SPECIAL FORMS OF PAYMENT 1. 2. 3. 4.

Application of Payment Dation in Payment Payment by Cession Tender of Payment and Consignation

Q: When must application of payment be made? - At the time payment is made. - There is no prohibition of law which forbids application of payment in advance. Q: When may a creditor make an application of payment? - when the debtor at the time of payment does not make an application of payment, then the creditor may now choose on where the payment will be made to apply. Q: Is the right to make an application of payment is only for the debtor? - No. it is also for the creditor. - Creditor may propose of how a payment made be applied. - Receipt is not a requirement of payment Q: in making an application of payment, is the consent of the creditor necessary to the validity made by the debtor? - No. Consent of the creditor is not necessary. Q: Can the creditor object to the application of payment made by the debtor? - Yes. But it must be made on the grounds provided by law. Q: In how many ways may the application of payment be made? 1. When the debtor applies the payment 2. When the creditor applies the payment 3. Neither debtor nor the creditor made an application of payment, then the payment is applied in accordance with law. Q: What is the Burdensome Rule? When and who can invoke the rule? - Neither debtor nor creditor can invoke this rule. - It will apply only to legal application of payment which means that it is made
Page 1 of 4 OBLIGATIONS AND CONRACTS – Finals R.A. 2010-2011

Q: APPLICATION OF PAYMENT? - Designation of the debt in which the debtor wants his payment to be applied. Q: Requisites of Application of Payment? 1. One Debtor and Creditor 2. There are several debts due 3. Payment is not sufficient to cover the debts NOTE: All debts must be of the same kind. [essential requisite] - Primarily it is the debtor who can make an application of payment but the creditor may also make such application of payment. Q: Is it an Absolute Right? - No. because there are limitations in making an application of payment: 1. Debtor cannot compel the creditor to accept the PARTIAL PAYMENT. (Rationale: it will violate the characteristic of Indivisibility of Payment) 2. Debtor cannot make a payment that is not yet due. 3. If stipulated in the contract on how a payment is to be applied, he cannot make a payment other than what was stipulated. 4. Cannot apply a payment to a debt which is not yet liquidated. 5. It cannot apply to debts with interest (the payment should be first applied to the interest, should there be an excess, then such excess will apply to the principal debt)

Q: If the obligation is does not involve money. Sometimes it ends up in Partial Extinguishment. Change in the cause of the obligation c.in accordance with law and not on the will of the parties.He can go after the seller (Deprivation in Law) Page 2 of 4 OBLIGATIONS AND CONRACTS – Finals R.No. (Go to court and sue as the owner of the property) 2.In payment to the debt in money . 2010-2011 . Because there is a change in the object (substitution). Q: Who makes the alienation? . Q: What kind of properties may be alienated? . Q: Suppose the creditor loses possession of the property. there are 2 kinds of Deprivation: 1. Q: Since Dation in Payment is the alienation of property. the principal obligation is extinguished while in Novation. The remedy of the Creditor when this happen will be: o Law on sales will apply when it comes to Dation in Payment o The Law on Sales states that.The creditor must accept such change to make it valid.Yes.No.To satisfy the debt in money .The payment shall be applied to the debt which is more burdensome. will it revive the original obligation? .A form of payment wherein the debtor alienates (transfer) his property in favor of the creditor to satisfy the debt in money. .No.In Dation in payment. - In Dation in payment.He can invoke the warranty against the seller. it can extend to all kinds of properties. Novation? .It is an XPN to identity of Payment because the creditor is receiving something different from what is originally due. . Deprivation in Law – when a person loses the property. Q: For what purpose? . because they are different. Q: How will the payment be applied? . Change in the object b.Yes. depending on the agreement of the parties. The law does not require.No. Change in any of the principal condition of the obligation Q: Dation v. when you change the object another obligation arises.A. (debtor) Q: DATION IN PAYMENT? .The Debtor.They don’t have the same purpose. does it constitute Novation? . . (barter) . . can there be Dation in payment? . Deprivation in Fact – when a person was disposed by another for what he was bought.Dation in payment shall be governed by the law in sales. Because it can also be applied in satisfaction of non-monetary debts. he may ask for a court order. Q: What is the remedy of the buyer when he gets evicted on the property he has bought? .Since the law does not distinguish. the purpose is simply the extinguishment of the obligation. Q: Does Dation in Payment always extinguish the obligation? .Novation may take place in 3 ways: a. Q: Should the consent of the creditor be obtained in Dation in Payment? . Q: Is it necessary that the property be equal to the amount of payment to be made? .

) Q: When is consignation not proper? . (but it is not always judicial) Q: How to make a consignation? (Art 1256) – MEMORIZE! 1.Should 1 of the creditors objects. Q: Voluntary Insolvency? .Yes. 2.A. because only the proceeds of the sale is the basis of the extinguishment . (Rationale: rentals can be made deposited not only in the court but also in the bank. .There is no transfer of ownership in payment by cession. . the obligation still exists.No. When the title of the obligation as been lost NOTE: Consignation can also be made in accordance with BP 25.Q: PAYMENT BY CESSION . he knows where to get it. Purpose #2 – to inform the creditor where the consignation was made.SC ruled that consignation is not proper when what is involved is the right of redemption because there is no payment due or payment to be paid. without just cause.The debtor goes to court and asks to declare him insolvent. 2010-2011 .The consent of the creditor is not necessary in order for the debtor to withdraw what was deposited. When two or more persons claim the same right to collect 5. Prior act of consignation 2. Purpose #1 – to give the creditor an opportunity to reconsider his unjust refusal 2. As long as the creditor hasn’t claimed what has been consigned. Q: May the debtor withdraws what has been deposited? . . When he is incapacitated to receive the payment at the time it is due 3. or does appear at the place of payment. the law does not require. he refuses to give a receipt 4. what release him from the obligation is the issuance of a “Discharge”.[Requisite] Consent of ALL the creditors must be obtained . It is only considered as preparatory to consignation.Consignation is a judicial proceeding wherein the thing due is placed under judicial disposal. (so that if he wants to claim it. . Q: Is it an absolute rule to extinguish the obligation? .If the sale is still not enough to cover the debt. . When. just an authority to sell the debtor’s property. When creditor is absent or unknown. The debtor is still deemed the owner.Tender of payment does not extinguish an obligation because it is only an offer to pay.The mere declaration of insolvency doesn’t discharge the debtor from his obligation to the creditor. wherein it allows consignation be done extra-judicially but only for rentals in arrears. Q: If the creditor withdraws what was consigned. is the consent of the debtor necessary? Page 3 of 4 OBLIGATIONS AND CONRACTS – Finals R.No. Actual act of deposit Q: What is the purpose of the 2-notice rule? 1. Q: TENDER OF PAYMENT & CONSIGNATION .The debtor gives authority to the creditor to sell his property. payment by cession could not take place. Q: Is it necessary that the property be equal to the amount of the payment made? . under the name of the creditor) Q: What is the 2-notice rule given by the debtor to the creditor? 1.

It must comply with the requisites of payment. . particularly in the proper place of payment. particularly complying with what is the proper place of payment. the obligation is not extinguished.The creditor claims that what was consigned is only a partial of what is due. Q: What is a withdrawal with reservation? . Page 4 of 4 OBLIGATIONS AND CONRACTS – Finals R. 2010-2011 .In case of loss. but the debtor can object if the claim to withdraw was made by the creditor with reservation. CASE: LIM . even if due to fortuitous events or without debtor’s fault.- No. Q: Consignation as a special form of payment? .A.SC ruled that the obligation is not extinguished if the payment was not made in the proper place. .It must comply with the requisites of payment.

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