CHAPTER 4, SEC. 6 Novation (Articles 1291-1!

4"
SECTION 6 - NOVATION
(Arts. 1291-1304)
STUDY GUIDE:
1. #$at is novation%
Novation is t$e e&tinction or e&tin'(is$)ent o* an o+li'ation t$ro('$ t$e creation
o* a ne, one ,$ic$ s(+stit(tes t$e ol- one. (Art. 1291)
2. #$at are t$e re.(isites o* novation%
(a) A /revio(s vali- o+li'ation.
(b) T$e ca/acit0 an- intention o* t$e /arties to )o-i*0 or e&tin'(is$ t$e o+li'ation.
(c) T$e )o-i*ication or e&tin'(is$)ent o* t$e o+li'ation.
(d) T$e creation o* a ne, vali- o+li'ation.
3. #$at is t$e -(al /(r/ose or *(nction o* novation%
(a) To e&tin'(is$ or )o-i*0 an e&istin' o+li'ation.
(b) To create or s(+stit(te a ne, o+li'ation in /lace o* t$e ol- o+li'ation.
4. #$at are t$e ,a0s o* e**ectin' REAL or OBJECTIVE novation% [Art. 1291(1)]
(a) 10 c$an'e o* /rinci/al con-itions or ter)s (e.g., )a2in' t$e -e+t /a0a+le in
install)ents instea- o* at one ti)e".
(b) 10 c$an'e o* ca(se (e.g., )a2in' as a loan t$e /rice -(e".
(c) 10 c$an'e o* s(+3ect )atter or o+3ect (e.g., c$an'in' t$e o+3ect itsel* or its
.(antit0 or .(alit0".
5. #$at are t$e 2in-s o* PERSONAL or SUBJECTIVE novation% [Art. 1291(2) & (3)]
(a) SUBSTITUTION ,$en t$e /erson o* t$e -e+tor is s(+stit(te-. [(Art. 1291(2)]
4t )a0 eit$er +e 5
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CHAPTER 4, SEC. 6 Novation (Articles 1291-1!4"
(a.1.) E6PR784S47N (Arts. 1293 & 129) ,$en a t$ir- /erson ,it$o(t t$e
2no,le-'e or a'ainst t$e ,ill o* t$e ori'inal -e+tor ass()es t$e o+li'ation ,it$ t$e
consent o* t$e cre-itor9 or
(a.2.) :E;E<AC47N (Art. 129!) ,$en t$e cre-itor acce/ts a t$ir- /erson to
ta2e t$e /lace o* t$e -e+tor at t$e instance o* t$e -e+tor.
(b) SUBRO"ATION ,$en a t$ir- /erson is s(+ro'ate- to t$e ri'$ts o* t$e cre-itor.
[Arts. 1291(3) & 13##] 4t )a0 eit$er +e 5
($.1.) C7N=ENT47NA; (Art. 13#1) ,$en it ta2es /lace +0 a'ree)ent o* t$e
ori'inal /arties (t$e -e+tor an- t$e ori'inal cre-itor" an- t$e t$ir- /erson (t$e ne,
cre-itor"9 or
($.2.) ;E<A; (Art. 13#2) ,$en it ta2es /lace +0 o/eration o* la,.
6. #$at are t$e e**ects o* expromision? (Art. 129)
(a) T$e ol- -e+tor is release-9 an-
(b) T$e ne, -e+tor>s insolvenc0 or non-*(l*ill)ent o* t$e o+li'ation -oes not 'ive rise
to an0 lia+ilit0 on t$e /art o* t$e ori'inal -e+tor.
REAS7N5 T$e s(+stit(tion is not )a-e at t$e ori'inal -e+tor>s initiative.
Example5 % o,es C P1!!,!!! -(e on :ece)+er 1, 2!1. S 'oes to C an- ass()es t$e
o+li'ation o* % to C. C consente-.
1. 4s %&s o+li'ation to C e&tin'(is$e-% ?ES, +eca(se C consente- to t$e novation.
2. S(//osin' S +eco)es insolvent, can C /rocee- a'ainst % to collect t$e P1!!,!!!%
N7, +eca(se in novation t$e )o)ent t$e cre-itor consents to t$e novation, t$e o+li'ation
is totall0 e&tin'(is$e-.
7. #$at are t$e e**ects o* delegacion? (Art. 129!)
(a) T$e ne, -e+tor>s non-*(l*(ll)ent o* t$e o+li'ation or insolvenc0 -oes not 'ive rise
to an0 lia+ilit0 on t$e /art o* t$e ori'inal -e+tor.
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CHAPTER 4, SEC. 6 Novation (Articles 1291-1!4"
(b) Ho,ever, t$e ol- -e+tor )a0 +e $el- lia+le to t$e cre-itor i* t$e ne, -e+tor>s
insolvenc0 ,as alrea-0 e&istin' an- eit$er 5
($.1.) o* /(+lic 2no,le-'e at t$e ti)e o* t$e delegacion; OR
($.2.) 2no,n to t$e -e+tor at t$e ti)e o* t$e delegacion.
Example5 % o,es C P1!!,!!! -(e on :ece)+er 1, 2!1. 1e*ore t$e -(e -ate, %
-ele'ates $is o+li'ation to S ,it$ t$e consent o* C.
1. 4s %&s o+li'ation to C e&tin'(is$e-% ?ES, +eca(se C consente- to t$e novation.
2. S(//osin' S +eco)es insolvent, can C /rocee- a'ainst % to collect t$e P1!!,!!!%
N7, e&ce/t i*, at t$e ti)e o* t$e -ele'ation, % 2ne, t$at S is alrea-0 insolvent, or i* it is o*
/(+lic 2no,le-'e t$at S is insolvent, +eca(se % t$en ,ill +e consi-ere- to $ave acte- in
+a- *ait$.
8. #$at are t$e e**ects o* T7TA; or E6T4NCT4=E novation%
(a) T$e ol- o+li'ation is e&tin'(is$e-, an- re/lace- +0 t$e ne, one9 an-
(b) Accessor0 o+li'ations are also e&tin'(is$e-, +(t t$e0 s$all s(+sist in so *ar as
t$e0 +ene*it t$ir- /ersons ,$o -i- not 'ive t$eir consent. (Art. 129')
9. #$at are t$e e**ects o* novation in voi- an- voi-a+le o+li'ations%
(a) 4* t$e ne, o+li'ation is voi-, t$e ori'inal o+li'ation s$all s(+sist. (Art. 129()
(b) 4* t$e ori'inal o+li'ation is voi-, t$e ne, o+li'ation is also voi-. (Art. 129))
(c) 4* t$e ori'inal o+li'ation is voi-a+le onl0, a vali- novation can ta2e /lace +eca(se
voi-a+le contracts are vali- (ntil ann(lle- +0 /ro/er action in co(rt. (Art. 129))
10. #$at are t$e cases ,$en le'al s(+ro'ation o* t$e cre-itor is /res()e-%
(a) #$en a cre-itor /a0s anot$er cre-itor ,$o is /re*erre-, even i* /a0)ent is )a-e
,it$o(t t$e -e+tor>s 2no,le-'e.
Example 5 % o,es C1 an- C2* C1+ a )ort'a'e cre-itor *or P1!!,!!!9 an- C2+ an or-inar0
cre-itor *or P@!,!!!. C2+ ,it$o(t %&s 2no,le-'e /ai- %&s -e+t o* P1!!,!!! to C1. Here,
C2 ,ill +e s(+ro'ate- to t$e ri'$ts o* C1. C2 ,ill +e a )ort'a'e cre-itor *or P1!!,!!!, an-
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CHAPTER 4, SEC. 6 Novation (Articles 1291-1!4"
an or-inar0 cre-itor *or P@!,!!!. 4* % cannot rei)+(rse C2 *or t$e P1!!,!!! /ai- to C1+ C2
can $ave t$e )ort'a'e- /ro/ert0 *oreclose- +eca(se t$ere is $ere le'al s(+ro'ation.
(b) #$en a t$ir- /erson, not intereste- in t$e o+li'ation, /a0s ,it$ t$e e&/ress or
tacit a//roval o* t$e -e+tor. (See also Arts. 126, /ar. 2 A 12B"
Example 5 % o,es C P1!!,!!! -(e on :ece)+er 1, 2!1. S /ai- C P1!!,!!! ,it$ t$e
consent o* %. Here, S is s(+ro'ate- to t$e ri'$ts o* C. So t$at i* t$e -e+t is sec(re- +0 a
)ort'a'e- /ro/ert0, S can *oreclose t$e )ort'a'e i* % cannot rei)+(rse S. Ho,ever, i* S
/ai- ,it$o(t t$e consent o* %+ $e cannot *oreclose t$e )ort'a'e- /ro/ert0 +eca(se t$ere is
no le'al s(+ro'ation.
(c) #$en, even ,it$o(t t$e 2no,le-'e o* t$e -e+tor, a /erson intereste- in t$e
*(l*ill)ent o* t$e o+li'ation /a0s, ,it$o(t /re3(-ice to t$e e**ects o* con*(sion as to t$e
latter>s s$are.
Example 5 % o,es C P1!!,!!! sec(re- +0 a )ort'a'e an- '(arantee- +0 ". 4* " /ai- C
even ,it$o(t t$e 2no,le-'e o* %+ " ,ill +e s(+ro'ate- to all t$e ri'$ts o* C +eca(se as a
'(arantor, $e is intereste- in t$e /a0)ent o* t$e o+li'ation.
11. #$at are t$e e**ects o* T7TA; s(+ro'ation%
Total s(+ro'ation trans*ers to t$e /erson s(+ro'ate- (ne, cre-itor" t$e cre-it
an- all t$e ri'$ts an- actions t$at co(l- $ave +een e&ercise- +0 t$e *or)er cre-itor, eit$er
a'ainst t$e -e+tor or a'ainst t$ir- /ersons, +e t$e0 '(arantors or )ort'a'ors. (See t$e
Example (n-er 1!(+" a+ove."
12. #$at are t$e e**ects o* PART4A; SC1R7<AT47N%
T$e cre-itor to ,$o) /artial /a0)ent $as +een )a-e +0 t$e ne, cre-itor
re)ains a cre-itor to t$e e&tent o* t$e +alance o* t$e -e+t.
As +et,een t$e *irst cre-itor, an- t$e t$ir- /erson (ne, cre-itor" ,$o )a0 $ave
+een /artiall0 s(+ro'ate- to t$e ri'$ts o* t$e *irst cre-itor, it is still t$e *irst cre-itor ,$o is
/re*erre- in case o* insolvenc0 o* t$e -e+tor.
Example 5 % o,es C P1!!,!!!. 1e*ore t$e -(e -ate o* t$e o+li'ation, a t$ir- /erson, S /ai-
C 6!,!!! ,it$ t$e consent o* %. % no, $as t,o cre-itors, S *or P6!,!!!, an- C *or t$e
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CHAPTER 4, SEC. 6 Novation (Articles 1291-1!4"
+alance o* P4!,!!!. 4* % $as onl0 P@!,!!! to /a0 $is o+li'ation C ,ill +e /re*erre- to S.
T$(s, P4!,!!! ,ill +e /ai- to C *irst, an- t$e re)ainin' P1!,!!! ,ill +e /ai- to S.
APPLICATION/PROBLEMS :
1. % o,es C P1!!,!!!. ;ater, % /ro/ose- to C t$at S ,ill /a0 %&s -e+t, an- t$at %
,ill +e release- *ro) all lia+ilities. C an- S a'ree- to t$e /ro/osal. 7n -(e -ate, $o,ever,
,$en C trie- to collect t$e -e+t, C *o(n- o(t t$at S ,as insolvent. 4t ,as also /roven t$at at
t$e ti)e o* t$e -ele'ation, S ,as alrea-0 insolvent. Hence, C -e)an-e- *ro) % t$e
/a0)ent o* t$e P1!!,!!!. Cn-er t$e *act(al circ()stances o+tainin' in t$is case, can C
$ol- % lia+le *or t$e o+li'ation%
2. 7n De+r(ar0 1!, 2!12, <in' o+taine- a loan *ro) R(t$ in t$e a)o(nt o*
P!!,!!!. As sec(rit0 *or t$e loan, <in' )ort'a'e- to R(t$ a $o(se an- lot val(e- at
P@!!,!!!. 7n 8arc$ 1@, 2!12, <in' o+taine- anot$er loan *ro) ;ei in t$e a)o(nt o*
P2!!,!!!. 1ot$ -e+ts are -(e *or /a0)ent on Ean(ar0 !, 2!1. 7n :ece)+er 1!, 2!12,
,it$o(t t$e 2no,le-'e o* <in', ;ei /ai- <in'>s -e+t in t$e a)o(nt o* P!!,!!! to R(t$. As
t$e ne, cre-itor o* t$e P!!,!!! -e+t, ;ei no, -e)an-s /a0)ent o* t$e P!!,!!! -e+t
*ro) <in' on Ean(ar0 !, 2!1. <in', $o,ever, ,as (na+le to /a0. Can ;ei +e s(+ro'ate-
to t$e ri'$ts o* R(t$ (n-er t$is o+li'ation, an- *oreclose on t$e )ort'a'e, consi-erin' t$at
/a0)ent o* t$e P!!,!!! -e+t to R(t$ ,as )a-e +0 ;ei ,it$o(t t$e 2no,le-'e o* <in'%
3. % o,es C P@!!,!!!. #it$ t$e consent o* % an- C+ S /a0s C P2@!,!!!. No,, C
an- S are t$e cre-itors o* % in t$e a)o(nt o* P2@!,!!! eac$. S(//osin' t$at on -(e -ate
A $as onl0 P2@!,!!!, ,$o s$o(l- +e /re*erre- in t$e /a0)ent%
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