CHAPTER

4 
 

Extinguishment
of
Obligations 
ART.
1231  ART.
1231.
Obligations
are
extinguished: 
 
(1)
By
payment
or
performance; 
(2)
By
the
loss
of
the
thing
due; 
(3)
By
the
condonation
or
remission
of
the
debt; 
(4)
By
the
confusion
or
merger
of
the
rights
of 
creditor
and 
debtor; 
(5)
By
compensation; 
(6)
By
novation. 
 
Other
causes
of
extinguishment
of
obligations,
such 
as
annulment,
rescission,
fulfillment
of
a
resolutory 
condition,
and
prescription,
are
governed
elsewhere 
in
this
Code.
(1156a) 

How
can
an
obligation  - Extinguishment of Obligations means the termination of 
be
extinguished?  the obligations where it ceases to exist.  
  
- These are accomplished by: 
- Payment 
- Complying with the term 
- Force
Majeure
or
Fortuitous
Events  
- Loss of the Thing Due 
- Condonation
or
Remission 
- The forgiveness of the obligation 
- Confusion 
- The merger of debtor and creditor in one 
person 
- Compensation 
- Off-set of two concurring obligations  
- Novation 
- Replacement of old obligation with a new 
one  
- There are other modes by which obligations are 
extinguished but it is covered in other sections of the 
Civil Code or other laws. 

What
are
the
requisites  Requisites for payment to be valid: 
for
payment
to
be
valid?  a. must be paid by the right person (debtor or 
representative) 
b. payment must be done to the right person 
c. must be at the right time (reasonable hour of the day) 

 
 d. must be made at the right place 
e. must be in the right currency 

  ARTICLE

1232.

Payment
means
not
only
the
delivery
of 
  money
but
also
the
performance,
in
any
other 
  manner,
of
an
obligation.  
   
  ARTICLE

1233.

A
debt
shall
not
be
understood
to
have 
  been
paid
unless
the
thing
or
service
in
which
the 
  obligation
consist
has
been
completely
delivered
or 
  rendered,
as
the
case
may
be.   
   
  ARTICLE
1234.

If
the
obligation
has
been
substantially 
  performed
in
good
faith,
the
obligor
may
recover
as 
  though
there
had
been
a
strict
and
complete 
  fulfillment,
less
damages
suffered
by
the
obligee.  
   
  - Ex. I promised to deliver 4 specific white horses to X, 
  unfortunately due to fortuitous events, one of the horses 
  died. I can collect the fees from X, less the value of the 
  4th horse (unless indivisible).  
   
What
is
a
requisite?  - Requisite 
- There must be substantial performance, and 
The obligor must be in good faith. 

  ARTICLE

1235.

When
the
obligee
accepts
the 
performance,
knowing
its
incompleteness
or 
irregularity,
and
without
expressing
any
protest
or 
objection,
the
obligation
is
deemed
fully
complied 
with.  
 
- This is similar to an implied waiver by the obligee to 
claim for damages 
 
ARTICLE

1236.

The
creditor
is
not
bound
to
accept 
payment
or
performance
by
a
third
person
who
has 
no
interest
in
the
fulfillment
of
the
obligation,
unless 
there
is
a
stipulation
to
the
contrary. 
 
Whoever
pays
for
another
may
demand
from
the
debtor 
what
he
has
paid,
except
that
he
paid
without
the 
knowledge
or
against
the
will
of
the
debtor,
he
can 
recover
only
insofar
as
the
payment
has
been 
beneficial
to
the
debtor.  
 
- This article tackles situations where a third party to the 
obligation meddles in the payment of the obligation. 

  ARTICLE

1237.

Whoever
pays
on
behalf
of
the
debtor 
  without
the
knowledge
or
against
the
will
of
the 

 
  latter
cannot
compel
the
creditor
to
subrogate
him 
  in
his
rights,
such
as
from
arising
from
a
mortgage, 
  guaranty,
or
penalty.  
   
What
is
subrogation?  - Subrogation  
- The right to acquire the rights of the creditor. 
- “Stepping into the shoes of the creditor” 
- Subrogation can only apply if the debtor 
consented to the payment by a third party to the 
creditor. This means that the third party will 
acquire all the rights of the creditor in the 
obligation, including the securities and penalties 
originally agreed upon. 
 
- If the debtor did not consent, only substitution occurs. 
This is when only the personality of a party (the creditor) 
is transferred to another person. 

  ARTICLE
1238.

Payment
made
by
a
third
person
who 
does
not
intend
to
reimbursed
by
the
debtor
is 
deemed
to
be
a
donation,
which
requires
the 
debtor’s
consent.
But
the
payment
is
in
any
case 
valid
as
to
the
creditor
who
has
accepted
it.  
 
- Ex. Old Philippine Commercial on Integrity. 
 
- There are actually two situations being described in this 
particular case. 
 
- The case of the donation by a stranger to the debtor by 
paying the debt which must be accepted by the debtor 
to be a valid donation. And the case of the creditor 
accepting the payment from a stranger which 
extinguishes the obligation, even if it is without the 
consent or knowledge of the debtor. 

  ARTICLE

1239.

In
obligation
to
give,
payment
made
by 
one
who
does
not
have
the
free
disposal
if
the
thing 
due
and
capacity
to
alienate
it
shall
not
be
valid, 
without
prejudice
to
the
provisions
of
article
1425 
under
the
Title
on
“Natural
Obligations.”   

  ARTICLE
1240.

Payment
shall
be
made
to
the
person 
  whose
favor
the
obligation
has
been
constituted,
or 
  his
successor
in
interest,
or
any
person
authorize
to 
  receive
it.  
   
Who
is
the
person
in  - Who is the person in whose favor the obligation has 
whose
favor
the  been constituted? Is it not the creditor?  
obligation
has
been  - Normally, the person in whose favor the 
constituted?  obligation has been constituted is the 

 
  creditor/obligee because the creditor is the 
  passive subject in the obligation. But this is not 
  always the case.  
  - Ex. Tutorial lessons taken by parents for children. 
   
Who
are
successors
in  - Who are successors in interest?  
interest?   - Successors in interest are people who will 
  acquire the rights and interests of a person by 
  way of any legal means. Ex. In cases of 
subrogation, heirs of a decedent creditor, 
assignment of rights by the creditor 

  ARTICLE
1241.

Payment
to
a
person
who
is 
incapacitated
to
administer
his
property
shall
be 
valid
if
he
kept
thing
delivered,
or
insofar
as
the 
payment
has
been
beneficial
to
him. 
 
Payment
made
to
a
third
person
shall
also
be
valid 
insofar
as
it
has
redounded
to
the
benefit
of
the 
creditor.

Such
benefit
to
the
creditor
need
not
be 
proved
in
the
following
cases: 
 
(1) If
after
the
payment,
the
third
person
acquires
the 
creditor’s
rights; 
(2) If
the
creditor
ratifies
the
payment
to
the
third 
person; 
(3) If
by
the
creditors
conduct,
the
debtor
has
been
led 
to
believe
that
the
third
person
had
authority
to 
receive
the
payment.  

  ARTICLE

1242.

Payment
made
in
good
faith
to
any 
person
in
possession
of
the
credit
shall
release
the 
debtor.  
 
- A person in possession of the credit is the person who 
is able to prove to be in possession of the right to 
collect. i.e. person in possession of a winning ticket, 
promissory note or authority to collect. 
 
ARTICLE

1243.

Payment
made
to
the
creditor
by
the 
debtor
after
the
latter
has
been
judicially
ordered
to 
retain
the
debt
shall
not
be
valid.  
 
- Payment after being ordered by the court not to. 

  ARTICLE
1244.

The
debtor
of
the
thing
cannot
compel 
the
creditor
to
receive
a
different
one,
although
the 
latter
may
be
of
the
same
value
as,
or
more
valuable 
than
that
which
is
due. 
 

 
 In
obligation
to
do
or
not
to
do,
an
act
or 
forbearance
cannot
be
substituted
by
another
act
or 
forbearance
against
the
obligee’s
will.  
 
- Substitution of the object is only valid with the consent 
of the obligee. 
 
----------------------------------------------- 
Special Forms of Payment 
Dacion en Pago (Dation in Payment) [Art. 1245] 
Application of Payment [Art. 1252] 
Payment by Cession [Art.1255] 
Tender of Payment and Consignation [Art. 1256-1261] 

  ARTICLE

1245.

Dation
in
payment,
whereby
property
is 
  alienated
to
the
creditor
in
satisfaction
of
a
debt
in 
  money,
shall
be
governed
by
the
law
of
sales.  
   
What
is
Dacio
en
Pago?  Dacion
en
Pago 
  - a special form of payment where the ownership of a 
  thing is conveyed by the debtor to the creditor in 
  payment of a monetary obligation. 
   
  ARTICLE
1246.

When
the
obligation
consist
in
the 
What
does
it
mean
to  delivery
of
an
indeterminate
or
generic
thing,
whose 
have
‘a
medium
quality’?  quality
and
circumstance
have
not
been
stated,
the 
  creditor
cannot
demand
a
thing
of
superior
quality. 
The
purpose
of
the
obligation
and
other 
circumstances
shall
be
taken
in
consideration. 
 
- “Medium Quality only” unless contested in which case 
the purpose of the obligation and other circumstances 
shall be taken in consideration. 

  ARTICLE

1247.

Unless
it
is
otherwise
stipulated,
the 
extrajudicial
expenses
required
by
the
payment
shall 
be
for
the
account
of
the
debtor.
With
regard
to
the 
judicial
cost,
the
Rules
of
Court
shall
govern.  
 
- Debtor takes on the burden of payment unless 
otherwise agreed upon. 
 
ARTICLE
1248.

Unless
there
is
an
express
stipulation
to 
that
effect,
the
creditor
cannot
be
compelled 
partially
to
receive
the
prestations
in
which
the 
obligation
consists.

Neither
may
the
debtor
be 
required
to
make
partial
payments.   
 
However,
when
the
debt
is
in
part
liquidated
and
in 
part
unliquidated,
the
creditor
mat
demand
and
the 

 
 debtor
may
effect
the
payment
of
the
former
without 
waiting
for
the
liquidation
of
the
latter.  

  ARTICLE
1249.

The
payment
of
debt
in
money
shall
be 
made
in
the
currency
stipulated,
and
if
it
is
not 
possible
to
deliver
such
currency,
then
in
the 
currency
which
is
legal
tender
to
the
Philippines. 
 
The
delivery
of
promissory
notes
payable
to
order
or 
bills
of
exchange
or
other
mercantile
documents 
shall
produce
the
effect
of
payment
only
when
they 
have
been
cashed,
or
when
through
the
fault
of
the 
creditor
they
have
been
impaired. 
 
In
the
meantime,
the
action
derived
from
the
original 
obligation
shall
be
held
in
abeyance.  
 
Legal Tender 
- is that currency which a debtor can legally compel a 
creditor to accept in payment of a debt in money when 
tendered by the debtor in the right amount. 

What
is
Legal
Tender?  Legal
Tender  
- Note
that
the
law
requiring
payment
of
debts
using
only 
Philippine
Currency
is
no
longer
in
effect
and
foreign 
currency
are
now
allowed
for
payment
so
long
as
the 
currency
is
accepted
in
the
Philippines. 
- Payments
of
debt
using
coins
follow
the
rules
below: 
- Using
coins
below
5
Peso
until
25
centavos
are 
valid
only
if
the
debt
amounts
to
50
pesos. 
- Using
coins
below
25
centavos
are
valid
only
if 
the
debt
amounts
to
20
pesos 
- All
other
coins
and
bills
are
legal
tender
up
to
any 
amount 
- The
above
rules
will
not
apply
if
the
parties
agree 
otherwise
or
the
debtor
does
not
complain 
- Payment
by
means
of
Letters
of
Credits/Negotiable 
Instruments  
- are
allowed
only
with
the
consent
of
the
obligee 
until
then
the
right
to
demand
is
suspended
until 
the
LC/Negotiable
Instrument
is
dishonored. 

  ARTICLE
1250.

In
case
an
extraordinary
inflation
or 
  deflation
of
the
currency
stipulated
should 
  supervene,
the
value
of
the
currency
at
the
time
of 
  the
establishment
of
the
obligation
shall
be
the
basis 
  of
payment,
unless
there
is
an
agreement
to
the 
  contrary.  
   
Inflation  

 
 What’s
the
difference  - is a sharp sudden increase of money or credit or both 
between
inflation
and  without a corresponding increase in business 
deflation?   transaction. 
 
Deflation  
- is the reduction in volume and circulation of the 
available money or credit, resulting in the decline of the 
general price level 
 
This
article
shall
apply
only
in
cases
of
extraordinary 
inflation
or
deflation
of
the
currency
and
not
to 
ordinary
inflation
or
deflation. 

ARTICLE
1251.

Payment
shall
be
made
in
the
place 
designated
in
the
obligation. 
 

There
being
no
express
stipulation
and
if
the 
undertaking
is
to
deliver
a
determinate
thing,
the 
payment
shall
be
made
wherever
the
thing
might
be
at 
the
moment
the
obligation
was
constituted. 
 

In
any
other
case
the
place
of
payment
shall
be 
domicile
of
the
debtor.   
 

If
the
debtor
changes
his
domicile
in
bad
faith
or 
after
he
has
incurred
in
delay,
the
additional
expenses 
shall
be
borne
on
him. 
 

These
provisions
are
without
prejudice
to
venue 
under
the
Rules
of
Law.  
 
- Domicile vs. Residence 
 
-
Place
of
Payment
-  
   

 
Application
of
Payment 
 
What
is
Application
of 

ART.

1252.

He
who
has
various
debts
of
the
same
kind 
Payment?  in
favor
of
one
and
the
same
creditor,
may
declare
at 
the
time
of
making
the
payment,
to
which
of
them
the 
same
may
be
applied.

Unless
the
parties
so
stipulate, 
or
when
the
application
of
payment
is
made
by
the 
party
for
whose
benefit
the
term,
has
been
constituted, 
application
shall
not
be
made
as
to
debt
which
are
not 
yet
due. 
 
If
the
debtor
accepts
from
he
creditor
a
receipt
in
which 
an
application
of
the
payment
is
made,
the
former 
cannot
complain
of
the
same,
unless
there
is
a
cause 
for
invalidating
the
contract. 
 
Application
of
Payment  
- relates to how payment of a debtor to concurrent debts 
are applied when the payment is not sufficient to cover 
the entirety of the debts. 
- Case of multiple debts, make payment to creditor but 
not enough to pay the creditor 

What
are
the
Requisites  - Requisites for Application of Payment 
for
the
Application
of  - There must be one debtor and one creditor 
Payment?  - There must be two or more debts 
  - The payment must be of the same kind 
- The debt to which the payment has been applied 
must be due; and 
- the payment made must not be sufficient to 
cover all the debts 
- *illustration* 
- General rule: what does A want to pay first? 
- Application shall not be paid to ebts that are not 
due  
- Apply to most onerous/burdensome 
- Which is heavier? 5,000 vs. 1,000 
(including interest) 

Should
interest
be
paid  ARTICLE
1253.

If
the
debt
produces
interest,
payment 
before
principal?  of
the
principal
shall
not
be
deemed
to
have
been 
made
until
the
interest
have
been
covered.  
 
Interests must be paid first before the principal, unless 
otherwise stipulated 
 
ARTICLE
1254.

When
the
payment
cannot
be
applied
in 
accordance
with
the
preceding
rules,
or
if 

 
 application
can
not
be
inferred
from
other 
circumstances,
the
debt
which
is
most
onerous
to 
the
debtor,
among
those
due,
shall
be
deemed
to 
have
been
satisfied. 
 
If
the
debts
due
are
of
the
same
nature
and
burden, 
the
payment
shall
be
applied
to
all
of
them 
proportionately.  

How
do
you
decide  Guides
to
which
debt
is
more
onerous/burdensome 
which
debt
is
more   
burdensome?  - Interest bearing debts are more onerous than 
non-interest bearing debts 
- Between 2 interest bearing debts, the one with the 
higher interest is more onerous 
- Debt of a sole debtor is more onerous than that of 
solidary debtors 
- All other things equal, the older debt is more onerous 
- Debts with security/collateral is more onerous than 
unsecured debts 
- Obligations with a penalty clause is more onerous than 
ones without a penalty clause 
- In case of rentals, the rent of the place being occupied 
by the debtor is more onerous than the rent of the place 
not being occupied by the debtor. 
   

 
Payment
by
Cession 
 

What
is
Payment
by  ARTICLE
1255.

The
debtor
may
cede
or
assign
his 
Cession?  property
to
his
creditors
in
payment
of
his
debts. 
  This
cession,
unless
there
is
stipulation
to
the 
  contrary,
shall
only
release
the
debtor
from 
  responsibility
for
the
net
proceeds
of
the
thing 
  assigned.

The
agreements
which,
on
the
effect
of 
  the
cession,
are
made
between
the
debtor
and
his 
  creditors
shall
be
governed
special
laws.  
   
  Payment
by
Cession  
  - another special form of payment. It is the assigned or 
  abandonment of all the properties of the debtor for the 
  benefit of his creditor in order that the latter may sell the 
  same and apply the proceeds thereof to the satisfaction 
  of their credits 
   
What
is
required
for  Requisites for Payment by Cession: 
payment
by
cession?  - There must be two or more creditors 
- The debtor must be insolvent (even partially so) 
- The assignment must involve all the property of the 
debtor 
- The cession must be accepted by the creditors 

  - Payment by Cession is not to be confused with 

  Insolvency or Bankruptcy proceedings which is covered 
  by the insolvency law, nor foreclosure proceedings. 
  - Payment by Cession is a contractual agreement made 
  by the debtors to his creditors. 
   
What
is
the
difference  Difference between Cession and Dacion: 
between
cession
and  - In Dacion there is only one creditor. In Cession there are 
dacion?  multiple creditors 
- In Dacion there is no presumption of insolvency but in 
Cession there is. 
- In Dacion only a specific property is involved. In 
Cession all the property of the debtor is involved. 
- In Dacion, the creditor becomes the owner of the 
property of the debtor. In Cession, the creditor(s) does 
not necessarily become the owner of the property of the 
debtor. [creditors only acquire the right to sell the same] 
- In Dacion novation occurs but in Cession no novation 
occurs. 
   

 
Tender
of
Payment
or
Consignation 
 

What
is
Consignation? 
ART.

1256.

If
the
creditor
to
whom
tender
of
payment 
has
been
made
refuses
without
just
cause
to
accept
it, 
the
debtor
shall
be
released
from
responsibility
by 
consignation
of
the
thing
or
sum
due. 
 
Consignation alone shall produce the same effect in the 
following cases: 
 
1. When the creditor is absent or unknown, or does not 
appear at the place of payment; 
2. When he is incapacitated to receive the payment at the 
time it is due; 
3. When, without just cause, he refuses to give a receipt; 
4. When two or more persons claim the same rights to 
collect; 
5. When the title of the obligation has been lost.  
 
This article covers instance when a debtor wishes to pay 
but cannot do so 

Tender
of
Payment  - Tender of Payment  
  - is the act of offering to the creditor the amount 
  due. 
   
  - Consignation  
  - the act of depositing the prestation of the 
  obligation with the proper court in order to ask 
  the court, after due process, to extinguish the 
  obligation. 
   
What
are
the
requisites  Requisites for a valid Consignation 
for
a
valid
consignation?  - Existence of a valid debt that is due and demandable 
- Tender of payment by the debtor which is refused by the 
creditor without justifiable reason or the creditor is 
incapable of accepting the payment 
- Previous notice of consignation to the parties interested 
in the fulfillment of the obligation 
- Actual consignation/delivery of the prestation to the 
proper court 
- Subsequent notice of consignation made to interested 
parties 
- Judgment by court approving consignation. 

  ARTICLE
1257.

In
order
that
the
consignation
of
the 
thing
due
may
release
the
obligor,
it
must
first
be 
announced
to
the
person
interested
in
the
fulfillment 
of
the
obligation. 

 
  
The
consignation
shall
be
ineffectual
if
it
is
not
made 
strictly
in
consonance
with
the
provisions
which 
regulates
payment.  
 
- The purpose for the notice is to allow the creditor to 
reconsider his refusal to accept the tender of payment 
and hence avoid judicial and additional costs 
 
ARTICLE
1258.

Consignation
shall
be
made
by 
depositing
the
things
due
at
the
disposal
of
judicial 
authority,
before
whom
the
tender
of
payment
shall 
be
proved,
in
a
proper
case,
and
the
announcement 
of
the
consignation
in
other
cases. 

  ARTICLE
1259.

The
expense
of
consignation,
when 
properly
made,
shall
be
charged
against
the
creditor.  
 
- The cost is charged to the creditor because the judicial 
action was prompted by circumstance caused by or 
related to the creditor. 
 
ARTICLE
1260.
Once
the
consignation
has
been
duly 
made,
the
debtor
may
ask
the
judge
to
order
the 
cancellation
of
the
obligation. 
 
Before
the
creditor
has
accepted
the
consignation, 
or
before
a
judicial
has
been
properly
made,
the 
debtor
may
withdraw
the
thing
or
the
sum
deposited 
allowing
the
obligation
to
remain
in
force. 
 
- Order of the judge to cancel the obligation terminates 
the obligation. But the action may be cancelled by the 
debtor before that time and before the creditor accepts 
the consignation. 

  ARTICLE
1261.

If,
the
consignation,
having
been
made 
the
creditor
should
authorize
the
debtor
to
withdraw 
the
same,
he
shall
lose
every
preference
which
he 
may
have
over
the
thing.

The
co-debtors, 
guarantors
and
sureties
shall
be
released.  
 
- This situation covers the insistence of the creditor to not 
accept the object that has been reserved for him by the 
judicial consignation. His waiver of his rights releases all 
other parties that may be responsible for the obligation.  
   

 
Loss
of
the
Thing
Due 
 

1262  ARTICLE
1262.

An
obligation
which
consist
in
the 
  delivery
of
a
determinate
thing
shall
be
extinguished 
  if
it
should
be
lost
or
destroyed
without
the
fault
of 
  the
debtor
and
before
he
has
incurred
in
delay. 
   
  When
by
law
or
stipulation,
the
obligor
is
liable
even
for 
  fortuitous
events,
the
loss
of
the
thing
does
not 
  extinguish
the
obligation,
and
he
shall
be 
  responsible
for
damages.

The
same
rule
applies 
  when
the
nature
of
obligation
requires
the 
  assumption
of
risk.  
   
What
are
the
requisite
s  Requisite for Loss of the Thing Due to Extinguish the 
for
Loss
of
the
Thing  Obligations 
Due
to
Extinguish
the  1. The obligation is to deliver a specific thing 
Obligations?  2. The loss of the thing occurs without the faulty of the 
  debtor; and 
  3. The debtor is not guilty of delay 

1263  ARTICLE
1263.

In
an
obligation
to
deliver
a
generic 
thing
the
loss
or
destruction
of
anything
of
the
same 
kind
does
not
extinguished
the
obligation.  
 
- This is based on the principle that the class of things 
never dies. In the event that it does, then the last of the 
class becomes a determine object if possible. 
- Genus nuquam perit 
 
ARTICLE
1264.

The
court
shall
determine
whether, 
under
the
circumstances,
the
partial
loss
of
the 
object
of
the
obligation
is
so
important
as
to 
extinguish
the
obligation. 
 
- Partial loss means that a portion of the object has been 
lost or that the object has been damaged prior to 
delivery. The court shall decide whether the loss 
extinguishes the obligation. 

1265-66  ARTICLE
1265.

Whenever
the
thing
is
lost
in
the 
  possession
of
the
debtor
it
shall
be
presumed
that 
  the
loss
was
due
to
his
fault,
unless
there
is
a
proof 
  to
the
contrary,
and
without
prejudice
to
the 
  provisions
of
article
1165.

This
presumption
does 
  not
apply
in
case
of
earthquake,
flood,
storm,
or 
  other
natural
calamity.  
   
 

 
   - This presumption is made because the debtor has to 
  show that the appropriate diligence had been exercised 
  in the care of the object to be delivered.   
   
What’s
the
difference  ARTICLE
1266.

The
debtor
in
obligations
to
do
shall 
between
legal
and  also
be
released
when
the
prestation
becomes 
physical
impossibility?  legally
or
physically
impossible
without
the
fault
of 
the
obligor.   
 
- Legal Impossibility   
- when the law makes the obligation impossible to 
perform 
- Physical Impossibility  
- Loss or becomes prohibitive 

  ARTICLE
1267.

When
the
service
has
become
so 
difficult
as
to
be
manifestly
beyond
the 
contemplation
of
the
parties,
the
obligor
may
also
be 
released
therefrom,
in
whole
or
in
part.  
 
- Circumstances may make the service manifestly beyond 
the contemplation of the parties may be considered loss 
of the thing due even if the “service” can be considered 
generic. 
 
ARTICLE

1268.

When
the
debt
of
a
thing
certain
and 
determinate
proceeds
from
a
criminal
offense,
the 
debtor
shall
not
be
exempted
from
the
payment
of 
its
price,
whatever
may
be
the
cause
for
the
loss, 
unless
the
thing
having
been
offered
by
him
to
the 
person
who
should
receive
it,
the
latter
refused 
without
justification
to
accept
it.  
 
- Loss of the thing due does not exempt criminals from 
his/her liability to restore to the victim what was stolen 
unless the victim had unjustifiably refused to accept the 
object when offered by the criminal. 

  ARTICLE
1269.

The
obligation
having
been 
extinguished
by
the
loss
of
the
thing,
the
creditor 
shall
have
all
the
rights
of
action
which
the
debtor 
may
have
against
the
third
person
by
reason
of
loss.  
 
- In cases where loss of the thing due extinguishes the an 
obligation, the creditor acquires all the rights of redress 
that the debtor may have had against the ones who 
caused the loss of the thing due. 
 
- Example: Insurance Claims 
 

 
Condonation
or
Remission
of
the
Debt  
 

  ARTICLE
1270.

Condonation
or
remission
is
essentially 
  gratuitous,
and
requires
the
acceptance
by
the 
  obligor.

It
may
be
made
expressly
or
impliedly. 
   
  One
and
the
other
kind
shall
be
subject
to
the
rules 
  which
governs
inofficious
donations.

Express 
  condonation
shall,
furthermore,
comply
with
the 
  forms
of
donation.  
   
What
is
condonation?  - Condonation  
- the gratuitous waiver by the creditor of his rights 
against the debtor. 
- Etymology: “Con” and “Donation”  
 
- While a person may make donations, no one can give - 
more than that which he can give by will, otherwise, the 
excess shall be inofficious and shall be reduced by the 
court accordingly. 

What
are
Requisites
of  Requisites of Condonation: 
Condonation?  - it must be gratuitous; 
  - it must be accepted by the obligor; 
  - the parties must have capacity; 
  - it must not be inofficious; and 
  - if made expressly, it must comply with the forms of 
  donation 
   
  - Inter
vivos 
  - transfer or gift made during one's lifetime
  - Mortis causa
  - Gifts given after death
   
What
are
the
Kinds
of  Kinds of Condonation: 
Condonation?  - As to Form 
- Express and Implied 
- As to Extent 
- Complete and Partial 
- As to Date of Effectivity 
- Inter Vivos or Mortis Causa 

Implied
condonation  ARTICLE
1271.

The
delivery
of
a
private
document 
evidencing
a
credit,
made
voluntarily
by
the
creditor 
to
the
debtor,
implies
the
renunciation
of
the
action 
which
the
former
had
against
the
latter. 
 
If
in
order
to
nullify
this
waiver
it
should
be
claimed 
to
be
inofficious,
the
debtor
and
his
heirs
may 

 
 uphold
it
by
providing
that
the
delivery
of
the 
document
was
made
in
virtue
of
payment
of
the 
debt.  
 
- Note that this article speaks of a private document. The 
legal presumption of remission does not apply in the 
case of a public document because it is easy to obtain a 
copy of the same, being a public record 
- If the obligation is joint, the presumption of remission 
pertains only to the share of the debtor who is in the 
possession of the document; if solidary, to the total 
obligation 
 

  ARTICLE
1273.
The
renunciation
of
the
principal
debt 
shall
extinguish
the
accessory
obligations;
but
the 
waiver
of
the
latter
shall
leave
the
former
in
force. 
 
ARTICLE
1272.

Whenever
the
private
document
in 
which
the
debt
appears
is
found
in
the
possession
of 
the
debtor,
it
shall
be
presumed
that
the
creditor 
delivered
it
voluntarily,
unless
the
contrary
is
proved. 
 
ARTICLE
1274.

It
is
presumed
that
the
accessory 
obligation
of
pledge
has
been
remitted
when
the 
thing
pledged,
after
its
delivery
to
the
creditor,
is 
found
in
the
possession
of
the
debtor,
or
a
third 
person
who
owns
the
thing.  
 
- Pledge 
- You pawned it  
- The last two articles refers to presumptions in 
condonation similar to Art. 1271 
 

   

 
Confusion
or
Merger
of
Rights  
 

Confusion
or
Merger
of  - ARTICLE
1275.

The
obligation
is
extinguished
from 
Rights   the
time
the
characters
of
creditor
and
debtor
are 
  merged
in
the
same
person.  
   
- Confusion or Merger of Rights  
- the meeting in one person of the qualities of 
creditor and debtor with respect to the same 
obligation 
- Both debtor and creditor of the same obligation 
 
- Requisites of Confusion: 
- It must take place between the principal debtor 
and creditor of the same obligation 
- It must be complete and definite 

Article
1276  ARTICLE
1276.

Merger
which
takes
place
in
the
person 
of
the
principal
debtor
or
creditor
benefits
the 
guarantors.
Confusion
which
takes
place
in
the 
person
of
any
of
the
latter
does
not
extinguish
the 
obligation.  
 
- Only the Merger in the person of the principal debtor or 
creditor extinguishes the obligation. Merger of 
accessory or subsidiary parties may extinguish the 
accessory or subsidiary obligation but not the principal 
obligation. 
 
ART.
1277.

Confusion
does
not
extinguish
a
joint 
obligation
except
as
regards
the
share 
corresponding
to
the
creditor
or
debtor
in
whom
the 
two
characters
concur.   
 
- Nature of Joint Obligation.   
- Rule is different in Solidary - Obligations. 
 

   

 
Compensation 
 

Article
1276  ARTICLE
1278.

Compensation
shall
take
place
when 
two
person,
in
their
own
right,
are
creditor
and 
debtors
of
each
other.  
 
- Compensation  
- the extinguishment to the concurrent amount of 
the debts of two persons who, in their own right, 
are debtors and creditors of each other 
- may be partial or total depending on the 
amounts of the concurring debts.   

What
are
the
4
Kinds
of  Kinds of Compensation 
Compensation
as
to   
cause
or
origin?  - As to cause or origin: 
  - Legal  
  - when it takes place by operation of law 
  even without the knowledge of the parties 
  - Voluntary  
  - when it takes place by agreement of the 
  parties 
  - Judicial  
  - when it takes place by order from a court 
  in a litigation 
  - Facultative  
  - when it can be set up only by one of the 
  parties 
   
What
are
the
4
Kinds
of  - As to extent or effect 
Compensation
as
to  - Total  
extent?  - extinguishes the entirety of both 
concurring debts. 
- Partial  
- extinguishes the smaller of the concurring 
debt but the balance of the larger debt 
remains subsisting. 

What
are
the
Requisites  ARTICLE
1279.

In
order
that
compensation
may
be 
for
Compensation
to  proper,
it
is
necessary: 
take
place?   
1. That
each
of
the
obligors
be
bound
principally,
that 
he
be
at
the
same
time
a
principal
creditor
of
the 
other; 
2. That
both
debts
consist
in
a
sum
of
money,
or
if
the 
thing
due
are
consumable,
they
be
of
the
same
kind, 
and
also
of
the
same
quality
if
the
latter
had
been 
stated; 
3. That
the
two
debts
be
due; 

 
 4. That
they

be
liquidated
and
demandable; 
5. That
over
neither
of
them
there
be
any
retention
or 
controversy,
commenced
by
third
persons
and 
communicated
in
due
time
to
the
debtor.  
 
- This article enumerates the requisites for Compensation 
to take place. 

  ARTICLE
1280.

Notwithstanding
the
provisions
of
the 
preceding
article,
the
guarantor
may
set
up 
compensation
as
regards
what
the
creditor
may
owe 
the
principal
debtor.   
 
- Note: This article is an exception to the general rules 
that only the principal debtor can set up to his creditor 
what the latter owes him. 
 
ARTICLE
1281.

Compensation
may
be
total
or
partial. 
When
the
two
debts
are
of
the
same
amount,
there
is
a 
total
compensation.  
 
- Total compensation results when the two debts are of 
the same amount; if they are of different amounts, 
compensation is total as regards the smaller debt, and 
partial only with respect to the larger debt 

1282  ARTICLE
1282.

The
parties
may
agree
upon
the 
compensation
of
debts
which
are
not
yet
due. 
 
- In compensation, even obligations not yet due may be 
compensated by agreement of the parties. 
 
ARTICLE
1283.

If
one
of
the
parties
to
a
suit
over
an 
obligation
has
a
claim
over
the
damages
against
the 
other,
the
former
may
set
it
off
by
proving
his
right
to 
said
damages
and
the
amount
thereof. 
 
- Compensation may take place when so declared by the 
final judgment of a court in a suit. 
- In simple terms, Art. 1283 refers to situations where a 
party can offset his/her claim for damages from the 
other party with any receivables due to the other party 

What
are
Recissible
or  ARTICLE
1284.

When
one
or
both
debts
are
rescissible 
Voidable
Obligations?  or
voidable,
they
may
be
compensated
against
each 
other
before
they
are
judicially
rescinded
or
avoided.  
 
- Recissible
or
Voidable
Obligations 
- defective obligations that remain valid and 
subsisting until rescinded or voided. 
 

 
 ARTICLE
1285.

The
debtor
who
has
consented
to
the 
assignment
of
rights
made
by
a
creditor
in
favor
of
a 
third
person
cannot
set
up
against
the
assignee
the 
compensation
which
would
pertain
to
him
against
the 
assignor,
unless
the
assignor
was
been
notified
by
the 
debtor
at
the
time
he
gave
his
consent,
that
he
reserved 
his
rights
the
compensation. 
 
If
the
creditor
communicated
the
cession
to
him
but 
the
debtor
did
not
consent
thereto,
the
latter
may
set
up 
the
compensation
of
debts
previous
to
the
cession,
but 
not
of
subsequent
ones. 

1286  If
the
assignment
is
made
without
the
knowledge
of 
the
debtor,
he
may
set
up
the
compensation
of
all 
credits
prior
to
the
same
and
also
latter
ones
until
he 
had
knowledge
of
the
assignment.  
 
- This Article refers to instances where one of the 
concurring debts have been assigned by a creditor to a 
third party. 
- Compensation can only take place if the right to 
compensation was reserved. 
 
ARTICLE
1286.

Compensation
takes
place
by
operation 
of
law,
even
though
the
debts
may
be
payable
at 
different
places,
but
there
shall
be
an
indemnity
for 
expenses
of
exchange
or
transportation
to
the
place
of 
payment.  
 
- Compensation is automatic and takes place by 
operation of law 
- Different places of payment is not a hindrance to 
compensation of mutual obligations 

  ARTICLE
1287.

Compensation
shall
not
be
proper
when 
  one
of
the
debts
arises
from
a
depositum
or
from
the 
  obligations
of
a
depositary
or
of
a
bailee
in 
  commodatum. 
   
  Neither
can
compensation
be
set
up
against
a 
  creditor
who
has
a
claim
for
support
due
by
gratuitous 
  title,
without
prejudice
to
the
provisions
of
paragraph
2 
  of
article
301.  
   
  ARTICLE
1288.

Neither
shall
there
be
compensation
if 
  one
of
the
debts
consists
in
civil
liability
arising
from
a 
  penal
offense.  
   
What
is
Depositum?  - Depositum
or
Deposit  
 

 
   -a contract where a person receives a thing 
  belonging to another with the obligation of 
  keeping it safe and returning the same back. 
  - Commodatum  
What
is
Commodatum?  - a gratuitous contract where a person delivers to 
another something not consumable so that the 
latter may use it and then return the same later. 

  - The previous two Articles refers to instances where 

  Compensation cannot take place because the 
  obligations mentioned above are incompatible with a 
  regular obligation to pay a sum of money for one reason 
  or another. 
   
What
are
the
instances  - Instances when legal compensation is not allowed by 
when
legal  law: 
compensation
is
not  - Where one of the debts arises from a depositum 
allowed
by
law?  - Where one of the debts arises from a 
commodatum 
- Where one of the debts arises from a claim for 
support due by gratuitous title 
- Where one of the debts consist in civil liability 
arising from a penal offense 

  ARTICLE
1289.

If
a
person
should
have
against
him 
several
debts
which
are
susceptible
of 
compensation,
the
rules
on
the
application
of 
payments
shall
apply
to
the
order
of
the 
compensation.   
 
- Compensation is similar to payment and follows the 
same rules in application of payment 
 
ARTICLE
1290.

When
all
the
requisites
mentioned
in 
article
1279
are
present,
compensation
takes
effect 
by
operation
of
law,
and
extinguishes
both
debts
to 
the
concurrent
amount,
even
though
the
creditors 
and
debtors
are
not
aware
of
the
compensation.  
 
- This is the provision that declares that compensation is 
theoretically automatic and does not need the consent 
of the parties for it to take place provided the requisites 
under Article 1279 are present. 
   

 
Novation 
 

What
is
novation?  ARTICLE
1291.

Obligations
may
be
modified
by: 
  a. Changing
their
object
or
principal
conditions; 
  b. Substituting
the
person
of
the
debtor; 
  c. Subrogating
a
third
person
in
the
rights
of
the 
  creditor. 
   
  - Novation   
  - the extinction of an obligation through the 
  creation of a new one which substitute it. 
   
What
are
the
2  - In effect, in Novation there are actually 2 stipulations: 
stipulations
in
novation?  - Extinguish the original obligation 
- Replacing the original obligation with a new 
obligation. 

What
are
the
requisites  - Requisites of Novation 
of
Novation?  - a previous valid obligation; 
- capacity and intention of the parties to modify or 
extinguish the obligation; 
- the modification or extinguishment of the 
obligation; and the creation which consist in the 
substituting a new debtor in the place of the 
original one, may be made even without the 
knowledge or against the will of the latter, but 
not without the consent of the creditor. 

  Kinds of Novation 
   
What
are
the
kinds
of  1. According to origin: 
novation
according
to  - Legal  
origin?  - that which takes place by 
  operation 
  - Conventional  
  - that which takes place by 
  agreement of the parties 
What
are
the
kinds
of  2. According to how it is constituted: 
novation
according
to  - Express  
how
it
is
constituted?  - when it is so declared in 
  unequivocal terms 
  - Implied  
  - when the old and the new 
  obligations are essentially 
  incompatible with each other 
What
are
the
kinds
of  3. According to extent 
novation
according
to  - Total
or
extinctive  
extent?  - when the old obligation is 
  completely extinguished 

 
  - Partial
or
modifactory   
  - when the old obligation is merely 
  modified 
  4. According to subject: 
What
are
the
kinds
of  - Real
or
objective   
novation
according
to  - when he object or the principal 
subject?  conditions are changed 
- Personal
or
subjective  
- when the object or principal 
conditions are changed 
- Mixed  
- when the object and the debtor or 
the creditor, or both the parties, 
are changed. It is a combination 
of real and personal novation 

What
is
a
Personal  ARTICLE
1292.

In
order
that
an
obligation
may
be 
Novation?  extinguished
by
another
which
substitute
the
same, 
it
is
imperative
that
it
is
so
declared
in
unequivocal 
terms,
or
that
the
old
and
the
new
obligations
be
on 
every
point
incompatible
with
each
other.  
 
- Novation can never be implied. 
 
ARTICLE
1293.

Novation
which
consists
in
substituting 
a
new
debtor
in
the
place
of
the
original
one,
may
be 
made
even
without
the
knowledge
or
against
the
will 
of
the
latter
but
not
without
the
consent
of
the 
creditor.

Payment
by
the
new
debtor
gives
him
the 
rights
mentioned
in
articles
1236
and
1237.  
 
Personal Novation 
- Substitution  
- when the person of the debtor is 
substituted 
- Subrogation  
- when the third person is subrogated in 
the rights of the creditor 

   

  Kinds
of
Substitution
(Creditor
consent
is
necessary) 
   
What
is
expromission?   - Expromission  
  - takes place when a third person assumes the 
  obligation of the debtor without the knowledge 
  or consent of the original debtor. (Art. 
  1293-1294) 
What
is
delegacion?   - Delegacion  
 

 
 - takes place when a third person assumes the 
obligation of the debtor with the consent of the 
original debtor. (Art. 1295) 
 
ARTICLE
1294.

If
the
substitution
is
without
the 
knowledge
or
against
the
will
of
the
debtor,
the
new 
debtor’s
insolvency
or
non-fulfillment
of
the 
obligation
shall
not
give
rise
to
any
liability
on
the 
part
of
the
original
debtor.  
 
- This is the risk of the creditor in the case of Expromision 

  ARTICLE
1295.
The
insolvency
of
the
new
debtor,
who 
has
been
proposed
by
the
original
debtor
and 
accepted
by
the
creditor,
shall
not
revive
the
action 
of
the
latter
against
the
original
obligor,
except
when 
said
insolvency
was
already
existing
and
of
public 
knowledge,
or
known
to
the
debtor,
when
he 
delegated
his
debt.  
 
- In Delegacion, the responsibility of the original debtor 
would subsist if the insolvency of the new debtor was 
already known when the novation took place. 
 
ARTICLE
1296.

When
the
principal
obligation
is 
extinguished
in
consequence
of
a
novation, 
accessory
obligations
may
subsist
only
insofar
as 
they
may
benefit
third
persons
who
did
not
give
their 
consent.  
 
- Same as article 1230, 1273, 1280 

Void
Obligations   ARTICLE
1297.

If
the
new
obligation
is
void,
the
original 
one
shall
subsist,
unless
the
parties
intended
that 
the
former
relation
should
be
extinguished
in
any 
event. 
 
- This stresses as one of the essential requirement for a 
novation, to wit; the new obligation must be valid. 
 
ARTICLE
1298.

The
novation
is
void
if
the
original 
obligation
is
void,
except
when
annulment
may
be 
claimed
only
by
the
debtor,
or
when
ratification 
validates
acts,
which
are
voidable.   
 
- a void obligation cannot be novated because there is 
nothing to novate 
 
ARTICLE
1299.

If
the
original
obligation
was
subject
to 
a
suspensive
or
resolutory
condition,
the
new 

 
 obligation
shall
be
under
the
same
condition,
unless 
it
is
otherwise
stipulated.  

What
Kinds
of  ARTICLE
1300.

Subrogation
of
a
third
person
in
the 
Subrogation?  rights
of
the
creditor
is
either
legal
or
conventional. 
The
former
is
not
presumed,
except
in
cases 
expressly
mentioned
in
this
Code;
the
latter
must
be 
clearly
established
in
order
that
it
may
take
effect. 
 
Kinds of Subrogation 
 
- Conventional  
- when it takes place by the express agreement of 
the original parties and the third parties   
- Legal  
- when it takes place without agreement but by 
operation of law 
 
ARTICLE
1301.

Conventional
subrogation
of
a
third 
person
requires
consent
of
the
original
parties
and 
of
the
third
person.  

  ARTICLE
1302.

It
is
presumed
that
there
is
legal 
subrogation: 
1. When
a
creditor
pays
another
creditor
who
is 
preferred,
even
without
the
debtor’s
knowledge; 
2. When
a
third
person,
not
interested
in
the
obligation, 
pays
with
the
express
or
tacit
approval
of
the
debtor; 
3. When,
even
without
the
knowledge
of
the
debtor,
a 
person
interested
in
fulfilling
the
obligation
pays, 
without
prejudice
to
the
effects
of
confusion
as
to 
the
latter’s
share.  
 
- These are the instance where there is Novation by 
operation of law and requires no other participation from 
the parties. 

  ARTICLE
1303.

Subrogation
transfers
to
the
person 
subrogated
the
credit
with
all
the
rights
thereto 
appertaining,
either
against
the
debtor
or
against 
third
persons,
be
they
guarantors
or
possessors
of 
mortgages,
subject
to
stipulation
in
a
conventional 
subrogation.   
 
- In Subrogation, the new creditor essentially steps into 
the shoes of the old creditor. 
- But this may be modified by the stipulations of the 
parties. 
 
ARTICLE
1304.

A
creditor,
to
whom
partial
payment
has 
been
made,
may
exercise
his
rights
for
the 

 
 remainder,
and
he
shall
be
preferred
to
the
person 
who
has
been
subrogated
in
his
place
in
virtue
of 
partial
payment
of
the
same
credit.