SUBSECTION 2.

PAYMENT BY CESSION

ART. 1255. The debtor may cede or assign his ART. 1256. If the creditor to whom tender of
property to his creditors in payment of his debts. payment has been refused without just cause to
This cession, unless there is stipulation to the accept it, the debtor shall be released from
contrary, shall only release the debtor from responsibility by the consignation of the thing or
responsibility for the net proceeds of the thing sum due.
assigned. The agreements which, on the effect of Consignation alone shall produce the
the cession, are made between the debtor and his same effect in the following cases:
creditors shall be governed by special laws.
(1) When the creditor is absent or unknown,
*Payment by cession or does not appear at the place of
-another special form of payment. payment;
-it is the assignment or abandonment of all properties (2) When he is incapacitated to receive the
of the debtor for the benefit of his creditors in order payment at the time it is due;
that the latter may sell the same and apply the (3) When, without just cause, he refuses to
proceeds thereof to the satisfaction of their credits. give a receipt;
(4) When two or more persons claim the
same right to collect;
REQUISITES OF PAYMENT BY CESSION: (5) When the title of the obligation has been
1. there must be two or more creditors; lost.
2. the debtor must be (partially) insolvent; *Tender of payment- is the act, on the part of debtor,
3. the assignment must involve all the of offering to the creditor the thing or amount due.
properties of the debtor; and
-the debtor must show that he has in his possession
4. the cession must be accepted by the
the thing or money to be delivered at the time of the
creditors.
offer.
EFFECT: unless there is a stipulation to the contrary,
*Consignation- act of depositing the thing or amount
the assignment does not make the creditors the
due with the proper court when the creditor does not
owners of the property of the debtor and the debtor is
desire or cannot receive it, after complying with the
released from his obligation only up to the net
formalities required by law.
proceeds. The debtor is still liable if there is a balance.
-it is applicable when there is a debt or an obligation
to pay.
DATION IN PAYMENT AND CESSION
-it is always judicial and requires a prior tender of
DISTINGUISHED:
payment.
DATION CESSION
There is usually only There are several
REQUISITES OF A VALID CONSIGNATION:
one creditor creditors
It does not presuppose The debtor is insolvent 1. existence of a valid debt which is due
the insolvency of the at the time of 2. tender of payment by the debtor and refusal
debtor assignment without justifiable reason by the creditor to
accept it;
It does not involve all It extends to all the
the property of the property of the debtor 3. previous notice of consignation to persons
debtor subject to execution interested in the fulfillment of the obligation;
4. consignation of the thing or sum due; and
The creditor becomes The creditors only
5. subsequent notice of consignation made to
the owner of the thing acquire the right to sell
given by the debtor the thing and apply the the interested parties.
proceeds to their credits
proportionately. REQUISITES OF A VALID CONSIGNATION:
It is really an act of It is not an act of 1. Tender of payment must comply with the
novation novation rules on payment or with the terms required
Both are substitute forms of payment or by the contract in making such tender. The
performance tender, even if valid, does not by itself
 SUBSECTION 2. PAYMENT BY CESSION
produce legal payment, unless it is completed
by consignation;
2. It must be unconditional and for the whole
amount due and in legal tender; and
3. It must be actually made. The manifestation
of a mere desire or intention to pay is not
enough. The debtor must show present ability
to perform by an actual offer of the thing or
money due.
ART. 1257. In order that the consignation of the
thing due may release the obligor, it must first be
announced to the persons interested in the
fulfillment of the obligation.
The consignation shall be ineffectual if it
is not made strictly in consonance with the
provisions which regulate payment
*the consignation, as payment, shall be void if there
is no prior notice to the persons interested in the
fulfillment of the obligation.
*its purpose is to give the creditor a chance to reflect
on his previous refusal to accept payment considering
that the expenses of consignation shall be charged
against him and that in case of loss of the thing
consigned, he shall near the risk thereof.
*Consignation must comply with provisions on
payment.
ART. 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.
The consignation having been made, the
interested parties shall also be notified thereof.
*As tender of payment must precede consignation,
the tender must be proved by the debtor in the proper
case. In other cases when tender is not required, only
prior notice to interested persons of the consignation
needs to be proved.
*After the consignation has been made, the interested
parties must also be notified thereof. Its purpose is to
enable the creditor to withdraw the thing or sum
deposited in case he accepts the consignation.
ART. 1259. The expenses of consignation, when
properly made, shall be charged against the
creditor.
*If the consignation is not properly made, the
expenses are chargeable to the debtor.
WHEN CONSIGNATION DEEMED PROPERLY
MADE:
1. When the creditor accepts the thing or sum
deposited, without objection, as payment of
the obligation
2. When the creditor questions the validity of the
consignation, and the court, after hearing,
declares that it has been properly made; and
3. When the creditor neither accepts nor
questions the validity of the consignation, and
the court after hearing , orders the
cancellation of the obligation.
ART. 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 declaration that
the consignation has been properly made, the
debtor may withdraw the thing or the sum
deposited, allowing the obligation to remain in
force.
*The debtor, however, may withdraw as a matter of
right the thing or sum deposited:
1. before the creditor has accepted the consignation;
2. before a judicial declaration that the consignation
has been properly made, as he is still the owner of the
same.
**In such a case, the obligation shall continue to
remain in force. All expenses are paid by the debtor.
ART. 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.
Effect of withdrawal with authority of creditor:
*the creditor may authorize the debtor to withdraw the
deposit after he has accepted the same or after the
court has issued an order cancelling the obligation.
*As far as the debtor and the creditor are concerned,
their relations will remain as they were before
acceptance or cancellation.
 SUBSECTION 2. PAYMENT BY CESSION
*However, the creditor shall lose every preference
which he may have over the thing, and the co-debtors
(solidary debtors), guarantors and sureties shall be
released.
*The solidary debtors are released only from their
solidary liability but not from their shares of obligation
since they are principal debtors.
ART. 1262. An obligation which consists 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 the obligation requires
the assumption of risk.
*A thing is lost:
1. when it perishes
2. when it goes out of commerce or disappears in
such a way that its existence is unknown or it cannot
be recovered.
*Loss of a determinate thing is the equivalent of
impossibility of performance in obligations to do.
WHEN LOSS OF THING WILL EXTINGUISH AN
OBLIGATION TO GIVE
1. the obligation is to deliver a specific or
determinate thing;
2. the loss of the thing occurs without the fault
of the debtor; and
3. the debtor is not guilty of delay.
WHEN LOSS OF THING WILL EXTINGUISH AN
OBLIGATION TO GIVE
1. when the law so provides
2. when the stipulation so provides;
3. when the nature of the obligation requires the
assumption or risk; and
4. when the obligation to deliver a specific thing
arises from crime
ART. 1263. In an obligation to deliver a generic
thing, the loss or destruction of anything of the
same kind does not extinguish the obligation.
*This article pertains to the debtor being liable even
for fortuitous event because the law says so.
-it is based on the principle that a generic thing never
perishes (genus nunquam perit)
ART. 1264. The courts shall determine whether,
under the circumstance, the partial loss of the
object of the obligation is so important as to
extinguish the obligation.
*there is partial loss when only a portion of the thing
is lost or destroyed or when it suffers depreciation or
deterioration. Partial loss is the equivalent of difficulty
of performance in obligations to do.
*the court is given the discretion in case of
disagreement between the parties, to determine
whether under the circumstances it is so important in
relation to the whole as to extinguish the obligation.
ART. 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
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.
*the obligor who is not at fault is still liable in case he
is guilty of delay or has promised to deliver the same
thing to two or more persons who do not have the
same interest.
*In case of natural calamities, the presumption of fault
does not apply.
ART. 1266. The debtor in obligations to do shall
also be released when the prestation becomes
legally or physically impossible without the fault
of the obligor.
*If the obligation is impossible from the very
beginning, the obligation is void and it is immaterial
whether the impossibility was known or unknown to
the parties.
KINDS OF IMPOSSIBILITY:
1. In purely personal obligations, when the
personal qualifications of the obligor are
involved, physical impossibility takes place
when, for example, the obligor dies or
becomes physically incapacitated to perform
the obligation.
 SUBSECTION 2. PAYMENT BY CESSION

2. Legal impossibility occurs when the

obligation cannot be performed because it is
rendered impossible by provision of law,
although physically it may be possible of
performance. In every contract, a condition is
implied that the promisor shall be released
from his obligation if performance is rendered
impossible by law.

ART. 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.
General Rule: Impossibility of performance releases
the obligor.
*This article is applicable not only to (personal)
obligations to do but also to (real) obligations to give
or deliver.

ART. 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.
*This article is another instance where fortuitous
event does not exempt the debtor from liability.
*The obligation subsists except when the creditor
refused to accept the thing (e.g. property stolen from
him) without justification, after it had been offered to
him.
*Consignation is not necessary. The debtor, however,
must still exercise due diligence.

ART. 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 third persons by reason of the
loss.
*the creditor is given the right to proceed against the
third person responsible for the loss.
*the rights of action of the debtor are transferred to
the creditor from the moment the obligation is
extinguished, by operation of law to protect the
interest of the latter by reason of the loss.
*It finds frequent application in insurance.