ARTICLE

1248-1257

Presented by Carlisha Mei-chi T. Liao

ART. 1248. Unless there is an express stipulation to that effect, the
creditor cannot be compelled partially to receive the prestation 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 may demand and the debtor may effect the payment of the
former without waiting for the liquidation of the latter.
 Performance of obligation should be
complete

● The above provision contemplated obligations where there is only one creditor
and only on debtor.
● Joint and solidary obligations are governed by Articles 1207 to 1222
● In order that payment may extinguish an obligation, it is necessary that there, be
complete performance of the prestation
● The creditor may accept but he cannot be compelled to accept partial
performance.
● The debtor has the duty to comply with the whole of the obligation but he cannot
be required to make partial payments if he does not wish to do so.
 When partial performance is allowed
There are cases, however, when partial performance may be either required or insisted.
Among there cases are:

3
1
When there is an express When the different prestations in which the
stipulation to the effect obligation consists are subject to different
terms or conditions which affect some of
them.
In obligations which comprehend several
2 distinct prestations (e.g., obligation to pay
debt in installments), it is evident that the
When the debt is in part prestations need not be executed
liquidated (definitely and simultaneously but each successive
determined or computed) execution thereof must be complete
and in part unliquidated
 EXAMPLES

1. D is indebted to C for P5,000 due today. D cannot compel C to receive P4,000 in partial payment of
the obligation and neither can C require D to pay only P4,000 unless there is an agreement to the contrary.

2. If D owes C P5,000 plus the share of C from the profit of a business which, however, has not yet been
liquidated or determined, C may demand and D may effect the payment of the P5,000, which is already
known

3. If P4,000 o the debt of D is due today and P1,000 tomorrow, the obligation can be complied with
partially. Similarly, partial performance may be effected in case the payment of the P1,000 is subject to
the fulfillment of a condition.

4. If S obliged himself to deliver 50,000 bags of cement to B at the construction site of a building. S
makes a first delivery of 5,000 bags informing B that continuous deliveries will follow. In this case, B cannot,
in good faith refuse to accept the partial deliveries as long as they are sufficient for his construction needs
ART. 1249. The payment of debts in money shall be made in the
currency stipulated, and if it is not possible to deliver such currency, the in
the currency which is legal tender in 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. (1170)
Meaning of Legal Tender

Is that currency which is offered by the debtor in the right

amount, the creditor must accept in payment of a debt in money

Legal Tender in the Philippines

Debts in money shall be paid in the currency stipulated. If it is not possible to deliver such
currency or in the absence of any stipulation to make payment in a foreign currency, then
the payment shall be made in the currency which is legal tender in the Philippines.
In the Philippines, all coins and notes issued by the Bangko Sentral ng Pilipinas (BSP)
constitute legal tender for all debts, both public or private.
Legal Tender in the Philippines (cont.)

Unless otherwise fixed by the Monetary Board of the BSP, coins are legal tender
for amounts not exceeding P50.00 for denomination of P0.25 and above, and in
those for amounts not exceeding P20.00 for denominations of P0.10 or less

All coins and bill above P1.00 are, therefore, valid legal tenders for any amount.
 Payment by means of instruments of credits
1. Right of creditor to refuse or accept
promissory notes, checks, bills of exchange and other commercial documents are not legal
tender and, therefore, the creditor cannot be compelled to accept them. This is true even
though the check is certified
a. The creditor, however, if he chooses, may accept them, without the acceptance
producing the effect of payment. In the meantime, the demandability of the original
obligation is suspended.

b. The creditor must cash the instrument, and it is only when it is dishonored that he can
bring an action for non-payment of the debt
2. Effect on obligation
payment by means of mercantile documents does not extinguish the obligation:
a. Until they have been cashed
b. Until they have been impaired through the fault of the creditor
 EXAMPLES
D owes C P10,000 which is due today. Here, payment in cash and in legal
tender is implied. C can legally refuse to accept a check from D and insist on
payment in cash. He has the legal right to treat their contract as breached unless D
complies.

If C accepts, there is no payment yet until the check has been cashed or
when through his fault, it has been impaired as when he has delayed in presenting
the check for payment value by reason of the insolvency of the bank

The payment by check is considered to be only a conditional payment. D

is not finally released until the check has been honored by the bank on which it was
drawn. But until the check is dishonored, C cannot demand the payment of the
obligation.
ART. 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 currency
 MEANING OF INFLATION
AND DEFLATION

INFLATION
is a sharp sudden increase
of money or credit or both
without a corresponding
increase in business
transactions.
Inflation causes a drop in
the value of money,
resulting in the rise of the
general price level
DEFLATION
is the reduction in
volume and circulation
of the available money
or credit, resulting in a
decline of the general
price level;
Basis of payment in extraordinary
inflation or deflation
Under Article 1250, the purchasing value of the currency at the time of the
establishment of the obligation shall be the basis of payment, in case of any
extraordinary increase or decrease in the purchasing power of the currency
which the parties could not have reasonably foreseen. This is, however, subject
to the agreement of the parties to the contrary.
 EXAMPLES

D borrowed from C P5,000 payable after 5 years. On the maturity of the

obligation, the values of P5,000 dropped to P2,500 because of inflation (or
increased to P10,000 because of deflation).

In this case (assuming there is extraordinary inflation or deflation), the

basis of payment shall be the equivalent value of the currency today to the five (5)
years ago. Hence, D is liable to pay C P10,000 (or P2,500) unless there is an
agreement to the contrary, e.g. that D shall pay C P5,000 regardless of any
extraordinary decrease or increase in the purchasing power of the peso.

From the employment of the words “extraordinary inflation or deflation or deflation

of the currency stipulated,” is can be seen that the legal rule in Article 1250 envisages
contractual obligations where a currency is selected be the parties as the medium of payment.
It does not apple where the obligation to pay arises from a source independent of contract or
agreement, such as law, quasi-contract, crime, or tort.
ART. 1251. Payment shall be made in the place designated in the obligation

There being no express stipulation and 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 by him.

These provisions are without prejudice to value under the Rules of Court.
 Place where obligation shall be paid
Article 1251 gives the rules regarding the place for the payment of an obligation
without prejudice to venue under the rules of Court.

1 2 3
If there is a stipulation If there is no stipulation and the thing
There is a stipulation, and the thing to de to be delivered is generic, the place
the payment shall be delivered is specific, the of payment shall be the domicile of
made in the place payment shall be the debtor. In this case, the creditor
designated made at the place bears the expenses in going to the
where the thing was, at debtor’s place to accept payment
the perfection of the (see Art. 1247) subject to the rule in
contract. paragraph five

The order as above enumerated is successive and exclusive as may be gleaned from
the provision itself.
 Place where obligation shall be paid
(cont.)
Note: Venue is the place where a court suit or action must be filed or
instituted

DOMICILE RESIDENCE
is the place of a person’s habitual Is only an element of domicile.
residence; the place where he has
It simply requires bodily presence as in
his true fixed permanent home and
inhabitant in a given place, which
to which place he, whenever he is
domicile (or legal residence) requires
absent, has the intention or
bodily presence in the place and also an
returning.
intention to make it one’s domicile

It is believed that the term “domicile”, as used in Article 2051, connotes “actual” as distinguishes
from “legal” residence
 EXAMPLES

1. S obliged himself to deliver to B a specific refrigerator. It was agreed that the

refrigerator shall be delivered at B’s house. The house of B shall be the place of
delivery

2. If there is no agreement as to the place of delivery and the refrigerator was in

the house of C when the parties entered into contract, then the delivery shall be
made at the house of C. But is the refrigerator was temporarily at some place (e.g.,
on a ship in transit), the place of delivery shall be the domicile of S unless otherwise
stipulated.

3. If the obligation of S is to pay B a sum of money (a generic thing), the place of

payment is that designated in the obligation; otherwise, B must have to go to the
house of S to receive payment. B incurs the expenses incidental to such collection. If
S changes his domicile in bad faith or after he has incurred in delay, the additional
expenses shall be borne by him.
SUBSECTION 1 - APPLICATION OF PAYMENTS
ART 1252. He who has various debts of the same kind in favor of one and the same
creditor, may declare at the time of making the payment, to which of them the same must
be applied. Unless the parties so stipulate, or when the application of payment is made by
the party whose benefit the term has been constituted, application shall not be made as to
debts which are not yet due

If the debtor accepts from the 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
Meaning of Application of Payments

is the designation of the

debt to which should be
applied the payment made
by a debtor who has various
debts of the same kind in
favor of one (1) and the
same creditor.
 REQUISITES OF APPLICATION OF
PAYMENTS

1 2 3
There must be one (1) debtor and There must be two (2) or more The debts must be of the same
one (1) creditor debts kind

4 5
The debts to which payment The payment made must not
made by the debtor has been be sufficient to cover all the
applied must be due debts
 Application on debts are not yet due
The application of payments as to debts not yet due cannot be made
unless:

1
There is a stipulation
2
It is made be that the
that the debtor may debtor or creditor, as the
so apply; or case may be, for whose
benefit the period has
been constituted
 RULES ON APPLICATION OF PAYMENTS
A debtor who has several different debts may make part payment. As to which debt is paid,
the rules are as follows:

Rule 1 Rule 2 Rule 3 Rule 4 Rule 5

The debtor has the The right to make the If the debtor does not If the creditor has not If the debts due are of
first choice; he must application once apply payment, the also made the the same nature and
indicate at the time of exercised is irrevocable creditor may make the application, or it the burden, the payment
making payment, and unless the creditor designation by application is not valid, shall be applied to all of
not afterwards, which consents to the change specifying in the receipt the debt, which is most them proportionately
particular debt is which debt is being onerous to the debtor
being payed. If, in paid among those due, shall
making use of his be deemed to have
right, the debtor been satisfied
applied the payment
to a debt, he cannot
later claim that it
should be applied to
another debt
 EXAMPLES
D owes C as follows:

a. P1,500 payable on September 5;

b. P1,200 payable on September 20;

c. A specific transistor radio worth P2,000 to be delivered on September 20; and

d. P1,000 payable on October 15.

1. On September 20, D payed C, P1,500. D may apply the P1,500 to debt (a), or to debt (b) and (if
C does not object) to a portion of debt (a).

If D paid only P1,000, he cannot choose to apply his payment to the P1,500 debt because C cannot
be compelled to receive partial payment. D cannot properly apply his payment to debt (c ) because it
is not of the same kind. He must deliver the very thing agreed upon. Neither can he apply it to debt
(d) which is not yet due unless there is a stipulation to the contrary or he has the benefit of the period

An application of payment made by the debtor without objection from the creditor is binding upon
the latter. His acquiescence is equivalent to an agreement and has the force and efficacy of a
contract
 EXAMPLES (cont.)
2. If D does not make a choice, C can make the designation in the receipt with the
consent of D. D may change the application made by C. Note that the law says “if the
debtor accepts”, which implies that he has the liberty to reject also

The acceptance by D if the receipt given by C is regarded be the law as a contract in

itself independent of the principal obligation. His acquiescence to the application
made by C amounts to an assent to such application which he may no longer revoke
or change “unless there is a cause for invalidating the contract” as where the consent if
D in accepting the receipt was vitiated by reason of fraud, mistake, undue influence,
etc.

3. If C does not make the application in the receipt or no receipt was issued by him,
then the legal rules in Article 1254 will govern.
ART. 1253. If the debtor produces interest payment of
the principal shall not be deemed to have been made
until the interests have been covered
 Interest earned paid ahead of
principal

● The rule laid down in the article is mandatory. Hence, the debtor
cannot choose to credit his payment to the principal before interest is
paid.
● The payment must be applied first to the interest and whatever
balance is left can be credited to the principal.
● The creditor can refuse an application of the debtor made contrary to
the provision of Article 1253.
● The rule is subject, however, to any agreement between the parties, or
to waiver by the creditor. In this sense, Article 1253 is merely directory
 EXAMPLES

D owes C P10,000 with P1,000 as accrued interest. D pays

C P10,000
The P10,000 will first be applied to the interest earned by
the debt. Then the balance of P9,000 will be credited to the
amount. Therefore, D will still owe C P1,000 of the principal.
ART. 1254 When the payment cannot be applied in accordance
with the preceding rules, or if application cannot 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.
Application of payment to most onerous debt

In case no application of payment has been made by the debtor

and the creditor, then the payment shall be applied to the most
onerous debt, and if the debts are of the same nature and
burden, to all of them proportionately
 When a debt more onerous than another
A debt is more onerous than another when it is more burdensome to
the debtor.
No fixed rule can be laid down in determining which debt is more
onerous to the debtor since the condition of being more burdensome
The Supreme Court, however, in various decisions has given some rules which can be
followed to determine whether one (1) debt is more burdensome than another.
1. An interest-bearing debt is more onerous than a non-interest-bearing debt even if the latter is an older one

2. A debt as a sole debtor is more onerous than as a solidary debtor

3. Debts secured by a mortgage or by pledge are more onerous than unsecured debts

4. Of two (2) interest bearing debts, the one with a higher rate is more onerous

5. An obligation with a penalty clause is more burdensome than one without penalty clause.
Where debts subject to different burdens

Suppose the debts are subject to different burdens (like one debt
secured by a mortgage and the other with a penalty clause) that
it cannot be definitely determined which debt is more onerous to
the debtor
To what debt should the payment be applied? To all of them
proportionately.
SUBSECTION 2 - PAYMENT BY CESSION

ART 1255 The debtor may cede or assign his 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 by special laws.
Meaning of Payment by Cession

Payment by cession is another special form

of payment.

It is the assignment or abandonment of all

the properties of the debtor for the benefit
of his creditors in order that the latter may
sell the same and apply the proceeds
thereof to the satisfaction of their credits
 Requisites of payment by cession
1. There must be two (2)
or more creditors 2. The debtor must
be (partially)
insolvent

3. The assignment
must involve all
the properties of
the debtor 4. The cession
must be
accepted by the
creditors
Effect of Payment by Cession

Unless there is a stipulation to the contrary,

the assignment does not make the creditors
the owners of the property of the debtor
and the debtor is released from his
obligation only up to the net proceeds of the
sale of the property assigned.

In other words, the debtor is still liable if

there is balance
 EXAMPLES

D is indebted to several creditors in the total amount of P2 million. His assets

are not enough to pay all his debts
With the consent of his creditor, D may assign his property to them to be
sold, to satisfy their credits. It the net proceeds of the sale amount only to
P1.5 million, D is still liable for the balance of P500,000 unless there is a
stipulation that the assignment shall be in full satisfaction of all his debts
 Dation in Payment and Cession
distinguished
The differences are:

1. In dation, there is usually only one (1) creditor, while in cession, there are several
creditors;
2. Dations does not presuppose the insolvency of the debtor, which in cession, the
debtor is insolvent at the time of assignment.
3. Dation does not involve all the property of the debtor, while cession extends to
all the property of the debtor subject to execution;
4. In dation, the creditor become the owner of the thing given by the debtor, which
in cession, the creditors only acquire the right to sell the thing and apply the
proceeds to their creditors proportionately; and
5. Dation is really an act of novation, while in cession it is not an act of novation

Both are substitute forms of payment or performance

SUBSECTION 3 - Tender of Payment and Consignation
ART 1256 If the creditor to whom tender of payment has been refused without just cause
to accept it, the debtor shall be released from responsibility by the 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 right to collect;
5. When the title of the obligation has been lost
 Meaning of “tender payment” and
“consignation”
TENDER PAYMENT
is the act, on the part of the debtor, of
offering to the creditor the thing or
amount due. The debtor must show
that he has in his possession the thing
or money to be delivered at the time
of the offer.
CONSIGNATION
is the act of depositing the thing or amount due
with the proper court when the creditor or
amount due with the proper court when the
creditor does not desire or cannot receive it,
after complying with the formalities required by
law. Consignation is applicable when there is a
debt or an obligation to pay. It is always judicial
and it generally requires a prior tender of
payment which is, by its very nature,
extrajudicial.
 REQUISITES OF VALID
CONSIGNATION
In order that the debtor may be released from the obligation by the consignation of the thing or sum due, the following
requisites must be observed:

1 2 3
Existence of a valid debt which is Tender of payment by the debtor Previous notice of consignation
due and refusal without justifiable to persons interested in the
reason by the creditor at accept it fulfillment of the obligation

4 5
Consignation of the thing or sum Subsequent notice of
due consignation made to the
interested parties
 EXAMPLES

1. D owes C a sum of money. On the due date of the obligation, D offers to pay the obligation
but C refuses to accept the payment without any justifiable reason

In this case, D’s obligation will not be extinguished until he has made a valid consignation. The
refusal by C to accept the offer to pay without just case will not have the effect of payment but
D will be relieved from payment of any interest from the date of tender.

2. D entered into contract with C. D is given the right to cancel the contract upon payment of
P10,000 to C.

In this case, D has no existing debt to C. The amount of P10,000 is not owed by D, being merely
the consideration for the exercise of his right to cancel the contract. Hence, consignation of the
P10,000 is not necessary. Tender of payment in good faith is sufficient to entitle D to
cancellation
 When tender of payment not required

● In the five cases mentioned in the second paragraph of Article 1256,

tender of payment is not necessary before the debtor can consign the
thing due with the court.
● It has been held that a creditor who, without legal justification, informs
his debtor that payment of a debt will not be accepted thereby waives
payment on the date when the payment will be due; as a consequence
the debtor is, in such case, excused from making a formal tender of the
money in such date. A debtor does not incur default by failing to make
fruitless tender after notification from the creditor that the money will
not be received.
Requirements for valid tender of payment

● Tender of payment must comply with the rules on the payment or with the
terms required by the contract in making such tender. The tender, even if valid,
does not by itself produce legal payment, unless it is completed by consignation;
● It must be unconditional and for the whole amount due and in legal tender; and
● 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
Prior notice to persons
interested required
In the absence or prior notice to the persons interested in the
fulfillment of the obligation (such as guarantors, mortgagees,
solidary debtors, solidary creditors), the consignation, ay
payment, shall be void.
The purpose of the notice 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
bear the risk thereof
Consignation must comply
with provisions on payment
Consignation to amount to a valid payment must also
comply with the provisions which regulate payment. (par 2;
see ARTS 1233, 1239, 1244, 1246, 1248, 1249, 1253)

One of these rules is that payment should be made in legal

tender. The general rule is that an offer of a bank check for
the amount due is not a good tender and this is true even
though the check is certified or is a manager’s check, except
where no objection is made on the ground
END
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