Name: Vanessa Fajardo.

Date: March 16, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 3

DIFFERENT KINDS OF OBLIGATIONS

SECTION 1: PURE AND CONDITIONAL OBLIGATIONS

Kinds of obligations according to demadability

* Pure obligation- no term & no condition: demandable at once

* Condition obligation- subject to the fulfillment of a condition

* Condition is a future and uncertain event, upon the happening of which, the effectivity or
extinguishment of an obligation.

Characteristics of a condition

1. Future and uncertain- whether it will happen or not

2. Past but unknown – to both parties

3. Should not be impossible

Kinds of condition

1. Suspensive condition - the fulfillment of the condition will give rise to an obligation.

2. Resolutory condition - the fulfillment of the condition will extinguish an obligation.

Past Event Unknown to the Parties

* If it has happened – the obligation immediately exists purely and simply.

*If it has not happened – there is no obligation at all.

DURATION OF PERIOD DEPENDING ON THE WILL OF DEBTOR

ART. 1180: When the debtor binds himself to pay when his means permit him to do so, the
obligation shall be deemed to be one with a period."

1. The debtor promises to pay when his means permit him to do so. There is no definite time
frame given.

2. The debtor binds himself to pay:

Little by little

As soon as possible

From time to time

At any time I have the money

In partial payments

When I am in a position to pay

EFFECTS OF HAPPENING OF CONDITION

"ART. 1181: In conditional obligations, the acquisition of rights, as well as teh

extinguishment of loss of those already acquired, shall depend upon the happening of the
event which constitutes the condition."

Acquisition of rights. If the suspensive condition does not take place and it is certain that it
will not be fulfilled, the parties would stand as if the conditional obligation had never
existed. (Example: The surrender of the Lotto ticket is the condition precedent to the
payment of the prize.)

Loss of rights already acquired. The happening of the event which constitutes the condition
produces the extinguishment of loss of rights already acquired. (A father binds himself to
support his daughter until she graduates from college. The obligation is extinguished when
the condition is fulfilled - graduation.)

CLASSIFICATION OF CONDITIONS

AS TO EFFECT:
1. Suspensive - the happening gives rise to the obligation

2. Resolutory - The happening extinguishes the obligation

AS TO FORM:

1. Express - the condition is clearly stated

2. Implied - the condition is merely inferred

AS TO POSSIBILITY:

1. Possible - the condition is capable of fulfillment, legally and physically

2.Impossible - the condition is not capable of fulfillment, legally or physically

AS TO CAUSE OR ORIGIN:

1. Potestative - the condition depends upon the will of one of the contracting parties

2. Casual - the condition depends upon chance or upon the will of a third person

3. Mixed - the condition depends partly upon chance and partly upon teh will of a third
person.

AS TO MODE:

1. Positive - the condition consists of the performance of an act.

2. Negative - the condition consists of the omission of an act.

AS TO NUMBERS:

1. Conjunctive - there are several conditions and all must be fulfilled

2. Disjunctive - there are several conditions and only one or some of them must be fulfilled

AS TO DIVISIBILITY:

1. Divisible - the condition is susceptible of partial performance

2. Indivisible - the condition is not susceptible of partial performance

POTESTATIVE CONDITION
A condition suspensive in nature and which depends upon the sole will of one of the
contracting parties.

SUSPENSIVE CONDITION

-WHEN SUSPENSIVE CONDITION DEPENDS UPON THE WILL OF DEBTOR

1. Conditional obligation void. The condition depends solely upon the will of the debtor.
There is no burden on the debtor and no juridical tie is created.

2. Only the condition void. The obligation is pre-existing and does not depend for its
existence upon the fulfillment by the debtor of the postestative condition, only the condition
is void leaving unaffected the obligation itself.

CASUAL CONDITION

Fulfillment of the condition depends exclusively upon chance or will of a third person

MIXED CONDITION

Fulfillment of the condition depends upon the will of one of the contracting parties and
partly upon the chance or will of a third person.

2 KINDS OF IMPOSSIBLE CONDITIONS

1. Physically impossible conditions - ones which cannot exist or cannot be done.

2. Legally impossible conditions - those which are contrary to law, morals, good customs,
public order, or public policy.

EFFECT OF IMPOSSIBLE CONDITIONS

1, Conditional obligation is void.

2. Conditional obligation valid

3. Only the affected obligation void.

4. Only the condition void.

POSITIVE CONDITION

Positive condition is the happening of an event at a determinate time. The obligation is

extinguished when:
(a) As soon as the time expires without the event taking place

(b) As soon as it has become indubitable that the event will not take place although the time
specified has not expired.

NEGATIVE CONDITION

A condition when an event will not happen at a determinate time. The obligation shall
become effective and binding:

(a) From the moment the time indicated has elapsed without the event taking place.

(b) From the moment it has become evident that the event cannot occur, although the time
indicated has not yet elapsed

CONSTRUCTIVE FULFILLMENT

"ART. 1186: The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment."

REQUISITES OF CONSTRUCTIVE FULFILLMENT OF SUSPENSIVE CONDITION

1. The condition is suspensive.

2. The obligor actually prevents the fulfillment of the condition.

3. He acts voluntarily.

RETROACTIVE EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION

1. Obligation to give - An obligation to give subject to a suspensive condition becomes

demandable only upon the fulfillment of the condition.

2. In obligation to do or not to do- With respect to the retroactive effect of the fulfillment of
a suspensive condition, in obligations to do or not to do, no fixed rule is provided.

RETROACTIVE EFFECTS AS TO FRUITS AND INTERESTS IN OBLIGATIONS TO GIVE

1. In reciprocal obligations. There is no retroactivity because the fruits and interests received
during the tendency of the condition are deemed to have been mutually compensated.

2. In unilateral obligations. There is usually no retroactive effect because they are gratuitous.

RIGHTS PENDING FULFILLMENT OF SUSPENSIVE CONDITION

1. Rights of creditor. He may take or bring appropriate actions for the preservation of his
right,

2. Rights of debtor. He is entitled to recover what he has paid by mistake prior to the
happening of the suspensive condition.

KINDS OF LOSS

1. Physical loss - when a thing perishes

2. Legal loss - when a thing goes out of commerce

3. Civil loss- when a thing disapperars in such a way that its existence is unknown

RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT OF THING DURING PENDENCY

OF SUSPENSIVE CONDITION

1. Loss of thing without debtor's fault

2. Loss of thing through debtor's fault

3. Deteriorating of thing without debtor's fault

4. Deterioration of thing through debtor's fault

5. Improvement of thing by nature or by time

6. Improvement of thing at expense of debtor

*Usufruct is the right to enjoy the use and fruits of a thing belonging to another.

KINDS OF OBLIGATIONS ACCORDING TO THE PERSON OBLIGED

1. Unilateral obligation - when only one party is obliged to comply with a prestation.

2. Bilteral obligation - when both parties are mutually bound to each other. Both parties are
debtors and creditors of each other.

REMEDIES IN RECIPROCAL OBLIGATIONS

1. Choice of remedies

(a) Action for specific fulfillment of the obligation with damages

(b) Action for rescission of the obligation also with damages

2. Remedy of rescission fo non-compliance - the revocation, cancellation, or repeal of a law,
order, or agreement.

LIMITATIONS ON RIGHT TO DEMAND RESCISSION

The right to rescind by the injured party is not absolute. Thus,

1. Resort to the courts

2. Power of court to fix period.

3. Right of third person.

4. Substantial violation.

5. Waiver of right

BREACH

WHEN BOTH PARTIES ARE GUILTY OF BREACH

1. First infractor known - one party violated his obligation and then other violated his part.
The liability of the first infractor should be equitably reduced.

2. First infractor cannot be determined - One party violated his obligation followed by the
other, but it cannot be determined which of them was the first infractor.

Name: Vanessa Fajardo BSMA-1 Date: March 16, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 3

DIFFERENT KINDS OF OBLIGATIONS

SECTION 2. OBLIGATIONS WITH A PERIOD

Period- is a future or certain length of which determines the effectivity or the extinguished
of obligation

Obligation with a period- is one whole effects or consequences are subjected in one way or
another to the expiration or arrival of said period or term

PERIOD AND CONDTION DISTINGUISHED

PERIOD CONDITION

 As to fulfillment  Certain event  Uncertain event

 As to time  Refers only to future  May refer also to

past event unknown
to the parties

 As to influence on  Merely fixes the time  Causes an obligation

the obligation of the effectivity of either to rise or to
the obligation cease

 As to effect, when  Depends upon the  Depends upon the

left to debtors will will of the debtors sole will of the
empowers the court debtor invalidates
to fix the duration the obligation
thereof

 As to retroactivity  The arrivals of period  The happening of a

effects does not have any condition has
retroactive effect retroactive effect

KINDS OF PERIOD OR TERM

(a) ACCORDING TO EFFECT

1. Suspensive period- the obligation becomes effective only from the arrival of a certain day
or period

2. Resolutory period- the obligation is valid up to a day certain and terminates upon arrival
of the period

(b) ACCORDING TO SOURCE

1. Legal period-when it is provided by laws

2. Conventional or voluntary period- when it is agreed to by the parties

3. Judicial period- when it is fixed by the court

(c) ACCORDING TO DEFINITENESS

1. Definite period- when it is fixed or it is known when it will come

2. Indifinite period- when it is not fixed or it is not known wjen it will come.

REQUISITES FOR A VALID TERM OR PERIOD

1. It must be future

2. It must be certain, that is, sure to come but may be extended ny mutual agreement

3. It must be possible physically and legally

Article 1194.

THIS ARTICLE SPEAKS OF LOSS, DETORIATION OR IMPROVEMENT OF THE THING BEFORE

ARRIVAL OF THE DAY CERTAIN
ARTICLE 1195

Anything paid or delivered before the arrival of the period, the obligor being unaware of the
period or believing that the obligation has become due and demandable, ay be recovered,
with the fruits, and interest.

PAYMENT BEFOR THE ARRIVAL OF PERIOD

 In Article 1195, applies only to obligation to give. It has no application to do or not to

do

RIGHT TO INTERESTS AND FRUITS

 The debtor has the right to demand for the thing which is paid by mistake. This
article is in relation to solutio indebiti or payment is not due.

ARTICLE 1196

Presumption as to benefit of period- it is presumed that the period is intended for the
benefit of both creditor and debtor such as a loan with interest.

EXEMPTIONS TO THE GENERAL RULE

1. Term is for the benefit of the debtor alone- he cannot be compelled to pay prematurely,
but he can, if he desires to do so.

2. Term is for the benefit of the creditor- creditor may demand the performance of the
obligation at any time but the debtor cannot compel him to accept payment before the
expiration of the period
COMPUTATION OF TERM OR PERIOD

1. The Administration Code of 1987, provides:

 Legal Period
 Year- 365 days
 Month- 30 days
 Day- 24 hrs.
 Night- from sunset to sunrise

2. Month designate by their names- computed by the number of days which they respective
have.

ARTICLE 1197

COURT GENERALLY WITHOUT POWER TO FIX A PERIOD

 Of the obligation does not state a period and no period is intended, the court is not
authorized to fix a period. The courts have no right to make comtracts for the parties

Exceptions to the General Rule:

1. No period is fixed but a period was intended

2. Duration of the period depends upon the will of the debtor

ARTICLE 1198

General Rule: The obligation is not demandable before the lapse of the period

WHEN OBLIGATION CAN BE DEMANDABLE BEFORE THE LAPSE PERIOD:

1. When debtor becomes insolvent

2. When debtor does no furnish guaranties or securities promised
3. When guaranties or securities given have been impaired or have disappeard
4. When debtor violates an undertaking
5. When debtor attempts to abscond
Name: Vanessa Fajardo BSMA-1 Date: March 18, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 3

DIFFERENT KINDS OF OBLIGATIONS

ALTERNATIVE OBLIGATIONS

KINDS OF OBLIGATION ACCORDING TO OBJECT

1. Simple obligation- one where there is only one prestation

2. Compound obligation- one where there are two or more prestations

2 KINDS OF COMPOUND OBLIGATION

1. Conjunctive obligation- there are several prestations and all of them are due
2. Distributive obligation- there are several prestations, but only one or some of the
prestations are due
  There are 2 kinds of Distributive Obligations
 Alternative obligation- several prestations are due but the performance of one is
sufficient
 Facultative obligation- only one prestation is due but the debtor may substitute
another.

RIGHT OF CHOICE, AS A RULE, GIVEN TO DEBTOR

 As a general rule, the right to choose the prestation belongs to the debtor

RIGHT OF CHOICE OF DEBTOR NOT ABSOLUTE

1. The debtor cannot choose those prestations which are impossible, unlawful, or which
could not havebeen the object of the obligation.

2. The debtor has no more right of choice when, among the prestations whereby he is
alternatively bound, only one is applicable

ARTICLE 1201

Communication of notice that choice has been made

1. Effect of notice- until the choice is made and communicated, the obligation remains
alternative

2. Proof and form of notice- the burden of proving that such communication has been made
is upon him who made the choice. It may therefore be made orally or in writing

ARTICLE 1202

 The debtor loses his right of choice when only one alternative prestation is
practicable of performance.

ARTICLE 1203

WHEN DEBTOR MAY RESCIND CONTRACT

 Recession creates the obligation to return the things which were the object of the
contract together with their fruits, and the price with interest

ARTICLE 1204

EFFECT OF LOSS OF OBJECTS OF OBLIGATION

 1. Some of the objects- if some of the objects of the obligatiom has been lost through
the debtos fault, the latter is not liable since he has the right of choice and the
obligation can still be performed
2. All of the objects- if all of them have been lost, the creditor shall have the right to
indemnity for damages since the obligation can no longer be complied with.

BASIS OF INDEMNITY

 The indemnity shall be fixed taking as a basis the value of the last thing which
disappeared

ARTICLE 1205

RULES IN CASE OF LOSS BEFORE CREDITOR HAS MADE CHOICE

1. When a thing is lost through a fortuitous event

2. When a thing is lost through debtors fault
3. When all the things are lost through debtors fault
4. When all the things are lost through a fortuitous event

MEANING OF FACULTATIVE OBLIGATION

Facultative obligation- only one prestation has been agreed upon but the obligor may render
another in substitution

EFFECT OF LOSS

1. Before substitution- if the principal thing is lost through fortuitous event, the
obligation is extinguished
2. After substitution- if the principal thing is lost, the debtor is not liable whatever may
be the cause of the loss, because it is no longer due.

ALTERNATIVE AND FACULTATIVE OBLIGATION DISTINGUISHED:

ALTERNATIVE OBLIGATIONS FACULTATIVE OBLIGATIONS

Number of prestations  several prestations  only one prestations

are due but is due although the
compliance with one debtor is allowed to
is sufficient substitute it.

Right of choice  May be given to the  The right to make the

 creditor or third substitution is given
person only to the debtor

Loss through a fortuitous  The loss of one or  The loss of thing due
event more alternatives extinguishes the
does not extinguish obligation
the obligation

Loss through fault of debtor  Loss of one  The loss of the thing
alternative does not due through his fault
render him liable makes him liable
 When the choice  The loss of the
belongs to the substitute before the
creditor, the loss of substitution through
one alternative the fault of the
tjrough the fault of debtor does not
the debtor gives rise render him liable.
to liability

Name: Vanessa Fajardo BSMA-1 Date: March 18, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 3

DIFFERENT KINDS OF OBLIGATIONS

JOINT AND SOLIDARY OBLIGATIONS

KINDS OF OBLIGATION ACCORDING TO THE NUMBER OF PARTIES

1. Individual obligations- there is only one debtor and one creditor in a contract

2. Collective obligation- there are two or more debtor and two or more creditors

KINDS OF COLLECTIVE OBLIGATION

1. Joint Obligation– where the whole obligation is to be paid or fulfilled proportionately by

the different debtors and demanded proportionately by the different creditors.

2. Solidary obligation- where each one of the debtors is bound render, and/or each creditor
has the right to demand from any of the debtors

WORD USED TO INDICATE JOINT LIABILITY

 Other words used for joint obligations are: mancomunada:mancomunadamente:

pro rata: proportionately: "we promise to pay" signed by two or more persons

WHEN OBLIGATION SOLIDARY

Under Article 1207, there is solidary luability only when:

1. The obligation expressly solidary: or

2. The law requires solidary: or

3. The nature of the obligation requires solidarity

Solidary liability also exists when it is imposed in a final judgment against several defendants

KINDS OF SOLIDARITY

1. ACCORDING TO THE PARTIES BOUND:

 Passive solidarity- solidarity on the part of the debtor , where any one of them can
be made liable for the fulfillment of the entire obligation
 Active solidarity- solidarity on the part of the creditors, where any one of them can
demand the fulfillment of the entire obligation
 Mixed solidarity- solidarity on the part of the debtors and creditors

2. ACCORDING TO SOURCE:
  Conventional solidarity- where solidarity is agreed upon by the parties
 Legal solidarity- when solidarity is imposed by the law
 Real solidarity- wjere solidarity is imposed by the nature of the obligation

JOINT INDIVISIBLE OBLIGATION

 The obligation is joint because the partoes are merely proportionately liable. It is
indivisible because the object orsubect matter is not physically divisible into
different parts.

INDIVISIBILTY AND SOLIDARITY DISTINGUISHED

INDIVISIBLE OBLIGATIONS SOLIDARY OBLIGATIONS

 Refers to the prestation  Refers to juridical or legal tie

 Only the debtor guilty of breach of  All of the debtors are liable for the
obligation is luable for damages breach of the obligation comitted by
a debtors

 Indivisibility can exist although there  There must be atleast two debtros or
is only one debtor and one creditor two creditors

 The others are not liable in case of  The other debtors are
insolvency of one debtor proportionately liable

KINDS OF SOLIDARY OBLIGATION ACCORDING TO THE LEGAL TIE

1. Uniform- when the parties are bound by the same stipulations

2. Non-uniform or varied- when the parties are not subject to the same stulipulations

ACT OF SOLIDARY CREDITOR USEFUL PREJUDICIAL TO OTHERS

 A solidary creditor may do any act or beneficial or useful to the others but he cannot
perform any act prejudicial to ther.

ARTICLE 1215

LIABILITY OF SOLIDARY CREDITORIN CASE OF:

1. Novation- extinguished of old obligation and replaced by a new obligation

2. Compensation- both parties are debtors and creditors of each other
 3. Conclusion- the debtor is also the creditor
4. Remission- extinguishment of obligation gratuitously

ARTICLE 1217

 The creditor has the right to accept which mode of payment to accept if more than
one of ghe debtors offers payment
 Debtors who make payment can collect interest. If payment was made before the
debt is due, interest cannot be demanded from co-debtors

EFFECTS OF PAYMENT BY SOLIDARY DEBTOR

1. Between the solidary debtors and creditor

2. Among the solidary debtors

3. Among the solidary creditors

ARTICLE 1218

 Prescribed- “lapsed”; no longer due and demandable; expired

 Prescriptive period – time when rights should be exercised or else rights expire

ARTICLE 1219

 If payment was made by the debtor, creditor should give back the condoned amount
 If remission was made after debt was paid, the debtor. A has the right to reimburse
from debtor B

ARTICLE 1221

RULES IN CASE THING HAS BEEN LOST OR PRESTATION HAS BECOME IMPOSSIBLE

1. Loss is without fault and before delay

2. Loss is due to fault on the part of a solidary debtor

3. Loss is without fault but after delay

ARTI CLE 1222

DEFENSES AVAILABLE TO A SOLIDARY DEBTOR

1. Defenses derived from the nature of the obligation

2. Defenses personal to, or which pertain to share of, debtor sued

3. Defenses personal to other solidary debtors.

Name: Vanessa Fajardo BSMA-1 Date: March 23, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 3

DIFFERENT KINDS OF OBLIGATIONS

DIVISIBLE AND INDIVISIBLE OBLIGATIONS

MEANING OF DIVISIBLE AND INDIVISIE OBLIGATIONS

1. Divisible obligation- an obligation the prestation of which is capable of partial

performance.

2. Indivisible obligation- an obligation the prestation of which is not capable of partial

performance

 An obligation is presumed to be indivisible when there are only one debtor and
creditor

KINDS OF DIVISION

1. Qualitative Division –division of object based on quality rather than on numbers or

quantity.

2. Quantitative Division -division of object of obligation based on numbers or quantity rather

than on quality.

3. Ideal or Intellectual Division – is one which exists only in the mind of the parties.

KINDS OF INDIVISIBILITY
1. Legal indivisibility – an indivisible obligation set by law even if the object is by nature
divisible.

2. Conventional Indivisibility – an indivisible obligation set or contracted by the parties, even

though the object is by nature divisible

3. Natural Indivisibility – an object which is by nature indivisible, regardless of the intention

of the parties. (Example: car)

WHERE THERE IS ONLY ONE DEBTOR OR CREDITOR

 the debtor has to perform the obligation in totality, whether the prestation is
divisible or not. The creditor cannot be compelled to receive partial performance
and a partial performance would not extinguish the obligation unless it is fully
performed.

ARTICLE 1224

EFFECT OF NON-COMPLIANCE BY A DEBTOR IN A JOINT INDIVISIBLE OBLIGATION

 the obligation will be turned into one for damages (i.e., to pay money). The creditor
cannot demand specific performance or rescission because there is no cause of
action against the other debtors who are willing to fulfill their promises.

ARTICLE 1225

OBLOGATIONS DEEMED INDIVISIBLE

1. Obligations t9 give definite things

2. Obligations which are not susceptible of partial performance
3. Obligations provided by law to be indivisible even if thing or service is physically
divisible
4. Obligations intended by the parties to be indivisible even if thing or service is
physically divisible

OBLIGATIONS DEEMED DIVISIBLE

1. Obligation which have for their object the execution of a certain number of days of
work
2. Obligations which have for their object the accomplishment of work by metrical
units
 3. Obligations which by their nature are susceptible of partial performance

DIVISIBILITY OR INDIVISIBILTY IN OBLIGATIONS NOT TO DO

 In negative obligations not to do, the character of the prestation in each particular
case shall determine their divisibility or indivisibility
 Obligations to do and not to do are generally indivisible

Name: Vanessa Fajardo BSMA-1 Date: March 23, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 3

DIFFERENT KINDS OF OBLIGATIONS

OBLIGATIONS WITH PENAL CLAUSE

ARTICLE 1226

MEANING OF PRINCIPAL AND ACCESSORY OBLIGATIONS

1. Principal obligation – is one which can stand by itself and its validity and existence do not
depend on another obligation.

2. Accessory obligation – is one which cannot stand by itself and depends upon a principal
obligation.
MEANING OF OBLIGATION WITH PENAL CLAUSE

 Obligation with a penal clause – is one which there is an accessory undertaking

attached to it in order to pay previously stipulated indemnity in case of breach.

MEANING OF PENAL CLAUSE

 Penal clause – is an accessory undertaking attached to an obligation to assume

greater liability in case of breach.

PURPOSES OF PENAL CLAUSE

 According to Art. 1226, penal clasue are incorporated to obligations to ensure their
performance (to make the the consequence of breach as eronous as possible) and to
substitute penalty for indemnity for damages and payment of interests in no-
compliance. The main purposes are reaparation and punishment

KINDS OF PENAL CLAUSE

1. As to its origin:

a) Legal Penal clause – when it is provided for by law.

b) Conventional penal clause – when it is provided by the contracting parties.

2. As to its purpose:

a) Compensatory penal clause – when the purpose of the penalty is for payment of
damages.
b) Punitive penal clause – when the purpose of the penalty is to punish the violator.

3. As to its demandability or effect:

a) Subsidiary or alternative penal clause – when only the penalty can be enforced.
b) Joint or cumulative penal clause – when the principal obligation and penalty can be
enforced.

PENALTY SUBSTITUTES FOR DAMAGES AND INTEREST

  as a general rule, the penal clause substitutes for damages and payment of interests
in case of non-compliance. The creditor does not need to go to court to prove the
actual damages if there is penal clause.

WHEN CREDITOR RECOVER DAMAGES

1. When so stipulated by the parties

2. When the obligor refuses to pay the penalty
3. When the obligor is guilty of fraud in the fulfillment of the obligation

WHEN PENALTY MAY BE ENFORCED

 penalty can only be demandable if there is a breach committed by the obligor and if
it is not contrary to law, morals, customs, public policy and public order. The penalty
may also be reduced if it is iniquitous or unconscionable and if there is already
partial fulfillment.

PAYMENT NOT SUBSTITUTE FOR PERFORMANCE

 the debtor cannot just pay the penalty in substitution for non-compliance of the
obligation. By the general purpose of penal clause, it is to ensure the compliance of
the obligation, thus penalty is not a substitute. However, the debtor can do so if it is
clearly stipulated that the creditor allowed him, thus the obligation is not with a
penal clause anymore but an alternative.

PENAL CLAUSE PRESUMED SUBSIDIARY

1. When there is performance- once the obligation is fulfilled, this purpose is attained and,
therefore, there is no need flr demanding, the penalty.

2. Where there is no performance- in case of non- compliance , the creditor may ask for the
penalty or require specific performance.

WHEN PENAL CLAUSE JOINT

 with respect to the creditor, he has the right to demand both the principal
obligation and penalty jointly if this right is clearly granted to him. However, it is not
required for it to be expressed clearly if it can be understood impliedly through the
nature of obligation.

ARTICLE 1228
PENALTY DEMANDABLE WITHOUT PROOF OF ACTUAL DAMAGES

 the creditor need not to present proof of actual damages in obligation with a penal
clause, the only thing needs to be proven is the breach of contract or non-
compliance. The creditor may enforce penalty whether he suffered or not. However,
the penalty cannot exceed the amount stipulated even if actual damages are more
than the penalty stipulated.

DAMAGES RECOVERABLE IN ADDITION TO PENALTY MUST BE PROVED

 in case when the creditor can still demand damages in addition to the penalty, the
creditor must prove those damages which he actually suffered.

ARTICLE 1229

WHEN PENALTY MAY BE REDUCED BY THE COURTS

 The rule in Article 1229 is evident justice. The penalty provided for in the penal
clause may be reduced by the courts

1. When there is partial or irregular performance

2. When the penalty agreed upon is iniquitous or unconsionable

ARTICLE 1230

EFFECT OF NULLITY OF THE PENAL CLAUSE

 If only the penal clause is void, the principal obligation remains valid and
demandable. The injured party may recover indemnity for damages in case of non-
performance of the obligation as if no penalty has been stipulated

EFFECT OF NULLITY OF THE PRINCIPAL OBLIGATION

 the penal clause is dependent to the principal obligation; therefore if the principal is
void, penal clause will also be void. However, if the nullity is due to the fault of
debtor who acted in bad faith, the creditor who suffered damages can demand for
the payment of penalty (which is not void).

Name: Vanessa Fajardo BSMA-1 Date: March 25, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 4

EXTINGUISHMENT OF OBLIGATIONS

GENERAL PROVISIONS AND

PAYMENT OR PERFORMANCE

EXTINGUISHMENT OF OBLIGATIONS

GENERAL PROVISIONS

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)

OTHER CAUSES OF EXTINGUISHMENT OF OBLIGATIONS

1. Death of a party in case the obligation is a personal one

2. Mutual desistance or withdrawal
3. Arrival of a resolutory period
4. Compromise
5. Impossibility of performance
6. Happening of a fortuitous event
ARTICLE 1232

In this article, Payment and performance are synonymous in law.

MEANING OF PAYMENT

 Payment may refers only to the delivery of money

 Payment may consist of not only in the delivery of money but also the giving of a
thing, the doing of an act, or not doing of an act

ARTICLE 1233

WHEN DEBT IS CONSIDERED PAID

Debt – may refer to an obligation to deliver money, to deliver a thing, to do an act, or not to
do an act.

Requisites:

1. Integrity of prestation- a debt to deliver a thing including money

2. Identity of the prestation- means that the very prestation die must be delivered or
performed

ARTICLE 1234

RECOVERY ALLOWED IN CASE OF SUBSTANTIAL PERFORMANCE IN GOOD FAITH

 In case of substantial performance, the obligee is benefited. So, the obligor should
be allowed to recover as if there had been a strict and complete fulfillment less
suffered by the obligee.

Requisites for the application of Art. 1234/ substantial performance.

1. There must be a substantial performance

2. The obligor must be in good faith

ARTICLE 1235

RECOVERY ALLOWED WHEN INCOMPLETE OR IRREGULAR PERFORMANCE IS WAIVED

1. If the payment is incomplete or irregular, the creditor may properly reject it.
 2. In case of acceptance, the law considers that he waives his right. The whole
obligation is extinguished.

REQUISITES FOR THE APPLICATION OF ART. 1235 INCOMPLETE OR IRREGULAR

 The obligee knows that the performance is incomplete or irregular

 He accepts the performance without expressing any protest or objection

PERSONS FROM WHOM THE CREDITOR MUST ACCEPT PAYMENT

 The creditor is bound to accept payment or performance from the following

1. the debtor
2. Any person who has an interest in the obligation
3. A third person who has no interest in the obligation when there is stipulation
that he can make payment

GENERAL RULE:

 The creditor is not bound to accept payment or performance by a third person who
has no interest in the fulfillment of the obligation.
 Exception: Unless there is a stipulation to the contrary

GENERAL RULE:

 Second paragraph of Article 1236. Whoever pays for another may demand from the
debtor what he has paid.
 Exception: Except if 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.

EFFECT OF PAYMENT BY A THIRD PERSON

1. If made without the knowledge or against the will of debtor

 the payer can only recover from the debtor the amount which has been beneficial to
the latter.

2. If made with the knowledge and consent of the debtor

 the payer has the right to reimbursement for the whole amount that has been paid
and subrogation of rights of creditor.
ARTICLE 1237

RIGHT OF THIRD PERSON TO SUBROGATION

 the third person cannot compel the creditor to subrogate him in the latters
accessory right of mortgage, guaranty or penalty.

SUBROGATION AND REIMBURSEMENT DISTINGUISHED

 Subrogation – there is no real extinction of the obligation, but only a change of

creditor.
 Reimbursement – the third person entitled by reason of payment has merely the
bare right to be refunded to the extent provided in the second paragraph of Article
1236 without the right to the guarantees and securities of the original obligation.

,PAYMENT BY A THIRD PERSON WHO DOES NOT INTEND TO BE REIMBURSED

 Iif the paying throd perspn does not intend to be reimbursed, the payment is
deemed a donation which requires the debotrs consent to be valid

MEANING OF FREE DISPOSAL OF THING DUE AND CAPACITY TO ALLIANATE

a) Free disposal of the thing due – means that the thing to be delivered must not be
subject to any claim or lien or encumbrance of a third person.
b) Capacity to alienate – means that the person is not incapacitated to enter into
contracts and for that matter, to make a disposition of the thing due.

PERSON TO WHOM PAYMENT SHALL BE MADE TO:

1. The creditor or obligee ( person in whose favor obligation has been constituted)
2. His successor in interest (like an heir or assigbed
3. Any person authorized to receive it

GENERAL RULE IN ARTICLE 1241:

 Payment to a person incapacitated to administer or manage his property is not valid.

Except:
a) The incapacitated person kept the thing paid or delivered.
b) Or he was benefited by the payment

WHEN BENEFIT TO CREDITOR NEED NOT BE PROVED BY DEBTOR

a) Subrogation of the payer in the creditor’s right

b) Ratification by the creditor

c) Estoppel on the part of the creditor

 Estoppel – an admission or representation is rendered conclusive upon the person

making it and cannot be denied or disproved as against the person relying thereon.

ARTICLE 1245

SPECIAL FORMS OF PAYMENT

1. dation in payment
2. Application of payment
3. Paymemt by cession
4. Tender of payment and consignation

Dation in payment (adjudication or dacion en pago) – is the conveyance of ownership of a

thing as an accepted equivalent of performance.

ARTICLE 1247

DEBTOR PAYS FOR EXTRAJUDICIAL EXPENSES

 Extrajudicial expenses required by the payment shall be for the account of the
debtor.
 Judicial costs – are the statutory amounts allowed to a party to an action for his
expenses incurred in the action.

ARTICLE 1248

WHEN PARTIAL PERFORMANCE ALLOWED

a) when there is an express stipulation to that effect

b) when the debt is in part liquidated and in part unliquidated

c) when the different prestations in which the obligation consists are subject to different
terms or conditions which affect some of them.

ARTICLE 1249
  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.

PAYMENT BY MEANS OF INSTRUMENTS OF CREDITS

1. Right of creditor to refuse or accept

2. Effect of payments- payment by means of mercantile documents does not extinguish the
obligation

ARTICLE 1250

MEANING OF INFLATION AND DEFLATION

1. Inflation – is a sharp sudden increase of money or credit or both without a

corresponding increase in business transactions.
2. Deflation – is the reduction in volume and circulation of the available money or
credit, resulting in a decline of the general price level; it is the opposite of inflation.

ARTICLE 1251

PLACE WHERE OBLIGATION SHALL BE PAID

1. If there is a stipulation, the payment shall be made in the place designated.

2. If there is no stipulation and the thing to be delivered is specific, the payment shall
be made at the place where the thing was, at the perfection of the contract.
3. If there is no stipulation and the thing to be delivered is generic, the place of
payment shall be the domicile of the debtor.
 Venue – is the place where a court suit or action must be filed or instituted.
 Domicile – is the place of a person’s habitual residence; the place where he has his
true permanent home
 Residence – is only an element of domicile.
Name: Vanessa Fajardo BSMA-1 Date: March 30, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 4

EXTINGUISHMENT OF OBLIGATIONS

Application of Payments

Payment by Cession

, Tender of Payment and Consignation

ARTICLE 1252
  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 and the same creditor.

REQUISITES OF APPLICATION OF PAYMENTS

1. There must be one debtor and one creditor

2. There must be two or more debts
3. The debts must be of the same kind
4. The debts to which the payment has been applied must be due
5. The payment made must not be sufficient to cover all the debts

APPLICATION AS TO DEBTS NOT YET DUE CANNOT BE MADE UNLESS:

1. there is stipulation that the debtor may so apply

2. It is made by the debtor or creditor, as the case may be, for whose benefit the period has
been constituted

RULES ON APPLICATION OF PAYMENTS

1. he debtor has the first choice; he must indicate at the time of making payment, and
not afterwards, which particular debt is being paid.
2. The right to make the application once exercised is irrevocable unless the creditor
consents to the change.
3. If the debtor does not apply payment, the creditor may make the designation by
specifying in the receipt which debt is being paid.
4. If the creditor has not also made the application, or if the application is not valid,
the debt, which is most onerous to the debtor among those due, shall be deemed to
have been satisfied.
5. If the debts due are of the same nature and burden, the payment shall be applied
to all of them proportionately.

GENERAL RULE ARTICLE 1253:

 The rule is subject, however, to any agreement between the parties, or to waiver by
the creditor.
RULES TO ONEROSITY

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 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.

ARTICLE 1255

 Payment by cession – is another special form of payment. Like, 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 or more creditors

2. The debtor must be insolvent
3. The assignment must involve all the properties and the debtors
4. The cession must be accepted by the creditors

DATION IN PAYMENT AND CESSION DISTINGUISHED

DATION CESSION

 Only one creditor  Several creditors

 Does not presuppose the insolvency  The debtor is insolvent at the time of
of the debtor assignment

 Does not involve all the property of  Extends to all property of the debtor
the debtor subject to execution

 The creditor becomes the owner of  The creditors only acquire the right
the thing given by the debtor to sell the thing and apply the
proceeds to their credits
proportionately

 An act of novation  Not an act of novation

MEANING OF TENDER PAYMENT AND CONSIGNATION

1. Tender of payment – is the act, on the part of the debtor, of offering to the creditor
the thing or amount due.
2. Consignation – is the act of depositing the thing or amount due with the proper
court when the creditor does not desire or cannot receive it.

REQUISITES OF A VALID CONSIGNATION

1. Existence of a valid debt which is due

2. Tender of payment by the debtor and refusal without justifiable reason by the
creditor to accept it
3. Previous notice of consignation to persons interested in the fulfillment of the
obligation
4. Consignation of the thing or sum due
5. Subsequent notice of consignation made to the interested parties

REQUIREMENTS FOR VALID TENDER OF PAYMENT

1. Tender of payment must comply with the rules on payment

2. It must be unconditional and for the whole amount.
3. It must be actually made.

ARTICLE 1259

WHEN CONSUGNATION 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
3. When the creditor neither accepts nor questions the validity of the consignation,
and the court after hearing, orders the cancellation of the obligation

ARTICLE 1260
THE DEBTOR 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.

Name: Vanessa Fajardo BSMA-1 Date: April 01, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

 CHAPTER 4

EXTINGUISHMENT OF OBLIGATIONS

LOSS OF THE THING DUE

ARTICLE 1262

WHEN A THING IS CONSIDERED LOST

 Thing is Lost – when it perishes, or 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 equivalent to impossibility of performance in
obligations to do.

REQUISITES FOR LOSS OF THE THING IN OBLIGATION TO GIVE

1. The obligation is to deliver a specific thing

2. The loss of the thing occurs without the fault of the debtor
3. The debtor is not guilty of delay

WHEN LOSS OF THING WILL NOT EXTINGUISH LIABILITY

1. When the law so provides

2. When the stipulation so provides
3. When the nature of obligation requires the assumption of risk
4. When the obligation to deliver a specific arises from a crime

ARTICLE 1263

 In article 1253, It is based on the principle that a generic thing never perishes (genus
nunquam perit).

ARTICLE 1264

EFFECT OF PARTIAL LOSS OF A SPECIFIC THING

 Partial Loss – only a portion of the thing is lost or destroyed or when it suffers
depreciation or deterioration. It is equivalent of difficulty of performance in
obligations to do.
ARTICLE 1265

WHEN PRESUMPTION NOT APPLICABLE

 In case of natural calamities, the presumption of fault does not apply

ARTICLE 1266

EFFECT OF IMPOSSIBILTY OF PERFORMANCE

 This article refers to a case when, without the debtors fault, the obligation becomes
legally or physically ompossible.
 If the obligation is impossible from the very beginning, the obligation is void.

KINDS OF IMPOSSIBILITY

1. Physical Impossibility – in purely personal obligations, when the personal

qualifications of the obligor are involved, this takes place, when, for example, the
obligor dies or becomes physically incapacitated to perform the obligation.
2. Legal impossibility- occurs when the obligation cannot be performed because it is
rendered impossible by provision of law,

ARTICLE 1267

EFFECT OF DIFFiCULTY OF PERFORMANCE

 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.

ARTICLE 1268

 Article 1268 is another instance where a fortuitous event does not exempt the
debtor from liability

ARTICLE 1269

 Under the above article, the creditor is given the right to proceed against the third
person responsible for the loss.
 The rule in Article 1269 finds frequent application in insurance
Name: Vanessa Fajardo BSMA-1 Date: April 01, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 4

EXTINGUISHMENT OF OBLIGATIONS

CONDONATION OR REMISSION DEBT

ARTICLE 1270

 Condonation or remission – is the gratuitous abandonment by the creditor of his

right against the debtor.

REQUISITES OF CONDONATION OR REMISSION

1. It must be gratuitous
2. It must be accepted by the obligor
3. The parties must have capacity
4. It must not be inofficious
5. If made expressly, it must comply with the forms of donations

KINDS OF REMISSION

1. As to its extent
a) Complete – when it covers the entire obligation
b) Partial – when it does not cover the entire obligation

2. As to its form

a) Express – when it is made either verbally or in writing

b) Implied – when it can only be inferred from conduct
3. As to its date of effectivity

a) Inter vivos – when it will take effect during the lifetime of the donor
b) Mortis causa – when it will become effective upon the death of the donor. It must
comply with the formalities of a will
 Legitime – is that part of the testator’s property which he cannot dispose of because
the law has reserved it from certain heirs who are, therefore, called COMPULSARY
HEIRS.

ARTICLE 1271

PRESUMPTION IN CASE OF VOLUNTARY DELIVERY OF DOCUMENT OF INDEBTEDNESSBY

CREDITOR

1. Prseumption of implied remission- if the debt is not yet paid, the creditor would
need the document to enforce payment
2. Contrary evidence- the presumption is prima facie or rebuttable by contrary
evidence
3. Extent of remssion- if the obligation is joint, the presumption of remission
pertains only to the share of the debtor who is in possession of the document: if
solidary, to the total obligation
4. Presumption applicable only to privsted 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.

ARTICLE 1272

PRESUMPTION IN CASE DOCUMENT FOUND IN POSSESSION OF DEBTOR

 Of the documwnt is later found in the hands of the debtor and it is not known how
he came into possession of the same, the presumption is that it was voluntarily
delivered by the creditor. This presumption of voluntary delivery, in turn, gives rise
to the presumption of remission.

ARTICLE 1273

EFFECT OF RENUNCIATION OF THE PRINCIPAL DEBT OF THE ACCESSORY OBLIGATION

  The above provision follows the rule that the accessory follows tye principal. While
the accessory obligations cannot exist without the principal obligation, the latter
may exist without the former.

ARTICLE 1274

PRESUMPTION IN CASE THING PLEDGED FOUND IN POSSESSION OF DEBTOR

 In a contractof pledge, it is necessary that the thing pledged be placed in the

possession of creditor or third person by common agreement
 If the thing pledged is later found in the hands of the debtor or third person only
the accessory obligation of pledged is presumed remitted, not the obligation
itself.

Name: Vanessa Fajardo BSMA-1 Date: April 06, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 4

EXTINGUISHMENT OF OBLIGATIONS

CONFUSION OR MERGER OF RIGHTS

ARTICLE 1275

 Confusion or merger – is the meeting in one person of the qualities of creditor and
debtor with respect to the same obligation.

REQUISITES OF CONFUSION

1. It must take place between the principal debtor and creditor

2. It must be complete

ARTICLE 1276

EFFECT OF MERGER IN THE PERSON OF PRINCIPAL DEBTOR OR CREDITOR

  Merger in the person of the principal debtor or creditor extinguishes the obligation
 The accessory obligation of guaranty is also extinguished in accordance with the
principle that the accessory follows the principal

ARTICLE 1277

CONFUSION IN A JOINT OBLIGATION

 In a joint obligation, there are many debts as there are debtors and as many credits
as there are crediotrs, the debts or credits being considered distinct and separate
from one another.

CONFUSION IN A SOLIDARY OBLIGATION

 Merger in the person of one of the solidary debtors shall extinguish the entire
obligation because it is also a merger in the other solidary debtors.

Name: Vanessa Fajardo BSMA-1 Date: April 06, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 4

EXTINGUISHMENT OF OBLIGATIONS

COMPENSATION

ARTICLE 1278

 Compensation – is the extinguishment to the concurrent amount of the debts of two

persons who, in their own right, are debtors and creditors of each other.

OBJECT OF COMPENSATION
  Is the prevention of unnecessary ligitation and payments.
 Compensation is often called simplified payment because it provides a more
convenient amd less expensive effectuation of payments between two persons who
are reciprocally creditors and debtors

COMPENSATION AND CONFUSION DISTINGUISHMENT

CONFUSION COMPENSATION

 Only one person who is a creditor  Two persons involved, each of whom
and debtor of himself is a debtor and a creditor of the
other

 One obligation  Two obligations

 There is impossibilty of payment  There is indirect payment

KINDS OF COMPENSATION

1. By its effect or extent:

a) Total – when both obligations are of the same amount and are entirely
extinguished
b) Partial – when the two obligations are of different amounts and a balance
remains.

2. By its cause or origin

a) Legal – when it takes place by operation of law even without the knowledge of the
parties
b) Voluntary – when it takes place by agreement of the parties
c) Judicial – when it takes place by order from a court in a litigation.
d) Facultative – when it can be set up only by one of the parties

ARTICLE 1279

REQUISITES OF LEGAL COMPENSATION

1. The parties are principal creditors and principal debtors of each other
2. Both debts consist in a sum of money, or of consumable things of the same kind and
quality
 3. The two debts are due and demandable
4. The two debts are liquidated
5. No retention or controversy commenced by a third person

ARTICLE 1280

GENERAL RULE

 General Rule: Only the principal debtor can set up against his creditor what the
latter owes him

ARTICLE 1281

 Total compensation – results when the two debts are of the same amount.

ARTICLE 1282

 Only the principal debtor can set up against his creditor what the latter owes him
 Voluntary or conventional compensation – includes any compensation which takes
place by agreement of the parties even if all the requisites for legal compensation
are not present.

ARTICLE 1283

JUDICIAL COMPENSATION

 Compensation may also take place when so declared by a final judgement of a court
in a suit.

ARTICLE 1284

COMPENSATION OF RESCISSIBLE OR VOIDABLE DEBTS

 Rescissible and voidable obligations are valid until they are judicially rescinded or
avoided. Prior to recscission or annulment, the debts may be compensated against
each other.

ARTICLE 1285

WHERE COMPENSATION HAS TAKEN PLACE BEFORE ASSIGNMENT

 the debtor can raise the defense of compensation to the assignee. The remedy of
the assignee is against the assignor.
3 CASES WHERE COMPENSATION HAS TAKEN PLACE AFTER ASSIGNMENT

1. Assignment with the consent of debtor – debtor cannot set up compensation

against the assignee unless he reserved his right to the compensation.
2. Assignment with the knowledge but without the consent of debtor – debtor can set
up compensation
3. Assignment without the knowledge of the debtor – debtor can set up compensation
when he learned of the assignment

ARTICLE 1286

 This article applies to legal compensation

 Foreign Exchange – has been defined as the conversion of an amount of money or
currency of one country into an equivalent amount of money or currency of
another.
 Exchange rate- the price of one currency expressed

ARTICLE 1287

INSTANCES WHEN LEGAL COMPENSATION IS NOT ALLOWED BY LAW

1. Where one of the debts arises from a depositum

2. Where one of the debts arises from a commodatum
3. Where one of the debts arises from a claim for support due by gratuitous title
4. Where one of the debts consists in civil liability arising from a penal offense
 Deposit – is constituted from the moment a person receives a thing belonging to
another with the obligation of safely keeping it and of returning the same
 Commodatum – is a gratuitous contract whereby one of the parties delivers to
another something not consumable so that the latter may use the same for a certain
time and return it.

ARTICLE 1289

 Compensation is similar to payment. If a debtor has various debt which sre

susceptible of compensation, he must inform the creditor which of them shall be the
object of compensation.

ARTICLE 1290

CONSENT OF PARTIES NOT REQUIRED IN LEGAL COMPENSATION

 1. Compemsation takes place automatically by mere operation of law
2. Full legal capacity of parties not reuired

Name: Vanessa Fajardo BSMA-1 Date: April 08, 2020

Subject: OBLICON/MW/2:30-4:00. Instructor: Reymar Ingles Dico, C0A, JD

CHAPTER 4

EXTINGUISHMENT OF OBLIGATIONS

NOVATION
ARTICLE 1291

OBLIGATIONS MAY BE MODIFIED:

1. Changing their object or principal conditions

2. Substituting the person of the debtor
3. Subrogating a third person in the right of creditor
 Novation – is the extinction of an obligation through the creation of a new one
which substitutes it.
 Dual function of novation – it is a contract containing two stipulations: one to
extinguish an existing obligation, the other to substitute a new one in its place. It
operates as a relative extinction only.

KINDS OF NOVATION

1. According to origin:

a) Legal – takes place by operation of law

b) Conventional – takes place by agreement of the parties

2. According to how it is constituted:

a) Express – declared in unequivocal terms

b) Implied – when the old and new obligations are essentially incompatible with each
other

3. According to extent:

a) Total or extinctive –when the old obligation is completely extinguished

b) Partial or modificatory – when the old obligation is merely modified

3. According to subject:

a) Real or objective – when the object or principal conditions are changed

b) Personal or subjective – when the person of the debtor is substituted and/or when a
third person is subrogated in the rights of the creditor
c) Mixed – when the object and the debtor or the creditor, or both the parties, are
changed. It is a combination of real and personal novations.

ARTICLE 1292
REQUISITES 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
 The creation of a new valid obligation

NOVATION IS NOT PRESUMED

 Novation is never presumed. It must be clearly and unmistakably established either

by the express agreement of the parties or acts of equivalent import or by the
incompatibility of the two obligations with each other in every material respect.

TEST OF INCOMPATIBILITY BETWEEN TWO OBLIGATIONS OR CONTRACTS

 The test is whether they can stand together, each one having an independent
existence. If they cannot, they are incompatible.

ARTICLE 1293

KINDS OF PERSONAL NOVATION

1. Substitution – when the person of the debtor is substituted

2. Subrogation – when a third person is subrogated in the rights of the creditor

KINDS OF SUBSTITUTION

1. Expromission – takes place when a third person of his own initiative and without
the knowledge or against the will of the original debtor assumes the latter’s
obligation with the consent of the creditor.
2. Delegacion – takes place when the creditor accepts a third person to take place of
the debtor at the instance of the latter.
 All the parties, the old debtor and the new debtor, and the creditor must agree

RIGHT OF NEW DEBTOR WHO PAYS

1. In expromission, payment by the new debtor giveshim the right to beneficial

reimbursement under the second paragraph
2. If the payment was made with the consent of the orginal debtor. The new debtor is
entitledto reimbursement and subrrogation under Articleb1237
ARTICLE 1294

EFFECT OF NEW DEBTORS INSOLVENCY

 The new debtor insolvency of the obligation will not revive the action of the creditor
against the old debtor.

ARTICLE 1295

GENERAL RULE:

 The old debtor is not liable to the creditor in case of the insolvency of the new
debtor.

EXCEPTIONS:

 The said insolvency was already existing AND of public knowledge at the time of the
delegacion
 The insolvency was already existing AND known to the debtor at the time of the
delegacion

ARTICLE 1296

EFFECT OF NOVATION ON ACCESSORY OBLIGATIONS

GENERAL RULE:

 Extinguishment of the principal obligation carries with it that of the accessory

obligations.
 Exception: In the case of an accessory obligation created in favor of a third person
which remains in force unless said third person gives his consent to the novation.

ARTICLE 1297

EFFECT WHERE THE NEW OBLIGATION VOID

GENERAL RULE:

 There is no novation if the new obligation is void and, therefore, the original one
shall subsist for the reason that the second obligation being inexistent, it cannot
extinguish or modify the first.
EFFECT WHERE THE NEW OBLIGATION VOIDABLE

 If the new obligation is only voidable, novation can take place. But the moment it is
annulled, the novation must be considered as not having taken place, and the
original one can be enforced, unless the intention of the parties is otherwise.

ARTICLE 1298

 A void obligation cannot be novated because there is nothing to novate.

ARTICLE 1299

PRESUMPTION WHERE ORIGINAL SUBJECT TO A CONDITION

 The rule im this article is that the efficacy of the new obligation depends upon
whether the condition which affects the old obligation is complied with or not.

ARTICLE 1300

 Subrogation- is the substition of one person in the place of a creditor with reference
to a lawful claim or right .

KINDS OF SUBROGATION

1. Conventional – when it takes place by express agreement of the original parties and
the third person
2. Legal – when it takes place without agreement but by operation of law (not
presumed except in cases expressly stipulated by law)

ARTICLE 1301

CONSENT OF ALL PARTIES REQUIRED IN CONVENTIONAL SUBROGATION

1. The debtor- because he becomes liable under the new obligation to a new creditor
2. The old creditor- because his right against the debtor is extinguished
3. The new creditor- because he msy dislike or distrust the debtor

ARTICLE 1302

CASES OF LEGAL SUBROGATION

1. When a creditor pays another creditor who is preferred

 2. When a third person without interest in the obligation pays with the approval of the
debtor
3. When a third person with interest in the obligation pays even without the
knowledge of the debtor

ARTICLE 1303

EFFECT OF LEGAL SUBROGATION

 The effect of legal subrogation is to transfer to the new creditor the credit and all
the rights and actions that could have been exercised by the former creditor either
against the debtor or against third person, be they guarantors or mortgagors.

ARTICLE 1304

EFFECT OF PARTIAL SUBROGATION

 To creditor whom partial payment has been made by the new creditor remains a
creditor to the extent of the balance of the debt.