Quiz no.

1. Enumerate at least five (5) different modes of extinguishment of obligations. Briefly

explain each.

By payment or performance - means not only the delivery of money but also the

performance, in any other manner, of an obligation.

By the condonation or remission of the debt - it is the gratuitous abandonment by the

creditor of his right.

By the confusion or merger of the rights of creditor and debtor - it is the meeting in

one person of the qualities of creditor and debtor with respect to the same obligation.

By compensation - it is the extinguishment in the concurrent amount of the obligations

of those persons who are reciprocally debtors and creditors of each other.

By novation - the replacement of an old contract with a new one, by changing the object

or principal conditions; substituting the person of the debtor; and subrogating a third

person in the right of the creditor.

2. How does payment extinguish an obligation?

 In order that payment may extinguish an obligation, it is necessary that it be made at a

proper time and place, in a proper manner, and by and to a proper person.

3. What are the different special forms or types of payment? Briefly explain each.

 Application (or imputation) of payment (Art. 1252) – designation of the debt to which

should be applied a payment made by a debtor who owes several debts in favor of the
 same creditor. It is the phrase applied to show which debt, out of two or more debts

owing the same creditor, is being paid.

 Dation in payment (adjudicacion en pago) (Art 1245) – a special mode of

extinguishing an obligation whereby the debtor alienates in favor of the creditor, property

for the satisfaction of monetary debt.

 Assignment in favor of creditors or cession (Art. 1255) – process by which a debtor

transfers all the properties not subject of execution in favor of his creditors so that the

latter may sell them, and thus apply the proceeds to their credits.

 Tender of payment and consignation (Art. 1256-1261) – if the creditor to whom the

tender of payment has been made refuses without just cause to accept it, the debtor shall

be released from responsibility by the consignation of the thing or sum due.

4. Give an example of dation in payment.

 To pay my debt of P1M in favor of Joie, I gave her with her consent, a diamond ring

instead worth P1M.

5. Discuss the case of Filipino Pipe and Foundry Corp vs National Waterworks and Sewerage

Authority.

 FACTS: On June 12, 1961, NAWASA contracted FPFC for the latter to supply it with

cast iron pressure pipes for the former’s Masbate and Samar projects at a total cost of

P270,187.50. NAWASA paid in installments on various dates a total of P134,680,

leaving a balance of P135,507.50. Having completed delivery, FPFC demanded payment

of the balance price with interest. NAWASA failed to pay the balance.
 FPFC filed a lawsuit where the court ordered NAWASA to pay the unpaid balance of

P135,507.60 in NAWASA negotiable bonds, redeemable for 10 years from issuance with

interest of 6% per annum, P40,944.73 as interest up to May 15, 1966 and the interest

accruing thereafter to the issuance of the bonds at 6% PA. NAWASA still failed to satisfy

the decision. On Feb 18, 1971, FPFC filed another case seeking an adjustment of the

unpaid balance in accordance with the value of the Philippine peso when the case was

decided on Nov 23, 1967.

 ISSUE: Whether or not, FPFC can validly ask for adjustment of judgment award based

on inflation.

 HELD: No, adjustment cannot be granted.

 Art. 1250, NCC provides that “in case of an extraordinary inflation or deflation of the

currency stipulated should supervene, the value of the currency at the time of the

establishment of the obligation shall be the basis of payment, unless

there is an agreement to the contrary xxx.”