Lexlie E.

Lopez BSBA MM 2-3 Written Report #6

The last two causes to extinguish an obligation is written in the section 5 and section 6 of chapter 4. In section 5,
it discussed that obligation can be extinguished through compensation. There is a difference between compensation and
confusion. In compensation, there are two persons who we call the debtor and the creditor while confusion has one
person who merged the quality of both. In article 1278 of the New Civil Code, it is mandated that compensation shall
take place when there are creditors and debtors of one obligation. There are also different kinds of compensation
depending on their means. Compensation can be (1) as to means which are bounded by (a) Legal, (b) voluntary, (c)
judicial, (d) facultative, or (2) As to effect which can be (a) total and (b) partial. In article 1279, it discussed the requisites
that are needed for the compensation to take effects through the operation of law. One of the requisites is that claim
should be liquidated, or the time and the amount of the payment is fixed. Regarding article 1279, article 1280 mandates
that guarantor has the right to set up compensation depending on what the creditor may owe the principal debtor.
Compensation should also be paid on due dates but there is an exception according to article 1282 to those cases where
both parties agreed about their mutual debts. It pertains to conventional or voluntary compensation when the parties
agree to extinguish the obligation even without some legal requisites. The difference between legal compensation and
conventional compensation is that the legal compensation is operated by the law when the all the requisites are present
while the conventional compensation is the agreement of both parties even with the absence of legal requisites.
Rescissible or voidable debts can also be compensated before they are judicially rescinded or annulled because it is still a
valid debt. In article 1285, it discussed how the assignment of rights were legally transferred from one party to another.
There are also debts that cannot be compensated such as those which arises from contract of depositum. When the
contract is under deposit, the person obliged with the thing belonging to other will be under the obligation of safe
keeping until the thing has been return to the owner. Debts arises from commodatum, also, cannot be compensated.
The difference between simple loan and commodatum is that when the contract is under commodatum, the bailor
retains the ownership of the thing loaned while in simple loan, the ownership passes to the borrower. Also, claims for
support due by gratuitous title cannot be compensated. Support is everything that is indispensable for sustenance.
Lastly, debts cannot be compensated if the debts consist in civil liability arising from a penal offense.

The last section regarding the extinguishment of obligation is through novation. Novatio, in civil law, means to
make new. Therefore, extinguishment through novation is the substitution of the obligation to extinguish the first. The
requisite in novation is that (1) there must be a previous valid obligation, (2) agreement of the party to a new contract,
(3) extinguishment of the old contract, and (4) validity of the new contract. There are also different kinds of novation
depending on its means. Novation as to the subject can be (a) real or objective, (b) personal or subjective, (c) mixed of
both while novation as to constitution refers to (a) express and (b) implied. Novation as to effect is either (a) total and
(b) partial while novation as to origin can be (a) legal and (b) conventional. In article 1293, it is discussed that the
consent of substituting debtor is possible if there is a consent of the creditor. There are two kinds of substitution,
expromision and delegation. Expromision is when the initiative of substituting the debtor does not come from himself
while delegation is the substitution of the debtor that he offered to the creditor. Delegado is what we call the new
debtor, delegante for the original debtor, and delegatario for the creditor. Article 1294-1295 dictates that the delegante
should not be liable if the delegado has been insolvent to the obligation. In extinguishment of the old obligation, a new
one should subsist. Articles 1300-1304 defines legal and conventional subrogation. Subrogation is the transfer of rights
of the creditor to a third person which makes him obliged to all the rights. Subrogation of a third person can either be
conventional or legal which means that it can be either in form of agreement or through the operation of law. Also, if
there has been a partial payment, the original creditor will be the preferred person of the debtor and can exercise his
right for the remainder of the obligation.