9/24/2020

BUSLAW 1:
THE LAW ON
OBLIGATIONS &
CONTRACTS
ATTY. LIZA LYN S. LAMASON-GARCIA, LLB, LLM
FULL-TIME FACULTY, COLLEGE OF BUSINESS AND ACCOUNTANCY
CENTRAL PHILIPPINE UNIVERSITY

LOSS OF THE THING DUE

 What is LOSS? LOSS

 Effect of LOSS of a
Determinate Thing =
 Effect of LOSS of a Generic IMPOSSIBILIY OF
Thing
PERFORMANCE

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EFFECT OF LOSS WHERE OBLIGATION

PROCEEDS FROM CRIME

ALAN stole the car of RODY.

Rody filed a case against ALAN
and the latter was found guilty.

ALAN suffered the penalty of
imprisonment and was ordered to
return the car to RODY.

Before ALAN can return RODY’s
car, it was hit by lightning and was
totally damaged. I

Is the obligation of ALAN to deliver
the car extinguished?

Article 1268. When the debt of a
thing certain and determinate
proceeds from a criminal offense,
the debtor shall not be exempted
from the payment of its price,
whatever may be the cause for
the loss, unless the thing having
been offered by him to the person
who should receive it, the latter
refused without justification to
accept it.

CONDONATION OR REMISSION
OF THE DEBT
 A form of DONATION.
 Essentially gratuitous, requires
acceptance by the obligor,
and may be made expressly
or impliedly.
 May be total or partial.

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MELBA owes DARIO P100,000.00. To secure the

loan, MELBA mortgaged her car worth
P500,000.00 to DARIO. DARIO fell in love with
MELBA so he renounced MELBA’S debt. Is the
mortgage likewise extinguished?

Article 1273. The renunciation of the principal

debt shall extinguish the accessory obligations;
but the waiver of the latter shall leave the
former in force.

CONFUSION OR MERGER OF
RIGHTS

Article 1275. The obligation is

extinguished from the time the
characters of creditor and debtor
are merged in the same person.
In order for merger to extinguish an
obligation, it must be complete.

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CONFUSION

MEG is obligated to pay RYAN P10,000.00 on

December 31, 2014.
As payment, she issued a post-dated check. MEG
RYAN did not encash the check but used it to
pay for his own debt by negotiating the same
to JED.
JED is indebted to MEG in the amount of
P10,000.00 and as payment, he negotiated to JED RYAN
MEG the check which he received from RYAN.
Is the obligation of MEG to RYAN extinguished?

COMPENSATION

Article 1278. Compensation shall
ANA owes BEN P1,000.00.

take place when two persons, in
BEN owes ANA P1,000.00.
their own right, are creditors and

No need for payment to extinguish the
debtors of each other.
obligation.

Compensation extinguishes the

It is a sort of balancing between obligation.
two obligations.

May be total or partial.

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COMPENSATION vs
CONFUSION/MERGER

CONFUSION COMPENSATION
 There is only one person  There are two persons who
who is a creditor and are mutually creditor and
debtor of himself. debtor to each other.
 There is only one  There are two obligations.
obligation.  There is indirect payment.
 There is impossibility of
payment.

NOVATION

 Article 1291. Obligations may be modified by:

1. Changing their object or principal conditions;
2. Substituting the person of the debtor;
3. Subrogating a third person in the rights of the creditor.
DUAL FUNCTION: one, to extinguish or modify an existing
obligation, and two, to create a new one and substitute
in its place.

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PERSONAL NOVATION:
1. Substitution – when the person of the DEBTOR is substituted.
a) Expromision – that which takes place when a third person
of his own initiative and without knowledge or against the
will of the original debtor, assumes the latter’s obligation
with the consent of the creditor.
b) Delegacion – that which takes place when the creditor
approves or consents to a third person to take place of
the debtor at the instance of the old debtor

2. Subrogation – when a third person is subrogated to the

rights of the CREDITOR.

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