MODES OF EXTINGUISHING OBLIGATIONS:

OUTLINE NOTES
LAW 121/OBLIGATIONS & CONTRACTS
SECTIONS JD1A & JD1B
By: JEN N. ASUNCION

LOSS OF THE THING DUE (Art. 1262, NCC)

LOSS DEFINED. It is understood that a thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence is unknow or it cannot be
recovered. (Art. 1189, NCC)

NB: Broadly speaking, loss (as a cause for extinguishment of the

obligation) refers to the impossibility of the performance of
the obligation.

▪ The impossibility which extinguishes obligation refers to that which occurred AFTER
the creation of the obligation. If the impossibility existed AT THE TIME of the creation
of the obligation, it is VOID AB INITIO.

▪ The extinguishment of an obligation which has become impossible to perform

follows from the principle that no person shall be liable for fortuitous event, or those
which could not be foreseen, or which, though foreseen, were inevitable. (Art.
1174, NCC)

PARTIAL LOSS. Only a portion of the thing is lost or destroyed, or when it suffers
depreciation or deterioration.

GENERAL RULE: Partial loss of the object of the obligation does not extinguish the
obligation.

Example: A is obliged to deliver to B a specific car. Before the

delivery, the wheels were destroyed by a typhoon. This is
partial loss will not amount to extinguishment of the obligation.

EXCEPTION: If the loss is partial, the courts shall determine whether, under the
circumstances, the partial loss is so important as to extinguish the obligation. (Art. 1264,
NCC)

Example: In the above example, if the engine was lost or

destroyed by the typhoon then the courts will determine if the
loss is so important as to extinguish the obligation.

GENERAL RULE: An obligation to deliver a determinate thing shall be extinguished if it

should be lost or destroyed without the fault of the debtor, and before he has incurred in
delay.

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EXCEPTIONS: The obligation is not extinguished, and the debtor is thus liable for damages,
in any of the following cases:

a. When, by LAW, the obligor is liable even for fortuitous events. (Arts. 1262 and 1174,
NCC)

Example: The bailee (Art. 1942, NCC); Depositary (Art. 1979,

NCC); and, the officious manager (Art. 2147, NCC) are, by
law, liable for fortuitous events under certain circumstances.
(Please check these articles)

b. When, by STIPULATION, the obligor is liable even for fortuitous events. (Arts. 1262
and 1174, NCC)

c. When the nature of the obligation requires assumption of risk. (Arts. 1262 and 1174,
NCC)

Example: Carnapping is a normal business risk of those

engaged in the repair of motor vehicles. Robbery for those
engaged in pawnshops.

d. When the obligor is guilty of CONTRIBUTORY FAULT or NEGLIGENCE. (Arts. 1262 and
1170, NCC)

PRESUMPTION: Whenever the thing is lost in the possession of

the debtor, it shall be presumed that the loss was due to his
fault:

(1) Unless there is proof to the contrary, and without prejudice to

the provision of Art. 1165, NCC. (Art. 1265, NCC); or,

(2) Except in case of earthquake, flood, storm, or other natural

calamity. (Art. 1265, NCC)

e. When the loss or impossibility occurred after the obligor has incurred in DELAY.
(Arts. 1262 and 1165, NCC)

f. When the obligor has promised to deliver the same thing to two or more persons
who do not have the same interest. (Art. 1165, NCC)

g. When the obligation to give the thing due arose from a CRIMINAL OFFENSE. (Art.
1268, NCC)

EXCEPT: Unless the thing having been offered by him to the

person who should receive it, the latter refused without
justification to accept it. (Art. 1268, NCC) (Mora Accipiendi)

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 Example: THEFT – Accused is obliged to return the object of
the crime. In case of loss, he shall be liable for indemnity or
value of the thing.

h. When the obligation is to deliver a GENERIC THING. (Art. 1263, NCC)

GENUS NUNQUAM PERIT – Genus never perishes.

An obligation to give a generic thing never perishes;
therefore, it is not excused by fortuitous event.

CREDITOR’S REMEDY

The obligation having been extinguished by the loss of the thing, the creditor shall have
ALL the rights of action which the debtor may have against third persons by reason of the
loss. (Art. 1269, NCC)

Example: The creditor may seek recourse to the insurance

indemnity for the thing lost.

EFFECT ON RECIPROCAL OBLIGATIONS. In reciprocal obligations, the release of the debtor

due to loss or impossibility also releases the creditor from the counter-prestation, because
each obligation depends on the other.

IN OBLIGATIONS TO DO

1. IMPOSSIBILITY. The debtor in obligations to do shall also be released when the

prestation becomes legally or physically impossible without the fault of the debtor.
(Art. 1266, NCC)

2. EXTREME DIFFICULTY DUE TO UNFORESEEN EVENTS. 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. (Art. 1267, NCC)

This is the equivalent of partial loss in obligations to give.

NB: Art. 1267, NCC is said to be based on the principle of REBUS SIC STANTIBUS,
under which the parties are considered to have stipulated in the light of certain
prevailing conditions, and once these conditions cease to exist, the contract also
ceases to exist. However, Art. 1267 is not an absolute application of the principle
of rebus sic stantibus, which would endanger the security of contractual relations.
The parties to the contract must be presumed to have assumed the risks of
unfavorable developments. It is therefore only in absolutely exceptional changes
or circumstances that equity demands assistance for the debtor.

NB: If the performance has become impossible altogether, Art. 1266 should be
applied.

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CONDONATION OR REMISSION OF THE DEBT

A. IN GENERAL:

1. CONDONATION OR REMISSION DEFINED. An act of liberality whereby the creditor,

without receiving any equivalent, renounces the enforcement of the obligation,
which is accordingly extinguished in its entirety or in that part remitted.

2. GRATUITOUS. Condonation or remission is essentially gratuitous and requires the

ACCEPTANCE of the obligor. (Art. 1270, NCC)

It is an essential characteristic of remission that it be

gratuitous, that there is no equivalent received for the benefit
given; once such equivalent exists, the nature of the act
changes.

(a) It may become dation in payment when the creditor receives

a thing different from that stipulated; or,

(b) It may become novation, when the object or principal

conditions of the obligation should change; or,

(c) It may become a compromise, when the matter renounced

is in litigation or dispute and in exchange of some concession
which the creditor receives.

3. GOVERNING LAW. Condonation is essentially donation of the credit to the debtor

and is thus subject to the rule on donations with respect to acceptance, amount,
and revocation.

(a) Condonation must be accepted by the debtor.

QUESTION1: How can a debt condoned by the creditor but refused

acceptance by the debtor be extinguished eventually?

(b) The condonation is subject to the rule on inofficious donations (the amount
condoned cannot be more than what the creditor may give by will. (Art. 1270
in rel. to Art. 752, NCC)

4. REQUISITES OF CONDONATION OR REMISSION.

(a) It must be gratuitous;

(b) It must be accepted by the obligor;
(c) The parties must have capacity;
(d) The condition must not be inofficious; and,
(e) The condonation must comply with the forms of donation, if it is an express
condonation.

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5. KINDS OF CONDONATION.

A. As to form:

o Express – made in accordance with the formalities prescribed by law

for donations;
o Implied – It is not made in accordance with the formalities prescribed
by law for donations, but it can be deduced from the act of the obligee
or creditor.

B. As to extent:

o Total – entire obligation is extinguished.

o Partial – refers only to the principal or to the accessory obligation or to
an aspect thereof which affects the debtor.

C. As to constitution:

o Inter Vivos – when it will take effect during the lifetime of the donor;
o Mortis Causa – when it will take effect upon the death of the donor. It
must comply with the formalities of a will.

6. EFFECT ON ACCESSORY OBLIGATION. The renunciation of the principal debt shall

extinguish the accessory obligations. (Art. 1273, NCC)

(a) The waiver of the accessory obligations shall leave the

principal obligation in force. (Art. 1273, NCC) Thus, the
accessory obligation of pledge may be waived without
affecting the principal debt previously secured by the
pledge.

(b) It is presumed that the accessory obligation of pledge

has been remitted when the thing pledged, after its
delivery to the creditor, is found in the possession of the
debtor, or of a third person who owns the thing. (Art. 1274,
NCC)

NB: Read Art. 2093, NCC, it is necessary that the thing

pledged be placed in the possession of the creditor or of
a third person by a common agreement.

B. MANNER OF CONDONATION: Condonation may be made expressly or impliedly.

(Art. 1270, NCC)

1. EXPRESS CONDONATION – shall comply with the forms of donation. (Art. 1271,
NCC)

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 NB: If the condonation is made mortis causa, the forms of a will must be
followed.

2. IMPLIED CONDONATION. The New Civil Code provides two instances where
condonation is implied:

(a) The DELIVERY OF A PRIVATE DOCUMENT evidencing a credit, made

voluntarily by the creditor to the debtor, implies the renunciation of the
action which the former had against the latter.

i. Whenever the private document in which the debt appears is found

in the possession of the debtor, it shall be presumed that the creditor
delivered it voluntarily, unless the contrary is proved. (Art. 1272,
NCC)

ii. The waiver may be nullified if inofficious, but the debtor and his heirs
may uphold it if they can prove that the delivery of the document
was made in virtue of payment of the debt. (Art. 1271, NCC)

QUESTION2: What is the effect of this presumption to joint and solidary

obligations?

(b) An implied condonation may also result from the presumption that the
accessory obligation of pledge has been remitted when the thing pledged,
after its delivery to the creditor, is found in the possession of the debtor, or
of a third person who owns the thing. (Art. 1274, NCC)

IMPORTANT: Being a mere PRESUMPTION, it may be overcome by proof that

no condonation was intended.