MODES OF EXTINGUISHMENT OF OBLIGATION

LOSS OF THE THING DUE CONDONATION/REMISSION CONFUSION/MERGER COMPENSATION NOVATION

Partial or Total/Includes “Gratuitous Abandonment by Meeting in one person the It is a sort of balancing (CUM The substituting or changing
impossibility of performance the Creditor of his Right.” qualities of creditor and PONDER – “to weigh of an obligation by another,
When is there a LOSS: debtor with respect to the together”). It is the which extinguishes or
a. When the object REQUISITES: same obligation (ONE extinguishment of the modifies the first, either
perishes (physically) 1. There must be an CANNOT CLAIM AGAINST obligations of those persons changing its OBJECT or
b. When it goes out of agreement HIMSELF) who are reciprocally debtors PRINCIPAL condition, or
commerce (acceptance of the - Guarantor also and creditors of each other. substituting another in place
c. When it disappears offer is required) EXTINGUISHED - 2 persons are of the debtor or subrogating
in such a way that: 2. Parties must be creditors and a third person in the right of
its existence is capacitated and REQUISITES: debtors of each the creditor
unknown or it cannot must consent 1. Between debtor and other. NOTE: at the time it
be recovered (beyond the power creditor (Principal extinguishes an
d. Impossibility of of the courts or and not mere Usefulness/Advantages: obligation, it creates a
performance congress) representative) 1. Facility of payment new one in lieu of the old.
3. Subject matter 2. Merger is clear and 2. Debts extinguished May be MODIFIED by:
Effect of Loss TO GIVE 4. Consideration must definite without requiring the 1. Changing the object
(determinate) be liberality 3. Obligations involved transfer of or principal condition
- Obligation is (essentially must be the SAME money/property 2. Substituting the
EXTINGUISHED gratuitous) and IDENTICAL Note: Clearing House – take person of the debtor
REQUISITES: 5. Obligation must be NOTE: 3. Substituting a third
cares of compensation in
a. Thing lost must be demandable at the - Mere transfer of person in the right of
banking accounts.
determinate time of the remission RIGHTS and not the Creditor
b. Thing was lost 6. Remission must not
credit does not Partial or Total Compensation –
without fault of the be inofficious
result in merger TRUE TO ALL KINDS REQUISITES:
debtor (if lose by (prejudicial to 3rd
1. A valid obligation
fault of debtor, person)
Revocability of Kinds of Compensation: (voidable obligation
obligation is 7. Formalities of
Confusion/Merger A. Legal Compensation still possible)
converted into an donation (express
- If the reason for the – takes effect by 2. Intent to extinguish
obligation to remission)
confusion ceases, operation of law or to modify by a
8. Waivers are not to
INDEMNITY the obligation is (a) Takes place substantial difference
c. The thing lost before be presumed
REVIVED. automatically 3. Capacity and Consent
the debtor has generally. They must
- Agreement: UNLESS there has of ALL the parties
incurred in delay be clearly and Except:
presence of any of been a waiver
Effect of Loss TO GIVE convincingly shown EXPROMISION (old
the causes of (b) Compensation
(generic) either by express debtor does not)
rescission, which extinguishes
- Does not extinguish stipulation/acts 4. Validity of the New
annulment, etc. principal also
the obligation admitting of no other obligation
- Inheritance: nullity extinguishes
because generic explanation. a. Suspensive and
of the will, accessory
things do not perish condition does
subsequent (c) Concurrent amount
(genus nunquam Delivery of Private not materialize,
appearance of an – if one debt is
peruit) Document no novation
heir with better right larger than the

Effect of Fortuitous Event:
extinguishment of the
obligation
Exception:
i. The debtor is still
liable even fortuitous
events
ii. Stipulated by the
parties
iii. The nature of the
obligation requires
the assumption of
risk
iv. The loss of the thing
is due partly to the
fault of the debtor
v. When the loss of the
thing occurs after
the debtor has
incurred in delay
vi. Bad faith (promised
to deliver to two or
more persons
vii. Obligation arises
from a criminal
offense
viii. Obligation is generic
RECIPROCAL OBLIGATIONS –
if one of the reciprocal
obligation is extinguished
the other must also be
extinguished.
Presumption of FAULT – on
the part of the debtor if the
thing is lost while in his
possession.
Except:
Earthquake, flood, storm, or
other calamity
Court granted
DISCRETION to determine
- Remission or Effect: obligation is other, the balance NOTE: cannot extinguish
renunciation is recreated in the same form subsist as a debt CRIMINAL LIABILITY
presumed. Private and under the same REQUISITES:
document is the condition in which it was Affirmative Kinds of Novation
BEST EVIDENTIARY found before the merger 1. Each obligors are OBJECT/PURPOSE
proof to show that took place. bound principally and A. Real/objective –
the obligation has - Period which has that he be at the same changing the object
not been paid elapsed cannot be time a principal creditor or the principal
- This is only computed in the of the other conditions of the
disputable and not determination of the - 2 debts and 2 credits obligation
conclusive (maybe period of - Generally bound as B. Personal/subjective –
for prescription principals change of
examination/collecti 2. Debts consist of SUM of - Expromision/
on) MONEY/if things of the delegacion (Debtor)
Mortgagee Becomes Owner
1. Joint Obligation – SAME KIND and also - Subrogating a third
- Mortgage is
only the share of the SAME QUALITY if the person (Creditor)
extinguish but not
bearer is remitted. later is stated FORMS/CONSTITUTION
the Principal Debt
2. Solidary Obligation – - Fungible (Consumable) A. Express
whole obligation is – generic, capable of B. Implied
EFFECTS OF MERGER TO
remitted substitution EXTENT
GUARANTORS: 3. Debts be DUE
Note: Presumption on both A. Total/Extinctive
- Accessory follows 4. Liquidated and
may be overcome by Extinctive – never presumed.
the Principal. demandable
superior contrary There must be an express
- Contra of guaranty is Demandable – refer to
evidence. intention to novate.
extinguished but not the fact that neither of
Implied – necessitates that
the obligation to pay the debt has
Implied Remission the old obligation is
the original debt prescribed/obligation is
- Voluntary completely superseded by
In case of: not invalid or illegal
destruction by the the new one.
a. Guarantor-creditor – Liquidated – exact
creditor of the Done by making substantial
can demand the amount are already
instrument is changes:
performance of the determined
likewise another a. In the object/subject
obligation from the (unliquidated could not
form. b. In the cause of the
debtor, in case of be set off)
Note: presumption of consideration of the
default, even from Negative
remission usually prevails contract
his co guarantors 1. Neither of the debts c. Principal
over presumption of b. Guarantor-debtor – must there be
terms/conditions
payment. the CREDITOR can retention/controversy
demand the commenced by a 3rd Test of incompatibility –
Presumption of remission of performance of the person and
whether they can stand
accessory obligation of obligation directly communicated in due
together, each one having a
PLEDGE from the guarantor. time to the debtor
independent existence, if
- Exist when the thing, 2. There must be no
they cannot and are
after its delivery to Merger on Joint Obligations waiver
irreconcilable, the
the creditor, was - Debtor’s personal 3. Compensation must not
subsequent obligation would
found at the share is have become
extinguish the first.
possession of the extinguished but not prohibited by LAW:
whether a partial loss or debtor. his co debtors. Legal Compensation Cannot B. Partial/Modificatory –
destruction of the thing - Merger on Solidary Take Place still remains in force,
is sufficient as to Presumption of Unpaid Debt Obligations a. debts arising from only modified
extinguish the obligation. – rebutted by presentation of - Obligation is DEPOSITUM
receipt altogether b. DEPOSITARY SUBSTITUTION – of debtor
Obligation TO DO: extinguished without c. bailee in without consent of the
- Must have occurred NOTES: prejudice to the COMMODATUM creditor is binding upon the
- Express remission: d. claims from FUTURE
AFTER the rights and parties to the substitution but
acceptance by the support by gratuitous
constitution of the obligations of the not on the creditor
debtor may be title
obligation solidary creditors
e. civil liability
2 Causes: implied or tacit, and debtors among Passive Subjective Novation
f. damages suffered by a
1. Legal Impossibility – provided that the themselves (debtor)
partnership thru fault of
when the law value of the thing 1. Expromision –
a partner cannot
prohibits the condoned does not initiative comes from
compensate with
performance or exceed 5,000 pesos a 3rd person. It is
profits and benefits he
execution of the (ART. 748) essential that the
may have earned for
work agreed upon Remedy for VOID Donation: OLD debtor is
the partnership)
(direct) a. Reduction of the g. certain obligations in released from his
The law imposes donation favor of government, obligation; otherwise
duties of a superior b. Suppression of the there will be no
such as taxes, fees,
character upon the donation Expromision, no
duties, and others of a
obligor which are similar nature novation.
incompatible with - Remission of the REQUISITES:
the work agreed Principal Obligation a. Initiative must come
Guarantor May Set Up
upon (indirect) is remission of the from a third person
Compensation with Respect to
2. Physical Accessory obligation b. New creditor and
PRINCIPAL debt
Impossibility – arises but NOT VICE VERSA debtor must
A owes B (500k)
from the death of CONSENT
B owes A (100k)
the obligor, when c. Old debtor must be
C guarantor of A must only pay
the act to be excused/released
400k in case of default
performed requires from his obligation
Exception: extinguishment of
his personal (his consent NOT
principally obligation
qualifications, or REQUIRED)
extinguishes the guaranty
from the death of Note: old debt, will NOT be
the oblige responsible for the new
B. Conventional/Volunt
3. Relative Impassibility debtor’s INSOLVENCY
ary Compensation
– service has (with/without his knowledge)
REQUISITES:
become so difficult 2. Delegacion – caused
1. Agreement must be
as to be manifestly by the replacement
valid
beyond the of the old debtor by a
2. Parties have legal
contemplation of the new debtor.
capacity
parties, the court 3. Consent freely given REQUISITES:
should be authorized Note: Debts that are not due a. Initiative must come
to release the may be Compensated from debtor
obligor in whole or in b. All the parties agree
part. (creditor may give
C. Judicial EXPRESS/IMPLIED
Compensation/Set consent)
Off – when defendant NOTE: if in BAD FAITH (new
has an unliquidated debtor is already insolvent),
claim for damages not valid
against the plaintiff c. Must release the old
sets it off by proving his debtor of the
right to said damages obligation
and the amount Rights of the NEW DEBTOR
thereof, it is converted - Payment by the new
into a liquidated claim debtor gives him the
by a court decree right mentioned in
REQUISITES: arts. 1236 and 1237
1. Counterclaim must be (beneficial
made reimbursement/reimb
2. All requisites ursement and
mentioned in Art. 1279 subrogation)
must be present except
at the time of the EFFECTS of Insolvency of the
pleading, claim need NEW debtor:
not yet be liquidated General Rule: Old Debtor Not
3. Unless pleading and Liable
proof are made, the Requisites to Hold Old Debtor
court cannot of its own Liable:
accord declare the 1. Insolvency was
compensation. already existing at
Compensation takes the time of
place by the judgment delegation
as to the date the 2. Insolvency was
compensation was already existing and
pleaded. known to the debtor
at the time of
Compensation of delegation
Rescissible/Voidable Debts – Note: if Insolvency is after
valid until rescinded or voided the delegation, old debtor is
(Compensation is allowed) NOT LIABLE.
Prevention of Unfairness – if Does not Apply if:
rescission/annulment is later on 1. 3rd person was only
decreed by the court, it is as if an agent
NO compensation ever took 2. 3rd person acted only
place ass guarantor or
- DECREE is surety
RETROACTIVE 3. New debtor merely
agree to be solidarily
Effects of Assignment to a 3rd liable for the
Person obligation
1. With CONSENT of 4. New debtor merely
Debtor – compensation agreed to make
cannot be set-up himself jointly or
because there is partly responsible.
consent and therefore a EFFECTS on Accessory
waiver Extinguishment of the
2. With knowledge but no Principal carries with it the
consent of debtor – extinguishment of the
compensation may be accessory.
set up regarding to NOTE: does not apply to
debts previous to the Novation by Subrogation
cession/assignment
(before the notice) Modificatory Novation –
3. Without knowledge – applies to extinctive novation
debtor can set up (express intention)
compensation as a Effect to Guarantors and
defense for all debts Sureties
maturing PRIOR to his a. If more ONEROUS –
KNOWLEDGE of the they are liable for the
assignment original obligation
b. If LESS – guarantors
D. Facultative – by the and sureties are still
will of only one party liable
and the other cannot Effect of Stipulations to the
choose compensation Contrary
because of any Accessory obligations would
impediment still remain as accessory
Obligations of Depositary: provided that the debtors of
1. Keep the thing safely said accessory obligations
and return it to give their consent
depositor, heirs, Pour Autrui – obligations
successors, person made in favor of third
designated persons remain unless said
2. Depositary cannot third persons have their
deposit the thing to a consent of the Novation
third person
3. If 3rd person is allowed,
depositary is liable for
the loss if he deposited
with a person who is
manifestly careless or
unfit
4. Depositary is
 responsible for the
negligence of his
employees
5. Cannot use the thing
unless authorized

NOTES:
Non compensation if one debt
arises from a crime. It would be
improper and inadvisable. BUT
victim can claim.
If a person should have against
him several debts which are
susceptible of compensation,
the rules on the application of
payments shall apply to the
order of compensation (MORE
ONEROUS)