Romeo C. Saberon Jr.

Assignment No. 2
Obligations and Contracts

19. WHAT IS AN OBLIGATION WITH A PENAL CLAUSE?

Answer:

An obligation with a penal clause is one with an accessory undertaking by virtue

of which the obligor assumes a greater responsibility in case of breach of the
obligations. (Jurado 2009)

20. WHAT ARE THE EXCEPTIONS WHERE ASIDE FROM PENALTY,

DAMAGES AND INTEREST MAY BE DEMANDED BY THE CREDITORS?

Answer:

The following are exceptions where aside from penalty, damages and interest may
be demanded by the creditors, to wit:

a) When there is express stipulation to the effect that damages or interest may be
recovered;

b) When the debtor refused to pay the penalty imposed in the obligation;

c) When the debtor is guilty of fraud or dolo in the fulfilment of the obligation. The
reason for the third exception is clear, there can be no renunciation of an action to
enforce liability for future fraud because, as we have seen, this is against the
express provisions of the law. (Paras 20212)

21. WHAT ARE THE MODES OF EXTINGUISHING AN OBLIGATION?

Answer:

The modes of extinguishing an obligation are:

a) payment of performance;
b) loss of the thing due;
c) condonation or remission of the debt;
d) confusion or merger of the rights of creditor and debtor;
 e) compensation; and
f) novation (Article 1231, NCC)

Other causes of extinguishment of obligations, such as

a) annulment;
b) rescission;
c) fulfilment of a resolutory condition; and
d) prescription. (NCC Article 1231)

Other causes not expressly mentioned are:

a) Death- in obligation which are purely personal in character;

b) Arrival of resolutory period;
c) Mutual dissent;
d) Change of civil status; and
e) Happening of unforeseen event. (Rabuya 2017)

22. WHAT ARE THE SPECIAL MODES OF PAYMENT AND EXPLAIN

EACH.

Answer:

The following are the special modes of payment:

a) Application of payments. The designation of the debt which payment shall be

made, out of 2 or more debts owing the same creditor. (CIVIL CODE, art. 1252)

b) Dation in payment. A mode of extinguishing an obligation whereby

the debtor pays a monetary obligation with property. It is a special form of
payment because one element of payment is missing: Identity. (EDGARDO L.
PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED:

Dation in payment extinguishes the obligation to the extent of the value of the
thing delivered, either as agreed upon by the parties or as may be proved, unless
the parties by agreement express or implied, or by their silence – consider the thing
as equivalent to the obligation, in which case the obligation is totally extinguished.
(Tan Shuy v. Maulawin, , G.R. No. 190375, Feb. 8,2012)

The contractual intention determines whether the property subject of the dation
will be considered as the full equivalent of the debt and will therefore
serve as full satisfaction for the debt. (Luzon Dev Bank v. Enriquez, G.R. No.
168646, Jan. 12, 2011).

c) Cession or Assignment (in favor of creditors) (CIVIL CODE, art. 1255)

The process by which a debtor transfers ALL his assets which are not subject to
execution in favor of creditors, so that the latter may sell them and apply the
proceeds to his outstanding obligations. Except if there is contrary agreement, or as
may be provided by law, the obligations are extinguished only up to the net amount
of the proceeds of the sale. (EDGARDO L. PARAS, CIVIL CODE OF THE
PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND
CONTRACTS 417 (2016).

(d) Tender of payment and Consignation (CIVIL CODE, art. 1256)

Tender – the act of offering to the creditor what is due him together with a
demand that the creditor accepts the same. (EDGARDO L. PARAS, CIVIL
CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION;
OBLIGATIONS AND CONTRACTS 419
(2016))

If the creditor refuses w/o just cause to accept payment, he becomes in mora
accipiendi and tender alone will not extinguish the obligation; consignation is
needed. (Co v. PNB, G.R. No. L51767, June 29, 1982).

Consignation – the act of depositing the thing due with the court or judicial
authorities whenever the creditor refuses to accept payment, and generally requires
prior tender of payment. (RUBEN E. AGPALO, OBLIGATIONS AND
CONTRACTS 185 (2008).

23. SUMMARY OF THE RULES IN APPLICATION OF PAYMENT

Answer:

The application of payment is made:

(a) Debtor makes the designation.

(b) If not, creditor proposes to make the application by advising the debtor or
through certain acts such as issuing a receipt with an application of payment. Since
this is a mere proposal (since only a debtor can make an application of payments),
the debtor must accept it either expressly or impliedly by not objecting to the
creditor’s proposal, as when the debtor accepts without objection the receipt issued
by the creditor with an application of payment.

(c) If the debtor makes no application and the creditor has not made a proposal, or
if the application is not valid, then application is made by operation of law: 1. It is
to be applied to the most onerous debt (e.g., to an interest bearing debt over debts
without interest; or 2. If all debts are equally onerous or of the same burden, or it
cannot be determined which debt is the most onerous, then the payment should be
applied pro rata to all the obligations due. (CIVIL CODE, Art. 1252-1254).

24. WHAT ARE THE EFFECTS OF CESSION/ASSIGNMENT?

Answer:

The effect of cession or assignment are:

(a) Creditors do not become the owner; they are merely assignees with authority to
sell (hence, the legal contract involved is one of Agency and not Sale);

(b) Debtor is released up to the amount of the net proceeds of the sale, UNLESS
there is a stipulation to the contrary;

(c) Creditors will collect credits in the order of preference agreed upon, or in
default of agreement, in the order ordinarily established by law. (EDGARDO L.
PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED:
PRESCRIPTION; OBLIGATIONS AND CONTRACTS 417-418 (2016)

25. WHAT ARE THE REQUISITES OF VALID CONSIGNATION?

Answer:

The following are requisites of Valid Consignation:

1. Existence of Valid debt;

2. Creditor has unjustifiably refused to accept payment, i.e., previous valid tender;
3. Prior notice of Consignation had been given to the person interested in
performance of obligation; (1st notice) (CIVIL CODE, Art. 1257)
4. Actual deposit/consignation with proper judicial authorities;
5. Subsequent notice of Consignation (2nd notice). (HECTOR S. DE LEON &
HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS
AND CONTRACTS 359-360)

26. WHAT ARE THE INSTANCES WHEN CONSIGNATION ALONE

WITHOUT TENDER OF PAYMENT WIL EXTINGUISH THE OBLIGATION?

Answer:

The following instances when consignation alone without tender of payment will
extinguish the obligation.

1. Creditor absent or unknown/ does not appear at the place of payment;

2. Incapacitated to receive payment at the time it is due;
3. Refuses to issue receipt w/o just cause;
4. 2 or more creditors claiming the same right to collect;
5. Title of obligation has been lost;
6. Debtor had previously been notified by the creditor that the latter would not
accept any payment (Kapisanan Banahaw, Inc. v. Dejarme, G.R. No. L-32908,
Nov. 28, 1930).