MODULE 3

Activities:

Problems: Explain or state briefly the rule or reason for your answer.

D borrowed P50,000 as character loan (no security) from a bank. Despite demands for payment after
the loan fell due, D did not pay the bank. D has a savings deposit of P40,000 with the bank. Has the
bank the right to apply the deposit to the payment of D’s debt?

-Yes, according to Article 1287, a bank has a right of set-off of the deposits in its hands for the payment
of any indebtedness to it on the part of a depositor. In this case, the bank may apply the deposit to the
payment of D’s debt.

Assessment:

Quiz 1: Answer the following questions.

1. What are the distinctions between confusion and compensation as modes for extinguishing an
obligation?

(1) In confusion, there is only one person who is a creditor and debtor of himself, while in compensation,
there are two persons involved, and each of whom is a debtor and a creditor of the other;

(2) In confusion, there is but one obligation, while in compensation, there are two obligations; and

(3) In confusion, there is impossibility of payment, while in compensation, there is indirect

payment.

2. In what way is compensation similar to payment?

According to Article 1289, compensation is similar to payment in a way due to the fact that application
of payments can be applied to compensation.

3. In novation are accessory obligations necessarily extinguished? Explain.

Article 1296. When the principal obligation is extinguished in consequence of a novation, accessory
obligations may subsist only insofar as they may benefit third persons who did not give their consent.

Because NO person should be prejudiced by the act of another without his consent.

Reflection

Direction:

Write down your reflections on the topic.

In module 3 its talk about payment or performance. On Section1 Article 1231

Obligations are extinguished: By payment or performance; By the loss of the thing due; By the
condonation or remission of the debt; By the confusion or merger of the rights of creditor and debtor;
By compensation; By novation.

When we say Payments, basically is the transfer of money, goods, or services in exchange for goods and
services in acceptable proportions that have been previously agreed upon by all parties involved. A
payment can be made in the form of services exchanged, cash, check, wire transfer, credit card, debit
card, or cryptocurrencies.

As a legal mode of extinguishing an obligation, Article 1232 Payment may consists of not only in the
delivery of money but also the giving of a thing(other than money), the doing of an act, or not doing of
an act. When a debtor pays damages or penalty in lieu of the fulfillment of an obligation, there is also
payment. In law, payment and performance are synonymous.

Overall I learned from this topic is if we buy something or service it’s our obligation to pay in a period of
time.

Assignment:

Define and give meaning of the following:

1. Legal compensation - when it takes place by operation of law even without the knowledge of
the parties.

2. Confusion - Confusion which takes place in the person of any of the latter does not extinguish
the obligation.
Article 1277. Confusion does not extinguish a joint obligation except as regards the share
corresponding to the creditor or debtor in whom the two characters concur.

3. Merger- It is the meeting of one person of the qualities of creditor and debtor with respect to
the same obligation. Merger which takes place in the person of the principal debtor or creditor
benefits the guarantors.

4. Condonation or remission of debt- Article 1270. Condonation or remission is essentially

gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly.
One and the other kind shall be subject to the rules which govern inofficious donations. Express
condonation shall, furthermore, comply with the forms of donation.
CONDONATION – implied forgiveness
REMISSION – a release from debt or claim (may be by will)

5. Legal impossibility - occurs when the obligation cannot be performed because it is rendered
impossible by provisions of the law, although physically it may be possible of performance.