1. How are obligations extinguished?

5%
Answer:
Obligations are extinguished by:
1. Payment
2. By the loss of the thing due
3. By the condonation or remission of the debt
4. By the confusion or merger of the rights of the creditor & debtor
5. By compensation
6. By novation

01. D borrowed P10,000 from C with G as guarantor. Subsequently, D paid C P 2,000. Unknown
to D, T a third person paid C P10,000 believing that D still owed C such amount. What is the
legal effect of the payment by T?

* T can recover P8,000 from D, the law provides that only the amount to which the
creditor has benefited could be reimbursed to the third person paying if the payment was
without knowledge of the creditor. If D cannot pay, T cannot go after G to collect. (1236)

Art. 1236. The creditor is not bound to accept

payment or performance by a third person who has
no interest in the fulfillment of the obligation,
unless there is a stipulation to the contrary.
Whoever pays for another may demand from
the debtor what he has paid, except that if he paid
without the knowledge or against the will of the
debtor, he can recover only insofar as the payment
has been beneficial to the debtor.

02.. D owes C P10,000. T offers to pay D’s obligation and tells D that D need not reimburse him.
However, D does not give his consent to T’s offer not to be reimbursed. C, nonetheless, accepts
the payment from T. Was the payment valid?

* The payment is valid insofar as C is concerned. The case is deemed to be a donation,

however to be constituted as such D’s consent is necessary. (1238)

Art. 1238. Payment made by a third person

who does not intend to be reimbursed by the debtor
is deemed to be a donation, which requires the
debtor's consent. But the payment is in any case
valid as to the creditor who has accepted it.

03. D obtained a loan of P10,000 from C who was in his right mind at the time he granted the
loan. On due date, D paid his obligation of P10,000 to C who had since become insane. C lost
P4,000 of the amount he received and spent P6,000 for his food and other necessary expenses.
Was the obligation extinguished?

* The obligation is extinguished up to P6,000 only. Payment of an obligation to an

incapacitated person shall be valid when the person has kept the thing delivered and only
insofar as the payment has been beneficial to him. (1241)
 Art. 1241. Payment to a person who is
incapacitated to administer his property shall be
valid if he has kept the thing delivered, or insofar as
the payment has been beneficial to him.
Payment made to a third person shall also be
valid insofar as it has redounded to the benefit of
the creditor. Such benefit to the creditor need not
be proved in the following cases:
(1) If after the payment, the third person
acquires the creditor's rights;
(2) If the creditor ratifies the payment to the
third person;
(3) If by the creditor's conduct, the debtor has
been led to believe that the third person had
authority to receive the payment.

04. May a 3rd person pay the obligation of another? Explain

As a rule, no. Under the law, a third person cannot ordinarily pay the obligation of a party
in a contract. This is based on the principle that there is no privity of contract between the third
person and a party to a contract. The exemption are:

a. When there is a stipulation allowing it; and

b. When the third person has an interest as co-debtor or guarantor.(Monte de Piedad vs
Rodrigo, 63 Phil. 312).

05. State the rules when a 3rd person pays the obligation of another.

(a) If payment was made with the knowledge of the debtor, the third person can ask for
reimbursement. Aside from that, he can be subrogated to rights such as those arising from a
guaranty, penalty clause or mortgage. (Art. 1237, NCC)

Example:

X is indebted to Y on the amount of P10,000.00. As security for the payment of the obligation, X
executed a real estate mortgage over a parcel of land belonging to him Z, a friend of X, paid the
obligation with the consent of X.

Here, Z can ask for reimbursement from X. Aside from that, he can be subrogated to such rights
as a mortgagee.

(b) If the payment was made without the knowledge of the debtor, there can be a right of
reimbursement or subrogation, to the extent of the benefit in favor of the debtor.(Art. 11236,
NCC)

Example:

X is indebted to Y for P 10,000.00 Under the contract, X would pay only P 5,000.00. Without
his consent, Z paid the amount of P 10,000.00 to Y.

In this case, Z can recover only the P 5,00.00 since he is entitled only to a beneficial
reimbursement. X benefited out of the payment to the extent of only P 5,000.00.

(c) If the payment is made by the 3rd person who does not intend to be bound, it is deemed to be a
donation; it needs the consent of the debtor because no body can be compelled to accept the
liberality of another. (Art. 1238, NCC).
Thereason for the rule is that payment made by a third person without the intention to be
reimburse with such payment is considered as donation. The law, however, requires the
acceptance by the debtor because no one can be compelled to accept the liberality of another. It is
rule that, for a donation to be valid, it must be accepted by the donee.

06. To whom should the payment be made?

Payment must be made to:

a. The person in whose behalf the obligation was constituted;

b. The person authorized to receive. (Art. 1240, NCC).

07. Under what circumstances, if any may a debtor compel the creditor to accept a thing
different from that which was agreed upon?

They are:

a. When the obligation is a facultative obligation. Here, one presentation has been agreed
upon; but the obligator may render another in substitution of the same (Art. 1206, NCC) ;

b. When there is another contract entered into between the parties resulting in dacion en
pago or novation;

c. When there is a waiver made by the creditor as when he accepted the thing other than
what was agreed upon. This constitutes estoppel.

08. If there is default in the performance of one’s obligation, what is the effect of the
acceptance of delayed payments?

Recission is impliedly waived. Failure to exercise the right of recisision after the debtor
defaulted constitutes a waiver of such right. The continued acceptance of payments after the
default place the debtor in estoppel.

09. What is the difference between tender of payment and consignation. 10%

Tender of payment is the valid offer of payment by the debtor to the creditor but the
creditor refuses the payment without just cause. Hence tender is preparatory act that will give
rise to consignation which is done in court.
Tender is extra-judicial since this is prior to the filing of consignation while consignation
is judicial.

10. What is compensation? Can there be legal compensation if one of the obligations is not
fixed or is merely contingent? Explain. 10%

Compenstion is a mode of extinguishing obligations whereby two persons in their

principal capacity as both mutual creditors and mutual debtors to each other with respect to
the debts which are equally liquidated and demandable obligations, to which there are no
controversies timely communicated by 3rd parties.
As a general rule, both debts should be due and demandable and should be liquidated;
however, the parties may agree to the compensation of debts not yet due.