Similarities of Dation in Payment and Payment by Cession 4.

Act of consignation
-what is given is property 5. Subsequent notice of consignation made to the interested parties
*if the 5 requisites are present, is the obligation extinguished? NO, but
Differences the creditor will be the one to pay for the expenses (effect) because
Dation in Payment Payment by Cession we need judicial declaration. The court will be the one to declare that
1 creditor 2 or more creditor the obligation is extinguished.
If the debtor gives the property to The creditor only become Then if the 5 requisites are present, obligation is not extinguished yet,
the creditor, he becomes the assignee we need court declaration.
owner The judicial declaration is the one that need to extinguish the
Don’t need partial insolvency Partial insolvency is needed on obligation.
the part of the debtor
Instances where we don’t Need Tender of Payment
Similarities of Application of Payment and Payment by Cession 1. Because the creditor is absent
-there are 2 or more debts 2. Because the creditor is incapacity to receive the payment
3. There is refusal to give receipt
Differences 4. 2 or more persons are claiming the property
Application of Payment Payment by Cession 5. Loss (1198 vs 1256)
1 creditor Numerous creditors 1198 – debtor losses the period
We choose We assign, we abandon the Instances: -Debtor becomes insolvent
property -Debtor does not give the guaranty
Partial insolvency is not required Partial insolvency is required -When guaranty is destroyed
-Debtor violates the undertaking
ARTICLE 1256- Tender of Payment and Consignation -Attempts to Abscond
Tender of Payment- act of paying *fault of the debtor
Consignation- act of depositing the thing in court (we don’t need
tender of payment) 1256 – We don’t need tender of payment because it’s the
creditor’s fault, why? Because of the 5 instances
General Rule: there must be both tender of payment and consignation
Exception: Consignation alone extinguishes (5)
ARTICLE 1257 – PRIOR NOTICE TO THE PERSONS INTERESTED
Example IN OBLIGATION
A Specific Car B
-guarantor
Suppose A will give B specific car, A is going to make a tender of -surety
payment. If B refuses, then he will deposit it in court. -mortgagor
-creditor
Requisites
1. Existence of a valid debt which is due Because we need the notice, because at the end of the day if the
2. Tender of payment and refusal on the part of the creditor to accept requisites are present who will pay the obligation? CREDITOR.
3. Prior notice of consignation
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Creditor will be the one who will pay for the expenses; he will be the
one who bear the loss. And he might change his might, the reason
why we need PRIOR NOTICE.
ARTICLE 1258 – CONSIGNATION MUST BE WITH PROPER
AUTHORITY
Either on the municipal trial court or regional trial court
Proper court – judicial court
-Second notice of consignation
Giving the creditor the option to change his mind because he
will be the one who bear the loss and pay for expenses of
consignation
ARTICLE 1259 – CREDITOR PAYS EXPENSES, IF PROPERLY
MADE
If the 5 requisites are present and if the consignation was properly
made, the CREDITOR will pay for expenses.
ARTICLE 1260 – WITHDRAWAL OF THING/ SUM DEPOSITED
Can the debtor withdraw the thing? Yes, given the 2 instances:
1. Before the creditor has accepted the consignation
2. Before judicial declaration of proper consignation
ARTICLE 1261 – EFFECT OF WITHDRAWAL WITH CONSENT OF
CREDITOR
Should the creditor agree to the withdrawal? NO, because there are
adverse effects
EFFECTS:
1. Creditor losses preference over the thing
If there is collateral or security, he losses the preference over
the collateral or over the principal thing
2. Co-debtors, guarantors and securities are released with the
process
Example:
G D1 2k
C negligence (not fraud because you cannot deceive a horse)
S D2 Solidary
2
D1 and D2 owe C solidarity, and there are supposed a Guarantor and
Surety.
If the creditor agrees with the withdrawal, the effect will be the
guarantor and the surety will be released. The solidary obligation will
be only became joint obligation. D1 and D2 will still be liable. And if
there is security or collateral, they will be released also.
(Creditor should NOT agree to the withdrawal)
LOSS OF THE THING DUE
ARTICLE 1262 – WHEN IS THE THING CONSIDERED LOST?
Kinds of Loss (1189)
1. Physical – when it’s perishes
2. Legal – goes out of commerce
3. Civil – thing disappear in such a way that its existence is unknown
Requisites to Extinguish the Obligation
1. The obligation to deliver is specific/determinate thing.
2. There is no fault on the part of the debtor
3. There is no delay on the part of the debtor
Example
A Specific Car B
If the 3 requisites are present, the obligation extinguished, then we
have LOSS OF THE THING DUE.
General Rule: Loss extinguishes the obligation
Exception: Debtor is still liable to pay for damages (obligation is
converted into action for damages)
1. Law
(1170 – delay, fraud, negligence, violation)
Example (negligence)
Specific Horse
A B
A gives B specific horse, A fed horse with poison, then A is guilty of
The death of the horse is a fortuitous event, but the loss of the horse Exception: Court will decide whether partial loss is equivalent to
is not negligence because of A and he will pay for damages. complete /total loss (if it is so material or substantial, the court will
declare them as the same)
(1165 – fraud and delay)
Example (delay) Example
A S. racing horse B
Specific car
A B One of the feet of the horse suffered injury that is partial loss, but the
A gives B specific car due today, A did not give today and B horse can’t no longer run that fast then that is the total loss.
demanded, then A is in delay.
A is about to deliver the car to the following day, the car was Example
Paint B’s portrait
destroyed by fortuitous event, then the debtor is liable because he is A B
guilty of delay. A promise to paint B’s portrait using his right hand, but A right hand
got amputated, that is already total loss because he can no longer use
2. Stipulation/Agreement his hand. But supposed his hand is trembling, that is partial because
3. Nature of the obligation requires the assumption of risk he can still paint but he can’t paint that good. Then court may declare
Example: Insurance that partial loss and total loss are equivalent, because its material to
Supposed I obtained an insurance of my life and I died, then the obligation
the company of the insurance is liable because that is the nature of
assumption of risk. ARTICLE 1265
There is the assumption of risk on the part of the debtor General Rule: Debtor is presumed at fault (if the thing is destroyed)
4. Obligation to deliver the thing arises from crime (1268) Example
5. Generic (1263) A Specific Car B
A promise to B a specific car 1 week from now, however, during the
ARTICLE 1263 – EFFECT OF LOSS OF GENERIC THING week, the car was destroyed, then A presumed at fault. That is only a
Example disputable presumption (disputable presumption – not yet final).
A Car B
A gives B a car, car is generic, if the car is destroyed, the debtor is WHY? DGFF (debtor is presume at fault because of DGFF)
liable because car can be replace.
Exception: debtor is not presumed at fault if loss was caused by
Example: supposed the debtor is going to manila and he brought 10k natural disaster (FE)
because he’s going to pay the creditor. Along the way, he was subject
to theft/robbery, and then he lost the money. Debtor is liable because ARTICLE 1266 – IMPOSSIBILITY OF THE FULFILLMENT OF THE
money is generic. OBLIGATION
1183 1266
ARTICLE 1264 – TOTAL LOSS VS. PARTIAL LOSS Impossible condition Impossibility of the
General Rule: Total loss and partial loss are NOT the same fulfillment of the
obligation
Total loss (example): specific car, the car is totally wrecked/destroyed When it happens? Start After the creation of
Partial loss (example): only a scratch the obligation
What is the effect? The obligation is Debtor is released
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 ANNULED, the debtor from obligation
is not liable. Both the
obligation and
condition are void.
Similarities: in both cases, there is impossibility
Example (1183)
Specific Car
A B
Made in mars
Obligation (S. car) and condition (made in mars) are void.
Example (1183)
Specific Car
A B
A promise B specific car 1 week from now, the car destroyed by FE,
then he can no longer deliver and the debtor is not liable (debtor is
released from obligation)
ARTICLE 1267 – DIFFICULTY OF PERFORMANCE
-DOCTRINE OF UNFORESEEN EVENT/ DOCTRINE OF
FRUSTRATION OF ENTERPRISE
Case decided by the supreme court: Naga telephone company
There was this Naga electric company, it was created ahead
of Naga telephone company. It was able to build its electric lines but
after 3 years Naga telephone company was also created, they need
tower to put the wires. It was happened that Naga electric company
already had the post. There has an agreement, naga electric
company said that naga telephone company can use their electric
post but have to give them 10 telephone line free of charge.
~Benefit given to naga electric company: 10 telephone lines free of
charge
~Benefit given to naga telephone company: can use the electric post
After so many years, the customers increases. The wires in the post
can’t exercise anymore by the naga electric company .
Decision of supreme court: Naga electric company is released
because it’s difficult on his part to continue with the obligation.
1266 & 1267: DEBTOR IS RELEASED FROM OBLIGATION
4
ARTICLE 1268 – EFFECT OF FORTUITOUS EVENT WHERE
OBLIGATION PROCEEDS FROM CRIMINAL OFFENSE
Example: A stole the carabao from B, stealing is a crime.
Scope of civil liability (restitution, reparation, indemnification)
A supposed to return the carabao but the carabao died, A is
liable because the obligation arises from a crime
General Rule: debtor is liable
Exception:
Example (continuation): supposed B accepts, then he is liable of
MORA ACCIEPIENDI. Upon going home, the carabao died, the
DEBTOR IS NOT LIABLE because the creditor is already guilty.
ARTICLE 1269 – RIGHTOF THE CREDITOR TO PROCEED
AGAINTS THIRD PERSON
Example: insurance business
Supposed I insured my car in an insurance company. After
insuring it after a month, while driving my car, somebody hit me. Then,
the necessary payment should get from insurance company, but the
insurance company can get the reimbursement from TP.
TP and insurance company have no existing contract, but in
1269, the creditor can proceeds to TP for reimbursement
CONDONATION OR REMISSION OF DEBT
ARTICLE 1270 – CONDONATION/ REMISSION/ WAIVER/
RENUNCIATION
Remission - first heard when discussing joint and solidary
Condonation or remission – gratuitous abandonment by the creditor
of his right against the debtor. (gratuitous – for free)
Example
9K
A B
A owe B 9k, B said to A to do not pay. The moment B told A to not to
pay the obligation, that is the CONDONATION.(express remission)
Requisites (5)
1. It must be gratuitous (free)
2. It must be accepted by the obligor (because it is a form of donation)
3. The parties must have capacity (not minor, nor insane, not because B cannot collect it anymore because the proof/evidence
incapacitated) returned it back to A.
4. It must not be inofficious (not excessive)
5. It must expressly, it must comply with the forms of donations. *1215

Condonation is a form of donation which needs acceptance. A 9k

B D
Kinds of Remission C Promissory note
1. As to its extent
a. Total/Complete – covers the entire obligation. A, B and C owe 9k to D evidence by promissory note. If D returned
Example: B told A to not pay the whole obligation – total/complete the promissory note to A, what extinguished is only 3k
remission.
A
b. Partial – does not cover the entire obligation B D
Example: A owes B 9k, B told A to not pay the 5k – partial remission. C Promissory note
Solidary
2. As to its form A, B and C owe 9k to D evidence by promissory note. If D returned
a. Express – made either verbally/oral or in writing the promissory note to A, what extinguished is the whole 9k.
b. Implied – only be inferred from conduct (base on the acts of
the parties) ARTICLE 1272 – (IMPLIED) Presumption in case document found
in possession of debtor.
3. As to its date of effectivity Example
9k
a. Inter vivos – take effect during the lifetime of the donor A B
(buhay pa ang donor) Promissory note
b. Mortis causa – become effective upon the death of the The promissory note should be in possession of B, but in this case,
donor (patay na ang donor) the promissory note is in the possession of A. then the presumption, B
voluntarily delivered it to A.
ARTICLE 1271 – (IMPLIED) Presumption in case of voluntary
delivery of private document of indebtedness by creditor (not 1271 - sinabi ng problem na sinauli ang promissory note
applicable in public document kasi madaming kopya kapag public) 1272 - hindi sinabi ng problem na sinauli ang promissory note pero
ito ay na kay A. If it found on the possession of A that is what we
Example called IMPLIED REMISSION.
A 9k B *but in both cases, the obligation extinguished.
Promissory note
A owe B 9k, (9k – principal; promissory note – proof/evidence)
A made the promissory note, but B held the promissory note.
B will return the promissory note to A (the law says delivery), kapag
sinauli at wala namang sinabi si B, that is IMPLIED (The act of
returning, the act of delivering it back). The obligation extinguish,

5
ARTICLE 1273 – EFFECT OF RENUNCIATION (both to principal and If B returns the promissory note
accessory) -9k extinguish and all others extinguish

Example: If B return the ring ONLY to A

-only the ring extinguish, all others remains
G 9K
A C If the guarantor do not pay
Accessory -only the guaranty extinguish, but all other remains
If B told A to not to pay the 9k, the principal (9k) extinguish, the
guaranty also extinguish because accessory (guaranty) cannot stand
alone without the principal. CONFUSION OR MERGER OF RIGHTS
If B told A to not to pay the guaranty, the guaranty extinguish but 9k ARTICLE 1275 – The obligation is extinguished from the time the
will remain because principal can stand alone. characters of creditor and debtor are merged in the same person.

ARTICLE – 1274 Presumption in case thing pledged (nakasangla) Merger – merge – to combine (meeting in one person of the
found in possession of debtor. characters of creditor and debtor with respect to the same obligation)
Example
9k
A B pledge – collateral One person – he is the debtor and creditor at the same time
Ring – pledge - security Example
A 9k B
A owns the ring, then the ring is in possession of B (collateral). The Promissory note
contract called pledge. If B returns the ring to A, what extinguishes is A owes B 9k evidence by promissory note. A id the debtor, B is the
the PLEDGE not the principal (9k). creditor. B transfer it to C, C transfer it to D, D transfer it to E. B is the
ORIGINAL CREDITOR. E already hold the promissory note then he
will be the creditor.
Supposed E bought goods from A, E pay through the promissory
note/check. Then A will be the debtor and creditor at the same time
Example: because the promissory note is already on his possession. Then wala
nang sisingilin si A. the obligation extinguish.
G 9K
A C If the promissory note only returned to the debtor – remission/waiver
Accessory 2% If the promissory note use to pay to the debtor – merger
Promissory note
Pledge (ring) ARTICLE 1276 – Effect of merger in the person of principal debtor or
creditor
Example:
If B tells A do not pay the 9k
-principal extinguish, all others (interest, promissory note, pledge) are G 9K
extinguish A C
PN
6
A owe 9k to B evidence by promissory note, B give it to C, C give it to *remission (1215)
D, D is the creditor. D pay the promissory note to A, A then became A 9k
the debtor and creditor. Principal extinguish, guaranty also extinguish B D
C Promissory note
Effect of merger in the person of the guarantor
Example: D returns the promissory note to A, 3k only extinguish

G 9K A 9k
A C B D
PN C Promissory note
A owe 9k to B evidence by promissory note, B give it to C, C give it to Solidary
D, D is the creditor. D pay the promissory note to Guarantor,
accessory became extinguished, but the 9k (principal) remains. Then D returns the promissory note to A, entire 9k extinguish
guarantor will demand payment or reimbursement from A with the D cannot ask reimbursement from A (no reimbursement in remission)
amount of 9k.
CONFUSION COMPENSATION
ARTICLE 1277 – CONFUSION IN A JOINT OBLIGATION One person – both debtor/creditor Both parties – debtor and creditor
A PN B C D A PN B
*merger
A 9k 9K 9K
B D
C Promissory note D is the creditor, A is the debtor. A owe B 9k, B also owe 9k to A.
D pay the promissory note to F, F pay to G, G is the creditor. G pay D pay the PN to A, then A will both obligation extinguish
the promissory note to A, 3k is only extinguish become the debtor and the
creditor.
A 9k
B D
C ARTICLE 1278 – COMPENSATION
Promissory note -set off
Solidary -Abbreviated Payment / Signified Payment
D pay the promissory note to F, F pay to G, G is the creditor. G pay Compensation - extinguishment to the concurrent amount of debts of
the promissory note to A, entire 9k extinguish two persons.
G pay the PN to A, there is still reimbursement (there is - Debtor and creditor of each other (both parties)
reimbursement in confusion/merger). G parted with goods, A parted
with money. Example: A owe B 9k, and B owe A also 9k.
(kapag parehong may utang sa isa’t isa – compensation)
(kapag isa lang – merger)

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Kinds of Compensation
1. Legal – declared by law (takes place by operation of law even
without the knowledge of the parties)
2. Judicial – declared by court (takes place by order from a court in
litigation)
3. Voluntary – declared by both parties and there is agreement (takes
place by the agreement of the parties)
4. Facultative – only one party declares (when it can be set up by only
one of the parties)
ARTICLE 1279 – REQUISITES OF LEGAL COMPENSATION (5)
1. Both parties are principal debtors and creditors
Example: A - - - - - > B 9k
B - - - - - > A 9k
A and B are both principal debtor and creditor, obligation
extinguish.
A - - - - - > B 9k
A owe B 9k, but B owe Guarantor then that is not valid. (kasi
sabi dapat ay sa principal debtor at principal creditor lang may utang)
A - - - - - > B 9K (A is member of partnership/
corporation)
A owe B 9k, B owe the partnership / corporation to which A
belongs, then there is still NO legal compensation.
2. Same kind or Quality (both debts consist in a sum of money, or of
consumable things of the same kind and quality.
A----->B
A owe B 9k, B owe A 5k. There is compensation because law
said that it must be same kind and quality NOT same amount. (Partial
Compensation)
A owe B 9k, B owe A TV, not legal compensation because one
is money, one is thing, it must be same kind/quality.
A owe B stove, B owe A electricfan. Not legal compensation,
because both are not the same kind.
8
A owe B specific carabao, B owe A specific horse. Not legal
compensation.
A owe B sinandomeng rice, B owe A NFA rice. Not legal
compensation because even though the two are the same kind, they
are different in terms of quality.
A owe B a car, B owe A specific car. One is generic, another
one is specific, that is NOT legal compensation. But suppose A said to
B that whatever B will deliver is also what A will deliver (facultative
compensation - si A lang ang pwede magdeclare, hindi pwede
magdeclare si B kasi specific siya)
3. Both debts are due and demandable
Example: A owe B 9k, B owe A 9k. Both debts are due and
demandable because both are pure (1179 – when there is no period
and condition, the obligation is PURE) then the obligation extinguish.
Suppose A owe B 9k due March 30, 2020, B owe A 9k due
March 15, 2020. One is due, the other is not yet, then that is not legal
compensation because law said that it must be due and demandable.
4. Both debts are liquidated
(liquidated - alam mo na kung magkano ang matatanggap mo)
Example: A owe B 9k, B owe A 9k – LIQUIDATED. There is legal
compensation
A owe B 9k, B owe A interest in the partnership. First
obligation is known, the second obligation is not, so that is not
liquidated, therefore, that is NOT legal compensation.
5. No retention or controversy commenced by third person.
Example: A owe B 9k, B owe A 9k. Pedro said that the obligation was
owned by him, ninakaw lang sa kanya ni B. Therefore, there is claim,
controversy, complain. NOT LEGAL COMPENSATION. There must
be no retention or controversy commenced by third person.
ARTICLE 1280 – COMPENSATION BENEFITS THE GUARANTOR
Example: A owe B 9k, B owe A 9k, A has guarantor. Suppose the
obligation extinguish, the guarantor also extinguish. When principal
(9k) extinguish, accessory (guarantor) also extinguish
ARTCILE 1281 - TOTAL AND PARTIAL COMPENSATION
Example: A owe B 9k, B owe A 9k. TOTAL COMPENSATION – two
debts are of the same amount
A owe B 9k, B owe A 5k. PARTIAL COMPENSATION
ARTICLE 1282 – VOLUNTARY COMPENSATION
Voluntary Compensation – declared by BOTH parties / agreement
Example : A owe B television, B owe A electric fan. But both parties
agree, then the obligation extinguish.
A owe B 9k due 03/30/2020, B owe A 9k due 03/15/2020. Two
debts are not due and demandable but both parties AGREED, then
both obligations extinguish.
ARTICLE 1283 – JUDICIAL COMPENSATION
Judicial compensation – declared by court
Example: A owe B 80k (no compensation)
-A owe B 80k and A owns specific car. A demands from B
(1169 - no demand, no delay). A refuses to pay, B became angry so
he destroyed the car of A worth 50k. Then B file a case in court, A
says that he owes 80k to B but B destroyed his car. Court said to A
that he will pay 30k to B.
ARTICLE 1284 – COMPENSATION OF RESCISSIBLE OR
VOIDABLE DEBTS – allowed
Example: A owe B 9k, B owe A 9k. Supposed B is minor. When one
party is minor, that is what we called VOIDABLE. Even if one of the
parties is minor, compensation is allowed. Meaning, there is
compensation even if one of the debts are voidable or rescissible.
9
ARTICLE 1285 -
RULE: Do not give your consent to the assignment in order for LEGAL
COMPENSATION to operate automatically
Example: A owe B 9k, B owe A 9k. A’s obligation is payable
03/30/2020 (not yet due). B’s obligation is payable 03/15/2020
(already due). B sell the obligation to C on 03/15/2020 (today). Kapag
ibinenta ang utang – assignment of credit (B – assignor, C –
assignee)
Supposed it’s already 03/30/2020 where both debts are due and
demandable, can C collect from A? It depends if A agree, if A did not
agree C cannot collect from A because there is LEGAL
COMPENSATION.
ARTICLE 1286 – COMPENSATION WHERE DEBTS PAYABLE AT
DIFFERENT PLACES
(pwede ba mag-exist ang compensation even though parties reside at
different places? YES)
Example: A owe B 9k, B owe A $100. A resides in Philippines, B
resides in US. It is possible to have legal compensation.
Who will pay the rate of exchange? The one who will declare
ARTICLE 1287 – 1288 – INSTANCES WHERE LEGAL
COMPENSATION IS NOT ALLOWED BY LAW
1. Where one of the cases arises from a depositum
Safety deposit box – basic obligation is safe keeping
A open a safety deposit box in bank, bank nagpautang kay A, can the
bank open the safety keeping box? NO, NOT ALLOWED because the
primary function of bank is to safe keep. Exception: only A is allowed
to open (facultative)
Exception:
Example: Case of Gulias vs. PNB
A has savings deposit in bank 10k (A creditor, B debtor – because
bank is the one who pays the interest) Bank nagpautang to A 10k,
then Bank became the creditor, A became the debtor –
compensation) COMPENSATION IS ALLOWED
2. Where one of the debts arises from commodatum
Commodatum – gratuitous contract whereby one of the parties
delivers to another something not consumable
Example: A owe B 100k (mutuum), B owe A specific car
(commodatum). B demanded from A, A refuses to pay, so B decided
to not to return the car (NOT ALLOWED – Because A’s obligation is to
pay, B’s obligation is to return)
3. Where one of the debts arises from a claim for support due by
gratuitous title
Example: A supporting his son (B) 10k monthly (A – Debtor, B -
Creditor). Supposed B ask debt to A 10K, A decided to not to give B
10k for next month (NOT ALLOWED – because B cannot survive
without the support of A)
Exception: support in arrears (arrears – support that has not been yet
given for the previous months)
And only B can declare compensation (facultative)
4. Where one of the debts consists of civil liability arising from a penal
offense (1285)
Example: A owe B 100k, B demanded from A but A refuses. So B
decided to steal the car of A (not allowed)
ARTICLE 1289 - RULES ON APPLICATION OF PAYMENTS APPLY
TO ORDER OF COMPENSATION
(1252 – Debtor chooses)
Suppose A has lot of debts to B, and B also has lots of debts to A,
compensation exists. A will choose to his obligation, also B will
choose to his obligation.
ARTICLE 1290 – CONSENT OF PARTIES NOT REQUIRED IN
LEGAL COMPENSATION
We do not need the consent of parties in Legal Compensation
because it declared by law.
Example:
A owe B 9k, A paid B (PAYMENT). The obligations extinguish.
A owe B 9k, but what A is paying is Promissory Note, B can refuse
(1249 - because PN is not legal tender). B also can accept.
10
A promise B to give specific car, (1262). Specific car was destroyed
by Fortuitous Event. Then obligation extinguish. (LOSS)
A owe B 9k, B say to A to do not pay (it express remission). B
returned the promissory note to A (implied remission)
A owe B 9k evidence by promissory note, B give it to C, C give it to D.
D pay the promissory note to A (MERGER/CONFUSION)
A owe B 9k, B owe A 9k (compensation)
*NOVATION – Novate
-to change
Example: A promise B a specific car, B cannot change it because it is
specific (1244). But both of them can agree to change it.
Novation - agree to change the obligation.
The new obligation is specific jeep. The previous obligation
extinguished because they agree to change it (from specific car to
specific jeep)
NOVATION
ARTICLE 1291 – NOVATION
- Last mode of extinguishment of obligation
- Comes from root word NOVATE (to change)
- Total partial extinction of an obligation through the creation of a new
one which substitutes it.
- Old obligation extinguish, new obligation arises
Example: A promise B a specific car, B cannot change it because it is
specific (1244 – rule of identity cannot be change). But both of them
can agree to change it.
Novation - agree to change the obligation.
The new obligation is specific jeep. The previous obligation
extinguished because they agree to change it (from specific car to
specific jeep)
Dual purpose of novation is Extinguish and Substitute
Kinds of Novation
According to its origin
Legal – takes place by operation of law.
Conventional – takes places by agreement of the parties
According to how it is constituted
Express – when it is declared in clear/unequivocal terms
(nakitang nag agree ang parties)
Implied – when old and new obligations are essentially
incompatible with each other. Obligations cannot stand together, no
agreement.
According to extent or effect
Total or Extinctive – old obligation is completely extinguished
Partial or Modificatory – old obligation is merely modified,
the change is merely incidental to main obligation.
According to the subject
Real or objective – when the object (or cause) or principal
conditions of the obligation are changed.
- object ang papalitan
Example: A promise B specific car and it will change to specific jeep
(object change)
Personal or subjective – when the person of the debtor
substituted and / or when a third person is subrogated in the rights of
the creditor
- tao ang papalitan
Example: A owe B 9k. A change to C, C is the debtor now.
Mixed – object and / or principal conditions off the obligation
AND the debtor or the creditor, or both parties, are changed.
Combinations of real and personal novations.
- papalitan yung object at yung tao
Example: A owe B specific car, the A will become C and specific car
will become speicif jeep.
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ARTCILE 1292 – IMPLIED / TACIT NOVATION
Implied novation – when old and new obligations are essentially
incompatible with each other. Obligations cannot stand together, no
agreement.
Requisites of Novation (4)
1. A previous valid obligation
2 Capacity and intention of the parties to modify or extinguish the
obligation
3. The modification or extinguishment of the obligation
4. The creation of a new valid obligation
*1 and 4, old obligation must be valid, new obligation must be valid
Novation is never presumed
A promise B house, they will build it in Lot no. 1. Later on, A promise
B to build in Lot no. 1 but a building. They both did not agree but there
is still novation because two structures (house and building) cannot
stand together (implied novation).
*period of payment is shortened – there is novation
*period of payment is postponed or extended – no novation
Example:
A owe B 9k payable on April 30 but it changed to March 30, there is
novation (payment is shortened). 2 periods cannot stand together
A owe B 9k payable on April 30 but it extended to May 30, no
novation (payment is extended). 2 periods CAN stand together.
Creditor is just being lenient.
ARTICLE 1293 – PERSONAL NOVATION
Personal novation - when the person of the debtor substituted and /
or when a third person is subrogated in the rights of the creditor
- party ang pinapalitan (either debtor or creditor)
Kinds of personal novation
1. Substitution – when the person of the debtor is substituted (debtor
and pinapalitan)
Kinds of substitution
a. Expromission – takes place when a third person of his own
initiative. It is proposed by a NEW DEBTOR.
Example: A will change to Pedro but A refuses, the one who only
agree is new debtor and creditor, not the old debtor.
Right of Pedro(new debtor): beneficial reimbursement (reimbursement
to the extent that the debtor was benefited)
b. Delegacion – when creditor accepts a third person to take
place of the debtor. It is proposed by the OLD DEBTOR.
Example: A proposed to change him to Pedro. They all agree (old
debtor, new debtor and creditor). All parties gave their consent.
*in both cases, B should release A because if not there will be two
person who will demand.
Right of Pedro: reimbursement and subrogation
ARTICLE 1295
Effect of new debtor’s insolvency or non-fulfillment of obligation in
delagacion.
A proposed, due date is on March 30. On march 25, A told Pedro to
pay and B agreed because old debtor should be released. On march
30, Pedro is insolvent then on general rule: old debtor is NOT LIABLE.
Exception: old debtor is liable
1. Public knowledge but A and B did not know that Pedro is insolvent
2. Old debtor knew that New Debtor is insolvent (guilty of fraud)
ARTICLE 1296 – EFFECT OF NOVATION ON ACCESSORY
OBLIGATIONS (exception)
General Rule: if principal is extinguish, accessory also extinguish
A owe B 9k (principal) with 2% (accessory). A and B agree to give the
2% to Pedro, Pedro accepted (1311). A and Pedro agreed that A will
give him a piano. The principal obligation extinguish, accessory
remains because it belong to Pedro

2. Subrogation – when a third person is subrogated in the right of the

creditor (creditor ang pinapalitan)
Kinds of subrogation
Legal –
Conventional -

ARTICLE 1294
Effect of new debtor’s insolvency or non-fulfillment of obligation in
expromissory.
Supposed A owe B 9k payable 03/30. Pedro will pay B, he proposed
that he will pay on March 25, A refuses. On March 30, Pedro is
insolvent, old debtor is NOT LIABLE because he did not agree on the
novation.

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