Article 1231 This article refers to when the debt is considered paid.
A debt may
Obligations are extinguished:
(1) By payment or performance;
(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 creditor and
debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as
annulment, rescission, fulfillment of a resolutory condition,
and prescription, are governed elsewhere in this Code.
(1156a)
The general provisions regarding the extinguishment of the
obligation. In addition to those enumerated in Article 1231, other
causes are:
(1) Death of a party in case of an obligation requiring personal
service
(2) Mutual desistance or withdrawal. Where after the approval of
his loan, the borrower, instead of insisting for its release, asked
that the mortgage given by him as security be cancelled and the
creditor (DBP) acceded thereto, the action thus taken by both
parties was in the nature of mutual desistance which is a mode of
extinguishing obligations. It is a concept that derives from the
principle that since mutual agreement can create a contract,
mutual disagreement by the parties can cause its extinguishment
(3) Arrival of resolutory period (par2, Art. 1193,.);
(4) Compromise (Art. 2028.);
(5) Impossibility of fulfillment (Art. 1266.); and
(6) Happening of a fortuitous event. (Art. 1174.)
These causes as well as those enumerated in the second
paragraph of Article 1231 are governed under other chapters of
the Civil Code.
Article 1232
Payment means not only the delivery of money but also the
performance, in any other manner, of an obligation. (n)
This article refers to the meaning of payment in legal terms.
(1) In ordinary parlance, payment refers only to the delivery of
money.
(2) As a legal mode of extinguishing an obligation, it has a much
wider meaningPayment may consist 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 (see Art. 1226.), there is also payment in the sense
used in Article 1232. In law, payment and (specific) performance
are synonymous. (see Art. 1191.)
Article 1233
A debt shall not be understood to have been paid unless the
thing or service in which the obligation consists has been
completely delivered or rendered, as the case may be.
refer to an obligation to deliver money, to deliver a thing (other
than money), to do an act, or not to do an act.
(1) Integrity of prestation. A debt to deliver a thing (including
money) or to render service is not understood to have been paid
unless the thing or service has been completely delivered or
rendered, as the case may be. Partial or irregular performance will
not produce the extinguishment of an obligation as a general rule.
EXAMPLES:
(1) S obliged himself to deliver 100 sacks of rice to B. S delivered
only 90 sacks.
Under the law, there is no payment by S, and B can refuse to pay
for the 90 sacks if S does not deliver what is lacking
(2) X agreed to paint the house of Y for P100,000. X did not paint
the kitchen anymore and instead asked Y to pay him P100,000
less the cost of painting the kitchen.
Y can refuse to pay X because the debt of Y (to deliver money) will
arise only after the debt of X (to paint the house) is completely
rendered. (see Art. 1191.)
(2) Identity of the prestation. This second requisite means that
the very prestation due must be delivered or performed.
If the obligation has been substantially performed in good faith, the
obligor may recover as though there had been a strict and
complete fulfillment, less damages suffered by the obligee. (n)
Article 1234
If the obligation has been substantially performed in good
faith, the obligor may recover as though there had been a
strict and complete fulfillment, less damages suffered by the
obligee.
Article 1234 is the first exception to the rule laid down in Article
1233. It embodies the doctrine of substantial performance. There
is substantial performance when the important or essential part of
the contract has been performed and only a small or minor part
thereof has not been carried out. In case of substantial
performance, the obligee is benefited. So the obligor should be
allowed to recover as if there had been a strict and complete
fulfillment less damages suffered by the obligee. This last condition
affords a just compensation for the relative breach committed by
the obligor and it must be distinguished from the partial
performance stated in Article 1233. Good faith is always
presumed in the absence of proof to contrary.
S obliged himself to deliver 500 bags of cement to B for a certain
price. However, despite diligent efforts on his part, S was able to
deliver only 450 bags because of cement shortage. Take note that
S wants to comply with his obligation to deliver the entire 500 bags
but he could not do so for reasons beyond his control.
Under Article 1234, S can recover as though there had been
complete delivery less the price of the 50 bags. S must show,
however, that he attempted in good faith to comply with his
obligation
Article 1235

When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any
protest or objection, the obligation is deemed fully complied
with.
The above provision is the other exception to Article 1233. It is
founded on the principle of estoppel.
(1) If the payment is incomplete or irregular, the creditor may
properly reject it.
(2) In case of acceptance, the law considers that he waives his
right. The whole obligation is extinguished.
Requisites for the application of Article 1235.
(1) The obligee knows that the performance is incomplete or
irregular; and
(2) He accepts the performance without expressing any protest or
objection.
X agreed to paint the house of Y. According to their stipulation, X
would use a particular brand of paint.
If Y accepted the performance of X, knowing that the paint used
was another brand and without expressing any protest or
objection, the obligation is deemed fully complied with.
Unlike in Article 1234, where there is substantial performance, X is
not liable for damages that may be suffered by Y. The reason is
that the performance is considered complete or regular.
Article 1237
Whoever pays on behalf of the debtor without the knowledge
or against the will of the latter cannot compel the creditor to
subrogate him in his rights, such as those arising from a
mortgage, guaranty, or penalty.
This article refers to the right of third person to subrogation.
Whoever pays on behalf of the debtor is entitled to subrogation if
the payment is with the consent of the latter. If the payment is
without the knowledge or against the will of the debtor, the third
person cannot compel the creditor to subrogate him in the latter's
accessory rights of mortgage, guaranty, or penalty.
D borrowed from C P10,000. G is the guarantor. Without the
knowledge or consent of D, S paid C P10,000.
In this case, S can claim reimbursement from D for the whole
amount of P10,000 inasmuch as D was benefited up to that
amount. (Art. 1236.)
If D cannot pay S, the latter cannot proceed against G, the
guarantor (even if C is willing) because, having paid without the
consent of D, S is not entitled to subrogation. But if the payment
was with the express or tacit approval of D, S would be entitled not
merely to full reimbursement but also to subrogation.
Suppose the obligation of D is secured by a mortgage of a land
owned by D. Payment by S without the knowledge or against the
will of D cannot give S the right to subrogation. S can recover only
insofar as the payment has been beneficial to D.
Article 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.
This article refers to the payment by a third person who does not
intend to be reimbursed. Article 1238 "embodies the idea that no
one should be compelled to accept the generosity of another." If
the paying third person does not intend to be reimbursed, the
payment is deemed a donation which requires the debtor's
consent to be valid. However, if the creditor accepts the payment,
it shall be valid as to him and the payor although the debtor did not
give his consent to the donation.
D owes C P10,000. Without the intention of being reimbursed, S
paid D's obligation. D had previously accepted S's generosity.
In this case, D is not liable to S and his obligation is extinguished.
But if D did not consent to the donation, S may recover from D
since there has been no donation, although originally S did not
intend to be reimbursed. Nevertheless, the obligation of D to C is
extinguished because the payment is valid as to C who has
accepted it.
Can D legally refuse to pay S and instead insist on paying C? No.
Article 1239
In obligations to give, payment made by one who does not
have the free disposal of the thing due and capacity to
alienate it shall not be valid, without prejudice to the
provisions of Article 1427 under the Title on "Natural
Obligations."
(1) Free disposal of the thing due means that the thing to be.
delivered must not be subject to any claim or lien or encumbrance
(e.g., mortgage, pledge) of a third person.
(2) Capacity to alienate means that the person is not
incapacitated to enter into contracts (Arts. 1327, 1329.) and for
that matter, to make a disposition of the thing due.
As a general rule, in obligations to give, payment by one who does
not have the free disposition of the thing due and capacity to
alienate it is not valid. This means that the thing paid can be
recovered.
The exception is provided in Article 1427. The creditor cannot be
compelled to accept payment where the person paying has no
capacity to make it.
(1) S agreed to sell to B a television set. If the television set
delivered to B by S belongs to C, the same can be recovered by C
because the payment is not valid. S does not have free disposal of
the television set.
The same right of recovery exists although the television set
belongs to S if he is a minor and, therefore, has no capacity to
alienate it.
(2) Under Article 1427, if S is a minor between 18 and 21 years,
and he voluntarily pays a sum of money or delivers a fungible thing
(like rice) to B in fulfillment of his obligation, there shall be no right
to recover the same from B in case the latter has spent or
consumed it in good faith.
Article 1240
Payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest,
or any person authorized to receive it.
This article states that payment shall be made to:
(1) the creditor or obligee (person in whose favor obliga- tion has
been constituted);
(2) his successor in interest (like an heir or assignee); or
(3) any person authorized to receive it.
The creditor referred to must be the creditor at the time the
payment is to be made, not at the constitution of the obligation.
However, it means not only a person authorized by the creditor,
but also a person authorized by law to receive the payment, such
as a guardian, executor or administrator of the estate of a
deceased, and assignee or liquidator of a partnership or
corporation as well as any other person who may authorized to do
so by law.
Dowes C P10,000. In this case, D must pay C or any person
authorized by C or in case of his death, his heirs or any person
authorized by law. Payment to any other person is not valid except
as provided in paragraph 2, Article 1241.
That D acted in good faith in paying to the wrong party is not an
excuse.
Article 1242
Payment made in good faith to any person in possession of
the credit shall release the debtor.
This article gives another instance when there is valid payment to
a third person. It must be observed that the "possession" referred
to under the above provision is possession of the credit itself and
not merely of the document or instrument evidencing the credit.
Hence, mere possession of the instrument (unless transferable by
delivery) does not entitle the holder to payment nor does payment
release the debtor. Furthermore, the payer must act in good faith,
that is, in the honest belief that he is making a valid payment and
that the payee is the owner of the credit. Good faith is presumed.
D is indebted to C in the amount of P1,000 which indebtedness is
evidenced by a promissory note signed by D in favor of C. C lost
the promissory note which was later found by T who demanded
payment from D.
Payment to T is not valid because T is the possessor merely of the
document evidencing the credit and not of the credit itself. If the
promissory note is payable to bearer or holder, the obligation will
be extinguished if D pays T in good faith.
Similarly, if the promissory note was indorsed by C to T, under a
private agreement that T would not collect from D, payment by D in
good faith to T will also extinguish the debtThe right of C will be
against T.
Article 1243
Payment made to the creditor by the debtor after the latter has
been judicially ordered to retain the debt shall not be valid.
In an action against the debtor who is the creditor of another, the
latter (the debtor-stranger), during the pendency of the case, may
be ordered by the court (or by any competent authority though it be
administrative) to retain the debt until the right of the plaintiff, the
creditor in the main litigation is resolved.
Payment made subsequently by the debtor-stranger shall not be
valid if the plaintiff wins the case and cannot collect from the
debtor to whom the payment is made. Such payment is considered
as made in bad faith.
D owes C 10,000. E, in turn owes D P10,000. In an action by C
against D, E, upon petition of C, may be ordered by the court not
to pay D and to retain the debt in the meantime. In this case, the
debt of E is said to be "garnished" or is subjected to payment to C.
Any payment made by E to D in violation of the judicial order is
considered invalid under this article. In other words, C may still
hold E liable for the debt. Of course, should E be made to pay C, a
quasi-contractual obligation on the part of D is created, which is to
return the amount he had received from E. The payment by E to C
shall extinguish the obligation of D to C.
But the payment by E to D shall be valid if made after the order of
retention but before it is known to him. If D is also indebted to F,
the latter has no right to question the payment by E in violation of
the order of retention.
Article 1244
The debtor of a thing cannot compel the creditor to receive a
different one, although the latter may be of the same value as,
or more valuable than that which is due.
In obligations to do or not to do, an act or forbearance cannot
be substituted by another act or forbearance against the
obligee's will.
(1) The first paragraph refers to a real obligation to deliver a
specific thing. A thing different from that due cannot be offered or
demanded against the will of the creditor or debtor, as the case
may be.
(2) The second paragraph refers to personal (positive and
negative) obligations. The act to be performed or the act prohibited
cannot be substituted against the obligee's will.
D obliged himself to deliver to C a specific horse. D cannot require
C to accept another horse although it commands a higher price;
neither can C require D to deliver another horse belonging to D
although it can be sold only at a much lower price
Of course, substitution can be made if the obligee consents. In
facultative obligations, the debtor is given the right to render
another prestation in substitution. (Art. 1206.)
Article 1244 will not also apply in case of waiver by the creditor or
substitution is allowed by stipulation with the consent of the
creditor.