Oblicon Reviewer
1234, Dravis can recover as though
Extinguishment of Obligation
Section 1: Payment or Performance
Art. 1232: Payment is not only the delivery of money
but it’s also the performance of an obligation.
Meaning of Payment:
In simple or known term Payment refers to the giving
of money.
But in a legal mode of extinguishing an obligation,
payment not only consist of the delivery of money, it
is also giving of a thing other than money, doing of an
act, and not doing an act.
Art. 1233: A debt shall not be understood as paid
unless the thing or service has been completely
delivered or rendered.
Integrity of prestation:
A debt to deliver a thing or to render service shall not
be understood to have been paid unless the thing or
service has been delivered or rendered.
The General Rule is Partial or Irregular Performance
will not produce the extinguishment of an obligation.
Identity of the prestation:
The prestation that is due must be delivered or
performed.
e.g., Nathalie obliged herself to deliver 10 sacks of
potatoes to Ashteroh. Nathalie only delivered 7 sacks.
Under the law, there is no payment by Nathalie, and
Ashteroh can refuse to pay for the 7 sacks if Nathalie
didn’t deliver what is lacking.
Art. 1234: If the obligation has been substantially
performed in good faith.
NOTE!!
- Art. 1234 is the exception to the rule in Art. 1233.
Requisites for the application of Art. 1234:
1. There must be substantial performance
2. The debtor must be in good faith
Substantial Performance:
- when the important or essential part of the contract
has been performed and only a small or minor part
has not been carried out.
e.g., Dravis obliged himself to deliver 10 boxes of
blueberries to Audrina in a certain price. However,
despite diligent efforts on his part, Dravis was able to
deliver only 8 boxes because of shortage. Take note
that he really wants to comply to deliver the entire 10
boxes but he couldn’t do so for reasons beyond his
control.
Under the Art.
there had been complete delivery less the price of 2
boxes.
Art. 1235: When the creditor accepts the performance,
knowing that it is incomplete or irregular and without
expressing any objection or protest, the obligation then
is deemed fully complied with
NOTE!!
- Art. 1235 is another exception to the rule of Art.
1233.
- Art. 1235 is founded on the principle of estoppel
which means the law presumes that you are waiving
your right to reject the incomplete performance.
Recovery allowed when incomplete or irregular
performance in waived:
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 rights. The whole obligation is
extinguished.
Requisites for the application of Art. 1235:
1. The creditor knows that the performance is
incomplete or irregular.
2. The creditor accepts the performance without
expressing any protest or objection.
e.g., Arken agreed to paint the house of Lorden.
According to their stipulation, Arken would use a
particular brand of paint.
If Lorden 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.
Art. 1236, par. 1: The creditor is bound or not bound
to accept the payment of a 3rd person.
Persons from who the creditor must accept the
payment:
1. The debtor
2. Any person who has an interest in the obligation
(like guarantor)
3. A third person who has no interest in the
obligation when there is stipulation that he can
make payment
NOTE!!
- The creditor should not be compelled to accept the
payment from a third person whom he may dislike
or distrust.
Art. 1236, par. 2: When a 3rd person has paid with
the knowledge of the debtor, he is entitled to
subrogation and reimbursement. On the other hand,
if it is without the knowledge of the debtor, the 3 rd
person can only recover the payment that benefited
the debtor.

Art. 1237: The 3rd person is entitled to subrogation if
their payment is allowed with the consent f the debtor.
On the other hand, if it’s without the knowledge or
against the will of the debtor, the 3rd person then
cannot compel the creditor to subrogate him.
NOTE!!
- The provision of Art. 1237 is for the benefit of the
debtor. So, the subrogation can only take place with
their consent.
Subrogation and Reimbursement distinguished:
Subrogation:
- the 3rd person is put into the shoes of the creditor.
Reimbursement:
- 3rd person is entitled to get repaid by the debtor.
Art. 1238: Payment of a third person who does not
intend to be reimbursed is deemed to be a donation
which requires debtor’s consent.
NOTE!!
- Art. 1238 embodies the idea that no one should be
compelled to accept the generosity of the other.
Art. 1239: In obligation to give, payment made by one
who does not have the free disposal of a thing due and
capacity to alienate it shall not be valid.
Meaning of “free disposal of a thing due”:
- it means that the thing to be delivered must not be
subject to any claim, lien, encumbrance by a third
person.
Meaning of “capacity to alienate”:
- it means that a person is not incapacitated to enter a
contract.
NOTE!!
- Payment by one who does not have the free
disposition of the thing due and capacity to alienate is
not valid. Therefore, the thing paid can be recovered.
Art. 1240: To whom the payment must be made.
Payment shall be made to:
1. The creditor or oblige
2. The creditor’s successor in interest
3. Any person authorized to receive it
NOTE!!
- The creditor referred to must be the creditor at the
time the payment is to be made.
- Hence, if a person is subrogated to the right of
creditor, then the payment should be made to the new
creditor.
- A person authorized is the one who is authorized by
the creditor and authorized by law to receive the
payment.
Art. 1241, par. 1: Payment to an incapacitated
person is only valid if they kept this thing delivered or
the payment is beneficial to them
Art. 1241, par. 2: Payment to a third person shall be
valid as it has redounded to the benefit of the creditor.
This is not Presumed it shall be Proved. The debtor
shall prove that the payment had benefited the
incapacitated creditor. However, such benefit to
creditor need not be proved in following cases:
1. If after the payment, the third person
acquires the creditors rights
2. If the creditor ratifies the payment to 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.
Effect of payment to an incapacitated person:
- Payment to an incapacitated person is not valid
unless the incapacitated person kept the thing paid
or delivered.
- If the incapacitated creditor hadn’t kept the thing,
then the debtor may be made to pay again by the
guardian or the incapacitated person himself if they
recovered.
Effect of payment to a third person:
- Payment to a third person or wrong party is not
valid. Unless it has redounded to the benefit the
creditor.
When benefit to creditor need not be proved by
debtor:
1. Subrogation of the payer in the creditor’s right
2. Ratification by the creditor
3. Estoppel on the part of creditor
Art. 1242: Payment in good faith to any person in
possession of the credit shall release the debtor.
e.g., Draxon is indebted to Cadence in the amount of
₱1,000 which indebtedness is evidenced by
promissory note signed by Draxon in favor of
Cadence. Cadence lost the promissory note which
was later found by Zak who demanded payment
from Draxon.
Payment to Zak is not valid because Zak is the
possessor merely of the document evidencing the
credit and not the credit itself.
If the promissory note is payable to bearer or
holder, the obligation will be extinguished if Draxon
pays Zak in good faith.
Art. 1243: Payment made to creditor by the debtor
after the latter has been judicially ordered to retain
the debt shall not be valid.
 NOTE!!
- garnishment is involved
- the debtor of my debtor is my debtor
Art. 1244. Debtor cannot compel creditor to receive
a different thing or a different performance.
(substitution)
e.g., Xanthos obliged himself to deliver to Xceron a
specific horse.
Xanthos (debtor) cannot require Xceron (creditor)
to accept another horse although it commands a
higher price; neither can Xceron require Xanthos to
deliver another horse belonging to Xanthos
although it can be sold only a much lower price.
NOTE!!
- Substitution can be made if creditor consents.
Art. 1245. Dacion en Pago whereby a property is
alienated to the creditor in satisfaction of a debt in
money.
Special Forms of Payment
1. Dation in payment (Dacion en pago)
2. Application of payments
3. Payment by cession
4. Tender of payment and consignation
NOTE!!
- application of payment is not a special form of
payment
- law of sale governs because Dacion en pago may be
considered a special specie of sale
Art. 1246. When an obligation consists of a delivery
of an indeterminate thing, whose quality and
circumstances have not been stated, the creditor
cannot demand a superior quality neither can the
debtor deliver a thing of inferior quality.
Art. 1247. Unless it is otherwise stipulated, the
extrajudicial expenses required by the payment shall
be for the account of the debtor.
Art. 1248. Unless there is an expressed stipulation to
that effect, the creditor cannot be compelled partially
to receive the prestation in which the obligation
consists. Neither may the debt