Law on

OBLIGAtions
Civil Code of the Philippines
Articles 1156 - 1304
What is aN Obligation?
An obligation is a juridical necessity to give, to do or not
to do (Article 1156)
Essential requisites:
● Passive subject (debtor or obligor)
● Active subject (creditor or obligee)
● Object or prestation
● Juridical or legal tie
Obligations arise from:

❖ Law
❖ Contracts
❖ Quasi-contracts
❖ Acts or omissions punished
by law
❖ Quasi-delicts

(Article 1157)
 LAW (Article 1158)
● Obligations imposed by the
law itself
● Obligations derived from
law are not presumed
● Special laws refer to other
laws not contained in the
Civil Code
CONTRACTS (Article 1159)
● Contract is the meeting of
minds between 2 (or more)
persons whereby one binds
himself, with respect to the
other, to give something or to
render some service (Article
1305)
● Binding force
● Compliance in good faith
 QUAsi-contracts (Article 1160)
● Obligations arise from lawful,
voluntary and unilateral acts
which are enforceable to the
end that no one shall be unjustly
enriched or benefited at the
expense of another (Article 2142)
● Negotiorum gestio (Article 2144)
● Solutio indebiti (Article 2154)
Criminal offenses (Article 1161)
● Obligations arise from civil
liability which is the
consequence of a criminal
offense
● Civil liability include restitution,
reparation for the damage
caused and indemnification for
consequential damages
 QUASI-Delict (Article 1162)
● Obligations arise from damage
caused to another through an act
or omission, there being fault or
negligence, but no contractual
relations exists between the parties
(Article 2176)

● Also known as torts

 Determinate thing
● Refers to a specific thing
● Debtor cannot substitute it
for another even if the latter
is of the same value or more
valuable without the consent
of the creditor (Article 1244)
Generic thing
● Thing that is not specified but
has reference only to a class
or genus
● Debtor can deliver anything of
the same class a long as it is
of the same quality
Obligation to give
Duties of debtor in obligation to deliver a determinate thing:

● Take care of the things with the diligence of a good father of the family
(Article 1163). “Diligence of a good father of a family” refers to the diligence
which an average person exercises over his/her own property
● Deliver the thing itself
● Deliver the fruits of the thing (Article 1164)
● Deliver the accessions (everything which is produced thereby, or which is
incorporated or attached thereto, either naturally or artificially (Article 440)
and accessories (joined to or included in the principal thing for the latter’s
better use (Article 1166)
● Liable for damages in case of non-fulfillment or breach (Article 1170)
Duties of debtor in obligation to deliver a generic thing:

● Deliver a thing which is of the quality intended by the parties taking into
consideration the purpose of the obligation and other circumstances
(Article 1246)
● Liable for damages in case of non-fulfillment or breach (Article 1170)

❖ Article 1262 states that the loss of a determinate thing through fortuitous
event extinguishes the obligation. However, Article 1263 states that the loss
of a generic thing does not extinguish the obligation - genus nunquam perit
(a generic thing never perishes)
❖ Remedies of the creditor when the debtor fails to perform his/her
obligation:
(1) If to deliver a determinate thing
(a) compel the debtor to make the delivery (Article 1165)
(b) demand damages from the debtor (Article 1170)

(2) If to deliver an indeterminate thing

(a) ask that the obligation be complied with at the expense of the
debtor (Article 1165)
(b) demand damages from the debtor (Art. 1170)
Obligation to do
Remedies of a creditor in case the debtor fails to perform his/her obligation:

(1) When debtor fails to perform his/her obligation to do or performs it but

contravenes the tenor thereof:
● The creditor may have the obligation executed at the expense of
the debtor (Article 1167)
● The creditor may demand damages from the debtor (Article 1170)
(1) When the debtor performs his/her obligation but poorly done
● The creditor may have the same be undone at the debtor’s
expense (Article 1167)
● The creditor may demand damages from debtor (Article 1170)
Obligation NOT TO DO
When the debtor performs what has been forbidden of him/her:
● The creditor may demand what has been done be undone (Article 1168)
● The creditor may demand damages from the debtor (Article 1170)
DELAY
Delay or default or mora is the failure to
perform an obligation on time which
failure constitutes a breach of the
obligation.

Kinds of delay:

(1) Mora solvendi

(2) Mora accipiendi
(3) Compensatio morae
For delay to exist the following must be present:
(a) The obligation must be due and demandable
(b) The debtor does not perform his/her obligation
(c) The creditor demands for the performance of the obligation judicially or
extra-judicially
(d) The debtor fails to comply with such demand

General Rule: No demand, no delay

Exceptions (Article 1169):
(1) The obligation or the law expressly so declare
(2) When time is of the essence of the contract
(3) Demand would be useless
(4) In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent
upon him/her. From the moment one of the parties fulfills his obligation, delay
by the other begins.
Effects of delay:

As to debtor:
(a) Debtor shall be liable for damages (Article 1170)
(b) In obligation to deliver determinate thing, debtor shall be responsible for any
fortuitous event until he/she has effected the delivery (Article 1165)

As to creditor:
(a) Debtor may resort to consignation of the thing due (Article 1256, 1258)
(b) Creditor shall bear the risk of loss and shoulders the expenses for
preservation of the thing (Article 1262)
FRAUD
Kinds of fraud:
A. According to meaning
(1) Fraud employed in obtaining consent
● dolo causante or causal fraud
(2) Fraud employed in the performance
of an obligation
● dolo incidente or incidental
fraud

B. According to the time of the

commission of the fraud
(1) Past Fraud
(2) Future Fraud
NEGLIGENCE
Negligence is the omission of that
diligence which is required by the nature
of the obligation and corresponds with
the circumstances of the person, of the
time and of the place (Article 1173)

Kinds of negligence:
(1) Culpa Contractual (contractual
negligence)
(2) Culpa Aquiliana (tort or quasi-delict)
(3) Culpa Criminal (criminal negligence)
DAMAges
Grounds for liability to pay for damages
(Article 1170):
● Fraud
● Negligence
● Delay
● Contravene tenor of an obligation

Kinds of damages:
Moral (Article 2217)
Exemplary (Article 2229)
Nominal (Article 2221)
Temperate (Article 2224)
Actual (Articles 2199 & 2200)
Liquidating (Article 2226)
Fortuitous events
Fortuitous events are events that could not
be foreseen, or which, though foreseen, are
inevitable (Article 1174)

General Rule: No person shall be liable for

a fortuitous event
Exceptions:
● when the law or stipulation of the parties
so express
● when the nature of the obligation require
the assumption of risk
● when declared by stipulation
REmedies
● Exact fulfillment (specific performance) with the right to damages
● Pursue the properties of the debtor except those exempt by law
● Exercise all the rights (like the right to redeem) and bring all the actions (like
the right to collect from the debtor of his/her debtor), except those which
are inherent in his/her person (accion subrogatoria)
● Impugn the acts which the debtor may have done to defraud his/her
creditors (accion pauliana)

General Rule: All rights acquired by virtue of an obligation are transmissible

Exceptions (Article 1178):
(1) Prohibited by law (partnership, agency, commodatum)
(2) Prohibited by stipulation of the parties
PURE OBLIGATIONS (Article 1179)
● Fulfillment is not dependent on a future or
uncertain event or a past event unknown to the
parties

● Immediately demandable
Conditional obligations
● Obligation arises upon the happening or non-happening of a future and
uncertain event

● The happening of the condition can give rise to the acquisition of rights
or extinguishment or loss of rights already acquired (Article 1181)
> suspensive condition - the acquisition of rights by the creditor
depends upon the happening of the event which constitutes the
condition; if such condition does not take place, it would be as of the
conditional obligation had never existed
> resolutory condition - the rights and obligations already existing
are under threat of extinction upon the happening or fulfillment of such
condition
● Condition may be a past event unknown to the parties

● Condition must not be impossible (Article 1183)

> impossibility existed at the time the obligation was constituted
> physically impossible or legally impossible

● 3 kinds of conditions under Article 1182:

(1) POTESTATIVE – a suspensive condition which depends upon the
will of one of the contracting parties = if at the sole will of the debtor, it is
void; if at the creditor’s, still valid
(2) CASUAL – the condition depends upon chance or the will of a third
person
(3) MIXED – the condition depends partly upon the will of the parties
and partly upon chance or the will of a third person
● Positive suspensive condition refers to the fulfillment of an event or
performance of an act (Article 1184). The obligation is extinguished:
(1) As soon as the TIME EXPIRES without the event taking place
(2) As soon as it has become certain that the EVENT WILL NOT TAKE
PLACE although the time specified has not yet expired

● Negative condition refers to the non-fulfillment or nonperformance

of an act (Article 1185). The obligation shall become effective and binding:
(1) From the moment the time indicated has elapsed without the event
taking place
(2) From the moment it has become evident that the event cannot
occur, although the time indicated has not yet elapsed
● Rules in case of loss, deterioration or improvement of thing during
pendency of suspensive condition (Article 1189):

LOSS: (1) debtor without fault – obligation is extinguished

(2) debtor with fault – obligation to pay damages

DETERIORATION: (1) debtor without fault – impairment is to be borne by

the creditor
(2) debtor with fault – creditor chooses: rescission of
obligation, fulfillment, indemnity

IMPROVEMENT: (1) by nature or time – improvement inure to the

benefit of the creditor
(2) at the expense of the debtor – granted to the
usufructuary
● Remedies in reciprocal obligations (Article 1191):
(1) action for specific performance (fulfillment) of the obligation with
damages OR
(2) action for rescission of the obligation with damages

● When both parties are guilty of breach (Article 1192):

> First infractor known - the liability of the first infractor should be
equitably reduced – equitably offset each other’s damages
> First infractor cannot be determined - the court shall declare the
extinguishment of the obligation and each shall bear his/her own
damages
Obligations with a period
● Period or term consists in a space or length of time upon the arrival of
which, the demandability or the extinguishment of an obligation is
determined; it may be definite (exact date or time is known) or indefinite
(arrival of date is unknown but sure to come)

● General Classification:
(a) Suspensive period (ex die) – from a day certain give rise to the
obligation; suspensive effect
(b) Resolutory period (in diem) – arrival of a term certain terminated
the obligation; resolutory effect
● If payment was made before arrival of the period and debtor was unaware
of the period or he knows that the obligation has become due (Article 1195):
> if debtor was not aware of the period or believes that the obligation
has become due and demandable – he/she can recover what he/she
paid or delivered including fruits and interests
> if debtor was aware and paid voluntarily – he/she cannot recover the
delivery made; it is deemed a waiver of the benefit of the term and the
obligation is considered already matured

● PRESUMPTION: Obligation with a period is for the benefit of both the

creditor and debtor.
EXCEPTION: when it appears that the period is for the benefit of one or the
other (Article 1196)
 (1) Term is for the benefit of the debtor alone – he/she cannot be
compelled to pay prematurely but he/she can if he/she desires to do
so
(2) Term is for the benefit of the creditor – he/she may demand
fulfillment even before the arrival of the term but the debtor cannot
require him/her to accept payment before the expiration of the
stipulated period

● The period is disregarded and the obligation becomes pure and

immediately demandable (Article 1198):
(1) When debtor becomes insolvent
(2) When the debtor does not furnish guaranties or securities
(3) When guaranties or securities given have been impaired or have
disappeared
(4) When debtor violates an undertaking, if such undertaking is the
reason for the creditor to agree with such period
(5) When debtor attempts to abscond (escape)
ALTERNATIVE Obligations
● Obligations with Plural Prestations:
(1) CONJUNCTIVE/COMPOUND OBLIGATION - an obligation where
the debtor has to perform ALL the several prestations in the contract to
extinguish the obligation
(2) ALTERNATIVE OBLIGATION – an obligation where the debtor is
required to fulfill ONLY ONE of the several prestations to extinguish the
obligation (Article 1199)
(3) FACULTATIVE OBLIGATION – an obligation where the debtor is
bound to perform ONLY ONE prestation, with a reserved right to choose
another prestation as SUBSTITUTE for the principal.
● The right of choice belongs to the debtor unless expressly granted to the
creditor (Article 1200)

● Debtor cannot choose prestations that are impossible, unlawful or which

could not have been the object of the prestation (Article 1200)

● The choice shall not produce any legal effect until it has been duly
communicated to the other party (Article 1201)

● The debtor has no more right of choice when, among the prestations
where he/she is alternatively bound, only one is practicable (Article 1202)
● If the debtor could not make a choice due to the creditor’s act of making
the prestations impossible, debtor may RESCIND the contract with
damages - rescission takes place at the initiative of the debtor (Article 1203)

● If all of the objects have become impossible through the fault of the debtor,
the creditor shall have the right to indemnity for damages. The indemnity is
fixed taking as a basis the value of the last thing which disappeared or that
of the service which last became impossible (Article 1204)

● Rules in case of loss before creditor makes a choice (Article 1205):

(1) only one thing lost – fortuitous event – creditor chooses from the
remainder – debtor delivers the choice to creditor;
(2) only one remains – debtor delivers the same to the creditor;
 (3) only one thing lost – fault of the debtor:
(a) creditor may choose any one of the remainders;
(b) creditor may choose the price or value of the one which was
lost;
(c) may choose (a) or (b) plus damages
(4) all things lost – fault of the debtor – creditor may choose the price
of ANY ONE of the things, with damages if warranted

● In facultative obligations, if Ioss or deterioration of the substitute happened

before substitution is made, debtor is not liable; after substitution is
communicated, debtor is liable for loss through delay, negligence or fraud
(Article 1206)
Joint and solidary Obligations
● INDIVIDUAL OBLIGATION – one debtor and one creditor
● COLLECTIVE OBLIGATION – two or more debtors and two or more
creditors
(1). JOINT – entire obligation is to be paid or performed proportionately
by the debtors
(2) SOLIDARY – each one of the debtors are obliged to pay the entire
obligation, each one of the creditors has the right to demand from any of
the debtors, the fulfillment of the entire obligation
● Passive Solidarity – solidarity on the part of the DEBTORS
● Active Solidarity – solidarity on the part of the CREDITORS
● SOLIDARITY SHOULD BE EXPRESSED – law, stipulation, nature of
obligation (Article 1207)
● When there is a concurrence of several creditors or of several debtors in
one and in the same obligation, there is a presumption that the obligation is
joint (JOINT DIVISIBLE OBLIGATION - Article 1208)

> Each of the creditors shall be entitled to demand only the

payment of his proportionate share of the credit
> Each of the debtors may be compelled to pay only his
proportionate share of the debt
> The credits or debts shall be considered distinct from one
another

● JOINT INDIVISIBLE OBLIGATION – an obligation where solidarity is not

provided and the prestation or object is not susceptible of division; its
fulfillment requires the concurrence of all debtors, while doing each one’s
parts (Article 1209)
● Liability in an indivisible obligation may either be joint or solidary; in a
solidary obligation, the subject may be divisible or indivisible (refer to
Article 1210 and Article 1225)

● The solidarity of the debtors is not affected even if different terms and
conditions are made applicable to them (Article 1211)

● Every solidary creditor may do whatever may be useful to others but not
what may be prejudicial (Article 1212)

● A solidary creditor cannot assign his/her rights without the consent of the
others (Article 1213)

● The debtor can pay any one of the solidary creditors. Such payment when
accepted by any of the solidary creditors will extinguish the obligation. To
 avoid confusion on the payment of the obligation, the debtor is required to
pay only to the demanding creditor and that payment is sufficient to effect
the extinguishment of the obligation (Article 1214)

● Novation (Article 1291), compensation (Article 1278), confusion (Article 1275)

and remission (Article 1270) are modes of extinguishment of obligations -
the creditor who executed any of these acts are liable to the others (Article
1215) for their corresponding shares considering that such acts are
prejudicial to them (Article 1212)

● When there is passive solidarity, the creditor can proceed against (Art 1216):
(1) Any of the solidary debtors;
(2) Some of the solidary debtors;
(3) All of the solidary debtors, simultaneously
● Payment made by one of the solidary debtor extinguishes the obligation
and the paying solidary debtor can demand reimbursement from the
co-debtors for their proportionate shares with interest only from the time of
payment (Article 1217)

● No reimbursement if (Article 1218):

(1) Obligation PRESCRIBES (i.e, the creditor did not make any
demand for more than 10 years - Article 1144)
(2) Obligation becomes ILLEGAL (law has been passed, making
such prestation illegal)

● If payment is made first, the remission is of no effect (Article 1219)

● The remission of the whole obligation obtained by one of the solidary
debtors does not entitle him/her to reimbursement (Article 1220)

● Loss of the thing or impossibility of prestation (Article 1221):

1) NO FAULT – solidary debtors – obligation is extinguished
(2) FAULT of any one of them – all are liable because of their mutual
agency
(3) FORTUITOUS EVENT – delay on the part of the debtors – all will be
liable

● DEFENSES OF A SOLIDARY DEBTOR (Article 1222):

(1) arising from the nature of the obligation
(2) personal to him or which pertains to his/her own share alone
(3) personal to the other solidary creditors but only as regards that part
of the debt for which the other creditors are liable
DIVISIBLE AND INDIVISIBLE Obligations
● DIVISIBILITY – refers to the susceptibility of an obligation to be performed
partially

● INDIVISIBILITY – refers to the non-susceptibility of an obligation to partial

performance. If a thing could be divided into parts and as divided, its value
is impaired disproportionately, that thing is INDIVISIBLE

● JOINT INDIVISIBLE OBLIGATION – the object is indivisible but the liability of

the parties is joint. The unfulfilled undertaking (duty) is converted into a
monetary obligation which is not divisible. The guilty debtor is liable for
damages (Article 1224)
● The following are considered INDIVISIBLE obligations:
(1) Obligations to give definite things
(2) Obligations which are not susceptible of partial performance
(3) Even though the object or service may be physically divisible, it is
indivisible if:
(a) the law so provides
(b) when the parties intended it to be indivisible

● The following obligations are deemed DIVISIBLE:

(1) When the object of the obligation is the execution of a certain
number of days of work
(2) When the object of the obligation is the accomplishment of work
measured in units
(3) When the object of the obligation is susceptible of partial
compliance
 (4) When the object of the obligation is such that the debtor is required
to pay in installments

● If the contract is divisible, and a part of it is illegal, the illegal part is void,
and the rest shall be valid and enforceable

● If the contract is indivisible, and a part of it is illegal, the entire contract is

void

● Partial performance of an indivisible obligation is tantamount to

non-performance
Obligations WITH A PENAL CLAUSE
● PENALTY CLAUSE is an accessory obligation attached to the principal
obligation, which imposes an additional liability in case of breach of the
principal obligation.

● The penalty imposable is a substitute for the indemnity for:

(a) damages
(b) payment of interest in case of breach of obligation
unless the contrary is stipulated
EXCEPTIONS – additional damages may be recovered from the following
acts:
(1) If the debtor refuses to pay the penalty
(2) If the debtor is guilty of fraud in the fulfillment of the obligation
 (3) If there is express stipulation that the other damages or
interests are demandable to the penalty in the penal clause
(Article 1226)

● A debtor cannot evade from the payment of his /her principal obligation by
choosing to pay the penalty stipulated except when the debtor is
EXPRESSLY granted with the right to substitute the penalty for the principal
obligation (Article 1227)

● The creditor cannot demand the stipulated fulfillment of the principal

obligation and the penalty at the same time, except:
(a) when the creditor was clearly given the right to enforce both
the principal obligation and penalty
 (b) when the creditor has demanded fulfillment of the obligation
but cannot be fulfilled due to the:
> debtor’s fault – creditor may demand for penalty
> creditor’s fault – he/she cannot claim the penalty
> fortuitous event – principal obligation and penalty are
extinguished

● Proof of actual damages is not necessary (Article 1228)

● JUDICIAL REDUCTION OF PENALTY allowed when (Article 1229):

(1) principal obligation is partly complied with by the debtor
(2) principal obligation is complied not in accordance with the tenor of
the agreement (refers to irregular performance)
(2) penalty is iniquitous or unconscionable
● The nullity of the penal clause does not mean the nullity of the principal
obligation (Article 1230)
Extinguishment of obligations
Obligations are extinguished:

❖ By payment or performance
❖ By loss of the thing due
❖ By condonation or remission of the
debt
❖ By confusion or merger of rights of
creditor and debtor
❖ By compensation
❖ By novation

(Article 1231)
Payment or performance
● Payment may consist 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 (Article
1232)

● Requisites of payment (Article 1233):

(1) integrity of prestation - thing or service has been completely
delivered or rendered
(2) identity of the prestation - the very prestation due must be delivered
or performed

● Burden of proving extinguishment by payment devolves upon the debtor

who claims payment
● Exceptions to Article 1233:
(1) Recovery allowed in case of substantial performance in good faith
(Article 1234)
> there must be substantial compliance = the important or
essential part of the contract has been performed and only a
small or minor part has not been carried out
> debtor must be in good faith
(2) Recovery allowed when incomplete or irregular performance is
waived (Article 1235)
> creditor knows performance is incomplete or irregular
> creditor accept the performance without expressing any
protest or objection

● Creditor is bound to accept payment from:

(1) debtor
(2) person who has an interest in the obligation
 (3) third person who has no interest in the obligation when there is a
stipulation that said person can make payment (Article 1236)
> if made without the knowledge or against will of debtor -
payer can recover from the debtor only insofar as the payment
was beneficial to the latter
> if made with the knowledge of debtor - payer shall have the
right to recover what payer has paid

● Payment by a third person who does not intend to be reimbursed is deemed

a donation which requires consent (Article 1238)

● Person to whom payment shall be made (Article 1239):

(1) creditor
(2) successor-in-interest
(3) any person authorized to receive it
● Payment to a person incapacitated to administer or manage his/her property
is not valid unless such incapacitated person kept the thing paid or delivered
or was benefited by the payment (Article 1241)

● Payment to a third person or wrong party is not valid except insofar as it has
redounded to the benefit of the creditor (Article 1241)

● Payment made in good faith to any person in possession of the credit

releases the debtor (Article 1242)

● Payment made to creditor by debtor after debtor has been judicially ordered
to retain the debt shall not be valid (Article 1243)

● Debtor cannot compel creditor to receive different prestation unless creditor

consents (Article 1244)
● Dacion en pago is the conveyance of ownership of a thing as an accepted
equivalent of performance. If debt is money, law on sales govern - the act is
deemed to be a sale with the amount of the obligation to the extent that
it is extinguished being considered as price (Article 1245)

● For delivery of an indeterminate or generic thing, creditor cannot demand a

thing of superior quality and debtor cannot deliver thing of inferior quality.
The purpose of the obligation and other circumstances shall be taken into
consideration (Article 1246)

● Debtor pays for extrajudicial expenses (Article 1247)

● Performance of obligation should be complete except (Article 1248):

(1) there is an express stipulation
(2) debt is in part liquidated and in part unliquidated
● LEGAL TENDER means such currency which in a given jurisdiction can be
used for the payment of debts, public and private, and which cannot be
refused by the creditor (Article 1249)

● Place of payment (Article 1251):

(1) place designated, if there is stipulation
(2) place where thing might be at the moment obligation was
constituted, if there is no stipulation and thing to deliver is determinate
(3) domicile of debtor, if there is no stipulation and thing to deliver is
generic

● Requisites for application of payments:

(1) 1 debtor and 1 creditor only
(2) 2 or more debts of the same kind
(3) all debts must be due
(4) amount paid by the debtor must not be sufficient to cover the total
amount of all the debts
● Rules on application of payments (Articles 1252 and 1254):
(1) debtor has the first choice and must indicate choice at the time of
payment
(2) the right to make application once exercised is irrevocable unless
creditor consents
(3) if debtor does not apply payment, creditor may make designation by
specifying in the receipt which debt is being paid
(4) if creditor does not make any application or application is invalid,
debt which is most onerous to the debtor among those due shall be
deemed to have been paid
(5) if debts are of the same nature and burden, payment shall be applied
to all of the proportionately

● Interest earned paid ahead of principal (Article 1253)

● Payment by cession is a special form of payment whereby the debtor
abandons or assigns all of his/her property for the benefit of his/her
creditors so that the latter may obtain payment of their credits from the
proceeds of the property (Article 1255)
> Requisites:
(1) plurality of debts
(2) partial or relative insolvency of the debtor
(3) acceptance of cession by the creditors

● TENDER OF PAYMENT is the manifestation by the debtor to the creditor of

his/her desire to comply with his/her obligation; the act of the debtor of
offering to the creditor the thing or amount due

● CONSIGNATION is the deposit of the object or the amount due with the
proper court after refusal or inability of the creditor to accept the tender of
payment
● Requisites of valid consignation:
(1) existence of a valid debt which is due (Article 1256)
(2) valid prior payment by the debtor and refusal without justifiable
reason by the creditor to accept it (Article 1256)
(3) previous notice of consignation to persons interested in the
fulfillment of the obligation (Article 1257)
(4) consignation of the thing or sum due (Article 1258)
(5) subsequent notice of consignation made to the interested parties
(Article 1258)

● Creditor bears expenses of consignation (Article 1259)

● After consignation, debtor may ask the judge to order the cancellation of the
obligation but prior acceptance of consignation by creditor or judicial
declaration that the consignation was properly made, the debtor may
withdraw the thing or sum deposited (Article 1260)
LOSS OF THE THING DUE
● The loss of a determinate thing through fortuitous event extinguishes the
obligation (Article 1262)

● The loss of a generic thing does not extinguish the obligation - genus
nunquam perit (a generic thing never perishes) (Article 1263)

● In case of partial loss, the court will decide whether the partial loss is such to
be equivalent to complete or total loss (article 1264)

● Disputable presumption of fault if the thing to be delivered is lost in the

possession of the debtor (Article 1265)

● Impossibility of performance without debtor’s fault will extinguish the

obligation (Article 1266)
● Difficulty of performance may extinguish the obligation (Article 1267)

● When the obligation proceeds from a criminal offense, the obligation

subsists even in case of a fortuitous event except when the creditor refused
to accept the thing without justification (Article 1268)

● Creditor has the right to proceed against third person responsible for the loss
(Article 1269)
Condonation or remission of debt
● Condonation or remission is the gratuitous abandonment by the creditor of
his/her right against the debtor (Article 1270)

● Requisites of condonation or remission:

(1) it must be gratuitous
(2) it must be accepted by the debtor
(3) parties must have capacity
(4) it must not be inofficious
(5) if made expressly, it must comply with the forms of donation

● There is a presumption of implied remission in case of voluntary delivery of

document of indebtedness by the creditor to debtor (Article 1271)
● There is presumption of voluntary delivery when document is found in the
possession of the debtor (Article 1272)

● The renunciation of the principal debt extinguishes the accessory obligations

but the waiver of the accessory obligation does not extinguish the principal
(Article 1273)
Confusion or merger of rights
● Confusion or merger is the meeting in one person of the characters of debtor
and creditor with respect to the same obligation. The effect of such
confusion or merger is to extinguish the obligation (Article 1275)

● Requisites of confusion or merger:

(1) It must take place between the creditor and the principal debtor
(2) the very same obligation must be involved, for if the debtor acquires
rights from the creditor, but not the particular obligation in question in
question there will be no merger
(3) the confusion must be total or as regards the entire obligation

● The extinguishment of the principal obligation through confusion releases

the guarantor’s because the obligation of the latter is merely accessory.
When the merger takes place in the person of a guarantor, the obligation is
not extinguished (Article 1276)
● In a joint obligation, confusion will extinguish only the share corresponding to
the creditor or debtor to whom the two characters concur (Article 1277)
Compensation
● Compensation is a mode of extinguishing to the concurrent amount, the
obligations of those persons who in their own right are reciprocally debtors
and creditors of each other. It is the offsetting of two obligations which are
reciprocally extinguished if they are of equal value or extinguished to the
concurrent amount if of different values (Article 1278)

● It is legal when it takes place by operation of law because all requisites are
present

● It is facultative when it can be claimed by one of the parties, who, however,

has the right to object to it, such as when one of the obligations has a period
for the benefit of one party alone and who renounces that period so as to
make the obligation due
● It is conventional when the parties agree to compensate their mutual
obligations even if some requisite is lacking

● It is judicial when decreed by the court in a case where there is a

counterclaim

● Requisites of compensation (Article 1279)

(1) the parties are principal creditors and principal debtors of each other
(2) both debts consist in a sum of money, or of consumable things of the
same kind and quality
(3) the 2 debts are due
(4) the 2 debts are liquidated and demandable
(5) no retention or controversy commenced by a third person
NOVATION
● Novation is the extinguishment of an obligation by a substitution or change
of the obligation by a subsequent one which extinguishes or modifies the first
either by (Article 1291):
(1) changing the object or principal conditions
(2) by substituting the person of the debtor
(3) subrogating a third person in the rights of the creditor

● Novation is a juridical act of dual function. At the time it extinguishes an

obligation it creates a new one in lieu of the old

● Classification of novation according to subject:

(1) Subjective or personal – either passive or active. Passive if there
is substitution of the debtor (substitution); active if a third person is
subrogated in the rights of the creditor (subrogation)
 (2) Objective or real – substitution of the object with another or
changing the principal conditions
(3) Mixed – Combination of subjective and objective

● Classification according to form:

(1) Express – parties declare that the old obligation is substituted
by the new
(2) Implied – an incompatibility exists between the old and the new
obligation that cannot stand together

● Classification according to effect:

(1) Total – when the old obligation is completely extinguished
(2) Partial – when there is only a modification or change in some
principal conditions of the obligation
● Requisites of novation:
(1) a previous valid obligation
(2) agreement of all parties
(3) extinguishment of the old contract – may be express or implied
(4) validity of the new one (Article 1297)

● Novation is not presumed (Article 1292)

● Kinds of substitution (Article 1293)

(1) expromision - takes place when a third person of his/her own
initiative and without the knowledge or against the will of the
original debtor assumes the latter’s obligation with the consent of
the creditor
(2) delegacion - takes place when the creditor accepts a third
person to take the place of the debtor at the instance of the latter.
All parties must agree,
● Kinds of subrogation (Articles 1300-1304)
(1) conventional - takes place by express agreement of the original
parties and the third person
(2) legal - takes place without agreement but by operation of law
> when a creditor pays another creditor who is preferred
> when a third person without interest in the obligation pays
with the approval of the debtor
> when a third person with interest in the obligation pays even
without the knowledge of the debtor

● The effect of legal subrogation is to transfer to the new creditor the credit
and all the rights and actions that could have been exercised by the former
creditor against the debtor or third persons