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SECTION 2:

LOSS OF THE
THING DUE

MEANING OF
LOSS

Lossof the thingpertainsto objects that do not exist anymore

WHEN IS A THING
CONSIDERED
LOST?

It is understood that a thing is lost when it:


1. Perishes (physical loss);
2. Goes out of commerce of man (legal loss); or
3. Disappears in such a way that its existence is unknown or

cannot be recovered (civil loss).

EFFECTS OF
LOSS OF THING

IN OBLIGATIONS
TO GIVE

Specific
or
Determinate

Generic
or
Indeterminat
e

genus never
perishes

RISK OF LOSS

Before perfection

Creditor bears all of the risks

At perfection

Contract is without effect

After perfection, before


delivery

Art. 1480. Any injury to or


benefit from the thing sold, after
the contract has been perfected,
from the moment of the
perfection of the contract to the
time of delivery, shall be
governed by Articles 1163 to
1165, and 1262.

Every person obliged to give something is also obliged to take


care of it with the proper diligence of a good father of a family,
unless the law or the stipulation of the parties requires another
standard of care. (1094a)
-Art. 1263-

The creditor has a right to the fruits of the thing from the time
the obligation to deliver it arises. However, he shall acquire no
real right over it until the same has been delivered to him.
(1095)
-Art. 1164-

When what is to be delivered is a determinate thing, the


creditor, in addition to the right granted him by Article 1170,
may compel the debtor to make the delivery.
-Art. 1165-

An obligation which consists in the delivery of a determinate


thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor, and before it has incurred
delay.
-Art. 1262-

Thing to be delivered is determinate


Debtor is not at fault
Thing is lost before debtor has incurred delay

Obligation
extinguishe
d

Obligation
NOT
extinguishe
d

Obligation extinguished
1. The thing to be delivered
is specific or determinate,
debtor not in fault or delay

Obligation NOT
extinguished
1. The thing to be
delivered is generic or
indeterminate

Illustration (1)
Facts:

S promised to deliver 100 cavans of rice to B.

First issue:
lost in a

The 100 cavans of rice which S intended to deliver were


flood. Should the obligation be extinguished?

Second issue: Suppose the obligation of S is to deliver 100 cavans of rice


from
his harvest and such harvest is completely lost or
destroyed, is
the obligation extinguished?

Cases when the loss of the specific thing even in the absence
of fault and delay will not exempt debtor from liability:
1. When the law so provides;
2. When the stipulation so provides;
3. When the nature of the obligation requires the assumption

of risk; and
4. When the debt arises from criminal offense.

- Article 1262 par. 2-

When the debt of a thing certain and determinate proceeds


from a criminal offense, the debtor shall not be exempted from
the payment of its price, whatever may be the cause for the
loss, unless the thing having been offered by him to the person
who should receive it, the latter refused without justification to
accept it.
-Article 1268-

Illustration (2)
Facts:
the

D stole the jeep of C. Hence, D has the obligation to return


jeep to C.

First issue:
effect on

The jeep was lost and destroyed due to flood. What is its
the obligation?

Second issue: What if C refuses to accept the jeep?

Obligation extinguished
1. The thing to be delivered
is specific or determinate,
debtor not in fault or delay

Obligation NOT
extinguished
1. The thing to be
delivered is generic or
indeterminate
2.
Obligation arises from a
criminal offense

PARTIAL LOSS OF
THING

The courts shall determine whether, under the circumstances,


the partial loss of the object of the obligation is so important as
to extinguish the obligation.

-Article 1264-

Obligation extinguished
1. The thing to be delivered
is specific or determinate,
debtor not in fault or delay
2. Through courts
discretion: partial loss of
thing

Obligation NOT
extinguished
1. The thing to be
delivered is generic or
indeterminate
2.
Obligation arises from a
criminal offense

Illustration (3)
Facts:

S obliged himself to deliver to B a specific race horse.

First issue:

The horse met an accident as a result of which it suffered a


broken leg. The injury is permanent. Should it
extinguish the
obligation?
Second issue: Suppose the horse was only to be slaughtered by B, should
it
extinguish the obligation?

LOSS OF THING IN
POSSESSION OF
DEBTOR

Presumption:
Exception:

Loss due to debtors fault


There is proof to the contrary

Loss is due to natural calamities

-Article 1265-

Obligation extinguished
1. The thing to be delivered
is specific or determinate,
debtor not in fault or delay
2. Through courts
discretion: partial loss of
thing

Obligation NOT
extinguished
1. The thing to be
delivered is generic or
indeterminate
2.
Obligation arises from a
criminal offense
3. Loss is due to debtors fault

Illustration (4)
Facts:

B borrowed the car of L.

First issue:
was not
L?

On due date, B told L that the car was stolen and that he
at fault. Is it enough as to extinguish his obligation to

Second issue: Suppose the house of B was destroyed by fire and it was
accidental that the car was in the house at the time
it occurred.
Is B still liable?

Debtor who is not at fault may still be liable in case he is guilty


of delay or he has promised to deliver the same thing to two or
more persons who do not have the same interest.
-Article 1165 par. 3-

Obligation extinguished
1. The thing to be delivered
is specific or determinate,
debtor not in fault or delay
2. Through courts
discretion: partial loss of
thing

Obligation NOT
extinguished
1. The thing to be
delivered is generic or
indeterminate
2.
Obligation arises from a
criminal offense
3. Loss is due to debtors fault
4. Debtor incurs in delay

Illustration (5)
Facts:

B borrowed the car of L.

First issue:
was not
L?

On due date, B told L that the car was stolen and that he
at fault. Is it enough as to extinguish his obligation to

Second issue: Suppose the house of B was destroyed by fire and it was
accidental that the car was in the house at the time
it occurred.
Is B still liable?
Third issue:
was

What if only after the due date had B told L that the car
caught by fire? Should it extinguish the obligation?

LOSS OF
IMPOSSIBILITY
OF
SPECIFIC =
PERFORMANCE
THING

IN OBLIGATIONS
TO DO

The debtor in obligations to do shall also be released when the


prestation becomes legally or physically impossible without the
fault of the obligor.

-Article 1266-

Obligation becomes legally or physically impossible

Impossibility not through the fault of the debtor

Impossibility takes place after the constitution of the


obligation

Natural impossibility and impossibility in fact

Natural impossibility consists in the nature of the thing to be


done and not in the inability of the party to do so

Impossibility in fact is only improbable or out of the power of


the obligor

Obligation extinguished
1. The thing to be delivered
is specific or determinate,
debtor not in fault or delay
2. Through courts
discretion: partial loss of
thing
3.
Service performance is
rendered impossible

Obligation NOT
extinguished
1. The thing to be
delivered is generic or
indeterminate
2.
Obligation arises from a
criminal offense
3. Loss is due to debtors fault
4. Debtor incurs in delay
5. Impossibility is due to
debtors fault
6. Impossibility only arises
from an impossibility in fact

Illustration (6)
Facts:

S obliges himself to deliver certain goods to B.

First issue:

The goods perished in a shipwreck.

Second issue: Suppose S is unable to deliver the goods promised and his
inability arises not from their destruction but from, say,
his
inability to raise money to buy them due to
sickness.

PARTIA
L
LOSS

DIFFICULTY OF
PERFORMANC
E

DIFFICULTY OF
PERFORMANCE

When the service has become so difficult as to be manifestly


beyond the contemplation of the parties, the obligor may also
be released therefrom, in whole or in part.

-Article 1267-

Obligation extinguished
1. The thing to be delivered
is specific or determinate,
debtor not in fault or delay
2. Through courts
discretion: partial loss of
thing
3.
Service performance is
rendered impossible
4. Through courts
discretion: service difficulty

Obligation NOT
extinguished
1. The thing to be
delivered is generic or
indeterminate
2.
Obligation arises from a
criminal offense
3. Loss is due to debtors fault
4. Debtor incurs in delay
5. Impossibility is due to
debtors fault
6. Impossibility only arises
from an impossibility in fact

Illustration (7)
Facts:

X agreed to construct a road near a mountain.

First issue:

A very strong typhoon caused an avalanche making the


construction of the road dangerous to human lives.

RIGHT OF CREDITOR
TO PROCEED AGAINST
THIRD PERSONS

Creditor is given the right to proceed against the third person


responsible for the loss.

Rights of action of debtor transferred to creditor

No need for assignment by debtor


-Article 1269-

Illustration (8)
Facts:

S is obliged to deliver to B a specific horse.

First issue:

The horse is lost through the fault of T.

Held:
The obligation of S is extinguished and he is not liable to B.
Such
being the case, S would not be interested in going after
T. The law
however, protects B by giving him the right to
bring an action
against T to recover the price of the
horse with damages.

SECTION 3:

CONDONATION OR
REMISSION OF DEBT

MEANING OF
CONDONATION
OR REMISSION

Condonation or remission is the gratuitous abandonment by


the creditor of his right against the debtor.

An act of liberality, and therefore requires an evidence in


order that it be proven

KINDS OF
REMISSION

As to its extent
Complete
Partial
As to its form
Expressed
Implied
As to its date of effectivity
Inter vivos
Mortis causa

REQUISITES OF
CONDONATION OR
REMISSION

1. It must be gratuitous.
2. It must be accepted by the obligor.
3. The parties must have capacity.
4. It must not be inofficious.
5. If made expressly, it must comply with the forms of donation.

-Art. 1270-

The provisions of Article 750 notwithstanding, no person may


give or receive, by way of donation, more than he may give or
receive by will.
The donation shall be inofficious in all that it may exceed this
limitation.(636)
-Article 752-

VOLUNTARY
DELIVERY
OF PRIVATE
DOCUMENT

VOLUNT
ARY
=
DELIVER
Y

PRESUMPTI
ON OF
PAYMENT

prima facie

Waiver proved to be invalid


Debtor or his successors in interest may uphold the
remission by establishing that the delivery of the credit
document was done as evidence of payment of the debt.

Extent of Remission

Joint obligation
Pertains only to the
share of the debtor
who is in possession
of the private
document

Solidary obligation
Pertains to the total
obligation

Presumption only applicable to private document.

PRIVATE DOCUMENT
IN POSSESSION OF
DEBTOR

Presumption:

Voluntarily delivered by creditor

However, if it is known that indeed there is no


payment should there be a presumption of remission.

PRESUMP
TION OF PRESUMPTI
VOLUNTA = ON OF
REMISSION
RY
DELIVERY

Illustration
Suppose Christian borrowed Php100,000 from James evidenced
by a promissory note and is signed by Christian which he later
on gave to James.
What presumption arises if:
(a)The promissory note is voluntarily given by James to
Christian?
(b)If it is known that Christian hasnt paid James yet?
(c) Suppose it is not known how James came into possession of
the promissory note?

PRINCIPAL AND
ACCESSORY

The renunciation of the principal debt shall extinguish the


accessory obligations; but the waiver of the latter shall leave
the former in force.
-Article 1273-

accessory
follows
principal

THING PLEDGED
FOUND IN POSSESSION
OF DEBTOR

It is presumed that the accessory obligation of pledge has


been remitted when the thing pledged, after its delivery to the
creditor, is found in the possession of the debtor, or of a third
person who owns the thing.
-Article 1274-

SECTION 4:

CONFUSION OR
MERGER OF RIGHTS

MEANING OF
CONFUSION OR
MERGER

Confusion or merger is the meeting in one (1)


person of the qualities of creditor and debtor
with respect to the same obligation.

Basis of Confusion
1. The law treats confusion or merger as a mode of

extinguishing obligations because if a debtor is his own


creditor, enforcement of the obligation becomes absurd
since a person cannot claim payment from himself.
2. Furthermore, when there is a confusion of rights, the

purposes for which the obligation may have been created


are deemed realized.

CONFUSION AND
MERGER
DISTINGUISHED

REQUISITES OF
CONFUSION OR
MERGER

1. It must take place between the principal

debtor and creditor; and


2. It must be complete and definite.

EXTINCTION OF
REAL RIGHTS BY
CONFUSION

consolidation
of ownership

EFFECT OF
MERGER

MERGER OF
EXTINGUISH
PRINCIPAL
= MENT OF
DEBTOR OR
OBLIGATION
CREDITOR

EXTINGUISHMEN
EXTINGUISH
T OF ACCESSORY
MENT OF = OBLIGATION OF
GUARANTY
OBLIGATION

MERGER IN EXTINGUISHMEN
THE PERSON T OF ACCESSORY
= OBLIGATION
OF
ONLY
GUARANTOR

CONFUSION IN JOINT
AND SOLIDARY
OBLIGATIONS

Confusion in Joint Obligations


Will extinguish only the share corresponding to the

creditor or debtor in whom the two characters concur

Confusion in Solidary Obligations


Shall extinguish the entire obligation