EXTINGUISHMENT OF

O B L I G AT I O N S

GENERAL PROVISIONS
 Obligations are extinguished:
(1) B y payment or performance:
(2) B y the loss of the thing due:
(3)B y the condonation or remission of
the debt;
(4)B y the confusion or merger of the
A RT I C L E 1 2 3 1 rights of creditor and debtor;
(5) B y compensation;
(6) B y novation.
Other causes of extinguishment of
obligations, such a s annulment,
rescission, fulfillment of a resolutory
condition, and prescription, are
governed elsewhere in this Code.
 P R I N C I PA L M O D E S

Payment or performance
Loss of the thing due
Condonation or remission of debt
Confusion or Merger
Compensation
Novation
AT M ( a d d to m e m o r y ) : PA - LO – C O N -
CON - COM - NOV
 OTHER M O D E S

Annulm ent
Rescission
Fulfillment of a resolutory condition
Prescription

AT M : F – A – R – P
 Death of a party in case the obligation is a
personal one (Article 1311, par. 1)

Mutual desistance or withdrawal

Arrival of Resolutory Period (Article 1193,

A D D ITIO N A L par. 2)
CAUSES

OF Compromise (Article 2028)

E X TIN G U IS H M E N T
OF
O B L I G AT I O N S Impossibility of fulfillment (Article 1266)

Happening of a fortuitous event (Article

1174)
S E C T I O N 1. PAY M E N T
OR PERFORMANCE

1 2 3 2 to 1 2 5 1
 Payment m e an s not only
the delivery of money
but also the
A RT I C L E 1 2 3 2
performance, in any
other manner, of an
obligation.
 It means the delivery of
money or thing (to give), the
PAY M E N T doing of a thing (to do), or
the desistance from doing
something (not to do).
 It means that the parties to
the contract have done that
which they agreed to do. The
possibility of non-
PERFORMANCE
performance should be
anticipated when drawing up
contract terms and
conditions.
Payment and Performance
are synonymous under
the law.
In a monetary obligation, by
delivery of the money in
full.

In an obligation to deliver a
thing or an object, by delivery of
the thing or an object.
HOW
PAY M E N T
In an obligation to something,
the performance of the IS
supposed undertaking. MADE
In an obligation not to do
something, the desisting or
refraining from doing the
forbidden undertaking.
 A debt shall not be
understood to have been
paid unless the thing or
service in which the
A RT I C L E 1 2 3 3
obligation consists has
been completely
delivered or rendered, as
the case m a y be.
 EXAMPLE

Xian agreed to paint the house of Yanna

for P50,000.00. Xian did not paint the
kitchen anymore and instead asked
Yanna to pay him P50,000.00 less the
cost of painting the kitchen. Yanna can
refuse to pay Xian because the debt of
Yanna (to deliver money) will arise only
after the debt of Xian (to paint the
house) is completely rendered.
 • Integrity of the prestation – A
debt to deliver a thing (including
money) or to render service is
not understood to have been
paid unless the thing has been
W H E N DEBT IS com pletely or
C O N S I D E R E D PA I D deliv ered rendered.
or irregularrule,
General performance will not
partia
extinguish the obligation. l
• Identity of the prestation – The
very prestation due must be
delivered or performed.
 If the obligation has been
substantially performed in
good faith, the obligor m a y
A RT I C L E 1 2 3 4 recover as though there had
been a strict and complete
fulfillment, less damag es
suffered by the obligee.
 R E C O V E RY
A L L O W E D IN
C A S E OF Article 1 2 3 4 is the first
S U B S TA N T I A L exception to the general rule
laid in Article 1233.
PE R FO R M A N C
E IN G O O D
FAITH
 a)There must be
REQUISITES FOR
substantial
T H E A P P L IC AT IO N performance.
O F ART. 1 2 3 4 :
b)The obligor must be in
good faith.
 Sarah obliged himself to sell 1,000 b a g s of
cement to Bea for a certain price. However,
despite diligent efforts on her part, Sarah was
able to deliver only 9 5 0 b a g s because of
cement shortage. Take note that Sarah wants
to comply with her obligation to deliver the
entire 1,000 b a g s but she could not do so for
reasons beyond her control.
EXAMPLE Under Article 1234, Sarah can recover as
though there had been complete delivery less
the price of the 5 0 bags. In other words, Bea
cannot require Sarah to deliver first the
remaining 5 0 b a g s as a condition to her liability
for the price. S h e must pay for the 9 5 0 b a g s
and enforce her right to dam ag e s for failure of
Sarah to deliver the difference. It is incumbent
upon Sarah, however, to explain satisfactorily
her failure to make complete delivery.
 When the obligee accepts
the performance,
knowing its
incompleteness or
A RT I C L E 1 2 3 5
irregularity, and without
expressing any protest or
objection, the obligation is
deemed fully complied
with.
 Article 1 2 3 5 is the second
exception to the general rule
(Article 1233). It is founded
on the principle of estoppel.
In case of acceptance, the
R E C O V E RY
ALLOWED W HEN law considers that the
IN C O M PLE TE O R creditor waives his right. The
IRREGULAR
P E R F O R M A N C E WA I V E D whole obligation is
extinguished. If the payment
is incomplete or irregular,
the creditor m a y properly
reject it.
The obligee knows that
the performance is
incomplete or irregular;
and REQUISITES
FOR THE
A P P L I C AT I O N OF
He accepts the A RT I C L E 1 2 3 5
performance without
expressing any protest
or objection.
 . The creditor is not bound to
accept payment or performance
by a third person who has no
interest in the fulfillment of the
obligation, unless there is a
stipulation to the contrary.

A RT I C L E 1 2 3 6 Whoever pays for another m a y

demand from the debtor what he
has paid, except that if he paid
without the knowledge or against
the will of the debtor, he can
recover only insofar a s the
payment has been beneficial to
the debtor.
 The creditor is bound to accept
payment or performance from
the following:
(1) The debtor;
PER S O N S FR O M W H O M (2)Any person who has an
THE C R E D I TO R M U S T
A C C E P T PAY M E N T:
interest in the obligation (like
a guarantor); or
(3)A third person who has no
interest in the obligation
when there is stipulation that
he can make payment.
 1) If m a d e wit h o ut th e k n o w l e d g e or
a g a i n s t t h e will of debtor. — The
payer can recover from the debtor only
in so far a s the payment has been
beneficial to the latter. In other words,
the recovery is only up to the extent or
amount of the debt at the time of
payment. Furthermore, the third person
EFFECT OF is not subrogated to the rights of the
PAY M E N T BY creditor, such a s those arising from a
A T H IR D mortgage, guarantee, or penalty
PE R S O N :
2) If m a d e with t h e k n o w l e d g e of
t h e debtor. — The payer shall have
the rights of reimbursement and
subrogation, that is, to recover what he
has paid (not necessarily the amount
of the debt) and to acquire all the
rights of the creditor.
 David owes Cris the s u m of P1,000.00. If
Shawn, a stranger to the obligation, offers to
pay Cris, the latter m a y or m a y not accept the
offer of payment. Suppose Cris accepts, the
right of Shawn to recover from David depends
upon whether the payment is with or without
the knowledge or consent of David.
Without the knowledge (or against the will) of
David — If the actual indebtedness is
EXAMPLE P1,000.00 and Shawn paid P1,000.00, he can
ask reimbursement for P1,000.00 but if
P400.00 had already been paid by David, then
Shawn is entitled to be reimbursed only for
the amount of P600.00 because it is only to
that amount that David has been benefited.
Shawn can recover P400.00 from Cris who
should not have accepted it.
If Cris acted in bad faith, he is liable also for
interest in lieu of damages.
 David owes Cris the s u m of P1,000.00. If
Shawn, a stranger to the obligation,
offers to pay Cris, the latter m a y or m a y
not accept the offer of payment.
Suppose Cris accepts, the right of Shawn
to recover from David depends upon
whether the payment is with or without
EXAMPLE the knowledge or consent of David.
With the knowledge of David — In either
case, if the payment of P1,000.00 was
made with the knowledge or consent of
David, Shawn can recover from David
P1,000.00 with all the rights of
subrogation to the accessory obligations
such as mortgage, guaranty, or penalty.
 Andrei owes Harriet
P100,000 payable on
September 20, 2019. Jessa,
a third person, pay Harriet
P100,000 without the
knowledge of Andrei. Jessa
PROBLEM 1 did not know that Andrei had
previously paid P30,000.00

How much can Jessa recover

from Andrei?
 ANSWER:

Andrei owes Harriet P100,000 payable on September

20, 2019. Jessa, a third person, pay Harriet
P100,000 without the knowledge of Andrei. Jessa
did not know that Andrei had previously paid
P30,000.00
How much can Jessa recover from Andrei?
Although the payment of Jessa to Harriet was for
P100,000, Jessa can only recover from Andrei
P70,000, the amount the benefited Andrei.
(Exception in Article 1236, par. 2 applies.)
 Louise owes Lawuel
P100,000 payable on June
13, 2019. G V is the
guarantor of Louise. O n due
date, Ryan paid Lawuel
P100,000 against the will of
P R O B L E M II Louise. Later, Louise
cannot reimburse Ryan.
Can Ryan ask Lawuel to
subrogate him in his right
so that Ryan can proceed
against GV, the guarantor?
 ANSWER

Louise owes Lawuel P100,000 payable on June 13, 2019.

GV is the guarantor of Louise. O n due date, Ryan paid
Lawuel P100,000 against the will of Louise. Later, Louise
cannot reimburse Ryan. Can Ryan ask Lawuel to subrogate
him in his right s o that Ryan can proceed against GV, the
guarantor?
No, because the payment by Ryan to Lawuel was made
against the will of Louise. Therefore, Ryan cannot compel
Lawuel to subrogate him in his right arising from guaranty.
 Whoever pays on behalf of
the debtor without the
knowledge or against the
will of the latter, cannot
A RT I C L E 1 2 3 7 compel the creditor to
subrogate him in his rights,
such a s those arising from
a mortgage, guaranty, or
penalty.

P R I N C I P LE O F S U B R O G AT I
ON ( RI GHT OF A T HI RD P
E R S O N T O S U B R O G AT I O N )
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.
 S U B R O G AT I O N VS. R E I M B U R S E M E N T

S U B R O G AT I O N REIMBURSEMENT

Th e p e rs o n w h o p a y s fo r the d e btor The third person entitled by

is put into the s h o e s of the creditor. reason of payment ha s merely the
The payer acquires not only the bare rig ht to be refunded to the
right to be reimbursed for what he extent prov ided in the s econd
ha s paid bu t als o all other rig h ts parag raph of Article 1 2 3 6 * *
wh ich the creditor could h a v e without the rig ht to the
exercis ed perta in in g to the g uarantee s and s ecuritie s of the
either against the debtor or againstcredit original obligation.
th ird pers ons , be they g u aran tors
or possessors of mortgages. **If paid without the knowledge or
ag ains t the will of the
Here, there is no extinction of the debtor, payment shall be m a d e
obligation bu t only a ch an g e of only to the
extent which has been
creditor. beneficial to him.
 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
A RT I C L E 1 2 3 8
debtor's consent. But the
payment is in any case valid
as to the creditor who has
accepted it.
 This is in pursuant of the principle
that that “no one should be
compelled to accept the generosity
of another.”
If the paying third person does not
PAY M E N T BY A T H I R D intend to be reimbursed the
PERSON WHO DOES
N O T I N T E N D TO B E payment is deemed a donation
REIMBURSED which requires the debtor’s consent
to be valid. (Art. 725.) 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.
 Doni owes Camille P1,000.00. Without
the intention of being reimbursed, Ryan
paid Doni’s obligation. Doni had
previously accepted Ryan’s generosity.
In this case, Doni is not liable to Ryan
and his obligation to Camille is
extinguished. But if Doni did not consent
EXAMPLE
to the donation, Ryan m a y recover
from Doni since there has been no
donation, although originally Ryan did
not intend to be reimbursed.
Nevertheless, the obligation of Doni to
Camille is extinguished because the
payment is valid a s to Camille who has
accepted it.
 In obligations to give,
payment made by one who
does not have the free
disposal of the thing due and
A RT I C L E 1 2 3 9 capacity to alienate it shall
not be valid, without
prejudice to the provisions of
Article 1 4 2 7 under the Title
on "Natural Obligations."
 The thing to be
delivered must not be
FR E E SUBJECT to any
D IS P O S A L O F
THE THING
claim or lien or
encumbrance of a
third person.
 The person is not
incapacitated to enter
into contracts (Arts.
C A PA C IT Y
TO 1327, 1329.) and for
A L I E N AT E that matter, to make a
disposition of the
thing due
 Payment shall be made
to the person in whose
favor the obligation has
A RT I C L E 1 2 4 0 been constituted, or his
successor in interest, or
any person authorized to
receive it.
 the C R E D I TO R O R O B L I G E E (person in
whose favor the obligation has been
constituted);

PAY M E N T his S U C C E S S O R I N I N T E R E S T (like an

S H A LL B E heir or assignee); or
M A D E TO:
any P E R S O N A U T H O R I Z E D to receive it
(not only by the creditor, but also
authorized by the law e.g. guardian,
executor, administrator,
assignee/liquidator of a partnership or
corporation).
 Jan was a creditor of Diane. The first
wife of Jan died and he married again.
After the death of Jan, the plaintiffs,
children of Jan by his first marriage,
demanded payment from Diane. Diane
paid instead the widow of the
second marriage of Jan.
EXAMPLE

Is there payment of the debt?

No. The wife of the second marriage
had no right to receive payment, since
the demand was already made by the
heirs of Jan. Diane made an undue
payment.
 Payment to a person who is incapacitated
to administer his property shall be valid if
he h a s kept the thing delivered, or insofar
a s the payment h a s been beneficial to him.
Payment m a d e to a third person shall also
be valid insofar a s it h a s redounded to the
benefit of the creditor. S u c h benefit to the
creditor need not be proved in the following
cases:
A RT I C L E 1 2 4 1
(1)If after the payment, the third person
acquires the creditor's rights;
(2)If the creditor ratifies the payment to
the third person;
(3)If by the creditor's conduct, the debtor
h a s been led to believe that the third
person had authority to receive the
payment.
 Payment to a person incapacitated to
administer or m a n a g e his property
is not valid unless such
incapacitated person kept the thing
paid or delivered (so that it is not
necessary that it should have been
EFFECT OF
invested in s o m e profitable venture)
PAY M E N T T O A N or was benefited by the payment.
I N C A PA C I TA T E D
PERSON In the absence of this benefit, the
debtor m a y be made to pay again by
the creditor’s guardian or by the
incapacitated person himself when he
acquires or recovers his capacity.
Proof of such benefit is incumbent
upon the debtor who paid.
 E m m a delivers P1,000.00 to Jake, a
minor under guardianship, in
payment of a debt. Jake loses
P700.00 of the money due to
negligence or ignorance. In this case,
the payment should be considered
EXAMPLE as made only to the extent of
P300.00.
However, if Jake kept the money paid
or spent it for purposes useful to
him, the payment shall be valid;
otherwise, Jake would unduly enrich
himself at the expense of Emma.
 Payment to a third person or
wrong party is not valid
except insofar as it has
redounded to the benefit of
the creditor. It is immaterial
PAY M E N T TO that the debtor acted in
A T H IR D utmost good faith and by
PE R S O N mistake as to the person of
the creditor, or through error
induced by fraud of a third
person if the creditor is
without fault or negligence.
 Payment made in
good faith to any
A RT I C L E 1 2 4 2 person in possession
of the credit shall
release the debtor.
 “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
PA Y M E N T T O T H I R D transferable by delivery) does not
P E R S O N IN
PO S S E S S IO N
entitle the holder to payment nor
OF CREDIT 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,
however, is presumed.
 Mimi is indebted to Ben in the
amount of P1,000.00 which
indebtedness is evidenced by a
promissory note signed by Mimi in
favor of Ben. Ben lost the promissory
EXAMPLE note which was later found by Louis
who demanded payment from Mimi.
Payment to Louis is not valid because
Louis is the possessor merely of the
document evidencing the credit and
not of the credit itself.
 Payment made to the
creditor by the
debtor after the
A RT I C L E 1 2 4 3 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, m a y be ordered by the
court (or by any competent authority
though it be administrative) to retain
WHEN the debt until the right of the plaintiff,
PAY M E N T TO the creditor in the main litigation, is
C R E D IT O R N O T resolved.
VA L I D Payment made subsequently by the
debtor-stranger shall not be valid if
the plaintiff wins the case and cannot
collect from the debtor to wh om
the payment is made. Such
payment is considered a s made in
bad faith.
 Ryan owes Kate P1,000.00.
Lia, in turn owes Ryan
P1,000.00. In an action by
Kate against Ryan, Lia, upon
petition of Kate, m a y be
EXAMPLE ordered by the court not to
pay Ryan and to retain the
debt in the meantime. In this
case, the debt of Lia is said
to be “garnished” or is
subjected to payment to
Kate.
 The debtor of a thing cannot
compel the creditor to receive
a different one, although
the latter m a y be of the
s a m e value as, or more
A RT I C L E 1 2 4 4 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.
 V E RY P R E S TATIO N D U E M U S T
BE COMPLIED
WITH
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 m a y be.
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.
But, c a n th e p r e s t a t i o n b e s u b s t i t u t e d ?
YES, substitution can be made if the obligee or the creditor
consents. (Facultative Obligation)
 Dation in payment,
whereby property is
alienated to the creditor
A RT I C L E 1 2 4 5 in satisfaction of a
debt in money, shall be
governed by the law of
sales.
 SPECIAL F O R M S O F PAY M E N T

There are four special forms of payment

under the Civil Code, namely:
1) dation in payment (Article 1245);
2) application of payments (Article
1253);
3) payment by cession (Article 1255);
and
4) tender of payment and consignation
(Article 1256-1261)
 It is the conveyance of
ownership of a thing by the
debtor to creditor a s an
accepted equivalent of
performance of a monetary
D ATIO N IN obligation.
PAY M E N T
( A D J U D I C AT I O N It is a special form of
O R D A C IO N E N
PA G O ) payment because it is not the
ordinary way of
extinguishing an obligation.
An existing debt in money is
satisfied, not by the
alienation of property.
 Howard owes Gian P30,000.00. To fulfill
the obligation, Howard with the
consent of Gian, delivers a piano.
If the piano, however, is less than
P30,000.00, the conveyance must be
deemed to extinguish the obligation to
EXAMPLE the extent only of the value agreed
upon unless the parties by their
agreement have considered the piano
as full payment, in which case, the
obligation is totally extinguished.
The conveyance is, in effect, a
novation of the contract.
R E Q U IS ITE S O F D ATIO N IN
PAY M E N T ( D A C I O N EN
PA G O )
There must be performance of the prestation in lieu
of payment (animo solvendi) which m a y consist in
the delivery of a corporeal thing or a real right or
a credit against a third person;

There must be some difference between the

prestation due and that which is given in
substitution (aliud pro alio); and

There must be an agreement between the creditor

and debtor that the obligation is immediately
extinguished by reason of the performance of a
prestation different from that due.
 Anna owes Bea P100,000. With
Bea’s consent, Anna delivered the
latest M a c Computer. However, if
the worth of the M a c Computer is
less than P100,000 the
obligation of Anna is only to the
EXAMPLE extent of the value of the thing
delivered unless, it was agreed
upon by both parties that the
parties have considered the
delivery of the thing, a s full
payment or fulfilment of the
obligation.
 D AT I O N IN PAY M E N T V S . S A L E S

D ATIO N IN PAYM E N T S A LE S

• There is pre-existing • There is none.

credit
• Obligation arises
• Obligation is
• There is greater freedom
extinguished
• There is lesser freedom in • The payment of the
determining the price price extinguishes the
obligation of the buyer,
• The giving of the property
as a rule.
in payment of the
monetary obligation
m a y totally or partially
extinguish the obligation.
 When the obligation consists in
the delivery of an indeterminate
or generic thing, whose quality
and circumstances have not been
stated, the creditor cannot
A RT I C L E 1 2 4 6 demand a thing of superior
quality. Neither can the debtor
deliver a thing of inferior quality.
The purpose of the obligation and
other circumstances shall be
taken into consideration.
 If the obligation consists in the delivery
of a specific thing, the very thing due
must be delivered. (Art. 1244.)
However, if the obligation is to deliver a
generic thing, the purpose of the
obligation and other circumstances shall
RULE OF THE be taken into consideration to
M E D I U M QUALITY determine the quality or kind of thing to
be delivered.
The benefit of this article m a y be
waived by the creditor by accepting a
thing of inferior quality and by the
debtor by delivering a thing of superior
quality.
 Lalaine promised to deliver to Robert, a horse.
Robber cannot compel Lalain to deliver a price-
winning race horse. Neither can Lalaine require
Robert to accept an old sickly horse.
However:
a) If the seller sells, horses that are good for
racing, it is understood horse, which is the
object or the prestation of the obligation is the
one which is being referred to.
EXAMPLE b) If the seller is a calesa driver, and the buyer
agrees to pay for the horse, then that kind of
horse which the calesa driver owns m a y
be delivered.
c) If the buyer is a veterinary doctor and his
purpose to buy the horse is to examine the
organs of the horse in connection to his work,
or to determine diseases which would affect
horses, an old sickly horse is intended by the
parties to be delivered.
 Unless it is otherwise
stipulated, the
extrajudicial expenses
required by the payment
A RT I C L E 1 2 4 7
shall be for the account of
the debtor. With regard
to judicial costs, the
Rules of Court shall
govern.
 The extrajudicial expenses of payment
are for the account of the debtor. The
reason is that the obligation is
extinguished when payment is m a d e and
it is, therefore, the debtor who is
primarily benefited.
If the parties have m a d e a stipulation a s
D E B T O R PAY S F O R to who will bear the expenses, then
EXTRAJUDICIAL their stipulation shall be followed.
EXPENSES Article 1 2 4 7 does not apply to
expenses incurred by the creditor in
going to the debtor’s domicile to collect.
A s for judicial costs, it is the losing party
who generally pays. Judicial costs are
the statutory amounts allowed to a
party to an action for his expenses
incurred in the action.
 Unless there is an express
stipulation to that effect, the
creditor cannot be compelled
partially to receive the prestations
in which the obligation consists.
Neither m a y the debtor be required
A RT I C L E 1 2 4 8 to make partial payments.
However, when the debt is in part
liquidated and in part unliquidated,
the creditor m a y demand and the
debtor m a y effect the payment of
the former without waiting for the
liquidation of the latter.
 In order that payment m a y
extinguish an obligation, it is
necessary that there be complete
performance of the prestation.
(Art. 1233.) The creditor m a y
accept but he cannot be
PA RT I A L
compelled to accept partial
PAY M E N T O R
PE R FO R M A N C E payment or performance. The
debtor ha s the duty to comply
with the whole of the obligation
but he cannot be required to
make partial payments if he does
not wish to do so.

W H E N PA RT I A L
P E R F O R M A N C E OF
O B L I G AT I O N A L L O W E D
(1) when there is an express stipulation to
that effect (par. 1);
Ex. A owes B P5,000 today. A cannot
compel B to accept P3,000 a s partial
payment, neither can B demand A to pay
only P3,000 unless there is an
agreement.
(2) when the debt is in part liquidated
(definitely determined or determinable)
and in part unliquidated (par. 2.);
Ex. A owes B P5,000 plus his interest
profits from the business of A, however,
this interest profits are yet to be
liquidated. Hence, B m a y demand for the
return of his P5,000 since the amount is
already known.

W H E N PA RT I A L
P E R F O R M A N C E OF
O B L I G AT I O N A L L O W E D
(3) when the different prestations in which the
obligation consists are subject to different terms
or conditions which affect some of them.
Ex. A owes B P5,000. The P3,000 is due today,
and the P2,000 is due tomorrow. Hence, B m a y
compel A to pay today P3,000, and not the entire
obligation of P5,000.
(4)when the parties know that the obligation
reasonably cannot be expected to be performed
completely at one time; and
(5)when there is abuse of right or if good faith
requires acceptance.
Ex. S obliged himself to deliver 50,000 b a gs of
cement to B at the construction site of a
building. S makes a fi rst delivery of 5,000 bags,
informing B that continuous deliveries will follow.
In this case, B cannot, in good faith, refuse to
accept the partial deliveries as long as they are
sufficient for his construction needs.
 The payment of debts in money shall be
made in the currency stipulated, and if
it is not possible to deliver such
currency, then in the currency which is
legal tender in the Philippines.
The delivery of promissory notes
payable to order, or bills of exchange or
A RT I C L E 1 2 4 9 other mercantile documents shall
produce the effect of payment only
when they have been cashed, or when
through the fault of the creditor they
have been impaired.
In the meantime, the action derived
from the original obligation shall be held
in the abeyance.
 It is that currency which a debtor can legally
compel a creditor to accept in payment of
a debt in m o n e y when tendered by the
debtor in the right amount.
In the Philippines, all coins and notes issued
by the Bangko Sentral n g Pilipinas
constitute legal tender for all debts, both
LEGAL TENDER public or private.
B S P Circular No. 5 3 7 (July 18, 2 0 0 6 ) which
took effect on August 11, 2006, the
m a x i m u m amount of coins to be considered
legal is adjusted a s follows: (1) P1,000.00
for denominations P1.00, P5.00, and P10.00
coins, and (2) P100.00 for denominations of
P.01, P.05, P.10 and P.25 coins.
 1. R i g h t of creditor to re f us e or
a cce p t - Promissory notes, checks,
bills of exchange and other
commercial documents are not legal
tender and, therefore, the creditor
cannot be compelled to accept them.
IN S T R U M E N T This is true even though the check is
OF CREDITS certified, or is a manager’s check.
2. Effect o n obligation. — Payment by
means of mercantile documents do
not extinguish the obligation —
a. until they have been cashed; or
b. unless they have been impaired through
the fault of the creditor. (par. 2.)
 In case an extraordinary
inflation or deflation of the
currency stipulated should
supervene, the value of the
A RT I C L E 1 2 5 0 currency at the time of the
establishment of the
obligation shall be the basis
of payment, unless there is
an agreement to the contrary.
 It is the sharp sudden
increase of money or
I N F L AT I O N credit or both without a
corresponding increase
in business transactions.
 It is the reduction in
volume and circulation of
the available money or
D E F L AT I O N credit, resulting in a
decline of the general
price level; it is the
opposite of inflation.
 There is an official declaration
of extraordinary inflation or
deflation from the Bangko
Sentral n g Pilipinas (BSP).
REQUISITES The obligation is contractual in
F O R A R T IC L E nature; and
1250:

The parties expressly agreed

to consider the effects of
the extraordinary inflation
or deflation.
 D borrowed from C P5,000.00 payable after
five (5) years. On the maturity of the
obligation, the value of P5,000.00
dropped to P2,500.00 because of inflation
(or increased to P10,000.00 because of
deflation). - In this case (assuming there is
extraordinary inflation or deflation), the
EXAMPLE basis of payment shall be the equivalent
value of the currency today to that five
(5) years ago. Hence, D is liable to pay B
P10,000.00 (or P2,500.00) unless there is
an agreement to the contrary, e.g., that D
shall pay C P5,000.00 regardless of any
extraordinary decrease or increase in the
purchasing power of the peso.
 Payment shall be m a d e in the place
designated in the obligation.
There being no express stipulation
and if the undertaking is to deliver a
determinate thing, the payment shall
be m a d e wherever the thing might
be at the moment the obligation
w a s constituted.
A RT I C L E 1 2 5 1 In any other case the place of
payment shall be the domicile of the
debtor.
If the debtor changes his domicile in
bad faith or after he h a s incurred
in delay, the additional expenses
shall be borne by him.
These provisions are without prejudice
to venue under the Rules of Court.
If there is a stipulation, the
payment shall be made in the
place designated (par. 1; see
Art. 1306.);

If there is no stipulation and the

thing to be delivered is PLACE
specific, the payment shall be
made at the place where the WHERE
thing was, at the perfection of O B L I G AT I O N
the contract (par. 2.); S H A LL
B E PA ID
If there is no stipulation and the
thing to be delivered is
generic, the place of payment
shall be the domicile of the
debtor. (par. 3.)