oblicon

• Obligations are extinguished by

  • Payment or performance
  • Loss of the thing due
  • Condonation or remission of the debt
  • Confusion or merger of the rights of creditor and debtor
  • Compensation
  • Novation
• Causes of extinguishment of obligation

  • Death
  • Mutual desistance or withdrawal
  • Arrival of resolutory period
  • Compromise
  • Impossibility of fulfillment
  • Happening of a fortuitous event
• Modes of extinguishment of obligation

  • Voluntary:
  • Performance: Payment and Consignation
  • Substitution: Dacion en pago, Novation
  • By release agreement: Mutual waiver, Unilateral waiver, Remission, Resolutary condition, Extinctive period
  • Involuntary:
  • By reason of the object: Confusion, Death of the contracting parties
  • By reason of the object: Loss of the thing due or impossibility of performance
  • By failure to exercise (right of action): Extinctive prescription
• Payment


  Not only the delivery of money but also the performance, in any other manner, of an obligation
• Elements of payment


  • Persons who may pay and to whom payment may be made
  • Thing or object in which payment must consist
  • The cause thereof
  • The mode or form thereof
  • The place and the time in which it must be made
  • The imputation of expenses occasioned by it
  • The special parts which may modify the same and the effects they generally produce
• Requisites for a valid payment

  • Integrity of prestation - the prestation must be fulfilled completely
  • Identity of prestation - the very prestation due must be delivered
• Burden of proving payment


  When the existence of a debt is admitted by the debtor or established by the evidence of the creditor, the burden of proving extinguishment by payment dissolves upon the debtor who claims payment
• Requisites for the application of Article 1234 (recovery allowed in case of substantial performance in good faith)

  • There must be substantial performance
  • The obligor must be in good faith
• Requisites for Article 1235 (obligation deemed fully complied with)

  • The obligee knows that the performance is incomplete or irregular
  • He accepts that the performance without expressing any protest or objection
• Persons from whom the creditor must accept payment

  • The debtor
  • Any person who has an interest in the obligation (like a guarantor)
  • A third person who has no interest in the obligation when there is stipulation that he can make payment
• Effect of payment by a third person

  • If made without the knowledge or against the will of the debtor, the recovery is only up to the extent or amount of the debt at the time of payment
  • If made with knowledge of the debtor, the payer shall have the rights of reimbursement and subrogations, to recover what he has paid
• Subrogation and reimbursement


  • In subrogation, the person who pays for the debtor is put into the shoes of the creditor
  • In reimbursement, the third person has merely the bare right to be refunded to the extent provided without the right to the guarantees and securities of the original obligation
• Payment deemed as donation


  If a stranger to the obligation willingly paid the debt of a debtor without the intention to be reimbursed or to recover the amount from the debtor, then it may be considered as a donation with the consent of the debtor
• Requisites for valid payment in obligations to give

  • The person making payment must have the free disposal of the thing due and capacity to alienate it
• Persons to whom payment shall be made


  • The creditor or obligee
  • His successor in interest
  • Any person authorized to receive it
• Payment to an incapacitated person


  • Valid if the incapacitated person has kept the thing delivered or insofar as the payment has been beneficial to him
• Payment to a third party not duly authorized

  • Valid only to the extent of benefits to the creditor
• Payment to person in possession of the credit

  • Must be in good faith by the payor
  • The payee must be in possession of the creditor itself
• Payment to creditor by debtor after the latter has been judicially ordered to retain the debt shall not be valid
• Payment to a third party not duly authorized

  • The payment is valid only to the extent of benefits to the creditor
  • The creditor was benefited by the payment made by the debtor to a third person is not presumed
• When benefit to creditor needs to be provided

  1. Subrogation of the payer in the creditor's rights

  2. Ratification by the creditor

  3. Estoppel on the part of the creditor
• Payment to third person in possession of credit

  • Payment by payor must be in good faith
  • The payee must be in possession of the creditor itself
• Payment to creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid
• Payment made after judicial order to retain

  The judicial order may have been prompted by an order of attachment, injunction or garnishment
• Very prestation due must be complied with

  • A thing different from that due cannot be offered or demanded against the will of the creditor or debtor
  • The act to be performed or the act prohibited cannot be substituted against the obligee's will
• Instances when Article 1244 does not apply

  • In case of facultative obligation
  • In case there is another agreement resulting in either dation in payment or novation
  • In case waiver by the creditor (expressly or impliedly)
• Dation in payment


  Is the conveyance of ownership of a thing by the debtor to creditor as an accepted equivalent of performance of a monetary obligation
• Requisites for valid dation in payment

  • There must be performance of the prestation in lieu of payment
  • There must be some different between the prestation due and that which is given in substitution
  • There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason if the performance of a prestation differs from that due
• Rule of the medium quality

  • If the obligation consists in the delivery of a specific thing, the very thing due must be delivered
  • If the obligation is to deliver a generic thing, the purpose of the obligation and other circumstances shall be taken into consideration to determine the quality or kind of thing to be delivered
• Extrajudicial expenses of payment

  • Debtor pays generally for extrajudicial expenses
  • Judicial costs are governed by the Rules of Court
• Partial performance


  • The prestation must be performed in one act and not in parts
  • The creditor may accept but he cannot be compelled to accept partial payment or performance
  • The debtor has 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
• Instances when partial performance may be required or insisted

  • When there is an express stipulation to that effect
  • When the debt is in part liquidated and in part unliquidated
  • When the different prestations in which the obligation consists are subject to different terms or conditions which affect some of them
  • When the parties know that the obligation reasonably cannot be expected to be performed completely at one time
  • When there is abuse of right or if good faith requires acceptance
• Payment in money


  • 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 the legal tender in the Philippines
  • The delivery of promissory notes payable to order or bills of exchange or 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
• RA No. 529 required the payment of domestic obligations in Philippine currency and declared as null and void any provision requiring payment in a foreign currency
• RA No. 8183 repealed RA No. 529, so there is no longer any impediment to having obligations or transactions paid in a foreign currency as long as the parties agree
• Legal tender


  Currency which the debtor can legally compel a creditor to accept in payment of a debt in money when tendered by the debtor in the right amount
• Checks and other negotiable instruments are not legal tender, so the creditor cannot be compelled to accept them
• A check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash
• Creditor


  Can refuse or accept promissory notes, checks, bills of exchange and other commercial documents
• Promissory notes, checks, bills of exchange and other commercial documents are not legal tender and, therefore, the creditor cannot be compelled to accept them