Article 1241 - 1304

• Payment to a person who is incapacitated


  Valid if the thing delivered has been kept, or insofar as the payment has been beneficial to him
• Payment made to a third person

  Valid insofar as it has redounded to the benefit of the creditor
• Cases where benefit to the creditor need not be proved


  • If after the payment, the third person acquires the creditor's rights
  • If the creditor ratifies the payment to the third person
  • If by the creditor's conduct, the debtor has been led to believe that the third person had the authority to receive the payment
• Effect of payment to an incapacitated person


  If the creditor does not benefit, the debtor might have to pay again later, unless the money is kept for the creditor or directly benefits them
• Effect of payment to a third person

  Valid only if it benefits the creditor, regardless of the debtor's good faith or error, and the burden of proving such benefit falls on the interested party
• When benefit to creditor need not be proved by debtor


  • Subrogation
  • Ratification by the creditor
  • Estoppel
• Payment made in good faith to any person in possession of the credit

  Releases the debtor
• Payment to third person in possession of credit

  Valid if the payer possesses the credit itself in good faith, believing they are making a valid payment to the rightful owner of the credit
• Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt

  Not valid
• Debtor cannot compel the creditor to receive a different thing

  Although the latter may be of the same value as, or more 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
• Dation in payment


  The debtor offers, and the creditor accepts, a different object or service to extinguish the obligation
• Special forms of payment

  • Dation in payment
  • Application of payments
  • Payment by cession
  • Tender of payment and consignation
• Requisites of dation in payment

  • There must be performance of the prestation in lieu of payment (animo solvendi)
  • There must be some difference between the prestation due and that which is given in substitution (aliud pro alio)
  • 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
• Rule of the medium quality

  The creditor cannot demand a thing of superior quality, nor can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration.
• Extrajudicial expenses required by the payment

  Shall be for the account of the debtor, unless otherwise stipulated
• Judicial costs


  Governed by the Rules of Court
• Without agreement, creditors can't be forced to accept partial payments, nor debtors to make them


  But for partly settled debts, partial payments are allowed
• Payment of debts in money

  Shall be made in the currency stipulated, and if not possible, then in the currency which is legal tender in the Philippines
• Delivery of promissory notes, 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
• Abuse of Right or Good Faith

  Either accepting partial performance or insisting on it would be considered reasonable
• Creditor agrees to accept partial payment

  Knowing the debtor is facing temporary financial hardship
• 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
• Legal tender


  A currency that a debtor can legally use to pay off a debt when offered in the correct amount
• In the Philippines, all coins and notes issued by the Bangko Sentral ng Pilipinas are legal tender for all debts, both public and private, unless specified otherwise
• Promissory notes, checks, and bills of exchange

  Aren't legal tender; creditors aren't required to accept them as payment
• Creditor has the option to accept commercial documents like checks

  Without it immediately satisfying the debt; the original obligation remains suspended until the document is cashed
• Payment by means of mercantile documents

  Does not extinguish the obligation until they have been cashed; unless they have been impaired through the fault of the creditor
• Payment by promissory note


  • Conditional payment only; debtor not released until the check has been honored by the bank
• Extraordinary inflation or deflation of the currency


  The value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary
• Inflation


  Rapid increase in money or credit, not matched by increased economic activity, leading to decreased purchasing power and rising prices
• Deflation


  Decrease in money or credit availability, leading to lower prices and economic activity; opposite of inflation
• Payment shall be made


  In the place designated in the obligation
• If the undertaking is to deliver a determinate thing


  The payment shall be made wherever the thing might be at the moment the obligation was constituted
• In any other case


  The place of payment shall be the domicile of the debtor
• Domicile


  The habitual residence of a person with both physical presence and intention, synonymous with legal residence or 'inhabitant' in legal contexts
• Debtor with multiple similar debts to one creditor


  Can designate payment application; creditor's designation stands unless contract invalid
• Application of payments


  The process of determining which specific debt a payment should be applied to when a debtor owes multiple debts of the same type to the same creditor
• If the debt produces interest


  Payment of the principal shall not be deemed to have been made until the interests have been covered
• When the payment cannot be applied in accordance with the preceding rules

  The debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied