Supplemental Notes On Extinguishment of Obligations
Supplemental Notes On Extinguishment of Obligations
Supplemental Notes On Extinguishment of Obligations
a. By payment or performance;
b. By the loss of the thing due;
c. By the condonation or remission of the debt;
d. By the confusion or merger of the rights of creditor and debtor;
e. By compensation;
f. By novation.
2. Payment - does not only mean delivery of money but also the performance, in any
other manner, of an obligation.
3. As a general rule: A debt shall not be understood to have been paid unless the
thing or service in which the obligation consists has been completely delivered or
rendered, as the case may be.
Exceptions:
a. If the obligation has been substantially performed in good faith, the obligor
may recover as though there had been a strict and complete fulfillment, less
damages suffered by the obligee.
b. When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection, the obligation is
deemed fully complied with.
5. Whoever pays for another may 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 as the payment has been beneficial to the debtor.
6. Whoever pays on behalf of the debtor without the knowledge or against the will of
the latter, cannot compel the creditor to subrogate him in his rights, such as those
arising from a mortgage, guaranty, or penalty.
7. Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.
Exceptions: When the payment to a third person redounded to the benefit of the
creditor.
9. 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.
Legal Tender in Philippine – refers to the currency which the creditor cannot refuse
to accept as payment.
If the debtor accepts from the creditor a receipt in which an application of the
payment is made, the former cannot complain of the same, unless there is a
cause for invalidating the contract.
When the payment cannot be applied in accordance with the preceding rules,
or if application can not be inferred from other circumstances, the debt which
is most onerous to the debtor, among those due, shall be deemed to have been
satisfied.
If the debts due are of the same nature and burden, the payment shall be
applied to all of them proportionately
If the debt produces interest, payment of the principal shall not be deemed to
have been made until the interests have been covered.
c. Payment by cession - The debtor may cede or assign his property to his
creditors in payment of his debts. This cession, unless there is stipulation to
the contrary, shall only release the debtor from responsibility for the net
proceeds of the thing assigned
a. Dation in payment transfers the ownership over the thing alienated to the
creditor, while in payment by cession, transfers only the right to sell the
properties.
b. Dation in payment totally extinguish the obligation, while in payment by
cession only extinguishes the credits to the extent of the amount realized from
the properties assigned.
13. Ifthe thing to be delivered is a determinate thing and the same is lost through a
fortuitous event – the obligation is extinguished.
If the thing to be delivered is an indeterminate thing and the same is lost through
a fortuitous event – the obligation is not extinguished.
The renunciation of the principal debt shall extinguish the accessory obligations.
The renunciation of the accessory obligation shall not extinguish the principal
debt.
15. Confusion or merger is a mode of extinguishing obligation which takes place when
there is meeting in one person of the qualities of creditor and debtor with respect
to the same obligation.
Requisites:
a. It must take place between the creditor and the principal debtor.
b. The very same obligation must be involved
c. The confusion or merger must be total or as regards the entire obligation.
Merger which takes place in the person of the principal debtor or creditor benefits
the guarantor.
Merger which takes place in the person of the guarantor does not extinguish the
principal obligation.
16. Compensation - takes place when two persons, in their own right, are creditors
and debtors of each other.
Kinds of Compensation
a. Each one of the obligors be bound principally, and that he be at the same time
a principal creditor of the other.
b. Both debts consist in a sum of money, or if the things due are consumable,
they be of the same kind, and of the same quality if the latter has been stated.
18. Inorder that an obligation may be extinguished by another which substitutes the
same, it is imperative that it be so declared in unequivocal terms.
There is implied novation if the old and new obligations are on every point
incompatible with each other.
If the new obligation is void, the original obligation was not extinguished, unless
the parties intended that the former should not subsist in any event.
The novation is void if the original obligation was void, except when annulment
may be claimed only by the debtor, or when ratification validates acts which are
voidable.
a. Expromission, the initiative for the change does not emanate from the original
debtor and may be made even without his knowledge, since it consists in a
third person assuming the obligation and it logically requires the consent of
the third person (new debtor) and the creditor.
b. Delegacion, the original debtor (delegante) offers and the creditor (delegatario)
accepts a third person (delegado) (new debtor) who consents to the
substitution, so that the consent of the three parties is necessary.
If the substitution is without the knowledge or against the will of the debtor, the
new debtor's insolvency or non-fulfillment of the obligations shall not give rise to
any liability on the part of the original debtor.
The insolvency of the new debtor, who has been proposed by the original debtor
and accepted by the creditor, shall not revive the action of the latter against the
original obligor, except when said insolvency was already existing and of public
knowledge, or known to the debtor, when he delegated his debt.
Substitution of Creditor
(1) When a creditor pays another creditor who is preferred, even without the
debtor's knowledge;
(2) When a third person, not interested in the obligation, pays with the express
or tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a person interested in the
fulfillment of the obligation pays, without prejudice to the effects of confusion
as to the latter's share.