Extinguishment of Obligations (Complete)

Extinguishment
of Obligations
PaLoReMeConComNo ☺
Sections of Extinguishment
PAYMENT Articles 1232 to 1261
LOSS Articles 1262 to 1269
REMISSION OR
Articles 1270 to 1274
CONDONATION
CONFUSION OR
Articles 1275 to 1277
MERGER
COMPENSATION Articles 1278 to 1290
NOVATION Articles 1291 to 1304

Definition of Terms
Means not only the delivery of money but also the
PAYMENT
performance, in any other manner, of an obligation.
LOSS Physical Loss or Destruction or Illegality of the thing.
REMISSION OR It is the gratuitous abandonment by the creditor of his

CONDONATION right.
It is the meeting in one person of the qualities of creditor

CONFUSION OR MERGER
and debtor with respect to the same obligation.
It is the extinguishment in the concurrent amount of the

COMPENSATION obligations of those persons who are reciprocally debtors
and creditors of each other.
The replacement of an old contract with a new one, by

changing the object or principal conditions; substituting
NOVATION
the person of the debtor; and subrogating a third person
in the right of the creditor.
01 (Pa)
Payment or
Performance
Pertinent Provisions
Article 1232. Payment means not only the delivery of money
but also the performance, in any other manner, of an obligation.
- this article talks about ways by which “Payment” is enforced or

accomplished. It could either be:
a. Delivery of Money (ordinary parlance)

b. Performance of the Obligation in the manner agreed upon (to
give, to do, not to do)
In law, payment = specific performance.

Article 1232 Examples
1. If Danny is obligated to give Eve a specific car, how is
payment made?
-Payment is made by delivering the car.
2. If Charles is obligated to repair the computer of Faith, how is

payment made?
-Payment is made by performing the service (repairing the

computer).
3. How about if the obligation is not to construct a house?

Article 1233. 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.
*Debt - may refer to an obligation to deliver money, to deliver a thing

(other than money), to do an act or not to do an act.
Example: John and Maria agreed to pay Sonny P500,000 in cash. On

due date, John and Maria tried paying Sonny $50,000, the latter
refused. Is Sonny’s refusal justified?
YES. Payment should be made in the currency agreed upon, on the

time and place agreed upon. The thing delivered or service rendered
must be exactly that which was the object of negotiation.
Article 1233. 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.
*Integrity of Prestation – Completeness of the performance. The

prestation must be completely rendered. Partiality or irregularity will
not lead to extinguishment.
*Identity of Prestation – The thing or the act agreed upon must be the
one delivered or performed, as the case may be. No substitutes are
allowed and the delivery of this will not lead to extinguishment, unless
agreed upon.
Burden of payment belongs to the DEBTOR. (GR)

Article 1234. 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.
*Substantial Compliance - There is substantial compliance by the

debtor when in good faith he has attempted to perform the contract or
prestation but through excusable neglect or oversight, he failed to
make full and complete performance for which the other party may be
indemnified. (Doctrine of Substantial Performance)
If there is substantial compliance the obligor may recover as though

there has been complete fulfillment minus the amount of damages
suffered by the obligee.
Article 1234 Example
Sarah obliged himself to sell one thousand (1,000) sacks of sugar
to Brandon for a certain price. However, despite diligent effort on
his part, Sarah was able to deliver only nine hundred (900) bags
because of the existing sugar shortage that time. Sarah wants to
comply with her duty to deliver the entire obligation but she
could not do so for reasons beyond her control.
Under the law, Sarah can recover as though there had been complete
delivery less the price of the one hundred bags. Brandon cannot require
Sarah to deliver first the remaining one hundred bags as a condition to
his liability for the payment of the purchase price. He must pay for the
900 bags and enforce his right for damages for failure of Sarah to
deliver the difference. It is incumbent upon Sarah however to explain
satisfactorily his failure to make complete delivery.
Article 1235. 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. (Waiver of Incomplete or Irregular
Performance)
Requisites:
1. The obligee knows that the performance is incomplete or
irregular; and
2. He accepts the performance without expressing any
protest or objection.
Article 1235. 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.
Q: Is there a form needed for the Protest or Objection?
Answer: None. So long as the acts of the creditor evince that

he/she is not satisfied with the debtor’s payment/performance,
the obligation shall NOT be deemed extinguished.
Article 1235 Examples
A availed of B’s services to print the logo of his business on
10,000 pcs of shirts for donation using a particular color. B
delivers the 10,000 pcs of shirts with the logo on each but he
used a different color for the logo’s main parts. Instead of yellow,
he used blue due to the alleged “shortage of yellow pigments” in
his shop. A received the shirts and distributed them to the
donees. Here, the obligation is extinguished.
A availed of C’s services to renovate his house for the purpose of

making it soundproof. B renovated the house but the
soundproofing was not effective. That night, A texted B that he is
not satisfied with the latter’s work. Here, the obligation of B is
NOT fully extinguished due to the objection of the creditor.
Article 1236. 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. (1st paragraph)
GR: The creditor cannot be forced to accept payment from any

other person not the debtor.
XPTN: If there is an express stipulation to the contrary.
Example: A borrowed 10k from B. On due date, D, a

philanthropist tried paying the debt of A. B declined. Is B’s
refusal proper? YES, because D has nothing to do with the
obligation.
Article 1236. 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. (2nd
paragraph)
Consequences:
1. Payment with debtor’s consent – Payer has the right to
reimbursement and subrogation, and to acquire all rights of the
creditor against the debtor.
2. Payment against the will of the debtor – The payer can
recover only the amount that benefited the debtor, or only the
amount of the debt at the time of payment.
Article 1237. 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.
Explanation: 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.
Kris borrowed from Darla P100,000.00. Bimby is the guarantor.
Without the knowledge or consent of Kris, Josh paid Darla
P1,000.00. In this case, Josh can claim reimbursement from
Kris for the whole amount of P1,000.00 inasmuch as Kris was
benefited up to that amount.
If Kris cannot pay Josh, the latter cannot proceed against

Bimby, the guarantor (even if Darla is willing) because, having
paid without the consent of Kris, Josh is not entitled to
subrogation. But if the payment was with the express or tacit
approval of Kris, Josh would be entitled not merely to full
reimbursement but also to subrogation.
Suppose the obligation of Kris is secured by a mortgage of a land
owned by her. Payment by Josh without the knowledge or
against the will of Kris, cannot give Josh the right to foreclose
the mortgage because he has no right to subrogation. Josh can
recover only insofar as the payment has been beneficial to Kris.
Article 1238. 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 debtor’s consent. But the payment
is in any case valid as to the creditor who has accepted it.
Article 1238 “embodies the idea that no one should be compelled to

accept the generosity of another.” If the paying third person does not
intend to be reimbursed the payment is deemed a donation which
requires the debtor’s consent to be valid. 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.
Cardo owes Alyana P1,000.00. Without the intention of being
reimbursed, Nena paid Cardo’s obligation. Cardo had previously
accepted Nena’s generosity. In this case, Cardo is not liable to
Nena and his obligation to Alyana is extinguished. But if Cardo
did not consent to the donation, Nena may recover from Cardo
since there has been no donation, although originally Cardo did
not intend to be reimbursed. Nevertheless, the obligation of
Cardo to Alyana is extinguished because the payment is valid as
to Alyana who has accepted it.
Article 1239. In obligations to give, payment made by one who
does not have the free disposal of the thing due and capacity to
alienate it shall not be valid, without prejudice to the provisions
of Article 1427 under the Title on “Natural Obligations.”
This article deals with obligation to give. The payor must have the free
disposal of the thing paid, otherwise the payment is not valid. Payor
who does not have the capacity to alienate the thing such as when he
is a non-compos mentis (not of a sound mind) the payment is not valid
and it can be annulled unless it is made by minors under article 1427
which states that: ” money or fungible goods delivered by a minor can
no longer be recovered if they have been consumed by the creditor in
good faith.
Article 1239. In obligations to give, payment made by one who
does not have the free disposal of the thing due and capacity to
alienate it shall not be valid, without prejudice to the provisions
of Article 1427 under the Title on “Natural Obligations.”
Free Disposal- thing is not subject to any claim, lien, or encumbrance

from a third person.
Capacity to Alienate – the person making the transfer or disposal has

the capacity to do so.
The creditor cannot be compelled to accept payment from an

incapacitated person.
Sisa, 89 years of age, transferred the title of her land to
Crisostomo, her creditor, for the satisfaction of her debt. The
time the transfer was made, Sisa often goes out of the house,
naked, and runs back in again. Is the transfer valid?
Such transfer is not valid since Sisa no longer has legal

capacity. However, further reading of the law will tell us that not
all the transactions of an insane person are invalid.
Transactions done during the lucid intervals are valid.
Lucid Intervals- state of an insane person where that person is

in possession of his mental faculties. It is also referred to as
temporary/periodic sanity.
Article 1240. 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.
Q: Andy owes Calvin P10,000. Instead of paying Calvin directly,

Andy deposited the money in a bank in the name and for the
credit of Calvin. All these were done without Calvin’s
permission. Was Andy’s debt extinguished?
A: NO! The payment should be made directly to Calvin or his

assigns. Here, the act of depositing it, even in the name of
Calvin, will not extinguish the debt.
Article 1241. Payment to a person who is incapacitated to
administer his property shall be valid if he has kept the thing
delivered, or insofar as the payment has been beneficial to him.
Q: Josh borrowed 50k from Sisa. 2 months after the

transaction, Sisa became insane, which Josh was informed of.
On the 3rd month, Josh visited Sisa and gave her 50k cash.
Josh immediately left. Sisa, believing that the money was
confetti, threw it out of the window, scattered by the wind, the
50k was lost. A week later, Sisa regained her sanity and called
Josh to pay his debt. Josh vehemently refused, saying that he
already paid in cash a week earlier. Is Josh’s refusal to pay
correct?
Article 1241. Payment made to a third person shall also be
valid insofar as it has redounded to the benefit of the creditor.
Such benefit to the creditor need not be proved in the following
cases:
(1) If after the payment, the third person acquires the creditor's
rights; (Subrogation)
(2) If the creditor ratifies the payment to the third person;
(Ratification)
(3) If by the creditor's conduct, the debtor has been led to
believe that the third person had authority to receive the
payment. (Estoppel)
In the three instances above, THERE IS NO NEED TO

PROVE BENEFICIAL EFFECTS TO THE CREDITOR.
Andeng owes Anton P50k. Before the obligation matures, Anton
figured into a car accident that caused him to suffer coma. If
Andeng is ready to pay and Anton is still in a coma, what may
the former do to extinguish her obligation to the latter?
Andeng may either choose to pay Anton by settling the latter’s

medical expenses or consign her payment to the court. Andeng’s
payment will be valid as long as the payment she made will be
beneficial to the incapacitated creditor.
Article 1242. Payment made in good faith to any person in
possession of the credit shall release the debtor.
Q: Andrew owes Becky P1M. Becky lost the promissory note

given by Andrew, to which the latter was informed. Camille
found the promissory note after 3 days and demanded payment
from Andrew when it became due. Can Andrew validly refuse to
pay Camille?
YES, because Camille is not the creditor. Camille is merely in

the possession of the instrument evidencing credit, and not the
credit itself.
Article 1243. Payment made to the creditor by the debtor after
the latter has been judicially ordered to retain the debt shall not
be valid.
The payment made to the creditor after the credit has been
attached or garnished is void as to the party who obtained the
attachment or garnishment, to the extent of the amount of the
judgment in his favor.
Garnishment - The proceeding by which a debtor’s creditor is

subjected to the payment of his own debt to another.
Jasmine owes Aladdin P5,000, 000.00. Aladdin, in turn, owes
Genie P1,000,000.00. Genie brings an action against Aladdin,
who claims insolvency but admits the credit which he has over
Jasmine. Before Jasmine pays Aladdin, Jasmine is summoned
into the proceeding, and asked to retain the debt in the
meantime. Thus, the debt is “garnished”. The reason being that
Jasmine should not pay Aladdin, and instead she should pay
Genie, should Genie really be adjudged the creditor of Aladdin
in the meantime is considered invalid under the law.
Suppose in the preceding example, Jasmine, in the meantime,
deposited the judicial order to the contrary and supposing it
should turn out that Genie is not really the creditor of Aladdin
as a consequence of which the garnishment proceedings are
dropped, should Jasmine again pay Aladdin, in view of the fact
that the first payment is not valid under the law?
No. Jasmine does not need to pay Aladdin a second time.

At the beginning, the payment was not valid, but the defect here
has been cured by the dismissal of the garnishment
proceedings. It is as if there never had been any judicial order
asking Jasmine to retain the debt. Moreover, why should
Aladdin, the creditor, be paid twice for the same debt? To hold
that he should be is to allow a travesty of justice, an undue
enrichment of Aladdin.
Article 1244. The debtor of a thing cannot compel the creditor
to receive a different one, 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. (General
Rule on Prohibition of Substitute Performance)(Emphasis supplied)
Article 1244 does not apply if:

1. Creditor Gives Consent to substitution;
2. Facultative Obligations;
3. Stipulation to Substitution
Article 1245. Dation in payment whereby property is alienated
to the creditor in satisfaction of a debt in money, shall be
governed by the law of sales. (Dation is a special form of
payment)
Q: Andy owes Benny P100,000. Instead of delivering cash which

he does not yet have, with the consent of Benny, Andy gave the
Benny a diamond jewelry set instead. Does this transaction
extinguish the obligation?
It depends. If the value is equal to or higher than the debt in

money, then it is extinguished since the delivery of the jewelry
set in lieu of the cash was made with the consent of the creditor.
If not, then only the portion for the value shall be extinguished.
Article 1246. When the obligation consists in the delivery of an
indeterminate or generic thing, whose quality and
circumstances have not been stated, the creditor cannot
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.
This refers to the Rule of Medium Quality. The debtor cannot

be compelled to deliver a thing of superior quality, not can the
creditor be compelled to accept something of inferior quality.
This is a principle of equity.

Article 1247. Unless it is otherwise stipulated, the extrajudicial
expenses required by the payment shall be for the account of
the debtor. With regard to judicial costs, the Rules of Court
shall govern.
GENERAL RULE: The debtor has to pay for the extrajudicial

expenses incurred during the payment. It is the debtor who
benefits primarily, since his obligation is thus extinguished.
EXCEPTION: When there is a stipulation to the contrary.

Article 1247. Unless it is otherwise stipulated, the extrajudicial
expenses required by the payment shall be for the account of
the debtor. With regard to judicial costs, the Rules of Court
shall govern.
What about for Judicial Costs?

-The losing party pays the judicial costs which are the costs in
order to cover those spent in litigation.
No costs shall be allowed against the Government, unless

otherwise provided by law.
Barbie, the owner of an apartment building, entered into a
contract of lease with Ken for the amount of P15, 000 to be paid
every 10th of the month. If Barbie lives in a separate barangay,
where Ken has to pay P250 for taxi, Ken shoulders the payment
for the fare and cannot ask for reimbursement from Barbie
because it is him, the debtor, who benefits primarily, since his
obligation is extinguished.
What if Ken cannot pay and Barbie filed a case, to which the
Court ruled in favor of the latter?
Ken would pay the judicial costs as ordered by the Court, since
he lost the case.
Article 1248. 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 may the
debtor be required to make partial payments. However, when
the debt is in part liquidated and in part unliquidated, the
creditor may demand and the debtor may effect the payment of
the former without waiting for the liquidation of the latter.
(Emphasis supplied)
This article talks about completeness of the performance. Where

can there be partial performance?
1. If expressly agreed upon;
2. If debt is partly liquidated and partly unliquidated;
3. Prestations are governed by separate terms or conditions.
Article 1249. 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 (...)
Q: What do we mean by Legal Tender?
It is that currency which a debtor may compel a creditor to

accept in payment of the debt in money.
Johnny and Depp entered into a contract where the former will
buy the iPhone 14 of the latter for P50,000. On the date of the
payment, Johnny gave Depp a voucher worth P50,000 in
Country Club amenities. Depp refused. Is Depp’s refusal
justified?
Yes. The refusal of Depp is justified as a voucher is not

considered as legal tender in the Philippines. Since the
obligation calls for the payment of P50,000 then the payment
should be made in that particular currency.
What if Johnny issues a check instead, and Depp refused? Is

the refusal valid? Still, the refusal is valid. There is no payment
if a check is issued until and unless the same was encashed.
Article 1250. In case an extraordinary inflation or deflation of
the currency stipulated should supervene, 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.
Extraordinary inflation or deflation exists when there is a

decrease or increase in the purchasing power of the Philippine
currency which is unusual of beyond the common fluctuation
on the valued of said currency, and such increase or decrease
could not have been reasonably foreseen or was manifestly
beyond the contemplation of the parties at the time of the
establishment of the obligation.
Article 1250. In case an extraordinary inflation or deflation of
the currency stipulated should supervene, 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. (Emphasis supplied)
(1) Inflation is a sharp sudden increase of money or credit, or

both, without a corresponding increase in business transaction.
Inflation causes a drop in the value of money, resulting in rise of
the general price level.
(2) Deflation is the reduction in volume and circulation of the

available money or credit, resulting in a decline of the general
price level; it is the opposite of inflation.
Taylor borrowed from Swift P250,000.00 payable after Ten (10)
years. Upon maturity of the obligation, the value of P250,000.00
dropped to P185,000.00 because of inflation.
In this case, assuming there is extraordinary inflation, the basis

of payment shall be the equivalent value of the currency today
to that ten (10) years ago. Hence, Taylor is liable to pay Swift
P185,000.00 unless there is an agreement to the contrary.
Pertinent Provisions of 1251
PLACE OF PAYMENT
1. In the place designated in the obligation.
2. In the absence of stipulation:
a. If obligation is to deliver a determinate thing: wherever the
thing might be at the moment the obligation was constituted.
b. In any other case: domicile of debtor [Art. 1251]
TIME OF PAYMENT
General Rule: Upon demand
Exceptions:
1. When time is of the essence
2. When the debtor loses the benefit of the period
3. When the obligation is reciprocal
Special
Forms of
Payment
Application of Payments
Requisites:
1. There is a plurality of debts;
2. Debts are of the same kind;
3. Debts are owed to the same creditor and by the same debtor;
4. All debts must be due, UNLESS parties so stipulate, or when
application is made by the party for whose benefit the term has
been constituted;
5. Payment made is not sufficient to cover all debts [Art. 1252,
CC]
Rules on Application of Payments
1. Preferential right of debtor - debtor has the right to select
which of his debts he is paying. [Art. 1252, CC]
2. The debtor makes the designation at the time he makes the
payment;
3. If not, the creditor makes the application, by so stating in the
receipt that he issues, unless there is cause for invalidating the
contract.
4. If neither the creditor nor debtor exercises the right to apply,
or if the application is not valid, the application is made by
operation of law. (see no. 6)
-The right to make application, once exercised, becomes

irrevocable, unless otherwise agreed upon.
Rules on Application of Payments (continued)
5. If debt produces interest, the payment is not to be applied to

the principal unless the interests are covered. [Art. 1253, CC]
6. When no application can be inferred from the circumstances

of payment, it is applied:
(a) to the most onerous debt of the debtor; or
(b) if debts due are of the same nature and burden, to all the
debts in proportion. [Art. 1254, CC]
7. Rules on application of payment may not be invoked by a

surety or solidary guarantor.
Payment by Cession
*Cession- Special form of payment where the debtor
assigns/abandons ALL his property for the benefit of his
creditors in order that from the proceeds thereof, the latter may
obtain payment of their credits.
Requisites:
1. There is a plurality of debts
2. There is a plurality of creditors
3. Partial or relative insolvency of debtor
4. Acceptance of the cession by the creditors [Art. 1255, CC]
5. Debtor is released only for the net proceeds unless there is a
stipulation to the contrary.
Tender of Payment and Consignation
*Tender of Payment- Manifestation made by the debtor to the
creditor of his desire to comply with his obligation, with offer of
immediate performance. [Del Carmen v. Sps. Sabordo, G.R.
No. 181723 (2014)]
Tender of payment must be made in the lawful currency. The

tender of a check to pay for an obligation is not a valid tender of
payment thereof. [Soco v. Militante, G.R. No. L-58961, (1983)]
*Consignation - Deposit of the object of obligation in a

competent court in accordance with the rules prescribed by law
whenever the creditor unjustly refuses payment or because of
some circumstances which render direct payment to the creditor
impossible or inadvisable.
Requisites of consignation:
1. There is a debt due;
2. Consignation is made because of some legal cause:
a. There was tender of payment and creditor refuses without just
cause to accept it;
b. Instances when consignation alone would suffice as provided
under Art. 1256;
3. Previous notice of consignation was given to those persons
interested in the performance of the obligation. Previous notice is
essential to the validity of the consignation and its lack invalidates
the same; [Soco v. Militante, G.R. No. L- 58961, (1983)] (1st Notice –
BEFORE Consigning the thing in court)
4. Amount or thing due was placed at the disposal of the court;
5. After the consignation has been made, the persons interested
were notified thereof (2nd Notice- Notice AFTER Consignation)
When tender and refusal not required [Art.1256, CC]
1. Creditor is absent or unknown, or does not appear at the place
of payment.
2. Creditor is incapacitated to receive the thing due at the time of

payment.
3. Without just cause, creditor refuses to give receipt.
4. Two or more persons claim the same right to collect (i.e.

Interpleader)
5. Title of the obligation has been lost.

What constitutes valid consignation?
In order that the consignation of the thing due may release the
obligor, it must first be announced to the persons interested in the
fulfilment of the obligation. The consignation shall be ineffectual if it
is not made strictly in consonance with the provisions which regulate
payment. [Art. 1257, CC]
How consignation is made?

Consignation shall be made by depositing the things due at the
disposal of judicial authority, before whom the tender of payment
shall be proved, in a proper case, and the announcement of the
consignation in other cases. The consignation having been made, the
interested parties shall also be notified thereof.
Who bears the expenses
The expenses of consignation, when properly made, shall be charged
against the creditor. [Art. 1259, CC]
Effects of Consignation
If accepted by the creditor or declared properly made by the
Court:
1. Debtor is released in same manner as if he had performed the
obligation at the time of consignation;
2. Accrual of interest is suspended from the moment of
consignation;
3. Deterioration or loss of the thing or amount consigned,
occurring without the fault of debtor, must be borne by creditor
from the moment of deposit.
Withdrawal of Consigned Amount by the Debtor
1. Before approval of the court or acceptance of the creditor-
Obligation remains in force. [par. 2, Art. 1260, CC]
2. After approval of the court or acceptance by the creditor, with the
consent of the latter - Obligation remains in force, but guarantors and
co-debtors are liberated. Preference of the creditor over the thing is
lost. [Art. 1261, CC]
3. After approval of the court or acceptance by the creditor, and
without creditor’s consent - debtor can no longer withdraw the
consigned amount since the obligation has already been
extinguished [Pabugais v. Sahijwani, G.R. No. 156846 (2004)]
4. If the creditor authorizes the debtor to withdraw, third persons
who were benefited by the consignation are not prejudiced by the
revival of the obligation.
02 (Lo)
Loss of the
Thing Due
Pertinent Questions
Q: What happens to a specific real obligation if the thing is lost?
A: It depends on the cause of the loss. If due to FE, the
obligation is extinguished, except if the law provides for liability
even for FE. If due to the fault of the debtor, then he shall be
liable.
Q: What happens to a generic real obligation if the thing is lost?

A: The obligation is not extinguished. (genus nunquam perit)
Q: What if there is partial loss of the object of the obligation?

A: The courts shall determine whether the partial loss
extinguishes the obligation.
Pertinent Questions
Q: What is the presumption of the thing is lost in the possession
of the debtor?
A: It is presumed that he is at fault, unless there is proof to the
contrary. The presumption does not apply in instances of
natural calamities.
Q: In personal obligations, what happens when the act agreed

upon becomes illegal or impossible?
A: It depends upon the cause of impossibility or illegality. If it is
NOT due to the fault of the debtor (fortuitous events), then
extinguished. Otherwise, debtor shall be liable for damages.
Pertinent Questions
Q: What if, after the obligation was perfected, the circumstances
make it so that it becomes difficult to perform, beyond the
contemplation of the parties?
A: Debtor may be released in whole or in part in the performnce
of the obligation.
Q:What if the thing subject of the obligation is a proceed of a

crime, and the thing was lost due to FE before delivery to the
owner, is the debtor liable?
A: Yes, this is another exception to non-liability due to
fortuitous events. Unless, the creditor-owner unjustly refused
acceptance.
03 (Re)
Remission or
Condonation
Art. 1270. Condonation or remission is essentially gratuitous,
and requires the acceptance by the obligor. It may be made
expressly or impliedly. One and the other kind shall be subject
to the rules which govern inofficious donations. Express
condonation shall, furthermore, comply with the forms of
donation. (1187)
*Condonation – it is the gratuitous abandonment of the right

against the debtor by the creditor. It takes the form of a
donation. This could also be referred to as Implied Forgiveness.
Art. 1270.
Kinds of Remission:
A) Complete vs. Partial
B) Express vs. Implied
C) Inter vivos vs. Mortis Causa
*Remission is an act of liberality, by virtue of which, without

receiving any equivalent, the creditor renounces the
enforcement of the obligation. The obligation is extinguished
either in whole or in such part of the same to which remission
refers. [Tolentino]
Art. 1270.
Requisites:
1. Debt must be existing and Demandable;
2. Renunciation or Forgiveness must be Gratuitous;
3. Debtor must accept the Remission;
-If the renunciation is not gratuitous, the act either becomes

Dation in Payment, Novation, or Compromise.
Jack, a widower, is the father of Roberts and Barbie. Before he
died, he only has P5M representing all of his properties. When
Jack died, David, an alleged legatee, claims for the P3M as
stated in the will of Jack. Roberts and Barbie vehemently
refused. Was their refusal to give the P3M to David valid?
Yes. The refusal was valid because the legacy was inofficious,
since it impaired the legitime of the compulsory heirs Roberts
and Barbie. The legacy could be validly reduced and only 2.5M
can be freely disposed through will, it being the free portion of
the estate.
What if, instead of having property, Jack instead has receivables
from David, and before dying, Jack condoned the entirety of the
obligation. Prior to this transaction, Jack executed a will giving
all his assets to his two children, Roberts and Barbie. Was that
condonation valid?
No. Since the remission likewise impaired the legitime of the

compulsory heirs. In cases that the remission or condonation
violated the requirements under the law, it could be revoked,
upon the petition of Roberts and Barbie, the heirs.
Art. 1270.
Examples of Formal Requirements in Donation:

A. Real Property is Involved:
- must be in a public instrument, specifically describing the property,
made known to the donor, accepted by the donor in a public
instrument. The acceptance may be made in the same
deed of donation or in a separate public document, but it shall not take
effect unless it is done during the lifetime of the donor.
B. Personal Property is Involved:

- acceptance may be done verbally upon delivery of the thing, or in
writing if the value exceeds P500 (in compliance with the Statute of
Frauds which is the general rule in other contracts). But since we are
talking specifically about donation of personal property, we will
consider P5,000 as the threshold amount.
Art. 1271. The delivery of a private document evidencing a
credit, made voluntarily by the creditor to the debtor, implies
the renunciation of the action which the former had against the
latter.
If in order to nullify this waiver it should be claimed to
be inofficious, the debtor and his heirs may uphold it by proving
that the delivery of the document was made in virtue of payment
of the debt.
*Presumption of Implied Remission – if the debtor is already

in the possession of the document evidencing the credit, then
there exists a presumption that the same was voluntarily
delivered by the creditor. Meaning, the debt was extinguished.
This could be proven otherwise.
Art. 1271.
Q: What if the obligation is joint, and the document of credit

was only delivered to one, not all the debtors?
A: Then it is presumed that only his share was condoned. It is a
different story if the debtors are solidary.
Q: Does this apply to ALL documents evidencing credit?

A: NO. It only applies to private documents. Since public
documents could easily be accessible due to their characters of
being a public record.
Art. 1272. Whenever the private document in which the debt
appears is found in the possession of the debtor, it shall be
presumed that the creditor delivered it voluntarily, unless the
contrary is proved.
*Presumption of Voluntary Delivery– if the debtor is already

in the possession of the document evidencing the credit, then
there exists a presumption that the same was voluntarily
delivered by the creditor. Unless the voluntariness is rebutted
by presenting proof to the contrary.
Art. 1273. The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of the latter
shall leave the former in force.
-this is from the principle that the accessory follows the

principal, and not the other way around.
Example: Brad owes Pitt $50 million with Kanye as the

guarantor. Here, the principal obligation is the loan of $50
million, while the accessory obligation is the guaranty of Kanye.
If the loan is condoned, the guaranty shall likewise be

condoned, since it cannot stand without the principal
obligation. However, if only the guaranty is condoned, the debt
remains in force.
Art. 1274. 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. (Presumed Remission of
Pledge)
*Pledge – also referred to as “sangla” in the Philippines.
Example: Harry delivers to Hermione his wand in pledge to

guarantee the payment of a loan in the amount of $10,000. If
later on the wand is found in the possession of Harry, the
presumption is that Hermione agreed to the loan without the
pledge. Hermione may prove that she returned the wand to
Harry upon the latter’s request, to be delivered back to her.
04 (MeCon)
Merger or
Confusion
Art. 1275. The obligation is extinguished from the time the
characters of creditor and debtor are merged in the same
person.
*Confusion or Merger– it is the meeting in one person of the

qualities of creditor and debtor of the same obligation.
Requisites:
a. It should take place between principal debtor and creditor;
b. The very same obligation must be involved; and
c. The confusion must be total or complete, i.e. as regards the
whole obligation. [Valmonte v. CA, G.R. No. L-41621,
February 18, 1999]
Art. 1275.
Effects:
a. In general - The obligation is extinguished from the time the
characters of the debtor and creditor are merged in the same
person. [Art. 1275, CC]
b. Confusion among the Guarantors - A merger which takes
place in the person of the principal debtor or creditor benefits
the guarantors. Confusion which takes place in the person of
any of the latter does not extinguish the obligation.
In 2022 Sander owes Ford P10M. Before Ford can collect the
debt, he dies and the credit passes on to his heir Marlou.
Sometime in 2019, Marlou owed Sander the amount of P10M
arising from Marlou’s purchase of a house and lot in Baguio
City. In satisfaction of his debt, Marlou assigns to Sander the
credit he inherited from Ford. Is the debt extinguished?
Yes, the debt is extinguished by virtue of the merger of creditor

and debtor in one person, Sander.
Art. 1276. Merger which takes place in the person of the
principal debtor or creditor benefits the guarantors. Confusion
which takes place in the person of any of the latter does not
extinguish the obligation.
-Again, accessory follows the principal. Merger in the debtor or

creditor extinguishes the obligation. Merger in the persons
holding the accessory obligations will not extinguish the
obligation.
Nemo owes Dory P500,000.00, guaranteed by Marlon. Dory
assigns his right to Zeke who assigns his right to Jeff, and Jeff
assigns his right to Marlon.
Effect: Nemo still have to pay Marlon. However, the contract of

guaranty is extinguished, but not Nemo’s obligation to pay the
P500,000.00. Marlon, as the new creditor, can demand payment
from Nemo.
Art. 1277. Confusion does not extinguish a joint obligation
except as regards the share corresponding to the creditor or
debtor in whom the two characters concur. .
Example: Anna, Benjamin, and Charlie owe Daniel P1.2M. Upon

the death of Daniel, he made Charlie his legatee for P400,000.
What happens in this case?
Confusion and merger happens in the share of Charlie, only up

to the extent of P400,000, which actually is his whole share in
the obligation. That is the only part extinguished, so that Anna
and Benjamin still must pay the heirs of Daniel their respective
share.
05 (Com)
Compensation
Art. 1278.
Definition:
Compensation shall take place when two persons, in their own
right, are creditors and debtors of each other.
Example: Sheniqua owes Louquisha P10M. Earlier, however,

Louquisha owed Sheniqua P15M. Is there an obligation, from
either of the parties?
Yes, Louquisha is still liable to Sheniqua for P5M, the P10M

having been extinguished by compensation.
Art. 1278.
Kinds:
A. Total – debts are of the same amount and are entirely
extinguished;
B. Partial – when the two obligations are of different amounts
and a balance remains.
C. Legal – takes place by operation of law (ipso jure) from the
moment all requisites are met.
D. Voluntary – takes place when parties who are mutual
creditors and debtors of each other agree to compensate
their respective claims, even though requisites are lacking.
E. Judicial – takes place by judicial decree.
F. Facultative – when set up by only one of the parties.
Art. 1279.
Requisites of Compensation:
a. Each obligor is bound principally, and at the same time a
principal creditor of the other;
b. Both debts must consist in a sum of money, or if the things
due are consumable, of the same kind and quality;
c. Both debts are due;
d. Debts are liquidated and demandable; and
e. There must be no retention or controversy over either of the
debts, commenced by third persons and communicated in due
time to the debtor.
Art. 1279.
a. Each obligor is bound principally, and at the same time a
principal creditor of the other;
Example: Anton owes Tanya 10k. In the past, Tanya also

borrowed money in the accumulated amount of 10k. Will there
be compensation?
Yes, since they are both principal debtors and creditors of each
other.
What if a surety was present, let us say Cassy, and instead of

owing Anton, Tanya owes Cassy the 10k?
-No compensation because Cassy is not a principal party.
Art. 1279.
b. Both debts must consist in a sum of money, or if the things
due are consumable, of the same kind and quality;
Example:
Cara owes Mia P50k. On the other hand, Mia owes Cara a
diamond necklace. Can there be compensation?
-No, since one is a debt in money and one is a debt in kind.
Cara owes Mia a 10 sacks of white milled sugar while Mia owes
Cara 10 sacks of brown sugar.
- Still, no compensation because they are not of the same kind.
Art. 1279.
c. Both debts are due or demandable;
Example:
John owes Cena $8,000 due on October 30, 2023. Cena owes
John the same amount but due on November 30, 2023. Can
compensation apply?
-No, since the two debts are not due and demandable on the
same date. However, if on November 30, John did not yet pay
Cena, compensation can be had.
Art. 1279.
d. Debts are liquidated and demandable;
Example:
Sinam Phal owes Keenu Ruth P30k. Keenu Ruth, on the other
hand, promised to give Sinam Phal 10% of his income for the
month. Can there be compensation?
-None, because one of the debts is still unliquidated.
What if there was partial liquidation already?

-Then compensation would apply on that portion which was
already partly liquidated.
Art. 1279.
e. There must be no retention or controversy over either of the
debts, commenced by third persons and communicated in due
time to the debtor.
-This talks about the absence of a retention or a controversy.
*Retention- credit of one is a satisfaction for other persons, not

part of the contract or principal obligation.
*Controversy- third person asserts credit rights over one of the

parties.
Art. 1280.
GR: Only principal parties can claim compensation.
XPTN: Guarantors can set up compensation if there was partial
compensation covering the debt owed by the creditor to the
debtor. Because the extinguishment of the principal obligation
carries with it the extinguishment of the accessory obligations.
Example:
Mac owes Arthur ₱100,000 secured by a guarantor, Jerry;
Arthur owes Mac ₱10,000. When both debts fell due and partial
compensation should take place, Mac was already insolvent.
Arthur sues Jerry for the whole amount. Here, Jerry may set up
partial compensation as a defense, so that he may pay only
₱90,000.
Art. 1281. Total and Partial Compensation
-You only need to remember that when both of the debts are of
the same amount, then there may be total compensation.
What if there are 2 different amounts?

-There is total compensation as for the smaller debt, and partial
compensation as for the larger debt/amount.
Art. 1282. Voluntary Compensation

May the parties agree to a compensation even if the debts are
not yet due and demandable?
-Yes, because this is a provision that acts as an exception to
Article 1279 (Requisites for valid Compensation)
Art. 1283. Judicial Compensation
-Damages claimed by one party may be compensated by the
debt owed by the other.
Example:
Naruto owes Sasuke P10,000. When Sasuke demanded
payment, Naruto failed to pay. In the heat of his anger, Sasuke
damaged the property of Naruto to the extent of P9,000.
If a case was filed in court for damages, Naruto can set off the
obligation of Sasuke to pay him damages in the amount of Php
9, 000 against his debt of P10,000 to the latter.
Art. 1284. Compensation of Rescissible or Voidable Obligations
-The law states that rescissible or voidable obligations can be
compensated before judicial rescission or avoidance.
Example: Darlaaaa owes Bimbz P50,000. When they got home

from a drinking spree, Darlaaaa made Bimbz sign a note stating
that the latter is liable to the former for P40,999. Could there
be compensation in this particular instance?
-Yes, until and unless the note is voided by the courts.
What if compensation already lie before declaration of invalidity

of the note? Is Darlaaaa still liable to pay?
-Yes, annulment retroacts to the date the note was executed.
Art. 1285. Compensation before Assignment of Credit
-In order for the debtor to be made liable even after there was
assignment of rights, the latter’s consent is material. (1st par.)
Example: Arlyn is indebted to Brian for P500k. Brian in turn owes

Arlyn P200,000.00. Because both debts are already due, and because
all other requisites for legal compensation are present, both debts are
extinguished automatically up to the amount of P200k. Later, Brian,
with the consent of Arlyn, assigned his (Brian’s) P500k credit to Carmi.
How much can Carmi collect successfully from Arlyn?
- Carmi can collect from Arlyn the whole P500k. Arlyn cannot set up
the defense of compensation as of the P200k in view of her consent to
the assignment. However, had Arlyn reserved her rights to the
compensation, Arlyn would only be liable for P300k, representing the
balance.
Art. 1285. Assignment with Knowledge but w/o consent of
debtor
-Compensation can be set up regarding debts previous to the
cession or assignment. (2nd par.)
Example 1: Assignment Prior to Communication to the Debtor

Arah owes Bena P500k due on November 15. Bena owes Arah P150k
due also on November 15. On November 5, Bena assigned her P500k
credit to Crisel, with the knowledge but without the consent of Arah.
On November 15, how much can Crisel collect from Arah?
-P500k. Compensation took place after the assignment and not before.
Thus, there would be no compensation here.
Art. 1285. Assignment with Knowledge but w/o consent of
debtor
-Compensation can be set up regarding debts previous to the
cession or assignment. (2nd par.)
Example 2: Communication to Debtor Prior to Assignment

Arah owes Bena P1M. Bena owes Arah P300k. Both debts are already
due. Later, Bena, with the knowledge but without the consent of Arah,
assigned the P1M credit to Caren. How much can Caren successfully
collect from Arah?
-Caren can collect only P700k if she sets up the defense of partial
compensation as to previously maturing debts. There had already
been compensation with respect to the P300k before the assignment
was made, without the consent of the debtor
Art. 1285. Assignment Made Without the knowledge of the
Debtor
-Debtor can set up compensation as a defense for all debts prior
to his knowledge of the assignment not prior or after the
assignment. (3rd par.)
Example:
Adrian owes Boyet P800,000.00. Boyet owes Adrian P300,000.00. Both
debts are already due. Later, Boyet assigns the P800,000.00 credit to
Nelson, without the knowledge of Adrian. The assignment was made on
May 1. On May 15, a P150,000.00 debt of Boyet in favour of Adrian
matured. Adrian learned the assignment on August 1. On August 25, a
P100, 000.00 debt of Piolo in favour of Adrian matured. Later Nelson
asks Adrian to pay his debt. How much can Nelson collect from
Adrian?
Example:
Adrian owes Boyet P800,000.00. Boyet owes Adrian P300,000.00. Both
debts are already due. Later, Boyet assigns the P800,000.00 credit to
Nelson, without the knowledge of Adrian. The assignment was made on
May 1. On May 15, a P150,000.00-debt of Boyet in favor of Adrian
matured. Adrian learned the assignment on August 1. On August 25, a
P100, 000.00-debt of Piolo in favor of Adrian matured. Later Nelson
asks Adrian to pay his debt. How much can Nelson collect from
Adrian?
-Nelson can collect P350,000.00 because Adrian cannot set up the
defense of partial compensation regarding the P300,000.00 and the
P150,000.00 debts, debts which had matured and were therefore
already compensable prior to his knowledge of the assignment. But
Adrian cannot set up the last debt of P100,000.00 for partial
compensation because this matured only after he came to know of the
assignment.
Art. 1286. Compensation where Debts are Payable in Different
Places
-This applies to legal compensation. The indemnity refers to in
the article will not be the difference in the value of the
obligation, but to the expense of monetary exchange or of
transportation.
Example: (Transportation)
Alpha obliged himself to deliver to Bravo 100 sacks of rice in Cebu.
Bravo is also bound to deliver to Alpha 100 sacks of rice of the same
kind in Laguna. The expenses of transportation of rice to Cebu amount
to 10,000, and to Laguna is 5,000.
-If A claims compensation, B should indemnify A the amount of 5,000

for the expenses of transportation.
Art. 1286. Compensation where Debts are Payable in Different
Places
Example: (Exchange)
Alpha owes Bravo $5,000 payable in California. Bravo owes A P250,000
payable in Manila.
-If A claims compensation, he must pay for the expenses of exchange.

Art. 1287. Compensation not allowed by Law in:
a. Depositum
b. Commodatum
c. Support
d. Civil liability arising from crime
*Deposit- is a special real contract whereby the depositor entrusts to

the depository something for safe keeping. There is a bailment created
which imposes upon the depository the duty to return the property.
The depository does not even have the right to use it.
*Commodatum- is a gratuitous contract whereby one of the parties

delivers to another something not consumable so that the latter may
use the same for a certain time and return it. The borrower cannot
retain the thing loaned to offset something the lender may owe him
even though this may be for expenses.
Art. 1287.
The right to receive support cannot be waived nor transferred because

support is necessary for subsistence and the right is purely personal to
the recipient.
Article 1287 uses the “depositum instead of “deposit” which is used for
an ordinary bank deposit. A bank deposit is not a depositum as defined
above. It is really a loan which creates the relationship of debtor and
creditor. A bank’s failure to honor a deposit of money is failure to pay
its obligation as debtor and not a breach of trust arising from
depositary’s failure to return the thing deposited.
Art. 1288. Neither shall there be compensation if one of the debts
consists in civil liability arising from a penal offense.
When the debt proceeds from a criminal offense, the debtor shall NOT
BE EXEMPTED from the payment of the criminal liability (penalty), nor
shall he be excused from the payment of indemnity arising from his
acts.
Is this prohibition total?

-Yes, but only as to the offender (accused/culprit). The accused cannot
set up compensation regarding his liability but the offended
party/complainant ca set up compensation as to his debt towards the
latter.
Example:
Andrea owes Benjie ₱10,000. Benjie stole the diamond necklace
of Andrea worth ₱10,000. Here, compensation by Benjie is not
proper, since he is criminally liable. But Andrea, the offended
party, can claim the right of compensation. The prohibition in
Article 1288 pertains only to the accused but not to the victim of
the crime.
Art. 1289. If a person should have against him several debts which
are susceptible of compensation, the rules on the application of
payments shall apply to the order of the compensation.
-Compensation may be likened to payment. If the debtor has various

debts subject to compensation, he may inform the creditor regarding
the application. If he fails to give such information, compensation will
be applied to the most onerous obligation first.
Example:
Charlie is indebted to Angel in the amount of:
(1) P10,000.00 without interest due today;
(2) P10,000.00 with interest of 12% due to also today; and
(3) P10,000.00 with interest of 10% due yesterday.
Angel owes Charlie P10,000.00 due today.
For purposes of the application of payment, Charlie is the

debtor. He must specify to Angel which of the three debts
should be compensated. If he fails to inform the latter, then the
latter should apply the compensation to the second obligation of
Charlie, which is the obligation bearing the 12% interest
because it is the most onerous obligation among the three.
Art. 1290. When all the requisites mentioned in Article 1279 are
present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even though the
creditors and debtors are not aware of the compensation.
Legal Compensation occurs automatically, without the need for consent

from the parties. The moment all the requisites found under Article
1279 concur, legal compensation takes place automatically.
Question: Will it take place even if the parties do not have full legal
capacity?
-Yes, since it takes place ipso jure, without any acts required from the
parties.
06 (No)
Novation
Art. 1291. How obligations are Modified
They are modified by:

1) Changing their OBJECT or principal condition;
2) SUBSTITUTING the person of the DEBTOR;
3) SUBROGATING a third person in the rights of the CREDITOR.
Novation is the process of totally or partially extinguishing an

obligation through the creation of a new obligation that substitutes it.
This mode of extinguishment is a juridical act of dual function – it

extinguishes an obligation, and at the same time, it creates a new one
in lieu of the old. Thus, this is a RELATIVE EXTINCTION, not an
ABSOLUTE EXTINCTION.
Examples:
A. Changing the Object or Principal Condition
Simon agreed to deliver to Ibarra a house. Later, they entered

into another contract whereby, instead of Simon delivering a
house, he would deliver 10 cars. The obligation to deliver a
house is extinguished by the new obligation to deliver the 10
cars, which supersedes the previous obligation. The change may
also involve the principal terms of the obligation.
Examples:
B. Substituting the person of the Debtor
In the previous example, if after the perfection of the obligation,

both parties agreed that Charlie will substitute for Simon, such
that Charlie will be the one to deliver the 10 cars, then there is
novation by virtue of the substitution of the Debtor.
C. Subrogating a third person in the rights of the Creditor
If, in the previous examples, Danny will be subrogated in the

rights of Ibarra, there is a personal novation. In this case,
Simon becomes liable to Danny. (This is also referred to as
Personal Novation – novation where the parties are changed.)
Art. 1291. How obligations are Modified
They are modified by:

1) Changing their OBJECT or principal condition;
2) SUBSTITUTING the person of the DEBTOR;
3) SUBROGATING a third person in the rights of the CREDITOR.
Novation is the process of totally or partially extinguishing an

obligation through the creation of a new obligation that substitutes it.
Art. 1292.
This particular article did not specify what form of novation is neede.
However, the following rules could be derived therefrom:
1. If it is Express Novation, it is imperative that it must be declared in

unequivocal terms in order to avoid doubt.
2. If it is Implied Novation, it is essential that the old and the new

obligation are incompatible on all material points.
Requisites of Novation:
a. A previous VALID obligation;

b. Agreement of all the parties to the new obligation;
c. Animus novandi or the intent to novate;
d. Substantial difference between the old and the new obligation;
e. Extinguishment of the old obligation;
f. Validity of the new obligation.
Examples:
Brian executed a promissory note to pay Peter P500,000 on
December 3, 2023. However, before the arrival of the due date,
Peter, upon sensing that Brian could not satisfy the obligation
on time, approached him and said that instead of paying one
time, he should pay it in 4 equal monthly installments, from
January to April 2024. Brian agreed to the new obligation.
Is there novation here?

No. Under this example it is not proper to consider the
obligation novated because it does not alter its essence. Brian is
still obliged to pay the exact same amount. In order for novation
to be effective, the old and new obligations must be
incompatible with each other. Here, the two are compatible.
Art. 1293. Novation which consists in substituting a new
debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but not
without the consent of the creditor. Payment by the new debtor
gives him the rights mentioned in Articles 1236 and 1237.
-This article talks about passive subject novation, or the novation on

the part of the debtor, and may be of two types: Expromision and
Delegacion.
Art. 1293. EXPROMISION vs. DELEGACION
EXPROMISION- the initiative for the change does not come from, and
may even be made without the knowledge of, the debtor, since it
consists of a third person’s assumption of the obligation.
DELEGACION- the debtor offers, and the creditor accepts, a third

person who consents to the substitution and assumes the obligation;
thus, the consent of these three persons are necessary.
-In both instances, consent from the creditor is required.
The definitions came from Arco Pulp and Paper Co vs. Dan T. Lim,
G.R. No. 206806, June 25, 2014.
Examples:
Daisy owes Rose P500,000. Cherry, the best friend of Daisy,
approached Rose and tells her: “Rose, I will be the one to pay
Daisy’s obligation. From now, until payment has been made, I
am now the debtor.” Rose agreed. Is there expromision here?
Answer: Yes. Since Rose agreed to Cherry’s proposal.
If Cherry was not able to pay Rose, can Daisy be held liable?
-No. Since Cherry is the new debtor, Daisy can no longer be
held liable since her character as the debtor has been removed
when Rose agreed to Cherry’s terms. The new debtor’s
insolvency or non-fulfillment of the obligation shall not give rise
to any liability on the part of the original debtor. (Article 1294)
Art. 1295. 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 the delegated his debt.
-This is applicable only in delegacion, not expromision.
GR: If the new debtor who has been accepted by the creditor, happens
to be insolvent and cannot fulfill the obligation delegated to him, the
original debtor is no longer liable anymore for the payment of the
obligation.
XPTN: 1. Insolvency existed, and is of public knowledge, upon
delegation; and
2. Insolvency of the new debtor was already existing and known to the
original debtor at the time of the delegation of the debt to the new
debtor.
Art. 1295.
Are there instances when the old debtor is still liable?
Yes, in the following instances:
A) When the third person is only secondarily liable

B) If the third person is a mere agent of the debtor
C) When the old debtor is still answerable jointly with the new debtor or
solidarily by express stipulation.
Example:
Sarah is indebted to Lavigna for the amount of P100,000. Sarah
proposed Lottie to be the new debtor and obtained the consent
of Lavigna. If at the time of the delegacion Lottie was already
insolvent, but her insolvency was neither of public knowledge
nor known to Sarah, then Sarah may no longer be made liable
for the obligation, neither is Sarah liable if the insolvency of
Lottie took place after she delegated her debt.
Art. 1296. When the principal obligation is extinguished in
consequence of a novation, accessory obligations may subsist only
insofar as they may benefit third persons who did not give their
consent.
Effects of Novation on Accessory Obligations:

G.R. The extinguishment of the principal obligation carries with it that
of the accessory obligations.
XPTN: Accessory obligations subsist insofar as they benefit third
persons who have NOT given their consent to the novation.
Art. 1297. If the new obligation is void, the original one shall subsist,
unless the parties intended that the former relation should be
extinguished in any event.
Bryan is indebted to Anne in the amount of P1,000.00. Since Bryan

cannot pay his debt, Bryan and Anne entered into a new contract
whereby Bryan will kidnap and kill the enemy of Anne and the later will
consider Bryan’s debt extinguished. In this case, the original obligation
of Bryan and Anne shall subsist because the new obligation of Bryan to
Anne is void, it being against the law.
Art. 1298. 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.
Sam agreed to deliver prohibited drugs to Smith. Later on, it was

agreed that Sam would pay Smith P500,000.00 instead of delivering
the drugs. Here, the novation is void because the original obligation is
void.
Suppose Sam was induced, through fraud committed by Smith, to sign

a contract whereby the former obliged himself to deliver a specific car
to the latter. Subsequently, it was agreed between Sam and Smith that
Sam would give Smith P100,000.00 instead of the car. Here, the
original obligation of Sam is voidable. As it has not yet been annulled
at the instance of Sam, the second contract is valid.
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Extinguishment

NOVATION Articles 1291 to 1304

LOSS Physical Loss or Destruction or Illegality of the thing.

REMISSION OR It is the gratuitous abandonment by the creditor of his

It is the meeting in one person of the qualities of creditor

It is the extinguishment in the concurrent amount of the

The replacement of an old contract with a new one, by

- this article talks about ways by which “Payment” is enforced or

a. Delivery of Money (ordinary parlance)

In law, payment = specific performance.

-Payment is made by delivering the car.

2. If Charles is obligated to repair the computer of Faith, how is

-Payment is made by performing the service (repairing the

3. How about if the obligation is not to construct a house?

*Debt - may refer to an obligation to deliver money, to deliver a thing

Example: John and Maria agreed to pay Sonny P500,000 in cash. On

YES. Payment should be made in the currency agreed upon, on the

*Integrity of Prestation – Completeness of the performance. The

Burden of payment belongs to the DEBTOR. (GR)

*Substantial Compliance - There is substantial compliance by the

If there is substantial compliance the obligor may recover as though

Q: Is there a form needed for the Protest or Objection?

Answer: None. So long as the acts of the creditor evince that

A availed of C’s services to renovate his house for the purpose of

GR: The creditor cannot be forced to accept payment from any

Example: A borrowed 10k from B. On due date, D, a

Explanation: Whoever pays on behalf of the debtor is entitled to

If Kris cannot pay Josh, the latter cannot proceed against

Article 1238 “embodies the idea that no one should be compelled to

Free Disposal- thing is not subject to any claim, lien, or encumbrance

Capacity to Alienate – the person making the transfer or disposal has

The creditor cannot be compelled to accept payment from an

Such transfer is not valid since Sisa no longer has legal

Lucid Intervals- state of an insane person where that person is

Q: Andy owes Calvin P10,000. Instead of paying Calvin directly,

A: NO! The payment should be made directly to Calvin or his

Q: Josh borrowed 50k from Sisa. 2 months after the

In the three instances above, THERE IS NO NEED TO

Andeng may either choose to pay Anton by settling the latter’s

Q: Andrew owes Becky P1M. Becky lost the promissory note

YES, because Camille is not the creditor. Camille is merely in

Garnishment - The proceeding by which a debtor’s creditor is

No. Jasmine does not need to pay Aladdin a second time.

Article 1244 does not apply if:

Q: Andy owes Benny P100,000. Instead of delivering cash which

It depends. If the value is equal to or higher than the debt in

This refers to the Rule of Medium Quality. The debtor cannot

This is a principle of equity.

GENERAL RULE: The debtor has to pay for the extrajudicial

EXCEPTION: When there is a stipulation to the contrary.

What about for Judicial Costs?

No costs shall be allowed against the Government, unless

This article talks about completeness of the performance. Where

Q: What do we mean by Legal Tender?

It is that currency which a debtor may compel a creditor to

Yes. The refusal of Depp is justified as a voucher is not

What if Johnny issues a check instead, and Depp refused? Is

Extraordinary inflation or deflation exists when there is a

(1) Inﬂation is a sharp sudden increase of money or credit, or

(2) Deﬂation is the reduction in volume and circulation of the