DIVINE WORD COLLEGE OF CALAPAN

SCHOOL OF ACCOUNTANCY
MODULE - LAW ON OBLIGATION AND CONTRACTS
Atty. Ma. Ellen C. Abas, CPA

LEARNING OVERVIEW

This course is the introductory subject for business laws. It includes an

introduction to law that systematically leads to the main subject in a
gradual manner. It also shows the practical applications of the different
legal provisions for obligations and contracts with numerous examples
typical of everyday life.

LEARNING OUTCOMES

At the end of the lesson, the students should be able to:

Learn obligation, its nature, effects and kinds.
Enumerate the causes why obligations are terminated.
Interpret certain contracts and give the reasons for their reformation.
Determine if a certain contract is valid or defective.

SUGGESTED READING MATERIALS

De Leon, Hector. Law On Obligations and Contracts (Latest Edition)
Agpalo, Ruben E. Obligations and Contracts (Latest Edition)

GENERAL INSTRUCTIONS:

1. Read the Module Discussion.

2. For offline mode - in all the activities, your answers must be
legibly handwritten in a separate paper. The submission date is found
at the start of each activity.
3. Submission may be done thru
a) Online (scan or photograph your answer), in MS word form with file
name, “law1 (your schedule) activity1 (your surname)”(e.g. law1
mwf4-5 activity1 abas) then send it to [email protected] OR
b) send it to our drop-off box at RJF Café, DWCC, Calapan City stating
therein your name, activity number, subject and schedule.

MODULE 2

Part 1
REQUIRED READING
De Leon, Hector. Law On Obligations and Contracts (Latest Edition) –
Chapter on Different Kinds of Obligations

Classification of Obligations

(1) Primary classification of obligations under the Civil Code:

(a) Pure and conditional obligations (Articles
1179-1192);
(b) Obligations with a period (Articles 1193-1198);
(c) Alternative (1199-1205) and facultative obligations
(Article 1206);

Page 1
 (d) Joint and solidary obligations (Articles 1207-1222);
(e) Divisible and indivisible obligations (Articles 1223-1225); and
(f) Obligations with a penal clause (Articles 1226-1230)

(2) Secondary classification of obligations under the Civil Code:

(a) Unilateral and bilateral obligations (Articles 1169-1191);
(b) Real and personal obligations (Articles 1163-1168);
(c) Civil and natural obligations (Articles 1423); and
(d) Legal, conventional, and penal obligations (Articles 1157, 1159,
1161)

DIFFERENT KINDS OF OBLIGATIONS

CATEGORIES:
a. Demandability - pure, conditional or with a term
b. Plurality of object - simple, alternative or facultative
c. Plurality of subject - simple, joint or solidary
d. Performance - divisible or indivisible
e. Sanctions for breach - with or without a penal clause

(1) Pure – demandable at once, no term, no condition. Example: A

promises to pay B P1,000

(2) Conditional - A condition is a future and an uncertain event or a

past event unknown to the parties. Example: C promises to pay B
P1,000.00 if D remains to become an outstanding employee of the hotel
for the month of May.

Kinds:
a. Suspensive – happening of condition gives rise to obligation
Effects:
1. effectivity is retroactive
2. no retroactivity with reference to fruits or interest & prescription
3. creditor may preserve rights
4. debtor – recovery of payment by mistake or even w/o mistake

Rules on loss, impairment, improvement of the subject matter pending the happening of suspensive condition/
term

I. Loss/ II. Improvement

Impairment

w/ fault or at Indemnity & specific performance

expense of damages rescission & damages
obligor/ If it improved at the
usufructuary expense of the
debtor, he shall have
no other right than
that granted to the
usufructuary. (art
1189)

w/o fault or not Extinguished Creditor to bear

at expense of damages
obligor Creditor gets it

REQUISITES FOR THE AFOREMENTIONED RULE:

1. There is a suspensive condition
2. There is an obligation to deliver a determinate thing

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 3. There is loss, deterioration or improvement before the happening of
the condition
4. The condition happens

b. Resolutory – happening of condition extinguishes obligation

Effects:
1. no retroactive effect
2. obligation extinguished
3. restore to each other what was received plus interest/fruits
c. Potestative – dependent on sole will of 1 party; if on part of
debtor & suspensive - void
d. Casual – dependent on chance or hazard
e. Mixed – chance, or any of parties
f. With term -
a) Positive – extinguished if time expires or indubitable of
condition to
happen
b) Negative – effective from moment of time elapsed or evident it
can't
happen
g. Impossible and illegal –
(1) To do - both the condition and the obligation are void
(2) Not to do –disregard the condition, the obligation is still
valid

Impossible condition – physically not feasible

Illegal condition – prohibited by law, good custom, public
policy and morals

(3) With a period – future & certain, past & uncertain, payable when
able.

Example: A (hotel owner) promises to pay B (employee) P5,000.00

on or before December 30, 2020 as part of the staff incentive
program.

When stipulation says “payable when able” – it is with a period,

remedy:
a) agreement among parties
b) court shall fix period of payment when parties unable to agree

Kinds:
a.Resolutory (in diem) – takes effect at once but terminate upon
arrival of the day certain; Day certain – that which must
necessarily come, although it may not be known when
b.Suspensive (ex die) – takes effect on the day stipulated

WHEN COURTS MAY FIX PERIOD:

a) Art. 1197
b) Art. 1197, 2nd paragraph
c) Art. 1191, 3rd paragraph
d) Art. 1687, 2nd, 3rd, 4th sentence
e) Art. 1180

WHEN DEBTOR LOSES RIGHT TO PERIOD:

a. insolvency of debtor, unless security provided
b. did not deliver security
c. impaired security- thru fault or fortuitous event
d. violate undertaking in consideration of extension of period
e. attempts to abscond

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(4). Facultative – only one prestation has been agreed upon but another may
be given in substitution

Effect of loss or deterioration thru negligence, delay or fraud of

obligor:
a) of thing intended as substitute - no liability
b) of the substitute after substitution is made – with liability

(5). Alternative – bound by different prestations but only one is due

Right of choice: General rule: right of choice belongs to debtor

a. the choice is with debtor
(1) If only 1 is left either because of fortuitous events or due to
debtor's acts, perform what is left. The effect is that the debtor
loses the right of choice
(2) if the choice is limited because of the creditor's acts, the
debtor has the right of resolution and damages
(3) if all are lost due to debtor, the creditor is entitled to
damages
(4) if some are lost, the debtor can choose from the remaining

b. the choice is with creditor

(1) if one or some are lost due to fortuitous event, the creditor
chooses the remainder
(2) if one or some is lost because of the fault of debtor, the
creditor may choose either the remainder or the value of any which
disappeared, and damages in either case
(3) if all is lost due to the debtor's fault, the creditor may choose
the value of any if some is lost due to debtor's fault, the
creditor chooses the remainder
(4) if all is lost due to fortuitous event, obligation is
extinguished
(5) if all is lost due to creditor's fault, the obligation is
extinguished

Requisites for making the choice:

a) Made properly so that creditor or his agent will actually know
b) Made with full knowledge that a selection is indeed being made
c) Made voluntarily and freely
d) Made in due time – before or upon maturity
e) Made to all proper persons
f) Made w/o conditions unless agreed by the creditor
g) May be waived, expressly or impliedly

DISTINCTIONS BETWEEN ALTERNATIVE AND FACULTATIVE OBLIGATIONS

III. ALTERNATIVE IV. FACULTATIVE

a) Various things are due a) Only one thing is due but a
but the giving substitute may be given to render
principally of one is payment/fulfillment easy
sufficient
b) If one of prestations is b) If principal obligations is
illegal, others may be void and there is no necessity of
valid but obligation giving the substitute; nullity of
remains P carries with it nullity of S

c) If it is impossible to c) If it is impossible to give the

give all except one, the principal, the substitute does
last one must still be given not have to be given; if it is
impossible to give the
substitute, the principal must
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 still be given
d) Right to choose may be d) The right of choice is given
given either to debtor or only to the debtor
creditor

(6) Joint – presumption when 2 or more creditors or 2 or more debtors

concur in one and the same obligation

Effects:
a. Demand on one produces delay only with respect to the debt
b. Interruption in payment by one does not benefit or prejudice the other
c. Vices of one debtor to creditor has no effect on the others
d. Insolvency of one debtor does not affect other debtors

(7) Solidary – must be expressed in stipulation or provided by law or

by nature of obligation

a. Active – on the part of creditor or obligee

Effects:
1. Death of 1 solidary creditor transmits share to heirs (but
collectively)
2. Each creditor represents the other in the act of recovery of
payment
3. Credit is divided equally between creditors as among themselves
4. Debtor may pay any of the solidary creditors

b. Passive – on the part of debtors or obligors

Effects:
1. Each debtor may be requested to pay whole obligation with right to
recover from co-debtors
2. Interruption of prescription to one creditor affects all
3. Interest from delay on 1 debtor is borne by all

c. Mixed – on the part of the obligors and obligees, or the part of the
debtors and the creditors
d. Conventional – agreed upon by the parties
e. Legal – imposed by law

Instances where law imposes solidary obligation:

1. obligations arising from tort
2. obligations arising from quasi-contracts
3. legal provisions regarding obligation of devisees and legatees
4. liability of principals, accomplices, and accessories of a felony
5. bailees in commodatum
Effects:
a. payment made before debt is due, no interest can be charged, otherwise
– interest can be charged
b. insolvency of one – others are liable for share pro-rata
c. if different terms & conditions – collect only what is due, later on
collect from any
d. no reimbursement if payment is made after prescription or became
illegal
d. remission made after payment is made – co-debtor still entitled to
reimbursement
e. effect of insolvency or death of co-debtor – still liable for whole
amount
f. fault of any debtor – everyone is responsible – price, damage &
interest

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 g. complete/ personal defense – total or partial (up to amount of share
only) if not personal to him

Effect of loss or impossibility of the prestation:

a. if without fault – no liability
b. if with fault – there is liability (also for damage and interest)
c. loss due to fortuitous event after default – there is liability
(because of default)

(8) Divisible – obligation that is capable of partial performance

a. execution of certain number of days work
b. expressed by metrical units
c. nature of obligation – susceptible of partial fulfillment

(9) Indivisible – one not capable of partial performance

a. to give definite things
b. not susceptible of partial performance
c. provided by law
d. intention of parties

(10) With penal clause - an accessory undertaking to assume greater

liability in case of breach;

CHARACTERISTICS OF PENAL CLAUSES

1. Subsidiary - As a general rule, only penalty can be demanded,
principal cannot be demanded, except: Penalty is joint or
cumulative
2. Exclusive - takes place of damage, damage can only be demanded in
the ff. cases:
a. Stipulation – granting right
b. refusal to pay penalty
c. with dolo ( not of creditor )

Causes for reduction of penalty:

a. partial/irregular performance
b. penalty provided is iniquitous/unconscionable

ACTIVITY 1 (to be submitted on ________)

Please practice Integrity in answering the activity.

(link will be provided at Google classroom)

Part 2

REQUIRED READING
De Leon, Hector. Law On Obligations and Contracts (Latest Edition) –
Chapter on Extinguishment of Obligations

EXTINGUISHMENT OF OBLIGATIONS

Modes of Extinguishment of Obligation:

1. Payment or performance
2. Loss of the thing due
3. Condonation or remission of debt
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4. Confusion or merger of rights
5. Compensation
6. Novation
7. Annulment
8. Rescission
9. Fulfillment of resolutory condition

1. PAYMENT OR PERFORMANCE – delivery of money and performance, in any other

manner of the obligation

REQUISITES FOR VALID PAYMENT/PERFORMANCE

A. With respect to prestation itself:
(1) identity
(2) integrity or completeness
(3) indivisibility

B. With respect to parties - must be made by proper party to proper party

(1) Payor
(a) Payor - the one performing, he can be the debtor himself or
his heirs or assigns or his agent, or anyone interested in the
fulfillment of the obligation; can be anyone as long as it is
with the creditor's consent
(b) 3RD person pays/performs - only the creditor's consent; If
performance is done also with debtor's consent - he takes the
place of the debtor. There is subrogation except if the 3 rd
person intended it to be a donation
(c) 3rd person pays/performs with consent of creditor but not
with debtor's consent, the repayment is only to the extent that
the payment has been beneficial to debtor
(2) Payee
(a) payee - creditor or obligee or successor in interest of
transferee, or agent
(b) 3rd person - if any of the ff. concur:
i. it must have redounded to the obligee's benefit and only to
the extent of such benefit
ii. it falls under art 1241, par 1,2,3 - the benefit is total
so, performance is total
(c) anyone in possession of the credit - but will apply only if
debt has not been previously garnished

PAYMENT MADE TO AN INCAPACITATED PERSON, VALID IF:

1. Incapacitated person kept the thing delivered, or
2. Insofar as the payment has been beneficial to him

PAYMENT TO A 3RD PARTY NOT AUTHORIZED, VALID IF PROVED & ONLY TO THE
EXTENT OF BENEFIT; PRESUMED IF:
1. After payment, 3rd person acquires the creditor’s rights
2. Creditor ratifies payment to 3rd person
3. By creditor’s conduct, debtor has been led to make the payment
(estoppel)

PAYMENT MADE IN GOOD FAITH TO A PERSON IN POSSESSION

OF CREDIT SHALL RELEASE DEBTOR, Requisites:
1. Payment by debtor must be made in good faith
2. Creditor must be in possession of the credit & not merely the
evidence of indebtedness

C. With respect to time and place of payment - must be according to the

obligation

oblicon-module part1/mecabas Page 7

 Where payment should be made:
1. In the place designated in the obligation
2. If there is no express stipulation and the undertaking is to
deliver a specific thing – at the place where the thing might be at
the moment the obligation was constituted
3. In other case – in the place of the domicile of the debtor

Time of payment - time stipulated

Effect of payment – extinguish obligation

Except: order to retain debt

SUBSTANTIAL PERFORMANCE
1. Attempt in Good Faith to perform without willful or intentional
departure
2. Deviation is slight
3. Omission/Defect is technical or unimportant
4. Must not be so material that intention of parties is not attained

Effect of Substantial performance in good faith

1. Obligor may recover as though there has been strict and complete
fulfillment, less damages suffered by the obligee
2. Right to rescind cannot be used for slight breach

SPECIAL RULES/FORMS OF PAYMENT - Special Forms:

a. Application of Payments – the designation of the debt which payment

shall be made, out of 2 or more debts owing the same creditor:
stipulation or application of party given benefit of period – OK;
to be valid: must be debtor’s choice or w/ consent of debtor

Requisites for the Application of payment:

1. Various debts of the same kind
2. Same debtor
3. Same creditor
4. All debts must be due
Exception: there may be application of payment even if all
debts are not yet due if:
a) parties so stipulate
b) when application of payment is made by the party for whose
benefit the term has been constituted
5. Payment is not enough to extinguish all debts

HOW APPLICATION IS MADE:

1. Debtor makes the designation
2. If not, creditor makes it by so stating in the receipt that he
issues – unless there is cause for invalidating the contract
3. If neither the debtor nor creditor has made the application or if
the application is not valid, then application, is made by
operation of law

WHO MAKES APPLICATION:

General Rule: Debtor
Exception: Creditor –
a) Debtor without protest accepts receipt in which creditor
specified expressly and unmistakably the obligation to which such
payment was to be applied – debtor in this case renounced the
right of choice
b) When monthly statements were made by the bank specifying the
application and the debtor signed said statements approving the
status of her account as thus sent to her monthly by the bank

oblicon-module part1/mecabas Page 8

 IN CASE NO APPLICATION HAS BEEN MADE
1. Apply payment to the most onerous
2. If debts are of the same nature and burden, application shall be
made to all proportionately

b. Dacion en Pago – mode of extinguishing an obligation whereby the

debtor alienates in favor of the creditor property for the
satisfaction of monetary debt; extinguish up to amount of property
unless w/ contrary stipulation; A special form of payment because 1
element of payment is missing: IDENTITY
 Governed by law on sales
 Conditions for a valid dacion:
1) If creditor consents, for a sale presupposes the consent of
both parties
2) If dacion will not prejudice the other creditors
3) If debtor is not judicially declared insolvent

c. Cession/Assignment in Favor of creditors – the process by which

debtor transfer all the properties not subject to execution in
favor of creditors is that the latter may sell them and thus, apply
the proceeds to their credits; extinguish up to amount of net
proceeds (unless w/ contrary stipulation)

Kinds:
1. Legal – governed by the insolvency law
2. Voluntary – agreement of creditors

REQUISITES FOR VOLUNTARY ASSIGNMENT

a) More than 1 debt
b) More than 1 creditor
c) Complete or partial insolvency of debtor
d) Abandonment of all debtor’s property not exempt from execution
e) Acceptance or consent on the part of the creditors

EFFECTS:
a) Creditors do not become the owner; they are merely assignees
with authority to sell
b) Debtor is released up to the amount of the net proceeds of the
sale, unless there is a stipulation to the contrary
c) Creditors will collect credits in the order of preference
agreed upon, or in default of agreement, in the order
ordinarily established by law

d. Consignation
Tender -the act of offering the creditor what is due him together
with a demand that the creditor accept the same (When creditor
refuses w/o just cause to accept payment, he becomes in mora
accepiendi & debtor is released from responsibility if he consigns
the thing or sum due)

Consignation – the act of depositing the thing due with the court
or judicial authorities whenever the creditor cannot accept or
refuses to accept payment; generally requires prior tender of
payment

REQUISITES OF VALID CONSIGNATION:

(1) Existence of valid debt
(2) Consignation was made because of some legal cause
- previous valid tender was unjustly refused or circumstances
making previous tender exempt

oblicon-module part1/mecabas Page 9

 (3) Prior Notice of Consignation had been given to the
person interested in performance of obligation (1st notice)
(4) actual deposit/Consignation with proper judicial
authorities
(5) subsequent notice of Consignation (2nd notice)

Effects: Extinguishment of obligation

(1) Debtor may ask judge to order cancellation of obligation
(2) Running of interest is suspended
(3) Before creditor accepts or before judge declares
consignation has been properly made, obligation remains ( debtor
bears risk of loss at the meantime, after acceptance by creditor
or after judge declares that consignation has been properly made
– risk of loss is shifted to creditor)

Consignation w/o prior tender – allowed in:

1. creditor absent or unknown/ does not appear at the place of
payment
2. incapacitated to receive payment at the time it is due
3. refuses to issue receipt w/o just cause
4. 2 or more creditor claiming the same right to collect
5. title of obligation has been lost

2.LOSS OF THE THING DUE – partial or total/ includes impossibility of

performance

WHEN IS THERE A LOSS:

1) When the object perishes (physically)
2) When it goes out of commerce
3) When it disappears in such a way that: its existence is unknown or it
cannot be recovered

WHEN IS THERE IMPOSSIBILITY OF PERFORMANCE

1) Physical impossibility
2) Legal impossibility :
(a) Directly – caused as when prohibited by law
(b) Indirectly – caused as when debtor is required to enter a
military draft

OBLIGATION TO DELIVER A SPECIFIC THING

General Rule: Extinguished
Exceptions:
a) Debtor is at fault
b) Debtor is made liable for fortuitous event because of a provision of
law, contractual stipulation or the nature of the obligation requires
assumption of risk on part of debtor

OBLIGATION TO DELIVER A GENERIC THING

General Rule: Not extinguished
Exceptions:
a) if the generic thing is delimited
b) if the generic thing has already been segregated
c) monetary obligation

OBLIGATION TO DO
General Rule: Debtor is released when prestation becomes legally or
physically impossible without fault on part of debtor

EFFECT OF PARTIAL LOSS – ( judicial determination of extent is

necessary)
a) when loss is significant – may be enough to extinguish obligation

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 b) when loss insignificant – not enough to extinguish obligation

WHEN THING IS LOST IN THE POSSESSION OF THE DEBTOR

Presumption: Loss due to debtor’s fault ( disputable )
Exception: natural calamity, earthquake, flood, storm

3. REBUS SIC STANTIBUS - agreement is valid only if the same conditions

prevailing at time of contracting continue to exist at the time of
performance

EFFECT OF DIFFICULTY BEYOND PARTIES’ CONTEMPLATION

Rule: Obligor may be released in whole or in part

REQUISITES:
(a) The event or change could not have been foreseen at the time of
the execution of the contract
(b) The performance is extremely difficult, but not impossible
(because if it is impossible, it is extinguished by impossibility)
(c) The event was not due to the act of any of the parties
(d) The contract is for a future prestation

4. CONDONATION/REMISSION OF THE DEBT – gratuitous abandonment of debt;

right to claim; donation; rules of donation apply; express or implied

REQUISITES:
a. There must be an agreement
b. There must be a subject matter (object of the remission, otherwise
there would be nothing to condone)
c. Cause of consideration must be liberality (Essentially gratuitous, an
act of liberality)
d. Parties must be capacitated and must consent; requires acceptance by
obligor; implied in mortis causa & expressed inter vivos
e. Formalities of a donation are required in the case of an express
remission
f. Revocable – subject to rule on inofficious donation (excessive,
legitime is impaired) & ingratitude & condition not followed
g. Obligation remitted must have been demandable at the time of remission
h. Waivers or remission are not to be presumed generally

Forms: Extent: Kinds:

a. Express – a. total a. Principal – accessory also

formalities of condoned
donation

b. Implied – b. partial b. accessory – principal still

conduct is outstanding
sufficient

c. accessory oblig. Of pledge –

condoned; presumption only,
rebuttable

Requisites of Implied:
1. voluntary delivery – presumption; when evidence of indebtedness is w/
debtor – presumed voluntarily delivery by creditor; rebuttable
2. effect of delivery of evidence of indebtedness is conclusion that debt
is condoned – already conclusion; voluntary delivery of private
document
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 a. if in hands of joint debtor – only his share is condoned
b. if in hands of solidary debtor - whole debt is condoned
c. Tacit – voluntary destruction of instrument by creditor; made to
prescribe w/o demanding
5. CONFUSION OR MERGER OF RIGHTS– character of debtor & creditor is merged
in same person with respect to same obligation

REQUISITES:
a. It must take place between principal debtor & principal creditor
only
b. Merger must be clear & definite
c. The obligation involved must be same & identical – one obligation
only
d. Revocable, if reason for confusion ceases, the obligation is
revived

6. COMPENSATION – Set off; it is a mode of extinguishment to the concurrent

amount the obligation of persons who are in their own right reciprocally
debtors or creditors

REQUISITES:
a. Both parties must be mutually creditors and debtors - in their own
right and as principals
b. Both debts must consist in sum of money or if consumable, of the
same kind or quality
c. Both debts are due
d. Both debts are liquidated & demandable (determined)
e. Neither debt must be retained in a controversy commenced by 3rd
person & communicated w/ debtor (neither debt is garnished)

Kinds:
a. legal – by operation of law; as long as 5 requisites concur- even
if unknown to parties & if payable in diff places; indemnity for
expense of exchanges; even if not equal debts – only up to
concurring amount
b. conventional – agreement of parties is enough, forget other
requirement as long as both consented
c. facultative – one party has choice of claiming/opposing – one who
has benefit of period may choose to compensate
- not all requisites are present
- depositum; commodatum; criminal offense; claim for future
support; taxes
d. judicial – set off; upon order of the court; needs pleading &
proof; all requirements must concur except liquidation
e. total – when 2 debts are of the same amount
f. partial – when 2 debts are not of the same amount

Effect of assignment of credit to 3 rd person; can there still be

compensation
a. if made after compensation took place – no effect; compensation
already perfected
b. if made before compensation took place – depends
1. with consent of debtor – debtor is estopped unless he reserves
his right & gave notice to assignee
2. with knowledge but w/o consent of debtor – compensation may be
set up as to debts maturing prior to assignment
3. w/o knowledge – compensation may be set-up on all debts prior to
his knowledge

7. NOVATION – extinguishment of obligation by creating/ substituting a new

one in its place

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a. changing object or principal conditions
b. substituting person of debtor
c. subrogating 3rd person in right of creditor

REQUISITES:
a. valid obligation
b. intent to extinguish old obligation – expressed or implied:
completely/substantially incompatible old and new obligation on every
point
c. capacity & consent of parties to the new obligation
d. valid new obligation

EFFECT OF NOVATION:
a. extinguishment of principal carries accessory, except:
- stipulation to contrary
- stipulation pour autri unless beneficiary consents
- modificatory novation only; obliged to w/c is less onerous
- old obligation is void
b. old obligation subsists if:
- new obligation is void or voidable but annulled already (except:
intention of parties)
c. if old obligation has condition
- if Resolutory & it occurred –old obligation already extinguished;
no new obligation since nothing to novate
- if suspensive & it never occurred –as if no obligation; also
nothing to novate
d. if old obligation has condition, must be compatible with the new
obligation; if new is w/o condition – deemed attached to new
e. if new obligation has condition
- if resolutory: valid
- if suspensive & did not materialize: old obligation is enforced

KINDS:
a. REAL/OBJECTIVE – change object, cause/consideration or principal
condition
b. PERSONAL/SUBJECTIVE
1. substituting person of debtor (passive)

EXPROMISION; initiative is from 3rd person or new debtor; new debtor

& creditor to consent; old debtor released from obligation; subject
to full reimbursement & subrogation if made w/ consent of old
debtor; if w/o consent or against will, only beneficial
reimbursement; if new debtor is insolvent, not responsible since
w/o his consent

DELEGACION; initiative of old debtor; all parties to consent; full

reimbursement; if insolvent new debtor – not responsible old debtor
because obligation extinguished by valid novation unless:
insolvency already existing & of public knowledge or know to him at
time of delegacion
a. Delegante – old debtor
b. Delegatario - creditor
c. Delegado – new debtor

2. subrogating 3rd person to rights of creditor (active)

a. conventional- agreement & consent of all parties; clearly
established
b. legal- takes place by operation of law; no need for consent; not
presumed except as provided for in law:

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 presumed when-
1. creditor pays another preferred creditor even w/o debtor’s
knowledge
2. 3rd person not interested in obligation pays w/ approval of
debtor
3. person interested in fulfillment of obligation pays debt even
w/o knowledge of debtor

Difference from payment by 3rd Change of debtor

person

1. debtor is not nec. Released 1. debtor is released

from debt

2. can be done w/o consent of 2. needs consent of creditor

creditor – express or implied

3. 1 obligation 3. 2 obligations; 1 is
extinguished & new one created

4. 3rd person has no oblig. to 4. new debtor is obliged to pay

pay if insolvent

ACTIVITY 2 (to be submitted on ________)

Please practice Integrity in answering the activity.

(link will be provided at Google classroom)

MODULE QUIZ/FORMATIVE ASSESSMENT

Two (2) set of quizzes will be sent on

_____________________________________.

EVALUATION/REFLECTION

1. What am I learning from this module?

2. Which topics I have understand better?
3. Which topics are still unclear to me or I am finding hard or
challenging?
4. What was the most important thing I learned from this module

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