TITLE I

OBLIGATIONS
(Arts. 1156-1304, Civil Code)

Chapter 1

Article 1156

 Obligation
- the juridical necessity to give to do or not to do.

- derived from the latin word “obligation” which means tying or bonding

 Civil obligation
- gives the creditor or oblige a right under the law to enforce their performance in charts of
justice.
 Normal obligation
- do not grant a right of action to enforce their performance.
 Essential requisites of an obligation :
1. Passive subject (debtor or obligor)
2. Active subject (creditor or obligee)
3. Object or prestation (subject matter)
4. Juridical or legal tie (efficient cause)
 Form of obligation
o manner in which obligation is manifested or incurred
o may be oral or in writing, partly oral, or partly in writing
 Obligation, right and wrong distinguished
 Obligation- the act or performance that law enforces
 Right- power of a person to demand from another
 Wrong- an act or omission of one party in violation of legal rights
 Kinds of obligation
1. Real obligation- obligation to give
2. Personal obligation- obligation to do or not to do
a. Positive personal
b. Negative personal
Article 1157

 Sources of obligation
1. Law – imposed by law itself
2. Contracts- arise from stipulation of the parties
3. Quasi contracts – arise from lawful, voluntary and unilateral acts
4. Crimes- arises from civil liability
5. Quasi delicts or torts- arises from damage caused to another through an act or
Omission

Article 1158

 Legal obligations
o legal obligations or obligations arising from law
o not presumed because they are considered a burden upon the obligor

Article 1159

 Contract
o meeting of minds between two persons whereby one binds himself with respect
o to the other to give something or render service.
 Compliance in good faith
 o compliance or performance in accordance with the terms of the contract or
agreement

o sincerity and honesty must be observed

Article 1160

 Kinds of Quasi contract

1. negotiorum gestio

o the voluntary management of the property or affairs of another without the

knowledge of the latter
2. solution indebiti

o when something is received when there s no right to demand

o unduly delivered through mistake
 Scope of civil liability
1. restitution
2. reparation for the damage caused
3. indemnification for consequential damages

Article 1162

 Requisites of Quasi delict there must be:

1. an act or omission
2. fault or negligence
3. damage caused
4. direct relation of cause and effect of act and damage
5. no pre existing contractual relation between parties
 Crime distinguished from quasi delict
Crime Quasi delict
there is malicious intent there is negligence
purpose is punishment indemnification of offended party
affects public interest concerns private interest
has criminal and civil liability there is only civil liability
cant be compromised and settled can be compromised
negligence of defendant need only be
guilt of the accrued must be proved proved by preponderance of evidence

Article 1163

 Specific or determinate
o identified by its individuality
o cannot be substituted
 Generic or indeterminate
o identified only by its specie
o the debtor can give anything of the same class as long as it is of the same kind

 Duties of debtor in obligation to give a DETERMINATE thing.

1. preserve the thing
2. deliver the fruits of the thing
3. deliver the accessories and accessions
4. deliver the thing itself
5. answer for damages in case of non fulfillment.
  Duties of debtor in obligation to deliver a GENERIC thing
1. to deliver the thing which is of the quality intended
2. to be liable for damages in case of fraud, negligence or delay

Article 1164

 Different kinds of fruit

1. Natural fruits
o spontaneous products of the soil and the young and other products
2. Industrial fruits
o produced by lands of any kind through cultivation or labor
3. Civil fruits
o derived by virtue of a juridical relation
 Personal right
o the right or power of a person to demand from another
 Real right
o right or interest of a person over a specific thing

Article 1165

a. If what is to be delivered is DETERMINATE thing, the creditor may compel the

debtor to make the delivery
b. If the thing id INDETERMINATE, the creditor may ask that the obligation be
complied with at the expense of the debtor.
Article 1166

 Accessions
o fruits of a thing or additions or improvements upon a thing
 Accessories
o joined to or included with the principal thing for the latter’s embellishment, better use or
completion.
 The rule is that all accessions and accessories are considered included in the obligation to deliver
a determinate thing although they may not have been mentioned.

Article 1167

 Remedies of creditor in positive personal obligation

1. if the debtor fails to comply, creditor has the right
a. to have the obligation performed by himself or at the debtor’s expense
b. to recover damages
2. if the obligation is done in contravention of terms, it may be ordered that it be
undone if still possible

Article 1168

 Remedies of creditor in negative personal obligation

o As a rule, the remedy of the obligee is the undoing of the forbidden thing plus damages.

Article 1169

 Ordinary delay
o failure to perform an obligation on time
  Legal delay
o failure to perform an obligation on time which contributes a breach of the obligation.
 Kinds of delay or default
1. mora solvendi - delay on the aprt of the debtor to fulfill his obligation
2. mora accipiendi – delay on the aprt of the creditor to accept the performance of the
obligation
3. compensation morae – delay of the obligor in reciprocal obligation
 Requisites of delay by the debtor
1. failure to perform on the date agreed upon
2. demand may be either judicial (complaint filed in court)
or extra judicial (made outside of court)

3. failure of debtor to comply with such demand

 When demand is not necessary to put debtor in delay
1. When the obligation so provides.
2. When the law so provides.
3. When time is of the essence.
4. When demand would be useless.
5. When there is performance by a party in reciprocal obligations.

Article 1170

 Grounds for liability

1. Fraud (deceit or dolo)
o deliberate or intentional evasion of the normal fulfillment of an
o obligation.
2. Negligence (fault or culpa)
o any voluntary act with no malice, which prevents the normal fulfillment of the
obligation.
3. Delay (mora)
o failure to perform obligation on time
4. Contravention of the terms of the obligation
o violation of the terms and conditions stipulated in the obligation.

Article 1171

 Waiver of action for past and future fraud

a. A waiver of an ction for FUTURE fraud is void as being against the law and public
policy.
b. A PAST fraud can be the subject of avalid waiver because the waiver can be
considered as an act of generosity and magnanimity on the part of the victim of the
fraud.

Article 1172

 Kinds of negligence according to source of obligation

1. Contractual negligence (culpa contractual)
o negligence in contracts resulting in their breach.
2. Civil negligence (culpa aquiliana)
o negligence when by itself is the source of an obligation between the
o parties.
3. Criminal negligence (culpa criminal)
o results in the commission of a crime.
Article 1173

 Factors to be considered in negligence

1. nature of the obligation
2. circumstances of the person
3. circumstances of time
4. circumstances of the place

 Fortuitous event
o any event which cannot be foreseen or which though foreseen, is inevitable.

Article 1174

 Kinds of fortuitous event

1. Ordinary fortuitous event
o events which are common and which the contradicting parties could reasonably
foresee.
2. Extra - ordinary fortuitous event
o events which are uncommon and which the contradicting parties could not have
reasonably foreseen.
 Exception of obligation extinguished due to a fortuitous event
1. When expressly specified by law.
2. When declared by stipulation.
3. When the nature of the obligation require the assumption of risk.

Article 1175

 Simple loan or mutuum

o contract whereby one of the parties delivers money or other consumable thing upon the
condition that the same amount of the same kind and quality shall be paid.
 Usury
o contracting for or receiving interest in excess of the amount allowed by law for the loan
or use of money

Article 1176

 Presumption
o the influence of a fact not actually known
o arises from its usual connection with another which is known
 Two kinds of presumption
1. Conclusive presumption - cannot be contradicted
2. Disputable presumption – can be contradicted or rebutted

Article 1177

 Remedies available to creditors for the satisfaction of their claims

1. exact fulfillment
2. pursue leviable property of the debtor
3. after having pursued the properties, exercise all the rights and bring all the actions of
the debtor
4. ask the court to rescind or impugn acts or contract
Article 1178

 Exceptions in transmissibility of rights

1. prohibited by law
a. by the contract of partnership
b. by the contract of agency
c. by the contract of commodatum
2. prohibited by stipulation of the parties

Section 1: Pure and Conditional Obligations

ARTICLE 1179

 Pure Obligation- not subject to any condition and no specific date is mentioned
 Conditional Obligation- one whose consequences are subject in one way or another to the
fulfillment of the condition
 Condition- future and uncertain event, upon the arrival of which, the effectivity or
extinguishment of the obligation depends
 CHARACTERISTICS OF A CONDITION
a) Future and uncertain
b) Past but unknown
c) Not impossible
 PRINCIPAL KINDS OF CONDITIONS
1) Suspensive Condition (Condition Precedent/Condition Antecedent)
-the fulfillment of which gives rise to the obligation

2) Resolutory Obligation (Condition Subsequent)

-the fulfillment of which extinguishes the obligation

 DISTINCTIONS BETWEEN SUSPENSIVE AND RESOLUTORY OBLIGATIONS

 Fulfillment
o Suspensive: obligation arises
o Resolutory: obligation extinguishes
 If it does not take place
o Suspensive: no tie, disappears
o Resolutory: obligation continues
 Until it takes place
o Suspensive: mere hope
o Resolutory: termination of obligation
 OBLIGATION IS DEMANDABLE WHEN
o It is pure
o It is subject to resolutory condition
o It is subject to resolutory period
 PAST EVENTS UNKNOWN TO THE PARTIES
o what is really contemplated by the law is the knowledge to be acquired in the future of
a past event

ARTICLE 1180

Period- future and certain event upon arrival the obligation arises or extinguishes

 A CONDITION SUBJECT TO A PERIOD EITHER ARISES OR EXTIGNUISHED WHEN:

o Debtor promises to pay hen his means permit hi to do so
o Other causes ( little by little, as soon as possible. From time to time, at any time I have the
money, in partial payments, etc)
ARTICLE 1181

 EFFECTS OF HAPPENING OF CONDITION

o Acquisition of rights- depends upon the happening
o Loss of rights already acquired- in resolutory condition, fulfillment means extinguishment or
loss of rights already acquired

ARTICLE 1182

 CLASSIFICATION OF CONDITIONS
 Effect
o Suspensive- happening gives rise to obligation
o Resolutory- happening extinguishes the obligation
 Form
o Expressed- clearly stated
o Implied- inferred
 Possibility
o Possible- capable of fulfillment (legally/physically)
o Impossible- not capable of fulfillment (legally/physically)
 Cause or Origin
o Potestative- will of one of the contracting parties
o Casual- chance or will of a third person
o Mixed- partly chance and partly will of a third person
 Mode
o Positive- performance of an act
o Negative- omission of an act
 Numbers
o Conjunctive- all conditions must be fulfilled
o Disjunctive- at least one or some of the conditions be fulfilled
 Divisibility
o Divisible- susceptible of partial performance
o Indivisible- not susceptible of partial performance
 Potestative Condition- depends upon the sole will of one party
 WHERE SUSPENSIVE CONDITION DEPENDS UPON WILL OF DEBTOR
o Conditional obligation void
o Only condition void (obligation valid)
 WHERE SUSPENSIVE CONDITION DEPENDS UPON WILL OF CREDITOR
 Valid
 Casual Condition- Suspensive condition depends upon chance or upon will of third person
(valid)
 Mixed Condition- partly upon chance and partly upon will of a third person (valid)
 WHERE SUSPENSIVE CONDITION DEPENDSA PARTLY UPON WILL OF DEBTOR:
o Partly upon will of debtor and partly upon will of third person- valid
o Partly upon will of debtor and partly upon chance- void

ARTICLE 1183

o impossibility already existed at the time the obligation was constituted

 KINDS OF IMPOSSIBLE CONDITIONS
o Legally impossible conditions- cannot exist, cannot be done
o Legally impossible conditions- contrary to law, morals, good customs, public order or public
practice
 EFFECTS OF IMPOSSIBLE CONDITIONS
o Conditional obligation void- obligation and condition are void (no intention to comply)
 o Conditional obligation valid- f condition is negative, not to do an impossible thing, pure and
valid
o Only affected obligation void- if obligation is divisible, only part of it is void and the rest is
not affected
o Only the obligation void- if pre-existing, does not depend on fulfillment of an impossible
condition

ARTICLE 1184

 Positive Condition- (Positive Suspensive Condition)

o happening of an event at a determinate time (extinguished)
 As soon as the time expires without event taking place
 Indubitable that the event will not take place even if time has not yet expired

ARTICLE 1185

 Negative Condition- an event will not happen at a determinate time (effective and binding)
o Time has elapsed without the event taking place
o Evident that it would not occur even if time has not yet elapsed

ARTICLE 1186

 THREE REQUISITES FOR CONSTRUCTIVE FULFILLMENT OF SUSPENSIVE CONDITION:

1) Condition is Suspensive
2) Obligor prevents fulfillment of condition
3) Acts voluntarily
 CONSTRUCTIVE FULFILLMENT OF RESOLUTORY CONDITION
o with respect to the debtor who is bound to return what he has received upon the
fulfillment of the condition

ARTICLE 1187

 RETROACTIVE EFFECTS OF FULFILLMENT OF SUSENSIVE CONDITION:

o In obligations to give- effect shall retroact to the day when the obligation was constituted
o In obligations to do or not to do- no fixed rule provided, courts are empowered by the use of
sound discretion and bearing in mind the intent of the parties
o -no retroactive effect of the fulfillment of a Suspensive condition
 RETROACTIVE EFFECTS AS TO FRUITS AND INTERESTS IN OBLIGATIONS TO GIVE:
o In reciprocal obligations- no retroactivity, both parties mutually compensated during
pendency
o In unilateral obligations- no retroactive effect because they ate gratuitous. Debtor receives
nothing from the creditor.

ARTICLE 1188

 RIGHTS PENDING FULFILLMENT OF SUSPENSIVE CONDITION

o Rights of creditor- preservation of his right, he may go to court to prevent alienation or
concealment of property of the debtor or have his right annotated in the registry of
property
o Rights of debtor- right to recover what he paid by mistake prior to the happening of a
Suspensive condition

ARTICLE 1189
  REQUISITES FOR APPLICATION OF ARTICLE 1189
o Real obligation
o Object is specific or determinate thing
o Obligation is subject to Suspensive condition
o Condition is fulfilled
o There is loss, deterioration or improvement of the thing during the pendency of the
condition
 KINDS OF LOSS
o Physical loss- when thing perishes
o Legal loss- when thing goes out of commerce or from legal, it becomes illegal
o Civil loss- when thing disappears and existence is unknown or even if known can never be
recovered
 RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT OF THING DURING PENDENCY OF
SUSPENSIVE CONDITION:
o Loss of thing without debtor’s fault
o Loss of thing through the debtor’s fault
o Deterioration of thing without debtor’s fault
o Deterioration of thing through debtor’s fault
o Improvement of thing by nature or by time
o Improvement of thing at expense of debtor
 Usufruct- right to enjoy the use and fruits of a thing belonging to another

ARTICLE 1190

 EFFECTS OF FULFILLMENT OF RESOLUTORY CONDITION

o In obligations to give-when condition is fulfilled, obligation is extinguished and parties are
obliged to return to each other they have received
 -return to status quo
o In obligations to do or not to do- courts shall determine the retroactive effect of the
fulfillment of the resolutory condition
 APPLICABILITY OF ARTICLE 1189 TO PARTY WITH OBLIGATION TO RETURN
o the fulfillment of the resolutory condition converts the creditor into debtor, and the
debtor into creditor

ARTICLE 1191

 KINDS OF OBLIGATION ACCORDING TO THE PERSON OBLIGED:

 Unilateral- only one party is obliged to comply with a prestation
 Bilateral- both parties are mutually bound to each other
o Reciprocal obligations- arise from the same cause and each party is a debtor and
a creditor of the other
o Non-reciprocal obligations- don’t impose simultaneous and correlative
performance on both parties
 REMEDIES IN RECIPROCAL OBLIGATIONS:
 Choice of remedies- if one of the obligors don’t comply with what is incumbent
upon him, aggrieved party may choose between two remedies:
o Fulfillment with damages
o Rescission with damages
 Remedy of rescission for non-compliance
 COURT MAY RANT GUILTY PARTY TERM FOR PERFORMANCE
o Court orders rescission unless there is a just cause for granting the party in default a
term of period for the performance of his obligation. It only applies when guilty party
is willing to comply with his obligation but needs time to do so.
 REMEDIES ARE ALTERNATIVE
o Remedies of an injured or aggrieves party are alternative and not cumulative. Creditor
is privileged to choose only one of the remedies and not both.
  LIMITATIONS ON RIGHT TO DEMAND RESCISSION
o The right to rescind is not absolute. Thus, it has limitations, namely;
 Resort to the courts- rescission is a judicial rescission is granted by courts
 Power of court to fix period- court allows period where the person in default is
permitted to perform his obligation
 Right of third person- if thing is at the hands of a third party who acted in good
faith, rescission is not available
 Substantial violation- rescission not granted for slight breaches of contract
 Waiver of right- right to rescind may be waives, expressly or impliedly

 RESCISSION WITHOUT PREVIOUS JUDICIAL DECREE

o Where automatic rescission expressly stipulated- agreement of cancellation of contract even
without judicial intervention or permission, but there must be at least a written notice sent
to the other party informing him of the rescission
o Where contract is still executory- if on both parties, no one has performed yet, but one is
read and willing to comply, he may rescind the contact without previous judicial decree of
rescission.

ARTICLE 1192

 WHERE BOTH PARTIES ARE GUILTY OF BREACH

o First infractor known- liability of first infractor should be equitable reduced
o First infractor cannot be determined- contract shall be deemed extinguished and each shall
bear his own damages

Section 2: Obligations with a Period

ARTICLE 1193

 Obligation with a period- consequences are subjected in one way or another to the expiration of
said period or term.
 Period- future and certain event upon the arrival of which the obligation subject to it either
arises or is terminated
 PERIOD AND CONDITION DISTIGNUISHED
 As to fulfillment:
o Period: certain, must happen sooner or later at date known beforehand
o Condition: uncertain event
 As to time:
o Period: refers only to the future
o Condition: refers not only to the future but also past event unknown to the parties
 As to influence of obligation:
o Period: merely fixes time for the efficaciousness of obligation
o Condition: causes an obligation either to arise or to cease
 As to effect when left to the debtor’s will
o Period: empowers court to fix the duration
o Condition: if it only depends on sole will of the debtor, it invalidates the
obligation
 As to retroactivity
o Period: no retroactive effect, it must be possible
o Condition: retroactive, it must also be possible
 KINDS OF PERIOD OR TERM
 According to effect
o Suspensive period (ex die)- obligation begins only from a day certain upon the
arrival of period
o Resolutory period (in diem)- obligation valid up to a day certain and terminates
upon the arrival
 According to source
 o Legal period- when provided for by laws
o Conventional of voluntary period- when t is agreed to by the parties
o Judicial period- fixed by the court
 According to definiteness
o Definite period- fixed or it is known when it will come
o Indefinite period- not fixed or not known when it will come

ARTICLE 1194

 EFFECT OF LOSS, DETERIORATION OR IMPROVEMENT BEFORE ARRIVAL OF PERIOD:

-see comments under Article 1189

ARTICLE 1195

 PAYMENT BEFORE ARRIVAL OF PERIOD

o Allows the recovery of what has been paid by mistake before the fulfillment of a
Suspensive condition. Creditor cannot unjustly enrich himself by retaining the
thing or money received before the arrival of the period
 DEBTOR PRESUMED AWARE OF PERIOD
o the debtor is presumed that he knew the debt was not yet due. He can no longer
recover the fruit or interest from the date of premature performance up to the
maturity date of performance.
 NO RECOVERY IN PERSONAL OBLIGATIONS.
o In obligations to do, it is physically impossible to recover the service rendered.
o In obligations not to , debtor cannot recover what he has not done

ARTICLE 1196

 The PERIOD is presumed to have been established for the benefit of both creditor and debtor.
Presumption is rebuttable however.
o EXCEPTIONS TO THE GENERAL RULE
 Term is for the benefit of the debtor alone- debtor is not compelled to pay
prematurely
 Term is for the benefit of the creditor- he may demand fulfillment even before the
term arrives
 COMPUTATION OF TERM OF PERIOD
o The first day shall be excluded and the last day included

ARTICLE 1197

 COURT GENERALLY WITHOUT POWER TO FIX A PERIOD

o Judicial period- fixed by court
o Contractual period- fixed by parties in their contract
 EXCEPTIONS TO THE GENERAL RULE
o Two cases where court is authorized to fix the duration of a period
 No period is fixed but a period was intended- no fixed period in the obligation
but is inferred from its nature and circumstances that a period was intended.
 Duration of the period depends upon the will of the debtor the court fixes the
duration of the period to forestall the possibility that the obligation ay never be
fulfilled.
 LEGAL EFFECT WHERE SUSPENSIVE PERIOD OR CONDITION DEPENDS UPON THE WILL OF THE
DEBTOR:
o The existence of obligation is not affected although the period depends upon the sole
will of the debtor
o It obligation is subject to a condition which depends upon the sole will of the debtor,
conditional obligation is void.
  PERIOD FIXED CANNOT BE CHANGED BY THE COURTS
o If there is a fixed period and has already lapsed, court cannot fix another period
o If both parties give their acceptance and consent o the period fixed by court. However,
parties can modify the term by a new agreement.

ARTICLE 1198

 WHEN OBLIGATION CAN BE DEMANDED BEFORE LAPSE OF PERIOD

o As a general rule, obligation is no demandable before the lapse of the period.
 EXCEPTIONS WHERE DEBTOR MIGHT NOT BE ABLE TO COMPLY WITH HIS OBLIGATION:
o When debtor becomes insolvent
o When debtor does no furnish guaranties or securities promised
o When guaranties or securities given have been impaired or have disappeared
o When debtor attempts to abscond

Section 3 – Alternative Obligation

Article 1199

 Kinds of Obligation according to object:

1. Simple Obligation – having only one prestation
2. Compound Obligation – having two or more prestations.
a. Conjunctive obligation – all prestations are due.
b. Distributive obligation – one two or more of the prestations is due.
i. Alternative obligation – several prestations are due but the performance of
one is sufficient.
ii. Facultative obligation – only one prestation is due but the debtor may
substitute another.
 Meaning of Alternative Obligation
An alternative obligation is one wherein various prestations are due but the
performance of one of them is sufficient as determined by choice which, as a general rule,
belongs to the debtor.

Article 1200

 Right of choice, as a rule is given to the debtor

o It may be granted to the granted only when expressly granted to him, or by a third
person when the right is given to him by common agreement.
 Right of choice of debtor not absolute.
1. The debtor cannot choose those prestations which are: impossible, unlawful or which
could not have been the object of the obligation.
2. The debtor has no more right of choice when among the prestations whereby he is
alternatively bound only one is applicable.
3. The debtor cannot choose part of one prestation and part of another prestation.

Article 1201

 Until the choice is made and communicated, the obligation remains alternative. The burden of
proving that such communication has been made is upon him who made the choice.

Article 1202

 If only one is applicable, the obligation is converted into a simple one.

Article 1203

 The right given to the debtor to rescind the contract and recover damages if, through the
creditor’s fault, he cannot make a choice according to the terms of the obligation.
Article 1204

 Effect of loss of objects of obligation

1. Some of the objects – the debtor is not liable since the obligation can still be performed.
2. All of the objects – the creditor shall have the right to indemnity for the damages, but in
the case of a fortuitous event, the obligation is extinguished.
 Basis of indemnity
The value of the last thing which disappeared or that of the service which last became
impossible.

Article 1205

 The right of choice belongs to the debtor

 Rules in case of loss before the creditor has made a choice:
1. When a thing is lost through a fortuitous event – choose from among the remainder or
that which remains.
2. When a thing is lost through the debtor’s fault – The creditor may claim one of the
remaining alternatives with a right to damages or the price of the alternative lost also
with a right to damages.
3. When all things are lost through the debtor’s fault – The creditor can demand payment
of the price of any of the alternatives lost with a right to indemnity for damages.
4. When all things are lost through a fortuitous event – the obligation shall be
extinguished.

Article 1206

 Meaning of Facultative obligation

A facultative obligation is one where only one prestation has been agreed upon but the
obligor may render another in substitution.
 Effects of loss
1. Before substitution – The loss of the thing intended as a substitute with or without the
fault of the debtor does not render him liable.
2. After substitution – If the principal thing is lost, the debtor is not liable whatever may be
the cause of the loss.

Section 4 – Joint and solidary Obligations

Article 1207 and 1208

 Kinds of obligation according to the number of parties

1. Individual obligation
2. Collective obligation – may be joint or solidary
 Meaning of joint and solidary obligations
Joint obligation is one where the whole obligation is to be paid or fulfilled
proportionately by the different debtors and/or is to be demanded proportionately by
the different creditors

Solidary obligation or one where each one of the debtors is bound to render, and/ or
each one of the creditors has a right to demand from any of the debtors, entire
compliance with the prestation.
 Collective obligation is presumed to be joint
 Presumption is subject to rules on multiplicity of suits
 Words used to indicate joint liability.
1. Mancomunada 4. Proportionately
2. Mancomunadamente 5. We promise to pay
3. Pro rata
 When obligation is solidary, only when:
 1. The obligation expressly so states
2. The law requires solidarity
3. The nature of the obligation requires solidarity
 Words used to indicate solidary liability
1. Solidary 5. In solidum 9. Collectively
2. Jointly 6. Together 10. Juntos o
3. Severally 7. Separately separadamenete
4. Solidaria 8. Individually 11. I promise to pay
 Kinds of solidary
1. According to parties bound:
 Passive solidarity – solidarity on the part of the debtors
 Active solidarity – solidarity on the part of the creditors
 Mixed solidarity
2. According to source
 Conventional solidarity – where solidarity is agreed upon by the parties.
 Legal solidarity – where solidarity is imposed by the law
 Real solidarity – where solidarity is imposed by the nature of the obligation.
 Solidarity is not presumed.

Article 1209

 Joint indivisible obligation- It is joint as to liabilities of the debtors or rights of the creditors but
indivisible as to compliance.

Article 1210
  Indivisibility Solidarity
1. refers to prestation juridical tie
2. liable for damages only the debtor guilty of breach all debtors
3. existence only one debtor and one creditor at least two debtors or two creditors
4. insolvency others are not liable others are proportionally liable

Article 1211

 Kinds of solidarity
1. Uniform – when the parties are bound by the same stipulations
2. Non-uniform or varied – when the parties are not subject to the same stipulations.
 Solidarity not affected by diverse stipulations
The rule is that the creditor may bring his actions in toto against any of the solidary debtors less
the shares of the other debtors with unexpired terms or unfulfilled conditions who are entitled
to defense under Article 1222.

Article 1212

 A solidary creditor may do any act beneficial or useful to the others but he cannot perform any
act prejudicial to them.

Article 1213

 In the absence of consent given by the others, a solidary creditor cannot assign his rights to a
third person. If the assignment is made to a co-creditor; the consent of the other creditors is not
necessary.

Article 1214

 The rule is that the debtor may pay any one of the solidary creditors unless a demand, judicial or
extrajudicial has been made by one of them.
Article 1215

 Novation, compensation, confusion, remission are modes or causes of extinguishment of

obligations. It is but logical that the creditor who executed any of these acts should be liable to
the others for their corresponding shares considering that such acts are prejudicial to them.
 In a joint obligation, the said modifications do extinguish the obligation.

Article 1216

 In a solidary obligation, any one or some or all solidary debtors simultaneously, may be made to
pay the debt so long as it has not been fully collected.

Article 1217

 Effects of payment by a solidary debtor:

1. Between the solidary debtors and creditors – payment made by one of the solidary
debtors extinguishes the obligation.
2. Among solidary debtors – after payment of the debt, the paying solidary debtor can
demand reimbursement from his co- debtors for their proportionate shares with
interest only from the time of payment.
3. Among the solidary creditors – the receiving creditors is jointly liable to the others for
their corresponding shares.

Article 1218

 A solidary debtor is not entitled for reimbursement from his co-debtors after the obligation has
been prescribed or become illegal.
 Prescription – one acquires ownership and other rights through the lapse of time in the manner
and under the conditions laid down by law.

The following actions must be brought…

TEN YEARS SIX YEARS FOUR YEARS
Upon an injury to the rights
Upon a written contract Upon an oral contract
of the plaintiff
Upon an obligation created by
Upon a quasi-contract Upon a quasi-delict
law
Upon a judgement    

Article 1219

 If payment is made first, the remission or waiver is of no effect. There is no more obligation to
remit.
 This article secures equality and justice to the paying debtor inasmuch as the payment benefits
his co-debtors

Article 1220

 No right to reimbursement in case of remission.

Article 1221

 Loss is without fault and before delay – the obligation shall be extinguished.
 Loss is due to fault on the part of a solidary debtor – As far as the creditor is concerned, the fault
or delay of one solidary debtor shall be the fault or delay of all solidary debtors. The other
solidary debtors may recover from the debtor who is guilty of delay.
  Loss is without fault but after delay – The default made by one of the solidary debtors makes all
of the solidary debtors responsible even for a fortuitous event.

Article 1222

 Defenses available to a solidary debtor:

1. Defenses derived from the nature of the obligation.
2. Defenses personal to, or to which pertain to share of, debtor sued.
3. Defenses personal to other solidary debtors.

Article 1223

 Divisible Obligation – is one the object which, in its delivery or performance, is capable of
partial fulfilment.
 Indivisible Obligation – is one the object of which, in its delivery or performance, is not
capable of partial fulfilment.
 Test for Distinction:
1. the controlling circumstance is the purpose of the obligation or the intention of the
parties
2. Even if it is physically divisible, the obligation is indivisible if provided by law or intended
by parties, if not, it is indivisible.
3. The obligation is indivisible if there is only one creditor and only one debtor.
 Kinds of Division:
1. Qualitative Division – based on quality, not on number or quantity of the things which
are the object of the obligation.
2. Quantitative Division – based on quantity rather than on quality.
3. Ideal or Intellectual Division – one which exists only in the minds of the parties.
 Kinds of Indivisibility:
1. Legal Indivisibility – where a specific provision of law declares as indivisible, obligations
which, by their nature, are divisible.
2. Conventional Indivisibility – where the will of the parties makes as indivisible,
obligations which, by their nature, are divisible.
3. Natural Indivisibility – where the nature of the obligation or prestation does not admit
of division.
 When there is only one creditor and one debtor, the debtor has to perform the obligation in its
totality, whether or not the prestation is divisible. Unless there is an express stipulation to that
effect.

Article 1224

 Effect of Non-Compliance by a Debtor in a Joint Indivisible Obligation:

1. The obligation is converted is converted into one for damages
2. The creditor cannot ask for specific performance or rescission because there is no
cause of action against the other debtors who are willing to fulfil their promises.

Article 1225

 Obligations Deemed Indivisible:

1. Obligations to give definite things
2. Obligations which are not susceptible of partial performance
3. Obligations provided by law to be indivisible even if thing or service is physically
divisible
4. Obligations intended by the parties to be indivisible even if thing or service is
physically divisible
 Obligations Deemed Divisible:
1. Obligations which have for their object the execution of a certain number of days of
work
2. Obligations which have for their object the accomplishment of work by metrical units
3. Obligations which by their nature are susceptible of partial performance
  Divisibility or Indivisibility in Obligations
o For negative personal obligation, the character of the prestation in each case shall
determine their divisibility or indivisibility.
 Obligations “to do” or “not to do” are generally indivisible. Obligations “to do” that has
for its object the execution of a certain number of days of work, the accomplishment of work by
metrical units, or analogous things which by their nature are susceptible of partial performance
are divisible.

Article 1226

 Principal Obligation – is one which can stand by itself and does not depend for its validity and
existence upon another obligation.
 Accessory Obligation – is one which is attached to a principal obligation and, therefore, cannot
stand alone.
 Obligation with a Penal Clause – one which contains an accessory undertaking to pay a
previously stipulated indemnity in case of breach of the principal prestation, intended primarily
to induce its fulfilment.
 Penal Clause – an accessory undertaking attached to an obligation to assume greater liability in
case of breach.

 Purpose of Penal Clause:

1. To insure their performance by creating an effective deterrent against breach, making the
consequences of such breach as onerous as it may be possible. (General Purpose)
2. To substitute a penalty for the indemnity for damages and the payment of interests in case
of non-compliance or to punish the debtor for the non-fulfillment or violation of his
obligation.
 Penal Clause and Condition Distinguished:
1. Penal clause constitutes an obligation although accessory while condition does not
2. Penal clause may become demandable in default of the unperformed obligation and
sometimes jointly with it, while a condition is never demandable.
 Kinds of Penal Clause:
1. As to origin:
a. Legal Penal Clause – when it is provided by law
b. Conventional Legal Clause – when it is provided for by stipulation of the parties
2. As to its purpose:
a. Compensatory Penal Clause – when the penalty takes place of damages
b. Punitive Penal Clause – when the penalty is imposed merely as punishment for
breach
3. As to its demandability or effect:
a. Subsidiary or Alternative Penal Clause – when only the penalty can be enforced
b. Joint or Cumulative Penal Clause – when both the principal obligation and the penal
clause can be enforced.
 Penalty Substitutes for Damages and Interests
o As a general rule, in an obligation with a penal clause, the penalty takes the place of the
indemnity for damages and the payment of interests in case of non-compliance. Proof
of actual damages suffered by the creditor is not necessary in order that the penalty
may be enforced.
 When Creditor May Recover Damages:
- When so stipulated by the parties
- When the obligor refuses to pay the penalty, in which case the creditor may recover
legal interest thereon
- When the obligor is guilty of fraud in the fulfilment of the obligation, in which case
the creditor may recover damages caused by such fraud.
 When Penalty May be Enforced
o The penalty may be enforced only when it is demandable in accordance with the
provisions of the Civil Code. This means that the penalty, as a stipulation in a contract, is
 demandable only of there is a breach of the obligation and it is not contrary to law,
morals, good customs, public order, or public policy.

Article 1227

 Penalty Not Substitute for Performance

o Generally, the debtor cannot just pay the penalty instead of performing the obligation.
The purpose of the penalty is to secure compliance with his obligation. If the debtor is
allowed to pay the penalty, this would in effect make the obligation alternative at once.

 Penal Clause Presumed Subsidiary

o The creditor cannot demand the fulfilment of the obligation and the satisfaction of the
penalty at the same time. The primary purpose of penalty is to urge the debtor to the
performance of the main obligation.
1. Where there is performance – Once the obligation is fulfilled, this purpose is
attained and, therefore, there is no need for demanding the penalty. The
exception arises when “this right has been clearly granted” the creditor.
2. Where there is no performance – In case of non-compliance, the creditor may
ask for the penalty or require specific performance. The remedies are
alternative and not cumulative nor successive, subject to the exception that the
penalty may be enforced if after the creditor has decided to require fulfilment.
 When Penal Clause Joint
o The debtor has the right to pay penalty in lieu of performance only when this right has
been expressly reserved for him. With respect to the creditor, he has the right to
demand performance and payment of the penalty jointly when this right has been
clearly granted him.

Article 1228

 Proof of actual damages suffered by the creditor is not necessary in order that the penalty may
be demanded.

 Penalty Demanded Without Proof of Actual Damages

o The creditor has to prove, to enforce the penalty, the violation of the obligation by the
debtor. It is not necessary to adduce evidence to prove losses and damages suffered by
the creditor or the extent of the same. Indeed, one of the reasons of fixing the penalty is
to avoid such necessity and other difficulties involved in litigations.

 Damages Recoverable in Addition to Penalty must be proved

o Proof of actual damages suffered by the creditor is not necessary in order that the
penalty may be demanded, applies only where the penalty is fixed by the parties to
substitute the indemnity for damages.

Article 1229

 When penalty may be reduced by the Courts:

1. When there is partial or irregular performance – refers to the extent of fulfilment, the latter,
to the manner. As a general rule, an obligation is not deemed performed unless the thing or
service in which it consists has been completely delivered or rendered
2. When the penalty agreed upon is iniquitous or unconscionable – the penalty may be
reduced even if there is no performance at all. Even if iniquitous or unconscionable,
liquidated damages, whether intended as an indemnity or as a penalty, are not void, but
subject merely to equitable reduction.

Article 1230
  Effect of Nullity of the Penal Clause
o The general principle that the accessory follows the principal and not vice versa is
illustrated in: Article 1230 – The nullity of the penal clause does not carry with it that of
the principal obligation. The nullity of the principal obligation carries with it that if the
penal clause.
o If only the penal clause is void, the principal obligation remains valid and demandable.
The penal clause is just disregarded. The injured party may recover indemnity for
damages.
 Effect of Nullity of the Principal Obligation
o If the principal obligation is void, the penal clause is likewise void. But if the nullity of
the principal of the obligation is due to the fault of the debtor, who acted in bad faith,
by reason of which the creditor suffered damages, on equitable grounds, the penalty
may be enforced.

Article 1231

 Obligations are extinguished:

1. By payment or performance
2. By the loss of the thing due
3. By the condonation or remission of the debt
4. By the confusion or merger of the rights of creditor and debtor
5. By compensation
6. By novation
 Other Causes of Extinguishment of Obligations
1. Death of a party in case the obligation is a personal one
2. Mutual desistance or withdrawal
3. Arrival of resolutory period
4. Compromise
5. Impossibility of fulfilment
6. Happening of a fortuitous event

Article 1232

 Payment
- in ordinary parlance, payment refers only to the delivery of money
- as a legal mode of extinguishing an obligation, it has a much wider meaning.
Payment may consist of not only in the delivery of money but also the giving of a
thing, the doing of an act, or not doing of an act
- when the debtor pays damages or penalty in lieu of the fulfilment of an obligation,
there is also payment.

Article 1233

 When Debt is Considered Paid

A debt may refer to an obligation to deliver money, to deliver a thing, to do an act or not to do
an act:

1. Integrity of Prestation – A debt to deliver a thing or to render service is not understood to

have been paid unless the thing or service has been completely delivered or rendered, as the
case may be. Partial or irregular performance will not produce the extinguishment of an
obligation as a general rule.

2. Identity of the Prestation – The very prestation due must be delivered or performed.

Article 1234

 Recovery Allowed in case of Substantial Performance in Good Faith

 o Article 1234 is the first exception to the rule laid down in Article 1233. The reason for
the exception given by the Code Commission is as follows:
o “The above rule (Art. 1234) is adopted from American Law. Its fairness is evident. In case
of substantial performance, the obligee is benefited. So the obligor should be allowed to
recover as if there had been a strict and complete fulfilment less damages suffered by
the obligee. This last condition affords a just compensation for the relative breach
committed by the obligor.”
 Requisites for the Application of Article 1234
1. There must be substantial performance
2. The obligor must be in good faith

Article 1235

 Recovery Allowed when Incomplete or Irregular Performance is waived

o Article 1235 is another exception of Article 1233. It is founded on the principle of
estoppel. If the payment is incomplete or irregular, the creditor may properly reject it.
In case of acceptance, the law considers that he waives his right. The whole obligation is
extinguished.
 Requisites for the Application of Article 1235
- The oblige knows that the performance is incomplete or irregular
- He accepts the performance without expressing any protest or objection

Article 1236

 Persons from whom the creditor must accept payment

1. The debtor
2. Any person who has an interest in the obligation
3. A third person who has no interest in the obligation where there is stipulation that he can
make payments.
 Creditor may Refuse Payment by a Third Person
o “Under the old Civil Code, the creditor cannot refuse payment by a third person but the
Commission believes that the creditor should have a right to insist on the liability of the
debtor. Moreover, the creditor should not be compelled to accept payment from a third
person whom he may dislike or distrust. The creditor may not, for personal reasons,
desire to have any business dealings with a third person; or the creditor may not have
confidence in the honesty of the third person who might deliver a defective thing or pay
with a check which cannot be honored.”
 Effect of Payment by a Third Person
1. If made with out the knowledge or against the will of the debtor – The payer can recover
from the debtor only in so far as the payment has been beneficial to the latter.
2. If made with the knowledge of the debtor – The payer shall have the rights of
reimbursement and subrogation, that is, to recover what he has paid and to acquire all the
rights of the creditor.

Article 1237

 Right of a Third Person to Subrogation

o 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 or mortgage, guaranty, or penalty.
 Subrogation and Reimbursement Distinguished
- in subrogation, the person who pays for the debtor is put into the shoes of the
creditor. The payor acquires not only the right to be reimbursed for he has paid but
also all other rights which the creditor could have exercised pertaining to credit
either against the debtor or against third persons, be they guarantors or possessor
of mortgages.
 - In reimbursement, the third person entitled by reason of payment has merely the
bare right to be refunded to the extent provided in the second paragraph of Article
1236 without the right to the guarantees and securities of the original obligation.

Article 1238

 Payment of a Third Person who does not intend to be Reimbursed

o 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.

Article 1239

 Free Disposal of Thing Due – the thing to be delivered must not be subject to any claim or lien or
encumbrance of a third person
 Capacity to Alienate – the person is not incapacitated to enter into contracts and for that
matter, to make a disposition of the thing due.
 Free Disposal of Thing Due and Capacity to Alienate Required
o As a general rule, in obligations to give, payment by one who does not have the free
disposition of the thing due and capacity to alienate is not valid. This means that the
thing paid can be recovered.

Article 1240

 Person to whom payment shall be made

1. The creditor or obligee
2. His successor in interest
3. Any person authorized to receive it – not only a person authorized by the creditor but also a
person authorized by law to receive payment.

Article 1241

 Payments 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
2. If the creditor ratifies the payment to the third person
3. If by the creditor’s conduct, the debtor has been led to believe the third person had
authority to receive the payment.

 Effect of Payment in an Incapacitated Person

o Payment in an incapacitated person to administer or manage his property is not valid
unless such incapacitated person kept the thing paid or delivered or was benefited by
the payment.
 Effect of Payment to a Third Person
o Payment to a third person or wrong party is not valid except insofar as it has redounded
to the benefit of the creditor.
 When benefit to Creditor Need Not be Proved by Debtor
- Subrogation of the payer in the creditor’s right
- Ratification by the creditor
- Estoppel on the part of the creditor.

Article 1242

 Payment to third person in possession of credit

o It must be observed that the “possession” referred to under the above provision is
possession of the credit itself and not merely of the document of instrument evidencing
the credit.
Article 1243

 When payment of creditor not valid

o In an action against the debtor who is the creditor of another, the latter(the debtor-
stranger), during the pendency of the case, may be ordered by the court to retain the
debt until the right of the plaintiff, the creditor in the main litigation is resolved.

Article 1244

 Very Prestation Due must be Complied with

1. The first paragraph of Article 1244 refers to a real obligation to deliver a specific thing. A
thing different from that due cannot be offered or demanded against the will of the creditor
or debtor
2. The second paragraph of Article 1244 refers to personal obligations. The act to be
performed or the act prohibited cannot be substituted against the obligee’s will.
 When Prestation may be Substituted
o Subsitution can be made if the obligee consents. In facultative obligation, the debtor is
given the right to render another prestation in substitution.

Article 1245

 Special Forms of Payment

1. Dation in payment – is the conveyance of ownership of a thing as an equivalent of
performance
2. Application of payments
3. Payment by cession
4. Tender of payment and consignation

 Governing Law
o The law of sales governs because dation in payment may be considered a specie of sale
in which the amount of the money debt becomes the price of the things alienated.

 Rule of the Medium Quality

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

Article 1247

 Debtor pays for extrajudicial expenses

o The extrajudicial expenses of payment are for the account of the debtor. The reason is
that the obligation is extinguished when payment is made and it is, therefore, the
debtor who is primarily benefited.
 Losing party generally pays judicial costs
o Judicial Costs – Statutory amounts allowed to a party to an action for his expenses
incurred in the action. Under the Rules of Court, the costs of an action shall, as a rule be
paid by the losing party. The court may however for special reasons, adjudge that either
party shall pay the costs or that the same be divided as may be equitable.

Article 1248

 Performance of Obligation should be Complete

 o In order that payment may extinguish an obligation, it is necessary that there, be
complete performance of the prestation.
 When partial performance allowed
1. When there is an express stipulation to that effect
2. When the debt is in part liquidated and in part unliquidated
3. When the different prestations in which the obligation consists are subject to different
terms or conditions which comprehend several distinct prestations, it is evident that the
prestations need not be executed simultaneously but each successive execution thereof
must be complete.

Article 1249

 Legal Tender – that currency which a debtor can legally compel a creditor to accept in payment
of a debt in money when tendered in the right amount.
 Legal Tender in the Philippines
o Debts in money shall be paid in the currency stipulated. If it is not possible to deliver
such currency or in the absence of any stipulation to make payment in a foreign
currency, then the payment shall be made in the currency which is legal tender in the
Philippines. In the Philippines, all coins and notes issued by the Bangko Sentral ng
Pilipinas constitutes legal tender for all debts, both public and private.
o Unless fixed by the Monetary Board of the BSP, coins are legal tender for amounts not
exceeding P50.00 for denominations of P0.25 and above, and in those of amounts not
exceeding P20.00 for denominations of P0.10 or less.
 Payments by means of instruments or credits
1. Right of creditor to refuse or accept – Promissory notes, checks, bills of exchange and other
commercial documents are not legal and, therefore the creditor cannot be complied to
accept them.
2. Effect on obligation – Payment by means of mercantile documents does not extinguish the
obligation:
a. Unless they have been cashed
b. Unless they have been impaired through the fault of the creditor

Article 1250

 Inflation – a sharp sudden increase of money or credit or both without a corresponding increase
in business transactions. It causes a drop in the value of money resulting in the high prices.
 Deflation – the reduction in volume and circulation of the available money or credit, resulting in
a decline of the general price level.
 Basis of payment in case of extraordinary inflation or deflation
o The purchasing value of the currency at the time of the establishment of the obligation
shall be the basis of the payment, in case of any extra ordinary increase o r decrease in
the purchasing power of the currency which the parties could not have reasonably
foreseen. This is however, subject to the agreement of the parties in contrary.

Article 1251

 Place where obligation shall be paid

1. If there is a stipulation, the payment shall be made on the place designated.
2. If there is stipulation and the thing to be delivered is specific, the payment shall be made at
the place where the thing was, at the perfection of the contract.
3. If there is no stipulation and the thing to be delivered is generic, the place of payment shall
be the domicile of the debtor.
 Domicile – the place of a person’s habitual residence, the place where he has his true fixed
permanent home and to which he, whenever he is absent, has the intention of returning.

Article 1252

 Application of payments
 o It is the designation of the debt to which should be applied the payment made by a debtor
who has various debts of the same kind to one creditor
 Requisites
1) There must be one debtor and one creditor
2) There must be two or more debts
3) The debts must be of the same kind
4) The debts to which payment made by the debtor has been applied must be due
5) The payment must not be sufficient to cover all debts
 Application as to debts not yet due
1) There is stipulation that the debtor may so apply
2) It is made by the debtor or creditor for whose benefit the period has been constituted
 Rules
o The debtor has the first choice and must indicate which particular debt is being paid
o If the debtor does not apply payment, the creditor may make the designation
o If the creditor has also not made the application, or if the application is not valid, the debt
which is most onerous to the debtor shall be deemed to have been satisfied
o If the debts due are of the same nature and burden, the payment shall be applied to them
proportionately

Article 1253

 The debtor cannot choose to credit his payment to the principal before the interest is paid
 However, the rule is subject to any agreement between the parties

Article 1254

 When a debt more onerous than another

i) An interest bearing debt is more onerous than a non-interest bearing debt
ii) A debt as a sole debtor is more onerous than as a solidary debtor
iii) Debts secured by a mortgage or by pledge is more onerous than unsecured debts
iv) Of two interest bearing debts, the one with a higher rate is more onerous
v) An obligation with a penalty clause is more burdensome than one without

Article 1255

 Payment by cession
i) It is the assignment or abandonment of all properties of the debtor for the benefit of his
creditors in order that the latter may sell the same and apply the proceeds to the debts
 Requisites
i) There must be two or more creditors
ii) The debtor must be (partially) insolvent
iii) The cession must be accepted by the creditors
 Effect
i) The assignment does not make the creditors owners of the properties of the debtor
unless there is stipulation
ii) The debtor is released from his obligation only up to the net proceeds of the sale

Article 1256

 Tender of payment
i) The debtor’s act of offering to the creditor the thing or amount due
 Consignation
 i) The act of depositing the thing or amount due with the proper court when the creditor
does not desire or cannot receive it
 Requisites
i) Existence of a valid debt which is due
ii) Tender of payment by the debtor and refusal without justifiable reason by the creditor
to accept it
iii) Previous notice of consignation to persons interested in the fulfillment of the obligation
iv) Consignation of the thing or sum due
v) Subsequent notice of consignation made to the interested parties
 Tender of payment not required
i) When creditor informs his debtor that payment of a debt will not be accepted
 Requirements for valid tender of payments
i) Tender of payments must comply with the rules on payments
ii) It must be unconditional and for the whole amount
iii) It must actually be made

Article 1257

 In the absence of the prior notice to the persons interested in the fulfillment of the obligation,
the consignation shall be void
 Consignation must also comply to the provisions which regulate payment

Article 1258

 Consignation with the proper judicial authority is necessary to effect payment

 After consignation is made, the interested parties must also be notified thereof

Article 1259

 Expenses in consignation should be charged against the creditor, except when consignation is
not properly made

Article 1260

 The debtor can move for the cancellation of the of the obligation by the court
 The debtor can withdraw the thing or sum deposited before the creditor has accepted or
before judicial declaration

Article 1261

 The creditor may authorize the debtor to withdraw the deposit after accepting or
declaration
 The creditor shall lose every preference over the thing and the co-debtors, guarantors, and
sureties shall be released

Article 1262

 When loss of thing will extinguish liability

i) The obligation is to deliver a specific or determinate thing
ii) The loss of the thing occurs without fault of the debtor
iii) The debtor is not guilty of delay
 When loss of thing will not extinguish liability
i) When law so provides
ii) When the stipulation so provides
 iii) When the nature of the obligation requires assumption of risk
iv) When the obligation to deliver a specific thing arises from a crime

Article 1263

 Loss of a generic thing does not extinguish the obligation to give

 However, the creditor cannot demand a thing of superior quality nor can the debtor deliver
a thing of inferior quality

Article 1264

 Partial loss
o When only a portion of the thing is lost or destroyed
 In case of partial loss, the court is given the discretion whether it is so important as to
extinguish the obligation

Article 1265

 Loss of thing in possession of the debtor shall be presumed as the debtor’s fault
 However, in the case of natural calamities, the presumption of fault shall not be applied

Article 1266

 The impossibility of a performance, without the debtor’s fault, shall extinguish the
obligation
 Kinds of impossibility
i) Physical impossibility
ii) Legal impossibility

Article 1267

 The court is authorized to release the obligor in whole or part when the performance has
become so difficult as to be manifested beyond the contemplation of the parties

Article 1268

 When an obligation to give proceeds from a criminal offense, the loss of the thing due to
fortuitous events shall not extinguish the obligation

Article 1269

 The creditor is given the right to proceed against the third person responsible for the loss

Article 1270

 Condonation of remission
i) The gratuitous abandonment by the creditor of his right against the debtor
 Requisites
i) It must be gratuitous
ii) It must be accepted by the obligor
iii) The parties must have the capacity
iv) It must not be inofficious
v) If made expressly, it must comply with the forms
 Kinds of remission
i) As to extent
(1) Complete
 (2) Partial
ii) As to its form
(1) Express
(2) Implied
iii) As to its date of effectivity
(1) Inter vivos
(2) Mortis causa

Article 1271

 If the debtor voluntarily delivers the private document to the debtor, remission is presumed
 To nullify, it should be claimed as inofficious or should be proved by the debtor or his heirs
that delivery was in virtue of payment of debt

Article 1272

 If the private document is in possession of the debtor, it shall be presumed that it was
delivered voluntarily, unless proved otherwise

Article 1273

 Accessory obligations cannot exist without the principal but the latter may exist without the
former

Article 1274

 If the thing pledged of an accessory obligation is in possession of the debtor or a third party,
it shall be presumed that only the accessory obligation is remitted, not the obligation itself.

Section 4 – Confusion or Merger of Rights.

ARTICLE 1275

 Meaning of confusion or merger.

Confusion or merger is the meeting in one person of the qualities of creditor and debtor
with respect to the same obligation.
 Reason or basis for confusion.
(1) Mode of extinguishing obligations because if a debtor is his own creditor, enforcement
of the obligation becomes absurd since a person cannot claim payment from himself.
(2) The purposes for which the obligation may have been created are deemed realized.
 Requisites of confusion.
(1) Must take place between the principal debt and creditor.
(2) Must be complete.

ARTICLE 1276

 Merger in the person of the principal debtor or creditor extinguishes the obligation. The
accessory obligation of guaranty is also extinguished in accordance with the principle that
the accessory follows the principal.
 Merger, which takes place in the person of the guarantor, while it extinguishes the guaranty,
leaves the principal in force.

ARTICLE 1277

 Confusion in a joint obligation.

 (1) There are as many debts as there are debtors and as many credits as there are creditors.
(2) The debts and the credits being considered distinct and separate from one another.
(3) Extinguishment is only in the share corresponding to the creditor or debtor whom the
characters concur.
 Confusion in a solidary obligation.
(1) Merger in the person of one of the solidary debtors shall extinguish the entire
obligation.
(2) He who makes payment may claim reimbursement from his co-debtors for the shares
which correspond to them.

Section 5 – Compensation.

ARTICLE 1278

 Meaning of compensation.
Compensation is the extinguishment to the concurrent amount of the debts of two persons
who, in their own right, are debtors and creditors of each other.
 Compensation and confusion distinguished.
(1) Confusion
(a) There is only one person who is creditor and debtor of himself.
(b) There is one obligation.
(c) There is impossibility of payment.
(2) Compensation
(a) There are two persons involved.
(b) There are two obligations.
(c) There is indirect payment.
 Kinds of compensation
(1) By its effect or extent
(a) Total
(b) Partial
(2) By its cause or origin
(a) Legal
(b) Voluntary
(c) Judicial
(d) Facultative

ARTICLE 1279

 Requisites of legal compensation

(1) The parties are principal creditors and principal debtors of each other.
(2) Both debts consist in a sum of money, or of consumable things of the same kind and
quality.
(3) The two debts are due or demandable.
(4) The two debts are liquidated.
(5) No retention or controversy commenced by a third person.

ARTICLE 1280

 Compensation benefit guarantor.

(1) This article is an exception to the general rule that only the principal debtor can set up
against his creditor what the latter owes him.
(2) The extinguishment of the principal obligation as a consequence of compensation
carries with it the accessory obligations such as guaranty.
ARTICLE 1281

 Total and partial compensation.

(1) Total results when two debts are of the same amount.
(2) If of different amount, compensation is total with respect to smaller debts.
(3) If of different amount, compensation is partial with respect to larger debts.

ARTICLE 1282

 Voluntary compensation
(1) Voluntary or conventional compensation includes any compensation which takes place
by agreement of the parties even if all requisites for legal compensation are not present.

ARTICLE 1283

 Judicial compensation
(1) Compensation may also take place when so declared by a final judgment of a court in a
suit. A party may set off his claim for damages against his obligation to the other party
by proving his right to said damages and the amount thereof.

ARTICLE 1284

 Compensation of rescissible or voidable debts.

(1) Rescissible and voidable obligations are valid until they are judicially rescinded or
avoided.
(2) Prior to rescission or annulment, the debt may be compensated against each other.

ARTICLE 1285

 Compensation has taken place before assignment.

(1) When compensation takes effect by operation of law or automatically, the debts are
extinguished to the concurrent amount.
(2) If subsequently, the extinguished debt is assigned by the creditor to a third person, the
debtor can raise the defense of compensation with respect to the debt.
(3) Remedy of the assignee is against the assignor.
 Compensation has taken place after assignment.
(1) Assignment with the consent of debtor.
(2) Assignment with the knowledge but without the consent of debtor.
(3) Assignment without the knowledge of debtor.

ARTICLE 1286

 Applies to legal compensation.

 Refers to the expenses of monetary exchange and expenses of transportation
 Indemnity shall be paid by the person who raises the defense of compensation.
o Foreign exchange
o Exchange rate

ARTICLE 1287

 Compensation shall not be proper when one of the debts arises from a depositum or from
the obligations of a depositary or of a bailee in commodatum.

ARTICLE 1288

 When legal compensation is not allowed by law.

 (1) When one of the debts arises from a depositum.
(a) Deposit us constituted from the moment a person receives a thing belonging to
another with the obligation of safely keeping it and of returning the same.
(b) General rule, a bank has a right of set-off of the deposits in its hands for the
payment of any indebtedness to it on the part of a depositor.
(c) A depositor has every right to set off his money deposit with a bank against the
loans he had obtained from said bank.
(2) Where one of the debts arises from a commodatum.
(a) 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.
(3) Where one of the debts arises from a claim for support due by gratuitous title.
(4) Where one of the debts consists in civil liability arising from a penal offense.
(a) Compensation would be improper and inadvisable because the satisfaction of such
obligation is imperative.

ARTICLE 1289

 Compensation is similar to payment.

(a) If a debtor has various debts which are susceptible of compensation, he must inform
the creditor which of them shell be the object of compensation.
The compensation shall be applied to the most onerous obligation, in case the
debtor fails to do so.

ARTICLE 1290

 Consent of parties not required in legal compensation

(a) Compensation takes place automatically by mere operation of law.
(b) Full legal capacity of the parties not required.

Section 6 – Novation.

ARTICLE 1291

 Meaning of novation.
Novation is the extinction of an obligation through the creation of a new one which
substitutes it.
 Dual Function of novation.
Contract containing two stipulations:
(1) To extinguish or modify an existing obligation.
(2) To substitute a new one in its place.
 Kinds of novation.
(1) According to origin:
(a) Legal
(b) Conventional
(2) According to how it is constituted:
(a) Express
(b) Implied
(3) According to extent or effect:
(a) Total or extinctive
(b) Partial or modificatory
(4) According to the subject:
(a) Real or objective
 (b) Personal or subjective
(c) Mixed

ARTICLE 1292

 Requisites of novation.
(1) A previous valid obligation.
(2) Capacity and intention of the parties to modify or extinguish the obligation.
(3) The modification or extinguishment of the obligation
(4) The creation of a new valid obligation.
 Novation is not presumed.
Must be clearly and unmistakably established either:
(1) By the express agreement of the parties.
(2) Acts of equivalent import.
(3) By the incompatibility of the two obligations with each other in every material
respect.
 Test of incompatibility between two obligation and contracts.
(1) Stand together, each one having an independent existence.
(2) They cannot stand together. They are incompatible and the subsequent obligation
novates he first.

ARTICLE 1293

 Kinds of personal novation.

(1) Substitution.
(a) Expromision .
(b) Delegacion.
(2) Sudrogation.
 Right of new debtor who pays.
(1) In expromision, payment by the new debtor gives him the right to beneficial
reimbursement.
(2) If payment was made with the consent of the original debtor or on his own
initiative, the new debtor is entitled to reimbursement and subrogation.

ARTICLE 1294

 Effect of new debtor’s insolvency or non-fulfillment of the obligation in expromision

o It will not revive the action of the creditor against the old debtor whose obligation is
extinguished by the assumption of the debt by the new debtor.

ARTICLE 1295

 Effect of new debtor’s insolvency or non-fulfillment of the obligation in delegacion.

(1) General rule: The old debtor is not liable to the creditor in case of the insolvency of the
new debtor.
The exceptions are:
(a) The said solvency as already existing and of public knowledge at the time of the
delegacion.
(b) The insolvency was already existing and known to the debtor at the time of the
delegacion.

ARTICLE 1296

 Effect of novation on accessory obligations.

 (1) General rule: The extinguishment of the principal obligation carries with it that of the
accessory obligations.
The exception:
(a) An accessory obligation created in favor of a third person which remains in force
unless said third person give his consent to the novation.

ARTICLE 1297

 Effect where the new obligation void.

(1) General rule: There is no novation if the new obligation is void and. Therefore, the
original one shall subsist for the reason that the second obligation being inexistent, it
cannot extinguished or modify the first.
The exception:
(a) The parties intended that the old obligation should be extinguished in any event.
 Effect where the new obligation voidable.
(1) If the new obligation is only voidable, novation can take place.
(2)

ARTICLE 1298

 Effect where the old obligation void or voidable.

(1) A void obligation cannot be novated because there is nothing to novate.
(2) If the original is only voidable or if the voidable obligation is validated by ratification,
the novation is valid.

ARTICLE 1299

 Presumption where original obligation subject to a condition.

The second obligation is deemed subject to the same condition unless the contrary is
stipulated by the parties in their contract.

ARTICLE 1300

 Meaning of subrogation.
Subrogation is the substitution of one person (subrogee) in the place of a creditor (subroger)
with reference to a lawful claim or right, giving the former all the rights of the latter,
including the right to employ all remedies to enforce payment.
 Kinds of subrogation.
(1) Conventional – takes place by express agreement of the original parties and the
third person.
(2) Legal – takes place without agreement but by operation of law.

ARTICLE 1301

 Consent of all parties required in conventional subrogation.

(1) The debtor.
(2) The old creditor.
(3) The new creditor.

ARTICLE 1302

 Case of legal subrogation

(1) When a creditor pays another creditor who is preferred.
(2) When a third person without interest in the obligation pays with the approval of the
debtor.
 (3) When a third person with interest in the obligation pays even without the
knowledge of the debtor.

ARTICLE 1303

 Effect of legal subrogation.

(1) To transfer to the new creditor the credit and all rights and actions that could have
been exercised by the former creditor either against the debtor or against third
person, be they guarantors or mortgagors.

ARTICLE 1304

 Effect of partial subrogation.

(1) The creditor to whom partial payment has been made by the new creditor remains
a creditor to the extent of the balance of the debt.
(2) In case of insolvency of the debtor, he is given a preferential right under the article
1304 to recover the remainder against the new creditor.