Chapter 4 (Section 1)

STUDY GUIDE

I. Definition
Define or give the meaning of the following:
1. Payment
- Payment, the performance of an obligation to pay money. A person under
such an obligation is called a debtor, and a person to whom the obligation is
owed is called a creditor. The obligation may arise in various ways, but it is
most commonly the result of a commercial transaction or contract between the
parties. In law, in order that payment may extinguish the obligation, it is
necessary that it be made at a proper time and place, in a proper manner, and
by and to a proper person.
2. Dation in payment
- A mode of discharging a debt or claim by the debtor's giving to the creditor
with the latter's consent something in full satisfaction of the obligation but of a
character different from that originally called for by the obligation.
3. Application of payment
- Application of payments 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
in favor of one and the same creditor.
4. Payment by cession
- Payment by cession is another special form of payment. It is the assignment or
abandonment of all the properties of the debtor for the benefit of his creditors
in order that the latter may sell the same and apply the proceeds thereof to the
satisfaction of their credits.
5. Consignation
- Consignation is the act of depositing the thing due with the court or judicial
authorities whenever the creditor cannot accept or refuses to accept payment
and generally requires a prior tender of payment.
II. Discussions
1. May an obligor recover although there has been no strict and complete fulfillment
by him of his obligation?
- If the obligation has been substantially performed in good faith, the obligor
may recover as though there had been a strict and complete fulfillment, less
damages suffered by the oblige.
2. What must be delivered when the obligation consists of:
a. The delivery of a specific thing?
 If the subject of an obligation is the delivery of a specific thing, the
person making performance must deliver the thing in connection in
which it is at the same time when delivery is to be made.
b. The delivery of a generic thing?
 The thing to be delivered cannot be substituted against the obligee’s
will.
3. When is partial performance of an obligation allowed?
- Partial performance of an indivisible obligation extinguishes a corresponding
proportion of the obligation if the benefit of the performance is voluntarily
retained by the creditor, but not otherwise.
4. What must a debtor do to be released from his obligation if the creditor refuses to
accept payment without any justifiable reason?
- If the creditor to whom tender of payment has been made refuses without just
cause to accept It, the debtor shall release from responsibility by the
consignation of the thing or sum due.
5. Give the requisites of payment by cession. What rights are acquired by the
creditor in this form of payment as distinguished from dation on payment?
- Payment by cession is another special form of payment. It is the assignment or
abandonment of all the properties of the debtor for the benefit of his creditors
in order that the latter may sell the same and apply the proceeds thereof to the
satisfaction of their credits.
- Requisites of payment by cession: 1) There must be two or more creditors 2)
The debtor must be (partially) insolvent 3) The assignment must involve all
 the properties of the debtor; and 5) The cession must be accepted by the
creditors.
III. Problems
Explain or state briefly the rule or reason for your answer.
1. D (debtor) owes C (creditor) P10,000 with G as guarantor. On the due date of the
obligation, T, a third person, offered to pay the obligation of D. Can C legally
refuse to accept the payment? How about an offer of payment from G?
- Yes, C can refuse to accept the payment of T. The third person may have the
payment of P10,000 but the creditor may insist on his right on the liability of
the debtor.
- Yes, C can accept the payment from G. As G being the guarantor, which is a
person who has an interest in the obligation.
2. M (maker) issued promissory note for P10,000 in favor of P (payee) who lost the
note which was found by T who demands payment from M. M did not know that
the note was lost by P. Is M justified in paying T?
- Yes. In Article 1242, “Payment in good faith to any person in possession of
the credit shall release the debtor.” With the possession of the promissory note
of T, M should pay the amount of P10,000 stated in the promissory note. If M
did not know that P lost the note, so it will be under the payment in good faith.
After paying the amount of P10,000 to T, M is not liable anymore to any
payments to P.
3. D owes C P10,000 which was paid by T who demands reimbursement from D.
a. When is D liable to T?
 D become liable to T when T claims the reimbursement and D cannot
pay it.
b. When is D not liable to T?
 D is not liable to T when it is verbally spoken with no witnesses.

c. When is D liable for less than P10,000 to T?

  T paid P10,000 to C without the knowledge or against the will of D.
And if D paid P4,000 to C, then T can only reimburse P6,000 because
it is the only amount benefited to D.
4. D owes C P10,000. Without the knowledge of C, D in good faith paid to T his
obligation to C. Is D required by law to prove that the payment has been received
by C in order to be released from liability?
- Proof is not necessary if, after payment, T acquired C’s right against D, or C
ratified or subsequently consented to the payment to T, or if before payment,
D has been led to believe by C’s conduct or fault that T had authority to
receive the payment even if T had, in fact, no such authority.
5. D owes C P10,000 in payment for which C accepts a check from D. On the
ground that a check is not legal tender, C later insists that D pay him in cash. Is D
justified in rejecting this demand of C?
- C can legally refuse to accept check from D and insist on payment in cash
because payment in cash and in legal tender is implied here. He has the legal
right to treat their contract as reached unless D complies.