EXTINGUISHMENT OF

OBLIGATIONS PART 2
LAW 421 CIVIL LAW REVIEW II
2nd Semester. A.Y 2022-2023
JENNIFER N. ASUNCION, LL.B., LL.M
MODES OF EXTINGUISHMENT

a. Loss of the thing due;

b.Condonation or Remission of a Debt;
c. Confusion or Merger;
d.Compensation; and,
e.Novation
LOSS OF THE THING DUE
Art. 1189,NCC:
LOSS:
a. It perishes;
b. Goes out of commerce; or,
c. Disappears in such a way that its existence is
unknown or it cannot be recovered.
GENERAL RULE
• The obligation may be extinguished by the loss of the
thing provided the following requisites are present:
a. The obligation to deliver is a determinate thing;
b. The thing is lost without the fault of the debtor;
and,
c. The thing is lost before the debtor has incurred
delay.
EXCEPTIONS
a. When the law so provides;
b. When the stipulation so provides;
c. When the nature of the obligation requires the assumption of risk;
d. When the loss of the thing occurs AFTER the debtor has incurred in
delay;
e. When the loss occurs with the fault of the debtor;
f. When the debtor promised to deliver the same thing to two or more
persons who do not have the same interest (Art. 1165, NCC);
g. When the obligation is to deliver a generic thing (Art. 1263, NCC); or,
h. When the obligation to deliver a thing arises from a crime. (Art. 1268,
NCC)
PARTIAL LOSS OF A SPECIFIC THING
• Art. 1264, NCC
PARTIAL LOSS – only a portion of the thing is lost or destroyed or when
it suffers depreciation or deterioration.
Partial loss is equivalent to difficulty of performance in obligations to
do. (Art. 1267, NCC)
GENERAL RULE: Partial loss of the object of the obligation does not
extinguish the obligation.
EXCEPTION: When the courts determine that the partial loss of the
object of the obligation is so important as to extinguish the obligation.
PRESUMPTION OF FAULT
•Art. 1265, NCC
GENERAL RULE: If the thing is lost while in the
possession of the debtor, it shall be presumed
that the loss was due to his fault, unless there is
proof to the contrary.
EXCEPTION: The general rule does not apply in
case of earthquake, flood, storm or other natural
calamity.
IMPOSSIBILITY OF PERFORMANCE –
OBLIGATIONS TO DO
•Art. 1266, NCC
RULE: The debtor in obligations to do shall
also be released when the prestation
becomes legally or physically impossible
without the fault of the obligor.
DIFFICULTY OF PERFORMACE
•Art. 1267, NCC
•Doctrine of Unforeseen Events
RULE: When the performance of the service has
become so difficult as to to manifestly beyond the
contemplation of both parties, the court is
authorized to release the obligor in whole or in
part.
EFFECT OF FORTUITOUS EVENT WHERE
OBLIGATION PROCEEDS FROM A CRIMINAL
OFFENSE
GENERAL RULE: The debtor shall not be exempted from
the payment of the price of the determinate thing,
whatever may be the cause for loss. Thus, even if the
cause for the loss of the determinate thing is through
fortuitous event.
EXCEPTION: The thing having been offered by the debtor
to the person who should receive it, the creditor refused
without justification to accept it – MORA ACCIPIENDI.
RIGHT OF THE CREDITOR TO PROCEED
AGAINST THIRD PERSONS
Art. 1269, NCC
The obligation having been extinguished by
the loss of the thing, the creditor shall have
all the rights of action which the debtor may
have against third persons by reason of the
loss.
CONDONATION OR REMISSION OF A DEBT
• Art. 1270, NCC
Condonation or Remission – Act of liberality. The gratuitous abandonment
by the creditor of his right against the debtor.
The creditor renounces the enforcement of the obligation.
REQUISITES OF CONDONATION:
a. It must be gratuitous;
b. It must be accepted by the obligor;
c. The parties must have capacity;
d. The condonation must not be inofficious; and,
e. The condonation must comply with the forms of donation, if it is an
express condonation.
KINDS OF CONDONATION OR REMISSION
AS TO FORM:
a. Express;
b. Implied
AS TO EXTENT:
a. Total;
b. Partial
AS TO CONSTITUTION:
a. Inter Vivos;
b. Mortis Causa
PRESUMPTION IN CASE OF VOLUNTARY DELIVERY
OF DOCUMENT OF INDEBTEDNESS BY THE
CREDITOR
Art. 1271, NCC
1st Paragraph, RULE:
a. Prima facie Presumption of Condonation;
b. May be rebutted by contrary evidence; and,
c. Presumption is applicable only to PRIVATE
DOCUMENTS.
2 Paragraph:
nd

Remission becomes null and void

upon proof that it is inofficious.
PRESUMPTION IN CASE DOCUMENT IS
FOUND IN POSSESSION OF THE DEBTOR
•Art. 1272, NCC
•Presumption of Voluntary Delivery
•Presumptions in Joint or Solidary
Obligations
CONDONATION – PRINCIPAL AND ACCESSORY
OBLIGATIONS
• Arts. 1273 & 1274, NCC
PRINCIPAL AND ACCESSORY OBLIGATIONS:
If the condonation refers to the principal obligation, all the
accessory obligations are extinguished. However, if the
condonation refers only to the accessory obligations, the
principal obligation continues to subsists.
PLEDGE – Accessory Obligation
Art. 2098, NCC
CONFUSION OR MERGER OF RIGHTS
• Art. 1275 & 1276, NCC
CONFUSION OR MERGER – The meeting in the same person of the qualities
of creditor and debtor with respect to one and the same obligation.
RATIONALE: Obligation becomes absurd, since one cannot claim against
himself.
REQUISITES:
a. The merger of the characters of the creditor and debtor must be in the
same person;
b. The merger must take place in the person of either the principal creditor
or the principal debtor; and,
c. The merger must be complete and definitive.
CONFUSION – JOINT OR SOLIDARY
OBLIGATIONS
JOINT OBLIGATIONS:
If the confusion takes place in one of the joint debtors,
the principal obligation is partially extinguished up to
the share which corresponds to him.
SOLIDARY OBLIGATIONS:
Entire obligation is extinguished subject to
reimbursement.
COMPENSATION
• Art. 1278, NCC
• COMPENSATION – Reciprocal extinction of claims between mutual
debtors.
• “CUM PONDER”
COMPENSATION CONFUSION
Two persons, who with their right are One person in whom is merged the
creditors and debtors of each other qualities of a creditor and debtor
There must be at least two debts There is only one obligation.
KINDS OF COMPENSATION
AS TO CAUSE:
a. Legal (Art. 1279);
b. Voluntary or Conventional (Art. 1282, NCC)
c. Judicial; (Art. 1283)
d. Facultative.
AS TO EFFECT: (Art. 1281)
a. Total;
b. Partial.
LEGAL COMPENSATION
• Art. 1279, NCC
REQUISITES:
a. The parties are principal creditors and debtors of each other; (NB: Read
Art. 1280, NCC)
b. Both debts consist in a sum of money, or of consumable things of the
same kind and quality;
c. The two debts must be due and demandable;
d. The two debts are liquidated; and,
e. No retention or controversy commenced by a third person.
NB: Automatic Compensation if all requisites are present. (Art. 1290, NCC)
EXCEPTION

Art. 1279, NCC

The parties are principal creditors and
principal debtors of each other
Exception Art. 1280
The guarantor may set up compensation as
regards what the creditor may owe the
principal debtor.
LEGAL COMPENSATION CANNOT TAKE PLACE
Art. 1287, NCC
a. When one debt arises from a depositum;
b. When one debt arises from the obligations of a
bailee in commadatum;
c. Where one of the debt arises from a claim for
support due by gratuitous title or;
d. When one debt consists in civil liability arising
from a penal offense. (Art. 1288, NCC)
RULES OF APPLICATION OF PAYMENTS SHALL
APPLY TO ORDER OF COMPENSATION
•Art. 1289, NCC:
RULES: Arts. 1252 & 1254, NCC
a. Debtor’s choice;
b. Debtor’s consent – in case creditor chooses;
c. Onerous debts;
d. Proportionate application.
VOLUNTARY OR CONVENTIONAL
COMPENSATION
• Art. 1282, NCC
• Parties agree to the mutual extinguishment of their credits
or to compensate their mutual obligations even in the
absence of the legal requisites.
REQUISITES:
a. Each of the parties can dispose of the credit he seeks to
compensate; and,
b. That they agree to the mutual extinguishment of their
credit.
COMPENSATION IN CASE OF RESCISSIBLE OR
VOIDABLE DEBTS
RULE: Valid until judicially rescinded
or voided.
Prior to rescission or annulment, the
debts may be compensated against
each other.
EFFECT OF ASSIGNMENT ON COMPENSATION
OF DEBTS
Art. 1285, NCC
Debtor consents Debtor can invoke
compensation unless
reserved
ASSIGNMENT OF Debtor did not consent Debtor may invoke
RIGHTS BY compensation previous to
CREDITOR TO 3rd the assignment
Debtor not aware Debtor may invoke
PERSON
compensation until
knowledge of assignment
NOVATION
• NOVATION – understood as the substitution or change of an
obligation by another, which extinguishes or modifies the first.
MODES (Art. 1291, NCC)
a. Changing their object or principal conditions;
b. Substituting the person of the debtor; or.
c. Subrogating a third person or the right of the creditor.
DUAL PURPOSE/FUNCTION OF NOVATION:
a. It extinguishes an obligation; and,
b. It creates a new one in lieu of the old one
KINDS OF NOVATION
AS TO THE SUBJECT:
a. Real or Objective;
b. Personal or Subjective; or,
c. Mixed.
AS TO CONSTITUTION:
a. Express; or,
b. Implied.
AS TO EXTENT:
a. Total/Extinctive;
b. Partial/Modificatory.
AS TO ORIGIN:
a. Legal; or,
b. Conventional.
REQUISITES OF NOVATION
• Art. 1292, NCC (EXPRESS NOVATION)
a. There must be a previous valid obligation;
b. There must be an agreement ;
c. There must be the extinguishment of the old contract;
and,
d. There must be the validity of the new contract.
NB: Absence of an express agreement, novation takes place
only when the old and new obligations are INCOMPATIBLE on
every point.
TEST OF INCOMPATIBILITY

•Whether the two (2) obligations can

stand together, each one with its own
independent existence. If they cannot,
they are incompatible and the latter
obligation novates the same.
PERSONAL NOVATION

KINDS:
A.SUBSTITUTION – substituting the person
of the debtor.
B.SUBROGATION – subrogating a third
person in the rights of the creditor.
SUBSTITUTION
KINDS:
A. EXPROMISION – takes place when a third person of
his own initiative and without the knowledge or
against the will of the original debtor assumes the
latter’s obligation with the consent of the creditor.
EFFECT: Old debtor is RELEASED from his obligation;
otherwise there is no expromision
REQUISITES OF EXPROMISION
a. The initiative must come from a third person;
b. The new debtor and the creditor must consent; and,
c. The old debtor must be released from his obligation.
ILLUSTRATION: A is indebted to B in the amount of
P300,000.00. C, a friend of A approaches B and tells him “I will
pay you what A owes you”. B agreed.
TRUE EXPROMISION: “I will pay you what A owes you. From
now on, consider me your debtor, not A”.
B. DELEGACION – substitution of the person of the
debtor may be effected by: the debtor offers and the
creditor accepts a third person who consents to the
substitution and assumes the obligation; thereby
releasing the original debtor from the obligation.
NB: All parties must consent.
PARTIES: DELEGANTE (OD) - DELEGATARIO (C) -
DELEGADO (ND)
REQUISITES OF DELEGACION
a. The initiative comes from the old debtor;
b. All the parties concerned must consent;
c. The old debtor must be excused or released from his
obligation.
RIGHTS OF THE NEW DEBTOR: (Arts. 1236 & 1237, NCC)
1. Payment is made without the knowledge or against the will
– beneficial reimbursement – expromision.
2. Payment is made with consent and knowledge –
reimbursement and subrogation – delegacion.
EFFECT OF INSOLVENCY OR NON-
FULFILLMENT BY NEW DEBTOR
IN EXPROMISION:
It will NOT REVIVE the action of the creditor against the old creditor.
IN DELEGACION:
General Rule: The insolvency of the new debtor shall not revive the
action of the creditor against the original debtor.
Exception:
1. The insolvency was already existing and of public knowledge at the
time of the delegacion; or,
2. The insolvency was already existing and known to the debtor at the
time of the delegacion.
ART. 1295 DOES NOT APPLY IF:
a. The third person was only an agent, messenger or
employee of the debtor;
b. The third person acted only as guarantor or surety;
c. When the new debtor merely agreed to make
himself solidarily liable for the obligation; or,
d. When the debtor merely agreed himself to make
himself jointly or partly liable for the obligation.
EFFECT OF NOVATION ON ACCESSORY
OBLIGATIONS
GENERAL RULE: When the principal obligation is
extinguished as a consequence of novation,
accessory obligations are also extinguished.
EXCEPTION: STIPULATION POUR AUTRUI
Accessory obligations may subsist only in so far as
they may benefit third persons who did not give
their consent.
EFFECT IF THE NEW OBLIGATION IS VOID
GENERAL RULE: If the new obligation is void, the original one
shall subsists
If the new obligation is subject to a condition and said
condition did not materialize, the old obligation subsists.
If the new obligation was intended, but the new contract was
never perfected, the old obligation subsists.
EXCEPTION: When the parties intended that the former
relation should be extinguished in any event.
•NEW OBLIGATION IS MERELY VOIDABLE
•Old obligation is novated because a voidable
obligation is valid until it is annulled.
•If the new obligation is annulled, the old
obligation subsists and whatever novation has
taken place will naturally have to be set aside.
EFFECT IF THE OLD OBLIGATION IS VOID
General Rule: The novation is void if the original
obligation is void.
Exception: VOIDABLE
1. Annulment may be claimed only by the debtor.
2. When ratification validates acts which are
voidable.
OLD OBLIGATION WAS EXTINGUISHED BY
LOSS
RULES:
1. If the loss was purely because of fortuitous
event – the novation is void or there is no
novation.
2. If the loss made the debtor liable, there is still
an existing monetary obligation – may be
subject to novation.
ORIGINAL OBLIGATION WAS CONDITIONAL

GENERAL RULE: The conditions attached

to the old obligation are also attached to
the new obligation (Art. 1299, NCC)
EXCEPTION: If there is a contrary
stipulation.
SUBROGATION

•The transfer to a third person of all the

rights appertaining to the creditor,
including the right to proceed against
guarantors, possessors of mortgages,
subject to any legal provision or any
modification that may be agreed upon.
KINDS OF SUBROGATION
AS TO CAUSE OR ORIGIN:
a. Conventional or Voluntary Subrogation;
b. Legal Subrogation
AS TO EXTENT:
a. Total Subrogation;
b. Partial Subrogation.
CONVENTIONAL SUBROGATION v.
ASSIGNMENT OF RIGHTS
CONVENTIONAL SUBROGATION ASSIGNMENT OF RIGHTS
Transfer of ALL rights of the creditor to a Only to the extent as the assignor could
third person have enforced it against the debtor
Debtor’s consent is necessary Debtor’s consent is not necessary
Extinguishes an obligation and gives rise Refers to the same right which passes
to a new one from one person to the other
Nullity of an old obligation may be cured Nullity of an obligation is not remedied
by subrogation by assignment of the creditor’s right.
CONVENTIONAL OR VOLUNTARY
SUBROGATION
NB: The consent of ALL parties are
REQUIRED:
a.Debtor;
b.Old Creditor; and,
c. New Creditor.
LEGAL SUBROGATION
• Takes place without agreement but by operation of law
because of certain acts.
A. When a creditor pays another creditor who is preferred
even without the debtor’s consent.
B. When a third person, not interested in the obligation, pays
with the express or tacit approval of the debtor.
C. When even without the knowledge of a debtor, a person
interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the
latter’s share.
EFFECTS OF LEGAL SUBROGATION

Art. 1303, NCC

EFFECT: Transfer to the new creditor the
credit with all the rights and action that
could have been exercised by the former
creditor against the debtor or against third
persons.
PARTIAL SUBROGATION

•Art. 1304, NCC

TWO (2) CREDITORS:
a. Old Creditor – who remains to be a
creditor as to the balance; and,
b. New Creditor – creditor to the extent of
what he had paid the creditor.