EXTINGUISHMENT OF OBLIGATION Art. 1233.

A debt shall not be understood

to have been paid unless the thing or
Art. 1231. Obligations are extinguished: service in which the obligation consists
has been completely delivered or
(1) By payment or performance: rendered, as the case may be. (1157)
(2) By the loss of the thing due:
(3) By the condonation or remission of the Note:
debt; Completeness of Payment
(4) By the confusion or merger of the rights
of creditor and debtor; Requisites for a valid payment under this
(5) By compensation; Article:
(6) By novation.
● The very thing or service
contemplated must be paid.
Other causes of extinguishment of
● Fulfillment must be complete.
obligations, such as annulment, rescission,
fulfillment of a resolutory condition, and How payment or performance is made:
prescription, are governed elsewhere in this
Code. (1156a) ● If the debt is a monetary obligation,
by delivery of the money. The
Payment or Performance: amount paid must be full, unless of
course otherwise stipulated in the
Art. 1232. Payment means not only the
contract. (Note: The term
delivery of money but also the
“indebtedness” has been defi ned as
performance, in any other manner, of an
an unconditional and legally
obligation. (n)
enforceable obligation for the
Note: payment of money. Within that defi
nition, it is apparent that a tax may
● Payment is that mode of be considered as an indebtedness.)
extinguishing obligations which ● If the debt is the delivery of a thing
consists of: (a) the delivery of or things, by delivery of the thing or
money, or (b) the performance in things.
any other manner of an obligation. ● If the debt is the doing of a personal
(Example: rendition of the required undertaking, by the performance of
service). said personal undertaking.
● A person pays a pre-existing ● If the debt is not doing of something,
obligation. If no such obligation by refraining from doing the action.
exists, strictly speaking there is no
payment. Burden of proof: An alleged creditor has
● For payment to properly exist, the the burden of showing that a valid debt
creditor has to accept the same, exists. Once he does this, the debtor has
expressly or implicitly. Payment, for the burden of proving that he has paid the
valid reasons, may properly be same. Thus, if a promissory note is still in
rejected. the creditor’s possession, the presumption
● If the judgment upon which the is that it has not yet been paid.
aggrieved party made payment is
Proving of payment: One good proof is the
null and void, the payment made
presentation of the receipt. A debtor is
thereunder is also null and void
justified in demanding that a creditor issue a
receipt when the debt is paid.
Art. 1234. If the obligation has been objection, the obligation is deemed fully
substantially performed in good faith, complied with. (n)
the obligor may recover as though there
had been a strict and complete Note:
fulfillment, less damages suffered by the
obligee. (n) Estoppel on the Creditor’s Part in View
of His Acceptance: The presence of
Note: WAIVER and ESTOPPEL.

Substantial Performance in Good Faith There is a possibility that a protest or

objection can be made. Hence, there is
The above rule (Art. 1234) is adopted from what is called “qualifi ed acceptance of
American Law. Its fairness is evident. In incomplete or irregular payment.” Be it
case of substantial performance, the obligee remembered that a creditor who gives a
is benefits ted. So the obligor should be receipt for a partial payment does not
allowed to recover as if there had been a necessarily acquiesce to such incomplete
strict and complete fulfillment, less damages payment. His actuations may show his
suffered by the obligee. This last condition dissatisfaction.
affords a just compensation for the relative
breach committed by the obligor. (Report of Art. 1236. The creditor is not bound to
the Code Commission, p. 131). accept payment or performance by a
third person who has no interest in the
It must be noted that the liability of the fulfillment of the obligation, unless there
debtor for damages suffered by the creditor is a stipulation to the contrary.
in case of substantial performance does not
arise under the conditions set forth in Art. Whoever pays for another may demand
1235 of the Civil Code. from the debtor what he has paid, except
that if he paid without the knowledge or
Inasmuch as substantial performance in against the will of the debtor, he can
good faith may already be equivalent to recover only insofar as the payment has
“fulfillment” or “payment,” it follows that the been beneficial to the debtor. (1158a)
right to rescind (mentioned in Art. 1191)
cannot be used simply because there have Right of Creditor to Refuse Payment by
been slight breaches of the obligation. In Third Person: if there is a stipulation
fact, such right to rescind is not absolute, allowing this; or if said third person has an
and therefore the Court may even grant, at interest in the fulfi llment of the obligation
its discretion, a period to a person in default, (co-debtor, guarantor, even a joint debtor).
within which the obligation can be fulfilled.
Payment by a Third Person:
Substantial performance or compliance
is, in a sense, a performance according to ● With the knowledge and consent of
the fair intent of the contract, with an the debtor. (Here, the payor is
attempt in good faith to perform. entitled to REIMBURSEMENT and
SUBROGATION to such rights as
Fair dealing and equity demand a faithful guaranty, penalty clause, or
compliance of one’s contractual obligations. mortgage.)
● Without the debtor’s knowledge or
Art. 1235. When the obligee accepts the against his will. (Here, the payor is
performance, knowing its not entitled to subrogation;
incompleteness or irregularity, and moreover, he is allowed only
without expressing any protest or BENEFICIAL REIMBURSEMENT.)
Other instances when recovery can be had Some Rights Which May Be Exercised by
from the creditor and not from the innocent the Person Subrogated in the Place of
debtor: the Creditor: mortgage; guaranty; penalty
or penal clause.
● when the debt had prescribed
● when the debt had been completely Subrogation vs Reimbursement:
remitted
● when the debt has already been Subrogation Reimbursement
paid
● when legal compensation had recourse can be there is no such
already taken place had to the recourse.
mortgage or
Art. 1237. Whoever pays on behalf of the guaranty or pledge
debtor without the knowledge or against
the will of the latter, cannot compel the the debt is the new creditor
creditor to subrogate him in his rights, extinguished in one has different rights,
such as those arising from a mortgage, sense, but a new so it is as if there
guaranty, or penalty. (1159a) creditor, with has indeed been an
exactly the same extinguishment of
When No Subrogation Exists: Under the rights as the old the obligation.
article of the old Civil Code, no mention was one, appears on the
made in case the payor paid against the will scene.
of the debtor. Furthermore, no examples of
subrogation were made. The amendment, there is something there is only a
however, does not effect any radical change more than a personal action to
in the law inasmuch as even under the old personal action of recover the amount.
Civil Code, our jurisprudence has ruled that recovery
one who pays without the knowledge of the
debtor has no right to subrogation. Hence,
Similarity:
with less reason should a payor against the
will of the debtor be entitled to subrogation. There can be recovery of what the stranger
Under the old Civil Code too, the concept of “has paid” (not necessarily the amount of
subrogation and the rights it carried were the credit).
well known; hence, the New Civil Code
article in this respect has not made any Art. 1238. Payment made by a third
substantial change. person who does not intend to be
reimbursed by the debtor is deemed to
Subrogation means the act of putting be a donation, which requires the
somebody into the shoes of the creditor, debtor's consent. But the payment is in
hence, enabling the former to exercise all any case valid as to the creditor who has
the rights and actions that could have been accepted it. (n)
exercised by the latter.
Payment by Stranger Is Deemed a
The law says: “Subrogation transfers to the Donation: Reason why debtor has to
person subrogated the credit with all the consent — No one should be compelled to
rights thereto appertaining, either against accept the generosity of another.
the debtor or against third persons, be they
guarantors or possessors of mortgages, Art. 1239. In obligations to give, payment
subject to stipulation in a conventional made by one who does not have the free
subrogation.” disposal of the thing due and capacity to
alienate it shall not be valid, without
prejudice to the provisions of Article Art. 1241. Payment to a person who is
1427 under the Title on "Natural incapacitated to administer his property
Obligations." (1160a) shall be valid if he has kept the thing
delivered, or insofar as the payment has
Payment by an Incapacitated Person: been beneficial to him.

If person paying has no capacity to give: Payment made to a third person shall
also be valid insofar as it has redounded
payment is not valid — if accepted; creditor to the benefit of the creditor. Such
cannot even be compelled to accept it; the benefit to the creditor need not be
remedy of consignation would not be proved in the following cases:
proper.
(1) If after the payment, the third person
Exception: When a minor between eighteen acquires the creditor's rights;
and twenty-one years of age, who has (2) If the creditor ratifies the payment to
entered into a contract without the consent the third person;
of the parents or guardian voluntarily pays a (3) If by the creditor's conduct, the
sum of money or delivers a fungible thing in debtor has been led to believe that the
fulfi llment of the obligation, there shall be third person had authority to receive the
no right to recover the same from the payment. (1163a)
obligee who has spent or consumed it in Payment to Incapacitated or
good faith. Unauthorized Persons:
Art. 1240. Payment shall be made to the If payment to a person incapacitated to
person in whose favor the obligation has manage or administer his property is
been constituted, or his successor in valid only: if the incapacitated person has
interest, or any person authorized to kept the thing delivered; or insofar as the
receive it. (1162a) payment has been beneficial to him.
To Whom Payment Must Be Made: to the
person in whose favor the obligation has Payment to a Third Party Not Duly
been constituted (the creditor); to the Authorized: The payment is valid BUT only
successor-in-interest (like the heirs); to any to the extent of benefi t (fi nancial, moral, or
person authorized to receive it. intellectual) to the creditor. The payment
must be proved and is, therefore, not
NOTE: This refers to the creditors at the presumed except in the three instances
time of payment, not the original creditor at provided for in the second paragraph of Art.
the time the obligation was constituted. The 1241.
authorization may be by agreement or by Art. 1242. Payment made in good faith to
law. : If the recipient was not authorized, the any person in possession of the credit
payment generally is NOT valid. shall release the debtor. (1164)
Payment Made to Authorized Entities: Payment Made in Good Faith to a Person
Payment made to entities authorized by an in Possession of the Credit: The Article is
occupation government (like the Japanese another instance of a valid payment.
occupation government in the Philippines)
of debts in favor of enemy persons and Requisites: Payment by payor must be
corporations, should be considered as valid, made in good faith (this is presumed) (but
because a belligerent military occupant has payee may be in good or bad faith); The
the right under International Law to payee must be in possession of the credit
sequester or freeze the assets of the itself (not merely the document evidencing
enemy. the credit).
Note: When one possesses the credit, there one, although the latter may be of the
is color of title to it. same value as, or more valuable than
that which is due.

In obligations to do or not to do, an act

Art. 1243. Payment made to the creditor or forbearance cannot be substituted by
by the debtor after the latter has been another act or forbearance against the
judicially ordered to retain the debt shall obligee's will. (1166a)
not be valid. (1165)
Art. 1245. Dation in payment, whereby
Payment Made After Judicial Order to property is alienated to the creditor in
Retain: The judicial order may have been satisfaction of a debt in money, shall be
prompted by an order of attachment, governed by the law of sales. (n)
injunction or garnishment (garnishment
takes place when the debtor of a debtor is Art. 1246. When the obligation consists
ordered not to pay the latter so that in the delivery of an indeterminate or
preference would be given to the latter’s generic thing, whose quality and
creditor). Note that the payment in this circumstances have not been stated, the
Article is void. creditor cannot demand a thing of
superior quality. Neither can the debtor
Garnishment: “The proceeding by which a deliver a thing of inferior quality. The
debtor’s creditor is subjected to the payment purpose of the obligation and other
of his own debt to another is known as circumstances shall be taken into
garnishment. It consists in the citation of consideration. (1167a)
some stranger to the litigation, who is the
debtor of one of the parties to the action. By Art. 1247. Unless it is otherwise
this means such debtor-stranger becomes a stipulated, the extrajudicial expenses
forced intervenor, and the court, having required by the payment shall be for the
acquired jurisdiction over his person by account of the debtor. With regard to
means of the citation required of him to pay judicial costs, the Rules of Court shall
his debt, not to his former creditor, but to the govern. (1168a)
new creditor, who is the creditor in the main
litigation.” Art. 1248. Unless there is an express
stipulation to that effect, the creditor
Interpleader: It is technical name of the cannot be compelled partially to receive
action in which a certain person in the prestations in which the obligation
possession of certain property wants consists. Neither may the debtor be
claimants to litigate among themselves for required to make partial payments.
the same.
However, when the debt is in part
Injunction: It is a judicial process by virtue liquidated and in part unliquidated, the
of which a person is generally ordered to creditor may demand and the debtor may
refrain from doing something. It is called effect the payment of the former without
preliminary injunction if the prohibition is waiting for the liquidation of the latter.
during the pendency of certain proceedings. (1169a)

Art. 1249. The payment of debts in

money shall be made in the currency
stipulated, and if it is not possible to
deliver such currency, then in the
Art. 1244. The debtor of a thing cannot currency which is legal tender in the
compel the creditor to receive a different Philippines.
The delivery of promissory notes party for whose benefit the term has
payable to order, or bills of exchange or been constituted, application shall not
other mercantile documents shall be made as to debts which are not yet
produce the effect of payment only when due.
they have been cashed, or when through
the fault of the creditor they have been If the debtor accepts from the creditor a
impaired. receipt in which an application of the
payment is made, the former cannot
In the meantime, the action derived from complain of the same, unless there is a
the original obligation shall be held in cause for invalidating the contract.
the abeyance. (1170) (1172a)

Art. 1250. In case an extraordinary Art. 1253. If the debt produces interest,
inflation or deflation of the currency payment of the principal shall not be
stipulated should supervene, the value deemed to have been made until the
of the currency at the time of the interests have been covered. (1173)
establishment of the obligation shall be
the basis of payment, unless there is an Art. 1254. When the payment cannot be
agreement to the contrary. (n) applied in accordance with the preceding
rules, or if application can not be
Art. 1251. Payment shall be made in the inferred from other circumstances, the
place designated in the obligation. debt which is most onerous to the
debtor, among those due, shall be
There being no express stipulation and if deemed to have been satisfied.
the undertaking is to deliver a
determinate thing, the payment shall be If the debts due are of the same nature
made wherever the thing might be at the and burden, the payment shall be
moment the obligation was constituted. applied to all of them proportionately.
(1174a)
In any other case the place of payment
shall be the domicile of the debtor.
SUBSECTION 2. - Payment by Cession
If the debtor changes his domicile in bad
faith or after he has incurred in delay, the Art. 1255. The debtor may cede or assign
additional expenses shall be borne by his property to his creditors in payment
him. of his debts. This cession, unless there
is stipulation to the contrary, shall only
These provisions are without prejudice release the debtor from responsibility for
to venue under the Rules of Court. the net proceeds of the thing assigned.
(1171a) The agreements which, on the effect of
the cession, are made between the
debtor and his creditors shall be
SUBSECTION 1. - Application of governed by special laws. (1175a)
Payments

Art. 1252. He who has various debts of SUBSECTION 3. - Tender of Payment and
the same kind in favor of one and the Consignation
same creditor, may declare at the time of
making the payment, to which of them Art. 1256. If the creditor to whom tender
the same must be applied. Unless the of payment has been made refuses
parties so stipulate, or when the without just cause to accept it, the
application of payment is made by the debtor shall be released from
responsibility by the consignation of the been properly made, the debtor may
thing or sum due. withdraw the thing or the sum deposited,
allowing the obligation to remain in
Consignation alone shall produce the force. (1180)
same effect in the following cases:
Art. 1261. If, the consignation having
(1) When the creditor is absent or been made, the creditor should authorize
unknown, or does not appear at the the debtor to withdraw the same, he shall
place of payment; lose every preference which he may
(2) When he is incapacitated to receive have over the thing. The co-debtors,
the payment at the time it is due; guarantors and sureties shall be
(3) When, without just cause, he refuses released. (1181a)
to give a receipt;
(4) When two or more persons claim the Loss of the Thing Due
same right to collect;
(5) When the title of the obligation has Art. 1262. An obligation which consists
been lost. (1176a) in the delivery of a determinate thing
shall be extinguished if it should be lost
Art. 1257. In order that the consignation or destroyed without the fault of the
of the thing due may release the obligor, debtor, and before he has incurred in
it must first be announced to the delay.
persons interested in the fulfillment of
the obligation. When by law or stipulation, the obligor is
liable even for fortuitous events, the loss
The consignation shall be ineffectual if it of the thing does not extinguish the
is not made strictly in consonance with obligation, and he shall be responsible
the provisions which regulate payment. for damages. The same rule applies
(1177) when the nature of the obligation
requires the assumption of risk. (1182a)
Art. 1258. Consignation shall be made by
depositing the things due at the disposal Art. 1263. In an obligation to deliver a
of judicial authority, before whom the generic thing, the loss or destruction of
tender of payment shall be proved, in a anything of the same kind does not
proper case, and the announcement of extinguish the obligation. (n)
the consignation in other cases.
Art. 1264. The courts shall determine
The consignation having been made, the whether, under the circumstances, the
interested parties shall also be notified partial loss of the object of the obligation
thereof. (1178) is so important as to extinguish the
obligation. (n)
Art. 1259. The expenses of consignation,
when properly made, shall be charged Art. 1265. Whenever the thing is lost in
against the creditor. (1178) the possession of the debtor, it shall be
presumed that the loss was due to his
Art. 1260. Once the consignation has fault, unless there is proof to the
been duly made, the debtor may ask the contrary, and without prejudice to the
judge to order the cancellation of the provisions of article 1165. This
obligation. presumption does not apply in case of
earthquake, flood, storm, or other natural
Before the creditor has accepted the calamity. (1183a)
consignation, or before a judicial
declaration that the consignation has
Art. 1266. The debtor in obligations to do made in virtue of payment of the debt.
shall also be released when the (1188)
prestation becomes legally or physically
impossible without the fault of the Art. 1272. Whenever the private
obligor. (1184a) document in which the debt appears is
found in the possession of the debtor, it
Art. 1267. When the service has become shall be presumed that the creditor
so difficult as to be manifestly beyond delivered it voluntarily, unless the
the contemplation of the parties, the contrary is proved. (1189)
obligor may also be released therefrom,
in whole or in part. (n) Art. 1273. The renunciation of the
principal debt shall extinguish the
Art. 1268. When the debt of a thing accessory obligations; but the waiver of
certain and determinate proceeds from a the latter shall leave the former in force.
criminal offense, the debtor shall not be (1190)
exempted from the payment of its price,
whatever may be the cause for the loss, Art. 1274. It is presumed that the
unless the thing having been offered by accessory obligation of pledge has been
him to the person who should receive it, remitted when the thing pledged, after its
the latter refused without justification to delivery to the creditor, is found in the
accept it. (1185) possession of the debtor, or of a third
person who owns the thing. (1191a)
Art. 1269. The obligation having been
extinguished by the loss of the thing, the Confusion or Merger of Rights
creditor shall have all the rights of action
which the debtor may have against third Art. 1275. The obligation is extinguished
persons by reason of the loss. (1186) from the time the characters of creditor
and debtor are merged in the same
Condonation or Remission of the Debt person. (1192a)

Art. 1270. Condonation or remission is Art. 1276. Merger which takes place in
essentially gratuitous, and requires the the person of the principal debtor or
acceptance by the obligor. It may be creditor benefits the guarantors.
made expressly or impliedly. Confusion which takes place in the
person of any of the latter does not
One and the other kind shall be subject extinguish the obligation. (1193)
to the rules which govern inofficious
donations. Express condonation shall, Art. 1277. Confusion does not extinguish
furthermore, comply with the forms of a joint obligation except as regards the
donation. (1187) share corresponding to the creditor or
debtor in whom the two characters
Art. 1271. The delivery of a private concur. (1194)
document evidencing a credit, made
voluntarily by the creditor to the debtor, Compensation
implies the renunciation of the action
which the former had against the latter. Art. 1278. Compensation shall take place
when two persons, in their own right, are
If in order to nullify this waiver it should creditors and debtors of each other.
be claimed to be inofficious, the debtor (1195)
and his heirs may uphold it by proving
that the delivery of the document was Art. 1279. In order that compensation
may be proper, it is necessary:
(1) That each one of the obligors be the time he gave his consent, that he
bound principally, and that he be at the reserved his right to the compensation.
same time a principal creditor of the
other; If the creditor communicated the cession
(2) That both debts consist in a sum of to him but the debtor did not consent
money, or if the things due are thereto, the latter may set up the
consumable, they be of the same kind, compensation of debts previous to the
and also of the same quality if the latter cession, but not of subsequent ones.
has been stated;
(3) That the two debts be due; If the assignment is made without the
(4) That they be liquidated and knowledge of the debtor, he may set up
demandable; the compensation of all credits prior to
(5) That over neither of them there be the same and also later ones until he had
any retention or controversy, knowledge of the assignment. (1198a)
commenced by third persons and
communicated in due time to the debtor. Art. 1286. Compensation takes place by
(1196) operation of law, even though the debts
may be payable at different places, but
Art. 1280. Notwithstanding the there shall be an indemnity for expenses
provisions of the preceding article, the of exchange or transportation to the
guarantor may set up compensation as place of payment. (1199a)
regards what the creditor may owe the
principal debtor. (1197) Art. 1287. Compensation shall not be
proper when one of the debts arises
Art. 1281. Compensation may be total or from a depositum or from the obligations
partial. When the two debts are of the of a depositary or of a bailee in
same amount, there is a total commodatum.
compensation. (n)
Neither can compensation be set up
Art. 1282. The parties may agree upon against a creditor who has a claim for
the compensation of debts which are not support due by gratuitous title, without
yet due. (n) prejudice to the provisions of paragraph
2 of Article 301. (1200a)
Art. 1283. If one of the parties to a suit
over an obligation has a claim for Art. 1288. Neither shall there be
damages against the other, the former compensation if one of the debts
may set it off by proving his right to said consists in civil liability arising from a
damages and the amount thereof. (n) penal offense. (n)

Art. 1284. When one or both debts are Art. 1289. If a person should have
rescissible or voidable, they may be against him several debts which are
compensated against each other before susceptible of compensation, the rules
they are judicially rescinded or avoided. on the application of payments shall
(n) apply to the order of the compensation.
(1201)
Art. 1285. The debtor who has consented
to the assignment of rights made by a Art. 1290. When all the requisites
creditor in favor of a third person, cannot mentioned in Article 1279 are present,
set up against the assignee the compensation takes effect by operation
compensation which would pertain to of law, and extinguishes both debts to
him against the assignor, unless the the concurrent amount, even though the
assignor was notified by the debtor at
creditors and debtors are not aware of third persons who did not give their
the compensation. (1202a) consent. (1207)

Novation Art. 1297. If the new obligation is void,

the original one shall subsist, unless the
Art. 1291. Obligations may be modified parties intended that the former relation
by: should be extinguished in any event. (n)

(1) Changing their object or principal Art. 1298. The novation is void if the
conditions; original obligation was void, except
(2) Substituting the person of the debtor; when annulment may be claimed only by
(3) Subrogating a third person in the the debtor or when ratification validates
rights of the creditor. (1203) acts which are voidable. (1208a)

Art. 1292. In order that an obligation may Art. 1299. If the original obligation was
be extinguished by another which subject to a suspensive or resolutory
substitute the same, it is imperative that condition, the new obligation shall be
it be so declared in unequivocal terms, under the same condition, unless it is
or that the old and the new obligations otherwise stipulated. (n)
be on every point incompatible with each
other. (1204) Art. 1300. Subrogation of a third person
in the rights of the creditor is either legal
Art. 1293. Novation which consists in or conventional. The former is not
substituting a new debtor in the place of presumed, except in cases expressly
the original one, may be made even mentioned in this Code; the latter must
without the knowledge or against the will be clearly established in order that it
of the latter, but not without the consent may take effect. (1209a)
of the creditor. Payment by the new
debtor gives him the rights mentioned in Art. 1301. Conventional subrogation of a
Articles 1236 and 1237. (1205a) third person requires the consent of the
original parties and of the third person.
Art. 1294. If the substitution is without (n)
the knowledge or against the will of the
debtor, the new debtor's insolvency or Art. 1302. It is presumed that there is
non-fulfillment of the obligations shall legal subrogation:
not give rise to any liability on the part of
the original debtor. (n) (1) When a creditor pays another creditor
who is preferred, even without the
Art. 1295. The insolvency of the new debtor's knowledge;
debtor, who has been proposed by the (2) When a third person, not interested in
original debtor and accepted by the the obligation, pays with the express or
creditor, shall not revive the action of the tacit approval of the debtor;
latter against the original obligor, except (3) When, even without the knowledge of
when said insolvency was already the debtor, a person interested in the
existing and of public knowledge, or fulfillment of the obligation pays, without
known to the debtor, when the delegated prejudice to the effects of confusion as
his debt. (1206a) to the latter's share. (1210a)

Art. 1296. When the principal obligation Art. 1303. Subrogation transfers to the
is extinguished in consequence of a persons subrogated the credit with all
novation, accessory obligations may the rights thereto appertaining, either
subsist only insofar as they may benefit against the debtor or against third
person, be they guarantors or Art. 1310. The determination shall not be
possessors of mortgages, subject to obligatory if it is evidently inequitable. In
stipulation in a conventional such case, the courts shall decide what
subrogation. (1212a) is equitable under the circumstances. (n)

Art. 1304. A creditor, to whom partial Art. 1311. Contracts take effect only
payment has been made, may exercise between the parties, their assigns and
his right for the remainder, and he shall heirs, except in case where the rights
be preferred to the person who has been and obligations arising from the contract
subrogated in his place in virtue of the are not transmissible by their nature, or
partial payment of the same credit. by stipulation or by provision of law. The
(1213) heir is not liable beyond the value of the
property he received from the decedent.

CONTRACTS If a contract should contain some

stipulation in favor of a third person, he
CHAPTER 1 may demand its fulfillment provided he
communicated his acceptance to the
GENERAL PROVISIONS obligor before its revocation. A mere
incidental benefit or interest of a person
Art. 1305. A contract is a meeting of is not sufficient. The contracting parties
minds between two persons whereby must have clearly and deliberately
one binds himself, with respect to the conferred a favor upon a third person.
other, to give something or to render (1257a)
some service. (1254a)
Art. 1312. In contracts creating real
Art. 1306. The contracting parties may rights, third persons who come into
establish such stipulations, clauses, possession of the object of the contract
terms and conditions as they may deem are bound thereby, subject to the
convenient, provided they are not provisions of the Mortgage Law and the
contrary to law, morals, good customs, Land Registration Laws. (n)
public order, or public policy. (1255a)
Art. 1313. Creditors are protected in
Art. 1307. Innominate contracts shall be cases of contracts intended to defraud
regulated by the stipulations of the them. (n)
parties, by the provisions of Titles I and
II of this Book, by the rules governing Art. 1314. Any third person who induces
the most analogous nominate contracts, another to violate his contract shall be
and by the customs of the place. (n) liable for damages to the other
contracting party. (n)
Art. 1308. The contract must bind both
contracting parties; its validity or Art. 1315. Contracts are perfected by
compliance cannot be left to the will of mere consent, and from that moment the
one of them. (1256a) parties are bound not only to the
fulfillment of what has been expressly
Art. 1309. The determination of the stipulated but also to all the
performance may be left to a third consequences which, according to their
person, whose decision shall not be nature, may be in keeping with good
binding until it has been made known to faith, usage and law. (1258)
both contracting parties. (n)
Art. 1316. Real contracts, such as
deposit, pledge and Commodatum, are
not perfected until the delivery of the
object of the obligation. (n)

Art. 1317. No one may contract in the

name of another without being
authorized by the latter, or unless he has
by law a right to represent him.

A contract entered into in the name of

another by one who has no authority or
legal representation, or who has acted
beyond his powers, shall be
unenforceable, unless it is ratified,
expressly or impliedly, by the person on
whose behalf it has been executed,
before it is revoked by the other
contracting party. (1259a)