ARTICLE 1271: ARTICLE 1273:

When a creditor voluntarily gives back the it states that if the principal debt is
document proving the debt, it's presumed that extinguished, all accessory obligations connect
they've forgiven the debt and no longer intend to it are also extinguished. however, if the
to collect it. This presumption is based on the accessory obligations are extinguished, the
idea that the creditor, by giving back the principal debt remains in force. If a loan is
document, is essentially saying they're not forgiven, any guarantees related to that loans is
going to pursue the debt. The debtor can automatically released. however, if a guarantee
challenge this presumption by proving that the is released, the borrower is still obligated to
document was given back for a different reason, repay the loan itself.
like a payment was made, or the document was
ARTICLE 1274:
lost and a new one was needed.
presumption that an accessory obligation of
Example: Imagine Sarah owes her friend, John,
pledge has been remitted when the pledged
$500. John wrote down the amount Sarah
item, after being delivered to the creditor, is
owed on a small piece of paper. One day, John
found in the possession of the debtor or a third
returns the paper to Sarah, saying he's happy to
party who owns the item. This presumption
forgive the debt. Under Article 1271, this act of
arises because it's assumed the creditor
returning the document creates a presumption
voluntarily returned the pledged item,
that John has forgiven the debt. However, Sarah
indicating their intention to release the debtor
could prove this presumption wrong if she had
from the pledge. However, this presumption
a receipt showing she paid John the $500, or if
can be rebutted if the creditor can prove that
John simply lost the piece of paper and made a
the item was not voluntarily returned, such as if
new one.
it was stolen, returned for repairs, or if the third
ARTICLE 1272: party doesn't actually own the item.

The presumption that a debt is forgiven when Example: Imagine Maria borrowed money from
the private document is found in the possession John and, to secure the loan, she pledged her
of the debtor, but this presumption can be necklace to him. John kept the necklace as
contradicted if the creditor can prove that the collateral. Later, John found the necklace back
document was not voluntarily delivered, such as in Maria's possession. According to Article
if the debtor stole it or if the document was lost 1274, this suggests that John voluntarily
and made a new one. When the document was returned the necklace, meaning he's released
found in the debtor's possession doesn't Maria from the pledge. However, John could
automatically mean that the debt is forgiven argue that the necklace was stolen from him or
unless the creditor proves it. that Maria returned it for repairs, in which case
the pledge would still be in effect. Just having
Example: Imagine Maya owes her friend, Alex,
the necklace back doesn't automatically mean
$1000. Alex wrote down the amount Maya
the pledge is gone.
owed on a promissory note. One day, Alex finds
the promissory note in Maya's possession. ARTICLE 1275:
Under Article 1272, it's presumed that Alex
an obligation is extinguished when the roles of
voluntarily gave the note back to Maya,
creditor and debtor merge in the same person.
suggesting he's forgiven the debt. However,
This happens when a single person becomes
Alex can challenge this presumption if he can
both the one owed money and the one who
prove he didn't give the note back willingly. For
owes it. This is called "confusion" or "merger"
example, he could prove that Maya stole the
of rights. This extinguishes the obligation
note or that he lost the original note and made
because it becomes absurd for a person to
a new one. Just because the note was found
demand payment from themselves. For
with Maya doesn't automatically mean the debt
example, if someone owes money to a company
is forgiven.
and later becomes the owner of that company,
the debt is extinguished because the company
is now essentially demanding payment from
itself.

Example:
Imagine Sarah owes her friend, John, $500. share. According to Article 1277, only John's
John, in turn, owes Sarah's company, where she share of the debt is extinguished, leaving Sarah
works, $500 for a service they provided. One and Emily still jointly responsible for the
day, Sarah becomes the owner of the company. remaining $2000.
Now, the company is owed $500 by John, but
ARTICLE 1278:
Sarah, as the owner, also owes John $500. This
creates a situation of confusion, where the roles Compensation as a mode of extinguishing
of creditor and debtor merge in the same obligations. It occurs when two individuals, in
person (Sarah/the company). As a result, the their own right, are both creditors and debtors
obligation is extinguished, and both debts are to each other, with equally liquidated and
cancelled out. demandable obligations. This means both debts
are clearly determined and due for payment.
ARTICLE 1276:
Compensation happens automatically by
if the principal debtor and creditor become the operation of law, even if the parties are
same person, this benefits the guarantor, unaware of it.
extinguishing their obligation.
Example: if John owes Mary $500 and Mary
However, if the guarantor themselves merge owes John $500, their obligations are
with either the debtor or creditor, this does not extinguished by compensation, and neither
extinguish the principal obligation. needs to pay the other.

Example: Imagine Sarah owes John $1000, and ARTICLE 1279:

to secure the loan, her friend, Emily, agreed to
For compensation to be valid, several
act as a guarantor. Now, let's say John decides
conditions must be met: both parties must be
to transfer his right to collect the debt to Emily.
bound as principal debtors and creditors, the
This means Emily becomes the new creditor,
debts must involve sums of money or
and Sarah still owes her the $1000. Because
consumable things of the same kind and quality,
Emily is now both the creditor and the
both debts must be due and demandable, the
guarantor, the guarantee is extinguished, but
amounts must be liquidated (clearly fixed), and
Sarah's obligation to repay the $1000 remains.
there must be no retention or controversy
This is because the debt itself is independent of
initiated by third parties.
the guarantee, and the merger only affects the
accessory obligation. Example: Imagine Sarah owes John $500 for a
painting he bought, and John owes Sarah $500
ARTICLE 1277:
for some gardening services she provided. Both
It states that confusion, where the roles of debts are due and clearly defined (liquidated).
creditor and debtor merge in the same person, Since they are both debtors and creditors to
does not extinguish a joint obligation entirely. each other, legal compensation can occur. This
Instead, it only extinguishes the share of the means that their obligations are automatically
obligation corresponding to the creditor or extinguished by the simultaneous payment of
debtor in whom the two characters concur. This their mutual debts, effectively cancelling out
means that if one of the joint debtors or the $500 owed by each party. No actual money
creditors becomes both the creditor and debtor needs to be exchanged because their debts
for their own share, only that specific share is balance each other out.
extinguished, while the remaining shares of the
ARTICLE 1280:
obligation remain in effect. For example, if two
people are jointly liable for a debt, and one of ARTICLE 1281:
them becomes the creditor for their own share
of the debt, only that share is extinguished, and Article 1281 of the Philippine Civil Code explains
the other person remains liable for their share. that legal compensation, the process of
extinguishing mutual debts, can be either total
Example: or partial. Total compensation occurs when two
parties owe each other the same amount of
Imagine three friends, Sarah, John, and Emily,
money, effectively canceling out both debts.
are jointly responsible for a $3000 loan. One
Partial compensation happens when the debts
day, John inherits a large sum of money and
are unequal, and the party with the smaller
decides to pay off his $1000 share of the debt.
debt is only relieved of that amount, while the
However, he also happens to be the one who
remaining balance remains an obligation.
lent the money to the friends in the first place.
This creates confusion because John is now Example: if John owes Mary $100 and Mary
both the creditor and debtor for his own $1000 owes John $100, total compensation occurs,
and both debts are extinguished. However, if they received before the contract was
John owes Mary $100 and Mary owes John $80, invalidated.
partial compensation takes place, leaving John
Example: Imagine Sarah buys a used car from
with a remaining obligation of $20.
John, but later finds out it’s faulty. She wants to
ARTICLE 1282: cancel the deal. However, John also owes Sarah
money. Even if the car deal is canceled, Article
Article 1282 of the Philippine Civil Code allows
1284 allows them to use their debts to cancel
parties to agree on the compensation of debts
each other out before the deal is officially
that are not yet due. This is an exception to the
voided.
general rule that only debts that are due and
demandable can be compensated. Essentially, ARTICLE 1285:
it allows parties to preemptively settle their
mutual debts, even if they are not yet required
to be paid. This agreement must be explicitly
stated in a valid contract between the parties,
and no specific requirements beyond that are
needed.

ARTICLE 1283:

Article 1283 of the Philippine Civil Code allows a

party involved in a lawsuit over an obligation to
offset their own claim for damages against the
other party. This means if someone is suing
another for breach of contract and they
themselves have suffered damages due to the
other party’s actions, they can deduct the
amount of their damages from the amount they
owe. To do this, they must prove their right to
those damages and the specific amount. This is
essentially a way to balance out the scales of
justice by allowing both parties to account for
their respective losses within the same legal
proceedings.

Example: Imagine you’re a student suing your

tutor for missing appointments, causing you to
fall behind in your studies. The tutor claims
*you* missed appointments too, disrupting
their ability to help you. Under Article 1283, the
tutor could try to reduce their liability by
proving *your* missed appointments caused
them financial losses.

ARTICLE 1284:

Article 1284 of the Philippine Civil Code

addresses compensation, a way to extinguish
mutual debts, in the context of rescissible or
voidable contracts. It states that even though
these contracts can be legally canceled, the
parties can still use compensation to offset their
debts before they are officially rescinded or
annulled by a court. This means that if both
parties have debts that are potentially invalid,
they can still use the debts to cancel each other
out, even if the contracts themselves are later
declared void. However, if a contract is later
rescinded or annulled, the compensation is also
canceled, and both parties must return what