Reviewer in Law 1 (from De Leon's book) Chapter 4 ·         He accepts the performance without expressing

CHAPTER 4 – EXTINGUISHMENT OF OBLIGATIONS any protest or objection

1)      Major causes of extinguishment of obligation
·         By payment or performance 8)      General Rule: Article 1236. The creditor is not
·         By loss of the thing due bound to accept payment or performance by a third
·         By condonation or remission of debt person who has no interest in the fulfillment of the
·         By confusion or merger of rights of creditor and obligation.
debtor Exception: Unless there is a stipulation to the contrary
·         By compensation General Rule: Second paragraph of Article 1236.
·         By novation Whoever pays for another may demand from the
2)      Other causes of extinguishment of obligation debtor what he has paid.
·         Death of a party in case the obligation is a Exception: Except if he paid without the knowledge or
personal one against the will of the debtor, he can recover only
·         Mutual desistance or withdrawal insofar as the payment has been beneficial to the
·         Arrival of a resolutory period debtor.
·         Compromise 9)      Persons from whom the creditor must accept
·         Impossibility of performance payment
·         Happening of a fortuitous event ·         The debtor
3)      Article 1232. Payment means not only the ·         Any person who has an interest in the obligation
delivery of money but also the performance, in any (like a guarantor)
other manner, of an obligation. Payment and ·         A third person who has no interest in the
performance are synonymous in law. obligation when there is stipulation that he can make
4)      Debt – may refer to an obligation to deliver payment
money, to deliver a thing, to do an act, or not to do an 10)   Effect of payment by third person
act. ·         If made without the knowledge or against the will
5)      General Rule: Article 1233. A debt shall not be of debtor – the payer can only recover from the debtor
understood to have been paid unless the thing or the amount which has been beneficial to the latter.
service in which the obligation consists has been ·         If made with the knowledge and consent of the
completely delivered or rendered, as the case may be. debtor – the payer has the right to reimbursement for
Exception to the general rule: the whole amount that has been paid and subrogation
a) Article 1234. If the obligation has been substantially of rights of creditor.
performed in good faith, the obligor may recover as 11)   General Rule: Article 1237. Whoever pays on
though there had been a strict and complete fulfillment, behalf of the debtor without the knowledge or against
less damage suffered by the obligee. the will of the latter, cannot compel the creditor to
b) Article 1235. When the obligee accepts the subrogate him in his rights, such as those arising from a
performance, knowing its incompleteness or mortgage, guaranty, or penalty.
irregularity, and without expressing any protest or Exceptions to the general rule: Article 1302. Legal
objection, the obligation is deemed fully complied with. subrogation by operation of law is presumed in certain
6)      Requisites for the application of Art. 1234/ cases.
substantial performance 12)   Reimbursement – the third person entitled by
·         There must be a substantial performance reason of payment has merely the bare right to be
·         The obligor must be in good faith refunded to the extent provided in the second
7)      Requisites for the application of Art. 1235/ paragraph of Article 1236 without the right to the
incomplete and irregular performance guarantees and securities of the original obligation.
·         The obligee knows that the performance is 13)   Subrogation – there is no real extinction of the
incomplete or irregular obligation, but only a change of creditor.
14)   Article 1238. Payment made by a third person who delivered.
does not intend to be reimbursed by the debtor is b) Or he was benefited by the payment
deemed to be a donation, which requires the debtor’s 22)   General Rule: Article 1241. Payment to a third
consent. But the payment is in any case valid as to the person is not valid. 
creditor who has accepted it. Exception: The payment has been redounded to the
15)   General Rule: Article 1239. In obligations to give, benefit of the creditor and payment made in good faith
payment made by one who does not have the free (presumed) to any person in possession of the credit.
disposal of the thing due and capacity to alienate it shall (Art. 1242)
not be valid. 23)   General Rule: Article 1241. It is not presumed and
Exception to the general rule: Article 1427. When a therefore must be proven that the creditor was
minor entered into a contract without the consent of benefited by the payment made to a third person.
the parent or guardian, voluntarily pays a sum of money Exception: When benefit to creditor need not be proved
or delivers a fungible thing in fulfillment of the by debtor
obligation, there shall be no right to recover the same a) Subrogation of the payer in the creditor’s right
from the obligee who has spent or consumed it in good b) Ratification by the creditor
faith. c) Estoppel on the part of the creditor
16)   Free disposal of the thing due – means that the 24)   Estoppel – an admission or representation is
thing to be delivered must not be subject to any claim rendered conclusive upon the person making it and
or lien or encumbrance of a third person. cannot be denied or disproved as against the person
17)   Capacity to alienate – means that the person is not relying thereon.
incapacitated to enter into contracts and for that 25)   Ratification – process of cleansing the defect in a
matter, to make a disposition of the thing due. contract by acknowledging its validity despite its
18)   Person to whom payment shall be made defects. Recognizing a person’s authority despite the
·         The creditor or obligee (He must be the creditor at absence of it.
the time the payment is to be made not at the 26)   Article 1243. Payment made to the creditor by the
constitution of the obligation. Hence, if a person is debtor after the latter has been judicially ordered to
subrogated to the right of the creditor, payment should retain the debt shall not be valid.
be made to the new creditor.) 27)   General Rule: Article 1244. The debtor of a thing
·         His successor in interest cannot compel the creditor to receive a different one,
·         Any person authorized to receive it although the latter may be of the same value as, or
19)   Any person authorized to receive payment more valuable than that which is due. In obligation to
·         Guardian of a ward do or not to do, an act or forbearance cannot be
·         Administrator of executor of the estate of a substituted by another act or forbearance against the
deceased obligee’s will.
·         Liquidator of a partnership/corporation Exception: Substitution can be made if the obligee
·         Persons authorized by special power of attorney consents, for example in facultative obligations. Article
·         Third person provided that the payment benefits 1244 will not also apply in case of waiver by the creditor
the creditor or substitution is allowed by stipulation with the
20)   Ward – minor person or person of age but has a consent of the creditor.
mental disposition of that as a minor. 28)   Article 1245. Dation in payment, whereby property
21)   General Rule: Article 1241. Payment to a person is alienated to the creditor in satisfaction of a debt in
incapacitated to administer or manage his property is money, shall be governed by the law of sales.
not valid. 29)   Special forms of payment
Except: ·         Dation in payment
a) The incapacitated person kept the thing paid or ·         Application of payments (stictly speaking, it is not
a special form of payment)
·         Payment by cession in money when tendered by the debtor in the right
·         Tender of payment and consignation amount.
30)   Dation in payment (adjudication or dacion en 36)   General Rule: Article 1250. In case an
pago) – is the conveyance of ownership of a thing as an extraordinary inflation or deflation of the currency
accepted equivalent of performance. An existing debt in stipulated should supervene, the value of the currency
money is satisfied, not by payment of money but by the at the time of the establishment of the obligation shall
alienation of property. be the basis of payment.
31)   General Rule: Article 1246. (Rule of medium Except: Unless there is an agreement to the contrary.
quality and a principle of equity) When the obligation 37)   Inflation – is a sharp sudden increase of money or
consists in the delivery of an indeterminate or generic credit or both without a corresponding increase in
thing, whose quality and circumstances have not been business transactions. It causes a drop in the value of
stated, the creditor cannot demand a thing of superior money, resulting in the rise of the general price level.
quality. Neither can the debtor deliver a thing of inferior 38)   Deflation – is the reduction in volume and
quality. The purpose of the obligation and other circulation of the available money or credit, resulting in
circumstances shall be taken into consideration. a decline of the general price level; it is the opposite of
Exception: The benefit of this article may be waived by inflation.
the creditor or by accepting a thing of inferior quality, 39)   Place where obligation shall be paid
and by the debtor by delivering a thing of superior ·         If there is a stipulation, the payment shall be
quality. made in the place designated.
32)   General Rule: Article 1247. Extrajudicial expenses ·         If there is no stipulation and the thing to be
required by the payment shall be for the account of the delivered is specific, the payment shall be made at the
debtor. place where the thing was, at the perfection of the
Exception: Unless it is otherwise stipulated, stipulation contract.
of the parties must be followed. This article does not ·         If there is no stipulation and the thing to be
apply to expenses incurred by the creditor in going to delivered is generic, the place of payment shall be the
the debtor’s domicile to collect. domicile of the debtor. In this case, the creditor bears
33)   Judicial costs – are the statutory amounts allowed the expenses in going to the debtor’s place to accept
to a party to an action for his expenses incurred in the payment.
action. The costs of an action shall, as a rule be paid by 40)   Venue – is the place where a court suit or action
the losing party. The court may, however, for special must be filed or instituted.
reasons, adjudge that either party shall pay the costs or 41)   Domicile – is the place of a person’s habitual
that the same be divided as may be equitable. residence; the place where he has his true fixed
34)   General Rule: Article 1248. The creditor cannot be permanent home and to which place he, whenever he is
compelled partially to receive the prestations in which absent, has the intention of returning
the obligation consists. Neither may the debtor be 42)   Residence – is only an element of domicile. It
required to make partial payments. simply requires bodily presence as an inhabitant in a
Exceptions: When partial performance is allowed given place.
a) when there is an express stipulation to that effect 43)   General Rule: Article 1252. Application of payment
b) when the debt is in part liquidated and in part shall not be made as to debts which are not yet due.
unliquidated Except: The parties so stipulate or when the application
c) when the different prestations in which the obligation of payment is made by the party for whose benefit the
consists are subject to different terms or conditions term has been constituted.
which affect some of them. 44)   General Rule: Article 1252. If the debtor accepts
35)   Legal Tender – is that currency which a debtor can from the creditor a receipt in which an application of
legally compel a creditor to accept in payment of a debt the payment is made, the former cannot complain of
the same.
Except: There is a cause for invalidating the contract. ·         Debts secured by a mortgage or by pledge are
45)   Application of payments – is the designation of more onerous than unsecured debts.
the debt to which should be applied the payment made ·         Of two interest bearing debts, the one with a
by a debtor who has various debts of the same kind in higher rate is more onerous.
favor of one and the same creditor. ·         An obligation with a penalty clause is more
46)   Requisites for application of payments burdensome than one without penalty clause.
·         There must be one debtor and one creditor 50)   General Rule: Article 1255. Payment by cession
·         There must be two or more debts shall only release the debtor from responsibility for the
·         The debts must be of the same kind net proceeds of the thing assigned.
·         The debts to which the payment has been applied Exception: Unless there is a stipulation to the contrary.
must be due 51)   Payment by cession – is another special form of
·         The payment made must not be sufficient to cover payment. It is the assignment or abandonment of all the
all the debts properties of the debtor for the benefit of his creditors
47)   Rules on application of payments in order that the latter may sell the same and apply the
·         The debtor has the first choice; he must indicate proceeds thereof to the satisfaction of their credits.
at the time of making payment, and not afterwards,
which particular debt is being paid. If, in making use of 52)   Requisites of payment by cession
his right, the debtor applied the payment to a debt, he ·         There must be two or more creditors
cannot later claim that it should be applied to another ·         The debtor must be insolvent
debt. The right to make the application once exercised ·         The cession must be accepted by the creditors
is irrevocable unless the creditor consents to the
change. 53)   Dation in payment and cession distinguished
·         If the debtor does not apply payment, the creditor ·         In dation, there is usually only one creditor, while
may make the designation by specifying in the receipt in cession, there are several creditors.
which debt is being paid. The debtor must consent to ·         Dation does not presuppose the insolvency of the
this. debtor, while in cession, the debtor is insolvent at the
·         If the creditor has not also made the application, time of assignment.
or if the application is not valid, the debt, which is most ·         Dation does not involve all the property of the
onerous to the debtor among those due, shall be debtor, while cession extends to all the property of the
deemed to have been satisfied. debtor subject to execution.
·         If the debts due are of the same nature and ·         In dation, the creditor becomes the owner of the
burden, the payment shall be applied to all of them thing given by the debtor, while in cession, the creditors
proportionately. only acquire the right to sell the thing and apply the
48)    General Rule: Article 1253. If the debt produces proceeds to their credits proportionately.
interest, payment of the principal shall not be deemed
to have been made until the interests have been 54)   Article 1256. If the creditor to whom tender of
covered. payment has been refused without just cause to accept
Exception: The rule is subject, however, to any it, the debtor shall be released from responsibility by
agreement between the parties, or to waiver by the the consignation of the thing or sum due.
creditor. Consignation alone shall produce the same effect in the
49)   Rules to onerosity following cases:
·         An interest-bearing debt is more onerous than a a) When the creditor is absent or unknown, or does not
non-interest bearing debt even if the latter is an older appear at the place of payment
one. b) When he is incapacitated to receive the payment at
·         A debt as a sole debtor is more onerous than as a the time it is due
solidary debtor. c) When, without just cause, he refuses to give a receipt
d) When two or more persons claim the same right to ·         When the creditor neither accepts nor questions
collect the validity of the consignation, and the court after
e) When the title of the obligation has been lost hearing, orders the cancellation of the obligation
55)   Tender of payment – is the act, on the part of the
debtor, of offering to the creditor the thing or amount 61)   The debtor may withdraw as a matter of right the
due. The debtor must show that he has in his thing or sum deposited
possession the thing or money to be delivered at the ·         Before the creditor has accepted the consignation
time of the offer. ·         Before a judicial declaration that the consignation
56)   Consignation – is the act of depositing the thing or has been properly made, as he is still the owner of the
amount due with the proper court when the creditor same. In such a case, the obligation shall continue to
does not desire or cannot receive it, after complying remain in force. All expenses are paid by the debtor.
with the formalities required by law. It is always judicial
and it generally requires a prior tender of payment 62)   Article 1261. If, the consignation having been
which is by its very nature extrajudicial. made, the creditor should authorize the debtor to
withdraw the same, he shall lose every preference
57)   Requisites of a valid consignation which he may have over the thing. The co-debtors,
·         Existence of a valid debt which is due guarantors and sureties shall be released.
·         Tender of payment by the debtor and refusal
without justifiable reason by the creditor to accept it 63)   Thing is Lost – when it perishes, or goes out of
·         Previous notice of consignation to persons commerce or disappears in such a way that its existence
interested in the fulfillment of the obligation is unknown or it cannot be recovered.
·         Consignation of the thing or sum due
·         Subsequent notice of consignation made to the 64)   Loss of a determinate thing is equivalent to
interested parties impossibility of performance in obligations to do.

58)   Requisites for valid tender of payment 65)   Requisites for loss of the thing in obligation to give
·         Tender of payment must comply with the rules on ·         The obligation is to deliver a specific thing
payment (Art. 1256-1258). The tender, even if valid, ·         The loss of the thing occurs without the fault of
does not by itself produce legal payment, unless it is the debtor
completed by consignation. ·         The debtor is not guilty of delay
·         It must be unconditional and for the whole
amount. 66)   (Exception to the General Rule that impossibility of
·         It must be actually made. performance or loss of the thing due releases the
obligor) When loss of the thing will not extinguish
59)   Article 1259.  The expenses of consignation, when liability
properly made, shall be charged against the creditor. ·         When the law so provides
·         When the stipulation so provides
60)   When consignation deemed properly made ·         When the nature of obligation requires the
·         When the creditor accepts the thing or sum assumption of risk
deposited, without objection, as payment of the ·         When the obligation to deliver a specific  arises
obligation from a crime
·         When the creditor questions the validity of the
consignation, and the court, after hearing, declares that 67)   Art. 1263. In an obligation to deliver a generic
it has been properly made thing, the loss or destruction of anything of the same
kind does not extinguish the obligation. It is based on
the principle that a generic thing never perishes (genus obligor may also be released therefrom, in whole or in
nunquam perit). part.

68)   Partial Loss – only a portion of the thing is lost or 76)   General Rule: Article 1268. When the debt of a
destroyed or when it suffers depreciation or thing certain and determinate proceeds from a criminal
deterioration. It is equivalent of difficulty of offense, the debtor shall not be exempted from the
performance in obligations to do. payment of its price, whatever may be the cause for the
loss.
69)   Art. 1264. The court shall determine whether, Exception: Unless the thing having been offered by him
under the circumstances, the partial loss of the object to the person who should receive it, the latter refused
of the obligation is so important as to extinguish the without justification to accept it. (Creditor is in mora
obligation. accipiendi)

70)   General Rule: Article 1265. Whenever the thing is 77)   Article 1269.  The obligation having been
lost in the possession of the debtor, it shall be extinguished by the loss of the thing, the creditor shall
presumed that the loss was due to his fault. have all the rights of action which the debtor may have
Exception: Unless there is proof to the contrary, and against third persons by reason of the loss.
without prejudice to the provisions of article 1165. This
presumption does not apply in case of earthquake, 78)   Condonation or remission – is the gratuitous
flood, storm or other natural calamity. abandonment by the creditor of his right against the
debtor. It is thus a form of donation.
71)   Article 1266. The debtor in obligations to do shall
also be released when the prestation becomes legally or 79)   Requisites of condonation or remission
physically impossible WITHOUT THE FAULT OF THE ·         It must be gratuitous
OBLIGOR. ·         It must be accepted by the obligor
·         The parties must have capacity
72)   Kinds of Impossibility (Article 1266 refers to ·         It must not be inofficious
personal obligations) ·         If made expressly, it must comply with the forms
·         Physical Impossibility of donations
·         Legal Impossibility
·         Relative Impossibility 80)   Kinds of Remission
As to its extent
73)   Physical Impossibility – in purely personal ·         Complete – when it covers the entire obligation
obligations, when the personal qualifications of the ·         Partial – when it does not cover the entire
obligor are involved, this takes place, when, for obligation
example, the obligor dies or becomes physically
incapacitated to perform the obligation. As to its form
·         Express – when it is made either verbally or in
74)   Legal Impossibility – occurs when the obligation writing
cannot be performed because it is rendered impossible ·         Implied – when it can only be inferred from
by provision of law, although physically it may be conduct
possible of performance. As to its date of effectivity
·         Inter vivos – when it will take effect during the
75)   Relative Impossibility – article 1267 talks about lifetime of the donor
this. When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the
·         Mortis causa – when it will become effective upon
the death of the donor. It must comply with the 88)   Requisites of Confusion
formalities of a will ·         It must take place between the principal debtor
and creditor
81)   Legitime – is that part of the testator’s property ·         It must be complete
which he cannot dispose of because the law has
reserved it from certain heirs who are, therefore, called 89)   Article 1276. Merger which takes place in the
COMPULSARY HEIRS. person of the principal debtor or creditor benefits the
guarantors. Confusion which takes place in the person
82)   Article 1271. The delivery of a private of any of the latter does not extinguish the obligation.
document evidencing a credit made voluntarily by the
creditor to the debtor, implies the renunciation of the 90)   Article 1277. Confusion does not extinguish a joint
action which the former had against the latter. It can be obligation except as regards the share corresponding to
nullified, however, by showing that the waiver is the creditor or debtor in whom the two characters
inofficous. concur.

83)   General Rule: Article 1272. Whenever the private 91)   Confusion in solidary obligation – merger in the
document in which the debt appears is found in the person of one of the solidary debtors shall extinguish
possession of the debtor, it shall be presumed that the the entire obligation because it is also a merger in the
creditor delivered it voluntarily. other solidary debtors.
Exception: Unless the contrary is proved.
92)   Compensation – is the extinguishment to the
84)   Article 1273. The renunciation of the principal debt concurrent amount of the debts of two persons who, in
shall extinguish the accessory obligations; but the their own right, are debtors and creditors of each other.
waiver of the latter shall leave the former in force.
93)   Kinds of Compensation:
85)   Pledge – is a contract by virtue which the debtor ·         By its effect or extent
delivers to the creditor or to a third person a movable  * Total – when both obligations are of the same
or instrument evidencing incorporeal rights for the amount and are entirely extinguished
purpose of securing the fulfillment of a principal * Partial – when the two obligations are of different
obligation with the understanding that when the amounts and a balance remains.
obligation is fulfilled the thing delivered shall be ·         By its cause or origin
returned with all its fruits and accessions. * Legal – when it takes place by operation of law even
without the knowledge of the parties
86)   General Rule: Article 1274. It is presumed that the * Voluntary – when it takes place by agreement of the
accessory obligation of pledge has been remitted when parties
the thing pledged, after its delivery to the creditor, is * Judicial – when it takes place by order from a court in
found in the possession of the debtor,  or of a third a litigation.
person who owns the thing. * Facultative – when it can be set up only by one of the
Exception: This presumption is subject to contrary parties
evidence. It does not arise if the third person in
possession of the thing pledged does not own the same. 94)   Requisities of Legal Compensation
·         The parties are principal creditors and principal
87)   Confusion or merger – is the meeting in one person debtors of each other
of the qualities of creditor and debtor with respect to ·         Both debts consist in a sum of money, or of
the same obligation. consumable things of the same kind and quality
·         The two debts are due and demandable 103)     3 cases where compensation has taken place
·         The two debts are liquidated AFTER assignment
·         No retention or controversy commenced by a ·         Assignment with the consent of debtor – debtor
third person cannot set up compensation against the assignee unless
he reserved his right to the compensation.
95)   General Rule: Only the principal debtor can set up ·         Assignment with the knowledge but without the
against his creditor what the latter owes him consent of debtor – debtor can set up compensation
Exception: Article 1280. Notwithstanding the provisions ·         Assignment without the knowledge of the debtor
of the preceding article, the guarantor may set up – debtor can set up compensation when he learned of
compensation as regards what the creditor may owe the assignment
the principal debtor.
104)     Foreign Exchange – has been defined as the
96)   Total compensation – results when the two debts conversion of an amount of money or currency of one
are of the same amount. country into an equivalent amount of money or
currency of another.
97)   General Rule: Only debts which are due and
demandable can be compensated. 105)     Article 1286. In legal compensation, even though
Exception: (This is a kind of voluntary compensation) the debts may be payable at different places, but there
Article 1282. The parties may agree upon the  shall be an indemnity for expenses of exchange or
compensation of debts which are not yet due. transportation to the place of payment by the party
who set up the compensation.
98)   Voluntary or conventional compensation – includes
any compensation which takes place by agreement of 106)     Instances when legal compensation is not
the parties even if all the requisites for legal allowed by law:
compensation are not present. ·         Where one of the debts arises from a depositum
·         Where one of the debts arises from a
99)   Article 1283. (Judicial Compensation) If one of the commodatum
parties to a suit over an obligation has claim for ·         Where one of the debts arises from a claim for
damages against the other, the former may set it off by support due by gratuitous title
proving his right to said damages and the amount ·         Where one of the debts consists in civil liability
thereof. arising from a penal offense

100)     Article 1284. When one or both debts are 107)     Deposit – is constituted from the moment a
rescissible or voidable, they may be compensated person receives a thing belonging to another with the
against each other before they are judicially rescinded obligation of safely keeping it and of returning the
or avoided. After annulment, compensated is deemed same.
not taken place.
108)     Commodatum – is a gratuitous contract whereby
101)     Where compensation has taken place BEFORE one of the parties delivers to another something not
assignment – the debtor can raise the defense of consumable so that the latter may use the same for a
compensation to the assignee. The remedy of the certain time and return it.
assignee is against the assignor.
109)     Support – comprises everything that is
102)     The right to the compensation may be waived by indispensable for sustenance, dwelling, clothing,
the debtor before or after the assignment. medical attendance, education and transportation, in
keeping with the financial capacity of the family.
 o   Mixed – when the object and the debtor or the
110)     Article 1289. If a person should have against him creditor, or both the parties, are changed. It is a
several debts which are susceptible of compensation, combination of real and personal novations.
the rules on the application of payments shall apply to 116)     Article 1292. In order that an obligation may be
the order of the compensation. extinguished by another which substitutes the same, it
is imperative that the old and the new obligations be on
111)     Article 1290. When all the requisites mentioned every point incompatible with each other.
in article 1279 are present, compensatiion takes effect
by operation of law, and extinguishes both debts to the 117)     Requisites of Novation
concurrent amount, even though the creditors and ·         A previous valid obligation
debtors are not aware of it. ·         Capacity and intention of the parties to modify or
extinguish the obligation
112)     Article 1291. Obligations may be modified by: ·         The modification or extinguishment of the
·         Changing their object or principal conditions obligation
·         Substituting the person of the debtor ·         The creation of a new valid obligation
·         Subrogating a third person in the right of creditor
118)     Novation is never presumed. It must be clearly
113)     Novation – is the extinction of an obligation and unmistakably established either by the express
through the creation of a new one which substitutes it. agreement of the parties or acts of equivalent import or
by the incompatibility of the two obligations with each
114)     Dual function of novation – it is a contract other in every material respect.
containing two stipulations: one to extinguish an
existing obligation, the other to substitute a new one in 119)     Article 1293. Novation which consists in
its place. It operates as a relative extinction only. substituting a new debtor in the place of the original
one, may be made even without the knowledge or
115)     Kinds of Novation against the will of the latter, but not without the
·         According to origin: consent of the creditor.
o   Legal – takes place by operation of law
o   Conventional – takes place by agreement of the 120)     Kinds of personal novation:
parties ·         Substitution – when the person of the debtor is
·         According to how it is constituted: substituted
o   Express – declared in unequivocal terms ·         Subrogation – when a third person is subrogated
o   Implied – when the old and new obligations are in the rights of the creditor
essentially incompatible with each other
·         According to extent: 121)     Kinds of Substitution
o   Total or extinctive –when the old obligation is ·         Expromission – takes place when a third person of
completely extinguished his own initiative and without the knowledge or against
o   Partial or modificatory – when the old obligation is the will of the original debtor assumes the latter’s
merely modified obligation with the consent of the creditor. It is
·         According to subject: essential that the old debtor be released from his
o   Real or objective – when the object or principal obligation, otherwise, there is no expromission.
conditions are changed ·         Delegacion – takes place when the creditor
o   Personal or subjective – when the person of the accepts a third person to take place of the debtor at the
debtor is substituted and/or when a third person is instance of the latter. All the parties, the old debtor and
subrogated in the rights of the creditor the new debtor, and the creditor must agree.
122)     Article 1294. If the substitution is without the
knowledge or against the will of the debtor, the new 129)     Kinds of Subrogation
debtor’s insolvency or non-fulfillment of the obligation ·         Conventional – when it takes place by express
shall not give rise to any liability on the part of the agreement of the original parties and the third person
original debtor. (Expromission) ·         Legal – when it takes place without agreement but
by operation of law (not presumed except in cases
123)     General Rule: The old debtor is not liable to the expressly stipulated by law)
creditor in case of the insolvency of the new debtor.
Exceptions: (In case of Delegacion) 130)     Cases of Legal Subrogation
a) The said insolvency was already existing AND of ·         When a creditor pays another creditor who is
public knowledge (although it was not known to the old preferred
debtor) at the time of the delegacion ·         When a third person without interest in the
b) The insolvency was already existing AND known to obligation pays with the approval of the debtor
the debtor (although it was not of public knowledge) at ·         When a third person with interest in the
the time of the delegacion obligation pays even without the knowledge of the
debtor
124)     General Rule: Extinguishment of the principal
obligation carries with it that of the accessory 131)     Article 1303. Subrogation transfers to the person
obligations. subrogated the credit with all the rights thereto
Exception: In the case of an accessory obligation appertaining, either against the debtor or against third
created in favor of a third person which remains in force persons, be they guarantors or possessors of
unless said third person gives his consent to the mortgages, subject to stipulation in a conventional
novation. subrogation.

125)     General Rule: There is no novation if the new 132)     Article 1304. A creditor, to whom partial
obligation is void and, therefore, the original one shall payment has been made, may exercise his right for the
subsist for the reason that the second obligation being remainder, and he shall be preferred to the person who
inexistent, it cannot extinguish or modify the first. has been subrogated in his place in virtue of the partial
Exception: In case where the parties intended that the payment of the same credit.
old obligation should be extinguished in any event.

126)     If the new obligation is only voidable, novation

can take place. But the moment it is annulled, the
novation must be considered as not having taken place,
and the original one can be enforced, unless the
intention of the parties is otherwise.

127)     Article 1298. The novation is void if the original

obligation was void, EXCEPT when annulment may be
claimed only by the debtor, or when ratification
validates acts which are voidable.

128)     Article 1299. If the original obligation was

subject to a suspensive or resolutory condition, the new
obligation shall be under the same condition, UNLESS it
is otherwise stipulated.