OBLIGATIONS WITH A PERIOD -whether it will happen or not

ARTICLE 1193- As to time:

Obligations for whose fulfillment a day certain has been Period: refers only to the future
fixed shall be demandable at once. Condition: may refer also to past event unknown to
(1st paragraph) the parties.
-uncertain event unknown to the parties or past event
Obligations with a resolutory period take effect at once still unknown to the parties.
but terminate upon arrival of the day certain. As to influence on the obligation
(2nd paragraph) Period: merely fixes the time for the efficaciousness of
the obligation
A day certain is understood to be that which must -the period would fix the time when the obligation is
necessarily come, although it may not be known when. effective.
(3rd paragraph) Condition: causes an obligation either to arise or cease
As to effect, when left to the debtor’s will
If the uncertainty consists in whether the day will come Period: a period which depends upon the will of the
or not, the obligation is conditional and shall be debtor empowers the court to fix the duration thereof.
regulated by the rules of the preceding section. -when the period is left to the will of the debtor, the
(4th paragraph) court is empowered to fix the duration of the parties.
Condition: condition which depends upon the sole will
Obligation with a period- of the debtor invalidates the obligation
- one whose consequences are subject in one way -the obligation is without effect if the condition depends
or another to the expiration or arrival of said upon the sole will of the debtor. NULL & VOID
period or term. Retroactive effects- effects of the period/term/condition
- You can demand the performance of an on the obligation if the happening of the
obligation or the extinguishment/termination of period/term/condition has happened prior to the effect of
the obligation subject to the expiration of the the condition.
term/period which must necessarily come. Period: unless there is agreement to the contrary, the
There is a day certain when the obligation will arrival of the period does not have retroactivity effects.
arise. -it will not retroact upon the happening of the period.
Period or Term- a future and certain event upon the However, if there is an agreement, there will be
arrival of which the obligation (right) subject to it retroactive effect.
either arises or terminated. Condition: the happening of the condition has
Example: retroactivity effects.
On August 15, 2021 A obliged himself to give -the effect of the obligation retroacts upon the happening
his ring to B on December 1, 2021. On December 1, of the condition.
2021, the obligation is now demandable by reason of SIMILARITY: both must be possible
the expiration of the term/period. The arrival of which -if it would be impossible there would be no term or
the obligation for A to give his ring to B will now condition.
expire and it would now be demandable by reason of
expiration of the period which is December 1, 2021. KINDS OF PERIOD/TERM:
-when the future and certain event has arrived, the 1.According to effect:
obligation would extinguish or arise. a. Suspensive (ex die- from a certain day)- obligation
On August 15, 2021, A allowed B to use his begins from a day certain upon the arrival of a period.
car until December 1, 2021. A’s obligation is -the expiration of the term causes the obligation to arise.
demandable on August 15, 2021 when the obligation Suspensive period cannot be demandable until the
has been constituted. However, on December 1, 2021, expiration of the term.
his obligation is now extinguished. Example:
When can you say that a day is certain in essence? I will pay you 60,000 pesos 6 months from now.
A day is certain when it must necessarily -That would be the time the obligation begins.
come. It would come however the exact date and time b. Resolutory (in diem-until a certain day)- obligation is
is unknown. valid up to a day certain and terminates upon arrival of
the period.
Example: Death of a person -The expiration of the period will cause the
A is obliged to give 5,000 pesos to B upon the extinguishment of the obligation.
death of B’s father. Is the obligation a conditional? A’s -demandable at once upon the expiration of the term.
obligation is one with a period. As a day certain is Example:
fixed for it, it is demandable and because the death of I will give you this book until the end of the semester.
B’s father is a future and certain event although the Because the obligation is valid but it would terminate
date may be unknown. upon the arrival of the period.
As to fulfillment 2.According to source:
Period: certain event which must happen sooner or a. Legal- when provided for by laws, fixed by law
later at a date known beforehand or at a time which b. Conventional or Voluntary- when it is agreed to by the
cannot be determined parties.
-the event is not only certain, but it must happen either C. Judicial- when it is fixed by the court.
at a date known beforehand by the parties or a certain 3. According to definiteness:
time which cannot be determined. a. Definite- when it is fixed or it is known when it will
-certain to come come.
Condition: an uncertain event
b. Indefinite- when it is not fixed or it is not known when  1f he was aware of the period, and he paid
it will come. voluntarily, he cannot recover the payment or
delivery he made. He is deemed to have waived the
ARTICLE 1194- Rules in Art. 1189 shall be equally benefit of the term and the obligation is considered
applicable in case of loss, deterioration or improvement as already matured. Hence recovery is barred.
of the thing before the arrival of the period.
REQUISITES: DEBTOR PAYMENT BEFORE ARRIVAL OF
1. obligation is a real obligation PERIOD:
2. object is a specific/determinate thing - The obligor may no longer recover the thing or money
3. obligation is subject to a suspensive condition once the period has arrived but he can recover the fruits
4. condition is fulfilled or interests thereof from the date of premature
5. there is a deterioration or improvement, loss of the performance to the date of maturity of the obligation.
thing due during the pendency of the condition
KINDS OF LOSS: Example:
1. Physical If the obligation is due on September 9, 2022
2. Legal and it is paid by mistake on February 14, 2022. Here, the
3. Civil debtor made the payment believing that the period has
RULES: arrived. The debtor can recover the amount paid together
1. Loss of the thing without debtor’s fault- obligation is with its interest from the date of payment.
EXTINGUISHED, debtor is NOT LIABLE.
2. Loss of thing through the debtor’s fault- debtor bears What if the debtor made payment with knowledge of the
the loss, creditor is entitled to damages. period has arrived or with knowledge that the period has
3. Deterioration of thing without debtor’s fault- creditor not arrived? (He is not in good faith). Here the debtor
bears the loss. A thing deteriorates when its value or cannot recover what he has paid or delivered by making
substance is reduced or impaired with or without the the payment or delivery knowing that the period has
fault of the debtor. already arrived or with knowledge that the period has not
4. Deterioration of thing through debtor’s fault- yet arrived. He has deemed to have impliedly waived the
Remedies of the creditor: Rescission of the obligation benefit of the period.
with damages/specific performance.
5. Improvement of the thing by nature or by time- NOTE:
improvement shall inure to the benefit of the creditor to  If lumagpas na sa period, interest nalang makukuha
compensate creditor who would suffer in case there  If hindi pa lumagpas sa period, pwedeng ibalik yung
would be deterioration without fault of the debtor. money.
A thing is improved when its value is increased or
enhanced by nature or by time at the expenses of the ARTICLE 1196- the period is for benefit of both parties
debtor or creditor. unless it would appear from the agreement of the
6. Improvement of the thing at the expense of the debtor- obligation. It would appear that the period has been
debtor will have the right granted to a usufruct (the right established for the benefit of one part of the parties.
to enjoy the use and fruits of a thing belonging to -If it is for the benefit of both parties, the creditor cannot
another) demand payment from the debtor and the debtor cannot
compel the creditor to accept his payment before the
ARTICLE 1195- If there has been payment or delivery expiration of the period because it is for the benefit of
before the arrival of the period and the obligor is not both parties.
aware of the period or believes that the obligation has
become due and demandable, there may be recovered
with the fruits and interest. ARTICLE 1197- refers to JUDICIAL PERIOD-fixed
by court
-this provision is only applicable to an obligation to give General rule: if the obligation does not state a period
a thing. and no period has been intended by the parties, the court
-solutio indebiti- it allows the recovery of what has been is not authorized to fix a period for them since the court
paid by mistake before the fulfillment of suspensive has no right also to make contracts for the parties.
condition. -the court cannot intervene and has no authority to fix
-What would be the effect of the payment before the term for the parties.
expiration of the term? -it is with the agreement of the parties that would bind
-if the debtor made by the payment believing that the both of them.
period has arrived (good faith). The debtor can recover -if the agreement of the parties does not state a period
what he has paid with its fruits and interest. and the parties intended that there is no period in the
-Allows the recovery of what has been paid by mistake obligation the law is clear that the court cannot
before the fulfillment of a suspensive condition. intervene.
 If before the maturity date of the obligation, the The binding is the agreement they agreed upon.
debtor paid or delivered a thing to the creditor, the This agreement is contrary to law.
debtor may or may not recover what he has paid or Example: A binds himself to pay B 20,000 pesos. The
delivered depending upon his good or bad faith. general rule applies.
 If he was not aware of the period or he was of the Exceptions: the court may fix the period even though no
belief that the obligation has become due and period has been mentioned in the obligation in order to
demandable he can recover what he paid or forestall the possibility that the obligation may never be
delivered including fruits and interest. fulfilled:
1.No period is fixed but a period was intended by the -if the debtor to secure another guarantee that is equally
parties because it can be inferred from its nature and the satisfactory from the first guarantee, then the obligation
circumstances that a period was intended. is not demandable.
-intention of the parties to have a period in the Example: On January 1, 2021, A borrowed 100k from B
obligation. payable on December 31, 2022. To secure the loan, A
Example: A is obliged to construct the house of B. No constituted a chattel mortgage on his car. On February 1,
period was indicated in the agreement as to when A must 2021, the car was partly burned because A stored
complete the construction of the house. From the nature flammable materials therein. B can now demand
of the obligation, it is apparent that there has to be a immediate payment. Why? Because the car was
period. It was not mentioned. B may now go to the court impaired due to the fault of A.
and ask it to fix the duration of the construction of the If the car was totally wrecked due to fortuitous event, B
house. can likewise demand immediate payment because of the
2.Duration of the period depends upon the will of the disappearance. A can continue enjoying the benefit of
debtor. the period if he furnishes another guarantee. The general
-When the duration depends upon the will of the debtor, rule would apply.
the court has to fix the period. 4. When the debtor violates an undertaking.
Example: I will pay you as soon as my permit me to do If the debtor violates an undertaking in consideration of
so. which the creditor agreed to that period, the obligation is
-Duration of the obligation, the court must come in to fix demandable before the lapse of the period.
the duration. Example: On January 1, 2021, A borrowed 100k from B.
B gave A up to December 31, 2022 to pay on the
ARTICLE 1198- Cases where the obligation is condition that A would not bet a lotto until he has paid
demandable before the lapse of the period. the debt. On February 14, 2022, A was seen betting lotto
General rule: Obligation is not demandable before the and therefore there is already a violation of the
lapse of the period. undertaking, then, the obligation is demandable before
-the obligation is not demandable before the lapse of the the lapse of the period.
period 5. When the debtor attempts to abscond (to depart
-the benefit of the period may be established for the secretly). The creditor can demand for the performance
benefit of the debtor hence; the creditor may demand of the obligation even before the lapse of the period. It is
payment from the debtor only upon the expiration of the not necessary that the debtor flees in order for him to
term/period. lose the benefit of the period. It is sufficient that there is
-if the debtor wusses the benefit of the period, the an attempt on his part to flee or abscond.
obligation becomes a pure obligation and is considered Example: On January 1, 2021, A borrowed 100k from B
immediately demandable. payable on December 31, 2022. On February 14, 2022,
A secretly moved in another town, with the intention of
Exceptions: evading the payment of his debt. B can demand for
1.When the debtor becomes insolvent, the obligation is payment by reason of the attempt of A to abscond.
demandable even if the period has not yet lapsed.
-The debtor is insolvent when the assets of the debtor are ALTERNATIVE OBLIGATIONS
not sufficient to pay his debts. More debts than assets. ARTICLE 1199- A person alternatively bound by
The debtor could no longer pay his debts. different prestations shall completely perform one of
-The insolvency of the debtor does not require judicial them.
declaration. It is not necessary for the court to declare The creditor cannot be compelled to receive part of one
that the debtor is insolvent for purposes of applying this and part of the undertaking.
first exemption. It is sufficient that the debtor has a hard -it means that, the creditor has the right to complete
time paying his debts. compliance of the prestation.
Example: On January 1, 2021, A borrowed 100,000 from Kinds of Obligation according to object:
B. It is payable on December 31, 2022. On May 1, 2021, 1. Simple Obligation- one where there is only one
A became insolvent. He could no longer pay and B can prestation.
now demand payment even before December 31, 2022 -the obligation to give a specific ring.
unless A would give guarantee for the debt. 2. Compound Obligation- one where there are two or
2. When the debtor does not furnish guarantees or more prestations:
securities promised. a. Conjunctive- one where there are several prestations
-even if the period has not yet lapsed the creditor can and all of them are due and need to be performed.
demand for payment from the debtor. -the obligation of A to give a specific car and a specific
Example: A obtained a loan of 100,000 pesos from B on bracelet. All of them are due
January 1, 2021 payable on December 31, 2022. A b. Distributive- one where one of two or more
promised to constitute a chattel mortgage on his car prestations is due.
within 1 month to secure the loan meaning to say “I will 1. Alternative- one where several prestation are due
borrow money from you and as a security of the loan, I but the performance of one is sufficient.
will mortgage my car.” If the 1-month period has -there are several prestation are due but the performance
expired without A executing the chattel mortgage, B can of one obligation is sufficient to extinguish the debt or
demand A for immediate payment without waiting for the obligation.
December 31, 2022. 2. Facultative- one where only one prestation is due
3. When the guarantees or securities given have been but the debtor may substitute another.
impaired or have disappeared it necessarily follows that
the obligation is demandable even if the lapse of the ALTERNATIVE OBLIGATION- one wherein various
period has not yet arrived. prestations are due but the performance of one of them is
sufficient as determined by the choice which, as a S obliged himself to deliver to B his car, or his race
general rule belongs to the debtor. horse. S chose the car and properly informed B of his
-a person alternatively bound by different prestation choice. The obligation becomes a simple obligation to
shall completely perform one of them. deliver the car. As such, neither party can change the
Example: A agreed to give 10,000 pesos or 20 sacks of prestation without the consent of the other. Of course, S
rice to B. To comply with his obligation, A must or B may waive his right after a choice has been made.
perform completely any of this prestation. As a general rule, all rights may be waived.
He could give the 10,000 pesos or the 20 sacks or rice to
B. The effect of which would be the extinguishment of **The concurrence of the creditor to the choice made by
the obligation once the debtor made a choice of which the debtor is NOT REQUIRED.
prestation he will perform. -once the debtor made the choice, the choice need not to
(2nd paragraph) Thus, when the obligation states that A be concurred by the creditor.
agreed to give 10,000 pesos or 20 sacks of rice to B. A
cannot be partial payment and partial sacks of rice ARTICLE 1203- Remedy of rescission if because of the
unless, B consents. creditor’s fault, the debtor cannot make a choice
-The creditor deserves the entire performance of the according to the terms of the obligation.
obligation with respect to the debtor’s obligation. -if through the creditor’s acts, the debtor cannot make a
choice according to the terms of obligation, the latter
ARTICLE 1200- Right to choose prestation, as a may rescind the contract plus damages.
general rule, belongs to the DEBTOR Rescission- creates the obligation to return the things
Exceptions/Limitations: which were the object of the contract together with their
1. When expressly granted to him or by a third person fruits and the price with its interest.
when the right is given to him by a common agreement it -cancellation of the obligation.
is now the creditor who has the right to choose which -the debtor cannot make a choice through the acts of the
prestation must be performed. creditor, then there will be a remedy of rescission.
Example: A agreed to give 10,000 pesos or 20 sacks of -it speaks of the effect when the debtor cannot choose
rice to B. General rule applies. due to the acts of the creditor, the debtor may cancel the
If there is a common agreement where the right is given contract with a right to ask for damages.
to the creditor and that agreement was expressly given
by a third person. Example: A agreed to paint the vios car or to paint the
2. Debtor cannot choose prestations which are ford car of B for 20,000 pesos. B sells the Ford van.
impossible, unlawful, or which could not have been the Since it was the fault of the creditor why A cannot make
object of the obligation. a choice, the remedy of the debtor is to rescind the
Example: A who is obliged to give 5 bills of tobacco contract and ask for damages as he is deprived of right to
leaves or 5 bills of marijuana leaves or 5 sacks of corn choose.
for milling or to plow the 20-hectare farm of B in one ** It states that rescission is not automatic, the debtor
day using only one carabao. A has the right of choice, may choose not to rescind the contract but he could also
however, he cannot choose unlawful prestation. A perform any of the remaining prestation. The choice of
cannot choose to deliver the 5 bills of marijuana leaves. the debtor and it was the fault of the creditor**
It is against the law. 9165. A cannot choose to plow the ARTICLE 1204- The right of choice still belongs to the
20-hectare farm of B in one day using only one carabao, debtor and the loss or impossibility happened before the
it is impossible for him to do so. A can only choose to choice was communicated to the creditor.
give 5 bills of tobacco or 5 sacks of corn for milling. If Rules:
the roots of the corn have sprouted, A cannot choose this If only one or some are loss because of fortuitous events
prestation because the corn was intended for milling. or the fault of the debtor, the debtor may deliver any of
3. The debtor cannot choose part of one prestation and the remainder or that which remains if only one subsists.
part of another prestation. Example: A gives a specific carabao or a specific cow or
a specific horse to B. If the carabao was struck by
ARTICLE 1201- The choice shall produce no effect lightning, A may still deliver the remaining depending
except from the time it has been communicated. on his decision.
**Once the notice of election has been communicated, If the carabao fell into the ravine, due to the negligence
the obligation ceases to be alternative and becomes of A, A may still deliver the cow or the horse.
simple and becomes IRREVOCABLE.
-The choice must be communicated to the creditor by the If all of the prestation have been lost because of
debtor it is only from that time that such choice produces fortuitous events, the obligation is now extinguished.
effect. There should be no person liable for fortuitous event.
The law is silent as to form of notice. The notice of
choice may be given expressly (oral or written). That If A gives a specific carabao or a specific cow or a
once of the choice has been communicated the specific horse to B and if all the prestation were struck
obligation cease to be an alternative obligation. by lightning, A’s obligation will now be extinguished.
IRREVOCABLE.
The choice can no longer be changed without the If all the prestation are lost because of the fault of the
consent of the creditor. The obligation becomes a simple debtor, the debtor shall pay the value of the last thing
obligation to perform the prestation which has been that was lost plus for damages.
selected. If all of the thing except one because of the fault of the
Principle of irrevocability once there has been noticed of debtor and the remaining item is subsequently lost
the election. because of fortuitous event, the obligation of the debtor
is extinguished.
If A gives a specific carabao or a specific cow or a 1.Before substitution- if the principal thing is lost
specific horse to B. If the carabao and the cow are lost through fortuitous event, the obligation is
because of the fault of A, the obligation becomes a EXTINGUISHED, otherwise, the debtor shall be liable
simple obligation to deliver what is remaining prestation. for damages.
If the horse is subsequently lost due to fortuitous event, -before the debtor has informed the creditor that he
A’s obligation is extinguished. However, if all except are would deliver the substitute.
lost because of fortuitous event and the remaining It is not yet due, if the substitute was lost before
prestation was subsequently lost because of the fault of substitution, there is no additional obligation because the
the debtor, A will pay for damages. substitute is not yet due. The lost of the substitute would
now convert into simple obligation.
ARTICLE 1205- The right of choice belongs to the EXAMPLES:
creditor and the obligation shall cease to be alternative S will give B item one or if S wants, item two. If:
from the day when the selection has been communicated EFFECT:
to the debtor. (a) item one is lost through a fortuitous event the
Rules in case of Loss before the creditor has made obligation of S is extinguished. (Arts. 1174, 1262.)
choice: (b) item one is lost through the fault of S - S is
1.When a thing is lost through a fortuitous event, liable for damages. (Art. 1170.)
creditor can choose among the remainder or what (c) item two is lost with or without the fault of S - S
remains. is still liable to deliver item one (see Art. 1165.); he is
Example: A is obliged to give a specific carabao or a not liable for damage for the loss of item two as it is not
specific cow or a specific horse to B. The carabao was due.
killed by lightning. The loss occurred before the creditor
has made choice. A shall deliver the cow or the horse 2.After substitution- if the principal thing is lost, the
depending upon the decision of B. debtor is not liable whatever may be the cause of the loss
If both the carabao and cow were struck by lightning, A because it is no longer due. If the substitute is lost, the
shall deliver the horse. liability of the debtor depends upon whether or not the
2.When a thing is lost through the debtor’s fault, the loss is due to his fault. Once substitution is made, the
creditor can choose what remains plus damages OR the obligation is converted into a simple one to deliver or
price of the thing lost PLUS damages. perform the substituted thing or prestation.
Example: A is obliged to give a specific carabao or a -the loss of the principal thing whether it is the debtor’s
specific cow or a specific horse to B. If the carabao was fault or due to fortuitous event, there is no additional
killed when it fell into the ravine due to the debtor’s obligation to the debtor because what has been lost (the
fault, B may claim the cow or the horse or have the principal thing), it is no longer due.
payment of the price of the carabao plus damages. -state whether the loss (substitute) is due to fortuitous
If both the carabao and the cow were killed due to the event the obligation is extinguished, if the loss of the
debtor’s fault, B may claim the horse or the payment of substitute is lost because of the debtor’s fault, he shall be
the price of either the cow or carabao with the right of liable for damage.
damages. Example: S will give B item one or if S wants, item two.
3.When all the things are lost through the fault of the If:
debtor, creditor can demand the price of any of those lost EFFECT:
PLUS damages. (a) item one is lost with or without the fault of S - S
Example: If the three animals were lost due to the fault is not liable for its loss since his obligation is to deliver
of the debtor, B may claim the price of any of the item two.
animals plus damages. (b) item two is lost through a fortuitous event –
4. When all the things are lost through fortuitous event, obligation of S is extinguished
the obligation shall be extinguished and Article 1174 (c) item two is lost through the fault of S- S is liable
shall apply. for damages

ARTICLE 1206- Facultative obligation and the effect of Alternative and facultative obligations distinguished.
loss before and after substitution has been made. The differences are as follows:
FACULTATIVE OBLIGATION- one where only one (1) Number of prestation- In the first, several prestation
prestation has been agreed upon but the obligor may are due but compliance with one is sufficient, while in
render another substitution. the second, only one (1) prestation is due although the
-only one prestation has been agreed upon the debtor debtor is allowed to substitute it;
may render another substitution. (2) Right of choice -In the first, the right of choice may
Example: A is obliged to give a specific ring to B but if be given to the creditor or third person, while in the
A desires, A may also deliver a specific wrist watch as a second, the right to make the substitution is given only to
substitute. the debtor;
There is only one prestation that has agreed upon by the (3) Loss through a fortuitous event- In the first, the loss
parties but A may render another in substitution. of one or more of the alternatives through a fortuitous
A owes B 50,000 pesos. The parties agreed that if A event does not extinguish the obligation, while in the
does not have a necessary fund on the due date A could second, the loss of the thing due extinguishes the
also give a lot of the same of value. obligation; and
In Facultative obligation, the right to determine whether (4) Loss through fault of debtor.
the substitute should be given or not belongs to the a) In the first, the loss of one of the alternatives
debtor. through the fault of the debtor does not render him
EFFECT OF LOSS: liable, while in the second, the loss of the thing due
through his fault makes him liable;
b) In the first, where the choice belongs to the Solidary Obligation- one where each one of the debtors
creditor, the loss of one alternative through the fault of is bound to render, and or each one of the creditors has a
the debtor gives rise to liability, while in the second, the right to demand from any of the debtors, entire
loss of the substitute before the substitution through the compliance with prestation.
fault of the debtor does not render him liable. -anyone of the debtors can be liable for the entire
compliance of the whole obligation and anyone of the
creditors can collect the whole obligation.
Joint and Solidary Obligation
Article 1207 and 1208- Joint and Solidary Obligations
and the presumption of a JOINT OBLIGATION.
ART. 1207. The concurrence of two or more creditors or Example:
of two or more debtors in one and the same obligation A and B owe C and D= P100,000
does not imply that each one of the formers has a right to A is liable to either C and D= P100,000
demand, or that each one of the latter is bound to render, -one of the debtors is liable to render the whole payment
entire compliance with the prestation. There is a solidary of the obligation either to any of the creditors.
liability only when the obligation expressly so states, or B is liable to either C and D= P100,000
when the law or the nature of the obligation requires C can either demand from A or B= P100,000
solidarity. (1137a) D can either demand from A or B= P100,000

ART. 1208. If from the law, or the nature or the wording Presumption of Joint Obligation- in case the obligation
of the obligations to which the preceding article refers, is silent as to whether it is joint or solidary, it is always
the contrary does not appear, the credit or debit shall be presumed that the obligation is JOINT.
presumed to be divided into as many equal shares as
there are creditors or debtors, the credits or debts being Words to indicate Joint Liability- mancomunada,
considered distinct from one another, subject to the mancomunadamente, pro rata, proportionately, we
Rules of Court governing the multiplicity of suits. promise to pay signed by two or more persons.
(1138a) Words to indicate Solidary Liability- jointly and/or
Kinds of Obligation according to the number of severally, solidaria, in solidium, together and/or
parties separately, individually and/or collectively, I promise to
1. Individual obligation-one where there is only one pay signed by two or more persons.
obligor or one oblige; and Note: It is not necessary that the agreement should
2. Collective obligation-where there are two or more employ precisely the word solidary in order that an
debtors and/or two or more creditors. It maybe Joint or obligation may be considered. It is sufficient that the
Solidary. obligation declares for instance that each of the debtors
Example: can be compelled to pay the entire obligation or can be
A and B are obliged to deliver a cellphone to C and D. proceeded against for the full amount of the obligation.
Joint Obligation- one where the whole obligation is to - It is not stated by the law that there has to be certain
be paid or fulfilled proportionately by the different words indicating joint or solidary.
debtors and/or is to be demanded proportionately by When obligation is solidary:
the different creditors. 1.The obligation expressly so states;
-pro rata Example: A and B are solidarily liable to pay C and D
-each debtor is liable only for a proportionate part and the amount of P 50,000
each debtor is entitled only to a proportionate part of the 2. The law requires solidarity
credit. Example: The partnership shall be solidarily liable with
Example: (Joint debtors) all the partners for lost or injury cost for a third person
A and B owe C= P100,000 by reason of a wrongful act or omission of any partner
A’s obligation to C= P50,000 acting in an ordinary course of business of the
B’s obligation to C= P50,000 partnership with authority of his/her partners.
C can demand from A and B= P50,000 each -the partnership is solidarily liable with all the partners
Example: ( Joint Creditors) for whatever loss or injury which has caused to a 3 rd
A owes B and C= P100,000 person because of a wrongful act or omission by one of
A’s obligation to B= P50,000 the partners acting within the scope of the business. It is
A’s obligation to C= P50,000 now the law that requires that the partnership is
B can demand from A= P50,000 only solidarily liable.
C can demand from A= P50,000 only -The responsibility of two or more payees when there is
Example: (Joint debtors and creditors) payment that is not due.
A, B, C and D are liable to X, Y and Z in the amount of -When there are 2 or more persons who are liable for
P12,000 each. Each debtor is liable for 3,000 pesos, quasi-delicts (an act or omission intent). It is the law that
however, since there are 3 creditors the amount will be requires solidarity.
divided into 3. A is obliged to give 1,000 pesos each to 3. The nature of obligation requires solidarity.
the creditors. On the other hand, each of the creditors Example:
can collect 4,000 pesos (1,000 pesos each) from the In the workman’s compensation law, wherein in the
debtor. decision decided from a supreme court it held that the
Note: Since debts are distinct and separate from each partners liability under workman’s compensation act is
other in a joint obligation, the insolvency of one of the solidary since the nature of their obligation requires
debtors shall not make others liable. solidarity. This is for the protection of their employees.
For example, A (a security guard) of AB partnership and
he died in line of his duty he was shot dead. Now the airs
now ask for the demand of compensation under the partnership or with the authority of his co-partners.
workman’s compensation law for the whole amount (Arts.1822-1824.)
from partner A. Now the partnership claimed that their 3. If two or more persons have appointed an agent for a
liability is only joint. However, the supreme court held common transaction or undertaking, they shall be
the liability of partners under the workman’s solidarily liable to the agent for all the consequences of
compensation law is solidarity. the agency. (Art.1915.)
Kinds of Solidarity: 4. When there are two (2) or more bailees to whom a
1. According to the parties bound thing is loaned in the same contract, they are liable
solidarily (Art. 1945.)
5. The responsibility of two (2) or more payees, when
a. Passive Solidarity- solidarity on the part of the there has been a payment of what is not due, is solidary.
debtors, where any one of them can be made liable for (Art. 2157.)
the fulfillment of the entire obligation. It is in the nature 6. The responsibility of two (2) or more persons who are
of mutual guaranty (any of the debtor may be made to liable for a quasi-delict is solidary. (Art.2194.)
fulfill the entire obligation). Each debtor assumes the 7. If the engineer or architect supervises the construction
responsibility of assuming payment or fulfillment of of a building, he shall be solidarily liable to the
another’s debts or obligation. contractor for damages for any defect in the
Example: Here comes now, A, B, C, and D solidary construction. (Art.1723.)
debtors, who are liable to X, Y, and Z joint creditors in 8. In a felony (crime), the principal, accomplices, and
the amount of 36,000 pesos. In here, anyone of the accessories, each within their respective class, shall be
debtors can be held liable for the entire amount of liable severally (in solidum) among themselves for their
36,000 pesos, but each of the creditors can collect only quotas, and subsidiarily for those of other persons liable.
up to 12,000 pesos thus in the given example X, Y, and (Art. 110, Revised Penal Code.)
Z can each collect 12,000 pesos from A alone and after c. Real Solidarity- when solidarity is imposed by nature
that after A has made payment of 36,000 pesos, he can of the obligation.
demand reimbursement of 9,000 pesos each from B, C, Solidarity is NOT PRESUMED since solidary
and D. obligations are very burdensome, for they create unusual
b. Active solidarity- solidarity on the part of the rights and liabilities. Solidarity between debtors
creditors, where any one of them can demand fulfillment increases their responsibility where solidarity between
of the entire obligation. Its essential feature is that of creditors increase the right of each creditor. It gives
mutual representation among the solidary creditors tremendous rights in which they could demand full
with powers to exercise the rights of the others in same compliance of the entire obligation.
manner as their rights. Each of the creditor represent the
other creditors. ARTICLE 1209- Joint Indivisible Obligation- the
Example: A, B, C, and D joint debtors they are liable to parties are merely proportionately liable but the object or
X, Y, and Z solidary creditors in the amount of 36,000 subject matter is not physically divisible into different
pesos. Anyone from the creditors can collect the entire parts.
amount of 36,000 pesos but each of the debtors can be -The obligation is joint because the parties are merely
held liable for not more than 9,000 pesos thus X can proportionately liable. It is indivisible because the object
collect 36,000 pesos but he can’t collect more than 9,000 or subject matter is not physically divisible into different
pesos from A, B, C, and D. After X has collected the parts.
36,000 pesos, he must give 12,000 pesos each to Y and -It is an obligation where the debtors/creditors are jointly
Z. bound but the prestation is indivisible or not capable of
c. Mixed solidarity- solidarity on the part of the debtors partial performance.
and creditors where each one of the debtors is liable to Rule:
render, and each one of the creditors has a right to -The creditors must act collectively, all of them must
demand the entire compliance with the obligation. make the demand unless one is specifically authorized to
Example: act for others.
Here comes A, B, C, and D who are solidarily debtors -A demand made by one or some but not all creditors
and they are liable to X, Y, and Z solidary creditors. So, will not be considered effective, since the obligation is
each of the debtors either A, B, C, and D could be made joint and the demand must be made against all the
to pay the entire obligation of 36,000 pesos to X, Y, and debtors since the compliance is only possible if they act
Z who are solidarily creditors. Each of the creditors also together.
could demand the entire compliance from any of the -The right of the creditors may be prejudiced only by
solidary debtors which is A, B, C, and/or D. their collective acts, therefore, if there has been a
2. According to source: renunciation made by all of the creditors, it now
a. Conventional solidarity- where solidarity is agreed extinguishes the obligation, however, if it is only made
upon by the parties. by one of the joint creditors, such renunciation
b. Legal solidarity- imposed by law extinguishes only his share because it is a joint liability.
EXAMPLES: The obligation is now converted to an obligation to pay
1. Even when the agent has exceeded his authority, the the value of the thing less the share of the renouncing
principal is solidarily liable with the agent if the former creditor.
allowed the latter to act as though he had full powers. -If one of the debtor does not comply with his
(Art. 1911.) undertaking, the obligation is converted into a monetary
2. All partners are solidarily liable with the partnership obligation to pay damages.
for any crime or quasi-delict committed by any partner Example: A B and C are jointly liable to deliver to D a
acting in the ordinary course of business of the painting valued at P60,000. On the date of the delivery,
A and B are willing to deliver but not C. In this case, D
has no cause of action against C for the delivery of the other hand, the share of B will be collected on Christmas
painting because as a joint debtor, C is liable only for a day next year. And the share of C if the star market price
proportionate part of the obligation which is P20,000. of San Miguel Corporation shares reaches 60 pesos per
Since the painting is indivisible, the debt can only be share.
enforced by, proceeding against all the debtors for Today X the creditor may collect 10,000 pesos from
compliance is not possible unless they act together. The either A, B, or C. Comes now on Christmas day next
liability then is converted into one for damages. So, A, B year which is now the stipulation made on the share of
and C will be liable for P20,000 each or a total of P B. X can collect 10,000 pesos which are now represents
60,000, the value of the painting without increase again from either A, B, or C. Now next, if the stock
responsibility for A and B. C, the unwilling debtor, shall market price of a San Miguel shares reaches now 60
be liable for damages to D for having violated the pesos per share X can also collect 10,000 pesos which
obligation. If A and B suffered damages by reason of the are now represents the share of C. And he can collect it
non fulfillment of the obligation of C, they may recover either A, B, or C.
from C. The creditor X can go after the same debtor as soon as
ARTICLE 1210- The indivisibility of an obligation the share on any one of them becomes due.
does not necessarily give rise to solidarity. Nor does -The existence of solidarity is not affected not
solidarity of itself implies indivisibility. withstanding that there would be diversity of the terms
-The liability in an indivisible obligation may either be and condition.
joint or solidary and in a solidary obligation, the subject Kinds of solidary obligation according to the legal tie
matter maybe divisible or indivisible. 1.Uniform-when the parties are bound by the same
-Indivisibilty refers to the subject matter/prestation not stipulations.
being susceptible of partial performance. 2.Non-uniform or Varied-when parties are not subject
-If the performance of an obligation is indivisible it does to the same stipulations.
not necessarily follow that the debtors are solidarily
bound. The debtors may be jointly bound although the ARTICLE 1212- Each one of the solidary creditors may
fulfillment of the obligation is indivisible. do whatever may be useful to the others, but not
Joint Indivisible Obligation anything which maybe prejudicial to them
A and B are jointly liable to deliver to C a particular car. Prejudicial- not beneficial, harmful
Here, the prestation is INDIVISIBLE but the liability of -if he performs any act prejudicial to the others, and as a
A and B is JOINT. result, the obligation is extinguished, he shall be
Solidary Indivisible Obligation responsible to others for damages. As far as the debtor or
A and B obliged themselves solidarily to give the car to debtors are concerned, the act shall be valid and binding.
C. The rule is based on the theory of mutual agency among
Solidary Divisible Obligation: the solidary creditors.
A and B promised solidarily to pay C P100,000 That is with respect to prejudicial acts performed by any
Joint Divisible Obligation: of the solidary creditors in a solidary obligation. Now of
A and B are JOINTLY LIABLE to pay P100,000 to C. course this is not true if what acts that has been
performed by the solidary creditors are considered useful
ARTICLE 1211- even if the parties may not be bound or beneficial to the other creditors so in that case, each
in the same manner and by the same periods and one then of the Solidary creditors may do whatever may
conditions, there may be solidary obligations. be useful or beneficial to other creditors thus, for
-Solidarity may exist although the creditors and the example
debtors may not be bound in the same manner and by the A solidary creditor may make an extra judicial demand
same periods and conditions. upon the debtor or to fight a court action against him for
-the essence of solidary consist of each right of the the recovery of the obligation because such act is
creditor to enforce the obligation of all and on the part of considered useful or beneficial to the other creditors that
each debtor, their liability to answer all the creditors. is allowed. What is not allowed considered under the law
Rule: The creditor may bring his own action in toto are those acts which are considered prejudicial to the
(holy) against any of the solidary debtors less the shares other creditors.
of other debtors with an unfulfilled-conditions. Upon the A solidary creditor then, should not do anything
expiration of the term or the fulfillment of the condition, prejudicial to the other creditors otherwise, he can be
the creditor will now have the right to demand the held liable for damages. That solidary creditor who
payment of the remainder. performed an act prejudicial not beneficial or not useful,
However, the parties may stipulate that any solidary it dangers the other co solidary creditors, that creditor
debtor already bound may be made liable for the entire may be held liable for damages. Thus, then we could say
obligation since the obligation is solidary. that a solidary creditor should not delay in making a
-The solidarity does not require the parties being demand upon the debtor if he knows that the debt is
uniformly bound. Solidarity exists although the debtors nearing prescription so that debt will already be
and creditors are differently bound as long as solidarity prescribed. That solidary creditor then must now act
is stipulated, provided for by law or the nature of the immediately because he knows that when he will not
obligation requires solidary. make demand on the debt, it would now prescribe. In
EXAMPLE: which case the creditors will now lose the right to
A, B, and C who are solidarily liable to give X 30,000 demand the performance of the entire obligation.
pesos. The obligation is solidary debtors in the persons Likewise, also in case the solidary creditor causes the
of A, B, and C who is creditor X. The parties stipulated/ extinguishment of the obligation like for example
agreed that the share of A may be collected on demand, compensation etc. If one of these extinguishments of
meaning to say the share of A as one of the solidary obligation has been made by any of the solidary creditors
debtors may be collected by X on/upon demand. On the
in an obligation, he shall also be liable on the others for solidary debtor and to X, Y, and Z are solidary creditors.
the share obligation corresponding to each. Now, if one of the solidary creditors Let’s say in the
person of X assigns his rights to T who is a third person
As we pointed out here, this rule is based on the theory who is not a part to the obligation who is a stranger to
of mutual agency among solidary creditors such that any the obligation. Without the consent with his solidary
act that is considered prejudicial to the others is not creditors Y and Z. What is the effect? The assignment
tolerated and the creditor who is responsible for the acts valid or not? The assignment is not valid. Thus, then if T
prejudicial would be liable to the other solidary creditor the third person now collects the debts from A and Y and
for the damages. But as we also mentioned, the act made Z do not get their respected shares from him, Y and Z
by the solidary creditor even though it is prejudicial to can go after whom? Of course, to X to recover their
the other solidary creditor that act is still considered shares.
valid and binding. The solidary creditor who assigned his right to a third
person is responsible to give the shares of the other
EXAMPLE: solidary creditors. But if the assignment is let’s say if X
A owes B and C, solidary creditors the amount of assigned his rights to Y even without the consent of Z. Is
P1,000. B may make a demand for the payment of the it allowed?? It is allowed. That is by the provision of the
obligation for this will benefit C. Under the law, law. This assignment will reduce now, the number of the
prescription of action is interrupted when they are filed creditors to two with Y owning 2/3 and X of course 1/3.
before the court. So also, if B collects from A, C will be
benefitted. ARTICLE 1214- The debtor may pay any of the
solidary creditors, but if demand, judicial or extrajudicial
In case of remission or condonation effected by B, the has been made by one of them, the payment should be
obligation will be extinguished since C cannot be made to him.
prejudiced by the remission, B has to reimburse C for the
latter's share. Example:
A owes X, Y, and Z, solidary creditors in the amount of
ARTICLE 1213- A solidary creditor cannot assign his 9,000 pesos. No demand has been made by any of the
rights without the consent of the others. solidary creditors. To whom A should pay? A may pay
Why is there a prohibition on the assignment of the the whole amount of 9,000 pesos to either X, Y, or Z.
rights of a solidary creditor to others without the consent
of the other. What if there would now demand? So, if a demand has
Reason- each of the creditor represents the others and been made by any of the solidary creditors. To whom
the assignee may not have the confidence of the original shall A (the debtor) will pay?? Payments must be made
solidary creditors considering that the assignee after to the solidary creditor who made the demand. What is
receiving payment may not give the shares of the others. the reason? Because the solidary creditor making
If the assignment is made to a co creditor, the consent of demand acts now as the agent of the others. Now if the
the other creditors is not necessary. debtor made the payment to a non-demanding creditor,
-mutual agency, meaning to say the solidary creditors are the payment is not valid as to the creditor who made the
bound by mutual trust and confidence, therefore, a demand.
solidary creditor cannot assign his right without the Accordingly, what is the effect? The latter now may
consent of the others because the person to whom this require the debtor to pay his share of the credit.
right has been assigned may not have the trust and TAKE NOTE: you must know first who made the
confidence of the other non-assignee creditors. demand or if there is a demand or not.
Therefore, any assignment made without the consent of -the debtor may pay one of the solidary creditors, but
the other solidary creditors will not be valid as to the when there is judicial or extrajudicial demand, payment
latter. should be made to him for the non-confusion as well as
-Accordingly, the other solidary creditors can recover prejudice to the more diligent creditors otherwise, the
the respective shares from the assigning creditors. The obligation will not be extinguished and so far as the
person to whom the right has been assigned fails to give creditor payee’s share is concerned. In case the latter
them their respective shares. The other solidary creditors does not give the other creditors’ share.
can recover their shares to another person. Example:
A is liable to pay B and C, solidary creditors the amount
It applies only if the assignee is a third person. Third of P1,000. In this case, A may pay either B or C, but if
person who is not part in the obligation. So, if the demand, judicial or extrajudicial is made by B, payment
assignment is made in favor to a co creditor. Is the should be made to B. If A nevertheless paid C, B is
assignment valid even without the consent of the co entitled to his share from A in case C does not turn over
solidary creditor? It is valid. Why?? Since the assignee to B the latter’s share. If B and C demanded payment at
the other co creditor already enjoys the trust and the same time, A may pay either of them.
confidence of the others. And of course, the law in
favors an assignment to a co creditor to do a way on ARTICLE 1215- Effects of novation, compensation,
what we call now, co ownership/ pro in division. So, it is confusion, remission of the debt by any of the solidary
now a rule that if the assignment is made by a solidary creditors or with any of the solidary debtors.
creditor to another solidary co creditors, that is now PREJUDICE - harm
considered valid even if there is no consent coming from REMISSION - cancellation
the other solidary creditors. CONDONATION – forgiveness
Example: -ways in which the obligation is extinguished.
Here comes now A, who is in debted to X, Y, and Z
solidary creditors in the amount of 30,000 pesos. A is the
-If this has been made by any of the solidary creditors, (2) The payment by A gives him the right to demand
Article 1215 will now speak of these acts of reimbursement from B and C P3,000 each with interest
extinguishment. from the date of payment. But A is not entitled to
-A creditor in a solidary obligation, who executed any of reimbursement nor to interest for any payment made
these acts should be liable to the others for their before January 5. The obligation of B and C to reimburse
corresponding shares because these are acts prejudicial him with interest will arise only from January 5.
to them shall be made liable for their respective shares. If C is insolvent, both A and B shall bear his insolvency
In a joint obligation, these acts do not extinguish or in proportion to their shares. Hence, A can still ask B to
modify the obligation except with respect to the creditor pay an additional sum of P1,500. Of course, A and B can
or debtors affected. later on recover from C should the latter's finances
Example: (Act of remission) improve.
A, debtor and B, C and D are solidary creditors in the 3. Among solidary creditors, the receiving creditor is
amount of P30,000. If B validly condones the debt in the jointly liable for the others for their corresponding
amount of P18,000, he shall be liable for P6,000 each to shares.
C and D. If B collects P15,000 from A, B must account Example:
for the P5,000 share each of C and D. (3) D, in the above example, has the obligation to give to
-If the obligation of A is joint, the condonation will E his corresponding share in the credit.
affect only the share of B in the amount of P10,000. So,
A is still indebted to C and D in the amount of P20,000. ARTICLE 1218- Payment by a solidary debtor shall not
In the first example, only the P12,000 of the debt entitle him to reimbursement from his co-debtors if such
remains, the obligation of A to pay the P18,000 payment is made after the obligation has prescribed or
condoned having been extinguished. become illegal.

ARTICLE 1216- reiterates the rule that in a solidary Prescription- one acquires ownership and other real
obligation (passive solidarity), any one or some, or all of right through lapse of time in the manner and under
the solidary debtors simultaneously may be made to pay conditions laid down by law (ACQUISITIVE
the debt as long as it has not been fully collected. PRESCRIPTION). In the same way, rights and actions
Example: are lost by prescription (EXTINCTIVE
A, B, and C are solidary debtors of X in the amount of PRESCRIPTION).
P30,000. So, we have here, passive solidarity on the part ACQUISITIVE PRESCRIPTION -A person can
of solidary debtors A, B, and C in the amount of acquire ownership and real rights through lapse of time
P30,000. X now the solidary creditor may demand and in accordance with the law.
payment of the whole from A, B, or C or from any two -ownership and possession are 2 different things. One
of them or from all of them simultaneously. If he goes may be the owner of a real property but he is not in
against A and A let’s say pays only P5,000. What is the possession of that property or vice versa. But he does not
effect here? What would happen here? He can go after B have any evidence that he owns the property. A can
and C the remaining solidary debtors for the balance of apply for the ownership of the land. Because of that, A
P25,000. can go to the court and ask for the ownership of the land
by virtue of prescription. A now acquired ownership and
ARTICLE 1217- Effects of payment by a solidary real right over a particular land through lapse of time.
debtor Example: Here comes now A who is in possession of a
What would be the effect if one of the solidary debtors 1-hectare parcel of land. It means he is there since time
pays the entire obligation? immemorial. He possessed the land for a considerable
1.Between the solidary debtors and creditors, it length of time. He was in open continuous adverse
extinguishes the obligation. However, the creditor for his uninterrupted of such particular land and nobody
protection is given the right to choose which offer to questions why is it that he is in that land.
accept if two or more solidary debtors offer to pay. EXTINCTIVE PRESCRIPTION- this rights and
Example: actions could also be lost through lapse of time.
(1) A, B, and C are jointly and severally liable to D and Example: In criminal law, there are prescriptive period
E in the amount of P9,000 due on January 5. within which a crime has to be filed in order that you
If both A and B offer to pay D, on January 5, the latter will not lose your right to claim for damages/ to
may choose which offer to accept. If A pays the entire vindicate your rights.
amount of P9,000 on January 5, the obligation is The prescriptive period for the crime of murder is 20
extinguished. years. Within the period of 20 years, the crime of murder
2.Among the solidary debtors- after payment of the debt, has to be filed in court otherwise, the right to vindicate
the paying solidary debtor can demand reimbursement could no longer be entertained by the court.
from his co-debtors for their proportionate shares with In a crime of murder, the prescriptive period is 20 years
legal interest only from the time of payment. The other from the time of discovery. If the crime has not been
debtors do not become by virtue of such payment, discovered, the prescriptive period is tolled/interrupted.
solidary debtors of the debtor-payer. Their liability is not In a crime of rape, the prescriptive period of filing an
based on the original obligation which has been action is 10 years. If after 10 years the victim of the
extinguished but upon the payment made by the co- crime is silent, the accused may ask the court for the
debtors which creates a joint obligation of dismissal of the case.
reimbursement on the part of the others. However, in
case of insolvency of any of the solidary debtors, the -As a rule, a solidary debtor who pays the obligation is
other assume the share of the insolvent one pro rata. entitled to reimbursement from his co-debtors. In Article
Example: 1218, it mentions the two instances when the paying
debtor could no longer ask for reimbursement, and that
is, if the obligation has already prescribed or becomes Example: A, B and C are solidarily liable to X for
illegal. In which case, the obligation is extinguished and P30,000. X condones the share of B. The debt is reduced
no more obligation to be complied with. to P20,000. A paid 20,000 pesos to X. A can recover
When can a debtor cannot be entitled to 10,000 pesos to C. If C is insolvent, A can still recover
reimbursement? 5,000 pesos from B under solution indebiti.
When the payment was made by him after the obligation Example: A and B are solidarily liable to C in the
has prescribed. An obligation already prescribed if the amount of P1,000. C remitted A’s share. Subsequently,
right to enforce it has already been lost or due to lapse of payment by B of P1,000 to C will not entitle him to
time such that the paying debtor could no longer demand reimbursement from A since the reimbursement
reimbursement if he voluntarily made the payment extinguished the obligation with respect to A’s share.
knowing that the debt has already prescribed. However, B can demand the return of P500 from C
If the paying debtor has no knowledge that the debt has under the principle of solution indebiti. If payment by B
already prescribed, the law says that the debtor can was made before the remission, A still is liable to B
recover payment from the creditor from the ground of because the remission is without effect, the obligation
solution indebiti. The creditor has to return the having been extinguished already by payment.
payment.
Example: ARTICLE 1220- The remission of the whole obligation
A and B are solidarily liable to C in the amount of obtained by one of the solidary debtors, does not entitle
P1,000. The debt prescribed (the right of C to collect him to reimbursement from his co-debtors.
from A has prescribed from lapse of time). If a REASON: the debtor who obtains remission pays
nevertheless paid the debt, A cannot collect from B, the nothing to the creditor. Remission is essentially
share corresponding to the latter. Neither can A recover gratuitous. It is really a donation.
from C. -This article applies only when the whole obligation is
A, B, and C, executed a promissory note in favor of X remitted.
for the loan they obtained from him. X did not collect Example: A, B and C are solidary debtors of X for
the debt within 10 years from due date. A new that the P9,000. X forgave the entire debt because of the
debt has prescribed but not withstanding that he knew pleadings of A, who informed X that he was suffering
for a fact that he knew it but he still voluntarily paid X from financial problems. Can A get any reimbursement
because he thinks that he has to pay it. A cannot demand from B and C? No. Because the whole obligation is
reimbursement from B and C. already extinguished. The remission of the whole
PAYMENT WAS MADE BY THE SOLIDARY obligation will not entitle one of the debtors for
DEBTOR AFTER THE OBLIGATION BECOMES reimbursement from other co-solidary debtors.
ILLEGAL Example:
-The solidary debtor is still not entitled to reimbursement A, B and C are liable in solidium to D in the amount of
from his co-debtors. P3,000. D remitted the share of A. After paying D
A, B and C bound themselves solidarily to deliver 30 P2,000, the balance of the credit, B demands the
cases of bottle drinks of yakult to X. Before the date of reimbursement from C who became insolvent after the
delivery, the bureau of food and drugs administration remission. In this case, A is obliged to contribute to the
banned the consumption of the drink because it was share of C because the share of the insolvent co-debtor
discovered that it contains harmful ingredients that are shall be borne by all his co-debtors in proportion the
harmful to people. Nonetheless, A still bought yakult debt of each. Furthermore, the remission can only refer
and delivered to X. A cannot demand reimbursement to the share of A in the obligation and cannot therefore
from B or C. Because the delivery was made after the affect his responsibility to contribute to the share of C,
obligation has become illegal. the insolvent debtor.
Example:
ARTICLE 1219- Effect of remission before and after A and B executed jointly and severally a promissory
payment. note for P2,000 in favor of C. C remitted the whole
If payment is made first, the remission or waiver is no obligation out of regard for A. A here is not entitled to
effect. There is no more obligation to remit. If remission reimbursement from B since A did not pay anything to
is made previous to the payment and payment is made, C. If only P1,300 is remitted, B is still liable to C for
solution indebiti arises. P700. B has no obligation to reimburse A for P300 of
-If the payment was made by a solidary debtor before the B’s share affected by the remission for the same reason
remission of anothers debtor’s share, the obligation is that no payment was made by A.
extinguished by the payment. There is nothing to remit.
The debtor who paid can demand reimbursement from ARTICLE 1221- Rules in case a thing has been lost or
the debtor whose share was remitted. prestation has become impossible in a solidary
Example: A, B and C are solidarily liable to X for obligation.
P30,000. A paid the whole amount to X. X condones the The liability of the solidary debtors depends upon
share of B. A can still demand reimbursement from B whether or not there is fault or delay:
and C. 1.If the loss is without fault and before there is delay,
In case wherein the remission of the share of one of the the obligation is extinguished.
solidary debtor was made before the payment of the -If the loss was due to fortuitous event before the
debt. The paying debtor can no longer demand solidary debtors incurred delay, the obligation is
reimbursement from the debtor whose share was already extinguished.
remitted but, if another solidary debtor is insolvent the Example:
debtor whose share was remitted could still be liable pro A, B and C promised in solidum to deliver a specific car
rata for the share of the insolvent debtor. valued at P100,000. The car was destroyed due to
lightning and without the fault of A, B and C and before
they incurred delay. The obligation of the debtors is parties that the payment of P100,000 be given at one
extinguished. time.
A is obliged to deliver a specific painting to B. The
2. If the loss is due to the fault on the part of a object is indivisible, the obligation is still indivisible.
solidary debtor, the other co-debtors shall also be KINDS OF DIVISION:
responsible to the creditor for the price of the thing 1.Qualitative division- one based on quality, not on
as well as damages. A solidary obligation is a mutual number or quantity of the things which are the object of
agency, hence, as far as the creditor is concerned, the the obligation. Ex., inheritance, the house and lot, rice
fault or delay of one of the solidary debtors shall be the field.
fault or delay of all the solidary debtors. The co-debtors 2.Quantitative- one based on quantity rather than on
however can recover from the guilty debtor the full quality. Ex., partition of inheritance
amount of such price plus damages if they have already 3.Ideal or intellectual- one which exists only in the
contributed to the price of the thing. If the creditor minds of the parties. Ex., co-ownership
recovers the price and damages from the guilty debtor, KINDS OF INDIVISIBILITY
the guilty debtor cannot claim reimbursement from his 1.Legal Indivisibility- where a specific provision of law
co-debtors because he alone was at fault. declares as indivisible obligations which, by nature are
Example: If in the same situation, the car was lost divisible.
because of the fault of C, A and B shall also be liable to 2. Conventional Indivisibility- where the will of the
D for the price of the car plus damages although A and B parties makes as indivisible obligations which, by nature
are not at fault. A and B can recover, however from C, are divisible.
the guilty or negligent debtor, the full amount of the 3. Natural Indivisibility- where the nature of the object
price of the car plus damages if A and B have already or prestation does not admit of division.
contributed to the price of the car. If D recovers the price
and damages from C, the latter cannot claim ARTICLE 1225- General rule for determining the
reimbursement from A and B because he alone was at divisibility or indivisibility of an obligation.
fault. Obligations are deemed indivisible:
1.Obligations to give definite things
3. If loss is without fault but there is already delay, 2.Obligation which are not susceptible of partial
creditor can still recover damages from either one of performance
the debtors or both of them without prejudice to the Ex., singing the national song before a match
right of action of the latter against the negligent 3.Obligations provided by law to be indivisible even if
debtor. The default by one of the debtors makes all the the thing or service is physically divisible.
solidary debtors responsible even for fortuitous event. Ex., the payment of whole amount of taxes.
Example: If the car was lost because of fortuitous event 4.Obligations intended by the parties to be indivisible
but after demand was made upon C, D can recover even if thing or service is physically divisible.
damages from A or B or both of them without prejudice Ex., the obligation to give 5 sacks of rice in one delivery
to the right of action of the latter against C following the by agreement.
same in No. 2. Obligations are deemed divisible:
1.Obligations which have for their object the execution
DIVISIBLE AND INDIVISIBLE OBLIGATIONS of certain number of days of work.
Divisible Obligation- one where the object of which in Ex., the obligation to plow a rice field in 3 days.
its delivery or performance is capable of partial 2.Obligations which have for their object the
fulfillment. accomplishment of work by metrical units.
Indivisible Obligation- one where the object of which Ex., the obligation to give 12 cubic meters of garden
in its delivery or performance is not capable of partial soil.
performance. 3.Obligations which by their nature are susceptible of
TEST FOR DISTINCTION. In determining whether partial performance.
an obligation is divisible or not, the controlling factor is Ex., the obligation to teach oblicon in 1 st semester and
not the possibility or impossibility of partial performance the other for 2nd semester.
but the purpose of the obligation or intention of the ARTICLE 1227 - As a general rule, the debtor cannot
parties. Hence, even though the object or service may be just pay the penalty instead of performing the obligation.
physically divisible, an obligation is indivisible if so Precisely, the purpose of the penalty is to secure
provided by law or intended by the parties. However, if compliance with his obligation. If the debtor is allowed
the object is not physically divisible or the service is not to pay the penalty, this would in effect make the
susceptible of partial performance, the obligation is obligation an alternative one.
always indivisible, the intention of the parties to the ** The debtor can exempt himself from the non
contrary notwithstanding. This rule is absolute. An fulfillment of his obligation only when this right has
obligation is presumed indivisible where there is only been expressly reserved to him.
one creditor and only one debtor. EXAMPLE.
-In order for you to ascertain whether an obligation is ** As a general rule, the creditor cannot demand the
divisible or not, you have to take note not the possibility fulfillment of the obligation and the satisfaction of the
or impossibility of partial performance. The controlling penalty at the same time.
factor is the purpose of the obligation or the intention of Exception: when this right has been clearly granted the
the parties. creditor.
EXAMPLE: A is obliged to pay P100,000 on December
20,2022. The object is physically divisible but the General Rule: a penal clause is subsidiary and not joint.
obligation is indivisible because it was intended by the Where there is no performance, the creditor may ask for
the penalty OR require specific performance. These
remedies are alternative and not cumulative not ARTICLE 1233- WHEN DEBT IS CONSIDERED
successive, subject to the exception that penalty maybe PAID:
enforced if after the creditor has decided to require 1. Integrity of prestation
fulfillment, the same should become impossible without 2. Identity of prestation
his fault. If there is fraud on the part of the debtor, the
creditor may recover the penalty as well as damages for ARTICLE 1234 - Exception in Art. 1233: substantial
non-fulfillment. compliance or performance in good faith by the obligor,
REMEMBER: he can recover as though there had been a strict and
1. The debtor has the right to pay the penalty instead of complete fulfillment less damages suffered by the
performing his obligation only when this right has been oblige.
expressly reserved to him. REQUISITES:
2. With respect to the creditor, he has the right to 1. There must be substantial compliance;
demand performance and payment jointly when this 2. The obligor must be in good faith.
right has been clearly granted to him. EXAMPLE.

ARTICLE 1229- Penalty may be reduced by the courts: ARTICLE 1235 - when the oblige accepts performance
1.When there is partial or irregular performance. 2. knowing that it is incomplete or irregular and the oblige
When the penalty agreed upon is iniquitous or did not express any protest or objection, the obligation is
unconscionable. deemed fully complied with. This is founded on the
Example: principle of estoppel.

ARTICLE 1230- The nullity of the penal clause does REQUISITES:

not carry with it that of the principal obligation. The 1. The oblige knows that the performance is incomplete
nullity of the principal obligation carries with it that of or irregular;
the penal clause. 2. He accepts the performance without expressing any
BASIS: the general principle that accessory follows the protest or objection.
principal and not vice versa.
** If only the penal clause is void, the principal ARTICLE 1236- The creditor is not bound to accept
obligation remains valid and demandable. The penal payment or performance by a third person who has no
clause is just disregarded. The injured party may recover interest in the fulfillment of the obligation unless there is
indemnity for damages in case of non-performance of a stipulation to the contrary. Whoever pays for another
the obligation as if no penalty has been stipulated. may demand from the debtor what he has paid, except
EXAMPLE. that if he paid without the knowledge or against the will
** If the principal obligation is void, the penal clause of the debtor, he can recover only insofar as the payment
likewise is void. But if the nullity of the principal has been beneficial to the debtor.
obligation is due to the fault of the debtor, who acted in PERSONS FROM WHOM THE CREDITOR MUST
bad faith, by reason of which the creditor suffered ACCEPT PAYMENT:
damages, on equitable grounds, the penalty may be 1. Debtor
enforced** 2. Any person who has interest in the obligation
EXTINGUISHMENT OF OBLIGATION 3. A third person who has no interest in the obligation
ARTICLE 1231- Obligations are extinguished by: when there is a stipulation that he can make payment
1. Payment or performance EFFECT OF PAYMENT BY A THIRD PERSON (2nd
2. Loss of the thing due paragraph of Art. 1236) - payment or performance made
3. Condonation or remission of the debt by any person not incapacitated, even without the
4. Confusion or merger of the rights of the creditor and knowledge or against the will of the debtor and although
debtor he has absolutely no interest in the obligation:
5. Compensation 1. If made without the knowledge or against the will of
6. Novation the debtor, the payer can recover from the debtor only
7. Other causes of extinguishment of obligations insofar the payment has been beneficial to the latter.
(annulment, rescission, fulfillment of a resolutory
condition and prescription) EXAMPLE.
OTHER CAUSES: A owes B, P1,000. C, a stranger paid the obligation
1. Death of a party in case the obligation is a personal without the knowledge or against the will of A. C can
one ask reimbursement for the P1,000 from A. But if P400
2. Mutual desistance or withdrawal has already been paid by A, then C is entitled to be
3. Arrival of a resolutory period reimbursed to the amount of P600 because it is only to
4. Compromise that amount that A has been benefited. C can recover
5. Impossibility of fulfillment P400 from B who should not have accepted it. If B acted
6. Happening of fortuitous event in bad faith, he is liable for interest in lieu of damages.

ARTICLE 1232- Payment means not only the delivery 2. If made with knowledge of the debtor, the payer shall
of money but also the performance in any manner of an have the rights of reimbursement and subrogation, that is
obligation. to recover what he has paid and to acquire all rights
Payment consists not only in the delivery of money but (mortgage, guaranty, penalty) of the creditor.
also the giving of a thing (other than money), the doing
of an act or not doing an act. When the debtor pays In the given example, if payment was made by C with
damages or penalty in lieu of the fulfillment of an the knowledge of A, C can recover P1,000 with all the
obligation, there is also payment.
rights of subrogation to the accessory obligations such as CAPACITY TO ALIENATE - that the person is not
mortgage, guaranty or penalty. incapacitated to enter into contract and for that matter to
make a disposition of the thing due.
ARTICLE 1237- Whoever pays on behalf of the debtor EXAMPLE:
is entitled to subrogation, if the payment is with the A agreed to give a diamond ring to B. If the ring
consent of the latter. If without the consent of the debtor, delivered by A belongs to C, the same can be recovered
the third person cannot compel the creditor to subrogate by C because the payment is not valid. A does not have
him in the latter's accessory rights of mortgage, guaranty free disposal of the ring. The same right of recovery
or penalty. exists although the ring belongs to D, a minor and
therefore he has no capacity to alienate it.
SUBROGATION versus REIMBURSEMENT:
SUBROGATION - the person who pays for the debtor is EXCEPTION: Art. 1427 - When a minor between 18
put into the shoes of the creditor and the person who and 21 years of age, who has entered into a contract,
pays for the debtor acquires not only the rights to be without the consent of the parent or guardian, voluntarily
reimbursed for what he has paid but also other rights pays a sum of money or delivers a fungible thing in the
which the creditor could have exercised pertaining to the fulfillment of the obligation, there shall be no right to
credit, either against the debtor or against third persons. recover the same from the oblige who has spent or
In subrogation, however, there is no real extinction of consumed it in good faith.
the obligation but change of creditor. EXAMPLE. If A then is a minor and he voluntarily pays
P100 to B in the fulfillment of his obligation, there can
REIMBURSEMENT - the third person entitled by be no right to recover the P100 from B in case the latter
reason of payment has merely the bare right to be has spent or consumed it in good faith (like for payment
refunded to the extent provided in the second paragraph of his necessities).
of Art. 1236 without the right to the guarantees or ARTICLE 1240- PERSON TO WHO PAYMENT
securities of the original obligation. SHALL BE MADE:
Example: 1. Creditor or oblige
A borrowed from B P20,000. C is the guarantor. Without 2. His successors-in-interest
the knowledge or consent of A, D paid P20,000. In this 3. Any person authorized to receive it - not only a person
case, D car claim reimbursement from A for the whole authorized by the creditor but also a person authorized
amount since A was benefited up to that amount. If A by law to receive payment
cannot pay D, D cannot proceed against C, the guarantor
because having paid without the consent of A, D is not ARTICLE 1241- Payment to a person who is
entitled to subrogation. But if the payment was made incapacitated to administer his property shall be valid if
with the express or tacit approval of A, D is entitled not he has kept the thing delivered or insofar as the payment
merely to full reimbursement but also to subrogation. has been beneficial to him.
Suppose the obligation of A is secured by a mortgage of Payment made to a third person shall also be valid
a land owned by A, payment by D without the insofar as it has redounded to the benefit of the creditor.
knowledge or against the will of A cannot give D, the Such benefit to the creditor need not to be proved in case
right to subrogation. D can recover only insofar as the there is subrogation of the payer in the right of the
payment has been beneficial to A. creditor, there is ratification by the creditor or there is
estoppel on the part of the creditor such that the
ARTICLE 1238- Payment made by a third person who creditor's conduct had led to believe that the third person
does not intend to be reimbursed by the debtor is deemed had authority to receive payment. (2nd paragraph)
to be a donation, which requires the debtor's consent. But EXAMPLE:
the payment is in any case valid as to the creditor who A delivers P20,000 to B, a minor under guardianship in
has accepted it. payment of debt. B loses P5,000 of money in
EXAMPLE: nightclubbing. In this case, payment should be
A borrowed from B P20,000. Without the intention of considered as made only to the extent of P15,000. On the
being reimbursed, C paid A's obligation. A has other hand, if B kept the money paid or spent it for
previously accepted the generosity of C. In this case, A purposes useful to him, the payment shall be valid;
is not liable to C and his obligation is extinguished. But otherwise, B would be unduly enriched himself at the
if A did not consent to the donation, C may recover from expenses of A.
A since there has been no donation, although originally
C did not intend to be reimbursed. Nevertheless, the ARTICLE 1242- Payment made in good faith to any
obligation of A to B is extinguished because the payment person in possession of the credit shall release the
is valid as to B who accepted it. debtor.
** This is another situation when there is valid payment
ARTICLE 1239- In obligations to give, payment by one to a third person.
who does not have the free disposal of the thing due and ** Possession of the credit and not merely the document
capacity to alienate it shall not be valid (General rule). or instrument evidencing the credit. Furthermore, the
Exception: Art. 1427 payer must act in good faith that is in the honest belief
The creditor cannot be compelled to accept payment that he is making a valid payment and the payee is the
where the person paying has no capacity to make it. owner if the credit.
FREE DISPOSAL OF THE THING DUE - that the EXAMPLE.
thing to be delivered must not be subject to any claim or A owes B in the amount of P20,000. A issued
lien or encumbrance of a third person. promissory note as an evidence of the obligation. B lost
the promissory note and was found by C who now
demanded payment from A. Here, payment to C is not
valid because C is just a possessor of the promissory ARTICLE 1246- When the obligation consists in the
note and not the credit itself. delivery of an indeterminate or generic thing, whose
Now, if for example the same note was indorsed by B to quality and circumstances have not been stated, the
D, under a private agreement that D will not collect from creditor cannot demand a thing of superior quality.
A, Payment by A in good faith to D will extinguish the Neither can the debtor demand a thing of superior
obligation. The right of B will be against D. quality. Neither can the debtor deliver a thing of inferior
quality. The purpose of the obligation and other
ARTICLE 1243- Payment made to the creditor by the circumstances shall be taken into consideration.
debtor after the latter has been judicially ordered to EXAMPLE
retain the debt shall not be valid. A binds himself to deliver a horse. B cannot compel A to
deliver a price wining race horse. Neither can A require
EXAMPLE. B to accept an old sickly horse.
A owes B P20,000. C in turn owes À P20,000. In an a.) If B owns a stable race horses and horse racing is his
action filed by B against A, C, upon the petition of B, main diversion in life, which fact is known to A, and the
maybe ordered by the court not to pay A and to retain price agreed upon is the reasonable price of a race horse,
the debt in the meantime. In this case, the debt of C is then A must deliver a race horse.
said to be garnished or subjected to payment to B. Any b.) If B happens to be a calesa deriver and B agreed to
payment made by C to A in violation of the judicial pay A for the horse an amount which is the reasonable
order is considered invalid. In other words, B may still price of a horse for calesa, then that kind of horse maybe
hold C liable for the debt. Should C be made to pay B, a delivered
quasi-contractual obligation on the part of A is created, c.) If B is a veterinary doctor and his only purpose in
which is to return the amount he has received from C. buying a horse is to examine its organs in connection
The payment by C to B shall extinguish the obligation of with his work, this and other relevant circumstances
A to B. show that the old sickly horse was intended by the
ARTICLE 1244- The debtor of a thing cannot compel parties to be delivered.
the creditor to receive a different one, although the latter ARTICLE 1247- Extrajudicial expenses shall be borne
may be of the same value as, or more valuable than that by the debtor, unless otherwise stipulated by the parties.
which is due. ** Does not apply to expenses incurred by the creditor in
In obligations to do or not to do, any act or forbearance going to the debtor's domicile to collect.
cannot be substituted by another act or forbearance Judicial costs are the statutory amounts allowed to a
against the obligee's will. party to an action for the expenses incurred in the action.
EXAMPLE. It shall be paid by the losing party (Rules of Court)
A obliged himself to deliver a specific car to B. A cannot
require B to accept another car although it commands a ARTICLE 1248. Unless there is an express stipulation
higher price, neither can B require A to deliver another to that effect, the creditor cannot be compelled partially
car belonging to A although it can be sold only at a to receive the prestations in which the obligation consists
much lower price. of. Neither may the debtor be required to make partial
EXCEPTIONS: Substitution can be made if the oblige payments.
consents. In facultative obligation, the debtor is given
the right to render another prestation in substitution. In However, when the debt is in part liquidated and in part
case of waiver by the creditor or substitution is allowed unliquidated, the creditor may demand, and the debtor
by stipulation with the consent of the creditor. may affect the payment of the former without waiting for
SPECIAL FORMS OF PAYMENT: the liquidation of the latter.
1. Dation in payment
2. Application of payments As a general rule, the debtor cannot compel the creditor
3. Payment by cession to accept partial payments because of the rule that
4. Tender of payment payment must be complete.

ARTICLE 1245- Dation in payment is the conveyance Example: A borrowed P10,000 to B. Now in making a
of ownership of a thing as an accepted equivalent of payment, of course, it should be the exact payment. A
performance. has to give the entire amount to B. However, if both
** It is a special form of payment because it is not the parties A and B agreed the time that the obligation was
ordinary way of extinguishing an obligation. An existing constituted that A shall pay the debt in five equal
debt in money is satisfied not by payment of money but installments of P2,000 each. Of course, can give partial
by alienation of the property. payments because they agreed upon it, so it is allowed.
** The law on sales governs because dation in payment
may be considered a specie of sale in which the amount there is only one debtor and one creditor
of money debt becomes the price of the thing alienated. **there should be complete prestation in order that the
EXAMPLE: obligation is extinguished neither the debtor can be
A owes B 20,000. To fulfill the obligation, A with the compelled to make partial payments if he does not wish
consent of B delivers a narra set. If the narra set is to do since he has the duty to comply with the whole
however less than P20,000, the conveyance must be obligation. subject to certain exceptions:
deemed to extinguished the obligation to the extent only
of the value agreed upon unless, the parties by their a.) Express stipulation
agreement have considered the narra set as full payment b.) Debt is in part liquidated and in part unliquidated
in which case the obligation is totally extinguished.
Example. A owes B P20,000 plus the share of B from a
profit of the business which, however, is not yet
determined, B may demand, and A may effect of the and the check lost its value by reason of the insolvency
payment of P20,000, which is already known. of the bank.

c.) When the different prestations in which the obligation ARTICLE 1250. In case of extraordinary inflation or
consists of are subject to different terms or conditions deflation of the currency stipulated should intervene. the
which affect some of them value of the currency at the time of the establishment of
the obligation shall be the basis of payment unless there
Example. A owes B P20,000, P10,000 of which is due is an agreement to the contrary.
today and P10.000 due tomorrow. The obligation can be - If the inflation or deflation is only ordinary, then
complied with partially. do not apply article 1250.
- If there was a stipulation that the same amount is
ARTICLE 1249. The payment of debts in money shall to be paid even in case of extraordinary inflation
be made in the currency stipulated and if not or deflation, then it would be followed because
possible to deliver such currency, then in the currency that is the law of the parties that was agreed
which is the legal tender in the Philippines. upon.
LEGAL TENDER-that currency which a debtor can Competent authority- Bangko Sentral ng Pilipinas (BSP)
legally compel a creditor to accept in payment of debt in When there is extraordinary inflation or deflation- What
money when tendered by the debtor in the right amount. is the basis of payment? - It is the value of the currency
at the time the obligation was constituted unless the
LEGAL TENDER POWER OF CURRENCY- means parties agreed otherwise or unless there is an agreement
that when a currency is offered for payment of a debt, to the contrary.
public or private, the same must be accepted. -The value that we are referring to is the purchasing
power of the amount or its real worth at the time the
LEGAL TENDER IN THE PHILIPPINES obligation was incurred or constituted.
Debts in money shall be paid in the currency stipulated.
If it is not possible such currency or in the absence of INFLATION – a sharp sudden increase of money or
any stipulation to make payment in a foreign currency, credit or both without a corresponding increase in
then payment shall be made in the currency which is the business transactions. Inflation causes a drop in the value
legal tender in the Philippines of money, resulting in the rise of the general price level.
**Philippine currency notes have no limit to their legal - Since the value of money decreases, its natural
tender power. tendency is the substantial and continuing rise in
the general price level of goods and services
NEW CENTRAL BANK ACT: REPUBLIC ACT DEFLATION-reduction in volume and circulation of
NO. 7653 the available money or credit, resulting in a decline in
the general price level. It is the opposite of inflation.
NOTE: Per BSP Circular No.537 series of 2006, COINS -there is now a sharp sudden decrease in money or credit
IN DENOMINATION OF: or even without the corresponding decrease in business
transactions.
1,5,10 Piso-they shall be legal tender in the amount not -Since the value of money increases, its natural tendency
exceeding P1,000 is to decline in the general price level of goods and
1,5,10 and 25 centimos shall be legal tender in the services.
amount not exceeding P100
Under Art.1250, the purchasing value of the currency at
EXAMPLE. the time of the establishment of the obligation shall be
Here comes now A who borrowed P5,000 from B. On the basis of payment, in case of an extraordinary
the due date, A tendered the payment amounting to increase or decrease in the purchasing power of the
P5,000 consisting of 5,000 pieces of 1 Piso coins. currency which parties could not have reasonably
foreseen subject to the agreement of the parties to the
PAYMENTS BY MEANS OF INSTRUMENTS OF contrary.
CREDITS (mercantile documents)
EXAMPLE: A borrowed P5,000 from B payable after
1. A creditor has the right to refuse or accept promissory five years. On the maturity of the obligation, the value of
notes, checks, bills of exchange and other commercial P5,000 dropped to P2,500 because of inflation (or
documents since they are not considered legal tender. increased to P10,000 because of deflation. In this case,
The creditor may accept them if he chooses without the (assuming there is extraordinary inflation) the basis of
acceptance producing the effect of payment. In the payment shall be the equivalent value of the currency
meantime, the demand ability of the original obligation today to that five years ago. Hence, A is liable to pay to
is suspended. The creditor must cash the instrument and B P10,000 (or P2,500), unless there is an agreement to
it is only when dishonored that he can bring an action for the contrary.
non-payment of debt.
-Applying now article 1250, what is the basis of
2. Payment by means of a mercantile document does payment of the debtor for the year 2027? It shall be the
not extinguish the obligation: equivalent of the currency today to that 5 years ago. In
which case then A is liable to pay to B 10,000 or 2,500
a.) Until they have been cashed; unless there is agreement to their contrary.
b.) Unless they have been impaired through the fault of
the creditor (as when he has delayed in presenting the ARTICLE 1251 - Place where obligation shall be paid.
check for payment for an unreasonable length of time
-the order here enumerated is successive and exclusive Residence - only an element of domicile. It simply
so meaning to say you have to know first if there is a requires bodily presence as an inhabitant in a given
stipulation, If there is no stipulation, what is the thing to place.
be delivered specific, and what is the thing to be -It would be just a requirement that you are present as an
delivered is generic. inhabitant in a given place.
-there is only one rule to be applied as to the place on
where the obligation shall be paid considering now the ARTICLE 1252 - APPLICATION OF PAYMENTS
rules stated. -It is the designation of the debt to which should be
RULES: applied the payment made by a debtor who has various
1. If there is stipulation, the payment shall be made in debts of the same kind in favour of one and the same
the place designated. creditor.
For example, A is obliged to perform or render a song to -meaning to say there is now the designation of the debt
B for his wedding. So where is the place shall be paid or to which payment shall be applied when the debtor owes
performed? If there is a stipulation, that stipulation several debts in favor of the same creditor.
would prevail wherein if the parties would agree that the
performance of the obligation shall be on the reception Special form of payment: Dation in pago, adjudication/
of the wedding of B so that would now the place where dation in payment
the obligation shall be paid or perform -we are still in the first mode of extinguishing an
2. If there is no stipulation and the thing to be delivered obligation known as payment or performance. Under this
is specific, the payment shall be made at the place where payment or performance, we have specialized the forms.
the thing was, at the perfection of the contract. The first one we have adjudication and the second one is
Example: If the vendee would like now to pay for the this article 1252 which is the application of payment.
thing to be delivered by the vendor. For example, REQUISITES:
specific cellphone. So where would be the payment of 1. There must be one debtor and one creditor.
the purchase price of that specific cellphone? It is where 2. There must be two or more debts.
that cellphone was or is located. For example, that 3. The debts must be of the same kind.
specific cellphone was at the store of A(vendor) in the -If it is money, it should be all money. If it is fungible
house or building where that specific cellphone can be goods, it should be all fungible goods.
found. So that would be the place where the vendee must 4. The debts to which payment made by the debtor
make payment. That is when there is no agreement as to has been applied must be due. EXCEPTION: if there
what place should make the payment. is a stipulation that the debtor may apply or it is made by
3. If there is no stipulation and the thing to be delivered the creditor or debtor, as the case maybe, for whose
is generic, the place of payment shall be the domicile of benefit the period has been constituted
the debtor. In this case, the creditor bears the expenses in -It must be due or ready. However, there is a exception
going to the debtor's place to accept payment. wherein application of payments could also be applied to
-So here it would now be at the domicile of the debtor article 1252 even the debts are not due If there is a
where payment shall be made. Necessary then and we stipulation, that the debtor may apply or it is made by the
should conclude now that it would be the creditor who creditor or debtor as the case maybe, for whose benefit
will go to the debtor’s domicile in order to accept the period has been constituted. In other words, if the
payment and in which case, he would be the one to parties have stipulated that the payment maybe applied
shoulder the expenses going to the debtor’s domicile or to a debt not yet due, so you see how powerful the
place in order to accept payment. agreement or stipulation of the parties in law.
-If in a contract of sale and there is no contract by the -The second exemption is when the stipulation of the
parties as to the place where the obligation shall be paid debt not yet due is made by the party for whose benefit
on the part of the vendee or buyer and the subject matter the term has been constituted.
is a generic thing like for example a cellphone and they 5. The payment made must not be sufficient to cover
aren’t agreed where the debtor would pay the purchase all the debts.
price of the cellphone. What then the place of payment?
Under article 1251, the number 3 rule. The place of RULES ON APPLICATION OF PAYMENTS:
payment shall now be the domicile of the debtor. So
necessarily then the creditor/vendee will go to the place 1. The debtor has the first choice and when making his
of the domicile of the debtor where he will make the choice, he must indicate at that time of making payment
payment of his obligation and the expense shall be and not afterwards which particular debt is being paid.
shoulder by the creditor/vendee in going to the domicile -The debtor has the right of choice. So it is now the
of the debtor. debtor who is given the preferential rights to apply the
** The order enumerated is successive and exclusive. payment designated the debts to be paid.
Venue - place where a court suit or action must be filed -So, he has the right of choice first and when making his
or instituted. choice he must at that time of making payment and not
Domicile - the place of a person's habitual residence; the afterwards which particular debt is being paid. So he has
place where he has his true fixed permanent home and to the responsibility to indicate at the time that he is now
which place, he, whenever he is absent, has the intention making payment for which the payment to which
of returning. It requires bodily presence in the place and particular debt is being applied to his payment.
also an intention to make it one's domicile 2. The right of making the application of payment once
-permanent home exercise cannot be revoked by the debtor unless the
- it is here where the person will always return. Even creditor consents to the change.
though he will go to another place, he will always have -it is important to know that the right of making the
that intention to return. application of payment once exercise, cannot already be
revoke by the debtor unless the creditor consents to the
change. So, if there has been already a choice made by
the debtor as to what debt he is applying his payment, On September 20, A paid B P1,500. A may apply the
that could no longer change/revoke by the debtor himself P1,500 to debt (1) or to debt (2) and if B does not object
unless the consent of the creditor to the change made by to a portion of debt (1).
the debtor as to his choice.
3. If the debtor does not apply payment, the creditor may If A paid only P1,000, he cannot choose to apply his
make the designation by specifying in the receipt which payment to debt (1) because B cannot be compelled to
debt is being paid with the consent of the debtor. receive partial payment. A cannot also apply his
-if the debtor does not like to make the choice for which payment to debt (3) because it is not of the same kind.
debt, he is applying for his payment, the creditor will He cannot also apply to debt (4) because it is not yet due
now make the designation. How would he do that? He unless there is stipulation to the contrary or he has the
will specify it when he will give the receipt to the debtor benefit of the period.
specifying now which debt is being paid in payment
made by the debtor, again with the consent of the If A does not make a choice, B can make the designation
creditor. in the receipt with the consent of A. A can change the
In which case, it is now the creditor who applies for the application made by B.
payment, and he would indicate the debt being paid in
his receipt. If the debtor would now accept the receipts -As you would see, the payment of B is not sufficient to
from the creditor the debtor also cannot complain. cover now the debts of A
Unless there is just cost for invalidating the contract. - As you would see the debtor has numerous debts
4. If the creditor has not made the application or if the however the payment which he made is not sufficient to
application is not valid, the debt which is most onerous cover all the debts. Now will apply the provisions of the
to the debtor among those due shall be deemed to have law then. On September 20, A paid B P1,500. What
been satisfied (refer to Art. 1254) like an interest bearing would happen with that 1,500? Now going back the rules
debt is more onerous than a non-interest bearing debt as we have said the first rule is it would be the debtor
even if the latter is an older one; a debt as a sole debtor who will make the designation to which debt he would
is more onerous than that as a solidary debtor; a debt apply his payment the 1,500 pesos. A then would apply
secured by a mortgage or by pledge are more onerous the 1,500 to the first debt which is due to September 5 or
than that of unsecured debts; of low interest bearing could also be the number 2 which is due on September
debts, the one with a higher rate is more onerous, an 20. Now if B does not object a portion of debt #1. So, if
obligation with a penalty clause is more burdensome the creditor does not object that the 1,500 would be
than one without a penalty clause. applied a portion of which to debt #1.
- If the creditor has not made the application or if the Now if A paid only 1,000, he could not choose of course
application is not valid or the debtor also does not make to apply such payment of the 1,000 pesos to debt #1.
the designation what would now be the rule? On number Reason? Because as we have said, the creditor cannot be
4 the debt which is most onerous or burdensome to the compelled to receive a partial payment. Here, there has
debtor among those due shall be deemed to have been to be complete payment such that if the creditor has only
satisfied. Meaning the payments shall be applied to the 1,000 pesos he cannot apply such payment to debt #1
debts among those due, which is most onerous or because it is not sufficient so B cannot be compelled to
burdensome to the debtor. When can you say debt is receive 1000 because it is just a partial payment. A
more enormous than the other debts? It is in article 1254. cannot also apply his payment to debt # 3 because it is
So, the debt is more onerous than another if the debt is not of the same kind. Since what A owes is a specific
interest-bearing even if a non-interest bearing is an older radio worth 2,000 pesos that is not on the same kind as
one if the other debt is an interest-bearing debt. What is what are other debts which A owed from B. He cannot
more onerous? It is an interest-bearing debt. also apply to debt #4 because it is not yet due unless
What else? Debt as a sole debtor is more onerous than a there is stipulation to the contrary or he has the benefit of
solidary debtor. So you would be the one who will the period. In which case, the 1,000 pesos can be applied
shoulder the entire obligation, the entire debt. to A’s October 15 debt.
- As contrast with one which is you have another co- If A does not make a choice, It is now B the creditor
solidary debtor who also pledge to pay the entire who can make the designation in the receipt of course
obligation so what is more onerous? It is the one who is with the consent of A. So if B will now issue a receipt of
sole debtor. the payment made by A he has to indicate what debt is
What else? ; a debt secured by a mortgage or by pledge the payment is being paid. What among the debts will
are more onerous than that of unsecured debts because payment will be applied. A, of course can change the
here there is now either personal or real property which application made by B so the debtor even if B has
is now given as a security for the debt. already made the designation in the receipt still the
5. If debts due are of the same nature and burden, the debtor can still change the application made by the
payment shall be applied to all of them proportionately. creditor.
Example. A owes B as follows:
ART. 1253. If the debt produces interest, payment of
1. P1,500 payable on September 5 the principal shall not be deemed to have been made
until the interest have been covered.
2. P1,200 payable on September 20
The rule is mandatory. The debtor cannot choose to
3. A specific radio worth P2,000 to be delivered on credit his payment to the principal before the interest is
September 20 and paid. The payment must be applied first to the interest
and whatever balance is left can be credited to the
4. P1,000 payable on October 15. principal.
 - This rule is mandatory, meaning to say there has debtor release only from his obligation up to the net
to be payment first of interest ahead of the proceeds of the sale of the property assigned. In other
principal obligation. words, the debtor is still liable if there is still a balance.
- This rule is obligatory/mandatory. Hence the EXAMPLE. A owes B, C, D and E the amount of
debtor cannot insist that the payment shall be P500,000. His assets are insufficient to pay all his debts.
credited to the principal first and then to the With the consent of the creditors, A may assign his
interest. Unless the creditor agrees. This is with property to them to be sold to satisfy their credits. If the
a debt that produces interest. Again, the rule is net proceeds of the sale amount only to P100,000, A is
when the debtor will now pay his debt, that still liable to pay P400,000, unless there is a stipulation
payment shall be paid applied first to the interest that the assignment shall be in full satisfaction of all the
then whatever is left/residue it would be applied debts.
to the principal. The reason? Applying the -If B, C, D, E agree that whatever would be the net
payment to the principal, obligation ahead of the proceed it would now cover the entire satisfaction of the
interest would be unfair, would give injustice to debt of A in the amount of 5,000 pesos such agreement
the creditor because the basis of the computation would be followed since it is not contrary to law, good
of his interest earning will be reduced while at morals, public customs, and public policy.
the same time he is remain unpaid or not fully
paid of the interest that is already accrued. DIFFERENCES BETWEEN PAYMENT BY
CESSION AND DATION OF PAYMENT
EXAMPLE. A owes B P1,000 with 5% interest monthly. Payment by cession
If A paid P1,000, it will first be applied to the interest - there should be two or more creditors
earned by the debt. Then the balance of P950.00 will be -the debtor is insolvent/partially insolvent
credited to the amount. Therefore, A will still owe B P50 -it affects all the properties of the debtor except those
of the principal. exempted by the execution under the family code.
-the creditors are authorized to sell only the property of
ART. 1255. PAYMENT BY CESSION the debtor
It is the assignment or abandonment of all the properties -the creditors are not automatically the owners of the
of the debtor for the benefit of his creditors in order that properties of the debtor because what they will do is just
the latter may sell the same and apply the proceeds to sell properties and whatever proceeds of the sale will
thereof to the satisfaction of their credits. be applied to the debts.
-So, here the assignment or the cession operates only to -the debtor is not released totally from his liabilities.
authorize the creditor to sell the property of the debtors. Dation in payment/adjudication/ dation in pago
As we have here two or more various creditors the -It is not necessary to have two or more creditors. The
assignment made by this creditors only authorize them to plurality of the creditors is not required.
sell the property of the debtor. With that we could -the debtor may not be insolvent
conclude that the ownership of that properties or the -it affects only such properties that are necessary to
properties of the debtor is not transferred to the creditor extinguish the debt.
unless again otherwise agreed by the parties. In which -the creditor may now become the owner of the
case, the cession releases the debtor from his properties given as payment.
responsibility only to the extent of the net proceeds of -the debtor as rule is released by his liabilities.
the things assign to him. ART. 1256. TENDER OF PAYMENT AND
REQUISITES : CONSIGNATION
1. There must be two or more creditors; -last special form of payment.
2. The debtor must be (partially) insolvent; - As a general rule these two are different acts but as a
3. The assignment must involve the properties of the general rule, they have to go together. They have to be
debtor; with one another. They could not be separated as a
4. The cession must be accepted by the creditors. general rule.
Tender of payment- the act on the part of the debtor of
EFFECT OF PAYMENT BY CESSION : offering to the creditor the thing or amount due. It is
Unless there is a stipulation to the contrary, the considered extrajudicial.
assignment does not make the creditors owners of the -Debtor who would now offer to the creditor his
property of the debtor and the debtor is released from his payment. I am now offering my payment creditor. I am
obligation only up to the net proceeds of the sale of the now tendering my payment creditor.
property assigned. In other words, the debtor is still Consignation - the act of depositing the thing or amount
liable if there is balance. due with the proper court when the creditor does not
-If there no stipulation to the contrary, If there is now the desire or cannot receive it after complying with the
assignment of the properties of the debtor to the creditors formalities required by law. It is always judicial and
it does not mean that the creditors are now the owners of requires a prior tender of payment.
the property of the debtor because what will happen in -Meaning to say, before you consign or before there is
payment by cession is that if there is already the consignation there has to be a tender of payment first.
abandonment of the properties of the debtor in favor of Hence, tender of payment must precede consignation
the creditors. What will happen to these properties? It and must be prove by the debtor in the proper case. So, if
would be sold at public auction and whatever proceeds the after offering of the payment to the creditor and the
of the sale will be applied to the debts of the creditors. creditor does not want to receive or cannot receive for an
So they would recover there claims, the creditors could unreasonable cause the creditor would not like to receive
recover there claims out of the proceeds of the sale. Now the payment the debtor can now go to the court and
if the proceeds of the sale are not sufficient in the deposit the thing or amount due after compliance with
obligation of the debtor. What is the rule here? The certain formalities required by the law.
 bear the expenses of consignation and if there will be
DIFFERENCES BETWEEN THE TWO: loss of the thing that has been consigned, he should be
the one also to bear with the risk thereof.
TENDER OF PAYMENT Before there has been consignation, there has to be
-it is considered as the antecedent of consignation. notice, prior notice to all person interested in the
Meaning to say it is an act preparatory to consignation. fulfillment of the obligation.
-may be extrajudicial Person interested in the fulfillment of the obligation:
CONSIGNATION Mortgages, persons with interest like the ears of person
-is a principal and from which are derived the immediate interested
consequences which the debtor desires or seeks to 4. Consignation of the thing or sum due;
obtain. -So, what would be the act here? The debtor can now to
-necessary judicial where in the debtor can now go to the court and file a civil case known now as consignation.
court and deposit the thing or amount due after tendering Of course, with the assistance of the lawyer. The lawyer
such payment and the debtor now refuses to receive such would now make the pleadings/ consignation of the
payment. thing or sum due and stating now the reasons why is it
** Tender of Payment must precede consignation and now that on behalf of his client, the debtor who is now
must be proved by the debtor in the proper case. consigning the thing or amount due to the court.
REQUISITES FOR A VALID TENDER OF 5. Subsequent notice of consignation made to
PAYMENT: interested parties, the purpose of which is to enable
1. It must comply with the rules on payment and the creditor to withdraw the thing or sum deposited
therefore the payment should be made in legal in case he accepts the consignation.
tender; -meaning to say after this have already been
-the payment that is being rendered must be the thing consignation the interested parties must still be notified
which is contemplated. In legal tender in case, it is a after the act of consignation. The purpose of which is to
monetary obligation. It must also be complete. enable the creditor to withdraw the thing or sum
-A tender of payment is not considered valid if what is deposited in case he accepts the consignation. So, he
being offered payment is a cheque because a cheque is would have time to reflect whether he could also or he is
not considered as legal tender. ready to withdraw the thing or sum deposited by the
2. It must be unconditional and for the whole creditor.
amount; If all the requisites of the tender of payment and
-there is no condition attached. No buts No ifs consignation has already complied then he would now
-the debtor would just offer his payment to the creditor accept the consignation or he will now the creditor to
without any conditions at all. So, He should not say that, withdraw the thing or sum deposited with the court.
I am tendering my payment to you if you will deduct
interest or if you will forego the interest that we have TENDER OF PAYMENT IS NOT REQUIRED:
stipulated.
- If the debtor owes 100,000 pesos and you just 1. When the creditor is absent or unknown or does
tendering 50,000 pesos. That is not a valid tendering of not appear at the place of payment;
payment. -How could the be the debtor still tender or offer his
3. It must be actually made. payment if the creditor is not present or is absent does
-It is not just for the sake of offering the payment when not appear at the place of payment
actually you don’t have the money yet. The debtor has 2. When incapacitated to receive the payment at the time
no money yet his hands. it is due;
-the debtor must be actually made to the creditor. -If the creditor is acting like insane the time he is about
to receive the payment. Of course the debtor is not
REQUSITES OF A VALID CONSIGNATION already required to offer his payment to the creditor
1. Existence of a valid debt which is due; because he is already incapacitated to fully understand
2. Tender of payment by the debtor and refusal the consequences of receiving payment from the debtor.
without justifiable reason by the creditor to accept it; 3. When without just cause he refuses to give a receipt;
-these two must go hand in hand. There has to be first -When the creditor without any valid reason he does not
tender of payment before the consignation, So when the want to give receipt of the payment so in that case what
debtor offers his payment, the creditor simply refuses to would be the debtor do? He could consign now the thing
accept such payment. The debtor could now validly due to the proper court.
consign the amount due to the court. 4. When two or more persons claim the same right to
3. Previous notice of consignation to persons collect;
interested in the fulfillment of the obligation, the -Meaning to say there are two persons who are saying
purpose of which is to give the creditor a chance to that they have the respective claim in the payment so
reflect on his previous refusal to accept payment with that the debtor is now in a quandary who among
considering that the expenses of consignation shall be these persons will he offer his payment. In that case the
charged against him and in case of loss of the thing debtor is not already required to tender his payment. He
consigned, he shall bear the risk thereof. (Art. 1257); could consign now his payment to the proper court.
-meaning to say there has to be prior notice of the act of 5. When the title of the obligation has been lost.
consigning the amount due to the court and to whom -It is not necessary that the debtor offer his payment. He
such notice may be given to persons interested in the could now go to the court directly.
fulfillment of the obligation. And what would be the
purpose of the notice? It would now give the creditor a ART. 1259. The expenses of consignation when
chance to reflect on his previous refusal to accept properly made shall be charged against the creditor.
payment considering now that he would be the one to
ART. 1260. Once the consignation has been duly made, -when the debt proceeds from a criminal offense and the
the debtor may ask the judge to order the cancellation of thing was lost because of fortuitous events, the debtor
the obligation. Before the creditor has accepted the will not be exempted from damages and liability.
consignation, or before a judicial declaration that the -A stole the carabao of B. One of the civil liabilities of A
consignation has been properly made, the debtor may is to return the carabao to B. Before A could return the
withdraw the thing or sum deposited allowing the carabao, the carabao was hit by lightning. The debtor is
obligation to remain in force. still liable because the obligation to deliver the carabao
-if there has been already a consignation but the creditor arises from crime theft.
has not yet accepted the consignation, or the court has
not yet issued. In order that the proper consignation has ART. 1263. In an obligation to deliver a generic thing,
already been made , the debtor may withdraw the thing the loss or destruction of a thing of the same kind does
or sum deposited allowing the obligation to remain in not extinguish the obligation.
force.
** The observance of all the requisites of consignation This is based on the principle of genun nunquam perit
operates as a valid payment hence, the debtor can move (genus never perishes) and the debtor can still be
for the cancellation of the obligation by the court. The compelled to deliver a thing of the same kind. However,
debtor however may withdraw as a matter of right the the creditor cannot demand a thing of superior quality
thing or sum deposited: neither can the debtor deliver a thing of inferior quality.
-the debtor is still liable even through fortuitous event
1. Before the creditor has accepted the consignation; or because it is now the law that speaks.

2. Before a judicial declaration that the consignation has (self-explanatory daw)

been properly made as he is still the owner of the same.
In such a case, the obligation shall continue to remain in
force and all expenses are paid by the creditor. ART. 1264 speaks of partial loss where the court is
LOSS OF THE THING DUE- mode in which an given the discretion in case the parties disagree whether
obligation is extinguished which is based on Article the partial loss is equivalent to a complete or total loss.
1231. There is partial loss when only a portion of the thing is
ART. 1262. A thing is lost when it perishes or goes out lost or destroyed or when it suffers depreciation or
commerce or disappears in such a way that its existence deterioration. Partial loss is equivalent of difficulty of
is unknown or it cannot be recovered. performance in obligations to do.
-if the part loss is important in relation to the whole
REQUISITES IN ORDER THAT AN OBLIGATION object, the court may extinguish the obligation.
TO GIVE WILL EXTINGUISH AN OBLIGATION: EXAMPLE. A is obliged to deliver a specific horse to
1. Obligation is to deliver a specific thing; B. The horse met an accident and it suffered a broken
-The loss of a determinate or a specific thing leg. The injury is permanent. Partial loss is so important
extinguishes the obligation. as to extinguish the obligation.
2. The loss of the thing occurs without the fault of the If the loss is due to the fault of A, he shall be obliged to
debtor; pay the value of the horse with indemnity for damages.
-due to fortuitous event If the horse to be delivered is to be slaughtered by B, the
3. The debtor is not guilty of delay. injury is clearly not important. Even if there was fault on
Instances when even if there is loss of the specific the part of A, he can still deliver the horse with liability
thing even without the fault or delay on the part of for damages, if any, suffered by B.
the debtor will not exempt him from liability, thus he EXAMPLE:
can still be held liable for damages: A is obliged to deliver a horse to B and it was intended
1. When the law so provides to be used in a horse race. The right front leg was
-if the law provides, and all the requisites are present the broken. The partial loss is important and would now
debtor will still be liable for damages and does not extinguish the obligation.
exempt him from liabilities. If the horse is only for a painting, the partial loss is not
Example: When the debtor has promised to deliver the important, therefore A is still obliged to deliver the horse
same thing to 2 or more persons who do not have the to B.
same interest, the law provides that the debtor is not -feasible
exempted from liability.
2. When the stipulation so provides ART. 1265. Disputable (not a basis) presumption of
-Stipulations of the parties would always prevail and fault whenever the thing to be delivered is lost in the
what was agreed upon is the controlling factor as long as possession of the debtor.
it is not contrary to any law, regulations and public -the debtor must have the proof that the thing is not his
policy, etc. fault and not due to negligence.
3. When the nature of the obligation requires the REASON: there is presumption since the debtor has the
assumption of risk custody and care of the thing and he can easily explain
-it requires the debtor to assume the risk of the loss of the circumstances of the loss.
the thing. EXCEPTION: in case of natural calamities, lack of
Example: Contract of insurance, the nature of an fault on the part of the debtor is more likely, so it is
obligation of an insurance company requires the unjust to presume negligence on his part.
assumption of the risk of the loss of the property that has ** In ART. 1165 (3rd paragraph), the obligor who is not
been insured. at fault is still liable in case he is guilty of delay or has
4. When the obligation to deliver a specific thing arises promised to deliver the same thing to two or more
from a crime. persons who do not have the same interest.
EXAMPLE: A borrowed the cellphone of B. On due EXEMPTION: when the creditor refuses to accept it
date of the obligation, to return the cellphone, A told B without just cause and the creditor will be in mora
that the cellphone was stolen and that he was not at fault. accipiendi, the debtor will be exempted from liability.
That is not enough to extinguish A's obligation. There EXAMPLE.
was a presumption that it was A's fault why the A stole the carabao of B. After trial A is obliged to
cellphone is lost and therefore he is liable, unless he return the carabao, but before A could deliver the
proves the contrary. carabao, it was struck by lightning. A is still liable
Suppose the house of A was gutted by fire with because his obligation proceeds from a crime.
accidental origin and that the cellphone was at his house If A offered to deliver the carabao to B but B refuses
at the time of fire. Here, A is not liable unless B proves without just cause. B is in mora accipiendi. The delay of
fault on the part of A. B will extinguish A’s obligation.

ART. 1266. If the obligation becomes legally or ART. 1269 - the creditor is given the right to proceed
physically impossible without the debtor's fault, the against the third person responsible for the loss. There is
obligation is extinguished. no need for assignment by the debtor.
-the debtor in obligations to do shall also be released -If the loss is caused by the act of a third person the
when the prestation becomes legally or physically obligation is extinguished and the creditor has the right
impossible without the fault of the debtor, the obligation of action which the debtor may have against the third
is extinguished. person. The debtor need not assign his rights to the
creditor who acquires these rights by operation of law.
EXAMPLE. A is obliged to deliver to B a specific
horse. The horse is lost because of the fault of C. The
obligation of A is extinguished and he is not liable to B.
Such being the case, A would not be interested in going
after C. The law however protects B by giving him the
KINDS OF IMPOSSIBILITY: right to bring an action against C to recover the price of
1. Physical impossibility - in purely personal the horse with damages.
obligations, when the personal qualifications of the
obligor are involved. CONDONATION OR REMISSION OF DEBT
Example: A agreed to paint the portrait of B however A Art. 1270 - speaks of condonation or remission as a way
was paralyzed because of stroke. The obligation is of extinguishing an obligation.
extinguished due to physical impossibility.
2. Legal impossibility - obligation cannot be performed **Condonation or remission is the gratuitous
because it is rendered impossible by provision of the law abandonment by the creditor of his right against the
-the act can no longer be performed because it is debtor and thus a form of donation**
prohibited by law. -forgiveness of indebtedness.
EXAMPLE: A who is a lawyer private practitioner, his -the consent of the debtor is required in the condonation.
services was procured by B who is accused of murder, A REQUISITES:
has the obligation to defend B in all the proceedings in 1. It must be gratuitous;
RTC. However, before the court could render decision, -the consideration must be the liberality of the creditor.
A was appointed as a judge and as stated by law you 2. It must be accepted by the obligor;
could no longer render service in your profession. A’s 3. The parties must have capacity:
obligation is extinguished. -incapacitated persons could not enter the contract.
4. Must not be inofficious;
ART. 1267. When the service has become so difficult as -it now impairs the legitime
to be manifestly beyond the contemplation of the parties, 5. If made expressly, it must comply with the forms of
the obligor may also be released therefrom, in whole or donation.
in part. -the donation is valid if made expressly.
-the debtor’s obligation will be extinguished whether it EXAMPLE:
is total or in part when the service becomes difficult. A borrowed P4,000 from B. The debt is evidenced by a
** The impossibility of the performance releases the promissory note executed by A. On due date, B informed
obligor in whole or in part** A that he will no longer be collecting the debt and he
EXAMPLE. delivered the promissory note to A. A accepts the
A is obliged to drill manually a 25 meter deep well for generosity of B. The obligation is extinguished.
B. A find it hard to drill when he was at 15 meters
because he came upon a marble rock. A may be released KINDS OF REMISSION:
from his obligation whether from whole or from part. 1. As to its extent:
a.) Complete - covers the entire obligation
ART. 1268 - another instance when a fortuitous event b.) Partial - it does not cover the entire obligation
does not exempt the debtor from liability, that is where
the obligation proceeds from a criminal offense except 2. As to its form:
when the creditor refused to accept the thing without a.) Express - made either verbally or in writing
justification, after it has been offered to him. b.) Implied - when it can be inferred from the conduct
-if the obligation to give a determinate thing proceeds of the parties that there is condonation/remission.
from a criminal offense, the debtor is liable whatever
may be the cause of the loss. 3. As to its date of effectivity:
a.) Intervivos - take effect during the lifetime of the
donor
b.) Mortis causa - it will become effective upon the it shall be presumed that the creditor delivered it
death of the creditor/donor and must comply with the voluntarily unless the contrary is proved.
formalities of a will.
-it partakes of a nature of a testamentary disposition. ** Ordinarily, the document evidencing the debt is in the
possession of the creditor. He has in his favour the legal
EFFECTS OF INOFFICIOUS REMISSION: presumption that his credit is as yet uncollected, unless
** While a person may make donations, no one can give the debtor proves satisfactorily by one of the rules
more than that which he can give by will, otherwise the recognized in law that he has already paid the claim. If
excess shall be inofficious and shall be reduced by the later, the document is found in the hands of the debtor
courts accordingly** and it is not known how he came into possession of the
-if the condonation is inofficious, there is no valid same, the presumption is that it was voluntarily delivered
condonation. by the creditor. This presumption of voluntary delivery,
LEGITIME - is the part of the testator's property which in turn, gives rise to the presumption of remission. It is
he cannot disposed of because the law has reserved it for believed however, that the presumption of voluntary
certain heirs who are therefore called compulsory heirs. delivery should give rise to the presumption of payment
-any person can give what he wants, however, no one and only when it is known that indeed there is no
can give more than which he can give by will because if payment should there be a presumption of remission:
he gives more than enough to persons, accordingly the
court may reduce. EXAMPLE. A owes B P1,000 evidenced by a
-when a person dies and he left certain properties and promissory note. The note signed by A is given to B. If
there is a certain part of his properties that he cannot the promissory note is voluntarily delivered to A, the
dispose of because that part is only reserved to presumption is that the debt must have been paid by A.
compulsory heirs. If it is known that A has not yet paid B, it must be
presumed that the obligation has been remitted by B.
Compulsory heirs under succession, that person cannot Suppose it is not known how A came into possession of
give more than what is allowed by law, if what he has the promissory note, the presumption is that it was
given is part of his properties which he cannot dispose voluntarily delivered by B unless B proves the contrary.
because the law has reserve it for the compulsory heirs.
If the person who dies and he has given the legitime that ART. 1273. The renunciation of the principal debt shall
is considered inofficious. extinguish the accessory obligations, but the waiver of
-If the testator gave part of the legitime to someone who the latter shall leave the former in force.
is not a compulsory heir, that donation is inofficious and ** Accessory follows the principal. While the accessory
the court may reduce it. obligations cannot exist without the principal obligation,
the latter may exist without the former**
ART. 1271 - IMPLIED OR TACIT REMISSION
** if the debt is not yet paid, the creditor would need the EXAMPLE. A owes B P1,000 with C as the guarantor.
document to enforce payment. In case he voluntarily The principal debt here is P1,000 while the accessory
delivers it to the debtor, the only logical inference is that obligation is the guaranty of C. The remission of the debt
he is renouncing his right to collect. The presumption of A by B shall extinguish the guaranty of C but if only
however is only prima facie or rebuttable by contrary the guaranty of C is condoned, the obligation of A shall
evidence. remain in force.
-you could prove otherwise that even if the creditor
voluntarily delivered the document to the debtor, it does CONFUSION OR MERGER OF RIGHTS
not necessarily mean that the creditor is renouncing his ART. 1275. The obligation is extinguished from the
right to collect. It might be that the document was time the characters of creditor and debtor are merged in
voluntarily delivered to the debtor because the debtor the same person.
needs it for xerox.
** if the obligation is joint, the presumption of remission CONFUSION/MERGER - the meeting in one person
pertains only to the share of the debtor who is in of the qualities of creditor and debtor with respect to the
possession of the document; if solidary, to the total same obligation.
obligation.
** the presumption speaks only to a private document - It is a mode of extinguishing an obligation wherein
(exclusive to the parties who executed the document) there is now the meeting in one person of the characters
and it does not apply in the case of a public document or the qualities of debtor and creditor.
(notarized, it has been acknowledged before a notary
public that that document is their true act) because it is - The debtor in an obligation becomes now the creditor
easy to obtain a copy of the same, being a public record. of himself. That’s why the consequence of which is the
** 2nd paragraph of ART. 1271, the renunciation of the obligation is extinguished.
action which the creditor had against the debtor maybe
nullified or invalidated by showing that the waiver is REASON/BASIS OF CONFUSION: The law treats
inofficious. confusion or merger as a mode of extinguishing an
-while it is true that there is renunciation, the same may obligation because if a debtor is his own creditor,
still be nullified by proving that the renunciation is enforcement of the obligation becomes absurd (illogical)
inofficious. since a person cannot claim payment from himself.
Furthermore, when there is confusion of rights, the
ART. 1272. Whenever the private document in which purposes for which the obligation may have been created
the debt appears is found in the possession of the debtor, are deemed realized.
-If there is an obligation and if the debtor now becomes principal obligation carries with it that of the accessory
now the creditor of himself, in that way, the obligation obligation.
for which it may have been created is already realized
because there is now the merger of the characters or REMEMBER:
qualities of the creditor and debtor with respect to the The guarantee which is merely an accessory obligation is
same obligation. likewise extinguished. The reason is an accessory
obligation cannot stand by itself. Therefore, if the
REQUISITES: principal obligation is extinguished because of the
It must take place between the principal debtor and confusion or merger that takes place between the persons
creditor; of the debtor and the creditor also the guarantee which is
merely the accessory obligation is likewise extinguished.
It must be complete However, what if there is the merger in the person of the
guarantor? What is the effect?
EXAMPLE. A owes B P1,000 for which he executed a
negotiable promissory note in favour of B. By virtue of EFFECT OF MERGER IN THE PERSON OF
the loan which A owed from B, A now executed a GUARANTOR
promissory note, a negotiable promissory note in favour The extinguishment of the accessory obligation does not
of B. A promissory note may be negotiated so it is a carry with it that of the principal obligation.
merchant pile document which could be negotiated. Consequently, merger, which takes place in the person
From then on, B endorsed the note to C who in turn of the guarantor, while it extinguishes the guaranty,
endorsed it to D. The promissory note now is in the leaves the principal obligation in force.
hands of D. Now, D bought goods from the store of A.
Instead of paying cash, D endorsed the note to A. Here, - In other words, merger in the person of the guarantor
A owes himself. Consequently, his obligation is extinguish the guarantee but not the principal obligation.
extinguished by merger. Reason is because principal obligation can stand
independently of the accessory obligation.
- There is now the meeting in one person of the
characters of debtor and creditor. Thre obligation here EXAMPLE. Suppose, in the example given, B assigns
now is extinguished because it is now absurd or illogical his credit to D who in turn assigns the credit to C, the
for the creditor to claim payment from himself. guarantor. In this case, the contract of guaranty is
extinguished however A's obligation to pay the principal
ART. 1276. Merger which takes place in the person of obligation subsists. C is now as the new creditor can
the principal debtor or creditor benefits the guarantors. demand payment from A.
Confusion which takes place in the person of any of the
latter does not extinguish the obligation. - It is just the opposite of the first discussion a while
back. The effect of merger in the person of the principal
**Merger in the person of the principal debtor or debtor or the creditor when there is a guarantor would
creditor extinguishes the obligation. Hence, the extinguish both of the principal obligation and the
accessory obligation of guaranty is also extinguished in guarantee. Here, it talks about the effect of merger in the
accordance with the principle that the accessory follows person of the guarantor which clearly stated that it would
the principal. extinguish the guarantee but not the principal obligation.
The effect is in contradictory of each other.
- In summary, merger then in the principal debtor or
creditor will extinguish the obligation. Hence, the ART. 1278. Compensation shall take place when two
accessory obligation of guarantee which is now persons, in their own right, are creditors and debtors of
considered as an accessory obligation is extinguished in each other.
accordance with the principle that the accessory follows
the principal. COMPENSATION - the extinguishment to the
concurrent amount the debts of two persons, who in their
- In other words, merger in the person of the principal own right are debtors and creditors of each other.
debtor or creditor, benefits the guarantors. Why? Here
both the principal obligation and the guarantee, the - it is now a mode of extinguishing obligations when two
accessory obligation of guarantee are already persons in their capacity as principals are mutual debtors
extinguished following now the principle that accessory and creditors of each other.
follows the principal.
- What may be the reason of compensation as a way in
which an obligation is extinguish? Why is it that there is
EXAMPLE. A is indebted to B with C as the guarantor. compensation? That has been provided by the law for
The principal obligation is the debt which A owed to B. which an obligation is extinguished (Di ko alam kung
So, A has the obligation to pay B. The accessory sagot to o katuloy ng question 31:29). What is the object
obligation is C as the guarantor. The merger of of which? This would now prevent the unnecessary suits,
characters of debtor and creditor in A shall free C from unnecessary cases that may be filed in court through the
liability as guarantor. There is now a confusion or mutual extinction by operation of law of existing or
merger or meeting in one person of the characters of A concurrent debts.
and B will now free the accessory obligation of
guarantee and in this example, it is C who is the - In layman’s term, we call it “quits.”
guarantor. Similarly, the merger which takes place in the
person of B benefits C because the extinction of the - It is also synonymous to “set-off”
 - Each one of the obligors debound (di q sure 39:57)
EXAMPLE. A owes B P1,000. B owes A P700. Both principally and that he be at the same time principal
debts are due and payable today. Here, compensation creditor of the other.
takes place partially that is to the concurrent amount of
P700. So A shall be liable to B for only P300. EXAMPLE:
A owes B Php 10,000. B owes Php 10,000. Both debts
- Here there is a partial compensation but in total
are due. So here, the obligations are extinguished by
compensation it’s as simple as A owes B Php 1, 000. B
owes A Php 1, 000. So instead of A paying B Php 1,000 legal compensation because A and B are bound
and also B paying A Php 1,000, both obligations are principally. They are principal debtors and creditors of
already extinguished to their concurrent amount. each other.
Because these 2 persons A and B, are in their own right 2. Both debts consists in a sum of money, or of
debtors and creditors of each other. There is no need to
consumable things of the same kind and quality;
pay each other because their obligation is extinguished
by means of compensation. - The term “consumable” refers to things that are
fungible or capable of substitution.
COMPENSATION versus CONFUSION:
-Both debts consists in a sum of money, or if it is
1. In confusion, there is only one person who is a thingsthey should be consumable with that they must be
creditor and debtor of himself, while in compensation, of the same kind and the same quality.
there are two persons involved, each of whom is a debtor
and creditor of the other; EXAMPLE:
A owes B a cellphone. B also owes A a cellphone. Here
2. In confusion, there is but one obligation, while in
the debts are already extinguished by legal compensation
compensation, there are two obligations;
because the objects are fungible although they are not
3. In confusion, there is impossibility of payment, in consumable.
compensation, there is indirect payment What if it is a specific cellphone that is agreed upon?
4. - There is an impossibility of payment because the Can legal compensation takes place?
creditor now is the debtor of himself, while in
compensation there is indirect payment because persons No, because the things due are not replaceable because it
involved here is debtor and creditor of the other. So we is a specific cellphone.
could still say that there is a payment of the obligation
that extinguish the obligation of the two persons ANOTHER EXAMPLE:
involved.
Here comes now A who owes B 10 sacks of rice while B
owes A 10 sacks of corn. Can legal compensation takes
KINDS OF COMPENSATION :
place? No, because the things due are not of the same
1. By its effect or extent : kind.
ANOTHER EXAMPLE:
a.) Total - when both obligations are of the same amount
and are entirely extinguished (Art. 1281) A owes B 10 sacks of milagrosa rice. B owes A 10 sacks
of sinandomeng rice. Can legal compensation takes
b.) Partial - when two obligations are of different place? No, because although the things due are of the
amounts and a balance remains. The extinctive effect of same kind which is rice, however they are not of the
compensation will be partial only as regards the larger same quality.
debt (Art. 1281)
3. The two debts are due and demandable;
2. By its cause or origin:
- When can you say that a debt is due? If the time for
a. )Legal - when it takes place by operation of law even payment has arrived or the condition of its payment has
without the knowledge of the parties (Art. 1290) already been fulfilled. However, in here, the third
requisite, it is not required that the debts have the same
- It would be the provision of the law that would require due date because all that is needed is that both debts are
compensation that would take place in an obligation already due.
even without the knowledge or consent of the parties.
- In order that legal compensation takes place, it is not
REQUISITES (Art. 1279): necessary that the debts have the same due date. What is
required by the law is both debts are already due.
- In order that legal compensation shall take place by
operation of the law even if it is without the consent or EXAMPLE:
knowledge of the parties: A owes B Php 10,000 which is due today. B also owes A
1. The parties are principal creditors and debtors of Php 10,000 due two weeks from today. Can legal
each other; compensation takes place? No, because only one of the
debts is due which is the debt of A to B which is due
today. If A has not yet paid his debt to B after two
weeks, can legal compensation takes place? Yes, not be the case in order that legal compensation could
because the debts are already have become due. take place.

4. The two debts are liquidated; 6. It should not be prohibited by law.

- Both debts are liquidated if the amount is fixed already
b.) Voluntary - when it takes place by agreement of the
or can be determined by simple arithmetical process.
parties (ART. 1282)
-- When can you say that the debt has already been
demandable? A debt is demandable if it can be collected ** an exception to the general rule that only debts which
through court. If the debt has already prescribed, it are due and demandable can be compensated. Voluntary
cannot be said that it is demandable. or conventional compensation includes any
compensation which takes place by agreement of the
EXAMPLE: parties even if all the requisites for legal compensation
are not present
A owes B Php 20,000. B owes A 5% of the net profit of
his share in the business base on the audited financial - We can therefore conclude that in voluntary
statements. However the audit is still going on. Can legal compensation, it has no special requisite because here, it
compensation takes place? No, because the debt of B to is the parties who would agree that compensation shall
A is still unliquidated. So, the fourth requisite is not takes place and (di q sure kung and or in) the obligation.
present. Even if those debts or obligations are not yet due and
demandable.
ANOTHER EXAMPLE:
**it has no special requisites. It is sufficient that the
A owes B Php 10,000. B owes A Php 20,000. B’s debt to
contract of the parties which declares the compensation,
D however has already prescribed. The right to collect
is valid.
on the part of D has already prescribed by lapse of time
or through lapse of time. Here, legal compensation - In short, voluntary or conventional compensation when
cannot take place because for the main reason that B’s not all the requisites of legal compensation are present,
debt are no longer demandable by reason of prescription. such as for example the debts are not yet due or
(Di ko rin alam bakit may D, padouble check nalang demandable, still, compensation may take place. How?
guiz sa 48 ata) By agreement of the parties and that is now what we call
voluntary or conventional compensation.
5. No retention or controversy commenced by a third
person. (negative requisite) b. ) Judicial (or set-off)- when it takes place by order
- When can you say that there is a retention commenced from a court in a litigation (ART. 1283). It is now the
by a third person? court which would order the extinguishment of the
obligation by reason of compensation. Compensation
** there is said to be a retention when the credit of one may also take place when so declared by a final
of the parties is subject to the satisfaction of the claims judgement of a court in a suit. A party may set off his
of a third person, while a controversy exists when a third claim for damages against his obligation to the other
person claims he is a creditor of one of the parties. party by proving his right to the said damages and the
amount thereof.
- In this requisite, since it is a negative requisite, that
over neither of them, there may be any retention or EXAMPLE:
controversy in any of the two obligations. There will be A is indebted to B for Php 50,000. B sued A for
no retention commenced by third persons and collection of the Php 50,000. One week after A was
communicated in due time to the debtor. sued, B through negligence rammed his jeep into the
parked car of A which now cause the scratches and dents
EXAMPLE. A owes B P10,000. B also owes C to the doors of the car. In this case, A can claim for
P10,000. C causes the garnishment of the credit of B damages for the dents and scratches on his car. If A
against A and notifies A not to pay B P10,000 as C has a pleads such damage in his counter claim and can prove
better right to the said amount. B may not owe C but the that it was due to wrongful act of B and the amount
latter claims that he and not B is the creditor of A. In this thereof the court may order the off-setting of the amount
case, compensation cannot take place between A and B of damages against the amount of A’s debt to B.
in view of the controversy commenced by C, a third
person. In the meantime, the compensation is suspended. ANOTHER EXAMPLE:
If C loses the case, compensation shall be deemed to A owes B Php 50,000. When B went to the house of A
have taken place as of the date the requisites for legal which is the debtor to collect the Php 50,000, A was so
compensation concurred. hesitant to pay his obligation. Because of that, out of
anger, B threw in front of the face of A the most
ANOTHER EXAMPLE. precious antique jars in the house of A and that antique
Here comes now A who owes B milagrosa rice which jar costs Php 50,000. A now sued B for damages, aside
are stored in the warehouse of A. C owes A milagrosa now whatever criminal action which A could file against
rice. D, who is now a third person, went to the court and B. The amount of loan of A to B is Php 50,000 also the
sued A to recover now the 10 sacks of rice stored on his amount of damages with respect to jar that was thrown
warehouse because they were allegedly stolen by A. Can out of anger by B is also Php 50,000. Now, there could
legal compensation can takes place? No, because the be judicial compensation wherein the court now can
debt of A is subject to a legal controversy. That should order of the off-setting of the amount of indebtness of A
to B with respect to the amount of damages which A is the assignment. How much can C collect from B? B can
claiming against B by virtue of the wrecked precious set up the compensation of debts on November 10 which
antique jar which B threw on the face of A. There is now was before the cession on November 12. There being
what you call judicial compensation. partial compensation, the assignment is valid only up to
the amount of P1,000. But B cannot raise the defense of
c. ) Facultative - when it can be set up only by one of compensation with respect to the debt of A due on
the parties. November 15 which has not yet matured. So, on
- One of the parties can set up or has the right to claim or November 12, B is liable to C for P1,000. Come
oppose also compensation. It is only one of the parties of November 15, A will be liable for his debt of P1,000 to
the obligation has the right. Either to claim or oppose the B.
compensation.
3. Assignment without the knowledge of the debtor.
ART. 1285. ► EXAMPLE. In the preceeding example, let us
WHERE COMPENSATION HAS TAKEN PLACE suppose that the assignment was made without the
BEFORE ASSIGNMENT: knowledge of B who learned of the assignment only on
** when compensation takes place by operation of law November 16. In this case, B can set up the
or automatically, the debts are extinguished to the compensation of credits before and after the assignment.
concurrent amount. If subsequently, the extinguished
debt is assigned by the creditor to a third person, the ART. 1287 and ART. 1288. WHEN LEGAL
debtor can raise the defense of compensation with COMPENSATION IS NOT ALLOWED BY LAW:
respect the debt. The remedy of the assignee is against
the assignor. 1. When one of the debts arises from a depositum.
Assignment- is a contract whereby a person who is the Deposit- a person receives a thing belonging to another
assignor transfers his rights against a third person to with the obligation of safely keeping it and returning the
another who is now known as assignee for a same.
consideration certain in money or its equivalent. EXAMPLE. A owes B P10,000. B in turn owes A
EXAMPLE: P10,000 representing the value of a ring deposited by A
A owes B P10,000. The debt was evidenced by a with B which B failed to return. In this case, B who is
promissory note executed by A. B assigned his rights to the depositary cannot claim legal compensation even if
T with notice to A. What is the contract between B and A fails to pay his obligation. The remedy of B is to file
T? Contract of assignment. A will have to make the an action against A for the recovery of the amount of
payment to T and no longer to B. P10,000.
The assignee is against the assignor. ** A bank deposit is not a depositum but a loan which
EXAMPLE. A owes B P3,000 due yesterday. B owes A creates the relationship of a debtor a creditor. Therefore,
P1,000 due also yesterday. Both debts are extinguished as a general rule, a bank has a right of setting off the
up to the amount of P1,000. Hence A still owes B deposits in its hands for the payment of any indebtedness
P2,000 today. If B assigns his right to C, the latter can to it on the part of the depositor. Similarly, a depositor
collect only P2,000 from A. However, if A gave his has every right to set off his money deposit with a bank
consent to the assignment before it was made or against the loans he had obtained from said bank.
subsequently, A loses the right to set up the defense of
compensation. So, A will be liable to C for P3,000 but 2. Where one of the debts arises from a
he can still collect the P1,000 owed by B. In other commodatum.
words, the compensation shall be deemed not to have Commodatum - a gratuitous contract whereby one of
taken place. the parties delivers to another something not consumable
-The debtor gave his consent before the assignment has so that the latter may use the same for certain time and
been made return it.

WHERE COMPENSATION HAS TAKEN PLACE EXAMPLE.

AFTER ASSIGNMENT In the preceding example, if B borrowed the ring of B
1. Assignment with the consent of the debtor. cannot refuse to
▶ EXAMPLE. A owes B P3,000 due on November 15. return the ring on the ground of compensation because
B owes A P1,000 due on November 15. B assigned his no compensation
right to C on November 1 with the consent of A. On can take place when one of the debts arises from a
November 15, A cannot set up against C, the assignee, commodatum.
the compensation which pertains to him against B, the The purpose of the law is to prevent a breach of trust
assignor. In other words, A is still liable to C for P3,000 and confi dence
but he can still collect the P1,000 debt of B. However, if on the part of the borrower (or depositary in a
A, while consenting to the assignment reserved his right depositum).
to the compensation, he would be liable only for P2,000 A, however, can assert compensation of the value of the
to C. ring against
the credit of B.
2. Assignment with the knowledge but without the 3. Where one of the debts arises from a claim for support
consent of the debtor. due by gratuitous title. Support comprises everything
▶ EXAMPLE. that is indispensable for sustenance, dwelling, clothing,
A owes B P1,000 due on November 1. B owes A P2,000 medical assistance, education.
due on November 10. A owes B P1,000 due on
November 15. A assigned his right to C on November REASON: the right to support is essential to the life of
12. A notified B but the latter did not give his consent to the recipient.
**Support in arrears maybe compensated.

EXAMPLE.
(1) B is the father of A, a minor, who under the law is
entitled to be supported by B. Now A owes B P1,000.00.
B cannot compensate his obligation to support A by
what A owes him because the right to receive support
cannot be compensated with what the recipient (A) owes
the obligor (B). The right to receive support cannot be
compensated because it is essential to the life of the
recipient.
(Report of the Code Commission, p. 90.)
However, if B failed to support A say, for three months,
the support in arrears may be compensated with the debt
of A.6 The reason is that A no longer needs the support
in arrears as he was able to exist even without the
support of B.
(2) “A donates to B an allowance of P1,000.00 a month
for five (5) years for the latter’s support. However,
previous to the donation, B already owed A P10,000.00
which was due and unpaid. In this case, A cannot say to
B ‘Inasmuch as you owe me P10,000.00, I will not pay
your allowance for ten months

4. Where one of the debts consists in civil liability

arising from a penal offense.
REASON: satisfaction of such obligation is imperative.

EXAMPLE. A owes B P10,000. B stole the ring of A

worth P10,000. Compensation by B is not proper. But A,
the offended party can claim the right of compensation.
The prohibition pertains only the accused but not to the
victim of the crime.