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Chapter 4: EXTINGUISHMENT OF OBLIGATIONS Causes of Et!"#u!sh$e"t of O%&!#at!o"s 1. By P Paym ayment ent or or perfor performan mance ce 2. By los loss s of of the the thing thing due due 3. By the condon condonatio ation n or remiss remission ion of the the thing thing due 4. By the confusi confusion on or merger merger of the rights rights of credito creditorr and debtor debtor 5. By comp compen ensa sati tion on 6. By No Novati vation on . !nnu nnulmen lmentt ". #esci esciss ssio ion n $. %ul&llment ul&llment of a #esol #esolutor utory y 'onditio 'ondition n 1(.Prescription Other Causes of Et!"#u!sh$e"t o%&!#at!o"s 1. 2. 3. 4. 5. 6.
)eath of a Party* for personal obligation +utual )esistance or ,ithdra,al ,ithdra,al !rrival of #esolutory 'ondition -!rt. 11$3 par 2/ 'ompr 'ompromi omisese-!rt !rt.. 2(2" 2(2"// 0mpossibi 0mpossibility lity of of %ul&l %ul&llment lment - !rt. 1266/ 1266/ appenin appening g of %ortu %ortuitous itous vent vent -!rt. -!rt. 114/ 114/
Ge"era& 'ro(!s!o"s Art) 1*+1. bligations are etinguished 1. By P Paym ayment ent or or perfor performan mance ce 2. By los loss s of of the the thing thing due due 3. By the condon condonatio ation n or remiss remission ion of the the thing thing due 4. By the confusi confusion on or merger merger of the rights rights of credito creditorr and debtor debtor 5. By comp compen ensa sati tion on 6. By No Novati vation on . ther causes of etinguishment of obligations such as the follo,ing are governed else,here in the 'ivil 'ode. ". !nnu nnulmen lmentt $. #esci esciss ssio ion n 1(.%ul&llment of a #esolutory 'ondition 11.Prescription Se,t!o" 1: 'a-$e"t or 'erfor$a",e Art) 1*+*) 'a-$e"t $ea"s "ot o"&- the .e&!(er- of $o"e-/ %ut a&so the perfor$a",e/ !" a"- other $a""er/ of a" o%&!#at!o") +eaning of Payment * delivery of money giving of a thing the doing of an act the not doing of an act payment of damages or penalty in lieu of the ful&llment of an obligation
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Art) 1*++) A .e%t sha&& "ot %e u".erstoo. to ha(e %ee" pa!. u"&ess the th!"# or ser(!,e !" 0h!,h the o%&!#at!o" ,o"s!sts has %ee" ,o$p&ete&.e&!(ere. or re".ere./ as the ,ase $a- %e) hen a debt considered paid7 1. 'omplete delivery or rendition of the thing due -integrity of prestation/ 2. )elivery or performance of the very prestation due -identity of the prestation/ 3. 0ndivisibility
Art) 1*+4) If the o%&!#at!o" has %ee" su%sta"t!a&&- perfor$e. !" #oo. fa!th/ the o%&!#or $a- re,o(er as thou#h there ha. %ee" a str!,t a". ,o$p&ete fu&&&$e"t/ &ess .a$a#es su2ere. %- the o%&!#ee) 3 !n eception provided for !rt. 1233 3 !8ords 9ust compensation for the relative breach committed by the obligor. 3 bligor allo,ed to recover ample cement case #e:uisite ;ubstantial Performance 1.
Art) 1*+) 5he" the o%&!#e a,,epts the perfor$a",e/ 6"o0!"# !ts !",o$p&ete"ess or !rre#u&ar!t-/ a". 0!thout epress!"# a"- protest or o%7e,t!o"/ the o%&!#at!o" !s .ee$e. fu&&- ,o$p&!e. 0!th) >eneral #ule Performance or delivery of the prestation must be complete. !rt. 1232 ceptions 1. ;ubstantial compliance ? !rt. 1234 2. hen the oblige or creditor accepts the performance @no,ing its incompleteness ,ithout epressing any protest or ob9ection.
e9u!s!te: 1.
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Art) 1*+) The ,re.!tor !s "ot %ou". to a,,ept pa-$e"t or perfor$a",e %a th!r. perso" 0ho has "o !"terest !" the fu&&&$e"t of the o%&!#at!o"/ u"&ess there !s a st!pu&at!o" to the ,o"trar-) 5hoe(er pa-s for a"other $a- .e$a". fro$ the .e%tor 0hat he has pa!./ e,ept that !f he pa!. 0!thout the 6"o0&e.#e or a#a!"st the 0!&& of the .e%tor/ he ,a" re,o(er o"&- !"sofar as the pa-$e"t has %ee" %e"e,!a& to the .e%tor) Ge"era& u&e: 'reditor may refuse to accept payment or performance by a third person ,ho has no interest in the ful&llment of the obligation. E,ept!o": stipulation to the contrary. 'erso"s fro$ 0ho$ the ,re.!tor $ust a,,ept pa-$e"t: 1.
Se,o". 'ara#raph -5hoe(er pa-s for a"other $a- .e$a". fro$ the .e%tor 0hat he has pa!./ e,ept that !f he pa!. 0!thout the 6"o0&e.#e or a#a!"st the 0!&& of the .e%tor/ he ,a" re,o(er o"&- !"sofar as the pa-$e"t has %ee" %e"e,!a& to the .e%tor); 3
#ecogniAes that payment or performance may be made by any person not incapacitated even ,ithout the @no,ledge or against the ,ill of the debtor and although he has no interest in the ful&llment of the obligation. E2e,t: 1. 0f made ,ithout the @no,ledge or against the ,ill of the debtor *Bene&cial #eimbursement* payer can only recover from the debtor only insofar as the payment has been bene&cial to the latter. 2. 0f made ,ith the @no,ledge of the debtor *%ull #eimbursement and ;ubrogation* the payer may recover from the debtor all that he has paid and ,ill ac:uire all the rights of the creditor.
Art) 1*+<) 5hoe(er pa-s o" %eha&f of the .e%tor 0!thout the 6"o0&e.#e or a#a!"st the 0!&& of the &atter ,a""ot ,o$pe& the ,re.!tor to su%ro#ate h!$ !" h!s r!#hts/ su,h as those ar!s!"# fro$ $ort#a#e/ #uara"t-/ or pe"a&t-) Ge"era& ru&e: hoever pays in behalf of the debtor is entitled to subrogation. ;ubrogation can only ta@e place ,hen there is consent of the debtor.
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E,ept!o": 0f the payment is ,ithout the @no,ledge or against the ,ill of the debtor. r ,ithout the debtors consent E2e,t !f there !s "o ,o"se"t: 1. Payer or third person is entitled to bene&cial reimbursement 2.
Art) 1*+8) 'a-$e"t $a.e %- a th!r. perso" 0ho .oes "!ot !"te". to %e re!$%urse. %- the .e%tor !s .ee$e. to %e a .o"at!o"/ 0h!,h re9u!res the .e%tor=s ,o"se"t) But the pa-$e"t !s !" a"- ,ase (a&!. as to the ,re.!tor 0ho has a,,epte. !t) Payment by a third person ,ho does not intend to be reimbursed 3 Payment is deemed a donation* re:uires the debtors consent to be valid 3 o,ever if the creditor accepts the payment it shall be valid as to him and the payor* the payor then may recover reimbursement from the debtor.
Art) 1*+>) I" o%&!#at!o"s to #!(e/ pa-$e"t $a.e %- o"e 0ho .oes "ot ha(e the free .!sposa& of the th!"# .ue a". ,apa,!t- to a&!e"ate !t sha&& "ot %e (a&!./ 0!thout pre7u.!,e to the pro(!s!o"s of Art 1*4< u".er the t!t&e o" Natura& O%&!#at!o"s) Mea"!"# 1. Free disposal of the thing due * the thing to be delivered must not be sub9ect to any claim or lien or encumbrance. 2. Capacity to alienate- the person is not incapacitated to enter into contracts and for that matter to ma@e disposition of the thing due Ge"era& u&e: 0n obligations to give payment by one ,ho does not have the free disposition of the thing due and capacity to alienate it is not validD The thing paid can be recovered.
E,ept!o": !rt. 124* 0f the sum of money paid or a fungible thing delivered by the incapacitated person in ful&llment of an obligation has been spent or consumed in good faith by the creditor..- There shall be no right to recover. Art) 1*4?) 'a-$e"t sha&& %e $a.e to the perso" !" 0hose fa(or the o%&!#at!o" has %ee" ,o"st!tute./ or h!s su,,essor !" !"terest/ or a"- perso" author!@e. to re,e!(e !t) Person to ,hom payment shall be made 1. 'reditor or oblige 2. is successor in interest* heir or assignee
Page of 8 3. !ny person authoriAed to receive it* either by the creditor or by la,* guardian eecutor administrator of the estate li:uidator of a partnership or corporation CPayment in good faith to any person in possession of the credit is valid although such person may not be authoried to receive the payment
Art) 1*41) 'a-$e"t to a perso" 0ho !s !",apa,!tate. to a.$!"!ster h!s propert- sha&& %e (a&!. !f he has 6ept the th!"# .e&!(ere./ or !"sofar as the pa-$e"t has %ee" %e"e,!a& to h!$) 'a-$e"t $a.e to a th!r. perso" sha&& a&so %e (a&!. !"sofar as !t has re.ou".e. to the %e"et of the ,re.!tor) Su,h %e"et to the ,re.!tor "ee. "ot %e pro(e. !" the fo&&o0!"# ,ases: 1) If after the pa-$e"t/ the th!r. perso" a,9u!res the ,re.!tor=s r!#hts *) If the ,re.!tor rat!es the pa-$e"t to the th!r. perso" +) If %- the ,re.!tors ,o".u,t/ the .e%tor has %ee" &e. to %e&!e(e that the th!r. perso" ha. author!t- to re,e!(e the pa-$e"t) %irst Paragraph 8ect of payment to an incapacitated person 1. >eneral rule Payment to an incapacitated person is invalid. 2. ception Payment is valid if the incapacitated person @ept the thing paid or delivered or if he ,as bene&ted by the payment. ;econd Paragraph 8ect of payment to a third person 1. >eneral #ule Payment to a third person or ,rong party is not valid. 2. ception Payment ,ill be valid if it has redounded to the bene&t of the creditor. -bene!t to the creditor is not presumed" it has to be satisfactorily established. hen bene&t to the creditor need not to be proved7 1. ;ubrogation of the payer in the creditors rightsE 2. #ati&cation by the creditorE 3. stoppels on the part of the creditor.
Art) 1*4*) 'a-$e"t $a.e !" #oo. fa!th to a"- perso" !" possess!o" of the ,re.!t sha&& re&ease the .e%tor) Payment to third person in possession of credit* good faith is presumed 3valid if the payer acted in good faith and in honest belief that he is ma@ing a valid payment therefore obligation is ful&lled or etinguished # Possession of the credit itself and not merely of the the document or instrument evidencing the credit. $nstrument must be transferrable by delivery.
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Art) 1*4+) 'a-$e"t $a.e to the ,re.!tor %- the .e%tor after the &atter has %ee" 7u.!,!a&&- or.ere. to reta!" the .e%t sha&& "ot %e (a&!.) hen payment to creditor not valid7 1. 0n an action against the debtor ,ho is the creditor of another the latter -debtor*astranger/ during the pendency of the case may be ordered by the court to retain the debt until the right of the plainti8 the creditor in the main litigation is resolved. 2. Payment made subse:uently by the debtor*stranger shall not be valid if the plainti8 ,ins the case and cannot collect from the debtor to ,hom payment is made. ;uch payment is considered in bad faith. Art) 1*44) The .e%tor of a th!"# ,a""ot ,o$pe& the ,re.!tor to re,e!(e a .!2ere"t o"e/ a&thou#h the &atter $a- %e of the sa$e (a&ue as/ or $ore (a&ua%&e tha" that 0h!,h !s .ue) I" o%&!#at!o"s to .o or "ot to .o/ a" a,t or for%eara",e ,a""ot %e su%st!tute. %- a"other a,t or for%eara",e a#a!"st the o%&!#ee=s 0!&&) %irst paragraph *refers to real obligation to deliver a speci&c thing. *! thing di8erent from that due cannot be o8ered or demanded against the ,ill of the creditor or debtor as the case may be. ;econd Paragraph * refers to personal obligations.
Art) 1*4) at!o" !" pa-$e"t 0here%- propert- !s a&!e"ate. to the ,re.!tor !" sat!sfa,t!o" of a .e%t !" $o"e- sha&& %e #o(er"e. %- the &a0 of sa&es) 4 ;pecial %orms of Payment 1. )ation in Payment 2. !pplication of payments 3. Payment by cession 4.
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3 overning la, 3 =a, of ;ales
Art) 1*4) 5he" the o%&!#at!o" ,o"s!sts !" the .e&!(er- of a" !".eter$!"ate or #e"er!, th!"#/ 0hose 9ua&!t- a". ,!r,u$sta",es ha(e "ot %ee" state./ the ,re.!tor ,a""ot .e$a". a th!"# of super!or 9ua&!t-) Ne!ther ,a" the .e%tor .e&!(er a th!"# of !"fer!or 9ua&!t-) The purpose of the o%&!#at!o" a". other ,!r,u$sta",es sha&& %e ta6e" !"to ,o"s!.erat!o") #ule of the +edium Fuality 1. 0f the obligation consists in the delivery of a speci&c thing the very thing due must be delivered. 2. 0f the obligation is to deliver a generic thing the purpose of the obligation and other circumstances shall be ta@en into consideration to determine a :uality or @ind of thing to be delivered. ?not superior nor inferior %uality CBene&ts of this article may be ,aived by the creditor or by accepting a thing of inferior :uality and by the debtor by delivering a thing of superior :uality. Art) 1*4<) U"&ess !t !s other0!se st!pu&ate./ the etra7u.!,!a& epe"ses re9u!re. %- the pa-$e"t sha&& %e for the a,,ou"t of the .e%tor) 5!th re#ar. to 7u.!,!a& ,osts/ the u&es of Court sha&& #o(er") >eneral rule
Art) 1*48) U"&ess there !s a" epress st!tpu&at!o" to that e2e,t/ the ,re.!tor ,a""ot %e ,o$pe&&e. part!a&&- to re,e!(e the prestat!o"s !" 0h!,h the o%&!#at!o" ,o"s!sts) Ne!ther $a- the .e%tor %e re9u!re. to $a6e part!a& pa-$e"ts) Ho0e(er/ 0he" the .e%t !s !" part &!9u!.ate. a". !" part u"&!9u!.ate./ the ,re.!tor $a- .e$a". a". the .e%tor $a- e2e,t the pa-$e"t of the for$er 0!thout 0a!t!"# for the &!9u!.at!o" of the &atter)
Page 8 of 8 *above provision contemplates obligations ,here there is only one creditor and only one debtor. >eneral rule 'omplete payment or performance of prestationGobligation is necessary in order for payment to etinguish an obligation ception Partial Performance is allo,ed ,hen 1.
