EXTI NGU GUI SHME M ENT NTOF OFOB OBLI GATI ONS Ext i ngui shme mentofObl i gati ons( CI VI LCODE,Ar t .1231) : ( NoCoMe MeRePaLoPr eReFulAn) 1 .Nov a t i o n 2.Comp e ns a t i o n 3 .Co nf us i o no rMe rMerg e r 4.Res c i s s i o n 5.Pay me me n t / p e r f o r ma nc e 6.Los so ft het hi ngdue 7 .Pr es c r i p t i o n 8.Res c i s s i o n 9.Ful fil me nto far e s o l ut o r yc o ndi t i o n 1 0 A . nnul me nt r a t i o nund e rAr t .1 2 31i sn o te x c l us i v e . Note:Enume Ot herForms msofExt i ngui s hmentNotUnderArt .123 1: 1.De at h(f o rpe r s o na lo ri nt r a ns mi mi s s i b l eo bl i g at i o n) 2 .Mut ua ld e s i s t a nc eo rwi t hd r a wa l 3 .Ar r i v alo fr e s o l ut o r ype r i o d 4.Compr omi mi s e 5 .I mpo s s i bi l i t yo ff ul fil me nto fc o ndi t i o n 6 .Fo r t ui t o use v e nt( JUR URADO,Obl i gat i onsandCont r act s, s upraat230) . Payme mentorPer f or mance No to nl yt hed e l i v e r yo fmo ne yb uta l s ot hep e r f o r ma ma nc e , i na nyo t he rma ma nne r ,o fa no b l i g at i o n ( CI VI LCODE,Ar t . 1232) . Ful fil me nto ft hepr e s t a t i o nd ue .Af ul fil me ntt ha te x t i ng ui s he st heo bl i g at i o nb yt her e a l i z a t i o no ft hepur p o s e sf o rwhi c hi twa s c o ns t i t u t e d.
J ur i di c a la c twhi c hi sv o l unt a r y ,l i c i ta ndma dewi t ht hei nt e ntt oe xt i ng ui s ht heo bl i g at i o n ( JUR URADO,Obl i gat i onsand Co nt r a c t s , s u pr aat2 13 ) . BurdenofPr ovi ngPayme ment Whe nt he e x i s t e nc eo fa d e bti sf ul l ye s t a bl i s h e db yt he e v i d e nc e ,t he s e t t l er u l ei st ha tt he b ur d e no fp r o v i ng e x t i ng ui s h me me n tb ypa y me me n td e v o l v e su p o nt hede b t o rwh op l e a d spa y me me n to ro ff e r ss uc h ade f e n s et ot hec l a i mo ft h e c r e di tr a t he rt ha no nt hel a t t e rt opr o v eno np ay me me nt .Thede b t o rha st heb ur d e no fs h o wi wi ngwi wi t hl e g alc e r t a i nt yt h att he o b l i g a t i o n ha sb e e nd i s c h ar g e db yp a y me me n t .Onl y wh e nt h ed e b t o ri nt r o d uc e se v i d e nc et ha tt heo b l i g a t i o nh asb e e n e x t i ng ui s he ddo et h eb ur d e ns hi f tt ot hec r e d i t o r( r( Cha mv . Pa i t a Mo y a ,A. C.No .7 4 94 ,June2 7 ,2 00 8 ) Requi s i t esofPayme ment : 1 .Pa y o ro rt hep e r s o nwh whop a y s ; 2.Paye eort hepers ont owhom payme menti smade; 3 .Thi ngt ob ep ai d ;a nd 4 .Ma nne r ,t i mea ndpl a c eo fp l a c e( e( TOLENTI NO,Ci vi lCode, s upr aat274) . Ki ndsofPayme ment : 1 .No r ma l–wh whe nt hede b t o rv o l unt a r i l ype r f o r ms mst hepr e s t a t i o na sa gr e e dup o n 2 .Ab no r ma ma l–wh whe nd e bt o ri sf o r c e dbyme me a nso fj ud i c i a lp r o c e e d i nge i t he rt oc o mpl ywi t ht hep r e s t a t i o no rp a yi nd e mn mni t y Characteri st i csofaval i dpayme ment : 1 .I d e nt i t y–o nl yt hep r e s t a t i o na gr e e dup o na ndnoo t he rmus tb ec o mp mp l i e dwi wi t h
2 .Co mp mp l e t e ne s s–t het hi ngo rs e r v i c emu mus tb ec o mp mp l e t e l yde l i v e r e do rr e n de r e d 3 .I ndi v i s i b i l i t y–pa y me me nto rp e r f o r ma ma nc emu mus tb ei ndi v i s i b l e . Asag ene r a lr ul e ,t heab o vec h ar a c t e r i s t i c smus tc o nc ur . Not e: Pr i nc i pl eofI nt e gr i t y( CI VI LCODE,Ar t .1233) . GeneralRul e A : de bts hal lno tbeunde r s t o o dt oha v ebe e n pai dunl e s st het hi ngo rs e r v i c ei n whi c ht heo bl i g at i o n c o n s i s t sha sbe e nc o mpl e t e l yde l i v e r e do rr e nd e r e d,a st h ec a s ema ma yb e . Excepti ons: 1 .Whe nt heo b l i g at i o nha sbe e ns u bs t a nt i a l l ype r f o r me me di ng o o df a i t h,t heo b l i g o rma ma yr e c o v e ra st hr o u ght he r eh asb e e na s t r i c ta ndc o mpl e t ef ul fil l me ntl essdama magessurf edbyt heobl i gee( e( CI VI LCODE,Ar t .1 2 34 ) ;and 2 .Whe nt heo b l i g eac c e p t sp e r f o r ma ma nc e , kno wi ngi t si nc o mp l e t e ne s so ri r r e g ul a r i t yandwi t ho ut Ex pr e s s i ngan ypr o t e s to ro b j e c t i o n;b as e do nt hepr i nc i pl eo fe s t o pp pe l( l( CI VI LCODE,Ar t .1235) . Whomu mus tpay I ngeneral : 1 .De b t o r ; 2 .An yo nea c t i ngo nt hede bt o r ’ sb e ha l f ; a .Dul yaut ho r i z e da ge nto rl e g alr e p r e s e nt a t i v e ; b .he ’ s( pr o v i de dt ha tt hede b t o ri sal r e a d yd e adf o ro t he r wi s et h e ya r ec o n s i d e r e da st hi r dp e r s o nsi nt e r e s t e di nt he o bl i g at i o n) ;and JURADO,Ob l i g a t i o nsa ndCo nt r a c t s , s u pr aat2 39 ) . c . Suc c e s s o r s i ni nt e r e s ta ndas s i g ne e s( s( Thi rdpers onwhoi sanI nt eres t edpart y I nt erest edPart y Onewhoha sa ni nt e r e s ti nt hee x t i ng ui s h me me nto ft heo b l i g at i o ns u c ha s : 1 .Co de bt o r s ; 2.Sur e t i e s ; 3 .Gua r a nt o r s ;a nd 4 .Owne r so fmo r t g a g e spr o p e r t yo fp l e d g e Not e:Ev e nwi t ho utt hekno wl e dg eo ft hede b t o r ,ap e r s o ni nt e r e s t e di nt hef ul fil l me nto ft heo bl i g at i o nc a np ay ( CI VI L CODE,Ar t .1 30 2,p ar .3 ) . Effec t sofPayme ment : 1 .Theob l i g at i o ni se xt i ng ui s he d; 2 .Thede b t o ri st of ul l yr e i mb ur s et het hi r dpe r s o nw wh hoi sa ni nt e r e s t e dpa r t y ;a nd 3.Thet hi r dpe r s o ni nt e r e s t e di ss ubr o g at e dt ot her i g ht so ft hec r e di t o r . Not e: Thec r e d i t o rc a nno tr e f us ev a l i dt e nd e ro fp a yme ntf r o mt heab o v eme me nt i o ne di nd i v i d ua l s( Mont edePi e dad v . Ro dr i g o ,G. R.No .L42928,Augus t18,1936) . Thi rdPer sonwh whoi sNotanI nt er es t edPart ybutwi t hdebt or’ sConse nt Thec r e d i t o ri sn o tb o u ndt oa c c e p tp a y m me e n to rp e r f o r ma nc eb yat h i r dp e r s o nwhoha s no i nt e r e s ti nt he GeneralRul e: CI VI LCODE,Ar t .1 23 6 ,p ar .1 ) . f ul fil l me nto ft heo bl i g at i o n( n( Excepti on:Unl e s st h er ei sas t i pul at i o nt ot hec o nt r a r y .
Effec t sofPayment : 1 .Thi r dpe r s p o ni se nt i t l e dt of ul lr e i mb ur s e me nt . 2 .The r ei sl e g als ub r o ga t i o na st het hi r dpe r s o n,i . e . s t e psi nt ot hes ho eso ft hec r e di t o r . Not e: Thec r e d i t o rma yr e f us et oa c c e p tp a yme nt . Thi rdPer sonwhoi sNotanI nt er es t edPart yandWi t houtknowl edgeorAgai ns tt heWi l loft heDebt or GeneralRul e:Whoev erpaysf oranot hermaydemandf r om t hedebt orwhathehaspai d( CI VI LCODE,Ar t .1 2 36 ,p ar .2 ) . Except i ons:I fp a y me ntwa sma dewi t ho utt hekno wl e d g eo ra g ai ns tt hewi l lo ft hed e bt o r . I ns uc hc a s e , hec a no nl yr e c o v e ri ns o f a ra st hepa y me ntha sb e e nb e ne fic i a lt ot hede b t o r . Effec t sofPayment : 1 .Thi r dp e r s o nc a no nl yber e i mb ur s e di ns o f a ra spa y me ntha sb e e nb e ne fic i a lt ot hede b t o r . Be ne fitt ot h ec r e d i t o ri spr e s ume di nt hef o l l o wi ngc a s e s( CI VI LCODE,Ar t .1 24 1 ,p ar . 2 ) :( RES) a .I st hec r e d i t o rr a t i fie st hepa yme ntt ot het hi r dpe r s o n(Rat i fic a t i o n) b .I fb y et hec r e d i t o r ’ sc o n duc t ,t hede bt o rha sbe e nl e dt obe l i e v et h att het hi r dpe r s o na ut ho r i t yt or e c e i v et h epa yme nt ( Es t o p p e l ) c . I faf t e rt hepa yme nt ,t het hi r dpe r s o nac q ui r e st hec r e di t o r ’ sr i g ht s(Su b r o g a t i o n ) Ar t .1237s t at e st hatwho e v e rpa y so nbe hal fo ft hede bt o rwi t ho utt hekno wl e dg eo rag ai ns tt hewi l lo ft hel at t e r ,c anno t c o mpe lt hec r e di t o rt os ub r o ga t ehi mi nhi sr i g ht s . PaymentMadebyaThi r dPer s onWhoDoesNotI nt endt ober ei mbur s edbyt heDebt or Effec t sofPayment : 1 .Pr e s u me dt ob ea d o na t i o n.The r e o f ,t hec o ns e n to ft hed e bt o ri sne c e s s a r y ,a si nt hec a s eo fad o nei no r d i na r y d o n a t i o n s ; 2 .Onc et hec o ns e nti ss e c ur e d ,t her ul e so no r d i na r ydo na t i o nwi l la ppl y ;a nd 3 .I ft hec o ns e nti sno ts e c ur e d ,Ar t /1 23 6a n1 23 7wi l la ppl y( JURADO,Ob l i g a t i o nsa ndc o nt r a c t s , s u pr aat2 38 ) Towhom Paymentmus tbeMade( CI VI LCODE,Ar t .1240) 1 .Thepe r s o ni nwho s ef a v o rt heo b l i g at i o nha sbe e nc o n s t i t ut e d ; 2Hi ss uc c e s s o ri ni nt e r e s t ;o r 3 .An ype r s o na ut ho r i z e dt or e c e i v ei t . EffectofPaymentt oUnaut hori zedPer s oni nObl i gat i ont oGi ve: ts h al lno tb ev al i de v e nt ho ug hma dei ng o o df a i t h. GeneralRul e:I
Excepti ons: 1 .Pa y me ntma det oat h i r dpe r s o n,pr o v i d e dt ha ti tha sr e d o und e dt ot heb e ne fito ft hec r e d i t o r . Be ne fit st ot hec r e di t o ri sp r e s ume di nt hef o l l o wi ngc a s e s( CI VI LCODE,Ar t .1 24 1,p ar .2 ) :( RES) a .I st hec r e d i t o rr a t i fie st hepa yme ntt ot het hi r dpe r s o n(Rat i fic a t i o n) b .I fb y et hec r e d i t o r ’ sc o n duc t ,t hede bt o rha sbe e nl e dt obe l i e v et h att het hi r dpe r s o na ut ho r i t yt or e c e i v et h epa yme nt ( Es t o p p e l ) c . I faf t e rt hepa yme nt ,t het hi r dpe r s o nac q ui r e st hec r e di t o r ’ sr i g ht s(Su b r o g a t i o n )
CI VI LCODE,Ar t .1242) 2 .Pa y me ntt ot hepo s s e s s o ro ft hec r e di tno tt hedo c u me ntf a i t h( Thi sr e f e r st ot h ep os s e s s i o no fc r e di tn o tt hedo c ume nte v i de nc i ngi t . Not e: I no bl i g at i o nst og i v e ,pa yme ntt oi nc a pa c i t a t e dha ske pti sv a l i dwhe n: a .Thei nc a p ac i t a t e dha ske p tt heamo unto rt hi ngpa i do rd e l i v e r e d ;o r b .Pa y me ntha sb e e nb e ne fic i a lt ot hei nc a p ac i t a t e dp e r s o n( CI VI LCODE,Ar t .1 24 1 ,p ar .1 ) . Pa yme ntma det ot hec r e d i t o rb yt hede bt o ra f t e rt hel a t t e rha sbe e nj udi c i a l l yo r de r e dt or e t a i nt hede bts ha l lno tb ev al i d ( CI VI L CODE,Ar t .1243) ;unl e s so t he r wi s es t i pul a t e d ,e x t r a j udi c i a le x p e ns e sr e q ui r e db yt hep ay me nts h al lb ef o rt h e a c c o unto ft hede bt o r( CI VI LCODE,Ar t .1247) . Thi ngt obePai d Rul ei nMonet aryObl i gat i ons( CI VI LCODE,Ar t .1249) 1 .Mus tb epa i di nt hec ur r e nc ys t i pul a t ei fi t sno tp o s s i b l et ode l i v e rs uc hc ur r e n c y ,t he ni nt hec ur r e n c ywhi c hi sl e g al t e nde ri nt hePhi l i ppi ne s . 2 .De l i v e r yo fp r o mi s s o r yno t e sp ay a bl et oo r d ero rb i l l so fe x c ha ng eo ro t he rme r c a nt i l edo c u me nts ha l lno tp r o duc et he e ffe c to fp a y me nte x c e p t : a .Whe nt he yha v eb e e nc a s he do rc r e d i t e d ;o r b .Whe nt hr o u ght hef a ul to ft hec r e d i t o rt he yha v eb e e ni mpa i r e d . Not e:Thei mp a i r me n to ft hene g o t i a b l ei ns t r ume n tt hr o u g ht h ef a ul to ft hec r e d i t o rc o n t e mp l a t e db y Ar t .1 2 49 i s a ppl i c a b l eo nl yt oado c u me nte x e c u t e db yat h i r dpe r s o na ndd e l i v e r e db yt hede b t o rt ot hec r e d i t o ra nddo e sn o ta ppl yt o i ns t r u me nt se x e c u t e dbyd e bt o rhi ms e l fa ndde l i v e r e dt ot h ec r e di t o r( JURADO,Ob l i g a t i o na ndCo n t r a c t s ,s u pr aat2 6 1 ) Pe nd i ng t hec a s hi ng i ft heme r c a nt i l ed o c u me nt ,t hec r e d i t o rc a nno tb r i ng a na c t i o na g ai ns tt hed e bt o rdur i ng t he i nt e r v e ni ngpe r i o da s“ t heac t i o nde r i v e df r o mt heo r i g i na lo b l i g at i o ns ha l lb ehe l di na be y anc e ”( I d.at253) . LegalTender : Suc hc ur r e nc ywhi c hma ybeus e df o rt hepa y me nto fa l ld e bt s , whe t he rp r i v a t eo rp ub l i c . I t ss i g ni fic a nc ei s ma ni f e s t e db yt h ef a c tt ha ti ti ss u c hwhi c ht hede b t o rma yc o mp e lac r e d i t o rt oa c c e p ti np ay me nto ft hede b t( I d.at251) . Le g alt e nde ri nt hePhi l i p pi newo ul db eal lno t e sa ndc o i nsi s s u e db yt he BangkoSe nt r al( Ci r c ul arNo .573,s e r i e so f2006) : 1 .1 Pe s o , 5 Pe s o sa nd1 0Pe s oc o i ns : i na mo unt sno te x c e e di ngP1 ,0 00 . 0 0 2 .2 5c e n t a v oc o i no rl e s : i na mo unt sno te x c e e d i ngP1 00 . 0 0 Ta keno t et ha tb i l l s , r e g a r d l e s so fd eno mi na t i o n,a r el e g alt e nde ru pt owha t e v e ra mo unt . R. A.8 18 3p r o v i de st h ata l lmo ne t a r yo b l i g at i o nss ha l lb es e t t l e dIt hePhi l i pp i nec u r r e n c ywhi c hi sl e g alt e nd e ri nt he Phi l i ppi ne s ,Ho we v e r , t hepa r t i e s ,ma ya gr e et ha tt heo bl i g at i o no rt r a ns a c t i o ns ha l lb es e t t l e di na nyo t he rc u r r e nc yatt he t i meo fp a y me n t( R. A. 8183,Se c . 1) Ext raor di naryI nflat i onorDeflat i on ( CI VI LCODE,Ar t .1250) Requi si t es: 1 .Th e r emus tb ead e c r e a s eo ri nc r e a s ei nt hepur c ha s i n gp o we ro ft hec u r r e n c ywhi c hi su nus u a lo rb e y o n dt h ec o mmo n fluc t ua t i o ni nt hev al ueo ft hec ur r e nc y ; a nd 2 .Suc hde c r e a s eo ri nc r e a s ec o u l dno tha v eb e e nr e a s o n ab l yf o r e s e e no rwhi c hwa sma ni f e s t l ybe y o n dt hec o n t e mp l a t i o no f t hepa r t i e satt het i met heo bl i g at i o nwa se s t a bl i s he d. Tak eno t et h atAr t .1 25 0me nt i o n“ I i nt hec ur r e nc ys t i pul a t e d. ”Thus ,i ta ppl i e so nl yt oc o nt r a c t ua lo b l i g at i o ns . Val ueo fc ur r e nc yatt het i meo ft hee s t abl i s hme nto ft heo bl i g at i o ns hal lbet hebas i so fpa yme nt .Thel a w do e sno ts a yi t s h o u l db et hea mo u ntp a i d( JURADO,Ob l i g a t i o nandCo n t r a c t s ,s up r aa t2 6 3 )
Not e:Ev e ni ft hep r i c ei n de xo ft heg o o d san ds e r v i c e sma yh a v er i s e nd ur i n gt h ei nt e r v e n i ngp e r i o d ( Sa ng r a do r v . Val der r ama,G. R.No.79552,Nov e mbe r29,1988) ,t hi si nc r e a s e ,wi t ho utmo r e ,c a nno tb ec o n s i d e r e da sr e s ul t i ng i n “ e x t r a o r di nar yi nflat i o n”a st oj us t i f yt heappl i c a t i o no fAr t i c l e1250 ( Te l e n gf an& So ns , I nc . v .Uni t e d St at e sLi ne s ,I n c . ,e t .al . ,G. R.NO.1 32 28 4,Fe b r uar y28 ,2 00 6) The r emus tb eade c l a r a t i o no fs u c he x t r a o r di na r yi nfla t i o no rd e fla t i o nb yt h e Bangk oSe nt r al . Wi t ho uts u c hd ec l a r a t i o n, t hec r e d i t o r sc a nno td e ma nda ni nc r e a s ea ndd e bt o r sade c r e a s e ,o fwha ti sd uet oo rf r o mt he m ( Ramosv . CA,G. R.No. 1 19 8 72 ,Jul y7 , 1 99 7a ndMo b i lOi lPhi l s . v . CA,G. R.NO.1 0 30 72 ,Aug us t2 0,1 9 93 ) . Rul ewhent heObl i gat i onConsi st si ntheDel i veryofaDet ermi nat eorSpeci ficThi ng De b t o rc a nno tf ul fil lhi so b l i g at i o nb yd el i v e r i ngat hi ngwhi c hi sad i ffe r e n to ne ,a l t ho ug ht hel a t t e rma y beo ft hes a me v a l uea s ,rmo r ev a l ua bl et ha nt ha twhi c hi sd ue( CI VI LCODE,Ar t .1 2 4 4,p ar .1 ) Rul ewhent heObl i gat i on i st oDoorNott oDoandt heObj ecti sanActorFor bearancewhi chi sSpeci ficor Det er mi nat e Obl i g orc a nno tf ul fil lhi so bl i g at i o nb ys ubs t i t ut i ngano t h era c to rf o r b ear a nc eag ai ns tt heo bl i g ee ’ swi l l( CI VI LCODE,Ar t . 1 24 4,par . 2 ) Rul eswhent heObl i gati onConsi sti nt heDel i veryofI ndet ermi nat eorGeneri cThi ngs I fc o nt r a c tdo e sno ts p ec i f yt h eq ua l i t yandc i r c ums t a nc e s : 1 .Cr e d i t o rc a nno tde ma ndat hi ngo fs up e r i o rq ua l i t y( b uthema yde ma ndandac c e p to n eo fi nf e r i o rq ua l i t y ) 2.De bt o rc a nno td e l i v e rat hi ngofi nf e r i o rqual i t y ,buti fhes ode s i r e s ,hema yde l i v e roneo fs u pe r i o rqual i t y( pr o v i de di ti s no to fadi ffe r e ntki nd)( CI VI LCODE,Ar t .1246) . Not e:Thec r e d i t o rc a nno tb ec o mpe l l e dpa r t i a l l yt or e c e i v et h epr e s t a t i o nsi nwhi c ht heo bl i g at i o nc o ns i s t s .Ne i t he rma y t hed e bt o rb er e q ui r e dt oma kep ar t i a lp a yme nt( CI VI LCODE,Ar t .1 2 4 8,p ar .1 ) Excepti ons: 1 .Whe nt heo bl i g at i o ne x pr e s s l ys t i pul a t e st hec o nt r a r y ; 2 .Whe nt he d i ffe r e ntp r e s t a t i o nswhi c hc o ns t i t ut e st h eo b j e c t so ft heo b l i g a t i o na r es u bj e c tt od i ffe r e ntt e r msa nd c o ndi t i o ns ;o r 3 .Whe nt hed e bti si np ar tl i q ui da t e da ndi np ar tunl i q ui da t e d ,t hec r e di t o rma ye ffe c tt hep ay me nto ft hef o r me rwi t ho ut wai t i ngf o rt h el i qui dat i o no ft hel at t e r( CI VI LCODE,Ar t .1 2 4 8,p ar .2 ) Ar t .1248o nl yappl i e swhe nt he r ei so nl yo nec r e di t o rando nede bt o r . Pl acei fPayment 1 .Pa c es t i pul a t e db yt hepa r t i e s ; 2 .I ft he r ei snos t i pul a t i o na ndt heo bl i g at i o ni st ode l i v e rad e t e r mi na t et hi ng ,p ay me nts ha l lb ema deatt hepa c ewhe r e t het hi ngmi g htb eatt het i met heo bl i g at i o nwa sc o ns t i t ut e d;o r 3 .I na nyo t he rc a s e ,t hepa y me nts h al lb ema dea tt hed o mi c i l eo ft hede b t o r( CI VI LCODE,Ar t .1251) . Not e:I ft hede b t o rc ha ng e shi sdo mi c i l ei nb adf a i t ho ra f t e rheha si nc u r r e di nd e l a y ,t hea ddi t i o na le x p e ns e ss ha l lb e bor nebyhi m( CI VI LCODE,Ar t .1251) . Ar t .1251go v e r nsuni l at e r alo bl i g at i o ns .Re c i pr o c alObl i g at i o nsar eg o v e r ne db ys pe c i alr ul e s . Spec i alFormso fPayment Appl i cat i onofPayme nt( CI VI LCODE,Ar t .1252) .
De s i g na t i o no ft hede b tt owhi c ht hepa y me ntmus tb eap pl i e dwhe nt hede b t o rh ass e v e r a lo b l i g a t i o no ft hes a meki ndi n f a v o roft hes amec r e d i t o r . Requi si t es: 1 .The r emus tb eo nl yde b t o ra ndo nl yc r e d i t o r ; Und e rAr t .1 7 92 ,a pp l i c a t i o no fp a y me ntma ybeha de v e ni ft he r ea r et o wc r e d i t o r s–t hep ar t ne r s h i p sa ndt h ema na g i ng p a r t n e r( JURADO,Ob l i g a t i o nsa ndCo nt r a c t s , s up r aat2 6 5) ,b utt hel a wa l l o wss u c ha pp l i c a t i o ni nf a v o ro ft hema na gi ng p ar t ne ro n l yi ft hepe r s o na lc r e d i to ft hepa r t ne rs h o ul db emo r eo n e r o ust ohi m. Ne i t he rt her e q ui r e me ntt ha tt he r emus tb eo nl yo nede b t o rmi l i t a t e sa g ai ns tt hepo s s i b i l i t yo fe x t e nd i ngt her ul e so n a ppl i c a t i o no fp ay me ntt os o l i d ar yo bl i g at i o n.Thes o l i da r yd e bt o rwhopa i dma yha v et he i ro b l i g a t i o ni nf a v o ro ft he c r e di t o r . 2 .The r emus tb et woo rmo r ed e b t so ft hes a mek i nd ; I ti sa l s oe s s e n t i a lt ha te a c ho ft hede b tmus tb ei d e nt i c a lo rho mo g e no uss p e c i e( JURADO,Obl i gat i onsandCont r act s , s upr aat270) .
Except i on:Whe ns o meo ft heo bl i g at i o nsar eno ti de nt i c a ls p e c i ea tt het i meo ft he i rc o n s t i t ut i o n,a nda tt het i meo f d e s i g na t i o no ra ppl i c a t i o ni sma de ,s uc ho b l i g at i o na nda l r e a d yb e e nc o n v e r t e di nt oo bl i g at i o nt oi nd e mni f ywi t hd ama ge s b yr e a s o no fb r e a c ho rno nf ul fil l me nt( JURADO,Ob l i g a t i o n sa ndCo n t r a c t s ,s up r aat2 7 0) .
3 .Al lt hed e bt smus tb edue ;a nd Excepti ons: a .Whe nt he r ei sas t i pul a t i o nt ot hec o nt r a r y b .Th ea p pl i c a t i o no fp a y me n ti sma d eb yt h ep ar t yf o rwho s ebe n e fitt het e r mso rp e r i o dha sb e e nc o n s t i t ut e d ( CI VI L CODE,Ar t .1196) . 4 .Amo u ntp a i db yt h ed e b t o ri si ns u ffic i e n tt oc o v e rt h et o t a la mo u nto fa l lt hed e b t s ( JURADO,Obl i gat i onsand Co nt r a c t s , s u pr aat2 68 ) . Rul esonAppl i cat i onofPayment GeneralRul e:Ther i g htt ode s i g na t et h ed e btt owhi c ht hepa y me nts ha l lb ea pp l i e db e l o ng spr i ma r i l yt ot h ed e bt o r ( JURADO,Ob l i g a t i o n san dCo n t r a c t s ,s up r aat2 7 0) . Ther i g hti so n l ya v ai l a b l et ot hed e bt o ra tt het i mewhe np a yme nti sma de ( I d. ) . Excepti on:I ft hede b t o rd o e sno ta p pl yt hec r e d i t o rma yde s i g na t ewhi c hde b ti spa i db ys p e c i f y i ngi nt her e c e i p t .Thus , t hec r e d i t o rha st her i g htt opr o p o s es ub j e c tt ot hee x pr e s so rt a c i ta pp r o v a lo ft hed e bt o r( JURADO,Obl i gat i onsand Co nt r a c t s , s u pr aat2 71 ) . I ft hec r e di t o rdi dno tappl yori fappl i c a t i o ni sv o i d,de btwhi c hi st hemo s to ne r o usi st heo nes at i s fie d.I ti se v i de nti nt he c i r c ums t a nc e sl a i db yAt .1 25 4t ha ti ti sl a w whi c hma ke st hea pp l i c a t i o n. LegalAppl i cat i onofPayment( CI VI LCODE,Ar t .1254) .
Thed e b twhi c hi smo r eo n e r o u st ot hed e b t o r ,a mo ngt ho s ed ue ,s h al lb ede e me dt oha v eb e e ns a t i s fi e d. Therul eappl i es: 1 .Whe nt hep a yme ntc a nno tb eap pl i e di na c c o r d anc ewi t ht hep r e c e d i ngr u l e s ; o r 2 .I ft heap pl i c a t i o nc a nno tb ei nf e r r e df r o mt hec i r c ums t a nc e s( JURADO,Ob l i g a t i o nsa ndCo nt r a c t s , s u pr aat2 7 22 73 ) . Whyt hemos toner ousdebt I nmaki ngt h ea ppl i c a t i o no fpa yme nt s ,t hel a wc o ns i de r sp ar t i c ul a r l yt hei nt e r e s to ft hede b t o r .I ti sa s s ume dt ha ti ft he d e bt o rh asc ho s e nt h ede b tt ob ep ai d ,hewo ul dha v er e l i e v e dhi ms e l ffir s to ft hemo s tb ur d e ns o mede b t . Thi si smoreonerous: 1 .Ol d e s td e bt sa r emo r eo ne r o ust ha tmo r er e c e nto ne s ; 2 .I nt e r e s tb e a r i ngde b t sa r emo r eo ne r o u st h ant ho s ewhi c hdono t ,e v e nI ft hel a t t e rwe r ei nc u r r e data ne a r l i e rd at e ; 3 .Be t we e ni nt e r e s tb ea r i ngde b t s , t hed eb twi t hahi g he rr a t eo fi nt e r e s ti smo r eo ne r o us ; 4 .As e c ur e dd e bti smo r eo ne r o ust ha nt ha twhi c hi sn o t ; 5 .Ad eb ti nwhi c ht hed e bt o ri sp r i nc i pa l l yb o undi smo r eo n e r o ust ha nt ha twhi c hi sh ei sme r e l yagua r a nt o ro rs u r e t y ; 6 .Ad eb ti nwhi c hhei ss o l i d ar i l ybo undi smo r eo n e r o ust ha nt ha twhi c hhei so nl yas o l ede b t o r ; 7 . Wi t hi nas o l i da r yo bl i g at i o n,t hes ha r ewhi c hc o r r e s p o ndst oas o l i d ar yde b t o rwo ul db emo s to ne r o u s ; 8 .Ano b l i g at i o nf o ri nd e mni t yi smo r eo n e r o ust ha nt ha twhi c hi sb ywa yo fp e na l t y ;o r 9 .Li q ui d at e dd e bt sa r emo r eo ne r o ust ha nunl i q ui d at e do n e( JURADO,Ob l i g a t i o nsa ndCo nt r a c t s , s u pr aat2 72 2 73 ) . Not e: Noha r dandf a s tr u l e ,ho we v e r ,c a nb eputup . Whe ni ti sf a i r l yi mp o s s i b l et ode t e r mi newhi c ho ft hede b t sd uei st hemo s to ne r o uso rb ur d e ns o meot hede b t o r ,o rwhe n t hed e bt sd uea r eo ft hes a mena t u r ea ndbur d e n,p a y me nts h al lb ea pp l ypr o p o r t i o na t e l y( I d.at274) . Mus tc o nf o r mt ot heg e ne r a lr u l e so np a yme ntf o undund e rAr t .1 23 2 1 25 1 o ft heCi v i lCo d e . I l l us t r at i on: Ap pl y i ngb o t hr u l e s ,s h o u l dade b t o rha v et wod e b t so ft hes a mena t ur ea ndbur d e na mo u nt i ngt oP1 0 0a nd P2 00a ndhepa y so nl yP1 00 ,t hes a mes ha l lno tb ea pp l i e dp r o p o r t i o na t e l ya st hec r e d i t o rc a n no tb ec o mp e l l e dt oac c e p t p ar t i a lp ay me nt .Co ns e q ue nt l y , hi sp a yme nts h al lb ef ul la ppl i e dt ot hede b ta mo unt i ngt oP1 00 . Not e: I ft hede b tp r o d uc e si nt e r e s t ,p ay me nto ft hepr i nc i pa ls h al lno tb ede e me dt oha v ebe e nma deunt i lt hei nt e r e s tha v e CI VI LCODE,Ar t .1 2 5 3) ;a b e e nc o v e r e d( pp l i e so nl yi nt heab s e nc eo fa na gr e e me ntt ot hec o n t r a r ya ndi sme r e l ydi r e c t o r y a ndno tma nd at o r y .I tme a nst ha tt heb e ne fit so fAr t .1 25 3ma yb ewa i v e db ywa yo fs t i p ul a t i o n. Daci onenpago) Dat i oni nPayment( De l i v e r ya nd t r a ns mi s s i o no fo wne r s h i po fa t hi ng b yt hed e b t o rt o t hec r e d i t o ra sa na c c e p t e de q u i v a l e n to ft he pe r f o r ma nc eo ft heo b l i g at i o n. Requi si t es: 1 .Ex i s t e nc eo famo ne yo bl i g at i o n; Tak eno t e ,ho we v e r , t ha ti ti spr e c i s e l yi no bl i g at i o nwhi c ha r eno tmo ne yde bt s ,i nwhi c ht het r uej ur i di c a lna t ur eo fda t i o n i np ay me ntb e c o me sma ni f e s t .Thef a c tt ha tt he r emus tb eap r i o ra g r e e me nto ft hepa r t i e so nt hede l i v e r yo ft het hi ngi n l i e uo ft heor i g i na lp r e s t a t i o ns ho wst h att he r ei sano v at i o nwhi c he x t i ng ui s he st h eo r i g i na lo b l i g at i o n,a ndt hede l i v e r yi s ame r ep e r f o r ma nc eo ft heo b l i g at i o n( TOLENTI NO,Ci vi lCode, s upr aat294) . Thus ,i ft hec r e d i t o ri se v i c t e df r o mt het hi nggi v e ni ndat i ngi npa yme nt , t heo r i g i nalo bl i g at i o ni sno tr e v i v e d.
I ti ss u bmi t t e dt ha tt heque s t i o no fwhe t he rt hepr e e x i s t i ngo bl i g at i o ni nda t i o ni np ay me nti si nmo ne yha ss i g ni fic a nc e o nl yi nd e t e r mi ni ngwhe t he rt her e s u l t i ngc o nt r a c ti st h a to fs a l ea nd no twhe t he rt heo r i g i na lo b l i g a t i o n ha sb e e n e x t i ng ui s h e d. 2 .Al i e na t i o nt ot hec r e d i t o ro fapr o p e r t yb yt hede bt o rwi t ht hec o ns e nto ft hef o r me r ; a nd 3.Sat i s f ac t i o no ft hemo ne yo bl i g at i o no ft hede bt o r . PaymentbyCes s i on( CI VI LCODE,Ar t .1255) ; A s pe c i alf o r mo fpa y me ntwhe r e b yt hede bt o ras s i gnso rabando nsal lo fhi spr o pe r t yf o rt hebe ne fito fhi sc r e di t o r si n o r d e rt ha tf r o mt hepr o c e e d st he r e o f ,t hel a t t e rma yo bt a i npa y me nto ft he i rc r e d i t s . Requi si t es: 1 .Pl ur a l i t yo fde bt s 2.Par t i alo rr e l at i v ei ns o l v e nc yoft hede bt o r ;and 3 .Ac c e pt a nc eo ft hec e s s i o nb yt hec r e d i t o r s( JURADO,Ob l i g a t i o nsa ndCo nt r a c t s , s u pr aa t2 7 5) . Ki ndsofPaymentbyCes s i on: 1 .Co nt r a c t ua l( CI VI LCODE,Ar t .1255) ; 2 .J udi c i a l( g o v er ne db yI n s o l v e nc yl a w) a .Vo l unt ar y b .I nv o l unt ar y
Dat i oni nPaymentv. paymentbyCes s i on Dat i o ni nPa y me nt
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t r a ns mi t t e d. TenderofPaymentandConsi gnat i on( CI VI LCODE,Ar t .1256) Te nd e ro fPa y me nt
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TenderofPayment Defini t i on:Co n s i s ti nt he ma ni f e s t a t i o n ma de b yt he d e bt o rt ot he c r e d i t o ro fhi sd e c i s i o nt oc o mp l y i mme di a t e l ywi t hhi so b l i g at i o n J (URADO,Obl i g at i o nsandCo nt r ac t s ,s upr aat277) Te n de ro fp a y me nt ,e v e ni fv a l i d ,d o e s no tb yi t s e l fp r o d uc el e g a lp a yme nt ,u nl e s si ti sc o mp l e t e db y c o ns i g na t i o n P (hi l .Nat i o nalBankv .Re l at i v o ,G.R.No .L5298,Oc t o be r29,1952) . Effect sonI nt erest : 1 .Whe nat e nd e ro fp a yme nti sma dei ns u c haf o r mt ha tt hec r e d i t o rc o ul dha v ei mme d i a t e l yr e a l i z e dp ay me nti fhe ha da c c e p t e dt het e nd e rf o l l o we db yap r o mp ta t t e mp to ft hede b t o rt ode p o s i tt heme a nso fp a y me n ti nc o ur tb ywa y o fc o ns i g na t i o n,t heac c r ua lo fi nt e r e s to nt heo bl i g at i o nwi l lb es us p e nde df r o mt heda t eo fs uc ht e nde r ; o r 2.When t he t enderofpaymenti snotac c ompani edbyt hemeansofpayment ,and t he debt ordi d nott akeany i mme d i a t es t e pt oma keac o ns i g na t i o n,t he ni nt e r e s ti sno ts u s p e nd e df r o mt het i meo fs u c ht e nd e r(TOLENTI NO, Ci v i lCo de , s upr aat3 21) . Exerci seofRi ghtofRepurc hase I nc a s eo fe x e r c i s eo fr i g hto fr e p ur c ha s eb yt e nde ro fc he c k ,s uc ht e nde ri sv al i db ec a us ei ti sane x e r c i s eo far i g ht a ndno tma deasmo d eo fp a y me nto fa no b l i g a t i o n.Ar t i c l e12 49i sno ta pp l i c a b l e A ( de l f aPr o pe r t i e s I nc . ,v .CAG. R. No .111238,Januar y25,1995) . Consi gnat i on Not e:Co n s i g n at i o nb e i ngaf o r mo fp a y me n tp r e s u p po s e st ha tt he r emus tb ead e b tt ha tmus tb ep a i d .Te n de ro f pay mental one wo ul db es uffic i e ntt opr e s e r v et her i g hto ft her e d e mp t i o ne ro ft hev e nd e er e t r o .
GeneralRequi s i t esofConsi gnat i on( s e ep r e v i o u sdi s c us s i o ni nc o nne c t i o nwi t hp ay me n ti ng e ne r a lCI VI LCDE, Ar t .12321251) Speci alRequi si t esofConsi gnat i on ( CI VI LCODE,Ar t .1 2 5 61 2 58 ) : 1 .Ex i s t e nc eo fav al i dde btwhi c hi sd ue ; 2 .Te nd e ro fPa y me ntb yt hed e b t o r ; 3 .Cr e d i t o r ’ sr e f us a lt oa c c e p tt hepa yme nti s
wi t ho utj us tc a us eo ra nyo ft hec a s e spr o v i de dI n
Ar t .1256par .2e xi s t s . a .Te nd e rmus tp r e c e d ec o ns i g na t i o n; b .I tmus tha v eb e e nunc o n di t i o na l ;a nd c . Re f us a lmus tb ewi t ho utj us tc a us e Att het i meo fd e po s i t ,ho we v e ri ti sn o tne c e s s a r yf o rt hed e bt o rt os h o w wa nto fc a us ef o rt her e f us a lo ft he c r e di t o r ; t hi sf a c tma ybee s t a bl i s he ddur i ngt hehe a r i ngo ft hec a s e . 4.Pr e v i o usno t i c eo fc o ns i g nat i o nt ope r s o ni nt e r e s t e di nt hef ul fil l me nto ft heo bl i g at i o n,i no r d ert ogi v et hec r e di t o r t h eo p p o r t uni t yt or e c o n s i d e rh i s unj us t i fie dr e f us a la nd t r oa c c e p tpa y me n tt oa v o i dc o n s i g na t i o na nd t he s ubs e que ntl i t i g at i o n. La c ko fp r e v i o usno t i c edo e sno ti n va l i d at et h ec o n s i g na t i o n,b uts i mp l yma ke st hed e bt o rl i a bl ef o rt hee xp e ns e s o c c a s i o ne dt he r e b y( TOLENTI NO,Ci vi lCode ,s upr aat324) . 5 .Co ns i g na t i o n–amo unto rt hi ngduep l a c e d att hed i s po s alo ft hec o ur t . Thi sr e q ui r e me nti sc o mp l i e dwi t hi ft hede b t o rd ep o s i t st het hi ngo ramo untwi t ht heCl e r ko fCo ur t .No r ma l l y ,t hi s r e q ui r e me nti sa c c o mpa ni e db yt hefil i ngo ft hec o mpl a i nti t s e l f( JURADO,Ob l i g a t i o nsa ndCo nt r a c t s , s up r aa t2 83 ) . 6 .Sub s e q ue ntno t i c eo fc o n s i g na t i o nt oe na bl e t hec r e d i t o rt owi t hd r a wt heg o o d so rmo ne yd e po s i t e d . I Two ul db eunj us tt oma ket h ec r e d i t o rs u ffe rt her i s ko fd e t e r i o r a t i o n,d e pr e c i a t i o no rl o s so fs u c hg o o dso rmo ne y b yr e a s o no fl a c ko fkno wl e dg eo ft hec o ns i g na t i o n
Not e:Si nc ec o ns i g na t i o ni sa s p e c i a lf o r mo fp a yme n t ,i tmus tc o nf o r m no to nl ywi t ht hes p e c i a lr e q ui r e me nt s pr e s c r i b edb yl a w,b uta l s owi t ha l lt her e q ui s i t eo fav al i dpa y me nt . I ns t anceswher econsi gnat i on s hal lproducet heeffect sofpaymentwi t houtpri ort enderofpayment ( CI VI LCODE,Ar t .1 2 56 ,p ar2 ) : 1 .Cr e d i t o ri sa b s e nto ru nkno wn,o rd o e sn o ta pp e ara tt hep l a c eo fp ay me nt . Not e: Ab s e nc en e e dno tb ej ud i c i a l l yde c l a r e d .Hemus tho we v e r ,ha v enol e g alr e p r e s e nt a t i v et oac c e p tt hepa y me nt . 2 .Cr e d i t o ri si nc a pa c i t a t e dt or e c e i v et h epa yme nta tt het i mei tI sdue . 2 .Whe nwi t ho utj us tc a us e , t hec r e d i t o rr e f us e st ogi v ear e c e i p t . Not e: I ta ppe ar si nt hi sc a s et ha tt her e f us a lt oi s s u ear e c e i p tp r e c e d edt het e nde ro fpa yme nt . 4 .Whe nt woo rmo r ep e r s o nsc l a i mt hes a mer i g htt oc o l l e c t( a si nt hec a s eo fi nt e r p l e de r ) . 5 .Whe nt het i t l e so ft heo bl i g at i o nha sb ee nl o s t .
Thel i s ti sno te x c l us i v e .Ther ul eal s oappl i e si ft hec r e di t o r ,pr i o rt ot het e nde ro fpa yme nt ,i nt i mat e dt hath ewi l l no ta c c e p tt hede b t o r ’ sp a yme nt .
Effect sofCons i gnat i on: 1 .I ft he c r e d i t o ra c c e p t st he t hi ng o ra mo u nt d e p o s i t e d wi t ho u tc o n t e s t i ng t he v a l i d i t yo re ffic a c yo ft he c o ns i g nat i o n,t heo bl i g at i o ni sno tc a nc e l l e d/ e xt i ng ui s he d. 2.I ft hec r e di t o rc o nt e s tt heva l i di t yo ft hec o ns i g nat i o no ri ft hec r e di t o ri sno ti nt e r e s t e do runkno wno ri sabs e nt , t he r e s u l ti sl i t i g at i o n.I fdur i ng t he t r i a l ,t he pl a i nt i ffde bt o ri sa bl et oe s t a bl i s ht hata l lt he r e q ui s i t e so f c o ns i g na t i o nha v ebe e nc o mpl i e dwi t h,t heo bl i g at i o ni se x t i ng ui s he d( JURADO,Ob l i g a t i o nandCo n t r a c t s ,s up r aa t 287) . Effect sofwi t hdrawaloft heObj ect / AmountDeposi t ed: 1 .Be f o r ec r e d i t o rhasac c e p t e dc o ns i g na t i o no rbe f o r eaj ud i c i a ld ec l ar a t i o no fc o ns i g na t i o n( CI VI L CODE,Ar t i c l e 1 60 ,par2 ) : Ob l i g at i o nsr e ma i ni nf o r c e . Wi t hdr a wa lb yt hed eb t o ratt hi ss t a gei sama t t e ro fr i g htb e c aus ehes t i l lo wnst het hi ng .
Sho ul dt hede b t o ro p tn o tt owi t hdr a wt het hi ngatt hi ss t a ge ,c a na no t he rc r e d i t o ra t t a c ht hes a mepr o p e r t ys i nc e t hede b t o rs t i l lo wnst het h i ng ?No .Pr o p e r t yd e po s i t e dwi t hc o ur ti se x e mp tf r o ma t t a c h me nta ndno ws u bj e c tt o us t o di al e g i s e x ec ut i o n;I ti ss ai dt obei nc a ndc a nno tb ewi t hd r a wnwi t ho ute x p r e s so r d e rf r o mt hec o ur t .
CI VI LCODE,Ar t .1261) : 2 .Wi t hc o ns e nto ft hec r e d i t o r( a .Cr e d i t o rl o s e se v e r yp r e f e r e n c ewhi c hhema yha v eo v e rt het hi ng ; b.So l i dar yc o de bt o r sar er e l e as e do nl yf r o mt he i rs o l i dar yl i ab i l i t ybutno tf r o mt he i rs har e so ft he i ro bl i g at i o n;and d.Theo bl i g at i o ni sr e v i v e d,butno twi t ho utpr e j udi c et oo t he ri nt e r e s t e dpar t i e s .
Wi t hdr a wa lb yt hede bt o ra tt hi ss t a gei sama t t e ro fpr i v i l e g e
Not e: Toha v et hee ffe c to fp ay me nt ,t hel a wr e q ui r e st het wi na c t so ft e nd e ro fp ay me nta ndc o ns i g na t i o n.Te nd e ro f p a yme ntwi t ho utc o ns i g na t i o no n l yf r e e st hede b t o rf r o mt heo bl i g a t i o nt opa yi nt e r e s to nt heo ut s t a nd i nga mo unt f r o mt het i met heunj us t i fie dr e f us a lt a ke sp l a c e( GoSi nc ov .CA,G. RNo .1 51 90 3 ,Oc t o b e r9 ,2 00 9 ) .
Thee x pe ns e so fc o n s i g na t i o n,whe np r o pe r l yma de ,s h al lb ec ha r g e da ga i ns tt hec r e d i t o r( CI VI LCODE,art .1259) .
Los soft heThi ngDue EffectofLossi ndet ermi nat eObl i gat i ont oGi ve CI VI LCODE, Ar t .1262) Ob l i g at i o ni se xt i ng ui s he d( Requi si t es: 1 .Thet hi ngwhi c hi sl o s tmus tb ede t e r mi na t e ;
2.Thet hi ngi sl o s twi t ho utan yf aul to ft hede bt o r ; and JURADO,Ob l i g a t i o nsa ndc o nt r a c t s ,s u pr aat2 8 8) . 3 .Thet h i ngi sl o s tb ef o r et hede bt o rha si nc u r r e di nde l a y( GeneralRul e:Lo s so fade t e r mi na t et hi ngt hr o ug hf o r t ui t o use v e nts hal le x t i ng ui s ht heo bl i g at i o n. Exempt i ons: 1 .Whe nt hel a ws op r o v i d e s ; 2 .Whe nt hes t i p ul a t i o ns op r o v i d e s ; 2 .Whe nt hena t u r e so ft heo b l i g at i o nr e q ui r e sa na s s ump t i o no fr i s k ; 4.Lo s so ft het h i ngi sp ar t l yduet ot hef aul to ft hede bt o r ; 5 .Lo s so ft het h i ngo c c ur sa f t e rt hede bt o ri nc ur r e di nde l a y ; 6 .Whe nt hed e bt o rp r o mi s e dt od e l i v e ra r i s e sf r o m ac r i mi na lo ffe ns e ; a nd 8 .Whe nt heo bl i g at i o ni sg e ne r i c( JURADO,Ob l i g a t i o nsa ndCo nt r a c t s , s up r aat2 89 2 90 ) . I ft hel o s si st hr o ug ht he f t ,t hede bt o ri sc o ns i de r e dne g l i g e nth av i ngpl a c e dt het h i ngwi t hi nt her e ac ho ft hi e v e sand no ti nas e c u r eands a f epl a c e .I nt he f t ,t aki ngi sac c o mpl i s he dwi t ho utt heus eo fv i o l e nc ef o r c e( TOLENTI NO,c i vi l Co de , s u pr aa t3 37 ) . LossofGeneri cThi ngs( CI VI LCODE,Ar t .1263) GeneralRul e:l o s so fg ene r i ct hi ngdo e sno te x t i ng ui s ho bl i g at i o n. Reas on: t heg e nusn e v e rp e r i s h e s( Ge nusnunquam pe r i t ) . Except i on:De l a mi na t e dGe ne r i cThi ng–Whe nt he r ei sal i mi t a t i o no ft hege ne r i co b j e c tt oap ar t i c u l a re x i s t i ng ma s so rap ar t i c u l a rgr o u po ft hi ng s ,t heo b l i g at i o ni se x t i ng ui s h e db yt hel o s so ft hepa r t i c u l a rma s so rgr o u po r l i mi t e dqua nt i t yf r o m whi c ht hepr e s t a t i o nha st ob et a k e n( TOLENTI NO,Ci vi lCode ,s upr aat340) . EffectofPart i alLoss( CI VI LCODE,Ar t .1264) GeneralRul e:Par t i a ll o s sdo e sno te x t i ng ui s ht heo bl i g at i o n. Except i on:Whe nt hepa r t i a ll o s so rd e s t r u c t i o no ft het hi ngi sp fs uc hi mp o r t a nc et ha two ul db et a nt a mo untt oa c o mpl e t el o s so rd e s t r uc t i o n J (URADO,Obl i g at i o nandCo nt r ac t s ,s upr aat291) .
Rul ei ft het hi ngi si nDebt or’ sPossess i on( CI VI LCODE,Ar t .1265) GeneralRul e:I ft het hi ngi sl o s twhi l ei nt hepo s s e s s i o no ft hede bt o r ,i ts hal lbepr e s ume dt hatt hel o s swasd uet o hi sf aul t ,unl e s st he r ei spr o o ft ot h ec o nt r a r yandwi t ho utpr e j udi c ett hepr o v i s i o nso fAr t .1165. Exept i on:Nos u c hpr e s ump t i o ni nc a s eo fe a r t hq ua ke ,flo o d ,s t o r mo ro t he rn at ur a lc a l a mi t y . Effect sofI mpossi bi l i t yofPerf ormancei nObl i gat i ont oDo Whe nt heo b l i g at i o nb ec o me sl e g al l yo rph ys i c a l l yi mpo s s i b l ewi t ho utt hef a ul to ft hede bt o r ,o bl i g o ri sr e l e as ef r o m t he o b l i g at i o n( CI VI L CODE,Ar t .12 66) .T ak e no t et ha tt he p r o v i s i o n me n t i o n st ha tt he p r e s t a t i o nb e c o me s i mp o s s i b l eandt hus , wo ul dc o n t e mp l a t es u bs e q ue nti mp o s s i b i l i t y . Thel e g ala ndph ys i c a li mpo s s i b i l i t ymus tha v eo c c ur e da f t e rt hec o ns t i t ut i o no ft heo bl i g at i o n. Note:Do e sno ta ppl yt oo bl i g at i o nst ogi v e .
NaturalI mpossi bi l i t yandI mpossi bi l i t yI nf actDi st i ngui shed Na t ur a lI mp o s s i b i l i t y I mp o s s i b i l i t yI nFa c t Ast ot het hi ng Must co nsi s ti nt he I n t he Abs e nc e o f na t u r eo ft het hi ngt i i nhe r e nti mpo s s i b i l i t y bedone and nott he i nt he na t ur eo ft he i nabi l i t yo ft hepar t y t hi ngs t i pul at e dt ob e t odos o
per f or med, whi c h i s onl y i mpr obabl e or out of t he power of t heo bl i g or
Ast ot hee ffe c t Re n de r st he c o n t r a c t Doe s notr endert he v o i d
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Na t ur a li mpo s s i b i l i t yi sr e c k o ne df r o mt het i meofc o ns t i t ut i o no ft heo b l i g at i o n.Thus ,t heo b l i g at i o nr e ma i nsv o i d e v e ni ft hepr e s t at i o ns ub s e que nt l ybe c o me sp os s i b l e . I nc a s eo fs ub s e que ntpar t i ali mpo s s i bi l i t y ,t her ul ei nAr t .12 64ma yb ea ppl i e d(TOLENTI NO,Ci vi lCode ,s upr aat 345) . Te mp o r a r yi mp o s s i b i l i t yd o e sno te x t i ng ui s ht heo b l i g at i o nb utme r e l yd e l a y si t sf ul fil l me nt .Thi spr e s upp o s e dt ha t t he d ur a t i o no fi mp o s s i b i l i t y ha sb e e nc o nt e mp l a t e db yt he p ar t i e s ;o t he r wi s e ,t he s a me ma ye x t i ng ui s ht he o b l i g at i o nunde rAr t .1 26 7 .I nt hel a t t e rc a s e ,t hef ac tt ha tt h epr e s t at i o nl a t e rb e c o me spo s s i b l edo e sno tr e v i v et he o bl i g at i o n( I d .At246) . p.2 62 Effe c t si fRe l a t i v eI mpo s s i bi l i t y CI VI LCODE,Ar t .1267) Doct ri neofUnf ores eenEvent s( Whe nt hes e r v i c eha sbe c o mes od i ffic ul ta st ob e ma ni f e s t l yb e y o n dt h ec o nt e mp l a t i o no ft hep a r t i e s ,t hec o ur ts h o u l db e a ut ho r i z et or e l e as et h eo bl i g o ri nwho l eo ri npa r t( Thi si sal s or e f e r r e dt oast he Doct ri neofFrust rat i onofEnt erpri se) . Thei nt e nt i o no ft hepa r t i e ss h o ul dg o v e r na ndi fi ta p pe a r st ha tt hes e r v i c et ur n so utt obes od i ffic u l ta st oha v ebe e nb e y o nd t he i rc o nt e mpl at i o n,i two ul dbedo i ngvi o l e nc et ot h ei n t e nt i o nt oho l dt heo bl i g ors t i l lr e s po ns i bl e . Doct ri neo R f e busSi cSt ant i bus Thea r t i e ss t i pul a t ei nt hel i g hto fc e r t a i npr e v a i l i ngc o ndi t i o nsando nc et h e s ec o ndi t i o nsc e as et oe xi s t ,t hec o nt r a c ta l s oc e as e s t oe xi s t N ( ag aTe l e pho neCo . ,e tal .v .CA,G. R.No .107112,Fe br uar y24,194) I twi l lb eno t e dt ha tAr t .1 26 7s p e akso fa“ s e r v i c e ” -ape r s o na lo b l i g at i o n.Thus ,r e a lo b l i g at i o nsar eno twi t hi ni t ss c o p e( PARAS, Ci v i lCo de ,s u pr aat4 39 J ) . us t i c eJur ado ho we v e ri so ft heo pi ni o nt ha tt hewo r d“ s e r v i c e ”s h oul db eund e r s t o o da sr e f e r r i ngt o t he“ p e r f o r ma nc e ”o ft heo bl i g at i o n J ( URADO Obl i g at i o nsandCo nt r ac t s ,s pr aat293) . I ti sno tar e q ui r e me ntund e rAr t .1 26 7t ha tt hec o nt r a c tb ef o rf ut ur es e r v i c ewi t hf ut ur eu nus u alc ha ng e( Nag at e l e pho neCp. , v . CA,G. R.No .us et he1 0 71 12 ,Fe b r u ar y ,2 4,1 99 4) .
Thei mpo s s i b i l i t yi sr e l a t i v ebe c a us et hedi ffic ul t yo fpe r f o r ma nc et r i g ge r sama ni f e s tdi s e q ui l i b r i um i nt hepr e s t a t i o n,s uc ht ha t o nep ar t ywo ul dbep l a c ea td i s a dv a nt a g eb yt heu nf o r e s e e ne v e nt . Pr i nc i pl eofSubj e c t i v el yI mpos s i bi l i t y Whe nt he r ei snoph ys i c a lo rl e g all o s sb utt heo bj e c to ft heo bl i g at i o nb e l o ng st oa no t he r ,t hepe r f o r ma nc eb yt hede b t o ro ft he o b l i g at i o nundo ub t e d l ybe c o me si mpo s s i b l e .Fa i l ur eo fp e r f o r ma nc ei si mp ut a bl et ot hede b t o r .Thus ,t hes uffe r e dbyt h el a t t e r ( TOLENTI NO,Ci vi lCode, s upr aat336) . . Effect sofLossonreci procalObl i gat i ons Fi r s tvi e w:I fa no bl i g at i o ni se x t i ng ui s he db yt hel o s so ft het h i ngo ri mpo s s i b i l t yofpe r f o r ma nc et hr o ug hf o r t ui t i o use v e nt s ,t he c o u nt e r p r e s t a t i o ni sa l s oe x t i ng ui s h e d.Thede b t o ri sr e l e a s e df r o mt hel i a bi l i t yb uth ec a nno td e ma ndt hepr e s t a t i o nwhi c h d.At3 37 3 3 8) . Ha sb e e ns t i p ul a t e df o rhi sb e n e fit .Hewhog i v e sn o t hi ngha snor e a s i nt od e ma nd(i Secondvi ew:Thel o s so ri mp o s s i b i l i t yo fp e r f o r ma nc emus tb ed uet ot hef a ul to ft hede b t o r .I nt hi sc a s e ,t hei nj ur e dpa r t yma y a s kf o rr e s c i s s i o nunde rAr t i c l e11 91pl usda ma ge s .I ft hel o s so ri mpo s s i bi l i t ywa sduet oaf o r t ui t i o use v e nt ,t heo t h e rpar t yi s s t i l lo bl i g edt og i v et h epr e s t a t i o nduet ot h eo t he r . ( J. B. l ,Re ye s ) Rul ei fObl i gati onAri sesf rom Cri mi nalOffense( Ci vi lCode,Art .1268)
General Rul e:
De b t o rs ha l lno tb ee x e mp t e df r o mt hep a y me nto ft hep r i c ewha t e v e rma yb et h ec a us ef o rt hel o s s . Ex c e p t i o n:Whe nt het hi ngha v i ngb e e no ffe r e db yt hede b t o rt ot h epe r s o nwhos ho u l dr e c e i v ei t ,t hel a t t e rr e f us e dwi t ho ut j us t i fic at i o n. Theo ffe rr e f e r r e di nAr t ,1 26 8s ho ul dno tb ec o nf us e dwi t hc o n s i g na t i o nt hel a t t e rr e f e r so n l yt ot hepa y me nto ft heo b l i g a t i o n, t hef o r me rr e f e r st ot h ee x t i ng ui s h me nto ft heo bl i g at i o nt hr o u ghl o s sb yf o r t ui t o use v e nt( J ur a d o ,Ob l i g a t i o nsa ndCo nt r a c t s , s u pr aa t2 96 2 97 ) Co n do n at i o no rRe mi s s i o no ft h eDe b t Anac to fl i be r al i t yb yv i r t ueo rwhi c ht heo bl i g e ,wi t ho utr e c e i vi nganypr i c eo re qui v al e nt ,r e no unc e s ,t hee nf o r c e me nto rt he o bl i g at i o na sar e s u l to fwhi c hi si te x t i ng ui s he di ni t se nt i r e l yori nt ha ta pr to ra s pe c t so ft hes amet owhi c ht her e mi s s i o nr e f e r s ( I da t2 99 ) I si tt heg r a t u i t i o usa b and o nme ntb yt h ec r e d i t o ro fhi sr i g htaf o r mo fdo na t i o n.( Sa nc h e zRo ma n( Requi si t esofRemi ss i on: 1. I tmus tbegrat ui t i ous 2. I tmustbeaccept edbyt heobl i gat or( bi l at eralact) ; 3. Theobl i gat i onmustbedemandabl e; 4. Part i esmusthavet hecapaci t y; 5. Noti noffici ous;and 6. Mus tcompl ywi t ht hef ormsofdonat i ons houl di tbeexpres s( Ci vi lCode,Art .748and749) Not e:Whet herexpres sori mpl i ed,t heextentofremi ss i on orcondonat i on shal lbegovernedbyt herul esregardi ng i noffici ousdonat i on. Whenrenunci at i onofact i onagai ns tt hedebtori spres umed I ft hecredi t orvol unt ari l ydel i verst hepri vat edocumentevi denci ngt hecredi tt ot hedebt or, t herei sapresumpt i on t hatherenounceshi sri ghtofact i on agai nstt hel att erf ort hecol l ecti onoft hesai d Cr e d i t( Ar t .1 27 1 )whe ns u c hp r i v a t edo c ume n ti sf o und i np o s s e s s i o no ft hed e bt o r ,i ts h a l lb ep r e s u me dt ha tt hec r e d i t o r de l i v e r e di tv o l unt a r i l y ,unl e s st hec o nt r ar yi spr o v e d. ( Ar t .1272 ) Whe nt heo bl i g a t i o ni sj o i nt ,a ndt hepr i v a t edo c u me nte v i de nc i ngad e bti sf o undi nt hepo s s e s s i o no fo neo ft hede b t o r s ,t he pr e s ump t i o no fr e mi s s i o nc a nr e f e ro nl yt ot hepo r t i o no ft hede bt o rwhoi si nt hepo s s e s s i o no ft hei ns t r ume nt ,i ft heo bl i g at i o ni s s o l i dar y , Ar t i c l e s1 21 5,1 21 9a nd12 20s ha l la ppl y . Rul eswhenAcces soryObl i gat i onsareI nvol ved. I ft her e mi s s i o nr e f e r st ot hepr i nc i pa l o bl i g at i o na l lt heac c e s s o r yo bl i g at i o nsa r ee x t i ng ui s he d.Ho we v e r ,i fr e mi s s i o nr e f e r s o nl yt ot heac c e s s o r yo bl i g at i o n, t h epr i nc i pa lo b l i g at i o nc o nt i nue st os ubs i s t . ( Ar t .1273 )
I ti spr e s me dt ha tt heac c e s s o r yo bl i g at i o no fpl e dg eha sbe e nr e mi t t e dwhe nt het hi r dpl e dg e da f t e ri t sd el i v e r yt ot hec r e d i t o r ,i s f o undi nt hepo s s e s s i o no ft hede b t o r ,o ro fat hi r dpe r s o nwhoo wnst het h i ng .( Ar t .1 27 4) .Thepr o v i s i o np r e s up po s e st ha tt he a c c e s s o r yc o nt r a c to rpl e dg eha sbe e np e r f e c t e d. Appl i cat i onoft heRul esofDonat i on Co ndo na t i o no rr e mi s s i o ni sa s s e nt i a l l yado na t i o no fc r e d i tt ot hede bt o r .I tmus tb es ub j e c tt ot her ul eo ndo na t i o nswi t hr e s p e c t t oac c e p t a bl e( Ar t .7 45a nd7 46 )a mo untCi v i lCo d e ,Ar t /7 5 0a nd7 52 )a n dr e v o c a t i o nAr t .7 60 ,7 61 ,7 6 4,a nd7 6 5)( To l e nt i no , Ci v i lCo d es up r aa t3 6 4) Conf usi on I ti sme r g e ro ft hec h ar a c t e r so ft hec r e d i t o ra ndt hede b t o ri no n ea ndt hes a mepe r s o nb yv i r t ueo rwhi c ht heo bl i g a t i o ni s e x t i n g u i s h e d . I l l us t r at i on A : t o ymake sac he c kpa y abl et obe ar e r ,andhandsi tt ot heJo e y ,whohandsi tt oKa y ewhofinal l yhandsi tt oAt o y . He r eAt o yo we shi ms e l fa ndt hus , hi so b l i g a t i o ni se x t i ng ui s h e d. I fho we v e r ,t her e a s o nf o rt hec o n f us i o nc e a s e s ,t heo b l i g a t i o ni sr e v i v e d.Thus ,s h o ul dKa y ed e l i v e rt h eno t et oAt o yi nt he pe r f o r ma nc eo favo i do bl i g at i o n;At o y ’ so b l i g at i o ni sr e c r e at e d.Butt het i mei nt e r v e nt i ngbe t we e nt heme r g e ra ndi t sr e v o c a t i o n i sno tt obec o mput e di nt hede t e r mi na t i o no ft hepe r i o do fp r e s c r i p t i o n. Re q ui s i t e so fMe r g e r : 1 . Me r g e ro ft h ec ha r a c t e r so ft h ec r e d i t o ra n dd e b t o rmus tb ei nt h es a mep e r s o n . 2 . Mus tt a kepl a c ei nt hepe r s o no fe i t he rt hepr i nc i p l ac r e d i t o ro rt hepr i nc i p ald e bt o r ; a nd 3 . Whe t he rt heme r g e rr e f e r st ot h ee n t i r eo b l i g a t i o no ro n l yp a r tt h e r e o f ,t h e r emus tb ec o mp l e t ea nd d e fin i t eme e t i ngo fa l l q ua l i t i e so fc r e d i t o ra ndde bt o ri nt heo bl i g at i o no ri nt hepar tt he r e o fa ffe c t e db yt heme r g e r .( J ur a do ,Ob l i g at i o nsa ndCo nt r a c t s , s u p r aa t3 9 7 ) Effe c t so fCo nf us i o n/ Me r g e r ( Ar t .1 27 6 1 27 7) 1 . I f c o nf us i o nt a ke spl a c ei nt hepe r s o no fe i t he rt hepr i nc i pa lc r e d i t o ro rp r i nc i pa lde bt o r -e x t i ng ui s hme nto fe nt i r eo b l i g at i o n;o r 2 . I fc o n f us i o nt a ke spl a c ei nt hepe r s o no fas u bs i d i a r yc r e d i t o ro rs u bs i d i a r yd eb t o r( e . gg ua r a nt o r ) -noe x t i ng ui s h me nto fpr i nc i pa l o bl i g at i o n;o nl ys ubs t i t ut i o no fc r e di t o ro rde bt o r ; o r 3 . I fc o n f us i o nt a ke sp l a c ei no neo ft hej o i ntd eb t o r s -p r i nc i p alo b l i g at i o ni se x t i ng ui s h e dupt ot h es ha r ewhi c hc o r r e s p o nd st ohi m; o r 4 . I fc o n f us i o nt a ke sp l a c eI no neo ft hes o l i d ar yd e bt o r s e nt i r eo b l i g a t i o ni se x t i ng ui s he d .Ho we v e rt hede b t o ri nwho mc o n f us i o n t o o kp l a c ema yc l a i m r e i mb ur s e me n tf r o m c o d e b t o r sf o rt h es h a r e swhi c hc o r r e s p o n d st ot h e m.( J ur a d o ,Ob l i g a t i o n sa nd Co nt r a c t s , s u pr aa r3 0 83 09 ) Compensat i on Mo deo fe x t i ng ui s hi ngi nt hec o nc u r r e n ta mo unto ft heo bl i g a t i o no ft he s epe r s o nswhoar er e c i pr o c a l l yde b t o r sa ndc r e d i t o r so f e a c ho t he r( J ur a d o ,Ci v i lCo d e ,s u pr aat3 09c i t i ngCa s t a n) Effe c t :I te x t i ng ui s he sb o t hde b t st ot hee x t e ntt ha tt hea mo untc o v e r e dbyt hea mo unto ft heo t he r .
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p. 2 64
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o pe r a t i o no fl a w. Ki ndsofCompens at i on 1 . Ast oc aus e a . Le g a l -t a ke se ff e c tb yo pe r a t i o no fl a wf r o mt hemo me n ta l lo ft her e q u i s i t e sa r ep r e s e n t . b . Vo l unt a r y -whe npa r t i e swhoa r emut ua l l yc r e d i t o r sd e bt o ra gr e et oc o mp ens a t et he i rr e s p ec t i v eo b l i g a t i o nse v e nt ho ug ha l lo ft he r e q ui s i t e sf o rc o mp e ns a t i o nma yno tb epr e s e n t . c . J ud i c i a l -t a ke se ffe c tb yj ud i c i a ld e c r e e . d. Facul t at i ve 2. Ast oe ffe c t a. Tot al —debt st obec ompens at edar ee quali namount b . Pa r t i a l -d e b t st ob ec o mp e ns a t e da r eno te q u ali namo u nt Requi si t esofcompensat i on-( Art .1279) 1. t he r emus tb et wopa r t i e s ,whoI nt he i ro wnr i g hta r ep r i nc i pa lc r e di t o r sa ndp r i nc i p ald e bt o r so fe a c ho t he re x c e p ti nc a s eo fa g ua r a nt o r( Ar t . 1 28 0) . 2. Bo t hd e bt smus tc o n s i s t si ns u mo fmo ne y ,o ri ft het hi ng sd uea r ef ung i b l e( c o n s u ma bl e s ) ,t he ymus tb eo ft hes a mek i nda nd qual i t y . GeneralRul e:Co mp ens a t i o ni sno tp o s s i b l ei no b l i g a t i o nt odob e c a us eo ft hed i ffe r e n c ei nt her e s p ec t i v ec a pa c i t i e so ft he o bl i g o r s .( J ur a do ,Ob l i g at i o nsa ndCo nt r a c t s ,s upr aat3 17 )
3. Bo t hdeb t smus tbedue; Ex c e p t i o n:Vo l unt a r yc o mp e ns a t i o no rt hep ar t i e sma yne v e r t he l e s sa g r e eup o nt hec o mp e ns a t i o no ft heo b l i g at i o ns . ( Ar t .1 28 2) 4. Bot hdebt smustbel i qui dat eanddemandabl e Li q ui d a t e dDe b t s -t ho s ea mo u nto fwh i c h ma yb ed e t e r mi na t e db yas i mp l ea r i t h me t i c a lo p e r a t i o n( J ur a d o ,Ob l i g a t i o n sa nd Co nt r a c t s , s u pr aat3 1 7) . 5 . Th e r emus tb enor e t e n t i o no rc o n t r o v e r s yc o mme n c e db yt h i r dpe r s o nso v e re i t he ro o ft h ed e b t sa n dc o mmun i c a t e di nd uet i met o t hede b t o r ; No t e :Re t e nt i o nc o ns i s t si nt hea ppl i c a t i o no ft hec r e d i t o ro fo neoft hepa r t i e st ot hes at i s f a c t i o no ft hec l a i mso ft hi r dpe r s o ns whi l ec o nt r o v e r s yr e f e r st oac a s ei nwhi c hat hi r dpe r s o nc l a i mst obet h ec r e d i t o r( J ur a d o ,Ob l i g at i o nsa ndCo nt r a c t ,s u pr aat 318) Ri g hto fGua r a n t o rt oSe tupCo mp e ns a t i o n Th eg u ar a nt o ri nc a s et hep a y me n to ft h ed e b ti sd e ma nd e df r o m hi m ma ys e tu pc o mp e ns a t i o n ,no to n l yf o rwha tt hec r e d i t o r o we shi m,b uta l s of o rwha tt hec r e d i t o ro we st hepr i nc i pa lde bt o r .( Ar t .1 28 0) Rul ei nc a s eo fRe s c i s s i b l eo rVo i da bl eDe bt s Re s c i s s i b l eo rv o i d ab l eo b l i g a t i o nsma yb ec o mp e ns a t e da ga i ns te a c ho t he rbe f o r et h e ya r ej ud i c i a l l yr e s c i nd e do ra v o i d e d.( Ar t . 1284) Effect sofAss i gnmentofRi ght s: 1. I ft hec o ns e n to fd eb t o r -d eb t o rc a nno ts e tupc o mp e ns a t i o nunl e s sh er e s e r v e dhi sr i g htt oc o mpe ns a t i o n. 2. I fwi t hk no wl e d g eb utwi t ho utc o n s e nto fd e bt o r -d e bt o rma ys e t upc o mp e ns a t i o np r i o rt ot hea s s i g nme ntb utno ts u bs e q u e nt o ne s ;o r 3. I fwi t ho u tk no wl e d g eo ft hed e bt o rma ys e tupc o mp e ns a t i o no fa l lc r e d i t swhi c hhema yha v ea g ai ns tt hea s s i g no ra n dwhi c hma y ha v eb e c o med e ma nd ab l e , b e f o r ehewa sno t i fie do ft hea s s i g nme nt .( Ar t .1 28 5 ) Debt swhi chCannotbecompens at ed( Art .12861287) 1 . De b t sa r i s i n gf r o mc o n t r a c t so fd e p o s i t u m 2 . De b t sa r i s i n gf r o mc o n t r a c t so fc o mmo dat um; 3 . Cl a i msf o rs u pp o r td ueb yg r a t ui t o ust i t l e
p. 2 65 Not e: Ta keno t et ha tt hel a wd i dno tl i mi ti t s e l ft ol e g als u pp or ta ndt huswo ul di nc l ud eo t he rr i g ht swhi c hha v ef o rt he i rp ur p o s e t hes ub s i t e nc eo ft hede bt o r ,s uc hasp e ns i o ns . 4 . Ob l i g a t i o n sar i s i ngf r o mc r i mi na lo ffe ns e s .( Ar t .1 28 8)a nd 5 . Ce r t a i no b l i g at i o nsi nf a v o ro fg o v e r nme nt( e . gt a x e s ,f e e s , dut i e s . Ando t he r so fas i mi l a rna t u r e ) Note:b utwhe nt hed eb t sa r ep ur e l yc o nt r a c t ua la nda r eno to fp ub l i ci nt e r e s t ,c o mp e ns a t i o nc a nt a kepl a c e . Whencompen, s at i ont akeseffect : 1 . Le g a lc o mp e ns a t i o n -f r o mt hemo me nta l lt hee s s e nt i a lr e q u i s i t e sp r e s c r i b e db yl a wa r epr e s e n t .( Ar t .1 29 0) 2. Vol unt aryCompensat i on-f r om t hemomentagre eduponbyt hepar t i es ;or 3. Judi c i alCompensat i on=f r om t hemomentt hej udgmentbec omesfinalandex ec uto ry Facul t at i veCompensat i on Co mp e ns a t i o nwhi c hc a nb es e tupo nl yatt heo p t i o no ft hec r e d i t o rwhe nl e g a lc o mp e ns a t i o nc a n no tt a kep l a c eb e c a us eo fwa nto f s o mel e g alr e q ui s i t e sf o rt hebe ne fito ft hec r e d i t o r .Thel a t t e rc a nr e n o unc ehi sr i g htt oo pp o s et h ec o mpe ns a t i o na ndhehi ms e l f c a ns e ti tu p.I td i ffe r sf r o mc o n v e nt i o na lc o mp e ns a t i o nb e c a us ei ti suni l a t e r a lwhi l et hel a t t e rd e pe nd sup ont heag r e e me nto f b ot hpar t i e s .( To l e nt i no ,Ci v i l Co de ,s upr aat367 ) No v a t i o n : I ti st hes ub s t i t ut i o no rc ha ng eo fa no bl i g at i o nb ya no t he r ,r e s u l t i ngi ni t se x t i ng ui s he me nto rmo di fic a t i o n,e i t he rb yc ha ng i ng i t so bj e c to rpr i nc i pa lc o ndi t i o ns ,o rb yt hes ub s t i t ut i o ngano t he ri npl a c eoft hede bt o r ,o rb ys ub r o ga t i ngat hi r dpe r s o ni nt he r i g ht so ft hec r e d i t o r .( J ur a do ,Ob l i g at i o nsa ndCo nt r a c t s ,s upr aat3 2 5) Requi si t esofNovat i on: 1. Pr e v i o usv al i da nde x i s t i ngo bl i g at i o n; Ane wc o nt r ac t ,r e c o g ni z i ngandas s umi ngapr e s c r i be dde bt ,wo ul dbev al i dande nf o r c e abl e .Thepr e s c r i pt i o n,be i nga v ai l abl et o t hede b t o r ,c a nb ewa i v e db yhi m.Theno v a t i o no fapr e s c r i o b e dd e bti st husv a l i d .
2 . Ca pa c i t yo ft hec o n t r a c t i ngpa r t i e s( t ot hene wc o nt r a c t ) 3. Ani musno v andi o ri nt e ntt ono v at e( e s pe c i al l yf o ri mpl i e dno v at i o nands ub s t i t u t i o no fde bt o r s .) 4 . Sub s t a nt i a ld i ffe r e nc ebe t we e nt he o l do b l i g a t i o na nd t he ne wo b l i g a t i o n( e s p e c i a l l yf o ri mp l i e d no v a t i o n) ;c o n s e q u e nt l y e x t i ng ui s hme nto ft heo bl i g at i o n;a nd 5 . Va l i di t yo ft hen e wo b l i g a t i o n( J ur a d o ,Ob l i g at i o nsa ndCo nt r a c t s ,s u pr aa t3 26 ) Twof o l dPur p o s eo f No v a t i o n 1 . Or i g i na lo b l i g a t i o ni se x t i ng ui s h e da nd 2 . An e wo b l i g a t i o ni sc r e a t e d Ki ndsofNovat i on 1. Ast oi t ses se nce a. Obj ec t i ve / Real b . Sub j e c t i v e / Pe r s o n al -s u bs t i t ut i o no fd e bt o ro rb ys ub r o g at i o n c . Mi x e d -c ha ng ei nt heo b j e c to rpr i n c i p a lc o n d i t i o na nd c h ang ei nt h ep e r s o n so fe i t he rc r e d i t o rand d e b t o ro fa ne x i s t i ng o bl i g at i o n. 2 . Ast oi t sf o r m/ c o n s t i t ut i o n a . Ex pr e s s -whe ni ti sd e c l a r e di nune q ui v o c a lt e r mst ha tt heo l do b l i g a t i o ni se x t i ng ui s h e db yane wo newhi c hs u bs t i t ut e st he s ame. b . I mp l i e d -wh e nt heo l da ndne wa r ei nc o mp a t i b l ewi t he a c ho t he ro ne v e r yp o i nt . Te s tofI nc ompat i bi l i t y Whe t he ro rn o tt heo l da ndne wo b l i g a t i o nsc a ns t a ndt o g e t he r ,e a c hha v i ngi t so wni nd e pe nd e dnte x i s t e nc e .I ft he yc a ns t a nd t o g e t he r ,t he r ei snoi nc o mpa t i bi l i t yhe nc e ,nono v at i o n.Oft he yc a nno ts t a ndt o g e t he r ,t he r ei si nc o mpa t i b i l i t y ,c o ns e q ue nt l y , t he r ei sno v a t i o n( J ur a d o ,Ob l i g at i o nsandCo nt r a c t s ,s u pr aat3 3 3)c h ang e st h atb r e e di nc o mp at i b i l i t ymus tb ee s s e n t i a li n na t u r ea ndno tme r e l yi nc i d e nt a l( I d .At3 28 ) No t e :Thei nc o mp at i b i l i t ymus ta ffe c ta n yo ft hee s s e n t i a le l e me nt so ft heo b l i g at i o ns ,s u c ha si t so bj e c t ,c a us eo rp r i nc i p al c o n di t i o nst he r e o fo t he r wi s et hec ha ng ei sme r e l ymo d i fic a t o r yi nna t u randi ns u ffic i e ntt oe x t i ng ui s ht heo r i g i na lo b l i g at i o n. ( He i r so fSe r v a n doFr a n c ov . Sp s .Go nz a l e s , GRNo .1 59 7 09 ,J une2 7 ,2 01 2) 3. Ast oext ent / effec t a. To t al b. Par t i al Note:no v a t i o ni sne v e rp r e s u me d.Unl e s si ti sc l e a r l ys h o wne i t he rb ye x pr e s sa gr e e me nto ft hepa r t i e so rb ya c t so fe q ui v a l e nt i mp o r tt hi sd e f e ns ewi l lne v e rb ea l l o we d .( Ongv . Bo ng na l b alGRNo . 1 49 14 0,Se p t e mb e r1 220 06 )
p.2 66 Obj ect i veNovat i on-( Ar t .1 29 1, pa r . 1 )Ac c o r di ngt oCa s t a n,o bj e c t i v eno v at i o ni se ffe c t e db y: 1 . Cha ng i ngt hec a us eo ft h eo b l i g a t i o n ; 2 . Cha ng i ngt heo b j e c to ft heo b l i g a t i o n,o r 3 . Cha ng i ngt hepr i nc i p alo re s s e nt i a lc o n di t i o nso rt heo b l i g at i o ns . Re qui s i t e s : 1 . ne wo b l i g a t i o ne x pr e s s l yde c l a r e st ha tt heo l di se x t i ng ui s h edo r 2. new obl i gat i oni sonev er ypoi nti ncompat i bl ewi t ht heol done( Al exMar ket i ngandDev el opmentCor p.v .CA GR No.118585, Sept ember141995) Not e:A c h ang eI nt her a t eo fi nt e r e s ti sme r e l yac o l l a t e r a la g r e e me nt ,b e t we e nt hec r e d i t o ra ndp r i nc i p alde b t o rt ha td i dno t a ffe c tt hes ur e l y ,t hea gr e e me ntt opa yt h ead di t i o na li nt e r e s twa sana dd i t i o na lb ur d e nupo nt hede b t o ro n l y .Otd i dno ti na ny wa ya ffe c tt heo r g i na lc o nt r a c t .Thus ,d e s pi t et h ec o mp o undi ngo ft hei nt e r e s tt hel i a bi l i t yo ft hes ur e t yr e ma i nso nl yupt ot h e o r i g i na lunc o mp o und e di nt e r e s t . ( Ga r c i aJ Rv . Ca .GRNo .L8 02 0 1,No v e mb e r2 0 ,1 99 0) Thegr a n to fa4 5d a yc r e d i te x t e ns i o nd o e sno tn o v a t et hec o nt r a c ta si tme r e l ymo d i fie st hec o nt r a c tb ye x t e nd i ngt het i mef o r p a y me nt .( Fo und at i o nSp e c i a l i s t ,I nc . v . Ba t o n v alRe a dyCo nc r e t eI n c . GRNo .1 70 6 74 ,Aug us t2 4,2 0 09 ) Theo b l i g a t i o nt opa yas u mo fmo ne yi sn o tn o v a t e db yani ns t r u me ntt ha te x p r e s s l yr e c o g ni z e st heo l dc ha ng e so n l yt h et e r mso f t hepa y me nt ,a dd so t he ro b l i g a t i o n sno ti nc o mp at i b l ewi t ht heo l do n e so rt hene wc o n t r a c tme r e l ys up pl e me nt st heo l dc o n t r a c t ( Sp s . Re y e sv .BPIFa mi l ySa v i ng sBa nk s ,GRNo . 1 4 9 84 1 4 1Ma r c h31 ,2 0 06 )
I fas ub s e que ntc o nt r a c ti sde s i g ne dt ono v at eapr e c i o usc o nt r a c ta ndno ta l lp ar t i e st ot h eor i g i na lc o nt r a c tc o ns e nt e dt oo ra r e ma dep ar t i e si nt hes u bs e q ue ntc o n t r a c t , t he r ec a nb enono v a t i o n. Novati onbySubst i t ut i onofDebt ors ( Ci v i lCo de ,Ar t .1 29 3) As ubs j e c t i v e / pe r s o nalno v at i o nc o ns i s t si nt hes ubs t i t ui t i o no fane w de bt o ri npl ac eo ft heo r i gi nalde bt o r . FormsofNovati onbySubst i t ut i onofDebtor s: ffe c t e dwi t ht hec o ns e n to ft hec r e d i t o ra tt hei ns t a nc eo ft hene wd e bt o re v e nwi t ho utt hec o ns e n to re v e n 1. Expr omi s i on-e a ga i ns tt hewi l lo ft heo l dd e bt o r( b e ne fic i a lr e i mb ur s e me nt )
Requi si t es a . I n i t i a t i v ef o rs ub s t i t ut i o nmus te ma na t ef r o mt hene wd e b t o r b . Co ns e n to ft hec r e d i t o rt ot hes u bs t i t ut i o na nd ; c . Ol dde b t o rmus tb er e l e a s e df r o mo b l i g a t i o n( J ur a d o ,Ob l i g a t i o nandCo n t r a c t ss up r aa t3 39 ) I l l us t r at i on A : t o yo we sEug e ne1K,Jo e yaf r i e ndo fAt o yappr o ac he sEug e neandt e l l shi m“ Iwi l lpa yy o uwhatAt o yo we sy o u. Fr o m no wo nc o n s i d e rmey o urd e b t o r .At o yi st ob ee x c u s e d ” . Ta keno t et ha ti nt hi se x a mp l e ,t he r ei sa na gr e e me ntt ha tAt o ywi l l b er e l e a s e df r o mt heo b l i g a t i o n.Sa nss u c ha gr e e me nt ,t he r ei snono v a t i o na nd t hec r e d i t o r( Eug e ne )c a ns t i l le n f o r c et h e o bl i g at i o nag ai ns tt heo r i g i nalde bt o r( At o y ) Expr omi s i on Ki ndsofSubst i t ut i onby a. Sub s t i t ut i o nwi t ht hekno wl e d g ea ndc o ns e n to ft heo l dd e bt o ra nd b. Sub s t i t ut i o nwi t ho utt hekno wl e d geo rag ai ns tt hewi l lo ft heo l dd e bt o r 2. Del egaci on-e ffe c t e dwi t ht hec o ns e nto ft hec r e d i t o ra tt hei ns t a nc eo ft heo l dd e bt o r( d e l a ga nt e )wi t ht hec o nc u r r e nc eo ft he ne wd e bt o r( d e l e g a do )( r e i mb ur s e me n ta nds u b r o g a t i o n) Requi si t es: a . I ni t i a t i v ef o rs ub s t i t ut i o nmus te ma na t ef r o mt heo l dde b t o r b. Cons entof t henewdeb t or c . Ac c ept anc ebyt hecr edi t orand d . Ol dde b t o rmus tb er e l e a s e df r o m hi so b l i g a t i o n( J ur a d o ,Ob l i g a t i o nsa ndCo nt r a c t s , s u pr aa t3 3 9 ) I l l us t r a t i o n:At o yo we sEug e ne1 K,At o yt e x t e dEug e net ha th i sf r i e ndJ o e ywi l lpa yt h ede b t ,a ndhewi s h edt ob er e l e a s e df r o m t h eo b l i g a t i o n .No t hJ o e ya nd Eug e n ea g r e e dt os u c ht e r ms .Ta k eno t eag a i nt h att hes u bs t i t ut i o n mus tb ema d e wi t ht he i nt e nt i o nt or e l e as et heo r i g i nalde bt o r . Par t i e si n Del egaci on: a. De l e g ant e -o r i g i nalde bt o r( At o y ) ; b. De l e g at o r i o -t hec r e d i t o r( Eug e ne )a nd c . De l e g ado -t hene wd eb t o r( J o e y ) No t e :i ne i t he ro ft het womo de so fs ub s t i t ut i o n,t hec o ns e nto ft hec r e d i t o ri sa ni ndi s pe ns i b l er e q ui r e me nt .( Qui nt ov .Pe o pl e ,GR No .1 26 71 2,Ap r i l1 4,1 99 9)
P. 2 67 Ri ght sofNew Debt or: 1 E . xpr omi s i on a .Su bs t i t u t i o nwi t hk no wl e d g ea ndc o ns e n to fo r i g i na ld e b t o ra n dp a y me n tma d eb yne wd e b t o rwi t ho rwi t ho u tk no wl e d g ea nd c o ns e nto fo r i g i nalde bt o r : i .Re i mb ur s e me ntf r o mt heo r i g i na ld e bt o ro ft hee nt i r ea mo untp ai d i i .Subr o g at i o ni na l l t her i g ht so ft h ec r e di t o r b .Sub s t i t ut i o nwi t ho utt hekno wl e d g ea ndc o n s e n to ft heo r i g i na ld e b t o r ,a ndp a yme nti sma deb yt hec o n s e nto ft heo r i g i na l d e b t o r : i .Re i mb ur s e me ntf r o mt heo r i g i na ld e bt o ro n l yi ns o f a ra st hepa y me ntha sbe e nb e ne fic i a ls u c hd e bt o r
i i .Nos ubr o g at i o n De egaci on–Si 2 . l nc es ub s t i t ut i o nwa se ffe c t e dwi t ht hec o n s e n to fa l lt hep ar t i e s ,t hene wd e bt o rc a nd e ma ndr e i mb ur s e me n t f r o mt heo r i g i na ld e b t o ro ft hee nt i r ea mo untwhi c hheha spa i da swe l la sc o mp e lt hec r e d i t o rt os ub r o g a t ehi mt oal lo fhi s r i g ht s . Not e:Theme r ef a c tt ha tt hec r e d i t o rr e c e i v e sag ua r a n t yo ra c c e p t sp a y me n tf r o m at hi r dp e r s o nwh oa g r e e st oas s umet he o b l i g at i o n,whe nt he r ei snoa gr e e me ntt ha tt h efir s td e bt o rs ha l lb er e l e a s e df r o mr e s p ons i b i l i t y ,d oe sno tc o ns t i t ut eno v a t i o n, a ndt hec r e di t o rc an s t i l le nf o r c et he o bl i g at i o na ga i ns tt heo r i g i na ld eb t o r .I ft heol de rde bt o ri sno tr e l e as e d,t he r ei sno no v a t i o n;t het h i r dpe r s o nb e c o me sme r e l yac o de b t o r ,s ur e t yo rc o s u r e t y (Me r c ant i l eI ns ur anc eCo . ,I nc .v .CA,GR.No .85647 , Apr i l22,1991 ) . EffectofI ns ol vencyorNonf ul fil l mentbyNew Debt or ( CI VI LCODE,Ar t .12941295 ) 1 E . xpr omi s i on –I ft hes ub s t i t ut i o nwa se ffe c t e dwi t ho utt hekno wl e dg eanda ga i ns tt hewi l lo ft heo r i g i na ld e b t o r .Thene w de bt o r ’ si ns o l v e nc yo rno nf ul fil l me nts ha l lno tr e v i v et heo r i g i nald e bt o r ’ sl i a bi l i t yt ot hec r e di t o r( JURADO,Obl i g at i o nsand Co nt r a c t s , s u pr aat3 45 ) . I ft hes ubs t i t u t i o nwase ffe c t e dwi t ht hekno wl e dg eandc o ns e nto ft heo r i g i n alde bt o r , i ts hal lr e v i v et heo r i g i n alde bt o r ’ sl i abi l i t y t ot hec r e di t o r I (d.At345 ) . 2 De . l e gaci on –Ther i g hto ft hec r e d i t o rc a nnol o ng e rber e v i v e de x c e p ti nt heff.c a s e s : a .I ns o l v e nc ya l r e a d ye x i s t i ngando fp ub l i ck no wl e d geatt het i mewhe nt heo r i g i na ld e bt o rd e l e g at e dhi sd e bt b .I ns o l v e nc ywa sa l r e a dye x i s t i ngandkno wnt ot heo r i g i na ld e bt o r ,whe nhed e l e g at e dhi sd e bt( I d.At345 ) .
I tIs u bmi t t e dt ha ta c t ua lk no wl e dg eo ft hec r e d i t o rt ha tne w de b t o rwa si ns o l v e nta tt het i meo fd e l e g at i o n,wi l lb arhi mf r o m r e c o v e r i ngf r o mt heo l dd e b t o r .Hemus tb e a rt hec o n s e q ue nc eo fhi sa c t sk no wi ng l ydo ne .
A hang ei nt hei nc i de nt ale l e me nt so f ,o ranaddi t i o no fs uc he l e me nt st oano bl i g at i o n,unl e s so t he r wi s ee xpr e s s e db yt he Note : c par t i e s ,wi l lno tr e s ul ti ni t se x t i ng ui s hme nt .
Effect sofNovati onuponAcces sor yObl i gati ons Whe nt hepr i nc i p alo b l i g a t i o ni se x t i ng ui s h e di nc o n s e que nc eo fano v a t i o n,a c c e s s o r yo bl i g at i o nma ys ub s i s to n l yi ns o f a rast he y ma yb e ne fitt hi r dp e r s o n swhod i dno tg i v ec o n s e nt(CI VI LCODE,Ar t .1299 ) .
2 .I ft hene wo bl i g at i o na ndt heo l do bl i g at i o na r es ub j e c tt odi ffe r e ntc o ndi t i o ns : a .I ft hec o ndi t i o nsc a ns t a ndt o g e t he r– i .I fb o t ha r ef ul fil l e d–t h ene wo b l i g at i o nb e c o me sd e ma nda bl e i i .Ofo nl yt hec o ndi t i o naffe c t i ngt heo l do bl i g at i o nI sf ul fil l e d–o l do bl i g at i o ni sr e v i v e dwhi l et hene wo bl i g at i o nl o s e si t sf o r c e . i i i .I fo nl yt hec o ndi t i o na ffe c t i ngt hene wo bl i g at i o ni sf ul fil l e d–t he r ei snono v at i o ns i nc et h er e q ui s i t eo fapr e v i o usv al i da nd e ffe c t i v eo bl i g at i o nwo ul db el a c ki ng .
b .I ft hec o n di t i o nsar ei nc o mpa t i b l e–t hee ffe c ti st oe x t i ng ui s ht heol do b l i g a t i o ns ot h ato nl yt hene wo b l i g a t i o nr e ma i nsand who s ed ema nd ab i l i t y / e ffe c t i v i t yde p e ndup o nt hef ul fil l me nt no nf ul fil l me nto ft hec o nd i t i o na ffe c t i ngi t( JURASDO,Obl i g at i o ns a ndCo nt r a c t s , s u pr aa t3 4 8 3 49 ) .
Novat i onbySubrogat i on ( CI VI LCODE,Ar t .1300) Ape r s o nalno v at i o ne ffe c t e dbys ubr o g at i ngat hi r dpe r s o ni nt her i ght so ft hec r e di t o r .
FormsofNovat i onbySubrogat i on: 1 .Co nv e nt i o nal–t ak espl a c eb ya gr e e me nto ft heo r i g i na lc r e di t o r ,t het hi r dpe r s o ns ub s t i t ut i ngt heo r i g i na lc r e d i t o r ,t het hi r d pe r s o ns ub s t i t ut i ngt heo r i g i na lc r e d i t o r ,a ndt hede bt o r(CI VI LCODE,Ar t .1301 ) . 2 .Le g al–t a ke spl a c eb yo pe r a t i ngl a w Convent i onalSubrogat i onv.Ass i gnmentofri ght s Co n v e n t i o n al
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f r o m t he mo me nt o f i fc o n c e r n e d, a r i s e s no v at i o n/ s ub r o ga t i o n
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LegalSubrogat i on ( CI VI LCODE,Ar t .1302 ) GeneralRul e:Le g a ls u br o g a t i o ni sn o tp r e s u me d Excepti ons: 1 .Whe nac r e d i t o rp a y sano t he rc r e d i t o rwhoi sp r e f e r r e d,wi t ho utd e bt o r ’ sk no wl e dg e , I l l us t r at i on: At o yh ast woc r e d i t o r s ,Mhi kwhoi samo r t g a g ec r e d i t o rf o rP1 5K a ndJe r o mewhoi sa no r d i na r yc r e d i t o rf o rP6 K. J e r o mep ai dAt o y ’ d e b to fP1 5 Kt oMh i kJ e r o mewi l lb es u br o g a t e dt ot h er i g ht so fMhi k .Thi sme a n st h atJ e r o mewi l lno wb ea mo r t g a g ec r e d i t o rf o rP1 5K a ndao r d i na r yc r e d i t o rf o rP6 K. 2 .Whe nat hi r dpe r s o n,no ti nt e r e s t e di nt heo bl i g at i o n,pa y swi t ht hee x pr e s srt a c i ta ppr o v a lo ft hede bt o r ; o r I l l us t r at i on: At o yo we sJ o e y1 0 Ks e c ur e db ymo r t g a g e ,Eug e ne ,ac l a s s ma t eo fAt o y ,a ndha v i ngnoc o nne c t i o nwi t ht hec o nt r a c t p ai dJ o e ywi t hAt o y ’ sa p pr o v a l .Sub r o g a t i o nt a ke sp l a c ea ndEug e neb e c o me samo r t g a g ec r e d i t o r . I fEug e nepa y swi t ho utt hekno wl e d g eo ra g a i ns tt hewi l lo fAt o y ,hei so n l ye nt i t l e dt ode ma ndr e i mb ur s e me n ta st ot hee x t e nt t ha tAt o yha sb e e nb e ne fi t e db yt hep a yme nt .The r ei sn os u br o g a t i o ni nt hi sc a s e .
3 .Whe n,e v e nwi t ho utk no wl e d geo ft hede b t o r ,ape r s o ni nt e r e s t e di nt hef ul fil l me nto ft heo bl i g at i o np ay s ,wi t ho utp r e j ud i c et o t hee ffe c t so fc o nf us i o na st ot hel at t e r ’ ss har e .
I l l us t r at i on: J o e yo we sCa t hP1 0 Ks e c u r e db yamo r t g a g ea ndb yag ua r a n t yo fAt o y .I fAt o ye v e nwi t h o utJ o e y ’ sk no wl e d g ep a y s Ca t h ,At o ywi l lb es ub r o g at e di nCa t h s ’ sp l a c e .Byr e a s o no fc o n f us i o n,o rb yr e a s o no ft hef a c tt ha tAt o yb e c a meagua r a nt o ra nd ac r e d i t o ra tt hes a met i me ,t heg ua r a nt yi se x t i ng ui s h e d. St r i c t l ys pe aki ng ,t he r ei snol e g als ub r o ga t i o nwhe nas o l i dar yde bt o rp ay st hee nt i r eo b l i g at i o n.So l i da r i t yt e r mi na t e supo nt he p ay me nto ft hewho l eo b l i g at i o n.Thus ,t hepa y i ngde b t o rd o e sno tc o mpl e t e l ys t e pi nt ot hes ho e so ft hec r e d i t o r ,a shec a nno t d e ma nd f r o ma nyo fhi sc o d e bt o r st h ec o mp l i a nc eo ft hee nt i r eo b l i g a t i o nb uto n l yt hep r o p o r t i o n whi c hp e r t a i n st oe a c h J (URADO,Obl i g at i o nsandCo nt r ac t s ,s upr aat352) . Effect sofSubrogat i on ( CI VI LCODE,Ar t .13031304 ) 1 .To t a ls u br o g a t i o n–t r a ns f e r st ot hep er s o ns u br o g a t e dt hec r e d i twi t ha l lt her i g ht st h eo r i g i na lc r e d i t o rha da g ai ns tt hi r d p e r s o nsandt her ul ei sab s o l ut ewi t hr e s pe c tt ol e g als u br o g a t i o n.I nc o n v e nt i o na ls u br o g a t i o n,a c c e s s o r yo bl i g a t i o nsma y be i nc r e a s e do rr e d uc e dup o na gr e e me n to ft hepa r t i e s . 2 .Pa r t i a lSub r o g a t i o n-A c r e d i t o r ,t owho mp ar t i a lp a y me nth a sbe e nma de ,ma ye x e r c i s ehi sr i g htf o rt her e ma i nd e r ,a ndhe s h al lb epr e f e r r e dt ot hep e r s o nwhoha sb e e ns ub r o g at e di nhi sp l a c e . I l l us t r at i on A :t o yo we sEug e neP4K.Wi t ht hec o ns e nto fbo t h,Jo e ypa y sEug e neP2K.No w Eug e neandJo e yar et hec r e di t o r so f At o yt ot heamo unto fP2K.Byr e as o no ft hepr e f e r e nt i alr i g htt ot her e mai nde r ,Eug e nei st obepr e f e r r e di nc as eAt o yhaso nl y P2 K.Thepr e f e r e nc e ,ho we v e r ,e n j o y e db yEug e nei so nl yi nt heas s e t sr e ma i ni ngwi t ht hede b t o r( At o y )a ndno tt ho s ea l r e a dy t r a ns f e r r e dt oo t h er s .
COMPROMI SE A c o mpr o mi s ei sac o nt r ac twhe r e b yt hepar t i e s ,b ymaki ngr e c i pr o c alc o nc e s s i o ns ,a v o i dl i t i g at i o no rputane ndt oo neal r e ady c o mme nc e d( CI VI LCODE,Ar t .2028 ) . Requi si t es; 1 .Unc e r t a i nt yo fj ur i di c a lr e l at i o n;and 2 .Ana gr e e me ntt oe l i mi na t et heunc e r t a i nt yt h r o ug hr e c i p r o c a lc o n c e s s i o ns . Ki nds : 1 .J udi c i al–e ndap endi ngl i t i g at i o n;a nd 2 .Ex t r a j udi c i al–t opr e v e ntal i t i g at i o nf r o m ar i s i ng . Cha r ac t e r i s t i c s : 1 .Co n s e ns u al ; 2 .Re c i pr o c a l ; 3 .On e r o u s ; 4.Nomi nat e; 5 .Ac c e s s o r y( i nt hes e ns et ha tapr i o rc o nfli c ti sp r e s uppo s e d) ; 6 .Onc eac c e p t e d ,b i ndi ngupo nt he[ a r t i e se x c e pti fc o ns e nti sv i t i a t e d;a nd 7 .Pr i nc i pal l y ,s e t t l e me nto fc o nt r o v er s y ;I nc i de nt al l y ,s e t t l e me nto fc l ai m. Quest i onsonwhi cht herecanbenoval i dcompromi s e: 1 .Thec i v i ls t a t uso fpe r s o ns ; 2 .Thev al i di t yofama r r i a geo fal e g als e pa r at i o n; 3 .An yg r o undf o rl e g als e p ar a t i o n; 4 .Fut ur es up po r t ;
5 .Thej ur i s di c t i o no fc o ur t s ;and 6 .Fut ur el e g i t i me( CI VI LCODE,Ar t .2035 ) . Effec t sofCompromi s e Ac o mpr o mi s ehasupo nt hepar t i e st hee ffe c t sandaut ho r i t yo fr e sj udi c at a;butt he r es hal lbenoe x e c ut i o ne x c e pti nc o mpl i anc e wi t haj udi c i a lc o mpr o mi s e( CI VI LCODE,Ar t .2037 ) . I fo neo ft hepa r t i e sf a i l so rr e f us e st oab i d eb yt hec o mp r o mi s e ,t heo t he rp ar t yma ye i t he re nf o r c et h ec o mp r o mi s eo rr e g a r di ta s r e s c i nd e da ndi ns i s tup o nhi so r i g i na ld ema nd(CI VI LCODE,Ar t .2041 ) . A c o mpr o mi s ee x t i ng ui s he st her i ght sandac t i o nswhi c hg a v er i s et oi tandne wo bl i gat i o nar ec r e at e di ns ubs t i t ut i o no ft ho s e e x t i ng ui s h e d( TOLENTI NO,Ci vi lCode, s upr aat492) . I fawr i to fe x e c ut i o ni si s s ue dt oe nf o r c eaj ud gme n tb as e do nc o mp r o mi s e ,t hewr i tc a nno tb ee nf o r c e da g ai ns tap e r s o nwho a l t ho ug hap ar tt ot hec a s e , Wa sn o tap ar t yt ot h ec o mp r o mi s ea g r e e me n t ,a ndwh oi nf a c twa sa b s o l v e df r o m l i abi l i t y P (ARAS,Ci vi lCo de ,s upr aat994 ) .
