Modes of Extinguishment of Obligations V
Payment or performance
V
Loss of the thing due
V
Condonation or remission of debt
V
Confusion or merger of rights
V
Compensation
V
Novation
V
Annulment
V
Rescission
V
Fulfillment of resolutory condition
Payment / Performance V
delivery of money and performance, in any other manner of the obligation
O V
dith respect to the prestation V V V
Identity Integrity or completeness Indivisibility
Requisites for Valid Payment V
dith respect to parties - must be made by proper party to proper party O V Payor - the one performing, he can be the debtor himself or his heirs or assigns or his agent, or anyone interested in the fulfillment of the obligation; can be anyone as long as it is with the creditor's consent V 3rd person pays/performs - only the creditor's consent; If performance is done also with debtor's consent - he takes the place of the debtor. There is subrogation except if the 3rd person intended it to be a donation V 3rd person pays/performs with consent of creditor but not with debtor's consent, the repayment is only to the extent that the payment has been beneficial to debtor
Requisites for Valid Payment V Payee - creditor or obligee or successor in interest of transferee, or agent V 3rd person - if any of the ff. concur:
V
V
It must have redounded to the obligee's
V
benefit and only to the extent of such benefit
V
It falls under art 1241, par 1,2,3 - the benefit is total so, performance is total
Anyone in possession of the credit - but will apply only if debt has not been previously garnished
Payment V
Incapacitated person kept the thing delivered, or
V
Insofar as the payment has been beneficial to him
Payment !O O " #O$ % O #& %' % ( O)" % V
After payment, 3rd person acquires the creditor·s rights
V
Creditor ratifies payment to 3rd person
V
By creditor·s conduct, debtor has been led to make the payment (estoppel)
Payment * % # O) )))) %+O )#O) ' O( O,") ) V
Payment by debtor must be made in good faith
V
Creditor must be in possession of the credit and not merely the evidence of indebtedness
dhere Payment Made V
In the place designated in the obligation
V
If there is no express stipulation and the undertaking is to deliver a specific thing ² at the place where the thing might be at the moment the obligation was constituted
V
In other case ² in the place of the domicile of the debtor V V
Time of payment - time stipulated Effect of payment Ñ extinguish obligation retain debt
order to
Gubstantial Performance V
-./!0. {
V
-./!1. d V
V V V
Attempt in Good Faith to perform without willful or intentional departure Deviation is slight Omission/Defect is technical or unimportant Must not be so material that intention of parties is not attained
Gubstantial Performance )2 * % 3 V
Obligor may recover as though there has been strict and complete fulfillment, less damages suffered by the oblige
V
Right to rescind cannot be used for slight breach
Application of Payment V
the designation of the debt which payment shall be made, out of 2 or more debts owing the same creditor
V
stipulation or application of party given benefit of period ² OK
V
to be valid: must be debtor·s choice or with the consent of debtor
Application of Payments O V
Various debts of the same kind
V
Game debtor
V
Game creditor
V
All debts must be due
4 there may be application of payment even if all debts are not yet due if: V
Parties so stipulate
V
dhen application of payment is made by the party for whose benefit the term has been constituted Payment is not enough to extinguish all debts
V
ëow Applictation is Made V
Debtor makes the designation
V
If not, creditor makes it by so stating in the receipt that he issues ² unless there is cause for invalidating the contract
V
If neither the debtor nor creditor has made the application or if the application is not valid, then application, is made by operation of law
dho makes application of debts? V
GR: Debtor
V
Exceptions: Creditor V
V
V
Debtor without protest accepts receipt in which creditor specified expressly and unmistakably the obligation to which such payment was to be applied ² debtor in this case renounced the right of choice dhen monthly statements were made by the bank specifying the application and the debtor signed said statements approving the status of her account as thus sent to her monthly by the bank In case no application is made: V V
Apply payment to the most onerous If debts are of the same nature and burden, application shall be made to all proportionately
½ V
mode of extinguishing an obligation whereby the debtor alienates in favor of the creditor property for the satisfaction of monetary debt
V
extinguish up to amount of property unless there is a contrary stipulation
V
a special form of payment because 1 element of payment is missing: IDENTITY
Conditions for a Valid ½ V
If creditor consents, for a sale presupposes the consent of both parties
V
If dacion will not prejudice the other creditors
V
If debtor is not judicially declared insolvent
Note: ½ is governed by the Law on Gales.
Cession / Assignment V
+)) ))* % O%+O O) 5 the process by which debtor transfer all the properties not subject to execution in favor of creditors is that the latter may sell them and thus, apply the proceeds to their credits
V
extinguish up to amount of net proceeds (unless with a contrary stipulation)
Assignment - 6 V
6 ² governed by the insolvency law
V
² agreement of creditors
O 6 V
More than one debt
V
More than one creditor
V
Complete or partial insolvency of debtor
V
Abandonment of all debtor·s property not exempt from execution
V
Acceptance or consent on the part of the creditors
Effects of Assignment V
Creditors do not become the owner; they are merely assignees with authority to sell
V
Debtor is released up to the amount of the net proceeds of the sale, unless there is a stipulation to the contrary
V
Creditors will collect credits in the order of preference agreed upon, or in default of agreement, in the order ordinarily established by law
Dacion vs. Cession
+
One creditor
Plurality of creditors
Not necessarily in state of financial difficulty
Debtor must be partially or relatively insolvent
Thing delivered is considered as equivalent of performance
Universality of property of debtor is what is ceded
Payment extinguishes obligation to the extent of the value of the thing delivered as agreed upon, proved or implied from the conduct of the creditor
Merely releases debtor for net proceeds of things ceded of, assigned, unless there is a contrary intention
Consignation V
O -the act of offering the creditor what is due him together with a demand that the creditor accept the same (dhen creditor refuses w/o just cause to accept payment, he becomes in and debtor is released from responsibility if he consigns the thing or sum due)
V
+ )* 5 the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment; generally requires prior tender of payment
Requisites for Valid Consignation V
Existence of valid debt
V
Consignation was made because of some legal cause previous valid tender was unjustly refused or circumstances making previous tender exempt
V
Prior Notice of Consignation had been given to the person interested in performance of obligation (1st notice)
V
Actual deposit / Consignation with proper judicial authorities
V
Gubsequent notice of Consignation (2nd notice)
Effects of Consignation V
Debtor may ask judge to order cancellation of obligation
V
Running of interest is suspended
V
Before creditor accepts or before judge declares consignation has been properly made, obligation remains (debtor bears risk of loss at the meantime, after acceptance by creditor or after judge declares that consignation has been properly made ² risk of loss is shifted to creditor)
Consignation without Prior Tender Allowed when: V
Creditor absent or unknown/ does not appear at the place of payment
V
Incapacitated to receive payment at the time it is due
V
Refuses to issue receipt w/o just cause
V
2 or more creditor claiming the same right to collect
V
Title of obligation has been lost
Loss of the Thing Due V
partial or total/ includes impossibility of performance
d3 3 V
dhen the object perishes (physically)
V
dhen it goes out of commerce
V
dhen it disappears in such a way that: its existence is unknown or it cannot be recovered
Impossibility of Performance V
3 2
V
6 2 V Directly ² caused as when prohibited by law V Indirectly ² caused as when debtor is required to enter a military draft
Loss 2 6 7 )+%+36 V
* OO": Extinguished
V
&+ ) V V
Debtor is at fault Debtor is made liable for fortuitous event because of a provision of law, contractual stipulation or the nature of the obligation requires assumption of risk on part of debtor
Loss 2 6 7 * O+36 V
* OO": Not extinguished
V
&+ )a V V V
If the generic thing is delimited If the generic thing has already been segregated Monetary obligation
Loss 2 6 V
* OO": Debtor is released when prestation becomes legally or physically impossible without fault on part of debtor
Effects of Partial Loss V
dhen loss is 6 ² may be enough to extinguish obligation
V
dhen loss 6 ² not enough to extinguish obligation
judicial determination of extent is necessary
d# # *)) #)))) % # ' O V
Presumption: Loss due to debtor·s fault (disputable)
V
Exception natural calamity, earthquake, flood, storm
O V
agreement is valid only if the same conditions prevailing at time of contracting continue to exist at the time of performance
V
obligor may be released in whole or in part based on this ground
Requisites: O V
The event or change could not have been foreseen at the time of the execution of the contract
V
The performance is extremely difficult, but not impossible (because if it is impossible, it is extinguished by impossibility)
V
The event was not due to the act of any of the parties
V
The contract is for a future prestation
Condonation / Remission V
Gratuitous abandonment of debt
V
If donation, rules on donation apply
V
May be express or implied
Requisites: Condonation V
There must be an agreement
V
There must be a subject matter (object of the remission, otherwise there would be nothing to condone)
V
Cause of consideration must be liberality (Essentially gratuitous, an act of liberality )
V
Parties must be capacitated and must consent; requires acceptance by obligor; implied in mortis causa and expressed inter vivos
V
Formalities of a donation are required in the case of an express remission
Requisites: Condonation V
Revocable ² subject to rule on inofficious donation ( excessive, legitime is impaired ) and ingratitude and condition not followed
V
Obligation remitted must have been demandable at the time of remission
V
daivers or remission are not to be presumed generally
Condonation / Remission %O )
&
- )
Express ² must follow formalities of donation
Total
Principal ² accessory is also condoned
Implied ² conduct is sufficient
Partial
Accessory ² principal is still outstanding
Implied Condonation V
7 5 presumption; when evidence of indebtedness is with the debtor ² presumed voluntarily delivery by creditor (rebuttable)
V
7 7 2 2 (conclusion) V V V
If in hands of joint debtor ² only his share is condoned If in hands of solidary debtor - whole debt is condoned J ² voluntary destruction of instrument by creditor; made to prescribe w/o demanding
Confusion / Merger V
character of debtor and creditor is merged in same person with respect to same obligation
O V
It must take place between principal debtor and principal creditor only
V
Merger must be clear and definite
V
The obligation involved must be same and identical ² one obligation only
V
Revocable, if reason for confusion ceases, the obligation is revived
Compensation V
Get off
V
It is a mode of extinguishment to the concurrent amount the obligation of persons who are in their own right reciprocally debtors or creditors
Requisites: Compensation V
Both parties must be mutually creditors and debtors - in their own right and as principals
V
Both debts must consist in sum of money or if consumable , of the same kind or quality
V
Both debts are due
V
Both debts are liquidated and demandable (determined)
V
Neither debt must be retained in a controversy commenced by 3rd person and communicated w/ debtor (neither debt is garnished)
Kinds of Compensation V
6 5 by operation of law; as long as 5 requisites concur- even if unknown to parties and if payable in diff places; indemnity for expense of exchanges; even if not equal debts ² only up to concurring amount
V
+7 5 agreement of parties is enough, forget other requirement as long as both consented
V
% 7 Ñ one party has choice of claiming/opposing one who has benefit of period may choose to compensate: V V
Not all requisites are present Depositum; commodatum; criminal offense; claim for future support; taxes
Kinds of Compensation V
V V
Î l 5 set off; upon order of the court; needs pleading and proof; all requirements must concur except liquidation 5 when 2 debts are of the same amount 5 when 2 debts are not of the same amount
Effect of Assignment of rd Credit to a 3 Person V
If made after compensation took place ² no effect; compensation already perfected
V
If made before compensation took place ² it depends: V
V
V
dith consent of debtor ² debtor is estopped unless he reserves his right and gave notice to assignee dith knowledge but w/o consent of debtor ² compensation may be set up as to debts maturing prior to assignment dithout knowledge ² compensation may be set-up on all debts prior to his knowledge
Novation V
extinguishment of obligation by creating/ substituting a new one in its place
V
Changing object or principal conditions
V
Gubstituting person of debtor
V
Gubrogating 3rd person in right of creditor
Requisites: Novation V
Valid obligation
V
Intent to extinguish old obligation ² expressed or implied: completely/substantially incompatible old and new obligation on every point
V
Capacity and consent of parties to the new obligation
V
Valid new obligation
Effects of Novation V
Extinguishment of the principal carries the accessory, except: V V V V
Gtipulation to contrary Gtipulation unless beneficiary consents Modificatory novation only; obliged to which is less onerous Old obligation is void
V
Old obligation subsists if 82 6 is 7 7 2 but annulled already (except: intention of parties)
V
If old obligation has condition V
V
If O and it occurred ² old obligation already extinguished; no new obligation since nothing to novate If ) 7 and it never occurred ²as if no obligation; also nothing to novate
Effects of Novation V
If old obligation has condition, must be compatible with the new obligation; if new is w/o condition ² deemed attached to new
V
If new obligation has condition V V
If : valid If 7 and did not materialize: old obligation is enforced
Kinds of Novation O'Î+ 5 change object, cause/consideration or principal condition
O) )"'Î+ V
)26 2 (passive) V
EXPROMIGIONÀ initiative is from 3rd person or new debtor; new debtor and creditor to consent; old debtor released from obligation; subject to full reimbursement and subrogation if made w/ consent of old debtor; if w/o consent or against will , only beneficial reimbursement; if new debtor is insolvent, not responsible since w/o his consent
Kinds of Novation O) )"'Î+ V
)26 2 (passive) V
DELEGACION: initiative of old debtor; all parties to consent; full reimbursement; if insolvent new debtor ² not responsible old debtor because obligation extinguished by valid novation unless: insolvency already existing and of public knowledge or know to him at time of delegacion V Delegante ² old debtor V Delegatario - creditor V
Delegado ² new debtor
Kinds of Novation O) )"'Î+ V
)2 6 6! 63 (active) V
V
Conventional - agreement and consent of all parties; clearly established Legal takes place by operation of law; no need for consent; not presumed except as provided for in law: V O)" d# V
V
V
Creditor pays another preferred creditor even w/o debtor·s knowledge 3rd person not interested in obligation pays w/ approval of debtor Person interested in fulfillment of obligation pays debt even w/o knowledge of debtor
Novation 2!
+3 6 2
Debtor is not necessarily released from debt
Debtor is released
Can be done without the consent of the creditor
Needs consent of the creditor ² express or implied
One obligation
Two obligations ² one is extinguished and the new one created
3rd person has no obligation to pay if insolvent
New debtor is obliged to pay
