Download Law of Oblicon Subject and more Summaries Law of Obligations in PDF only on Docsity!
Pre-Assessment: This is a short quiz to stimulate the curiosity of the student in the study of the topic of this particular module. The answers are provided in the succeeding page but the student is required to finish this activity first before going to the answers. It is the duty of the student to be honest to herself/himself, you can use other sources aside of this module in answering. Determine whether each statement is true or false and give a short explanation why is it true/false. Write your answer in no more than two (2) sentences in the lines provided below each statement.
- Payment means not only the delivery of money but also the performance, in any other manner, of the obligation.
- An obligation to give 100 pesos can be extinguish by the loss of a thing. Course Code and Title: AE 3 - THE LAW ON OBLIGATIONS AND CONTRACTS Lesson Number: 8 Topic 8 : Extinguishment of an obligation. Learning Objectives: At the end of this lesson, the student should be able to: Determine the different modes of extinguishing an obligation. Discover how the ways of extinguishing obligations apply to our day-to-day transactions.
- Donation of the creditor of the money loaned by the debtor in favor of the latter is a form of extinguishment of an obligation.
- A RayBan wayfarer which sinks in the bottom of Laguna bay is considered lost even if the owner know that it is only there.
- An obligation is extinguished by confusion when the creditor forgot about its fulfillment because he/she got confused.
Lesson Presentation: The obligor is duty bound to comply with his obligation to do or not to do in good faith, without delay, and in line with the tenor of the obligation. Of course, the fulfillment of the obligation is the main goal of the obligor, hence, the extinguishment of the obligation. Art. 1231. Obligations are extinguished: (1) By payment or performance: (2) By the loss of the thing due: (3) By the condonation or remission of the debt; (4) By the confusion or merger of the rights of creditor and debtor; (5) By compensation; (6) By novation. Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code.^1 SECTION 1. - Payment or Performance (Articles 1232-1261) Payment means not only the delivery of money but also the performance, in any other manner, of an obligation. 2 This refers to every normal and voluntary fulfillment of an obligation. The rule is that there is no payment and the obligation is not deemed fulfilled unless the thing or service has been completely delivered or rendered.^3 However, there are exceptions to this rule. Under article 1234, if the obligation has been substantially complied with in good faith, the debtor may recover as though there had been a strict and complete fulfillment less damages suffered by the creditor. Suppose Brad bound himself to 100 push- ups in consideration of 50 pesos. Despite his best efforts however, he only made 98. This can be considered as substantial compliance. Of the required 100, 98 were made and this is (^1) Civil Code (^2) Article 1232, Civil Code (^3) Article 1233, Civil Code
deemed as substantial compliance. On the other hand, if the creditor accepts the performance of the debtor knowing its incompleteness or irregularity and without causing any protest or objection, the obligation is deemed complied with. 4 Subsection 1. Application of Payment (articles 1252- 1 254) If the debtor owes the creditor several debts and they are all due and demandable and they are not the same kind, and the debtor pays the creditor but is insufficient, the law provides the application of payment to determine which of the debts is to be paid. Suppose Brad owes tow debts, both of which amounts to 2,000 pesos each for different transactions. He made a payment of 2,000 pesos which does not cover the amount for both obligations. Brad has the right to determine whether it is for the first or second 2, pesos debt. Unless there is a basis for objecting on the ground that the payment was not made in accordance with the rules of payment, the creditor cannot object. If Brad did not indicate to which of the two debts shall be paid, meaning he did not exercise his option, the right passes to the creditor. The creditor then can propose to which on the debts the payment shall be applied by issuing a receipt. But this is not absolute as such option on the part of the creditor is merely a proposal as such is still subject to the concurrence of Brad, the debtor. Under article 1254, the rule is that if the application cannot be inferred from other circumstances, we apply the payment to the more burdensome debt. Subsection 2. Payment by cession The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws. 5 There is payment by cession when the debtor has several creditors and is in the state (^4) Article 1235, Civil Code (^5) Article 1255, Civil Code
however, there was a law enacted prohibiting the sale of mung beans sprout. Here the obligation to sell is not legally possible because of a legal hindrance. SECTION 3. - Condonation or Remission of the Debt Condonation or remission is the gratuitous extinguishment of a debt. Because it is gratuitous in character, it is in reality, a form of donation. The creditor in effect donates the value of the debt of the debtor. That being the case, acceptance on the part of the debtor is required. 7 Suppose Britney owes Belle 1,000 pesos and Belle subsequently condone the credit, Britney’s obligation to pay becomes extinguished. SECTION 4. - Confusion or Merger of Rights Just remember, the moment the qualities of a debtor and a creditor are merged in one and the same person, the obligation is extinguished. 8 Let us say that A issued a promissory note to his creditor B to pay the amount of 1,000 pesos. B subsequently issued a check in favour of C because he owes him the same amount. C on the other hand has a debt to A, which coincidentally the same amount of 1,000 pesos. C therefore assigned the check to A for the payment of his debt, so A has in his hand a check that he issued for the payment of debt. He is now there a creditor and debtor of himself by virtue of the check, hence, the obligation to pay 1,000 pesos is extinguished. SECTION 5. – Compensation Legal compensation is that which exist when all the legal requisites for compensation under the law are present. Once all the requisites of law are present, it takes place automatically even if the parties are not aware of it. That is the reason why there could be legal compensation even if one of the parties happens to be incapacitated. It does not require the consent of the parties. In order that compensation may be proper, it is necessary: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the (^7) Article 1270, Civil Code (^8) Article 1275, Civil Code
other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; and (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.^9 Let us say that A owes B 100 pesos, B on the other hand owes C for the same amount of 100 pesos. If C subsequently assigned his credit to A, A and B will then become mutually creditor and debtor of each other of 100 pesos. Hence, the obligation is extinguished. SECTION 6. – Novation Novation differs from the other modes of extinguishing obligations in one important aspect. In novation, an obligation is extinguished but a new one is created. Obligations may be modified by: (1) Changing their object or principal conditions; (2) Substituting the person of the debtor; and (3) Subrogating a third person in the rights of the creditor. Let us say that Belle bound herself to deliver to Britney one kilogram of mung beans (munggo), Britney however asked Belle that instead of munggo, she wants mung beans sprout (toge). The obligation to deliver munggo is now extinguished and is novated by the obligation to deliver toge instead. Instructor/Professor’s discussion: (^9) Article 1279, Civil Code
Comments and jurisprudence on Obligations and Contracts (2002) by Justice Desiderio Jurado The Law on Obligations and Contracts (1999) by Hector S. De Leon Introduction to Law (2003) by Rolando A. Suarez Lectures on Obligations and Contracts by Dean Domingo Navarro Philippine Jurisprudence END
