Monica P.

Medina

FMFR3

Section 5 Compensation

1. What are the distinctions between confusion and compensation as modes for extinguishing an obligation?
The differences are: (1) In confusion, there is only one person who is a creditor and debtor of himself, while in compensation, there are two persons involved, each of whom is a debtor and a creditor of the other; (2) In confusion, there is but one obligation, while in compensation, there are two obligations; and (3) In confusion, there is impossibility of payment, while in compensation, there is indirect payment. There may be compensation in joint and solidary obligations.

2. In what way is compensation similar to payment?

(ART. 1289) Compensation is similar to payment. If a debtor has various debts which are susceptible of compensation, he must inform the creditor of which item shall be the object of compensation. In case he fails to do so, then the compensation shall be applied to the most onerous obligation. (Arts. 1252, 1254.)

3. May there be compensation although the things due are not consumable? Explain.
None because according to paragraph 2 of article 1279 in order that compensation may be proper it is necessary 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.

4. When may compensation take place when only one of the debts is due? According to paragraph 3 of article 1279 in order that compensation may be proper it is necessary that the two debts be due or demandable.

Section 6 Novation

1. Give the requisites of novation.

(ART. 1292) In novation, there are four essential requisites, namely: (1) A previous valid obligation; (2) Capacity and intention of the parties to modify or extinguish the obligation; (3) The modification or extinguishment of the obligation; and (4) The creation of a new valid obligation.

2. When there is subrogation, what rights are acquired by the new creditor?
(ART. 1303) Subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in a conventional subrogation. Simply stated, except only for the change in the person of the creditor, the obligation subsists in all respects as before the novation. The effect of legal subrogation may not be modified by agreement.

3. In novation, give the effect where: a. The new obligation is voidable;

Article 1297 stresses one of the essential requirements of a novation, to wit: the new obligation must be valid. The general rule is that there is no novation if the new obligation is void and, therefore, the original one shall subsist for the reason that the second obligation being inexistent, it cannot

extinguish or modify the first. If the new obligation is only voidable, novation can take place. But the moment it is annulled, the novation must be considered as not having taken place, and the original one can be enforced, unless the intention of the parties is otherwise.

b. The old obligation is voidable. Explain.

(ART. 1298) The novation is void if the original obligation was void, except when annulment may be claimed only by the debtor, or when ratification validates acts which are voidable. A void obligation cannot be novated because there is nothing to novate. However, if the original obligation is only voidable or if the voidable obligation is validated by ratification the novation is valid.

4. In novation are accessory obligations necessarily extinguished? Explain. (ART. 1296) When the principal obligation is extinguished in consequence of a novation, accessory obligations may subsist