Art 1174 FORTUITOUS EVENT.

What is the the GR? What are the requisites so that we have a
fortuitous event?
1. The event is independent of the hum,an will
2. It unforeseen and inevitable or, though foreseen, is inevitable or
unavoidable
3. Occurrence renders it impossible for the obligor to fulfill his
obligation in a normal manner. (Impossibility must be absolute
and not partial, otherwise no force majeure)
4. There is no aggravation or no participation by the debtor to the
injury or damage to the creditor.

Note: *****
GR:
No one is liable for a fortuitous event.

Exceptions:
1. When the law and stipulation of the parties expressly so
provide
2. Nature of the obligation requires the assumption of risk
Example is an insurance company who assumes the risk.
They take the risk of insuring you for life. If theres any
accident that happen, they will pay. Insurance are also
against fire or flood r whatever peril. Pag nagflood or
typhoon, they will pay.
3. In commodatum, deposit, negotiorum gestio, the law law
expressly provides that even if theres a FE, the bailee, the
depositary, the officious manager could be liable, even if
theres a fortuitous event.

Art 1176
PRESUMPTIONS

1. The receipt of the principal by the creditor without reservation as

to the interest, the presumption is the interest has been paid.The
provision applies to an interest-bearing debt.

GR:
If the debt is interest-bearing, before we apply the payment to
the principal, we apply it first to the payment of the interest.

If theres a receipt issued to you for the payment of the principal,

the presumption is the interest has already been paid. Otherwise,
if you were the creditor, iaaply mo muna yun payment sa
interest, rather than to the principal.

2. The receipt/of a later installment without reservation as to the

prior installment shall give rise to the presumption that such
installments have been paid
 Example:
A debt payable on installment. Your rentals, for example. Every
month you pay rental every 5 th day of the succeeding month.
There is now a receipt for that specific later month. The
presumption, the arrear monthly installment has already been
paid.

KINDS OF OBLIGATION
1. Pure or Conditional
a. Pure Obligation
Obligations that are not subject to conditions and are
demandable at once OR even if theres a condition, it is a
resolutory condition and therefore it is also demandable at
once subject to the happening of the resolutory condition.

Note:
Remember, the happening of the resolutory condition
extinguishes the obligation. Whereas the happening of a
suspensive condition gives birth to the obligation.

Example of a Pure Obligation which Is demandable at once not

subject to condition, whether future or past:
You borrow money from A. You issue a PN which states that

I promise to pay A one million. In the example, as soon as

A see the maker of the PN, A can demand payment bcoz it
is demandable at once. It is demandable. That is a pure
obligation demandable at once.

Example of obligation that is subject to a resolutory condition,

which is also demandable at once subject to the happening of
the resolutory condition

A will give B his law library until B passed the Bar. If B did
not pass the Bar, A will have to get back the law library and
B will have to return the law library to A. Or that same oath
already been included in the PN that in the event B could
not pass the the Bar, the law library will now be returned to
A. That is the resolutory condition.

A needs to give the law library to B bcoz as a resolutory

condition, it is demandable at once, subject to the
happening of the resolutory condition that if you B do not
pass the bar exam, B will have to return the law library.

Art 1180
GR:
 If the obligation says and the debtor binds himself to pay
when his means permits him to do so, the obligation shall be
deemed to be an obligation with a PERIOD.

So what are the terms That we could use so that we could

construe it as an obligation with a period?
Example:
I promise to pay A little by little; I promise to pay you when
my means can afford it; I promise to pay you in installment;
I promise to pay you when I m able to do so.. These are
obligations with a period. It can be inferred from the terms
and conditions of that particular obligation that WE INTENDED
a period. But there is no period that is fixed as of yet, di ba. So
who will now fix the period? It the COURT will be the one to fix
the period, PROVIDED THAT it can be inferred from the
circumstances of that obligation, it can be inferred from the
tenor of the obligation, it can be inferred from the intention of
the parties. The court will not make the period UNLESS IT CAN
BE INFERRED from the circumstances and the intention of the
parties. The court is not the one making the contract between
the parties.

Q If the court has already fixed the period, can the parties
change the period that has been fixed already?
A No more. See Art 1197 (QUESTION subject to clarification)

Q Can the contracting parties period changed again?

A Yes. Mutuality of contracts. (A contract shall bind the
contracting parties. Therefore, the creditor and the debtor
may, AGAIN, be allowed to fix the period)

OTHER CONDITIONS THAT MAY BE INCLUDED IN THE CONTRACT

BETWEEN THE PARTIES
a. Suspensive
b. Purely Potestative Condition
c. Casual Condition or a Mixed Condition

SUSPENSIVE CONDITION
The happening of an event gives rise to the obligation. Unlike
in resolutory condition, in which the happening of the the
resolutory condition extinguishes the obligation to deliver, the
obligation in suspensive condition is not demandable at once.
In suspensive condition, the obligation is not demandable at
once. It is Only after the happening of the suspensive
condition that it will give rise to the the obligation to deliver.

Example:
I will give 10k to A if he pass the Bar
 Note:
Do not use the word when. The word when is with a term.
The proper word is if, which implies suspensive.

Q Do you need to give the 10k at once?

A No. Bcoz the suspensive condition must happen first

CASUAL CONDITION
It is dependent on the will of the debtor or a third party or
even by chance.

MIXED CONDITION
It is dependent also on the third person or the debtor or by
chance

PURELY POTESTATIVE CONDITION

Q What is the The effect if there is a purely potestative
condition Dependent on the sole will of the debtor? What is
the effect?
A The obligation is VOID. Not only the condition but also it is
the obligation that is void.

Example Of a purely potestative condition dependent on the

sole will of the debtor:
I will pay you if I want; I will pay you if I like

However if you say it this way I will pay you if you like me
to pay, the creditor, of course is interested to the fulfillment
of the obligation. Therefore, it is valid.

REQUISITES OF AN OBLIGATION
a. Passive subject or the debtor
b. Active subject or the creditor
It is the creditor who can demand the fulfillment of the obligation.
Therefore the creditor will need to make a demand for the debtor
to pay. Otherwise, the debtor will not pay. So the creditor in this
sense is the ACTIVE SUBJECT, the debtor is the passive subject.
c. Object or the prestation
d. Legal tie or the vinculum juris between the parties so that the Cr
can demand from the Dr the fulfillment of the obligation

Note:
A purely potestative condition dependent of the sole will of the Dr
null and void. But a purely potestative condition dependent on the
sole will of the Cr is valid.
Example:
I would like you to comply with the obligation
Mixed condition is also valid. It is dependent on chance or the will of
the third party.

IMPOSSIBLE CONDITION
Those contrary to good customs or public policy SHALL ANNUL
the obligation which depends upon them. These are
obligations which are contrary to public policy or morals

CONCEPT OF LOSS
a. If the thing is lost without the fault of the debtor, the obligation
shall be extinguished.

b. If the thing is lost thru the fault of the debtor, the Cr may compel
the obligor to pay damages

The thing is lost when:

aa. It perishes
ab. It goes out of commerce
ac. It disappears in such a way that its existence is unknown or it
cannot be recovered

c. When the thing deteriorates without the fault of the debtor,

impairment is to borne by the Cr
d. If it deteriorates thru the fault of the Dr, the Cr may choose
between the rescission of the obligation and its fulfillment with
indemnity for damages in either case
e. If the thing is improved by its nature or by time, the improvement
shall inure to the benefit of the Cr
f. If it is improved at the expense of the Dr, he shall have no other
rt than that granted to the usufructuary.

Q And What is granted to a usufructuary?

A The right to REMOVE whatever has been placed by the Dr.
Example: useful improvements

Art 1191
1191 just means that this is a JUDICIAL RESCISSION.

The power to rescind obligations is IMPLIED in reciprocal obligations

in case one of the obligors should not comply with what is
incumbent upon him.

The injured party have two options. He may choose between:

a. Fulfillment of the obligation, or what we call SPECIFIC
PERFORMANCE, or
b. Rescission of the obligation, or what we call JUDICIAL RECISSION

Note:
 In either case, the creditor may ask for the payment of damages.
He may also seek for rescission if fulfillment would be impossible

Note:
By agreement of the parties, they may include in the contract itself
that if there is any breach committed by the other party, there can
now be what we call EXTRA-JUDICIAL RESCISSION. The parties do
not even need to go to the court.

Under Art 1191, the court will be the one to determine whether the
rescission is proper or not. Therefore, you need to go to court so
that there will be judicial rescission. So if there is that particular
extra-judicial rescission, you already included in your contract that if
theres any breach of the conditions included in the contract, any of
the injured party will be the one to extra-judicially rescind the
contract, of course with payment of damages. Eto yung rescission
made by one of the contracting parties if it is already included in
their agreement.

2. Obligations with a period

GR:
These are obligations which fulfillment a day certain has been
fixed and which shall be demandable only when that day
comes. We wait for the period.
Example:
I will give to you my car after the death of B. In the
case, I will have to wait for the death of B. The car will
be given after the death of B.

I will pay you on December 25, 2016. Today is only

October so I will have to wait for Dec 25, 2016.

5 INSTANCES WHEN THE DEBTOR LOSES THE RIGHT TO A

PERIOD
a. When after the obligation has been contracted he becomes
insolvent, unless he gives a security or guaranty for the
debt
b. When he does not furnish to the creditor the guaranties or
securities which he has promised

Example:
A owes B 1M. A promised to Constitute a REM on his lot to
secure the loan. A did not execute the contract of
mortgage. B can demand at once the payment of the 1M. A
lose the rt to a period.

c. When by his own acts, he has impaired the said guaranties

and securities after their establishment, and when through
 a fortuitous event they disappear, unless he immediately
gives new ones EQUALLY SATISFACTORY

Example:
Through the fault of the debtor you impair the security
given or even in fortuitous event, you lose also the security
or the guaranty given.
Exception:
Unless you give another security satisfactorily equivalent.
Bcoz if it is not satisfactory, it will not absolve you from the
fulfillment of the obligation at once. You lose the guaranty,
you lose the Collateral, you lose the house, you lose the
pledge, therefore I can demand the fulfillment of the
obligation at once

d. When the Dr violates the undertaking in consideration of

which the Cr agreed to the period

Example:
You told me that you are going to use the 1M that I will be
giving to you as a loan to set up a business. But later on, I
saw you at the casino, playing. So I can demand the
fulfillment of the obligation a once.

Or you told me that you are going a farm. But later on I

learned that you bought a new car. Ginamit mo yung pera
to buy a new car. Kikita ba yung pera pag binili mo ng
kotse? Unless uber. So I can demand the fulfillment of the
obligation at once.

e. When the Dr attempts to abscond.

You can demand the fulfillment of the obligation at once.
Do not wait until he has already absconded. So pag
nagaattempt pa lang, like the debtor has already
transferred all his properties to another person, you can
already presume that he will be transferring to another
place.

ART 1196
Q In whose benefit do we give a period?
A GR, it is for the benefit of both the Cr and the Dr.

Q What is the benefit to the Dr if theres a period?

A The Dr cannot be compelled to pay at once. Longer period
to pay.

Q What is the benefit to the Cr if theres a period?

 A Usually, when there is a period, there is an interest. So the
longer the period, then the Cr will be allowed to collect the
interest, meanwhile, that there is no payment by the Dr.

Art 1197
If the obligation does not fix a period but from the nature and
circumstances it can be INFERRED that a period was intended,
the court may fix the the duration thereof. If it can be inferred,
the court will be the one to determine.

It will be premature to collect if there is no fixed period as of

yet. Although it can be presumed that the intentions of the
parties is to have a period. But if the period has not yet been
fixed by the court, it is premature to collect. Wala pang
maturity, wala pang default.

3. Alternative Obligation or Facultative Obligation

Distinction between Alternative and Facultative

a. In Alternative Obligation, there are different prestations. Dr is
alternately bound by different prestations but He shall
completely comply with one of them.

Example:
A borrowed money from B, P500k. B may choose to pay the
money, in cash or installment, OR deliver a car worth 500k OR
deliver a bag worth 500k.

There are 3 prestations that B can chosse with in complying

with the obligation.

In Alternative, as a GR, the right of choice belongs to the Dr.

The choice must be communicated to the Cr. It will not be
valid and not be binding unless Dr communicates his choice to
the Cr.
However, if it is EXPRESSLY provided in that agreement that I
would be the Cr who will have the option to make a choice on
which prestation the Dr will have to deliver, that will also be
respected. The Cr will be the one to choose.

Q What is the effect if ALL the alternative prestations are lost

Through the fault of the Dr?
A The VALUE OF THE LAST PRESTATION which has been lost
or destroyed or the last service that was available shall be the
basis for damages. It will now be in the form of damages.

But if there is still one remaining, the one remaining will be

the one delivered to the Cr.
 Note:
The Dr shall lose the rt of choice when there is only one
remaining or practicable.

b. An obligation is Facultative, when there is only one prestation

but the Dr is allowed to make a substitute.

As a GR, the right of choice belongs to Dr.

4. Joint and Solidary Obligations

Q The concurrence of several creditors or the concurrence of

several debtors, do we presume that the obligation is solidary?

A No. Even if there are several Crs and several Drs, the
presumption under the law is that the obligation is JOINT.

Note:
The obligation is joint when Each Dr will only be compelled to pay
his proportionate share. He cannot be compelled to pay the full
amount.

When it is Solidary, any of the solidary Drs may be compelled To

pay the full amount. Although there is no prohibition also to
compel them to pay their own proportionate share.

Ok. That is join and solidary

Q When can there be solidary obligation? What are the

principles in a solidary obligation?
A Solidary obligation exists when:
a. GR, we have Solidary obligation only when the law
expressly so provides
b. When the nature of the obligation requires solidarity
c. Stipulations of the parties require solidarity
d. Charge or condition is imposed upon the heirs or legatees
and will expressly makes the charge or condition in solidum
e. Solidary responsibility is imputed by a final judgement
upon several defndants

Q When do we know that there is solidarity?

A if I use the word We

we promise to pay X 1M on or before December 25,

2016
Q What kind of obligation is this?
A This is joint bcoz of the use of the word We.
However, if the word we is replaced by the word I, even
if signed by several debtors, it now becomes SOLIDARY.
So although signed by A, B, and C, because of the use of
the word used I

Example:
I will pay 1M on or before December 25, 2016
even if signed by three Drs, it is now a solidary Obligation.

Principles involved if the obligation is solidary

i. Defects of one is the defects of all. It will extinguish
the obligation unless the defects is personal to the
one invoking it.
ii. Payment by one is payment by all. However, the one
who paid will now have a recourse against the other
solidary debtors. Therefore, Payment can be
compelled by the one who paid.
iii. Remission secured by one, is remission of the entire
obligation.

Q However, is the one who procured the remission

is entitled to payment?
A To illustrate:
A, B, C are the Crs; X, Y, Z are the Drs; Amount of
loan is 9M; the words used are

X, Y, Z are indebted to A, B , C JOINTLY AND

SEVERALLY

So the obligation is in solidum. Solidary obligation

9M. So, anyone of the solidary Drs may offer to pay.
However, if one of the solidary Crs demanded
payment from one of them, what can be compelled to
be paid, the full amount or only their share? Answer:
the full amount or its also the option of the one who
wanted to be paid whether to demand payment from
each solidary Drs. That is the choice of the Cr.

Now let us say A demanded payment from X. How

much can A required from X? Answer: the full amount
of 9M. However, what is now the right of X? Answer:
reimbursement from the other solidary Drs. Because
AS TO THEM (the Drs), the obligation is still joint. The
vinculum within the solidary Drs IS STILL JOINT. They
are only required to pay their proportionate share. So
3M can be demanded from each of them. However,
what is now the obligation of A who was the one who
was able to collect? Answer: he must give the other
Crs their proportionate share. The vinculum within
the solidary Crs is ALSO joint. So bcoz A was able to
collect 9M, then he is required to give to the other
solidary Crs their own proportionate shares.

Can A assign his right to collect to another person?

Answer: GR, No. You cannot assign the credit to
another person. Why? Answer: due to TRUST AND
CONFIDENCE. Remember, you can collect the full
amount. However, what is the exception in the GR
that you cant assign the credit to stranger? Answer:
with the consent of the other Crs, you can assign the
credit to another person, if they also trusted the
other person. Bcoz if there is no trust and confidence,
this another person can collect the full amount and
they will now be prejudiced bcoz their proportionate
amount will not be given to them.

Ok.. That is payment.

Now, what about Remission? Let us say X is the

friend of A. And later on, X said you are already rich.
Can you now condone our entire loan. And A
condoned the entire loan. What will now be the
effect? Answer: first effect Remission of the debt
extinguishes the ENTIRE OBLIGATION. you do not
extinguish only the share of this person, X. Iba yun
ha. If the remission is only with respect to the share
of X, that is different. But this time the remission for
the full amount. Therefore, the remission of the full
amount is already extinction of the entire obligation,
wel extinguish the entire obligation. However, what
will now be the effect? Do we give X the right to
collect from the other solidary Drs? Answer: NO. It is
gratuitous. X did not pay anyway. Therefore, he is not
allowed to collect from the other solidary Drs.
However, What is now the obligation of A, who
condoned solely the entire obligation? Answer: he is
now required to give the share of the other solidary
Crs.

There is solidarity even if they are not bound by the

SAME TERMS. Solidary obligation

I promise to pay in solidum, that was included in

the PN
X promise to pay on January 2, 2016; Y promise to
pay on October 1, 2016; Z promise to pay when he
passed the Bar exam in 2017
 In the problem, we are bound by different terms. And
yet there is solidarity bcoz of the phrase in solidum.

So if A, one of the Crs, compelled Z to pay, how much

can be compelled from Z? Answer: 6M. Because the
only due and demandable obligations are the
obligations of X and Y, the 3M of X and the 3M of Y.
Although the obligation was imposed on Z, his
condition is not yet due. And bcoz the two obligations
are already due and demandable, he can be
compelled to pay. So it is very onerous on the part of
the solidary Drs bcoz you may be compelled to pay
the full obligation, even if you are not the one
compelled to do so.

What other ways can we say that there can be

compulsion on the part of the Drs?

iv. Compensation

Ano yung magiging sample natin In compensation?

Example:
We have 3 creditors; we also have 3 Drs; the loan is
9M. In the example, can there be compensation? You
are required to pay A B and C of the full amount and
later on, ano nangyari sa kanilang dalawa.. Si A
borrowed 9M from X, so to them, quits na
Compensation happened, so later on, they will not
pay each other. But what is the obligation of A
towards the other Crs? Pay the share of B and C. X,
whose loan was the one condoned, can collect from Y
and Z. So remember that if there is solidarity, they
are bound by one particular debt and yet, they may
not be allowed also to get any contribution from the
others if there is remission or it is gratuitous.

v. Defenses available to a solidary Dr (1222)

a. Defenses which are personal to the debtor
Personal Defenses available to solidary Drs
(1)Vitiated consent
(2)Minority
(3)Insanity

Those are the defenses available only to the person

who is the one who is insolvent, or who is the one
who is minor or insane
 b. Defenses that are derived from the nature of the
obligation
(1)Nullity of the contract of loan
(2)Prescription
(3)Payment already
(4)Res Judicata

Those are the defenses available to a solidary Dr

based on the nature of the obligation

c. Personal to him but can be invoked by the other

solidary debtor(s) but only with respect to his
share (to the extent only of the share of that
particular person)

So with his share of 3M, Y or Z may also

invoke the minority of X. It is personal to
him, and yet they can invoke it to the
REMOVE the share of that debtor. That is
personal to him but they can also use that,
but only to the extent of his share, the 3M.

vi. What is the effect if there is insolvency on the part of

of on of the solidary Drs?
Now, let us assume that there was insolvency on the
part of Z. There was payment already that was made.
It was X who paid the full amount of 9M. Then later
on, Z became insolvent. So payment was made by
one of the solidary Drs, then Z became insolvent.
Now, what will be the effect? Who will now shoulder
the share of Z, the insolvent Dr? X and Y will share
the insolvency. So magkano ito, 3M share of X, 3M
share of Y, 3M share of Z. So the 3M OF Z will now be
shouldered by PROPORTIONATELY by X and Y, 1.5M
each will be added to the share of X and Y. We do
not burden the one who made the payment
with the insolvency of another solidary Dr. It
must be borne by the two other SOLVENT solidary
Drs.

5. Indivisible Obligation
Indivisibility of the object of an obligation does not also
redound to a solidary obligation.

Example of indivisible obligation and yet it does not mean that

it is solidary:
To deliver a specific live cow. A, X, Y, Z. The obligation
is to deliver a specific live cow. Now, if one of them does
 not want to deliver or fails to deliver the cow, what is
now the obligation, can we compel the others to do so?
Yes you can compel. However, kung talagang ayaw, they
do not want to deliver the live cow, then what do we do?
Answer: We now CONVERT this obligation to MONETARY
obligation. We convert it to the monetary value of the
live cow. The one who is AT FAULT will be the one who
will also pay the other solidary or joint Drs. Ikaw ang
may fault. You do not want to deliver but you are able to
do so, so you now convert this to a monetary obligation.
Kung yung cow ay 6k, so we will now require them to
deliver the monetary obligation in cash or in installment.
But this does not mean that it is a solidary obligation.
The obligation is still JOINT, that is the presumption.

6. Obligation with a Penal Clause

GR:
The penalty is the substitute for the payment of damages and
interest.

Exception:
Instances that the penalty will be on top of the payment of
interest or damages. What are the instances that we now add
it, not a substitute, bcoz the GR is that you substitute the
penalty for the payment of damages and interest. Ano yung
exceptions
a. If it is stipulated by the parties (might be included in the
exam), or
b. the obligor does not want to pay the penalty, or
c. There is fraud in the fulfillment of the obligation

Note:
In any of these instances, then you give the penalty on top
of the payment of damages and interest

Example of a penalty clause:

How do we know that there is a penalty clause In that
particular obligation? Answer:

In a contract to deliver certain items, purchase order. A

delivery of 1,000 reams of bond paper; delivery period is
within 5 days from the receipt of the PO; Penalty Clause: in
case there is a delay in the delivery of the 1k reams of
bond paper, there will payment of a penalty of P100 for
every day of delay. Usually, percent yan e. So, pwede
ilagay na 1% for every day of delay or P400 every day of
delay. So ou count the number of days that there is delay
and that will now be multiplied by the amount of the
 penalty. So 10 days of delay multiplied by P100 for every
day of delay, magkano ang penalty? P1k.

Can you now say I will pay the penalty but I will not deliver
anymore? I will pay the penalty but I cannot be anymore
compelled to deliver, can that be allowed? NO, the
payment of penalty does not exempt the obligor. He must
comply with the obligation. Why? What is the purpose of
the Penalty Clause? Answer: to insure the performance
of the obligation. Syempre, you have to comply with the
obligation.

Now, when can the court reduce the penalty? Answer:

under Art 1229, the judge shall equitably reduce the
penalty when:
a. The principal obligation has been PARTLY or
IRREGULARLY complied with, or
b. Even if there is no compliance as of yet, if the penalty is
UNCONSCIONABLE or INIQUITOUS
Example:
Ang penalty mo 1M for every day of delay. Sobra yun.

Art 1230
The nullity of the Penal Clause does not carry with it the nullity
of the principal obligation. However, the nullity of the principal
obligation carries with it the Penalty or the accessory. Kaya
itong penalty clause is only an accessory obligation, it can be
considered null and void.

EXTINGUISHMENT OF OBLIGATION
PaLoConMerComNo
Payment; Loss of the Thing Due; Condonation or Remission of Debt;
Merger or Confusion; Compensation; Novation

1. PAYMENT
When do we consider that there is payment?

Payment is not only the delivery of money but also the

performance, in whatever manner, of an obligation. So if the
obligation is to sing in the concert, you comply with that.

Payment must be in legal tender. It must also be complete and it

must be regular. You comply with that obligation.

When do we consider payment if it is money? Legal tender,

complete. Payment by check, how do we now consider that there
was payment already? Answer: Payment by check or any
negotiable instrument is considered (1) upon encashment of the
check, or (2) When the check is impaired through the fault of the
 Cr. You get the check but you did not go to the bank to encash
until it became a stale check, you can no longer demand from
the debtor that he will change that particular check.

Art 1236
Under Art 1236, can I compel the Cr to accept payment or
performance by a 3rd person? The contract of loan is between you
and me and Ms. Fernandez wanted to pay me the loan that you
incurred from me? Answer: GR, NO. We do not allow a 3 rd person
to make the payment. There is no privity of contract. The
contract is between us. However what is the effect if there is
payment that was made by a 3rd person?
a. If the payment was made with the knowledge and consent of
the principal Dr, what is the effect? Answer: the obligation is
extinguished. What is now the right of the 3 rd person who
made the payment? Answer: he has now the right of
REIMBURSEMENT from the principal Dr to the full amount that
he paid and also the right of SUBROGATION to the penalty or
mortgage or guaranty.

b. If the payment by the 3rd person was WITHOUT the knowledge

and consent of the principal Dr, what is the effect? Answer:
the one who paid has only the right to reimbursement to the
extent of what has been beneficial to the principal Dr. Only to
that extent. NO RIGHT OF SUBROGATION. And if the 3 rd person
who made the payment did not want to be reimbursed, what
is the effect? Answer: it will be considered a DONATION, then
we need the consent of the principal Dr. It must also comply
with formalities of a valid donation that is based on Art 1236.

So we cannot compel The Cr to accept the payment, that is the GR.

Art 1239
Obligations to give. The incapacitated person was the one who paid.
Ano obligation ngayon dito? Incapacitated person paid the
obligation, he is insane, he is not of sound mind What is now the
effect? Answer: GR, the payment is not valid. Unless, we consider it
as a Natural Obligation.

1240
To whom shall payment be made? Kanino ka dapat magbayad?
Answer: GR, to the person to whom the obligation has been
constituted, meaning to the Cr. If you cannot find the Cr or Cr has
become incompetent, to whom do you make the payment? Answer:
payment must be made to his
a. Successor in interest, or in his absence, to
b. a person AUTHORIZED to receive the payment, otherwise if that
person is not authorized to receive the payment, then you can be
compelled to make another payment by the Cr.
 Payment to an incapacitated person, what is the effect? Nagbayad
ka. You are indebted to me. And yet you paid to an incapacitated
person, to my grandchild who is only 5 year-old. What is the effect.
Answer: The payment is considered valid, provided, under 2
circumstances
a. The payment has been kept intact by the incapacitated person,
or
b. In so far as it has been beneficial to the incapacitated person.

Otherwise, if there was no benefit to the incapacitated person or

he did not keep it, then you can compel also another payment,
that can be compelled.

1244
GR:
The Dr cannot compel the Cr to accept or receive a different one
from what has been agreed upon.

Ang ating Agreement is for you to deliver to me a refrigerator. Can

you now tell me that you are delivering to me an air-conditioning
unit? Can you compel me to receive a different thing from that was
agreed upon? Answer: as a GR, NO. What are the exceptions:

Exceptions:
(That the Cr may be required to accept a different thing from
that which has been agreed upon)
a. If the obligation is facultative
So you can substitute another thing

b. When there is dacion en pago

In dacion en pago, there is the delivery of a thing or an
object and the obligation is loan of money. So, instead of
paying in cash or in money, you deliver a certain thing,
dacion en pago

c. When there is NOVATION of the contract

So there are now 2 contracts. Later on, you agree a
different thing shall be delivered. That is what we call
novation.

Modes of Payment
I. Dacion en pago
II. Payment by Cession
III. Application of Payment
IV. Tender of Payment and Consignation

NOTE:
Q When do we have dacion en pago?
A Under 1245 and 1255 we have cession. Please identify what is
dacion en pago And what is cession. Give the distinguishing features
between the two.

Distinguishing features of dacion en pago and cession:

a. In DEP, the principal obligation is a loan of money and yet you
cannot pay in cash, therefore, you now offer another property,
only one or some; In cession you offer to deliver ALL your
properties

b. In DEP,you only have one Cr and one Dr; In cession, several Crs
and one Dr and the universality of the Drs property is delivered
to the Crs,

c. In DEP, ownership is transferred from the Dr to the Cr; In cession,

there is no transfer of ownership bcoz what the Crs need to do is
to sell the properties, only the proceeds will be applied to the
debt

d. In DEP, GR, there is now TRANSFER of ownership of the property

that is delivered by the Dr to the Cr. We extinguish the obligation
TO THE EXTENT of the value of the thing that is delivered, that is
the GR. Exception: even if the property that was delivered is LESS
than the value of the obligation, we extinguish the entire
obligation IF there was an agreement between the parties. But
the GR is, the obligation shall only be extinguished to the extent
of the value of the property that was delivered; In cession, we
extinguish the obligation ONLY to the EXTENT of the proceeds of
the sale.

e. In DEP, the Dr need not be insolvent, he may not be insolvent. He

is not liquid but he has assets, therefore, there is no insolvency
on the part of the Dr; In cession, the Dr is insolvent, whether total
or partial.

So, DEP and cession are 2 modes of payment. Another mode of

payment is application of payment.

Application of Payment
When do we have application of payment? What are the requisites?
a. There is 1 Dr, 1 Cr
b. Several debts of the same kind, either in money or even if hey
are in kind, same kind and quality
c. All the debts are due and demandable, however, there is
INSUFFICIENCY on the part of the Dr

Q Who can make a choice?Who is given the option to choose?

A GR, the Dr, unless, the Dr did not make the choice.
 Q When do you make application of payment?
A GR, the Dr is given the option to make application of
payment. He does that AT THE TIME OF THE PAYMENT. If he does
not make application of payment, at the time of the payment,
then YOU GIVE THE OPTION to the Cr who will now ISSUE a
receipt and later on, you cannot impugn that receipt that is
issued by the Cr, unless there is vice or defect of consent. (GR, it
is the Dr who makes the choice of application; exception, it is
given to the creditor)

Q What if no one among them made the application of

payment, how do we now make the application of payment?
A Legal application of payment shall govern. What do we mean
by that? Answer: we will now apply payment to the MOST
ONEROUS obligation/debt.

So to sum up, GR=Dr; Exception=Cr; if no one among them

makes the application of payment=Legal Application, application
of payment to the most onerous debt.

Note:
On the part of the Dr, he would want to extinguish the most
onerous debt; on the part of the Cr, if given the opportunity to
make the application, he would want to extinguish the less
onerous to the Dr.

Tender of Payment and Consignation

GR, THERE MUST BE FIRST tender of payment. TOP is ANTECEDENT
to consignation. It is ESSENTIALLY extrajudicial. It is the PERSONAL
ATTEMPT of the Dr to make the payment to the Cr. So the
consignation is the one which extinguishes the obligation. So first
thing you have to do is make a VALID PRIOR TOP. However, what will
now happen that you need to consignate? Answer: When the Cr
UNJUSTIFIABLY REFUSES to accept the tender of payment. If the Cr
unjustifiably refuses to accept payment, then that is the time you
can make the consignation. There must be TWIN ACTS of the Dr
Twin Acts
a. Dr makes a Tender of Payment, and the TOP must be a
legal tender, full amount of the debt, hindi pwede
installment, it must be to the Cr who unjustifiably refused
to accept the payment
b. Consignation

Instances when consignation can be done even without prior

valid TOP
a. The Cr is absent or he is unknown or does not appear in
the place of payment
b. The Cr, unjustifiably or without reason, refuses to issue a
receipt
 Receipt is impt to Dr bcoz it is the evidence of payment
c. Title of the obligation has been lost
d. The Cr is incapacitated to receive the payment, at the time
of the payment
e. 2 or more persons are claiming to collect

Requisites of Consignation
a. There must be a Valid existing debt
b. Prior TOP
c. Cr unjustifiably refuses to accept payment
d. Cr refuses to issue a receipt
e. Prior/First notice
Purpose:
So that the Cr may be given a chance to think it over. So
that he may decide to accept payment to avoid being
burdened of additional expenses by reason of the
consignation bcoz when the Dr goes to court, additional
charges of consignation will borne by the Cr

f. Actual deposit of the thing with the judicial authorities

Under the NCC, you make the consignation with judicial
authorities. You do not open an account in the bank. That is
done in normal practice, open an account and then you
make a payment in favor of the account of the Cr. But
under the NCC, under the law, you make the deposit with
court authorities. Magbabayad ka ng filing fee.

g. After the deposit has been made, subsequent notice,

SECOND NOTICE, must be given to the Cr
Purpose:
So that the Cr will be able to know that payment has been
consignated and that he can accept if now bcoz acceptance
by the Cr means that there is already payment. We now
extinguish the obligation. And even if the Cr does not
accept the payment, later on, there will be a declaration by
the court that consignation has been properly done. We
also extinguish the obligation.
Now let us suppose that you have already deposited the
Money. Meron ka dapat i-deposit, rentals of your apartment
unit. The Cr does not want to accept your rental payment.
You now deposited it in court. Can you still withdraw the
money that you have already deposited in court? Answer:
YES, you can withdraw, provided, there is (1) NO
acceptance yet by the Cr and (2) NO DECLARATION yet by
the court that there has been a valid consignation, you can
still withdraw the amount that you have consignated.

What is the effect of the withdrawal of the money that you

have consignated in court? Answer: the obligation
 SUBSISTS. You do not extinguish the obligation as Of yet.
Kinuha mo ulit yung money mo. So the obligation still
subsists.

Now what is the effect if later on you have already

consignated the money in court and then you went to the
Cr and asked the permission of the Cr to be allowed to
withdraw the money, what is now the effect? Answer: the
obligation also SUBSISTS. You do not extinguish the
obligation and the Cr loses the preference to that payment.
So if there is any payment that Was made, you lose the
particular right to that payment, if you were the Cr.

2. LOSS OF THE THING DUE

GR:
A determinate thing that is lost, if it is due to a FE, we extinguish the
obligation

Exception:
a. Unless there is a stipulation to the contrary, or
b. There is delay already, or
c. There is contravention of the tenor of the obligation

Q What if it is an INDETERMINATE/GENERIC thing?

A The obligation is not extinguished bcoz GENUS DOES NOT
PERISH. You can provide a substitute for that generic/indeterminate
thing.

Q What about in obligation to do, when do we extinguish that

obligation to do?
A When it BECOMES LEGALLY IMPOSSIBLE to comply with, like
when the Dr is already dead. The Dr who is to sing in a concert is
now dead, you cannot anymore compel him to do so. Or it is now
beyond the contemplation of the parties. So difficult that it is now
beyond the contemplation of the parties. Like the singer does not
have any voice, wala lumalabas na boses, cannot sing also. That is
why we also extinguish the obligation to do. BUT that is the GR

3. CONDONATION OR REMISSION OF DEBT

Condonation is ESSENTIALLY gratuitous. There is NO compensation
given to the creditor.

What are the presumptions?

a. If the private document is in the possession of the Dr, what is the
presumption?
Meron tayo PN. Then later on, you saw that PN is now in the
possession of Dr, what is the presumption? Answer: there is
 already CONDONATION made by the Cr. More importantly is that,
that document is voluntarily delivered by the Cr.

But that is only a presumption. It can be disputed by the Cr that

he did not deliver the document to the Dr, that it was stolen the
Dr, or it was missed of inspection. So there is no presumption of
that particular time.

b. Bcoz condonation IS REALLY A DONATION, it must also COMPLY

with the formalities of a valid donation.

c. Art 1273
The renunciation of the principal debt shall extinguish the
accessory. However, the renunciation of the accessory DOES NOT
extinguish the principal obligation. Principal obligation natin is
the loan of money. What is the accessory? The pledge or the
REM. They are only accessory contracts.

Now if you see the object of the pledge already returned to the
debtor, what is the presumption? Do we presume the
extinguishment of the principal obligation? Answer: NO. The
principal obligation of loan REMAINS. We only extinguish the
accessory obligation or pledge or REM, if there was a mortgage
that was executed by the Parties.

4. MERGER OR CONFUSION
Merger or confusion happens when there is a NEGOTIABLE
INSTRUMENT. When do we have a NI?

This is a PN. I promise to pay X or order 1M on or before Dec 25,

2016. (NOTE: hindi pwedeng wala yung phrase na or order
otherwise, hindi ito negotiable) Who should sign the PN? The Dr,
debtor A, who must Also be the maker. Who should be in possession
of the PN? Answer: X, the Cr, must be in possession of the PN.

But later on X became indebted to B. So what do you do with the

negotiable PN? Answer: You FIRST have to indorse it. How do you
indorse? Answer: Sign at the back and then deliver it to B. Who is
now in possession? Answer: B is now in possession.

Later on, B becomes indebted to another person, C. So B indorse the

PN and delivers it to C. C also delivered it to D. And later on, D
becomes indebted to A. So what is now the effect? Who is now in
possession of the PN? Answer: A.

Originally, A was the Dr and later on, A now becomes the Cr. He is
now in possession of the PN. Does he still have to pay himself?
Answer: NO more. There is now what we call MERGER OR
 CONFUSION. We now pass the person of the Dr to the person of the
Cr. You do not pay yourself.

5. COMPENSATION
a. What are The requisites so that we now have LEGAL
COMPENSATION. In CONVENTIONAL COMPENSATION, there must
be an agreement by the parties. However, when we have legal
compensation, by operation of law, we can compensate the debts
from one to the other. What are the requisites of
LegalCompensation?
(1)The creditor and the debtor are Cr and Dr of each other in
their own rights
They are principally bound to each other as Cr and Dr of each
other

(2)That both debts consist in money or even in kind, the same

kind and quality
(3)Both debts are due and demandable and liquidated already
(4)There is no retention or controversy that is communicated to
the Dr
(5)Compensation is not prohibited by law

The classic example of compensation is when you have a deposit in

the bank.

Example:
Bank is BPI. You are the depositor, for 1M. What are you with respect
to the bank, are you the Dr or the Cr? You are the Cr of the bank.

Later on you went to the BPI. You wanted to buy a car. So you
applied for a car loan for 1M. Payable monthly. But you did not even
start payment. So what are you now with respect to the debt with
BPI, bcoz of the loan of money? You are now the Dr.

You, as Dr, did not pay. What can the BPI do With respect to your
bank deposit Of 1M? Can BPI now debit the whole amount of your
1M deposit and apply it to your loan? Answer: YES. All the requisites
are present. So this is what we call legal compensation.

Even without the knowledge of the Dr. And even against the will of
the Dr, legal compensation can be done by operation of law. You do
not need to agree to the compensation being done by the bank.
Concurrent amount of 1m. Now even if your deposit is 1.5M, pwede
pa din ang compensation, only to the extent of the CONCURRENT
amount that is required to be offsetted or compensated. That is
legal compensation.

6. NOVATION
Novation is the change of an obligation by another resulting in the
extiguishment or modification, either by changing the object or
principal conditions or by substituting another in the place of the Dr
or by subrogating a 3rd person To the rts of the Cr

What are the Modes of Novation, what are the Principles in Novation,
what are the Requisites of Novation?

Requisites of Novation
a. Previous valid obligation
b. Agreement to a new obligation
c. Extinguishment of the old obligation
d. Validity of the new obligation

Now, there are 2 contracts. Now, what are the modes of novation? If
you change the terms and conditions or the object of the contract,
then that is what we call objective novation

Modes of Novation
a. If you change the terms and conditions or the object of the
contract, then that is what we call OBJECTIVE NOVATION. If you
now change the persons of the Drs or the persons of the Crs, we
now have what we call SUBJECTIVE NOVATION.

Note:
So pagka change in the person of the Dr, we now have
DELEGACION or EXPROMISSION.

If there is now a change in the person of the Cr, we now have

SUBROGATION.

Note:
Q When do we have delegacion? Who makes the offer of the
new Dr?
A it is the old Drs who offer the new Dr, that is Delegacion

Q When do we have expromission?

A the offer of a new debtor will come from a 3 rd person OR the
CR

Note:
Whether it is expromission or delegacion, who should consent to
the change of the Drs? Answer: the Cr. You can have delegacion,
it is the offer of the new Dr, you can have expromission, it is the
offer of the 3rd person OR the Cr, but ALWAYS, it should be the Cr
who should consent/agree.

Now what is the effect if there is delegacion, and later on the new
Dr became insolvent, can we revive the obligation of the old Dr?
 Answer: GR, NO. You do not revive the liability of the old Dr.
However, what is the exception? If at the time of delegacion, the
old debtor already KNOWS the insolvency of the new Dr OR it is
of PUBLIC KNOWLEDGE that the new Dr is already insolvent
Then we can revive the liability of the old DR.

However if it is expromission, you do not revive the liability of the

ld Dr simply bcoz the offer of the new Dr was made by a 3 rd
person OR the Cr. It was not made by the old Dr

Now when do we have the PRESUMPTION OF LEGAL

SUBROGATION? This time there is now a change in the person of
the CR. Answer: Under Art 1302,

(1)when a Cr pays another Cr who is more preferred. Example: I

paid the government , the Cr is the government for payment
of taxes, the govt is more prefered. Then later on, there is now
subrogation. The one who made the payment will be te one
that is entitled to collect. Nagbayad ako ng utang mo sa
income tax, then I will be now subrogated to the rights of the
Cr. I will now be the new Cr.

(2)If the payment was made by a 3rd person with the consent and
the knowledge of the principal Dr, subrogation is allowed. The
one who paid the 3rd person, who made the payment, is
subrogated to the rt of the old Cr

(3)When even without the knowledge of the debtor, a person

interested in the fulfillment of the obligation pays, without
prejudice to the effects of confusion as to the latters share

I am the guarantor or the surety, I am interested to the

extinguishment of the obligation. So even without the consent
of the principal Dr, I can pay so that the obligation will now be
extinguished. Then I am subrogated as the new Cr.

So these are the presumptions under Art 1302. There is legal

subrogation in the 3 instances.