ART. 1282. The parties may agree upon the compensation of debts which are not yet due.

Article 1282 refers to the idea of "compensation," which is when two people or parties owe each other
money or obligations. In simple terms, it means that if two people owe each other different amounts, they
can agree to "cancel out" these debts instead of paying each other separately. This can even happen before
the debts are due.

The article specifically says that the two parties can decide to do this even if the debts aren't due yet. This
means that if they both agree, they can settle their obligations by simply reducing or canceling each other’s
debts early, as long as both parties are okay with it.

For example, if Person A owes Person B 1,000 pesos, and Person B owes Person A 500 pesos, they can
agree to cancel the 500 pesos debt that Person B owes, and Person A only needs to pay 500 pesos. Even if
the debts are not yet due, they can still do this if they both agree.

ART. 1283. If one of the parties to a suit over an obligation has a claim for damages against the other, the
former may set it off by proving his right to said damages and the amount thereof.

Article 1282 refers to the idea of "compensation," which is when two people or parties owe each other
money or obligations. In simple terms, it means that if two people owe each other different amounts, they
can agree to "cancel out" these debts instead of paying each other separately. This can even happen before
the debts are due.

The article specifically says that the two parties can decide to do this even if the debts aren't due yet. This
means that if they both agree, they can settle their obligations by simply reducing or canceling each other’s
debts early, as long as both parties are okay with it.

For example, if Person A owes Person B 1,000 pesos, and Person B owes Person A 500 pesos, they can
agree to cancel the 500 pesos debt that Person B owes, and Person A only needs to pay 500 pesos. Even if
the debts are not yet due, they can still do this if they both agree.

ART. 1284. When one or both debts are rescissible or voidable, they may be compensated against each
other before they are judicially rescinded or avoided.

Article 1284 addresses situations where one or both debts are "rescissible" or "voidable." In simple terms,
"rescissible" means a contract or agreement can be canceled because it was made under unfair conditions,
while "voidable" means a contract can be canceled because one party has a valid reason for doing so. This
article says that even if a debt might be canceled later, the parties can still use compensation, or set off,
before the debt is officially canceled.
This means that if both parties owe each other money and one of the debts is in danger of being canceled,
they can still use that debt to reduce or cancel out the other debt. They don’t need to wait for a court
decision to use this option as long as both parties agree. However, the debts still have the potential to be
canceled later on, but they can be compensated before that happens.

For example, if Person A owes Person B 1,000 pesos and Person B owes Person A 500 pesos, but the 1,000
pesos debt might be canceled due to unfair conditions, Person A and Person B can still agree to reduce the
amount owed by compensating the debts. Person A might pay only 500 pesos, even though the 1,000
pesos debt could later be rescinded by a court.

ART. 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of a third
person, cannot set up against the assignee the compensation which would pertain to him against the
assignor, unless the assignor was notified by the debtor at the time he gave his consent, that he reserved
his right to the compensation. If the creditor communicated the cession to him but the debtor did not
consent thereto, the latter may set up the compensation of debts previous to the cession, but not of
subsequent ones.

Article 1285 discusses situations involving the transfer of a debt or rights from one person (the creditor)
to another (a third person or assignee). It explains that if the debtor agrees to the assignment (or transfer)
of the creditor's rights, they cannot use compensation (set off) to reduce the debt with the assignee if they
have a separate debt with the original creditor. However, if the debtor had informed the original creditor
at the time of agreeing to the assignment that they reserved the right to use compensation, then they
could still use it.

The article also says that if the debtor was notified by the creditor about the transfer, but the debtor did
not agree to it, they can still use compensation to reduce their debt for obligations that occurred before
the transfer. However, they cannot use compensation for any new debts that arise after the transfer is
made, unless they had already reserved that right.

For example, if Person A owes Person B 1,000 pesos and Person B transfers the debt to Person C, Person A
cannot reduce the debt to Person C by using any money they owe Person B, unless Person A told Person B
beforehand that they would reserve the right to do so. If Person A didn’t agree to the transfer, they could
still use compensation to reduce the amount owed to Person C for debts that existed before the transfer,
but not for any new debts created after the transfer.

ART. 1286. Compensation takes place by operation of law, even though the debts may be payable at
different places, but there shall be an indemnity for expenses of exchange or transportation to the place of
payment.

Article 1286 explains that compensation (or set off) automatically happens by law, even if the debts are
supposed to be paid in different places. This means that when two people owe each other money, the
debts can still be canceled out, even if one person is supposed to pay in one location and the other in
another. However, if there are extra costs involved, like the expense of exchanging currency or transporting
the money to another place, these costs must be paid separately.

The law allows compensation to happen automatically, but it doesn’t ignore the additional costs that might
come from having to pay in different locations. These costs, such as exchange rates or transportation fees,
are not covered by the compensation itself, so the party responsible for those extra costs will need to pay
them on top of the compensation.

For example, if Person A owes Person B 1,000 pesos in Manila, and Person B owes Person A 1,000 pesos
in Cebu, compensation can still occur even though the debts are in different locations. However, if it costs
50 pesos to transport the money to Cebu or convert it into the local currency, Person B would need to pay
that extra 50 pesos, because the compensation doesn’t cover the costs of getting the money to the correct
place.

ART. 1287. Compensation shall not be proper when one of the debts arises from a depositum or from the
obligations of a depositary or of a bailee in commodatum. Neither can compensation be set up against a
creditor who has a claim for support due by gratuitous title, without prejudice to the provisions of
paragraph 2 of Article 301.

Article 1287 explains situations where compensation (or set off) cannot be used. First, it says that
compensation cannot happen when one of the debts comes from a "depositum" (a situation where
someone has been entrusted with something to keep safe) or from obligations of a "depositary" (the
person who has the item) or a "bailee in commodatum" (a person who has borrowed something for free).
This is because these types of debts involve a special trust and cannot be canceled out by simple
compensation.

Secondly, the article says that compensation cannot be used to reduce or cancel a debt if the creditor is
claiming support (money for living expenses) due to a "gratuitous title," meaning a claim for something
given without charge, like support from a relative. This ensures that people who rely on support for their
basic needs are not harmed by compensation.

For example, if Person A leaves their valuable watch with Person B for safekeeping (a depositum), and
Person B owes Person A 500 pesos for a separate debt, Person B cannot use the 500 pesos to cancel the
debt for the watch. The trust involved in keeping the watch safe is too important to allow compensation.
Similarly, if Person A owes money for child support, they cannot reduce what they owe by offsetting it with
a separate debt they have with the other party.
ART. 1288. Neither shall there be compensation if one of the debts consists in civil liability arising from a
penal offense.

Article 1288 explains that compensation (or set off) cannot be used if one of the debts is related to civil
liability arising from a penal offense. This means that if a person owes money because of the damage
caused by a criminal act, they cannot cancel out that debt by using a separate debt they might have with
the same person.

The law makes this rule because civil liability from a crime involves compensation for harm caused by
illegal actions. It is treated differently from regular debts, and the focus is on making the injured party
whole. Allowing compensation in such cases could unfairly reduce the amount of compensation needed
for the victim.

For example, if Person A damages Person B’s property in a car accident that was their fault (a penal
offense), and Person A owes Person B 1,000 pesos for a separate reason, Person A cannot use the 1,000
pesos debt to reduce the amount owed for the damage caused by the accident. The legal system wants to
ensure that the victim receives full compensation for the harm caused by the crime.

ART. 1289. If a person should have against him several debts which are susceptible of compensation, the
rules on the application of payments shall apply to the order of the compensation.

Article 1289 explains that if a person has multiple debts that could be canceled out through compensation,
the rules about how payments are applied will determine the order in which the debts are set off. This
means that if a person owes multiple amounts and can use compensation to reduce their debts, there are
specific guidelines for deciding which debts will be canceled first.

The law follows the same rules used for applying payments to multiple debts. Generally, payments are first
applied to the oldest or most pressing debt, or based on any agreement between the parties. This helps
prevent confusion and ensures that the compensation is used fairly to address the various debts in an
organized way.

For example, if Person A owes Person B 500 pesos for one debt and 300 pesos for another, and both debts
are eligible for compensation, the debts will be canceled according to a set order. If there’s no agreement,
the 500 pesos debt might be canceled first, because it’s the larger or earlier debt. This way, the debts are
handled in a clear and structured manner.
ART. 1290. When all the requisites mentioned in Article 1279 are present, compensation takes effect by
operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and
debtors are not aware of the compensation.

Article 1290 explains that when all the requirements listed in Article 1279 are met, compensation happens
automatically by law. This means that the debts are canceled out to the amount that matches both debts,
even if the people involved (the creditors and debtors) do not know that the compensation has taken
place. The law does this to simplify the process and ensure that the debts are settled without needing
formal agreements or notifications between the parties.

The article emphasizes that compensation doesn’t require the creditors and debtors to be aware of it for
it to happen. As long as the conditions for compensation are met, the debts are automatically canceled,
which helps avoid complications in debt management. This can be helpful for situations where the parties
might not be actively communicating or keeping track of their debts.

For example, if Person A owes Person B 1,000 pesos and Person B owes Person A 1,000 pesos, and all the
conditions for compensation are met, the law will automatically cancel out both debts. Neither Person A
nor Person B needs to be aware that this has happened—the debts are just erased up to the amount of
1,000 pesos.

ART. 1291. Obligations may be modifi ed by: (1) Changing their object or principal conditions; (2)
Substituting the person of the debtor; (3) Subrogating a third person in the rights of the creditor.

Article 1291 outlines the ways in which obligations (or agreements) can be changed or modified. The
article lists three specific ways this can happen: first, by changing the object or main conditions of the
obligation; second, by substituting a new debtor in place of the original one; and third, by allowing a third
person to take over the creditor's rights (a process known as subrogation).

This means that obligations are flexible and can be adjusted based on the agreement of the parties
involved. These changes can happen if both parties agree to the modifications, and they can involve
changes to the things involved in the contract, who is responsible for the debt, or who gets paid. These
types of changes help accommodate new circumstances or needs.

For example, if Person A borrows 1,000 pesos from Person B and they decide to modify the agreement,
they could do so in different ways. They might change the terms of the loan, like the repayment schedule.
Alternatively, Person A could ask Person C to take over the loan, becoming the new debtor. Or, Person B
might allow Person D to take over their rights as the creditor, so Person D would now receive the payment
from Person A.

ART. 1292. In order that an obligation may be extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every
point incompatible with each other.
Article 1292 explains that for one obligation to replace or extinguish another, it must be clearly stated that
the new obligation is taking the place of the old one. This means that the parties involved must express,
in clear and definite terms, that the new obligation will replace the old one. Alternatively, the old and new
obligations must be completely incompatible, meaning they cannot both exist at the same time due to
their differences.

In simpler terms, the law requires that it must be very clear whether the new obligation is replacing the
old one. If the terms of the new agreement do not allow the old one to continue, then the old obligation
is considered extinguished. Without such clarity, the new obligation cannot automatically replace the old
one.

For example, if Person A owes Person B 1,000 pesos, and they create a new agreement where Person A
agrees to pay Person B 1,000 pesos in a different form (like a car instead of money), the new agreement
must clearly state that the car replaces the original debt. If it’s unclear or if the two debts can still exist
together, the new debt will not automatically cancel the old one.

ART. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be
made even without the knowledge or against the will of the latter, but not without the consent of the
creditor. Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237. (1205a)

Article 1293 explains that in a type of novation (which is a legal process where a new agreement replaces
an old one), a new debtor can replace the original debtor without the original debtor’s knowledge or
consent. However, this change cannot happen without the approval of the creditor, the person to whom
the debt is owed. This means that while the original debtor doesn’t need to agree to the replacement, the
creditor must give their consent for the change to take effect.

This article also highlights that once the new debtor makes the payment, they gain certain rights. These
rights, as explained in Articles 1236 and 1237, are related to the payment of the debt and can involve the
ability to use defenses or claims that the original debtor had, especially if the payment was made in full
and properly.

For example, if Person A owes Person B 1,000 pesos, but Person C agrees to take over the debt and pay it
on behalf of Person A, Person B must agree to let Person C become the new debtor. If Person C then pays
the 1,000 pesos, they now have the same rights as Person A would have had, including the right to make
any claims or defenses that could have been used by Person A.

ART. 1294. If the substitution is without the knowledge or against the will of the debtor, the new debtor’s
insolvency or non-fulfillment of the obligation shall not give rise to any liability on the part of the original
debt.
Article 1294 explains that if a new debtor is substituted for the original debtor without the knowledge or
against the will of the original debtor, the original debtor is not responsible for any problems that arise if
the new debtor fails to fulfill the obligation or becomes insolvent (unable to pay). In other words, the
original debtor will not be held liable if the new debtor cannot pay the debt.

This rule protects the original debtor, as they did not agree to the substitution, and they should not bear
the risks associated with the new debtor’s failure to fulfill the debt. The creditor can only hold the new
debtor accountable for the debt, not the original one, in this situation.

For example, if Person A owes Person B 1,000 pesos but without Person A's knowledge, Person C is
substituted as the debtor, and Person C fails to pay, Person A is not responsible for the debt. If Person C
becomes insolvent and cannot pay, Person B cannot go after Person A for the money, as the substitution
was made without Person A’s consent.

ART. 1295. The insolvency of the new debtor, who has been proposed by the original debtor and accepted
by the creditor, shall not revive the action of the latter against the original obligor, except when said
insolvency was already existing and of public knowledge, or known to the debtor, when he delegated his
debt.

Article 1295 explains that if a new debtor, who was proposed by the original debtor and accepted by the
creditor, becomes insolvent (unable to pay), the original debtor cannot be held liable for the debt again.
However, there are two exceptions to this rule. If the new debtor was already insolvent and this fact was
publicly known, or if the original debtor knew about the insolvency when they agreed to transfer the debt
to the new debtor, then the original debtor could be held liable once again.

This rule is meant to protect the original debtor from being unfairly held responsible for the new debtor's
failure to pay, as long as the insolvency of the new debtor wasn’t already known. If the insolvency was
known beforehand, it would be unfair to let the original debtor off the hook, knowing that the new debtor
was unlikely to fulfill the obligation.

For example, if Person A (the original debtor) proposes Person C as the new debtor to Person B (the
creditor), and Person B accepts, but Person C later becomes insolvent, Person A will not be held liable
again. However, if Person A knew that Person C was already bankrupt when they made the agreement,
and this was public knowledge, then Person A could still be responsible for the debt if Person C fails to pay.

ART. 1296. When the principal obligation is extinguished in consequence of a novation, accessory
obligations may subsist only insofar as they may benefit third persons who did not give their consent.

Article 1296 explains that when a principal obligation (the main debt or agreement) is extinguished due to
novation (a legal process where a new obligation replaces the old one), the accessory obligations
(additional responsibilities related to the principal obligation, like interest or guarantees) may still exist.
However, these accessory obligations can only continue if they benefit third parties who did not give their
consent to the novation.

In simple terms, when the main debt is replaced by a new one, the extra responsibilities tied to the original
obligation generally end. But if there are third parties who were not part of the novation (like a guarantor
or someone with an interest in the agreement), the accessory obligations may still be in effect to protect
their rights.

For example, if Person A owes Person B 1,000 pesos, and Person C agrees to take over the debt (a
novation), the original debt is canceled, and Person C becomes responsible. However, if Person B had a
guarantee or other obligation from a third party (like a co-signer), that obligation might still exist, as the
third party didn't consent to the novation and their rights need to be protected.

ART. 1297. If the new obligation is void, the original one shall subsist, unless the parties intended that the
former relation should be extinguished in any event.

Article 1297 explains that if a new obligation, created through novation (the replacement of an old
obligation with a new one), is found to be void (invalid), the original obligation will continue to exist. This
means that if the new agreement is legally invalid for any reason, the original debt or agreement will still
stand. However, if the parties involved intended for the original relationship to end regardless of the
validity of the new obligation, then the original obligation will be extinguished.

In simpler terms, if the new obligation is canceled or invalid, the old obligation comes back into effect
unless both parties specifically agreed that the old obligation would be canceled no matter what happens
with the new one.

For example, if Person A owes Person B 1,000 pesos and they agree to replace it with a new agreement
where Person A promises to give Person B a car. If the new agreement is later found to be invalid (for
example, because it wasn’t legally signed), the original debt of 1,000 pesos will still exist, unless Person A
and Person B had clearly agreed that the original debt would be completely canceled once the new
agreement was made, no matter its validity.

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.

Article 1298 explains that if the original obligation (the original agreement or debt) is void (invalid), the
novation (the replacement of the original obligation with a new one) is also considered void. This means
that if the first obligation wasn’t legally valid, the new obligation created through novation cannot be valid
either. However, there are two exceptions to this rule:

1. If the annulment of the original obligation can only be claimed by the debtor (the person who
owes the debt), the novation may still be valid.
 2. If the original obligation was voidable (it could be canceled by one of the parties, but hasn’t been
canceled yet), and the parties later ratify or confirm the agreement, the novation can still be valid.

In simple terms, if the original agreement is invalid, the new one won't work unless the debtor has the
right to cancel the original obligation or if the original agreement can still be confirmed by the parties.

For example, if Person A and Person B agree to a contract, but that contract is invalid because it was not
properly signed (making it void), and then they try to replace it with a new agreement (novation), the new
agreement is also void. However, if Person A, the debtor, is the only one who can cancel the contract,
Person A could still confirm the original contract and the novation might be valid. Similarly, if the original
contract was voidable and Person A later confirms it, the novation can be valid.

ART. 1299. If the original obligation was subject to a suspensive or resolutory condition, the new obligation
shall be under the same condition, unless it is otherwise stipulated.

Article 1299 explains that if the original obligation (the original debt or agreement) was subject to a
suspensive condition (something that must happen before the obligation becomes effective) or a
resolutory condition (something that, if it happens, will end the obligation), the new obligation created
through novation will also be subject to the same type of condition unless the parties involved agree
otherwise. In other words, the conditions attached to the original agreement carry over to the new
agreement unless both parties decide to change them.

This rule ensures that if the original obligation was dependent on certain conditions, those same
conditions will apply to the new obligation unless there is a clear agreement to modify them. This helps
maintain the same structure or requirements for the new obligation, providing clarity for both parties
involved.

For example, if Person A and Person B have a contract where Person A will pay Person B 1,000 pesos only
if Person A gets a job (a suspensive condition), and they later agree to replace that contract with a new
one (novation), the new contract will still have the same condition—that Person A only has to pay the
1,000 pesos if they get a job—unless they both decide to remove or change that condition in the new
agreement.

ART. 1300. Subrogation of a third person in the rights of the creditor is either legal or conventional. The
former is not presumed, except in cases expressly mentioned in this Code; the latter must be clearly
established in order that it may take effect.

Article 1300 explains that there are two types of subrogation: legal and conventional. Subrogation happens
when a third person takes over the rights of the creditor (the person owed money) to collect the debt.

Legal subrogation occurs automatically in certain situations defined by law. For example, if a third party
pays off a debt on behalf of the debtor, the law might automatically allow that third party to step into the
creditor’s shoes and claim the rights to the debt. However, legal subrogation is not assumed unless
specifically stated by law.

Conventional subrogation happens when both the creditor and the third person agree that the third
person will take over the creditor’s rights. This agreement must be clearly stated for the subrogation to be
valid. For example, if Person A owes Person B money and Person C pays the debt, Person C would need an
agreement with Person B to claim the rights to the debt, and this agreement must be clearly expressed for
the subrogation to be effective.