OBLIGATIONS

without the knowledge or against the

will of the debtor, but the debtor later
voluntarily reimburses the third person,
the obligor cannot recover what he has
ART. 1156 paid (Art. 1425)
A juridical necessity to give, to do or not to do. ii. After an action to enforce a civil
obligation has failed the defendant
A juridical necessity because in case of voluntarily performs the obligation, he
noncompliance, the courts of justice may be called cannot demand the return of what he
upon by the aggrieved party to enforce its has delivered or the payment of the
fulfillment or, in default thereof, the economic value of the service he has rendered.
value that it represents. (Art. 1428)
iii. When a testate or intestate heir
ART. 1423 voluntarily pays a debt of the decedent
exceeding the value of the property
Obligations are either natural or civil
which he received by will or by the law
Kinds of Obligations as to Basis of intestacy from the estate of the
deceased, the payment is valid and
and Enforceability
cannot be rescinded by the payer. (Art.
a. CIVIL OBLIGATIONS 1429)
- Derive their binding force from ESSENTIAL ELEMENTS OF
positive law or substantive law and OBLIGATION
can be enforced by court action or
the coercive power of public a. Active Subject (creditor/obligee) – the
authority person who is entitled to demand the
- In this sense, there is juridical fulfillment of the obligation; he who has a
right
necessity to perform the obligation
b. Passive Subject (debtor/obligor) – who is
because it can result in judicial or
bound to the fulfillment of the obligation;
legal sanctions
he who has a duty
b. NATURAL OBLIGATIONS c. Object or Prestation (subject matter of the
- Based on equity and natural law obligation) – refers to the promise or
- Do not grant a right of action to particular conduct to be performed in the
enforce their performance, but after fulfillment or rendition of the obligation,
voluntary fulfillment by the obligor, which may be to give, to do or not to do.
they authorize the retention of what Without the prestation, there is nothing to
has been delivered or rendered by perform.
reason thereof. (Art. 1428, Civil d. VINCULUM JURIS / EFFICIENT CAUSE /
Code) JURIDICAL TIE– that which binds or
connects the parties to the obligation; the
EXAMPLES OF NATURAL OBLIGATIONS reason why the obligation exists which can
be any of the five sources of obligations.
i. A third party pays a debt which the
obligor is not legally bound to pay REQUISITES OF AN OBJECT OR PRESTATION OF AN
because the action has prescribed, OBLIGATION
 i. Must be possible, physically, and
Obligations derived from law are
juridically not presumed. Only those
ii. Must be determinate, or, at least, expressly determined in this
determinable according to pre- Code or in special laws are
established elements or criteria
iii. must have possible equivalent in money and policies recognized and enforces
by judicial decision
TRANSMISSIBILITY OF
Such obligations shall be regulated by:
OBLIGATIONS
a. The precepts (general rule) of the law
GENERAL RULE: all rights acquired in virtue of an
which established them; and
obligation are transmissible
b. As to what has not been foreseen, by
EXCEPTIONS: the provisions of the Civil Code (Art.
1158, Civil Code)
a. When the nature of the obligations is that it
is not transmissible; when the rights are 2. CONTRACTS
purely or strictly personal in nature, i.e., the (OBLIGATIONS EX
qualifications and skills of the person have
been considered in the constitution of the CONTRACTU)
contract. - A meeting of minds between two
b. By stipulation; e.g., the right to sublease is persons whereby one binds himself,
granted by law – but may be prohibited by with respect to the other, to give
stipulation something or to render some
c. By provision of law; e.g., heirs as to the service. (Art. 1305, Civil Code)
usufruct. The law provides that the rights of - Obligations arising from contracts
a usufructuary shall not be transmitted to have the force of law between the
the heirs, unless the parties stipulate contracting parties and should be
otherwise complied with in good faith. (Art.
1159, Civil Code)

SOURCES OF 3. QUASI-
CONTRACTS
OBLIGATIONS (Obligations ex
1. LAW quasi-contractu)
 Juridical relation resulting
(OBLIGATIONS EX from lawful, voluntary, and unilateral acts
LEGE) by virtue of which the parties become
bound to each other to the end that no one
- Refers to the principles and
will be unjustly enriched of benefited at the
regulations established in a
expense of another.
community by some authority and
applicable to its people, whether in KINDS OF QUASI-CONTRACT
the form of legislation or of custom
 A. NEGOTIORUM GESTIO – voluntary substitute him, if the owner is in a position
management of the property or affairs of to do so. (Art. 2144)
another without the knowledge or consent  The officious manager shall perform his
of the latter. (Art. 2144) duties with all the diligence of a good father
of a family, and pay the damages may be
Whoever voluntarily takes charge of the
suffered by the owner of the property
property of another, without any power from
because of his negligence. (Art. 2145)
the latter, is obliged to continue the same until
 If the officious manager delegates to
the termination of the affair and its incidents,
another person all or some of his duties, he
or to require the person concerned to
shall be liable for the acts of the delegate,
substitute him, if the owner is in a position to
without prejudice to the direct obligation of
do so. This juridical relation does not arise in
the latter toward the owner of the business.
either of these instances:
(Art. 2146)
 When the property or business is not  The responsibility of two or more officious
neglected or abandoned managers shall be solidary, unless the
 If in fact the manager has been tacitly management was assumed to save the thing
authorized by the owner (Art. 2144) or business from imminent danger (Art.
2146)
OBLIGATIONS OF THE OWNER
 The officious manager shall be liable for any
 Owner of the property who enjoys the fortuitous event:
advantages of the officious management a. If he undertakes risky operations
shall be liable for obligations incurred in his which the owner was not
interest, and shall reimburse the officious accustomed to embark upon;
manager for the expenses and damages b. If he has preferred his own interest
which the latter may have suffered in the to that of the owner;
performance of his duties. (Art. 2150) c. If he fails to return the property or
 Same obligation shall be incumbent upon business after demand by the
him when the management prevent an owner;
imminent loss, although no benefit may d. If he assumed the management in
have been derived. (Art. 2150) bad faith.
 Owner is liable under these conditions even  Except when the management was assumed
no benefit has been derived and no to save property or business from imminent
imminent loss: danger, the officious manager shall be liable
a. The officious manager has acted in for fortuitous events:
good faith, and a. If he is manifestly unfit to carry on
b. The property or business is intact, the management;
ready to be returned to the owner b. If by his intervention he prevented a
more competent person from taking
OBLIGATIONS OF THE OFFICIOUS MANAGER
up the management.
 Whoever voluntarily takes charge of the
MULTIPLE OFFICIOUS MANAGERS: are generally
management of the business or property of
another, without any power from the latter, liable solidarily unless the officious management
is obliged to continue the same until the was done under imminent danger which makes the
termination of the affair and its incidents, or obligations merely joint.
to require the person concerned to
 A. SOLUTIO INDEBITI – the juridical Title on Human Relations under the Civil
relation which is created when something Code.
is received when there is no right to
demand it and it was unduly delivered
through mistake
Requisites: Civil liability arising from a criminal act includes:
 There is no right to receive the a. RESTITUTION – restoration of the thing
thing delivered itself even though it be found in the
 The thing was delivered through possession of a third person who has
mistake
acquired it by lawful means
MULTIPLE PAYEES: are liable solidarily for the b. REPARATION OF THE DAMAGE CAUSED –
return of the payment received by mistake shall be determined by the Court taking into
consideration of the price of the thing and
OTHER EXAMPLE OF QUASI-CONTRACTS
its sentimental value
a. When funeral expenses are borne by a c. INDEMNIFICATION FOR CONSEQUENTIAL
third person, without the knowledge of DAMAGES – shall include not only those
those relatives who were obliged to give caused the injured party but also those
support to the deceased, said relatives suffered by his family or by a third person by
shall reimburse the third person, should
reason of the crime (Art. 104, Revised Penal
the latter claim reimbursement. (Art.
Code)
2165)
b. A stranger gives support to a child of Proof Necessary:
another person without the knowledge
a. CRIMINAL LIABILITY – proof beyond
of the person obliged to give support
reasonable doubt
(Art. 2166, Civil Code)
b. CIVIL LIABILITY – preponderance of
c. When through an accident or other
evidence
cause a person is injured or becomes
seriously ill, and he is treated or helped Acquittal of accused:
while he is not in a condition to give
a. Acquittal because the accused did not do
consent to a contract, he shall be liable
the act complained of – no civil liability
to pay for the services of the physician
b. Acquittal due to reasonable doubt – there
or other person aiding him, unless the
can still be civil liability
service has been rendered out of pure
generosity. (Art. 2167, Civil Code) Employer’s subsidiary liability:
4. DELICT - An employer engaged in any kind of
(OBLIGATIONS EX industry shall be subsidiarily liable for
felonies committed by their employees in
MALEFICIO OR EX the discharge of their duties (Art. 103,
Revised Penal Code)
DELICTO)
Persons Exempt from Criminal Liability:
- An act or omission punishable by law
which may be governed by the Revised a. An imbecile or insane person
Penal Code, other penal laws, or the b. A person under 18 years of age
 c. Any person who acts under the compulsion c. exists a damage or injury which must be
of an irresistible force proved by the person claiming recovery
d. Any person who acts under the impulse of (plaintiff-complainant)
an uncontrollable fear of an equal or greater d. there must be a direct causal connection
injury or a relation of cause and effect
Persons Exempt from Both Civil and Criminal between the fault or negligence and the
Liability: damage or injury, or that the fault or
negligence be the cause of the damage
a. Any person who acts in self-defense of one-
or injury
self of relatives or of strangers
b. Any person who acts in the performance of VICARIOUS LIABILITY: Under Art. 2180 of the
his duties or obligations
c. A woman suffering from battered woman
syndrome
5. QUASI-DELICTS
(OBLIGATIONS EX
QUASI-DELICTO OR
EX QAUSI-
MALEFICIO)
- Whoever by act or omission causes damage
to another, there being fault or negligence,
is obliged to pay for the damage done.
- Such fault or negligence, if there is no pre- Civil Code, the following are responsible for the
existing contractual relation between the damages caused by:
parties (Art. 2167, Civil Code)

REQUISITES:
DEFENSE: the responsibility shall cease when
a. No pre-existing relation between the the persons mentioned prove they observed all
offender and offended parties the diligence of a good father of a family to
 Exceptional cases allow filing of prevent damage.
civil action based on quasi-delict
despite the presence of
QUASI-DELICT VS. CRIME/DELICT
contractual relations if the act
that violated the contract right violated is a A public right
constitutes a tortuous act on private right
itself. Name of the case if
Name of the case is
b. exists a wrongful act or omission People of the
Private-Plaintiff vs.
imputable on the defendant by reason Philippines vs.
Respondent or
Accused
of his fault or negligence Defendant
Every quasi-delict No civil liability
 gives rise to liability
for damages to the
arises
CONCURRENT
injured party OBLIGATIONS IN
Criminal liability for
IMPRISONMENT OBLIGATIONS TO GIVE A
AND FINES can
Can be
never be
DETERMINATE THING
compromised
compromised a. to take care of it with the proper diligence of a
except in case of
good father of a family (bonus pater familia),
criminal negligence
unless there is stipulation, or the law requires
Criminal intent is
another standard of care. (Art. 1163, Civil
necessary except in
a. Criminal Code)
negligence b. To deliver the fruits of the thing from the time
b. Mala the obligation to deliver it arises.
prohibita or - The creditor will not acquire real
Criminal intent is crimes rights over the fruits until it is
not necessary where good delivered to him (Art. 1164, Civil
faith is not a Code)
defense
where PERSONAL RIGHT – a right that can be
criminal exercise only against a specific person
intent is not thereby prohibiting an action to recover the
required ownership or possession of a specific thing
Must be PROVEN BY if already with a third person but only
PROOF BEYOND
allows action for damages against a specific
REASONABLE
person.
DOUBT although
Claims arising form
civil damages arising REAL RIGHT – a right that can be exercise
quasi-delict must
from crime may be against the whole world thereby allowing an
be PROVEN BY
proven only by
PREPONDERANCE action to recover the ownership or
preponderance of
OF EVIDENCE possessions of a specific thing regardless of
evidence by the
private offended the possessor of such thing.
party plaintiff or
victim of the crime KINDS OF FRUITS:
 NATURAL – spontaneous products of
MULTIPLE SOURCES OF OBLIGATIONS: a single act the soil, and the young and other
can be the source of multiple sources of obligations products of animals
 INDUSTRIAL – produced by lands of any
DOUBLE RECOVERY NOT ALLOWED: the plaintiff
kind through cultivation or labor
cannot recover damages twice for the same act or
 CIVIL – result of civilization or fruit
omission of the defendant (Art. 2177, Civil Code)
arising out of a juridical relation or

NATURE AND EFFECT OF contracts such as the rents of buildings,

the price of leases of lands and other

OBLIGATIONS property and the amount of perpetual

or life annuities or other similar income
c. To deliver all accessions and accessories, even ONLY SUBSTITUTE PERFORMANCE IS AVAILABLE:
though they may not have been mentioned. Forcing the obligor to comply (against involuntary
(Art. 1166, Civil Code) servitude)
ACCESSIONS - include everything which is
produced by a thing, or which is Obligations not to do:
incorporated or attached thereto, either And the obligor does it, the creditor may
naturally or artificially have it undone at the expense of the debtor (Art.
ACCESSORIES – refer to those which 1168, Civil Code)
destined for the embellishment, use or their
preservation of another thing or more Rescission in reciprocal obligations
importance, have for their object the Reciprocal Obligation
completion of the latter for which they are
A type of obligation which arises from the
indispensable or convenient.
same cause and in which each party is a debtor and
NOTE: in an obligation to give a creditor of the other, such that the obligation of
a generic thing, no such concurrent one is dependent upon the obligation of the other.
obligations exist (Ex. Contract of sale, barter, lease, common carrier
or service)
REMEDIES FOR BREACH RESOLUTION
OF OBLIGATIONS  A primary remedy where the cause of
action is substantial or fundamental breach
Obligations to give: or non-compliance.
1. DETERMINATE THING – specific  Available once a party is ready to comply
performance only if it is legally and with his part of the obligation and the other
physically possible is not.
 Substitute performance is not
possible GENERAL RULE: The injured party may opt to ask
2. GENERIC THING for the exact fulfillment or specific performance of
a. Specific performance obligation with damages, but he can no longer ask
b. Substitute performance – the for rescission or cancellation of obligation after
creditor can have another person to initial selection of exact fulfillment
have such kind of thing be delivered
at the cost of the debtor plus EXCEPTIONS:
damages (Art. 1165, Civil Code)
 If exacting fulfillment or specific
Obligations to do: performance becomes legally impossible
after its initial selection, the injured
If a person obliged to do something party may exceptionally ask for the
fails to do it, the same shall be executed at rescission of the obligation.
his cost. This same rule shall be observed if  If the injured party elected rescission or
he does it in CONTRAVENTION OF THE cancellation of the obligation plus
TENOR of the obligation. It may be decreed damages, he is now absolutely
that what has been poorly done be undone prohibited from asking exact fulfillment
of the obligation because they are
inconsistent remedies.
DAMAGES the case, be provided with
certainty.
An action for damages may be demanded in
5. Actual – are those pecuniary losses
case of non-fulfillment of an obligation
suffered and duly proved by the
KINDS OF DAMAGES plaintiff.
- The only type of damages
1. Moral – are damages awarded by that would require proof.
reason of physical suffering, mental 6. Liquidated – are damages agreed
anguish, fright, serious anxiety, upon by the parties to a contract, to
besmirched reputation, wounded be paid in case of breach thereof.
feelings, moral shock, social - The type of damages that
humiliation, and similar injury. (Cases is not assessed by the
on page 16) court but merely applied
2. Exemplary – are damages imposed, by based on the contractual
way of example or correction for the stipulation of the parties.
public good, in addition to the moral,
temperate, liquidated or
compensatory damages.
Moral and exemplary Remedies of a judgment creditor in a
damages may be imposed specific action suit
together with the succeeding
other four types of damages A judgment creditor is one who has
or may be awarded in successfully obtained a favorable judgment in a civil
addition to them. action to exact fulfillment or a specific
3. Nominal – are damages adjudicated in performance, will have the following remedies:
order that a right of the plaintiff, 1. To levy by attachment and execution upon
which has been violated or invaded by all the property of the debtor including
the defendant, may be vindicated or garnishment of bank deposits, expect those
recognized, and not for the purpose of properties exempted by law from execution
indemnifying the plaintiff for any loss 2. To exercise all rights and actions of the
suffered by him. debtor, except those rights which are
Adjudication is the legal inherently personal to him (Accion
process of resolving a Subrogatoria)
dispute. It is to make a
formal judgment or decision Requisites of Accion Subrogatoria:
regarding a problem or a. Debtor’s assets must be insufficient to
disputed matter. satisfy claims against him;
4. Temperate – are more than nominal b. Creditor must have pursued all
but less than compensatory damages. properties pf the debtor subject to
May be recovered when the execution
court finds that some c. Right of action must not be purely
pecuniary loss has been personal; and
suffered but its amount d. The debtor whose right of action is
cannot, from the nature of exercised must be indebted to the
creditor.
 3. To ask for the recission or cancellation of  Dolo causante (causal fraud) – or fraud in
the contracts made by the debtor in fraud obtaining consent, is applicable only to
of creditor’s rights (ACCION PAULIANA obligations where consent is necessary thus
affects the validity thereof, making it
Requisites of Accion Pauliana:
voidable.
a. That the plaintiff asking for rescission has a o Through insidious words, or
credit prior to, the alienation, although machinations of one of the
demandable layer; contracting parties, the other is
b. That the debtor has made a subsequent induced to enter into a contrach
contract conveying a patrimonial benefit to which, without them, he would not
a third person; have agreed to.
c. That the creditor has no other legal remedy o Under this fraud, the party would
to satisfy his claim, but would benefit by not have entered into the contract
rescission of the conveyance to the third were if not for the fraud. Annulment
person. is the remedy of the party whose
d. That the act being impugned is fraudulent; consent was obtained through fraud.
and  Dolo incidente (incidental fraud) – the
e. That the third person who received the deliberate and intentional evasion of the
property conveyed, if by onerous title, has normal fulfillment of the obligation.
been an accomplice in the fraud. o Under this, a party would have
entered the obligation with or
4. To file an action for damages against the without the fraud. The proper
third person who acquired the property of remedy is not the annulment of the
debtor in bad faith. obligation but for damages.

SPECIFIC
WAIVER
CIRCUMSTANCES  Future fraud – waiver of an action for future
AFFECTING fraud is void because it is contrary to law
OBLIGATIONS IN and public policy. Such waiver will
encourage commission of crime.
GENERAL  Past fraud – waiver may be considered valid
on the part of the plaintiff and defendant
Those who in the performance of their obligation
provided public interest are not involved.
are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, 2. NEGLIGENCE
are liable for damages (Art. 1170, Civil Code)
(CULPA)
1. FRAUD (DOLO) - Consists in the omission of that
- Responsibility arising from fraud diligence which is required by
is demandable in all obligations. the nature of the obligation and
(Art. 1171) corresponds with the
circumstances of the persons, of
Kinds of Fraud
the time and of the place (Art.
1173, Civil Code)
Degree of care required: o In personal obligations (Mora
solvendi ex persona)
 As a rule
o Required by law; or Effects:
o Agreed upon by the parties
 The debtor becomes liable for
 In the absence of the two above, diligence
damages for the delay or default or
of a good father of a family
mora
Examples of degree of care required by  When it has for its object a
law: determinate thing, the delay or
default or mora places the risk of
 Contract of common carrier – extraordinary
loss of the determinate thing on the
diligence on the part of common carrier
debtor
 Contract of necessary deposit (things
 Mora Accipiendi – delay on the part of the
brought in hotel or motel) – extraordinary
creditor
diligence on the part of hotel or motel or
inn keeper Effects:
 Banks - extraordinary diligence on the part
 The creditor becomes liable for
of the bank
damages
Kinds of Negligence as to SOURCE:  The debtor may relieve himself of
the obligation by the consignation of
 Culpa Contractual – negligence in the
the thing after a valid tender of
performance of a contractual obligation
payment.
(contractual negligence)
 The creditor bears the risk of the
 Culpa Aquiliana – civil negligence or quasi- loss of the determinate thing
delict  The responsibility of the debtor for
 Culpa Criminal – which results in the the loss of the determinate thing is
commission of a crime or a delict (criminal reduced and limited to fraud and
negligence) gross negligence.
 All expenses for the preservation of
Negligence on the part of the supposed
the thing after the delay or default
creditor/injured party:
or mora shall be chargeable to the
 If his negligence was the immediate and creditor
proximate cause of the injury, there is no  Compensatio Morae – delay on the part of
recovery for damages. both parties
 If his negligence was only contributory – he Effects:
may still recover damages, BUT the courts
can mitigate or reduce the same  The delays of both debtor and
creditor are compensated or offset.
3. DELAY Therefore, no one will be liable for
damages by reason of delay.
Kinds of Delay
 Mora Solvendi – delay on the part of the WHEN CONSIDERED IN DEFAULT
debtor, which may either be: GENERAL RULE: upon demand, which may be
o In real obligations (Mora solvendi ex
judicial or extra-judicial (Art. 1169, Civil Code)
re)
EXCEPTIONS:
5. FORTUITOUS
a. When stipulated – a due date in itself is not
enough, what should be stipulated is that
EVENT
- An excuse for non-performance
there is no need for demand to consider the
- By definition are extraordinary
debtor in default
events not foreseeable or
b. When the law so declares avoidable.
c. When the time is of the essence - Must be one impossible to
d. When demand would be useless foresee or to avoid
e. When there is a performance by a party in
Requisites:
reciprocal obligations –where the respective
obligations must be performed  The event must be independent of the
simultaneously, and one party was not human will or at least of the debtor’s
ready. (Art. 1169, Civil Code). However, if will;
the parties agreed to specified due dates for  The event could not be foreseen, or if
their respective obligations, no delay shall foreseen, is inevitable;
set in unless there is demand.  The event makes it impossible for the
debtor to comply with his obligations in
Obligation Not To Do: there is no delay in a normal manner; and
obligations not to do  The debtor must have no concurrent
negligence on his part
4. ANY OTHER Absence of any of the above
MANNER OF requisites would prevent the obligor
from being exempt from liability.
CONTRAVENTION
GENERAL RULE: No person shall be responsible for
(VIOLATIO) those events which could not be foreseen, or which
- Refers to illicit act which impairs though foreseen, were inevitable (Art. 1174, Civil
the strict and faithful fulfillment Code)
of the obligation or every kind of
EXCEPTIONS:
defective performance.
- Refers to the violation of the a. When expressly specified by law – in
terms and conditions of exceptions (first three) below, the special
obligation or defects in the strictness of the law is justified
performance of the obligation  The debtor is guilty of fraud,
negligence, or delay, or
In general, every debtor who contravention of the tenor of the
fails in performance of his obligation (Art. 1170, 1165, par. 3,
obligations is bound to Civil Code)
indemnify for the losses and  The debtor has promised to deliver
damages caused thereby. the same (specific) thing to two (2)
or more persons who do not have
the same interest
 The obligation to deliver a specific
thing arises from a crime (Art. 1268)
  The thing to be delivered is generic an obligation (or right) subject to
(Art. 1263) it depends
 Debtor can still comply with his
obligation by delivering another KINDS OF CONDITIONS
thing of the same kind in accordance Happening of which
with the principle that “genus never As to when gives rise to the
SUSPENSIVE
perishes” (Genus Nunquam Perit) obligation (condition
the
b. When declared by stipulation – the precedent)
obligation
intention to make the debtor liable even in Happening of which
should be
case of a fortuitous event should be clearly extinguishes the
performed/a RESOLUTORY rights already
expressed
s to effect existing (condition
c. When the nature of the obligation requires
the assumption of risk subsequent)
The condition

KINDS OF CIVIL depends upon the

will of one of the

OBLIGATIONS contracting parties

The conditional
AS TO PERFECTION AND obligation shall be
void when the
EXTINGUISHMENT fulfillment of the
POTESTATIVE
As to whom condition depends
1. PURE OBLIGATIONS – one which
upon the sole will of
is not subject to any condition and no or where it
the debtor. This is so,
specific date is mentioned for its fulfillment depends
because if it were
and is, therefore, immediately demandable. on/as to
allowed by law, there
- Does not depend upon a future cause or is a possibility that
or uncertain event, or upon a origin the obligation will
past event unknown to the never arise. (Art,
parties, and is demandable at 1182, Civil Code)
once. (Art. 1179, Civil Code) Depends upon
Obligations with a resolutory condition or CASUAL chance or the will of
resolutory term are demandable at once since the a third-person
happening of the condition or the arrival of the Depends partly upon
term extinguishes the already demandable chance and partly
MIXED
obligation. upon the will of a
third-person
2. CONDIITIONAL OBLIGATIONS As to
DIVISIBLE
Can be performed in
– is one whose consequences are subject in capacity to parts
one way or another to the fulfillment of a be
condition performed Cannot be
INDIVISIBLE
 Condition – a future and in parts/as performed in parts
uncertain event, upon the to divisibility
happening of which, the As to the CONJUNCTIV There are several
effectivity or extinguishment of conditions and all
 number of E must be fulfilled Effect:
obligations
a. When an impossible condition is
are to be There are several imposed, the obligation and the
performed conditions and only condition are treated as void since the
DISJUNCTIVE
when there one or some of them debtor knows that no fulfillment can be
are several must be fulfilled done, and therefore is not serious about
of them being liable
Condition consists in b. In obligations not to do, the impossible
POSITIVE the performance of condition can just be disregarded, and
As to
an act
nature/mod
Condition consists in
e
NEGATIVE the omission of an
act
As to how Condition is clearly
EXPRESS the obligation remains
made known stated
to the other EFFECT OF FULFILLMENT OF
party/as to IMPLIED Merely inferred
CONDITIONS
form
As to Condition is capable GENERAL RULE: Once the condition has been
whether the POSSIBLE of fulfillment, legally
obligation and physically
can be
Not capable of
fulfilled/as IMPOSSIBLE
fulfillment
to possibility
CONSTRUCTIVE or PRESUMED FULFILLMENT OF
SUSPENSIVE CONDITION (Art. 1186, Civil Code)
- The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment for one
must not profit by his own fault or bad faith.

IMPOSSIBLE CONDITIONS: shall annul the

obligation which depends upon them. If the fulfilled, it shall retroact to the day of the
obligation is divisible, that part thereof which is not constitution of the obligation. (Art. 1187, Civil
affected by the impossible or unlawful condition Code)
shall be valid (Art. 1183, Civil Code) In conditional obligation to do or not to do, the
Two kinds of impossible courts shall determine, in each case, the retroactive
effect to the fruits of the condition that has been
conditions
complied with taking into account the agreement
 Physically impossible – when they, in nature of the parties.
of things, cannot exist or cannot be done
 Legally impossible – when they are contrary EXCEPTIONS:
to law, morals, good customs, public order,  Fruits or interests in obligation to give
or public policy
 a. Reciprocal obligations – the determinate thing such as filing a petition for asset
fruits are deemed mutually preservation order over the determinate thing.
compensated 3. OBLIGATIONS WITH A
b. Unilateral obligations – the
PERIOD/TERM
debtor is entitled to the fruits,
unless a contrary intention  a period is a certain length of time which
appears determined the effectivity or the
 Period of prescription – counted still from extinguishment of the obligation.
the time the condition was fulfilled  Unlike a condition, a period is certain to
arrive or must necessarily come even
CONDITION WHERE OBLIGATION IS TREATED AS
though it may not be known when.
ONE WITH A PERIOD: when the debtor binds himself
to pay when his means permit him to do so, the KINDS OF TERM:
obligation shall be deemed to be one with a period (Art.
 Definite – specific date, e.g., Dec. 31, end of
1180)
the year this year, within 6 months;
SUSPENSIVE CONDITIONS WITH A DEADLINE: the  Indefinite – period may arrive upon the
condition that some event happen at a determinate fulfillment of a certain event which is
time shall extinguish the obligation as soon as the time certain to happen. E.g., death
expires or if it has become indubitable (unquestionable)
that the event will not take place. Or

RULES AS TO IMPROVEMENT, LOSS, OR  Legal – imposed or provided by law, e.g.,

DETERIORATION: Art. 1189 provides that in case of filing of taxes; obligations to give support –
obligations to give a specific or determinate thing is within the first 5 days of the month
subject to a suspensive condition, the following rules  Voluntary – agreed upon by the parties
shall be observed in case of the improvement, loss or  Judicial - those fixed by courts
deterioration of the thing during the pendency of the
condition: As to effect, a term/period may be:

 Ex die – a period with a suspensive effect

 In diem - a period with a resolutory effect
The above rules likewise apply to obligations with
a period. THE COURTS CAN FIX THE
The thing is considered lost when it: PERIOD IN THE FOLLOWING
 Perishes
CIRCUMSTANCES:
 Goes out of commerce  Under Art. 1191, par. 3: in reciprocal
 Disappears in such a way that its existence is
obligations, when one party asked for the
unknown, or it cannot be recovered
recission of obligation, the court shall
 Is a destroyed specific thing or determinate
decree such rescission claimed, unless there
thing or delimited generic thing
be just cause authorizing the fixing of a
REMEDY OF CREDITOR DURING PENDENCY OF THE period
CONDITION: Before the fulfillment of suspensive  Under Art. 1197:
condition or during pendency of the suspensive
condition, the creditor may preserve his right over the o If the obligation does not fix a period
but a period was intended (nature
 and circumstance), the courts may  when the debtor violates any undertaking,
fix the duration thereof in consideration of which the creditor
o The court shall also fix the duration agreed to the period
of the period when it depends upon  when the debtor attempts to abscond (a
the will of the debtor. sign of bad faith and intention not to
 Ex. When the obligation is comply with the obligation
payable when the debtor’s o what is material here is the intent of
means permit him to do so. the debtor in absconding

PAYMENT BY MISTAKE DURING PENDENCY OF THE

BENEFIT OF THE PERIOD
SUSPENSIVE CONDITION OF PERIOD:
GENERAL RULE: Whenever in an obligation a period
 if during the pendency of the suspensive
is designated, it is presumed to have been
condition, the debtor has paid by mistake a
established for the benefit of both the creditor and
sum of money, the debtor can recover the
the debtor.
sum of money, but the interests can be
EXCEPTIONS: From the tenor of the obligation or recovered only if the creditor acted in bad
other circumstances it should appear that the faith
period has been established in favor of one or of o whoever in bad faith accepts an
the other. (Art. 1196) undue payment, shall pay legal
interest if a sum of money is
Consequences of general rule:
involved
 the debtor cannot be made to pay before  if during the pendency of the suspensive
the period period, the debtor has paid by mistake a
 the creditor cannot be made to accept sum of money, the debtor can recover not
payment before the period only the sum of money but also additional
interests whether the creditor acted in good
DEBTOR’S LOSS OF BENEFIT OF THE PERIOD: the
faith or bad faith
debtor loses the right to make use of the period in
o anything paid or delivered before
the following cases:
the arrival of the suspensive period,
 when after the obligation has been the obligor being unaware of the
contracted, he becomes insolvent, unless he period or believing that the
gives a guaranty or security for the debt obligation has become due and
 when he does not furnish to the creditor demandable, may be recovered,
the guaranties or securities which he has with the fruits and interests
promised  if during the pendency of the suspensive
 when by his own acts he has impaired said condition or period, the debtor has
guaranties or securities after their delivered a determinate or specific thing by
establishment, and when through a mistake, the may file (1) an accion
fortuitous event they disappear, unless he reinvidicatoria if the thing is with the
immediately gives new ones equally creditor or (2) an action for indemnification
satisfactory for damages if the thing is no longer with
the creditor
 o Undue payment, when accepted in prestations that could not have been
bad faith, shall be liable for fruits the obligation's object.
received. He shall furthermore o The choice, to take effect, must be
answerable for any loss or communicated. The communication
impairment of the thing from any of the choice made is technically
cause, and for damages to the called “concentration”
person who delivered the thing, until o The choice cannot be part of one
it is recovered. and part of another
o Undue payment, when accepted in o When from all the choices, only one
good faith, only results in is practicable, the debtor shall lose
impairment or loss of the thing or its the right of choice. Logically, the
accessories and accessions if obligation would be to deliver that
benefited, and alienation requires a which remains
return or assign the action to collect
the sum.
o The obligor may recover any
payments or deliveries with the
fruits and interests made before the
suspensive period if they are
unaware of the period or believe the
obligation is due and demandable.

AS TO PLURALITY OF PRESTATION
 CONJUNCTIVE
- use the word “and”
- all the prestations must be complied with
in order to fulfill the obligation
 ALTERNATIVE
- use the word “or”
- performance of the one of the prestations  FACULTATIVE
fulfill the obligation - when only one prestation has been agreed
o Fulfillment of one is sufficient for upon, but the obligor may render another in
several objects due substitution
o Right of choice: generally, belongs to o Right to substitute: is always with
the debtor except: the debtor. He cannot be compelled
o When expressly granted to the to make the substitution.
creditor i.e., it cannot be implied; or
o When the right of choice is given to
a third party
o The debtor's right of choice is
limited to impossible, unlawful, or
AS TO RIGHTS AND OBLIGATIONS should be made to him. (Art. 1214, Civil
Code)
OF MULTIPLE PARTIES
 The obligation can be extinguished through
SOLIDARY OBLIGATION novation, compensation, confusion, or
remission by any of the solidary creditors or
- one in which each debtor is liable for the debtors. (Art. 1215)
entire obligation or o The creditor who executed any of these
- each creditor is entitled to demand the acts and collects the debt is liable to
whole obligation others for their share in the
Solidarity arises when the obligation: corresponding obligation. (Art. 1215, 2nd
par.)
 Expressly so states (stipulated): jointly o The creditor's remission of a share
and/or severally; in solidum; individually; affecting a solidary debtor does not
juntos o separadamente; “I promise to pay” relieve the debtor from his responsibility
 When the law requires solidarity: towards the co-debtors if the debt was
o When multiple heirs inherit an fully paid. (Art. 1219)
estate, they are solidarily liable for o The remission of the whole obligation,
the loss or destruction of the obtained by one of the solidary debtors,
devised or bequeathed item. (Art. does not entitle him to reimbursement
927) from his co-debtors (Art. 1220)
o Even when the agent has exceeded  A solidary debtor may, in actions filed by the
his authority, the principal is creditor, avail himself of all defenses which
solidarily liable with the agent if the are derived from the nature of the
former allowed the latter to act as obligation and of those which are personal
though he had full powers (Art. to him, or pertain to his own share. With
1911) respect to those which personally belong to
o When there are two or more bailees the others, he may avail himself thereof
to whom a thing is loaned in the only as regards that part of the debt for
same contract, they are liable which the latter are responsible. (Art. 1222,
solidarily (Art. 1945) Civil Code)
o The responsibility of two or more
payees, when there has been Examples of Total Defenses:
payment of what is not due, is  Payment by another co-debtor, as to a
solidarily (Art. 2157) subsequent demand of a creditor
o The responsibility of two or more  If the contract is void
persons who are liable for quasi-  If the obligation has prescribed
delict is solidary (Art. 2194)
 When the nature of the obligation requires  Payment made by one of the solidary
solidarity debtors extinguished the obligation. He who
ENFORCEMENT OF SOLIDARY OBLIGATIONS made the payment may claim from his co-
debtors only the share which corresponds
 The debtor can pay any of the solidary to each, with the interest for the payment
creditors, but if a demand is made by one of already made. (Art. 1217, Civil Code)
them (judicial or extrajudicial), payment  When one of the solidary debtors cannot,
because of his insolvency, reimburse his
 share to the debtor paying the obligation,  There are 2 or more creditors or 2 or more
such share shall be borne by all his co- debtors, but they are named disjunctively as
debtors, in proportion to the debt of each. debtors and creditors in the alternative.
(Art. 1217, last par., Civil Code)  The rules on solidary obligations must apply.
 The creditor may proceed against any one
of the solidary debtors or some or all of AS TO PERFORMANCE OF
them simultaneously. (Art. 1216, Civil Code) PRESTATION
 Payment by a solidary debtor shall not
A. DIVISIBLE – when the prestation is capable
entitle him to reimbursement from his co-
of partial performance
debtors if such payment is made after the
obligation has prescribed or become illegal. Obligations deemed divisible:
(Art. 1218, Civil Code)
 The object of the obligation is the execution
JOINT OBLIGATIONS of a certain number of days of work.
 When the object is the accomplishment of
 One in which each of the debtors is liable work by metrical units.
only for a proportionate part of the debt or  When the purpose of the obligations is to
each creditor is entitled only to a pay a certain amount in installments.
proportionate part of the credit.  When the object of the obligation is the
 There are as many OBLIGATIONS as there accomplishment of work susceptible of
are debtors multiplied by the number of partial performance. (Art. 1225, Civil Code)
creditors.
 Each debt/credit is considered independent B. INDIVISIBLE – when the prestation is NOT
of each other. capable of partial performance
Effects: Obligations deemed indivisible:
 The demand by one creditor upon one  Obligation to give definite things
debtor, produces the effects of default only  Those not susceptible of partial
with respect to the creditor who demanded performance
and the debtor of whom the demand was  If capable of partial performance but the
made, but not with respect to the others; law or the intention of the parties treats it
 The interruption of prescription by the as indivisible. (Art. 1225, Civil Code)
judicial demand of one creditor upon a
debtor does not benefit the other creditors Nature and Effects of Obligations: the divisibility or
nor interrupt the prescription as to other indivisibility of the things that are object of
debtors. obligations in which there is only one debtor and
 The vices of each obligation arising from the only one creditor does not alter or modify the rules
personal defect of a particular debtor or on Nature and Effects of Obligations discussed
creditor does not affect the obligation or earlier.
rights of the others; Multiple Parties: The rules on solidarity and joint
 The insolvency of a debtor does not are still observed.
increase the responsibility of his co-debtors,
nor does it authorize a creditor to demand The indivisibility of an obligation does not
anything from his co-creditors; necessarily give rise to solidarity. Nor does
solidarity of itself imply indivisibility. (Art. 1210,
DISJUNCTIVE Civil Code)
 i. JOINT INDIVISIBLE principal obligation carries with it that of the penal
 If the division is impossible, the right clause. (Art. 1230, Civil Code)
of the creditors may be prejudiced
only by their collective acts, and the Payment of penalty instead of fulfillment of the
debt can be enforced only by obligation: the debtor cannot exempt himself from
proceeding against all the debtors. the performance of the obligation by paying the
o If one of the latter should be penalty, save in the case where this right has been
insolvent, the others shall expressly reserved for him.
not be liable for his share.
 Neither can the creditor demand the
(Art. 1209, Civil Code)
fulfillment of the obligation and the
 Gives rise to indemnity for damages
satisfaction of the penalty at the same time,
from the time anyone of the debtors
unless this right has been clearly granted
does not comply with his
him.
undertaking.
 However, if after the creditor has decided to
o The debtors who may have
require the fulfillment of the obligation, the
been ready to fulfill their
performance thereof should become
promises shall not contribute
impossible without his fault, the penalty
to the indemnity beyond the
may be enforced. (Art. 1227, Civil Code)
corresponding portion of the
price of the thing or of the Reduction of penalty: the courts can reduce the
value of the service in which penalty whenever:
the obligation consists. (Art.
1224, Civil Code)  The principal obligation has been partly or
ii. SOLIDARY INDIVISIBLE irregularly complied with
 The penalty same is iniquitous or
OBLIGATION WITH A PENAL unconscionable. (Art. 1229, Civil Code)
CLAUSE
General rule: the penalty shall substitute the
indemnity for damages and payment of interests in
case of non-compliance

Exceptions:

 If there is stipulation to the contrary

 If the debtor refuses to pay the penalty
 If the debtor is guilty of fraud in the
fulfillment of the obligation. (Art. 1226, Civil MODES OF
Code)

Proof of actual damages suffered by the creditor is

EXTINGUISHMENT OF
not necessary in order that the penalty may be
demanded. (Art. 1228, Civil Code)
OBLIGATIONS
Obligations are extinguished:
The nullity of the penal clause does not carry with
it that of the principal obligation. The nullity of the  By payment or performance
  By the loss of the thing due 2) Estoppel by deed occurs when a party to a
 By the condonation or remission of the debt deed and his privies are precluded from
 By the confusion or merger of the rights of denying any material fact stated in the said
creditor and debtor deed as against the other party and his
 By compensation privies.
 By novation 3) Estoppel by laches is considered an
equitable estoppel wherein a person who
Other causes of extinguishment of obligation:
failed or neglected to assert a right for an
 Annulment unreasonable and unexplained length of
 Rescission time is presumed to have abandoned or
 Fulfillment of a resolutory condition otherwise declined to assert such right and
 Prescription (Art. 1231) cannot later on seek to enforce the same, to
the prejudice of the other party, who has no
Annulment and Rescission: are modes to extinguish
notice or knowledge that the former would
a voidable and rescissible contract, respectively.
assert such rights and whose conditions has
Prescription: refers to the mode of extinguishment so changed that the latter cannot, without
of right to file an action or obligation by the mere injury or prejudice, be restored to his
lapse of time fixed by law. former state.
It converts the enforceable civil obligation into an
unenforceable natural obligation.
PAYMENT OR
 6 years for quasi contract
PERFORMANCE
 6 years for oral contract Payment means not only the delivery of money but
 10 years for written contract also the performance, in any other manner, of an
 10 years for court judgment obligation. (Art. 1232, Civil Code)
 4 years for quasi delict
 1 year for libel or unlawful detainer or A debt shall not be understood to have been paid
forcible entry unless the thing or service in which the obligation
consists has been completely delivered or
Estoppel: prevents a person to claim differently rendered, as the case may be. (Art. 1233, Civil
from his representation or acts which was already Code)
relied upon by the other party. Which may be:
Substantial Performance: if the obligation has been
1) Estoppel in pais means a person is substantially performed in good faith, the obligor
considered in estoppel if by his conduct, may recover as though there had been a strict and
representation or admissions or silence complete fulfillment, less damages suffered by the
when he ought to speak out, whether oblige. (Art. 1234, Civil Code)
intentionally, or through culpable
negligence, causes another to believe Incomplete performance: when the oblige accepts
certain facts to exist and such other the performance, knowing its incompleteness or
rightfully relies and acts on such belief, as a irregularity, and without expressing any protest or
consequence of which he would be objection, the obligation is deemed fully complied
prejudiced if the former is permitted to with. (Art. 1235, Civil Code)
deny the existence of such facts.
Requisites: In any case, payment is still valid as to the creditor
and the obligation is still extinguished. (Art. 1238,
 The payment must be in accordance with
Civil Code)
the obligation.
 The person paying (debtor) as well as the Capacity and Free Disposal: the payor should have
one receiving payment (creditor) should capacity to alienate and the free disposal of the
have the requisite capacity. thing due for payment to be effective.
 The payment should be made by the debtor
 Such that minors (who don’t have capacity)
to the creditor.
and those suffering the penalty of civil
 The payment should be made at the right
interdiction (no free disposal) cannot make
time and place.
a valid payment. (Art. 1239, Civil Code)
Provisions related to PAYMENT
OR PERFORMANCE 2) Provisions as to the PAYEE

1) Provisions as to the PAYOR Payment may be made to:

a. Person in whose favor the obligation has

Payment made by a third person: (Art. 1236 and
been constituted – not necessarily a party
Art. 1237, Civil Code)
to the constitution of the obligation.
b. His successor in interest – who may not be
creditors at the time of constitution but may
be creditors at the time of fulfillment.
c. Any person authorized to receive it – agents
are creditors because they have the right to
collect, but not in their own right. (Art.
1240, Civil Code)
d. Third party – if it redounds to the benefit of
the creditor. (Art. 1241, Civil Code)
Person who has interest in the fulfillment of the
(Illustration on pages 46 - 47)
obligation: include those subsidiarily liable such as
guarantors and co-debtors (including joint co- The benefit to the creditor need not be proven in
debtors), even third party-mortgagors whose the following cases:
properties secure the obligation. (Illustration on
i. After the payment, the third person
page 45)
acquired the creditor’s rights;
If third party payor does not intend to be ii. The creditor ratifies the payment to the
reimbursed: the payment may be treated as a third person;
donation. As such it is necessary that the debtor iii. By the creditor’s conduct, the debtor has
accept the same for validity. been led to believe that the third person
had authority to receive the payment. (Art.
If the debtor did not consent, there would be no
1241, Civil Code)
valid donation, and the third party-payor can seek
iv. If the third party is in possession of the
reimbursement from the debtor.
credit. (Art. 1242, Civil Code)
(Illustration on page 47) dependent on the creditor. However, should the
creditor accept the same, they do not produce the
Payment to an incapacitated person: is valid only if
effect of payment, or extinguish the obligation,
the incapacitated person kept the thing delivered
until:
or insofar as it was beneficial to him. (Art. 1241,
Civil Code) a. At the time of the check or other
mercantile documents have been
(Illustration on page 47)
encashed;
3) THING to be paid or delivered b. Its value becomes impaired. (Art.
1249, Civil Code)
Delivery of a specific thing: the debtor of a thing
cannot compel the creditor to receive a different Extraordinary inflation or deflation: of the
one, although the latter may be of the same value currency stipulated should supervene, the value of
as, or more valuable than that which is due. (Art. the currency at the time of the establishment of
1244, Civil Code) the obligation shall be the basis of the payment,
unless there is an agreement to the contrary. (Art.
Delivery of a generic thing: whose quality and 1250, Civil Code)
circumstances have not been stated, the creditor
cannot demand a thing of superior quality. Presumptions: the receipt of the principal by the
Neither can the debtor deliver a thing of inferior creditor without reservation with respect to the
quality. The purpose of the obligation and other interest, shall give rise to the presumption that said
circumstances shall be taken into consideration. interest has been paid.
(Art. 1246, Civil Code) The receipt of a later installment of a debt without
Obligations to do or not to do: an act or reservation as to prior installments, shall likewise
forbearance cannot be substituted by another act raise the presumption that such installments have
or forbearance against the obligee’s will. (Art. been paid. (Art. 1176, Civil Code)
1244, Civil Code)
4) Place of Payment (Art. 1251, Civil
LEGAL TENDER: refers to payment which the Code)
creditor can be compelled to accept. a) Payment shall be made in the place
Under the New Central Bank Act, coins and designated in the obligation.
currencies issued by the BSP have legal tender b) If there was no stipulation and the
power. For currency notes, there is no limit as to obligation consists in the delivery of a
the amount it can be used as legal tender. However, determinate thing, the payment shall be
for coins, the following are the limits: made wherever the thing might be at the
moment the obligation was constituted.
a. P1 coins and above – shall be c) In any other case the place of payment shall
legal tender in amounts not be the domicile of the debtor.
exceeding P1,000; d) If the debtor changes his domicile in bad
b. Coins below P1 – legal tender faith or after he has incurred in delay, the
not exceeding P100 additional expenses shall be borne by him.
Negotiable Instruments and Checks: are not
considered legal tender and their acceptance is
SPECIAL FORMS OF debtor defaulted in the payment of the
secured loan.
PAYMENT b) Dacion en pago is valid and legal while
pactum commissorium is invalid for being
1) Dation in Payment contrary to law and public policy.
 Asset swap in financial accounting
 A special form of payment whereby a 2) Application of Payments
property is alienated to the creditor is  The designation of the debt which is
satisfaction of a debt in money when the being paid by a debtor who has several
loan in money is already due at the time of obligations of the same kind in favor of
change. (Art. 1245, Civil Code) the creditor to whom payment is made.
 It may consist not only of a thing but also of
Requisites:
rights, i.e., usufruct or credit.
 Shall be governed by Law on Sales. a. Only one debtor
b. There are several debts
If the change of prestation occurs before the
c. The debts are of the same kind
maturity day of the obligation to pay a sum of
d. There is only one and the same creditor
money, the proper mode of extinguishment of
obligation is novation instead of dation in payment. Right to apply payment: generally, the debtor has
the right to apply the payment at the time of
Governed by the law on sales: the essential
making the payment, subject to the following
elements of a contract of sale, namely, consent,
LIMITATIONS:
object, certain, and cause or consideration must be
present. a. Creditor cannot be compelled to accept
partial payment. (Art. 1248)
Nature: there has to be delivery of the thing and
b. Debtor cannot apply payment to principal if
prior acceptance and a consequent transfer of
interest has not been paid. (Art. 1253)
ownership to consider it a dation in payment.
c. The debt must be liquidated, except when
 A mere promise to deliver a thing in lieu of the parties agree otherwise;
the originally constituted subject amount to d. Cannot be made when the period has not
a novation. arrived and such period was constituted in
Extent of extinguishment favor of the creditor, except with the
consent of the creditor (Art. 1252);
General rule: to the extent of the value of the thing e. When there is agreement as to which debt
delivered as agreed upon or as may be proved must be paid first. (Art. 1252)
Exception: if the parties consider the thing as (Illustration on page 51)
equivalent to the obligation through an express or
implied agreement or by silence. If the debtor did not designate, to which debt shall
payment apply? That which was chosen by the
Dacion en pago vs. Pactum Commissorium: creditor as reflected in the receipt which is
a) Dacion en pago requires subsequent and accepted by the debtor without protest. (Art. 1252,
voluntary agreement of the debtor and 2nd par.)
creditor while Pactum Commissorium If debtor and creditor did not designate:
involves automatic transfer of pledged or
mortgaged property the moment the
 a. If the debts are of different nature and
burden – to that debt which is most
onerous to the debtor.
b. If the debts are of the same nature and
burden – applied proportionately

3) Payment by Cession or
Assignment
 Akin to Corporate Liquidation in
Financial Accounting
 Special type of payment which involves
the voluntary abandonment of the
universality of the property of the
debtor for the benefit of his creditors, in
order that such property may be applied
to the payment of the credits.
Kinds:
a. Voluntary – the debtor may cede or assign
his property to his creditors in payment of
his debts; extent of extinguishment is only
up to the amount of the proceeds. (Art.
1255, Civil Code)
b. Judicial – under the Financial Rehabilitation
and Insolvency Act.
o An advantage of judicial cession is
that the court discharges the debtor
of his debts, and the obligations are
extinguished.
Properties exempt from execution: are generally
not covered by cession. Except if the debtor waives
such exemption.
Dation in payment vs. Cession
 creditor unjustly refuses, or even without
tender of payment in the following cases:
i. When the creditor is absent
or unknown, or does not
appear at the place of
payment
ii. When he is incapacitated to
receive the payment at the
time it is due
iii. When, without just cause, he
How proceeds distributed to the creditors: refuses to give a receipt
iv. When two or more persons
a. Stipulation claim the same right to
b. Preference of credits collect
v. When the title of the
4) Tender of Payment and Consignation obligation has been lost. (Art.
Tender of Payment is the manifestation made by 1256, Civil Code)
the debtor to the creditor of his desire to comply c. There is previous notice to consign to the persons
with his obligation, with the offer of immediate having interest in the fulfillment of the obligation.
performance.
d. The amount or thing due is deposited in court.
 It is a PREPARATORY ACT to consignation
and in itself DOES NOT extinguish the e. After the consignation, the persons interested
obligation. (creditor) were notified thereof. (2nd notice to the
creditor of actual consignation to the court)
Consignation shall be made by depositing the
things due at the disposal of judicial authority, Expenses of the Consignation: shall be charges
before whom the tender of payment shall be against the creditor. (Art. 1259, Civil Code)
proved, in a proper case, and the announcement of Effectivity of the Consignation: Happens either:
the consignation in other cases.
a) Judicial declaration of propriety of
 The consignation having been made; the consignation; or
interested parties shall also be notified b) Creditor’s acceptance.
thereof. (Art. 1258, Civil Code)
Effects:
Applies only to extinguish of obligation not to
exercises a right: such that in a situation where a a) The debtor is released in the same manner
party would exercise his right or repurchase and as if he had performed the obligation at the
the buyer refused to accept. The right to redeem is time of the consignation, because this
a RIGHT, not an obligation, therefore, there is no produces the same effect as a valid
consignation that may be made. payment.
b) The accrual of interest on the obligation is
Requisites: suspended from the moment of
a. There exists a valid debt that is due; consignation.
b. There is legal cause to consign, that is there c) The deterioration or loss of the thing or
has been a valid tender of payment and the amount consigned occurring without fault
of the debtor must be borne by the creditor,
 because the risks of the thing are
transferred to the creditor from the
moment of deposit or consignation to the
court.
d) Any increment or increase in value of the
thing after the consignation insures to the
benefit of the creditor.
Withdrawal of the Thing Deposited:
a) Withdrawal as a matter of right: debtor
withdraws before acceptance by the
creditor or before judicial declaration of
propriety of consignation.
o In this case, no extinguishment yet
of the obligation.
o As such, no revival since the
obligation has not been extinguished
to begin with. (Art. 1260, Civil Code)
b) Withdrawal after acceptance or
declaration: only with the consent of the
creditor. In this case,
o The obligation is revived
o The creditor shall lose every
preference which he may have over
the deposited thing.
o The other co-solidary debtors shall
be releases of their solidary
obligation but not of their joint or
respective shares in the obligation.
 The obligation will remain to
be solidary on the part of the
consigning debtor.
o The guarantors and sureties of the
secured obligation shall be released
form their obligation. (Art. 1261,
Civil Code)