Article 1156 Definition of obligation

-Juridical necessity to give, to do or not to do.

Essential requisites
1. Passive subject debtor/obligor
2. Active subject creditor/obligee
3. Prestation subject matter
4. Juridical tie contract/obligation itself
Obligation an act which the law will enforce
Right a power which a person under the law, to demand from another any prestation
Wrong an act of one party in violation of rights of another
Real obligation to deliver or to give
Personal obligation to do or not to do
Article
1.
2.
3.
4.
5.

1157 Sources of obligation

Law
Contracts stipulation
Quasi-contracts as if there is contracts
Crimes/delicts
Quasi-delicts

Article 1158 Presumption

Article 1159 Contracts should be complied in good faith
Article 1160 All about quasi-contracts
-Juridical relation resulting from lawful, voluntary and unilateral acts by virtue of
which the parties become bound to each other to the end that no one will be unjustly
benefited at the expense of another.
1. Negotiorumgestio management of property of another without the consent of the latter.
2. Solutioindebiti something is received where there is no right to demand it and it
was unduly delivered through mistake.
Article
1.
2.
3.

1161 Civil liability from crimes

Restitution return
Reparation for the damages
Indemnification for consequential damages.

Article 1162 Quasi-delicts

- Act by a person which causes damage to another by negligence, but there is no preexisting contractual relation between them.
Requisites
1. There must be an act
2. There must be fault/negligence
3. There must be damage caused
4. There must be direct relation of cause and effect between the act and the damage
5. There is no pre-existing contractual relation between the parties
CRIME
Intention
Punishment
Public interest
Criminal and civil liabilities
Cannot be settled by parties alone
Proved beyond reasonable doubt

QUASI-DELICTS
Negligence
Indemnification
Private interest
Civil liability
Can be settled by parties
Proved by preponderance of evidence

Article 1163 Diligence of a good father of a family

- Refers to specific/determinate thing

Duties of debtor in obligation to give determinate thing

1. Preserve the thing
a. Diligence of a good father of a family
b. Another standard of care
c. Factors to be considered
d. Reason for debtor obligation
2. Deliver the fruits of the thing art. 1164
3. Deliver the accessions and accessories art. 1166
4. Deliver the thing itself
5. Answer for damages in case of non-fulfillment art. 1170

Duties of debtor in obligation to give determinate thing

1. To deliver a thing which is of the quality intended by the parties
2. To be liable for damages in case of fraud, negligence, or delay

Article 1164 Creditor has a right to the fruits from the time the obligation to deliver it
arises.
1. Natural fruits from soil/animals
2. Industrial fruits through labor
3. Civil fruits juridical relation
Personal right power of creditor to demand from debtor the fulfillment to give, to do
or not to do
Real right right over a specific thing
Article 1165 If determinate thing, creditor may compel debtor to make the delivery.
- If indeterminate thing, creditor may ask that the obligation be complied at the
expense of the debtor.
- If delayed, debtor shall be responsible for fortuitous event until the delivery.
Article 1166 Obligation to give determinate thing includes its accessions and accessories
Accessions fruits/addition to a principal thing
Accessories joined to the principal thing for the embellishment, better use or
completion
Article 1167 If debtor fails to do it, it will be done at his cost. If poorly done, it will be
undone
Article
Article
1.
2.

1168 If not to do and was done by obligor, it shall be undone at his expense
1169 Delay
Ordinary delay the failure to perform an obligation on time
Legal delay(default/mora) the failure to perform an obligation on time which leads to
the breach of the obligation
a. Mora solvendi delay of the debtor to perform
i.
Ex re delay in real obligation
ii.
Ex personae delay in personal obligation
b. Mora accipiendi delay of the creditor to accept
c. Compensatiomorae delay of the debtors in reciprocal obligation
NO DEMAND, NO DELAY
Requisites of morasolvendi
1. Failure to perform his obligation on the agreed date
2. Demand made by creditor upon the debtor to comply which demand may be either judicial
or extrajudicial
3. Failure of the debtor to comply with such demand
Effects of delay
1. Mora solvendi
a. The debtor is guilty of breach of violation of the obligation
b. The debtor is liable for the interest/damages
c. The debtor is liable even for a fortuitous event when the obligation is to deliver
a determinate thing. However, if proven that the loss would be as same as when
there is no delay, the damages would be reduced by the court.
2. Mora accipiendi
a. The creditor is guilty of breach of obligation
b. The creditor is liable for damages suffered by the debtor, if any.
c. The creditor bears the risk of loss of the thing due
d. The debtor is not liable for the interest, in case that the obligation is to pay
money.
e. The debtor may release himself from the obligation by the consignation/deposit in
court of the thing/sum due
3. Compensatiomoraethe delay of the obligor cancels the delay of the obligee and vice
versa.
When demand is not necessary to put debtor in delay
1. When the obligation so provides
2. When the law so provides
3. When time is of the essence
4. When demand would be useless
5. When there is performance by a party in reciprocal obligations
Article 1170 Liable for damages where there is fraud, negligence, or delay
Fraud(deceit or dolo) deliberate or intentional evasion of the normal fulfillment of an
obligation
Negligence (culpa) any voluntary act or omission, there being no bad faith or malice,
which prevents the normal fulfillment of an obligation
Art. 1170 doloincidente(incidental fraud/pre-existing valid contract and fraud happened

during the performance), while in art. 1338, dolocausante(casual fraud/contract was made
because the party was induced by another)
FRAUD
Intention is to cause damage
Waiver for future liability is void
Must be clearly proved
Liability for fraud cannot be reduced by the
courts

NEGLIGENCE
No intention
May be allowed
Presumed from the violation of a contractual
obligation
Liability for negligence may be reduced
according to the circumstances

Article 1171 Responsibility from fraud is demandable in all obligations and any waiver for
future fraud is void.
Article 1172 Responsibility from negligence is demandable in all obligations, but its liability
may be regulated by courts.
1. Contractual negligence (culpa contractual) leads to breach of the obligation
2. Civil negligence (culpa aquiliana) it is the source of an obligation. Also called
quasi-delict.
3. Criminal negligence (culpa criminal) it results to the commission of a crime.
Article 1173 Negligence is the result of the lack of diligence. The standard diligence is a
diligence of a good father of a family.
Factors
1. Nature of the obligation
2. Circumstances of the person
3. Circumstances of time
4. Circumstances of the place
Kinds of required diligence
1. Agreed upon by the parties
2. Required by law in the particular case
3. A good father of a family
Article 1174 no one shall be responsible for the fortuitous event, except when specified by law,
stipulation, or when the nature of the obligation requires the assumption of risk.
Fortuitous event any event which cannot be foreseen, or even though, inevitable.
1. Acts of man will of the obligor
2. Acts of God independent will of every human being
Kinds
1. Ordinary fortuitous events common and could be reasonably foreseen
2. Extra-ordinary fortuitous events uncommon and could not be reasonably foreseen
Requisites
1. The event must be independent of the human will or at least of the debtors will
2. The event could not be foreseen, or if foreseen, is inevitable
3. The character of the event is impossible for the debtor to comply
4. The debtor must be free from liability for damages
Exceptions
1. When specified by law
2. When declared by stipulation
3. When the nature of the obligation requires the assumption of risk
Article 1175 Usurious transaction is governed by special law
Simple loan (mutuum) to deliver money or other consumable thing, with the interest
Usury receiving interest in excess of that allowed by law
Requisites for recovery of interest
1. The payment of interest must be expressly stipulated
2. The agreement must be in writing
3. The interest must be lawful
Article 1176 The receipt of the principal without reservation for interest will be
interest has been paid. The same is applied for the receipt of a later
without reservation for prior installments.
Presumption inference of a fact not actually known arising from its usual
with another which is known or proved.
1. Conclusive presumption cannot be contradicted
2. Disputable (rebuttable) presumption can be contradicted by presenting
contrary
Exceptions

presumed that
installment
connection
proof to the

1.
2.
3.
4.
5.

With reservation as the interest

Receipt withoutindication of particular installment paid
Receipt for a part of the principal
Payment of taxes
Non-payment proven

Article 1177 Satisfaction of creditors for their claims

Remedies
1. Exact fulfillment with the right to damages
2. Pursue the leviable property of the debtor
3. After having pursued the debtors property, exercise all the rights and bring all the
actions of the debtor (right to collect from his debtor) except those inherent in or
personal to the person of the latter (right to vote, to receive legal support and
etc.)
4. Ask the court to rescind which the debtor may have done to defraud him when he cannot
in any other manner recover his claim. (cancellation of debtors sale to the third
party)
Articles 1178 Rights acquired by virtue of an obligation are transmissible
Exceptions
1. Prohibited by law
a. By the contract of partnership
b. By the contract of agency
c. By the contract of commodatum
2. Prohibited by stipulation of the parties
Article 1179 Pure and resolutory obligation is demandable at once
Pure obligation no specific date and immediately demandable
Conditional obligation consequences are subject in one way or another to the
fulfillment of a condition.
Condition - future and uncertain event, upon the happening of which will give rise of
extinguish the obligation.
1. Future and uncertain
2. Past but unknown
Kinds of condition
1. Suspensive condition happening of which will give rise to an obligation
2. Resolutory condition happening of which will extinguish an obligation
Article
Article
1.
2.

1180 Debtors means permit him to do so = obligation with period

1181 Effect of the happening of condition
Acquisition of rights suspensive condition
Loss of rights already acquired resolutory condition

Article 1182When fulfillment depends upon the sole will of the debtor, the conditional
obligation shall be void. If depends upon chance or will of a third person,
conformity of the provisions
Classification of the condition
1. As to effect
a. Suspensive
b. Resolutory
2. As to form
a. Express clearly stated
b. Implied merely inferred
3. As to possibility
a. Possible
b. Impossible
4. As to cause
a. Potestative sole will of one of the parties
b. Casual upon chance or the will of a third person
c. Mixed partly upon chance and partly upon the will of a third person
5. As to made
a. Positive performance
b. Negatice omission
6. As to numbers
a. Conjunctive several conditions and all must be fulfilled
b. Disjunctive several conditions and one or some of them must be fulfilled
7. As to divisibility
a. Divisible partial performance
b. Indivisible whole performance

Article
1.
2.

Suspensive condition depends upon will of debtor

1. Conditional obligation void
2. Only condition void if pre-existing obligation
1183 Impossible conditions
Physically impossible conditions
Legally impossible conditions
Effects
1. Conditional obligation is void
2. Conditional obligation is valid obligation not to do
3. Only the affected obligation is void divisible
4. Only the condition void pre-existing obligation

Article 1184 Positive suspensivecondtion

The obligation is extinguished when:
1. As soon as the time expires without the event taking place
2. As soon as it has become indubitable that the event will not take place although the
time specified has not expired
Article 1185 Negative condition
Article 1186 the condition is fulfilled when the obligor voluntarily prevents its fulfillment
Requisites
1. The condition is suspensive
2. The obligor actually prevents the fulfillment of the condition
3. He acts voluntarily
Article 1187 Retroactivity
Effect of fulfillment of suspensive condition
1. Obligation to give demandable only upon the fulfillment, but when fulfilled, its
effect shall retroact to the day when the obligation was constituted
2. Obligation to do or not to do no fixed rule
Effects as to fruits and interest
1. Reciprocal obligation no retroactivity
2. Unilateral obligation usually no retroactivity
Article 1188 Creditors right to preservation before the fulfillment, and debtors right to
recovery of what has been paid by mistake
Article
1.
2.
3.
4.
5.
6.

1189 loss, deterioration and improvement of the object

When lost without the fault of the debtor, the obligation shall be extinguished
When lost through the fault of the debtor, he is liable for damages
When deteriorates without the fault of the debtor, it is borne by the creditor
When deteriorates through the fault of the debtor, creditor may choose between the
rescission and fulfillment plus damages in either case
When improved by its nature, it shall inure to the benefit of the creditor
When improved through the expense of the debtor, he has no right other than to
usufructuary (to enjoy/use the fruits)
Requisites
1. Real obligation
2. Determinate thing
3. Suspensive condition
4. Condition is fulfilled
5. There is loss, deterioration, or improvement
Kinds of loss
1. Physical loss when a thing perishes
2. Legal loss when a thing goes out of commerce or when a thing which was legal
becomes illegal
3. Civil loss when a thing disappears in such a way that its existence is unknown

Article 1190 Return of the thing when the resolutory condition has been fulfilled, except when
the parties do not intend the return of the thing
Article 1191 Reciprocal obligation
Kinds of obligation according to the person obliged
1. Unilateral only one party is obliged to comply
2. Bilateral both parties are debtors and creditors of each other
a. Reciprocal obligation the performance of one party is dependent upon the
simultaneous performance by the other
b. Non-reciprocal obligation the performance of one party is not dependent upon the

simultaneous performance by the other

Remedies in reciprocal obligation
1. Choice of remedies
a. Action for fulfillment plus damages
b. Action for rescission plus damages
2. Remedy of rescission for non-compliance
Limitations on right to demand rescission
1. Resort to the courts
2. Power of court to fix period
3. Right of third person
4. Substantial violation
5. Waiver of right
Rescission without judicial decree
1. Where expressly stipulated
2. Where contract still executor

Article 1192 In case of a breach of the obligation, the liability of the first shall be
equitably reduced by the court, but if the first infractor cannot be determined, the
obligation shall be extinguished, and each shall bear his own damages.
Article 1193 the fulfillment is only demandable only when the day comes (obligation with a
period)
Period future and certain event upon the arrival of which the obligation will rise
or extinguish.
FULFILLMENT
TIME

PERIOD
Certain
Future

INFLUENCE

Merely fixes the time

EFFECT, WHEN LEFT TO DEBTORS

WILL
RETROACTIVITY OF EFFECTS

Empowers court to fix the

duration
No effect, unless agreed

CONDITION
Uncertain
Future and past unknown
Causes either to arise or
cease
Invalidates the obligation
There is retroactive effect

Kinds of period
1. According to effect
a. Suspensive period (ex die) the obligation begins only upon the arrival of period
b. Resolutory period (in diem) the obligation is valid up to the arrival of period
2. According to source
a. Legal period provided by law
b. Conventional/voluntary period agreed by the parties
c. Judicial fixed by court
3. According to definiteness
a. Definite period fixed
b. Indefinite period not fixed

Article 1194 Article 1189 shall be observed in case of loss, deterioration, or improvement
before the arrival of period
Article 1195 Payment made before the arrival of the period by unawareness may be recovered with
the fruits and interest
Article 1196 When the period is designated, it is presumed that the period is for the benefit of
both parties, except when the term is for the benefit of one party only.
1. Legal period year, with twelve calendar months, month, with thirty days, day with
twenty-four hours, night, from sunset to sunrise.
2. Calendar month month designated in the calendar without regard to the number of days it
may contain.
Article 1197 If there is no fixed period, the court may fix the duration.
Article
1.
2.
3.
4.
5.

1198 Loss of debtors right

When he becomes insolvent, unless he gives security
When he does not furnish the securities he promised
When securities given have been impaired or have disappeared, unless he immediately give
new ones equally satisfactory
When he violates an undertaking
When he attempts to abscond

Article 1199 When in alternative obligation, the debtor shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the other.
Kinds of obligation according to object
1. Simple obligation only one prestation
2. Compound obligation two or more prestations
a. Conjuctive obligation all of them are due
b. Disjunctive obligation
i.
Alternative obligation performance of one is sufficient
ii.
Facultative obligation substitution is acceptable
Article 1200 Right of choice belongs to the debtor, unless expressly granted to the creditor.
The debtor shall have no right when prestation is impossible, unlawful or which
could not have been the object of the obligation.
Article 1201 The choice should be communicated in order for it to have an effect
Article 1202 Debtor losses his right of choice when in alternative obligation, only one
prestation is practicable.
Article 1203 If debtor cannot make a choice through the fault or act of the creditor, the debtor
may rescind the contract with damages.
Article 1204 The creditor has the right to damages when all the prestations have been lost or
become impossible through the fault of the debtor. The indemnity shall be the value
of the last thing lost.
Article 1205 If the choice is given to the creditor in alternative obligation, the obligation
shall cease to be alternative when the choice has been communicated.
1. If one is lost through fortuitous event, creditor shall choose from the remainder
2. If one is lost through the fault of the debtor, creditor shall chose from the
reminder plus damages or claim the price of the lost thing plus damages
3. If all is lost through the fault of the debtor, creditor shall demand the payment
of the any one/last item plus damages
4. If all is lost through fortuitous event, obligation shall be extinguished and the
debtor is not liable for damages (art.1174)
Article 1206 facultative obligation
Effect of loss
1. Before substitution if principal thing is lost through the fortuitous event, the
obligation is extinguished, and if through the fault of the debtor, he is liable for
damages, but the loss of substitute does not make him liable.
2. After substitution if the principal thing is lost, the debtor is not liable, and if
the substitute is lost through the fault of the debtor, he is liable for damages, but
if through the fortuitous event, the obligation is extinguished.

NUMBER OF PRESTATION
RIGHT OF CHOICE
LOSS THROUGH THE FORTUITOUS
EVENT
LOSS THROUGHT THE FAULT OF
THE DEBTOR

ALTERNATIVE
Several, and performance of
one is sufficient
May be given to the creditor
or third person
Does not extinguish the
obligation
Not liable, when the choice
is given to creditor, debtor
is liable

FACULTATIVE
Only one, and the substitution
is acceptable
Only to the debtor
Extinguished the obligation
Liable, loss of substitute
before the communication, not
liable

Article 1207 First sentence (without stipulation), it is joint obligation. Second sentence (only
when expressly states), it is solidary obligation.
Article 1208 In joint obligation, the credits or the debts shall be divided into as many equal
shares as there are creditors or debtors.
Obligation according to the number of parties
1. Individual obligation only one obligor and only one obligee
2. Collective obligation two or more debtors and creditors
a. Joint obligation debtors/creditors are only up to their proportionate shares
b. Solidary obligation any one of the debtor can perform for the entire compliance
and any one of the creditor has a right to demand from any one of the debtors for

the entire compliance.

When obligation is solidary
1. When the obligation expressly so states
2. When the law requires
3. When the nature of the obligation requires
Kinds of solidarity
1. According to the parties bound
a. Passive solidarity on the part of the debtors
b. Active solidarity on the part of the creditors
c. Mixed solidarity on the part of the debtors and creditors
2. According to source
a. Conventional solidarity agreed upon by the parties
b. Legal solidarity imposed by law
c. Real solidarity imposed by nature

Article 1209 In joint indivisible obligation, the compliance is only possible when the debtors
act together, and in case of non-compliance, the insolvency of one does not make the
others liable.
Article 1210 The indivisibility does not necessarily give rise to solidarity, nor does
solidarity imply indivisibility.
INDIVISIBILITY
Refers to prestation
Only the debtor who is guilty of breach is
liable
Can exist although there is only one debtor
and one creditor
The others are not liable for the insolvency
of one debtor

SOLIDARITY
Refers to juridical tie
All the debtors are liable
There must be at least two debtors or two
creditors
The others are proportionately liable for the
insolvency of one debtor

Article 1211 Solidarity may exist although the debtors and creditors may not be bound in the
same manner.
Article 1212 The act of the creditors in active solidarity may be beneficial for all of the
creditors, and any condonation by one of the creditors shall extinguish the
obligation.
Article 1213 A creditor, in solidary obligation, cannot assign his rights to another without the
consent of the others.
Article 1214 The payment should be made to specified creditor if there is any judicial or
extrajudicial demand.
Article 1215 Novation, compensation, confusion or remission of the debt, made by solidary
creditor shall extinguish the obligation, and he will be liable to the others for the
shares corresponding to them.
Article 1216 The creditor has right to collect from any one of the solidary debtors or all of
them simultaneously.
Article 1217 Payment by one of the solidary debtors extinguishes the obligation, and if there
are two or more of them offer to pay, the creditor may choose which to accept. The
one who made a payment may claim from his co-debtors the share corresponds to each
and interest, if any.
Article 1218 The solidary debtor who made a payment does not have a right to reimbursement from
his co-debtors when the payment is made after the obligation has prescribed or become
illegal.
Article 1219 The remission made by the creditor to one of the solidary debtor does not mean that
the latter is released from his responsibility towards his co-debtors.
Article 1220 If remission of the whole obligation is made by the creditor to one of the solidary
debtor, it does not entitle him to reimbursement from his co-debtors.
Article 1221 If the thing is lost without the fault of the debtors and before delay, the
obligation is extinguished.

If the loss is through one of the solidary debtor, all of the solidary debtors are
liable.
-If the thing is lost through the fortuitous event after the delay, the solidary
debtors are liable.
Article 1222 A solidary debtor, who was filed by the creditor, may avail himself of all defenses
which his co-debtors used in their defenses.
1. Defenses derived from the nature of the obligation
2. Defenses personal to, or which pertain to share of, debtor sued
3. Defenses personal to other solidary debtors
Article 1223 Divisible (capable of partial fulfillment) and indivisible obligations (not capable
of partial fulfillment)
Kinds of division
1. Qualitative division
2. Quantitative division
3. Ideal or intellectual division
Kinds of indivisibility
1. Legal indivisibility specific provision of law declares
2. Conventional indivisibility will of the parties
3. Natural indivisibility nature of the object
Article 1224 When the debtor does not comply in a joint indivisible obligation, it gives rise
to indemnity for damages.
Article 1225
Obligations deemed indivisible
1. Obligations to give definite things
2. Obligations which are not susceptible of partial performance
3. Obligations provided by law to be indivisible even if thing or service is physically
divisible
4. Obligations intended by the parties to be indivisible even if thing or service is
physically divisible
Obligations deemed divisible
1. Obligations which have for their object the execution of a certain number of days of
work
2. Obligations which have for their object the accomplishment of work by metrical units
3. Obligations which by their nature are susceptible of partial performance
Article 1226 Penal clause
1. Principal obligation can stand alone and does not depend for its validity and existence
upon another obligation.
2. Accessory obligation one attached to a principal obligation and cannot stand alone.
Obligation with penal clausecontains accessory obligation which is to pay in case of the
breach of the principal obligation
Penal clause penalty
Purposes of penal clause
1. To insure their performance by creating an effective deterrent against breach, making
the consequences of such breach as onerous as it may be possible.
2. To substitute a penalty for the indemnity for damages and the payment of interests in
case of non-compliance.
PENAL CLAUSE
CONDITION
Constitutes obligation (accessory)
Does not
Demandable
Never demandable

Kinds of penal clause

1. As to its origin
a. Legal penal clause imposed by law
b. Conventional penal clause agreed by the parties
2. As to its purpose
a. Compensatory penal clause penalty for damages
b. Punitive penal clause penalty for punishment
3. As to demandability or effect
a. Subsidiary or alternative penal clause only the penalty can be enforced
b. Joint or cumulative penal clause both the principal obligation and penal clause
can be enforced

Article 1227 The debtor cannot escape from the obligation by paying the penalty. The creditor

cannot demand the fulfillment of the obligation and the penalty at the same time.
Article 1228 Proving damages is not necessary when the penalty is fixed by the parties.
Article 1229 The courts shall reduce the penalty when the debtor made a partial/irregular
fulfillment of the principal obligation, and in case when the penalty is iniquitous
or unconscionable.
Article 1230 The nullity of the penal clause does not mean the nullity of the principal
obligation, but the nullity of the principal obligation leads to the nullity of the
penal clause.
Articles 1231 Obligations extinguished when:
1. By payment or performance
2. By the loss of the thing due
3. By the condonation or remission of the debt
4. By the confusion or merger of the rights of the creditor and debtor
5. By compensation
6. By novation
Article 1232 Payment is not only the delivery of money, but also the performance of the
obligation.
Article 1233 - It is understood to have been paid when the thing or service has been completely
delivered or rendered.
1. Integrity of prestation complete delivery
2. Identity of the prestation very presentation due must be delivered
Article 1234 If the obligor is in good faith for the performance of the obligation, he may
recover minus damages suffered by the obligee.
1. There must be substantial performance
2. The obligor must be in good faith
Article 1235 When the obligee accepts the performance with the knowledge of its incompleteness
or irregularity, and without expressing any objection, the obligation is deemed
fully complied with.
1. The performance is incomplete or irregular and the obligee knows it
2. He accepts without any objection
Article 1236 The creditor is not bound to accept the payment or performance by a third person
who has no interest in the fulfillment, unless agreed.
- Whoever has paid may demand from debtor what he has paid, but if the payment was
without the knowledge of the debtor, he can recover only up to the amount of the
debt at the time of payment.
Article 1237 The one who has paid on behalf of the debtor without the knowledge of the latter
cannot compel the creditor to subrogate (substitute) him in his rights.
Article 1238 The payment by a third person without the intention of reimbursement by a debtor is
deemed to be a donation.
Article 1239 When the payment is made while the obligor does not have the right to free disposal
of the thing due and capacity to alienate, the payment is not valid.
Article 1240 Payment shall be made to the 1.creditor, 2.his successor in interest, or 3.any
person authorized to receive it.
Article 1241 Payment to an incapacitated person is valid only when he has kept the thing
delivered, or insofar as the payment has been beneficial to him
-Payment to a third person is valid only when:
1. If after the payment, the third person acquire the creditors right
2. If the creditor ratifies the payment to the third person
3. If by the creditors conduct, the debtor has been led to believe that the third
person had authority to receive the payment

When benefit to creditor need not be proved by debtor

1. Subrogation of the payer in the creditors right
2. Ratification by the creditor
3. Estoppel on the part of the creditor

Article 1242 The payment to any person who is in possession of credit (if stated that it is
payable to holder or bearer) made in good faith shall release the debtor.
Article 1243 Payment is invalid when paid after the debtor has been judicially ordered to retain
the debt.
Article 1244 In obligation to give, debtor cannot compel the creditor to receive a substitute
even though it is of the same value as, or more valuable.
- In personal obligation, the performance shall not be substituted against the
obligees will.
Article 1245 Payment by dation (dacion en pago) which property is alienated to the creditor
shall be governed by the law of sales.
Article 1246 In case of an obligation to deliver a generic or indeterminate thing, the creditor
cannot demand a superior one, neither can the debtor deliver an inferior one.
Article 1247 Unless stipulated, the extrajudicial expenses required by the payment will be
borne by the debtor.
Article 1248 Partial payment shall not be made unless stipulated or when the debt is in part
liquidated (determinate amount) and in part unliquidated.
Article 1249 The payment should be made in the currency stipulated, if that currency is not
possible to deliver, then legal tender in the Philippines should be delivered.
-Mercantile documents have effect of payment only when they have been cashed, or
when impaired through the fault of the creditor.

Legal tender currency which if offered by the debtor in the right amount, the creditor
must accept as the payment of debt in money.
Payment by means of instruments of credits
1. Right of creditor to refuse or accept
a. The creditor may accept them if he chooses to
b. The creditor must cash the instrument, and when dishonored, he can bring action
for non-payment of the debt
2. Effect on obligation The payment by mercantile documents does not extinguish the
obligation
a. Until they have been cashed
b. Unless impaired through the fault of the creditor
Article 1250 In case of extraordinary inflation or deflation at the time of payment, the value
when the payment is made shall be applied, unless stipulated.
Article 1251 The delivery shall be made in the place agreed by the parties.
- If there is no stipulation, and the thing is determinate, the delivery shall be
made at the place where it was, at the perfection of the contract.
- If there is no stipulation, and the thing is generic, the delivery shall be made
at the domicile (legal residence) of the debtor.
- If the debtor changes his domicile in bad faith, the additional expenses shall be
borne by him.
Article 1252 Application of payments
- If the debtor accepts the receipt from the creditor, he cannot complain for the
application of payment made by the creditor.
Requisites of application of payments
1. There must be one debtor and one creditor
2. There must be two or more debts
3. The debts must be of the same kind
4. The debts to which payment made by the debtor has been applied must be due
5. The payment made must not be sufficient to cover all the debts
Application as to debts not yet due
1. Stipulation
2. Made by the debtor or creditor for whose benefit the period has been constituted
Rules on application of payments
1. The debtor has the first choice
2. The right to make the application once exercised is irrevocable unless the creditor
consents to the change
3. If the debtor does not apply, the choice belongs to creditor by specifying the
application in the receipt

4.
5.

If
to
If
of

the creditor also does not apply, the most onerous to the debtor shall be deemed
have been satisfied
the debts are of the same nature and burden, the payment shall be applied to all
them proportionately

Article 1253 In case there is interest, the payment shall be applied first to the interest and
the remainder goes to the principal.
Article 1254 - If the creditor also does not apply, the most onerous to the debtor shall be
deemed to have been satisfied
- If the debts are of the same nature and burden, the payment shall be applied to
all of them proportionately
Article 1255 Payment by cession will release the debtor from his obligation only when the net
proceeds of the thing was delivered to the creditor.
1. There must be two or more creditors
2. He debtor must be (partially) insolvent
3. The assignment must involve all the properties of the debtor
4. The cession must be accepted by the creditors
DATION
Usually only one creditor
Does not presuppose the insolvency of the
debtor
Not all property of the debtor
Creditor is given the ownership of the property
Act of novation

CESSION
Several creditors
The debtor is insolvent at the time of
assignment
All the property of the debtor
Creditor is given the right to sell and apply
the proceeds proportionately
Not an act of novation

Article 1256 Consignation shall be made when the creditor refuses to accept the payment, even
though there was tender of payment.
Consignation shall also be made without the tender of payment when:
1. The creditor is absent and unknown, or does not appear at the place of payment
2. He is incapacitated to receive the payment at the time it is due
3. He refuses to give a receipt
4. Two or more persons claim the same right to collect
5. The title of the obligation has been lost
Requisites of a valid consignation
1. Existence of a valid debt which is due
2. Tender of payment and refusal without justifiable reason by the creditor to accept it
3. Previous notice of consignation to persons interested in the fulfillment of the
obligation
4. Consignation of the thing or amount due
5. Subsequent notice of consignation made to the interested parties
Article 1257 In order that the consignation to have an effect, it must first be announced to
the all persons interested in the fulfillment of the obligation.
Article 1258 Consignation shall be made by depositing the thing or amount due at the disposal
of judicial authority and the subsequent notice is required.
Article 1259 The expenses of consignation shall be charged against the creditor.
Article 1260 After the consignation, the debtor may ask the judge for the cancellation of the
obligation.
Before the creditor to accept the consignation, or before a judicial declaration
that the consignation has been properly made, the debtor may withdraw, allowing the
obligation to remain in force.
Article 1261 The creditor should authorize the debtor to withdraw the consignation, and he
shall lose every rights against the debtor. The co-debtors, guarantors and sureties
shall be released.
Article 1262 The loss of the thing due (determinate) incurred by the fortuitous event, unless
stated in the law or stipulated and before the delay, shall extinguish the
obligation.

Debtor is held liable for the loss of the thing due incurred even by the fortuitous event
1. Law
2. Stipulation
3. Nature
4. Delay
5. Two or more creditors who dont have same interest
6. crime

Article 1263 In an obligation to deliver a generic thing, the loss or destruction does not
extinguish the obligation.
Article 1264 The courts shall determine whether the partial loss of the object is so important
as to extinguish the obligation.
Article 1265 When the thing is lost in the possession of the debtor, it is presumed that the
loss was due to his fault, unless proven to the contrary.
Article 1266 The debtor shall be released from the obligation when the prestation becomes
legally or physically impossible.
Article 1267 When the obligation to do has become so difficult to be completed, the obligor may
be released.
Article 1268 The obligation shall not be extinguished when the debt of a thing determinate
proceeds from a criminal offense.
Article 1269 When the obligation is extinguished due to the loss of the thing due incurred by
the third person, the creditor shall have all rights of action against third person.
Article 1270 Condonation requires acceptance by the obligor, and it is a form of donation.
Condonation gratuitous abandonment by the creditor of his right against the debtor
1. It must be gratuitous
2. It must be accepted by the obligor
3. The parties must have capacity
4. It must not be inofficious
5. If made expressly, it must comply with the forms of donation
Kinds of remission
1. As to its extent
a. Complete covers entire obligation
b. Partial
2. As to its form
a. Express verbally or in writing
b. Implied can only be inferred from conduct
3. As to its date of effectivitiy
a. Inter vivos take effect during the lifetime of the donor
b. Mortis causa effecvtive upon the death of the donor
Article 1271 The delivery of a private document evidencing a credit, voluntarily by the
creditor to the debtor, implies the renunciation.
Presumption in case of voluntary delivery of document of indebtedness by creditor
1. Presumption of implied remission
2. Contrary evidence
3. Extent of remission
4. Presumption applicable only to private document
Article 1272 Whenever the private document is which the debt appears is found in the possession
of the debtor, it is presumed that the creditor delivered voluntarily, unless the
contrary is proved.
Article 1273 The renunciation of the principal debt shall extinguish the accessory obligation.
However, the waiver of the accessory obligation shall leave the principal obligation
in force.
Article 1274 In accessory obligation of pledge, it is presumed that the obligation is remitted
when the thing pledged, after its delivery to the creditor, is found in the
possession of the debtor, or of a third person who owns the thing.
Pledge a bailment or delivery of the property of the debtor to creditor as a security
for a debt

Article 1275 The obligation is extinguished when the characters of creditor and debtor are
merged in the same person.
Confusion/merger meeting in one person of the qualities of creditor and debtor with
respect to the same obligation
Reasons for confusion
1. A person cannot claim payment from himself
2. When there is a confusion, the purposes of the obligation are deemed realized

Requisites
1. It must take place between the principal debtor and creditor
2. It must be complete

Article 1276 Merger of principal debtor and creditor benefits the guarantors since the
accessory obligation is also extinguished.
- However, the merger of the guarantors does not extinguish the obligation.
Article 1277 Confusion does not extinguish a joint obligation except to the share corresponding
to the creditor or debtor in whom the two characters concur.
Confusion extinguishes entire solidary obligation.
Article 1278 Compensation shall take place when two persons, in their own right, are creditors
and debtor of each other.
Compensation the extinguishment to the concurrent amount of debts of two persons who,
in their own right, are debtors and creditors of each other.
The object is the prevention of unnecessary litigations and payments.
COMPENSATION
only one person who is a debtor and a creditor
of himself
Only one obligation
Impossibility of payment

CONFUSION
Two persons who are creditors and debtor of
each other
Two obligations
Indirect payment

Kinds of compensation
1. By its effect or extent
a. Total both obligations are of the same amount and are entirely extinguished
b. Partial different amounts and a balance remains
2. By its cause or origin
a. Legal takes place by operation of law even without the knowledge of the parties
b. Voluntary agreement of parties
c. Judicial by order from a court in a litigation
d. Facultative set up only by one of the parties

Article 1279 Requisites of compensation

1. That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other
2. That both debts consist in a sum of money, or if the things due are consumable, they be
of the same kind, and also of the same quality if the latter has been stated
3. That the two debts be due
4. That they be liquidated and demandable
5. That over neither of them there be any retention or controversy, commenced by third
persons and communication in due time to the debtor
Article 1280 The guarantor may set up compensation as regards what the creditor may owe the
principal debtor.
Article 1281 Compensation may be total or partial, if two debts are of the same amount, there
is total compensation.
Article 1282 The parties may agree upon the compensation of debts which are not yet due.
Article 1283 If one of the parties has a claim for damages against the other, the former may
set it off by providing his right to said damages and the amount thereof.
Article 1284 When one or both debts are rescissible or voidable, they may be compensated before
they are judicially avoided.
Article 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, unless the assignor was

notified by the debtor at the time of his consent, that he reserved his right to the
compensation.
- If the debtor has knowledge, but did not consent, he may set up the compensation
previous to the cession, but nor of subsequent ones.
- If the assignment was made without the knowledge of the debtor, he may set up the
compensation of all credits prior to the same and also later ones until he had
knowledge of the assignment.
Article 1286 Compensation of debts which are payable at difference place shall have an
indemnification for expenses of exchange or transportation to the place of payment.
Article 1287 Compensation is not allowed when one of the debts arises from a depostium or from
the obligations of a depositary or of a bailee of commodatum.
- Neither can compensation be set up against a creditor who has a claim for support due by
gratuitous title.
Article 1288 Neither shall there be compensation if one of the debts consists in civil
liability arising from crime. (However, the victim can claim the right of
compensation.)
Article 1289 If there are several debts which are susceptible of compensation, the rules on the
application of payments shall apply to the order of the compensation.
Article 1290 If all the requisites of compensation are present, it take effect by operation of
law, and extinguishes both debts to the concurrent amount, even though the parties
are not aware of the compensation.
Article
1.
2.
3.

Article
1.
2.
3.
4.

1291 Obligations may be modified by:

Changing their object or principal condition
Substituting the person of the debtor
Subrogating a third person in the rights of the creditor.
Novation total or partial extinction of an obligation through the creation of a new one
which substitutes it
Kinds of novation
1. According to origin
a. Legal
b. Conventional
2. According to how it is constituted
a. Express
b. Implied
3. According to extent or effect
a. Total or extinctive
b. Partial or modificatory
4. According to the subject
a. Real or objective change of object of principal condition
b. Personal or subjective when one or all of the parties changed
c. Mixed
1292 Requisites of novation
A previous valid obligation
Capacity and intention of the parties to modify or extinguish the obligation
The modification or extinguishment of the obligation
The creation of new valid obligation

Article 1293 Novation by substitution may be made even without the knowledge or consent of the
original debtor, but not without the consent of the creditor. Payment by new debtor gives him the
rights mentioned in Art. 1236 and 1237.
Kinds of personal novation
1. Substitution the debtor is substituted
2. Subrogation the third person is subrogated in the rights of the creditor
Kinds of substitution
1. Expromision it takes place when a third person of his own initiative and without
the knowledge or consent of the original debtor assumes the latters obligation with
the consent of the creditor. (art. 1236)
2. Delegacion it takes place when the creditor accepts a third person to take place of
the debtor at the instance of the latter. (art. 1237)
Article 1294 In expromision, the new debtors insolvency or non-fulfillment shall not give rise

to any liability to the original debtor.

Article 1295 In delegacion, the new debtors insolvency shall not give rise to any liability to
the original debtor, except when said insolvency was already existing and of public
knowledge, or known to the debtor, when he delegated his debt.
Article 1296 When the principal obligation is extinguished by novation, the accessory
obligation may subsist only insofar as they may benefit third persons who did not
give their consent.
Article 1297 If the new one is void, the original one shall subsist, unless the parties
intended that the former relation should be extinguished in any event.
Article 1298 Novation is void if the original one was void, except when annulment may be
claimed only by the debtor, or when ratification validates acts which are voidable.
Article 1299 If the original one was subject to a suspensive or resolutory condition, the new
obligation shall follow the original condition, unless stipulated.
Article 1300 Subrogation may be 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 to take effect.
Subrogation substitution of one person in the place of a creditor with reference of the
lawful claim or right, giving the former all the rights of the latter, including the
right to employ all remedies to enforce payment.
Article 1301 Conventional subrogation requires the consent of the original parties and of the
third person.
Article 1302 It is presumed that there is legal subrogation when:
1. A creditor pays another creditor who is preferred, even without the knowledge of the
debtor
2. A third person, not interested in the obligation, pays with the express or tacit approval
of the debtor
3. 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
Article 1303 Subrogation transfers to the person subrogated the credit with all the rights,
either against the debtor or against the third person, be they guarantors or
possessors of mortgages, subject to stipulation in a conventional subrogation.
Article 1304 When a partial payment was made to a creditor, he may exercise his right for the
remainder, and he shall be preferred to the person who has been subrogated in his
place in virtue of the partial payment of the same credit.