Law on Obligation and Contracts Reviewer

CAUSES OF EXTINGUISHMENT OF OBLIGATION 1. remuneration or per unionizeance 2. Loss of the thing due 3. Condonation or remission of the debt 4. Confusion or merger of matures of creditor and debitor 5. Compensation 6. Novation I PAYMENT OR exertion PAYMENT means not only the livery of coin but also the performance, in each other manner of an indebtedness. How mustiness the defrayal be made? 1. There must be delivery of the thing or rendition of the service that was contemplated. a. The debtor of a thing cig betnot compel the creditor to strain birth a diametrical ane although the latter may be of the same value as, or more worthful than that which is due. . In arrangement to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the creditors will. c. In promise to give generic thing whose musical note and circumstance deal not been stated, the creditor cannot demand a thing of superior quality neither can the debtor del iver a thing of inferior quality. The purpose of the obligation must be interpreted into consideration. d. If the obligation is a monetary obligation, the defrayment must be in legal testy. 2. The payment or performance must be complete. Exceptions 1.If the obligation has been substantially performed in good faith, the debtor may find out as though thither had been complete fulfillment less damages suffered by the creditor. 2. When the creditor yields the performance erudite its incompleteness or irregularity and without expressing any protest or buttion. Who must delineate the payment? Payment must be made by the debtor who must possess the pursual 1. the free tendency of the thing due and the property must not be subject of any claim by third someone. 2. the capacity to alienate the thing. debtor must not be incapable of giving take otherwise the payment is void.Payment by a third mortal The creditor is not bound to accept payment or performance by a third person EXCE PT in the following cases 1. when there is a stipulation to that effect 2. when the third person has an interest in the fulfillment of the obligation (example guarantor) Rights of a third person who makes the payment a. payment with friendship and consent of the debtor 1. third person can recover what he has paid from the debtor 2. third person is entitled to be subrogated in the rights of the creditor b. payment without the knowledge or against the will of the debtor 1. e can recover only up to now as the payment has been beneficial to the debtor 2. he is not entitled to subrogation Payment by a third person who does not want to be reimbursed -The payment shall be deemed to be donation which requires the debtors consent. To whom shall payment be made? 1. to the creditor 2. to the creditors successors in interest 3. to any person genuine to receive payment Payment to an unauthorized third person General Rule Not sensible Exceptions 1. Payment has redounded to the benefit of the creditor 2. Payment is made in good faith to a third person in possession of the credit. Where payment must be made? 1.If there is a stipulation, then in the place designated. 2. If there is no stipulation a. to give determinate thing wherever the thing must be at the time the obligation was constituted. b. to give generic thing or an obligation to do domicile of the debtor Special forms of payment 1. Dation in payment (Dacion en pago) it is a special form of payment where the ownership of a property belonging to the debtor is transferred to his creditor to a debt in money. 2. Application of payment it is the designation of the debt to which payment shall be applied when the debtor owes several debts in esteem of the same creditor. mathematical mental process . the debtor is given the preferential right to apply the payment designates the debt to be paid. 2. if the debtor does not make the designation, the creditor makes it by indicating the debt being paid in his receipt. 3. if neither the debtor nor the creditor makes the designation or application a. payment shall be applied to the debt which is the most onerous b. if the debts ar the same to all debts proportionately 3. Payment by ceding it is the abandonment or assignment by the debtor of all his property in favor of his creditors so that the latter may sell them and recover their claims out of the proceeds. Requisites . there must be devil or more creditors 2. the debtor is insolvent 3. the debtor abandons all his properties 4. the creditors accept the abandonment Note The cession or assignment operates only to authorize the creditors to sell the debtors property, hence, ownership is not transferred to them. 4. new of payment and consignation Tender of payment is the act of the debtor of offering to his creditor what is due him. Consignation is the act of depositing the sum or thing due with the judicial authorities whenever the creditor refuses without just cause to accept the same, or in the cases when the creditor cannot accept it. notion of consignation duly made -The debtor may ask the judge to order the cancellation of the obligation. The obligation shall be extinguished after the creditor has accepted the consignation or the judge has declared that the consignation has been properly made. When consignation, without a anterior tender of payment, will produce the same effect 1. the creditor is absent or unknown or does not step up at the place of payment. 2. the creditor is incapacitated to receive the payment at the time it is due. 3. when, without just cause, he refuses to give receipt. 4. two or more persons claim the same right to collect.II LOSS OF THE THING referable A. Concept A thing is considered lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or cannot be recovered. B. Effect on the obligation 1. Loss of a determinate thing General Rule obligation is extinguished. Exceptions a. when the loss is due to the fault of the debtor. b. when the debtor has incurred in delay. c. when so provided by law. (ex. The debtor promised to deliver the same thing to two or more persons who do not have the same interest. ) d. when it is stipulated by the parties. e. hen the nature of the obligation requires the assumption of risk. 2. Loss of a generic thing the loss of destruction of anything of the same kind does not extinguished the obligation. C. Creditors right if the loss is caused by a third person if the obligation has been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. III CONDONATION OR REMISSION OF DEBT A. Concept Condonation or remission is the gratuitous abandonment by the creditor of his right. In plain language, this refers to the favor of indebtedness.To extinguish the obligation, it requires the debtors consent. B. Kinds of condonation or remission 1. as to th e amount or extent a. enumerate when the total obligation is remitted. b. partial(p) when only part of the obligation, or only the accessory obligation is remitted. 2. as to form a. Express one made orally or in writing. b. Implied one inferred from the conduct of the parties. C. Effect of condonation or remission 1. The remission of the principal debt extinguishes the accessory obligation. 2. the remission of the accessory obligation does not lean with it that of the principal debt. IV CONFUSION OR MERGER A. ConceptConfusion or merger is the shock in one person the qualities or the character of creditor and debtor. B. Effect of merger when there is guarantor 1. fusion which takes place in the principal debtor or creditor benefits the guarantors. Both the principal obligation and the guaranty are extinguished. 2. Merger which takes place in the person of the guarantor does not extinguish the obligation, only the guaranty is extinguished. V- remuneration A. Concept Compens ation is a mode of extinguishing an obligation when two persons, in their own right, are debtors and creditors of each other. B. Kinds of compensation 1. as to amount or extent a.Total when the debts are of the same amount. b. Partial when the debts are of different amount. 2. as to cause or origin a. legal it takes place by operation of law and extinguishes both debts to the concurrent amount even though the debts are payable at different places and the creditors and debtors are not aware of the compensation. Requisites 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. . That the two debts are due. 4. That both debts be liquidated and demandable b. Voluntary or conventional redemption takes place by capital of New Hampshire of the parties, s uch as when they agree to the compensation of debts which are not yet due. c. Judicial compensation tenacious by the court. d. Facultative compensation that may be claimed or opposed by one of the parties (such as when not all the requisites for legal compensation cannot take place) VI NOVATION A. Concept It is the modification or extinguishment of an obligation by another, either by a. changing the object or principal condition b. ubstituting the person of the debtor or c. subrogating a third person in the rights of the creditor. B. Requisites of novation 1. there must be a previous valid obligation. 2. there must be an agreement between the parties to modify or extinguish the obligation. 3. the extinguishment of the doddering obligation. 4. the validity of the new obligation. C. Kinds of novation 1. as to object or purpose a. Real or objective novation by changing the object or principal condition. b. Personal or subjective novation by change of the parties (debtor or credi tor). a) substituting the person of the debtor (always with the creditors consent) 1.Expromision third person initiates the substitution and assumes the obligation even without the knowledge or against the will of the debtor) 2. Delegacion debtor initiates the substitution, which requires the consent of all parties (original debtor, creditor and new debtor) b) Subrogating a third person in the rights of the creditor. Kinds of Subrogation 1. Conventional subrogation change of creditor by the agreement of the parties. 2. Legal subrogation subrogation by operation of law. 3. Mixed subrogation change of object and parties to the obligation. 2. as to form a.Express novation declared in unequivocal terms. b. Implied when the old and new obligation are on every point incompatible with each other. 3. as to extent a. Total the old obligation is totally extinguished. b. Partial the old obligation still remains in force except as it has been modified. D. Effect if new obligation is vo id If the new obligation is void, the novation is void. In such case, the original one shall subsist. E. Effect if original obligation is void The novation is void if the original obligation is void. If the original obligation is void, there is no obligation to extinguish since it is non-existent.