Oblicon

Compensatio Morae Exception

Contrary stipulation (e.g. installment plans)

Physical impossibility

Contrary to law of nature

Mora Solvendi General Rule

Creditor should make demand before debtor incurs delay

PAYMENT BEFORE HAPPENING OF CONDITION:

Debtor may only recover what he paid by mistake before happening of suspensive condition, hence if condition has been fulfilled, he can no longer claim because of retroactivity of the condition.

Pure Obligations

Every obligation whose performance DOES NOT depend upon a future or uncertain event OR upon a past event unknown to the parties is demandable at once.

Fortuitous Event (Force Majeure)

Except in cases expressly specified by law, or when it is otherwise declared by stipulation, or when the nature of obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen or which, though foreseen, were insevitable.

Exception in obligations to do

FACULTATIVE OBLIGATION wherein the debtor reserves the right to substitute another prestation

Fraud

Fraud is the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission.

General rule on impossible conditions

Impossible condition annuls the obligation dependent upon them

Obligations to do

In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee's will.

Effect of Fraud

Liability for damages, a crime or a quasi delict

Potestative condition

One which depends upon the will of one of the contracting parties; in the power of one of the parties to realize or prevent

Extent of Accion Subrogatoria

Plaintiff entitled only to so much as is needed to satisfy his credit, any balance shall pertain to the debtor

Action for Damages

Recoverable damages include any and all damages that a human being may suffer. Responsibility for damages is indivisible.

Rescission (General Rule)

Rescission requires judicial Approval to produce legal effects

Effect of Suspensive Condition

The binding tie of conditional obligation is produced from the time of perfection, not happening of condition.

Positive suspensive

The condition that some event happen at a determinate time shall EXTINGUISH the obligation as soon as the time expires OR if it has become indubitable that the event will not take place

Rights of debtor before happening of suspensive condition

The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition.

Reciprocal Obligation

The injured party may choose between FULFILLMENT and the RESCISSION of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become IMPOSSIBLE.

Action for Rescission

The power to rescind obligation is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between FULFILLMENT and the RESCISSION of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become IMPOSSIBLE. The court shall decree the rescission claimed UNLESS there be a just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.

Delay (Mora)

Those obliged to DELIVER or to DO something incur in delay from the time the OBLIGEE JUDICIALLY OR EXTRAJUDICIALLY DEMANDS from them the fulfillment of their obligations.

Kinds of prestation

To give, to do, not to do

Effect of passive purely potestative conditione

VOID because it is a direct contravention of Art 1308 on mutuality of contracts and to do so is to sanction illusory conditions

Effect of active purely potestative

Valid if it depends exclusively on the will of the creditor

Obligations not to do

When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense.

Negotiorium Gestio

Whoever voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to do so

Obligation

a juridical necessity to give, to do or not to do.

ELEMENTS OF QUASI DELICT

a) duty on the part of the defendant to protect the plaintiff from injury of which the latter complains b) failure to perform such duty c) an injury to the plaintiff through such failure

Obligation to do

all kinds of work or services, whether mental or physical

debtor or obligor (passive)

bound to perform the prestation

Not to do

consists in abstaining from some act, includes "not to give," both being negative obligations

Obligation to give

consists in the delivery of a movable or an immovable thing, in order to create a real right or for the use of the recipient or for its simple possession or in order to return to its owner

Juridical impossibility

contrary to law, morals, good customs, and public policyAND restricts certain rights which are necessary for the free development of human activity i.e. political rights, family rights and constitutional rights and liberties e.g. condition not to change domicile, religion or contract marriage

Casual condition

depends exclusively upon chance, will of a third person or other factors, and not upon the will of the contracting parties

Purely potestative condition

depends solely and exclusively upon the will

Mixed condition

depends upon the will of one of the contracting parties and other circumstances, including the will of third persons

Resolutory Condition

extinguishes rights and obligations already existing

Suspensive Conditions

the obligation arises, but if the condition does not happen, obligation does not come into existence

Effect of impossible condition

• Annuls only obligations which are POSITIVE and SUSPENSIVE. In the case of a negative impossible condition, it's considered as not written and the obligation is converted to a pure and simple one. • Applies only to contracts and not to simple and testamentary donations and to testamentary dispositions • Impossibility of condition must exist at the time of the creation of the obligation (not existence of a valid obligation subsequently rendered impossible under Art 1266 on "subsequent impossibility")

Condition

every future and uncertain event upon which an obligation or provision is made to depend even though uncertain, it should be possible

Negligence (culpa aquilana)

- Source of Obligation - Fault or negligence which constitutes an independent source of obligation between parties not previously bound

Exceptions to Negotiorum Gestio

1) When the property or business is not neglected or abandoned 2) If in fact the manager has been tacitly authorized by the owner

Subsidiary Remedies of Creditor

1. Accion Subrogatoria 2. Accion Pauliana 3. Accion directa

Remedies of Creditor in case of Breach

1. Action for performance 2. Action for rescission 3. Action for damages

Requisites of Force Majeure

1. Cause of the unforeseen and unexpected occurrence or the failure of the debtor to comply with his obligation must be independent of human will 2. Impossible to foresee the event which constitute the caso fortuito (ordinary) OR if it can be foreseen, must be impossible to avoid (extraordinary) 3. Occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner 4. Obligor must be free from any participation in the aggravation of the injury resulting to the creditor (no concurrent negligence)

Requisites of Accion Subrogatoria

1. Creditor has an interest in the right or action not only because of his credit but because of insolvency of the debtor 2. Malicious or negligent inaction of the debtor in the exercise of his right or action of such seriousness as to endanger the claim of the creditor 3. The credit of the debtor against a third person is certain, demandable and liquidated ○ It is not essential that the creditor's claim be prior to the acquisition of the right by the debtor 4. The debtor's right against 3rd person must be patrimonial, or susceptible of being transformed to patrimonial value for the benefit of the creditor

Exception in Mora Solvendi

1. Express stipulation - Insertion of the clause "without further notice" 2. Law so provides - Not enough to merely fix date for performance, but also that default will commence after the period lapses 3. Period is the controlling motive or the principal inducement for the creation of the obligation - in cases where it appears that the obligation would not have been created for a date other than that fixed (Abella v. Francisco) 4. Demand would be useless - performance has become impossible

Debtor is still liable despite force majeure:

1. Expressly specified by law 2. Stipulation by parties 3. Assumption of risk 4. Debtor in delay 5. Debtor guilty of concurrent negligence

Effects of Rescission

1. Extinguishes obligatory relation as if it had never been created, extinction has a retroactive effect. Equivalent to invalidate the juridical tie, leaving things in their status before the celebration of the contract 2. Mutual restitution

Modes of Breach

1. Fraud 2. Negligence 3. Delay 4. Contravention of Tenor 5. Total Non-Performance

Kinds of Fraud

1. Fraud in Performance (1171) - cause of obligation 2. Fraud in execution/creation/birth of the contract

Sources of Obligation

1. Law 2. Contracts 2. Quasi contracts 3. Delicts 4. Quasi Delicts

No liability in the following cases where force majeure is present

1. Non performance 2. Delay 3. Loss of deterioration before happening of the suspensive or resolutory condition

Requisites of Mora Solvendi

1. PRESTATION is demandable and already liquidated 2. That the debtor delays performance 3. That the creditor requires or demands the performance extrajudicially or judicially

Requisites of Accion Pauliana

1. Plaintiff asking for rescission (subsidiary action) has a credit prior to the alienation, although demandable later 2. Debtor has made subsequent contract, giving advantage to a 3rd person 3. Creditor has no other remedy but to rescind the debtor's contract to the 3rd person (last resort) 4. Act being impugned is fraudulent ○ Presumption of fraud may be found in Art 1387 (gratuitous transfer without leaving sufficient funds for obligations OR gratuitous transfers by a judgment debtor) More details in page __ 5. 3rd person who received the property is an accomplice in the fraud ○ See Rescissible Contracts for more detail discussion on the effects of good faith and bad faith of the third party transferee (Page 82)

Cessation of the effects of delay

1. Renunciation by Creditor 2. Prescription

Extent of Civil Liability Arising from Crime

1. Restitution - thing itself is restored (Art 105, RPC) 2. Reparation of damage caused - court determines amount of damage (Art 106, RPC) 3. Indemnification for consequential damages - not only caused the 3rd party but also those suffered by his family or by a 3rd person by reason of the crime

Action for Performance

1. Specific Performance 2. Substituted performance 3. Undoing of poor work or substituted performance in obligations to do (EXCEPTION: Imposition of personal force or coercion upon the debtor to comply with his obligation —> tantamount to involuntary servitude and imprisonment for debt) 4. Action for undoing in obligation not to do (EXCEPTION: When the only feasible remedy is indemnification for the damages caused: - If has become impossible to undo the thing physically or legally - If the act is definite and will not cease even if undone)

Kinds of Conditions

1. Suspensive 2. Resolutory 3. Potestative 4. Casual 5. Mixed 6. Possible 7. Impossible 8. Positive suspensive 9. Negative suspensive

Requisites of Liability under Quasi Delict

1. There exists a wrongful act or omission imputable to the defendant by reason of his fault or negligence 2. There exists a damage or injury 3. Direct causal connection or relation of cause and effect between the fault or negligence and the damage or injury OR that the fault or negligence be the cause of damage or injury

Effects of Mora Solvendi

1. When it has for its object a determinate thing, the delay places the risk of the thing on the debtor 2. Debtor becomes liable for damages of the delay

When demand is not necessary to incur delay

1. When the OBLIGATION or LAW expressly so declares 2. When from the nature and the circumstances of the obligation it appears that the DESIGNATION OF THE TIME when the thing to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract 3. When demand would be USELESS, as when the obligor has rendered it beyond his power to perform

Accion Subrogatoria

Action which the creditor may exercise in place of the negligent debtor in order to preserve or recover for the patrimony of the debtor the product of such action, and then obtain therefrom the satisfaction of his own credit.

Effect of Compensatio Morae

one is not compelled to perform his prestation when the other contracting party is not yet prepared to perform his prestation; default of one compensates the default of the other

creditor or obligee (active)

power to demand the prestation

Simple potestative condition

presupposes not only a manifestation of will but also the realization of an external act - On the part of the debtor: Does not prevent formation of valid obligation because in part depends on contingencies over which he has no control

Period

space of time which, exerting an influence on obligations a s a consequence of a juridical act, suspends their demandability or determines their extinguishment.

Legal compensation

takes place by operation of law because all the requisites are present

Consignation is properly made when:

After the thing has been deposited in the court, the creditor accepts the consignation without objection and without reservation of his right to contest it because of failure to comply with any of the requisites for consignation When the creditor objects to the consignation but the court, after hearing declares that the consignation has been validly made.

Effect of Active Solidary Obligation (creditors)

Mutual representation —> Each creditors represents the other in the act of receiving the payment and in all other acts which tend to secure the credit or make it more advantageous Death of solidary creditor does not transmit the solidrity to each of his heirs but all of them taken together The credit and its benefit are divided equally among the creditors UNLESS there is an agreement among them to divide differently

CONVENTIONAL SUBROGATION

- Takes place by agreement of the parties

LEGAL SUBROGATION

- Takes place without agreement but by operation of law because of certain acts

When debtor loses right to make use of period

1) When after the obligation has been contracted, he becomes insolvent UNLESS he gives a guaranty or security for the debt dovetail with accion pauliana (prior credit although demandable later) 2) When he does not furnish to the creditor the guaranties or securities which he has promised 3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, UNLESS he immediately gives new ones equally satisfactory 4) When the debtor violates any undertaking in consideration of which the creditor agreed to the period 5) When the debtor attempts to abscond shows bad faith

Double function of obligations with a penal clause

1) provide for liquidated damages and 2) strengthen the coercive force of the obligation by the treat of greater responsibility in the event of breach

Effects of Payment by 3rd Person - Not Interested - Without Knowledge or Against the Will

1. 3rd person can only be reimbursed insofar as payment has been beneficial to debtor • Burden of proof of payment on the 3rd person • Benefit to the creditor need not be proved in the following cases: a. If after the payment, the third person acquires the creditor's right b. If the creditor ratifies the payment to the third person c. If by the creditor's conduct, the debtor has been led to believe that the third person had authority to receive the payment d. Assignment of credit without notice to debtor (Art 1626) 2. 3rd person cannot compel creditor to subrogate him in the latter's rights

Effects of Payment by 3rd Person - Not Interested - With Debtor's Consent

1. 3rd person is entitled to full reimbursement Demand from the debtor what he has paid 2. Legal subrogation (novation) - 3rd person is subrogated/steps into the shoes of creditor Payor can exercise all the rights of the creditor arising from the very obligation itself, whether against the debtor or third person 3. Creditor may refuse to accept payment

Requisites of Consignation

1. A debt is due 2. The creditor a. to whom tender of payment was made refused to accept the payment without just cause. b. Or the creditor was absent, unknown or incapacitated c. Several persons claimed the same right to collect d. Title of the obligation was lost 3. The person interested in the performance of the obligation was given notice before consignation was made 4. The amount was placed at the disposal of the Court 5. The person interested in the performance of the obligation was given notice after the consignation was made

Elements of an Obligation

1. Active subject 2. Passive subject 3. Prestation or Object 4. Efficient cause/juridical tie/vinculum juris 5. Form in which the obligation is manifested

Special Forms of Payment

1. Application of Payment 2. Payment by Cession 3. Dacion en Pago 4. Tender and Consignation

Effects of Indivisible Obligations

1. Art 1223 The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title (Nature and Effect of Obligations). 2. Art 1233 A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered as the case may be. a. EXCEPTIONS: a. Obligation has been substantially performed in good faith (Art 1234) b. When the creditor accepts performance, knowing its completeness, and without protest, the obligation is deemed fully performed (Art 1235) 3. Art 1224 A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service which the obligation consists. 4. See Joint Indivisible Obligations

Effects of Divisible Obligations

1. Art 1223 The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title (Nature and Effect of Obligations). 2. Art 1233 A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered as the case may be.

Effects of Conventional Subrogation

1. Art 1303 Subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the creditor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in a conventional subrogation. ○ If suspensive condition is attached, that condition must be fulfilled first in order the new creditor may exercise his rights. 2. Art 1304 A creditor, to whom partial payment has been made, 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.

Effects of Legal Subrogation

1. Art 1303 Subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the creditor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in a conventional subrogation. ○ If suspensive condition is attached, that condition must be fulfilled first in order the new creditor may exercise his rights. 2. Art 1304 A creditor, to whom partial payment has been made, 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.

Requisites of Substantial Performance

1. Attempt in good faith to perform, without any willful or intentional departure 2. Deviation from the obligation must be slight 3. Omission or defect is unimportant and technical 4. Must not be so material that intention of the parties is not attained

Effects of Legal Compensation

1. Both debts are extinguished to the concurrent amount (Art 1290) 2. Interests stop accruing on the extinguished obligations or the part extinguished 3. Period of prescription stops with respect to the obligation or part extinguished 4. All accessory obligations of the principal which has been extinguished are also extinguished 5. If a person should have against him several debts which are susceptible of compensation, the rules on application of payments shall apply to the order of the compensation. (Art 1289)

Alternative Obligations

1. Conjunctive - all prestations must be performed to extinguish obligation 2. Disjunctive - one or some prestations must be performed to extinguish obligation a. Alternative - Debtor must perform one of several alternatives, choice belongs to debtor UNLESS expressly given to creditor b. Facultative - One principal prestation but one or more substitutes, choice belongs to DEBTOR ONLY

Requisites of Conventional Subrogation

1. Consent of the old creditor —> because his right is extinguished 2. Consent of the debtor —> old is extinguished and he becomes liable to a new obligation 3. Consent of the third person new creditor —> becomes a party to the new relation

Requisites of Expromision

1. Consent of two parties (new debtor and creditor) 2. Knowledge or consent of the debtor is not required

Exceptions to rule of integirty

1. Contrary stipulation 2. Debt is partly liquidated and not liquidated 3. When there are several subjects/parties are bound under different terms and conditions 4. Compensation

When tender and refusal not required

1. Creditor is absent or unknown or does not appear at place of payment 2. Incapacitated to receive payment at the time it is due need not be legally declared 3. Without just case, he refuses to give a receipt 4. Two or more persons claim the same right to collect 5. Title of the obligation has been lost

To whom payment can be made

1. Creditor/person in whose favor obligation was constituted 2. His successor in interest 3. Any person authorized to receive it 4. Third person

Effects of Payment by Cession

1. Creditors do not become the owner; they are merely assignees with authority to sell 2. Debtor is released up to the amount of the net proceeds of the sale, unless there is a stipulation to the contrary not total extinguishment 3. Creditor will collect credits in the order of preference agreed upon, or in default of agreement, in order ordinarily established by law.

Effects of Joint Indivisible Obligation

1. Creditors prejudiced only by their collective acts 2. Co-debtors not liable for the share of the insolvent debtor 3. Creditor must proceed against all the joint debtors, because the compliance of the obligation is possible only if all the joint debtors would act together. 4. If one of the debtors cannot comply, the obligation is converted into monetary consideration (liability for losses and damages). One who is ready and willing to comply will pay his proportionate share plus damages when his financial condition improves. 5. Debtor must deliver to all the creditors. If he delivers to only one, liable for non-performance as to other creditors. Damages are divisible and each creditor can recover separately his proportionate share.

Kinds of Quasi Delict

1. Culpa aquilana - or culpa extra-contractual; negligence as a source of obligation, a quasi-delict 2. Culpa contractual - negligence in the performance of a contract 3. Culpa criminal - criminal negligence

Effects of Negligence

1. Damages are demandable, which the courts may regulate according to circumstances 2. Invalidates defense of fortuitous event

Requisites of Condonation

1. Debts must be existing and demandable at the time remission is made 2. The renunciation of the debt must be gratuitous or without any equivalent or consideration 3. Debtor must accept the remission

When compensation is not allowed

1. Depositum (Art 1287) 2. Commodatum (Art 1287) 3. Support due gratuitous title (Art 1287) 4. Civil liability arising from a penal offense (Art 1288)

Requisites of Voluntary Compensation

1. Each of the parties can dispose of the credit he seeks to compensate 2. They agree to the mutual extinguishment of their credits

Requisites for Legal Compensation

1. Each one of the obligors be bound principally and that at the same time a principal creditor of the other • "Principals" not applicable if only a guarantor • Solidary debtor cannot set up the obligation of the creditor in favor of a co-debtor, except as regards the share of the latter 2. That both debts consists 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 are due 4. That they be liquidated and demandable • "Liquidated debts" - when its existence and amount are determined • "Demandable" - enforceable in court • What are not subject to compensation ○ Period which has not yet arrived ○ Suspensive condition has not yet happened ○ Obligation cannot be sued upon e.g. natural obligation 5. That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor • Not applicable to facultative obligations, but applicable to those with penal clause

Requisites for application of 1267 (difficulty in performance)

1. Event or change in circumstances could not have been foreseen at the time of the execution of the contract 2. Makes the performance of the contract extremely difficult but not impossible 3. Event must not be due to the act of any of the parties 4. Contract is for a future prestation

Effects of Rescission

1. Extinguishes obligatory relation as if it had never been created Equivalent to invalidate the juridical tie, leaving things in their status before the celebration of the contract 2. Mutual restitution

Effects of Dation in Payment

1. Extinguishes payment to the extent of the value at the thing to be delivered, either as agreed upon by the parties, or as may be proved, unless the parties by agreement expressly or impliedly or by their silence, consider the thing as equivalent to the obligation in which case the obligation is totally extinguished. 2. If property delivered to the creditor assumption that it is a PLEDGE, as it involves less transmission of rights unless it is clearly the intention of parties

Requisites of a period

1. Future 2. Certain 3. Possible

Effects of Loss of the Thing Due

1. Give specific thing —> extinguish obligation EXCEPTIONS (debtor is liable): * law expressly privides * express stipulation which makes obligor liable for force majeure * nature of obligation requires assumption of risk * fault of debtor + force majeure * loss after mora * debtor promised to deliver the same thing to 2 or more different parties * obligation arises from a criminal act 2. To give generic thing —> NOT extinguished EXCEPTIONS 1. Delimited generic things: limitation of the generic object to a particular existing mass or a particular group of things; become determinate objects whose loss extinguishes the obligation 2. Generic thing has been segregated 3. Monetary obligation 3. Partial Loss - The courts shall determine whether, under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation.

What is to be paid (to give specific thing)

1. Give specific things itself 2. Accessions and accessories 3. If with loss, improvements, deterioration —> Apply Art 1189

When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. Until then, the responsibility of the debtor shall be governed by the following rules:

1. If ONE of the thing is LOST through fortuitous event, he shall perform the obligation by delivering that which the creditor should choose from the remainder, or that which remains if only one subsists. 2. If the LOSS of ONE of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the debtor has disappear, with a right to damages. 3. If ALL the things are LOST through the fault of the debtor, the choice by the creditor shall fall upon the price of any of them, also with indemnity for damages.

When court mat fix period

1. If the obligation does not fix a period, but from its nature and circumstance it can be inferred that a period was intended, the courts may fix the duration thereof. 2. The courts shall also fix the duration of the period when it depends upon the will of the debtor. 3. The courts shall determine which period as may under the circumstances have been probably contemplated by the parties. *Once fixed by the courts, the period cannot be changed by them.

Effects of Confusion

1. In general —> extinguish 2. Joint Obligations. —> does not extinguish a joint obligation [EXCEPT as regards the share corresponding to the creditor or debtor in whom the two characters concur.] 3. Solidary Obligations —> shall extinguish the obligation, without prejudice to the provisions of Art 1219." (Solidary co-debtor who has been remitted is still liable to co- debtors if one of the had paid the obligation in full prior the remission)

Effects of Condonation

1. In general —> extinguishes either totally or partially 2. In case of joint or solidary obligations —> affects the share corresponding to the debtor in whose benefit the remission was given

Effects of Novation

1. In general —> extinguishment of the original obligation and creation of a new one 2. When accessory obligation may subsist —> only insofar as they may benefit third person who did not give the consent to the novation

Exceptions to Accion Subrogatoria

1. Inherent rights of debtor a. Right to existence, exempting from the reach of creditors whatever he may be receiving as support b. Rights or relations of a public character c. Rights of an honorary character d. Rights consisting of powers which have not been used i. Power to administer e.g. debtor fails to have some property leased the creditor cannot give it in lease for him ii.Power to carry out an agency or deposit because purely personal acts iii.Power to accept an offer for a contract e. Non-patrimonial rights e.g. action to establish the creditor's status as a legitimate or natural child, action for legal separation or annulment of marriage, and other rights arising from family relations f. Patrimonial rights not subject to execution e.g. right to a government gratuity or pension g. Patrimonial rights inherent in the persons of the debtor e.g. right to revoke a donation by reason fo ingratitude, right to demand the exclusion of an unworthy heir 2. Art 772 Only those who at the time of the donor's death have a right to the legitime and their heirs and successors in interest may ask for the reduction or inofficious donations. Those referred to in the preceding paragraph cannot renounce their right during the lifetime of the donor, either by express declaration, or by consenting to the donation. The donees, devisees and legatees, who are not entitled to the legitime and the creditors of the deceased can neither ask for the reduction nor avail themselves thereof. 3. Sec 13, Rule 39, Rules of Court

Requisites of Delegacion

1. Initiative for substitution must emanate from the old debtor 2. Consent of the new debtor 3. Acceptance by the creditor

Exceptions from Liability in Negligence

1. Insurance 2. Renunciation of right to enforce liability in cases of SIMPLE NEGLIGENCE (Cannot waive liability in GROSS Negligence)

Requisites of Loss of the Thing Due

1. Loss or destroyed without the fault of the debtor 2. Before the debtor incurs in delay 3. After the obligation is constituted

LOSS, DETERIORATION or IMPROVEMENT pending happening of the condition (Obligation to give DETERMINATE thing)

1. Loss without fault of debtor: obligation extinguished 2. Loss through the fault of debtor: obliged to pay damages. A thing is loss when it: a. Perishes b. Goes out the commerce of man c. Disappears in such a way that its existence is unknown or it cannot be recovered 3. Deteriorates without fault of the debtor: impairment to be borne by the creditor 4. Deteriorates through the fault of debtor: creditor may choose between the rescission of the obligation and its fulfillment with indemnity for damages in either case 5. Improved by its nature, time: inure to the creditor 6. Improved at the expense of the debtor: no other right than that granted to the usufructuary

Kinds of Mora

1. Mora Solvendi (default on part of the creditor) 2. Mora accipiendi (default on part of the creditor) 3. Compensatio Morae (parties in a bilateral contract can regulate the order in which they shall comply with their reciprocal prestations. Otherwise, the fulfillment must be SIMULTANEOUS and RECIPROCAL)

Requisites for Confusion

1. Must take place between the creditor and the principal debtor (Art 1276) 2. Very same obligation must be involved, for if the debtor acquires rights from the creditor, but not particular obligation in question, there will be no merger 3. Confusion must be total or as regards the entire obligation

Kinds of Quasi-contracts

1. Negotiorum gestio - the involuntary management of the property or affairs of another without the knowledge or consent of the latter. 2. Solutio indebiti - the juridical relation which is created when something is received when there is no right to demand it and it was unduly delivered through mistake. The requisites are: a. There is no right to receive the thing delivered. b. The thing was delivered through mistake.

Duties of Obligor in Obligations not to do

1. Not to do what should not be done 2. To should the cost to undo what should not have been done (Art 1168) 3. To pay damages (Art 1170, 2201-2202)

EFFECT OF THE STATUS OF THE ORIGINAL OR NEW OBLIGATION

1. Nullity of the original obligation —> new obligation is VOID 2.Voidability of the original obligation —> new obligation is VALID if ratified before novation —> new obligation is VALID even if not ratified 3. Nullity of the new obligation —> original SUBSISTS, UNLESS intends extinguishment of former in any event 4. Voidability of the new obligation —> new obligation is VALID 5. Suspensive or resolutory condition of original obligation —> New is pure 6. Original obligation is pure —> New obligation is conditional

Effects of withdrawal before consignation is final

1. Obligation remains in force 2. Debtor bears all the expenses incurred because of the consignation

Requisites of Impossibility

1. Obligation used to be possible at the constitution of obligation 2. Subsequent impossibility 3. Without the fault of the debtor

Requisites of Mora Accipiendi

1. Offer of performance by the debtor who has the required capacity 2. Offer must be to comply with the prestation as it should be performed 3. Creditor refuses the performance without just cause

"Most Onerous Debt"

1. Older > more recent 2. With interest > no interest 3. Higher interest > lower interest 4. Secured > not secured 5. Debtor is principally bound > debtor is a guarantor 6. Sole debtor > solidarily bound 7. Share which corresponds to solidary debtor 8. For indemnity > penal clause > no penal clause 9. Liquidated debt > unliquidated debt

EFFECTS OF DELEGACION

1. Original debtor is released from the obligation 2. The new debtor is subrogated in the rights of the creditor. He may demand from the old debtor the entire amount of what he has paid for the obligation. (Art 1302 Par 2) 3. GENERAL RULE: Old debtor is not liable for the insolvency or non-fulfillment of the new debtor (Art 1295) EXCEPTION: i. He is aware of the insolvency at the time he delegated his debt (Art 1295) ii.At the time of the delegation, the new debtor's insolvency is already existing and of public knowledge (Art 1295)

Effects of Payment by 3rd person - Interested or not - Does not intend to be reimbursed

1. Payment is deemed as a donation/offer of donation 2. Donation must be in proper form (i.e. if above P5K it must be in writing)

Requisites of a Valid Payment

1. Person who pays 2. Person to whom payment is made 3. Thing to be paid 4. Manner, time and place of payment

Requisites for Payment by Cession

1. Plurality of debts 2. Plurality of creditors 3. Complete or partial insolvency of the debtor 4. Abandonment of all debtor's property not subject to execution 5. Acceptance or consent on the part of the creditors

Requisites of Novation

1. Previous valid obligation 2. The agreement of all parties to the new contract 3. Extinguishment of the old contract 4. Validity of the new one 5. Animus novandi or intent to novate

Primary Classification of Obligations

1. Pure and Conditional 2. With a term or period 3. Alternative and Facultative 4. Joint and Solidary 5. Divisible and Indivisible 6. With a penal clause

Condonation or Remission

An act of liberality by virtue of which, without receiving any equivalent, the creditor renounces the enforcement of obligation, which is extinguished in its entirety or in that part or aspect of the same to which the remission refers.

Effects of Mora Acciepiendi

1. Responsibility of the debtor for the thing is reduced and limited to fraud and gross negligence 2. Debtor is exempted from the risks of loss of thing, which automatically pass to the creditor 3. All expenses incurred by the debtor for the preservation of the thing after the mora shall be chargeable to the creditor 4. If the obligation bears interest, the debtor does not have to pay it from the moment of the mora 5. The creditor becomes liable for damages 6. The debtor may relieve himself of the obligation by the consignation of the thing

Rules in Application of Payment

1. Right to apply must be exercised at the time of the payment (Art 1252) 2. Creditor may undertake application, subject to the debtor's approval. Once the latter accepts receipt of application, he cannot complain UNLESS there is a cause for invalidating the contract. (Art 1252) 3. Apply to interest first. BOTH (1) interest stipulated and (2) interest due because of debtor's delay Art 1253 If debt produces interest, payment of the principal shall not be deemed to have been made until the interest are covered.

Correlative rights of the Obligee in Obligations to give a determinate thing

1. Right to compel delivery of fruits, accessions, and accessories (only personal right) 2. Right to rescission or resolution 3. Right to damages in failure to deliver, fraud, negligence in performance, delay, contravention of tenor

Rights if the Obligee in Obligations to give an indeterminate thing

1. Right to rescission or resolution 2. Right to damages

Requisites for Application of Payment

1. Same debtor 2. Same creditor 3. Various debts are of same kind, generally monetary character 4. All obligations must be due ○ EXCEPTIONS: Mutual agreement of parties upon consent of the party in whose favor the term was established 5. Payment is not enough to extinguish all debts 6. Debtor has preferential right to choose the debt which his payment is to be applied ○ Not absolute; LIMITATIONS: Cannot make partial payments Cannot apply to unliquidated debts Cannot choose a debt whose period is for the benefit of the creditor, and period has not yet arrived Right to apply debts must be exercised at the time when debt is paid

Advantage of Compensation over Payment

1. Simple, taking effect without action by either party to extinguish their respective obligations 2. More guaranty in making the credit effective, because there is less risk of loss by the creditor due to insolvency or fraud of the creditor

Effects of penal clause

1. Substitute for indemnity for damages and payment of interest (Art 1226) EXCEPTION: Unless there is a stipulation to the contrary e.g. becomes a facultative obligation 2. Not exempt debtor from performance - penalty is not a defense for leaving obligation unfulfilled Art 1227 The debtor cannot exempt himself from the performance of the obligation by paying the penalty EXCEPTION: Where this right to substitute penalty has been expressly reserved for him 3. Creditor cannot demand both performance and penalty at the same time Art 1227 Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time" EXCEPTION: Unless this right has been clearly granted him 4. Creditor cannot collect other damages in addition to penalty Art 1226 Substitute the indemnity for damages and the payment of interest in case of non- fulfillment * EXCEPTIONS: 1. There is an express provision to that effect 2. Debtor refuses to pay the penalty 3. Debtor is guilty of fraud in the non-fulfillment of the obligation

Kinds of Period

1. Suspensive 2. Resolutory 3. Express 4. Implied 5. Definite 6. Indefinite 7. Conventional 8. Judicial 9. Legal

Requisites of a Valid Tender of Payment

1. Tender of payment must comply with the rules on payment 2. It must be unconditional and for the whole amount 3. It must be actually made

Presumptions in Condonation

1. The DELIVERY of a private document evidencing a credit, made voluntarily by a creditor to the debtor, IMPLIES the renunciation of the action which the former had against the latter. 2. Whenever the private document in which the debt appears is found in the POSSESSION of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved. 3. It is presumed that the accessory obligations of pledge has been REMITTED when the thing pledged, after its delivery to the creditor, is found in the possession of the debtor, or a third person who owns the thing.

Effects of Expromision

1. The debtor is released from obligation 2. Creditor generally cannot recourse from the old debtor if the new debtor is insolvent 3. If substitution is without his knowledge or consent a. Old debtor is not liable for the insolvency or non-fulfillment of the new debtor (Art 1294) b. The new debtor can only compel old debtor to reimburse inasmuch as the payment has been beneficial to him No subrogation takes place (Art 1237) 4. If substitution is with knowledge and consent a. New debtor is entitled to full reimbursement of the amount paid and subrogation

Effects of Consignation

1. The debtor is released in the same manner as if he had performed the obligation at the time of consignation, because this produces the effect of a valid payment. 2. The accrual of interest on the obligation is suspended from the moment of the consignation. 3. The deteriorations or loss of a thing or 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. 4. Any increment or increase in value of the thing after the consignation inures to the benefit of the creditor.

Effect of loss or impossibility of one or all prestations

1. The debtor shall lose the right of choice, when among the prestations whereby he is alternatively bound, only one is practicable. 2. If through the creditor's act, the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages. 3. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, a. ALL THE THINGS which are alternatively the object of the obligation have been LOST or b. COMPLIANCE of the obligation has become IMPOSSIBLE. 4. The indemnity shall be fixed taking as a basis the VALUE of the last thing which disappeared OR that of the service which last became impossible. * Damages other than the value of the last thing or service may also be awarded.

Contravention of Tenor

Any illicit act which impairs the strict and faithful fulfillment of the obligation or every kind of defective performance

Requisites for Dation in Payment

1. There must be performance of the prestation in lieu of payment. It may be in the form of delivery of a corporeal thing or a real right or a credit against third person 2. There must be some difference between the prestation due and that which is given in substitution 3. There must be an agreement between the creditor and the debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due 4. Consent

DEFENSES AVAILABLE TO A SOLIDARY DEBTOR AGAINST THE CREDITOR

1. Those derived from the nature of the obligation (vices of consent, prescription, void, voidable) —> total defense 2. Personal defenses (minority, insanity, fraud, violence, intimidation) —> total defense 3. Defenses pertaining to his share —> partial 4. Personally belonging to co-debtor —> partial

Duties of the Obligor in Obligation to Give a DETERMINATE THING

1. To deliver the thing itself 2. To preserve the thing with due care 3. To deliver the accessions and accessories 4. To deliver the fruits

Duties of Obligor in Obligations to do

1. To do it (Art 1167) 2. To shoulder the cost if someone else does it (Art 1167) 3. To undo what has been poorly done (Art 1167) 4. To pay damages (Art 1170-1172, 2201-2202)

KINDS OF PRESTATION

1. To give 2. To do 3. Not to do

Effects of Payment by 3rd Person - Interested

1. Valid payment; obligation extinguished 2. Debtor to reimburse fully 3rd person interested 3. 3rd person subrogated to the rights of the creditor

When is Legal Subrogation presumed

1. When a creditor pays another creditor who is preferred, even without the debtor's knowledge ○ Refers to hierarchy of credits which will be taught next sem hehe ○ Debtor can still use any defenses he may have against the original creditor such as compensation 2. When a 3rd person, not interested in the obligation, pays with the express/tacit approval of the debtor 3. When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share ○ Solidary co-debtor may reimburse to the extent of the debtor's share ○ Guarantors, mortgagors and sureties

No compensation may occur even when all the requisites concur:

1. When there is renunciation of the effects of compensation by a party —> rests upon a potestative right and unilateral declaration of renunciation is sufficient 2. When the law prohibits compensation a. Art 1287 (commodatum) b. Art 1288 (support)

Test of Divisibility

1. Will or intention of the parties 2. Objective or purpose of the stipulated prestation 3. Nature of the thing 4. Provisions of law affecting the prestation

Effects of Joint Obligation on the rights of the creditors

1.Demand by one creditor upon one debtor produces the effects of default only with respect to the creditor who demanded and the debtor on whom the demand was made, but not with respect to others 2.Interruption of prescription by the judicial demand of one creditor upon a debtor does not benefit the other creditors nor interrupt the prescription as to other debtors

Effects of Joint Obligation on liability of the debtor

1.Only with respect to his particular share in the debt 2.Vices of each obligation arising from the personal defect of a particular debtor or creditor does not affect the obligation or rights of the others 3.The insolvency of a debtor does not increase the responsibility of his co-debtors nor does it authorize a creditor demand anything from his co-creditors 4.JOINT DIVISIBLE OBLIGATION: defense of res judicata is not extended from one debtor to another

2 concepts of force majeure

A. Act of God - by nature e.g. earthquakes, storms, floods, epidemics, fires, etc; all human agencies excluded B. Act of Man - by acts of man, e.g armed invasion, attack by bandits, governmental prohibitions, robbery, etc; for as long as that they have a force of an imposition which the debtor could not have resisted

Who can pay

A. In general (creditor cannot refuse valid tender of payment) 1. Debtor 2. Anyone acting on his behalf a. Duly authorized agent or representatives b. Heirs (means that debtor is dead, if alive, they would be third persons interested in obligation) c. Successors in interest and assignees B. Third person who is an INTERESTED PARTY (creditor cannot refuse valid tender of payment) Meaning of INTERESTED PARTY - interested in the extinguishment of the obligations such as • Guarantors • Co-debtors • Sureties • Owners of mortgaged property or pledge C. Third person who is NOT AN INTERESTED PARTY but WITH CONSENT of debtor D. Third person who is NOT AN INTERESTED PARTY and WITHOUT THE KNOWLEDGE OR AGAINST THE WILL OF THE DEBTOR E. Third person who does NOT INTEND TO BE REIMBURSED

Effects of Assignment of Credit

A. Made AFTER compensation took place —> no effect; compensation already perfected, nothing to assign at all B. Made BEFORE compensation took place 1. With consent of debtor —> cannot set up against assignee UNLESS debtor reserved his right to compensation when he gave his consent 2. With knowledge but without consent of debtor —> only debts prior to assignment, not subsequent 3. Without the knowledge of debtor —> all debts maturing prior to his knowledge

Modes of Extinguishment of Obligations

A. Payment or performance - most natural way of extinguishing obligation B. Loss of the thing due or Impossibility of performance C. Condonation or Remission of the debt D. Confusion or Merger of the rights of the creditor and debtor E. Compensation F. Novation

PAYMENT BY CESSION

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 his credits.

Effect of Joint Obligation on compensation

Affects only the share of the joint co-debtor in whom the compensation takes place

Effect of Joint Obligation on Novation

Affects only the share of the joint co-debtor in whom the novation is created

OBLIGATIONS WITH A PENAL CLAUSE

An accessory undertaking to assume greater responsibility in case of breach. Attached to an obligation to insure performance.

Effect of payment in advance/ before arrival of the period (in obligations to give)

Anything paid or delivered before the arrival period, the obligor being unaware of the period OR believing that the obligation has become due and demandable, may be RECOVERED, with the fruits and interests.

Right of choice in alternative obligations

Art 1200 The right of choice belongs to the debtor, UNLESS it has been expressly granted to the creditor.

Estoppel in payment

Art 1235 When oblige accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with.

Effect of Joint Obligation on Remission

Benefits only the joint co-debtor in whom the remission is granted, obligation extinguished

Effect of Joint Obligation on Confusion

Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur.

Accion Pauliana

Creditors have the right to set aside or revoke acts which the debtor may have done to defraud them. All acts of the debtor which reduce his patrimony in fraud of his creditors, whether by gratuitous or onerous title, can be revoked by this action.

DATION IN PAYMENT

Delivery and transmission of ownership of a thing by the debtor and to the creditor as an accepted equivalent of the performance of the obligation.

APPLICATION OF PAYMENTS

Designation of the debt which is being paid by a debtor who has SEVERAL OBLIGATIONS OF THE SAME KIND, in favor of one creditor to whom payment is being made

Solidary Obligation

Each of the debtors is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. Each creditor may enforce the entire obligation and each debtor may be obliged to pay it in full.

Joint Obligations (presumption)

Each of the debtors is liable only for a proportionate part of the debt, and each creditor is entitled only to a proportionate part of the credit. Each creditor can recover only his share of the obligation and each debtor can be made to pay only his part

NOVATION IS NEVER PRESUMED

Express Novation > Implied Novation Test of incompatibility: If the two contracts can stand together and each one having independent existence

Effects of Impossibility

Extinguishment EXCEPTIONS ○ By law ○ By stipulation ○ Nature of the obligation requires assumption of risk

Two notice requirement

FIRST NOTICE: Art 1257 Par 1 In order that the consignation of the thing due may release the obligor, it must FIRST be announced to the persons interested in the fulfillment of the obligation. SECOND NOTICE: Art 1258 Par 2 The consignation having been made, the interested parties shall also be notified thereof.

Compensatio Morae General Rule

Fulfillment of parties should be simultaneous

Payment or performance

Fulfillment of the prestation due, a fulfillment that extinguishes the obligation by the realization of the purposes for which it was constituted. Juridical act which is VOLUNTARY, LICIT, and MADE WITH THE INTENT TO EXTINGUISH THE OBLIGATION

How payment is made (Rule of Integrity)

GENERAL RULE: 1. Partial payment is not allowed —> Creditor cannot be compelled to receive partial prestations; Debtor cannot be compelled to give partial payments

What is to be paid (to give generic thing)

GENERAL RULE: Creditor cannot demand a superior quality; Debtor cannot deliver a thing of inferior quality EXCEPTION: Unless quality and circumstances have been stated, purpose and other circumstances of obligation considered.

Obligations arising from Crime

GENERAL RULE: Criminal action bars civil action for the same offense EXCEPTIONS: 1. Offended party reserves the right to institute it separately 2. The law provides for an independent civil action (i.e. civil action may proceed to final judgment irrespective of result of the criminal action and filing of the criminal action does not suspend the civil action)

Preserving with due care

GENERAL RULE: Diligence of a good father EXCEPTION: Extraordinary diligence (common carriers, banks, pharmacies)

Payment to a wrong third party

GENERAL RULE: Not valid, obligation is not extinguished, even if in good faith of the debtor EXCEPTION: 1. Extinguished if the mistake is imputable to the fault or negligence of the creditor (PAL v CA) 2. Payment in good faith to person in possession of credit (Art 1242)

Payment to Incapacitated Person

GENERAL RULE: Payment not valid EXCEPTION - When payment to an incapacitated person is valid: a) If creditor has kept the thing delivered b) Insofar as payment benefited creditor

Payment to a third person

GENERAL RULE: VALID if third person proves that it redounded to creditor's benefit; otherwise VOID EXCEPTION; When proof of benefit not required 1. If after the payment, the third person acquires the creditor's right 2. If the creditor ratifies the payment to the third person 3. If by the creditor's conduct, the debtor has been led to believe that the third person had authority to receive the payment 4. Assignment of credit without notice to debtor 5. Payment in good faith to any person in possession of the credit shall release the debtor

Impossible condition

IMPOSSIBLE CONDITIONS, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them.

Presumptions in payment of interests and installments

INTEREST 1. The receipt of the principal by the creditor, without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid. 2.If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered. 3. principal amount is received without reservation as to interest , interest is presumed to have been paid INSTALLMENT 1. If a latter installment is received without reservation to prior installments —>> prior installments are presumed to have been paid

LOSS OF THE THING DUE

If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is loss when it: a. Perishes b. Goes out of the commerce of man c. Disappears in such a way that its existence is unknown or it cannot be recovered

Conditional Obligations

In conditional obligations, the acquisition of rights, as well as extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

What is to be paid (to do or not to do)

In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee's will.

EXPROMISION

May be done at the instance of the creditor or the third party himself

When period is for the benefit of the creditor

May demand performance anytime, but not compelled to accept before period expires or E.g. payment of interest, wants to keep his money safely invested instead of having it in his hands, protects himself from sudden decline in purchasing power of the currency loaned

When period is for the benefit of the debtor

May oppose a premature demand, but may validly pay any time before period expires E.g. time to raise money

Confusion or Merger of Rights

Merger or confusion is the meeting in one person of the qualities of the creditor and the debtor with respect to the same obligation.

Confusion in Principal or Accessory Obligation

Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. Confusion which takes place in the person of any of the latter does not extinguish the obligation.

Effect of Passive Solidary Obligation (debtor)

Mutual guaranty

What is to be paid (interest)

No interest shall be due unless it has been expressly stipulated in writing. Interest must be satisfied first before capital

Effect of Solidary Obligation to Solidary Debtor in relation to Common Creditor

Obligation to perform • Each one of the solidary co-debtor is bound to render entire compliance with the prestations (Art 1207) In case of novation, compensation, confusion, remission by a creditor • Extinguishes the obligation without prejudice to the responsibility of a solidary co-debtor with respect to reimbursement prior to his remission (Art 1215 Par 1)

Obligation with a Term or Period

Obligations whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once but terminate upon arrival of the day certain. A "day certain" is understood to be that which must necessarily come, although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is CONDITIONAL, and it shall be regulated by the rules of the preceding Section.

Divisible Obligations

One which is susceptible of partial performance; debtor can legally perform the obligation by parts and the creditor cannot demand a single performance of the entire obligation.

When period is for the benefit of both parties (presumption)

Presumption in absence of stipulation or in case of doubt Creditor must give consent first before debtor may pay in advance especially when creditor receives other benefits by reason of the term

Requisites of Joint Obligations

Requisites of Joint Obligations 1. Plurality of subjects 2. Determination of the shares in the demandability of the fulfillment of the obligation

Subjective Novation: Change in debtor

Subjective novation is the substitution of a new obligor for the original obligor. To constitute novation, the prior obligor must be discharged on account of the substitution. Subjective novation can occur generally even without the original obligor's consent.

Subjective Novation: change of creditor

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

TENDER OF PAYMENT AND CONSIGNATION

TENDER OF PAYMENT The act of offering the creditor what is due him together with a demand that the creditor accept the same

CONSIGNATION

The act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment.

Negative suspensive

The conditions that some event will not happen at a determinate time shall render the obligation EFFECTIVE from the moment the time indicated has elapsed OR if it has become evident that the event cannot occur. If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated, bearing in mind the nature of obligation.

Effects of non-compliance with two notice ruke

The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.

Rights of creditor before fulfillment of suspensive condition

The creditor, may before the fulfillment of the obligation, bring the appropriate action for the preservation of his right. No preference of credit is granted to the creditor but only allows him to bring proper action for the preservation of his rights.

IMPOSSIBILITY OF PERFORMANCE

The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.

Exception of the right of choice of debtor in alternative obligations

The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the object of the obligation ○ Grant to creditor cannot be implied ○ Choice may also be entrusted by the parties to a third person ○ LIMITATIONS ON RIGHT OF CHOICE Right to choose is indivisible (cannot choose part of one and part of the other) Cannot choose prestations which are impossible, unlawful or could not have been the object of the obligation (Art 1200, Par 2)

Expenses of consignation

The expenses of consignation, when properly made, shall be charged against the creditor.

NOVATION

The extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first either by: 1. Changing the object or principal conditions 2. Substituting the person of the debtor 3. Subrogating a third person in the rights of the creditor

What is to be paid (money)

The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is the legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

Effects of Renunciation of Principal or Accessory Obligation

The renunciation of the principal debt shall extinguish the accessory obligations; but the waiver of the latter shall leave the former in force. !! Accessory merely follows principal !!

What is to be paid in general

The thing itself (Rule of Identity)

JOINT INDIVISIBLE OBLIGATIONS

Their tie is joint, but the performance is indivisible. One in which the object of the object or prestation is indivisible, not susceptible of division; while the tie between the parties is joint, that is liable only to a proportionate share. (Art 1209)

Indivisible Obligations

Whatever may be the nature of the thing which is the object thereof, when it cannot be validly performed in parts.

When is payment to be made

When obligation is due and demandable but debtor may pay before due date if period is for the benefit of debtor. If for the benefit of both the debtor and creditor, debtor may only prior to the due date if creditor consents thereto.

Effects of Nullity of debts to be compensated

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

Effect of CONCURRENT FAULT of the Debtor

When the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that the immediate cause of the damage was the act of God. If he creates a dangerous condition or negligence although the act of God was the immediate cause, he cannot escape liability for the natural and probable consequence thereof. There must be NO fraud, negligence, delay or violation/contravention in any manner of the tenor of the obligation. When the effect is found to be partly resulting from the participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules applicable to the acts of God (NPC v CA - the case of Welming and the exploding dam)

Obligations to give an indeterminate thing

When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration.

Presumption in Loss of the Thing Due

Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was DUE TO HIS FAULT, UNLESS there is proof to the contrary, and without prejudice to the provisions of Art 1165.

Withdrawal by debtor AFTER proper consignation

With creditor's approval EFFECTS: revival of the obligation and relationship between creditor and debtor is restored to the condition in which it was before the consignation

Compensation

a mode of extinguishing the obligation to the concurrent amount, the obligations of those persons who in their own right are reciprocally debtors and creditors of each other. Offsetting of two obligations which are reciprocally extinguished if they are of equal value or extinguished to the concurrent amount if of different values. it must be alleged and proved by the debtor who claims its benefits. Once proved, its effect retroacts to the moment when the requisites provided by law concur.

Where payment is to be made

a. In the designated place in the obligation (Art 1251 Par 1) b. If no place is expressly designated 1. There being no express stipulation and if the undertaking is to deliver a determinate thing the payment shall be made wherever the thing might be at the moment the obligation was constituted. 2. In any other case (not to deliver a determinate thing), the place of payment shall be at the domicile of the debtor. 3. If the debtor changes his domicile in bad faith, or after he has incurred in delay, the additional expenses shall be borne by him. (Absent such circumstances, it will be borne by the creditor)

Requisites for Rescission

a. One of the creditors failed to comply with what is incumbent upon him b. Obligor who performed chose rescission over fulfillment or performance is impossible c. The breach is substantial so as to defeat the object of the parties in making the

Requisites of Prestation

a. Physically and juridically possible b. Determinate or at least determinable according to pre-established elements or criteria c. Possible equivalent in money

OBJECTIVE NOVATION

change in the object of prestations

Rescission (Exception)

object is not yet delivered AND obligation has not yet been performed If the obligation has not yet been performed: extrajudicial declaration of party willing to perform would suffice; can refuse to perform if the other party is not yet ready to comply If the injured party has already performed: cannot extrajudicially rescind IF the other party opposes the rescission (otherwise, rescission produces legal effect). In the case the other party impugns rescission, the court comes in either to: a. Declare the rescission as properly made b. Give a period to the debtor in which to perform

If rules are inapplicable and application cannot be inferred

the debt which is MOST ONEROUS TO THE DEBTOR among those due, 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.

VOLUNTARY/CONVENTIONAL COMPENSATION

when the parties agree to compensate their mutual obligations even if some requisite is lacking,

Effect of Solidary Obligation of Solidary creditor in relation to Common debtor

• Debtor may pay to any solidary creditor, but if a judicial demand is made against him, he must pay only to the plaintiff. (Art 1214) Judicial demand revokes the tacit mutual representation of co-creditors, though not perpetually: only until such time the action exists. Payment to creditor who did not sue is a payment to 3rd person. Same effect granted to extrajudicial demand. DEMAND BY SEVERAL CREDITORS: Pay the one who notified him first. If simultaneous, debtor reserves the right to choose. Does not apply to MIXED SOLIDARITY: solidary co-debtor may pay in behalf of the one to whom demand has been made AND to any of the solidary creditors • The creditor may proceed against ANY ONE of the solidary debtors or SOME or ALL of them simultaneously. (Quiombing v CA) The demand made against one of them shall not be an obstacle to those which may be subsequently be directed against others, so long as the debt has not been fully collected. (Art 1216) • Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which to accept. (Art 1217, Par 1) • Each creditor may renounce his right even against the will of the debtor, and the latter need not thereafter pay the obligation to the former. In case of novation, compensation, confusion, remission by a creditor • Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors OR with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of Art 1219 i.e. responsibility of a solidary co-debtor with respect to reimbursement prior to his remission (Art 1215 Par 1)

DELEGACION

• Debtor offers and the creditor accepts a third person who consents to the substitution so that the consent of the three is necessary

Effect of Solidary Obligation to Solidary Debtor in relation to Solidary co debtor

• Payment by one of the solidary co-debtors extinguishes the obligation. (Art 1217, Par 1) • Solidary co-debtor who paid may reimburse from his co-debtors only the share which corresponds to each, with the interest for the payment already made, but if the payment is made before debt is due, no interest for the intervening period may be demanded. (Art 1217, Par 3) Converted into a Joint Obligation as to co-debtors, but no real case of subrogation because the old one is extinguished and the new one is created Partial payment: may recover only insofar as the payment exceeded his share of the obligation • When one of the solidary debtors is insolvent and cannot reimburse, his share will be borne by all his co-debtors in proportion to the debt of each. (Art 1217, Par 3) • Payment by co-debtor does not entitle him to reimburse from co-debtors if such payment is made after the obligation has prescribed or become illegal. (Art 1218) Also applies to prior total remission in favor of one debtor • The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors, in case debt had been totally paid by anyone of them before remission was effected. (Art 1219) Applies when one of the debtors has already paid the obligation in full (in such a case, the obligation as to the creditor is already extinguished and nothing more to remit even partially) Relationship of the creditor with the solidary debtor does not extend to the relationship among solidary co-debtors • The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors. (Art 1220) In case of fortuitous event • If the thing has been LOST OR if the prestation has become IMPOSSIBLE without the fault of the solidary debtors, the obligation shall be extinguished (Art 1221, Par 1) • If there was fault on the part of any one of them, ALL shall be responsible to the creditor, for the price and payment of damages and interests, without prejudice to their action against the guilty or negligent debtor. (Art 1221, Par 2) Guilty creditor who pays indemnity cannot recover from his co-debtors. Other co-debtors who pay the indemnity can recover the full amount from the guilty co-debtor. • If through a fortuitous event, the thing is LOST or the performance of the prestation has become IMPOSSIBLE after one of the solidary debtors has incurred in delaythrough the judicial or extra-judicial demand upon him by creditor, the provisions of the preceding paragraph shall apply. (Art 1221, Par 3)

Effect of Solidary Obligation of Solidary creditors in relation to solidary co-creditors

• The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to others for the share in the obligation corresponding to them (Art 1215 Par 2) ○ Remission done by several but not all of the creditors: those who made it do not have action against each other, but all of them liable for the share of one who does not remit • Each one of the solidary creditors may do whatever is useful to the others, but not anything which may be prejudicial to the latter. (Art 1212) ○ E.g. remission, novation, compensation and merger/confusion ○ Take note that the same act is permitted by Art 1215, wherefore Tolentino concludes that the provision is "unhappily inaccurate". ○ To harmonize with Art 1215: The prejudicial acts are valid as to the debtor, but not with respect to the co-creditors whose rights subsists and can be enforced against the creditor who performed prejudicial acts • Solidary creditor cannot assign his rights without the consent of others (Art 1213) ○ Why? As a solidary creditor, he is an agent of others, cannot assign that agency without the consent of his principals. Implies mutual confidence may take into account the personal qualification of each creditor. ○ Assignment of rights allowed as to co-creditor

Effects of notice of choice in alternative obligations

• The effect of notice of choice is to limit the obligation to the object or prestation selected, with all the consequences which the law provides. • The obligation is converted to a simple obligation to perform the prestation chosen. • Once the selection has been communicated, it becomes irrevocable.

Exception on impossible conditions

○ Pre-existing obligation ○ Divisible obligation ○ Simple or remuneratory obligation ○ Testamentary disposition ○ Negative impossible things

Limitation on Retroactive effect of suspensive condition

○ acts of administration before fulfillment not affected by retroactivity; however abuse of rights in guise of administration are not allowed to defeat rights of creditor ○ usufructuary rights not within the principle of retroactivity of conditional obligations