Extinguishment of Obligations

Topics: Debt, Money, Debtor Pages: 12 (3042 words) Published: October 13, 2013
Chapter 4
EXTINGUISHMENT OF OBLIGATIONS

Section 1 – PAYMENT OR PERFORMANCE

Payment
It is the fulfillment of a promise; the performance of an agreement. This consists of: a. the delivery of money or its equivalent in specific property or services, or b. doing a certain act or not doing a certain act.

How payment is made
a. The thing or service contemplated must be delivered or rendered. 1. The debtor of the thing cannot compel the creditor to accept a different one although the latter maybe of the same value as, or more valuable than that which is due. 2. 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. 3. In obligations to give a generic thing whose quality and circumstances have not been stated, the debtor cannot deliver a thing of inferior quality. 4. In monetary obligations, the payment must be in the legal tender although the parties may stipulate that payment may be made in currency other than Philippine legal tender at the time of payment.

b. Fulfillment of the obligation must be complete.
Exceptions:
1. If the obligation has been substantially performed in good faith. 2. When the obligee accepts the performance knowing its incompleteness or irregularity, and without expressing any protest or objection.

Substantial performance in good faith
If the obligation has been substantially performed in good faith, it is considered as though there had been strict and complete fulfillment. The debtor is allowed to recover from the creditor less damages suffered by the latter. Requisites:

1. There must be a substantial performance.
2. The obligor must be in good faith.

Acceptance of incomplete or irregular payment
If the obligee accepts the payment knowing that it is incomplete or irregular and without expressing any protest, the obligation is considered fulfilled and the whole debt is extinguished. Requisites:

1. The obligee knows that the performance is incomplete or irregular. 2. He accepts the performance without expressing any protest or objection.

Payment made by third person
The obligee cannot be compelled to accept payment from a third person because the obligee may not have the confidence in the honesty of the third person who might deliver a defective thing or pay with a check which may not be honored.

Exceptions:
1. When there is a stipulation to that effect.
2. When the third person has an interest in the fulfilment of the obligation (guarantor or co-debtor). Persons from whom the creditor must accept payment
1. Debtor
2. Person who has an interest in the obligation
3. From a third person who has no interest in the obligation but there is a stipulation that he can make payment.

Rights of the third person making the payment
a. Payment without the knowledge or against the will of the debtor 1. The payer can ask for reimbursement. He can recover from the debtor but only insofar as the payment was beneficial to the latter. 2. He is not entitled to be subrogated in the rights of the creditor. b. Payment with the consent of the debtor

1. He can recover from the debtor what he has paid.
2. He shall be entitled to be subrogated in the rights of the creditor.

When payment by third person considered a donation
If the paying third person does not intend to be reimbursed, the payment is deemed a donation which requires the debtor’s consent to be valid. However, if the creditor accepts the payment, it shall be valid as to him and the payer although the debtor did not give his consent to the donation. a. Rights of the third person making the payment

1. If the debtor consented to the non-reimbursement, the third person cannot recover anything from the debtor. This is so because in donation, the cause is liberality of the donor. 2. If the debtor consented to the payment but not to the non-reimbursement, the third person can recover what he has paid and he shall be entitled to the subrogation....
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