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Section 1. – Payment or PerformanceI. Definitions 1. Payment –A payment is the voluntary tender of money or its equivalent or of things of value by one party to another in exchange for goods, or services provided by them, or to fulfill a legal obligation. 2. Dation in payment – is the conveyance of ...

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Section 1. – Payment or Performance I. Definitions 1. Payment –A payment is the voluntary tender of money or its equivalent or of things of value by one party to another in exchange for goods, or services provided by them, or to fulfill a legal obligation. 2. Dation in payment – is the conveyance of ownership of a thing as an accepted equivalent of performance.

3. Application of payment – is the designation of the debt to which should be applied the payment made by a debtor who has various debts of the same kind in favour of one and the same creditor. 4. Payment by cession – It is the assignment or abandonment of all the properties of the debtor for the benefit of his creditors in order that the latter may sell the same and apply the proceeds thereof to the satisfaction of their credits. 5. Consignation – is the act of depositing the thing or amount due with the proper court when the creditor does not desire or cannot receive it II. Discussions 1. May an obligor recover although there has been no strict and complete fulfilment by him of his obligation? - the obligor may recover as though there had been a strict and complete fulfilment, less damages suffered by the oblige.

2. What must be delivered when the obligation consist of: a) The delivery of a specific thing? - the person making performance must deliver the thing in connection in which it is at the same time when delivery is to be made.

b) The delivery of a generic thing? - he may ask that the obligation be complied with at the expense of the debtor. 3. When is partial performance of an obligation allowed? -

(1)When there is stipulation to this effect; (2)When the different prestations are subject to different conditions or different terms

4. What must a debtor do to be released from his obligation if the creditor refuses to accept payment without any justifiable reason? - Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept It, the debtor shall released from responsibility by the consignation of the thing or sum due

5. Give the requisites of payment by cession. What rights are acquired by the creditor in this form of payment as distinguished from dation on payment? - (1) There must be two or more creditors; (2) The debtor must be (partially) insolvent; (3) The assignment must involve all the properties of the debtor; and (4) The cession must be accepted by the creditors.

III. Problems 1. D (debtor) owes C (creditor) P10,000 with G as guarantor. On the due date of the obligation, T, a third person, offered to pay the obligation of D. Can C legally refuse to accept the payment? How about an offer of payment from G? - Yes, C can refuse to accept the payment of T. The third person may have the payment of P10,000 but the creditor may insist on his right on the liability of debtor. In Article 1236 par. 1 , "The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary." It was not stated in the problem any specified requirement or stipulation for T, C can refuse to accept the payment of t Also, creditor should not be compelled to accept payment from a third person due to personal reasons. - Yes, C can accept the payment from G. As G being the guarantor, which is a person who has an interest in the obligation. Again stated in Article 1236 par. I, the creditor may refuse to accept payment third person who has no interest in the fulfillment on the obligation. The guarantor has the interest in the obligation which may lead to creditor's acceptance of payment from G. 2. M (maker) issued a promissory note for P10,000 in favor of P (payee) who lost the note which was found by T who demands payment from M. M did not know that the note was lost by P. Is M justified in not paying T? - Yes, C can refuse to accept the payment of T. The third person may have the payment of P10,000 but the creditor may insist on his right on the liability of debtor. In Article 1236 par. 1 , "The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary." It was not stated in the problem any specified requirement or stipulation for T, C can refuse to accept the payment of t Also, creditor should not be compelled to accept payment from a third person due to personal reasons. -Yes, C can accept the payment from G. As G being the guarantor, which is a person who has an interest in the obligation. Again stated in Article 1236 par. I, the creditor may refuse to accept payment third person who has no interest in the fulfillment on the obligation. The guarantor has the interest in the obligation which may lead to creditor's acceptance of payment from G. 3. D owes C P10,000 which was paid by T who demands reimbursement from D. a) When is D liable to T? - When there is a written agreement or content that D will reimburse or pay T the10,000

b) When is D not liable to T? -

When it is verbally spoken with no witnesses. There should be a written contract or agreement.

c) When is D liable for less than P10,000 to T?

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If there is a contract or agreement stating the amount in the contract.

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Yes, if there is a written agreement or contract between D and T that D will pay or reimburse T for the amount he paid to C

d) May D be liable to T for P12,000 if that was the amount paid

4. D owes C P10,000. Without the knowledge of C, D in good faith paid to T his obligation to C. Is D required by law to prove that the payment has been received by C in order to be released from liability? - Payment mad in good faith to any person in possession of the credit shall release the debtor. 5. D owes C P10,000 in payment for which C accepts a check from D. On the ground that a check is not legal tender, C later insists that D pay him in cash. Is D justified in rejecting this demand of C? -

Yes, as long the check is cleared that it good will not bounced. It is considered as a payment.

Section 2. – Loss of the Thing Due I. Definitions 1. Legal impossibility – when the obligation cannot be performed because it is rendered impossible by provision of law 2. Loss of thing – is a mode of extinguishment of obligation wherein the determinate thing is lost or destroyed without the fault of the debtor, and before he has incurred in delay. 3. Difficulty of performance – If a contract becomes difficult to perform but not impossible the promisor would not be discharged on that account.

II. Discussions 1. Give two (2) cases when a person may be released from an obligation validly entered into. - According to Art.1266, a person may be released from an obligation if the prestation becomes legally or illegally impossible without the fault of the obligor. Another case is when (according to Art.1267) the service has become so difficult, as to be manifestly beyond the contemplation of both parties, the obligor may be released in whole or part

2. Give the cases when loss of the specific thing to be delivered will not exempt the obligor from liability even in the absence of fault or delay. - According to Art.1262, the obligor will not be exempt from liability if it is stated by law or stipulation. This also applies when the nature of the obligation requires the assumption of risk. 3. Will partial loss of the specific thing to be delivered extinguish the obligation?

Explain. - According to Art. 1264, the courts will determine if the partial loss of the object of the obligation is so important as to extinguish the obligation

III. Problems 1. X obliged himself to deliver to Y a specific carabao to Y on July 31. The carabao died on July 25. Y has no proof that X was negligent. Is X liable to Y?

- No, because of fortuitous event 2. X obliges himself to deliver a specific thing to Y on a certain date. The thing was lost by X without his fault and before he has incurred in delay. Does it mean that X is already exempt from liability? - According to article 1262, whenever a determinate thing is loss without the fault of the debtor and before he has incurred in delay, the obligation shall be extinguished. In the case of x, he lost that specific thing without his fault and before he has incurred in delay.

3. Suppose in the preceding problem, the thing was lost through the fault of Z, third person. State the effect of the loss as far as X, Y, and Z are connected. - Article 1269. The obligation having 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.

Section 3. – Condonation or Remission of Debt I. Definitions 1. Condonation or remission of debt – gratuitous abandonment by the creditor 2. Inofficious remission – when the remission given is more than that which the creditor can give by will.

II. Discussions 1. Give the requisites in order that a condonation or remission of debt may be valid. - Must be gratuitous, accepted by obligor, parties must have capacity, not be inofficious, if made expressly, it must comply with the forms of donation

2. When is the condonation or remission of debt considered inofficious? What is the remedy of the party adversely affected thereby? - The debtor and his heirs may uphold it by providing that the delivery of the document was made in the virtue of payment of the debt. III. Problems 1. D (debtor) borrowed money from C (creditor) evidenced by a promissory note signed by D. a) What presumption arises if: 1) The promissory note is voluntarily given by C to D? 2) It is found in the possession of D? b) When will the presumption of remission arise? 2. Suppose in the same problem, the debt of D, aside from being guaranteed by G, is secured by a pledge of certificate of shares of stock delivered by D to C. What presumption arises if: a) The debt of D is condoned by C? b) The certificate is later found in possession of D?

Section 4. – Confusion or Merger of Rights I. Definitions 1. Confusion – which takes place in the person of the guarantor does not extinguish the obligation 2. Merger – which takes place in the principal debtor or creditor benefits the guarantor

II. Discussions 1. What is the rationale behind confusion or merger as a mode of extinguishing an obligation? - If one who is a debtor is his own creditor, enforcement of the obligation becomes absurd, since one cannot the obligation is extinguished.

claim

payment

against

himself.

Hence,

2. Give the effect of merger when it takes place: a) In the person of the principal debtor or creditor. b) In the person of the guarantor of the principal obligation. III. Problems 1. A, B, and C are jointly liable to D in the amount of P15,000. Subsequently, D assigned his credit to C in consideration for goods sold by C to D. Give the effect of the assignment. - According to Art. 1277, confusion does not extinguish a joint obligation, originally a joint debtor, becomes the creditor, then A and B are now liable of Php 5,000 each. 2. Assuming the obligation of A, B, and C is solidary, distinguish the effect of the assignment from the first problem. - According to article 1276 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.

Section 5. – Compensation I. Definitions 1. Compensation – the extinquishment to the concurrent amount of the debts of two person, who in their own rights, are debtors and creditors of each other. 2. Legal compensation – when it takes place by operation of law even without the knowledge of the parties. 3. Facultative compensation – when it can be set up only by one of the parties II. Discussions 1. What are the distinctions between confusion and compensation as modes for extinguishing an obligation? - a compensation requires two persons to be mutually debtor and creditor each other, while a confusion requires only one person to be both the debtor and creditor. a compensation covers two obligations, while a confusion covers only one obligation.

2. In what way is compensation similar to payment? -

is that pay is money given in return for work; salary or wages while compensation is the act or principle of compensating.

3. May there be compensation although the things due are not consumable? Explain. -

None because according to paragraph 2 of article 1279 in order that compensation may be proper it is necessary 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.

4. When may compensation take place when only one of the debts is due?

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According to Art. 1279, compensation may take place when A has not yet paid B on the date that B's obligation is due

III. Problems 1. D borrowed P50,000 as character loan (no security) from a bank. Despite demands for payment after the loan fell due, D did not pay the bank. D has a savings deposit of P40,000 with the bank. Has the bank the right to apply the deposit to the payment of D’s debt? - Yes. The bank has the right to get the deposited money of the debtor’s to pay for his debt.

2. D owes C P10,000 payable on November 20. C owes D P10,000 payable on October 20. Can compensation also take place although the debts are not payable on the same date? -

NO, the compensation cannot take place since the due dates are not the same

3. Illustrate compensation which can be set up only by one of the parties. -

Facultative compensation- when it can be set up only by one of the parties

4. After contracting a debt in the amount of P10,000 in favour of C, D succeeded through fraudulent means to make C liable to him in the same amount. Assuming that both obligations are now due, may the two debts be compensated against each other? What is the effect if the debt of C is later annulled in court at the instance of D? - No, C obligation to pay will be null and void and C will still receive payments from D.

Section 6. – Novation I. Definitions 1. Novation – It is the extinction of an obligation through the creation of a new one which substitutes it

2. Mixed novation – when the object and / or principal conditions of the obligation and the debtor or the creditor, or both the parties, are changed is a combination of real and personal novations. 3. Expromision – that which takes place when a third person of his own initiative and without the knowledge or against the will of the original debtor assumes the obligation of the latter with the consent of the creditor. 4. Delegacion – That which takes plcae when the creditor accepts a third person to take place of the debtor at the instance of the latter. II. Discussions 1. Give the requisites of novation. - (1) a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old contract; and (4) validity of the new one

2. When there is subrogation, what rights are acquired by the new creditor?

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Subrogation of a third person in the rights of the 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.

3. In novation, give the effect where: a) The new obligation is voidable; -

Article 1297 stresses one of the essential requirements of a novation, towit: the new obligation must be valid. The general rule is that there is no novation if the new obligation is void and, therefore, the original one shall subsist for the reason that the second obligation being inexistent, it cannote x ti n g u i sh o r m o d i f y t h e fi rs t . I f t h e n e w o b l ig a ti o n i s o n l y v o i d a b le , novation can take place. But the moment it is annulled, the novation must be cons id ered as n ot hav ing ta ken pla ce , and th e ori gi na l on e ca n be en forced, unless the intention of the parties is otherwise

b) The old obligation is voidable. Explain. -

The novation is void if the original obligation was void, except when annulment may be claimed only by the debtor, or when ratification validates acts which are voidable. A void obligation cannot be novated because there is nothing to novate. However, if the original obligation is only voidable or if the voidable obligation is validated by ratification the novation is valid

4. In novation, are accessory obligations necessarily extinguished? Explain. -

When the principal obligation is extinguished in consequence of a novation, accessory obligations may subsist

III. Problems 1. T (third person) tells C (creditor) that T will pay the debt of D (debtor). C agrees. Is D released from his obligation to C? - Yes, according to article 1293. There is expromission only if D is released from his obligation to C. If T and C didn't agree as to such. D is not liable because T paid without his knowledge or consent. 2. Suppose in the above problem, D proposed to C that T would substitute D as the new debtor to which C agreed. Is D still liable to C in case of insolvency of T? - No, according to article 1295, the insolvency of the new debtor will not revive the creditor’s action against the original one. 3. T paid C the debt of D without objection from the latter. What are the rights of T? - According to article 1302, T has all the previous rights that C had. 4. Illustrate a mixed novation.

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Ana will deliver to Marie a birthday cake, in the agreement of the parties, Ana will instead deliver a dozen of balloons to Karen.

CONTRACTS Chapter 1 – General Provisions I. Definitions 1. Contract – Article 1305, a contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to_give something or to render some service. 2. Stipulation pour autrui – a contract or provision in a contract that confers a benefit on a third-party beneficiary

3. Real contract – are agreements between parties to perform or refrain from performing an action in respect to real property 4. Perfection of contract – Stages in the life of a contract 1. P re pa ra tio n/ Ne go tia tio n – in cl ud es a ll t he s te ps ta ke n by t he p ar tie s leading to the perfection of the contract. The parties have not yet arrived at any definite agreement2 . P e r fe c ti o n / B i r t h – t h i s i s wh e n t h e p a r ti e s h a v e c o m e t o a d e fi n i t e agreement or meeting of the minds regarding to the subject matter and cause of the contract 3. Consummation/ Termination – this is when the parties have performed their re s pe c ti v e o b l i ga ti on s a n d t h e co n t ra c t ma y b e s a i d to h av e b e en f u l ly accomplished or executed, resulting in the extinguishment or termination t h e r e o f. A co n t ra c t m a y a l s o b e te r m i n a t e d a ft e r i t s p e r f e c ti o n , n o t b y performance but by mutual agreement of the parties.

II. Discussions 1. May a third person acquire rights under a contract to which he is a stranger or be bound thereby? Explain. - Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. -

If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocati...