Oblicon Reviewer Articles 1231- 1277 PDF

Preview

Summary

ARTICLE 1231Causes of Extinguishment of Obligations.This article provides the different ways an obligation is extinguished. Ordinarily, the first six (i., payment or performance up to novation) is stated in this article. The other causes such as annulment, rescission, fulfillment of a resolutory con...

Description

ARTICLE 1231 Causes of Extinguish Extinguishment ment of Obligations. This article provides the different ways an obligation is extinguished. Ordinarily, the first six (i.e., payment or performance up to novation) is stated in this article. The other causes such as annulment, rescission, fulfillment of a resolutory condition and prescription is mentioned under this article but governed under other chapters of the Civil Code. Still, there are other causes such as: 1. Death of a party in case the obligation is a personal one (as when a singer, hired to perform at a concert, dies before the concert begins); 2. Resolutory Term – here the obligation ceases upon the arrival of the term; 3. Change of Civil Status – as when a married woman becomes a widow or when an unmarried woman gets married; 4. Compromises; 5. Mutual Dissent – as when both parties to a contract refuse to go ahead with the contract; 6. Impossibility of Fulfillment; 7. Fortuitous Event. Obligations are exti extinguished: nguished: 1. 2. 3. 4.

By payment or performance; By the loss of the thing due; By the condonation or remission of the debt; By the confusion or merger of the rights of creditor and debtor; 5. By compensation; 6. By novation. Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. (1156a) Other Causes of Extincti Extinction: on: • • • • • • • •

Prescription Death Renunciation Compromise Fulfillment of Resolutory Condition Arrival of Resolutory period Recission and nullity of contracts Mutual Dissent

Death As General Rule ➢ Death of either creditor and debtor does not extinguish the obligation. ➢ Obligation actively and passively is transmissible to the heirs. ➢ Rights and obligation which are personal are extinguished by death Want interest The want of interest of the creditor in the fulfillment of an obligation does not extinguish the obligation. In some cases: if the creditor has no interest to serve, the debtor should be relieved. Abandonment There are special cases that of extinguishment and obligation by abandonment. –The abandonment of the interest party wall We remember that obligation is the juridical necessity to give, to do or not to do. It may arise from law, contracts, quasi-contracts, delicts or quasi-delicts. Obligations, nevertheless, are not forever. They can be extinguished. This Article enumerates only six (6) of the many ways by which an obligation may be extinguished: payment or performance; loss; condonation or remission; confusions; compensation, and; novation. As mentioned above, there are other ways of extinguishing an obligation aside from the six (6) enumerated by Article 1231. They are: annulment; rescission; fulfillment of the resolutory condition; prescription; death; arrival of the resolutory term; change of civil status; compromises; mutual dissent; impossibility of fulfillment, and; fortuitous event. Consignation may also be considered as a mode of extinguishing obligation. Payment of performanc performance e A promised that he would paint a portrait of B in exchange of Php 100,000. A did and delivered the portrait on time. A's obligation here was extinguished by performance. B, in turn, has the obligation to pay the Php 100,000 fee. He issued a check in favor of A. A encashed the same. B's obligation here was extinguished by payment.

Loss of the Thing Due

Annulment

A promised to make and deliver a particular sculpture for B. Without his fault and after actually finishing the art, a burglar entered A's house at night and stole the sculpture. A here now does not have any obligation to deliver the sculpture anymore; his obligation has been extinguished by the thing's loss.

A, 16 years of age, entered into a contract with B, 21. A's parents knew and went to court. They argued that the contract is voidable and sought the annulment of the same.

However, this rule does not apply when it comes to the obligation to deliver an indeterminate thing. Remember, genus never perishes. So, if A promised to deliver onekilo of high-grade sugar and what he prepared was lost by his fault or through a fortuitous event, he is still obliged to deliver one-kilo of said sugar. Condonation or Remis Remission sion A owed B $5000. B decided to let go of the $5000 debt since A has been a very good friend to him through the years. A here now does not have any obligation to pay the money anymore because it was condoned by B.

Rescission Pending litigation over a parcel of land, B, the defendant in the case, sold the same parcel of land to C, who knew very well of the nature of the parcel of land and of the pending hearing over the same. A, the plaintiff, filed an action for the rescission of the contract of sale between B and C. Fulfillment of the R Resolutory esolutory Condition A told B, "This car is yours until you pass the BAR." B passed the BAR. A's obligation to give the car, or more accurately put, to let B enjoy possession and use of the car, is extinguished by the happening of the resolutory condition.

Confusion or Merger A borrowed money from B so, in order to pay, the former issued a check in favor of the latter. B, then, who was in turn indebted to C, handed it to C. Unknown to B, C also owed the same amount of money from A. C returned the check to A. There is now a merger of the rights of the debtor and the creditor. Compensation A and B are debtors and creditors of each other both in the amount of Php 100,000. By operation of law, A and B are no more debtors and creditors of each other. Novation Article 1291 provides that Obligations may be modified by: (1) Changing their object or principal conditions; (2) Substituting the person of the debtor; (3) Subrogating a third person in the rights of the creditor. Therefore, if A had the obligation to deliver a certain car to B and if they both agreed that the thing to be delivered would be a certain unit of personal computer instead, the obligation to deliver the car cannot be enforced anymore. Assigning C in place of A or D in place of B would also extinguish the obligation to deliver the car between A and B.

Prescription Under Law XXX, a student may demand the school a rebate of 10% of all his total tuition payments within one (1) month after his graduation. A graduated on January 1. He demanded on February 27. Here, the school's obligation to grant the rebate had already prescribed. Death A met minds with B to have the former's house and lot sold to the latter. The contract was perfected. However, A died the following day. Is B still bound to pay the house and lot? Not anymore. Arrival of the Resolut Resolutory ory Term A told B, "This car is yours until the first day of 2016." The first day of 2016 came. A is no more bound to let B maintain possession over the car. Change of Civil Sta Status tus [xxx] Compromises A bound himself to give B a parcel of land. They, however, agreed and entered into a compromise that A would instead give half of the promised land. A's

obligation to completely deliver the parcel of land had already been extinguished. Mutual Dissent A and B perfected a contract to sell. They, however, later on, both agreed to cancel the contract. Impossibility of Ful Fulfillment fillment A bound himself to deliver 2 sacks of brown rice to B. The following day, all kinds of brown rice were declared illegal by a statute. Here, there occurred what is called legal impossibility.

The term "paym "payment" ent" does not only refer to the delivery of money. Under this section of the Civil Code, "payment" as a term of art in Obligation and Contracts also refers to the performance, in any other manner, of an obligation. Therefore, in order to extinguish an obligation by payment, one may (1) delivery money or (2) perform, in any other manner, the obligation. Why pay?

A and B agreed that the former would deliver a certain dog to the latter. The dog, however, without the fault of A, died when a meteor hit it while it was sleeping one night.

Payment is made only because of or is grounded on an existing obligation to pay. The obligation may arise from law, like in the case of taxes. It may arise from contracts, like in the case of contracts of loan, mortgage or pledge. It may arise from quasi-contracts, like in the case of solutio indebiti. It may arise from delicts or even quasidelicts, like in the case of murder where the convict is ordered to pay Php 50,000.

Consignation

What if the creditor rrejects ejects payment?

Fortuitous Event

A had the obligation to pay B $500,000. On the day the payment was agreed to be made, B, apparently without any just cause or reason, refused to receive the payment. A went to court, presented proof of tender of payment, deposited the amount to court and served notice to B. The consignation by A extinguished the obligation.

Well, the creditor does have the right to reject payment in cases when there are valid reasons. Acceptance, however, may be in the form of an express or tacit acceptance.

ARTICLE 1232

A paid B for the something something.. It turned out, howe however, ver, that that something being tthe he object of th the e obligation has rendered the obligati obligation on null and void. What happ happens ens to the payment?

Payment Defined.

The payment is also null and void.

Payment means not only the delivery of money but also the performance, in any other manner, of an obligation.

A paid B the amount o off $100 days aft after er the obligation to pay already prescribe prescribed d without knowing that it already did. May A recollect th the e payment from B?

Ang pagbabayad ay nangangahulugan hindi lamang ang pagbibigay ng pera kundi pati na rin ang pagganap, sa anumang iba pang mga paraan, ng isang obligasyon.

Yes, for this is a case of unjust enrichment at the expense of another.

Debtor = obligor

A paid B the amount o off $100 days aft after er the obligation to pay already prescri prescribed bed knowing fully w well ell that it had already prescribed. May A still de demand mand the return of tthe he $100 payment?

Payment = performance

Not anymore, no. This is a case of natural obligation.

DISSCUSSION

Requisites of Payment Payment.. A valid payment must fulfill the following requisites

No obligation = No paymen paymentt Creditor = obligee

Concept of Payment. Payment is the consummation or fulfillment of a prestation that is due, leading to the extinguishment of the obligation.

1. The person who pays or the payor 2. The person to whom the payment is made or the payee

3. The thing to be paid 4. The manner, time and place of payment Kinds of Payment. Payment may be normal/voluntary or abnormal/involuntary. It is normal or voluntary when a debtor willingly pays or performs the prestation stipulated; and it is abnormal or involuntary when the debtor is forced to pay or perform the prestation by order of the court. Payment is that mode of extinguishing obligations which consists of: 1. The delivery of money; or 2. The performance in any other manner of an obligation. Example: Rendition of the required service.

ARTICLE 1233

Burden of proving pay payment ment Creditor = obligation exist Debtor = proving pa payment yment TIME OF PAYMENT The time of the payment or performance must on the date stipulated. Whether the date stipulated falls on holidays or what so ever. Failure to pay or perform the obligation is not an excuse. However, Negotiable Instrument Law can be payable in the next succeeding business day. Negotiable Instrum Instrument ent A financial document containing an unconditional promise to pay a sum of money, payable on demand, or at a definite date. PROOF OF PAYMENT

Completeness of Pa Payment yment A DEBT SHALL NOT BE UNDERSTOOD TO HAVE BEEN PAID UNLESS THE THING OR SERVICE IN WHICH THE OBLIGATION CONSIST HAS BEEN COMPLETELY DELIVERED OR RENDERED, AS THE CASE MAY BE. Ang utang ay hindi dapat ipagpalagay na bayad na maliban na ang mga bagay o serbisyo na napapaloob sa obligasyon ay kumpletong naibigay na o naisagawa, kung anu man ang maaring sitwasyo. Requisites for a valid payment und under er this Article: 1. The very thing or service contemplated must be paid. 2. Fulfillment must be complete TWO REQUIREMENTS FOR PAYMENT 1.. Identity of the pr prestation estation - The thing must be delivered and released. 2. Integrity of the pr prestation estation - The prestation must be fulfilled and complete otherwise, obligation would not be extinguished. •

Exceptions: ➢ Substantial compliance in good faith ➢ Waiver ➢ Application of payments if the debts are equally onerous

When the existence of a debt is admitted by the debtor or established by the evidence of the creditor, the burden of proving extinguishment by payment devolves upon the debtor who claims payment. ISSUANCE OF RECEI RECEIPT PT Issuance of receipt must be observed and testimony alone of the debtor which pays his/her obligation would be insufficient to prove the alleged payments which are without receipt. In case creditor refuse to issue a receipt without just cause will be a ground for consignation under article 1256 by which the court will order the creditor to issue a receipt. Question: X owes 15,000 from Y, to fulfill for his obligation X delivered his carabao for his payment. Is the obligation of X complete? Answer: Yes, the obligation is complied if the creditor accepts the carabao delivered by X without any protest and objection by Y.

ARTICLE 1234 Substantial perfor performance mance in good faith rule IF THE OBLIGATION HAS BEEN SUBSTANTIIALLY PERFORMED IN GOOD FAITH, THE OBLIGOR MAY

RECOVER AS THOUGH THERE HAD BEEN A STRICT AND COMPLETE FULFILLMENT, LESS DAMAGES SUFFERED BY THE OBLIGEE. In case of substantial performance, the obligee or creditor is benefited. So the obligor or debtor should be allowed to recover as if there has been a strict and complete fulfillment, less damages suffered by the obligee or creditor. This last condition affords a just compensation for the relative breach committed by the obligor or debtor. APPLICATION 1. There must be a substantial performance 2. The obligor acted in good faith. SUBSTANTIAL PERFORM PERFORMANCE ANCE - fulfilment of the obligations agreed to in a contract, with only slight variances from the exact terms and/or performance unimportance omission or minor defects. e.g., the contract is for supplying 144 pumps for 14,000 Php only 140 pumps were delivered. NON PERFOMANCE OF MATERIAL PART OF A CON CONTRACT TRACT E.G 500 ribbons were contracted by A on October 29, 2016, only 499 ribbons were delivered to B on November 5, 2016. If a date has been settled for example ribbons were meant to be used on Halloween party, thus the ribbon was delivered on November 5, 2016, the material part of a contract was violated, hence there is no substantial performance on the said act even though it was done in good faith.

ARTICLE 1235 Estoppel on the Cr Creditor’s editor’s Part in View of His Acceptance When the obligee accepts the performanc performance e, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. This Article provides an express rule that an obligee is already estopped from demanding from the obligor further compliance if he accepts an incomplete or irregular compliance of the obligation, knowing fully well that such defect exists. The law deems the obligation fully complied with in this case.

All requisites of a valid waiver are present: (1) the right to demand further compliance exists; (2) the person waiving the right has the capacity to do so (otherwise, he could not have entered into a contract in the first place); (3) the waiver, although not express, is clear, and; (4) the waiver is not contrary to law, public order, public policy, morals or good customs or is prejudicial to third person. Is this absolute? No, it is not absolute. Paras, the great author, in one of his comments on the Civil Code said, "Note that under this Article, there is a possibility that a protest or objection can be made. Hence, there is what is called "qualified acceptance of incomplete or irregular payment." Be it remembered that a creditor who gives a receipt for a partial payment does not necessarily acquiesce to such incomplete payment. His actuation may show his dissatisfaction." Further, Paras said, "Thus, a creditor may conditionally accept performance by the debtor after the time of maturity, but with the stipulation that the surety or the guarantor of the debtor should give CONSENT. This is to prevent the surety or guarantor from later on alleging that the creditor had given an extension of time to the debtor. In this way, the surety or guarantor cannot claim that he has been released from the obligation." (Paras, Civil Code of the Philippines Annotated) Reason for the Articl Article: e: The presence of waiver and estoppel.

ARTICLE 1236 Right of Creditor to Refus Refuse e Payment by Third PPerson erson The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfilment of the obligation, unless there is a stipulation to the contrary. Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. (1158a) Exceptions: 1. If there is a stipulation that the creditor shall accept the payment made by a third person;

2. If the third person has an interest in the fulfilment of an obligation such as the interest of a surety, a guarantor or a mortgagee. If the third person pays for the obligation of the debtor with the knowledge and co consent nsent of the latt latter er er, the payor is entitled to be reimbursed for the full amount. If the third person pays for the obligation with the knowledge of the debtor aand nd does not object thereto at any time time, the latter must pay the amount advanced by the former. If the payment was made without the knowl knowledge edge of or against the will of tthe he debtor debtor, the reimbursement shall only be up to the amount or extent by which the debtor was benefited. If the debt had already prescribed or had been compensated, the payor is not entitled to reimbursement from the debtor.

because he (the stranger) was at fault in not seeking first the consent of the debtor. An obligation may be discharged by any person who has an interest in doing so, such as a joint debtor or a surety. The obligation can even be discharged by a third party who has no interest in doing so, provided that the thirdparty acts in the name of and in order to discharge the debtor or provided that, if he acts in his own name, he is not subrogated to the rights of the creditor. The creditor is bound to accept paym payment ent from: ➢ The debtor ➢ Any person who has an interest in the obligation Ex. Guarantor ➢ Third person who has no interest in the obligation when there is stipulation that he can make payment

ARTICLE 1237

What was the old rule rule?? The old rule states that payment may be made by a stranger where the obligation is not intuitu personae (strictly personal). What is the reason ffor or this new rule? According to the framers of the new Civil Code, the creditor should have the right to insist on the liability of the debtor and the right to avoid business dealings with people he might dislike or distrust. Furthermore, the creditor should have a right to transact only with people in whom he has confidence and a right to avoid fraud whenever he so desires. This rule actually prevents the issue of payment from getting more complicated. What if the stranger paid w with ith the knowledge and consent of the debto debtor? r? In such a case, ...