Subsections of obli and contracts PDF

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Subsection 1 – Application of PaymentArticle 1252He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by t...

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Subsection 1 – Application of Payment Article 1252 He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due. If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract

Application of Payment – designation of debt in which the payment should be applied when the debtor has several obligations of the same kind in favor of the same creditor.

Requisites: 1. There must be only one debtor and only one creditor -the first requisite that states that there must only be one debtor does not prevent the rule to the extent of solidary obligations, for the reason that the debtor can have other obligations other than the solidary one with the same creditor to whom payment is made. The same goes with the requirement of one creditor, it does not prevent the application of payment in case of an indebted person to a separate and demandable sum to a partnership and to the managing partner of the partnership.

Which means that the debt payed should be applied proportionately to the two creditors unless the debtor gave a statement in which the application should be made.

2. There must be two or more debts of the same kind -the application of payment cannot be applied to a guarantor or surety since it is only liable to a particular obligation -it also requires that the debt must be of the same kind However there is an exception to this in which the rule may apply if the obligation was converted into an indemnity for damages

3. All of the debts must be due -general rule Exceptions: -when there is a stipulation to the contrary -if the application of payment is made by the party for whose benefit the term or period has been constituted, in line with article 1196

4. The amount paid by the debtor must not be sufficient to cover the total amount of all the debts. -since if the payment is enough to extinguish all debts, then there is no need for the application of payment

Right of the Debtor – general rule -right of application is primarily in the debtor – only available after the payment was made -no application from debtor – governed by 1254 -unless the creditor gives a receipt where the payment is applicated and the debtor accepts it – exception -application by the creditor is a mere proposal -application of payment by receipt may no longer be impugned, unless there is a cause, such as mistake, force, intimidation, undue influence, or fraud, which will invalidate the application.

-application of payment must be exercised at the time the payment was made

Article 1253 If the debt produces interests, payment of the principal shall not be deemed to have been made until the interests have been covered.

-the creditor may impugn any application of payment which is contrary to the above rule. -the above provision applies only in the absence of a verbal or written agreement to the contrary. -directory not mandatory

Article 1254 When the payment cannot be applied in accordance with the preceding rules, or if application cannot be inferred from other circumstances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied. If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately.

When debts are not of the same burden -the obligation that is the most onerous to the debtor shall be deemed satisfied

1. Where there are various debts which are due and they were incurred at different dates, the oldest are more onerous to the debtor than the more recent ones 2. The debt that has an interest is more onerous, however if both obligations have interests, then the debt with the higher interest is considered more onerous. 3. Where one debt is secured and the other is not, the first is more onerous to the debtor 4. Where the debtor is bound as principal in one obligation and as guarantor or surety in another, the former is more onerous to him. 5. When the debtor is bound as a solidary debtor in one obligation and as the sole debtor in another, the former is more onerous to him.

6. Within a solidary obligation, the share which corresponds to a solidary debtor would be most onerous to him. 7. Where one obligation is for indemnity and the other is by way of penalty, the former is more onerous to the debtor. 8. Where one debt is liquidated and the other is not, the former is more onerous to the debtor.

Solidary > Secured > Interest > Unsecured

When debts are of same burden. -payment should be applied proportionately -can also be applied to cases where it is indeterminable which debt is most onerous to the debtor

Subsection 2 – Payment by Cession Article 1255 The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws.

Cession – special payment where the debtor abandons all of his property for the benefit of his creditors

Requisites: 1. Plurality of debts 2. Partial or relative insolvency of the debtor 3. Acceptance of the cession by the creditors -proceeding to insolvency law

Kinds: Contractual – cession referred to in Article 1255 Judicial – cession regulated by the Insolvency Law

Distinguishment from Dation in Payment

As to number of parties Dacion en pago

Cession

May consist of only one creditor

Plurality of debtors is essential

As to financial condition of parties

Debtor is not necessarily in a state of financial difficulty

Debtor is in a state of partial or relative insolvency

As to object

Deliver a thing to be considered as equivalent of the performance of the obligation

Ceded by the debtor would be all of his property

As to effect

Extinguishes the obligation to the extent of the value of the thing delivered

Release the debtor for the net proceeds of the things ceded or assigned

Effect – assignment of the properties of the debtor will only release him from responsibility for the net proceeds of the property assigned.

Extinguishment of his obligations will only be partial

Ownership of the properties are not transferred, rather it is only the possession that the creditors will have, so that they can then sell the property and get the proceeds for the payment of the debt.

Subsection 3 – Tender of Payment and Consignation Article 1256 If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. Consignation alone shall produce the same effect in the following cases: (1) When the creditor is absent or unknown, or does not appear at the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3) When, without just cause, he refuses to give a receipt; (4) When two or more persons claims the same right to collect; (5) When the title of the obligation has been lost.

Article 1257 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. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.

Article 1258 Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made; the interested parties shall also be notified thereof.

Tender of Payment – manifestation made by the debtor to the creditor of his decision to immediately comply with his obligation – unconditional offer of the debtor to pay Consignation – deposit of the object of the obligation in a competent court, after refusal or inability of the creditor to accept the tender of payment

Tender of Payment

Consignation

Antecedent – Preparatory act

Principal act which will produce the effects of payment of the obligation Judicial

In its nature is extrajudicial

Tender of payment must be completed with consignation to extinguish the obligation.

After a valid tender of payment the debtor shall be released from responsibility by the consignation of the thing due. (1258) The debtor may petition the judge for the cancellation of the obligation, must the consignation complete the tender of payment.

General Requisites of Consignation 1. Rules stated in connection with payment in general (1232-1251) 2. Five requirements prescribed by Article 1256 – 1258

Consignation must follow the provisions which regulate payment Payment should be made in legal tender

Special Requisites of Consignation 1. There is a debt due. 2. The creditor to whom tender of payment refused to accept the payment without just cause, or because any of the causes stated by law for effective consignation without previous tender of payment exists.

General Rule -tender of payment must be made prior to the consignation -must be unconditional – it becomes conditional when it is not in accordance with the contract -the creditor must have refused to accept the payment without just cause – it is not necessary for the court to assess whether the refusal of the

creditor is with or without a just cause – it will be resolved in a subsequent proceeding

Exceptions (1) When the creditor is absent or unknown, or does not appear at the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3) When, without just cause, he refuses to give a receipt; (4) When two or more persons claims the same right to collect; (5) When the title of the obligation has been lost.

Effect of valid tender of payment -it exempts the debtor from payment of interest and/or damages -tender of payment must be completed with consignation to extinguish the obligation. -good faith of the debtor should excuse him from paying the interest

3. That previous notice of the consignation had been given to the persons interested in the fulfillment of the obligation.

Tender of payment – manifested only to the creditor Previous notice – manifested to the creditor and to the persons interested in the fulfillment of the obligation, announcing consignation

-can be combined in a single act, which includes the tender of payment and the notice of consignation – creditor and persons interested (surety, guarantor, solidary-debtor)

4. That the thing or amount due had been placed at the disposal of judicial authority.

-clerk of the court – accompanied by the filling of complaint – specific performance or cancellation of the obligation

5. The persons interested in the fulfillment of the obligation had been notified after the consignation. Notification – before and after to the creditor and persons interested

If the consignation was accompanied by complaint for specific performance or cancellation of the obligation, the requirement will be complied with as long as the other parties interested in the fulfilment of the obligation are furnished copies thereof. There is nothing in the Civil Code or in the Rules of Court which would prohibit compliance with all of the requisites of a valid and effective consignation before the filing of the complaint for consignation.

Consignation may apply also to immovables – due to the reason that it would be unjust to charge the debtor indefinitely with the task of preserving the property which constitutes the object of the obligation.

Article 1259 The expenses of consignation, when properly made, shall be charged against the creditor.

Expenses of Consignation – Creditor

Consignation is considered properly made when: -when the creditor accepts the thing or amount deposited as payment of the obligation without contesting the efficacy or validity of the consignation; -when the creditor contests the efficacy or validity of the consignation, and the court finally decides that it has been properly made or cancels the obligation at the instance of the debtor in accordance with the provision of the first paragraph of Art. 1260.

Article 1260 Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation. Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force.

Article 1261 If the consignation having been made, the creditor should authorize the debtor to withdraw the same, he shall lose every preference which he may have over the thing. The co-debtors, guarantors and sureties shall be released.

Effects of Consignation: -when the creditor accepts the thing or amount deposited as payment of the obligation without contesting the efficacy or validity of the consignation; -when the creditor contests the efficacy or validity of the consignation, and the court finally decides that it has been properly made or cancels the obligation at the instance of the debtor in accordance with the provision of the first paragraph of Art. 1260.

Effect of Withdrawal 1. Withdrawal by the debtor of the amount deposited before the creditor has accepted the consignation – obligation remains in force 2. Withdrawal by the debtor with the consent of the creditor – creditor loses every preference over the thing. Solidary co-debtors, guarantors, and sureties, however, shall be released.

Section 2 – Loss of the Thing Due The thing which constitutes the object of the obligation perishes, or goes out of the commerce of man, or disappears in such a way that its existence is unknown, or it cannot be recovered.

Article 1262 - Loss of determinate thing – 1174 An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay. When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk.

An obligation is extinguished if the thing is lost or destroyed without the fault of the debtor and before he has incurred in delay

Requisites: -it is a determinate thing -the thing is lost without the fault of the debtor -the thing is lost before the debtor has incurred delay

EXCEPTIONS -When by law, the debtor is liable even for fortuitous events

-When by stipulation of the parties, the debtor is liable even for fortuitous events -When the nature of the obligation requires the assumption of risk -When the loss of the thing is due partly to the fault of the debtor -When the loss of the thing occurs after the debtor has incurred in delay -When the debtor promised to deliver the same thing to two or more persons who do not have the same interest -When the obligation to deliver arises from a criminal offense -When the obligation is generic

Article 1263 - Loss of Generic Thing In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation.

Loss of a generic thing shall not extinguish the obligation -the genus of a thing can never perish (genus nunquam peruit) -neither superior nor inferior quality

EXCEPTIONS -if the generic obligation whose object is a particular class or group but consists of specific or determinate qualities

Article 1264 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.

Whether or not the partial loss or destruction of the thing is of such importance that it would be tantamount to a complete loss or destruction, shall depend upon the sound discretion of the court.

Article 1265 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 Article 1165. This presumption does not apply in case of earthquake, flood, storm or other natural calamity.

In such case, the obligation is not extinguished; in other words, the debtor is still liable to the creditor for damages.

Article 1266 The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.

Effect of Impossibility in To Do

-for the obligation to be extinguished, the requisites stated in article 1262 is also prescribed -the object of the obligation must be physically or legally impossible -impossibility after the constitution of the obligation

Legally Impossible -when the law prohibits the performance Physically Impossible -principally from the death of the debtor (accident or fault of debtor without the acts of third persons to prevent the fulfillment)

Effect of Impossibility in Not To Do -extinguishment Article 1267 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.

Effect of Relative Impossibility -the court should be authorized to release the debtor in whole or in part -service = performance

Article 1268 When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted from the payment of its price whatever may be the cause for the loss, unless the thing having been offered by him to the person who should receive it, the latter refused without justification to accept it.

Rule: -applies on restitution, reparation, and indemnification -applies to those principally and subsidiarily liable -the refusal of the creditor for the payment is essential

Remedy: 1. Consignation = Relief of obligation 2. Keep the thing to be delivered = Obligation will subsist, Article 1262 and 1265 will govern

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 the third persons by reason of the loss.

Section 3. — Condonation or Remission of the Debt Concept -act of liberality -without receiving any price or equivalent, renounces the enforcement of the obligation, as a result of which it is extinguished in its entirety or in that part or aspect of the same to which the remission refers

Requisites: -must be gratuitous -must be accepted by the debtor -obligation must be due/demandable

Kinds: As to number of form Express

Implied

When it is made in accordance Can be deduced from the acts of with the formalities prescribed by th...