Buslaw 1: de La Salle University Comlaw Department
Buslaw 1: de La Salle University Comlaw Department
Buslaw 1: de La Salle University Comlaw Department
De La Salle University
Comlaw Department
Obligations and
Contracts
Book IV, New Civil Code
Title 1, Chapter 4[S2]
Loss of the Thing Due
SECTION 2. – Loss of the Thing Due
ARTICLE 1262. An obligation which consist 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
obligation requires the assumption of risk.
This is based on the principle that the class of things never dies. In the event that it
does, then the last of the class becomes a determine object if possible.
ARTICLE 1264. The court shall determine whether, under the circumstances,
the partial loss of the object of the obligation is so important as to extinguish
the obligation.
Partial loss means that a portion of the object has been lost or that the object has been
damaged prior to delivery. The court shall decide whether the loss extinguishes the
obligation.
SECTION 2. – Loss of the Thing Due
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 a 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.
This presumption is made because the debtor has to show that the appropriate diligence
had been exercised in the care of the object to be delivered.
ARTICLE 1268. When the debt of a thing certain and determinate proceeds from a
criminal offense, the debtor shall not be exempted from he 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.
Loss of the thing due does not exempt criminals from his/her liability to restore to the victim
what was stolen unless the victim had unjustifiably refused to accept the object when offered by
the criminal.
SECTION 2. – Loss of the Thing Due
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 person by reason of loss.
In cases where loss of the thing due extinguishes the an obligation, the creditor acquires
all the rights of redress that the debtor may have had against the ones who caused the
loss of the thing due.
One and the other kind shall be subject to the rules which governs
inofficious donations. Express condonation shall, furthermore, comply with
the forms of donation.
Condonation is the gratuitous waiver by the creditor of his rights against the debtor.
While a person may make donations, no one can give more than that which he can give
by will, otherwise, the excess shall be inofficious and shall be reduced by the court
accordingly.
SECTION 3. – Condonation
Requisites of Condonation:
it must be gratuitous;
it must be accepted by the obligor;
the parties must have capacity;
it must not be inofficious; and
if made expressly, it must comply with the forms of donation
Kinds of Condonation:
As to Form
Express and Implied
As to Extent
Complete and Partial
As to Date of Effectivity
Inter Vivos or Mortis Causa
SECTION 3. – Condonation
ARTICLE 1271. The delivery of a private document evidencing a credit, made
voluntarily by the creditor to the debtor, implies the renunciation of the
action which the former had against the latter.
NOTE : Note that this article speaks of a private document. The legal
presumption of remission does not apply in the case of a public document
because it is easy to obtain a copy of the same, being a public record
If the obligation is joint, the presumption of remission pertains only to the share of the
debtor who is in the possession of the document; if solidary, to the total obligation
SECTION 3. – Condonation
ARTICLE 1272. 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.
The last two articles refers to presumptions in condonation similar to Art. 1271
Obligations and
Contracts
Book IV, New Civil Code
Title 1, Chapter 4[S4]
Confusion or Merger of Rights
SECTION 4. – Confusion
ARTICLE 1275. The obligation is extinguished from the time the characters
of creditor and debtor are merged in the same person.
Requisites of Confusion:
It must take place between the principal debtor and creditor
Of the same obligation
It must be complete and definite
Only the Merger in the person of the principal debtor or creditor extinguishes the
obligation. Merger of accessory or subsidiary parties may extinguish the accessory or
subsidiary obligation but not the principal obligation.
Owes P50,000.00
Compensation to
James the extent of Dan
P40,000
Owes P40,000.00
As to extent or effect
Total – extinguishes the entirety of both concurring debts.
Partial – extinguishes the smaller of the concurring debt but the balance of the larger
debt remains subsisting.
SECTION 5. – Compensation
ARTICLE 1279. In order that compensation may be proper, it is necessary:
1. That each of the obligors be bound principally, that he be at the same time a
principal creditor of the other;
2. That both debts consist in a sum of money, or if the thing due are
consumable, they be of the same kind, and also of the same quality if the
latter had been stated;
3. That the two debts be due;
4. That they be liquidated and demandable;
5. That over neither of them there be any retention or controversy, commenced
by third persons and communicated in due time to the debtor.
Note: This article is an exception to the general rules that only the principal debtor
can set up to his creditor what the latter owes him.
ARTICLE 1281. Compensation may be total or partial. When the two debts
are of the same amount, there is a total compensation.
Total compensation results when the two debts are of the same amount; if they are of
different amounts, compensation is total as regards the smaller debt, and partial only
with respect to the larger debt
SECTION 5. – Compensation
ARTICLE 1282. The parties may agree upon the compensation of debts
which are not yet due.
In compensation, even obligations not yet due may be compensated by agreement of the
parties.
ARTICLE 1283. If one of the parties to a suit over an obligation has a claim
over the damages against the other, the former may set it off by proving his
right to said damages and the amount thereof.
Compensation may take place when so declared by the final judgment of a court in a
suit.
In simple terms, Art. 1283 refers to situations where a party can offset his/her claim for
damages from the other party with any receivables due to the other party
SECTION 5. – Compensation
ARTICLE 1284. When one or both debts are rescissible or voidable, they may
be compensated against each other before they are judicially rescinded or
avoided.
Recissible or Voidable Obligations are defective obligations that remain valid and
subsisting until rescinded or voided.
ARTICLE 1285. The debtor who has consented to the assignment of rights
made by a creditor in favor of a third person cannot set up against the
assignee the compensation which would pertain to him against the assignor,
unless the assignor was been notified by the debtor at the time he gave his
consent, that he reserved his rights the compensation.
If the creditor communicated the cession to him but the debtor did not
consent thereto, the latter may set up the compensation of debts previous to
the cession, but not of subsequent ones.
SECTION 5. – Compensation
If the assignment is made without the knowledge of the debtor, he may
set up the compensation of all credits prior to the same and also latter ones
until he had knowledge of the assignment.
This Article refers to instances where one of the concurring debts have been assigned
by a creditor to a third party.
Compensation can only take place if the right to compensation was reserved.
Neither can compensation be set up against a creditor who has a claim for
support due by gratuitous title, without prejudice to the provisions of
paragraph 2 of article 301.
ARTICLE 1290. When all the requisites mentioned in article 1279 are present,
compensation takes effect by operation of law, and extinguishes both debts to
the concurrent amount, even though the creditors and debtors are not aware
of the compensation.
This is the provision that declares that compensation is theoretically automatic and does
not need the consent of the parties for it to take place provided the requisites under
Article 1279 are present.
Obligations and
Contracts
Book IV, New Civil Code
Title 1, Chapter 4[S6]
Novation
SECTION 6. – Novation
ARTICLE 1291. Obligations may be modified by:
Novation is the extinction of an obligation through the creation of a new one which
substitute it.
In effect, in Novation there are actually 2 stipulations:
Extinguish the original obligation
Replacing the original obligation with a new obligation.
SECTION 6. – Novation
Requisites of Novation
Kinds of Novation
1. According to origin:
a) Legal – that which takes place by operation of law
b) Conventional – that which takes place by agreement of the parties
SECTION 6. – Novation
Kinds of Novation
3. According to extent:
a) Total or extinctive – when the old obligation is completely extinguished
b) Partial or modifiacatory – when the old obligation is merely modified
4. According to subject:
a) Real or objective - when he object or the principal conditions are changed
b) Personal or subjective – when the object or principal conditions are changed
c) Mixed – when the object and the debtor or the creditor, or both the parties, are changed.
It is a combination of real and personal novation
SECTION 6. – Novation
ARTICLE 1292. In order that an obligation may be extinguished by another
which substitute the same, it is imperative that it is so declared in
unequivocal terms, or that the old and the new obligations be on every point
incompatible with each other.
Personal Novation
Substitution – when the person of the debtor is substituted
Subrogation – when the third person is subrogated in the rights of the creditor
SECTION 6. – Novation
Kinds of Substitution (Creditor consent is necessary)
Expromision – takes place when a third person assumes the obligation of the debtor
without the knowledge or consent of the original debtor. (Art. 1293-1294)
Delegacion – takes place when a third person assumes the obligation of the debtor
with the consent of the original debtor. (Art. 1295)
This stresses as one of the essential requirement for a novation, to wit; the new
obligation must be valid.
ARTICLE 1298. The novation is void if the original obligation is void, except
when annulment may be claimed only by the debtor, or when ratification
validates acts, which are voidable.
Kinds of Subrogation
Conventional – when it takes place by the express agreement of the original parties
and the third parties
Legal – when it takes place without agreement but by operation of law
These are the instance where there is Novation by operation of law and requires no other
participation from the parties.
SECTION 6. – Novation
ARTICLE 1203. Subrogation transfers to the person subrogated the credit
with all the rights thereto appertaining, either against the debtor or against
third persons, be they guarantors or possessors of mortgages, subject to
stipulation in a conventional subrogation.
In Subrogation, the new creditor essentially steps into the shoes of the old creditor.
But this may be modified by the stipulations of the parties.
ARTICLE 1204. A creditor, to whom partial payment has been made, may
exercise his rights for the remainder, and he shall be preferred to the person
who has been subrogated in his place in virtue of partial payment of the
same credit.
Buslaw 1
Study Guide
MODIFIED TRUE OR FALSE
1. Loss of the thing due will always extinguish an obligation provided the
debtor was not at fault or in delay.
2. If a thing is only damaged, it can still be considered lost
3. If the location of the thing is known, the thing cannot be considered lost.
4. If a thing is lost in the possession of the debtor, the loss cannot be presumed
to have been lost with the fault of the debtor because of presumption of
innocence unless proven otherwise.
5. Loss of the thing during a calamity is presumed to be with the fault of the
debtor unless proven otherwise.
6. If a thing is lost by fortuitous event, creditor can no longer run after any
other person to ask for damages or recover what was lost.
7. Condonation is extinguishing an obligation by donation.
MODIFIED TRUE OR FALSE
8. Because condonation is made by condoning the obligation, it must always
be expressly made.
9. If a person to whom a check is delivered tears the check, it is considered an
act of condonation.
10. Condonation must be accepted by the debtor to be valid.
11. Confusion occurs when parties cannot ascertain the nature of the obligation
which extinguishes the obligation.
12. Confusion occurs when a party is both debtor and creditor in the same
obligation.
13. Confusion occurs when a party is both a debtor and creditor in an
obligation.
14. Confusion in one party of a joint obligation cannot extinguish an obligation.
MODIFIED TRUE OR FALSE
15. Compensation normally occurs when two people owe each other .
16. Compensation must always be total to extinguish an obligation.
17. Compensation may be partial.
18. Criminal liability can be offset by a debtor with an existing debt owed by
the victim to the offender.
19. Debts which are not yet due cannot normally be the subjected to
compensation
20. An object in a contract deposit cannot be subjected to compensation by the
person in possession of the object.
21. Objects of a voidable contract cannot be subjected to compensation by the
parties because the contract can be annulled.
MODIFIED TRUE OR FALSE
22. An obligation to support cannot be compensated for a debt.
23. Compensation can be subjected to application of payment.
24. Novation is a two stage extinguishment. Creation of an obligation and
extinguishing the old obligation.
25. Subrogation is an example of novation.
26. Rescissible obligations cannot be novated.
27. An obligation cannot be impliedly novated by the parties.
28. Novation of the contract needs the consent of both parties for it to
extinguish an obligation.
29. Void obligations cannot be novated.
30. A void obligation cannot be used to extinguish a valid obligation.
ENUMERATIONS/DEFINITIONS
1. What are the requisites of loss of the thing due to extinguish an obligation?
2. What are the kinds of impossibility?
3. Define condonation.
4. What are the requisites of condonation?
5. What are kinds of condonation as to date of effectivity?
6. Define confusion.
7. What are the requisites for confusion?
8. Define compensation.
9. What are the kinds of compensation as to origin?
10. What are the requisites for compensation to be proper?
ENUMERATIONS/DEFINITIONS
11. When can compensation not be allowed by law?
12. Define novation.
13. When does novation occur?
14. What are the kinds of novation as to subject?
15. What are the kinds of personal novation?
16. What are the kinds of substitution of debtors?
17. When is legal subrogation presumed?
PROBLEM SOLVING
Problem 1. – Daniel owed James a P50,000 for which he issued a check payable
to the order of Cash to James for the said amount. As it turned out, James owed
Mike an amount of P50,000 and to pay this amount to Mike, James gave Mike
the check that Daniel gave to him. Mike on the other hand owed Daniel P50,000
and seeing that the check that Mike has was signed by Daniel, Mike gave the
check to Daniel and called the obligation quits.
When Daniel issued to James the check in payment of his obligation, was
Daniel’s obligation extinguished? Justify.
When James gave the check to Mike, did Mike become Daniel’s creditor and
as such can extinguish the obligation he had with Daniel but compensation?
Justify.
Was Daniel’s obligation extinguished by payment, by confusion or by
compensation? Justify
PROBLEM SOLVING
Problem 2. – Mitchie promised to give to Monmon P20,000 next Wednesday.
On due date Mitch realized that Monmon needed and really wanted to get a
new cellphone. But when she looked for Monmon, she discovered that
Monmon had gone to Cebu and would be back in town only by Friday. So
Mitchie decided to buy a P20,000 top of the line cellphone and decided to give
the phone as payment to Monmon.
Is Mitchie’s obligation to Monmon extinguished by Dacion en Pago? Justify.
Is Mitchie’s obligation extinguished by Novation? Justify.
Is Mitchie’s obligation extinguished? Justify.
Buslaw 1