MODES OF EXTINGUISHMENT OF OBLIGATION

LOSS OF THE THING DUE

CONDONATION/REMISSION

Partial or Total/Includes
impossibility of performance
When is there a LOSS:
a. When the object
perishes (physically)
b. When it goes out of
commerce
c. When it disappears
in such a way that:
its existence is
unknown or it cannot
be recovered
d. Impossibility of
performance

Gratuitous Abandonment by
the Creditor of his Right.

Effect of Loss TO GIVE

(determinate)
Obligation is
EXTINGUISHED
REQUISITES:
a. Thing lost must be
determinate
b. Thing was lost
without fault of the
debtor (if lose by
fault of debtor,
obligation is
converted into an
obligation to
INDEMNITY
c. The thing lost before
the debtor has
incurred in delay
Effect of Loss TO GIVE
(generic)
Does not extinguish
the obligation
because generic
things do not perish
(genus nunquam
peruit)

REQUISITES:
1. There must be an
agreement
(acceptance of the
offer is required)
2. Parties must be
capacitated and
must consent
(beyond the power
of the courts or
congress)
3. Subject matter
4. Consideration must
be liberality
(essentially
gratuitous)
5. Obligation must be
demandable at the
time of the remission
6. Remission must not
be inofficious
(prejudicial to 3rd
person)
7. Formalities of
donation (express
remission)
8. Waivers are not to
be presumed
generally. They must
be clearly and
convincingly shown
either by express
stipulation/acts
admitting of no other
explanation.
Delivery of Private
Document

CONFUSION/MERGER
Meeting in one person the
qualities of creditor and
debtor with respect to the
same obligation (ONE
CANNOT CLAIM AGAINST
HIMSELF)
Guarantor also
EXTINGUISHED
REQUISITES:
1. Between debtor and
creditor (Principal
and not mere
representative)
2. Merger is clear and
definite
3. Obligations involved
must be the SAME
and IDENTICAL
NOTE:
Mere transfer of
RIGHTS and not
credit does not
result in merger
Revocability of
Confusion/Merger
If the reason for the
confusion ceases,
the obligation is
REVIVED.
Agreement:
presence of any of
the causes of
rescission,
annulment, etc.
Inheritance: nullity
of the will,
subsequent
appearance of an
heir with better right

COMPENSATION
It is a sort of balancing (CUM
PONDER to weigh
together). It is the
extinguishment of the
obligations of those persons
who are reciprocally debtors
and creditors of each other.
2 persons are
creditors and
debtors of each
other.
Usefulness/Advantages:
1. Facility of payment
2. Debts extinguished
without requiring the
transfer of
money/property
Note: Clearing House take
cares of compensation in
banking accounts.
Partial or Total Compensation
TRUE TO ALL KINDS
Kinds of Compensation:
A. Legal Compensation
takes effect by
operation of law
(a) Takes place
automatically
UNLESS there has
been a waiver
(b) Compensation
which extinguishes
principal also
extinguishes
accessory
(c) Concurrent amount
if one debt is
larger than the

NOVATION
The substituting or changing
of an obligation by another,
which extinguishes or
modifies the first, either
changing its OBJECT or
PRINCIPAL condition, or
substituting another in place
of the debtor or subrogating
a third person in the right of
the creditor
NOTE: at the time it
extinguishes an
obligation, it creates a
new one in lieu of the old.
May be MODIFIED by:
1. Changing the object
or principal condition
2. Substituting the
person of the debtor
3. Substituting a third
person in the right of
the Creditor
REQUISITES:
1. A valid obligation
(voidable obligation
still possible)
2. Intent to extinguish
or to modify by a
substantial difference
3. Capacity and Consent
of ALL the parties
Except:
EXPROMISION (old
debtor does not)
4. Validity of the New
obligation
a. Suspensive and
condition does
not materialize,
no novation

Effect of Fortuitous Event:

extinguishment of the
obligation
Exception:
i.
The debtor is still
liable even fortuitous
events
ii.
Stipulated by the
parties
iii.
The nature of the
obligation requires
the assumption of
risk
iv.
The loss of the thing
is due partly to the
fault of the debtor
v.
When the loss of the
thing occurs after
the debtor has
incurred in delay
vi.
Bad faith (promised
to deliver to two or
more persons
vii.
Obligation arises
from a criminal
offense
viii.
Obligation is generic
RECIPROCAL OBLIGATIONS
if one of the reciprocal
obligation is extinguished
the other must also be
extinguished.
Presumption of FAULT on
the part of the debtor if the
thing is lost while in his
possession.
Except:
Earthquake, flood, storm, or
other calamity
Court granted
DISCRETION to determine

Remission or
renunciation is
presumed. Private
document is the
BEST EVIDENTIARY
proof to show that
the obligation has
not been paid
This is only
disputable and not
conclusive (maybe
for
examination/collecti
on)
1. Joint Obligation
only the share of the
bearer is remitted.
2. Solidary Obligation
whole obligation is
remitted
Note: Presumption on both
may be overcome by
superior contrary
evidence.
Implied Remission
Voluntary
destruction by the
creditor of the
instrument is
likewise another
form.
Note: presumption of
remission usually prevails
over presumption of
payment.
Presumption of remission of
accessory obligation of
PLEDGE
Exist when the thing,
after its delivery to
the creditor, was
found at the
possession of the

Effect: obligation is
recreated in the same form
and under the same
condition in which it was
found before the merger
took place.
Period which has
elapsed cannot be
computed in the
determination of the
period of
prescription
Mortgagee Becomes Owner
Mortgage is
extinguish but not
the Principal Debt
EFFECTS OF MERGER TO
GUARANTORS:
Accessory follows
the Principal.
Contra of guaranty is
extinguished but not
the obligation to pay
the original debt
In case of:
a. Guarantor-creditor
can demand the
performance of the
obligation from the
debtor, in case of
default, even from
his co guarantors
b. Guarantor-debtor
the CREDITOR can
demand the
performance of the
obligation directly
from the guarantor.
Merger on Joint Obligations
Debtors personal
share is
extinguished but not

other, the balance

subsist as a debt
REQUISITES:
Affirmative
1. Each obligors are
bound principally and
that he be at the same
time a principal creditor
of the other
2 debts and 2 credits
Generally bound as
principals
2. Debts consist of SUM of
MONEY/if things of the
SAME KIND and also
SAME QUALITY if the
later is stated
Fungible (Consumable)
generic, capable of
substitution
3. Debts be DUE
4. Liquidated and
demandable
Demandable refer to
the fact that neither of
the debt has
prescribed/obligation is
not invalid or illegal
Liquidated exact
amount are already
determined
(unliquidated could not
be set off)
Negative
1. Neither of the debts
must there be
retention/controversy
commenced by a 3rd
person and
communicated in due
time to the debtor
2. There must be no
waiver
3. Compensation must not
have become
prohibited by LAW:

NOTE: cannot extinguish

CRIMINAL LIABILITY
Kinds of Novation
OBJECT/PURPOSE
A. Real/objective
changing the object
or the principal
conditions of the
obligation
B. Personal/subjective
change of
Expromision/
delegacion (Debtor)
Subrogating a third
person (Creditor)
FORMS/CONSTITUTION
A. Express
B. Implied
EXTENT
A. Total/Extinctive
Extinctive never presumed.
There must be an express
intention to novate.
Implied necessitates that
the old obligation is
completely superseded by
the new one.
Done by making substantial
changes:
a. In the object/subject
b. In the cause of the
consideration of the
contract
c. Principal
terms/conditions
Test of incompatibility
whether they can stand
together, each one having a
independent existence, if
they cannot and are
irreconcilable, the
subsequent obligation would
extinguish the first.

whether a partial loss or

destruction of the thing
is sufficient as to
extinguish the obligation.
Obligation TO DO:
Must have occurred
AFTER the
constitution of the
obligation
2 Causes:
1. Legal Impossibility
when the law
prohibits the
performance or
execution of the
work agreed upon
(direct)
The law imposes
duties of a superior
character upon the
obligor which are
incompatible with
the work agreed
upon (indirect)
2. Physical
Impossibility arises
from the death of
the obligor, when
the act to be
performed requires
his personal
qualifications, or
from the death of
the oblige
3. Relative Impassibility
service has
become so difficult
as to be manifestly
beyond the
contemplation of the
parties, the court
should be authorized
to release the
obligor in whole or in

debtor.
Presumption of Unpaid Debt
rebutted by presentation of
receipt
NOTES:
Express remission:
acceptance by the
debtor may be
implied or tacit,
provided that the
value of the thing
condoned does not
exceed 5,000 pesos
(ART. 748)
Remedy for VOID Donation:
a. Reduction of the
donation
b. Suppression of the
donation
-

Remission of the
Principal Obligation
is remission of the
Accessory obligation
but NOT VICE VERSA

his co debtors.
Merger on Solidary
Obligations
Obligation is
altogether
extinguished without
prejudice to the
rights and
obligations of the
solidary creditors
and debtors among
themselves

Legal Compensation Cannot

Take Place
a. debts arising from
DEPOSITUM
b. DEPOSITARY
c. bailee in
COMMODATUM
d. claims from FUTURE
support by gratuitous
title
e. civil liability
f. damages suffered by a
partnership thru fault of
a partner cannot
compensate with
profits and benefits he
may have earned for
the partnership)
g. certain obligations in
favor of government,
such as taxes, fees,
duties, and others of a
similar nature
Guarantor May Set Up
Compensation with Respect to
PRINCIPAL debt
A owes B (500k)
B owes A (100k)
C guarantor of A must only pay
400k in case of default
Exception: extinguishment of
principally obligation
extinguishes the guaranty
B. Conventional/Volunt
ary Compensation
REQUISITES:
1. Agreement must be
valid
2. Parties have legal
capacity
3. Consent freely given
Note: Debts that are not due
may be Compensated

B. Partial/Modificatory
still remains in force,
only modified
SUBSTITUTION of debtor
without consent of the
creditor is binding upon the
parties to the substitution but
not on the creditor
Passive Subjective Novation
(debtor)
1. Expromision
initiative comes from
a 3rd person. It is
essential that the
OLD debtor is
released from his
obligation; otherwise
there will be no
Expromision, no
novation.
REQUISITES:
a. Initiative must come
from a third person
b. New creditor and
debtor must
CONSENT
c. Old debtor must be
excused/released
from his obligation
(his consent NOT
REQUIRED)
Note: old debt, will NOT be
responsible for the new
debtors INSOLVENCY
(with/without his knowledge)
2. Delegacion caused
by the replacement
of the old debtor by a
new debtor.
REQUISITES:
a. Initiative must come
from debtor
b. All the parties agree

part.
C. Judicial
Compensation/Set
Off when defendant
has an unliquidated
claim for damages
against the plaintiff
sets it off by proving his
right to said damages
and the amount
thereof, it is converted
into a liquidated claim
by a court decree
REQUISITES:
1. Counterclaim must be
made
2. All requisites
mentioned in Art. 1279
must be present except
at the time of the
pleading, claim need
not yet be liquidated
3. Unless pleading and
proof are made, the
court cannot of its own
accord declare the
compensation.
Compensation takes
place by the judgment
as to the date the
compensation was
pleaded.
Compensation of
Rescissible/Voidable Debts
valid until rescinded or voided
(Compensation is allowed)
Prevention of Unfairness if
rescission/annulment is later on
decreed by the court, it is as if
NO compensation ever took
place
DECREE is
RETROACTIVE

(creditor may give

EXPRESS/IMPLIED
consent)
NOTE: if in BAD FAITH (new
debtor is already insolvent),
not valid
c. Must release the old
debtor of the
obligation
Rights of the NEW DEBTOR
Payment by the new
debtor gives him the
right mentioned in
arts. 1236 and 1237
(beneficial
reimbursement/reimb
ursement and
subrogation)
EFFECTS of Insolvency of the
NEW debtor:
General Rule: Old Debtor Not
Liable
Requisites to Hold Old Debtor
Liable:
1. Insolvency was
already existing at
the time of
delegation
2. Insolvency was
already existing and
known to the debtor
at the time of
delegation
Note: if Insolvency is after
the delegation, old debtor is
NOT LIABLE.
Does not Apply if:
1. 3rd person was only
an agent
2. 3rd person acted only
ass guarantor or
surety
3. New debtor merely
agree to be solidarily

Effects of Assignment to a 3rd

Person
1. With CONSENT of
Debtor compensation
cannot be set-up
because there is
consent and therefore a
waiver
2. With knowledge but no
consent of debtor
compensation may be
set up regarding to
debts previous to the
cession/assignment
(before the notice)
3. Without knowledge
debtor can set up
compensation as a
defense for all debts
maturing PRIOR to his
KNOWLEDGE of the
assignment
D. Facultative by the
will of only one party
and the other cannot
choose compensation
because of any
impediment
Obligations of Depositary:
1. Keep the thing safely
and return it to
depositor, heirs,
successors, person
designated
2. Depositary cannot
deposit the thing to a
third person
3. If 3rd person is allowed,
depositary is liable for
the loss if he deposited
with a person who is
manifestly careless or
unfit
4. Depositary is

liable for the

obligation
4. New debtor merely
agreed to make
himself jointly or
partly responsible.
EFFECTS on Accessory
Extinguishment of the
Principal carries with it the
extinguishment of the
accessory.
NOTE: does not apply to
Novation by Subrogation
Modificatory Novation
applies to extinctive novation
(express intention)
Effect to Guarantors and
Sureties
a. If more ONEROUS
they are liable for the
original obligation
b. If LESS guarantors
and sureties are still
liable
Effect of Stipulations to the
Contrary
Accessory obligations would
still remain as accessory
provided that the debtors of
said accessory obligations
give their consent
Pour Autrui obligations
made in favor of third
persons remain unless said
third persons have their
consent of the Novation

5.

responsible for the

negligence of his
employees
Cannot use the thing
unless authorized

NOTES:
Non compensation if one debt
arises from a crime. It would be
improper and inadvisable. BUT
victim can claim.
If a person should have against
him several debts which are
susceptible of compensation,
the rules on the application of
payments shall apply to the
order of compensation (MORE
ONEROUS)