August 10 2019 Payment or performance – means not only the delivery of

money but also the performance in any other manner of an

Divisible obligation – those obligation whose subject are obligation
capable of partial performance in their delivery or
performance Dation of payment – the conveyance of ownership of a
thing as an acceptable equivalent of performance
Indivisible obligation – those obligation whose subject are
not capable of partial fulfillment in delivery or performance Legal tender- the currency which the debtor can legally
compel the creditor to accept in payment of a debt in
Obligation deemed invisible money
 Obligation to give definite things Inflation – share and sudden increase of money or credit
 Obligation which is not susceptible of partial without increase in business transaction
performance
 Obligation provide by law as individual although Deflation – decline of the general price level
capable of being divisible
 Delivery of money
 Obligation intended by the parties to be invisible
 Giving of the thing due
although capable of being divisible
 The doing of an act
TEST OF DISTINCTION  The not doing of an act
Presumption: Kinds of penal clause
 Invisible: definite thing not partial performance  Legal
 Divisible: partial performance by daily work,  Conventional
medical units or analogous things  Compensatory
 Physically divisible subject to law of what is  Punitive
intended by parties  Subsidiary or alternative
 Not to do: determined by characteristic prestation  Joint or cumulative
Recovery for damage
Kinds of indivisibility
 When stipulated by the parties
 Legal indivisibility  When obligor refuses to pay the penalty
 Conventional indivisibility  When the obligor is guilty of fraud in the fulfillment
 Natural indivisibility of the obligation
Defense available solidary debtors Nullity of penal clause (void)
 Those derived from the nature of the obligation  If the principal obligation the penal clause is
 Those personal to the debt being sued likewise said
 Those personal to the other solidary debtors to the  If the penal clause is void the principal obligation
extent of the share of the latter remains valid and demandable
Extinguishment of obligation
August 17, 2019 (mode of extinguishment)
Obligation with a penal clause – obligation with contains  Payment of performance
an accessory undertaking for the purpose of incurring its  Loss of the thing due
performance by virtue of which the obligation is bound to  Compensation
pay a stipulated indemnity or perform a stipulated  Annulment
prestation in case of breach  Rescission
Requisite of payment
Principal obligation – one which can stand by itself and  There must be delivery of the thing or rendition of
does not depend upon another obligation for its validity the service
and existence  Payment should be complete:
Accessory obligation – one which is attached to a principal a. Substantial in good faith, but the creditor may
obligation for its consistence and validity recover any damages suffered
b. Acceptance by creditor of an incomplete or
irregular performance without any protest or
objection
Valid payment b. When the debt is in part liquidated and in part
unliquidated
(with respect to prestation itself) c. When different prestation are subject to different terms
 Identity and condition
 Integrity or completeness Basic of payment
 Indivisibility
(with respect to parties) (in case of extraordinary inflation/deflation)
 Payor
1. The purchasing value of the currency at the time of
 3rd person pays/perform
establishment of the obligation
 3rd person pays/perform with consent of creditor
2. Agreement of the parties
but not the debtor consent
Time and place of payment
Requisite for valid payment
(where payment should be made)
 Payee
1. In the place designated in the obligation
 3rd person 2. If there is no express stipulation and the undertaking is
 Anyone with possession of the creditor to deliver a specific thing at the place where the thing
Payment to a third party not authorize, valid is proved and might be at the moment the obligation was constituted
only to the extent of benefit. Presumed if: 3. In other cases, in the place of the domicile of the debtor
1. After payment, 3rd person acquires the creditor rights
2. Creditor satisfies payment to 3rd person When the payment should be made:
3. By creditor conduct, debtor has been led to make the
 Payment should be made when it is due
payment
 Even if the payment is due, the general rule is that
Payment after judicial order for the debtor to retain the demand is still necessary
debt
Exception: (demand is not necessary)
1. Payment made to creditor is not valid
2. Debtor may still be held liable incase plaintiff wins the a. When the obligation on the law expressly so
case declares
b. Time is the controlling native for the establishment
Special forms of payment of the contract
c. Demand would be useless
 Dation of payment
 Application of payment
 Payment by cession
 Tender of payment and consignation
Condition for valid dation
 With consent of the creditor
 Should not prejudice the right of other creditors
 The debtor is not judicially declared insolvent
Other rules of valid payment
 In delivery of thing, the thing due must be
delivered
 In delivery of generic thing, the creditor cannot
demand a thing of superior quality, neither can the
debtor deliver a thing of inferior quality
 Debtor pays for extrajudicial expenses, unless
otherwise stipulated
 Judicial cost shall be for the account if the losing
party
Partial performance
General rule: performance of obligation should be
complete
Exception:
a. When there is express stipulation AUGUST 24 2019
EXTINGUISHMENT OF OBLIGATION
Application of payment – the assignation of the debt which
is being paid by a debtor who has several obligations of the
same kind in favor of the creditor to whom payment is
made.
payment by cession – assignment or abandonment of all
properties of the debtor for the benefit of his creditor in
order that the latter may sell the same apply the proceeds
thereof to the satisfaction of the credit
tender of payment – act of offering the creditor is due him
together with a demand that the creditor accepts the same
consignation – act of depositing the thing due with the
court or judicial authorities whenever the creditor cannot
accepts or refuses to accept payment and it generally
requires a prior tender of payment
condonation- gratuitous abandonment by the creditor of
his rights against the debtor
confusion or merger- meeting in one person to the
qualities of the creditor and debtor with respect to the
same obligation
Merger of the characteristic of the creditor and
the debtor in one and the same person by virtue of which
the obligation is extinguished
Requisites for application of payment
 There must be one debtor one creditor
 There must be two or more debts
 The debts to which payment has been applied must
be due
 Payment made must not be sufficient to cover all
the debts
Rules in the application of payment
 Apply in accordance with the agreement
 If there is no agreement, the debtor has the right
to apply
 If the debtor does not choose, the creditor can
choose
 Apple to the most onerous event
 If equally enormous, apply proportionately
Requisite of payment by cession
 there must be two or more creditor
 the debtor must be insolvent at the time of
assignment
 the assignment must involve all the properties of
the debtor
 the cession must be accepted by the creditor
effect of payment by cession
 assignment does not make the creditor the owner
of the property
 debtor is released only up to the extend of the net
proceed of the sale
 debtor is still liable if there is any balance unless
there is stipulation to the contrary
requisites of valid tender of payment
 it must comply with the rule on payment
 it must be unconditional and for the whole amount
 it must be actually made
requisite of valid consignation
 existence of valid debt
 consignation was made because of some legal
cause previous valid tender was unjustly refused or
under circumstances making previous tender
exempt
 prior notice of consignation had been given to the
person interested in the performance of obligation
 actual deposit/ consignation with proper judicial
authorities
 subsequent notice of consignation
effect of consignation
 debtor may ask judge to order cancelation of
obligation
 running of interest is suspended
 before creditor accepts or before judge declares
consignation has been properly made, obligation
remains
consignation alone shall produce the same effect
 when the creditor is absent and unknown
 when he is incapacitated to reduce the payment at
the time it is due
 when, without just cause, he refuses to give a
receipt
 when to or more person claims the same right to
collect
 when the title of the obligation has been lost
loss of the thing due
a thing is lost when:
 it perishes
 it goes out of commerce
 it perishes in such a way that existence is unknown
or it cannot recover
golden rule:
less of the thing without the fault of the debtor shall
extinguish the debtor obligation
exemption:  since the creditor voluntarily delivered the private
document then there is a presumption of remission
 when the debtor is guilty or default
 when the laws provide for liability even in cases of requisite of confusion
fortuitous events
 it must take place between the principal debtor
 when the parties stipulate that the obligation is not
and creditor
extinguish by fortuitous event
 it must be complete
 when the nature of the obligation requires the
assumption of risk other rules
 when the obligation is to give a generic thing
 when the debtor has promised to deliver the same  confusion or merger benefit the guarantor
thing two or more person who do not have the  confusion in the person of the guaranty does not
same interest extinguish the obligation
 confusion in the person of any joint debtor or
other rules or presumption creditor does not affect the others
 in case of partial loss of a specific thing, the court  confusion in solidary obligation extinguish the
entire obligation
shall determine if the obligation shall be
distinguished
 the debtor is presumed to be at fault in case of loss
the thing in his possession
 the obligation is extinguished is case the prestation
becomes legally or physically impossible to do
without the debtor fault
 difficulty of performance beyond party’s
contemplation releases the debtor in whole or in
part
 loss of thing which is the object of a criminal
offense does not extinguish the debtor’s obligation
 when the obligation is extinguished the debtor
obligation thing, the creditor shall have all the
rights of action which the debtor may have against
the third person by reason of the loss
requisite of condonation
 it must be accepted by the obligor
 it must be gratuitous
 the parties must have capacity
 it must not be in officious
 if made expressly, it must comply with the form of
donation
different kind of remission
 complete
 partial
 express
 implied
 inter vivos
 mortis causa
presumption in remission AUGUST 31 2019
 if a private document is found in the possession of
the debtor, then it is presumed that the creditor
voluntarily delivered it to him
Compensation- extinguishment to the concurrent amount requisites of novation
of the debts of two person who are involved, in their own
rights are debtor and creditor of each other  a previous valid obligation
 capacity and intention of the parties
Novation- it is total or partial extinction of an obligation  the extinguishment of the obligation
through the creation of a new which substitute it.  creation of new valid obligation
Contacts- is the meeting of the mind between two persons kinds of novation
whereby one bind himself, with respect to the other, to do
something or to render some service  legal
 conventional
Kinds of compensation  express
 implied
 legal
 total
 conventional or voluntarily
 partial
 facultative
 real
 judicial
 personal
 total
 mixed
 partial
kinds of personal novation
requisites of compensation
1. substitution- change in debtor
 both parties must be mutually creditor and debtor
2. subrogation- change in creditor
of each other
a. legal
 both debtors must consist in sum of money or if
b. conventional
consumable, of the same kind of quality
 both debts are due and demandable forms of substitution by debtor
 both debts are liquidated
 no retention or controversy commenced by a third 1. expromission- instance of new debtor
party 2. delegacion- instance of new creditor

effect of assignment of credit to 3rd person effects of condition in novation

1. if made after compensation took place- no effect, 1. if the original obligation was subject to condition, the
compensation is already perfected new obligation shall be under the same condition,
2. if made before compensation took place – depends unless it is otherwise stipulated
a. with convent of debtor- debtor is stopped unless 2. if new obligation and the old obligation are subject to a
he reserves his rights and gave notice to assignee different condition:
b. with knowledge but without consent of the a. if the conditions are compatible both must be
debtor- compensation must be set up as the debts fulfilled otherwise there is nothing to novate
maturing prior to the assignment b. if the condition is incompatible the latter should be
c. without knowledge- compensation may be set up fulfilled
on all debts prior to his knowledge principal characteristics
instances when compensation is not allowed  autonomy
 where one of the debts arises from a depositum  mutuality
 where one of the debts arises from a  obligatory or consensuality
commodatum  relativity
 where one of the debts arises from a claim for kinds of contracts
support due by gratuitous  consensual
 where one of the debts consist in civil liability  real
arising from penal clause  formal
purpose of novation  informal
1. the original obligation is extinguished  principal
2. a new obligation is created  accessory
 preparatory
  gratuitous
 onerous
 remuneratory
 unilateral
 bilateral
 commutative
 aleatory
 innominate
kinds of innominate contracts
1. do ut des – I give that you may give
2. do ut facias – I give that you may do
3. facio ut des – I do that you may give
4. facio ut facias- I do that you may do
determination of performance by third person
 the determination of performance of contracts is
agreed upon by parties to the contract
 may be left to the will of the third person by
agreement of principal parties
 shall not be valid until made by the creditor is
unknown
person bound by contract
 parties to the contract
 their assigns
 their heirs
cases when a third person is affected by contract
 stipulation pour autri
 in contract creating real rights
 in contract entered into the defraud creditor
 in contract which have been violated at the
inducement of a third person
stipulation pour autri
 the stipulation must only be a part of a contract: it
must not be the whole contract
 the contracting parties clearly and deliberately
conferred the favor to the third person
 neither of the contracting parties been the legal
representation or authorization of a 3RD party
 the 3rd person must have communicated his
acceptance to the obligor before its recreation by
the original parties
stage of contact
1. preparation of conception
2. perfection or birth
3. consummation or death
 September 7 2017 golden rule:

Modes of payment – the person making the offer may fix an offer or proposal may be withdrawn as long as the
offeror has no knowledge that the offeree has already
the time, place, manner of acceptance all of which must be
complied with accepted the offer
 an offer made through an agent is accepted from time exemption
acceptance communicated to him
 when the option is founded upon a consideration,
simulation of contracts- acts of deliberately deceiving as something paid or promised, the offer cannot be
others, by pretending by agreement, the appearance of a withdrawn
contract which is either non-existent or concealed  acceptance mode by letter of telegram does not
object- the thing right or service which is the subject bind the offer except from the time it came to his
matters of the obligation arising from the contract knowledge
 an offer becomes ineffective upon the death, civil
stages of contracts interdiction, insanity or insolvency of either party
before acceptance is conveyed
 preparation or conception
 business advertisement of thing for sale are not
 perception or birth
definite offers, but mere invitations to make an
 consummation or death
offer
classification of contracts person who cannot give valid consent
 unemancipated minors
 consensual contract  insane or demented person
 real contract  deaf-mute or illiterates who do not know how to
 solemn contract write
authority of a contract  intoxicated and hypnotized person
 person who gives consent through mistake
general rule:  a person induced by fraud
a person is not bound by the contract of another of which other special disqualification contracts consented only by
he has no knowledge or has not given consent the following are void:
exception  those under civil interdiction
 hospitalized lepers
if ratified expressly or impliedly
 prodigal
Requisites of contracts  deaf & dumb who are unable to read and write
 those who by reason of age, disease weak mind
 consent of the contracting parties
and other similar causes
 object or subject matter
causes which vitiate freedom to consent
 cause or consideration
 violence
elements of consent  intimidation
 mistake
 it must be given by two or more parties  fraud
 capacity on the part of the contracting parties  undue influence
 intelligently and freely given
 there must be express or tacit manifestation of the kinds of simulation
will
 absolute simulation
requisites of offer  relative simulation

 definite requisites of object

 complete
 must be within the commerce of man
 intentional
 must be licit
withdrawal of offer  must be possible
 must be determinable
  must be transmissible cause
those which cannot be the object of a contract - direct and most proximate reason of a
contract
 future inheritance - objective and juridical reason
 impossible things or services cannot be the object - cause is always same for each contracting
of contract parties
 contrary to law morals good customs, public order
and public policy motive
 indeterminable as to their kind - indirect and remote reason
 outside the commerce of man - psychological or purely personal reason
 in transmissible rights - motive differs for each contracting parties
forms of contracts
September 14 2017  informal
Cause- the immediate and most proximate purpose of  formal
the contracts  real

 the essential reasons which impels the contract which must be in public document
contracting parties to enter into a contract  real right over immovable property, sale of real
forms of contracts – form is a manner in which contract property
is executed or manifested  hereditary rights and conjugal property of gains
 power to administer property, other power to act
reformation of contracts- remedy in equity by means of or to prejudice 3rd person
which a written instrument is made or constructed. So
as to expose or conform to the real intention of the requisites of reformation
parties when some error or mistakes has been
 meeting of minds
committed
 true intention must be expressed within the
interpretation of contract- determination of the instrument by reason of mistake, fraud and
meaning of the terms or words used by the parties in inequitable
their written contracts  there is clear and convincing proof of mistake,
accident, fraud, simulation or inequitable conducts
rescissible contract – is valid contract but is defective
due to injury or damage to either of the contracting causes of reformation
parties or to 3rd person
 mutual
general rule: contract are valid and enforceable in  unilateral
whatever form, even if orally entered  mistake by a third person
 other specified by law
exemption:
when no reformation is allowed
 when the law requires contract to be in some form of
validity  simple donation inter vivos wherein no
 when the law requires contract to be in some form of condition is imposed
enforceable  will
 when the law requires contract to be in some form of  when the real agreement is void
convenient  estoppel
requisites of cause interpretation of contracts

 it must exist at the time of celebration of the  literal meaning of clear terms
contract  evident intention prevails over letter
 it must be real  contemporaneous and subsequent acts considered
 it must be licit or lawful  general terms in accordance to intention
 interpret of effectuate
  read as a whole  there must be fraud or at least, the intent to
 in keeping with nature ad object of contract commit fraud to the prejudice of the creditor
 customs facilitate interpretation seeking rescission
 obscure words for no-obscurers  the creditor cannot, in any legal manner collect his
 doubts credit
 the object of the contract must be both be legally
defective contracts in possession of a 3rd person
 rescissible contracts voidable - is a contract in which all of the essential
 voidable contracts element for validity are present
 unenforceable
 void or inexistent of contract characteristics of voidable
requisites of rescission
 effective until set aside
 contract is essentially valid
 may be assailed
 there is lesion or pecuniary prejudice
 can be confirmed
 plaintiff has no others means to object reparation
 can be assailed only by the parties whose consent
 plaintiff must be able to return whatever he may be
was defective
obliged to return due to rescission
 the things must not have been passed to 3 rd person ground of voidable contracts
who did not act in good faith
 it must be made within the prescribed period  one of the parties incapable of giving consent to a
contract
grounds for rescission  the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud
 those entered into by guardian where the word
suffer lesion of more the ¼ of the value of the thing annulment – remedy provided by law in order to restore
which one objects the parties to their original position in which they were
 those agreed upon in representation of absences, before the contract has executed
of the latter suffers cession by more the ¼ of the
general rule: the party prejudice has the right to annul a
value of things which are the subject
voidable contract
 those undertaken in fraud of creditors when the
latter cannot in any many claim what are due them causes of extinction of an action
 those which refer to things under litigation if they
have been entered into by the defendant without 1. prescription
the knowledge and approval of the litigants of the 2. ratification
court 3. loss of the thing due to default of plaintiff
 all other contract especially declared by law to be kinds of unenforceable contract
subject to rescission
when rescission is not allowed 1. unauthorized or no sufficient authority
 when there are other means 2. failure to comply with statue of frauds
 when he who demand rescission has no ability to 3. both parties incapable of giving consent
restore
 in possession of a 3rd person in good faith
 rescission referred to in no. 7 and 2 article 1380
shall not take place with respect to contracts
approved by the court
effect to recission
1. as to the parties
2. as to 3rd person
rescission due to fraud
 there must be credit existing prior to the
celebration of a contract