MODULE 6

I. DIVISIBLE AND INDIVISIBLE OBLIGATION - performance of the prestation and not to the
thing which is the object thereof

DIVISIBLE OBLIGATIONS

Concept One which is susceptible of partial performance; debtor can legally perform the obligation by parts and
the creditor cannot demand a single performance of the entire obligation.
D DIVISIBILITY OF THINGS different from DIVISIBILITY OF OBLIGATIONS
o Divisible 7hing: When each one of the parts into which it is divided forms a homogenous and
analogous object to the other parts as well as to the thing itself
o Indivisible 7hing: When if divided into parts, its value is diminished disproportionately
D 7est of Divisibility
1. Will or intention of the parties
2. Objective or purpose of the stipulated prestation
3. Nature of the thing
4. Provisions of law affecting the prestation

1. Art 1223 The divisibility or indivisibility of the things that are the object of obligations in which there is only
one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title (Nature
and Effect of Obligations).
2. Art 1233 A debt shall not be understood to have been paid unless the thing or service in which the obligation
consists has been completely delivered or rendered as the case may be.

INDIVISIBLE OBLIGATIONS

Concept Whatever may be the nature of the thing which is the object thereof, when it cannot be validly performed in
parts.

Distinguished from Solidary Obligations

INDIVISIBILITY SOLIDARITY
Each creditor cannot demand more than his share and each Each creditor may demand the full prestation and each debtor
debtor is not liable for more than his share has the duty to comply with the entire prestation
Indivisibility refers to the prestation that is not capable of Solidarity refers to the legal tie or vinculum defining the extent
partial performance of liability
Only the debtor guilty of breach of obligation is liable for All of the debtors is liable for the breach of obligation
damages, thereby terminating the agency committed by any one of the debtors
Can exist even if there is only one debtor or only one creditor Can only exist when there is at least creditor or debtors
(requires plurality of subjects)
The other debtors are not liable in case of insolvency of one The other debtors are proportionately liable in case of
debtor insolvency of one debtor

Kinds of Indivisible ObligationsNATURAL

Art 1225 Par 1 For the purposes of the preceding articles, obligations to give definite things and those which are
not susceptible of partial performance shall be deemed to be indivisible.

1. Obligation to give definite things

2. Not susceptible of partial performance

LEGAL

Art 1225 Par 3 However, even though the object or service may be physically divisible, an obligation is indivisible if so
provided by law or intended by parties.

CONVENTIONAL

Art 1225 Par 3 However, even though the object or service may be physically divisible, an obligation is indivisible if so
provided by law or intended by parties.

Presumptions in Indivisible Obligations

OF INDIVISIBILITY

Art 1225 Par 1 For the purposes of the preceding articles, obligations to give definite things and those which are
not susceptible of partial performance shall be deemed to be indivisible.

D Presumption of indivisibility also applies in obligations to do

OF DIVISIBILITY

Art 1225 Par 2 When the obligation has for its object the execution of certain number of days of work, the
accomplishment of work by metrical units or analogous things which by their nature are susceptible of partial
performance, shall be divisible.

Divisibility and indivisibility in obligations not to do

Art 1225 Par 4 In obligations not to do, divisibility or indivisibility shall be determined by the character of the
prestation in each particular case.

Effects of Indivisible Obligations

1. Art 1223 The divisibility or indivisibility of the things that are the object of obligations in which there is only
one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title (Nature
and Effect of Obligations).
2. Art 1233 A debt shall not be understood to have been paid unless the thing or service in which the obligation
consists has been completely delivered or rendered as the case may be.
a. EXCEPTIONS:
a. Obligation has been substantially performed in good faith (Art 1234)
b. When the creditor accepts performance, knowing its completeness, and without
protest, the obligation is deemed fully performed (Art 1235)
3. Art 1224 A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the
debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their
promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing
or of the value of the service which the obligation consists.
4. See Joint Indivisible Obligations

Cessation of Indivisibility
a) Natural Indivisibility: conversion of the obligation to pay damages
b) Conventional/Legal Indivisibility: novation, death of creditor (division among heirs)

Entire and Severable Contracts - depends upon the consideration to be paid, not upon its object

• Not in the syllabus but Sir mentioned in passing during lecture

• ENTIRE - consideration is entire and single; e.g. Sir Labitag: yearly subscription to Herald Tribune
• SEVERABLE - consideration is expressly or by implication apportioned; e.g. part to be performed by one party
consists in several distinct and separate items, and the price is apportioned to each of them

II. OBLIGATIONS WITH A PENAL CLAUSE

Concept An accessory undertaking to assume greater responsibility in case of breach. Attached to an obligation to
insure performance.
 D "Ad terrorem clause"
D Generally a sum of money, but can be any other thing stipulated by the parties, including an act or abstention
D Double function: (1) provide for liquidated damages and (2) strengthen the coercive force of the obligation by
the treat of greater responsibility in the event of breach
D Mere non-performance of the principal obligation gives rise to damages
D PENAL CLAUSE constitutes an exception to the general rules on the recovery of losses and damages.

PRINCIPAL OBLIGATION ACCESSORY OBLIGATION

Can stand alone, independent of other obligations Attached to the principal in order to complete it or take their
place in case of breach

OBLIGATIONS WITH A PENAL CLAUSE CONDITIONAL OBLIGATION

There is already an existing obligation (the principal) from the No obligation before the suspensive condition happens, it is the
very beginning fulfillment of the condition that gives rise to the obligation
Accessory obligation (penalty) is dependent upon non- Principal obligation itself is dependent upon an uncertain event
performance of the principal obligation

OBLIGATIONS WITH A PENAL CLAUSE ALTERNATIVE OBLIGATION

Only one prestation and it is only when this is not performed Two or more obligations are due, but fulfillment of one of them
that the penal clause is enforceable is sufficient
Impossibility of the principal obligation also extinguishes the Impossibility of one of the obligations, without the fault of the
penalty debtor, still leaves the other subsisting
He cannot choose to pay the penalty to relieve himself of the The debtor an choose which prestation to fulfill
principal obligation, unless that right is expressly granted to him

OBLIGATIONS WITH A PENAL CLAUSE FACULTATIVE OBLIGATION

Payment of the penalty in lieu of the principal can be made only Power of the debtor to make substitution is absolute

by express stipulation
Creditor may demand both prestation as long as such right is Creditor can never demand both prestations
granted to him (i.e. complementary penalty)

OBLIGATIONS WITH A PENAL CLAUSE GUARANTY

Contract by virtue of which a person, called the guarantor, binds
himself to fulfill the obligation of the principal debtor in case the
latter should fail to do so.
SIMILARITIES
1. They are both intended to insure the performance of the principal obligation.
2. They are both accessory and subsidiary obligations.
3. Can be both assumed by a third person.
To pay the penalty is different from the principal obligation The object of the obligations of the principal debtor and the
guarantor is the same.
Principal obligation and the penalty can be assumed by the Principal debtor cannot be the guarantor of the same obligation
same person.
Penalty is extinguished by the nullity of the principal obligation, Guaranty subsists even when the principal obligation is voidable
except when the penal clause is assumed by a third person or unenforceable or is a natural one. However, if the penal
clause is assumed by a third person, the same principle will
apply as in the case of a guaranty.

Kinds of Penal Clause

1. As to effect

SUBSIDIARY - only the penalty may be enforced

• Presumed in Art 1227: "Cannot demand the fulfillment of the obligation and the satisfaction of the
penalty at the same time"

COMPLEMENTARY - both principal obligation and penalty may be enforced

 • Only occurs by express stipulation of the parties

2. As to source

CONVENTIONAL - by express stipulation of the parties

LEGAL - by law

3. As to purpose

PUNITIVE - the right to damages, besides the penalty subsists; the question of indemnity for damage is not
resolved, but remains subsisting
• Only occurs by express stipulation of the parties
• Sir Labitag: value of the penal clause is much more than the value of the principal, it's purpose is to
bludgeon the debtor into performing the obligation
• The Courts are authorized to reduce the damages if:
o They find that the breach was not one that is wanton (noodles) or done in callous disregard
for the rights of the creditor
o Treble damages

REPARATORY - substitutes the damages suffered by creditor; the matter of damages is generally resolved,
and it represents the estimate of the damages that a party might suffer from non-performance of the
obligation, thereby avoiding the difficulties of proving such damages
• Presumption in Art 1226, Par 1: "Shall substitute the indemnity for damages and the payment of
interests in case of non-compliance"
• Sir Labitag: pre-agreed measure prior to the breach
• Cases when damages and interest may be recovered in addition to the penalty
1. There is an express provision to that effect
2. Debtor refuses to pay the penalty
3. Debtor is guilty of fraud in the non-fulfillment of the obligation

Demandability of penalty
Art 1226 Par 2 The penalty may be enforced only when it is demandable in accordance with the provisions of Code.

a. Only when the non-performance is due to the fault or fraud of the debtor
b. Non-performance gives rise to the presumption of fault D creditor does not need to prove the fault of the
debtor. Burden of proof for the excuse on the debtor. (Art 1228)
c. When creditor elected fulfillment but the same has become impossible (Art 1227)
• HOWEVER, penalty not enforceable when the principal obligation becomes IMPOSSIBLE:
• Due to fortuitous event
• Because the creditor prevents the debtor from performing the principal obligation

Effects of penal clause

1. Substitute for indemnity for damages and payment of interest (Art 1226)
EXCEPTION: Unless there is a stipulation to the contrary e.g. becomes a facultative obligation

Cases:

• Makati Development Corporation v Empire Insurance

• Tan v CA
• Country Bankers Insurance v CA

2. Not exempt debtor from performance - penalty is not a defense for leaving obligation unfulfilled
Art 1227 The debtor cannot exempt himself from the performance of the obligation by paying the penalty
EXCEPTION: Where this right to substitute penalty has been expressly reserved for him
3. Creditor cannot demand both performance and penalty at the same time
Art 1227 Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the
same time"
EXCEPTION: Unless this right has been clearly granted him

4. Creditor cannot collect other damages in addition to penalty

Art 1226 Substitute the indemnity for damages and the payment of interest in case of non-fulfillment *
EXCEPTIONS:
1. There is an express provision to that effect
2. Debtor refuses to pay the penalty
3. Debtor is guilty of fraud in the non-fulfillment of the obligation

When penalty shall by equitably reduced

Art 1229 The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there is no performance, the penalty may also be reduced by the courts if it is
iniquitous or unconscionable.
• "Partial" - quantity or extent of fulfillment
• "Irregular" - form of fulfillment
• Only applies to penalties prescribed in contracts and not to collection of the surcharge on taxes that are
due, which is mandatory on the collector

Effects of Nullity of Principal Obligation or Penal Clause

Art 1230 The nullity of the penal clause does not carry with it that of the principal obligation. The nullity of the
principal obligation carries with it that of the penal clause.

GENERAL RULES:

1. Nullity of principal obligation Also nullifies the penal clause

D EXCEPTIONS: Penal clause may subsist even if the principal obligation cannot be enforced
• When the penalty is undertaken by a 3rd person precisely for an obligation which is unenforceable,
natural or voidable D assumes a form of guaranty which is valid under Art 2052

• Nullity of principal obligation itself gives rise to liability of debtor for damages e.g. vendor knew
that the thing was inexistent at the time of the contract, vendor becomes liable for the damages
although contract itself is void

2. Nullity of penal clause Does not affect the principal obligation

D In the case of non-performance, damages shall be determined by the same rules as if no penalty had
been stipulated
D Penal clause may be void because it is contrary to law, morals, good customs, public order or public policy
D Rationale: Penalty is merely an accessory to the principal obligation

Chapter IV. Extinguishment of Obligations

I. Modes of Extinguishment

Art 1231 Obligations are extinguished:

A. Payment or performance - most natural way of extinguishing obligation
B. Loss of the thing due or Impossibility of performance
C. Condonation or Remission of the debt
D. Confusion or Merger of the rights of the creditor and debtor
E. Compensation
F. Novation
G. Other causes of extinguishment of obligations
- Annulment
- Rescission
 - Fulfillment of resolutory condition
- Proscription
H. Additional miscellaneous causes from Sir Labitag and Tolentino
- Arrival of resolutory period
- Compromise
- Mutual dissent (opposite of mutual agreement)
- Death - extinguishes obligations which are of a purely personal character, apart from its extinctive effect
in some contracts such as partnership and agency
- Renunciation by the creditor
- Abandonment e.g. Art 662 (abandonment of interest in a party wall) and abandonment of a vessel under
the code of commerce
- Insolvency - does not extinguish obligation unless judicially declared and a discharge was given him.

II. Payment or Performance

CONCEPT Fulfillment of the prestation due, a fulfillment that extinguishes the obligation by the realization of the
purposes for which it was constituted.
D Juridical act which is VOLUNTARY, LICIT, and MADE WITH THE INTENT TO EXTINGUISH THE OBLIGATION
D Requisites of a Valid Payment
1. Person who pays
2. Person to whom payment is made
3. Thing to be paid
4. Manner, time and place of payment
D Kinds of Payment
a. Normal debtor voluntarily performs the prestation stipulated
b. Abnormal when debtor is forced by means of judicial proceeding, either to comply with the
prestation or pay indemnity
D Why do you pay? Bigger consequences if you don't pay, the creditor will file action for collection then the
sheriff will levy upon your other properties
D What are the elements/characteristics of a valid payment?
1. Identity - what is to be paid, payment should be the very same obligation/prestation promised to be
performed/not performed

2. Integrity - how payment should be made, it should be complete (not only specific thing but all of its
accessions and accessories)
D Can anybody pay? YES, as long as his payment has integrity and identity and the creditor accepts it as a
valid tender of payment

1. Who can pay

a. In general (creditor cannot refuse valid tender of payment)

1. Debtor
2. Anyone acting on his behalf
a. Duly authorized agent or representatives
b. Heirs (means that debtor is dead, if alive, they would be third persons interested in obligation)
c. Successors in interest and assignees

b. Third person who is an INTERESTED PARTY (creditor cannot refuse valid tender of payment)
Meaning of IN7ERES7ED PAR7Y - interested in the extinguishment of the obligations such as
• Co-debtors • Guarantors
• Sureties • Owners of mortgaged property or pledge
 Art 1302 (3) When even IAithout the knoIAledge of the debtor, a person interested in the fulfillment of the

obligation pays, IAithout prejudice to the effects of confusion as to the latter's share.

Effects of Payment by 3rd Person - Interested

1. Valid payment; obligation extinguished

2. Debtor to reimburse fully 3rd person interested
3. 3rd person subrogated to the rights of the creditor

c. Third person who is NOT AN INTERESTED PARTY but WITH CONSENT of debtor
Art 1302 (2) When a third person, not interested in the obligations, pays with the express or tacit approval of the
creditor.
Art 1236 Par 1 The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Effects of Payment by 3rd Person - Not Interested - With Debtor's Consent

1. 3rd person is entitled to full reimbursement
■ Demand from the debtor what he has paid
2. Legal subrogation (novation) - 3rd person is subrogated/steps into the shoes of creditor
■ Payor can exercise all the rights of the creditor arising from the very obligation itself, whether
against the debtor or third person
3. Creditor may refuse to accept payment

d. Third person who is NOT AN INTERESTED PARTY and WITHOUT THE KNOWLEDGE OR AGAINST THE
WILL OF THE DEBTOR
Art 1236 Par 1 The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Art 1236 Par 2 Whoever pays for another may demand from the debtor what he has paid, except that if he paidwithout the
knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to
the debtor.

Art 1237 Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot
compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty or
penalty.

Effects of Payment by 3rd Person - Not Interested - Without Knowledge or Against the Will
1. 3rd person can only be reimbursed insofar as payment has been beneficial to debtor
• Burden of proof of payment on the 3rd person
• Benefit to the creditor need not be proved in the following cases:
 a. If after the payment, the third person acquires the creditor's
right
b. If the creditor ratifies the payment to the third person
c. If by the creditor's conduct, the debtor has been led to believe
that the third personhad authority to receive the payment
d. Assignment of credit without notice to debtor ( Art 1626)

2. 3rd person cannot creditor to subrogate him in the latter’s rights

a. Third person who does NOT INTEND TO BE REIMBURSED D DEBTOR MUST GIVE
CONSENT
Art 1238 Payment by third person who does not intend to be reimbursed by the debtor is
deemed to be a donation, which requires the debtor's consent. But the payment is in
any case valid as to the creditor whohas accepted it.

Effects of Payment by 3rd person - Interested or not - Does not intend to be reimbursed
1. Payment is deemed as a donation/offer of donation
2. Donation must be in proper form (i.e. if above P5K it must be in writing)

b. In obligation to give
Art 1239 In obligation to give, payment made by one who does not have free disposal of
the thing due and capacity to alienate it shall not be valid, without prejudice to the
provisions of Art 1427 under Title on Natural Obligations.
Art 1427 When a minor 18-21 entered into a contract without the consent of the parent or
guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of an
obligation, there shall be no right to recover the same from the oblige who has spent or
consumed it in good faith.
Effect of Incapacity of the payor
1. No free disposal and no capacity to alienate
D Payment is invalid, but without prejudice to natural obligations
2. Minor who entered contract without consent of parent/guardian
D No right to recover fungible thing delivered to the creditor who spent
or consumed it in good faith

c. In case of active solidarity

Art 1214 The debtor may pay any one of the solidary creditors, but if any demand,
judicial or extrajudicial has been made by one of them, payment should be made to him.

3. To whom payment can be made

a. In general
Art 1240 Payment shall be made to the person in whose favor the obligation has been
constituted, or his
successor in interest, or any person authorized to receive it.

1. Creditor/person in whose favor obligation was constituted

2. His successor in interest
3. Any person authorized to receive it

Payment to a wrong third party

GENERAL RULE: Not valid, obligation is not extinguished, even if in good faith of the debtor EXCEPTION:
 1. Extinguished if the mistake is imputable to the fault or negligence of the creditor (PAL
v CA)
2. Payment in good faith to person in possession of credit (Art 1242)

Incapacitated person

Art 1241 Par 1 Payment to a third person incapacitated to administer his property shall be valid
if he has kept thething delivered or insofar as the payment has been beneficial to him.

GENERAL RULE: Payment not valid

EXCEPTION - When payment to an incapacitated person is valid:

a) If creditor has kept the thing delivered

b) Insofar as payment benefited creditor
D Benefit to the creditor need not be proved in the following cases:

e. If after the payment, the third person acquires the creditor's

right
f. If the creditor ratifies the payment to the third person
g. If by the creditor's conduct, the debtor has been led to believe
that the third personhad authority to receive the payment
h. Assignment of credit without notice to debtor (Art 1626)

b. Third person
Art 1241 Par 2 Payment to a third person shall also be valid insofar as it has redounded
to the benefit of the creditor.
GENERAL RULE: VALID if third person proves that it redounded to creditor's
benefit; otherwise VOIDEXCEPTION; When proof of benefit not required D
also applicable to INCAPACITATED PERSONS Art 1241 Par 3 Such benefit to the
creditor need not be proved in the following cases:
1. If after the payment, the third person acquires the creditor's right
2. If the creditor ratifies the payment to the third person
3. If by the creditor's conduct, the debtor has been led to believe that the third person
had authority to receive the payment
4. Assignment of credit without notice to debtor (Art 1626)
5. Payment in good faith to any person in possession of the credit shall release the
debtor (Art 1242) D
EFFECT: Debtor is released

Art 1243 Debtor pays creditor after being judicially

ordered to retain debtEFFECT: Payment not valid if
the property is attached or garnished

c. In case of active solidarity

Art 1214 The debtor may pay any one of the solidary creditors, but if any demand,
judicial or extrajudicial has been made by one of them, payment should be made to him.
• If no demand is made, debtor may pay to any of the solidary creditors
• If any judicial/extrajudicial demand is made by any of the creditors who made the
demand

3. What is to be paid ("identity")

a. In general
• The very prestation (thing or service) due

b. In obligations to..

- GIVE a specific thing

Art 1244 Par 1 The debtor of a thing cannot compel the creditor to receive a different
one, although the lattermay be of the same value as, or more valuable than which is
due.
1. Give specific things itself
2. Accessions and accessories
3. If with loss, improvements, deterioration D Apply Art 1189

- GIVE a generic thing

Art 1246 When the obligation consists in the delivery of an indeterminate or generic
thing, whose quality andcircumstances have not been stated, the creditor cannot
demand a thing of superior quality. Neither can the debtor deliver a thing of inferior
quality. The purpose of obligation and other circumstances shall be taken into
consideration.
GENERAL RULE: Creditor cannot demand a superior quality; Debtor cannot deliver a thing
of inferior quality EXCEPTION: Unless quality and circumstances have been stated,
purpose and other circumstances of obligation considered.

- Pay money
Art 1249 The payment of debts in money shall be made in the currency stipulated, and if it
is not possible todeliver such currency, then in the currency which is the legal tender in the
Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shallproduce effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in abeyance.

EXCEPTION; RA 4100, RA 8183: Foreign currency if agreed to by parties

Art 1250 In case of an extraordinary inflation or deflation of the currency stipulated

should supervene, the value of the currency at the time of the establishment of the
obligation shall be the basis of the payment, unless there is an agreement to the
contrary.

RA 529
RA 4100

- DO or NOT TO DO
Art 1244 Par 2 In obligations to do or not to do, an act or forbearance cannot be
substituted by another actor forbearance against the obligee's will.
• Substitution cannot be done against the will of creditor

Cases:

• Arrieta v NARIC supra

• Kalalo v Luz
 • St. Paul Fire and Marine Insurance v Macondray
• Papa v AV Valencia et al
• PAL v CA

c. Payment of interest
Art 1956 No interest shall be due unless it has been
expressly stipulated in writing.Art 1253 Interest must be
satisfied first before capital

4. How is payment to be made ("integrity")

a. In general
Art 1233 A debt shall not be understood to have been paid unless the thing or service
in which the obligation consists has been completely delivered or rendered as the
case may be.

GENERAL RULE: Partial payment is not allowed D Creditor cannot be compelled to receive partial
prestations; Debtorcannot be compelled to give partial payments
EXCEPTIONS:
1. Contrary stipulation
o Art 1248 Par 1 Unless there is an express stipulation to that effect, the creditor cannot be
compelled partially to receive the prestations, in which the obligation consists. Neither may the
debtor be required to make partial payments.
2. Debt is partly liquidated and partly unliquidated
o Art 1248 Par 2 However, when the debt is in part liquidated and in part unliquidated, the
creditor may demand and thedebtor may effect the payment of the former without waiting for the
liquidation of the latter.
3. When there are several subjects/parties are bound under different terms and
conditions
4. Compensation

b. Substantial performance in good faith

Art 1234 If the obligation has been substantially performed in good faith, the obligor may
recover as thoughthere had been a strict and complete fulfillment, less damages
suffered by the oblige.

• Requisites of Substantial Performance

1. Attempt in good faith to perform, without any willful or intentional
departure
2. Deviation from the obligation must be slight
3. Omission or defect is unimportant and technical
4. Must not be so material that intention of the parties is not attained

c. Estoppel
Art 1235 When oblige accepts the performance, knowing its incompleteness or irregularity,
and withoutexpressing any protest or objection, the obligation is deemed fully complied
with.

- Constitutes a "waiver of defect in performance" D there must however be an

intentional relinquishment of aknown right. Waiver will not result from mere failure to
assert a claim for defective performance when the thing or work is received

- Applies only when he knows the incompleteness or irregularity of the

payment, obligation is deemedextinguished. Estopped from complaining
 d. Presumptions in payment of interests and installments

INTEREST

Art 1176 The receipt of the principal by the creditor, without reservation with respect to
the interest, shall giverise to the presumption that said interest has been paid.
Art 1253 If the debt produces interest, payment of the principal shall not be deemed to have
been made untilthe interests have been covered.

• If principal amount is received without reservation as to interest

D interest is presumed to have been paid

INSTALLMENTS

Art 1176 Par 2 The receipt of a later installment of debt, without reservation as to prior
installments shall likewiseraise the presumption that such installments have been paid.

• If a latter installment is received without reservation to prior installments

D prior installments are presumed to have been paid

5. When is payment to be made

D When obligation is due and demandable but debtor may pay before due date if period
is for the benefit of debtor. If for the benefit of both the debtor and creditor, debtor
may only prior to the due date if creditor consents thereto.

a. In general
Art 1169 Debtor incurs in delay from the time creditor judicially or extrajudicially demands
fulfillment of the obligation

b. See Chapter 2: Delay

6. Where payment is to be made

a. In the designated place in the obligation (Art 1251 Par 1)

b. If no place is expressly designated

Art 1251 Par 2 There being no express stipulation and if the undertaking is to deliver a
determinate thing the
payment shall be made wherever the thing might be at the moment the obligation was
constituted.

Art 1251 Par 3 In any other case (not to deliver a determinate thing), the place of payment
shall be at the
domicile of the debtor.

Art 1251 Par 4 If the debtor changes his domicile in bad faith, or after he has incurred in delay, the
additional

expenses shall be borne by him. (Absent such circumstances, it will be borne by the creditor)
7. Expenses of making payment
Art 1247 Unless it is otherwise stipulated, the extra-judicial expenses required by the
payment shall be for theaccount of the debtor with regard to the judicial costs, the Rules of
Court shall govern.