Extinguishment of obligations: Please note that the Article mentioned in each number is the answer to

the problem.

1. X delivers to Y his one and only dog in accordance with their contract. Is there payment and
therefore, the obligation is extinguished? (Art. 1232)

2. A owes B P10,000 payable on Oct.30, 2021. If on due date A has P9,000.00 only, what are the
effects or consequences on his obligation? (See par. 1 Art. 1248)

3. X binds himself to pay W P5,000 and whatever commission she will receive from Avon Co. for the
month of November 2021. Suppose the commission is not yet liquidated, can X pay W the amount
of P5,000 ahead of the commission? (Art. 1248 par.2)

4. F agrees to give E a brand new Panasonic electric stand fan in black. If F delivers to E a brand new
Panasonic electric stand fan in navy blue, may the creditor refuse to accept the performance by F?
( See Art. 1244)

5. Referring to no. 4, if E knowing that the electric fan was not in the color agreed upon still accepts it
without any objection or protest, what is the effect? (Art. 1235)

Note: failure to object or protest amounts to waiver or estoppel

6. A owes B P5,000 guaranteed by X payable on Oct. 30, 2021. If C, a third person offers to pay A’s
obligation, is B obliged to accept the payment? What are the effects? (Arts. 1236-1238)

7. Referring to no. 6, to whom should A pay his obligation? Give the effects. (Art. 1240)

8. If payment or performance is made or rendered to a third person, is it valid or not? (Art. 1241 par.2)
9. X , 18 years old, borrows P2,000 from Y, 16 years old. On due date X pays Y the amount of P2,000.
Is the payment valid? (Art. 1241 par. 1)

10. A owes B P10,000. On due date B goes to A’s residence to collect the payment and A is ready to
pay the full amount. However, they agreed that instead of cash B will accept A’s wristwatch worth
more or less P10,000 as full payment. What special form of payment is this? (Art.1245)

11. X owes several creditors in the amount of P1M all due and demandable. A has no enough money to
pay for all his obligations but he owns personal and real properties. May A use these properties to
pay off his obligations? (Art.1255)

12. A owes B the following: P1,000 due and demandable and P500 due (not yet due). A has P500 only.
To which debt is the payment to be applied? Who shall apply the payment? What if both debts are
due and demandable? What if both debts are of the same amount, let’s say P500 and are already
due? (Arts. 1252-1254)

13. What if the debtor refuses to accept your payment without valid reason? What if he is willing to
accept the payment but he does not want to issue a receipt? What will you do? (Art. 1256)

14. Legal tender

15. A pays B the amount of P100,000 by way of a check. If B accepts the check, is A considered to have
paid the obligation? (Art. 1249 par. 2)

Answer:

Concept: Payment by check is considered as payment of an obligation when the check is accepted
by the payee.

Example: If A pays B the amount of P100,000 by check, and B accepts the check, A is considered to
have paid the obligation.

16. X binds himself to deliver to B a specific object. While the object is in his possession it was lost.
What is the presumption under the law? Is there such a presumption when there’s fortuitous event?
(Art.1265)

Answer:
 Concept: When a specific object that is the subject of an obligation is lost while in the possession of
the debtor, the law presumes that the loss was due to the fault of the debtor unless a fortuitous
event can be proven.

Example: If X promises to deliver a specific piece of artwork to B, and that artwork is lost while in
X's possession, it is presumed to be X's fault unless he can prove it was a fortuitous event.

17. A binds himself to deliver a specific truck to B. Before delivery, the truck engine was stolen without
fault on the part of A. Since there was only a partial loss, is the obligation of A extinguished or not
extinguished? (Art.1264)

Answer:

Concept: When a specific thing is partially lost without the fault of the debtor, the obligation is not
extinguished.

Example: A promises to deliver a specific car to B, and before the delivery, the car's engine is stolen
without fault on the part of A. Since there was only a partial loss, the obligation of A is not
extinguished.

18. Condonation or Remission of the debt

Answer:

Concept: Condonation or remission is the act of forgiving a debt by the creditor, resulting in the
extinguishment of the obligation.

Example: If a creditor forgives a debt of P10,000 owed by a debtor, the debt is considered as
condoned and is no longer owed.

19. X is indebted to W in the sum of P2,000 evidenced by a promissory note executed in long hand by
X. If W returns the promissory note to X, what is the presumption? (Art. 1271 par. 1)

Answer:

Concept: If a promissory note is returned to the debtor by the creditor, there is a presumption that
the debt has not been paid. This is in accordance with Article 1271, paragraph 1 of the Civil Code.

Example: X is indebted to W in the sum of P2,000, and this debt is evidenced by a promissory note
executed in long hand by X. If W returns the promissory note to X, the legal presumption is that the
debt has not been paid. The return of the promissory note does not necessarily indicate that the
 obligation has been extinguished; instead, it suggests that the evidence of the debt has been
returned but the debt itself remains.

20. A and B are indebted to X in the sum of P2,000 evidenced by a promissory note executed by the
former (A and B). If the promissory note is found in the possession of A, what is the presumption?
Does it mean that the obligation of both A and B are condoned or only A’s share in the debt? What
if the obligation of A and B is solidary? (See Joint & Solidary obligations)

Answer:

Concept: If a promissory note is found in the possession of one of the debtors, it doesn't
necessarily mean that the obligation is condoned, especially if the obligation is solidary.

Example: If a promissory note for a debt owed by both A and B is found in the possession of A, it
doesn't mean that the obligation is condoned, especially if it's a solidary obligation.

21. W is indebted to Y for P5,000 secured by a pledge of wristwatch. If Y condones the debt in the sum
of P5,000, what is the effect? (Art.1273)

Answer:

Concept: If a creditor forgives a secured debt, it releases the security but does not affect the debt
itself.

Example: If a debtor owes P5,000 secured by a pledge of jewelry and the creditor forgives the debt,
the jewelry is released from the pledge, but the debt is considered paid.

22. Confusion or Merger of rights – meeting in one person the qualities of both creditor and debtor in
one and the same obligation.

Answer:

Concept: Confusion occurs when one person assumes both the qualities of a creditor and debtor in
the same obligation, resulting in the extinction of the obligation.

Example: A borrows P5,000 from B and later inherits P5,000 from B, there's confusion, and the
obligation is extinguished.

23. A borrows P5,000 from B and executed a negotiable promissory note payable to the latter on
January 15, 2022. B pays the promissory note to C for a certain celphone. C pays the promissory
note to D for repairing the former’s car. D pays the promissory note to A for a specific puppy sold to
him by A. There is confusion or merger of rights in the person of A.
 Answer:

Concept: Confusion or merger of rights occurs when one person assumes both the qualities of a
creditor and debtor in the same obligation, resulting in the extinction of the obligation.

Example: A borrows P5,000 from B and executes a negotiable promissory note payable to B on
January 15, 2022. B pays the promissory note to C for a certain cellphone. C pays the promissory
note to D for repairing the former's car. D pays the promissory note to A for a specific puppy sold
to him by A. In this scenario, there is confusion or merger of rights in the person of A. A, who was
initially the debtor to B, has now become the creditor of D, and D, who was initially a creditor of C,
has become the debtor to A. This results in the extinction of the initial obligation between A and B.

24. D owes C P1,000 the same being evidenced by a promissory note with G as guarantor.
Subsequently, C indorses back the promissory note to D. D, therefore became the debtor and creditor
with respect to the same obligation resulting in the extinguishment of the obligation. As such, the
accessory obligation of guaranty of G is also extinguished. (Art, 1276)

Answer:

Concept: When a debt is extinguished, the obligation of the guarantor is also extinguished.

Example: D owes C P1,000, which is evidenced by a promissory note with G as the guarantor.
Subsequently, C endorses back the promissory note to D. D, therefore, becomes both the debtor
and the creditor with respect to the same obligation. As a result, the initial obligation to C is
extinguished, and the accessory obligation of guaranty provided by G is also extinguished under
Article 1276.

25. Suppose in number 24, C indorses the promissory note to F and the latter indorses the same
promissory note to G, then the characters of creditor and guarantor are merged in the same person.
In such a case, the accessory obligation of guaranty is extinguished but the principal obligation of D
still subsists. Because G is now the creditor, he can demand from D the amount of P1,000. (Art.
1276)

Answer:

Concept: If a promissory note, originally guaranteed by a party (in this case, G), is endorsed to
different parties (in this case, C endorses to F, and F endorses to G), the characters of creditor and
guarantor may merge in the same person. This merger results in the extinguishment of the
accessory obligation of guaranty. However, the principal obligation of D still subsists. The current
holder (G) can demand the amount of P1,000 from D as the creditor.

Example: D owes C P1,000, which is evidenced by a promissory note with G as the guarantor.
Subsequently, C endorses the promissory note to F, and F further endorses it to G. In this scenario,
G becomes the holder of the promissory note and the creditor of the P1,000 owed by D. The
guarantor's obligation (G's role as the guarantor) is extinguished, but the principal obligation of D
remains, and G, as the current holder, can demand the P1,000 from D.
26. COMPENSATION takes place when two persons, in their own right, are creditors and debtors of
each other.

Answer:

Concept: Compensation takes place when two persons, in their own right, are creditors and
debtors of each other. This means that one person owes money to another person, while the
second person also owes money to the first person, and these debts offset each other.

Example: X owes Y P500, and Y also owes X P400. In this situation, compensation can occur. X's
debt to Y can be offset by Y's debt to X, resulting in the payment of the lesser amount, which is
P100.

27. Legal compensation- This takes place when compensation extinguishes the two debts in their
concurrent amounts even without the express agreement of the parties, that is, extinguishment by
operation of law or automatically as when all the requisites in Art. 1279 are present.

Answer:

Concept: Legal compensation takes place when compensation extinguishes the two debts in their
concurrent amounts even without the express agreement of the parties. This means that the debts
offset each other automatically as a result of operation of law, provided that all the requisites
outlined in Article 1279 are met.

Example: X owes Y P1,000, and Y owes X P1,000. Without any specific agreement, if both debts are
due and demandable, and all the requisites of Article 1279 are satisfied, legal compensation
automatically extinguishes both debts.

28. Voluntary compensation- This takes place when there is compensation by agreement of the parties.

Answer:

Concept: Voluntary compensation takes place when there is compensation by agreement of the
parties. In this case, the parties involved willingly agree to offset their mutual debts.

Example: X owes Y P500, and Y owes X P600. X and Y agree to set up a voluntary compensation by
mutually acknowledging and agreeing to offset their debts. As a result, they might agree that X will
pay Y P100, and the remaining P500 debt is offset.

29. X owes Y P500 which is now due and demandable. Y also owes X P500 also due and demandable.
There is compensation. (Arts. 1278; 1279)
 Answer:

Concept: Compensation takes place when two persons, in their own right, are creditors and
debtors of each other, and their debts offset each other in concurrent amounts. This means that if
one person owes another person an amount, and the second person also owes the first person the
same amount, compensation occurs.

Example: X owes Y P500, and Y owes X P500. Both debts are due and demandable. In this situation,
compensation automatically takes place without the need for the parties to make a specific
agreement. The debts offset each other, and neither party owes the other any money.

30. D owes C P1,000. In another obligation, X owes D P1,000 with C as guarantor. Compensation will
not take place because D and C are not bound principally to each other, C being merely a guarantor
in another obligation. (Art. 1279 par. no. 1)

Answer:

Concept: Compensation does not occur when the parties involved are not bound principally to
each other in their obligations. This means that compensation doesn't take place if one of the
parties is merely a guarantor in the obligation.

Example: D owes C P1,000, but in another separate obligation, X owes D P1,000, and C acts as a
guarantor for X's debt. Compensation will not take place in this scenario because D and C are not
bound principally to each other. C's role is that of a guarantor in a different obligation, and that
does not lead to compensation according to Article 1279, paragraph no. 1.

31. X owes Y P1,000 with G as guarantor due and demandable. Y owes X P1,000 due and demandable.
Suppose X becomes insolvent and Y demands payment from G (as guarantor), G may set up
compensation as regards the debt of Y to X. (Art. 1280)

Answer:

Concept: If one party becomes insolvent and the creditor demands payment from the guarantor,
the guarantor may set up compensation as regards the debt of the insolvent party to the creditor.
Compensation in this case can offset the debts between the creditor and the guarantor, even
though the guarantor is not the primary debtor.

Example: X owes Y P1,000 with G as guarantor due and demandable. Y owes X P1,000 due and
demandable. If X becomes insolvent and Y demands payment from G (as guarantor), G may set up
compensation as regards the debt of Y to X.

32. Compensation may be total or partial. (Art.1281)

Answer:
 Concept: Compensation may be total or partial. Total compensation occurs when the debts offset
each other entirely, canceling out the obligations. Partial compensation happens when the debts
offset each other only partially, and the remaining amounts are still owed.

Example: X owes Y P500, and Y owes X P600. Total compensation would occur if X and Y agree to
offset these debts, resulting in neither party owing the other. Partial compensation could occur if
they decide to offset P500, and Y still owes X the remaining P100.

33. Facultative compensation- when compensation can be set up only by one of the parties (Art. 1287
par. 1; 1288)

Answer:

Concept: Facultative compensation occurs when compensation can be set up by only one of the
parties involved, without the need for mutual agreement. It is initiated unilaterally by one party.

Example: If X owes Y P1,000, and Y owes X P500, X can unilaterally choose to set up compensation
by deducting the P500 owed to them.

34. The parties may agree upon the compensation of debts which are not yet due (Art. 1282)

Answer:

Concept: The parties involved may agree to set up compensation for debts that are not yet due.
This means that they can decide to offset obligations that will become due in the future.

Example: X owes Y P1,000 that will be due next month. Y also owes X P800 that will be due next
month. X and Y agree to set up compensation for these future debts.

35. X will deliver to Y ten (10) sacks of first class white rice due and demandable. Y is also obliged to
deliver to X ten (10) sacks of first class white rice due and demandable.

Answer:

Concept: When both parties have obligations to each other, and the objects of the obligations are
of the same kind and due and demandable, compensation can occur.

Example: X will deliver to Y ten (10) sacks of first-class white rice due and demandable.
Simultaneously, Y is obliged to deliver to X ten (10) sacks of first-class white rice, also due and
demandable. Compensation can take place in this scenario.
36. A will deliver to B a narra dining table. B binds himself to deliver to A a bed made of dao wood.
Both obligations are due and demandable. There will be no compensation because the things which
are the object of the obligation are not of the same kind or nature.

Answer:

Concept: Compensation will not take place if the objects of the obligations are not of the same kind
or nature.

Example: A will deliver to B a narra dining table. B binds himself to deliver to A a bed made of dao
wood. Both obligations are due and demandable, but there will be no compensation because the
objects are different.

37. Compensation shall not take place in deposit/depositum, commodatum, in support and in debts
arising from a crime (Arts. 1287; 1288)

Answer:

Concept: Compensation shall not take place in deposit/depositum, commodatum, in support, and
in debts arising from a crime. These are specific situations where compensation is not allowed.

Example: If a deposit agreement, loan for use (commodatum), or support obligations are involved,
compensation cannot occur.

38. NOVATION is the change or modification of obligation. The change may be done by (a) replacing
an old obligation with a new one (b) replacing the original debtor with a new debtor (Substituting
the person of the debtor) (c) replacing the original creditor with a new creditor (Subrogating a third
person in the rights of the creditor)

Answer:

Concept: Novation is the change or modification of an obligation. This change can occur by (a)
replacing an old obligation with a new one, (b) replacing the original debtor with a new debtor
(substituting the person of the debtor), or (c) replacing the original creditor with a new creditor
(subrogating a third person in the rights of the creditor).

Example: A borrows P10,000 from B and is initially obligated to pay it in cash. However, A and B
later agree to replace the old obligation with a new one. They decide that A will provide B with a
laptop computer worth P10,000 instead of cash. This change represents novation, as they've
replaced the original obligation (payment in cash) with a new one (laptop computer).

39. NOVATION IS NEVER PRESUMED. (See Art. 1292)

Concept: Novation is never presumed, meaning that it doesn't happen automatically. To establish
novation, the parties must clearly express their intention to modify the existing obligation.
 Example: X owes Y P5,000, and their original agreement was to repay it in 12 equal monthly
installments. Several months later, they orally agree that X can pay the entire P5,000 in one lump
sum without further interest. While they've modified the terms of the original obligation, it does
not automatically constitute novation. Novation requires a clear and express intention to change
the obligation, often in writing, to avoid any disputes about the terms.

40. 1292. In order that an obligation may be extinguished by another which substitute the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on
every point incompatible with each other.

Answer:

Concept: To achieve novation and extinguish an existing obligation by substituting it with a new
one, it is imperative that the intention be declared in unequivocal terms. The old and new
obligations must also be entirely incompatible with each other.

Example:

X owes Y P5,000, which was originally due in cash. However, they later agree to replace the old
obligation with a new one. They clearly express their intention that X will provide Y with a laptop
computer worth P5,000 instead of paying in cash. This change meets the requirements for
novation as it is declared in unequivocal terms, and the old and new obligations (cash payment vs.
laptop delivery) are entirely incompatible.

41. X binds himself to give Y a male German shepherd puppy. Later on, X agrees to give Y a male
Labrador puppy. Is there novation? (Art. 1292)

Answer:

Concept: To achieve novation, it is imperative that the intention be declared in unequivocal terms,
and the old and new obligations must be entirely incompatible with each other.

Example: X initially binds himself to give Y a male German Shepherd puppy. Later on, X agrees to
give Y a male Labrador puppy. There is no novation in this case because the old and new
obligations are not entirely incompatible, as both involve the delivery of male puppies, even if they
are of different breeds.

42. A agrees to deliver to W 50 bottles of multivitamins. But later they agreed to change the object to
ecstasy party drug. Is there novation? Is X still obliged to sell to W 50 bottles of multivitamins? (Art.
1297)

Answer:
 Concept: Novation may occur when there is a change in the object of the obligation. The extent of
incompatibility between the old and new obligations determines whether novation takes place.

Example: A agrees to deliver 50 bottles of multivitamins to W. Later, they agree to change the
object of the obligation to ecstasy party drugs. In this case, there is novation according to Art. 1297
because the objects of the old and new obligations (multivitamins and ecstasy) are entirely
incompatible. X is no longer obliged to sell 50 bottles of multivitamins to W.

43. A owes B P5,000 due on December 31, 2021. X, a third person, went to B and obliged himself to
pay the debt of A. If B accepts X in place of A, then a substitution of debtor by EXPROMISION
takes place and the obligation of A to B is extinguished and a new one (the obligation of X to B) is
created resulting in novation. (Art. 1294)

Answer:

Concept: Novation can occur when a third person (X) goes to the creditor (B) and obliges
themselves to pay the debt of the original debtor (A). In this case, there's a substitution of debtor
by expromision, resulting in the extinguishment of A's obligation to B and the creation of a new
obligation between X and B, effectively achieving novation.

Example: A owes B P5,000 due on December 31, 2021. X, a third person, goes to B and obliges
himself to pay the debt of A. If B accepts X in place of A, a substitution of debtor by expromision
takes place. The obligation of A to B is extinguished, and a new obligation arises between X and B,
resulting in novation.

44. X obliged himself to deliver to Y 20 sacks of first class white rice. Later on, X brought to Y his
friend W and proposed to Y that W will take his place as debtor with respect to the obligation to
deliver 20 sacks of first class white rice. If Y agrees to the proposal of X, then X’s obligation is
extinguished and a substitution of debtor by DELEGACION takes place resulting in novation of the
obligation. In this kind of novation, the consent of the three parties is necessary. (Art. 1295)

Answer:

Concept: Substitution of debtor by delegacion occurs when a debtor (X) proposes to a creditor (Y)
that another person (W) will take their place as the debtor with respect to the obligation. If Y
agrees to this proposal, X's obligation is extinguished, and a new obligation arises between Y and
W, resulting in novation. Consent from all three parties is necessary for this type of novation.

Example: X initially obliged himself to deliver 20 sacks of first-class white rice to Y. Later, X
introduces his friend W to Y and proposes that W will take over the obligation to deliver the rice. If
Y agrees to this proposal, X's obligation is extinguished, and W becomes the new debtor in place of
X.
 45. Subrogation is the substitution of one person in the place of a creditor with reference to a lawful
claim or right, giving the former all the rights of the latter including the right to employ all remedies
to enforce payment.

Answer:

Concept: Subrogation is the substitution of one person in the place of a creditor with reference to a
lawful claim or right. The person who assumes the creditor's rights (the new creditor) gains all the
rights and remedies to enforce payment.

Example: If A owes B a debt of P10,000, and C, a third party, pays that debt on behalf of A, C is
subrogated in B's position as the creditor. C can now enforce the debt and has all the rights that B
had as the original creditor.

46. Kinds of subrogation:

Answer:

Concept: Subrogation can occur in various ways. There are different kinds of subrogation, one of
which is conventional subrogation, which takes place by express agreement of the parties,
including the debtor, original creditor, and the new creditor.

Example: Suppose A owes B P10,000, and C, a third party, pays off A's debt to B without any
specific agreement or intervention of A. This represents legal subrogation because it occurs
without the need for any express agreement between the parties. C steps into B's position as the
creditor.

47. Conventional subrogation takes place by express agreement of the parties ( debtor, original creditor
and third person (new creditor)

Answer:

Concept: Conventional subrogation occurs when the parties involved, including the debtor, the
original creditor, and the third person (new creditor), expressly agree to the substitution of the
creditor. In this kind of subrogation, all parties are in mutual agreement to transfer the creditor's
position and rights.

Example: A owes B P15,000, and C, a third party, agrees to pay off A's debt to B with the mutual
agreement of all parties. A, B, and C expressly agree that C will replace A as the debtor, and B
consents to this arrangement. This constitutes conventional subrogation as it occurs by express
agreement of all involved parties.

Ex. A owes B P5,000. With the consent of A, B entered into a contract assigning (transfer) his credit to X.
 1. Legal which takes place by operation of law even without the agreement of the parties

Ex.

 X owes St. Peter funeral parlor the sum of P10,000. X also owes W P3,000. Knowing the debt of X
to St. Peter, W pays the obligation without the consent of X. In this case, W is subrogated in the
rights of St. Peter as preferred creditor and he (W) is entitled to be paid ahead of other obligations.
 A owes B P5,000 guaranteed by X. A becomes insolvent. X paid the obligation of A to B. X is
subrogated in the rights of B.

 W owes Z P10,000. With the consent of W, X paid W’s indebtedness to Z. X is subrogated in the
rights of Z.