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1-30 LAW11 Notes

EXTINGUISHMENT OF OBLIGATIONS PAYMENT OR PERFORMANCEWhat to Pay

For determinate things: Debtor cannot compel creditor to receive a thing different from thatagreed upon even if the replacement is of equal or higher value.

For indeterminate things: Creditor cannot demand to a thing of superior quality and neither can thedebtor give a thing of inferior quality.

Dation in payment where property is given to the creditor in payment of a debt in moneyshall be governed by the laws on sale.

As a rule extrajudicial expenses required for payment shall be for the account of the debtor.

Payment of debts in money shall be in the currency stipulated and if not possible then inPhilippine legal tender. Payment is not considered made if made in promissory notes, billsof exchange or other mercantile document, until the same has been encashed and whenthrough the fault of the creditor they have been impaired. In the meantime, the actiondelivered from the original obligation shall be held in abeyance.

In case of extraordinary inflation or deflation, value of currency at time of establishment ofthe obligation shall be the basis for payment, unless if agreed to the contrary.

For extraordinary inflation (or deflation) the following requisites must be proveno That there was an official declaration of extraordinary inflation or deflation from the

BSPo That the obligation was contractual in nature ando That the parties expressly agreed to consider the effects of the extraordinary inflation

or deflation

Where to Pay

Rule: in place designated in the obligation

Exceptions:o If no place is stipulated, and item to be delivered is determinate, payment shall be

made where the item was at time of constitution of the obligation.o In any other case, in the domicile of the debtor. If debtor changes domicile in bad

faith or after delay, additional expenses for collection shall be for his account.

Special Methods of Payment:

Application of Paymento Requisites:

There must be one debtor and one creditor There must be two or more debts The debts must be of the same kind The debts to which payment made by the debtor has been applied must be

due

Exceptions:o There is a stipulation that the debtor may so apply even to

undue debts.o It is made by the debtor or creditor, as the case may be, for

whose benefit the period has been constituted. The payment made must not be sufficient to cover all the debts.

o Rules on Application of Payments: The debtor has the first choice. The right to make the application once

exercised is irrevocable unless the creditor consents to the change.

If the debtor does not specify, the creditor may designate where to apply thepayment by indicating it in the receipt. If the creditor does not indicate where payment will be applied or of the

application is not valid, the payment shall be applied to the debt, which ismost onerous.

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If all due and of the same burden, then apply to all proportionately.o If the debt produces interest, payment of the principal shall not be deemed to have

been made until the interest has been recovered. Note through the presumption thatreceipt of the principal without reservation gives rise to the presumption that interesthad been paid.

Payment by Cession It is assignment or abandonment of all the properties of the debtorfor the benefit of his creditors in order that the latter may sell the same and apply theproceeds thereof to the satisfaction of their credits.

o Requisites: There must be two or more creditors The debtor must be partially insolvent The cession must be accepted by the creditors

o If the amount of assets ceded is not sufficient to cover all the obligations, the debtoris still liable for the balance, unless otherwise stipulated.

Tender of Payment and Consignationo Definitions:

Tender of Payment is the act on the part of the debtor, of offering to thecreditor the thing or amount due. The debtor must show that he ahs in his

possession the thing or money to be delivered at the time of the offer. Consignation is the act of depositing the thing or amount due with the proper

court when the creditor does not desire or cannot receive it, after complyingwith the formalities required by the law.

o Requisites for a valid Tender: The tender must comply with the rules on payments It must be unconditional and for the whole amount It must be actually made

o Requisites for a valid Consignation: Existence of a valid debt which is due Tender of payment and refusal without justifiable reason by the creditor

Previous notice of the consignation to persons interested in the fulfillment ofthe obligation

Consignation of the thing or sum due with the proper court in a proper case.Expenses of consignation shall be charged against the creditor

Subsequent notice of consignation made to the interested parties.Note: Once the consignation has been properly made, the debtor may ask the judge to order thecancellation of the obligation. Before the declaration or before creditor accepts the consignation,the debtor can withdraw the ting consigned. After consignation, the creditor may withdraw thesame from the court. He may likewise authorize the debtor to withdraw it after which the obligationis deemed satisfied.

Consignation alone shall produce the same effect in the following cases: When the creditor is absent or unknown, or does not appear at the place of payment

When he is incapacitates to receive the payment at the time is due

When, without just cause, refuses to give a receipt

When two or more persons claim the same right to collect

When the title of the obligation has been lost