CHAPTER 1 GENERAL PROVISIONS Art. 1156. An obligation is a juridical necessity to give, to do or not to do. 1.

JURIDICAL NECESSITY MAY BE ENFORCED THRU COURT ACTION AS DISTINGUISHED FROM NATURAL OBLIGATIONS. 2. ELEMENTS OF OBLIGATION (CIVIL) - Juridical or Legal Tie - Active Subject (One who has right to compel) - Passive Subject (One who is directed to perform) - Prestation (Object of the obligation) Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts. (1089a)

NOTES: 1. QUASI-CONTRACTS (OR IMPLIED CONTRACT) LAWFUL, VOLUNTARY OR UNILATIRAL ACTS CAN GIVE RISE TO QUASI-CONTRACTS (E.G. UNJUST ENRICHMENT, SOLUTIO INDEBITI (E.G. PAYMENT BY MISTAKE) 2. QUASI-DELICTS ACTS OR OMISSION CAUSES DAMAGE TO ANOTHER THERE BEING FAAULT OR NEGLIGENCE IF THERE IS NO PRE-EXISTING CONTRACTUAL RELATIONS Art. 1158. Obligations derived from law are not presumed. NOTE: ONLY THOSE EXPRESSED BY LAW ARE DEMANDABLE. Art. 1159. Obligations ARISING FROM CONTRACTS HAVE FORCE OF LAW BEWEEN PARTIES. SHOULD BE COMPLIED WITH IN GOOD FAITH. Art. 1160. Obligations from QUASI-CONTRACTS governed by Chap 1, Titles XVII Art. 1161. Civil obligations from CRIMINAL OFFENSES - governed by the penal laws, subject to the provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages. Art. 1162. Obligations derived from QUASI-DELICTS shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws.

CHAPTER 2 NATURE AND EFFECT OF OBLIGATIONS

Obligation To give a determinate thing Debtors obli. 1. To deliver 2. Take care of thing (1163) Creditors right To demand delivery CRs right to damages In case of debtors: 1. fraud 2. negligence 3. delay 4. breach (1170) Responsible if thing is lost due to fortuitous event if he promised to deliver thing to 2 or more person (1165) No real right until thing delivered (1164) Deliver accessions and accessories even if not mentioned (1166) Note: To exclude accessions and accessories, it must be made clear To give generic thing 1. To deliver Note: No obligation to take care of thing since it is replaceable Ask obligation to be complied with at the expense of debtor (1165) NO LIABILITY IF NONPERFORMANCE IS DUE TO UNFORSEEN EVENT, OR FORTUITOUS EVENT To do Perform the obligation at debtors cost (1167) No to do Undo at debtors expense (1168) Right to fruits only from time deliver arises. If there is fraud, damages is demandable. Waiver of action against FUTURE fraud is void (1171) If there is negligence, liability is regulated by court (1172)

Notes: Delay: There is delay when creditor demands and debtors fail to perform. There is delay also when (1) law provides, (2) nature and circumstance of obligation, (3) when demand is useless like when debtor cannot perform the obli. Reciprocal obligation, one party is in delay when one party fulfilled his obligation (1169) Negligence: omission of diligence required by the nature of obligation

CHAPTER 3: KINDS OF OBLIGATIONS

PURE when obligation does not depend on any condition Example: I will give you P1,000.
CONDITIONAL when obligation depends on a condition (1181) 2 Types: 1. Suspensive if this happens, it will give rise to the obligation Example: I will give you P1,000 if you pass the final exams

Demandable at once (pwede ng hingin agad) (1179) Obligation based on resolutory condition is also demandable at once.

Condition based on sole will (solong kagustuhan) of debtor, the OBLIGATION is VOID. NOTE: THIS IS CALLED POTESTATIVE CONDITION If it depends on 3rd person or by chance, VALID (1182) Impossible conditions. Physical (hindi talaga pwedeng mangyari) or Legal (ipinagbabawal ng batas o ng kabutihang asal o ng public policy), the obligation is ANNULED Just disregard condition NOT to do IMPOSSIBLE THING (1183) Condition that something happens at a DETERMINATE thing, obligation will be EXTINGUISHED if: 1. Time expires 2. Sure that it will not happen

2. Resolutory if this happens, the obligation stops I will give you P1,000 if you will win as Class President on October 1, Example: I will give you P1,000 monthly until you graduate from college 2012. I will not be obligated (hindi ko kailangan magbayad) if: 1. Oct. 1, 2012 came and you are not yet elected class president 2. You dropped out even before October 1, 2012, hence it is sure that you will not be class president (1184) Condition that event will NOT happen at a determinate date shall render obligation EFFECTIVE when: 1. time elapsed 2. it is evident that the event cannot occur example: I will give you P1,000 if you DONT become class president on Oct. 1, 2012 1. I need to pay you on Oct. 1, 2012 if you are not yet class president example:

then even if no election was called 2. I need to pay you even if its still August 2012 if you dropped out since you will never be elected class president if you are not a student anymore (1185) Condition deemed fulfilled (hence, obligation arises) when debtor (obligor) voluntarily prevents its fulfillment (sinadya ng may utang wag matupad ang kondisyon) (1186) Obligation to give: Effect retroacts to the day obligation was constituted. Example: On August 7, 2012, I promised to give you my car with plate number XXX 888 if you pass the exam on October 1, 2012. You sold the car on August 10, 2012. You passed the exam on October 1, 2012. The sale you made is valid since you are deemed owner of the car on August 7, 2012 (retroactive effect) Reciprocal obli fruits and interests mutually compensated. (No need to turnover, unless there is an agreement) Example: I promise to give you 2 cows. You promised to give me your apartment for rent. Until delivery of the cows and the galaxy tab, I will own the milk and the young of the cows assuming that it produces milk and give birth to young. You will own the rent of the apartment until you give it to me. Unilateral obli fruits and interests belong to the debtor (Unless there is agreement) (1187) I promise to give you the 2 cows. I will own the milk and the young unless there is a contrary stipulation (pwere na lang kung napagkasunduan natin na pati iyon ay ibibigay ko sayo) While condition is NOT yet happening: 1. Creditor may file action to preserve his right (1188) 2. Debtor may recover if he paid by mistake

3. When thing is LOST, DETERIORATED or IMPROVED Lost without fault of debtor obli is extinguished With fault debtor liable for damages Deteriorated without fault cost borne by creditor With fault Creditor may chose (1) rescind (2) fulfill With damages on both cases Improved by nature inure to the benefit of creditor By expense of debtor debtor enjoy right to use (1189) In case of Resolutory Condition is fulfilled: a. Obligation is to Give (determinate thing): 1. Parties to RETURN to each other what they have received 2. In case of LOST, DETERIORATED or IMPROVED, apply rule in Art. 1189 WITH RESPECT TO THE DEBTOR b. Obligation to Do or Not to do: Apply Art. 1187 (1190) Reciprocal obligation: 1. Power to rescind by the party willing and able to comply is IMPLIED. 2. Injured party may choose: a. Fulfillment with damages (may still be rescinded if fulfillment is impossible) b. Rescission with damages (1191) If BREACH committed by both parties: 1. Liability of FIRST infractor will be equitably tempered (pabababain ng husgado) by the court If first infractor cannot be determined, obligation is extinguished and each party shall bear his own damages

WITH A PERIOD when obligation is based on a day certain (exact date) or an event sure to come

Payable when means of the DEBTOR permits him (1180) Demandable when day comes.

even though not known when (death, next rain, next sunrise). Example: 1. On August 7, 2012, I promised to pay you P1,000 on October 1, 2012 (day certain). 2. On August 7, 2012, I promised to pay you P1,000 on the opening of the enrollment for School Year 2013-14 (sure to come but not known when)

If resolutory period, obligation is terminated when period comes. (1193) In case of Loss, Deterioration, or Improvement, apply 1189 (1194) Payment by mistake (debtor unaware that period has not yet arrived) may be recovered together with fruits and interest (1195) Period is for the benefit of both parties unless it is clear that period is for the benefit of one party only (1196) Hence, a creditor cannot be forced to receive early payment if it is not agreed upon. Court will fix the period if: 1. parties failed to fix it (as long as intention to fix the period is clear) 2. period depends on sole will of debtor (1179) Debtor loses right to use the period when: 1. He becomes insolvent and he did not give new security 2. He did not give promised security to the creditor 3. When his security was impaired (nasira) by own act (after establishment) or when they disappear thru fortuitous event 4. He violated any undertaking (kasunduan) which is the reason why creditor agreed to the period 5. He attempts to abscond (tumakas) (1198)

ALTERNATIVE when the debtor is bound by different prestations (obligation) Example: A is obliged to deliver 2 labrador dogs or 1 iphone 4s or sing until the creditor Only one prestation is due

Creditor cannot be compelled (mapipilit) to receive part of both obligation. Example: In the given example, A cannot be compelled (hindi pwede pilitin) to give just 1 labrador dog and to sing for the creditor for 4 days only. Unless of course A would approve it (pwera na lang kung papayag si A) (1199) Right of choice belongs to the Debtor unless expressly granted to the debtor (1200) Effective only when choice was communicated (1201) Right is lost when only one prestation is practicable (1202) If debtor cannot make a choice because of the creditor, the debtor may rescind the contract with damages (1203)

Creditor has right to indemnity (mabayaran) when: Debtors fault, all choices were lost or become impossible. Basis: value of last thing disappeared or service last became impossible. Damages may also be awarded (1204) When choice given to CREDITOR: Obligation ceases (tumigil) to be alternative from day selection has been communicated to the debtor. Until then, debtors responsibility is: 1. To perform the choice of the creditor from the remainder of the prestation when original choice is lost thru fortuitous event (di sinasadya at inaasahang pangyayari) 2. If only one remains, perform that remaining prestation 3. If loss is due to fault of debtor, creditor may ask for the price of that lost thing with right to damages 4. If all things were lost due to fault, the creditor may choose with right to damages also. Same rule applies to obligation to do or not to do. (1205) FACULTATIVE - when only one obligation agreed upon but debtor may render another in substitution. Example: A is obliged to deliver 2 labrador dogs to B. They agreed that A may give just his iphone 4s as a substitute . Loss or deterioration of substitute does not make debtor liable UNLESS the substitution has been made and there is delay, negligence or fault of the debtor. (1206)

JOINT when there are 2 or more debtors and each of them answers only their part.

When there are 2 or more debtors or 2 or more creditors. General rule is obligation is joint (obligation is divided into as many equal shares as there are creditors or debtors) (1208) Example:

Example: Peter, John and Paul owed Mary P3,000 each. Mary can demand only Peter, John and Paul owed Mary P1,000 each. Mary can demand only P1,000 per person. She cannot demand entire amount to only one or two. If division is impossible, rights of creditors may be prejudiced (masisira) only by collective acts and the debt can be enforced only by proceeding against all the debtors. If one of the debtor should be insolvent, others shall be liable for his share. (1209) Example: Jose and Carlo are obliged to deliver a horse to Mario. Mario must sue both Jose and Carlo for specific performance since law provides that debt can be enforced only by proceeding against ALL debtors. SOLIDARY when there are 2 or more debtors and the entire debt may be demanded from just 1 debtor Example: Indivisibility (hindi mahahati) of an obligation does not necessarily gives Peter, John and Paul owed Mary P3,000 jointly and severally. Mary can demand P3,000 to any of the debtors. Example: Peter, John and Paul owed Mary P3,000 jointly and severally. Peters is liable to pay on August 15, 2012 while John is liable when B-Meg became champion this PBA conference. Pauls obligation is pure. Mary can demand only P2,000 from any of the debtors on August 16, 2012 since B-Meg lost in the championship. Solidary Creditors may do whatever is useful to the others but not anything which may be prejudicial to other creditors. (1212) Solidary Creditor cannot assign (ilipat) his rights without consent (pag sangayon) of others. (1213) Debtor may pay any of the solidary creditors. But if demand was made by one of them, payment must be made to that creditor. (1214) Obligation extinguished when there is novation, compensation, May exist although creditors and debtors may not be bound in the same manner and by the same periods and condition. (1211) rise to solidarity. (1210) 1. Stipulated (words like jointly and severall, in solidum, Ipromise to pay signed by 2 or more 2. Provided by law 3. When nature of obligation requires There is solidary obligation when: P1,000 per person since without any stipulation, the obligation is deemed joint.

confusion, or remission of debt made by any of the solidary creditors without prejudice to Art. 1219. The creditor who executed any of the acts as well as he who collects the debt shall be liable to the others for the share in the obligation corresponding to them. (1215) Creditor may proceed against anyone of the solidary debtor or some or all of them simultaneously. Others may be run after if debt is not fully paid yet. (1216) Debt extinguished if any of debtor pay. Creditor may choose if 2 or more solidary debtors offer to pay. He who made payment may claim from co-debtors. When one solidary debtor cannot pay, such share shall be borne by all his co-debtors in proportion to the debt of each. (1217) If debt prescribed (lumipas na), solidary debtor who paid does not have right to reimbursement (1218) Remission (pagpapatawad ng utang): Remission made by creditor to solidary debtor does not release that debtor from his responsibility to co-debtors in case debt has been fully paid by any one of them BEFORE remission. (1219) When obtained by one debtor, does not entitle him to reimbursement from other debtors. (1220) Obligation extinguished when: Thing lost or if prestation becomes impossible without fault of the solidary debtors. If with fault on any debtor, ALL shall be responsible to the creditor. Same thing when thing is lost when there is delay on any of the debtor. (1221) Defenses: Solidary debtor may avail: 1. All defenses derived from nature of obligation 2. All defensPersonal to him 3. Pertain to his share If personal to other debtor, he may avail thereof only as regards that part of the debt for which the latter is responsible.

(1222) DIVISIBLE when obligation may be performed partially Example: Example: Certain number of days: House painting job that will last for 10 days. Obligation to deliver 10 sacks of rice. It is possible the 5 sacks will be delivered today and the rest, tomorrow. INDIVISIBLE when obligation is not capable of partial performance. Example: Example: Obligation to deliver a specific mobile phone Peter and John are obliged to give to Maria a specific Nokia Phone. Obligation is NOT solidary but it is indivisible. If the phone is worth P10,000. Peter and John for whatever reason cannot deliver the phone. Their obligation is converted to monetary. Peter is ready with is P5,000 but John is not. Peter is only duty bound to give P5,000 to Maria. He is not answerable to the P5,000 debt of John (unless the obligation is SOLIDARY) WITH PENAL CLAUSE obligation that contains provision that debtor will pay a penalty for failure to perform the obligation according to agreement Example: Obligation to pay on 10 equal monthly installments. For failure to pay any of the installments, the debtor will be charged with 10% interest and the entire Judge shall equitable reduce penalty when obligation has been partly or irregularly complied with. Penalty may also be reduced even if there is Proof of actual damage not necessary to demand penalty payment. (1228) Debtor cannot excuse himself from performing the obligation by paying the fine, unless that right is expressly granted to him. Creditor cannot demand fulfillment of the obligation and payment of the penalty at the same time unless this right has been expressly grandted. (1227) Penalty shall substitute the indemnity for damages and payment of interests if there is no contrary stipulation. Damages will have to be paid if debtor refuses to pay penalty or is guilty of fraud. (1226) But even if thing may be divisible, the obligation is indivisible if it is provided by law or by intention of the parties. (1125) Joint indivisible obligation gives rise to indemnity for damages from time any of the debtors does not comply with his undertaking. Debtor who is ready to comply with his obligation shall not contribute to the indemnity beyond his portion of the price of the obligation. (1224) Metrical units: 10 sacks of rice Analogous: Typing job per paper When obligation may be executed for a certain number of days, or by metrical units, or analogous things, it is divisible.

debt shall be considered due and demandable.

no performance at all, if it is iniquitous or unconscionable (hindi na makatarungan dahil sobra sobra na)(1229) Nullity of penalty clause does not carry nullity of principal obligation. But nullity of principal obligation carries with it nullity of penalty clause. (1230)

Chapter 4 Extinguishment of Obligations

Reasons 1. Payment or performance 2. Loss of thing due 3. Condonation or remission 4. Confusion or merger of the rights of creditor and debtor 5. Compensation 6. Novation PAYMENT when money owed is delivered or obligation has been complied with (nabayaran na o nagawa na ang dapat gawin) (1232) Less than perfect payment: If obligation has been substantially performed in good faith (pwede na, hanggat sa abot ng makakaya) the debtor may recover as if there was complete performance, less damages suffered by the creditor. (1234) When creditor accepts knowing incompleteness or irregularity of performance, and did not express protest or objection, obligation is deemed fully complied with. (1235) 1. Thing or service itself must be paid (Identity) 2. Completely delivered or rendered (Integrity) (1233) Requisite for Payment:

Creditor not bound to accept payment from third person who has NO interest in the fulfillment of obligation, unless there is stipulation to the contrary. Whoever pays for another may demand from debtor what he has paid. Except: When he paid WITHOUT knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. (1236) Example: Peter paid the airline ticket of Maria for P2,000.00. It was done

without the knowledge (or against the will) of Maria. Later, Maria told Peter that she is entitled to half-the-price for the ticket. In this case, Peter can only recover P1,000 from Maria. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel (pilitin) the creditor to subrogate (ilipat sa kanya) him in his rights, such as those arising from a mortgage guaranty, or penalty. (1237) Example: Peter owed Maria P10,000.00. They agreed that in case Peter cant pay, Maria will own Peters iphone. John paid the debt of Peter. It was done without the knowledge of Peter. In this case, John can recover P10,000.00 from Peter. But if Peter cannot pay, he cannot have Peters iphone. Reason: No subrogation. Payment made by third person who does NOT INTEND TO BE REIMBURSED (di nya gusto mabayaran) by the debtor is deemed to be a DONATION (bigay) which requires debtors consent. But the payment is valid as to the creditor who has accepted it. (1238) Obligation to give: Payment by someone who does not have the FREE DISPOSAL (pagaari) and CAPACITY TO ALIENATE (kakayahang ibenta) it shall NOT be valid. Without prejudice to provisions on Natural Obligations. (1239) To whom payment must be made: 1. To the person in whose favor the obligation has been constituted 2. Or his successor in interest (tagapagmana) 3. Or any person authorized to receive it (1240) If payment was made to INCAPACITATED or UNAUTHORIZED persons, payment is INVALID as a general rule. Incapacited persons who by law are not capable of administering (pangalagaan) their properties. Example: Insane (mga baliw) Unauthorized person who is not authorized (hindi binigyan ng katungkulan) Payment to incapacitated valid when he kept the thing delivered or insofar as the payment has been beneficial to him.

Payment to unauthorized person is valid if it has redounded to the benefit of the creditor (nakabuti). Benefit need not be proved in the following cases: 1. if after payment, the third person acquires creditors rights 2. if the creditor ratifies the payment (sinangayunan) 3. if by creditors conduct, debtor has been led to believe that the third person had authority to receive the payment. (1241)

If payment was made to any person in possession of credit (evidence of indebtedness), it will release the debtor if it was done in good faith. (1242) Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. (1243) Example: Peter owed Maria P100,000. Maria owed John P100,000. John sued Maria. Maria claims she is insolvent but claims that Peter owed her the same amount. Peter was asked by the court to retain the debt (this is called garnishment). Any payment made by Peter to Maria at this point shall be invalid. Obligation to give: Debtor cannot compel creditor to receive a different one, even if it is of same value or more valuable. Obligation to do or not to do: An act or forbearance cannot be substituted by another act or forbearance against the creditors will. (1244) DATION IN PAYMENT to pay the debt, the debtor gave his property to the creditor and the creditor agreed with it. Example: Peter owed Maria P1,000. Peter gave Maria his cell phone because he did not have any cash. Maria agree.

Debt is extinguished. Governed by the law on Sales. (1245) Obligation to give a generic thing: Creditor cannot demand thing of superior quality. Neither can debtor deliver a thing of inferior quality. The purpose and circumstance of the obligation shall be taken into consideration. (1246) Unless agreed upon: Creditor cannot be compelled to partially receive prestations in which the obligation consists. Neither may the debtor be required to make partial payments. (1248) Payment of debts in money shall be made in currency stipulated. If not possible, then the currency which is legal tender in the Philippines. Legal Tender -

All notes and coins issued by the Bangko Sentral shall be legal tender: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for denominations of Twenty-five centavos and above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or less.
Delivery of promissory notes or bills of exchange shall produce effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. In case of extraordinary inflation or deflation, the value of the currency at the time shall be the basis of payment, unless there is agreement to contrary. (1250) INFLATION sharp increase of money without increase in business transaction. Results in sharp increase in prices. DEFLATION opposite of inflation Place of payment place agreed upon. If there is no agreement: To give determinate thing delivery at the place where thing might be at the moment obligation was constituted.

In any other cases payment at domicile of the debtor. (1251) Application of payment out of 2 or more debts owing to the same creditor, it refers to the debt that is being paid. Example: Peter has several debts to Maria, to wit: P1,000 because he bought Marias puppy. P2,000 because he bought Marias new book. P5,000 because he hired Maria to do his project. If Peter paid P1,000 to Maria, to what debt should Maria apply this payment? Peter may declare to which debt his payment must be applied. If Peter does not say so, the payment may not be applied to debt that is not due. (1252) If Maria issued a receipt to Peter stating that his payment is applied to the P2,000 for the book and Peter accepted it, Peter cannot complain about it later. The payment will be applied to that debt. (1252) If Peter did not declare and Maria did not issue a receipt stating where she applied the payment, the payment will be applied to the most onerous (pinakamabigat). (1254) Example: In the example above: P 1,000 loan bears no interest P 2,000 loan bears 10% interest P 5,000 loan bears 5% interest The P2,000 loan is the most onerous. If the debts due are of the same nature and burden, it will be applied to all proportionately. (1254) If debt produces interest, payment shall be applied to the interest first before it shall be applied to the principal. (1253) Payment by cession - where debtor transfer all of his properties not subject to execution (free to dispose) to the creditors so that they may sell them and apply proceeds to the debt. Requirements:

1. More than one debt 2. More than one creditor 3. Insolvency of debtor, complete or partial 4. Abandonment of all debtors property not exempt from execution 5. Consent of all creditors Effect: 1. Creditors shall not own the properties. They shall sell it and apply proceeds to the debt. 2. Debtor is released up to the amount of the net proceeds of the sale, unless there is stipulation to the contrary. Debtor still liable to balance. 3. Creditors will collect in the order of preference agreed upon. If no agreement, based on order established by law. Tender of Payment act of offering the creditor what is due him together with a demand that the creditor accept the same. Consignation act of depositing the thing due with the court whenever the creditor cannot accept or refuses to accept payment

If the creditor refuses without just cause to accept tender of payment, the debtor shall be released from responsibility by the consignation of the thing or sum due. Consignation ALONE shall produce the same effect if: (1) When the creditor is absent or unknown, or does not appear at the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3) When, without just cause, he refuses to give a receipt; (4) When two or more persons claim the same right to collect; (5) When the title of the obligation has been lost. (1256)

LOSS OF THING DUE

An obligation to deliver DETERMINATE thing is extinguished if thing lost or destroyed without the fault of the debtor, unless: 1. Debtor incurred delay before loss 2. When by law or stipulation, the obligor is liable even for fortuitous events 3. When the nature of the obligation requires the assumption of risk. (1262) If loss is partial, court will determine whether loss is so important to extinguish obligation. (1264)

When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. (1267) If obligation is to deliver a GENERIC thing, the loss or destruction of anything of the same kind does NOT extinguish the obligation. (1263) Presumption of fault when the thing is lost while in the possession of the debtor, unless there is proof to the contrary. This presumption does not apply in case of earthquake, flood, storm, or other natural calamity. (1265) The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor. (1266) When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted from the payment of its price, whatever may be the cause for the loss, unless the thing having been offered by him to the person who should receive it, the latter refused without justification to accept it. (1268) Example: Tonyo stole Annas cellphone. Tonyo was caught and was asked to return the cellphone. Tonyo lost the cellphone due to fortuitous event. Tonyo is still liable for the amount of the cellphone. The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. (1269)
CONDONATION OR REMISSION OF DEBT gratuitous abandonment by the creditor of his right.

Needs to be accepted by the debtor expressly (hayagang sinabi) or impliedly (masasabi dahil sa mga senyales kahit di hayagang sinabi). (1270) Example of Implied Condonation: Delivery of private document evidencing credit, voluntarily by the creditor to the debtor (1271) If creditor renounce (pinatawad) the principal debt, it shall extinguish the accessory obligation. But waiver of accessory

obligation does not extinguish the principal debt. (1273)

CONFUSION OR MERGER OF RIGHTS Meeting in one person of the qualities of creditor and debtor with respect to the same obligation COMPENSATION takes place when two persons, in their own right, are creditors and debtors of each other (1278)

Example: Jun issued a check payable to Cash. It was given to Terry. Terry paid it to Migs, who later paid it to Jun.

Kinds: 1. According to effect or extent: a. Total both debts completely extinguished (1281) b. Partial balance remains 2. According to origin: a. Legal takes place by operation of law b. Voluntary agreement of both parties c. Judicial set-off (1283) d. Facultative one party has the choice of claiming the compensation Requisites: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Novation change of an obligation by another, which extinguishes the first

Obligations may be modified (changed) by: (1) Changing their object or principal conditions; (2) Substituting the person of the debtor; (3) Subrogating a third person in the rights of the creditor. 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. (1292)