Group 4 Persons from whom the creditor must accept

payment
Obligations are extinguished: 1. Debtor
(1) By payment or performance; 2. Any person who has an interest in the obligation.
(2) By the loss of the thing due; 3. Third person who has no interest in the
(3) By the condonation or remission of the debt; obligation when there is stipulation he can make
(4) By the confusion or merger of the rights of payment.
creditor and debtor;
(5) By compensation; Creditor may refuse payment by a third person
(6) By novation. Creditor should have a right to insist on the
Other causes of extinguishment of obligation, liability on the debtor unlike before; the creditor
such as annulment, rescission, fulfillment of a cannot refuse payment made by the third
resolutory condition, and prescription, are governed person.
elsewhere in this Code. Creditor is also not compelled to accept
payment by a third person whom he dislikes. The
Other causes of extinguishment of obligations creditor may not desire to have any dealings
(1) Death of a party in case the obligation is a with the third person.
personal one. ** The creditor is only making sure, thats why
(2) Mutual desistance or withdrawal. he may not accept payment from a third person.
(3) Arrival of resolutory period.
(4) Compromise Effect of Payment by third person
(5) Impossibility of fulfillment. 1. If made without the knowledge or against the
(6) Happening of a fortuitous event. will of the debtor.
2. If made with the knowledge of the debtor.
Payment or Performance
Meaning of payment: Right of third person to subrogation
Ordinary Parlance: It refers only to the delivery of Whoever pays in behalf of debtor is entitles to
money. subrogation, if payment is with consent of latter.
In legal mode: Payment may consist of not only in the If payment is without knowledge or against will
delivery of money but also the giving of a thing, the of debtor then third person cannot compel
doing of an act, or not doing of an act. creditor to subrogate him in the latters
accessory rights of mortgage, guaranty, or
When debt is considered paid penalty.
(1) Integrity of prestation Subrogation can only take place with debtors
(2) Identity of prestation consent.
Third person who without necessity paid under
Exception to the rule under Article 1233 such condition is protected by his right to
1. Article 1234, because: reimbursement.
It is adopted from American Law.
In case of substantial performance, the Subrogation and Reimbursement Distingushed
obligee is benefited. Subrogation Reimbursement
Obligor should be allowed to recover as if Person who pays Third person
there had been a strict and complete for debtor is put entitled by reason
fulfillment less damages suffered by the into shoes of of payment has
oblige. creditor. merely the bare
Compensation for breach committed by the Payor acquires not right to be
obligor. only right to refunded, this is
Requisites: reimburse what he without right to the
a. There must be substantial performance. has paid but also all guarantees and
b. The obligor must be in good faith. other rights securities of
2. Article 1235. It is also founded on the principle creditor could have original obligation.
of estroppel. exercised.
If payment irregular or complete, creditor may There is no real
reject. extinction of
If creditor accepts, the right must be waived, obligation, only
then the obligation is extinguished. change of creditor
Requisites
a. The obligee knows that the performance is Payment by a third person who doesnt intend to be
incomplete or irregular. reimbursed
b. He accepts the performance without **No one should be compelled to accept the
expressing any protest or objection. generosity of another. If paying the third person
does not intend to reimburse then the payment is
made into a donation which requires the debtors
consent to be valid. However if creditor accepts
payment, it will be also considered as a donation
even without consent of the debtor.
Meaning of free disposal of thing due and
capacity to alienate
Free disposal of thing due thing to be delivered
must not be subject to any claim, lien or
encumbrance of a third person.
Capacity to alienate person is not incapacitated to
enter into contracts and to make the disposal of a
thing due.
Free Disposal of thing due and capacity to alienate
required
In obligation to give, payment by one who
doesnt have the free disposition of a free thing
due and capacity to alienate is not valid (paid
thing can be recovered).
Person to whom payment shall be made
1. Creditor or oblige
2. His successor in interest
3. Any person authorized to receive it
** Creditor referred to must be the creditor at
time of payment not at time of constitution of
obligation.
Effect of Payment to an incapacitated person
Payment to a person unable to manage his
property is not valid unless such incapacitated
person kept the thing paid or delivered, or it was
benefited by payment.
In absence of benefit, debtor may be made to
pay again by the creditors
guardian/incapacitated person himself.
Proof of benefit is obligatory upon debtor who
paid.
Effect of Payment to third person
Payment to third person or wrong party is not
valid unless it was redounded to benefit of
creditor.
The payment made by debtor to third person
benefited by creditor is no presumed and must
be established by person in proving this fact.
In absence of proof, payment thereof in error
and in good faith will not deprive creditor to
demand payment.
When benefit to creditor need not be proved by
debtor
1. Subrogation of payer in creditors rights.
2. Ratification by creditor.
3. Estoppel on part of creditor admission is
representation is rendered conclusive upon
person making it and cannot be denied as
against person relying thereon.
Payment to third person in possession of credit
This refers to the possession of credit itself.
Mere possession of instrument does not entitle
holder to payment.
Payment does not release the debtor
Payor must act in good faith.
When payment to creditor not valid
In action against debtor that is the creditor of
another, the debtor-stranger may be ordered by
court to retain the debt until right of plaintiff,
the creditor is main litigation is resolved.
Payment made by debtor-stranger shall be
invalid id plaintiff wins case and cannot collect
from debtor to whom payment is made.
Very prestation due must be complied with
1st paragraph refers to a real obligation to deliver
specific thing. A thing different from what is due
cannot be demanded against will of debtor or
creditor.
2nd refers to personal obligation. Act to be
performed or prohibited cant substituted
against obligees will.
When prestation may be substituted
Substitution can happen if oblige consents
Facultative obligation debtor is given right to
render another prestation in substitution
Article 1244 will not apply in case of waiver by
creditor or substitution is allowed with consent
of creditor.
Special forms of payment
1. Dation in payment is conveyance of ownership
of a thing as an accepted equivalent of
performance. It is not an ordinary way of
extinguishing obligation. An existing debt in
money is satisfied not by payment of money but
alienation of property.
2. Application of payments
3. Payment be cession
4. Tender of payment and consignation
Governing law
Law on sales governs because dation in payment
may be considered specie of sale: amount of the
money due becomes price of thing alienated.
Rule of the medium quantity
If to deliver a specific thing, thing itself should be
delivered.
If its to deliver a generic thing, purpose of
obligation and other circumstances will be taken
into consideration to determine quality of thing
to be delivered.
If there has been disagreement by the parties
regarding precise declaration in obligation or
finding one thing exactly like the other, law steps
in.
 Benefit of article may be waived by creditor if he
accepted thing of inferior quality.
Benefit of article may be waived by debtor if he
delivered thing of superior quality.
Debtor pays for extrajudicial expenses
Extrajudicial expenses are for account of debtor
because obligation is extinguished when
payment is made unless otherwise stipulated.
Losing party generally pays judicial costs
Judicial costs statutory amounts allowed to a
party to an action for his expenses incurred in
the action.
Costs will be paid by the losing party however
the court may adjudge that the cost may be paid
by either party or the payment be equally
divided amongst the parties.
No costs against government, unless provided
by law.
Performance of obligation should be complete
Article 1248 only covers once creditor one
debtor basis
Obligation will be extinguished if there is
complete performance of prestation
The creditor may accept but cannot be
compelled to receive partial performance
Debtor is required to comply with whole
obligation but cannot be required to make
partial payments if he doesnt want to.
When partial performance allowed
1. When there is an express stipulation to that
effect.
2. When debt is part liquidated and unliquidated.
3. When prestations in which the obligation
consists are subject to different terms which
affect some of them.
**If obligation has several distinct prestation,
prestations need not to be done simultaneously
but successive execution of the prestations must
be complete.
Meaning of legal tender
Legal tender is the currency which a debtor can
legally compel a creditor to accept in payment of a
debt in money when tendered by the debtor in the
right amount.
Legal tender in the Philippines
Debts in money shall be paid in the currency
stipulated, if currency not available then pay in
the currency which is the legal tender in the
Philippines.
All coins and notes issued by Bangko Sentral ng
Pilipinas in legal tender for all debts public or
private.
Coins are legal tender amounts not exceeding
Php 50 for denominations Php 0.25 and above,
and in those amounts not exceeding Php 20 for
denominations Php 0.10 or less.
All coins and bills above Php 1 are valid for
tenders of any amount.
Payment by means of instruments of credits
1. Right of creditor to refuse or accept.
2. Effect on obligation.
a. Until they have been cashed
b. Unless they have been impaired through fault
of creditor.
Meaning of inflation and deflation
Inflation sharp sudden increase of money and/or
credit without increase in business transactions.
Inflation causes drop of money, rise of general price
level.
Deflation reduction in volume and circulation of
money or credit resulting in decline of general price
level.
Basis of payment in case of extraordinary inflation
or deflation
Purchasing value at time of establishment of
obligation shall be the basis of payment.
If there has been an extraordinary
increase/decrease in price that wasnt foreseen,
this is subject to agreement of the parties to the
contrary.
extraordinary inflation or deflation of the
currency stipulated
This article envisages contractual obligations
where a currency selected by the parties is the
medium of payment.
Place where obligation shall be paid
1. If there is stipulation, the payment will be made
in the place designated.
2. If the thing to be delivered is specific, payment
shall be made at the place where the thing was
upon completion of contract.
3. If no stipulation and thing is generic, place of
payment shall be domicile to the debtor,
creditor bears expenses to going to creditors
place to accept payment.
Venue place where a court suit or action must be
filed or instituted.
Domicile/Legal Residence is a place of a persons
habitual residence, place where he has intention of
returning in case of absence. Requires bodily
presence in that place and intention to make it ones
domicile.
Residence is an element of domicile. Requires
bodily presence as an inhabitant in a given place.