Obligations and Contracts

Corina’s Notes
Section 3- Condonation or Remission of the Debt

Article 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the
obligor. It may be made expressly or impliedly.

One and the other kind shall be subject to the rules which govern inofficious donations. Express
condonation shall, furthermore, comply with the forms of donation

Concept-

Remission

 an act of liberty by virtue of which the creditor renounces the enforcement of the obligation, as a result of
which it is extinguished in its entirety, or in that part of the same to which the remission transfers.
 Gratuitous abandonment by the creditor of his right
 It is an essential characteristic of remission that it be gratuitous, that there is no equivalent for the
benefit given; Once equivalent exists, the nature of the act changes.
 It may become Dation in payment when the credito receives a thing different from that stipulation
 Novation, when the object/ principal conditions of the obligation should be changed
 Compromise when the matter renounced is in litigation or dispute and in exchange of some concession which
the creditor receives
 CA however has held that if the creditor agrees to renounce the collection of accts of the debtor on the
condition that the latter would return all the fixtures and furniture which he had acquired by purchase from
his own creditor, the case is not the satisfaction of an obligation, but condonation or remission of a debt

Requisites

1. It must be gratuitous
2. Must be accepted by obligor
3. Obligation must be demandable

Kinds

Form Express Remission may be made in accordance with the formalities

prescribed by law for donations
It is made formally, and it should be done in accordance with
the forms of ordinary donations
Implied It can be inferred from the acts of the parties
Extent Total The entire obligation is extinguished
Partial It refers only to the principal or to the accessory obligation or
to an aspect which the debtor
May refer to the amount of indebtedness, or to an accessory
obligation(pledge/ interest) or to some aspect of obligation
Constitution Inter Vivos Effective during the lifetime of the creditor
Mortis Causa Effective upon death of the creditor
Constituted by last will or testament

Application of Rules

 Condonation or remission is essentially a donation of the credit to the debtor.

 A bilateral act, which requires acceptance by debtor

On the matter of acceptance, the ff provisions are applicable

Article 745. The donee must accept the donation personally, or through an authorized person with a special power for the purpose, or with a general
and sufficient power; otherwise, the donation shall be void. (630)

Article 746. Acceptance must be made during the lifetime of the donor and of the done

With respect to the amount, the ff provisions govern:

Article 750. The donation may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in
usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be
supported by the donor. Without such reservation, the donation shall be reduced in petition of any person affected.
 Obligations and Contracts
Corina’s Notes
Article 752. The provisions of article 750 notwithstanding, no person may give or receive, by way of donation, more than he may give or receive by
will.

As to revocation:

Article 760. Every donation inter vivos, made by a person having no children or descendants, legitimate or legitimated by subsequent marriage, or
illegitimate, may be revoked or reduced as provided in the next article, by the happening of any of these events:
(1) If the donor, after the donation, should have legitimate or legitimated or illegitimate children, even though they be posthumous;
(2) If the child of the donor, whom the latter believed to be dead when he made the donation, should turn out to be living;
(3) If the donor subsequently adopt a minor child.
Article 761. In the cases referred to in the preceding article, the donation shall be revoked or reduced insofar as it exceeds the portion that may be freely
disposed of by will, taking into account the whole estate of the donor at the time of the birth, appearance or adoption of a child.

Article 764. The donation shall be revoked at the instance of the donor, when the donee fails to comply with any of the conditions which the former imposed
upon the latter.
In this case, the property donated shall be returned to the donor, the alienations made by the donee and the mortgages imposed thereon by him being void,
with the limitations established, with regard to third persons, by the Mortgage Law and the Land Registration laws.
This action shall prescribe after four years from the noncompliance with the condition, may be transmitted to the heirs of the donor, and may be exercised
against the donee's heirs. (647a)
Article 765. The donation may also be revoked at the instance of the donor, by reason of ingratitude in the following cases:
(1) If the donee should commit some offense against the person, the honor or the property of the donor, or of his wife or children under his parental authority;
(2) If the donee imputes to the donor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act
has been committed against the donee himself, his wife or children under his authority;
(3) If he unduly refuses him support when the donee is legally or morally bound to give support to the donor.

Express Remission

Movable or personal property, Art 748 is applicable (also obli to do/not to do).
Article 748. The donation of a movable may be made orally or in writing.
An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated.
If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void.
Immovable or real property, Art 749 applies
Article 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the
donee must satisfy.
In cases of movable things, where remission is oral, there is no need of delivering the thing, because there is no
transferring of property but merely remission of an obli to give personal prop. (Represented w/ public instrument)

If the remission is made expressly, but because it fails to comply with forms provided in art 748/749, it cannot
properly take effect as an express remission. Can it be enforced as an implied remission?
- No. An express remission which is formally defective cannot affect the creditor. (refer to last P, 1270)

Article 1271. The delivery of a private document evidencing a credit, made voluntarily by the creditor to
the debtor, implies the renunciation of the action which the former had against the latter.
If in order to nullify this waiver it should be claimed to be inofficious, the debtor and his heirs may
uphold it by proving that the delivery of the document was made in virtue of payment of the debt.

Implied remission

-
There may be an implied remission when creditor voluntarily destroys/ cancels evidence of the credit,
with the intent to renounce his rights.
- The want of such intent must be proved upon the creditor who alleges it
- Destruction/ cancellation was due to mistake of care
- When destruction/ cancellation is without intent to remit, obligation subsists
Limited to Private Document
- A voluntary delivery to the debtor of the first original copy of a public instrument does not imply
remission.
Release through Error
- Creditor may grat a release to his debtor by mistake, and latter may accept it in error.
- In this case, there is no extinguishment of obligation
- Under Argentinian code, Debtor is obliged to recognize the debt again, with the same secutiry and same
kind of instrument. If debtor refuses to make a voluntary recognition, judgement compelling him to
recognize the debt will serve as the title og the obligation upon its maturity; and if the debt is already
matured, creditor can sue for payment (unjust enrichment)
When Inofficious
- Voluntary return of the title of credit is presumed to be by reason of remission, not by reason of payment
of debt.

Article 1272. Whenever the private document in which the debt appears is found in the possession of the debtor, it
shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved.
 Obligations and Contracts
Corina’s Notes
Nature of Presumption
- While the existence in the hands of the creditor of an instrument of credit, is evidenced that the debt is
still unpaid , unless the contrary is proved
Plurality
- When obligation is joint, and the private document evidencing a debt is found in the possession of one of
the debtors, presumption of remission can refer only to the portion of the debtor who is in possession of
the instrument
- If the delivery was made by only one joint creditor, only the share pertaining to him shall be deemed
remitted.
- If the obligation is solidary, remission must be considered as total.

Article 1273. The renunciation of the principal debt shall extinguish the accessory obligations; but the waiver
of the latter shall leave the former in force

Effect of remission
 To extinguish the obligation in its entirety or in the part/ aspect to which remission refers.
 If obligation is JOINT, remission can only affect the share of the creditor who makes remission and the
corresponding share of debtor in whose favor the remission is made
 For solidary obligations,
o Article 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall
extinguish the obligation, without prejudice to the provisions of article 1219.
The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation
corresponding to them.
o Article 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards
the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected.
o Article 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors.

Article 1274. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged, after
its delivery to the creditor, is found in the possession of the debtor, or of a third person who owns the thing.

Effect on accessory obli

 If the remission refers to principal obligation , all accessory obligations are extinguished (accessory depends
on principal for existence
 If remission refers to accessory obligation, principal obligation continues to subsist

Nature of presumption (conclusive-definite) – this article is prima facie

- Presumption: Creditor voluntarily returned the thing pledged to the debtor.
- It may, however, be shown that the debtor recovered the thing pledged without the consent of the
creditor, who may have lost it, or from whom it may have been stolen, or that the return to the debtor is
for a limited time and a special purpose, such as to make repairs thereon or to allow the owner to make
some particular use thereof
- The remission of pledge extinguishes only the security, not the principal obligation.

SECTION 4
Confusion or Merger of Rights

Article 1275. The obligation is extinguished from the time the characters of creditor and debtor are merged in the
same person.

Concept of Merger

-
Merger or Confusion is the meeting in one person the qualities of creditor and debtor with respect to
the same obligation
- It erases the plurality of subjects of the obligation because it is absurd that a person should enforce an
obligation against himself.
- The purpose for which the obligation may have been created are considered as fully realized by merger of
the qualities of debtor and creditor in the same person.
Requisites
1. Merger of the characters of creditor and debtor must bein the same person (1276)
2. It must take place in the person of either the principal creditor or principal debtor
3. It must be complete and definite
Kinds
CAUSE/ CONSTITUTIONS:
a. inter vivos – constituted by agreement of parties
b. mortis causa – constituted by succession
EXTENT OR EFFECT
a. total- if it results in he extinguishment of entire obligation
b. partial – it reslts in the extinguishment of only a part of obligation
1) when confusion/merger refers only to a part of oblifation
2)when obligation is joint
 Obligations and Contracts
Corina’s Notes

Causes of Merger
 Merger or confusion arises from any act which brings about a succession to the credit, whether it be
universal or particular, inter vivos or mortis causa.
 Most frequent, is by way of testate or intestate succession in which the debtor inherits from the debtor, there
can be no confusion of the debt is for a sum of money, because the debt is not transmitted to the heir under
our present law
Real right
 Real rights, which do not involve the relation of debtor and creditor, may be extinguished by “merger” of the
real right with the right to ownership
 Merger is a consolidation
 When a credit is secured by a mortgage of a real property belonging to a third person, and the mortgagee
acquires a part of the property subject to the mortgage, that part is released from the burden
Revocation of merger
 When the act which occasions the merger is at risk of termination, merger that has taken place is also
terminated, and obligation is recreated in the same condition that it had when the merger took place
Effect of Merger
 The effect of merger is to extinguish the obligation

Article 1276. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors.
Confusion which takes place in the person of any of the latter does not extinguish the obligation.

If the merger will take place in the person of the subsidiary creditor and subsidiary debtor (guarantor), principal
obligation is not extinguished, there will only be SUBSTITUTION of creditor or debtor.

In case of:
• Guarantor-creditor – can demand the performance of the obligation from the debtor, in case of default, even from
his co-guarantors
• Guarantor-debtor – the creditor can demand the performance of the obligation directly from the guarantor.
Release of Guarantor
 Extinguishment of the principal obligation through confusion releases the guarantors, because the obligation
of the latter is merely accessory.

Merger in the Guarantor

 When the merger takes place in the person of a guarantor, obligation is not extinguished
 If the guarantor acquires the credit, his obligation as a guarantor is extinguished, but the principal
obligation subsists and can be enforced by him against the debtor and other co guarantors
Mortgaged property
 When mortgaged property belongs to third person, the mortgagee acquires a part of suh property subject to
mortgage, that part is released from burden, which continues to be a hindrance to the rest of the property
 But the credit is not extinguished, because there is no confusion

Article 1277. Confusion does not extinguish a joint obligation except as regards the share corresponding to the
creditor or debtor in whom the two characters concur

SECTION 5
Compensation

Article 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors
of each other

Compensation- mode of extinguishing in their concurrent amount those obligations of persons who in their own right
are creditors and debtors to each other.
 weighing two obligations simultaneously in order to extinguish them to the extent in which the amount of
one is covered by the amount of the other.
– Simplified payment (pago abreviado)
– double advantage over payment:
 facility of payment (it takes effect by operation of law)
 guaranty for effectivity of the credit, because, if parties will have to comply with formalities
of ordinary parment
 operation of law
– guaranty for the effectivity of the creditmay avoid prejudice to one party by
 fraud or insolvency of the other
 Obligations and Contracts
Corina’s Notes
COMPENSATION VS PAYMENT

Payment Compensation
Takes effect by acts of Takes effect by
parties operation of law
Capacity to give and to Capacity to give and to
acquire are necessary acquire not essential
Complete and Partial payment
indivisible payment

COMPENSATION VS CONFUSION

Confusion Compensation
NUMBER OF PERSONS There is only one person
There is only one person in who is merged the qualities
whom, are creditors and debtors of the creditor and debtor
of each other
In number of obligations There must be at least two
there is only one

COMPENSATION vs COUNTERCLAIM

Counterclaim Compensation
Similarity of debts is not debts must consists in money or
necessary if not, they must be of the same
kind and quality
Does not require liquidation of Debts must be liquidated
debts
Need to be pleaded to be Need not be pleaded
effectual

Kinds of Compensation:
As to cause
• Legal- takes effect by operation of law when all the requisites are present (Art. 1278-1279, Civil Code)
• Voluntary- agreement of the parties who are mutually creditors and debtors to compensate their respective obligations, requisites
may not all be present

◦ takes effect the moment the parties agree

• Facultative- by the will of only one party and the other one cannot choose compensation because of any impediment. (Art. 1287-
1288)
• Judicial- takes effect by judicial decree
◦ takes effect the moment the judicial decree becomes final and executory

As to effect
• Total – compensation of 2 equal debts
• Partial - compensation of two unequal debts