MODES OF EXTINGUISHMENT (Art. 1231) Q: 6 Principal modes to extinguish an obligation? 1. Payment or Performance 2. Loss of the thing due 3.

Compensation 4. Confusion or Merger of Rights 5. Condonation or Remission of the debt 6. Novation Q: Additional Modes of Extinguishment of an obligation? 1. Annulment of the contract 2. Recission of the obligation 3. Fulfillment of a Resolutory Condition 4. Prescription Q: Does prescription extinguish an obligation? - In the case of Development Bank v. _______ - The Supreme Court said, No. prescription does not extinguish an obligation. What is extinguished by prescription is only the right of the creditor to enforce the obligation but the obligation remains. Hence, prescription becomes a defense against an action to enforce an obligation that has prescribed. Q: What is extinguished in prescription? - Only the civil nature or character of the obligation and not the obligation itself. The obligation is converted from its civil character (enforceable) to a natural obligation (unenforceable). - The prescription to bring an action is 10 years. Q: Proof that the obligation doesnt extinguish even after prescription? - If the payment is accepted by the creditor even after the prescription. Q: PAYMENT?

Under the codal provision, Payment means not only the delivery of the money but also the performance of an obligation in any other manner. On that basis, Payment can apply to all kinds of obligation to give, to do or not to do.

Q: What are the requirements of Payments? 1. Payor one who makes the payment 2. Payee one who receives the payment 3. Thing to be paid must always conform to the thing due 4. Time, Place, Manner of Payment Q: When must payment be made? - The law says, on its due date. Q: When is the due date of an obligation? - From the date or time that the creditor acquires the right to enforce or invoke the obligation. Q: At what time of the due date must an obligation be paid? - The debtor has 24 hours (the whole day) to pay the creditor; also the creditor has the right to demand within 24 hours. Q: Can the debtor compel the creditor to accept payment at 2:00 am? - Literally, YES. As long as it is within the 24-hour limit. - However, a day should be interpreted as within the Reasonable Hours of the due date (working day) Q: Where may payment be demanded? - The law is silent. However, when a creditor demands, he expects to be paid in the proper place. Q: What and where is the proper place of payment? - Art 1251 states that the following: 1. Payment shall be made in the place designated in the obligation
Page 1 of 3 OBLIGATIONS AND CONRACTS Finals R.A. 2010-2011

2. When there is no agreement and the thing due is a specific thing, the proper place of payment is the place where the thing was at the moment the obligation was constituted. 3. If the thing due is generic, the place of payment shall be the domicile of the debtor. 4. If debtor changes his domicile in bad faith, additional expenses shall be borne by him. NOTE: Law Residence. says DOMICILE and not

If Payment if made by a 3rd person, consent of the principal debtor is NOT necessary. What is essential is the acceptance by the creditor.

Q: Difference between domicile and residence? - Residence characterized by temporariness - Domicile characterized by permanence; a place where a person may be absent from but has intention to return Q: If the proper place of payment is the Debtors domicile, but the debtor changed his domicile in bad faith, where is the proper place of payment? - The place of payment will still be the domicile of the debtor. Q: CHARACTERISTICS OF PAYMENT? 1. Integrity 2. Identity 3. Indivisibility Q: Difference between the Requisites of Payment and Characteristics of payment? - Requisites matters which are necessary to the validity of payment - Characteristic matters on how payment should be made Q: If payment is made by a 3rd party, what is the status of that payment? - VALID, if the creditor accepts the payment. Q: Payment by a 3rd person and Principal Debtor?

Q: Rights acquired by the 3rd person? - If payment is made by a 3rd person against the will or without knowledge of the principal debtor, the only right of the 3rd party is that he can seek reimbursement from the debtor for what he paid. But only to the extent of what had been beneficial to the debtor. - However, if the payment made by the 3rd person was CONSENTED by the principal debtor, 2 rights are acquired by the 3rd person. a. Right to absolute reimbursement b. Right to subrogation (substitute) Q: What is absolute reimbursement? - Whether the payment redounded to the benefit of the debtor or not, the 3rd person becomes entitled to be reimbursed to what he paid. Q: Explain Integrity and Indivisibility? - Integrity performance of payment must be complete or full - Indivisibility payment should not be partially made Q: XPNs in Integrity? - 1. Substantial Compliance - 2. Estoppel (waiver on the part of the creditor) creditor accepts such performance, being aware of the irregularity in the performance of the obligation. Q: What is Identity? - Means that what is performed must conform to the thing due. The thing paid must not vary from the thing due. Q: XPN in Identity?
Page 2 of 3 OBLIGATIONS AND CONRACTS Finals R.A. 2010-2011

Dation in Payment. Because in dation in payment, what the creditor receives is not the thing due. (substitute thing)

Q: XPNs to Indivisibility? 1. If the parties agree on partial performance 2. Obligation is partly liquidated and partly unliquidated Q: What is the status of payment when it is made by an incapacitated person (debtor)? - Law says: NOT VALID (but it is not deemed void) - However, under RA 6809, they are valid until set aside (Voidable) Q: What is the status of payment made to the incapacitated creditor? - VALID if it is redounded to the benefit of the creditor - Gen. Rule shall apply that it should benefit the creditor - If he did not kept the payment but it redounded for his benefit VALID. Q: Payment made by an incapacitated person is voidable, to what kind of obligation is the law referring to? - Only in Obligation to Give, because capacity of the obligor is necessary since it involves transfer of ownership. Q: What kind of benefit? - All kinds of benefit except sexual benefit - If the benefit is redounded to the creditor, then the payment is valid - As long as the benefit involves feelings, that is deemed sexual benefit Q: What if the payment is made to a 3rd person, what is the status of the payment? - It will be valid only if the payment made to a 3rd person redounded to the benefit of the creditor. - Benefit must be established because it is never presumed, otherwise it is VOID. - XPNs:

1. 3rd person acquires the right of the creditor (he becomes the new creditor) 2. Creditor ratifies the Payment to the 3rd person 3. Creditor led the debtor to believe that the 3rd person was authorized to receive the payment. Q: Status of payment? - It becomes a Donation if the creditor accepted it.

Page 3 of 3 OBLIGATIONS AND CONRACTS Finals R.A. 2010-2011