Section 1.

Payment or Performance

Payment (1232): may consist of not only in the delivery of money but also giving of a thing, the doing of an act, or
not doing of an act.

When is debt considered paid (1233):

1. Integrity of prestation: if the thing or service has been delivered completely.
2. identity of the prestation: the very prestation due must be delivered or performed.

Exception to complete fulfilment/performance:

1. in case of substantial performance in good faith (1234).
2. accepting incompleteness or irregularity by the oblige without objection, waiver (1235).




Payment by a third person (1236):
General rule: creditor not bound to accept payment from a third person who has no interest in the fulfilment of
obligation.

Exception: if it is stipulated.

Effect of payment by 3
rd
person:
1. without knowledge or against the will of the debtor: the payer can only recover from the debtor insofar as
the payment has been beneficial to the latter.
2. with knowledge of debtor: the payer have the right to reimbursement and subrogation, and to acquire all
rights of the creditor.

Payment by third person without intent to be reimbursed (1238):
The payment will be considered as a donation, and therefore must be with the consent of the debtor to be
valid. However the payment is valid as to the creditor who has accepted it.

Payment by one who does not have the free disposal of the thing due and capacity to alienate it shall be
void and can be recovered. (1239)




To whom the payment should be made (1240):
1. the creditor or oblige (at the time the payment is to be made.)
2. his successor in interest.(heir/assignee)
3. any person authorized to receive it. (also authorized by law like guardian, executor or administrator)

* payment in good faith to any person in possession of the credit is valid (1242)
(the possession must not merely refer to the document or instrument evidencing credit but it must be the credit
itself).

Effect of payment to an incapacitated person (1241):
General rule: payment made to an incapacitated person is invalid.
Exceptions: 1. If the incapacitated person kept the thing.
2. if he was benefited by the payment.
*the debtor may be made to pay again. Proof of such benefit is incumbent upon the debtor.

Payment to a third person:
General rule: payment to a third person is invalid.
Exception: if such payment has redounded to the benefit of the creditor. This must be satisfactorily established by
debtor, absence of proof even if payment is made in good faith will not deprive the creditor the right to demand.







When benefit to the creditor need not be proved by debtor:
1. if after the payment, the third person acquires the right of the creditor against the debtor.
2. if the creditor ratifies the payment to third person.
3. if by creditors conduct, the debtor has been led to believe that the third person had authority to receive the
payment.

Payment to creditor by debtor made after the latter has been judicially ordered to retain the debt is
invalid. (1243)
There are three parties involve here: 1) main creditor 2) main debtor and a creditor to another, and 3)
debtor to the main debtor.

The very prestation due must be complied with (1244):
A thing (real obli.) different that from due cannot be offered or demanded against the will of
creditor/debtor. The act to be performed or the act prohibited cannot be substituted against obligees will.
Exception: substitution can be made with consent or if allowed by stipulation.


Dation in payment (1245):
Conveyance of ownership of a thing as an accepted equivalent of performance. An existing debt of money is
satisfied not by payment of money but by alienation of property. If the value of the thing is less than the original
monetary debt, it shall extinguish the obli. Only to the extent of the value of the thing, unless the parties agreed to
consider it full payment.

Medium quality rule (1246):
If the thing to be delivered is generic without stating quality and circumstances, the creditor cannot demand a
thing of superior quality nor the debtor deliver a thing of inferior quality. May be waived by accepting the thing.

Extrajudicial expenses to be shouldered by debtor (1247):
Debtor shall pay for extrajudicial expenses unless otherwise stipulated in the contract. This does not
include expenses incurred by creditor in going to debtors domicile to collect.
As to judicial expenses, it is usually the losing party that pays, but the court may decide. The gov. cannot pay
unless provided by law.

Partial payment (1248):
The creditor cannot be compelled to accept partial performance nor the debtor be required to make partial
payment.
Allowable partial performance:
1. when there is stipulation.
2. when debt is in part liquidated and in part liquidated.
3. when there are several prestations subject to different terms or conditons.