OLBIGATIONS AND CONTRACTS

Art. 1156. An Obligation is a juridical necessity to give, to do or not to do.

Elements of an Obligation:1. An active Subject (Obligee or Creditor) – the possessor of a right; he in whose favor the obligation is constituted.2. A passive Subject (Obligor or Debtor) – he who has the duty of giving, doing, or not doing.3. The object or prestation – the subject matter of the obligation.4. The efficient cause (the vinculum or juridical tie) – the reason why the obligation exists.

Example:A promises to paint B’s picture as an result of an agreement A – obligor, B – obligee, B’s picture - prestation, agreement/contract – efficient cause

Prestation – is an obligation; more specifically, it is the subject matter of the obligation – may consist of giving a thing, doing or not doing a certain act.

KINDS OF OBLIGATIONSa. viewpoint of sanctions1. Civil Obligation – that defined in Art. 1156. The sanction is juridical process.2. Natural Obligation – the duty not to recover what has voluntarily been paid although payment was no longer required.3. Moral Obligation - the duty of a Catholic to hear mass on Sundays and holy days of obligation. The Sanction is conscience or morality.

b. viewpoint of subject matter1. real obligation – the obligation to give2. personal obligation – the obligation to do or not to do

c. viewpoint of affirmativeness and negativeness of obligation1. positive or affirmative obligation – the obligation to give or to do.2. negative obligation – the obligation not to do includes not to give.

d. viewpoint of persons obliged1. unilateral – where only one party is bound2. bilateral - where both parties are boundEx. Contract of sale: the buyer is obliged to pay; seller obliged to pay. 2.1. reciprocal 2.2 non reciprocal

Art. 1157. Obligations arise from:1. Law;2. Contracts;3. Quasi-contracts4. Acts or omissions punished by law; and5. Quasi-delicts

Sources of Obligationa. Law (obligation ex lege) – like the duty to pay taxes

and support ones familyb. Contracts (obligation ex contracto) – duty to repay a

loan by virtue of an agreementc. Quasi-contracts (obligation quasi-contractu) – like the

duty to refund an “over change” of money because of the “solutio indebiti”

d. Crimes or Acts or Omissions Punishable by Law (obligation ex maleficio or ex delicto) – like the duty to return a stolen carabao

e. Quasi delicts or Torts (obligation ex quasi-delicto or ex quasi maleficio) – like the duty to repair damage due to negligence.

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen , by the provisions of this Book.

Obligation Ex LegeExamples:

1. Duty to support2. The duty to pay taxes

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Difference between an Obligation and ContractObligation is a result of a contract, while a Contract, if valid, always results in obligations, not all obligations come from contracts.

The so-called Innominate Contracts“contratos innominados”

a. Do ut des- I give that you may giveb. Du ut facias – I give that you may doc. Facio ut des – I do that you may gived. Facio ut facas – I do that you may do

Art. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book.

Quasi-Contract is a juridical relations resulting foma lawful, voluntary and unilateral act, and which has for its purpose the payment of indemnidty to the end that no one shall be ujustly enriched or benefited at the expense of another

2 Principal Kinds1. Negotiorum Gestio; whena person voluntarily takes

charge of anothers abandoned business of property without the owners authority.

2. Solutio Indebiti; when something is received when there is no right to demand it, and it was unduly delivered thru mistake. The recipient has the duty to return.

Art. 1161. Civil obligations arising fromcriminal offenses should be governed by the penal laws, subject to the provisions of Articile 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book regulationg damages.

Pertinent Provisions of the Revised Penal Code:Art. 100, RPC says: “Every person criminally liable for a felony is also civilly liable”

Liability of an Insane CriminalAn insane criminal who commits a crime is exempted from criminal liability, but his guardian can be held civily liable unless the latter was diligent in his task of taking care the insane.

Civil Liability arising from a Crime includes:1. Restitution2. Reparation of the damage caused;3. Indemnification for consequential damages

Effects of acquittal in Criminal Casea. If the reason why there was an acquittal was because

the accused could not have committed the act, no civil action.

b. If the reason for the acquittal was because of an exempting circumstatnce (insane) still civily liable.

c. If there is an independent civil action allowed by the law.

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.

Another name for quasi-delicts is “tort” or “culpa aquiliana”.

Quasi-delicts is a fault or act of negligence (or omission of care) which causes damagesto another, there being no pre existing contractual relations between the parties.

Examples:a. While driving a car recklessly, I injured a pedestrianb. While cleaning my windows sill, cause the flower pot

to fall breaking the arms of my neighbor.

Negligence (Culpa) is the failure to observe, for the protection of the interests of another person, that degree of care, precaution and vigilance which circumstances justly demand.

Requisites Before a Person Can Be Held Liable for a Quasi-Delict1. There must be fault or negligence attributable to the

person charged;2. There must be damage or injury;3. There must be a direct relation of cause and effect

between the fault or negligence on the one hand and the damage or injury on the other.

NATURE AND EFFECT OF OBLIGATION

Art. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulations of the parties requires another standard of care.

Determinate - specificIndeterminate – on of class

Diligence Needed:a. That which is required by the nature of the obligatin

and corresponds with the circumstances of person, time, and place. Diligence of a good father of a family.

b. If the law or contract provides a different standard of care.Ex: “A common carrier bound to carry the passengers safely as far as human care and foresight can provide.

Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him.

Personal right is also called jus in personam or jud ad rem; it is the power demandable by one person to another – to give, to do or not to do.Real right is also called jus in re; power of the specific thing like the right of ownership or possession and is binding on the whole world.

Kinds of delivery:a. Actual delivery (or traditio) – where physically, the

proper changes hands. Ex: if a sells B a fountain pen, the giving by A to B of the pen is actual delivery.

b. Constructive delivery – that where the physical transfer is implied. This may be don by:1. Traditio simbolica (symbolical tradition (keys of

the bodega are given)2. Traditio longa manu (delivery by mere consent or

the pointing out of the object.3. Traditio brevi manu (delivery by the short hand)

4. Traditio constitutum possessorium – the delivery whereby a possessor of a thing as an owner, retains possession no longer as an owner.

5. Traditio by execution of legal forms and solemnities (like an execution of public instrument selling land)

When does the Obligation to Deliver Arisea. If there is no term or condition, from the perfection of

the contract.b. If there is a condition or term, from the moment the

term arrives or the condition happens.

Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel to the debtor to make the delivery.

If the thing is indeterminate or generic thing, he may ask that the obligation be complied with at the expense of the debtor,

If the obligation delays, or has promised to delvier the same thing to two or more persons who do not have the same interest, he shall be responsible for fortuitous event until has effected the delivery.

Specific or Determinate things – when it is capable of particular designation. Ex: this car, tha car owned by A on Sept. 12, 2005, the care with the plate number 1815, th particular picture of Mayela in my notebook.

Generic or Indeterminate Things – refers only to class, to a genus, and cannot be pointed out with particularity.Ex.: A car, a 2005 BMW, the sum of P5 Million, a kilo of sugar.

Remedies of the Creditor When Debtor Fails to Comply with his Obligations:

a. Demand for specific performance of the obligation.b. Demand for rescission or cancellationc. Demand for damages either with or without either of

the first two. (a or b)

Effect of Fortuitous Events:a. To deliver a Determinate thing; obligation is

extinguished.b. To deliver an Indeterminate thing; obligation is not

extinguished.

Fortuitous Event does not Exempt; a. Of the obligor delaysb. Of the obligor is guilty of BAD FAITH

Ordinary Delay – merely non-performance at the stipulated time; Legal Delay (default) – which amounts to a virtual nonfulfillment of the obligation.

Art. 1156. The Obligation to give a determinate thing includes that of deliviering all its accession and accessories even though they may not have been mentioned.

Accessories – those joined to or included with the principal for the latters better use, perfection or enjoyment. (Ex: keys of a house, dishes on a restaurant.)Acessions – additions to or improvements of a thing. (ex: soil river bank, whatever is built, planted or sown on a persons parcel of land.

Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost

This same rule shall be observed if he does it in contravention if the tenor of the obligation. Furthermore, it may be decreed that what has been poorly undone.

Article 1167 - Positive Personal Obligation (TO DO)

Remedies of the Creditor if Debtor fails to do1. To have the obligation performed (by himself or by

another) at debtors expense.2. Also – to obtain damages

Art.1168. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense.

Negative Personal ObligationRemedies: Undoing of the prohibited thing and damages.

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee juridically or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

1. When the obligation or the law expressly so declares2. Or when from the nature and the circumstances of

the obligation it appears that the designation of the time when the thing is to be delivered of the service to be rendered was a controlling motive for the establishment of the contract; or

3. When demand would be useless, as when the obliger has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is in ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins.

When Demand is Not Needed to Put the Debtor in Default;a. When the law so providesb. When the obligation so providesc. When time is essence of the contractd. When demand would be uselesse. When the obligor has expressly acknowledge that he

really is in default.

Different Kinds of Mora (default)a. Mora Solvendi (default on the part of the debtor)

1. Mora solvendi ex re (debtors default in real obligations)

2. Mora solvendi ex persona (debtors default in personal obligations)

b. Mora accippiendi (default on the part of the creditor)c. Compensatio Morae (when in reciprocal obligation

both parties ar in default)

Mora SolvendiRequisites:

a. Obligation must be due, enforceable and already liquidated or determinate in amount.

b. There must be non-performancec. There must be demand, unless the demand is not

required.d. The demand must be for the obligation that is due.

Effects:a. Debtors default, liable for interest or damages.b. Bear the risk of loss,c. Liable even for a fortuitous event.

Mora AccipiendiThe creditor is guilty of default when he unjustifiably refuses to accept payment or performance at the time said payment or performance can be done.

Reciprocal Obligations Depend upon each other for performance

Art. 1170. Those who in the performance of their obligation are guilty of fraud, negligence, or delay and those in any manner contravene the tenor thereof, are liable for damages.

Grounds for Liability in the Performance of Obligations;a. Fraud (deceit or dolo)b. Negligence (fault or culpa)c. Default (mora)d. Violation of the terms of obligation

Kinds of Damages (MENTAL)a. Moral – (mental and physical anguish)b. Exemplary – (to set an example)c. Nominal – (to vindicate a right)d. Temperate – (when the exact amount of damages

cannot be determined)e. Actual – (actual losses as well as unrealized profit)f. Liquidated – (predetermine d beforehand)

Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.

Art. 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances.

Fraud Distinguished from NegligenceFraud has deliberate intention to cause damage while negligence has no deliberate intention.Fraud Liability cannot be mitigated or reduced by courts while negligence can be reduced.Waiver of an action is void while negligence is allowed.

4 Kinds of Culpa:a. Culpa Contractual – that which results in a breach of

contract.b. Culpa Aquiliana – Civil Negligence or tort or quasi

delict.c. Culpa Criminal – that which results in the commission

of a crime or a delict.

Art. 1173. The fault or negligence of the obligor consists on the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person, of the time and place. When the negligence shows bad faith, the provisions of Article 1171 and 2201, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required.

Degrees of Culpa Under Roman Law:a. Culpa lata – grave negligence;b. Culpa levis – ordinary negligence;c. Culpa levissima – slight negligence

Kinds of Diligence Under the Civil Code:a. That agreed by the partiesb. In absence of (a), that required by lawc. In absence of (b), that expected of a good father of a

family

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by the stipulation or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, where inevitable.

No Liability for a fortuitous eventExceptions:

a. When expressly declared by lawb. When expressly declared by stipulation or contractc. When the nature of the obligation requires the

assumption of risk

Equivalent Terms for Fortuitous Eventa. Caso fotuito b. Act of Godc. Force majeure (like war or armed robbery)d. Unavoidable accident (like a tire blow out)

Characteristics of Fortuitous events:a. The cause must be independent of the will of the

debtorb. Impossibility of foreseeing or impossibility of avoiding

it, even if foreseenc. The occurrence must be such as to render it

impossible for the debtor to fulfill his obligation in a normal manner.

Art. 1175. Usurious transactions shall be governed by special laws.

Usury – it is contracting for or receiving something in excess of the amount allowed by the law for the loan or us of money, goods, chattels, or credits.

Kinds of Interest:a. Given for compensation or use of the moneyb. Given by way of damages

Art. 1176. The receipt of the Principal by the creditor, without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid.

The receipt of a later installment of a debt withouth reservation as to prior installment, shall likewise raise the presumption that such installments have been paid.

Art. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save thoes which are inherent in the person; they may also impugn the acts which the debtor may have to defraud them.

Rights of Creditors:a. Exact paymentb. Exhausts debtors properties, generally by attachmentc. Accion subrogatoriad. Accion pauliana

Art. 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary.

Transmissibility of RightsRights are transmissible.Exeptions:

a. If the law provides otherwise;b. If the contract provides otherwise;c. If the obligation is purely persona

DIFFERENT KINDS OF OBLIGATIONSSection 1

Art. 1179. Ever y obligation whose performance does not depend upon a future or certain event, or upon a past event unknown to the parties, is demandable at one.

Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event.

Pure Obligation – one without a condition or a termConditional Obligation – When there is a condition.Condition – “it is an uncertain event which wields an influence on a legal relationship”.Term or Period – which necessarily must come whether the parties know when it will happen or not.

When an obligation is Demandable at Oncea. When it is pure;b. When it is a resolutory condition

Classification of Conditions1. Suspensive – the happening of the condition gives rise

to the obligation.2. Resolutory – the happening of the condtion

extinguishes the condition.3. Protestative – depends upon the will of the debtor.4. Casual – depends the chance or hazard or the will of a

third person.5. Mixed – depends partly on the will of one of the

parties and partly on chance or the will of a third person.

6. Divisible – capable of partial performance.7. Indivisible – not capable of partial performance

because of the nature of the thing.8. Positive – an act is to be performed.9. Negative – something will be omitted.10. Express – the condition is stated.11. Implied – the condition is merely inferred.12. Possible - capable of the fulfillment in nature and in

law.13. Impossible – not capable of fulfillment due to nature

or due to the operation of the law or morals or public policy.

14. Conjunctive – if all the conditions must be performed.15. Alternative – if only few of the conditions have to be

performed.

Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197.

Art. 1181. In conditional obligations, the acquistions of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

Suspensive Condition - – the happening of the condition gives rise to the obligation.Resolutory Condition - – the happening of the condtion extinguishes the condition.

Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provision of this Code. Protestative – depends on the exclusive will of one parties.Casual – depends on chance OR upon the will of a third person.

Protestative on the Part of the DEBTOR:If suspensive: voidIf resolutory: validProtestative on the part of the CREDITOR: valid

Art. 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid.

The condition no to do an impossible thing shall be considered as not having been agreed upon.

Classification:a. Impossible: physical- to make a dead man liveLogically – to make a circle that is the same timesquare

b. Illegal – prohibited by good customs, public policy, prohibited, directly or indirectly by law; like killing X, a friend.

EFFECTS:a. If condition is to do an IMPOSSIBLE or ILLEGAL thing:

VOIDb. If condition is NEGATIVE, not to do the impossible,

JUST REGARD the condition but obligation REMAINSc. If the condition is NEGATIVE, not to do the illegal

thing, condition and obligation are VALID.

Art. 1184. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or If it has become indubitable that the event will not take place. (Refers to POSITIVE Conditions)

Art. 1185. The condition that same event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur.

If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated bearing in mind the nature of the obligation. (refers to NEGATIVE Conditions)

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Rule: CONSTRUCTIVE or PRESUMED FULFILLMENTRequisites:

a. VOLUNTARILY madeb. Actually PREVENTS

Art. 1187.

Effects of Fulfillment of Suspensive Conditions:a. RETROACTS (as general rule) to the day the obligation

was constituted.b. No Retroactivity with reference only to:

1. Fruits or interest.2. Period of Prescription

No Retroactive Effects as to Fruits and Interest;a. Unilateral; debtors gets the fruits and interest unless

there is a contrary intent.b. Reciprocal; the fruits and interest during the pendency

of the condition shall be deemed to compensate each other.

SCOPE OF FRUITS:Fruits here refer to natural, industrial, and civil fruits (rent)

Art. 1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right.

The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition.

Bring appropriate actions – sue in courtOther appropriate actions:

a. Ask for security if the debtor is insolventb. Ask the court to prevent alienation or concealment.

Art. 1189. When then conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss, or deterioration;

1. If the thing is lost without the fault of the debtor, theObligation shall be extinguished;

2. If the thing is lost through the fault of the debtor, heShall be obliged to pay damages; it is understood that the when the thing is lost when perishes, or goes out of commerce, or disappear in such a way that its existence is unknown or it cannot be recovered;

3. When the thing deteriorates without the fault of the

The fault of the debtor, the impairment is to be bourne by the creditor;

4. If deteriorates through the fault of the debtor, theCreditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;

5. If the thing is improved at the expense of the debtor,He shall have no right than that granted to him usufractuary.

Loss – it is understood that the thing is lost;a. When it perishesb. When it goes our of commercec. When it disappears In such a way that its existence is

unknown.d. When it disappears in such a way that it cannot be

recovered.

Art. 1190:

Effects when Resolutory Condition is Fulfilleda. The obligation is extinguishedb. Because the obligation had been extinguished and

considered to have had no effect, the parties should restore to each other what they received.

c. Aside from the actual things received, the fruits or interests thereon should also be return.

d. The rules given n Art. 1189. Will apply to whoever has the duty to return in case of loss, deterioration, or improvement of the thing.

e. The courts are given power to determine the retroactivity of the fulfillment of resolutory conditions.

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case on of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Article 1385 and 1388 and the Mortgage Law.

Right to Rescind – right to cancel the contract or reciprocal obligation in case of nonfulfillment on the part of one.

Characteristic of the Right to Rescind or Resolve:a. It exists only in reciprocal obligation.b. It can be demanded only if plaintiff is ready, willing

and able to comly with his own obligation

Section 2OBLIGATIONS WITH A PERIOD

Art. 1193. Obligation for whose fulfillment a day certain has been fixed, and shall be demandable only when that day comes.

Obligations with a resolutory period take effect at one, but terminate upon arrival of the day certain.

A day certain is understood to be that which must necessarily come, although it may not to be known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional and it shall be regulated by the rules of the preceding Section.

Period – is a certain length of time which determines the effectivity or the extinguishmwnt of obligations

Period Distinguished from Conditiona. In their fulfillment

A condition is an uncertain event; but period is an event which must happen sooner or later.

b. Reference to time; A period always refers to the future, a condition may under the law refer even to the past.

c. As to influence of obligation;A condition causes an obligation arise or to cease, but a period merely fixes the time or the efficiaciousness of an obligation.

Different kinds of terms or Periods1. Definite – the exact date or time2. Indefinite – something that will surely happen,3. Legal – a period granted under the provision of law4. Conventional – period agreed by parties5. Judicial – the period or term fixed by the courts6. Ex die – a period with suspensive effect7. In diem – a period or term with a resolutory effect.

Requisites for a Valid Period or Term;a. It must refer to the future.b. It must be certain but can be extended.c. It must be physical and legally possible, otherwise the

obligation is void.

Art. 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in Art. 1189 shall be observed.

Art. 1195. Anything paid or delivered before thearrival of the period, the obligor being un nawware of the period or believeing that the obligation has become due and demandable, may be recovered, with the fruits and interests.

Art. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both the creditor anddebtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other.

Art. 1197. If the obligation does not fix period, but from its nature and cirtcumstance it can be inferred that a period was intended, the courts may fix the duration therof,

The courts shall also fix the duration of the period when it depends upon the will of the debtor.

In every case the courts shall determine such period as may under the crcumstances have been probably contemplated by the parties, once fixed by the courts, the period cannot be changed by them.

Art. 1198. The debtor shall lose every right to make use the of the period:

1. When after the obligation has been contracted,

Art. 1231. Obligations are extinguished:1. By Payment of Performance;2. By the loss of the thing due;3. By condonation or remission of the debt;4. By the confusion or merger of the rights of creditor

and debtor;5. By compensation;6. By novation.Other causes of extinguishment of obligation, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code.

SECTION 1 PAYMENT OR PERFORMANCE

Art. 1232. Payment means not only the delivery of money but also the performance, in any other manner, of an obligation.

Payment - mode of extinguishment of obligation which consist of;

a. Delivery of money orb. The performance in any manner of an obligation.

Art. 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be.

Requisites of valid Payment:a. The very thing or service contemplated must be paid.b. Fulfillment must be complete.

How Payment or Performance is Madea. If the debt is a monetary obligation, by the delivery of

the money.b. If the debt is the delivery of a thing or things, by the

delivery of the thing(s).c. If the debt is the doing of a personal undertaking, by

the performance of said personal undertaking.d. If the debt is not doing of something, by refraining

from doing the action.

Presentation of Receipts – means of proving payment

Art. 1234. If the Obligation has been substantially perfrormed in good faith, the obligor may recover as though there has been strict and complete fulfillment, less damages suffered by the obligee.

Substantial Performance – the obligee is benefited

Art. 1235. When the obligee accepts the performance, knowing its incompeleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with.

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor.

Right of Creditor to Refuse Payment by Third Person:The creditor can refuse payment by a stranger except:

a. If there is a stipulation allowing this;b. If the third person has an interest in the fulfillment of

the obligation.

Payment by the Third Person (BAR)The third person may pay:

a. With the knowledge and consent of the debtorThe payor is entitled to REIMBURSEMENT and SUBROGATION to such rights as guaranty, penalty clause, or mortgage.

b. Without the debtors knowledge or against his will. The payor is not entitled to subrogation; moreover he is allowed only for BENEFICIAL REIMBURSEMENT.

Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty.

Subrogation – means the act of putting somebody into the shoes of the creditor, hence, enabling the former to exercise all the rights and actions that could have been exercised by the latter.

Rights which may be Exercised by the Person Subrogated in the Place of the Creditor:

a. Mortgageb. Guaranty c. A penalty or penal clause

Subrogation Distinguished from ReimbursementSubrogation recourse can be had to guaranty or pledge; Reimbursement there is no recourse.Subrogation there is something more than personal action of recovery; Reimbursement only a personal action to recover the amount.

Art. 1238. Payments made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which requires the debtors consent. But the payment is in any case valid as to the creditor who has accepted it.

Art. 1239. In obligation to give, payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid, without prejudice to the provisions of Article 1427 under the Title on “Natural Obligations.”

Payment by an Incapacitated Person;a. Payment is not valid – if accepted;b. Creditor cannot even be compelled to accept it;c. The remedy of consignation would not be proper

Art. 1240. Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it.

Art. 1241. Payment to a person who is incapacitated to administer his property shall be valid if he has kept the thing delivered, or insofar as the payment has been beneficial to him.

Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor.such benefit to the creditor need to be proved in the following cases;

1. If after payment, the third person requires the creditors rights;

2. If the creditor ratifies the payment to the third person;

3. If by the creditors conduct, the debtor has been led to believe that the third person had authority to receive the payment.

Effect in General: Payment to the third party, the payment is valid BUT only to the extent of benefit to the creditor.

Art. 1242. Payment made in good faith to any person in possession of the credit shall release the debtor.

Art. 1243. Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid.

Garnishment – the proceeding by which a debtors creditor is subjected to the payment of his own debt to another

Interpleader – technical name of the action in which a certain person in possession of certain property wants claimants to litigate among themselves for the same.

Injunction – it is a judicial process by virtue of which a person is generally ordered to refrain from doing something.