C1.M2.L1 Em121 PDF

Module No.
and Title MODULE 2 Extinguishment of Obligations
Payment or Performance
LEARNING OUTCOMES
At the end of this lesson, the students will be able to do the following:
Know when an obligation is terminated through payment or
performance of the debtor
Understand the concept of payment or performance in
extinguishing obligations.
INTRODUCTION:
In this lesson, we will be discussing the first mode of extinguishing an
obligation – payment or performance. Moreover, we will know what payment
means in the legal realm.
Study the scrambled letters and rearrange the letters to
form a word.
HKIO00OKM
1. BDET
___________________
2. DCRETI
___________________
3. YPAMNTE
___________________
4. FRANCMREPO
___________________
5. GHSIUXETNI
___________________
Eyes here
When I say payment,

do you think money is
always involved?
ABSTRACTION
Art. 1231, CC. Obligations are extinguished:
1. By payment or performance;
2. By loss of the thing due;
3. By the 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.
xxx
Art. 1232, CC. Payment means not only the delivery of money but also the performance,
in any other manner, of an obligation.
- Payment
o As a legal mode of extinguishing an obligation, payment may consist of not
only in the delivery of money but also the giving of a thing (other than money),
the doing of an act, or not doing of an act.
Article 1233, CC. 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.
- A debt may refer to an obligation to deliver money, to deliver a thing other than money,
to do an act, or not do an act.
o It is considered paid when the thing or service has been completely delivered
or rendered. Partial or irregular performance will not produce the
extinguishment of an obligation as a general rule.
o However, if the obligation has been substantially performed in good faith, the
obligor may recover as though there had been a strict and complete fulfillment.
o Another exception is that when the obligee accepts the performance, knowing
its incompleteness or irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.
o 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.
▪ If the payment is without the knowledge or against the will of the
debtor, the third party payer can recover from the debtor only insofar
as the payment has been beneficial to the latter.
▪ If made with the knowledge of the debtor, the third party payer shall
the rights of reimbursement and subrogation, that is, to recover what
he has paid and to acquire all the rights of the creditor.
▪ If the third party payer does not intend to be reimbursed by the debtor,
the payment to the creditor is deemed to be a donation, which requires
the debtor’s consent. But the payment is in any case valid as to the
creditor who has accepted it.
o The debtor of a thing cannot compel the creditor to receive a different one,
although the latter may be of the same value as, or more valuable than that
which is due. In obligations to do or not to do, an act or forbearance cannot be
substituted by another act or forbearance against the obligee’s will.
o He who has various debts of the same kind in favor of one and the same
creditor, may declare at the time of making the payment, to which of them the
same must be applied. Unless the parties so stipulate, or when the application
of payment is made by the party for whose benefit the term has been
constituted, application shall not be made as to debts which are not yet due.
o If the debt produces interest, payment of the principal shall not be deemed to
have been made until the interest have been covered.
▪ The rule is mandatory. However, still subject to any agreement
between the parties, or to waiver by the creditor.
o The debtor may cede or assign his property to his creditors in payment of his
debts. This cession, unless there is stipulation to the contrary, shall only release
the debtor from responsibility for the net proceeds of the thing assigned. The
agreements which, on the effect of the cession, are made between the debtor
and his creditor shall be governed by special laws.
o If the creditor to whom tender of payment has been refused without just cause
to accept it, the debtor shall be released from responsibility by the consignation
of the thing or sum due.
▪ Consignation alone shall produce the same effect in the following
cases:
a. When the creditor is absent or unknown, or does not appear at the
place of payment;
b. When he is incapacitated to receive the payment at the time it is
due;
c. When, without just cause, he refuses to give a receipt;
d. When two or more persons claim the same right to collect;
e. When the title of the obligation has been lost.
▪ Tender of payment means an act, on the part of the debtor, of offering
to the creditor the thing or amount due.
▪ Consignation is the act of depositing the thing or amount due with the
proper court when the creditor does not desire or cannot receive it,
after complying the formalities required by law:
a. Existence of a valid debt which is due
b. Tender of payment by the debtor and refusal without justifiable
reason by the creditor to accept it
c. Previous notice of consignation to persons interested in the

fulfillment of the obligation
d. Consignation of the thing or sum due
e. Subsequent notice of consignation made to the interested parties.
Discussion:
1. When is partial performance of an obligation allowed?
2. What must a debtor do to be released from his obligation if the creditor refuses to
accept payment without any justifiable reason?
Well done for finishing your first lesson for

this subject!
If you are ready, please proceed to Lesson 2 for Module 2.
4

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Module No.

and Title MODULE 2 Extinguishment of Obligations

When I say payment,

o The creditor is not bound to accept payment or performance by a third person

c. Previous notice of consignation to persons interested in the

Well done for finishing your first lesson for

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