OBLICON

ARTICLE 1290

When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation
of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors
are not aware of the compensation. (1202a)

- It extinguishes that the both debts up to the amount owed by each party
even if the creditors and debtors are not aware that compensation has take
the place.

Consent of parties not required in legal compensation.

- Once the all conditions for legal compensation are met it’s automatically by
operation of law. Even if the parties does not agree or are not aware of it.
Compensation extinguishes the debts involved up to the amount owed by
each party. It do not require any deliberate action from the parties and
happens as soon as the conditions are met.

Compensation, a matter of defense

- The compensation is automatic according to the law. It typically needs to be

raised as a defense in legal proceedings and once prove, its effects can
retroactively apply back to the day when all the necessary conditions for
compensation were met. This means that it can be applied from the moment
the requirements were fulfilled even if it's raised later in legal proceedings.

EX.

Ian owes Pot 200 Php with Sean as the guarantor. Pot owes Ian 200 Php. The obligation of guaranty is
extinguished by compensation and if the compensation is only partial and Ian cannot pay the balance
then Sean will be liable for the said balance.

REF: https://www.coursehero.com/file/12728881/Law/#:~:text=Example%3A%20A%20owes%20B
%201000,liable%20for%20the%20said%20balance.

ARTICLE 1291

Obligations may be modified by: Changing their object or principal conditions, Substituting the person of
the debtor, Subrogating a third person in the rights of the creditor.

Kinds of novation.

Legal. — Which takes place by operation of law (Arts. 1300, 1302; see Art. 1224.)

Conventional — Takes place by agreement of the parties. (Arts. 1300, 1301.)

According to how it is constituted

Express. — When it is so declared in unequivocal terms (Art. 1292.)

Implied. — When the old and the new obligations are essentially incompatible with each other. (Ibid.)

According to extent or effect

Total or extinctive. — When old obligation is completely extinguished

Partial or modifi catory. — When the old obligation is merely modified the change is merely incidental to
the main obligation.

According to the subject:

Real or objective. — When the object, (cause) or principal conditions of the obligation are changed (Art.
1291[1]

Personal or subjective. — When the person of the debtor is

substituted and when a third person is subrogated in the rights of the creditor

Mixed. — When the object or principal condition of the obligation and the debtor or the creditor or both
the parties are changed. It is a combination of real and personal novations.

EX:

Ian is a supplier of raw meat that wants to part with a business customer and might find another source
for the customer. If all customers agree the contract can be torn up and replaced with a new contract
that differs only in the name of Ian's.

REF: https://www.investopedia.com/terms/n/novation.asp#:~:text=To%20novate%20is%20to
%20replace,the%20name%20of%20the%20supplier.

ARTICLE 1292

In order that obligation may be extinguished by another which substitutes the same. It is imperative that
it be so declared in unmistakeble terms or that the old and the new obligations be on every point
incompatible with each other.

- It is extinguished by another that replaces it. There must be clear and cannot
be understood wrongly. Declaration or the old and new obligations must be
completely incompatible with each other in every aspect. This to ensures that
a clean and definitive substitution of one obligation to another.
Novation with respect to criminal liability.

It may prevent the rise of criminal liability as long as it occurs prior to the filing of the criminal
information in court. In other words, novation does not extinguish criminal liability but may only prevent
its rise.
Novation not presumed

While as a general rule there is no form of words or writing is necessary to give effect to a novation it
must be clearly and unmistakably established by express agreement or by the acts of the parties as
novation is never presumed

EX:

Contractual obligations are terms for all the parties commit to when they sign a contract. The most
common types of contractual obligations include delivery, timelines, payment terms.

REF: https://www.pandadoc.com/blog/contractual-obligation/#:~:text=Contractual%20obligations
%20are%20the%20terms,compete%20and%20non%2Ddisclosure%20obligations.

ARTICLE 1293

Novation which consists in substituting a new debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but not without the consent of the creditor.
Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237.

- It involves substituting a new debtor for the original one it can occur even
without the knowledge or against the will of the original debtor but it requires
the consent of the creditor.

Kinds of personal novation.

1.Substitution - When the person of the debtor is substituted or replacement of original debtor with a
third party

2.Subrogation - When a third person is subrogated in the rights of the creditor or when a one party takes
on the legal rights of another especially substituting one creditor for another.

Kinds of Substitution

1.Expromision which takes place when a third person of his own initiative and without the knowledge or
against the will of the original debtor assumes the latter’s obligation with the consent of the creditor.

EX:

Mr Ian is the original debtor, Mr Pot is the third person while Mr Sean is the creditor Mr. Pot fulfilled Mr
Ian's obligation without the knowledge of Mr. Ian but with the consent of Mr. Sean.

REF: https://www.coursehero.com/file/144489845/Article-1293-1294docx/

ARTICLE 1294

If the substitution is without the knowledge or against the will of the debtor, the new debtor's insolvency
or non-fulfillment of the obligation shall not give rise to any liability on the part of the original debtor. of
public knowledge nor known to Juan, then Juan is not liable.
If the substitution of debtor occurs without the knowledge or against the will of the
original debtor and the new debtor later becomes insolvent or fails to fulfill the
obligation the original debtor cannot be held as liable.

Effect of new debtor’s insolvency or non fulfillment of obligation

In expromision. — Under Article 1294, the new debtor’s insolvency or non fulfillment of the obligation
will not revive the action of the creditor against the old debtor whose obligation is extinguished by the
assumption of the debt by the new debtor. Remember that in expomision, the replacement of the old
debtor is not made at his own initiative. It would seem that even if the substitution is with the
knowledge or consent of the original debtor, he is no longer liable. Article 1295 applies if the new debtor
“has been proposed by the original debtor and accepted by the creditor.’’

(2) In delegation. — Article 1295 refers to delegation. It must be noted that the article speaks only of
insolvency. If the non fulfillment of the obligation is due to other causes the old debtor is not liable. The
general rule is that the old debtor is not liable to the creditor in case of the insolvency of the new debtor.

EX:

Ian had a debt and he must pay any one of the solidary creditors but if any demand, judicial or
extrajudicial has been made one of them the payment should be made to him. It is a must pay separately
and pay to the one who notified the latter first.

REF: https://www.scribd.com/document/488715159/LAW-ON-OBLIGATIONS-AND-CONTRACTS-
EXPLANATION-AND-EXAMPLE-ART-1212-1218#:~:text=Article%201214.,should%20be%20made%20to
%20him.&text=must%20pay%20separately%20and%20pay%20to%20the%20one%20who%20notified
%20latter%20first.