LAW ON OBLIGATIONS

- A juridical necessity to give (real), to do, or not to do (personal) (Art. 1156)

- All are transmissible (except by nature, stipulation, or law)

Elements of an Obligation
● Active subject (Creditor) – whose favor the obligation is constituted
● Passive subject (Debtor) – one required to perform
● Prestation – subject matter
● Vinculum Juris (Juridical Tie) – reason why obligation exists; source of obligation

Sources of Obligation – double recovery from a single act is not allowed

● Law (ex-lege) – those expressly determined in the civil code or special laws (e.g., to give support, to pay taxes)
● Contracts (ex-contractu) – meeting of minds between 2 persons
● Quasi-contracts (ex-quasicontractu) – no one shall be unjustly enriched at the expense of another
o Negotiorum Gestio – whoever voluntarily takes charge of the agency/management of another, without
any power from latter, is obliged to continue the same or to require the person concerned to substitute
him; property must be neglected or abandoned, except during emergencies
o Solutio Indebiti – undue delivery through mistake when there is no right to demand it
Note: When 2 or more officious managers, liability shall be solidary even when problem states just
jointly.
o Funeral Expenses – reimburse the third person by those obliged to give support
● Delicts (ex-delicto) – act or omission punishable by law
o Criminal Liability – proof beyond reasonable doubt
o Civil Liability – preponderance of evidence; every person criminally liable is also civilly liable
o Subsidiary Liability of Employers – employee commits act while in the performance of his duties
● Quasi-delicts (ex-quasidelicto) – act or omission causes damage to another, there being fault or negligence.

Kinds of Obligations
1. As to Enforceability
● Civil – give a right of action to compel performance
● Natural – do not grant right of action
o Prescription
o Voluntary payment/reimbursement/performance

2. As to Perfection and Extinguishment

1. Pure Obligations – an obligation whose performance does not depend upon a future or uncertain event, or upon
a past event unknown to the parties (Art. 1179)
2. Conditional Obligation – the acquisition 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 (Art. 1181)
3. Obligation with a Period – obligation for whose fulfillment a day certain, or understood to be that which must
necessarily come although it may not be known when, has been fixed (Art. 1193)

Condition – a future and uncertain event, or past but unknown, upon the happening of which, the effectivity or
extinguishment of an obligation (or right) subject to it depends
Classification of Conditions
● As to effect
o Suspensive – the happening of which gives rise to the obligation (or right)

o Resolutory – the happening of which extinguishes the obligation (or right) already existing

● As to cause or origin
o Potestative – condition depends upon the will of one of the contracting parties
▪ suspensive + will of the debtor = void; if obligation is a pre-existing one, only the condition is
void leaving unaffected the obligation itself (Art. 1182).
▪ will of the creditor = valid
o Casual – condition depends upon chance or upon the will of a third person
o Mixed – condition depends partly upon chance and partly upon the will of a third person
● As to possibility
o Possible – capable of fulfillment, legally and physically
o Impossible – not capable of fulfillment, legally or physically (Art. 1183)
▪ Positive Condition: both the obligation and the condition are void
▪ Negative Condition: condition is not to do an impossible thing, disregard as if fulfilled
▪ Divisible Obligation: the part thereof not affected by the impossible condition shall be valid
▪ Pre-existing Obligation: only the condition which is impossible is void
● As to mode
o Positive – condition consists in the performance of an act

o Negative – condition consists in the omission of an act

Art. 1186. Constructive Fulfillment – a condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment

Art. 1187. Effects of Fulfillment of Suspensive Condition

● Obligation to give: Obligation should be considered from the time it is constituted and not from the time the
condition is fulfilled. As to fruits and interests;
o in reciprocal obligations, there is no retroactivity because the fruits and interests during the pendency of
the condition shall be deemed to have been mutually compensated.
o in unilateral obligations, there is usually no retroactive effect because they are gratuitous, unless it may
be inferred that the intention of the person constituting the same was different.
● Obligation to do or not to do: The courts shall determine, by the use of sound discretion and bearing in mind the
intent of the parties, the retroactive effect.
Art. 1188. Rights Pending Fulfillment of Suspensive Condition
● Rights of Creditor – before the fulfillment of the condition, bring the appropriate actions for the preservation of
his right

● Rights of Debtor – recover what he has paid by mistake prior to the happening of the condition.

Art. 1189. Rules in case of loss, deterioration, or improvement of thing during pendency of suspensive condition
WITHOUT DEBTOR’S FAULT THROUGH DEBTOR’S FAULT
LOSS OF THING – it is understood Obligation shall be extinguished. A Debtor is obliged to pay damages.
that a thing is loss when it perishes person, as a general rule, is not liable
(physical loss), goes out of for a fortuitous event
commerce (legal loss), or disappears
in such a way that its existence is
unknown or cannot be recovered
(civil loss)
DETERIORATION OF THING Impairment is to be borne by the Creditor may choose between (1)
creditor. rescission or (2) fulfillment, with
indemnity for damages in either case.
BY NATURE / TIME AT EXPENSE OF DEBTOR
IMPROVEMENT OF THING – value is Improvement shall inure to the benefit Debtor shall have no other right than

increased or enhanced of the creditor. that granted to the usufructuary.

Art. 1190. Effects of Fulfillment of Resolutory Condition

● Obligation to give: Obligation is extinguished and the parties are obliged to return to each other what they have
received under the obligation including fruits and interests, except when the intention of the parties is
otherwise.
● Obligation to do or not to do: The courts shall determine, by the use of sound discretion and bearing in mind the
intent of the parties, the retroactive effect.

Art. 1191. Remedies in case of breach by one of the contracting parties.

● Fulfillment with payment of damages
● Rescission with payment of damages, subject to the ff limitations:
o Resort to the courts – rescission should be one granted by a court; cannot be extrajudicially
o Power of court to fix period – a person in default may be granted a term or period for the performance
of his obligation
o Right of third person – if the subject matter of the obligation is in the hands of a third person who acted
in good faith, rescission is not available as a remedy
o Substantial violation – rescission will not be granted for slight breaches of contract
o Waiver of right – may be expressly or impliedly

Art. 1192. Remedies in case of breach by both parties

● First infractor known – liability of the first infractor should be equitably reduced
● First infractor cannot be determined – contract shall be deemed extinguished and each shall bear his own
damages

Art. 1193. Obligations with a Period

Period – a future and certain event upon the arrival of which the obligation subject to it either arises or is extinguished
(e.g., death)
● Suspensive Period (Ex die) – obligation begins only from a day certain upon the arrival of period
● Resolutory Period (In Diem) – obligation is valid up to a day certain and terminates upon arrival of the period

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

Art. 1195. Payment before arrival of period

● Debtor unaware of the period: Anything paid or delivered may be recovered, with the fruits and interests. If the
debt has matured, right to recovery is only for interests.
● Debtor aware of the period: This is the presumption. Debtor has no right to recovery.

Art. 1196. Benefit of Period

● Presumption: Period is established for the benefit of both the creditor and debtor. This means that before the
expiration of the period, debtor may not fulfill the obligation neither may the creditor demand its fulfillment
without consent of the other
● Exceptions to the rule: Tenor of the obligation may show that it was the intention of the parties to constitute the
period for the benefit of one party.

Art. 1197. When court is authorized to fix the duration of the period:
● No period is fixed but a period was intended
● Duration of the period depends upon the will of the debtor
● Resolution in reciprocal obligations when one party is ready to deliver

Art. 1198. When debtor shall lose every right to make use of the period:
● He becomes insolvent after the obligation has been contracted, unless he gives a guaranty or security for the
debt;
● He does not furnish guaranties or securities promised;
● By his own acts, guaranties or securities given have been impaired or disappeared;
● He violates an undertaking; or
● He attempts to abscond

PERIOD AND CONDITION DISTINGUISHED

PERIOD CONDITION
Certain event Uncertain event
Refers only to the future May refer to a past event unknown to parties
Merely fixes the time for efficaciousness of the Causes an obligation either to arise or to cease
obligation
When left to debtor’s will, court can fix the duration When left to debtor’s will, condition is void
Does not have any retroactive effect, unless there is Has a retroactive effect
agreement to the contrary

II. AS TO PLURALITY OF PRESTATION

● Single Obligation – only one prestation
● Compound Obligation – two or more prestation
o Conjunctive – there are several prestations and all of them are due
o Distributive – two or more of the prestations is due
▪ Alternative – several prestations are due but the performance of one is sufficient (Art. 1199)
 ▪ Facultative – only one prestation is due but debtor may substitute another (Art. 1206); choice is
always from debtor
Art. 1200. Right of Choice – generally belongs to the debtor subject to the ff limitations:
● If prestation is impossible, unlawful, or could not have been the object of the obligation, the prestation is void.
● Choice cannot be part of one prestation and part of another (Art. 1999).
● No right of choice when, among the prestations, only one is practicable (Art. 1202).
● Right of choice belongs to the creditor if it has been expressly granted to him.
● Choice must be communicated, technically called concentration

Art. 1201. The choice shall produce no effect except from the time it has been communicated.

Art. 1204. Effect of Loss on Alternative Obligations (Right of Choice: Debtor)

FORTUITOUS EVENT FAULT OF DEBTOR FAULT OF CREDITOR
(Art. 1203)
SOME WERE LOST Deliver remaining Deliver remaining Fulfillment + Damages /
ALL WERE LOST Obligation is extinguished Value of last prestation + Rescission + Damages
Damages

Art. 1205. Effect of Loss on Alternative Obligations (Right of Choice: Creditor)

FORTUITOUS EVENT FAULT OF DEBTOR
SOME WERE LOST Demand from remaining Price of that which was lost + Damages /
Demand from remaining + Damages
ALL WERE LOST Obligation is extinguished Value of any + Damages

Art. 1206. Effect of Loss on Facultative Obligations

BEFORE SUBSTITUTION AFTER SUBSTITUTION
PRINCIPAL THING Extinguished Not extinguished
SUBSTITUTE THING Not Extinguished Extinguished

III. AS TO RIGHTS AND OBLIGATIONS OF MULTIPLE PARTIES

● Individual Obligation – only one obligor and one obligee
● Collective Obligation – two or more debtors and/or two or more creditors
o Joint – obligation is to be paid/fulfilled/demanded proportionately by the different debtors and/or
creditors (e.g., mancum, mancomunada, we promise)
o Solidary – each one of the debtors/creditors is bound to render/demand entire compliance with the
prestation (e.g., by contract or surety, juntos o separadamente, separately, together, jointly and
individually, i promise)

Solidary Obligation
a) Exists only when expressly stated, or when the law or the nature of the obligation requires (Art. 1207);
a. Heirs take possession of estate
b. Agent has exceeded his authority and principal allowed the latter to act
c. Bail loan contracts
d. Solutio indebiti
e. Quasi-delicts
b) Is not presumed (Art. 1208);
c) Does not imply indivisibility nor does indivisibility give rise to solidarity (Art. 1210);
d) Is not affected by diverse stipulations (Art. 1211);

Enforcement of Solidary Obligation

a) Acts of Solidary Creditor:
o may do acts useful but not prejudicial to others (Art. 1212)
 o he cannot assign his rights without consent of others (Art. 1213)
b) Payment of Debtor to Solidary Creditors: may pay any one of the solidary creditors but if any demand has been
made by one of them, payment should be made to him (Art. 1214)
c) Payment of Solidary Debtor to Creditors:
o creditor may proceed against any one of the solidary debtors or some or all of them simultaneously (Art.
1216).
o solidary debtor who made the payment may claim from his co-debtors the share which corresponds to
each, with interest if applicable (Art. 1217)
o when one of the co-debtors is insolvent, his share shall be borne by all his co-debtors, pro rata (Art.
1217)
o solidary debtor is not entitled to reimbursement if such payment is made after the obligation has
prescribed or become illegal (Art. 1218)
d) Novation, Compensation, Confusion, or Remission of the Debt:
o creditor who executed the act shall be liable to others for their share (Art. 1215)
o if payment is made first, the remission or waiver is of no effect (Art. 1219)
o in case of remission, there is no right to reimbursement (Art. 1220)
e) Rules in case of Lost or Prestation becomes impossible (Art. 1221):
o without fault and before delay – obligation is extinguished
o with fault on any one of the solidary debtors – all shall be responsible for the price, damages, and
interests without prejudice to their action against the guilty debtor
o without fault but after delay – all shall be responsible for the price, damages, and interests without
prejudice to their action against the guilty debtor
f) Defenses Available to a Solidary Debtor (Art. 1222):
o Nature of the Obligation: payment of virtue, prescription, illegality
o Defenses Personal to Debtor: incapacity, minority, violence
o Defenses Personal to Other Solidary Debtors (partial defense)

Enforcement of Joint Obligations

● Demand by one creditor produces the effects of default only with respect to creditor who demanded and whom
demand was made
● Interruption of prescription does not benefit other creditors
● Partial payment does not stop the running of the statute of limitations
● Insolvency does not increase the responsibility of co-debtors

IV. AS TO PERFORMANCE OF PRESTATION

● Divisible Obligation – by their nature are susceptible of partial performance (Art. 1225); or capable of being
measured
● Indivisible Obligation – obligations (1) to give definite things, (2) those which are not susceptible of partial
performance, (3) provided by law, or (4) intended by parties to be indivisible (Art. 1225)

When with multiple parties:

● Joint Indivisible
o joint as to liabilities (rights) of the debtors (creditors) but indivisible as to compliance (Art. 1209)
o debt can be enforced only by proceeding against all debtors; same principle applies to creditors
o should any one of the debtors be insolvent, others shall not be liable (Art. 1209)
o liability is converted into one for damages from the time anyone of the debtors does not comply (Art.
1224)
● Solidary Indivisible – not presumed
o even the innocent debtor can be made liable for damages but is given the right to reimbursement from
the debtor at fault
 Indivisibility Solidarity

refers to prestation refers to juridical tie

exists even if there is only one debtor and one creditor exists only if there are two or more debtors or creditors

each is not bound more than his share each is bound for entire obligation

in case of breach, converted into one for damages in case of breach, solidary character remains

only debtors guilty is liable for damages all debtors are liable for damages

others are not liable for other debtor’s share all other debtors are liable for other debtor’s share

V. OBLIGATIONS WITH A PENAL CLAUSE

Penal Clause – an accessory undertaking attached to an obligation to assume greater liability in case of breach

Rules:
1. Penalty shall substitute indemnity for damages and interests in case of breach, except when (Art. 1226):
o stipulated by the parties;
o obligor refuses to pay the penalty; or
o obligor is guilty of fraud
2. Penalty cannot be substituted for performance except when expressly reserved (Art. 1227).
3. Creditor cannot demand fulfillment of obligation and satisfaction of penalty at the same time, unless (Art. 1227):
o clearly granted
o the fulfillment should become impossible without creditor’s fault
o there was fraud on part of the debtor
4. Proof of damages is not necessary for penalty to be demanded except when damages may be recovered in
addition to penalty (Art. 1228).
5. Courts shall equitably reduce penalty when (Art. 1229)
o there is partial or irregular performance
o penalty agreed upon is iniquitous or unconscionable
6. The nullity of the penal clause does not carry with it that of the principal obligation, but the nullity of the
principal obligation carries with it that of the penal clause (Art. 1230).

Obligation to Give a Specific/Determinate Thing

● Take care of it with the proper diligence of a good father of a family, unless another care (e.g., for banks) is
stipulated
● Creditor has personal right to the fruits when obligation arises. Real right (ownership) is acquired when the same
has been delivered
o Natural Fruits – product of the soil without cultivation
o Industrial Fruits – require human intervention
o Civil Fruits – results from juridical relations (e.g., rentals, interests)
● Delivering all its accessions and accessories, even though they may not have been mentioned (not applicable for
generic thing)
o Accessories – not attached; included with the principal for the latter’s perfection (e.g., key to a house)
o Accessions – attached; additions or improvements (e.g., alluvium, building constructed on land)

Remedies in case of Breach

● To give determinate thing – specific performance only; substitute performance is not possible
● To give generic thing – specific or substitute performance plus damages
● Obligation to do – substitute performance only since forcing the obligor would violate involuntary servitude
 ● Obligation not to do – have it undone

Kinds of Damages – always an available remedy in case of nonperformance; only awarded if proven
● Moral – for mental and physical anguish; only liable if there is bad faith
● Exemplary – corrective or to set an example; in such case, attorney’s fees are allowed
● Nominal – vindicate a right when no other kind of damages may be recovered
● Temperate – when exact amount of damage cannot be determined
● Actual – actual losses incurred; requires actual proof
● Liquidated – predetermined by the parties beforehand; same as penalty

Specific Circumstances Affecting Obligations

1. Fraud (Dolo) – through insidious words or machinations of one, the other is induced to enter into a contract
● Dolo Causante – fraud in obtaining consent, making the contract voidable; remedy is annulment (e.g.,
misrepresentations in application for insurance)
● Dolo Incidente – committed while performing the obligation; makes the party liable for damages (e.g, tax
evasion)
Fraud Negligence

waiver for future fraud is void (if past fraud, valid) waiver for future negligence may be valid

liability cannot be mitigated liability can be mitigated

2. Negligence (Culpa) – omission of that diligence which is required

Culpa Contractual Culpa Aquiliana Culpa Criminal

breach of contract civil negligence/quasi-delict commision of crime/delict

merely incidental to performance direct, substantive, and independent

of obligation

prima facie evidence is contract negligence must be proved proof beyond reasonable doubt
and its breach (preponderance)

liability of employer conclusively liability of employer prima facie employee’s guilt automatically the
presumed presumed employer’s guilt if former is
insolvent

due diligence in due diligence in due diligence in

selection/supervision of selection/supervision of selection/supervision of
employees not available as employees available as defense employees not available as
defense defense

e.g., driver-passenger e.g., driver-passerby e.g., drive to passenger or

passerby

3. Delay (Mora) – those obliged incur in delay from the time the obligee judicially or extrajudicially demands; no demand,
no delay, except when
● Express stipulation (not the due date alone)
● Law expressly declares (e.g., liability of a partners to a partnership)
● Time is a controlling motive (e.g., wedding cake)
 ● Demand would be useless (e.g., loss of the thing due)
● In reciprocal obligations, when one party is not ready
● Mora Solvendi – delay on the part of the debtor
o ex re – to give
o ex persona – to do
● Mora Accipiendi – delay on the part of the creditor
● Compensatio Morae – delay on the part of both parties
4. Breach (Violatio) – any illicit act which impairs the strict and faithful fulfillment of the obligation
5. Fortuitous Events – extraordinary events not foreseeable or avoidable (acts of God); no person shall be responsible for
these events except when:
● Stipulations
● Nature of the obligation (e.g., insurance)
● Specified by law
● Negligence, delay, or fraud concurred with
● Obligations arising from a criminal offense, unless in mora accipiendi
● Obligations to give a generic thing, except in cases of limited generic
Elements:
● Independent of human will
● Impossible to avoid
● Occurrence renders it impossible for debtor to fulfill in a normal manner
● Obligor must be free from any participation in the aggravation of the injury

Modes of Extinguishment of Obligations

1. Payment/Performance
● Rules as to the Payor
With consent of the Without
debtor/With interest knowledge/consent of the
debtor

Compel the creditor to accept payment Yes No

Subrogation to the rights of the creditor Yes No

Amount of Reimbursement Full Beneficial Reimbursement

Note: Payor should have capacity to alienate and the free disposal of the thing due for payment to be
effective, otherwise no right to recover (e.g., minors cannot make a valid payment). With regards to
incapacitated payee, it is valid if he has kept the thing delivered.
● Rules as to the Payee – payment may be made to
o Person in whose favor the obligation has been constituted (not necessarily the creditor)
o His successor in interest
o Any person authorized to receive
o Third party if it redounds to the benefit of the creditor; need not be proven if
▪ Subrogation – After payment, third person acquires creditor’s rights
▪ Ratification – Creditor ratifies the payment to the third person
▪ Estoppel – By the creditor’s conduct, debtor has been led to believe that the third person had
authority to receive
▪ Third party is in possession of the credit
● Rules as to the Thing to be Paid or Delivered
o Delivery of a specific thing – cannot compel the creditor to receive a different one
o Delivery of a generic thing – creditor cannot demand a thing of superior quality, neither the debtor
deliver a thing of inferior quality
o Obligations to do or not to do – cannot be substituted by another act or forbearance against the
obligee’s will
 o Extraordinary Inflation or Deflation – must be contractual to affect obligation, with declaration from BSP
or parties expressly agreed; otherwise, value is at the time obligation was established
● Rules in payments of debts of money
o Shall be made in currency stipulated > Legal Tender
▪ Bills – no limit
▪ P1 coins and above – amount not exceeding P1000
▪ Coins below P1 – not exceeding P100
o Negotiable instruments and checks (not legal tender)
▪ at the time it is encashedP1 coins and above
▪ value becomes impaired through fault of creditor
● Place of Payment/Performance – default rule is place agreed upon by the parties; if none
o Delivery of a determinate thing – wherever the thing might be at the moment the obligation was
constituted
o Any other case – domicile of the debtor; if debtor changes domicile in bad faith, additional expenses
shall be borne by him
● Special Forms of Payment
o Dation in payment (Dacion en pago) – actual delivery of a thing or right as an accepted equivalent of the
performance of the obligation to the extent of the value of the thing delivered except with express or
implied agreement by silence
▪ Animo Solvendi – performance of the prestation in lieu of payment
▪ Aliud Pro Alio – difference between prestation due and that which is given in substitution

▪ Agreement between creditor and debtor that obligation is immediately extinguished

o Application of Payments – designation of the debt; one debtor, with insufficient funds, has several debts
of the same kind due (except when parties agree otherwise) to one creditor
▪ Right to apply payment – generally, the debtor subject to the ff limitations
● Creditor cannot be compelled to accept partial payment
● Apply first to interest then principal – thus, could be deemed paid
● Debt must be liquidated
● When there is agreement
Note: For installments, receipt of later is a presumption that prior installments are paid.
For delayed payments, no objections from payee is deemed complied with
▪ If debtor did not designate, right transferred to creditor
▪ If both did not designate
● Debts are of different nature and burden – debt which is most onerous to the debtor
● Debts are of the same nature and burden – applied proportionately
o Cession/Assignment – debtor, who is insolvent, delivers to all his creditors all his properties for the
purpose of selling and applying the proceeds to settle the obligation; no transfer of ownership
▪ Voluntary/Conventional – extent of extinguishment is only up to the amount of proceeds
▪ Judicial – governed by FRIA; all obligations are extinguished

o Tender of Payment – manifestation made by the debtor to the creditor of his desire to comply with his
obligation; preparatory act to consignation; does not extinguish obligation (not applicable for rights)
o Consignation – deposit of the object in a competent court after tender of payment has been refused or
direct payment to the creditor is impossible and with notice of consignment before and after;
extinguishes obligation (not applicable for rights); allowed even without tender of payment when
▪ Creditor is absent or unknown or does not appear at the place of payment
▪ He is incapacitated to receive the payment at the time it is due
▪ Without just cause, he refuses to give a receipt
▪ Two or more persons claim the same right to collect
 ▪ Title of obligation has been lost

2. Loss of the Thing or Impossibility of Performance – goes out of commerce, perishes, or disappears
● Partial Loss: courts shall determine; test is whether the parties would not have entered into the obligation
without the thing
● Presumption of Fault: Debtor’s fault if the thing is lost in his possession
● Impossibility: extinguishes the obligation when impossibility happened during the existence of the obligation
● Difficulty of Performance: courts shall determine to release debtor from obligation but not to modify terms
● Creditor’s Right – creditor shall have all the rights of action which the debtor may have against third persons

3. Condonation/Remission – creditor, with capacity and not inofficious, renounces the obligations; must be totally
gratuitous in character
● Express – made formally and should comply with the formal requisites of a donation
o Acceptance of the debtor
o If movable property, oral donation requires the simultaneous delivery
o If movable property exceeds 5K, shall be made in writing
o If immovable property, must be in a public document
● Implied – it can only be inferred from the acts of the parties
o Delivery of the promissory note (or private document evidencing credit) to the debtor
o Voluntary Destruction
o Cancellation of the evidence of credit with intent to renounce the right
o As to pledge, if after delivery it is found in the possession of the debtor
● Inter Vivos – during the lifetime of the creditor
● Mortis Causa – will take effect upon death which must be done through a will

4. Confusion/Merger – person is both creditor and debtor

● Must take place between the creditor and principal debtor
● Must involve the very same obligation
● Must be total

5. Compensation (Quits) – obligations of those persons who in their own right are reciprocally creditors and debtors of
each other; at least one obligation shall be extinguished
● Mutual principal debtors and creditors in their own right
● Both debts must be due (not necessarily at the same time)
● Both debts must be liquidated
● Must pertain to sums of money, or if consumables, must be of same kind and quality
● Must be clearly demandable (i.e., no controversy)
● If there is assignment, only if right to compensation is reserved or if there is no knowledge about the assignment
Not proper if
● Depositum/Commodatum – as to the depositary; same specific thing
● Bail – as to the bailee
● Legal Support – as to the one giving support if it is required for purposes of sustenance or survival except support
in arrears and those contractual in nature
● Penal Offense

6. Novation (Modification) – old obligation is extinguished by the new one but conditions are carried over
Requisites
● Previous Valid Obligation
● New Contract
● Extinguishment of Old Contract
● Validity of the New Contract
Kinds
 ● Objective/Real – changing the object or principal conditions (express or implied with clear proof of
incompatibility); test is whether two obligations can stand together
● Subjective/Personal – changing the person
o Subrogation (Active) – by agreement or by law; same rules with third party payor; preference on original
creditor
▪ Creditor pays another creditor who is preferred even without debtor’s knowledge
▪ Third person not interested pays with the approval of debtor
▪ Person interested pays without prejudice without the knowledge of debtor
o Substitution (Passive) – must have consent from creditor
Reimbursement Insolvency of new debtor
(delegado)

Expromision Without the To the extend the debtor Old debtor not liable
knowledge/consent of was benefited
debtor

Delegacion With knowledge/consent Full Amount Old debtor still liable if

of the debtor (delegante) insolvency was already
but without any objections existing (public knowledge
or known to debtor)

Rules on Prescription
● Movables – 8 years from possession
● Immovables – 30 years
● Mortgage Action – 10 years
● Sources of Obligation
○ Law/Judgement – 10 years
○ Written Contract – 10 years
○ Oral Contract – 6 years
○ Quasi-Contract – 6 years
○ Defective Contracts — 4 years
○ Quasi-delict/Injury – 4 years
● Forcible Entry/Detainer or Defamation – 1 year
● Warranties
○ Express – 4 years
○ Against Hidden Defects – 6 months
○ Redhibitory Defects – 40 days
○ Non-Apparent Encumbrances – 1 year
● Other actions – 5 years
● No Prescription
○ Demand a Right of Way
○ Aate a Public/Private Nuisance

Some more RFBT Terms:

● Accion Directa – right of lessor to go directly to sublessee for unpaid rents of lessee
● Accion Reivindicatoria – recover a parcel of land as an element of ownership
● Accion Publiciana – recover right of possession which should be brought in the proper RTC when dispossession
has lasted for more than one year