Extinguishing Obligations: Civil Code

Modes of Extinguishing Obligations

• Obligations are extinguished through various means as outlined in Article 1231 of the Civil Code.
• These include payment, loss of the thing due, condonation or remission of debt, confusion or merger of rights, compensation, and novation.
• Additional causes include annulment, rescission, fulfillment of a resolutory condition, and prescription, governed elsewhere in the Code.

Payment or Performance

• Payment is not only the delivery of money, but the performance of the obligation.
• A debt is considered paid once the complete delivery or rendering of the agreed service or thing has been fulfilled.
• Payment must be made to the person who the obligation has been constituted in favor of, their successor in interest, or any authorized person.

Special Forms of Payment include:

• Dation in payment: Property alienation to the creditor in satisfaction of a money debt, governed by sales laws.
• Payment by cession: Debtor cedes or assigns property to creditors, releasing the debtor from responsibility for net proceeds, unless otherwise stipulated.
• Agreements on cession's effects are governed by special laws.
• Tender of payment and consignation: Debtor can be released if the creditor refuses a valid tender of payment without cause via consignation.

Consignation Details

• Consignation alone has the same effect as payment when the creditor is absent/unknown, incapacitated, refuses receipt without cause, has multiple claimants, or the obligation title is lost.
• For consignation to release the obligor, it must be announced to interested parties and strictly adhere to payment regulations.
• Consignation is made by depositing the due items under judicial authority, proving tender of payment, and announcing consignation to interested parties.
• Properly made consignation expenses are charged to the creditor.
• After consignation, the debtor can request the judge to cancel the obligation.
• Before creditor acceptance or judicial declaration, the debtor can withdraw the deposit, reinstating the obligation.
• If the creditor allows the debtor to withdraw, the creditor loses preference over the thing.
• Co-debtors, guarantors, and sureties are released.

Tender of Payment and Consignation

• Tender of payment is the act of the debtor offering the due item/amount to the creditor.
• Requirements include being made in legal tender/lawful currency, including due interest, being unconditional, and the obligation already being due.
• Consignation requires a valid debt, tender and creditor refusal without cause, prior notice to interested parties, consignation of item/sum due, and subsequent notice to interested parties.

Loss of the Thing Due

• An obligation to deliver a specific thing is extinguished if lost/destroyed without debtor fault and before delay incurrence.
• If the obligor is liable for fortuitous events or assumes risk, loss does not extinguish the obligation; they are responsible for damages.
• A thing is considered lost when it perishes, goes out of commerce, disappears with unknown existence, or cannot be recovered.
• Loss extinguishes the obligation to give if it's a specific thing, occurs without debtor fault, and the debtor isn't guilty of delay.

Condonation or Remission of Debt

• Condonation/remission is gratuitous, requiring obligor acceptance, and can be express or implied.
• It's subject to rules governing inofficious donations and requires compliance with donation forms if express.
• Meaning of condonation or remission: creditor's gratuitous abandonment of rights.
• Requisites involve being gratuitous, accepted by the obligor, and parties having capacity.
• It must not be inofficious, and if express, must comply with donation forms.

Confusion or Merger of Rights

• Obligation is extinguished when creditor and debtor roles merge.
• Meaning of confusion/merger: creditor and debtor qualities meet in one person for the same obligation.
• Requisites: must occur between principal debtor and creditor, be complete and definite, and involve the same/identical obligation.

Compensation

• Compensation occurs when two parties are debtors and creditors of each other in their own right.
• Meaning: extinguishment to the concurrent amount of debts between reciprocally principal debtors and creditors.

Novation

• Obligations may be modified by changing object/principal conditions, substituting the debtor, or subrogating a third-party creditor rights.
• An obligation can be extinguished by substitution, which must be expressly declared or have incompatible terms with the old one.
• Meaning is total/partial extinction via creating a new obligation.
• Requisites: existence of a previous valid obligation, parties’ intention/capacity to extinguish/modify, obligation extinguishment, and valid new obligation creation/birth.

Other Modes of Extinguishing Obligations Include:

• Annulment: Invalidates a legal contract, canceling it entirely.
• Rescission: Remedy for contracting/third parties to repair damages caused by a contract by restoring to original condition.
• Fulfillment of a resolutory condition: The condition's fulfillment extinguishes the obligation.
• Prescription: Acquisition/loss of rights over time.