Obligations and Contracts

Obligations and Payment

• Obligations are extinguished through 6 means: payment or performance, loss of the thing due, remission or condonation, confusion or merger of rights, compensation, and novation.
• Other means of extinguishing obligations include death of a party, mutual withdrawal, arrival of a resolutory period, compromise, impossibility of fulfillment, and fortuitous events.

Payment

• Payment refers to the fulfillment of an obligation, which can be giving, doing, or not doing something.
• Payment is not limited to delivering money, but also includes giving a thing, doing an act, or not doing an act.

Debt and Payment

• A debt is considered paid only when the payment is completely delivered or rendered.
• Requisites for payment include integrity of prestation and identity of prestation.
• The burden of proving payment lies with the debtor.

Substantial Performance

• Substantial performance in good faith by the obligor can entitle them to the benefits of the contract.
• Requisites for substantial performance include substantial performance and good faith.
• The amount can be reduced by any damages suffered by the other party due to incomplete performance.

Doctrine of Substantial Performance

• Substantial performance occurs when the essential part of the contract has been performed.
• It allows for a proportionate reduction in the amount recoverable by the obligor.
• It is different from partial performance, which involves performing a minor part of the obligation.

Acceptance of Incomplete Performance

• If the obligee accepts the performance knowing its incompleteness without objection, the obligation is deemed fulfilled.
• Requisites for acceptance of incomplete performance include the obligee knowing the performance is incomplete and accepting it despite its incompleteness.

Payment by Third Party

• A creditor can refuse to accept payment from a third party.
• A third party who pays the creditor can demand reimbursement from the debtor.
• Exceptions to reimbursement include when the debtor is without knowledge, where they can only recover the payment that was beneficial to them.

Payment without Debtor's Consent

• A third party who pays the debt without the debtor's consent cannot compel the creditor to subrogate them in their rights.
• Payment by a third party without the intention to be reimbursed may be deemed a donation, requiring the debtor's consent.

Validity of Payment

• Payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid.
• Payment shall be made to the creditor, their heirs and successors, or any person authorized to receive it.

Payment to Incapacitated Creditor

• Payment to a creditor who is incapacitated is only valid if they kept the thing delivered or if it was beneficial to them.
• Payment made by a third person is also valid if the payment was beneficial for the creditor.