Notes on Article 1231: Extinguishing Obligations
Article 1231. Obligations are extinguished:[1] By payment or performance;
[2] By the 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.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. (Civil Code)We remember that obligation is the juridical necessity to give, to do or not to do. It may arise from law, contracts, quasi-contracts, delicts or quasi-delicts.
[4] By the confusion or merger of the rights of creditor and debtor;
[5] By compensation;
[6] By novation.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. (Civil Code)We remember that obligation is the juridical necessity to give, to do or not to do. It may arise from law, contracts, quasi-contracts, delicts or quasi-delicts.
Obligations, nevertheless, are not forever. They can be extinguished. This Article enumerates only six (6) of the many ways by which an obligation may be extinguished: payment or performance; loss; condonation or remission; confusions; compensation, and; novation.
As mentioned above, there are other ways of extinguishing an obligation aside from the six (6) enumerated by Article 1231. They are: annulment; rescission; fulfillment of the resolutory condition; prescription; death; arrival of the resolutory term; change of civil status; compromises; mutual dissent; impossibility of fulfillment, and; fortuitous event. Consignation may also be considered as a mode of extinguishing obligation.
Payment of performance
A promised that he would paint a portrait of B in exchange of Php 100,000. A did and delivered the portrait on time. A's obligation here was extinguished by performance.
B, in turn, has the obligation to pay the Php 100,000 fee. He issued a check in favor of A. A encashed the same. B's obligation here was extiguished by payment.
Loss of the Thing Due
A promised to make and deliver a particular sculpture for B. Without his fault and after actually finishing the art, a burglar entered A's house at night and stole the sculpture. A here now does not have any obligation to deliver the sculpture anymore; his obligation has been extinguished by the thing's loss.
However, this rule does not apply when it comes to the obligation to deliver an indeterminate thing. Remember, genus never perishes. So, if A promised to deliver one-kilo of high-grade sugar and what he prepared was lost by his fault or through a fortuitous event, he is still obliged to deliver one-kilo of said sugar.
Condonation or Remission
A owed B $5000. B decided to let go of the $5000 debt since A has been a very good friend to him through the years. A here now does not have any obligation to pay the money anymore because it was condoned by B.
Confusion or Merger
A borrowed money from B so, in order to pay, the former issued a check in favor of the latter. B, then, who was in turn indebted to C, handed it to C. Unknown to B, C also owed the same amount of money from A. C returned the check to A. There is now a merger of the rights of the debtor and the creditor.
Compensation
A and B are debtors and creditors of each other both in the amount of Php 100,000. By operation of law, A and B are no more debtors and creditors of each other.
Novation
Article 1291 provides that Obligations may be modified by: (1) Changing their object or principal conditions; (2) Substituting the person of the debtor; (3) Subrogating a third person in the rights of the creditor.
Therefore, if A had the obligation to deliver a certain car to B and if they both agreed that the thing to be delivered would be a certain unit of personal computer instead, the obligation to deliver the car cannot be enforced anymore. Assigning C in place of A or D in place of B would also extinguish the obligation to deliver the car between A and B.
Annulment
A, 16 years of age, entered into a contract with B, 21. A's parents knew and went to court. They argued that the contract is voidable and sought the annulment of the same.
Rescission
Pending litigation over a parcel of land, B, the defendant in the case, sold the same parcel of land to C, who knew very well of the nature of the parcel of land and of the pending hearing over the same. A, the plaintiff, filed an action for the rescission of the contract of sale between B and C.
Fulfillment of the Resolutory Condition
A told B, "This car is yours until you pass the BAR." B passed the BAR. A's obligation to give the car, or more accurately put, to let B enjoy possession and use of the car, is extinguished by the happening of the resolutory condition.
Prescription
Under Law XXX, a student may demand the school a rebate of 10% of all his total tuition payments within one (1) month after his graduation. A graduated on January 1. He demanded on February 27. Here, the school's obligation to grant the rebate had already prescribed.
Death
A met minds with B to have the former's house and lot sold to the latter. The contract was perfected. However, A died the following day. Is B still bound to pay the house and lot? Not anymore.
Arrival of the Resolutory Term
A told B, "This car is yours until the first day of 2016." The first day of 2016 came. A is no more bound to let B maintain possession over the car.
Change of Civil Status
[xxx]
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Compromises
A bound himself to give B a parcel of land. They, however, agreed and entered into a compromise that A would instead give half of the promised land. A's obligation to completely deliver the parcel of land had already been extinguished.
Mutual Dissent
A and B perfected a contract to sell. They, however, later on, both agreed to cancel the contract.
Impossibility of Fulfillment
A bound himself to deliver 2 sacks of brown rice to B. The following day, all kinds of brown rice were declared illegal by a statute. Here, there occurred what is called legal impossibility.
Fortuitous Event
A and B agreed that the former would deliver a certain dog to the latter. The dog, however, without the fault of A, died when a meteor hit it while it was sleeping one night.
Consignation
A had the obligation to pay B $500,000. On the day the payment was agreed to be made, B, apparently without any just cause or reason, refused to receive the payment. A went to court, presented proof of tender of payment, deposited the amount to court and served notice to B. The consignation by A extinguished the obligation.