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ARTS. 1245 - 1255

carlo mariano

on 8 September 2013

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Law on Obligations and Contracts
(Arts. 1245 - 1255)

Dation in payment whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n)

Special forms of Payment (under the Civil Code)

1) dation in payment (Article 1245.);
2) application of payments (Article 1253.);
3) payment by cession (Article 1255.); and
4) tender of payment and consignation. (Articles 1256-1261.)

Chapter 4
Extinguishment of Obligations
When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration. (1167a)

Rule of the Medium Quality
Specific thing | Generic thing
Art. 1248.
Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Neither may the debtor be required to make partial payments.
However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter. (1169a)
Art. 1249.
The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in the abeyance. (1170)
Art. 1250.
In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary. (n)
Art. 1251.
Payment shall be made in the place designated in the obligation.
There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be made wherever the thing might be at the moment the obligation was constituted.
In any other case the place of payment shall be the domicile of the debtor.
If the debtor changes his domicile in bad faith or after he has incurred in delay, the additional expenses shall be borne by him.
These provisions are without prejudice to venue under the Rules of Court. (1171a)
Art. 1252.
He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract. (1172a)

Prepared by
Reyes, Jenalyn E.
Dungca, Kriscel
Paras, Kevin
Andalis, Benedick
Cunanan, Ronnel

Art. 1247.
Unless it is otherwise stipulated, the extrajudicial expenses required by the payment shall be for the account of the debtor. With regard to judicial costs, the Rules of Court shall govern. (1168a)

Debtor pays for extrajudicial expenses.
The reason is that the obligation is extinguished when payment is made.

Losing party generally pays judicial costs.
– are the statutory amounts allowed to a party to an action for his expenses incurred in the action.

Meaning of application of payments
Application of payments
– is the designation of the debt to which should be applied the payment made by a debtor who has various debts of the same kind in favor of one and the same creditor.

Requisite of application of payments
1. There must be one debtor, one creditor.
2. There must be two or more debts.
3. The debts must be of the same kind.
4. The debts to which payment made by the debtor has been applied must be due.
5. The payment made must not be sufficient to cover all the debts.

Art. 1253.
If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered. (1173)

Interest earned paid ahead of principal
The payment must be applied first to the interest and whatever balance is left can be credited to the principal.

Article 1254
When the payment cannot be applied in accordance with the preceding rules, or if application cannot be inferred from other circumstances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied.

Article 1255
The debtor may cede or assign his property to his creditor in payment of his debt. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreement which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws.

Performance of obligation should be complete.
The creditor may accept but he cannot be compelled to accept partial performance.
The debtor has duty to comply with the whole of the obligation but he cannot be required to make partial payments if he does now wish to do so.
When partial performance allowed.
1. When there is an expressed stipulaton to that effect
2. When the debt is in part liquidated (definitely and determined or computed) and in part unliquidated
3. When the diff. prestations in which the obligation consist are subject to diff. terms or conditions which affect some of them.
Payment by means of instruments of credits
1. Right of creditor to refuse or accept
2. Effect on obligation – payment by means of mercantile documents does not extinguished the obligation:
a. Until they have been cashed;
b. Unless they have been impaired through the fault of the creditor.
– is that currency which a debtor can legally compel a creditor to accept in payment of a debt in money when tendered by the debtor in the right amount.

Legal Tender in the Philippines
Debts in money shall be paid in the currency stipulated
BSP constitute legal tender for all debts both public or private
Meaning of inflation and deflation

Basis of payment in case of extraordinary inflation or deflation
Under art. 1250, the purchasing value of the currency at the time of the establishment of the obligation shall be the basis of payment.

Place where obligation shall be paid.
1. If there is a stipulation the payment shall be made in the place designated.
2. If there is a stipulation and the thing is to be delivered specific the payment shall be made at the place where the thing was at the perfection of the contract
3. If there is no stipulation and the thing to be delivered is generic the place of payment shall be the domicile of the debtor.
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