Overview
This episode discusses the extinguishment of obligations, focusing on the legal principles of payment or performance, including who may pay, how and where payment should be made, and under what conditions payment extinguishes an obligation.
Definition and Basic Principles of Payment
- Payment or performance is defined as the delivery of money or the fulfillment of an obligation in any manner.
- The debtor bears the burden of proving that payment has been made.
- Two requisites for valid payment: identity (correct object or prestation delivered) and integrity (payment must be complete).
Identity and Integrity of Payment
- The debtor must deliver the specific object owed; substitutes are not allowed unless the object is generic.
- For generic obligations, the creditor cannot demand superior quality nor can the debtor deliver inferior quality.
- Dacion in payment occurs when property is used to settle a debt, subject to the law on sales.
- Payment must be complete; partial payments are generally not acceptable unless expressly agreed, there is substantial performance in good faith, or the creditor knowingly accepts partial payment.
Who Can Make and Receive Payment
- Payment must be made by the debtor unless otherwise stipulated.
- A third person may pay if allowed by agreement; rights differ based on debtor's knowledge and benefit received.
- If a third person pays with debtor's knowledge, they may be subrogated to the creditor's rights; without knowledge, reimbursement is limited to the debtor's benefit, with no subrogation.
- Payment must typically be made to the creditor, successors, or authorized persons.
- Payment to third parties is valid only if it benefits the creditor, or if certain legal presumptions are met (acquisition of creditor's rights, ratification, or debtor's reasonable belief in third party's authority).
- Good faith payment to a possessor of credit can also extinguish the obligation.
Manner, Medium, and Place of Payment
- Parties’ stipulation on payment manner (e.g., currency) prevails; absent this, payment must be in legal tender.
- Checks or promissory notes do not constitute valid payment until encashed or impaired by the creditor.
- Coins below 25 centavos are legal tender up to 100 pesos; higher denominations up to 1,000 pesos.
- In cases of extraordinary inflation or deflation, legal tender at the time the obligation was constituted governs.
- Payment is made at the agreed place; absent stipulation, at the location of the determinate thing, or debtor's domicile.
Recommendations / Advice
- Use this material for educational purposes only; consult a lawyer for actual legal advice.
- Students should supplement this with direct study of relevant laws.