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    Application of Payments

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    Roger de Dios
    This document summarizes the rules for application of payments under Philippine law. It discusses that when a debtor owes multiple debts to the same creditor, the debtor can designate which debt the payment applies to. If no designation is made, the creditor can choose or if neither chooses, the most onerous debt is paid first. Debts are considered more onerous if they accrue interest, are older, involve primary liability, are secured, or have a penalty clause. If debts are equally onerous, payment is applied proportionately.

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    Application of Payments

    Uploaded by

    Roger de Dios
    551 views1 page
    This document summarizes the rules for application of payments under Philippine law. It discusses that when a debtor owes multiple debts to the same creditor, the debtor can designate which debt the payment applies to. If no designation is made, the creditor can choose or if neither chooses, the most onerous debt is paid first. Debts are considered more onerous if they accrue interest, are older, involve primary liability, are secured, or have a penalty clause. If debts are equally onerous, payment is applied proportionately.

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    This document summarizes the rules for application of payments under Philippine law. It discusses that when a debtor owes multiple debts to the same creditor, the debtor can designate which debt the payment applies to. If no designation is made, the creditor can choose or if neither chooses, the most onerous debt is paid first. Debts are considered more onerous if they accrue interest, are older, involve primary liability, are secured, or have a penalty clause. If debts are equally onerous, payment is applied proportionately.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    551 views1 page

    Application of Payments

    Uploaded by

    Roger de Dios
    This document summarizes the rules for application of payments under Philippine law. It discusses that when a debtor owes multiple debts to the same creditor, the debtor can designate which debt the payment applies to. If no designation is made, the creditor can choose or if neither chooses, the most onerous debt is paid first. Debts are considered more onerous if they accrue interest, are older, involve primary liability, are secured, or have a penalty clause. If debts are equally onerous, payment is applied proportionately.

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    © All Rights Reserved
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    Application of Payments

    Articles 1252-1254
    Obligations and Contracts

    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.

    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.

    Art. 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.

    If the debts due are of the same nature and burden, the payment shall be applied to all of them
    proportionately.

    Discussions

     Application payment is the designation of the debt which is being paid by a debtor who has several
    obligations of the same kind in favor of the creditor to whom payment is made.

     The situation in application of payments is that a debtor owes his creditor. There are several debts
    due, but the debtor cannot pay all of the debts due.

     The creditor can always not accept application of payments since the creditor cannot be compelled
    to accept partial performance of the obligation. However, this may not be wise since the debtor may
    have other creditors.

     The rules on application of payment solve the problem of distributing the payment which is less
    than the total obligation.

    Rules in Application of Payment

    1st Rule: Apply in accordance with the agreement.

    2nd Rule: If there is no agreement, the debtor has the right to apply.

    3rd Rule: If the debtor does not choose, the creditor can choose.

    4th Rule: Apply to the most onerous debt (Article 1254, par 1)

    Rules to Determine Which is the More Onerous Obligation

    i. An interest bearing obligation is more onerous than a non-interest bearing


    obligation.
    ii. An older debt is more onerous than a recent debt.
    iii. An obligation where the party is bound as a principal is more onerous than an
    obligation is bound as a surety.
    iv. An obligation which is secured is more onerous than an obligation which is
    unsecured.
    v. An obligation with a penal clause is more onerous than an obligation without a
    penal clause.

    5th Rule: If equally onerous, apply proportionately (Article 1254, par 2)

    Prepared by RCD

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