WWW Law Activity 13 & 14

Jonathan C.
Balansag BSMA III

La Consolacion College BUSINESS LAW (BAC33)
Activity No. 13
Coverage Article 1278-1290
I. Definitions
Define or give the meaning of the following:
1. Compensation - is the extinguishment to the concurrent amount of the debts of two
persons who, in their own right, are reciprocally principal debtors and creditors of each
other. (Arts. 1278, 1290.)
2. Legal compensation - when it takes place by operation of law when all the requisites
are present even without the knowledge of the parties (Arts. 1279, 1290.);
3. Facultative compensation - when it can be set up only by one of the parties. (see
Arts. 1287, par. 1; 1288.)
II. Discussion
1. What are the distinctions between confusion and compensation as modes of
extinguishing an obligation?
Answer: Compensation is when two persons or two parties are debtors and creditors of
each other. (Not necessarily reciprocal, but it is bilateral). Not the same as confusion. In
confusion, there is only one obli involved, while in compensation, there are at least two
oblis involved. In confusion, there is only one party involved because the characters of
debtor and creditor meet in one and the same person. Whereas in compensation, there
are two parties involved.
2. In what way is compensation similar to payment?

Answer: (ART. 1289) Compensation is similar to payment. If a debtor has various debts
which are susceptible of compensation, he must inform the creditor of which item shall
be the object of compensation. In case he fails to do so, then the compensation shall be
applied to the most onerous obligation. (Arts. 1252, 1254.)
3. May there be compensation although the things due are not consumable? Explain.
Answer: None because according to paragraph 2 of article 1279 in order that
compensation may be proper it is necessary that both debts consist in a sum of money,
or if the things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated.
4. When may compensation take place when only one of the debts is due?
Answer: According to paragraph 3 of article 1279 in order that compensation maybe
proper it is necessary that the two debts be due or demandable.
III. Problems
1. D borrowed P50,000 as character loan (no security) from a bank. Despite demands
for payment after the loan fell due, D did not pay the bank. Has the bank the right to
apply the deposit of D to the payment of his debt?
Held: Yes. The bank has the right to get the deposited money of the debtor’s to pay for
his debt.
According to ART. 1283. If one of the parties to a suit over an obligation has a claim for
damages against the other, the former may set it off by proving his right to said
damages and the amount thereof. (n) ART. 1287. Compensation shall not be proper
when one of the debts arises from a depositum or from the obligations of a depositary or
of a bailee in commodatum. Neither can compensation be set up against a creditor who
has a claim for support due by gratuitous title, without prejudice to the provisions of
paragraph 2 of Article 301. (1200a)
2. D owes C P10,000 payable on November 20. C owes D P10,000 payable on October
20. Can compensation also take place although the debts are not payable on the same
date?
Held: NO, the compensation cannot take place since the due dates are not the same.
No, the compensation cannot take place since the due dates are not the same. This is
with accordance to Article 1279, para 3 “In order that compensation may be proper, it is
necessary: (3) that two debts be due”, Article 1282 states “The parties may agree upon
the compensation of debts which are not yet due”
Activity No. 14
Coverage Article 1291-1304
I. Definitions
Define or give the meaning of the following:
1. Novation - is the total or partial extinction of an obligation through the creation of a
new one which substitutes it.
2. Mixed novation - when the object or principal condition of the obligation and the
debtor or the creditor or both the parties, are changed. It is a combination of real and
personal novations. (Ibid.)
3. Expromision - In expromision, payment by the new debtor gives him the right to
beneficial reimbursement under the second paragraph of Article 1236.
4. Delegacion - If the payment was made with the consent of the original Art. 1293 423
debtor or on his own initiative (delegacion), the new debtor is entitled to reimbursement
and subrogation under Article 1237.
II. Discussion
1. Give the requisites of novation.
 Previous valid obligation
 Capacity and intention of the parties to modify or extinguish the obligation
 The modification or extinguishment of the obligation
 The creation of a new valid obligation
2. When there is subrogation, what rights are acquired by the new creditor?
Answer: According to Art. 1293, states that subrogation with new debtor with original
one may be made even without the knowledge or against the will of the latter but not
without the consent fo the creditor.
3. In novation, give the effect where:

a. the new obligation is voidable;
Answer: Novation can take place. But if annulled, the novation must be considered as
not having taken place and the original one can be enforced, unless the intention of the
parties is otherwise.
b. the old obligation is voidable. Explain.
Novation cannot take place because there is nothing to novate. However, if the original
is only voidable or validated by ratification, the novation is valid.
4. In novation, are accessory obligations necessarily extinguished? Explain

Answer: No. Only the principal obligations unless otherwise agreed upon by parties.
III. Problems
1. T (third person) tells C (creditor) that T will pay the debt of D (debtor). C agrees. Is D
released from his obligation to C?
Held: Yes. According to ART. 1293. Novation which consists in substituting a new
debtor in the place of the original one, may be made even without the knowledge or
against the will of the latter, but not without the consent of the creditor. Payment by the
new debtor gives him the rights mentioned in Articles 1236 and 1237. (1205a)
2. Suppose in the above problem, D proposed to C that T would substitute D as the new
debtor to which C agreed. Is D still liable to C in case of insolvency of T?
Held: No. Because C consented that T will substitute for D even if T is insolvent.

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Jonathan C.

Balansag BSMA III

2. In what way is compensation similar to payment?

3. In novation, give the effect where:

4. In novation, are accessory obligations necessarily extinguished? Explain

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