Obligations and Contracts Chapter 4 Extinguishment of Obligations Section 3 Loss of the Thing Due Loss: in this part of the

code, loss! embraces all causes "hich ma# render impossible the performance of the prestation $ not limited to obligations to gi%e in this part of the code& extends to those "hich are personal o also 'no"n as impossibilit# of performance& the o must be subse(uent to the execution of the contract in order to extinguish the obligation o if impossibilit# alread# existed "hen contract "as made, result is the )*E++)C,C- of the obligation under .34/ and .403, 1)LL*OT result in extinguishment of the obligation $ a thing is lost "hen it perishes or goes out of commerce, or it disappears in such a "a# that its existence is un'no"n or it cannot be reco%ered ,rticle .232 ,n obligation "hich consists in the deli%er# of a determinate thing shall be extinguished if it should be lost or destro#ed "ithout the fault of the debtor, and before he has incurred in dela#4 1hen b# la" or b# stipulation, the obligor is liable e%en for fortuitous e%ents, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages4 The same rule applies "hen the nature of the obligation re(uires the assumption of ris'4 Loss of DETE56)*,TE ob7ect $ determinate thing is a concrete particulari8ed ob7ect, indicated b# its o"n indi%idualit# $ *O*$E9)STE*CE in the hands of the obligor "hen the fulfillment of the obligation becomes impossible through ,*cause $ includes the DEST5:CT)O* of the thing, as "ell as D)S,;;E,5*CE <- LOSS, T=E+T or 5O<<E5$ Original Sub7ecti%e impossibilit# o 1here there is no ph#sical or legal loss but the thing belongs to another, thus ma'ing it impossible for the debtor to perform the obligation "hich "ould not ha%e happened if the thing belonged to the debtor o The failure of performance is imputable to the debtor so he must indemnif# the creditor for damages suffered

)f the creditor ac(uired the thing b# >5,T:)TO:S ?b# inheritance or donation@ title, creditor is entitled to the A,L:E of the thing )f the creditor ac(uired the thing b# O*E5O:S, he is entitled to the ;5)CE =E ;,)D +O5 )T4

The happening of a +O5T:)TO:S e%ent )* )TSEL+ does not necessaril# extinguish the obligation to deli%er a DETE56)*,TE thing $ Obligation is extinguished "hen in an obligation to deli%er a specified thing, that thing is lost or destro#ed o without the fault of the obligor and o before he is in default $ )n the absence of la" or stipulation to the contrar#, the impossibilit# of performance without the negligence of either part# , prevents the enforcement of an obligation 5obber# and Theft $ )f the thing is lost through 5O<<E5- 1)T= A)OLE*CE, the debtor must sho" that he could not resist the violence $ )f thing is lost through T=E+T, debtor is considered negligent for not placing the thing in a secure place& debtor is liable for damages in this case 5eciprocal obligations $ The extinguishment of the obligation due to loss of the thing or impossibilit# of performance affects <OT= DE<TO5 and C5ED)TO5& entire 7uridical relationship extinguished $ 5es perit domino: ris' pertains to the debtor o if obligation is extinguished because of ?.@the loss of the thing is due or?2@ impossibilit# of performance through fortuitous e%ents, the counter$prestation is also extinguished debtor is 5ELE,SED from liabilit# and he cannot demand the prestation "hich has been stipulated for his benefit o he "ho gi%es nothing has no reason to demand an#thing o applies to both debtors and creditors 5e(uisites for an obligation to be extinguished b# the loss of the thing: .4 obligation to deli%er a specific or determinate thing 24 loss of thing occurs "ithout fault of the debtor 34 debtor is not guilt# of dela#

Exceptions to the rule that loss of determinate ob7ect b# fortuitous e%ent shall extinguish the obligation& in the follo"ing cases, debtor is still liable for damages: .4 the law expressly provides that the debtor shall be liable e%en if the loss is due to fortuitous e%ents B ..C4 ?ex4 <ailee .042, depositar# .0C0, officious manager 2.4C, "hoe%er in bad faith accepts undue pa#ment 2.D0@ 24 b# express stipulation, the obligor is made liable e%en if loss occurs through fortuitous e%ents $ ..C4 34 the nature of the obligation re(uires the assumption of ris' $ ..C4 44 fault or negligence of the debtor concurs "ith the fortuitous e%ent in causing the loss D4 loss occurs after debtor has incurred in dela# $ ..3D 34 debtor has promised to deli%er the same thing to t"o or more different parties $ ..3D C4 obligation to deli%er a determinate ob7ect arises from criminal act B .23/ ,rticle .233 )n an obligation to deli%er a generic thing, the loss or destruction of an#thing of the same 'ind does not extinguish the obligation Loss of generic thing $ >eneric thing: one "hose determination is confined to that of its nature, the genus to "hich it pertains $ Loss of generic thing "ithout fault of debtor does not extinguish the obligation $ 1ar, flood and other catastrophe are considered contingencies, collateral incidents $ >enus nun(uam perit B the genus ne%er perishes, therefore a generic ob7ect is ne%er considered lost o <ut "hen ,LL the things of the 'ind stipulated disappear or perish, obligation to deli%er a generic ob7ect is extinguished ?li'e "hen the manufacture of a particular merchandise is discontinued@ o Exception: delimited generic obligations under >erman La" 1hen there is a limitation of the generic ob7ect to a particular mass or group Obligation is extinguished b#: Loss of the particular mass or group or limited (uantit# from "hich the prestation has to be ta'en

The impossibilit# of getting from it the things for the prestation 1hen the delimited ob7ects ha%e been indi%iduali8ed and segregated from the rest of the class ,*D this is made 'no"n to the creditor, ob7ects become DETE56)*,TE )f these are lost "ithout fault of the debtor, obligation is extinguished, e%en if debtor has other ob7ects of that class

,rticle .234 The courts shall determine "hether, under the circumstances, the partial loss of the ob7ect of the obligation is so important as to extinguish the obligation ,ssumption: partial loss is not imputable to the fault or negligence of the debtor, but to fortuitous e%ents or circumstances be#ond his control >eneral rule: partial loss DOES *OT E9T)*>:)S= the obligation o thing should be deli%ered to the creditor in its impaired condition o 1)T=O:T liabilit# for damages on the part of the debtor $ E9CE;T)O*: if the thing lost is of such an extent or nature that the obligation would not have been constituted without it, obligation extinguished Courts to determine "hether partial loss is e(ui%alent to complete or total loss ,rticle .23D 1hene%er the thing is lost in the possession of the debtor, it shall be presumed that the loss "as due to his fault, unless there is proof to the contrar#, and "ithout pre7udice to the pro%isions of article ..3D4 This presumption does not appl# in case of earth(ua'e, flood, storm or other natural calamit#4 Debtor has the burden to pro%e that the loss of the thing in his possession occurred b# reason of fortuitous e%en $ )f he fails to pro%e so, presumption is that it "as lost through his fault or negligence $ *egligence is presumed from the mere fact of loss o Except in case of natural calamit# "here lac' of fault is li'el# and it is un7ust to presume negligence

.23D must be construed in relation to .232 $ 1hen it is found and the fact is undisputed that the catastrophe although *OT a natural disaster ,"as accidental, then it is e(ui%alent to a finding that such e%ent is not attributable to the fault of the debtor and negates an# negligence on his part ,rticle .233 The debtor in obligations to do shall also be released "hen the prestation becomes legall# or ph#sicall# impossible "ithout the fault of the obligor Subse(uent impossibilit# $ )mpossibilit# that super%enes at the time of performance "hich brings about a 6OD)+)C,T)O* or E9T)*>:)S=6E*T of the obligation, depending on "hether or not it is imputable to the debtor $ As4 impossibilit# existing at the time the obligation is constituted: brings about the nullit# of the contract Einds of )mpossibilit#: .4 ;h#sical B the act b# reason of its *,T:5E cannot be accomplished o )n purel# personal obligations, )n%ol%es the personal (ualification of the obligor 24 Legal B the act b# reason of a S:<SEF:E*T L,1, becomes prohibited o ;erformance is rendered impossible b# la", e%en if it is ph#sicall# possible to perform 34 Ob7ecti%e B "hen act or ser%ice in itself, "ithout considering the person of the obligor, becomes impossible o Li'e "hen the prestation is subse(uentl# prohibited b# la" 44 Sub7ecti%e B the act or ser%ice cannot be done b# the debtor himself, but it can be accomplished b# others o Li'e "hen debtor becomes so seriousl# ill Ob7ecti%e and sub7ecti%e impossibilit# produce the same effect $ 1hen debtor dies or b# some accident caused b# a third person, debtor becomes disabled and incapacitated to perform the obligation, o ,s long as there is not fault on the part of the debtor for this impossibilit#, obligation is extinguished )mpossibilit# of performance 5ELE,SES the debtor, because the obligation, being LE>)T)6,TE at its origin, "as subse(uentl# made

impossible b# circumstances not due to the fault or negligence of the debtor& as such debtor cannot be held liable 1hen it is *OT the prestation that becomes impossible but an ,CT to be performed after the prestation has been fulfilled, obligation is not extinguished $ Ex4 , bought half of a %essel and it "as agreed b# him and his shareholders that a portion of the purchase price "ould be allotted to install a ne" motor& after the prestation has been fulfilled, the %essel is lost4 , is still liable to pa# the purchase price e%en if installation of the ne" motor has become impossible ;artial impossibilit# $ Cannot be sub7ect to inflexible rules $ )n determining "hether partial impossibilit# extinguishes an obligation, ,ttention must be directed to: o )6;O5T,*CE and C o O*SEF:E*CE of the partial impossibilit# and o ;:5;OSE of the obligation in each case $ ;artial impossibilit# ma# be e(ui%alent to total impossibilit#& in this case .234 is applied ?courts to determine if partial loss is important enough to extinguish the obligation@ $ )f at the time performance becomes impossible, debtor alread# performed ;,5T of the obligation, creditor must pa# the part done so long as he <E*E+)TS from such partial performance $ )f debtor alread# recei%ed something from the creditor, he must 5ET:5* the E9CESS of that "hich corresponds to "hat he has been able to perform Temporar# )mpossibilit# B "hen temporar# obstacles are expected to disappear in the near future $ Obligation *OT extinguished o E9CE;T)O*: "hen the obstacles are of an :*E*O1* and :*+O5ESEE* duration, obligation ma# be declared 7udiciall# impossible to perform & it is extinguished and *OT 5EA)AED later "hen circumstances change and it becomes possible $ 6erel# dela#s fulfillment o E9CE;T)O*: "hen b# its *,T:5E or b# 1)LL O+ T=E ;,5T)ES, it should be performed at a DETE56)*,TE T)6E 5eciprocal obligations B release of the debtor due to impossibilit# of performance also releases the creditor, because each obligation depends upon each other

,rticle .23C 1hen the ser%ice has become so difficult as to be manifestl# be#ond the contemplation of the parties, the obligor ma# also be released therefrom, in "hole or in part >eneral rule: impossibilit# of performance releases obligor $ E9CE;T)O*: "hen the ser%ice has become so difficult as to be manifestl# be#ond the contemplation of the parties o )n "hich case, the court should be authori8ed to release the obligor, in 1=OLE or in ;,5T o )ntention of the parties should go%ern& if the performance has gone be#ond the contemplation of the parties, then obligor must be released since performance "ould go against the intention o DOES *OT authori8e the courts to rema'e, modif# or re%ise the contract Court ma# 7ust authori8e the 5ELE,SE of the obligor o 5ebus sic Stantibus B parties stipulate in the light of CE5T,)* ;5EA,)L)*> CO*D)T)O*S Once these conditions cease to exist, contract also ceases to exist ,pplication of this theor# is *OT absolute& it should not endanger securit# of contractual relations ,pplicable onl# on ,<SOL:TEL- E9CE;T)O*,L C=,*>E S in circumstances , (uestion of fact left at the discretion of the court o Does not appl# to obligation to pa# an amount of mone# "hen there is a change in the %alue of the stipulated currenc# 5e(uisites for the application of ,rt.23C: .4 The e%ent or change in circumstances could not ha%e been foreseen at the time of the execution of the contract 24 6a'es the performance of the contract extremely difficult but *OT impossible 34 E%ent must not be due to the act of an# of the parties 44 Contract is for a future prestation o )f fulfillment is immediate, the gross ine(ualit# ma# in%ol%e

Lesion B in7ur# suffered because of ine(ualit# of situation b# one "ho does not recei%e full credit for "hat he gi%es 1ant of cause

,rticle .23C does not appl# to .4 ,leator# contracts B contracts conditional upon of a fortuitous e%ent 24 Contracts "hich are purel# speculati%e Determining :nforeseen E%ents court must consider: .4 Those e%ents and ris's "hich under the normal and ordinar# course of life 24 ,ccording to the circumstances of time and place 34 ;arties ma# reasonabl# contemplate such e%ent as possible 44 ,n# change or circumstance >5E,TL- be#ond these limits "ould be manifestl# be#ond the contemplation of the parties Difficult# in performance B a manifest e(uilibrium in the prestation, placing one part# at a disad%antage b# the unforeseen e%ent $ Does not co%er small losses falling "ithin normal ris's of the contract $ Extraordinar# obstacles "hich can be o%ercome onl# b# a sacrifice absolutel# disproportionate or "ith %er# gra%e ris's, in light of the rational, ethical and economic conditions Disappearance of the creditorGs interest "hich the obligation protects E9T)*>:)S=ES the obligation $ )f obligation is based upon an interest of the creditor "orth# of protection, such protection still ma# *OT extend be#ond the interest "hich is alread# lost ,rticle .23/ 1hen the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted from the pa#ment of its price, "hate%er ma# be the cause for the loss, unless the thing ha%ing been offered b# him to the person "ho should recei%e it, the latter refused "ithout 7ustification to accept it ,lternati%es upon debtor "hen he offers pa#ment but creditor refuses to accept 1)T=O:T 5E,SO*: .4 Consign the thing and relie%e himself from an# further responsibilit# 24 Eeep the thing in his possession, "ith the obligation to use due diligence, sub7ect to the general rules of obligations, but *O LO*>E5 to the special liabilit# imposed b# this article

,rticle .230 The obligation ha%ing been extinguished b# the loss of the thing, the creditor shall ha%e all the rights of action "hich the debtor ma# ha%e against third persons b# reason of the loss ,rticle .230 co%ers: .4 5ights and actions that the debtor has against third persons 24 ,n# indemnit# "hich the debtor ma# ha%e alread# recei%ed Examples: $ )ncludes mone# from insurance obtained from the loss of the thing& such insurance mone# should be liable for the damages suffered b# others $ ,pplies also to mone# paid to the debtor upon expropriation of the propert# "hich is the ob7ect of the obligation Expropriate B propert# is ta'en b# go%ernmentHH Section 3 Condonation or 5emission of the Debt ,rticle .2CI Condonation or remission is essentiall# gratuitous and re(uires the acceptance b# the obligor4 )t ma# be made expressl# or impliedl#4 One and the other 'ind shall be sub7ect to the rules "hich go%ern inofficious donations4 Express Condonation shall, furthermore, compl# "ith the forms of donation4 Concept $ Essential: >5,T:)TO:S o *o e(ui%alent recei%ed for benefit gi%en o )f there is an e(ui%alent recei%ed, ma# be: Dation B "hen something different from that stipulated is recei%ed *o%ation B "hen ob7ect or principal conditions changed Concession B thing renounced is in dispute and Condonation "as made b# the creditor in exchange for some concession he recei%es4 $ ,ct of liberalit#& "herein the creditor renounces the enforcement of the obligation o Such renunciation E9T)*>:)S=ES the obligation either E*T)5EL- or ;,5TL- ?onl# to that part "hich the renunciation refers@ $ <)L,TE5,L B re(uires acceptance b# debtor

Sub7ect to the rules on donation "ith respect to: acceptance, amount and revocation

Einds $ <ased on +O56 .4 Express B made formall# ,*D must compl# "ith the +O56S of donation 24 )mplied B ?onl#@ "hen it is inferred from the actions of the partie $ <ased on E9TE*T .4 Total 24 ;artial B ma# refer to the amount, or to an accessor# obligation ?pledge or interest@, or to some other aspect ?li'e solidarit#@ $ <ased on 6,**E5 .4 )nter %i%os B effecti%e during lifetime of the creditor 24 6ortis causa B effecti%e upon the death of the creditor "hich must be in a "ill or testament ;ro%isions applicable for acceptance: C4D B debtor ?donee@ must accept personall#, or through an authori8ed person "ith a special, general or sufficient po"er& other"ise %oid C43 B acceptance must be "ithin lifetime of creditor ?donor@ and debtor ?donee@ ;ro%isions applicable for amount: CDI B co%ers all or part of personal propert# of creditor ?donor@, pro%ided he reser%es sufficient means to support himself and all relati%es "ho are legall# entitled to recei%e support from the creditor ?donor@ at the time of the remission ?donation@4 1ithout such reser%ation, the remission ?donation@ shall be reduced upon petition of an# affected person4 CD2 B not"ithstanding CDI, no person ma# gi%e or recei%e b# remission more than "hat he ma# gi%e or recei%e b# "ill4 )f remission exceeds this, inofficious4 )nofficious B inconsistent "ith moral dut# and natural affection Officious B aggressi%el# gi%ing oneGs help, ad%ise, support "ithout being as'ed to do so ;ro%isions applicable for revocation: C3I B 5emission ?donation@ made b# person "ith *O children or descendants ?legitimate, illegitimate or legitimated b# subs marriage@ ma# be re%o'ed "ith the happening of the ff e%ents:

.4 )f the creditor ?donor@ should ha%e legitimate, legitimated or illegitimate children after ma'ing the remission ?donation@, e%en if the child is posthumous ?born after death@ 24 )f the child of the creditor ?donor@ "ho the creditor ?donor@ thought "as dead, should turn out to be li%ing4 34 )f the creditor ?donor@ adopts a minor child C3. B remission ?donation@ shall be re%o'ed insofar as it exceeds the portion that ma# be freel# disposed of b# "ill, ta'ing into account the "hole estate of the creditor ?donor@ at the time of birth, appearance or adoption of the child C34 B creditor ?donor@ ma# re%o'e "hen debtor ?donee@ fails to compl# "ith an# condition "hich the creditor ?donor@ imposed4 ;ropert# remitted ?donated@ shall be returned to the creditor ?donor@ and alienations and mortgages made b# the debtor ?donee@ are %oid, "ith limitations relating to third persons as established b# the 6ortgage La" and the Land 5egistration la"s4 This action prescribes 4 #ears from the noncompliance of the debtor ?donee@ "ith the condition& it ma# be transmitted to the heirs of both the creditor ?donor@ and the debtor ?donee@4 C3D B Creditor ?donor@ ma# also re%o'e b# reason of ingratitude: .4 Debtor ?donee@ commits some offense against person, honor or propert# of the creditor ?donor@, his "ife and children under his parental authorit# 24 Debtor ?donee@ imputes to the creditor ?donor@ a crim offense or an act of moral turpitude ?conduct grossl# %iolating accepted standards& %ile@, e%en if the debtor ?donee@ can pro%e it, :*LESS the act or offense is committed against the debtor ?donee@ himself, his "ife or children under his parental authorit# 34 Debtor ?donee@ undul# refuses to gi%e creditor ?donor@ support "hen debtor ?donee@ is legall# or morall# bound to gi%e support to creditor ?donor@4 5e(uisites .4 Debt is existing and demandable at the time of remission 24 5enunciation of debt must be gratuitous, or "ithout an# e(ui%alent or consideration 34 Debtor must accept 5e(uisites ?de Leon@: .4 >ratuitous 24 6ust be accepted b# the obligor 34 ;arties must ha%e capacit# 44 6ust not be inofficious ?inconsistent "ith moral dut#@

D4 )f made expressl#, must compl# "ith the forms of donations a4 )f mo%able or personal propert# "as remitted, C4/ "ill go%ern i4 1hen remission is oral, no need to deli%er because it "ould alread# be in possession of the person in "hose fa%or remission "as made b4 )f immo%able or real propert# "as remitted, C40 "ill go%ern c4 )f obligation is in public instrument, remission need not be in public instrument Condonation of )nterest B can be done b# creditor& not b# courts $ La" that condones pa#ment of interest is unconstitutional $ 5, 4I. condoned pa#ment of interest to >o%t and corps capitali8ed b# it& such condonation is still b# creditor because go%t is the creditor in this case E%idence of remission must be clearer and more con%incing than "hat is needed to establish pa#ment :nilateral renunciation B remission re(uires acceptance b# the debtor $ <ut there is nothing that pre%ents the creditor from abandoning his credit and in effect extinguishing the obligation4 ,rticle 3 allo"s this ,rticle .2C. The deli%er# of a pri%ate document e%idencing a credit, made %oluntaril# b# the creditor to the debtor, implies the renunciation of the action "hich the former had against the latter4 )f in order to nullif# this "ai%er it should be claimed to be inofficious, the debtor and his heirs ma# uphold it b# pro%ing that the deli%er# of that the deli%er# of the document "as made in %irtue of pa#ment of the debt4 Tacit or )mplied 5emission $ Deli%er# of the pri%ate document e%idencing credit ?title of credit@ $ Creditor %oluntaril# destro#s or conceals e%idence of credit , 1)T= )*TE*T)O* to renounce his right to enforce it o Such intent should be pro%ed b# creditor "ho alleges it, because destruction ma# be due to mere mista'e or lac' of care o )f destruction is pro%ed to be "ithout intent, obligations subsists

6ust be a ;5)A,TE document B b# deli%ering the e%idence of credit, the creditor surrenders his "eapon! for the enforcement of the obligation "hich extinguishes the obligation4 $ ;ublic docs ha%e copies in archi%es "hich are a%ailable to the public $ Deli%er# of the first original CO;- of a public instrument DOES *OT )6;L- , 5E6)SS)O*4 5elease through Error $ ;ossible that creditor released the document b# mista'e or the debtor ma# recei%e the document b# mista'e $ *O extinguishment of the obligation o Debtor O<L)>ED to recogni8e the debt again& if he refuses: Judgment of court compelling him to recogni8e debt ma# be used as the title of the obligation "hich "ill be presented to debtor upon maturit# )f debt alread# matured, creditor can sue for pa#ment These are 7ustified b# art22 on un7ust enrichment and the articles on solution indebiti Creditor can see' to nullif# the "ai%erKrenunciation of his right through deli%er# of the document b# claiming that it is )*O++)C)O:S4 )n this case, debtor is authori8ed b# this pro%ision to pro%e that pa#ment "as made4 $ Tolentino belie%es this 2nd paragraph is absurd and anomalous because the pro%ision alread# assumes that pa#ment "as remitted b# the creditor, and #et the 2nd paragraph authori8es the debtor to pro%e that debt "as paid ,rticle .2C2 1hene%er the pri%ate document in "hich the debt appears is found in the possession of the debtor, it shall be presumed that the creditor deli%ered it %oluntaril#, unless the contrar# is pro%ed4 )nstrument in hands of creditor B e%idence that debt is still unpaid, unless contrar# is pro%ed ;5)A,TE )nstrument in hands of debtor B presumption that creditor deli%ered %oluntaril#, impl#ing remission, $ ;resumption onl# prima facie, ma# be o%ercome b# contrar# e%idence sho"ing that debt has not #et been paid Joint: $ ;ossession of one debtor B presumption refers onl# to the portion of that debtor "ho possess the pri%ate instrument

Deli%er# b# one creditor B presumption is onl# the share of that creditor is remitted

Solidar# B remission is total ,rticle .2C3 The renunciation of the principal debt shall extinguish the accessor# obligations& but the "ai%er of the latter shall lea%e the former in force 5ule do"n ,rt .23I B accessor# follo"s the principal ?nullit# of penal clause@ ,rticle .2C4 )t is presumed that the accessor# obligation of pledge has been remitted "hen the thing pledged, after its deli%er# to the creditor, is found in the possession of the debtor, or of a third person "ho o"ns the thing ;resumption is onl# prima facie $ <ased on assumption that creditor %oluntar# deli%ered pledge to the debtor o <ut it ma# be that the debtor reco%ered possession of the thing pledged "hen the creditor lost it, or "hen it "as stolen from the creditor, or it "as returned onl# for a limited time for a specific purpose li'e to ma'e some repairs on it4 5emission extinguished O*L- the SEC:5)T-, principal obligation subsists