1. Suppose Cedi owes Patrache P1,000.00, in turn, Patrache owes Cedi P1,000.00 representing the value of an earphone deposited by Cedi with Patrache, which Patrache failed to return.

1. Can Patrache claim legal compensation? why or why not?

2. Can Cedi set up his deposit by way of compensation against Patrache's credit? why or why not?

3. If instead of a deposit, Patrache borrowed the earphones, can Patrache refuse to return the earphones on the ground of compensation? why or why not?

2. Suppose Huck owes Tom P10,000,000.00.

1. Huck proposed to Tom that Aunt Polly would substitute him as a debtor. Tom agreed to the proposal. What will happen if at the time of the delegacion, Aunt Polly is already insolvent?

2. If Pap pays Tom with the express consent of Huck, what will be the rights of Pap?

3. If Pap is a guarantor of Huck and he pays Tom without the knowledge of Huck, what will be the rights of Pap?