CONSTRUCT 5 Questions about the information below in relation to what they can learn and reflect about the Extinguishment of Payment(RELATE TO BUSINESS LAW)

PAYMENT OR PERFORMANCE

Payment in law does not only refer to the delivery of money but also the performance of an obligation. For instance, if the obligation is to paint a car, payment will consist of the performance of the service which is the painting of the car.

For payment to be made, there are certain requisites that must be followed. One is that there must be delivery of the thing or rendition of the service that was contemplated, in order for the payment to be effected or valid, there must be a performance of the service in the obligation or the delivery of the money due in the obligation.

The debtor cannot compel the creditor to accept a different object of the obligation, even if it is of the same value or more valuable. For example, B is obliged to give C a Seiko watch. B cannot compel c to accept a Rolex watch even if it is of higher value.

In obligations to do or not to do, an act cannot be substituted by another act against the obligee's will. For instance, B is obliged to paint C's car, B cannot substitute it with an obligation to paint C's house.

In obligations to give a specific thing whose quality and specifications have not been stated, the creditor cannot demand a thing of superior quality, neither can the debtor deliver a thing of inferior quality.

If the obligation is a monetary obligation, the payment must be in legal tender. Checks are not considered legal tenders, therefore creditors can refuse to accept payments by check made by the debtor.

Another requisite is that the payment or performance must be complete, meaning if the obligation is to pay 10,000 then what is to be delivered is the full amount of 10,000. Except when certain circumstances affect the completeness of the deliver. For example, A is obliged to deliver 20 water bottles to B, however A was only able to deliver 15 water bottles, after that A can no longer deliver the remaining 5 water bottles because there are no longer water bottles available in the market, S can recover the cost of the 20 water bottles from B less damages suffered by B, which includes the cost of the 5 water bottles.

When the obligee accepts the performance despite knowing the incompleteness of the performance, and did not protest or object, then the obligation is deemed fully complied with.

Loss of determinate thing due or impossibility or difficulty of performance

Loss refers to a thing perishing or being out of commerce, or disappears in a way that its existence is unknown or can't be recovered. The general rule is, the loss of a determinate thing extinguishes the obligation, however there are exceptions.

One exception is that when the loss is due to the fault of the debtor, the thing is considered loss because of the debtor's fault when it was lost while the debtor is in possession of the thing. This exception does not apply to fortuitous events such as storms, flood and fires.

Another exception is that when the debtor is in delay, meaning when the thing was lost because the debtor was in delay, then the debtor is liable for the damages suffered by the creditor.

Another is when it is provided by law and stipulated by the parties. When the parties stipulates that even if the thing is lost for unknown reasons, the obligation shall continue, then the parties will still be bound by the obligation

When the nature of the obligation requires the assumption of risks. This exception typically applies to the insurance industry.

Last exception is when the debt proceeds from a criminal offense, when the obligation is a result of a criminal offense, then even if the thing is lost, the debtor will still be bound.

Condonation or Remission of Debt

Condonation or remission refers to the gratuitous abandonment by the creditor of his right. This simply means the forgiveness of an indebtedness. This however requires the debtor's consent in order to extinguish the obligation.

For example, D owes H 10,000, evidenced by a promissory note. H then informs D that he will no longer collect the debt and delivers the note to D. Then D accept H's kindness, the obligation here is extinguished by reason of condonation or remission, D is no longer bound by the obligation.

Confusion

Confusion or merger refers to the meeting in one person of the qualities or the characters of creditor and debtor. This happens when one person become the creditor and debtor at the same time, thus extinguishing the obligation.

For instance, Z makes a promissory not payable to X or order. X indorses the not to C, C to V, V to B. On due date, B indorsed the note back to Z. The obligation here is extinguished because Z became the creditor and debtor of himself.

Compensation

Compensation happens when two persons, in their own right, are creditors and debtors of each other. Two persons are mutual debtors and creditors of each other with respect to equally demandable obligations.

An example is, A owes S 15,000. S owes A 15,000. Both debts are due and demandable. The parties do not need to pay each other for the reason that their obligations are extinguished by compensation.

Novation

Novation refers to the modification or extinguishment of an obligation by another obligation. This happens either by changing the object or principal condition, substituting the debtor, or subrogating the rights of the creditor to a third person.

For example, D owes W, 20,000. If the parties agree that D should instead give the brand new iPhone, there is novation by changing the object or prestation.