Part Ⅱ Obligations
Chapter I General Provisions
Section 6 - Extinction Of Obligations
Sub-section 1 General Provision
When the obligations are extinguished, the securities furnished for its performance, and other accessory rights are extinguished simultaneously.
Once an obligation has been wholly extinguished, the debtor may require the creditor to return or cancel the deed in which the obligation is embodied. If the obligation has been only partially extinguished, or if the deed entitles the creditor to exercise other rights, the debtor may demand that particulars of the extinction to be endorsed into the deed.
If the creditor alleges that he cannot return or endorse the deed, the debtor may require from the creditor a publicly certified acknowledgment showing that the obligation has been extinguished.
Sub-section 2 Performance
When performance has been made to the creditor or to his qualified representative in conformity with the tenor of the obligation, and has been accepted, the obligation is extinguished.
The bearer of a receipt signed by the creditor is deemed to be the qualified representative of the creditor, except the debtor knew or was negligent of not knowing that the bearer was not qualified to receive the performance.
If the performance is tendered to a third party and has been accepted by him, the following rules shall apply:
(1) Performance effects if the creditor has acknowledged it or if the third party subsequently has acquired the claim of the obligation;
(2) Performance effects, if the performance had been accepted by the quasi possessor of the claim, and the creditor did not know that he is not a creditor;
(3) In cases other than those specified in the preceding two sections, the performance effects only to the extent which the creditor has been benefited thereby.
An obligation may be performed by a third party unless otherwise agreed by the parties or accorded with the nature of the obligation.
If the debtor objects to the obligation being performed by a third party, the creditor may refuse such performance; but if the third party has the interest of conflicts on the performance of the obligation, the creditor shall not refuse.
If a third party who has interest on the performance of the obligation has performed the obligation, the third party is subrogated to the rights of the creditor to the amount of the performance, but such third party shall not exercise them to the detriment of the creditor.
The provisions of Articles 297 and 299 shall apply mutatis mutandis to the subrogation specified in the preceding article.
Unless otherwise provided by the act or by the contract or by the custom, or unless otherwise decided by the nature of the obligation or other situations, the place of performance shall be decided as follows:
(1) If the object of the obligation is to deliver a specific thing, performance shall be tendered at the place where such thing was at the time when the contract was constituted.
(2) The other obligations shall be performed at the place of the creditor's domicile.
Unless otherwise provided by the act or by the contract, or unless otherwise decided by the nature of the obligation or other situations, the creditor may demand the performance at any time and the debtor may also perform at any time.
If there is a deadline for performance, the creditor may not demand the performance before the deadline; but if there is no contrary expression, the debtor may perform before the deadline.
Unless otherwise provided by the act or by the contract, the costs of performance shall be borne by the debtor. But if the creditor has increased the costs of performance by changing his domicile or by any other acts, the additional costs shall be borne by the creditor.
A debtor is not entitled to perform in part. However, the court may, taking the condition of the debtor into consideration, allow him to perform by installment or to delay his performance in such reasonable time as may not greatly prejudice to the interests of the creditor.
When the court allows the debtor to perform by installment, the creditor may claim for the whole prestation if the debtor has delayed any installment.
In case the prestation is indivisible, the court may, subject to the provision of the first paragraph, allow the debtor to delay his performance.
If the creditor has accepted other prestation in lieu of the prestation originally agreed, the obligation is extinguished.
When the debtor, for the purpose of satisfying his creditor, has assumed a new obligation towards him, the original obligation will not be extinguished, if the new obligation is not performed, unless otherwise agreed by a contrary expression of the parties.
If a debtor is bound to the same creditor to perform several obligations of the same kind, and if the prestation performed is insufficient for discharging all the obligations, it is the person tendering the performance to specify the obligation to be discharged at the time of the prestation.
If the person tendering the performance has not made the specification provided in the preceding article, the obligation to be discharged shall be specified as follows:
(1) If a obligation has been due, it shall be discharged first;
(2) If all of the obligations are due or if none is due, the obligation which affords the creditor the least security shall be discharged first; if all the obligations are equally secured, the obligation which will be the most favorable to the debtor if performed shall be discharged first; if all the obligations will be equally favorable the debtor if performed, a obligation which matures first shall be discharged first;
(3) If all the obligations are equally favorable to the debtor and all mature at the same time if performed, the obligations shall be discharged proportionately.
The prestation tendered by the person tendering the performance shall be taken to discharge the expenses first, then the interest and finally the capital. The same rule shall be applied when an obligation is performed according to the provisions of the preceding two articles.
The person tendering the performance may demand from the person accepting the performance the delivery of a written receipt.
In case of payment of interest or other periodical performance, if the creditor gives a receipt for one term without any reservation for the other terms, it is presumed that he has received performance for the previous terms.
If the creditor gives a receipt for the capital, it is presumed that he has received the interest.
If the deed to the obligation has been returned, it is presumed that the obligation has been extinguished.
Sub-section 3 Lodgments
When the creditor is in default, or when it is impossible to know exactly who the creditor is so that performance becomes difficult, the person tendering the performance may lodge the prestation for the creditor.
Lodgment shall be made in the lodgment office of the courthouse at the place of performance.
After the lodgment, the danger of the damage or destruction of the object of the prestation is borne by the creditor, and the debtor is not bound to pay the interest or to compensate for failure to acquire the profits.
The creditor is entitled to take delivery of the thing lodged at any time. If, however, the debtor is bound to perform only after a counter-prestation has been performed by the creditor, the debtor may prevent the delivery of the thing lodged, until the counter-prestation has been performed or proper security has been furnished.
The right of the creditor to the thing lodged shall be exercised within ten years from the day of lodgment; and if it is not exercised within such period, the ownership of the thing lodged is assigned to the Treasury.
If the object of the prestation is not suitable for lodgment, or if it might be damaged or destroyed, or if its lodgment would cost disproportionate expenses, the person tendering the performance may apply to the court of the place of performance to have it sold by auction and to lodge the proceeds of the sale.
When the object of the prestation mentioned in the preceding article has a current market value, the court may allow the person tendering the performance to sell it at such market value and to lodge the proceeds of the sale.
The costs of lodging the proceeds of the auction or the sale are borne by the creditor.
Sub-section 4 Offset
If two persons are bound by obligations for each other, and the objects of which are of the same kind and which are both due, each party may take his own obligation to offset the other party's, except the nature of the obligations or the agreement of the parties does not permit of it.
The agreement provided in the preceding paragraph shall not be a valid defense against any bona fide third party.
The offset shall be made with the expression of intent by one party to the other. As the mutual relationship of the obligations between themselves, it is extinguished to the extent of the corresponding amounts of the obligations deducted in the offset since the moment when the offset could be claimed.
The expression specified in the preceding paragraph, if made subject to a condition or to a time of commencement or ending, is void.
An offset may be made even though the obligations are to be performed in different places; but the party who has claimed the offset shall compensate the other party for any injury resulting therefrom.
Even if the claim of an obligation has been extinguished by prescription, it may also be offset, provided that the offset may be made prior to its extinction.
If the obligation is not subject to a judicial attachment, the debtor shall not claim for offset.
If the obligation is resulted from an intentional wrongful act, the debtor shall not claim for offset.
When an obligation has been attached by an order of the court, the third debtor of such obligation shall not take a claim which he has acquired from the creditor after the attachment to offset the obligation attached.
When it is provided by a contract that an obligation shall be performed to a third party, the debtor of such obligation shall not take the obligation of the other party to the contract to offset his obligation.
The provisions of Articles 321 to 323 shall apply mutatis mutandis to the offset.
Sub-section 5 Releases
If the creditor has expressed his intent to release the debtor from his obligation, the relationship of the obligation is extinguished.
Sub-section 6 Merger
When the right and liability of an obligation are vested in the same person, the obligation is extinguished, except when it was the object of another person's right or when it is otherwise provided by the act.