DEC. 17, 2013

Topic: payment / performance as a mode of extinguishing an obligation.

ART. 1246: different types of objects.

a. Specific or determinate objects: no substitute.

b. Generic: delivery of something of the same genus.

A creditor cannot demand a thing of superior quality.

NOT IN THE LAW: that debtor cannot deliver a thing of superior

quality.

o WHAT IS IN THE LAW: he cannot deliver a thing of

inferior quality.

o So there is nothing in the law that prohibits the debtor to

deliver a thing that is better.

ART. 1248: rule on partial payments, subject to 3 EXCEPTIONS:

1. When the obligation expressly stipulates the contrary.

2. When the different prestations constituting the objects of the

obligation are subject to different terms and conditions.

3. When the obligation is in part liquidated and in part unliquidated.

ART. 1249

A borrowed P1K from B and they entered into an agreement that

A will pay B in US dollars. Is such stipulation valid?

o YES, it is valid.

o Can B legally insist on being paid in US dollars? YES.

o Is RA 4100 still in effect? Not anymore; repealed.

It is NOT impossible for parties to stipulate such

(as of July 1996).

There is no legislative prohibition in the currency

of payment.

When there is no currency stipulated by the parties or when it

becomes impossible to deliver such currency; CURRENCY TO

BE USED: currency which is legal tender in the Philippines.

Are all notes and coins issued by the Central Bank legal tender of

all types of debts (public and private)? YES.

o If A owes B P10M, can A pay B using P20 bills? YES.

o Can A pay B using P10 coins? NO.

o Circular No. 537:

a. P1, P5, P10 coins: only until P1,000.

b. Centavo coins: only until P100.

o If I ride a taxi, and my fare amounted to P98, can I pay

using centavo coins alone? YES.

o If I buy 1kg of meat (P140), can I use centavo coins to

pay? NO, it is not legal tender. The price is higher than

P100.

A owes B P1M and when it became due, A issued a check worth

P1M. Can B refuse the check?

o YES, why? A check is not a legal tender.

o Will there be a difference if it is a cashier’s check? NO.

Whatever kind of check → NOT legal tender.

o A check is not legal tender and may thus be validly

refused.

If A’s debt of P10M becomes due and A paid using a check to B,

and B accepted such, as of that moment, is the debt paid

already?

o NOT YET. When is the debt considered paid?

1. When it has already been encashed.

2. When due to the creditor’s fault, the check was

impaired.

A issued a check for P10M. B did not encash it and instead, kept

it in his drawer, where every morning, he looks at it for the next 8

months.

o DISHONORED: stale → validity of a check (6 months).

o Since it was impaired because of the failure of the

creditor to present it, does that mean the debt is already

paid? NO; no prejudice to the debtor.

o If A issued a check, with the amount due deposited in the

bank, but B failed to enchash it within 6 months. STILL,

there is no impairment on A’s part.

EXCEPTION: when the bank was closed (bank

run). In that case, the debt is considered paid in

such a way that B cannot go after A anymore.

IMPAIRMENT: more applicable with merchantile documents

(issued by third persons).

o Ordinarily, impairment happens to checks and documents

issued by third persons. If there is such due to the

creditor’s fault, then the debt is considered paid.

ART. 1250: EXTRA-ORDINARY INFLATION

A owed B so they entered a contract that A will pay B in US

dollars, where the prevailing exchange rate of Peso and US

dollars is 40:1. When the payment became due, the exchange

rate became 44:1. Is such inflation extraordinary?

o NO. The value of any currency would usually fluctuate on

a daily basis → ORDINARY FLUCTUATIONS only.

o The change must be SO BIG and completely

UNFORESEEABLE / totally beyond the contemplation of

the parties.

Many of our cases: no extraordinary inflations, MOSTLY

ORDINARY.

EXAMPLES OF EXTRAORDINARY INFLATION:

1. FILIPINO PIPE VS. NAWASA: when Germany lost in

WWI. They were forced to pay huge reparations so the

value of their currency spiralled down/

2. Japanese war notes during the WWII.

NOTE: according to (someone) there is a need for official

government declaration of the existence of an extraordinary

inflation.

ART. 1251: PLACE OF PAYMENT

1. In the place stipulated by the parties.

2. If there is NO express stipulation:

a. DETERMINATE THING: where the thing is located.

- NOT LITERAL: not the precise place where it is

at.

If A obliged himself to deliver a particular

car to B, and when the agreed date of sale

came, the car was being driven by A’s

brother to La Union → difficult to locate

precisely.

- WHAT IT MEANT: where it is habitually kept.

b. Domicile of the debtor.

If you are the lawyer of the creditors, you need to make sure that

there is a stipulation for the place of payment.

o You need to stipulate payment must be made in the

residence or office of your client to avoid inconveniences

on your clients’ part.