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Confusion or Merger
•The obligation is extinguished from the time the characters of the creditor and debtor are merged in the same person. (ART. 1275)
Example
Dec. 1, 2015
(Marries)
Joe (debtor/obligor)Stacy (creditor/
obligee)
Jan. 1, 2014
(Owes P100,000)
Effect of merger when there is a guarantor
1. Merger which takes place in the principal debtor or creditor benefits the guarantors (ART. 1276)
Example
2. Confusion which takes place in the person of the guarantor does not extinguish the obligation. (ART. 1276)Example
•Guarantor – a person who promise to pay back a loan if the original borrower does not pay it back•Guaranty- a formal promise to pay a debt
Dec. 1, 2015
(Marries)
Joe (debtor/obligor)Stacy (creditor/
obligee)
Jan. 1, 2014
(Owes P100,000)
Andy (guarantor)
Dec. 1, 2015
(Marries)
Jan. 1, 2014
(Owes P100,000)
Andy (guarantor)
Go after
Joe (debtor/obligor)Stacy (creditor/
obligee)
Merger in a joint obligation
•Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditors and debtors in whom the two characters concur. (ART. 1277)
Example
Michelle Valerie Synth
Daniel
Dominic
August 1, 2014
(owes P4500- air
conditioner)
Oct. 1, 2014
(buys a soccer shoes on
account worth P4500)
Dec, 1, 2014
(buys a polo perfume on
account worth P4500)
Compensation
•Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. (ART. 1278)
Example
Amanda Dolly
Borrowed P50
Asked to buy a
lunch worth P50
Kinds of compensation
I. As to cause or origina. Legal1. That each one of the obligation be
bound principally, and that he be at the same time a principal creditor of the other; (ART. 1279
Example
Kinds of compensation
Exception to the first requisiteA guarantor may set up
compensation as regards what the creditor may owe the principal debtor. (ART 1280)
Example
Alyssa (guarantor)
Amanda Dolly
Borrowed P50
Asked to buy a lunch worth
P50
Alyssa (guarantor)
Amanda Dolly
Borrowed P50
Asked to buy a lunch worth
P40
Collect P10
Kinds of compensation
2. That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated3. That the two debts be due4. That they be liquidated and demandable5. That over neither of them there be any retention or controversy, commenced by the third persons and communicated in due time to the debtor
Example
Borrowed P50
Asked to buy a
lunch worth P50Collect P50
Alyssa
AmandaDolly
Borrowed P50
Kinds of compensation
II. As to amount or extenta. Total – when the debts are of the
same amount. (ART. 1281)b. Partial – when the debts are of
different amounts. (ART. 1281)