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)