Summary
Highlights
The court can declare compensation when one party proves damages owed by the other in a lawsuit.
An obligation to deliver a specific thing is extinguished if it is lost or destroyed without the debtor's fault and before they are in delay. 'Loss' means the thing perishes, goes out of commerce, or disappears beyond recovery. This does not apply to generic things, as a generic thing never perishes (genus nunquam perit), meaning replacement is always an option unless the generic thing becomes specific by designation.
Partial loss occurs when a part of a specific thing is lost or deteriorates. The courts decide if this partial loss is significant enough to extinguish the entire obligation, considering if the damage is equivalent to a total loss for its intended purpose.
If a specific item is lost while in the debtor's possession, it is presumed to be due to their fault, a disputable presumption. This rule does not apply in cases of natural calamities.
A debtor is released from an obligation to do if performance becomes legally or physically impossible without their fault, provided this impossibility arises after the obligation was formed. This includes physical impossibility (e.g., a painter losing an arm) or legal impossibility (e.g., new laws prohibiting construction).
When an obligation's performance becomes exceptionally difficult and was not contemplated by the parties, the obligor can be released, either completely or partially. This applies to situations with elements of force majeure or fortuitous events.
If an obligation to deliver a specific thing stems from a criminal offense, the debtor is not released from liability even if a fortuitous event causes its loss. The obligation to pay the price remains, unless the debtor offers the item and the owner unjustifiably refuses it.
When an obligation is extinguished due to the loss of a specific thing, the creditor has the right to take legal action against any third party responsible for the loss, safeguarding the creditor's interest.
Condonation or remission is the gratuitous abandonment by the creditor of their rights against the debtor, requiring the debtor's acceptance. It can be express or implied and must comply with the forms of donation if made expressly.
Voluntary delivery of a private document evidencing a credit by the creditor to the debtor implies remission of the debt. If the document is found in the debtor's possession, it is presumed the creditor delivered it voluntarily, and the debt has been forgiven or paid, unless proven otherwise. This presumption applies only to private documents.
Renunciation of the principal debt extinguishes accessory obligations. However, waiver of accessory obligations (like a pledge) does not affect the principal debt. If a pledged thing is found in the debtor's possession after delivery to the creditor, the accessory obligation of pledge is presumed remitted, but not the principal debt.
Confusion or merger occurs when the roles of creditor and debtor for a single obligation merge into the same person, thus extinguishing the obligation. This is illogical to enforce a debt against oneself. It must be between the principal debtor and creditor and be complete.
A merger of roles of principal debtor and creditor extinguishes the entire obligation, including accessory obligations like guarantees, following the principle that the accessory follows the principal. However, if the merger happens to the guarantor, the principal obligation remains.
In a joint obligation, confusion extinguishes the obligation only for the share of the specific person in whom the merger occurs, not for the entire obligation. In a solidary obligation, the entire obligation is extinguished, but the debtor in whom confusion occurs has a right to reimbursement from co-debtors.
Compensation occurs when two people owe each other money, and their debts cancel out to the extent they are equal, avoiding unnecessary lawsuits and payments. It can be total (debts are equal) or partial (debts are unequal, smaller one cancels out). Compensation can be legal, voluntary, or judicial.
For legal compensation to occur, both parties must be principal debtors and creditors to each other, the obligations must be of the same kind and quality, both debts must be due, liquidated, and demandable, and there must be no third-party claim over either debt.
Even if normal rules would prevent it, a guarantor may claim compensation for what the creditor owes the principal debtor, using the principal debtor's credit to offset their own obligation.
Compensation is total when two debts are of the same amount and cancel each other completely. It is partial when debts are not equal, and the smaller debt cancels out, leaving a balance on the larger debt.
If one or both debts are voidable or rescissible, compensation may still be affected, meaning they can be compensated, rescinded, or avoided depending on the case.
If a creditor assigns their credit to another person and the debtor consents, the debtor cannot later use compensation against the new creditor unless they reserved that right at the time of consent.
Novation is the extinction of an obligation by creating a new one that substitutes it. This can be objective (changing the object or principal conditions) or personal (substituting the debtor or subrogating a third person in the creditor's rights). Novation functions dual-purpose: to extinguish or modify an existing obligation and to substitute a new one.
Four requisites for novation: a previous valid obligation, capacity and clear intention of parties to modify/extinguish, modification/extinguishment of the old obligation, and creation of a new valid obligation. Novation is not presumed and must be explicit.
Personal novation involves changing the parties. Substitution happens when a new debtor takes the place of the original (expromision, with or without original debtor's knowledge; delegacion, with original debtor's proposal and creditor's agreement). Subrogation means a third person steps into the creditor's shoes.
In expromision (without original debtor's knowledge), if the new debtor becomes insolvent, the original debtor is not liable. In delegacion (with original debtor's proposal and creditor's agreement), the general rule is that the original debtor is not liable for the new debtor's insolvency, as their obligation was extinguished upon novation.
When the main obligation is extinguished by novation, all accessory obligations (like pledges or guarantees) are generally also extinguished, unless the accessory obligation benefits a third party who did not consent to the novation.
If the new obligation created by novation is void from the beginning, the original obligation remains in force, as there was no valid novation. An exception is if parties clearly intended to extinguish the old obligation regardless of the new one's validity.
A void original obligation cannot be novated, as 'nothing valid exists' to be replaced. However, a voidable obligation (e.g., entered into by a minor) can be novated if consented to after ratification.
If the original obligation was subject to a suspensive (takes effect upon an event) or resolutory (extinguishes upon an event) condition, the new obligation is presumed to carry the same condition unless the parties agree otherwise.
Subrogation is putting a third person in the place of the creditor, giving them the rights, powers, and remedies of the old creditor. It can be conventional (by agreement of all parties) or legal (by operation of law in specific cases, e.g., a guarantor paying the debt).