MODES TO EXTINGUISH OBLIGATION
a) By payment or Performance. Payments mean not only the delivery of money
but also the performance, in any other manner, of an obligation.
b) By the loss of the thing due. An obligation which consists in the delivery of a
determinate thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor, and before he has incurred in delay. When by
law or stipulation, the obligor is liable even for fortuitous events, the loss of
the thing does not extinguish the obligation, and he shall be responsible for
damages. The same rule applies when the nature of the obligation requires
the assumption of risk
c) By the condonation or remission of the debt. Condonation or remission is
essentially gratuitous, and requires acceptance by the obligor. It may be
made expressly or impliedly. One and the other kind shall be subject to the
rules which govern inofficious donations. Express condonation shall,
furthermore, comply with the forms of donation.
d) By the confusion or merger of the rights of creditor and debtor. The
obligation is extinguished from the time the characters of creditor and
debtor are merged in the same person. Merger which takes place in the
person of the principal debtor or creditor benefits the guarantors. Confusion
which takes place in the person of any of the latter does not extinguish the
obligation. Confusion does not extinguish a joint obligation except as regards
the share corresponding to the creditor or debtor in whom the two
characters concur.
e) By compensation. Compensation shall take place when two persons, in their
own right, are creditors and debtors of each other.In order that
compensation may be proper, it is necessary: That each one of the obligors
be bound principally, and that he be at the same time a principal creditor of
the other; 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 stated; That the two debts be due; That they be liquidated
and demandable; That over neither of them there be any retention or
controversy, commenced by third persons and communicated in due time to
the debtor. Compensation may be total or partial. When the two debts are of
the same amount, there is a total compensation
f) By Novation. Novation which consists in substituting a new debtor in the
place of the original one, may be made even without the knowledge or
against the will of the latter, but not without the consent of the creditor.
SOURCE: https://www.trans-lex.org/602450/_/philippines-republic-act-386/