- Statute
- Civil Code
- Article
- Art. 1279
- Topic
- Extinguishment of Obligations
- Status
- In force
- Book
- BOOK IV Obligations and Contracts
- Title
- TITLE I Obligations
- Chapter
- CHAPTER 4 Extinguishment of Obligations
- Formerly
- Art. 1196 of the old Civil Code
- Year
- 1949
- Cited by
- Multiple Supreme Court decisions
The provision
In order that compensation may be proper, it is necessary: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (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 stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. (1196)
Intellegal Wiki · In plain terms
Lists the requirements for legal compensation (offsetting mutual debts): each party must be a principal debtor and principal creditor of the other; both debts must be money or consumable things of the same kind (and same quality if stated); both must be due, liquidated, and demandable; and neither may be tied up in a retention or dispute raised by a third person and communicated to the debtor in time.
An editorially maintained plain-language explanation of this provision — not legal advice.
Intellegal Wiki · How the courts apply it
In Union Bank of the Philippines v. Development Bank of the Philippines, the Supreme Court held: Denied the petition and affirmed the CA: legal compensation cannot occur because requisites 3 and 4 of Article 1279 are absent—DBP's contingent obligations are not yet due or demandable.
One leading Supreme Court case applying this provision.
Cases applying this article
- Mondragon Personal Sales v. Victoriano S. Sola, Jr. G.R. No. 174882
- Thunga Chui v. Que Bentec G.R. No. 929
- Development Bank of the Philippines v. Pedro Salazar G.R. No. 228703
- Rolando C. de La Paz v. L & J Development Company G.R. No. 183360
- Citibank v. Modesta R. Sabeniano G.R. No. 156132
- Fortunata Solis v. Maxima Barroso G.R. No. 27939
- Francisco Gutierrez Repide v. Ivar O. Afzelius G.R. No. 13438
- Agaton Araneta v. Braulio Montelibano G.R. No. 4177
Other Supreme Court decisions also apply this article.