Business Law | Extinguishing of Obligation (Debt) | Part 2 | For Educational Purposes Only

The term 'pago' indicates the transfer of ownership from debtor to creditor in lieu of monetary payments, acting under the law of sales as per Article 1245. This involves substituting property instead of money to fulfill a debt, requiring consent for validity. If the property's value is less than the debt, the difference remains payable unless an agreement states otherwise, extinguishing the obligation through payment substitution by property.

Obligations can be extinguished not only by payment but also by certain events, like the loss of a specific item without the debtor's fault. Article 1262 mentions that if a specific item is lost or destroyed without the debtor's fault and prior to any delivery delay, the obligation is voided. However, this does not apply to generic items. Loss needs to be unavoidable and not caused by the debtor, as seen in examples where negligence, like ignoring storm warnings, doesn't exempt liability.

An example illustrates the non-application of fault-based exemptions in cases such as a vessel ignoring weather warnings, where the debtor could still be liable due to negligence. Requisites for obligation extinguishment include loss without fault, no delivery delay, and no applicable laws holding debtor liable. In some contracts, like life insurance or certain transportation laws, specific statutes can supersede typical exemption rules, preserving debtor liability despite inevitable events.

Another method of obligation extinguishment is through condonation or debt remission, where the creditor forgives the debt, which can be explicit or implied. This act is like a donation and requires mutual agreement and capacity by both parties. Conditions include mutual agreement, gratuitous offering, and compliance with the donation process. Implied condonation examples include return of a promissory note to the debtor or release of an obligation accessory upon principal debt remission.

Confusion or merger of roles is when one person becomes both debtor and creditor to the same obligation, leading to its extinguishment, as the person owes and receives at the same time. An instance is when a promissory note endorsed through transactions returns to the initial debtor, extinguishing the obligation. Effects include the release of guarantors if the principal debtor merges roles, while if only a guarantor merges roles, the accessory obligation nullifies but the principal remains intact.