Compensation: Extinguishment of Concurrent Debts, High school final essays of Mathematics

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Compensation

SECTION 5

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Compensation shall take place when two persons, in^8

their own right, are creditors and debtors of each other. (1195) Compensation

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is the extinguishment to the concurrent amount of the debts of two persons who, in their own right, are debtors and creditors of each other. It is often called simplified payment.

Kinds of

compensation

Kinds of

compensation

(1) By its effect or extent

(a) Total (b) Partial

(2) By its cause or origin

(a) Legal (b) Voluntary (c) Judicial (d) Facultative

A r t I c l e 1 2 In order that compensation may be proper, it is^ 7 9

necessary;

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditors of the other; (2) That both debts consists in a sum of money, or if the things due are consumable, they be of the same kinds, 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. (1996)

A r t I c l e

A r t i c l e 1 2 8 0 Notwithstanding the provisions of the preceding article, the guarantor may set up compensation as regards what the creditor may owe the principal debtor. (1197) Compensation benefits guarantor.

A r t I c l e 1 2 Compensation may be total or partial. When the^ 8 1 two debts are of the same amount, there is total compensation. (n) Total and partial compensations.

If one of the parties to a suit over an obligation has a claim for damages against the other, the former may set it off by proving his right to said damages and the amount thereof. (n) Judicial compensation.

Article 1283

Article 1284 When one or both debts are rescissible or voidable, they may be compensated against each other before they are judicially rescinded or avoided. (n) Compensation of rescissible or voidable debts.

If the assignment is made without the knowledge of the debtor, he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment. (1198a) If the creditor communicated the cession to him but the debtor did not consent thereto, the latter may set up the compensation of debts previous to the cession, but not of subsequent ones.

• (^) Where compensation has taken place before assignment. (1) Assignment with the consent of debtor. (2) Assignment with the knowledge but without the consent of debtor. (3) Assignment without the knowledge of the debtor. Where compensation has taken place after assignment.

A r t i c l e 1 2 8 7 Compensation shall not be proper when one of the debts arises from a depositum or from obligations of a depositary or of a bailee in commodatum. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title, without prejudice to the provisions of paragraph 2 article 301. (1200a) A r t i c l e 1 2 8 8 Neither shall there be compensation if one of the debts consists in civil liability arising from a penal offense. (n)

Instances when legal compensation is not allowed by law. (1) Where one of the debts arises from a depositum. (2) Where one of the debts arises from a commodatum. (3) Where one of the debts arises from a claim for support due by gratuitous title. (4) Where one of the debts consists in civil liability arising from penal offense.

A r t i c l e 1 2 9 0 When all the requisites mentioned in article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, event though the creditors and debtors are not aware of the compensation. (1202a) Consent of parties not required in legal compensation. (1) Compensation takes place automatically by mere operation of law. (2) Full legal capacity of parties not required.