Quiz no.

1. How does compensation and novation extinguish an obligation?

Compensation – when two persons are creditors and debtors of each other.

Novation – (a) by changing their object or principal conditions; (b) by substituting

the person of the debtor; (c) by subrogating a third person in the right of the

creditor.

2. Yoon Seri owns shares of stock in Seri’s Choice Lending Company worth P10k. Later,

Yoon Seri borrowed money from Seri’s Choice Lending Company amounting to P10k

including interests. When the loan fell due, Yoon Seri was not able to pay the loan. Yoon

Seri wanted to compensate the loan with her shares of stock in Seri’s Choice. Can Yoon’s

debt be compensated with the shares of stock he owns?

 Yoon’s indebtedness to a banking corporation cannot be compensated with the

amount of his shares in the same institution because the owning shares of stock

does not create a debtor creditor relationship.

3. Captain Ri has a P1M savings deposit with the Bank of Korea. One day, Captain Ri

borrowed P200k from Bank of Korea. Without asking permission from A, the bank

deducted P200k from A’s account, leaving a balance of P800k in A’s favor. Is the bank’s

action proper? Why?

 Yes. Compensation is allowed here because in this case, the relationship between

the bank and the depositor is that of debtor and creditor. (Art. 1980)

4. What are the requisites of a valid novation?

  Existence of a valid old obligation.

 Intent to extinguish or to modify the old obligation by a substantial difference

(extinguishment or modification itself is a result of novation).

 Capacity and consent of all parties, except in the case of expromision where the old

debtor does not participate.

 Validity of the new obligation.

5. Mang Ki obliged himself to deliver a particular laptop to Mang Kay. Subsequently, Mang

Ki and Mang Kay agreed that instead of delivering the laptop, Mang Ki will deliver two

particular cellphones to Mang Kok with the understanding that Mang Kok will be the new

creditor and that the old obligation is being abandoned by the new agreement. Is there

novation in this case? If yes, what kind of novation is present? Justify your answer.

 Yes, there is novation in this case. It is Mixed Novation because there is a change in
the person of the creditor and the object of the obligation.