ARTICLE 1278

Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. (1195)


Ang kabayaran ay mangyayari sa dalawang tao ayon sa kanilang mga karapatan kung sino ang nagpautang at sino ang umutang.

Compensation 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.

Kinds of Compensation

1. By its effect or extent.

a. Total- when both obligations are of the same amount.

b. Partial- when the two obligations are of different amounts.

2. By its cause or origin:

a. Legal- when it takes place by operation of law even without the knowledge of the parties.

b. Voluntary- when it takes place by agreement of the parties.

c. Judicial- when it takes place by order from a court of litigation.

d. Facultative- when it can be set up only by one of the parties.

Example:

Chowqueen owes MacBonald 10M. MacBonald on another occasion owed Chowqueen 15M pesos. MacBonald is liable to Chowqueen with 5M.