them into three kinds: (1) those which take place by the performance of the contract; (2) those obtained by the mutual graeement of the parties; and (3) those which take place due to the impossibility of the compliance of the contract. The first may be direct as it happens with the payment, either general or special, or indirect as in the case of compensation. The second takes place either by remission, mutuo disenso, transaction, compromise and novation; and the last may take place either by the impossibility of performance as regards the parties, or as regards the subject matter, or as regards the obligation itself of the contract. (8 Manresa 246; IV Sanchez Román 823.)

Kinds of Discharge under American Law.-The ways in which a contract may be discharged under American Law are: (1) By agreement of the parties to that effect; (2) By performance of the contract; (3) By impossibility of performance; (4) By operation of law; and (5) By breach. (Elliott on Contracts, Vol. III, sec. 1856; 9 Cyc. p. 593.)

A. By performance under Spanish Law

(1) Direct-(a) By Payment in General.-The word Payment has three distinct acceptations: general, special and very special (especialisima). The first two are juridical terms and the last, common. The acceptation, however, more proper to the nature of the payment in question, and the most admitted by the authorities is the special payment which consists "in the real and effective compliance of the prestation which forms the object of the obligation, whatever may be the nature of the object in which the prestation consists of." Thus, the following shall be deemed payment: The person who, owing money to another, pays his debt; the borrower of a horse, who returns, the same to the lender; the architect who is bound to construct a thing and terminates it and places the same at the disposal of the owner and the like. (8 Manresa 250.) Viso, speaking about this kind of payment, says: "By payment or compliance is meant the delivery of the thing or quantity or the prestation of the service which was promised." From this definition our Civil Code was also inspired and in its article 1157, it provides: "A debt shall not be considered as paid, until the total amount of the things has been delivered or the prestation of which the obligation consisted has been made." In order to have an effective payment, it is necessary that the following circumstances be present: (1) that the payment be made by the party who has a right to the thing which constitutes the object of a contract; (2) that it must be made to the person entitled to receive the payment; (3) that the payment be made in the place and time stipulated for in the contract; and (4) that it be made in the form provided for by law or by the customs of the place. For the elaborate discussion of this subject, see 8 Manresa pp. 258-300; IV Sanchez Román pp. 253-283; Viso Vol. 3, pp. 82-88.

Imputation of payment. Concept.-This imputation of payment takes place when one is a debtor of several debts or obligations of the same creditor. (IV Sanchez Roman 267.) This from may be reduced into the following rules:

8.

When the debtor pays a certain sum to the person whom he owes several debts of the same kind, such payment shall be applied to the debt the debtor may assign at the time of making the payment, but if the debtor does not make any assignment, such payment shall be applied to the debt the creditor may designate in the receipt, and the debtor cannot later object to such application unless there be a cause which would invalidate the contract. (Article 1172, Civil Code);

b. When the debt bears interest, the payment cannot be applied to the capital, while the interests are not yet paid, unless the creditor agrees to that effect. (Article 1173, Civil Code);

c. If neither the debtor nor the creditor make any assignment of the payment nor could it be applied in accordance with the foregoing rules, such payment shall be applied to the debt most onerous to the debtor among those due, understanding, however, for onerous, that debt which bears interest or to which penalties were imposed, or which was given under security. (Article 1174, Civil Code, part 1);

d. If all the debts were of the same nature and charges, the payment shall be applied to all pro rata. (Article 1174, part 2, Civil Code.)

(1) Adjudicación o dación en pago.

Concept. "It is the conveyance of the ownership of a thing as an accepted equivalence of performance". (8 Man. 314.) It is a sort of sale. (Id.)

See Art 1531, Civil Code.

This special form of payment differs from assignment of property in these respects: the former does not require, in order to take place, that there be a plurality of creditors, whereas the latter does; neither it needs refer to all the property of the debtor as assignment does and finally adjudication unlike assignment may take place even during the solvency of the obligor. (8 Man. 314.)

(2) Tender of Payment and Consignation. Concept.-This form takes place when the debtor, desiring to make payment, the creditor, however, declines to accept the thing or the amount owed, in which case the debtor may extinguish his obligation by means of Tender of Payment and Consignation made in the form prescribed bylaw. Tender of Payment means "the act by which the debtor informs the cred. itor that he is ready to make payment of the amount due, or to make the delivery of the thing belonging to him;" and Consignation "is the deposit which the debtor desires to make of the thing or amount due, when the creditor declines to receive the same." (3 Viso 89.)

Requisites of Tender of Payment.-In order that the Tender of Payment may be valid it must have the following requisites:

(a) That the payment be of the whole debt;

(b) That it be made by the person who has capacity to make the payment, and to the person who has capacity to receive the same; the same may also be made to the creditor's agent if the latter is specially authorized for that purpose;

(c) That it be made in the place agreed upon and, in its default, in the domicile of the creditor;

(d) That the payment be made at its maturity, or that the condition imposed upon when the debt was contracted, be complied with;

(e) That the debtor should inform before persons of good reputation or before a judge of competent jurisdiction that he is ready to pay his debt and that if the creditor refuses to receive the same, he is ready to make the consignation thereof (Law 8, tit. XIV, Partida 5.) It seems that the first part of the last requisite is no longer in force here.

Requisites of Consignation.-Consignation should follow the Tender of Payment. (Article 1176, part 1, Civil Code; Panganiban vs. Cuevas, 7 Phil. 477) However, the consignation alone may be made, when the creditor is absent, or when he is incapacitated to receive the payment at the time it is to be made, and when several persons pretend to have a right to collect the debt, or when the title of the obligation has been mislaid. (Article 1176, part 2, Civil Code, Panganiban vs. Cuevas, 7 Phil. 477, 487.) The consignation may also be effected when the creditor, without just reason, refuses to accept the payment. (Article 1176, part 1, Civil Code; Fabros vs. Villa San Agustin, 18 Phil. 336, 340), or when the creditor is not found at the time and place agreed upon for the payment (IV Sanchez Román 295), or when the creditor is not known (IV Sanchez Román 295), or finally when the creditor refuses to give a receipt for the payment made in order to avoid fraud. (IV Sanchez Román 295.) The effect of consignation is to free the debtor from responsibility. (Article 1176, part 1, Civil Code; 8 Manresa 318.) But in order to have a proper consignation, it should be notified to the person interested in the compliance of the obligation. (Article 1177, part 1, Civil Code.) Moreover, it should be adjusted literally to the provisions which regulate the payment. (Article 1177, part 2, Civil Code.) The consignation is made by depositing the things due at the disposal of the judicial authority, before which the Tender shall be accredited and the announcement of the consignation, to the others, Consignation, once duly made, shall also be notified to the interested parties. (Article 1178, Civil Code; Panganiban vs. Cuevas, 7 Phil. 477, 486; Fabros vs. Villa San Agustin, 18 Phil. 336, 340.) The expenses of the consignation, when properly made, will be charged against the creditor. Consignation once duly made, the debtor may ask the judge to order the cancellation of the obligation. As long as the creditor has not yet accepted the consignation, or the approval of the judge as to consignation has not yet been made, the debtor may withdraw the thing or amount consigned leaving the obligation subsisting. (Article 1180, Civil Code.) If, after the consignation is made, the creditor authorizes the debtor to withdraw, the former shall lose all the right of preference which he has on the thing. The co-debtors and sureties in such a case shall be discharged. (Article 1181, Civil Code.)

(3) Payment by Assignment (Cession) of Property.-Concept.-Assignment is meant the abandonment by the debtor of his property in favor of his creditor or creditors. Proemio of tit. XV, Partida 5.

Kinds: Assignment may be conventional or judicial.-Conventional assignment or cession "is that which the creditors accept voluntarily binding themselves as to what was stipulated between them and the debtor. Judicial assignment or cession is that which, by some special benefit, the law concedes to the debtors in good faith, in order that they may abandon their property in favor of their creditor, when, in consequences of a fatal misfortune, they become unable to pay their creditors. (3 Viso 92.)

Persons who can make the assignment of property.-These may be those unfortunate debtors, who, by unforeseen events, become unable to pay their creditors. In case of extra judicial assignment, as this is the result of an agreement between the creditor and the debtor, the latter cannot force the former to accept the property assigned; but in a judicial assignment the creditor cannot refuse nor the judge can permit such refusal, because the law considers as an act of humanity to protect the debtors once their misfortune and good faith are proven. (Law 1, tit. XV, Partida 5.)

Property subject to assignment.-In accordance with Law 1, tit. XV, Partida 5, all property of the debtor except the ordinary clothing, may be subject to assignment; but in practice it is conceded as a humanitary act that those instruments used in the profession of the debtor and all others which are exempt from attachment as provided for in the Code of Civil Procedure, section 452, Act 190, may also be respected.

Effects of assignment.-In order to determine the effect of assignment, it should be noted that the assignment may be conventional or judicial. If conventional, what was stipulated should govern. But the creditor who is not in conformity with the terms of the assignment, cannot be bound by the same. (8 Manresa 312.) If it were judicial, or being conventional and nothing was stipulated, the important effects produced are: (1) to sell the property assigned and with its proceeds to satisfy the creditors according to their respective credits. (8 Manresa 313); (2) to extinguish the credit or credits up to the amount the proceeds of the sale may cover, the debtor remaining obligated to pay for the rest together with his joint creditors and sureties if their be any, and in their default, the heirs of the debtor if they receive the inheritance without the benefit of the inventory. (Article 1175, Civil Code.) It seems that this last part regarding inventory is no longer in force at the present time in the Philippine Islands; (3) in view of the assignment the creditors will become subrogated in all the rights of the debtor, with the right to exercise all the actions which may be derived therefrom. In this connection sce article 1175, Civil Code. The stipulation which may be agreed upon between the creditor and the debtor in the contract of assignment will be adjusted in accordance with the provisions of title XVII of the Civil Code and those of the Enjuiciamiento Civil.

(2) Indirect (a) Compensation, Concept.-"Compensation shall take place when two persons in their own right are mutually creditors and debtors of each other." (Article 1195, Civil Code.) "Two obligations are balanced and extinguished to the extent in which the value of one co-exist with the other and this is often called simplified payment." (8 Manresa 391.) Compensation is very useful to both parties, because it saves expenses, suits and troubles which cannot be avoided if each debtor should be compelled to pay materially what he owes, in order to extinguish his debt. (8 Manresa, 391.)

Kinds: As to its cause, it may be legal, voluntary and judicial; and as to its effect, it may be total or partial.

Legal compensation "is that which is created against the will of one of the parties and even without the consent of either party from the time the reciprocal concurrence of the debts and the conditions required from the latter, take place." In this connection see Luengo & Martinez vs. Herrero, 17 Phil. 29 and also Yap Unki vs. Chua Jamco, 14 Phil. 602. This kind of compensation is paramount. Voluntary compensation "is the one obtained through the agreement of the parties." It differs from novation in that in the latter the original obligations are extinguished in order to produce or create new ones, while in the voluntary compensation, the obligations become totally extinguished. Judicial compensation, ordinarily speaking, does not exist as such and it is only so called when the same is declared by the court in view of a demand made by one of the parties. (8 Manresa 393-394.) Total compensation takes place when it produces the extinguishment in toto of the obligations, and partial when it extinguishes only in part. (8 Manresa 392-393.)

Requisites. Compensation in order to be valid must have the following requisites: (1) Each debtor must be principally bound and must be at the same time the principal creditor of the other; (2) Both debts must consist of a sum of money or other fungible goods of the same kind and quality, if quality has been stipulated; (3) Bǝth debts must be due; (4) The debts must be liquidated and demandable; (5) None of them must be subject to any retention or suit instituted by a third person and of which the debtor has been duly notified; (6) Finally, none of the debts must be of the kind which the law excludes from the operation of compensation. (Articles 1195 and 1196, Civil Code; see Acuña Co Chongco vs. Dievas, 12 Phil. 250.) Let us explain briefly some of these requisites for their clear understanding.

The debts must be mutual.-The law requires that the debts must be mutual or must be of persons who at the same time are principal debtors and creditors of each other. (Article 1195; Article 1196, part 1, Civil Code.) So, for the lack of this requisite the following debts cannot be compensated each for the other: (a) The debtor who has consented to the assignment of the rights by a creditor in favor of a third person, cannot set up to the transferee the compensation which would correspond to him against the transferrer, (Article 1198, part 1, Civil Code; (b) If the debtor be informed of the assignment and he refuses, then he can set up the compensation for the