SUBsection 3 tender of payment and consignation

Tender of Payment (Art. 1256)

If the creditor unjustly refuses payment, the debtor may consign the thing or amount due in court to be released from the obligation.

When Consignation Alone Is Allowed:

Mnemonics: AIRPO

1. Creditor is ABSENT or unknown.

2. Creditor is INCAPACITATED to receive payment.

3. Creditor REFUSES to give a receipt without just cause.

4. Two or more PERSONS claim the same debt.

5. Title of the OBLIGATION is lost.

what is tender of payment?

• The debtor offers the creditor the exact payment due and demands acceptance.

• If the creditor refuses, the debtor may consign the payment in court, which produces the effect of payment.

For payment to be effective, tender must be followed by consignation.

Consignation

Depositing the thing or amount due in court when the creditor cannot or refuses to accept payment, usually after tender of payment.

Requisites of Consignation

1. Debt is due.

2. Proper ground for consignation exists (creditor refuses, absent, incapacitated, multiple claimants, or title lost).

3. Prior notice to interested parties.

4. Deposit of the thing or amount in court.

5. Subsequent notice after consignation.

note:

Failure to comply with any requirement makes the consignation ineffective.

Rationale for Consignation

To prevent the debtor’s obligation from becoming more burdensome due to causes not his fault.

Tender of Payment Distinguished from Consignation

Tender of payment is the offer to pay the creditor while consignation is the deposit of the payment with the court to extinguish the obligation

Notice Required for Consignation (Art. 1257)

Consignation only releases the debtor if interested parties are notified and it follows the rules of payment.

How Consignation Is Made (Art. 1258)

Consignation is done by depositing the payment with the court and notifying interested parties.

Consignation Expenses (Art. 1259)

If properly made, the creditor bears the costs of consignation since they unjustly refused payment.

Effect and Withdrawal of Consignation (Art. 1260)

After consignation, the debtor can ask the court to cancel the debt, but may withdraw the payment before acceptance or judicial approval, keeping the debt active.

Effect if Consignation Has Been Duly Made

When consignation is properly made in accordance with the law the obligation is extinguished

Effect of Creditor Allowing Withdrawal (Art. 1261)

If the creditor lets the debtor withdraw the consignation, the creditor loses any priority, and co-debtors, guarantors, and sureties are released.

Effects of Withdrawing Consignation with Creditor’s Authority:

1. Obligation remains active.

2. Creditor loses any priority over the payment.

3. Co-debtors, guarantors, and sureties are released.