Legal Mechanisms for Modifying and Terminating Contractual Obligations

Modification and Termination of Obligations

Obligations can undergo two types of modifications:

1. Subjective Change

This occurs when the legal relationship changes the debtor or the creditor.

• Changing the Debtor: Fulfillment will be carried out by someone other than the original debtor, provided the creditor consents.
• Changing the Creditor: This can occur without the consent of the debtor.

2. Objective Modification

This involves changes to the situational elements of the obligation, such as a change in the location or time of performance.

Assignment of Commercial Contracts

In commercial practice, the Civil Code (CC) does not explicitly regulate this issue. However, according to jurisprudence, assignment is admissible under Section 1.255.

Requirements for Contract Assignment:

1. The contract must be bilateral, and the reciprocal benefits must not have been wholly executed.
2. The other party to the contract must consent to the assignment (cesión).

The assignment of a contract involves the release (desvinculación) or liberation of the original party.

Extinction of Obligations (CC Art. 1156)

Obligations are extinguished by:

• Payment or performance.
• Loss of the thing or supervening impossibility of the provision.

Conditions for Loss of Thing/Impossibility of Provision:

These circumstances must occur to extinguish the obligation:

1. The failure must affect positive obligations.
2. The circumstances must arise subsequent to the formation of the obligation.
3. The causes (factual or legal) must affect the object of the provision.
4. The loss must not be attributable to the debtor.

The debtor is not responsible for the loss of the thing or the inability of the service unless it occurred after the debtor was in default (mora). For obligations to provide a specific thing, failure to extinguish the obligation requires that the specific thing is certain, because if the thing is generic, its loss does not extinguish the obligation.

Other Methods of Obligation Extinction

Compensation (Set-Off)

Compensation is the total or partial extinction of two debts when they are homogeneous and their owners are mutually and reciprocally debtor and creditor, balancing the legal situation.

Requirements for Compensation:

• Both parties must be individually and principally creditors and debtors to the other.
• Both debts must be homogeneous (similar), typically monetary.
• Both debts must be due (overdue), liquid, and payable.

Confusion of Rights

This occurs when the concepts of creditor and debtor merge into a single person.

Extinctive Novation

Extinctive novation occurs when a change in the obligation is of a nature sufficient to extinguish the original obligation, replacing it with a different one.

Condonation (Waiver or Forgiveness of Debt)

Article 1.187 of the Civil Code regulates the cancellation of debt. Canceling the debt amounts to forgiving or waiving the requirement. This can occur in two ways:

• Mortis Causa: A case involving the legacy of forgiveness.
• Inter Vivos: Remission or referral itself.

The waiver may be express or tacit. Waivers are subject to the provisions governing inoperative donations. The express waiver must also conform to the forms required for a donation.