Obligation Modification and Termination: Legal Aspects

Modification and Termination of Obligations

Subjective Modification

This type of modification involves a change in either the debtor or the creditor. This means that the provision is fulfilled by a person different from the original debtor. A change in the debtor always requires the creditor's consent. However, a change in the creditor can be made without the debtor's consent, but the debtor must be notified of the change.

Objective Modification

This type of modification alters situational elements of the obligation, such as a change in the location or time of performance.

Extinction of Obligations

Article 1156 of the Civil Code states that obligations are extinguished by:

• Payment or performance
• Loss of the thing due or supervening impossibility of performance

Circumstances of Impossibility

• Impossibility must affect both obligations to give and obligations to do.
• The impossibility must occur after the obligation is constituted.
• The impossibility may be due to factual or legal causes affecting the object of the provision.
• The impossibility must not be attributable to the debtor.

The debtor is not liable for the loss of the thing or failure of service unless the debtor is in default. For obligations to give, the failure to deliver extinguishes the obligation only if the thing is specific and certain. Loss of a generic thing does not extinguish the obligation.

Debt Forgiveness

Debt forgiveness occurs when a creditor forgives the debt, and the debtor agrees to this waiver. Forgiveness is, therefore, bilateral. It can be express or implied. A creditor cannot forgive more than they can leave in their will, to avoid affecting the rights of legal heirs. Forgiveness of a principal debt extinguishes the ancillary obligations, but not vice versa.

Compensation

Compensation is equivalent to balancing a legal situation. It is the total or partial extinction of two debts when they are homogeneous, and their owners are mutually and reciprocally creditor and debtor. Each one must be the principal creditor and the principal debtor of the other. Both debts must be homogeneous (similar), monetary, due, liquid, and payable.

Confusion of Rights

Confusion of rights occurs when one person holds the roles of both creditor and debtor.

Novation

There are two types of novation:

• Extinctive Novation: This occurs when there is a change in the obligation that extinguishes it and leads to a different obligation.
• Amending Novation: This occurs when the obligation is only modified.

Within amending novation, we find subjective and objective modifications. Obligations can also be extinguished by special causes, different from the general ones mentioned above.