Sunday, July 5, 2009

Conventional Compensation

However, we recognize the concept of conventional compensation, defined as occurring “when the parties agree to compensate their mutual obligations even if some requisite is lacking, such as that provided in Article 1282.” It is intended to eliminate or overcome obstacles which prevent ipso jure extinguishment of their obligations.

The only requisites of conventional compensation are (1) that each of the parties can dispose of the credit he seeks to compensate, and (2) that they agree to the mutual extinguishment of their credits. (UPSUMCO v. G.R. No. 126890, April 2, 2009)

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