Engineering Board Exam Reviewer · ECE · hard

X owes Y ₱50,000 due on March 1. Y owes X ₱30,000, also due and demandable on March 1, both in money. What is the effect if both debts are liquidated and no third-party claim exists?

  1. Both debts are fully extinguished
  2. Nothing happens until a court rules
  3. Y now owes X ₱20,000
  4. Legal compensation extinguishes both debts up to ₱30,000; X still owes Y ₱20,000

Answer

D. Legal compensation extinguishes both debts up to ₱30,000; X still owes Y ₱20,000

Solution

Legal compensation takes effect by operation of law up to the concurrent amount (Arts. 1279, 1290).

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