Article 1278
RA 386 · Civil Code of the PhilippinesKey provision
ELI5— what this means for you
Compensation (set-off): when two persons are both debtor and creditor to each other, their debts are extinguished to the extent they cover each other.
Key point
If you owe someone ₱10,000 and they owe you ₱8,000, compensation occurs — you only need to pay ₱2,000.
Official text — RA 386
Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. (1195)
Source: lawphil.net (RA 386 as amended)
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