3. Fulfilling contract terms is called “performance”.Fulfilling contract terms is called “performance”.
Some situations may make performance ofSome situations may make performance of
contract terms impossible.contract terms impossible.
For example, in a contract for a musical concert,For example, in a contract for a musical concert,
the contract may sometimes be terminated ifthe contract may sometimes be terminated if
the performer becomes incapacitated.the performer becomes incapacitated.
4. In situations where an obligee refuses to acceptIn situations where an obligee refuses to accept
performance (contract).performance (contract).
For example, the payment of a certain sum ofFor example, the payment of a certain sum of
money - the obligor can discharge his obligationmoney - the obligor can discharge his obligation
by means of a certified offer to perform. If thisby means of a certified offer to perform. If this
offer is refused, the debtor becomes entitled tooffer is refused, the debtor becomes entitled to
deposit the money (or goods) due with thedeposit the money (or goods) due with the
Court and to receive an order of.Court and to receive an order of.
5. A particular obligation can also be discharged by theA particular obligation can also be discharged by the
creation of a new obligation intended to replace it.creation of a new obligation intended to replace it.
Novation can occur in 3 ways:Novation can occur in 3 ways:
• The old contract is replaced by a new oneThe old contract is replaced by a new one
• The old obligor is replaced by a new oneThe old obligor is replaced by a new one
• The old obligee is replaced by a new oneThe old obligee is replaced by a new one
In all cases, however, the novation must have theIn all cases, however, the novation must have the
agreement of both of the original parties, and theiragreement of both of the original parties, and their
intentions must in fact be to extinguish the originalintentions must in fact be to extinguish the original
debt between them.debt between them.
6. When two persons owe each other similar obligations,When two persons owe each other similar obligations,
the two debts cancel one another up to the amount ofthe two debts cancel one another up to the amount of
the lesser of the two.the lesser of the two.
For example, if A owes B $12 and is owed 85 by B, B'sFor example, if A owes B $12 and is owed 85 by B, B's
debt to A will be discharged, and A’s debt to B reduceddebt to A will be discharged, and A’s debt to B reduced
to 87. For the "compensation" or "set-off" to occur, theto 87. For the "compensation" or "set-off" to occur, the
obligations must be of a similar type and concernobligations must be of a similar type and concern
similar objects - mutual obligations to pay money, say,similar objects - mutual obligations to pay money, say,
or to deliver goods of the same type and quality.or to deliver goods of the same type and quality.
7. If the position of creditor and debtor becomeIf the position of creditor and debtor become
united in one person, the obligation isunited in one person, the obligation is
extinguished. This situation usually arises as aextinguished. This situation usually arises as a
result of succession.result of succession.
For example, A, the debtor of B, succeeds toFor example, A, the debtor of B, succeeds to
B's rights by virtue of B's last will andB's rights by virtue of B's last will and
testament.testament.
8. As a general rule, an obligor is always free to release hisAs a general rule, an obligor is always free to release his
oblige from an obligation. To be valid, the remissionoblige from an obligation. To be valid, the remission
must be affirmatively proved. The Code provides thatmust be affirmatively proved. The Code provides that
voluntary delivery by the creditor to his debtor of thevoluntary delivery by the creditor to his debtor of the
original, signed copy of the agreement is sufficientoriginal, signed copy of the agreement is sufficient
evidence of release.evidence of release.
For example, when creditor A surrender to debtor B thatFor example, when creditor A surrender to debtor B that
he cant fulfill his debt, so they will make remission forhe cant fulfill his debt, so they will make remission for
those debt under private signature constituting thethose debt under private signature constituting the
obligation.obligation.
9. If the goods which are the object of a contract areIf the goods which are the object of a contract are
damaged beyond repair, are lost or perish, and the sellerdamaged beyond repair, are lost or perish, and the seller
himself is not responsible for this loss or disappearance,himself is not responsible for this loss or disappearance,
he is discharged from his obligation to deliver.he is discharged from his obligation to deliver.
For example, (when A agree to buy B’s house. But beforeFor example, (when A agree to buy B’s house. But before
the transaction the B’s house destroy by the fire. Thus,the transaction the B’s house destroy by the fire. Thus,
the A cancel the purchasing. Because of the destructionthe A cancel the purchasing. Because of the destruction
of subject matter).of subject matter).
10. A court, as noted earlier, can annul the contractsA court, as noted earlier, can annul the contracts
of minors and wards, and also contracts whereof minors and wards, and also contracts where
the requisite consent is obtained by duress,the requisite consent is obtained by duress,
misrepresentation, mistake, or fraud.misrepresentation, mistake, or fraud.
For example, your 6-year-old child signs aFor example, your 6-year-old child signs a
contract to buy a used car. The contract isn’tcontract to buy a used car. The contract isn’t
valid because minors (usually under 18 yearsvalid because minors (usually under 18 years
old) aren’t old enough to make them.old) aren’t old enough to make them.
11. Recognizes a category of obligations known as "conditionalRecognizes a category of obligations known as "conditional
obligations", that is, obligations which either come into existence orobligations", that is, obligations which either come into existence or
disappear upon the happening of a particular event whosedisappear upon the happening of a particular event whose
occurrence is not certain to happen.occurrence is not certain to happen.
For example, a promise to rent one's house to X in the event oneFor example, a promise to rent one's house to X in the event one
goes abroad, or a promise by X to relinquish the house he is rentinggoes abroad, or a promise by X to relinquish the house he is renting
from Y if and when Y returns to Indonesia from abroad. Anfrom Y if and when Y returns to Indonesia from abroad. An
obligation of the latter sort, which is known as an obligation subjectobligation of the latter sort, which is known as an obligation subject
to a resolutory condition, is said to be extinguish by the realizationto a resolutory condition, is said to be extinguish by the realization
of the condition, and the creditor must return whatever he hasof the condition, and the creditor must return whatever he has
received in the same state as though there had never been areceived in the same state as though there had never been a
contract.contract.
12. A creditor who waits too long to press a claim may beA creditor who waits too long to press a claim may be
barred forever from doing so. As a general rule that allbarred forever from doing so. As a general rule that all
legal claims of whatever sort expire 30 years after thelegal claims of whatever sort expire 30 years after the
date on which they arise, and all related legal obligationsdate on which they arise, and all related legal obligations
are discharged. Shorter periods are sometimes specifiedare discharged. Shorter periods are sometimes specified
for particular actions.for particular actions.
For example, we have seen that an action to nullify aFor example, we have seen that an action to nullify a
contract on grounds of duress, mistake or fraud must becontract on grounds of duress, mistake or fraud must be
brought within five years of the cessation of the duressbrought within five years of the cessation of the duress
or within five years of the discovery of the mistake oror within five years of the discovery of the mistake or
fraudfraud
