Kinds of novation

Novation is a juridical act of dual function—it extinguishes an obligation, and at the same time, it creates a new one in lieu of the old. It operates as a relative, not an absolute, extinction. 

There are different kinds of novation. 
As to origin.
1. Legal - takes place by operation of law; or
2. Conventional - takes place by agreement of parties.

As to form. 
1. Express - when it is declared in unequivocal terms; or
2. Implied - when the old and new obligations are on every point incompatible with each other.

In California Bus Line v. State Investment,[1] the Supreme Court held that in the absence of an unequivocal declaration of extinguishment of the pre-existing obligation, only proof of incompatibility between the old and new obligation would warrant a novation by implication. Moreover, the test of incompatibility decides whether or not the two obligations can stand together, each one having its independent existence. If they cannot, they are incompatible and the latter obligation novates the first. In Quinto v. People,[2] the Supreme Court held that the incompatibility must take place in any of the essential elements of the obligation, such as its object, cause or principal conditions thereof; otherwise, the change would be merely modificatory in nature and insufficient to extinguish the original obligation

As to subject.
1. Real/objective - when the object, cause (consideration), or principal conditions of the obligation are changed; 
2. Personal/subjective - when the person of the debtor is substituted and/or when a third person is subrogated in the rights of the creditor; or
3. Mixed - when the object or principal condition of the obligation and the debtor or the creditor or both the parties, are changed. It is a combination of real and personal novations.[3]

As to effect.
1. Total - when the old obligation is completely extinguished; or
2. Partial - when the old obligation is merely modified, i.e., the change is merely incidental to the main obligation.[4]

[1] California Bus Line v. State Investment, G.R. No. 147950, (2003).

[2] Quinto v. People, G.R. No. 126712, (1999).

[3] De Leon. (2014). Obligations and Contracts.

[4] Id.

Popular Posts