Forms of payment

Article 1249 of the Civil Code of the Philippines provides:

ART. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance. (1170)

Article 1249 governs the obligation consisting payment of a sum of money. If the obligation is to pay a sum of money, general rule is to pay in the currency stipulated by both parties. If payment is not possible in such currency or in the absence of such stipulation, payment should be made in legal tender.

Now, we may ask, what is legal tender? Legal tender is that currency which a debtor can legally compel a creditor to accept in payment of a debt in money when tendered by the debtor in the right amount.[1][2] Furthermore, when the debtor pays the creditor but not in legal tender, the creditor may refuse to accept the payment.[3] Note that checks are not a valid tender of payment.[4]

Moreover, in case of extraordinary inflation or deflation of the currency stipulated by both parties should supervene. The value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.[5]

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[1] Black's Law Dictionary.

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

[3] Philippine Airlines v. Court of Appeals, G.R. No. L-49188 (1990).

[4] Id.

[5] Article 1250, Civil Code.