Payment is one of the ways to extinguish a debt. According to Article 1233 of the Civil Code of the
Philippines, “[a] debt shall not be understood to have been paid unless the thing or service in which the
obligation consists has been completely delivered or rendered, as the case may be.” Thus, stated simply,
a borrower, in case of monetary obligation, can only say that his debt has been paid if he has already
paid in full the amount that he has borrowed from the lender, and this includes the interest therein.

To better understand “payment”, take note of the following:

Who – it should be clear who pays who. The borrower and the lender are the original parties in
a loan contract, so it should be the BORROWER who will pay the LENDER. However, there may
be instances when a third person comes into the picture to either help the BORROWER in paying
the debt, or receive payment on behalf of the LENDER. In either case, these third parties should
be agreed upon by the parties – it should be included in the terms of the parties’ agreement.

What and How – it should be understood what the BORROWER will pay the LENDER with. For
instance, the parties agree that the loan of the borrower in the amount of P100,000.00 will be
paid by him with groceries amounting to One Hundred Thousand. If this is the case, it is only
when the borrower is able to give the lender one hundred thousand worth of groceries that his
debt is extinguished, unless the parties later on agree to modify the terms of payment.

Where – Payment shall be made in the place agreed upon by the parties. If there is no
agreement, then the payment shall be made in the domicile of the borrower.

For better protection of their rights, both the borrower and lender should understand the concept of
payment. If there are still some confusion regarding “payment”, lawyers should be ready to assist the
parties.