Swapping the debt for another: when the old one is really extinguished

It is Chapter IV of Title IV of Book Four of the Civil Code of 2020, Articles 1182 to 1188. It is the way of extinguishing an obligation by substituting another for it: changing what is owed, changing the debtor, or changing the creditor.

Any creditor and debtor who want to substitute their obligation with another. If what changes is the debtor, the creditor’s consent is needed on both routes the Code provides.

• For the old obligation to be extinguished, that this be declared in categorical terms or that both obligations be totally incompatible.Verified against the official source
• To substitute the debtor, the creditor’s consent: without it there is no novation, even if the original debtor never learns of it.Verified against the official source
• To keep the accessory obligations, that creditor and debtor expressly agree to reserve them.Verified against the official source

• The document of the new obligation, because whether the extinction of the previous one was declared categorically follows from it.
• The record of the creditor’s consent where the debtor is substituted, and of the express reservation of the accessory obligations if they are to be kept.

1. 1

   Step 1: What novating is

   Article 1182 defines it in a line: novation is the substitution of a previous obligation by a new one, which extinguishes the first. It is not modifying: it is swapping one for the other and killing the previous one.

2. 2

   Step 2: Three things can change

   Article 1183 lists them. The variation of the obligation’s object or its conditions. The substitution of the old debtor by another, so that the first is released by the creditor. And the substitution of the old creditor by another, so that the debtor is bound to them by a new obligation and released as to the old one.

3. 3

   Step 3: Modifying is not novating

   This is the point that generates most disputes, and Article 1184 settles it: for an obligation to be extinguished by another substituting it, it is necessary that this be declared in categorical terms or that both be totally incompatible. Refinancing, changing the date or adjusting an instalment does not by itself extinguish the old debt.

4. 4

   Step 4: Changing the debtor without their knowing

   Article 1185 allows it: the novation consisting in the substitution of a new debtor for the original one may be made without the latter’s knowledge, but not without the creditor’s consent. The one who can be left out of the equation is the old debtor; the one who cannot is the creditor.

5. 5

   Step 5: And when the debtor delegates

   Article 1186 describes the other route: where with the creditor’s consent the debtor is substituted by a new one, the second is the first’s delegate, and the first is consequently released. It is the original debtor’s clean exit.

6. 6

   Step 6: If the new debtor cannot pay

   The second paragraph of Article 1186 protects the one who left: the insolvency of the new debtor, accepted by the creditor, does not revive the creditor’s action against the original debtor. With one concrete exception: unless that insolvency was prior and public, or known to the debtor when delegating their debt.

7. 7

   Step 7: The securities do not survive on their own

   Article 1187 conditions everything: once the principal obligation is novated, the accessory obligations may subsist only in so far as they benefit third parties who have not given their consent, and if creditor and debtor expressly agree to reserve them. Without an express reservation, the surety and the other accessories fall with the old obligation.

8. 8

   Step 8: If either obligation was void

   Article 1188 resolves both directions. The novation is void if the original obligation is also void, except where the cause of nullity can only be invoked by the debtor or where the acts void at their origin are validated. And if the new obligation is void but there is no defect in the original one, the latter revives, except as it affects third parties protected by law. The rules on nullity live in another book of the Code and we did not read them here.

Novation is agreed between the parties; there is no counter. If it is disputed whether there was novation or whether the old obligation is still alive, the Court of First Instance decides. The Code names no agency here.

• Treating the old debt as extinguished because a new document was signed: it must be declared categorically or both must be totally incompatible.
• Substituting the debtor without the creditor’s consent.
• Believing the original debtor must be notified: expromisión may be made without their knowledge.
• As a delegating debtor, staying silent about a new debtor’s insolvency that was prior and public or known.
• Novating without expressly reserving the securities and losing them without noticing.
• Assuming the surety stays bound after novation without having consented or the security having been reserved.
• Counting on the old obligation reviving if the new one turns out void: only if the original had no defect, and without affecting third parties protected by law.
• Calling giving in payment a novation, where the Code says no new obligation is constituted.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov