What is consignation of payment?
Consignation of payment is a legal remedy provided for under Philippine law. It occurs when a debtor attempts to pay a creditor, but the creditor refuses to accept payment. In such cases, the debtor may make a deposit of the amount owed with a court or authorized depositary.
Under Article 1256 of the Civil Code of the Philippines, consignation shall be made by depositing the thing or sum due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.
For consignation to be valid under Philippine law, the debtor must follow certain requirements:
There must be a debt: Consignation can only be used when there is an existing debt that is due and payable.
There must be a valid tender of payment: The debtor must have offered to pay the debt to the creditor in a valid manner, such as by offering cash or a check.
The creditor must refuse payment: The creditor must have refused to accept payment, or if the creditor is absent or unknown, the debtor must have attempted to locate the creditor and failed to do so.
The debtor must deposit the payment with the proper court or entity: The debtor must deposit the payment with the proper court or entity, and follow the proper procedures for consignation.
Notice of consignation must be given to the creditor: The debtor must give notice of the consignation to the creditor or attempt to do so if the creditor is unknown or cannot be found.
If the consignation is made in accordance with these requirements, it will release the debtor from his obligation to pay and the creditor will be deemed to have been paid.