Consignation is the act of depositing the thing or sum due with the court when the creditor refuses or is unable to accept payment without just cause, so the debtor can be released from the obligation. Ordinarily, it must be preceded by a valid tender of payment that the creditor refused. To be effective, consignation generally requires: a debt that is due; a prior valid tender of payment (unless a recognized exception applies, such as the creditor being absent, incapacitated, or refusing to give a receipt, or two or more persons claiming the same right to collect); prior notice of the consignation to the persons interested; actual deposit of the thing or sum with the court; and subsequent notice that the consignation has been made. Once properly done and judicially declared valid, the obligation is extinguished and interest stops running.
What if you want to pay your debt, but the creditor refuses to accept — perhaps to let interest pile up, or to keep a lease in default? The law's answer is tender and consignation.
What Consignation Is
Consignation is the deposit of the thing or sum due with the court when the creditor, without just cause, refuses or cannot accept payment. It allows the debtor to be released from the obligation even though the creditor would not take the money.
Tender Comes First
As a rule, consignation must be preceded by a valid tender of payment — an actual, unconditional offer of the exact amount or thing due — which the creditor refused. Tender is the offer; consignation is the deposit that follows the refusal.
When Tender Is Not Required
Prior tender is excused in recognized situations, such as when:
- The creditor is absent or unknown, or does not appear at the place of payment;
- The creditor is incapacitated to receive payment;
- The creditor refuses to give a receipt without just cause;
- Two or more persons claim the same right to collect; or
- The title to the obligation is lost.
The Requisites
For consignation to extinguish the obligation, these generally must concur:
- A debt due;
- A valid prior tender that was refused (unless excused);
- Prior notice of the consignation to the persons interested;
- Actual deposit of the thing or sum with the proper court; and
- Subsequent notice to the interested parties that the consignation was made.
The Effect
When consignation is properly made and judicially declared valid, the obligation is extinguished as if payment had been accepted. Importantly, from a proper tender/consignation, the debtor generally stops the running of interest and is protected from being treated as in default. The debtor may also withdraw the thing consigned before the creditor accepts or before the court declares the consignation proper, but doing so revives the obligation.
Practical Takeaways
- Consignation lets you pay into court when the creditor unjustly refuses, releasing you from the debt;
- It usually requires a valid prior tender, plus notice, deposit, and notice again — unless a recognized exception excuses tender;
- Done properly, it extinguishes the obligation and stops interest from running.
Frequently Asked Questions
What is consignation? It is the deposit of the thing or sum due with the court when the creditor, without just cause, refuses or cannot accept payment, so the debtor can be released from the obligation.
Do I need to tender payment first? As a rule, yes. Consignation must generally be preceded by a valid tender of payment that the creditor refused. Tender is excused in situations like the creditor being absent, incapacitated, refusing to give a receipt, or when several persons claim the same right.
What are the requirements for valid consignation? A debt that is due, a valid prior tender that was refused (unless excused), prior notice of the consignation to interested persons, actual deposit with the court, and subsequent notice that the consignation was made.
What is the effect of valid consignation? The obligation is extinguished as if payment had been accepted, and the running of interest generally stops. The debtor may withdraw the deposit before acceptance or a valid declaration, but that revives the obligation.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.