Which of the following obligations may be subject to legal compensation?

• A. Obligation of depositary in a contract of deposit
• B. Obligation of bailee in a contract of commodatum
• C. Obligation arising from crime or delict
• D. Obligation arising from contract of loan or mutuum

Answer: (D)

Set-off (legal compensation) happens when two parties owe each other money and those debts are due, certain, and capable of being expressed in money. The obligation that comes from a loan or mutuum fits this neatly: both sides have a clear, monetary claim—one must repay the loaned amount, and the lender has a corresponding claim for repayment. Because these are straightforward, liquidated money obligations between the same two parties, they can be offset against each other, extinguishing the smaller debt and leaving any excess if present.

Obligations arising from a depositary contract or a commodatum aren’t simply monetary debts. The depositary’s duty is to return the exact item deposited, and the bailee’s duty in a commodatum is to use and return the item loaned for use. Those are custodial or use-based obligations, not readily expressible as a fixed money debt to be offset, so they aren’t the typical candidates for set-off.

Obligations arising from crime or delict involve civil liability for wrongdoing and aren’t generally treated as mutual monetary debts between the same parties in the same way as a loan; they’re typically pursued through separate civil actions rather than offsetting against another obligation.