Compensation is a method of extinguishing mutual obligations between contractual partners. It applies when there are two obligations of the same nature, and they can be settled up to the value of the lowest obligation. If the obligations are of equal value, they can be fully settled through compensation. Compensation can be used for contractual obligations involving a sum of money or a certain quantity of fungible goods. However, there are certain exceptions, such as when the claim results from damaging acts or when the obligation involves the restitution of goods given as a deposit or bailment.