CONTRAST IN CONTRACTS
CREDIT TRANSACTIONS
CREDIT
The credit of an individual means his ability to A loan (mutuum) means the delivery by one
borrow money or things by virtue of the
confidence or trust reposed by a lender that he
will pay what he may promise within a
specified period.
The concession of a “credit” necessarily involves the granting of “loans” up to the limit of the
amount
fixed in the “credit.”
LOAN
interest is usually taken at the expiration of a
credit;
loan is generally, on a single-name paper
COMMODATUM
Commodatum ordinarily involves something
not consumable
In commodatum, ownership of the thing loaned
is retained by the lender
Commodatum is essentially gratuitous
In commodatum, the borrower must return the
same thing
loaned
Commodatum may involve real or personal
property
Commodatum is a loan for use or temporary
possession
In commodatum, the bailor may demand the
return of the thing loaned before the expiration
of the term in case of urgent need
In commodatum, the loss of the subject matter
is suffered by the bailor since he is the owner
commodatum is purely personal
in character
LOAN
party (lender/creditor), and the receipt by the
other party (borrower/debtor)who become the
owner, of a given sum of money or other
consumable
thing upon an agreement, express or implied,
to repay the same amount of the same kind
and quality, with or without interest.
DISCOUNT
In a discount, interest is deducted in advance
A discount is always on a double-name paper
Discounting is slightly more expensive for the
borrower because interest is calculated on the
amount loaned (P1,000.00) and not on the
amount actually received
MUTUUM
mutuum, the subject matter is money
or other consumable thing;
while in mutuum, the ownership is
transferred to the borrower;
While mutuum may be gratuitous or it may be
onerous, that is, with stipulation to pay interest;
while in mutuum, the borrower need only pay
the
same amount of the same kind and quality;
mutuum refers only to personal property
while mutuum is a loan for consumption
the lender may not demand
its return before the lapse of the term agreed
upon;
the borrower suffers the loss even if caused
exclusively by a fortuitous event and he is not,
therefore, discharged from his duty to pay.
Not personal in character
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 CONTRAST IN CONTRACTS
CREDIT TRANSACTIONS
CONTRACT OF LOAN
A contract of loan signifies the delivery of
money or some other consumable thing to
another with a promise to repay an equivalent
amount of the same kind and quality, but not a
promise to return the same thing loaned which
becomes the
property of the obligor.
In a contract of loan, the relation between the
parties is that of obligor and obligee
In a contract of loan, the creditor receives
“payment” for his loan
CONTRACT OF RENT
contract of rent is a contract by which one of
the parties delivers to another some non-
consumable thing in order that the latter may
use it during a certain period and return it to
the former. In a contract of rent, the owner or
lessor of the property
does not lose his ownership. He simply loses
his control over the property rented during the
period of the contract.
a contract of “rent,” the
relation is that of landlord and tenant
in a contract of “rent,” the owner of the
property
rented receives “compensation” or “price”
either in money, provisions, chattels, or labor
from the occupant thereof in return
for its use.

TRUST RECEIPT SIMPLE

LOAN
refer to the written or printed document signed
by the entrustee in favor of the entruster containing terms and conditions substantially
complying with the provisions of [the] Decree
a document in which is expressed a security transaction, whereunder the lender,
having no prior title in the goods on which the lien is to be
given, and not having possession which remains in the borrower, lends his money to
the borrower on security of the goods, which the borrower is privileged to sell clear of
the lien on agreement
to pay all or part of the proceeds of the sale to the lender.
Trust Receipts Law does not seek to enforce
payment of the loan, rather it punishes the dishonesty and abuse of confi dence in the
handling of money or goods to the prejudice of another regardless of whether the
latter is the
owner.

FUNGIBLE THINGS CONSUMABLE THINGS

Those which cannot be used without being Under the classification of movable property
consumed
depends upon the intention of the parties Depends upon its nature
Fungible things, are those which are usually dealt with by number, weight, or measure such as
rice, oil, sugar, etc. so that any given unit or portion is treated as the equivalent of any other unit
or portion.

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 CONTRAST IN CONTRACTS
CREDIT TRANSACTIONS
MUTUUM BARTER COMMODATUM
it is money or any other fungible non-fungible
things (nonconsumable) things
the equivalent thing is the bailee is bound to return
given in return for the identical thing borrowed
what has been received. when the time has expired or
the purpose has been served.
Mutuum may be gratuitous Barter, on the other hand, commodatum is always
is an onerous contract. It is gratuitous.
really a mutual sale.
By the contract of barter or exchange, one of the parties binds himself to give one thing in
consideration of the other’s promise to give another thing. (

INTEREST SURCHARGES AND PENALTIES

Penalty stipulation is not necessarily preclusive of Need to have an agreement to that effect
interest
When court dis-allows non payment of surcharges and penalties even in an valid agreement it
does not mean that they are not justified for nonpayment and reduction of interest

DEPOSIT MUTUUM
In deposit, the principal purpose is safekeeping or the consumption of the subject matter;
mere custody,
the depositor can demand the return of the subject the lender must wait until the expiration of
matter at will the period granted to the debtor
both movable and immovable property may only money and any other fungible thing.
be the object

DEPOSIT
the principal purpose is safekeeping,
Deposit may be gratuitous,
In (extrajudicial) deposit, only movable (corporeal)
things may be the object
COMMODATUM
while in commodatum, the transfer of the
use;
while commodatum is essentially and
always gratuitous
while in commodatum, both movable
and immovable property may be the
object.

VOLUNTARY DEPOSIT NECESSARY DEPOSIT

Freedom in choosing the depositary Lack of Free Choice in the depositor

In an irregular deposit (supra.), the consumable thing deposited

may be demanded at will by the irregular depositor for whose
benefi t the deposit has been constituted,

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 CONTRAST IN CONTRACTS
CREDIT TRANSACTIONS

IRREGULAR DEPOSIT MUTUUM

the consumable thing deposited
may be demanded at will by the irregular depositor
for whose benefit the deposit has been constituted
in an irregular deposit, the
only benefi t is that which accrues to the depositor
the depositor in an irregular deposit has preference
over other creditors with respect to the thing
deposited6
The lender is bound by the provisions of
the contract and cannot seek restitution
until the time for payment
the essential cause for the transaction is
the necessity of the borrower. A loan with
a stipulation to pay interest is for the
benefit of both parties
common creditors enjoy no preference in
the distribution of the debtor’s property

NEGOTIABLE INSTRUMENTS NEGOTIABLE WAREHOUSE RECEIPTS

Subject is money Subject is the merchandize

Instrument itself is the object of value Warehouse receipt is not the object of
value but the goods described in the
Intermediate parties becomes secondarily liable Intermediate parties are not liable for the
warehouseman failure to deliver the goods
Not used in the same sense as negotiable instruments law and bills of exhanges
written acknowledgment by a warehouseman that he has received and holds certain goods
therein described in store for the person to whom it is issued.

NON NEGOTIABLE WAREHOUSE NEGOTIABLE WAREHOUSE RECEIPTS

SEC. 4. Definition of non-negotiable receipt. —
A receipt in which it is stated that the goods
received will be delivered to the depositor or to
any other specified person,is a non-negotiable
receipt.
SEC. 5. Definition of negotiable receipt.
— A receipt in which it is stated that the
goods received will be delivered to the
bearer or to the order of any person
named in such receipt is a negotiable
receipt.

No provision shall be inserted in a negotiable receipt

that it is non-negotiable. Such provision, if inserted, shall
be void.

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 CONTRAST IN CONTRACTS
CREDIT TRANSACTIONS
GUARANTY
liability of the guarantor depends upon an
independent agreement to pay the obligation if the
primary debtor fails to do so;
engagement of the guarantor is a collateral
undertaking
The guarantor is secondarily or subsidiarily liable,
i.e., he contracts to pay if, by the use of due
diligence, the debt cannotbe paid by the principal
guarantor is not bound to take notice of the
non-performance of his principal
while a guarantor is often discharged by the mere
indulgence of the creditor of the principal, and is
usually not liable unless notified of the default of the
principal.
Warrants the solvency of debtor
Cannot be a guarantor to himself
Does not enjoys the benefit of excussion
Pays the Creditor without qualification
Does not contract that the principal will
pay
OBLIGATION ASSUMED BY SURETY IS GREATER OR MORE ONEROUS THAN OF A
GUARANTOR
GUARANTY
contract of guaranty is that of security
liability of a guarantor is more extensive than that of
an indorser. whereas failure in either or both of
these particulars does not, as a general rule, work
an absolute discharge of a guarantor’s liability, but
he is discharged only to the extent of the loss which
he may have suffered in consequence thereof
A guarantor warrants the solvency of the promisor
which he being answerable on a strict compliance
with the law by the holder, whether the promisor is
solvent or not;
A guarantor cannot be sued as promisor,
SURETYSHIP
surety and a guarantor are unlike in that
the surety assumes liability as a regular
party to the undertaking
A surety is charged as an original
promisor,
while a surety is primarily liable, i.e.,
he undertakes directly for the payment
without reference to the solvency of the
principal (regardless of whether or not the
principal is financially capable to fulfill his
obligation), and is so responsible at once if
the latter makes default, without any
demand by the creditor upon the principal
whatsoever or any notice of default
A surety is ordinarily, held to know every
default of his principal,
a surety will not be discharged either by
the mere indulgence of the creditor of the
principal or by want of notice of the default
of the principal, no matter how much he
may be injured thereby,
Insurer of debt
Solidary Debtor is Principal Debtor
Enjoys the benefit of escussion
INDORSEMENT
The contract of indorsement is primarily
that of transfer,
LESSER LIABILITY AND LESS
EXTENSIVE
The indorse does not
An indorser may be sued as promisor
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 CONTRAST IN CONTRACTS
CREDIT TRANSACTIONS
GUARANTY WARRANTY
guaranty is a contract by a warranty is an undertaking
which a person is bound to another for the that the title, quality, or quantity of the
fulfillment of a promise or engagement of a third subject matter of a contract is what it has
party, been represented to be, and relates to
some agreement made ordinarily by the
party who makes the
warranty

NON NEGOTIABLE WAREHOUSE NEGOTIABLE WAREHOUSE RECEIPTS

SEC. 4. Definition of non-negotiable receipt. —
A receipt in which it is stated that the goods
received will be delivered to the depositor or to
any other specified person,is a non-negotiable
receipt.
SEC. 5. Definition of negotiable receipt.
— A receipt in which it is stated that the
goods received will be delivered to the
bearer or to the order of any person
named in such receipt is a negotiable
receipt.

No provision shall be inserted in a negotiable receipt

that it is non-negotiable. Such provision, if inserted, shall
be void.

MONETARY INTEREST COMPENSATORY INTEREST

Payment for the use of the money
Payable even before the stipulated period has
come
Always stipulated in writing in order for it to be
demandable
Need not to have order of the court
Payment in the form of penalty and
indemnity due to the default of the debtor
Payable after due date
Need not to be stipulated in writing,
Possibility of Grant is through Court Order

No provision shall be inserted in a negotiable receipt

that it is non-negotiable. Such provision, if inserted, shall
be void.

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 CONTRAST IN CONTRACTS
CREDIT TRANSACTIONS
CONTRACT DEFINITION
COMMODATUM It is a contract where one of the parties
(bailor) delivers to another (bailee)
something not consumable so that the latter
may use the same for a certain time and
thereafter returns it.
MUTUUM It is a contract whereby one of the parties
called the “lender” delivers to another called
the “borrower”, money or other consumable
thing subject to the condition that the same
amount of the same kind and quantity shall
be paid.
GUARANTY It is a contract where a person called the
guarantor binds himself to the creditor to
fulfill the obligation of the principal
debtor in case the latter should fail to do
so.
SURETY It is a contract where a person binds himself
solidarily with principal debtor.
Directly,Primarily and equally bound with the
Principal as original promisor although he
possesses no direct or personal interest over
the latters obligation nor does he receive any
benefit therefrom.
Considered as being the same party as the
debtor in relation to whatever is adjudged
touching the obligations and their liabilities
are interwoven and dependent as to be
inseparable.
CHARACTERISTICS
1.Real contract – delivery of the thing loaned
is necessary for the perfection of the
contract
2. Unilateral contract – once subject matter
is delivered, creates obligations on the part
of only one of the parties (the borrower)
3. Essentially gratuitous
4. Purpose is to transfer the temporary use
of the thing loaned
5. Principal contract
6. Purely personal contract
(1) It is accessory because it is dependent
for its existence upon the principal obligation
guaranteed by it;
(2) It is subsidiary and conditional because it
takes effect only when the principal debtor
fails in his obligation subject to limitation
(see Arts. 2053, 2058, 2063, 2065.);
(3) It is unilateral because —
(a) it gives rise only to a duty on the part of
the guarantor in relation to the creditor and
not vice versa although after its fulfillment,
the principal debtor becomes liable to
indemnify the guarantor(Art. 2066.) but this
is merely an incident of the contract; and
also because
(b) it may be entered into even without the
intervention of the principal debtor (Art.
2050.); and
(4) It is a contract which requires that the
guarantor must be a person distinct from the
debtor because a person cannot be the
personal guarantor of himself.
1.Liability is contractual and accessory but
direct
2.Liability is limited by the terms of the
contract
3.Liability arises only if principal debtor is
held liable
4.Surety is not entitled to exhaustion
5.Undertaking is to creditor not to the debtor
6.Surety is not entitled to notice of the
principals default
7.Prior demand by the creditor upon
principal not required
8.Surety is not exonerated by neglect of the
creditor to sue principal.
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 CONTRAST IN CONTRACTS
CREDIT TRANSACTIONS

LOAN
It is a contract where one of the parties delivers to another, either something not consumable so that the
latter may use the same for a certain time and return it, in which case is called a commodatum; or money or
other consumable things, upon the condition that the same amount of the same kind and quality shall be
paid, in which case the contract is simply called a loan or mutuum

PRECARIUM
Precarium is a kind of commodatum where the bailor may demand the thing at will. It has been
defined as a “contract by which the owner of a thing, at the request of another person, gives the
latter the thing for use as long as the owner shall please.

Precarium – one whereby the bailor may demand the thing loaned at will in the following cases:
a. if the duration of the contract had not been stipulated;
b. if the use to which the thing loaned should be devoted had not been stipulated; or
c. if the use of the thing is merely by tolerance of the owner

MUTUUM

CHARACTER
Borrower acquires ownership of the thing.
If the thing loaned is money, payment must be made in the currency which is legal tender in the Philippines
and in case of extraordinary deflation or inflation, the basis of payment shall be the value of the currency at
the time of the creation of the obligation.

If fungible thing was loaned, the borrower is obliged to pay the lender another thing of the same
kind, quality and quantity.