III • Informal Contract – because no particular
DEPOSIT form is required for the contract
Chapter I
DEPOSIT IN GENERAL AND ITS DIFFERENT KINDS
Art. 1962. A deposit is constituted from the moment a
person receives a thing belonging to another, with the
obligation of safely keeping it and of returning the
same. If the safekeeping of the thing delivered is not
the principal purpose of the contract, there is no
deposit but some other contract
Definition of contract of deposit
• Deposit – is derived from the word
depositum of Roman Law
Governing Law
• Civil deposit – governed by the:
o Old civil code
• Commercial Deposit – governed by the:
o Code of Commerce but is now
abolished
o Now governed by New Civil Code
Characteristics
• Real Contract – it is perfected by the delivery
of the subject matter of the contract
• Unilateral Contract – it gives rise to the
principal obligation, on the part of the
depositary, to safely keep the thing and to
return it
o It is only when the depositor has
agreed to pay remuneration to the
depository that the contract will
become bilateral and onerous
o Unilateral not withstanding the
reimbursement obligations of the
depositor as the liabilities of the
depositor may or may not arise
o The contingent liabilities of the
depositor do not originally arise
from the contract but arise from
extrinsic or independent events
• Nominate Contract – because it has been
given a specific name by the Civil Code
• Principal Contract – because its existence is
not dependent on another contract
• Gratuitous Contract – generally but it can
also be an onerous contract
o where the depositor does not pay
compensation to the depositary
o if renumeration is paid by the
depositor, the contract becomes a
contract of work or service
o GR: a deposit is a gratuitous
contract
▪ XPNs:
• unless there is an
agreement to the
contrary; or
• unless the
depositor is
engaged in the
business of
storing goods
Essential requisites of the contract
• consent of the contracting parties
• object certain which is the subject matter of
the contract
• cause of the obligation which is established
• delivery of the thing (di to sure pero nakay de
leon)
o the delivery by the depositor of the
thing to the depositary transfers
possession of the thing in the
concept of a deposit
o Without delivery, the depositary
cannot comply with its obligation of
safely keeping the thing and
returning it.
o Delivery need not consist of an
actual delivery of the thing
Consent of the contracting parties
• Manifested by the meeting of the offer and
acceptance upon the thing and the cause
which are to constitute the contract
• May be manifested expressly or tacitly
• Must be given by the parties with capacity to
give consent
Object of the contract
 • Only movable things capable of being
delivered may be the object of the deposit
o Contract for custody and
safekeeping of immovable property
– not a contract of deposit
o Movable and immovable property –
may be the object of sequestration
or judicial deposit
• Within the commerce of men
• Determinate and not impossible
o Issues regarding determinateness
and impossibility will arise only in a
contract to deposit;
▪ After delivery, the issue of
determinateness and
impossibility will be moot
Cause of the contract
• Essentially gratuitous
o A deposit is an onerous contract
when the depositary is paid fees or
when the depositary is engaged in
the business of storing goods
Deposit as a credit transaction
• Deposit is a contract of confidence
o The depositor places full faith and
confidence in the depositary’s
probity and zeal
Parties to the contract
• Depositor
o There may be more than one
Extinguishment of deposit
depositor
o Need not be the owner of the thing
deposited
▪ Because a contract of
deposit does not transfer
ownership of the thing
deposited
• Depositary
o Cannot demand that the depositor
prove his ownership of the thing
deposited
Safekeeping, principal purpose of the contract
• Principal purpose – safekeeping of the thing
delivered
o If safekeeping is only an accessory
or secondary obligation deposit is
not constituted
• Balance of a commission account remains in
the possession of the agent at the principal’s
disposal
o The same acquires at once the
character of a deposit which the
former must return or restore to the
latter at any time it is demanded
o It can only become his loan if so
expressly agreed by its owner
▪ Who would then be
obligated not to demand it
until the expiration of the
legal or stipulated period
• Document which embodies the contract
states that US Dollars in cash were received
by the bank for safekeeping and the
subsequent acts of the parties also show that
the intent was really for the bank to safely
keep the dollars and return it to the plaintiff
• GR: Depositary cannot make use of the thing
deposited
o XPN: 2 instances in Art. 1977
1. by express permission of
the depositor
2. when the preservation
of the thing deposited
requires its use, it must
be used only for that
purpose
• General modes under Art. 1231
o By payment or performance
o By the loss of the thing due
o By the condonation or remission of
the debt
o By the confusion or merger of the
rights of creditor and debtor
o By compensation
o By novation
• Loss or destruction of the thing deposited
• In case of a gratuitous deposit
o upon the death of either the
depositor or the depositary
• by the return of the thing deposited
 • NOTE: Compensation is not applicable to a Art. 1964. A deposit may be constituted judicially or
deposit. extrajudicially
o Article 1287 – compensation is not
Creation of deposit
proper when one debt arises from
▪ a deposit or from the • Reason why the CC employs the word
obligation of a depositary; “constituted” in defining and classifying
or deposit
▪ of a bailee in o A deposit may be created by virtue
commodatum of
▪ Court order; or
Deposit distinguished from mutuum
▪ Law
Deposit Mutuum
Kinds of Deposit
Principal Safekeeping or Consumption
Purpose mere custody of the subject • Judicial – one which takes place when an
matter
attachment or seizure of property in
Return of the The depositor The lender
litigation is ordered
object can demand must wait until
deposited the return of the expiration • Extrajudicial
the subject of the period o Voluntary – wherein the delivery is
matter at will granted to the made by the will of the depositor or
debtor by two or more persons each of
Object Both movable Only money whom believes himself entitled to
and and other the thing deposited
immovable consumable o Necessary – one made in
thing compliance with a legal obligation
or on the occasion of any calamity
Deposit distinguished from commodatum or by travelers in hotels and inns or
by travelers with common carriers
Deposit Commodatum
Principal Safekeeping Transfer of the Art. 1965. A deposit is a gratuitous contract, except
Purpose use when there is an agreement to the contrary, or unless
Cause May be Essentially and the depositary is engaged in the business of storing
gratuitous always goods.
gratuitous
Object Extrajudicial Both movable Contract of deposit generally gratuitous
deposit – only and
movable immovable • GR: a contract of deposit is generally
(corporeal) property may gratuitous
things be the object • XPNs:
o Contrary stipulation by the parties
▪ Provided it is not contrary
Art. 1963. An agreement to constitute a deposit is
to law, public policies,
binding, but the deposit itself is not perfected until the
good morals and customs
delivery of the thing
o Depositary engaged in business of
Binding effect of agreement to deposit storing goods
o Property saved from destruction
• when there has been no delivery, there is without knowledge of the owner
merely an agreement to deposit which is ▪ Involuntary deposit
binding and enforceable upon the parties ▪ During a calamity
• contract of future deposit – consensual
 ▪ The owner is bound to pay
the person who saved the
property just
compensation
Art. 1966. Only movable things may be the object of a
deposit
Subject matter of deposit
• Extrajudicial Deposit – ONLY movable or
personal property whether voluntary or
necessary
• Judicial Deposit – may cover movable and
immovable property its purpose being to
protect the rights of parties to a suit
Corporeal things contemplated
• A deposit can only have as its object movable
corporeal things.
• Art. 1966 does not cover incorporeal or
intangible property
o Such follows the person of the
owner and is not susceptible of
custody
o Deeds and documents – may be the
object of the deposit
▪ Only the materialized and
representative expression
of rights
Art. 1967. An extrajudicial deposit is either voluntary
or necessary
Kinds of extrajudicial deposit
• Deposit is generally voluntary
• Deposit becomes necessary when
o Made in compliance with a legal
obligation
o On the occasion of any calamity
o By travelers in hotels and inns
Chapter 2
Voluntary Deposit
Art. 1968. A voluntary deposit is that wherein the
delivery is made by the will of the depositor. A deposit
may also be made by two or more persons each of
whom believes himself entitled to the thing deposited
with a third person, who shall deliver it in a proper case
to the one to whom it belongs
Voluntary deposit
• One wherein the delivery is made by the
depositor
Voluntary and necessary deposits distinguished
Voluntary Deposit Necessary Deposit
The depositor has There is lack of free
complete freedom in choice in the depositor
choosing the depositary
• Interpleader – the action to compel the
depositors to settle their conflicting claims
among themselves
o Here, one of the depositor is not
the owner
Art. 1969. A contract of deposit may be entered into
orally or in writing
Form of contract of deposit
• Contracts are obligatory in whatever form
they have been entered into, provided all
the essential requisites for their validity are
present
o No required form of deposit
• Delivery of the thing perfects the contract
o Before delivery, there may be an
agreement to constitute a deposit
binding to the parties
Art. 1970. If a person having capacity to contract
accepts a deposit made by one who is incapacitated,
the former shall be subject to all the obligations of s
depositary, and may be compelled to return the thing
by the guardian, or administrator of the person who
made the deposit, or by the latter himself if he should
acquire capacity
Where the depositary capacitated and depositor
incapacitated
• If the depositary is capacitated – he is subject
to all the obligations of a depositary whether
the depositor is capacitated
• If the depositor is incapacitated – the
depositary must
 o return the property to the legal
representative of the incapacitated;
or
o to the depositor himself if he should
acquire capacity
• Persons who are capable cannot allege the
incapacity of those with whom they contract
• The depositary may be compelled to return
the thing by the depositor if the depositor
should acquire capacity
o Depositor cannot be compelled by
the incapacitated depositor to
return the thing to such depositor
• If the depositary learns that the depositor is
incapacitated – it is best for the depositor to
contact the depositor’s guardian or
administrator in relation to the return of the
thing
Status of contract
• The CC do not indicate the status of a
contract where one party to the contract of
deposit is incapacitated to give consent to
the contract
o Voidable
▪ Applying the general
provisions of contract law
• Where both parties are incapable of giving
consent to a contract
o the contract is unenforceable
Art. 1971. If the deposit has been made by a
capacitated person with another who is not, the
depositor shall only have an action to recover the thing
deposited while it is still in the possession of the
depositary, or to compel the latter to pay him the
amount by which he may be enriched or benefited
himself with the thing or its price. However, if athird
person who acquired the thing acted in bad faith, the
depositor may bring an action against him for its
recovery
Where depositary incapacitated and depositor
capacitated
• The incapacitated depositary
o Does not incur the obligation of a
depositary, however, he is liable
1. To return the thing
deposited while still in his
possession
2. If the thing deposited is no
longer in his possession
• To pay the depositor
the amount which
o he may have
benefited himself
with the thing or
its price subject
to the right of any
third person who
acquired the
thing in good faith
SECTION 2 – Obligations of the Depositary
Art. 1972. The depositary is obliged to keep the thing
safely and return it, when required, to the depositor, or
to his heirs and successors, or to the person who may
have been designated in the contract. His
responsibility, with regard to the safekeeping and the
loss of the thing, shall be governed by the provisions of
Title I of this Book
If the deposit is gratuitous, this fact shall be
taken into account in determining the degree of care
that the depositary must observe
Principal Obligations of the depositary
• The depositary has 3 principal obligations
1. the obligation to keep the thing (Arts.
1962, 1972)
2. the obligation to not use the thing (Art.
1977)
3. the obligation to return the thing (Art.
1962, 1972)
• In relation to the obligation to keep the thing,
the depositary has these related obligations
1. The obligation to keep the thing safely
(Art. 1972)
2. The obligation to not deposit the thing
with a third person (Art. 1973)
3. The obligation to not change the way of
the deposit (Art. 1974)
4. The obligation to collect interest on
certificates when they become due and
preserve the value of securities (Art.
1975)
 5. The obligation to not commingle grain
and other articles of the same kind and
quality if there is a stipulation to the
contrary (Art. 1976)
• In relation to the obligation to return the
thing, the depositary has these related
obligation
1. The obligation to return the thing with all
its products, accessions and accessories
(Art. 1983)
2. The obligation to return the thing closed
and sealed if delivered in such condition
(except in certain instances) (Arts. 1981
– 1982)
Obligation to keep the thing deposited
• Degree of care – the diligence required of the
depositary is that agreed upon by the parties
o they may limit or expand the degree
of diligence required
• Ordinary Cases – the depositary must
exercise over the thing deposited the same
diligence as he would exercise over his
property
o Reasons:
▪ Because it is an essential
requisite of the judicial
relation which involves the
depositor’s confidence in
his good faith and
trustwothiness
▪ Because the presumption
that the depositor, in
choosing the depositary,
considered the diligence
which the depositary is
accustomed regarding hos
own property
• The depositary cannot excuse himself from
liability if
o loss occurs by claiming that he
exercised the same degree of care
towards the thing deposited as he
would towards his own
▪ if such care is less than that
required by the
circumstances
• Liability of the depositary for the care and
delivery of the thing is governed by the rules
on obligations (Art. 1163)
o He is liable if the loss or
deterioration of the thing occurs
through his fault or negligence (Art.
1170)
▪ Even if the thing was
insured (Art. 2207)
o The loss of the thing while in his
possession ordinarily raises a
presumption of fault on his part
(Art. 1265)
o If the contract does not state the
diligence required,
▪ that which is expected of a
good father of the family is
required (Art. 1173)
o the required degree of care is
greater if the deposit is for
compensation than when it is
gratuitous.
▪ Even when gratuitous, due
care must still be exercised
• Dominant view – GR: the depositary, when
the deposit is gratuitous, does not have to
obtain insurance for the thing deposited
o XPN: there is a stipulation to the
contrary
Obligation to return
• The depositary has the obligation to return
the thing deposited to the depositor
• GR: the depositary must return the thing
received, with all its products, accessories
and accessions
o XPNs:
1. If the depositary was not
prohibited from comingling
rains and other articles of the
same kind and quality
• then the depositary must
return an article of the
same kind and quality
2. If the depositary by force
majeure loses the thing and
receives money or another
thing in its place,
 • he must deliver the money
or other thing received to
the depositor
3. if the depositary’s heirs sells
the thing sold in good faith (not
knowing the thing was merely
deposited)
• he is only bound to return
the price he may have
received
4. If the thing deteriorates while
in the custody of the depositary
• The depositary will return
the thing to the depositor
in the deteriorated state
a. In the absence of fault
on the part of the
depositary
o The depositary
cannot be held
liable for
deterioration
suffered by the
thing
• To whom returned – the depositary must
return the thing
o to the depositor, or
o to his heirs and successors, or
o to the person who may have been
designated in the contract
• Priority between the heir and assignee of
the depositor
▪ If the assignee did not intervene in the
contract, but was just appointed to
receive the deposit
o The thing must be delivered to
the heirs
▪ If the deposit was made for the benefit
of the assignee
o The assignee acquires the right
to require delivery of the thingo
deposited
• With respect to the return of the thing to
the person designated in the contract
o Delivery may be made to such person
▪ If the clause was established foro
the benefit of the depositor
• Then the depositor can
terminate the designation
▪ If the clause was for the benefit
of the party named
• The depositor cannot
terminate the designation
• If the depositor was incapacitated at the time
of making the deposit
o The property must be returned to his
▪ guardian or
▪ administrator
▪ If the depositor loses his capacity to contract
after having made the deposit
o The depositary must return the thing to
the persons who may have
administration of the depositor’s
property and rights
▪ When there are two or more depositors
o If they are not solidary and the thing
admits of division
▪ Each cannot demand more
than his share
▪ The depositary may deliver the
thing to any of the solidary
depositors
o If any demand, judicial or extrajudicial
has been made by any of the depositors
▪ Delivery should be made to him
o If the thing is indivisible or there is
solidarity
▪ A depositor can request the
return of the thing and the
depositary is obligated to
deliver the thing
o The depositary is only obligated to
deliver to each depositor the part that
pertains to such depositor
▪ The depositary must return the thing
deposited to the true owner in the case
contemplated under Art. 1984
When should the deposited property be returned
▪ The depositary must return or deliver to the
depositor at all times
o he only acts as a custodian in the
exclusive interest of the depositor
Where should the deposited property be returned
• The depositary must return the thing at the place
designated for its return
 o Absent stipulation – at the place where
the thing deposited might be
▪ Even if it should not be the
same place where the original
deposit was made
• Provided the transfer
was accomplished
without malice on the
part of the depositary
Breach of obligation to return
• Depositary fails to return the thing
o His liability will be governed by the
general provisions on obligations
under Title I, Book IV of the CC
o the depositary can be held liable for
damages (Art. 1170)
o the depositary can also be held
criminally liable for estafa
▪ should he appropriate the
thing
• Failure to return the thing in case of mistake
and force majeure
o Mistake – the mistake relates to the
heirs of the depositary who in good
faith sold the thing which he did not
know was deposited
▪ The heir will not be held
liable for damages
• But is bound to
return the price
he may have
received; or
• Assign his right of
action against the
buyer in case the
price has not
been paid to him
o Force Majeure
▪ GR: if the depositary loses
the thing by force majeure
and he does not receive
money or another thing in
its place
• Depositary is not
bound to return
the thing
▪ XPN: but if the depositary
receives money or another
thing in place of the thing
deposited
• Then the
depositary must
deliver the sum or
money or the
other thing to the
depositor
Art. 1973. Unless there is a stipulation to the contrary,
the depositary cannot deposit the thing with a third
person. If deposit with a third person is allowed, the
depositary is liable for the loss if he deposited the thing
with a person who is manifestly careless or unfit. The
depositary is responsible for the negligence of his
employees
Custody must be personal
• The depositary’s custody must be personal
o Contract of confidence; before the
deposit is constituted, the depositor
considered the personal qualities of
the depositary
Obligations not to transfer deposit:
• GR: the depositary may not deposit the thing
with a third person
o XPN: unless authorized by express
stipulation
• The depositor is liable for the loss of the thing
deposited if:
o He transfers with a third person
without authority although there is
no negligence on his part and the
third person
o He deposits the thing with a third
person who is manifestly careless or
unfit although authorized, even in
the absence of negligence; or
o The thing is lost through the
negligence of his employees
whether the latter are manifestly
careless or not
• The depositor is not responsible if the thing
is lost without negligence of the third person
with whom he was allowed to deposit the
thing
 o if such third person is not manifestly
careless or unfit
• The depositor is not responsible if the
depositor has authorized the deposit of the
thing with another person and has
designated the third person
• In urgent cases
o Depositary may deposit the thing
with a third person if such is
necessary for the preservation of
the thin
Art. 1974. The depositary may change the way of the
deposit if under the circumstances e may reasonably
presume that the depositor would consent to the
change if he knew of the facts of the situation.
However, before the depositary may make such
change, he shall notify the depositor thereof and wait
for his decision, unless delay would cause danger
Obligation not to change way of deposit
• The depositary may change the way or
manner of the deposit if there are
circumstances indicating that the depositor
would consent to the change
o However, the depositary should first
notify the depositor and wait for the
latter’s decision.
▪ The requirement may not
be dispensed with unless
delay would cause danger
o It follows the general rule that the
depositary must take good care of
the thing with the diligence of a
good father of a family
Art. 1975. The depositary holding certificates, bonds,
securities or instruments which earn interest shall be
bound to collect the latter when it becomes due and to
take such steps as may be necessary in order that the
securities may preserve their value and the rights
corresponding to them according to law
The above provision shall not apply to
contracts for the rent of safely deposit boxes
Obligation to collect interest on choses in action
deposited
• If the thing deposited should earn interest,
the depositary is under obligation
o To collect the interest as it becomes
due; and
o To take such steps as may be
necessary to preserve its value and
the rights corresponding to it.
• The depositary of a negotiable promissory
note which has been dishonored by non –
payment by the maker
o Must give notice of dishonor to
indorsers
▪ Indorsers to whom such
notice is not given are
discharged from liability
• The depositary is bound to collect not only
the interest but also the capital itself when
due
Contract for rent of safety deposit boxes
• Not an ordinary contract of lease of things
but a special kind of deposit
o Not to be strictly govern by the
provisions on deposit
• In operating a safety deposit box, the box and
the contents thereof are in the manual
possession of the lessor
o However neither the lessor nor the
renter can be given access to the
contents of the box without the
consent and cooperation of the
other
Art. 1976. Unless there is a stipulation to the contrary,
the depositary may commingle grain or other articles
of the same kind and quality, in which case the various
depositors shall own or have a proportionate interest
in the mass
Obligation not to commingle things deposited if so
stipulated
• The depositary may commingle grain or
other articles of the same kind and quality
• The depositors of the mingled goods shall
own the entire mass in common and each
depositor shall be entitled to such proportion
of the entire mass as the amount deposited
by him bears to the whole
 • The depositary cannot commingle goods,
even if they are of the same kind and quality,
if so stipulated

Art. 1977. The depositary cannot make use of the thing

deposited without the express permission of the
depositor

Otherwise, he shall be liable for damages.

However, when the preservation of the thing

deposited requires its use, it must be used but only for
that purpose

Obligation not to make use of thing deposited unless

authorized

• Deposit is for the safekeeping of the subject

matter and is not for its use
• The unauthorized use by the depositary
would make him liable for damages
• The depositary may make use of the thing
deposited even without the express
permission of the depositor where such use
is necessary for its preservation
o But in such cases the use is limited
for that purpose only