CREDIT TRANSACTION – PAGE 320 - 324

LOAN – PAGE 325 - 329

COMMODATUM – PAGE 330 – 341
MUTUUM – PAGE 342 - 352

➢ There must be a delivery of the subject of loan,

CREDIT TRANSACTION the delivery of the subject matter of that
contract of loan is essential for the perfection
What’s this credit transaction? of that particular contract.
Credit transactions include all transactions ➢ If the subject matter has not been delivered
involving the purchase or loan of goods, services, then there is no perfection.
or money with a promise to pay or to deliver such
goods or to render such services in the future. CAUSE OR CONSIDERATION IN A CONTRACT OF LOAN
(Article 1933) - As to the borrower, the acquisition of the thing.
- As to the lender, the right to demand its return
Types of credit transaction or its equivalent.
Secured transaction or contracts of real security –
those are with securities or collateral and KINDS OF LOAN:
supported with securities or collateral 1. COMMODATUM – it is a contract by virtue of
Unsecured transaction or contracts of personal which one of the contracting parties delivers
security – those are without securities or collateral to the other an unconsumable object or non-
and they are merely supported by promise it’s just fungible object. So that whoever receives the
undertaking to pay no delivery of the security and same is obligated to return the same object for
no delivery of collateral for that matter. a certain time and after a certain period of
time.
Contract of bailments 2. MUTUUM or SIMPLE LOAN – it is a contract by
It is referring to subjects such as usury, contracts virtue of which one of the contracting parties
of guaranty and suretyship, mortgage, antichresis, will deliver to others a money, consumable, or
and concurrence as well as preferences of credits fungible object. Subject to the condition that
and then the composition of those different kinds the same amount of the same kind and quality
of bailment contracts will now result to “credit must be paid or returned.
transaction.” COMMODATUM MUTUUM
(Hiram) (Utang)
Bailment – French word “BAILLER”; meaning “To Essentially gratuitous (If May be gratuitous or
deliver”. there is compensation, it onerous (with interest).
ceases to be commodatum)
May be involve real and Refers to personal property.
Who are the parties in this contract of bailment?
personal property.
• Bailor or comodatario or giver – the party who
Transfer its use. Transfer of ownership.
delivers the possession or custody of a thing
Ownership retained by the Ownership goes to borrower
bailed. lender or bailor. or bailee.
• Bailee or comodante or recipient – the party May be returned before the May not be returned until
who receives the possession or custody of end of the term in case of the end of the term.
things thus delivered. urgent need.

LOAN KINDS OF COMMODATUM

Ordinary Precarium
Commodatum
What is the contract of loan?
➢ It is a real contract or unilateral contract
Precarium
It’s a contract of commodatum whereby the bailor
or the lender has the right to demand for the return
of the thing which is the object of the contract at
will.
Two instances whereby there is precarium:
1. If the duration of the contract or the use of the
subject matter has not been agreed upon the
parties.
2. If the use of the thing who is merely tolerated
by the lender.
* For the return the same can be demanded by the
bailee or lender at any time or upon the will.
LOAN - COMMODATUM
PARTIES IN COMMODATUM
Bailor Bailee
(Lender) (Borrower)
NATURE OF THE CONTRACT OF COMMODATUM
 Essentially gratuitous – means that
commodatum is for free. There is no
consideration being demanded in a contract of
commodatum.
 Real contract – because there must be the
delivery of the subject matter of that
commodatum. It is the delivery of the object of
the contract that is required for its perfection.
* Commodatum is not perfected only by mere
consent, even if they have agreed already or there
is meeting of the minds there is still no perfection
yet. Because in commodatum there must be the
delivery of the subject matter in order to have
perfection.
 Purely personal (personal contract) - because
the borrower or the bailee cannot generally
lend or lease the object to a third person.
OBJECT OR SUBJECT MATTER (Commodatum)
 Movable
 Immovable
OBLIGATIONS OF THE BAILEE (BORROWER)
1. To preserve the thing loaned and to take care
of it with the proper diligence of a good father
of a family;
2. To pay for the ordinary expenses incident to
the use and preservation of the thing loaned.
3. To return the thing loaned at the expiration of
the contract.
RULE IN CASE OF LOSS
 General rule: Res Perit Domino
➢ If it was lost or damages due to fortuitous
events the damage shall be borne by the bailor
or the owner because he retained the
ownership. It is the bailor’s loss (he should
suffer the loss).
 Exceptions:
• If he devotes the thing loaned to any purpose
different from that for which has been loaned.
• If he keeps it longer than the period stipulated,
or after the accomplishment of the use for
which the commodatum has been constituted.
• If the thing loaned has been delivered with
appraisal of its value, unless there is a
stipulation that the bailee shall not be liable in
case of loss caused by a fortuitous event.
• If he lends or leases the thing to a third person,
who is NOT a member of his household.
• If, being able to save either the thing borrowed
or his own thing, he chose to save the latter.
CASE:
Andrew borrowed the Toyota Innova of Ben. During a fire
caused by a lightning which gutted the house of Andrew, the
latter had time to save only one vehicle. Andrew decided to
save his own car instead of the car that he borrowed from
Ben.
Question: Is he liable for the loss of Ben’s car?
Answer: Yes, in a contract of commodatum the law provides
that the bailee (borrower) is liable for the loss of the thing,
even if it should be through a fortuitous event, if being able
to save the thing borrowed or his own thing, he chose to save
the latter. (Article 1942 - 5).
RULE IN CASE OF DETERIORATION
 General rule: It shall be borne by the bailor.
 Exception: If the depreciation is caused by the
bailee’s negligence.
OBLIGATIONS OF THE BAILOR (OWNER)
1. To refund the extra-ordinary expenses for
preservation.
2. To indemnify the bailee for the damages
caused by the flaw in the thing, if he, the bailor,
knew of the flaws, and he did not advise the
bailee of the same.
RIGHTS OF THE BAILOR (OWNER)
1. The bailor is entitled to a return of the thing
loaned at the expiration of the period
stipulated or after the accomplishment of the
use for which the commodatum has been
constituted.
2. To demand the immediate return of the thing
loaned if the bailee committed an act of
ingratitude.
3. To demand the immediate return of the thing
loaned in cases of precarium.
MODES OF EXTINGUISHING COMMODATUM
1. Expiration of the period.
2. Destruction or loss of the thing loaned.
3. Return of the thing loaned due to urgent
permanent need.
4. Ingratitude
5. Death of the bailor or bailee – unless
commodatum is transmitted to the heirs.
LOAN - MUTUUM
NATURE OF THE CONTRACT OF COMMODATUM
 Real contract – there must be the delivery of
the subject matter which is a personal
property. You need to deliver the personal
property to the borrower in order to have
perfection of the contract of mutuum.
 Not essentially gratuitous or onerous – It is not
for free. For onerous, such as there is a
payment of interest or a business of lending.
Another is gratuitous, if there is no payment of
interest.
PAYMENT OF INTEREST
 Eastern Shipping Lines, Inc. v. CA, GR No. 97412,
July 12, 1994
 Dario Nacar v. Gallery Frames and/or Felipe
Bordey, Jr., GR No. 189871, August 13, 2013
 Lara’s Gifts and Decors, Inc. v. Midtown Industrial
Sales, Inc. GR No. 225433, August 28,2019
KINDS OF INTEREST:
1. MONETARY INTEREST – Refers to the
compensation that has been agreed upon the
parties for use or loan. The interest should
have been expressly agreed upon by the
parties in writing. If there was no stipulation as
to payment of the interest in writing then you
cannot claim the monetary interest.
- 6% per annum (Legal rate of interest
per year)
2. COMPENSATORY INTEREST – Refers to interest
that will be assessed or will be imposed as a
penalty or as indemnity for damages that will
be imposed by law or by the court.
- 6% per annum from the time there is a
demand whether judicial or extra-
judicial.
 Sun Life of Canada (Phils.), Inc. v. Sandra Tan
Kit, etal., GR No. 183272, October 15, 2014
OBJECT OF THE CONTRACT
 Money
 Consumable or fungible things
CAPACITY OF THE PARTIES
1. The bailor must be the owner of the thing
loaned.
2. He must be capacitated to bind the property.
3. He must have the juridical capacity to act.
CONSIDERATION OF THE CONTRACT
1. The liberty of the bailor
2. The interest
FORMALITY OF THE CONTRACT
 General rule: No special form is required.
 Exception (In writing):
o If the contract is to be performed after
more than one year
o If payment of interest has been agreed
upon.

OBLIGATIONS OF THE BAILEE (BORROWER)

1. To return another thing of the same kind,
quantity, and quality.
2. To pay interest in case it has been expressly
stipulated in writing.