Credit Trans 2

KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City

Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2022-2023
CREDIT TRANSACTIONS As to Object The object The object is

may either be always
Kinds of Contracts of Loan movable or movable
immovable property and it
1. Contract of Commodatum and if movable is always
This is a contract of loan by one to another of non- property it is money or
consumable property to be temporarily used by the ordinarily non- other
latter and returned in specie as where a horse or a consumable consumable
house is lent to a friend to be used by him objects
As to right in The bailor Ownership
2. Contract of Mutuum subject matter retains the passes to the
This is a contract of lone by one of money or other ownership of borrower
for consumption, this other becoming the owner of the thing
the things subject to an obligation to repay the same loaned
amount of the same quality as he had received, as As to duty of Specific thing The thing
where A delivers a quantity of rice to B to that end the Borrower loaned is to be loaned may be
that B shall consume or otherwise dispose of it on returned consumed and
condition that he shall repay A with rice of the same the borrower
quality and quantity. discharges
himself, not by
Distinction returning the
identical
As to Commodatum Mutuum loaned but by
Purpose Use the thing To consume paying its
borrowed and the thing equivalent in
with the borrowed and kind, quality
obligation to with the and quantity.
return the very obligation to As to Essentially May be
same thing repay its Consideration gratuitous gratuitous or
equivalent in with a
kind, quality stipulation to
and quantity pay interest
Contact No. 228-1996/887-2051
Business Department
How Perfected Nature and Characteristics of Commodatum
Both are Real Contracts Peculiar Characteristics of Contract
Contracts are perfected by delivery of the object of 1. Purpose

the contract. Thus in a case where a prospective Enjoyment and use of the thing borrowed. But unlike
lender issued checks to a prospective borrower but in usufruct, the bailee (borrower) has no right over
there was no evidence that the checks were actually the fruits, unless there is stipulation to that effect
encashed or deposited because the checks were 2. No transfer of Ownership
retained by another person thus there was no The bailor (lender) retains the ownership of the thing
perfected contracts loaned and the obligation of the borrower is to return
the very same thing that he barrowed.
Accepted Promise to Lend or To Borrow
3. Subject Matter
An accepted promise to deliver something by way of Movable or Immovable property may be object of
commodatum or simple loan is binding upon parties. Commodatum. Movable Property ordinarily must be
This contract is consensual which can only give rise non-consumable. Except if the purpose of the
to an action for damages in case of breach and not contract is not the consumption of the consumable
specific performance. The delivery of the thing object when it is merely for exhibition.
borrowed cannot be compelled. It is different from
real contract of loan which requires the delivery of 4. Essentially Gratuitous
the object of the contract for its perfection and which The contract of commodatum is essentially
gives rise to obligations only on the part of the gratuitous and if any consideration is to be paid the
borrower. contract ceases to be commodatum
5. Purely Personal Contract

As a consequence The death of the bailor or the
bailee will extinguish the contract and the bailee
cannot allow third to use the thing borrowed unless
authorized by the bailor. However, the members of
the bailee’s household are entitled to make use of
the thing loaned except when there is a stipulation to
Contact No. 228-1996/887-2051
Business Department
the contrary or when the nature of the thing forbids iv. If he lends or leases the thing to a third
such use of other member. person who is not a member of his
household
In case of unauthorized delegation of use the bailee v. If being able to save either the thing
is liable for the loss of the thing, even if it should be borrowed or his own thing he chose to
through a fortuitous event and the bailee is liable for save the latter
extraordinary expenses for the preservation of the
thing arising from the fault of the delegate. 3. Liability for deterioration
The bailee does not answer for the deterioration of
Obligation of Parties the thing loaned due only to the use thereof and
without his fault
Obligation of Bailee (Borrower) 4. Liablility of Two or More bailies
They are solidarily liable
1. Ordinary Expenses
The bailee is obliged to pay for the ordinary 5. Return of the thing loaned
expenses for the use and preservation of the thing When to return
loaned
Upon expiration of the period stipulated or after the
2. Loss of the Thing Loaned accomplishment of the thing loaned
The Bailee is liable for the thing loaned if Urgent need of bailor
a. It was lost through his fault Should the bailor have urgent need of the thing, he
b. Even if it should be lost through a fortuitous event may demand its return or temporary use in which the
i. if he devotes the thing loaned to any contract of commodatum is suspended.
purpose different from being loaned
ii. If he keeps it longer than the period Right of Retention
stipulated or after the accomplishment of The bailee has the right to retain the thing borrowed
the use only when the bailor is liable for damage because
iii. If the thing has been delivered with the bailee suffered damages by reason of the flaws
appraisal value unless there is a or defect of thing which are known to the bailor but
stipulation exempting the bailee from the latter did not advise the former of the existence
responsibility in case of fortuitous event of the same.
Contact No. 228-1996/887-2051
Business Department
Obligation of the Bialor (Owner) loan with an equal amount of the same kind and
quality.
1. Extraordinary Expenses
c. Subject Matter
Rule: Extraordinary expenses for the preservation of The object of mutuum is always personal property
the thing loaned shall be for the account of the bailor. which must be either money or other consumable
things.
2. If Bailee advances such expenses
d. Consideration
He shall be entitled to a refund proved he notified the Either be gratuitous or with stipulation to pay
bailor before incurring said expenses, except when interest.
they are urgent that the reply to the notification
cannot be awaited without danger. Transfer of Ownership
A. Bank Deposits
3. Exception Rule Whether fixed, savings or current deposits are in the
If the extraordinary expenses arise on the occasion nature of a contract of mutuum. There is a debtor-
of actual use of the thing by the bailee, even though creditor relationship between bank and depositor.
he acted without fault, the expenses shall be borne
equally by both the bailor and bailee unless there is Cash Advances
a stipulation to the contrary. Nature of simple loan (Mutuum), where ownership
over the money passes to the employee, hence, no
Contract of Mutuum fiduciary relation is created.
Characteristics of Contract Obligation of Borrower
a. Purpose 1. In Loan of other consumable not money

To consume the thing Borrowed The debtor owes another thing of the same kind,
quantity, quality, even if it should change in value. In
b. Transfer of Ownership case it is impossible to deliver the same kind, its
In Mutuum the owenership passes to the borrower, value at the time of the perfection of the loan shall
hence, the obligation of the borrower is to repay the be paid.
Contact No. 228-1996/887-2051
Business Department
Contract of Deposit Subject Matter
Definition Extrajudicial Deposit

A deposit is a constituted from the moement a Only movable things may be object of a deposit.
person receives a thing belonging to another with the Necessarily, the movable must be corporeal
obligation of safely keeping it and returning the considering the purpose of the contract.
same. The parties are Depositor (Depositante) he
who delivers the thing to another under Judicial Deposit
circumstances coming within the definition of deposit Movable as well as immovable property may be
and the depositary (depositario) he whom the thing object of sequestration or judicial deposit
is to be delivered.
Compensation
Generally Gratuitous contract, except it is for a
Principal Purpose compensation when there is an agreement or even
without an agreement if the depositary is engaged in
The principal purpose of the contract is safekeeping. business of storing goods.
If the safekeeping of the delivered is not the principal Kinds of Deposit
purpose of the contract, there is no deposit but some
other contract. Thus, incase of a valet parking the a. Classification of Extrajudicial Deposit
contract entered into is one of deposit. 1. Voluntarily Deposit
Where the deposit is made by the will of the
Real Contract depositor
The contract of deposit is a real contract, it is not Parties

perfected until the delivery of the thing. Depositor need not to be the owner of the thing
If the depository has reasonable ground to believe
Consensual Contract that the thing has not been lawfully acquired by the
The same is consensual contract and such depositor, he may return the same.
agreement shall give rise to an obligation to do.
Contact No. 228-1996/887-2051
Business Department
Rights and obligation of the depositary Obligation to return the thing deposited
a. Use of the thing deposit Return the thing deposited incluing all its products
and accessories. The thing must be return to the
The depositary cannot make use of the thing depositor upon demand even though a specified
deposited without the permission of the depositor, period or time for such return may have been fixed.
otherwise, he shall be liable for damages. Except,
when the preservation of the thing deposited Obligation of Depositor
requires its use, it must be used but only for that
purpose. 1. Reimbursement of expenses for preservation
The depositor is obliged to reimburse the depository
Duty to safe-keeping for the expense the latter may have been incurred
for the preservation of the thing if it is gratuitous.
1. Standard
He is required to observe the diligence which is 2. Reimbusement for losses arising from character
expected of a good father of a family, unless a of thing deposited.
different degree has been stipulated by the parties. The depositor shall reimburse the depositary for any
loss arising from the character of the thing
deposited.
2. When the thing is closed and sealed
When the depositary must return it in the same Necessary Deposit in Hotels or Inns
condition and be liable for damages should the seal
or lock be broken through his fault. 1. Deposit of effects in hotels or inns
3. Duty to keep secret of Deposit The deposit of effects made by travellers in hotels or
When the seal or lock is broken with or without the inns shall also be regarded as necessary and the
depositary’s fault he shall keep the secret of the keepers of hotels or inns shall also be regarded as
deposit depositaries. As such depositaries, hotels and inns
are liable for the safety of the effect introduced in its
premises.
Contact No. 228-1996/887-2051
Business Department
Extent of Liabilities 2. Guarantor cannot be debtor himself

A person cannot be both the primary debtor and
The hotel-keeper is liable even for vehicles, animals, guarantor of his own debt.
and articles which have been introduced or placed in
annexes of the hotel. 3. Obligation of Guarantor is Subsidiary
A contract of guaranty gives rise to a subsidiary
The responsibility of the hotels or inns shall include obligation on the part of guarantor. It is only after the
loss or injuries to the personal property of the guest creditor has proceeded against the properties of the
caused by the servants or employees of the hotels principal debtor that the guarantor can be held liable.
or inns as well as by strangers but not that which
may proceed from force majure. Robbery and Thief 4. Governed by Statute of Frauds
is not force majure unless with use of irresistible The undertaking of guarantor is covered by statutes
force. of frauds.
Kinds of Guaranty
Accessory Contract
Contracts of Guaranty and Suretyship a. According to Source
1. Conventional- Created by agreements of parties
Contract of Guaranty Proper 2. Legal- Constituted in compliance with provision of
Law
Definition 3. Juridical- That which the court requires in order to
By guaranty a person called the guarantor, binds secure the eventual right of the party.
himself to the creditor to fulfil the obligation of the
principal debtor in case the latter should fail to do. b. According to Consideration
1. Accessory Contract 1. Gratuitous- Guarantor receives no compensation

A guaranty is an accessory contract in the sense that 2. Onerous- Guarantor receives the consideration
it is entered into for the purpose of securing the for guaranteeing the principal obligation.
performance of another obligation which is c. According to Person Guaranteed
denominated as principal obligation 1. Simple- Where obligation secured is that of
principal debtor
Contact No. 228-1996/887-2051
Business Department
2. Double- Where the obligation is secured is that of

the first or anterior guarantor. Principles Common to Both Guaranty and
Suretyship
Contract of Suretyship
Nature and Characteristics Nature of Principal Obligation Guaranteed
1. It must be valid Obligation (Not void)
a. Suretyship is created when a guarantor binds 2. It may be voidable or unenforceable
itself solidarily with the principal obligor. 3. It may be civil or natural obligation
4. It may also be a conditional obligation
b. Accessory Contract
The surety’s obligation is not an original and direct Obligation Covered
one for the performance of his own act but merely 1. A guaranty or surety does not only covers
accessory or collateral to the obligation contracted obligation of principal debtor but may also secure
by the principal. future debts, the amount of which is not yet know.
2. Contract of guaranty or suretyship is only
c. Liability is Direct and Primary prospective and not retroactive unless contrary is
clearly shown.
Although surety contract is secondary only to valid
principal obligation, his liability to the creditor or Right to Reimbursement
promise of the principal is direct, primary and
absolute. The guarantor who pays for a debtor must be
indemnified by the latter
d. Governed by Statute of frauds
Suretyship is a contractual relation resulting from Except
agreement whereby one person, the surety engages
to be answerable of the debt, default of another thus 1. If the guarantor has paid without notifying the
it is covered by statute of frauds. debtor, and the latter not being aware of the
payment, repeats the payment, the guarantor has no
e. Consideration in suretyship remedy against the debtor.
The suretyship becomes liable for the debt or duty of 2. If the guaranty is entered into without the
another. The consideration necessary to support a knowledge and consent or against the will of the
surety obligation need not pass directly to the surety. principal debtor.
Contact No. 228-1996/887-2051
Business Department
If the guarantor pays the debt before the maturity he

cannot demand reimbursement until the expiration of
the period.
Extinguishment of Guaranty
1. The guaranty is extinguished indirectly upon

extinguishment of principal debt.
2. The guaranty is extinguished for the same causes
as all other obligation
Principles applicable only to Contract of

Guaranty
1. Benefit of Excussion
The guarantor cannot be compelled to pay the
creditor unless the latter has exhausted all the
property of the debtor.
2. Benefit of Division
When there are several guarantors of only one
debtor and for the same debt and they did not bind
themselves solidary.
Any one of the co-guarantors has the right to have

the creditor divide the claim which he may have
against all of them, the creditor not being able then
to demand from each co-guarantor more than the
portion that devolves on him to satisfy by reason of
the said division.

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KORBEL FOUNDATION COLLEGE, INC.

Purok Spring 1, Brgy. Morales, Koronadal City

CREDIT TRANSACTIONS As to Object The object The object is

How Perfected Nature and Characteristics of Commodatum

Both are Real Contracts Peculiar Characteristics of Contract

Contracts are perfected by delivery of the object of 1. Purpose

5. Purely Personal Contract

Characteristics of Contract Obligation of Borrower

a. Purpose 1. In Loan of other consumable not money

Contract of Deposit Subject Matter

Definition Extrajudicial Deposit

The contract of deposit is a real contract, it is not Parties

Extent of Liabilities 2. Guarantor cannot be debtor himself

1. Accessory Contract 1. Gratuitous- Guarantor receives no compensation

2. Double- Where the obligation is secured is that of

If the guarantor pays the debt before the maturity he

1. The guaranty is extinguished indirectly upon

Principles applicable only to Contract of

Any one of the co-guarantors has the right to have

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