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INTRODUCTION MEANING AND SCOPE OF CREDIT TRANSACTIONS Credit transactions include all transactions involving the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future. ‘TWO TYPES OF CREDIT TRANSACTIONS/ CONTRACTS OF SECURITY 1. Secured transactions or contracts of real security ~ supported by a collateral or an ‘encumbrance of property 2. Unsecured transactions or contracts of personal security ~ fulfllment by the debtor is, ‘supported only by a promise to pay or the personal commitment of another EXAMPLES OF CREDIT TRANSACTIONS Bailment contracts Contracts of guaranty and suretyship Mortgage ‘Antichresis Concurrence and preference of credits MEANING OF SECURITY Security (det). Something given, deposited, or serving as 2 means to ensure the fulfillment or enforcement of an obligation or of protecting some Interest in property. KINDS OF SECURITY 1. Personal Security - when an individual becomes a surety or a guarantor 2. Property or Real Security ~ when a mortgage, pledge, antichresis, charge, or lien or ‘other device used to have property held, out of which the person to be made secure can be ‘compensated for loss. BAILMENT Bailment (def). The delivery of property of one person to another in trust for a specific purpose, with a contract, that the trust shall be faithfully executed and the property returned or duly accounted for when the special purpose is accomplished or kept until the bailor reclaims it. ‘To be legally enforceable, a ballment must contain all the elements of a valid contract, which are consent, object, and cause or consideration. However, a bailment may also be created by operation of law. PARTIES IN BATLMENT. 1. Bailor ~ the giver; the one who delivers the possession of the thing balled 2. Bailee ~ the recipient; the one who receives the possession or custody of the thing delivered KINDS OF BAILMENT 1. For the sole benefit of the bailor Examples: gratuitous deposit and mandatum (ballment of goods where the ballee gratuitously Undertakes to do some act with respect to the property) ‘Sheryl 1D 2002 PAGE 1 > Ex. My tito from the States makes padala a balikbayan box filled with spam through another relative who's flying to the Philippines on vacation, It only benefits my tito (the bailar). Or, Helen deposits Polsci’s baby chair with the mysterious little guy who doesn’t smile in the bag depository counter outside the lb. In this case, only Helen benefits (based on a true story). 2. For the sole benetit of the ballee Examples: commodatum and gratuitous simple oan or mutuum > Ex. Xilca borrows my white blouse because she forgot to bring clothes to change from her Pasay City Jail outfit. Only Xilea is benefited, not me. Or, Xilca borrows Pi0 from me without interest 3. For the benefit of both parties Examples: deposit for a compensation, involuntary deposit, pledge, ballments for hire > Ex. Ansky pawns her huge diamond earrings at Villarica Pawnshop. The pawnshop gives, her P10,000 and a pawn ticket, Both parties benefit ~ Ansky gets fast cash, while the Pawnshop gets to keep the huge diamond earrings to make sure that Ansky pays, and in case she doesn't they can sell the earrings. Land 2 are gratuitous bailments, ‘There ls no consideration because they are considered more ‘as a favor by one party to the other. Bailments under number 3 are mutual-benefit bailments, and they usually result from business transactions. BAILMENT FOR HIRE Bailment for hire arises when goods are left with the bailee for some use or service by him always for some compensation. KINDS OF BAILMENT FOR HIRE 1. Hire of things ~ goods are delivered for the temporary use of the hirer 2. Hire of service — goods are delivered for some work or labor upon it by the bailee 3. Hire for carriage of goods ~ goods are delivered either to a common carrier or to a private person for the purpose of being carried from place to place 4. Hire of custody ~ goods are delivered for storage L.LOAN GENERAL PROVISIONS ‘Art. 1953. By the contract of loan, 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 the ‘contract is called a commodatum; or money or other consumable thing, upon condition that the ‘samme amount of the same kind and quality shall be paid, in which case the contract is simply called ‘loan or mutuum. ‘Commodatum is essentially gratuitous. ‘Simple loan may be gratuitous or with a stipulation to pay interest. In commodatum the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower. ‘Art. 1934. An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commadatum or simple loan itself shall not be perfected until the delivery of the object of the contract. ‘Sheryl 1D 2002 PAGE 2 ESSENTIAL ELEMENTS OF A CONTRACT IN THE CONTEXT OF A LOAN ‘Consent of the parties Borrower and Lender Object Property ‘Cause or Consideration For the lender: right to demand the return of the thing For the borrower: acquisition of the thing CHARACTERISTICS OF THE CONTRACT OF LOAN 1. A real contract ~ the delivery of the thing loaned Is necessary for the perfection of the contract 2. A unilateral contract ~ once the subject matter has been delivered, it creates obligations on the part of only one of the parties (the borrower) ‘CAUSE OR CONSIDERATION IN A CONTRACT OF LOAN 1, As to the borrower: the acquisition of the thing 2. AS to the lender: the right to demand its return or ofits equivalent KINDS OF LOAN 1. Commedatum ~ where the lender delivers to the borrower @ nen-consumable thing so that the latter may use it for a certain time and return the Identical thin: 2. Simple loan or mutuum ~ where the lender delivers to the borrower meney or other consumable thing upon the condition that the latter shall pay the same amount of the same kind and quality. LOANS DISTINGUISHED FROM CREDIT Credit means the ability of an individual to 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. Loan means the deli r a money or other consumable thing upon an agreement to repay the same amount of the same kind ‘and quality, with or without interest, + The concession of a credit necessarily involves the granting of loans up to the limit of the amount fixed in the credit. ‘As opposed to debt, credit is a debt considered from the creditor's standpoint. It is that which is due to any person. ‘Sheryl 1D 2002 PAGE 3