Professional Documents
Culture Documents
Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public
policy.
A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to acquire the property
given as security for the loan. This is embraced in the concept of pactum commissorium, which is proscribed
by law.22
The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by way of
security for the payment of the principal obligation, and (2) there should be a stipulation for automatic
appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation
within the stipulated period.23