Loan in the Philippines

Monetary Obligation
There are two kinds of loan in the Philippines: commodatum and mutuum
(simple loan). Commodatum happens when one party (called the bailor) delivers
personal property to another (called the bailee), and the bailee has the
obligation to return to the bailor the exact same thing delivered to him. On the
other hand, mutuum or simple loan happens when one party delivers money or
other consumable personal property to another, and the latter has the obligation
to return the same amount of money, or personal property of the same quantity
and quality.
Just like any other contracts, a contract of loan is perfected when there is a
meeting of the minds between the first party and the second party; however, it
only becomes consummated when the personal property is delivered by first
party to the second party.
So, for example, if Juan borrows money in the amount of P1,000.00 from John
and John agrees, then the contract of loan is perfected. But it is only when John
gives P1,000.00 to Juan that the contract of loan is consummated. So once it is
consummated, John becomes obliged to deliver the amount to Juan. Juan, on the
other hand, is obliged to return the same amount of money to John on the date
agreed upon.
Contracting loan in the Philippines is very easy; it is the observance of the terms
of the contract that makes it confusing and legally problematic. So, in drafting a
contract of loan, lawyers advice may be important to make sure that the terms
of the contract are lawful and nt oppressive to any of the parties.
Commodatum happens when one party (called the bailor) delivers personal
property to another (called the bailee), and the bailee has the obligation to
return to the bailor the exact same thing delivered to him. On the other hand,
mutuum or simple loan happens when one party delivers money or other
consumable personal property to another, and the latter has the obligation to

return the same amount of money, or personal property of the same quantity
and quality.
Just like any other contracts, a contract of loan is perfected when there is a meet

ing of the minds between the first party and the second party; however, it only
becomes consummated when the personal property is delivered by first party to
the second party.
So, for example, if Juan borrows money in the amount of P1,000.00 from John
and John agrees, then the contract of loan is perfected. But it is only when John
gives P1,000.00 to Juan that the contract of loan is consummated. So once it is
consummated, John becomes obliged to deliver the amount to Juan. Juan, on the
other hand, is obliged to return the same amount of money to John on the date
agreed upon.
Contracting loan in the Philippines is very easy; it is the observance of the terms
of the contract that makes it confusing and legally problematic. So, in drafting a
contract of loan, lawyers advice may be important to make sure that the terms
of the contract are lawful and nt oppressive to any of the parties.