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MIDTERMS COMPILATION (19977-2015)

MCQ QUESTIONS
Q: A __________ is an insurer of the insolvency of the debtor. (2014, 2015)
A: Guarantor
Q: If the alteration in the warehouse receipt was __________ (2014, 2015), the warehouseman shall be liable
__________. (2010)
A: (2014, 2015) Authorized
A: (2010) According to the terms of the receipt as altered
Q: The indorsement of a warehouse receipt amounts merely to a __________. (2014)
A: Conveyance
Q: A __________ guaranty is one constituted solely to guarantee or secure the performance by the debtor of
the principal obligation. (2014, 2015)
A: Single
Q: A bondsman is a __________ offered in virtue of a provision of law or a judicial order. (2014)
A: Surety
Q: By a contract of __________, one of the parties binds himself to give one thing in consideration of the
others promise to give another thing. (2014, 2015)
A: Barter
Q: In case of extraordinary inflation or deflation, the basis of payment for the loan shall be the value of the
currency __________. (2014, 2015)
A: At the time of creation of the obligation
Q: A receipt in which it is stated that the goods received will be delivered to the depositor or to any other
specified person named in such receipt is a __________. (2014, 2015)
A: Non-negotiable receipt
Q: When there are two (2) or more bailees to whom a thing is loaned in the same contract, they are liable
__________. (2014)
A: Solidarily
Q: If the principal obligation is subject to __________, the guarantor is liable only after the fulfillment of the
condition. (2014)
A: Suspensive condition
Q: __________ is a contract of real security. (2015)
A: Mortgage
Q: If the creditor voluntarily accepts immovable or other property in payment of the debt, even if he should
afterwards lose the same through eviction, __________. (2015)
A: The guarantor is released
Q: The depositary may retain the thing in __________ until the full payment of what may be due him by

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MIDTERMS COMPILATION (19977-2015)

reason of the deposit. (2009, 2010, 2012, 2015)


A: Pledge
Q: The rule of strictissimi juris commonly refers to an __________. (2009, 2010, 2012, 2015)
A: Accommodation surety
Q: By the contract of __________ one of his parties binds himself to give on thing thereof in consideration of
the others promise to give another thing. (2009, 2010)
A: Barter
Q: In the determination of the interest, if it is payable in kind, the value shall be appraised __________ (2012)
of the products or goods __________. (2009, 2010, 2012)
A: (2012) At the current price
A: (2009, 2010, 2012) At the time and place of payment
Q: The depositary __________ demand that the depositor prove his ownership of the thing deposited. (2009,
2010)
A: Cannot
Q: A receipt in which it is stated that the good received will be delivered to the bearer or to the order of any
person named in such receipt is a __________. (2009, 2010)
A: Negotiable warehouse receipt.
Q: The guarantor shall answer for such judicial costs only as have been incurred __________ he has been
judicially required to pay. (2009, 2010, 2012)
A: After
Q: The indorsement of a receipt __________ make the indorser liable to any failure on the past of the
warehouseman or previous endorser of the receipt to fulfill their respective oblgiations. (2009, 2010)
A: Shall not
Q: Interest due shall earn interest from the time of a __________ demand. (2009, 2010, 2011, 2012)
A: Judicial
Q: In __________, the party receiving the thing can dispose of the same and his act will not be considered
misappropriation thereof. (2011, 2013)
A: Mutuum
Q: If what was loaned is a fungible thing other than money, the borrower is under the obligation to pay the
lender another thing of the same kind, quality and quantity. In case it is impossible to do so, the borrow shall
pay its value __________ of the loan. (2011, 2012, 2013)
A: At the time of perfection
Q: If the thing deposited is a consumable thing, the permission to use it will result in its consumption and the
contract is converted into __________. (2011)
A: Mutuum
Q: As to claim not specified in the receipt, the warehouseman __________. (2011)
A: Shares pro rata with the other creditors of the depositor the balance of the proceeds of the sale for the satisfaction

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MIDTERMS COMPILATION (19977-2015)

of said claims
Q: The hotel keeper __________ liable for the vehicles, animals and articles which have been introduced or
places in the annexes of the hotel. (2011)
A: Is
Q: A non-negotiable receipt __________ negotiated, and the indorsement of such receipt gives the transferee
no additional right. (2011)
A: May be
Q: The indorsement of a receipt shall not make the indorser liable as __________ for any failure on the part of
the warehouseman or previous indorser of the receipt to fulfill their respective obligations. (2011)
A: Guarantor, surety, bailor
Q: The guarantor who guarantees the debt of an absentee at the request of another has a right to claim of
reimbursement, after satisfying the debt from the person who requested him to be guarantor __________ the
debter. (2011, 2013)
A: Or
Q: The warehouseman __________ set up title in himself as an excuse for his failure or refusal to deliver the
goods. (2011)
A: Cannot
Q: Commodatum is similar to __________ in that it confers a benefit to the recipient. (2011, 2013)
A: Donation
Q: The bailee __________ for the deterioration of the thing loaned due only to the use thereof and without his
fault. (2011)
A: Does not
Q: When two or more bailees to whom a thing is loaned in the same contract __________. (2011, 2012)
A: They are liable solidarily
Q: The debtor in delay is liable to pay legal interest at __________ as indemnity for damages even in the
absence for the payment of interest. (2011)
A: 6%
Q: If the depositary be in delay or has used the money without permission, he shall __________. (2011)
A: be relieved as depositary, liable for interest as indemnity, be charged civilly.
Q: The act of a thief or robber who has entered the hotel __________ deemed force majeure, unless it is done
with the use of arms or through an irresistible force. (2011)
A: Is not
Q: The hotel keeper __________ retain the things brought into the hotel by the guest as a security for credits
on account of lodging, and supplies usually furnished to hotel guests. (2011, 2013)
A: Can

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MIDTERMS COMPILATION (19977-2015)

Q: The guarantor __________ an insurer of the debt guaranteed. (2011)


A: Is not
Q: A judicial bondsman __________ demand the exhaustion of the property of the principal debtor. (2011)
A: Cannot
Q: If the creditor voluntarily accepts immovable or other property in payment of the debt, even he should
afterwards, lose the same through eviction __________. (2012)
A: The guarantor is released
Q: A guarantor who pays without the knowledge or against the will of the debtor can recover __________.
(2012)
A: Only in so far as the payment has been beneficial to the debtor
Q: If the alteration is material but innocently made though unauthorized __________. (2012, 2013)
A: The warehouseman is liable on the altered receipt according to its original tenor
Q: The guarantors or suretys action for release befor epayment can be exercised against the __________.
(2012, 2013)
A: Debtor
Q: __________ is a contract of real security. (2012)
A: Mortgage
Q: The balor in commodatum __________ the owner of the thing loaned. (2012, 2013)
A: Need not be
Q: Fixed, savings and current deposits of money in bank shall be governed by the provisions concering
__________.
(2012)
A: Single loan
Q: In case of lost or destroyed receipts, the delivery of the goods under an order of the court __________
relieve the warehouseman from liability to a person whom the negotiable receipt has been or shall be
negotiated for value without notice of the proceedings or of the delivery of the goods. (2012)
A: Shall not
Q: A __________ deposit takes place when an attachment or seizure of property in litigation is ordered. (2012,
2013)
A: Judicial
Q: If the receipt is negotiable, the goods __________ cannot be attached or levied under an execution unless
the receipt be first surrendered to the warehouseman or its negotiation enjoined. (2012)
A: Cannot

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MIDTERMS COMPILATION (19977-2015)

ESSAY QUESTIONS
Q: Distinguish mutuum from commodatum (1999, 2000, 2002, 2010)
A: (bluebook answer) In commodatum, a non-consummable thing is delivered to another person for its use for a
specified period. The subject matter may be immovable or movable property. Commodatum is essentially gratuitous.
Furthermore, ownership of the thing is retained by the bailor, and consequently, he is the one who suffers from the
loss of the thing. In commodatum, the bailee has to return the same thing loaned. Finally, the bailor cannot demand
the return of the thing at will unless it is a precarium or there is an urgent need.
On the other hand, the subject matter of muttum is a consumable thing, hence, it should be personal property or
money. Moreover, mutuum may be onerous (with interest) or gratuitous. Since the subject matter of mutuum is money
or any other consummable thing, the ownership thereof is transferred to the bailee; consequently, loss of the thing
does not extinguish the mutuum since the bailee is only required to pay the same kind, quantity or quality of the thing
loaned. In mutuum, the lender cannot demand the payment of the thing in mutuum during the duration of the period
specified for the loan. Moreover, the borrower cannot be held liable for estafa in mutuum since ownership is
transferred to the borrower.
Q: Who is liable for ordinary expenses in commodatum? (2006)
A: According to Art. 1941 of the Civil Code, the bailee is obliged to pay for the ordinary expenses. This refers to
expenses for the use and preservation of the thing loaned. As a rule, the borrower must take good care of the thing
with the diligence of a good father of the family. Included in this level of care is the ordinary expenses the borrower
may incur for the use and preservation of the thing loaned. As to extraordinary expenses. Art. 1949 shall apply, not
Art. 1941.
Q: Distinguish guaranty from suretyship (1999, 2007)
A: In guaranty, liability depends upon an independent agreement to pay the obligation if the primary debtor fails to do
so. It is a collateral undertaking that makes the guarantor secondarily or subsidiarily liable. The guarantor is not
bound to know if the principal debtors in default. Also a guarantor is often discharged by the mere indulgence of the
creditor of the principal. Hence, he is not liable unless notified of the default of the principal. Lastly, a guarantor binds
himself to pay only if the principal cannot or is unable to pay.
On the other hand, a surety assumes liability as a regular party. He is therefore charged as an original promissor. A
surety also undertakes directly for the payment without reference to the solvency of the promissor. He is held
principally liable together with the principal debtor. He is also held to know every default of his principal. Unlike the
guarantor, a surety is not discharged by either the mere indulgence of the creditor or by want of notice of the default
of the principal. Moreover, a surety binds himself to pay if the principal does not pay, even if he is fully capable of
paying. As soon as the principal defaults in payment, whether insolvent or not, the surety can be held liable for
payment of the obligation.
Q: Differentiate real security from personal security (2010)
A: (bluebook answer) Real security is security supported by property such as real mortgage, pledge, chattel
mortgage. Conversely, personal security is security supported by the debtors promise to pay when the amount or
thing becomes due, such as in guaranty or suretyship.
Q: How is the warehousemans lien satisfied by sale? (1997, 1998, 1999, 2000, 2002, 2003, 2006, 2007, 2008,
2009, 2010, 2012, 2014, 2015)
A: (bluebook answer) The warehousemans lien could be satisfied by sale following this procedure:
1. Written notice must be given to the owner or the depositor of goods or any person with interest over the
goods covered by the warehouse receipt. It should be personally delivered or it could be sent through mail to
the last known address of the person being addressed. The notice must contain the following:

An itemized statement of accounts

Date when such account became due

Demand to pay the accounts on liens due stating that it must be paid at a particular date not earlier
than 10 days from the date notice is personally delivered or not earlier than 10 days from the date
the notice reached the person addressed by mail, taking into consideration the course of mail.

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MIDTERMS COMPILATION (19977-2015)

2.

3.
4.
5.

Statement that failure to pay will cause the sale of goods in public auction
After the lapse of time given from the payment to be made and payment payment has not yet been done,
public auction of the goods will be held. Advertisement of the sale must be done through:

Advertisement containing brief description of goods, name of owner and address of owner of
goods, time and place of public auction, must be published once in two consecutive weeks in a
newspaper in the place of sale

If there is no newspaper, the advertisement must be posted in at least 6 conspicuous places at


least 10 days prior to the sale

Where to conduct sale: in place where the lien is incurred or if not suitable, in the nearest suitable
place

When should auction sale be made: not earlier than 15 days from date of first publication
The proceeds from sale shall be applied to the lien as well as other expenses for the notice, advertisement
and conduct of auction sale. The balance shall be kept by warehouseman until delivery is demanded by
owner.
In case some other person with interest on the goods appear during the course of the auction sale, being
able to prove entitlement over the goods, it shall be delivered to him.
In case of perishable or hazardous goods, demand of lien and removal of good must be demanded from the
owners. Failure to comple, the goods can be sold either in a public or private auction without need of
advertisement. The proceeds will be applied as with an ordinary auction sale. If not sold, warehouseman can
dispose and will not incur liability.

Q: How can a warehousemans lien be lost? (2010)


A: (bluebook answer) A warehousemans lien may be lost when he surrenders or delivers the thing to the person
entitled to receive it without demanding satisfaction of the lien to be first complied with. The warehouseman also
loses his lien if upon proper demand to deliver the thing to the person entitled to receive it, he fails or refuses to do so
when he has no lawful exercise to retain it.
Q: When does unpaid interest earn interest? (1999, 2009, 2014)
A: Generally, accrued interest, or interest due and unpaid, shall not earn interest except in two instances:

When express stipulation made by the parties that the interest due and unpaid shall be added to the
principal obligation and the resulting total amount shall earn interest; or

When it is judicially demanded as provided for in Art. 2212


The first exception refers to compounded interest. In order for this exception to apply, the stipulation for compounded
interest must be made in writing. For the second exception, we refer to Art. 2212 of the Civil Code which states that
interest due shall earn interest from the time it is judicially demanded although the obligation may be silent upon this
point. This is applicable only where interest has been stipulated by the parties. The said provision contemplates the
presence of stipulated or conventional interest which has accrued when demand was judicially made. In cases where
no interest has been stipulated by the parties, no accrued conventional interest could further earn interest upon
judicial demand.
Q: Discuss the effects of alteration of a receipt on the liability of a warehouseman. (2000, 2002, 2014)
A:
The alteration of a receipt shall not excuse a warehouseman from any liability if such alteration is
immaterial, authorized, or made without fraud. He shall be liable according to the original tenor of the receipt if
such alteration is immaterial, unauthorized but without fraud, material but innocently or even fraudulently
made. In the latter case (fraudulently made), he is liable to a purchaser of the receipt for value without notice, and
even to the alterer and subsequent purchasers with notice but with regard to the last two, only for delivery as he is
excused from any liability. He is liable according to the altered receipt when the alteration is authorized, such as
changing the name of a party.
Q: Discuss the liability of the warehousemen in case of lost or destroyed receipts. (2002)
A: (CSBP) Court may order the delivery upon satisfactory proof of loss/destruction and upon giving of bond with
sufficient sureties to protect the warehouseman from any liability which may be incurred. However, warehouseman
is still liable to a holder of the receipt for value without notice since the warehouseman can secure himself on the
bond given.

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MIDTERMS COMPILATION (19977-2015)

Q: Discuss the duty/obligation of the warehouseman when there are several claimants. (2002)
A: (DeVa BC) Determine within a reasonable time the validity of conflicting claims, and deliver to the person whom
he finds is entitled to the possession or to bring legal proceedings to compel all claimants to interplead.
Q: Discuss the effect of payment by a guarantor before the maturity of the principal obligation. (1999)
A: According to Art. 2069 of the Civil Code, if the debt was for a period and the guarantor paid it before it became
due, he cannot demand reimbursement of the debtor until the expiration of the period unless the payment has been
ratified by the debtor. This provision applies when the debt has a period/maturity date, and the guarantor pays the
debt before due date. Generally, the guarantor is not entitled to reimbursement since there is no necessity for
accelerating payment. Thus, he can only demand for reimbursement upon expiration of the period. However, if
payment is ratified or was made with consent of the debtor, then the guarantor can demand reimbursement even
before maturity. Moreover, if guarantor pays before due date, the interest does not run even if debtor has been
notified.
Q: Discuss the benefit of excussion. (1998, 2000, 2008)
A: Art. 2058 of the Civil Code states that the guarantor cannot be compelled to pay the creditor unless the latter has
exhausted all the property of the debtor, and has resorted to all the legal remedies against the debtor. Because the
guarantor is only secondarily liable, all legal remedies against the debtor must first be exhausted before the creditor
can go after the guarantor. This includes the remedy of rescission of fraudulent alienations of property made by the
debtor. The benefit of excussion is an exclusive right of the debtor. It is not applicable to contracts of suretyship.
Furthermore, the guarantor may even demand exhaustion of all the property of the debtor before he can be
compelled to pay. However, this only applies to ordinary personal guarantors, and not to a pledger or mortgagor.
Nevertheless, when the creditor secures a judgment against the guarantor before the exhaustion of the debtors
properties, the guarantor shall be entitled to deferment of the execution of the judgment against him until after the
properties of the debtor have been exhausted.
Q: What are the exceptions to the benefit of excussion? (1997, 1998, 1999, 2000, 2002, 2006, 2008, 2012, 2013,
2014)
A: (bluebook answer) As provided by law, the guarantor loses his right to the benefit of excussion in the following
cases:
1. When the guarantor has renounced his right
2. When the gurantor has bound himself solidarily with the principal debtor
3. In case the debtor bedomes insolvent
4. When the principal debtor absonds unless he left a legal administrator for his property
5. When it can be presumed that the debotr does not have sufficient property would not result in the
satisfaction of the obligation
The guarantor also loses his right to the benefit of excussion when:
1. He fails to set up his right to the benefit of excussion (i.e. by failure to point out suffienct properties of the
debtor in the Philippines)
2. He is a bondsman or a sub-surety
3. Whe has given a pledge or mortgage as a special security
4. When he fails to interpose as a defense the benefit of excussion when the creditor claims the debt from him
Q: What is the benefit of division? In whose favor is it applicable? Exceptions? (2000, 2012)
A: The benefit of division applies to instances wherein there are several guarantors for the same debt, but only one
debtor. Here, the liability of the guarantors is only joint. This means that the guarantors are not liable to the creditor
beyond the shares which they are respectively bound to pay, and the creditor cannot claim from the guarantors
except their own shares. As an exception, the guarantors may be held liable solidarily, but this must be stipulated.
Furthermore, the benefit of division against the co-guarantors ceases in the same cases and for the same reasons as
the benefit of excussion against the principal debtor.

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MIDTERMS COMPILATION (19977-2015)

Q: Discuss the effect of payment by the guarantor without notice to the debtor. (2000)
A: Art. 2068 of the Civil Code states that if the guarantor should pay without notifying the debtor, the latter may
enforce against him all the defenses which he could have set up against the creditor at the time the payment was
made. However, if the debtor has already paid the creditor, when the guarantor pays, the debtor can set up against
the guarantor the defense of previous extinguishment of the obligation by payment.

Q: Deposit is generally voluntary. Enumerate the instances when it becomes necessary. (1997)
A: According to Art. 1996 of the Civil Code, A deposit is necessary when it is made in compliance with a legal
obligation. A deposit is also necessary when it takes place on the occasion of any calamity, such as fire, storm, flood,
or any other similar events. Furthermore, Art. 1998 of the Civil Code states that the deposit of effects made by the
travelers in hotels or inns shall also be regarded as necessary.
Q: How is voluntary deposit extinguished? (2006, 2015)
A: According to Art. 1995 of the Civil Code, a voluntary deposit is extinguished upon the loss or destruction of the
thing deposited. In case of a gratuitous deposit, it is extinguished upon the death of either the depositor or depositary.
If it is for compensation, the deposit is not extinguished by the death of either party because it is an onerous deposit,
and not personal in nature. Hence, the rights and obligations arising therefrom are transmissible to their respective
heirs. However, these causes are not exclusive. A deposit can also be extinguished by the other modes of
extinguishment of obligations such as: confusion, payment, except compensation.
Q: Discuss the liability of keepers of hotels and inns with regard to the effects of their guests. What is the
extent of their liability? Can they dispense with or limit their liability by posting notices that they are not
liable for articles brought in by their guests? (1999, 2000, 2003, 2006, 2008, 2009, 2012)
A: According to Art. 1998 of the Civil Code, the keepers of hotels or inns shall be responsible for the effects of their
guests as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the
guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects. This liability is extended to the vehicles, animals and articles
which have been introduced or placed in annexes of the hotel.
No, they cannot dispense with or limit their liability by posting notices that they are not liable for articles brought in by
their guests. Art. 2003 further states that any stipulation between the hotel-keeper and the guest whereby the
responsibility of the former is suppressed or diminished shall be void.
Q: When are the keepers of hotels not liable? (2003, 2013, 2014, 2015)
A: (bluebook answer) The hotel-keeper is not liable for the loss in the following instances:

By reason of force majeure

When the loss and destruction was caused by theft who used arms or irresistible force

When the loss is caused by the guests, their family, servants or visitors

When it is cause by the nature of the article brought in the hotel


Q: Does the depositary have a right of retention over the thing deposited? (2000)
A: Yes. (RPF) Depositary may Retain thing in Pledge until Full payment of what may be due him.
Q: Discuss the effect if death of the depositor/depositary. (2000, 2007)
A: If the deposit is gratuitous, the death of either the depositor or depositary extinguishes the deposit.
If the deposit is for a compensation, it is not extinguished by the death of either party because, unlike a gratuitous
deposit, an onerous deposit is not personal in nature. (see Art. 1411.) Hence, the rights and obligations arising
therefrom are transmissible to their respective heirs. (Art. 1178.) But the heirs of either party have a right to terminate
the deposit even before the expiration of the term.

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MIDTERMS COMPILATION (19977-2015)

Q: Discuss the exceptions to the rule that no interest shall be due unless it has been expressly stipulated in
writing. (1997, 2006, 2008, 2013, 2015)
A: (bluebook answers) The exceptions to the rule that interest must be expressly stipulated and in writing are as
follows:
1. Interest as indemnity for damages. This may be charged even when theres no stipulation; and
2. Interest accruing from unpaid interest. This is due and chargeable from the time of judicial demand.
Q: What is precarium? When may the bailor demand the return of the thing at will? (1998, 1999, 2000, 2002,
2007, 2008, 2009)
A: Art. 1947 of the Civil Code defines precarium as a kind of commodatum where the bailor may demand the thing at
will. There is a precarium when neither the duration of the contract nor the use to which the thing loaned should be
devoted, has been stipulated; or when the use of the thing is merely tolerated by the owner. When the commodatum
is a precarium, or when the bailee does any acts of ingratitude such as: when the bailee should commit some
offenses against the person, the honor or the property of the bailor, or of his wife or children under his parental
authority, when the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though
he should prove it, unless the crime or the act has been committed against the bailee himself, his wife or children
under his authority, and when the bailee unduly refuses the bailor support when the bailee is legally or morally bound
to give support to the bailor, the bailor may demand the return of the thing at will. The bailor may also demand the
return of the thing at will when he has an urgent need for the use of the thing.
Q: When may a bailor be made liable to pay damages for known hidden flaws? (1999, 2006, 2014)
A: (bluebook answer) According to the Civil Code, a bailor is liable for damages suffered by the bailee under the
following conditions:
1. When there is a flaw or defect in the thing,
2. The flaw or defect is hidden,
3. The bailor knows of the defect or flaw,
4. He did not inform the bailee of the flaw or defect, and
5. The bailee suffered damages due to the flaw or defect.
In this case, the bailee has the right to retain the thing until payment by the bailor of damages.
Q: When is the bailee liable for the loss of the thing, even If it should be through a fortuitous event? (1997,
1998, 1999, 2000, 2006, 2007, 2009, 2010, 2012, 2014, 2015)
A: (bluebook answer) According to the Civil Code, generally, a bailee is not liable for the loss of the thing if through a
fortuitous event as ownership is retained by the bailor. However, under the following instances, a bailee is liable to the
loss even if due to a fortuitous event:
1. When the thing is devoted for purposes other than that agreed or the purpose why commodatum was
constituted; or
2. When the bailee keeps the thing even after the expiration of term of commodatum or accomplishment of the
use for which commodatum was constituted; or
3. When the thing is delivered with appraisal of value at the time of perfection, unless the baliee is expressly
exempted from responsibility; or
4. When the thing is lent or leased to third persons other than the member of the household of the bailee; or
5. When in the occasion of saving either his own thing or the thing subject of commodatum, he saved his own
thing.
Q: What is the nature of the liability of two or more bailees to whom a thing is loaned in the same contract?
(2010)
A: (bluebook answer) When a thing is loaned to 2 or more bailees in the same contract, the Civil Code provides that
they should be solidarily liable to the bailor.
Q: When is the depository liable for the loss of the thing even if it be through fortuitous event? (1999, 2002,
2003, 2006, 2007, 2008, 2009)
A: Generally, the depositary is not liable for loss through a fortuitous event without his fault. However, according to
Art. 1979, the depositary is liable for the loss of the thing through a fortuitous event:
1. If it is so stipulated;

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MIDTERMS COMPILATION (19977-2015)

2.
3.
4.

10

If he uses the thing without the depositors permission;


If he delays its return;
If he allows others to use it, even though he himself may have been authorized to use the same.

Q: Can the depositary return the thing deposited prior to the expiration of the time designated? Why? (2003)
A: Yes, Art. 1989 of the Civil Code states that if the deposit is gratuitous and the depositary has justifiable reasons for
its return, then the depositary can return the thing deposited prior to the expiration of the time designated. If the
depositor refuses to receive the thing, the depositary may deposit the thing at the disposal of judicial authority. If the
deposit is for a valuable consideration, the depositary has no right to return the thing deposited before the expiration
of the time designated even if he should suffer inconvenience as a consequence. He is bound by the period and
restitution before its expiration constitutes a breach of his obligation.
Q: Discuss the rights of a person to whom negotiable receipt has been duly negotiated. (1998, 1999, 2008,
2010, 2014)
A: (bluebook answer) A person to whom a receipt has been negotiated acquires:
1. The title of the person negotiating the receipt over the goods covered thereby
2. The title of the depositor or possessor to whom the goods are to be delivered
3. The direct obligation to have the warehouseman hold the good in possession covered by the receipt without
the necessity of notifying the warehouseman
Q: Discuss the rights of a person to whom a (non-negotiable) receipt has been transferred. (1998, 2006, 2009,
2010, 2014)
A: (bluebook answer) A person to whom a receipt has been transferred acquires:
1. Such title as against the transferor
2. Right to notify the warehouseman that the receipt has been transferred to him and acquires the direct
obligation to have the warehouseman hold the goods in possession covered by the receipt
3. Right to have the indorsement of the transferor if it was given for value
4. However, the receipt may be subject of garnishment or can be levied upon under execution and may defeat
the rights of the transferee before the receipt is actually negotiated to him by such indorsement.
Q: May a negotiable warehouse receipt be attached? Discuss the reason and exceptions to the rule. (2009)
A: No, unless he surrenders the receipt.
Q: Why is an indorser of a receipt not a guarantor? (2006)
A: Because the only duty of the indorsee is to know that all the previous indorsements are genuine. He shall not be
liable to holder if the warehouseman fails to deliver due to his fault or negligence.
Q: Discuss the advantages of a negotiable warehouse receipt. (1999, 2006, 2007)
A: (PC-AN)

Protects purchaser for value and in good faith

Cannot be garnished/levied, unless surrendered or impounded or enjoined

Holder Acquires direct obligation of warehouseman

Not subject to sellers lien


Q: Discuss the warranties or liabilities of a person negotiating or transferring a receipt? (2000, 2003, 2006,
2007, 2008, 2012, 2014, 2015)
A: (GRK-TM)

Genuine receipt

He has the Right to negotiate

No Knowledge of any fact impairing validity,

Right to Transfer title

Merchantable goods and fit for the particular purpose.

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Q: What are the acts for which a warehouseman may be held liable? (2002)
A: (DNM-CRTS)

Duplicate: failure to stamp

Non-negotiable: failure to indicate

Misdelivery

Cancellation: failure to effect upon delivery

Receipt for non-existing goods/misdescription

Take care (failure)

Sale: failure to give notice of sale to satisfy lien


Q: When is the warehouseman bound to deliver the goods upon demand made either by the holder of a
receipt of by the depositor? (2012)
A: Demand by the depositor accompanied by an offer to: (SSS)

Satisfy warehousemans lien

Surrender receipt

Sign an acknowledgement that they have been delivered


Q: When may interest be charged? What are its exceptions? (2000, 2002)
A: Art. 1956 states that no interest shall be due unless it has been expressly stipulated in writing. However, liability for
interest comes in even in the absence of stipulation when:
1. There is indemnity for damages; or
2. There is interest accruing from unpaid interest where interest due shall earn interest from the time it is
judicially demanded although the obligation may be silent upon this point as stipulated in Art. 2212. This is
only applicable where interest has been stipulated by the parties. Art. 2212 contemplates the presence of
stipulated or conventional interest which has accrued when demand was judicially made. In case where no
interest has been stipulated by the parties, no accrued conventional interest could further earn interest upon
judicial demand.
Q: How is interest payable in kind determined? (1999, 2002, 2008, 2009)
A: According to Art 1958, in the determination of the interest, if it is payable in kind, its value shall be appraised at the
current price of the products or goods at the time and place of payment.
Q: When may the guarantor proceed against the principal debtor even before having paid the debt? (2002,
2006, 2007, 2009, 2014, 2015)
A: (bluebook answer) According to the Civil Code, a guarantor can proceed against the debtor even before paying
when:
1. He is sued for payment by the creditor
2. The principal debtor is insolvent
3. When there is a stipulation that the guaranty shall be relieved after a period of time and such time arrives or
expires
4. When the debt has become demandable, when its maturity has arrived or when the term expires
5. After lapse of 10 years if no period for the maturity or extinguishment of the obligation is provided, unless by
the nature of the obligation, it cannot be extinguished within 10 years.
6. When there is reasonable fear that the debtor will abscond
7. When there is imminent danger that the principal debtor will be insolvent.
The remedy of the guarantor in this case is to be released from guaranty or to be furnished of security to compensate
for the possible loss due to the principal debtors non-payment to him.
Q: Why is the guarantor allowed by law to proceed against the debtor before payment in the above
circumstances? (refer to question above)

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A: The purpose is to enable the guarantor to take measures (to obtain release from the guaranty, or to demand a
security) for the protection of his interest in view of the probability that he would be called upon to pay the debt
through the debtors insolvency or any proceedings by the creditor.
Q: May a guarantor or surety be released by reason of a change in the principal contract? (2002)
A: Yes, according to Art. 2063, any agreement between the creditor and principal debtor which essentially varies the
terms of the principal contract without the consent of the surety, will release the same from liability (also applicable to
guarantors)
Q: Why is a surety considered an insurer of the debt? (2007, 2009)
A: Because liability arises when the principal simply fails or refuses to pay, regardless of solvency.
Q: Why is it said that the guarantor is an insurer of the solvency of the debtor? (2009)
A: Because liability only arises when the principal debtors failure to pay is due to his insolvency, and nothing more.
Q: Discuss the nature of the suretys undertaking. Does the surety make covenant with the principal debtor?
Is he entitled to notice of the principal debtors default? How should a suretyship contract be construed?
(2006)
A: Nature: Contractual, accessory, but direct. Primary liability, solidarily with principal. Limited to terms of contract. No
exhaustion.
No, he is not entitled to notice of principals default.
If there is any doubt on the terms and conditions of the guaranty or surety agreements, the doubt should be resolved
in favor of the guarantor or surety.
Q: How should a contract of guaranty be construed? (2010, 2012, 2015)
A: (bluebook answer) A guaranty is to be construed strictly in favor of the guarantor. Since fguaranty is generally
gratuitous, any argument as to the constitution of the guarantor should be strictly construed against the person
asserting it. The strict construction of a guaranty shall not apply to:
1. Banks. They are to exercise extraordinary diligence
2. Persons who are engaged in guarantying for business since guaranty becomes onerous, it is no longer
necessary to apply the maxim, strictissimi juris.
3. Judicial bondsman or sub-surety since they are constituted by operation of law or by court order.
Q: When is a guarantor not entitled to indemnity or reimbursement? (2008, 2012, 2014, 2015)
A: Generally, a guaranty who pays for a debtor must be indemnified by the latter. The indemnity includes:
1. Total amount of debt
2. Legal interest thereof starting from the time notice of payment of debt was made known to the debtor
3. Expenses incurred by the guarantor that he had to satisfy as a consequence of the guaranty such as judicial
costs and attorneys fees
4. Damages, if they are due
However, there are exceptions to the guarantors right to indemnity or reimbursement. These are:
1. When the guaranty constituted without knowledge or against the will of the debtor, recovery only insofar as
the payment has been beneficial to the debtor (Art. 2050)
2. When payment by a third person who does NOT intend to be reimbursed by the debtor is deemed a
donation, which requires the debtors consent. (Art 1238)
3. When the guarantor waived his right to demand reimbursement.
Q: What is a bondsman? (2002, 2014)

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A: A bondsman is a surety offered in virtue of a provision of law or a judicial order. He must satisfy the qualifications
required of a guarantor in Art 2056.The bondsman must also satisfy qualifications found in the Rules of Court (Sec
12, 13, Rule 114), and other special laws.
Q: Is a judicial bondsman entitled to the benefit of excussion? Why? (2002, 2013)
A: No. A justicial bondsman acts as a surety in compliance with a legal obligation on a judicial order. As a surety, he
is primarily liable in the event of default of the principal obligor. Consequently, he is an insurer of the debt and not the
solvency of the principal. Be that as it may, it is not necessary that the creditor exhaust all the properties of the debtor
before he can claim payment from the bondsmand, Thus, a bondsman is not entitled to the benefit of excussion.
Q: Discuss the obligations of the capacitated depositary to incapacitated depositor. (2010, 2012)
A: Art. 1970 states that if a person having capacity to contract accepts a deposit made by one who is incapacitated,
the former shall be subject to all the obligations of a depositary, and may be compelled to return the thing but the
guardian, or administrator, of the person who made the deposit, or by the latter himself if he should acquire capacity.
People who are capable cannot allege the incapacity of those with whom they contract.
Q: Discuss the obligations of the incapacitated depositary to a capacitated depositor. (2010)
A: The incapacitated depositary does not incur the obligations of a depositary. However, Art. 1971 of the Civil Code
states if the deposit has been made by a capacitated person with another who is not, the depositor shall only have an
action to recover the thing deposited while it is still in the possession of the depositary, or to compel the latter to pay
him the amount by which he may have enriched or benefitted himself with the thing or its price. Furthermore, if a third
person who acquired the thing acted in bad faith, the depositor may bring an action against him for its recovery.
Q: Discuss the obligations of the depository with respect to choses in action deposited. (2010)
A: Generally, the depositary may not change the way of deposit. However, the depositary may change the way of the
deposit if it can be presumed that the depositor would consent to the same. Here, the depositary should first notify the
depositor and wait for the latters decision. If the same would cause delay and danger to the object deposited,
consent from the depositor need be given before depositary may change the way of the deposit, but the depositary
should notify the depositor of the same after the change has been made. Furthermore, if the object is sealed or
locked, the depositary may open the thing if he was given the key and authorized to do so, or if the instructions if the
depositor cannot be fulfilled without opening the same.
Q: Discuss the obligations of the depositary with respect to a thing delivered closed and sealed. (2010, 2012,
2013)
A: (bluebook answer) When the thing delivered is closed and sealed, the depositary is obligated to:
1. Deliver the thing deposited in the same condition as it was received (i.e. closed and sealed)
2. Be liable for damages in case the lock or seal is broken through his fault which is presumed unles proven
otherwise.
3. Keep the secret of the thing deposited whether or not the seal was broken through his fault.
Q: On April 15, 2013, Marlon borrowed One Million (PHP 1,000,000.00) from William at an interest rate of to
(2%) percent per month payable one (1) year from date, William chose Richard to be the guarantor for the
obligation. On maturity date, Marlon failed to pay. William now demands payment from Richard. Can Richard
be made to pay? Reasons. (2014)
Q: On January 14, 2014, Marc borrow Two Million (PHP 2,000,000.00) Pesos from William at an interest rate of
three (3%) percent per month payable one (1) year from date. William required Marc to mortgage his Hidalgo
condominium unit in his favor. Likewise, he also chose August to be the guarantor for the obligation. On
maturity date, Marc defaulted. William now demands payment from August. Can August be made to pay?
Decide with reasons. (2015)
A: (bluebook answer)
ART. 2058. The guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the proper- ty
of the debtor, and has resorted to all the legal remedies against the debtor.

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Answer: Guarantor only secondarily liable. This rule arises from the character of the contract of guaranty which is
accessory and subsidiary. All legal remedies against debtor to be first exhausted. To warrant recourse against the
guarantor for payment, it may not be a sufficient reason that the debtor appears insolvent. The insolvency may be
simulated. The law requires the creditor to resort to all legal remedies against the debtor including the bringing of
actions for the rescission of fraudulent alienations of property made by the debtor. (see Arts. 1177, 1380[3], 1387.)
This is what is otherwise known as the benefit of excussion.
It has been held, however, that the creditor may, prior to exhaustion, secure a judgment against the guarantor, who
shall be entitled, however, to a deferment of the execution of said judgment against him, until after the properties of
the principal debtor shall have been exhausted, to satisfy the latters obligation.
Bluebook Answer: Yes. Richard can be made to pay for the obligation of Marlon. Upon demand of William, Richard
can set up the benefit of excussion or exhaustion of the property of Marlon. If proven that William exhausted all the
properties of Marlon and resorted to all legal remedies available to him but to no avail, he can then collect on demand
payment from Richard for the value of the obligation at the time of maturity which includes the principal and interest
accrued for one year.
The fact that it was William, the creditor who chose richard to be the guarantor will not release richard from his liability
as a guarantor. According to the Civil Code, when one is required to furnish a guarantor, the latter should be with
integrity, of capacity to act, or oblige himself, and has sufficient property to cover the obligation. Theres no proof that
Richard lacks any of these qualification. The only difference in this case was that it was the creditor who chose the
guarantor. But according to thecivil code the effects of which is only to disallow the creditor to demand a new
guarantor when the latter is convicted of crimes of dishonesty in fact instance or became insolvent. Since there is no
proof as to the last two, Richard can be made to pay.

Q: (a) Why is it said that the guarantor is not an insurer of the debt guaranteed? Reasons. (2014)
A: (bluebook answer) According to the Civil Code, when one person, called the guarantor, binds himself with the
creditor to pay the obligation of the principal debtor in case the latter cannot do so, a contract of guaranty is created.
From the very word of the law, the guarantor is only secondarily liable to the obligation of the principal debtor, such
that, he is only liable to pay when the principal debtor cannot. Hence, a guarantor is an insurer of solvency and not of
debt. If he has other properties to satisfy the debt, the law provides that the principal debtors property must first be
exhausted and other legal remedies must first be resorted to in order to make the guarantor liable. It is the surety who
is an insurer of debt since a surety is primarily liable, solidarily with the principal debtor such that hen the latter does
not pay whether or not he has other properties, the surety can be held liable.
Q: On January 2, 2009, Arnel borrowed from Toto twenty (20) sacks of Basmati rice payable one (1) year
thereafter. At that time, the price per sack was PHP 2,000.00. On the due date of the loan, Arnel could not find
the same kind of rice because of lack of importation. How should Arnel pay Toto? (2010)
Q: Mark borrowed from Joseph ten (10) bags of Basmati rice. At the time of the perfection of the loan, the
price of each bag was PHP 500.00. On the due date of the loan, Mark could not find any Basmati rice due to
difficulty of importation. How should Mark pay Joseph? Reasons. (2014)
A: (bluebook answer) Generally, in contract of loan involving other fungible things aside from money, the borrower
shall pay the same kind, quality and quantity of goods, even if the value of the goods may have changed. However, if
payment of goods be impossible, the borrower must pay the lender the value of the thing at the time of the perfection
of contract. Hence, in this case, since Mark could not find any Basmati rice, he should pay Joseph PHP 5,000.00
which is PHP 500.00 each for the ten bags of Basmati rice.
Q: Jose is a collector of vintage watches. Since he would be travelling to Switzerland to attend an
international exhibition of vintage watches, he deposited his collection to Toto. While in Switzerland, Jose
had an accident and developed amnesia. How should Toto now return the deposit? Reasons. (2014)
A: (bluebook answer) According to the Civil Code, when the depositor becomes incapacitated during the term of the
deposit, the depositary is obliged to return the thing deposited to the administrator of the property of the depositor.
According to the Civil Code, a person is incapacitated when could not bind himself or could oblige himself to certain
obligations. A person with amnesia is not necessarily incapacitated as he can still do acts with binding effects.
However, as regards previous obligations contracted by Jose such as the contract of deposit, Toto should return the
watches still with Jose as amnesia is not one of the causes of incapacity. However, if proven that the accident

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affected his discernment, equity would suggest that the things should be delivered to Joses administrator of property
if proven to be incapacitated.
Q: Discuss the nature of a deposit made on the occasion of a calamity. What are the rights and obligations of
the parties thereto. (2014)
ART. 1996. A deposit is necessary:
(2) When it takes place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck, or other similar
events.
ART. 1997. The deposit mentioned in No. 2 of the preceding article shall be regulated by the provisions concerning
voluntary deposit and by Article 2168.
ART. 2168. When during a fire, flood, storm or other calamity, property is saved from destruction by another person
without the knowledge of the owner, the latter is bound to pay the former just compensation.
A: In this type of necessary deposit, the possession of movable property passes from one person to another by
accident or fortuitously through force of circumstances and which the law imposes on the recipient the obligations of a
bailee. Here, the more immediate object is to save the property rather than its safekeeping. Such a quasi-bailment is
ordinarily distinguished by the name involuntary bailment or involuntary deposit. (see 6 Am. Jur. 177.) There must be
a causal relation between the calamity and the constitution of the deposit.
Aside from the provisions concerning voluntary deposit, this kind shall be governed by Article 2168. The depositary is
bound to pay the depositor just compensation. Article 2168 establishes a quasi-contract.

Q: When does judicial deposit take place? (2014)


A: A judicial deposit takes place when an attachment or seizure of property in litigation is ordered by a court. (Art.
2005.)

Q: Marlon lent his vintage Jaguar to Richard so that the latter may participate in vintage car racing
sponsored by the Manila Sports Car Club. Marlon did not advise Richard that the Jaguars brake was not
functioning properly. Richard met an accident during the race and suffered bodily injuries which
necessitated hospitalization at Makati Medical Center for one (1) week. Richard filed a case against Marlon
for damages. Decide with reasons. (2015)
A: (bluebook answer) The law provides that the bailee may seek for indemnity from the bailor when the bailor with
knowledge of hidden defects of a thing lent, did not advise the bailee of such defects and the bailee incurred
damages or suffered from such. In the case at bar, Richard has a right to file a case against Marlon for damages and
he must be awarded for such because, from the facts of the case, it can be concluded that Marlon, knowing that the
Jaguars brake was not functioning, did not advise Richard of this hidden defect and consequently, Richard met an
accident which caused him to be hospitalized for one week. Thus, damages must be awarded to Richard.
Q: Joseph borrowed from Bong P100 million. Considering that Joseph is a childhood friend of Joel (a
billionaire), Joel agreed to guarantee Josephs obligation for P150 million. On maturity date, Joseph failed to
pay. After a lengthy litigation, Bong finally obtained judgment against Joel for the guaranty. How much
should Joel pay and why? (2010)
A: (bluebook answer) Joel should only pay Bong P100 million. The Civil Code provides that a guarantor may bind
himself to the creditor for loss, but not for more than the principal obligation. In the case at bar, the principal obligation
of Joseph is only P100 million, while Joel bound himself to the extent of P150 million. Joel can only bind himself for
P100 million or less. He cannot bind himself to guarantee P150 million, which is P50 million more than the principal
obligation of P100 million. The stipulation making Joel liable for the P50 million in excess of the principal obligation is
void. Hence, Joel should only pay Bond P100 million.
Q: Discuss the liability of the warehouseman for the non-existence or misdescription of the goods. (2009)
A: Warehouseman is obliged to deliver the identical property stored with him. Failure to do so makes the
warehouseman liable to the holder of the receipt for damages caused by the non-existence of goods or
misdescription.
Exception: Misdescription with ff conditions:

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When the goods in the receipt are described by merely a statement of marks or labels on the
goods.

When the goods in the receipt are described based on packaging containing them.

When the goods in the receipt are described by statement that the goods are said to be goods of a
certain king or that the packaging containing the goods are said to contain goods of a certain kind,
or by words of like import, is such statements were true (despite misdecription), then
warehouseman not liable.
Against a bona fide purchaser of a warehouse receipt, warehouseman is ESTOPPED to deny that he received the
goods described in it
Q: Enumerate the warranties on the sale of a receipt. (2009)
.
That the receipt is genuine
.
That he has a legal right to negotiate or transfer it
.
That he has knowledge of no fact which would impair the validity of the worth of the receipt
.
That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular
purpose, whenever such warranties would have been implied, if the contract of the parties had been to
transfer without a receipt of the goods represented thereby.
Q: Joseph deposited his vintage omega watch to his cousin Arnel who would be turning 18 years old on
September 18. Arnel, needing cash to redeem his cell phone from Ablaza Pawnshop, sold the vintage watch
to Bong. Can Joseph recover his watch from Bong? Decide with reasons. (2009)
Art. 1971 If the deposit has been made by a capacitated person with another who is not, the depositor shall only have
an action to recover the thing deposited while it is still in the possession of the depositary, or to compel the latter to
pay him the amount by which he may be enriched or benefited himself with the thing or its price. However, if a third
person who acquired the thing acted in bad faith, the depositor may bring an action against him for its recovery.
A: The incapacitated depositary (like a minor or an insane person) does not incur the obligation of a depositary. If
Bong acted in bad faith, Joseph may recover the watch from him. But if Bong acted in good faith, Josephs only
recourse is against Arnel to compel him to return the price received for the watch or the amount by which he may
have benefited himself.

Q: When may accrued interest earn interest? (2009)


Art. 1959 Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest. However,
the contracting parties may by stipulation capitalize the interest due and unpaid, which as added princi- pal, shall
earn new interest. (n)
A: When judicially demanded as provided for in Article 2212 & When there is an express stipulation made by the
parties. This practice is called compounding interest and it is allowed by the Usury Law if there is express stipulation.
he stipulation as to compound interest must be in writing. (Nolan vs. Majinay, 12 Phil. 559 [1909].)
Q: Why is the rule of strict construction not applicable to compensated sureties? (2013)
A: The rule of strictissimi juris, ordinarily applied in relief of an individual surety, is not applied in case of compensated
sureties. The presumption indulged in by the law in favor of guarantors was premised on the fact that guarantees
were originally gratuitous obligations, which is not true at present, at least in the great majority of cases. The surety
bond must be read in its entirety and together with the principal contract. Any ambiguity in the surety bond should be
interpreted against the surety company that prepared it. (Jurisprudence)

Q: Glen borrowed from EJ P3m. Ronnie, a good friend of Glen, agreed to guarantee the obligation without the
knowledge of Glen. On maturity date, Glen defaulted. After EJ was able to exhaust all the properties of Glen,
Ronnie finally paid Glens obligations. Can Ronnie collect from Glen? Discuss with reasons. (2013)
ART. 2050. If a guaranty is entered into without the knowledge or consent, or against the will of the principal debtor,
the provisions of Articles 1236 and 1237 shall apply

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A: A person who pays without the knowledge or against the will of the debtor can recover only insofar as the payment
has been beneficial to the debtor (Art. 1236.) and he cannot compel the creditor to subrogate him in his (creditors)
rights, such as those arising from a mortgage, guaranty or penalty. (Art. 1237.)

Q: What are the exceptions to the right of guarantor to indemnity? (2012)


A:
(1) Where the guaranty is constituted without the knowledge or against the will of the principal debtor, the guarantor
can recover only insofar as the payment had been beneficial to the debtor.
(2) Payment by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation,
which, however, requires the debtors consent. But the payment is in any case valid as to the creditor who has
accepted it. (Art. 1238.)
(3) The right to demand reimbursement is subject to waiver.

Q: What is the liability of the depositary if he loses the thing by force majeure or government order? (2011)
Art. 1990. If the depositary by force majeure or government order loses the thing and receives money or another
thing in its place, he shall deliver the sum or other thing to the depositor.
A: He is not liable for loss of the thing by force majeure or by government order. However, if in place of the thing he
receives money or another thing, he has the duty to deliver to the depositor what he has received otherwise, he
would enrich himself at the expense of the depositor.