Professional Documents
Culture Documents
Issue:
WON there is a perfected consensual contract?
Held:
YES. There was a perfected consensual contract, as recognized in Article 1934 of the Civil Code.
Article 1934.: An accepted promise to deliver something by way of commodatum or
simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be
perfected until delivery of the object of the contract.
There was undoubtedly offer and acceptance in the case. The application of Saura, Inc. for a loan
of P500,000.00 was approved by resolution of the defendant, and the corresponding mortgage was
executed and registered. The defendant failed to fulfill its obligation and the plaintiff is therefore entitled
to recover damages. When an application for a loan of money was approved by resolution of the
respondent corporation and the responding mortgage was executed and registered, there arises a perfected
consensual contract.
However, it should be noted that RFC imposed two conditions (availability of raw materials and
increased production) when it restored the loan to the original amount of P500,000.00. Saura, Inc.
obviously was in no position to comply with RFC’s conditions. So instead of doing so and insisting that
the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled.The action thus
taken by both parties was in the nature of mutual desistance which is a mode of extinguishing obligations.
It is a concept that derives from the principle that since mutual agreement can create a contract, mutual
disagreement by the parties can cause its extinguishment.