REY ALMON T.

ALIBUYOG
JD-II

CREDIT TRANSACTIONS

What is credit? b) Gratuitous- there is no consideration or burden imposed.

It is a person’s ability to borrow money by virtue of confidence or trust
reposed in him by the lender that he will pay what he may promise.
What is credit transaction?
It refers to agreement based on trust or belief of someone on the ability of
another person to comply with his obligations.
What is bailment?
It may be defined as the delivery of property of one person to another in trust for a specific
purpose, with a contract, express or implied, 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.

What do credit transactions include? Creation of Bailment.

It include all transactions involving loans of foods, services or money In general, bailment may be said to be a contractual relation. To be legally enforceable, it must
extended to another either gratuitously or onerously with a promise to pay or contain all the elements of a valid contract.
deliver in the future.
Parties in bailment.
What is security? 1. Bailor- the giver; the party who delivers the possession or custody of the thing bailed; and
It is something given, deposited, or serving as a means to ensure the 2. Bailee- the recipient; the party who recieves the possession or custody of the thing thus
fulfillment or enforcement of an obligation or of protecting some interest in delivered.
the property.
Kinds of contractual bailment.
What are the types of security? 1. For the sole benefit of the bailor (gratuitous)
Personal: when an individual becomes a surety or a guarantor. a) Gratuitous deposit
Real or property: when an encumbrance is made on property. b) Commodatum
2. For the sole benefit of the baille (gratuitous)
Kinds of credit transactions a) Commodatum
1. As contracts of security b) Mutuum
a) Contracts of real security- supported by collateral/s or burdened by 3. For the benefit of both parties
an encumbrance on property such as mortgage and pledge a) Involuntary deposit
b) Contracts of personal security- the performance by the principal b) Pledge
debtor is not supported by collateral/s but only a promise to pay or c) Bailments for Hire
by the personal undertaking or commitment of another person
such as in surety or guaranty. Kinds of Bailment for Hire
2. As to their existence 1. Hire of things- where good are delivered for the temporary use of the hirer (lease);
a) Principal contracts- existence does not depend on the existence of 2. Hire of service- where goods are delivered for some work or labor upon it by the bailee
another contract. (commodatum and mutuum) (contract for a piece of work);
b) Accessory contracts- depend on the existence of a principal 3. Hire for carriage of goods- where goods are delivered either to a common carrier or to a private
contract of loan. (guaranty, suretyship, pledge, mortgage and person for the purpose of being carried from place to place; and
antichresis) 4. Hire of custody- where goods are delivered for storage.
3. As to their consideration
a) Onerous- there is consideration or burden imposed like interest. LOAN
REY ALMON T. ALIBUYOG
JD-II

CREDIT TRANSACTIONS

Commodatum vs Mutuum
What is loan?
By the contract of loan, one of the parties delivers to another, either COMMODATUM MUTUUM
something not consumable so that the latter may use the same for a certain Involves something not consumbale The subject matter is money or other
time and return it, in which case the contract is called a commodatum; or consumable thing
money or other consumable thing, upon the condition that the same amount Ownership of the thing loaned is Ownership is transferred to the
of the same kind and quality shall be paid, in which case the contract is retained by the lender borrower
simply called mutuum. Essentially gratuitous May be gratuitous or onerous (with
Commodatum is essentially gratuitous. interest)
Simple loan may be gratuitous or with a stipulation to pay interest. The borrower must return the same The borrower need only pay the
In commodatum, the bailor retains the ownership of the thing loaned, thing loaned same amount of the same kind and
while in simple loan, ownership passes to the borrower. quality
Involve real or personal property Refers only to personal property
CHARACTERISTICS It is a loan for use or temporary It is a loan for consumption
1. Real contract- delivery of the thing loaned is necessary for the perfection possession
of the contract. The bailor may demand the return of The bailor may not demand its return
2. Unilateral contract- once the subject matter has been delivered, it creates the thing loaned before the before the lapse of the term agreed
obligations on the part of only one of the parties (borrower) expiration of the term in case of upon
urgent need
CAUSE OR CONSIDERATION The loss of the subject matter is The borrower suffers the loss even if
1. As to the borrower- the acquisition of the thing suffered by the bailor since he is the caused exclusively by a fortuitous
2. As to the lender- the right to demand its return or its equivalent. owner event and he is not, therefore,
discharged from his duty to pay
KINDS OF LOAN Purely personal Not personal
1. Commodatum- where the bailor (lender) delivers to the bailee
(borrower) a non-consumable thing so that the latter may use it for a
Delivery essential to perfection of loan
certain time and return the identical thing; and
An accepted promise to deliver something by way of commodatum or simple loan is binding
2. Simple loan- where the lender delivers to the borrower money or
upon the parties, but the commodatum or simple loan itself shall not be perfected until the
other consumable thing upon the condition that the latter shall pay the
delivery of the object of the contract.
same amount of the same kind and quality.
COMMODATUM
Consumable and non-consumable things
A thing is consumable when it cannot be used in a manner appropriate
Kinds
to its nature without being consumed (rice, gasoline, money, fruit, firewood,
1. Ordinary commodatum- bailor cannot just demand the return of the thing at will, because there
etc.).
is a period agreed upon by the parties.
A non-consumable thing is a movanle thing that which can be used in a
2. Precarium- one whereby the bailor may demand the thing loaned at will in the following cases:
manner appropriate to its nature without it being consumed (car, television,
a) If the duration of the contract had not been stipulated;
radio).
b) If the use to which the thing loaned should be devoted had not been stipulated; or
REY ALMON T. ALIBUYOG
JD-II

CREDIT TRANSACTIONS

c) If the use of the thing is merely be tolerance of the bailor. C. If the thing loaned has been
delivered with appraisal of its value,
ELEMENTS OF COMMODATUM unless there is a stipulation
1. Bailor and bailee; D. If he lends or leases the thing to a
2. Bailee cquires the use of the thing; third person who is not a member of
3. It must be gratuitous. his household;
E. If being able to save either the
SUBJECT OF COMMODATUM thing borrowed or his own thing, he
GR: the subject matter of commodatum must be non-consumable chose to save the latter
because the thing must be returned. As to the deterioration of the thing Not liable for the deterioration of the
XPN: consumable goods may be the object of commodatum if the loaned thing loaned caused by the ordinary
purpose is not to consume them such as when they were merely for wear and tear of the thing loaned
exhibition purposes. After which, the same and identical goods shall be When there are two or more bailees,
returned to the lender or bailor. their liability is solidary.

OBJECT OF COMMODATUM RIGHTS OF A BAILEE

Both movable and immovable property may be the object of commodatum
PURELY PERSONAL CHARACTER OF COMMODATUM
Commodatum is purely personal in character. Consequently:
1. The death of either the bailor or the bailee extinguishes the contract;
2. The baille can neither lend nor lease the object of the contract to a
third person. However, the members of the bailee’s household may make
use of the thing loaned, unless there is a stipulation to the contrary, or
unless the nature of the thing forbids such use.
OBLIGATIONS OF THE BAILEE
As to ordinary expenses Pay for the ordinary expenses for the
use and preservation of the thing
As to the loss of the thing in case of A. If he devotes the thing to any
fortuitous event purpose different from that for which
it has been loaned;
B. If he keeps it longer than the
period stipulated, or after the
accomplishment of the use for which
the commudatum has been
constituted;
1. Use of the thing;
2. Make use of the fruits of the thing when such right is stipulated in the contract;
3. Not answerable for the deterioration of the thing loaned due to the use thereof and without his
fault;
4. Right of retention for damages due to hidden defects or flaws of the thing of which he was not
advised by the bailor.
OBLIGATIONS OF THE BAILOR
1. Allow the bailee the use of the thing loaned for the duration of the period stipulated or until the
accomplishment of the purpose;
2. Refund the extraordinary expenses the bailee incurred for the preservation of the thing;
a) GR: the bailee must bring to the knowledge of the bailor such expenses before incurring
the same.
b) XPN: in case there is urgency and delay would cause imminent danger.
3. To be liable for damages for known hidden defects;
4. Cannot exempt himself from payment of expenses or damages by abandonment of the thing to
the bailee.
RIGHTS OF A BAILOR
GR: Cannot demand the return of the thing loaned anytime he pleases.
XPNs:
A. in case of urgent need by the bailor;
REY ALMON T. ALIBUYOG
JD-II

CREDIT TRANSACTIONS

B. In case of precarium;
C. If the bailee commits an act of ingratitude to the bailor.

MUTUUM

MUTUUM DEFINED
A contract whereby one of the parties delivers to another money or other
consumable thing with the understanding that the same amount of the same
kind and quality shall be paid.

CHARACTERISTICS
1. Borrower acquires ownership of the thing;
2. If the thing loaned is money, payment must be made in the currency
which is legal tender in the Philippines and in case of extraordinary deflation
or inflation, the bases of payment shall be the value of the currency at the
time of the creation of the obligation;
3. If fungible thing was loaned, the borrower is obliged to pay the lender
another thing of the same kind, quality and quantity.

REQUISITES FOR RECOVERY OF INTEREST

1. The payment of interest must be expressly stipulated;
2. The agreement must be in writing; and
3. The interest must be lawful.