CREDIT TRANSACTIONS

COMMODATUM
Defined as a contract by virtue of which one of the contracting parties deliver to the other a non-
consumable (non-fungible) thing so that the latter may use the same for a certain time and return it.
MUTUUM
Mutuum or Simple Loan is defined as a contract by virtue of which one of the contracting parties delivers to
the other money or any other consumable (fungible) thing subject to the condition that the same
amount of the same kind and quality be paid or returned.
COMMODATUM V. MUTUUM
CATEGORY COMMODATUM MUTUUM
As to Object Non-Consumable Thing Object is money or any
consumable (fungible) thing
As to Cause Essentially Gratuitous May or may not be Gratuitous

As to Purpose Loan for Use Loan for Consumption

As to Transmission of Ownership
As to what must be returned
The bailor retains the ownership Ownership passes to the Debtor
of the thing loaned
Bailee must return the specific The debtor must pay or return an
thing loaned equal amount of the same kind
and quality

CONTRACT OF LOAN, REAL OR CONSENSUAL

It is real because it is not perfected until after the delivery of the thing which constitutes the subject matter
of the contract. | Real Contract – give the specific thing to the lender
CONTRACT PERFECTED UPON THE RELEASE OF MONEY OR UPON SIGNING OF THE CONTRACT
The contract of loan is not a consensual contract but a real contract which is perfected only upon the
delivery of the object of the contract. Hence, the contract is perfected at the time of the release of the
loan. A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is
the consideration for that of the other.
It is a basic principle in reciprocal obligations that neither party incurs in delay, if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon him. (Art. 1169, NCC.)
Only when a party has performed his part of the contract can he demand that the other party also fulfills
his own obligation. If the latter fails, default sets in. Consequently, the creditor could only demand for the
payment of the monthly amortization after the release of the loan, for it was only then when it complied
with its obligation under the loan contract.
COMMODATUM V. LEASE
CATEGORY COMMODATUM LEASE
Type of Contract Real Contract Consensual Contract

As to Object Non-Consumable Thing Work, Thing or Service

As to Cause Essentially Gratuitous Not Gratuitous

MUTUUM V. LEASE
CATEGORY COMMODATUM LEASE
As to Relationship Created The relationship which is created Lessor – Lessee | Landlord –
is that of creditor and debtor Tenant

As to Object Any Consumable Thing Work, Thing or Service

As to Transfer of Ownership The thing loaned becomes the The object of the lease does not
property of the debtor become the property of the
lessee

WHEN BAILEE LIABLE FOR LOSS OF THE THING EVEN IF IT IS DUE TO A FORTUITOUS EVENT
BAILOR – the giver, one who delivers the possession or the custody of the thing bailed
BAILEE – the recipient, the party who receives the possession or custody of the thing thus delivered.
The bailee is liable for the loss of the thing, even if it should be through a fortuitous event:
(1) If he devotes the thing to any purpose different from that for which it was loaned
(2) If he keeps it longer than the period stipulated, or after the accomplishment of the use for which
the commodatum has been constituted;
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation
exempting the bailee from responsibility in case of a fortuitous event;
(4) If he lends or leases the thing to a third person, who is not a member of his household;
(5) If, being able to save either the thing borrowed or his own thing, he chose to save the latter.

CONTRACT OF PECARIUM
A contract of pecarium is a contract of commodatum where the bailor has the right to demand the
return of the thing which is the object of the contract at will.
This takes place in the following cases:
1) If neither the duration of the contract nor the use to which the thing loaned should be devoted has
been stipulated; or
2) If the use of the thing should be merely tolerated.
Note: Article 1956. No interest shall be due unless it has been expressly stipulated in writing.
RULES ON INTEREST
GENERAL RULE: There is no interest if there is no written agreement for the same . Hence,
informal loans that usually impose exorbitant, sky-high interests which are not in writing. These are
unenforceable for lack of a written agreement,
Interest can still be imposed despite the lack of Agreement if:
The obligation is breached, and it consists in the payment of a sum of money.
If there is no stipulation, the legal interest which is 6% per annum shall apply. This is what is known as
compensatory interest which is imposed against the borrower by reason of his default. Under Article
2210 of the Civil Code, interest may also be allowed on damages awarded for breach of contract
INTEREST CAN ITSELF EARN INTERESTY
The interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 6% per annum to be computed from default, from the time of
judicial or extrajudicial demand.
The Monetary board lowered such legal or default interest from 12% to 6% per annum for the loan or
forbearance of any money, goods or credits, and the rate allowed in judgments starting July 1, 2013
onwards.
REMEMBER
GENERAL RULE: INTEREST MUST BE IN WRITING
 If the parties have agreed on the amount of interest payable on the loan, that agreement is binding
on them.
 In the absence of such agreement, from the time of default, the interest due is 6% per year.
 From the time of final judgment, forbearance of money or credit shall itself earn interest if the
debtor still fails to pay despite the final order or judicial demand.
USURIOUS INTEREST IN A LOAN TRANSACTION
The entire obligation in usurious loans does not become void because of an agreement for usurious
interest, the unpaid principal debt still remains valid but the stipulation as to the interest becomes void.
In a simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt,
which is the cause of the contract is not illegal. The illegality lies only as to the prestation to pay the
stipulated interest. Hence being separable, only the latter should be deemed void, since it is the only one
that is illegal.
DEPOSIT
A deposit is that which is constituted from the moment a person receives a thing belonging to another with
the obligation of safely keeping it and of returning the same.
It may be either judicial or extra-judicial.
Judicial when it is so constituted by virtue of a court order for the attachment or seizure of property in
litigation. Extrajudicial when it is not so constituted.
TYPES OF EXTRA-JUDICIAL DEPOSITS
1. Voluntary deposit is that which is effected by the will of the depositor.
2. Necessary deposit is that which is effected in compliance with a legal obligation, or on the
occasion of any calamity, or by travelers in hotels or inns with regard to their effects, or passengers
in common carriers.
COMMODATUM V. DEPOSITUM
COMMODATUM DEPOSITUM
The main purpose is the use of the thing The main purpose is the safekeeping of the thing

The object, as a general rule, must be a non- The nature or class of the object of the contract is
consumable (non-fungible) thing. immaterial.
Essentially gratuitous May or may not be gratuitous

Constituted extra-judicially only May be constituted judicially or extra-judicially

JUDICIAL V. EXTRA JUDICIAL DEPOSIT

JUDICIAL DEPOSITS EXTRA-JUDICIAL DEPOSITS
Constituted by virtue of a court order Constituted by will of the contracting parties

The object may be a movable or immovable Object is Movable Property only

property
The main purpose is to secure or protect the The main purpose is safekeeping of the property
owner’s right.
 Always onerous Generally, gratuitous

Thing is returned only upon order of the court The depositary is obliged to return the thing
deposited upon demand made by the depositor.
STANDARD OF CARE
1. Degree of care ordinarily, the depositary must exercise over the thing deposited the same diligence
as he would exercise over his property. General rule applies unless another standard of care is
provided.
a. Because it is an essential requisite of the judicial relation which involves the depositor’s
confidence in good faith and trustworthiness.
b. Presumption that the depositor in choosing the depositary took into account the diligence
which the depositary is accustomed with respect to his own property
Note: Lesser Standard of Care is possible as long as it is agreed upon by the parties
DEPOSTIOR NEED NOT PROVE OWNERSHIP
The depositary who receives the thing in deposit cannot require that the depositor prove his ownership
over the thing.
Where 3rd person appears to be the owner
Should the depositary discover that the thing has been stolen and who its true owner is, he must advise
the latter of the deposit.
If the owner, in spite of such information, does not claim it within the period of one month, the
depositary shall be relieved of all responsibility by returning the thing deposited to the depositor.
If the depositary has reasonable grounds to believe that the thing has not been lawfully acquired by the
depositor, the former may return the same.
Note: Deposits, savings accounts and currency deposits in banks and other similar institutions are
classified as deposits as contracts of mutuum.
RENT OF SAFE DEPOSIT BOXES
The contract for rent of safety deposit boxes is not an ordinary contract of lease of things because the full
and absolute possession and control of the safety deposit box is not given to the party renting.
It is actually a special kind of deposit. It is a contractual relation between the parties. The liability rules are
governed by the Civil Code provisions on obligations and contract, and not on donations.

DEPOSITARY LIABLE FOR LOSS THROUGH A FORTUITOUS EVENT

The depositary is liable for the loss of the thing through a fortuitous event:
(1) If it is so stipulated;
(2) If he uses the thing without the depositor’s permission;
(3) If he delays its return;
(4) If he allows others to use the same
TO WHOM SHALL THE RETURN BE MADE BY THE DEPOSITARY
1. The depositary is obliged to return the thing deposited when required, to the depositor, to his heirs
and successors, or to the person who may have been designated in the contract.
2. If the person was incapacitated at the time of making the deposit, the property must be returned to
his guardian or administrator or the person who made the deposit or to the depositor himself
should he acquire capacity.
3. Even if the depositor had capacity at the time of making the deposit but he subsequently loses his
capacity during the deposit, the thing must be returned to his legal representative.
DEPOSITARY NOT OBLIGED TO RETURN THE PROPERTY
 1. When the thing has been judicially attached while in the depositary’s possession.
2. When he has been notified of the opposition of a third person to the return or removal of the thing
deposited.
DEPOSITARY’S RIGHT OF RETENTIION
1. When he is still not yet paid for expenses related to the safekeeping of the thing deposited.
2. The thing retained serves as security for payment of what may be due to the depositary by
reason of the deposit.
3. Another remedy is for the Depositary to foreclose through public auction
CONTRACT OF DEPOSIT EXTINGUISHED
A deposit is extinguished:
1. Upon the loss or destruction of the thing deposited.
2. In case of a gratuitous deposit, upon the death of either the depositor or the depositary.
Note:
1. Deposit gratuitous – if the deposit is gratuitous, the death of either the depositor or depositary
extinguishes the deposit.
2. Deposit onerous – a deposit for a compensation isn’t extinguished by the death of either party
because unlike a gratuitous deposit, an onerous deposit isn’t personal in nature. Hence. The rights
and obligations arising therefrom are transmissible to their respective heirs. But the heirs of either
party have a right to terminate the deposit even before the expiration of the term.