REVIEWER IN CREDIT TRANSACTIONS
Contracts of Real Security
By: Luis Raphael Capulong
Introduction
Meaning and Scope of Credit Transactions
1.
- It includes all transactions involving the purchase or
loan of goods, services, or money in the present with
a promise to pay or deliver in the future.
2.
- By the use of credit, more exchanges are possible,
persons are able to enjoy a thing today but pay for it
later, and through the banking system, actual money
transfer is eliminated by cancellation of debts and
credits
3.
- A credit transaction may consist of a principal
contract and contracts of security.
- Types of Credit Transaction:
a) Secured transactions or contracts of real security
- Those supported by collateral or an encumbrance of
property or some security intended to secure the
fulfillment of the principal obligation.
b) Unsecured transactions or contracts of personal
security.
- Those the fulfillment of which by the principal
debtor is secured or supported only by a promise to
pay or the personal commitment of another such as a
guarantor or surety.
4.
- Bailment contracts, together with the other related
subjects such as usury the contracts of guaranty and
suretyship, mortgage, antichresis, and concurrence
and preference of credits all make up the so-called
“credit transactions.”
Meaning and kinds of security
- The term security is something given, deposited, or
serving as a means to ensure the fulfillment or
enforcement of an obligation or of protecting some
interest in property.
- Contracts of Security are either Personal or Real:
1. Contract of Personal Security
- In this contract the faithful performance of the
obligation by the principal debtor is secured by the
personal commitment of another.
Ex: Guaranty and Suretyship
2.
-The fulfillment of the obligation is secured by an
encumbrance of property.
Contracts of Real Security
- In contracts of real security, such as a pledge, a
mortgage or an antichresis, that fulfillment is secured
by an encumbrance of property — in pledge, the
placing of movable property in the possession of the
creditor; in chattel mortgage, by the execution of the
corresponding deed substantially in the form
prescribed by law; in real estate mortgage, by the
execution of a public instrument encumbering the real
property covered thereby; and in antichresis, by a
written instrument granting to the creditor the right
to receive the fruits of an immovable property with
the obligation to apply such fruits to the payment of
interest, if owing, and thereafter to the principal of his
credit — upon the essential condition that if the
obligation becomes due and the debtor defaults, then
the property encumbered can be alienated for the
payment of the obligation, but that should the
obligation be duly paid, then the contract is
automatically extinguished proceeding from the
accessory character of the agreement
Meaning of Bailment
- The word “bailment” comes from the French word
“bailler,” meaning “to deliver.”
- It signifies a situation which one person holds
personal property, the ownership of which is in
another.
- Ownership and Possession are separate. The person
with possession is under the obligation to return the
same goods, wither in the same or in altered form to
the owner or dispose of them for his benefit, when
the purpose of the bailment shall have been
accomplished.
- Not all transactions in which there is a separation of
title and possession are bailments.
Creation of Bailment