Credit 2nd meeting 030521

Credit

- The ability to borrow money by virtue of a trust reposed by the lender to the borrower that the
latter will return it
- If he is given the ability to borrow money, he can enter into a contract for borrowing money
o Ability to borrow money can be evidenced by credit cards
- Two persons involved
o Borrower
o Lender

Credit Transaction

- Involves of transactions of purchase of money, goods or services in the premise that it will be
returned later
- Advantages of the existence of trust and confidence over one person by another (practical
advantages)
o More exchanges are possible
o People are able to enjoy a thing today and pay it later
o through the banking system actual money transfers are eliminated
o generates job
- Nature:
o Contract of Security
 You can get the item now and payment is later
 Assurance that you can buy even without money in the present
- Types:
o Secured Transaction/real contract of security
 These kinds of transactions are covered by collateral
 May either be property
o Real
o Personal
o Movable
o immovable
o unsecured Transaction
 no collateral
 contract of personal security coupled only with
 words of the borrower to pay or deliver the borrowed thing
 personal commitment
 surety and guarantee
- Contracts related in CT
o Contract of guarantee
o Contract of surety
o Chattel and real estate mortgage
o Antichresis
 o Deposit
o Concurrence or preference of credit
o Usury law
 Pegging of the interest
 Legal rate CB: 6%
- Elements of a contract
o Essential elements: must exist without which contract is void
 Consent
 Object
 Cause
o Natural Elements: those inherent elements to the contract
 Elements against eviction
 Elements against hidden defect
o Accidental Elements: stipulated or anything agreed by the parties in the contract

Bailment

- Came from French word bailor meaning to deliver

- Delivery of property by one person to another in trust for a specific purpose which may be
supported by express or implied contract and that the trust may be faithfully executed for that
purpose and should that purpose be done, the property is returned.
- Nature:
o A contract
- Source:
o Agreement between the parties
 When there is an offer which is accepted by another
o Created by law
- Parties:
o Bailor or in latin a commodatario or the in the ordinary parlance the giver
 Does not deliver ownership except in mutuum
 Creditor or obligor in the normal transaction
o Bailee or commodante or recipient
 The person who receives the possession or custody
 Debtor or oblige in the normal transaction
- Kinds or classifications of a contractual bailment
 Contractual bailment – always with compensation
o Bailment for the sole benefit of the bailor
o For the benefit of the bailee
 Because after the bailor delivers the thing there is only one sided obligation
which is for the bailee to return the thing after the specific purpose has been
accomplish
o For the benefit of both parties
 Deposit for a compensation
 On the part of the bailor his property will be kept by the bailee on the
part of the bailee he is compensated
  more of a contract
o bailment for hire – arises when goods are left to the bailee for a compensation
 kinds:
 hire of things
o lease
 hire of service – goods are delivered for some work or labor and is paid
because of it
 hire for carriage of goods – goods are delivered either to a common
carrier or to a private person for the purpose of being carried from
place to place
o lalamove, grab
 hire of custody or location custodae – goods are delivered for storage
o warehouse receipt law

Art.1933

- banner provision; very substantial provision

- talks about the 2 kinds of loan
o mutuum or simple loan
o commodatum
- what is being delivered
o not consumable
 you can use the thing for its purpose which you cannot finish
 interchangeable with non – fungible
- Commodatum
o Nothing more but the delivery by one person to another of a non consumable thing for
a specified person and after the specific purpose is accomplished or done it is returned
o Return it even if its on its deteriorated state
o Return the same exact object
o Essentially gratuitous
 Consideration is the generosity or the liberality of the giver
 Different from loan
o Loan – you are no longer going to return the exact same thing
you borrowed
 Or it could be with a stipulation as in the case of money
o Risk of lost shall be borne by the lender
o 2 kinds
 Ordinary comodatum
 Precarium – one whereby the bailor may demand the return of the thing at will
 Special kind of comodatum
- Mutuum
o Delivery of a consumable thing or fungible
 Thing used by consuming
 o Not necessarily that you return the very same object but to return the same kind,
quantity or quality
o Ownership is already transferred

- Characterestics of Contract of loan

o Real Contract – it is perfected by delivery
 There is only a consummated contract when there is delivery
 Delivery is the actual passage or delivery of the thing
 Validity – whether or not it has the essential elements to be valid
o Uniateral Contract
 Creates an obligation only on the part of one of the parties
 E.g. after delivery of the contract what is left is only for the bailee to
return the object
o Cause of the contract
 To the borrower
 The acquisition of the thing
 to the lender
 the right to demand its return or its equivalent
- Distinctions
o Commodatum
 Same thing to be returned
 Intention to compel the return of the thing
 Essentially gratuitous unless there is a stipulation to the contrary
 Ownership is retained by the lender
 Personal in character
 Debt of either the obligor or the oblige puts an end to the obligation
 Loan for the use of a thing or temporary possession
 May demand the return of the object
o Mutuum or simple loan
 What is returned is only the equivalent of the fungible thing borrowed
 It may be onerous or gratuitous
 No agreement and there is delay 6% interest
 Ownership is transferred to the bailee or borrower
 Not personal
 It can transcend to the estate or the heirs
 Loan for consumption
 May not demand the return of the object

o Loan
 Loses property in favor of the bailee
 Relationship is between the creditor and debtor
o Lease
 Does not lose ownership only temporary
  Lessee and lessor

o Herrera vs Petrophil Corp case

 Loan
 Interest is taken at the end or expiration of the credit
 Discount of paper
 Interest is taken in advance
 It’s a paper
o Check
o Promissory note

o Loan
 For use or consumption
 Borrower pays at the end of the period
 Lender or borrower
 There is compensation of money
o Deposit
 Solely for safekeeping
 If not solely for safekeeping then it becomes mutuum
 At any time
 Depositor or depository
 No compensation of things deposited with each other

o Loan
 Use and Return at the end of the agreement
 No preference from other credits
 Essential cause is for the benefit of the borrower
o Irregular Deposit – the loaned object can still be used only when there is stipulation to
that effect
 May also be used
 Preference from other credits
 Cause: to give special benefit for the depositor

o Loan
 Unilateral
o Sale
 Consensual contract
 Bilateral and reciprocal

- Jaime vs Salvador
o Equitable mortgage
 If property is sold and the real intention is to pay a credit where the price is
considerably small for the value of the product, there really is a contract of loan
in the form of equitable mortgage
Art. 1934

- Merely talks of an accepted promise to deliver something

o No delivery yet, merely an accepted promise
- Effect
o Binding upong the parties but the contract of simple loan or commodatum is not
perfected

Art 1935

- Commodatum
o Derived from the Latin word commodum
 Usefulness or particular usefulness
o For usage
o Does not include fruits
 Industrial
 Civil
 Natural
o Gratuitous
o GR: Non – consumable
 XPN: Consumable goods may also be the object of commodatum but only for
the purpose of exhibition (Art.1936)
- Ususfract
o Right to use the thing as well as the fruits thereof unless there is a stipulation to the
contrary

Art. 1937

- Objects of Commodatum
o Movable
o immovable

Art 1938

- Bailor need not be the owner

o Bailor does not transfer ownership merely transfers the right to use or possess or
custody
- Bailor only need to have the right to possess
o Mercado and ebora case

Art. 1939

- Purely personal in character

o The death of either the bailor or bailee extinguishes the contract
o The bailee can neither lend nor lease the object of the contract to a third person
 XPN: members of the bailee’s household may make use of the thing loaned
 Members of the household – those who live within the same house as
you
 o XPN to the XPN: the nature of the thing forbids such use
- XPN to Art. 1178

Art. 1940

- Contrary or XPN to Art. 1935

- By way of stipulation, the fruits may be used by the bailee
- If incidental to the us and there is stipulation to that effect usage of the fruit is valid

Art. 1941

- Talks about the obligation of the bailee

- Ordinary expenses
o It is necessary for the preservation of the thing
o Necessary expenses
o Borne by the bailee
 Since he is the one who uses the thing
- Extraordinary expenses
o Not really necessary for the embellishment for the thing to have a higher value which
equates to luxurious expenses
o Borne by the bailor
 Take care of the thing with the diligence of a good father of a family

Art. 1942

- GR: if a thing is lost through a fortuitous event, the obligation is extinguish

- This is the XPN:
o If lost in the hands of the bailee; bailee is liable
o Lost if:
 Perishes
 Cannot be recovered or if recovered
o Instances where bailee is liable despite fortuitous event:
 If he devotes the thing to any purpose different from that which it has been
loaned
 If he keeps it longer than the period stipulated or after the period or duration of
the loan
 If the thing loan is delivered with the appraisal value
 XPN: stipulation exempting the bailee from liability or responsibility
despite
o Reason: Ownership is not transfer
 If he lends or leases the thing to a 3rd person
 XPN: member of the borrower’s household
 If being able to save either the thing borrowed or his own thing, he chose to
save the latter
 Preference on the borrowed thing
- Extent of liability of the bailee – full amount
Art. 1943

- If can be prove that the deterioration is caused by the use bailee not liable

Art. 1944

- Talks about retention

- Bawal quits
- Bailee cannot retain the thing loaned by reason of expenses
- XPN: if there are damages incurred by reason of the use of the thing loaned:
o Damages caused by the defects or flaws
o hidden defects or undisclosed
 Not retain if the damages are incurred by 3 rd persons
- If bailor is in good faith – bailee will not retain

Art. 1945

- Solidary
o XPN to the GR of 1207 and 1208
- Cannot be contested

Art. 1946

- Similar to precarium
o Under art 1947
- General Rule
o Bailor cannot demand for the return of the thing loaned till after the stipulation of the
period
- XPN:
o Demand the return
 Urgent need (must be proven)
o Effect:
 Contract is suspended while the thing is at the possession of the bailor
- Reason: Commodatum is for a certain time
o Based on the ground of equity
- What if di na binalik ng bailor?
o Return may be temporary or permanent
 Wala ka na magagawa because comodatum is essentially gratuitous

Art. 1947

- 2 instances where there is precarium or when the bailor may demand the return of the
borrowed thing
o Neither the duration of the contract nor the use to which the thing loaned should be
devoted has been stipulated
o If the use of the thing is merely tolerated by the owner
- Distinctive
Art. 1948

- Return of the thing by reason of acts of ingratitude

o If the bailee commits some offenses against the bailor, or the property of the bailor or
his wife or children under his parental authority
o If the bailee imputes to the bailor or the property of the bailor or his wife or children
under his parental authority
 Di kinasuhan, inimpute lang
o Refusal of support to the bailor when he has the obligation for such

Art. 1949

- Extraordinary expenses – borne by the bailor

o If bailee advances, bailor should refund in the following instances
 Bailee told him
 Reply is not needed because it is urgent
o If through the use of thing
 50/50 by bailor and bailee

Art. 1951

- If you lend the intention is for the benefit of the bailee

- If there is bad faith
o Bailor pays
o Bailee may retain if he suffers damages
- Requisites
o There is something wrong
o Flaw or defect is hidden
o Bailor is aware of the defect
o Bailor does not advise the bailee
o Bailee suffers damages
- Bawal quits kasi baka di equal yung price sa injury na nasuffer ni bailee
- Pero kapag yung price is more than the injury or damage suffered by the bailee pwede kasi
walang law which expressly stipulates na bawal

Assignment 30 articles from 1963