CONTRACT OF LOAN

TWO TYPES OF CONTRACT OF LOAN

1. Commodatum - The lender delivers to the borrower a non-consumable thing.

The borrower may use it for a certain period of time and returns it afterwards
✓ Borrowing of car
✓ Lease of building
2. Mutuum (simple loan) – The lender delivers to the borrower a consumable thing
or money upon which consider the latter shall pay the said amount or quality.
✓ Loan from classmate
✓ Loan from a bank or.
✓ Depositing money to the bank (debtor is the bank; creditor is the one who
deposited)

DISTINCTION BETWEEN COMMODATUM AND MUTUUM

COMMODATUM
1. The ownership of the thing loan is
retained by the lender
2. The borrower must return the same
consumable thing to the lender
3. It involves non consumable thing
4. It is a loan for use
5. The subject matter is real or personal
property
6. The return of the thing loan may be
demanded before the expiration of the
term in case of urgent need
7. The lost is born by the bailor or owner
because the ownership of the property is
still retained by the owner
MUTUUM
1. The ownership is transferred to the
borrower
2. The borrower the same amount or
quality to the lender
3. It involves consumable thing or money
4. It is a loan for consumption
5. The subject matter refers only to
personal property. Money is a personal
property.
6. The lender may demand its return
before the term agreement upon
expiration.
7. The loss is born by the borrower
because the ownership is transferred from
the lender to the borrower

CONSUMABLE THING AND FUNGIBLE THING

• CONSUMMABLE THING - one is which consumed when it is used in a manner

appropriate to its nature.
✓ Rice
✓ Money
• FUNGIBLE THING – one is dealt with by number, by weight, by measurement or
that any given unit or portion
✓ Water (by gallons)
TWO KINDS OF COMMODATUM

1. Ordinary Commodatum – it can be returned after period time of use

2. Precarium Commodatum – it can be demanded at any time at the will of the
lender

TWO PARTIES IN COMMODATUM

1. Bailor
2. Bailee

TWO PARTIES IN MUTUUM

1. Lender (creditor)
2. Borrower (debtor)

OBLIGATIONS OF THE BAILEE/BORROWER

1. To pay for the ordinary expenses for the use and preservation of the thing
✓ Ordinary Expenses – substantial amount to prolong the life of a property
or an asset
✓ Extraordinary Expenses – overhauling expenses that requires
substantial amount. It can be considered as capital expenditure. One-half
to the bailee and one-half to the bailor
2. To be liable for the loss of the thing, even if it is through of fortuitous event
✓ When it devotes the thing for any purpose different from what has been
agreed upon
✓ If the bailee keeps it longer than the period stipulated or after the
accomplishment of the use for which the commodatum has been
constituted

There is a stipulation excepting the bailee from responsibility in case of

fortuitous event in case of demand

➢ If the term loan has been delivered with appraisal of its value,
➢ If the bailee lends it to the third person aside from his family
➢ If being able to save either the thing borrowed or his own, he
selected to save the latter
3. To answer for the deterioration of the thing loan in case of fault or if he devotes
the thing to any purpose different from what the parties have agreed for loan
4. To retain the thing loan for damages due to hidden flows
5. To be liable solidarity if there are two or more bailees
RESPONSIBILITIES OF THE BAILOR/LENDER

1. To demand the thing at will in case of precarium

2. To respect the period stipulated for the return of the thing loan unless there is an
urgent need for the thing in which case the bailor may demand for return of
temporary use
3. To demand the immediate return of thing if the bailee commits an act of
ingratitude
4. To answer for the hidden flaw or defect known to him but failed to inform the
bailee which caused damages to the bailee
5. To refund extraordinary expense of the contract for the preservation of the thing
with prior notice

Key notes:

o Interest can only be collected if stipulated in writing except when the loan or
obligation has been due and demandable (default on the part of the debtor), the
creditor can demand extra judicially for interest.
o You can only impose legal interest when it is stipulated in writing or because of
default.
o Legal Interest is between 6% to 12% per annum only
o Since usury law has been suspended, one can impose higher than 9%

INTEREST – compensation allowed by law or fixed by agreement of the parties for a

loan or forbearances loan of money

KINDS OF INTEREST

1. Simple Interest
2. Compound Interest
3. Legal or Lawful Interest
4. Unlawful or Usurious Interest

DEPOSIT – constituted from a moment a person received a thing belonging to another

with the obligation of safe keeping it and returning it the same

EXAMPLES OF CONTRACT OF DEPOSIT

✓ Depository banks
✓ Warehouse for storage purpose (rice warehouse)
✓ Depository lodge in supermarkets (excess baggage)
CHARACTERISTICS OF CONTRACTS OF DEPOSIT

1. It is a real contract because if it is not merely perfected by consent but also by

delivery
2. It is either or unilateral or bilateral according whether it is gratuitous or for
compensation. It is a gratuitous except where there is an agreement to the
contrary.

PARTIES IN A DEPOSIT

1. Depositor – the one is making the deposit for the purpose of safekeeping
2. Depositary – the one who will safekeep the thing

KINDS OF DEPOSIT

1. Judicial Deposit (sequestration) – it takes place when an attachment or

seizure of property is in litigation is ordered unmovable or immovable property
2. Extrajudicial Deposit – when it is a voluntary delivered by the will of the
depositor. Necessary when the deposit is made in the compliance with the legal
obligation or occasion of any calamity
✓ Safekeeping of a gun in an airport

DISTINCTION BETWEEN JUDICIAL AND EXTRAJUDICIAL DEPOSIT

JUDICIAL DEPOSIT EXTRAJUDICIAL DEPOSIT

1. Takes place by order of the court
2. The purpose is to maintain a status quo
during dependency of the litigation in order
to derive the parties for a probable
judgment
3. The subject matter is either movable of
immovable
4. It is a loan for use
5. It is onerous
1. Takes place by will of the party
2. The purpose is only for safekeeping and
returning after a certain period of time
3. The subject matter is movable
4. It is a loan for consumption
5. It is gratuitous

GUARANTEE – it means a person is called guarantor that binds himself to the creditor
to fulfill obligation of the principal debtor in case the latter should fail to do so.

SURETY – if the person binds himself solidarily with the principal debtor. The contract is
called suretyship and the guarantor is called surety.

CONCEPTS OF GUARANTEE - The person guarantees the fulfillment of an obligation

or in order to secure the obligation, the property either movable or immovable property
is put to it or is use as a security
KINDS OF GUARANTEE

1. Immovable Guarantee – real estate mortgage and the antichresis

2. Movable Guarantee – pledge and shuttle mortgages

CLASSIFICATIONS OF GUARANTEE

1. Personal Guarantee – the person guarantees the fulfillment of an obligation

2. Real Guarantee – In order to secure the obligation, the property either movable
or immovable property is put to it or is use as a security
3. Conventional Guarantee – by means agreement of the parties
4. Legal Guarantee – which is created by virtue of law
5. Judicial Guarantee
6. Single Guarantee
7. Double or sub-guarantee
8. Definite Guarantee
9. Indefinite or Simple Guarantee

DISTINCTION BETWEEN GUARANTEE AND SURETYSHIP

GUARANTEE
1. The guarantor is secondarily liable
2. The guarantor pays if the principal
cannot pay
3. The liability of the guarantor depends
upon the independent agreement
SURETYSHIP
1. The surety is primarily liable
2. The surety when the principal does not
pay
3. The surety assumes liability as a regular
party to the undertaking