Credit Transactions lesson 3

Date: Feb20

OBLIGATIONS BETWEEN THE BAILEE AND THE BAILOR

Ordinary vs. Extraordinary Expenses

Ordinary Expenses - for the use and preservation of the thing loaned (usual) cause by natural use
Extra Ordinary Expenses - also an expense for preservation (restore the thing to its original state), if that expense
arose due to exceptional circumstances.

Ordinary Expenses
The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned. Art 1941
Reason: Under Art 1933 of the Civil Code, He is obliged to take good care of the thing with the diligence of a good
father of a family. Moreover, it is also his obligation to return the thing that is loaned to him.

Art 1949 Extraordinary expenses

A. Borne by bailor - provided the bailee brings the same to the knowledge for of the bailor before incurring them
except when they are so urgent that the reply to the notification cannot be awaited without the danger.
B. Equally by Bailee and Bailor - When such extraordinary expenses arise on the occasion of actual use of the of the
thing by bailee, without fault. Unless there is stipulation to the contrary.
C. Bailee alone - if acted with Fault, because of the obligation to take care of the thing with the diligence of a good
father of a family.

Question: A Borrowed a motorcycle, he figured in a accident. How do you figure that expense, is it ordinary or
extraordinary? Who will bear that expenses?
Answer: Extraordinary. If the bailee is at fault, he will borne the expenses. If without fault, both bailor and bailee shall
be borne by them equally. Art 1949

IN CASE OF LOSS
The thing loaned was lost, who is liable?
GR: The bailee is liable for the loss of the thing.

The bailee is not liable for the loss of the thing, if the loss is due to fortuitous event except:
As provided by Art. 1942.
1. If he devotes the thing to any purpose different from that which it has been loaned;
This amounts to bad faith or abuse of the generosity of the bailor.
2. If he keeps it longer than the period stipulated, or after the accomplishment of the use for which commodatum has
been constituted.
Applying the law on obligations, In case of delay/default, you are still liable for the loss of the thing.
3. If the thing loaned has been delivered with appraisal of its value, unless there is stipulation exempting the bailee
from responsibility in case of fortuitous event;
The implication of the appraisal of value, eminently, the giving of the value was made for the bailee liable for its loss.
After all this is not a contract of sale but a commodatum and neither is ownership transferred.
Except if there was stipulation to the contrary.
4. If he lends or leases the thing to a third person, who is not a member of his household; (being personal in character
and the lender has task to take care of the thing loaned)
5. If being able to save either the thing borrowed or his own thing, he chose to save the latter.
(The bailee shows ingratitude. Violation of the trust)

Q: A borrowed the car of B. There was a fire. He could only save one because of time. A saved his car. Is he liable?
A: Yes. Even if it is fortuitous, A showed ingratitude in this case.

IN CASE OF DETERIORATION
-the bailee is not liable if without fault.
-The natural use of the use of the thing is borne by the bailor. Provided the bailee has no fault.
Art 1944 The bailee cannot retain the thing loaned on the ground that the bailor owes him something, even though it
may be for the reason of expenses.
Exception: Art 1951 (Right of retention until paid for damages)
The bailor does not inform the flaws (hidden) of the thing loaned.

Summary:
BAILOR BAILEE
ORDINARY EXPENSES NO YES
EXTRAORDINARY EXPENSES YES (bailor must be notified, unless 50% if arose from the use of the thing
reply to notice cannot be awaited 100% If at fault
without danger)
LOSS (general rule) NO YES
LOSS IN FORTUITOUS EVENT YES, except art 1942 YES in art 1942
DETERIORATION WITHOUT FAULT YES NO unless at fault

RIGHT OF RETENTION
GR: Art. 1944 BAILEE cannot retain the thing loaned on the ground that the bailor owes him something.
The character of the contract/bailment implied trust. When the purpose is already accomplished, or the period already
expired, the property must be returned or restored to the bailor.
ER: Art 1951 The bailor who knows the flaws of the thing loaned, does not advise the bailee of the same and bailee
suffered by reason thereof. (must be hidden)
Art. 1287 Compensation will not be proper when one of the debt arises depositum or from the obligations of
depositary of commodatum.

Question: If the bailee refuses to return, can his possession ripen into ownership? For purpose of Prescription?
Answer: No. In a contract of commodatum, the property was in the possession of the bailee in the concept of
borrower and as long as he recognizes the ownership of the bailor.
Question: What if bailee will say, I am now the owner of this. Can that ripen into ownership with the rescribed number
of years for acquisitive prescription?
Answer: Yes. If the bailor repudiates the ownership if the bailor does not take action.

Prescription
Repudiation of trust ripen into ownership if will not demand immediate return.

Requisites for art 1951:

1. There was deffect
2. The flaw was hidden.
3. The flaw was rare.
4. Bailor did not advise about the flaw.
5. The bailee sufferred because of the flaw.

The Bailee cannot sell the thing while the property is in his custody retained while waiting for the payment of
damages caused by Art. 1951

Solidarily liable - In case there is two or more bailees.