Mutuum and Commodatum

TITLE XI: LOAN MUTUUM vs. COMMODATUM

MUTUUM COMMODATUM
CREDIT, defined. equivalent amount to same thing to be
refers to belief or trust by a person in another’s ability be returned (subject returned (subject matter
to comply with an obligation. matter is fungible) is nonfungible)
may be gratuitous or essentially gratuitous
CREDIT TRANSACTIONS, defined. onerous
refers to the contracts or agreements based on said ownership goes to ownership retained by
trust or credit. borrower or bailee lender or bailor
refers to personal may involve real and
property only personal property
Scope of Credit Transactions
referred to as loan for referred to as loan for
1. Principal Contracts of Loan (Commodatum & consumption use or temporary
Mutuum) and Deposit (belief, trust, or faith) possession
2. Accessory Contracts (generally depends on borrower, because of lender, because of his
the existence of principal contracts and his ownership, bears ownership, bears risk of
strengthens the belief by the security given) risks of loss loss
a. Personal Guaranty – person’s personal can be generally while generally obliged
credit is involved. obliged to pay only at to return object at end of
b. Real Guaranty – if real property – end of period period, still in some
contracts of real mortgage and cases the return can be
antichresis; if personal property – demanded even before
contracts of pledge and chattel mortgage the end of the period
3. Preference and Concurrence of Credit not personal in personal in character
character
General Provisions
CONSUMMABLE vs. NON-CONSUMMABLE
Art. 1933. By the contract of loan, one of the NON-
CONSUMMABLE
CONSUMMABLE
parties delivers to another, either something not
a movable which a movable which can
consumable so that the latter may use the same
cannot be used in a be used in a manner
for a certain time and return it, in which case the manner appropriate to appropriate to its nature
contract is called a commodatum; or money or its nature without its without its being
other consumable thing, upon the condition that being con- sumed. consumed.
the same amount of the same kind and quality
shall be paid, in which case the contract is FUNGIBLE vs. NON-FUNGIBLE
simply called a loan or mutuum. FUNGIBLE NON-FUNGIBLE
if the intention is to if the intention is to
Commodatum is essentially gratuitous. allow a substitution of compel a return of the
the thing given identical thing given
Simple loan may be gratuitous or with a
stipulation to pay interest. BAILMENT, defined.
The delivery of property by one person to another in
In commodatum the bailor retains the ownership trust for a specific purpose, with a contract, ex- press
of the thing loaned, while in simple loan, or implied, that the first shall be faithfully executed
ownership passes to the borrower. and the property returned or duly accounted for
when the special purpose is accomplished or kept
Loans under the Old Law. until the bailor reclaims it.
1. Civil Loan – governed by the Old Civil Code;
and Parties in Bailment.
2. Commercial Loan – governed by the Code of 1. Bailor – giver; and
Commerce. 2. Bailee – recipient.

Two kinds of Loan under the New Civil Code. Consideration or Cause in a Bailment of Loan
1. Mutuum or Simple Loan; and 1. Borrower – the acquisition of the thing.
2. Commodatum. 2. Lender – the right to require the return of the
same thing or its equivalent.

REVIEWER: Midterm Coverage Reference: J. Edgardo L. Paras Barataman-Abdulcadir

 Mutuum and Commodatum
CREDIT (as applied to Loans), defined. there can be NO compensation of
The ability to borrow money or thing by virtue of the compensation of credits things deposited with
confidence or trust reposed by a lender that the each other (except by
borrower will pay what he may promise. mutual agreement).

LOAN vs. RENT OR LEASE LOAN vs. IRREGULAR DEPOSIT

LOAN RENT OR LEASE IRREGULAR
LOAN
Lender loses his Owner of property does DEPOSIT
property for the not lose his ownership; borrower can use and depository can also use
borrower becomes the he merely loses control will return only at end of (as distinguished from a
owner thereof. thereof in a limited way period generally case of a regular
for the duration of the deposit where
rent or lease. depositary cannot
The relationship is one The relationship is one generally use)
of lender and borrower of lessor and lessee. lender has no irregular depositor has
(creditor and debtor). preference over other preference
creditors
In Re Guardianship of Tamboco, et al. essential cause is essential use is the
No, because this was a loan and not a deposit. NECESSITY of special benefit for
borrower depositor (as his money
Although it was not expressly agreed that
is being safeguarded)
Chuatongco could use the money, this can
nevertheless be inferred from the fact that
LOAN vs. SALE
Chuatongco was obliged to pay interest.
LOAN SALE
Real contract Consensual Contract
Government v. Phil. Sugar Estate Dev. Co. Generally unilateral bilateral and reciprocal
The money was given as an investment and not as because only borrower
a loan. It is difficult to see how this contract can be has obligations
con- sidered a loan. There was no date fixed for the
return to be made for the money. Furthermore, the Form of Interest.
sugar company was not to receive anything for the Herrera v. Petrophil Corp.
use of said sum until after the capital had been fully A loan must be in the form of money or something
repaid, which is not consistent with the general idea circulating as money. It must be repayable
of loan. absolutely and in all events.

LOAN vs. DISCOUNTING OF A PAPER Escalation Clause

DISCOUNTING OF A Insular Bank of Asia and America v. Salazar
LOAN
PAPER Escalation clauses are valid stipulations in
interest is deducted in interest is taken at the commercial contracts to maintain fiscal stability and
advance expiration of a credit to retain the value of money in long-term contracts.
double-name paper Single-name paper
However, the enforceability of such stipulations is
subject to certain conditions:
Herrera v. Petrophil Corp.
1. the increased rate imposed by the lender
The difference between a discount and a loan or
does not exceed the ceiling fixed by law or
forbearance is that the former does not have to be
the monetary board;
repaid.
2. the increase is made effective not earlier
than the effectivity of the law or regulation
LOAN vs. DEPOSIT
authorizing such increase; and
LOAN DEPOSIT
3. the remaining maturities of the loans are
purpose — to grant its purpose —
more than 730 days as of the effectivity of the
USE to borrower SAFEKEEPING by
depositary (who law or regulation authorizing such an
generally cannot use) increase.
generally, the borrower the return of deposited
pays only at end of things can be Art. 1934. An accepted promise to deliver
period demanded by the something by way of commodatum or simple
depositor at any time loan is binding upon the par- ties, but the
relationship is that of relationship is that of commodatum or simple loan itself shall not be
lender (creditor) and depositor and perfected until the delivery of the object of the
borrower (debtor) depositary contract.

REVIEWER: Midterm Coverage Reference: J. Edgardo L. Paras Barataman-Abdulcadir

 Mutuum and Commodatum
Nature of the Contract of Loan
Commodatum and loan are real contracts. They are
perfected by the delivery of the object loaned. On the
other hand, consensual contracts are perfected by
mere consent.

Need for Delivery

A delivery is either real or constructive, is essential.

Consent of the Parties

The borrower and the lender must of course consent
either personally or through an authorized agent.
Acceptance need not be actual.

Consensual Contract of Future Loans

There can also be a consensual contract created by
an accepted promise to deliver something by way of
commodatum or simple loan.

REVIEWER: Midterm Coverage Reference: J. Edgardo L. Paras Barataman-Abdulcadir