PART III Simple loan may be gratuitous or with a stipulation to

CREDIT TRANSACTIONS pay interest.

In commodatum, the bailor retains the ownership of the

INTRODUCTION:
thing loaned, while in simple loan, ownership passes to
Define credit transactions
the borrower.
 These are transactions that involves purchase or
loan of goods, services, or money in the present  The bailee in commodatum acquires the use of
with a promise to pay or deliver in the future. the thing loaned but not its fruits; if any
 Persons are able to enjoy a thing today but of compensation is to be paid by him who acquires
course they need to pay it later. the use, the contract ceases to be a
 Credit transactions are contracts of security. commodatum.
 2 types:
o Secured transactions/contracts of real Requisites of commodatum
security-supported by collateral or 1. The thing given is non-consumable;
encumbrance of property 2. The thing is given for the borrower’s use; and
o Unsecured transactions/contracts of 3. The borrower must return the thing after the
personal property-debtor is secured or period given or the purpose of the loan
supported only by a promise achieved.
 What are these so-called credit transactions?
o We have bailment contracts, together with Characteristics:
other related subject such as usury, 1. Real contract-the delivery is necessary for the
mortgage, and etc. perfection of the contract
Define the meanings and kinds of security 2. Unilateral contract-when the subject matter is
 Security is something given, deposited, or delivered, it now creates an obligation on the
serving as a means to ensure the fulfillment or part of only one of the parties (i.e., the
enforcement of an obligation of a person to borrower)
another, or of protecting some interest in
property. Cause or consideration:
Define Bailment 1. As to the borrower, the acquisition of the thing
 Came from the French word “bailer” meaning 2. As to the lender, the right to demand its return
“to deliver” or its equivalet
 Parties involved:
o Bailor-the giver or the one who delivers Kinds of loan
o Bailee-the recipient or the one who 1. Commudatum-meaning Commodare “borrow;”
receives the possession mutare, meaning “change” Borrower may use
or consume the thing (contract the thing
Article 1933 (contract of of use) consumption) and return
A. LOAN the thing of same the kind or quality, or the
identical thing value of the thing
By the contract of loan, one of the parties delivers to 2. Simple loan or mutuum-the lender delivers to
another, either something not consumable so that the the borrower a money or other consumable
latter may use the same for a certain time and return it, things upon the condition that the latter shall
in which case the contract is called a commodatum; or pay the same amount of the same kind and
money or other consumable thing, upon the condition quality. (Examples of consumable: Rice,
that the same amount of the same kind and quality shall gasoline, money and etc.)
be paid, in which case the contract is simply called a
loan or mutuum.

Commodatum is essentially gratuitous.

 7. In commodatum, the bailor may demand the
return of the thing loaned before the expiration
of the term in case of urgent need (Art. 1946),
Distinguish Commudatum and mutuum (simple loan) while in mutuum, the lender may not demand
its return before the lapse of the term agreed
1. Commodatum ordinarily involves something not upon. Note that this does not mean that the
consumable (see Art. 1936.), while in mutuum, bailor may demand the return of the thing
the subject matter is money or other anytime; there must be an urgent need.
consumable thing. It must be noted that only
personal (movable) property can be classified On the other hand, even if there is urgent need
into consumable or not; or emergency (e.g. hospitalization of a child,
2. In commodatum, ownership of the thing loaned etc.), the bailor in mutuum cannot demand the
is retained by the lender (Art. 1933.), while in return of the thing before the lapse of the
mutuum, the ownership is transferred to the period agreed upon. In fact, he cannot go to
borrower. The purpose of mutuum is for the court for this purpose.
borrower to own the thing loaned and use and 8. In commodatum, the loss of the subject matter
consume it; is suffered by the bailor since he is the owner
3. Commodatum is essentially gratuitous, while (Art. 1942 and Art. 1174.), while in mutuum, the
mutuum may be gratuitous or it may be borrower suffers the loss even if caused
onerous, that is, with stipulation to pay interest. exclusively by a fortuitous event and he is not,
If any compensation is paid by the bailee, the therefore, discharged from his duty to pay. It
contract is no longer within the concept of may also be said that while commodatum is
commodatum; purely personal in character (see Art. 1939.),
4. In commodatum, the borrower must return the mutuum is not so.
same thing loaned, while in mutuum, the
borrower need only pay the same amount of
the same kind and quality. Money, for example,
Kinds of Commodatum
when it used, parts the owner and, therefore, it
is almost impossible for a bailee in mutuum to 1. Ordinary commudatum
return the same cash with the same series 2. Precarium-one whereby the bailor may demand
numbers; the thing loaned at will
5. Commodatum may involve real or personal
property (Art. 1937.), while mutuum refers only
to personal property. If personal property ARTICLE 1934
(whether or not consumable) is borrowed not
for the purpose of consumption but for An accepted promise to deliver something by way of
exhibition or display, the contract is commodatum or simple loan is binding upon the
commodatum, not mutuum; parties, but the commodatum or simple loan itself shall
6. Commodatum is a loan for use or temporary not be perfected until the delivery of the object of the
possession (Art. 1935.), while mutuum is a loan contract.
for consumption. Use or temporary possession A contract of loan is thus a real contract, perfected
of the thing may or may not include its fruits. In upon delivery of the subject matter (as opposed to a
commodatum, the parties may stipulate that consensual contract, whereby a simple meeting of the
the bailee has the right to make use of the fruits minds between the parties perfects the contract).
of the thing bailed BUT the fruits are not the
main purpose of the contract. Otherwise (i.e.
the main purpose of the contract being the ARTICLE 1935
enjoyment by the bailee of the fruits of the
thing), the contract may be classified as one of The bailee in commodatum acquires the used of the
usufruct. thing loaned but not its fruits; if any compensation is to
be paid by him who acquires the use, the contract  In commodatum, the bailor need not be the
ceases to be a commodatum. owner of the thing loaned since by the loan,
ownership does not pass to the borrower.
 Commodatum is essentially gratuitous Any
compensation paid by the borrower who
acquires the use of the thing removes the
Article 1939
contract from the ambit of a commodatum. In
such case, the contract that arises is a lease. Commodatum is purely personal in character.
Consequently:
EXTENT OF BAILEE’S RIGHT TO USE
1. The death of either the bailor or the bailee
 Is limited to the thing loaned but not to its fruits
extinguishes the contract;
unless there is a stipulation to the contrary. As
2. The bailee can neither lend nor lease the object
the owner of the thing loaned, the bailor is
of the contract to a third person. However, the
naturally entitled to its fruits.
members of the bailee’s household may make
Contract similar to donation use of the thing loaned, unless there is a
stipulation to the contrary, or unless the nature
 Commodatum is similar to a donation in that it
of the thing forbids such use.
confers a benefit to the recipient.
 It is said that while commodatum is purely
personal in character and mutuum is not so.
 Hence, the death of either party terminates the
ARTICLE 1936 contract unless by stipulation, the
Consumable goods may be the subject of commodatum commodatum is transmitted to the heirs of
if the purpose of the contract is not the consumption of either or both parties.
the object, as when it is merely for exhibition. Article 1940
 Thus, if consumable goods are loaned only for A stipulation that the bailee may make use of the fruits
purposes of exhibition, or when the intention of of the thing loaned is valid.
the parties is to lend consumable goods and to
have the very same goods returned at the end  Bailor retains ownership and he is therefore
of the period agreed upon, the loan is a entitled to the fruits of the thing and the bailee
commodatum and not a mutuum. is entitled only to the use of the thing loaned
 The rule is that the intention of the parties and not to its fruits.
thereto shall be accorded primordial  Stipulation for enjoyment of the fruits: cannot
consideration in determining the actual be presumed and must only be incidental to the
character of a contract. In case of doubt, the use of the thing itself. The law sanctions such
contemporaneous and subsequent acts of the stipulation BUT such use should only be
parties shall be considered in such incidental and not the main cause of the
determination. contract.  Because if it is the main cause, then
the contract may that one of a usufruct.
Article 1937

Movable or immovable property may be the object of

commodatum.

 I commodatum, the subject matter is generally

non-consumable things whether real or
personal.

Article 1938

The bailor in commodatum need not be the owner of

the thing loaned.