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I. Concept of Loan - II. Commodatum - III. Simple Loan - Coggle Diagram

- - - - D. Contract to Loan (1934) - A consensual contract; An accepted promise to deliver. A binding obligation arising from a contract between a debtor who promises to deliver the property, and the creditor (who accepts the promise).
        
        Article 1934. An accepted promise to deliver something by way of commodatum or simple loan is binding upon parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. (n)
        
        DISTINGUISHED FROM LOAN - A contract of loan is a real contract.
        
        A CL is perfected by DELIVERY not by mere consent.
        
        In essence, a CtL is preparatory, whereby once the debtor in a CtL delivers the property to the creditor the roles become reversed.
        
        CREDIT CARD (Pantaleon v. AMEX) - In credit card transactions, the creditor-debtor relationship arises only AFTER the credit card issuer approves the cardholder's purchase request.
        
        This perfects the mutuum contract between the holder and the company.
        
        Effect of Breach - There is a perfected consensual contract to loan. Its breach can give rise to damages.
        
        To Sell - you can sue for damages
      - C1. Object - The subject of the loan. May be non-consumable OR money/consumable.
        
        C2. Consideration (1933) - As a general rule, a contract of loan is a reciprocal obligation where the debtor promises to pay serves as the consideration.
        
        However, the consideration for the creditor differs.
        
        C3. Obligation to return or pay (1933 & 1232-1233) - Necessarily differs as the objects are different.
        
        Commodatum - Obligation consists in returning the SAME property delivered.
        
        Mutuum - Obligation consists in the PAYMENT of the SAME amount borrowed OR the SAME kind and quality.
        
        Article 1232. Payment means not only the delivery of money but also the performance, in any other manner, of an obligation. (n)
        
        Article 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. (1157)
        
        Commodatum - Gratuitous in nature, where the consideration for the creditor is always liberality.
        
        Mutuum - May be gratuitous or with stipulation to pay interest.
        
        Consumable/Mutuum - Here, the object is money or other consumable property. , whereby delivery transfers ownership of the consumable property and creates an obligation on the part of the debtor to pay the same amount or kind and quality to the creditor.
        
        Non-consumable/Commodatum - The object is any property that is not-consumable. May be movable or immovable. Here, delivery does NOT transfer ownership. Instead, for permissive use of the debtor. Obligation of the debtor is to return the property.
    - - NATURE - a REAL contract, whereby property passes from one party to another.
        
        As a real contract, delivery by the creditor of the object of the contract is essential for the perfection of the contract. (Garcia v. Thio)
- - - - C. Consideration (1933,1935 & 1939) - Commodatum is essentially gratuitous, with liberality being the consideration. If some form of compensation is involved, then it is no longer commodatum.
        
        D. Parties to a commodatum -
        
        Bailor (Creditor) and
        
        Bailee (Debtor).
        
        This originated from the common law concept of commodatum, which is bailment. This refers to the delivery of personal property by one person to another, who holds the property for a specified purpose.
        
        D1. Ownership by Bailor (1938, 1993) - The bailor need not be the owner of the property loaned.
        
        BUT, if against the bailee, it is the bailor who retains ownership of the property loaned.
        
        D2. Use by Bailee (1935 & 1939 & 1940) - No right to fruits.
        
        GR - The Bailee acquires the permissive use of the property loaned but not its fruits.
        
        XCPN - However, the parties may stipulate that the bailee acquires the permissive use of the fruits of the property.
        
        D3. Solidary Liability of Bailees (1945) - When there are two or more bailees to whom a thing is loaned in the same contract, they are liable solidarily.
        
        Article 1935. The bailee in commodatum acquires the use of the thing loaned but not its fruits; if any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum. (1941a)
        
        **
        
        Article 1940. A stipulation that the bailee may make use of the fruits of the thing loaned is valid. (n)
        
        NO USE - If the thing cannot be used but is delivered, then it is a contract of deposit i.e. purpose is safekeeping.
        
        Right of Bailee to Lease -
        
        GR: the bailee may not lend or lease the object to a third person,
        
        XCPN:but family/household may use of the property loaned
        2a.XCPN 2 XCPN: UNLESS stated otherwise or its nature forbids use.
        
        E. Liability for Expenses and Damages
        
        E1. Ordinary Expenses (1933, 1925, 1941,1943) - Because the Bailee acquires permissive use, they are liable for ordinary expenses for the use and preservation of the thing.
        
        E2. Extraordinary Expenses (1949) - Depends on whether or not the expenses are for use or preservation.
        
        E3. Other Expenses (1950) - The bailee is liable for all other expenses incurred for the use of the property loaned OTHER than ordinary and extraordinary expenses.
        
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        Article 1949. The bailor shall refund the extraordinary expenses during the contract for the preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply to the notification cannot be awaited without danger.
        If the extraordinary expenses arise on the occasion of the actual use of the thing by the bailee, even though he acted without fault, they shall be borne equally by both the bailor and the bailee, unless there is a stipulation to the contrary. (1751a)
        
        PRESERVATION -
        
        GR: Because ownership is not transferred, the Bailor is responsible for extraordinary expenses for the preservation of the property loaned.
        
        XCPN - if the bailee incurs these expenses without informing the bailor before incurring them. UNLESS the expenses for preservation are so urgent that the bailor's reply cannot be awaited.
        
        FOR ACTUAL USE -
        
        GR - Both the bailee and the bailor are equally liable for the extraordinary expenses that arise from the ACTUAL use by the bailee
        
        XCPN - UNLESS otherwise stipulated.
        
        Article 1941. The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned. (1743a)
        Article 1943. The bailee does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault. (1746)
        
        Liability for Deterioration - Generally, Bailee not liable unless:
        
        Fault - Bailee they are at fault.
        
        Stipulation - Parties stipulate otherwise
        
        Another Use - Bailee devotes the property to another use
        
        Beyond the Period - Deterioration occurs beyond the stipulated period
        
        F. Liability for Loss (1933 & 1942) - GR: Bailor, as the owner bears the loss due to fortuitous event.
        
        G. Obligation to Return
        
        G1, General Concepts (1946-1948) - The obligation to return is the primary obligation of the bailee in commodatum. However, this only arises AFTER the period stipulated OR the accomplishment of the intended use.
        
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        XCPNS (1942): - Here, bailee becomes liable for the loss of the thing even if through fortuitous event.
        
        BREACH
        
        Purpose - When the bailee devotes the property to a different purpose.
        
        Lease/Loan - When the bailee lends or leases the property to a third person who is NOT a member of the household.
        
        DELAY
        
        Period - Bailee keeps the property longer than the stipulated period.
        
        Use - Bailee keeps the property after the accomplishment of the stated use.
        
        INTENTION - If the property loaned was delivered with an appraised value. Here the intent is to shift the liability for the loss. UNLESS there is a stipulation that exempts the bailee from loss due to fortuitous event.
        
        INGRATITUDE - If, being able to save the property owned by them or the property loaned, the bailee chooses their own property.
        
        Article 1938. The bailor in commodatum need not be the owner of the thing loaned. (n)
        
        Article 1993. The depositor shall reimburse the depositary for any loss arising from the character of the thing deposited, unless at the time of the constitution of the deposit the former was not aware of, or was not expected to know the dangerous character of the thing, or unless he notified the depositary of the same, or the latter was aware of it without advice from the depositor. (n)
        
        Article 1935. The bailee in commodatum acquires the use of the thing loaned but not its fruits; if any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum. (1941a)
        Article 1939. Commodatum is purely personal in character. Consequently:
        
        (1) The death of either the bailor or the bailee extinguishes the contract;
        
        (2) The bailee can neither lend nor lease the object of the contract to a third person. However, the members of the bailee's household may make use of the thing loaned, unless there is a stipulation to the contrary, or unless the nature of the thing forbids such use. (n)
        
        Bailee - The consideration for the bailee is the permissive use of the property loaned.
        
        EXTINGUISHMENT - As a gratuitous contract, commodatum is a personal contract. Thus, the death of either party extinguishes the commodatum.
      - Article 1936. Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition. (n)
        
        Article 1937. Movable or immovable property may be the object of commodatum. (n)
  - - - B. Object (1933, 1953, 1954 & RA 2137 S. 58) - Necessarily fungible goods. Fungible goods means goods of which any unit is, from its nature by mercantile custom, treated as the equivalent of any other unit.
        
        C. Obligation to Pay (1955, 1249, 1250) - The primary obligation of the borrower is to pay. This obligation may be evinced by a written promise to pay.
        
        D. Interest - The compensation to be paid by the borrower. If the simple loan is onerous, then it is with a stipulation to pay interest.
        
        D1. Conventional Interest - Interest paid as compensation i.e. not prescribed by law. Convention = agreement by the parties.
        
        D2. Compensatory Interest (1169, 2209, 1226, 2210, 2213, 2226, 2227) - Interest to recoup damages.
        
        D3. Finance Charges
        
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        a. General Concepts (2209) - Refers to penalty interest/indemnity interest. Interest allowed by law in the absence of a promise to pay, as compensation for delay in an obligation consisting in the payment of a sum of money in paying a fixed sum or a delay in assessing and paying damages.
        
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        b. Monetary Interest - Refers to the conventional interest in a simple loan of money.
        
        a. General Concepts
        
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        c. Interest Rate (Usury Law) - Also applies to forbearance. Generally, the interest stipulated is applicable.
        
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        Payment of Interest (1253) - If no payment of interest, then principal debt not deemed paid as well.
        
        Interest in Payment in Kind (1958) - Value of Interest shall be appraised at the current price of the products/goods at the time and place of payment.
        
        When Payment of Interest Proper (1956) - The following two conditions must concur for the payment of interest to be allowed
        
        EXPRESS STIPULATION - for the payment of interest
        
        WRITING - Said stipulation is in writing.
        
        Effect of Lack of Conditions
        
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        Payment in Money (1249) - Value of the payment is determined at the time of delivery. Must be made in the currency stipulated or if the same is not possible then in legal tender.
        
        Payment in Kind - Payment must be in another property of the same kind, quantity and quality. The value of the payment in kind is determined at the time of PERFECTION i.e. delivery of the object.
        
        Mercantile Documents - Produce the effect of payment ONLY when encashed OR through the fault of the creditor they have been impaired.
        
        Extraordinary Inflation (1250) - value of the currency at the time of the establishment of the obligation shall be the basis of the payment, unless there is agreement to the contrary.
        
        Evidence of Payment; Forms
        
        Note - A written promise by one party to pay money to another/party bearer OR written promise to pay specified amount to a certain person on demand or a certain date.
        
        Bond - Written promise to pay money to the holders, or a written promise issued by government or corporation holders to pay the principal the amount of a loan at maturity and a specified sum of money usually at specific intervals
        
        Debenture - An instrument acknowledging a debt secured only by the issuer's earning power and NOT by a lien, legal right or interest i.e. an unsecured bond.
        
        Article 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality. (1753a)
        
        d. Reduction of Interest
        
        Compensatory Interest (1229 & 2227) - Partial performance or iniquity
        
        Conventional Interest (1306) - Iniquity
        
        Effect of Loss - Res Perit Domino. However, obligation to return a thing of same kind and quality.
      - Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.
      - Ownership - Here, the borrower acquires ownership of the money or consumable property for the permissive use of the property loaned.
        
        Barter (People v. Puig & Porras & 1954) - If the primary purpose of the contract is to transfer ownership of NON-FUNGIBLE property and payment is made by giving some thing of the same kind, quantity and quality then it is a contract of barter.
- - - - Commercial Credit Transactions - Refers to credit transactions that are habitually entered into by merchants. Thus, these are considered as covered by the Code of Commerce and NOT the Civil Code.
        
        Form - As these are habitually entered into, usually come in the form of read-made contracts i.e. pre-printed forms. This form means that they are contracts of adhesion.
      - As differentiated from Loan (People v. Concepcion) - Use of a credit/concession converts a grant of credit to a loan. e.g. Credit card = extension of credit, use of card = loan.