LOANS

Bailor lender (delivers the thing)

Bailee borrower (receives the thing)
1933 Types of Loans
Commodatum Loan
USE
Involves nonconsummable
(real or personal) property
that one delivers to
another for free use
There is no transfer of
ownership.
Bailor need not be the
owner of the thing
In cases of loss, damage
or deterioration, bailor
bears the risk

Mutuum or Simple
Loan
CONSUMPTION
Involves money or
fungible goods
(personal) products
There is transfer of
ownership

In cases of loss, damage

or deterioration, bailee
bears the risk

Consumable Goods deteriorates upon

consumption (e.g. food)
Fungible Goods something that can be replaced
(e.g. antique products)
COMMODATUM
- 1939. Only the bailee is entitled to the use of
the thing thus sublease is not allowed.
However, members of the family of the bailee
are also allowed to use the thing.
Exception: there is stipulation or the very nature
of the thing prohibits it
- Gratuitous (for free) if there will be a required
payment for the use of the thing, it ceased to be
a commodatum
- Duration of use: depends on the agreement of
the parties. If there is no agreement, bailor can
demand the return at any time [Contract of
Precarium]. Also it is considered a contract of
Precarium if the use is tolerated.
- Bailor is intended to pay for ordinary expenses
(e.g. day to day expenses)
- Bailor and Bailee are equally liable for extraordinary expenses (e.g. major repairs)
- If bailor refuses to pay, bailee may exercise his
right of retention. Although there is no transfer
of ownership, the bailer is entitled to deliver the
thing to the bailee to use the property
- 1939. Death of either bailor or bailee
extinguishes the contract
- Bailee is not entitled on the fruits of the thing.
Parties may agree otherwise.
- Consumable goods may be the object of
commodatum if the purpose is for display or
exhibition only

MUTUUM
- There is transfer of ownership however the
bailee still needs to return/replace with the
same kind and same quality of the thing loaned.
- Can you return in kind? No. However, parties
may agree for payment in kind
- Legal tender also applies. [Foreign currency is
also allowed]
- If there is no replacement at the designated
time, pay the value of the fungible thing [value
at the time of perfection of loan]
- Perfection of loan occurs upon the delivery of
the property
- Interest: parties can agree on paying the
interest however, there must be a written
agreement
- How much interest? based on the agreement. If
unconscionable, court may equitably reduce If
interest is silent, use the legal interest (6% per
annum). Parties must also agree on the manner
of computation whether simple or compound
Note:
Credit Card is not a loan.
Bank Deposit is a mutuum
DEPOSIT
Depositor gives the thing
Depositay keeps the thing
-

1962. The purpose is for safekeeping. There

must be a delivery of the thing.
Property: real or personal
There will be no transfer of ownership.
Depositor need not be the owner of the thing
Use of the thing is not allowed except when
there is a need to use it for preserving the thing
Allowing the use of the thing ceases the
contract of deposit

Kinds:
Judicial
There is a court order and
case requiring the deposit of
the thing The court acquires
the possession and acts as
the depositary

Extra-judicial
May be voluntary or
involuntary

Voluntary:
- Virtue of the agreement of the parties
- Real contract: there is a need for delivery
- Form: oral or writing
- When the depositor is a minor, deposit is
recognized. However the thing must be
returned/replaced to the guardian.

When the depositary is a minor, the depositor

may recover the thing. Note however:
a. If the thing is disposed to a third party,
depositor can no longer recover. What he
can recover is the amount of benefit that the
incapacitated party received
b. If the third party is in bad faith, depositor
may collect the property plus damages.
Thus 1265 the possessor of the thing must
prove he is not at fault
Depositing at the third party is not allowed
unless agreed upon. Depositary is liable for the
actions of the third party
Res perit domino applies
Use of the thing: not allowed. It is only allowed
for the purposes of preservation. If the use is
simply accidental, it remains to be a deposit.
Agreement to the contrary ceases the contract
of deposit.
Modes of Extinguishment:
a. Loss or destruction of the property
b. Death of depositor
c. Expiration of time
d. Contract of Precarium demand at will
e. Mutual Withdrawal
f. Fulfillment of the purpose of deposit

Involuntary/Necessary:
- 1996. Takes place on the occasion of
calamities. We are bound by law to help our
neighbors in cases of calamities
- 1998. Deposit made by travellers in hotels or
inns are considered as necessary.
o Hotel keepers act as depositary
provided that notice was given to them.
o In cases of loss, the owner of the hotel
is liable but must satisfy the condition:
a. Traveller must give notification
regarding his things (must fill up a
form)
b. Traveller
must
follow
the
precautionary measures prescribed
by the hotel
o Statements, hotel is not liable for any
loss, damage is not applied
o This rule extends to the parking lot
o If the loss is caused by an outsider, the
hotel is liable. If the outsider used
irresistible force and is armed, hotel is
not liable
o If the loss is caused by an employee,
the hotel is liable If the employee used
irresistible force and is armed, hotel is
liable

If the loss is caused by a guest of the

client, hotel is not liable
In cases of failure of the hotel guest to pay the
fees, the hotel has the right to retain possession
of the thing as a security until full payment
o

GUARANTY
2047
Guaranty
Guarantor binds himself
to the creditor to fulfill
obligation of the debtor
in cases of his failure
Guarantor is an insurer
of insolvency of the
debtor. He is a
subsidiary
Creditor must collect
first from the debtor. If
debtor cannot pay, that
is when the creditor can
go against guarantor
-

Suretyship
Surety is solidarily liable
to the obligation of the
debtor
Surety is an insurer of
debt of the debtor

Creditor can directly go

against the surety.

How much can guarantor guarantee? Equal or

less than the amount of the loan of debtor
Before collection from the guarantor, principle of
excussion applies:
o In cases of nonfulfillment of the debtor,
creditor must exhaust first all properties
or assets of the debtor and go against
other receivables of the debtor before
he can go against guarantor. If not so,
guarantor can refuse to pay
o Exception:
R renunciation (waives his right)
U useless to exhaust the properties
S solidary (guarantor is surety)
I insolvency
A abscond
If guarantor paid, he can seek reimbursement
from the debtor. He can collect the total
amount, interest, expenses and damages
Guarantor can only collect the reimbursement
from the debtor once he has paid the creditor
Instances when even if guarantor has not yet
paid the creditor, guarantor can collect from
debtor
S sued (file against guarantor)
I insolvency of the debtor
P period has lapsed
E expiration of period and debt is demandable
T ten years has lapsed (no fixed period)
A abscond
I imminent danger of insolvency