LOAN

Obligations And Contracts

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GENERAL PROVISIONS ON LOAN

Art. 1933. By the contract of loan, one of the parties delivers to another,
either something not consumable so that the latter may use the same for a
certain time and return it, in which case the contract is called a
commodatum; or money or other consumable thing, upon the condition that
the same amount of the same kind and quality shall be paid, in which case
the contract is simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum the bailor retains the ownership of the thing loaned, while in
simple loan, ownership passes to the borrower. (1740a)

CONTRACT OF LOAN
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The abovementioned defines the two kinds of loan and gives their
characteristics

CHARACTERISTICS OF THE CONTRACT

1. Real contractbecause the delivery of the thing loaned is necessary for the
perfection of the contract
2. Unilateral contractonce the subject matter has been delivered, it creates
obligations on the part of only one of the parties

CAUSE OR CONSIDERATION IN A CONTRACT OF LOAN

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For the borrowerthe acquisition of the thing

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For the lenderthe right to demand its return or its equivalent

KINDS OF LOAN
1. COMMODATUMwhere the bailor delivers to the bailee a non-consumable
thing so that the latter may use it for a certain time and return the identical
thing

2. SIMPLE LOAN OR MUTUUMwhere the lender delivers to the borrower

money or other consumable thing upon the condition that the latter shall pay he
same amount of the same kind and quality

WHEN IS A THING CONSUMABLE?

It is consumable when used in a manner appropriate for its purpose or nature,
like gasoline, rice, money, fruit, firewood, etc.

1. In commodatum, if you do not return the thing when it is due, you will be liable
for estafa because ownership of the property is not transferred to the borrower.

2. In loan, the borrower who

His liability is only a civil liability
because in loan, ownership of
there is no unlawful taking of

does not pay is not criminally liable for estafa.

for the breach of the obligation to pay. This is
the thing is transferred to the borrower, so
property belonging to another.

Art. 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)

DELIVERY ESSENTIAL TO PERFECTION OF LOAN

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The abovementioned is a necessary consequence of the fact that
commodatum and mutuum are real contracts which require the delivery of the
subject matter thereof for their perfection

ACCEPTED PROMISE TO MAKE A FUTURE LOAN

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Is there a contract of loan at this point? No, because loan is a real contract and
is perfected only upon delivery of the thing.

FORMALITY IN LOAN
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There are no formal requisites for the validity of a contract of loan except if
there is a stipulation for the payment of interest. A stipulation for the payment
of interest must be in writing.

COMMODATUM
NATURE OF COMMODATUM
Art. 1935. The bailee in commodatum acquires the used 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)

KINDS OF COMMODATUM
1. ORDINARY COMMODATUM
2. PRECARIUMone whereby the bailor may demand the thing loaned at will
Art. 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)
Art. 1937. Movable or immovable property may be the object of commodatum. (n)
Art. 1938. The bailor in commodatum need not be the owner of the thing loaned. (n)

Art. 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)
Art. 1940. A stipulation that the bailee may make use of the fruits of the thing loaned is valid.
(n)
NATURE OF COMMODATUM SUMMARIZED
1. COMMODATUM IS ESSENTIALLY GRATUITOUS
a. A commodatum is essentially gratuitous
b. The contract ceases to be a commodatum if any compensation is to be paid by the
borrower who acquires the use
c. A commodatum is similar to a donation in that it confers a benefit to the recipient
2. EXTENT OF BAILEES RIGHT TO USE is limited to the thing loaned but not to the fruits
unless there is stipulation to the contrary
a. As the bailor is the owner of the thing loaned, the bailor is naturally entitled to its fruits
3. CAN THERE BE A STIPULATION GRANTING THE BAILEE USE OF THE FRUITS? Of
course. The law sanctions such stipulation BUT such use should only be incidental and not the
main cause of the contract. Because if it is the main cause, then the contract may that one of a
usufruct.
4. The PURPOSE of a commodatum is the temporary use of thing loaned
a. If the bailee is not entitled to the use of the thing loaned, the contract may be that of deposit
5. The SUBJECT MATTER is generally a non-consumable things, whether real or personal
a. It may be the case that the purpose is for exhibition only of the thing loaned. If this
is the case, then the subject matter may be that of a consumable thing
6. The bailor NEED NOT BE THE OWNER of thing loaned
7. Commodatum is PURELY PERSONAL in character.
Consequently:
a. The death of either the bailor or the bailee extinguishes the contract;
b. The bailee can neither lend nor lease the object of the contract to a third person. However,

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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.