CREDIT TRANSACTIONS:

An agreement based on trust/ belief of someone on the ability of another to comply with his obligations.

INTRODUCTION:

CREDIT:
 Denote Financial Accommodation
 Obligations—the option to demand a patrimonial prestation and which the law will enforce
 Accounting- money owing or due to one person or entity
 Business reputation- ability to borrow money by virtue of confidence reposed

KINDS OF CREDIT TRANSACTIONS:

 Loans
 Price Deferment Agreements
 Financial Lease

PART 1 --- CONTRACT OF LOAN

By the contract of loan, one of the parties, called the bailor or lender delivers to another called the Bailee or
borrower, either something not consumable so that the latter may use it for a certain time and return the same
thing or money or consumable so that the borrower may consume it with the obligation to pay the same amount of
the same kind or quality

PARTIES:
 Lender/ Bailor
 Borrower/Bailee

CHARACTERISTICS:
 Real- shall not be perfected until the delivery of the contract
 Unilateral- there is no contract of loan before delivery of the lender; after delivery the contract is already
unilateral because the obligation is only on the part of the borrower to pay.

KINDS OF LOANS:
 Commodatum
 Simple Loan/ Mutuum
DISCOUNTING:
 Interest in deducted in advance
REVOLVING CREDIT:

 Fixed-sum—borrower agrees to take fixed amount of credit and to repay with interest/ other charges and
the transaction is terminated upon full payment.
 Credit Line- fixed limit of credit granted by bank, retailer, or credit card issuer.
 Revolving Credit- a borrower is given a credit limit which the borrower can draw on

CHAPTER 1: COMMODATUM (URNET)

 The main purpose is use
 The thing loaned is supposed to be returned
 Not entitled to fruits
 Essentially gratuitous
 temporary
*An accepted promise to deliver by way of commodatum is binding, but commodatum is not perfected until
delivery is made.

COMMODATUM V USUFRUCT:

COMMUDATUM USUFRUCT
As to right to enjoy
fruits Can’t enjoy fruits Jus Fruendi
Transferability Personal can’t be
transferred May convey
Use by third
persons Not allowed Allowed
Right of Retention
No right of With right of
retention retention

OBJECT OF THE CONTRACT:

 Movables or Immovable
 Consumable—if the purpose is merely for exhibition

BAILOR NEED NOT BE THE OWNER as long as:

1. He has the right to possess and use the thing

2. Has the right to transfer such right to use and possess

 The Bailee cannot be the bailor of the same thing

COMMODATUM IS PERSONAL IN NATURE

 Death of either the parties extinguishes the contract
 Bailee can neither lend nor lease the object of the contract to a third person – members of the household
can use the thing except when (1)stipulation to the contrary (2)nature of the thing forbids such use

RIGHTS OF THE BAILEE

1. Use the thing
2. Not be liable for deterioration without his fault
3. Right of retention for damages from hidden defects

OBLIGATIONS OF THE BAILEE:

 Exercise due diligence
 Pay ordinary expenses
 Responsible for the loss of the thing (fortuitous event)
 Liable for loss for any loss/ injury because of Bailee’s fault
 Return the thing upon expiration

LIABILITY OF BAILEE FOR LOSS IN CASE OF FORTUITOUS EVENT

 Devotes the thing to any purpose different from that for which it has been loaned
 Keeps it longer than period stipulated
 The thing is delivered with appraisal of its value unless with stipulation exempting the Bailee
 Lends it to 3rd person
  If being able to save either the thing borrowed or his own thing, he chose to save the latter.
RIGHT OF RENTENTION:
 Can’t retain the thing loaned if the bailor owes him something; has right to retain for damages because of
the flaw or defect in thing of which the bailor was aware
OBLIGATIONS OF THE BAILOR
Gen Rule: Bailor can’t demand the return of the thing until after the expiration of the period
Exceptions:
1. Urgent Need
2. Precarium- neither contract nor use to which the thing is devoted has been stipulated; or use of the thing
is merely tolerated by the owner
3. Bailee commits any act of ingratitude

*in case of urgent need, contract of commodatum is suspended.

ACTS OF INGRATITUDE:
1. Commits an offense against the person, honor, property, wife or children of the bailor under his parental
authority
2. Imputes to the bailor any criminal offense
3. Undue refusal to support bailor