Credit Transactions Include all transactions involving the purchase or loan of goods, services or money in the present with

a promise to pay or deliver in the future More exchanges are possible even without money at the moment ; through the banking system, actual money transfer is eliminated by cancellation of debts and credits Credit transactions are contracts of security. Two types: 1. Secured transactions or contracts of real security supported by collateral or an encumbrance (pledge, chattel mortgage, real estate mortgage, antichresis) 2. Unsecured transactions or contracts of personal security fulfillment of which by the principal debtor is secured or supported only by a promise to pay or the personal commitment of another such as a guarantor or surety. Bailment contracts, together with the other related subjects such as usury, contracts of guaranty, suretyship, mortgage, antichresis and concurrence and preference of credits Security something given, deposited, or serving as a means to ensure the fulfillment or enforcement of an obligation or of protecting some interest in property May be personal security or a property or real security as when mortgage, pledge, antichresis charge or lien or other device used to have property held, out of which the person to be made secure can be compensated for loss. Bailment French bailer; to deliver Delivery of property of one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed and the property returned or duly accounted for when the purpose is accomplished

In general, bailment may be said to be a contractual relation. To be legally enforceable, it must contain all the elements of a valid contract. It may also be created by operation of law. Parties in bailment: 1. Bailor(comodatario)- the giver; the party who delivers the possession or custody of the thing bailed 2. Bailee(comodante) the recipient; the party who receives the possession or custody of the thing thus delivered Contractual bailment may be classified into three as reference to compensation: 1. Sole benefit of the bailor;
Art. 1965: A deposit is a gratuitous contract, except when there is an agreement to the contrary, or unless the depositary is engaged in the business of storing goods

It is a gratuitous deposit, and mandatum; Bailment of goods without recompense where the mandatory or person to whom property is delivered undertakes to do some act with respect to the same; as simply to carry it, or keep it or otherwise to do something with respect to it gratuitously.

2. Sole benefit of the the bailee; and Commodatum and gratuitous simple loan or mutuum; gratuitous bailment
Art1933: 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.

or compensation. The contactor may either employ only his labor or skill, or also furnish the material.

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

3. Hire of carriage of goods (location operis mercium vehendarum) where goods are delivere either to a common carrier (art1713) or to a private person for the purpose of being carried from place to place; and 4. Hire of custody (location custodiae)- where goods are delivered for storage (arts 1507-1520) Loan:

In commodatum, the bailor retains the ownership of the thing loaned while in simple loan, owndership passes to the borrower.

3. Those for the benefit of both parties Deposit for compensation (Art1965) including involuntary deposit and bailments for hire. Usually from bailments involving business transactions known as mutual-benefit bailments.

Art1933: By the contract of loan, one of the parites delkivers 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 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 comodatum the bailor retains the ownerships of the thing loanded, while in simple loan, ownership passes to the borrower.

Bailments for hire: It arises when goods are left with the bailee for some use or service by him and is always for some compensation. 1. Hire of things (location rei)-where goods are delivered for the temporary use of the hirer (art. 1642, 1643)
Art1642: the contract of lease may be of things or of work and service Art1643: in the lease of things, one of the parties binds himself to give to another the enjoyment of use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than 99 years shall be valid.

Contract of loan is 1. A real contract because the delivery of the thing loaned is necessary for the perfection of the contract 2. Unilateral contact because once the subject matter has been delivered, it creates obligations on the party of only one of the parties: i.e. the borrower The cause or consideration of the loan as to the borrower, is the acquisition of the thing, and as to the lender, is the right to demand its return or its equivalent. Kinds of loan: 1. Commodatum-where the bailor delivers a nonconsumable thing so that the latter may use it for a certain time and return the identical thing

2. Hire of service (location operis faciendi) where goods are delivered for some work or labor upon it by the bailee (art1713)
Art1713: By the contract of a piece of work, the contactor binds himself to execute a piece of work for the employer in consideretion of a certain price

2. Simple loan or mutuum- where the lender delivers to the borrower money or other consumable thing upon the condition that the latter shall pay the same amount of the same kind and quality Consumable- when it is consumed, when used in a manner appropriate to its purpose or nature (rice, gasonline,money, fruit, firewood, etc) Loans distinguished from credit Credit- ability to borrow money or things by virtue of the confidence or trust reposed by a lender that he will pay what he may promise within a specified period Loan- the delivery by one party and the receipt by the other party who becomes the owner of a given sum of money or other consumable thing upon an agreement, express or implied to repay the same amount of the same kind and quality with or without interest. Credit VS Debt Credit is a sum credited on the books of a company to a person who appears to be entitled to it. Creditor-debtor relationship, and may be said to imply ability, by reason of property or estates, to make a promised payment. Loan distinguished from discounting of paper In a discount, interest is deducted in advance, while in a loan, interest is usually taken at the expiration of a credit. Discount is always on a double name paper, while a loan is generally on a single name paper. Discount is slightly more expensive for the borrower because interest is calculated on the amount loaned (P1,000.00) and not on the amount actually received. Commodatum 1. 1. Involves something not consumable 2. 2. Ownership of the loan is retained by the lender 3. 3. Essentially gratuitous 4. 4. Borrower must return the same thing loaned 5. 5. May involve real/personal property 6. 6. Loan for use or temporary possession 7. 7.Bailor may demand the return of the thing before the expiration of the term in urgent need 8. 8. Loss of the subject is suffered by the bailor Mutuum Subject matter is money or other consumable things Ownership is transferred to the borrower May be gratuitous or onerous (with stipulation to pay interest) Borrower need only pay the same amount of the some kind and quality Only personal property is involved Loan for consumption

Lender may not demand return before the lapse of the term agreed upon

Borrower suffers the loss even if caused exclusively by a fortuitous event and is not discharged with duty to pay

-a perfected contract of loan can give rise to an action for damages but does not constitute the real contract of loan. Commodatum and mutuum (simple loan) distinguished.

Kinds of Commodatum: 1. Ordinary commodatum 2. Precarioum- onw whereby the bailor may demand the thing loaned at will Delivery essential to perfection of loan Necessary consequence of commodatum and mutuum are real contracts which require the delivery of the subject matter thereof for perfection Necessary in view of the purpose of the contract which is to transfer either the use or ownership of the thing loaned. Binding effect of accepted promise to lend An accepted promise to make a future loan is a consensual contract and binding upon the parties but only after delivery will the real contract of loan arise. -where an application for a loan of money was approved by resolution of the corporation and the corresponding mortgage was executed and registered, there arises a perfected consensual contract of loan.