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ATENEO CENTRAL BAR OPERATIONS 2007
Civil Law
SUMMER REVIEWER
—Adviser: Dean Cynthia Roxas-Del Castillo ; Heads: Joy Marie Ponsaran, Eleanor Mat
eo ; Understudies: Joy Stephanie
Tajan, John Paul Lim; Subject Head: Sarah Lopez; Pledgee: Aiza Constantino—
2 TYPES OF CREDIT TRANSACTIONS:
1. secured transactions – those supported by
a collateral or an encumbrance of property
2. unsecured transactions – those supported
only by a promise to pay or the personal commitment of another such as a guarant
or or surety
SECURITY is something given, deposited or serving
as a means to ensure the fulfillment or enforcement of an obligation or of prote
cting some interest in the property
2 TYPES OF SECURITY:
1.personal – when an individual becomes a
surety or a guarantor
2.real or property – when an emcumbrance is
made on property
BAILMENT is the 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 a
ccounted for when a special purpose is accomplished or kept until the bailor rec
laims it.
PARTIES IN BAILMENT
1.bailor – the giver, the party who delivers
possession/custody of the thing bailed
2.bailee – the recipient, the party who receives
the possession/custody of the thing delivered
KINDS OF CONTRACTUAL BAILMENT W/
REFERENCE TO COMPENSATION
1. for the sole benefit of the bailor (gratuitous) e.g. gratuitous deposit, mand
atum (do some act w/ respect to a thing)
2.for the sole benefit of the bailee (gratuitous)
e.g. commodatum, gratuitous simple loan or
mutuum
3. for the benefit of both parties e.g. depositfor
compensation, involuntary deposit, pledge
and bailments for hire:
a. hire of things – temporary use
b. hire of service – for work or labor
c. hire of carriage of goods – for carriage
d. hire of custody – for storage
LOAN
CHARACTERISTICS
1.real contract – delivery is essential for perfection of the loan (BUT a promise
to lend, being consensual, is binding upon the parties)
2.unilateral contract - only the borrower has
the obligation
KINDS
1.commodatum – where the bailor delivers to the bailee a non-consumable thing so t
hat the latter may use it for a certain time and return the identical thing
kinds of commodatum:
a. ordinary commodatum – use by the bailee of the thing is for a certain period of
time
b. precarium – one whereby the bailor may demand the thing loaned at will; exists
in cases where:
i. neither the duration of the contract nor the use to which the thing loaned sh
ould be devoted has been stipulated
ii. if the use of the thing is merely
tolerated by the owner
2.mutuum or simple loan - where the lender delivers to the borrower money or oth
er consumable thing upon the condition that the latter will pay the same amount
of the same kind and quality (when it is consumed in a manner appropriate to its
purpose)
LOAN
CREDIT
1. delivery by one party and the receipt by the other party of a given sum of mo
ney or other consumable thing
upon
an agreement, express or implied
2. to repay the same amount of the same kind and quality, w/ or w/o interest
The
ability
of
an
individual
to
borrow money or things by virtue of the confidence or trust reposed by a lender
that he will pay what he may promise w/in a specified period
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 (contract of security)
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Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS2007
Page 191 of 297
LOAN
DISCOUNTING PAPER
Interest is usually taken at the expiration of a credit
Interest is deducted in
advance
Always on single-name
paper
Double name paper
More expensive for the
borrower
because interest is calculated on the amount loaned and not the amount actually
received
COMMODATUM
MUTUUM
(SIMPLE LOAN)
Object
Ordinarily non-
consumable
Money or other
consumable thing
Ownership
of the thing
Ownership
is retained by the lender
Ownership
is transferred to the borrower
Cause
Essentially
gratuitous
Gratuitous
or
onerous
(w/ stipulation to pay interest)
Thing to be
returned
Borrower must return the same thing loaned
Borrower
need only pay the same amount of the same kind and quality
Subject
Matter
May involve real
or
personal
property
Only
personal
property
Purpose
Loan for use or
temporary
possession
Loan
for
consumption
When to
return
Bailor
may
demand
the return of the thing
loaned
before
the expiration of the term in case of urgent need
Lender may not demand its return before the lapse of the term agreed upon
Who bears
risk of loss
Loss
of
the subject matter is suffered by the bailor since he is the owner
Borrower suffers the loss (even if caused exclusively by a fortuitous event and
he is not
therefore discharged from his duty to pay)
Nature
Purely personal
Not purely
personal
COMMODATUM
(Articles 1935-1952)
1.cause: essentially gratuitous (otherwise, if
there Is compensation, it might be lease)
2.purpose: temporary use of the thing loaned but not its fruits, unless stipulat
ed or is incidental (otherwise, if the bailee is not entitled to the use of the
thing, it might be deposit)
3.subject matter: generally non-consumable goods but if the consumable goods are
not for consumption, such may be the subject of the commodatum, as when merely
for exhibition (Art. 1936)
4.bailor need not be the owner of the thing
loaned (Art 1938)
•
it is sufficient that he has a possessory
interest
•
a mere lessee or usufructuary may lend but the borrower or bailee himself may no
t lend not lease the thing loaned to him to a third person (Art. 1932[2])
5. purely personal
a. death of either party terminates the contract UNLESS there is stipulation to
the contrary
b. generally, bailee can neither lend nor lease the object to a 3rd person in th
e absence of some agreement to that effect
c. use of the thing loaned may extend to the bailee’s household (who are not consi
dered 3rd persons) except:
1. when there is a contrary stipulation
2. nature of the thing forbids such use
6.enjoyment of fruits – a stipulation to make use of fruits is valid, but it is ne
ver presumed. The enjoyment of the fruits must only be incidental to the use of
the thing itself, for if it is the main cause, the contract may be one of usufru
ct.
OBLIGATIONS OF THE BAILEE (Arts 1941-1945)
(COOLRD2)
1. To pay for the ordinary expenses for the use
and preservation of the thing loaned(Art.
1941)
2. To pay for all other expenses other than those referred to in Art. 1941 and 1
949 (refund of extraordinary expenses either in full or in half)
(Art. 1950)
REASON: Bailee makes use of the thing.
Expenses for ostentation are to borne by the
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Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS2007
Page 192 of 297
bailee because they are not necessary for the
preservation of the thing
3. To take good care of the thing with the
diligence of a good father of a family(Art.
1163)
4. To be liable for loss even if due to a fortuitous
event:
GR:the bailee is not liable for loss or damage
due to a fortuitous event (Art. 1174)
Reason: the bailor retains the ownership of the
thing loaned
Exceptions: (Art. 1942 – punishes the bailee
for his improper acts although they may not be the proximate cause of the loss)
a. Bad faith – if the bailee devotes the thing to any purpose different from that
for which it has been loaned
b. Delay - he keeps it longer than the period stipulated or after the accomplish
ment of the use for which the commodatum has been constituted
c. Has been delivered with appraisal -the thing loaned has been delivered with a
ppraisal of its value, UNLESS there is a stipulation exempting the bailee from r
esponsibility in case of a fortuitous event
d. Lends the subject matter to a 3rd person - he lends or leases the thing to a
third person who is not a member of his household
e. Ingratitude - being able to save the thing borrowed or his own thing, he chos
e to save the latter
5. The bailee has NO RIGHT to retain the thing loaned as security for claims he
has against the bailor, even though they may be by reason of extraordinary expen
ses (Art. 1944)
Reasons:
a. Ownership remains in bailor – the bailee acquires only the use of thing, the ow
nership of which remains w/ the bailor
b. Only temporary use given to bailee – the bailee would be violating the bailor’s t
rust in him to return the thing as soon as the period stipulated expires or the
purpose has been accomplished
Exception: Claim for damages suffered
because the bailor doesn’t advise bailee of
the flaws known to him (Art. 1951)
6. A bailee doesn’t answer for the deterioration of the thing loaned due only to t
he use thereof and without his fault
7. Liability when there are 2 or more bailees: The
presumption is that they are solidarily liable
(Art. 1945)
Reason for the presumption: to safeguard effectively the right of the bailor. Th
e law presumes that the bailor takes into account the personal integrity and res
ponsibility of all the bailees and that, therefore, he would not have constitute
d the commodatum if there were only one bailee
OBLIGATIONS OF THE BAILOR(AD-READ-HA)
1. Primary obligation of the bailor:
GR: To allow the bailee the use of the thing loaned
for the duration of the period stipulated or until the accomplishment of the pur
pose for w/c the commodatum was constituted
Exceptions: the bailor may demand the return or
its temporary use upon:
a. bailor has an urgent need for the thing (Art.
1946) – the contract is suspended
• Reason: the right of the bailor is based on
the fact that commodatum is essentially
gratuitous
b. bailee commits an act of ingratitude (Art.
1948)
•
if the bailee should commit an offense against the person, the honor or the prop
erty of the bailor, or of the wife or children under his parental authority
•
if the bailee imputes to the bailor any criminal offense, or any act involving m
oral turpitude, even though he should prove it, unless the crime or the act has
been committed against the bailee himself, his wife, or children under his autho
rity; and
•
if the bailee unduly refuses the bailor support when the bailee is legally or mo
rally bound to give support to the bailor
•
Reason: the person who commits any of the acts of ingratitude makes himself unwo
rthy of the trust reposed upon him by the bailor.
•
2. May demand the thing at will when the contract is
precarium
•
PRECARIUM – a kind of commodatum
where the bailor may demand the thing at will. It has been defined as a contract
by which the owner of a thing, at the request of another person, gives the latt
er the thing for use as long as the owner shall please
3. To refund the extraordinary expenses (Art. 1949)
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ATENEO CENTRAL BAR OPERATIONS2007
Page 193 of 297
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GR on reimbursement: Notice should be given by
the bailee to the bailor regarding such extraordinary
expenses
Reason for the rule: notice is required because it is possible that the bailor m
ay not want to incur the extraordinary expense at all.
Exception: where the extraordinary expenses are
so urgent that the reply to the notification cannot be
awaited w/o danger.
4. if the extraordinary expenses arise from the actual use of the thing and even
though bailee acted w/o fault, the expenses will be borne equally by both the b
ailor and the bailee (50-50) (Art. 1949,
2ndpar.)
•
Reasons:
a. the bailee pays ½ because of the benefit derived from the use of the thing loan
ed to him;
b. the bailor pays the other ½ because he is the owner and the thing will be retur
ned to him
Exception: Stipulation to the contrary that provide
for a different apportionment of such expenses or that they shall be borne by th
e bailee or bailor alone
5. all other expenses which are not necessary for the use and preservation of th
e thing must be shouldered by the borrower (bailee)
6. the depreciation caused by the reasonable and
natural use of the thing is borne by the bailor(A rt .
1943)
Reason: The parties to the contract know that the
thing
borrowed cannot be used without
deterioration due to ordinary wear and tear.
Exceptions:
a. when there is a stipulation to the
contrary;
b. when the bailee is guilty of fault or
negligence;
c. if he devotes the thing to any purpose different from that for which has been
loaned
7. To pay damages for known hidden flaws(Art.
1951)
Requisites: (the following must concur)
a. there is a flaw or defect in the thing
loaned
b. the flaw or defect is hidden
c. the bailor is aware thereof
d. he does not advise the bailee of the
same
e. the bailee suffers damages by reason of
the flaw or defect
Exception: when the defect is not known to the
bailor, he is not liable because commodatum is
gratuitous.
8. The bailor has no right of abandonment for
expenses and damages (Art. 1952)
Reason: The expense and/or damages may
exceed the value of the thing loaned
SIMPLE LOAN OR MUTUUM
SIMPLE LOAN OR MUTUUM – contract whereby
one of the parties delivers to another money or other fungible thing w/ the unde
rstanding that the same amount of the same kind and quality shall be paid. (Art.
1933)
SIMPLE LOAN
RENT/LEASE
Signifies the delivery of money or some other consumable thing to another w/ a p
romise to repay an equivalent amount of the same kind and quality
One party delivers to
another
some
non- consumable thing in order that the latter may use it during a certain perio
d and return it to the former
There is a transfer of ownership of the thing delivered
The owner of the lessee or the lessor of the property does not lose his ownershi
p. He simply loses control over the property rented during the period of the con
tract
The relation between parties is that of obligor and oblige
The relation is between
landlord and tenant
The creditor receives
payment for his loan
The owner of the property receives “compensation” or “price” either in money, provisions
, chattels, or labor from the occupant thereof in return for its use
Basis of
comparison
MUTUUM
COMMODATUM
BARTER
Subject
matter
Money or any other fungible
things/
Personal
or
real
property (generally non- consumable)
Non-
fungible or
non-
consumabl
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Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS2007
Page 194 of 297
personal
property
e things
Obligation
of bailee
Pay
or deliver the same kind or quality loaned to the bailee
Return
the identical thing borrowed when the time has expired or the purpose
has
been served
The
equivalent
thing
is
given
in return for what has been
received
Nature of
contract
May
be
gratuitous
Always
gratuitous
Onerous
NATURE OF MUTUUM
a.bilateral - borrower’ promise to pay is the consideration for the lender’s obligat
ion to furnish the loan
b.no criminal liability upon failure to pay
SUBJECT MATTER
a. fungible or consumable-depending on the intent of the parties, that the retur
n of the thing is equivalent only and not the identical thing
b. money
c. if the transfer of ownership is on a non- fungible thing, with the obligation
of the other to give things of the same kind, quantity and quality, it is a bar
ter
INTEREST
GR: Interest must be expressly stipulated in writing,
and it must be lawful (Art. 1956)
Exceptions:
1.Indemnity for damages – the debtor in delay is liable to pay legal interest (6%/
12%) as indemnity for damages even in the absence of a stipulation for the payme
nt of interest. Interest as indemnity for damages is payable only in case of def
ault or non-performance of contract.
•
Basis for computation for indemnity:
a. Central Bank Circular 416 – 12% p.a. in
cases of:
•
Loans
•
Forbearance of money, goods or
credits
•
Judgments involving such loans or forbearance, in the absence of the express agr
eement as to such rate of interest
•
During the interim period from the
date judgment until actual payment
b. Art. 2209 of the Civil Code – 6% p.a. in
cases of:
•
Other sources (e.g. sale)
•
Damages arising from injury to
persons
•
Loss of property which does not
involve a loan
2. Interest accruing from unpaid interest - interest due shall earn interest fro
m the time it is judicially demanded although the obligation may be silent upon
this point.
DETERMINATION OF INTEREST PAYABLE IN
KIND:
Its value shall be appraised at the current price of the products or goods at th
e time and place of payment. (Art. 1958)
Purpose: to make usury harder to perpetrate
COMPOUNDING INTEREST (Art. 1959)
GR: accrued interest (interest due and unpaid) shall
not earn interest
Exceptions:
•
When judicially demanded
•
When there is an express stipulation made by the parties to wit: that the intere
st due and unpaid shall be added to the principal obligation and the resulting t
otal amount shall earn interest
Compounding interest may be availed of only when there is a written stipulation
in the contract for the payment of interest.
BARTER
BARTER - A contract whereby one person transfers
the ownership of non-fungible things to another with
the obligation on the part of the latter to give things of
the same kind, quantity and quality.
DEPOSIT
DEPOSIT - A deposit is constituted from the moment
a person receives a thing belong to another, with the
obligation of safely keeping it and of returning the
same.
If the safekeeping of the thing delivered is not the principal purpose of the co
ntract, there is no deposit but some other contract.
NOTE:it is essential that the depository is not the
owner of the thing deposited
Credit Transactions
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