CREDIT TRANSACTIONS

Course Outline
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.

I. REVIEW OF CONTRACT LAW

(1) Elements – Art. 1305, 1318, CC.

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service.

Art. 1318. There is no contract unless the following requisites concur: C O C

1. Consent of the contracting parties;
2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established.

(2) Characteristics of Contract – Art. 1306, 1308, 1311, 1315

Autonomy
Art. 1306. (GR)The contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, (ER) provided they are not contrary to law, morals, good customs, public order, or
public policy.

Mutuality
Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will
of one of them.

Relativity
Art. 1311. (GR)Contracts take effect only between the parties, their assign and heirs, (ER)except in case
where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation
or by provision of law. The heir is not liable beyond the value if the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person.

Obligatory Force
Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith.
Art. 1315. Contracts are perfected by mere consent, and from that moment, the parties are bound not only to
the fulfillment of what has been expressly stipulated, but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law.

(3) Perfection – Art. 1315, 1316

(GR) Art. 1315. Contracts are perfected by mere consent, and from that moment, the parties are bound not
only to the fulfillment of what has been expressly stipulated, but also to all the consequences which, according
to their nature, may be in keeping with good faith, usage and law.

(ER)Art. 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected until the
delivery of the object of the obligation.

II. CONTRACT OF LOAN

 (1) General Provisions – Art. 1933 and 1934

Art. 1933. By the contract of loan, one of the parties delivers to another, either (1) 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 (2)
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.

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

Contract of Loan v. Contract to Loan

(BPI Investment Corporation v. Court of Appeals, G.R. No. 133632, February 15, 2002)

- A loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of
the contract. The contract in Bonnevie is a perfected consensual contract under Art. 1934, which is an accepted promise
to deliver something by way of a simple loan. A contract of loan involves a reciprocal obligation, wherein the obligation or
promise of each part is the consideration for that of the other.

- A perfected consensual contract can give rise to an action for damages. However, said contract does not constitute
the real contract of loan which requires the delivery of the object of the contract for its perfection and which gives rise to
obligations only on the part of the borrower.

(2) Commodatum and Mutuum distinguished

Commodatum Mutuum

Character Essentially gratuitous Naturally gratuitous

Object Non-fungible thing (but may be Money or fungible thing

consumable) (substitutability)

Purpose Loan for use Loan for consumption

Primary obligation Return of the thing loaned Payment of equal quality and
quantity

Risk of Loss Bailor (as owner) Borrower (as owner and as

debtor of a generic thing)

Duration May be claimed before the end May not be claimed until the
of the term if urgently needed term expires or is forfeited

Transfer of There is no transfer of Ownership of the thing loaned

ownership ownership of the thing loaned is transferred to the borrower

Use of the fruits Bailee has no right to use the Borrower (as owner) may use
fruits unless so stipulated the fruits
(3) Commodatum – Art. 1935 - 1952

- Distinguish from usufruct and lease

- Pactum de commodando or an accepted promise to deliver something by way of
commodatum
- Republic v. Court of Appeals, G.R. No. L-46145, November 26, 1986
- Spouses Abella v. Spouses Abella, G.R. No. 195166, July 8, 2015
- Producers Bank of the Philippines v. Court of Appeals, G.R. No. 115324,
February 19, 2003.

(4) Mutuum – Art. 1953 – 1961.

- Art. 2209 – 2213

- Act No. 2655, as amended by Presidential Decree No. 116
- C.B. Circular No 905, Series of 1982|||
- BSP Circular No. 799 dated June 21, 2013
- Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, [July 12, 1994],
304 PHIL 236-254
- Nacar v. Gallery Frames, G.R. No. 189871, [August 13, 2013], 716 PHIL 267-
283)
- (Spouses Almeda v. Court of Appeals, G.R. No. 113412, [April 17, 1996], 326
PHIL 309-326)
- Security Bank Corp. v. Spouses Mercado, G.R. Nos. 192934 & 197010, [June 27,
2018]
- Spouses Silos v. Philippine National Bank, G.R. No. 181045, [July 2, 2014], 738
PHIL 156-206
- De la Paz v. L & J Development Co., G.R. No. 183360, [September 8, 2014]

(5) Truth in Lending Act

- Bank of the Philippine Islands v. Spouses Yu, G.R. No. 184122, [January 20,
2010], 624 PHIL 408-421
- Spouses Silos v. Philippine National Bank, G.R. No. 181045, [July 2, 2014], 738
PHIL 156-206)