Commercial Law

Week 2 - Credit Transactions

Arabit, Emmanuel
Overview
1. Intro in the concept of Credit, Debt and Security
2. Concept of Loan in General
3. Commodatum
CIVIL LAW > CREDIT > LOANS > COMMODATUM
1. Intro in the concept of Credit, Debt and Security
A. Credit and Credit transactions defined
1. Republic Act No. 3765, Sec.3 (2)
2. People v. Concepcion, G.R. No.
L-19190

B. Commercial Credit Transactions

Code of Commerce, Arts. 1 to 3
Republic Act No. 3765, Sec.3 (2)

Credit" means any loan, mortgage, deed of trust, advance, or discount; any conditional
sales contract; any contract to sell, or sale or contract of sale of property or services,
either for present or future delivery, under which part or all of the price is payable
subsequent to the making of such sale or contract; any rental-purchase contract; any
contract or arrangement for the hire, bailment, or leasing of property; any option,
demand, lien, pledge, or other claim against, or for the delivery of, property or money;
any purchase, or other acquisition of, or any credit upon the security of, any obligation
of claim arising out of any of the foregoing; and any transaction or series of transactions
having a similar purpose or effect.
People v. Concepcion, G.R. No. L-19190

The "credit" of an individual means his ability to borrow money by virtue of the
confidence or trust reposed by a lender that he will pay what he may promise.
(Donnell vs. Jones [1848], 13 Ala., 490; Bouvier's Law Dictionary.) A "loan" means the
delivery by one party and the receipt by the other party of a given sum of money, upon
an agreement, express or implied, to repay the sum loaned, with or without interest.
(Payne vs. Gardiner [1864], 29 N. Y., 146, 167.) The concession of a "credit" necessarily
involves the granting of "loans" up to the limit of the amount fixed in the "credit,"
B. Commercial Credit Transactions. Code of Commerce, Arts. 1 to
3
Article 1

The following are merchants for the purposes of this Code:

1. Those who, having legal capacity to trade, customarily devote themselves thereto.

2. Commercial or industrial associations which are formed in accordance with this Code.

Article 2

Commercial transactions, be they performed by merchants or not, whether they are specified in this Code or not, shall be governed by the provisions
contained in the same; in the absence of such provisions, by the commercial customs generally observed in each place; and in the absence of both, by
those of the common law.

Commercial transactions shall be considered those enumerated in this Code and any others of a similar character.

Article 3

The legal presumption of a customary engagement in commerce exists from the time the person who desires to trade gives notice through circulars,
newspapers, handbills, posters exhibited to the public, or in any other manner whatsoever, of an establishment, the purpose of which is to conduct any
commercial transaction.
Overview
1. Intro in the concept of Credit, Debt and Security
2. Concept of Loan in General
3. Commodatum
CIVIL LAW > CREDIT > LOANS > COMMODATUM
2. Concept of Loan In General
A. General Concepts
B. Obligation to deliver
C. Object of a loan
D. Consideration of a loan
E. Obligation to return or pay
F. Contract to loan
A. General Concepts (Art. 1933 / Art. 1305)

Article 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)

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. (1254a)
B. Obligation to deliver (Art. 1934)

Article 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)

The obligation to deliver is further explained in

Garcia v. Thio, G.R. No. 154878
In Garcia v. Thio, G.R. No. 154878
A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the
object of the contract. This is evident in Art. 1934 of the Civil Code which provides:
An accepted promise to deliver something by way of commodatum or simple loan is binding
upon the parties, but the commodatum or simple loan itself shall not be perfected until the
delivery of the object of the contract. (Emphasis supplied)
Upon delivery of the object of the contract of loan (in this case the money received by the
debtor when the checks were encashed) the debtor acquires ownership of such money or loan
proceeds and is bound to pay the creditor an equal amount.
C. Object of a loan (Art. 1933 / Art. 418)

Article 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)

Art. 418. Movable property is either consumable or nonconsumable. To the first class belong those movables which cannot be used in a
manner appropriate to their nature without their being consumed; to the second class belong all the others. (337)
D. Consideration of a Loan
Article 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)
E. Obligation to Return or Pay (Art. 1933 / Art. 1232-33)
Article 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)

Art. 1232. Payment means not only the delivery of money but also the performance, in any other manner, of an
obligation. (n)
Art. 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case may be. (1157)
F. Contract to Loan (Art. 1934)

Article 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)

Contract to loan is further explained in the ff. Cases

In Saura Import and Export Co. v. Development Bank

The Supreme Court ruled in favor of the defendant. The Court's reasoning centered on
the concept of mutual desistance, which extinguishes obligations when both parties
agree to terminate a contract. The Court noted that while there was an initial offer and
acceptance regarding the loan, the subsequent actions of Saura, Inc. indicated a failure
to comply with the conditions set by RFC, particularly regarding the availability of local
raw materials.
In BPI Investment Corp. v. CA and ALS Management

The Supreme Court clarified that a loan contract is not merely a consensual contract
but a real contract, which is perfected only upon the delivery of the loan amount. Thus,
the obligation to pay monthly amortizations could not commence until after the loan
was perfected. The court also noted that in reciprocal obligations, neither party incurs
delay if the other party has not fulfilled its obligations. Since BPIIC had not fully
complied with its obligation to release the loan, ALS and Litonjua were not in default
for failing to make payments.
In Pantaleon v. American Express International, Inc.

The Supreme Court clarified that AMEX had no contractual obligation to approve Pantaleon's
purchase requests within a specific timeframe. The relationship between a credit card issuer and a
cardholder is characterized as one where the cardholder's use of the card constitutes an offer to enter
into a loan agreement, which only becomes binding upon the issuer's approval. The Court emphasized
that the delay in approving Pantaleon's purchase was not indicative of bad faith or gross negligence, as
AMEX was exercising its right to review Pantaleon's credit history due to the unusually large
transaction amount. The Court also noted that Pantaleon was aware of the time constraints of the
tour group and could have canceled the purchase to avoid the delay. Thus, the embarrassment and
humiliation he experienced were largely self-inflicted, and AMEX's actions did not constitute a breach
of duty. Consequently, the Court found no basis for awarding damages, as there was no legal injury or
breach of duty by AMEX.
Overview
1. Intro in the concept of Credit, Debt and Security
2. Concept of Loan in General
3. Commodatum
CIVIL LAW > CREDIT > LOANS > COMMODATUM
3. Commodatum

A. General Concepts
B. Parties to a Commodatum
C. Liabilities for Expenses and damages
D. Liability for Loss
E. Obligation to Return
A. General Concepts

Article 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)

Article 1935. The bailee in commodatum acquires the use 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)
A. General Concepts

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)
Consideration and Object of Commodatum

Article 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)
Article 1937. Movable or immovable property may be the object of commodatum. (n)
Producers Bank v. Court of Appeals

As correctly pointed out by both the Court of Appeals and the trial court, the evidence
shows that private respondent agreed to deposit his money in the savings account of
Sterela specifically for the purpose of making it appear "that said firm had sufficient
capitalization for incorporation, with the promise that the amount shall be returned
within thirty (30) days." Private respondent merely "accommodated" Doronilla by
29

lending his money without consideration, as a favor to his good friend Sanchez. It was
however clear to the parties to the transaction that the money would not be removed
from Sterela’s savings account and would be returned to private respondent after thirty
(30) days.
B. Parties to a commodatum

A. Ownership by Bailor
B. Use by Bailee
C. Solidary liability of Bailees
Ownership by Bailor

Article 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)

Article 1938. The bailor in commodatum need not be the owner of the thing loaned. (n)
Use by Bailee

Article 1935. The bailee in commodatum acquires the use 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)

Article 1939. Commodatum is purely personal in character. Consequently: (1) (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)

Article 1940. A stipulation that the bailee may make use of the fruits of the thing loaned is valid. (n)
Solidary Liability of Bailees

Article 1945. When there are two or more bailees to whom a thing is loaned in the same
contract, they are liable solidarily. (1748a)
C. Liability for Expenses and Damages
A. Ordinary Expenses
B. Extraordinary Expenses
C. Other Expenses
D. Abandonment by Bailor
E. Right of Retention by Bailee
A. Ordinary Expenses
Article 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)

Article 1935. The bailee in commodatum acquires the use 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)

Article 1941. The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned. (1743a)

Article 1943. The bailee does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault. (1746)
Pajuyo v. Court of Appeals

While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the property in
good condition. The imposition of this obligation makes the Kasunduan a contract different from
a commodatum. The effects of the Kasunduan are also different from that of a commodatum. Case law on
ejectment has treated relationship based on tolerance as one that is akin to a landlord-tenant relationship
where the withdrawal of permission would result in the termination of the lease. The tenant’s withholding
of the property would then be unlawful. This is settled jurisprudence.
Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as
bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. The
obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of
commission, administration and commodatum. These contracts certainly involve the obligation to deliver
or return the thing received.
B. Extraordinary Expenses

Article 1949. The bailor shall refund the extraordinary expenses during the contract for the
preservation of the thing loaned, provided the bailee brings the same to the knowledge of
the bailor before incurring them, except when they are so urgent that the reply to the
notification cannot be awaited without danger.
If the extraordinary expenses arise on the occasion of the actual use of the thing by the
bailee, even though he acted without fault, they shall be borne equally by both the bailor
and the bailee, unless there is a stipulation to the contrary. (1751a)
C. Other Expenses

Article 1950. If, for the purpose of making use of the thing, the bailee incurs expenses
other than those referred to in articles 1941 and 1949, he is not entitled to
reimbursement. (n)
D. Abandonment by Bailor
Article 1952. The bailor cannot exempt himself from the payment of expenses or damages
by abandoning the thing to the bailee. (n)
E. Right of Retention by Bailee

Article 1944. The bailee cannot retain the thing loaned on the ground that the bailor owes
him something, even though it may be by reason of expenses. However, the bailee has a
right of retention for damages mentioned in article 1951. (1747a)

Article 1951. The bailor who, knowing the flaws of the thing loaned, does not advise the
bailee of the same, shall be liable to the latter for the damages which he may suffer by
reason thereof. (1752)
D. Liability for Loss

Article 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)
D. Liability for Loss

Art. 1942. The bailee is liable for the loss of the thing, even if it should be through a fortuitous event:
(1) If he devotes the thing to any purpose different from that for which it has been loaned;
(2) If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the
commodatum has been constituted;
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation
exemption the bailee from responsibility in case of a fortuitous event;
(4) If he lends or leases the thing to a third person, who is not a member of his household;
(5) If, being able to save either the thing borrowed or his own thing, he chose to save the latter. (1744a
and 1745)
Republic v. Bagtas
A contract of commodatum is essentially gratuitous. If the breeding fee be considered a compensation, then the contract would be a lease of the
bull. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith, because she had continued
possession of the bull after the expiry of the contract. And even if the contract be commodatum, still the appellant is liable, because article 1942
of the Civil Code provides that a bailee in a contract of commodatum —

. . . is liable for loss of the things, even if it should be through a fortuitous event:
(2) If he keeps it longer than the period stipulated . . .

(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case
of a fortuitous event;

The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was renewed for another period of one year to end on 8
May 1950. But the appellant kept and used the bull until November 1953 when during a Huk raid it was killed by stray bullets. Furthermore, when
lent and delivered to the deceased husband of the appellant the bulls had each an appraised book value, to with: the Sindhi, at P1,176.46, the
Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It was not stipulated that in case of loss of the bull due to fortuitous event the late husband
of the appellant would be exempt from liability.
E. Obligation to Return
Article 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)

ARTICLE 1946. The bailor cannot demand the return of the thing loaned till after the expiration of the period stipulated, or after the
accomplishment of the use for which the commodatum has been constituted. However, if in the meantime, he should have urgent
need of the thing, he may demand its return or temporary use.

In case of temporary use by the bailor, the contract of commodatum is suspended while the thing is in the possession of the bailor.
(1749a)
E. Obligation to Return

Art. 1947. The bailor may demand the thing at will, and the contractual relation is called a
precarium, in the following cases:
(1) If neither the duration of the contract nor the use to which the thing loaned should be
devoted, has been stipulated; or
(2) If the use of the thing is merely tolerated by the owner. (1750a)

Article 1948. The bailor may demand the immediate return of the thing if the bailee
commits any act of ingratitude specified in article 765. (n)
E. Obligation to Return

Art. 765. The donation may also be revoked at the instance of the donor, by reason
of ingratitude in the following cases:
(1) If the donee should commit some offense against the person, the honor or the
property of the donor, or of his wife or children under his parental authority;
(2) If the donee imputes to the donor any criminal offense, or any act involving
moral turpitude, even though he should prove it, unless the crime or the act has
been committed against the donee himself, his wife or children under his authority;
(3) If he unduly refuses him support when the donee is legally or morally bound to
give support to the donor. (648a)
Quintos v. Beck
The contract entered into between the parties is one of commadatum, because under it the plaintiff
gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership
thereof; by this contract the defendant bound himself to return the furniture to the plaintiff, upon
the latters demand (clause 7 of the contract, Exhibit A; articles 1740, paragraph 1, and 1741 of the
Civil Code). The obligation voluntarily assumed by the defendant to return the furniture upon the
plaintiff's demand, means that he should return all of them to the plaintiff at the latter's residence or
house. The defendant did not comply with this obligation when he merely placed them at the
disposal of the plaintiff, retaining for his benefit the three gas heaters and the four eletric lamps. The
provisions of article 1169 of the Civil Code cited by counsel for the parties are not squarely applicable.
The trial court, therefore, erred when it came to the legal conclusion that the plaintiff failed to
comply with her obligation to get the furniture when they were offered to her.
 Quick Recap
Commodatum
Commodatum is a type of gratuitous loan governed by Articles 1933 to 1952 of
the Civil Code of the Philippines. It involves the delivery of a non-consumable
thing by the owner (the lender or commodant) to another person (the borrower
or commodatary) for the latter's use and for free, with the obligation to return
the exact same thing after use.
1. ESSENTIAL ELEMENTS
a. Delivery of the Thing
-The lender delivers the thing to the borrower.
-Ownership of the thing remains with the lender.
b. Non-consumable Thing
-The thing lent is not intended to be consumed through use. (e.g., tools, vehicles, or books).
-If consumable goods are lent but intended to be used for exhibition or display, it can still constitute commodatum.
c. Gratuitousness
-Commodatum is always without compensation or consideration. If compensation is involved, it becomes another -type of contract,
such as a lease.
d. Obligation to Return
-The exact same thing must be returned, not a similar or equivalent object.
2. CHARACTERISTICS OF COMMODATUM
1.Real Contract
◦ It is perfected upon the delivery of the thing. Mere agreement without delivery does not
create the contract.
2.Unilateral or Bilateral
◦ It is primarily unilateral, as only the borrower typically has obligations (to preserve and
return the thing).
◦ It may become bilateral when the lender assumes specific obligations (e.g., to reimburse
necessary expenses).
3.Nominate Contract
◦ It is specifically provided for and regulated under the Civil Code.
4.Gratuitous
◦ The lender receives no compensation for lending the thing.
3. KINDS OF COMMODATUM
1.Ordinary Commodatum
◦ The thing is lent for the borrower's use for a specified time or purpose.
2.Precarium (Precarious Commodatum)
◦ The lender may demand the return of the thing at will.
◦ It arises when:
▪ The borrower is allowed to use the thing by mere tolerance of the
lender, or
▪ No specific period or purpose is stated in the contract.
4. OBLIGATIONS OF THE PARTIES
A. OBLIGATIONS OF THE COMMODATARY (BORROWER):
1. To Preserve the Thing
◦ The borrower must exercise extraordinary diligence in the use and preservation of the thing (Art. 1941).
2. To Use the Thing According to its Purpose
◦ The thing must be used only for the purpose stipulated or customary for its nature (Art. 1942).
◦ Misuse or use beyond the agreed purpose may lead to liability or termination of the contract.
3. To Return the Thing
◦ The exact same thing must be returned upon the expiration of the period or accomplishment of the purpose (Art. 1946).
4. Liability for Loss or Damage
◦ The borrower is generally liable for the loss or deterioration of the thing if:
▪ The loss is due to the borrower’s fault or negligence.
▪ The borrower delays returning the thing.
▪ The thing is used for purposes other than agreed or customary.
▪ The borrower lends the thing to a third person without the lender’s consent (Art. 1942 and Art. 1949).
5. Reimbursement of Necessary Expenses
◦ The borrower must reimburse the lender for extraordinary expenses incurred for the preservation of the thing (Art. 1949).
B. OBLIGATIONS OF THE COMMODANT (LENDER):
1. To Allow Use of the Thing
◦ The lender must allow the borrower to use the thing for the agreed purpose or period.
2. To Reimburse Extraordinary Expenses
◦ The lender is obligated to reimburse extraordinary expenses necessary for the preservation of the thing if incurred by the borrower (Art. 1949).
3. Liability for Defects
◦ The lender is liable for damages arising from hidden defects in the thing which the lender knew or should have known but failed to disclose (Art. 1951).
5. RIGHTS OF THE PARTIES
A. RIGHTS OF THE COMMODANT (LENDER):
1.To Demand Return
◦ The lender may demand the return of the thing upon:
▪ The expiration of the period.
▪ Accomplishment of the purpose.
▪ Breach by the borrower.
2.To Recover Damages
◦ The lender may recover damages for any unauthorized use or deterioration due to the borrower’s fault.
3.To Demand Immediate Return (Precarium)
◦ In precarious commodatum, the lender may demand the return of the thing at will.
B. RIGHTS OF THE COMMODATARY (BORROWER):
1.Right to Use
◦ The borrower has the right to use the thing in accordance with the terms of the contract.
2.Right to Reimbursement
◦ The borrower may demand reimbursement for extraordinary expenses incurred to preserve the thing.
6. SPECIAL RULES
1.Loss of the Thing
◦ The borrower is not liable for loss if:
▪ The thing perishes due to fortuitous events, unless:
▪ The borrower is in default.
▪ The thing was used for unauthorized purposes.
▪ The thing was lent to a third party without the lender’s consent.
2.Subleasing or Lending
◦ The borrower cannot lend or sublease the thing to a third person without the lender’s consent.
Violation makes the borrower liable for loss or deterioration (Art. 1942).
3.Termination of Commodatum
◦ The contract terminates upon:
▪ Expiration of the period.
▪ Accomplishment of the purpose.
▪ Demand for return in precarious commodatum.
End of Week 2