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COMMERCIAL LAW I

COURSE OUTLINE /SYLLABUS

ATTY. CYNTHIA D. ARIAS-RAMOS

Faculty

The Course:

Commercial Law I is part of Mercantile Law subject in the College of Law curriculum
that focuses on different types of Credit Transactions and the law(s) governing each
type. Credit Transaction particularly relates to the civil code provisions on loan,
interest, deposit, pledge (repealed by PPSA), mortgage, antichresis, guaranty,
suretyship. It also involves mercantile contracts like Warehouse Receipt, Trust
Receipts, Letter of Credit, Financial Rehabilitation and Insolvency Act and other
credit transaction covered by special laws.

This syllabus also spells out the objectives and the expectations from the students at
the end of the semester.

Similarly, it points out the reading materials to focus on and the class activities to
comply with in order to complete the requirements of the course.

Furthermore, this syllabus aims to help the students design their study routine.

The Course Outline:

This course outline imparts the students with a guide or instructions on why and how
the subject is taught. This outline also instructs the students what topic(s) should be
discussed each meeting. It contains the brief description, rationale, objective,
content, reading guide and references of the subject.

Rationale

Since Credit Transactions, is a subject that deals with different kinds of contracts, be
it civil or commercial contracts, students will be equipped with theoretical knowledge
on how contract under each category is perfected. This subject is an important
foundation in transactional practice of law. Full knowledge of this subject will help
students to create or prepare a contract based on the client’s intention.

The Course Objectives:

At the end of the semester, students are expected to:

1. Identify, learn and acquire the basic knowledge of the various laws covered by
Commercial Law I, such as loan, interest, deposit, pledge, mortgage,

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antichresis, guaranty, suretyship and other Credit Transactions including FRIA

and Personal Property Security Act.

2. Comprehend the salient features of each type of credit transaction, such as,
but not limited to the definition, nature, coverage, concept, distinctions of the
different types of credit transaction.

3. Demonstrate their basic knowledge and understanding of the subject by

participating in the discussion of each topic through questions and answers
during recitations.

4. Apply the laws, rules and regulations on Credit Transactions through case
digest, recitation, and written examination.

The Course Methodologies

The teaching methodologies shall comprise of the following, but not limited to:
a) lectures
b) recitation and discussion
c) reporting
d) case digest
e) midterm and final exam.
The Course Content:

The subject includes lecture and discussion of the following:

I. BRIEF OVERVIEW OF CREDIT TRANSACTION

II. Part One: Contract of Loan

A. Contract of Commodatum
a. Contracts of Loan (Definition, Distinctions)
b. Real Contract (How perfected, Concept of Real Contracts, Accepted
Promise to Lend)
c. Nature of Commodatum (Parties to Contract, Purpose of Contract,
Essentially Gratuitous)
d. Subject Matter (In general, If Subject Matter is Movable Property)
e. Bailor Need not be the Owner
f. Purely Personal Contract
g. Obligation to Preserve Thing Loaned (Degree of Diligence required,
Obligations to Pay Ordinary Expenses
h. Liability for Fortuitous Event (General Rule, Exceptions,
Unauthorized Conversion of Use, If Return is Delayed, If Delivered
with Appraisal, Unauthorized Delegation of Use, if he saves his own
thing))
i. Responsibility for Deterioration
j. Bailee’s Right of Retention (Obligation to Return, When Bailee is
Entitled to Retain)
k. Solidary Liability of two or more Bailees

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l. Obligations of the Bailor

m. Return of thing loaned (When bailor entitled of the thing loaned,
Exceptions to the Rule)
n. Contract of Precarium (Case of Pajuyo vs CA)
o. Acts of Ingratitude
p. Expenses (Extraordinary Expenses, Extraordinary Expenses Arising
on Occasion of Actual Use, Rule on Other Expenses)
B. Contract of Mutuum
a. Contract of Mutuum
b. Obligation of the Parties
c. When Interest Due
d. Rate of Interest (Rate of Monetary Interest, Rate of Compensatory
Interest, guidelines in Imposition of Interest
e. Interest in Interest (General Rule and Exceptions, Nature of Interest
on Interest)
f. Payment of Interest as Natural Obligation
g. Usury Law

III. Part Two: Deposit

C. Contract of Deposit
a. Concept of Deposit (Definition, Treatment of Bank’s Safety Deposit
Boxes)
b. Deposit is Real Contract
c. How constituted
d. Requirement of Compensation
e. Subject Matter of the Contract
f. Kinds of Extrajudicial Deposit
g. Concept of Voluntary Deposit (definition, parties to the contract,
requirement of ownership on the part of depositor, deposit made by
two persons who each believes himself as owner)
h. Form of Voluntary Deposit
i. Effect of Incapacity of One of the Parties
j. Obligation to Safekeep and to Return
k. Deposit with Third Person
l. Changing Way of Deposit
m. Use of Thing Deposited
n. If thing deposited is lost
o. Irregular Deposit
p. Thing Delivered Closed and Sealed
q. Return of the Thing Deposited
r. Sale of thing in Good Faith
s. Obligations of the Depositor
t. Extinguishment of Deposit
u. Necessary Deposit
v. Deposit of Effects by Travelers in Hotels or Inns
w. Extent of Liability of Hotelkeepers
x. Inn-keepers Liens
y. Judicial Deposit

Part IV. Guaranty and Suretyship

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D. Accessory Contracts (Definition, Distinction between Guaranty and

Suretyship)
E. Contract of Suretyship
a. Definition, Nature of Surety Liability, Laws applicable to Contract of
Suretyship)
b. Cause or Consideration
c. Parties to the Contract of Guaranty
d. Kinds of Guaranty
e. Subject Matter
f. Nature and Extent of Liability
g. Requirement of Formalities
h. When Debtor Obliged to Furnish Guarantor
i. Effects if Guarany in General
j. Benefits of Excussion
k. When Excussion cannot take place
l. Conditions Precedent for Invoking Defenses of Excussion
m. Action by Creditor
n. Rights of Sub-Guarantor to Excussion
o. Benefit of Division
p. Relationship between Debtor and Guarantor
q. Benefit of Subrogation
r. Rights and Defenses of Debor
s. Guarantor’s Remedy against Debtor
t. Where Debtor Procured a Guarantor
u. Effects of Guaranty among Co-Guarantors
v. Extinguishment of Guaranty
w. Direct but General Causes
x. Direct but Special Causes
y. Right to Avail of Debtor’s Defenses
z. Legal And Judicial Bonds (In General, Legal Bonds, Judicial Bonds,
Qualifications of Bondsman, Excussion not Available to Judicial
Bondsman)

Part V. Mortgage and Antichresis

F. Real Estate Mortgage
a. Introduction, Concept, Definition, Kinds of Mortgage)
b. Requirements for Perfection and Validity
c. Applicability of Article 2052 to Mortgage
d. Mortgage may secure Future Advancements
e. Mortgage Merely Subjects Property to Lien
f. Pactum Commissorium
g. Indivisibility of Mortgage
h. May Secure Conditional Obligation
i. Promise to Constitute Mortgage
j. Subject Matter of Mortgage
k. Formalities Required in Mortgage
l. Mortgage is Right In Rem
m. Properties included in Mortgage
n. Mortgage Credit
o. Effects of Subsequent Transfer

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p. Pacto de Non Aliendo

q. Concept of Equitable Mortgage
r. Remedies of Creditor (Mortgage)
s. Foreclosure of Mortgage
G. Antichresis
a. Concept, Definition, Subject Matter, Essence of Antichresis
b. Application of Fruits
c. Formalities Required in Antichresis
d. Taxes and Expenses for Preservation
e. Return of the Property
f. Effect of Nonpayment of Debt

Part VI. Personal Property Security Act

H. Introductory
a. Scope of PPSA
b. Creation of Security Act
c. Perfection of Security Interest
d. Rules in Determination of Priority Interest
1. Priority Rules for Specific Cases
e. Enforcement of Security Interest

Part VII. Concurrence and Preference of Credits

I. Concurrence and Preference
a. Availability of Debtor’s Property
b. Law Governing Insolvency
c. Liability of Community or Conjugal Property
d. Share of Insolvent Debtor in Co-ownership
e. If Insolvent Debtor is merely a trustee
f. Concurrence and Preference of Credit
g. Classifications of Credit
h. Order of Preference Among Special Preferred Credits
i. Ordinary Preferred Credits
j. Common Credits

Part VIII. Case Digest [cases to be assigned during the class]

Reading Guide/Basic Materials/Reference:

 Credit Transactions 2024 Edition by Elmer Rabuya

 Commercial Law I by Claridades
 Civil Code Provisions on Loan
 Civil Code Provisions on Deposit
 BSP Issuances on Interest Rates
 An Act Amending Further Certain Sections of Act Numbered Two
Thousand Six Hundred Fifty-Five as Amended, Otherwise Known as
"The Usury Law (PD 116)
 CBP Circular No. 905-82
 BSP Circular No 799 s 2013
 The Usury Law as amended.
 Civil Code Provisions on Usury

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 Civil Code Provisions on Guaranty

 Civil Code Provisions on Pledge, Mortgage, and Antichresis
 Law on Extra Judicial Foreclosure of Mortgage
 Judicial Foreclosure of Mortgage under Rule 68 of the Rules of Court
 Law on Personal Property Security (RA 11507)
 Civil Code Provisions on Concurrence and Preference of Credits
 Procedure in Extra-Judicial Foreclosure of Mortgage
 An Act Providing for the Rehabilitation or Liquidation of Financially
Distressed Enterprises and Individuals (RA 10142)
 An Act Concerning Warehouse Receipts (Act No. 2137)
 An Act Providing for the Regulation of Trust Receipt Transactions (PD
115)
 Code of Commerce Provisions on Letters of Credit
 An Act to Require the Disclosure of Finance Charges in Connections
with Extension of Credit (RA 3765)
 Regulating the Establishment and Operations of Pawnshop (PD 114)

Activities to Engage Students:

To achieve the objective(s) of the course, the students should:

1) Study and learn the basic concepts, salient features of the law covering
each type of credit transaction.
2) Engage in case digest and reporting of the facts, issue and ruling of the
cases assigned.
3) Report on a specific topic assigned to student.

Exercise to Practice, Apply, Synthesize:

Students are required to do the following:

a. Accomplish and submit assigned classwork.

b. Actively participate in class discussion / recitation.
c. Read and digest illustrative cases as assigned.
d. Participate in all short quizzes.

Note: This Course Outline is not exclusive, additional content or topic found relevant
or helpful in understanding the subject may be further introduced.

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Commercial Law I - Credit