In WRITING

Immovable property/ Real rights

- Whether Covered by chattel mortgage or pledge

 Rules are different; therefore, it requires that you know the difference
between movable and immovable property

Elements of a Contract
a) Consent
b) Object
c) Cause

Is form an element of a contract?

Not unless the rules require it. Unless the rules require that it be in a certain form.
Then this form should be absolute and indispensable.

Forms a contract
1) Oral
2) Writing
3) In a public instrument – notarization makes it in a public instrument

When it is notarized ---- public instrument

Effect of it being in a public instrument has to do with the presumption of
regularity. Once a lawyer affixes his notarial seal, there is an attachment of
presumption of regularity. For purpose of presentation in court, the presumption
is that it is duly executed and it is authentic. Presumption that a lawyer will not
notarize a document where the parties did not appear before him or this is not
executed or sworn to.

2 documents relevant in credit transaction which should be in a public

instrument
1. Acts which have for the creation, transition and modification of real rights
over immovable properties.
Anything that creates, transmits or modifies any real right over
immovable property

4. Cession of actions or rights proceeding from an act appearing in a public

document.

Even though there is no requirement that it must be in a public instrument, in

order for it to be terminated revoked or ended, it should also be in a public
instrument

The form that created this right or obligation should also the form in which it shall
be terminated or even revoked.
 7. Involuntary Bailment- arises from an accident but without negligence, a person leaves
property in another’s possession
CREDIT
-belief/trust in the ability of another person to pay *Loan is a bailment because there is delivery (loan is a real contract- consent, object,
consideration and delivery; perfected only upon delivery which may be actual or
CREDIT TRANSACTION constructive)
-contracts based on trust and belief
(consensual contract is a contract that arises from the mere consensus of the parties;
*Credit vs. Loan does not require the performance of any formal or symbolic acts to fix the obligation)
-ability to pay; contracts where money is given with guaranty that it shall be paid with or
without interest CREDIT LOAN
-loan is within credit of a person The delivery by one party and the
Ability to borrow money by virtue of the receipt by the other party of a
confidence or trust reposed by a lender given sum of money, upon an
Types of Credit Transaction agreement, express or implied, to
A. Secured- secured with a collateral; security ensure payment; to lessen risk (usually with that he will pay what he may promise
repay the sum loaned, with or
lower interest rates) without interest

Types of Security:
1. Real- any form of asset (movable/immovable)
Ex. Principal contract- Loan; Accessory contract- real estate mortgage (annotated) Kinds of Loan
1. MUTUUM- simple loan; money
2. Personal- just a personal undertaking (to pay on behalf) 2. COMMODATUM- property; loan of something with expectation that it is to be returned
Ex. Guarantor shall pay if debtor fails to pay
*Consumables are products that consumers buy recurrently, i.e., items which "get used up"
B. Unsecured- only secured with a promise or discarded.
*Fungibles are goods which are interchangeable; have no distinguishing characteristics
BAILMENT (bailor/giver & bailee/receiver) from others of like kind, such as grains or oils, so that they can be easily replaced or
-contract to deliver; mere possession is transferred; rightful possession of goods by a substituted.
person who is not its owner
Requirements: COMMODATUM
1. Personal property -loan of a property (real or personal); using it for a certain time with the condition that it
2. Mere possession is transferred shall be returned, hence it is non-fungible and non-consumable (except when loaned for
3. Eventual return of the property exhibit only); gratuitous (out of liberality, free); perfected by delivery (real contract)
-without delivery, merely a consensual contract (promise to enter into a commodatum;
Kinds: binding insofar as it compels a party to deliver the thing)
1. Actual Bailment- actual/constructive delivery of the thing to the bailee -for movable, no form; for immovable, in public instrument (although the law does not
require, an act of prudence)
2. Bailment for Hire/Lucrative Bailment- bailee is compensated - diligence of a good father of a family (ordinary diligence)
Ex. Safety deposit box -bailor retains ownership of the thing loaned, bailor need not be the owner because mere
possession is transferred
3. Bailment of Mutual Benefit- bailee is compensated while bailor enjoys advantages
Ex. Pledge As to Fruits:
General Rule- not subject of commodatum (Art. 441, NCC. To the owner belongs: (1) The
4. Gratuitous Bailment- bailee receives no compensation; bailment for the sole benefit of natural fruits; (2) The industrial fruits; (3) The civil fruits)
bailor (requirement: return upon demand)
Exception- (Art. 1940, NCC. A stipulation that the bailee may make use of the fruits of the
5. Bailment for Sale- bailee agrees to sell goods for bailor (consignment); bailee’s obligation thing loaned is valid) vs. (Art. 1935, NCC. The bailee in commodatum acquires the used of
to return what was not sold 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)
6. Constructive Bailment- arises when law imposes obligation on a possessor to return *use of fruits if with compensation is usufruct
property to its rightful owner
Personal (Not Transmissible)
Art. 1939, NCC. Commodatum is purely personal in character. Consequently:
(1) The death of either the bailor or the bailee extinguishes the contract; 4. Lends or leases it to 3rd person other than members of the household

(2) The bailee can neither lend nor lease the object of the contract to a third person. 5. Saves own thing instead of the thing borrowed- failure to observe due diligence
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. Time of Return
1. Expiration of period stipulated
As to Expenses: 2. After accomplishment of use for which commodatum was constituted
1. Ordinary Expense- bailee does not answer for deterioration of the thing loaned due
only to its use and without his fault 3. Bailor has urgent need of the thing; for temporary use (commodatum is suspended)
4. Upon demand of bailor (Precarium- kind of commodatum where there is no stipulation
2. Extraordinary Expense- ultimately benefits the bailor; bailor refunds bailee, given the
as to duration or devoted use; merely tolerated)
following requirements:
a) For preservation
b) Bailee notifies bailor, unless it is so urgent to prevent danger Acts of Ingratitude (the same with donation)
Art. 765, NCC. The donation may also be revoked at the instance of the donor, by reason of
*bailee shall bear expenses if it is for pure luxury or mere pleasure; for bailee’s benefit ingratitude in the following cases:
*bailor liable for damages incurred by bailee if flaws known by bailor and did not disclose (1) If the donee (bailee) should commit some offense against the person, the honor or
the same the property of the donor (bailor), or of his wife or children under his parental
*bailor cannot exempt himself from paying expenses by abandoning thing to bailee authority;
(2) If the done (bailee) imputes to the donor (bailor) any criminal offense, or any act
EXPENSES BAILOR BAILEE involving moral turpitude, even though he should prove it, unless the crime or the
Ordinary Expenses for the act has been committed against the done (bailee) himself, his wife or children
use and preservation under his authority;
X
(1941) (3) If he unduly refuses him support when the done (bailee) is legally or morally
bound to give support to the donor (bailor)
Deterioration due to the
use (1943) NONE MUTUUM (simple loan)
-involves consumable and fungible thing (same kind, quality and quantity, even if it shall
Extraordinary expenses for change in value; value at the time of the perfection is the basis)
the preservation of the
X -it is barter/exchange if it involves return of a non-consumable thing of the same kind,
thing loaned (1949)
quality and quantity
Extraordinary expense -may be gratuitous or with stipulation of interest
because of actual use,
X X
without fault (1949) -real contract
-not personal
Other expenses other than
from Art. 1941 and Art. -ownership passes to the bailee
X
1949 (1950)
-loss of thing does not extinguish obligation
Damages suffered by bailee
for non-disclosure of flaws Extinguishment of Mutuum (money)
X
(1951)  Payment- currency stipulated, legal tender
 Extraordinary Inflation or Deflation- payment of the value at the establishment of the
obligation
Bailee’s Liability for Loss of Thing Even if Due to Fortuitous Event
*Inflation is the unusual inability of the Philippine Peso to purchase goods, requires the
1. Devoted thing to another purpose not intended- manifest abuse of generosity official announcement from the BSP
2. Kept longer than period stipulated or after accomplishment of stipulated purpose
3. Loaned with appraisal value- manifestation that bailee shall be liable in case of
loss even if arising from fortuitous event