LOAN

Category: Obligations and Contracts

GENERAL PROVISIONS ON LOAN

 
Art.  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)
 

CONTRACT OF LOAN

>     The  abovementioned  defines  the  two  kinds  of  loan  and gives their characteristics

CHARACTERISTICS OF THE CONTRACT

1.   Real contract—because the delivery of the thing loaned is necessary for the perfection of the contract
2.   Unilateral  contract—once  the  subject  matter  has  been delivered, it creates obligations on the part of only one of the parties
 

CAUSE OR CONSIDERATION IN A CONTRACT OF LOAN

>     For the borrower—the acquisition of the thing
>     For  the  lender—the  right  to  demand  its  return  or  its equivalent
 

KINDS OF LOAN

1.   COMMODATUM—where  the  bailor  delivers  to  the  bailee  a non-consumable  thing  so  that  the  latter  may  use  it  for  a certain time and return the identical thing

2.   SIMPLE  LOAN  OR  MUTUUM—where  the  lender  delivers  to the  borrower  money  or  other  consumable  thing  upon  the condition that the latter shall pay he same amount of the same kind and quality
 

WHEN IS A THING CONSUMABLE? 

It is consumable when used in  a  manner  appropriate  for  its  purpose  or  nature,  like  gasoline, rice, money, fruit, firewood, etc. 

1.   In commodatum, if you do not return the thing when it is due, you will be liable for estafa because ownership of the property is not transferred to the borrower.

2.   In  loan,  the  borrower  who  does  not  pay  is  not  criminally liable for estafa.  His liability is only a civil liability for the breach  of  the  obligation  to  pay.    This  is  because  in  loan, ownership  of  the  thing  is  transferred  to  the  borrower,  so there  is  no  unlawful  taking  of  property  belonging  to another.
 
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. (n)
 

DELIVERY ESSENTIAL TO PERFECTION OF LOAN

>     The  abovementioned  is  a  necessary  consequence  of  the fact  that  commodatum  and  mutuum  are  real  contracts which require the delivery of the subject matter thereof for their perfection
 

ACCEPTED PROMISE TO MAKE A FUTURE LOAN  

>     Is there a contract of loan at this point?  No, because loan is a real contract and is perfected only upon delivery of the thing. 
 

FORMALITY IN LOAN 

>     There are no formal requisites for the validity of a contract of loan except  if there  is  a  stipulation for the  payment  of interest.  A stipulation for the payment of interest must be in writing.