II. LOAN

Question 1

Art. 1933. By the contract of loan, one of the parties […], in which case the contract is called a commodatum; or […], in which case the contract is simply called a loan or mutuum.

Commodatum is essentially […].

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum the bailor […], while in simple loan, […].

Answer 1

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 ownerships of the thing loaned, while in simple loan, ownership passes to the borrower.

Question 2

What are the characteristics of a contract of loan?

Answer 2

1. A real contract because the delivery of the thing loaned is necessary for the perfection of the contract (Art. 1934; see also Art. 1316); and
2. A unilateral contract because once the subject matter has been delivered, it creates obligations on the part of only one of the parties, i.e., the borrower.

Question 3

What is the cause or consideration in a contract of loan?

Answer 3

In a contract of loan, the cause is:

1. As to the borrower, the acquisition of the thing; and
2. As to the lender, the right to demand its return or its equivalent.

Question 4

What are the two kinds of loan?

Answer 4

There are two kinds of loan, namely:

1. Commodatum - where the bailor (lender) delivers to the bailee (borrower) a non-consummable thing so that the latter may use it for a certain time and return the identical thing; and
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 the same amount of the same kind and quality

Question 5

What is the difference between a loan and a credit?

Answer 5

The credit of an individual means his ability to borrow money or things by virtue of the confidence or trust reposed by a lender that will pay what he may promise within a specified period.

A loan (mutuum) means the delivery by one party (lender / creditor), and the receipt by the other party (borrower / debtor) who become the owner, of a given sum of money or other consumable thing upon an agreement, express or implied, to repay the same amount of the same kind and quality, with or without interest.

Question 6

Distinguish commodatum and mutuum (simple loan)

Answer 6

To determine whether a loan is commodatum or mutuum, the following are the principal points of distinction:

1. Commodatum ordinarily involves something not consumable (see Art. 1936), while in mutuum, the subject matter is money or other consumable thing;
2. In commodatum, ownership of the thing loaned is retained by the lender (Art. 1933.), while in mutuum, the ownership is transferred to the borrower;
3. Commodatum is essentially gratuitous (ibid.), while mutuum may be gratuitous or it may be onerous, that is, with stipulation to pay interest;
4. In commodatum, the borrower must return the same thing loaned (ibid.), while in mutuum, the borrower need only pay the same amount of the same kind and quality;
5. Commodatum may involve real or personal property (Art. 1937), while mutuum refers to personal property;
6. Commodatum is a loan for use or temporary possession (Art. 1935), while mutuum is a loan for consumption;
7. In commodatum, the bailor may demand the return of the thing loaned before the expiration of the term in case of urgent need (Art. 1964), while in mutuum, the lender may not demand its return before the lapse of the term agreed upon; and
8. In commodatum, the loss of the subject matter is suffered by the bailor since he is the owner (Art. 1942; Art. 1174.), while in mutuum, the borrower suffers the loss even if caused exclusively by a fortuitous event and he is not, therefore, discharged from his duty to pay.

It may also be said that while commodatum is purely personal in character (see Art. 1939.), mutuum is not so.

Question 7

What are the two kinds of commodatum?

Answer 7

Commodatum is divided into:

1. ordinary commodatum (Art. 1933); and
2. precarium - one whereby the bailor may demand the thing loaned at will (Art. 1947).

Question 8

When is a contract of commodatum or simple loan perfected?

Answer 8

Art. 1934. 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.