Commodatum and Mutuum and Barter

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.

Article 1935

Commodum

Usefulness

Commodo

Particular usefulness to a borrower

Real - perfected by delivery

Principal - can stand alone by itself

Gratuitous - no consideration 

Personal - based on trust

Features or Characteristics of Commodatum as a Contract

GR: Right to the use (jus utendi) and not the right to the fruits (jus fruendi)

XPNs: There is a stipulation to the contrary

What Bailee (Borrower) in Commodatum Acquires

GR: Non-consummable goods

XPNs: Consumable goods only if the intention is to use for display (ad ostentationem)

Subject Matter of Commodatum

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.

Article 1936

Movable or immovable property may be the object of commodatum.

Article 1937

Immovable property

Movable property

Properties That May Be the Object of Commodatum

The bailor in commodatum need not be the owner of the thing loaned.

Article 1938

The contract of commodatum does not transfer ownership.

What is the reason for Article 1938

Right to the use of property

All that is required is that the bailor has the ___________ of the property which he is lending

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.

Article 1939

All rights and obligations arising from commodatum are not transmissible to their heirs

Personal nature of commodatum

The death of one does not extinguish the commodatum, unless there is a stipulation to the contrary.

Death in case of two or more borrowers

A stipulation that the bailee may make use of the fruits of the thing loaned is valid.

Article 1940

The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned.

Article 1941

The bailee is supposed to return the identical thing so he is obliged to take care of the thing with the digilence of a good father of a family.

Reason for article 1941

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 commodatum has been constituted;

(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;

(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.

Article 1942

The bailee does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault.

Article 1943

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.

Art. 1944

When there are two or more bailees to whom a thing is loaned in the same contract, they are liable solidarily.

Article 1945

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.

Article 1946

GR: Bailor cannot demand immediate return

XPNs: Urgent necessity of the thing in which he may demand its return or temporary use

Demand immediate return

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.

Article 1947

Precarium is a special form of commodatum where there is no stipulated duration or the use of the thing is merely tolerated

What is precarium?

The bailor may demand the immediate return of the thing if the bailee commits any act of ingratitude specifi ed in Article 765.

1948

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 notifi cation 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.

Article 1949

GR: Paid by the bailor and he must be given a noticed/discretion before incurring them

XPNs: Extraordinary expenses arise during actual use of bailee, in such case the extraordinary expenses is shouldered by them equally

Extraordinary expenses

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)

Article 1950

The bailor who, knowing the fl aws 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.

Article 1951

If although bailor knows the defect but he does not inform the bailee, bailor is liabled incase the bailee is injured due to the flaws. However, he is not liable for not communicating anything which he did not know. 

When bailor knows flaws 

The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee.

Article 1952

He is not exempt from payment of expenses or damages because the value of the thing might be less than the value of the expenses or damages

Effect of bailor’s abandoment or giving the object

A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality.

Article 1953

A contract whereby one person transfers the ownership of non-fungible things to another with the obligation on the part of the latter to give things of the same kind, quantity, and quality be considered a barter.

Article 1954

1) Currency stipulated

2) Legal tender in the Philippines

In case of promissory notes, it shall produce the effect of payment only when they have been cashed

Liability of borrower of money

Value of the thing at the time of PERFECTION applies

Loan on things other than money

No interest shall be due unless it has been expressly stipulated in writing.

Article 1956

The interest must be stipulated in WRITING.

Formality of interest

Monetary interest

Compensatory interest

Kinds of interest

Monetary interest - if stipulated in the contract

Compensatory - if there is a delay after a demand is made (either judicially or extra-judicially)

How interest arises

Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.

When an interest earns an interest

In the determination of the interest, if it is payable in kind, its value shall be appraised at the current price of the products or goods at the time and place of payment.

Article 1958

Value should be at time and place of PAYMENT

Determination of interest if in kind

Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest.

Article 1959

GR: Accrued interest will not bear interest

XPNs: (a) There is agreement to this effect or (b) if there is judicial demand

When accrued interest earns interest

If the borrower pays interest when there has been no stipulation therefor, the provisions of this Code concerning solutio indebiti, or natural obligations, shall be applied as the case may be.

Article 1960

GR: Borrower may recover interest paid due to undue payment or solutio indebiti

XPNs: If he agreed orally, he cannot recover interest paid

Payment of interest when there is no stipulation

Usurious contracts shall be governed by the Usury Law and other special laws, so far as they are not inconsistent with this Code.

Article 1961

By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing.

Article 1638

Clear intention: by the manifest of intention

Unclear intention: Barter = Thing given > Money; Sale = Thing given < Money

Mixed consideration

Mutual delivery 

Consummation of barter

From moment of consent

Perfection of barter

Substitute money does not mean sale

Explain substitute money

If one of the contracting parties, having received the thing promised him in barter, should prove that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in exchange, but he shall be entitled to damages.

Article 1639

The aggrieved person is freed from his own duty to DELIVER. Moreover, he can claim DAMAGES.

Effect if giver was not the owner of the thing delivered

One who loses by eviction the thing received in barter may recover that which he gave in exchange with a right to damages, or he may only demand an indemnity for damages. However, he can only make use of the right to recover the thing which he has delivered while the same remains in the possession of the other party, and without prejudice to the rights acquired in good faith in the meantime by a third person.

Article 1640

If evicted, the loser can choose between (a) recovery of what he has given PLUS damages, or (b) claim DAMAGES

Effect of Eviction in Case of Barter

As to all matters not specifi cally provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales.

Article 1641