Credit Transactions Flashcards

Flashcards about Credit Transactions

Credit Transactions

All transactions involving the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future.

Principal contracts in Credit Transactions

Contracts of loan (commodatum and mutuum) and deposit

Accessory contracts in Credit Transactions

Contracts that generally depend on the existence of the aforementioned contracts and which tends to strengthen said “belief” or “trust” because of the security given

Types of Accessory contracts

Personal guaranty and Real Guaranty

Contract of loan

The delivery of the thing is necessary for the perfection of the contract

Commodatum

Where the bailor (lender) delivers to the bailee (borrower) a non-consumable thing so that the latter may use it for a certain time and return the identical thing

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

Commodatum

Ordinarily involves something not consumable, ownership of the thing loaned is retained by the lender and is essentially gratuitous

Mutuum

The subject matter is money or other consumable thing, ownership is transferred to the borrower and may be gratuitous or onerous

Commodatum Loan

A loan for use, while Mutuum is a loan for consumption

Precarium

One whereby the bailor may demand the thing loaned at will

Extent of Bailee’s right to use in Commodatum

The right to use is limited to the thing loaned but not to its fruits unless there is a stipulation to the contrary

Consumable goods 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, consumable goods may be the subject of commodatum

Bailor in commodatum the owner of the thing loaned?

The bailor in commodatum need not be the owner of the thing loaned because the contract of commodatum does not transfer ownership

Commodatum Article 1939

Commodatum is purely personal in character and the death of either the bailor or the bailee extinguishes the contract

Obligations of the Bailee

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

Bailee liable for loss

The bailee is liable for the loss of the thing, even if it should be through a fortuitous event if he devotes the thing to any purpose different from that for which it has been loaned

Deterioration of the thing loaned

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

Obligation to respect duration of loan

The primary obligation of the bailor is to allow the bailee the use of the thing loaned for the duration of the period stipulated

Obligations of the Bailor

Refund the extraordinary expenses during the contract for the preservation of the thing loaned

Acts of ingratitude

The bailee committed some offense against the person, honor or property of the bailor, or of his wife or children under his parental authority

Mutuum

A contract where one of the parties (creditor) delivers to another (debtor/borrower) money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid

Obligations of the Borrower

Pay the creditor an Equal amount of the same kind and quality, Pay Value at the time of perfection of loan, if impossible, to deliver the same kind and Pay Interest, if stipulated

Rights of the Borrower

Right of ownership and Right to not pay interest, unless stipulated

Obligations of the Creditor

Barred from placing stipulations under any cloak or device that circumvent laws on usury

Rights of the Creditor

Right to receive an equal amount of the same kind and quality and Right to impose interest, once stipulated

Interest

The compensation allowed by law or fixed by the parties for the loan or forbearance of money, goods or credits

Requisites for Interest to be chargeable

Must be Expressly stipulated, Agreement must be in Writing and Must be Lawful

Kinds of Interest

Simple interest and Compound Interest

Legal Interest

That which the law directs to be charged in the absence of any agreement as to the rate between the parties, or when there are actual and compensatory damages imposed by the Court

Lawful Interest

That which the laws allow or do not prohibit, that is, the rate of interest is within the maximum prescribed by law

Unlawful or usurious interest

That which is paid or stipulated to be paid beyond the maximum fixed by law

Deposit

A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same

Principal Purpose in Deposit

Safekeeping of the thing; if safekeeping is NOT the principal purpose, or is only an accessory obligation, there is NO DEPOSIT but some other contract

Parties in Deposit

Depositor and Depositary

Kinds of Deposit

Extrajudicial deposit and Judicial deposit

Voluntary Deposit Extinguishment

Loss or destruction of thing deposited, or In case of a gratuitous deposit, upon the death of either the depositor or depositary

Obligations of a Depositary

Keep the thing safely, Return the thing to the depositor, heirs, successors or person designated in the contract, when required and Bear the expenses for preservation of the thing deposited if the deposit is onerous

Necessary Deposit

Made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers with common carriers [Arts.1734-1735, CC], or by travelers in hotels and inns [Arts.1996-2004,CC]

Judicial Deposit or Sequestration

Takes place when an attachment or seizure of property in litigation is ordered

Guaranty Art. 2047

By a guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so

Parties to a Guaranty

Creditor, Debtor of the Principal Obligation and Guarantor

Excussion

The guarantor cannot be compelled to pay the creditor unless the latter has Exhausted all of the property of the debtor; and Resorted to all the legal remedies against the debtor

Right to Indemnification

The guarantor who pays for a debtor must be indemnified by the latter.

Right to Subrogation

The guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor

Extinguishment of Guaranty

The guarantor is released if the creditor voluntarily accepts immoveable or other property in payment of the debt, even if he should afterwards lose the same through eviction.

Personal Property Security Act (REPUBLIC ACT No. 11057)

Applies to ALL transactions that secure an obligation with movable collateral with Exceptions Interests in aircrafts and Interests in ships

No More Pledge and Chattel Mortgage Under the PPSA

Contracts creating a security interest over a movable property are referred to simply as “security agreement” and the distinction existing between the contracts of pledge and chattel mortgage under the Civil Code is no longer applicable

Security Interest

property right in collateral that secures payment or other performance of an obligation, regardless of whether the parties have denominated it as a security interest

Priority Rules

The priority of security interests and liens in the same collateral shall be determined according to time of registration of a notice or perfection by other means, without regard to the order of creation of the security interests and liens.

Remedies of Secured Creditor

He may sell or otherwise dispose of the collateral, publicly or privately, subject to the requirements of Section 51(a) and He may retain the collateral in full satisfaction of the secured obligation

Right Of Redemption Under the PPSA

There is now a right of redemption in relation to personal property as security

Real Mortgage

A contract whereby the debtor secures to the creditor the fulfillment of a principal obligation (real security transaction), immediately making immovable property or real rights answerable to the principal obligation in case it is not complied with at the time stipulated

Right to Alienate mortgage credit Article 2128

The mortgage credit may be alienated or assigned to a third person, in whole or in part, with the formalities required by law

Right to Alienate Collateral

The mortgagor may still sell the mortgaged property, and any stipulation to the contrary is void

Essential Requisites

The mortgage must be constituted to secure the fulfillment of a principal obligation, The mortgagor must be the absolute owner of the immovable or alienable real rights and must be recorded in the Registry of Property