Credit Transactions, Bailments, and Consumer Protection Laws

Credit Transactions

Credit transactions involve the purchase or loan of goods, services, or money with a promise of future payment or delivery. These transactions are fundamental to modern economies, enabling individuals and businesses to acquire assets and manage cash flow. Credit transactions are governed by specific laws and regulations to protect the rights and obligations of both parties involved.

Parties to Bailments

1. Bailor: The giver who delivers possession or custody of the thing bailed. The bailor retains ownership of the property but temporarily transfers possession to another party.

2. Bailee: The recipient who receives possession or custody of the thing delivered. The bailee has a duty to take reasonable care of the property and return it to the bailor according to the terms of the bailment agreement.

Kinds of Bailment Contract

1. For the sole benefit of the bailor:

   • Gratuitous deposit: A deposit where the bailee provides safekeeping services without compensation.

   • Mandatum: A service that the bailee undertakes to perform gratuitously on behalf of the bailor.

2. For the sole benefit of the bailee:

   • Commodatum: A loan of a non-consumable item for temporary use, with the expectation that it will be returned in its original condition.

   • Gratuitous mutuum: A loan of consumable goods or money, with the expectation that the bailee will return the equivalent amount.

3. For the benefit of both parties:

   • Deposit for compensation; involuntary deposit: A deposit where the bailee receives payment for safekeeping services.

   • Pledge: A bailment of personal property as security for a debt or obligation.

   • Bailments for hire: Situations where the bailee is compensated, such as renting equipment or using a storage facility.

Loan

A loan involves one party delivering to another something non-consumable for temporary use and return, or money/consumable items with the condition of repayment in the same amount, kind, and quality. Loans can be either secured or unsecured, with secured loans requiring collateral to mitigate risk.

Characteristics of the Contract

1. Real Contract: Perfection requires the delivery of the thing loaned $(Article 1934; Article 1316)$. Delivery is essential for the contract to be valid.

2. Unilateral Contract: Obligations arise only on the part of one party after the subject matter is delivered. Only the borrower has obligations once the loan is made.

Kinds of Loan

1. Commodatum: Bailor (lender) delivers a non-consumable thing to the bailee (borrower) for temporary use, with the obligation to return the identical thing. The borrower is responsible for the safekeeping and return of the item.

2. Mutuum: Bailor (lender) delivers money or other consumable things to the bailee (borrower) with the condition to pay the same amount of the same kind and quality. This type of loan transfers ownership to the borrower, who is then obligated to repay the loan.

Commodatum vs. Mutuum

Kinds of Commodatum

1. Ordinary commodatum $(Art. 1933)$

2. Precarium $(Art. 1947)$: Bailor may demand the thing loaned at will.

Accepted Promise vs. Perfected Commodatum/Loan

An accepted promise to deliver something by way of commodatum or simple loan is binding, but the commodatum or simple loan itself is perfected only upon delivery $(Art. 1934)$. A promise indicates intent, but delivery completes the transaction.

Consumable Goods in Commodatum

Consumable goods may be subject to commodatum if the purpose is not consumption but exhibition $(Art. 1936)$. For example, displaying food items at a trade show.

Extent of Bailee’s Right of Use

Bailee acquires the use of the thing loaned but not its fruits, unless stipulated. May involve movable and immovable properties. Any benefits from the property, such as rental income, remain with the bailor unless otherwise agreed.

Commodatum: Purely Personal

• Death of either party extinguishes the contract. The personal nature of commodatum means that the agreement does not transfer to heirs.

• Bailee cannot lend or lease the object to a third person. The bailee's right to use the property is exclusive and cannot be delegated.

Obligations of the Bailee

1. Liable for ordinary expenses for the use and preservation of the thing loaned. The bailee must cover costs associated with normal use and upkeep.

2. General Rule: Not liable for loss or damage due to a fortuitous event.

   • Exceptions:

     • Bailee devotes thing to a different purpose

     • Bailee keeps thing longer than stipulated period

     • Thing loaned was delivered with appraisal of its value (unless otherwise stipulated)

     • Bailee lends thing to a third person not a member of his household

     • Bailee chooses to save his own thing over the thing borrowed

3. Bailees are solidarily liable when the thing is loaned to two or more bailees in the same contract. Each bailee is fully responsible for the entire obligation.

Deterioration and Retention

• Bailee is not responsible for deterioration due to use. Normal wear and tear is expected and does not create liability.

• Bailee has no right of retention for expenses owed by the bailor. The bailee cannot hold the property to ensure payment of expenses.

• Bailees are solidarily liable under a single contract.

Ordinary Wear and Tear

General Rule: Bailee is not liable for ordinary wear and tear due to use of the thing loaned. Exceptions:

a. If he is guilty of fault or negligence

b. If he devotes thing to any purpose different from that for which it has been loaned.

Obligations of Bailor

1. To allow the bailee the use of the thing loaned for the stipulated period, except in cases of urgent need. The bailor must respect the bailee's right to use the property as agreed.

2. To refund extraordinary expenses for preservation, provided bailor is notified (unless urgent need). Significant costs to maintain the property must be reimbursed.

3. To refund 50% of extraordinary expenses arising from actual use (caused by fortuitous event), unless otherwise stipulated. This applies to unexpected costs due to unforeseen events.

4. To pay damages for known hidden flaws. The bailor is liable for any harm caused by defects they were aware of but did not disclose.

Bailor's Rights and Liabilities

• Bailor can demand return if bailee commits an act of ingratitude. Abuse of the bailment relationship allows the bailor to terminate the agreement.

• Bailor is liable for damages if he doesn't advise bailee of known flaws.

• $(Art. 1952)$: Bailor cannot exempt himself from expenses or damages by abandoning the thing.

Precarium

• If duration of the contract has not been stipulated.

• If use or purpose of the thing has not been stipulated.

• If use of thing is merely tolerated by the bailor.

$(Art. 1952)$. The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee.

Mutuum

Mutuum is a contract where one party delivers money or consumable things to another with the understanding that the same amount, kind, and quality will be paid. This is a standard loan agreement.

Fungible Things

Fungible things are those dealt with by number, weight, or measure, easily replaceable with another item practically the same. Examples include grains, liquids, and currency.

Characteristics of Mutuum

1. Borrower acquires ownership and can dispose of the thing borrowed; no criminal liability for failure to pay debt. Once the loan is made, the borrower has full control over the property.

2. If money is loaned, payment must be made in legal tender of the Philippines; in cases of extraordinary deflation or inflation, payment is based on the value of the currency at the time of creation of the obligation. This protects both parties from extreme economic fluctuations.

3. If fungible thing was loaned, the borrower is obliged to pay the lender another thing of the same kind, quality and quantity. The borrower must replace the loaned item with an equivalent one.

Fungible Things Other Than Money

If what was loaned is a fungible thing other than money, the debtor owes another thing of the same kind, quantity and quality, even if it should change in value. In case it is impossible to deliver the same kind, its value at the time of the perfection of the loan shall be paid.

Distinctions between Mutuum and Lease

Interest in Mutuum

• Interest must be expressly stipulated in writing $(Article 1956)$. Oral agreements regarding interest are not enforceable.

• If interest is payable in kind, its value is appraised at the current price at the time and place of payment. This ensures fair valuation of non-monetary interest.

Deposit

Deposit is constituted when a person receives a thing belonging to another, with the obligation of safely keeping it and returning it. Safekeeping is the primary purpose of a deposit.

Safekeeping as Principal Purpose

If safekeeping is not the principal purpose, it is not a deposit but some other contract. The intent to safeguard property distinguishes a deposit from other agreements.

Agreement vs. Perfected Deposit

Agreement to constitute a deposit is binding, but the deposit itself is not perfected until delivery $(Art. 1963)$. The physical transfer of the item is necessary for the deposit to be valid.

Characteristics of Deposit

1. Real Contract: Perfected by delivery of the subject matter.

2. If gratuitous, it is unilateral; if onerous, it is bilateral. A deposit can be either free or for compensation.

3. Principal purpose is safekeeping.

4. May be entered into orally or in writing. Both verbal and written deposit agreements are valid.

Deposit vs. Mutuum

Deposit vs. Commodatum

Kinds of Deposit

1. Judicial

2. Extrajudicial

   • Voluntary

   • Necessary

Judicial Deposit

• Occurs when attachment or seizure of property in litigation is ordered $(Art. 2005)$. Also referred to as “sequestration”.

• To secure or protect owner's right.

• Always onerous. Judicial deposits always involve compensation.

• May involve movables and immovables.

• Depositary is obliged to return only upon court order. The depositary must hold the property until instructed by the court.

Extrajudicial Deposit

• Constituted by the will of the parties.

• May only involve movable property.

• Purpose is safekeeping.

• Generally gratuitous. Extrajudicial deposits are usually free of charge.

• Depositary is obliged to return the thing upon the demand of depositor. The item must be returned whenever the depositor requests it.

Voluntary Deposit

Generally, deposit is voluntary.

Kinds of Necessary Extrajudicial Deposit

1. In compliance with a legal obligation

2. On occasion of any calamity

3. By travelers in hotels and inns

4. By travelers with common carrier

Object of Deposit

• Only corporeal or tangible movable or personal property may be the object of deposit, whether voluntary or necessary.

• Judicial deposit may cover movable and immovable property.

• A deposit may be made by two or more persons each of whom believes himself entitled to the thing deposited with a third person, who shall deliver it in a proper case to the one to whom it belongs.

Voluntary Deposit Details

• one wherein the delivery is made by the will of the depositor.

• For safe keeping only

• must return same item

Rule: Depositary Capacitated, Depositor not Capacitated

Depositary subject to all obligations.

Depositary may be compelled to return the thing by the guardian, or administrator.

Rule: Depositary Incapacitated, Depositor is Capacitated

• The depositor shall only have an action to recover the thing deposited while it is still in the possession of the depositary.

• The depositor may compel the latter to pay him the amount by which he may have enriched or benefited himself with the thing or its price.

• If a third person who acquired the thing acted in bad faith, the depositor may bring an action against him for its recovery.

Obligations of Depositary

1. To keep safely the thing and return it.

2. Liable for loss in case he made deposits to 3rd party who is manifestly unfit.

3. Responsible for the negligence of his employee.

4. Not to change way or manner of deposit.

5. To collect interest if holding commercial instruments.

6. Not to make use of thing deposited unless authorized

7. Liable for fortuitous event under some circumstances.

8. To return closed and sealed things in the same condition.

9. Return products, accessories and accessions.

10. Pay interest or money converted to personal use.

Deposit with Third Person

vIn case of stipulation, depositary can deposit the thing to 3rd person but he is liable if the latter is manifestly careless or unfit.

Commercial Instruments

If the deposited are commercial instruments:

• To collect the them and the interests, if any, when it becomes due.

• To take such steps as may be necessary in order that the securities may preserve their value and the rights corresponding to them.

Commingling of Grain

The depositary may commingle grain or other articles of the same kind and quality, in which case the various depositors shall own or have a proportionate interest in the mass.

Use of thing Deposited

The depositary cannot make use of the thing deposited without the express permission of the depositor.

However, when the preservation of the thing deposited requires its use, it must be used but only for that purpose.

Use of thing Deposited When allowed

When the depositary has permission to use the thing deposited, the contract loses the concept of a deposit and becomes a loan or commodatum, except where safekeeping is still the principal purpose of the contract.

Depositary Liability for loss

Depositary is liable for the loss of the thing through a fortuitous event:

(1) If it is so stipulated;

(2) If he uses the thing without the depositor's permission;

(3) If he delays its return;

(4) If he allows others to use it, even though he himself may have been authorized to use the same.

Bank Deposits

Fixed, savings, and current deposits of money in banks and similar institutions are SIMPLE LOAN.

When Thing is Closed and Sealed

a. The depositary must deliver the same in the same condition.

b. Pay for damages should the seal or lock be broken through his fault.

c. Keep the secret.

Opening a Locked Box

When it becomes necessary to open a locked box or receptacle, the depositary is presumed authorized to do so, if the key has been delivered to him; or when the instructions of the depositor as regards the deposit cannot be executed without opening the box or receptacle.

Depositor Ownership and Capacity

• The depositary cannot demand that the depositor prove his ownership of the thing deposited.

• If depositary discovers that the thing has been stolen and who its true owner is, he must advise the latter of the deposit.

• If the depositor should lose his capacity to contract after having made the deposit, the thing cannot be returned except to the persons who may have the administration of his property and rights.

Return of thing

*The thing deposited must be turned to the depositor upon demand, even though a specified period or time for such return have been fixed.

*If there is justifiable reasons for not keeping the thing deposited, the depositary may return the things even before the time designated, unless the deposit is for valuable consideration.

Force Majeure or Government Order

If the depositary, by force majeure or government order loses the thing and receives money or another thing in exchange, the depository must deliver the money or other thing given.

Right of Depositor if Depositary’s Heir sells the thing in Good Faith

1. Receive the price, or

2. Assignment of action for the unpaid price

Obligation of the Depositor

1. Reimburse the depositary for expenses of preservation, if the deposit is gratuitous.

2. Pay losses incurred due to the character of the thing.

Pay losses incurred due to the character of the thing – EXCEPTIONS

1. The depositor was not aware of the dangerous character of the thing

2. The depositor was not expected to know the dangerous character of the thing;

3. The depositary was notified of the dangerous character of the thing.

4. The depositor is aware of the dangerous character of the thing.

$(Art. 1994)$. is a pledge created by law. (The depositary may retain the thing until the full payment of what may be due his

by reason of the deposit.

Extinguishment of Deposit

Aside from the general mode of extinguishment of obligations, a deposit is extinguished on the following grounds:

1. Loss or destruction of the thing;

2. In case of gratuitous deposit, upon the death of either party.

Necessary Deposit

Necessary Deposit - one wherein the deposit is not made by the will of the depositor but created by force of the law or on occasion of a calamity.

Necessary Deposits

1. Made in compliance with a legal obligation

2. Made on the occasion of any calamity.

3. Made travellers in hotels and inns.

4. Made by passengers of common carriers.

Requisites for Hotels and Inns to be Liable

1. They are previously informed about the effects brought by the guests, and

2. The guest have taken the precautions prescribed for their safekeeping.

Hotels and Inns v

The hotel is liable for the vehicles, animals and articles which have been introduced or placed in the annexes of the hotel.

Liabilities of Hotelkeeper

1. Hotelkeeper is liable regardless of the amount in the following cases:

   a) The loss or injury is caused by his servants or employees as well as by strangers provided that notice has been given and proper precautions taken. $(Article 1998)$; and

   b) The loss is cause by the act of a thief or robber done without the use of arms and irresistible force $(Article 2001)$ for in this cause, the hotelkeeper is apparently negligent.

2. Stipulations on exemption or diminution of liability is void $(Article 2003)$.

3. Hotelkeeper has a right to retain the things of guests as security for unpaid lodging expenses and supplies.

Hotelkeeper Not Liable

a) The loss or injury is caused by force majeure like flood, fire $(Article 2000)$;

b) Loss is due to theft or robbery by a stranger with the use of arms or irresistible force $(Article 2001)$, etc., unless he is guilty of fault or negligence in failing to provide against the loss or injury from said cause (see Article 1170, 1174);

c) The loss is due to the acts of the guests, his family, servants or visitors $(Article 2002)$.

d) The loss arises from the character of the things brought into the hotel $(Article 2002)$.

Hotelkeeper Responsibility

*The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. $(Art. 2003, NCC)$

*Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as necessary depositary is suppressed or diminished shall be void. $(Art. 2003, NCC)$

Hotel-Keeper Right

The hotel-keeper has a right to retain the things brought into the hotel by the guest, as a security for credits on account of lodging, and supplies usually furnished to hotel guests. $(Art. 2004)$

Guaranty and Suretyship

Guaranty is a contract whereby a person binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so and his property are exhausted to pay all his obligations.

Suretyship

Suretyship is a contract whereby one person, the surety, engages to be solidarily liable for a debt, default, miscarriage of another.

Suretyship - a relation which exist where one person (principal) has undertaken an obligation and another person (surety) is under a direct and primary obligation to the creditor if the former fails to pay.

Rules in Contract of Suretyship

• since he is solidarily liable, he has the same obligations as that of his principal, with respect to the creditor.

• the surety is liable the moment there is failure to pay

Guaranty vs. Suretyship

Characteristics of a Contract of Guaranty

1. accessory

2. subsidiary and conditional

3. unilateral

4. requires that the guarantor must be a person distinct from the debtor

Rules in Contract of Guaranty

Guaranty is generally gratuitous

Guaranty is an accessory contract, there must be a valid principal obligation for guaranty to be valid. Guarantor may secure the performance of voidable, unenforceable, natural, conditional, and future obligations $(Article 2052)$.

It is not presumed and must be expressed.

Can be constituted on future debts and conditional obligations.

Contract of Guaranty Rights

• Guarantor has the right to the benefit of excussion or exhaustion of the debtor’s property before he can be compelled to pay.

• Guaranty is a contract of indemnity.

• Guarantor can proceed against the debtor and has the right of subrogation against the debtor.

Guaranty Contract rules

But if the guaranty is entered into without the knowledge or consent, or against the will of the principal debtor, the latter will only be liable to the extent he benefitted and he will not be subrogated to the right of the principal debtor.

Guarantor Obligation

The guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor, and has resorted to all the legal remedies against the debtor.

The excussion shall not take place

(1) If the guarantor has expressly renounced it;

(2) If he has bound himself solidarily with the debtor;

(3) In case of insolvency of the debtor;

(4) When he has absconded, or cannot be sued within the Philippines unless he has left a manager or representative;

(5) If it may be presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation.

Multiple Guarantors

Should there be several guarantors of only one debtor and for the same debt, the obligation to answer for the same is divided among all. The nature of their liability is joint.

Extent of Guarantor’s Indemnity

(1) The total amount of the debt;

(2) The legal interests thereon from the time the payment was made known to the debtor, even though it did not earn interest for the creditor;

(3) The expenses incurred by the guarantor after having notified the debtor that payment had been demanded of him;

(4) Damages, if they are due.

Guarantor Release

A release made by the creditor in favor of one of the guarantors, without the consent of the others, benefits all to the extent of the share of the guarantor to whom it has been granted.

Extension of Debt

An extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty.

Pledge and Mortgage

Pledge is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable or document evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions.

Characteristics of Pledge

1. A real contract because it is perfected by the delivery of the thing pledged by the debtor who is called the pledgor to the creditor who is the pledge, or to a third person by common agreement;

2. An accessory contract because it has no independent existence of its own; to give extra security / support

3. A unilateral contract because it creates an obligation solely on the part of the creditor to return the thing subject thereof upon the fulfillment of the principal obligation;

4. A subsidiary contract because the obligation incurred does not arise until the fulfillment of the principal obligation to which it is secured

Essential Requisites for Contracts of Pledge and Mortgage

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

Provisions Applicable only to Pledge

1. The pledgor retains his ownership of the thing pledged. He may, therefore, sell the same provided the pledgee consents to the sale.

2. The possession of the pledgee constitutes his security. Hence, the debtor cannot demand for its return until the debt secured by it is paid.

3. Pledgee has the obligation to take care of the thing pledged with the diligence of a good father of the family. He is entitled to reimbursement of the expenses incurred for its preservation and he is liable for loss or deterioration by reason of fraud, negligence, delay or violation of the terms of the contract. $(Articles 1174, 1170)$.

4. Pledgee is not authorized to transfer possession of the thing pledged to a third person.

5. The pledgee has no right to use the thing pledged or to appropriate the fruits thereof without the authority of the owner.

6. When the thing pledged is later found in the hands of the pledgor or the owner, only the accessory obligation of pledge is presumed remitted, not the principal obligation itself.

Pledge and Mortgage Common Provisions

1. Contract may be constituted only by the absolute owner of the thing pledged or mortgaged otherwise, the pledge or mortgage is void, such as that constituted by an impostor.

2. A mortgage of conjugal property by one of the spouses is valid only as to one-half (1/2) of the entire property.

Pledge vs. Mortgage

The contract of pledge or mortgage may secure all kinds of obligations, be they pure or subject to a suspensive or resolutory condition. $(Art. 2091, NCC)$

Consenting Pledge

With the consent of the pledgee, the thing pledged may be alienated by the pledgor or owner, subject to the pledge. The ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgee consents to the alienation, but the latter shall continue in possession.

The contract of pledge gives a right to the creditor to retain the thing in his possession or in that of a third person to whom it has been delivered, until the debt is paid.

The pledgee cannot deposit the thing pledged with a third person, unless there is a stipulation authorizing him to do so.

The pledgee has no right to use the thing pledge or to appropriate the fruits thereof without authority of the owner.

The pledgee can apply the fruits, income, dividends or interest earned or produced by the thing pledge to the payment of interest and principal.

In case of a pledge of animals, their offspring shall pertain to the pledgor or owner of animals pledged, but shall be subject to the pledge, if there is no stipulation to the contrary.

PLEDGOR MAY ASK THE THING TO BE DEPOSITED, in the following cases

1. If the debtor uses the thing without authority.

2. If he misuses the thing in any other way.

3. If the thing is in danger of being lost or impaired because of the negligence or willful act of the pledgee.

• Renunciation or abandonment extinguishes pledge.

Requisite for the Sale of the Thing Pledge

1. The debt is due and unpaid;

2. The sale must be at a public auction;

3. There must be notice to the pledgor and owner stating the amount due; and

4. The sale must be made with the intervention of a notary public.

• Renunciation or abandonment extinguishes pledge.

Requisite for the Sale of the Thing Pledge

1. The debt is due and unpaid;

2. The sale must be at a public auction;

3. There must be notice to the pledgor and owner stating the amount due; and

4. The sale must be made with the intervention of a notary public.

Real Estate Mortgage

A real estate mortgage is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated.

Characteristics of Real Estate Mortgage

1. Accessory Contract: It exists only as a security for a principal obligation.

2. Unilateral Contract: It creates obligations only on the part of the creditor to free the property once the obligation is fulfilled.

3. Nominate Contract: It has a specific name provided by law.

4. Consensual Contract: Perfected by mere consent

5. indivisibility: A real estate mortgage is indivisible, even though the debt may be divided among the different debtors or the land among the different successors in title. Therefore, each one of the debtors or successors may not ask for the release of the mortgage until the debt has been completely satisfied.

   However, it may be divisible when several things are given to guarantee a single obligation. This can exist when each one of the things guarantees only a determinate portion of the credit.

6. Inseparability: The mortgage security is inseparable from the property. It subsists notwithstanding the change of ownership, meaning that the mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation secured.

7. Real Right: A real estate mortgage creates a real right. It is enforceable against the whole world. A mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation secured.

Foreclosure

If the debtor fails to pay his obligation, the real estate mortgage is foreclosed. Foreclosure is the procedure by which the mortgagee subjects the property mortgaged to the satisfaction of the obligation secured.

Kinds of Foreclosure

1. Judicial Foreclosure: A judicial foreclosure is one which takes place under the direction and control of a court of justice. The Rules of Court govern the procedure for judicial foreclosure

2. Extrajudicial Foreclosure: An extrajudicial foreclosure is one made outside of court, usually done pursuant to a special power inserted in the mortgage contract authorizing the mortgagee, upon default of the mortgagor, to foreclose the mortgage by selling the mortgaged property at public auction in the manner prescribed by law. (Act No. 3135, as amended)

Equity of Redemption

Equity of redemption refers to the right of the mortgagor to redeem the mortgaged property after his default in the performance of the conditions of the mortgage but before the sale of the mortgaged property or confirmation of the sale.

Right of Redemption

Right of redemption is the right of the mortgagor to redeem the mortgaged property within a certain period after it was sold for the satisfaction of the mortgage debt.

Antichresis

By the contract of antichresis the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal of his credit.

Characteristics of Antichresis

1. A Real Contract: A real contract requires the delivery of the object of the contract for its perfection.

2. Accessory Contract: It is constituted as security for a principal obligation

3. Formal Contract: The amount of the principal and of the interest shall be specified in writing; otherwise, the contract of antichresis shall be void.

Rights and Obligations of the Antichresis Creditor

1. Obligation to pay the taxes and charges.

2. Obligation to apply the fruits of the property to the payment of the interest, if owing, and thereafter to the principal of his credit.

3. The creditor, unless there is a stipulation to the contrary, is obliged to pay the taxes and charges which weigh upon the estate.

4. He is also bound to bear the expenses necessary for its preservation and repair.

5. The debtor cannot reacquire the enjoyment of the immovable without first having totally paid what he owes the creditor.

Preference of Credits

Preference of Credits refers to the order in which creditors shall be paid from the assets of a debtor. This is particularly relevant when the debtor is insolvent or bankrupt and has multiple creditors.

General Concepts

1. Insolvency: A financial state where a debtor is unable to pay their debts as they fall due.

2. Bankruptcy: A legal process by which a debtor who cannot pay their debts may seek relief from some or all of their debts.

3. Creditor: A person or entity to whom money is owed.

4. Debtor: A person or entity that owes money to others.

Classification of Credits

Credits are classified into different categories, each with its own level of priority. These categories determine the order in which creditors will be paid.

The Civil Code of the Philippines provides for the classification and preference of credits:

1. Special Preferred Credits: These credits have a specific lien or mortgage over certain property. They are satisfied first from the proceeds of the sale of that specific property.

2. Ordinary Preferred Credits: These credits have preference over all other credits but do not have a specific lien on any property. They are paid in the order provided by law.

3. Common Credits: These credits have no preference and are paid last, pro rata, if there are any remaining assets.

Order of Preference

The order of preference for credits is generally as follows:

1. Secured Creditors: Those with a specific lien or mortgage on property.

2. Tax Claims: Claims for unpaid taxes due to the government.

3. Wage Claims: Claims for unpaid wages due to employees.

4. Other Preferred Credits: As listed in the Civil Code.

5. Common Credits: Unsecured debts.

Consumer protection

Consumer protection refers to the laws and organizations designed to ensure the rights of consumers, as well as fair trade, competition and accurate information in the marketplace. Consumer protection laws address a variety of issues, such as product liability, privacy rights, unfair business practices, fraud, misrepresentation and other consumer/business interactions.

Consumer Protection Act

The Consumer Act of the Philippines (Republic Act No. 7394) is the primary law governing consumer protection in the Philippines. It aims to protect consumers against hazards to health and safety, protect against deceptive, unfair and unconscionable sales acts and practices, provide information and education to facilitate sound choice and the proper exercise of consumer rights; provide redress.

Consumer Product Quality and Safety

1. Standards: The government sets standards for consumer products to ensure they are safe and of good quality.

2. Testing and Certification: Products may undergo testing and certification to ensure they meet these standards.

3. Recall: If a product is found to be unsafe, it may be subject to a recall.

Deceptive Sales Acts and Practices

1. False Advertising: Misleading advertisements are prohibited. Consumers have the right to accurate information about the products they are buying.

2. Unfair Sales Practices: Practices that are unfair, deceptive, or unconscionable are prohibited.

Product Service and Warranty

1. Express Warranty: A seller who gives an express warranty shall do the following:

   • set forth the terms of warranty in clear and readily understanding language and clearly identify himself as the warrantor;

   • identify the party to whom the warranty is extended;

   • state the products or parts covered;

   • state what the warrantor will do in the event of defect, malfunction or failure to conform to the written warranty;

   • state at whose expense;

   • if the product or part requires service, such service shall be furnished by the warrantor or his representative/s;

   • the period of time within which, after notice of defect, malfunction or failure to conform to the warranty, the warrantor or his representative will perform any obligation under the warranty; and

   • the steps the consumer must take to obtain performance of any obligation under the warranty.

2. Implied Warranty:

   • (a) Implied warranty of merchantability – that the goods are reasonably fit for the general purpose for which they are sold, and that they are free from any defect rendering them unmerchantable, which would not be apparent on reasonable examination of the sample, when there has been a sale by sample.

   • (b) Implied warranty of fitness for a particular purpose – that the goods are fit for the particular purpose for which the buyer is acquiring the goods if he has made known to the seller, either expressly or by implication, the particular purpose for which he is buying the goods and has relied upon the seller’s skill or judgment and not the other way around.

Labelling and Packaging

1. Mandatory Labelling: Products must have labels containing accurate and complete information about their contents, weight, and other relevant details.

2. Prohibited Acts: It shall be unlawful for any person to perform any of the following acts of misbranding:

   • (a) Alters, defaces, obliterates or removes any marking or labeling required by this Act;

   • (b) Represents a consumer product to be a new article, if such product is composed in whole or in part of used, second-hand, reconditioned, renovated or remanufactured parts;

   • (c) Fails to disclose that a consumer product or any portion thereof is used, second-hand, reconditioned, renovated or remanufactured.

3. Packaging: Products must be packaged in a way that protects them from damage and does not mislead consumers.

Other Consumer Rights Law

Price Tag Act

An act providing for the Price Tag Act which requires consumer products sold at retail to bear appropriate price tags or labels and for other purposes.

Lemon Law

The Lemon Law (Republic Act No. 10667) protects new car buyers from defects that substantially impair the use, value, or safety of the vehicle. If the manufacturer cannot repair the defect after a reasonable number of attempts, the consumer is entitled to a replacement or refund.

PD 507

PD 507, also known as the Decree on Illegal Gambling, prohibits various forms of gambling activities, promoting consumer protection by preventing deceptive or fraudulent gambling practices.

Price Act

The Price Act (Republic Act No. 7581, as amended) aims to stabilize prices of basic necessities and prime commodities and to provide measures against hoarding, profiteering, and cartels.

Philippine Competition Act

Definition and Scope of Application

The Philippine Competition Act (PCA), officially known as Republic Act No. 10667, is a landmark legislation designed to promote and protect competitive market conditions. The PCA aims to enhance economic efficiency and ensure that consumers benefit from fair prices, quality goods and services, and wider choices. It applies to all entities engaged in trade, industry, and commerce in the Philippines.

Prohibited Acts

The Philippine Competition Act prohibits specific actions that can harm competition in the market. These include:

Anti-competitive agreements

Agreements, whether written or implied, between or among competitors that restrict competition.

1. Agreements that restrict competition by fixing prices, dividing markets, limiting production, or rigging bids.

Abuse of dominant position

Conduct by an entity with a dominant market position that substantially lessens, restricts, or prevents competition.

1. Monopolization: Actions by a dominant firm to maintain or strengthen its market position through anti-competitive means. This may include predatory pricing, exclusive dealing, or refusing to deal.

Prohibited mergers and acquisitions

Transactions that substantially lessen competition in the relevant market.

1. Mergers and acquisitions that create or strengthen a dominant position to the detriment of competition. The Philippine Competition Commission (PCC) reviews mergers and acquisitions to assess their potential impact on competition.

Exceptions

The PCA provides exceptions for certain activities that may have anti-competitive effects but are deemed necessary for public interest or economic efficiency.

1. Exemptions: Activities specifically exempted by law.

Covered transactions

The Philippine Competition Act requires compulsory notification for certain transactions that meet specific thresholds.

Thresholds for compulsory notification

Monetary limits based on the value of assets or revenues of the entities involved in the transaction.

Notifying entity

The entity responsible for notifying