a. Commodatum

A. Mutuum and Commodatum (Civil Code, arts. 1933-1961)

Civil Code, arts. 1933-1961

TITLE XI

LOAN

General Provisions

Article 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)

Article 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)

CHAPTER 1

Commodatum

SECTION 1

Nature of Commodatum

Article 1935. 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. (1941a)

Article 1936. 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. (n)

Article 1937. Movable or immovable property may be the object of commodatum. (n)

Article 1938. The bailor in commodatum need not be the owner of the thing loaned. (n)

Article 1939. 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. (n)

Article 1940. A stipulation that the bailee may make use of the fruits of the thing loaned is valid. (n)

SECTION 2

Obligations of the Bailee

Article 1941. The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned. (1743a)

Article 1942. 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 the 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. (1744a and 1745)

Article 1943. The bailee does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault. (1746)

Article 1944. 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. (1747a)

Article 1945. When there are two or more bailees to whom a thing is loaned in the same contract, they are liable solidarily. (1748a)

SECTION 3

Obligations of the Bailor

ARTICLE 1946. 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. (1749a)

Article 1947. 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. (1750a)

Article 1948. The bailor may demand the immediate return of the thing if the bailee commits any act of ingratitude specified in article 765. (n)

Article 1949. 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 notification 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. (1751a)

Article 1950. 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 1951. The bailor who, knowing the flaws 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. (1752)

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

CHAPTER 2

Simple Loan or Mutuum

Article 1953. 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. (1753a)

Article 1954. 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 shall be considered a barter. (n)

Article 1955. The obligation of a person who borrows money shall be governed by the provisions of articles 1249 and 1250 of this Code.

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. (1754a)

Article 1956. No interest shall be due unless it has been expressly stipulated in writing. (1755a)

Article 1957. Contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be void. The borrower may recover in accordance with the laws on usury. (n)

Article 1958. 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. (n)

Article 1959. 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. (n)

Article 1960. 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. (n)

Article 1961. Usurious contracts shall be governed by the Usury Law and other special laws, so far as they are not inconsistent with this Code. (n)

GENERAL PROVISIONS

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

Kinds of Loan

• Commodatum – where the bailor (lender) delivers to the bailee (borrower) a nonconsumable thing so that the latter may use it for a given time and return the identical thing;
• Mutuum or Simple Loan – where the lender delivers to the borrower money or other consumable thing upon the condition that the latter shall pay same amount of the same kind and quality.

Commodatum is a loan of use (because there is a transfer of the use of the thing borrowed) while mutuum is a loan of consumption (because there is a transfer of the ownership of the thing, which is generally received for consumption).

Object of a contract of loan

• Commodatum – The object is generally not consumable; and
• Mutuum – The object is consumable.

Irreplaceability of non-fungible thing

GR: Non-fungible things are irreplaceable. They must be returned to the lender after the purpose of the loan had been accomplished.

XPN: If a person transfers ownership of non-fungible things to another, who undertakes to give things of the same kind, quantity, and quality, the contract is barter rather than a loan.

Delivery essential to perfection of loan Delivery is necessary in view of the purpose of the contract which is to transfer either the use or ownership of the thing loaned.

An accepted promise to deliver something by way of commodatum or mutuum is binding upon the parties, but the commodatum or mutuum itself shall not be perfected until the delivery of the object of the contract. (NCC, Art. 1934)

COMMODATUM

Bailment - is the delivery of property of one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed and the property returned or duly accounted for when a special purpose is accomplished or kept until the bailor reclaims it. Generally, it is contractual, but may also be created by operation of law.

Parties in Bailment

• Bailor– The lender/giver; the party who delivers possession/custody of the thing bailed
• Bailee – The recipient; the party who receives the possession/custody of the thing delivered

Commodatum – bailor delivers to bailee a nonconsumable thing so that the latter may use it for a certain time and return the identical thing

Exception to the object: A consumable thing may be the object of commodatum if the purpose is not its consumption, as when it is merely for exhibition.

Kinds of commodatum

• Ordinary commodatum – bailee uses the thing for a certain period of time
• Precarium – bailor may demand the thing loaned at will; exists in cases where:
• Neither the duration of the contract nor the use to which the thing loaned should be devoted has been stipulated
• Use of the thing is merely tolerated by the owner(Art. 1947).

Principal Obligations of a Bailee in a Commodatum

• Take good care of the thing with the diligence of a good father of a family. (Art. 1163).
• Use the thing loaned only for the purpose for which it was loaned. (Art. 1942[1])
• Payment of the ordinary expenses for the use and preservation of the thing loaned. (Art. 1941)
• Payment of a 50% portion (unless otherwise stipulated) of extraordinary expenses arising from the actual use of the thing, which shall be borne by both the bailor and the bailee, even though the bailee acted without fault, unless there is a stipulation to the contrary. (Art. 1949, par. 2)
• Return and to not retain the thing loaned except for damages mentioned in Art. 1951.

When is the bailee in a commodatum liable for the loss of the thing which is the object of the contract, even if such loss is due to a fortuitous event?

• If he devotes the thing to any purpose different from that for which it has been loaned.
• If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted.
• If the thing loaned has been delivered with the appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event.
• If he lends or leases the thing to a third person, who is not a member of his household.
• If, being able to save either the thing borrowed or his own thing, he chose to save the latter. (Art. 1942[5])

What are the obligations of a bailor in commodatum?

• Respect the duration of the loan. Bailor cannot demand return until after (a) expiration of period stipulated, or (b) accomplishment of use for which commodatum was constituted. (Art. 1946)
• Exceptions:
• If urgently need thing (may demand return/temporary use); or
• If the bailor may demand immediate return of the thing if the bailee commits any acts of ingratitude. (Art. 1948)
• If the bailee should commit some offense against the person, the honor or the property of the bailor, or of his wife or children under his parental authority;
• If the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the bailee himself, his wife or children under his authority;
• If he unduly refuses him support when the bailee is legally or morally bound to give support to the bailor.
• Refund to the bailee extraordinary expenses incurred for the preservation of the thing, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when the reply to the notification cannot be awaited without danger. (Art. 1949, par. 1) However, if the extraordinary expenses arise on the occasion of the actual use 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. (Art. 1949, par. 2)
• Be liable for damages which the bailee may suffer for failure of the bailor to advise the former of flaws

(hidden defects) of the thing loaned which are known to him. (Art. 1951)