CREDTRANS

CREDIT TRANSACTIONS
I- PRELIMS
Credit transactions include 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.

By the use of credit, more exchanges are possible, persons are able to enjoy a thing today but pay for
it later, and through the banking system, actual money transfer is eliminated by cancellation of debts
and credits.

Credit transactions are really CONTRACTS OF SECURITY.

They are of two types:

(a) Secured transactions or contracts of real security. — Those supported by

a collateral or an encumbrance of property; and

(b) Unsecured transactions or contracts of personal security. — Those the

fulfillment of which by the principal debtor is secured or supported only by a
promise to pay or the personal commitment of another such as a guarantor or
surety.

All make up the so-called “credit transactions”:

1. Bailment contracts
2. Other related subjects such as usury (Act No. 2655, as amended [The Usury Law])
3. The contracts of guaranty and suretyship
4. Mortgage
5. Antichresis; and
6. Concurrence and preference of credits (Arts.*2236-2251.)

MEANING AND KINDS OF SECURITY.

Something given, deposited, or serving as a means to ensure the fulfillment or enforcement of
an obligation or of protecting some interest in property.

The security, as herein before intimated, may be:

1. Personal Security
- when an individual becomes a surety or a guarantor; or

2. Property or Real Security

- when a mortgage, pledge, antichresis, charge or lien or other device used
to have property held, out of which the person to be made secure can be
compensated for loss.

Thus, a SECURED creditor is one who holds a security from his debtor for payment of the latter’s
debts.

MEANING OF BAILMENT.
The word “bailment” comes from the French word “bailler,” meaning “to deliver.” It may be
defined as 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 the special purpose is accomplished or kept until the bailor reclaims it. (3 R.C.L. 73.)

How is it created?
In general, bailment may be said to be a contractual relation. To be legally enforceable, it must
contain all the elements of a valid contract.

JOSE MARIA COLLEGE MARIA ANNY G. YANONG

CREDTRANS

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

However, it does not necessarily mean that an agreement is always necessary to create
bailment. It may be created by operation of law.

Article 1996. A deposit is necessary:

(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity, such as fire, storm,
flood, pillage, shipwreck, or other similar events.

The parties to a bailment are the:

(1) Bailor (Comodatario in Spanish law; Commodans in Roman law.)

— the giver; the party who delivers the possession or custody of the thing
bailed; and

(2) Bailee (Comodante in Spanish law; Commodatarius Roman law.)

— the recipient; the party who receives the possession or custody of the
thing thus delivered.

In every bailment, there is an obligation on the part of the bailee to restore the subject of the
bailment in the same or in altered form or to account therefor.

I- LOAN
(Arts. 1933-1961)

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

Kinds of loan:

COMMODATUM LOAN OR MUTUUM

One of the parties (bailor/ lender) One of the parties delivers to

delivers to another (bailee/ borrower) another something consumable
something not consumable for the thing upon the condition that the
latter’s use for a certain time and return same amount of the same kind and
it. quality shall be paid.

(to return) (to pay)

Characteristics of contract of loan:

(1) a real contract
(2) a unilateral contract

JOSE MARIA COLLEGE MARIA ANNY G. YANONG

CREDTRANS

LOANS VS CREDIT

CREDIT LOAN
The credit of an individual means his ability to A loan (mutuum) means the delivery by one party
borrow money or things by virtue of the (lender/ creditor), and the receipt by the other
confidence or trust reposed by a lender that he party (borrower/debtor) who become the owner,
will pay what he may promise within a specified of a given sum of money or other consumable
period. thing upon an agreement, express or implied, to
repay the same amount of the same kind and
The concession of a “credit” necessarily involves quality, with or without interest.
the granting of “loans” up to the limit of the
amount fixed in the “credit.”

CREDIT DEBT
The term “credit,” in its usual meaning, is a sum It is a debt considered from the creditor’s
credited on the books of a company to a person standpoint. It may consist of money, goods, or
who appears to be entitled to it. It presupposes a services.
creditor-debtor relationship, and may be said to
imply ability, by reason of property or estates, to
make a promised payment. It is the correlative to
debt or indebtedness, and that which is due to
any person as distinguished from that which he
owes.

DISCOUNTING OF PAPER LOAN

Interest is deducted in advance Interest is usually taken at the
expiration of a credit; and

JOSE MARIA COLLEGE MARIA ANNY G. YANONG