Credit Transaction
Preliminaries
A. Credit, Debt and Security.
Art. 3 Sec 20 of 1987 Constitution: No person shall be imprisoned for debt or non-payment of a poll tax.
B. Credit and Credit Transaction Defined.
Sec 3(2) of RA3765 Trust lending act: "Credit" means any loan, mortgage, deed of trust, advance, or discount;
any conditional sales contract; any contract to sell, or sale or contract of sale of property or services, either for
present or future delivery, under which part or all of the price is payable subsequent to the making of such sale
or contract; any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of
property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money; any
purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of
the foregoing; and any transaction or series of transactions having a similar purpose or effect.
Credit Transaction – include all transactions, purchase of loan of goods, services or money, in the present, with
promise to pay or deliver or return in the future.
Ex: Commadatum, mutuum of loan. Sale on Credit but not on cash. Trust receipts; bailment, contracts
of security like mortgage, pledge and antichresis; use of credit card. Use your credit card now
pay it later – borrowing from credit card company, LRT Stored value ticket.
In the case of People vs Conception G.R. No. L-19190, The "credit" of an individual means his ability to borrow
money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise. A "loan"
means the delivery by one party and the receipt by the other party of a given sum of money, upon an
agreement, express or implied, to repay the sum loaned, with or without interest. The concession of a "credit"
necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit,".
Discounts are favored by bankers because of their liquid nature, growing, as they do, out of an actual, live,
transaction. But in its last analysis, to discount a paper is only a mode of loaning money, with, however, these
distinctions: (1) In a discount, interest is deducted in advance, while in a loan, interest is taken at the expiration
of a credit; (2) a discount is always on double-name paper; a loan is generally on single-name paper.
C. Commercial Credit Transaction
Code of Commerce:
Article 1
The following are merchants for the purposes of this Code:
1. Those who, having legal capacity to trade, customarily devote themselves thereto.
2. Commercial or industrial associations which are formed in accordance with this Code.
Article 2
Commercial transactions, be they performed by merchants or not, whether they are specified in this Code or
not, shall be governed by the provisions contained in the same; in the absence of such provisions, by the
commercial customs generally observed in each place; and in the absence of both, by those of the common law.
Commercial transactions shall be considered those enumerated in this Code and any others of a similar
character.
Article 3
The legal presumption of a customary engagement in commerce exists from the time the person who desires to
trade gives notice through circulars, newspapers, handbills, posters exhibited to the public, or in any other
manner whatsoever, of an establishment, the purpose of which is to conduct any commercial transaction.
PART I: LOAN
A. General Concepts
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.
B. Obligation to Deliver
Art. 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.
In the case of Garcia vs Thio, A loan is a real contract as it is perfected upon delivery of the object. This is
different from a consensual contract which only requires consent. An accepted promise to deliver by
way of commodatum or simple loan is binding upon parties, however, the loan itself is only perfected
upon delivery of the object.
C. Kinds of Loan
1. Object of Loan
2. Consideration of a Loan
3. Obligation to Return or Pay
D. Contract to Loan
Art. 1934
