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The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Commodatum is a contract of loan wherein 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.
Mutuum or simple loan is a contract of loan wherein money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. (Article 1933, New Civil Code)
In the case of Producers Bank of the Philippines vs. Hon. Court of Appeals, G.R. No. 115324, February 19, 2003, the Supreme Court made various distinctions between commodatum and mutuum, as follows:
- Commodatum is essentially gratuitous, while simple loan or mutuum 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.
- If the subject of the contract is a consumable thing, such as money, the contract would be a mutuum. However, there are some instances where a commodatum may have for its object a consumable thing.
Article 1936 of the Civil Code provides:
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.
Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is a commodatum and not a mutuum.
In the case of Spouses Ramon Sy vs. Westmont Bank, G.R. No. 201074, October 19, 2016, the Supreme Court further explained that a simple loan or mutuum is a contract where one of the parties delivers to another, either money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. A simple loan is a real contract and it shall not be perfected until the delivery of the object of the contract. Necessarily, the delivery of the proceeds of the loan by the lender to the borrower is indispensable to perfect the contract of loan. Once the proceeds have been delivered, the unilateral characteristic of the contract arises and the borrower is bound to pay the lender an amount equal to that received.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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