Credit Transactions

Credit Transactions

• A credit transaction involves the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future.
• There are two types of credit transactions:

  Secured Transactions

  • Supported by a collateral or an encumbrance of property.

  Unsecured Transactions

  • Supported only by a promise to pay or the personal commitment of another, such as a guarantor or surety.

Security

• A security is something given, deposited, or serving as a means to ensure the fulfillment or enforcement of an obligation or protect some interest in the property.
• There are two types of security:

  Personal Security

  • When an individual becomes a surety or a guarantor.

  Real or Property Security

  • When an encumbrance is made on property, such as:
    • Real estate mortgage
    • Chattel mortgage over vessels or aircraft
    • Security interest over movables

Characteristics of Loans

• A loan is a real contract, meaning delivery is essential for perfection of the loan.
• A promise to lend is binding upon the parties, being a consensual contract.
• A loan is a unilateral contract, meaning only the borrower has an obligation once the subject matter has been delivered.

Commodatum and Mutuum

• A commodatum is a contract where the bailor delivers a non-consumable thing to the bailee for a certain time, with the obligation to return the identical thing.
• There is no transfer of ownership in a commodatum.
• A mutuum is a contract where the object borrowed is a consumable thing, and the ownership of which is transferred to the borrower.
• The borrower incurs the obligation to return the same consumable thing to the lender in an equal amount, kind, and quality.

Credit Transactions

• A credit transaction involves the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future.
• There are two types of credit transactions:

  Secured Transactions

  • Supported by a collateral or an encumbrance of property.

  Unsecured Transactions

  • Supported only by a promise to pay or the personal commitment of another, such as a guarantor or surety.

Security

• A security is something given, deposited, or serving as a means to ensure the fulfillment or enforcement of an obligation or protect some interest in the property.
• There are two types of security:

  Personal Security

  • When an individual becomes a surety or a guarantor.

  Real or Property Security

  • When an encumbrance is made on property, such as:
    • Real estate mortgage
    • Chattel mortgage over vessels or aircraft
    • Security interest over movables

Characteristics of Loans

• A loan is a real contract, meaning delivery is essential for perfection of the loan.
• A promise to lend is binding upon the parties, being a consensual contract.
• A loan is a unilateral contract, meaning only the borrower has an obligation once the subject matter has been delivered.

Commodatum and Mutuum

• A commodatum is a contract where the bailor delivers a non-consumable thing to the bailee for a certain time, with the obligation to return the identical thing.
• There is no transfer of ownership in a commodatum.
• A mutuum is a contract where the object borrowed is a consumable thing, and the ownership of which is transferred to the borrower.
• The borrower incurs the obligation to return the same consumable thing to the lender in an equal amount, kind, and quality.