Law on Credit Transaction

Question 1

What are credit transactions?

Answer 1

Credit transactions involve the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future.

Question 2

What supports credit transactions?

Answer 2

Credit transactions are supported by a collateral or an encumbrance of property.

Question 3

What are the requisites of a contract of pledge and mortgage?

Answer 3

1. Constituted to secure the fulfillment of a principal obligation.
2. The pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged.
3. The persons constituting the pledge or mortgage must have free disposal of their property or be legally authorized.

Question 4

What is an accessory contract in the context of pledge and mortgage?

Answer 4

An accessory contract cannot exist without a valid obligation or a principal contract.

Question 5

Can a pledge or mortgage secure voidable or unenforceable contracts?

Answer 5

Yes, a pledge or mortgage may be constituted to guarantee the performance of a voidable or an unenforceable contract.

Question 6

What is prohibited regarding automatic appropriation in pledges?

Answer 6

Any stipulation for automatic appropriation is null and void, known as Pactum Commissorium (ART. 2088).

Question 7

What is the rule of indivisibility in pledges and mortgages?

Answer 7

A pledge or mortgage is indivisible, even if the debt is divided among successors in interest of the debtor or creditor.

Question 8

What is a pledge?

Answer 8

A contract by which a debtor delivers movable property to the creditor or a third person to secure the fulfillment of a principal obligation.

Question 9

What are the characteristics of a pledge?

Answer 9

1. Real contract - perfected by the delivery of the thing pledged.
2. Accessory contract - no independent existence.
3. Unilateral - creates an obligation solely on the part of the creditor to return the thing.
4. Subsidiary - obligation incurred does not arise until the fulfillment of the principal obligation.

Question 10

What are the rights of the debtor/pledgor?

Answer 10

The thing pledged must be placed in the possession of the creditor or a third person by common agreement.

Question 11

What are the kinds of pledge?

Answer 11

1. Voluntary/Conventional - created by agreement of the parties.
2. Legal - created by operation of law.

Question 12

What is required to affect third persons in a pledge?

Answer 12

To affect third persons, there must be a public instrument that contains the description of the thing pledged and the date of the pledge.

Question 13

What can a pledgor demand in case of fear of destruction, loss, or impairment?

Answer 13

The pledgor may demand the return of the thing upon offering another thing in pledge of the same kind and no inferior quality.