Article 2088

RA 386 · Civil Code of the PhilippinesKey provision

ELI5— what this means for you

Pactum commissorium is PROHIBITED: a stipulation that the pledgee/mortgagee automatically becomes the owner of the pledged/mortgaged property if the debt is not paid. Such a stipulation is VOID.

Key point

A lender cannot include a clause saying they automatically own your collateral if you default — that is pactum commissorium and void.

Official text — RA 386

The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void. (1859a)

Source: lawphil.net (RA 386 as amended)

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