What exactly must I return on a loan of money or of goods?

The article splits the answer in two

Article 1955 sends money loans to the Code's payment rules, and then deals with goods itself: If what was loaned is a fungible thing other than money, the debtor owes another thing of the same kind, quantity and quality, even if it should change in value. In case it is impossible to deliver the same kind, its value at the time of the perfection of the loan shall be paid. A fungible thing is one that can be replaced by another of the same sort — rice, fuel, cement — which is why handing back an equivalent, rather than the identical items, discharges the debt.

Money: the currency, and when payment counts

For money the governing provision is Article 1249: The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The same article carries a trap worth knowing. Handing over a cheque or a promissory note does not itself pay the debt; such instruments produce the effect of payment only when they have been cashed, or when through the creditor's own fault they have been impaired. A borrower whose cheque bounced has not paid, whatever his receipt appears to say.

Goods: price movements are the borrower's problem

The words even if it should change in value settle a very common argument. If you borrowed twenty sacks of rice and the price has since doubled, you still owe twenty sacks. If it has halved, you still owe twenty sacks — you do not owe the peso value of what you received. That is the bargain in a loan of goods, and it cuts both ways. Only where returning the same kind is genuinely impossible does the debt turn into money, and then it is measured by its value at the time of the perfection of the loan: the value when the loan was made, not today's.

Currency collapse, and being precise up front

Article 1250 covers the rare case of an extraordinary inflation or deflation of the currency stipulated, in which the value of the currency when the obligation was established becomes the basis of payment, unless you agreed otherwise. It is a narrow rule for genuine currency upheaval, not for ordinary price rises. Two practical points. Write down exactly what was lent — quantity, grade and due date — because arguments over quality are the ones that end up in court. And settle interest at the start: interest is not owed merely because a loan exists, so if it is intended it must be stipulated in writing.

Related provisions

• Civil Code, Article 1955 — Obligation of the Money/Fungible Borrower
• Civil Code, Article 1249 — Currency of Payment; Payment by Instruments
• Civil Code, Article 1250 — Extraordinary Inflation or Deflation