The demarcation between a loan for use and lease with particular reference to Maltese jurisprudence

Abstract

While many similarities exist between a loan for use and lease from both substantive and procedural points of view, juridical confusion nevertheless arises when it comes to discerning the distinction between the two contracts in practice, as Maltese jurisprudence shows. While emphasis has been made on the gratuitous nature of the contract of commodatum by our Courts, the question remains as to whether the granting of compensation or the procurement of services in favour of the commodator as an acknowledgement or appreciation for the thing let constitute rent in terms of the legal provisions governing the letting of things. Arguably, this would ex lege counter the gratuitousness of the loan, effectively transmuting the contract of commodatum to that of lease; however some judgements of the Maltese Courts have held otherwise. In the course of this term paper, the salient elements and obligations of the two contracts are explained, followed by an analysis of Maltese jurisprudence which touch upon commodatum, with the aim of shedding light on the reasoning of the Maltese judicature behind the demarcation line between the two contracts. While there is no definite point at which a loan for use is transmuted into a contract of lease, due to differentiating facts and merits, and the principle of equity, certain situations which are likely to sway judges to this end were observed.