Professional Documents
Culture Documents
Commercial Law Review Lecture
Commercial Law Review Lecture
1. Making
2. Drawing
3. Negotiating
4. Accepting
To show consent
o N.B. But for all, there must be delivery
Basic principles: NIL is for justice.
o 1. Bad faith: So if a person is in BF, he cannot invoke
o
o
o
o
he is in bad faith.)
2. Estoppel ex. A father allowing a son to steal a check and
drawer
4. The law will only protect you from personal defenses if you
Good faith
With value
each other
An overdue instrument is shouting to the high
heavens I have been dishonored!
o
o
Location is immaterial
2a. Must contain a promise or order to pay
fine
Creates a NEW obligation to pay, not a mere
acknowledgement of an old debt
uncertain
events
and
certain
o
o
o
o
number.
3. Payable on demand or on a determinable future time
4. Payable to order or bearer
writing.
The stipulated rate controls there is no more ceiling on
reduced to 12% (in circular 416).
If there is stipulated interest, without a rate, 12% as well.
If payment is by installment, for the instrument to be valid, the
maturity of each installment is specified.
or possessor
5. Where the instrument is addressed to a drawee, he must be
events,
mother-in-law)
2c. Sum certain, and payable in money
to X or his assigns
Ex. instead of bearer pay to X or holder; pay to X
Nov 2005)
If there is an acceleration clause failure to pay an installment
o
o
except
when
there
is
written
stipulation.
Yes.
anyway.
Sec 3: promise is unconditional
o Instructions on how payment will be entered into the books of
and if I fail to do so, he can declare the entire balance due and
This
demandable.
makes it conditional.
Elizalde: Person bought cars. He issued a PN, secured with a
company.
HELD:
is not dependent to the CM. Test: does the promise to pay rely
(better view)
2nd situation: same if the holder feels unsecure, he can
declare the entire balance due and demandable.
demandable.
Differentiate:
valid.
If hinged upon a contingency, non-negotiable even if the event
or condition happens.
Philippine Education v. Soriano: A money order is not
Waiver of venue
demand money
Sec 6: omissions which do not affect
o 1. Not dated
o 2. Failure to mention consideration
securities
Authorizes confession of judgment if instrument not paid upon
maturity
found
In this example, it is not complete until Jose indorses
it, because there has to be delivery (at least two
o
o
o
parties to a contract)
3. Drawee
4. Two or more payees jointly
city of Makati)
If the drawee is not indicated with reasonable certainty, then it
checks.
provision.
negotiable
instruments.
The
presentment. (Caltex)
2. To person or bearer
3. Order of fictitious person
instrument.
[As explained by Phil. Law Library]: The Certificates of
are
Deposit
Time
partnership.
is not negotiable.
Sec 9: When it is payable to bearer
o 1. Expressed as such
HELD:
intent.
American Sash: Had a payroll clerk, who prepares
checks payable to employees.
Rodriguez
instrument.
Whenever the SLA lends to members, it issues postdated checks. But most of the time, the SLA does not
HELD:
Z placed in the
of the acceptance fee. The lawyer said that he will return the
E?
o
Sec 14:
o When it is wanting of a material particular the person
What happens?
believed the contention that the inaanak never intended for the
given to him
HELD:
By pre-
P60000 from X?
Treasurer of Iloilo to pay for local taxes. They did not deliver it
to the treasurer, and just gave it to the employee.
o
o
o
The
Somehow,
the checks fell into the hands of someone else, who indorsed it
shopping malls, etc. must sue the drawee banks, and then the
characters in a NI
If I promise to pay note is signed by two or more persons
Sec 18
o GENERAL RULE: person whose signature does not appear on
treat it as either
Ambiguous role of signature deemed an indorser
HELD:
Sec 19/20
o To avoid liability as signing agent:
C) he has authority
Minority/incapacity of corporation
o Maker of a PN cannot refuse to pay to a holder on the ground
that the indorser is a minor. Neither can he raise the defense
that the prior indorsee is a minor. ONLY the minor can raise
The check
o
Exceptions:
Sec 23 Forgery
o
The person whose signature is forged did not give consent to the
contract
1. Signature is copied
Fraud in factum.
something else.
3. Duress amounting to forgery
1. Promissory note
indorsement.
Can E collect from A?
forged by B)-B-C-D-E
o Indorsing an instrument that need not be
payable to bearer
Can E run after C?
A. Drawer
o 1. Order
Accepted
Unaccepted
o 2. Bearer
Accepted
Unaccepted
indorsers.
E cannot run after A (cut off) or B or C. He can run
bearer.
the thief.
A issued a BOE payable to B or order. B C. D forged
signature is forged.
Can go after A if E is a HDC. Cannot go after A if E is
not HDC.
EXCEPTIONS to general rules:
o 1. When there is estoppel (ex. father saying that his sons
forgery of his signature was genuine)
them. HELD: MWSS must bear the loss for failing to exercise
him
Test:
PNB v Quimpo:
o Left check book with his friend, who was in the car. The friend
He
It is an
The
Province issues
but triumph did not report it to the bank. Robbers were able to
the theft.
But JJ believes that the bank should have been held negligent
through forgeries.
o Split accountability 50-50
General rule:
o If the indorsement is forged, the collecting bank must return the
money to the drawee bank
drawer
3. A Holder in Due Course acquires good title if forged
(due to warranties)
Rules on clearing
o Checks are brought to a clearing house and are run through a
clearing house. They check the magnetic strips on the checks.
BIR.
Citibank was guilty only of negligence.
The bank manager (who was complicit) was criminally liable.
JJ doesnt agree with the court as regards Insular Bank of
Americas liability.
o Check: G.R. 121413 29 Jan. 2001
Price v. Neal
o See Jack notes
PNB v. CA
o See Jack notes, too
the drawer.
BUT this 24 hour rule SHOULD NOT apply when it is
the payees or indorsees signature that is forged,
because the drawee bank has no way to find out, until
Consideration
Under the law, consideration is presumed
o Travel Inc.: Travel agency sued on the basis of a bouncing
wrong for asking the agency to prove the value of the ticket
But Jack
The seller however only delivered 5 sacks of rice. HELD: He can only
consideration.]
Rule on holder for value vis--vis prior parties:
o Rule: Where value is given for the NI, the holder is a holder for
value in respect to all parties who became such prior to [the
time consideration was given]
payee.
[Same facts] X accepted. Can X refuse to pay on account
of partial failure of consideration?
Accommodation parties
o Signs as party but does not received consideration or value
Prudencio spouses.
any
part
of
the
is
deemed
HELD: Here, the issuance of the check was ultra vires. It was
accommodation indorser.
The client of
Y was
As a general rule: a
The other
an
Jose:
o
cannot claim PNB was in bad faith when it released the money
accommodation party.
PNB sued
holder in due course, because it knew that the spouses did not
HELD:
accommodation parties.
indorsement.
Indorsement must appear on the instrument itself.
o Or to a paper attached to it
Indorsement must be of the entire instrument.
o Indorsing only part of the amount will make it cumbersome.
o Prohibited to indorse to 2 or more indorsees severally. Ex: A
check for P100K is negotiated to Jose Cruz for 50K and
installments)
Types of indorsements:
o Special specified person to whom it is being indorsed
o Blank does not name any person
To
Jose
Cruz,
for
collection
only
(as
agent only)
Yes,
but
subject
to
same
restriction
that he only
holds it for
collection
X, because
the
indorsee is
a
mere
agent of the
indorser
X,
because
there is no
transfer of title
To
Jose
Cruz,
as
trustee for
Glenn
Tuazon
(indorsee
named as
trustee)
Yes,
but
subject
to
same trust
Yes
Yes, because
there
is
transfer of title
Pay to Jose
Cruz only
Negotiabilit
y
Passing of
title
Consideration
presumed
Defense
available
Yes
Yes
X, because
indorsee is
a
HIDC,
defenses
against
indorser
cannot
apply to him
Yes,
defenses
against
indorser can
be
raised
against
indorsee
because he
is just an
agent
X, because
title
transfers
This can be done if the instrument will fall due for a long time
(ex. 5 years), and the indorser does not want to be insecure for
solvent.
Signing of an instrument payable to bearer
o [wait for discussion on Sec 65]
o It can still be indorsed through mere delivery
o But the special indorser is only liable to those who can make
title through his indorsement
Payable to two or more payees
o All must endorse
o But if they are partners, there is mutual agency
Instrument payable to cashier or fiscal officer
o Assumed that the instrument is payable to the corporation he
represents
If name is misspelled
o Must indorse the instrument according to the misspelled name,
because other parties will not know that there was a mistake
collect from D?
Yes.
Because he warranted that the
instrument is genuine as to what it purports
E.
Conditional indorsement
o The maker (or acceptor) may disregard the condition because
fulfilled
If the maker pays, but the conditioned turned out to be
unfulfilled after, the remedy of the conditional indorser to run
after the indorsee to get back the money.
The conditional
made
If he wants, after signing as the misspelled name, he can sign
his real name, so it will appear wrong name indorsed to real
to be.
If D turned out to have forged Cs indorsement to
him, can E collect from D?
name
Indorsed as an agent
o Must state that he is negotiating as an agent, and disclose the
principal, and that he is duly authorized
If there is date attached to the negotiation
o Presumed to be correct, but rebuttable
o If no date, the negotiation is presumed to have been done
before it was overdue
o
o
This elaborates #3
RULE: The indorser who is struck out and ALL indorsers after
him are eliminated
HIDC
Indorsement to a prior indorser
o A-B-C-D-E-B
o Can B run after C, D, and E?
unlawful
means,
illegal
through
faith
Fraud ex. issuing it for a fake ring
Duress ex. ransom money
Unlawful means ex. stolen check
Illegal consideration ex. issued
for
marijuana
Rule on instruments payable on installments:
Status on payment
Knowledge
Effect
Holder is aware
HDC as to installments
not due on the face of
the instrument
Not a HDC
Holder is aware
HDC as to installments
not due on the face of
acceleration
clause
(automatic)
An installment is not
paid and there is an
optional
acceleration
clause
An installment is not
paid and there is an
optional
acceleration
clause
the instrument
Holder not aware of the
exercise of this option
HDC as to installments
not due on the face of
the instrument
Not a HDC
Claimant is not a
HDC.
Salas and State Investment House (2):
o In both cases there was lack or failure of consideration
sued.
HELD: Z was not a HIDC because Z refused to explain how
the payee, and the check had a notice of prior dishonor due to
However, Y took the check and paid it to ABC hospital, and the
o
o
yet.
Mesina:
o X left a cashiers check (issued by ABC bank) payable to Xs
order. Y stole it and indorsed it to Z. ABC refused to pay. Z
o
o
Banco Atlantico:
o X paid Y a check, drawn against ABC bank. Y altered the
amounts. Y deposited it in DEF (her bank). Y told DEF not to
present the check for payment right away, even if it was already
due, and to let Y to draw the amount anyway. The alteration
was discovered. ABC refused to pay. DEF sued to recover.
(54) A transferee who receives notice of infirmity before he has paid the
amount agreed for the instrument is a HDC only to the extent of the
amount paid by him.
o Ex. X issued a post-dated check to Y with value of P100K, and
X told Y to just pay him P80K right away because X could not
wait for the maturity of the check. Y has only paid P40K so far.
Then Y found out that the check was issued for a fake ring.
The check was presented but it was dishonored. Y sued Z, the
o
mean the non-HDC cannot collect. It just means that personal defenses
38?
54 notice before full amount is paid
124 when materially altered, a HDC may still
D who was aware of the fraud but not a party to it. What is the
effect?
Real defenses
even if he is not.
Ex. A was induced by B through fraud to issue a PN to B or
order. B C, who was NOT aware of the fraud (HDC). C
o
o
Acceptor
process of dishonor
completed: 1. He will
pay the amount to
holder, 2. Or to a
subsequent
indorser
who pays for it
<But
drawer
may
express
stipulation
limiting his liability>
Pay according to tenor
of acceptance
title occurred.
Fossum:
o X issued a check to Y, a HIDC. Y negotiated to Z, which was
not a HIDC (it was aware of the failure of consideration
between X and Y). Z sued X to collect. X refused and raised
personal defense of lack of consideration.
Qualified indorser or
indorser by delivery
What is the
implication?
Liabilities of parties
General indorser
Party
Obligations
Warranties
Maker
Drawer
If
1. Existence of payee
2. Capacity of payee to
indorse
1. Existence of payee
dishonored,
and
Either:
1.
Upon
due
presentment he will
accept/pay according to
tenor
2. Or if DH, he will pay
the amount to the
2. Capacity of payee to
indorse
3. On due presentment,
it will be accepted/paid
according to its tenor
1. Existence of drawer,
2.
Genuineness
of
drawers signature
3. Drawers capacity
and authority to draw
4. Existence of payee
and capacity to indorse
1.
Instrument
is
genuine and is what it
purports to be
2. He has good title
3. All prior parties had
capacity to contract
4. Has no knowledge of
any fact that would
impair the instrument
<IF BY DELIVERY
warranties only extend
to
immediate
transferee>
1.
Instrument
is
genuine and is what it
purports to be
2. He has good title
3. All prior parties had
capacity to contract
4. The instrument is
holder,
or
to
a
subsequent
indorser
compelled to pay it
Liability of Maker
o Araneta: X issued a PN to Y. Y collected, by X failed to pay.
He lodged the defense that he used the money to pay for his
a trust administered by Y.
HELD: X must pay. He made an unconditional promise to pay.
dishonored.
He can put without recourse to limit his liability.
Cebu International Finance v. CA:
original tenor.
Acceptor admits existence of drawer because without the
drawer to draw.
Acceptor admits existence and capacity of payee to indorse,
accepted the draft but set aside the jewelry. Deposited the
P
jewelry store guy delivered the jewelry to the buyer, and even
Landbank told FEB that the amount was altered from 30 pesos
against Landbank.
HELD: FEB cannot collect.
Later,
o
o
knowledge.
If the acceptor was deceived, it should not be
delivery.
Is
actually
an
check)
A (X irregular indorser) B C D E:
X is liable to B, C, D and E.
X is liable to C, D, and E.
the payee.
He is called such because you would normally expect the
payee as the first signature there.
DOES
NOT
ANSWER
FOR
dealt with
Sec 66 liability of general indorser
o Same as first 3 warranties of qualified indorser
o Last he warrants that the instrument is valid and subsisting
o If maker is insolvent, even if the indorser was not aware, he is
delivery
by
accommodation party
parties
Unlike a general indorser, a qualified indorser does not warrant
that the instrument will be paid. He is liable only if the maker or
liable.
Chartered Bank:
X was able to
collection).
applicable.
Signature of indorser was forged.
the first friend would withdraw. The friend gave the first guy a
withdrawal slip duly signed.
although the check had not been cleared, BPI (deposit bank)
paid. But American bank dishonored it. BPI sued.
HELD:
dishonored.
Far East Bank: (see the details above)
acknowledge payment.
The law mentions that warranties of general indorser
Quiz up to section 69
Presentment for payment
Sec 70
o Presentment for payment not necessary to charge the primarily
liable person
2.
acceptance
3. BOE payable elsewhere apart from residence or
get paid
But for those secondarily liable (indorsers and drawer) there
presentment
for
o
o
reasonable time
Consequence: will discharge drawer and all other indorsers
EXCEPTIONS no need to present if/or treated as dishonored
if:
1. Drawee is dead, has absconded, fictitious, or lacks
capacity to contract
2. Presentment cannot
reasonable diligence
3. Although presentment is irregular, acceptance was
liable
So, the bottomline: the instrument must be
charge the secondarily liable persons see
be
made
even
after
presented
AND will not prejudice rights of HIDC after omission to
requires
expressly
BOE
paid
[Step-by-step guide on presentment for payment]
o Step 1: Presentment for acceptance required if
non-payment needed
Except
o 1. If instrument was made/accepted
for his accommodation and he has
no reason to expect the instrument
o
omission to protest
Step 3: Give notice of dishonor by non-payment to secondarily
liable persons (if dishonored by non-payment)
o
o
o
reasonable diligence
3. Waiver of presentment, express or implied
not
HELD:
Letter of
indorsement is discharged.
Failure excused on two grounds:
shown
Sec 75
o Presentment where instrument payable at bank must be
made during banking hours. Law assumes that the bank will
o
demanded
So he can check genuineness
This is why telephone as demand is not allowed
First Pacific (?) Check negotiated by car dealer to financing
banks
Sec 72 when presentment is sufficient
o REQUISITES:
of
business/residence
Sec 74
o NI must be exhibited to the person from whom payment is
o
o
o
Sec 71
o Instrument not payable on demand
date of maturity.
Sec 76-78
o Applies when principal debtors is:
o
o
Dead
Liable as partners
o
o
diligence
o If partners, to any of the partners
payment
INDORSER when instrument was made/accepted for
indorsers accommodation, and indorser has no reason to
Sec 85
o If payable in a fixed period, it must be paid on that day
principal debtor
First National bank: PN payable at FNB. Maker had sufficient
funds. But holder did not show up at day of maturity. Dillydallied then the maker became insolvent. Had he shown up
by then, he would have been paid.
HELD:
No.
The fact
cannot be obtained
o 2. Presentment is excused and it is overdue and unpaid
What is the effect of dishonor by non-payment?
o Under the law, the moment it is dishonored, there is
liable. NO NEED to go to the primarily liable.
should pay.
N.B. Remember, failure to make proper presentment only
discharges those secondarily liable.
person is still liable, although the holder may not claim interest
defective
Notice of dishonor
Sec 89 dishonor
o Give notice of dishonor
o Any party may be compelled to pay it to the holder with right of
o
o
reimbursement
ABCDE
notice against
o Notice may be given by holder himself or agent of the holder.
Sec 90 Who can give notice of dishonor
o 1. Holder
o 2. Agent of holder
o 3. Party to the instrument who may be compelled to pay the
o
o
reimbursement from
4. Agent of such party
What about strangers?
Sec 91
o Notice may be given by a party or an agent
o Agent need not be authorized by the party
A) notify principal
On Tuesday
prior parties that have right of recourse against the one given
verbal/oral communication
Rule as to jointly liable parties:
o If partners?
office
N.B. This same time is counted again, after a party receives
notice of dishonor, to give that party a chance to give notice to
payment
antecedent parties
What is the effect of miscarriage in mails?
o Sec 105 if notice was duly addressed and deposited in the
not there.
to receiving letters
2. To place of business or residence
3. Place where he is sojourning
If notice is actually received, although not according to
It is still valid
When can there be waiver of notice of dishonor?
o 1. Before actual time for giving it comes
o 2. Or after failure to give it
o Can waiver be implied?
Yes.
Who is affected by a waiver in an instrument?
o If written on the instrument all the parties
o If written over a signature just that person
Waiver of protest
o Includes presentment and notice of dishonor (steps to hold a
would be dishonor.
When is notice of DH not needed to be given to indorser?
o 1. Drawee is fictitious person or has no capacity to contract
o
was made
3. Instrument was made or accepted for his accommodation
Drawer
Indorser
Drawer countermanded
If an instrument was not accepted, and notice of dishonor by nonacceptance is given, is there need to give notice of dishonor by
non-payment?
o No.
o What is the exception?
Discharge
instrument
C indorsed the
o
o
o
o
o
o
o
pursuant to a LOC)
o Cannot be other than payment of money
Must accept within 24 hours from presentment
o Acceptance deemed done on date of presentment
o When is a bill deemed accepted?
accept pa rin?
3. When it is overdue
sheet of paper?
time of acceptance
What if there is a promise to accept in writing?
payment
What is the special rule if the bill was dishonored
by prior non-acceptance, but it was accepted
thereafter?
Acceptance
thereof
NB: this applies for bills that do not exist yet
when the promise is made (Ex. BOE
2. Qualified
Conditional
Partial
As to time
discharged
BOE
of instrument
2. Bill expressly requires acceptance
3. Bill is payable elsewhere than residence or place of business
of drawee
What about other cases?
Yes.
Protest
bill
Made by Notary Public or respectable resident + two or more credible
witnesses
When must it be done?
o Day of DH
o If bill is noted in the notarial register, protest may be made
anytime
Where?
o Place of DH
o Except when expressly payable at the residence/business of
another person apart from the drawee
What is protest for better security?
matures
Is this mandatory?
Nope
What is the purpose?
Bills in set
Main Principle: each part of the bill, numbered and referring to the other
parts, the whole of the parts constitute one bill
o [usually, it is done to ensure that bills can be collected from
o
liable
Discharge of one part is discharge of all
payment immediately
Rules on BOE apply to checks too, such as the 24 hour
acceptance rule. If you dont return it in 24 hours, it is deemed
accepted
Cashiers and managers checks drawer and drawee is the same
Memorandum checks just usually used as evidence of credit, by the
sent separately]
What if different parts are negotiated to different HIDCs?
o The one whose title accrues first is the true owner
o But the one who gets acceptance or payment first is the one
If he pays and did not get back the part with the acceptance,
afternoon, but the computers are offline, so the bank accepted it. Bank
found out after and chased after the payee to recover. HELD: Sec 62
by accepting, the bank admitted authority of drawer to draw.
Case: Customer bought managers check and asked that his account be
because the account was actually closed. The customer already used
the check to buy goods. HELD: It was a managers check so the store
chemicals, the bank will pay him. Since the bank is more trustworthy,
arrives, PBC will tell ABC Company that the goods arrived.
PBC tells ABC Company that it will release the goods if there is
money.
Sito: When the payee delays in presenting a check for payment, the
BOE addressed to PBC, to pay it. Dupont then submits the bill
of lading, delivery receipt, etc. to PBC as proof of delivery so
them.
Letters of credit
the goods can be used to pay PBC if ABC does not pay.
Dupont will not collect directly from PBC. Dupont will issue a
HELD:
3. Underlying contract
Independence principle (always asked in Bar)
o A bank which issued a LOC is obliged to pay the draft so long
as the beneficiary submits the documents required by the LOC,
without verifying if he actually complied with the obligation in
o
pay
3. Misspellings If the LOC requires noodles but the
document says woodles the Bank may refuse to pay who
All that is
meet specifications:
discrepancy, then the bank pays. If the buyer does not waive,
failure
to
meet
Cojac.
Red clause
get payment
o
o
if the
from a thirty party producer that does not accept anything but
deliver the goods, too bad. The buyer still bears the risk.
Evergreen clause
o A provision that allows an expiring LOC to be automatically
which will pay the surety firm if the company is held liable. This
to a third party, who has the better right? HELD: The bank. It
Trust receipts
ABC was the real ownership of the shells and X just held it in
When the equipment arrived, X took the goods from ABC and issued a
trust receipt in ABCs favor. X installed the goods in his factory. X failed
to pay. ABC sued X for violation of PD 115. X claimed the goods were
lien. ABC still has the right to recover the money; or it can sell
the goods.
PNB Case:
terminate the obligation. It just has a lien, and to realize it, the
company
For estafa, there has to be misappropriation
o Meralco/steel towers case: X fabricated steel towers (hired
The bank then returns the excess or runs after the deficiency.
misappropriation.
Another case: X could not sell the goods covered by the TR.
X tried returning the goods to ABC, but it refused. HELD: X
bank did not have any lien or title to the goods; they were purchased
separately from the credit application.
that it is non-negotiable?
receipt for the goods he just purchased. HELD: This is invalid. The
To deliver
What are the conditions before the WHM delivers the goods?
o 1. Holder pays the WHMs liens
o 2. If the WHR is negotiable, to surrender the receipt
o 3. Readiness and willingness to sign an acknowledgment of
deliver.
The WHM in general, as a bailee, cannot claim ownership over the
during auction
What if the WHM delivers the goods without asking for surrender
of the WHR?
o He is liable for damages to any person who takes the WHR in
o
To safeguard
GF.
It is stipulated
It is customary to do so
What are the rules on commingled goods?
upon claim
What happens if there is partial loss?
In general
INSURANCE
Elements
o 1. Insured possesses interest susceptible of pecuniary
estimation
o 2. Insured is subject to risk of loss
o 3. As consideration, the insured pays premium
Someone organized a jeepney association. You give membership fees
and if a driver gets into an accident, the association pays indemnity.
Sued by Insurance Commission for not having license to do Insurance
Business.
o Held: Was conducting insurance business without license. Al
o
requisites concurred.
Contra Maxicare: Even if all elements are present, but if
primary purpose of contract is to provide services, then it is not
an insurance contract.
cars.
The buyer of a car, for instance, will only be insured if the
insurance company allows for an endorsement of the sellers
insurance contract.
It is unilateral
o It is only the insurer that has an obligation to perform (the
cannot collect.
o Ex. The Mortgagor brought fireworks to the building and it
o
Insurable interest
war with.
Wenfeld:
German company filed claim with Insurance
Company, and the Philippines was under US at that time. The
prevent performance
4. Any person upon whose life any estate or interest vested in
him depends
Parties
person
EXCEPT: if there is a way to place pecuniary value in
the same for a second boy and killed him. The second boys
fingerprints did not match the first boys prints, so the insurance
the policy.
o If the beneficiary is irrevocable, can it still be changed?
The
company said the child must consent. The father said he is the
legal guardian anyway. HELD: father is wrong. He must go
through guardianship proceedings to have another one make
the decision for the child. But how does he prove that revoking
o
o
o
o
o
completion
Lessor and lessee both have insurable interest
Mere possessor.
Then
the policy.
Change in interest after the loss does not change indemnity.
It is
the insured made the agent his own agent for the purpose of filling up
Title IV concealment
Test: the other party would not have entered into the
serious ailments
Case: Couple got an insurance policy for their
mongoloid baby, but they did not say he was a
inspectors.
Insured an oil tanker. Cannot use the defense, why did you
not disclose that there was a war in Afghanistan. They should
have known.
Nurse with a personal accident policy.
Insurance refused,
saying that she did not disclose there was a problem with
peace and order in Pampanga. HELD: Insurance company
should have known it was the center of the HUK movement
before.
Even if you die from another reason apart from the fact concealed, the
company is still not liable because it wouldnt have issued a policy.
Not required to disclose information of ones own judgment.
Can there be waiver?
o Yes. Either express (in the terms of insurance) or implied (as
already communicated0.
property.
Need not disclose matters which pertain to excluded or excepted risks.
o Ex. need not disclose that members of NPA are burning
Misrepresentation
Statements made to induce the other party to enter into the contract
o 1. Untrue statement
o 2. With knowledge and intent to deceive; or stated as true
without knowing it to be true and which tends to mislead
o 3. Fact is material
Consequence voidable at option of insurer
o But waived for acceptance of premium payments despite
inducement.
o But it may qualify as an implied warranty
As a rule, parole evidence is not allowed to vary the terms and
there is no misrepresentation.
HELD: No misrepresentation.
Insured filled up the application form, the Insurance company said that
they will only accept if the applicant is not more than 60 years old. He
was more than 60 years old. Held: he wrote on the application form his
date of birth, but the company still issued a policy.
There was no
misrepresentation.
Do you take alcoholic beverages? Applicant said no. But he has been
drinking since he was 16. He died of liver failure Misrep. But if he only
drank small amounts on cocktail parties, it is not material. There is no
to the risk
EXCEPT: Marine insurance where what is required is the
It is
imposed by law.
A representation is presumed to refer to the date on which the policy
statement
Representation is false if facts do not coincide with what was asserted
o Test for defense: substantially true in every particular material
o
misrep.
Application did not disclose incidents of defalcation by clients. There
was another such case.
Applicant
claimed that the question asked whether there was criminal conviction.
The bank
o
o
o
If there
misrepresented.
In one case, the insured died within two year clause. This was invoked
have lapsed. SC said that when the person died, there is no more
policy; liability has accrued. So count from death.
o JJ agrees with the result, but not the interpretation
o JJ: If the insured did not disclose that he had tuberculosis and
(vicious fraud)
5. Someone substituted for the insured during medical test
If a life insurance policy has been in force for at least 2 years since first
else
Requisites
o 1. Life insurance
o 2. Payable proceeds upon death
o 3. In force for 2 years since issuance or reinstatement
In old days, there was no such clause.
If the policy lapsed and was reinstated, the 2 year period will run again.
BUT there are still defenses that can be invoked even in this period:
o 1. Claimant has no insurable interest
o 2. Uncovered risks (ex. insured engaged in car racing)
o 3. Policy lapsed and insured did not pay
o 4. Policy was entered into pursuant to scheme to kill insured
another person
6. If insured is riding in a plane and it is not a commercial flight
liable even if the cause was not due to the cause concealed or
o
o
o
the new mill was finished it was insured. The policy however
original?
o Must be countersigned by the insured or owner
o N.B. No need for signature of insured otherwise
If a cover note was issued within 60 days, the policy must be issued.
o In marine insurance, this is a problem because 60 days have
HELD:
The
It is a
sum
o Marine policies are usually this
Running policy
o Successive insurances
o Ex. Goodyear, instead of getting insurance whenever it ships
tires to distributors, it gets a running policy that covers all of
common interest
Rules on interpretation:
Insurance
Asked Cebu
HELD:
Insurer refused.
Burned.
Clearly they intended the new mill to be insured, not the old
these
In any case, it would have to notify the insurance company
period is valid
But if the period fixed is less than one year from the time cause
reinsured.
Notice of cancellation:
o Must be in writing
o State ground for cancellation
o State that if the insured asks for the facts as basis, the insurer
will disclose
o * Prudent thing: to send by registered mail
(66) Insured in a non-life policy can automatically renew the policy as
long as he is willing to pay the premium
o Unless 45 days before expiration of policy, the insurer informs
matter of right
Policy written for term longer than 1 year, it will be treated as written for
successive terms of 1 year
o Ex. construction contract requires policy covering the building
against
3. Discovery of fraud/material misrepresentation
4. Discovery of willful or reckless acts increasing hazard
insured against
every week
5. Physical changes in property that makes it uninsurable
Express or implied
o Express found in terms and conditions
o Implied imposed by law
Usually embodied in a rider
o These riders, issued with the policy, need not be signed
What is the difference of warranties from representations?
o Warranties are express and placed in the contract
inducements
May relate to:
o Past ex. warranty that insured was never confined
o Present ex. warranty that insured is in good health
o Future ex. warranty in fire insurance that owner of property
will not store flammable materials
When does non-compliance with a future warranty not avoid the
He
policy?
o 1. Loss occurs
o 2. Performance becomes unlawful
o 3. Performance becomes impossible
Give an example
o Somebody tried to insure his house for fire. Inspectors said his
premium
Case on motor vehicle policies.
For
It is not double
insurance.
When is there a waiver by the insurer?
o When despite knowledge of the breach, it accepts the renewal
driven for a road test. Employees drove it for a road test. If its
While distracted, robbers broke into the store and stole the
On Sept
On December 31 he stored
boat arrived, the SMC rep met the captain and told the latter
that the boat should be moved to a safer place since there is a
typhoon brewing. The captain ignored it and tied the barge to
the wharf. During the typhoon the rope broke, the barge was
cut loose. Claim against insurance the captain was grossly
opportunity is gone
Usually fire policies have a provision that claims must be filed
the claim
When proof is required, insured is not required to give proof that stands
in court
o Noda: police report should be sufficient
Defects in the notice or substantiation thereof which the insurer didnt
specify waived
o Because the insured is usually a layman
Marine insurance
in the hull of sea. The insurer was liable because it was perils
Requisites:
o 1. Insured must be the same
Reinsurance
Two types:
o Treaty
o Facultative case by case
A reinsurer cannot intervene in the case of insurer and insured because
the reinsurer has his own interest anyway
After first layer, the subsequent layers are called reprocession
such portions
Deviation
o Check the three types of deviations
o Check when it is proper to make deviations
Renders it valueless
o Constructive total loss is unique in marine insurance
property, etc.)
<READ TRANSCRIPT ON MARINE AND FIRE no changes in the
law>
Motor vehicle liability insurance
cannot use the same set of stories since these were chosen by
Intellectual Property
is not yet registered with the National Library. But the law is
clear no need to register to have rights over intellectual
creation.
Are email and letters also covered?
o Yes. Any form of text is covered.
Even choreography, musical compositions,
drawings,
He came up with a
argued that you cannot have a monopoly on words. Court held that the
original writer used his judgment in selecting which words will be used.
Pilita Corales adopted A Million Thanks To You as her final song in
concerts.
intellectual creation.
Are derivative works also created?
o Yes, but you have to get the consent of the original creator.
o Examples of these are dramatizations of novels,
or
translations.
o Or adaptations (ex. Miss Saigon, from Madame Buttefly)
What about compilations?
o This involves judgment of, for instance, the best Filipino short
stories. So he has to get the consent of those whose stories
he included in the compilation.
paintings,
etc.
o But for collecting, the producer has the right.
If the work is done for hire or is part of his duties, then the employer will
own the copyright.
Torrens system.
o If you sell, mortgage, convey your copyright, you must register
it with the National Library to bind third parties.
Owner can object to the distortion of his work.
Transfer of the work to new media will not violate [?]
How long do these rights last?
o Modern rights last up to 50 years after the death of the author.
o They are not assignable.
The economic rights of author need permission:
o Reproduction or substantial reproduction (ex. photocopying an
entire book)
o Derivative works
o Public distribution or exhibition
Businesses started playing certain songs to drum up business.
Technically, this is economic exploitation of the work.
Monster.
Some artist connoisseurs bought Xs paintings for a cheap price.
Then they sold the paintings for a fortune when he became
famous. What is Xs right?
o He must get 5% of the selling price.