CODE OF COMMERCE COMMERCE – branch of human activity; purpose is to bring products to the consumer through operations habitually and

with intent of gain COMMERCIAL LAW – branch of private law which regulates the juridical relations arising from commercial acts CHARACTERISTICS OF COMMERCIAL LAW: 1. 1. universal 2. 2. uniform 3. 3. equitable 4. 4. customary 5. 5. progressive PORTIONS OF CODE OF COMMERCE STILL APPLICABLE: 1. 1. merchants; book of merchants and general provision of contracts 2. 2. joint account association 3. 3. commercial barter 4. 4. transfers of non-negotiable credits 5. 5. commercial contracts of overland transportation 6. 6. letters of credit 7. 7. maritime commerce OTHERS: 1. 1. Commerce – bringing products from the manufacturers to the consumers 1. 2. Characteristics of Commerce: 1. a. habituality 2. b. rapidity – if period is fixed, debtor in delay without need of demand; if contract does not fix period, 10 days 3. c. intent to join 1. 3. Merchant: 1. a. Individuals – legal capacity, 21 years, or subject to parental authority, habitually engaged in commerce 2. b. Juridical Persons – commercial and industrial company organized in accordance with law, habitually engaged in business 1. 4. General Rule: Minors cannot engage in commerce Exceptions: 1. a. to continue business of deceased parents through guardian 2. b. court authorizes guardian to place minor and property in business 3. c. minor is an alien and his national law allows him to be a merchant 1. 5. Which persons are not allowed to engage in commerce? 1. a. suffering accessory penalty of civil interdiction (reclusion perpetua and reclusion temporal) 2. b. those judicially declared insolvent until they can obtain their discharge 3. c. prohibited by Constitution and special laws 1. 6. Aliens 1. a. capacitated under his national law to engage in business 2. b. engaged in the business in the Philippines not reserved for the Filipinos 3. c. after securing license and BOI certificate 1. 7. Family Code: Either spouse may engage in business; when objected to by the other, court will look into valid grounds, i.e. serious and moral grounds 1. 8. BOI Certificate must be obtained by: 1. a. alien 2. b. foreign firm 1. 9. Meaning of Philippine National 1. a. citizen 2. b. domestic corporation wholly owned and organized by Filipinos in the Philippines 3. c. Filipino corporation where Filipino capital entitled to vote is at least 60% 1. 10. Query: If a corporation is a shareholder of another corporation, how do you determine whether the latter corporation is a Filipino national? Answer: The following must concur 1. a. At least 60% of the outstanding capital stock and entitled to vote of both corporations are held by citizens of the Philippines 2. b. At least 60% of the Board of Directors of both corporations are Filipinos 1. 11. Tenor of BOI Certificate 1. a. Business or activity to be engaged is consistent with the Investment Priorities Plan 2. b. Business will contribute to the sound and balanced development of the national economy in a self-sustaining basis 3. c. Business will not conflict with the Constitution and local laws

4. d. Business is not adequately exploited by Filipino nationals 5. e. No danger of monopolies/combinations in restraint of trade 1. 12. Basic Principles/Conditions laid down by BOI 1. a. resident agent of foreign firm is a Filipino citizen 2. b. establishment of office in the Philippines 3. c. bringing assets tot he Philippine office as capital 4. d. complete set of accounting records 1. 13. Merger and Consolidation subject to BOI requirements for the issuance of certificate: When merger and consolidation result in ownership and control of non-Filipino nationals over more than 40% of the capital of a consolidated corporation. 1. 14. SEC License issued upon compliance with the following requirements: 1. a. proof of compliance with principle of reciprocity 2. b. BOI certificate 3. c. Applicant for license gives required information n articles of incorporation n by-laws n names and addresses of resident agents n principal place of business in the Philippines 1. d. proof of solvency 2. e. deposit acceptable securities to protect future creditors RETAIL TRADE NATIONALIZATION LAW (Note: Material on the Retail Trade Liberalization Law will not be included in this reviewer. Supplement to follow) 1. 1. Retail Trade – any act, occupation, or calling of habitually selling direct to the general public, merchandise, commodities, or goods for consumption Jurisprudence has held that the term ―retail‖ should be associated with and limited to goods for personal, family or household use, consumption and utilization. The Retail Trade Nationalization Law refers to ―consumption goods‖ or ―consumer goods‖ which directly satisfy human wants and desires and are needed for home and daily life. Excluded from the law are those goods which are considered generally raw material used in the manufacture of other goods, or if not, as one of the component raw material, or at least as elements utilized in the process of production and manufacturing. 1. 2. Elements of What Constitutes Retail Trade: 1. a. The seller habitually engages in selling; 2. b. The sale is direct to the general public; and 3. c. The object of the sale is limited to merchandise, commodities or goods for consumption. 1. 3. General Rule: After 1964, only Filipinos or corporations whose capital is 100% Filipino may engage in retail trade. 1. 4. Exceptions, that is, instances when aliens may engage in retail trade in the Philippines: 1. a. manufacturer or processor if capital does not exceed P5,000.00; 2. b. farmer or agriculturist when selling his products; 3. c. manufacturer or processor selling to industrial or commercial users or consumers who use the produce to render service to the general public or to produce or manufacture goods which are sold by them to the public; 4. d. hotel owners or keepers of restaurants included or incidental to the hotel business; 5. e. sale by a manufacturer or processor to the Government or its agencies, including government owned and controlled corporations. 1. 5. Query: How to determine citizenship of shares of the corporation when they are not held directly by individuals, but in turn held by another entity? Answer: apply the GRANDFATHER RULE, to wit: Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. Thus, if 100,000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital respectively, of which belong to Filipino citizens, all of the said shares shall be recorded as owned by Filipinos. But, if let’s say, 50% of the capital stock belongs to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shares shall be recorded as belonging to aliens. However, while a corporation with 60% Filipino and 40% foreign equity ownership is considered a Philippine national for purposes of investment, it is not qualified to invest in or enter into a joint venture agreement with corporations or partnerships, the capital or ownership of which under the Constitution or other special laws are limited to Filipino citizens only. Hence, for purposes of the law, whatever the percentage of Filipino ownership in the owning corporation, the foreign ownership would always render a portion of its holding in the company as foreign equity and would disqualify the corporation to engage in retail trade. ANTI-DUMMY ACT 1. 1. The Act penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved for Filipinos or Filipino corporations. Criminal sanctions are imposed on the president,

. Loss of goods pending the dispossession shall not extinguish the obligation to the ENTRUSTER for the value thereof. upon the recommendation of the department head concerned. 3. the following may participate in management: 1. What doing business means: 1. 1. the ENTRUSTER’S security interest cannot be prejudiced by claims of creditors of the ENTRUSTEE. Issued to definite persons and not to order. to regulate the use of trust receipts TRUST RECEIPTS LAW 1. provided that no Filipino can do such technical work. A registered enterprise may employ foreign nationals in supervisory. 1. d. and 3. with express authority from the President. 2. 3. technical. 2. a. 1. When commissioned merchants/investors or commercial brokers act in their own name in selling foreign products. Traveler’s Letters of Credit 1. 1. 2. Disqualified aliens cannot intervene in the management. alien takes part in technical aspects. 3. 1. 1. purchases. 3. allowing her common-law alien husband to take part in the management of the retail business would be a violation of the law. rights and franchises. with or without remuneration. A Filipino common-law wife of an alien is not barred from engaging in the retail business provided she uses capital exclusively derived from her paraphernal properties. b. 4. 1. operation. Kinds: 1. any other act or acts that imply continuity in commercial dealings 1. the latter is doing business in the Philippines. the following positions may be held by foreign nationals: n president n treasurer n general manager n equivalent positions 1. Purpose: 1. 2. a. documents or instruments tot he possession of the former upon the ENTRUSTEE’S promise to hold said goods in trust for the ENTRUSTER.manager. a. Where majority of stocks of a pioneer enterprise is owned by foreign investors. The following are NOT doing business: 1. a. Commercial Letters of Credit 2. a. Trust receipts are denominated in Philippine currency or acceptable and eligible foreign currency. When a local corporation or person acts in the name of a foreign firm. e. c. Definition: A written/printed document signed by the ENTRUSTEE in favor of the ENTRUSTER whereby the latter releases the goods. mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business. to encourage use of and to promote transactions based on trust receipts. 4. except when: 1. thus. 5. having a nominee director or officer to represent interests in such corporation. 6. administration or control of the business reserved to Filipinos whether as an officer. 1. c. etc. service contracts. and to sell the goods. the foreign firm manufacturing these products is not doing business in the Philippines. opening offices whether called liaison offices or branches. 6. 5. participating in the management or supervision or control of any domestic firm. 1. 1. b. No protest required in case of dishonor. or to return the goods if UNSOLD. and advisory positions for a period of 5 years subject to extension. 2. employee or laborer. 4. 2. 2. entity or corporation in the Philippines. 2. 1. 3. exercise of rights as such investor. c. Risk of loss is borne by the ENTRUSTEE. 2. d. b. 5. b. b. non-negotiable. Pending the duration of the trust agreement. 8. 7. board member or persons in charge of the violating entity and causing the latter to forfeit its privileges. or for other purposes. soliciting orders. WITH THE OBLIGATION TO TURN OVER THE PROCEEDS THEREOF TO THE EXTENT OF WHAT IS OWING TO THE ENTRUSTER. ENTRUSTER is not liable as principal or vendor under any sale or contract to sell made by the ENTRUSTEE. 1. By way of exception. appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the country for a period totaling 180 days or more. 4. LETTERS OF CREDIT 1. 7. however. a. appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own accounts. Aliens may be elected to the Board of Directors to the extent of their allowable share in the capital of the corporation (in partially nationalized industries). 1. 3. c. b.

3. Insurance Code 2. PRICE TAGS LAW 1. Contract of Insurance – an agreement whereby one undertakes for a consideration to indemnify another against loss. doing reinsurance business. . General Principles prevailing on the subject in the US 1. When 6(c) is not complied with. 1. 5. a. 1. of the fixtures and equipment used in the business of the vendor. 1. 1. 1. 4. BULK SALES LAW 1. or public officers. 2. at least 10 days before the sale. c. 2.‖ 1. b. c. a. and participating in the favorable or unfavorable results thereof in the proportion they may determine. the sale is not void. Requisites of Insurance: 1. c. 2. transfer. 3. mortgage or assignments of all. When 6(b) above is not complied with. or assignment of all. If the vendor. of the business of the vendor. INSURANCE LAW 1. Purpose: meant to protect creditors of businessmen against preferential or fraudulent transfers 1. mortgagor. The law does not apply to executors. or assignor. 1. 4. Definition of ―doing an insurance business‖: 1. 7. 1. Only creditors at the time of the sale in violation of the law are within the protection of the laws and creditors subsequent to the sale are not covered. Even if the transaction falls within the definition of ―bulk sale‖. no criminal liability on the seller. Sale.. transferor or assignor produces and delivers a written waiver of the provisions of the law from his creditors as shown by verified statements. 6. a. 3. Sale transfer. a. Sale. b. transferor. merchandise. only if made by a surety who or which. It requires articles of commerce sold at retail to bear prices. 1. that fall within the description of what is a ―bulk sale. making or proposing to make as a surety. 2. c. the sale itself is also void. Contract of Suretyship – deemed to be an insurance contract within the meaning of the Insurance Code. making or proposing to make. b. wares. 3. b.1. 5. it may be oral. When 6(a) above is not complied with. receivers. 3. 2. Civil Code 3. etc. The vendor must deliver to such vendee a written statement of: n names and addresses of all creditors to whom said vendor or mortgagor may be indebted. or whether or not the seller is in a state of insolvency. mortgage. terms and conditions of the sale 1. Obligations when transaction is a bulk sale: 1. transferor. Consequences of Violation of Requirements under #6 above stated: 1. provisions. or assignor. the seller will be criminally liable. or substantially all. The seller. 2. merchandise. as such. or materials otherwise than in the ordinary course of trade. a. No suit may be maintained – investor and third persons dealing with the merchant conducting business. a. or substantially all. Joint accounts do not adopt a firm name. transfer. n amount of indebtedness due or owing to each of said creditors 1. c. 4. any insurance contract. existence of an insurable interest. contributing thereto the amount of capital they may agree upon. the following are not deemed covered by the law: 1. b. 1. The vendor must apply the purchase money to the pro-rata payment of bona fide claims of the creditors as shown in the verified statement. mortgagor. 2. mortgagor. a. doing or proposing to do any business in the substance equivalent to any of the foregoing in a manner designed to evade the provisions of the Insurance Code. acting under process. d. is doing an insurance business 1. 1. 4. 1. of the price. Limited to a fixed account. mortgage or assignments of a stock of goods. shall: n make a full detailed inventory of the goods. b. any contract of suretyship as a vocation and not merely incidental to any other legitimate business or activity of the surety. It exists when a merchant interests himself in the transaction of another merchant. JOINT ACCOUNTS 1. the sale itself is void. 4. The law covers all transactions. administrators. 2. seller is also criminally liable. cost price of each article to be included in the sale n notify every creditor at least 10 days before transferring possession of the goods. 3. Laws applicable to insurance in the order of priority: 1. It is not subject to any formal requirement for validity. as insurer. whether done in good faith or not. 1. damage or liability arising from an unknown contingent event. assignees in insolvency. Types of transactions which are treated as ―bulk sales‖: 1.

when interest must exist may be based on pecuniary interest. credit and the conduct of the other 7. an expectancy. which may damnify a person having an insurable interest. a. Interest in the Life or Health of a Person Insured must exist when the insurance takes effect. d. 8. 3. basis 2. b. b. or is to receive a certain sum upon the happening of a specified contingency 3. 3. e. Interest in Property insured must exist when the insurance takes effect and when the loss occurs. insured – person in whose favor the contract is operative. amount of insurable interest . of which death or illness might prevent the performance or delay it 4. 2. based purely on pecuniary interest affinity. and c are present. b. any person under a legal obligation to him for the payment of money. personal – each party takes into account the character. c. Category Insurable Interest in Life Insurable Interest in Property Insurance 1. b. 1. insurer – party who assumes the risk or undertakes to indemnify the insured or to pay a certain sum on the happening of a specified contingency 2. c. or (b) any contingent or unknown event. whether real or personal. 10. b. 4. coupled with an existing interest out of which the expectancy arises  Definition of Insurable Interest in Property: Interest in property. which may create a liability against the person insured. it is not a wagering nor a gambling contract 4. c. an inchoate interest. Insurable Interest in Property may consist of: 1. whether past or future. however. or in whom he has a pecuniary interest 3. executory as to insurer – not executed until payment for a loss 6. of such nature that a contemplated peril might directly damnify the insured. his spouse and his children 2. or consanguinity at the time the policy takes effect at the time the policy takes effect EXCEPT: life insurance taken by the and at the time of the loss creditor on the life of the debtor wherein interest must also exist at the time of the loss no limit EXCEPT: if insurable interest limited to the actual value of is based on creditor-debtor damage/injury/loss relationship (only to the extent of the credit or debt) 1. Every person has an insurable interest in the life and health of: 1. and who is indemnified against. and 5. b. an existing interest 2. founded on an existing interest 3. consensual 2. f. Beneficiaries of Property Insurance must have insurable interest in the property insured. Characteristics of an insurance contract: 1. c. Parties to a contract of Insurance: 1. but need not exist in the meantime. or respecting property or services. a. it is not a contract of insurance but a risk shifting device. executed as to the insured after payment of the premium 5. g. d. 6. or any relation thereto. any person upon whose life any estate or any interest vested in him depends 1. conditional – liability is based on the happening of the event insured against 7. assumption of risk. d. b. a. e. any person on whom he depends wholly or in part for education or support. beneficiary – may or may not be the same as the insured  What perils may be insured? (a) any contingent or unknown event. a. 4. 3. c. but need not exist thereafter or when the loss occurs. whether past or future. voluntary 3. scheme to distribute losses. himself. d. Instances when Insurable Interest must exist: 1. Beneficiaries of Life Insurance need not have insurable interest in the life of the insured. or liability in respect thereof. c. 1. aleatory – depends upon some contingent event. payment of premiums Note: If only a. a. 1. risk of loss. 2. 9.

1. until the interest in the thing and the interest in the insurance are vested in the same person. a. Failure on the part of the insured to disclose such facts known to his agent. ascendants. The revocation of or change in the designation shall take effect upon written notification thereof to the insured. b. The action to revoke the donation under this article must be brought within 5 years from the time the decree of legal separation has become final. b.  A concealment. (c) the party is duty bound to disclose such fact to the other. descendants. . those made to a public officer or his wife.  The following donations shall be void: 1. will avoid the policy. when the change in interest results after the occurrence of an injury which results in a loss 2. the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified. joint owners in common who are jointly insured to the others (even though it has been agreed that the insurance shall seize upon the alienation of the thing insured) 1. 3.  Note: An insured need not die of the very disease he failed to reveal to the insurer. whether in life or property insurance. General Rule: A change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance suspends the insurance to an equivalent extent.  Note: The insured is under an obligation to disclose not only such material facts as are known to him. a change of interest in one or more several distinct things. it was possible for the agent. 15. c. even if such designation be stipulated as irrevocable. those made by persons found guilty of the same criminal offense. but also those known to his agent where: a. those of which the other knows. Concealment – a neglect to communicate that which the party knows or ought to communicate  General Rule: The insured is not required to communicate the nature (or kind) or the amount of his insurable interest in the life or property insured to the insurer. the innocent spouse may revoke the donations as well as the designation of the latter as a beneficiary in any insurance policy.11. 1. a transfer of interest by one of several partners. whether intentional or not. if he is not the absolute owner thereof. entitles the injured party to rescind a contract of insurance. in the exercise of reasonable diligence. in which event. those made between persons who were guilty of adultery or concubinage at the time of the donation. (d) the party concealing makes no warranty as to the facts concealed. accomplice or accessory in willfully bringing about the death of the insured. c. even if such designation is irrevocable. b. 2. Neither party to the insurance contract is bound to communicate information on the following matters except in answer to the inquiries of the other: 1. Revocation of Beneficiaries  General Rule: Insurance contracts are revocable. (b) the facts concealed must be material to the risk. (b) After the finality of the decree of legal separation. health. 13. and accident insurance 1. Suspension – a change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the insurance suspends the insurance to an equivalent extent until the interest in the thing and the interest in the insurance are vested in the same person. to have made the communication before the making of the insurance contract. insurance policy must specify the interest of the insured in the property insured. It is sufficient that the non-revelation has misled the insurer in forming his estimate of the disadvantages of the proposed policy or in making his inquiries in order to entitle the insurance company to avoid the contract. (c) The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal. In case of life. a change in the interest by will or succession on the death of the insured (interest passes to the heirs) 4. Exceptions: a. d. a. (e) the other party has no other means of ascertaining the facts concealed. in consideration thereof. e. or wholly due to the fault of the agent. 1.  Exception: Any person who is forbidden to receive any donation under Article 739 of the Civil Code cannot be named beneficiary of a life insurance policy by the person who cannot make the donation to him. 1. 14. 1. it was the duty of the agent to acquire and communicate information of the facts in question.  Requisites: (a) the party concealing must have knowledge of the facts concealed. b.  Other Pertinent Provisions on Revocation: (a) The termination of a subsequent marriage shall allow the innocent spouse to revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy. separately insured by one policy 3. 12. despite the good faith of the insured. by reason of his office.  Exception: a. When the insurer makes inquiry from the insured of the nature or amount of the latter’s insurable interest.

4. 1. political situation.  It may be altered or withdrawn before the insurance is effected. 5.  Exceptions: (a) absence of insurable risk (b) cause of loss is an unexpected risk (c) fraud (d) non-payment of premium (e) violation of conditions relating to naval or military services (f) failure to comply with conditions subsequent to the occurrence of the loss 1. actual knowledge)  The statement of an erroneous opinion. when before the time of the performance of the warranty. even if the cause of the loss is a different risk.  A representation cannot qualify an express provision in a contract of insurance but it may qualify an implied warranty. when before the time for performance of the promissory warranty.  Waiver of material facts may be: (a) by the terms of the insurance. entitles the other party to rescind the contract.  Exceptions: 1. in the exercise of ordinary care.  Neither party is bound to communicate his mere opinion. unless fraudulent. to give information to the insurer and otherwise induce him to enter into the insurance contract. whether intentional or not. where they are distinctly implied in other facts which information is communicated  Materiality is to be determined not by the events but solely upon the probable and reasonable influence of the facts on the party to whom the communication is due in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. 3. those which relate to a risk excepted from the policy and which are not otherwise material. that which. 16. must be exercised previous to the commencement of an action on the contract (the action referred to is that to collect a claim on the contract) 2. whether intentional or not. or before.b. the issuance of the policy. . the issuance of the policy. i.  Concealment. the non-fulfillment of which in any respect and without reference to whether the insurer was in fact prejudiced by such nonfulfillment. those which prove or tend to prove the existence of the risk excluded by a warranty and which are not otherwise material. when before the time of the performance of the warranty. Note: If there is a breach of warranty. c.  A representation as to the future is to be deemed a promise unless it appears that it was merely a statement of belief or an expectation. renders the policy voidable by the insurer. or (b) by the neglect to make inquiry as to such facts. (must be susceptible of present.e. c.  It may be made orally or in writing. Warranties:  General Rule: Non-performance of a promissory warranty avoids a contract of insurance.  It may be made at the time of. wholly irrespective of the materiality of such statement or promise. b. will not avoid the contract of insurance.  A statement or a promise set forth in the policy or by reference incorporated therein. even upon inquiry. belief or information. said performance becomes impossible. 2. misrepresentation. or of an unfulfilled intention. 3. d. b. general usages of trade. a. whether intentional or not. because such opinion would add nothing to the appraisal of the application. e. the act becomes unlawful. those of which the other waives communication. a. Breach must refer to a material warranty. Warranty part of the insurance contract always written on the policy conclusively presumed material must be strictly complied with made by the insured   Representation collateral inducement maybe oral or written materiality must be proved requires substantial truth may be made by insurer or insured 2. or prior to. the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. 17.  Right to rescind because of false representation: 1. the other ought to know and of which the former has no reason to suppose his ignorance. Representation It is a factual statement made by the insured at the time of. a loss insured against occurs. the insurer is entitled to rescind the contract of insurance. but not afterwards. gives the right to rescind  Incontestable Clause: After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of 2 years from the date of its issue or of its last reinstatement.

but is left to be ascertained at the time of the loss 2.  General Rule: Cover notes bind insurer temporarily pending the issuance of the policy..  Kinds of Policies: 1. whenever the grace period applies (b) in case of estoppel  Insurer is entitled to payment of premiums as soon as the thing insured is exposed to the perils insured against. from the time of rejection of the claim by the insurer. occurrences after effective date of the policy (a) non-payment of premiums (b) conviction of a crime arising out of acts increasing the hazard insured against (c) discovery of fraud or material misrepresentation (d) discovery of willful or reckless acts or omissions increasing the hazard insured against (e) physical changes in the property insured which results in the property becoming uninsurable (f) determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of the Insurance Code (3) notice must be in writing (4) it must be mailed or delivered to the insured at the address shown in the policy (5) notice must state the ground relied upon and that upon written request of the insured. c. when the contract is voidable on account of fraud or misrepresentation of the insurer. i. Policy What is a Rider? It is an additional provision in a policy not part of the body of the printed form. the existence of which the insured was ignorant without his fault 3. c. 19. Valued – expresses on its face an agreement that the thing insured shall be valued at a specific sum 3. when by any default of the insured other than actual fraud.18.   For Policies Other than Life: (1) prior notice of the cancellation to insured (2) notice must be based on the ff. b. stipulation. Open – the value of the thing insured is not agreed upon. it is merely a determination of the maximum limit of recovery and not as the value of the policy. Running – contemplates successive insurance which provides that the object of the policy may be from time to time defined especially as to the subject of insurance by additional statements or endorsements n Note: If an amount is written on the face of an open policy. a. when the insured has become a public enemy and the policy automatically canceled (on the ground of equity) . a.  Exceptions: (a) in case of life or industrial life policy. b. Grounds for Cancellation of a Policy by the Insurer: 1. Premium  General Rule: No policy is binding until the premium thereof has been paid. the insurer will furnish facts on which the cancellation is based  Renewal of the Policies Other than Life: Insurer must mail or deliver to the insured notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages within 45 days before the policy ends. d. Category Open Policy Valued Policy what needs to be proven in order to value of property upon loss no need for proof of value of be able to claim property upon loss determining value of loss value of property is to be ascertained value of property upon loss is upon loss conclusively stipulated to a specified amount   Period for commencing an action against the policy: Within 1 year from the time the cause of action accrues. the insurer never incurred any liability under the policy 4. insured entitled to renew the policy upon payment of the premium due on the effective date of the renewal . when on account of facts.  When insurer entitled to Return of Premiums 1. intended to give temporary protection pending the investigation of the risk by the insurer.  Exception: Where it is merely an acknowledgment on behalf of the company that the latter’s branch office had received from the applicant the insurance premium and accepted the application subject for processing by the insurance company and that the latter will either approve or reject the same. 1. or until the issuance of a formal policy. 2. Otherwise. or agreement limiting the time to less than 1 year is void.e. Cover Note: written memorandum of the most important terms of a preliminary contract of insurance. Any condition.

3.  1. 2. person insured must be the same b. where the peril is specifically excepted. different risks and interests of insured 4. a loss which would not have occurred but for such peril is thereby excepted c. Double Insurance – exists where the same person is insured by several insurers separately in respect to the same subject and interest Requisites: a. 2. all the representations of the original insured. 4.  1. which permanently deprives the insured of its possession in whole or in part c. existence of several insurers c. all the knowledge and information he possesses. interest the same e. loss caused by the willful act of insured e. loss. loss caused by the connivance of the insured d. or a manifest intention of the contracting parties to the reinsurance contract to favor the insured.    1. 3. subject matter is the insured risk or liability 3. whether previously or subsequently acquired which are material to the risk  Exception: under automatic reinsurance treaties Reinsurance 1. Loss When Insurer is Liable: a. a. if it amounts to bad faith General Rule: The insurer is not liable for a loss caused by the willful act of the insured. where loss is caused by efforts to rescue the thing insured from a peril insured against d. insurer becomes the insured 2. 22. if. the immediate cause of which is a peril insured against except when the proximate cause is an excepted peril When Insurer Not Liable: a. subject matter insured must be the same d. risk insured against also the same Over Insurance Double Insurance may be only one insurer must be 2 or more insurers insurance covers more than the value of insurable insurance may or may not exceed the value of insurable interest interest  The Code prohibits double insurance without the consent of the insurer.5.  Liability of Insurer: Insurance taken from each insurer ———————————. 5. 21. 1. b. Reinsurance: A process by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance. where the peril insured against was only a remote cause b. If insured kills himself within a period of 2 years. the reinsurance contract in favor of the insured. 1. Exception: Suicide Clause in Life Insurance: Insurer liable in case insured committed suicide after the policy has been in force for a period of 2 years from the date of its issue or last reinstatement. where the thing insured is rescued from the peril insured against that would otherwise have caused a loss. although a peril not contemplated by the contract may have been the remote cause or even the immediate cause of the loss b. where the peril insured against was the proximate cause. 2. 2. insurer is not liable. e. loss caused by insured’s negligence. 4. proportioned to the amount by which the aggregate sum insured in all policies exceed the insurable value of the thing at risk) 20. regardless of the time of commission. insurer is not exonerated by a loss caused by simple negligence of the insured if the proximate cause of the loss is a peril insured against e. there must be consent of original 5. Exception to Exception: If suicide is committed in a state of insanity. 4. 5. 3. the thing is exposed to a peril not insured against. The original insured cannot recover from this insurance unless there is a specific grant.  General Rule: The insurer who obtains reinsurance must communicate: 1. 5. 4. in case of over-insurance by several insurers (ratable return of premiums. or assignment of.  1. and 2. the insurer is liable.x value of property received = liability of insurer total insurance 1. one who is original insured has no interest in the contract of reinsurance which is Double Insurance . in the course of such rescue. 3.

in reference to a material fact is material. except: (a) insurance for a specified length of time – at the commencement of every voyage it undertakes during that time.  Freightage: Signifies all the benefits derived by the owner. The goods serve as the principal security. d. with maritime or extraordinary interest on the account of the maritime risks to be borne by the lender. carriage of his own goods. 2. insured has to give his consent 10. b. ordinary wear and tear of a ship. that the vessel shall not deviate from the course of the voyage insured 4. in the hope of saving the rest of the venture. that the ship is seaworthy – complied with if the ship is seaworthy at the time of commencement of risk. b. a. national character of the insured 2. a. 3. 2. nature of the ship  1. in the ship even if it has been chartered by one who promises to pay him in value in case of loss (insurer is liable for what insured cannot recover from the charterer). 3. Marine Insurance: insures against perils of the sea. Concealment of the following merely exonerates the insurer from the resulting loss therefrom: 1. It is stipulated in such a contract that if the ship be lost in the course of the specific voyage or during a specified limited time caused by any of the perils enumerated in the contract. equipment or repair of the vessel for a definite term. or 3. or those of others. which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage  Charterer has insurable interest in the ship to the extent that he is liable to be damnified by its loss.  Jettison: Intentional casting overboard of any part of a venture exposed to a peril. information or the belief or expectation of a 3 rd person. e. whether it be of the cargo. or the ship’s furniture or tackle. in pursuance of some unlawful or fraudulent purpose. and which are to be sold or exchanged in the course of the voyage. d. 5. negligent failure of the ship owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions Owner of the Ship has Insurable Interest: a. 4. liability to seizure from breach of foreign laws of trade 4. It has also been defined as a contract by virtue of which the owner or the agent of the vessel for the transportation of goods or persons from one port to another. 1. liability of the thing insured to capture and detention 3.  Loan on Respondentia: Contract akin to that of mortgage made on the goods on board the ship. insurer remains the insurer 7. insured is the party in interest in all contracts 1. b. want of necessary documents 5. 1. and pledges the ship as a security for repayment. it is implied that the ship will carry the requisite documents to show such nationality or neutrality and that it will not carry any documents which may cast reasonable suspicion thereon  Seaworthiness depends on: 1.independent of the original contract of insurance 6.  Concealment: In marine insurance. the lender shall resolutely lose his money. that the vessel shall not engage in illegal venture 3. even when hypothecated by bottomry (only the excess of its value over the amount secured by bottomry) and 2. the same interest and risk are insured 9. natural and inevitable action of the sea prevented by human prudence 2.  Loan on Bottomry: Contract in the nature of a mortgage whereby the owner of a ship borrows money for the use. in the freightage. a.  Barratry: Any willful misconduct on the part of the masters or crew. use of false and simulated papers  Implied Warranties: 1. (b) cargo to be transshipped at indeterminate port – each vessel upon which cargo is shipped is seaworthy at the commencement of each particular voyage 2. not of the ship Perils of the Sea Perils of the Ship covered by marine insurance not covered by marine insurance denote nature accidents peculiar to the sea which do damage or losses resulting from: not happen by intervention of man nor are to be 1. . without the consent of the owners and to the prejudice of the owner’s interest. subject matter is property 8.  Insurable Interest in Marine Insurance: Determined when one will sustain loss from the destruction of the subject matter or derive benefit from its preservation. c. where the nationality or neutrality of a ship or cargo is expressly warranted.  Charter Party: Contract by virtue of which the owner or the agent of a vessel binds himself to transport merchandise or persons for a fixed price. c. 23.

irrevocable. a. c.  Requisites of a Valid Abandonment: 1. c. made within a reasonable time 3. a. b. need not be accompanied by proof of interest or loss  Acceptance of Abandonment 1.2. Constructive Total Loss – gives to the person insured the right to abandon  Average – any extraordinary or additional expense incurred during the voyage for the preservation of the vessel. must be explicit 3. nature of the voyage 3. b. a. or a risk which a prudent man would not undertake under the circumstances (d) if the thing insured is cargo or freightage. when made in good faith and upon reasonable grounds of belief in its necessity to avoid a peril  Loss 1. after a constructive total loss. d. written notice must be submitted within 7 days from oral notice) 2. b. c. b. conclusive upon the parties and admits the loss and sufficiency of abandonment 3. b. there must be no fraud on the insured’s part  Notice of Abandonment: 1. b. when made in good faith for the purpose of saving human life or relieving another vessel in distress 4. b. silence for unreasonable length of time) 2. a departure from the course of the voyage insured 2. insured must have interest at risk 2. freightage earned before loss – belongs to the insurer of freightage 2. c. of the thing insured 1. a. d. in a Voyage Policy – commencement of each portion of the voyage  Deviation 1. d. b. its cargo. b. c. must be total and conditional 2. he declares the relinquishment to the insured of his interest in the thing insured (where the cause of loss is a peril insured against) (a) more than ¾ thereof in value is actually lost or would have been expended to recover it from the peril (b) it is injured to such an extent as to reduce its value by more than ¾ (c) if the thing insured is the ship and the voyage cannot be lawfully performed without incurring an expense of more than ¾ of the whole. or both from the real or known risk  Abandonment – act of the insured by which. c. and the voyage cannot be performed on another ship procured by the master within a reasonable time and with reasonable diligence to forward the cargo without incurring an expense or a risk as stated above  Freightage cannot be abandoned unless ship is also abandoned. in a Time Policy – commencement of every voyage that must be undertaken 2. c. may be oral or in writing (if oral. unreasonable delay in pursuing the voyage 3. explicit notice 4. in a Cargo Policy – commencement of each particular voyage 3. unless the ground on which it is made is proved to be unfounded  If insurer refuses to accept a valid abandonment – liable as upon actual total loss  Upon actual abandonment 1.e. coupled with actual abandonment  Requisites for Valid Valuation in the Valued Marine Policy: 1. at the port of destination. a. freightage earned after loss – belongs to insurer of ship . must specify the particular cause for abandonment 4. when caused by circumstances over which neither the master not the owner of the ship has any control 2. a. when necessary to comply with a warranty or to avoid a peril whether it is insured against or not 3. Actual Total Loss n a total destruction of the thing insured n the irretrievable loss of the thing by sinking or by being broken up n any damage to the thing which renders it valueless tot he owner for which he held it n any other event which effectively deprives the owner of possession. cargo. commencement of an entirely different voyage  When is Deviation proper? 1. b. nature of the service Seaworthiness of the vessel is required only at the commencement of the risk Exceptions: 1. or both and all damages to the vessel and cargo from the time it is loaded and the voyage commenced until it ends and the cargo unloaded  General Average – an expense or damage suffered deliberately in order to save the vessel. a. a. may be express or implied (i. a.

otherwise. such alteration violates a provision in the policy 2. and it increases the risk of loss or damage  Rules: 1. a. it was made without the insurer’s consent 3. a. other allied risks  When does alteration in the use or condition entitle the insurer to rescind the contract? 1.Co-insurance: form of insurance in which the person who insures his property for less than the entire value is understood to be his own insurer for the difference which exists between the true value of the property and the amount of insurance  Co-insurance applies only where the: 1. on the death of the insured 2. Casualty Insurance: Any injury that is intended. by overdoes of drugs administered or taken by mistake. policy shall not protect the insured from injury consequent upon his negligent use or management of fire. by ignorance or material pathological conditions 4. 27. a. b. Life Insurance: an insurance in human life and insurance appertaining thereto or connected therewith may be payable: 1. semi-annual or quarterly premiums while he lives. so long as it is confined to the place where it ought to be 2. restore the property damaged – contract of insurance is discharged and parties enter into a new contract of insurance 1. it is done within the insured’s control. contingently on the continuance or cessation of life (b and c refer to endowment or annuities)  Uses and Common Kinds of Life Insurance: 1. d. b. e. unexpected and unusual. by unexpected bacterial infection consequent upon doing acts. insurance taken is less than the actual value of the thing insured 2. This does not apply to property damage. by unprovoked violence of others  Compulsory Motor Vehicle Liability Insurance Persons subject to CMVLI: 1. windstorms 4. loss is partial  Primage – increase in freightage 1. c. 24. b. c. Fire Insurance Insurer is liable for loss or damage caused by hostile fire (fire that escapes from the place where it was intended to burn and ought to be in) and not that caused by friendly fire (fire which burns in a place where it is intended to burn). it may become hostile if it by accident. even though it results from an act or even which was intelligently done. The insurer agrees to pay the face value of the policy upon the death of the insured. c. a. the insurer is liable 3. land transport operator or one who is the owner of a motor vehicle or vehicles being used for conveying passengers for compensation (including school buses)  No Fault Indemnity Clause: The insurance company shall pay any claim for death or bodily injuries sustained by a passenger or 3rd party without the necessity of proving fault or negligence of any kind subject to certain conditions. Suretyship – an agreement whereby the surety guarantees the performance of the principal or obligor of an obligation or undertaking in favor of a 3 rd party called the obligee 1. 25. earthquake 6. by taking poison by mistake 3. the insured agrees to pay annual. Limited Payment Life Policy – premiums paid only for a specified period of years.  Scope of Fire Insurance: 1.  Insurer is Liable for death/injury to insured: 1. fire 2. b. motor vehicle owner or one who is the actual legal owner of a motor vehicle in whose name such vehicle is registered with the LTO 2. e. f. even though such acts were intentionally done 5. b.  . a. if it escapes. lightning 3. b. a. tornado 5. b. even though a fire may remain in its proper place. 26. d. by his own hand while insane 2. Whole Life or Ordinary Policies – here. a. 1. on his surviving a specified period 3. becomes so extensive as to be beyond control  Options of the Insurer 1. a. c. b. a. b. even though the insured was negligent. purchase the property at appraised valuation 2. 2. c.

payable in 90 days) 1. a. Life Annuity – debtor binds himself to pay an annual pension or income during the life of one or more persons in consideration of a capital consisting of money or other property. 5. Non-negotiable Receipt – receipt deliverable to a specified person. Claims Settlement Unfair Claims Settlement Practices: (a) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue (b) failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies (c) failing to adopt or implement reasonable standards for the prompt investigation of claims arising under its policies (d) no attempt in good faith to effectuate prompt. c. b. or aids in any manner in soliciting. commission or any other thing of value. date of the issue of the receipt 3. a. d.c. and 2. if cash surrender value has been paid 2. Essential Terms which MUST be embodied in a Warehouse Receipt: 1. Negotiable Receipt – receipt deliverable to order or to bearer. and (b) filing of proof of death (upon failure to pay interest. Term Policy – insurer’s liability arises only upon the death of the insured within the agreed term as period. Life or Endowment Policies Grace Period – 30 days for the payment of any premium due after the first premium has been paid Period of Incontestability – after the lapse of 2 years from the date of issue or date of approval of last reinstatement Reinstatement of Policy – within 3 years from the date of default of premium. or its security deposits. location of the warehouse 2. payment of all overdue premiums and any indebtedness to the company upon said policy Exceptions: 1. 28. Endowment Policy – insurer agrees to pay a certain sum to the insured if the latter outlives a designated period. He must be first licensed as such before doing any acts as insurance agent. production of evidence of insurability. at the rate of 2 times the ceiling prescribed by the Monetary Board unless based on the ground that the rate is fraudulent) Proceeds of Policies other than Life – payable: (a) upon proof of loss (b) upon ascertainment of loss or damage (if not made within 60 days of proof of loss. or a specified person. e. e. Warehouse – a building or place where goods are deposited and stored for profit. upon: 1. 4. 1. or its available cash assets. fair and equitable settlement of claims submitted in which liability has become reasonably clear (e) compelling policy holders to institute suits to recover the amount due under its policies by offering with no justifiable reason an amount substantially less than that ultimately recovered in suits brought by them Proceeds of Life Insurance – payable within 60 days after: (a) presentation of claims. Warehouseman – person lawfully engaged in the business of storing goods for profit. is impaired or deficient (e) that the margin of solvency required of each company is deficient Insurance Agent – any person who for compensation solicits or obtains insurance on behalf of any insurance company or transacts for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in negotiating of such insurance. 3. negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance. on behalf of an insured other than himself. or his order 5. Power of Commissioner to Suspend/Revoke License (a) if insurance contract is in unsound condition (b) if it has failed to comply with the provisions of law or regulations obligatory upon it (c) its conditions or methods of business s such as to render its proceedings hazardous to the public or to its policy holders (d) that its paid up capital stock. Insurance Broker – any person for any compensation. if period of extension has expired 1. 6. b. If the latter survives the period. A license is required. whose ownership is transferred to him with the burden of income 1. 1. the contract terminates and the insurer is not liable 4. d. 1. a. The Business of Insurance 1. consecutive number of the receipt 4. c. 2. 1. WAREHOUSE RECEIPTS LAW 1. as the case may be. 1. b. a.  Only a warehouseman may issue warehouse receipts. if he dies before that time. b. rate of storage charges 3. Warehouse Receipt – written acknowledgment by a warehouseman that he has received and holds certain goods therein described in store for the person to whom it is issued. statement whether the goods received will be delivered to bearer. 1. the proceeds are paid to the beneficiary 5. . acts.

according to the terms of the original receipt 1. If the alteration is MATERIAL but AUTHORIZED. The validity of the warehouse receipt is not affected. 1. (3) a readiness and willingness to sign an acknowledgment that the goods have been delivered if such is requested by the warehouseman. the warehouseman is not liable even if the goods are not of the kind as indicated in the marks or labels. A. Effects of alteration on the liability of the warehouseman: 1. A warehouseman is under the obligation to deliver the identical property stored with him and if he fails to do so. 13. If the alteration is MATERIAL. 4. Duplicate receipts must be so marked. To deliver the goods to the holder of the receipt or the depositor upon demand. 1. a. 14. If the alteration is IMMATERIAL (the tenor of the receipt is not changed). b. b. Terms which may be inserted in a Warehouse Receipt: Any other terms except (a) those contrary to the provisions of this Act. any person lawfully entitled to the possession of the goods may be entitled to delivery without surrender of the receipt. Warranties of a warehouseman as to duplicate receipts: 1. description of the goods or packages containing them for identification purposes g. Effect of omission of any of the essential terms: 1. the warehouseman is liable according to the terms of the altered receipt. Persons to whom goods must be delivered: 1. provided demand is accompanied with: (1) an offer to satisfy the warehouseman’s lien. persons to whom a competent court has ordered the delivery of the goods (1) where a negotiable instrument has been lost or destroyed. a. 2. authorized or not. 8.  Exception: He shall not be liable for any loss or injury which could not have been avoided by the exercise of such care. 9. Effects of misdescription of goods: 1. To take care of the goods entrusted to his safekeeping  General Rule: A warehouseman is required to exercise such degree of care which a reasonable careful owner would exercise over similar goods of his own. 3. Persons lawfully entitled to the possession of the goods or his agent: a. 3. b. 2. then the goods delivered for storage become ordinary deposits. a. 12.  Exception to the Exception: He may limit his liability to an agreed value of the property received in case of loss. 7. otherwise. the warehouseman is estopped from denying that he has received the goods described in the receipt. A non-negotiable receipt must be clearly marked non-negotiable or not negotiable. 4. The issuance of a warehouse receipt in the form provided by the law is merely permissive and directory and not mandatory in the sense that if the requirements are not observed. Marks to be made on a warehouse receipt: 1. may treat it as negotiable. signature of the warehouseman h. Principal Obligations of a Warehouseman: 1. the warehouseman is held liable for all damages suffered by a holder believing the same to be the original. d. .f. 2. c. the warehouseman is liable on the altered receipt according to its original tenor. 3. Such original receipt is uncancelled at the date of the issue of the duplicate. 2. 1. he is liable directly to the owner. If the description consists merely of marks or label upon the goods or upon the packages containing them. the court may order delivery to a person upon satisfactory proof of such loss or destruction and upon proper posting of a bond to protect the warehouseman from any liability or expense which he may incur by reason of the original receipt remaining outstanding. the warehouseman is liable on the altered receipt according to its original tenor. If the receipt is non-negotiable. 6. He shall be liable for any loss or injury to the goods caused by his failure to exercise such care. c. d. 7. according to the terms of the original receipt (3) to subsequent purchasers with notice of the alteration. a. He cannot stipulate that he will not be responsible for any loss caused by his negligence. the warehouseman is liable: (1) to the purchaser of the receipt for value and without notice of the alteration according to the tenor of the altered receipt (2) to the alterer. The warehouseman shall be held liable for damages to those injured by his omission. UNAUTHORIZED but INNOCENTLY MADE. 10. If the alteration is MATERIAL and FRAUDULENTLY MADE. The negotiability of the warehouse receipt is not affected. whether fraudulent or not. (2) an offer to surrender the negotiable receipt properly endorsed. (b) those that would impair a warehouseman’s obligation to exercise that degree of care in the safekeeping of the goods entrusted to him 1. a. The duplicate is an accurate copy of the original receipt. otherwise. statement of the amount of advances made and of liabilities incurred for which the warehouseman claims as lien 1. a. 8. 11. c. the holder of the receipt who purchased it for value and who supposed it to be negotiable. b. b. 1. 1. As against a bona fide purchaser of a warehouse receipt. b. 1. 2.

2. 2. the warehouseman shall not be liable for failure to deliver the goods. c. one who has written authority from letter a 1. Effects of Misdelivery: The warehouseman shall be liable for conversion to all having a right to property or possession of the goods. If he makes partial delivery of the goods but fails to record the partial delivery on the receipt then he may still be held liable for the entire receipt to one who purchases for value and in good faith such receipt. an attaching creditor – Goods. 16. 19. 21. 1. indorsed in blank by the person whom delivery was promised 1. c. The different owners become co-owners of the whole mass. B. the warehouseman shall be excused from liability for refusing to deliver the goods either to the depositor or person claiming under him until he has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead. When is there Misdelivery? When the warehouseman delivers the goods to a person who is not in fact lawfully entitled to the possession of the goods because: 1. But this is without prejudice to liabilities which may be incurred by him due to such loss. b. or (iii) the receipt is impounded by the court c. If goods have been lawfully sold or disposed of because of their perishable or hazardous nature. to the purchaser in case of sale of the goods by the warehouseman to enforce his lien 1. a. 22. the warehouseman had either: (1) been requested by the person lawfully entitled to the delivery not to make such delivery. 1. while in the possession of the warehouseman and covered by a negotiable receipt. The warehouseman shall be severally liable to each depositor for the care and redelivery of his share of such mass to the same extent and under the same circumstances as if the goods had been kept separate. b. to bearer 3. If goods are covered by a non-negotiable receipt: 1. b. Effect of Co-mingling of Goods: 1. Remedies of a Creditor: (the debtor being the owner of the negotiable receipt) . The court will then order delivery to the person having a better right. The warehouseman having a valid lien against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied. or 2. If someone other than the depositor or person claiming under the depositor has a claim to the title or possession of the goods and the warehouseman has information of such claim. b.  Exception: A warehouseman may co-mingle fungible goods of the same kind and grade provided he is authorized by agreement or by custom. The warehouseman can refuse to deliver the goods if he has acquired title or right to the possession of the goods: (1) directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent thereto. The warehouseman will not be required to deliver the goods if such had been lost. e. then he is still liable to one who purchases for value and in good faith such receipt. indorsed to him 4. d. a. 1. 20. d. b. What happens if there is proper delivery or partial delivery but the warehouseman fails to cancel the receipt or record on the receipt of such partial delivery? 1. If goods are covered by a negotiable receipt. 1. 18. 15. 1. 1. or (2) had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods 1. the person does not fall under letter B or C above. 1. or 2. to him or order 2. 1. b. or (2) from the warehouseman’s lien 1. d. b. A warehouseman cannot refuse to deliver goods to the depositor or to a person claiming under him on the ground that adverse title to the goods belongs to a third person. a. 17. Lawful excuses for refusal to deliver goods: 1. a person in possession of the receipt. a. cannot be attached or levied upon under an execution unless: (I) the negotiable receipt is first surrendered to the warehouseman. 1.(2) where more than one person claims title or possession of the goods the warehouseman may require all claimants to interplead. the person falls under letter B or C but prior to delivery. Rules as regards Co-mingling of Deposited Goods:  General Rule: A warehouseman may not co-mingle goods belonging to different depositors or belonging to the same depositor for which separate receipts had been issued. the terms of which the goods are deliverable: 1. If goods covered by a negotiable warehouse receipt are delivered by a warehouseman but he fails to take the receipt and cancel it. a. a person entitled to the delivery by the terms of the receipt. or (ii) its negotiation is enjoined. a. to the purchaser where perishable or hazardous goods are sold at private or public sale 1. C. 1.

a. Physical delivery of the instrument will suffice. 23. by special indorsement – which would require further indorsements for further negotiations. b. there will be no longer a danger that a 3rd person will be prejudiced so the goods may now be attached. a. the warehouseman is not execution unless the receipt be first surrendered to bound to the transferee whose right may be the warehouseman or its negotiation enjoined.  Who may negotiate warehouse receipts? 1. the indorsements must be coupled with delivery. b.  Rights of a person to whom a negotiable receipt has been transferred.  Rights of a person to whom a non negotiable receipt has been transferred: 1. b. a. by filing a civil action for unpaid charges or by way of counterclaim in an action to recover the property from him  How is a lien lost? 1. the right to notify the warehouseman of the transfer thereof and 3. b. even if the receipt is indorsed. the owner of the receipt. by causing the extrajudicial sale of the property and applying the proceeds to the value of the lien 3. the transferee acquires no additional right. b. cooperating and other charges and expenses in relation to such goods 3. interest. That is why they are called non negotiable receipts. c. before negotiation. the title to the goods as against the transferor 2. goods belonging to the depositor who is liable to the warehouseman as debtor whenever such goods are deposited and 2. goods belonging to other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge  How is a lien enforced? 1. transportation. But if the instrument is indorsed specially. a. may protect themselves by obtaining a writ of preliminary injunction and serve the same on the depositor before he has a chance to negotiate the receipt.Creditors of the depositors. there will be a need for indorsement. levied upon. not indorsed: .  How do we negotiate a receipt deliverable to bearer? There is no need to indorse for negotiation. a. c. all reasonable charges and expenses for notice and advertisements of sale and for sale of the goods where default has been made in satisfying the warehouse lien  Goods Subject to lien: 1. Negotiation and Transfer of Receipts  How do we negotiate a receipt deliverable to order? 1. the direct obligation of the warehouseman to hold possession of the goods for him. the title of the person negotiating the receipt over the goods covered by the receipt 2. all lawful claims for money advances. But they may be transferred or assigned by delivery. or that the vendor’s lien or the right of stoppage in transit be exercised. as if the warehouseman directly contracted with him  May non negotiable receipts be negotiated? No. b. all lawful charges for storage and preservation of the goods 2. when the warehouseman voluntarily surrenders possession of the goods without requiring payment of his lien. by refusing to deliver the goods until the lien is satisfied 2. insurance. or 2. In both cases. a. Once enjoined. c. labor. a. b. the title of the person (depositor or owner) to whose order by the terms of the receipt the goods were to be delivered 3. when the warehouseman wrongfully refuses to deliver the goods when a demand is made with which he is bound to comply 1. weighing. b. by indorsing it in blank thereby making it deliverable to bearer or 2. 1. c. defeated by a levy of an attachment or execution upon the goods by the creditor of the transferor or by a notification to such warehouseman of the subsequent sale of the goods. the right thereafter to acquire the obligation of the warehouseman to hold the goods for him  Distinction between a non negotiable receipt from a negotiable receipt with regard to attachment or execution upon goods: Non-negotiable Receipt Negotiable Receipt Prior to notification of the warehouseman by the The goods cannot be attached or levied under an transferor or transferee. or 2. Warehouseman’s Lien  Extent of Warehouseman’s Lien: A warehouseman shall have a lien on goods deposited or on the proceeds thereof in his hands for: 1. 24. the person to whom possession of the receipt was entrusted to by the owner  Rights acquired by a person to whom the receipt has been negotiated: 1. the bearer character of the receipt is destroyed and for further negotiation. a.

 Warranties of a person negotiating or transferring a receipt: 1. But if the intention of the parties is that the receipt should merely be transferred.  It is the duty of the purchaser. he has a legal right to negotiate or transfer it 3. A holder in due course may be able to obtain a title An indorsee even if a holder in due course obtains better than that which the party who negotiated the only such title as the person negotiating has over the instrument to him had. it will always remain so payable regardless of specially. for example. 3. c. fault or negligence. a. Accordingly. or pledgor in possession of such receipt to make any subsequent negotiation.  A bona fide purchaser of a negotiable warehouse receipt acquires title to the goods where he purchases from the owner’s agent within the actual or apparent scope of his authority. d. mortgagee or pledgee of goods for which a negotiable receipt has been issued to require the negotiation of the receipt to him. it will be converted into a receipt the way it is indorsed. It is at the same time a conveyance of merely to a conveyance by the indorser.a. c. b. When a warehouse receipt is altered. a. he has a right to transfer the title to the goods and that the goods are merchantable  A holder for security of a receipt (mortgagee or pledgee) who in good faith accepts payment of the debt from a person does not warrant the genuineness of the receipt not the quality or quantity of the goods therein described. a. b. the right to compel the transferor to indorse the receipt. the indorser holder if. the instrument and a contract the indorser has with an indorser of a receipt shall not be liable to the the indorsee that on certain conditions. mortgagor. forward exchange transactions between banks 4. b. but it may be enforced only in accordance with its original tenor. no discrimination allowed 4. financial.  Distinctions between a negotiable instrument and a negotiable warehouse receipt: Negotiable Instrument Negotiable Warehouse Receipt When a negotiable instrument is altered deliberately. d. c. Exempt Transactions 1. d. obligations payable in gold/foreign currency 2. payable to bearer. Obligations Null and Void 1. 2. the receipt is genuine 2. the warehouseman fails to will pay the instrument if the party primarily liable deliver the goods because they were lost due to his fails to do so. the transferee has no right to require the transferor to indorse the receipt. transactions affecting high priority economic projects 3. (c) co-mingling must: 1. a bond with the National Grains Authority is required. liable for double market value should he accept goods in excess of the capacity of warehouse if goods are damaged or destroyed  Note: for palay and corn license. negotiation is valid despite having been made in breach of trust. In sum. obtain prior license from the Bureau of Commerce 2. The indorsement of a negotiable instrument has a The indorsement of a warehouse receipt amounts double effect. file a bond in an amount equivalent to 33 1/3 % of the capacity of the warehouse against which bond depositors may sue directly 3. government to government transactions or with international banking institutions 2. goods. 1. (b) milling. the right to the goods as against the transferor b. it is still valid it becomes null and void. deliverable to order and can only be negotiated further by indorsement and delivery. GENERAL BONDED WAREHOUSE LAW  Any warehouseman receiving commodities for (a) storage. Merchants and Commercial Transactions  Classes of Investments: 1. . obligations payable in Philippine currency but measured in gold/foreign currency 1. is indorsed bearer. b. The subsequent purchaser must have taken the receipt in good faith and for value. whether specially or in blank. otherwise his failure will have the same effect as an express authorization on his part to the seller. a. Note: Negotiation takes effect as of the time when the indorsement is actually made. investment and industrial transactions 1. open to the public. Uniform Currency Law 1. import and export and other international banking. If a negotiable instrument is originally payable to If a warehouse receipt. also an insurance cover is required. he has knowledge that would impair the validity or worth of the receipt and 4. 2.

guaranty. sales. investment not to exceed 40%. the former prevails 4. processing. absolutely disqualified by special laws 1. if juridical person. Probative Value of Merchant’s Book 1. d. The contract itself arises from the moment goods are delivered by shipper to carrier and the carrier agrees to carry them. c. (b) uses a design. b. from one place to another for a fixed price 1. Carrier/Conductor – one who binds himself to transport persons. b. The function of the Bill of Lading: the legal basis of the contract between the shipper and carrier shall be the bills of lading. 1. formula that is new and untried in the Phils. Relatively Disqualified 1. news. Requisites of Caso Fortuito 1. military chiefs 3. or to present his own person or those of other or others in the case of transportation of passengers 2. 9. b. invest up to extent as not to affect its registered status. d. c. by the contents of which all disputes which may arise with regard to their execution and fulfillment shall be decided. partnership. water. no common name 3. scheme. 2. If enterprise not registered. insolvent 3. 2. or news. requires only ordinary diligence 4. serving penalty of civil interdiction 2. a. undertakes to deliver goods/passengers for compensation. other proofs can be resorted to 1. If registered status. Bill of Lading – written acknowledgment of receipt of goods and agreement to transport them to a specific place to a person named or his carrier It is not indispensable to the creation of a contract of carriage. must exercise extraordinary diligence Private Carrier – not engaged in the business of carrying. journal of day to day operations 3. if one keeps books and the other does not and cannot explain why. 1. c. administrative. (d) produces nonconventional fuels/utilizes non-conventional sources of energy (all others are non-pioneer) 1. (c) agricultural activities/services essential to the attainment of food sufficiency. 5. or one employed in or engaged in the business of carrying goods for others for hire 1. 6. c. Shipper – one who gives rise to the contract of transportation by agreeing to deliver the things or news to be transported. include book of minutes and stock and transfer book 1. Permitted – one allowed without need of prior authority from the Philippine Government. 5. in case of conflicts between 2 books – that which s properly kept prevails 3. debtor free from aggravation/participation 4. This does not apply to deposit. even before knowledge of said acceptance by the offeror. Contract of Transportation – contract whereby a certain person or association of persons obligate themselves to transport persons. evidence against merchants themselves 2. things. Permissible – invest in excess of 40% in unregistered enterprise but with prior approval of BOI 3. d. Joint Account Partnership – business arrangement whereby 2 or more persons interest themselves in the business of another by making contributions thereto and participating in the results thereof 1. impossible to foresee or avoid 1. d. b. a. for compensation. by special laws cannot trade in specified territories 1. economic. no exceptions being admissible other than forgery or material errors in the drafting thereof. no juridical personality Transportation Law 1. event independent of human will 2. a. 1. Commercial Contracts by Correspondence are perfected from the moment the offeree accepts the offer. 7. c. book of inventories and balances.a. ledger for classifying accounts 4. copying book for letters and telegrams. 6. association engaged in the business of carrying or transporting passengers. a. firm. b. 3. loan.. d. things. 8. statement of assets. corporation. 1. b. b. occurrence makes it impossible for debtor to perform in normal manner 3. c. a. b. others are silent 2. judicial and prosecuting officials in active service 2. Common Carrier – person. if both books are properly kept and there is a conflict. by land. Absolutely Disqualified to become Merchants 1. only ostensible partners can sue/be sued 4. as the case may be. e. offering services to the public. no public employment. Pioneer Area – (a) involves manufacturing. agency. Books a Merchant must keep 1. liabilities and capital 2. government collection agents and custodian of funds 4. . Parties to the Contract of Transportation: 1. air. a. stock and commercial brokers 5. goods or both. production of product not produced at all/produced in non-commercial scale. 4. only one member is ostensible. Contributory negligence does not entitle passengers to recover moral/exemplary damages. c. a.

d. then he may refuse to accept and make carrier liable for conversion. Averages 2. Accidents and Damages in Maritime Commerce: 1. Exceptions: (1) vessel is not abandoned (2) claims under workmen’s compensation (3) injury/damage due to shipowner’s fault (4) vessel is insured  The doctrine also applies for claims due to death or injuries to passengers. c. pontoons. intended to save vessel and cargo or both 3. a. 13. technical director of the vessels 3. 10. 15. 1. c. represents the government of the country under whose flag he navigates 1. all extraordinary or accidental expenses which may be incurred during the voyage for the preservation of the vessel or cargo or both 2. Shipwrecks 1. Liability of Ship owners and Ship agents: 1.Carrier’s responsibility starts from the moment he receives unconditionally the merchandise personally or through an agent and lasts until he delivers them actually or constructively to the consignee or his agent. 1. aside from claims for goods. whether coastwise or on the high seas. 7. He may do so for so long as he is not estopped from invoking the same or do acts inconsistent with abandonment. c. 8. Formalities for Incurring Gross Average: 1. 18. 9. If delay is unreasonable. a. other officers of the vessel 4. there must be an assembly of the sailing mate and other officers with the captain including those with interests in the cargo . Mere delay in the delivery of goods to consignee does not give right to refuse goods – only breach of contract. there is success 1. equip and provision the vessel. Collisions 4. General Average – expenses/damages deliberately caused in order to save the vessel. b. scows and any other floating apparatus destined for the services of the industry or maritime commerce 1. dredges. from real and known risk 4. Loan In Respondentia – taken on security of the cargo repayable upon the safe arrival at cargo destination 1. Doctrine of Limited Liability – liability of shipowners is limited to amount of interest in said vessel because of the real and hypothecary nature of maritime law such that where the vessel is entirely lost. there is no procedure to be followed. b. 16. supercargo 1. d. its cargo or both from a real and known risk Requisites: 1. including floating docks. deliberately incurred 2. c. Simple Average – expenses/damages caused to the vessel/cargo not inured to common benefit and profit of all the persons interested in the vessel and her cargo. b. a. captain or master 3. 12. b. Roles of the Captain: 1. 14. ergo damages. There is neither a prescriptive period within which the ship owner can make the abandonment. if the amount claimed were made use of for the benefit of the vessel. Average: 1. 11. b. c. However. and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of their consignment 1. civil liability for contracts entered into by the captain to repair. ship owner and/or ship agent 2. civil liability for indemnities in favor of 3rd persons which may arise from the conduct of the captain in the care of the goods which the vessel carried. general agent of the ship owner 2. d. a. civil liability for the acts of the captain 2. a. Arrivals Under Stress 3. a. Vessels – those engaged in navigation. b. a.  In abandoning the vessel. borne by respective owners 1. as well as for the safety of the passengers transported  Ship owner/ship agent not liable for the obligations contracted by the captain if the latter exceeds his powers and privileges inherent in his position of those which may have been conferred upon him by the former. provided that the amount claimed was invested for the benefit of the vessel 3. the obligation is extinguished. Persons Participating in Maritime Commerce: 1. Loan on Bottomry – made by shipowner/ship agent guaranteed by vessel itself. 17. 1. the ship owner or ship agent is liable. repayable upon arrival at destination 1. all damages or deterioration which the vessel may suffer from the time it puts to sea at the port of departure until it casts anchor at the port of destination.

Salvage – the compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part from an impending peril.b. 23. 21. 25. risk of enemy not well known or manifest 3. derelict or recapture. without any hope of recovering it. 1. (c) by reason of accident of the sea disabling it to navigate When Not Lawful: 1. 29. due to the fault. malice. Notice of Loss or damage must be given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery. the carrier shall be discharged from all liability in respect of loss or damage of goods unless suit is brought within 1 year after delivery of the goods or the date when the goods should have been delivered. c. the notice must be given within 3 days of delivery. Arrivals under Stress – arrival of the vessel at a port not of destination on account of (a) lack of provisions. Shipwreck – denotes all types of loss/ wreck of a vessel at sea either by being swallowed up by the waves. 24. sailing mate or the complement of the vessel – ship owner liable for the losses and damages (Culpable Fault) 2. 1. 26. c. If the loss or damage is not apparent. with the reasons and motives and the votes for and against the resolution 4. . 27. 19. defect of vessel due to improper repair 4. no responsibility will fall on said vessel 1. 20. b. it cannot be determined which of the 2 vessels caused the collision – each vessel shall suffer its own damages. by sea 3. or such property recovered from actual peril or loss. Derelict – a ship or cargo which is abandoned and deserted at sea by those who are in charge of it. c. service voluntarily rendered when not required as an existing duty or from special contract 3. b. When Applicable: 1. a permit is required to engage in the salvage business 1. there must be a resolution of the captain c. a service which one person renders to the owner of a ship or goods by his own labor. Error in Extremis – sudden movement made by a faultless vessel during the 3 rd zone of collision with another vessel which is at fault. 2. d. b. d. Collision – impact of 2 vessels both of which are moving 1. lack of foresight or skill of captain 1. Cases of Collision: 1. or that the services rendered contributed to such success 1. by running against another vessel or thing at sea or on coast where the vessel is rendered incapable of navigation 1. the resolution shall be entered in the log book. 3. It is a contract of services. 22. to and from Philippine ports 4. he shall deliver one copy of these minutes to the maritime judicial authority thereat 1. even if the said movement is wrong. b. preserving the goods or ship which the owner or those entrusted with the care of them either abandoned in distress at sea or are unable to protect and secure. Difference between Towage and Salvage: Salvage Towage crew of salvaging ship is entitled to salvage. a. d. c. 28. and can crew of the towing ship does not have any interest or look to the salvaged vessel for its share rights with the remuneration pursuant to the contract salvor takes possession and may retain possession until tower has no possessory lien. contracts for the carriage of goods 2. Elements of a Valid Salvage: 1. the minutes shall be signed by the parties 5. only an action for recovery he is paid of sum of money court has power to reduce the amount of remuneration court has no power to change amount in towage even if if unconscionable unconscionable Carriage of Goods by Sea Act 1. and both shall be solidarily responsible for the losses and damages occasioned to their cargoes (Inscrutable Fault) 1. in foreign trade 1. a marine peril 2. a. in cases of shipwrecks. a. However. or without any intention of returning it 1. e. Allision – striking of a moving vessel against one that is stationary 1. Notice 2. lack of provisions due to negligence to carry according to usage and customs 2. due to fortuitous event or force majeure – each vessel and its cargo shall bear its own damages (Fortuitous) 3. a. negligence or lack of skill of the captain. Contract of Towage – contract whereby a vessel usually motorized pulls another from one place to another for compensation. within 24 hours upon arrival at the first port the captain makes. in whole or in part. negligence. (b) well-founded fear of seizure. success.

8. d. Action for damages must be brought at the option of the plaintiff. 4. c. a. before the court at the place of destination 1. Distinctions between CPCs and CPCNs . telephone or telegraph service. or from the date on which the aircraft ought to have arrived. Warsaw Convention 1. or in the case of landing outside an airport. for each passenger – limited to 125. baggage. if not given. When Applicable: 1. for hire/compensation with general/limited clientele whether permanent. Meaning of Transport by Air – period during which the baggage or goods are in charge of the carrier. 1. b. loss or damage to any check baggage or goods sustained during the transport by air 3. for goods and checked in baggage – limited to 250 francs per kilogram 3. 1. 2. 4. b. court of principal place of business of carrier.000 francs 2. Notice Requirements: COGSA Code of Commerce Warsaw Convention protest at time of receipt of protest at time of receipt of goods goods loss/damage not apparent protest within 3 days from protest within 24 hours after delivery receipt damage of baggage protest within 3 days from receipt damage of goods within 7 days from receipt delay within 21 days from receipt loss/damage apparent Public Service Act 1.000 francs per passenger  When can you not avail of this limitation? (1) willful misconduct (2) default amounting to willful misconduct (3) accepting passengers without ticket (4) accepting goods without airway bill or baggage without baggage chec 1. c. baggage. electric light. heat and power and public utility. 3. 4. or goods  Enumeration of causes of action as above stated is not an exclusive list. c. (Northwest Airlines vs. 1. 3. accidental.of loss. either: 1. manage. operate. 7. 1. whether in an airport or on board an aircraft. before the court of the domicile of the carrier. gas. that fact shall not affect or prejudice the right of the shipper to bring suit within the 1 year prescriptive period. transport of persons. 5. in any place whatsoever 1. Prior Applicant Rule – presupposes a situation where two interested persons apply for a CPC in the same community over which no person has yet been granted a CPC to operate. and done for a general business purpose any common carrier. b. occasional. The right to damages shall be extinguished if an action is not brought within 2 years from the date of arrival at the destination. court where he has a place of business through which the contract has been made. a. b. save in the case of fraud on his part. 2. water. Public Utility – business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity. transportation. 3. Notice requirement: damage to baggage : within 3 days from receipt damage to goods: within 7 days from receipt delay: within 21 days from receipt  Failure to file written notice. the prior operator must be given an opportunity to extend its service to meet the public needs in the matter of transportation. Convention provides for a limitation of liability: 1. shipyard. control in the Philippines. Liabilities under the Convention: 1. 6. delay in the transport by air of passengers. Every person that may own. or goods 1. for hand carry – limited to 5. or from the date on which the transportation stopped. a. If both applicants equal. 1. Cancer) 1. 5. international transport by air 2. 1. then the applicant who applied first will be given the CPC. a. Prior Operator Rule – before permitting a new operator to invade the territory of another already established. damage sustained in the event of the death or wounding of a passenger taking place on board the aircraft or in the course of any of the operations of embarking or disembarking 2. 1. 2. no action shall lie against the carrier. 1.

6. Certificate of Stock – written acknowledgment by the corporation of the stockholder’s interest in the corporation. Preferred Cumulative Participating Share of Stock – share entitling its holder to preference in the payment of dividends ahead of common stockholders and to be paid the dividends ahead of common stockholders and to be paid the dividends due for prior years and to participate further with common stockholders in dividend declarations 1. sale/disposition of all/substantially all corporate property 6. merger/consolidation of corporation 7. Promotion Stock for Services Rendered Prior to Incorporation Escrow Stock – stock deposited with a 3rd person to be delivered to stockholder/assignor after complying with certain conditions – usually payment of full subscription price 1. Trust Fund Doctrine – the subscribed capital stock of the corporation is a trust fund for the payment of debts of the corporation which the creditors have the right to look up to satisfy their credits. Watered Stock – stock issued gratuitously. It is the personal property and may be mortgaged/pledged. Voting Shares 1. public convenience Corporation Law 1. Exceptions where holders of non-voting shares may vote: 1. f.Certificate of Public Convenience Certificate of Public Convenience and Necessity any authorization to operate a public service issued by issued by the appropriate government agency to a the appropriate government agency public service to which any political subdivision has granted a franchise an authorization issued by the proper government an authorization issued by the proper government agency for the operation of public services for which no agency for the operation of public services for which a franchise. dividends where no surplus profits exist 1. either municipal or legislative is required by franchise is required by law law Requirements of CPC and franchise: 1. 2. 11. b. b. h. a. a. De Jure Corporation – corporation formed with all the requirements of law 1. etc. increase/decrease of capital stock 5. Corporation by Prescription – body not lawfully organized as a corporation but has been recognized by immemorial usage as a corporation with rights and duties maintainable by law (ex. null and void 1. gains and profits from transactions entered into by him/another competing corporation in which he has substantial interest. Preferred Shares – issued only with par value. Corporations may not dissipate this and the creditors may sue the stockholders directly for their unpaid subscriptions 1. c. Redeemable Shares – expressly provided in articles. a. . De Facto Corporation – corporation defectively formed from a bona fide attempt to incorporate under the existing law and exercises corporate powers 1. 5. Transfer binds the corporation 1. Founders Shares – given rights and privileges not enjoyed by owners of other stocks. 10. d. c. which should have been a transaction undertaken by the corporation. b. 3. investment of funds in another corporation/another business purpose 8.) 1. Roman Catholic) 1. financial capacity 3. donation. corporate dissolution 1. have to be purchased/taken up upon expiration of period of said shares purchased whether or not there is unrestricted retained earnings 3. 12. 1. c. increase/decrease of bonded indebtedness 4. g. Over-issued Stock – stock issued in excess of authorized capital stock. adoption/amendment of by-laws 3. 14. 8. a. amendments of articles of incorporation 2. 9. given preference in distribution of assets in liquidation and in payment of dividends and other preferences stated in the articles of incorporation 2. Treasury Stocks – stocks previously issued and fully paid for and reacquired by the corporation through lawful means (purchase. e. Doctrine of Corporate Opportunity – a director is made to account to his corporation. money/property less than par value. Doctrine of Piercing the Veil of Corporate Entity – it is to disregard for justifiable reasons by the state the fiction of juridical personality of the corporation separate and distinct from the persons composing it 1. services less than par value. right to vote/be voted in the election of directors shall not exceed 5 years Non-Voting Shares 1. 13. 1. Corporation by Estoppel – a group of persons which holds itself out as a corporation and enters into a contract with 3rd persons on the strength of such appearance cannot be permitted to deny its existence in an action under said contract 1. 7. This s a breach of fiduciary relationship. 4. Filipino citizenship 2. 6.

A stockholder who does not pay his subscription is not entitled to the issue of a stock certificate. adoption. filing of issue value of no par value share 2. The total par value of the stocks subscribed by him should first be paid. 28. a. Where similar acts have been approved by the directors as a matter of general practice. changing. notarized and filed with the SEC and the corporation 2. it acquires juridical personality 1. collection from cash dividends and other amounts due to stockholders if allowed by bylaws/agreed to by him 1. a. exercise of appraisal right 1. 17. a. Right of Appraisal 1. 18. 19. illegal combinations in restraint of trade in fraud 1. A corporation can reacquire stocks in the following cases: 1. a. state may provide causes for which the privilege may be withdrawn 1. c. ordinary civil action 3. b. Merger – one corporation absorbs the other and remains in existence while the other is dissolved 1. purchase delinquent shares 4. remedial rights 1. 26. non-compliance with required Filipino stock ownership 1. b. b. proprietary rights 4. inimical 3. election of officers But from issuance of certificate. c. c. eliminate fractional shares 2. Voting Trust Agreement – an agreement between a group of stockholders and trustee for a term not exceeding 5 years in which control over the stocks is lodged in the trustee. Methods of Collection of Unpaid Subscription 1. The purpose is for controlling the voting. c. c. cannot be entered into to circumvent the laws against monopolies. 1. 30. amendment. How to organize? 1. Theory of General Capacity – a corporation is said to hold such powers as are not prohibited/withheld from it by general law 1. custom and policy. adoption of by-laws 2. 1. Theory of Special Capacity – the corporation cannot exercise powers except those expressly/impliedly given 1. 29. 23. Cumulative Voting – the number of votes that a shareholder’s number of shares multiplied by the number of directors may give all said votes to one candidate or he may distribute them as he may deem . period not exceeding 5 years 3. purpose illegal. Consolidation – a new corporation is created and the consolidating corporations are extinguished 1. amending articles. a. b. 27. d. compensation and other per diems for directors 1. c. b. delinquency and sale at public auction of delinquent shares 2. 1. b. in writing. 15. restricting. corporate indebtedness arising from unpaid subscriptions 3. 21. 16. Acts requiring majority vote of stockholder: 1. b. treasurer’s affidavit false 4. 20. Grounds for Rejection of Registration 1. not in prescribed form 2. enlarging stockholder’s rights/extending.when it is recorded in the corporate books. d. Corporation must organize within 2 years from issuance of certificate of incorporation. Powers of stockholders: 1. a. merger and consolidation 4. 22. a. a. b. c. shortening corporate life 2. indirect participation in management to vote or remove directors 3. But the pledgee/mortgagee may not have voting rights unless stated in the contract and registered in the corporate name. a direct participation in management – where his vote is needed to approve certain corporate actions 2. 25. d. election of Board of Directors 3. call. investment of funds in another corporation/for a different purpose 1. d. c. Chattel mortgage of shares registered with the Registrar of Deeds need not be registered in corporate books to bind third parties because corporate books only cover absolute transfers. Concession Theory – a group of persons wanting to create a corporation will have to execute documents and comply with requirements set by the state before being given corporate personality. sale/disposition of all/substantially all of corporate assets 3. merely a privilege. the general manager may bind the company even without formal authorization of the board of directors 1. 24. repeal of by-laws 3.

associated with the clergy and consists of 1 person only and his successors. This is compulsory if the surplus is equal/or more than the paid-up capital. Corporation Sole – special form of corporation. 31. a. appointment of directors. Derivative Suit – brought by a stockholder for and in behalf of the corporation to protect/vindicate corporate rights after he has exhausted intra-corporate remedies Requisites: 1. (Selano vs. retention is necessary under existing circumstances 1. 37. Individual Suit – one brought to assert a right of a stockholder peculiar to himself 1. 39. The power of removal of directors that may be exercised with or without cause cannot apply to the director representing the minority shareholders. original and exclusive jurisdiction (1) fraudulent devices and schemes employed by directors detrimental to public interest (2) intra-corporate disputes and with the state in relation to their franchise and right to exist as such (3) controversies in the election. SEC Jurisdiction 1. injury to the corporation  Although corporations dissolved have 3 years to wind up. The lawyer who handled the case in the trial court may be considered as trustee for the dissolved corporation with respect to the matter in litigation only even if no appointment was extended to him. said single act constitutes engaging in business in the Philippines 2. 36. 1. c. (4) petition to be declared in a state of suspension of payments 1. Isolated. 38. the corporation in liquidation would lose what justly belongs to them/be exempt from payment of obligations because of a technicality. 32. a. He may only be removed with cause. having common cause against the corporation 1. prohibited by creditor to declare dividends 3. 1. it may continue even beyond the 3 year period until final determination of litigation. c. justified by approved expansion projects 2. refusal of corporation to sue 3. Courts will be venue to controversies (4) license subsequently granted enables foreign corporation to sue on contracts executed before the grant of the license (5) recovery of misdelivered property (6) where the unlicensed foreign corporation has a domestic corporation 1. goodwill. a. Non-stock Corporation – one where no part of its income is distributable to its members and shall be used in furtherance of the purpose of which it was organized 1. 35. Representative Suit – brought by the stockholder in his own behalf and in behalf of other stockholders similarly situated. 34. they can convey their properties to a trustee who can continue the suit beyond the 3 year period. and reputation of a foreign corporation (3) contracts provide that Phil. incorporated by law giving them legal capacity and advantage 2.fit. Grounds for Suspension/Revocation of Certificate of Registration (1) fraud in procuring registration (2) serious misrepresentation as to objectives of corporation (3) refusal to comply with lawful order of SEC (4) continuous inoperation for at least 5 years (5) failure to file by-laws within the required period (6) failure to file reports (7) other similar grounds Revised Securities Act . c. b. occasional or casual transactions do not amount to engaging in business. Close Corporations – one whose articles provide that its shares shall not be held by more than 20 persons. In a non-stock corporation. b. 33. Religious Corporations 1. But where the isolated act is not incidental/casual but indicates the foreign corporation’s intention to do other business. General Rule: If surplus profits exceed the requirements the corporation shall declare dividends. cause of action in favor of the corporation 2. Foreign Corporations 1. Otherwise. a. etc. Instances when unlicensed foreign corporations can sue: (1) isolated transactions (2) action to protect good name. its issued stock shall be subject to one or more restrictions on transfer and shall not be listed in any stock exchange/make public offering 3. a. Cumulative voting is a matter of right in a stock corporation. b. Exceptions: 1. Business Judgment Rule – decisions made by a corporation’s management body shall not be interfered with even by the courts unless such acts are oppressive/unconscionable as to violate the rights of the minority 1. b. it cannot be utilized unless allowed by the by-laws/articles 1. Doing Business – continuity of commercial dealings incident to prosecution of purpose and object of the organization. b. trustees. CA)  In a case filed before dissolution.

a. issued by building and loan association 5. c. Exception: 1. principle. explained. c. policy of insurance issued by insurance corporation supervised by the insurance commission 7. or mere data as such. manipulation of security prices 2. 1. e. false prospectus. by court order in cases of bribery and dereliction of duty against public officials 4. g. application incomplete/untruthful/omits to state a material fact 2. securities emanating from exempt transactions 1. a. b. g. including government banks. What Works are not Protected: 1. c. system. re-examination made by an independent auditor hired by a bank to conduct its regular trust Laws on Intellectual Creation Copyright 1. Deposits in banks. in insolvency 2. a. e.(Material on the Securities Regulation Code of 2000 to follow) 1. pre-incorporation subscription 6. violated code/ SEC rules. d. b. a. d. issuer/registrant insolvent. f. reports Secrecy if Back Deposits 1. e. h. b. Grounds for Revocation 1. c. 6. isolated transactions on securities done by owner/agent 4. artificial measures of price control 4. a. Acts Prohibited 1. General Rule: All securities before being offered for sale/actual sale to the public must first be registered and have the proper permit. b. 3. works of the government 3. a. statutes. e. issued by the government subdivisions/instrumentalities 2. 1. d. Grounds for Rejection of Registration 1. exempt securities 2. any idea. deposit is subject of litigation 5. does not conduct business in accordance with law 1. e. c. fraudulent transaction 4. method or operation. issuer insolvent 2. securities issued by public service operator to broaden equity base 1. violated of Code/SEC rules 3. rules. e. a. news of the day or other miscellaneous facts. Exempt Transactions 1. manipulation of deceptive devices 3. procedure. or any official text of a legislative. issue would prejudice the public 1. officer. f. d. 2. b. b. 1. 4. administrative or legal nature as well as any official translation thereof 2. issued by receiver/trustee of an insolvent approved by the court 6. pension plans regulated by BIR/Insurance Commission 1. d. issued by foreign government which the Philippines has diplomatic relations 3. even if they are expressed. concept. illustrated or embodied in a work. fraudulent transactions 5. b. director. f. issuer’s business not sound 4. b. sale of pledged property/foreclosed property to liquidate an obligation 3. c. engages in fraudulent transactions 3. d. etc. security/right/interest in real property including subdivision lot/condominium supervised by the Ministry of Human Settlements 8. discovery. issued by receiver/trustee of an insolvent approved by the court 4. anti-graft cases 6. may not be inquired into by any person. having the character of mere items of press information. insider trading 6. f. dishonesty by issuer/misrepresented prospectus 5. 5. general and special examination of bank order of the Monetary Board of bank fraud or serious irregularity 7. except: 1. communications. stockholders of issuers is disqualified 5. stock transfers emanating from mergers and consolidations 5. if depositor agrees in writing 2. c. a. impeachment cases 3. judicial sale by execution. and regulations of government agencies and offices . Exempt Securities 1.

d. 2. 4. a. 4. 1. decompilation: the reproduction of the code and translation of the forms of the computer program with other programs 1. involves an inventive step. new.000 to P150. playing games or doing business. d. a. c. discoveries. moral and exemplary damages 1. a. c. b. Terms of the Protection 1. 2. destruction of all infringing copies and/or devices 5. scholarship. Criminal Penalties 1. where the pseudonym leaves no doubt as to the identity of the author. a. or process or an improvement of any of the foregoing. b. actual damages. c.000 for the 3rd/subsequent offenses IN ALL CASES. contrary to public order or morality 1. Novelty 4. e. and programs for computers 3.000 to P1. copyrighted work: lifetime of creator plus 50 years after death (to be computed on the 1 st day of January of the year following the death) 2. for criticism. novelty 2. d. Patents 1. is industrially applicable 1. b. b. 8. Plaintiff is presumed to be the owner of the copyright 3.000 for the first offense 2. imprisonment of 3 years and 1 day to 6 years plus fine ranging from P150. 1. f. broadcasts: 20 years from the date the broadcast took place 1. d. b. a. Remedies for Infringement 1. be presumed to be the author of the work. Factors to Consider in Determining Fair Use: 1. rules and methods of performing mental acts. 1. It may be or may relate to as product. The natural person whose name is indicated on a work in the usual manner as the author shall. plant varieties or animal breeds or essentially biological process for the production of plants and animals Exception: micro-organisms and non-biological and micro-biological processes 1. including whether such use is of a commercial nature or for no profit or educational purposes 2. 3. Presumptions: 1. c. . impounding of articles during pendency of the action 4. purpose and character of the use. b. a. lectures. Non-Patentable Inventions 1.000. c. performances not incorporated in recordings: 50 years from end of year in which the performance took place 3. sermons. This is applicable even if the name is a pseudonym. a.000 for the 2nd offense 3. c. Requisites of Patentability 1. Prescription: No damages may be recovered after 4 years from time the cause of action arose. speeches. including legal costs and other expenses. 3. 5. 7. news reporting. schemes. teaching. c. sound or image and sound recordings and performances incorporated therein: 50 years from end of the year in which the recording took place 4. effect of use upon the potential market for a value of the copyrighted work 1. Presumption of copyright in the work of other subject matter to which the action related 2. aesthetic creations 2. 6. imprisonment of 1 to 3 years plus fine of P50. nature of the copyrighted work 3. d. in the absence of proof to the contrary. scientific theories and mathematical methods 2. e. imprisonment of 6 years and 1 day to 9 years plus fine of P500. 3. a. amount and substantiality of the portion used in relation to the copyrighted work as a whole 4.000 to P500. b. and similar purposes 2. subsidiary imprisonment in cases of insolvency 1. involve an inventive step and is industrially applicable shall be patentable. methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on the human or animal body Exception: products and composition for use in any of these methods 1. pronounced or rendered in courts of justices or nay administrative agencies in deliberative assemblies and meetings of public character 1. comment. b. injunction 2. Patentable Inventions – any technical solution of a problem in any field o human activity that is new. as he may have incurred due to the infringement as well as the profits the infringer may have made due to such infringement 3. addresses and dissertations. research. Fair Use of a Copyrighted Work is not Infringement 1.

b. 14. Cancellation proceedings may be filed at any time during the term of the patent. and provided further. it is still considered an original creation. 7. if having regard to the prior art. if not being worked in the Philippines on a commercial scale 1. or 2. health or morals shall not be protected 1. it is not obvious to a person skilled in the art at the time of the filing date of priority date of the application claiming the invention 1. request that the application be refused or 4. where a judicial or administrative body has determined that the manner of exploitation by the owner of the patent or his licensee is anti-competitive 4. a. Utility Models – an invention qualifies for registration as a utility model if it is new and industrially applicable . giving the inventor inchoate rights against an infringer after the publication of the application and before the grant of the patent and 3. Originality in Copyright – even if there is same creation. expanding the rights of the inventor to institute cancellation proceedings for the duration of the term of the patent. c. d. Term Protection – 7 years after the filing date of application without possibility of renewal 1. The First-to-File System – if 2 or more persons have made the invention separately and independently of each other. anything which has been made available to the public anywhere in the world before the filing date or the priority date of the application. (b) a patent office and the information was contained 1. 15. renewable for not more than 2 consecutive periods of 5 years each . 9. national emergency or other circumstances of extreme urgency 2. provided that the application which has validly claimed the filing date of an earlier application (priority date) is prior art with effect as of the filing date of such earlier application. or where 2 or more applications are filed for the same invention. where public interest. Term of Patent – 20 years from the filing date of the application 1. as long as a patent on the same creation has already been published anywhere in the world. Industrial Design – any composition of lines or colors or any 3 dimensional form.no inventive step required for registration . prosecute the application as his own application in place of the original applicant 2. a. if one has already been issued 1. In case of Compulsory Licensing of Patents involving Semi-conductor Technology. 10. 5. whether or not associated with lines or colors Industrial Designs essentially dictated by technical or functional considerations to obtain a technical result or those that are contrary to public order.The novelty requirement in the Code is absolute. the whole contents of an application for a patent. published in the IPO gazette. the patent is granted to the inventor who filed his patent application earlier than others thus simplifying the determination of who is entitled to own the patent. e. d. 6. in case of public non-commercial use of the patent by the patentee. with a filing or priority date that is earlier than the filing or priority date of the application. 12. b. the right of the patent belongs to the person who has the earliest filing date or the earliest priority date Under this system.no search and examination required 1. b. Inventive Step – an invention involves an inventive step. Grounds for Compulsory Licensing: 1. Under this system. or industrial design registration. 13. a. What is the difference between novelty in patents and originality in copyright? Novelty in Patents – even if you do not know of any previous creation. that the applicant and the inventor identified in both applications are not one and the same 1. c. national security. the license may be granted only in case of public non-commercial use or to remedy a practice determined after judicial or administrative process to be anti-competitive 1. an invention is not considered new if it forms part of a prior art. No access to the previous creation is a defense. health or the development of other vital sectors of the national economy as determined by the appropriate agency of the government so requires 3. as long as you do not copy your own creation. the right to the patent belongs to the person who filed an application for such invention. Term of Protection – 5 years from filing date of application. guaranteeing the confidentiality of the application prior to its publication 2. 8. Non-Prejudicial Disclosure The disclosure of information contained in the application during the 12 months preceding the filing date or the priority date of the application shall not prejudice the applicant on the ground of lack of novelty if such disclosure was made by (a) inventor. utility model. the applicant declared by final court order as having the right to the patent may: 1. Thus. A prior art consists of: 1. 1. The First-to-File System increases the rights of the inventor by: 1. seek the cancellation of the patent. filed or effective in the Philippines. 11. 16. b. file a new patent application in respect of the same invention 3. a. Industrial Applicability – an invention is considered industrially applicable if it can be produced and used in the industry 1. No access tot he other creation is no defense. c. you cannot claim novelty. without satisfactory reason 5.

2. General Rule: Chattel Mortgage cannot cover debts subsequently contracted. initiated by debtor if voluntary 1. 5. Vessels: Phil. or in substitution for goods on hand when the mortgage was executed. Debts and Obligations not Affected by Discharge of Insolvent 1.property given in CM must be described to enable the parties or any other person after reasonable inquiry and investigation to identify it 1. c. 1. 1. If mortgagor resides abroad. 9. 6. b. registered in place where mortgagor resides and where property (chattel) is located. Motor Vehicles: register also in Land Transportation Office 3. Growing fruits are covered by chattel mortgage but they may not be pledged. b. d. General Rule: In Chattel Mortgage. or 2. No need for notation in books of corporation 4. renewal of. 8. Requisites of CML: 1. b. a. contract must be registered 1. 3. selling property already pledged. 2. Future property may not be covered by CM but when such property is a: 1. d. 11. Formal Requisites of CM: 1. a. there is recovery of deficiency judgment. Criminal Acts – removal of chattel to another city or province without written consent of mortgagee.Insolvency Law 1. debts not included in the schedule submitted by debtor Chattel Mortgage Law 1. d. Fraudulent Preference – any act of insolvent which gives rise/has tendency to give preference to a creditor to the assets of the insolvent prejudicial to the right of other creditors of said insolvent 1. they be legally authorized for the purpose 4. must contain an affidavit of good faith 4. suit not yet filed – cannot be filed anymore. b. Provisions on pledge of NCC in so far as not in conflict with CML also govern chattel mortgages. a. c. said property may be covered by CM 1. b. 1. c. 4. debts due to fraud/embezzlement 3. 5 of CML 2. alimony 5. a. b. 1. register in place where property is located. assessments due to national and local government 2. mortgagor is absolute owner of the thing mortgaged 3. 1. b. affidavit of good faith 2. 3. Shares of Stock: place of domicile of corporation and shareholder. Machinery placed on plant or building owned by another can be the object of chattel mortgage. corporate debts 6. 12. constituted to secure the fulfillment of principal obligation 2. but claims may be presented to assignee 1. Rules: Chattel Mortgage cannot cover debts subsequently contracted 1. Effect on Actions Upon Adjudication of Insolvency 1. a. The law primarily governs chattel mortgage. f. Exception: when Recto Law applies 1. 7. e. substantial compliance with form in Sec. persons constituting the mortgage have the free disposal of the property and in the absence thereof. d. Distinguish Suspension of Payment and Insolvency Suspension of Payment Insolvency debtor has enough assets to meet liabilities but cannot debtor has more liabilities than assets meet them as they fall due always initiated by debtor initiated by creditors/other persons if involuntary. debts in which he is bound solidarily 4. purchased with proceeds (not of your own money) of said goods. Chattel Mortgage may be rescinded for being in fraud of creditors. 4. certificate of oath (notarial acknowledgment) 1. 13. c. To be valid against 3rdpersons: 1. 1. 10. suits pending in court (1) secured obligations suspended until assignee appointed (2) unsecured obligations terminated except to fix amount of obligation (3) foreclosure suits pending continue 1. or mortgaged without written consent of mortgagee . Affidavit of Good Faith – where the parties severally swear that the mortgage is made for the purpose of securing the obligation specified and for no other purpose and that the same is a just and valid obligation and not one entered into for fraud . a. 2. signed by at least 2 witnesses 3. recorded to bind 3rd persons 1. Coastguard 1. a. 1.

. in the latter case. A chattel mortgage may be foreclosed judicially or extra-judicially. before a notary or sheriff. Pactum Commissorium applies to Chattel Mortgage. 1. even without need of notice (when mortgagee forecloses) 15.14. or creditor or mortgagee when stipulated.