ATENEO LAW HOOL CENTRAL BAR OPERATIONS 2010 ATEREO CENTRAL BAR OPERATIONS kolo COMMERCIAL AN ADA dad commen AHL ADVISER mes ATTY. JACK JIMENEZ ee ERMAN BALOIS & JAVIN OMPOC ANNA MELISSA MARK JOREL ERICA CHRISTEL ABARQUEZ CALIDA PATINO>, COMMERCIAL LAW REVIEWER Fa OPERATIONS 2010 Bulle Sales LaW.serceste Chattel Mortgage Law. Warehouse Receipts LaW..vneressetessnes 7 General Bonded Warehouse Law... Trust Receipts Law Negotiabitity. Rights of a Holder.. Presentment. ‘Types of insurance Insurable Interest... Maritime insurance. < Common Carriers . Maritime Commerce Carriage of Goods by Sea Act..... a Warsaw Convention smn Public Service Act.. Rules in Granting Franchises. Securities Regulation Code .. Intellectual Property Code... Law on Patents ‘ 7 + — Advisers: AtYlimener; Heads: Eman Bao Javin Ompoc; Undestuses: Molo Bernard; Christon de los Santor; Volunteers: Jennifer Cru Joy ‘Duhayiongsod, Francs Esprit, Jon tna, Diane tiranaTL OPERATIONS 20i0 Law on Copyright .. Corporation Code... Components of a Corporation Board of Directors. Powers of a Corporation wrunneeeunne Rights of a Stockholder Non-Stock Corporation Dissolution... Foreign Corporation... New Central Bank Act. Bank Secrecy Law. Truth in Lending Act... Recto Law Real Estate Mortgage Law Insolvency LaW jesse Rules on Corporate eae eve Rehabilitation Courts... Nature of Proceedings & Orders Rehabilitation Plan Foreign Proceedings. Annex A. Common Types of Letters of Credit B. Difference of Notice in Art. 366 & Sec. 3(6) COGSA.. C. Notice Requirements... D. Grounds for Refusal of Trademark Registratior E, Trademark infringement vs. Unfair Competit F. Civil, Criminal & Admin Remedies Against Trademark infringement... G. Causes of Action in Trademark Infringement... Advisers: Atty. Jimener; Heads Erman Balols, avin Ompoc; Understudies: Nicolo Bernardo; Christan dels Santor; Volunteers: Jennifer Cruz, Jay ‘Ouhayiongsod, Francis Epi, Jon Lina, Dlane lipana + 2eT OPERATIONS 20/0 MEANING OF COMMERCIAL LAW The term has been defined as the body of laws and Jurisprudence which governs the rights, intercourse, and felations of persons, whether natural or juridical, engaged in commerce, trade and mercantile pursuits. (Black’s Law) SOURCES OF COMMERCIAL LAW A.Direct sources Llegistation 2.contracts 3.Commercial usage and practices; 4.Decision of local courts; and B.tndirect or auxiliary sources Natural Law; Z 2-Sciantific Law; rs 3.Explanatory notes and preambles tales, et; 4.Foreign Legisiation; S.Profestonal Opinions; and nit G.dectionafforegn buna. ashe) ok le Principal Characteristics of commercial li. ‘Universality: exists and observe in and D.Equtableness: seeks to give pes taythe transaction? | justice and equity, (MEANING OF COMMERCE ‘The term refers to the intercourse by way of trade and traffic between different peoples or states and the citizens or Inhabitants thereot. (Black's Low) ‘SCOPE OF COMMERCE 1.Purchase, sale and exchange of commodities; 2.instrumentaities and agencies by which it is promoted; 3.Ways and means by which its carried on; 4. Transportation of persons and goods by land, sea and water. Relates to intercourse or | Denotes business intercourse dealing with foreign nations | within the limitations of a orstates. ‘ation or state, or the buying, selling, and exchange of goods between members of the same community. Advisers Atty. smener; Head: Erman Blois, avin Ompot; Understudies: Nicolo Bornaro; Cristian de los Santos; Volunteers Jenifer Cruz, lay 3 egiéounties 2 y £ 2iProgresveness: Keeps up with moder trends by» incorporating new practices and discarding, ‘obsolete ones ‘cteraeaso MERCHANTS AND COMMERCIAL TRANSACTIONS Code of Commerce is applicable to the folowing commercial ‘transactions: (CRAM-4aC-Bol-BACAT) ‘Lharter Party 2.Respondentia B.averages 4. Maritime Commerce (except those relating to maritime Insurance) 5. Joint Accounts 6 Crossed Checks 7. Bottomry 8. Letters of Credit 9. Bill of tading aval Az.aithal ie © ut not anymore for: (PAG-OS1) ““LPartnership ‘of Commerce: (HIRap) Lhabigility peer Bin rapidity Special laws which REPEALED, expressly or impliedly, certain portions of the Code of Commerce: 1.Corporation Code, on socieded anonima; 2INIL, on PNs and BOES; 3.Securities Act, on Commercial Houses; 4.Cvil Code, on Partnership, Agency, Sales, Loan, Deposit, ‘and Guaranty; S.insurance Code, on Fire and Marine Insurance; Gulnsolvency Law, on Suspension of Payments and Bankruptcy ‘Special taws forming part of Philippines Commercial Law: 1. Chattel Mortgage Law 2, Warehouse Receipts Law 3. Bulk Sales taw 4. Central Bank Law 5. General Banking Act 6. Rural Banks Act Intellectual Property Code 8. Business Names Law 4 ‘Ouhayiongsod, Francs Espey, Jon tna, Clane tanaTas OPERATIONS 2010 ARTICLE 1. Merchants Merchants are those who, having legal capacity to engage in ‘commerce, habitually devote themselves thereto. ‘These onl refer to natural persons. However, under Article 15 of the Code, foreigners and companies created abroad may engage in commerce in the Philippines, subject to the laws of their country with respect to their capacity to contract, and to the provisions of the Code of Commerce a5 regard the creation of their establishments in Philippine territory, their mercantile operations, and the jurisdiction of the courts of the Philippines. In special cases 1. Persons sentenced to the penalty of cil Iterdiction, while they have not served their sentence or have not. been amnestied or pardoned; 2. Persons who have been declared bankrupts, while they have not obtained their discharge, or been ‘authorized by virtue of an agreement accepted at a general meeting of creditors and approved by judicial authority, to continue at the head of thelr establishments; the discharge being considered In such ‘cases Is limited to that expressed in the agreement; and, 3._ Persons who, on account of laws or special provisions, may not engage In commerce. The following CANNOT ENGAGE IN THE MERCANTILE governed by trates with ther countries, the prowons of aisien,,PROFESSION, IN PERSON OR THROUGH ANOTHER, nor hold treaties prevail. (Art. 15) The Corporation Code governs the organization of corporations, white the Civil Code governs that of partnerships. ARTICLE2. Acts of Commerce ei%n Acts of commerce, whether those who exec she merchants oF not, and whether spected this C should be governed by the provisions absence, by the usages of commerce | Those acts contained in this Code and all otters of snpiogpe character sal be deemed acs of commer, ARTICLE 3, Presumption of Commerce ‘The legal presumption of habitually engaging in coniiene ‘exst from the moment the person who intends to engage ‘therein announces through circulars, newspapers, handbils, posters exhibited to the public or in any other manner whatsoever, an establishment which has for its object some commercial operation ARTICLE 4. Legat capacity to habitually engage in commerce 1. Having completed the age of 18 years 2. Have the free disposition of their property EXCEPTION: (Art 15) Foreigners and companies created abroad may engage in commerce inthe Philippines, subject to the laws of thelr country with respect to their capacity to contract ARTICLE 13 and 14. Who ore disqualified to trade? ‘The following cannot engage in commerce nor hold office or have any direct, administrative, or financial intervention in ‘commercial or industrial companies: (8-A) + sect i th Cade or Rt ved in 0 thele ete or have any direct administrative or franca intervention in industria associations, within the lms of the dlstries, evinces or towns in which they discharge ther duties: 161 lustces, judges and officials of the fiscal office in active SEFTON: This provision shall not be spose to ‘the municipal mayors, judges and prosecuting © attomeys, nor to those who may temporarily sischarge judicial or prosecution duties. “Bg Administrative, economic or military heads of districts, 5, oF sts. loyed in the collection and administration of funds , appointed by the Government. EXCEPTION: Those who administer and collect under ‘contract and their representative are excepted. 4. Stock and commercial brokers of whatever class they may be. EXCEPTION: Those who, under special laws and provisions, cannot trade in specified territory. 22 KINDS OF INCAPACITY TO TRADE: 1. Absolute incapacity: extends throughout the Philippines, and lf notorious and apparent, the act is null and void; If not ‘apparent, that is, one party concealed his capacity, the other, shall have the option to annut or enforce the contract (enumerated under Art. 13, BA); 2. Relative Incapacity: co-extensive with the province or town where the officer incapacitated is exercising his functions; and its effect Is merely to subject the person violation the profibition to such disciplinary action oF punishment as may be imposed by special laws. (enumerated under Art. 14) Advisers: Atty. Simener; Heads: Erman alos, avin Ompoc; Understudes: Nicolo Bamnardo; Christian de los Santos; Volunteers: Jennifer Cruz yg, ‘Duhavionssod, Francis spit, Jon ina, Diane UpanaCOMMERCIAL LAW REVIEWER ARTICLE 51. Commercial Contracts Commercial contracts shall be valid and shall give rise to cbligations and causes of action in suits, whatever the form and language in which they may be executed, the class to which they may belong, and the amount they may involve, provided their ‘istence is shown by any means established by the civil aw. However, the testimony of witness alone shall not be sufficient to prove the existence of a contract which involves an amount exceeding P1, 500 pesetas unless supported by some other ‘evidence. This article supplements Art. 1403 of the Civil Code on the Statute of Frauds. ‘Accdg to Statute of Frauds an executory commercial contractse:syn., etceeing P500 cannot be proved by parol evdenge6y. This affects enforceabiltyand notvatiiy. ARTICLE 2, Exceptions from Article 51 1. Contracts which, in accordahce with this Codeor special laws, must be reduted to writing-of forms oF formalities ne 2 Conc eect Fe soy hey lew eqs crane (itso for thei valkty, although Philippine’ law oss not require them. . Ineither case, contracts which do not satisfy the crcums respectively requifed shall nt give rise tp obligations of of action. % ‘ ‘The difference of Art. 51 and Art. 52 is that it, 51 refers to forms and formalities which are necessary for the" Burpose.of proof; Art. 52 refer to forms and formalities, which are” necessary for the efficacy of contracts. However, Art. 52 does ‘not mean to say that the contract Is no longer valid. It is only ‘when the law requires a certain form that such forms shall be necessary for the efficacy of commercial contracts (e.g. negotiable instruments and insurance contracts, and ako for specific forms of charter parties and loans on bottomry and respondentia} ARTICLE 53. Iicit Agreements lic agreements do not give rise to obligations or causes of action even should they refer to commercial transactions. [ARTICLE 54. Contracts by Correspondence Contracts entered into by correspondence shall be perfected from the moment an answer is made accepting the offer or the conditions by which the latter may be modified. {tm commercial transactions, time is of the essence of the contract and the contract 1s perfected from the time the ‘acceptance is dropped in the mailbox. The receipt of the _gizeptance by the offerors material a ee) ee eeu Mercantile contracts are perfected from the moment the acceptance is sent, even ifithas not yet been receved by the offeror. law such as partnerships, agencies, deposits, loans, sales and guaranties’ will be perfected only upon receipt by the offeror ofthe luncondltional acceptance by the offeree. Offeror can no longer withdrew the offeror change ‘the terms and conditions, ARTICLE 55. Contracts with Agent and Broker Intervention Contracts in which an agent oF broker intervenes shall be perfected when the contracting parties shall have accepted his offer. ARTICLE 56. Contract with Penalty for Indemaification tn 8 tegnmercial contract in which a penalty for indemnification against the party fang to comply therewith is heed the injured ag Batty may demani though legal means the futfilment of the sap! contract oF the penalty stipulated; but the recourse to one of "988 these actions shall extinguish the other unless the contrary is nee mane TR * spite. solaiteys ‘The innocent party has only to prove the breach ofthe contract ‘to recover on the indemnity clause without need to prove «damages. |. Sais ON inTEsReTATION OF COMMERCIAL CONTRACTS: 5 ALE Commerzii contracts shall be executed and complied wth iin good*faith, according to the terms in which they were Ina and down un, tout evan trout abitary los the ply oer and usa mening of te si? $2Bhersce* spoken or written words, oF Hiting the effects which are naturally derived from the manner in which the contracting parties may have expressed their will and contracted their obligations. (Art. 575 2. Ifa discrepancy should appear between the copies of a ‘contract which the contacting parties present and, in its ‘execution, an agent or broker should have intervened, that which appears in the books of the latter shall prevail provided they are kept in accordance with law. (Art. 58) 3. tf doubts which cannot be decided in accordance with what 's provided in Article 2 of this Code should arse, the ‘question shall be decided in favor of the debtor. (art. 59) ARTICLE 61. Non-recognition of Doys of Grace, etc. Days of grace, courtesy or others which under any name ‘whatsoever defer the futfitment of commercial abligations shall not be recognized, except those which the parties may have previously fixed in contract or which are based on definite provision of law. ‘Although generally a grace period Is not recognized, Sec. 230 of the Insurance Code expressly recognizes @ 30-day grace period within which to pay premiums. 4 Advisers: Atty. anes; Heads: Eman Balois, Javin Ompoc; Understudes Neolo Bernardo; Christan dels Santos; Volunteers: Jenifer Cruz, lay § ‘Duhavlongsod, Francs Espirit, Jon Una, Diane Lpanaa) OPERATIONS 2010 ARTICLE 62 & 63. When debtor is considered in delay 4. If period of performance is fixed, next in delay without need ‘of demand, debtor in delay on the day following the day fixed; {f no period is fixed, 10 days from execution of contract and. ‘on 11” day, debtor n delay without need of demand. (This in contrast to Art. 1197 of the Civil Code which provides that if the obligation does not fx a period, but from its nature and the circumstances it should appeer that the perlod was Intended, then the obligee must go to the court to have the period fixed.) Potestative period — debtor in delay from demand acta ‘commercial ARTICLE 567. Letter of credit are those issued by, {0 another or for the purpose of attending.t transaction. 4 : conditions ofthe cet. es a a ay ioe mrosatst en geecgtegee saat erent me ate 9, omer omrany. have control of the goods before paying. (Tronsfield Philippines Be Luzon Hy Crp, GR NO 46717 November 22, S008 ac 2. To reduce risk of nonpayment of the purchase price under the contract for the sale of goods. (CLASSES OF LETTERS OF CREDIT 1.Commercialleter of credit 2.Travelers letter of credit PARTIES TO A LETTER OF CREDIT 1.Buyer - who procures the letter of credit and obliges himself to reimburse the issuing bank upon receipt of the document's title; issuing bank - which undertakes to pay the seller upon receipt of the draft and proper documents of titles and to surrender the documents to the buyer upon reimbursement; and 2.Seller the beneficiary, who in compliance withthe contract ‘f sale ships the goods to the buyer and delivers the documents of ttle and draft to the issuing bank to recover payment. —Adhsors: Atty. Sener; Heads: Erman Balls, Javin Ompoc; Understues: Nicole Bernardo; Chvstian de os Santos; Volunteers: Jenifer Cru, Say ‘The number ofthe parties may include: 1. Advising (notifying) bank - may be utiized to convey to the seller the existence of the credit, Bt does not assure ‘that the issuing bank will pay and may refuse to accept the drafts without being able; Confirming bank - which will lend credence to the letter, of credit issued ty @ lesser known issuing bank; the confirming bank ts directly lable to pay the seller beneficiary; . Paying bank - which undertakes to encash the drafts drawn by the exporter/seller Negotiating bank - instead of going to the place of the Issuing bank to claim payment, the buyer may approach “another bank, termed the negotiating bank to have the draft discounted (Charles Lee v. CA, GR No. 117913, February 1, 2002) t nce Prnciplein a letter of credit transaction means that @barkin determining compliance wth the terms of alter ‘of credit is red to examine only the shipping documents Presented by the seller and is precluded from determining ‘whether or not the main contract is actualy accomplished or fot. There are thiee distinct and independent contracts in a letter of credit: _(2} Between the sete and the buyer, '@) Between the buyer and the tsulng Dank NE Ex ag(@) The lettr of credit itself, wherein the bank promises to ‘Nature or Legal Relations Arising From Loc: e may be made conditional, but for purposes of protecting the banking and mercantile community, all conditions must be ‘complied with, however onerous. it unaffected by any breach ‘of contract on the part of the seller or the buyer or by any controversy which may arise between the buyer and seller or by ‘any other transactions between the buyer and the seller. (WAMARCO v Atlas Troding, GA No. 21921 September 29, 1967) ‘Rule of Strict Compliance-in a letter of credit transaction means that the documents tendered by the seller or beneficiary must strictly conform to the terms of the letters of credit, i., they ‘must include all documents required by the letter of credit Thus, a correspondent bank which departs from what has been stipulated under the letter of credit, as when it accepts a faulty ‘tender, acts on its own risk and may not thereafter be able to recover from the buyer or the issuing bank, as the case may be, ‘the money thus paid to the beneficiary (Feati Bank vs. CA, GR, ‘No. 94209 April 30, 1991) 6 ‘Duayiongsod, Francis Esprit, Jon Lina, Diane LianaWhen LoC Considered Consummoted Contract-it is the date if ‘payment ifthe amount of the foreign currency to the creditor in bis country by the agent or correspondent bank in the country of ‘the debtor that tums from executory to executed or ‘consummated contract. It is not the date of payment by the debtor to the bank in his country of the amount of foreign exchange sold that makes the contract executed or consummated, because the bank may grant the debtor ‘extension of time to pay such debt (Belman Compania v CB of the Philippines, GR No. 1491-94 May 20, 1960) ‘CLASSES OF COMMERCIAL and TRAVELER'S LETTERS OF CREDIT {see Annex A) There is no need for | there is a settlement of pre-requisite fofYelease funds could bereleased. _| funds. ‘A bank in an. irrevocable | A guafantor’s obligation iy merely collateral and arises ‘when the person primary, primary payment mechanism ~ payable ‘pon presentation by sellerbeneficiary af documents showing. that he has complied with sales agreement. FCocthuENTATON) Saller-beneficiary must | that applicant has | nt show documents that he | performed his contract has performed his | e sontract (CERTIFICATION) Sller-teneficiary need not make any certification. ‘Seller-beneficiary must certify ‘obligor has not performed his contract. PURPOSE OF THE LAW {To prevent the defrauding of creditors by the secret sale or disposal or mortgage in bulk of all or substantially all of a ‘merchant's stock of goods. 2.To prevent secret or fraudulent sale or mortgage of goods in bulk untit the creditor ofthe seller shall have been paid in ful, aa ya) OPERATIONS 2010 —Adhisers: Atty. simone; Heads: Erman Balas, avin Ompoc; Understudies: Ncole Bemardo; Chan dels Santor; Volunteers Jennifer Crut,tay 7 Important: The law covers all transactions, whether done in good faith or not, or whether the seller is In a state of insolvency or not, as long as the transaction falls within the description of whats a “bulk sale.” "TRANSACTIONS CONSIDERED AS “BULK SALE” ‘Any sale, transfer, mortgage or assignment of LA stock of goods, wares, merchandise, provisions, or ‘materials otherwise than in the ordinary course of trade 2.Ail, oF substantially all, of the business of the vendor, ‘mortgagor, transferor, of assienor 3.All, oF substantially al, of the firtures and equipment used in the business of the vendor, mortgagor, transferor, or assignor. need =a tng EMOTED TRANSACTION ‘When accompanied with 2 written waiver by all the rfmortgagor's creditors ig law does not apply to executors, administrators, receivers, assignees in insolvency, or pubic officers, _acting under legal process ‘Sale oF mortgage is made in the ardinary course of business 4. Sale by assignee In insolvency or those beyond the ag tight of creditors 5. Sale of, properties exempt from attachment or law ‘OBLIGATIONS OF THE VENDOR UNDER THE LAW ‘The vendor, mortgagor, transferor orassignor must: Lever to the vendee, mortgagee, transferee, or assignee a writen statement: a. Names and addresses of all creditors to wham s8id vendor or mortgagor may be indebted b. Amount of indebtedness due or owing to each of said creditors 2.Apply the purchase money to the pro-rata payment of bona fide claims of the creditors as shown in the verified statement. 3.At least 10 days before the sale, shall: 2. Make 2 full detailed inventory of the goods, merchandise, etc, cost price of each article to be Included inthe sale Notify every creditor at least 10 days before ‘wansferring possession of the goods, of the price, terms and conditions of the sale a ‘Dunaylongsog, Francis Espiritu Jon Lina, Diane Lpana1s between the parties: VALID CONTRACT ZAs between persons other than the creditors: VALID CONTRACT 3.8 to affected creditors of the seller/mortgagor: VOID CONTRACT 4. Criminal Kabitty, if expressly provided fule as to Transfers without Consideration or for Nominal Consideration 1LWhat the law says - The law makes It unlawful for any person, frm, oF corporation, as owner of any stock af goods, wares, merchandise, provisions, or materials, in bulk, tO transfer title to the same without consideration or for a ‘nominal consideration ony 2 - Ths wil make e ser cna lable, he ‘sole would be void or lack of consideration. ‘Ac. 240, oy a chat! mortgage, persis property secre in the Chattel Mortgage Register 3s 9. secuttyZfor'the performance of an obligation. f emote fame : recorded, is deivered to the creditor 2th Brain Corton pg ont scale [At 2441, The provisions of this Cade of ledges fasofar as theV EW § 210 not in confit with the Chattel Mortanepiiaw,shal.be applicable to chattel mortgages. Characteristics of Chattel Mortgage 1. ‘Accessory contract — to secure the peffrmance of a principal obligation. dai 2 Formal contract ~ registration in the Chattel Mortgage Register is indispensable for validity 3. Unilateral contract ~ it produces only obligations on the part ofthe creitor to free the thing from the encumbrance ‘on fulftiment ofthe obligation. ‘Subject: movable property | Subject: movable property ‘Oihetship of the mortgagor is an essential element to be valid_| Delivery, not necessary Delivery of personal. Property is necessary ‘Registration nthe Regietys | ofProperty Bh See required by law: = “The procedure for sale is found in Sec14 of Act No. 1508 “The procedure for sles provided for by the Chil Code (Art. 2112} cee —Advisers:Aty,Simener; Heads: Erman Balois,Javin Ompos; Understudies: Nicole Bernardo; Chistian de es Santos; Volunteers: Jenifer Cruz, lay CENTRAL BAR OPERATIONS 2010 Incase sale and there isa deficiency, the creditors ‘ot entitles to recover the ithe property sforecosed'and there isa deficiency, the ‘creditor is entitled to recover deficiency notwithstanding | the deficiency of from the any stipulation to the ‘contrary (art 2125) ‘debtor (Ablaza v Ignacio), ‘except if the CM mortgage isa security forthe purchase of personal property in |G thecontrary ____| instalments (see Ar 1484) ‘SUBJECT MATTER OF A GHATTEL MORTGAGE alor movable property matter of chattel mortgage has to be described and identifedita enable the parties to the mortgage or any other .g Petson to idenuty the'Same after a reasonable investigation and 3 Inguiey oferwise, i is valid. (Saldana v Phi. Guaranty Co, 8 tne Ro, 12984 January 23, 1960) _ EXTENT OF CHATTEL MORTGAGE ‘Section 7, Paragraph 4 of Act No, 1508: ‘A chattel morgage stall be deemed to cover only property described therein and not ike or substituted property thereafter _2equired by the mortgagor and placed in the same depositary as ‘Sie roperty orginally mortgaged, anything in the mortgage to ithstanding. in the mortgage extending its scope and effect to red property is valid and binding where the after- gss™aequired property i: (1) tr renewal of or in substitution for goods on hand when the mortgage was executed (2) Purchased with the proceeds of the sale of such goods. CChattel Mortgage of After-incurred Obligations A pledge, real estate mortgage or antichresis may secure after- incurred obligations so long as these future debts are accurately described. However, a chattel mortgage can only cover “obligations existing at the time the mortgage s constituted. ‘Although # promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding ‘commitment that can be compelled upon, the security itself does not arise until after a chattel mortgage agreement covering ‘the newly contracted debt is executed either by a fresh chattel ‘mortgage or by amending the old contract. ‘The remedy of foreclosure can only cover debts extant at the time of constitution and during the fife ofthe chattel morgage sought tobe foreclosed. (Acme Shoe Rubber & Plastic Corp vCA, ‘GR No, 103576 August 22,1996) + ‘Duhaylongsod, Francis Espiritu Jon Lina, Diane panaee COMMERCIAL LAW REVIEWER LENO CREATION OF A CHATTEL MORTGAGE: Registration of the personal property inthe Chattel Mortgage Register. If the property is situated in a different province from that in \which the mortgagor resides, the registration must be in both registers otherwise the chattel mortgage is vold. If mortgagor resides abroad, it must be registered in place where property is located. IM the chattel mortgage is not recorded, itis nevertheless binding between the partis. Registration of assignment of chattel mortgage merely permissive. PERIOD OF REGISTRATION: no specie time within whichsay chattel mortgage should be recorded. But,thé™law is substantially complied with where registratioit is made (1) before the mortgagor has complied his principal ‘obligation and (2) no right of innocent third parties is prejudiced. REQUISITES TO BIND THIRD PERSONS: 1 Alidavit of good faith 2. Contract must be regtered Under the chattel mortgage law, thersiGinbe'd fecovery 681° ¥ & deficiency judgment, except when the Recto tampons: BHF ESSENTIAL REQUISITES TO CONSTITUTE.A VALID GhArfEL 3 ‘MORTGAGE OVER PERSONAL PROPERTY 1 must be constituted to secure the flit of principal obligation. . 2. The mortgagor must be the absolute owner of the thing ‘mortgaged, 3. The persons constituting the mortgage have the free disposal of the property and in the absence thereof, they be legally authorized for the purpose. 4. Must be recorded in the Chattel Mortgage Register in ‘order to bind third persons. ‘The first three requirements pertain to the requirements of any. valid mortgage under the Civil Code. REQUIREMENTS UNDER THE CHATTEL MORTGAGE LAW FOR ‘THE VALIDITY OF A CHATTEL MORTGAGE 1. Substantial compliance with form 2. The deed of mortgage must be signed by at least 2 witnesses. 3. Deed must contain an affidavit of good faith. 4, Deed must be accompanied by 2 certificate of oath {notarial acknowiedgment}. Tat OPERATIONS 2010 e teammate ‘CONTENTS REQUIRED IN THE AFFIDAVIT OF GOOD FAITH. 1. 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; and, 2. Property even in chattel mortgage must be described to tenable the parties or any other person after reasonable Inquiry and investigation to identify it. EFFECT OF ABSENCE: vitistes 2 mortgage only as against third persons without notice like creditors and subsequent cencumbrancers. EFFECT OF PRESENCE: not necessary for the validity of the chattel mortgage itself but only to give ita preferred status. WHICH PROVIDE FOR CRIMINAL LABILITY UNDER THE CHAI iE LAW: (ART. 319, RPC) 4, Wemova of chattel to another ety or province without ‘written consent of mortgagee, 2. Selling property already pledged, or mortgaged without written consent of mortgagee. ight oF ReDeMPTION 1 Te folowing ay redeem the contion ofthe mortgage Biroter: 2. Moresen = EXCEPTIONS: 1. the goods are fungible 2. The commingling is authorized by: seen ‘custom ‘Attachment or Levy of Negotiable Receipt GENERAL RULE: The warehouseman has the direct obligation to hold possession of the goods for the original owner or for the person to whom the negotiable receipt of title has been duly negotiated. While in his possession, the goods cannot be attached or fevied upon under an execution. Unless: The document be first surrendered; or 2, tts negotiation is enjoined; or 3. The document is impounded by the court. Extent of Warchouseman’s Lien 1. All lawful charges for storage and preservation of the goods; 2, All lawful claims for money advanced, interest, insurance, transportation, labor, weighing, cooperating, and other charges and expenses in relation to such goods; All reasonable charges and expenses for notice and advertisements of sale and for sale of goods where default thad been made in satistying the warehouseman’s len, Goods Subject to Lien The warehouseman may enforce his lien against all goods: 1L OF the depositor who is fable as a debtor to the warehouseman; 2. OF ather persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge. Loss and Waiver of tien Upon Goods 1. By surrendering possession of goods. NOTE: A warehouseman who has released his lien by the surrender of the goods may not thereafter claim a Ken on other goods of the same depositor for unpaid charges if the goods were delivered to him under different brallments. But he has a pansion on eae goo fr cares on sured gods whee were received under one and the same bailment. 2 Boyt etn to deliver goods. <5 Vaid Rastons fr Rofusing to Deliver Goods 1. The holder ofthe receipt does not: 2. Offer to satisfy the warehouseman’s fen 'b. Offer to surrender the receipt fit is negotiable € Show readiness and willingness to sign an acknowledgement, when the goods are delivered, that they si Deen delivered if such is requested by the sman has legal title in himsei on the goods Aicecty oF indirect from a transfer made by itor atthe time of or subsequent to the deposit ‘or from the warchousemen’s len he warehouseman has legally setup tte or right of third Persons as lawful defense for non-delvery ofthe goods. @. The warehouseman has been requested by or on behalf of the person lawfully ented to a right of property of or possession in the goods not to make such delivery; b. The warehouseman had information thatthe delivery bout to be made was to one not lawfully entitled to the possession of the goods; The goods have already been lawfully sold to third persons to satisfy a warehouseman’s en or have been lavefully sold or disposed of because of their perishable or hazardous ature. 4. The warehouseman having 2 en valid against the person demanding the goods refuses to deliver the goods until the lin is satisfied 5. The failure was not due to any fault on the part of the warehouseman, Advises: Atty. timenes; Heads: Erman Bales, avin Ompoc; Understuties: Nicole Bernardo; Cristian de los Santos; Volunteers: Jennie Gru, 5y 4 ‘buhaviongsod, Francs Esprit, Jon Lina, Diane panaGe COMMERCIAL LAW REVIEWER Enforcement of Warchouseman's Lien The remedies available to 2 warehouseman for enforcing his len are as follows: 1. By refusing to deliver the goods until the lien is satisfied 2. By causing the extrajudicial sale of the property and ‘applying the proceeds tothe value of the lien; 3. by fling a civil action for collection of the unpaid charges or by way of counterclaim in an action to recover the property from him or such other remedies allowed by law for the enforcement of a lien against personal property or to @ recitor against his debtor, for the collection from the ‘depositor of all the charges which the depositor has bound birself to pay. WAREHOUSEMAN’S LIEN 1. Object of the Lien ~ onthe goods deposited with himor.on ‘the proceeds thereof in his hands or 2. Purpose - for all lawful charges fof storage and ‘preservation of goods, money him in relation to such goods such as expenses of trisportation or labor. 3. Against what Property may the lien be enforced all ‘e00ds bolonging tothe person liable forthe charges,aé wall as against all goods belonging to others deposited ty the person fable forthe charges and couftiave validly pleced the same, ( 4. Loss of len by warehousemsn by (sveclbve possession of the goods or refusii@'to deliver the gobd8 5: when demand is made with whic hes bound to comply Effect of the sale of goods ta satisty the warehousemarr® len or on account ofthe goods” perishable of worehouseman, after the sale, shall not be fable, for falling to deliver the goods to the person lawfully entitled t3"Yhe, goods, even if such receipt were negotiable. Effect of Sale of Goods 1. The warehouseman is not liable for non-delivery even ifthe receipt given for the goods when they were deposited be negotiated. 2. When the sale is made without the publication required and before the time specified by law, such sale is void and ‘the purchaser of the goods acquires na ttle in therm. ‘Advantage of a Negotiable Warehouse Receipt 1. Itprotectsa purchaser for value and in good faith. 2. The goods covered by the receipt cannot be garnished or levied upon under execution unless it is surrendered, Impounded or its negotiation enjoined, 3. The holder acquires the direct obligation of the warehouseman to hold possession of the goods for him without notice to such warehouseman. 4. The goods covered are not subject to selle’s lien or stoppage in transitu + Lt OPERATIONS 2010 dous nature <2 Rights of a Person to whom Receipt has been Negotiated 1. The title of the person negotiating the receipt over the gods covered by the receipt. 2, The ttle of the person (depositor or owner) to whose order by the terms ofthe receipt the goods were to be delivered. 3. The direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman rectly contracted with him. Rights of a Person to whom Receipt has been Transferred LL. The ttle to the goods as against the transferor. 2. The tight to notify the warebouseman of the transfer 3. The ight thereafter to acquire the obligation of the warehouseman to hold the goods for him, ‘The right of the transferee is not absolute as itis subject to the "igiins of any agreement with the transferor. He metely steps ieto th shoes ofthe transterr. artacanaent GF 50008 covenco By nicer ‘L Noa-negotiable receipt - fefore notification, the ‘warehouseman is not bound to the transferee whose right ‘tay be defeated by 2 levy of an attachment or execution ‘upon the goods by the creditor of the transferor or by 2 sputeston tact meracums ore nacennreche ‘of the goods. 2. Neguthte oct The good cnmot be ace or 4 slened union eneantan unk the rect be fit Terederd ose westeweman fe ngetiton Rigt ‘of @ NEGOTIABLE RECEIPT <4 The ight tothe goods as against the ansferr. 2, The ight to compel the transferor toindorse the receipt Criminal Offenses 1. Issue of recelpt for goods not received. 2. Issue of receipt containing false statement. 3. Issue of duplicate receipt not so marked. 4. Issue for warehouseman's goods of receipt which does not state that fact. 5. Delivery of goods without obtaining negotiable receipt. 6. Negotiation of receipt for mortgaged goods. (Act No. 3893 as amended by RA 247) Purpose of the law ‘The purpose of the law is to protect depositors by giving them recourse incase of the insolvency of the warehouseman against the bond filed by him. ——— + ~Advisers:Aty.limenes; Heads: Erman Bales, lavin Ompoe; Understudies: Nolo Bernard; Cvstan de les Sontos;Vohiteers: Jennifer Cuz, Jay 43 DDuhaylongsod, Francis spit, Jon Lin, Diane panaObligations of a Warehouseman: ‘A warehouseman cannot recelve goods for storage, milling or ‘commingling without performing the following: 1. He must secure a license from Bureau of Commerce (now Department of Trade and Industry). 2. He must file cash, real estate or surety bond in an amount not Jess then 33% of the market value of the maximum {quantity or commodity to be received. 3. He must not discriminate and must open his warehouse to the public 4. In case of damage to the goods because the ‘warehouseman accepts goods in excess of the capacity of his warehouse, the latte is fable in the amount equivalent to double the market value of the goods. 5. The goods must be insured against fire. a Note: The warehouse is not covered by the law.itxf8 owner merely rents space to a certain group of ‘because the law covers warehouses that accept goods for: a) storage, b) nilng, and c) commingling with obligation to return the same ‘quantity or to pay their value. Purpose of the law 1. To encourage and promote the uot coils ‘as an additional and convenient aid to esithmmerge’and trade; § Ff 2. To provide for the regulation of trust receigts trar nsagtions in order to assure the ‘off the rights, and Crfreeren o ebgations ot he gested ch ‘and, 3 3. To declare the misuse and/or misappr of goods or proceeds realized from the sale of goods, or, Instruments released under trust receipts as @ criminal’ offense punishable as estafa. ‘TRUST RECEIPT - a written/printed document signed and delivered by the entrustee in favor of the entruster, whereby the latter releases the goods, documents or instruments over which he holds absolute ttle or a security interest to the possession of the former, upon the entrustee’s promise to hold said goods in tuust for the entruster, and to sell or otherwise dispose of the ‘goods, etc. with the obligation to turn over the proceeds thereot to the extent of what is owing to the entruster; or to return the {g00ds if UNSOLD, or for other purposes. aoe Advises: Atty. limenes; Heads: Erman Balols,Javin Ompoc; Understudies: Nicole Bernardo; Chistian de les Santos Volunteers: Jennifer Cruz 3y 14 ase L OPERATIONS 20/0 ‘OBLIGATIONS IN THE TRUST RECEIPT ‘To sell them 2.To manufacture the forthe purposes of 2. Todeliver them to principal sale 3. To effect the consummation o ‘transaction involving delivery to a depositary ora register 4. To effect thetr presentation, collection or renewal 3.To unload/stip (or deal with them ina ‘manner preliminary to their sale [Nature of Trust Receipt Agreement LA trust receipt agreement is merely a collateral agreement, the purpose of which isto serve as security fora loan. In relation to a letter of credit, a letter of credit is a rate document from a trust receipt. While the trust ay have been executed as a security on the letter of credit, stil the two documents Involve different Ursertatngs and obitions. AIGHTS OF TRUSTER AND ENTRUSTEE L.To receive the surplus from the public sale (able for any deficiency); To have possession of the goods as a condition for his liability under the ‘TRL (Ramas v. CA) Tknttied to the proceeds fiom the sale of goods, ce all other rights jonhim under the 4.70 cancel the trust, take possession of goods or Instruments or of proceeds realized therefrom upon default ofthe entrustee 5.To sellthe goods ina public ‘private sale upon notice to the entrustee in case of default S.May purchase at the intended public sale (Sec. n 7. Extent of secunty interest: ‘2. AS. against innocent purchaser for value: not preferred ec. 11) b. AS against creditors of entrustee: preferred (Sec 12) + ‘Duhaylonesod, Francs Espiritu, lon Lina, Diane Lianarls e, 2 aL OPERATIONS 2010 1. To hold the goods or the proceeds of the sale in trust for the centruster; 2.0 comply with his alternative obligation; 3. To ensute against loss the goods for their total value; ATo keep the goods or sale proceeds separate. = and ‘identifiable; ‘5. To return the goods in the event of rnon-sale or upon demand of the entruster; 6.To observe the conditions of the trust receipt not contrary the goods to the entrustee; . To give at least 5 days notice to the entrustee of, the intention to sell the foods at the Intended public sale; RIGHTS AND LIABILITIES, 1 tabilty of the entruster in any sale or contract made the entrustee — not be sible as magn tee ce meee emp a ‘entrustee by virtue of such interest UE hating Bivgh the entrustee liberty of sale or other of the poses, Socuments or instruments undef the t8fis of the trust receipt transaction. € By 2. Who bears iskofloss—Entrustes KENT 3. Rights of a purchaser for value avd in good foith,of the < goods covered by the Trust Receipt. He acquies sid, ‘g00ds, documents or instruments free am the entruster's: security interest. "a Falure of the entrustee to turn over the _sale~ shall constitute the crime of estafa and may also be 2 cause for damages under Art 33 or the Civil Code (Prudential Bonk v. IAG, GR No. 74886 December 8, 1992) ‘Novation ofa tnst agreement -Supreme Court led that ‘4 Memorandum of Agreement entered into between the bank-entruster and entrustee extinguished the obligation under the existing trust receipt because the agreement did ‘not only reschedule the debts of the entrustee but it provided principal conditions which are incompatible with the trust agreement. Hence, the fabilty for breach of the Memorandum of Agreement would be purely cit in ‘ature and no criminal ability under the Trust receipt Law can be imposed. (Philipines Bank v. Alredo T. Ong, GR ‘No, 133176 August 8, 2002) ao NEGOTIABLE INSTRUMENT. A written contract for the payment ‘of money; by its form, intended as a substitute for money and intended to pass from hand to hand, to give the holder in due ‘course the right to hold the same free from defenses available to ‘rior parties and collect the sum due. ~ _ —Aavisers: Ay. mene; Heads: Erman Bales, avin Ompoc; Understuies: Nicolo Bernardo; Cston de fos Santas; Volunteers: Jenifer Cru, fay 45, PROMISSORY NOTE An unconditional promise in writing made by one person to another, signed by the maker, engaging to pay ‘on demand, or at a fixed or determinable future time, a sum ‘certain in money to order or to bearer. Where the note is drawn, to the maker’s own order, itis not complete until indorsed by im. (See. 184) BILL OF EXCHANGE An unconditional order in writing addressed bby one person to another, signed by the person glving it, requiring the person to whom its addressed to pay on demand ‘rat a fixed or determinable future time a sum certain in money to order or to bearer. (Sec. 126) CHECK A bill of exchange drawn on a bank and payable on demand. (Sec. 185) of Negotiable instruments: ity ~ alows the transfer from one person to stiotiesso_a5 to constitute the transferee asa holder in ‘due course that fs fee from personal defenses. = promissory Note . Bil of Exchange ‘Unconditional promise ‘Unconditional order itwoNes 2 partes (malay [InvoWes 3 partes (amen, {paves payee, drawee) | Maker primarily able ‘Drewer ony secondarily able ‘Only 1 ‘presentment - for | Generally 2 presentment - for bayinent acceptance andor payment | 90 secamation of eacndary contracts - stress a negotiated from person to person resulting to secondary Uablty, making more ani more persons Tableto the holder NEGOTIABLE V. NON-NEGOTIABLE ime donot contain all requisites of Sec. ‘il does notannly Scent | way contains all requisites of Sec 1 ‘ransferred by negotiation of ‘transferred only by | byassienment assignment = ‘ronbtechee Gar fever holder in due course. the transferee is subject to all defenses to prior parties a transferee who sa holderin ddue course is not subject to all defenses ’ ‘butavionssod, Francs Esprit, fon Lina, Diane tipanaCOMMERCIAL LAW REVIEWER CSVNGE [NEGOTIABILITY V. ASSIGNABIUTY ea eu primarily liable does not ot ‘cannot pay; he warrants the || unless the insolvency was solvency of the person prior to the assignment and primarily liable gf common knowledge ‘a qualified indorser and a person negotiating by mere ik delivery have limited ore secondary bability at Bae Indorser is not lable of is indorsement unless there be | presentment for payment at 1 ‘maturity and prompt notice ofishonorin case of > dshonor ys i i ‘CHECK V. BILL OF EXCHANGE : ‘always drawn upon a bank | may or = be drawn, orbanker against a bank ‘aiNays baVabIE OH” | ay be favable of emand oF | demand " at afced or deteritinable os futwetime © | not necessary tha necessary that it be presented presented for acceptance | for acceptance drawn ona deposi | mottalwn onadeposit | the death ofa drawer of | the death ofthe drawer of the check, with knowledge by | ordinary bill of exchange does te banks, revokes the | not revoke the authority of the authority ofthe bankerto | banker to pay poy nk Be peceennea Or” | aay Be pS TE payment within a payment within a reasonable reasonable time afterits | time after ts ist negotiation. issue. (6 months) i ae jg pertains only tonegotiable | more comprehensive; instruments pertain to contracts in drawer, the drawee bank and general ‘the payee [Pansforeg takes Wires Wom | subject Wo diana ‘ay be drawn against ay | always drawn against a Bank “pefsonal defenses avaiable: | obtaining among the 0, not necessaritya bank aiong partes. original parties ‘may be payable on demand or | always payable on demand consideration is presumed | necessary to allege and ata fixed or determinable and need not be allegedand | prove consideration to future time Proved maintain an action ona ‘promise to pay ‘An order to pay common law instrument ‘Fheral ngonerie ‘signori good Fath das ‘TPES OF CHECKS secondarily liable for any | not warrant the sokency of 4. Managers check - One drawn by the bank's manager upon ‘use for which the party | the debtor unless ithas the bank itslf; and itis similar toa cashier's check both 2 beh express stilted of |roanrny,_ to effect and use. (teratonl Comore Bank v Guec, ‘ge. te reer 2,200 + Altnanagtt’s check is regarded to be a5 good as the “money # represents ‘When a bank fais to exercise the diligence required, it ‘must beheld able for such loss. However, it may pursue ap action against the person responsible or who may have been unjustly benefited. (BP! Family Savings Bonk v Manikon, GR No, 148789 January 16, 2003} cog RULE: a manager's check is not legal tender, ExcgFto: Payment may be ete 2 wld #0 ingot objection is made. (Pobugias v Sahiwani, GR (gm 156846 February 23, 2004) 1007 Crossed check - Though the NIL is sent 28 to crossed checks, courts can take judicial cognizance of the practice that a check crossed with two parallel lines in the upper fot hhand comer means that it can only be deposited and not converted to cash. The effects of a crossed check thus relate to the mode of payment — meaning that the drawer intends it to be only for deposit by the rightful person, the named payee. |A check 1s crossed spacially when the name of a particular banker or company is written between parallel lines drawn ‘transversally on the face of the check. A check is crossed generally when the words “and company” or nothing is written between the parallel ines. Jurisprudence provides the following effects of crossing a check: a, The check may not be encashed but only deposited in the bank b. thecheck may be negotiated only once—to one whe has an account with a bank —Adviers: Atty. Jimenes; Heads: Erman Balois, avin Ompoc; Understudies: Nicolo Bernardo; Christian de los Santas; Volunteers: Jenaifer Cuz, ay 16 DDuhaylongsod, Francis Esp, Jon Lina, Dine Lipana<>, COMMERCIAL LAW REVIEWER The act of crossing the check serves as warning to the hholder that the check has been issued for a definite purpose so that he must inquire if he has recelved the check pursuant to that purpose, otherwise, he is not 2 holder in due coarse + holder of crossed-checs isnot obliged to inquire as to the purpose for which the checks were issued. (Bataan Cigar vs. CA, GR No. 93048 March 3, 1994) + Theiaw does not require the payee to be interested in the obligation in consteraton for which the check wat ised. The cause of reason of tsuance inconsequential (iv connection with BP 22) in determining criminal lbity. (Ngo vs. Pecple, GR No. 255815 lly 14, 2004) + When a payee of a crossed check issued wath thes notation "for payee’s account only” of ‘the said check belong only tothe pays Flue of the colecting bank to folow said pgtation wil make it fable in case i allows i taibe withdrawn by an ‘unauthorized individual ted Bank v. CAy-GRE "No 8902 Moy 7, 1992) oor, ‘Memorandum Check - Check oh wtich Is itten tt “memorandum” signifying that the the bona fide holder absolutely and not Pay upon presentment or nor-payrfient | 7 & Certified Check - A check on which the drawee bagk 835) ‘written an agreement whereby it undertakes to pay the. ‘heck at any future time when presefted for payment sich, °° as by stamping on the check the “certified” and’ i} underneath itis written the signature of th aehier Effects of certification: Equivalent to acceptance and is the operative act that makes the drawee bank lable b. it operates as an assignment of the funds of the drawer in the hands ofthe drawee bank if obtained by the holder, it discharges the persons secondarily able [REQUISITES OF A NEGOTIABLE INSTRUMENT Sec. 1. An instrument to be negotiable, must conform to the following requirements: (a) it must be in writing and signed by the maker or drawer, (b) Must contain an unconditional promise or order to ppay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (4) Must be payable to order arto bearer; and ‘Where the instrument is addressed to a rawee, he must be named or otherwise indicated therein with reasonable certainty. ) te) OPERATIONS 2010 passa HOW NEGOTIABILITY 15 DETERMINED 1. By the provisions of the Negotiable Instrument Law, particularly Section 1 thereof 2. By considering the whole instrument 3 By what appears on the face of the instrument and not elsewhere In determining whether the instrument is negotiable, only the Instrument itself and no other, must be examined and compared with the requirements stated in Sec. 1. If it appears on the Tnstrument that it lacks one of the requirements, It Is not ‘negotiable and the provisions of the NIL do not govern the instrument. The requirement lacking cannot be supplied by "using a separate instrument in which that requirement appear. WHEN A SUM IS CERTAIN Sec 2. The sum payable isa sum certain within the meaning of although itis to be pai: ithinterest; or {6) Bpstated installments; or (0. By stited instalments, with a provision that, upon default in payment of any installment of of interest, the whole shal become due; or (a) With costs of collection or an attorney’ fe, in case payment shal not be made at maturity EFFECT OF A CONDITIONAL PROMISE OR ORDER A promise or order should not depend on a contingent event. tf ‘sitisgonditional, jt is non-negotiable. ¥ WHEN 1S UNCONDITIONAL ‘Sec 3yAfi unqualified order or promise to pay is unconditional ‘the meaning ofthis Act, though coupied with — (a) An indication of a particular fund out of which reimbursement is to be made, or a particular account to be debited with the amount; or ‘A statement of the transaction which gives rise to the Instrument. But an order or promise to pay out of a Particular fund is not unconditional, ©) WHAT CONSTITUTES DETERMINABLE FUTURE TIME ‘Sec 4. An instrument is payable at a determinable future time, ‘within the meaning of this Act, which is expressed to be payable ) ) ‘Ata fixed period after date or sight; or On oF before 3 fixed or determinable future time specified therein; or On oF at a fixed period after the occurrence of a specified ‘event, which 1s certain to happen, though the time of happening be uncertain ( ‘An instrument payable upon a contingency Is not negotiable, ‘and the happening ofthe event does not cure the defect. Advisers: Atty. Jimene; Heads: rman Balls, Javin Ompoc: Understudes: Nicole Bemardo; Orstian de los Santos; Volunteers Jenifer Crut.Jay 47 Duhaylongsod, Francs Esprit, Jon in, Diane lipansWhen some other act is Required other than Payment of ‘Money in an instrument ‘Sec’. An instrument which contains an order or promise to o any act in addition to the payment of money is not regotiable. But the negotiable character of an instrument ‘otherwise negotiable is not affected by a provision which: (@) Authorizes the sale of collateral securities in case the instrument be not paid at maturity; or (b) Authorizes a confession of judgment if the instrument be ‘ot pald at maturity; or (4) Waives the benefit of any low intended for the advantage ‘or protection of the obligor; or (@) Gives the holder an election to require something to be done in lieu of payment of money. But nothing in this section shall validate 21 spulation otherwise Weal ro Notes on Section 5: : 1. Limitation on the provision: it cafmot require someth iegal ay 2. There are two kinds of judgments by confession a. cognovitactionem a8 wd“ b._relicta veificatione ares 3. Confessions of judgment in ton are void 3s against public policy. rendered non-acgotsbe. % WWSTANCES. THAT DO. NOT AerEcT WW, VALOTY AMEE 2 NEGOTIABILITY OF AN INSTRUMENT “ey Sec. The vl nd reqtbe career ofan Smet, pot afc by re ct {a} itis not dated; or {b} Does not specify the value given, or that any value has been: given therefor; or (© Does not specify the place where it is drawn or the place wees payaso (d} Bears a seal; or (e) Designates particular kind of current money in which ryron tobe made But nothing in this section shall alter or repeal any statute ‘equiring in certain cases the nature of the consideration to be stated in the instrument. WHEN AN INSTRUMENT IS PAYABLE UPON DEMAND ‘Sec. 7.An instrument is payable on demand: {a} Where itis expressed to be payable on demand, or at sight, of on presentation; or (b} trwhich no time for payment is expressed. Passe CENTRAL BAR es) ea Where an instrument isissued, accepted, or indorsed when ‘overdue, It is, as regards the person so issuing, accepting, or indorsng it, payable on demand. WHEN AN INSTRUMENT IS PAYABLE TO ORDER ‘An instrument is payable to order when It is drawn payable to the order of a specified person or to a specified person or his order. For Whose Order an instrument can be Drawn See. 8. The instrument is payable to order where itis drawn payable tothe order ofa specified person orto him or his order. Iemay be drawn payable to the order of: (2) Apayee whois not maker, drawer, or Grawee; or eo The drawer or maker; or eames of (8 “Teagr more oyeescinty (0) One Stomeo several payee: oF <4 (0) The holder of an office for the time being. Where the instrument is payable to order the payee must be named or otherwise indicated therein with reasonable certainty. ‘Instruments Payable to Bearer ‘Sec. 9. The instrument is payable to bearer: C15) When tts expressed to be so payable; or “{b} - When tis p3 «Tél. When it i payable to the order of a fictitious or non- ble to a person named therein or bearer; oF ceisting son, and such fact was known to the person rant so payable: or (6)_,.en the name of the payee does not purport to be the 2 name of any person; oF (el. When the only or last indorsement isan indorsement in blank INSTANCES WHEN A DATE MAY GE INSERTED IN AN INSTRUMENT Sec. 13. Where an instrument expressed to be payable at a fixed Period after date is issued undated, or where the acceptance of ‘an instrument payable at a fied period after sight is undated, ‘any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly. ‘The Insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted s to be regarded as the true date. Effect When a Date is Inserted in an instrument ‘A nholder may insert the true date of issuance or acceptance, the Insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course. As regards to the holder in due course, the date inserted (even if itis a wrong date) is regarded asthe true date. + "~Adbvisers: Atty Jimenex; Heads: Erman Bais, JavinOmpoc; Understudes: Nolo Barnardo; Christian de los Santos; Vounteers: Jennifer Cruz, Jay 1. Duhaylongsod, Fanci Espirt, Jon ina, Dane pana=», COMMERCIAL LAW REVIEWER SATENEO Deficiencies that do not Affect the Rights of a Subsequent Holder in Due Course 1. Incomplete but delivered instrument (Sec. 14) 2. Complete but undelivered (Sec. 16) 3. Complete and delivered issued without consideration or a consideration consisting of a promise which was nat folfled (Sec 28) Deficiencies/Abnormalities that Affect the Rights of a Holder in Due Course Incomplete and undelivered instrument (Sec. 15) Maker/drawer's signature forged (Sec. 23) ‘+n case the amount of a check has been altered; the drawee TT OPERATIONS 2010 ‘When an instrument is Complete but Undelivered Sec. 16. Every contract on a negotiable instrument is incomplete and revocable until dfivery of the instrument for the purpose of giving effect thereto ‘As between immediate parties, and as regards a remote party ‘other than a holder in due course, the delivery, in order to be ‘effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for 2 special purpose only, and not for the ‘purpose of transferring the property inthe instrument. ‘But where the instrument is in the hands of 2 holder in due bbank has 24 hours to return to the collecting bank. Should thesssss..0UrS, a valid delivery thereof by al parties prior to him so as to awe bank fa to do so the collecting back sab from lability. Republic Bank v. Cour of Appedts, No. 42725 Apri 22, 1991) ‘+The alteration of a serial number of athecks not materi ancl does not entitle the drawee bank which paid it payment. {PNB v. Court of Appeal, Re OES, 1996) 1 Where an isrument wanting thi tgp older has prima facie authority toil vp the Bapks therein. b. Winst be filed up sity in accordance hk Se authority elven and within a time. © Hf negotiated to a holder in due courses valid and etlectl for al purposes a though Na Me pa strictly in accordance with the authority given ani ‘within reasonable time. (Sec, 14) 2. Where only a signature on a blank paper was delivered: a. Ih was delivered by the person making itn order that it may be converted into a negotiable instrument b. The holder has prima facie authority to fillit up as. such for any amount. (See. 14) WHEN AN INSTRUMENT |S INCOMPLETE AND UNDELIVERED Sec. 15. Where an incomplete instrument has not been elivered, it will not, If completed and negotiated without ‘authority, be a valid contract in the hands of any holder, as ‘against any person whose signature was placed theraon before delivery. Note: It isa real defense. It can be interposed against a holder in due course. Detivery is not conclusively presumed where the instrument is incomplete, Defense of the maker is to prove non- cal Se hem fable to hms concusvey presumed. And viteré’the instrument ts no longer in the possession of a arty whese signature appears thereon, a vaid and intentional “6 delivery by him is presumed until the contrary is proved, Riles On Delivery Of Negotiable instruments 1. Dolvery & essential to the validity of any negotiable {pstrument “As between immediate parties or those in like cases, delivery must be with intention of passing ttle , COMMERCIAL LAW REVIEWER NOTE: Neither party is bound to communicate his mere opinion, ‘even upon inquiry, because such opinion would add nothing to the appraisal ofthe application. NOTE: Information as to the nature of interest need not be isclosed except in property insurance, ifthe insured is not the ‘owner. if somebody ts insuring properties of which he ls not the owner, he must disclose why he has insurable interest that ‘would entitle him to insure ft. Waiver of Material Facts: 1. by the terms of the insurance; oF 2. by the neglect to make inquiry as to such facts, where they are distinctly implied In other facts which Information is communicated, ATE ‘Test of Materialty: It is determined not by the event Bit solely by the probable and reasonable influence oie upon the party to whom the communication ise, i forming his ‘estimate of the disadvantages of the contract, or in making his inquires or ining the premiumrate. r= ot © Good faith is no defense,in conceal, Vd Be Cena i no. 9280 et 1993) it + Tne fact that the matter contd il ho a to the couse of death of he becouse ts well sted tat the a need notiie oF te nese he a fale Helo the HE 7 Insurer in forming his estimates of thesis of the proposed insurance poly of In maki aNdeS aq. (Sunlife Assuronce Company of Canada v. Court of ‘Appeals, 245 SCRA 268(1995)) Representation It isa factual statement made by the insured at the time of, of prior to, the isuance of the poly, to eve Information to the insurer and otherwise induce him to enter into the insurance contract. It may be made orally or in writing. may be made at the time of, or before, the issuance of the policy. tt may be atered or withdrawn before the insurance i effected, bt not afterwards. NOTE: A representation cannot qualify an express provision in 2 contract of insurance but it may qualify an implied warranty. A representation as tothe future is to be deemed a promise unless it appears that it was merely @ statement of belief or an ‘expectation that is susceptible to present, actual knowledge. The statement of an erroneous opinion, belief or information, or of an unfutfiled intention, will not avoid the contract of insurance, unless fraudulent. a Advisers: Atty, Jimener; Heads: Erman Baois, avin Ompoc; Understudies: Nealo Bernardo; Cistan de ls Santos; Volunteers: Jennifer Cru, Jay a eT ey kinds of Representation: 1. Afficmative -an affirmation of a fact existing when the contracts begins; or 2. Promissory - a statement by the insured concerning, what isto happen during the term of the insurance. [NOTE:if there is misrepresentation, the inured party is entitled to rescind from the time when the representation becomes false. The right to rescind must be exercised previous to the ‘commencement of an action on the contract (the action referred ‘to's that tocollect a claim on the contract) ‘Concealment ‘Misrepresentation ‘ile insured withholds |The insured makes Information “of matetal | erroneous statements of *{ facts fromthe insurer, | facts with the intent of © inducing. the insurer to enter into the insurance contact Passe for ofthe act | Active form of the act ‘Warranty it isa statement or promise set forth in the policy oF “by reference incorporated therein, the untruth or nom fulfilent of which in any respect, and without reference to whether insurer was in fact prejudiced by such untruth or non- aot importaft & & & 6 futfliment, ‘endef the pbey voiabl by the insure. ~ An agreement contained in the policy or flatly incorporated therein as part thereof whereby itt the insured stipulates that certain facts relating tothe ck are or shall be true or certain act relating to the same subjects have been or shal be done. 2. Implied ~ Warranties that are deemed included in the contrac, although not expressly mentioned. They are found ory in marine insurance. 3. Affirmative - Asserts the existence of 2 fact or condition atthe time itis made; 4. Promissory ~The insured stipulates that certain facts or conditions shall exist or thin shall be done or omitted. Effect of Breach of Warranty: It gives the insurer the right to rescind, except inthe following instances — 1. Loss occurs before the time of performance of the warrenty; 2. The performance becomes unlawful; 3, Performance becomes impossibie. ’ 35 ‘Ouhaylonesod, Francis Esprty, on Una, Diane panaa A 5 Opener —— Part ofthe contract | Golateral inducement ‘Wien on the pole or | Need not be wien id rider or attachment “Generally conclusively presumed tobe material Fality 0 non-fulfiiment operates 2s 9 breach of contract “Should be established to be material falsity fenders the policy oid on the ground. of Fact warranted must be strictly complied with Requires only to be substantially true Other Insurance Clause - This is a clause in the policy that Provides that the policy shall be void if the insured pr ‘2dditional insurance without the consent of the e purpose is to prevent over-insurance and avert the possibilty of a perpetration of fraud. itis waranty that entitles the insurer to rescind in case of breach. The “other insurance cause" may be subject tovaver but the waver must ether be exes ori 0 bE implied from conduct mainly,. doctamust. 58 cleaty indicative of a clear itch tae suBh Hight There must be clear sho our ken about the violation of the cau (Genbal fn ad ure Co i No 1373 1360) ‘Time to Exercise the Right to Rescind: 1. Non-tife Policy ~ Prior to the comi action on the contract 2. fe atey A period of two years from the iter issue or last reinstatement of the policy (Le. Incontestabilty clause). See. 48. Whenever a right to rescind a contract of insurance is given to the insurer by a provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After apotic of life insurance made payable onthe death of the insured shall have been in force during the lifetime of the insured for a period of two years from the dote of Is iste o ts last reinstatement, the insurer cannot prove that the policy Is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation ofthe insured or his agent Requisite of incontestablty Clause: (UP-2YRS) 1. The insurance i a fe insurance policy. 2. tis payable on the death of the insured. 3. thas been in force during the lifetime ofthe insured ‘for at least 2 years from fs date of issue or of its last reinstatement. The period of 2 years may be shortened but it cannot be extended by stipulation. Defenses nat ated by icatestabity Cause: ‘That the person taking the insurance lacked insurable interest as required by laws 2. That the cause of the death of the insured is excepted risks 3. Thatthe premiums have not been paid; ‘4. That the congitions of the policy relating to miltary or naval service have been violated; 5. That the fraud is of a particularly vicious type, wherein: ‘a. The policy was taken In furtherance of 2 scherne to murder the insured; b. The insured instituted another person for the medical examination; and, © The beneficiary feloniously kiled the insured; og, & That the beneficiary failed to furnish proof of death or “Sein to comply with any condition imposed by the policy fterthe loss has happened; oF, a: the action was not brought within the time specified. 2° BOUBLE INSURANCE It exists where the same person is insured by Several insurers separately in respect to same subject and interest. (Sec. 93) It is not prohibited by law but it may be byan “other insurance clause”. When there is double Insurance and over insurance results, the insured can claim i (} case of loss only up to the agreed valuation or up to the full "deste vale fom ary, some or al insurer without prelude AE ie insurers atably apportioning the payments Insured can RS covey tere or aher the es om Sth lsues the sien he haspald. of Double Insurance: (Same RIPS, 2 or more Insurers) The person toured the sae There are two or more insurers insuring separately Thesubect matters the sme: Theoret aured alo the same; The fo pert sured against shew the same, vas Reinsurance is one by which an insurer procures a third person ‘to insure him against loss oF labilty by reason of such original Insurance. (Sec. 95) In every reinsurance contract, the original contract of insurance and the contract of reinsurance are separate and distinct and covered by separate policies. Reinsurance ‘Any Gonittact “by ditch “an. ‘insurer procures a 3 person to | insure’ in| against toss. oF | ability by reason of ah orga Hoectanduate Sr eauen cs Formal written instrument | The original contract of trance athe tot ot ference, oe cre by ‘Souate pons J evidencing the contract of insurance Advisers: Atty. Jimenex; Heads: Erman Balols, avin Ompoc; Understudies: Nkolo Bernardo; Christian de los Santos; Volunters: Jennifer Cruz ay 36 ‘Dahaylongsod, Francis spit, Jon tina, Dlane paraCOMMERCIAL LAW REVIEWER a) OPERATIONS 2010 Effect of Delay of insurer: Ifthe prescribed period for both life and property insurance are not complied with, the beneficiary is, Double insurance Reinsurance {aed to parant ch Tivohes the ~ same” ‘different Interest for the duration of the delay at the rate of interest ae eee 8 ‘twice the legal interest; insurer remains in such] insurer becomes en 2. Attorney's fees and other tigation expenses; capacity insured in relation to 3, Appropriate damages under the Cwil Code like moral ‘newer and exemplary damages when requisites are present. Teka the P| Original aumed has 0 | contract 6 9 parly in | interest in. reinsurance Sec. 63. A condition, stipulation, or agreement in any policy of interest in the 2 | contract insurance, limiting the time for commencing an action sine thereunder to a period of less than one year from the time when Subject of insurance is | Subject of insurance is the cause of action acrues, is void. roperty the original insurers risk aa Gee aT Sea Commencement of Actions: A clause In an insurance policy to leaisent” cf peared, pot nepessany .the effect an action upon the policy by the insured must be 2 within a eectain period is valid and will prevail over the s ‘on imitations of actions. But, ifthe period fixed is nha peer og t less tah die year fromthe time the cause of action accrues, the 1. Loss the yximate cause of whicfi ts the peril insured Last rnimate cnet wis the pert ured Stone ol nthe se, hwere of» poly of 2 Seman oc arfan na greet eee eter ine ee agsinst except where proximete cause ne ote oe ‘after the cause of action accrues. wa pee 4. Lose caused by efforts to “epee fon el, er, the patles may wally apree on a sorter period ered agit ding he cou of ee A tp sce ve css of con scams fom te oa Se mneM een NLT RES Teict ineo seers cae Sen cone 2 ey eam Insurer is Not lable H: 1. Loss by insured’s wilful actor gross negligence rsa 2. Loss due to connivance of the insured; 3. Loss where the excepted perlis the proximate cause. ‘year from the time the cause of action accrues and the insured files a motion for reconsideration upon the initial denial Cf his claim, the period shall commence to un from the denial of the caim, not from the resolution of the motion for reconsideration filed by the insured, otherwise, it can be used by ‘the insured as a scheme or device to waste time until the evidence which may be used against him is destroyed. CLAIMS SETTLEMENT: 1. Ufe insurance a. The proceeds shal be paid immediately upon the maturity of the policy there is such a maturity date. b. If the policy matures by the death of the Insured, within sixty (60) days after presentation of the claim and filing of the proof of the death of the insured. ‘© Action or suit must be brought in proper cases, with 2. Property Insurance ‘Commission or the courts within one year from the denial 2. Proceeds shall be paid within thirty (20) days after ‘ofthe claim, otherwise, the claimant’ right of action shall proof of loss is recelved by the insurer and prescribe. Uacqueline Jimenez Vda. De Gabriel v. CA, GA. ascertainment of the loss or damage is made ‘No. 103883 November 4, 1996) ether by agreement or by arbitration. b. tf'no ascertainment is made within 60 days after receipt of proof of loss, the loss shall be paid within 90 days ‘+ Under 384 of the insurance Code, notice of claim must be filed within six months from the date of accident, ‘otherwise the claim shall be deemed waived, ——4 ‘Advisers: Atty Jimenez; Heads: Eman Balos, Javin Ompoc; Understuies: Nicolo Bernardo; Christan de ls Santos; Volunteers: lenifer Cruz, Jay 37, DDuhaylongsod, Francis Espirit Jon Lina, Dane ipana .+ COMMERCIAL LAW REVIEWER TT OPERATIONS 20/0 ‘Subrogation The right of subrogation is the mode which equity ‘adopts to compel the ultimate payment of a debt by one who in, jstice and good conscience oughit to pay. It is not dependent ‘pon, nor does it grow out of any privity of contract nor upon written assignment of claim. It accrues simply upon payment by ‘the insurance company of the insurance claim. Consequently, ‘the payment made by the insurer to the assured operates as an ‘equitable assignment to the former of all the remedies which the later may have against the obligor. Cee Wien ther Nog of Sabogation: The insured by his own act releases ‘wrongdoer/third person liable forthe loss; the 2. Where the insurer pays the insured for a loss or risk ‘not covered by the policy; 3. Inlife insurance; For recovery of lossin excess of insurance, Implied Warranties in Marine Insurance: 1L That the ship is seaworthy at’ the inception of the insurance; (Sec. 113) That the ship will not deviate from age unless deviation is proper; (Sec. 123,425) >> The the hip wl ong Ga (ance) : Warranty of possession of Sor ins, that the ship will carry the:tqi onto eal of sing suo rauealy or rewraly 5 xleaty eae (See. 120) Presence finsuablintrest, ‘cargo. wal aria 5, Insurable Interest in Marine Insurance: 1. Shipowner a. Over the value of the vessel, (even if chartered and the charterer agreed to pay the shipowner the value of the vessel in case of loss, however, the shipowner can recover onfy the amount not recoverable form the charterer). However, f the ship & hypothecated by bottomry loan, the insurable interest is onty up to the excess of the value ofthe vessel over the loan. b. Over expected freightage. ‘Cargo owner/shipper — Over the cargo and expected profits. Charterer 2. Over the vessel up tothe extent of the amount he fs lable to the shipowner, if the ship is lost or damaged during the voyage. Over his expected profits or freightage if he accepts cargoes from other persons for a fee. Over his own cargo or his client's cargo. 3. —Aekisers: Atty ener; Heads: Erman Bal’, avin Ompor; Understdies: Nicolo Bernardo; Christan de ls Santos; Volunteer: lenifer Cruz, Say Perils of the Ship Not coveted by marine insurahice Damage or losses resulting from: accidents peculiar to | 1. natural and inevitable action of the sea which do not] thesea happen by intervention | 2. ordinary wear and tear ofa ship, ‘of man nor are to be prevented by human prudence or negligent failure of the ship ‘owner to provide the vessel with - proper equipment to ‘convey the cargo under ordinary conditions 3. [a ee con the pat of the master or crew in [Pustiznce ‘of some unlawful or fraudulent purpose without the * onsen owners, andto the prejudice of owner's interest Tis apres covered by the policy. When so covered, proof sid and intgkional act is necessary. No honest error ot {judgment or mere negligence, unless criminally gross, can be barat toan on 2 Goren (or Respondentia A loan in which under any sinagfer, te repaymartcf eum wane ro ium gtipulated, depends upon the safe arrival in port of ich its made or of the price they may receive in ident. tis a loan on bottomry when the security isa ‘Charter Party Contract Contract by virtue of which the owner or the agent of a vessel binds himself to transport merchandise or persons for a fied price. It has also been defined as a contract by virtue of which the owner or the agent of the vessel lets the ‘vessel or some principal part thereof for the transportation of ‘8000S oF persons from one port to another. Concealment in Marine insurance: 1. To constitute concealment, it is sufficient that the insured isin possession of the material fact concealed although he may nat be aware oft. Belief and expectation ofa third person in reference to ‘a material fact {s material and must be disclosed in ‘marine insurance. The rule is different from the general rule where matters of belief, judgment or ‘opinion of third persons (excopt experts) are not material In marine insurance, there are instances when ‘matters, although concealed, will not vitiate the contract but merely exonerates the Insurer from the loss resulting from the risk concealed: + 38 ‘Duhaylongsod, Francis Espiritu, Jon Lina, Dane Upara‘a. National character ofthe insured; 'b. Liability of insured thing to capture or detention; © Liability to setzure from breach of foreign laws of trade; dd. Want of necessary documents; and, Use of false or simuiated papers. Seaworthiness A ship is seaworthy, when reasonably fit 10 perform the service, and to encounter the ordinary perils of the voyage, contemplated by the parties tothe policy. There should bbe due consideration to the nature of the ship, the voyage and the service to be performed. (Sec. 114) WHEN A SHIP SHOULD BE SEAWORTHY: An implied warranty of seaworthiness is complied with I the ship be seaworthy atthe tine ofthe commencement of thers except in the flenings= 1. Time policy ~ When the insu specified length of time, the im complied with unless the commencement of evry voate i undertakes rng that time; 2. Creo poly ~ When the insrane-g ud in which, by the terms of the poy, seine te Z voyage, or established pany of te, 6 0 Be transshipped at an inte ede commencement of each ana ATES 3. Vovore poly Whee leent Boost he voyage are contemplated, at the cotirencees * each portion; 4. When the ship was seaworthy at of the voyage but becomes un: voyage to which an insurance unreasonable delay in repairing the defect exonerat the insurer on ship or shipowner’s interest from lability from any los arising therefrom. made for @ warranty is not Deviation Departure of vessel from course of voyage, or an unreasonable delay in pursuing voyage, or the commencement of an entirely different voyage. (Sec. 123) Deviation is Proper When (Sec. 124): 1. If due to circumstances outside the control of the ‘master or ship owner; 2. if done to comply with a warranty or to avold a peri, ‘whether or not the perilis insured against; 3. If made in good faith, and upon reasonable ground of belief in its necessity to avoid a peril; 4, If made in good faith, for the purpose of saving human life or elieving another distressed vessel KINDS OF LOSSES IN MARINE INSURANCE: 1. Actual total los (Sec. 130) a. Total Destruction; Inrtrievable loss by sinkin by being broke up; Ta OPERATIONS 2010 's seaworthy at the na git © Damage rendering the thing valueless; or 4. Total deprivation of owner of possession of thing. insured. 2. Constructive total loss (Sec. 131 in relation to Sec. 139) 2. Actual loss or more than three-fourths (3/4) of the value of the object; b. Damage reducing value by more than three- fourths (3/4) of the value of the vessel and of cargo; and. & Expenses of shipment exceed three-fourths (3/4) of value of cargo. NOTE: In case of constructive total loss, insured may abandon the goods or vessel to the insurer and claim for whole insured value, or he may, without abandoning vessel, claim for partial actual loss. ment The act of the insured by which, after 2 total fos, he declares the relinguishment to the Interest nthe thing insured. (Sec. 138) L. There must be an actual relinguishment by the person insured of his interest in the thin insured 2. There must be constructive total loss; 3 The abarifonment be neither partial nor conditional; . emust te made within a reasonable time after receipt ‘of reliale information ofthe loss; be factual; bbe made by giving notice thereof to the Insurer ‘whigh may be done orally or in writing: and ‘potice of abandonment must be explicit and must _ef spect the parelar cause ofthe abndonment. eter ‘Simple or Particular Average — Includes all expenses and damages caused to the vessel or cargo which have rot inured to the common benefit of all persons Interested in the vessel or cargo. (Sec. 808, Code of Commerce) 2. General or Gross Average - Includes all the damage and expenses which are deliberately caused in order to save the vessel, its cargo or both, from real and known risks (Sec. 812, Code of Commerce) Right to Freightage: 1. Freightage earned before loss Belongs to the insurer of freightage 2. Froightage earned after loss - Belongs to insurer of ship Cotnsurance Co-insurance is @ form of insurance In which a petson 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 Advisers: Aty. Jimenex; Heads: Erman Balls, lavin Ompc; Under studies: Nealo Bernardo; Chistian de les Santos; Volunteers: Jennifer Cruz Jay 39) ‘buhaylongsod, Francis Espn, Jon Lina, Dine panaas OPERATIONS 2010 ‘When Co-tnsurance Applies: 1L Insurance taken {5 less than the actual value of the thing insured 2. Lossis partial Fire Insurance Its @ contract of indemnity by which the insurer for a consideration agrees to indemnify the insured against loss ‘of, or damage to, property by fire, but may include loss by lightning, windstorm, tamado or earthquake and other allied ‘sks, when such risks are covered by extension to fie insurance policies or under separate policies. (Sec. 167) Fleny Fie and Hoste Fre: Friendly Fire ~ Fire that burns in a place where itis supposed to burn 2. Hostile Fire — Fire that escapes and burns in, ‘where itis not supposed to be. It may al that started out as a friendly fire ‘original piace or it becomes too, ‘out of control. fire from its NOTE: The insurer is liable for loss or damoge caused tiy histle fire (ire that escapes from the place where jewastnteng burn and ought to be in) and not that caused ecb fea re ™ ‘hich burns ina place where itis intended tq, ca ‘Alteration An alteration is the use of eo from that to which ts Kid by the poly insured, and increasing the risks, entitles erov se contract of fie insurance. “| Effect of an Aheration in the Use oF Condition SthacTNg Insured Form that Limited by the Policy: ‘The insurer may rescind a contract of fire insurance provided the following requisites are present: 1. The use or condition of the thing insured is specially {imited or stipulated in the policy; 2. Such use or condition is altered; 3. The alteration is made without the consent of the incurer; 4, The alteration is made by means within the control of the insured; 5. The alteration increases the risk; and. 6. There must be 2 violation of a material policy provision. Casualty Insurance It is an insurance covering loss or Fabilty arising from accident or mishap, excluding those falling under those types of insurance such as fire, suretyship, fife or marine. (Sec. 174) ‘+ Approvision of the policy which excludes intentional injury thatis controlling. aoe ‘+ Ifthe injuries suffered by the insured clearly resulted from the intentional act of a third person, the insurer is relieved from liabilty a5 stipulated. (Biagtan v. The Insular Ufe Assurance Co.Ltd, GR No. 26194 March 29, 1972) ‘©The terms “accident” and “accidental” as used In Insurance contracts, have not acquired any technical meaning. They are construed by the courts in the ordinary and common aeceptation. ‘* Thus, the terms have been taken to mean that which ‘happens. by chance or fortuitously, withaut intention. or design, which is unexpected, unusual and unforeseen. The terms do not, without qualification, exclude events resulting in damage or loss due to fault, recklessness or negigence of third parties ‘Sethe concept Is not necessarily synonymous with “no fault, it may be utiized simply to distinguish intentional ous actsifrom negligent or careless acts of man. (Pan Malayan Insurance Corp. v. CA, GR No. 81026 April 3, 1990), Suretyship It is an agreement whereby one undertakes to ‘anigwet, under specified terms and conditions, for the debt, defadlt or riscarriage of another in favor of a third party. (Sec. 175) Property Insurance ‘Agj accessory contract ieipal contract in seit | the surety, principal | Insurer and insured ‘or obligor, and editor or oblige eee More of a ciedit | Generally» contract oF aécommodstion with the | indemnity surety assuming primary abit The surety iS entitled to | No night of recovery for reimbursement from the | the loss the insurer may principal and his guarantors | sustain except when the for the loss & may suffer | insurer Is entitled to under the contract subrogation CRcoplance of the Oblge & Foes not | aed | Tie aed ‘acceptance | of ce party Life insurance Life Insurance Is an insurance on human fife, Insurance appertaining thereto or connected therewith may be payable: (1) On the desth of the insured, (2) On his surviving a speciied period, and (3) Otherwise, contingently on the continuance or cessation of life (b and c refer to endowment or annutties) (Sec. 179-180) Advisers: Atty. menes; Heads: Erman BalosJavin Ompoc; Unterstules: Nicolo Bernardo; Christian de ls Santos; Volunteers: Jenifer Cruz, Jay 4g, DDuhaylongsod, Francis Esp, Jon Lina, lane pana, COMMERCIAL LAW REVIEWER TT OPERATIONS 2010 KINDS OF LIFE INSURANCE: Whole Life or Ordinary Policies - the insured agrees to pay annual, semi-annual or; 2. Quarterly premiums while he lives. The insurer agrees to pay the face value of the policy upon the death of ‘the insured. 3. Limited Payment Life Policy - premiums paid only for a specified period of years. 4. Term Policy - insurers lability arises only upon the », COMMERCIAL LAW REVIEWER Jurisprudence on Bil of Lading: (Magellan Bf. Marketing Corp vs. 203 SCRA 20, August 22, 1993) ‘Abil of lading, when property executed and delivered 10.2 shipper, is evidence thatthe carrier received the ‘goods described therein for shipment. ‘Acceptance of bil of lading without dissent raises the presumption tht all terms therein were brought to the knowiedge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is stopped {rom denying that he assented to such terms ‘Abill of fading isan actionable document, which must, be properly pleaded, and the genuiness and due e@ecution thereof are deemed admitted unless spectically denied by the adverse party. Proof in Absence of Bil of Lading stall be determined by legal proofs contracting parties may present in provisions established in this Code’ ‘orcorfter: Delivery The cartier must deliver the goods jn the ‘quantity in which they were recei lading. Time to Deliver 1. When no petied fixed: carrier must forward goo i the first shipment of same or similar goods. When period fixe: carrer must gelver goods! time fixed 2 LUnbilty of Carrier when there is delay in delivery 1. Indemnity stipulated inthe bil of lading 2. If nat stipulation, damages due to delay which may not ‘exceed the current price of the goods on the day and place of destination Ry comet 3, Special damages, like unrealized profit, if carrier foresaw or had notice of circumstances leading to the probable occurrence of such damage. 4. full value of goods, if consignee should exercise abandonment of the goods by advising carrier accordingly prior to arrival at destination. Partial/Defective Delivery 1. In case of partial delivery, consignee may refuse to recelve those delivered if they cannot be used independently of those not delivered. If the goods delivered were rendered useless for sale ‘or consumption, consignee may refuse to receive. If the goods delivered are damaged to such an extent that their value is diminished, carrier must pay the difference in value as judged by experts. TT OPERATIONS 2010 wale {nthe first 2 cases, consignee may exercise abandonment and be entitled to the fullvalue of the goods. Claims on Account of Damage to the Goods Transported: 1. If the damage is apparent from the exterior of the package, the claim must be made upon receipt of the package. f the damage cannot be known from the exterior, the claim must be made within 24 hours following the receipt ofthe merchandise. = A longer period may be stipulated but not a shorter one. ‘After the periods have elapsed, or after the transportation charges have been’ paid, no claim whatsoever shall be admitted against the cartier with ‘regard to the condition in which the goods transported were delivered. i ks a condition precedent to right of action, which be filed within 4 year from delivery of goods or denial of claim. ‘Art. 349. A contract of transportation overland or waterways of ‘any kind shall be considered commercial: ‘when its object is merchandise or any commercial effects giwhen, no nfstter what its object may be, the carrier is a * techn shabu engaged in tonsportatin forthe iver Mcenses shall be issued by the Coletor of 35 to vessels engaged in the business of towing or carrying ‘of articles or passengers in the bays, harbors, rivers and inland ‘waters navigable form the sea To be eligible for such license, a vessel must be: 1. buittin the Philippines 2. owned by citizens of the Philippines or domestic corporations 75% of whose corporate capital belongs to Cctizens ofthe Philippines. (Sec. 914, RA 1937) Exemption: The following vessels are not required to procure ‘such licenses: vessels of 3 tons net or less; yachts, launches, and ‘other crafts used exclusively for pleasure and recreation; ship's boats and launches bearing the name and home port of the vessel plainly marked thereon; and vessels owned by the Government of the Philippines. The exemption of any vessel shall at once cease if it engages in the business of transporting ‘cargo or passengers, for hice. Note: A contract of towage is not a contract of carriage but 2 contract forthe hire of services. + “—Adbviers Atty Jimenes; Heads: Erman Bais, Savin Ompoc; Understudies: Nolo Bamnardo; Christian de los Santos: Volunteers: lenafer Cruz, Jay. 46 ‘Ouhavlongsod, Francis Espn, Jon Una, Diane UparaCe COMMERCIAL LAW REVIEWER ‘Art. 350. The shipper as well as the carrer of merchandise of effects may mutually demand of each other the issue ofa bil of {aging in which there shall be stated: 1. the name, surname, and domicile ofthe shipper. 2. the name, surname, and domicile of the carier. 3. the name, sumame and domicile of the person to ‘whom or to whose order the effects are sent, or whether such effects are to be detvered to the bearer of said bit. 4. the description of the effects, with statement of their kind, weight, and the exterior marks or signs of the packages containing the same. the cost of transportation the date on which shipment is made ‘the place of delivery to the carrier the indemnity to be paid by the corer of delay, should there be any agreement i this point. A bill of lading is three-fold in character: 1L It a receipt specifying the quantity, character-and= otha, HE ‘condition ofthe goods received; 2 Its 2 contrac, by which the cartier gare to ire the goods therein described ce there deliver them toa oa 2 ‘terms and conditions specitiet epee oe 3, Itisa document of ile a Note: if the bill of lading was issued to ndauis hl carrier was under a duty NOT to deliver the mentioned nthe bil of acing, exept upon Reesentatin ofthe! 0 bill of lading duly indorsed by the shipper. The Code does not demand, as a necessary requisite i contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and the shipper to mutually demand of each other the delivery of sai bill BILL OF LADING AS EVIDENCE ‘Art. 353. The legal evidence of the contract between the shipper and the carrier shall be the bills of lading, by the contents of which all disputes which may arise with regard to their execution and fulfilment shall be decided, no exceptions being admissible other than falsity and material error in the drafting thereof. After the contract has been complied with, the bill of lading shall be retumed to the carrier who may have issued it, and by virtue of the exchange of this bill for the object transported, the respective obligations and actions shall be considered as cancelled, unless in the same act the claims which the contracting parties desire to reserve are manifested in writing, ‘exception being made of the provisions of Article 366. + at a) OPERATIONS 2010 the place and time of delivery to the consignee... 1m, Sapa In case the consignee cannot return, upon receiving the ‘merchandise, the bill of lading subscribed by the carrier, due to Fs loss or for any other cause, he must give the sald carrier a receipt for the goods delivered, this receipt producing the same effect asthe return ofthe bill of lading. ‘Upon the cartier rests the burden of proof to establish the actual delivery of the merchandise cated for inthe bill of fading, In the absence of a bill of lading, respective claims can be determined by legal proofs or other documents signed by the consignee. Three kinds of stipulations inthe bil of lading limiting carier’s lab: 1. Exempting the carrier from any and al abiity for the loss or damage occasioned by its own negligence. qualified limitation of such laity to. an agreed on. 4 Litng the liability ofthe cartier to an agreed valuation ‘less the shipper deciare a higher value and pays a higher tate of freight. ‘Only the third is valid and enforceable since the frst and second “finds stipulations oe invalid as being contrary to public policy. } INSPECTION OF THE GOODS BY THE CARRIER ‘wellfounded suspicions of the falsity in the ‘declaration ofthe contents of a package, the carrier decides to shall make his investigation in the presence of ‘with the assistance of the shipper or consignee. ‘Should the shipper and consignee who had to be notified do not ‘appear, the examination shall be made before a notary who shall write the memorandum of the result of the examination, for such purposes which may be proper. ‘Should the declaration of the shipper appear to be true, the ‘expenses occasioned by the examination and by the carefut repacking of said package shall be paid the cartier, and, in a contrary case, by the shipper. PERIOD TO DELIVER GOODS WHEN NOT STIPULATED ‘Art. 358. Should there be no period of time previously fixed for the delivery of the goods, the carrier shall be under the ‘obligation to forward them with the first shipment of the same ‘or similar merchandise he may make to the point where he must deliver ther, and should he not do so, the damages occasioned by the delay shall be suffered by him. Advisers: Atty Jimenez; Heads Erman Balois, tain Ompoc; Understuis: Neolo Bernard; Chistian de fos Santas; Volunteers: Jennifer Cruz, RY 47 Duhaylongsod, Francis Espirt, Jon Lina, Dane Lipana