MANILA LAW COLLEGE COMMERCIAL LAW REVIEW COURSE SYLLABUS 2nd Semester 2019-2020 Atty. Danilo C. Barde, LLB, LLM COURSE DESCRIPTION: Mercantile law is a body of law that deals with customs and practices of local and international commerce. It deals with all business transactions and covers agreements, contracts, copyrights, franchising, insurance, licensing, patents, shipping and transport, trademarks. CREDIT: 5 UNITS METHOD OF INSTRUCTION: Every meeting the students will be called to recite within the assigned topic and cases, and the professor shall amplify/supplement what has been recited by the students. All cases assigned must be read in the original and the students called to recite are expected to explain the same. Short quizzes will be given. REFERENCE BOOKS: 1, Reviewer on Commercial Law by Atty. Jose Sundiang, Sr. and Atty. Timoteo B. Aquino 2. Commercial Law Review by Cesar L. Villanueva COURSE OUTLINE: I. CORPORATION LAW (Provisions of BP 68, not affected by RA 11232) A. General Principles 1. Nationality of corporations a. Place of incorporation test b. Control test c. Grandfather rule 2. Doctrine of separate juridical personality 3. Doctrine of piercing the corporate veil . Stock vs. non-stock corporations De facto corporations and corporations by estoppel . Board of Directors and Trustees 1. Basic principles a. Doctrine of centralized management b. Business judgment rule 2. Duties, liabilities, and responsibility for unlawful acts E. Powers of corporations 1. How powers are exercised 2. Ultra vires doctrine 3. Trust fund doctrine F. Stockholders and Members 1, Doctrine of equality of shares 2. Proprietary rights a. Right to dividends b. Right to inspect vow 1]c. Pre-emptive right d. Right of first refusal 3. Intra-corporate disputes a, Concept b. Individual vs. representative vs. derivative suits G. Foreign Corporations 1. What constitutes “doing busines: 2. Personality to sue and suability H. Mergers and Consolidations 1. Concept 2. Effects and limitations Il. NEGOTIABLE INSTRUMENTS LAW (Act No. 2031) A. Negotiable Instrument B. Requisites of negotiability 1. Meaning of Negotiation 2. Determination of Negotiability of an instrument C. Governing Law 1, Code of Commerce 2. The New Civil Code 3. Applicability of the NIL D. Functions of a Negotiable Instrument 1. It operates as a substitute for money 2. It is a means of creating and transferring credit 3. It facilitates the sale of goods 4. It increases the purchasing medium in circulation E. Two Important Features of a Negotiable Instrument 1. Negotiability 2. Accumulation of Secondary Contracts F. Kinds of Negotiable Instruments 1. Bill of Exchange 2. Promissory Note 3. Kinds of bill of exchange a. Draft b. Inland and Foreign Bill c. Time Draft d. Sight or Demand Draft e. Trade Acceptance f, Bankers Acceptance g. Check 4. Kinds of Promissory Notes a. Certificate of Deposit b, Bonds c. Debenture 5. Instances when a bill of exchange may be treated as a promissory note by the Holder 6. Negotiable Promissory Note vs. Negotiable bill of exchange a. Bill of Exchange vs. Check 7. Are the following Commercial papers negotiable instruments? a. A crossed check b. A trade acceptance c. A money order d. A warehouse receipt e. Pawn Ticket f. Treasury Warrant g. Bill of Lading h, Trust Receipt 2131 G. Persons Involved . Maker Payee . Drawer . Drawee . Acceptor . Holder . Referee in case of need NOMsONE H. Distinctions between Negotiable instruments and Non- negotiable Instruments I. Requisites 1. Distinguish Negotiability and Assignability of Negotiability 1. In writing and signed by the Maker or Drawer 2, It must contain an unconditional promise or order to pay a sum certain in money 3. Payable in sum certain in money 4. Payable on demand or at a fixed or determinable future time 5. Payable to order or Bearer 6. Identification of the Drawee J. Omissions and Provisions that do not affect Negotiability 1, When date may be inserted by holder K. Transfer and Negotiation L. Holders : Issuance . Negotiation . Bearer Instrument always a bearer Instrument - Incomplete Negotiation of order instrument . Indorsement a, Where indorsement should be placed b. Kinds of Indorsement i, Blank indorsement ii, Special indorsement iii, Qualified indorsement iv. Conditional indorsement v. Restrictive indorsement c. Negotiation by Prior Party aQsone . Holder in Due Course Demand Instruments . Notice of Infirmity and Defect . Holder for Value . Rights of Holder in due Course Qawde M. Real and Personal Defenses - Forgery; Effects of Forgery . Incomplete but delivered Instrument . Complete but undelivered instrument - Incomplete undelivered instrument . Undated Instrument . Material Alteration. Effects Fraud . Failure, Absence of or Illicit Consideration . Minority or Incapacity or Want of Authority 10. Prescription PONANAWNE N. Persons with Secondary and Primary Liability 1. Liabilities of maker, drawer and acceptor 2. Warranties of qualified endorser; general endorser 3. Accommodation Party 0. How to Enforce Liability 1. Primarily Liable 2. Secondary Liable 3. Rules on Presentment for Payment 4. Presentment for Acceptance5. Acceptance 6. Notice of Dishonor 7. Acceptance for Honor 8. Payment for Honor P. BILLS IN SET 1. Bill in Set 2. Purpose 3. Liability of Acceptor 4. Obligations of Transferor Q. Discharge 1. How may a negotiable instrument be discharged? 2. Payment in Due Course 3. When is a person secondarily liable discharged? R. Checks 1. Meaning of Check. When Check operates as an assignment 2. Kinds of Check a. Cashier’s Check b. Certified Check c. Crossed Check d. Memorandum Check e, Traveler’s Check 3. Stopping Payment Ill. INSURANCE (PD 612, as amended by RA 10607) A. Basic concepts . Contract of Insurance . Contract of Suretyship . What may be insured . Insurable interest . Double insurance and overinsurance . Reinsurance No fault, suicide, and incontestability clauses B. Characteristics C. Elements of Insurance 1, Existence of an insurable interest 2. Risk of loss 3. Assumption of risks 4. Scheme to distribute losses 5. Payment of premiums D. Perfection of the insurance contract 1. Cover notes 2. The policy a. Policy of insurance b. Basic contents of policy c. Rider d. Cancellation of non-life policy e. Kinds of policies E. Types of Insurance Contracts 1. Life Insura a. Indi b. Group Life c. Industrial Life 2. Non-life insurance a. Marine b. Fire c. Casualty 3. Contract of Suretyship NOs WNE 4l5I F, Parties to Insurance Contract 1, Insurer 2. Insured 3. Beneficiary G. Insurable interest 1. Life Insurance 2. Insurable interest in property 3. Insurable interest of mortgagor and mortgagee over mortgaged property a. Mortgagor b. Mortgagee c. Standard or union mortgage clause vs. open or loss payable mortgage clause H. Risks Insured Against I. Premium J. Transfer of Policy L. Incontestability Clause 1. Requisites 2. Defenses that are not barred by incontestability clause. M. Double Insurance and Reinsurance N. Loss and Claims Settlement O. Period of Prescription P. Right of Subrogation Q. Marine Insurance 1. Coverage 2. Implied warranties in marine insurance 3. Insurable interest in marine insurance a. Ship owner b. Cargo owner/shipper ¢. Charterer Perils of the sea vs. Perils of the ship . Concealment 6. General average loss vs. Particular average loss 7. Co-insurance clause 8. Seaworthiness 9. Deviation 10. Loss and abandonment a. Actual total loss b. Constructive total loss c. Abandonment R. Fire Insurance 1, Extent of liability of an insurer under an open policy 2. Alteration 3. Friendly Fire vs. Hostile Fire S. Casualty Insurance 1. Intentional vs. Accidental 2. Third-Party Liability T. Compulsory Motor Vehicle Liability Insurance (CTPL) 1. Mandatory insurance 2. Purpose of compulsory third-party liability insurance 3. No Fault Clause 4. From whom should the injured recover 5. Time to file and process claim under CTPL 6. May a third person sue the insurer directly? 7. Other rules concerning motor vehicles a. Authorized Driver Clause b. Theft ClauseU. Life Insurance 1, Effect of death of insured through suicide 2. Kinds of Life Insurance a. Ordinary life, General life or Old line policy b. Limited payment policy c. Endowment policy d. Term insurance ¢. Industrial life IV. INTELLECTUAL PROPERTY CODE (RA 8293) A. Patents 1. Patentable vs. non-patentable inventions 2. Ownership of a patent 3. Grounds for cancellation of a patent 4, Remedy of the true and actual inventor 5. Rights conferred by a patent 6. Limitations on patent rights 7. Patent infringement B. Trademarks 1. Marks vs. collective marks vs. trade names 2. Acquisition of ownership a. Concept of actual use b. Effect of registration 3. Non-registrable marks 4, Well-known marks 5. Priority right 6. Rights conferred by registration 7. Cancellation of registration 8, Trademark infringement 9. Unfair competition C. Copyrights 1. Copyrightable works 2. Non-copyrightable works 3. Rights conferred by copyright 4, Ownership of a copyright 5. Limitations on copyright 6. Doctrine of fair use 7. Copyright infringement V. SECURITIES REGULATION CODE (RA 8799) 6] A. What are Securities? 1. What are Investment Contracts? 2. What are Derivatives? 3. What are Commodity Futures Contracts? 4. What is a Commodity? B. Registration requirement; Exemptions C. Prohibitions on fraud, manipulation, and insider trading 1. Define “put”, “call” and “straddle”. What is the rule regarding the three practices in the SRC? 2. Short Sale 3. Who is an insider? a. Duties of an insider b. Presumption c. Material fact or information d. Unlawful acts involving insiders in connection with tender offer ¢. Short swing profitsD. Protection of investors 1. Tender offer rule 2. Rules on proxy solicitation 3. Disclosure rule 4. Margin Trading VI. BANKING LAWS A. The New Central Bank Act (RA 7653, as amended by RA 11211) 1. Handling of banks in distress a, Conservatorship b. Closure c. Receivership d. Liquidation B. Secrecy of Bank Deposits (RA 1405, as amended, and RA 6426, as amended) 1. Prohibited acts 2. Exceptions from coverage 3. Garnishment of deposits, including foreign deposits C. General Banking Law of 2000 (RA 8791) 1, Nature of bank funds and bank deposits 2. Diligence required of banks 3. Prohibited transactions by bank directors and officers D. Philippine Deposit Insurance Corporation Act (RA 3591, as amended) 1, Maximum deposit insurance coverage 2. Meaning of insured deposit 3. Splitting of deposits E. Truth in Lending Act (R.A. No. 3765) 1. Disclosure requirement 2. Definitions a. Credit b. Finance charge c. Creditor VI. ANTI-MONEY LAUNDERING ACT (RA 9160, as amended) A. Covered institutions and their obligations B. Covered and suspicious transactions C. Safe harbor provision D. When is money laundering committed (including predicate crimes) E. Authority to inquire into bank deposits P, Freezing and forfeiture VIII. CONSUMER ACT (R.A. No. 7394) IX. HUMAN SECURITY ACT OF 2007 A. Examination and Sequestration of Deposits B. The Terrorism Financing and Prevention and Suppression Act 1, Financing Terrorism 2. Authority of AMLC to investigate 3. Authority to Freeze X, ELECTRONIC COMMERCE ACT (RA 8792) A. Legal recognition of electronic data messages, documents, and signatures B. Presumption relating to electronic signatures C. Admissibility and evidential weight of electronic data message or electronic document D. Obligation of confidentiality 7\XI. DATA PRIVACY ACT (RA 10173) A. Personal vs. sensitive personal information B. Scope C. Processing of personal information D. Rights of data subject XII. LETTERS OF CREDIT AND TRUST RECEIPTS A. Basic concepts 1. Doctrine of independence 2. Fraud exception principle 3. Doctrine of strict compliance 4. Warehouseman’s lien B. Rights and obligations of parties 1. Entruster/entrustee 2. Applicant/banks/beneficiary C. Remedies available XIII. BULK SALES LAW (Act. No. 3952) A. When is sale considered a sale in Bulk? B, Purpose of the Bulk Sales Law C. Formalities Required by the Bulk Sales Law D. Cases when the Formalities/ Requirements need not be complied with. E. Effects of the violation of Bulk Sales Law XIV. FINANCIAL REHABILITATION, INSOLVENCY, LIQUIDATION and SUSPENSION OF PAYMENTS (RA 10142, FR Rules [A.M. No. 12-12-11-SC], and FLSP Rules [A.M. No.15-04-06-SC]) A. Basic concepts 1. Rehabilitation 2. Insolvent 3. Liquidation 4, Suspension of payments B. Modes of rehabilitation 1. Court-supervised rehabilitation a. Voluntary vs. involuntary b. Commencement order (including stay order) c. Rehabilitation receiver and management committee d. Determination of claims ¢. Rehabilitation plan i, Concept of feasibility ii. Material financial commitments iii. Liquidation analysis f. Creditor approval and confirmation g. Failure of rehabilitation 2, Pre-negotiated rehabilitation a. How initiated b. Period and effect of approval 3. Out-of-Court or Informal Restructuring Agreement or Rehabilitation Plan a. Minimum requirements b. Standstill period c, Cram down effect C. Liquidation 1, Voluntary liquidation vs, involuntary liquidation vs. conversion 2. Procedure a. Liquidation order; effects 3. Determination of claimsD. Suspension of Payments; Suspension of Payment Order E, Remedies 1. Motion for reconsideration 2. Petition for certiorari XV. TRANSPORTATION LAW A. Common carriers 1. Concept 2. Common carrier vs. private carrier 3. Diligence required B. Obligations and liabilities 1, Vigilance over goods 2. Safety of passengers XVI. RECTO LAW (Art.1484, NCC) XVII. CHATTEL MORTGAGE LAW (Act. No. 1508) A. Chattel Mortgage . Subject matter . After-acquired properties . After-incurred obligations . Formalities a. Registration b. Affidavit of good faith 6. Right of redemption 7. Deficiency after foreclosure Apor 91