WEEK 1

a. Discuss In re: Joaquin Borromeo, 241 SCRA 405, A.M. No. 93-7-696-0, 21 February 1995
“Little learning is a dangerous thing; and that he who acts as his own lawyer has a fool for a client.”
➢ Borromeo knows that he’s not a lawyer nor has he mastered the law, but he still chose to represent himself
through which their collateral properties were forfeited, and worse, mock professionals in the field.
➢ It is better to have a lawyer, someone who has studied the law more intensively to not cause more troubles like
having the properties forfeited or even orate offensive statements.
➢ Clearly, it is his pride as a non-lawyer who have little learning of the law that mattered to him, and so we should
avoid becoming like Borromeo.
➢ If you know that you have not mastered the complexities of law and you want to be a lawyer, then study very
well. If you ever need a lawyer someday, and you did not pursue that profession, then hire one. Borromeo was a
fool for being his own client, considering that he has not studied law enough.

b. Discuss Department of Education Culture and Sports v. San Diego, G.R. No. 89572, 21 December 1989.
“We cannot have a society of square pegs in round holes”
“We may be swamped with mediocrity not because we are lacking in intelligence, but because we are a nation of
misfits.”
➢ We dream to make it come true. To do so, we must give our 99% and make the effort to hone our abilities to
reach the capacity of doing everything that is necessary to achieve our dream. But if the remaining 1%, which
are things beyond our control, prevails, then we go back to the 99% and try our best to accept the reality.
➢ If not, we will be “swamped with mediocrity” which will only be a menace to other people. The field of medicine
is delicate because what’s at stake is literally one’s life. To entrust it to someone who has not proven his capacity
is negligence which the government, or anyone, must never tolerate.
➢ Our purpose in life may be beyond what we have imagined it to be – like saving patients. Those who did not
become doctors nor lawyers must realize that they could be someone else and that they will matter just the
same.

c. What is law as defined by St. Thomas Aquinas?

➢ Ordinance of reason
o Must be reasonable; product of careful and serious deliberation
o Intellectually made
o Ex. Law against driving under the influence of alcohol is based on concrete findings that alcohol
consumption causes loss of control and coordination.
➢ Promulgated by competent authority
o If laws are not prescribed, people could not be expected to observe them.
o Lawmaking Body: Legislative Branch (House of Representatives/Senate)
o Authority to make law is conferred upon those duly chosen by the sovereign will of the people. In
consonance with Sec. 1, Article 2 of Constitution “sovereignty resides in the people and all government
authority emanates from them”.
➢ For the common good

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 o “Salus Populi Est Suprema Lex” – The welfare of the people shall be the supreme law.
o Should apply equally to all people, regardless of religion, political stance, and status.
o Not necessarily beneficial to EVERYONE
o We avoid the animal nature to manifest – Survival of the fittest
o Has direct and indirect benefits

d. What are the three inherent powers of the state? Discuss each.
Who grants the inherent powers of the State?
➢ Sovereign people expressed through the Constitution.
Why is it essential?
➢ Once a state is established, inherent powers exist even if it is not granted by the constitution yet.
Is it essential to be in the constitution?
➢ NO. They are inherent. Constitution will only limit the enforcement.
➢ Police Power
o Promote public welfare by regulating and restraining the liberty and property of people
▪ Lockdown, quarantine is within police power
o Needs lawful subject and lawful means
o Not the power of the policemen literally
o How is it exercised? Through legislation and enforcement.
o How do you protect the people? Make laws.
o Constitutional Limitations: Equal protection and due process.
➢ , Power of Eminent Domain
o Power to take private property for public use upon payment of just compensation
➢ Power of Taxation
o Enforcement of proportional contribution from people, property, and exercise of a right to raise revenue
for defraying necessary government expense

e. Discuss the hierarchy of laws. (Article 7, Republic Act No. 386 or the Civil Code of the Philippines)1
ARTICLE 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by
disuse, or custom or practice to the contrary.

When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern.

Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the
Constitution.

➢ 1987 Philippine Constitution

o Highest, supreme law of the land
o Fundamental powers of the government are established, limited, and defined.
➢ Statutes (Legislative Enactments/International Laws)

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 o By Doctrine of Incorporation, rules of international law are given equal standing as legislative
enactments. In Int’l law, senate concurrent is not needed as long as we are signatory to the
conventions/treaties.
o IMPLEMENTING RULES AND REGULATIONS (IRR) – issuances from executive department, not from
congress, why? Because Executive Branch is tasked to implement the law.
o Is what is on the RA lacking? YES. It does not provide the details and specifications.
➢ Administrative Rules and Regulations
o Executive Orders, Administrative Orders, and Proclamations
o Promulgated by the president, in accordance with Article VII, Sec 10 of the Constitution
o Has the power and effect of law
Note: Today, president cannot have lawmaking powers during martial law.
MARTIAL LAW: Still in the constitution today because it is still essential since it is for emergency purposes.
➢ Ordinances
o Only effective within their territorial limits
o LGUs are also created by congress – via statute as well

f. What are the three branches of government? Discuss each.

➢ We have a presidential form of government – checks & balances and separation of powers is essential
o Checks and Balances
- Principle of government wherein different branches of the government do not interfere with each
other but share powers
- In the case of Francisco et al. v House of Representatives et al., G.R. No. 160261, November 10,
2003 (Supreme Court of the Philippines, 2003), the Supreme Court emphasized the doctrine of
separation of powers is clearly related with the principles of checks and balances.
- When the doctrine of separation of powers is practiced well, it does not mean that the system
of checks and balances is also observed. As in the Philippine case, the doctrine of the separation
GINAN NAof powers is practiced, however, the system of checks and balances is ill-practiced
because some constitutional and legal structures designed to check and balance the President
are subverted (Rose-Ackerman et al., 2010). It happens when the president or any branch of
government for that matter justifies its unilateral action by invoking the principle of separation
of powers but when checked of its action, it still invokes the same principle.

o Separation of Powers
- Governmental power cannot be possessed by one person or body only to prevent the
concentration of power or group of persons as this may lead to its abuse and to tyranny.
- This authority needs the following to ensure a balance of government power: an intellect to
direct it (legislative power), a will that is active and a resolve to make it work (executive power),
and a conscience that judges and punishes what is bad (judicial power) (Ople, 1998).

Executive Department Legislative Department Judiciary Department

➢ May veto a bill ➢ May impeach the president ➢ May render a law
➢ President appoints SC & lower ➢ Approves budget of Executive unconstitutional - Power of
court judges, subject to ➢ Make laws judicial review
confirmation by the Commission
on Appointment, further limited
by the JBC which sends a list of
nominees

g. Read the Article VII of the 1987 Philippine Constitution

Section 1. The executive power shall be vested in the President of the Philippines.

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Section 2. No person may be elected President unless he is a natural-born citizen of the Philippines, a registered voter,
able to read and write, at least forty years of age on the day of the election, and a resident of the Philippines for at least
ten years immediately preceding such election.

➢ Qualifications of a President:
o Natural-born Filipino
o Registered voter
o Able to read and write
o At least 40 yrs old on the day of the election
o Resident of the PH for at least 10 years

Section 3. There shall be a Vice-President who shall have the same qualifications and term of office and be elected with,
and in the same manner, as the President. He may be removed from office in the same manner as the President.

The Vice-President may be appointed as a Member of the Cabinet. Such appointment requires no confirmation.

Section 4. The President and the Vice-President shall be elected by direct vote of the people for a term of six years
which shall begin at noon on the thirtieth day of June next following the day of the election and shall end at noon of the
same date, six years thereafter. The President shall not be eligible for any re-election. No person who has succeeded as
President and has served as such for more than four years shall be qualified for election to the same office at any time.

No Vice-President shall serve for more than two successive terms. Voluntary renunciation of the office for any length of
time shall not be considered as an interruption in the continuity of the service for the full term for which he was elected.

Unless otherwise provided by law, the regular election for President and Vice-President shall be held on the second
Monday of May.

The returns of every election for President and Vice-President, duly certified by the board of canvassers of each province
or city, shall be transmitted to the Congress, directed to the President of the Senate. Upon receipt of the certificates of
canvass, the President of the Senate shall, not later than thirty days after the day of the election, open all the certificates
in the presence of the Senate and the House of Representatives in joint public session, and the Congress, upon
determination of the authenticity and due execution thereof in the manner provided by law, canvass the votes.

The person having the highest number of votes shall be proclaimed elected, but in case two or more shall have an equal
and highest number of votes, one of them shall forthwith be chosen by the vote of a majority of all the Members of both
Houses of the Congress, voting separately.

The Congress shall promulgate its rules for the canvassing of the certificates.

The Supreme Court, sitting en banc, shall be the sole judge of all contests relating to the election, returns, and
qualifications of the President or Vice-President, and may promulgate its rules for the purpose.

Section 5. Before they enter on the execution of their office, the President, the Vice-President, or the Acting President
shall take the following oath or affirmation:

“I do solemnly swear [or affirm] that I will faithfully and conscientiously fulfill my duties as President [or Vice-President or
Acting President] of the Philippines, preserve and defend its Constitution, execute its laws, do justice to every man, and
consecrate myself to the service of the Nation. So help me God.” [In case of affirmation, last sentence will be omitted].

Section 6. The President shall have an official residence. The salaries of the President and Vice-President shall be
determined by law and shall not be decreased during their tenure. No increase in said compensation shall take effect
until after the expiration of the term of the incumbent during which such increase was approved. They shall not receive
during their tenure any other emolument from the Government or any other source.

Section 7. The President-elect and the Vice President-elect shall assume office at the beginning of their terms.

If the President-elect fails to qualify, the Vice President-elect shall act as President until the President-elect shall have
qualified.

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If a President shall not have been chosen, the Vice President-elect shall act as President until a President shall have been
chosen and qualified.

If at the beginning of the term of the President, the President-elect shall have died or shall have become permanently
disabled, the Vice President-elect shall become President.

Where no President and Vice-President shall have been chosen or shall have qualified, or where both shall have died or
become permanently disabled, the President of the Senate or, in case of his inability, the Speaker of the House of
Representatives, shall act as President until a President or a Vice-President shall have been chosen and qualified.

The Congress shall, by law, provide for the manner in which one who is to act as President shall be selected until a
President or a Vice-President shall have qualified, in case of death, permanent disability, or inability of the officials
mentioned in the next preceding paragraph.

Section 8. In case of death, permanent disability, removal from office, or resignation of the President, the Vice-President
shall become the President to serve the unexpired term. In case of death, permanent disability, removal from office, or
resignation of both the President and Vice-President, the President of the Senate or, in case of his inability, the Speaker
of the House of Representatives, shall then act as President until the President or Vice-President shall have been elected
and qualified.

The Congress shall, by law, provide who shall serve as President in case of death, permanent disability, or resignation of
the Acting President. He shall serve until the President or the Vice-President shall have been elected and qualified, and
be subject to the same restrictions of powers and disqualifications as the Acting President.

Section 9. Whenever there is a vacancy in the Office of the Vice-President during the term for which he was elected, the
President shall nominate a Vice-President from among the Members of the Senate and the House of Representatives
who shall assume office upon confirmation by a majority vote of all the Members of both Houses of the Congress, voting
separately.

Section 10. The Congress shall, at ten o’clock in the morning of the third day after the vacancy in the offices of the
President and Vice-President occurs, convene in accordance with its rules without need of a call and within seven days,
enact a law calling for a special election to elect a President and a Vice-President to be held not earlier than forty-five
days nor later than sixty days from the time of such call. The bill calling such special election shall be deemed certified
under paragraph 2, Section 26, Article VI of this Constitution and shall become law upon its approval on third reading by
the Congress. Appropriations for the special election shall be charged against any current appropriations and shall be
exempt from the requirements of paragraph 4, Section 25, Article VI of this Constitution. The convening of the Congress
cannot be suspended nor the special election postponed. No special election shall be called if the vacancy occurs within
eighteen months before the date of the next presidential election.

Section 11. Whenever the President transmits to the President of the Senate and the Speaker of the House of
Representatives his written declaration that he is unable to discharge the powers and duties of his office, and until he
transmits to them a written declaration to the contrary, such powers and duties shall be discharged by the Vice-
President as Acting President.

Whenever a majority of all the Members of the Cabinet transmit to the President of the Senate and to the Speaker of
the House of Representatives their written declaration that the President is unable to discharge the powers and duties
of his office, the Vice-President shall immediately assume the powers and duties of the office as Acting President.

Thereafter, when the President transmits to the President of the Senate and to the Speaker of the House of
Representatives his written declaration that no inability exists, he shall reassume the powers and duties of his office.
Meanwhile, should a majority of all the Members of the Cabinet transmit within five days to the President of the Senate
and to the Speaker of the House of Representatives, their written declaration that the President is unable to discharge
the powers and duties of his office, the Congress shall decide the issue. For that purpose, the Congress shall convene, if
it is not in session, within forty-eight hours, in accordance with its rules and without need of call.

If the Congress, within ten days after receipt of the last written declaration, or, if not in session, within twelve days after
it is required to assemble, determines by a two-thirds vote of both Houses, voting separately, that the President is

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unable to discharge the powers and duties of his office, the Vice-President shall act as President; otherwise, the
President shall continue exercising the powers and duties of his office.

Section 12. In case of serious illness of the President, the public shall be informed of the state of his health. The
members of the Cabinet in charge of national security and foreign relations and the Chief of Staff of the Armed Forces of
the Philippines, shall not be denied access to the President during such illness.

Section 13. The President, Vice-President, the Members of the Cabinet, and their deputies or assistants shall not, unless
otherwise provided in this Constitution, hold any other office or employment during their tenure. They shall not, during
said tenure, directly or indirectly, practice any other profession, participate in any business, or be financially interested
in any contract with, or in any franchise, or special privilege granted by the Government or any subdivision, agency, or
instrumentality thereof, including government-owned or controlled corporations or their subsidiaries. They shall strictly
avoid conflict of interest in the conduct of their office.

The spouse and relatives by consanguinity or affinity within the fourth civil degree of the President shall not, during his
tenure, be appointed as Members of the Constitutional Commissions, or the Office of the Ombudsman, or as
Secretaries, Undersecretaries, chairmen or heads of bureaus or offices, including government-owned or controlled
corporations and their subsidiaries.

Section 14. Appointments extended by an Acting President shall remain effective, unless revoked by the elected
President, within ninety days from his assumption or reassumption of office.

Section 15. Two months immediately before the next presidential elections and up to the end of his term, a President or
Acting President shall not make appointments, except temporary appointments to executive positions when continued
vacancies therein will prejudice public service or endanger public safety.

Section 16. The President shall nominate and, with the consent of the Commission on Appointments, appoint the heads
of the executive departments, ambassadors, other public ministers and consuls, or officers of the armed forces from the
rank of colonel or naval captain, and other officers whose appointments are vested in him in this Constitution. He shall
also appoint all other officers of the Government whose appointments are not otherwise provided for by law, and those
whom he may be authorized by law to appoint. The Congress may, by law, vest the appointment of other officers lower
in rank in the President alone, in the courts, or in the heads of departments, agencies, commissions, or boards.

The President shall have the power to make appointments during the recess of the Congress, whether voluntary or
compulsory, but such appointments shall be effective only until disapproved by the Commission on Appointments or
until the next adjournment of the Congress.

Section 17. The President shall have control of all the executive departments, bureaus, and offices. He shall ensure that
the laws be faithfully executed.

Section 18. The President shall be the Commander-in-Chief of all armed forces of the Philippines and whenever it
becomes necessary, he may call out such armed forces to prevent or suppress lawless violence, invasion or rebellion. In
case of invasion or rebellion, when the public safety requires it, he may, for a period not exceeding sixty days, suspend
the privilege of the writ of habeas corpus or place the Philippines or any part thereof under martial law. Within forty-
eight hours from the proclamation of martial law or the suspension of the privilege of the writ of habeas corpus, the
President shall submit a report in person or in writing to the Congress. The Congress, voting jointly, by a vote of at least a
majority of all its Members in regular or special session, may revoke such proclamation or suspension, which revocation
shall not be set aside by the President. Upon the initiative of the President, the Congress may, in the same manner,
extend such proclamation or suspension for a period to be determined by the Congress, if the invasion or rebellion shall
persist and public safety requires it.

The Congress, if not in session, shall, within twenty-four hours following such proclamation or suspension, convene in
accordance with its rules without need of a call.

The Supreme Court may review, in an appropriate proceeding filed by any citizen, the sufficiency of the factual basis of
the proclamation of martial law or the suspension of the privilege of the writ of habeas corpus or the extension thereof,
and must promulgate its decision thereon within thirty days from its filing.

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A state of martial law does not suspend the operation of the Constitution, nor supplant the functioning of the civil courts
or legislative assemblies, nor authorize the conferment of jurisdiction on military courts and agencies over civilians
where civil courts are able to function, nor automatically suspend the privilege of the writ of habeas corpus.

The suspension of the privilege of the writ of habeas corpus shall apply only to persons judicially charged for rebellion or
offenses inherent in, or directly connected with, invasion.
During the suspension of the privilege of the writ of habeas corpus, any person thus arrested or detained shall be
judicially charged within three days, otherwise he shall be released.

Section 19. Except in cases of impeachment, or as otherwise provided in this Constitution, the President may grant
reprieves, commutations, and pardons, and remit fines and forfeitures, after conviction by final judgment.

He shall also have the power to grant amnesty with the concurrence of a majority of all the Members of the Congress.

Section 20. The President may contract or guarantee foreign loans on behalf of the Republic of the Philippines with the
prior concurrence of the Monetary Board, and subject to such limitations as may be provided by law. The Monetary
Board shall, within thirty days from the end of every quarter of the calendar year, submit to the Congress a complete
report of its decision on applications for loans to be contracted or guaranteed by the Government or government-
owned and controlled corporations which would have the effect of increasing the foreign debt, and containing other
matters as may be provided by law.

Section 21. No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of
all the Members of the Senate.

Section 22. The President shall submit to the Congress, within thirty days from the opening of every regular session as
the basis of the general appropriations bill, a budget of expenditures and sources of financing, including receipts from
existing and proposed revenue measures.

Section 23. The President shall address the Congress at the opening of its regular session. He may also appear before it
at any other time.

h. Discuss Executive Order No. 292 (Administrative Code of 1987), Book IV, Title X, Chapter 1, Secs. 1 to 4.
Title X
Trade and Industry

Chapter I
General Provisions

SECTION 4. Organizational Structure. — The department shall consist of the offices of the secretary, undersecretaries
and assistant secretaries, national service centers, regional offices, and line corporate agencies and government entities.

i. What are the state policies found in Sec. 1?

SECTION 1. Declaration of Policy. — The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos. It recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investments.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian
reform, through industries that make full and efficient use of human and natural resources, and which are competitive
in both domestic and foreign markets. It shall protect Filipino enterprises against unfair foreign competition and trade
practices.

In pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to
develop. Private enterprises, including corporations, cooperatives, and similar collective organizations shall be
encouraged to broaden the base of their ownership.

The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange
on the basis of equality and reciprocity.

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The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of
trade or unfair competition shall be allowed. The state shall protect consumers from trade malpractices and from
substandard or hazardous products.

j. What is the mandate of the Department of Trade and Industry?

SECTION 2. Mandate. — The Department of Trade and Industry shall be the primary coordinative, promotive, facilitative
and regulatory arm of the Executive Branch of government in the area of trade, industry and investments. It shall
promote and develop an industrialization program effectively controlled by Filipinos and shall act as catalyst for
intensified private sector activity in order to accelerate and sustain economic growth through: (a) comprehensive
industrial growth strategy, (b) a progressive and socially responsible liberalization program, (c) policies designed for the
expansion and diversification of trade, and (d) policies to protect Filipino enterprises against unfair foreign competition
and trade practices.

k. What are the powers and functions of the Department of Trade and Industry?
SECTION 3. Powers and Functions. — The Department of Trade and Industry shall:

(1) Formulate and implement policies, plans and programs relative to the development, expansion, promotion and
regulation of trade, industry, and investments;

(2) Consolidate and coordinate all functions and efforts pertaining to the promotion of exports, diversification and
decentralization of industries, and development of foreign trade;

(3) Encourage and promote the growth and expansion of industries which make full use of human and natural resources
and which are competitive in domestic and foreign markets;

(4) Adopt and implement measures to protect Filipino enterprises against unfair foreign competition and trade
practices;

(5) Provide incentives to broaden the base of ownership of large-scale industrial enterprises and accelerate the
formulation and growth of small and medium-scale enterprises;

(6) Regulate the importation of essential consumer and producer items to maintain their fair
and competitive prices to end-users;

(7) Protect consumers from trade malpractices and from substandard or hazardous products;

(8) Adopt and implement measures to prohibit combinations in restraint of trade and unfair competition;

(9) Develop the capabilities of industry to increase the domestic content of its products and upgrade the quality of
products according to competitive international standards;

(10) Encourage and support the formation of People’s Economic Councils at regional, provincial and municipal levels as
well as other trade, industry and consumer protection institutions or associations;

(11) Upgrade and develop the manufacture of local capital goods and precision machinery components;

(12) Formulate the appropriate mechanics to guide and manage the transfer of appropriate industrial technology in the
country;

(13) Formulate country and product export strategies which will guide the export promotion and development thrusts of
the government; and implement programs and activities geared towards the overseas promotion of Philippine exports in
overseas markets;

(14) Take the primary role in negotiating and reviewing existing international trade agreements, particularly those
affecting commodity quotas limiting existing exports of Philippine products to determine programs for renegotiations of
more favorable terms;

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(15) Administratively adjudicate and impose reasonable fines and penalties for violation of existing trade and industry
laws;

(16) Prepare, for consideration of the Monetary Board, proposed programs in the commercial banking sector for
directing commercial lending facilities towards priority areas of commercial and industrial development, as well as
coordinate government direct funding and financial guarantee programs to achieve trade and industry growth;

(17) Issue subpoena and subpoena duces tecum to compel the attendance of witnesses and the production of the
necessary information, papers and documents which it may deem necessary in the exercise of its powers and functions;

(18) Prescribe and enforce compliance with such rules and regulations as may be necessary to implement the intent and
provisions of this Code, which rules and regulations shall take effect fifteen (15) days following their publication in the
Official Gazette; and

(19) Perform such other functions as may be necessary or incidental in carrying into effect the provisions of this Code
and as may be provided by law.

l. Who heads the Department of Trade and Industry?

➢ Ramon M. Lopez, Secretary
o Has the authority and responsibility for the exercise of the DTI mandate
o Presidential appointee – by Du30
o Functions:
- To advise the President of the Philippines on matters related to trade and investments, and
industry, and on the promulgation of Department orders, rules and regulations, and other
issuances related to trade, industry, and investments
- To establish policies and standards for the effective, efficient, and economical operations of the
Department in accordance with government programs
- To supervise and control all offices, functions, and activities of the Department
- To delegate authority for the performance of any administrative or substantive function to any
Undersecretary or other officials of rank at the Department
- To ensure the clear delineation of the functions of personnel and constituent units of the
Department, including its attached agencies to prevent task duplication or overlapping

m. Discuss 1987 Constitution, Art. VII, Section 17.

Section 17. The President shall have control of all the executive departments, bureaus, and offices. He shall ensure that
the laws be faithfully executed.

n. What is the doctrine of qualified political agency?

➢ GR: The acts of the secretaries of the Executive departments performed and promulgated in the regular course
of business are presumptively the acts of the Chief Executive/President (Villena vs Secretary of Interior).
➢ XPN:
o In cases where the law or the Constitution requires the president to act in person
• Declaration of Martial Law (Sec. 18, Art. VII, 1987 Constitution)
• Granting of Presidential parole
o Exigencies of the situation demand that he act personally, the multifarious executive and
administrative functions of the Chief Executive are performed by and through the executive
departments.
➢ Rationale: President is a busy man, he is not expected to exercise the totality of his power of control all the
time. He is expected to delegate some of his tasks to men of his confidence, particularly to members of his
cabinet.
➢ Doctrine adopted from American jurisprudence
➢ The president is the executive of the government, but he may have alter ego thru department heads.
➢ “each head of a department is, and must be, the President’s alter ego in the matters of that department where
the President is required by law to exercise authority.” (Myers vs US)

n.1. Discuss Angeles v. Gaitan, G.R. No. 165276, 25 November 2009.

HELD: The appeal was denied because it cannot be considered as within the same exceptional class which cannot be
delegated.
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Certainly, it would be unreasonable to impose upon the President the task of reviewing all preliminary investigations
decided by the Secretary of Justice. To do so will unduly hamper the other important duties of the President by having to
scrutinize each and every decision of the Secretary of Justice notwithstanding the latter's expertise in said matter.

n.2. Discuss Tiu v. Dizon, G.R. No. 211269, 15 June 2016.

HELD: The writ of habeas corpus was NOT granted because the grant of executive clemency to him is incomplete and
ineffective given that no individual pardon papers were issued in petitioner’s favor. The grant of pardon and the
determination of the terms and conditions of a conditional pardon are purely executive acts which are not subject to
judicial scrutiny.

o. What is the Filipino First Policy?

➢ A mindset
➢ By Pres. Carlos P. Garcia
➢ History:
o PH was one of the most devastated countries after World War II
o In 1946, the Americans passed the Bell Trade Act in the guise of helping Filipinos, it demanded:
▪ US control of the PH peso
▪ Very low to none tariffs on US imports
▪ Unlimited currency transfer from PHP to USD
▪ Parity Rights – To be granted to Americans so they will have equal rights to PH’s natural resources
o If PH does not agree, US will not release the $800 Million worth of war rehabilitation
➢ Government’s active promotion and preference for Filipino-owned businesses over foreign-owned ones
➢ Controlled imports and currency to favor Filipino entrepreneurs
➢ Remnants are seen in Art. XII of the 1987 Constitution – limits foreign ownership of entrepreneurs
o Foreigners may not be allowed to fully own businesses in the PH
▪ Inhibits economic growth according to others
➢ Garcia’s Filipino First Policy raised the issue on:
o What makes a person Filipino?
o Does one have to be born in the Ph to be a Filipino?
o Is there such thing as “Chinese-Filipino”?
o Children born to Filipino parents but in America, are they Filipino?

p. Discuss 1987 Constitution, Art, XII, Section 10.

Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest
dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital
is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The
Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly
owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give
preference to qualified Filipinos.

The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance
with its national goals and priorities.

p.1. Discuss Manila Prince Hotel v. GSIS, G.R. No. 122156, 03 February 1997.
HELD: Section 10, Article 12 of the 1987 Constitution is self-executing because:
1. It is complete in itself and, thus, becomes operative without the aid of supplementary or enabling legislation.
2. Since the Constitution is the fundamental, paramount, and supreme law of the land, it is deemed written in every
statute and contract.
3. Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-executing.

q. What is the Foreign Investment Negative List? Read Executive Order No. 65, Series of 2018.
➢ Set of business sectors list which let investors know which is okay to invest plus its regulation, especially regarding
shared ownership.

10
r. Which industries are included?
➢ Internet access providers
➢ Training centers
➢ Lending companies
➢ Wellness centers
➢ Construction
➢ Ownership of private lands
➢ Operation of PUVs
➢ Educational institutions
➢ ETC.

s. How is Filipino or foreign ownership determined in a corporation?

➢ Control Test - shares belonging to corporations or partnerships at least 60% of the capital of which is owned by
Filipino citizens shall be considered of Philippine nationality. This test is straightforward and does not scrutinize
further the ownership of the Filipino shareholdings.
➢ Grandfather Rule - the “beneficial ownership” of corporations engaged in nationalized activities must reside in
the hands of Filipino citizens.
o “the method by which the percentage of Filipino equity in a corporation engaged in nationalized and/or
partly nationalized areas of activities, provided for under the Constitution and other nationalization laws,
is computed, in cases where corporate shareholders are present, by attributing the nationality of the
second or even subsequent tier of ownership to determine the nationality of the corporate shareholder.”

When is the grandfather rule applied?

• the corporation’s Filipino equity falls below the constitutional threshold of 60 percent
• there exists a “doubt” as to the Filipino to Foreign equity.

s.1. Control Test and the Grandfather rule. Discuss Narra Nickel Mining and Development Corp. v. Redmont
Consolidated Mines Corp., G.R. No. 195580, 21 April 2014.

HELD:

The “doubt” demanding the application of the Grandfather Rule is not confined or refer to the fact that the
apparent Filipino ownership of the corporation’s equity falls below the 60% constitutional threshold.
Rather, “doubt” refers to various indicia that the “beneficial ownership” and “control” of the corporation do not in fact
reside in Filipino shareholders but in foreign stakeholders which actually gave rise to the legislation on the Anti-Dummy
Law.
In the present case, the doubt exists as to the extent of control and beneficial ownership of MBMI over the
petitioners and their investing corporate stockholders. In applying the Grandfather Rule, the Supreme Court looked into
the actual ownership of MBMI in each of the three corporations. It further checked the structure of the other shareholder
corporations of each company. Through the application of the Grandfather Rule, the Supreme Court held that petitioners
Narra Nickel, Tesoro and MacArthur Mining are not considered Philippine nationals since MBMI, a 100 percent Canadian
corporation, owns 60 percent or more of their equity shares interests. Hence, as non-Philippine nationals, they are
disqualified to participate in the exploitation, utilization and development of the Philippines’ natural resources.
WEEK 2
a. Read Republic Act No. 8762 or the Retail Trade Liberalization Act of 2000 and its Implementing Rules and Regulations.

b. Study history of ban on foreigners from engaging in retail trade in the Philippines.
➢ There was alien domination which poses threat and danger to our economy
➢ Aliens has replaced the native retailer – he sells articles of daily life
➢ There is predominance and apparent control over the distribution of almost all kinds of goods
➢ If it weren’t for National Rice and Corn Corp. (NARIC), Namarco, Facomas, and Acefa, aliens would have had total
control over principal foods and products
➢ Statistics from 1941 to 1951 showed that alien participation has steadily increased during the years
o Filipinos are higher in number of retailers, but aliens have higher capital both in assets and gross sales
(6/7 times higher)
o Filipinos were engaged in minor retailer enterprises

11
 ➢ I such a situation should remain; political independence alone is no guarantee to national stability. Filipino
private capital is not big enough to wrestle from alien hands the control of the economy - there shall be
movement against the possibility of economic subjugation by alien interests in the economic field
➢ Freedom of trade is thus curtailed, and free enterprise correspondingly suppressed
➢ Aliens have cornered the market of essential commodities like corn and rice, creating scarcities to justify and
enhance profits t unreasonable proportions
➢ Have hoarded goods to the prejudice of the consuming public
➢ Aliens have also evaded tax laws, smuggled goods and money, violated import and export prohibitions, and bribed
corrupt politicians

b.1. Read Republic Act No. 1180

➢ Absolutely prohibits foreign nationals from engaging in retail trade business
➢ 1954

b.1.a. Discuss Ichong v. Hernandez, G.R. No. L-7995, 31 May 1957.

FACTS:
Petitioner, for and on behalf of other alien residents, corporations, and partnerships adversely affected by the provisions
of R.A. No. 1180, “An Act to Regulate the Retail Business”, filed to obtain a judicial declaration that said act is
unconstitutional because:
1. It denies to alien residents the equal protection of the laws and deprives of their liberty and property without due
process of law
2. The subject of the act is not expressed or comprehended in the title
3. The act violates international treaty obligations
4. The provisions are against the transmission by aliens of their retail business thru hereditary succession, and those
requiring 100& Filipino capitalization for a corporation or entity to engage in the retail business – violative of the
constitution (Secs. 1 and 5, Art. XIII and Sec. 8, Art. XIV)

The Sol-Gen denies the contentions of the petitioner and claims that:
1. The act was passed in the valid exercise of the police power in the interest of economic survival
2. The act only has one subject embraced in the title
3. No treaty was violated
4. Only the form is affected but the value of the property is not impaired

ISSUE: Whether or not RA No. 1180 denies to alien residents the equal protection of the laws and deprives of their liberty
and property without due process.

HELD: NO, because:

1. The enactment is a valid exercise of police power in the interest of economic survival – the law is clearly in the
interest of the public and the classification is valid because it is reasonable and necessary.
a. Police Power
• Promote public welfare by regulating and restraining the liberty and property of persons
• No person shall be deprived of life, liberty, or property without due process of law, nor shall any
person be denied the equal protection of the laws (Sec. 1, Art. III of the Constitution).
o Universal in application – regardless of race, color, and nationality

b. Equal Protection Clause

• Against undue favor and individual or class privilege, as well as hostile discrimination or the
oppression of inequality
• Does not demand absolute equality – merely requires that all persons shall be treated alike, under
like circumstances and conditions both as to privileges and liabilities.
• Because of the practices resorted to by aliens – control of distribution, utter disregard of the
welfare of customers, and manipulation of demand and prices – shows fundamental differences
which justify the classification adopted.

c. Due Process

12
 • The law is prospective in operation and recognizes the privilege of aliens already engaged in the
occupation and reasonably protects the same

2. The title only has one subject, there is no duplicity

a. The word “regulation” also includes “prohibition” and “nationalization”
b. “Regulate” implies some degree of restraint and prohibition of acts
c. The title need not be an index of the contents of the law – it should be a simple and all-encompassing
word
d. It has not misled the legislators, or the segment of the population affected

3. There is no treaty violated

a. The Nations Charter and UDHR did not impose strict or legal obligation regarding the rights and freedom
of their subjects
b. Member-states, Norway and Denmark also prohibit foreigners from engaging in retail trade
c. The treaty of Amity with China is neither violated because the nationals of China are being treated fairly
with all other nationals, except those of US who were granted special rights by the Constitution
d. Police power may not be curtailed or surrendered by any treaty or conventional agreement

c. Why is there a need to restrict participation of foreigners in retail trade activities in the Philippines?
➢ To free the national economy from alien control and dominance
➢ Such control and dominance are both a danger and a threat that alien domination of retail trade poses to national
economy
➢ This gives us freedom and liberty which would not be real if the people are subject to the economic control and
domination of others, especially if not of their own race or country
➢ People who have not the same inspiration for the public weal, nor share the same intimacy towards knowledge
of our laws, customs, and usages

d. Is RA 8762 constitutional? YES

➢ Repealed RA 1180
➢ Allows natural-born Filipino who had lost their citizenship and now reside in the PH to engage in the retail trade
and enjoy the same rights as Filipino citizens
o Are they considered “Filipino citizens”?
o How many years of residence is needed?
➢ Lessens the restraint on the foreigners’ right to property or to engage in an ordinarily lawful business
(Espina vs Zamora).

d.1. Discuss Espina v. Zamora, G.R. No. 143855, 21 September 2010.

FACTS:
Members of the HOR filed the present petition, assailing the constitutionality of RA 8762 on the ff grounds:
1. Violative of Sections 9, 19 and 20 of Article II of the Constitution – enjoins the State to place the national economy
under the control of Filipinos
2. Implementation of RA 8763 would lead to alien control of retail trade – loss of effective Filipino control
3. Foreign retailers would rush Filipino retailers
4. World Bank-IM improperly imposed RA 8762 to release loans
5. Clear danger of monopolies or combinations in restraint of trade

Respondents countered that:

1. Petitioners have no legal standing to file the petition
a. Cannot invoke that they are taxpayers – no disbursement of public funds
b. Cannot invoke that they are members of HOR – no infringement on their rights as legislators
2. No justiciable controversy – no rights of small retails vendors are violated by RA 8762
3. Failed to overturn the assumption of constitutionality – provisions cited were not self-executing that are judicially
demandable
4. Constitutional mandate is regulation of foreign equity and not prohibition
a. Areas of investments are to be reserved to Filipinos upon recommendation of NEDA and/or when the
national interest so dictates

13
ISSUE:
1. W/N the petitioners have legal standing
2. W/N RA 8762 is unconstitutional

HELD:
1. NO because they failed to show that they will be prejudiced by the questioned statute, either as taxpayers nor as
legislators.
a. The court will still resolve the question because the public interest so requires.

2. NO because RA 8762 did not violate the constitutional mandate on a self-reliant and independent national
economy.
a. Sections 9, 19, and 20 of the constitution are not self-executing
• “Not self-executing” – needs legislative implementation before I may be applied in courts
• Constitutional provisions merely set forth a line of policy or principles without supplying the
means by which the are to be effectuated
• Section 19|Self-reliant and Independent – Does not impose a Filipino monopoly of economic
environment but only contemplates that Filipinos should be given preference in all areas of
development.

b. Article XII of the constitution outlines the ideals of economic nationalism:

• Preference in favor of the Filipinos
• Adopt measures to help Filipino retailers to be more competitive
• Develop a self-reliant and independent national economy controlled by Filipinos

c. Section 10, Art. XII of the Constitution

• Par. 3 allows regulation of foreign investments
• gives Congress the discretion to reserve certain areas of investments upon recommendation from
NEDA
• National Economic and Development Authority – socioeconomic planning body

e. Discuss the state policy stated in RA 8762.

Section 2. Declaration of Policy. – It is the policy of the State to promote consumer welfare in attracting promoting and
welcoming productive investment that will bring down price for the Filipino consumer, create more jobs, promote tourism,
assist small manufacturers, stimulate economic growth and enable Philippine goods and services to become globally
competitive through the liberalization of the retail trade sector.

Pursuant to this policy, the Philippine retail industry is hereby liberalized to encourage Filipino and competitive retail
trade sector in the interest of empower the Filipino consumer through lower prices, higher quality goods, better services
and wider choices.

➢ Mandates the liberalization of the retail trade industry to encourage competitive retail trade section in the interest
of empowering Filipino consumers.
➢ For the benefit of the Filipino consumers

f. What is retail trade?

➢ Any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or good
for consumption (Sec. 3 of R.A. No. 8762).

g. What are the sale transactions not considered as a retail trade activity?2
Section 2. Sales Not Considered as Retail. – The following sales are not considered as retail:

(a) Sales of a manufacturer, processor, laborer, or worker of products manufactured, processed or produced by him to
the general public whose capital does not exceed One hundred thousand pesos (100,000.00);
• IG stores

(b) Sales by a farmer or agriculturist selling the products of his farm, regardless of capital;

2
See Section 2 of Rule I of the Implementing Rules and Regulations of RA 8762.
14
 • Because they do not sell to the general public? – They sell to retailers.

(c) Sales arising from restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital,
provided, that the restaurant is incidental to the hotel business;
• Dining is exclusive for those who checked-in?
• Room Service
• Café Ilang-Ilang (Manila Hotel), Spiral (Sofitel)

(d) Sales through a single outlet owned by a manufacturer of products manufactured, processed or assembled in the
Philippines, irrespective of capitalization;
➢ Because only a single outlet? – cannot cater the general public
➢ Tshirt printing

(e) Sales to industrial and commercial users or consumers who use the products bought by them to render service to
the general public and/or produce or manufacture of goods which are in turn sold by them; or
➢ They are not the general public – the sale is to another manufacturer/producer
➢ Incidental to the business

(f) Sales to the government and/or its agencies and government-owned and controlled corporation
➢ Not the general public

h. What are high end or luxury goods?

➢ Goods which are not necessary for life maintenance and whose demand is generated in large part by the higher
income groups.
➢ Includes: jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods,
electronics and other personal effects sold in boutique-type stores.
What the guidelines say
The Revised Guidelines provide the following criteria for the type of goods sold by the foreign retailer seeking inclusion
in the NEDA List. Under the Revised Guidelines, the type of goods sold must:

1. not be necessary for life maintenance (i.e., goods that are not necessities in the sense that life can go on without
some minimum quantity of the item or can be dispensed with altogether if circumstances require);
2. be high-end or luxury goods such as jewelry, branded or designer clothing and footwear, wearing apparel,
leisure and sporting goods, electronics, other personal effects and goods of a similar nature with majority of
products priced at least 200% higher than brands/products usually consumed by those who belong to the C
income group in the Philippines; and
3. be demanded in a large part by higher income groups which belong to the A and B income classes based on the
2015 Family Income and Expenditure Survey i.e. under the seventh to tenth decile per capita income with
total annual family income of PhP 587,817 and above.

i. Who are is a natural born Filipino citizen?3

➢ By blood are Filipinos – mother/father
➢ By election of Filipino mothers
➢ Fernando Poe Jr. – Illegitimate child of an American mother and Filipino father is natural-born Filipino if the
paternity is clearly proved.

Section 1. The following are citizens of the Philippines:

1. Those who are citizens of the Philippines at the time of the adoption of this Constitution;
➢ February 2, 1987 – Adoption of the 1987 Constitution

2. Those whose fathers or mothers are citizens of the Philippines;

➢ 1935 Constitution – Filipino father – Filipino baby
➢ 1973 Constitution – Filipino mother – Filipino baby

3
See Sections 1 and 2 of Article IV of the 1987 Constitution.
15
 3. Those born before January 17, 1973, of Filipino mothers, who elect Philippine Citizenship upon reaching the age
of majority; and
➢ January 17, 1973 – Adoption of the 1973 Constitution
➢ Election is to equalize the status of those born before with those born on or after

4. Those who are naturalized in the accordance with law.

➢ Citizenship – Denotes membership of a citizen in a political society whereby he acquires rights.

➢ Nationality – Owes allegiance to a state, democratic or not. Not aliens nor citizens.
➢ Acquisition of Citizenship –
o Birth
▪ Jus Sanguinis – blood – what is followed
▪ Jus Soli – place of birth
o Naturalization – legal act of adopting an alien and clothing him with privilege of a native-born citizen.
o Marriage – Foreign woman marries a Filipino husband, provided she satisfies the requirements for
naturalization.
NOTE:
Repatriation - restoration to former status
➢ Naturalized – loss – naturalized
➢ Natural-born – loss – natural-born

Section 2. Natural-born citizens are those who are citizens of the Philippines from birth without having to perform any
act to acquire or perfect their Philippine citizenship. Those who elect Philippine citizenship in accordance with
paragraph (3), Section 1 hereof shall be deemed natural-born citizens.

➢ If a person loses his Filipino citizenship by renunciation or other modes recognized by law, he is NOT a natural-
born Filipino except for purposes of transferring of private lands as provided under Art. XII, Section 8 of the
Constitution.

Section 1 of RA 8762 IRR. Rights of Former Natural born Filipinos. - Any natural born Filipino citizen who has lost his
Philippine citizenship and who has legal capacity to enter into a contract under Philippine laws may be allowed to
engage in retail trade, provided that he resides in the Philippines.

➢ Natural born Filipinos who lost their citizenship, may engage in retail trade provided he resides here for at least
180 days.
➢ Requirement:
o Birth Certificate
o If born before January 17, 1973 -sworn statement of election of Filipino citizenship

j. Who is considered a resident former natural-born Filipino citizen?4

➢ A former natural born Filipino citizen is deemed “residing in the Philippines” if he physically stays in the country
for at least one hundred eighty (180) days within a given year.

k. Discuss foreign equity participation: Categories A, B, C, and D.

Section 5. Foreign Equity Participation. - Foreign-owned partnerships, associations and corporation formed and
organized under the laws of the Philippines may, upon registration with the Securities and Exchange Commission (SEC)
and the Department of Trade and Industry (DTI), or in case of foreign owned single proprietorships, with the DTI, Engage
or invest in the retail trade business, subject to the following categories.

Category A Less than Exclusively for Filipino citizens and corporations

US$2,500,000.00 wholly owned by Filipino citizens.
Category B US$2,500,000.00 up but less For the first two years of R.A. 8762’s effectivity,
than US$7,500,000.00 foreign ownership is allowed up to 60%. After
the two-year period, 100% foreign equity shall
be allowed.

4
See Section 1 (t) of Rule I of the Implementing Rules and Regulations of RA 8762.
16
 Category C US$7,500,000.00 or more
Category D US$250,000.00 per store of
foreign enterprises specializing
in high-end or luxury products
May be wholly owned by foreigners. Foreign
investments for establishing a store in
Categories B and C shall not be less than the
equivalent in Philippine Pesos of US$830,000.00.
May be wholly owned by foreigners.

Failure to maintain the full amount of the prescribed minimum capital prior to notification of the SEC and the DTI, shall
subject the foreign investor to penalties or restrictions on any future trading activities/business in the Philippines.

Foreign retail stores shall secure a certification from the Bangko Sentral ng Pilipinas (BSP) and the DTI, which will verify
or confirm inward remittance of the minimum required capital investments.

➢ For regulation

Section 2. Branches/Stores. - Opening of branches/stores by the registered foreign retailer shall be allowed, provided
that the investments for each branch/store established by registered foreign retailers falling under Categories B and C
must be no less than the equivalent in Philippine Pesos of Eight hundred thirty thousand US dollars (US$830,000.00).

l. What is paid-up capital?

➢ “Capital” – The working capital for sole proprietorships and partnerships, while for corporations, it shall be the
paid-up capital.
➢ “Paid-Up Capital” – The total investment in a business that has been paid-in in a corporation or partnership or
invested in a single proprietorship, which may be in cash or in property. It shall also refer to inward remittance
or assigned capital in the case of foreign corporations.
o The amount of money a company has received from shareholders in exchange for shares of stocks
o Created when a company sells its shares on the primary market directly to investors, usually through an
initial public offering (IPO).
o Par Value - value of a single common share as set by a corporation’s charter
▪ How much each share costs

m. Does the requirement of a paid-up capital contradict the Revised Corporation Code, which does not require a
minimum capital stock for stock corporations?5
➢ NO. Section 12. Minimum Capital Stock Not Required of Stock Corporations. - Stock corporations shall not be
required to have minimum capital stock, except as otherwise specially provided by special law (Section 12, RA
11232).
➢ The revised corporation code provides for the general rule, exception thereto is provided under RA 8762

n. What are the requirements regarding maintenance of the capital stated in Section 5 of RA 8762?
Section 5, Par. 5. Failure to maintain the full amount of the prescribed minimum capital prior to notification of the SEC
and the DTI, shall subject the foreign investor to penalties or restrictions on any future trading activities/business in the
Philippines.

o. What is a retail store?6

➢ Retail Store – The company that owns the retail store and/or the physical location, such as a shop, where
goods are sold on a retail basis.
➢ It includes the administrative offices, warehouse, preparation facility or storage facility of such goods, regardless
of whether or not it is adjacent to such outlet.
➢ In cases where the administrative office, warehouse, preparation facility or storage facility services several
stores, the capital for such administrative office, warehouse preparation or storage facility to be included in the
investment requirement for one store shall be pro-rated (allocated/distributed) to the number of stores being
serviced.

5
Read Section 12 of Republic Act No. 11232 or the Revised Corporation Code of the Philippines.
6
See Section 1 (p) of Rule I of the Implementing Rules and Regulations of RA 8762.
17
p. What are the applicable rules regarding acquisition of shares of stock of local retailers by foreign investors?
Section 6. Foreign Investors Acquiring Shares of Stock of Local Retailers. - Foreign investors acquiring shares from existing
retail stores whether or not publicly listed whose net worth is in the excess of the peso equivalent of Two million five
hundred thousand US dollars (US$2,500,000.00) may purchase only up to a maximum of sixty percent (60%) of the equity
thereof within the first two (2) years from the effectivity of this Act and thereafter, they may acquire the remaining
percentage consistent with the allowable foreign participation as herein provided.
➢ Foreigners can buy for the first 2 yrs provided they follow abcd

q. What is a public offering of shares of stock?

➢ The transition of a private corporation to public corporation
➢ The sale of equity shares or other financial instruments such as bonds of a private corporation to the public in
order to raise capital through issuance of stocks
➢ Equity – ownership of assets that may have liabilities attached to them

r. Where will the shares of stock be offered publicly?

➢ Primary Market
o PSE (Philippine Stock Exchange)
o MetroSec

s. Who are required to make a public offering?

Section 7. Public Offering of Shares of Stock. – All retail trade enterprises under Categories B and C in which foreign
ownership exceeds eighty percent (80%) of equity shall offer a minimum of thirty percent (30%) of their equity to the
public through any stock exchange in the Philippine within eight (8) years from their start of operations.

Section 2, Rule IX of RA 8762 IRR. Affected registered retailers shall then be required to list their shares at any stock
exchange duly formed and organized under Philippines laws.

Compliance with this requirement shall be supervised and monitored by the SEC.

➢ Enterprises under Categories B and C which foreign ownership exceeds 80%

o 30% of the equity
o Within 8 years from start of their operation

t. What is the effect of the requirement of offering shares of stock to the public on the foreign equity of the retailer?
➢ Reduce foreign ownership
➢ The company becomes of public ownership – thus Filipinos can now participate and buy stocks

t.1. Read Sections 6, 7, 8, and 9 of Republic Act No. 11232.

➢ Shares of Stock
o Represents the rights and interests of a shareowner
o He may manage thru voting if he has a right to vote
o Dividends
o Interest in properties and assets after liquidations

Common Shares Preferred Redeemable Treasury Founder’s

• Residual • Has priority • No voting rights • May be • Subscribers’
• Represents a • Only issued with • Within 6 months redeemed by shares
share bought par value the corporation, • Has voting
• Has voting • Not creditors – without fixed shares
shares cannot demand period of time
• No voting rights • No voting rights

Section 6. Classification of Shares. - The classification of shares, their corresponding rights, privileges, restrictions, and
their stated par value, if any, must be indicated in the articles of incorporations. Each share shall be equal in all respects
to every other share, except as otherwise provided in the articles of incorporation. Each share shall be equal in all
respects to every other share, except as otherwise provided in the articles of incorporation and in the certificate of
stock.

18
The share stock corporations may be divided into classes or series of shares, or both. No share may be deprived of
voting rights except those classified and issued as "preferred" or "redeemable" shares, unless otherwise provided in this
Code: Provided, That there shall be a class or series of shares with complete voting rights.

Holders of nonvoting shares shall nevertheless be entitled to vote on the following matters;

(a) Amendment of the articles of incorporation;

(b) Adoption and amendment of bylaws;
(c) Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the corporate
property;
(d) Incurring, creating, or increasing bonded indebtedness;
(e) Increase or decrease of authorized capital stock;
(f) Merger or consolidation of the corporation with another corporation or other corporations;
(g) Investment of corporate funds in another corporation or business in accordance with this Code; and
(h) Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote required under this Code to approve a particular
corporate act shall be deemed to refer only to stocks with voting rights.

The shares or series of shares may or may not have a par value: Provided, That banks, trust, insurance, and preneed
companies, public utilities, building and loan associations, and other corporations authorized to obtain or access funds
from the public whether publicly listed or not, shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by a corporation may be given preference in the distribution of dividends and in the
distribution of corporate assets in case of liquidation, or such other preferences: Provided, That preferred shares of
stock may be issued only with a stated par value. The board of directors, where authorized in the articles of
incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, further, That
such terms and conditions shall be effective upon filing of a certificate thereof with the Securities and Exchange
Commission, hereinafter referred to as the "Commission".

Shares of capital stock issued without par value shall be deemed fully paid and nonassessable and the holder of such
shares shall not be liable to the corporation or to its creditors in respect thereto: Provided, That no-par value shares
must be issued for a consideration of at least Five pesos (₱5.00) per share: Provided, further, That the entire
consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available
for distribution as dividends.

A corporation may further classify its shares for the purpose of ensuring compliance with constitutional or legal
requirements.

Section 7. Founders' Shares. - Founders' shares may be given certain rights and privileges not enjoyed by the owners of
other stock. Where the exclusive right to vote and be voted for in the election of directors is granted, it must be for a
limited period not to exceed five (5) years from the date of incorporation: Provided, That such exclusive right shall not be
allowed if its exercise will violate Commonwealth Act No. 108, otherwise known as the "Anti-Dummy Law"; Republic Act
No. 7042, otherwise known as the "Foreign Investments Act of 1991"; and otherwise known as "Foreign Investments Act
of 1991"; and other pertinent laws.

Section 8. Redeemable Shares. - Redeemable shares may be issued by the corporation when expressly provided in the
articles of incorporation. They are shares which may be purchased by the corporation. They are shares which may be
purchased by the corporation from the holders of such shares upon the expiration of a fixed period, regardless of the
existence of unrestricted retained earnings in the books of the corporation, and upon such other terms and conditions
stated in the articles of incorporation and the certificate of stock representing the shares, subject to rules and
regulations issued by the Commission.

Section 9. Treasury Shares. - Treasury shares are shares of stock which have been issued and fully paid for, but
subsequently reacquired by the issuing corporation through purchase, redemption, donation, or some other lawful
means. Such shares may again be disposed of for a reasonable price fixed by the board of directors.

19
t.2. Discuss Power to Increase Capital Stock (Section 37) and Power to Deny Preemptive Right (Section 38) as stated in
the Revised Corporation Code.

Section 37. Power to increase or Decrease Capital Stock; Incur, Create or Increase Bonded Indebtedness. - No corporation
shall increase or decrease its capital stock or incur, create or increase any bonded indebtedness unless approved by a
majority vote of the board of directors and by two-thirds (2/3) of the outstanding capital stock at a stockholders'
meeting duly called for the purpose. Written notice of the time and place of the stockholders' meeting and the purpose
for said meeting must be sent to the stockholders at their places of residence as shown in the books of the corporation
served on the stockholders personally, or through electronic means recognized in the corporation's bylaws and/or the
Commission's rules as a valid mode for service of notices.

A certificate must be signed by a majority of the directors of the corporation and countersigned by the chairperson and
secretary of the stockholders' meeting, setting forth:

(a) That the requirements of this section have been complied with;

(b) The amount of the increase or decrease of the capital stock;

(c) In case of an increase of the capital stock, the amount of capital stock or number of shares of no-par stock
thereof actually subscribed, the names nationalities and addresses of the persons subscribing, the amount of
capital stock or number of no-par stock subscribed, the names, nationalities and addresses of the persons
subscribing, the amount of capital stock or number of no-par stock subscribed by each, and the amount paid by
each on the subscription in cash or property, or the amount of capital stock or number of shares of no-par stock
allotted to each stockholder if such increase is for the purpose of making effective stock dividend therefor
authorized;

(d) Any bonded indebtedness to be incurred, created ot increased;

(e) The amount of stock represented at the meeting; and

(f) The vote authorizing the increase or decrease of capital stock, or incurring, creating or increasing of bonded
indebtedness.

Any increase or decrease in the capital stock or the incurring, creating or increasing of any bonded indebtedness shall
require prior approval of the Commission and where appropriate, of the Philippine Competition Commission. The
application with the Commission shall be made within six (6) months from the date of approval of the board of directors
and stockholders, which period may be extended for justifiable reasons.

Copies of the certificate shall be kept on file in the office of the corporation and filed with the Commission and attached
to the original articles of incorporation. After approval by the Commission and the issuance by the Commission of its
certificate of filing may declare: Provided, That the Commission shall not accept for filing any certificate of increase of
capital stock unless accompanied by a sworn statement of the treasurer of the corporation accompanied by a sworn
statement of the treasurer of the corporation lawfully holding office at the time of the filing of the certificate, showing
that at least twenty-five percent (25%) of the increase in capital stock has been subscribed and that at least twenty-five
percent (25%) of the amount subscribed has been paid in actual cash to the corporation or that property, the valuation
of which is equal to twenty-five percent (25%) of the subscription, has been transferred to the corporation: Provided,
further, That no decrease in capital stock shall be approved by the Commission if its effect shall prejudice the rights of
corporate creditors.

Nonstock corporations may incur, create or increase bonded indebtedness when approved by a majority of the board of
trustees and of at least two-thirds (2/3) of the members in a meeting duly called for the purpose.

Bonds issued by a corporation shall be registered with the Commission, which shall have the authority to determine the
sufficiency of the terms thereof.

Section 38. Power to Deny Preemptive Right. - All stockholders of a stock corporation shall enjoy preemptive right to
subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings, unless such
right is denied by the articles of incorporation or an amendment thereto: Provided, That such preemptive right shall not
20
extend to shares issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or
to shares issued in good faith with the approval of the stockholders representing two-thirds (2/3) of the outstanding
capital stock in exchange for property needed for corporate purposes or in payment of previously contracted debt.

u. Discuss the qualifications of foreign retailers.

Section 8. Qualification of Foreign Retailers. - No foreign retailer shall be allowed to engage in retail trade in the Philippine
unless all the following qualifications are met:

(a) A minimum of Two hundred million US dollar (US$200,000,000.00) net worth in its parent corporation for
Categories B and C, and Fifty million US dollar (US$50,000,000.00) net worth in its parent corporation for
category D;

(b) (5) retailing branches or franchises in operation anywhere around the word unless such retailer has at least
one (1) store capitalized at a minimum of Twenty-five million US dollars (US$25,000,000.00);

(c) Five (5)-year track record in retailing; and

(d) Only nationals from, or juridical entities formed or incorporated in Countries which allow the entry of Filipino
retailers shall be allowed to engage in retail trade in the Philippines.

The DTI is hereby authorized to pre-qualify all foreign retailers, subject to the provisions of this Act, before they are
allowed to conduct business in the Philippine.

The DTI shall keep a record of Qualified foreign retailers who may, upon compliance with law, establish retail stores in
the Philippine. It shall ensure that parent retail trading company of the foreign investor complies with the qualifications
on capitalization and track record prescribed in this section

The Inter- Agency Committee on Tariff and Related Matters Authority (NEDA) Board shall formulate and regularly update
a list of foreign retailers of high-end or luxury goods and render an annual report on the same to Congress.

v. Discuss promotion of locally manufacture products. How much of the inventory should be products made in the
Philippines?
Section 3. Promotion of Locally Manufactured Products. – For ten (10) years after the effectivity of this Act, at any given
time, at least thirty percent (30%) of the aggregate cost of the stock inventory situated in the Philippines of foreign
retailers falling under Categories B and C and ten percent (10%) for Category D shall be made in the Philippines.

All registered foreign retailers shall be required to maintain books of accounts showing the inventory situated in the
Philippines and its origin at all times and these books may be examined at any time, by the duly authorized
representative of the Department of Trade and Industry.

Furthermore, these registered foreign retailers shall be required to submit quarterly statements under oath certifying
the ratio of their local and imported inventory.

➢ Categories B & C - 30% | Category D – 10%

➢ Locally Manufactured Goods – Goods manufactured, processed, or assembled in the PH, regardless of the source
of the raw materials and components used in the manufacture of the product.
➢ Will increase our GDP

w. What are the prohibited activities of qualified foreign retailer?

Section 10. Prohibited Activities of Qualified Foreign Retailers. – Qualified foreign retailers shall not be allowed to engage
in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or carts, the use of
sales representatives, door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities:
Provided, That a detailed list of prohibited activities shall hereafter be formulated by the DTI.

➢ Cannot engage in retail outside their accredited stores through e-commerce

x. What is the penalty imposed on any person guilty of violating any provision of RA 8762?

21
Section 12. Penalty Clause. - Any person who shall be Found guilty of Violation of any provision of this Act shall be punished
by imprisonment of not less that six (2) years and one (1) day but not more than eight (8) years, and a fine of not less than
One million pesos (P1,000,000.00) but not more that Twenty million pesos (P20,000,000.00)

In the case of associations, partnerships or corporations, the penalty shall be imposed upon its partners, president,
directors, manager and other officers responsible for the violation. If the offender is not a citizen of the Philippines he
shall be deported immediately after service of sentence. If the Filipino of fender is a public officer or employee, he shall,
in addition to the penalty prescribed herein, suffer dismissal and permanent disqualification from public office

➢ Any person in violation of this act

o Imprisonment | Min. 6 yrs and 1 day – Max. 8 yrs
o Fine | Min. 1 Million Pesos to Max. 20 Million Pesos

➢ Associations, Partnerships, or Corporations

o Penalty is imposed upon its partners, president, directors, manager, and other responsible officers.
o If violator is a foreigner:
▪ Immediate deportation after service of sentence
o Public officer or Employee:
▪ Dismissal
▪ Permanent Disqualification from Public Office
WEEK 3
a. Discuss Articles 1156 of the C ivil Code.
Article 1156. An obligation is a juridical necessity to give, to do, or not to do.
➢ Definition by Sanchez Roman

b. Why is Article 1156 an incomplete definition of an obligation?

➢ It is incomplete and inaccurate according to Justice J.B.L Reyes
o The definition did not emphasize the right of the creditor to demand from its debtor upon breach
o It is limited to civil obligations – does not cover natural obligations (Art 1423-1430)

c. What is an obligation according to Arias Ramos?

➢ It is a juridical relation whereby a person (creditor) may demand from another (debtor) the observance of a
determinative conduct (giving, doing, or not doing), and in case of breach, may demand satisfaction from the
assets of the latter.
➢ Provided for remedies available for the creditor
➢ Accurate as approved by Justice J.B.L Reyes

d. What are the elements of an obligation?

➢ Active Subject – who has the power/authority to demand the obligation
➢ Passive Subject
➢ Prestation or Object - determinate
➢ Efficient Cause or Vinculum Juris
o Covers juridical relation
o Juridical Relation – binds the party to the obligation | the source of relation is the law
o Effect of Juridical Relation – parties become obliged

d.1. Discuss Asuncion v. Court of Appeals, G.R. No. 109125, December 2, 1994.
HELD:
The right of first refusal was not binding because there is no juridical relation.
There is no juridical relation because there was no term and conditions, or meeting of the minds, as to how the
right will be executed – there is no contract, there is no obligation.

Note: The right of first refusal necessitates a pre-determined price, to which the property shall be offered even after
refusal.

e. What is an active subject?

➢ One demanding the performance of the obligation
22
 ➢ Obligation is constituted in his favor

f. What is a passive subject?

➢ One bound to perform the obligation
➢ Debtor/Obligor

Note: When there is a right there is a corresponding obligation. Right is the active aspect while obligation is the passive
aspect. Thus, it is said that the concepts of credit and debt are two distinct aspects of unitary concept of obligation.
(Pineda, Obligations and Contracts, p. 2, 2000 ed)

g. What is a prestation or object?

➢ It is a conduct that may consist of giving, doing, or not doing something.
➢ It is the conduct that must be observed by the debtor/obligor.

h. Discuss the different sources of an obligation under Article 1157.

Art. 1157 Obligations arise from:

1) Law
➢ Obligations as established by the law
➢ We don’t carry the burden of an obligation unless otherwise stated
➢ Pay taxes
➢ Legitimes – to support one’s family

2) Contracts
➢ Obligations as agreed upon in a contract
➢ Contracts is the law between the parties
➢ Stipulations, clauses, terms and conditions therein
➢ Repay a loan by virtue of an agreement
➢ Deliver parcel 15 as agreed upon

3) Quasi-contracts
➢ Quasi – resembles, but not really
➢ Negotiorum Gestio (unauthorized management but resulted in benefit of the owner) and Solutio Indebiti (undue
payment delivered thru mistake)
➢ It is a juridical relation arising from lawful, voluntary and unilateral acts based on the principle that no one
should unjustly enrich himself at the expense of another.

4) Acts or omissions punished by law (Obligations Ex Delicto)

➢ Consequence of a criminal liability but a civil obligation arose
➢ Crime is essential
➢ Ex. Thief returning the car he stole -restitution
➢ Ex. Killer indemnifying the heirs of his victim

5) Quasi-delict or Tort
➢ It is an act or omission arising from fault or negligence which causes damage to another, there being no pre‐
existing contractual relations between the parties.
➢ Responsibility for a fault in quasi-delicts are entirely separate from civil liability
➢ Action anchored on negligence

i. What are the modes of extinguishing an obligation under Article 1231 of the Civil Code?

1. Payment or performance
2. Loss of the specific thing due
3. Condonation or remission of debt
4. Confusion or merger of rights
Ex. Debtor buys properties of the creditor
5. Compensation

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 6. Novation
• New parties
• New contract
• New terms and conditions
• Subrogation – insurance
7. Annulment – invalidation of a voidable contract
8. Rescission under Art. 1191 – cancel an existing reciprocal obligation – resolution
9. Fulfillment of a resolutory condition
10. Prescription (Art. 1231, NCC)

Note: The enumeration is not exclusive.

j. What is payment?
➢ Payment may consist not only in the delivery of money but also the giving of a thing (other than money), the doing
of an act, or not doing of an act.
➢ Tender of payment is the definitive act of offering the creditor what is due him or her, together with the demand
that the creditor accept the same.
o There must be a fusion of intent, ability and capability to make good such offer, which must be absolute
and must cover the amount due. (FEBTC v. Diaz Realty Inc., G.R. No. 138588, Aug. 23, 2001)
➢ Form of Payment
o Payment in cash– all monetary obligations shall be settled in the Philippine currency which is legal
tender in the Philippines. However, the parties may agree that the obligations or transactions shall be
settled in any other currency at the time of payment. (Sec. 1, R.A. 8183)

Note: R.A. 8183 amended the first paragraph of Art. 1249 of the Civil Code, but the rest of the article
remain subsisting. (Pineda, Obligations and Contracts, 2000 ed, p. 221)

o 2. Payment in check or other negotiable instrument – not considered payment, they are not considered
legal tender and may be refused by the creditor except when:
▪ the document has been cashed; or
▪ it had been impaired through the fault of the creditor.

k. How must payment of debts in money be made under Art. 1249 of the Civil Code?

Article 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver
such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in the abeyance. (1170)
➢ In the currency stipulated
➢ Legal tender in the PH

l. What is legal tender?

➢ Currency which may be used for payments of debts which the creditor cannot refuse to accept
➢ BSP Circular No. 537, Series of 2008
o Limit of coins as a legal tender
▪ 1, 5, 10 – P1,000
▪ 25 cents – P100
o It will be troublesome not only to count them but also to carry them
o Creditor may not accept coins as payment

m. Will the delivery of promissory notes payable to order, bills of exchange, or other mercantile documents result in
payment?
➢ GR: In general, a check does not constitute legal tender, and that a creditor may validly refuse it. It must be
emphasized, however, that this dictum does not prevent a creditor from accepting a check as payment. In other

24
 words, the creditor has the option and the discretion of refusing or accepting it. (FEBTC v. Diaz Realty Inc., G.R.
No. 138588, Aug. 23, 2001)
➢ XPNs:
o After encashment
o Impairment of promissory notes, bills of exchange, or other mercantile documents

m.1. Discuss Evangelista v. Screenex, Inc. G.R. No. 211564, 20 November 2017.
HELD: There was no act resulting to the impairment of the check because they did not encash it within the 10-year period.

If the check was stale, does that mean that the obligation was impaired?
NO. Payment is still demandable, as long as it is within 10 years.

n. What is a contract according to the Civil Code? (Article 1305)7

Article 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other,
to give something or to render some service. (1254a)

o. Is the definition of a Contract under the Civil Code accurate?

▪ No

p. What is a contract according to Ernesto L. Pineda?

▪ It is a meeting of the minds between two or more parties, whereby one party binds himself with respect to the
other, or where both parties bind themselves reciprocally, in favor of one another, to fulfill a prestation to give,
to do or not to do.

q. What is an auto-contract?
▪ Contracts where the two parties are represented by the one and the same person, who represents and acts in
different capacities (i.e. agent representing his principal who authorized him to borrow money)

r. What are the characteristics of a contract? Explain each.

1. Relativity (Art. 1311, NCC)

GR: A contract is binding not only between parties but extends to the heirs, successors in interest, and assignees
of the parties, provided that the contract involves transmissible rights by their nature, or by stipulation or by
provision of law.

XPNs:
▪ Stipulation pour autrui (stipulation in favor of a third person) – benefits deliberately conferred by parties to
a contract upon third persons.
▪ The obligation is personal
▪ Contrary stipulation

2. Obligatoriness and consensuality (Art. 1315, NCC)

The parties are bound not only by what has been expressly provided for in the contract but also to the natural
consequences that flow out of such agreement.
▪ Obligatory - Party can go to court and compel the other party

3. Mutuality (Art. 1308, NCC)

Contract must be binding to both parties and its validity and effectivity can never be left to the will of one of the
parties.

4. Autonomy (Art. 1306, NCC)

It is the freedom of the parties to contract and includes the freedom to stipulate provided the stipulations are not
contrary to law, morals, good customs, public order or public policy.

s. What are the essential elements of a contract?

➢ Consent;

7
Recommended text: Ernesto L. Pineda, Obligations and Contracts
25
 ➢ Object or subject matter; and
➢ Cause or consideration

s.1. Discuss The Insular Life Assurance Company Ltd. v. Asset Builders Corporation, G.R. No. 147410, 05 February 2004.
HELD: There is NO COTRACT because there is no consent – no notice of award was received, which shall signify the
acceptance of the bid.

t. What are natural elements?

▪ Those which are part of the contract even if the parties do not provide (stipulate) them, and is presumed by law
to exists; such as a warranty of hidden defects or eviction in contract of sale.

u. What are accidental elements?

▪ Those which are established or stipulated in the contract by the contracting parties as they may deem convenient;
such as stipulations, clauses, terms and conditions.

WEEK 4
a. What is Article 1458?
Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional. (1445a)

b. What is a contract of sale?

➢ Sale is a contract where one party (seller) obligates himself to transfer the ownership of and to deliver a
determinate thing, while the other party (buyer) obligates himself to pay for said thing a price certain in money
or its equivalent.
o “Equivalent”- also includes service

c. What are the stages of a contract of sale?

➢ Generation or Negotiation
o Starts from the time where the prospective contracting parties indicate interest in the contract to the
time the contract is concluded or perfected.

When is a Contract of Sale is perfected?

• The moment there is meeting of the minds upon a determinate thing and a certain price
• Being a consensual contract – delivery and payment are not essential
o Only essential in real contracts like a loan

➢ Perfection
o Upon concurrence of essential elements

➢ Consummation
o When parties perform their respective undertakings under the contract

d. What are the characteristics of a contract of sale?

➢ Consensual
o perfected by mere consent
o As distinguished from real contract – perfected by delivery
➢ Bilateral Reciprocal
o both parties are bound by obligations dependent upon each other
➢ Onerous
o To acquire the rights, valuable consideration must be given
➢ Commutative
o Because the values exchanged are almost equivalent to each other
o Aleatory – what one receives may in time be greater or smaller than what has been given
➢ Principal
o No necessity for it to depend upon the existence of another valid contract (e.g. mortgage)
26
 ➢ Nominate
o Code refers to it by special designation
o A special contract
➢ Title and not a mode of acquiring ownership

e. Distinguish between absolute sale and conditional sale?

When is a sale ABSOLUTE?

➢ Where the sale is not subject to any condition
➢ Where the title passes to the buyer upon delivery of the thing sold

When is a sale CONDITIONAL?

➢ Where the sale contemplates contingency
➢ Where the contract is subject to certain conditions, usually, full payment (vendee) or fulfillment of certain
warranties (vendor)

CONDITIONAL SALE ABSOLUTE SALE

One where the seller is granted the
right to unilaterally rescind the
contract predicated on the fulfillment
or non‐fulfillment, as the case may be,
of the prescribed condition.
Contract executed between the seller
and the buyer
One where the title to the property is
not reserved to the seller or if the seller
is not granted the right to rescind the
contract based on the fulfillment or
non‐fulfillment, as the case may be, of
the prescribed condition.
Contracts, first the contract to sell
(which is conditional or preparatory
sale) and second, the final deed of sale
or the principal contract which is
executed after full payment of the
purchase

f. What are the essential elements of a contract of sale?

➢ Consent or meeting of the minds
o Absolute acceptance – no counter-offer
➢ Determinate subject matter
o No sale of generic thing
o If the parties differ as to the object, there is no meeting of the minds
o Within the commerce of man – also means licit
o Must be specific? YES.
➢ Price certain in money or its equivalent
o Cause or consideration – either the service to be rendered or a price to pay
o The price need not be in money

f.1. Discuss Manila Metal Container Corporation v. PNB, G.R. No. 166862, 20 December 2006.

FACTS:
Petitioner mortgaged its and in favor of PNB. Because of its failure to pay, PNB filed for a petition to foreclose the
property and be auctioned for the amount of petitioner’s balance +interest + atty’s fees (900k). The property was
subsequently sold, but petitioner asked for an extension to repurchase said property. The BOD accepted the offer to
repurchase for a higher price and also accepted the down payment in the sum of 725k.

ISSUE: Whether or not there was a perfected contract of sale.

HELD: No, there is no perfected contract of sale because:

1. There was no consent – no meeting of the minds.

• Acceptance was not absolute

27
 • Price was not certain – essential element of a contract of sale.
2. PNB was not bound by SAMD’s recommendation and acceptance – only BOD.
3. The 750k was not an “earnest money” but merely a deposit
• There can only be earnest money if the contract was perfected

g. What are the natural elements of a contract of sale?

➢ Warranty against eviction
➢ Warranty against hidden defects

h. What are the accidental elements of a contract of sale?

➢ May or may not be stipulated

i. Discuss Article 1546.

Article 1546. Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural
tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing
relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller's
opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it
was relied upon by the buyer. (n)

j. What is a warranty?
➢ Statement or representation by a seller contemporaneously and as part of the contract with reference to either
the character, quality, or title of the goods and by which the promise to ensure certain are shall be as he
represents.

k. What is an express warranty?

➢ Any affirmation of fact or any promise by the seller relating to the thing if the natural tendency of such
affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying
thereon.

l. How is express warranty different from mere sales talk or dealer’s talk?
➢ Express Warranty
o Responsible when there is breach
➢ Dealer’s Talk
o Does not import a warranty unless the seller is an expert and the opinion were relied upon by the buyer
o What if not an expert but the opinion was relied upon? – Art 1343. Mere error or mistake.
▪ Article 1340. The usual exaggerations in trade, when the other party had an opportunity to
know the facts, are not in themselves fraudulent.
▪ Article 1341. A mere expression of an opinion does not signify fraud, unless made by an expert
and the other party has relied on the former's special knowledge.
▪ Article 1343. Misrepresentation made in good faith is not fraudulent but may constitute error.

l.1. Discuss Philippine Steel Coating Corp. v. Quinones, G.R. No. 194533, 19 April 2017.

FACTS:
PH steel offered to Quinones their new product for the painting of its buses. Hesitant, Quinones had 4 to 5
meetings with PH Steel employees and kept asking about the compatibility of their products to what his company uses.
According to PH Steel employees, their primer-coated GI Sheets are compatible with Quinones’ buses. After a successful
test paint, it ordered in bulk, relying on the affirmation that the GI Sheets offered are compatible.

ISSUE: Whether or not the affirmations made by the PH Steel employees constitute an express warranty.

HELD: YES, the affirmations constitute an express warranty and are not merely dealer’s talk because:
1. It was backed by tests proving the compatibility of the products.
2. The employees were expert and gave warranties which Quinones relied upon.

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m. Discuss Article 1547.

Article 1547. In a contract of sale, unless a contrary intention appears, there is:

(1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the
ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession
of the thing;

(2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.

This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other
person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a
legal or equitable interest. (n)

n. What is an implied warranty?

➢ Warranties deemed included in all contracts of sale by operation of law. (Art. 1547)

o. What are the implied warranties in a contract of sale?

1. Warranty that seller has right to sell – refers to consummation stage. Not applicable to sheriff, auctioneer,
mortgagee, pledge

2. Warranty against eviction

Requisites: JPENS
a. Buyer is Evicted in whole or in part from the subject matter of sale
b. Final Judgment
c. Basis of eviction is a right Prior to sale or act imputable to seller
d. Seller has been Summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant
through 3rd party complaint brought by buyer
e. No waiver on the part of the buyer

Note: For eviction – disturbance in law is required and not just trespass in fact.

3. Warranty against encumbrances (non‐ apparent)

Requisites:
a. immovable sold is encumbered with non‐apparent burden or servitude not mentioned in the agreement
b. nature of non‐apparent servitude or burden is such that it must be presumed that the buyer would not have
acquired it had he been aware thereof

XPN: warranty not applicable when non‐apparent burden or servitude is recorded in the Registry of Property –
unless there is expressed warranty that the thing is free from all burdens & encumbrances

4. Warranty against Hidden Defects

p. When is implied warranty not applicable?

➢ “As is and where is” sale
➢ Sale of second hand articles
➢ Sale by virtue of authority in fact or law
➢ Sale at public auction for tax delinquency

q. Discuss Article 1561.

Article 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have,
should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an
extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it;

29
but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible
if the vendee is an expert who, by reason of his trade or profession, should have known them. (1484a)

r. What are the requisites for enforcement of the warranty against hidden defects?

➢ “Hidden Defects” – A hidden defect is one which is unknown or could not have been known to the buyer.
➢ Requisites: HENNAS
a. Defect is important or Serious
i. The thing sold is unfit for the use which it is intended
ii. Diminishes its fitness for such use or to such an extent that the buyer would not have acquired it had he
been aware thereof
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller within reasonable time
e. Action for rescission or reduction of the price is brought within the proper period
o i. 6 months – from delivery of the thing sold
o ii. Within 40 days – from the delivery in case of animals
f. There must be No waiver of warranty on the part of the buyer.

Note: Seller does not warrant patent defect; Caveat emptor (buyer beware)

r.1. Discuss Sps. Batalla v. Prudential Bank, G.R. No. 200676, 25 March 2019.

FACTS:
Sps. Batalla bought a brandnew car from Honda through a loan with Prudential bank. After 3 days from receipt of
the item, Batallas discovered that the door was faulty. Upon bringing it to repair shops, both men said that it was not
brand new because the rooftop was no longer shiny. Hence, they seek to rescind both the contract of sale (Honda) and
the contract of loan (Prudential).

ISSUE:
1. Whether or not the car had hidden defects.
2. Whether or not they may rescind both contracts.

HELD:
1. NO, because they failed to prove the same:
• The Court was unconvinced of Villanueva because he did not have special training and/or knowledge – he
was not an expert.
• The printouts from LTO which they subsequently presented was a mere photocopy and was never
authenticated.
• The defect in the car door could not be attributed to Honda because they immediately had a remote-
control system installed.
2. NO, because the contracts are independent of one another.
• Contract of Loan
▪ Real contract
▪ With Prudential – not a privy to the COS
• Contract of Sale
▪ Consensual
▪ With Honda

s. What is a redhibitory action?

➢ It is a defect in the article sold against which defect the seller is bound to warrant. The vice must constitute an
imperfection, a defect in its nature, of certain importance; and a minor defect does not give rise to redhibition.
(De Leon, Comments and Cases on Sales and Lease, 2005 ed, p. 318)

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s.1. Discuss Nurtrimix Feeds Corporation v. Court of Appeals, G.R. No. 152219, 25 October 2004.

FACTS:
Sps. Evangelista were engaged in the business of poultry. They feed Nutrimix products to their hogs and broilers.
Because of their close relationship with the President, brother of Efren, they were given a favorable deal – they pay on
credit in a period of 30 to 45 days. After some time, when their animals were affected by the plague, they started to fail
issuing checks as payment and claims that it was due to the poison contained in Nutrimix’ animal feeds.

ISSUE: Whether or not there is hidden defects.

HELD: NO, because they failed to prove the same:

• Respondents only contested that the feeds were poisonous after 3 months from the last delivery.
o The feeds could have been contaminated and it is beyond the control of the manufacturer.
• Respondents also mixed the Nutrimix products with other feeds.
• Their contention as to the poison only rose when they cannot issue checks, but they initially said that the deaths
were caused by the plague.
• Because there is no warranty attributable to Nutrimix, they cannot be granted of the remedy.

t. Discuss Article 1562.

Article 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as
follows:

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the
goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the
grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such
purpose;

(2) Where the goods are brought by description from a seller who deals in goods of that description (whether he
be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable
quality. (n)

u. Discuss Article 1571.

Article 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the
delivery of the thing sold.
➢ If the action arises from a breach of warranty, it shall be filed within 6 months from the delivery.

u.1. Discuss Sps. Gaspar v. Disini, G.R. No. 239644, 03 February 2021.

FACTS:

RTC: Disini
CA: Disini, deleting the award of Atty’s Fees

To secure a loan, Marquez, registered owner, mortgaged his Pajero to Legacy owned by Yu. To dispose said car,
Marquez executed and signed a Deed of Sale thereto. Sps. Gaspra bought the Pajero from Yu through its agent, Salita.
Gaspar subsequently sold it to Disini from whom the car was apprehended while it was illegally parked in Makati in 2003.
Disini later found that it was stolen from the Office of the President and was overlaid with another plate number to avoid
identification.

As such, Gaspar reimbursed 150k to Disini and Yu reimbursed 200k. However, Yu later contended that he should
not reimburse Gaspar because the implied warranty does not apply if the defect is apparent (caveat emptor), especially
since they are engaged in such business, and that they merely relied on the Certificates provided by Marquez.

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 CA said that the sale between Yu and Gaspar gave rise to an implied warranty which prescribes within 6 months
from delivery pursuant to Article 1571. In this case, the third-party complaint was filed after almost 4 years from delivery.

ISSUE:
1. Whether or not the COS is valid.
2. Whether or not the third-party complaint was filed on time.
3. Whether or not the rules on implied warranty applies.

HELD:
1. NO, the COS is void ab initio because the object was illicit.
• The Pajero was found to be stolen from the Office of the President and is, thus, illicit as provided under
Art. 1409 of the NCC.
2. YES, because it assumes the nature of an action to declare the inexistence of a contract which does not prescribe.
• Art. 1410 provides that the action for the declaration of the inexistence of a contract does not prescribe.
3. NO, because there is no valid COS.
• Disini was not deprived of possession on the basis of a final judgement, a requirement which constitutes
a valid warranty against eviction.
• Disini also did not contest the confiscation when he was informed that it was stolen.
WEEK 5
a. Read (1) Republic Act No. 8792 or the Electronic Commerce Act of 2000 and (2) the Rules on Electronic Evidence (A.M.
No. 01-07-01-SC).

b. Discuss the state policy expressed in RA 8792.

Section 2. Declaration of Policy -
➢ State recognizes the vital role of information and communications technology (ICT) in nation-building
➢ To create an information-friendly environment which supports and ensures the availability, diversity and
affordability of ICT products and services
➢ The primary responsibility of the private sector in contributing investments and services in telecommunications
and information technology
➢ The need to develop, with appropriate training programs and institutional policy changes, human resources for
the information technology age
➢ A labor force skilled in the use of ICT and a population capable of operating and utilizing electronic appliances and
computers
➢ Its obligation to facilitate the transfer and promotion of technology
➢ To ensure network security, connectivity and neutrality of technology for the national benefit
➢ The need to marshal, organize and deploy national information infrastructures, comprising in both
telecommunications network and strategic information services, including their interconnection to the global
information networks, with the necessary and appropriate legal, financial, diplomatic and technical framework,
systems and facilities.

c. Discuss the objective stated in RA 8792.

Section 3. Objective - This Act aims to facilitate domestic and international dealings, transactions, arrangements
agreements, contracts and exchanges and storage of information through the utilization of electronic, optical and similar
medium, mode, instrumentality and technology to recognize the authenticity and reliability of electronic documents
related to such activities and to promote the universal use of electronic transaction in the government and general public.
➢ To facilitate domestic and international dealings
➢ To facilitate domestic and international dealings
➢ To promote the universal use of electronic transaction in the government and general public

d. What is the sphere of application of RA 8792?

Section 4. Sphere of Application - This Act shall apply to any kind of data message and electronic document used in the
context of commercial and non-commercial activities to include domestic and international dealings, transactions,
arrangements, agreements contracts and exchanges and storage of information.

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 ➢ Any kind of data message and electronic document used in the context of commercial and non-commercial
activities, locally or internationally.
➢ The e-commerce act applies to non-commercial transactions covering any electronic information.

e. Discuss the terms defined in RA 8792.

Section 5. Definition of Terms - For the purposes of this Act, the following terms are defined, as follows:

(a) "Addressee" refers to a person intended to receive the electronic data message or electronic document. The
term does not include a person acting as an intermediary with respect to that electronic data message or
electronic data document.

(b) "Computer" refers to any device or apparatus which, by electronic, electro-mechanical, or magnetic impulse,
or by other means, is capable of receiving, recording, transmitting, storing, processing, retrieving, or producing
information, data, figures, symbols or other modes of written expression according to mathematical and logical
rules or of performing any one or more of these functions.

(c) "Electronic Data Message" refers to information generated, sent, received or stored by electronic, optical or
similar means.

(d) "Information and Communications System" refers to a system intended for and capable of generating,
sending, receiving, storing, or otherwise processing electronic data messages or electronic documents and
includes the computer system or other similar device by or in which data is recorded or stored and any
procedures related to the recording or storage of electronic data message or electronic document.

(e) "Electronic Signature" refers to any distinctive mark, characteristic and/or sound in electronic form,
representing the identity of a person and attached to or logically associated with the electronic data message or
electronic document or any methodology or procedures employed or adopted by a person and executed or
adopted by such person with the intention of authenticating or approving an electronic data message or
electronic document.

(f) "Electronic Document" refers to information or the representation of information, data, figures, symbols or
other modes of written expression, described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be prove and affirmed, which is receive, recorded, transmitted,
stored, processed, retrieved or produced electronically.

(g) "Electronic Key" refers to a secret code which secures and defends sensitive information that cross over
public channels into a form decipherable only with a matching electronic key.

(h) "Intermediary" refers to a person who in behalf of another person and with respect to a particular electronic
document sends, receives and/or stores provides other services in respect of that electronic data message or
electronic document.

(i) "Originator" refers to a person by whom, or on whose behalf, the electronic document purports to have been
created, generated and/or sent. The term does not include a person acting as an intermediary with respect to
that electronic document.

(j) "Service provider" refers to a provider of -

i. On-line services or network access or the operator of facilities therefor, including entities offering the
transmission, routing, or providing of connections for online communications, digital or otherwise,
between or among points specified by a user, of electronic documents of the user's choosing; or

ii. The necessary technical means by which electronic documents of an originator may be stored and
made accessible to designated or undesignated third party.

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Such service providers shall have no authority to modify or alter the content of the electronic data message or
electronic document received or to make any entry therein on behalf of the originator, addressee or any third party
unless specifically authorized to do so, and who shall retain the electronic document in accordance with the specific
request or as necessary for the purpose of performing the services it was engaged to perform.

f. Is a facsimile transmission an electronic document?

➢ No because:
o It is not the functional equivalent of an original under the Best Evidence Rule
o Not admissible as electronic evidence

Best Evidence Rule, Rule 130, Revised Rules of Court

GR: When the subject of inquiry is the contents of a document, only the original document is admissible.
XPN:
• Original was lost or destroyed
• Cannot be produced in court without bad faith on the part of the offeror
• Original is in the custody of the opposing party
• Original consist of numerous accounts, too time-consuming to go over with
• Original is a public record

f.1. Discuss Rule 3 of the Rules on Electronic Evidence.

Rule 3
ELECTRONIC DOCUMENTS

Section 1. Electronic documents as functional equivalent of paper-based documents. – Whenever a rule of evidence
refers to the term writing, document, record, instrument, memorandum or any other form of writing, such term shall
be deemed to include an electronic document as defined in these Rules.

➢ Any form of writing referred under the rule of evidence may also be in a digital form.
➢ 3 Types of Evidence
o Testimonial
o Object – how it was used
o Documentary – contents of the document is the focus

Section 2. Admissibility. – An electronic document is admissible in evidence if it complies with the rules on admissibility
prescribed by the Rules of Court and related laws and is authenticated in the manner prescribed by these Rules

When is an electronic document admissible?

➢ If it complies with the rules on admissibility prescribed by the rules of court

When is an evidence admissible under Rule 128 of the Rules of Court?

➢ When it is relevant to the issue and is not excluded by the law of these rules
➢ Relevancy – Evidence must have such a relation to the fact in issue as to induce belief in its existence or non-
existence.
o In assessing the evidential weight of an electronic data message or electronic document, the reliability
of the manner in which it was generated, stored or communicated, the reliability of the manner in
which its originator was identified, and other relevant factors shall be given due regard (Section 12, RA
8792).

Section 3. Privileged communication. – The confidential character of a privileged communication is not lost solely on the
ground that it is in the form of an electronic document.

Is the character of privileged communication lost if the writing is in the form of an electronic document?

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 ➢ No.

f.2. Discuss Torres v. PAGCOR, G.R. No. 193531, 14 December 2011.

FACTS:
Torres was a Slot Machine Operations Supervisor (SMOS) of PAGCOR. He allegedly embezzled and stole money
from PAGCOR by adding zero after the first digit of the actual CMR (Credit Meter Readings) of a slot machine or adding a
digit before the first digit of the actual CMR. Because of this, he was placed under preventive suspension and was asked
to explain why he should not be dismissed. He then replied, denying the allegations. However, he was dismissed by
PAGCOR on a letter dated 04 August 2007.
Torres filed with CSC for illegal dismissal and non-payment of wages and other benefits. In response thereto,
PAGCOR contends that Torres failed to perfect an appeal within the period and manner provided by the Rules on
Administrative Cases in the Civil Service Law.

ISSUE: Whether or not Torres filed his motion for reconsideration within the reglementary period and in the manner
provided.

HELD: NO, records did not show that he had filed his motion.
1. It was also not recorded as a valid motion because it is in the form of a facsimile or a fax transmission, which is
not an electronic document as contemplated under the laws.
2. A facsimile transmission is not considered as an electronic evidence under the e-commerce act.
• Motion for Reconsideration may only be filed either by personal delivery or by email.
• However, “Electronic Data Message” and “Electronic Document” do not include a facsimile transmission.
• It is not the functional equivalent of an original under the Best Evidence Rules and is not admissible as
electronic evidence (MCC Industrial Sales Corporation v. Ssangyong Corporation).
2. Since the mode used by Torres was not sanctioned by the Uniform Rules on Administrative Cases in the Civil
Service, it is invalid.

What is a facsimile transmission?

It is a process involving the transmission and reproduction of printed and graphic matter by scanning an original
copy, one elemental area at a time, and representing the shade or tone of each area by a specified amount of electric
current (Garvida vs Sales, Jr.).

f. Discuss legal recognition of electronic data message, electronic documents, electronic signatures.

Section 6. Legal Recognition of Electronic Data Messages - Information shall not be denied legal effect, validity or
enforceability solely on the grounds that it is in the data message purporting to give rise to such legal effect, or that it is
merely referred to in that electronic data message.

Section 7. Legal Recognition of Electronic Documents - Electronic documents shall have the legal effect, validity or
enforceability as any other document or legal writing, and -

(a) Where the law requires a document to be in writing, that requirement is met by an electronic document if the said
electronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent
reference, in that -

i. The electronic document has remained complete and unaltered, apart from the addition of any
endorsement and any authorized change, or any change which arises in the normal course of communication,
storage and display; and

ii. The electronic document is reliable in the light of the purpose for which it was generated and in the
light of all relevant circumstances.

(b) Paragraph (a) applies whether the requirement therein is in the form of an obligation or whether the law simply
provides consequences for the document not being presented or retained in its original from.

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(c) Where the law requires that a document be presented or retained in its original form, that requirement is met by an
electronic document if -

i. There exists a reliable assurance as to the integrity of the document from the time when it was first
generated in its final form; and

ii. That document is capable of being displayed to the person to whom it is to be presented:
Provided,That no provision of this Act shall apply to vary any and all requirements of existing laws on formalities
required in the execution of documents for their validity.

For evidentiary purposes, an electronic document shall be the functional equivalent of a written document under
existing laws.

This Act does not modify any statutory rule relating to admissibility of electronic data massages or electronic documents,
except the rules relating to authentication and best evidence.

Section 8. Legal Recognition of Electronic Signatures. - An electronic signature on the electronic document shall be
equivalent to the signature of a person on a written document if that signature is proved by showing that a prescribed
procedure, not alterable by the parties interested in the electronic document, existed under which -

(a) A method is used to identify the party sought to be bound and to indicate said party's access to the electronic
document necessary for his consent or approval through the electronic signature;

(b) Said method is reliable and appropriate for the purpose for which the electronic document was generated or
communicated, in the light of all circumstances, including any relevant agreement;

(c) It is necessary for the party sought to be bound, in or order to proceed further with the transaction, to have executed
or provided the electronic signature; and

(d) The other party is authorized and enabled to verify the electronic signature and to make the decision to proceed with
the transaction authenticated by the same.

Section 9. Presumption Relating to Electronic Signatures - In any proceedings involving an electronic signature, it shall be
presumed that -

(a) The electronic signature is the signature of the person to whom it correlates; and

(b) The electronic signature was affixed by that person with the intention of signing or approving the electronic
document unless the person relying on the electronically signed electronic document knows or has noticed of defects in
or unreliability of the signature or reliance on the electronic signature is not reasonable under the circumstances.

f.1. Discuss Rule 6 of the Rules on Electronic Evidence.

Rule 6
ELECTRONIC SIGNATURES

Section 1. Electronic signature. – An electronic signature or a digital signature authenticated in the manner prescribed
hereunder is admissible in evidence as the functional equivalent of the signature of a person on a written document.

When is an electronic signature admissible under Section 1, Rule 6 of the Revised Rules of Court?

➢ When it is authenticated

How is an electronic signature authenticated under Section 2, Rule 6 of the Revised Rules of Court?
➢ By evidence that it was verified
➢ Other means provided by law
➢ Other means satisfactory to the Judge

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g. What are the presumptions involving electronic signatures?
➢ It is the signature of the person to whom it correlates
➢ The person signed with the intention to approve the document
➢ The signature was authenticated
➢ The signed certificate’s information is correct
➢ Certificate was signed during the operational period
➢ Certificate is not invalid nor revocable
➢ Message contained was not altered from the time it was signed
➢ Certificate was issued by the authority prescribed therein

h. What are considered original documents under the E-Commerce Act?

h.1. Discuss Rule 4 of the Rules on Electronic Evidence.

Section 1. Original of an electronic document. – An electronic document shall be regarded as the equivalent of an
original document under the Best Evidence Rule if it is a printout or output readable by sight or other means, shown to
reflect the data accurately.

When is an electronic document regarded as an original document?

1. When it is a printout

Section 2. Copies as equivalent of the originals. – When a document is in two or more copies executed at or about the
same time with identical contents, or is a counterpart produced by the same impression as the original, or from the
same matrix, or by mechanical or electronic re-recording, or by chemical reproduction, or by other equivalent
techniques which accurately reproduces the original, such copies or duplicates shall be regarded as the equivalent of the
original.

Notwithstanding the foregoing, copies or duplicates shall not be admissible to the same extent as the original if:

(a) a genuine question is raised as to the authenticity of the original; or

(b) in the circumstances it would be unjust or inequitable to admit the copy in lieu of the original.

i. How are electronic data messages and electronic documents authenticated under Section 2, Rule 5?
i.1. Discuss Rule 5 of the Rules on Electronic Evidence.

2. By evidence that it was signed by the same person (intended & one who actually signed)
3. By evidence using an authorized security procedure or device
4. Other evidence showing its integrity and reliability to the satisfaction of the judge

Who has the burden of proving authenticity of an electronic document?

5. The person seeking to introduce an electronic document as an evidence (Section 1, Rule 5 of the Revised Rules of
Court).

Is an electronically notarized document considered as a public document under Section 3, Rule 5?

6. Yes, provided it is in accordance with the rules

j. Discuss admissibility and evidentiary weight of electronic message or electronic document.

j.1. Discuss Rule 7 of the Rules on Electronic Evidence.

Section 1. Factors for assessing evidentiary weight. – In assessing the evidentiary weight of an electronic document, the
following factors may be considered:

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 (a) The reliability of the manner or method in which it was generated, stored or communicated, including but
not limited to input and output procedures, controls, tests and checks for accuracy and reliability of the
electronic data message or document, in the light of all the circumstances as well as any relevant agreement;

(b) The reliability of the manner in which its originator was identified;

(c) The integrity of the information and communication system in which it is recorded or stored, including but
not limited to the hardware and computer programs or software used as well as programming errors;

(d) The familiarity of the witness or the person who made the entry with the communication and information
system;

(e) The nature and quality of the information which went into the communication and information system upon
which the electronic data message or electronic document was based; or

(f) Other factors which the court may consider as affecting the accuracy or integrity of the electronic document
or electronic data message.

Section 2. Integrity of an information and communication system. – In any dispute involving the integrity of the
information and communication system in which an electronic document or electronic data message is recorded or
stored, the court may consider, among others, the following factors:

(a) Whether the information and communication system or other similar device was operated in a manner that
did not affect the integrity of the electronic document, and there are no other reasonable grounds to doubt the
integrity of the information and communication system;

(b) Whether the electronic document was recorded or stored by a party to the proceedings with interest
adverse to that of the party using it; or

(c) Whether the electronic document was recorded or stored in the usual and ordinary course of business by a
person who is not a party to the proceedings and who did not act under the control of the party using it.

j.2. What is hearsay? (Read Section 37 of Rule 130 of the 2019 Amendments to the 1989 Rules on Evidence)
7. Hearsay – a statement other than one made by the declarant while testifying at a trial or hearing, offered to prove
the truth of the facts asserted therein.
8. Dying Declaration is an Exception to the Hearsay Rule – Made under the consciousness o an impending death,
may be received in any case wherein his death is the subject of inquire, as evidence of the cause and surrounding
circumstances of such death.

j.3. Discuss Rule 8 of the Rules on Electronic Evidence.

Rule 8
BUSINESS RECORDS AS EXCEPTION TO THE HEARSAY RULE

Section 1. Inapplicability of the hearsay rule. – A memorandum, report, record or data compilation of acts, events,
conditions, opinions, or diagnoses, made by electronic, optical or other similar means at or near the time of or from
transmission or supply of information by a person with knowledge thereof, and kept in the regular course or conduct of
a business activity, and such was the regular practice to make the memorandum, report, record, or data compilation by
electronic, optical or similar means, all of which are shown by the testimony of the custodian or other qualified
witnesses, is excepted from the rule on hearsay evidence.

➢ Only needs to prove that it is part of the ordinary course of business

➢ Impractical to ask everyone involved in the transactions

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Section 2. Overcoming the presumption. – The presumption provided for in Section 1 of this Rule may be overcome by
evidence of the untrustworthiness of the source of information or the method or circumstances of the preparation,
transmission or storage thereof.

k. Discuss Rules 9 to 11 of the Rules on Electronic Evidence.

Rule 9
METHOD OF PROOF

Section 1. Affidavit evidence. – All matters relating to the admissibility and evidentiary weight of an electronic document
may be established by an affidavit stating facts of direct personal knowledge of the affiant or based on authentic
records. The affidavit must affirmatively show the competence of the affiant to testify on the matters contained therein.

What makes a statement a sworn?

➢ Done before a jurat – person who has taken an oath

Section 2. Cross-examination of deponent. – The affiant shall be made to affirm the contents of the affidavit in open
court and may be cross-examined as a matter of right by the adverse party.

Rule 10
EXAMINATION OF WITNESSES

Section 1. Electronic testimony. – After summarily hearing the parties pursuant to Rule 9 of these Rules, the court may
authorize the presentation of testimonial evidence by electronic means. Before so authorizing, the court shall determine
the necessity for such presentation and prescribe terms and conditions as may be necessary under the circumstances,
including the protection of the rights of the parties and witnesses concerned.

Section 2. Transcript of electronic testimony. – When examination of a witness is done electronically, the entire
proceedings, including the questions and answers, shall be transcribed by a stenographer, stenotypist or other recorder
authorized for the purpose, who shall certify as correct the transcript done by him. The transcript should reflect the fact
that the proceedings, either in whole or in part, had been electronically recorded.

Section 3. Storage of electronic evidence. – The electronic evidence and recording thereof as well as the stenographic
notes shall form part of the record of the case. Such transcript and recording shall be deemed prima facie evidence of
such proceedings.

Rule 11
AUDIO, PHOTOGRAPHIC, VIDEO, AND EPHEMERAL EVIDENCE

Section 1. Audio, video and similar evidence. – Audio, photographic and video evidence of events, acts or transactions
shall be admissible provided it shall be shown, presented or displayed to the court and shall be identified, explained or
authenticated by the person who made the recording or by some other person competent to testify on the accuracy
thereof.

Section 2. Ephemeral electronic communications. – Ephemeral electronic communications shall be proven by the
testimony of a person who was a party to the same or has personal knowledge thereof. In the absence or unavailability
of such witnesses, other competent evidence may be admitted.

A recording of the telephone conversation or ephemeral electronic communication shall be covered by the immediately
preceding section.

If the foregoing communications are recorded or embodied in an electronic document, then the provisions of Rule 5
shall apply.

l. Read Republic Act No. 8484 or Access Devices Regulation Act of 1998.
m. What is an access device?

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 9. Access Device – means any card, plate, code, account number, electronic serial number, personal identification
number, or other telecommunications service, equipment, or instrumental identifier, or other means of account
access that can be used to obtain money, good, services, or any other thing of value or to initiate a transfer of
funds (other than a transfer originated solely by paper instrument) (Section 3(a) of RA 8484 or the Access Devices
Regulation Act).

n. What is a credit card?

10. Credit Card – means any card, plate, coupon book, or other credit device existing for the purpose of obtaining
money, goods, property, labor or services or any thing of value on credit (Section 3(f) of RA 8484 or the Access
Devices Regulation Act);

n.1. Discuss Pantaleon v. American Express International, Inc., G.R. No. 174269, 25 Aug. 2010.
HELD: AMEX’ delay constituted breach of its contractual obligation because:
1. 78mins is an awfully long, patently unreasonable length of time to approve or disapprove credit card purchase.
2. The delay was attended by unjustified neglect and bad faith, since it alleges to have consumed more than one
hour, more so when there is nothing in Pantaleon’s history that would warrant the imprudent suspension of action
by AMEX in processing the purchase.

o. Discuss the other terms defined in Section 3 of RA 8484.

(b) Counterfeit Access Device – means any access device that is counterfeit, fictitious, altered, or forged, or an
identifiable component of an access device or counterfeit access device;

(c) Unauthorized Access Device – means any access device that is stolen, lost, expired, revoked, canceled, suspended, or
obtained with intent to defraud;

(d) Access Device Fraudulently Applied for – means any access device that was applied for or issued on account of the
use of falsified document, false information, fictitious identities and addresses, or any form of false pretense or
misrepresentation;

(e) Consumer – means a natural person;

(g) Device Making or Altering Equipment – means any equipment, mechanism or impression designed or primarily used
for making or altering or reencoding an access device or a counterfeit access device;

(h) Finance Charges – represent the amount to be paid by the debtor incident to the extension of credit such as interest
or discounts, collection fees, credit investigation fees, and other service charges;

(i) Open-end-credit plan – means a consumer credit extended on an account pursuant to a plan under which:

1) the creditor may permit the person to make purchase or obtain loans, from time to time, directly from the
creditor or indirectly by use of credit card, or other service;

2) the person has the privilege of paying the balance; or

3) a finance charge may be computed by the creditor from time to time on an unpaid balance.

(j) Penalty Charges – means such amount, in addition to interest, imposed on the credit card holder for non-payment of
an account within a prescribed period;

(k) Produce – includes design, alter, authenticate, duplicate or assemble; and

(l) Trafficking – means transferring, or otherwise disposing of, to another, or obtaining control of, with intent to transfer
or dispose of.

p. What are the pieces of information required to be disclosed during credit card application and solicitation process?
1. Annual Percentage Rate

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 • Interest rate upon failure to pay
• Options if you don’t want to pay:
i. Cancel
ii. Waive
iii. Find for another credit card that doesn’t charge annual fees
2. Annual and other fees
3. Balance Calculation Method
4. Cash Advance Fee
5. Over-the-Limit-Fee

q. What pieces of information need not be disclosed?

1.

r. What pieces of information should be disclosed prior to renewal?

1. Billing period that the account will expire if not renewed
2. Information in Section 4, disclosed at least 30 days prior to the scheduled renewal date
3. Information in Section 4(1) which shall be transmitted to consumer’s credit card account
4. Method by which a consumer may terminate continued credit availability

s. What is the penalty for failure to disclose those required pieces of information?
➢ After due notice and hearing, shall be subject to suspension or cancellation of their authority to issue credit cards
by BSP, SEC, and other government agency.

t. Discuss the acts that constitute access devices fraud.

Section 9. Prohibited Acts. – The following acts shall constitute access device fraud and are hereby declared to be
unlawful:

(a) producing, using, trafficking in one or more counterfeit access devices;

(b) trafficking in one or more unauthorized access devices or access devices fraudulently applied for;

(c) using, with intent to defraud, an unauthorized access device;

(d) using an access device fraudulently applied for;

(e) possessing one or more counterfeit access devices or access devices fraudulently applied for;

(f) producing, trafficking in, having control or custody of, or possessing device-making or altering equipment without
being in the business or employment, which lawfully deals with the manufacture, issuance, or distribution of such
equipment;

(g) inducing, enticing, permitting or in any manner allowing another, for consideration or otherwise to produce, use,
traffic in counterfeit access devices, unauthorized access devices or access devices fraudulently applied for;

(h) multiple imprinting on more than one transaction record, sales slip or similar document, thereby making it appear
that the device holder has entered into a transaction other than those which said device holder had lawfully contracted
for, or submitting, without being an affiliated merchant, an order to collect from the issuer of the access device, such
extra sales slip through an affiliated merchant who connives therewith, or, under false pretenses of being an affiliated
merchant, present for collection such sales slips, and similar documents;

(i) disclosing any information imprinted on the access device, such as, but not limited to, the account number or name or
address of the device holder, without the latter's authority or permission;

(j) obtaining money or anything of value through the use of an access device, with intent to defraud or with intent to
gain and fleeing thereafter;

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(k) having in one's possession, without authority from the owner of the access device or the access device company, an
access device, or any material, such as slips, carbon paper, or any other medium, on which the access device is written,
printed, embossed, or otherwise indicated;

(l) writing or causing to be written on sales slips, approval numbers from the issuer of the access device of the fact of
approval, where in fact no such approval was given, or where, if given, what is written is deliberately different from the
approval actually given;

(m) making any alteration, without the access device holder's authority, of any amount or other information written on
the sales slip;

(n) effecting transaction, with one or more access devices issued to another person or persons, to receive payment or
any other thing of value;

(o) without the authorization of the issuer of the access device, soliciting a person for the purpose of:

1) offering an access device; or

2) selling information regarding or an application to obtain an access device; or

(p) without the authorization of the credit card system member or its agent, causing or arranging for another person to
present to the member or its agent, for payment, one or more evidence or records of transactions made by credit card.

t.1. Discuss Soledad v. People of the Philippines, G.R. No. 184274, 23 February 2011.

FACTS:
Petitioner offered a Citifinancing loan assistance at a low interest rate. Because Yu was interested, he submitted
the documents as requested by the former. Petitioner then applied for 7 phone numbers and opened a credit card with
Metrobank.
Petitioner was charged in violation of RA 8484, Section 9(e) for possessing a counterfeit access device fraudulently
applied for. Denying the same, he avers that he was never in possession of the credit card because he was arrested
immediately after signing the acknowledgement receipt.

ISSUE: Whether or not Soledad is guilty of access device fraud.

HELD: YES, because:

1. He was in “possession” of the access device
• He had the intent to own the credit cards as he signed the receipt of the same – manifestation of animus
possidendi
• He had materially held the envelop containing the credit card with the intent to possess – manifestation
of corpus or the material holding

t.2. Discuss Cruz v. People of the Philippines, G.R. No. 210266, 07 June 2017.
FACTS:
Cruz used a Citibank credit card bearing the name of “Gerry Santos” to purchase a pair of Ferragamo shoes and 2
bottles of CK perfume from Duty Free. Both transactions were approved, but Wong, cashier when he bought the perfumes,
noticed the abnormality on the last 4 digits of the card number. As such, she called the Citibank to verify the card, and it
later confirmed that it was counterfeit.

ISSUE:
1. Whether or not Cruz was guilty of access device fraud.
2. Whether or not the card was admissible as evidence.

HELD:
1. YES, he was GUILTY because:
• He was in possession and control of the counterfeit card
• The real Gerry Santos was the Head of Citibank’s Risk Management Division
• He also used the counterfeit card to purchase goods
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 2. YES, the card was ADMISSIBLE because:
• Although AM No. 03-1-09-SC generally precludes evidence which were not marked during the pre-trial,
the Court may, through its discretion, allow some evidence provided that there is a good cause shown, or
any substantial reason that affords a legal excuse.

u. When is there conspiracy to commit access devices fraud under Section 11 of RA 8484? What is the penalty?
➢ GR: Conspiracy is not a crime.
➢ When two or more persons conspire to commit any of the offenses listed in Sec. 9
➢ Then one or more persons does any act to effect the object of conspiracy
o Object of Conspiracy - accomplishment of the act
➢ Penalty – each party shall be punished

B|C|D|E|F|G|P Fine – P10,000 or twice the value, There must be NO other

whichever is higher conviction for another offense
under Section 9.
AND

Imprisonment – 6 to 10 years
A|F Fine – P10,000 or twice the value There must be NO other
conviction for another offense
AND under Section 9.

Imprisonment – 10 to 12 years
A-P Fine – P10,000 or twice the value After conviction of any other
offense under Section 9.
AND/OR

Imprisonment – 10 to 20 years

v. What is the penalty for frustrated and attempted access devices fraud?
➢ 2/3 – Attempted – Commences but does not perform all acts of execution
➢ 1/2 - Frustrated – Performs all acts of execution but did not consummate the act

w. What is the penalty for being an accessory to access devices fraud?

➢ Accessory - With intent to gain for himself or for another
➢ Penalty – 1/2 – May be prosecuted under this Act or the Anti-Fencing Law, whichever imposes a longer jailtime

x. When is there prima facie evidence of intent to defraud under Section 14 of RA 8484?
➢ Mere possession, control or custody of:
o Access device without permission
o Counterfeit access device
o Access device fraudulently applied for
o Device-making or altering equipment of access device, not registered to be engaged in such business
o Genuine access device not in the name of the possessor or his ordinary course of business
➢ Prima facie evidence is not equivalent to proof beyond reasonable doubt.
o Rebuttable presumption

y. What is the effect of timely reporting of the loss of an access device to the issuer under Section 15?
➢ Would absolve the holder of any financial liability from fraudulent use from the time of report
WEEK 6
a. Read Republic Act No. 10642 or the Philippine Lemon Law and its Implementing Rules and Regulations (IRR) from the
DTI.
b. Discuss the state policy declared in RA 10642.
➢ To promote full protection to the rights of consumers in the sale of motor vehicles against business and trade
practices which are deceptive, unfair, or inimical to the public.
➢ The state recognizes that a motor vehicle is a major consumer purchase or investment. Hence, the rights shall be
clearly defined.
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c. Discuss the terms defined in RA 10642 and its IRR.

(a) Brand new motor vehicle refers to a vehicle constructed entirely from new parts and covered by a manufacturer’s
express warranty at the time of purchase that it has never been sold or registered with the Department of
Transportation and Communications (DOTC) or an appropriate agency or authority, and has never been operated on any
highway of the Philippines, or in any foreign state or country;

(b) Collateral charges refer to the fees paid’ to the Land Transportation Office (LTO) for the registration of a brand new
motor vehicle and other incidental expenses such as, but not limited to, the cost of insurance pertaining to the vehicle,
chattel mortgage fees and interest expenses if applicable;

(c) Comparable motor vehicle refers to a motor vehicle that is identical or reasonably equivalent to the motor vehicle to
be replaced, in terms of specifications and values, subject to availability, as the motor vehicle existed at the time of
purchase: Provided, That there shall be an offsetting from this value for reasonable allowance for its use;

(d) Consumer refers to any person, natural or juridical, who purchases a brand new motor vehicle either by cash or
credit from an authorized distributor, dealer or retailer in the Philippines;

(e) Dealer or retailer refers to any person, natural or juridical, authorized by the manufacturer or distributor to sell
brand new motor vehicles directly to the retail buyers and the public;

(f) Distributor refers to any person, natural or juridical, authorized by the manufacturer to sell brand new motor vehicles
to duly authorized dealers or retailers;

(g) Implementing agency refers to the Department of Trade and Industry (DTI), reorganized under Title X, Book IV of
Executive Order No. 292, series of 1987, otherwise known as the "Administrative Code of 1987";

(h) Lemon Law rights period refers to the period ending twelve (12) months after the date of the original delivery of a
brand new motor vehicle to a consumer or the first twenty thousand (20,000) kilometers of operation after such
delivery, whichever comes first. This shall be the period during which the consumer can report any nonconformity, as
defined in paragraph (k) herein, to the standards and specifications of the manufacturer, authorized distributor,
authorized dealer or retailer, and pursue any right as provided for under this Act;

(i) Manufacturer refers to any person, natural or juridical, engaged in the business of manufacturing or assembling
motor vehicles;

(j) Motor vehicle refers to any self-propelled, four (4) wheeled road vehicle designed to carry passengers including, but
not limited to, sedans, coupes, station wagons, convertibles, pick-ups, vans, sports utility vehicles (SUVs) and Asian
Utility Vehicles (AUVs) but excluding motorcycles, delivery trucks, dump trucks, buses, road rollers, trolley cars, street
sweepers, sprinklers, lawn mowers and heavy equipment such as, but not limited to, bulldozers, payloaders, graders,
forklifts, amphibian trucks, cranes, and vehicles which run only on rails or tracks, and tractors, trailers and traction
engines of all kinds used exclusively for agricultural purposes. Trailers having any number of wheels, when propelled or
intended by attachment to a motor vehicle, shall be classified as separate motor vehicle with no power rating;

(k) Nonconformity refers to any defect or condition that substantially impairs the use, value or safety of a brand new
motor vehicle which prevents it from conforming to the manufacturer’s or distributor’s standards or specifications,
which cannot be repaired, but excluding conditions resulting from noncompliance by the consumer of his or her
obligations under the warranty, modifications not authorized by the manufacturer or distributor, abuse or neglect, and
damage due to accident or force majeure;

(l) Purchase price refers to the invoice price or the amount of money which the dealer or retailer actually received for
the brand new motor vehicle, in consideration of the sale of such brand new motor vehicle;

(m) Warranty refers to the written assurance, so labeled, of the manufacturer of a brand new motor vehicle including
any term or condition precedent to the enforcement of obligations under the warranty; and

44
(n) Warranty rights period refers to the period provided for under the contract of sale when the manufacturer would
guarantee the materials used, the workmanship and the roadworthiness of a brand new motor vehicle for ordinary use
or reasonable intended purposes.

d. What are the motor vehicles covered under RA 10642?

➢ Self-propelled motor vehicles – 4-wheeled or more

e. What is repair attempt?

➢ After at least four (4) separate repair attempts by the same manufacturer, distributor, authorized dealer or
retailer for the same complaint, and the nonconformity issue remains unresolved, the consumer may invoke his
or her rights under this Act.
➢ The repair may include replacement of parts components, or assemblies.

f. Discuss the repair attempt process outlined in the IRR of RA 10642.

➢ Service Booklet
➢
g. When must the consumer make the notice of availment of Lemon Law rights and in what form?
➢ Must be in writing
h. Discuss the responsibilities of the consumer under Rule II of the IRR of RA 10642.
i. Discuss the process of availment of Lemon Law rights.
j. What are the documents to be presented before a consumer may avail of his Lemon Law rights?
k. Discuss the remedies for dispute resolution.
➢ Mediation
➢ Arbitration
➢ Adjudication

k.1. Who exercises exclusive and original jurisdiction over disputes arising RA 10642?
➢ DTI

k.2. Discuss mediation and the process.

k.3. Discuss arbitration.
➢ Ad hoc arbitration

k.4. Discuss adjudication and the process.

➢ A judgment will come from the DTI hearing officer

k.5. Is the DTI Secrtary’s decision final and non-appealable? (Read Sections 1 and 4 of Rule 65 of the Rules of Court)
➢ Yes
➢ May raise an appeal to CA
➢ Rule 65 – errors of jurisdiction – grave abuse of discretion amounting to excess or lack of jurisdiction

l. What is reasonable allowance for use?

➢ 20% deduction from the purchase price because of depreciation

m. What should be disclosed on resale?

➢ Fact of return of the vehicle
➢ Nature of nonconformity which caused the return
➢ Condition of the vehicle at the time of the transfer to the manufacturer, distributor, authorized dealer or retailer

n. Is violation of the Philippine Lemon Law a crime?

➢ Yes, because there is a penalty of at least P100,000.

o. What are the three Rs of consumer protection in relation to the Philippine Lemon Law?
➢ Repair
➢ Replace/Return
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 ➢ Refund

WEEK 7
a. Read Arts. 1 to 47 of Republic Act No. 7394 and its Implementing Rules and Regulations.
b. Discuss the state policy declared in RA 7394.
➢ Protect the interest of the consumer
➢ Promote the general welfare of consumers
➢ Establish standards of conduct for business and industry
o Protection against hazards to health and safety
o Protection against deceptive, unfair, and unconscionable sales acts and practices
o Provision of information and education to facilitate sound choice and the proper exercise of rights by the
consumer
o Adequate rights and means of redress
o Involvement of consumer representatives in the formulation of social and economic policies

c. What is the rule in construing and interpreting provisions of RA 7394?

➢ In favor of the consumer and against the retailer

d. Discuss the terms defined in RA 7394.

➢ Fd

e. Discuss Consumer Product Quality and Safety

f. What is the declared policy involving consumer product and safety
➢ To develop and provide safety and quality standards for consumer products
➢ To assist the consumer in evaluating the quality
➢ To protect the public against unreasonable risks of injury associated with the product
➢ Undertake research on quality improvement of products
➢ Assure the public of the consistency of standardized products

g. Who are tasked to implement consumer product quality and safety?

➢ Department of Health – food, drugs, cosmetics, devices, and substances
➢ Department of Agriculture – agricultural products
➢ Department of Trade and Industry – other consumer products not specified

h. What is a consumer product safety rule?

➢ Standards set by the implementing agency which provides for the protection of consumers against hazards
➢ Must be promulgated 2 newspapers of general circulation for at least once a week in a month

i. Discuss the minimum requirements for consumer product standards under Article 7.
➢ Establish consumer product quality and safety standards containing requirements on:
o Performance, composition, contents, design, construction, finish, packaging
o Kind, class, grade, dimensions, weight, material
o Sampling, tests
o Storage precautions, transporting, packaging
o Mark with clear and adequate safety warnings or instructions, respecting the warnings or instructions

j. What should be done in case a consumer product is found to be injurious, unsafe, or dangerous?
➢ Petition/Initiative of consumer
➢ Assess that the product is injurious or dangerous
➢ Give due notice and hearing
➢ Render judgment whether to recall (return), prohibition, or seizure from sale

k. What happens if a consumer product is found to be imminently injurious, unsafe or dangerous?

➢ Order is immediate recall, ban, or seizure from public sale or distribution
46
 ➢ Seller, distributor, manufacturer, or producer shall be afforded a hearing within 48 hrs from such order
l. In case a department determines a consumer product to be substandard or materially defective, what must the
department do under Article 11?
➢ Conduct hearing
➢ Find the product to be substandard or materially defective
➢ Notify the manufacturer, distributor, or seller to:
o Give notice to the public
o Give notice to each manufacturer, distributor, or seller
➢ Order the manufacturer, distributor, seller to provide all or any of the remedies to the injured consumer:
o Make the product conform with the standards or repair it to conform
o Replace the product with alike or equivalent product
o Refund purchase price less a reasonable allowance for use
o Pay reasonable damages determined by the department

m. What is a certification of conformity to consumer product standards?

➢ Philippine Standard Certification Mark - Proof that a product has complied with the relevant standards set by the
department and in accordance with its IRR

m.1. Discuss Dept. of Trade and Industry v. SteelAsia Manufacturing Corporation, G.R. No. 238263, 16 November
2020. (Discuss also application of Art. 15)
FACTS:
ISSUE:
HELD:

n. Discuss the rules involving imported consumer products under Article 15.
o. Discuss the rules involving exported consumer products under Article 16.
p. Discuss the prohibited acts and penalties stated in Articles 18 and 19.

q. Discuss regulations involving consumer food, drugs, cosmetics, and devices.

r. What is the declared policy under Article 20?
➢ Ensure safe and good quality of food, drugs, cosmetics, and devices
➢ Regulate production, sale, distribution, and advertisement of food, drugs, cosmetics, and devices
➢ Protect the health of the consumers
o To safeguard Filipino consumers from harmful products that are easily accessible to the general public or
market to the extent that it may cause injury
➢ How will be ensured?
o Promulgate standards and regulations

s. Which agency is tasked to implement the policy in Article 20?

➢ Department of Health
➢ Francisco Duque III
o First appointment as DOH sec was during GMA (2005 to 2009)
o BS Zoology in UST
o DMD from UST

t. What is an adulterated food? | Adulterated - Contaminated

A – Poisonous or Deleterious Substance
➢ Added substance to food which contains poisonous or deleterious substance which renders it injurious to health
o Not if the quantity does not ordinarily render it injurious
➢ Containing any added or poisonous or deleterious substance, except:
o Pesticide chemical on raw agricultural commodity
o Food additive
o Color additive which conformed to the standards

47
 ➢ In whole or in part, consists filthy (dirty), putrid (rotten), or decomposed (disintegrated) substance, making it unfit
for food (ex. Amag)
➢ Prepared, packed, or held under unsanitary conditions
o Exposed to dirt and has become contaminated
➢ In whole or part, product of a diseased animal, or died other than by slaughter
o Equipment used in slaughtering must be rust resistant and sanitized
➢ Container has poisonous or deleterious substance
➢ Passed its expiry date

B – Valuable Constituent
➢ Valuable constituent has been omitted or abstracted, and the same has not be substituted by any healthful
equivalent
➢ Any substance – not considered a valuable constituent – has been added
➢ Damage or inferiority has been concealed
➢ Substance has been added or packed therewith, increasing its bulk or weight, reducing its quality or strength to
make it appear of greater value

C – Unsafe Color Additive

➢ DOH shall promulgate regulations on color additives which are harmless and suitable for use and where tolerances
have been established

D – Confectionery, Alcohol, or Other Non-Nutritive Articles

➢ When is non-nutritive article SAFE?
o If such addition is functional for the packaging, manufacture, or storage of confectionery
o Use of the same does NOT promote deception which results in adulteration or mislabeling
o Must NOT render the product injurious or hazardous
➢ When is a confectionery SAFE to use?
o Contains less than 1/2 of 1% alcohol by volume – 0.5% alcohol used in flavoring extracts
o Over ½ alcohol by volume is considered alcoholic
➢ When is a chewing gum SAFE?
o If it contains harmless non-nutritive masticatory (chewy) substance

E – Oleomargarine, Margarine, or Butter

➢ If the raw materials used, whole or part, filthy, putrid, or decomposed making it unfit for food

F – Not in Accordance with Manufacturing Practice

➢ As established by the DOH

t.1. Discuss Department of Health v. Nestle Philippines, Inc., G.R. No. 244242, 14 September 2020.

FACTS:
Jarra bought a 150-gram packet of Nestle Bear Brand Powdered Milk from Joy Store in San Del Monte,
QC. Upon opening, she noticed the presence of larvae and that the milk looked yellowish and lumpy. So,
she filed a complaint.

CAO-NCR: Jarra | Reconsideration: Denied

During the conciliation proceedings with the Consumer Arbitration Office of NCR, the officer requested BFAD for
a laboratory test. It later revealed that the milk had live insect larvae and the cream powder has a strong stale
odor, rendering it unfit for human consumption. Because there is a substantial evidence proving that there is
clear violation of the Consumer Act, the CAO-NCR rendered decision in favor of Jarra.

Office of DOH Secretary: Jarra | Reconsideration: Denied

The DOH secretary affirmed the CAO-NCR ruling with modification – actual damages were deleted. Because
there is no proof that there was grave abuse of discretion, giving credence to the findings of BFAD was upheld.
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 CA: Nestle | Reconsideration: Denied
The CA ruled in favor of Nestle because they think that the infestation could have been cause by some other
unknown reason:
• BFAD report did not state whether the milk was adulterated while in custody of Jarra or on its
defective or unsanitary manufacturing process.
• It could be assumed that the infestation occurred when it was transported or packed, or when
stored in stock by the vendor.

DOH is claiming that:

• The assailed CA decision relied on mere errors of judgment, not a proper basis of certiorari
• There was no finding that the DOH and CAO-NCR acted with grave abuse of discretion amounting to lack
or excess of jurisdiction
• CAO-NCR and DOH based their rulings on substantial evidence, the BFAD report

Nestle is claiming that:

➢ The courts are not bound by the findings of administrative agencies when there is no evidence in
support thereof, or when there is grave abuse of discretion.

ISSUE: Whether or not the CA committed grave abuse of discretion.

HELD: NO grave abuse of discretion can be attributed to the DOH in giving more weight on the account of Jarra and the
findings of BFAD because:

1. Doctrine of Conclusiveness of Administrative Findings of Fact – applies to all administrative agencies – only requires
substantial evidence
1.1 The DOH gave more credence on the allegations of Jarra and the BFAD report
1.2 BFAD is presumed to possess technical expertise on the given field and its findings cannot be peremptorily
set aside
1.3 There is no doubt that the milk was a product of Nestle, and that such was found to be adulterated

2. The welfare of the consumers or “unsuspecting public” is of paramount importance as against the rights of the
manufacturer.

3. Nestle failed to satisfy the burden of proof that it was not their fault, they failed to turn over the assumption.

IMPORTANT:
➢ Instead of restituting Jarra with 2 bottles of RC Cola, or reimburse the value thereof, Nestle must restitute Jarra
with same Bear Brand Milk.
o No longer Jarra’s discretion – order of the court

u. Who regulates unprocessed food?

➢ Provincial, Municipal, and City Government
➢ Pursuant to Local Government Code – Section 21 (d), Section 447 (5) (iv), Section 458 (5) (iv)
➢ Unprocessed Food –
o Meat, fresh fruits, poultry, milk, fish, vegetables, and other foodstuff for public consumption
➢ What about SM?

v. Discuss the rules involving poisonous ingredients in food.

➢ GR: Any poisonous ingredient is deemed unsafe.
➢ XPN:
o Required or cannot be avoided in production
o Cannot be avoided by good manufacturing practice

49
 ▪ DOH must promulgate regulations standardizing the allowable amount which is safe for
consumption
▪ Quantity exceeding such threshold shall be deemed unsafe

What are the rules in determining the allowable quantity?

➢ Must consider the amount which is required/cannot be avoided in the production or manufacture
➢ Must consider other ways that consumers may be affected by the same or other substance

w. What is a food additive? When is it allowed?

➢ Food Additive – Substances added to food to maintain or improve its safety, freshness, taste, texture, or
appearance.
o Examples – salt (meat/bacon/tuyo), sugar (marmalade – citrus fruit preservative, with peel), sulfur dioxide
(in wine)
➢ GR: Any food additive is deemed unsafe.
➢ XPN:
o Intended use is for investigational purpose by experts
o Intended use is in conformity with the regulation issued by DOH

x. Discuss petition for regulation of food additive.

➢ Who may initiate the action? – Any person
➢ What is the subject of the action? – Petition proposing the issuance of a regulation on the intended use of a food
additive
➢ What shall the DOH do? –

1. Promulgate a regulation prescribing:

o Conditions under which a food additive may be safely used:
▪ Specifications of the food
▪ Classes of the food
o Maximum quantity which may be:
▪ Used
▪ Permitted to remain on the food
o Manner in which additive may be added or used
o Directions or other labeling or packaging requirement
2. Notify the petitioner of judgement either:
o Grant and the reasons
o Deny and the reasons

y. What are considered as adulterated drugs and devices?

A – Filthy, Putrid, or Decomposed Substance

➢ In whole or in part, contains filthy, putrid, or adulterated substance which may affect its safety, efficacy, or good
quality
➢ Manufactured, prepared, or held under unsanitary conditions whereby it may have been contaminated
➢ Container is composed of any poisonous or deleterious substance
➢ Bears or contains any color other than a permissible one as determined by the DOH

B – Drugs Recognized in a Compendium

➢ GR: It is deemed adulterated if the drug is recognized in a compendium, but its strength is below the prescribed
threshold from said compendium
o Drug Compendium – Summaries of drug information that are complied by experts who have reviewed
clinical data on drugs
▪ Philippine National Formulary
▪ United States Pharmacopeia
➢ XPN:
50
 o If the current prescribed methods of assay/evaluation is insufficient
o If the DOH promulgates a special regulation prescribing appropriate tests or methods of safety, efficacy,
quality, purity
o If the methods of assay are different from what has been prescribed, and such was plainly stated in its
label and approved for registration as such

C – Other Drugs
➢ If it is not subject of Par. B and it has different strength than what it purports or represented to posses

D – Mixture of Products Reducing its Safety and Efficacy

➢ If the drug has been mixed or packed with other substances
➢ If the drug has been substituted in whole or in part

E – Methods. Facilities, and Control

➢ If the methods, facilities, or controls used are not in conformity with current good manufacturing practices even
though the drug, itself, met the quality and purity characteristics it purports or represented to posses

z. Discuss Article 30 regarding exemptions.

A. Drugs and devices are EXEMPT from labeling and packaging requirements if it is:
• In accordance with the process of trade, to be processed, labeled, or repacked in substantial quantities at
establishments AND
• Not adulterated or mislabeled

OTHER EXEMPTIONS:
B.1.i. Habit-forming – has special regulations
• Takes control of the brain and behavior, activating behavioral patterns that are directed excessively and
compulsively toward drug usage
• Intends to develop repetitive and nearly automatic behaviors – habit
• Examples – Muscle relaxers, medications for insomnia

B.1.ii. Because of their toxicity, use must always be supervised by a licensed doctor

B.1.iii. New drugs for investigational use, dispensed only upon certain documents:
• Written prescription
• Oral prescription reduced in writing and filed by an RPH
• Refiling authorized and filed by an RPH

NOTE: Non-compliance renders the drug as deemed mislabeled

B.2. Drugs and devices dispensed by refiling or filing of a prescription by a licensed doctor, also tasked to administer the
drug are exempt from the requirements under Article 89 if:
• On the label:
o Name and address of the dispenser – company
o Serial number and date of prescription or its filing
o Name of the prescriber – doctor
• On the prescription:
o Name of the patient
o Directions for use
o Cautionary statements

NOTE: Must still comply with Article 89, must NOT be:
• a – false or misleading labeling
• h – misleading form of container
o imitation of another drug
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 o offered for sale under the name of another drug
• f – drug recognized in the official compendium but the name on the label is not as what has been prescribed |
Method of packaging may be modified by DOH
• g – drug liable to deterioration but precautions must be on the label, and packaged in such form and manner as
prescribed by the DOH

B.3. DOH, by regulation, may remove drugs subject to Article 89 (d) and Article 31 from the requirements of sub-article
(b) (1) when such requirements are NOT necessary
➢ Exempt from investigation and reports showing that drugs are safe, efficacious and of good qualities:
• Article 89 (d) – drugs containing narcotics – heroin, morphine, codeine – painkillers
o After being designated by DOH, regulated as habit-forming
• Article 31 – the need for licensing and registration

B.4. Caution Statement: “Caution: Should not be dispended without prescription”

➢ Drugs subject to Article 31 (b) (1) shall be deemed mislabeled if it failed to bear the caution statement
➢ Drugs not subject to Article 31 (b) (1) if it bears the caution statement
➢ Article 31 (b)(1) – Submission to DOH of report of investigation that drugs are safe, efficacious and of good
qualities

aa. Discuss the requirement of certificate of product registration and license to operate – MUST BE FROM FDA
➢ Effective application, certificate of product registration, and license are ALL necessary before drugs/devices may
be manufactured, sold, offered for sale, imported/exported, or distributed.

➢ Requisite of an Effective Application

o Filing, by any person, of an application under oath
o Such person must submit:
▪ Reports of investigation that the drug/device is safe, efficacious, and of good quality based on
clinical studies conducted in the Philippines
▪ Full list of components of the drug/device
▪ Full statement of the composition of the drug/device
▪ Full description of the methods, facilities, and controls used
▪ Samples of such drug/device
▪ Specimen of labeling
▪ Other requirements as prescribed
o Within 180 days or more as may be agreed upon, DOH may either:
▪ Approve the application + reasons
▪ Give Notice of Hearing + reasons

➢ Grounds for Disapproval of Application

o Reports of investigation is inadequate and subsequent tests showed that the drug/device is unsafe,
inefficacious, or of doubtful therapeutic value, and the facilities and controls used are inadequate to
preserve its identity, strength, quality, and purity
o Insufficient information in determining whether drug/device is safe
o Lacks substantial evidence that the drug will have the effects it claimed to have
o Labeling is misleading/false
▪ Therapeutic Value – related to the therapeutic properties of medications, their clinical
effectiveness, and health outcomes.

➢ Grounds for Suspension of an Effective Application

o Upon applicability of a test, result showed that the tests done/methods used that the drug/device is
unsafe
o Untrue statement of material facts

➢ Exemptions
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 o Drugs for investigational use need not secure licenses and registration
o Compassionate Special Permit
▪ Special permit granted to physicians or hospitals to use investigational drugs which are not yet
registered or in the process of registration in the Philippines

➢ Fees
o Fees for the issuance of certificate of registration shall be promulgated by the DOH

bb. What are the rules involving dangerous drugs under Article 32?
➢ Importation, distribution, manufacture, production, compounding, prescription, dispensing and sale of, and
other lawful acts in connection with dangerous drugs, as may be deemed necessary according to the medical
and research needs of the country, and quantity thereof, shall be under the jurisdiction and authority of the
Dangerous Drugs Board.
➢ PDEA is the implementing arm of DDB | DDB is the policymaker while PDEA enforces
➢ Example: Hydrochloric Acid, Muriatic Acid – Dangerous Drug – Chemical Formula

cc. What are the rules involving banned or restricted drugs under Article 33?
➢ Banned or confiscated or use is severely restricted, whichever is appropriate
➢ DOH must monitor and cause maintenance and regular publications of an updated consolidated list
➢ Examples: Marijuana, heroin, opium, coca leaves
o Scientific name - Cannabis Sativa
o Cannabis - Drug Name
o marijuana - Common Name

dd. Discuss certification of drugs containing antibiotics.

➢ When must certification be issued?
o GR: Batches of drug which contain any kind of antibiotic, in whole or in part.
o XPNs:
▪ When the DOH finds that the requirement is NOT necessary
▪ Exemptions from requirements under Art 34 and 89 (j):
• Drugs which are to be stored, processed, labeled, or repacked at establishments
• Drugs which conform to standards set by DOH
• Drugs for investigational use

➢ What is the requisite for certification?

o Drugs has the identity, strength, quantity and purity as prescribed by the DOH and is necessary for
consumer protection

➢ What is the process of certification?

o DOH shall issue the release for such batch
▪ It must be released without risk to safety and efficacy of use
▪ DOH shall prescribe the date of expiration & other conditions which may make the drug
ineffective, per batch/portion

➢ Antibiotic Drug – Containing any quantity of any chemical substance which is produced by a micro-organism and
has the capacity to inhibit or destroy micro-organism in dilute solution
o Destroys or slow down the growth of bacteria

ee. What are adulterated cosmetics?

➢ Cosmetics –
o Articles intended to be rubbed, poured, sprinkled, or sprayed on skin for cleansing, beautifying, promoting
attractiveness
o Article intended for use as a component of any article, except soap
➢ Cosmetics are deemed adulterated if:

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 o It contains poisonous or deleterious substance which may make it injurious to users under:
▪ Prescribed usage – amount limitations, frequency
▪ Customary usage
o Consists of filthy, putrid, or decomposed substance – whole/part
o Prepared, packed, or held under unsanitary conditions where the product has been contaminated
o Container is composed of poisonous or deleterious substance
o If product is not a hair dye – color additive other than which has been prescribed is deemed adulterated
▪ Does NOT apply to eyebrow/eyelash hair dyes
o If product is a hair dye – if label did NOT bear caution statement:
▪ May cause skin irritation
▪ Directions for preliminary test/patch test

ff. What are provisional permits?

➢ Temporary authorization for the distribution or sale of food, cosmetics, drugs or devices, pending clearance
and/or compliance with domestic requirements
o “Provisional” - Temporary, preliminary, or tentative
o Recognition by one or both sides of the negotiation process that an agreement be considered in force
pending compliance with domestic requirements for the effectivity of the agreement.
➢ If after investigation, DOH finds that a product is injurious, ad such cannot be adequately determined because
the article4s have entered the domestic commerce – the general public, DOH shall:
o Issue, suspend, and revoke the current provisional permits in such locality for a temporary period of
time as may b necessary for public health
o During such time, no person may distribute such articles without a provisional permit

gg. What are the prohibited acts and penalties under Arts. 40 and 41?
➢ Transactions involving adulterated or mislabeled products
➢ Adulteration or misbranding
➢ Refusal to permit entry under Art. 36 where samples are to be collected
➢ Guaranty
➢ Forging the use of any mark, stamp, tag, label, or other identification authorized or required
➢ Using to personal advantage, or revealing information on method/process of a trade secret entitled to protection
o Trade Secret – IP rights on confidential information which may be sold or licensed
▪ Commercially valuable
▪ Known to limited group of persons
▪ Subject to reasonable steps taken by the rightful holder
➢ Alteration on the labeling, rendering the product adulterated or mislabeled
➢ Claiming to be licensed when not under Art. 31
➢ Promotional use of reports or analysis furnished in compliance with Sec. 19 of EO 175 (license to operate from
BFD)
➢ Manufacturing/Transacting without license from DOH
➢ Manufacturing/Transacting without registration from DOH
➢ Selling beyond expiration date
➢ Selling without batch certification

hh. What is a hazardous substance?

➢ Any article bearing or containing harmful substances described in clause a, par. 1
➢ Any substance or mixture which is toxic, corrosive, irritant, strong sensitizer, flammable or combustible, or
generates pressure through decomposition, heat or other means, which may cause injury or substantial illness
during or as a result of customary or foreseeable ingestion by children
o Injurious to health, especially when a person is exposed thereto without PPE (Personal Protective
Equipment)
➢ Radioactive substance sufficiently hazardous that it requires labelling
➢ Toy or other articles intended for use by children where there is a need to determine the presence of an electrical,
mechanical, or thermal hazard

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ii. Discuss regulations regarding hazardous substances.
➢ DOH may declare the “hazardous substances” which meet the requirements of paragraph (ak), clause (1) (i) of
Article 4
➢ DOH may exempt from labeling and packaging requirements to the extent consistent with safeguarding the
public
➢ Hazardous substance is deemed mislabeled when it does NOT bear label in accordance with the regulation

jj. What are the prohibited acts and penalties under Arts. 41 and 42?
➢ Violation of Article 40, upon conviction
o Natural Person
▪ Imprisonment of at least 1 year to 5 years OR
▪ Fine – at least P5,000 to P10,000
▪ OR BOTH
o Juridical Person
▪ Chairman of the BOD, President, General Manager, or partners/persons directly responsible
➢ Exemptions
o Transactions in good faith – unless he does NOT want to disclose the:
▪ name and address of the person from whom he purchased or received such product
▪ copies of all documents, if any there be, pertaining to the delivery of the product to him
o Having violated Article 40 BUT he established a guaranty or undertaking signed by, and containing the
name and address of, the person residing in the Philippines from whom he received in good faith the
product
o Having violated Article 40 (a), where the violation exists because the product is adulterated by reason of
containing a color other than the permissible one under regulations promulgated by the Department in
this Act, if such person establishes a guaranty or undertaking signed by, and containing the name and
address, of the manufacturer of the color, to the effect that such color is permissible, under applicable
regulations promulgated by the Department in this Act.
WEEK 8
a. Read Arts 48 to 73 of Republic Act No. 7394 and its Implementing Rules and Regulations.
➢ PROTECTION AGAINST DECEPTIVE, UNFAIR ANDUNCONSCIONABLE SALES ACTS OR PRACTICES

b. Discuss the state policy declared in Art. 48 of RA 7394.

➢ To promote and encourage fair, honest, and equitable relations in consumer transactions
➢ To protect consumers against deceptive, unfair, and unconscionable acts or practices
o To foster just dealings and transactions among buyers and sellers, and to safeguard innocent consumers
from deceptive and unfair acts and practices
➢ Why is there a need to protect consumers?
o To avoid unjust enrichment
o To prevent the success of those with callous minds – insensitive and cruel disregard for others
o Good faith – innocent
o Some products are indispensable to sustaining our health but not everyone is very knowledgeable about
these products – hygiene

c. What are considered deceptive sales acts or practices under Art. 50?
➢ When a seller, manufacturer, producer, or supplier induces a consumer to enter into sales or lease of any product
or service through concealment, false representation, or fraudulent manipulation, before, during, or after such
transaction.
o Concealment – A neglect to communicate that which a party knows and ought to communicate
o False Representation – Misrepresentation | Usually with an intent to deceive or be unfair
o Fraudulent Manipulation – Controlling someone or something to your own advantage

➢ An act or practice is deceptive when:

o Claims that it has the benefits which it in fact does not (INTENT and INDUCED)
▪ Dealer’s Talk – in cosmetic products – exaggerations
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 • Article 1340. The usual exaggerations in trade, when the other party had
an opportunity to know the facts, are not in themselves fraudulent.
• Article 1341. A mere expression of an opinion does not signify fraud, unless
made by an expert and the other party has relied on the former's special
knowledge.
• Article 1343. Misrepresentation made in good faith is not fraudulent but
may constitute error.
o Claims that it has such quality when in fact it does not
▪ Non-stick pans but when scratch, the coating is deteriorated
o Claims it is new, unused, or original when in fact it is not
▪ Greens hills gadgets
o Service/Product available for a reason different from the fact
▪ Nakaw? | Limited Edition kuno | Cash only pero pwede credit
o Claims that it has been supplied in accordance with the previous representation when it was not
▪ Sale by Description/Sample (Lazada)
o Supplied in a quantity greater than the supplier intends
▪ Alcohol shortage
o Service or repair is needed when in fact it is not
▪ Aircon Freon
o That a specific price advantage exists when in fact it does not – SALE?
▪ Save P10!
o Gives false warranty obligations
▪ Example
o Supplier has sponsorship approval when it does not
▪ Cruelty-free, ICC Certification (International Chamber of Commerce)

c.1. Discuss Islamic Da'wah Council of the Philippines, Inc., v. Office of the Executive Secretary, G.R. No. 153888, 09 July
2003.

FACTS:
• IDCP is an NGO and operates under DSWD License, also a federation of national Islamic organizations and an
active member of RISEAP and World Assembly of Muslim Youth
o RISEAP – Federation of Muslim organizations in non-Muslim countries where such are a minority
o Halal – lawful food, things, manners, and actions allowed by God | “to slaughter for food”
▪ Important so consumers would know that the produce are in accordance with the Shariah Law
• RISEAP accredited IDCP to issue halal certifications
o In 1995, IDCP also formulated the internal rules and procedures based on the Quran and Sunnah for the
analysis of food, inspection, and issuance of said certifications
o Also started issuing certifications for a fee and even adopted a patented logo
▪ Quran – central religious text of Islam = Bible
▪ Sunnah – traditional social and legal custom and practice of the Islamic community
• Office of Executive Secretary issued EO 46 in 2001
o Established the Philippine Halal Certification Scheme
o Designated the exclusive authority to issue halal certificates to Office on Muslim Affairs (OMA)
• OMA warned NGOs issuing “illegal halal certification” & encouraged consumer to only purchase products with
their certified products, and sent letters to manufacturers to secure certification from them or they will be
violation EO 46
o In effect, IDCP lost revenues

IDCP claims that:

• EO 46 violates the constitutional provision on the separation of the Church and State
o Section 6, Article II – The separation of the Church and State shall be inviolable
• EO 46 also violates the free exercise of religion
o Section 5, Article III – Free exercise and enjoyment of religion shall forever be allowed.
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 • OMA cannot validly perform the certification because:
o Certifying qualified food products as halal is a function only performed by religious organizations, entity,
or scholars
o A food product only becomes halal after Islamic rituals and prayers
o Only practicing Muslims are qualified to slaughter animals for food
• EO 46 also violated the provision on non-impairment clause
o Section 10, Article III – No law impairing the obligation of contracts shall be passed”
o Prior to issuance of EO 46, they have existing contracts with other manufacturers
• EO 46 also violated other Constitutional rights people’s organizations - Sections 15 and 16, Article XIII:
o State shall respect people’s organizations and their collective interests
o Their social, political, and economic decision shall not be abridged without adequate consultation
▪ EO 46 was issued without consulting them

OSG claims that:

• Freedom of religion is subservient to police power – inferior
• OMA seeks to protect and promote the Muslim Filipinos’ right to health

ISSUE: Whether or not EO 46 is unconstitutional.

HELD: YES, because:

1. The State, in passing EO 46, encroached on the religious freedom of Muslim organizations
• It gave the exclusive authority to certify foods as halal to OMA
• OMA is not composed of practicing Muslims
• Classifying foods as halal is a religious function
o Standards are from Quran and Sunnah
• Compelled Muslims to accept the State’s interpretation of ‘halal’
2. There is no immediate and grave danger to the security and welfare of the community which may justify the
infringement of religious freedom.
3. Filipinos’ right to health are already provided for in existing laws – perceived dangers are likely avoided
• Section 48(4) of the Administrative Code provides for the National Meat Inspection Commission (NMIC)
o NMIC guarantees that the meat sold has been inspected and fit for consumption
• Consumer Act
o Article 2 – Statement of Policy – to protect consumers
o Article 14 – Requirement on standard certification mark prior to sale or distribution
o Article 48 – Tasks DTI to protect consumers from unfair, unconscionable, and deceptive sales in Art. 50
o Article 74 – Requirement on labeling and fair packaging
o Article 50 – Deceptive Sales
3. The Courts believe that Muslims are intelligent buyers
• They can diligently inquire on the reliability of the product

OTHER NOTES:
• DTI Philippine Accreditation Bureau (PAB)
o Deals with the accreditation of halal-certification bodies

d. What are considered unfair or unconscionable sales act or practice under Art. 52?
➢ When during, after, or before the transaction, the seller/supplier, by taking advantage of the consumer’s
physical or mental infirmity (weakness), ignorance (not very knowledgeable), illiteracy, lack of time or the
general conditions of the environment, induces the consumer to enter into a transaction grossly inimical
(adverse – being forced unto him) to his interests, or grossly one-sided in favor of the seller.
➢ An act or practice is deemed unconscionable or unfair if:
o Seller took advantage of the inability of the consumer to reasonably protect his interest because of his
inability to understand the language of the agreement
▪ Appliance/Car

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VS UNJUST ENRICHMENT –
• Unjustly retains the benefit to the loss of another
• Against the fundamental principles of justice, equity, and good conscience
• Two conditions: (1) Benefited without a valid basis and; (2) benefit is at the expense of another

o Price grossly exceeded the retail value

▪ J1s (SRP), Concert Ticket Scalpers (???)
o Consumer was unable to receive substantial benefit from the subject of the transaction
▪ Hydroflask – 12hrs instead of 24hrs – insulated tumblers
o Seller was aware that there was no reasonable probability that consumer will be able to pay
▪ 5/6?
o Seller induced the customer to enter into a grossly one-sided transaction
▪ Pressured by salespersons

c.1. Discuss Aowa Electronic Philippines, Inc. v. DTI-NCR, G.R. No. 189655, 13 April 2011.
FACTS:
• 273 consumer complaints were filed to DTI-NCR against AOWA from 2001 to 2007 for their sale scheme, to wit:
o Telling the consumer that he/she has won a gift and such may be received upon purchasing an additional
product that is substantially priced
o Upon acceptance, customer is invited to Aowa’s store and telling them that they are qualified for a raffle,
by which they may receive another gift, claimable at the expense of another purchased priced item
o Aowa’s representative would also surround the potential customer or gang up, during which they disclose
the need to purchase an item before claiming said gifts
o When short in cash, representatives would urge the potential customer to use credit card or withdraw
cash, or even accompany them at home to get cash
• DTI-NCR filed an administrative action against AOWA for violation of Article 50 and 52.

Adjudication Officer:
• AOWA is LIABLE because:
o Complaints continued to rise despite claims of amicable settlement
o There are no proofs of said amicable settlements
o The 273 complaints are prima facie evidence of violation of consumer act – which allows the
administrative action under Article 159 of the Consumer Act
o AOWA has no promotional permit

Appeal to DTI on the grounds of grave abuse of discretion - DENIED:

• AOWA is still LIABLE because:
o AOWA’s schemes and techniques were fraudulent
o They baited potential customers into buying through their scheme

CA Ruling | Appeal to CA - DENIED:

• AOWA is LIABLE because:
o CA relied on the findings of facts of DTI and the adjudication officer
o AOWA committed acts of misrepresentation violative of the consumer act
o AOWA has no promotional permit

AOWA claims:
• Complaints filed before the DTI-NCR are only from NCR
• DTI did not question the said amicable settlements reached
• Mere filing of numerous complaints is not prima facie evidence of violation of the Consumer Act
• Complaints were based on mere assumptions – not factual
• Amicable settlement manifests AOWA’s good faith and fair dealings

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 • Like other companies, salespersons were employed to convince customers to buy
o Potential customers were never deprived of their refusal to the offer

ISSUE: Whether or not AOWA violated Articles 50 and 52 of the Consumer Act.

HELD: YES, because:

1. DTI acted on the basis of 273 consumer complaints all over Philippines
2. Such complaints were continuously filed despite the issuance of Preventive Measure Order (PMO)
• PMO’s validity was assailed but RTC – DENIED because of lack of jurisdiction
• CA – DENIED because prescriptive period has lapsed
3. Sales scheme they operated was in violation of Articles 50 and 52 of the Consumer Act because:
• Article 50 – techniques and scheme were fraudulent because it was used as a bait to induce customers to buy
o Di naman talaga nanalo – LIE – FRAUD
• Article 52 – techniques and scheme were unfair or unconscionable because it took advantage of the customers
to induce them to buy
o Social pressure
• NOTE: Had AOWA not employed such techniques, consumers would not have bought.
4. AOWA operated their business through such unfair and fraudulent scheme – it was not only promotional

e. What is chain distribution plans or pyramid sales? Is it a valid practice?

➢ Sales devices whereby a person, upon CONDITION that he makes an investment, is granted by the
manufacturer or his representative a RIGHT TO RECRUIT FOR PROFIT one or more additional persons who will
also be granted such right to recruit upon condition of making similar investments.

➢ Conditions in a Pyramid Sales –

o The profits of the person employing such a plan are derived PRIMARILY FROM THE RECRUITMENT OF
OTHER persons into the plan rather than from the sale of consumer products, services and credit.
o The limitation on the number of participants does NOT change the nature of the plan.

➢ Is it a valid practice?
o NO – Article 53 of RA 7394
o Why? Because there is an inevitable collapse of the system due to the saturation of people - plateau
▪ Saturation – State where something is filled completely so no more can be added
o Investment fraud that pays existing investors with funds collected from new investors

➢ VS MULTILEVEL MARKETING PLANS

o Recognized legal business technique
o Engaged in retail of products
o Earns from legitimate sales – makes actual revenues

f. What is home solicitation sales? When is it allowed? DOOR-TO-DOOR

➢ “Home Solicitation Sales” - Consumer sales or leases which are personally solicited by any person or
organization by telephone, person-to-person contact or by written or printed communication other than
general advertising or consummated at the buyer's residence or a place of business, at the seller's transient
quarters, or away from a seller's regular place of business.
➢ Does it only cover transactions that take place at the customer’s residence?
o NO. It may cover places anywhere than the seller’s appropriate trade premises
▪ Example: Fullybooked Book Sale at Benavides Library
➢ When is it allowed?
o After it obtains a permit from DTI
▪ Permit may be revoked or suspended after due notice and hearing
o If it is conducted between 9am to 7pm of each working day (Weekdays)
▪ May be beyond prescribed hours upon agreement
o When conducted by a person who has the proper identification and authority
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 o When properly receipted
➢ Example: Flyers, Avon, Natasha

g. What are the prohibited representations involving home solicitation sales?

➢ Buyer has been specially selected – ulterior motive
➢ Survey, test, or research is being conducted
➢ Seller is making a special offer to a few persons only for a limited period of time

h. What is a referral sale?

➢ Making sales through someone’s referral, usually those who have already tried the products – already their
customers
➢ Sales device employed by the sellers wherein the buyer is induced to acquire goods or services by representing
that after the acquisition of the goods or services, he will receive a rebate, commission or other benefit in return
for the submission of names of potential customers or otherwise helping the seller enter into other sales, if the
receipt of such benefit is contingent on an event occurring after the sale is made.
➢ Can referral sales be used in consumer product? – NO, unless:
o Seller executes a written undertaking that will grant him a specified COMPENSATION or other BENEFIT
to said buyer in return for each transaction made or for subsequent sales caused by the buyer
➢ EXAMPLE: Anytime Fitness,
➢ VS ARTIST ADVERTISEMENT
o Artists have reputation and goodwill which is also their business
o The person who makes the referral:
▪ Artist – professional fee
▪ Regular customer – benefit

i What are the penalties stated in Article 60 of the Consumer Act?

➢ Any violation of Title III, Chapter I, - Unconscionable and Unfair Sales – upon conviction –
o Fine of at least P500 to P10,000 OR
o Imprisonment of at least 5 months to 1 year
o OR BOTH
➢ Court may also grant an injunction restraining order to restrain the business operations and/or actual damages
as may be deemed fit

j. Discuss regulation of practices relative to weight and measures.

k. Which agency enforces provisions involving regulation of practices relative to weight and measurements?
➢ Provisions of Title III, Chapter II – Provincial, city or municipal treasurers
o REGULATION OF PRACTICES RELATIVE TO WEIGHTS AND MEASURES GENERAL PROVISION
➢ Use of Metric System – DTI

l. Discuss sealing and testing of instruments of weights and measure.

➢ All instruments for determining weights and measures in consumer related transactions shall be tested,
calibrated, and sealed every 6 months continuously by the official sealer upon payment of fees
➢ Who is the official sealer? - City or municipal treasurer or his authorized representative

m. What is the system of measurement used?

➢ Metric System –
➢ Used for all products, commodities, materials utilities, services, and commercial transactions
➢ DTI shall adopt a standard measurement for garments, shoes, and other similar products

n. What is the metric system (SI)?

➢ System of measurement which uses:
o Length – meter (m)
o Time – seconds (s)
o Amount of substance – mole (mole)
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 o Electric Current – ampere (A)
o Temperature – kelvin (K)
o Luminous Intensity – candela (cd)
o Mass – kilogram (kg)
➢ Metric System a.k.a International System of Units
➢ Pursuant to PD 187 as amended by PD 748 and BP Blg. 8
➢ Unit of Measurement:
English (or Imperial System) Metric
Inches Centimeters
Feet Meters
Pounds Kilograms
Ounces Grams
Gallons Liters
Miles Kilometers

o. What are the prohibited acts and penalties stated in Arts. 64 and 65?

PROHIBTED ACTS
a) Attaching official tag indicating that the measuring instrument has been tested, calibrated, or inspected by any
person other than the official sealer or his authorized person
b) Imitation of such seal
c) Alteration of certificate or receipt given by the official sealer
d) Sale or use of counterfeit seal
e) Alteration of written figures in the official seal
f) Reuse or restoration of an altered, expired, damaged seal
g) Use of measuring instrument which has not been officially sealed, license has expired, and not renewed
h) Fraudulent alteration of any measuring instrument after obtaining the official seal
i) Knowingly use false measuring instrument, sealed or not
j) Fraudulently giving of short weight measures in the making of a scale
k) Assuming to determine the true weight or measure only to fraudulently misrepresent the same
l) Procure the commission of any such offense – cause someone else to do it for you

PENALTIES
➢ Violation of (a) to (f), and (l), upon conviction –
o Fine of at least P200 to P1,000 OR
o Imprisonment maximum for 1 year
➢ Violation of (g) – use without official seal, expired license
o 1st time:
▪ Fine at least P500 OR
▪ Imprisonment of at least 1 month to 5 years
▪ OR BOTH
➢ Violation of (h) to (k), upon conviction –
o Fine of at least P300 OR
o Imprisonment of maximum of 1 year
o OR BOTH

p. Discuss consumer product and service warranties.

v. Which agency is tasked to implement provisions on consumer products and service warranties?
➢ DTI

w. What is the applicable law on warranties?

➢ Applicable law is from the Law on Sales contained in the New Civil Code
➢ Why? – It is specific

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x. Discuss the additional provisions on warranties stated in Article 68.
A – Terms of Express Warranty
➢ Obligations of the seller/manufacturer who gives express warranty are:
o Set forth terms in clear and readily understandable language
o Clearly identify that the seller is the warrantor
o Identify to whom the warranty is extended – the consumer
o State products or parts covered
o What the warrantor will do in case of defect, malfunction, or other breach and who is responsible
o What the consumer must do to avail the rights under warranty
o Stipulate the prescriptive period from notice of defect, malfunction, or other breach by which the
warrantor may be liable/answerable

B – Express Warranty – Operates from the moment of sale – perfection?

➢ Sales Report –
o All sales shall be reported to the manufacturer, producer or importer within 30 days from date of
purchase, unless otherwise agreed upon.
o The report shall contain:
▪ Date of purchase
▪ Model of the product
▪ Serial Number
▪ Name and address of the buyer
o Sales report is equivalent to warranty registration with the manufacturer, producer, or importer –
sufficient to hold them liable for warranty.
➢ Failure to Make or Send Report –
o Relieves the manufacturer, producer, or importer of the liability in case of breach of warranty
o Distributor becomes personally liable
➢ Retail –
o Retailer is subsidiarily liable in case of failure of both manufacturer and distributor
o Retailer will honor the costs and expenses necessary
o May get reimbursement from manufacturer or distributor
➢ Enforcement of Warranty or Guarantee –
o May be enforced by presentment of a claim through:
▪ Warranty Card or Receipt AND
▪ Product bought
o No other documentary requirement shall be demanded
o If the manufacturer/distributor is the immediate seller – warranty is immediately honored
▪ Receipt or warranty card NOT needed?
o If the immediate seller is a retailer – retailer shall present the warranty to the distributor without cost, in
customer’s behalf
➢ Record of Purchases –
o Who shall keep record? – Distributors and retailers
o How long shall they keep ALL the record? – Corresponding to the lifetime of warranties or guarantees
▪ Guarantee – Express or implied assurance of the quality or length of satisfactory use | Covers
consumer satisfaction | Commitment | Service
▪ Warranty – Covers the product only | Quality and character of goods
➢ Contrary Stipulations – NULL and VOID

C – Designation of Warranties
➢ Full Warranty –
o Meets the requirements of Par. d
➢ Limited Warranty –
o Does not meet the requirements of Par. d

D – Minimum Standards for Warranties

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 ➢ Warrantor shall:
o Remedy/Repair the product within a reasonable time and without charge
o Permit the consumer to choose whether he wants a refund or replacement without charge, after
reasonable number of attempts to repair
➢ Defense of the Warrantor:
o Proves that the defect, malfunction, or breach of warranty was caused by an unreasonable use
attributable to the consumer

E – Duration of Warranty
➢ Express Warranty – Period may be stipulated
➢ Implied Warranty – at least 60 days to 1 year
➢ Implied Warranty on Merchantability AND Express Warranty – As stipulated in express warranty

F – Breach of Warranties
➢ Express Warranty –
o Repair
▪ Must be made to conform to the express warranty within 30 days
▪ 30-day period may be extended by conditions beyond the control of warrantor
• Ex. Repair part will be imported
o Refund/Replacement
▪ Allowable use prior to discovery of defect deducted | Allowance for use
➢ Implied Warranty –
o Accion Quanti Minoris – May retain the goods and recover damages
o Accion Redhibitoria – Reject the goods, cancel contract (rescission – art. 1191 NOT 1380) and recover
from the seller the purchase price + damages (bad faith)

x.1. Discuss De Guzman v. Toyota Cubao, Inc., G.R. No. 141480, 29 November 2006.
FACTS:
• De Guzman purchased a brand-new pick-up on November 27, 1997, (Toyota Hi-Lux) 1996 model for P508,00
o DP: P152,400
o Bal: P355,600 payable in 36 months with 54% interest
• Car was delivered to petitioner 2 days later (Nov. 29)
• October 18, 1998, almost 1 year later, De Guzman demanded replacement of the engine because the car
developed a crack while traversing Marcos Highway during a heavy rain
• De Guzman wants a new engine, grounding his demands on an implied warranty
• Toyota denies his request because such damage was not covered by a warranty
• De Guzman also claims that his action has not prescribed:
o Article 169 of Consumer Act – prescribes in 2 years
o Quasi-delict – prescribes in 4 years

ISSUE: Whether or not the action for breach of implied warranty has prescribed.

HELD: YES, because:

1. Article 67 of the Consumer Act
• The law on sales shall govern the issues on warranties – express provision
2. Article 68(e) of the Consumer Act
• In the absence of an express warranty, there is implied warranty
• Its prescriptive period is not less than 60 days to not more than 1 year – has also prescribed since its been 19
months
3. Article 1571 of the New Civil Code – Law on Sales
• Prescriptive period for action on breach of implied warranty is 6 months
4. A car is a consumer product because it is used for personal, family, or agricultural purposes.

63
 • Article 4. q) "Consumer products and services" means goods, services and credits, debts or obligations which are
primarily for personal, family, household or agricultural purposes, which shall include but not limited to food,
drugs, cosmetics, and devices.
5. What would have covered his action is an implied warranty against hidden defects
• That the engine of the vehicle was defective
• However, he should have filed it within six months – complaint was filed on April 20, 1999 (19 months from date
of delivery Nov. 29, 1997).
6. Article 169 cannot prevail over Article 68 because the latter is the specific provision on the matter.
• 2 years prescriptive period

On whether or not the hierarchy of courts was violated – YES, because:

• The appropriate action is notice of appeal from RTC to the CA – not certiorari with SC
o RTC’s order partake the nature of a final disposition
o Certiorari was filed within the reglementary period but was DISMISSED for violation of hierarchy of courts
• Article 169 of the Consumer Act and the prescription under the Law on Torts DO NOT APPLY because:
o The transaction was a sale governed by the Law on Sales
▪ There was transfer of ownership
▪ Specific law on the matter

y. What are the warranties in supply of services?

➢ Implied Warranty –
o Service will be rendered with due care and skill
o Any material supplied will be fit for the purpose
➢ When the consumer specifies the reason for the service
o There is an implied warranty that the service and contract are of nature or quality that are reasonably
expected to achieve said result UNLESS:
▪ Consumer does not rely on seller’s skill or judgment
▪ Unreasonable for him to rely on seller’s skill or judgment
• Consumer relies on his own judgment/skill

z. Does the provisions of the Consumer Act on warranty apply to professional services? What will apply?
➢ NO, the following are:
o CPA – RA 9298 or the Philippine Accountancy Act of 2004
o Architects – RA 9266 or An Act to Regulate the Practice of Architecture in the Philippines
o Engineers – RA 544 or An Act to Regulate the Practice of Civil Engineering in the Philippines
o Lawyers –
▪ Code of Canon
▪ RA 7662 or the Legal Education Reform Act of 1993 (established LEB)
▪ Article VIII of the 1987 Constitution, Judicial Department
▪ Prior to Admission – Rule 138 of the Rules of Court: Attorneys and Admission to Bar
▪ After Admission – IBP Membership
o Veterinarians – RA 9268 or An Act to Regulate the Practice of Veterinary Medicine in the Philippines
o Optometrists – RA 8050 or An Act Regulating the Practice of Optometry
o Pharmacists – RA 10918 or An Act Regulating and Modernizing the Practice of Pharmacy in the Philippines
o Nurses – RA 9173 or The Philippine Nursing Act of 1991
o Nutritionists and Dietitians – RA 10862 or the Nutrition and Dietetics Law of 1977
o Physical Therapists – RA 11241 or the Philippine Occupational Therapy Law of 2018
o Salesmen – RA 8799 or the Securities Regulation Code
o Medical and Dental Practitioners – RA 4224 or The Medical Act as Amended

➢ Why does the Consumer Act does NOT Apply?

o Because they render professional services, unlike non-professional ones which re repetitive or often
manual in nature
o Said professional studies need board exams/bar
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 o Professional Service - Requiring specialized knowledge and skill usually of a mental or intellectual
nature and usually requiring a license, certification, or registration.
o Their works are impressed with public Interest – there is public duty
▪ Extraordinary diligence

aa. What is the guaranty for service firms?

➢ Service Firms – Service companies/businesses
➢ Shall guarantee workmanship and replacement of spare parts for at least 90 days
➢ It must be indicated in the pertinent invoices

bb. What are the prohibited acts under Art. 72?

➢ Refusal to honor a warranty without any valid legal cause
➢ Unreasonable delay of honoring the warranty
➢ Removal of warranty to evade the same
➢ False representation in an advertisement as to existence of warranty

cc. What are the penalties under Art. 73?

VIOLATION OF ART. 67 – Provisions of the Civil Code on the Law on Sales
➢ First Conviction
o Fine of at least P500 to P5,000 OR
o Imprisonment of at least 3 months to 2 years
o OR BOTH
➢ Second Conviction
o Penalty under first conviction + Revocation of Business Permit and License

VIOLATION OF CHAPTER III, CONSUMER PRODUCT AND SERVICE WARRANTIES

➢ Fine of at least P1,000 to P50,000 OR
➢ Imprisonment for at least 1 year to 5 years
➢ OR BOTH

NOTE: Penalty is without prejudice to Civil obligations (e.g. damages).

WEEK 9
a. Read Arts. 74 to 107 of Republic Act No. 7394 and its Implementing Rules and Regulations.
➢ Chapter IV, Labeling and Fair Packaging

b. Discuss the state policy declared in Article 74 of RA 7394.

➢ Enforce compulsory labeling, and fair packaging to enable the consumer to obtain accurate information as to the
nature, quality and quantity of the contents of the products and to facilitate his comparison of the value of such
products
o Comparison allows the consumer to check which product is the best for his preferences/needs
o Comparison for like products (ex. All shampoos)

c. What is the implementing agency for the provisions on labeling and fair packaging? (Article 75)
➢ DTI – other products (appliances, electronic devices, etc.)
➢ DOH – foods, drugs, cosmetics, devices, and hazardous substances

d. What are the prohibited acts on labeling and packaging? (Article 76)
➢ Who may be liable? – Any person, principal or agent engaged in labelling or manufacturing of consumer product
➢ Prohibited Acts –
o Display or distribute, or cause to be, in commerce any consumer product whose package or label does
NOT conform to the standards
➢ Does this chapter apply to wholesale or retail distributors? – NO 32
XPNs:
o Engaged in packaging/labeling business – principal
o Prescribe the manner in which products are packaged/labeled – principal
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 o Knowingly refused to disclose the source of mislabeled product – accessory

e. What are the minimum labeling requirements for consumer products? (Article 77)
➢ Do the minimum labeling standards apply to ALL products domestically sold?
o YES, either imported or locally manufactured
o Why? – Consumers in the Philippines are aimed to be protected by RA 7394

➢ Minimum Standard –
o Correct and registered tradename or brand name – to identify who may be answerable
o Duly registered trademark
o Duly registered business name
o Address of the manufacturer, importer, repacker of the consumer product in the Philippines
o General make or active ingredients
o Net quality of contents, in terms of weight, measure or numerical count rounded off to at least the nearest
tenths in the metric system
▪ Tenths – 0.0 – one decimal place
o Country of manufacture, if imported
o If the consumer product is manufactured, refilled or repacked under license from a principal, the label
shall so state the fact

*Why do we allow non-english labels? – Some products’ packaging are in the language of the importing country

➢ Other standard which may be required by the concerned department –

o Flammable or not (ex. Butane)
o Directions for use, if necessary (ex. Hair dyes) – relevant information regarding the reconstitution,
preparation, and consumption of the product
o Warning of toxicity
o Wattage, voltage, or amperes (ex. Light bulbs, Hair straightener)
o Process of manufacture used if necessary (ex. Halal)

➢ Design or Visibility Requirement –

o Information which are required to be on the labeling shall appear with conspicuousness – must stand out
– to the extent that it is understood and easily read by ordinary individual

➢ Durability Requirement –
o Integral part of the label must be without danger of being erased or detached under ordinary handling
o “Integral Part” – Necessary information – the list
o Ex. “Nutrition Facts”, While in transit, displayed in sunlight – di dapat mabura
o Nutrition Facts
▪ Not mandatory but it is in the US

f. What is the Philippine Product Standard (PS) Mark?

➢ A mark which identifies whether a product has passed the standard of safety prescribed by the BPS-DTI
➢ Issued by Bureau of Philippine Standard (BPS) of DTI
➢ ICC – Import Commodity Clearance – Imported Products
o For imported products covered under the Mandatory Certification Scheme
➢ PS - “Philippine Standard Quality and/or Safety Mark”
o For local or international manufacturers
➢ The DTI has a list of products under Mandatory Certification and without such, the product may not be
sold/distributed
o Household Appliances
o Consumer Electronics (ex. TV, soundbar system)
o Lighting and Wiring Devices (ex. Christmas Lights)
o Steel Products (ex. Wires)
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 o Plastic Pipes and Ceramic Products (ex. PVC/PB Pipes for Water Supply)
o Cement and Other Construction Materials (ex. Tiles, plywoods)
o Chemical Products (ex. Fireworks)
o Automotive Related Products (ex. Seat belts, Helmets)
o Other Consumer Products (ex. Lighters)
➢ A product certification scheme where products are certified to have passed the consumer product standard
prescribed by the concerned department

g. Is it mandatory to place the Philippine PS mark in the product label? (Article 78)
➢ NO –
o Article 78 used the word “may”
▪ Only permissive but not mandatory
o DTI has a list of products under Mandatory Certification
o Imported products may obtain ICC Mark instead of PS

h. Discuss special packaging requirements for protection of children.

➢ NOT mandatory for all products, but for some
➢ When may special packaging for children be imposed?
o When the degree of nature of hazard to children from the use and handling of such product, by reason
of its packaging, may cause injury or serious illness to children
▪ “Keep Out of Reach of Children” – Children are naturally curious
▪ Ex. Zonrox Bleach
o The packaging required is feasible, practicable, and appropriate
o The concerned department shall consider:
▪ Reasonableness
▪ Available scientific, medical and engineering data concerning special packaging and concerning
accidental, ingestions, illnesses and injuries caused by consumer product
▪ Manufacturing practices of affected industries
▪ Nature and use of product

i. What is a price tag?

➢ the label on an item for sale, showing its price.
➢ Any device, written, printed, affixed or attached to a consumer product or displayed in a consumer repair or
service establishment for the purpose of indicating the retail price per unit or service.
o The price indicated must already include VAT
o Service Charge shall not be included in the price per meal – “Subject to 5% Service Charge”
➢ RA 71 – Requires price tag to be affixed on all articles of commerce
➢ RA 1074 – Requires names of woods to be on the price tag
o Both are already amended by RA 7394

j. When is a price tag required?

➢ During the retail sale to the public of each products
➢ What are the other price tag requirements?
o Publicly displayed
o Shall indicate the price of each article or per unit
o Not to be sold at a price higher than stated
o Without discrimination – price indicated shall not vary for different customers
➢ If the item is a lumber –
o Official name of the wood shall be indicated
▪ So consumers may identify what they need
➢ If the item is too small to stick on a price tag or impractical to put one –
o Price list shall be placed at the nearest point where the product is displayed
▪ ex. Pandora rings

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k. Discuss the manner and regulations for price tags.
➢ Manner –
o Must be written clearly, indicating the price per unit in peso and centavos
▪ Why need centavos – because it’s the smallest amount in coins which circulates in the PH
o Shelf Pricing – Allowed when the item is too small for an individual price tag
o Barcodes and Price Scanners – In addition to price tags, labels or markings, or in combination with shelf
pricing (ex. SM Supermarket)
➢ Regulations –
o Department shall prescribe rules for the visible placement of price tags
o No erasure or alterations of any sort – what about sales?

l. What are the additional labeling requirements for food?

➢ Expiry or expiration date
o “Best Before” must also include “Expiration Date”
o “Best Before” only is not allowed
➢ State whether semi-processed, fully processed, ready-to-cook, ready-to-eat, prepared food or plain mixture
➢ Nutritive value – that’s why piso chips have no nutritional table
➢ Whether ingredients are natural or synthetic
➢ Such other requirements as may be deemed necessary

m. What is a mislabeled food?

a) Labeling or advertising is misleading in any way
b) Offered for sale under the name of another food
c) Imitation of another food, unless specifically stated that it is meant to be an imitation
d) Container is misleading
e) In package form, unless the labeling conforms to this Act
f) If an information required to be prominent on the label is not placed as such
g) If it claims to be a certain food with a set identity, unless
o It conforms to such definition
o Its label bears the name of such food
h) If it purports to be or represented as:
o Food which a standard of quality has been prescribed and its quality fall below such, unless it was meant
and was showed in the label
o Food for which standard for containers have been set and its quality falls below such, unless it was means
and was showed in the label
i) Not a subject of paragraph (g) unless its label bears:
o Common or usual name of food
o Common name of ingredients if manufactured/processed
▪ Spices, flavorings, and colorings need not be named each
j) If it purports to be for special dietary use, unless its label bears the dietary properties
k) Bears or contains any artificial flavoring, coloring, o chemical preservative, unless stated

n. Which law applies for labeling of drugs?8

➢ The Generics Act RA 6675, Section 6* (c). Who Shall Use Generic Terminology –
o Drugstores, hospital and non-hospital pharmacies, supermarkets and stores shall inform any buyer
about any and all other drug products having the same generic name, with their corresponding prices
so the buyer may exercise his option
➢ Generic Name – Chemical name of the drug
o ex. Paracetamol vs Biogesic (brand)
o ex. Bioflu and Neozep has the same generic name

o. What are the additional labeling requirements for cosmetics?

8
Read RA No. 6675 (Generics Act of 1988), Section 6 (c)
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 ➢ Expiry or expiration date
➢ Whether or not it may be an irritant – what ingredients
➢ Precautions or contra-indications
➢ Other requirements as may be deemed necessary

p. When are cosmetic products deemed mislabeled?

➢ False or misleading advertisements/label
➢ In package form unless it conforms to the requirements
➢ Required information was not prominently placed
➢ Container is formed or made to be misleading
➢ Label does not state the common or usual name of the ingredients

q. When are hazardous substances deemed mislabeled?

a) Having been intended or packaged in a form suitable for use in households, especially for children, the
packaging or labeling of which is in violation of the special packaging regulations issued

b) such substance fails to bear a label;

1) which states conspicuously:
i. the name and the place of business of the manufacturer, packer, distributor or seller;
ii. the common or usual name or the chemical name, if there be no common or usual name, of the
hazardous substance or of each component which contributes substantially to the harmfulness
of the substance, unless the concerned department by regulation permits or requires the use of
the recognized generic name;
iii. the signal word "danger" on substances which are extremely flammable, corrosive or highly
toxic;
iv. the signal word "warning" or "caution" with a bright red or orange color with a black symbol
on all other hazardous substances;
v. a clear statement as to the possible injury it may cause if used improperly;
vi. precautionary measures describing the action to be followed or avoided;
vii. instructions when necessary or appropriate for first-aid treatment;
viii. the word "poison" for any hazardous substance which is defined as highly toxic;
• Produces death within 14 days when or when it kills at least 5 laboratory rabbits:
a. Inhaled
b. Single dose
c. Continuous contact with the bare skin
ix. instructions for handling and storage of packages which require special care in handling and
storage; and
x. the statement "keep out of the reach of children", or its practical equivalent, if the article is not
intended for use by children and is not a banned hazardous substance, with adequate directions
for the protection of children from the hazard involved. The aforementioned signal words,
affirmative statements, description of precautionary measures, necessary instructions or other
words or statements may be in English language or its equivalent in Filipino; and

2) on which any statement required under clause 1) of this paragraph is located prominently in bright red
and orange color with a black symbol in contrast typography, layout or color with the other printed
matters on the label.
i. ex. “Keep out of reach of children” must be in bright red with black symbol
ii. “warning”
iii. “caution”
iv. “danger”

EXEMPTION: If the concerned department finds that full compliance is impractical, it may be lifted through a regulation.

r. What are the grounds for seizure and condemnation of mislabeled hazardous substances?
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 ➢ Grounds for seizure and condemnation
o Introduced into commerce or while held for sale
o Order for seizure and/or condemnation from the concerned department
▪ Must not be arbitrary

➢ Seizure and Condemnation – Meaning

o Seizure – Forcible taking of property of a person suspected of violating the law
o Condemnation – Legal acquisition of property by the government

➢ Does Article 93 apply to hazardous substance intended for export to any foreign country? – NO, if:
o Its packaged/labeled in accordance with the specifications of the foreign purchaser
o Labeled in accordance with the laws of the foreign country
o Labeled on the outside of the shipping package to show it’s intended for export
o So exported
o WHY? – Because the laws of the exporting country will apply

➢ May there be seizure and condemnation without order? – NO

o Violation of Due Process

➢ Hazardous substance, after order, must be disposed of by destruction or sale, and the proceeds minus the legal
costs and charges, shall be paid into the treasury of the Philippines.
o XPN: Must not be sold contrary to the provisions of this act
o Treasury – Funds or revenue of a state – Bureau of Treasury

➢ Expenses incurred from the destruction, storage, and labor shall be paid by the consignee or the owner
o Default in payment constitutes a lien against owner/consignee
▪ Possessory Lien – Grants a creditor to remain in possession of property until payment of debtor

s. What are the labeling requirements for cigarettes?

➢ Applies to cigarettes sold and distributed within the PH – not manufactured?
➢ Shall bear “Warning: Cigarette Smoking is Dangerous to Your Health” – or in Filipino
➢ Must be placed in a conspicuous place on every cigarette packet
➢ There should also be a “warning” in the advertisements

t. What are the penalties stated in Article 95.

➢ Violation of Title III, Chapter IV – Except Article 81 to 83 (Price Tag)
o Fine of at least P500 to P20,000 OR
o Imprisonment of at least 3 months to 2 years
o OR BOTH
➢ If the consumer product is not a food, cosmetic, drug, device, or hazardous substance:
o Fine of P200 to P5,000 OR
o Imprisonment for at least 1 month to 1 year
o OR BOTH
➢ Violation of Article 81 to 83 for the first time –
o Fine of at least P200 to P5,000 OR
o Imprisonment of at least 1 month to 6 months
o OR BOTH
o Second Conviction – + Revocation of business permit and license

u. What is a defective product?

➢ A product which, because of the pattern of the defect, the number of defective products distributed in commerce
and the severity of the risk or otherwise, creates a substantial risk of injury to the public.

➢ Unreasonably dangerous when used for its intended purpose and creates substantial risk of injury to the public
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 o ex. Christmas Lights

➢ When is a product defective?

o It does not offer the safety rightfully expected of it, taking relevant circumstances into consideration like:
▪ Presentation (ex. Electric fan tapos di kumpleto yung takip)
▪ Use and hazards reasonably expected of it
▪ Time it was put into circulation

➢ When it a product NOT defective?

o When there is a better-quality product which has been placed in the market

➢ What are the defenses of the manufacturer, builder, producer, or importer?

o If it did not distribute the product to the market
o Product was not defective
o Third party or consumer’s fault

v. Who is liable for defective products?

➢ Defective – unfit for use and poses substantial risk to consumers | Safety is important
➢ Any Filipino or foreign manufacturer, producer, importer
➢ What are they liable for?
o Redress Independently of Fault – an action taken to pay back or fix something
o Damages caused to consumers by defects resulting from design, manufacture, construction, assembly,
and erection, formulas and handling and making up, presentation or packing of the product, and
insufficient information on use and hazards – LACK OF DUE DILIGENCE – CAN THERE BE CASE ON QUASI-
DELICT?

RIGHT TO REDRESS
The right to be compensated for
misrepresentation, shoddy goods or
unsatisfactory services. You may look forward to
manufacturers/storeowners would replace
defective goods pursuant to the provision “No
Return, No Exchange” provided in the DTI’s
Implementing Rules and Regulations of Republic
Act 7349, otherwise known as the Consumer Act
of the Philippines.

w. What is a defective service?

➢ Does not provide the safety the consumer may rightfully expect of, taking the relevant circumstances into
consideration, including but not limited to:
o Manner in which it is provided
o Result of hazards which may be reasonably expected
o Time when it was provided
➢ Services must meet the agreed standards in terms of their content, performance, and outcome.

➢ When is a service not considered defective?

o Use or introduction of new techniques – trial and error

➢ When may the service supplier be liable?

o When the service is defective, he is liable of redress, independently of fault, for damages caused to
consumers by defects relating to the rendering of the services, as well as for insufficient or inadequate
information on the fruition (completion) and hazards thereof

➢ What are the defenses of a supplier?

o No defect in the service rendered
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 o Consumer or third party is solely at fault

x. Who is liable for defective service?

➢ Service Supplier – company/business entity
➢ When is a service supplier liable?
o Redress independent of fault
▪ For damages caused to consumers by defects relating to the rendering of the services
▪ And for insufficient or inadequate information on the fruition (completion) and hazards thereof

y. What is considered as product or service imperfection?

➢ Render the products unfit or inadequate for consumption for which they are designed or decrease their value
➢ Those resulting from inconsistency with the information provided on the container, packaging, labels or publicity
messages/advertisement, with due regard to the variations resulting from their nature, the consumer being able
to demand replacement to the imperfect parts
➢ Product use cannot be maximized

z. Who is liable for product or service imperfections?

➢ Suppliers of durable or nondurable products are jointly liable
➢ Durable Products – Life span of more than 3 years
➢ Nondurable Products – Life span of less than 3 years

aa. What are the rules in dealing with product or service imperfection?
➢ When may the consumer avail of the remedy?
o When by virtue of the extent of the imperfection, the replacement of the imperfect parts may jeopardize
the product quality or characteristics, thus decreasing its value.
o Customer shall demand

➢ If the imperfection is not (first recourse) corrected within thirty (30) days, the consumer may alternatively
demand at his option:
a) the replacement of the product by another of the same kind, in a perfect state of use;
▪ If the replacement of the same kind is NOT possible, it may be replaced by another of a different
kind, mark or model
▪ If the replacement unit is cheaper or more expensive, supplier must reimburse or supplement
the price difference
b) the immediate reimbursement of the amount paid, with monetary updating, without prejudice to
any losses and damages;
c) a proportionate price reduction.

➢ The parties may agree to reduce or increase the term specified as to correction
o 7 days to 180 days only

➢ Consumer may make immediate use of the alternatives

bb. Who is liable for product quantity imperfection?

➢ Suppliers are jointly liable
➢ The immediate supplier shall be liable if the instrument used for weighing or measuring is not gauged in
accordance with official standards.

➢ When is there product quantity imperfection?

o When their net content is less than that indicated on the container, packaging, labeling or advertisement

➢ What are the alternative remedies of the consumer if imperfection is not corrected within 30 days?
a) the proportionate price - refund
b) the supplementing of weight or measure differential; - ibigay yung kulang

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 c) the replacement of the product by another of the same kind, mark or model, without said imperfections;
d) the immediate reimbursement of the amount paid, with monetary updating without prejudice to losses and
damages if any.

cc. Who is liable for service quality imperfection?

➢ Service supplier
➢ ***Involuntary Servitude

dd. What are the rules in dealing with service quality imperfection?
➢ Any quality imperfections that render the services:
o Improper for consumption or decrease their value
o Inconsistent with the information contained in the offer or advertisement

➢ What are the alternative remedies of the consumer?

a) the performance of the services, without any additional cost and when applicable;
b) the immediate reimbursement of the amount paid, with monetary updating without prejudice to
losses and damages, if any;
c) a proportionate price reduction.

➢ Reperformance of services may be entrusted to duly qualified third parties, at the supplier's risk and cost.
o Whose choice?
➢ Improper services are those which prove to be inadequate for purposes reasonably expected of them and those
that fail to meet the provisions of this Act regulating service rendering.

ee. What are the rules in dealing with repair service obligation?
➢ There is an assumption that the supplier will use adequate, new, original replacement parts for the repair
➢ When services are provided for the repair of any product, the supplier shall be considered implicitly bound to use
adequate, new, original replacement parts, or those that maintain the manufacturer's technical specifications
unless, otherwise authorized, as regards to the latter by the consumer.

ff. Is supplier’s ignorance of quality imperfection a valid defense?

➢ NO
➢ The supplier's ignorance of the quality imperfections due to inadequacy of the products and services does not
exempt him from any liability.
o Redress independent of fault
o Strict liability

gg. Discuss legal guarantee of adequacy.

➢ The legal guarantee of product or service adequacy does not require an express instrument or contractual
exoneration of the supplier being forbidden.

hh. What are the prohibited contractual stipulations under Article 106?
➢ The stipulation in a contract of a clause preventing, exonerating or reducing the obligation to indemnify for
damages effected is hereby prohibited, if there is more than one person responsible for the cause of the damage,
they shall be jointly liable for the redress established in the pertinent provisions of this Act.

➢ EXONERATION CLAUSES ARE PROHIBITED

o Clause which limits or exclude the liability of the debtor

➢ LIMITED LIABILITY CLAUSE IS PROHIBITED

➢ However, if the damage is caused by a component or part incorporated in the product or service, its
manufacturer, builder or importer and the person who incorporated the component or part are jointly liable.

ii. What are the penalties stated in Article 107?

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 ➢ Violation of consumer products (not food etc)
o Fine of at least P5,000 OR
o Imprisonment of not more than 1 year
o OR BOTH
➢ If Juridical Person
o Penalty shall be imposed upon its president, manager or head
➢ If Alien
o After payment of fine and service of sentence, be deported without further deportation proceeding

WEEK 10
a. Read Arts. 110 to 130 of Republic Act No. 7394 and its Implementing Rules and Regulations.
b. Discuss the state policy declared in Article 109 of RA 7394.
Article 109. Implementing Agency. – The Department of Trade and Industry shall enforce the provisions of this Chapter
and its implementing rules and regulations: Provided, That with respect to food, drugs, cosmetics, devices and hazardous
substances, it shall be enforced by the Department of Health.

c. What is the implementing agency for the provisions on advertising and sales promotion?
➢ DTI – Other consumer products
➢ DOH – Foods, drugs, cosmetics, devices, and hazardous substances

d. What are the acts considered false, deceptive, or misleading advertisement?

➢ Dissemination or causing to disseminate of any false, deceptive or misleading advertisement by Philippine mail or
in commerce by print, radio, television, outdoor advertisement or other medium for the purpose of inducing or
which is likely to induce directly or indirectly the purchase of consumer products or services.
➢ When is an advertisement false, deceptive, or misleading?
o Not in conformity with the provisions
o Misleading in material respect
➢ Considerations in determining whether an advertisement is false, deceptive, or misleading –
o Representations made or any combination thereof
o Extent to which the advertisement fails to reveal material facts in the light of such representations, or
materials with respect to consequences which may result from the use or application of consumer
products or services to which the advertisement relates under the conditions prescribed in said
advertisement
o Under such conditions as are customary or usual

e. When is price comparison in advertisements allowed?

➢ What is Price Comparison?
o "Price comparison" means the direct comparison in any advertisement of a seller's current price for
consumer products or services with any other price or statement of value for such property or services
expressed in pesos, centavos, fractions or percentages.
➢ When is it allowed? – When it conforms to the following:
o Former price of the seller – Item compared shall either have been:
▪ sold at that price within the ninety (90) days immediately preceding the date of the
advertisement OR
▪ offered for sale for at least four (4) weeks during such ninety-day period

o Future price of the seller – Price shall take effect on:

▪ date disclosed in the advertisement OR
▪ within ninety (90) days after the price comparison is stated in the advertisement

GR: Stated future price shall be maintained by the seller for a period of at least four (4)
weeks after its effective date.

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 XPN: Compliance thereof may be dispensed with in case of circumstances beyond the seller's
control.

➢ Competitor’s price - competitor's price shall:

▪ relate to the consumer products or services advertised or sold in the ninety-day period AND
▪ shall be representative of the prices similar consumer products or services are sold or
advertised in the locality where the price comparison was made.

f. What are the special advertising requirements for food, drug, cosmetic, device, or hazardous substance?

a) No claim in the advertisement may be made which is not contained in the label or approved by the concerned
department.

b) No person shall advertise any food, drug, cosmetics, device, or hazardous substance in manner that is false,
misleading or deceptive or is likely to create an erroneous impression regarding its character, value, quantity,
composition, merit, or safety.

c) Where a standard has been prescribed for a food, drug, cosmetic, or device, no person shall advertise any article or
substance in such a manner that it is likely to be mistaken for such product, unless the article complies with the
prescribed standard or regulation.

d) No person shall, in the advertisement of any food, drug, cosmetic, device, or hazardous substance, make use of any
reference to any laboratory report of analysis required to be furnished to the concerned department, unless such
laboratory report is duly approved by such department.

e) Any businessman who is doubtful as to whether his advertisement relative to food, drug, cosmetic, device, or
hazardous substance will violate or does not conform with this Act or the concerned department's pertinent rules and
regulations may apply to the same for consideration and opinion on such matter before such advertisement is
disseminated to the public. In this case, the concerned department shall give its opinion and notify the applicant of its
action within thirty (30) days from the date of application; otherwise, the application shall be deemed approved.

f) No person shall advertise any food, drug, cosmetic, device, or hazardous substance unless such product is duly
registered and approved by the concerned department for use in any advertisement.

g. What are the requirements for credit advertising?

GR: Creditor must NOT state that:
o A specific periodic consumer credit amount or installment amount can be arranged
o A specified down payment is required in any extension of consumer credit

XPN: When creditor usually and customarily arranges such in that amount.

h. What is an open-end credit plan?

➢ Installment plans extended to consumers, usually when buying appliances and phones
➢ Not consumer loans from banks – it’s called Credit Plan
o Has advertisements given by banks has to be approved by BSP not DTI
o If you advertise allowing open-end credit plans are allowed, finance charge (interest rate) shall be made
known to the consumer

i. What are the requirements for open-end credit plan advertising?

➢ Open-end Credit Plan – A consumer credit extended on an account pursuant to a plan under which:
o Creditor may permit the person to make purchases or obtain loans, from time to time, directly from the
creditor or indirectly by use of credit card, check or other device
o Person has the privilege of paying the balance
o Finance charge may be computed by the creditor from time to time on an outstanding unpaid balance

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 ➢ In case of an open-end credit plan, the rate of interest and other material features of the plan shall be disclosed
in the advertisement.

j. What is a special claim?

➢ Any advertisement which makes special claims shall:
a) substantiate such claims; and
b) properly use research result, scientific terms, statistics or quotations.

k. What are the requirements for an advertisement which makes special claims?
➢ Research has to be presented to DTI

l. Discuss permit to conduct promotion.

➢ Promotion – publicizing materials with the end goal of making sales
➢ Company has to secure a promotion permit at least 30 days from showing the advertisement

l.1. Discuss DOH v. Philip Morris Philippines Manufacturing, Inc. G.R. No. 202943, 25 March 2015.

FACTS: On November 19, 2008, PMPMI, through the advertising agency PCN Promopro, Inc. (PCN), by virtue of the
Consumer Act of the Philippines, applied for a sales promotion permit before the BFAD, now the FDA, for its Gear Up
Promo. The application included the mechanics for the promotional activity, as well as relevant materials and fees.

On November 28, 2008, PMPMI, through another advertising agency, Arc Worldwide Philippines Co. (AWPC), filed
another application for a sales promotional permit, this time for its Golden Stick Promo, which the BFAD refused
outright, pursuant to a directive of the BFAD Director that all permit applications for promotional activities of tobacco
companies will no longer be accepted. Despite inquiries, the BFAD merely advised AWPC to await the formal written
notice regarding its application.

Eventually, in a letter dated January 5, 2009, the BFAD denied PMPMI's Gear Up Promo application in accordance with
the instructions of the Undersecretary of Health for Standards and Regulations, directing that as of July 1, 2008, "all
promotions, advertisements and/or sponsorships of tobacco products are already prohibited," based on the provisions
of the Tobacco Regulation Act of 2003.

ISSUE: Whether or not RA 9211 (Tobacco Regulation Act) has impliedly repealed the authority of DOF, through BFAD.

HELD: YES, because special law repeals general laws. Thus, the creation of the Tobacco Act and its provision on IAC-
Tobacco’s authority has impliedly repealed that of the DOH. However, they may still delegate such power to the latter.

m. When may publication or dissemination of information be suspended?

➢ After due notice and hearing
➢ DTI or DOH may suspend the publication and dissemination of any information accompanying a sales promotion
campaign, if it finds the campaign to be in violation of the provisions of this act or its IRR

n. What are the requirements for conduct of sales promotion?

➢ Duration
➢ Commencement and termination of the promotion
➢ Deadline for submission of entries
➢ Governing criteria or procedure to be followed

o. What are the requirements for packaging of products under promotion?

➢ Must not be tampered
➢ There must be no change in the conduct of a sales promotion

p. What are the requirements when there will be a change in the starting and termination dates of promotion?
➢ Shall be published in a newspaper of general circulation before the expiration of the original schedule or the
termination date, whichever comes first.

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q. What are the requirements in determining winners in any sales promotion?
➢ shall be determined at a definite time and place
➢ shall be verified by a representative of the concerned department and the sponsor
➢ after the winners are selected or determined, a list with their addresses and corresponding prizes shall be
submitted to the concerned department.
➢ All winners shall be announced or published in the same manner that the sales promotion was announced or
published
➢ publication in a newspaper of general circulation shall be done in a legible manner at least once, if the sales
promotion is national in scope
➢ such announcement and publication shall be done not later than two (2) weeks after the determination of
winners.
➢ In all cases where the amount of the price is Five hundred pesos (P500.00) or more, the winners shall also be
notified in writing by registered mail or any communication wherein proof of notice or service can be verified.

r. What is an injunctive relief?

➢ Remedy that may be sought from courts to stop someone from doing something
➢ Concerned department may seek for an injunction
o How? – File complaint + Prayer for restraining order
o Without damages
o Must be filed in the locality of the business
➢ Injured person may also seek for an injunction
o May ask for damages
o Must be filed in any court with jurisdiction of either party

s. When is an injunctive relief allowed under Article 122?

➢ Upon violation of any provision

t. What are the penalties under Article 123?

➢ Violation of Articles 110 to 115 (False, Deceptive or Misleading Advertisement)
o Fine – min. of P500 to P5,000 OR
o Imprisonment – min. 1 month to 6 months OR
o BOTH

➢ Violation of Articles 116 to 121 (Promotion of Sales of Consumer Products and Services)
o Fine – min. of P200 to P600 OR
o Imprisonment – min. 1 month to 6 months OR
o BOTH

➢ If the violation was committed by a juridical person, the manager, representative, director, agent or employee
of said juridical person responsible for the act shall be deported after service of sentence and payment of the fine
without need for further deportation proceedings.

u. Who are exempt from penalties?

➢ GR: No publisher, radio broadcast, television licensee or medium for the dissemination of advertising shall be
liable by reason of dissemination by him of any false advertisement
➢ XPN: Unless he refuses, on the request of appropriate authorities, to furnish the name and post office address
of the manufacturer, packer, distributor seller or advertising agency.

➢ Who are NOT exempt?

o The manufacturer, packer, distributor or seller of the consumer product or service and the advertising
agency responsible for the false and misleading advertising.

v. Discuss regulation of repair and service firms.

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 ➢ Repair and Service Firms - any business establishment, engaged directly or indirectly, in the repair, service or
maintenance of any consumer product.

w. Discuss the declared policy under Article 125.

➢ Repair and service firms shall be accredited to guarantee and ensure the services and to have someone answer in
case of breach or bad faith

x. Who is the implementing agency of the provision on regulation of repair and service firms?
➢ DTI

y. What are the minimum requirements for accreditation?

a) the duly registered business name, firm name or style of the firm;
b) date of issue and effectivity of the certificate of accreditation;
c) number and skills of technical personnel; and
d) required license for the repair or servicing of any consumer product as required by special laws.

z. May a repair or service firm operate without accreditation from DTI?

➢ No, not legally.

aa. What are the rules involving certification of accreditation?

➢ DTI shall issue certificate of accreditation
➢ A separate certificate shall be required for each branch of an enterprise located in areas outside of the main
office.
➢ With respect to repair and service centers of factory authorized representatives of franchised dealers, such
centers may display a certified true copy of the certificate of accreditation of the parent company.

bb. When may a certificate of accreditation be suspended, revoked, or cancelled?

➢ Happens upon notice and upon conduct of hearing

WEEK 11
a. What is the declared policy under Article 131?
➢ State shall simplify, clarify and modernize the laws governing credit transactions and encourage the
development of fair and economically sound consumer credit practices.
➢ To protect the consumer from lack of awareness of the true cost of credit to the user, the State shall assure the
full disclosure of the true cost of credit.

b. What is a consumer credit transaction?

➢ Consumer Credit Transaction - Any transaction in which credit is offered or extended to an individual for personal,
family, or household purposes.

c. What are included in finance charges?

➢ Finance Charge - Cost of borrowing money, including interest and other fees. Imposed in connection with any
consumer credit transaction.
➢ The sum of all charges, payable directly or indirectly by the person to whom the credit is extended and imposed
directly or indirectly by the creditor as an accident to the extension of credit, including any of the following type
of charges which are applicable:

a) interest or time price differential and any amount payable under point or other system of additional
charges;

b) collection fees which include finder's fees or similar charges;

c) credit investigation fees;

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 d) notarial fees, if any;

e) premium or other charges for any guarantee or insurance protecting the creditor against the obligor's
default or other credit loss. The implementing agency shall determine what items shall be exempted
from the computation of the finance charges.

d. Discuss determination of simple annual rate, deferral charges, finance charge on refinancing, right to prepay, and
rebate on prepayment.
➢ Simple Annual Rate
o Applicable to any extension of consumer credit shall be determined in accordance with the rules and
regulations promulgated by the implementing agency.

➢ Delinquency Charges
o Parties may agree to a delinquency charge on any installment not pain in full on or before the tenth day
after its scheduled or deferred due date.

➢ Deferral Charges
o Parties in a consumer credit transaction may at any time agree in writing to a deferral of all or part of one
or more unpaid installments and the creditor may make and collect a charge which shall not exceed the
rate previously disclosed pursuant to the provisions on disclosure.
o A deferral charge may be collected at the time it is assessed.

➢ Finance Charge on Refinancing

o Parties may agree on a finance charge in an open-end credit plan based on the amount financed resulting
from the refinancing or consolidation at a rate not exceeding that permitted by the rules promulgated by
the implementing agency.

➢ Right to Prepay
o Person to whom credit is extended may prepay in full or in part, at any time without penalty, the unpaid
balance of any consumer credit transaction.

➢ Rebate on Prepayment
o Upon prepayment in full of the unpaid balance of a precomputed consumer credit transaction,
refinancing or consolidation, an amount not less than the unearned portion of the finance charge
calculated according to this Article shall be rebated to the person to whom credit is extended.

e. What are the general requirements on credit cost disclosure?

➢ Each creditor shall disclose, in accordance with the regulations of the implementing agency, to each person to
whom consumer credit is extended, the disclosures required by this Act.
➢ If there is more than one obligor, a creditor need not furnish a statement of information required under this Act
to more than one of them.

f. What are the required disclosure for credit sale?

➢ Any creditor extending a consumer credit sale other than one pursuant to an open-end credit plan shall disclose
in a statement to the extent applicable, the following information:
o the cash price or delivered price of the property or service to be acquired;
o the amounts, if any, to be credited as down payment and/or trade in;
o the total amount to be financed or the difference between the amounts set forth under paragraphs (1)
and (2);
o the charges, individually itemized, which are paid or to be paid by such person in connection with the
transaction but which are not incident to the extension of credit;
o the finance charge expressed in terms of pesos and centavos;
o the percentage that the finance charge bears to the total amount to be financed expressed as a simple
annual rate on the outstanding balance of the obligation;
o the effective interest rate;
o the number, amount and due dates or periods of payments scheduled to repay the indebtedness; and
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 o the default, delinquency or similar charges payable in the event of late payments.

g. What are the required disclosure on open-end credit plan?

➢ Before opening any account under an open-end consumer credit plan, the creditor shall disclose, to the extent
applicable, the following information:
o the conditions under which a finance charge may be imposed, including the time period, if any, within
which any credit extended may be repaid without incurring a finance charge;
o the method of determining the balance upon which a finance charge may be imposed;
o the method of determining the amount of the finance charges, including any minimum or fixed amount
imposed as a finance charge;
o where one or more periodic rates may be used to compute a finance charge, each such rate, the range
of balances to which it is applicable, and the corresponding simple annual rate;
o the conditions under which the creditor may impose a security lien and a description of the goods to
which such lien may attach.
o The implementing agency shall prescribe regulations consistent with commonly accepted accounting
standards to carry out the requirements of this Article.

h. What are the required disclosure on consumer loans not under open-end credit plan?
➢ Any creditor extending a consumer loan or in a transaction which is neither a consumer credit sale nor under an
open-end consumer credit plan shall disclose, to the extent applicable, the following information:
o the amount of credit of which the debtor will have the actual use, or which is or will be paid to him or
for his account or to another person on his behalf;
o all charges, individually itemized, which are included in the amount of credit extended but which are not
part of the finance charge;
o the total amount to be financed or the sum of the amounts referred to in paragraphs (a) and (b);
o the finance charge expressed in terms or pesos and centavos;
o the effective interest rate;
o the percentage that the finance charge bears to the total amount to be financed expressed as a simple
annual rate on the outstanding unpaid balance of the obligation;
o the default, delinquency or similar charges payable in the event of late payments;
o a description of any security interest held or to be held or to be retained or acquired by the creditor in
connection with the extension of credit and a clear identification of the property to which the security
interest relates.

i. Discuss the form and timing of disclosure?

➢ Shall be made clearly and conspicuously in writing before the transaction is consummated.

j. What must be stated in the periodic statement of charges?

➢ The periodic statement transmitted by the creditor in connection with any extension of consumer credit other
than under an open-end consumer credit plan, shall set forth the following information:
o the simple annual rate;
o the effective interest rate;
o the date by which, or the period (if any) within which payment must be made in order to avoid
additional finance charges;
o method of determining the balance upon which the finance charge may be imposed.

k. What are the exempted transactions?

➢ The foregoing requirements on consumer credit transactions shall not apply to the following credit transactions:
o those involving extension of credits for business or commercial purposes, or to the Government and
governmental agencies and instrumentalities, juridical entities or to organizations;
o those in which the debtor is the one specifying the definite set of credit terms such as bank deposits,
insurance contracts, sale of bonds or analogous transactions.
l. What are the rules involving sale of consumer products on installment payment?
➢ In a consumer credit sale other than one pursuant to an open-end credit plan, the obligation of the consumer to
whom credit is being extended shall be evidenced by a single instrument which shall include, in addition to the
disclosures required by this act, the signature of the seller and the person to whom credit is extended, the date
it was signed, a description of the property sold and a description of any property transferred as a trade-in. The

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 instrument evidencing the credit shall contain a clear and conspicuous typewritten notice to the person to
whom credit is being extended that:
o he should not sign the instrument if it contains any blank space;
o he is entitled to a reasonable return of the precomputed finance charge if the balance is prepaid; and
o he is entitled to an exact, true copy of the agreement.
o In cases where the instrument will be sold at a discount to a bank, financing company or other lender,
the said transferee shall be subject to all claims and defenses which the debtor could assert against the
seller of consumer products obtained hereto or with the proceeds thereof.

m. What are the penalties stated in Art. 147?

➢ Fine of P1,000 OR amount equal to twice the finance charge – whichever is greater – but must NOT exceed
P3,000
➢ Prescriptive Period - Action to recover such penalty may be brought by such person within one (1) year from the
date of the occurrence of the violation in any court of competent jurisdiction.

n. What is the National Consumer Affairs Council?

➢ Created to improve the management, coordination and effectiveness of consumer programs

o. What are the powers and functions of the NCAC?

➢ The Council have the following powers and functions:
o to rationalize and coordinate the functions of the agencies charged with consumer programs and
enforcement of consumer related laws to the end that an effective, coordinated and integrated system
of consumer protection, research and implementation and enforcement of such laws shall be achieved;
o to recommend new policies and legislation or amendments to existing ones;
o to monitor and evaluate implementation of consumer programs and projects and to take appropriate
steps to comply with the established priorities, standards and guidelines;
o to seek the assistance of government instrumentalities in the form of augmenting the need for
personnel facilities and other resources;
o to undertake a continuing education and information campaign to provide the consumer with, among
others;
o facts about consumer products and services;
o consumer rights and the mechanism for redress available to him;
o information on new concepts and developments on consumer protection; and
o general knowledge and awareness necessary for a critical and better judgment on consumption;
o such other matters of importance to the consumer's general well-being.

p. Read DAO No. 07, Series of 2006 or the Simplified and Uniform Rules of Procedure for Administrative Cases Filed
with the Department of Trade and Industry (DTI) for Violations of the Consumer Act of the Philippines and Other
Trade and Industry Laws
q. What is a complaint?
➢ A complaint is a sworn written statement charging a person with an offense, subscribed by the offended party,
any peace officer, or other public officer charged with the enforcement of the law violated.
r. What happens after a consumer complaint is filed?
s. Who is a consumer arbitration officer?
➢ Attorney III
➢ DTI-appointed consumer arbitration officer

t. What are minimum qualifications of a consumer arbitration officer? Read also Section 9 of DAO No. 07, Series of 2006
➢ The consumer arbitration officer must be a college graduate with at least three (3) years experience in the field of
consumer protection and shall be of good moral character
➢ There shall be not more than ten (10) consumer arbitration officers per province, including the National Capital
Region

u. What is the jurisdiction of a consumer arbitration officer?

➢ Have original and exclusive jurisdiction to mediate, conciliate, hear and adjudicate all consumer complaints
➢ However, this does not preclude the parties from pursuing the proper judicial action
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v. What are imposable sanctions under Article 164?
➢ After investigation, any of the following administrative penalties may be imposed even if not prayed for in the
complaint:
o the issuance of a cease and desist order, Provided, however, That such order shall specify the acts that
respondent shall cease and desist from and shall require him to submit a report of compliance therewith
within a reasonable time;
o the acceptance of a voluntary assurance of compliance or discontinuance from the respondent which
may include any or all of the following terms and conditions:
▪ an assurance to comply with the provisions of this Act and its implementing rules and
regulations;
▪ an assurance to refrain from engaging in unlawful acts and practices or unfair or unethical trade
practices subject of the formal investigation;
▪ an assurance to comply with the terms and conditions specified in the consumer transaction
subject of the complaint;
▪ an assurance to recall, replace, repair, or refund the money value of defective products
distributed in commerce;
▪ an assurance to reimburse the complaint out of any money or property in connection with the
complaint, including expenses in making or pursuing the complaint, if any, and to file a bond to
guarantee compliance therewith.
o restitution or rescission of the contract without damages;
o condemnation and seizure of the consumer product found to be hazardous to health and safety unless
the respondent files a bond to answer for any damage or injury that may arise from the continued use of
the product;
o the imposition of administrative fines in such amount as deemed reasonable by the Secretary, which
shall in no case be less that Five hundred pesos (P500.00) nor more than Three hundred thousand pesos
(P300,000.00) depending on the gravity of the offense, and an additional fine of not more than One
thousand pesos (P1,000.00) or each day of continuing violation.

w. Discuss appeal from orders.

➢ Any order, not interlocutory of the Consumer arbitration officer, becomes final and executory unless appealed
to the Department Secretary concerned within fifteen (15) days from receipt of such order. An appeal may be
entertained only on any of the following grounds:
o grave abuse of discretion;
o the order is in excess of the jurisdiction or authority of the consumer arbitration officer;
o the order is not supported by the evidence or there is serious error in the findings of facts.

x. May the decision of the DTI Secretary on the appeal be appealed to a regular court?
➢ YES, if filed within 15 days
➢ The Secretary shall decide the appeal within thirty (30) days from receipt thereof. The decision becomes final after
fifteen (15) days from receipt thereof unless a petition for certiorari is filed with the proper court.

x.1. Discuss Moran, Jr. v. Office of the President, G.R. No. 192957, 29 September 2014.
HELD: Moran should have elevated he case directly to the CA through a petition for certiorari. The DTI Resolution had
become final and executory with Moran’s failure to appeal the same within the 15-day reglementary period.

WEEK 12
a. Read DAO No. 07, Series of 2006 or the Simplified and Uniform Rules of Procedure for Administrative Cases Filed with
the Department of Trade and Industry (DTI) for Violations of the Consumer Act of the Philippines and Other Trade and
Industry Laws
b. Discuss the rules on construction of provisions and the applicability of the Rules of Court. (Rule I)
c. Discuss the basic terms enumerated. (Rule II)
d. Discuss jurisdiction of the adjudication officers. (Rule III)
e. Discuss venue for complaints, formal charges, and change of venue. (Rule IV)
f. Discuss commencement of actions and the essential elements and parts of a complaint and a formal charge. (Rule V)
g. Distinguish between a complaint and a formal charge.

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h. Discuss service of pleadings and other papers. (Rule IV)
i. Discuss prohibited pleadings and motions. (Rule VII)
j. Discuss prescription of actions. (Rule VIII)
k. Discuss proceedings before adjudication officers. (Rule IX)
l. Discuss mediation. (Rule X)
m. Discuss preliminary conference. (Rule XI)
n. Discuss submission of position paper and hearing. (Rule XII)
o. Discuss decision and administrative penalties. (Rule XIII)
p. Discuss motion for reconsideration. (Rule XIV)
q. Discuss appeals. (Rule XV)
r. Discuss execution of decisions. (Rule XVI)

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