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    Mercantile Reviewer Atty. G Asido

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    Janice Cabalag

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    ADAMSON UNIVERSITY COLLEGE OF LAW Central Bar Operations 2012 __ Atty. Guiller B. Asido aN NOTES ON MERCANTILE LAW neve | [Prepared by Prof. Guiller B. Asido as of September 26, 2022. All Rights Reserved.) ES ON ME! LE LA\ EW. ATTY. G. ASIDO ADAMSON UNIVERSITY ‘COLLEGE OF LAW iples of commercial law: = Under the [heory of cognition) the acceptance Is considered to effectively bind the offeror only from the time it came to his knowledge. (Followed in Civil Law) * Under the [theory of manifestation) the contract is perfected at the moment yfign the tance is declared le by the ‘ee. (Followed in Mercantile La * aletter of credit is a written instrument whereby the writer re Sic the addressee to pay money or deliver goods to a third person agd\assumes responsibility for payment of debt therefor to the addressee. e ‘Iwo Essential Conditions for a Letter of Credit K2 n and not to order. It is nota ble Instruments Law. ‘ay be one or more but always with a = Aletter of credit is negotiable instrument governed by the’ eit Is i % maximum amount. a» If any ‘of the two circumstances"Is missing, it is not a letter of credit. It is a mere recommendation. ky Parties to a Letter of Se O 1, Wisma — Tyg tHe enti willis jit. It usually is a bank but it can be any finangal.iNytitution of substance. The issuer assumes the full obligation topay the Ov von the presentation of the documents specified in the credit. = The applicant is also known as the account party or customer. He requests Ye the issuer the credit he wants for his beneficiary. He pays the issuer for the credit with cash ar collateral so as to secure the issuer the funds necessary for the reimbursement obligation to the beneficiary. (Bemepitary - The beneficiary is the party that will be identified in the credit as the entity it under the letter of credit. a eI NOTES ON MERCANTILE LAW REVIEW ATTY. G. ASIDO ' ADAMSON UNIVERSITY (COLLEGE OF LAW 4, AWiSInGNBBBR ~ The role of the advising bank is to ootify the beneficiary that a credit has been Issued by another bank. it assumes no responsibility other than notifying the beneficiary. However, its obligation is limited to accurately advising the terms of the credit that has been issued. In this capacity itis only playing “postafiice” 5. Gonpimmingysany - The responsibilty of the confirming bank is that It dbligated on-the-credit and now assumes the rights and obligations er. Typically the confirming bank’s role is one e,, a bank located close to the beneficiary. However, it can also be a well-kaown Wank, that will assume the responsibility for a lesser known bank by confirming th it, therefore, rendering the credit more acceptable to the beneficiary, important Doctrines in Letters of Credit AY 5 1. (GidepeReRESREIE- This principle of independe fearly states that theobligation fh a gd. The issuing bank is not required to evaluate if the berfegiciary has performed under the underlying contract or if it is contractually efttitigd to payment. The issuer is only obligated to pay upon presentation of goctmeié that conform to the requirements of the letter hs Luzon Hydro Electric Corp. 22, 2004, Tinga) . The contract provides for a period for which the project is to be pleted and also allows for the extension of the period provided that the of credit. = Transfield Phil Onn is based on justifiable grounds such as fortuitous event. In order to guarantee performance by Transfield, two stand-by letters of credit were required to be opened. During the construction of the plant, Transfield requested for extension of time citing fortuitous events brought about by typhoon, barricades and demonstration, LHC did not give due course to the /. G. ASIDO ISON UNIVERSITY sGE OF LAW extension of the period prayed for biteferred the matter to arbitration committee. In the meanwhile, because of the delay in the construction of the plant, LHC called on the stand-by letters of credit because of default. However, the demandaya: objected by Transfield on the ground that there is still pending arbitrati r request for extension of time, LHC invoked the “independence princifiteg,On the other hand, Transfield claims fraud on the part of LHC on callingthe stand-by letters of credit. Under the independence principle, a LC accommodsti ely distinct and separate, independent agreement. It is not supposedag ted by the main contract upon which it rests. 2. SRGECSRIBNARCRIRUE The rete g M presentmentin strict... compliance with the terms, conditigns grichpP8€edures of the credit. Further to this, since the adherence of the requirem st be strictly applied to the beneficiary, eanaficiaty, for the purpose of drawing conficming.bank, dacuments.that contain, areuntue. S A . pon shall refer to the written or printed document signed by the entrustee in of f the entruster containing terms and conditions substantially complying with the ovisions of Presidential Decree no.115. No further formality of execution or ‘authentication shall be necessary to the validity of a trust receipt. ¥ OBLIGATION OF THE ENTRUSTEE 1) Pou THE GPL IN TRUST FoR The EXTRUsTER Q SYALL DISPOSE OF MEM STRICTLY IN ACCORDANCE W/ THe TERM& AND CONDITIONS OF IME TRUst RECEIPT : 2) RECEIVE TE PROCEEDS IN TRUST ARID TURN OVER THE SAME D TE EXTENT or THE MOUNT OWING 1 TE ENTRUST Ok AS APPEARS IN te TRUST RECEIPT, 3) INSURE Me GODS FOR MHEIE PIAL VALUE AGAINST (dos FROM FIRE, TMePT, ALTEKACE Ok OER crsUALnES,: )) wep SMD cod OR PROCEEDS meRECr Nuifennee IN) MONEY OR WHATEVER FORM, SEPARATE AND CAPABLE OF IDENTIFICATION AS. PROPERTY OF IME ENTRUCTER,’ 5) RETURN Me Cor IN THE EVENT CF NON- SALE. CR UFON Deano or mite exmusrer 5 No 6) OBSERVE AL Cte TERMS OND CONDITIONS! Off THE TRUST RECEIPT NOT CONTRARY NTE PRONISIONS OF PD Us: NOTES ON MERCANTILE LAW REVIEW 1 ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW Parties to a Trust Receipt = Bb . " shall refer to the person of goods, documents or instruments under a trust receipt transaction, and any successor in interest of such person for the purpose or purposes specified in the trust receipt agreement. hall refer to the person haldineditlaayer the eos, docume instrutnents subject of a trust receipt transaction, and any successor tol ‘such person, YY receipt may be denominated in the Philippine currency4gr\any foreign currency eotable and eligible as part of international reserves of the Philippifies, the provisions of law, executive orders, rules and regulations to the c Atyotw hstandi x, That in the case of trust receipts denominated in currency, payment shall be ir agreements executed between Oey ér and the entrustee. er > hiding He eer, ho quan The entruster shall be enti from the sale of the goods, documents or instruments released uader trust receipt to the entrustee to the extent of the amount ‘owing to the nab) ‘appears in the trust receipt; ‘orto the ods, documents or instruments in.case of non-saleand}to the conferred on him in the trust receipt provided such are Mtrustee shall (1) hold the goods, documents or instruments in trust for the ruster and shall disposg of them strictly in accordance with the terms and conditions ‘of the trust receipt; (2) receive the proceeds in trust for the entruster and turn over the same to the entruster to the extent of the amount owing to the entruster or as appears ‘on the trust receipt; (3) insure the goads for their total value against loss from fire, theft, pilferage or other casualties; (4) keep said goods or proceeds thereof whether in NOTES ON MERCANTILE LAW REVIEW ATTY. G, ASIDO ADAMSON UNIVERSITY ‘COLLEGE OF LAW money or whatever form, separate and capable of identification as property of the entruster; (5) return the goods, documents or instruments in the event of non-sale 6 upon demand of the entruster; and (6) observe all other ter ons of the trust receipt not contrary to the provisions of PD 115. ‘Who bears liability in case of loss owing ox talang ponendion op Sor The risk of loss shall be borne by the; Loss of goods, document! instruments which are the subject of a trust receipt, i irrespective of whether or not it was due to the fault or negligence of intrustee, shall not extinguish his obligation to the entruster for the valu \NUEL P. LUCENTE, petitioners, vs. METROPOLITAN BANK &-TRWST COMPANY, respondent. fe Trust Receipts Law was enacted to safeguard conffMercial transactions and to offer an itional layer of security to the lending bank. Tryskfefelpts are indispensable contracts in ional and domestic business transacti aa prevalent use of trust receipts, the ger of their misuse and/or misappropriati Ae goods or proceeds realized from the sale goods, documents or instruments. gag for entruster banks, and the need for lation of trust receipt transactidgs to\yafeguard the rights and enforce the obligations of parties involved are the main thrust®ef the Trust Receipts Law. second paragraph ot seaiah Poste a statutory @EISSSUSISIEROVSMENeUSEE™ in the nt of default or failure ntrustee to comply with any of the terms and conditions of trust receipt or a St agreement between the entruster and the entrustee. More may cancel the trust ang take possession of the goods, documents 3f the trust or of the proceeds realized therefrom at any time”. The law ni “the entruster if possession of the goods, document or instruments may, it, give notice to the entrustee of the intention to sell, and may, not less than % serving or sending of such notice, sell the goods, documents or instruments at private sale, and the entruster may, at a public sale, become a purchaser. The ‘ds of any such sale, whether public or private, shall be applied (a) to the payment of the rages thereof; (b) to the payment of the expenses of re-taking, Keeping and storing the s, documents or instruments; (c) to the satisfaction of the entrustee's indebtedness to the Page I7 NOTES ON MERCANTILE LAW REVIEW Val ATTY. G. ASIDO ee ie pile rch the epods £G Ss ADAMSON UNIVERSITY cm COLLEGEOFLAW ial foc Mtlid (2 aro) entruster. The entrustee shall receive any surplus but shall be liable to the entruster for any deficiency.” GR. No. 122539. March 4, 1999. JESUS V. TIOMICO, petitioner, vs. THE HON. COURT OF APPEALS (FORMER FIFTH DI\ ‘and PEOPLE OF THE PHILIPPINES, respondent The Court has repeatedly upheld the validity of the Trust Receipts Law al sistently ‘declared that the said law does not violate the constitutional re nay prisonment for non-payment of debts. The case of People vs. Nitafan held: “the hy Receipts Law punishes the dishonesty and abuse of confidence In the penal of fponey or goods to the prejudice of another regardless of whether the latter is the omer he law does not seek to enforce payment of a loan. Thus, there can be no ey dh t imprisonment for non-payment of a debt.” 328. September 5, 2000. <2 ‘MELVIN COLINARES and LORDINO VELOSO, petitic {| HONORABLE COURT OF APPEAL ‘and THE PEOPLE OF THE PHILIPPINES, mm There are two possible situations in a OYecnt transaction. The fl is covered by the provision which refers to money r wy. jer the — involving the duty to deliver it {entregarla) to the owner of the mert ie sold. The Gecondlis covered by the provision which refers to merchandise Sy under the obligation to "return" it (devolvera) to the ‘owner. Tart “the rights and duties of a warehouseman; wo relati between a warehouseman ani ‘The depositor of the goods or; + Holder of warehouse receipt for the goods; = The person lawdully entitled to the possession of the goods or NOTES ON MERCANTILE LAW REVIEW ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW = Other persons Pen beraan => A.warehouse receipt is a written acknowledgement by a warehouseman that he has \:!'teceived and held-certain goods therein described in store for the person to whom it is issued. ‘ ‘A warehouseman is the person lawfully engaged in, the business of stori for compensation for such . Y Y + Negotiable - if deliverable to order(oi}te hearer; “\ "= Non-negotiable - if deliverable to a specified person. Ra warehouseman is liable to person believing it to be iS) stamped, otherwise re. "Conflicting Claims - remedy of a warehousemai So an action for interpleader + Warehouseman's Lien - this is effective ontie Zoods deposited which operates as @ ‘retaining lien until his charges are paid, Theyen is lost (a) by surrender ef goods, and (b) refusal to deliver goods as nsibilities of Warehouseman * General Rule SECTION 187. No insurance company shall transa¢ \y Insurance business in the Philippines until after it shall have obtained algptifigate of authority}for that purpose from the Commissioner upon applicatian therefor and payment by the company concerned of the fees hereinafter prescBleg, the person in whose Arey thp contract is operative and who is indemnified BBAINSE or is to receive a cerfaMsuyh upon the happening ofa specified contingency or event. Ar (section 7, Insurance Code) ‘Cestul Que Vie ~ Person on whase life the insurance is utitten, "= Beneficiary ~ Person designatedc receive the proceeds of the policy when the risk attaches NOTES ON MERCANTILE LAW REVIEW ATTY. G. ASIDO ADAMSON UNIVERSITY SGE OF LAW Kinds of Beneficiary = Insured himself = Third Person who paid consideration * Third through mere bounty of insured REVOCABLE » UILETS WAVED, ird person through mere bounty vy pe - * SECTION 11, The insured shall have the right to change the beneficiary ignated in the policy, unless he has expressly waived this right in said mio) SECTION 12. The interest of a beneficiary ina life insurance pe shall be when the beneficiary is the principal, accomplice, or a the death-ofthe insured; in which event, the insured shall receive the proceeds of said insurance if not otherwise. Beneficiary acquires a vested right in the policy xe SECTION 181. A policy of insuragc« in é fe or health may pass Peanste! ‘will or Sticcession to any person, whether hy insurable interest or not, and such person may recover upon it whagevedth@insured might have recoveret Note Articles 43 (4), 50 and 64% the Family Code ~ Innocent spouse may revoke the designation of the other spouse who actes as beneficiary, even if such redeceases insured ion of Beneficiary — Beneficiary has acquired vested right; Legal (iep are entitled to the proceeds as assets of his estatex Unless) the proceeds cep fayable to the benefici if le ~ Proceeds past to the estate of the insured rights, title and interest in the policy of insurance taken out by an original owner on life or health of a minor shall automatically vest in the minor upon the death of the jinal owner, unless otherwise provided for in the policy. JON 10. Every person has an insurable interest in the life and health: AF wouter invest PRCA conic IN: 1) AN eXIMNG INTEREST 2) an NoROntE INTEREST 3) A expectancy cour wiTh AN EXISTING fooNoen on exons INTEREST ie INTEREST IN Thar cur Or Nich EXPECTANCY ARIST (a) Of himself, of his spouse.and of his children; _ (b) Of any person on whom he depends wholly or in part for educatiafi or ’ ‘support, or in whom he has a pecuniary interest; ee. ()__ Ofany person under a legal obligation to him for the payment, or respecting property or services, of which death or illness might delay or performance; and ae (d) Of any person upon whose life any estate or interest Westep fh hi eee a3 depends. Anjinsurabii is one of the most basic and essential Kquirenents in an insurance ‘contract. in general, an insurable interest is that interest @nich"a Berson is deemed to ey) e ‘preservation of the subject matter insured al om its ruction, termination, or injé ice of an insurable nego the legal right to insure the subject matter of insurance. Section 10 Insurance Code indeed provides that every person able interest il . Section 19 of the same code also states that an interest ‘or health of a persof\jnsfed must exist when the insurance takes effect, but need 18ss occurs.(G.R. No, 183526. August 25, 2009.]VIOLETA R. [SULAR LIFE ASSURANCE COMPANY LIMITED, AS REPRESENTED BY “AVILON, respondent. Every interest in property, whether real or personal, or any relation to, of liability in respect thereof, of such nature that a contemplated peril might ly damnify the insured, is an insurable interest. ION 14, An insurable interest in property may consist in: An existing interest; iseuRapve (here IN : Q@ Prorerty Coursscr i; —-—-_——__ is. oxcuts (om New vor east Te weanne) UF pmo nT Cooment ross eccurs (Ne Nor EXIST fifcemPee OR witey We Wss Occurs ) Acer Q CHD pewrOR (Denon. evporee UNIVERSITY OF LAW {b) Aninchoate interest founded on an existing interest; or (ce) An expectancy,/coupled/ with an existing interest in that out of which the ‘expectancy arise’ SECTION 15. A farrier or depositoryf any kind has an insurable interest in as such, extent of his liabil hheld by him as such, to the extent of his liability but foto exceed the valu "SECTION 16. A mere contingent or expectant interest in anythi ‘actual right to the thing, nor upon any valid contract for it, isfhot)instgablg cS hbaaaaia SECTION 17. The measure of an insurable interest In[proper \the extent to which the insured might be damnified by loss or injury thereo! XK SECTION 18. No contract or policy of insurance on pf ‘shall be enforceable lexcept for the banefit of some person havis t in the property exist when the insurance takes ist in the meantime; and interest in the when the insurance takes effect, but need a. the insurance takes effect, but need not exist thereafter (section 19, Insurance Code) fo have insurable interest not only at the contract but also at the time of the s death, in the insurance is taken by the employer on the life of the employee. INGURABLE TUTEREST5t-— OF man fe income He « > ud oxic hun He inwyomee jnlos eect @ wihrn Be PO cas) ak", dh nd NOT cai act hd wat ait in Ba manne. a ecu (ON 13. Every interest in property, whether real or personal, or any relation eto, of liability in respect thereof, of such nature that a contemplated peril might ly damnify the insured, is an insurable interest. ION 14. An insurable interest in property may consist in: ENE An existing interest; a} Ra An inchoate interest founded on an existing interest; or eee An expectancy, ‘expectancy arise ith an existing interest in ‘of which the ° JON 15, A carrier or depository of any kind hi [Barra interest in a thing eld by him as such, to the extent of his ney to exceed the value thereof. ION 16. Amere contingent or expect ferest in anything, not founded on an afigontract fort, isnot insurable. al right to the thing, nor upon any y NON 18. No contr; olicy of insurance on property shall be enforceable sxcept for the benef} fe person having an insurable interest in the property when the insurance take ) fing Interest ~ May be legal title or equitable title (e.g. “Trustee/Mortgagor/Lessor/Mortgagee) Inchoate Interest* - Stockholder’s inchoate interest in properties of the corporation Page |18 ISON UNIVERSITY sGE OF LAW * inchoate — a legal right or entitlement that is only partial and incomplete, which may later develop into a full property right. Sections 20 ~ 24, insurance Code NS = Rules when insurable interest changes during the course of an ees = What may be transferred or assigned: Te VY af 4. Thing insured (section 20) 2. The Policy itself (section 58) F 0M 3. The claim itself (section 83) © S four sections, and in the cases of = SECTION 20. Except in the cases specified in ery rest in any part of a thing insured life, accident, and health insurance, a chan; ° unaccompanied by a corresponding cha iterest in the insurance, suspends the insurance to an equivalent extent, ay iterest in the thing and the interest in the insurance are vested in the a = SECTION 21. Acchange in interésefn a thing insured, after the occurrence of an injury which results in a loss, < affect the right of the insured to indemnity for the loss. cealment and Represenitath is concealment where thefasurega knowledge of facts, ,, and good faith and fair dealing require him to reveal them, and he CTION 26. Aneglect to communicate that which a party knows and ought to communicate, is called a concealment. Representation — A statement incidental t insurance relative to some fact having reference thereto and upon the faith of which the contract is entered into, Page |19 SECTION 44. A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations. Relevant Provisions of Law Se TN , Sections 26 to 48, Insurance Code Both take place before the contract is entered into; Both give rise to the same|remedif discovery of the concealment agri sentation before loss or death i he policy/excephere there is an incontestal lause. : SECTION 27. A concealment whether neg entitles the injured party to rescind a contract oy ince. iscovered before loss or death, zai ed after death or loss, the company unintentional General Rule : If concealment or misrepresents then the in icy. Gs an refuse to pay. SECTION 48. Whenei OX to rescind a contract of insurance is given to the rer mage pi of this chapter, such sight must be exercised eormenet ofan ection on the conrect After a ps life insurance made payable on the death of the insured shall have b ce during the lifetime of the insured for a period of two years foe te of its issue or ofits last reinstatement, the insurer cannot prove fe policy is void ab initio or is rescindable by reason of the fraudulent coge@uplent or misrepresentation of the insured or his agent. f Gr fraudulent ‘omission to communicate information roe basis of the rule vitiating the contract in cases of concealment is that it leads or deceives the insurer into accepting the risk, or accepting it at the rate of jpremium agreed upon. The insurer, relying upon the belief that the assured will disclose every material fact his actual or presumed knowledge, is misled into a belief that the circumstance withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist. 4 Cer THe exceTON 1) WON" Fewest OF PREMIUMS D WLAN OF CONDITION REGARDING NILTARY a NAVAL SERVE IN) TIME of WAR 5) #0 eure WER $) CE OF Pear WAS @eERED op Ay categeo 3) FRO OF ViCIS TYPE ©) reer of peATH NAC HoT GIVEN) MERCANTILE LAW REVIEW ; - Bernardo Argente vs. West Coast Life Insurance Co., G.R. No, 28499, March 19, 1928 EXCEPTION SECTION 48 (2 paragraph) After a policy of life insurance made payable on the deathaf.the tured shall have bees jn force during the e of the insured for conga years from. chbdace of ssuf ort rinstatemert. hyd cannot prove that the policy Is void ab initio or is rescindable by geasor6f the fraudulent: concealment or misrepresentation of the insured o nt. . “4 The so-called "incontestability clause” precast fer from raising the defenses of false representations or concealment of mateniQape insofar as health and previous diseases are concerned if the insurance ja; force for at least two years during the insured’s lifetime. Emilio Tan vs, Asin G.R. No, 48049, June 29, 1989 a de : Under Section 227 (j) of Insur The pol oe sat be entitled to have the policy reinstated at any time within fars from the date of default of premium payment unless the cash surg ue has been duly paid, or the extension period has expired, upon, ion of evidence of insurability satisfactory to the company and inGtpn of all overdue premiums and any indebtedness to the company aid policy, with interest rate not exceeding that which would have been plicable to sa'd premiums and indebtedness in the policy years prior to ‘reinstatement. incontestability clause tions to the Exception: 1 Non-Payment of premiums (Section 227) Violation of condition re military/naval service in time of war (Section 227) Page |22 ‘No insurable interest ‘Cause of death was excepted or not covered Fraud of vicious type Proof of death was not gi Astatement in the policy, part of the contract, a condition on nica irae depends and is conclusively presumed material, It is the essencegf warranty that its Ibreach bars recovery even though the breach has nothing th the loss. (sections ° 67 to 76, Insurance Code) ny "SECTION 67. A warranty is either exoressed/o SECTION 68. A warranty may relate to thi a *Gresent, the future, or to any or all of these. ° SECTION 69. No pai SW necessary to create a warranty. oe ‘or before the execution of a polityymust be contained in the policy itself, or in another instrument signed by the/figured and referred to in the policy as making a part of it. SECTION 71. Asa a policy of matter relating to the person or thing insured, lorto the risk, as@igagt''s an express warranty thereof. ‘atement in a policy, which imparts that it is intended to do or not to ich materially affects the risk, is a warranty that such act or omission shall SECTION 83. An agreemen((nopo insured against the insurer ‘after the loss has happened isyaid it madelbetord she lass(@xcepi)as otherwise provided — in the case of life insurance. of life insuran¢ Page [22 UNIVERSITY OF LAW JON’80. if’ pefil insured against has existed, and the insurer has been liable for yperiod, howeVer short, the insured is ndt éntitled t6 retlen ‘St remiums; so far as Particular risk is concerned. A pes of Losses Compensable, 1, Actual Total Loss. 2. Constructive Total Loss «Pp * 3. Partial Loss al Total Loss entitles insured a) ven) . Constructive Total Loss when insured exercised right of loment. This right may be ised when the property Insured suffers a dam: a marine peril of at least % insured merely notifies insurer of his exercise, et of abandonment, immediately ship over damaged property pastes to, and it pays insured as if there ctual total loss, yaium, proportioned to the amount by which the aggregate licies exceeds the insurable value of the thing at risk. Ice when the insured ingures the same property for an amount Oss, the gatrpanys boun f the lost. The insured is entitled to recover the amount of premium corresponding excess in value of the property. » JON 94. Where the insured is over-insured by double insurance: REAISURANCE TREATY b> 15 MERELY AN AGREEMENT BEIWEAJ TRO INSURANCE GoHIY COMPANIES ONE AGREES D RESENE) CEDE ANP THE THER To ACCEPT REINSURANCE BUSINEDS PURSUANT 1 PROVISIONS SPEONIED IN THE TREATY © CONTRAGIS _TOR_ INSURANCE. = REINSURANCE FUCY Ps A COTTRACT oF Bey CAE, SURE MAKES. TH ANCTHER TO PRofecr THE MIRsT INSURER TROM A RISK IT BAS AREROY ASSUMED. W™ CONTRACT _OF INSUIE ARE Page | 23 sTTY. G. ASIDO MSON UNIVERSITY ILLEGE OF LAW (a) The insured, unless the policy otherwise provides, may claim payment from the irers in such order as he may select, up to the amount for which the insurers are severally le under their respective contracts; (b) Where the policy under which the insured claims is a )alued polloy the j ist give credit as against the valuation for any sum received by him under any ot} jout regard to the actual value of the subject matter insured; (c) Where the policy under which the insured claims is an unvalged Rx credit, as against the full insurable value, for any sum received by him u (4) Where the insured receives any sum in excess of th jon in the case of ed policies, or of the insurable value'in the case of leaned, iy must hold such in trust for the insurers, according to their right of conti Danone chonsall (e) Each insurer is bound, as between himse| asthe other insurers, to contribute bly to the loss in proportion to the amount me is liable under his contract. urance = SECTION 95. A contract of r ~ by which arfinsurer cures a third person to insure him against ass o ability by reaso al insurance, = REINSURANCE TREATY ANQ REINSURANCE POLICY, DISTINGUISHED. — A reinsurance policy is a contract of ity one insurer makes with another to protect the first. insurer from a riskit ready assumed, while a reinsurance treaty is merely an Pwo insurance companies whereby one agrees to cede and the COMPANY, petitioner, vs. THE AUDITOR GENERAL, respondent. * SECTION 96. Where an insurer obtains reinsurance, except under automatic reinsurance treaties, he must communicate all the representations of the original ASIDO IN UNIVERSITY iE OF LAW insured, and also all the knowledge and information he possesses, whether previously or subsequently acquired, which are material to the risk. SECTION 97. A reinsurance is presumed to be a contract of indemnity against liability, and not merely against damage. SECTION 98. The original insured has no interest in a contract of reinsura’ the insured Sections 167 — 173, insurance Code A contract by which the insurer for a consideration agrees against loss of, or damage to, property by hostile fire, intludi y lighting, Windstorm, tornado or earthquake, and other allied Ne such risks are covered by extension to fire insurance policies or under se} 3s. (Section 167) The presence of heat, steam, or even smoke i Goirce of fire, but taken by itself it will ‘Rot prove the existence of fire. Unless dt nied by ignition, heat sufficient to cause harring or scorching does not one To constitute fire, combustion must Broceed at a rate sufficiently fa ice a flame, a glow or incandescence. Regardless of the amount of ffegt, tijere can be no fire until ignition takes place. liravite, “The money of the Philippines” citing D.L.Bickelhauf, p.478) ire Insurance ISS — this must be immediately given, unless delay is waived cdly by the insurer; and F OF LOSS ~ based on best evidence obtainable, unless delay is waived ‘or impliedly by the insurer. of Indemnity POLICY — entitled to recover only the expense necessary to replace the thing lost injured in the condition it was at the time of the injury. MERCANTILE LAW REVIEW ATTY. G, ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW 2. VALUED POLICY ~ the parties are bound by the valuation, in the absence of fraud or mistake. X constructed a house for which he spent P300,000.00 which he insured against fire for the same amount. When built, the house was already worth 600,000.00. Howev&y, one day, 1/5 of the house was destroyed by accidental fire. How much can X recover ? * Ifpolicy is an open policy, x can recover his actual loss of P120,0000Q wifich is 1/5 of P600,000.00, the value of the property at the time of loss. * Ifthe policy is a valued policy, and the house was valued,at}R$00/090.00, X can recover only 1/5 of P300,000.00 or P60,000.00. “Ay * Alteration in the use of the thing insured made wi entitles the latter to rescind the contract of ins Requisites for rest n in case of altel The use or condition of the oS he limited or stipulated in the policy; Such use or condition as limifetkby the policy is altered; The alteration is made it the consent of the insurer; The alteration is ma jeans within the control of the insured; The alteratio Ox tthe risk; (section 168); and b&a violation of a policy provision, ion in the risk or condition of the thing insured which does not increase the not affect a contract of fire insurance. fer section 75, the insurer is given the right to insert terms and conditions in the which if violated would avoid it. An alteration made in the use or condition of the insured will thus avoid a policy under the same section if such alteration is Page (26 NOTES ON MERCANTILE LAW REVIEW ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW on pledge, h cate fer fire policy As arrule, after a loss has occured, insured may pledge, hypothecate or transfer a fire insurance policy or rights thereunder. This he may even do so even without the consent of or notice to the insurer. In such case, it is not the personal contract which is bAfg assigned, but a claim under or a right of action on the policy against the insugers * This rule however is subject to the provisions of Section 173 of the ad * No policy of fire insurance shall be pledged, hyothecated, or wanted Povoason, firm or company who acts as agent for or otherwise represents the issWhg compan and any such pledge, hypothecation, or transfer hereacter. all be void and of no 'sofar as it may affect other creditors of the insu 173, Insurance OPTION TO REBUILD CLAUSE ey Section 172 of the insurance Code. aN Insurer may have the option to reinstptaoSveplace the property damaged or destroyed any part thereof, instead of payi Noon of the loss or damage. Reserved by the insurer in ordeRt-protect himself from unfairness in the appraisal and award rendered by ony in case of loss. This option must i ‘ed within a stipulated period or within a reasonable time. bPecrance includes all forms of insurance against loss or liability arising from tt or mishap which are not within the scope of other types of insurance, namely: Ine, fire, surety, ship and life, jple : Robbery and theft insurance, accident insurance Re VIEW ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW Page [27 * Liability insurance is a contract of indemnity for the benefit of the insured and those in privity with him, or those to whom the law upon the grounds of public policy extends the indemnity against liability Section 174 defines casualty insurance by process of elimination. Applies to almost any kind of insurance Includes therfore any loss or damage when an accident isthe cause Sash The terms ‘accident’ and ‘accidental’, as used in insurance have not acquired any technical meaning, and are construed by the courts i inary and common -acceptation. Thus, the terms have been taken to may hich happen by chance or "fortuitously, without intention and design, and winks ‘expected, unusual, and unforeseen. An accident is an event that takes @ ithout one's foresight or ‘expectation — an event that proceeds fo fnown cause, or is an unusual effect '2 known cause and, therefore, not explete OND DIVISION[G.R. No. 1009Z0. eptember 2, 1992.]FINMAN GENERAL ASSURANCE ORPORATION, petitioner, Vs,gTHE HONORABLE COURT OF APPEALS and JULIA SURPOSA, pondents. ging of the act which produces the injury, the resulting death is within the pF the policies insuring against death or injury from accident." (De la Cruz vs. lurance & Surety Co., Inc., 17 SCRA 559 (1966)]. Divisions of Health insurance Page |28 ASIDO UNIVERSITY OF LAW ince against specified perils which may affect the person and/or property of the red iples ~ personal accident, robbery/theft insurance Party Liability ~ Insurance against specified perils which may give rise Part of the insured for claims for injuries or damage to property of of ince against specified perils which may affect the person ondary bey ofthe ed irance against specified perils which may give rise to lia the part of the « red for claims for injuries to others or damage to the| insurable interest is to be found in western insured has in the safety of Fs0n or property who may maintaior¥A the freedom from damage of property may become the basis of Oy him in case of their injury or destructic insurable interest does ngt dependMipon whether the insured has a legal or le interest in property Bht,yzon whether he may be charged at law with liability which insurance isstaken out. when the Of the insured attaches, regardless of actual loss at that time. Son injured to sue the insurer of the party at fault (insured) depends ‘Contract of insurance is intended to benefit third persons also or only to two tests: ‘the contract provides for indemnity against liability to third persons, then third ‘to whom the insured is liable, can sue the insurer. Page [29 sTTY. G, ASIDO SON UNIVERSITY EGE OF LAW 2. Where the contract is for Indemnity against actual loss or payment then third persons cannot proceed against the insurer , the contract being solely to reimburse the insured for liability actually discharged by him through payment to third persons, said third Person’s recourse being limited to the insured alone, ul Insurance = Sections 373 - 389, Insurance Code of the Philippines X y * Aprotection coverage that will answer for legal liability for losse; A. for bodily injuries or property damage that may be sustained by er arising from the use and operation of a motor vehicle by its owner. SECTION 373. For purposes of this chapter: oy (2) "Motor Vehicle" is any vehicle as epee ta ion three, paragraph (a) of Republic Act Numbered Four Thousand ew Thirty-Six, otherwise known as the a “Land Transportation and Traffic Code; “A rnY RA 4136, as amended, provides: xs av SECTION 3. Wolls.gild phrases defined. — As used in this Act: () "Motor Vehicle”, ean any vehicle propelled by any power other than iscular power usi iblic highways, but excepting road rollers, trolley cars, vet-sweepers,, *rs, lawn mowers, bulldozers, graders, fork-lifts, amphibian s, and erg Prot used on public highwoys, vehicles which run only on rails or ks, ang tacts, trailers and traction engines of all kinds used exclusively for poses. javing any number of wheels, when propelled or intended to be propelled by iment to a motor vehicle, shall be classified as separate motor vehicle with no rating. "Third Party" is ony person other than a passenger as defined in this section and also exclude a member of the household, or a member of the family within the degree of consanguinity or affinity, of a motor vehicle owner or land NTILE LAW REVIEW : /.G. ASIDO ISON UNIVERSITY GE OF LAW : transportation operator, as likewise defined herein, or his employee in respect of death or bodily injury, arising out of and in the course of employment; 4) "Owner" or "Motor Vehicle Owner" means the actual legal owner of a motor vehicle, in whose name such vehicle is duly registered with the Land Transportagi Commission; (e) “Land transportation operator" means the owner or owners of m icles for transportation of passengers for compensation, including ‘school “*~) The injured for whom the contract of insurance i of statutes enabling an injured p intended purpose may be accomplished, has even been held that such a provision creates a contractual relation rad the benefit of any and every person who d may be negligently injured by t! sured as if such injured person were specifically named in the polidy (S 2497 Am. Jur., 2d, pp. 118-119) lawful for any land transportation operator or owner of a motor vehicle to operatéheW¥ame in the public highways unless there is in force in ‘elation thereto a Finsurance or guarantee in cdsh or surety bond issued In ‘accordance ko favisions of this chapter. SECTION ‘Commissioner shall furnish the Land Transportation Commissioner ieurance companies authorized to issue the policy of Insurance or surety ed by this chapter. SECTION 374. It shall be ‘halll not allow the registration or [ON 376. The Land Transportation Commission s| Mrewal of registration of any motor vehicle without first requiring from the land "transportation operator or motor vehicle owner concerned the presentation and filing of substantiating documentation in a form approved by the Commissioner evidencing that the policy of insurance or guaranty in cash or surety bond required by this chapter is in effect. Page |32 /. G. ASIDO ISON UNIVERSITY IGE OF LAW = [G.R. No. 60506. August 6, 1992,],FIGURACION VDA. DE MAGLANA, EDITHA M. CRUZ, ERLINDA M. MASESAR, LEONILA M. MALLARI, GILDA ANTONIO and the minors LEAH, LOPE, JR., and ELVIRA, all surnamed MAGLANA, herein represented by their mother, FIGURACION VDA. DE MAGLANA, petitioners, vs. HONORABLE FRANCISCO Z. CONSOLACION, Presiding Judge of Davao City, Branch Il, and AFISCO INSURAN CORPORATION, respondents. ISSUE : WHEN DOES THE INSURER'S LIABILITY INA COMPREHENSIVE. woven LIABILITY INSURANCE ACCRUE? ssurer's liability which the labili "tWhhere an insurance policy insures directly against liability, tl accrues immediately upon the occurrence of the injury or e' depends, and does not depend on the recovery of judam the insured. The underlying reason behind the third Compulsory Motor Vehicle Liability Insurance is "to"acotétt injured persons against the insolvency of the insured who causes such inj Ang! fo give such injured person a certain beneficial interest in the proceeds afifte policy. -.." (Shafer vs. Judge, RTC of Olongapo City, Br. 75, G.R. No. aay 1988, 167 SCRA 386, 391) * [G.R. No. 101439. June 21, 19 MENT SERVICE INSURANCE SYSTEM (GIS), petitioner, vs. COURT OF API rmer Tenth Division), VICTORIA JAIME VDA. DE KHO, for herself and minog ROY ROLAND, GLORIA KHO VDA. DE CALABIA for herself and minors MARY GRACE, WiLLIEYAR., VOLTAIRE, GLENN, and MAY, all surnamed CALABIA, DANIEL KHO, JOSEFI| ), EMERITA KHO APEGO, ANTONIO KHO and TERESITA KHO, respondents. a A cro driven by Guillermo Corbeta and owned by the National Food Auth ‘A), collided with a Toyota Tamaraw owned and operated by Victor Uy. The th ees with the GSIS against liabilities for death and injuries to third persons fe maximum indemnity for death of P12,000. Five passengers died and 10 others re injured in the accident. All were passengers of the Toyota Tamaraw. One of the three cases filed was for damages based on quasi-delict against GSIS, as insurer of the truck, NFA, the driver Corbeta, Uy and the insurer, Mabuhay Insurance and Guaranty Co,, MIGC the insurer of the Toyota Tamaraw. Hospital charges and fees rendered to the victims were conclusively established at the trial Thereofter, judgment was rendered ordering MIGC, Corbeta, NFA and GSIS to pay jointly ‘ond severally private respondents, heirs and victims of the collision, damages after a {finding that the negligence of Corbeta was the proximate cause of the collision. On ‘appeal, the Court of Appeals rendered judgment affirming in toto the assailed degfsic ‘Hence, this recourse by GSIS challenging the adjudged solidary liability on the ‘that its liability under the Insurance contract is different from the liability of from quasi-delict and the lack of cause of action for failure of respondent le their insurance claim within six (6) months from date of accident. Ss y EXTENT OF LIABILITY OF INSURER. — However, although the victigy may proceed directly af ‘0 the extent of the INSURER NOT SOLIDARILY LIABLE WITH INSURED. imnes PARTY AT FAULT. — While itis true that where the insurance oe for indemnity against libility to third persons, and such third persons gon ‘sue the insurer, the direct liability of the insurer under indemnity contracts estes iird party liability does not mean that the insurer can be held liable in solid 1 ‘insured and/or the other parties found at ‘fault. For the liability of the ingurerig bt ‘ed on contract; that of the insured carrier or vehicle owner is based on tort. ility of GSIS based on tiie insurance contract is direct, but not solidary es of the NFA. The latter's lability is based separately on ‘against the insurer for indemnity, the third party liability is insurance policy and those required by law. i Article 2180 of the Civil Viotice of insurance claims must be filed within six (6) months from jo. 144274. September 20, 2004.]; NOSTRADAMUS VILLANUEVA, petitioner, vs. {ISCILLA R. DOMINGO and LEANDRO LUIS R. DOMINGO, respondents. Petitioner Villanueva wos a former owner who remained to be the registered owner of a cor that got involved in a traffic: mishap. The incident caused damage to the car registered to Priscilla Domingo and driven by Leandro Luis Domingo, both respondents Page [33 herein. The driver of the vehicle registered in petitioner's name was found to be at fault. As. result, a complaint was filed against several persons including petitioner. After trial, the trial court found the petitioner liable and ordered him to pay the respondent actual, ‘moral and exemplary damages plus appearance and attorney's fees. The Court of, Appeals affirmed the trial court's decision but deleted the appearance and attaae\\ fees. Whether the registered owner of a motor vehicle may be held liable for daXages arising from a vehicular accident involving his motor vehicle which was ie by the employee of the vehicle's buyer without the latter's consent? We have consistently ruled that the registered owne?, vo is directly and primarily responsible to the public and third mg it is being operated. The fationale behind such doctrine was explained wa) ‘in 1957 in Erezo vs. Jepte: The principle upon which this doctrine is based (ey dealing with vehicles registered under the Public Service Law, the public hgS\hefight to assume or presume that the registered owner is the actual owner thBxgop, for it would be difficult for the public to enforce the actions that they ma, Oy Injuries caused to them by the vehicles being negligently operated if the public Shgul’be required to prove who the actual owner is, Whether the driver is authgrized or not by the actual owner is irrelevant to determining the liability of the regis iwner who the law holds primarily and directly responsible for any accident, inj leath caused by the operation of the vehicle in the streets and highways. To the driver of the vehicle to be authorized by the actual owner 'd owner can be held accountable is to defeat the very purpose why -gislations are enacted in the first place. pe: that it is immaterial whether or not the driver was actually employed by the ‘or of record. It is even not necessary to prove who the actual owner of the vehicle id the employer of the driver is. Granting that, in this case, the father of the driver is the actual owner and that he is the actual employer, following the well-settled principle that the operator of record continues to be the operator of the vehicle in contemplation ef law, as regards the public and third person, and as such is responsible for the ‘onsequences incident to its operation, we must hold and consider such owner-operator Of record as the employer, in contemplation of law, of the driver. And, to give effect to this policy of law as enunciated in the above cited decisions of this Court, we must now extend the same and consider the actual operator and employer as the agent of the operator of record." * AUTHORIZED DRIVER" CLAUSE, MEANING. — Under the “authorized drive ban authorized driver must not only be permitted to drive by the insured. It essential that he is permitted under the law and regulations to drive the mogor disqualified from so doing under any enactment or nosten A accident, Stokes had been in the Philippines for more than 9 lays fence, under the law, he could not drive a motor vehicle without a Phili iver's license. He was therefore not an "authorized driver" under the terms oft iratce policy in question, ‘and MALAYAN was right in denying the claim of the prog? GR. No. 1-34768. February24,1984.JAM! S, a5 Attorney-in-Fact of Daniel Stephen Adolfson and DANIEL STEPHEN. ARQLFSON, plaintiffs-appellees, vs. MALAYAN INSURANCE CO., INC., defendant-appelign’ * Can an insurance company ddyy a Yai based on a finding that the motor vehicle when it was carnapped was being drivewby on unauthorized driver? Where a car is admij S in this case, unlawfully and wrongfully taken without the ‘owner's consent, ledge, such taking constitutes theft, and, therefore, it is the “THEFT” clause Ore the "AUTHORIZED DRIVER" clause, that should apply. entirely different legal concept from that of accident, Theft is committed with the intent to gain or, to put it in another way, with the concurrence of person by whose agency it was caused. (Bouvier's Law Dictionary, Vol. |, 1914 ed,, p. 101). NOTES ON MERCANTILE LAW REVIE\ ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW LIFE INSURANCE Reference As to amount As to legal basis LY i) 2 to time of ferest Insurance Not a contract of indemnity & “ any legal Page [35 Accident insurance a No limit as to to the value amount, except the f the property to be Insured’s health ande % sured his capacity to pa the exception: in of debtor is Life insurance 4 Lim There must be legal basis Must exist at the time of perfection and the time of loss. Must exist only at the time of the perfection of the contract Marine and Fire insurance Contracts of indemnity ON LAW REVI ATTY. G, ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW It isa valued policy May be transferred or assigned to another person even without insurable interest Consent of insurer is not essential to the validity of the assignment of contract Insurable interest in the life or health Of the insured need not exist after the insurance takes effect Insurable interest need not have any legal basis The contingency that is contemp! sy is a certain event, the only uncertainty being when itayill take place aS The liability is vee No Pe ent prove financial yer term contract Page |36 May be open or valued ‘Must have an insurable interest Consent, in the absen essential insurable regres) must exist at the takes effect and when a eg interest must have legal basis Contingency insured may or may not take place Liability is uncertain Submit proof May be cancelled by either party and is usually only for 1 year NOTES ON MERCANTILE LAW REVIEW ATTY. G. ASIDO oF ADAMSON UNIVERSITY 4 COLLEGE OF LAW Kinds of Life Insurance Policies 1. Ordinary Life Policy "Insured is required to pay a certain fixed premium annually or at more frequet intervals throughout life and the beneficiary is entitled to receive payment policy only after the death of the insured * Also known as “whole life, regular life, or straight life policy.” VY 2. Limited Payment Life Policy ° Ky + Payable only upon death of the insured + Premium is payable only during a limited period S 3. Term Payment Life Policy @ ° “A * Coverage only if the insured dies during Age sd period 4. Endowment Policy wy” + Insurer binds himself to paiga fixed sum to the insured if he survives for a specified period, or if he dies sth period, tosome other person indicated. Scope of Life tauren Oo (1.) ewsrgey oO Actual death ) Y {c.) Retirement Death 2.) Health Insurance - When health insurance is written by life insurers, injury or illness are also viewed as casualties. . | Page [38 NOTES ON MERCANTILE LAW REVIEW ATTY. G, ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW Contract of Life Annuit) = Refer to Article 2021, Civil Code = By the aleatory contract of life annuity, the debtor binds himself to pay an anu; pension or income during the life of one or more determinate persons in con: jon of a capital consisting of money or other property, whose ownership is trant him at once with the burden of the income. purchaser of a life insurance expectshis The purchaser ofa life annuity expects his iy his beneficiary a specified sum insurer'to pay him aperiodic income as long an his death. as he lives. a ©" = Section 180 (2 paragraph) ~ Every contract or pledge for the: nF endowments or annuities shall be considered a life insurance coftract for purpose of this Code. Bule on Suicide "Sec. 180-A. The inst when it is com the date of rer the policy has been in force for a period of two years from or of its last reinstatement, unless the policy provides a shorter insurer for suicide in the following cases: Qos is committed after the policy has been in force for a period of two (2) years from the date of its issue or of its last reinstatement; 2. Insurance policy provides for a shorter period instead of two years; and NOTES ON MERCANTILE LAW REVIEW ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW 3, Suicide is committed in the state of insanity regardless of the date of commission, unless suicide is an excepted risk. When is insurer not lable in cases of suicide 1) suicide is not by reason of insanity and is committed within the two year period; 2.) suicide is by reason of insanity but is not among the risks assumed by the insycgy regardless of the date of commission; 3,) insurer can show that the policy was obtained with the intention to coy le even in the absence of any suicide exclusion in the policy Right of insured to assign life insurance policy ” x = Sec. 181. A policy of insurance upon life or health by transfer, will or succession to any person, whether he has an nee interest or not, and such person may recover upon it whatever the insured mi /e recovered. = Alllife insurance policies are declared to be assignable regardless of whether the assignee has an insurable interest inthe Ie of the insured or not, «Sec. 182, Notice to an insuref Oa transfer or bequest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly required. : policy wgPhisunance = Ship Owner = Cargo Owner NOTES ON MERCANTILE LAW REVIEW 5 ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW "Charterer = Owner/Debtor = Creditor/Lender Insurable Interest in Marine Insurance = Ship Owner = Over the vessel to the extent of its value, provided tay fartered, the recovery is only up to the amount net recoverable from the chacferer - He also has insurable interest on the expected freightag¥@gestign 103) = No insurable interest if he will be compensate, rterer for the value of the vessel, in case of loss, = Over the cargo and me 105) = Creditor/Lender «aS - Amount of the Loan + cago Over 4& Only Perils of the Sea, in case of an All Risk Policy where perils of the ship are es only hose casualties due to the; A loss which in the ordinary course of events, Dee 8 rregults from the: usual violence : 2, Extraordinary action of the wind and wave” 1, Natural and inevitable action ofthe sea) 3. Negligent failure of the ship’s owner to provide the vessel with the proper equipment to convey the cargo under ordinary conditions a Sections 107 - 110, Insurance Code ° x = MATTERS ALTHOUGH CONCEALED WILL NOT VITIATE fRonTRact EXCEPT WHEN THEY CAUSED THE LOSS. < Section 110 of the Insurance Code 1, National Character of the Insured xy 2.Liability of the thing ros detention 3.Liability to seizure from breachgfAoreign laws of trade a papers 5.Use of false or 5 INCTION oncga IN MARINE INSURANCE AND OTHER INSURANCE 4.Want of necessary di The information or The information or the belief or expection belief of a 3rd party is of 3rd persons in not materialand need not be communicated reference toa NOTES ON MERCANTILE LAW REVIEW ATTY. G, ASIDO ADAMSON UNIVERSITY ‘COLLEGE OF LAW material fact is material and must be concealed. Effect of concealment The concealment of any fact in relation to any of the matters stated in section 110 does not vitiate the entire contract but insurer from a risk concealed < © 4S 1, Seawotthiness of the ship 2. Against improper devi Gy 3, Against illegal ve Implied Warrant 4, Warranty offhetyrality 5. Pres fhsurable interest hiness voyage, contemplated by the parties to the policy. = General Rule on Seaworthiness merely exonerates the resulting from the fact unless it proceeds from an agent of the insured whose duty is to give information Concealment of any material fact will vitiate the entire contract, whether the loss results from the risk concealed Yrs fitness to perform the service and to encounter the ordinary perils of the NOTES ON MERCANTILE LAW REVIEW ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW The warranty of seaworthiness is complied with if the ship be seaworthy at the time of the ‘commencement of the risk. Prior or subsequent unseaworthiness is not a breach of the warranty nor is it material that the vessel arrives in safety at the end of her voyage. = Ex ceptions to the General Rule on seaworthiness 1. Incase of Time Policy, the ship must be seaworthy at the commencement 61 voyage she may undertake during the period of the coverage; 2. In the case of Cargo Policy, each vessel upon which the cargo is when pped a must be seaworthy at the commencement of each particular vo 3. In the case of Voyage Policy, contemplating a voyage at gi ges, the ship must be seaworthy at the commencement of each stage of th viation x * Departure from the course of the voyage ins! an unreasonable delay in pursuing the voyage or, the commencement of aft ly diffrerent voyage. (section 123) = Instances of Deviation ky 1.Deviation from the ceveitheg) 2, Departure of vessel froffithe course of the sailing fixed by mercantile usage; 3. Departure of ves ‘the most natural, direct and advantegous route if not fixed by mercantile iy 4. Unreast leSdelay in pursuing the voyage; Yement of an entirely different voyage. (sections 121-123, Insurance Code) SpCoffi SEN snin X When caused by circumstances outside the control of the ship captain or ship owner = When necessary to comply with a warranty or to avoid a peril (REAL PERIL) = When made in good faith to avoid a peril (NON-EXISTING/ASSUMED PERIL) . NOTES ON ILE. ATTY. G. ASIDO ADAMSON UNIVERSITY COLLEGE OF LAW = When made in good faith to save human life or to relieve another vessel in distress (section 124) Effect - In case of loss, the insurer is liable. Improper Deviation = Every deviation not specified in Section 124 * Effect ~ In case of loss or damage subsequent to an improper devi not liable. (section 124) Loss = Rules in case of Loss A. Total A Total 1. Actual 1.1 Total Dgstr 1.2 Irretrievab€foss by sinking or being broken up; rendering the thing valueless to the owner for the purpge Ypr which he held it; or © Other event which effectively deprives the owner of the %session, at the port of destination, of the thing insured. é Porosreuctve y 2.1 Actual loss of more than % of the value of the object; 2.2 Damage reducing, by more than % of the value of the vessel and ofthe cargo; and 2.3. Expense of the transshipment exceeds % of the value of the carg NOTES ON MERCANTILE LAW REVIEW ; ATTY. G. ASIDO . ADAMSON UNIVERSITY COLLEGE OF LAW B, Partial — that which is not total (section 128) IN casi INSTRUCTIVE TOTAL LOSS, INSURED’s REMEDIES ARE: 1. Abandon the goods or vessel to the insurer and claim for whole insured value; (sagtion 139) 2. Without abandoning the vessel, claim for partial actual loss (section 155) Abadonment - Act of the insured by which, after a constructive total I red the relinquishment to the insurer of his interest in the thing Insured. (section 2. REVISED SECURITIES ACT (RA 8799] oF x = Establish a socially conscious free market a Geli itself; = Encourage widest participation of

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