2023 PRE-WEEK HO 6 - Commercial Law

2023 BAR REVIEW Handout No.
6
Commercial Law
PRE-WEEK
PARTNERSHIP
1. What are the essential elements of a contract of partnership?
Under Article 1767 of the Civil Code, there are two essential elements in a contract of
partnership: (a) an agreement to contribute money, property or industry to a common fund;
and (b) intent to divide the profits among the contracting parties. Jarantilla, Jr. vs. Jarantilla,
636 SCRA 299, G.R. No. 154486 December 1, 2010
2. What is the nature of a partners’ obligation with respect to the partnership liabilities?
It is subsidiary in nature. It provides that the partners shall only be liable with their property
after all the partnership assets have been exhausted. To say that one’s liability is subsidiary
means that it merely becomes secondary and only arises if the one primarily liable fails to
sufficiently satisfy the obligation. Resort to the properties of a partner may be made only
after efforts in exhausting partnership assets have failed or that such partnership assets are
insufficient to cover the entire obligation. The subsidiary nature of the partners’ liability with
the partnership is one of the valid defenses against a premature execution of judgment
directed to a partner. Guy vs. Gacott, 780 SCRA 579, G.R. No. 206147 January 13, 2016
3. Is an oral contract of partnership as good as a written one?
Since a contract of partnership is consensual, an oral contract of partnership is as good as a

written one. Where no immovable property or real rights are involved, what matters is that
the parties have complied with the requisites of a partnership. It may be constituted in any
form; a public instrument is necessary only where immovable property or real rights are
contributed thereto. The fact that there appears to be no record in the Securities and
Exchange Commission of a public instrument embodying the partnership agreement
pursuant to Article 1772 of the Civil Code did not cause the nullification of the partnership.
Tocao vs. Court of Appeals, 342 SCRA 20, G.R. No. 127405 October 4, 2000
4. How is an industrial partner’s profit determined?
For the purpose of determining the profit that should go to an industrial partner (who shares
in the profits but is not liable for the losses), the gross income from all the transactions carried
on by the firm must be added together, and from this sum must be subtracted the expenses
or the losses sustained in the business. Only in the difference representing the net profits
does the industrial partner share. But if, on the contrary, the losses exceed the income, the
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2023 BAR REVIEW Handout No. 6
Commercial Law
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industrial partner does not share in the losses. Santos vs. Reyes, 368 SCRA 261, G.R. No.
135813 October 25, 2001
5. Discuss the final stages of a partnership.
Under the Civil Code, the three final stages of a partnership are (1) dissolution; (2) winding-
up; and (3) termination. These stages are distinguished, to wit:
i. Dissolution Defined—Dissolution is the change in the relation of the partners caused

by any partner ceasing to be associated in the carrying on of the business (Art. 1828).
It is that point of time the partners cease to carry on the business together;
ii. Winding Up Defined—Winding up is the process of settling business affairs after

dissolution. (Note: Examples of winding up: the paying of previous obligations; the
collecting of assets previously demandable; even new business if needed to wind up,
as the contracting with a demolition company for the demolition of the garage used
in a ‘used car’ partnership.);
iii. Termination Defined—Termination is the point in time after all the partnership affairs
have been wound up. Idos vs. Court of Appeals, 296 SCRA 194, G.R. No. 110782
September 25, 1998
6. May any of the partners demand an accounting of the partnership’s business?
For as long as the partnership exists, any of the partners may demand an accounting of the
partnership’s business. Prescription of the said right starts to run only upon the dissolution
of the partnership when the final accounting is done. Contrary to petitioner’s protestations
that respondents’ right to inquire into the business affairs of the partnership accrued in 1986,
prescribing four (4) years thereafter, prescription had not even begun to run in the absence
of a final accounting. Emnace vs. Court of Appeals, 370 SCRA 431, G.R. No. 126334 November
23, 2001

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CORPORATION LAW
7. What is a holding or parent corporation?
A "holding company" is organized and is basically conducting its business by investing

substantially in the equity securities of another company for the purposes of controlling their
policies (as opposed to directly engaging in operating activities) and "holding" them in a
conglomerate or umbrella structure along with other subsidiaries. Maricalum Mining vs.
Florentino, G.R. No. 221813, July 23, 2018
8. What is a corporation sole?
It is a corporation consisting of only one person or member, for the purpose of administering
and managing, as trustee, the affairs, property and temporalities of any religious
denomination, sect or church, a corporation sole may be formed by the chief archbishop,
bishop, priest, minister, rabbi or other presiding elder of such religious denomination, sect or
church.
9. What is a One Person Corporation?
A One Person Corporation is a corporation with a single stockholder, who may be a natural
person, trust, or an estate. Sec. 116, RCC
10. Explain the No-Transfer Clause.
No transfer of stock or interest, which shall reduce the ownership of Filipino citizens to less
than the required percentage of capital stock as provided by existing laws, shall be allowed
or permitted to be recorded in the proper books of the corporation, and this restriction shall
be indicated in all stock certificates issued by the corporation.
Corporations which will engage in any business or activity reserved for Filipino citizens shall
include this in the Articles of Incorporation.

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11. Define the concepts of Outsider Reverse Piercing and Insider Reverse Piercing.
Outsider reverse piercing occurs when a party with a claim against an individual or
corporation attempts to be repaid with assets of a corporation owned or substantially
controlled by the defendant.
In contrast, in insider reverse piercing, the controlling members will attempt to ignore the
corporate fiction in order to take advantage of a benefit available to the corporation, such as
an interest in a lawsuit or protection of personal assets. International Academy of
Management and Economics (I/AME) vs. Litton and Company, Inc. , 848 SCRA 437, G.R. No.
191525 December 13, 2017
12. Who is disqualified from the Board?
A person shall be disqualified from being a director, trustee, or officer of any corporation if,
within five (5) years prior to the election or appointment as such, the person was:
(a) Convicted by final judgment:

1. Of an offense punishable by imprisonment for a period exceeding six (6) years;
2. For violating the Code; and
3. For violating Republic Act No. 8799, otherwise known as “The Securities
Regulation Code”;
(b) Found administratively liable for any offense involving fraudulent acts; and
(c) By a foreign court or equivalent foreign regulatory authority for acts, violations or
misconduct similar to those enumerated in paragraphs (a) and (b) above. Par. 1, Sec. 26,
RCC
13. When are corporations required to have Independent Directors?
Under the Revised Corporation Code, corporations vested with public interest shall have
independent directors or trustees constituting at least twenty percent (20%) of such board.
Such corporations are listed under Section 22 thereof, to wit:
a. Corporations covered by Section 17.2 of the Securities Regulation Code;

i. Those whose securities are registered with the SEC; and

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ii. Those listed with an exchange or with assets of at least P 50 million and having
two hundred (200) or more holders of shares, each holding at least one hundred
(100) shares of a class of its equity shares;
b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service

business, preneed, trust, and insurance companies, and other financial intermediaries;
and
c. Other corporation engaged in business vested with public interest similar to the above,
as may be determined by the SEC, after taking into account relevant factors which are
germane to the objective and purpose of requiring the election of an independent
director, such as the extent of minority ownership, type of financial products or securities
issues or offered to investors, public interest involved in the nature of business
operations, and other analogous factors. Sec. 22, RCC
14. Who is an independent director?
An independent director or trustee is a person, who apart from shareholdings and fees
received from the corporation, is independent of management and free from any business or
other relationship which could, or could reasonably be perceived to materially interfere with
the exercise of independent judgment in carrying out the responsibilities as a director or
trustee. Sec. 22, RCC
15. Explain the Business Judgment Rule.
Questions of policy or of management are left solely to the honest decisions of officers and
directors of a corporation, and so long as they act in good faith, their orders are not
reviewable by the courts. Saber vs. Court of Appeals, G.R. No. 132981, August 31, 2004
16. What is the quorum for board meetings?
Unless the articles of incorporation or the bylaws provides for a greater majority, a majority
of the directors or trustees as stated in the articles of incorporation shall constitute a quorum
to transact corporate business, and every decision reached by at least a majority of the
directors or trustees constituting a quorum, except for the election of officers which shall
require the vote of a majority of all the members of the board, shall be valid as a corporate
act. Sec. 52, RCC

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17. What is the basis in determining the presence of a quorum in non-stock corporations?
The basis in determining the presence of quorum in non-stock corporations is the numerical
equivalent of all members who are entitled to vote, unless some other basis is provided by
the By-Laws of the corporation. To include those members without voting rights in the total
number of members for purposes of quorum would be superfluous for although they may
attend a particular meeting, they cannot cast their vote on any matter discussed therein. Lim
vs. Moldex Land, Inc., 815 SCRA 619, G.R. No. 206038 January 25, 2017
18. Provide a list of corporate acts requiring approval of majority of the outstanding shares or
members.
1. Approval of management contract, if any of the instances under Section 43 is absent

2. Adoption, amendment or repeal of by-laws
3. Fixing the issued value of price of shares
4. Revocation of the power of the board to amend the by-laws, which was previously
delegated by the stockholders
5. Grant of compensation to Board members
19. Explain the rule on Self-Dealing Contracts.
A contract of the corporation with one (1) or more of its directors, trustees or officers or their
spouses and relatives within the fourth civil degree of consanguinity or affinity is voidable, at
the option of such corporation, unless all the following conditions are present:
a. The presence of such director or trustee in the board meeting in which the contract
was approved was not necessary to constitute a quorum for such meeting;
b. The vote of such director or trustee was not necessary for the approval of the
contract;
c. The contract is fair and reasonable under the circumstances.
d. In case of corporations vested with public interest, material contracts are approved
by at least two-thirds (2/3) of the entire membership of the board, with at least a
majority of the independent directors voting to approve the material contract; and
e. In case of an officer, the contract has been previously authorized by the board of
directors. Sec. 31, RCC

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20. A, B and C, stockholders of PSR, demanded to inspect the confidential records of PSR which
the latter denied. According to PSR, they have no legitimate purpose in this case and that
if they will be allowed access to PSR’s trade secrets and other confidential information,
these will be used by A, B and C to give undue commercial advantage to third parties. PSR
then filed an injunction to restrain them from accessing its books and records. Decide if the
case for injunction of PSR is legally in order.
The case is not legally in order. The clear provision of the law is sufficient authority to
conclude that an action for injunction and, consequently, a writ of preliminary injunction filed
by a corporation is generally unavailable to prevent stockholders from exercising their right
to inspection. Specifically, stockholders cannot be prevented from gaining access to the (a)
records of all business transactions of the corporation; and (b) minutes of any meeting of
stockholders or the board of directors, including their various committees unless it is shown
that these stockholders’ demand for inspection is tainted with bad faith. Philippine
Associated Smelting and Refining Corp. vs. Lim, G.R. No. 172948; October 5, 2016
21. The handwritten minutes of the March 22, 1997 stockholders' meeting recorded the
following:
Quorum established.
Ratified all acts and proceedings of the Board of Directors and Management
Declaration of stock dividends
Nomination and the election of same Board and Officers in the preceding years as new Board
Meeting adjourned. 1:05 P.M.
Is this sufficient to establish declaration of 300% stock dividends by the company?
No. The foregoing minutes alone would be insufficient to prove petitioners' claim that the
300% stock dividends were approved by the board of directors and ratified by the
stockholders in the March 22, 1997 meeting. The minutes did not provide any other detail
that would convincingly show that the 300% stock, dividends distributed in 2002 were the
same stock dividends that were ratified by the stockholders in 1997.
Furthermore, while the minutes contain the names and signatures of stockholders who were
present at the meeting, the shares held by each were not indicated. On its face, the minutes
did not readily confirm how many shares were represented and voted at the meeting,
particularly on the stock dividends declaration. Lao, et al. vs. Lim, et al., G.R. No. 201306,
August 9, 2017

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22. SHR allegedly took over the property that was constructed by BF even though it has not yet
fully paid BF under their construction contract. BF then initiated arbitration against SHR but
impleaded the board and officers of SHR because allegedly, they manifested bad faith in
dealing with SHR. Can these board members and officers be compelled to participate in the
arbitration proceedings though they are not signatories to the construction contract?
Yes. As a general rule, a corporation's representative who did not personally bind himself or
herself to an arbitration agreement cannot be forced to participate in arbitration proceedings
made pursuant to an agreement entered into by the corporation. However, when, as in this
case, there are allegations of bad faith or malice against corporate directors or
representatives, it becomes the duty of courts or tribunals to determine if these persons and
the corporation should be treated as one. Hence, these directors and officers should be made
to participate in the arbitration proceedings in order to determine if such distinction should
indeed be disregarded and, if so, to determine the extent of their liabilities. Lanuza vs. BF
Corporation, G.R. No. 174938, October 1, 2014
23. X sought examination of the books of BBB, Inc. This was opposed by Y, who claimed that X
held the 25 shares in BBB, Inc. under his name merely in trust for Y as X had not paid for
these shares. Y further advised BBB, Inc. that X has a business in direct competition with it.
Y thus suspects that the request of X to inspect the records of BBB, Inc. was a means to
obtain a competitor's business information, and therefore, in bad faith. Considering the
ownership of X of the shares is being repudiated, can this case still be regarded as an intra-
corporate case? Why?
This is still an intra-corporate case.
Applying the relationship test, as long as both X and Y are named shareholders in BBB, Inc.’s
corporate records, the conflict involves two (2) shareholders, although the ownership of
stocks of one (1) stockholder is questioned.
Unless X is adjudged as a stranger to the corporation because he holds his shares only in trust
for Belo, then both he and Belo, based on official records, are stockholders of the corporation.
Applying the nature of the controversy test, this is still an intra-corporate dispute. Ultimately,
the goal is to stop X from inspecting corporate books. This goal is so apparent that, even if X
is declared the true owner of the shares of stock, still, his disqualification from inspecting the
corporate books based on bad faith will be pursued. Belo Medical Group, Inc. vs. Santos, 838
SCRA 142, G.R. No. 185894 August 30, 2017

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24. The several movements in the ownership of the shares at PBC, Inc. led to two major groups
in the company, namely, KRA Group and the PMA Group. The KRA Group having more
equity shares holds substantial number in the board and managed to pass a number of
resolutions affecting PBC, Inc., involving among other things, pre-emptive right
consideration, subscription price, recording of share transfer and quorum requirement. As
the two groups are unable to settle their differences, the PMA Group was constrained to
pursue a legal action against the KRA Group where the decisions reached by the directors
nominated and elected by the latter were challenged and nullification thereof sought. Is
this an intra-corporate case or a derivative suit? Why?
This is a derivative suit. The remedies that the PMA Group seeks are for PBC, Inc. itself to
avail. This is precisely the situation that the rule permitting derivative suits contemplates:
minority shareholders having no other recourse "whenever the directors or officers of the
corporation refuse to sue to vindicate the rights of the corporation or are the ones to be sued
and are in control of the corporation." Thus, it is imperative that the corporation itself be
impleaded being the real party in interest and whose cause of action is being pursued. Florete
vs. Florete, GR. No. 174909, January 20, 2016
25. When is a board meeting unnecessary for close corporations?
Unless the bylaws provide otherwise, any action taken by the directors of a close corporation
without a meeting called properly and with due notice shall nevertheless be deemed valid if:
a) Before or after such action is taken, a written consent thereto is signed by all the
directors; or
b) All the stockholders have actual or implied knowledge of the action and make no
prompt objection in writing; or
c) The directors are accustomed to take informal action with the express or implied
acquiescence of all the stockholders; or
d) All the directors have express or implied knowledge of the action in question and none
of them makes prompt objection in writing. Sec. 100, RCC
BANKING LAWS
26. Are banks under obligation to treat the accounts of their depositors with meticulous care?
Yes. In Spouses Carbonell v. Metropolitan Bank and Trust Company, 825 SCRA 1 (2017), the
Court emphasized that the General Banking Act of 2000 demands of banks the highest

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standards of integrity and performance. The Court ruled that banks are under obligation to
treat the accounts of their depositors with meticulous care. The Court ruled that the bank’s
compliance with this degree of diligence has to be determined in accordance with the
particular circumstances of each case. In this case, BPI failed to exercise the highest degree
of diligence that is not only expected but required of a banking institution. Bank of the
Philippine Islands vs. Quiaoit, 890 SCRA 509, G.R. No. 199562 January 16, 2019
27. Is the doctrine of last clear chance applicable to banking transactions?
The Court has also applied the doctrine of last clear chance in banking transactions. In Allied
Banking Corporation v. Bank of the Philippine Islands, 692 SCRA 186 (2013), the Court
explained: The doctrine of last clear chance, stated broadly, is that the negligence of the
plaintiff does not preclude a recovery for the negligence of the defendant where it appears
that the defendant, by exercising reasonable care and prudence, might have avoided
injurious consequences to the plaintiff notwithstanding the plaintiff’s negligence. The
doctrine necessarily assumes negligence on the part of the defendant and contributory
negligence on the part of the plaintiff, and does not apply except upon that assumption.
Stated differently, the antecedent negligence of the plaintiff does not preclude him from
recovering damages caused by the supervening negligence of the defendant, who had the
last fair chance to prevent the impending harm by the exercise of due diligence. Moreover,
in situations where the doctrine has been applied, it was defendant’s failure to exercise such
ordinary care, having the last clear chance to avoid loss or injury, which was the proximate
cause of the occurrence of such loss or injury. Bank of the Philippine Islands vs. Quiaoit, 890
SCRA 509, G.R. No. 199562 January 16, 2019
28. Cite an instance when the rule on innocent purchasers or mortgagees for value is applied
more strictly.
When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or
mortgagees for value is applied more strictly. Being in the business of extending loans secured
by real estate mortgage, banks are presumed to be familiar with the rules on land
registration. Since the banking business is impressed with public interest, they are expected
to be more cautious, to exercise a higher degree of diligence, care and prudence, than private
individuals in their dealings, even those involving registered lands. Banks may not simply rely
on the face of the certificate of title. Hence, they cannot assume that, simply because the title
offered as security is on its face free of any encumbrances or lien, they are relieved of the
responsibility of taking further steps to verify the title and inspect the properties to be
mortgaged. Parcon-Song v. Parcon, G.R. No. 199582, July 7, 2020

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29. Cite exceptions to the Rule on Confidentiality of Bank Deposits.
In Union Bank of the Philippines v. Court of Appeals, we held that “Section 2 of the Law on
Secrecy of Bank Deposits, as amended, declares bank deposits to be ‘absolutely confidential’
except:
(1) In an examination made in the course of a special or general examination of a bank

that is specifically authorized by the Monetary Board after being satisfied that there is
reasonable ground to believe that a bank fraud or serious irregularity has been or is being
committed and that it is necessary to look into the deposit to establish such fraud or
irregularity;
(2) In an examination made by an independent auditor hired by the bank to conduct its
regular audit provided that the examination is for audit purposes only and the results
thereof shall be for the exclusive use of the bank;
(3) Upon written permission of the depositor;
(4) In cases of impeachment;
(5) Upon order of a competent court in cases of bribery or dereliction of duty of public
officials; or
(6) In cases where the money deposited or invested is the subject matter of the litigation.”
Marquez vs. Desierto, 359 SCRA 772, G.R. No. 135882 June 27, 2001
30. What is the “Close Now, Hear Later Rule”?
Under the law, the sanction of closure could be imposed upon a bank by the Bangko Sentral
ng Pilipinas (BSP) even without notice and hearing — this “close now, hear later” scheme is
grounded on practical and legal considerations to prevent unwarranted dissipation of the
bank’s assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders, and the general public. Bangko Sentral ng Pilipinas Monetary Board vs.
Antonio-Valenzuela, G.R. No. 184778, October 2, 2009

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31. What is the relationship between the Philippine Deposit Insurance Corporation and a
closed bank?
The relationship between the Philippine Deposit Insurance Corporation and a closed bank is
fiduciary in nature. Section 30 of Republic Act No. 7653 directs the receiver of a closed bank
to "immediately gather and take charge of all the assets and liabilities of the institution" and
"administer the same for the benefit of its creditors."
The law likewise grants the receiver "the general powers of a receiver under the Revised Rules
of Court." Under Rule 59, Section 6 of the Rules of Court, "a receiver shall have the power to
bring and defend, in such capacity, actions in his [or her] own name."
Thus, Republic Act No. 7653 provides that the receiver shall also "in the name of the
institution, and with the assistance of counsel as [it] may retain, institute such actions as may
be necessary to collect and recover accounts and assets of, or defend any action against, the
institution." Considering that the receiver has the power to take charge of all the assets of
the closed bank and to institute for or defend any action against it, only the receiver, in its
fiduciary capacity, may sue and be sued on behalf of the closed bank. Banco Filipino Savings
and Mortgage Bank vs. Bangko Sentral ng Pilipinas and the Monetary Board, G.R. No.
200678, June 04, 2018
32. Does the bank retain its juridical personality even if it was placed under conservatorship?
Yes. A bank retains its juridical personality even if placed under conservatorship; it is neither
replaced nor substituted by the conservator who shall only take charge of the assets,
liabilities and the management of the institution.
It being the fact that the PDIC should not be considered as a substitute or as a codefendant
of the petitioner bank but rather as a representative party or someone acting in fiduciary
capacity, the insolvent institution shall remain in the case and shall be deemed as the real
party-in-interest. Nowhere in Section 3, Rule 3 of the Revised Rules of Court is it stated or, at
the very least implied, that the representative is likewise deemed as the real party-in-interest.
The said rule simply states that, in actions which are allowed to be prosecuted or defended
by a representative, the beneficiary shall be deemed the real party-in-interest and, hence,
should be included in the title of the case. Balayan Bay Rural Bank, Inc. vs. National
Livelihood Development Corporation, 771 SCRA 139, G.R. No. 194589 September 21, 2015

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33. Who has the authority to issue a freeze order as well as to extend its effectivity?
As the law now stands, it is solely the Court of Appeals, which has the authority to issue a
freeze order as well as to extend its effectivity. It also has the exclusive jurisdiction to extend
freeze orders previously issued by the Anti-Money Laundering Council (AMLC) vis-à-vis
accounts and deposits related to money laundering activities.
The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the CA over
the extension of freeze orders. As the law now stands, it is solely the CA which has the
authority to issue a freeze order as well as to extend its effectivity. It also has the exclusive
jurisdiction to extend existing freeze orders previously issued by the AMLC vis-à-vis accounts
and deposits related to money-laundering activities. Republic vs. Cabrini, Green & Ross, Inc.,
489 SCRA 644, G.R. No. 154522, G.R. No. 154694, G.R. No. 155554, G.R. No. 155711 May 5,
2006
34. Does Section 11 of the Anti-Money Laundering Act violate due process?
Section 11 of the Anti-Money Laundering Act (AMLA) providing for ex parte application and
inquiry by the Anti-Money Laundering Council (AMLC) into certain bank deposits and
investments does not violate substantive due process, there being no physical seizure of
property involved at that stage.
It is the preliminary and actual seizure of the bank deposits or investments in question which
brings these within reach of the judicial process, specifically a determination that the seizure
violated due process. In fact, Republic v. Eugenio, Jr., 545 SCRA 384 (2008), delineates a bank
inquiry order under Section 11 from a freeze order under Section 10 on both remedies’ effect
on the direct objects, i.e., the bank deposits and investments. Subido Pagente Certeza
Mendoza and Binay Law Offices vs. Court of Appeals, G.R. No. 216914, December 6, 2016
35. Does the Anti-Money Laundering Council exercise quasi-judicial powers?
The Anti-Money Laundering Council (AMLC) does not exercise quasi-judicial powers and is
simply an investigatory body finds support in the Supreme Court’s (SC’s) ruling in Shu v. Dee,
723 SCRA 512 (2014). In that case, petitioner Shu had filed a complaint before the NBI
charging respondents therein with falsification of two (2) deeds of real estate mortgage
submitted to the Metropolitan Bank and Trust Company (Metrobank). After its investigation,
the NBI came up with a Questioned Documents Report No. 746-1098 finding that the
signatures of petitioner therein which appear on the questioned deeds are not the same as
the standard sample signatures he submitted to the NBI. Ruling on the specific issue raised

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by respondent therein that they had been denied due process during the NBI investigation,
we stressed that the functions of this agency are merely investigatory and informational in
nature. Subido Pagente Certeza Mendoza and Binay Law Offices vs. Court of Appeals, G.R.
No. 216914, December 6, 2016
INSURANCE LAW
36. AV applied for and was granted a housing loan by UB Bank secured by a promissory note,
a real estate mortgage over the lot, and a mortgage redemption insurance (MRI) taken on
the life of Alvarez with UB as beneficiary. Alvarez passed away and UB filed a death claim
under AV’s name pursuant to the MRI. The insurance company maintained that based on
the documents submitted by UB, Alvarez was no longer eligible under the MRI since he was
more than 60 years old when his loan was approved. It appears that in one of the
documents he submitted to the insurance company, his age was written as “below 60 years
old”. Decide whether in this case, there is clear and convincing evidence that AV intended
to defraud the insurer as to justify denial of the claim.
There is none. A single piece of evidence hardly qualifies as clear and convincing. Its contents
could just as easily have been an isolated mistake. AV must have accomplished and submitted
many other documents when he applied for the housing loan and executed supporting
instruments like the promissory note, real estate mortgage, and Group Mortgage
Redemption Insurance. A design to defraud would have demanded his consistency. He
needed to maintain appearances across all documents. The Insular Assurance Co., Ltd., vs.
Heirs of Alvarez, G.R. No. 207526 October 3, 2018; Union Bank of the Philippines vs. Heirs
of Alvarez, G.R. No. 210156, October 3, 2018
37. Explain the Incontestability Rule on life insurance.
For a life insurance policy to be incontestable, the requisites are: (a) The insurance is a life
insurance policy payable on the death of the insured; and (b) It has been in force during the
lifetime of the insured for at least two (2) years from its date of issue or of its last
reinstatement.
The period of two (2) years may be shortened but it cannot be extended by stipulation. If the
insured dies after the two (2) year period, the insurer cannot rescind the contract due to his
misrepresentation or concealment. Sec. 48, ICP

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38. What is the Test of Materiality of Information?
Materiality is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom the communication is due, in forming his
estimate of the disadvantages of the proposed contract, or in making his inquiries. Sec. 31,
ICP
39. What is Microinsurance?
Microinsurance is an insurance intended to cover low-income households or individuals that

would allow them to recover indemnity for illness, injury, or death.
40. Define insurable interest, as to life and health insurance.
Every person has an insurable interest in the life and health:
i. of himself, of his spouse and of his children;

ii. of any person on whom he depends wholly or in part for education or support, or in
whom he has a pecuniary interest;
iii. of any person under a legal obligation to him for the payment of money, respecting
property or service, of which death or illness might delay or prevent the performance;
and
iv. of any person upon whose life any estate or interest vested in him depends. Sec. 10,
IC
41. Is insurable interest in property limited to property ownership in the subject matter of the
insurance?
No. Insurable interest in property is not limited to property ownership in the subject matter
of the insurance. Where the interest of the insured in, or his relation to, the property is such
that he will be benefitted by its continued existence, or will suffer a direct pecuniary loss by
its destruction, his contract of insurance will be upheld, although he has no legal or equitable
title. A husband would thus have an insurable interest in the paraphernal property of his wife
since the fruits thereof belong the conjugal partnership and may be used for the support of
the family. UCPB General Insurance Co., Inc. v. Asgard Corrugated Box Manufacturing Corp.,
G.R. No. 244407, January 26, 2021

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42. Is an insurer liable for a loss caused by the willful act of the insured?
No. Section 89 of the Insurance Code (Republic Act No. 10607) is clear - an insurer is not liable
for a loss caused by the willful act of the insured.
Section 89. An insurer is not liable for a loss caused by the willful act or through the
connivance of the insured; but he is not exonerated by the negligence of the insured, or of
the insurance agents or others.
The insurer is not liable for a loss caused by the intentional act of the insured or through his
connivance. Such damage/loss is not an insurable risk because the occurrence of the loss was
subject to the control of one of the parties and not merely caused by the negligence of the
insured.
However, the insurer is not relieved from liability by the mere fact that the loss was caused
by the negligence of the insured, or of his agents or others. Accordingly, it is no defense to an
action on the policy that the negligence of the insured caused or contributed to the injury.
However, when the insured's negligence is so gross that it is tantamount to misconduct, or
willful or wrongful act, the insurer is not liable. UCPB General Insurance Co., Inc. v. Asgard
Corrugated Box Manufacturing Corp., G.R. No. 244407, January 26, 2021
43. What is the rule on rescission of life insurance due to fraud?
After the two-year period lapses, or when the insured dies within the period, the insurer must
make good on the policy, even though the policy was obtained by fraud, concealment, or
misrepresentation. Manila Bankers Life Insurance Corporation vs. Aban, 702 SCRA 417, G.R.
No. 175666, July 29, 2013
The insurer has two years from its issuance to investigate and verify whether the policy was
obtained by fraud, concealment, or misrepresentation. Upon the death of the insured within
the two-year period from the issuance of the policy, the insurer loses its right to rescind the
policy. Sun Life of Canada (Philippines), Inc. v. Ma. Daisy’s Sibya, G.R. No. 211212, June 8,
2016
44. Does the availability of check already produce the effect of payment of premium?
The notice of the availability of the check, by itself, does not produce the effect of payment
of the premium. Here, there is no dispute that the check was delivered to and was accepted
by respondent’s agent, Trans-Pacific, only on September 28, 1996. No payment of premium

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had thus been made at the time of the loss of the vehicle on September 27, 1996. While
petitioner claims that Trans-Pacific was informed that the check was ready for pickup on
September 27, 1996, the notice of the availability of the check, by itself, does not produce
the effect of payment of the premium. Trans-Pacific could not be considered in delay in
accepting the check because when it informed petitioner that it will only be able to pick up
the check the next day, petitioner did not protest to this, but instead allowed Trans-Pacific to
do so. Thus, at the time of loss, there was no payment of premium yet to make the insurance
policy effective. There are, of course, exceptions to the rule that no insurance contract takes
effect unless premium is paid.
Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by

an insurance company is valid and binding unless and until the premium thereof has been
paid.—We cannot sustain petitioner’s claim that the parties agreed that the insurance
contract is immediately effective upon issuance despite nonpayment of the premiums. Even
if there is a waiver of prepayment of premiums, that in itself does not become an exception
to Section 77, unless the insured clearly gave a credit term or extension. This is the clear
import of the fourth exception in the UCPB General Insurance Co., Inc. v. Masagana Telemart,
Inc., 356 SCRA 307 (2001).
To rule otherwise would render nugatory the requirement in Section 77 that

“[n]otwithstanding any agreement to the contrary, no policy or contract of insurance issued
by an insurance company is valid and binding unless and until the premium thereof has been
paid. Gaisano vs. Development Insurance and Surety Corporation, 818 SCRA 603, G.R. No.
190702 February 27, 2017
45. What are the defenses not barred by incontestability?
The following defenses may still be interposed by the insurer notwithstanding incontestable
status of the policy:
i. The person taking the insurance lacked insurable interest as required by law.
ii. The cause of the death of the insured is an excepted risk.
iii. The premiums have not been paid.
iv. The conditions of the policy relating to military or naval service have been violated.
v. The fraud is of a particularly vicious type.
vi. The beneficiary failed to furnish proof of death or to comply with any condition
imposed by the policy after the loss has happened.
vii. The action was not brought within the time specified

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46. Is the right of subrogation absolute?
The right of subrogation is however, not absolute. “There are a few recognized exceptions to
this rule. For instance, if the assured by his own act releases the wrongdoer or third party
liable for the loss or damage, from liability, the insurer’s right of subrogation is defeated. x x
x Similarly, where the insurer pays the assured the value of the lost goods without notifying
the carrier who has in good faith settled the assured’s claim for loss, the settlement is binding
on both the assured and the insurer, and the latter cannot bring an action against the carrier
on his right of subrogation. x x x And where the insurer pays the assured for a loss which is
not a risk covered by the policy, thereby effecting ‘voluntary payment,’ the former has no
right of subrogation against the third party liable for the loss x x x.” Loadstar Shipping
Company, Incorporated vs. Malayan Insurance Company, Incorporated, 742 SCRA 627, G.R.
No. 185565 November 26, 2014
47. What is co-insurance?
Co-insurance is type of insurance in which the insured pays a share of the payment made
against a claim.
48. What is a No-Fault Indemnity Clause under the Compulsory Motor Vehicle Liability
Insurance?
The no-fault indemnity clause of the Compulsory Motor Vehicle Liability Insurance allows the
victim of a vehicular incident to recover indemnity from the insurer of the relevant insurer
without the necessity of showing fault.
Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle,
claim, shall lie against the insurer of the vehicle in which the occupant is riding, mounting or
dismounting from. In any other case, claim shall lie against the insurer of the directly
offending vehicle. In all cases, the right of the party paying the claim to recover against the
owner of the vehicle responsible for the accident shall be maintained. Sec. 391, IC
49. When is prescriptive period for the insured’s action for indemnity reckoned?
Case law illumines that the prescriptive period for the insured’s action for indemnity should
be reckoned from the “final rejection” of the claim. Section 10 of the General Conditions of
the subject CAR Policies commonly read: 10. If a claim is in any respect fraudulent, or if any
false declaration is made or used in support thereof, or if any fraudulent means or devices

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are used by the Insured or anyone acting on his behalf to obtain any benefit under this Policy,
or if a claim is made and rejected and no action or suit is commenced within twelve months
after such rejection or, in case of arbitration taking place as provided herein, within twelve
months after the Arbitrator or Arbitrators or Umpire have made their award, all benefit under
this Policy shall be forfeited. H.H. Hollero Construction, Inc. vs. Government Service
Insurance System, 736 SCRA 303, G.R. No. 152334 September 24, 2014
50. What is Double Insurance? What are its requisites?
A double insurance exists where the same person is insured by several insurers separately in
respect of the same subject and interest. Sec. 95, IC
Double insurance exists where the same person is insured by several insurers separately in
respect to the same subject and interest and risk. The requisites in order for double insurance
to arise are as follows: 1. The person insured is the same; 2. Two or more insurers insuring
separately; 3. There is identity of subject matter; 4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against. Malayan Insurance Co., Inc. vs.
Philippines First Insurance Co., Inc., 676 SCRA 268, G.R. No. 184300, 11 July 2012
51. What is the liability of insurer in case of suicide?
The insurer in a life insurance contract shall be liable in case of suicide only when it 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, unless the policy provides a shorter period: Provided,
however, That suicide committed in the state of insanity shall be compensable regardless of
the date of commission. Sec. 183, IC
52. What is a contract of reinsurance?
A contract of reinsurance is one by which an insurer (the “direct insurer” or “cedant”)

procures a third person (the “reinsurer”) to insure him against loss or liability by reason of
such original insurance. The reinsurer’s contractual relationship is with the direct insurer, not
the original insured, and the latter has no interest in and is generally not privy to the contract
of reinsurance. Put simply, reinsurance is the “insurance of an insurance.” Communication
and Information Systems Corporation vs. Mark Sensing Australia Pty. Ltd., 815 SCRA 449,
G.R. No. 192159 January 25, 2017

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TRANSPORTATION LAW
53. Define contract of carriage.
A contract of carriage is defined as one whereby a certain person or association of persons

obligate themselves to transport persons, things, or news from one place to another for a
fixed price. Thus, an airline's issuance of confirmed tickets is a guarantee to the passenger
that the airline would honor the tickets, assure him of a space in the flight, and transport him
for that segment of his trip corresponding to the confirmed ticket. Meanwhile, breach of
contract is defined as the failure, without legal reason, to comply with the terms of a contract,
or the failure, without legal excuse, to perform any promise which forms the whole or part of
the contract. Air France vs. Zani, G.R. No. 199767, March 13, 2019
54. Does the failure to register the vehicle negate liability as common carrier?
No. The failure to register the vehicle as a public vehicle or a common carrier does not negate
the true nature of the vehicle. It is settled that: A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions governing common
carriers. That liability arises the moment a person or firm acts as a common carrier, without
regard to whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted a
certificate of public convenience or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. Heirs of
Mendoza v. ES Trucking and Forwarders, G.R. No. 243237 , February 17, 2020
55. Will the turnover of the goods to the port authorities of the place of destination discharge
the carrier from liability?
No. Nothing in the New Civil Code, however, suggests, even remotely, that the common
carriers’ responsibility over the goods ceased upon delivery thereof to the custom authorities.
The contract of carriage remains in full force and effect even after the delivery of the goods
to the port authorities; the only delivery that releases it from their obligation to observe
extraordinary care is the delivery to the consignee or his agents. Even more telling of
petitioners’ continuing liability for the goods transported to the fact that the original bills of
lading up to this time, remains in the possession of the notify party or consignee. Nedlloyd

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Lijnen B.V. Rotterdam vs. Glow Laks Enterprises, Ltd., 740 SCRA 592, G.R. No. 156330
November 19, 2014
56. Is hijacking of goods considered a fortuitous even or a force majeure?
No. The hijacking of the goods is not considered a fortuitous event or a force majeure. It bears
to stress that the hijacking of the goods is not considered a fortuitous event or a force
majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting loss
caused by robbery or hijacked if it is proven that the robbery or hijacking was attended by
grave or irresistible threat, violence or force. In this case, Keihin-Everett failed to prove the
existence of the aforementioned instances. Keihin-Everett Forwarding Co., Inc. vs. Tokio
Marine Malayan Insurance Co., Inc., 891 SCRA 332, G.R. No. 212107 January 28, 2019
INTELLECTUAL PROPERTY LAW
57. Distinguish trademark, copyright, and patents.
Trademark, copyright and patents are different intellectual property rights that cannot be
interchanged with one another.
A trademark is any visible sign capable of distinguishing the goods (trademark) or services
(service mark) of an enterprise and shall include a stamped or marked container of goods. In
relation thereto, a trade name means the name or designation identifying or distinguishing
an enterprise.
Meanwhile, the scope of a copyright is confined to literary and artistic works which are
original intellectual creations in the literary and artistic domain protected from the moment
of their creation.
Patentable inventions, on the other hand, refer to any technical solution of a problem in any
field of human activity which is new, involves an inventive step and is industrially applicable.
Pearl & Dean (Phil.), Inc. vs. Shoemart, Inc. G.R. No. 148222, August 15, 2003

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58. What is the determinative factor in ascertaining whether marks are confusingly similar to
each other?
The determinative factor in ascertaining whether or not marks are confusingly similar to each
other “is not whether the challenged mark would actually cause confusion or deception of
the purchasers but whether use of such mark would likely cause confusion or mistake on the
part of the buying public. “The risk of damage is not limited to a possible confusion of goods
but also includes confusion of reputation if the public could reasonably assume that the goods
of the parties originated from the same source.'' Converse Rubber Corporation vs. Universal
Rubber Products, Inc., 147 SCRA 154, No. L-27906 January 8, 1987
59. What factors are considered under the Dominancy Test?
The dominancy test considers the similarity of the prevalent or dominant features of the
competing trademarks that might cause confusion, mistake, and deception in the mind of the
purchasing public. More consideration is given on the aural and visual impressions created
by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales
outlets, and market segments. Somboonsakdikul vs. Orlane S.A., 816 SCRA 404, G.R. No.
188996 February 1, 2017
60. Is there confusing similarity between PHILIPS and PHILITES?
There is. The mark “PHILITES” bears an uncanny resemblance or confusing similarity with
respondent’s mark “PHILIPS,” to wit: Applying the dominancy test in the instant case, it shows
the uncanny resemblance or confusing similarity between the trademark applied for by
respondent with that of petitioner’s registered trademark. An examination of the trademarks
shows that their dominant or prevalent feature is the five-letter “PHILI,” “PHILIPS” for
petitioner, and “PHILITES” for respondent. The marks are confusingly similar with each other
such that an ordinary purchaser can conclude an association or relation between the marks.
The consuming public does not have the luxury of time to ruminate the phonetic sounds of
the trademarks, to find out which one has a short or long vowel sound. At bottom, the letters
“PHILI” visually catch the attention of the consuming public and the use of respondent’s
trademark will likely deceive or cause confusion. Most importantly, both trademarks are used
in the sale of the same goods, which are light bulbs. The confusing similarity becomes even
more prominent when we examine the entirety of the marks used by petitioner and
respondent, including the way the products are packaged. In using the holistic test, we find
that there is a confusing similarity between the registered marks PHILIPS and PHILITES, and
note that the mark petitioner seeks to register is vastly different from that which it actually

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uses in the packaging of its products. Dy vs. Koninklijke Philips Electronics, N.V., 821 SCRA
241, G.R. No. 186088 March 22, 2017
61. Are visual and aural differences factors in determining whether there is colorable imitation
pf a mark?
Yes. In one case, it was ruled that LOLANE is not a colorable imitation of ORLANE due to
distinct visual and aural differences. As correctly argued by petitioner in his answer before
the BLA, there are visual differences between LOLANE and ORLANE since the mark ORLANE
is in plain block upper case letters while the mark LOLANE was rendered in stylized word with
the second letter L and the letter A co-joined. Second, as to the aural aspect of the marks,
LOLANE and ORLANE do not sound alike. xxx The first syllables of each mark, i.e., OR and LO
do not sound alike, while the proper pronunciation of the last syllable LANE — “LEYN” for
LOLANE and “LAN” for ORLANE, being of French origin, also differ. We take exception to the
generalizing statement of the Director General, which was affirmed by the CA, that Filipinos
would invariably pronounce ORLANE as “ORLEYN.” This is another finding of fact which has
no basis, and thus, justifies our reversal of the decisions of the IPO Director General and the
CA. While there is possible aural similarity when certain sectors of the market would
pronounce ORLANE as “ORLEYN,” it is not also impossible that some would also be aware of
the proper pronunciation — especially since, as respondent claims, its trademark ORLANE has
been sold in the market for more than 60 years and in the Philippines, for more than 40 years.
Somboonsakdikul vs. Orlane S.A., 816 SCRA 404, G.R. No. 188996 February 1, 2017
62. Can a mark which is considered by the competent authority of the Philippines to be well-
known internationally and in the Philippines, whether or not it is registered here, be
registered by another in the Philippines?
As we have said in Fredco Manufacturing Corporation v. Harvard University, 650 SCRA 232
(2011), “[i]ndeed, Section 123.1(e) of R.A. No. 8293 now categorically states that ‘a mark
which is considered by the competent authority of the Philippines to be well-known
internationally and in the Philippines, whether or not it is registered here,’ cannot be
registered by another in the Philippines.” Rule 100(a) of the Rules and Regulations on
Trademarks, Service Marks, Tradenames and Marked or Stamped Containers defines
“competent authority” in the following manner: (c) “Competent authority” for purposes of
determining whether a mark is well-known, means the Court, the Director General, the
Director of the Bureau of Legal Affairs, or any administrative agency or office vested with
quasi-judicial or judicial jurisdiction to hear and adjudicate any action to enforce the rights to
a mark. Dy vs. Koninklijke Philips Electronics, N.V., 821 SCRA 241, G.R. No. 186088 March
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63. What are the essential elements of Unfair Competition?
The essential elements of an action for unfair competition are (1) confusing similarity in the
general appearance of the goods and (2) intent to deceive the public and defraud a
competitor. The confusing similarity may or may not result from similarity in the marks, but
may result from other external factors in the packaging or presentation of the goods. The
intent to deceive and defraud may be inferred from the similarity of the appearance of the
goods as offered for sale to the public. Actual fraudulent intent need not be shown. In-N-Out
Burger, Inc. vs. Sehwani, Inc., G.R. No. 179127, 24 December 2008
ELECTRONIC COMMERCE ACT
64. What is the objective of the E-Commerce Act?
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.
Sec. 3, ECA
65. What is the scope of E-Commerce Act?
E-Commerce Act applies 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. Sec. 4, ECA
66. What is the rule on “lawful access”?
This means that access to an electronic file, electronic signature, electronic data message, or
electronic document, shall be kept by the individual or entity who has a legal right to the
possession or the use of plaintext electronic signature or file. The electronic key for identity
or integrity shall not be made available to any person or party without the consent of the
individual or entity in lawful possession of that electronic key. Sec. 31, ECA

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67. Define Electronic Document.
It 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 proved and affirmed,
which is received, recorded, transmitted, stored, processed, retrieved or produced
electronically. Sec. 5[f], ECA
It includes digitally signed documents and any print-out or output, readable by sight or other
means, which accurately reflects the electronic data message or electronic document. For
purposes of these Rules, the term "electronic document" may be used interchangeably with
"electronic data message". Rule 2, Sec. 1[g], A.M. No. 01-7-01-SC
68. Is an electronic document deemed an original for the purposes of the Best Evidence Rule?
An electronic data message or electronic document shall be considered as retained and

presented in the original form where:
i. the integrity of the information from the time when it was first generated in its
final form, as an electronic data message or electronic document is shown by
evidence aliunde or otherwise; and
ii. information, when required to be presented, is capable of being displayed to the
person to whom it is to be presented. Sec. 10(1), ECA
69. Define Electronic Data Message.
"Electronic Data Message" refers to information generated, sent, received or stored by

electronic, optical or similar means. Sec. 5(c), ECA
70. Explain the 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. Sec. 6, ECA

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71. Explain the 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.
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. Sec. 7, ECA
72. Can Contracts be expressed in electronic form?
Except as otherwise agreed by the parties, an offer, the acceptance of an offer and such other
elements required under existing laws for the formation of contracts may be expressed in,
demonstrated and proved by means of electronic data messages or electronic documents
and no contract shall be denied validity or enforceability on the sole ground that it is in the

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form of an electronic data message or electronic document, or that any or all of the elements
required under existing laws for the formation of the contracts is expressed, demonstrated
and proved by means of electronic data messages or electronic documents. Sec. 16(1), ECA
73. Define Electronic Signature.
"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. Sec. 5(e),
ECA
74. Explain the 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.
Sec. 8, ECA

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75. What are the presumptions 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. Sec. 9, ECA
FOREIGN INVESTMENTS ACT
76. Define full beneficial ownership, under the Foreign Investments Act.
The term “full beneficial ownership” found in the Foreign Investments Act-Implementing
Rules and Regulations (FIA-IRR) is to be understood in the context of the entire paragraph
defining the term “Philippine national.” Mere legal title is not enough to meet the required
Filipino equity, which means that it is not sufficient that a share is registered in the name of
a Filipino citizen or national, i.e., he should also have full beneficial ownership of the share.
If the voting right of a share held in the name of a Filipino citizen or national is assigned or
transferred to an alien, that share is not to be counted in the determination of the required
Filipino equity. In the same vein, if the dividends and other fruits and accessions of the share
do not accrue to a Filipino citizen or national, then that share is also to be excluded or not
counted. Roy III vs. Herbosa, 810 SCRA 1, G.R. No. 207246 November 22, 2016
77. What are the tests to determine whether a foreign corporation is doing business?
The two (2) general tests in determining whether a foreign corporation is doing business in
the Philippines are:
Substance Test – whether the foreign corporation is continuing the body of the business or
enterprise for which it was organized or whether it has substantially retired from it and
turned it over the other.
Continuity Test – continuity of commercial dealings and arrangements, and contemplates, to

that extent, the performance of acts or works or the exercise of some of the functions

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normally incident to, and in the progressive prosecution of, the purpose and object of its
organization. Agilent Technologies Singapore (Ptd.) Ltd. vs. Integrated Silicon, G.R. No.
154618, 14 April 2004
PUBLIC SERVICE ACT
78. What are the public utilities under the PSA, as amended?
Public utility refers to a public service that operates, manages or controls for public use any
of the following:
1. Distribution of Electricity;
2. Transmission of Electricity;
3. Petroleum and Petroleum Products Pipeline Transmission Systems;
4. Water Pipeline Distribution Systems and Wastewater Pipeline Systems, including
sewerage pipeline systems;
5. Seaports; and
6. Public Utility Vehicles. Sec. 13(d), PSA, as amended
79. What the difference between distribution of electricity and transmission of electricity?
Distribution of electricity refers to the conveyance of electric power by a distribution utility

though its distribution system as defined by Sec. 4(n) of R.A. No. 9136, otherwise known as
the “Electronic Power Industry Reform Act of 2001,” Sec. 2(f) PSA, as amended
On the other hand, transmission of electricity refers to the conveyance of electricity through
the high voltage backbone system, as defined by Sec. 4(cc) of R.A. No. 9136, as amended. Sec.
2 (n), PSA, as amended
80. What are Public Utility Vehicles?
Public Utility Vehicles (PUVs) refer to internal combustion engine vehicles that carry
passengers and/or domestic cargo for a fee, offering services to the public, namely trucks-
for-hire, UV express service, public utility buses (PUBs), public utility jeepneys (PUJs),
tricycles, filcabs, and taxis: Provided, that transportation vehicles accredited with and
operating through transport network corporations shall not be considered as public utility
vehicles. Sec. 2(k), PSA, as amended

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Commercial Law
PRE-WEEK
81. Enumerate the criteria for a public service to be classified as a public utility.
Upon recommendation of the NEDA, the President may recommend to Congress the
classification of a public service as a public utility on the basis of the following criteria:
1. The person or juridical entity regularly supplies and transmits and distributes to the
public through a network a commodity or service of public consequence;
2. The commodity or service is a natural monopoly that needs to be regulated when the
common good so requires. For this purpose, natural monopoly exists when the market
demand for a commodity or service can be supplied by a single entity at a lower cost
than by two or more entities;
3. The commodity or service is necessary for the maintenance of life and occupation of
the public; and
4. The commodity or service is obligated to provide adequate service to the public on
demand. Sec. 13(d), PSA, as amended
82. What is a foreign state-owned enterprise?
A foreign state-owned enterprise is an entity in which a foreign state:

a) Directly or indirectly owns more than 50% of the capital, taking into account both the
voting rights and beneficial ownership;
b) Controls, through ownership interests, the exercise of more than 50% of the voting
rights; or
c) Holds the power to appoint a majority of members of the board of directors or any
other equivalent management body. Sec. 2(g), PSA, as amended
83. What is a Critical Infrastructure?
Critical infrastructure refers to any public service which owns, uses, or operates systems and
assets, whether physical or virtual, so vital to the Republic of the Philippines that the
incapacity or destruction of such systems or assets would have a detrimental impact on
national security, including telecommunications and other such vital services as may be
declared by the President of the Philippines Sec. 2[e] PSA, as amended by R.A. No. 11659

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Commercial Law
PRE-WEEK
84. What acts are considered unlawful for any public service?
The following are considered unlawful for a public service:
1. To provide or maintain any service that is unsafe, improper, or inadequate, or

withhold or refuse any service which can reasonably be demanded and furnished, as
found and determined by the Commission in a final order which shall be conclusive
and shall take effect in accordance with C.A. No. 146, upon appeal or otherwise; Sec.
19(a), PSA
2. To make or give, directly or indirectly, by itself or through its agents attorneys or
brokers, or any of them, Discounts or rebates on authorized rates, or grant credit for
the payment of freight charges, or any undue or unreasonable preference or
advantage to any person or corporation or to any locality or to any particular
description of traffic or service, or subject any particular person or corporation or
locality or any particular description of traffic to any prejudice or disadvantage in any
respect whatsoever; to adopt, maintain, or enforce any regulation, practice or
measurement which shall be found or determined by the Commission to be unjust,
unreasonable, unduly preferential or unjustly discriminatory, in a final order which
shall be conclusive and shall take effect in accordance with the provisions of C.A. No.
146, upon appeal or otherwise; Sec. 19(b), PSA, as amended
3. To refuse or neglect, when requested by the Postmaster General or his authorized
representative, to carry public Mail on the regular trips of any public land
transportation service, upon such terms and conditions and for a consideration in
such amount as may be: (i) agreed upon between the Postmaster General and the
public service carrier or (ii) fixed by the Commission in the absence of an agreement
between the Postmaster General and the carrier; Sec. 19(c), PSA, as amended
4. To refuse or neglect, when requested by the Administrative Agency to urgently use,
deliver or render the public service for the purpose of avoiding further loss on human,
material, economic, or environment during a state of calamity. Sec. 19(d), PSA, as
amended
85. Are public services which are not classified as a public utility still required to obtain
franchise or certificate to operate?
Yes, public services that are not public utilities must still secure the certificate or franchise to
operate from the Commission. However, a public service that is not a public utility is not
subject to the constitutional provision requiring Filipino ownership of 60% of its outstanding
capital stock. AQUINO & SUNDIANG, Reviewer on Commercial Law, p. 196-197

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2023 PRE-WEEK HO 6 - Commercial Law

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2023 BAR REVIEW Handout No.

1. What are the essential elements of a contract of partnership?

3. Is an oral contract of partnership as good as a written one?

Since a contract of partnership is consensual, an oral contract of partnership is as good as a

4. How is an industrial partner’s profit determined?

Legal Edge Bar Review 0942 – 949 91 76

5. Discuss the final stages of a partnership.

i. Dissolution Defined—Dissolution is the change in the relation of the partners caused

ii. Winding Up Defined—Winding up is the process of settling business affairs after

6. May any of the partners demand an accounting of the partnership’s business?

Legal Edge Bar Review 0942 – 949 91 76

7. What is a holding or parent corporation?

A "holding company" is organized and is basically conducting its business by investing

8. What is a corporation sole?

9. What is a One Person Corporation?

10. Explain the No-Transfer Clause.

Legal Edge Bar Review 0942 – 949 91 76

12. Who is disqualified from the Board?

(a) Convicted by final judgment:

13. When are corporations required to have Independent Directors?

a. Corporations covered by Section 17.2 of the Securities Regulation Code;

Legal Edge Bar Review 0942 – 949 91 76

b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service

14. Who is an independent director?

15. Explain the Business Judgment Rule.

16. What is the quorum for board meetings?

Legal Edge Bar Review 0942 – 949 91 76

1. Approval of management contract, if any of the instances under Section 43 is absent

19. Explain the rule on Self-Dealing Contracts.

Legal Edge Bar Review 0942 – 949 91 76

Is this sufficient to establish declaration of 300% stock dividends by the company?

Legal Edge Bar Review 0942 – 949 91 76

This is still an intra-corporate case.

Legal Edge Bar Review 0942 – 949 91 76

25. When is a board meeting unnecessary for close corporations?

Legal Edge Bar Review 0942 – 949 91 76

27. Is the doctrine of last clear chance applicable to banking transactions?

Legal Edge Bar Review 0942 – 949 91 76

29. Cite exceptions to the Rule on Confidentiality of Bank Deposits.

(1) In an examination made in the course of a special or general examination of a bank

(3) Upon written permission of the depositor;

(4) In cases of impeachment;

30. What is the “Close Now, Hear Later Rule”?

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

35. Does the Anti-Money Laundering Council exercise quasi-judicial powers?

Legal Edge Bar Review 0942 – 949 91 76

37. Explain the Incontestability Rule on life insurance.

Legal Edge Bar Review 0942 – 949 91 76

38. What is the Test of Materiality of Information?

39. What is Microinsurance?

Microinsurance is an insurance intended to cover low-income households or individuals that

40. Define insurable interest, as to life and health insurance.

Every person has an insurable interest in the life and health:

i. of himself, of his spouse and of his children;

Legal Edge Bar Review 0942 – 949 91 76

43. What is the rule on rescission of life insurance due to fraud?

Legal Edge Bar Review 0942 – 949 91 76

Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by

To rule otherwise would render nugatory the requirement in Section 77 that

45. What are the defenses not barred by incontestability?

Legal Edge Bar Review 0942 – 949 91 76

46. Is the right of subrogation absolute?

47. What is co-insurance?