SALES

STRAIGHT SALE - The balance is payable in its entirety after the payment of an
initial sum.
BARTER - The consideration of the contract is another thing.
PIECE OF WORK - A contract for the delivery at a certain price of an article to be
manufactured specially for the customer and upon his special order, and not for the
general market
PAYMENT BY CESSION - The creditors are given the right to sell the debtor's
properties and apply the proceeds to their respective claims.
DACION EN PAGO - Ownership of a thing is transferred to the creditor to settle a
monetary obligation.
CONTRACT TO SELL – ownership is by agreement, reserved to the vendor and is
not pass to the vendee until full payment of purchase price.
AGENCY TO SELL – title of goods is retained by the owner despite the delivery of
the goods to the agent, agent required to turn over to the principal the price of the
goods which he received from the buyer
EMPTIO REI SPERATAE - Sale of an expected thing.
EMPTIO SPEI - The sale of hope or expectancy.
FUNGIBLE GOODS - They refer to interchangeable goods such as grain, oil, etc.,
that allow one to be replaced by another without loss of value.
FUTURE GOODS - Refer to goods to be manufactured, raised or acquired by the
seller
PRICE - The sum stipulated as the equivalent of the thing sold
BY-BIDDERS/PUFFERS - A person employed by the seller or auctioneer to raise the
price in an auction sale.
EARNEST MONEY - Proof of the perfection of a contract of sale.
OPTION MONEY - . The consideration paid for the purpose of holding one to his
promise to buy or sell a determinate thing for a certain period of time, which
consideration is separate and distinct from the purchase price
RES PERIT DOMINO – the loss of the property falls upon the owner
KINDS OF INCAPACITY IN A CONTRACT OF SALE
1. ABSOLUTE INCAPACITY - Applies to persons who cannot bind themselves in
a contract including a contract of sale
2. RELATIVE INCAPACITY - Applies to persons who, under certain
circumstances, cannot purchase certain property.
KINDS OF DELIVERY OR TRADITION
1. REAL/ ACTUAL DELIVERY -delivery by physically placing the thing sold in
the hands of the vendee
2. LEGAL DELIVERY
a. LEGAL FORMALITIES - Delivery through the execution of a public
document.
b. SYMBOLIC DELIVERY - Delivery of the keys of the place where a
movable is kept or stored.
c. TRADITIO CONSTITUTUM POSSESSORIUM - Delivery that takes
pla6e when the seller continues in possession of the thing sold after
the sale but as lessee, depositary or otherwise.
d. TRADITIO LONGA MANU - Delivery of a movable by mere agreement
of the parties if the thing cannot be transferred to the vendee at the
time of sale.
e. TRADITIO BREVI MANU - Delivery that takes place when the buyer
who was in possession of the thing sold at the time of sale continues in
possession of the same as an owner.
3. DELIVERY OF INCORPOREAL PROPERTY – placing title of ownership in the
possession of the vendee, use by the vendee of his rights with the consent of
the vendor, by execution of public document.
SALE OR RETURN - Ownership is transferred to buyer upon delivery but he has the
option to revert such ownership to the seller.
DOCUMENT OF TITLE - A document used as proof of the goods, or possession or
control of goods or authorizing or purporting to authorize the document the
processor of the document to transfer or receive either by indorsement or by
delivery, the goods represented by such document.
COMMON FORMS OF DOC OF TITLE
1. BILL OF LADING - A document issued by a common carrier acknowledging
the receipt of the goods and agreeing to transport and deliver them to a
specified place.
2. DOCK WARRANT – a warrant given by a dock owner to the owner of the
goods imported and warehoused on the dock upon the faith of the bill of
lading, as a recognition of the title to the goods of the owner of such goods.
3. WAREHOUSE RECEIPT OR ORDER - Contract for the storage of goods for a
compensation.
CLASSES OF DOC OF TITLE
1. NEGOTIONABLE
a. BEARER DOCUMENT OF TITLE - Negotiated.by mere delivery
b. ORDER DOCUMENT OF TITLE - Negotiated by indorsement
2. NON-NEGOTIOBLE
UNPAID SELLER - Includes one who has received as conditional payment for the
goods a negotiable instrument but the condition has been broken by reason of the
dishonor of the instrument or the insolvency of the buyer.
RIGHTS OF AN UNPAID SELLER
1. POSSESSORY LIEN - An unpaid seller's right to retain the goods for the price
while he is in possession of them.
2. STOPPAGE IN TRANSITU - Exercised by the seller by obtaining actual
possession of the goods or by giving notice to the carrier or other bailee
having actual possession of the goods.
3. RIGHT OF RESALE
4. RIGHT TO RESCIND SALE
PRIORE TEMPORE POTIOR JURE(first in time, stronger in right) – governing
principle in double sale
KINDS OF WARRANTIES
1. EXPRESS WARRANTIES – refers to the affirmation of fact or any promise by
the seller relating to the things whose natural tendency is to induce the buyer
to purchase which such things rely on the affirmation or promise.
2. IMPLIED WARRANTIES -are those that are inherent in the contract of sale.
a. WARRANTY AGAINST EVICTION - Seller's undertaking that the
buyer shall enjoy legal and Peaceful possession of the thing sold.
EVICTION – The deprivation by final judgment of the vendee of the
whole or a part of the thing sold based on a right prior to the sale or an
act imputable to the vendor
b. WARRANTY AGINST HIDDEN DEFECTS – this refers to the implied
warranty that the thing shall be free from hidden faults or defects or
any changers or encumbrance not declared or known to the buyer.
VENDOR - The party in a contract of sale who is obligated to transfer the ownership
of and to deliver a determinate thing.
VENDEE - . The person obligated to pay the price of the thing purchased.
WAIVER INTENCIONADA - . It is made by the buyer with knowledge of the risk of
eviction; hence, the seller will not have any liability if the buyer is evicted.
WAIVER CONSCIENTE - It is made by the buyer without knowledge of the risk of
eviction.
EASEMENT OR SERVITUDE - An encumbrance imposed upon an immovable for
the benefit of another immovable belonging to a different owner.
KINDS:
1. APPARENT EASEMENT – one that is made known and continually kept in
view by external signs that reveal its use and enjoyment
2. NON-APPARENT EASEMENT – one which shows no external indication of
existence.
ACCION REDHIBITORIA - Remedy of buyer to withdraw from the sale and ask for
damages
ACCION QUANTI MINORIS - Buyer's remedy which involves the proportionate
reduction in the price of the thing purchased.
REDHIBITORY DEFECT – Even professional inspection is not sufficient to discover
it
PACTUM COMMISSORIUM - A stipulation in a contract of sale involving an
immovable that the sale is automatically rescinded upon failure of the buyer to pay
the price.
CONVENTIONAL REDEMPTION - Right of seller to repurchase the thing sold and
the exercise of which was reserved by the seller at the time of sale.
LEGAL REDEMPTION - The right to be subrogated upon the same terms and
conditions stipulated in the contract, in the place of one who' acquires a thing by
purchase or dation in payment, or by any other transaction whereby ownership is
transmitted by onerous title.
RIGHT OF PRE-EMPTION - Right given to an adjoining owner of an urban land to
purchase the same ahead of others if such land is held for speculation.
EQUITABLE MORTGAGE - Lacks formalities but nevertheless shows the real
intention of the parties to create a specific property to secure the performance of an
obligation.
POLICITATION - A unilateral promise to buy or sell a thing which is not accepted by
the promissee.

NECESSARIES - Include everything indispensable for sustenance, dwelling,

clothing, medical attendance, education and transportation.
SALE ON TRIAL - Ownership. of the thing sold is retained by the seller despite
delivery to the buyer, but the latter agrees to pay the price if he finds the thing,
satisfactory.
ASSIGNMENT OF CREDIT - It has for its purpose the transfer to another person of
the right to collect the debt.
BAILEE - Includes a warehouseman, carrier or other person who receives
thepo8session or custody of the thing delivered
AUCTION - Sale of property to the highest bidder.
 PLEDGE, MORTGAGE, AND ANTICHRESIS
PLEDGE - Movable property is delivered by the debtor to the creditor or a third
person by common agreement to secure a principal obligation
KINDS:
1. CONVENTIONAL PLEDGE - A pledge created by the agreement of the
parties.
2. LEGAL PLEDGE- A pledge created by operation of law
PLEDGEE - The party who receives a movable property from another to secure the
latter's debt or that of another
MORTGAGEE - The party in whose favor a security is constituted upon a movable
or immovable property but without the delivery of V. the property to him.
PLEDGOR - The party who delivers a movable property to another to secure his
debt or that of another person
MORTGAGOR - The party who constitutes a security upon a movable or immovable
property but without delivering the property.
PACTUM COMMISSORIUM - The stipulation in a contract of pledge or mortgage
whereby the creditor automatically becomes the owner of the property pledged or
mortgaged upon default of the debtor, which stipulation is, void.
REAL ESTATE MORTGAGE - A mortgage constituted upon an immovable to secure
an obligation.
CHARACTERISTICS:
1. ACCESSORY
2. INDIVISIBLE/ INDIVISIBILITY - The character of pledge or mortgage
whereby a lien is created on the property pledged or mortgaged, which lien
continues until the obligation it secures has been fully paid.
 3. INSEPERABLE/ INSEPARABILITY - The character of a contract of mortgage
whereby the property upon which the mortgage is imposed is subjected to
the fulfillment of the obligation for whose security it was constituted, whoever
the possessor of the property may be.
4. REAL RIGHT
KINDS:
1. CONVENTIONAL MORTGAGE – one which is created by the agreement of
the parties
2. LEGAL MORTAGE – one executed pursuant to an express requirement of a
provision of law.
3. EQUITABLE MORTGAGE - One lacking the formalities of a mortgage but
nevertheless shows the intention of the parties that a certain property shall
secure an obligation
UPSET PRICE OR “TIPO” - The price stipulated by the parties in a mortgage
below which the property shall not be sold in the event of foreclosure.
REDEMPTION – a transaction through which the mortgagor or one claiming his
right, by means of payment or the performance of the condition, reacquires or buys
back the value of the title which may have passed under mortgage or divests the
mortgage premises of the lien which the mortgage may have created.
KINDS:
1. EQUITY OF REDEMPTION - The right of the mortgagor to redeem the
mortgaged property after his default in the performance of his obligation but
before the property is sold
2. RIGHT OF REDEMPTION - The right of the mortgagor to repurchase within a
certain period the property that was mortgaged after it was sold for the
payment of the mortgage debt.
CHATTEL MORTGAGE - A mortgage constituted upon a movable property to
secure an obligation.
ANTICHRESIS - A contract whereby the fruits an immovable belonging to the
debtor or a third person are to be applied to the interest of, and thereafter to, the
principal obligation.
AFFIDAVIT OF GOOD FAITH - A sworn statement attesting to the fact that the
mortgage is made for the purpose of securing the obligation specified in the
conditions thereof, and for no other purpose, and that the obligation is a just and
valid obligation, and one not entered into for the purpose of fraud.
FREE DISPOSAL - The property being given in pledge or mortgage must not be
subject to any claims or encumbrances
FORECLOSURE - The remedy given to the mortgagee by which he subjects the
mortgaged property to the satisfaction of the obligation through the sale of the
mortgaged property at public auction and the application of the proceeds of the sale
to the payment of his claim.

AGENCY
AGENCY - A contract whereby a person binds himself to render some service or to
do something in representation or in behalf of another, with the consent and
authority of the latter
PRINCIPAL - The person who gives authority to another to perform a certain act in
the former's behalf.
AGENT - A person who performs a service or does something in representation or in
behalf of another with the latter's consent and authority
KINDS OF AGENCY
AS TO FORM:
1. IMPLIED AGENCY - An agency that is inferred from the acts of the
principal or from his silence or inaction, or from his failure to repudiate the
 agency knowing that another person is acting in his behalf without
authority.
2. EXPRESS AGENCY - An agency that is entered into orally or in writing
AS TO EXTENT:
1. GENERAL AGENCY - It comprises all the business of the principal.
2. SPECIAL AGENCY - An agency that comprises one or more specific
transactions.
INSTRUCTIONS - They refer to the orders given by the principal to his agent
relating to the manner by which the agency shall be carried out
AUTHORITY – refers to the subject matter upon which the agent is commissioned
to act.
COMMISION AGENT - A person who buys and sells goods consigned or delivered
to him by his principal, for a compensation known commission
BROKER - He serves as intermediary between his principal and the buyer or seller
and has no relation to the property subject matter of the transaction.
REVOCATION - This refers to the act of the principal of terminating the agency at
will
FIDUCIARY - The nature of the relationship of the principal and the agent, which is
founded on trust-and confidence.
GENERAL POWER OF ATTORNEY - The authority given by the principal to his
agent when the act to be performed is an act of administration.
SPECIAL POWER OF ATTORYNEY - The authority required when the act to be
performed by an agent is an act of ownership or strict dominion, a gratuitous act, or
an act where trust and confidence is the essence of the agreement.
SUBSTITUTE - A person appointed by the agent to perform the tasks entrusted to
him by the principal
DEL CREDERE COMMISION - The receipt thereof by the agent, in addition to the
ordinary commission, will make the agent bear the risks of collection.
CIVIL INTERDICTION - A penalty which deprives a person of the right to manage
or dispose his property and which will cause the extinguishment of an agency if
imposed upon the principal or the agent.
COMPROMISE - A contract whereby the parties agree to make reciprocal
concessions to avoid or end a litigation, and the performance of which by an agent
will require a special power of attorney from the principal.
ARBITRATION - This refers to the submission of the controversy to a third person
for decision and which will require a special power of attorney when made by an
agent in behalf of his principal
WITHDRAWAL - A mode of extinguishment of an agency when the agent
terminates the agency by giving notice of such termination to the principal.

PARTNERSHIP
PARTNERSHIP - Two or more persons bind themselves to contribute money,
property or industry to a common fund with the intention of dividing the profits
among themselves
KINDS OF PARTNERSHIP:
As to object:
1. UNIVERSAL PARTNERSHIP
 a. UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY -
Property belonging to each partner at the time of the establishment
of the, partnership as well as the profits realized therefrom belongs
to the partnership
b. UNIVERSAL PARTNERSHIP OF PROFITS - A partnership which
comprises all that the partners may acquire by their, work or
industry during the existence of the partnership.
2. PARTICULAR PARTNERSHIP - It has for its object determinate things,
their use or fruits, or a specific undertaking, or the exercise of a profession
As to liability
1. GENERAL PARTNERSHIP - All the partners are general partners
2. LIMITED PARTNERSHIP - A partnership where there is at least one
general partner and at least one limited partner.
As to duration
1. PARTNERSHIP FOR A FIXED TERM - A period is stipulated for the
existence of the partnership
2. PARTNERSHIP FOR A PARTICULAR UNDERTAKING - A partnership
organized for a certain purpose which when attained will cause the
dissolution of the partnership
3. PARTNERSHIP AT WILL - A partnership. whose existence may be
terminated at any time by the partners
As to representation to others
1. ORDINARY PARTNERSHIP – one which actually exists among the
partners as well as 3rd party
2. PARTNERSHIP BY ESTOPPEL - It is not in reality a partnership but is
considered as one with respect to those who, by reason of their conduct or
admission, are precluded from denying its existence.
KINDS OF PARTNER
As to liability
1. GENERAL PARTNER - A partner who is liable to the extent of his separate
property when all the partnership assets have been exhausted.
2. LIMITED PARTNER - A partner who is liable only to the extent of his
contribution to the partnership
3. GENERAL-LIMITED PARTNER – one who has all the rights and power and
is subject to all the restriction of a general partner, except that in respect
to his contribution, he shall have the rights against the other members
which he would have had if he were not also a general partner, ex. he
shall be liable pro-rata to partnership creditor to the extent of his separate
assets after pship asset exhausted, but he can demand reimbursement of
amt he paid from co-partners
As to contribution
 1. CAPITALIST PARTNER - He contributes money and/ or property to the
common fund of the partnership
2. INDUSTRIAL PARTNER - He contributes his services to the partnership
3. CAPITALIST-INDUSTRIAL PARTNER – partly money, partly service
SUBSTITUED LIMITED PARTNER - A person admitted to all the rights of a limited
partner who has died or who has assigned his interest in the partnership
DELECTUS PERSONAE - The principle that a person is free to choose those whom
he wants to be associated in partnership.
SUBSIDIARY LIABILITY - The pro rata liability for partnership obligations of the
partners, including industrial ones, to the extent of their separate property after
partnership assets have been exhausted.
DISSOLUTION - The change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on of the business
WINDING UP - Refers to the process of settling the business or affairs of the
partnership lifter dissolution.
TERMINATION - The point when all partnership affairs are wound up.
.

CORPORATION
CORPORATION - An artificial being created by operation of law, having the right of
succession, and the powers, attributes and properties expressly authorized by
law or incident to its existence
DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENITY - The separate
personality of a corporation is disregarded if it is used for an illegal or fraudulent
purpose or to evade faithful compliance of an obligation
CLASSIFICATION OF CORPORATIOS
AS TO STOCKS
1. STOCK CORPORATION - A corporation which has capital stock divided into
shares and is authorized distribute dividends from its surplus profits to its
shareholders on the basis of shares held
2. NON-STOCK CORPORATION - A corporation where no part of its income is
distributable as dividends to its members
AS TO COUNTRY WHOSE LAW CREATED
1. DOMESTIC CORPORATION - A corporation formed under the 'laws of the
Philippines
2. FOREIGN CORPORATION - A corporation organized under the laws of a
country other than the Philippines and whose laws allow Filipino citizens or
corporations to do business in such country
TEST TO DETERMINE NATIONALITY
A. INCORPORATION TEST - The nationality of a corporation follows
that of the country under whose laws it was formed or organized
B. CONTROL TEST - Applicable generally in times of war when a
corporation is considered an enemy by the country under which it
operates although it may have been formed under the laws of such
country
GRANDFATHER RULE - A method of determining whether the
percentage of Filipino equity in nationalized or partly nationalized areas
of activities is diminished when there are several layers of corporate
stockholders
AS TO NUMBER OF PERSONS COMPOSE
1. CORPORATION AGGREGATE – one that is composed of 2 or more
corporators
2. CORPORATION SOLE – one composed only one person like bishop
AS TO PURPOSE
1. PRIVATE CORPORATION - A corporation formed for a private purpose or
end
2. PUBLIC CORPORATION - A corporation organized for the government of a
portion of the State, such as a province, city, municipality or barangay
3. ECCLESIASTICAL OR RELIGIOUS - formed for religious purpose
4. LAY CORPORATION – other than religious purpose
5. ELEEMOSYNARY CORPORATION – organized for public charity
6. CIVIL CORPORATION – organized for business or profit
 AS TO LEGAL RIGHT
1. DE FACTO CORPORATION - A corporation that is defectively formed but
there is an exercise of corporate powers resulting from an attempt in good
faith to incorporate on the part of its members
2. DE JURE CORPORATION - A corporation that has been created in strict
compliance with all the legal requirements and whose right to exist as a
corporation cannot be successfully attacked in a direct proceeding for that
purpose by the State
AS TO RELATION TO ANOTHER CORP
1. PARENT CORPORATION - A corporation that owns the shares of another
corporation and having power, directly or indirectly, over the latter including
the election of the directors thereof
2. SUBSIDIARY CORPORATION - One whose: shares of stock are owned by
another corporation which has the power to elect its directors
AS TO SHARES HELD PUBLIC OR NOT
1. OPEN CORPORATION - One whose shares may be listed in any and thus
may be held by the public
2. CLOSE CORPORATION - A corporation whose shares are not listed in any
stock exchange, the ownership is limited to a few, and the transfer thereof is
restricted
OTHER CLASSIFICATION
1. CORPORATION BY PRISCRIPTION - A corporation that has exercised
corporate powers for such a length of time without interference by the State,
and which, by fiction of law, is given the status of a corporation
2. CORPORATION BY ESTOPPEL - It is not in reality a corporation but is
considered as one with respect to those who are precluded by their admission
or conduct from denying its existence
COMPONENTS OF CORPORATION
1. CORPORATORS - Those that compose a corporation whether as
stockholders or members
2. INCORPORATORS - Those originally forming and composing the corporation
whose names appear in the articles of incorporation and are signatories
thereof
3. STOCKHOLDERS - They refer to the corporators of a stock corporation
4. MEMBERS - They refer to the corporators of a non-stock corporation
PROMOTERS – is a person, natural or juridical who usually discovers a prospective
business and bring persons interested to invest in it through the formation of a
corporation
CAPITAL STOCK - the amount specified in the articles of incorporation paid in or
procured to be paid in for carrying on the business of the corporation
 a. AUTHORIZED CAPITAL STOCK -The total amount of shares which
a corporation is allowed to issue if the shares have par value
b. SUBSCRIBE CAPITAL STOCK - That part of the capital stock which
whether paid or unpaid
c. OUTSTANDING CAPITAL STOCK - Refers to the total shares- of
stock issued to subscribers or stockholders, whether or not fully or
partially paid, as long as there is a binding subscription agreement,
except treasury shares
d. PAID-UP CAPITAL STOCK – the part of the subscribed capital
stock paid to the corporation
e. UNISSUED CAPITAL STOCK – the part of the capital stock which is
not issued or subscribed.
LEGAL CAPITAL - It refers to the total par value of all issued par value shares, or
the total consideration received for all issued no par value shares
STATED CAPITAL - refers to the capital with which a corporation whose shares are
without par value commences its business and increased or diminished by
subsequent capital transaction.
CAPITAL - Refers to the actual property of a corporation in money and/or other
property
SHARE OF STOCK - It is one of the units into which the capital stock is divided and
represents the intangible interest which an owner has in the management,
profits and assets of the corporation
CLASSES OF SHARES OF STOCK
1. COMMON STOCK - The ordinary stock of a corporation which entitles the
holder to a pro rata division of the dividends, without any preference or
advantage over other stockholders
2. PREFERRED STOCK - A stock that enjoys preferences over other stocks
such as with respect to dividends and the distribution of assets upon
liquidation
KINDS AS TO DIVIDENDS:
A. Cumulative preferred stocks
B. Non-cumulative ps
C. Participating ps
D. Non-participating ps
3. PAR VALUE STOCK - A stock the nominal value of which appears in the
stock certificate
4. NO PAR VALUE STOCK - A share of stock without any nominal value
appearing on the stock certificate
5. REDEEMABLE SHARES - Shares that grant the issuing corporation the
power to purchase or reacquire them after a certain period
6. FOUNDER’S SHARES - Shares given to the organizers of a corporation
which may be given certain rights and privileges not enjoyed by other shares,
such as the exclusive right to vote and be voted as directors
 7. TREASURY SHARES - Shares that have been issued and fully paid for, but
subsequently reacquired by the issuing corporation by purchase, redemption,
donation, or through some other lawful means
8. WATERED STOCK - A stock that is sold below its par value or issued price
9. VOTING SHARES those entitle to vote
10. NON-VOTING SHARE
ARTICLES OF INCORPORATION - They refer to the document signed by the
incorporators which is required to be submitted prior to incorporation to the
Securities and Exchange Commission before a corporation may acquire juridical
personality
PRINCIPLE OF HOLDOVER -the incumbent directors do not automatically cease to
hold office upon the expiration of their term if they have yet no successors.
CUMULATIVE VOTING - In determining the number of votes, the number of shares
are multiplied by the number of directors to be elected
Determine number of shares needed to elect desired no. of directors
QUOROM – is the number of directors or trustees sufficient to transact business
EXCUTIVE COMMITTEE - A body within a corporation created pursuant to the by-
laws and composed of not less than three members of the board of directors of a
corporation whose function is to take immediate action on important matters
without the necessity of board meetings
INTERLOCKING DIRECTORATE - It occurs when one, some or all of the directors of
one corporation, are also the directors of another corporation
BUSINESS JUDGEMENT RULE – protects directors who act with due care and in
good faith, provided their decisions are within the law and made in the best
interest of the corporation
DOCTRINE OF CORPORATE OPPORTUNITY -opportunity acquire by directors
belongs to the corporation
KINDS OF POWERS OF CORPORATIONS
1. EXPRESS POWER - Powers granted to a corporation by its charter
2. IMPLIED POWERS - Powers that are necessary to carry into effect the
powers expressly granted upon a corporation
3. INCIDENTAL/INHERENT POWER - Also called inherent power- they may be
exercised by a corporation by reason of its. very existence as a corporation
 POWER OF SUCCESSION - The right of a corporation to
continue to exist for the period for which it was formed
regardless of the changes in the ownership of its stocks or in its
membership
 POWER TO HAVE CORPORATE NAME
 POWER TO ADOPT CORPORATE SEAL
 POWER TO ADOPT/AMEND LAWS
 4. PRE-EMPTIVE RIGHT - The right of existing stockholders to purchase or
subscribe to new issuances or dispositions of shares, in proportion to their
respective stockholdings, before such shares are offered to the public
TRUST FUND DOCTRINE - There shall be no return of assets to the stockholders of
a corporation until the claims of creditors have been satisfied
VOTING REQUIREMENTS
A. CASH DIVIDEND - The declaration thereof requires only the vote of the
board of directors
B. STOCK DIVIDEND - The declaration thereof requires the vote of the board of
directors and the ratification of the stockholders
ULTRA-VIRES - An act of a corporation performed outside its express, implied and
incidental powers
BY-LAWS - They refer to the rules of action adopted by a corporation for its own
government and for the government of its stockholders or members and those
having the direction, management and control of its affairs
VOTING TRUST AGREEMENT - An agreement in writing whereby one or more
stockholders of a corporation transfer their shares to a trustee or trustees, for
the purpose, of conferring in the latter, voting and other rights pertaining to such
shares
PROXY - It refers to the authority given by a stockholder to another person to vote
the shares and which is generally effective only for a particular meeting
SUBSCRIPTION - A contract for the acquisition of unissued shares in an existing
corporation or a corporation still to be formed
KINDS OF SUBSCRIPTION
1. PRE-INCORPORATION SUBS. – subs to unissued stock of corp still to be
formed
2. POST-INCORPORATION SUBS – subs to unissued stock of corp has been
formed.
STOCK CERTIFICATE - The document which evidences the interest of a
stockholder in a corporation and in its property
MERGER - A corporate combination whereby the constituent corporations, except
one, lose their separate personalities
APPRAISAL RIGHT - The right of a stockholder to demand the payment of the fair
value of his shares in case he dissents from certain corporate acts
DOCTRINE OF LIMITED CAPACITY - A corporation can exercise only the powers
expressly conferred upon it by law and its articles of incorporation, those implied
from such powers expressly granted, and those that are incident to its existence
CERTIFICATE OF INCORPORATION - The document issued by the Securities and
Exchange Commission which confers juridical personality upon a corporation
CONSOLIDATION - A corporate combination whereby the constituent corporations
lose their separate personalities and a new corporation having a personality of
its own emerges

NEGOTIABLE INSTRUMENT
NEGOTIABILITY - The attribute that allows a negotiable instrument to be passed
from one person to another so as to give a holder in due course the right to hold
the instrument free from defect of title of prior parties and free from defenses
available to prior parties among themselves, and to enforce the full amount of
the instrument against all parties liable thereon
REQUISITES:
1. Must be in writing, signed by maker/drawer
2. Must contain unconditional promise or order to pay sum certain in money
3. Must be payable in demand or at a fixed determinable future time
4. Must be payable to order or bearer
5. Where instrument addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty
COMMON FORMS OF NEGOTIABLE INSTRUMENT
1. PROMISSORY NOTE - An unconditional promise in writing made by one
person to another, signed by the maker, engaging to pay on demand or at a
fixed or determinable future time, a sum certain in money, to order or to
bearer
2. BILLL OF EXCHANGE - An unconditional order in writing addressed by one
person to another, signed by the person giving it, requiring the person to
whom it is addressed, to pay on demand or at a fixed or determinable future
time, a sum certain in money to order or bearer.
3. CHECK - A bill of exchange drawn on a bank which is payable on demand
PARTIES
A. PAYEE - The party to whom a bill of exchange is drawn payable or in whose
favor a promissory note is made payable
B. MAKER - The party who executes the written promise to pay
 C. DRAWER - The person who executes the written order to pay a bill of
exchange
D. DRAWEE - The person who is given the command by the drawer to pay the
payee
COGNIVIT ACTIONEM - Literally, "he has confessed action': it refers to a written
confession of defendant acknowledging indebtedness to plaintiff after action has
been filed
RELICTA VERIFICATIONE - Literally, "his pleading being abandoned'; it refers to a
confession of judgment accompanied by withdrawal of defense
ANTE-DATING - Dating an instrument earlier than the date of issue
POST-DATING - Dating an instrument later than the date of issue
ACCELERATION CLAUSE - The provision in a negotiable instrument which states
that the whole amount on the instrument shall become due in case of default in the
payment. of an installment or of interest
IMMEDIATE PARTY - One that has knowledge of the conditions or limitations
placed upon the delivery of the instrument or the fact that the instrument was
never delivered
SIGNATURE BY PROCURATION - The act of appointing another as one's agent or
attorney and which operates as a notice that an agent has a limited authority to
sign
FORGERY -The counterfeit making or fraudulent alteration of any writing, and may
consist in the signing of another's name, or the alteration of an instrument in the
name, amount, description of the person 'and the like, with intent to defraud
CONSIDERATION – is the cause of a contract; it is the essential reason why a party
enters into a contract
VALUE - Any consideration sufficient to support a simple contract
KINDS OF CONSIDERATION:
1. WANT OF CONSIDERATION – if no consideration was intended to pass, such
as when a fake ring was given for a promissory note
2. FAILURE OF CONSIDERATION – if consideration was intended to pass but
there was inability to have it performed or given.
3. PARTIAL FAILURE OF CONSIDERATION – consideration was not completely
perform or given.
ACCOMODATION PARTY - He is one who has signed the instrument .as maker,
drawer, indorser, or acceptor, without receiving value therefor, and for the
purpose of lending his name to some other person.
NEGOTIATION - The transfer of a negotiable instrument from one person to
another in such a manner as to constitute the transferee the holder thereof.
INDORSEMENT – is the act of signing one’s name on a negotiable instrument
payable to order, indicating the intent to transfer the ownership of the
instrument to another.
INDORSER - A person who transfers a negotiable instrument by means of an
indorsement
INDORSEE - The person or party to whom an instrument is negotiated by
indorsement
KINDS OF INDORSEMENT:
A. SPECIAL INDORSEMENT - An indorsement that specifies the person to
whom or to whose order, the instrument is to be payable
B. BLANK INDORSEMENT - An indorsement that specifies no indorsee and
makes the instrument payable to bearer
C. RESTRICTIVE INDORSEMENT - An indorsement that prohibits the further
negotiation of the instrument, or constitutes the indorse e a mere agent of
the indorser, or vests the title in the indorse in trust for some other person.
D. QUALIFIED INDORSEMENT - An indorsement that constitutes the indorser a
mere assignor of the title the instrument; it is usually made by adding to the
indorser's signature the words "without recourse."
E. CONDITIONAL INDORSEMENT - An indorsement that is subject to the
happening of a contingent event
ALLONGE - A separate paper. attached to a negotiable instrument where an
indorsement or the acceptance of a bill of exchange is written
HOLDER - The payee or indorsee of a bill or note who is in possession of the
instrument, or the bearer thereof
KINDS OF HOLDER
A. HOLDER FOR VALUE - One who gives valuable consideration for an
instrument issued or negotiated to him
B. HOLDER IN DUE CURSE - A holder who takes the instrument free from
defect of title of prior parties and free from personal defenses available to
prior parties among themselves
C. HOLDER NOT IN DUE CURSE -when any one of the condition in number 2 is
absent.
REAL DEFENSE - One that attaches to the instrument itself and can be set up
against the whole world including a holder in due course
PERSONAL DEFENSE - It grows out of the agreement or the conduct of a particular
person in regard to the instrument which renders it inequitable for him, though
holding legal title, to enforce it against the defendant, but which is not available
against a holder in due course
IRREGULAR OR ANOMALOUS INDORSER - A person who, not otherwise a party
to the instrument, places thereon his signature in blank before delivery
PRESENTMENT FOR PAYMENT - The production of a promissory note to the party
primarily liable on the instrument for the payment of the same, or of a bill of
exchange to the drawee or acceptor for payment
NOTICE OF DISHONOR - The act of informing the drawer and each indorser that
an instrument has not be been accepted by the drawee, or that it has not been
paid by the acceptor; in the case of bill of exchange, or by the maker, in the case
of promissory note.
DISHONOR BY NON-PAYMENT - It takes place when an instrument is
presented for payment but payment is refused or cannot be obtained.
DISHONOR BY NON-ACCEPTANCE - It takes place when a bill of exchange is
presented for acceptance and such acceptance is refused or cannot be obtained.
SPOLIATION - An alteration made by a stranger to the instrument
ACCEPTANCE - The signification by the drawee of his assent to the order of the
drawer.
ACCEPTOR - The person who signifies his acceptance to the order of the drawer
KINDS OF ACCEPTANCE
1. ACTUAL ACCEPTANCE
2. CONSTRUCTIVE ACCEPTANCE – when a drawee to whom a bill delivered for
acceptance, destroy the bill or refuse after such delivery
3. GENERAL ACCEPTANCE - assents without qualification to the order of the
drawer
4. QUALIFIED ACCEPTANCE
PRESENTMENT FOR ACCEPTANCE - The production of the bill of exchange to the
drawee for acceptance
PROTEST - The formal declaration drawn up and signed by a notary that he
presented a bill of exchange for acceptance or for payment and that it was
refused
ACCEPTANCE FOR HONOR – an acceptance made by a person who is not a party
to the bill after the bill has been protested for non-acceptance or for better
security and before it is overdue, for the honor of the drawer or of any one of the
indorser. (acceptance supra protest)
PAYMENT FOR HONOR – means payment of a bill of exchange after it has been
dishonored by non-payment and protested for non-payment, by any person,
including one already a party to the bill, for the honor of one, or all the parties to
the bill
BILLS IN SET - A bill composed of various parts, each part being numbered, and
containing a reference to. the other parts, all of which parts constitute but one
bill
 WARRANT OF ATTORNEY - The authority for confession of judgment before the
action is begun
COGNOVIT NOTE - Includes not only a promise to pay on the part of the maker but
also grants permission to the payee to take judgment against the maker without
trial if the maker fails to pay on maturity date
FRAUD IN FACTUM OR IN ESSE CONTRACTUS - It exists in those cases in which
a person, without-negligence, has signed an instrument which was, in fact, a
negotiable instrument, but was deceived as to the character of the instrument
and without knowledge of it
FRAUD IN INDUCEMENT - A personal defense where a party is deceived into
signing for a larger amount than he intended, or on different terms, in a
negotiable instrument
ISSUE - The first delivery of an instrument, complete in form, to a person who takes
it as holder
EXCHANGE - The difference in value of the same amount of money in different
countries
PROMISSORY NOTES