Commercial Answer Key

1.
a. The insurance company cannot refused to pay the proceeds of the life insurance policy. As
contemplated by the first paragraph of Section 48 of the Insurance Code of the Philippines, a contract of
insurance may be rescinded on the ground of concealment, or false representation, or breach of warranty.
And whenever the right to rescind a contract of insurance is given to the insurer, such right must be
exercised previous to the commencement of an action of the contracts. Also, the first paragraph should
be understood to be qualified by the second paragraph of Section 48. By virtue of the second paragraph,
the grounds for rescission are available only during the first two (2) years of a life insurance policy. This
rule, otherwise known as incontestable clause, shall estopped the insurer from contesting the policy after
the requisites are shown to exist: (i) the policy is a life insurance policy; (ii) it is payable on death of the
insured; and (iii) it has been in force during the lifetime of the insured for at least two (2) years from its
date of issue. In the case problem, Mr. Ando took out an insurance policy on the life of his spouse, which
was payable upon his spouse’s death given the circumstance that Mr. Ando contacted the insurance policy
after internment, and lastly, the insurance policy was enforced more than two (2) years, from the issuance
of the policy on January 4, 2015, up to the untimely death of Mrs. Ando on February 14, 2017. Therefore,
with all the foregoing conditions present for its incontestability, the insurance policy cannot refused to
pay thereof, and Mr. Ando can now claim the proceeds of the life insurance policy on the life of his spouse.
b. Yes. Under Section 233 (a), when in case of individual life insurance, the policy holder is entitled
to a grace period of either 30 days or one (1) month within which the payment of any premium after the
first may be made. As a rule, payment of premium is a condition precedent to, and essential for, the
efficaciousness of insurance contract. Except when the insurance coverage relates to life or industrial
(health) insurance a grace period applies – Aerola v. Court of Appeals, 236 SCRA 643, 1994. In the case
problem, Mr. Ando failed only to pay the last monthly premium pay, in effect, did not invalidate the
contract of insurance since the grace period applies. Therefore, he is still entitled to the proceeds of the
life insurance policy on the life of his spouse.
2.
a. Mr. Smith, as the buyer, is the one who has insurable interest over the furniture. In marine
insurance, the insurable interest in case of cargo is attached to the shipper or the consignee depending
upon the terms of the sale. If the term of the sale is F.O.B. (free on board), like F.O.B. factory, the buyer
assumes responsibility when the goods leave the factory, or, F.O.B. point of destination, the buyer does
not assume responsibility until the goods are received from the carrier. In the given facts, the term chosen
was F.O.B. Manila, hence, a point of destination. Thus, upon the delivery of the furniture to the cargo-
airline Manila, Mr. Smith, the buyer, has acquired the insurable interest of the furniture.
b. Mr. Galupo, as the seller, is the one who has insurable interest over the furniture. In marine
insurance, the insurable interest in case of cargo is attached to the shipper or the consignee depending
upon the terms of the sale. If the term of the sale is C.I.F. (cost, insurance, freight), the seller assumes
complete responsibility for securing all necessary insurance, thereby, making the seller one who has
insurable interest over the goods. In the given facts, the term chosen was C.I.F. New York, thus, upon the
delivery of the furniture to the cargo-airline Manila, Mr. Galupo then, the buyer, has acquired the
insurable interest of the furniture.
c. Mr. Smith, as the buyer, bears the loss. In an F.O.B. shipping arrangement, it presumes that the
seller shall comply with his obligation to deliver the cargo to the vessel. It is the buyer who shall pay the
freightage and thus the vessel is deemed the agent of the buyer so that delivery to the vessel is delivery
to the buyer. Ownership over the cargo will pass to the buyer upon delivery by the seller to the vessel.
Hence, applying the doctrine of res perit domino, the owner shall bear the loss thereof. Therefore, Mr.
Smith, buyer, bears the loss of the furniture when it was lost in the custody and possession of the cargo-
airline.
d. Mr. Galupo, as the seller, bears the loss. In C.I.F. shipping arrangement, it presumes that the
seller shall pay cost of crating and packaging, insurance and the freightage. The carrier is deemed to be
agent of the seller, so the entire trip the ownership is retained by the seller and only passes to the buyer
upon reaching the point and the cargo is discharged in favor of the buyer. And by applying the res perit
doctrine, of which the owner shall bear the loss, Mr. Galupo, as the seller-owner of the furniture, bears
the loss of the furniture when it was damaged in the custody and possession of the cargo-airline.
3. China Airlines is incorrect. Under the rules on the contract of carriage, the general rule under
doctrine of lex loci contractus – page 171.
4. sec 23, corporation code, page 665., PAGE 668, 669, SEC 35
PART II
I. a. see Sec 184., page 402

b. endorsed-negotiated, on demand, holder in due course,
II. a. Sec. 22, page 658
b. Sec. 22, same effect
III. SEC. 23, PAGE 668, SEC 35
IV. Insurable interest of non-life, page 331, read sec
V.
VI. s 19-23, insurance code, ownersip transferred by virtue of registration to the LTO. Sec. 373
VII. a. Hypothecary doctrine, Limited Liability Rule, page 79-80, vs. stevedoring, page 82. Page
194, 195, 204, 214

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I. a. see Sec 184., page 402

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