Complete RFLB Slides

REGULATORY FRAMEWORK AND
LEGAL ISSUES IN BUSINESS

First Trimester, Schoolyear 2023 – 2024
October 3, 2023
Atty. Manuel R. del Rosario

COURSE DESCRIPTION
The subject covers the government mandated regulatory

framework governing business transactions relating to
individuals and all types of business organizations
The course will focus on the basic principles provided by

these special commercial laws, and the application of
these principles to relevant business transactions.
2
LEARNING OUTCOMES
1. Understand the basic legal context of these special

commercial laws and appreciate where they apply and
to what extent.
2. Understand the important role of CPAs in ensuring

faithful compliance with these special commercial laws.
3. Be aware of the social and ethical responsibilities

imposed on CPAs by these special commercial laws.
3
WHAT WE WILL STUDY IN THIS COURSE
(more than 400 slides)
The Law on Sales, including
- Recto Law
- Maceda Law
- Condominium Act
Law on Pledge, Mortgage and Antichresis

WHAT WE WILL STUDY IN THIS COURSE
Special Commercial Laws
1. Law on Bouncing Checks
2. Secrecy of Bank Deposits
3. Unclaimed Bank Balances
4. Truth in Lending Act
5. Anti-Money Laundering Act (AMLA)
6. Philippine Deposit Insurance Corporation
7. New Central Bank Law
8. Financial Rehabilitation and Insolvency Act (FRIA)
9. Law on Consumer Protection
10. Data Privacy Law
11. E-Commerce Law
12. Ease of Doing Business
13. Philippine Competition Act
14. Law on Intellectual Property (Patents, Trademarks and Copyright)
15. Law on Insurance
16. Government Procurement
17. Labor and Social Legislation
ZOOM CLASSROOM DECORUM
- Cameras on, Microphones on mute;

- Position your cameras properly
- Make sure your full name is indicated in your Zoom profile;
- WE ALWAYS START ON TIME;
- Log in before the start of the class;
- Avoid distractions and focus on the lesson;
- No food allowed in class. Drinks are allowed;
- We have a 10-minute break;
- If you need to step out of the Zoom class, send me a
private message in the chat box;
- If you get disconnected, try to reconnect
immediately;
- We will take a photo at the start and end of every
class
THE LEGAL ENVIRONMENT
In making a BUSINESS DECISION there are a host of

factors to consider. One of the most important considerations
is the Legal Framework.
Is it legal? How do we resolve differences? What does the

law mean? How do we avoid mistakes? What is the best advice
we can give our clients?
HOW TO STUDY BUSINESS LAW
The general study of law covers three basic items:
- The relevant law (codal provisions)

- Interpretation and examples of the law’s application by
legal authors
- Jurisprudence (decisions made by the courts and other
administrative bodies)
GRADING SYSTEM
Class Attendance and

Participation 15%
Paper and Zoom Quizzes 20%
Mid-Term Examinations 30%
Final Examinations 35%

100%
9
WEEKS ONE to THREE
CLASS SCHEDULE
(Face to Face unless
otherwise indicated)
October 3, Tuesday - 10:00 am to 12:00 nn
October 10, Tuesday - 8:00 am to 10:00 am

October 12, Thursday – 8:00 am to 10:00 am
October 14, Saturday - 8:00 am to 10:00 am (PAPER QUIZ)
October 17, Tuesday - 8:00 am to 10:00 am

October 19, Thursday – 8:00 am to 10:00 am (PAPER QUIZ)
October 21, Saturday – ZOOM CLASS – Time To Be Announced
REVIEW:
THE LAW ON OBLIGATIONS
AND CONTRACTS
REVIEW:
TWO KINDS OF CONDITIONS
1. SUSPENSIVE CONDITION
condition precedent – once it happens, the obligations starts
2. RESOLUTORY CONDITION
condition subsequent – once it happens, the obligation is

resolved or ends
12
REVIEW:
WHAT ARE JOINT
OBLIGATIONS?
Joint Obligations are those where the entire obligation is to be paid
or fulfilled PROPORTIONATELY by the different debtors and / or
is to be demanded PROPORTIONATELY by the different
creditors. This means:
- There are as many debts are there are creditors and there are as
many credits as there are creditors
- The debts or credits are considered separate and distinct from
each other
- Each debtor is liable only for a proportion of the debt
- Each creditor is entitled only to a proportion of the credit
KANYA KANYA. TO EACH HIS OWN

13
REVIEW:
WHAT ARE SOLIDARY OBLIGATIONS?
Solidary Obligations are those where each one of the debtors

is liable to pay and/or each one of the creditors has a right
to demand from any of the debtors, ENTIRE or
COMPLETE compliance. There is only one debt and there is
only one credit.
ONE FOR ALL. ALL FOR ONE.

SAMA SAMA TAYO.
SOLID.
14
WHAT ARE THE ELEMENTS OF
A CONTRACT? (COC)
Art. 1318. There is no contract unless the following

requisites concur:
1. Consent of the contracting parties;

2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
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5 VICES OR DEFECTS OF CONSENT
Whenever the consent of one of the parties to a contract is defective or

irregular, the contract is voidable and the remedy of the injured party is
annulment of the contract.
1. MISTAKE (OR ERROR or Pagkakamali)

Mistake is not only the wrong conception of a thing, but also the lack of
knowledge with respect to a thing.
2. FRAUD (OR DECEIT or Panlilinlang) Art. 1338

There is fraud when, through insidious words or machinations (plot or
scheme) of one of the contracting parties, the other enters into a contract
which, without these words or machinations, he would not have agreed
to.
3. VIOLENCE (Pananakit)
There is violence when in order to get the other party’s consent, serious or
irresistible physical force is employed.
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4. INTIMIDATION (Pananakot)
There is intimidation when one of the contracting parties is compelled by
a reasonable and well-grounded fear of an imminent and grave evil
upon his person or property, or upon the person or property of his
spouse, descendants or ascendants, to give his consent.
5. UNDUE INFLUENCE (Pagsasamantala) Art. 1337

There is undue influence when a person takes improper advantage of his
power over the will of another, depriving the latter of a reasonable
freedom of choice. The following circumstances shall be considered: the
confidential, family, spiritual and other relations between the parties, or
the fact that the person alleged to have been unduly influenced was
suffering from mental weakness or was ignorant or in financial distress.
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Violence, Intimidation and Undue Influence

are collectively called DURESS.
These are actions to force someone to do something

against their will
18
REVIEW:
HEIRARCHY OF CONTRACTS
Valid
Rescissible
Voidable
Unenforceable
Void
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REVIEW:
FOUR KINDS OF DEFECTIVE CONTRACTS
1. Rescissible – valid until rescinded; has all the essential

requisites of a contract but by reason of injury or damage
to one of the contracting parties or third persons, such as
creditors, it may be rescinded by an action for recission.
PUWEDENG IPAWALANG BISA
2. Voidable – valid until voided or annulled; it has all the

essential requisites but it may be annulled by an action for
annulment because there is a defect in the consent.
An action must be instituted in court.
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REVIEW:
3.Unenforceable – cannot be sued upon or enforced, unless

ratified. It is invalid and has no effect now, but it may be
effective upon ratification later on. WALANG BISA SA
KASALUKUYAN.
4.Void – has no effect at all. It cannot be ratified or validated.

WALANG BISA FOREVER. To be safe
the aggrieved party can file a case to declare the contract void
but is not necessary.
21
REVIEW:
TYPE STATUS ACTIONS THAT WHEN TO FILE

CAN BE
TAKEN
Rescissible Valid until Action for rescission; Within 4 years
May be ratified
rescinde
d
Voidable Valid until annulled Action for annulment; Within 4 years
May be ratified
Unenforceable Invalid and has no Ratification by the Anytime
effect unless party; court
ratified action not
needed
Void Invalid and has no Action to declare Forever – Does
effect forever nullity not prescribe
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REVIEW:
BREACH OF CONTRACTS
1. By non-fulfillment
2. By partial fulfillment
3. By irregular fulfillment
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REVIEW:
REMEDIES FOR
BREACH OF
CONTRACTS
1. Go to court and ask for specific performance
2. Go to court and ask a third party to perform the
obligation – substituted performance
3. Cancel the contract, go to court to get back
what you paid and recover damages
4. If the contract has a penalty clause, recover
the agreed penalty
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THE LAW ON SALES
Articles 1458 – 1623

Civil Code of the Philippines
ELEMENTS OF AN OBLIGATION
1. Passive Subject – the obligor who has the duty

2. Active Subject – the obligee who has the right
3. Subject Matter – what has to be given or done
4. Legal Tie – The basis for the obligation
ELEMENTS OF A CONTRACT
1. Consent of the contracting parties;

2. Object certain which is the subject matter of the
contract;
3. Cause of the obligation which is established.
WHAT IS A CONTRACT OF SALE?
It is a contract where one of the contracting parties (Seller

or Vendor) binds himself (1) to transfer the ownership
(documentation) and (2) to deliver a determinable thing
(possession), and the other party (Buyer or Vendee) (a) to
pay a price certain in money or its equivalent and (b) to
accept delivery of the item or subject matter.
A contract of sale may be absolute or conditional.
A determinate or determinable thing is transferred.

PARTIES TO A CONTRACT OF SALE
SELLER or VENDOR – Ang may pinagbibili o ang nagtitinda
BUYER or VENDEE – Ang bumibili

ELEMENTS OF A CONTRACT OF SALE
(CSP)
1. Free, Voluntary and Informed Consent

2. Determinate or Determinable Subject Matter
3. Price certain in money or its equivalent
A contract of sale is an EXCHANGE.

(1) CONTRACT OF SALE vs.
(2) CONTRACT FOR SERVICES vs.
(3) CONTRACT FOR A PIECE OF WORK
Different subject matter:
1. CONTRACT OF SALE - An object already available for mass market

2. CONTRACT FOR SERVICES - For services to be rendered
3. CONTRACT FOR A PIECE OF WORK - An object to be custom
made not for the mass market
Risk of loss:
4. CONTRACT OF SALE – After Perfection but Before Delivery –

Buyer
5. CONTRACT FOR SERVICES - Not Applicable
6. CONTRACT FOR A PIECE OF WORK - Before delivery – Custom
Maker
RISK OF LOSS IN A
CONTRACT OF
SALE
1. Before Perfection (NO Meeting of the Minds) – Seller

2. After Perfection but Before Delivery – Buyer
3. After Delivery – Buyer
FUTURE THINGS CAN BE THE SUBJECT
MATTER OF A CONTRACT OF SALE
(POTENTIAL EXISTENCE)
Future things may be the subject of a sale provided that at

the time of perfection they are already determinate –
particularly designated or physically segregated. Only
uncertainty is quantity and quality
- Palay to be produced in a plot of land;
- Mangoes to be harvested from an orchard;
- Puppies to be delivered by a pregnant dog.
- IF THEY DO NOT MATERIALIZE, NO SALE. This sale

is
subject to a condition that the subject matter comes into
existence. What kind of condition is this?
FUTURE THINGS CAN BE THE SUBJECT
MATTER OF A CONTRACT OF SALE
Sale of a thing having potential existence is VALID.

Emptio Rei Sperati - palay, mangoes, puppies
Sale of a mere hope or expectancy is also VALID.

Emptio Spei – sale of a lotto ticket
Sale of a vain hope (hopeless or impossible) or expectancy

is VOID. Sale of a ticket to yesterday’s lottery (nothing to
expect or to be delivered)
WHAT IS A VALID PRICE?
The price or consideration of a contract of sale must be:
1. Real
2. Money or any equivalent valuable consideration like
services or property (dacion en pago)
3. Certain or can be ascertained
CERTAINTY OF THE PRICE
The price or consideration of a contract of sale is still certain:
(a) If it is in reference to another thing that is certain.
Example: I will pay you US$5,000 in Philippine Pesos based

on the exchange rate on December 1, 2023
(b) If it is going to be set by a specific person.
Example: I will sell you the property on Rizal Street based on

the latest per square meter valuation of Cuervo Appraisal.
The price cannot be determined by one of the contracting

parties. ART 1474 WHY? There is no consent.
STAGES OF A SALES CONTRACT
1. Negotiation - price setting exercise, due diligence

2. Perfection – meeting of the minds as to object + price
3. Consummation – parties perform their respective obligations,
resulting in the extinguishment of the contract of sale (San
Miguel Properties vs. Huang, 2000) THIS IS USUALLY
DELIVERY OE TRANSFER OF THE SUBJECT MATTER
Example: Pedro purchased Jose’s motorcycle and they signed a

Deed of Absolute Sale on December 15, 2023 (perfection).
However the motorcycle was in Davao City, and will be
transported to Manila. Expected delivery will be on December 21,
2023 (consummation).
REVIEW:
OBLIGATIONS ARE EXTINGUISHED
1. By payment or performance
2. By the loss of the thing due
3. By the condonation or remission of the debt
4. By the confusion or merger of the rights of creditor
and debtor
5. By compensation
6. By novation
7. By other means – subrogation, death, compromise,
becomes illegal, resolutory condition occurs
37
WHEN IS OWNERSHIP OF THE
OBJECT TRANSFERRED?
UPON DELIVERY
Upon actual or constructive delivery of the object or thing
(1477).
The thing sold is understood delivered when it is

placed in the control and possession of the buyer. (1497)
RES PERIT DOMINO – The thing perishes for the owner

WHEN DOES THE SELLER HAVE TO BE
THE OWNER OF THE PROPERTY IN ORDER
TO HAVE A VALID CONTRACT OF SALE?
The seller need not be the owner of the item at the time of
the perfection of the contract. It is sufficient that he has the
right to transfer ownership at the time of delivery. (1459)
If the seller is not the owner of the property at the time of

delivery, the buyer acquires no better title to the items than
the seller had. (1505)
WHEN DOES THE SELLER HAVE TO BE
THE OWNER OF THE PROPERTY IN ORDER
TO HAVE A VALID CONTRACT OF SALE?
EXAMPLE: Valerie is going to buy a bracelet on sale at

Lazada for P600 since it is on Flash Sale. Even before she
bought it, she already sold the bracelet to her friend Aida for
P650 since Aida does not do any online shopping. The sale
is valid even if at the time the sale was perfected Valerie
was not yet the owner of the bracelet. (1459)
If Valerie was not able to buy the bracelet from Lazada as it

became out of stock, Aida acquires no title to the items than
the Valerie had. There is no sale.
October 10, 2023

Most of the questions po
this October 2023 c,
overs cooperatives an,d
cor, poration po Atty.
Nung1
May po, special laws po
yung mara1 mi th1 en
cor, poration 1p o.
Nu1ng May po 72% po
yung rating ko.
Ngaiyon pong October,
ratings are not yet
released pa po.
Upd,ate ko,
po kayo. Thank you po
SALE OF FUNGIBLE GOODS
In the case of fungible goods, there may be a sale of an undivided share
of a specific mass, though the seller purports to sell and the buyer to buy
a definite number, weight or measure of the goods in the mass, and
though the number, weight or measure of the goods in the mass is
undetermined. ART 1464
FUNGIBLE GOODS – these are goods which, because of their nature,

are capable of being substituted by other of the same kind. A kilo of
refined white sugar can be replaced by another kilo of refined white
sugar. Substitution is possible.
EXAMPLE: Brenda owns a warehouse full of sand. She does not the how
much sand is inside the warehouse. She can sell all the sand in the
warehouse to EJ Construction even if the definite amount is not specified.
This is a VALID sale.
SALE OF FUNGIBLE GOODS
(1464)
By such a sale the buyer becomes owner in common of such a share in the mass
as the number, weight or measure bought bears to the number, weight or
measure of the mass. If the mass contains less than the number, weight or
measure bought, the buyer becomes the owner of the whole mass and the seller
is bound to make good the deficiency from goods of the same kind and quality,
unless a contrary intent appears.
EXAMPLE 1: Brenda owns a warehouse full of sand. She does not know how
much sand is inside the warehouse. She sells 2 tons of the sand in the
warehouse to EJ Construction. Brenda did not sell all the sand but only 2 tons.
This is a VALID sale.
EXAMPLE 2: In Example 1, what if there is less than 2 tons of sand in the

warehouse? Brenda is liable to make up the difference and deliver the balance of
the sand to EJ construction.
CONTRACT OF SALE vs.
AGENCY TO SELL
(1466)
EXAMPLE: Jose appointed Pedro as his agent to sell his motorcycle

for P75,000. Pedro is an agent of Jose. The seller is still Jose. This is
a contract of agency. Ahente si Pedro ni Jose.
CONTRACT OF SALE AGENCY TO SELL

OWNERSHIP OF Ownership is transferred to Title remains with the seller.
PROPERTY the buyer. Agent receives the goods to
sell on behalf of the seller.
PAYMENT OF PRICE Buyer pays the price to the Buyer pays the price to the
seller agent who will in turn remit
the same to the seller
PROMISE TO BUY /
PROMISE TO
SELL
A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. ART 1479, paragraph 1
EXAMPLE: Jose promised to buy Pedro’s horse for P85,000 and

Pedro promised to sell his horse to Jose for P85,000. Pareho silang
nagbigay ng pangako sa isa’t isa.
If Pedro changes his mind, Jose can take him to court to force Pedro
to proceed with the sale. If Jose changes his mind, Pedro can take
him to court to force Jose to proceed with buying the horse. Specific
Performance
PROMISE TO BUY /
PROMISE TO
SELL
An accepted unilateral promise to buy or sell a determinate thing for a
price certain is binding upon the promisor (isa lang ang nagbigay ng
pangako) if there is a consideration distinct from the price, from the
moment of the perfection of the contract to the time of delivery. ART
1479, paragraph 2
EXAMPLE: Jose unilaterally promised to buy Pedro’s horse for P85,000

and gave a reservation fee of P2,000. This was accepted by Pedro. If
Jose does not take steps to pay for the horse, Pedro can go to court to
ask for specific performance.
CONTRACT OF SALE BY
DESCRIPTION OR SAMPLE
In the contract of sale by description OR by sample, the contract may be
rescinded if the bulk of the goods delivered do not correspond with the
description or the sample. ART 1481
EXAMPLE 1: Josefa purchased 500 shirts from La Jolla Embroidery

based on a sample provided by the latter. The sample shirt provided was
100% cotton. When the 500 shirts were delivered only 100 of them were
made of 100% cotton. The balance of 400 were made of 50% cotton and
50% polyester. Josefa can rescind the sale + damages. Irregular
Fulfillment
EXAMPLE 2: What if only 50 shirts did not correspond to the sample?

Josefa cannot rescind the sale, but she can ask for damages. No right of
rescission (cancellation) because bulk of the goods (450 shirts) were
proper
CONTRACT OF SALE BY
DESCRIPTION AND SAMPLE
If the contract of sale is by sample AND by description, it will not be

sufficient that the bulk of the goods (majority) correspond with the
sample if they do not correspond with the description. ART 1481
EXAMPLE: Josefa purchased 500 shirts from La Jolla Embroidery based

on a sample provided by the latter. The sample shirt provided was 100%
cotton. The Contract also included a description that the shirts will be
manufactured in the US. All 500 shirts were delivered and they were all
100% cotton. However, the shirts were made in China. Josefa can rescind
the sale + damages. Kailangan katulad ng sample + description.
CONTRACT OF SALE vs.
CONTRACT TO SELL
CONTRACT OF SALE CONTRACT TO SELL
NATURE As defined previously. It is a Seller binds himself to sell the
final contract. item to the prospective buyer
upon fulfillment of certain
conditions. It is a preliminary
contract.
TRANSFER OF TITLE Title passes to the buyer Title passes to the buyer only
upon delivery upon fulfillment of certain
conditions such as payment
OWNERSHIP OF Seller cannot recover Title remains with the seller

PROPERTY ownership of the thing
PAYMENT OF PRICE Non-payment of the price Payment of price may be one
results in no sale of the conditions
REMEDIES Specific performance or Specific performance or
rescission + damages rescission + damages
EARNEST MONEY OR
DOWN PAYMENT
Juan is very interested to buy the parcel of land in Baliuag being
offered for sale by Jose for P2.3M. Since Juan does not want
anyone to beat him to buy the property, he agrees to give Jose
earnest money or down payment of P500,000.
This means that Juan still owes Jose P1.8M as balance. The
P500,000 down payment is an advance payment and will be
deducted from the purchase price for the property.
The contract of sale has already been perfected there being a

meeting of the minds between the buyer and the seller. If Juan
refuses to pay the balance, Jose can sue for specific performance.
OPTION MONEY IS IN
ADDITION TO THE PURCHASE PRICE
Juan is interested to buy the parcel of land in Baliuag being offered for
sale by Jose for P2.3M. Juan however is not yet sure if he will buy the
property since he is also looking at another piece of property in Pulilan.
So that he will have an exclusive right to buy the property, Jose asked
Juan to give an option money of P50,000. In return Jose agrees not to sell
the property to anyone else for a period of 72 hours. Reservation
Money
Within the 72 hours, Juan can buy the property for P2.3M or he can decide
not to buy the property BUT he cannot get back his P50,000. BUMILI NG
OPTION SI JUAN. It is up to the buyer who gave option money whether
or not to proceed with the purchase.
EARNEST MONEY vs.
OPTION MONEY
EARNEST MONEY OPTION MONEY
Part of the purchase price; down Distinct consideration for an option
payment contract, not deducted from the
purchase price
Given when there is already a Given when the sale is not yet
meeting of the minds or a perfected perfected, no meeting of the minds yet
sale
Buyer must pay the balance Buyer has option not to pay the
balance and buyer may decide to
forfeit the option money.
Bumibili ng isang bagay. Nagbigay na Pinagiisipan pa. Nagbigay ng pera

paunang bayad. pang reservation ng karapatang bumili
SALE or RETURN
(1502)
When goods are delivered to the buyer on “sale or return” the
buyer has the option to return the goods instead of paying
for them. Ownership passes to the buyer but ownership can
REVEST in the seller upon return of the item.
EXAMPLE: Jose sold his motorcycle to Pedro for P30,000 ”on

return.” Pedro becomes the owner but if he finds something in
the motorcycle that he does not like he can return it to Jose.
SALE ON TRIAL
(1502)
When goods are delivered to the buyer on “trial or approval

or satisfaction” ownership passes to the buyer if he or she
signifies his acceptance of the items or he or she does not
make any decision within the time given by the seller.
EXAMPLE: Jose sold his motorcycle to Pedro for P30,000

”on trial” for 7 days. Pedro becomes the owner only if
(a) he accepts the motorcycle or (b) he does not make
any decision within 7 days.
SALE or RETURN vs.
SALE ON TRIAL
SALE or RETURN SALE ON TRIAL

Ownership passes to the buyer but if Ownership remains with the seller until
the item is returned, ownership the item on trial is accepted by the
reverts back to the seller. buyer.
This is subject to a resolutory This is subject to a suspensive

condition – There is an obligation condition – no obligation until buyer
until the return of the item accepts the item on trial
Depends on the will of the buyer to Depends on the will of the buyer to
return the item or not accept the items on trial
Risk of loss is on the buyer because Risk of loss is with the seller because
ownership transferred to him already there is still no transfer of ownership of
the item on trial
WHO CAN ENTER INTO A
VALID CONTRACT OF SALE?
All natural or juridical (legal or artificial) persons who have

capacity to act or the power to do so with legal effect
may enter into a contract of sale.
REVIEW: The following persons are incapable of giving

their consent to a contract:
• Minors
• Insane and demented persons
• Deaf-Mutes
• Persons who enter into a contract in a state of
Drunkenness and Hypnotic Spell (1327 and 1328)
WHO CAN SELL PROPERTY OWNED
BY THE HUSBAND AND WIFE?
Sales of property owned by the husband and wife must be

signed by both the husband and the wife.
EXAMPLE: The owners listed in the Transfer Certificate of

Title or TCT are “Spouses Juan dela Cruz and Petra Santos.”
In this case both Juan and Petra need to sign the Deed of
Absolute Sale.
To be safe, the same rule applies even if the owner listed in

the TCT is “Juan dela Cruz married to Petra Santos.”
PROPERTY RELATIONS BETWEEN
THE HUSBAND AND WIFE
1. Those married prior to August 3, 1988 will be governed by the
Conjugal Partnership of Gains.
“What is yours remains yours, what is mine remains mine,

what is ours will be ours.
2. Those married after August 3, 1988 will be governed by

Absolute Community of Property.
“What is yours is now ours, what is mine is now ours.”
3. The married couple can also choose to have Complete

Separation of Properties.
No comingling of properties. “Walang pakialaman.”

PROPERTY RELATIONS BETWEEN
THE HUSBAND AND WIFE
Couples married after August 3,1988, when the Family Code

took effect, have a property regime of Absolute Community of
Property – “what is yours is now ours, what is mine is now
ours.”
EXCEPTION: Property acquired by the husband or wife after

the marriage thorough succession or donation will be treated
as separate property.
TIP: If the couple does not want to have Absolute Community

of Property, they can execute a prenuptial agreement or a
marriage settlement.
WHAT IS THE RIGHT OF FIRST REFUSAL?
It is a promise on the part of the owner that if he decides to sell the

property in the future, he will first negotiate its sale to the person
to whom the promise is given.
EXAMPLE: Julius owns a house worth P2M. Manny told his friend Julius
that he wants to buy the property in case Julius decides to sell. Julius
agreed. If Julius agrees to sell the house in 2028, Julius has to offer the
house to Manny first before offering it to others.
At what price should Julius sell the house to Manny? Depends on what
they negotiate and agree upon.
OWNER IS THE ONE WHO DECIDES TO SELL OR NOT BUT HE

SHOULD OFFER IT FIRST TO THE ONE GIVEN THE RIGHT.
PROPER TERMINOLOGY IN
CONTRACTS OF SALE
The correct legal term is Deed of Absolute Sale (DoAS)

and NOT Absolute Deed of Sale.
What is absolute is the Sale and NOT the deed or the

document.
BARTER OR EXCHANGE
In a Barter or Exchange of goods there is no money involved.

It is NOT a sale because there is no price certain in money
or equivalent.
EXAMPLE: Jose exchanges 20 sacks of rice for Pedro’s

bicycle. No money is exchanged. This is NOT a contract of
sale. It is a contract of barter.
A Contract of Sale is also an exchange BUT goods are

exchanged for money or a price certain.
CONTRACT OF SALE OR BARTER
The two contracts (sale and barter) can be combined when

the consideration is partly money and partly goods.
EXAMPLE: Jonathan sells a piece of property to Gloria for

P1.2M. Gloria pays P400,000 in cash and gives a Toyota Vios
worth P800,000 as payment of the balance. This is a barter.
If price of goods is greater than cash = BARTER

If price of goods is equal to the cash = SALE
If cash is greater than the price of goods = SALE
OBLIGATIONS OF THE SELLER
1. To deliver a determinate thing including the fruits or accessories, if

any. The fruits belong to the buyer from the day the contract is
perfected (1537);
2. To transfer ownership of the thing;
3. To warrant against eviction;
4. To warrant against hidden defects;
5. To pay for expenses incurred unless there is a contrary agreement
(1487);
6. Preserve the thing or object from the moment the contract is
perfected up to the time of delivery
VERY IMPORTANT: Ownership of the thing sold is transferred upon

its delivery. Payment of the purchase price is NOT necessary for the
transfer of ownership. (1496)
WHAT ARE WARRANTIES?
Warranties are express or implied statements or

representations made by the seller of the goods, as
part of the contract of sale, having reference to
the character, quality or title of the goods where
he promises or undertakes to insure that certain
facts shall be as he represents. (1546 – 1547)
WARRANTY AGAINST EVICTION
Eviction happens when there is a final judgment based on a prior right
to the sale or an act imputable to the seller and the buyer is deprived of
the whole or a part of the thing purchased.
EXAMPLE: In October 2021 Nora sold a 3,000 sqm property to Belen.

After the contract was executed, payment made and Belen took over the
property, SMART Communications came in to construct a cellphone tower
in the property. It appears that in November 2020 Nora had entered into a
Contract of Lease with SMART for a 300 square meter lot inside the
property sold to Belen. Nora did not tell Belen about the lease.
SMART can sue Belen to be allowed to construct the cellphone tower. If

final judgment is rendered against Belen, she can sue Nora for a return of
a portion of the consideration plus damages.
WARRANTY AGAINST HIDDEN DEFECTS
Requisites:
1. The defect is hidden, not known and could not have been known;
2. Defect exists at the time the sale was made;
3. Ordinarily would not have entered into the contract;
4. Renders the thing unfit or considerably decreases value.
EXAMPLE: Mon buys a German Shepherd puppy from Dr. Tan for
P45,000. The intent was that the puppy was going to be used for
breeding and entered in dog competitions. After two months the dog
developed hip dysplasia. Mon complained to the seller about the dog’s
condition which is a breach of warranty. Dr. Tan has an obligation or
warranty that the dog sold is as good as advertised.
REMEDIES AGAINST HIDDEN DEFECTS
If the seller does not voluntarily remedy the situation, buyer may
institute:
1. Accion Redhibitoria – rescind or cancel the sale with

damages;
2. Accion Quanti Minoris – reduction in the price with

damages
EXAMPLE OF ACCION REDHIBITORIA: Mon buys a German

Shepherd puppy from Dr. Tan for P45,000. The intent was that the
puppy was going to be used for breeding and entered in dog
competitions. After two months the dog developed hip dysplasia. Mon
complained to the seller about the dog’s condition which is a breach of
warranty. If Dr. Tan refuses to replace the puppy, Mon can sue to
rescind or cancel the sale and get back the P45,000 he paid Dr. Tan.
HOW DO YOU SELL AN OBJECT WITH
APPARENT (NOT HIDDEN) DEFECTS?
It is LEGAL and VALID to sell an item that is defective provided the
buyer is made fully aware of the defect upon the perfection of the
contract.
EXAMPLE: Selling a defective TIMEX watch or selling a parcel of land

with informal settlers.
REMEDY: Sell item on an “As Is, Where Is, All Faults” basis. CAVEAT
EMPTOR meaning BUYER BEWARE. Buyer should be aware that
there are defects in the item being sold. Huwag itago ang defect.
Ipaalam sa mga gustong bumili.
Buyer should be vigilant and conduct investigation before buying.

HOW IS THE THING
SOLD
DELIVERED?
1. Real or Actual Delivery
2. Legal Delivery
3. Constructive Delivery
- traditio symbolica
- traditio longa manu
- traditio brevi manu
- traditio constitutum possessorium
HOW IS THE THING
SOLD
DELIVERED?
Delivery can be (1) real or actual –
when the buyer is given actual possession of the thing sold.
Delivery can also be (2) legal –
Execution of a public document (written and notarized).

WHEN DO WE HAVE DELIVERY
OF THE THING SOLD?
Delivery can also be (3) constructive –
a.Traditio symbolica - for example when the buyer is given the keys to
the motor vehicle or when the actual Transfer Certificate of Title (TCT) is
given to the buyer together with the Deed of Absolute Sale duly executed;
b. Traditio longa manu – the vendor points to the thing sold;
c.Traditio brevi manu – Buyer already had possession of the thing

before the sale. For example the lessee (tenant) buying the property;
d.Traditio constitutum possessorium – Seller continues possession of

the property after the sale. This is the opposite of traditio brevi manu.
WHEN SHOULD A CONTRACT OF SALE
BE IN WRITING?
TO BE SAFE – All contracts, regardless of the kind of

property or the amount involved should be in writing,
signed by the parties and their witnesses and notarized.
PUBLIC DOCUMENT
October 12, 2023

WHEN SHOULD A CONTRACT OF SALE
BE IN WRITING?
Art. 1483 – A contract of sale may be made in writing, or

by word of mouth or partly in writing and partly by word
of mouth or may be inferred from the conduct of the
parties.
TO BE SAFE – All contracts, regardless of the kind of

property or the amount involved should be in writing,
signed by the parties and their witnesses and notarized.
PUBLIC DOCUMENT
OBLIGATIONS OF THE BUYER
1. To accept delivery
2. To pay the agreed upon price at the time stipulated
3. Other obligations stated in the contract
OBLIGATIONS OF THE BUYER
Unless otherwise agreed, the buyer of goods is not bound to accept

delivery thereof by installments. (1583)
The buyer is given reasonable opportunity to examine the goods upon

delivery to make sure they are in conformity with the contract before
accepting the same. (1584)
Acceptance of the goods by the buyer can be express. Acceptance can

also be implied (1) if the buyer does any act in relation to the goods
which is inconsistent with the ownership of the seller or (2) the buyer
continues to retain the goods even after the lapse of time. (1585)
The seller shall not be liable if after accepting the goods, the buyer fails
to give notice to the seller of any defect or breach of warranty within a
reasonable time after knowledge by the buyer. (1586)
WHAT ARE THE REMEDIES IF THE SELLER
IS NOT PAID BY THE BUYER (1526)?
1. Possessory lien – the seller can hold on to the subject

matter and withhold delivery until he is paid;
2. Stoppage in transitu – in case of insolvency of the buyer
and the goods are on the way to be delivered to the
buyer, the seller can stop the transfer and re-take
possession;
3. Right to resell the object;
4. Right to rescind or cancel the sale;
5. Right to sue for damages
WHEN REAL PROPERTY IS SOLD, HOW CAN
THE SELLER RESCIND OR CANCEL THE SALE IF
THE BUYER DOES NOT PAY? (1592)
Before an unpaid seller can go to court to ask for rescission of the

contract of sale, a demand for rescission (usually through a
notarized demand letter) should be sent to the buyer.
This rule applies even if there is a provision in the contract that the
contract of sale is automatically rescinded upon failure to pay the
purchase price at the agreed time.
NO automatic rescission in real property purchases. Give

protection to the buyer.
2 steps for recission of real property sale – notarized demand

letter
+ court action
RULES ON DOUBLE SALE
(1544; Item sold to 2 or more buyers)
Requisites:
1. Two or more sales transactions must pertain to exactly

the same item and must be valid sales transactions;
2. The two or more buyers at odds represent conflicting

interests;
3. The two or more buyers at odds must have bought the

same item from the same seller.
Deception is not an essential element.

WHO IS RIGHTFUL OWNER
UNDER A DOUBLE SALE
If the subject matter is personal or movable property, the first

buyer who takes possession in good faith is the rightful owner.
(1544)
IN ORDER TO PROTECT YOUR RIGHTS: Acquire in good faith.

Take possession of the personal or movable property immediately.
PRIMUS TEMPORE, POTIOR JURE. First in time, stronger in

right.
UNDER A DOUBLE SALE
If the subject matter is real or immovable property, the rightful

owner is the:
1. First person who acquired it in good faith and registered the sale
with the Registry of Deeds;
2. If no registration was made, the first person who acquired it in
good faith who took possession;
3. If no registration was made and no one has gotten possession,
then the ownership is to the one who presents the oldest deed
of
sale
IN ORDER TO PROTECT YOUR RIGHTS: Acquire in good faith.

Register the real or immovable property immediately.
UNDER A DOUBLE SALE?
EXAMPLE: Bulacan Realty sold a parcel of land in San Ildefonso to Norman on
September 5, 2022. Unknown to Bulacan Realty and Norman, Miss Josol, an
agent of Bulacan Realty had already sold the property to JMT Corporation on
August 31, 2022.
Norman was able to transfer ownership of the property in his name with the
Register of Deeds on September 19, 2022. JMT Corporation objected saying
that it had a better right to the property since it had validly purchased the same
BEFORE Norman did. Who has a better right to the property? NORMAN,
because he was first to register.
Note: This is an example of a double sale because the two sales transactions
are valid.
Nauna bumili ng property ang JMT, pero nauna nag register si

Norman. Both are buyers in good faith.
PURCHASER IN GOOD FAITH
A purchaser in good faith is one who buys property of another without
notice that some other person has a right to, or interest in, such
property and pays a full and fair price for the property at the time of
the purchase or before he has notice of the claim or interest of some
other person in the property.
EXAMPLE 1: Bert purchased the dining table of Rosie for P15,000 on

August 26, 2023 not knowing that the day before on August 25,
2023 Rosie already sold the same dining table to Hannah also for
P15,000. Bert is a purchaser in good faith. He is an INNOCENT buyer
EXAMPLE 2: Bert purchased the dining table of Rosie for P15,000 on

August 26, 2023. Bert knew that Rosie already sold the same dining
table to Hannah also for P15,000 the day before on August 25, 2023.
Bert is a purchaser in BAD faith. He is NOT an innocent buyer.
TWO VALID CONTRACTS OF
SALE NEEDED IN A DOUBLE SALE
EXAMPLE: Washington Realty signed a Contract to Sell with Kelly

regarding a piece of property in Pampanga. Kelly was supposed to pay
10 installments to buy the property. Unknown to Washington Realty,
one of its agents Miss Asupan, had already sold the property on a cash
basis to Maria Ester and a Deed of Absolute Sale was executed.
Is there a double sale in this example? NO. In order for there to be a

double sale there must be two valid sales contracts. Here there is a
Contract of Sale and a Contract to Sell.
Who has the better right to the property? Maria Ester. Contract of Sale
gives better rights than a Contract to Sell
EXTINGUISHMENT OF SALE
1. Same causes as all other obligations:

- payment or performance of the obligation;
- loss of the thing due;
- condonation or remission of debt;
- confusion or merger of rights;
- compensation;
- novation
2. Conventional or voluntary redemption – pacto de retro

3. Legal or involuntary redemption
WHAT HAPPENS WHEN THE SUBJECT
MATTER IS LOST?
GENERAL RULE: The owner bears the loss. Res Perit Domino
1. Before the contract is perfected – seller bears the loss

2. After contract is perfected but before delivery – seller bears the
loss
3. After contract is perfected and after delivery – buyer bears the loss
BUYER bears the loss:

- When the item has already been delivered and accepted
- When there is a stipulation in the contract
- When seller has possession only to secure payment
- When delivery delayed due to fault of the buyer
LOSS OF THE ITEM AFTER
PERFECTION BUT BEFORE DELIVERY
Mariel purchased a 60-inch flat screen TV from SM Appliances.

The item was for delivery during the weekend. Unfortunately,
there was a fire at SM Appliances and the flat screen TV was
destroyed.
Who bears the loss? SM Appliances bears the loss of the

item because it was lost after perfection of the sale but before
delivery.
Remember Art. 1477 – The ownership of the thing sold shall

be transferred to the vendee upon the actual or constructive
delivery thereof.
89
LOSS OF THE ITEM DUE TO
FAULT OF THE BUYER
Boyet purchased a second-hand farm tractor from GAMI
Machineries for P65,000. The tractor was to be delivered to
Boyet’s farm on October 22, 2022. On the date of the delivery,
Boyet was not in the farm and there was no one there to accept
delivery.
The farm tractor was brought back to the GAMI warehouse and
on the night of October 24, 2022 there was a huge fire in the
GAMI warehouse and the farm tractor got burned.
Who bears the loss? Boyet is at fault and he bears the loss of
the item because of delay in acceptance (mora accipiendi – delay
in accepting delivery)
90

- payment of performance of the obligation;
- compensation;
- novation

WHAT IS CONVENTIONAL OR
VOLUNTARY REDEMPTION
PACTO DE RETRO SALE (1601)?
ART 1601 - Conventional redemption shall take place when the

vendor reserves the right to repurchase the thing sold. This is
known as a pacto de retro sale or sale with right of voluntary
redemption.
This is legal and valid. This is a contract of sale subject to a

condition. The right to repurchase MUST be written and
reserved at the time the sale is perfected.
WHAT IS CONVENTIONAL OR
VOLUNTARY REDEMPTION
PACTO DE RETRO SALE (1601)?
ART 1616 – The vendor cannot avail himself of the right of repurchase
without returning to the vendee the price of the sale and in addition:
- the expenses of the contract and other

legitimate payment made
- the necessary and useful expenses made on the
thing sold.
Relative title and ownership of the property transfers to the buyer but the
seller can buy the property back within 4 years if no period stated and
maximum of 10 years if there is a stipulation (1606).
Nag bentahan pero may option si seller. Choice ng seller

mag redeem or buy back mula sa buyer.
These terms all mean the same:
Conventional redemption
Voluntary redemption
Pacto de Retro Sale
Sale with Right to Redeem
Sale with Right to Repurchase
EXAMPLE OF A CONTRACT OF SALE WITH RIGHT
OF VOLUNTARY REDEMPTION
(PACTO DE RETRO SALE)
Junjie sold a parcel of land to his friend Harold for P1M. There is an express
provision stated in the contract that Junjie has the option to buy back the
property within 2 years for P1.1M. Junjie has the right to buy back the
property.
This is valid, legal and binding between Junjie and Harold. Harold, a vendee
a retro acquires relative title and ownership over the property. If Junjie as
vendor a retro does not buy back the property within 2 years Harold’s title
and ownership becomes absolute.
Pacto de retro sale – absolute title and ownership is NOT YET transferred to
the vendee a retro. Only relative title is transferred.
2 parties involved – vendor a retro and vendee a retro
The right belongs to the vendor a retro

WHY ENTER INTO A
PACTO DE RETRO SALE?
Junjie as vendor a retro wants to be sure that he can buy back the
property within the specified period if he wants to.
Can Harold as vendee a retro force Junjie to buy back the property?
NO. This option is exclusively given to the vendor a retro.
After the lapse of the repurchase period, Junjie loses the right to
repurchase the property and absolute title vests in Harold.
TIP : Pacto de retro sale is disadvantageous to the vendee. Avoid

this transaction because title to the property is not yet fully vested
in the buyer upon the sale. Hanap ka na lang ng ibang property.
(1) CONTRACT OF SALE vs.
(2) CONTRACT OF LOAN WITH REM vs.
(3) PACTO DE RETRO SALE
Kevin needs money for his business. He has a lot in Quezon City
valued at P1M. What are some of his options in order to raise cash
for his business?
1. He can get a loan from the bank but the bank will ask for
collateral or security and Kevin may be forced to mortgage
the QC lot (contract of loan with real estate mortgage);
2. Kevin can sell the QC lot outright, but he will lose ownership
over the same (contract of sale);
3. Kevin can sell the QC lot but he can reserve the right to
repurchase the property within a specified period (contract of
sale with right of repurchase or pacto de retro sale).

- compensation;
- novation

LEGAL OR INVOLUNTARY
REDEMPTION
Legal redemption is the process where the law (rather than the contract
between the buyer and the seller) automatically grants to certain
persons the right to get back from the buyer the real or personal
property purchased (subject to reimbursement).
EXAMPLES:
1. The co-owner (1620)

2. The owner of the adjacent rural property not exceeding one hectare
(1621)
3. The owner of adjacent urban property so small that a major portion
cannot be used for any practical purpose (1622)
WHY? Public policy – minimize co-ownership

LEGAL or INVOLUNTARY
REDEMPTION
Article 1619. Legal redemption is 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.
Article 1620. A co-owner of a thing may exercise the right of redemption in

case the shares of all the other co-owners or of any of them, are sold to a third
person. If the price of the alienation is grossly excessive, the redemptioner shall
pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they
may only do so in proportion to the share they may respectively have in the
thing owned in common.
subrogated = substituted
EXAMPLE 1 OF LEGAL or INVOLUNTARY
REDEMPTION BY A CO-OWNER (1620)
Diane, Karen and Leizel jointly purchased a property in Pasig City

for P3,000,000. Each of them contributed P1,000,000 each. One
day, Diane sold her share in the property to Hyacinth, who is not
known to Karen and Leizel.
In this case, Karen and Leizel have the right to redeem or buy back
the property from Hyacinth under Art. 1620.
Respect the co-ownership. Huwag magpapasok ng third

persons ng walang pahintulot.
Tatang Francisco died in 2015 and left 4 children – Abel, Benjamin, Corazon and
Dolores. Tatang Francisco owned a piece of property in Plaridel that he had
mortgaged to BDO Unibank to secure a loan. His 4 children are his compulsory
heirs and they became co-owners of the Plaridel property when Tatang Francisco
died.
Because the loan was unpaid, BDO foreclosed on the Plaridel property.
Thereafter, Benjamin, the second child of Tatang Francisco, redeemed the
property (tinubos) from BDO.
When Abel, Corazon and Dolores found out about this they asserted that they
are still co-owners of the property. Benjamin claims he is now the sole owner of
the property.
Is Benjamin correct? No. Benjamin redeemed the property for them as one of
the co-owners. The 3 siblings still have a right to the property.
October 14, 2023


- compensation;
- novation

LEGAL OR INVOLUNTARY
REDEMPTION
Legal redemption is the process where the law (rather than the contract
between the buyer and the seller) automatically grants to certain
persons the right to get back from the buyer the real or personal
property purchased (subject to reimbursement).
EXAMPLES:
1. The co-owner (1620)

2. The owner of the adjacent rural property not exceeding one hectare
(1621)
3. The owner of adjacent urban property so small that a major portion
cannot be used for any practical purpose (1622)
WHY? Public policy – minimize co-ownership

LEGAL or INVOLUNTARY
REDEMPTION
Article 1619. Legal redemption is 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.
Article 1620. A co-owner of a thing may exercise the right of redemption in

case the shares of all the other co-owners or of any of them, are sold to a third
person. If the price of the alienation is grossly excessive, the redemptioner shall
pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they
may only do so in proportion to the share they may respectively have in the
thing owned in common.
subrogated = substituted
Diane, Karen and Leizel jointly purchased a property in Pasig City

for P3,000,000. Each of them contributed P1,000,000 each. One
day, Diane sold her share in the property to Hyacinth, who is not
known to Karen and Leizel.
In this case, Karen and Leizel have the right to redeem or buy back
the property from Hyacinth under Art. 1620.
Respect the co-ownership. Huwag magpapasok ng third

persons ng walang pahintulot.
Tatang Francisco died in 2015 and left 4 children – Abel, Benjamin, Corazon and
Dolores. Tatang Francisco owned a piece of property in Plaridel that he had
mortgaged to BDO Unibank to secure a loan. His 4 children are his compulsory
heirs and they became co-owners of the Plaridel property when Tatang Francisco
died.
Because the loan was unpaid, BDO foreclosed on the Plaridel property.
Thereafter, Benjamin, the second child of Tatang Francisco, redeemed the
property (tinubos) from BDO.
When Abel, Corazon and Dolores found out about this they asserted that they
are still co-owners of the property. Benjamin claims he is now the sole owner of
the property.
Is Benjamin correct? No. Benjamin redeemed the property for them as one of
the co-owners. The 3 siblings still have a right to the property.
THE RECTO LAW
and
THE MACEDA
LAW
WHAT IS THE RECTO LAW?
The Recto Law is Act 4122 (1933) which was incorporated as

Article 1484 to 1486 of the Civil Code (1950). There is no
more Recto Law in effect today, its provisions are now in the
Civil Code.
The Recto Law was authored by Sen. Claro M. Recto and it

provides remedies to a seller in sales of (a) PERSONAL
Property (b) on installment.
The Recto Law protects the seller of personal property on

installment.
WHAT ARE THE REMEDIES OF THE
SELLER UNDER THE RECTO LAW?
1. Specific Performance – the seller exacts fulfillment from the buyer.

If buyer can no longer pay, the seller can cancel or rescind the
contract under no. 2.
2. Rescission – the seller cancels the sale if buyer fails to pay 2 or more
installments. GO TO COURT
3. Foreclosure – the seller forecloses on the chattel mortgage over the

personal property if there is one, in case the buyer fails to pay 2 or
more installments. Seller cannot recover balance if foreclosure sales
price is less than the obligation. THROUGH PUBLIC AUCTION BY A
NOTARY PUBLIC.
Chattel = personal or movable property

EXAMPLE UNDER THE RECTO LAW
Robert buys a second-hand Toyota Vios from Wellmade
Motors for P700,000. He paid P350,000 as down payment and
promised to pay P35,000 every month for 10 months. Robert
executed a chattel mortgage over the Toyota Vios in favor of
Wellmade Motors.
Robert was able to pay only 3 installments (P35,000 x 3) but

because of COVID-19 he lost his job and can no longer afford
to pay the 7 more installments.
What are the options of Wellmade Motors?

EXAMPLE UNDER THE RECTO LAW
1. Wellmade can sue Robert in the trial court to force him to pay the
balance of P245,000 (P35,000 x 7). But if Robert does not have any
money or property he cannot be forced to pay. NO ONE SHALL BE
IMPRISONED FOR NON-PAYMENT OF DEBTS.
2. Wellmade can file a case for Rescission in the trial court. It will get
back the car from Robert (hatakin) and it will also keep the
money already paid by Robert. Writ of Possession issued by the
Court.
3. Wellmade can foreclose on the chattel mortgage. This is faster, easier

and costs less money since there is no case to be filed in court. But if
the car sells for only P200,000 at auction Wellmade can no longer
run after Robert for the P45,000 balance
Note: Option is with the Seller

WHAT IS THE MACEDA LAW?
The Maceda Law is Republic Act No. 6552 was authored by

Senator Ernesto Maceda and became law in August 1972.
The Maceda Law protects buyers of (a) Residential REAL

Property (b) on installment.
The law DOES NOT APPLY to sales of commercial lots or

buildings, industrial lots or buildings. Residential real
property only.
RIGHTS GRANTED BY MACEDA LAW
IF BUYER HAS PAID AT LEAST 2 YEARS
If the buyer has paid at least two years installment, he has two options:
a. Pay the unpaid installments without additional interest or penalty

within the grace period. The grace period is 1 month for every year of
installment payments made, provided this right is exercised only
once every 5 years.
EXAMPLE: Jonathan purchased a residential lot from Big Bad Realty on

installment for P1,200,000 payable for P10,000 every month for 10 years.
After paying for 3 years Jonathan lost his job and was not able to make
installment payments. Under FIRST OPTION of the Maceda law he is
given a grace period of 3 months within which to pay the arrears
(balance). Jonathan still has the means to pay the unpaid installments.
If the buyer has paid at least two years installment, his second option is:
b. Cancel the contract and get a refund equivalent to 50% of the total
payments already made. Under this option the real property reverts back
to the seller.
Buyer returns the real property to the seller and gets an additional 5% for
every year exceeding 5 years provided that the refund does not exceed
90% of the total payments made. Buyer no longer has the financial
capability to continue the contract.
Note: Option is with the Buyer

EXAMPLE: Jonathan purchased a lot from Big Bad Realty on installment

for P1,200,000 with no down payment, payable for P10,000 every month
for 10 years. After paying for 3 years Jonathan lost his job and was not
able to make installment payments. Under the SECOND OPTION of the
Maceda law he can recover 50% of what he has paid = P180,000
(P10,000 x 36 months = P360,000 x 50%).
If Jonathan had paid for 7 years, his refund will be 60% (50% + 10%) of
what he has paid = P216,000 (P360,000 x 60%).
2 years to 5 years = 50% refund 9 years = 70%

6 years = 55 % 10 years = 75%
7 years = 60% 11 years = 80%
8 years = 65% 12 years = 85%
13 years or more = 90% refund
RIGHT OF BUYER UNDER THE MACEDA LAW IF
HE HAS PAID LESS THAN 2 YEARS OF
INSTALLMENT
EXAMPLE: Jonathan purchased a lot from Big Bad Realty on
installment for P1,200,000 payable for P10,000 every month for 10
years. After paying for 18 months Jonathan lost his job and was not
able to make installment payments.
Jonathan has ONLY ONE OPTION since he has paid less than 2
years – pay the arrears within 60 days from the date the installment
fell due.
NO REFUND, JUST A 60 DAY GRACE PERIOD IF PAYMENT

IS LESS THAN 2 YEARS
RECTO LAW MACEDA LAW
Basis Civil Code Special Law – RA 6552
Arts 1484 to 1486
Effectivity 1933 / 1950 1972
Protects The Seller The Buyer
Coverage Personal Property Residential, Real Property
Type of Sale On Installment On Installment
RIGHTS UNDER THE MACEDA LAW
Buyer has paid at Option 1: Grace period of 1 month per

least 2 Years (2 year of installments paid, without
Years or More) additional interest or penalty
Option 2: Cancel the contract, return the
property to the seller and get a refund
equivalent to 50% of payments made +
additional 5% for every year paid after
the 5th year. Maximum refund is 90% of
payments made
Buyer has paid less 60 days grace period
than 2 Years
THE CONDOMINIUM ACT
Republic Act No. 4726 (1966)

WHAT IS A CONDOMINIUM?
A condominium is an interest in a real property consisting of a
separate interest in a unit in a residential, commercial or
industrial building and an undivided interest in common,
directly or indirectly, in the land on which it is located and the
common areas of the building.
EXAMPLE: Herbert purchased a 45 sqm condominium unit in an

Avida Towers project for P6M. Herbert owns the unit.
Usually, a condominium corporation is formed as owner of the

land and of the common areas. Herbert will become a stockholder of
this condominium corporation. Let us assume that there are 80 units
in the condominium of the same size. The corporation will have 80
owners or stockholders and Herbert will be one of them owning 1/80.
UNIT OWNER = STOCKHOLDER

WHO CAN OWN LAND
IN THE PHILIPPINES?
Only Filipino citizens can own land in the Philippines. This
is a constitutional provision. Foreigners cannot buy land in
the Philippines.
What about corporations? Can corporations own land in the

Philippines?
YES, corporations that are 60% to 100% owned by

Filipinos can own land in the Philippines.
If the corporation is owned 50% by Filipinos and 50% by

foreigners, it CANNOT own land in the Philippines.
.
WHO CAN OWN CONDOMINIUMS
IN THE PHILIPPINES?
Filipinos as well as foreigners can own condominium units
in the Philippines. However, the land on which the
condominium stands may be owned by a corporation
where foreigners own a maximum of 40%
Foreigners can buy and own ONLY the condominium units

Why? Because only Filipinos can own land.
WHAT ARE THE COMMON AREAS?
Areas that are not found inside the unit are deemed
excluded from the unit. Examples are land on which the
condominium stands, columns, roofs, foundations,
lobbies, stairways, hallways, elevator shaft and
equipment, water tanks, pumps.
The land and the common areas are owned by the

Condominium Corporation.
The Unit Owners own the Condominium Corporation.

The Condominium Corporation owns the common areas.
WHAT HAPPENS TO MY UNIT IN
CASE THE CONDOMINIUM IS DESTROYED?
A few years after Herbert purchased his condominium unit at Avida
Towers, the building was partially destroyed and considered
uninhabitable after a strong earthquake. The foundation of the
building was adversely affected and the building was condemned by
city hall.
What can the Condominium Corporation do?
a. It can sell the lot on which the condominium was constructed and
divide the sales proceeds among the unit owners;
b. It can repair the condominium building;
c. It can demolish the old building and construct a new building.
But in b and c, the unit owners will have to infuse capital;

IS IT TRUE THAT AFTER 50 YEARS I AM
NO LONGER THE OWNER OF MY UNIT?
OLD RULE: The life of any domestic corporation was only 50
years. The thinking was if the corporation that owns the land
can be in existence for 50 years then ownership of unit is also
limited to 50 years.
NEW RULE: The New Corporation Code (Republic Act No.

11232) passed in February 2019 removes the 50-year limit on
the life of corporations. New and existing corporations are now
granted perpetual corporate existence so long as it
continues to function as a going concern – no more limit.
THE LAW ON PLEDGE
AND MORTGAGE
Articles 2085 – 2141
Civil Code of the Philippines
First Trimester, Schoolyear

2023 – 2024
October 17, 2023
128
REVIEW: WHAT ARE THE THREE
TYPES OF CONTRACTS?
1. Consensual Contracts – A contract that is perfected by mere

consent. 3 Requirements: Consent, Object and Cause or
Consideration.
2. Solemn or Formal Contracts – A contract that the law requires

to be in some particular form (in writing) in order for it to be
valid and enforceable. 4 Requirements: Consent, Object, Cause
or Consideration, Solemnity or Formality. ART 1403, par 2
(Statue of Frauds)
3. Real Contracts – A contract where the delivery of the object is

required in order for it to be perfected. 4 Requirements:
Consent, Object, Cause or Consideration, Delivery of the Object
129
WHAT IS A PLEDGE?
A pledge is an accessory, real and unilateral contract by virtue of which

the debtor or a third person delivers to the creditor or to a third
person movable property as security for the performance of the
principal obligation, upon fulfillment of which the thing pledged with
all its accessories and accessions shall be returned to the debtor or
the third person.
A pledge is not a stand-alone contract. It supports and is dependent on

the existence of a principal or main contract. It provides security to
the principal contract.
“SANGLAAN”
130
WHAT ARE THE ESSENTIAL ELEMENTS
OF A PLEDGE AND MORTGAGE?
1. It is constituted to secure the fulfillment of a principal obligation;

2. The pledgor or mortgagor is the absolute owner of the thing
pledged;
3. The pledgor or mortgagor has the free disposal of his property or
that he is legally authorized to do so;
4. There must be a valid, principal obligation;
5. Debtor retains ownership of the item given as security;
6. When the principal obligation becomes due, the thing pledged or
mortgaged may be used to pay the creditor.
No principal obligation, No pledge or mortgage.
131
THIRD PERSONS MAY SECURE
THE PRINCIPAL
OBLIGAITON
Third persons who are not party to the principal obligation may
secure the latter by pledging or mortgaging their own property. Art.
2085, paragraph 2
EXAMPLE: Butch wanted to borrow P2M from BPI but the bank
asked for security or collateral to guarantee the payment of the loan.
Donita, a friend of Butch, offered to mortgage her house and lot to
secure the loan of Butch to BPI. This transaction is valid.
132
WHAT IS A CHATTEL MORTGAGE?
A Chattel Mortgage is a contract where personal property is

recorded in the Chattel Mortgage Registry as a security for the
performance of an obligation.
If the principal obligation is not paid, the creditor can foreclose the
chattel mortgage for the purpose of selling the property to satisfy
his credit.
CM usually involves motor vehicles.
133
THREE ACCESSORY CONTRACTS
REQUIRING A PRINCIPAL CONTRACT
Pledge = involves personal or movable property
Real Estate Mortgage = involves real or immovable

property
Chattel Mortgage = involves personal or movable property

AND is registered in the CM Registry
134
TWO PARTIES INVOLVED
CREDITOR or PLEDGEE or MORTGAGEE

(ang nagpautang at pinagsanglaan)
DEBTOR or PLEDGOR or MORTGAGOR

(ang umutang at nagsangla)
135
INDIVISIBILITY OF PLEDGE OR MORTGAGE
1. GENERAL RULE: A pledge or mortgage is indivisible. EXCEPTION:

When there are several things given in pledge or mortgage and each one
guarantees only a determinate portion of the credit.
EXAMPLE: Boyet borrowed P75,000 from Edna and pledged his

Seiko watch to guarantee P50,000 and his diamond ring to guarantee
the P25,000 balance. If Boyet had already paid Edna P25,000 which
item pledged can be used to pay the balance? The Seiko watch.
May isang utang at may dalawang bagay na naka sangla.
136
2. The indivisibility of a pledge or mortgage is not affected by

the fact that the debtors are not solidarily liable (they are
liable
jointly)
EXAMPLE: Brothers Kyle, Kenneth and Kristian

borrowed P300,000 from XYZ Lending as joint debtors. The
brothers surrendered their Toyota Vios as security. Later on,
Kyle paid his P100,000 share of the loan. Can Kyle recover
the car already?
NO. The mortgage is indivisible. The car can be recovered

only upon full payment of the P300,000 obligation.
137
3. The contract of pledge or mortgage may secure all kinds of

obligations, be they pure or subject to a suspensive or
resolutory condition.
EXAMPLE: Angie borrowed P50,000 from Julie on the condition

that Angie passes the CPA Board Examinations in 2023 (obligation
with a suspensive condition). Angie pledged her diamond ring as
security to secure the loan when it is granted. This contract of
pledge is valid.
The diamond ring can be demanded only if the principal obligation

arises.
138
WHAT IS PACTUM
OR EQUITABLE MORTGAGE?
COMMISSORIUM
The creditor cannot appropriate the things given by way of pledge or
mortgage, or dispose of them. Any stipulation to the contrary is null
and void. ART 2088
Pactum Commissorium is a contractual stipulation that is deemed

contrary to law or is illegal. It is a stipulation empowering the creditor
to immediately appropriate the thing given as guaranty or security
for the fulfillment of the obligation in the event the obligor fails to
live up to his undertakings, without further formality, such as
foreclosure proceedings and a public sale.
It is an illegal shortcut to extract payment from a debtor. Ownership of

the thing or property is quickly transferred to the creditor by mere
default of the debtor. BAWAL ITO.
139
WHAT IS AN EQUITABLE MORTGAGE
OR PACTUM COMMISSORIUM?
Article 2088. The creditor cannot appropriate the things given by way of pledge
or mortgage or dispose of them. Any stipulation to the contrary is null and void.
An equitable mortgage is a transaction designated as a contract of sale but the

real intention of the parties is to have a piece of property secure the payment of
a debt and contains nothing contrary to law.
Red Flags or Signs that it is an Equitable Mortgage:
1. The price of a sale with the right to repurchase is unusually inadequate;

2. The vendor remains in possession as lessee or otherwise;
3. The period for the exercise of the right to repurchase is extended;
4. The purchaser retains for himself a part of the purchase price;
5. The vendor binds himself to pay the taxes on the thing sold;
6. The real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
Kunwari bentahan pero utang

na may sangla pala.
WHAT IS AN EQUITABLE MORTGAGE
OR PACTUM COMMISSORIUM?
1. Two parties are involved: the Lender and the Borrower

2. Their intention is a contract of loan with a piece of property to secure
the debt
3. If the Borrower cannot pay the debt the Lender should foreclose on
the property given as security. This is difficult to do and time
consuming
4. In order to make the process easier for the Lender, the parties enter
into a contract of sale. If the Borrower is not able to pay the loan,
the Lender will use the Deed of Sale to get ownership of the
property.
5. This violates Art. 2088. “The creditor cannot appropriate the things
given by way of pledge or mortgage or dispose of them.”
EXAMPLE OF AN EQUITABLE MORTGAGE
OR PACTUM COMMISSORIUM
Val borrowed P3M from Abner. In order to secure the transaction, they signed a
contract of sale where Val sells a piece of land in Quezon City to Abner in case
he is unable to pay the P3M loan in full.
In reality the land is security or collateral to the loan. If Val is not able to pay
Abner, the latter will just go to the Register of Deeds and transfer the ownership
of the QC property to his name. Pag hindi nakabayad si Val, kay Abner na
ang lupa.
What should they have done? It is really a Loan with a Real Estate Mortgage. If
Val cannot pay Abner, the latter will have to institute legal proceedings to
foreclose the property. Matagal at magastos. Shortcut na lang.
When Abner goes to the Register of Deeds to transfer the property to his name,
Val can raise an objection and ask that the Deed of Sale be considered a loan
with a real estate mortgage.
SALE WITH RIGHT OF REPURCHASE
(PACTO DE RETRO SALE)
AN EQUITABLE MORTGAGE
vs.
Sale with right of repurchase (pacto de retro sale) is valid.
An equitable mortgage is invalid. Why? It hides the true intention of

the parties. It is a loan transaction disguised as a sale. The law protects
the borrower / seller.
In case of doubt, a contract purporting to be a sale with right to

repurchase shall be construed as an equitable mortgage (1603)
Remedy in case of equitable mortgage? Seller / Borrower can go to

court and ask for the reformation of the instrument (1605)
Seller / Borrower can also object when the property is being transferred
to the name of the Buyer / Lender.
HOW SHOULD A THING PLEDGED BE
USED TO COVER THE PRINCIPAL
OBLIGATION?
A thing under a pledge by operation of law may be sold only after demand
of the amount for which the thing is retained. The public auction shall
take place within one month after such demand. If, without just grounds,
the creditor does not cause the public sale to be held within such period,
the debtor may require the return of the thing. ART 2122
EXAMPLE: Veron borrowed P30,000 from Aloy. In order to secure the

transaction, Veron pledged her gold watch to Aloy. Veron was not able to
pay Aloy the P30,000.
STEP 1: Aloy sends a demand letter to Veron to pay the P30,000

STEP 2: If still unsettled, Aloy sets a public auction through a notary public
of the gold watch within one month from the date the demand letter was
received by Veron.
144
HOW CAN A THING PLEDGED BE
SOLD AT PUBLIC AUCTION?
The creditor to whom the credit has not been satisfied in due time, may
proceed before a Notary Public for the sale of the thing pledged. This sale
shall be made at a public auction, and with notification to the debtor and
the owner of the thing pledged in a proper case, stating the amount for
which the public sale is to be held.
Who can bid at the public auction?
The pledgor or debtor may bid. If there is another bidder who bids the
same amount, the pledgor or debtor will be declared winner.
The creditor or pledgee may bid but his offer is NOT VALID, if he is the only
bidder.
145
146
HOW CAN A THING PLEDGED BE
SOLD AT PUBLIC AUCTION?
If at the first auction the thing is not sold, a second auction with the same
formalities shall be held; and if at the second auction there is no sale either,
the creditor may appropriate the thing pledged. ART 2112
EXAMPLE: The diamond ring of Sarah was being sold at public auction to
satisfy her debt of P75,000 to Patty.
During the first auction, only Patty made a bid. The first auction is not valid
and there is no sale since the creditor cannot win the auction if she is the
only bidder
During the second auction, again only Patty made a bid. Since this is the
second failed auction already, Patty can appropriate Sarah’s diamond ring in
payment of the P75,000 loan.
147
WHAT OTHER TYPES OF PERSONAL
PROPERTY CAN BE PLEDGED?
1. Incorporeal rights (copyrights, licenses, right of way, etc.)

2. Bills of Lading
3. Shares of stocks
4. Bonds
5. Warehouse Receipts
6. Negotiable Instruments
7. Animals
148
RIGHTS OF THE CREDITOR OR
PLEDGEE OR MORTGAGEE
1. To retain the thing in his possession;
2. To be reimbursed for expenses needed to preserve the item pledged;
3. To bring actions which may pertain to the real owner of the item in order to
recover or defend it against a third person;
4. To continue his lien on the object even if it is sold;
5. To demand a substitution or the immediate payment of the obligation in
case he was deceived regarding the substance or quality of the thing
pledged;
6. To be a preferred creditor in case of insolvency.
Note: The creditor cannot use the thing pledged without the authority of the
owner. ART. 2104 Creditor / Pledgee has possession but no right to use.
Note: If the creditor misuses the thing pledged, the pledgor can ask that the
item be deposited with a third person to preserve it. ART. 2104
149
RIGHTS OF THE CREDITOR OR
EXAMPLE: Merlin borrowed P25,000 from Cristy and pledged

her Apple Macbook Air as security. Later on, Cristy learned that
the Apple Macbook Air given as a pledge is not the genuine
product. Cristy has two options:
1. Demand that Merlin substitute another item as security or

2. Consider the principal obligation due and demand payment of
the P25,000 loan.
150
OBLIGATIONS OF THE CREDITOR OR
The creditor shall take care of the thing pledged with the diligence of a
good father of a family. He has the right to the reimbursement of the
expenses made for its preservation and is liable for its loss or
deterioration. He cannot deposit the thing pledged to a third
person. ARTS. 2099 and 2100
Example 1: Kevin borrowed P15,000 from Abigail and pledged his 1-year
old German Shepherd as security or collateral. Abigail took possession of
the dog. While the dog was with Abigail it became sick and Abigail had to
bring it to the veterinarian where she spent P2,500 for consultation,
treatment and medicine.
Abigail can reimburse the P2,500 from Kevin when he pays off the loan.
151
Example 2: Kevin borrowed P15,000 from Abigail and pledged his 1-

year old German Shepherd as security or collateral. Abigail took
possession of the dog. While the dog was with Abigail a drunk driver
ran over the dog and it sustained a leg fracture. Abigail sued the driver
for damages. Can Abigail initiate this suit?
YES. Even if she is not the owner of the dog, she has the right to
prosecute the person who caused injury. Abigail is just protecting her
collateral. If the dog becomes lame or crippled it will affect what she
will get if Kevin is unable to pay the loan and the dog is sold at auction.
152
In the pledge earns or produces fruits, income, dividends or interest,

the creditor shall compensate what he receives with those that are
owing to him (interest due). If nothing is owed to the creditor, then it
shall be applied to the principal. ART. 2102
Example 3: Kevin borrowed P15,000 at 10% interest per annum from

Abigail. Kevin pledged shares of stock in San Miguel Corporation as
security. If the shares of stock of SMC earn P350 as dividends, Abigail
should apply this to the interest that is due.
153
RIGHTS OF THE DEBTOR OR
PLEDGOR OR MORTGAGOR
1. To ask the pledgee to have the item deposited elsewhere if:

- the pledgee uses the thing without permission;
- the pledgee misuses the thing
- the item pledged is in danger of being lost or destroyed
2. To participate in any auction for the thing pledged;
3. To sell the item provided the creditor agrees;
4. To demand return of the thing pledged when the principal obligation is
fulfilled.
EXAMPLE: Joyce borrowed P10,000 from Kathy and pledged her

cellphone. After one week, Joyce wanted to sell the cellphone to Abby.
Joyce needs to get the agreement of Kathy, the creditor.
154
OBLIGATIONS OF THE DEBTOR OR
PLEDGOR OR MORTGAGOR
1. To inform the creditor if there are any known flaws or

defects of the object pledged as collateral;
2. To pay the principal obligation at the proper time;
3. To reimburse the creditor for reasonable expenses incurred
while taking care of the thing pledged
EXAMPLE: Dorothy borrowed P50,000 from Larry. She pledged

her Honda motorcycle as collateral. If the pledged vehicle has
defective brakes or it is not registered with the LTO, Dorothy as
pledgor must inform Larry of these flaws or defects.
155
MODES OF EXTINGUISING THE
ACCESSORY CONTRACT OF PLEDGE
1. If the thing pledged is returned by the pledgee to the pledgor

2. If the pledgee renounces or abandons the pledge
3. Payment of the debt or performance of the obligation
4. Sale of the item pledged at public auction
EXAMPLE: Gino borrowed P30,000 from Henrietta and pledged his

diamond ring as security. Later on, Henrietta voluntarily returns the
ring to Gino. The accessory contract of pledge is extinguished since the
creditor or pledgee gave up the security given to her. However, the
principal contract of loan for P30,000 is still existing.
156
WHAT IS A REAL ESTATE
MORTGAGE (REM)?
A Real Estate Mortgage is a contract embodied in a public instrument

recorded in the Registry of Property, by which the owner of an
immovable directly and immediately subjects it, whoever the possessor
may be, to the fulfillment of the principal obligation for whose security
it was constituted.
If the principal obligation is not paid, the creditor can foreclose the real
estate mortgage for the purpose of selling the property to satisfy his
credit.
Principal Contract = Contract of Loan

Accessory Contract = Real Estate Mortgage
157
TWO TYPES OF FORECLOSURE
OF REAL ESTATE MORTGAGE
The creditor has the right to foreclose the real estate mortgage if the
principal obligation is not paid. The property covered by the mortgage
will be sold and the proceeds applied to the debt.
1. Judicial Foreclosure under Rule 68 of the Rules of Court -

file a case in court and get a judgment in favor of the creditor. The
debtor is given a period of 90 to 120 days from date of judgment
to pay the debt. If he fails to do so the property will be sold by the
sheriff at a public auction to the highest bidder. The debtor can
redeem the property at any time before the sale is confirmed.
After confirmation the debtor has no right to redeem the property
anymore. WITH THE COURT
158
TWO TYPES OF FORECLOSURE
OF REAL ESTATE MORTGAGE
sale of the mortgaged property may be conducted by
2. Extrajudicial Foreclosure - in case of the mortgagor’s default, the
the sheriff without the need for court intervention. This
is a faster and cheaper way to get payment for the
unpaid obligation. WITH THE SHERIFF.
The right to extrajudicially foreclose the real estate

mortgage must be expressly stated in the Real
Estate Mortgage document.
TIP: Always place the right to extrajudicially foreclose the

real estate mortgage in the principal contract so there is no
need to go to court to get the property (see previous slide)
159
REDEMPTION OF FORECLOSED PROPERTY
If the mortgaged property has already been acquired by a third party, the owner
/ debtor / mortgagor can still reacquire the property by redemption. Redemption
is the transaction by which the mortgagor reacquires or buys back the property
which may have been purchased by a third party in a public auction. This right is
given to the mortgagor in both judicial foreclosures and extrajudicial
foreclosures.
No right to redeem in Judicial Foreclosures. The debtor has 90 to 120 days to

pay the judgment. The debtor may redeem the property before the auction sale
is confirmed. But once the auction sale is confirmed to the buyer, his title can no
longer be assailed.
Right to redeem only in Extrajudicial Foreclosures – The debtor has a period of 1

year from the date of the auction sale to redeem the property. The debtor
must pay the purchase price plus 1% interest per month plus costs and
expenses
Tubusin = Redeem
Remata = Foreclose 33
EXAMPLE OF EXTRAJUDICIAL FORECLOSURE
AND REDEMPTION OF PROPERTY
EXAMPLE: In 2015 Van loaned P3.5M from Carlo and put up a

parcel of land in Cavite City as collateral. In addition to the
Promissory Note, Van also signed a Real Estate Mortgage over
the Cavite City property. There is a provision in the mortgage
that Carlo can extrajudicially foreclose the mortgage should Van
default on the payment of the principal amount of the loan and
the interest thereon.
Van was able to pay only P700,000 and he still owed Carlo
P2.8M as principal.
161
EXAMPLE OF EXTRAJUDICIAL FORECLOSURE
AND REDEMPTION OF PROPERTY
Carlo elected to do an extrajudicial foreclosure of the REM and asked the

Sheriff to sell the Cavite City property at auction. There were no other
bidders for the property except Carlo. He bought the property on
November 25, 2023 for P2.8M. Van has until November 25, 2024 to pay
back Carlo the P2.8M he had paid in auction plus interest plus expenses.
If Van is not able to redeem the property by November 25, 2024, absolute
title vests in Carlo.
PAY YOUR DEBTS ON TIME.
162
REAL ESTATE MORTGAGE vs. PLEDGE
REAL ESTATE PLEDGE

MORTGAGE
Constituted on real or immovable Constituted on personal or movable

property property
Delivery is not required Delivery of the item to the creditor
or pledgee is required. The item can
also be delivered to a third person
if the parties agree
To be valid against third persons, it To be valid against third persons,
must be registered with the Registry there must be a description of the
of Deeds thing pledged and it must be in a
public instrument (written, signed
and notarized).
163
IF THERE IS AN EXCESS OR A
DEFICIENCY AFTER THE AUCTION SALE
OF THE MOVABLE PROPERTY PLEDGED
EXAMPLE 1: Neneng borrowed P35,000 from Amelia’s Pawnshop and she

pledged her gold bracelet as security. Neneng was not able to pay her loan and
Amelia’s Pawnshop sold the gold bracelet at public auction (subasta) for
P50,000. In this case Amelia’s pawnshop can keep the excess of P15,000.
EXAMPLE 2: If the gold bracelet was sold at public auction (subasta) for only
P20,000. Amelia’s Pawnshop bears the loss and it cannot recover anymore
from Neneng.
TIP: When an item is pledged to you, make sure the item is worth equal to or
more than the amount borrowed. This is why most pawnshops will give you
less than the fair market value of the items pawned to them.
164
DEFICIENCY AFTER THE AUCTION SALE
OF
THE REAL PROPERTY MORTGAGED
EXAMPLE 1: Rosalou loaned P5,000,000 from DRT Lending House and
put up a parcel of land in Pampanga as collateral. Rosalou was able to
pay only P1,000,000 and she still owed DRT Lending House
P4,000,000. The latter foreclosed the real property but it was sold at
public auction for only P3,500,000. DRT Lending House can still recover
the balance of P500,000 from Rosalou.
EXAMPLE 2: If the property was sold at public auction for P4,200,000,

the excess of P200,000 will be returned to Rosalou.
165
DEFICIENCY AFTER THE AUCTION
SALE OF THE THING PLEDGED OR
MORTGAGED
IF THERE IS AN EXCESS IF THERE IS A
DEFICIENCY
Pledge Excess goes to the creditor Creditor or mortgagee cannot
or mortgagee recover the deficiency from
the debtor or mortgagor
Real Estate Excess goes to the debtor Creditor or mortgagee can
Mortgage or mortgagor recover the deficiency from
Chattel Mortgage Excess goes to the debtor Creditor or mortgagee can
or mortgagor recover the deficiency from
166
Thank You!
167
October 19, 2023

LAW ON ANTICHRESIS
Articles 2132 - 2139
WHAT IS THE CONTRACT OF ANTICHRESIS?
By the contract of antichresis, the creditor acquires the right to

receive the fruits of an immovable of his debtor, with the obligation
to apply them to the payment of the interest, if owing, and
thereafter to the principal of his credit.
The actual market value of the fruits at the time of the application
thereof to the interest and principal shall be the measure of such
application.
ANTICHRESIS = FRUITS OF IMMOVABLE PROPERTY
3
WHO ARE THE PARTIES IN
A CONTRACT OF ANTICHRESIS?
Antichretic Creditor – the party who has the right to acquire the
fruits of an immovable property to be applied to the interest and
principal
Antichretic Debtor – the party who gives up the right to receive

the fruits of an immovable property
4
The amount of the principal and of the interest shall be
specified in writing; otherwise, the contract of antichresis shall
be void.
The antichretic creditor, unless there is a stipulation to the

contrary, is obliged to pay the taxes and charges upon the
estate. He is also bound to bear the expenses necessary for
its preservation and repair.
The antichretic debtor cannot reacquire the enjoyment of

the property without first having totally paid what he
owes the antichretic creditor.
5
Antichresis is an accessory contract to a contract of loan with
a real estate mortgage.
This means there should be 3 contracts in total:
1. a loan contract (the principal contract)

2. a real estate mortgage (the accessory contract)
3. an antichresis contract (what to do with the fruits of the
property covered by the REM)
Usually, they are combined into just one contract – Contract

of Loan with REM and with Antichretic provisions
6
EXAMPLE 1 OF A
CONTRACT OF ANTICHRESIS
Virgilio borrowed P850,000 from Dolores. In order to guarantee
payment of the debt Virgilio mortgaged a tilapia fishpond in Hagonoy,
Bulacan to Dolores. The P850,000 loan was to be paid in 1 year with
interest of 12% per annum or P102,000.
While the loan was outstanding, the tilapia in the fishpond was
harvested by Dolores and sold in the market for P45,000.
The P45,000 will be deducted from the P102,000 interest payable by

Virgilio. However, if Dolores spent a reasonable amount of money for
fish food, medicine, and others, said amount will be added to the total
P102,000 interest.
IBAWAS SA INTEREST ANG

KINITA NG PROPERTY.
7
EXAMPLE 2 OF A
CONTRACT OF ANTICHRESIS
Virgilio loaned P850,000 from Dolores. In order to guarantee payment of

the debt, Virgilio mortgaged a tilapia fishpond in Hagonoy, Bulacan to
Dolores. The P850,000 loan was to be paid in 1 year with interest of 12%
per annum or P102,000. Dolores is the antichretic creditor and Virgilio is
the antichretic debtor.
While the loan was outstanding the tilapia in the fishpond was harvested
by Dolores and sold in the market for P145,000.
P102,000 will be used to pay the interest and the balance of P43,000 will
be used to partially pay the principal of P850,000.
ANG KINITA NG NAKASANGLA NA PROPERTY,

GAMITIN PAMBAYAD NG INTEREST AT
PRINCIPAL
8
RIGHTS OF THE
ANTICHRETIC CREDITOR
1. The right to the fruits of the thing mortgaged;

2. The right to retain the thing or object until the debt is fully
paid;
3. The right to have the thing sold when the principal debt is
unpaid because there is still a mortgage.
No. 3 applies when the property bears no fruits, or the fruits

are not enough to pay for the interest and principal.
9
OBLIGATIONS OF THE
1. Pay the taxes and charges on the thing pledged;

2. Bear all the necessary expenses for preservation
3. Apply the fruits to the payment of the interest;
4. Submit an accounting of the fruits to the debtor.
BUT EXPENSES FOR 1 AND 2 SHOULD BE DEDUCTED

FROM THE FRUITS.
10
REMEDIES OF THE UNPAID
1. Sue in court for payment of the debt

2. Judicial Foreclosure of the mortgage with the courts
3. Extrajudicial foreclosure of the mortgage with the sheriff, if
this is provided in the real estate mortgage
Unpaid antichretic creditor CANNOT immediately acquire

ownership of the property if the debt is unpaid.
WHY? This will be a pactum commissorium which is

void.
11
LAW ON BOUNCING CHECKS
Batas Pambansa Blg. 22 (1979)
Drawer = Person who issued the Check
Drawee = Person to whom the Check was Issued to
Drawee Bank = firm who will negotiate the check

KINDS OF NEGOTIABLE INSTRUMENTS
• CHECKS - drawn on a bank payable on demand
DIFFERENT KINDS OF CHECKS

• Manager’s / Cashier’s Check – drawn by a bank on
itself and therefore, it is a primary obligation of the
bank. It is accepted in advance by the act of its
issuance and is not subject to countermand by the
payor after indorsement.
KINDS OF NEGOTIABLE INSTRUMENTS
• Traveler’s check – one upon which the purchaser’s

signature must appear twice – at the time he buys
it and also at the time he uses it. It has the
characteristics of a cashier’s check of the issuer.
• Crossed check – done by writing 2 parallel lines
diagonally on the left top portion of the check. If the
name of a bank/company appears between the parallel
lines, the check is said to be specially crossed, and
payment should be made only if with the intervention
of that bank/company. If no name appears between
the parallel lines, the check is said to be generally
crossed, and the drawee should not encash the same
but merely accept the check for deposit.
BLANK CHECK
UNCROSSED CHECK PAYABLE TO BEARER
CROSSED CHECK PAYABLE TO BEARER
UNCROSSED CHECK PAYABLE TO ORDER
CROSSED CHECK PAYABLE TO ORDER
WHAT IS A BOUNCED CHECK AND
WHY IS IT PUNISHED?
When a check is presented for payment to a bank and it is
dishonored it is known to have bounced (tumalbog).
Checks are an important part of our financial system and

economy. So if a worthless check is passed around, it
undermines the strength of the monetary system and will
restrict the speed and flow of business transaction.
Issuing a bounced check is a criminal offense with possible

imprisonment (not less than 30 days but not more than 1
year) or a fine (not more than double the amount of the
check but not to exceed P200,000) or both fine and
imprisonment
WHAT IS A BOUNCED CHECK AND
WHY IS IT PUNISHED?
Any person, natural or juridical, who draws and issues any

check on account or for value knowing that he does not have
sufficient funds and which check upon presentment is
dishonored is liable.
How BP 22 is committed or how is a check

dishonored?
- Drawn Against Insufficient Funds (DAIF)

- Drawn Against Uncollected Deposit (DAUD)
- Account Closed
- Drawer issued a “Stop Payment” Order without valid
reason
WHAT ARE THE REQUIREMENTS
FOR PROSECUTION UNDER BP 22?
1. The check must be issued for value;

2. The check must be presented to the bank within 90 days from
the date of the check. If you present the check to the bank
within 90 days there is a presumption that you knew there were
no sufficient funds.
3. The check was dishonored by the bank for the 4 reasons
previously listed;
4. IMPT. The drawer must be notified in writing by the
drawee of
the dishonor by the bank and he is given a period of 5 banking
days after receiving the written notice to make arrangements
for full payment.
If the bounced check was issued by a corporation – the officers who

signed the check are liable
POSSIBLE DEFENSES TO A CRIMINAL
COMPLAINT FOR VIOLATION OF BP 22
1. Failure to send a written notice to the drawer after the

dishonor of the check by the bank;
2. Payment was made within 5 banking days after drawer
was informed of the dishonor of the check by the bank;
3. Check was presented to the bank more than 90 days after
it was issued;
4. Stop payment order was valid. For example, goods the
check was to pay for were not delivered;
5. Check was not issued for value. For example, I gave
you a
check for P100,000 only so you can show proof that you
have funds for a certain transaction.
PROSECUTION UNDER BP 22 =
IMPRISONMENT FOR NON-PAYMENT OF DEBT?
No one will be imprisoned for non-payment of a debt. But in most
cases a post-dated check is used as security in order to get a loan.
Jeremiah borrows P50,000 from Chris on July 10, 2022. He issues a check
for P55,000 payable to Chris with date of September 10, 2022. When Chris
presented the check for payment it was dishonored for lack of sufficient
funds. Chris wrote Jeremiah a demand letter but the P55,000 remained
unpaid.
If Chris prosecutes Jeremiah for violation of BP 22 and Jeremiah is found

guilty and sentenced to 3 months imprisonment, are we not imprisoning
Jeremiah for non-payment of his debt to Chris?
PARTLY TRUE, that is why the Supreme Court prefers that violators be
fined only and not given prison time.
-
, ■ Jonathan Ravelas ,. C·TA and Pia Ranada follow
President Biden8 @P OTUS·
I" Un, it ed Stat es go 3h
vern,ment off ic11al
..
.
My Administration is making clear that charging Ame(cans for a
bounoed clheclk they deposit or an overdrafted bank account isn't just
wrong.
Ifs illegal.
Q 5,106 tl. 5,569 (?
29 K
BANK SECRECY LAW
Republic Act. No. 1405 (1955)
WHAT IS THE STATE POLICY ON
SECRECY OF BANK DEPOSITS?
The state encourages people to deposit their money in

banking institutions and discourages private hoarding so
money can be properly utilized by banks to issue loans
needed to assist the economic development of the Philippines.
WHAT IS PROHIBITED?
All deposits of whatever nature (savings, checking, time,

Peso, Dollar) with banks or banking institutions are
hereby considered as of an absolutely confidential nature
and may not be examined, inquired or looked into by
any person, government official, bureau or office.
WHAT ARE THE PENALTIES?

Imprisonment of not more than 5 years or a fine of not
more than P20,000 or both fine and imprisonment at
the discretion of the court
WHAT ARE THE EXCEPTIONS TO THE
SECRECY OF BANK DEPOSITS?
1. When the depositor grant permission by issuing a waiver;

2. In cases of impeachment;
3. Upon order of a competent court in cases of bribery or
dereliction of duty of public officials or in any case where
the money deposited or invested is the subject matter of
litigation, to include AMLA violations
RECENT MOVES TO AMEND
THE SECRECY OF BANK DEPOSITS?
There have been various attempts to amend the law on
Secrecy of Bank Deposits. The law is more than 70 years old.
The law hinders investigations into Money Laundering

activities. The hands of investigators are tied since all bank
deposits have to be confidential.
A criminal will hide ill-gotten wealth or funds from illegal

enterprises in the banking system (earning interest even!)
and away from the prying eyes of investigators.
GMA N ,ews O @gmanews ·
3h
Quezon City Representative Arjo Atayde 's has filed a bill seeking the
,exemption of government officials from bank secrecy provisions of
Republic Act 1405 or the Secrecy of Bank Deposit s law .
gmanetwork. com
Arjo Atayde bill seeks lifting of bank secrecy for gov t officials
1
Q 5 t"l 0 84
16
TRUTH IN LENDING
TRUTH IN LENDING POLICY?
It is the policy of the State to protect its citizens from a lack of

awareness of the true cost of credit to the user by assuring a
full disclosure of such cost with a view of preventing the
uninformed use of credit to the detriment of the national
economy.
Inform the borrower of the true and effective cost of the

transaction and make this an integral part of the
documentation.
DEFINITIONS
(1) "Board" means the Monetary Board of the Central Bank of the
Philippines.
(2)"Credit" means any loan, mortgage, deed of trust, advance, or

discount; any conditional sales contract; any contract to sell, or sale or
contract of sale of property or services, either for present or future
delivery, under which part or all of the price is payable subsequent to
the making of such sale or contract; any rental-purchase contract; any
contract or arrangement for the hire, bailment, or leasing of property;
any option, demand, lien, pledge, or other claim against, or for the
delivery of, property or money; any purchase, or other acquisition of, or
any credit upon the security of, any obligation of claim arising out of
any of the foregoing; and any transaction or series of transactions
having a similar purpose or effect.
DEFINITIONS
(3)"Finance charge" includes interest, fees, service charges, discounts,

and such other charges incident to the extension of credit as the Board
may be regulation prescribe.
(4)"Creditor" means any person engaged in the business of extending

credit (including any person who as a regular business practice make
loans or sells or rents property or services on a time, credit, or
installment basis, either as principal or as agent) who requires as an
incident to the extension of credit, the payment of a finance charge.
(5)"Person" means any individual, corporation, partnership, association,

or other organized group of persons, or the legal successor or
representative of the foregoing, and includes the Philippine Government
or any agency thereof, or any other government, or of any of its political
subdivisions, or any agency of the foregoing.
WHAT IS REQUIRED?
Any creditor shall furnish to each person to whom credit is extended, prior to
the consummation of the transaction, a clear statement in writing setting
forth, to the extent applicable and in accordance with rules and regulations
prescribed by the Board, the following information:
(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such
person in connection with the transaction, but which are not incident to
the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of Pesos and Centavos; and
(7) the percentage that the finance bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of
the obligation
TRUTH IN LENDING
DISCLOSURE
The disclosure statement in writing is a required attachment to
the STATEMENT
credit transaction contract. The borrower has a right to
demand a copy of the disclosure statement.
TRUTH AND
TRANSPARENCY
IN LENDING
Enhanced Implementation of the Truth in Lending Act
(Republic Act No. 3765)
The State protects its citizens from a lack of awareness of the true cost of credit
to the customer by assuring a full disclosure of such cost and other terms and
conditions with a view of preventing the uninformed use of credit.
As such, a disclosure statement is a required attachment to the loan contract.

It sha ll include, at a minimum, the following information:
l .) To ta l amount to be financed
2.) Finan ce Charges and all other charges incidents to the loan
3.) Net proceeds of the loan
4.) Sc h edule of Payments
5.) The percentage that the finance charge bears to the total
amount to be financed expressed as an Effec tive Interest
Rate (EIR}
IMPORTANT NOTICE
The borrower has a right to demand a copy
of the disclosure statement
October 21, 2023

PHILIPPINE DEPOSIT
INSURANCE CORPORATION
WHAT IS THE PDIC ?
PDIC is a government instrumentality established on June

22, 1963 by virtue of RA 3591 to provide depositor
protection and help maintain stability in the financial system
by providing payment and continuing deposit insurance.
RA 10846 amended RA 3591 and applies to all banks

ordered closed by the Monetary Board on June 11, 2016 and
onwards.
STATE POLICY
SECTION 2
It is hereby declared to be the policy of the State to strengthen the
mandatory deposit insurance coverage system to generate, preserve,
maintain faith and confidence in the country’s banking system, and
protect it from illegal schemes and machinations.
Towards this end, the government must extend all means and
mechanisms necessary for the Corporation to effectively fulfill its vital
task of promoting and safeguarding the interests of the depositing public
by way of providing insurance coverage on bank deposits and in helping
develop a sound and stable banking system.
In view of the crucial role and the nature of its functions and
responsibilities, the Corporation, while being a government
instrumentality with corporate powers, shall enjoy fiscal and
administrative autonomy.
WHAT ARE THE 3 MANDATES OF THE PDIC ?
Consistent with its public policy objectives, the PDIC has

the following mandates:
I. Deposit Insurance. The PDIC provides a maximum

deposit insurance coverage of PHP500,000 per
depositor per bank. To pay insured deposits, the
PDIC builds up the Deposit Insurance Fund primarily
through assessments of member-banks at an
annual flat rate of 1/5 of 1% of their total
deposit liabilities.
II. Examination and Resolution. The PDIC works

closely with the Bangko Sentral ng Pilipinas (BSP) to
help maintain stability in the banking system. PDIC is
authorized to issue regulations to implement its Charter,
conduct bank examinations and investigations to assess
financial safety and soundness of banks and their
adherence to banking and deposit insurance rules and
regulations, and extend financial assistance to
eligible distressed banks.
III. Receivership and Liquidation. The PDIC is the

statutory receiver and liquidator of closed banks. Upon
order of the Monetary Board of the BSP, PDIC takes over
closed banks; administers their assets, records and
affairs; and manages and preserves these assets for the
benefit of the closed banks' creditors. Under RA 10846
or the amended PDIC Charter, a closed bank transitions
seamlessly from closure to liquidation, enabling PDIC to
dispose and distribute assets and settle claims of
creditors in accordance with the preference and
concurrence of credits as provided by the Civil Code of
the Philippines.
WHAT DEPOSITS ARE INSURED ?
Deposits of all commercial banks, savings and mortgage

banks, rural banks, private development banks, cooperative
banks, savings and loan associations, as well as branches
and agencies in the Philippines of foreign banks and all
MANDATORY
other COVERAGE
corporations authorized to perform banking functions
inPhilippine
the Philippines, are insured with PDIC.
banks with branches outside the country, RA 9576 stipulates
that subject to the approval of the Board of Directors, any insured
bank with branch outside the Philippines may elect to include for
insurance its deposit obligations payable at such branch.
VOLUNTARY COVERAGE
WHAT DEPOSITS ARE INSURED ?
Foreign currency deposits are also insured. Depositors may receive

payment in the same currency in which the insured deposit is
denominated.
Effective June 1, 2009, the maximum deposit insurance coverage is

P500,000 per depositor.
All deposit accounts by a depositor in a closed bank maintained in the

same right and capacity shall be added together.
A joint account shall be insured separately from any individually-

owned deposit account.
WHAT DEPOSITS ARE NOT INSURED ?
1. Investment products such as bonds, securities and trust accounts;
2. Deposit accounts which are unfunded, fictitious or fraudulent

(Example: Jose Velarde)
3. Deposit products constituting or emanating from unsafe and

unsound banking practices;
4. Deposits that are determined to be proceeds of an unlawful

activity as defined under the Anti-Money Laundering Law.
CLAIMS WITH THE PDIC
Depositors with valid deposit accounts with balances of P100,000.00

and below are not required to file claims, provided they:
(1) have no obligations with the closed bank, or have not acted as co-
makers of these obligations, or are not spouses of the borrowers
(2) have complete mailing address found in the bank records or have
updated their addresses before the start of the onsite claims
settlement operation; and
(3) have not maintained the account under the name of business
entities
AUTOMATIC PROCESSING BY PDIC

PD IC tarts mai1 Ii ng Po s t a 1I M o
n e ·y O rd ie ts
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Galimuyod ( IIOC10 S S Ur ) , Inc.. w th b ·
ances of -P100K and b e l o w
Depositors who have nor receive-d thelr

checks af ,t e r .21 Novi 2022' are
advised to con-tact PDIC
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CLAIMS WITH THE PDIC
The following are required to file a deposit insurance claim:
1. With valid deposit accounts with balances of more than P100,000.00;
2. With outstanding obligations with the closed bank either as borrower, co-
maker, or as spouse of borrower;
3. With incomplete mailing address found in the bank records, or failed to

update them through the MAUF issued by the PDIC;
4. With accounts maintained under the name of business entities;
5. With accounts not eligible for early payment, regardless of type of account
and account balance per advice of PDIC; and
6. Who are deceased whose filing of claim is thru the legal heirs.
NO AUTOMATIC PROCESSING BY THE PDIC

RULES ON CLAIMS WITH THE PDIC
1. Claims should be filed within the two-year prescriptive period after

PDIC's takeover of the closed bank.
2. For depositors below 18 years old, a parent should sign on the

Claim form. For By or ITF accounts, the agent as disclosed in the
bank records may sign on the Claim Form. For joint accounts "OR,
AND/OR, AND" each depositor in the joint account should sign
separate Claim Form. For business entities, deceased depositors,
and depositors who executed a Special Power of Attorney (SPA),
only the authorized representative/s should sign on the Claim Form
3. The PDIC will not accept claims that are incomplete or lacking in
requirements.
ITF: In Trust For

RULES ON CLAIMS WITH THE PDIC
4. The PDIC may also require additional documents in the course of

claims processing.
5. All documents originated or executed abroad should be

apostilled by Competent Authority of the Apostille
country; or the documents may be notarized by the Philippine
Embassy or Consulate in a foreign country.
6. The PDIC, as Receiver, has the authority to adjust the interest rate
on unpaid interests on deposits if such rate is deemed unreasonably
higher compared to market rates.
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6 CHANGES INTRODUCED BY RA 10846
1.It allows depositors quicker access their insured deposits in the

event of bank closure (Below P100,000).
2.It allows PDIC authority to pay the insured deposits based on

evidence of deposit from the account holder and not solely on bank
records.
3.Gross settlement of account is computed. Depositors who are also

borrowers of the same closed bank will be paid the full amount of their
insured deposits. This gives depositor-borrowers the choice to settle
their obligations to the bank immediately or when it falls due.
6 CHANGES INTRODUCED BY RA 10846
4.It empowers PDIC to resolve problem banks while still open. PDIC does not
need to wait for the bank to close.
5.It hastens the liquidation process for closed banks. Upon bank closure,
PDIC can now proceed directly to liquidate the bank and distribute its assets
to creditors. To facilitate liquidation and enhance the chances of recovery by
creditors of their claims against the closed bank, the purchase of assets of the
closed bank and assumption of its liabilities by another insured bank, without
the need for approval of the liquidation court can now be undertaken as a
mode of liquidation.
6.Erring bank owners, officers, and employees, as well as individuals and

entities committing anomalies, frauds and irregularities and participating in
schemes to defraud a bank now face stiffer penalties which include
imprisonment of up to 12 years.
THE PDIC AND THE BANK SECRECY LAW
If a bank closes because of wrongdoing by its officers and employees,

the Bank Secrecy Law (RA 1405) prohibits PDIC from sharing its
findings with other regulators like the Department of Justice.
Since all deposits are “absolutely confidential” their details cannot be

revealed without a court order. But how can PDIC get a court order if
it cannot reveal the findings of its investigation?
UNCLAIMED BANK BALANCES
Presidential Decree No. 679 (1975)
WHAT ARE UNCLAIMED BANK BALANCES?
Unclaimed balances shall include credits or deposits of money,

tuition, security or other evidence of indebtedness of any
kind and interest thereon with banks, buildings and loan
associations and trust corporations in favor of any person:
a. Known to be dead;
b. No financial activity related to the account (deposits,
withdrawals, transfers of funds, etc.)
DORMANT ACCOUNTS do not earn interest

THREE STEP PROCESS FOR ALL
UNCLAIMED BANK BALANCES
“DORMANT ACCOUNTS”
Bank must send 3 written notices to the depositor:
a. That the account is about to be declared dormant (60 days before)

b. That the account is already dormant and it will be subject to a dormancy fee if
no activity within 5 years and falls below Minimum Average Daily Balance
(MADB) – (60 days before)
c. That the account will be forfeited by way of ESCHEAT PROCEEDINGS in
favor of the government through the National Treasurer
New Bangko Sentral Rule (2016): a depositor may be notified through postal mail,
courier delivery, email, telephone or other means at least 60 days before the
deposit becomes dormant and at least 60 days before the charging of any
dormancy fees
WHAT ARE ESCHEAT
PROCEEDINGS?
Escheat proceedings refer to the judicial process in which
the state or national government, by virtue of its
sovereignty, steps in and claims abandoned, left vacant or
unclaimed property, without there being an interested
person having a legal claim thereto.
In the case of dormant accounts, the state inquires into

the status, custody and ownership of the unclaimed
balance to determine whether the inactivity was brought
about by the fact of death or absence of or abandonment
by the depositor.
WHAT ARE ESCHEAT
PROCEEDINGS?
If after the proceedings the property remains without a
lawful owner interested to claim it, the property shall be
reverted to the state to forestall an open invitation to self-
service by the first comers.
If, however, interested parties have come forward and lay

claim to the property, the courts shall determine whether
the credit or deposit should pass to the claimants or be
forfeited in favor of the state.
THE NEW CENTRAL BANK ACT

and
Republic Act No. 11211
(2019)
WHAT IS RA 7653 ?
Approved on June 14, 1993
•Established the Bangko Sentral ng Pilipinas (BSP) as an independent

monetary authority. The law laid down the BSP’s objectives, principal
place of business and corporate powers
•The primary objective of the BSP is to maintain price stability

conducive to a balanced and sustainable growth of the economy.
•The BSP replaced the Central Bank of the Philippines, created in

1948.
WHAT IS RA 7653 ?
Approved on June 14, 1993
•Also established the Monetary Board that is comprised of seven (7)

members whose term is for six (6) years and who can be reappointed
only once.
•BSP has the sole power and authority to issue currency within the
Philippines.
WHAT ARE THE 6 FUNCTIONS OF THE
BSP ?
1. Serves as the Banker of the Philippine Government
2. Represents the Republic of the Philippines before the

International Monetary Fund (IMF). The IMF is an international
body that gives out loans to governments or states
3. Represents the Philippines before the International Bank for

Reconstruction and Development (IBRD), more commonly
known as the World Bank
WHAT ARE THE 6 FUNCTIONS OF THE
BSP ?
4. Serves as the depositary of the government
5. RA 7653 transferred fiscal agency functions of the BSP to the

Department of Finance
6. Regulatory powers over the operations of finance corporations

and other institutions were transferred to the SEC
Fiscal functions – how to spend

Monetary functions – how to manage money supply and inflation
WHAT IS RA 11211 ?
Approved on February 14, 2019 and amended certain

provisions of RA 7653
• The BSP’s responsibilities now include promoting financial

stability, overseeing the payment and settlement systems
in the Philippines, and promoting broad and convenient
access to high quality financial services and consider the
interest of the public.
• Increased the capitalization of the BSP from P50B to

P200B
• Provided for fiscal and administrative autonomy

WHAT IS RA 11211 ?
Approved on February 14, 2019 and amended certain provisions of

RA 7653
• Increased the number of Deputy Governors from 1 to at most 5
•Wields regulatory and examination powers not only over quasi-

banking operations of non-bank financial institutions but also over
money service businesses, credit granting businesses, and payment
system operators. WITH PDIC
•DOSRI (Directors, Officers, Stockholders and Related

Interests) LOANS
THANK YOU!
ANTI-MONEY LAUNDERING LAW
October 24, 2023

RATIONALE FOR ENACTING THE LAW
The Philippines, while striving to sustain economic development

and poverty alleviation through, among others, corporate
governance and public office transparency, must contribute its
share and play a vital role in the global fight against money
laundering – transnational investigation and prosecution.
Hence, the compelling need to enact responsive anti-money

laundering legislation in order to establish and strengthen an anti-
money laundering regime in the country which will not only
increase investor’s confidence but also ensure that the Philippines
is not used as a site to launder proceeds of unlawful activities.
STATE POLICIES
1. Protect and preserve the integrity of the Philippine

financial system, including the confidentiality of bank
accounts;
2. To ensure that the Philippines is not used as a money
laundering site for the proceeds of any unlawful
activity;
3. To extend cooperation in transnational investigations
and prosecution of persons involved in money
laundering activities wherever committed;
4. To protect life, liberty and property from acts of
terrorism
5. To recognize and adhere to international commitments
to combat the financing of terrorism
SALIENT FEATURES OF THE LAW
1. Retains confidentiality and integrity of legitimate bank
accounts
2. Prevents the Philippines from being a money laundering
site
3. Criminalizes money laundering
4. Creates a financial intelligence unit
5. Imposes requirements on customer due diligence -
identification, record keeping and reporting of covered
and suspicious transactions (KNOW YOUR CUSTOMER)
– KYC)
6. Relaxes strict bank deposits secrecy laws
7. Provides for bank inquiry and freeze ex parte
petition/seizure/forfeiture/recovery of dirty
money/property
8. Provides for international cooperation
WHAT IS MONEY LAUNDERING?
Money laundering describes the activity of concealing or
disguising the identity of illegally obtained proceeds.
Money laundering is a crime wherein the proceeds of unlawful

or illegal activities are transacted to make them clean – make
them appear to have been sourced from legal sources.
3 STEPS:
Placement – introduce the dirty money into the financial

system
Layering – a series of transactions to erase the signs of illegal

activity
Integration – use the money as legitimate funds

WHAT IS AN UNLAWFUL ACTIVITY?
Unlawful Activity is the offense which generates dirty money or
property. It is commonly called the predicate crime, the spurce of
the illegal funds.
Unlawful activity refers to any act or omission or series or

combination thereof involving or having direct relation to the
following:
Predicate Crimes/Unlawful Activities (Section 1 of 2018 IRR)
• Kidnapping for ransom

• Drug trafficking and related offenses
• Graft and corrupt practices
• Plunder (P50M or more)
• Robbery and Extortion
• Jueteng and Masiao
• Piracy
• Qualified theft
• Swindling or Estafa
• Smuggling
• Violations under the Electronic Commerce Act of 2000
• Hijacking; destructive arson; and murder, including those
perpetrated by terrorists against non-combatant persons
and similar targets
• Fraudulent practices and other violations under the
Securities Regulation Code of 2000
• Felonies or offenses of a similar nature that are punishable
under the penal laws of other countries.
• Terrorism financing and organizing or directing others to
commit terrorism financing (R.A. 10168).
• Attempt/conspiracy to commit terrorism financing and organizing

or directing others to commit terrorism financing (R.A. 10168).
• Attempt/conspiracy to commit dealing with property or funds of
designated person.
• Accomplice to terrorism financing or conspiracy to commit
terrorism financing.
• Accessory to terrorism financing.
• Bribery, malversation, forgeries and counterfeiting
• Carnapping
• Violation of Intellectual Property Code
• Child Pornography
• Felonies or offenses of a nature similar to the above unalwful
activities that are punishable under the penal laws of other
countries.
HOW DO WE PREVENT
MONEY LAUNDERING?
Customer Identification and Due Diligence – who is the

client, what is the business?
Record Keeping- keep all record of transactions for 5 years
Transaction Reporting – certain transactions need to be

reported
Covered Transactions– amount is P500,000 or more,

Suspicious Transactions – regardless of amount but suspicious
circumstances
Realty Transactions – involves real property and amount is
P500,000 or more
3 KINDS OF COVERED
TRANSACTIONS
VERY IMPORTANT
1. A transaction in cash or other equivalent monetary instrument

exceeding P500,000 within one (1) banking day;
2. A transaction involving jewelry dealers, dealers in precious

metals and dealers in precious stones in cash or other
equivalent monetary instrument exceeding P1,000,000;
3. A casino cash transaction exceeding P5,000,000 or its

equivalent in other currency.
3 KINDS OF COVERED
TRANSACTIONS
VERY IMPORTANT
1. A transaction in cash or other equivalent monetary

instrument exceeding P500,000 within one (1) banking
day;
If deposit is only P499,000 no report to AMLC.
What about P300,000 deposited everyday for 7 days or

a total of P2,100,000? May be a suspicious transaction if
these deviate from client’s past transactions
SUSPICIOUS TRANSACTIONS
Suspicious transactions are transactions with covered institutions, regardless
of the amounts involved, where any of the following circumstances exists:
1. there is no underlying legal/trade obligation, purpose or economic

justification;
2. the client is not properly identified;
3. the amount involved is not commensurate with the business or financial

capacity of the client;
4. there is a deviation from the client’s profile/past transactions;
5. the transaction is structured to avoid being the subject of reporting

requirements under the AMLA; Chop chop ng deposit
6. the transaction is related to an unlawful activity/offense under the AMLA;
7. and transactions similar or analogous to the above.

COVERED PERSONS UNDER AMLA
(institutions regulated by the BSP,
IC and SEC)
1. Banks, offshore banking units, quasi-banks, trust entities, non-

stock savings and loan associations, pawnshops, foreign exchange
dealers, money changers, money remittance or transfer companies,
electronic money issuers and all other persons and entities supervised
or regulated by the BSP, including their subsidiaries and affiliates
2. Insurance companies, insurance agents, insurance brokers,

professional reinsurers, reinsurance brokers, holding company
systems, pre-need companies, mutual benefit associations and all
other persons and entities supervised and regulated by the Insurance
Commission (IC).
3. Persons supervised or regulated by the SEC like securities dealers,

brokers, investment houses, mutual fund companies
(Designated Non-Financial Businesses
And Professions)
(a) jewelry dealers,

(b) dealers in precious metals and dealers in precious stones,
(c) Company service providers which, as a business, provide any of the
following services to third parties: DUMMIES
- acting as a formation agent of juridical persons;

- acting as (or arranging for another person to act as) a director or
corporate secretary of a company, a partner of a partnership, or a
similar position in relation to other juridical persons;
- providing a registered office; business address or accommodation,
correspondence or administrative address for a company, a
partnership or any other legal person or arrangement; and
- acting as (or arranging for another person to act as) a nominee
shareholder for another person.
And Professions)
(d) Persons, including lawyers, accountants and other

professionals who provide any of the following services:
- Managing of client money, securities or other

assets;
- Management of bank, savings or securities
accounts;
- Organization of contributions for the creation,
operation or management of companies; and
- Creation, operation or management of juridical
persons or arrangements, and buying and selling
business entities.
(e) Casinos, including internet-based casinos and ship-based

casinos with respect to their casino cash transactions.
DUTY OF ALL
COVERED PERSONS
They shall comply with all AMLA requirements.
They have the duty to cooperate with the AMLC in the discharge of the
latter’s mandate and execution of its lawful orders and issuance, to
protect their businesses or professions from being used in money
laundering or terrorism financing activities
Covered persons shall file all Covered Transaction Reports or CTRs and
Suspicious Transaction Reports or STRs, in accordance with the
registration and reporting guidelines of the AMLC. CTRs are filed within
5 working days from the occurrence thereof.
Covered persons shall maintain and safely store for 5 years from the
date of the transaction all customer records and transaction documents.
WHAT IS THE COMPOSITION OF THE
ANTI-MONEY LAUNDERING COUNCIL
(AMLC)?
1. Governor of the BSP
2. Chairman of the SEC
3. Commissioner of the IC
WHAT ARE THE POWERS OF THE

(AMLC)?
1. File criminal cases for violation of AMLA

2. Initiate forfeiture cases for proceeds of illegal activity
3. Inquire into bank deposits and investments
4. Issue Freeze Orders to stop transactions on the accounts
AUTHORITY TO INQUIRE INTO BANK
DEPOSITS AND INVESTMENTS
The AMLC may inquire into or examine any particular

deposit or investment with any banking institution or
non-bank financial institution upon order of the Court of
Appeals in cases of violation of the AMLA when it has
been established that there is probable cause that the
deposits or investments involved are in any way related
to a money laundering offense.
This inquiry is NOT a violation of the Bank Secrecy Law

(RA 1405)
FREEZING OF MONETARY
INSTRUMENT OR PROPERTY
The AMLC may file before the Court of Appeals, a verified application
ex parte (without notice to the other party) after determination that
probable cause exists that any monetary instrument or property is in
any way related to an unlawful activity.
The freeze order shall be effective immediately. The freeze order

shall be for a period of 20 days unless extended by the Court of
Appeals
After a summary hearing, the Court of Appeals can modify, lift or

extend the freeze order for a period no longer than 6 months. If no
case is filed against the person concerned, the freeze order is
deemed ipso facto (by that very fact) lifted.
CIVIL FORFEITURE
The AMLC shall file with the RTC a verified petition for civil forfeiture
upon determination that probable cause exists that any monetary
instrument or property is in any way related to an unlawful activity
or ML offense.
No prior criminal charge, pendency of a case or conviction for an

unlawful activity or ML offense is necessary for the commencement
or resolution of a petition for civil forfeiture.
The RTC can also issue an Asset Preservation Order (APO)

which is a provisional remedy aimed at preserving monetary
instruments or properties in anyway related to an unlawful activity or
ML offense during the pendency of the civil forfeiture proceedings.
WHO IS THE BENEFICIAL OWNER?
Beneficial owner refers to any natural person who:
a. Ultimately owns or controls the customer and/pr on whose behalf a

transaction or activity is being conducted.
b. Has ultimate effective control over a juridical person or legal
arrangement.
c. Owns, at least 20% shares, contributions or equity interest in a
juridical person or legal arrangement.
Beneficial Ownership Verification (BOV) is the process of taking

reasonable measures to identify and verify the beneficial owner,
including the determination of the true nature of the beneficial owner’s
capacities and duties vis-à-vis his agent, nominee or trustee.
WHAT IS THE SAFE HARBOR
PROVISION UNDER AMLA?
No administrative, criminal or civil proceedings shall lie against any
person for having made a covered transaction report in the regular
performance of his duties and in good faith, whether or not such
reporting results in any criminal prosecution under AMLA or any other
Philippine law.
This encourages covered institutions to report covered and suspicious

transactions without fear of reprisal. This is an exception to the Bank
Secrecy Law (RA 1405)
However, covered persons are prohibited from communicating to any

person or media of such fact and from publishing or airing such report.
PERSONS NOT COVERED UNDER AMLA
“Covered Persons” shall exclude lawyers and accountants acting

as independent professionals in relation to information
concerning their clients or where disclosure of information would
compromise client confidences or the attorney-client
relationship:
Provided, that these lawyers and accountants are authorized to

practice in the Philippines and shall continue to be subject to the
provisions of their respective codes of conduct and/or
professional responsibility or any of its amendments.
“Independent legal professional” are lawyers working in a private

firm or sole practitioner who by way of business provides purely
legal or notarial services to their clients.
WHAT ARE THE CRIMINAL ACTS OF
MONEY LAUNDERING?
A. When any person knows that a monetary instrument or property

represents, involves or resulted from the proceeds of an unlawful
activity and does any of the following 6 acts:
1. Transact
2. Convert
3. Conceal
4. Attempt or conspire to transact, convert or conceal,
5. Aid, abet, assist or counsel to transact, convert or conceal
6. Fail to do an act which facilitates the transaction, conversion or
concealment of an illegal activity
B. When a covered person knows that there is a reportable

transaction, and it fails to do so
JURISDICTION OVER
MONEY LAUNDERING CASES
The Regional Trial Courts (RTC) has jurisdiction to try ML cases

committed by private individuals, and public officers not covered by
the jurisdiction of the Sandiganbayan.
The Sandiganbayan has jurisdiction to try ML cases committed by

public officers under its jurisdiction, and private persons who are in
conspiracy with such public officers. Look at nature of the offense
and the salary grade of the public official (SG 27 or higher)
OFFENSES AND PENALTIES
1. Knowingly transacting or attempting to transact any monetary
instrument/property which represents, involves or relates to the
proceeds of an unlawful activity. Penalty is 7 to 14 years
imprisonment and a fine of not less than P3M but not more than
twice the value of the monetary instrument/property.
2. Knowingly performing or failing to perform an act in relation to any

monetary instrument/property involving the proceeds of any
unlawful activity as a result of which he facilitated the offense of
money laundering. Penalty is 4 to 7 years imprisonment and a fine
of not less than P1.5M but not more than P3M.
3. Knowingly failing to disclose and file with the AMLC any monetary
instrument/property required to be disclosed and filed. Penalty is 6
months to 4 years imprisonment or a fine of not less than P100,000
but not more than P500,000, or both.
OTHER OFFENSES AND PENALTIES
Failure to keep records is committed by any

responsible official or employee of a covered institution
who fails to maintain and safely store all records of all
transactions of said institution, including closed accounts,
for five (5) years from the date of the transaction/closure
of the account. Important for Accountants
Penalty is 6 months to 1 year imprisonment or a fine of

not less than P100,000 but not more than P500,000, or
both.
Malicious reporting is committed by any person who, with

malice or in bad faith, reports/files a completely
unwarranted or false information relative to money
laundering transaction against any person.
Penalty is 6 months to 4 years imprisonment and a fine of

not less than P100,000 but not more than P500,000, at
the discretion of the court. The offender is not entitled to
avail the benefits of the Probation Law.
• Ifthe offender is a corporation, association, partnership or
any juridical person, the penalty shall be imposed upon the
responsible officers, as the case may be, who participated in,
or allowed by their gross negligence, the commission of the
crime.
• If the offender is a juridical person, the court may suspend
or revoke its license.
• If the offender is an alien, he shall, in addition to the
penalties prescribed, be deported without further proceedings
after serving the penalties prescribed.
• If the offender is a public official or employee, he shall, in
addition to the penalties prescribed, suffer perpetual or
temporary absolute disqualification from office, as the case
may be.
Breach of confidentiality. When reporting covered or

suspicious transactions to the AMLC, covered institutions and
their officers/employees are prohibited from communicating
directly or indirectly, in any manner or by any means, to any
person/entity/media, the fact that such report was made, the
contents thereof, or any other information in relation thereto.
In case of violation thereof, the concerned official and
employee of the covered institution shall be criminally liable.
Neither may such reporting be published or aired in any

manner or form by the mass media, electronic mail or other
similar devices. In case of a breach of confidentiality
published or reported by media, the responsible reporter,
writer, president, publisher, manager and editor-in-chief shall
also be held criminally liable.
Penalty is 3 to 8 years imprisonment and a fine of not less

than P500,000 but not more than P1M.
KEY TAKEAWAYS
1. Follow the Money

2. Complicity of “innocent parties” like jewelry shops,
banks, casinos
3. Balance between Anti-Money Laundering versus
Privacy Right
4. Big problem in a global and digital economy with
cryptocurrency and NFTs – non-fungible tokens
ANTI-MONEY LAUNDERING ACT
October 26, 2023

A TYPICAL MONEY LAUNDERING SCHEME16
Collection of dirty Money
1. 3. INTEGRA TIO
PLACEMENT N
2.
LAYERING
Dirty Money Integrates
Purchase of Luxury Assels
into the financial System
Financial Investments
Comme rcial / Industrial
Investments
Transfer funds between various

Offshore / Onshore Banks
RATIONALE FOR ENACTING THE LAW
The Philippines, while striving to sustain economic development

and poverty alleviation through, among others, corporate
governance and public office transparency, must contribute its
share and play a vital role in the global fight against money
laundering – transnational investigation and prosecution.
Hence, the compelling need to enact responsive anti-money

laundering legislation in order to establish and strengthen an anti-
money laundering regime in the country which will not only
increase investor’s confidence but also ensure that the Philippines
is not used as a site to launder proceeds of unlawful activities.
STATE POLICIES
1. Protect and preserve the integrity of the Philippine

financial system, including the confidentiality of bank
accounts;
2. To ensure that the Philippines is not used as a money
laundering site for the proceeds of any unlawful
activity;
3. To extend cooperation in transnational investigations
and prosecution of persons involved in money
laundering activities wherever committed;
4. To protect life, liberty and property from acts
of
terrorism
5. To recognize and adhere to international commitments
to combat the financing of terrorism
SALIENT FEATURES OF THE LAW
1. Retains confidentiality and integrity of legitimate bank
accounts
2. Prevents the Philippines from being a money laundering
site
3. Criminalizes money laundering
4. Creates a financial intelligence unit
5. Imposes requirements on customer due diligence -
identification, record keeping and reporting of covered
and suspicious transactions (KNOW YOUR CUSTOMER)
– KYC)
6. Relaxes strict bank deposits secrecy laws
7. Provides for bank inquiry and freeze ex parte
petition/seizure/forfeiture/recovery of dirty
money/property
8. Provides for international cooperation
WHAT IS MONEY LAUNDERING?
Money laundering describes the activity of concealing or
disguising the identity of illegally obtained proceeds.
Money laundering is a crime wherein the proceeds of unlawful

or illegal activities are transacted to make them clean – make
them appear to have been sourced from legal sources.
3 STEPS:
Placement – introduce the dirty money into the financial

system
Layering – a series of transactions to erase the signs of illegal

activity
Integration – use the money as legitimate funds

WHAT IS AN UNLAWFUL ACTIVITY OR
PREDICATE CRIME?
Unlawful Activity is the offense which generates dirty money or property.
It is commonly called the predicate crime, the source of the illegal funds.
Unlawful activity refers to any act or omission or series or combination

thereof involving or having direct relation to the following:
Predicate Crimes/Unlawful Activities (Section 1 of 2018 IRR)
• Kidnapping for ransom

• Drug trafficking and related offenses
• Graft and corrupt practices
• Plunder (P50M or more)
• Robbery and Extortion
• Jueteng and Masiao
• Piracy
• Qualified theft
• Swindling or Estafa
• Smuggling
• Violations under the Electronic Commerce Act of 2000
• Hijacking; destructive arson; and murder, including those
perpetrated by terrorists against non-combatant persons and
similar targets
• Fraudulent practices and other violations under the
Securities Regulation Code of 2000
• Felonies or offenses of a similar nature that are punishable
under the penal laws of other countries.
• Terrorism financing and organizing or directing others to
commit terrorism financing (R.A. 10168).
• Attempt/conspiracy to commit terrorism financing and organizing

or directing others to commit terrorism financing (R.A. 10168).
• Attempt/conspiracy to commit dealing with property or funds of
designated person.
• Accomplice to terrorism financing or conspiracy to commit
terrorism financing.
• Accessory to terrorism financing.
• Bribery, malversation, forgeries and counterfeiting
• Carnapping
• Violation of Intellectual Property Code
• Child Pornography
• Felonies or offenses of a nature similar to the above unalwful
activities that are punishable under the penal laws of other
countries.
HOW DO WE PREVENT
MONEY
LAUNDERING?
Customer Identification and Due Diligence – who is the
client, what is the business? KYC
Record Keeping- keep all record of transactions for 5 years
Transaction Reporting – certain transactions need to be

reported
Covered Transactions– amount is P500,000 or more,

Suspicious Transactions – regardless of amount but suspicious
circumstances
Realty Transactions – involves real property and amount is
P500,000 or more
3 KINDS OF COVERED
TRANSACTIONS
VERY IMPORTANT
1. A transaction in cash or other equivalent monetary instrument

exceeding P500,000 within one (1) banking day;
2. A transaction involving jewelry dealers, dealers in precious

metals and dealers in precious stones in cash or other
equivalent monetary instrument exceeding P1,000,000;
3. A casino cash transaction exceeding P5,000,000 or its

equivalent in other currency.
3 KINDS OF COVERED
TRANSACTIONS
VERY IMPORTANT
1. A transaction in cash or other equivalent monetary

instrument exceeding P500,000 within one (1) banking
day;
If deposit is only P499,000 no report to AMLC.
What about P300,000 deposited every day for 7 days or

a total of P2,100,000? May be a suspicious transaction if
these deviate from client’s past transactions
SUSPICIOUS TRANSACTIONS
Suspicious transactions are transactions with covered institutions, regardless
of the amounts involved, where any of the following circumstances exists:
1. there is no underlying legal/trade obligation, purpose or economic

justification;
2. the client is not properly identified;
3. the amount involved is not commensurate with the business or financial

capacity of the client;
4. there is a deviation from the client’s profile/past transactions;
5. the transaction is structured to avoid being the subject of reporting

requirements under the AMLA; Chop chop ng deposit
6. the transaction is related to an unlawful activity/offense under the

AMLA;
7. and transactions similar or analogous to the above.

(institutions regulated by the BSP,
IC and SEC)
1.Banks, offshore banking units, quasi-banks, trust entities, non-
stock savings and loan associations, pawnshops, foreign exchange
dealers, money changers, money remittance or transfer companies,
electronic money issuers and all other persons and entities supervised
or regulated by the BSP, including their subsidiaries and affiliates
2.Insurance companies, insurance agents, insurance brokers,

professional reinsurers, reinsurance brokers, holding company
systems, pre-need companies, mutual benefit associations and all
other persons and entities supervised and regulated by the Insurance
Commission (IC).
3.Persons supervised or regulated by the SEC like securities dealers,

brokers, investment houses, mutual fund companies
And Professions)
(a) jewelry dealers,

(b) dealers in precious metals and dealers in precious stones,
(c) Company service providers which, as a business, provide any of the
following services to third parties: DUMMIES
- acting as a formation agent of juridical persons;

- acting as (or arranging for another person to act as) a director or
corporate secretary of a company, a partner of a partnership, or a
similar position in relation to other juridical persons;
- providing a registered office; business address or accommodation,
correspondence or administrative address for a company, a
partnership or any other legal person or arrangement; and
- acting as (or arranging for another person to act as) a nominee
shareholder for another person.
And Professions)
(d) Persons, including lawyers, accountants and other

professionals who provide any of the following services:
- Managing of client money, securities or other

assets;
- Management of bank, savings or securities
accounts;
- Organization of contributions for the creation,
operation or management of companies;
and
- Creation, operation or management of juridical
persons or arrangements, and buying and selling
business entities.
(e) Casinos, including internet-based casinos and ship-based

casinos with respect to their casino cash transactions.
DUTY OF ALL
COVERED PERSONS
They shall comply with all AMLA requirements.
They have the duty to cooperate with the AMLC in the discharge of the
latter’s mandate and execution of its lawful orders and issuance, to
protect their businesses or professions from being used in money
laundering or terrorism financing activities
Covered persons shall file all Covered Transaction Reports or CTRs and
Suspicious Transaction Reports or STRs, in accordance with the
registration and reporting guidelines of the AMLC. CTRs are filed within
5 working days from the occurrence thereof.
Covered persons shall maintain and safely store for 5 years from the
date of the transaction all customer records and transaction documents.
WHAT IS THE COMPOSITION OF THE
ANTI-MONEY LAUNDERING
COUNCIL (AMLC)?
1. Governor of the BSP
2. Chairman of the SEC
3. Commissioner of the IC
WHAT ARE THE POWERS OF THE

(AMLC)?
• File criminal cases for violation of AMLA
• Initiate forfeiture cases for proceeds of illegal
activity
• Inquire into bank deposits and investments with Court
of Appeals Order
• Issue Freeze Orders to stop transactions on the accounts
with Court of Appeals Order
AUTHORITY TO INQUIRE INTO BANK
DEPOSITS AND INVESTMENTS
The AMLC may inquire into or examine any particular

deposit or investment with any banking institution or
non-bank financial institution upon order of the Court of
Appeals in cases of violation of the AMLA when it has
been established that there is probable cause that the
deposits or investments involved are in any way related
to a money laundering offense.
This inquiry is NOT a violation of the Bank Secrecy Law

(RA 1405)
FREEZING OF MONETARY
INSTRUMENT OR PROPERTY
The AMLC may file before the Court of Appeals, a verified application
ex parte (without notice to the other party) after determination that
probable cause exists that any monetary instrument or property is in
any way related to an unlawful activity.
The freeze order shall be effective immediately. The freeze order

shall be for a period of 20 days unless extended by the Court of
Appeals
After a summary hearing, the Court of Appeals can modify, lift or

extend the freeze order for a period no longer than 6 months. If no
case is filed against the person concerned, the freeze order is
deemed ipso facto (by that very fact) lifted.
Freeze Order cannot be more than 6 months duration.

CIVIL FORFEITURE
The AMLC shall file with the Regional Trial Court (RTC) a verified
petition for civil forfeiture upon determination that probable cause
exists that any monetary instrument or property is in any way
related to an unlawful activity or ML offense.
No prior criminal charge, pendency of a case or conviction for an

unlawful activity or ML offense is necessary for the commencement
or resolution of a petition for civil forfeiture.
The RTC can also issue an Asset Preservation Order (APO) which
is a provisional remedy aimed at preserving monetary instruments
or properties in anyway related to an unlawful activity or ML offense
during the pendency of the civil forfeiture proceedings.
WHO IS THE BENEFICIAL OWNER?
Beneficial owner refers to any natural person who:
a. Ultimately owns or controls the customer and/or on whose behalf a

transaction or activity is being conducted.
b. Has ultimate effective control over a juridical person or legal
arrangement.
c. Owns, at least 20% shares, contributions or equity interest in a
juridical person or legal arrangement.
Beneficial Ownership Verification (BOV) is the process of taking

reasonable measures to identify and verify the beneficial owner,
including the determination of the true nature of the beneficial owner’s
capacities and duties vis-à-vis his agent, nominee or trustee.
WHAT IS THE SAFE HARBOR
PROVISION UNDER AMLA?
No administrative, criminal or civil proceedings shall lie against any
person for having made a covered transaction report in the regular
performance of his duties and in good faith, whether or not such
reporting results in any criminal prosecution under AMLA or any other
Philippine law.
This encourages covered institutions to report covered and suspicious

transactions without fear of reprisal. This is an exception to the Bank
Secrecy Law (RA 1405)
However, covered persons are prohibited from communicating to any

person or media of such fact and from publishing or airing such report.
PERSONS NOT COVERED UNDER AMLA
“Covered Persons” shall exclude lawyers and accountants acting

as independent professionals in relation to information
concerning their clients or where disclosure of information would
compromise client confidences or the attorney-client
relationship:
Provided, that these lawyers and accountants are authorized to

practice in the Philippines and shall continue to be subject to the
provisions of their respective codes of conduct and/or
professional responsibility or any of its amendments.
“Independent legal professional” are lawyers working in a private

firm or sole practitioner who by way of business provides purely
legal or notarial services to their clients.
WHAT ARE THE CRIMINAL ACTS OF
MONEY LAUNDERING?
A. When any person knows that a monetary instrument or property
represents, involves or resulted from the proceeds of an unlawful
activity and does any of the following 6 acts: SMURF
1. Transact
2. Convert
3. Conceal
4. Attempt or conspire to transact, convert or conceal,
5. Aid, abet, assist or counsel to transact, convert or conceal
6. Fail to do an act which facilitates the transaction, conversion or
concealment of an illegal activity
B. When a covered person knows that there is a reportable

transaction, and it fails to do so
JURISDICTION OVER MONEY
LAUNDERING CASES
The Regional Trial Courts (RTC) has jurisdiction to try ML cases

committed by private individuals, and public officers below SG 27.
The Sandiganbayan has jurisdiction to try ML cases committed by

public officers under its jurisdiction, and private persons who are in
conspiracy with such public officers. Look at nature of the offense
and the salary grade of the public official (SG 27 or higher)
OFFENSES AND PENALTIES
1. Knowingly transacting or attempting to transact any monetary
instrument/property which represents, involves or relates to the
proceeds of an unlawful activity. Penalty is 7 to 14 years
imprisonment and a fine of not less than P3M but not more than
twice the value of the monetary instrument/property.
2. Knowingly performing or failing to perform an act in relation to any

monetary instrument/property involving the proceeds of any
unlawful activity as a result of which he facilitated the offense of
money laundering. Penalty is 4 to 7 years imprisonment and a fine
of not less than P1.5M but not more than P3M.
3. Knowingly failing to disclose and file with the AMLC any monetary
instrument/property required to be disclosed and filed. Penalty is 6
months to 4 years imprisonment or a fine of not less than P100,000
but not more than P500,000, or both.
Failure to keep records is committed by any

responsible official or employee of a covered institution
who fails to maintain and safely store all records of all
transactions of said institution, including closed accounts,
for five (5) years from the date of the transaction/closure
of the account. Important for Accountants
Penalty is 6 months to 1 year imprisonment or a fine of

not less than P100,000 but not more than P500,000,
or both.
Malicious reporting is committed by any person who, with

malice or in bad faith, reports/files a completely
unwarranted or false information relative to money
laundering transaction against any person.
Penalty is 6 months to 4 years imprisonment and a fine of

not less than P100,000 but not more than P500,000, at
the discretion of the court. The offender is not entitled to
avail the benefits of the Probation Law.
•If the offender is a corporation, association, partnership or
any juridical person, the penalty shall be imposed upon the
responsible officers, as the case may be, who participated in,
or allowed by their gross negligence, the commission of the
crime.
•If the offender is a juridical person, the court may suspend
or revoke its license.
•If the offender is an alien, he shall, in addition to the
penalties prescribed, be deported without further proceedings
after serving the penalties prescribed.
•If the offender is a public official or employee, he shall, in
addition to the penalties prescribed, suffer perpetual or
temporary absolute disqualification from office, as the case
may be.
Breach of confidentiality. When reporting covered or

suspicious transactions to the AMLC, covered institutions
and their officers/employees are prohibited from
communicating directly or indirectly, in any manner or by
any means, to any person/entity/media, the fact that such
report was made, the contents thereof, or any other
information in relation thereto. In case of violation thereof,
the concerned official and employee of the covered
institution shall be criminally liable.
Neither may such reporting be published or aired in any

manner or form by the mass media, electronic mail or other
similar devices. In case of a breach of confidentiality
published or reported by media, the responsible reporter,
writer, president, publisher, manager and editor-in-chief shall
also be held criminally liable.
Penalty is 3 to 8 years imprisonment and a fine of not less

than P500,000 but not more than P1M.
KEY TAKEAWAYS
1. Follow the Money

2. Complicity of “innocent parties” like jewelry shops,
banks, casinos
3. Balance between Anti-Money Laundering versus
Privacy Right
4. Big problem in a global and digital economy with
cryptocurrency and NFTs – non-fungible tokens
November 4, 2023

EASE OF DOING BUSINESS AND
EFFICIENT GOVERNMENT
SERVICE DELIVERY ACT OF 2015
(RA 11032)
WHAT IS THE EASE OF DOING
BUSINESS AND EFFICIENT GOVERNMENT
SERVICE DELIVERY ACT OF
2015?
The law took effect on June 17, 2018. It amended RA No. 9485, the
Anti-Red Tape Act of 2007
The provisions of the law applies to all government offices and

agencies in the Executive Department including LGUs, government
owned or controlled corporations and other government
instrumentalities, located in the Philippines or abroad, that provide
services covering business-related and nonbusiness transactions.
WHAT IS THE PURPOSE OF THE EASE OF
DOING BUSINESS AND EFFICIENT GOVERNMENT
SERVICE DELIVERY ACT OF 2015?
The law seeks to streamline the delivery of government

services.
A new cabinet level office was created – the Anti-Red Tape Authority
(ARTA) – to implement and oversee the law. ARTA can initiate an
investigation motu proprio, or upon receipt of a complaint or file
cases for violations. It is also mandated to review proposed major
regulations of government agencies using regulatory impact
assessment or IRA.
8888 CITIZENS’COMPLAINT CENTER
Citizens’ can lodge their complaint, concern, or request to 8888 via

calls, text messages and 8888 website.
The 8888 Center caters to calls and text messages for complaints,
grievances, requests and express their needs, perceptions, and
aspirations addressed to government agencies, officers, and
employees.
A complaint, concern, or request lodged through any of the

communication channels shall be referred by the 8888 Center to the
appropriate agency within 32 minutes and shall be given a concrete
and specific action within seventy-two (72) hours from receipt of the
complaint, concern, or request by the proper government agency
(GA) or instrumentality (GI), and LGU.
WHAT ARE THE 6 KEY REFORMS OF RA
11032?
1. Faster Processing of Business Permits and Licenses
The EODB Law seeks to cut the red tape involved in business registration and
permit renewals. A unified application form will be required for business permits and
renewals. A business one-stop-shop (BOSS) will also be established to house
agencies involved in starting a business, including:
 Treasury
 Business and Licensing Office
 Zoning Office
MAXIMUM NUMBER OF SIGNATORIES – 3. Alternates must be appointed.

Electronic signatures or pre-signed documents may be used
Requesting parties who are at the premises prior to the end of official working
hours must be attended to and served even during lunch hour and breaktimes.
11032?
2. Standard Turnaround Time (TAT) for Government Transactions - The
“3-7-20” Rule
All government agencies have to comply with standard turnaround times for
various transactions. These mandated timeframes range from 3 to 20
business days, depending on the complexity of the task.
3 days for simple transactions

7 days for complex transactions and
20 days for highly technical transactions
All applications duly submitted to an agency will be automatically approved if

they fail to process the application within the prescribed time frame.
11032?
3. Automated Business Registration Process
To reduce the risk of graft and corruption, all forms will be moved
online, and digital copies of documents will be submitted
electronically. To this end, the DICT launched the Integrated
Business Permits and Licensing System (iBPLS), a cloud based
platform that enables business owners and investors to apply for
permits and licenses online.
Likewise, licenses and permits can now be printed at home, and this
copy shall have the same authority as a hard copy.
11032?
4. Anti-Corruption Policy – Zero Contact Policy
While the online iBPLS is still being deployed, all government units engaged in
the issuance of business permits and licenses will implement a zero-contact
policy between government employees and business applicants. This is sought
to improve the government agencies’ level of service delivery and
accountability.
After the filing of the application, government functionaries will anonymously

transact with applicants, with only a case number to identify them with.
All employees must wear their official IDs during working hours.
A Public Assistance or Complaints Desk must be stablished.
There will be an Anti-Red Tape Unit in the Civil Service

Commission (CSC).
11032?
5. Citizen’s Charter
All government agencies and local government units must post information
billboards containing their most current and updated service standards. This
set of standards will be called the Citizen’s Charter. A copy of it in English,
Filipino, or a vernacular language must be displayed in a conspicuous area in
their respective offices.
The Citizen’s Charter details the following:
 A checklist of all the requirements for each type of application or request

 The procedure to obtain a particular service
 The person/s responsible for each step
 The maximum time needed to accomplish a request
 The necessary documents to be presented, if needed
 Fees required, if needed
 The procedure for filing complaints
11032?
6. Accountability of Heads of Offices and Agencies
The head of the office or agency shall be primarily responsible for the
implementation of the law and shall be accountable for rendering fast,
efficient, convenient and reliable service.
The EODB Law prescribes administrative and criminal liability to the officials
and employees who may act inappropriately.
Some of the violations include:
 Refusal to accept and process an application

 imposition of requirements or fees not listed in the Citizen’s Charter
 Collusion with fixers
 Missed deadlines
WHAT IF THERE IS A REQUIREMENT FOR
SANGUNNIAN APPROVAL? ?
If the application for a license, clearance, permit, certification or

authorization requires the approval of the local Sanggunian, the
Sanggunian concerned shall be given a period of 45 working days
to act on the application or request which can be extended for
another 20 working days.
WHAT ARE THE 8 VIOLATIONS
PUNISHABLE UNDER RA 11032?
1. Refusal to accept application with complete requirements

without proper reason;
2. Imposition of additional requirements other than those listed in
the Citizen’s Charter;
3. Imposition of additional costs not reflected in the Citizen’s
Charter;
4. Failure to give written notice on the disapproval of the
application;
5. Failure to render government services within the prescribed
processing time;
6. Failure to attend to applicants prior to the end of working hours
and during lunch break;
7. Failure or refusal to issue Official Receipts;
8. Fixing and/or collusion with fixers.
WHAT ARE THE PENALTIES UNDER
RA 11032?
FIRST OFFENSE:
Administrative liability with six (6) months suspension, provided that

in case of fixing and/or collusion with fixers the higher penalty as if
it were the second offense will apply.
SECOND OFFENSE:
Administrative liability of (a) dismissal from the service and criminal

liability, (b) perpetual disqualification from holding public office and
(c) forfeiture of retirement benefits and
Criminal liability of imprisonment of 1 year to 6 years and a fine of

not less than P500,000 but not more than P2,000,000
ELECTRONIC
COMMERCE ACT
OF
Republic Act2000
No. 8792 (2000)
WHAT ARE THE REASONS FOR
ENACTING THE E-COMMERCE ACT?
Information technology and communications play a vital role in
nation building and economic development. The enactment of the
E-Commerce Act modernized consumer transactions.
The law aims to facilitate domestic and international dealings,

transactions, arrangements, agreements, contracts and exchanges
through the use of electronic, optical and similar medium. Mode,
instrumentality and technology to recognize the authenticity and
reliability of electronic documents.
The law also aims to promote the universal use of electronic

transactions by the government and the general public.
WHAT IS AN ELECTRONIC DATA MESSAGE?
An electronic data message refers to information generated,

sent, received or stored by electronic, optical or similar
means.
WHAT IS AN ELECTRONIC DOCUMENT?
An electronic document refers to information or the

representation of information, data, figures, symbols or
other modes of written expression, described or however
represented, by which a right is established or an obligation
extinguished, or by which a fact may be proven and
affirmed, which is received, recorded, transmitted, stored,
processed, retrieved or produced electronically.
For evidentiary purposes (in order to prove something),

these two are functionally equivalent:
Electronic Document = Written Document

WHAT IS AN ELECTRONIC SIGNATURE?
An 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 other methodology or procedure adopted by a person
with the intention of authenticating or approving an electronic
data message or electronic document.
WHAT IS AN EPHEMERAL
ELECTRONIC COMMUNICATION?
Ephemeral electronic communication refers to telephone

conversations, text messages, chatroom sessions, streaming audio
and other forms of communication the evidence of which IS NOT
RECORDED OR RETAINED.
EXAMPLE OF AN ELECTRONIC
DATA MESSAGE
Sylvia offered to sell her Birkin Bag to Amy for P85,000. Sylvia sent photos
of the bag to Amy via email. Sylvia also sent Amy via FB Messenger a
photo of the receipt when the bag was purchased in Paris in 2021.
Amy sent Sylvia a text message which said, “Ang ganda Sis! Kunin ko na
for P85,000. Please bring the bag to my office on October 22. Thanks.”
When Sylvia delivered the bag to Amy on October 22 Amy refused to pay
for the bag saying there was no meeting of the minds of the two parties
since her consent was through text only and not a formal document.
Amy is WRONG. Consent can be given through an electronic data

message. Sylvia can file a case for specific performance against Amy.
EXAMPLE 1 OF A COMMERCIAL TRANSACTION
THROUGH ELECTRONIC DATA MESSAGES
Greg instructed his wife Aurora to withdraw P10,000 from his BPI Savings
Account using his ATM card.
After a few days Greg went to the BPI branch where his savings account
was opened and demanded that the P10,000 withdrawn from his account
be returned to him because he did not authorize his wife to withdraw
money from the ATM. Greg claims the withdrawal was illegal because
there was no withdrawal slip with his signature that was submitted.
Greg is WRONG. When Greg obtained his ATM card, he agreed to the
Terms and Conditions that any withdrawal using the card is valid,
regardless of the person who makes the withdrawal because each card has
a PIN known only to the account holder.
EXAMPLE 2 OF A COMMERCIAL TRANSACTION
THROUGH ELECTRONIC DATA MESSAGES
Check processing using the Check Image Clearing System (CICS) of the
Philippine Clearing House Corporation.
No more transmittal of the physical checks before payment is made.

PHILIPPINE COMPETITION
ACT OF 2015
(RA 10667)
WHAT IS THE PHILIPPINE
COMPTITION ACT OF 2015 (PCA)?
It is a law primarily focused on competition policies. Competition laws

are anti-trust statutes developed to protect consumers from
predatory business practices. These laws are enforced to adapt and
reinforce a free market economy vigilantly guarding against outward
monopolies and prevent disruptions to the flow of competition.
The PCA is applied to a wide range of questionable business

activities, including but not limited to market allocation, bid rigging,
price fixing, and monopolies
The PCA mainly reflects the belief that competition promotes

entrepreneurial spirit, encourages private investments, facilitates
technology development and transfer, and enhances resource
productivity.
WHAT ARE THE CONSTITUIONAL
GOALS OF THE PCA?
The PCA is one of the measures taken by the State to liberalize key sectors
in the economy, provide equal opportunities and prohibit or restrict
monopolies when the public interest so requires and combinations in
restraint of trade or unfair competition.
The government believes that competition policies and laws are one step
forward in attaining a more equitable distribution of opportunities, income,
and wealth, sustain an increase in the amount of goods and services
produced by the nation for the benefit of the people and expands the
productivity which will raise the quality of life for all, especially the
underprivileged. Section 2
SCOPE AND APPLICATION
OF THE PCA
The provisions of PCA are enforceable against any person or entity

engaged in any trade, industry and commerce in the Philippines.
It shall likewise be applicable to international trade having direct,

substantial, and reasonably foreseeable effects in trade, industry, or
commerce in the Philippines, including those that result from acts done
outside the Philippines. (Section 3)
DEFINITION OF ACQUISITION,
CONTROL AND DOMINANT POSITION
The term Acquisition refers to the purchase of securities or

assets, through contract or other means, for the purpose of
obtaining control by:
a) One (1) entity of the whole or part of another;

b) Two (2) or more entities over another; or
c) One (1) or more entities over one (1) or more entities
agency or otherwise.
Control refers to the ability to substantially influence or direct
Thisthe
term is imperative
actions or decisions since
of an an entity thatbycontrols, is
, whether
controlled
entity by, or is under common control with another
contract,
entity or entities, have common economic interests, and are
not otherwise able to decide or act independently of each
other, shall not be considered competitors for purposes of
anti- competitive agreements.
Dominant position refers to a position of economic

strength that an entity or entities hold which makes it
capable of controlling the relevant market independently
from any or a combination of competitors, customers,
suppliers, or consumers
ABUSE OF DOMINANT POSITION
COMMITTED IN ANY OF 9 WAYS
Having a dominant position in a market or sector is not by itself prohibited
as long as it was acquired or maintained through legitimate means. The
PCA only prohibits acts of entity or entities which abuse their dominant
position by engaging in conduct that would substantially prevent, restrict or
lessen competition. Specifically, Abuse of Dominant Position may be
committed through the following acts:
a) Selling goods or services below cost with the object of driving

competition out of the relevant market;
b) Imposing barriers to entry or committing acts that prevent competitors

from growing within the market in an anti-competitive manner;
c) Making a transaction subject to acceptance by the other parties of

other obligations which, by their nature or according to commercial
usage, have no connection with the transaction;
d. Setting prices or other terms or conditions that discriminate unreasonably
between customers or sellers of the same goods or services, where such
customers or sellers are contemporaneously trading on similar terms and
conditions, where the effect may be to lessen competition substantially.
However, the following shall be considered permissible price differentials:
• Socialized pricing for the less fortunate sector of the economy;
• Price differential which reasonably or approximately reflect differences in the

cost of manufacture, sale, or delivery resulting from differing methods,
technical conditions, or quantities in which the goods or services are sold or
delivered to the buyers or sellers;
• Price differential or terms of sale offered in response to the competitive price of

payments, services or changes in the facilities furnished by a competitor; and
• Price changes in response to changing market conditions, marketability of

goods or services, or volume;
e. Setting prices, imposing restrictions on the lease or contract for sale or trade of
goods or services concerning where, to whom, or in what forms goods or
services may be sold or traded, such as fixing prices, giving preferential
discounts or rebate upon such price, or imposing conditions not to deal with
competing entities, where the object or effect of the restrictions is to prevent,
restrict or lessen competition substantially. However, this provision shall not
cover the following:
• Permissible franchising, licensing, exclusive merchandising or exclusive

distributorship agreements such as those which give each party the right to
unilaterally terminate the agreement; or
• Agreements protecting intellectual property rights, confidential information, or

trade secrets;
f. Making supply of particular goods or services dependent upon the purchase

of other goods or services from the supplier which have no direct connection
with the main goods or services to be supplied;
g. Directly or indirectly imposing unfairly low purchase prices for the goods or
services of, among others, marginalized agricultural producers, fisherfolk,
micro-, small-, medium-scale enterprises, and other marginalized service
providers and producers;
h. Directly or indirectly imposing unfair purchase or selling price on their

competitors, customers, suppliers or consumers, provided that prices that
develop in the market as a result of or due to a superior product or process,
business acumen or legal rights or laws shall not be considered unfair
prices; and
i. Limiting production, markets or technical development to the prejudice of

consumers, provided that limitations that develop in the market as a result
of or due to a superior product or process.
TWO TYPES OF
ANTI-COMPETITIVE AGREEMENTS
Anti-competitive agreements are those which substantially
hamper or stifle competition.
1.Per Se (by itself) Prohibited Agreements are those which

restricts competition as to price, or components thereof, or other
terms of trade and/ or fixes the price at an auction or in any form
of bidding including cover bidding, bid suppression, bid rotation and
market allocation and other analogous practices of bid
manipulation
2.The second type of anti-competitive agreements are those

which set, limit, or control production, markets, technical
development or investment and/or divide or share the market,
whether by volume of sales or purchases, territory, type of goods,
services, buyers or sellers or any other means
COMPULSORY
NOTIFICATION TO THE PCC
The PCA also requires entities who engaged in mergers and/or
acquisitions to notify the PCC before the execution of merger or
acquisition agreements. The notification act of the parties is a
pre-emptive measure to prevent likely exploitative abuse of
resulting market dominance (Medalla, Erlinda M, Understanding
the New Competition Act, Discussion paper Series No. 2017-14,
Page 9, Philippine Institute for Development Studies).
Merger or acquisition agreements that substantially prevent,

restrict or lessen competition in the relevant market or in the
market for goods or services as may be determined by
the PCC are prohibited. Section 20
COMPULSORY
NOTIFICATION TO THE PCC
Particularly, entities to the merger or acquisition agreement are

mandatorily required to notify the PCC if the value of the
transaction exceeds one billion pesos (P1,000,000,000.00).
Parties are prohibited from consummating their agreement until
thirty (30) days after providing notification to the PCC in the
form and containing the information specified in the regulations
issued by the PCC. An agreement consummated in violation of
this requirement to notify the Commission shall be considered
void and subject the parties to an administrative fine of one
percent (1%) to five percent (5%) of the value of the
transaction. Section 17
EXAMPLE OF CASES
BROUGHT TO THE PCC
1. The merger between Uber and Grab (approved with conditions

and fined P16M)
2.The planned acquisition by ABS-CBN of 49.5% of ABC 5

worth P2.16B (discontinued)
3.Urban DECA Homes Manila Condominium and its in-house internet

provider (disapproved with P27.11M fine)
4.Universal Robina’s planned purchase of Central Azucarera Don Pedro

in Batangas (disapproved)
5.San Miguel Corporation’s planned purchase of 85.73% of Holcim

Cement for US$2.15B (lapsed without PCC action)
November 7, 2023

REMAINING
CLASS SCHEDULE
(Face to Face unless
otherwise indicated)
November 7, Tuesday – 8:00 am to 10:00 am (FRIA)
November 9, Thursday – 8:00 am to 10:00 am (Data Privacy)
November 11, Saturday – Taped Lecture (Insurance Law)
November 14, Tuesday – 8:00 am to 10:00 am (PAPER QUIZ)

(Intellectual Property and Consumer Protection)
November 21, Tuesday – 8:00 am to 10:00 am (Consumer

Protection and Labor and Social Legislation)
FINAL EXAMINATIONS
In Person
Saturday, November 25, 2023
9:00 am to 12:00 nn
CBAA Rooms 401 and 402
60 points Multiple Choice Questions

40 points Essay Questions
Lunch will be served
3
FINANCIAL
REHABILITATION
AND INSOLVENCY
Republic ACT
Act No. 10142 (2010)
(FRIA)
WHAT IS INSOLVENCY?
Insolvency is the financial condition of the debtor
(1) that is generally unable to pay its liabilities as they fall

due in the ordinary course of business or
(2) has liabilities that are greater than its assets.
INSOLVENCY = BANKRUPTCY IN THE US

FRIA PROCEEDINGS
1. Proceedings are in rem – jurisdiction over all persons

affected by the proceedings shall be considered
acquired upon publication of the notice in any
newspaper of general circulation in the Philippines.
2. Proceedings shall be conducted in a summary and

non-adversarial manner.
STATEMENT OF POLICY
1. The state encourages debtors and their creditors to collectively

and realistically resolve and adjust competing claims and
property rights.
2. The state shall ensure timely, fair, transparent, effective and
efficient rehabilitation or liquidation of debtors.
3. The rehabilitation shall ensure or maintain certainty and
predictability in commercial affairs and preserve an maximize
the value of the assets of debtors, recognize creditor rights and
respect priority of claims.
4. When rehabilitation is not feasible, the State will facilitate a
speedy and orderly liquidation of the debtor’s assets and the
settlement of their obligations.
DEFINITION OF TERMS
• Claim shall refer to all claims or demands of whatever nature or

character against the debtor or its property, whether for money
or otherwise, liquidated or unliquidated, fixed or contingent,
matured or unmatured, disputed or undisputed including (1)
claims of the government (2) claims against directors and
officers of the debtor arising from acts done in the discharge of
their functions
• Commencement date shall refer to the date on which the court

issues the Commencement Order, which shall be retroactive to
the date of filing of the petition for voluntary or involuntary
proceedings.
• Date of liquidation shall refer to the date on which the court

issues the Liquidation Order.
DEFINITION OF TERMS
• Insolvent shall refer to the financial condition of a debtor that is
generally unable to pay its or his liabilities as they fall due in
the ordinary course of business or has liabilities that are
greater than its or his assets.
• Involuntary proceedings shall refer to proceedings initiated by

creditors
• Liquidator shall refer to the natural person or juridical entity

appointed as such by the court and entrusted with such power
and duties set forth in the law.
• Ordinary course of business shall refer to transactions in the

pursuit of the individual debtor’s business operations prior to
rehabilitation or insolvency proceedings and on ordinary
business terms.
DEFINITION OF TERMS
• Rehabilitation shall refer to the restoration of the debtor to a condition
of successful operation and solvency, if it is shown that its continuance
of operations is economically feasible and its creditors can recover by
way of the present value of payments projected in the plan, more if the
debtor continues as a going concern than if it is immediately
liquidated.
• Rehabilitation receiver shall refer to the person or persons, natural or

juridical, appointed as such by the court entrusted with such power
and duties set forth in the law.
• Rehabilitation plan shall refer to a plan by which the financial well-

being and viability of an insolvent debtor can be restored using various
means, including but not limited to, debt forgiveness, debt
rescheduling, reorganization or quasi-reorganization, dacion en pago,
debt-equity conversion and sale of the business (or parts of it) as a
going concern, or setting up of new businesses entity or other similar
arrangements as maybe approved by the courts or creditors.
EXCLUSIONS FROM FRIA
FRIA DOES NOT COVER banks, insurance companies, pre-need

companies and national and local government units, provided that
However, government financial institutions other than banks and

government owned or controlled corporations ARE COVERED by
FRIA.
FRIA COVERAGE MAY REQUIRE
COURT INTERVENTION
1. Suspension of Payments (natural persons only) –

MORE ASSETS
2. Rehabilitation (natural and juridical persons) –
MORE
LIABILITIES
3. Liquidation (natural and juridical persons) – MORE
LIABILITIES
TWO OPTIONS IN CASE OF INSOLVENCY?
1. Rehabilitation – repair or restore
2. Liquidation – close down
Note: Suspension of Payments is not available in case of

insolvency because Suspension of Payments requires Assets to
be greater than Liabilities
SUSPENSION OF PAYMENTS
WHAT IS SUSPENSION OF PAYMENTS?
An individual debtor (natural person) who, possessing sufficient property to
cover all his debts but foreseeing the impossibility of meeting them when they fall
due, may file a verified petition that he be declared in the state of suspension of
payments by the court of the province or city in which he resides. The debtor is not
yet insolvent.
The amount of debt is not affected by a suspension of payments. There is no

reduction or discharge of the debt. The amount due is still the same. There is only
a deferment or delay of payment.
FRIA does not set a minimum amount of debt.
ASSETS GREATER THAN LIABILITIES. TIMING ISSUE ONLY.
SUSPENSION OF PAYMENTS DOES NOT APPLY TO JURIDICAL PERSONS

LIKE PARTNERSHIPS AND CORPORATIONS.
“TIMEOUT - MORATORIUM”
WHAT ARE INCLUDED IN THE PETITON
FOR SUSPENSION OF PAYMENTS?
1. List of creditors
2. Schedule of debts and liabilities
3. Inventory of the debtor’s assets
4. Schedule of debtor’s income and expenditures
5. Proposed agreement with the creditors
6. Names of at least 3 nominees for Commissioner for the
Creditors Meeting
CREDITORS MEETING
If the petition is sufficient in form and substance, the court will then issue
an Order to schedule a meeting of all the named creditors not less than 15
nor more than 40 days from the date of the Order. The court will also
appoint a commissioner who will preside over the creditors meeting.
QUORUM for the Creditors Meeting: 3/5 of the liabilities of the debtor.
TWO POSSIBLE OUTCOMES:
A.If the debtor’s proposal is accepted by a vote of 2/3 of the creditors

representing at least 3/5 of the total liabilities, then the court approves the
agreement. DOUBLE MAJORITY NEEDED. 2/3 or 66% of 3/5 or 60% =
39.6%
B.If the debtor’s proposal is not approved by the creditors, then the
court dismisses the petition.
WHAT ARE THE EFFECTS OF A
SUSPENSION OF PAYMENTS ORDER?
Once an Order is issued by the Court suspending payments, said
Suspension Order:
1. Suspends all actions or proceedings in court or otherwise for the

enforcement of claims against the debtor. Note: secured creditors and
those with pending demands for payment for personal services can
continue to sue the debtor.
2. Suspends all actions to enforce any judgment, attachment or other
provisional remedies against the debtor;
3. Prohibits the debtor from selling, encumbering, transferring or
disposing in any manner all of its properties except in the ordinary
course of business;
4. Prohibits the debtor from making any payment of its liabilities
outstanding as of the commencement date except as provided in the
law. Only legitimate expenses are allowed.
PRESERVE THE STATUS QUO.

EXAMPLE OF SUSPENSION OF PAYMENTS
Trinidad borrowed P10M from China Bank to expand her

manufacturing operations. Unfortunately, despite new
capital purchases the business continues to lose money.
Good thing is that Trinidad still has a lot of assets but most
of them are not liquid.
CHINA BANK LOAN
Trinidad can file a verified petition with the trial courts
asking forDecember 2023
a suspension of payment,
No monthlyforpayment
example,
on for 3
loan balance
months. The amount of the debt of P10M is not affected.
January 2024 No monthly payment on
The suspension order from the loan court can have directives
balance
such as below:
February 2024 No monthly payment on
loan balance
March 2024 Monthly payment on loan
balance begins again.
REHABILITATION
WHAT IS REHABILITATION?
It is the restoration of the debtor to a condition of successful
operation and solvency if it is shown that:
a. Its continuance of operation is economically feasible and

b. Its creditors can recover by way of the present value of
payments projected in the rehabilitation plan, more if the
debtor continues as a going concern than if it is
immediately liquidated.
REHABILITATION REQUIRES LIABILITIES GREATER

THAN ASSETS
REPAIR AND RESTORE

“MAY PAG-ASA PA”
WHAT ARE THE THREE MAIN TYPES
OF REHABILITATION?
1. Court Supervised – petition for rehabilitation must be filed

in court – 100% court proceedings
2. Pre-Negotiated - private rehabilitation but with court

confirmation - HYBRID
3. Out of Court Rehabilitation Agreement (OCRA) – 100%

private proceedings, no court proceedings
WHAT IS A COURT SUPERVISED
REHABILITATION?
A Petition for rehabilitation is filed with the Regional Trial Court. It is accompanied
by a Rehabilitation Plan that lays down the scheme in order to bring the entity
back to a state of solvency. If meritorious, the court will issue a Commencement
Order and appoint a Rehabilitation Receiver.
REQUIREMENT:
a. voluntary (filed by the debtor) – majority vote of board of directors and 2/3
vote of stockholders
b. involuntary (filed by a creditor or a group of creditors) – Aggregate amount of

their claim is (1) at least P1,000,000 or (2) at least 25% of the subscribed
capital stock or partners contribution.
WHAT IS A COURT SUPERVISED
REHABILITATION PLAN?
A plan by which the financial well-being and viability of an insolvent

debtor can be restored using various means including, but not limited
to:
- Debt forgiveness
- Debt rescheduling
- Reorganization or Quasi-reorganization
- Dacion En Pago
- Debt to Equity Conversion
- Sale of the business as a going concern
- Setting up a new business entity
- Other similar arrangement approved by the courts or creditors
WHAT IS THE “CRAM DOWN” POWER
OF THE REHABILITATION COURT?
Cram down is the power of the rehabilitation court to approve and

implement a rehabilitation plan notwithstanding the objection of
the majority of creditors.
The cram down clause is necessary to curb the majority creditors’

natural tendency to dictate their own terms and conditions to the
rehabilitation absent due regard to the greater long-term benefit of all
stakeholders.
It FORCES the creditors to accept the terms and condition so the

rehabilitation plan preferring long term viability over immediate but
incomplete recovery. BPI vs. Sarabia Manor Hotel (2013).
SA AYAW O GUSTO NINYO

WHO CAN BE A
REHABILITATION RECEIVER?
1. Citizen of the Philippines or a Philippine resident 6 months prior to

his nomination;
2. Of good moral character
3. Has knowledge of insolvency and relevant commercial laws, rules
and procedures
4. Has no conflict of interest, which may be waived by a party who
may be prejudiced thereby.
The Rehabilitation Receiver is appointed by the court may or may not

be from among the three nominees submitted by the petitioner.
Once appointed, the Rehabilitation Receiver shall take an oath and file
a bond, in an amount fixed by the court, conditioned upon his faithful
and proper discharge of his duties.
MANAGEMENT OF THE FIRM
UNDER REHABILITATION
BY THE REHABILITATION RECEIVER OR
A MANAGEMENT COMMITTEE
Upon motion of any interested party, the court may direct the rehabilitation
receiver to assume the powers of management of the debtor or appoint a
management committee that will manage the debtor’s business if:
(1) There is actual or imminent danger of loss, wastage or destruction of the

debtor’s assets
(2) Paralyzation of the business operations
(3) Gross mismanagement of the debtor, fraud or other unlawful conduct
The members of the management committee shall be considered officers of

the court an shall assume the role of governing body of the debtor.
EXAMPLE OF A COURT
SUPERVISED REHABILITATION
Trinity Corporation borrowed P10M from China Bank to expand its
manufacturing operations. Unfortunately, despite new capital purchases the
company continues to lose money.
Trinity Corporation can file a verified petition with the trial courts asking for a
5-year rehabilitation plan. The court will appoint a Rehabilitation Receiver
whose job is to restore Trinity to a state of solvency. The plan will include:
a. List of all assets and liabilities;

b. Plan on how to put the business back on its feet;
c. Moratorium on China Bank from collecting the P10M;
d. Trinity’s recovery program on how it will make money (get new investors,
acquire some patents, enter into joint ventures)
e. After 5 years, Trinity can start paying China Bank again. No interest or
penalty charges will be allowed even if no payment was made for 5 years.
f. All reasonable operating expenses during the 5-year rehabilitation period
will have to be approved by the court (salaries, repair and maintenance,
payment of taxes)
WHAT IS A PRE-NEGOTIATED
REHABILITATION (HYBRID)?
The debtor and the creditors have already met and agreed on a Rehabilitation
Plan. They will now file a petition for the Regional Trial Court to approve the Plan.
The court will just CONFIRM the plan.
REQUIREMENT:
An affidavit showing the written approval by all the creditors holding at least
2/3 of the total liabilities of the debtor, including the approval of the secured
creditors holding more than 50% of the secured claims and the approval of the
unsecured creditors holding more than 50% of the unsecured claims.
WHAT IS AN OUT OF COURT
REHABILITATION AGREEMENT (OCRA)?
This rehabilitation DOES NOT involve the use of the court system. It is a 100%
private rehabilitation or restructuring.
REQUIREMENTS:
1. Agreement of the debtor to the OCRA

2. Approval of the creditors representing at least 67% of the secured obligations
3. Approval of the unsecured creditors representing at least 75% of the unsecured
obligations
4. Approval of the creditors holding at least 85% of the debtor’s total liabilities,
secured and unsecured.
EXAMPLE OF OCRA

manufacturing operations. Unfortunately, despite new capital
purchases the company continues to lose money.
Trinity Corporation can privately negotiate with China Bank to come up

with a mutually agreed upon rehabilitation plan. It is up to Trinity
Corporation and China Bank to think of ways to restore Trinity to a
state of solvency. The plan will be similar to the court supervised
rehabilitation plan in the previous slide.
No Court Intervention. This is a purely private agreement.

WHY IS PRE-NEGOTIATED REHABILITATION
BETTER THAN OCRA?
Since the pre-negotiated rehabilitation is approved and confirmed by
the Court, if the debtor does not comply with the provisions of the
Rehabilitation Plan, the creditor can ask the court to force the debtor
to do so and claim damages.
In OCRA, since this is 100% private, there is no court process that can
be relied upon. The creditor will still have to file a case for breach of
contract.
WHAT HAPPENS IF THE
REHABILITATION FAILS
(5 INSTANCES)?
If the Rehabilitation Receiver finds that
(1) there is no substantial likelihood for the debtor to be

successfully rehabilitated or
(2) there are objections to the rehabilitation plan that are not
curable or
(3) if the court does not confirm the rehabilitation plan within one
year from the filing of the Petition or
(4) in case of dismissal of the Petition for Rehabilitation the or
(5) there is bad faith on the part of the debtor or creditors,
the case may be converted into LIQUIDATION PROCEEDINGS.

LIQUIDATION
WHAT IS LIQUIDATION?
The basic premise is that the debtor does not have enough assets or
property to cover his obligations. There is no future for the business.
Liquidation proceedings may be voluntary or involuntary. Wind up affairs
and distribute assets. We studied liquidation in Partnerships and
Corporations.
LIQUIDATION MEANS THE DEBTOR IS INSOLVENT. LIABILITIES

GREATER THAN ASSETS
“LUGI NA ANG NEGOSYO, WALA NG PAG-ASA, ISARA NA NATIN

AT PAGHATIAN ANG ASSETS.”
“CHOP-CHOP, PLEASE RELEASE ME”

TWO KINDS OF LIQUIDATION
AS TO PERSON
1. Liquidation of natural persons
2. Liquidation of juridical persons (partnerships,
corporations and sole proprietorships,
[included by FRIA even if its is not a juridical
person])
TWO KINDS OF LIQUIDATION

AS TO MODE
1. Voluntary Liquidation
2. Involuntary Liquidation
WHAT IS VOLUNTARY LIQUIDATION OF
A NATURAL PERSON?
An individual debtor (natural person) whose properties are not enough to pay
his liabilities exceeding P500,000, then the remedy is liquidation. The debtor is
already insolvent.
Liquidation refers to the process where the debtor files a petition before the
Regional Trial Court. In the case, claims are filed and the assets of the debtor are
disposed of and the proceeds are divided among the creditors.
Liquidation maybe VOLUNTARY (initiated by the debtor himself) where the debtor
is applying to be discharged from his debts.
A NATURAL PERSON?
His unencumbered assets are sold or disposed of and converted to money for the
benefit of the creditors in accordance with the LIQUIDATION PLAN approved by
the court.
Debtor files a petition for voluntary liquidation. Debtor submits the names of at
least three nominees for the post of liquidator together with list of creditors, list of
debts and claims, inventory of assets and liabilities, sources of income, etc.
AN ACT OF INSOLVENCY ON THE PART OF THE DEBTOR.

WHAT IS INVOLUNTARY LIQUIDATION
OF A NATURAL PERSON?
When the individual debtor (natural person) who is insolvent fails or refuses
to act, FRIA allows any creditor or any group of creditors with an aggregate claim
of at least P500,000 to file a petition for liquidation in the court in the province or
city where the debtor resides alleging any acts of insolvency of the debtor such as:
-the debtor is about to or has departed from the Philippines with intent to defraud
his creditors
- the debtor has concealed himself or his property to evade payment
-the debtor has transferred his property with intent to delay or evade payment or
otherwise defraud his creditors (SEC. 105)
Creditors must file a bond in case it is proven that the debtor is not insolvent.
If debtor is in hiding or does not respond to the petition, the court may order the
sheriff to take hold and possession of the property of the debtor
A JURIDICAL PERSON?
An insolvent business entity can file a petition before the Regional Trial Court.
It must be shown that the filing of the petition was approved by at least a majority
of the Board of Directors and 2/3 of the outstanding capital stock.
WHAT IS INVOLUNTARY LIQUIDATION OF

A JURIDICAL PERSON?
Three or more creditors of the insolvent business entity can file a petition
before the Regional Trial Court. It must be shown that the aggregate claims is (1)
at least P1,000,000 or (2) at least 25% of the subscribed capital stock
If the Court finds the Petition to be meritorious, it will issue a Liquidation Order.
HOW IS LIQUIDATION UNDER FRIA
DIFFERENT FROM LIQUIDATION UNDER
THE CIVIL CODE FOR PARTNERSHIPS
AND UNDER THE RCC FOR
CORPORATIONS?
Liquidation of partnerships and corporations under the Civil Code and
the Revised Corporation Code can occur for various reasons – non-use
of corporate charter, continued inoperation, fraudulent incorporation,
closure by order of a competent court, etc.
Liquidation of partnerships and corporations under FRIA requires that

they are INSOLVENT. This is a special kind of liquidation.
PROVISIONS ON LIQUIDATION
APPLICABLE TO NATURAL PERSONS
AND JURIDICAL PERSONS
WHAT IS A LIQUIDATION ORDER?
The Liquidation Order:
1. Declare the debtor insolvent

2. Order the liquidation of the debtor, and in the case of a juridical
debtor, declare it as dissolved
3. Order the sheriff to take possession and control of the property of the
debtor
4. Direct the payment of any claims and conveyance of any property due
the debtor to the liquidator
5. Prohibit payments by the debtor and the transfer of any property by
the debtor
6. Direct all creditors to file their claims
7. Authorize the payment of administrative expenses
EFFECTS OF A LIQUIDATION ORDER?
Upon the issuance of a Liquidation Order:
1. The juridical debtor is deemed dissolved and its corporate existence is

terminated
2. Legal title to and control of the debtor’s assets shall be vested in the
liquidator
3. All contracts of the debtor are deemed terminated
4. No separate action for the collection of any unsecured claim shall be
allowed. Any pending action shall be transferred to the liquidator
for him to settle.
5. No foreclosure proceeding shall be allowed for a period of 180 days.
RIGHTS OF SECURED CREDITORS ARE NOT AFFECTED

WHAT IS A LIQUIDATION PLAN?
After the creditors file their claims with the liquidator, he will submit a Liquidation
Plan to the court for approval. The Liquidation Plan
1. Enumerates the assets of the debtor

2. Lists all the creditors and their proven claims
3. Proposed mode and schedule for the liquidation of assets and payment of the
claims
Once approved, the Liquidator can now sell, transfer or dispose of the property of
the debtor in a public auction to convert them into cash. Private sale of assets may
be approved (a) if the goods are perishable, (b) the goods are disproportionately
expensive to maintain or (c ) the private sale is to the best interest of the debtor
and creditors.
After distribution of the proceeds of the sale of the assets, the liquidator submits a
report to the court. The debtor is then discharged from all debts and liabilities.
EXAMPLE OF LIQUIDATION
manufacturing operations. Unfortunately, despite new capital purchases the
company continues to lose money. The Research and Planning department
concluded that it will be best to stop operations and close the business.
Trinity can file a verified petition with the trial courts asking for its liquidation.
The court will appoint a Liquidator whose goal is to wind up the affairs of
Trinity, sell off assets and pay off liabilities. The plan will include:
a. List of all assets and liabilities (P8M in assets as example only);

b. Moratorium on China Bank from collecting the P10M;
c. Liquidator will sell all the assets of Trinity for P8M (example only)
d. Liquidator will pay employees their salaries and separation pay amounting
to P3M (example only)
e. Liquidator will pay China Bank the remaining P5M. China Bank cannot run
after Trinity for the P5M balance since Trinity has closed and has no more
assets.
SUSPENSION OF PAYMENTS vs.
REHABILITATION vs.
LIQUIDATION
FOR NATURAL PERSONS ONLY - Business is Solvent but needs

time to recover, only one choice = SUSPENSION OF
PAYMENTS
Business is Insolvent or Bankrupt, there are two choices =

REHABILITATION or LIQUIDATION
November 9, 2023

DATA PRIVACY ACT OF 2012
Republic Act No.10173

10
Recent Data Breaches
On March 27, 2016, personal information of 55,000,000

voters in the Commission on Elections database was hacked
and leaked. This has been called the “biggest government
data breach in world history.” COMELEAK
228,605 email addresses, 1,300,000 passport numbers and

15,800,000 fingerprint records were posted online by LulzSec
Philippines, a hacktivist community.
On December 8, 2017 Jollibee Food Corporation notified the

National Privacy Commission (NPC) that unknown entities
were able to gain access to the customer database of
jollibeedelivery.com
On May 8, 2018, the NPC shutdown the jollibeedelivery.com

service “over serious vulnerabilities in its online service.”
Jollibeedelivery.com had 18,000,000 customers in its
database
In January 2019 more than 900,000 clients of Cebuana

Lhuillier were affected by a data breach.
Information stolen included names, date of birth, address

and sources of income.
Unauthorized downloads started in August 2018 but went

undetected
On March 16, 2019 the server of the Unified Student

Financial Assistance System for Tertiary Education or
UniFAST was hacked.
The server contained personal information of 1,130,899

student applicants which included the full name of the
student, father’s name, mother’s name, birth date and
complete address.
What is Data Privacy?
The fundamental right to privacy of communication and

personal data protection
Is there a law on data privacy?
• Republic Act No. 10173 or the Data Privacy Act 2012

and its implementing rules and regulation issued by the
National Privacy Commission
Who is protected under the law?
Personal Information pertaining to all citizens, employees,

suppliers and customers
Entities with juridical personality are included
What is personal data/information?
• Any information from which the identity of any individual is

apparent or can be reasonably and directly ascertained by
the entity holding the information, or when put together
with other information, would directly and certainly identify
the individual.
What are “personal information”?
Name
Address
Place of Work
Telephone Number
Residence
Date of Birth
Place of Birth
Salary
Contact Information – mobile phone, email, etc.
What are “sensitive personal information”?
Race, Color, Ethnic Origin
Marital Status
Health
Religion
Education
SSS Number
Tax Returns
Bank and credit card details
What are “sensitive personal information”?
Religious, philosophical or political affiliation,

Genetic or sexual life
Criminal proceedings or its disposal/sentence
Tax returns, tax identification and social security numbers,
and licenses (or their denial, suspension or revocation)
Those established by law to be kept classified
What information are excluded from the
coverage of the law?
Information of public concern, such as:
a) government officers/employees that relates to their
position/functions
b) contracting with government
c) financial benefit endowed by government like
licenses or permits
Other excluded information
(no protection)
Those for journalistic, artistic, or literary purpose

Research for public benefit
Those necessary to carry out functions of public authority
Those necessary for banks to comply with the Anti-Money
Laundering law
Those collected from residents of foreign jurisdiction in
accordance with law
What is “processing” of personal data?
Any operation performed upon personal data including collection, recording,

organization, storage, updating, modification, retrieval, consultation,
consolidation, blocking, erasure, or destruction of data
It may be manual or automated
What is a personal information controller (PIC)?
• A natural or juridical person who controls the processing of personal data

or instructs another to process on his behalf
What is a personal information processor (PIP)?

• A natural or juridical person who processes personal data upon the
instructions of the personal information controller
When is processing of personal data allowed?
If it adheres to three (3) principles of:

TRANSPARENCY,
LEGITIMATE PURPOSE, and
PROPORTIONALITY
What does “Transparency” mean?
The person must be aware of the nature, purpose, and

extent of the processing of his personal data
The risks and safeguards must be known
The identity of the Personal Information Controller is
disclosed
The communication of the above to the person must be
easy to access and understand
What constitutes “Legitimate Purpose”?
The processing shall be compatible with a declared and

specified purpose
The purpose must not be contrary to law, morals, or public
policy
Do not require information that is not relevant – salary of
your parents (unless for financial aid), whether you are
romantically involved, whether you are sexually active
What is meant by “Proportionality”?
The processing must be adequate, suitable, necessary and

not excessive in relation to the declared purpose
The processing shall be resorted if the purpose could not be
fulfilled by other means
When is processing of personal information
lawful & in accordance with the Rules?
If any of the following is present:

with prior consent
if he is a party to a contract & processing is stipulated, or necessary prior
to entering into a contract at the request of the person
compliance with a legal obligation to which the personal information
controller is subject
to protect the vital interests of the person, i.e. life and health
in response to national emergency or for public order & safety as
prescribed by law
necessary for the constitutional or statutory mandate of public authority
for the legitimate interests of the personal information controller or of the
third party whom it is disclosed except if fundamental constitutional rights
are adversely affected
When is processing of sensitive
personal information allowed?
If any of the following is present:
1. prior consent pursuant to a specified purpose
2. required by law or regulations
3. if necessary to protect life and health of the person, if he is legally or
physically incapable to express prior consent
4. to achieve the lawful & noncommercial objectives of public organizations
Three (3) Security Measures for the
protection of personal data
Personal information controllers (PIC) shall implement
appropriate
(1) organizational,
(2) physical, and
(3) technical security measures
The PIC shall ensure that any natural person does not
process personal information without their precise
instructions and guidelines
Organizational Security Measures
Designation of a Data Compliance Officer/s

Must have Data Protection Policies
Must have a record of Processing Activities that describes the data
processing system & the responsibilities of the individuals with
access to personal data
Proper management of Human Resources
Proper procedure in data collection, management, monitoring,
retention, and disposal
The PIC must have a contractual agreement to bind its processors
to comply in the same manner with the law
Physical Security Measures
Policies to limit access to workstation, stock rooms, or

facility
Design of office space and furniture to provide privacy
Clear duties and schedule of the processors
Policies regarding transfer, removal, disposal, and re-use
of electronic media to ensure protection of personal data
Policies to prevent mechanical destruction of files and
equipment & the workstation must be secured against
natural disasters, external access or similar threats
Technical Security Measures
Policy regarding processing of personal data

Safeguards against unlawful usage or interference with
computer network
Ability to ensure integrity and confidentiality of the systems
Regular monitoring for breaches and foreseeing potential
vulnerabilities in order to take preventive action
Ability to restore the availability of data in the event of a
physical or technical event
A process for regular testing of the efficacy of the security
measures
Encryption of personal data during storage, transit, or
authentication process
Rights of the person whose personal
data is to be processed
To be informed of the nature, extent, purpose, method, basis,
recipient, period of storage and identity of the personal
information controller
To object and refuse, unless pursuant to a subpoena, contractual
obligation, necessary in the context of employer-employee
relationship, or due to a legal obligation
To access upon demand, and request a copy
To cause rectification any inaccuracy or error
To erase, withdraw, block, or destroy from the filing system if
processing was unlawful or data is incomplete/false
To claim damages due to unlawful processing
Data Breach Notification
The PIC shall notify the National Privacy Commission (NPC)

and the person whose personal information was breached,
within 72 hours upon knowledge of the breach
If it involves sensitive personal information or any
information which may be used in identity fraud or give rise
to risk of serious harm to the person
The report may be written or electronic following the
contents/format required by the Rules
What are the 5 Pillars of Compliance?
1. Register your organization with the NPC

2. Appoint a Data Protection Officer
3. Conduct a Privacy Impact Assessment (PIA)
4. Create a Privacy Manual
5. Implement Privacy and Data Protection Measures
Exercise Breach Reporting Procedures

Punishable Acts
(imprisonment and /or fine)
Unauthorized processing of personal or sensitive personal
information
Accessing personal or sensitive personal information due to
negligence
Improper disposal of personal or sensitive personal information
Processing of personal or sensitive personal information for
unlawful purposes
Unauthorized access or intentional breach
Concealment of security breaches involving sensitive personal
information
Malicious disclosure
Unauthorized disclosure
Punishable Acts
BOTTOMLINE: WHAT SHOULD WE
DO?
IF YOU CAN’T PROTECT IT,

DON’T COLLECT IT.
RESPECT PEOPLE’S PRIVACY

November 11, 2023

INSURANCE CODE
Presidential Decree No. 602,
as Amended by RA 10607
WHAT IS A
CONTRACT OF INSURANCE?
It is an agreement whereby one undertakes for a consideration
to indemnify another against loss, damage or liability arising
from an unknown or contingent event.
Any contingent or unknown event, whether past or future, which

may injure a person having an insurable interest, or create a
liability against him, may be insured.
A contingent event is one that is not certain to take place.
An unknown past event is one which had already happened, but

no one is aware if it happened or not.
WHAT ARE THE 4 ELEMENTS
OF A CONTRACT OF INSURANCE?
1. Consent
2. Subject Matter
3. Cause or Consideration
4. Insurable Interest
WHO ARE THE PARTIES TO

A CONTRACT OF INSURANCE?
1. Insurer – the Life or Non-Life Insurance
Company
2. Insured or Assured – anyone except a
public enemy may be insured
WHAT ARE THE CHARACTERISTICS
OF A CONTRACT OF INSURANCE?
1. Consensual
2. Voluntary
3. Aleatory – dependent on some contingent or uncertain
event
4. Executed as to the Assured – after payment of the premium
5. Executory as to the Insurer – becomes demandable when
there is a loss
6. Conditional – subject to the happening of the event insured
against
7. Personal – each party considers the character, credit and
conduct of the other
CONSIDERATION FOR A
CONTRACT OF INSURANCE
An insurance business consists in undertaking, for a

consideration, to indemnify another against loss, damage or
liability.
The fact that no profit is derived from an insurance contract,

shall not be deemed conclusive to show that an entity is not
engaged in an insurance business.
CONSTRUCTION OF A
CONTRACT OF INSURANCE
Ambiguities or vagueness will be strictly construed against the party that
caused them. As the insurance policy is prepared solely by the insurer, any
ambiguity shall be construed against it and in favor of the insured. CONTRACT
OF ADHESION – One party imposes a ready-made contract on another party.
“Take it or Leave it”
EXAMPLE: The fire insurance contract purchased by Hannah from ABC

Insurance Company states that a Notice of Loss must be given within 5 days
from the date of the occurrence of the event. It is not clear if this is 5 calendar
days or 5 working days. The ambiguity will be construed against ABC Insurance
Company. Hannah can file the Notice of Loss within 5 calendar or working days.
A fire occurred on Friday, October 7, 2022. 5 calendar days is October 12, 2022.
5 working days is October 14, 2022 – do not count Saturdays, Sundays and
Holidays. Because of the ambiguity, Hannah can file the Notice of Loss on or
before October 14.
WHO SUPERVISES AND
REGULATES THE INSURANCE INDUSTRY?
The Insurance Commission is tasked under the Insurance Code to

supervise, monitor and regulate the insurance industry. This includes
life insurance companies, non-life insurance companies, Health
Maintenance Organizations (HMOs) and pre-need companies.
WHAT ARE THE
KINDS OF INSURANCE?
LIFE INSURANCE
• Individual
• Group Life
• Industrial Life
NON-LIFE INSURANCE
• Marine
• Fire – loss by fire, lightning, windstorm,
• Property
• Casualty – employer’s liability, motor vehicle, burglary and theft,
personal accident, health insurance
CONTRACTS OF SURETYSHIP AND BONDS – surety guarantees the

performance of the principal of an obligation or undertaking
REINSURANCE – An insurer procures a third party to insure him against loss

or liability by reason of the original insurance.
EXAMPLE OF REINSURANCE
Amazon Supermall is a large mall complex in Tarlac. The owners of the mall
purchased a P2.5 Billion Fire Insurance from XYZ Insurance Company (XYZ)
and paid P38M in premiums.
The risk to XYZ is huge in case the mall gets burned. So XYZ will buy
reinsurance policy from the Reinsurance Company of Japan (RCJ). In case
there is a fire that destroys the mall, the owner of the mall will file a claim
against XYZ and XYZ will in turn file a claim against RCJ.
Note: Another way to spread the risk is for XYZ to form a panel with several
other insurance companies to insure the mall against fire. This way you spread
the risk over many insurers.
Example: XYZ will insure for P1.2B, HIJ will insure for P200M, LMN will insure
for P800M and PQR will insure for P300M.
WHO ARE THE PARTIES IN
A CONTRACT OF REINSURANCE
1. The Insurer or Seller of the Reinsurance Policy – RCJ in our example in the
previous slide
2. The Insured / Assured or Buyer of the Reinsurance Policy – XYZ in our
example in the previous slide
The owner of the Amazon Supermall in our example is NOT a party to the
reinsurance contract.
Bumili ng insurance policy ang insurance company, para hindi ito

malugi kung sakaling may claim.
WHAT IS A
VARIABLE INSURANCE CONTRACT?
Variable insurance contracts are investment linked, meaning they provide
benefits or values that vary depending on investment results. It is called
variable because the investment results vary depending on market
conditions.
It is a permanent life insurance and investment rolled into one

product. It provides living, death, and disability benefits plus an investment
component.
EXAMPLE: Jacinta purchased a P1,000,000 variable life insurance contract.

Part of her annual premiums is invested by the insurer in various investment
products. If Jacinta dies, she will get P1,000,000 (the face value of the
policy) PLUS any investment income that her policy may have earned.
This makes the purchase of life insurance less morbid. “Bakit ako bibili ng
life insurance? Ayoko pang mamatay.”
WHAT IS A
CONTRACT OF SURETYSHIP?
Suretyship is an agreement where a party called the “surety”

guarantees the performance of another party called the
“principal obligor” of an obligation or undertaking in favor of a
third party called the “obligee.”
EXAMPLE OF SURETY
ABC Builders was hired by San Ildefonso University to build a

gymnasium for P85M. In order to guarantee the faithful performance
by ABC Builders of the contract as to quality of work, timeliness of
completion of the project and other risks, ABC purchases a surety or
performance bond from DEF Insurance Company.
If the quality of the work of ABC is poor or the project is delayed, San
Ildefonso University can call on DEF to pay it damages. DEF can then
run after ABC Builders.
Obligor – ABC
Obligee – San Ildefonso University
Surety - DEF
WHAT IS AN
INSURABLE INTEREST?
It is an interest which the law requires the owner of an insurance

policy to have in the thing or person insured. The person buying the
insurance must have a relation, connection or concern with the subject
matter and he will derive pecuniary (financial) benefit or advantage
from its preservation.
EXAMPLE 1: Peter obtains car insurance for the Toyota Vios that he
owns.
EXAMPLE 2: Phoebe cannot buy car insurance for the Toyota Vios
owned by Peter. Phoebe has no insurable interest in Peter’s car.
WHAT IS AN
INSURABLE INTEREST?
EXAMPLE 3: Carlos loaned P7,500,000 from BDO so he can buy a

house and lot in Baliwag. BDO requires Carlos to buy life insurance
worth P7,500,000 with BDO as beneficiary. If Carlos dies, BDO collects
the insurance proceeds to pay for the loan. This way bayad ang utang
ni Carlos sa BDO. The family of Carlos will get the house and lot, debt
free. BDO has an insurable interest in the life of Carlos since BDO
loaned money to Carlos.
EXAMPLE 4: Oliver purchased a P5,000,000 life insurance policy on

the life of Sen. Procopio since he heard that Senator Procopio is
already sick with cancer. Hindi puede. Oliver has no insurable interest
in the life of Senator Procopio. Oliver cannot insist to an insurance
company to issue a policy even if Oliver is willing to pay the premium .
WHAT IS THE INSURABLE INTEREST
IN PROPERTY INSURANCE?
In property insurance the insurable interest should pertain to:
• The property itself;

• Any relation thereto (like BDO in the previous slide) or
• Any liability regarding the property (tenant buys fire insurance for
contents of the rented property)
The insurable interest may consist in:
• An existing interest;
• An inchoate interest founded on an existing interest;
• An expectancy coupled with an existing interest
Insurable interest in property insurance is the extent to which the insured

might be damaged by loss or injury thereof.
WHO IS A
BENEFICIARY?
The person named or designated in a contract of insurance who will receive
the benefits which become payable upon the happening of the contingent or
unknown event. Kanino ibabayad ang proceeds?
EXAMPLE 1: Bert buys life insurance for P500,000 and designates his wife
Laura as beneficiary.
When one insures his own life, he may designate any person as beneficiary
whether or not the beneficiary has an insurable interest in the life of the
insured. In Example 1 above, Bert can designate his high school teacher Miss
Aldaba as beneficiary. Hindi kailangan na may insurable interest ang
beneficiary sa insured person, kung ang bumili ng life insurance ay ang person
mismo.
However, persons guilty of adultery or concubinage cannot be life insurance

beneficiaries, Art. 739, Civil Code. Bawal mag designate ng kabit as
beneficiary.
DESIGNATION
OF BENEFICIARY
GENERAL RULE: The insured has the right to change the

designated beneficiary in the policy. Here the designation of the
beneficiary is revocable (can be changed anytime).
EXCEPTION: When the designation of the beneficiary is

irrevocable, the designation cannot be changed without the
consent of the original beneficiary
WHAT IS
CONCEALMENT?
The insured withholds information of material facts from the

insurer.
Whether intentional or not intentional, the injured party is entitled to

rescind the contract on the ground of concealment and
misrepresentation.
EXAMPLE: Gregorio purchased Life Insurance worth P3,000,000 from

Filipinas Life. Gregorio concealed the fact that he has Stage 4 Lung
Cancer and has been given by his doctor only one year to live.
Filipinas Life can rescind the insurance policy.
Nag lihim ng mahalagang impormasyon.

WHAT IS
MISREPRESENTATION?
The insured makes erroneous statements of facts with the intent

of inducing the insurer to enter into the insurance contract.
Whether intentional or not intentional, the injured party is entitled to

rescind the contract on the ground of concealment and
misrepresentation.
EXAMPLE: Jeremiah purchased a fire insurance from ABC Insurance

Company and he stated that his house is made of concrete and strong
materials and that it was situated in a gated subdivision. There was a
fire and Jeremiah’s house was destroyed. It was later found out that
the house was made of light materials and was in a squatters’ area.
Hindi nagsabi ng katotohanan

HOW DO WE DETERMINE WHETHER THE
MISREPRESENTATION OR
CONCEALMENT IS MATERIAL?
The materiality of the representation 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 representation is made, in forming his estimates of the
disadvantages of the proposed contract or in making his inquiries.
Was the misrepresentation or concealment enough to FOOL the other party

into entering into the contract?
EXAMPLE: Patricia purchased a fire insurance policy and stated that her
house is in a residential area. She failed to mention that there were some sari-
sari stores in the area and therefore it is not 100% residential. Is this material
misrepresentation? NO. Minor mistake or misrepresentation. Many sari-sari
stores are found even in residential areas all over the country.
Hindi lahat ng concealment o misrepresentation ay sapat para ma

rescind ang policy.
WHAT IS
DOUBLE INSURANCE?
It exists when the same person is insured by several insurers separately in
respect to the same subject or interest. It is NOT prohibited by law but it
may be contractually prohibited by an insurance clause.
EXAMPLE: Brandon owns a warehouse in Pampanga with a fair market

value of P5M. He insures the same with three companies - ABC Insurance
for P5M, with DEF Insurance for P5M and GHI Insurance for P5M. Here
there is double insurance since the total sum insured is P15M when the
value of the property is only P5M
In this case if there is a loss, Brandon can only claim up to the agreed
valuation or up to the full insurable value (P5M) from any, some or all of the
insurers.
You cannot recover more than the value of your property.

REQUISITES OF
DOUBLE INSURANCE
1. The injured person is the same;

2. There are 2 or more insurers insuring separately (not a
consortium);
3. The subject matter is the same;
4. The insured’s interest is the same;
5. The risk or peril insured is the same.
NOTE: Like in our study of a Double Sale, we can have multiple

insurers involved and not only two. It is called Double Insurance
but is really Multiple Insurance
WHAT IS OVER INSURANCE?
It exists when the amount of insurance is beyond the value of the insured’s
insurable interest. The insurer is NOT liable for the total amount of the
insurance taken. Liability is limited to the amount of insurable interest in the
property.
EXAMPLE: Brandon owns a warehouse in Pampanga with a fair market value

of P5M. He insures the warehouse with ABC Insurance for P30M. In this case
if there is a loss, Brandon can only claim up to P5M from ABC. P5M is the FMV
of the property not P30M.
However, ABC needs to return the premium paid by Brandon in proportion to

the excess amount.
P30M insurance = P85,000 premium actually paid

P5M insurance = only P16,000 premium should be paid
Difference of P69,000 (P85,000 – P16,000) will be returned
by ABC Insurance.
WHAT IS COMPULSORY MOTOR
VEHICLE LIABILITY INSURANCE?
It is protection coverage that will answer for legal liability for losses
and damages for bodily injury and/or property damage that may arise
from the use and operation of a motor vehicle by its owner.
It is unlawful for any land transportation operator or owner of a motor

vehicle to operate the same in public highways unless there is an
insurance policy or guaranty to indemnify the death or bodily injury of
a third party or passenger arising from the sue thereof.
A motor vehicle is any vehicle that is propelled by any power

other than muscular power using the public highways.
EXCEPTIONS: road rollers, trolley cars, street sweepers, golf carts,

lawnmowers, bulldozers, forklifts, cranes, IF NOT USED in public
highways.
WHAT IS COMPULSORY THIRD
PARTY LIABILITY INSURANCE?
Registration of any vehicle will not be made or renewed with the LTO
without complying with the requirements of a CTPL using:
1. Insurance policy;
2. Surety bond or
3. Cash bond
The purpose of CTPL is to give immediate financial assistance to

victims of motor vehicle accidents and/or their dependents regardless
of the financial capability of the motor vehicle owner or the operators
responsible for the accident.
WHAT IS
A NO FAULT CLAUSE?
The injured party or passengers or the heirs of the deceased is given the option
to file a claim for death or injury without the necessity of proving fault or
negligence of any kind.
Conditions for the application of the No Fault Clause:
1. The claim must be for death or bodily injuries only (no property damage);
2. Total indemnity in respect to any person shall not exceed P15,000;
3. The following proof of loss shall be sufficient evidence to substantiate the
claim:
• Police report of the accident;
• Death certificate and evidence to establish the payee
• Medical report or evidence of medical expenses
4. Claim must be made against one motor vehicle only:

• Gains the insurer of the vehicle where one is the passenger or
• The offending vehicle
WHO CAN BE A CLAIMANT?
A. Passenger – Any fare paying person being transported and

conveyed in and by a motor vehicle for transportation of
passengers for compensation, including persons expressly
authorized by law or the operator to ride without fare;
B. Third Party – Any person other than a passenger and shall

EXCLUDE a member of the household or a member of the family
within the second degree of consanguinity or affinity of a motor
vehicle owner or operator, or his employee
FROM WHOM SHALL THE CLAIM BE MADE?
A. In case of an occupant of a vehicle, a claim shall be filed

against the insurer of the vehicle in which the occupant is riding,
mounting or dismounting from.
B. If not an occupant, claim shall be filed against the owner of the

offending or the insurer of the offending vehicle.
Notice of claim must be presented within 6 months from the date of

the accident. Otherwise, the claim is deemed waived.
An action or suit must be filed with the Insurance Commission within 1

year from the denial of the claim.
PAYMENT OF CLAIMS
Once there is a claim, the insurance company shall ascertain the truth
and the extent of the claim and make payment within 5 days from the
time an agreement as to the amount to be paid is made.
AUTHORIZED DRIVER
This is a stipulation in the motor vehicle insurance that provides that
the driver, other than the insured owner, must be duly licensed to
drive the motor vehicle. If not, the insurer has no liability.
The authorized driver must be the insured OR any person driving on

the insured’s order or with his permission, provided that the person
driving is permitted in accordance with licensing or other laws or
regulations to drive the vehicle and is not disqualified.
November 14, 2023

INTELLECTUAL PROPERTY LAW
WHAT INTELLECTUAL RIGHTS
SHOULD BE REGISTERED?
1. Trademarks – brand names and logos

2. Patents - inventions
3. Copyrights – original artistic and literary works
WHAT IS A TRADEMARK?
It 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.
Defines the brand of the product or service to differentiate it

from others
WHAT IS A PATENT?
It is a grant issued by the Intellectual Property Office (IPO)

and is an exclusive right granted to a product, process or an
improvement of a product or process which is new, inventive
and useful given to its inventor the right to exclude others
from making, using, or selling the product of his invention
during the life of the patent.
WHAT IS A COPYRIGHT?
Copyright is the legal protection extended to the owner of the

rights in an original work. “Original work” refers to every
production in the literary, scientific and artistic domain.
Among the literary and artistic works enumerated in the IP

Code includes books and other writings, musical works, films,
paintings and other works, and computer programs.
Copyright laws grant authors, artists and other creators

automatic protection for their literary and artistic creations,
from the moment they create it.
PATENT vs. TRADEMARK vs. COPYRIGHT
PATENT TRADEMARK COPYRIGHT

Subject Matter Technical solution to a Any sign to Literary or artistic
problem which is of distinguish the goods works
novelty, involves an or service of an
inventive step and is of enterprise
industrial application
Where Intellectual Property Intellectual Property National Library

registered Office (IPO) Office (IPO)
Duration of 20 years from date of 10 years but may be 50 years after

the right filing with no renewal renewed death of author
Who it Inventor Creator Author or Artist

protects
WHAT ARE THE 3 ELEMENTS OF A PATENT?
1. Novelty (New) – An invention is novel or new if it does

not form part of a prior work
2. Inventive Step (Inventive) – It is an inventive step, if

having regard to prior art, it is not obvious to a person
skilled in the art at the time of filing date or priority date
of application claiming the invention
3. Industrial Applicability (Useful) – An invention that

can be produced and used in any industry shall be
considered industrially applicable
WHY DO WE PROTECT PATENTS?
1. Patent law seeks to foster and reward invention;
2. It promotes disclosure of inventions to stimulate further

innovation and to permit the public to use the invention freely
once the patent expires. The term of protection for a patent
is 20 years from the date of filing, with no possibility of
renewal.
3. Patent law seeks to ensure that ideas in the public domain

remain there for free use of the public after patent expires.
NO PATENT = NO PROTECTION
INVENTION then INNOVATION
INNOVATION = IMPROVEMENT
OF AN INVENTION
INVENTIONS WHILE EMPLOYED
1. If the inventive activity is NOT part of his regular duties

even if he uses the time, facilities and materials of the
employer, the right to the patent belongs to the
EMPLOYEE;
2. If the invention is the result of the performance of the

employee’s regularly assigned duties, the right to the
patent belongs to the EMPLOYER, unless there is
agreement to the contrary.
WHAT IS THE FIRST TO FILE RULE?
When two or more persons have made the invention

separately and independently of each other, the right to the
patent shall belong to the person who filed an application
for such an invention or the applicant who has the earliest
filing or priority date.
WHAT ARE THE 4 GROUNDS
FOR PATENT CANCELLATION?
Any interested party may petition to cancel a patent on any of the

following grounds:
1. The claimed invention does not qualify for registration as a utility

model and is among the inventions that are not patentable;
2. The description and the claims do not comply with the prescribed
requirements;
3. No drawing which is necessary for the understanding of the invention

was submitted;
4. The owner of the patent is not the inventor or his successor in

interest.
WHAT IS PATENT INFRINGEMENT?
Patent infringement constitutes the
(a) making, using, offering for sale, selling or importing a

patented product or obtained from patented processes or
(b) use of patented processes without authority from the

owner of the patent (patentee).
HOW DOES ONE GET OWNERSHIP
OF A TRADEMARK?
OLD RULE - Prior to RA 8293 the rights to a trademark were acquired
through the ”First to Use” system.
CURRENT RULE – The right to a trademark is acquired through

registration with the IPO. “First to File” System
A trademark or service mark registration is valid for 10 years.

After the registration of a trademark, the registrant is required to
file a Declaration of Actual Use with proof of such use within 1
year from the 5th anniversary of the date of the registration of
the mark, or within 6 years. Otherwise, the mark shall be
removed from the Trademark Register by the IPO.
MUST A TRADEMARK BE REGISTERED
WITH THE IPO BEFORE IT IS
PROTECTED?
NO. A mark that is considered by competent authority to be
well known internationally, whether or not it is registered in
the Philippines is still protected. Harvard University vs.
Harvard Jeans (2011).
This is an exception to the “First to File” rule.

ILLUSTRATIVE CASES ON TRADEMARKS
- McDonalds vs. MacJoy (2007) – McDonalds won
- Harvard University vs. Harvard Jeans (2011) – Harvard

University won
- Coffee Mate vs. Coffee Match (2017) – Nestle lost

TRADEMARK INFRINGEMENT
vs.
UNFAIR COMPETITION
TRADEMARK UNFAIR
INFRINGEMENT COMPETITION
ESSENCE Unauthorized use of a Passing of one’s goods as
mark that of another
INTENT Intent to deceive or bad Intent to deceive or bad

faith is NOT required faith IS required
REGISTRATIO Prior registration of Registration is NOT

N mark allegedly infringed required
is required
475
WHAT WORKS CAN BE
PROTECTED BY COPYRIGHT?
1. Architectural Designs
2. Derivative Works
3. Original Artistic and Literary Works
4. Published Edition of Work.
“Unlike a patent, a copyright gives no exclusive right to the

art disclosed; protection is given only to the expression of
the idea, not the idea itself.”
Copyright protection for artistic, literary and derivative works

lasts during the lifetime of the author plus 50 years after the
author's death.
IS NEWS FOOTAGE COPYRIGHTABLE?
YES. The news or the event itself is not copyrightable. But

the event itself can be captured and presented in a
specific medium. Since the news coverage involves a
creative process and originality, the news footage is an
expression of the news.
WHAT WORKS ARE NOT
SUBJECT TO COPYRIGHT?
1. Any idea, procedure, system, method of operation, concept,

principle, discovery or mere data as such even if they are
expressed, explained, illustrated or embodied in a work;
2. News of the day and other miscellaneous facts having the

character of mere items of press information or
3. Any official text of a legislative, administrative or legal

nature, as well as any official translation thereof;
4. Works of the Government

WHAT IS INTELLECTUAL PIRACY
OR COPYRIGHT INFRINGEMENT?
Infringement of copyright or piracy consists in the doing by

any person, without the consent of the owner of the
copyright, of anything the sole right to do which is conferred
on the copyright owner.
WHAT ARE THE ELEMENTS OF

COPYRIGHT INFRINGEMENT?
1. Existence of a valid copyright;
2. Unauthorized copying, distribution, reproduction or
sale of a copyrighted work.
WHAT IS THE FAIR USE DOCTRINE?
The fair use of a copyrighted work for criticism, news

reporting, teaching (including multiple copies for classroom
use), research and similar purposes is NOT copyright
infringement
This is an exception to copyright infringement.

FOUR FACTORS TO DETERMINE FAIR USE
1. The purpose and character of the use including

whether such use is of a commercial nature or is for
non-profit educational purposes;
2. The nature of the copyrighted work;
3. The amount and substantiality of the portion

used in relation to the copyrighted work as a whole;
and
4. The effect of the use upon the potential market

for or value of the copyrighted work.
ILLUSTRATIVE CASES ON COPYRIGHT
- Original Pilipino Music (OPM) played in malls, restaurants,

stores – National Bookstore Radio
- Photocopying of books for classroom use
- Using a popular song as an election campaign jingle
- Copying a famous work of art
- Putting up a stage play written by a famous writer but
changing the ending
CONSUMER PROTECTION IN
THE PHILIPPINES
WHAT IS THE CONSUMER ACT
OF THE PHILIPPINES ?
The Consumer Act of the Philippines, Republic Act No. 7394 is the legal basis
for consumer protection in the country. It became law on July 15, 1992.
The law embodies the state policy on the protection of consumers and
establishes standards of conduct for business and industry in the country.
The Act aims to protect the “interest of the consumer, promote his general
welfare and establish standards of conduct for business and industry” by
adopting the following measures:
• protection against hazards to health and safety;

• protection against deceptive, unfair and unconscionable acts and
practices;
• provision of information and education to facilitate sound choice and the
proper exercise of rights by the consumer;
• provision of adequate rights and means of redress; and
• involvement of consumer representatives in the formulation of social and
economic policies.
IMPORTANT PROVISIONS OF THE
THE CONSUMER
ACT OF THE PHILIPPINES
Important sections of the law:
1. Consumer product quality and safety

2. Deceptive, Unfair and Unconscionable Sales Acts and
Practices
3. Consumer Products and Service Warranties
4. Labeling and Packaging
5. Price Tags
8 BASIC RIGHTS
OF CONSUMERS
All consumers have 8 basic rights pertaining to:
1. Basic needs
2. Safety
3. Information
4. Choice
5. Representation
6. Redress
7. Consumer education
8. A healthy environment
5 BASIC RESPONSIBILITIES
OF CONSUMERS
All consumers have 5 basic responsibilities:
1. Critical awareness
2. Action
3. Social Concern
4. Environmental awareness
5. Solidarity
WHO IMPLEMENTS THE CONSUMER
ACT OF THE PHILIPPINES ?
The provisions of the law shall be enforced by the following

implementing agencies:
1. the Department of Health with respect to food, drugs,

cosmetics, devices and substances;
2. the Department of Agriculture with respect to products

related to agriculture, and
3. the Department of Trade and Industry with respect to other

consumer products not specified above.
WHAT ARE DECEPTIVE SALES
ACTS AND PRACTICES?
Deceptive Sales Acts or Practices:
a) has the sponsorship, approval, performance, characteristics, ingredients,

accessories, uses, or benefits it does not have;
b) is of a particular standard, quality, grade, style, or model when in fact it is not;
c) is new, original or unused, when in fact, it is in a deteriorated, altered,
reconditioned, reclaimed or second-hand state;
d) is available to the consumer for a reason that is different from the fact;
e) has been supplied in accordance with the previous representation when in fact
it is not;
f) can be supplied in a quantity greater than the supplier intends;
g) a service, or repair is needed when in fact it is not;
h) a specific price advantage exists when in fact it does not;
i) involves or does not involve a warranty, a disclaimer of warranties, particular
warranty terms or other rights, remedies or obligations if the indication is false;
FALSE, DECEPTIVE OR
MISLEADING ADVERTISEMENT
False, Deceptive or Misleading Advertisement. – It shall be

unlawful for any person to disseminate or to cause the
dissemination of any false, deceptive or misleading
advertisement by Philippine mail or in commerce by print,
radio, television, outdoor advertisement or other medium for
the purpose of inducing or which is likely to induce directly or
indirectly the purchase of consumer products or services.
WHAT ARE PRODUCT SERVICE
AND WARRANTIES?
Product Service and Warranty
• A contract whether express or implied between the buyer and the

seller of a consumer product or owner of a service firm concerning
the rights and obligations of both parties.
• Designation of Warranty to Repair, Replace or Refund
• Duration of Warranty or Stipulation of seller and consumer on the

period of 60 days to 1 year following the sale of a new consumer
products
NO RETURN, NO EXCHANGE?
“NO RETURN, NO EXCHANGE” or words to that effect shall not be

written into the contract of sale, receipt or in any document
evidencing such sale or anywhere in a store or business
establishment.
This is prohibited because it is considered deceptive. Sellers are

obliged to honor their warranties and consumers are allowed to
return or exchange the goods, or avail themselves of other remedies,
in case of hidden faults or defects.
Only when product is faulty or defective. If the buyer changed his

mind or did not like the product he purchased, it cannot be returned
or exchanged.
LABELLING AND FAIR PACKAGING
Provides for the minimum labelling requirements of all consumer products domestically
sold, whether manufactured locally or imported.
MINIMUM REQUIREMENTS:
• Registered trade name or brand name
• Registered trademark
• Registered business name
• Address of the manufacturer, importer, repacker of the consumer product in the
Philippines
• General make or active ingredients
• Net quantity of contents
• Country of manufacture if imported
• If consumer product is manufactured, refilled or repacked under license from a
principal, the label shall state the fact
• Flammable or inflammable
• Direction for use
• Warning of toxicity
• Wattage, voltage or amperes
• Process of manufacture, if necessary
LABELLING AND FAIR PACKAGING
Labeling Requirements of Cigarettes. – All cigarettes for sale or

distribution within the country shall be contained in a package
which shall bear the following statement or its equivalent in
Filipino: "Warning" Cigarette Smoking is Dangerous to Your
Health".
Such statement shall be located in conspicuous place on every

cigarette package and shall appear in conspicuous and legible
type in contrast by typography, layout or color with other
printed matter on the package.
Any advertisement of cigarette shall contain the same warning

as indicated in the label.
PRICE TAGS
1. When the consumer pays in cash, he shall pay only the price indicated
in the price tag.
2. When the consumer pays through a credit/ATM/debit card, he shall

pay only the price indicated in the price tag.
3. When the retailer offers the consumer an option to pay in cash, card
or on installment, the same is allowed provided the payment options
shall be disclosed by way of a separate information to the consumer but
not in the price tag.
4. Price tag indicating a separate CASH PRICE TAG and REGULAR PRICE
TAG on each product or service is not allowed.
PRICE TAGS
Every retailer is required to display a price tag to indicate the price of

each consumer good and/or service. HINDI PUEDE ANG “PM IS
THE KEY.”
The price tag must be written clearly, indicating the price of the
consumer product including Value Added Tax (VAT) whenever the
consumer product is VATABLE. Service charge, if any, shall not be
included in the price tag.
If there is no price tag on basic necessities and prime commodities,

this is prima facie evidence of profiteering which is punishable under
RA 7851, the Price Act of 1992.
WHAT IS THE LEMON LAW ?
Republic Act No. 10642 (An Act Strengthening Consumer Protection in

the Purchase of Brand New Motor Vehicles)
• Implementing agency: DTI

• Covers brand new motor vehicles that are to be in nonconformity with
the standards or specifications of the vehicle’s manufacturer or
distributor
• Provides remedies through Mediation, Arbitration, Adjudication
REPAIR, REPLACE, REFUND

DISCLOSURE ON RESALE
OF A RETURNED MOTOR VEHICLE
Should the returned motor vehicle be made available for resale, the
manufacturer, distributor, authorized dealer or retailer shall, prior
to sale or transfer, disclose in writing to the next purchaser of the
same vehicle the following information:
(a) The motor vehicle was returned to the manufacturer, distributor,

authorized dealer or retailer;
(b) The nature of the nonconformity which caused the return; and
(c) The condition of the motor vehicle at the time of the transfer to
the manufacturer, distributor, authorized dealer or retailer.
The responsibility of the manufacturer, distributor, authorized

dealer or retailer under this section shall cease upon the sale of the
affected motor vehicle to the first purchaser.
INSTALLMENT ONLY PURCHASES
ARE PROHIBITED
If a buyer wants to purchase an item for CASH, the seller cannot

force the buyer to purchase the item on installment.
DTI Administrative Order 21-03 (Guidelines for Payment Options

on the Purchase of Consumer Products and Services) which took
effect on April 23, 2021 stipulates that all persons or companies,
whether registered or unregistered, must provide consumers with
the option to pay in cash.
PAY IN CASH OR PAY ON INSTALLMENT AS AN OPTION OF THE

CONSUMER. HINDI PUEDE NA PILITIN BUMILI ON INSTALLMENT.
QUESTION: Because of recent incidents of robberies and hold-ups,

a supermarket requires all consumers to pay only using Gcash,
Maya or other online platforms. Bawal ang cash. Is this allowed?
Under DTI Administrative Order 21-03 this is also prohibited.
November 21, 2023

FINAL EXAMINATIONS
In Person
Saturday, November 25, 2023
9:00 am to 12:00 nn
CBAA Rooms 401 and 402
60 points Multiple Choice Questions

40 points Essay Questions
505
GOVERNMENT PROCUREMENT
REFORM ACT (GPRA)

WHAT IS PROCUREMENT?
Procurement is commonly defined as the acquisition of

appropriate goods and/or services with the following
parameters:
(1) the best possible price

(2) quality
(3) quantity
(4) time of delivery, and
(5) location.
WHAT IS PROCUREMENT?
The procurement process formally starts from the point

where the need to make a purchase to deliver an
objective has been identified, and its process ends when
the product has been used up or sold, or the service
contract has been delivered completely and the supplier or
contractor is paid in full.
Purchasing is not the same as Procurement.

Procurement is bigger. For example, when you rent
something, you are procuring something, but you are not
purchasing it.
WHAT IS PUBLIC PROCUREMENT?
Procurement is also a major activity in government. In the

Philippines, hundreds of billions of pesos are spent by the
government to buy the goods and services it needs to operate
the bureaucracy, carry out projects and deliver services to its
citizens.
The World Bank cites that an average of 15% of the country’s

annual budget pass through government procurement
processes for infrastructure, equipment, materials, supplies and
services.
Budget of the Philippines for 2024 is P5.768 Trillion

15% is P865 Billion
WHAT IS PUBLIC PROCUREMENT?
Procurement plays a central role in delivering all Philippine government
priorities – from the free drugs and medicines at public hospitals, the
public school buildings, desks and chairs, to the guns and ammunitions
of the military and police and the electronic systems that supported
our recently-concluded automated elections.
Good procurement is essential to ensure good public services, from

buying goods and services that work as they are supposed to, to
achieving savings that can be ploughed back into front-line services
The Philippines’ procurement system was described as cumbersome

and prone to corruption as there were many outdated and
inconsistent laws and many agencies dealing with issuance of
guidelines and procedures in procurement.
WHAT IS THE GPRA?
With the passage in January 2003 of the Government

Procurement Reform Act (GPRA) or Republic Act No. 9184,
the Philippine procurement system was rationalized and
harmonized with international standards and best practices.
RA 9184 espoused the 3 principles of transparency,

competitiveness and accountability. It also mandates
the use of streamlined procurement processes and
monitoring of government procurement activities by the
public.
WHAT IS THE GPPB?
The GPRA created the Government Procurement Policy Board
(GPPB), as the central policy and monitoring body with the following
functions:
 Protect national interest in all matters affecting public procurement,

having due regard to the country’s regional and international
obligations
 Formulate and amend, whenever necessary, the implementing rules
and regulations and the corresponding standard forms for
procurement
 Ensure that Procuring Entities regularly conduct procurement
training programs and prepare a Procurement Operations Manual
for all offices and agencies of government; and
 Conduct an annual review of the effectiveness of the Government
Procurement Reform Act and recommend any amendments thereto,
as may be necessary
WHO ARE THE MEMBERS OF THE GPPB?
The GPPB is composed of the Secretary of Budget and
Management as Chairman and the Director General of NEDA as
Alternate Chairman
Members:
Secretary of Public Works and Highways

Secretary of Finance
Secretary of Trade and Industry
Secretary of Health
Secretary of National Defense
Secretary of Education
Secretary of Interior and Local Government
Secretary of Education
Secretary of Energy
Secretary of Transportation and Communication
Secretary of Science and Technology
A representative of the Private Sector
WHAT IS PhilGEPS?
An important breakthrough in the Government Procurement Reform

Act is the provision mandating all government agencies to utilize the
Government Electronic Procurement System (PhilGEPS) as
the single portal that shall serve as the primary source of information
on all government procurement.
The procurement process across all government agencies, from all

branches of government, to local government units and public
schools and universities, now involves announcing and advertising all
procurement opportunities, inviting qualified parties to bid,
evaluation of bids, awarding of contracts, monitoring of delivery and
performance and payment.
TRANSPARENCY
WHAT IS PhilGEPS?
This law set forth the rules and regulations for government procurement
transactions as guided by the principles of transparency, competitiveness,
streamlined procurement processes, accountability, and public monitoring.
It required ALL government requirements from goods, consulting

services to civil works to be centrally posted through PhilGEPS.
All National Government Agencies (NGAs), Government Owned and

Controlled Corporations (GOCCs), Government Financial Institutions
(GFIs), State Universities and Colleges (SUCS) including Local Government
Units (LGUs) are mandated to use the PhilGEPS.
Suppliers, manufacturers, contractors, consultants are also required to

register as well.
HOW DOES PhilGEPS BENEFIT
THE GOVERNMENT?
 Improved transparency in government procurement
 Enhanced competition and realization of value for money in
procurement
 Improved administrative efficiencies
 Reduction in procurement costs, including newspaper
advertisements
 Provision of audit trails through information posted in the system
 Serves as a medium in implementation of government
procurement policies, transparency and good governance
measures
 The expansive database of information in PhilGEPS aids
government agencies in procurement planning and monitoring
HOW DOES PhilGEPS BENEFIT
SUPPLIERS AND MERCHANTS?
 Access to government bid opportunities 24 hours a day and

7 days a week
 Downloading of electronic bid documents
 Automatic notification, through the user’s email, of bid
postings and supplements
 Savings on newspaper costs, transportation and manhours
 Information on government bid projects is important in
market research and in making business decisions
HOW ARE PhilGEPS’
MAJOR FUNCTIONALITIES?
 Electronic Bulletin Board

 Government Official Merchants’ Registry
 Electronic Catalogue
 Automatic Bid Notification
 E-Bidding
 Electronic Payment of PhilGEPS Fees and
Purchase of Bid Documents
LABOR LAW
AND SOCIAL LEGISLATION
GOVERNMENT MANDATED BENEFITS
1. Minimum Wages
2. Overtime Pay
3. Regular Holiday Pay
4. Premium Pay for Rest Day Work
5. Premium Pay for Special Holiday Work
6. Night Shift Differential
7. 5 Days Service Incentive Leave (SIL)
8. 13th Month Pay
9. Paternity Leave
10. Maternity Leave
11. Solo Parents Leave
12. Leave for Victims of VAWC
13. Two Months Special Leave for Women
14. Separation Pay
15. Retirement Pay
MINIMUM WAGES
RA 6727 (Wage Rationalization act) mandates the fixing of the

minimum wages applicable to different industrial sectors –
agriculture plantation, non-agriculture plantation, cottage or
handicraft, retail and service establishments
RA 6727 established mechanism and standards for the

determination of the minimum wage rates through the Regional
Tripartite Wage and Productivity Boards (RTWPB).
Prior to 1987 when RA 6727 was enacted the Philippines has a

minimum wage for the entire country. Now minimum wage are
set by region.
MINIMUM WAGES
Coverage: The basis of the minimum wage rates shall be the

normal working hours of eight (8) hours a day.
Barangay Micro Business Enterprises (BMBEs) with

Certificate of Authority, engaged in the production, processing or
manufacturing of products including agro-processing, trading and
services whose total assets, excluding the land on which the
office, plant and equipment are situated, are not more than P3
Million shall be EXEMPT from the coverage of the minimum wage
law.
MINIMUM WAGES
Apprentices and learners shall in no case be paid less than

75% of the applicable minimum wage rates. Apprentices and
learners are those who are overed by apprenticeship and learner
agreements duly approved by the Technical Education and Skills
Development Authority (TESDA).
A qualified employee with a physical disability shall be subject

to the same terms and conditions of employment and the same
compensation, privileges, benefits or allowances as a qualified
able-bodied person (RA 10524, Magna Carta for Persons with
Disability). No Discrimination. 100% of Minimum Wage
MINIMUM WAGES
Effective January 1, 2018 under the TRAIN Law, salaried

individuals earning annual gross compensation of P250,000 or
below per year are EXEMPTED from paying income taxes. The
computation of gross income includes:
• Holiday pay
• Overtime pay
• Premium Pay for Work on Rest Day
• Night shift differential pay
• Hazard Pay
MINIMUM WAGE
OF KASAMBAHAY
The minimum wage of a kasambahay shall not be less than:
1. P4,500 a month for those employed in the NCR

2. P2,500 to P4,000 a month for those employed in chartered
cities and first-class municipalities
3. P1,800 to P3,000 for those employed in other municipalities
RIGHTS AND BENEFITS
OF KASAMBAHAY
1. Minimum wage
2. Daily and weekly rest period (day off)
3. 5 Days Service Incentive Leave with Pay
4. 13th month pay
5. Freedom to dispose of wages
6. Coverage under SSS, Philhealth and Pag-Ibig
7. Board, lodging and medical attendance
8. Right to privacy
9. Access to outside communication
10. Access to education and training
11. Right to exercise their religious beliefs
OVERTIME PAY FOR
RANK AND FILE EMPLOYEES
Overtime pay refers to the additional compensation for work performed beyond
8 hours a day.
OT pay is computed using the basic pay of the employee only, excluding
allowances.
For work done in excess of 8 hours on an ordinary day = Plus 25% of the
hourly rate.
EXAMPLE: Jose earns P500 per day or P62.50 per hour. He worked 3 hours OT.
He is entitled to an additional P234.37 = P62.50 x 125% = 78.125 x 3 hours.
Total pay for the day: P500 + P234.37 = P734.37
Managers and Supervisors are NOT entitled to overtime pay.

REGULAR HOLIDAY PAY
Holiday pay refers to the payment of the regular daily wage for any
unworked regular holiday. This means that the employee is entitled to
100% of his wage rate EVEN IF HE OR SHE DID NOT REPORT FOR
WORK, provided he is present or is on leave with pay on the workday
immediately preceding the holiday.
EXAMPLE 1: Jose earns P500 per day. He worked on December 24,

2021, but did not report for work the next day, December 25, 2021
because it was Christmas Day. Jose is entitled to be paid P500 for
December 25, 2021 even if he did not report for work since it is a
regular holiday.
EXAMPLE 2: If Jose reported for work on Christmas Day, December

25, 2021, he is entitled to twice (200%) his daily wage. So P500 x
200% = P1,000 for working on December 25, 2021.
PREMIUM PAY FOR REST DAY
AND SPECIAL HOLIDAYS
Premium pay refers to the payment of additional compensation for work
performed within 8 hours on non-work days such as rest days or special days
(more commonly known as special holidays).
Generally, the no-work, no pay rule applies. If your rest day is Sunday and you
do not report for work, then you do not get paid. Same holds true if you do not
work on a special day like December 8 of every year (Feast of the Immaculate
Conception). No payment is given.
However, if you work on your rest day or on a special day, you are entitled to
receive an additional compensation of 30% of the basic wage.
EXAMPLE 1: Jenica earns P500 per day. She worked 8 hours on December 8,
2021, a special day. Jenica is entitled to be paid an additional P150 = P500 x
30%.
Total pay for the day for Jenica: P500 + P150 = P650.
NIGHT SHIFT DIFFERENTIAL
Night Shift Differential refers to the additional compensation of ten

percent (10%) of an employee’s regular wage for each hour of work
performed between 10:00 pm and 6:00 am.
EXAMPLE: Jose earns P500 per day or P62.50 per hour. He worked
from 10:00 pm to 2:00 am (4 hours). He is entitled to an additional
P275.00 = P62.50 x 110% = P68.75 x 4 hours.
Total pay for the day: P500 + P275.00 = P775.00

5 DAYS SERVICE INCENTIVE
LEAVE (SIL) WITH PAY
Every employee who has rendered at least 1 year of service is entitled to
Service Incentive Leave of 5 days with pay. The unused SIL is convertible to
cash at the end of the year.
Unknown to many, the law does not mandate the grant of vacation leave or sick
leave to employees. Employers can grant this as company-initiated benefits.
1 year of service means service within 12 months, whether continuous or

broken reckoned from the date the employee started working.
EXAMPLE: Jose earns P500 per day. After working for 1 year, he is entitled to
5 days of SIL. So he will get paid P500 for each day he goes on leave. If he is
able to use only 2 days SIL, he will be given P1,500 at the end of the year:
P500 x 3 days, as cash conversion.
13TH MONTH PAY
All employers are required to pay their rank-and-file employees 13th
month pay, regardless of the nature of their employment and
irrespective of the methods by which their wages are paid, provided
they worked for at least 1 month during a calendar year. The 13th
month pay should be given to the employees not later than December
24 of every year. By tradition and practice, even supervisors,
managers and executives are given 13th month pay.
How computed? Divide total basic salary earnings of the employee

for the year by 12. Does not include allowances and other monetary
benefits not considered as part of the regular or basic salary.
EXAMPLE: Jose earns P500 per day. For the year 2021 he was working
irregularly and his total earnings for the year totaled P61,500. He is
entitled to a 13th month pay of P5,125. 13th month pay and other
bonuses received by the employee up to P90,000 per year are NOT
taxable (TRAIN Law January 2018)
13TH MONTH PAY
• An employer may give its employees ½ of the 13th month pay before
the opening of the regular school year and the remaining half before
December 24 of every year.
• An employee who has resigned or whose services are terminated

any time before the time of the payment of the 13th month pay is
entitled to this benefit in proportion to the length of time he or she
worked during the year.
• Employees with multiple employers, whether on full-time or part-

time basis, are entitled to the 13th month pay from ALL their private
employers.
• Employees who are paid on a piece work basis are entitled to the
13th month pay.
7 CALENDAR DAYS PATERNITY LEAVE
WITH PAY FOR
MARRIED, MALE EMPLOYEES
Paternity leave is granted to all married, male employees in the private

sector, regardless of their employment status) probationary, regular,
casual, project based, contractual, etc). The purpose of this benefit is
to allow the husband to support his wife during her period of recovery
and/or in nursing their newborn child.
Paternity leave shall apply to the first 4 deliveries of the employee’s

lawful wife with whom he is cohabiting – meaning the obligation of
husband and wife to live together.
Paternity Leave is paid by the Employer.

7 CALENDAR DAYS PATERNITY LEAVE
WITH PAY FOR
MARRIED, MALE EMPLOYEES
The paternity leave shall be for 7 calendar days (not work days)
with full pay, consisting of the basic salary and mandatory
allowances, if any. The paternity leave can be used BEFORE or
DURING the delivery provided that the total number of days shall
not be more than 7 calendar days for each covered delivery.
Leave also applies if the wife suffers a miscarriage.
KAILANGAN LEGAL WIFE

105 CALENDAR DAYS WITH PAY
AS MATERNITY LEAVE (SSS)
This benefit applies to all female employees, whether married or unmarried.
NOTE: In contrast, paternity leave applies only to married males.
Every pregnant employee in the private sector, whether married or unmarried,

is entitled to maternity leave benefit of 105 calendar days with pay (regardless
of normal delivery or caesarian delivery) with an option to extend for an
additional 30 days without pay. This is paid by the SSS.
In case of miscarriage or emergency termination of pregnancy the maternity

leave is 60 calendar days.
The law also provides for an additional 15 days of paid leave if the female
worker qualifies as a solo parent under the Solo Parent Welfare Act of 2000
, with an option to extend for an additional 30 days without pay.
105 CALENDAR DAYS WITH PAY
AS MATERNITY LEAVE (SSS)
To be entitled to this benefit the female employee:
• should be an SSS member employed at the time of her delivery or

miscarriage
• Should notify SSS through her employer
• Her employer must have paid at least 3 monthly contributions to the SSS
within the 12-month period immediately before the date of childbirth or
miscarriage.
Unlike paternity leave which is limited to the first 4 deliveries, Maternity leave is
NOT limited to 4 instances. It applies to every instance of pregnancy,
miscarriage or emergency termination.
EXAMPLE: Josefa gave birth to her 8th child. She is still entitled to her
maternity leave benefit. UNLI MATERNITY LEAVE.
7 WORKDAYS PARENTAL LEAVE WITH PAY
FOR SOLO PARENTS
Parental leave for solo parents is granted to any solo parent or individual who is
left alone with the responsibility of parenthood due to:
• giving birth as a result of rape or other cries against chastity;

• death of spouse
• spouse is detained or is serving sentence for a criminal conviction
• physical and/or mental incapacity of spouse as certified by a public medical
practitioner
• legal separation or de facto separation from spouse for at least 1 year
• declaration of nullity or annulment of marriage
• abandonment of spouse for at least 1 year
• unmarried father or mother who has decided to keep and rear the child,
instead of having others care for them or give them up to a welfare institution
• Any other person who solely provides parental care and
support to a child
• Any family member who assumes the responsibility of a head of family by
reason of death, abandonment, disappearance or prolonged absence of the
parent.
7 WORKDAYS PARENTAL LEAVE WITH PAY
FOR SOLO PARENTS
Child refers to a person living with and dependent on the solo parent for support.
The child is unmarried, unemployed and below 18 years old or if above 18 years
old is incapable of self-support because the child is mentally and/or physically
challenged
The parental leave for solo parents shall be for 7 workdays (not calendar days)
every year.
The solo parent must present to the employer a Solo Parent Identification Card
issued by the DSWD office of the city or municipality where the parent resides.
If the parental leave is not availed of, it shall not be convertible to cash, unless
specifically agreed upon previously between the employer and the employee.
The parental leave is terminated if there is a change in the circumstances of the

parent such that he or she is no longer left alone with the responsibility of
parenthood. For example, the solo parent gets married.
10 WORKDAYS LEAVE WITH PAY
FOR VICTIMS OF VAWC
Private sector women employees who are victims as defined in RA 9262
shall be entitled to the paid leave benefit under such terms and
conditions provided herein. The leave benefit shall cover the days that
the woman employee has to attend to medical and legal concerns.
“Violence against women and their children,” as used in Republic

Act 9262 (the “Anti-Violence Against Women and Their Children Act of
2004”), “refers to any act or a series of acts committed by any person
against a woman who is his wife, former wife, or against a woman with
whom the person has or had a sexual or dating relationship, or with
whom he has a common child, or against her child whether legitimate
or illegitimate, within or without the family abode, which will result in or
is likely to result in physical, sexual, psychological harm or suffering, or
economic abuse including threats of such acts, battery, assault,
coercion, harassment or arbitrary deprivation of liberty.”
10 WORKDAYS LEAVE WITH PAY
FOR VICTIMS OF VAWC
To be entitled to the leave benefit, the only requirement is for the
victim-employee to present to her employer a certification from the
barangay chairman (Punong Barangay) or barangay councilor
(barangay kagawad) or prosecutor or the Clerk of Court, as the case
may be, that an action relative to the matter is pending.
In addition to other paid leaves under existing labor laws, company

policies, and/or collective bargaining agreements, the qualified victim-
employee shall be entitled to a leave of up to ten (10) days with full
pay, consisting of basic salary and mandatory allowances fixed by the
Regional Wage Board, if any.
The usage of the ten-day leave shall be at the option of the woman
employee. In the event that the leave benefit is not availed of, it shall
not be convertible into cash and shall not be cumulative.
TWO MONTHS SPECIAL LEAVE
WITH PAY FOR WOMEN
Any female employee regardless of age and civil status shall be entitled
to a special leave benefit if she has undergone surgery due to
gynecological disorders as certified by a competent physician.
“Gynecological disorders” refers to disorders that would require surgical

procedures such as, but not limited to dilatation and curettage and
those involving female reproductive organs such as the vagina, cervix,
uterus, fallopian tubes, ovaries, breast, adnexa and pelvic floor, as
certified by a competent physician. It shall also include hysterectomy,
ovariectomy and mastectomy.
The employee is entitled to special leave benefit of two (2) months with
full pay based on her gross monthly compensation.
SEPARATION PAY
Separation pay is given to employees in instances covered by Articles

298 and 299 of the Labor Code. The employee’s entitlement to
separation pay DEPENDS on the reason or ground of his or her
separation.
Employees terminated for just cause (MAY KASALANAN): No Separation

Pay
Employees terminated due to (a) Retrenchment to Prevent Losses, (b)

Closure or cessation of operations not due to serious losses or business
reverses, (c) when the employee is suffering from a disease not curable
within a period of 6 months AND continued employment is prejudicial to
his health or to the health of his co-employees – ½ month’s pay per
year of service, a fraction of at least 6 month is equivalent to 1 year.
SEPARATION PAY
Employees Terminated due to (a) the Installation of Labor-Saving

Devices, (b) Redundancy – 1 month’s pay per year of service, a fraction
of at least 6 month is equivalent to 1 year.
Separation pay received by an employee as a result of his separation

from the service of an employer due to death, sickness, physical
disability or for other causes beyond the control of said employee
(retrenchment, closure, installation of labor-saving devices,
redundancy), are EXEMPT from taxation.
RETIREMENT PAY
Employees shall be retired upon reaching the age of 60 years old or

more but not beyond 65 years old.
The minimum amount of retirement pay shall be equivalent to ½

month salary per year of service, a fraction of al least 6 months is
equivalent to 1 year. For purposes of computing retirement pay, ½
month salary shall include the following:
- 15 days salary based on the latest salary rate;

- Cash equivalent o 5 days Service Incentive Leave
- 1/12 of the 13th month pay (1/12 x 365 / 12 - .083 x 30.41 –
2.5 days)
THEREFORE, 15 + 5 +2.5 = 22.5 days per year of service.
RETIREMENT PAY
EXAMPLE 1: Peter worked at ABC Machinery for 12 years and 8

months. He was receiving a basic salary of P730 per day. If he reaches
60 yeas old today, he will get:
P730 x 22.5 days x 13 years = P213,525.00 12 years and 8 month is

rounded up to 13 years.
EXAMPLE 2: Miriam works for VGN Law Office. For 7 years. She was
receiving a basic monthly salary of P15,000 a month. If she reached 60
years old today, she will get:
Monthly salary of P15,000 x 12 months / 262 days (assuming she

works 5 days a week) = Daily rate of P687.02
P687.02 x 22.5 days x 7 years = P108,205.65

GOVERNMENT MANDATED ENROLLMENT
1. Social Security System / GSIS
2. Philhealth
3. Employees Compensation
4. Pag-Ibig Fund
SOCIAL SECURITY BENEFITS
COVER 5 LIFE CONTINGENCIES
Social security is the protection that society provides against the

economic hardships caused by 5 life contingencies: (1) sickness,
(2) maternity, (3) disability, (4) old age, and (5) death.
Basically, the Social Security System (SSS) provides for a

replacement of income lost on account of the aforementioned
contingencies.
SSS membership is for life. You cannot withdraw your membership
SSS administers two programs – Social Security Program and the

Employees Compensation (EC) Program
SOCIAL SECURITY:
4 TYPES OF MEMBERS
Every income earning individual should be enrolled with the SSS.

There are several types of SSS members:
- Employed, including household helpers and drivers

- Self-employed, including partners in partnerships, single
proprietors, farmers, fishermen
- Voluntary, including non-working spouses and separated members
- OFWs.
Membership starts on the first day of employment for employed

individuals and applicable month and year of first contribution paid
for other types of members.
SOCIAL SECURITY BENEFITS
The Social Security Program provides a package of benefits in the
event of
Death – death and funeral benefits

Disability – lump sum or monthly pension
Sickness – daily cash allowance
Maternity – daily cash allowance
Old age – lump sum or monthly pension
NO SSS MEMBERSHIP, NO SSS BENEFITS

SSS CONTRIBUTIONS
The Social Security Program requires both the employer and the
employee to contribute a monthly premium.
The current SSS contribution rate as of January 2023 is 14% of the

monthly salary of the employee.
Employers pay 9.5% and employees pay 4.5%. Automatic

salary deduction from employee’s salaries.
Contributions are due on the last day of the month following the
applicable month.
EXAMPLE: The SSS contributions for September have to be paid to

the SSS not later than October 31
SSS PENSION
The types of retirement benefits are:
a. the monthly pension, and

b. the lump sum amount.
The monthly pension is a lifetime cash benefit paid to a retiree who has
paid at least 120 monthly contributions to the SSS prior to the semester
of retirement.
If employee has paid less than 120 monthly contributions – LUMP SUM
If employee has paid at least 120 monthly contributions – MONTHLY
PENSION
WHAT WE STUDIED IN THIS COURSE
The Law on Sales, including
- Recto Law
- Maceda Law
- Condominium Act
Law on Pledge, Mortgage and Antichresis

WHAT WE STUDIED IN THIS COURSE
Special Commercial Laws
1. Law on Bouncing Checks
2. Secrecy of Bank Deposits
3. Unclaimed Bank Balances
4. Truth in Lending Act
5. Anti-Money Laundering Act (AMLA)
6. Philippine Deposit Insurance Corporation
7. New Central Bank Law
8. Financial Rehabilitation and Insolvency Act (FRIA)
9. Law on Consumer Protection
10. Data Privacy Law
11. E-Commerce Law
12. Ease of Doing Business
13. Philippine Competition Act
14. Law on Intellectual Property (Patents, Trademarks and Copyright)
15. Law on Insurance
16. Government Procurement
17. Labor and Social Legislation
SPECIAL COMMERCIAL
LAWS OF THE
PHILIPPINES
Law Title Implementing Agencies

RA 7394 (1992) Consumer Act of the Philippines Department of Health
Department of Agriculture
Department of Trade and Industry
RA 10667 (2015) Philippine Competition Act of 2015 Philippine Competition Commission
RA 9184 (2003) Government Procurement Reform Act Government Procurement Policy Board
RA 10846 (2016) PDIC Law Philippine Deposit Insurance Corporation
RA 1405 (1955) Bank Accounts Secrecy Law
PD 679 (1975) Unclaimed Bank Balances Law Bangko Sentral ng Pilipinas
RA 9160 (2001) Anti-Money Laundering Law Anti-Money Laundering Council
PD 612 (1974), as amended

Insurance Code Insurance Commission
by RA 10607 (2012)
SPECIAL COMMERCIAL
LAWS OF THE
PHILIPPINES
Law Title Implementing Agencies

RA 10142 (2010) Financial Rehabilitation and Insolvency Act
RA 3765 (1963) Truth in Lending Act Bangko Sentral ng Pilipinas
RA 8293 (1997) Intellectual Property Code of the Philippines Intellectual Property Office
RA 10173 (2012) Data Privacy Act of 2012 National Privacy Commission
RA 8792 (2000) Electronic Commernce (E-Commerce) Act of 2000
RA 11032 (2015) Ease of Doing Business and Efficient Government Anti- Red Tape Authority (ARTA)
Service Delivery Act of 2015
PD 442 (1974) Labor Code of the Philippines Department of Labor and Employment
RA 11199 (2018) Social Security Act of 2018 Social Security Administration

Employees Compensation Commission
The Rule of Law
All persons, institutions and entities, including the
State itself, are accountable to laws that are publicly
promulgated, equally enforced and independently
adjudicated and implemented regardless of an
individual’s rank, status or connections.
The Rule of Law
” We have no master but law,

no guide but conscience,
no aim but justice.”
Thank You!
I will see you in December 2024 for
PEA 5 – Regulatory Framework for
Business Transactions Review

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REGULATORY FRAMEWORK AND

LEGAL ISSUES IN BUSINESS

Atty. Manuel R. del Rosario

The subject covers the government mandated regulatory

The course will focus on the basic principles provided by

1. Understand the basic legal context of these special

2. Understand the important role of CPAs in ensuring

3. Be aware of the social and ethical responsibilities

The Law on Sales, including

Law on Pledge, Mortgage and Antichresis

- Cameras on, Microphones on mute;

In making a BUSINESS DECISION there are a host of

Is it legal? How do we resolve differences? What does the

The general study of law covers three basic items:

- The relevant law (codal provisions)

Class Attendance and

Paper and Zoom Quizzes 20%

Mid-Term Examinations 30%

Final Examinations 35%

October 3, Tuesday - 10:00 am to 12:00 nn

October 10, Tuesday - 8:00 am to 10:00 am

October 17, Tuesday - 8:00 am to 10:00 am

condition precedent – once it happens, the obligations starts

condition subsequent – once it happens, the obligation is

KANYA KANYA. TO EACH HIS OWN

Solidary Obligations are those where each one of the debtors

ONE FOR ALL. ALL FOR ONE.

Art. 1318. There is no contract unless the following

1. Consent of the contracting parties;

Whenever the consent of one of the parties to a contract is defective or

1. MISTAKE (OR ERROR or Pagkakamali)

2. FRAUD (OR DECEIT or Panlilinlang) Art. 1338

5. UNDUE INFLUENCE (Pagsasamantala) Art. 1337

Violence, Intimidation and Undue Influence

These are actions to force someone to do something

1. Rescissible – valid until rescinded; has all the essential

2. Voidable – valid until voided or annulled; it has all the

3.Unenforceable – cannot be sued upon or enforced, unless

4.Void – has no effect at all. It cannot be ratified or validated.

TYPE STATUS ACTIONS THAT WHEN TO FILE

Articles 1458 – 1623

1. Passive Subject – the obligor who has the duty

1. Consent of the contracting parties;

It is a contract where one of the contracting parties (Seller

A contract of sale may be absolute or conditional.

A determinate or determinable thing is transferred.

SELLER or VENDOR – Ang may pinagbibili o ang nagtitinda

BUYER or VENDEE – Ang bumibili

1. Free, Voluntary and Informed Consent

A contract of sale is an EXCHANGE.

Different subject matter:

1. CONTRACT OF SALE - An object already available for mass market

4. CONTRACT OF SALE – After Perfection but Before Delivery –

1. Before Perfection (NO Meeting of the Minds) – Seller

Future things may be the subject of a sale provided that at

- IF THEY DO NOT MATERIALIZE, NO SALE. This sale

Sale of a thing having potential existence is VALID.

Sale of a mere hope or expectancy is also VALID.

Sale of a vain hope (hopeless or impossible) or expectancy

The price or consideration of a contract of sale must be:

(a) If it is in reference to another thing that is certain.

Example: I will pay you US$5,000 in Philippine Pesos based

(b) If it is going to be set by a specific person.