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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 CODE OF COMMERCE COMMERCE - branch of human activity; purpose is to bring products to the consumer through operations habitually and with intent of gain COMME COMMERCI RCIAL AL LAW LAW - branch branch of privat private e law which which regula regulates tes the the jurid juridica icall relati relations ons arising from commercial acts CHARACTERISTICS CHARACTERISTICS OF COMMERCIAL LAW: 1. universal 2. uniform 3. equitable 4. customary 5. progressive PORTIONS OF CODE OF COMMERCE STILL APPLICABLE: 1. merchants; book of merchants and general provision of contracts 2. joint account association 3. commercial barter 4. transfers of non-negotiable credits 5. commercial commercial contracts of overland transportation 6. letters of credit 7. maritime commerce OTHERS: 1. Commerce - bringing products from the manufacturers to the consumers Commerce: 2. Characteristics of Commerce: a. habituality b. rapidity - if period is fixed, debtor in delay without need of demand; if contract does not fix period, 10 days c. intent to join
3. Merchant: a. Individuals - legal capacity, 21 years, or subject to parental authority, habitually engaged in commerce b. Juridical Persons - commercial and industrial company organized in accordance with law, habitually engaged in business 4. General Rule: Minors cannot cannot engage in commerce commerce Exceptions: a. to continue business of deceased parents through guardian b. court authorizes guardian to place minor and property in business c. minor is an alien and his national law allows him to be a merchant 5. Which persons are not allowed to engage in commerce? a. suffering accessory penalty of civil interdiction ( reclusion perpetua and reclusion temporal ) b. those judicially declared insolvent until they can obtain their discharge c. prohibited by Constitution and special laws 6. Aliens a. capacitated under his national law to engage in business b. engaged in the business in the Philippines not reserved for the Filipinos c. after securing license and BOI certificate 7. Family Family Code: Code: Either Either spouse may may engage in business; business; when objected objected to by the other, court will look into valid grounds, i.e. serious and moral grounds
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 8. BOI Certificate must be obtained by: a. alien b. foreign firm 9. Meaning of Philippine National a. citizen b. domestic corporation wholly owned and organized by Filipinos in the Philippines c. Filipino corporation where Filipino capital entitled to vote is at least 60% 10.
Query : If a corporation corporation is a shareholde shareholderr of another corporati corporation, on, how do you determine whether the latter corporation is a Filipino national? Answer : The following following must concur a. At least least 60% of the outstan outstandin ding g capita capitall stock stock and entitle entitled d to vote of both corporations are held by citizens of the Philippines b. At least 60% of the Board of Directors of both corporations are Filipinos
11. a. b. c. d. e. 12. a. b. c. d.
Tenor of BOI Certificate Business or activity to be engaged is consistent with the Investment Priorities Plan Business will contribute to the sound and balanced development of the national economy in a self-sustaining basis Business will not conflict with the Constitution and local laws Business is not adequately exploited by Filipino nationals No danger of monopolies/combinations in restraint of trade Basic Principles/Conditions laid down by BOI resident agent of foreign firm is a Filipino citizen establishment establishment of office in the Philippines bringing assets tot he Philippine office as capital complete set of accounting records
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Merge Mergerr and and Consol Consolida idatio tion n subjec subjectt to BOI BOI requi requirem rement ents s for the issuan issuance ce of certificate: When merger and consolidation result in ownership and control of non-Filipino nationals over more than 40% of the capital of a consolidated corporation.
14. a. b. c.
d. e.
SEC License issued upon compliance with the following requirements: proof of compliance with principle of reciprocity BOI certificate Applicant for license gives required information articles of incorporation by-laws names and addresses of resident agents principal place of business in the Philippines proof of solvency deposit acceptable securities to protect future creditors
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 RETAIL TRADE NATIONALIZATION LAW (Note: (Note: Mater Material ial on the Retai Retaill Trade Trade Libera Liberaliz lizati ation on Law Law will will not be includ included ed in this this reviewer. Supplement to follow) follow)
1. Retail Retail Trade Trade - any act, act, occup occupati ation, on, or callin calling g of habitu habituall ally y selli selling ng direct direct to the the general public, merchandise, commodities, or goods for consumption Jurisprud Jurisprudence ence has held that the term “retail” “retail” should be associated associated with and limited to goods for personal, family or household use, consumption and utilization. The Retail Retail Trade Trade Nationaliz Nationalization ation Law refers refers to “consump “consumption tion goods” goods” or “consume “consumer r goods” goods” which which directly directly satisfy human human wants wants and desires and are needed needed for home and daily life. Excluded from the the law are those goods goods which are considered generally generally raw material used in the manufacture of other goods, or if not, as one of the component raw mate materi rial al,, or at leas leastt as elem elemen ents ts util utiliz ized ed in the the proc proces ess s of prod produc ucti tion on and and manufacturing. 2. Elements of What Constitutes Retail Trade: a. The seller habitually engages in selling; b. The sale is direct to the general public; and object of the sale sale is limite limited d to merch merchand andise ise,, commod commoditi ities es or goods goods for for c. The object consumption. 3. Genera Generall Rule: Rule: After After 1964, 1964, only only Filipi Filipinos nos or corpo corporat ration ions s whose whose capit capital al is 100% 100% Filipino may engage in retail trade. 4. Excep Exceptio tions, ns, that that is, instance instances s when when aliens aliens may may engag engage e in retail retail trade trade in the Philippines: a. manufacturer or processor if capital does not exceed P5,000.00; b. farmer or agriculturist when selling his products; c. manu manufa factu cture rerr or proc proces esso sorr sell sellin ing g to indu indust stri rial al or comm commer erci cial al user users s or consumers who use the produce to render service to the general public or to produce or manufacture goods which are sold by them to the public; d. hotel hotel owner owners s or keeper keepers s of restau restauran rants ts includ included ed or incide incidenta ntall to the hotel hotel business; sale by a manu manufa fact ctur urer er or proc proces esso sorr to the the Gove Govern rnme ment nt or its its agen agenci cies es,, e. sale including government owned and controlled corporations 5. Query: How to determine citizenship of shares of the corporation when they are not held directly by individuals, but in turn held by another entity? Answer : apply the GRANDFATHER GRANDFATHER RULE, RULE, to wit: wit: Shares belonging to corporations or partnerships at least 60% of the capital of which is owned owned by Filipino citizens citizens shall shall be considered considered as Philippine Philippine nationalit nationality, y, but if the percentage of Filipino ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as of Philip Philippin pine e nation nationali ality. ty. Thus, Thus, if 100,000 100,000 shares shares are regist registere ered d in the name name of a corporation or partnership at least 60% of the capital stock or capital respectively, of which belong to Filipino citizens, all of the said shares shall be recorded as owned by Filipinos. Filipinos. But, if let’s say, 50% of the capital capital stock belongs belongs to Filipino Filipino citizens, citizens, only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shares shall be recorded as belonging to aliens. Howe Howeve ver, r, whil while e a corp corpor orat atio ion n with with 60% 60% Fili Filipi pino no and and 40% 40% fore foreig ign n equi equity ty owners ownership hip is consid considere ered d a Philip Philippin pine e nation national al for for purpo purposes ses of invest investme ment, nt, it is not qualif qualified ied to invest invest in or enter enter into into a joint joint ventu venture re agreem agreement ent with with corpo corporati ration ons s or partnerships, the capital or ownership of which under the Constitution or other special laws are limited limited to Filipino citizens citizens only. Hence, for purposes purposes of the law, whatever whatever the percentage percentage of Filipino Filipino ownership ownership in the owning corporation corporation,, the foreign foreign ownership ownership would always render a portion of its holding in the company as foreign equity and would disqualify the corporation to engage in retail trade. ANTI-DUMMY ACT
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 1. The Act penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved reserved for Filipinos Filipinos or Filipino corporations. corporations. Criminal sanctions sanctions are imposed on the president, manager, board member or persons in charge of the violating entity and causing the latter to forfeit its privileges, rights and franchises. 2. Disqualified aliens cannot intervene in the management, operation, administration or control of the business business reserved reserved to Filipinos Filipinos whether whether as an officer, officer, employee employee or laborer, with or without remuneration, except when: a. alien takes part in technical aspects; b. provided that no Filipino can do such technical work; and express authority authority from the President, President, upon the recommend recommendation ation of the c. with express department head concerned. 3. By way of exception, the following may participate in management: a. Aliens may be elected to the Board of Directors to the extent of their allowable share in the capital of the corporation (in partially nationalized industries). b. A registered enterprise may employ foreign nationals in supervisory, technical, and advisory positions for a period of 5 years subject to extension. c. Where majority of stocks of a pioneer enterprise is owned by foreign investors, the following positions may be held by foreign nationals: president treasurer general manager equivalent positions 4. A Filipino common-law wife of an alien is not barred from engaging in the retail busine business ss provid provided ed she uses uses capita capitall exclus exclusive ively ly derive derived d from from her her parap paraphern hernal al properties; however, allowing her common-law alien husband to take part in the management of the retail business would be a violation of the law. 5. What doing business means: a. soliciting orders, purchases, service contracts; b. opening offices whether called liaison offices or branches; c. appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the country for a period totaling 180 days or more; d. participating in the management or supervision or control of any domestic firm, entity or corporation in the Philippines; e. any other act or acts that imply continuity in commercial dealings 6. When commissioned merchants/investors or commercial brokers act in their own name in selling foreign products, the foreign firm manufacturing these products is not doing business in the Philippines. 7. When a local corporation or person acts in the name of a foreign firm, the latter is doing business in the Philippines. 8. The following are NOT doing business: a. mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business; b. exercise of rights as such investor; c. having a nominee director or officer to represent interests in such corporation; d. appointing appointing a representa representative tive or distributo distributorr domicile domiciled d in the Philippines Philippines which which transacts business in its own name and for its own accounts. TRUST RECEIPTS LAW 1. Purpose: a. to encourage use of and to promote transactions based on trust receipts; b. to regulate the use of trust receipts
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 2. Definition: A writte written/p n/prin rinted ted docum document ent signed signed by the ENTRU ENTRUSTE STEE E in favor favor of the ENTRUSTER whereby the latter releases the goods, documents or instruments tot he possession of the former upon the ENTRUSTEE’S promise to hold said goods in trust for the ENTRUSTER, and to sell the goods, etc. WITH THE OBLIGATION TO TURN OVER THE PROCEEDS THEREOF TO THE EXTENT OF WHAT IS OWING TO THE ENTRUSTER; or to return the goods if UNSOLD, or for other purposes. 3. Trust receipts are denominated in Philippine currency or acceptable and eligible foreign currency. 4. ENTRUSTER is not liable as principal or vendor under any sale or contract to sell made by the ENTRUSTEE. 5. Risk of loss is borne by the ENTRUSTEE. 6. Pending the duration of the trust agreement, the ENTRUSTER’S security interest cannot be prejudiced by claims of creditors of the ENTRUSTEE. 7. Loss of goods pending the dispossession shall not extinguish the obligation to the ENTRUSTER for the value thereof. thereof. LETTERS OF CREDIT
1. Kinds: a. Commercial Commercial Letters of Credit b. Traveler’s Letters of Credit 2. No protest required in case of dishonor. 3. Issued to definite persons and not to order, thus, non-negotiable. 4. Limited to a fixed account. PRICE TAGS LAW
1. It requires articles of commerce sold at r etail to bear prices. JOINT ACCOUNTS
1. It exists when a merchant interests himself in the transaction of another merchant, contributing thereto the amount of capital they may agree upon, and participating in the favorable or unfavorable results thereof in the proportion they may determine. 2. Joint accounts do not adopt a firm name. 3. No suit may be maintained - investor and third persons dealing with the merchant conducting business. 4. It is not subject s ubject to any formal requirement for validity; it may be oral. BULK SALES LAW Purpos ose: e: mean meantt to prot protec ectt cred credit itor ors s of busi busine ness ssme men n agai agains nstt pref prefer eren enti tial al or 1. Purp fraudulent transfers
2. The law covers all transactions, whether done in good faith or not, or whether or not the seller is in a state of insolvency , insolvency , that fall within the description of what is a “bulk sale”.
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 3. Types of transactions which are treated as “bulk sales”: Sale,, tran transf sfer er,, mortg ortgag age e or assi assign gnme ment nts s of a stoc stock k of good goods, s, ware wares, s, a. Sale merchandise, provisions, or materials otherwise than in the ordinary course of trade; Sale transf transfer, er, mortg mortgage age or assig assignm nment ents s of all, all, or substa substanti ntiall ally y all, all, of the the b. Sale business of the vendor, mortgagor, transferor, or assignor; c. Sale, transfer, mortgage, or assignment of all, or substantially all, of the fixtures and equipment used in the business of the vendor, mortgagor, transferor, or assignor. 4. Only creditors at the time of the sale in violation of the law are within the protection of the laws and creditors subsequent to the sale are not covered. 5. Even if the transaction falls within the definition of “bulk sale”, the following are not deemed covered by the law: a. If the vendor, mortgagor, transferor or assignor produces and delivers a written waive waiverr of the provis provision ions s of the law from his credit creditors ors as shown shown by verifi verified ed statements; b. The law does not apply to executors, administrators, receivers, assignees in insolvency, or public officers, acting under process. 6. Obligations when transaction is a bulk sale: a. The vendor must deliver to such vendee a written statement of: names and addresses of all creditors to whom said vendor or mortgagor may be indebted; amount of indebtedness due or owing to each of said creditors b. The vendor must apply the purchase money to the pro-rata payment of bona fide claims of the creditors as shown in the verified statement. c. The seller, at least 10 days before the sale, shall: make a full detailed inventory of the goods, merchandise, etc., cost price of each article to be included in the sale notify every creditor at least 10 days before transferring possession of the goods, of the price, terms and conditions of the sale 7. Consequences of Violation of Requirements under #6 above stated: a. When 6(a) above is not complied with, the sale itself is void; the seller will be criminally criminally liable. b. When When 6(b) above is not complied complied with, the sale itself itself is also void; seller is also criminally criminally liable. c. When 6(c) is not complied with, the sale is not void; no criminal liability on the seller. INSURANCE LAW
1. Laws applicable to insurance in the order of priority: a. Insurance Code b. Civil Code c. General Principles prevailing on the subject in the US 2. Contract of Insurance - an agreement whereby one undertakes for a consideration to indemn indemnify ify anothe anotherr agains againstt loss, loss, damage damage or liabil liability ity arisin arising g from from an unknow unknown n contingent event 3. Contract of Suretyship - deemed to be an insurance contract within the meaning of the Insurance Code, only if made by a surety who or which, as such, is doing an insurance business 4. Definition of “doing an insurance business”: a. making or proposing to make, as insurer, any insurance contract;
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 b. makin making g or proposin proposing g to make make as a suret surety, y, any contract contract of suret suretysh yship ip as a vocation and not merely incidental to any other legitimate business or activity of the surety; c. doing reinsurance business; d. doing or proposing to do any business in the substance equivalent to any of the foregoing in a manner designed to evade the provisions of the Insurance Code. 5. Requisites of Insurance: a. existence of an insurable interest; b. risk of loss; c. assumption of risk; d. scheme to distribute losses; and e. payment of premiums Note: Note: If only a, b, and c are present, present, it is not a contract contract of insurance insurance but a risk shifting device. •
6. Characteristics of an insurance contract: a. consensual b. voluntary c. aleatory - depends upon some contingent event; however, it is not a wagering nor a gambling contract d. executed as to the insured after payment of the premium e. executory as to insurer - not executed until payment for a loss f. personal - each party takes into account the character, credit and the conduct of the other g. conditional - liability is based on the happening of the event insured against 7. Parties to a contract of Insurance: a. insurer - party who assumes the risk or undertakes to indemnify the insured or to pay a certain sum sum on the happening happening of a specified contingency contingency b. insured - person in whose favor the contract is operative, and who is indemnified again against, st, or is to receiv receive e a certai certain n sum sum upon upon the happenin happening g of a specif specified ied contingency c. beneficiary - may or may not be the same as the insured What perils may be insured? any contingent or unknown event, whether past or future, which may (a) damnify a person having an insurable interest; or any contingent or unknown event, whether past or future, which may (b) create a liability against the person insured. •
8. Every person has an insurable interest in the life and health of: a. himself, his spouse and his children b. any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest any pers person on unde underr a lega legall obli obliga gati tion on to him him for for the the paym paymen entt of mone money, y, or c. any respec respectin ting g proper property ty or servic services, es, of which which death death or illnes illness s might might preven preventt the performance or delay it d. any person upon whose life any estate or any interest vested in him depends 9. Insurable Interest in Property may consist of: a. an existing interest b. an inchoate interest, founded on an existing interest c. an expectancy, coupled with an existing interest out of which the expectancy arises •
Definition of Insurable Interest in Property: Interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured.
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 10. Instances when Insurable Interest must exist: Interest in Property Property insured must exist when the insurance insurance takes effect and a. Interest when the loss occurs, but need not exist in the meantime. meantime. b. Interest in the Life or Health of a Person Insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs. c. Beneficiaries of Life Insurance need not have insurable interest in the life of the insured. d. Beneficiaries of Property Insurance must have insurable interest in the property insured. Category 1. basis
2. when when inte intere rest st must exist ist
3. amou mount interest
of
insu insura rabl ble e
Insurable Interest in Life Insurance may be based on pecuniary interest, affinity, or consanguinity at the the tim time the the poli polic cy tak takes effect EXCEPT: life insurance taken by the credi redito torr on the life life of the the debtor debtor wherein wherein interest interest must must also exist at the time of the loss no limit limit EXCEPT: if insurable insurable interest is based on creditordebto debtorr rela relati tion onsh ship ip (onl (only y to the the exte extent nt of the the cred credit it or debt)
Insurable Interest in Property base based d pure purely ly on pecu pecunia niary ry interest at the the time time the the poli policy cy take takes s effect and at the time of the loss
limited to the actual value of damage/injury/loss
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Gene Genera rall Rule: le: A chan change ge of int interest rest in any part of a thing ing insu insure red d unaccompanied by a corresponding change in interest in the insurance suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person. Exceptions: a. In case of life, life, health, and accident accident insurance insurance b. when the change in interest results after the occurrence of an injury which results in a loss c. a change of interest in one or more several distinct things, separately insured by one policy d. a change in the interest by will or succession on the death of the insured (interest passes to the heirs) transfer er of intere interest st by one of severa severall partn partners ers,, joint joint owner owners s in e. a transf common who are jointly insured to the others (even though it has been agreed that the insurance shall seize upon the alienation of the thing insured)
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Revocation of Beneficiaries General Rule: Rule: Insurance contracts contracts are revocable. revocable. Exception: Exception: Any person person who is forbidden forbidden to receive receive any donation under under Article 739 of the Civil Code cannot be named beneficiary of a life insurance policy by the person who cannot make the donation to him. The following donations shall be void: a. those made between persons who were guilty of adultery or concubinage at the time of the donation; b. thos those e made made by pers person ons s foun found d guil guilty ty of the the same same crim crimin inal al offe offens nse, e, in consideration thereof; c. those made to a public officer or his wife, descendants, ascendants, by reason of his office. Other Pertinent Provisions on Revocation: The termin terminati ation on of a subse subseque quent nt marri marriage age shall shall allow allow the innoce innocent nt (a) spouse to revoke the designation of the other spouse who acted in bad faith
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable. After the finality of the decree of legal separation, the innocent spouse (b) may revoke the donations as well as the designation of the latter as a beneficiary in any insurance policy, even if such designation is irrevocable. The revocation of or change in the designation shall take effect upon written notification thereof to the the insured. The action to revoke the donation donation under this article must be brought within 5 years from the time the decree of legal separation has become final. (c) The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice or accessory in willfully bringing about the death of the insured, in which event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified.
13.
Suspension - a change of interest in any part of a thing insured unaccompanied by a correspon corresponding ding change of interest interest in the insurance insurance suspends suspends the insurance insurance to an equivalent extent until the interest in the thing and the interest in the insurance are vested in the same person.
14.
Concealment - a neglect to communicate that which the party knows or ought to communicate General Rule: The insured is not required to communicate communicate the nature nature (or kind) or the amount of his insurable interest in the life or property insured to the insurer. Exception: a. When the insurer makes makes inquiry from the insured of the nature or amount of the latter’s insurable interest, whether in life or property insurance; insurance nce policy policy must specif specify y the intere interest st of the insured insured in the b. insura property insured, if he is not the absolute owner thereof. A concealment, whether intentional or not, entitles the injured party to rescind a contract of insurance. Requisites: (a) the party concealing must have knowledge of the facts concealed; (b) the facts concealed must be material to the risk; (c) the party is duty bound to disclose such fact to the other; (d) the party concealing makes no warranty as to the facts concealed; (e) the other party has no other means of ascertaining the facts concealed.
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Note: Note: An insured insured need not die of of the very disease disease he failed failed to reveal reveal to the insurer. It is sufficient sufficient that the non-revelation has misled misled the insurer in forming his his estim estimate ate of the disadvan disadvantag tages es of the proposed proposed policy policy or in makin making g his inquiries in order to entitle the insurance company to avoid the contract. Note: The insured is under under an obligation to disclose disclose not only such material material facts as are known to him, but also those known to his agent where: a. it was the duty of the agent to acquire and communicate information of the facts in question; b. it was possible for the agent, in the exercise of reasonable diligence, to have made the communication before the making of the insurance contract. Failure on the part of the insured to disclose such facts known to his agent, or wholly due to the fault of the agent, will avoid the policy, despite the good faith of the insured.
Neither party to the insurance contract is bound to communicate information on the following matters except in answer to the inquiries of the other: a. those of which the other knows; b. that which, in the exercise of ordinary care, the other ought to know and of which the former has no reason to suppose his ignorance, i.e. political situation, general usages of trade; c. those of which the other waives communication;
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 d. those which prove or tend to prove the existence of the risk excluded by a warranty and which are not otherwise material; those e whic which h rela relate te to a risk risk exce except pted ed from from the the poli policy cy and and whic which h are are not not e. thos otherwise material. •
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Neither party is bound to communicate his mere opinion, even upon inquiry, because such opinion would add nothing to the appraisal of the application. Waiver of material facts may be: (a) by the terms of the insurance; or (b) by the neglect to make inquiry as to such facts, where they are distinctly implied in other facts which information is communicated communicated Materiality is to be determined not by the events but solely upon the probable and reasonable influence of the facts on the party to whom the communication is due in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. Concealment, whether intentional or not, entitles the other party to rescind the contract.
16.
Representation It is a factual statement made by the insured at the time of, or prior to, the issuance of the policy, to give information to the insurer and otherwise induce him to enter into the insurance contract. It may be made orally or in writing. It may be made at the time of, or before, the issuance of the policy. It may may be alte altere red d or with withdr draw awn n befo before re the the insu insura ranc nce e is effe effect cted ed,, but but not not afterwards. A representation cannot qualify an express provision in a contract of insurance but it may qualify an implied warranty. A representation as to the future is to be deemed a promise unless it appears that it was merely merely a statement of belief belief or an expectation. (must be susceptible susceptible of present, actual knowledge) The statement of an erroneous opinion, belief or information, or of an unfulfilled intention, will not avoid the contract of insurance, unless fraudulent. Right to rescind because of false representation: a. must be exercised previous to the commencement of an action on the contract (the action referred to is that to collect a claim on the contract) misrepresentation, whether intentional or not, gives the right to rescind b. misrepresentation, • • •
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Incontestab Incontestable le Clause: Clause: After After a policy policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of 2 years from the date of its issue or of its last reinstatement , reinstatement , the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. Exceptions: (a) absence of insurable risk cause of loss is an unexpected risk (b) (c) fraud (d) non-payment of premium (e) violation of conditions relating to naval or military services (f) failure to comply with conditions subsequent to the occurrence of the loss •
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Warranties: General Rule: Non-performance of a promissory warranty avoids a contract of insurance. Exceptions: a. when before the time for performance of the promissory warranty, a loss insured against occurs;
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 b. when before the time of the performance of the warranty, the act becomes unlawful; c. when before the time of the performance of the warranty, said performance becomes impossible. •
A statement or a promise set forth in the policy or by reference incorporated therein, therein, the non-fulfil non-fulfillmen lmentt of which in any respect respect and without without reference reference to whether the insurer was in fact prejudiced by such non-fulfillment, renders the polic policy y voidab voidable le by the insure insurer, r, wholl wholly y irresp irrespect ective ive of the mater material iality ity of such such statement or promise.
Warranty part of the insurance contract always written on the policy conclusively presumed material must be strictly complied with made by the insured
Representation collateral inducement maybe oral or written materiality must be proved requires substantial truth may be made by insurer or insured
Note: If there is a breach of warranty, warranty, even if the cause cause of the loss is is a different risk, the insurer is entitled to rescind the contract of insurance. Breach must refer to a material warranty, whether intentional or not.
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Policy What is a Rider? Rider? It is an additional provision in a policy policy not part of the body of the printed form. Cover Note: written memorandum of the most important terms of a preliminary contr contract act of insur insuran ance, ce, inten intended ded to give give tempo temporar rary y protec protectio tion n pendin pending g the the investigation of the risk by the insurer, or until the issuance of a formal policy. General Rule: Cover notes bind insurer temporarily pending the issuance of the policy. Exception: Exception: Where Where it is merely merely an acknowledgme acknowledgment nt on behalf behalf of the company company that the latter’s latter’s branch office office had received from the applicant applicant the insurance insurance premium and accepted the application subject for processing by the insurance company and that the latter will either approve or reject the same. Kinds of Policies: a. Open - the value of the thing insured is not agreed upon, but is left to be ascertained at the time of the loss b. Valued - expresses on its face an agreement that the thing insured shall be valued at a specific sum c. Running - contemplates successive insurance which provides that the object of the policy may be from time to time defined especially as to the subject of insurance by additional statements or endorsements Note: If an amount is written written on the face of an open open policy, it is merely merely a determina determination tion of the maximum maximum limit of recovery recovery and not as the value of the policy.
Category what what need needs s to be prov proven en in order to be able to claim determining value of loss
Open Policy value lue of prop roperty erty upon pon lo loss value of property is to be ascertained upon loss
Valued Policy no nee need for for pro proof of of valu value e of property upon loss value of property upon loss is conclu conclusiv sively ely stipul stipulate ated d to a specified amount
Period for commencing commencing an action against against the policy: Within 1 year year from the time the cause of action accrues, i.e., from the time of rejection of the claim claim by the insurer. insurer. Any condition, condition, stipulation stipulation,, or agreement agreement limiting limiting the time to less than 1 year is void. Grounds for Cancellation of a Policy by the Insurer: For Policies Other than Life: (1) prior notice of the cancellation to insured •
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 (2)
notice must be based on the ff. occurrences after effective date of the policy non-payment of premiums premiums (a) (b) convic convictio tion n of a crime crime arisin arising g out out of acts acts increa increasin sing g the hazard insured against (c) discovery of fraud or material misrepresentation (d) disc discov over ery y of will willfu full or reck reckle less ss acts acts or omis omissi sion ons s increasing the hazard insured against physical physical changes in the property property insured which results in (e) the property becoming uninsurable (f) determination by the Commissioner that the continuation of the policy policy would would violate violate or would would place place the insurer in violation violation of the Insurance Code notice must be in writing (3) it must must be mail mailed ed or deli delive vere red d to the the insu insure red d at the the addr addres ess s (4) shown in the policy notice must state the ground relied upon and that upon written (5) request of the insured, the insurer will furnish facts on which the cancellation is based Renewal of the Policies Other than Life: Insurer must mail or deliver to the insured notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages within 45 days before before the policy ends. ends. Otherwise, insured insured entitled to renew the policy upon payment payment of the premium premium due on the effective effective date of the renewal . •
19. • •
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20. •
Premium General Rule: No policy is binding until the premium thereof has been paid. Exceptions: (a) in case of life or or industrial life policy, whenever the grace period period applies (b) in case of estoppel Insur Insurer er is entitl entitled ed to paymen paymentt of premiu premiums ms as soon soon as the thing thing insur insured ed is exposed to the perils insured against. When insurer entitled to Return of Premiums Premiums a. when the contract is voidable on account of fraud or misrepresentation of the insurer; b. when on account of facts, the existence of which the insured was ignorant without his fault c. when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy d. when the insured has become a public enemy and the policy automatically canceled (on the ground of equity) e. in case of over-insurance by several insurers (ratable return of premiums, propor proportio tioned ned to the amount amount by which which the aggregat aggregate e sum sum insure insured d in all policies exceed the insurable value of the thing at risk) Loss When Insurer is Liable: a. where the peril insured against was the proximate cause, although a peril not contemplated by the contract may have been the remote cause or even the immediate cause of the loss b. where the thing insured is rescued from the peril insured against that would otherwise have caused a loss, if, in the course of such rescue, the thing is expose exposed d to a peril peril not insure insured d agains against, t, which which perma permanen nently tly depriv deprives es the insured of its possession in whole or in part c. where loss is caused by efforts to rescue the thing insured from a peril insured against d. insure insurerr is not exonerate exonerated d by a loss loss caused caused by simple simple negligen negligence ce of the insured if the proximate cause of the loss is a peril insured against
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 e. loss, the immediate cause of which is a peril insured against except when the proximate cause is an excepted peril •
a. b. c. d. e.
When Insurer Not Liable: where the peril insured against was only a remote cause where the peril is specifically excepted, a loss which would not have occurred but for such peril is thereby excepted loss caused by the connivance of the insured loss caused by the willful act of insured loss caused by insured’s negligence, if it amounts to bad faith
General Rule: The insurer is not liable for a loss caused by the willful act of the insured. Excep Exceptio tion: n: Suici Suicide de Clause Clause in Life Life Insura Insurance nce:: Insure Insurerr liable liable in case case insured committed suicide after the policy has been in force for a period of 2 years years from the date of its issue issue or last reinstate reinstatement. ment. If insured insured kills himself himself within a period of 2 years, insurer is not liable. Exception Exception to Exception Exception:: If suicide suicide is committed committed in a state of insanity, insanity, regardless of the time of commission, commission, the insurer is liable. •
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21.
Double Insurance - exists where the same person is insured by several insurers separately in respect to the same subject and interest
•
Requisites: a. person insured must be the same b. existence of several insurers c. subject matter insured must be the same d. interest the same e. risk insured against also the same
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 Over Insurance Double Insurance may be only one insurer must be 2 or more insurers insu insura ranc nce e cove covers rs more more than than the the valu value e of insurance may or may not exceed the value of insurable interest insurable interest • •
The Code prohibits double insurance without the consent of the insurer. Liability of Insurer:
Insurance taken from each insurer ------------------------------------------------------------------ x total insurance
value of property received
= liability of insurer
22.
Reinsurance: A process by which which an insurer procures procures a third person person to insure him against loss or liability by reason of such original insurance. The original insured cannot recover from this insurance unless there is a specific grant, or assignment of, the reinsurance contract in favor of the insured, or a manifest intention of the contracting parties to the reinsurance contract to favor the insured. •
General Rule: The insurer who obtains reinsurance reinsurance must communicate: communicate: a. all the representations of the original insured; and knowledge dge and and inform informat ation ion he posses possesses ses,, whethe whether r b. all the knowle previously or subsequently acquired which are material to the risk Exception: under automatic automatic reinsurance reinsurance treaties treaties
•
1. 2. 3. 4. 5.
23.
Reinsurance insurer becomes the insured subject matter is the insured risk or liability different risks and interests of insured there must be consent of original one who is original insured has no interest in the the cont contra ract ct of rein reinsu sura ranc nce e whic which h is inde indepe pend nden entt of the the orig origin inal al cont contra ract ct of insurance
1. 2. 3. 4. 5.
Double Insurance insurer remains the insurer subject matter is property the same interest and risk are insured insured has to give his consent insu insure red d is the the part party y in inte intere rest st in all all contracts
Marine Insurance: Insurance: insures against perils of the sea, not of the the ship
Perils of the Sea covered by marine insurance denote denote nature nature accidents accidents peculiar peculiar to the sea which do not happen by intervention of man nor are to be prevented by human prudence
Perils of the Ship not covered by marine insurance damage or losses resulting from: 1. natural and inevitable action of the sea 2. ordinary wear and tear of a ship, or neglig igen entt fail failur ure e of the the ship ship owne ownerr to 3. negl provide the vessel with proper equipment to con convey vey the the cargo rgo unde nder ordin rdina ary conditions
Owner of the Ship has Insurable Interest: a. in the ship even if it has been chartered by one who promises to pay him in value in case of loss (insurer is liable for what insured cannot recover from the charterer), charterer), even when hypothecated hypothecated by bottomry bottomry (only the excess excess of its value over the amount secured by bottomry) and b. in the freightage, which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage •
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 Charterer has insurable interest in the ship to the extent that he is liable to be damnified by its loss. •
Barra Barratr try: y: Any Any will willfu full misc miscon ondu duct ct on the part part of the mast master ers s or crew, crew, in pursuance of some unlawful or fraudulent purpose, without the consent of the owners and to the prejudice of the owner’s interest.
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Jettison: Jettison: Intentional Intentional casting casting overboard overboard of any part of a venture venture exposed to a peril, whether it be of the cargo, or the ship’s furniture or tackle, in the hope of saving the rest of the venture.
•
Insurable Interest in in Marine Insurance: Insurance: Determined when when one will sustain loss from the destruction of the subject matter or derive benefit from its preservation.
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Charter Charter Party: Party: Contract Contract by virtue of which which the owner or the agent of a vessel vessel binds binds himself to transport transport merchand merchandise ise or persons for a fixed price. It has also been defined as a contract by virtue of which the owner or the agent of the vessel for the transportation of goods or persons from one port to another. •
Loan on Bottomry: Contract in the nature of a mortgage mortgage whereby the owner of a ship borrows money for the use, equipment or repair of the vessel for a definite term term,, and and pled pledge ges s the the ship ship as a secu securi rity ty for for repa repaym ymen ent, t, with with mari mariti time me or extraordinary interest on the account of the maritime risks to be borne by the lender. lender. It is stipulated stipulated in such a contract contract that if the ship be lost lost in the course of the specific voyage or during a specified limited time caused by any of the perils enumerated in the contract, the lender shall resolutely lose his money. •
Loan on Respondentia Respondentia:: Contract Contract akin to that of mortgage mortgage made on the goods goods on board the ship, and which are to be sold or exchanged in the course of the voyage. The goods serve serve as the principal security. security. •
Freightage: Signifies all the benefits derived by by the owner, owner, carriage of his own goods, or those of others.
•
Concealment: In marine insurance, insurance, information or the belief belief or expectation of a 3rd person, in reference to a material fact is material. Concealm Concealment ent of the following following merely exonerates exonerates the insurer insurer from the resulting loss therefrom: a. national character of the insured b. liability of the thing insured to capture and detention c. liability to seizure from breach of foreign laws of trade d. want of necessary documents e. use of false and simulated papers •
Implied Warranties: a. that the ship is seaworthy - complied with if the ship is seaworthy at the time of commencement commencement of risk, except: except: (a) insurance for a specified specified length of of time at the commen commencemen cementt of every voyage it undertakes undertakes during that time; time; (b) cargo cargo to be transs transship hipped ped at indet indeterm ermina inate te port port - each each vessel vessel upon upon which which cargo is shipped is seaworthy at the commencement of each particular voyage b. that the vessel shall not engage in illegal venture c. that the vessel shall not deviate from the course of the voyage insured d. where the nationality or neutrality of a ship or cargo is expressly warranted, it is impli implied ed that that the ship ship will will carry carry the requisit requisite e docum document ents s to show show such such nationality or neutrality and that it will not carry any documents which may cast reasonable suspicion thereon •
Seaworthiness depends on: a. nature of the ship b. nature of the voyage •
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 c. nature of the service Seaworthiness of the vessel is required only at the commencement of the risk Exceptions: a. in a Tim Time Poli Policy cy - comm commen ence ceme ment nt of ever every y voya voyage ge that that must must be undertaken commencement of each particular voyage b. in a Cargo Policy - commencement c. in a Voyage Policy - commencement commencement of each portion of the voyage
Deviation a. a departure from the course of the voyage insured b. unreasonable delay in pursuing the voyage commencement of an entirely different voyage c. commencement •
When is Deviation proper? a. when caused by circumstances over which neither the master not the owner of the ship has any control b. when necessary to comply with a warranty or to avoid a peril whether it is insured against or not c. when made in good faith for the purpose of saving human life or relieving another vessel in distress d. when when made made in good good faith faith and and upon upon reas reason onab able le grou ground nds s of beli belief ef in its its necessity to avoid a peril •
Loss a. Actual Total Loss a total destruction of the thing insured the irretrievable loss of the thing by sinking or by being broken up any damage to the thing which renders it valueless tot he owner for which he held it any other event which effectively deprives the owner of possession, at the port of destination, of the thing insured a. Constructive Total Loss - gives to the person insured the right to abandon Average - any extraordinary or additional expense incurred during the voyage for the preservation of the vessel, cargo, or both and all damages to the vessel and cargo from the time it is loaded and the voyage commenced until it ends and the cargo unloaded •
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General Average - an expense or damage suffered deliberately in order to save the vessel, its cargo, or both from the real or known risk
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Abandonment - act of the insured by which, after a constructive total loss, he declar declares es the relinq relinquis uishm hment ent to the insure insured d of his his intere interest st in the thing thing insure insured d (where the cause of loss is a peril insured against) (a) more more than than ¾ ther thereo eoff in valu value e is actu actual ally ly lost lost or woul would d have have been been expended to recover it from the peril (b) it is injured to such an extent as to reduce its value by more than ¾ (c) if the the thin thing g insu insure red d is the the ship ship and and the the voya voyage ge cann cannot ot be lawf lawful ully ly performed without incurring an expense of more than ¾ of the whole, or a risk which a prudent man would not undertake under the circumstances (d) if the thing insured is cargo or freightage, and the voyage cannot be performed on another ship procured by the master within a reasonable time and with with reason reasonabl able e dilige diligence nce to forwa forward rd the cargo cargo withou withoutt incurr incurring ing an expense or a risk as stated above •
•
Freightage cannot be abandoned unless ship is also abandoned.
Requisites of a Valid Abandonment: a. must be total and conditional •
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 b. made within a reasonable time c. explicit notice d. coupled with actual abandonment Requisites for Valid Valuation in the t he Valued Marine Policy: a. insured must have interest at risk b. there must be no fraud on the insured’s part •
Notice of Abandonment: a. may be oral or in writing (if oral, written notice must be submitted within 7 days from oral notice) b. must be explicit c. must specify the particular cause for abandonment d. need not be accompanied by proof of interest or loss •
Acceptance of Abandonment a. may be express or implied (i.e. silence for unreasonable length of time) conclu lusi sive ve upon upon the the part partie ies s and adm admits its the the loss loss and and suff suffic icie ienc ncy y of b. conc abandonment c. irrevocable, unless the ground on which it is made is proved to be unfounded •
If insurer refuses to accept a valid abandonment - liable as upon actual total loss •
Upon actual abandonment a. freightage earned before loss - belongs to the insurer of freightage b. freightage earned after loss - belongs to insurer of ship •
Co-insurance: form of insurance insurance in which the person who who insures his property property for less than the entire value is understood to be his own insurer for the difference which exists between the true value of the property and the amount of insurance
•
Co-insurance applies only where the: a. insurance taken is less than the actual value of the thing insured b. loss is partial •
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Primage - increase in freightage
24.
Fire Insurance Insurer is liable for loss or damage caused by hostile fire (fire that escapes from the place where it was intended to burn and ought to be in) and not that caused by friendly fire (fire which burns in a place where it is intended to burn). Scope of Fire Insurance: a. fire b. lightning c. windstorms d. tornado e. earthquake f. other allied risks •
When does alteration in the use or condition entitle the insurer to rescind the contract? a. such alteration violates a provision in the policy b. it was made without the insurer’s consent c. it is done within the insured’s control, and it increases the risk of loss or damage •
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Rules:
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 a. policy shall not protect the insured from injury consequent upon his negligent use or management of fire, so long as it is confined to the place where it ought to be b. if it escapes, even though the insured was negligent, the insurer is liable c. even though a fire may remain in its proper place, it may become hostile if it by accident, becomes so extensive as to be beyond control Options of the Insurer a. purchase the property at appraised valuation b. restore the property damaged - contract of insurance is discharged and parties enter into a new contract of insurance •
25.
Casualty Insurance: Insurance: Any injury that that is intended, intended, unexpected and unusual, unusual, even though it results from an act or even which was intelligently done.
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Insurer is Liable for death/injury to insured: a. by his own hand while insane b. by taking poison by mistake c. by overdoes of drugs administered or taken by mistake, by ignorance or material pathological conditions d. by unexpected bacterial infection consequent upon doing acts, even though such acts were intentionally done e. by unprovoked violence of others Compulsory Motor Vehicle Liability Insurance Persons subject to CMVLI: a. motor vehicle owner or one who is the actual legal owner of a motor vehicle in whose name such vehicle is registered with the LTO land transp transport ort operator operator or one who is the owner owner of a motor motor vehicle vehicle or b. land vehicles being used for conveying passengers for compensation (including school buses)
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No Fault Indemnity Indemnity Clause: The insurance company company shall pay any claim for death or bodily injuries sustained by a passenger or 3 rd party without the necessity of proving fault or negligence of any kind subject to certain conditions. This does not apply to property damage. •
26.
Suretyship - an agreement whereby the surety guarantees the performance of the principal or obligor of an obligation or undertaking in favor of a 3 rd party called the obligee
27.
Life Insurance: an insurance in human life and insurance appertaining appertaining thereto or connected therewith may be payable: a. on the death of the insured b. on his surviving a specified period c. otherwise, contingently on the continuance or cessation of life (b and c refer to endowment or annuities) •
a.
b. c.
d.
Uses and Common Kinds of Life Insurance: I nsurance: Whole Life or Ordinary Policies - here, the insured agrees to pay annual, semi-an semi-annual nual or quarterly quarterly premiums premiums while he lives. The insurer insurer agrees to pay the face value of the policy upon the death of the insured. Limited Payment Life Policy - premiums paid only for a specified period of years. Term Policy - insurer’s liability arises only upon the death of the insured withi within n the agreed agreed term as period period.. If the latter latter surviv survives es the period, period, the contract terminates and the insurer is not liable Endowment Policy - insurer agrees to pay a certain sum to the insured if the latter latter outliv outlives es a design designate ated d period period;; if he dies dies before before that time, time, the proceeds are paid to the beneficiary
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 e. Life Annuity - debtor binds himself to pay an annual pension or income duri during ng the the life life of one one or more more perso persons ns in cons consid ider erat atio ion n of a capi capita tall consisting of money or other property, whose ownership is transferred to him with the burden of income 28.
The Business of Insurance a. Life or Endowment Policies Grace Period - 30 days for the payment of any premium due after the first premium has been paid Period of Incontestability - after the lapse of 2 years from the date of issue or date of approval of last reinstatement Reinstatement of Policy - within 3 years from the date of default of premium, upon: a. production of evidence of insurability, and b. payment of all overdue premiums and any indebtedness to the company upon said policy Exceptions: a. if cash surrender value has been paid b. if period of extension has expired
b. Claims Settlement Unfair Claims Settlement Practices: know knowin ingl gly y misr misrep epre rese sent nting ing to clai claima mant nts s pert pertin inen entt fact facts s or poli policy cy (a) provisions relating to coverage at issue (b) fail failin ing g to ackn acknow owle ledg dge e with with reas reason onab able le prom prompt ptne ness ss pert pertin inen entt communications communications with respect to claims arising under its policies (c) failin failing g to adopt adopt or imple impleme ment nt reason reasonabl able e standa standards rds for the promp promptt investigation of claims arising under its policies (d) no atte attemp mptt in good good fait faith h to effe effect ctua uate te prom prompt pt,, fair fair and and equi equita tabl ble e settlement of claims submitted in which liability has become reasonably clear (e) compelling policy holders to institute suits to recover the amount due unde underr its its poli polici cies es by offe offeri ring ng with with no just justif ifia iabl ble e reas reason on an amou amount nt substantially less than that ultimately recovered in suits brought by them Proceeds of Life Insurance - payable within 60 days after: presentation of claims, and (a) (b) filing of proof of death (upon failure to pay interest, at the rate of 2 times the ceiling prescribed by the Monetary Board unless based on the ground that the rate is fraudulent)
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 Proceeds of Policies other than Life - payable: upon proof of loss (a) upon ascertainment of loss or damage (if not made within 60 days of (b) proof of loss, payable in 90 days)
c. Power of Commissioner to Suspend/Revoke License if insurance contract is in unsound condition (a) if it has has fail failed ed to comp comply ly with with the the prov provis isio ions ns of law law or regu regula lati tion ons s (b) obligatory upon it its conditions or methods of business s such as to render its proceedings (c) hazardous to the public or to its policy holders that its paid up capital capital stock, or its available available cash assets, assets, or its security security (d) deposits, as the case may be, is impaired or deficient that the margin of solvency required of each company is deficient (e) Insurance Agent - any person who for compensation solicits or obtains insurance on behalf behalf of any insuran insurance ce compa company ny or transa transacts cts for a perso person n other other than than himse himself lf an application for a policy or contract of insurance to or from such company or offers or assumes assumes to act in negotiating negotiating of such insurance. insurance. He must be first licensed licensed as such before doing any acts as insurance agent. Insurance Broker - any person for any compensation, commission or any other thing of value, acts, or aids in any manner in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured other than himself. himself. A license is required. WAREHOUSE RECEIPTS LAW
1. Warehouse - a building or place where goods are deposited and stored for profit. Warehouseman man - person person lawfully lawfully engaged engaged in the business business of storing storing goods goods for 2. Warehouse profit. •
Only a warehouseman warehouseman may issue issue warehouse receipts. receipts.
Warehouse Receipt - written written acknowled acknowledgmen gmentt by a warehouse warehouseman man that he has 3. Warehouse received and holds certain goods therein described in store for the person to whom it is issued.
4. Non-negotiable Receipt - receipt deliverable to a specified person. 5. Negotiable Receipt - receipt deliverable to order or to bearer. 6. Essential Terms which MUST be embodied in a Warehouse Receipt: a. location of the warehouse b. date of the issue of the receipt c. consecutive number of the receipt d. statement whether the goods received will be delivered to bearer, or a specified person, or his order e. rate of storage charges f. description of the goods or packages containing them for identification purposes g. signature of the warehouseman h. statement of the amount of advances made and of liabilities incurred for which the warehouseman claims as lien 7. Effect of omission of any of the essential terms: a. The validity of the warehouse receipt is not affected. b. The warehouseman shall be held liable for damages to those injured by his omission.
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 c. The negotiability of the warehouse receipt is not affected. d. The issuance of a warehouse receipt in the form provided by the law is merely perm permis issi sive ve and and dire direct ctor ory y and and not not mand mandat ator ory y in the the sens sense e that that if the the requirements are not observed, then the goods delivered for storage become ordinary deposits. which may be inserted inserted in a Warehouse Receipt: Receipt: Any other terms except except (a) 8. Terms which thos those e cont contra rary ry to the the prov provis isio ions ns of this this Act; Act; (b) (b) thos those e that that woul would d impa impair ir a warehouseman’s obligation to exercise that degree of care in the safekeeping of the goods entrusted to him.
9. Marks to be made on a warehouse receipt: a. A non-n non-neg egot otia iabl ble e rece receip iptt must must be clea clearl rly y mark marked ed non-n non-neg egot otia iabl ble e or not not negotiabl negotiable, e, otherwise otherwise,, the holder of the receipt who purchased it for value and who supposed it to be negotiable, may treat it as negotiable. b. Duplicate receipts must be so marked, otherwise, the warehouseman is held liable for all damages suffered by a holder believing the same to be the original. 10. Warranties of a warehouseman as to duplicate receipts: a. The duplicate is an accurate copy of the original receipt. b. Such original receipt is uncancelled at the date of the issue of the duplicate. Effects of alteration on the liability of the warehouseman: 11. a. If the altera alteratio tion n is IMMAT IMMATERI ERIAL AL (the (the tenor tenor of the receipt receipt is not changed) changed),, whether fraudulent or not, authorized or not, the warehouseman is liable on the altered receipt according to its original tenor. b. If the alteration is MATERIAL but AUTHORIZED, the warehouseman is liable according to the terms of the altered receipt. c. If the alteration is MATERIAL, UNAUTHORIZED but INNOCENTLY MADE, the warehouseman is liable on the altered receipt according to its original tenor. d. If the alteration is MATERIAL and FRAUDULENTLY MADE, the warehouseman is liable: to the the purc purcha hase serr of the the rece receip iptt for for valu value e and and with withou outt noti notice ce of the the (1) alteration according to the tenor of the altered receipt to the alterer, according to the terms of the original receipt (2) to subsequent purchasers with notice of the alteration, according to the (3) terms of the original receipt Effects of misdescription of goods: 12. a. A warehouseman is under the obligation to deliver the identical property stored with him and if he fails to do so, he is liable directly to the owner. b. As against a bona fide purchaser of a warehouse receipt, the warehouseman is estopped from denying that he has received the goods described in the receipt. c. If the description consists merely of marks or label upon the goods or upon the packages containing them, the warehouseman is not liable even if the goods are not of the kind as indicated in the marks or labels.
13. Principal Obligations of a Warehouseman: Warehouseman: a. To take care of the goods entrusted to his safekeeping General Rule: A warehouseman warehouseman is required required to exercise such such degree of of care which a reasonable careful owner would exercise over similar goods of his own. He shall be liable for any any loss or injury to the goods goods caused by his failure to exercise such care. Exception Exception:: He shall not not be liable for any loss or injury injury which could could not have been avoided by the exercise of such care. Exception to the Exception: Exception: He may limit limit his liability liability to an agreed agreed value of the property received in case of loss. He cannot stipulate that he will not be responsible for any loss caused by his negligence. a. To deliver the goods to the holder of the receipt or the depositor upon demand, provided demand is accompanied with: •
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 (1) (2)
an offer to satisfy the warehouseman’s lien; an offer to surrender surrender the negotiable negotiable receipt receipt properly properly endorsed. endorsed. If the receipt is non-negotiable, any person lawfully entitled to the possession of the goods may be entitled to delivery without surrender of the receipt. a readiness readiness and willingne willingness ss to sign an acknowled acknowledgmen gmentt that the goods (3) have been delivered if such is requested by the warehouseman.
14.
Persons to whom goods must be delivered: A. Persons lawfully entitled to the possession of the goods or his agent: a. persons to whom a competent competent court has ordered the delivery of the goods (1) where a negotiable instrument has been lost or destroyed, the court may orde orderr deli delive very ry to a pers person on upon upon sati satisf sfac acto tory ry proo prooff of such such loss loss or destru struc ction tion and upon prope roperr postin sting g of a bond bond to prote rotect ct the the warehouseman from any liability or expense which he may incur by reason of the original receipt remaining outstanding. (2) where more than one person claims title or possession of the goods the warehouseman may may require all claimants claimants to interplead. The court will then then order delivery to the person having a better right. b. an attaching creditor - Goods, while in the possession of the warehouseman and cover covered ed by a negoti negotiabl able e receip receipt, t, cannot cannot be attach attached ed or levie levied d upon upon under an execution unless: (I) the negotiable receipt is first surrendered to the warehouseman, or (ii) its negotiation is enjoined, or (iii) the receipt is impounded by the court c. to the purchaser purchaser in case of sale of the goods by the warehousem warehouseman an to enforce his lien d. to the purchaser where perishable or hazardous goods are sold at private or public sale
B. If goods are covered by a non-negotiable receipt: a. a person entitled to the delivery by the terms of the r eceipt, or b. one who has written authority from letter a C. If goods are covered by a negotiable receipt, a person in possession of the receipt, the terms of which the goods are deliverable: a. to him or order b. to bearer c. indorsed to him d. indorsed in blank by the person whom delivery was promised 15.
When is there Misdelivery? When the warehouseman delivers the goods to a person who is not in fact lawfully entitled to the possession of the goods because: a. the person does not fall under letter B or C above; or b. the person falls under letter B or C but prior to delivery, the warehouseman had either: been been reques requested ted by the person person lawful lawfully ly entitl entitled ed to the delivery delivery not to (1) make such delivery, or had informa informatio tion n that that the delivery delivery about to be made made was to one one not not (2) lawfully entitled to the possession of the goods
16.
Effects of Misdelivery: The warehouseman shall be liable for conversion to all having a right to property or possession of the goods.
17.
What hat happe ppens if the there is prop roper deliv elive ery or part partia iall delive livery ry but the the warehouseman fails to cancel the receipt or record on the receipt of such partial delivery?
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 a. If good goods s cove covere red d by a nego negoti tiab able le ware wareho hous use e rece receip iptt are are deli delive vere red d by a warehouseman but he fails to take the receipt and cancel it, then he is still liable to one who purchases for value and in good faith such receipt. b. If he makes partial delivery of the goods but fails to record the partial delivery on the receipt then he may still be held liable for the entire receipt to one who purchases for value and in good faith such receipt. Lawful excuses for refusal to deliver goods: 18. a. The warehouseman can refuse to deliver the goods if he has acquired title or right to the possession of the goods: directly or indirectly from a transfer made by the depositor at the time of (1) the deposit for storage or subsequent thereto; or (2) from the warehouseman’s lien
b. If someone other than the depositor or person claiming under the depositor has a claim to the title or possession of the goods and the warehouseman has information of such claim, the warehouseman shall be excused from liability for refusing to deliver the goods either to the depositor or person claiming under him until he has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead. c. The warehouseman will not be required to deliver the goods if such had been lost. But this is without prejudice prejudice to liabilities which may be incurred incurred by him due to such loss. d. The warehouseman having a valid lien against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied. e. If goods have been lawfully sold or disposed of because of their perishable or hazardous nature, the warehouseman shall not be liable for failure to deliver the goods. 19.
A warehouseman cannot refuse to deliver goods to the depositor or to a person claiming under him on the ground that adverse title to the goods belongs to a third person.
20.
Rules as regards Co-mingling of Deposited Goods: General Rule: A warehouseman may may not co-mingle goods goods belonging to different depositors or belonging to the same depositor for which separate receipts had been issued. Exception: Exception: A warehousema warehouseman n may co-mingl co-mingle e fungible goods goods of the same kind and grade provided he is authorized by agreement or by custom.
•
•
21. Effect of Co-mingling of Goods: a. The different owners become co-owners of the whole mass. b. The warehouseman shall be severally liable to each depositor for the care and redelivery of his share of such mass to the same extent and under the same circumstances circumstances as if the goods had been kept separate. 22.
Remedies of a Creditor: (the debtor being the owner owner of the negotiable receipt) receipt) Creditors Creditors of the depositors depositors,, before before negotiatio negotiation, n, may protect themselves themselves by obtaining a writ of preliminary injunction and serve the same on the depositor before he has a chance to negotiate the receipt. receipt. Once enjoined, there will will be no longer a danger danger rd that a 3 person will be prejudiced so the goods may now be attached, levied upon, or that the vendor’s lien or the right of stoppage in transit be exercised.
23.
Warehouseman’s Warehouseman’s Lien Extent of Warehouseman’s Warehouseman’s Lien: A warehouseman shall have a lien on goods deposited or on the proceeds thereof in his hands for: •
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 a. all lawful charges for storage and preservation of the goods lawful claims claims for money money advances, advances, interest, interest, insurance, insurance, transporta transportation, tion, b. all lawful labor, weighing, cooperating and other charges and expenses in relation to such goods c. all reasonable charges and expenses for notice and advertisements of sale and for sale of the goods where default has been made in satisfying the warehouse lien Goods Subject to lien: a. goods goods belon belongin ging g to the deposito depositorr who is liable liable to the warehous warehousem eman an as debtor whenever such goods are deposited and b. goods belonging to other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge
•
How is a lien enforced? a. by refusing to deliver the goods until the lien is satisfied b. by causing the extrajudicial sale of the property and applying the proceeds to the value of the lien c. by filing a civil action for unpaid charges or by way of counterclaim in an action to recover the property from him •
How is a lien lost? warehouseman eman voluntarily voluntarily surrenders surrenders possession possession of the goods goods a. when the warehous without requiring payment of his lien; or when the the wareh warehous ousem eman an wrongf wrongfull ully y refuse refuses s to delive deliverr the goods goods when when a b. when demand is made with which he is bound to comply •
24. •
Negotiation and Transfer of Receipts How do we negotiate a receipt deliverable to order? a. by indorsing it in blank thereby making it deliverable to bearer or b. by special indorsement - which would require further indorsements for further negotiations. In both cases, the indorsements must be coupled with delivery.
How do we negotiate a receipt deliverable to bearer? There is no need to indorse indorse for negotiation. Physical delivery of the instrument instrument will suffice. suffice. But if the instrume instrument nt is indorsed indorsed specially, specially, the bearer character character of the receipt is destroyed and for further negotiation, there will be a need for indorsement. •
Who may negotiate warehouse receipts? a. the owner of the receipt, or b. the person to whom possession of the receipt was entrusted to by the owner •
Rights acquired by a person to whom the receipt has been negotiated: a. the title of the person negotiating the receipt over the goods covered by the receipt b. the title of the person (depositor or owner) to whose order by the terms of the receipt the goods were to be delivered c. the direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him •
May non negotiable receipts be negotiated? No, even if the receipt is indorsed, the transferee acquires no additional right. That is why they are called called non negotiable receipts. But they may be transferred transferred or assigned by delivery. •
Rights of a person to whom a non negotiable receipt has been transferred: a. the title to the goods as against the transferor b. the right to notify the warehouseman of the transfer thereof and •
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 c. the right thereafter to acquire the obligation of the warehouseman to hold the goods for him Distincti Distinction on between between a non negotiable negotiable receipt receipt from a negotiable negotiable receipt with regard to attachment or execution upon goods:
•
Non-negotiable Receipt Negotiable Receipt Prior to notification of the warehouseman by The goods cannot be attached or levied under the transferor or transferee, the an exec execut utio ion n unle unless ss the the rece receip iptt be firs firstt warehouseman is not bound to the transferee surre surrend nder ered ed to the the ware wareho hous usem eman an or its its whose right may be defeated by a levy of an negotiation enjoined. attachment or execution upon the goods by the creditor of the transferor or by a noti notifi fica cati tion on to such such ware wareho hous usem eman an of the the subsequent sale of the goods. Rights of a person to whom a negotiable receipt has been transferred, not indorsed: a. the right to the goods as against the transferor b. the right to compel the transferor transferor to indorse the receipt. But if the intention of the parties is that the receipt should merely be transferred, the transferee has no right to require the transferor to indorse the receipt. Note: Note: Negotiatio Negotiation n takes effect as of the time when the indorseme indorsement nt is actually actually made. •
Warranties of a person negotiating or transferring a receipt: a. the receipt is genuine b. he has a legal right to negotiate or transfer it c. he has knowledge that would impair the validity or worth of the receipt and rightt to transf transfer er the the titl title e to the good goods s and and that that the the good goods s are are d. he has a righ merchantable •
A holder for security of a receipt (mortgagee or pledgee) who in good faith accepts payment of the debt from a person does not warrant the genuineness of the receipt not the quality or quantity of the goods therein described.
•
It is the duty duty of the purcha purchaser, ser, mortgag mortgagee ee or pledgee pledgee of goods goods for for which which a negotiable receipt has been issued to require the negotiation of the receipt to him, otherwise his failure will have the same effect as an express authorization on his part to the seller, mortgagor, or pledgor in possession of such receipt to make any subsequent negotiation. The subsequent purchaser purchaser must have have taken the receipt in good faith and for value. •
A bona fide purchaser of a negotiable warehouse receipt acquires title to the goods where he purchases from the owner’s agent within the actual or apparent scope of his authority. authority. In sum, negotiation negotiation is valid despite having having been made in breach of trust. •
Distin Distincti ctions ons betwee between n a negoti negotiabl able e instru instrumen mentt and a negoti negotiabl able e wareh warehou ouse se receipt: •
Negotiable Instrument When When a nego negotia tiabl ble e inst instru rume ment nt is alte altere red d deliberately, it becomes null and void.
Negotiable Warehouse Receipt When a warehouse receipt is altered, it is still valid but it may be enforced only in accordance with its original tenor. If a negotiable instrument is originally payable If a warehouse receipt, payable to bearer, is to bearer bearer,, it will will always always remai remain n so payabl payable e indorsed specially, it will be converted into a regardless of the way it is indorsed, whether receipt deliverable to order and can only be specially or in blank. nego negoti tiat ated ed furt furthe herr by indo indors rsem emen entt and and delivery. A holder holder in due course course may may be able able to obtain obtain An indorsee indorsee even if a holder holder in due course course
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 a title title bette betterr than than that that which which the party party who negotiated the instrument to him had. The indorsem indorsement ent of a negotiable negotiable instrument instrument has a double double effect. effect. It is at the same same time time a conveyance of the instrument and a contract the indorser indorser has with with the indorsee indorsee that that on certai certain n condit condition ions, s, the indors indorser er will will pay the instrument if the party primarily liable fails to do so.
obtai tains only such title as the person negotiating has over the goods. The The indo indors rsem emen entt of a ware wareho hous use e rece receip iptt amou amount nts s mere merely ly to a conv convey eyan ance ce by the the indorser. Accordingly, an indorser of a receipt shall not be liable to the holder if, for example, the warehouseman fails to deliver the goods beca becaus use e they they were were lost lost due due to his his faul faultt or negligence.
GENERAL BONDED WAREHOUSE LAW Any warehousem warehouseman an receiving receiving commodi commodities ties for (a) storage; storage; (b) milling; milling; (c) comingling must: a. obtain prior license from the Bureau of Commerce file a bond bond in an amou amount nt equi equiva vale lent nt to 33 1/3 1/3 % of the the capa capaci city ty of the the b. file warehouse against which bond depositors may sue directly c. open to the public, no discrimination allowed d. liable for double market value should he accept goods in excess of the capacity of warehouse if goods are damaged or destroyed •
Note: Note: for palay palay and corn license, license, a bond with the Nationa Nationall Grains Authority Authority is required; also an insurance cover is required.
•
Uniform Currency Law
1. Obligations Null and Void a. obligations payable in gold/foreign currency b. obligations payable in Philippine currency but measured in gold/foreign currency 2. Exempt Transactions a. government to government transactions or with international banking institutions b. transactions affecting high priority economic projects c. forward exchange transactions between banks d. import import and export export and other other internati international onal banking, banking, financia financial, l, investme investment nt and industrial transactions Commercial Transactions 3. Merchants and Commercial Classes of Investments: a. Permitted - one allowed without need of prior authority from the Philippine Governme Government. nt. If registere registered d status, invest invest up to extent extent as not to affect its registered registered status. status. If enterprise enterprise not registered registered,, investment investment not to exceed 40%. b. Permissible - invest in excess of 40% in unregistered enterprise but with prior approval of BOI manufacturing, processing, production production of product c. Pioneer Area - (a) involves manufacturing, not produced produced at all/prod all/produced uced in non-commercia non-commerciall scale; (b) uses a design, scheme scheme,, formu formula la that that is new and untrie untried d in the Phils. Phils.;; (c) agricul agricultur tural al acti activi viti ties es/s /ser ervi vice ces s esse essent ntia iall to the the atta attain inme ment nt of food food suff suffic icie ienc ncy; y; (d) (d) produces non-conventional fuels/utilizes non-conventional sources of energy (all others are non-pioneer) •
4. Absolutely Disqualified to become Merchants a. serving penalty of civil interdiction b. insolvent c. absolutely disqualified by special laws 5. Relatively Disqualified a. judicial and prosecuting officials in active service
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 b. c. d. e.
administrative, administrative, economic, military chiefs government collection agents and custodian of funds stock and commercial brokers by special laws cannot trade in specified territories
6. Books a Merchant must keep a. book of inventories and balances, statement of assets, liabilities and capital b. journal of day to day operations c. ledger for classifying accounts d. copyi copying ng book book for lette letters rs and telegr telegrams ams;; if juridi juridical cal perso person, n, inclu include de book book of minutes and stock and transfer book 7. Probative Value of Merchant’s Book a. evidence against merchants themselves b. in case of conflicts between 2 books - that which s properly kept prevails c. if one keeps keeps books and the other does not and cannot cannot explain explain why, the former former prevails d. if both books are properly kept and there is a conflict, other proofs can be resorted to 8. Commerc Commercial ial Contracts Contracts by Correspond Correspondence ence are perfected perfected from the moment moment the offeree accepts the offer, even before knowledge of said acceptance by the offeror. This does not apply to deposit, guaranty, sales, loan, agency, partnership. Joint Account Account Partnersh Partnership ip - business business arrangement arrangement whereby whereby 2 or more persons persons 9. Joint interest themselves in the business of another by making contributions thereto and participating in the results thereof a. only one member is ostensible, others are silent b. no common name c. only ostensible partners can sue/be sued d. no juridical personality
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 TRANSPORTATION LAW
1. Contract of Transportation - contract whereby a certain person or association of persons obligate themselves to transport persons, things, news, from one place to another for a fixed price 2. Parties to the Contract of Transportation: a. Shipper - one who gives rise to the contract of transportation by agreeing to deliver the things or news to be transported, or to present his own person or those of other or others in the case of tr ansportation of passengers b. Carrier/Conductor - one who binds himself to transport persons, things, or news, as the case may be, or one employed in or engaged in the business of carrying goods for others for hire 3. Common Carrier - person, corporation, firm, association engaged in the business of carr carryi ying ng or tran transp spor orti ting ng pass passen enge gers, rs, good goods s or both both,, by land land,, wate water, r, air, air, for for compensation, offering services to the public; must exercise extraordinary diligence Private Carrier - not engaged in the business of carrying; no public employment; undert undertake akes s to delive deliverr goods/ goods/pa passe ssenge ngers rs for compen compensat sation ion;; requi requires res only only ordina ordinary ry diligence 4. Requisites of of Caso Fortuito a. event independent of human will b. occurrence makes it impossible for debtor to perform in normal manner c. debtor free from aggravation/participation d. impossible to foresee or avoid
5. Contributo Contributory ry negligenc negligence e does not entitle entitle passenger passengers s to recover recover moral/ex moral/exempl emplary ary damages. 6. Bill Bill of Lading Lading - writte written n acknow acknowled ledgm gment ent of receip receiptt of goods goods and agree agreeme ment nt to transport them to a specific place to a person named or his carrier It is not indispensab indispensable le to the creation of a contract contract of carriage. carriage. The contract contract itself arises from the moment goods are delivered by shipper to carrier and the carrier agrees to carry them. The function function of the Bill of Lading: Lading: the legal legal basis of the contract between between the shipper and carrier shall be the bills of lading, by the contents of which all disputes which may arise with regard regard to their execution execution and fulfillme fulfillment nt shall shall be decided, no exceptions being admissible other than forgery or material errors in the drafting thereof. Carrier’s responsibility starts from the moment he receives unconditionally the merchandise personally or through an agent and lasts until he delivers them actually or constructively to the consignee or his agent. Mere delay in the delivery of goods to consignee does not give right to refuse goods - only breach breach of contract, ergo damages. damages. If delay is unreasonable, unreasonable, then he may refuse to accept and make carrier liable for conversion. 7. Vessels - those engaged in navigation, whether coastwise or on the high seas, incl includ uding ing floa floatin ting g dock docks, s, pont pontoo oons ns,, dred dredge ges, s, scow scows s and and any any othe otherr floa floati ting ng apparatus destined for the services of the industry or maritime commerce 8. Persons Participating in Maritime Commerce: Commerce: a. ship owner and/or ship agent b. captain or master c. other officers of the vessel d. supercargo 9. Liability of Ship owners and Ship agents: a. civil liability for the acts of the captain
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 b. civil civil liabil liability ity for contra contracts cts entere entered d into into by the captai captain n to repair repair,, equip equip and provision provision the vessel, vessel, provided that the amount claimed claimed was invested invested for the benefit of the vessel c. civil liability for indemnities in favor of 3 rd persons which may arise from the conduct of the captain in the care of the goods which the vessel carried, as well as for the safety of the passengers transported Ship owner/ship agent not liable for the obligations contracted by the captain if the latter exceeds his powers and privileges inherent in his position of those which which may have have been been confer conferred red upon upon him him by the forme former. r. Howeve However, r, if the amount claimed were made use of for the benefit of the vessel, the ship owner or ship agent is liable. •
10.
Doctri Doctrine ne of Limit Limited ed Liabil Liability ity - liabil liability ity of shipow shipowner ners s is limite limited d to amoun amountt of interest in said vessel because of the real and hypothecary nature of maritime law such that where the vessel is entirely lost, the obligation is extinguished. Exceptions: (1) vessel is not abandoned claims under workmen’s compensation (2) injury/damage due to shipowner’s fault (3) vessel is insured (4) The The doct doctri rine ne also also appl applie ies s for for clai claims ms due due to deat death h or inju injuri ries es to passengers, aside from claims for goods. In abandoning the vessel, vessel, there is no no procedure to be followed. There is neith neither er a pres prescr crip ipti tive ve peri period od with within in whic which h the the ship ship owne ownerr can can make make the the abandonment. He may do so for so long as he is not not estopped from invoking the same or do acts inconsistent with abandonment. •
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11. a. b. c.
Roles of the Captain: general agent of the ship owner technical director of the vessels represents the government of the country under whose flag he navigates
12.
Loan on Bottomry - made by shipowner/ship agent guaranteed by vessel itself, repayable upon arrival at destination
13.
Loan In Respondentia - taken on security of the cargo repayable upon the safe arrival at cargo destination
14. a. b. c. d.
Accidents and Damages in Maritime Commerce: Commerce: Averages Arrivals Under Stress Collisions Shipwrecks
15. Average: a. all all extra extraord ordina inary ry or accide accidenta ntall expens expenses es which which may may be incur incurred red durin during g the voyage for the preservation of the vessel or cargo or both b. all damages or deterioration which the vessel may suffer from the time it puts to sea at the port of departure until it casts anchor at the port of destination, and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of their consignment 16.
17.
Simple Average - expenses/damages caused to the vessel/cargo not inured to common benefit and profit of all the persons interested in the vessel and her cargo; borne by respective owners
General Average - expenses/damages deliberately caused in order to save the vessel, its cargo or both from a real and known risk Requisites: a. deliberately incurred b. intended to save vessel and cargo or both
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 c. from real and known risk d. there is success 18. Formalities for Incurring Gross Average: there must must be an assem assembly bly of the sailing sailing mate mate and other officers officers with with the a. there captain including those with interests in the cargo b. there must be a resolution of the captain c. the resolution shall be entered in the log book, with the reasons and motives and the votes for and against the resolution d. the minutes shall be signed by the parties e. within 24 hours upon arrival at the first port the captain makes, he shall deliver one copy of these minutes to the maritime judicial authority thereat 19.
Arriva Arrivals ls under under Stres Stress s - arriva arrivall of the vessel vessel at a port port not of destin destinati ation on on account of (a) lack of provisions; (b) well-founded fear of seizure; (c) by reason of accident of the sea disabling it to navigate When Not Lawful: a. lack of provisions due to negligence to carry according to usage and customs b. risk of enemy not well known or manifest c. defect of vessel due to improper repair d. malice, negligence, lack of foresight or skill of captain
20.
Collision - impact of 2 vessels both of which are moving
21.
Allision - striking of a moving vessel against one that is stationary
22.
Cases of Collision: a. due to the fault, negligence or lack of skill of the captain, sailing mate or the compl compleme ement nt of the vessel vessel - ship ship owner owner liable liable for the losses losses and damage damages s (Culpable Fault) b. due to fortuitous event or force majeure - each vessel and its cargo shall bear its own damages (Fortuitous) c. it cannot be determined which of the 2 vessels caused the collision - each vessel shall suffer its own damages, and both shall be solidarily responsible for the losses and damages occasioned to their cargoes (Inscrutable Fault)
23.
Error in Extremis - sudden movement made by a faultless vessel during the 3 rd zone of collision with another vessel which is at fault, even if the said movement is wrong, no responsibility will fall on said vessel
24.
Shipwreck - denotes all types of loss/ wreck of a vessel at sea either by being swallowed up by the waves, by running against another vessel or thing at sea or on coast where the vessel is rendered incapable of navigation
25.
Salvage - the compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part from an impending peril, or such property recovered from actual peril or loss, in cases of shipwrecks, derelict or recapture; a service which one person renders to the owner of a ship or goods by his own labor, preservin preserving g the goods or ship which the owner owner or those entrusted with the care of them either abandoned in distress at sea or are unab unable le to prot protec ectt and and secu secure re;; a perm permit it is requ requir ired ed to enga engage ge in the the salv salvag age e business
26.
Derelict - a ship or cargo which is abandoned and deserted at sea by those who are in charge of it, without any hope of recovering it, or without any intention of returning it
27.
Elements of a Valid Salvage: a. a marine peril
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 b. servi service ce volunt voluntari arily ly rende rendered red when when not requir required ed as an exist existing ing duty duty or from from special contract c. success, in whole or in part, or that the services rendered contributed to such success 28.
Contract of Towage - contract whereby a vessel usually motorized pulls another from one place place to another for compensation. compensation. It is a contract contract of services.
29.
Difference between Towage and Salvage: Salvage Towage crew of salvaging ship is entitled to salvage, crew of the towing ship does not have any and can look to the salvaged vessel for its inte intere rest st or righ rights ts with with the the remu remune nera rati tion on share pursuant to the contract salv salvor or take takes s poss posses essi sion on and and may may reta retain in tower has no possessory lien; only an action possession until he is paid for recovery of sum of money cour courtt has has powe powerr to redu reduce ce the the amou amount nt of cour courtt has has no powe powerr to chan change ge amou amount nt in remuneration if unconscionable towage even if unconscionable
CARRIAGE OF GOODS BY SEA ACT
1. When Applicable: a. contracts for the carriage of goods b. by sea c. to and from Philippine ports d. in foreign trade 2. Notice of Loss or damage must be given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person person entitled to delivery. delivery. If the loss or damage is not apparent, apparent, the notice must be given within 3 days of delivery. However, the carrier shall shall be discharged from all liability in respect of loss or damage of goods unless suit is brought within 1 year after delivery of the goods or the date when the goods should have been delivered. Notice of loss, if not given, that fact shall not affect or prejudice the right of the shipper to bring suit within the 1 year prescriptive period. WARSAW CONVENTION
1. When Applicable: a. international transport by air b. transport of persons, baggage, or goods 2. Liabilities under the Convention: a. damage sustained in the event of the death or wounding of a passenger taking plac place e on boar board d the the airc aircra raft ft or in the the cour course se of any any of the the oper operat atio ions ns of embarking or disembarking b. loss or damage to any check baggage or goods sustained during the transport by air c. delay in the transport by air of passengers, baggage, or goods Enume Enumerat ration ion of causes causes of action action as above above stated stated is not an exclus exclusive ive list. list. (Northwest Airlines vs. Cancer) •
3. Meaning of Transport by Air - period during which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft, or in the case of landing outside an airport, in any place whatsoever 4. Action for damages must be brought at the option of the plaintiff, either: a. before the court of the domicile of the carrier; b. court of principal place of business of carrier;
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 c. court where he has a place of business through which the contract has been made; d. before the court at the place of destination 5. Convention provides for a limitation of liability: a. for each passenger - limited to 125,000 francs b. for goods and checked in baggage - limited to 250 francs per kilogram c. for hand carry - limited to 5,000 francs per passenger When can you not avail of this limitation? (1) willful misconduct (2) default amounting to willful misconduct (3) accepting passengers without ticket (4) accepting goods without airway bill or baggage without baggage check •
6. The right to damages shall be extinguished if an action is not brought within 2 years from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the transportation stopped. requirement: damage to baggage : within 3 days from receipt 7. Notice requirement: damage to goods: within 7 days days from receipt delay: within 21 days from receipt Failure to file written notice, no action shall lie against the carrier, save in the case of fraud on his part. •
8. Notice Requirements: loss/damage apparent loss/damage not apparent damage of baggage
COGSA protest at time of receipt of goods protest within 3 days from delivery
damage of goods delay
Code of Commerce Warsaw Convention protest at time of receipt of goods protest within 24 hours after receipt protest within 3 days from receipt within 7 days from receipt within 21 days from receipt
PUBLIC SERVICE ACT Every perso person n that that may may own, own, operat operate, e, manage manage,, contr control ol in the Philip Philippin pines, es, for 1. Every hire/comp hire/compensati ensation on with general/li general/limite mited d clientele clientele whether whether permanen permanent, t, occasional occasional,, accidental, and done for a general business purpose any common carrier, shipyard, electric light, heat and power and public utility.
2. Public Utility - business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service. 3. Prior Operator Rule - before permitting a new operator to invade the territory of another another already already established, established, the prior operator operator must be given given an opportunity opportunity to extend its service to meet the public needs in the matter of transportation. 4. Prior Applicant Rule - presupposes a situation where two interested persons apply for a CPC in the same community over which no person has yet been granted a CPC to operate. If both applicants equal, then the applicant applicant who applied first will will be given the CPC. 5. Distinctions between CPCs and CPCNs Certificate of of Pu Public Co Convenience
Certificate of of Pu Public Co Convenience an and
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 Necessity any authorization to operate a public service issued by the appropriate government agency issued by the appropriate government agency to a publ public ic servi service ce to whic which h any any poli politi tica call subdivision has granted a franchise an auth autho oriza rizati tion on issu issue ed by the the prope roper r an auth autho oriz rizatio ation n issu issue ed by the the prope roper r government agency for the operation of public government agency for the operation of public serv serviices ces for for which no fra franch nchise ise, eithe ither r services for which a franchise is required by municipal or legislative is required by law law
6. Requirements of CPC and franchise: a. Filipino citizenship b. financial capacity c. public convenience
CORPORATION LAW
1. Doctrine of Corporate Opportunity - a director is made to account to his corporation, gain gains s and and prof profit its s from from tran transa sact ctio ions ns ente entere red d into into by him/ him/an anot othe herr comp compet etin ing g corp corpor orat atio ion n in whic which h he has has subs substa tant ntia iall inte intere rest st,, whic which h shou should ld have have been been a transaction undertaken by the the corporation. This s a breach breach of fiduciary relationship. relationship. 2. Doctrine of Piercing the Veil of Corporate Entity - it is to disregard for justifiable reasons by the state the fiction of juridical personality of the corporation separate and distinct from the persons composing it 3. De Jure Corporation - corporation formed with all the requirements of law 4. De Facto Corporation - corporation defectively formed from a bona fide attempt to incorporate under the existing law and exercises corporate powers 5. Corporation by Estoppel - a group of persons which holds itself out as a corporation and enters into a contract with 3 rd persons on the strength of such appearance cannot be permitted to deny its existence in an action under said contract 6. Corporation by Prescription - body not lawfully organized as a corporation but has been been recogn recognize ized d by imme immemo moria riall usage usage as a corpo corporat ration ion with with rights rights and duties duties maintainable by law (ex. Roman Catholic) 7. Trust Fund Doctrine - the subscribed capital stock of the corporation is a trust fund for the payment of debts of the corporation which the creditors have the right to look up to satisfy their credits. credits. Corporations may not dissipate this and the creditors creditors may sue the stockholders directly for their unpaid subscriptions 8. Voting Shares a. Founders Shares - given rights and privileges not enjoyed by owners of other stocks; right to vote/be voted in the election of directors shall not exceed 5 years Non-Voting Shares a. Preferred Shares - issued only with par value; given preference in distribution of assets in liquidation and in payment of dividends and other preferences stated in the articles of incorporation res - expres ressly provided in arti rticles; have to be b. Redeemable Shares purchased/taken up upon expiration of period of said shares purchased whether or not there is unrestricted retained earnings c. Treasury Stocks - stocks previously issued and fully paid for and reacquired by the corporation through lawful means (purchase, donation, etc.) 9. Exceptions where holders of non-voting shares may vote: a. amendments amendments of articles of incorporation b. adoption/amendment adoption/amendment of by-laws
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 c. d. e. f. g. h.
increase/decrease of bonded indebtedness increase/decrease of capital stock sale/disposition of all/substantially all corporate property merger/consolidation merger/consolidation of corporation investment of funds in another corporation/another business purpose corporate dissolution
10.
Preferred Cumulative Participating Share of Stock - share entitling its holder to preference in the payment of dividends ahead of common stockholders and to be paid the dividends ahead of common stockholders stockholders and to be paid the dividends due for prior years years and to participa participate te further further with common common stockhold stockholders ers in dividend dividend declarations
11.
Promotion Stock for Services Rendered Prior to Incorporation Escrow Stock stock stock deposi deposited ted with with a 3 rd person person to be delivered delivered to stockholde stockholder/assi r/assignor gnor after complying with certain conditions - usually payment of full subscription price
12.
Over-issued Stock - stock issued in excess of authorized capital stock; null and void
13.
Watered Stock - stock issued gratuitously, money/property less than par value, services less than par value, dividends where no surplus profits exist
14.
Cert Certif ific icat ate e of Stoc Stock k - writ writte ten n ackn acknow owle ledg dgme ment nt by the the corp corpor orat atio ion n of the the stockholde stockholder’s r’s interest interest in the corporati corporation. on. It is the personal property property and may be mortg mortgage aged/p d/pled ledged ged.. Transf Transfer er binds the corpor corporati ation on when when it is recorde recorded d in the corporate books. A stockholder who does not not pay his subscription is not not entitled to the issue of a stock certificate. certificate. The total par value value of the stocks subscribed by him should first be paid.
15.
Chattel mortgage of shares registered with the Registrar of Deeds need not be registered in corporate books to bind third parties because corporate books only cover cover absolute transfers. transfers. But the pledgee/mortg pledgee/mortgagee agee may not have voting rights unless stated in the contract and registered in the corporate name.
16. a. b. c.
Methods of Collection of Unpaid Subscription call, delinquency and sale at public auction of delinquent shares ordinary civil action collection from cash dividends and other amounts due to stockholders if allowed by by-laws/agreed to by him
17. a. b. c. d.
A corporation can reacquire stocks in the following cases: eliminate fractional shares corporate indebtedness arising from unpaid subscriptions purchase delinquent shares exercise of appraisal right
18. Right of Appraisal a. amend ending ing arti rticle cles, chan chang ging, ing, res restric tricti tin ng, enlarg largin ing g rights/extending, shortening corporate life b. sale/disposition of all/substantially all of corporate assets c. merger and consolidation d. investment of funds in another corporation/for a different purpose 19. a. b. c. d.
Grounds for Rejection of Registration not in prescribed form purpose illegal, inimical treasurer’s affidavit false non-compliance non-compliance with required Filipino stock ownership
stock tockho hold lde er’s r’s
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 20.
Corp Corpor orat atio ion n must must orga organi nize ze with within in 2 year years s from from issu issuan ance ce of cert certif ific icat ate e of incorporation. How to organize? a. adoption of by-laws b. election of Board of Directors c. election of officers But from issuance of certificate, it acquires juridical personality
21.
Merger - one corporation absorbs the other and remains in existence while the other is dissolved
22.
Consolidation - a new corporation is created and the consolidating corporations are extinguished
23.
Theory of General Capacity - a corporation is said to hold such powers as are not prohibited/withheld from it by general law
24.
Theory of Special Capacity - the corporation cannot exercise powers except those expressly/impliedly given
25.
Concession Theory - a group of persons wanting to create a corporation will have to execute documents and comply with requirements set by the state before being given corporate personality; merely a privilege; state may provide causes for which the privilege may be withdrawn
26. a. b. c. 27.
Acts requiring majority vote of stockholder: filing of issue value of no par value share adoption, amendment, repeal of by-laws compensation and other per diems for directors
Where similar acts have been approved by the directors as a matter of general practice, practice, custom and policy, policy, the general manager may bind the company company even without formal authorization of the board of directors
28. Powers of stockholders: a. a direct participation in management - where his vote is needed to approve certain corporate actions b. indirect participation in management to vote or remove directors c. proprietary rights d. remedial rights 29.
Voting Trust Agreement - an agreement between a group of stockholders and trustee for a term not exceeding 5 years in which control over the stocks is lodged in the trustee. The purpose is for controlling the voting. voting. a. in writing, notarized and filed with the SEC and the corporation b. period not exceeding 5 years cannott be entere entered d into into to circum circumven ventt the laws laws agains againstt mono monopol polies ies,, illega illegall c. canno combinations in restraint of trade in fraud
30.
Cumulative Voting - the number of votes that a shareholder’s number of shares multiplied by the number of directors may give all said votes to one candidate or he may distribute them them as he may deem fit. Cumulative voting is a matter matter of right in a stock corporation. In a non-stock corporation, corporation, it cannot be utilized utilized unless allowed by the by-laws/articles
31.
The power of removal of directors that may be exercised with or without cause cannot cannot apply apply to the director representi representing ng the minority minority shareholder shareholders. s. He may only be removed with cause.
36
COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 32.
General Rule: If surplus profits exceed the requirements requirements the corporation shall shall declare dividends. This is compulsory compulsory if the surplus is equal/or more more than the paidup capital. Exceptions: a. justified by approved expansion projects b. prohibited by creditor to declare dividends c. retention is necessary under existing circumstances
33.
Business Business Judgment Judgment Rule - decisions decisions made by a corporatio corporation’s n’s managem management ent body body shal shalll not not be inte interf rfer ered ed with with even even by the the cour courts ts unle unless ss such such acts acts are are oppressive/unconscionable as to violate the rights of the minority
34.
Individual Suit - one brought to assert a right of a stockholder peculiar to himself
35.
Representative Suit - brought by the stockholder in his own behalf and in behalf of othe otherr stoc stockh khol olde ders rs simi simila larl rly y situ situat ated ed,, havi having ng comm common on caus cause e agai agains nstt the the corporation
36.
Derivative Suit - brought by a stockholder for and in behalf of the corporation to protect/vindicate corporate rights after he has exhausted intra-corporate remedies Requisites: a. cause of action in favor of the corporation b. refusal of corporation to sue c. injury to the corporation Although corporations dissolved have 3 years to wind up, they can convey their properties properties to a trustee who can continue continue the suit suit beyond the 3 year period. period. The lawyer who handled the case in the trial court may be considered as trustee for the diss dissol olve ved d corp corpor orat atio ion n with with resp respec ectt to the the matt matter er in liti litiga gati tion on only only even even if no appointment was extended to him. (Selano vs. CA) In a case filed before dissolution, it may continue even beyond the 3 year period until final determination determination of litigation. Otherwise, the corporation corporation in liquidation would would lose what justly belongs to them/be exempt from payment of obligations because of a technicality. •
•
Foreign Corporations 37. a. Doing Business - continuity of commercial dealings incident to prosecution of purp purpos ose e and and obje object ct of the the orga organi niza zatio tion. n. Isol Isolat ated ed,, occa occasi sion onal al or casu casual al transactions do not amount amount to engaging in business. business. But where the isolated isolated act is not incidental/casual but indicates the foreign corporation’s intention to do othe otherr busi busine ness ss,, said said sing single le act act cons consti titu tute tes s enga engagi ging ng in busi busine ness ss in the the Philippines b. Instances when unlicensed foreign corporations can sue: isolated transactions (1) action action to protec protectt good good name, name, goodwi goodwill, ll, and reputa reputatio tion n of a forei foreign gn (2) corporation contracts provide that Phil. Courts will be venue to controversies (3) licens license e subseq subsequen uently tly grante granted d enable enables s foreig foreign n corpo corporat ration ion to sue on (4) contracts executed before the grant of the license recovery of misdelivered property (5) where the unlicensed foreign corporation has a domestic corporation (6) Religious Corporations 38. a. Corporation Sole - special form of corporation; associated with the clergy and consists consists of 1 person person only and his successors; successors; incorporated incorporated by law giving them legal capacity and advantage b. Close Corporations - one whose articles provide that its shares shall not be held by more than 20 persons; its issued stock shall be subject to one or more restri restricti ctions ons on transf transfer er and and shall shall not not be listed listed in any any stock stock exchan exchange/m ge/make ake public offering
37
COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 c. Non-stock Corporation - one where no part of its income is distributable to its memb members ers and shall shall be used used in furthe furtheran rance ce of the purpose purpose of which which it was organized SEC Jurisdiction 39. a. original and exclusive jurisdiction fraudulen fraudulentt devices devices and schemes schemes employed by directors directors detrimental detrimental to (1) public interest intra-corporate disputes and with the state in relation to their franchise (2) and right to exist as such controversies in the election, appointment of directors, trustees, etc. (3) petition to be declared in a state of suspension of payments (4)
b. Grounds for Suspension/Revocation of Certificate of Registration fraud in procuring registration (1) serious misrepresentation as to objectives of corporation (2) refusal to comply with lawful order of SEC (3) continuous inoperation for at least 5 years (4) (5) failure to file by-laws within the required period (6) failure to file reports (7) other similar grounds REVISED SECURITIES ACT (Material on the Securities Regulation Code of 2000 to follow) General Rule: All securities securities before before being being offered for sale/actual sale/actual sale to the public 1. General must first be registered and have the proper permit. Exception: a. exempt securities b. securities emanating from exempt transactions
2. Exempt Securities subdivisions/instrumentalities a. issued by the government subdivisions/instrumentalities b. issued by foreign government which the Philippines has diplomatic relations c. issued by receiver/trustee of an insolvent approved by the court d. issued by building and loan association e. issued by receiver/trustee of an insolvent approved by the court f. policy of insurance issued by insurance corporation supervised by the insurance commission security/right/ ight/intere interest st in real property property includin including g subdivisio subdivision n lot/condo lot/condomini minium um g. security/r supervised by the Ministry of Human Settlements h. pension plans regulated by BIR/Insurance Commission 3. Exempt Transactions a. judicial sale by execution, etc. in insolvency b. sale of pledged property/foreclosed property to liquidate an obligation c. isolated transactions on securities done by owner/agent d. stock transfers emanating from mergers and consolidations e. pre-incorporation subscription f. securities issued by public service operator to broaden equity base 4. Grounds for Rejection of Registration a. application incomplete/untruthful/omits incomplete/untruthful/omits to state a material fact b. issuer/re issuer/registr gistrant ant insolvent insolvent,, violated violated code/ code/ SEC rules, rules, engages engages in fraudulent fraudulent transactions c. issuer’s business not sound d. officer, director, stockholders of issuers is disqualified e. issue would prejudice the public
38
COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 5. Grounds for Revocation a. issuer insolvent b. violated of Code/SEC rules c. fraudulent transaction d. dishonesty by issuer/misrepresented issuer/misrepresented prospectus e. does not conduct business in accordance with law 6. Acts Prohibited a. manipulation of security prices b. manipulation of deceptive devices c. artificial measures of price control d. fraudulent transactions e. insider trading f. false prospectus, communications, reports SECRECY OF BANK DEPOSITS
1. Deposits in banks, including government banks, may not be inquired into by any person, except: a. if depositor agrees in writing b. impeachment impeachment cases c. by court order in cases of bribery and dereliction of duty against public officials d. deposit is subject of litigation e. anti-graft cases f. general and special examination of bank order of the Monetary Board of bank fraud or serious irregularity g. re-examination made by an independent auditor hired by a bank to conduct its regular trust LAWS ON INTELLECTUAL CREATION Copyright
1. What Works are not Protected: a. any idea, procedure, system, method or operation, concept, principle, discovery, or mere mere data data as such, such, even even if they they are expresse expressed, d, explai explained ned,, illust illustrat rated ed or embodied in a work; news of the day or other miscellaneous facts, having the character of mere items of press information, or any official text of a legislative, administrative or legal nature as well as any official translation thereof b. works of the government c. statutes, rules, and regulations of government agencies and offices speeches hes,, lectur lectures, es, sermo sermons, ns, addres addresses ses and disse disserta rtatio tions, ns, pronou pronounce nced d or d. speec rendered rendered in courts courts of justices justices or nay administrativ administrative e agencies agencies in deliberati deliberative ve assemblies and meetings of public character 2. Fair Use of a Copyrighted Work is not Infringement a. for criticism criticism,, comment, comment, news reporting reporting,, teaching, teaching, research, research, scholarsh scholarship, ip, and similar purposes b. decompilation: the reproduction of of the code and translation of the forms forms of the the computer program with other programs 3. Factors to Consider in Determining Fair Use: a. purp purpos ose e and and char charac acte terr of the use, use, inclu includi ding ng whet whethe herr such such use use is of a commercial commercial nature or for no profit or educational purposes b. nature of the copyrighted work c. amount and substantiality of the portion used in relation to the copyrighted work as a whole d. effect of use upon the potential market for a value of the copyrighted work
39
COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 4. Terms of the Protection creator plus 50 years after death (to be computed computed a. copyrighted work: lifetime of creator st on the 1 day of January of the year following the death) performances ces not incorporat incorporated ed in recordings: recordings: 50 years from from end of year in b. performan which the performance took place c. sound or image and sound recordings and performances incorporated therein: 50 years from end of the year in which the recording took place broadcast took place d. broadcasts: 20 years from the date the broadcast 5. Remedies for Infringement a. injunction actual damages, damages, including including legal legal costs costs and other expenses, expenses, as he may have b. actual incurred due to the infringement as well as the profits the infringer may have made due to such infringement c. impounding of articles during pendency of the action d. destruction of all infringing copies and/or devices e. moral and exemplary damages
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 6. Criminal Penalties a. imprisonment of 1 to 3 years plus fine of P50,000 to P150,000 for the first offense imprisonment of 3 years and 1 day to 6 years plus fine ranging from P150,000 to b. imprisonment P500,000 for the 2 nd offense impris ison onme ment nt of 6 year years s and and 1 day day to 9 year years s plus plus fine fine of P500 P500,00 ,000 0 to c. impr rd P1,000,000 for the 3 /subsequent offenses IN ALL CASES, subsidiary imprisonment in cases of insolvency 7. Presumptions: a. Presumption of copyright in the work of other subject matter to which the action related b. Plaintiff is presumed to be the owner of the copyright c. The natural person whose name is indicated on a work in the usual manner as the author shall, in the absence of proof to the contrary, be presumed to be the author of the work. This is applicable even even if the name is a pseudonym, pseudonym, where the pseudonym leaves no doubt as to the identity of the author. 8. Prescription: No damages may may be recovered after 4 years from time time the cause of action arose. Patents
1. Patentable Inventions - any technical solution of a problem in any field o human activity activity that is new, involve involve an inventive inventive step and is industrial industrially ly applicabl applicable e shall shall be patentable. It may be or may may relate to as product, or process or an improvemen improvementt of any of the foregoing. 2. Non-Patentable Inventions a. discoveries, scientific theories and mathematical mathematical methods b. schemes, rules and methods of performing mental acts, playing games or doing business, and programs for computers c. methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on the human or animal body Exception: products and composition composition for use in any of these methods methods d. plan plantt vari variet etie ies s or anim animal al bree breeds ds or esse essent ntia iall lly y biol biolog ogic ical al proc proces ess s for for the the production of plants and animals Exception: micro-organisms micro-organisms and non-biological and micro-biological micro-biological processes e. aesthetic creations f. contrary to public order or morality 3. Requisites of Patentability a. new, novelty b. involves an inventive step; c. is industrially applicable 4. Novelty The novelty novelty requireme requirement nt in the Code is absolute. absolute. Thus, Thus, an invention invention is not considered new if it forms part part of a prior art. A prior art consists of: a. anything which has been made available to the public anywhere in the world before the filing date or the priority date of the application, or b. the whole contents of an application application for a patent, patent, utility model, or industria industriall design design registration, published in the IPO gazette, filed or effective in the Philippines, with a filing filing or priority date that is earlier than the filing filing or priority date of the application, application, provided that the application which has validly claimed the filing date of an earlier application (priority date) is prior art with effect as of the filing date of such earlier application, and provided further, that the applicant and the inventor identified in both applications are not one and the same
41
COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 5. Inventive Step - an invention involves an inventive step, if having regard to the prior art, it is not obvious to a person skilled in the art at the time of the filing date of priority date of the application claiming the invention 6. Industrial Applicability - an invention is considered industrially applicable if it can be produced and used in the industry 7. The First-to-File System - if 2 or more persons have made the invention separately and independently of each other, the right to the patent belongs to the person who filed an application for such invention, or where 2 or more applications are filed for the same invention, the right of the patent belongs to the person who has the earliest filing date or the earliest priority date Under this system, the patent is granted to the inventor who filed his patent application earlier than others thus simplifying the determination of who is entitled to own the patent. The First-to-File System increases the rights of the inventor by: a. guaranteeing the confidentiality of the application prior to its publication b. giving the inventor inchoate rights against an infringer after the publication of the application and before the grant of the patent and c. expanding the rights of the inventor to institute cancellation proceedings for the duration of the term of the patent. Cancellation proceedings may may be filed at any time during the term of the patent. Under this system, the applicant declared by final court order as having the right to the patent may: a. prosecute the application as his own application in place of the original applicant b. file a new patent application in respect of the same invention c. request that the application be refused or d. seek the cancellation of the patent, if one has already been issued
8. What is the difference between novelty in patents and originality in copyright? Novelty in Patents - even if you do not know of any previous creation, as long as a patent on the same creation has already been published anywhere in the world, you cannot claim novelty. novelty. No access tot he other creation is no no defense. Originality in Copyright - even if there is same creation, as long as you do not copy your own creation, it is still still considered an original creation. creation. No access to the previous previous creation is a defense. 9. Non-Prejudicial Disclosure The disclosure of information contained in the application during the 12 months preceding the filing date or the priority date of the application shall not prejudice the applicant on the ground of lack of novelty if such disclosure was made by (a) inventor; (b) a patent office and the information was contained 10.
Term of Patent - 20 years from the filing date of the application
Grounds for Compulsory Licensing: 11. a. national emergency or other circumstances of extreme urgency b. where public interest, national security, health or the development of other vital sectors of the national economy as determined by the appropriate agency of the government so requires c. where where a judic judicial ial or admini administra strativ tive e body body has determ determine ined d that that the manne mannerr of exploitation by the owner of the patent or his licensee is anti-competitive public non-comm non-commercia erciall use of the patent by the patentee, patentee, without without d. in case of public satisfactory reason e. if not being worked in the Philippines on a commercial scale
12.
In case case of Comp Compul ulso sory ry Lice Licens nsin ing g of Paten Patents ts invo involv lvin ing g Semi Semi-co -cond nduc ucto tor r Technology, the license may be granted only in case of public non-commercial use
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 or to remedy a practice determined after judicial or administrative process to be anti-competitive
13.
Utility Models - an invention qualifies for registration as a utility model if it is new and industrially applicable - no inventive step required for registration - no search and examination required 14. Term Protection - 7 years after the filing date of application without possibility of renewal
15.
Industrial Design - any composition of lines or colors or any 3 dimensional form, whether or not associated with lines or colors Industrial Designs essentially dictated by technical or functional considerations to obtain a technical result or those that are contrary to public order, health or morals shall not be protected
16.
Term of Protection - 5 years from filing date of application, renewable for not more than 2 consecutive periods of 5 years each Insolvency Law
1. Distinguish Suspension of Payment and Insolvency Suspension of Payment Insolvency debtor debtor has enough assets to meet liabilities liabilities debtor has more liabilities than assets but cannot meet them as they fall due always initiated by debtor initiated by creditors/other persons involuntary; initiated by debtor if voluntary 2. Fraudulent Preference - any act of insolvent which gives rise/has tendency to give preference to a creditor to the assets of the insolvent prejudicial to the right of other creditors of said insolvent 3. Effect on Actions Upon Adjudication of Insolvency a. suits pending in court secured obligations suspended until assignee appointed (1) (2) unsecured obligations terminated except to fix amount of obligation foreclosure suits pending continue (3) b. suit not yet filed - cannot be filed anymore, but claims may be presented to assignee 4. Debts and Obligations not Affected by Discharge of Insolvent a. assessments due to national and local government fraud/embezzlement b. debts due to fraud/embezzlement c. debts in which he is bound solidarily d. alimony e. corporate debts f. debts not included in the schedule submitted by debtor
if
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 Chattel Mortgage Law primarily governs chattel mortgage. mortgage. Provisions on pledge pledge of NCC in so far 1. The law primarily as not in conflict with CML also govern chattel mortgages.
2. Chattel Mortgage may be rescinded for being in fraud of creditors. 3. Growing fruits are covered by chattel mortgage but they may not be pledged. 4. Machinery placed on plant or building owned by another can be the object of chattel mortgage. 5. General Rule: Chattel Mortgage cannot cannot cover debts subsequently subsequently contracted. 6. Rules: Chattel Mortgage Mortgage cannot cover debts subsequently contracted contracted a. registered registered in place place where mortgagor mortgagor resides resides and where property property (chattel) (chattel) is locat located. ed. If mortgag mortgagor or reside resides s abroa abroad, d, regist register er in place place where propert property y is located. Vehicles: register also in Land Transportation Transportation Office b. Motor Vehicles: c. Shares of Stock: place of domicile of corporation and shareholder. shareholder. No need for notation in books of corporation d. Vessels: Phil. Coastguard 7. To be valid against 3 rd persons: a. affidavit of good faith b. contract must be registered 8. General Rule: In Chattel Mortgage, Mortgage, there is recovery of of deficiency judgment. judgment. Exception: when Recto Recto Law applies 9. Requisites of CML: a. constituted to secure the fulfillment of principal obligation b. mortgagor is absolute owner of the thing mortgaged c. persons constituting the mortgage have the free disposal of the property and in the absence thereof, they be legally authorized for the purpose d. recorded to bind 3 rd persons 10. a. b. c. d.
Formal Requisites of CM: substantial compliance with form in Sec. 5 of CML signed by at least 2 witnesses must contain an affidavit of good faith certificate of oath (notarial acknowledgment)
11.
Affidavit of Good Faith - where the parties severally swear that the mortgage is made for the purpose of securing the obligation specified and for no other purpose and that the same is a just and valid obligation and not one entered into for fraud - property given in CM must be described to enable the parties or any other person after reasonable inquiry and investigation to identify it
Future property may not be covered by CM but when such property is a: 12. renewa wall of, of, or in subs substi titu tuti tion on for for good goods s on hand hand when when the the mort mortga gage ge was was a. rene executed, or b. purchased with proceeds (not of your own money) of said goods, said property may be covered by CM
13.
Criminal Acts - removal of chattel to another city or province without written consen consentt of mortg mortgage agee, e, selli selling ng proper property ty alrea already dy pledge pledged, d, or mortg mortgage aged d withou withoutt written consent of mortgagee
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COMMERCIAL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 14.
A chattel mortgage may be foreclosed judicially or extra-judicially, in the latter case, before a notary or sheriff, or creditor or mortgagee when stipulated, even without need of notice (when mortgagee forecloses)
15. Pactum Commissorium Commissorium applies to Chattel Mortgage. Mortgage.
