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COMMERCI AL 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
COMMERCI! !" - branch of private law which regulates the #uridical relations
arising from commercial acts
C$RC%ERI&%IC& O' COMMERCI! !"(
1. universal
2. uniform
3. e)uitable
4. customary
5. progressive
*OR%IO+& O' CO,E O' COMMERCE &%I!! **!IC-!E(
1. merchants; boo. of merchants and general provision of contracts
2. #oint account association
3. commercial barter
4. transfers of non-negotiable credits
5. commercial contracts of overland transportation
6. letters of credit
7. maritime commerce
O%$ER&(
1. Commerce - bringing products from the manufacturers to the consumers
2. Characteristics of Commerce(
a. habituality
b. rapidity - if period is fi/ed0 debtor in delay without need of demand; if contract
does not fi/ period0 11 days
c. intent to #oin
3. Merchant(
a. Individuals - legal capacity0 21 years0 or sub#ect to parental authority0 habitually
engaged in commerce
b. 3uridical *ersons - commercial and industrial company organi4ed in accordance
with law0 habitually engaged in business
4. 5eneral Rule( Minors cannot engage in commerce
E/ceptions(
a. to continue business of deceased parents through guardian
b. court authori4es guardian to place minor and property in business
c. minor is an alien and his national law allows him to be a merchant
5. "hich persons are not allowed to engage in commerce6
a. suffering accessory penalty of civil interdiction 7reclusion perpetua and reclusion
temporal8
b. those #udicially declared insolvent until they can obtain their discharge
c. prohibited by Constitution and special laws
6. liens
a. capacitated under his national law to engage in business
b. engaged in the business in the *hilippines not reserved for the 'ilipinos
c. after securing license and -OI certificate
7. 'amily Code( Either spouse may engage in business; when ob#ected to by the
other0 court will loo. into valid grounds0 i9e9 serious and moral grounds
8. -OI Certificate must be obtained by(
a. alien
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
b. foreign firm
9. Meaning of *hilippine +ational
a. citi4en
b. domestic corporation wholly owned and organi4ed by 'ilipinos in the *hilippines
c. 'ilipino corporation where 'ilipino capital entitled to vote is at least :1;
10. Query( If a corporation is a shareholder of another corporation0 how do you
determine whether the latter corporation is a 'ilipino national6
Answer( %he following must concur -
a. t least :1; of the outstanding capital stoc. and entitled to vote of both
corporations are held by citi4ens of the *hilippines
b. t least :1; of the -oard of ,irectors of both corporations are 'ilipinos
11. %enor of -OI Certificate
a. -usiness or activity to be engaged is consistent with the Investment *riorities
*lan
b. -usiness will contribute to the sound and balanced development of the national
economy in a self-sustaining basis
c. -usiness will not conflict with the Constitution and local laws
d. -usiness is not ade)uately e/ploited by 'ilipino nationals
e. +o danger of monopolies<combinations in restraint of trade
12. -asic *rinciples<Conditions laid down by -OI
a. resident agent of foreign firm is a 'ilipino citi4en
b. establishment of office in the *hilippines
c. bringing assets tot he *hilippine office as capital
d. complete set of accounting records
13. Merger and Consolidation sub#ect to -OI re)uirements for the issuance of
certificate(
"hen merger and consolidation result in ownership and control of non-'ilipino
nationals over more than =1; of the capital of a consolidated corporation9
14. &EC !icense issued upon compliance with the following re)uirements(
a. proof of compliance with principle of reciprocity
b. -OI certificate
c. pplicant for license gives re)uired information
articles of incorporation
by-laws
names and addresses of resident agents
principal place of business in the *hilippines
d. proof of solvency
e. deposit acceptable securities to protect future creditors
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
RETAIL TRADE NATIONALIZATION LAW
7+ote( Material on the Retail %rade !iberali4ation !aw will not be included in this
reviewer9 &upplement to follow8
1. Retail %rade - any act0 occupation0 or calling of habitually selling direct to the
general public0 merchandise0 commodities0 or goods for consumption
3urisprudence has held that the term ?retail@ should be associated with and
limited to goods for personal0 family or household use0 consumption and utili4ation9
%he Retail %rade +ationali4ation !aw refers to ?consumption goods@ or ?consumer
goods@ which directly satisfy human wants and desires and are needed for home and
daily life9 E/cluded from the law are those goods which are considered generally raw
material used in the manufacture of other goods0 or if not0 as one of the component raw
material0 or at least as elements utili4ed in the process of production and
manufacturing9
2. Elements of "hat Constitutes Retail %rade(
a. %he seller habitually engages in selling;
b. %he sale is direct to the general public; and
c. %he ob#ect of the sale is limited to merchandise0 commodities or goods for
consumption9
3. 5eneral Rule( fter 1A:=0 only 'ilipinos or corporations whose capital is 111;
'ilipino may engage in retail trade9
4. E/ceptions0 that is0 instances when aliens may engage in retail trade in the
*hilippines(
a. manufacturer or processor if capital does not e/ceed *B0111911;
b. farmer or agriculturist when selling his products;
c. manufacturer or processor selling to industrial or commercial users 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 owners or .eepers of restaurants included or incidental to the hotel
business;
e. sale by a manufacturer or processor to the 5overnment or its agencies0
including government owned and controlled corporations
5. Query: $ow to determine citi4enship of shares of the corporation when they are
not held directly by individuals0 but in turn held by another entity6
Answer( apply the 5R+,'%$ER RC!E0 to wit(
&hares belonging to corporations or partnerships at least :1; of the capital of
which is owned by 'ilipino citi4ens shall be considered as *hilippine nationality0 but if
the percentage of 'ilipino ownership in the corporation or partnership is less than :1;0
only the number of shares corresponding to such percentage shall be counted as of
*hilippine nationality9 %hus0 if 1110111 shares are registered in the name of a
corporation or partnership at least :1; of the capital stoc. or capital respectively0 of
which belong to 'ilipino citi4ens0 all of the said shares shall be recorded as owned by
'ilipinos9 -ut0 if letDs say0 B1; of the capital stoc. belongs to 'ilipino citi4ens0 only
B10111 shares shall be counted as owned by 'ilipinos and the other B10111 shares
shall be recorded as belonging to aliens9
$owever0 while a corporation with :1; 'ilipino and =1; foreign e)uity
ownership is considered a *hilippine national for purposes of investment0 it is not
)ualified to invest in or enter into a #oint venture agreement with corporations or
partnerships0 the capital or ownership of which under the Constitution or other special
laws are limited to 'ilipino citi4ens only9 $ence0 for purposes of the law0 whatever the
percentage of 'ilipino ownership in the owning corporation0 the foreign ownership
would always render a portion of its holding in the company as foreign e)uity and would
dis)ualify the corporation to engage in retail trade9
ANTI-DUMMY ACT
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
1. %he ct penali4es 'ilipinos who permit aliens to use them as nominees or dummies
to en#oy privileges reserved for 'ilipinos or 'ilipino corporations9 Criminal sanctions
are imposed on the president0 manager0 board member or persons in charge of the
violating entity and causing the latter to forfeit its privileges0 rights and franchises9
2. ,is)ualified aliens cannot intervene in the management0 operation0 administration
or control of the business reserved to 'ilipinos whether as an officer0 employee or
laborer0 with or without remuneration0 e/cept when(
a. alien ta.es part in technical aspects;
b. provided that no 'ilipino can do such technical wor.; and
c. with e/press authority from the *resident0 upon the recommendation of the
department head concerned9
3. -y way of e/ception0 the following may participate in management(
a. liens may be elected to the -oard of ,irectors to the e/tent of their allowable
share in the capital of the corporation 7in partially nationali4ed industries89
b. registered enterprise may employ foreign nationals in supervisory0 technical0
and advisory positions for a period of B years sub#ect to e/tension9
c. "here ma#ority of stoc.s of a pioneer enterprise is owned by foreign investors0
the following positions may be held by foreign nationals(
president
treasurer
general manager
e)uivalent positions
4. 'ilipino common-law wife of an alien is not barred from engaging in the retail
business provided she uses capital e/clusively derived from her paraphernal
properties; however0 allowing her common-law alien husband to ta.e part in the
management of the retail business would be a violation of the law9
5. "hat doing business means(
a. soliciting orders0 purchases0 service contracts;
b. opening offices whether called liaison offices or branches;
c. appointing representatives or distributors who are domiciled in the *hilippines or
who in any calendar year stay in the country for a period totaling 1E1 days or
more;
d. participating in the management or supervision or control of any domestic firm0
entity or corporation in the *hilippines;
e. any other act or acts that imply continuity in commercial dealings
6. "hen commissioned merchants<investors or commercial bro.ers act in their own
name in selling foreign products0 the foreign firm manufacturing these products is
not doing business in the *hilippines9
7. "hen a local corporation or person acts in the name of a foreign firm0 the latter is
doing business in the *hilippines9
8. %he following are +O% doing business(
a. mere investment as a shareholder by a foreign entity in domestic corporations
duly registered to do business;
b. e/ercise of rights as such investor;
c. having a nominee director or officer to represent interests in such corporation;
d. appointing a representative or distributor domiciled in the *hilippines which
transacts business in its own name and for its own accounts9
TRUST RECEIPTS LAW
1. *urpose(
a. to encourage use of and to promote transactions based on trust receipts;
b. to regulate the use of trust receipts
2. ,efinition(
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
written<printed document signed by the E+%RC&%EE in favor of the
E+%RC&%ER whereby the latter releases the goods0 documents or instruments tot he
possession of the former upon the E+%RC&%EED& promise to hold said goods in trust
for the E+%RC&%ER0 and to sell the goods0 etc9 "I%$ %$E O-!I5%IO+ %O %CR+
OFER %$E *ROCEE,& %$EREO' %O %$E EG%E+% O' "$% I& O"I+5 %O %$E
E+%RC&%ER; or to return the goods if C+&O!,0 or for other purposes9
3. %rust receipts are denominated in *hilippine currency or acceptable and eligible
foreign currency9
4. E+%RC&%ER is not liable as principal or vendor under any sale or contract to sell
made by the E+%RC&%EE9
5. Ris. of loss is borne by the E+%RC&%EE9
6. *ending the duration of the trust agreement0 the E+%RC&%ERD& security interest
cannot be pre#udiced by claims of creditors of the E+%RC&%EE9
7. !oss of goods pending the dispossession shall not e/tinguish the obligation to the
E+%RC&%ER for the value thereof9
LETTERS OF CREDIT
1. Hinds(
a. Commercial !etters of Credit
b. %ravelerDs !etters of Credit
2. +o protest re)uired in case of dishonor9
3. Issued to definite persons and not to order0 thus0 non-negotiable9
4. !imited to a fi/ed account9
PRICE TAGS LAW
1. It re)uires articles of commerce sold at retail to bear prices9
JOINT ACCOUNTS
1. It e/ists when a merchant interests himself in the transaction of another merchant0
contributing thereto the amount of capital they may agree upon0 and participating in
the favorable or unfavorable results thereof in the proportion they may determine9
2. 3oint accounts do not adopt a firm name9
3. +o suit may be maintained - investor and third persons dealing with the merchant
conducting business9
4. It is not sub#ect to any formal re)uirement for validity; it may be oral9
BULK SALES LAW
1. *urpose( meant to protect creditors of businessmen against preferential or
fraudulent transfers
2. %he law covers all transactions0 whether done in good faith or not, or whether or not
the seller is in a state of insolvency0 that fall within the description of what is a ?bul.
sale@9
3. %ypes of transactions which are treated as ?bul. sales@(
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
a. &ale0 transfer0 mortgage or assignments of a stoc. of goods0 wares0
merchandise0 provisions0 or materials otherwise than in the ordinary course of
trade;
b. &ale transfer0 mortgage or assignments of all0 or substantially all0 of the
business of the vendor0 mortgagor0 transferor0 or assignor;
c. &ale0 transfer0 mortgage0 or assignment of all0 or substantially all0 of the fi/tures
and e)uipment used in the business of the vendor0 mortgagor0 transferor0 or
assignor9
4. Only creditors at the time of the sale in violation of the law are within the protection
of the laws and creditors subse)uent to the sale are not covered9
5. Even if the transaction falls within the definition of ?bul. sale@0 the following are not
deemed covered by the law(
a. If the vendor0 mortgagor0 transferor or assignor produces and delivers a written
waiver of the provisions of the law from his creditors as shown by verified
statements;
b. %he law does not apply to e/ecutors0 administrators0 receivers0 assignees in
insolvency0 or public officers0 acting under process9
6. Obligations when transaction is a bul. sale(
a. %he 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. %he vendor must apply the purchase money to the pro-rata payment of bona
fide claims of the creditors as shown in the verified statement9
c. %he seller0 at least 11 days before the sale0 shall(
ma.e a full detailed inventory of the goods0 merchandise0 etc90 cost price of
each article to be included in the sale
notify every creditor at least 11 days before transferring possession of the
goods0 of the price0 terms and conditions of the sale
7. Conse)uences of Fiolation of Re)uirements under I: above stated(
a. "hen :7a8 above is not complied with0 the sale itself is void; the seller will be
criminally liable9
b. "hen :7b8 above is not complied with0 the sale itself is also void; seller is also
criminally liable9
c. "hen :7c8 is not complied with0 the sale is not void; no criminal liability on the
seller9
INSURANCE LAW
1. !aws applicable to insurance in the order of priority(
a. Insurance Code
b. Civil Code
c. 5eneral *rinciples prevailing on the sub#ect in the C&
2. Contract of Insurance - an agreement whereby one underta.es for a consideration
to indemnify another against loss0 damage or liability arising from an un.nown
contingent event
3. Contract of &uretyship - deemed to be an insurance contract within the meaning of
the Insurance Code0 only if made by a surety who or which0 as such0 is doing an
insurance business
4. ,efinition of ?doing an insurance business@(
a. ma.ing or proposing to ma.e0 as insurer0 any insurance contract;
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
b. ma.ing or proposing to ma.e as a surety0 any contract of suretyship 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 e)uivalent to any of the
foregoing in a manner designed to evade the provisions of the Insurance Code9
5. Re)uisites of Insurance(
a. e/istence of an insurable interest;
b. ris. of loss;
c. assumption of ris.;
d. scheme to distribute losses; and
e. payment of premiums
+ote( If only a0 b0 and c are present0 it is not a contract of insurance but a ris.
shifting device9
6. Characteristics of an insurance contract(
a. consensual
b. voluntary
c. aleatory - depends upon some contingent event; however0 it is not a wagering
nor a gambling contract
d. e/ecuted as to the insured after payment of the premium
e. e/ecutory as to insurer - not e/ecuted until payment for a loss
f. personal - each party ta.es into account the character0 credit and the conduct of
the other
g. conditional - liability is based on the happening of the event insured against
7. *arties to a contract of Insurance(
a. insurer - party who assumes the ris. or underta.es to indemnify the insured or to
pay a certain sum on the happening of a specified contingency
b. insured - person in whose favor the contract is operative0 and who is indemnified
against0 or is to receive a certain sum upon the happening of a specified
contingency
c. beneficiary - may or may not be the same as the insured
"hat perils may be insured6
(a) any contingent or un.nown event0 whether past or future0 which may damnify a
person having an insurable interest; or
(b) any contingent or un.nown event0 whether past or future0 which may create a
liability against the person insured9
8. Every person has an insurable interest in the life and health of(
a. himself0 his spouse and his children
b. any person on whom he depends wholly or in part for education or support0 or in
whom he has a pecuniary interest
c. any person under a legal obligation to him for the payment of money0 or
respecting property or services0 of which death or illness might prevent the
performance or delay it
d. any person upon whose life any estate or any interest vested in him depends
9. Insurable Interest in *roperty may consist of(
a. an e/isting interest
b. an inchoate interest0 founded on an e/isting interest
c. an e/pectancy0 coupled with an e/isting interest out of which the e/pectancy
arises
,efinition of Insurable Interest in *roperty( Interest in property0 whether real or
personal0 or any relation thereto0 or liability in respect thereof0 of such nature
that a contemplated peril might directly damnify the insured9
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
10. Instances when Insurable Interest must e/ist(
a. Interest in *roperty insured must e/ist when the insurance ta.es effect and
when the loss occurs0 but need not e/ist in the meantime9
b. Interest in the !ife or $ealth of a *erson Insured must e/ist when the insurance
ta.es effect0 but need not e/ist thereafter or when the loss occurs9
c. -eneficiaries of !ife Insurance need not have insurable interest in the life of the
insured9
d. -eneficiaries of *roperty Insurance must have insurable interest in the property
insured9
Categ!" I#$%!a&'e I#te!e$t (# L()e
I#$%!a#*e
I#$%!a&'e I#te!e$t (#
P!+e!t"
19 basis may be based on pecuniary
interest0 affinity0 or
consanguinity
based purely on pecuniary
interest
29 when interest must e/ist at the time the policy ta.es
effect EGCE*%( life insurance
ta.en by the creditor on the
life of the debtor wherein
interest must also e/ist at the
time of the loss
at the time the policy ta.es
effect and at the time of the
loss
>9 amount of insurable
interest
no limit EGCE*%( if insurable
interest is based on creditor-
debtor relationship 7only to
the e/tent of the credit or
debt8
limited to the actual value of
damage<in#ury<loss
11. 5eneral Rule( change of interest in any part of a thing insured unaccompanied by
a corresponding change in interest in the insurance suspends the insurance to an
e)uivalent e/tent0 until the interest in the thing and the interest in the insurance are
vested in the same person9
E/ceptions( a9 In case of life0 health0 and accident insurance
b. when the change in interest results after the occurrence of an in#ury
which results in a loss
c. a change of interest in one or more several distinct things0 separately
insured by one policy
d. a change in the interest by will or succession on the death of the
insured 7interest passes to the heirs8
e. a transfer of interest by one of several partners0 #oint owners in
common who are #ointly insured to the others 7even though it has
been agreed that the insurance shall sei4e upon the alienation of the
thing insured8
12. Revocation of -eneficiaries
5eneral Rule( Insurance contracts are revocable9
E/ception( ny person who is forbidden to receive any donation under rticle
J>A of the Civil Code cannot be named beneficiary of a life insurance policy by
the person who cannot ma.e the donation to him9
%he following donations shall be void(
a. those made between persons who were guilty of adultery or concubinage at
the time of the donation;
b. those made by persons found guilty of the same criminal offense0 in
consideration thereof;
c. those made to a public officer or his wife0 descendants0 ascendants0 by
reason of his office9
Other *ertinent *rovisions on Revocation(
(a) %he termination of a subse)uent marriage shall allow the innocent spouse to
revo.e the designation of the other spouse who acted in bad faith as
beneficiary in any insurance policy0 even if such designation be stipulated as
irrevocable9
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
(b) fter the finality of the decree of legal separation0 the innocent spouse may
revo.e the donations as well as the designation of the latter as a beneficiary
in any insurance policy0 even if such designation is irrevocable9 %he
revocation of or change in the designation shall ta.e effect upon written
notification thereof to the insured9 %he action to revo.e the donation under
this article must be brought within B years from the time the decree of legal
separation has become final9
(c) %he interest of a beneficiary in a life insurance policy shall be forfeited when
the beneficiary is the principal0 accomplice or accessory in willfully bringing
about the death of the insured0 in which event0 the nearest relative of the
insured shall receive the proceeds of said insurance if not otherwise
dis)ualified9
13. &uspension - a change of interest in any part of a thing insured unaccompanied by
a corresponding change of interest in the insurance suspends the insurance to an
e)uivalent e/tent until the interest in the thing and the interest in the insurance are
vested in the same person9
14. Concealment - a neglect to communicate that which the party .nows or ought to
communicate
5eneral Rule( %he insured is not re)uired to communicate the nature 7or .ind8
or the amount of his insurable interest in the life or property insured to the
insurer9
E/ception( a9 "hen the insurer ma.es in)uiry from the insured of the nature or
amount of the latterDs insurable interest0 whether in life or property insurance;
b. insurance policy must specify the interest of the insured in the
property insured0 if he is not the absolute owner thereof9
concealment0 whether intentional or not0 entitles the in#ured party to rescind a
contract of insurance9
Re)uisites(
(a) the party concealing must have .nowledge of the facts concealed;
(b) the facts concealed must be material to the ris.;
(c) the party is duty bound to disclose such fact to the other;
(d) the party concealing ma.es no warranty as to the facts concealed;
(e) the other party has no other means of ascertaining the facts concealed9
+ote( n insured need not die of the very disease he failed to reveal to the
insurer9 It is sufficient that the non-revelation has misled the insurer in forming
his estimate of the disadvantages of the proposed policy or in ma.ing his
in)uiries in order to entitle the insurance company to avoid the contract9
+ote( %he insured is under an obligation to disclose not only such material facts
as are .nown to him0 but also those .nown to his agent where(
a. it was the duty of the agent to ac)uire and communicate information of the
facts in )uestion;
b. it was possible for the agent0 in the e/ercise of reasonable diligence0 to have
made the communication before the ma.ing of the insurance contract9
'ailure on the part of the insured to disclose such facts .nown to his agent0
or wholly due to the fault of the agent0 will avoid the policy0 despite the good
faith of the insured9
15. +either party to the insurance contract is bound to communicate information on the
following matters e/cept in answer to the in)uiries of the other(
a. those of which the other .nows;
b. that which0 in the e/ercise of ordinary care0 the other ought to .now and of
which the former has no reason to suppose his ignorance0 i9e9 political situation0
general usages of trade;
c. those of which the other waives communication;
d. those which prove or tend to prove the e/istence of the ris. e/cluded by a
warranty and which are not otherwise material;
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
e. those which relate to a ris. e/cepted from the policy and which are not
otherwise material9
+either party is bound to communicate his mere opinion0 even upon in)uiry0
because such opinion would add nothing to the appraisal of the application9
"aiver of material facts may be(
(a) by the terms of the insurance; or
(b) by the neglect to ma.e in)uiry as to such facts0 where they are distinctly
implied in other facts which information is 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 ma.ing his in)uiries9
Concealment0 whether intentional or not0 entitles the other party to rescind the
contract9
16. Representation
It is a factual statement made by the insured at the time of0 or prior to0 the
issuance of the policy0 to give information to the insurer and otherwise induce him to
enter into the insurance contract9
It may be made orally or in writing9
It may be made at the time of0 or before0 the issuance of the policy9
It may be altered or withdrawn before the insurance is effected0 but not afterwards9
representation cannot )ualify an e/press provision in a contract of insurance but it
may )ualify an implied warranty9
representation as to the future is to be deemed a promise unless it appears that it
was merely a statement of belief or an e/pectation9 7must be susceptible of
present0 actual .nowledge8
%he statement of an erroneous opinion0 belief or information0 or of an unfulfilled
intention0 will not avoid the contract of insurance0 unless fraudulent9
Right to rescind because of false representation(
a. must be e/ercised previous to the commencement of an action on the contract
7the action referred to is that to collect a claim on the contract8
b. misrepresentation0 whether intentional or not0 gives the right to rescind
Incontestable Clause( fter a 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 0 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 agent9
E/ceptions( 7a8 absence of insurable ris.
(b) cause of loss is an une/pected ris.
(c) fraud
(d) non-payment of premium
(e) violation of conditions relating to naval or military services
(f) failure to comply with conditions subse)uent to the occurrence of the
loss
17. "arranties(
5eneral Rule( +on-performance of a promissory warranty avoids a contract of
insurance9
E/ceptions(
a. when before the time for performance of the promissory warranty0 a loss
insured against occurs;
b. when before the time of the performance of the warranty0 the act becomes
unlawful;
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
c. when before the time of the performance of the warranty0 said performance
becomes impossible9
statement or a promise set forth in the policy or by reference incorporated
therein0 the non-fulfillment of which in any respect and without reference to
whether the insurer was in fact pre#udiced by such non-fulfillment0 renders the
policy voidable by the insurer0 wholly irrespective of the materiality of such
statement or promise9
Wa!!a#t" Re+!e$e#tat(#
part of the insurance contract collateral inducement
always written on the policy maybe oral or written
conclusively presumed material materiality must be proved
must be strictly complied with re)uires substantial truth
made by the insured may be made by insurer or insured
+ote( If there is a breach of warranty0 even if the cause of the loss is a different
ris.0 the insurer is entitled to rescind the contract of insurance9
-reach must refer to a material warranty0 whether intentional or not9
18. *olicy
"hat is a Rider6 It is an additional provision in a policy not part of the body of
the printed form9
Cover +ote( written memorandum of the most important terms of a preliminary
contract of insurance0 intended to give temporary protection pending the
investigation of the ris. by the insurer0 or until the issuance of a formal policy9
5eneral Rule( Cover notes bind insurer temporarily pending the issuance of the
policy9
E/ception( "here it is merely an ac.nowledgment on behalf of the company
that the latterDs branch office had received from the applicant the insurance
premium and accepted the application sub#ect for processing by the insurance
company and that the latter will either approve or re#ect the same9
Hinds of *olicies(
a. Open - the value of the thing insured is not agreed upon0 but is left to be
ascertained at the time of the loss
b. Falued - e/presses 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 ob#ect
of the policy may be from time to time defined especially as to the sub#ect of
insurance by additional statements or endorsements
+ote( If an amount is written on the face of an open policy0 it is merely a
determination of the ma/imum limit of recovery and not as the value of the
policy9
Categ!" O+e# P'(*" ,a'%e- P'(*"
what needs to be proven in
order to be able to claim
value of property upon loss no need for proof of value of
property upon loss
determining value of loss value of property is to be
ascertained upon loss
value of property upon loss is
conclusively stipulated to a
specified amount
*eriod for commencing an action against the policy( "ithin 1 year from the
time the cause of action accrues0 i9e90 from the time of re#ection of the claim
by the insurer9 ny condition0 stipulation0 or agreement limiting the time to
less than 1 year is void9
5rounds for Cancellation of a *olicy by the Insurer(
For Policies Other than Life:
(1) prior notice of the cancellation to insured
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COMMERCI AL LAW
MEMORY AID
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(2) notice must be based on the ff9 occurrences after effective date of
the policy
(a) non-payment of premiums
(b) conviction of a crime arising out of acts increasing the ha4ard
insured against
(c) discovery of fraud or material misrepresentation
(d) discovery of willful or rec.less acts or omissions increasing the
ha4ard insured against
(e) physical changes in the property insured which results in the
property becoming uninsurable
(f) determination by the Commissioner that the continuation of the
policy would violate or would place the insurer in violation of the
Insurance Code
(3) notice must be in writing
(4) it must be mailed or delivered to the insured at the address shown in
the policy
(5) notice must state the ground relied upon and that upon written
re)uest of the insured0 the insurer will furnish facts on which the
cancellation is based
Renewal of the *olicies Other than !ife(
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 =B days before the policy ends9 Otherwise0 insured entitled to
renew the policy upon payment of the premium due on the effective date of the
renewal9
19. *remium
5eneral Rule( +o policy is binding until the premium thereof has been paid9
E/ceptions( 7a8 in case of life or industrial life policy0 whenever the grace period
applies
(b) in case of estoppel
Insurer is entitled to payment of premiums as soon as the thing insured is
e/posed to the perils insured against9
"hen insurer entitled to Return of *remiums
a. when the contract is voidable on account of fraud or misrepresentation of the
insurer;
b. when on account of facts0 the e/istence of which the insured was ignorant
without his fault
c. when by any default of the insured other than actual fraud0 the insurer never
incurred any liability under the policy
d. when the insured has become a public enemy and the policy automatically
canceled 7on the ground of e)uity8
e. in case of over-insurance by several insurers 7ratable return of premiums0
proportioned to the amount by which the aggregate sum insured in all
policies e/ceed the insurable value of the thing at ris.8
20. !oss
"hen Insurer is !iable(
a. where the peril insured against was the pro/imate cause0 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 loss0 if0 in the course of such rescue0 the thing is
e/posed to a peril not insured against0 which permanently deprives 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. insurer is not e/onerated by a loss caused by simple negligence of the
insured if the pro/imate cause of the loss is a peril insured against
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COMMERCI AL LAW
MEMORY AID
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e. loss0 the immediate cause of which is a peril insured against e/cept when
the pro/imate cause is an e/cepted peril
"hen Insurer +ot !iable(
a. where the peril insured against was only a remote cause
b. where the peril is specifically e/cepted0 a loss which would not have occurred
but for such peril is thereby e/cepted
c. loss caused by the connivance of the insured
d. loss caused by the willful act of insured
e. loss caused by insuredDs negligence0 if it amounts to bad faith
5eneral Rule( %he insurer is not liable for a loss caused by the willful act of the
insured9
E/ception( &uicide Clause in !ife Insurance( Insurer liable in case insured
committed suicide after the policy has been in force for a period of 2 years from
the date of its issue or last reinstatement9 If insured .ills himself within a period
of 2 years0 insurer is not liable9
E/ception to E/ception( If suicide is committed in a state of insanity0 regardless
of the time of commission0 the insurer is liable9
21. ,ouble Insurance - e/ists where the same person is insured by several insurers
separately in respect to the same sub#ect and interest
Re)uisites( a9 person insured must be the same
b. e/istence of several insurers
c. sub#ect matter insured must be the same
d. interest the same
e. ris. insured against also the same
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COMMERCI AL LAW
MEMORY AID
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O.e! I#$%!a#*e D%&'e I#$%!a#*e
may be only one insurer must be 2 or more insurers
insurance covers more than the value of
insurable interest
insurance may or may not e/ceed the value of
insurable interest
%he Code prohibits double insurance without the consent of the insurer9
!iability of Insurer(
Insurance ta.en
from each insurer
---------------------------------- / value of property received K liability of insurer
total insurance
22. Reinsurance( process by which an insurer procures a third person to insure him
against loss or liability by reason of such original insurance9
%he original insured cannot recover from this insurance unless there is a
specific grant0 or assignment of0 the reinsurance contract in favor of the insured0 or a
manifest intention of the contracting parties to the reinsurance contract to favor the
insured9
5eneral Rule( %he insurer who obtains reinsurance must communicate(
a. all the representations of the original insured; and
b. all the .nowledge and information he possesses0 whether
previously or subse)uently ac)uired which are material to the
ris.
E/ception( under automatic reinsurance treaties
Reinsurance ,ouble Insurance
1. insurer becomes the insured
2. sub#ect matter is the insured ris. or liability
3. different ris.s and interests of insured
4. there must be consent of original
5. one who is original insured has no interest
in the contract of reinsurance which is
independent of the original contract of
insurance
1. insurer remains the insurer
2. sub#ect matter is property
3. the same interest and ris. are insured
4. insured has to give his consent
5. insured is the party in interest in all
contracts
23. Marine Insurance( insures against perils of the sea0 not of the ship
*erils of the &ea *erils of the &hip
covered by marine insurance not covered by marine insurance
denote nature accidents peculiar to the sea
which do not happen by intervention of man
nor are to be prevented by human prudence
damage or losses resulting from(
1. natural and inevitable action of the sea
2. ordinary wear and tear of a ship0 or
3. negligent failure of the ship owner to
provide the vessel with proper e)uipment
to convey the cargo under ordinary
conditions
Owner of the &hip 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 7insurer is liable for what insured cannot recover from
the charterer80 even when hypothecated by bottomry 7only the e/cess of its
value over the amount secured by bottomry8 and
b. in the freightage0 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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COMMERCI AL LAW
MEMORY AID
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Charterer has insurable interest in the ship to the e/tent that he is liable to be
damnified by its loss9
-arratry( ny willful misconduct on the part of the masters or crew0 in pursuance of
some unlawful or fraudulent purpose0 without the consent of the owners and to
the pre#udice of the ownerDs interest9
3ettison( Intentional casting overboard of any part of a venture e/posed to a peril0
whether it be of the cargo0 or the shipDs furniture or tac.le0 in the hope of saving
the rest of the venture9
Insurable Interest in Marine Insurance( ,etermined when one will sustain loss from
the destruction of the sub#ect matter or derive benefit from its preservation9
Charter *arty( Contract by virtue of which the owner or the agent of a vessel binds
himself to transport merchandise or persons for a fi/ed price9 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 another9
!oan on -ottomry( Contract in the nature of a mortgage whereby the owner of a
ship borrows money for the use0 e)uipment or repair of the vessel for a definite
term0 and pledges the ship as a security for repayment0 with maritime or
e/traordinary interest on the account of the maritime ris.s to be borne by the
lender9 It is stipulated in such a contract that if the ship be lost in the course of
the specific voyage or during a specified limited time caused by any of the perils
enumerated in the contract0 the lender shall resolutely lose his money9
!oan on Respondentia( Contract a.in to that of mortgage made on the goods on
board the ship0 and which are to be sold or e/changed in the course of the
voyage9 %he goods serve as the principal security9
'reightage( &ignifies all the benefits derived by the owner0 carriage of his own
goods0 or those of others9
Concealment( In marine insurance0 information or the belief or e/pectation of a >
rd
person0 in reference to a material fact is material9
Concealment of the following merely e/onerates the 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 sei4ure from breach of foreign laws of trade
d. want of necessary documents
e. use of false and simulated papers
Implied "arranties(
a. that the ship is seaworthy - complied with if the ship is seaworthy at the time of
commencement of ris.0 e/cept( 7a8 insurance for a specified length of time -
at the commencement of every voyage it underta.es during that time; 7b8
cargo to be transshipped at indeterminate port - each vessel upon 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 e/pressly warranted0 it
is implied that the ship will carry the re)uisite documents to show such
nationality or neutrality and that it will not carry any documents which may cast
reasonable suspicion thereon
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
&eaworthiness depends on(
a. nature of the ship
b. nature of the voyage
c. nature of the service
&eaworthiness of the vessel is re)uired only at the commencement of the ris.
E/ceptions(
a. in a %ime *olicy - commencement of every voyage that must be
underta.en
b. in a Cargo *olicy - commencement of each particular voyage
c. in a Foyage *olicy - commencement of each portion of the voyage
,eviation
a. a departure from the course of the voyage insured
b. unreasonable delay in pursuing the voyage
c. commencement of an entirely different voyage
"hen is ,eviation proper6
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 made in good faith and upon reasonable grounds of belief in its
necessity to avoid a peril
!oss
a. ctual %otal !oss
a total destruction of the thing insured
the irretrievable loss of the thing by sin.ing or by being bro.en 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 possession0 at the
port of destination0 of the thing insured
a. Constructive %otal !oss - gives to the person insured the right to abandon
verage - any e/traordinary or additional e/pense incurred during the voyage for
the preservation of the vessel0 cargo0 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
5eneral verage - an e/pense or damage suffered deliberately in order to save the
vessel0 its cargo0 or both from the real or .nown ris.
bandonment - act of the insured by which0 after a constructive total loss0 he
declares the relin)uishment to the insured of his interest in the thing insured
7where the cause of loss is a peril insured against8
(a) more than L thereof in value is actually lost or would have been e/pended to
recover it from the peril
(b) it is in#ured to such an e/tent as to reduce its value by more than L
(c) if the thing insured is the ship and the voyage cannot be lawfully performed
without incurring an e/pense of more than L of the whole0 or a ris. which a
prudent man would not underta.e under the circumstances
(d) if the thing insured is cargo or freightage0 and the voyage cannot be performed
on another ship procured by the master within a reasonable time and with
reasonable diligence to forward the cargo without incurring an e/pense or a
ris. as stated above
'reightage cannot be abandoned unless ship is also abandoned9
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
Re)uisites of a Falid bandonment(
a. must be total and conditional
b. made within a reasonable time
c. e/plicit notice
d. coupled with actual abandonment
Re)uisites for Falid Faluation in the Falued Marine *olicy(
a. insured must have interest at ris.
b. there must be no fraud on the insuredDs part
+otice of bandonment(
a. may be oral or in writing 7if oral0 written notice must be submitted within J days
from oral notice8
b. must be e/plicit
c. must specify the particular cause for abandonment
d. need not be accompanied by proof of interest or loss
cceptance of bandonment
a. may be e/press or implied 7i9e9 silence for unreasonable length of time8
b. conclusive upon the parties and admits the loss and sufficiency of
abandonment
c. irrevocable0 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
Cpon 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 in which the person who insures his property for
less than the entire value is understood to be his own insurer for the difference
which e/ists between the true value of the property and the amount of insurance
Co-insurance applies only where the(
a. insurance ta.en is less than the actual value of the thing insured
b. loss is partial
*rimage - increase in freightage
24. 'ire Insurance
Insurer is liable for loss or damage caused by hostile fire 7fire that escapes from
the place where it was intended to burn and ought to be in8 and not that caused by
friendly fire 7fire which burns in a place where it is intended to burn89
&cope of 'ire Insurance(
a. fire
b. lightning
c. windstorms
d. tornado
e. earth)ua.e
f. other allied ris.s
"hen does alteration in the use or condition entitle the insurer to rescind the
contract6
a. such alteration violates a provision in the policy
b. it was made without the insurerDs consent
c. it is done within the insuredDs control0 and it increases the ris. of loss or
damage
1E
COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
Rules(
a. policy shall not protect the insured from in#ury conse)uent upon his negligent
use or management of fire0 so long as it is confined to the place where it ought
to be
b. if it escapes0 even though the insured was negligent0 the insurer is liable
c. even though a fire may remain in its proper place0 it may become hostile if it by
accident0 becomes so e/tensive 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( ny in#ury that is intended0 une/pected and unusual0 even
though it results from an act or even which was intelligently done9
Insurer is !iable for death<in#ury to insured(
a. by his own hand while insane
b. by ta.ing poison by mista.e
c. by overdoes of drugs administered or ta.en by mista.e0 by ignorance or
material pathological conditions
d. by une/pected bacterial infection conse)uent upon doing acts0 even though
such acts were intentionally done
e. by unprovo.ed violence of others
Compulsory Motor Fehicle !iability Insurance
*ersons sub#ect to CMF!I(
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 !%O
b. land transport operator or one who is the owner of a motor vehicle or
vehicles being used for conveying passengers for compensation 7including
school buses8
+o 'ault Indemnity Clause( %he insurance company shall pay any claim for
death or bodily in#uries sustained by a passenger or >
rd
party without the
necessity of proving fault or negligence of any .ind sub#ect to certain conditions9
%his does not apply to property damage9
26. &uretyship - an agreement whereby the surety guarantees the performance of the
principal or obligor of an obligation or underta.ing in favor of a >
rd
party called the
obligee
27. !ife Insurance( an insurance in human life and insurance appertaining thereto or
connected therewith may be payable(
a. on the death of the insured
b. on his surviving a specified period
c. otherwise0 contingently on the continuance or cessation of life
7b and c refer to endowment or annuities8
Cses and Common Hinds of !ife Insurance(
a. "hole !ife or Ordinary *olicies - here0 the insured agrees to pay annual0
semi-annual or )uarterly premiums while he lives9 %he insurer agrees to
pay the face value of the policy upon the death of the insured9
b. !imited *ayment !ife *olicy - premiums paid only for a specified period of
years9
c. %erm *olicy - insurerDs liability arises only upon the death of the insured
within the agreed term as period9 If the latter survives the period0 the
contract terminates and the insurer is not liable
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
d. Endowment *olicy - insurer agrees to pay a certain sum to the insured if
the latter outlives a designated period; if he dies before that time0 the
proceeds are paid to the beneficiary
e. !ife nnuity - debtor binds himself to pay an annual pension or income
during the life of one or more persons in consideration of a capital
consisting of money or other property0 whose ownership is transferred to
him with the burden of income
28. %he -usiness of Insurance
a. !ife or Endowment *olicies
5race *eriod - >1 days for the payment of any premium due after the first
premium has been paid
*eriod of Incontestability - after the lapse of 2 years from the date of issue or
date of approval of last reinstatement
Reinstatement of *olicy - within > years from the date of default of premium0
upon(
a. production of evidence of insurability0 and
b. payment of all overdue premiums and any indebtedness to the company
upon said policy
E/ceptions(
a. if cash surrender value has been paid
b. if period of e/tension has e/pired
b. Claims &ettlement
Cnfair Claims &ettlement *ractices(
(a) .nowingly misrepresenting to claimants pertinent facts or policy provisions
relating to coverage at issue
(b) failing to ac.nowledge with reasonable promptness pertinent
communications with respect to claims arising under its policies
(c) failing to adopt or implement reasonable standards for the prompt
investigation of claims arising under its policies
(d) no attempt in good faith to effectuate prompt0 fair and e)uitable settlement of
claims submitted in which liability has become reasonably clear
(e) compelling policy holders to institute suits to recover the amount due under
its policies by offering with no #ustifiable reason an amount substantially less
than that ultimately recovered in suits brought by them
*roceeds of !ife Insurance - payable within :1 days after(
(a) presentation of claims0 and
(b) filing of proof of death 7upon failure to pay interest0 at the rate of 2 times the
ceiling prescribed by the Monetary -oard unless based on the ground that
the rate is fraudulent8
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
*roceeds of *olicies other than !ife - payable(
(a) upon proof of loss
(b) upon ascertainment of loss or damage 7if not made within :1 days of proof of
loss0 payable in A1 days8
c. *ower of Commissioner to &uspend<Revo.e !icense
(a) if insurance contract is in unsound condition
(b) if it has failed to comply with the provisions of law or regulations obligatory
upon it
(c) its conditions or methods of business s such as to render its proceedings
ha4ardous to the public or to its policy holders
(d) that its paid up capital stoc.0 or its available cash assets0 or its security
deposits0 as the case may be0 is impaired or deficient
(e) that the margin of solvency re)uired of each company is deficient
Insurance gent - any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transacts for a person other than himself an
application for a policy or contract of insurance to or from such company or offers or
assumes to act in negotiating of such insurance9 $e must be first licensed as such
before doing any acts as insurance agent9
Insurance -ro.er - any person for any compensation0 commission or any other thing of
value0 acts0 or aids in any manner in soliciting0 negotiating or procuring the ma.ing of
any insurance contract or in placing ris. or ta.ing out insurance0 on behalf of an insured
other than himself9 license is re)uired9
WARE/OUSE RECEIPTS LAW
1. "arehouse - a building or place where goods are deposited and stored for profit9
2. "arehouseman - person lawfully engaged in the business of storing goods for
profit9

Only a warehouseman may issue warehouse receipts9
3. "arehouse Receipt - written ac.nowledgment by a warehouseman that he has
received and holds certain goods therein described in store for the person to whom
it is issued9
4. +on-negotiable Receipt - receipt deliverable to a specified person9
5. +egotiable Receipt - receipt deliverable to order or to bearer9
6. Essential %erms which MC&% be embodied in a "arehouse 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 bearer0 or a specified
person0 or his order
e. rate of storage charges
f. description of the goods or pac.ages 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. %he validity of the warehouse receipt is not affected9
b. %he warehouseman shall be held liable for damages to those in#ured by his
omission9
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
c. %he negotiability of the warehouse receipt is not affected9
d. %he issuance of a warehouse receipt in the form provided by the law is merely
permissive and directory and not mandatory in the sense that if the
re)uirements are not observed0 then the goods delivered for storage become
ordinary deposits9
8. %erms which may be inserted in a "arehouse Receipt( ny other terms e/cept 7a8
those contrary to the provisions of this ct; 7b8 those that would impair a
warehousemanDs obligation to e/ercise that degree of care in the safe.eeping of the
goods entrusted to him9
9. Mar.s to be made on a warehouse receipt(
a. non-negotiable receipt must be clearly mar.ed non-negotiable or not
negotiable0 otherwise0 the holder of the receipt who purchased it for value and
who supposed it to be negotiable0 may treat it as negotiable9
b. ,uplicate receipts must be so mar.ed0 otherwise0 the warehouseman is held
liable for all damages suffered by a holder believing the same to be the original9
10. "arranties of a warehouseman as to duplicate receipts(
a. %he duplicate is an accurate copy of the original receipt9
b. &uch original receipt is uncancelled at the date of the issue of the duplicate9
11. Effects of alteration on the liability of the warehouseman(
a. If the alteration is IMM%ERI! 7the tenor of the receipt is not changed80
whether fraudulent or not0 authori4ed or not0 the warehouseman is liable on the
altered receipt according to its original tenor9
b. If the alteration is M%ERI! but C%$ORIME,0 the warehouseman is liable
according to the terms of the altered receipt9
c. If the alteration is M%ERI!0 C+C%$ORIME, but I++OCE+%!N M,E0 the
warehouseman is liable on the altered receipt according to its original tenor9
d. If the alteration is M%ERI! and 'RC,C!E+%!N M,E0 the warehouseman
is liable(
(1) to the purchaser of the receipt for value and without notice of the alteration
according to the tenor of the altered receipt
(2) to the alterer0 according to the terms of the original receipt
(3) to subse)uent purchasers with notice of the alteration0 according to the
terms of the original receipt
12. Effects of misdescription of goods(
a. warehouseman is under the obligation to deliver the identical property stored
with him and if he fails to do so0 he is liable directly to the owner9
b. s against a bona fide purchaser of a warehouse receipt0 the warehouseman is
estopped from denying that he has received the goods described in the receipt9
c. If the description consists merely of mar.s or label upon the goods or upon the
pac.ages containing them0 the warehouseman is not liable even if the goods
are not of the .ind as indicated in the mar.s or labels9
13. *rincipal Obligations of a "arehouseman(
a. %o ta.e care of the goods entrusted to his safe.eeping
5eneral Rule( warehouseman is re)uired to e/ercise such degree of care
which a reasonable careful owner would e/ercise over similar goods of his
own9 $e shall be liable for any loss or in#ury to the goods caused by his
failure to e/ercise such care9
E/ception( $e shall not be liable for any loss or in#ury which could not have
been avoided by the e/ercise of such care9
E/ception to the E/ception( $e may limit his liability to an agreed value of
the property received in case of loss9 $e cannot stipulate that he will not be
responsible for any loss caused by his negligence9
a. %o deliver the goods to the holder of the receipt or the depositor upon demand0
provided demand is accompanied with(
22
COMMERCI AL LAW
MEMORY AID
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(1) an offer to satisfy the warehousemanDs lien;
(2) an offer to surrender the negotiable receipt properly endorsed9 If the receipt
is non-negotiable0 any person lawfully entitled to the possession of the
goods may be entitled to delivery without surrender of the receipt9
(3) a readiness and willingness to sign an ac.nowledgment that the goods have
been delivered if such is re)uested by the warehouseman9
14. *ersons to whom goods must be delivered(
A. *ersons lawfully entitled to the possession of the goods or his agent(
a9 persons to whom a competent court has ordered the delivery of the goods
(1) where a negotiable instrument has been lost or destroyed0 the court may
order delivery to a person upon satisfactory proof of such loss or
destruction and upon proper posting of a bond to protect the
warehouseman from any liability or e/pense which he may incur by reason
of the original receipt remaining outstanding9
(2) where more than one person claims title or possession of the goods the
warehouseman may re)uire all claimants to interplead9 %he court will then
order delivery to the person having a better right9
b. an attaching creditor - 5oods0 while in the possession of the warehouseman
and covered by a negotiable receipt0 cannot be attached or levied upon
under an e/ecution unless(
(I) the negotiable receipt is first surrendered to the warehouseman0 or
(ii) its negotiation is en#oined0 or
(iii) the receipt is impounded by the court
c9 to the purchaser in case of sale of the goods by the warehouseman to enforce
his lien
d. to the purchaser where perishable or ha4ardous 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 receipt0 or
b. one who has written authority from letter a
C. If goods are covered by a negotiable receipt0 a person in possession of the
receipt0 the terms of which the goods are deliverable(
a. to him or order
b. to bearer
c. indorsed to him
d. indorsed in blan. by the person whom delivery was promised
15. "hen is there Misdelivery6
"hen 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 - or C above; or
b. the person falls under letter - or C but prior to delivery0 the warehouseman had
either(
(1) been re)uested by the person lawfully entitled to the delivery not to ma.e
such delivery0 or
(2) had information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods
16. Effects of Misdelivery(
%he warehouseman shall be liable for conversion to all having a right to property
or possession of the goods9
17. "hat happens if there is proper delivery or partial delivery but the warehouseman
fails to cancel the receipt or record on the receipt of such partial delivery6
a. If goods covered by a negotiable warehouse receipt are delivered by a
warehouseman but he fails to ta.e the receipt and cancel it0 then he is still liable
to one who purchases for value and in good faith such receipt9
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b. If he ma.es 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 receipt9
18. !awful e/cuses for refusal to deliver goods(
a. %he warehouseman can refuse to deliver the goods if he has ac)uired title or
right to the possession of the goods(
(1) directly or indirectly from a transfer made by the depositor at the time of the
deposit for storage or subse)uent thereto; or
(2) from the warehousemanDs 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 claim0 the warehouseman shall be e/cused 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 interplead9
c. %he warehouseman will not be re)uired to deliver the goods if such had been
lost9 -ut this is without pre#udice to liabilities which may be incurred by him due
to such loss9
d. %he warehouseman having a valid lien against the person demanding the goods
may refuse to deliver the goods to him until the lien is satisfied9
e. If goods have been lawfully sold or disposed of because of their perishable or
ha4ardous nature0 the warehouseman shall not be liable for failure to deliver the
goods9
19. 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
person9
20. Rules as regards Co-mingling of ,eposited 5oods(
5eneral Rule( warehouseman may not co-mingle goods belonging to different
depositors or belonging to the same depositor for which separate receipts had
been issued9
E/ception( warehouseman may co-mingle fungible goods of the same .ind
and grade provided he is authori4ed by agreement or by custom9
21. Effect of Co-mingling of 5oods(
a. %he different owners become co-owners of the whole mass9
b. %he warehouseman shall be severally liable to each depositor for the care and
redelivery of his share of such mass to the same e/tent and under the same
circumstances as if the goods had been .ept separate9
22. Remedies of a Creditor( 7the debtor being the owner of the negotiable receipt8
Creditors of the depositors0 before negotiation0 may protect themselves by
obtaining a writ of preliminary in#unction and serve the same on the depositor before he
has a chance to negotiate the receipt9 Once en#oined0 there will be no longer a danger
that a >
rd
person will be pre#udiced so the goods may now be attached0 levied upon0 or
that the vendorDs lien or the right of stoppage in transit be e/ercised9
23. "arehousemanDs !ien
E/tent of "arehousemanDs !ien(
warehouseman shall have a lien on goods deposited or on the proceeds
thereof in his hands for(
a. all lawful charges for storage and preservation of the goods
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b. all lawful claims for money advances0 interest0 insurance0 transportation0
labor0 weighing0 cooperating and other charges and e/penses in relation to
such goods
c. all reasonable charges and e/penses for notice and advertisements of sale
and for sale of the goods where default has been made in satisfying the
warehouse lien
5oods &ub#ect to lien(
a. goods belonging to the depositor who is liable to the warehouseman 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 ma.e a valid pledge
$ow is a lien enforced6
a. by refusing to deliver the goods until the lien is satisfied
b. by causing the e/tra#udicial 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
$ow is a lien lost6
a. when the warehouseman voluntarily surrenders possession of the goods
without re)uiring payment of his lien; or
b. when the warehouseman wrongfully refuses to deliver the goods when a
demand is made with which he is bound to comply
24. +egotiation and %ransfer of Receipts
$ow do we negotiate a receipt deliverable to order6
a. by indorsing it in blan. thereby ma.ing it deliverable to bearer or
b. by special indorsement - which would re)uire further indorsements for further
negotiations9
In both cases0 the indorsements must be coupled with delivery9
$ow do we negotiate a receipt deliverable to bearer6
%here is no need to indorse for negotiation9 *hysical delivery of the instrument
will suffice9 -ut if the instrument is indorsed specially0 the bearer character of the
receipt is destroyed and for further negotiation0 there will be a need for indorsement9
"ho may negotiate warehouse receipts6
a. the owner of the receipt0 or
b. the person to whom possession of the receipt was entrusted to by the owner
Rights ac)uired 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 7depositor or owner8 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
him0 as if the warehouseman directly contracted with him
May non negotiable receipts be negotiated6
+o0 even if the receipt is indorsed0 the transferee ac)uires no additional right9
%hat is why they are called non negotiable receipts9 -ut they may be transferred or
assigned by delivery9
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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c. the right thereafter to ac)uire the obligation of the warehouseman to hold the
goods for him
,istinction between a non negotiable receipt from a negotiable receipt with regard
to attachment or e/ecution upon goods(
+on-negotiable Receipt +egotiable Receipt
*rior to notification of the warehouseman by
the transferor or transferee0 the
warehouseman is not bound to the transferee
whose right may be defeated by a levy of an
attachment or e/ecution upon the goods by
the creditor of the transferor or by a
notification to such warehouseman of the
subse)uent sale of the goods9
%he goods cannot be attached or levied under
an e/ecution unless the receipt be first
surrendered to the warehouseman or its
negotiation en#oined9
Rights of a person to whom a negotiable receipt has been transferred0 not
indorsed(
a. the right to the goods as against the transferor
b. the right to compel the transferor to indorse the receipt9 -ut if the intention of
the parties is that the receipt should merely be transferred0 the transferee has
no right to re)uire the transferor to indorse the receipt9
+ote( +egotiation ta.es effect as of the time when the indorsement is actually
made9
"arranties 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 .nowledge that would impair the validity or worth of the receipt and
d. he has a right to transfer the title to the goods and that the goods are
merchantable
holder for security of a receipt 7mortgagee or pledgee8 who in good faith accepts
payment of the debt from a person does not warrant the genuineness of the
receipt not the )uality or )uantity of the goods therein described9
It is the duty of the purchaser0 mortgagee or pledgee of goods for which a
negotiable receipt has been issued to re)uire the negotiation of the receipt to
him0 otherwise his failure will have the same effect as an e/press authori4ation
on his part to the seller0 mortgagor0 or pledgor in possession of such receipt to
ma.e any subse)uent negotiation9 %he subse)uent purchaser must have ta.en
the receipt in good faith and for value9
bona fide purchaser of a negotiable warehouse receipt ac)uires title to the goods
where he purchases from the ownerDs agent within the actual or apparent scope
of his authority9 In sum0 negotiation is valid despite having been made in breach
of trust9
,istinctions between a negotiable instrument and a negotiable warehouse receipt(
+egotiable Instrument +egotiable "arehouse Receipt
"hen a negotiable instrument is altered
deliberately0 it becomes null and void9
"hen a warehouse receipt is altered0 it is still
valid but it may be enforced only in
accordance with its original tenor9
If a negotiable instrument is originally payable
to bearer0 it will always remain so payable
regardless of the way it is indorsed0 whether
specially or in blan.9
If a warehouse receipt0 payable to bearer0 is
indorsed specially0 it will be converted into a
receipt deliverable to order and can only be
negotiated further by indorsement and
delivery9
holder in due course may be able to obtain
a title better than that which the party who
n indorsee even if a holder in due course
obtains only such title as the person
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negotiated the instrument to him had9 negotiating has over the goods9
%he indorsement of a negotiable instrument
has a double effect9 It is at the same time a
conveyance of the instrument and a contract
the indorser has with the indorsee that on
certain conditions0 the indorser will pay the
instrument if the party primarily liable fails to
do so9
%he indorsement of a warehouse receipt
amounts merely to a conveyance by the
indorser9 ccordingly0 an indorser of a receipt
shall not be liable to the holder if0 for e/ample0
the warehouseman fails to deliver the goods
because they were lost due to his fault or
negligence9
GENERAL BONDED WARE/OUSE LAW
ny warehouseman receiving commodities for 7a8 storage; 7b8 milling; 7c8 co-
mingling must(
a. obtain prior license from the -ureau of Commerce
b. file a bond in an amount e)uivalent to >> 1<> ; of the capacity of the
warehouse against which bond depositors may sue directly
c. open to the public0 no discrimination allowed
d. liable for double mar.et value should he accept goods in e/cess of the capacity
of warehouse if goods are damaged or destroyed
+ote( for palay and corn license0 a bond with the +ational 5rains uthority is
re)uired; also an insurance cover is re)uired9
U#()!0 C%!!e#*" La1
1. Obligations +ull and Foid
a. obligations payable in gold<foreign currency
b. obligations payable in *hilippine currency but measured in gold<foreign currency
2. E/empt %ransactions
a. government to government transactions or with international ban.ing institutions
b. transactions affecting high priority economic pro#ects
c. forward e/change transactions between ban.s
d. import and e/port and other international ban.ing0 financial0 investment and
industrial transactions
3. Merchants and Commercial %ransactions
Classes of Investments(
a. *ermitted - one allowed without need of prior authority from the *hilippine
5overnment9 If registered status0 invest up to e/tent as not to affect its
registered status9 If enterprise not registered0 investment not to e/ceed
=1;9
b. *ermissible - invest in e/cess of =1; in unregistered enterprise but with
prior approval of -OI
c. *ioneer rea - 7a8 involves manufacturing0 processing0 production of product
not produced at all<produced in non-commercial scale; 7b8 uses a design0
scheme0 formula that is new and untried in the *hils9; 7c8 agricultural
activities<services essential to the attainment of food sufficiency; 7d8
produces non-conventional fuels<utili4es non-conventional sources of energy
7all others are non-pioneer8
4. bsolutely ,is)ualified to become Merchants
a. serving penalty of civil interdiction
b. insolvent
c. absolutely dis)ualified by special laws
5. Relatively ,is)ualified
a. #udicial and prosecuting officials in active service
b. administrative0 economic0 military chiefs
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c. government collection agents and custodian of funds
d. stoc. and commercial bro.ers
e. by special laws cannot trade in specified territories
6. -oo.s a Merchant must .eep
a. boo. of inventories and balances0 statement of assets0 liabilities and capital
b. #ournal of day to day operations
c. ledger for classifying accounts
d. copying boo. for letters and telegrams; if #uridical person0 include boo. of
minutes and stoc. and transfer boo.
7. *robative Falue of MerchantDs -oo.
a. evidence against merchants themselves
b. in case of conflicts between 2 boo.s - that which s properly .ept prevails
c. if one .eeps boo.s and the other does not and cannot e/plain why0 the former
prevails
d. if both boo.s are properly .ept and there is a conflict0 other proofs can be
resorted to
8. Commercial Contracts by Correspondence are perfected from the moment the
offeree accepts the offer0 even before .nowledge of said acceptance by the offeror9
%his does not apply to deposit0 guaranty0 sales0 loan0 agency0 partnership9
9. 3oint ccount *artnership - business arrangement whereby 2 or more persons
interest themselves in the business of another by ma.ing contributions thereto and
participating in the results thereof
a. only one member is ostensible0 others are silent
b. no common name
c. only ostensible partners can sue<be sued
d. no #uridical personality
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TRANSPORTATION LAW
1. Contract of %ransportation - contract whereby a certain person or association of
persons obligate themselves to transport persons0 things0 news0 from one place to
another for a fi/ed price
2. *arties to the Contract of %ransportation(
a. &hipper - one who gives rise to the contract of transportation by agreeing to
deliver the things or news to be transported0 or to present his own person or
those of other or others in the case of transportation of passengers
b. Carrier<Conductor - one who binds himself to transport persons0 things0 or news0
as the case may be0 or one employed in or engaged in the business of carrying
goods for others for hire
3. Common Carrier - person0 corporation0 firm0 association engaged in the business of
carrying or transporting passengers0 goods or both0 by land0 water0 air0 for
compensation0 offering services to the public; must e/ercise e/traordinary diligence
*rivate Carrier - not engaged in the business of carrying; no public employment;
underta.es to deliver goods<passengers for compensation; re)uires only ordinary
diligence
=9 Re)uisites of Caso 'ortuito
a. event independent of human will
b. occurrence ma.es it impossible for debtor to perform in normal manner
c. debtor free from aggravation<participation
d. impossible to foresee or avoid
5. Contributory negligence does not entitle passengers to recover moral<e/emplary
damages9
6. -ill of !ading - written ac.nowledgment of receipt of goods and agreement to
transport them to a specific place to a person named or his carrier
It is not indispensable to the creation of a contract of carriage9 %he contract
itself arises from the moment goods are delivered by shipper to carrier and the carrier
agrees to carry them9
%he function of the -ill of !ading( the legal basis of the contract between the
shipper and carrier shall be the bills of lading0 by the contents of which all disputes
which may arise with regard to their e/ecution and fulfillment shall be decided0 no
e/ceptions being admissible other than forgery or material errors in the drafting thereof9
CarrierDs 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 agent9
Mere delay in the delivery of goods to consignee does not give right to refuse
goods - only breach of contract0 ergo damages9 If delay is unreasonable0 then he may
refuse to accept and ma.e carrier liable for conversion9
7. Fessels - those engaged in navigation0 whether coastwise or on the high seas0
including floating doc.s0 pontoons0 dredges0 scows and any other floating
apparatus destined for the services of the industry or maritime commerce
8. *ersons *articipating in Maritime Commerce(
a. ship owner and<or ship agent
b. captain or master
c. other officers of the vessel
d. supercargo
9. !iability of &hip owners and &hip agents(
a. civil liability for the acts of the captain
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b. civil liability for contracts entered into by the captain to repair0 e)uip and
provision the vessel0 provided that the amount claimed was invested for the
benefit of the vessel
c. civil liability for indemnities in favor of >
rd
persons which may arise from the
conduct of the captain in the care of the goods which the vessel carried0 as well
as for the safety of the passengers transported
&hip owner<ship agent not liable for the obligations contracted by the captain if
the latter e/ceeds his powers and privileges inherent in his position of those
which may have been conferred upon him by the former9 $owever0 if the
amount claimed were made use of for the benefit of the vessel0 the ship owner
or ship agent is liable9
10. ,octrine of !imited !iability - liability of shipowners is limited to amount of interest in
said vessel because of the real and hypothecary nature of maritime law such that
where the vessel is entirely lost0 the obligation is e/tinguished9
E/ceptions( 718 vessel is not abandoned
(2) claims under wor.menDs compensation
(3) in#ury<damage due to shipownerDs fault
(4) vessel is insured
%he doctrine also applies for claims due to death or in#uries to passengers0 aside
from claims for goods9
In abandoning the vessel0 there is no procedure to be followed9 %here is neither
a prescriptive period within which the ship owner can ma.e the abandonment9
$e may do so for so long as he is not estopped from invo.ing the same or do
acts inconsistent with abandonment9
11. Roles of the Captain(
a. general agent of the ship owner
b. technical director of the vessels
c. represents the government of the country under whose flag he navigates
12. !oan on -ottomry - made by shipowner<ship agent guaranteed by vessel itself0
repayable upon arrival at destination
13. !oan In Respondentia - ta.en on security of the cargo repayable upon the safe
arrival at cargo destination
14. ccidents and ,amages in Maritime Commerce(
a. verages
b. rrivals Cnder &tress
c. Collisions
d. &hipwrec.s
15. verage(
a. all e/traordinary or accidental e/penses which may be incurred during 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 destination0 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. &imple verage - e/penses<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
17. 5eneral verage - e/penses<damages deliberately caused in order to save the
vessel0 its cargo or both from a real and .nown ris.
Re)uisites(
a. deliberately incurred
b. intended to save vessel and cargo or both
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c. from real and .nown ris.
d. there is success
18. 'ormalities for Incurring 5ross verage(
a. there must be an assembly of the sailing mate and other officers with the
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 boo.0 with the reasons and motives
and the votes for and against the resolution
d. the minutes shall be signed by the parties
e. within 2= hours upon arrival at the first port the captain ma.es0 he shall deliver
one copy of these minutes to the maritime #udicial authority thereat
19. rrivals under &tress - arrival of the vessel at a port not of destination on account of
7a8 lac. of provisions; 7b8 well-founded fear of sei4ure; 7c8 by reason of accident of
the sea disabling it to navigate
"hen +ot !awful(
a. lac. of provisions due to negligence to carry according to usage and customs
b. ris. of enemy not well .nown or manifest
c. defect of vessel due to improper repair
d. malice0 negligence0 lac. of foresight or s.ill of captain
20. Collision - impact of 2 vessels both of which are moving
21. llision - stri.ing of a moving vessel against one that is stationary
22. Cases of Collision(
a. due to the fault0 negligence or lac. of s.ill of the captain0 sailing mate or the
complement of the vessel - ship owner liable for the losses and damages
7Culpable 'ault8
b. due to fortuitous event or force ma#eure - each vessel and its cargo shall bear
its own damages 7'ortuitous8
c. it cannot be determined which of the 2 vessels caused the collision - each
vessel shall suffer its own damages0 and both shall be solidarily responsible for
the losses and damages occasioned to their cargoes 7Inscrutable 'ault8
23. Error in E/tremis - sudden movement made by a faultless vessel during the >
rd
4one
of collision with another vessel which is at fault0 even if the said movement is wrong0
no responsibility will fall on said vessel
24. &hipwrec. - denotes all types of loss< wrec. of a vessel at sea either by being
swallowed up by the waves0 by running against another vessel or thing at sea or on
coast where the vessel is rendered incapable of navigation
25. &alvage - 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 peril0 or such property recovered from actual peril or loss0 in cases of
shipwrec.s0 derelict or recapture; a service which one person renders to the owner
of a ship or goods by his own labor0 preserving the goods or ship which the owner
or those entrusted with the care of them either abandoned in distress at sea or are
unable to protect and secure; a permit is re)uired to engage in the salvage
business
26. ,erelict - a ship or cargo which is abandoned and deserted at sea by those who are
in charge of it0 without any hope of recovering it0 or without any intention of
returning it
27. Elements of a Falid &alvage(
a. a marine peril
b. service voluntarily rendered when not re)uired as an e/isting duty or from
special contract
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c. success0 in whole or in part0 or that the services rendered contributed to such
success
28. Contract of %owage - contract whereby a vessel usually motori4ed pulls another
from one place to another for compensation9 It is a contract of services9
29. ,ifference between %owage and &alvage(
&alvage %owage
crew of salvaging ship is entitled to salvage0
and can loo. to the salvaged vessel for its
share
crew of the towing ship does not have any
interest or rights with the remuneration
pursuant to the contract
salvor ta.es possession and may retain
possession until he is paid
tower has no possessory lien; only an action
for recovery of sum of money
court has power to reduce the amount of
remuneration if unconscionable
court has no power to change amount in
towage even if unconscionable
CARRIAGE OF GOODS BY SEA ACT
1. "hen pplicable(
a. contracts for the carriage of goods
b. by sea
c. to and from *hilippine ports
d. in foreign trade
2. +otice of !oss 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 entitled to delivery9 If the loss or damage is not apparent0 the notice must be
given within > days of delivery9 $owever0 the carrier 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 delivered9
+otice of loss0 if not given0 that fact shall not affect or pre#udice the right of the
shipper to bring suit within the 1 year prescriptive period9
WARSAW CON,ENTION
1. "hen pplicable(
a. international transport by air
b. transport of persons0 baggage0 or goods
2. !iabilities under the Convention(
a. damage sustained in the event of the death or wounding of a passenger ta.ing
place on board the aircraft or in the course of any of the operations of
embar.ing or disembar.ing
b. loss or damage to any chec. baggage or goods sustained during the transport
by air
c. delay in the transport by air of passengers0 baggage0 or goods
Enumeration of causes of action as above stated is not an e/clusive list9 7+orthwest
irlines vs9 Cancer8
3. Meaning of %ransport by ir - period during which the baggage or goods are in
charge of the carrier0 whether in an airport or on board an aircraft0 or in the case of
landing outside an airport0 in any place whatsoever
4. ction for damages must be brought at the option of the plaintiff0 either(
a. before the court of the domicile of the carrier;
b. court of principal place of business of carrier;
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
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5. Convention provides for a limitation of liability(
a. for each passenger - limited to 12B0111 francs
b. for goods and chec.ed in baggage - limited to 2B1 francs per .ilogram
c. for hand carry - limited to B0111 francs per passenger
"hen can you not avail of this limitation6
(1) willful misconduct
(2) default amounting to willful misconduct
(3) accepting passengers without tic.et
(4) accepting goods without airway bill or baggage without baggage chec.
6. %he right to damages shall be e/tinguished if an action is not brought within 2 years
from the date of arrival at the destination0 or from the date on which the aircraft
ought to have arrived0 or from the date on which the transportation stopped9
7. +otice re)uirement( damage to baggage ( within > days from receipt
damage to goods( within J days from receipt
delay( within 21 days from receipt
'ailure to file written notice0 no action shall lie against the carrier0 save in the
case of fraud on his part9
8. +otice Re)uirements(
COGSA C-e ) C00e!*e Wa!$a1 C#.e#t(#
loss<damage
apparent
protest at time of
receipt of goods
protest at time of
receipt of goods
loss<damage not
apparent
protest within > days
from delivery
protest within 2=
hours after receipt
damage of baggage protest within > days
from receipt
damage of goods within J days from
receipt
delay within 21 days from
receipt
PUBLIC SER,ICE ACT
1. Every person that may own0 operate0 manage0 control in the *hilippines0 for
hire<compensation with general<limited clientele whether permanent0 occasional0
accidental0 and done for a general business purpose any common carrier0 shipyard0
electric light0 heat and power and public utility9
2. *ublic Ctility - business or service engaged in regularly supplying the public with
some commodity or service of public conse)uence such as electricity0 gas0 water0
transportation0 telephone or telegraph service9
3. *rior Operator Rule - before permitting a new operator to invade the territory of
another already established0 the prior operator must be given an opportunity to
e/tend its service to meet the public needs in the matter of transportation9
4. *rior pplicant Rule - presupposes a situation where two interested persons apply
for a C*C in the same community over which no person has yet been granted a
C*C to operate9 If both applicants e)ual0 then the applicant who applied first will be
given the C*C9
5. ,istinctions between C*Cs and C*C+s
Certificate of *ublic Convenience Certificate of *ublic Convenience and
+ecessity
any authori4ation to operate a public service
issued by the appropriate government agency
issued by the appropriate government agency
to a public service to which any political
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COMMERCI AL LAW
MEMORY AID
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subdivision has granted a franchise
an authori4ation issued by the proper
government agency for the operation of public
services for which no franchise0 either
municipal or legislative is re)uired by law
an authori4ation issued by the proper
government agency for the operation of public
services for which a franchise is re)uired by
law
6. Re)uirements of C*C and franchise(
a. 'ilipino citi4enship
b. financial capacity
c. public convenience
CORPORATION LAW
1. ,octrine of Corporate Opportunity - a director is made to account to his corporation0
gains and profits from transactions entered into by him<another competing
corporation in which he has substantial interest0 which should have been a
transaction underta.en by the corporation9 %his s a breach of fiduciary relationship9
2. ,octrine of *iercing the Feil of Corporate Entity - it is to disregard for #ustifiable
reasons by the state the fiction of #uridical personality of the corporation separate
and distinct from the persons composing it
3. ,e 3ure Corporation - corporation formed with all the re)uirements of law
4. ,e 'acto Corporation - corporation defectively formed from a bona fide attempt to
incorporate under the e/isting law and e/ercises corporate powers
5. Corporation by Estoppel - a group of persons which holds itself out as a corporation
and enters into a contract with >
rd
persons on the strength of such appearance
cannot be permitted to deny its e/istence in an action under said contract
6. Corporation by *rescription - body not lawfully organi4ed as a corporation but has
been recogni4ed by immemorial usage as a corporation with rights and duties
maintainable by law 7e/9 Roman Catholic8
7. %rust 'und ,octrine - the subscribed capital stoc. of the corporation is a trust fund
for the payment of debts of the corporation which the creditors have the right to loo.
up to satisfy their credits9 Corporations may not dissipate this and the creditors may
sue the stoc.holders directly for their unpaid subscriptions
8. Foting &hares
a. 'ounders &hares - given rights and privileges not en#oyed by owners of other
stoc.s; right to vote<be voted in the election of directors shall not e/ceed B years
+on-Foting &hares
a. *referred &hares - issued only with par value; given preference in distribution of
assets in li)uidation and in payment of dividends and other preferences stated
in the articles of incorporation
b. Redeemable &hares - e/pressly provided in articles; have to be
purchased<ta.en up upon e/piration of period of said shares purchased whether
or not there is unrestricted retained earnings
c. %reasury &toc.s - stoc.s previously issued and fully paid for and reac)uired by
the corporation through lawful means 7purchase0 donation0 etc98
9. E/ceptions where holders of non-voting shares may vote(
a. amendments of articles of incorporation
b. adoption<amendment of by-laws
c. increase<decrease of bonded indebtedness
d. increase<decrease of capital stoc.
e. sale<disposition of all<substantially all corporate property
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COMMERCI AL LAW
MEMORY AID
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f. merger<consolidation of corporation
g. investment of funds in another corporation<another business purpose
h. corporate dissolution
10. *referred Cumulative *articipating &hare of &toc. - share entitling its holder to
preference in the payment of dividends ahead of common stoc.holders and to be
paid the dividends ahead of common stoc.holders and to be paid the dividends due
for prior years and to participate further with common stoc.holders in dividend
declarations
11. *romotion &toc. for &ervices Rendered *rior to Incorporation Escrow &toc. - stoc.
deposited with a >
rd
person to be delivered to stoc.holder<assignor after complying
with certain conditions - usually payment of full subscription price
12. Over-issued &toc. - stoc. issued in e/cess of authori4ed capital stoc.; null and void
13. "atered &toc. - stoc. issued gratuitously0 money<property less than par value0
services less than par value0 dividends where no surplus profits e/ist
14. Certificate of &toc. - written ac.nowledgment by the corporation of the
stoc.holderDs interest in the corporation9 It is the personal property and may be
mortgaged<pledged9 %ransfer binds the corporation when it is recorded in the
corporate boo.s9 stoc.holder who does not pay his subscription is not entitled to
the issue of a stoc. certificate9 %he total par value of the stoc.s subscribed by him
should first be paid9
15. Chattel mortgage of shares registered with the Registrar of ,eeds need not be
registered in corporate boo.s to bind third parties because corporate boo.s only
cover absolute transfers9 -ut the pledgee<mortgagee may not have voting rights
unless stated in the contract and registered in the corporate name9
16. Methods of Collection of Cnpaid &ubscription
a. call0 delin)uency and sale at public auction of delin)uent shares
b. ordinary civil action
c. collection from cash dividends and other amounts due to stoc.holders if allowed
by by-laws<agreed to by him
17. corporation can reac)uire stoc.s in the following cases(
a. eliminate fractional shares
b. corporate indebtedness arising from unpaid subscriptions
c. purchase delin)uent shares
d. e/ercise of appraisal right
18. Right of ppraisal
a. amending articles0 changing0 restricting0 enlarging stoc.holderDs
rights<e/tending0 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. 5rounds for Re#ection of Registration
a. not in prescribed form
b. purpose illegal0 inimical
c. treasurerDs affidavit false
d. non-compliance with re)uired 'ilipino stoc. ownership
20. Corporation must organi4e within 2 years from issuance of certificate of
incorporation9
$ow to organi4e6
a. adoption of by-laws
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COMMERCI AL LAW
MEMORY AID
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b. election of -oard of ,irectors
c. election of officers
-ut from issuance of certificate0 it ac)uires #uridical personality
21. Merger - one corporation absorbs the other and remains in e/istence while the other
is dissolved
22. Consolidation - a new corporation is created and the consolidating corporations are
e/tinguished
23. %heory of 5eneral Capacity - a corporation is said to hold such powers as are not
prohibited<withheld from it by general law
24. %heory of &pecial Capacity - the corporation cannot e/ercise powers e/cept those
e/pressly<impliedly given
25. Concession %heory - a group of persons wanting to create a corporation will have to
e/ecute documents and comply with re)uirements set by the state before being
given corporate personality; merely a privilege; state may provide causes for which
the privilege may be withdrawn
26. cts re)uiring ma#ority vote of stoc.holder(
a. filing of issue value of no par value share
b. adoption0 amendment0 repeal of by-laws
c. compensation and other per diems for directors
27. "here similar acts have been approved by the directors as a matter of general
practice0 custom and policy0 the general manager may bind the company even
without formal authori4ation of the board of directors
28. *owers of stoc.holders(
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. Foting %rust greement - an agreement between a group of stoc.holders and
trustee for a term not e/ceeding B years in which control over the stoc.s is lodged
in the trustee9 %he purpose is for controlling the voting9
a. in writing0 notari4ed and filed with the &EC and the corporation
b. period not e/ceeding B years
c. cannot be entered into to circumvent the laws against monopolies0 illegal
combinations in restraint of trade in fraud
30. Cumulative Foting - the number of votes that a shareholderDs number of shares
multiplied by the number of directors may give all said votes to one candidate or he
may distribute them as he may deem fit9 Cumulative voting is a matter of right in a
stoc. corporation9 In a non-stoc. corporation0 it cannot be utili4ed unless allowed
by the by-laws<articles
31. %he power of removal of directors that may be e/ercised with or without cause
cannot apply to the director representing the minority shareholders9 $e may only
be removed with cause9
32. 5eneral Rule( If surplus profits e/ceed the re)uirements the corporation shall
declare dividends9 %his is compulsory if the surplus is e)ual<or more than the paid-
up capital9
E/ceptions(
a. #ustified by approved e/pansion pro#ects
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
b. prohibited by creditor to declare dividends
c. retention is necessary under e/isting circumstances
33. -usiness 3udgment Rule - decisions made by a corporationDs management body
shall not be interfered with even by the courts unless such acts are
oppressive<unconscionable as to violate the rights of the minority
34. Individual &uit - one brought to assert a right of a stoc.holder peculiar to himself
35. Representative &uit - brought by the stoc.holder in his own behalf and in behalf of
other stoc.holders similarly situated0 having common cause against the corporation
36. ,erivative &uit - brought by a stoc.holder for and in behalf of the corporation to
protect<vindicate corporate rights after he has e/hausted intra-corporate remedies
Re)uisites(
a. cause of action in favor of the corporation
b. refusal of corporation to sue
c. in#ury to the corporation
lthough corporations dissolved have > years to wind up0 they can convey their
properties to a trustee who can continue the suit beyond the > year period9 %he
lawyer who handled the case in the trial court may be considered as trustee for the
dissolved corporation with respect to the matter in litigation only even if no
appointment was e/tended to him9 7&elano vs9 C8
In a case filed before dissolution0 it may continue even beyond the > year period
until final determination of litigation9 Otherwise0 the corporation in li)uidation would
lose what #ustly belongs to them<be e/empt from payment of obligations because of
a technicality9
37. 'oreign Corporations
a. ,oing -usiness - continuity of commercial dealings incident to prosecution of
purpose and ob#ect of the organi4ation9 Isolated0 occasional or casual
transactions do not amount to engaging in business9 -ut where the isolated act
is not incidental<casual but indicates the foreign corporationDs intention to do
other business0 said single act constitutes engaging in business in the
*hilippines
b. Instances when unlicensed foreign corporations can sue(
(1) isolated transactions
(2) action to protect good name0 goodwill0 and reputation of a foreign
corporation
(3) contracts provide that *hil9 Courts will be venue to controversies
(4) license subse)uently granted enables foreign corporation to sue on
contracts e/ecuted before the grant of the license
(5) recovery of misdelivered property
(6) where the unlicensed foreign corporation has a domestic corporation
38. Religious Corporations
a. Corporation &ole - special form of corporation; associated with the clergy and
consists of 1 person only and his successors; 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 21 persons; its issued stoc. shall be sub#ect to one or more
restrictions on transfer and shall not be listed in any stoc. e/change<ma.e
public offering
c. +on-stoc. Corporation - one where no part of its income is distributable to its
members and shall be used in furtherance of the purpose of which it was
organi4ed
39. &EC 3urisdiction
a. original and e/clusive #urisdiction
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COMMERCI AL LAW
MEMORY AID
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(1) fraudulent devices and schemes employed by directors detrimental to public
interest
(2) intra-corporate disputes and with the state in relation to their franchise and
right to e/ist as such
(3) controversies in the election0 appointment of directors0 trustees0 etc9
(4) petition to be declared in a state of suspension of payments
b. 5rounds for &uspension<Revocation of Certificate of Registration
(1) fraud in procuring registration
(2) serious misrepresentation as to ob#ectives of corporation
(3) refusal to comply with lawful order of &EC
(4) continuous inoperation for at least B years
(5) failure to file by-laws within the re)uired period
(6) failure to file reports
(7) other similar grounds
RE,ISED SECURITIES ACT
7Material on the &ecurities Regulation Code of 2111 to follow8
1. 5eneral Rule( ll securities before being offered for sale<actual sale to the public
must first be registered and have the proper permit9
E/ception(
a. e/empt securities
b. securities emanating from e/empt transactions
2. E/empt &ecurities
a. issued by the government subdivisions<instrumentalities
b. issued by foreign government which the *hilippines 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
g. security<right<interest in real property including subdivision lot<condominium
supervised by the Ministry of $uman &ettlements
h. pension plans regulated by -IR<Insurance Commission
3. E/empt %ransactions
a. #udicial sale by e/ecution0 etc9 in insolvency
b. sale of pledged property<foreclosed property to li)uidate an obligation
c. isolated transactions on securities done by owner<agent
d. stoc. transfers emanating from mergers and consolidations
e. pre-incorporation subscription
f. securities issued by public service operator to broaden e)uity base
4. 5rounds for Re#ection of Registration
a. application incomplete<untruthful<omits to state a material fact
b. issuer<registrant insolvent0 violated code< &EC rules0 engages in fraudulent
transactions
c. issuerDs business not sound
d. officer0 director0 stoc.holders of issuers is dis)ualified
e. issue would pre#udice the public
5. 5rounds for Revocation
a. issuer insolvent
b. violated of Code<&EC rules
c. fraudulent transaction
d. dishonesty by issuer<misrepresented prospectus
e. does not conduct business in accordance with law
>E
COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
6. cts *rohibited
a. manipulation of security prices
b. manipulation of deceptive devices
c. artificial measures of price control
d. fraudulent transactions
e. insider trading
f. false prospectus0 communications0 reports
SECRECY OF BANK DEPOSITS
1. ,eposits in ban.s0 including government ban.s0 may not be in)uired into by any
person0 e/cept(
a. if depositor agrees in writing
b. impeachment cases
c. by court order in cases of bribery and dereliction of duty against public officials
d. deposit is sub#ect of litigation
e. anti-graft cases
f. general and special e/amination of ban. order of the Monetary -oard of ban.
fraud or serious irregularity
g. re-e/amination made by an independent auditor hired by a ban. to conduct its
regular trust
LAWS ON INTELLECTUAL CREATION
C+"!(g2t
1. "hat "or.s are not *rotected(
a. any idea0 procedure0 system0 method or operation0 concept0 principle0 discovery0
or mere data as such0 even if they are e/pressed0 e/plained0 illustrated or
embodied in a wor.; news of the day or other miscellaneous facts0 having the
character of mere items of press information0 or any official te/t of a legislative0
administrative or legal nature as well as any official translation thereof
b. wor.s of the government
c. statutes0 rules0 and regulations of government agencies and offices
d. speeches0 lectures0 sermons0 addresses and dissertations0 pronounced or
rendered in courts of #ustices or nay administrative agencies in deliberative
assemblies and meetings of public character
2. 'air Cse of a Copyrighted "or. is not Infringement
a. for criticism0 comment0 news reporting0 teaching0 research0 scholarship0 and
similar purposes
b. decompilation( the reproduction of the code and translation of the forms of the
computer program with other programs
3. 'actors to Consider in ,etermining 'air Cse(
a. purpose and character of the use0 including whether such use is of a
commercial nature or for no profit or educational purposes
b. nature of the copyrighted wor.
c. amount and substantiality of the portion used in relation to the copyrighted wor.
as a whole
d. effect of use upon the potential mar.et for a value of the copyrighted wor.
4. %erms of the *rotection
a. copyrighted wor.( lifetime of creator plus B1 years after death 7to be computed
on the 1
st
day of 3anuary of the year following the death8
b. performances not incorporated in recordings( B1 years from end of year in
which the performance too. place
c. sound or image and sound recordings and performances incorporated therein(
B1 years from end of the year in which the recording too. place
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
d. broadcasts( 21 years from the date the broadcast too. place
5. Remedies for Infringement
a. in#unction
b. actual damages0 including legal costs and other e/penses0 as he may have
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 e/emplary damages
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COMMERCI AL LAW
MEMORY AID
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6. Criminal *enalties
a. imprisonment of 1 to > years plus fine of *B10111 to *1B10111 for the first
offense
b. imprisonment of > years and 1 day to : years plus fine ranging from *1B10111
to *B110111 for the 2
nd
offense
c. imprisonment of : years and 1 day to A years plus fine of *B110111 to
*101110111 for the >
rd
<subse)uent offenses
I+ !! C&E&0 subsidiary imprisonment in cases of insolvency
7. *resumptions(
a. *resumption of copyright in the wor. of other sub#ect matter to which the action
related
b. *laintiff is presumed to be the owner of the copyright
c. %he natural person whose name is indicated on a wor. in the usual manner as
the author shall0 in the absence of proof to the contrary0 be presumed to be the
author of the wor.9 %his is applicable even if the name is a pseudonym0 where
the pseudonym leaves no doubt as to the identity of the author9
8. *rescription( +o damages may be recovered after = years from time the cause of
action arose9
Pate#t$
1. *atentable Inventions - any technical solution of a problem in any field o human
activity that is new0 involve an inventive step and is industrially applicable shall be
patentable9 It may be or may relate to as product0 or process or an improvement of
any of the foregoing9
2. +on-*atentable Inventions
a. discoveries0 scientific theories and mathematical methods
b. schemes0 rules and methods of performing mental acts0 playing games or doing
business0 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
E/ception( products and composition for use in any of these methods
d. plant varieties or animal breeds or essentially biological process for the
production of plants and animals
E/ception( micro-organisms and non-biological and micro-biological processes
e. aesthetic creations
f. contrary to public order or morality
3. Re)uisites of *atentability
a. new0 novelty
b. involves an inventive step;
c. is industrially applicable
4. +ovelty
%he novelty re)uirement in the Code is absolute9 %hus0 an invention is not
considered new if it forms part of a prior art9 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 application0 or
b. the whole contents of an application for a patent0 utility model0 or industrial design
registration0 published in the I*O ga4ette0 filed or effective in the *hilippines0 with a
filing or priority date that is earlier than the filing or priority date of the application0
provided that the application which has validly claimed the filing date of an earlier
application 7priority date8 is prior art with effect as of the filing date of such earlier
application0 and provided further0 that the applicant and the inventor identified in
both applications are not one and the same
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
5. Inventive &tep - an invention involves an inventive step0 if having regard to the prior
art0 it is not obvious to a person s.illed in the art at the time of the filing date of
priority date of the application claiming the invention
6. Industrial pplicability - an invention is considered industrially applicable if it can be
produced and used in the industry
7. %he 'irst-to-'ile &ystem - if 2 or more persons have made the invention separately
and independently of each other0 the right to the patent belongs to the person who
filed an application for such invention0 or where 2 or more applications are filed for
the same invention0 the right of the patent belongs to the person who has the
earliest filing date or the earliest priority date
Cnder this system0 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 patent9
%he 'irst-to-'ile &ystem 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. e/panding the rights of the inventor to institute cancellation proceedings for the
duration of the term of the patent9 Cancellation proceedings may be filed at any
time during the term of the patent9
Cnder this system0 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. re)uest that the application be refused or
d. see. the cancellation of the patent0 if one has already been issued
8. "hat is the difference between novelty in patents and originality in copyright6
+ovelty in *atents - even if you do not .now of any previous creation0 as long as a
patent on the same creation has already been published anywhere in the world0 you
cannot claim novelty9 +o access tot he other creation is no defense9
Originality in Copyright - even if there is same creation0 as long as you do not copy
your own creation0 it is still considered an original creation9 +o access to the previous
creation is a defense9
9. +on-*re#udicial ,isclosure
%he disclosure of information contained in the application during the 12 months
preceding the filing date or the priority date of the application shall not pre#udice the
applicant on the ground of lac. of novelty if such disclosure was made by 7a8 inventor;
7b8 a patent office and the information was contained
10. %erm of *atent - 21 years from the filing date of the application
11. 5rounds for Compulsory !icensing(
a. national emergency or other circumstances of e/treme urgency
b. where public interest0 national security0 health or the development of other vital
sectors of the national economy as determined by the appropriate agency of the
government so re)uires
c. where a #udicial or administrative body has determined that the manner of
e/ploitation by the owner of the patent or his licensee is anti-competitive
d. in case of public non-commercial use of the patent by the patentee0 without
satisfactory reason
e. if not being wor.ed in the *hilippines on a commercial scale
12. In case of Compulsory !icensing of *atents involving &emi-conductor %echnology0
the license may be granted only in case of public non-commercial use or to remedy
a practice determined after #udicial or administrative process to be anti-competitive
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
13. Ctility Models - an invention )ualifies for registration as a utility model if it is new and
industrially applicable
- no inventive step re)uired for registration
- no search and e/amination re)uired
14. %erm *rotection - J years after the filing date of application without possibility of
renewal
15. Industrial ,esign - any composition of lines or colors or any > dimensional form0
whether or not associated with lines or colors
Industrial ,esigns essentially dictated by technical or functional considerations to
obtain a technical result or those that are contrary to public order0 health or morals shall
not be protected
16. %erm of *rotection - B years from filing date of application0 renewable for not more
than 2 consecutive periods of B years each
I#$'.e#*" La1
1. ,istinguish &uspension of *ayment and Insolvency
&uspension of *ayment Insolvency
debtor has enough assets to meet liabilities
but cannot meet them as they fall due
debtor has more liabilities than assets
always initiated by debtor initiated by creditors<other persons if
involuntary; initiated by debtor if voluntary
2. 'raudulent *reference - any act of insolvent which gives rise<has tendency to give
preference to a creditor to the assets of the insolvent pre#udicial to the right of other
creditors of said insolvent
3. Effect on ctions Cpon d#udication of Insolvency
a. suits pending in court
(1) secured obligations suspended until assignee appointed
(2) unsecured obligations terminated e/cept to fi/ amount of obligation
(3) foreclosure suits pending continue
b. suit not yet filed - cannot be filed anymore0 but claims may be presented to
assignee
4. ,ebts and Obligations not ffected by ,ischarge of Insolvent
a. assessments due to national and local government
b. debts due to fraud<embe44lement
c. debts in which he is bound solidarily
d. alimony
e. corporate debts
f. debts not included in the schedule submitted by debtor
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
C2atte' M!tgage La1
1. %he law primarily governs chattel mortgage9 *rovisions on pledge of +CC in so far
as not in conflict with CM! also govern chattel mortgages9
2. Chattel Mortgage may be rescinded for being in fraud of creditors9
3. 5rowing fruits are covered by chattel mortgage but they may not be pledged9
4. Machinery placed on plant or building owned by another can be the ob#ect of chattel
mortgage9
5. 5eneral Rule( Chattel Mortgage cannot cover debts subse)uently contracted9
6. Rules( Chattel Mortgage cannot cover debts subse)uently contracted
a. registered in place where mortgagor resides and where property 7chattel8 is
located9 If mortgagor resides abroad0 register in place where property is
located9
b. Motor Fehicles( register also in !and %ransportation Office
c. &hares of &toc.( place of domicile of corporation and shareholder9 +o need for
notation in boo.s of corporation
d. Fessels( *hil9 Coastguard
7. %o be valid against >
rd
persons(
a. affidavit of good faith
b. contract must be registered
8. 5eneral Rule( In Chattel Mortgage0 there is recovery of deficiency #udgment9
E/ception( when Recto !aw applies
9. Re)uisites of CM!(
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 thereof0 they be legally authori4ed for the purpose
d. recorded to bind >
rd
persons
10. 'ormal Re)uisites of CM(
a. substantial compliance with form in &ec9 B of CM!
b. signed by at least 2 witnesses
c. must contain an affidavit of good faith
d. certificate of oath 7notarial ac.nowledgment8
11. ffidavit of 5ood 'aith - 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 #ust 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 in)uiry and investigation to identify it
12. 'uture property may not be covered by CM but when such property is a(
a. renewal of0 or in substitution for goods on hand when the mortgage was
e/ecuted0 or
b. purchased with proceeds 7not of your own money8 of said goods0 said property
may be covered by CM
13. Criminal cts - removal of chattel to another city or province without written consent
of mortgagee0 selling property already pledged0 or mortgaged without written
consent of mortgagee
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COMMERCI AL LAW
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
14. chattel mortgage may be foreclosed #udicially or e/tra-#udicially0 in the latter case0
before a notary or sheriff0 or creditor or mortgagee when stipulated0 even without
need of notice 7when mortgagee forecloses8
1B9 *actum Commissorium applies to Chattel Mortgage9

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