BA 162

Class Notes

Review of BA 161: Obligations and Contracts

Juridical Necessity juridical meaning you can go to court

o Works on the fact the law is bigger than us

Acquisition of ownership vs use:

o Ownership Sale
You have to right to possess, use, or even abuse
o Use Lease

Burdens of ownership
o Maintenance caretaker or insurance
o Tax CPA/ tax lawyer tax avoidance
Idle tax: greater tax for unutilized properties
o Risk of loss or damage insurance especially for fortuitous event
o Obsolescence

Business
o A process (e.g. manufacturing business) or an entity (i.e. your
business)
o Usual steps or process in conducting a business:
Make goods or services (i.e. production)
Distribution: how it will reach the internal market
Consumption of the goods and services
Not the end consumption

Roles of law in business:

o For regulation or control: what you can and cannot do
o Facilitate: help business

Steps in the formation of a contract:

o Preparation
o Perfection focus of the civil code
o Consummation focus of the civil code
Extinguishment of obligation

Requisites of a contract:
o Consent where the perfection of contract arises; meeting of the
minds exceptions are pledge and commodatum
o Object
o Cause

January 24, 2016

BA 162 facilitating business from regulate behavior

Going to court: the last resort in reality
BA 162
Class Notes

o There are arbitration and deviation; ADR

Three stages of contract:
o Preparation
o Perfection: until there is perfection, there is no contract
o Consummation
Consent
o There must be an offer certain and an absolute acceptance
o Counteroffer
With choice
A qualified acceptance (e.g. haggling, which is actually a form of
preparation of a contract)
Examples of forms of preparation of a contract
o Free demo
o Test drive
Second hand
o Also called pre-loved, pre-used
o Not subject to change policy (i.e. cannot be returned)
o No warranty
o Example: Auction or subastahan (e.g. HMR in Pasig); pallet or fork lift in
warehouses
Sample forms of contract
o Sale
o Employment
o Marriage
o Insurance
o Loan (Principal)
Accessory contracts
Mortgage (real estate)
Chattel mortgage
Pledge (guarantor or surety)
Lender/Creditor vs. Investor
o Investor
Equity holder
% ownership or control
profit

January 26, 2016

Pledge personal property is involved
Why lenders exist when there are guarantors and sureties?
o Because what lenders do is actually not a profession of the guarantors;
it may also complicate the relationship between the guarantor and the
debtor

Preparation of a Contract
BA 162
Class Notes

Sale of a real property

o You need to have due diligence before you buy a real property
o You have to look for the Transfer Certification of Title (TCT) which is
actually the evidence of ownership of a property
o Torrens system
The process of transferring a title from an owner to a new one
Example: OCT (Pedro 123) Johnny and Pedro, himself; OCT of
Pedro 123 will be cancelled and replaced by 2 TCTs for Johnny
and Pedro
These transfers involve tax consequences that actually
increases the zonal FMV purchase price:
Capital gains tax
Documentary stamp tax
Donors tax
o Graduated: the higher the value, the higher this tax
is
Estate tax
Inheritance tax
o Registry of deeds
Record of titles of the properties within its jurisdiction
o Deed of restrictions
Restrictions regarding the land (e.g. theme in exclusive
subdivisions)
As long as the title does not have encumbrance, even if there
are deed of restriction, it is still clean
o Cancellation of real estate mortgage
Example of a cancellation of a title encumbrance

Process of issuing titles:

o Two questions are asked: (1) If the owner has TCT, and (2) If it is named
after him (the seller)
a. If no He must have an authorization letter that involves:
i. Special Power of Attorney (SPA)
ii. If corporation, there must be a board resolution
o Two identical copies are then given: one to be given to original register of
deeds and the other will serve as owners duplicate that will contain the
same annotations
o However, sometimes these titles have encumbrances written at the
back:
Voluntary collateral (e.g. This property has a burden)
Involuntary burden on the property without the consent or
against the will of the registered owner (e.g. Lis Pendens)
Lis Pendens
o Pending litigation; there is a case involving the
property (doesnt require the owners duplicate)
BA 162
Class Notes

o The case itself must involve the property itself, and

does not only serve as a collateral or a security
(e.g. subastahan: levying after the case is done)

February 2, 2016
PS cyl. conc. Mons. (cylindrical concrete monument)
o Marks the boundaries of a land
o Placed by surveyors

Deciding what form of the partnership is still part of the preparation stage of
a contract
Advantages of a Partnership

More capital
Shared responsibility *
More skills (i.e. the sum is greater than its parts)
Delectus personae
Separate juridical personality
Spreading the risk*

Art. 1767

MPI (money, property, and industry [i.e. most important contributions])

common fund
Delectus personae right to choose your partners
o Trust and confidence
o Complementary to you
n + 1 number of entities
o n = partners
o 1 = partnership

Preparation of a Contract of Partnership

What business?
What form?

Comparison of different business types

Sole Proprietorship
o Full control
o Liability SP + Spouse (CPG; AC (Absolute Community))
o Assets SP
o Credit Small; limited
o Profit SP + Spouse
o Tax SP (ITR); reports other source of income
o Transfer of ownership Very easy
o Causes of death of SP
BA 162
Class Notes

Bankruptcy
Incapacity
Death
Retirement
Disaster
o No artificial personality
Partnership
Corporation
Joint Venture Agreement
Joint Venture Corporations
Cooperative
o Formed by those who share the same interest
o Examples are lending (microfinance), farmers (for milling), manpower
(janitorial services, housekeeping)

February 2, 2016