MERCANTILE LAW (to be memorized)

I- DOCTRINE IN INSURANCE LAW

MUST HAVE AT LEAST 900 MILLION CAPITAL (2019) WHILE NEW ENTRANTS MUST
HAVE AT LEAST 1 BILLION PAID-UP CAPITAL.

CO-INSURANCE- is the percentage in the value of the insured property which the
insured himself assumes or undertakes to act as insurer to the extent of the deficiency
in the insurance of the insured property. In case of loss or damage, the insurer will be
liable only for such proportion of the loss or damage as the amount of insurance bears
to the designated percentage of the full value of the property insured.

REINSURANCE- is where the insurer procures a third party, called the reinsurer, to
insure him against liability by reason of such original insurance.

MUTUAL LIFE INSURANCE COOPERATION- is a cooperative that promotes the

welfare of its own members, with the money collected from among themselves and
solely for their own protection and not for profit. Members are both the insurer and
insured. A mutual life insurance company has no capital stock and relies solely upon
its contributions or premiums to meet unexpected losses, contingencies and expenses

COGNITION THEORY- governs insurance contract whereby the insurance contract is

perfected only from the time the applicant came to know of the acceptance of the offer
by the insurer.

CASH AND CARRY PRINCIPLE- no contract shall be valid and binding until premium
has been paid.

INCONTESTABILITY CLAUSE- In life insurance policy, which is payable on the death

of the insured, after the lapsed of 2 years from the date of issue or last reinstatement,
the policy could no longer be proven void or rescindable by the insurer.

If a person insures the life or health of another person with himself as beneficiary, all
his rights, title and interests in the policy shall automatically vest in the person
insured.

MATERIALITY OF CONCEALMENT- (need not die of the disease he failed to disclose

provided it is still within the period of 2 years) representation is determined not by the
event but solely by the reasonable influence of the facts concealed to the insurer in
making his estimates before accepting the application for insurance.

COVER NOTE- may be issued to bind the insurer temporarily pending the issuance of
the policy.

IN PROPERTY INSURANCE- the beneficiary must have insurable interest in the

property insured. (Sec 18 Ins Code).

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IN LIFE INSURANCE- it is not required that the beneficiary must have insurable
interest in the life of the insured. What is required is insurable interest over the life of
the person insured.

INSURABLE INTEREST- a person is deemed to have insurable interest in the subject

matter insured where he has relation or connection with or concern in it that he will
derive pecuniary benefit or advantage from its preservation and will suffer pecuniary
loss or damage from its destruction, termination or injury by the happening of the
event insured against.

MARINE INSURANCE

PARTICULAR AVERAGE- is one that is borne by the owner of the lost or damaged
property (unless he was insured against the risk).

GENERAL AVERAGE- the jettison of the cargoes which resulted in general average
loss saved the vessel. One that is borne in common by the owners of all the property
engaged in the venture.

VOYAGE POLICY- a policy that covers single voyage only.

OPEN POLICY- a policy whereby the insurer agrees to provide coverage for all cargo
shipped by the insured during the policy period.

PROPER DEVIATION
- Circumstances beyond the control of the master or owner of the ship
- Comply with a warranty
- Avoid in good faith a peril
- To save in good faith human life/relieving distress a vessel
-
Notice of abandonment- if more than ¾ or 75% in value of the vessel is actually lost,
or would have to be expended to recover it from the peril

II- PRE-NEED CODE- contracts which provides for the performance of future services
or the payment of future monetary consideration at the time of actual need for which
planholders pay in cash or installments as stated in the prices with or without interest
or insurance coverage, and includes life, pension, education, interment and other
plans which the commission may from time to time approve.

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III- DOCTRINES IN TRANSPORTATION LAW

COMMON CARRIER- is a person, corp., firm or assoc., engaged in the business of

carrying or transporting passenger or good or both, by land, water or air, for
compensation, generally offering his services to the public.

1. CULPA CONTRACTUAL
2. CULPA AQUILIANA (QUASI-DELICT OR TORTS)
3. CULPA CRIMINAL

UNPAID SELLER EXERCISE RIGHT TO STOPPAGE IN TRANSITU- relationship

between the carrier and shipper is converted into contract of deposit.

LAST CLEAR CHANCE- permits the court to grant recovery to plaintiff who has also
been negligent provided that the defendant had the last clear chance to avoid the
casualty and failed to do so.

3 FOLD CHARACTER OF BILL OF LADING

1. It is receipt of the good.
2. it is a contract by which three parties- namely the shipper, the carrier and the
consignee- undertake specific responsibilities and stipulated obligations.
3. Evidence of the existence of the contract of carriage providing for the terms and
conditions.

SHEWARAN DOCTRINE- the qualified liability appearing on the ticket is binding even
if the passenger did not sign it.

A- MARITIME COMMERCE

BARRATRY- is any willful misconduct on the part of the master or the crew in
pursuance of some unlawful or fraudulent purpose without the consent of the owner
and to the prejudice of the interest of the owner.

ARRASTRE- contract of deposit (safekeeping)- contract of unloading of goods from the

vessel.

BAREBOAT/DEMISE CHARTER- possession, control and command of navigation is

given to the charterer by the ship-owner thereby converting the common carrier to a
private carrier.

LIMITED LIABILITY RULE/REAL HYPOTHECARY/NO VESSEL NO LAIBILITY- It

means that the liability of the shipowner is limited to the vessel, and that if the vessel
is lost, his liability is also lost.

EXCEPTIONS:
1. death /injury due to fault or negligence of shipowner/vessel not seaworthy
2. vessel is insured
3. in workmen’s compensation claims

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INSCRUTABLE FAULT- Applies in cases of maritime collision where the fault is not
ascertainable and directly attributable to either of the colliding vessels. In such case,
each vessel shall bear its own damage but both should be solidarily liable to the cargo
of both.

NO FAULT INDEMNITY- lies against the owner of the vehicle where the occupant was
riding, and the claimant is not free to choose from which insurer he will claim.

EMERGENCY RULE- provides that one who suddenly finds himself in a place of
danger, and is required to act without time to consider the best means that may be
adopted to avoid the impending danger, is not guilty of negligence if he fails to adopt
what subsequently and upon reflection may appear to have been a better method,
unless the danger in which he finds himself is brought about by his own negligence.

BOTTOMRY- this is a loan where the ship itself is given as a collateral and payable
only if the ship completes the agreed voyage safely. If the ship is lost at sea, the owner
doesn’t have to pay but he won’t be indemnified for the loss.
RESPODENTIA- this is a loan where the ship’s cargo, nor the ship itself, becomes the
collateral.

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B- PUBLIC SERVICE ACT

KABIT SYSTEM- An arrangement whereby a person who has been granted a

certificate of public convenience allows other person who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the earnings.

BOUNDARY SYSTEM- an arrangement whereby the vehicle registered owner allows

another person to operate it as a common carrier under a lease agreement, and
thereby avoiding the establishment of either an employee-employer or principal-agent
relation.

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C- WARSAW CONVENTION

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IV- BUSINESS ORG.

A- PARTNERSHIP

Partnership by estoppel-

Limited Partnership-

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B- DOCTRINES IN CORPORATION LAW

DOCTRINE OF DOING BUSINESS- doing business in the Philippines is deemed to

include the ff acts:
1. Soliciting orders, service contracts, opening offices, whether liason offices or
branches.

2. Appointing representatives or distributors operating under full control of foreign

corp. who are domiciled in the Phils, or in any calendar year stay in the Phils. for a
period not exceeding 180 days.

3. Participating in the mngt., supervision or control of any domestic business in the

Phils.

4. Any other acts that imply continuity of commercial dealings or arrangements and
contemplate to that extent the performance of works or the exercise of some of the
functions normally incident to or in progressive prosecution of commercial gain or of
the purpose of business organization.

DOCTRINE OF INDIVIDUALITY OF SUBSCRIPTION- holds that a subscription is one

entire and indivisible contract. It cannot be divided into portions.

DOCTRINE OF EQUALITY OF SHARES- all stocks issued by the corp. are presumed
equal with the same privileges and liabilities, provided that the AOI is silent on such
differences.

NELL DOCTRINE- GENERAL RULE- where one corporation sells or otherwise

transfers all of its assets to other corporation, the latter is not liable for the debts and
liabilities of the transferor.

EXCEPTIONS:

- Buyer expressly or impliedly assumes the liabilities of the seller

- If the sale amounts to a merger or consolidation
- If the sale is entered into fraudulently or made in bad faith
- If the buyer is merely a continuation of the personality of the seller or the so-
called business enterprise transfer rule.

DOCTRINE OF APPARENT AUTHORITY- By the DAA, the corporation will be

estopped from denying the agent’s authority if it knowingly permits one of its officers
or any other agent to act within the scope of an apparent authority and it holds him
out to the public as possessing the power to do those acts.

TRUST FUND DOCTRINE- By the TFD, subscriptions to the capital stocks of a

corporation constitutes a fund to which the creditors have a right to look for the
satisfaction of their claims. The scope of the doctrine encompasses not only the capital
but also other property and assets generally regarded as equity as a TF for the
payment of corporate debts.

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BUSINESS JUDGMENT RULE- Questions of policy and management are left to the
honest decisions of the officers and directors of a corporation and the courts and
without authority to substitute their judgment for that of board of directors, unless
said judgment had been attended with bad faith.

DOCTRINE OF ARTIFICIAL BEING- A Corporation is an artificial being invested by

law with a personality separate and distinct from the person composing it, and for that
of an entity to which it may be related.

THEORY OF CONCESSION- A Corporation being merely a creature of the state’ all its
powers and capacities are only to the extent that the laws and its charter have granted
it.

GENERAL RULE-

Doctrine of separate juridical personality- A Corporation has a personality separate

and distinct from its stockholders or members composing it, as well as from the
directors, trustees, and officers who act in its behalf.
An officer cannot be held personally liable for the consequences of his acts, for as long
as these are in behalf of the Corporation, done in good faith and within the scope of
his authority.

EXCEPTIONS-

Piercing the veil of corporate fiction- is an equitable remedy and awarded only in
cases where the corporate fiction is used to:
1. defeat public convenience
2. justify wrong
3’ protect fraud
4. defend a crime
5. when a corporation is merely an alter-ego or business conduit of a person.

CORPORATION BY ESTOPPEL- All persons who assume to act as a corporation

knowing it to be without authority to do so, shall be liable as general partners for all
debts, liabilities and damages incurred or arise as a result thereof.

SPECIAL FACT DOCTRINE- holding that a corporate officer with superior knowledge
gained by virtue of being an insider owes a limited fiduciary duty to a shareholder in
transaction involving transfer of stocks.

ULTRA VIRES ACT- Acts performed in excess of corporate powers are ultra vires,
which are generally not binding on the Corporation.

DOCTRINE OF CENTRALIZED MANAGEMENT- All corporate powers shall be

exercised, all business conducted, and corporate property shall be controlled and held
by the BOD/BOT to be elected from among the stockholders in a stock corporation or
member in a non-stock corporation.

DOCTRINE OF CORPORATE OPPORTUNITY- When a director by virtue of such

office, acquires a business opportunity which should belong to the corporation thereby

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obtaining profits to the damage of the corporation, the director must account for and
refund to the latter such profits. –

SELF-DEALING DIRECTOR- (covers contract of corp. with spouses and relatives

w/in 4th degree of consanguinity/affinity of dir/officer) A contract of a corporation
with one or more of its directors/trustees or officers are voidable at the option of the
corporation unless:
1. presence of such d/t/o in the board meeting is not necessary.
2. vote of such d/t/o was not necessary for approval.
3. contract is fair and reasonable.
4. in case of officer, contract has been previously authorized by the board.

INTERLOCKING DIRECTOR- Contracts between corporations with interlocking

directors are valid so long as there is no fraud; the contract is fair and reasonable
under the existing facts.

Director’s interest is nominal in one of the contracting corporations (not exceeding

20% of the OCS) then the contract must comply with Sec. 32 requisites ab0ve-
mentioned otherwise the contract is voidable.

DE FACTO MERGER- means that a corporation called the acquiring corporation

acquired the assets of and liabilities of another corporation in exchange of equivalent
value of shares of stocks of the acquiring corporation.

GRANDFATHER RULE- consistent with the rule that beneficial ownership of

corporation engaged in nationalized activities must reside in the hands of Filipino
citizens.
It should be applied only when the corporation’s Filipino equity falls below the
constitutional threshold of 60% or there exists a doubt as to the Filipino to foreign
equity.
Beneficial ownership and control of corporation does not in fact reside in Filipino
shareholders which actually gave rise to legislation of the Anti-dummy law.
The nationality of the corp. is determined is determined by the nationality of the
controlling interest.

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V- SECURITIES

SECURITIES REGULATION CODE also termed as BLUE SKY LAW

COVERED SECURITIES
1. debt inst.
2. equity inst.
3. investment inst.
4. truth inst.

EXEMPT SECURITIES
1. issued/guaranteed by Govt.
2. by foreign gov’t.
3. by receiver/trustee in bankruptcy proceedings
4. sale under supervision of OUC, HLURB and BIR
5. issued by banks except its own shares.

EXEMPT TRANSACTIONS
1. sale in insolvency/bankruptcy proceedings
2. offered for sale by leinholder or in any isolated transactions
3. distribution by corp. of surplus profits
4. sale of capital stocks by corp. to its own SH
5. share of subscription prior to incorp. Or in pursuance if increased of authorized
capital stocks.
6. transactions of issuer:
-sale to fewer than 20 persons in the in the Phils. during any 12-month period
-
7. broker’s transactions upon customer’s order
8. bonds or notes sold to a single purchaser
9. sale to any qualified buyers:
a. banks, investment houses , insurance companies
b. pension/retirement funds plans maintained by gov’t.

TENDER OFFER RULE- means a publicly announced intention by a person acting

alone or in concert with other person to acquire the outstanding equity securities of a
public company.

TRUTH IN SECURITIES LAW/ DISCLOSURE RULE- it requires the issuer to make

full and fair disclosure of information about securities being sold and offered to be sold
within the Philippines and penalizes manipulative and fraudulent acts, devices, and
schemes.

OPTION TRADING-

INSIDER TRADING- it is unlawful for insider to buy or sell security at the issuer while
in possession of non-public material information such that will result in change in the
market price that may potentially affect the investment decision of the investor with
respect to the issuer or the security that is not generally available to the public.

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EXCEPT:
1. Info was not gain from such relationship
2. Insider proves that the fact is generally available
- if other party to the transaction or his agent has info disclosed to him by
insider.
- has reason to believe that he also has possession of such info.

INVESTMENT CONTRACT- is a contract, transaction or scheme

- Involving an investment of money

- In a common enterprise
- With expectation of profits
- Primarily from the efforts of other

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VI- BANKING

A- NEW CENTRAL BANK ACT- BSP central monetary authority w/c the constitution
expressly granted the power of supervision over the operation of banks.

BSP AS LAST RESORT- it lends to the bank and similar institutions under financial
distress when they have no other means to raise funds.

1. CONSERVATOR- is appointed if a bank or a quasi-bank is in a state of continuing

inability or unwillingness to maintain a condition of liquidity deemed adequate to
protect the interest of creditors and depositor.

The conservator shall take charge of the asset and liabilities of the bank and exercise
management and other powers to restore the bank’s viability. The conservatorship
shall not exceed one year.

2. CLOSURE-

3. RECEIVER- is appointed generally if the realizable value of the bank’s assets as

determined by BSP are less than its liabilities or if it unable to pay its liabilities as
they become due in the ordinary course of business, but not those caused by
extraordinary demands induced by panic in banking community.

The receiver shall take charge of the assets and liabilities of the institution and
administer the same for the benefits of the creditor.

The receiver shall determine within 90 days whether the bank can be rehabilitated,
otherwise, he shall recommend the closure of the institution.

4. LIQUIDATION-

- VOLUNTARY- written notice shall be sent to MB and it shall have the right and
take steps as may be necessary to protect the interest of the creditors.

- INVOLUNTARY CLOSURE AND LIQUIDATION- whenever MB orders closure of

a bank, PDIC shall act as receiver and proceed with the takeover and
liquidation and may adopt and implement any or combination of modes of
liquidation:
o Conventional
o Purchase of assets or assumption of liabilities

B- LAW ON SECRECY OF BANK DEPOSITS- prohibits, subject to its exclusionary

clauses, any person from examining, inquiring or looking into all deposits of whatever
nature with the banking institution with the Phils. w/c are declared by law to be
confidential in nature.

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Punitive provisions of Secrecy of bank deposit law (RA NO. 1405) – including its
statutory exemptions are not applicable to FOREIGN CURRENCY DEPOSIT
ACCOUNTS, even when constituted locally.

NOTE- does not prohibit attachment/garnishment

Money deposited in the account must in itself the subject matter of litigation.

FOREIGN CURRENCY DEPOSIT ACT-

This law (RA NO. 6426) including its punitive provisions, refers to foreign currency
deposits accounts constituted within the Philippines.

NOTE:

- Absolutely confidential
- Exempt from attachment or any order of any court
- Malum prohibitum- violation prescribe in 8 years

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C- GENERAL BANKING LAW

BANKING INDUSTRY- impressed with public interest. It requires the standard of

highest degree of diligence/ high standard of integrity and performance.

BANK – RENTING OUT OF SAFETY DEPOSIT BOX- (bailor and bailee) special kind of
deposit where the bank is the depositary. The deposit box is located within the
premises of the bank premises and under its absolute control.

MONEY MARKET- contract of loan

INVESTMENT MANAGEMENT ACTIVITIES- contract of agency

FIT AND PROPER RULE- to maintain the quality of bank management and afford
better protection to depositors and the public in general. The MB shall prescribe, pass
upon and review the qualifications and disqualifications of individuals elected or
appointed bank directors or officers and disqualify those found unfit.

BANK DEPOSITS are funds obtained by a bank from the public which are relent by
such bank to its own borrowers.

DEPOSIT SUBSTITUTE- are alternative forms of obtaining funds from the public,
other than deposits, through the issuance, endorsement, or acceptance of debt
instruments for the own account of the borrower, for the purpose of relending or
purchasing of receivables and other obligations.
`
CLASSIFICATION OF BANKS

1. COMMENRCIAL BANKS- these are ordinary or regular commercial bank, as

distinguished from universal bank. They have lower capitalization requirements than
universal bank and cannot exercise the powers of investment house and invest in non-
allied enterprises.

2. UNIVERSAL BANKS- In addition to powers authorized by commercial bank, it has

authority to exercise powers of investment house and invest in non-allied enterprise.
They have the highest capitalization requirements.

3. COOPERATIVE BANK- these are those which are organized primarily to provide
financial and credit services to cooperatives and whose operations are primarily
governed by Coop code of the Phils.

4. RURAL BANK- these are those which are organized primarily and extend loans and
credit facilities to farmers, fishermen or farm families, as well as coop., merchants,
and private and public employees and whose operations are primarily governed by
Rural Bank Act.

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2 LIMITS/RESTRICTIONS ON LOANS AND CREDIT ACCOMODATIONS W/C MAY
BE EXTENDED BY BANKS- part of safeguard against imprudent bank

SINGLE’S BORROWER’S LIMIT- the total amount of loans, credit, accommodations

and guarantee that the bank may extend to any person shall not exceed 25% of the
bank’s net worth.

RATIONALE: to protect a bank from making any excessive loans to a single borrower.
By prohibiting it from lending beyond specified ceiling.

DOSRI ACCOUNT RULE- No director or officer of any bank, shall directly or indirectly,
for himself or as the representative or agent of others, borrow from such banks, nor
shall he become a guarantor, indorser, or surety for loans from such bank to others,
or in any manner be an obligor or incur any contractual liability to the bank except
with the written approval of the majority of all the directors of the bank including the
director concerned.
3 RESTRICTIONS OF DOSRI

- Transactions must be approved by at least majority of the entire board

excluding the director concerned
- Such approval be entered in the records of the bank
- Unless the loan is non-risk, the loan must not exceed the book value of the paid
up shares of the borrowing DOSRI and the amount of the unencumbered
deposit.

EFFECT OF DOSRI ACCOUNT- in excess of 5% or max. allowed by law shall be

required to waive secrecy of bank’s deposit.

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D- PHIL DEPOSIT INSURANCE CORPORATION ACT

SPLITTING OF DEPOSITS- occurs when a deposit account of more than 500,000 is

broken down and transferred into two or more accounts in the names of persons or
entities with no beneficial ownership on transferred deposits.

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VII- DOCTRINES IN INTELLECTUAL PROPERTY LAW

Trademark is any visible sign capable of distinguishing goods from the other.

Copyright is an incorporeal right granted by statute to the author or creator of

original literary and artistic works whereby he is invested for a limited period of time
with the right carry out, authorize and prevent the reproduction, distribution,
transformation, rental, public performance and other forms of communication of his
work to the public.

Patent is any technical solution of any problem in any field of human activity which is
new, requires an inventive step and industrially applicable.

As to object
The object of trademark is goods
The object of copyright is original literary and artistic works
The object of patent is invention

As to term
The term of trademark is 10 years
The term of copyright is generally 50 years
The term of patent is 20 years from application

As to how acquired
Trademark is acquired through registration and use
Copyright is acquired from the moment of creation
Patent is acquired through application with the IPO

TM INFRINGEMENT- a trademark owned or registered in one’s name is used or

imitated by third person that result in likelihood or confusion.

COPYRIGHT INFRINGEMENT- there is violation of exclusive economic or moral rights

granted to copyright owner. It may also consist in aiding or abetting such
infringement. He has in possession of an article which he knows or ought to know to
be an infringing copy of the work for the purpose of selling, distributing the article for
trade exhibit for the public.

PATENT INFRINGEMENT- can be committed by one or several persons. They commit

infringement by the act of making, using, offering for sale, selling or importing
patented products or products obtained directly or indirectly from a patented process,
without the authorization of the patentee.

UNFAIR COMPETITION- employing of any deception or any other means contrary to

good faith by which he shall PASS OFF the goods manufactured by him in which he
deals, or services for those of the one having established such goodwill, or who shall
commit any act that is calculated to produce said result is GUILTY OF UNFAIR
COMPETITION.

FAIR USE DOCTRINE- (COPYRIGHT) fair use of copyrighted work for criticism,
comment, news reporting, teaching, including limited number of copies for classroom

18
use, scholarship, research and for similar purposes is not an infringement of
copyright.

2 TESTS TO DETERMINE SIMILARITY/LIKELIHOOD OF CONFUSION IN TM

DOMINANCY TEST- focuses on the similarity of the prevalent features of the

competing TM that might cause confusion.

HOLISTIC TEST- requires the court to consider the entirety of the marks as applied to
the products, including the packaging, in determining confusing similarity.

IDEM SONANS- similarity of sounds alone does not constitute trademark infringement

DOCTRINE OF SECONDARY MEANING- a word or a phrase originally incapable of

exclusive appropriation with reference to an article on the market because geographic
or otherwise descriptive, might nevertheless have been used for so long and so
exclusively by one producer with reference to his article, in that trade and to
purchasing public, THE WORD OR PHRASE HAS COME TO MEAN THAT THE
ARTICLE WAS HIS PRODUCT.

DOCTRINE OF TM DILUTION- is the lessening of the capacity of the famous mark to

identify and distinguish good or services.

DOCTRINE OF EQUIVALENTS- infringement of patent occurs when a device

appropriates a prior invention by incorporating its innovative concept if two devices do
the same work in substantially the same way, an albeit with some modification or
change performs the same function in substantially the same way to achieve the same
result.

FIRST TO FILE RULE- if two or more persons have made the inventions separately
and independently of each other, the right to patent shall belong to the person who
filed an application for such invention or where two or more applications are filed for
the same invention, to the applicant who has the earliest filing date has the earliest
priority date.

PARALLEL IMPORTATION- an unauthorized importation of patented drugs or

medicines obtained from patented process. (allowed when it comes to medicine by
virtue of international exhaustion)

TECHNOLOGY TRANSFER AGREEMENT- the transfer of intellectual property from

one organization to the other and the most collective means of transferring them is
through licensing agreement whereby the licensee attains a right to use the technology
for a fixed period of time by paying a particular fee for it.

PROHIBITED CLAUSES IN TTA SECTION 87

1. imposing obligation to acquire raw materials and technologies from specific source.
2. right to fix resale price of products manufactured.
3. requiring payments for patent not used.

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MANDATORY PROVISIONS IN TTA SECTION 88
1. Phil. Laws to govern the contract; venue of action is where licensee has principal
office
2. continued access to improvements in techniques and processes related to license
technology
3. for arbitration procedure; arbitration law, UNCITRAL or ICC applies.

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VIII- SPECIAL LAWS

A- SECURED TRANSACTIONS

1. PERSONAL PROPERTY SECURITY ACT

21
2. REAL ESTATE MORTGAGE LAW

3. GUARANTY

4. SURETY

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5. LETTERS OF CREDIT

3 INTERTWINED RELATIONSHIP

IST CONTRACT
Buyer- applies for LC with bank
Seller- LC is issued

2ND CONTRACT
Buyer- reimburse issuing bank
Issuing bank-issue LC in favor of seller

3RD CONTRACT
Issuing bank- pay the seller upon receipt of doc of title from seller
Bank- issue LC in favor of seller
Seller- draw a draft and engage to pay them upon presentment together w/
doc. required under LC with bank.

RULE OF STRICT COMPLIANCE- the documents tendered must strictly conform to

the terms of LC.

INDEPENDENCE PRINCIPLE- assures seller-beneficiary of prompt payment

independent of any breach of the main contract and precludes issuing bank from
determining whether main contract is actually accomplished or not.

IRREVOCABLE LC- refers to its duration, and simple means that issuing bank, may
not without seller-beneficiary’s and buyer-applicant’s consents, revoke his
undertaking therein, because issuing bank does not reserve the right to revoke the
credit.

B- TRUTH IN LENDING ACT- (BANKS AND QUASI BANKS) any person extending
credit must give debtor in writing a recital of:

- Cash price
- Amount credited if on install price
- Difference between cash and installment price
- Recital of financial charges

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NOTE- non-compliance authorizes the borrower to recover any interest paid, and hold
lender liable for double finance charges plus atty.’s fees.

COVERED TRANSACTIONS

EXCLUDED TRANSACTIONS

C- ANTI-MONEY LAUNDERING ACT

NOTE: the money laundering law is separate from the unlawful activity (predicate
crime) and requires no previous conviction of the latter.

COVERED TRANSACTION- involves transaction in cash or other monetary equivalent

instrument involving a total amount in excess of 500,000.00 within one banking day.

SUSPICIOUS TRANSACTION- involves transactions with covered institutions

regardless of the amounts involved made under any of the suspicious circumstances.

SAFE HARBOR CLAUSE- no admin., criminal, civil proceedings shall lie against any
person for having made a covered or suspicious transaction reports in the regular
performance of his duties in good faith, whether or not such reporting results in any
criminal prosecutions under this act or any other law.

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GENERAL RULE- court order is needed in examination of account

EXCEPTION- no court order is required in cases of kidnapping, drug trafficking and

terrorism

D-FOREIGN INVESTMENT ACT

DOING BUSINESS IN THE PHILS.

NEGATIVE LIST A- NO FOREIGN EQUITY

 Mass media except recording

 Practice of profession
 Retail trade enterprises w/ paid up capital of not less than $2, 500,000
 Coop.
 Private sec. agencies
 Small-scale mining
 Utilization of marine resources in archipelagic waters, territorial sea and EEZ
 Ownership, operation and mngt. Of cockpit
 manufacture, stockfiling and distribution of nuclear weapons
 ___do__________of biological, chemical, radiological weapons and anti personal
mines
 Manufacture of firecrackers and other pyrotechnic devices

25% FOREIGN EQUITY

 Private recruitment, local or overseas

 Constructions and repairs of locally funded public works
 Construction for defense related structure

30%FOREIGN EQUITY

 Advertising

40% FOREIGN EQUITY

 EDU of natural resources

 Ownership of private lands
 Operation and management of public utilities
 Ownership and admin. Of educ. Institutions
 Culture, production, milling processing, trading excepting retailing of rice and
corn and acquiring by barter of the same
 Contracts for the supply of goods, material and commodities to GOCC or Mun.
corp.
 Project proponent and facility operator of a BOT project requiring a public
utility franchise
 Operation of deep sea commercial vessels

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  Adjustment of companies
 Ownership of condo units where the common areas in the condo projects are
co- owned by the owners of separate units or owned by the corp.

60% FOREIGN EQUITY

 Financing companies regulated by SEC

 Investment houses regulated by SEC.

NOTE:

- Foreign corp. must secure license to do business in the Phils. before the SEC
otherwise cannot sue but can be sued before Phil. court
- Appoint a resident agent otherwise license will be revoked
- Reciprocity compliance
- Can acquire other immovable property or building other than land.
- Foreign investors can lease private lands up to 75 years
- UNICITRAL MODEL LAW- governs international commercial arbitration in the
Phils.. Phils is now open as venue for int’l. commercial arbitration and
mediation.
- Foreign corp. can participate in bidding for projects by the Phil. government

FOREIGN CORP. CAN OWN LAND IN THE PHILS

- Private land
- Foreign equity in the corp. not exceeding 40% otherwise only lease contract is
allowed.

EXCEPTIONS TO THE OWNERSHIP OF LAND BY FOREIGN INVESTORS/CORP.

- Hereditary succession
- Purchase by former natural born citizen (dual citizenship law)

FOR RESIDENTIAL USE

1K SQ.M. for residential land
1 HEC. Agri.land

COMMERCIAL USE
5K SQ.M. urban land
3 HEC. rural land

- Purchase of not more than 40% interest in condo. project

- Ownership through Filipinos who are married to aliens who retained their
Filipino citizenship

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E-INSOLVENCY LAWS

1. CONCURRENCE AND PREFERRENCE OF CREDITS

SPECIAL PREFERRED CREDIT (specific movable/real property)

- TAXES

ORDINARY PREFERRED CREDIT w/respect to property other than above

mentioned

- FUNERAL EXPENSES OF DEBTOR AND HIS CHILDREN

NOTE:

- Only insolvency proceedings trigger the preference rule

2. FINANCIAL REHABILITATION AND INSOLVENCY ACT 2010

Contemplates continuance of corporate life and activities in an effort to restore and

reinstate the corp. to its former position of successful operation and solvency.

PROCEEDINGS COVERED BY FRIA

A. Suspension of payment- remedy available only for individual debtors who is a

resident and citizen of the Phils. and is unable to pay his debts as they fall due in the
ordinary course of business.

B. Court supervised rehabilitation

- Voluntary or debtor initiated proceedings- insolvent debtor (S.P., Corp. or

Partnership) may initiate by filing a petition.

- Involuntary or creditor initiated proceedings- creditors with aggregate

claims of at least P1M or 25% of debtor’s subscribed capital stocks may file a petition
for rehabilitation.

C. Pre-negotiated rehabilitation- debtor who by itself or jointly with other creditors

may file a verified petition with court for the approval of PNRP which has been
approved or endorsed by creditors holding at least 2/3 of total liabilities of debtor.

D. Out-of-court rehabilitation- debtor must agree to informal restructuring and by

the creditor holding at least 85% of the total liabilities of the debtor.

E. Liquidation of insolvent juridical debtors

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 -Voluntary- an insolvent debtor shall file a verified petition for liquidation

- Involuntary- 3 or more creditors, with aggregate claims of at least P1M or

25% of debtor’s subscribed capital stocks may apply for and seek liquidation of
insolvent debtor.

D. Insolvency of individual debtors-

- Voluntary- an individual debtor whose properties are not sufficient to cover

his liabilities and debts exceed P500,000.00 may file a verified petition to be
discharged from his liabilities.

- Involuntary- any creditors with aggregate claim of P500,000 and the

individual debtor has committed an act o insolvency may file a verified petition for
liquidation.

F. Cross-border insolvency proceedings- when assistance is sought in a Phil. Court

by a foreign court or foreign rep. in connection with a foreign proceeding, when
assistance is sought in foreign state, when foreign proceeding and FRIA are
concurrently taking place and when foreign creditors have interest.

COMMENCENMENT ORDER- is an order issued by the rehabilitation court if the

petition for rehabilitation filed by the financially distressed debtor or by its creditor is
sufficient in form and substance.

The STAY ORDER included in the commencement order shall suspend all actions or
proceedings for the enforcement of claims against the debtor.

CRAM DOWN EFFECT- when liquidation or rehabilitation plan is approved by the

rehabilitation court even if there are rejection from the creditors, the plan is binding
against the those participating and non-participating creditors

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F-DATA PRIVACY ACT OF 2012

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G- PHILIPPINE COMPETITION ACT

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31