BUSINESS LAW AND REGULATIONS

I. NEGLIGENCE
It is the omission of that diligence which is required by the circumstances of persons,
place and time (Art. 1173 Civil Code). It is the failure to observe for the protection of
the interests of another person the degree of care, precaution and vigilance, which
the circumstance justly demands, whereby such other person suffers injury. (PNR vs
CA. G.R. No. 157658, October 15, 2007).
The case of PNR vs. CA also states that there is no hard and fast rule whereby such
degree of care and vigilance is calibrated; it is dependent upon the circumstances in
which the person finds himself. All that the law requires is that it is perpetually
compelling upon a person to use that care and diligence expected of sensible men
under comparable circumstances.
A. Different Kinds of Negligence (Culpa)
Culpa Criminal (Criminal Negligence)
Culpa Aquiliana (Civil Negligence)
Culpa Contractual (Contractual Negligence)

Culpa Criminal Culpa Aquiliana Culpa Contractual

(Quasi – Delict)
Legal Basis of Liability
There can be no crime There can be a The obligation arises from the
unless there is a law quasi-delict as long breach of the contract because
clearly punishing the act as there is fault or of defendant’s failure to exercise
(nullum crimen nulla negligence resulting due care in its performance.
poene sine lege) in damage or injury
to another
Nature of Negligence
Direct, substantive and Direct, substantive Negligence is merely incident to
independent. and independent the performance of an obligation
(Rakes vs. Atlantic already existing because of a
Gulf and Pacific Co, contract (Rakes vs. Atlantic Gulf
GR.No. 1719, and Pacific Co, GR.No. 1719,
January 23, 1907) January 23, 1907)
Criminal Intent
Essential for criminal Not necessary, Fault Not necessary
liability to exist or negligence
without intent will
suffice
Proof Needed
 Proof beyond reasonable Preponderance of Preponderance of evidence
doubt evidence
Existence of Pre-Existing
Contractual Obligation
No pre – existing No pre – existing There is pre -existing obligation
obligation (except the obligation (except (a contract, either express or
duty never to harm the duty to be implied)
others) careful in all human
actuations)
Defense of “Good Father
of a Family”
Not a proper defense. A complete and Not a complete and proper
Here, the employee’s proper defense defense in the selection and
guilt is automatically the insofar, as parents, supervision of employees but can
employer’s guilt if the guardians, mitigate liability for damages
former is insolvent. The employees are
liability of the employer is concerned
subsidiary
Presumption of
Negligence
The innocence of the No presumption of As long as it is proved that there
accused is presumed until negligence. Injured was a contract and that it was
the contrary is proven party must prove carried out, it is presumed that
the negligence of the debtor is at fault, and it is
the defendant. his duty to prove that there was
no negligence in carrying out the
Otherwise, the terms of the contract
complaint of injured
party will be
dismissed.
Nature of the Right
Violated
Public Right. A crime is a Private Right. It is a Private Right
wrong against the State wrongful act against
a private individual.
Governing Law
Governed by Art. 365 of Governed by Art. Governed by Art. 1170 -1174 of
the Revised Penal Code 2176; Arts. 1172 - the Civil Code
1174 are also
applicable
(Civil Code of the
Philippines)

B. Degrees of Negligence:
1. Simple Negligence – failure to exercise the standard of care that a reasonably
prudent person would have exercised in a similar situation.
2. Gross Negligence – there is want of even slight care and diligence and implies
conscious indifference to consequences.; pursuing a course of conduct which would
naturally and probably result to injury; utter disregard of the consequences.

C. The Legal Principle/Doctrine of “Res Ipsa Loquitor”

The phrase is literally translated as “The thing or transaction speaks for itself”. The
said doctrine states that the thing which caused the injury, without the fault of the
injured, is under the exclusive control of the defendant and the injury is such that it
would have not occurred if he, having such control, used proper care.
The doctrine is an exception to the rule that in quasi-delict cases, the burden of proof
lies in the plaintiff to show negligence of the defendant. It has been resorted to settle
the issue of liability of a person where no direct evidence can be presented.
Requisites:
1. The accident is of a kind of which ordinarily does not occur in the absence of
someone’s negligence
2. It is caused by an instrumentality within the exclusive control of the defendant or
defendants and
3. The possibility of contributing conduct which would make the plaintiff responsible
is eliminated.
Example/ Illustration:
Dr. A is a surgeon who conducted a medical procedure/operation with Mr. B’s
stomach. Several days after the operation of Mr. B, he suddenly felt an intense pain in
his tummy which caused him to have a medical check-up.
During Mr. B’s medical check-up, his x-ray and his ultra-sound shows that there was a
scalpel in his stomach. Can Dr. A be held liable because a scalpel was found in Mr.
B’s stomach.?
Answer: Dr. A can be held liable under the doctrine of res ipsa loquitor wherein said
doctrine states that the thing which caused the injury, without the fault of the
injured, is under the exclusive control of the defendant and the injury is such that it
would have not occurred if he, having such control, used proper care.
In the said facts, the patient Mr. B does not have any fault because he is possibly
unconscious due to anesthesia and it is Dr. A who is completely in control of the
operation thus it can be necessarily concluded that he is negligent in said facts when
a scalpel was found in Mr. B’s stomach.

D. Circumstances which may affect the Determination of Negligence

1. Person exposed to risk
2. Emergency
Emergency Rule or Sudden Peril Doctrine
General Rule: An individual who suddenly in a situation of danger, required to act
without much time to consider the best means to avoid the impending danger is not
guilty of negligence if he fails to undertake what subsequently and upon reflection
may appear to be a better solution.
Reason: A person who is confronted with a sudden emergency may be left with no
time for thought and must make a speedy decision largely upon impulse or instinct (
Makati Auto Line Transport Corporation vs. People, G.R. 152040, March 31, 2006)
Exception: The emergency rule cannot be invoked if the person invoking it found
himself in danger which he himself created through his own negligence (Delsan
Transport vs. C and A construction Inc., October 1, 2003)
3. Social Value or unity of action
4. The time of the day may affect the diligence required of the actor
5. Gravity of the harm to be avoided
6. Place
Proximate Cause - Refers to that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury, and without which
the result would not have occurred.
Damage – The detriment, injury or loss which is occasioned by reason of fault of
another in the property of a person.

E. DAMAGES
Damages – The pecuniary compensation, recompense, or satisfaction for an injury
sustained, or as otherwise expressed, the pecuniary consequences which the law
imposes for the breach of some duty or the violation of some rights ( People vs
Ballesteros, G.R. No. 120921, January 29, 1998)
Damnum Absque Injuria (Damage without Injury) – A person may have suffered
physical hurt or injury, but for as long as no legal injury or wrong has been done,
there is no liability.
Example : Juan is driving his car in a moderate speed within the speed limit (e.g.
40km/h). The tire of his car suddenly tripped a stone which flew and hit the head of
Pedro which caused him to bleed. In this case, Juan cannot be held liable because he
is not negligent considering that he is driving in a moderate speed. This is a clear
example of damnum absque injuria.
The general rule is that pecuniary loss must be proved as a requirement before actual
damages may be awarded. The exception is in the case of moral, nominal, temperate,
liquidated, and exemplary damages
Pecuniary Loss which is defined as loss of money or something by which money or
something of money value may be acquired (De Leon, Torts)
F. Kinds of Damages Recoverable
1. Time losses – losses of wages or the value of any lost time or earning capacity
where injuries prevent work
2. Injury Expenses – incurred by reason of the injury
3. Pain and Suffering – in their various form, they include emotional distress and
consciousness of loss

G. Kinds of Damages (MENTAL)

M -oral
E- xemplary
N – ominal
T – emperate
A – ctual
L – iquidated

I. Moral Damages (Art. 2217-Art.2220, Civil Code)

Moral Damages include: Besmirched Reputation, Moral Shock, Wounded Feelings,
Fright, Physical Suffering, Mental Anguish, Serious Anxiety, Social Humiliation, Similar
Injury
We must take note that Moral Damages are essentially personal to the party claiming
them.
The award of moral damages is designed to compensate the claimants for actual
injury and is not meant to enrich the complainant. The grant of moral damages is
based on ancient maxim “when there is a wrong there is a remedy” (Torts and
Damages, Aquino)
Among the factors that can be considered in assessing moral damages is the standing
of the offended party in the community, on the one hand, the financial capability of
the offender.
A. Nature and Purpose: Moral damages are not punitive and not intended to enrich
the complainant in order to punish the defendant. They are for the reparation of
spiritual status quo ante; a means to assuage the moral suffering of the complainant
brought about by the defendant’s culpable action (Meralco vs Jose, February 14,
2007)
On the other hand, there is no need to prove pecuniary loss for moral damages to be
adjudicated. We must also remember that the award of moral damages must be
commensurate to the suffering or proportionate to the wrong committed (Meralco vs
Jose, February 14, 2007)
B. Factors in determining amount of Moral Damages
1. Extent of Humiliation
2. Pain and Suffering
3. Official, Political, Social, and Financial Standing
C. Moral Damages in Culpa Contractual - Moral damages are recoverable only if the
defendant acted fraudulently or in bad faith or is found guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual obligations. The
breach must be wanton, reckless, malicious, or in bad faith, oppressive or abusive
(Aznar vs. Citibank, N.A, (Philippines), GR No. 164273, March 28, 2007)
A conscious or intentional design need not always be present since negligence, may
occasionally be so gross as to amount to malice or bad faith. Bad faith in the context
of Art. 2220 of the Civil Code includes gross negligence (Bankard, Inc. vs. Feliciano,
GR No. 141761, July 28, 2006)
Art. 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are
justly due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
D. Moral Damages in Quasi-Delict – When an act or omission causes physical injury or
where the defendant is guilty of intentional tort, moral damages may be aptly
recovered (Torts and Damages, De Leon)
E. Moral Damages in Crime or Felony - It could be lawfully due when the accused is
found guilty of physical injuries, lascivious acts, adultery or concubinage, illegal or
arbitrary detention, illegal arrest or search, defamation, and malicious prosecution.
Moral Damages and Exemplary Damages are not recoverable in damage actions
predicated on a breach of promise to marry. The reason for this is clear. The mere
breach of promise to marry is not actionable, there can be no possible basis for an
award for damages, whether moral or exemplary.
It would be different however if the act of the defendant in breaking his promise to
marry is accompanied by any of the acts enumerated in Art. 2219 of the Civil Code. In
such cases, moral damages may be recovered, but, evidently, the basis of recovery
will not be breach of promise to marry (Jurado)
F. The general rule is that the victim can only recover moral damages
Exceptions:
1. The spouse, legitimate and illegitimate descendants and ascendants of the
deceased (Art. 2209 Civil Code)
2. The parents of a female seduced, abducted, raped or abused (Art. 2219 Par 3)
3. The spouse, descendants, ascendants, and brothers and sisters, in the order
named, against any person who shows disrespect to the dead, or wrongfully interferes
in the funeral of the deceased.
General Rule: A corporation may not be awarded moral damages, it being a juridical
person; it cannot suffer from wounded feelings, serious anxiety, mental anguish, or
moral shock (Meralco vs TEAM Corporation, December 13, 2007)
Exception: Libel, slander, or any other form of defamation. But there must be
evidence to prove it to justify the award (Filipinas Broadcasting Network vs. Ago
Medical, January 17, 2005)

II. Actual or Compensatory Damages– Damages awarded to a person as compensation

or indemnity for such pecuniary loss suffered by him as he has duly proved (Civil
Code, Art. 2199-2215)
Purpose : To repair the wrong that has been done, to compensate for the injury
inflicted and not to impose penalty (PNOC vs CA, GR 107518, October 8, 1998)
The primary object of an award of a civil action, and the fundamental principle or
theory on which it is based, is just compensation, indemnity or reparation for the loss
or injury (Aquino, Torts and Damages)
A. Classifications of Actual Damages
1. Dano emergente or damnum emergens – loss of what a person already possesses
2. Lucro Cessante or Ganacias Frustradas – failure to receive as a benefit that which
would have pertained to him (Civil Code, Art.2205)

B. Doctrine of Avoidable Consequences – Injured victims have a responsibility to act

reasonably to limit or mitigate losses incurred. Failure to mitigate the injury will not
hold the defendant for incremental losses that otherwise could have been avoided.
Example/ Illustration:
Johnny is driving his car which suddenly sideswiped Peter. Johnny then went to Peter
to check his condition and found out that there is a bump in the latter’s head. Johnny
insisted that Peter go to the hospital so he can be medically checked. Peter, on the
other hand, insisted that it is unnecessary and just went home so it can be iced.
Years after the said incident, Peter suffered unbearable headaches. He found out
through a medical exam that the bump in his head, through years, became the reason
of his unbearable headache. He then decided to file a civil case against Johnny. Will
the case prosper?
Answer: The case will not prosper because it is Peter who avoided medical treatment
during the accident. The degeneration of his health is attributable to him thus Johnny
cannot be held liable. This an application of the Doctrine of Avoidable Consequences.

Doctrine of Avoidable Consequences Contributory Negligence

Acts of the plaintiff occur after the act or
omission of the defendant
Injured victim have a responsibility to act
reasonably to limit or mitigate losses
incurred
Plaintiff’s act or omission occurs
before or at the time of the act of the
defendant
Contributed to causing the accident
responsible for the injury.

The general rule is that actual damages must be proved with a reasonable degree
of certainty.
Exceptions:
1. When a penalty clause is agreed upon in the contract between the parties (Art.
1226, Civil Code)
2. When the Liquidated damages have been agreed upon (Art. 1226, Civil Code)
3. When the loss is presumed as when a child or spouse dies as a result of the act or
omission of a person ( Manzanares vs Moreta, GR. No. L-12306, October 22, 1918)
4. Forfeiture of bonds in favor of the government for the purpose of promoting public
policy or interest (Far Eastern Surety vs CA)
5. “Damages for Death caused by a crime or delict” which can be awarded forthwith
to the heirs of the victim by proof alone of such fact of death
6. Damages implied by law
C. Doctrine of Foreseeable or Anticipated Consequences - Only those injuries which could
have been reasonably foreseen by the parties at the time the contract was entered
into are recoverable contract damages.

III. Nominal Damages (Art. 2221-2223)– They are those recoverable where a legal
right is technically violated and must be vindicated against an invasion that has
produced no actual present loss of any kind, or where, from the nature of the case,
there has been some injury arising from a breach of contract or legal duty the amount
thereof has not been or cannot be shown.
Purpose: In order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized. It is not for the purpose of
indemnifying the plaintiff for any loss suffered by him (Art.2221, Civil Code)
The grant of nominal damages, however, is a bar to recovery of actual or
compensatory, moral, or temperate damages (Torts and Damages, De Leon)
The law presumes damage although actual or compensatory damages are not proven
(Gonzales vs. People, GR No. 159950, February 12, 2007)

IV. Temperate or Moderate Damages (Art. 2224-2225, Civil Code)

Under Article 2224 of the Civil Code, temperate damages may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot, from
the nature of the case, be proved with certainty.
Temperate and Actual Damage are mutually exclusive in that both may not be
awarded at the same time (People vs Gutierrez, February 4, 2010)

V. Liquidated Damages (Art. 2226-2228) - Those agreed upon by the parties in a

contract, to be paid in case of breach thereof.
Purpose: to prevent breach of obligations between the contracting parties
The stipulation as to the amount of indemnity should not be enforced where the
breach committed by the defendant is not the one contemplated by the parties. It is
presumably contemplates a total breach thereof.
Liquidated damages are those agreed upon by the parties. No proof is necessary. It is
not subject to any contingency or determination as it already agreed upon. The
reason why there is no need for proof to recover liquidated damages is because the
agreement is the law between the parties (Albano)

Liquidated Damages Penalty

Purpose
Sum inserted in a contract as a measure of Sum inserted in a contract as a
compensation for its breach punishment for default, or by way
of security for actual damages
which may be sustained because of
non-performance
Nature
Its essence is a genuine covenanted pre- An agreement to pay a stipulated
estimate of damages sum on breach of contract
irrespective of the damage
sustained
Legal Results
There is no difference as far as legal results
are concerned.
Necessity of Proof of Damages
In either case, the injured party need to
prove his damages in order that the sum
stipulated may be demanded
Effect if principal obligation is void
Should the principal obligation be void, the
stipulation on liquidated damages will also be
void; both damages being accessory
obligations to the principal obligation
(Art.1230, Civil Code)

VI. Exemplary and Corrective Damages (Art. 2229-2235) – Imposed by way of

example or correction for the public good, in addition to the moral, temperate,
liquidated, or compensatory damages. It is required by public policy to suppress
wanton acts (Torts and Damages, Aquino).
Requisites:
 Imposed, by way of example in addition to compensatory damages, only after
the claimant’s right to it has been established.
Not recoverable as a matter of right, their determination depending upon the
amount of compensatory damages that may be awarded
The act must be accompanied by bad faith or done in wanton, fraudulent,
oppressive or malevolent manner
Exemplary Damages in Delict or Crime – Relative to the civil aspect of the case, an
aggravating circumstance, whether ordinary or qualifying, should entitle the offended
party to an award of exemplary damages within the unbridled meaning of Article 2230
of the Civil Code (People vs. Vergara, July 3, 2013)
Exemplary Damages in Quasi-Delict – It may be awarded if the defendant acted with
gross negligence (Art.2232, Civil Code)
Exemplary Damages in Contracts and Quasi-Contracts – It may be awarded if the
defendant acted in a wanton, fraudulent, reckless, oppressive, malevolent manner
(Art.2232, Civil Code)

Art.2233 Art. 2234 Art. 2235

Exemplary damages cannot be Although the amount of Agreement to
recovered as a matter of right. exemplary damages need not renounce
This may be granted at the be proved, plaintiff must show exemplary
discretion of the court even if that he is entitled to moral, damages in
not expressly pleaded or prayed temperate or compensatory advance shall be
for. damages null and void

II. INTENTIONAL WRONGDOING

A. Criminal Law – It is the branch of public law that defines crimes, treats of their
nature, and provides for their punishment
Crime – The generic term used to refer to a wrongdoing punished either under the
RPC or under the special law; an act committed or omitted in violation of a public law
forbidding or commanding it.
Felony – a crime punished under the Revised Penal Code
Trivia: The Revised Penal Code supplanted the Spanish Codigo Penal which is in effect
in the Philippines from 1886 to 1930.
Offense – a crime punished under the special law
Misdemeanor – a minor infraction of law
B. Legal Maxims
Nullum Crimen nulla poena sine lege – there is no crime when there is no law
that defines and punishes it
Actus non facit reum, nisi mens sit rea -the act cannot be criminal unless the
mind is criminal
Actus me invito factus non est meus actus – an act done by me against my will
is not my act
Doctrine of Pro Reo - Whenever a Penal Law is to be construed or applied and
the law admits of two interpretations – one lenient to the offender and one
strict to the offender – that interpretation which is lenient or favorable to the
offender will be adopted.This is in consonance with the fundamental rule that
all doubts shall be construed in favor of the accused and consistent with the
presumption of innocence of the accused.
C. Elements of a Felony
There must be an act or omission
The act must be punishable by the Revised Penal Code
The act is performed, or the omission is incurred, by means of malice (dolo) or
by means of negligence (culpa)
D. Classification of Crimes
Note: The first two (2) classification of crimes are considered felonies
1. Intentional Felonies – the act is performed, or the omission is incurred with
deliberate intent or malice to do an injury
Requisites of Dolo or Malice
Freedom/Voluntariness to Act
Intelligence or the capacity to know and understand the consequences of one’s
act.
Criminal Intent
2. Culpable Felonies – They are performed without malice
Requisites of Culpa
Freedom
Intelligence
 Negligence, imprudence, lack of foresight, or lack of skill
The act or omission is voluntary but the intent or malice in intentional felonies
is replaced by imprudence, etc.

Intentional Culpable
Act is malicious Not malicious
With deliberate intent Injury caused is unintentional being incident of another
act performed without malice
Has intention to cause Wrongful act results from the imprudence, negligence,
an injury lack of foresight or lack of skill

E. Honest Mistake of Fact – a misapprehension of fact on the part of the person

causing injury to another. Such person is not criminally liable as he acted without
criminal intent. (Ignorantia Facti Excusat)
Requisites of Mistake of Fact as a Defense:
That the act done would have been lawful had the facts been as the accused
believed them to be
That the intention of the accused in performing the act should be lawful
That the mistake must be without fault or carelessness on the part of the
accused.
Mala Prohibita – punishable by special penal laws and where criminal intent is not, as
a rule, necessary, it being sufficient that the offender has the intent to perpetrate
the act prohibited by the special law. It is punishable because the prohibited act is so
injurious to the public that it is the crime itself.
Another classification of crime is that it is classified as Mala in Se or Mala Prohibita.
Mala in Se crimes are those that are inherently wrong from its very nature (e.g.
murder, theft) and mostly covered by the provisions of the RPC. On the other hand,
Mala Prohibita crimes are those considered wrong because they are prohibited by law.
Mostly they are covered by special laws.
However, the crime of Plunder is covered by a special law, namely RA 7080, but is
considered inherently wrong in nature (mala in se). By contrast, Illegal Use of Public
Funds or Property or commonly known as Technical Malversation is penalized under
Article 220 of the RPC but it is not inherently wrong thus it is considered as mala
prohibita.

F. Criminal Liability
Under Article 4 of the RPC, criminal liability shall be incurred:
 By any person committing a felony although the wrongful act done be different
from that which he intended
Ilustration: Juan is talking with Petra, the fiancée of Pedro. Pedro became jealous
and then he went to Juan who the former suddenly punched with the intention of
injuring the latter’s face (burahin ang mukha). However, after being punched, Juan
fell, and his head hit a rock causing his instant death. In this case, Pedro will be held
liable for Juan’s death (homicide) despite the fact that his intention is only to injure
Juan’s face (physical injury).
Proximate cause – that cause, which, in the natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury, and without which
the result would not have occurred.
Efficient Intervening Cause – interrupted the natural flow of the events leading to
one’s death. This may relieve the offender from liability.
By any person performing an act, which would be an offense against persons or
property, were it not for the inherent impossibility of its accomplishment or an
account of the employment of inadequate or ineffectual means. This is also
known as Impossible crime.
Illustration: Mars is the spendthrift son of Don Zeus. Mars, because of his lifestyle,
got himself in several debts he cannot pay. Mars asked his father to pay such debts,
but his father rebuffed him considering that the latter is a frugal man.
Mars then schemed to kill his father by means of poison so he can already have the
properties of his father as his inheritance. Mars then prepared coffee which he put
poison in it. However, he unknowingly put sugar instead of poison thus failing to kill
his father.

G. Stages of Execution
Felonies are executed in three stages: 1) consummated 2) frustrated and 3)
attempted.
A felony is consummated when all the elements necessary for its execution and
accomplishment are present.
Example:
Elements for Homicide
That a person was killed
That the accused killed him without any justifying circumstance
That the accused had the intention to kill, which is presumed
 That the killing was not attended by any of the qualifying circumstances of
murder or of that of parricide
Juan shot Pablo with a shotgun after a heated argument. Pablo died because of the
gunshot wounds he received. Considering that above mentioned elements of homicide
are present then Juan has committed consummated homicide.
A felony is considered frustrated when the offender performs all acts of execution,
which would produce the felony as a consequence, but which, nevertheless, do not
produce it by reason of causes independent of the will of the perpetrator.
Example: Toguro, out of anger, shot his archrival Eugene with a pistol hitting the
chest. Due to the immediate action of Eugene’s friends, namely Alfred, Vincent,
Dennis and Karla, to bring the former to the hospital. Immediate death of Eugene was
avoided because of the prompt medical attention. In this case, Toguro can be held
liable of Frustrated Homicide.
In attempted felonies, there is an attempt when the offender commences the
commission of a felony directly or overt acts, and does not perform all the acts of
execution, which should produce the felony by reason of some cause or accident
other than his own spontaneous desistance.
Example: Hagorn intends to burn the house of sisters Pirena, Amihan, Alena and
Danaya. He then started to pour gasoline on the wall of the said house but was caught
by the four thus preventing him from burning said house. In this case, Hagorn can be
held liable for Attempted Arson. We must take note that the pouring of gasoline is an
overt act.