MERCANTILE OR COMMERCIAL LAW

SUBJECTS COVERED:
Corporation Law
Negotiable Instruments Law
Insurance Law
Transportation Law
Banking Law
Intellectual Property Law
Business and Transactions
Allied Laws

CORPORATION
Revised Corporation Code (R.A. No. 11232)

A corporation is an artificial being created by operation of law, having the right of

succession and the powers, attributes, and properties expressly authorized by law or incident to its
existence.

FORM OF CORPORATIONS:
a) Stock Corporations – which have capital stock divided into shares and are authorized to
distribute to the holders of such shares, dividends or allotments of the surplus profits on the
basis of the shares held
b) Non-Stock Corporations – all other corporations

DOCTRINE OF SEPARATE JURIDICAL PERSONALITY

It provides that a corporation is a legal or juridical person with a personality separate and
distinct from its individual stockholders or members or to any other legal entity to which it may be
connected.

CORPORATE TERM: perpetual existence unless its articles of incorporation provides otherwise.

CORPORATE NAME: no corporate name shall be allowed by the Commission if it is not

distinguishable from that already reserved or registered for the use of another corporation, or if
such name is already protected by law or when its use is contrary to existing law, rules and
regulations.

NEGOTIABLE INSTRUMENTS
 A negotiable instrument has been defined as a written contract for the payment of
money and primarily intended as a valid substitute for money. It is transferred from one party
to another either through delivery or endorsement.

COMMON FORMS:
Promissory Note; Bill of Exchange; and Check.

NEGOTIABILITY
 It is imperative that a negotiable instrument, as regards its negotiability, must conform to
the requirements provided under the laws as follows:
 It must be in writing and signed by the maker or drawer;
 It must contain an unconditional promise or order to pay a sum certain in money;
 It must be payable on demand, or at a fixed or determinable future time;
 It must be payable to order or to bearer; and
 Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.
 If a negotiable instrument does not conform to the above requisites, it is not negotiable.

INSURANCE LAW
Insurance is a risk-distributing device, a mechanism by which all members of a group
exposed to a particular risk contribute premiums to an insurer.
A contract of insurance is an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or contingent
event.

CLASSES OF INSURANCE
1) Life Insurance
2) Non-life insurance which is categorized as:
- Fire
- Marine
- Casualty
- Suretyship
- Compulsory Motor Vehicle Liability Insurance
- Microinsurance

TRANSPORTATION LAW
 A common carrier is defined as a person, natural or juridical, who is engaged in the
business of transporting either passengers or goods or both, over land, water or air, for
compensation and is available to the general public.
Legal Basis: Article 1732 of Civil Code
Article 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the circumstances of each
case.”

WHY EXTRAORDINARY DILIGENCE?

Because the conduct of transporting passengers and goods by common carriers is
necessarily imbued with public interest the Civil Code provides for the presumption of fault
on the part of the common carrier whenever accidents occur.

SECURITIES REGULATION CODE

The law aimed to establish, a socially concurs, free market that regulates itself,
encourages the widest participation of ownership in enterprises, enhance the democratization
of wealth, promote the development of the capital protect investors, ensure full and their
disclosure about securities, minimize if not totally eliminate insider trading and other
fraudulent or manipulative devices and practices which create distortions in the free market.

SECURITIES
Are shares, participation or interests in a corporation or in a commercial enterprise or
profit-making venture evidenced by a certificate, contract, instrument(s) whether written or
electronic in character.

Securities include:
 Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-booked
securities;
 Investment contracts, certificate of interest or participation in profit sharing agreement,
certifies of deposit for a future subscription;
 And others.

COMMERCIAL LAW AND CRIMINAL LAW

BANKING LAW
 − Banks shall refer to entities engaged in the lending of funds obtained in the form of
deposits.
− Generally, banks are stock corporations. However, cooperative banks may also be
formed under the Cooperative Code.

CLASSIFICATION OF BANKS
1) Universal Banks
− A universal bank has the most banking power, as it has the same powers as a
commercial bank, plus the powers to operate an investment house, whether as an
integral unit or as a subsidiary.
− To invest in non-allied enterprises
2) Commercial Banks
3) Thrift Banks
− Thrift banks are banks that focus on basic banking services for their clients, with
an emphasis on individuals and small businesses.
4) Rural Banks
− These are banks that are formed for the purpose of providing adequate credit
facilities to farmers and merchants, or to cooperatives
of such farmers and merchants and in general, the people of the rural communities.
− Cooperative Banks and Islamic Banks

INTELLECTUAL PROPERTY LAW

− Intellectual Property Rights that are intangible property rights granted by law to
owners of intellectual creations such as inventions, designs, signs and names used in
commerce, and literary and artistic works.
− It covers:
 Copyright and Related Rights;
 Trademarks and Service Marks;
 Geographic Indications;
 Industrial Designs;
 Patents;
 Utility Models;
 Layout-Designs (Topographies) of Integrated Circuits; and
 Protection of Undisclosed Information

DEFINITION AND ITS UNDERLYING DIFFERENCES

− The difference between copyright, trademarks, and patent lies in the scope of
protection.
 − A TRADEMARK is any visible sign capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise from that of another and shall include a
stamped or marked container of goods. In relation thereto, a trade name means the
name or designation identifying or distinguishing an enterprise.
− Meanwhile, the scope of a COPYRIGHT is confined to literary and artistic works
which are original intellectual creations in the literary and artistic domain protected
from the moment of their creation.
− PATENTABLE INVENTIONS, on the other hand, refer to any technical solution of a
problem in any field of human activity which is new, involves an inventive step and
is industrially applicable. [Kho vs CA, 379 SCRA 410 (2002)]

CRIMINAL LAW
Criminal law is that branch of public law that defines crimes, treats of their nature and
provides for their punishment.
Primary source: Revised Penal Code of the Philippines which is divided into three
parts namely:
1) Principles affecting criminal liability
2) Penalties which include civil and criminal liability; and
3) Felonies defined by different titles.

CHARACTERISTICS
○ Generality – means that penal laws govern everyone within the territorial
jurisdiction of the state regardless of race, belief, sex or creed subject to certain
exceptions under international agreements. Exceptions to this principle are as
follows:
○ Treaty stipulations
○ Principles of Public International Law
○ Laws of Preferential Application

CHARACTERISTICS
○ Territoriality – means that penal laws are only effective within the territorial
confines of one’s jurisdiction – be it land, maritime, interior waters, and
atmosphere.
○ Prospectivity – means that penal laws only take effect after its effectivity date.

MALA IN SE DISTINGUISHED FROM MALA PROHIBITA

• Mala in se is a crime or act that is inherently immoral such as murder; arson or rape. It is
conduct construed as sinful or inherently wrong by nature as distinguished from Mala
prohibita which is wrong only because it is prohibited by statute even if the act itself is not
necessarily immoral.

FELONIES
− Acts or omissions punishable by law are felonies, and are committed either by deceit
or by fault.
− There is DECEIT when the act is performed with deliberate intent;
− And there is FAULT when the wrongful act results from imprudence, lack of foresight
or lack of skill.

ELEMENTS OF A FELONY
− There must be an act or omission; there must be external acts
− The act or omission must be punishable by the RPC; and
− The act is performed or the omission is incurred by means of dolo (malice) or culpa
(fault).

CRIMINAL LAW (part 2)

STAGES OF EXECUTION OF CRIMES

○ Consummated – when all the elements necessary for its execution and
accomplishment are present;
 ○ Frustrated – when the offender performs all the 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.
○ Attempted – 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 this own spontaneous
desistance.

CIRCUMSTANCES THAT AFFECT CRIMINAL LIABILITY

1) Justifying Circumstances
– a person who acts under this does not commit a crime under the law. Thus, the
person is exempted from criminal and civil liability.
Self-Defense
○ Self-Defense to Relatives (his spouse, ascendants, descendants, or legitimate,
natural or adopted brothers or sisters, or his relatives by affinity in the same
degrees and consanguinity within the fourth civil degree)
○ Self-Defense to Strangers (that the person defending be not induced by revenge,
resentment, or other evil motive)
○ Any person who, in order to avoid an evil or injury, does not act which causes
damage to another, provided that the following requisites are present:
First: that the evil sought to be avoided actually exists;
Second: that the injury feared be greater than that done to avoid it;
Third: that there be no other practical and less harmful means of preventing it.
○ Any person who acts in the fulfillment of a duty or in the lawful exercise of a right
or office.
○ Any person who acts in obedience to an order issued by a superior for some
lawful purpose.

2) Exempting Circumstances
– A crime is committed but there is no criminal due to the absence of free will. The
offender, however, shall be civilly liable.
○ An imbecile or an insane person, unless the latter has acted during a lucid interval.
○ An child 15 years of age or under at the time of the commission of the offense
shall be exempted from criminal liability.
○ A child above 15 but below 18 years of age shall likewise be exempted unless
he/she acted with discernment.
 ○ Any person who, while performing a lawful act with due care, causes an injury by
mere accident without fault or intention of causing it.
○ Any person who act under the compulsion of an irresistible force.
○ Any person who acts under the impulse of an uncontrollable fear of an equal or
greater injury.
○ Any person who fails to perform an act required by law when prevented by some
lawful or insuperable cause.

3) Mitigating Circumstances
– Which lessen the penalty. It may be privileged or ordinary.
– Privileged mitigating circumstances cannot be offset by aggravating circumstances
while ordinary mitigating circumstances may be offset by aggravating circumstances.

○ Those mentioned under justifying and exempting circumstances (not attendant)

○ Minority and Old Age (over 70 years of age)
○ That the offender had no intention to commit so grave a wrong as that committed
○ That sufficient provocation or threat on the part of the offended party immediately
preceded the act.
○ That the act was committed in the immediate vindication of a grave offense to the
one committing the felony his spouse, ascendants, or relatives by affinity within
the same degree.
○ That of having acted upon an impulse so powerful as naturally to have produced
passion or obfuscation.
○ Voluntarily surrendered himself to a person in authority or his agents or
voluntarily confessed his guilt before the court prior to the presentation of
evidence for the prosecution.
○ That the offender is deaf and dumb, blind or otherwise suffering some physical
defect which thus restricts his means of action, defense, or communications with
his felony beings.
○ Such illness of the offender as would diminish the exercise of the will power of the
offender without however depriving him of the consciousness of his acts.
○ Analogous circumstances.

4) Aggravating Circumstances
– While mitigating circumstances tend to lessen the penalty, aggravating
circumstances will increase the penalty or will qualify the crime to a greater one.

○ That advantage be taken by the offender of his public position.

○ That the crime be committed in contempt or with insult to the public authorities.
 ○ Committed with insult or in disregard of the respect due the offended party on
account of his rank, age, or sex, or that is be committed in the dwelling of the
offended party, if the latter has not given provocation.
○ Committed with abuse of confidence or obvious ungratefulness.
○ That the crime committed in the palace of the Chief Executive or his presence, or
where public authorities are engaged in the discharge of their duties, or in a place
dedicated to religious workshop.
○ That the crime be committed in the nighttime, or in an uninhabited place, or by a
band, whenever such circumstances may facilitate the commission of the offense.
○ That the crime be committed on the occasion of a conflagration, shipwreck,
earthquake, epidemic or other calamity or misfortune.
○ That the crime be committed with the aid of armed men or persons who insure or
afford impunity.
○ That the accused is a recidivist.
○ That the offender has been previously punished by an offense to which the law
attaches an equal or greater penalty or for two or more crimes to which it attaches
a lighter penalty.
○ That the crime be committed in consideration of a price, reward, or promise.
○ That the crime be committed by means of inundation, fire, poison, explosion,
stranding of a vessel or international damage thereto, derailment of a locomotive,
or by the use of any other artifice involving great waste and ruin.
○ That the act be committed with evidence premeditation.
○ That the craft, fraud or disguise be employed.
○ That advantage be taken of superior strength, or means be employed to weaken the
defense.
○ That the act be committed with treachery.
○ That means be employed or circumstances brought about which add ignominy to
the natural effects of the act.
○ That the crime be committed after an unlawful entry.
○ That as a means to the commission of a crime a wall, roof, floor, door, or window
be broken.
○ That the crime be committed with the aid of persons under 15 years of age or by
means of motor vehicles, motorized watercraft, airships, or other similar means.
○ That the wrong done in the commission of the crime be deliberately augmented by
causing other wrong not necessary for its commissions.

5) Alternative Circumstances
 ○ Those which must be taken into consideration as aggravating or mitigating
according to the nature and effects of the crime and the other conditions attending
its commission.
○ They are: RELATIONSHIP; INTOXICATION; AND DEGREE OF
INSTRUCTION AND EDUCATION OF THE OFFENSE.
○ Relationship shall be taken into consideration when the offended party in the
spouse, ascendant, descendant, legitimate, natural, or adopted brother or sister, or
relative by affinity in the same degrees of the offender.
○ Intoxication can be mitigating if found not done habitually but if habitually it can
be aggravating.

PENALTIES
○ Death – suspended by law
○ Life imprisonment
○ Reclusion perpetua – 20 years to 40 years
○ Reclusion temporal – 12 years to 20 years
○ Prision mayor – 6 years to 12 years
○ Prision correccional – 6 months to 6 years
○ Arresto mayor – one month to 6 months
○ Destierro or bond to keep peace

TAXATION LAW
– Taxation is the power by which the sovereign raises revenue to defray the necessary
expenses of the government.
– Taxes are the enforced proportional contribution from persons and property levied
by the State by virtue of its sovereign power for public purposes.

NATIONAL INTERNAL REVENUE TAXES

○ Income tax (individual income)
○ Tax on corporations
○ Estate tax
○ Donor’s tax
○ Excise tax
○ Value-added taxes
○ Other Percentage taxes
○ Documentary stamp taxes
 ○ Such other taxes as are and may be imposed

THEORIES ON TAXATION
○ Necessity Theory – is premised on the belief that the existence of government is a
necessity and that it cannot continue without the necessary means to defray its
expenses and due to those means, it has the right to compel all citizens and
property within its territorial jurisdiction to contribute.

○ Benefits-Protection Theory – also called Doctrine of Symbiotic Relationship of

Taxation. The State demands and receives taxes from the subjects of taxation
within its jurisdiction so that it may be able to carry its mandate into effect and
perform the functions of government and the citizens pay from his property, the
portion demanded in order that it may by means thereof be secured in the
enjoyment of the benefits of organized society.

○ Lifeblood Theory – taxes are the lifeblood of the nation through which the
government agencies continue to operate and which the State effects its function
for the welfare of its constituents. [CIR vs CA, G.R. No. 106611, [1994]]

BUREAU OF INTERNAL REVENUE (BIR)

○ Bureau of Internal Revenue (BIR) is the primary administrative agency tasked
with the enforcement and implementation of the National Internal Revenue Code
(NIRC) and the collection of taxes.

KINDS
○ Income tax – tax on yearly profits arising from property, professions, trades or
offices or as a tax on a person’s income, emoluments, profits, and the like. [case]
○ Tax on Corporation – domestic and resident foreign corporations
○ Estate Tax – is a tax imposed on the privilege of transferring property upon the
death of its owner from the deceased to the lawful heirs.
○ Donor’s Tax – is a tax on the gratuitous transfer of property (donation or gift)
between two or more persons who are living at the time of the transfer.
○ Excise Tax – apply to goods manufactured or produced in the Philippine for
domestic sale or consumption or for any other disposition and to things imported
as well as services performed in the Philippines. [alcoholic products, tobacco
products, miscellaneous article]
○ Value-Added Tax – is an uniform tax (0% or 10%) imposed on all persons who sell
barter, exchange, or lease of goods or properties, or render services in the course
of trade or business and those who import goods, whether for business as
otherwise.