Commercial Law

Review on Commercial Law
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1 COMMERCI AL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 CODE OF COMMERCE COMMERCE - branch of human activity; purpose is to bring products to the consumer through operations habitually and with intent of gain COMMERCIA A! - branch of private law which regulates the "uridical relations arising from commercial acts C#ARAC$ERI%$IC% O& COMMERCIA A!' 1. universal 2. uniform 3. e(uitable 4. customary 5. progressive )OR$IO*% O& CO+E O& COMMERCE %$I A))ICA,E' 1. merchants; boo- of merchants and general provision of contracts 2. "oint account association 3. commercial barter 4. transfers of non-negotiable credits 5. commercial contracts of overland transportation 6. letters of credit 7. maritime commerce O$#ER%' 1. Commerce - bringing products from the manufacturers to the consumers 2. Characteristics of Commerce' a. habituality b. rapidity - if period is fi.ed/ debtor in delay without need of demand; if contract does not fi. period/ 01 days c. intent to "oin 3. Merchant' a. Individuals - legal capacity/ 20 years/ or sub"ect to parental authority/ habitually engaged in commerce b. 3uridical )ersons - commercial and industrial company organi4ed in accordance with law/ habitually engaged in business 4. 5eneral Rule' Minors cannot engage in commerce E.ceptions' a. to continue business of deceased parents through guardian b. court authori4es guardian to place minor and property in business c. minor is an alien and his national law allows him to be a merchant 2 COMMERCI AL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 5. !hich persons are not allowed to engage in commerce6 a. suffering accessory penalty of civil interdiction 7reclusion perpetua and reclusion temporal8 b. those "udicially declared insolvent until they can obtain their discharge c. prohibited by Constitution and special laws 6. Aliens a. capacitated under his national law to engage in business b. engaged in the business in the )hilippines not reserved for the &ilipinos c. after securing license and ,OI certificate 7. &amily Code' Either spouse may engage in business; when ob"ected to by the other/ court will loo- into valid grounds/ i9e9 serious and moral grounds 8. ,OI Certificate must be obtained by' a. alien b. foreign firm 9. Meaning of )hilippine *ational a. citi4en b. domestic corporation wholly owned and organi4ed by &ilipinos in the )hilippines c. &ilipino corporation where &ilipino capital entitled to vote is at least :1; 10. Query' If a corporation is a shareholder of another corporation/ how do you determine whether the latter corporation is a &ilipino national6 Answer' $he following must concur - a. At least :1; of the outstanding capital stoc- and entitled to vote of both corporations are held by citi4ens of the )hilippines b. At least :1; of the ,oard of +irectors of both corporations are &ilipinos 11. $enor of ,OI Certificate a. ,usiness or activity to be engaged is consistent with the Investment )riorities )lan b. ,usiness will contribute to the sound and balanced development of the national economy in a self-sustaining basis c. ,usiness will not conflict with the Constitution and local laws d. ,usiness is not ade(uately e.ploited by &ilipino nationals e. *o danger of monopoliesretail? should be associated with and limited to goods for personal/ family or household use/ consumption and utili4ation9 $he Retail $rade *ationali4ation aw refers to >consumption goods? or >consumer goods? which directly satisfy human wants and desires and are needed for home and daily life9 E.cluded from the law are those goods which are considered generally raw material used in the manufacture of other goods/ or if not/ as one of the component raw material/ or at least as elements utili4ed in the process of production and manufacturing9 2. Elements of !hat Constitutes Retail $rade' a. $he seller habitually engages in selling; b. $he sale is direct to the general public; and c. $he ob"ect of the sale is limited to merchandise/ commodities or goods for consumption9 3. 5eneral Rule' After [email protected]:=/ only &ilipinos or corporations whose capital is 011; &ilipino may engage in retail trade9 4. E.ceptions/ that is/ instances when aliens may engage in retail trade in the )hilippines' a. manufacturer or processor if capital does not e.ceed )A/111911; b. farmer or agriculturist when selling his products; c. manufacturer or processor selling to industrial or commercial users or consumers who use the produce to render service to the general public or to produce or manufacture goods which are sold by them to the public; d. hotel owners or -eepers of restaurants included or incidental to the hotel business; 4 COMMERCI AL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 e. sale by a manufacturer or processor to the 5overnment or its agencies/ including government owned and controlled corporations 5. Query: #ow to determine citi4enship of shares of the corporation when they are not held directly by individuals/ but in turn held by another entity6 Answer' apply the 5RA*+&A$#ER RBE/ to wit' %hares belonging to corporations or partnerships at least :1; of the capital of which is owned by &ilipino citi4ens shall be considered as )hilippine nationality/ but if the percentage of &ilipino ownership in the corporation or partnership is less than :1;/ only the number of shares corresponding to such percentage shall be counted as of )hilippine nationality9 $hus/ if 011/111 shares are registered in the name of a corporation or partnership at least :1; of the capital stoc- or capital respectively/ of which belong to &ilipino citi4ens/ all of the said shares shall be recorded as owned by &ilipinos9 ,ut/ if letCs say/ A1; of the capital stoc- belongs to &ilipino citi4ens/ only A1/111 shares shall be counted as owned by &ilipinos and the other A1/111 shares shall be recorded as belonging to aliens9 #owever/ while a corporation with :1; &ilipino and =1; foreign e(uity ownership is considered a )hilippine national for purposes of investment/ it is not (ualified to invest in or enter into a "oint venture agreement with corporations or partnerships/ the capital or ownership of which under the Constitution or other special laws are limited to &ilipino citi4ens only9 #ence/ for purposes of the law/ whatever the percentage of &ilipino ownership in the owning corporation/ the foreign ownership would always render a portion of its holding in the company as foreign e(uity and would dis(ualify the corporation to engage in retail trade9 ANTI-DUMMY ACT 1. $he Act penali4es &ilipinos who permit aliens to use them as nominees or dummies to en"oy privileges reserved for &ilipinos or &ilipino corporations9 Criminal sanctions are imposed on the president/ manager/ board member or persons in charge of the violating entity and causing the latter to forfeit its privileges/ rights and franchises9 2. +is(ualified aliens cannot intervene in the management/ operation/ administration or control of the business reserved to &ilipinos whether as an officer/ employee or laborer/ with or without remuneration/ e.cept when' a. alien ta-es part in technical aspects; b. provided that no &ilipino can do such technical wor-; and c. with e.press authority from the )resident/ upon the recommendation of the department head concerned9 3. ,y way of e.ception/ the following may participate in management' a. Aliens may be elected to the ,oard of +irectors to the e.tent of their allowable share in the capital of the corporation 7in partially nationali4ed industries89 b. A registered enterprise may employ foreign nationals in supervisory/ technical/ and advisory positions for a period of A years sub"ect to e.tension9 c. !here ma"ority of stoc-s of a pioneer enterprise is owned by foreign investors/ the following positions may be held by foreign nationals'  president 5 COMMERCI AL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001  treasurer  general manager  e(uivalent positions 4. A &ilipino common-law wife of an alien is not barred from engaging in the retail business provided she uses capital e.clusively derived from her paraphernal properties; however/ allowing her common-law alien husband to ta-e part in the management of the retail business would be a violation of the law9 5. !hat doing business means' a. soliciting orders/ purchases/ service contracts; b. opening offices whether called liaison offices or branches; c. appointing representatives or distributors who are domiciled in the )hilippines or who in any calendar year stay in the country for a period totaling 0D1 days or more; d. participating in the management or supervision or control of any domestic firm/ entity or corporation in the )hilippines; e. any other act or acts that imply continuity in commercial dealings 6. !hen commissioned merchantsbul- sale?9 3. $ypes of transactions which are treated as >bul- sales?' a. %ale/ transfer/ mortgage or assignments of a stoc- of goods/ wares/ merchandise/ provisions/ or materials otherwise than in the ordinary course of trade; b. %ale transfer/ mortgage or assignments of all/ or substantially all/ of the business of the vendor/ mortgagor/ transferor/ or assignor; c. %ale/ transfer/ mortgage/ or assignment of all/ or substantially all/ of the fi.tures and e(uipment used in the business of the vendor/ mortgagor/ transferor/ or assignor9 4. Only creditors at the time of the sale in violation of the law are within the protection of the laws and creditors subse(uent to the sale are not covered9 5. Even if the transaction falls within the definition of >bul- sale?/ the following are not deemed covered by the law' a. If the vendor/ mortgagor/ transferor or assignor produces and delivers a written waiver of the provisions of the law from his creditors as shown by verified statements; b. $he law does not apply to e.ecutors/ administrators/ receivers/ assignees in insolvency/ or public officers/ acting under process9 6. Obligations when transaction is a bul- sale' a. $he vendor must deliver to such vendee a written statement of'  names and addresses of all creditors to whom said vendor or mortgagor may be indebted;  amount of indebtedness due or owing to each of said creditors b. $he vendor must apply the purchase money to the pro-rata payment of bona fide claims of the creditors as shown in the verified statement9 c. $he seller/ at least 01 days before the sale/ shall'  ma-e a full detailed inventory of the goods/ merchandise/ etc9/ cost price of each article to be included in the sale  notify every creditor at least 01 days before transferring possession of the goods/ of the price/ terms and conditions of the sale 7. Conse(uences of Eiolation of Re(uirements under H: above stated' a. !hen :7a8 above is not complied with/ the sale itself is void; the seller will be criminally liable9 b. !hen :7b8 above is not complied with/ the sale itself is also void; seller is also criminally liable9 c. !hen :7c8 is not complied with/ the sale is not void; no criminal liability on the seller9 INSURANCE LAW 8 COMMERCI AL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 1. aws applicable to insurance in the order of priority' a. Insurance Code b. Civil Code c. 5eneral )rinciples prevailing on the sub"ect in the B% 2. Contract of Insurance - an agreement whereby one underta-es for a consideration to indemnify another against loss/ damage or liability arising from an un-nown contingent event 3. Contract of %uretyship - deemed to be an insurance contract within the meaning of the Insurance Code/ only if made by a surety who or which/ as such/ is doing an insurance business 4. +efinition of >doing an insurance business?' a. ma-ing or proposing to ma-e/ as insurer/ any insurance contract; b. ma-ing or proposing to ma-e as a surety/ any contract of suretyship as a vocation and not merely incidental to any other legitimate business or activity of the surety; c. doing reinsurance business; d. doing or proposing to do any business in the substance e(uivalent to any of the foregoing in a manner designed to evade the provisions of the Insurance Code9 5. Re(uisites of Insurance' a. e.istence of an insurable interest; b. ris- of loss; c. assumption of ris-; d. scheme to distribute losses; and e. payment of premiums • *ote' If only a/ b/ and c are present/ it is not a contract of insurance but a ris- shifting device9 6. Characteristics of an insurance contract' a. consensual b. voluntary c. aleatory - depends upon some contingent event; however/ it is not a wagering nor a gambling contract d. e.ecuted as to the insured after payment of the premium e. e.ecutory as to insurer - not e.ecuted until payment for a loss f. personal - each party ta-es into account the character/ credit and the conduct of the other g. conditional - liability is based on the happening of the event insured against 7. )arties to a contract of Insurance' a. insurer - party who assumes the ris- or underta-es to indemnify the insured or to pay a certain sum on the happening of a specified contingency b. insured - person in whose favor the contract is operative/ and who is indemnified against/ or is to receive a certain sum upon the happening of a specified contingency c. beneficiary - may or may not be the same as the insured 9 COMMERCI AL LAW MEMORY AID ATENEO CENTRAL BAR OPERATIONS 2001 • !hat perils may be insured6 (a) any contingent or un-nown event/ whether past or future/ which may damnify a person having an insurable interest; or (b) any contingent or un-nown event/ whether past or future/ which may create a liability against the person insured9 8. Every person has an insurable interest in the life and health of' a. himself/ his spouse and his children b. any person on whom he depends wholly or in part for education or support/ or in whom he has a pecuniary interest c. any person under a legal obligation to him for the payment of money/ or respecting property or services/ of which death or illness might prevent the performance or delay it d. any person upon whose life any estate or any interest vested in him depends 9. Insurable Interest in )roperty may consist of' a. an e.isting interest b. an inchoate interest/ founded on an e.isting interest c. an e.pectancy/ coupled with an e.isting interest out of which the e.pectancy arises • +efinition of Insurable Interest in )roperty' Interest in property/ whether real or personal/ or any relation thereto/ or liability in respect thereof/ of such nature that a contemplated peril might directly damnify the insured9 10. Instances when Insurable Interest must e.ist' a. Interest in )roperty insured must e.ist when the insurance ta-es effect and when the loss occurs/ but need not e.ist in the meantime9 b. Interest in the ife or #ealth of a )erson Insured must e.ist when the insurance ta-es effect/ but need not e.ist thereafter or when the loss occurs9 c. ,eneficiaries of ife Insurance need not have insurable interest in the life of the insured9 d. ,eneficiaries of )roperty Insurance must have insurable interest in the property insured9 Category I!"ra#$e Itere!t % L%&e I!"ra'e I!"ra#$e Itere!t % Pro(erty 09 basis may be based on pecuniary interest/ affinity/ or consanguinity based purely on pecuniary interest 29 when interest must e.ist at the time the policy ta-es effect EFCE)$' life insurance ta-en by the creditor on the life of the debtor wherein interest must also e.ist at the time of the loss at the time the policy ta-es effect and at the time of the loss I9 amount of insurable interest no limit EFCE)$' if insurable interest is based on creditor-debtor relationship 7only to the e.tent of the credit or debt8 limited to the actual value of damage