San Beda College of Law

1 MEMORY AID
IN

COMMERCIAL LAW

CODE OF COMMERCE
COMMERCE It is that branch of human activity, the purpose of which is to bring products to the consumer by means of exchanges or operations which tend to supply and extend to him, habitually, with intent to gain at the proper time and place and in good quality and quantity. (1 Blanco 36 cited in Miravites Bar Review Materials in Commercial Law, 2002 ed.) Commerce and trade are used interchangeably although the former is more commonly used in international dealings and the latter in domestic ones. (Pandect o Commercial Law and !"ris#r"dence, !"stice !ose $it"%, 1&&' ed.) COMMERCIAL LAW It is that branch of private law governing acts of commerce (business intercourse and!or the "uridical relations arising from such commercial acts. (Pandect o Commercial Law and !"ris#r"dence, !"stice !ose $it"%, 1&&' ed.) #rincipal characteristics$ %. &niform '. &niversal (. )quitable *. Customary +. #rogressive LAW MERCHANT (LEX MERCATORIA) ,n old international law of merchants and mariners growing out of their customary practices. It was a law practiced and enforced by businessman and ship owners in their own courts without professional "udges or lawyers. (Mellin(o s )ictionar* o +merican Le%al ,sa%e cited in -ristan Catindi%s .otes on /elected Commercial Laws) COMMERCIAL LAWS OF THE PHILIPPINES +. Code o Commerce (portions still in force %. -erchants, Commercial registries, .oo/ of -erchants, 0eneral provisions on commercial contracts (,rts. %1 2( '. 3oint ,ccounts (,rts. '(41'*( (. 5ransfers of non1negotiable credits (,rts. (*61(*7 *. Commercial Contracts of 8verland 5ransportation (,rts. (*41(64 +. 9etters of Credit (,rts. +261+6' 2. -aritime Commerce (,rts. +6(1 724 +. /#ecial Laws %. Corporation Code '. :egotiable Instruments 9aw, (. Insurance Code, *. Insolvency 9aw +. ;ecurities <egulation Code 2. #ublic ;ervice 9aw 6. 0eneral .an/ing 9aw 7. =arehouse <eceipts 9aw 4. Chattel -ortgage 9aw %>. 8thers B. .ew Civil Code (repealed certain contracts in the Code of Commerce %. ;ales '. #artnership (. ,gency *. 9oan +. ?eposit 2. 0uaranty MERCHANTS +. 0orei%n Merc1ants 5hose engaged in business in the #hilippines 1. +s to ca#acit* to contract 1 governed by the laws of their country 2. +s to t1e creation o t1eir esta2lis1ments, t1eir mercantile o#erations and t1e 3"risdiction o o"r co"rts - governed by the Code of Commerce Note: 5he Corporation Code applies to corporations. B. 0ili#ino Merc1ants 1. :atural person @ualifications$ a. 9egal capacity to engage in commerce (capacity i. 8f legal age (%7 years

COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: ea!ri" I. Ramos S# JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernan.o Lla/e (Insuran%e+, Al.ri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!.ula ( an3ing La*s+, Ro)es0ierre C# (La* on In!elle%!ual Pro0er!y+

2005 CENTRALIZED BAR OPERATIONS

ii. Aas free disposition of property b. Aabitually engaged in commerce (habituality 2. 3uridical person @ualifications$ a. Industrial or commercial company b. 8rganiBed in accordance with existing legislation Habituality 1. /eries o acts4 5he repetition and continuation of commercial acts in such manner that they are related to each other by reason of the commercial purpose or end which they tend to have, which is, the exchange or circulation of products. 2. /in%le act4 ,ct which manifests the intention to engage habitually in commerce. )xamples$ 5hrowing open to the public a shop or establishmentC public announcementC etc. Pres"m#tion o 1a2it"alit* )xists from the moment a person who intends to engage in commerce announces through circulars, newspapers, handbills, posters exhibited to the public, or in any other manner whatsoever, an establishment which has for its ob"ect some commercial operations. (,rt. ( DISQ ALIFICATIONS FROM EN!A!IN! IN COMMERCE +. +2sol"te dis5"ali ications4 %. 5hose serving the penalty of civil interdictionC '.5hose "udicially declared insolventC (. 5hose who are absolutely disqualified under special laws. (,rt. %( B. Relative dis5"ali ications4 %. Certain government officials, such as "udicial officers, prosecutors, department heads, collectors, and custodian of government funds '. -oney and commercial bro/ers (. 5hose who are under relative disqualification under special laws. (,rt. %*
C$AIRPERSONS

*. -embers of Congress (,rt. DI, ;ec. %*, %476 Constitution +. #resident, Dice #resident, members of Cabinet and their deputies or assistants (,rt. DII, ;ec. %(, %476 Constitution 2. -embers of Constitutional Commission (,rt. IE, ;ec. ' %476 Constitution 6. #resident, Dice1#resident, -embers of the Cabinet, Congress, ;upreme Court and the Constitutional Commission, 8mbudsman with respect to any loan, guaranty, or other form of financial accommodation for any business purpose by any government1owned or controlled ban/ to them (,rt. EI, ;ec. %2, %476 Constitution A"SOL TE INCAPACIT#
)xtends through out the #hilippines

RELATI$E INCAPACIT#
)xtends only to the territory where the officer is exercising his functions )ffect is to sub"ect the violator to disciplinary action or punishment

)ffect of act is null and void

ACTS OF COMMERCE (COMMERCIAL TRANSACTIONS) % 5hose acts contained in the Code of Commerce and ' all others of analogous character. 5he Code of Commerce does not attempt anywhere to define what commercial transactions are. It only specifies two general classes. -oreover, an act need not be performed by a merchant in order that it may be considered an act of commerce. (Cia. ,gricola de &ltramar v. <eyes 0overning law (in successive order $ % Code of CommerceC ' commercial usageC and ( Civil Code. COMMERCIAL RE!ISTR# %. , boo/ where entries are made of merchants and of documents affecting their commercial transactionsC 8<

2005 CENTRALIZED BAR OPERATIONS E EC!TI"E COMMITTEE AND S!B#ECT

Ma%&'el A(a%en)o* (O/er4all C&air0erson+1 Ronald #al+an,a% (O/er4all 'i%e C&air+1 Yolanda Tolen)&no('C4A%a.s+1 Jenn&fe% Ang('C4 Se%re!aria!+1 #o- Ind.')&/o ('C4-inan%e+1 Ela&ne Ma*.0a) ('C4 EDP+1 Anna Ma%ga%&)a E%e* ('C4Logis!i%s+. #ona)1an Mang.nda-ao (Poli!i%al La*+1 2%an'&* Bened&') Reo).)a% (La)or La*+1 Ro+.ald Pad&lla (Ci/il La*+1 C1a%+a&ne To%%e* (Ta"a!ion La*+1 Ma%0 Da/&d Ma%)&ne, (Criminal La*+1 3a%n- L.&*a Aleg%e (Commer%ial La*+1 #&n0- Ann !- (Reme.ial La*+1 #a'0&e Lo. Ba.)&*)a (Legal E!&i%s+

San Beda College of Law

4 MEMORY AID '. ,n office established for the purpose of copying and recording verbatim certain classes of documents of commercial nature. REQ IRED "OO%S OF MERCHANTS %. &nder the Code of Commerce a. .oo/ of inventories and balances b. 3ournal c. 9edger d. .oo/s for copies of letters and telegrams '. &nder special lawsC e.g. stoc/ and transfer boo/ under the Corporation Code (. &nder the :ational Internal <evenue Code COMMERCIAL CONTRACTS 5hose entered into by merchants in the pursuit of their activities as such merchants, those involving articles of commerce, or those defined as such contract by certain special commercial laws. ,n agreement between two or more merchants or non1merchants binding themselves to give or to do something in commercial transactions. ()el $iso 66 cited in Miravites Bar Review Materials in Commercial Law) 0overning 9aws$ %. Code of Commerce 1 primary '. Civil Code 1 suppletory (,rt. %7, Civil Code .ut in case of inconsistency, the latter prevails except as to contracts explicitly governed by the former such as 2ottomr* and res#ondentia. Formalities$ 78.8R+L R,L84 :eed not be in any particular form 89C8P-:;./4 %. Contracts required by the Code or special laws to be in writing or in a certain form. '. Foreign contracts executed abroad, required by foreign law to be in a particular form. #erfection$ 78.8R+L R,L84 Commercial contracts are consensual as to perfection. 89C8P-:;.4 =hen the Code of Commerce requires specific forms, such
COMMERCIAL LAW COMMITTEE
CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: ea!ri" I. Ramos S# JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernan.o Lla/e (Insuran%e+, Al.ri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!.ula ( an3ing La*s+, Ro)es0ierre C# (La* on In!elle%!ual Pro0er!y+

IN

COMMERCIAL LAW

as charter parties and loans on 2ottomr* and res#ondentia. )xact moment of perfection$ 78.8R+L R,L84 ,ll contracts, whether civil or commercial, are perfected from the moment the offeror has notice of the offereeGs acceptance. (Cognition theoryC ,rt. %(%4, Civil Code 89C8P-:;.4 &nder ,rticle +* of the Code of Commerce, commercial contracts entered into 2* corres#ondence are perfected from the moment an answer is made accepting the offer or the conditions by which the latter may be modified. (Mani estation t1eor*) Aowever, 3ustice Ditug believes that ,rticle +* is applicable only to contracts still specifically governed by the Code of Commerce. (Pandect o Commercial Law and !"ris#r"dence, 1&&' ed.) &OINT ACCO NT (cuentas en participacion) , business arrangement of merchants where other merchants agree to contribute the amount of capital agreed upon, and participating in the favorable or unfavorable results thereof in the proportion they may determine. (,rt. '(4 &OINT ACCO NT
:o firm name :o common fund :o "uridical personality 8nly ostensible partner liable to third persons 8nly ostensible partner manages 9iquidation done by ostensible partner

PARTNERSHIP
Aas a firm name Aas common fund Aas "uridical personality ,ll general partners liable to third persons ,ll general partners manage 9iquidation entrusted to any partner!s

LETTER OF CREDIT (LC) 5hat issued by one merchant to another for the purpose of attending to a commercial transaction. (,rt. +26 ,n instrument issued by a ban/ on behalf of one of its customers, authoriBing an individual or a firm to draw drafts on the ban/ or one of its

2005 CENTRALIZED BAR OPERATIONS

correspondents for its account under certain conditions of the credit. (Commercial Law Review, C. $illan"eva, 200< ed.) ,n engagement by a ban/ or other person made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit. (#rudential .an/ vs. C,, '%2 ;C<, '+6 . 5hrough it, the ban/ merely substitutes its own promise to pay for the promise to pay of one of its customers who in return promises to pay the ban/ the amount of funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon. )ssential conditions$ %. Issued in favor of a definite person and not to orderC '. ,mount fixed and specified. (,rt. +27 If any of these essential conditions is not present, the instrument is merely considered as a letter of recommendation. ?uration$ a. &pon the period fixed by the partiesC or b. If none is fixed, 2 months from its date if used in the #hilippines, or %' months if used abroad. (,rt. +6' 5he 9C becomes void if it is not made use of within the period applicable. #erfection$ 9C are perfected from the moment the correspondent ban/ ma/es payment to persons in whose favor the 9C has been opened. (.elman, Inc. vs. Central .an/, %>* #hil. 776 Pa'tie( 5here are at least ( basic parties to a 9C$ %. +##licant=2"*er=im#orter H one who purchases the goods, procures the 9C, and obliges himself to reimburse the issuing ban/ upon receipt of the documents of title. '. :ss"in%=o#enin% 2an( H one which issues the 9C, and underta/es to pay the seller upon receipt of the draft and proper documents of title from the seller

and to surrender them to the buyer upon reimbursementC and (. /eller=e>#orter=2ene iciar* H one who sells the goods to the buyer, and who delivers the draft and documents to the issuing ban/ to recover payment. 5he number of parties may be increased. -odern letters of credit are usually not made between natural persons. 5hey involve ban/1to1ban/ transactions. *. +dvisin%=noti *in% 2an( H the correspondent ban/ (agent of the opening ban/ through which it advises the beneficiary of the 9C. +. Con irmin% 2an( H ban/ which, upon the request of the beneficiary, confirms the 9C issued. 2. Pa*in% 2an( H ban/ on which the drafts are to be drawn, which may be the opening ban/ or another ban/ not in the city of the beneficiary. 6. .e%otiatin% 2an( H ban/ in the city of the beneficiary which buys or discounts the drafts contemplated by the 9C, if such draft is to be drawn on the opening ban/ or on another designated ban/ not in the city of the beneficiary. Natu'e 5he 9C is a financial device (mode of payment developed as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying. ;tages$ %. Contract of sale between the buyer and seller '. ,pplication for 9C by the buyer with the ban/ (. Issuance of 9C by the ban/ *. ;hipping of goods by the seller +. )xecution of draft and tender of documents by the seller 2. <edemption of draft (payment and obtaining of documents by the issuing ban/ 6. <eimbursement to the ban/ and obtaining of documents by the buyer 5here are at least ( distinct and independent contracts involved in a 9C$

2005 CENTRALIZED BAR OPERATIONS E EC!TI"E COMMITTEE AND S!B#ECT C$AIRPERSONS

Ma%&'el A(a%en)o* (O/er4all C&air0erson+1 Ronald #al+an,a% (O/er4all 'i%e C&air+1 Yolanda Tolen)&no('C4A%a.s+1 Jenn&fe% Ang('C4 Se%re!aria!+1 #o- Ind.')&/o ('C4-inan%e+1 Ela&ne Ma*.0a) ('C4 EDP+1 Anna Ma%ga%&)a E%e* ('C4Logis!i%s+. #ona)1an Mang.nda-ao (Poli!i%al La*+1 2%an'&* Bened&') Reo).)a% (La)or La*+1 Ro+.ald Pad&lla (Ci/il La*+1 C1a%+a&ne To%%e* (Ta"a!ion La*+1 Ma%0 Da/&d Ma%)&ne, (Criminal La*+1 3a%n- L.&*a Aleg%e (Commer%ial La*+1 #&n0- Ann !- (Reme.ial La*+1 #a'0&e Lo. Ba.)&*)a (Legal E!&i%s+

San Beda College of Law

5 MEMORY AID %. Contract of sale between the buyer and the seller '. Contract of the buyer with the issuing ban/ (. 9C proper in which the ban/ promises to pay the seller pursuant to the terms and conditions stated therein (with a #o"r a"tr"i stipulation in favor of the seller . 8ther contracts may be involved especially where the additional parties are present. I)*e+e)*e),e +'i),i+le 5he ( basic contracts are distinct and independent, and the underta/ings of the respective parties in each are neither sub"ect to claims and defenses nor affected by the breach in the others. Rule o- (t'i,t ,o.+lia),e It espouses that the documents tendered by the seller!beneficiary must strictly conform to the terms of the 9C, i.e. they must include all the documents required by the 9C. (Feati .an/ vs. C, %i)*( o- LC (.otes and Cases on Ban(s, .e%otia2le :nstr"ments and ot1er Commercial )oc"ments, -imoteo B. +5"ino) CONFIRMED LC
, 9C issued by one ban/ confirmed by another, in which case both ban/s are obligated to honor drafts drawn in compliance with the credit.
IN

COMMERCIAL LAW
not without the consent of the beneficiary (seller and the applicant (buyer revo/e his understanding under the 9C.

ban/ gives an absolute assurance to the beneficiary that it will underta/e the issuing ban/Gs obligation as its own according to the terms and conditions of the credit.

OTHER %INDS OF LC RE$OL$IN! "AC%/TO/ LC "AC% LC , credit that , credit provides for with renewed identical credit to documen1 become tary require1 available as ments and soon as the covering the opening ban/ same has advised merchandise the paying as another ban/ that the 9C, except drafts already for a drawn by the difference beneficiary in the price. have been reimbursed to the opening ban/ by the buyer.

STAND"# LC , security arrangement for the performance of certain obligations. It can be drawn against only if another business transaction is permitted.

IRRE$OCA"LE LC
, definite underta/ing on the part of the issuing ban/ and constitutes the engagement of that ban/ to the beneficiary and bona fide holders of drafts drawn and or documents presented thereunder, that the provisions for payment, acceptance or negotiation contained in the credit will be duly fulfilled, provided that all the terms and conditions of the credit are complied with. 5he issuing ban/ may

!o0e')i)1 la2 %. Code of Commerce '. &niform Customs and #ractice for ?ocumentary Credits NOTE: 5he &niform Commercial #ractice for ?ocumentary Credits allow 9etters of Credit to be payable to order.

5he

correspondent

COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: ea!ri" I. Ramos S# JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernan.o Lla/e (Insuran%e+, Al.ri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!.ula ( an3ing La*s+, Ro)es0ierre C# (La* on In!elle%!ual Pro0er!y+