2022 UP PreWeek - Commercial Law

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INSURANCE COMMERCIALLAW PRE-WEEK
2022 UP LAW BOC PRE-WEEK

COMMERCIAL LAW
2. Create liability against him
INSURANCE [Sec. 3)
d. Risk-distributing scheme:
1. What is a contract of insurance? distribution and transfer by the insurer
of risk of loss, damage or liability
Answer: A contract of insurance is an among persons having similar risks
agreement whereby one undertakes for a e. Insurable interest: the insured
consideration to indemnify another against possesses an interest of some kind,
loss, damage or liability arising from an susceptible of pecuniary estimation,
unknown or contingent event [Sec. 2(a)]. which the event insured against may
cause loss or damage
Note: f. A meeting of minds of the parties
a. A contract of suretyship shall be upon all the foregoing essentials
deemed to be an insurance contract,
within the meaning of the Insurance 3. What is insurable interest?
Code, only if made by a surety who or
which, as such, is doing an insurance Answer: Insurable interest is that interest
business as hereinafter provided. which a person is deemed to have in the
b. An insurance policy is different from subject matter insured, where he has a relation
the contract of insurance. The policy or connection with or concern in it, such that the
is the formal written instrument person will:
evidencing the contract of insurance a. Derive pecuniary benefit or advantage
entered into between the insured and from the preservation of the subject
the insurer [Sec. 232). matter insured; and
b. Suffer pecuniary loss or damage from
2. What are the elements of an insurance its destruction, termination, or injury by
contract? the happening of the event insured
against {La/ican v. Insular Life Ins.,
Answer: G.R. No. 83526 (2009)).
a. Cause: an event or peril insured
against 4. What is the effect of a change of interest
b. Consideration (premium): the agreed in the thing insured?
price for assuming and carrying the
risk. It is the consideration paid to the Answer: A change of interest in the thing
insurer for undertaking to indemnify the insured does not transfer the policy but
insured against a designated peril. It is suspends the insurance to an equivalent extent
based on probability of loss and extent until the interest in the thing and the interest in
of liability [43 Am. Jur. 2d326]. the insurance policy are vested in the same
c. Risk of loss or damage being assured person. Thus, the contract is not rendered void
by the insurer. but is merely suspended [Sec. 20).
Note: Peril is any contingent or Exception:
unknown event which may cause a a. Life, health, and accident insurance.
loss. Its existence creates a risk and its b. A change of interest in the thing insured
occurrence results in loss. after the occurrence of an injury which
results in a loss does not affect the
The event or peril insured against must policy [Sec. 21 ].
be such that its happening will: c. A change in the interest in one or more
1. Damnify or cause loss to a of several things, separately insured by
person; or one policy, such as a conveyance of
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INSURANCE COMMERCIAL LAW PRE-WEEK

one or more things, does not affect the time the contract is entered into in order
policy with respect to the others not so that the policy may be avoided; [Vance]
conveyed [Sec. 22). b. Waiver or estoppel;
d. A change of interest by will or c. In marine insurance, where
succession on the death of the insured. concealment of the following matters
His interest passes to his heir or legal does not vitiate the entire contract, but
representative who may continue the merely exonerates the insurer from a
insurance policy on the property by loss resulting from the risk concealed:
continuing paying premiums [Sec. 23). a. The national character of the insured;
e. A transfer of interest by one of several b. The liability of the thing insured to
partners, joint owners, or owners in capture and detention;
common, who are jointly insured, to the c. The liability to seizure from breach of
others. This will avoid the policy only as foreign laws of trade;
to the selling partners or co-owners, but d. The want of necessary documents; and
not as to others [Sec. 24). e. The use of false and simulated papers
f. Automatic transfers of interest in cases [Sec. 112).
in which the policy is so framed that it d. Incontestability clause: stipulates that
will inure to the benefit of whosoever the policy shall be incontestable after
may become the owner of the interest two years from its date of issue or of its
insured during the circumstance of the last reinstatement. The incontestability
risk [Sec. 57). clause is a mandatory provision in life
and endowment policies [Sec. 233 (b)
5. May the beneficiary of an insurance and Sec. 48).
policy be changed?
Note: There is a distinction as to the effect of
Answer: As a rule, the insured shall have the concealment on ordinary insurance and marine
right to change the beneficiary he designated insurance.
in the policy [Sec. 11].
Marine Ordinary
However, if the insured expressly waived his
Insurance Insurance
right to change the beneficiary, this makes the
latter an irrevocable beneficiary. But despite Required Exact and Substantial
the waiver, he can still change the beneficiary, Disclosure whole truth truth
provided he obtained the beneficiary's consent
[Sec.11).
Effect of Conceal me Any kind of
6. What is the Slayer Statute? Concealment nt of the concealment
matters will make the
Answer: Under the Slayer Statute, when the specified in insurer not
beneficiary is the principal, accomplice or Sec. 112 will liable.
accessory in willfully bringing about the death not entirely
of the insured, the interest of beneficiary in life avoid the
insurance policy is forfeited [Sec. 12). contract but
will merely
7. What is the effect of concealment? exonerate
the insurer
Answer: Concealment vitiates the contract and from losses
entitled the insurer to rescind, even if the death resulting
or loss is due to a cause not related to the from the risk
concealed matter [Sec. 27). concealed.
Exception:
a. Concealment after the contract has
become effective, because
concealment must take place at the
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8. What are the differences between Materiality
concealment and misrepresentation?
Presumed material Must be proved to be
Answer: material
Concealment Misrepresentation
Compliance
Who may commit Must be strictly Requires only

complied with substantial truth and
May be committed Committed only by compliance
by either insured or insured
insurer
Act involved
Passive form Active form 10. When is an insurer liable for suicide?
Insured withholds Insured makes
Answer: The insurer in a life insurance
information of erroneous
contract shall be liable in case of suicide only:
material facts from statements of facts
a. If committed after 2 years from the date
the insurer; he with the intent of
of the policy's issue or its last
maintains silence inducing the insurer
reinstatement unless the policy
when he ought to to enter into the
provides for a shorter period.
speak insurance contract
Materiality Note: Any stipulation extending the 2-

year period is void.
Determined by the same rules
b. If committed in a state of insanity,
Effects regardless of the date of the
commission, unless suicide is an
Same effects on the part of the insured; excepted peril [Sec. 183).
insurer has right to rescind
11. What are the differences between
Injured party is entitled to rescind a contract Interest in Property and Interest in Life?
of insurance on the ground of concealment
or false representation, whether intentional Answer:
or not.
Property Life
9. What are the differences between Extent
warranty and misrepresentation?
Limited to actual Unlimited (save in life
Answer: value of the interest insurance effected by
thereon a creditor on the life
Warranty Representation
of the debtor
Nature amount of debt only)
Part of the contract Mere collateral Existence

inducement
Must exist when the Must exist at the time
Form insurance takes the insurance takes
effect and when the effect, BUT need not
Written on the policy, May be written in the loss occurs, BUT exist thereafter
actually or by policy or may be oral need not exist in the
reference meantime
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14. When may premiums be
Property Life
refunded/returned?
Expectation of benefit to be derived
Answer:
Must have legal Need not have legal a. If the thing insured was never exposed
basis basis to the risks insured against, the whole
premium should be refunded [Sec.
Interest of beneficiary 80(a)].
b. When the contract is voidable due to
Must have insurable Need not have the fraud or misrepresentation of the
interest over the insurable interest insurer or his agent, the whole premium
thing insured over the life of the should be refunded [Sec. 82].
insured if the insured c. When by any default of the insured
himself secured the other than actual fraud, the insurer
policy. But if the never incurred any liability under the
insurance was policy and the whole premium should
obtained by the be refunded [Sec. 82].
beneficiary, the latter d. When the contract is voidable because
must have insurable of the existence of facts of which the
interest over the life insured was ignorant without his fault,
of the insured the whole premium should be refunded
[Sundiang; Aquino]. [Sec. 82].
e. Where the insurance is for a definite
12. What is double insurance? period and the insured surrenders his
policy, to such portion of the premium
Answer: Double insurance exists where the as corresponds with the unexpired time
same person is insured by several insurers at a pro rata rate, unless a short period
separately in respect to the same subject and rate has been agreed upon and
interest [Sec. 95]. appears on the face of the policy, the
premium should be returned (Sec.
Requisites: 80(b)].
a. The same person is insured; f. When there is over-insurance by
b. Two or more insurers insuring several insurers, the return premiums
separately; should be proportioned to the amount
c. The same subject matter; by which the aggregate sum insured in
d. The same interest insured; and all the policies exceeds the insurable
e. The same risk or peril insured against value of the thing at risk [Sec. 83].
[Malayan Insurance v. Philippine First g. When rescission is granted due to the
Insurance, G.R. No. 184300 (2012)]. insurer's breach of contract.
13. What are the differences between 15. What is a no fault clause?
double insurance and overinsurance?
Answer: The "no fault" clause connotes that
Answer: the victim of a tort can recover for his loss from
his insurer without regard to his own
Double Insurance Overinsurance contributory fault or the fault of the tortfeasor.
This is to guarantee compensation or indemnity
Amount of insurance Amount of insurance to persons suffering loss in motor vehicle
may or may not exceeds the value of accidents [Campos].
exceed the value of the insured's
the insured's insurable interest Its essence is in seeking to provide victims of
insurable interest vehicular accidents or their heirs immediate
compensation, although in a limited amount,
There are always There may be one or
pending final determination of who is
several insurers more insurers
responsible for the accident and liable for the
victims' injuries or death [Campos].
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16. What is an incontestability clause? still available to the insurer, subsequent to the
2-year period [Carale].
Answer: An incontestability clause stipulates
that the policy shall be incontestable after two Exceptions:
years from its date of issue or of its last a. Non-payment of premium;
reinstatement. The incontestability clause is a b. Violation of the conditions of the policy
mandatory provision in life and endowment relating to military or naval service in
policies [Sec. 233 (b) and Sec. 48). Thus, after time of war [Sec. 233(b)].
two years, the defenses of concealment or
misrepresentation, no matter how patent or 17. When is an insurance contract deemed
well-founded, will no longer lie. perfected?
It is a provision in law that after a policy of life Answer: Since an insurance contract is
insurance made payable on the death of the consensual, it is perfected by mere consent.
insured shall have been in force during the Consent is manifested by the meeting of the
lifetime of the insured for a period of two (2) offer and the acceptance upon the object or the
years from the date of its issue or of its last cause which are to constitute the contract.
reinstatement, the insurer cannot prove that the
policy is void ab initio or is rescindible by There is an offer when the insured submits an
reason of fraudulent concealment or application to the insurer. There is acceptance
misrepresentation of the insured or his agent when the insurer approves the application.
[Manila Bankers Life Insurance Corporation v.
Cresencia P. Aban, G.R. No. 175666 (2013)). So long as an application for insurance has not
been either accepted or rejected, it is merely a
Purpose: To give protection to the insured or proposal or an offer to make a contract [Perez
his beneficiary by limiting the rescinding of the v. CA, G.R. No. 112329 (2000)).
contract of insurance on the ground of
fraudulent concealment or misrepresentation Note: The insurance contract becomes
to a period of only two (2) years from the effective upon payment of first premium,
issuance of the policy or its last reinstatement provided there has been an approval of the
[Manila Bankers Life Insurance Corporation v. application.
Cresencia P. Aban, G.R. No. 175666 (2013)).
The parties may impose additional conditions
Effect: The insurer cannot prove that the policy precedent to the validity of the policy as a
is void ab initio or is rescindable by reason of contract as they see fit. Usually, it is stipulated
the fraudulent concealment or in the application that the contract shall not
misrepresentation of the insured or his agent: become binding until the policy is delivered and
a. After a policy of life insurance made the first premium is paid [De Leon].
payable on the death of the insured
shall have been in force during the 18. When may a contract of insurance be
lifetime of the insured for a period of rescinded?
two (2) years from the date of its issue
or of its last reinstatement [Sec. 48). Answer: A contract of insurance may be
b. The insurer's right to rescind a contract rescinded in the following instances:
is not exercised previous to the a. Concealment;
commencement of an action on the Requisites:
contract [Sec. 48). 1 . A party knows a fact which he
neglects to communicate or
The incontestability clause is made for the disclose to the other;
benefit of the insured, and not the insurer, 2. Such party concealing is duty
considering that its effect and purpose is to cut bound to disclose such fact to
off, after a considerable period, any assertion the other;
that the policy is invalid. 3. Such party concealing makes
no warranty of the fact
Defenses, other than concealment, concealed;
misrepresentation and breach of warranty are
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4. The other party has not the General rule: breach of an immaterial
means of ascertaining the fact provision does not avoid the policy [Sec. 75).
concealed; The exception is if the parties stipulate that
5. The fact concealed is material. violation of a particular provision, though
b. Misrepresentation/omission; immaterial, shall avoid the policy. In effect, the
Requisites: parties converted the immaterial provision into
1 . The insured stated a fact which a material one [Sundiang and Aquino].
is untrue;
2. Such fact was stated with
knowledge that it is untrue and
with intent to deceive or which
he states positively as true
without knowing it to be true
and which has a tendency to
mislead;
3. Such fact in either case is
material to the risk.
c. Breach of warranties
Note: Concealment is the failure to disclose

facts which the applicant, at the time of
application, knows or ought to know and are
material to the insurance applied for [Carale]. A
concealment, whether intentional or
unintentional, entitles the injured party to
rescind a contract of insurance [Sec. 27).
Misrepresentation is a false representation

which the insured states with knowledge that is
untrue, intended to deceive the insurer into
accepting risk. It can be distinguished from
concealment in a sense that it is an active form
of deception, while concealment is the passive
form thereof [Carale].
Just like concealment, misrepresentation is

committed before or at the time of the
commencement of the insurance contract.
Subsequent to this time, an insured may no
longer be guilty of misrepresentation as the
insurer had already been persuaded to assume
the risk [Carale].
A warranty is a statement or promise by the

insured set forth in the policy itself or
incorporated in it by proper reference, the
untruth or nonfulfillment of which in any respect
and without reference to whether the insurer
was in fact prejudiced by such untruth or non-
fulfillment, renders the policy voidable by the
insurer [Vance].
The violation of a material warranty, or other

material provision of the policy, on the part of
either the insured or insurer, entitles the other
to rescind [Sec. 74).
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TRANSPORTATION LAW COMMERCIAL LAW PRE-WEEK
TRANSPORTATION LAW deterioration of

goods [Art. 1753,
Civil Code].
1. Who are common carriers?
Regulation
Answer: They are persons, corporations, firms
or associations engaged in the business of A public service, Not subject to
carrying or transporting passengers or goods therefore subject to regulation as a
or both, by land, water, or air, for provisions governing common carrier.
compensation, offering their services to the common carriers and
public [Art. 1732, NCC]. public utilities.
2. Differentiate common carriers from 3. What is the standard of diligence

private carriers. required of common carriers in the
transportation of goods and of
Answer: passengers?
Common Carrier Private Carrier
Answer: Extraordinary diligence [Art. 1733,
Availability NCC]. As to passengers, a common carrier is
bound to carry the passengers safely as far as
Holds himself out in Agrees in some human care and foresight can provide, using
common, that is, to all special case with the utmost diligence of very cautious persons,
persons who choose some private with a due regard for all the circumstances [Art.
to employ him, as individual to carry for 1755, NCC].
ready to carry for hire.
hire. 4. What is the registered owner rule?
Binding Effect Answer: Registered owners are liable for

death or injuries caused by the operation of
Bound to carry all Not bound to carry their vehicles.
who offer and tender for any reason, such
reasonable goods as it is Its main aim is to identify the owner so that if
compensation for accustomed to carry, any accident happens, or that any damage or
carrying them. unless it enters into a injury is caused by the vehicle on the public
special agreement to highways, responsibility therefor can be fixed
do so. on a definite individual, the registered owner
[Greenstar Express, Inc. v. Universal Robina
Diligence Required Corp., G.R. No. 205090, October 17, 2016].
Extraordinary Ordinary diligence. 5. What is the general rule and what are
diligence. the exceptions in case of loss,
destruction or deterioration of goods?
Governing Law
Answer:
Civil Code; Code of Law on obligations General rule: Common carriers are
Commerce and and contracts. responsible for the loss, destruction, or
special laws, if not deterioration of the goods [Art. 1734, NCC].
regulated by the Civil
Code [Art. 1766, Clvil Exceptions: If the same is due to any of the
Code]; law of the following causes only:
country to which the a. Flood, storm, earthquake, lightning, or
goods are to be other natural disaster or calamity
transported, if b. Act of the public enemy in war, whether
regarding liability for international or civil
loss, destruction, or
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c. Act or omission of the shipper or owner 8. What is the effect of contributory
of the goods negligence?
d. The character of the goods or defects
in the packing or in the containers Answer: In case of loss, destruction or
e. Order or act of competent public deterioration of goods with the proximate
authority [Art. 1734, NCC]. cause being the negligence of the common
carrier, the latter shall be liable in damages,
6. What are the characteristics of a caso which shall be equitable reduced [Art, 1737,
fortuito/force majeure? NCC].
Answer: In case of death or injury to passengers with

a. The cause of the unforeseen and the proximate cause being the negligence of
unexpected occurrence, or the failure the common carrier, his/her contributory
of the debtor to comply with his negligence shall not bar recovery of
obligations, must be independent of damages but it shall be equitably reduced
human will [Art. 1762, NCC].
b. It must be impossible to foresee the
event which constitutes the caso 9. Are stipulations for limitation of liability
fortuito, or if it can be foreseen, it must allowed?
be impossible to avoid;
c. The occurrence must be such as to Answer: Yes. There are two possible
render it impossible for the debtor to stipulations limiting the liability of the common
fulfill his obligation in a normal manner carrier:
d. The obligor must be free from any a. Stipulation limiting the common
participation in the aggravation of the carrier's liability as to the diligence
injury resulting to the creditor [Art. required;
1174, NCC]. b. Stipulation limiting the common
carrier's liability as to the amount of
Note: A common carrier may not be absolved liability.
from liability in case of force majeure or
fortuitous event alone. The common carrier An agreement limiting the common carrier's
must still prove: liability for delay on account of strikes or riots is
a. That it was not negligent in causing the also valid [Art. 1748, Civil Code].
death or injury resulting from an
accident [Yobido v. CA, G.R. No. 10. What is the duration for the exercise of
113003 (1997)]; extraordinary diligence in the
b. That the loss or destruction of the transportation of goods?
merchandise was due to accident and
force majeure and not fraud, fault, or Answer:
negligence on the part of the captain or a. From the time the goods are
owner of the ship [Tan Chiong Sian v. unconditionally placed in the
lnchausti, G.R. No. L-6092 (1912)]. possession of and received by the
carrier for transportation until the same
7. If the carrier incurs delay and the loss, are delivered, actually or
destruction, or deterioration of the constructively, by the carrier to the
goods was due to a natural calamity, is consignee, or to the person who has a
it absolved from liability? right to receive them [Art. 1736].
b. When the goods are temporarily
Answer: No. If the carrier negligently incurs in unloaded or stored in transit, unless the
delay in transporting the goods, then the shipper or owner has made use of the
natural disaster shall not free it from such right of stoppage in transitu (Art. 1737].
responsibility [Art. 1740, NCC]. c. During the time the goods are stored in
a warehouse of the carrier at the place
of destination, until the consignee has
been advised of the arrival of the goods
and has had reasonable opportunity
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thereafter to remove them or otherwise for willful acts or gross negligence.
dispose of them [Art. 1738).
Exception to the exception: When a
11. What are the requisites for a valid passenger is carried gratuitously, a stipulation
stipulation limiting the liability of for willful acts or gross negligence is invalid
common carriers to less than [Art. 1758, NCC].
extraordinary diligence in the
transportation of goods? 15. Does the contract of carriage between
the common carrier and passenger end
Answer: after the passenger alights therefrom?
a. In writing, signed by the shipper or
owner Answer: NO. The relation of carrier and
b. Supported by a valuable consideration passenger does not cease at the moment the
other than the service rendered by the passenger alights from the carrier's vehicle at
common carrier a place selected by the carrier at the point of
c. Reasonable, just and not contrary to destination, but continues until the
public policy [Art. 1744, NCC]. passenger has had a reasonable time or a
reasonable opportunity to leave the
12. What are the requisites for a valid carrier's premises. And what is a reasonable
stipulation limiting the liability of time or a reasonable delay within this rule is to
common carriers to a fixed amount in be determined from all the circumstances
the transportation of goods? [Aboitiz Shipping Corp. v. Court of Appeals,
G.R. No. 84458 November 6, 1989).
Answer:
a. Reasonable and just under the 16. Are common carriers Iiable for the death
circumstances of or injuries to passengers through the
b. Has been fairly and freely agreed upon negligence or willful acts of their
[Art. 1750, NCC]. employees?
13. What are the requisites for a common Answer: YES.

carrier to be responsible as depositary
in case of carry-on luggage? General rule: Common carriers are liable for
the death of or injuries to passengers through
Answer: the negligence or willful acts of the farmer's
a. Notice was given to them, or to their employees, although such employees may
employees, of the effects brought by have acted beyond the scope of their authority
the passengers or in violation of the orders of the common
b. The guests take the precautions which carriers.
the common carrier advised relative to
the care and vigilance of their effects This liability does not cease:
[Art. 1998, NCC]. a. Even upon proof that they exercised all
the diligence of a good father of a
14. Can the common carrier and passenger family in the selection and supervision
stipulate on a lower standard of care? of their employees [Art. 1759, Civil
Code];
Answer: NO. b. By stipulation, by the posting of notices,
nor by statements on the tickets
General Rule: The responsibility of a common eliminating or limiting said liability [Art.
carrier for the safety of passengers cannot be 1760, Civil Code].
dispensed with or lessened by stipulation by
the posting of notices, by statements on tickets, Note: The employee must be on duty at the
or otherwise [Art. 1757, NCC]. time of the act. It is enough that the assault
happens within the course of the
Exception: When the passenger is carried employee's duty. It is no defense for the
gratuitously, a stipulation limiting the common carrier that the act was done in excess of
carrier's liability for negligence is valid, but not authority or in disobedience of the carrier's
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orders [Maranan v. Perez, G.R. No. L-22272 Note: The law speaks of injuries suffered by the
(1967)]. passenger but not death. However, there
appears to be no reason why the common
Exception: A common carrier is not carrier should not be held liable under such
responsible for acts falling under force circumstances. The word "injuries" should be
majeure. When a party is unable to fulfill his interpreted to include death [Agbayani].
obligation because of force majeure, hje cannot
be held liable for damages for non- Under Art. 1763, a tort committed by a stranger
performance [Japan Airlines v. CA, G.R. No. which causes injury to a passenger does not
118664 (1998)]. accord the latter a cause of action against the
carrier. The negligence for which a common
Note: In order to be exempted from liability due carrier is held responsible is the negligent
to a fortuitous event, a common carrier must omission by the carrier's employees to prevent
still prove a complete exclusion of human the tort from being committed when the same
agency from the cause of injury or death. could have been foreseen and prevented by
Hence, it was held that the explosions of the them through the exercise of the diligence of a
new tire may not be considered a fortuitous good father of a family [Pilapil v. CA, G.R. No.
event as there are human factors involved in 52159 (1989)).
the situation [Yobido v. CA, G.R. No. 113003
(1997)]. 19. Are common carriers liable for defects
in equipment and facilities?
17. When is a common carrier responsible
in case of injuries to passengers by Answer: YES. While a carrier is not an insurer
other passengers or strangers? of the safety of the passengers, it should
nevertheless be held to answer for the flaws of
Answer: If its employees, through the exercise its equipment and mechanical defects, if such
of the diligence of a good father of a family, flaws were at all discoverable.
could have prevented or stopped the act or
omission [Art. 1763, NCC]. The manufacturer of the defective appliance is
considered in law, as the agent of the carrier,
While the sudden act of the passenger who and the good repute of the manufacturer will
stabbed another passenger in the bus is within NOT relieve the carrier from liability.
the context of force majeure, the common
carrier, in order to be absolved from liability, Rationale: The passenger has no privity with
must still prove that it was not negligent in the manufacturer of the defective equipment.
causing the injuries resulting from such Hence, he has no remedy against him, while
accident [Bachelor Express v. CA, G. R. No the carrier usually has [Necesito vs. Paras,
85691,July31, 1990). G.R. No. L-10605 (1958)].
18. Are common carriers liable for injuries 20. May the consignee still file a claim
inflicted by strangers or co- against the carrier if the aforementioned
passengers? periods have elapsed? What if it had
already paid the transportation
Answers: NO. charges?
General Rule: A common carrier is NOT liable Answer: NO. No claim whatsoever shall be
for injuries inflicted by strangers or co- admitted against the carrier with regard to the
passengers. condition in which the goods transported were
Exception: A common carrier is responsible delivered after:
for injuries suffered by a passenger on account a. Periods mentioned have elapsed, or
of the willful acts or negligence of other b. Transportation charges have been paid
passengers or of strangers, if the common [Art. 366, COC].
carrier's employees, through the exercise of
the diligence of a good father of a family, could
have prevented or stopped the act or omission
[Art. 1763, Civil Code].
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21. If the consignee failed to file a claim with c. Third division - the time between the
the carrier, may it still file an action moment when collision has become a
before the court? practical certainty and the moment of
actual contact [G. Urrutia & Co. v. Baco
Answer: NO. The filing of a claim with the River Plantation Co, G.R. No. L-7675,
carrier is a condition precedent for filing an March 25, 1913].
action before the court.
26. What are the requisites before a
22. What is a ship agent? Certificate of Public Convenience may
be granted?
Answer:
a. Person entrusted with the provisioning Answer:
of a vessel. a. Applicant must be a citizen of the
b. Represent the vessel in the port in Philippines, or a corporation or co-
which she happens to be [Art. 586, partnership, association or joint stock
COC]. company constituted and organized
under the laws of the Philippines, 60
The ship agent is solidarily liable with the ship per centum at least of the stock or paid-
owner to creditors for losses and damages up capital of which belong entirely to
[Aquino]. citizens of the Philippines.
b. Applicant must be financially capable
23. What is the doctrine of limited liability? of undertaking the proposed service
(hypothecary rule) and meeting the responsibilities
incident to its operations.
Answer: The liability of the vessel owner and c. Applicant must prove that the
agent arising from the operation of such vessel operation of the public service
is confined to the vessel itself, its equipment, proposed and the authorization to do
freight, and insurance, if any. business will promote the public
interest in a proper and suitable
24. What are the 2 kinds of averages? manner [Vda. De Lat v. Public Service
Commission, G.R. No. L-34978,
Answer: February 26, 1988).
a. General (or Gross) Average - include
all the damages and expenses which 27. What are the three (3) distinct roles of a
are deliberately caused in order to save captain of a ship?
the vessel, her cargo, or both at the
same time, from a real and known risk Answer:
[Art. 811, COC]. a. General agent of the ship owner;
b. Special (or Particular) Average - all b. Commander and technical director of
damages and expenses caused to the the vessel;
vessel or cargo that did not inure to the c. Representative of the country under
common benefit and profit of all whose flag he navigates [Inter-Orient
persons interested in the vessel and Marine Enterprises v. NLRC, G.R. No.
her cargo [Art. 809, COC]. 115286 (1994)].
25. What are the three divisions/zones of 28. What is the Jason Clause?
time in collision of vessels?
Answer: Jason clause is a provision in the
Answer: contract of carriage that requires the cargo
a. First division - all the time up to the owners to contribute in the general average,
moment when the risk of collision may though the event which gave rise to the
be said to have begun. sacrifice or expenditure may have been due to
b. Second division - the time between the fault of one of the parties to the adventure
the moment when the risk of collision [Rule D, York Antwerp Rules].
begins and the moment when it has
become a practical certainty. Note: This shall not prejudice any remedies or
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defenses which may be open against or to that b. within the territory of a single State
party in respect of such fault. Party if there is an agreed stopping
place within the territory of another
29. What is the rule on collision between a State, even if that State is not a State
steam and a sail vessel? Party [Article 1(2), Montreal
Convention].
Answer: When meeting a sailing vessel,
whether close hauled or with the wind free, the Carriage between two points within the territory
sail vessel has a right to keep her course, and of a single State Party without an agreed
it is the duty of the steamer to adopt stopping place within the territory of another
precautions as will avoid the sail vessel. State is not international carriage for the
purposes of the Montreal Convention [Article
In a collision between a steam vessel and a sail 1(2), Montreal Convention].
vessel, the presumption is against the steam
vessel. 32. Does a carriage to be performed by
several successive carriers constitute
The steam vessel must show that she took the multiple carriages?
proper measures to avoid a collision.
Answer: NO. Under the Montreal Convention,
Ratio: The steamer's greater facility of a carriage to be performed by several
maneuvering over a sail vessel means it has successive carriers is deemed to be one
the greater ability to avoid collisions [G. Urrutia undivided carriage if it has been regarded by
& Co. v. Baco River Plantation Co, G.R. No. L- the parties as a single operation, whether it had
7675. (1913)). been agreed upon under the form of a single
contract or of a series of contracts [Article 1 (3),
30. What is the rule on collision between Montreal Convention].
two (2) power-driven vessels?
Note: It does not lose its international character
Answer: When two power-driven vessels are merely because one contract or a series of
meeting head on, or nearly head on, so as to contracts is to be performed entirely within the
involve risk of collision, each shall alter her territory of the same State [Article 1(3),
course to starboard (right side). Montreal Convention].
Ratio: So that each may pass on the port (left) 33. When is an air carrier liable for damages
side of the other [Smith Bell and Co. v. CA, under the Montreal Convention?
G.R. No. L-56294 (1991)).
Answer: An air carrier is liable for damages
31. When is the Montreal Convention under the following cases:
applicable? a. Damage sustained in case of death or
bodily injury of a passenger upon
Answer: The Montreal Convention applies to condition only that the accident which
all international carriage of persons, baggage caused the death or injury took place
or cargo performed by aircraft for reward. It on board the aircraft or in the course of
applies equally to gratuitous carriage by aircraft any of the operations of embarking or
performed by an air transport undertaking disembarking [Article 17(1 ), Montreal
[Article 1 (1), Montreal Convention]. Convention].
b. Damage sustained in case of
Note: International carriage means any destruction or loss of, or of damage to,
carriage in which, according to the agreement checked baggage upon condition only
between the parties, the place of departure and that the event which caused the
the place of destination, whether or not there destruction, loss or damage took place
be a break in the carriage or a transhipment, on board the aircraft or during any
are situated either: period within which the checked
a. within the territories of two States baggage was in the charge of the
Parties; or carrier [Article 17(2), Montreal
Convention].
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TRANSPORTATIONLAW COMMERCIALLAW PRE-WEEK

1. Exception: The carrier is not Note: The period of the carriage by air
liable if and to the extent that does not extend to any carriage by
the damage resulted from the land, by sea or by inland waterway
inherent defect, quality or vice performed outside an airport. If,
of the baggage [Article 17(2), however, such carriage takes place in
Montreal Convention]. the performance of a contract for
2. In the case of unchecked carriage by air, for the purpose of
baggage, including personal loading, delivery or transshipment, any
items, the carrier is liable if the damage is presumed, subject to proof
damage resulted from its fault to the contrary, to have been the result
or that of its servants or agents of an event which took place during the
[Article 17(2), Montreal carriage by air.
Convention].
3. Note: The passenger is entitled If a carrier, without the consent of the
to enforce against the carrier consignor, substitutes carriage by
the rights which flow from the another mode of transport for the whole
contract of carriage if: or part of a carriage intended by the
a. The carrier admits the agreement between the parties to be
loss of the checked carriage by air, such carriage by
baggage; another mode of transport is deemed to
b. The checked baggage be within the period of carriage by air
has not arrived at the [Article 18(4), Montreal Convention].
expiration of twenty-
one days after the date d. Damage occasioned by delay in the
on which it ought to carriage by air of passengers, baggage
have arrived (Article or cargo [Article 19, Montreal
17(3), Montreal Convention].
Convention]. 1 . Exception: the carrier shall not
c. Damage sustained in the event of the be liable for damage
destruction or loss of, or damage to, occasioned by delay if it proves
cargo upon condition only that the that:
event which caused the damage so a. it and its servants and
sustained took place during the agents took all
carriage by air [Article 18(1), Montreal measures that could
Convention]. reasonably be required
1. Exception: the carrier is not to avoid the damage;
liable if and to the extent it b. it was impossible for it
proves that the destruction, or or them to take such
loss of, or damage to, the cargo measures [Article 19,
resulted from one or more of Montreal Convention].
the following:
a. Inherent defect, quality 34. Can an air carrier limit its liability in case
or vice of that cargo; of death or injury of a passenger?
b. Defective packing of
that cargo performed Answer: Under the Montreal Convention, an
by a person other than air carrier, in case of death or injury of a
the carrier or its passenger, shall not be able to exclude or limit
servants or agents; its liability for damages not exceeding 100, 000
c. An act of war or an Special Drawing Rights (SDRs) for each
armed conflict; passenger.
d. An act of public
authority carried out in However, an air carrier shall not be liable for
connection with the damages to the extent that they exceed for
entry, exit or transit of each passenger 100 000 Special Drawing
the cargo [Article 18(2), Rights if the carrier proves that (a) such
Montreal Convention]. damage was not due to the negligence or other
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wrongful act or omission of the carrier or its
servants or agents; or (b) such damage was
solely due to the negligence or other wrongful
act or omission of a third party [Art. 21,
Montreal Convention].
Note: Under Art. 17 of the Montreal

Convention, the carrier is liable for damage
sustained in case of death or bodily injury of a
passenger upon condition only that the
accident which caused the death or injury took
place:
a. On board the aircraft or
b. In the course of any of the operations
of embarking or disembarking.
Note Further: The limits on liability under Art.

21 of the Montreal Convention has been
revised from 100,000 SD Rs to 128,821 SDRs
(2019 Revised Limits of Liability under the
Montreal Convention of 1999).
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CORPORATION LAW COMMERCIAL LAW PRE-WEEK

shareholders, but in foreign stakeholders.
CORPORATION LAW It involves the computation of Filipino
ownership of a corporation in which another
1. What is the nationality of a corporation corporation, of partly-Filipino and partly-foreign
organized and incorporated under the equity, owns capital stock. The percentage of
laws of a foreign country, but owned shares held by the second corporation in the
100% by Filipinos? first is multiplied by the latter's own Filipino
equity, and the product of these percentages is
Answer: Under the Control Test, the determined to be the ultimate Filipino
nationality of the private corporation is ownership of the subsidiary corporation.
determined by the citizenship of the controlling
stockholders. 4. What is a corporation sole?
Under the "liberal" Control Test, there is no Answer: A corporation sole is one formed for
need to further trace the ownership of the 60% the purpose of administering and managing, as
(or more) Filipino stockholdings of the Investing trustee, the affairs, property and temporalities
Corporation since a corporation which is at of any religious denomination, sect, or church,
least 60% Filipino-owned is considered as by the chief archbishop, bishop, priest, rabbi, or
Filipino [Narra Nickel Mining & Development other presiding elder of such religious
Corp. v. Redmon! Consolidated Mines Corp., denomination, sect or church [Sec. 108).
G.R. No. 195580, April 21, 2014).
A corporation sole has no nationality but for the
2. Discuss the importance of the Gamboa purpose of applying nationalization laws,
rulings in relation to the Filipino nationality is determined not by the nationality
nationality requirement. of its presiding elder but by the nationality of its
members constituting the sect in the
Answer: The Supreme Court clarified through Philippines. Thus, the Roman Catholic Church
the Gamboa cases that what the Constitution can acquire lands in the Philippines even if it is
requires is full and legal beneficial ownership of headed by the Pope [Roman Catholic
60% of the outstanding capital stock, coupled Apostolic, etc. v. Register of Deeds of Davao
with 60% of the voting rights that must rest in City, G.R. No. L-8451 (1957)).
the hands of Filipino nationals. Thus, for
purposes of determining compliance with the 5. What is a joint venture?
constitutional or statutory ownership, the
required percentage of Filipino ownership shall Answer: A joint venture is an agreement
be applied to both the (a) total number of between two parties to enter into a commercial
outstanding shares of stock entitled to vote in undertaking. It may fall under a partnership with
the election of directors; and (b) the total a limited purpose. Under Philippine law, a joint
number of outstanding shares of stock, venture is a form of partnership and should
whether or not entitled to vote [Jose M. Roy Ill thus be governed by the laws of partnership
v. Chairperson Teresita Herbosa, G.R. No. [Aurbach v. Sanitary Wares Manufacturing
207246 (2017)). Corp, G.R. No. 75875).
3. When and how is the Grandfather Rule 6. What is the doctrine of separate juridical
applied? personality?
Answer: The Grandfather Rule is applied if Answer: Under this doctrine, a corporation has
doubt exists as to the locus of the "beneficial a personality separate and distinct from that of
ownership" and "control" of a corporation, even its stockholders and members and is not
if the 60-40 Filipino to foreign equity ratio is affected by the personal rights, obligations, and
apparently met by the subject or investee transactions of the latter. For example,
corporation. corporate property is owned by the corporation
as a juridical person, and the stockholders
"Doubt" refers to various indicia that the have no claim on corporate property as
"beneficial ownership" and "control" of the owners. The latter only have a mere
corporation do not in fact reside in Filipino expectancy or inchoate right to the same upon
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dissolution of the corporation and after all within the scope of their authority are binding
corporate creditors have been paid. Such right on the corporation, but when these officers
is limited only to their equity interest. exceeded their authority, their actions cannot
Corollarily, a stockholder cannot bring an bind the corporation, unless it has ratified such
action for replevin to recover property of the acts or is estopped from disclaiming them
corporation. The corporation, as an artificial [Reyes v. RCPI Employees Credit Union, Inc.,
person, must purchase, hold, grant, sell, and G.R. No. 146535 (2006)).
convey the corporate property, and do
business, sue and be sued, plead and be 9. Can a corporation recover moral
impleaded, for corporate purposes, in its damages?
corporate name (Button v. Hoffman, 61 Wis. 20
(1884)]. Answer: No. A corporation, being an artificial
person, has no feelings, emotions nor senses;
7. When may a corporate director, trustee therefore, it cannot experience physical
or officer be held personally liable with suffering and mental anguish, which are bases
the corporation? for moral damages under Art. 2217 of Civil
Code [Manila Electric Co. v. Nordec
Answer: A corporate director, trustee or officer Philippines, 861 SCRA 515 (2018)].
be held personally liable with the corporation
under the following circumstances: Exception: The only exception to this rule is
a. When he assents to a patently unlawful when the corporation has a reputation that is
act of the corporation; debased, resulting in its humiliation in the
b. When he acts in bad faith or with gross business realm. But in such a case, it is
negligence in directing the affairs of the imperative for the claimant to present proof to
corporation, or in conflict with the justify the award. It is essential to prove the
interest of the corporation, its existence of the factual basis of the damage
stockholders or other persons; and its causal relation to the petitioner's acts
c. When he consents to the issuance of [Manila Electric Company v. T.E.A.M
watered stocks or who, having Electronics Corporation, G.R. No. 131723
knowledge thereof, does not forthwith (2007), as quoted in Manila Electric Co. v.
file with the corporate secretary his Nordec Philippines].
written objection thereto;
d. When he agrees to hold himself 10. What is the doctrine of "piercing the veil
personally and solidarily liable with the of corporate entity", and when does it
corporation; or apply?
e. When he is made, by specific provision
of law, to personally answer for the Answer: Under the doctrine of "piercing the veil
corporate action. of corporate entity," the legal fiction that a
corporation is an entity with a juridical
8. Can the acts of corporate officers personality separate and distinct from its
validly bind the corporation? members or stockholders may be disregarded
and the corporation will be considered as a
Answer: Just as a natural person may mere association of persons, such that when
authorize another to do certain acts for and on the corporation is adjudged liable, these
his behalf, the board of directors may validly persons, too, become liable as if they were the
delegate some of its functions and powers corporation.
to officers, committees or agents. The authority
of such individuals to bind the corporation is It is an equitable remedy developed to address
generally derived from law, corporate by- situations where the separate corporate
laws or authorization from the board, either personality of a corporation is abused or used
expressly or impliedly by habit, custom or for wrongful purposes [PNB v. Ritratto Group,
acquiescence in the general course of G.R. No. 142616 (2001)).
business [Cebu Mactan Members' Center, Inc. The veil of separate corporate personality may
v. Tsukahara, G.R. No. 159624 (2009)). be lifted/pierced:
a. When such personality is used to
As a general rule, the acts of corporate officers defeat public convenience, to justify
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wrong, to protect fraud or defend crime, from denying the agent's authority if it
or as a shield to confuse the legitimate knowingly permits one of its officers or any
issues; other agent to act within the scope of an
b. When the corporation is merely an apparent authority, and it holds him out to the
adjunct, a business conduit or an alter public as possessing the power to do those
ego of another corporation; or acts (Georg v. Holy Trinity College, G.R. No.
c. Where the corporation is so organized 190408 (2016)].
and controlled and its affairs are so
conducted as to make it merely an The doctrine functions as an exception to the
instrumentality, agency, conduit or general rule that prior board authorization is
adjunct of another corporation; or required before a corporate officer may enter
d. When the corporation is used as a into a contract on behalf of a corporation.
cloak or cover for fraud or illegality, or
to work injustice, or 13. What is an independent director?
e. Where necessary to achieve equity or
for the protection of the creditors [ China Answer: An independent director is a person
Banking v. Dyne-Sem, G.R. No. who, apart from shareholdings and fees
149237 (2006)]. received from the corporation, is independent
of management and free from any business or
11. What's the difference between a de other relationship which could, or could
facto corporation and a corporation by reasonably be perceived to materially interfere
estoppel? with the exercise of independent judgment in
carrying out the responsibilities as a director
Answer: A de facto corporation is one which [Sec. 22, RCC].
actually exists for all practical purposes as a
corporation but which has no legal right to 14. When is stockholder's action required:
corporate existence as against the State. It is a. By a majority vote
essential to the existence of a de facto b. By a two-thirds vote, and
corporation that there be: c. By cumulative voting?
a. An apparently valid statute under which
the corporation may be formed; Answer: Stockholder's action is required in the
b. a colorable compliancewith the legal ff. cases:
requirements in good faith; and
There has been use of corporate By majority vote:
powers, i.e. the transaction of business a. Entering management contracts
as if it were a corporation. (where a majority vote from both the
managing and the managed
On the other hand, a corporation by estoppel corporation is needed) (Sec. 43)
is present where a group of persons b. Amendment to by-laws (Sec. 47)
misrepresent themselves as a corporation to c. Revocation of delegation to the BoD of
the extent that they are subsequently estopped the power to amend or repeal or adopt
from claiming lack of corporate life in order to by-laws (Sec. 47)
avoid liability. A third party who has dealt with d. Granting of compensation other than
an unincorporated association as a corporation per diems to directors
is precluded from denying its corporate e. Fixing of consideration for no-par
existence on a suit brought by the alleged shares (Sec. 61)
corporation on the contract. They shall also be f. Voluntary dissolution of a corporation
liable as general partners for all debts, liabilities where no creditors are affected (Sec.
and damages incurred or arising as a result 134)
thereof. g. Revocation of delegation to the Board
of the power to Amend/Repeal/ Adopt
12. What is the doctrine of apparent by-laws (Sec. 47)
authority? h. Calling a Meeting to remove Directors
or Trustees (Sec. 27)
Answer: The doctrine of apparent authority
provides that a corporation will be estopped
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By two-thirds vote: [Sec. 80]. The appraisal right may be exercised
a. Entering management contracts for the by a prejudiced stockholder who dissented in
managed corporation, where a the meeting where the proposal was approved.
stockholder representing the same
interest of both the managing and the 16. What is a pre-emptive right?
managed corporations own or control
more than one-third (1/3) of the total Answer: Preemptive right is the preferential
outstanding capital stock entitled to right of shareholders to subscribe to all issues
vote of the managing corporation; or or disposition of shares of any class in
where a majority of the members of the proportion to their present shareholdings [Sec
managing corporation's BOD also 38]. The purpose of preemptive right is to
constitute a majority of the managed enable the shareholder to retain his
corporation's BOD; proportionate control in the corporation and to
b. Removal of directors or trustees (Sec. retain his equity in the surplus.
27)
c. Amendment of AOI (Sec. 15) 17. What is a derivative suit and who may
d. Delegation of power to amend or repeal bring the same?
bylaws or adopt new bylaws (Sec. 47)
e. Extending/shortening of corporate term Answer: A derivative suit is one which is
(Sec. 36) brought by a stockholder for and on behalf of
f. Increasing/decreasing capital stock the corporation for its protection from the
(Sec. 37) wrongful acts committed by the
g. Incurring, creating, increasing bonded directors/trustees of the corporation, when the
indebtedness (Sec. 37) stockholder finds that he has no redress
h. Issuance of shares not subject to pre- because the directors/trustees, are the ones
emptive right (Sec. 38) vested by law to decide whether or not to sue.
i. Sale/disposition of all or substantially The person instituting the action should be a
all of corporate assets (Sec. 39) stockholder or member at the time the acts or
j. Investment of funds in another transactions subject of the action occurred and
business (Sec. 41) the time the action was filed.
k. Stock dividend declaration (Sec. 42)
I. Ratifying contracts with respect to 18. What is an intra-corporate dispute?
dealings with directors/trustees (Sec. Which courVagency has jurisdiction
31) over intra-corporate disputes?
m. Ratifying acts of disloyalty of a director
(Sec. 33) Answer: There are two tests to determine the
n. Plan of merger or consolidation (Sec. existence of an intra-corporate dispute. Under
76) the relationship test, an intra-corporate dispute
o. Plan of distribution of assets in non- is conflict involving:
stock corporations (Sec. 94) a. Between the corporation, partnership,
p. Incorporation of a religious society or association and the public;
(Sec. 114) b. Between the corporation, partnership,
q. Voluntary dissolution of a corporation or association, and the State insofar as
where creditors are affected (Sec. 135) its franchise, permit, or license to
operate is concerned;
By cumulative voting: c. Between the corporation, partnership,
a. Election of Directors or trustees (Sec. or association, and its stockholders,
23) partners, members, or officers; and
d. Among the stockholders, partners, or
15. What is an Appraisal Right? associates themselves.
Answer: Appraisal Right is the right to Under the nature of controversy test, an intra-
withdraw from the corporation and demand corporate controversy arises when the
payment of the fair value of the shares after controversy is not only rooted in the existence
dissenting from certain corporate acts involving of an intra-corporate relationship, but also in
fundamental changes in corporate structure the enforcement of the parties' correlative
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rights and obligations under the Corporation on the theory that the preferred shareholders
Code and the internal and intra-corporate are merely investors in the corporation for
regulatory rules of the corporation {San Jose v. income in the same manner as bondholders
Ozamiz, G.R. No. 190590 (2017)). {Gamboa v. Teves, G.R. No. 176579 (2011 )].
The jurisdiction over intra-corporate disputes However, under the Corporation Code,
lies with the Regional Trial Court [Sec. 5, PD shareholders of preferred non-voting shares
No. 902-A in relation to Sec. 5.2, SRC]. are always entitled to vote on the following
matters:
19. What are Watered Stocks and who are a. Amendment of the articles of
liable for the same? incorporation;
b. Adoption and amendment of by-laws;
Answer: Watered Stocks are shares issued as c. Sale, lease, exchange, mortgage,
fully paid when in truth no consideration is paid, pledge, or other disposition of all or
or the consideration received is known to be substantially all of the corporate
less than the par value or issued value of the property;
shares [Sec. 64, RCC]. d. Incurring, creating, or increasing
bonded indebtedness; Increase or
Any director or officer of a corporation shall be decrease of authorized capital stock;
solidarily liable with the stockholder concerned e. Merger or consolidation of the
to the corporation and its creditors for the corporation with another corporation or
difference in value for: other corporations;
a. Consenting to the issuance of watered f. Investment of corporate funds in
stocks or; another corporation or business in
b. Failing express his objection in writing accordance with this Code; and
and file the same with the corporate g. Dissolution of the corporation.
secretary despite having knowledge h. Among the stockholders, partners, or
thereof of such issuance [Sec. 64, associates themselves [Sec. 6, RCC].
RCC].
22. Is a stock certificate a negotiable
20. Can treasury shares be re-issued or instrument?
sold again for a price below par value?
Answer: Certificates of stock are not
Answer: Yes. Treasury shares may be re- negotiable instruments. Although a stock
issued or sold again for a price below par value certificate is sometimes regarded as quasi-
as long as it is for a reasonable price fixed by negotiable, in the sense that it may be
the BOD. In this case, there can be no watering transferred by delivery, it is well-settled that the
of stock because such watering of stock instrument is non-negotiable, because:
contemplates an original issuance of shares. a. The holder thereof takes it without
prejudice to such rights or defenses as
21. What are preferred shares? What are the the registered owner or creditor may
voting rights of a holder of a preferred have under the law
share under the Corporation Code? b. Except insofar as such rights or
defenses are subject to the limitations
Answer: Preferred shares are those which imposed by the principles governing
entitle the shareholder to priority on dividends estoppels [Republic v. Sandiganbayan,
and asset distribution {CIR v. CA, G. R. G.R. Nos. 107789 & 147214, April 30,
No.108576 (1999)). 2003).
In the absence of provisions in the articles of 23. Can a portion of shares not fully paid be
incorporation denying voting rights to preferred sold?
shares, preferred shares have the same voting
rights as common shares. However, preferred Answer: The SEC has opined on several
shareholders are often excluded from any occasions that a stockholder who has not paid
control, that is, deprived of the right to vote in the full amount of his subscription cannot
the election of directors and on other matters, transfer part of his subscription in view of the
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indivisible nature of a subscription contract. for such debts [Nell v. Pacific Farms
Inc., G.R. No. L-20850).
24. Can there be a valid sale of all shares
not fully paid? 27. What is a close corporation?
Answer: The SEC has opined that the entire Answer: A close corporation is
subscription, although not yet fully paid, may be a. One whose Articles of Incorporation
transferred to a single transferee, who as a provides that:
result of the transfer must assume the unpaid 1 . All the corporation's issued
balance. stock of all classes, exclusive
of treasury shares, shall be
25. What are 3 ways by which a stock held of record by not more than
corporation may be voluntarily a specified number of persons,
dissolved? not exceeding twenty (20);
2. All the issued stock of all
Answer: The three ways by which a stock classes shall be subject to one
corporation may be voluntarily dissolved are: or more specified restrictions
a. Voluntary dissolution where no on transfer permitted by this
creditors are affected [Sec. 134 RCC]. Title; and
This type of dissolution is initiated by 3. The corporation shall not list in
the corporation. It does not prejudice, any stock exchange or make
or is not consented by creditors. any public offering of its stocks
b. Voluntary dissolution where creditors of any class.
are affected [Sec. 135). This covers a b. One where two-thirds (2/3) or more of
case where the corporation petitions for its voting stock or voting rights is NOT
its dissolution which may prejudice the owned or controlled by another
rights of creditors, or are not consented corporation, which is not a close
by all of them. Here, the corporation is corporation within the meaning of this
not under financial distress or in a state Code [Sec. 95, RCC].
of insolvency. In those cases, the
corporation must file a petition for 28. What is considered as "doing business"
rehabilitation or liquidation in court. in relation to foreign corporations?
c. By shortening the corporate term [Sec.
136). A voluntary dissolution may be Answer: The concept of "doing business"
effected by amending the AOI to implies a continuity of commercial dealings and
shorten the corporate term under Sec arrangements and the performance of
16 of the RCC. acts/works/exercise of some of the functions
normally incident to the purpose or object of a
26. What is the Nell Doctrine and what are foreign corporation's organization
the exceptions thereto? [Mentholatum Co., Inc. v. Mangaliman, Phil.
525 (1941)].
Answer: Under the Nell Doctrine, where one
corporation sells or otherwise transfers all of its 29. Do foreign corporations have
assets to another corporation, the latter is personality to sue?
generally not liable for the debts and liabilities
of the transferor, except: Answer: A foreign corporation transacting
a. where the purchaser expressly or business in the Philippines is required to
impliedly agrees to assume such debts; secure a license to have the personality to sue
b. where the transaction amounts to a before, or intervene in, any court or
consolidation or merger of the administrative proceeding [Sec. 150, RCC].
corporations;
c. where the purchasing corporation is By filing an action before Philippine courts, a
merely a continuation of the selling foreign corporation puts itself under their
corporation; and jurisdiction [Communication Materials v. CA,
d. where the transaction is entered into 260 SCRA 673 (1996)).
fraudulently in order to escape liability
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30. What is a One Person Corporation? owned and controlled corporations may not
incorporate as One Person Corporations. A
Answer: A corporation with a single natural person who is licensed to exercise a
stockholder. Only a natural person, trust, or an profession may not organize as a One Person
estate may form a One Person Corporation. Corporation for the purpose of exercising such
Banks and quasi-banks, pre-need, trust, profession except as otherwise provided under
insurance, public and publicly-listed special laws [Sec. 116, RCC].
companies, and non-chartered government-
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INTELLECTUAL PROPERTY LAW COMMERCIAL LAW PRE-WEEK
INTELLECTUAL PROPERTLY LAW
To promote creativity Identifying the origin or "Bring[ing) new designs and

and encourage ownership of goods and technologies into the public
creation of works services [Ang v. domain through disclosure"
[ABS-CBN v. Gozon, Teodoro, G.R. No. L- [Pearl & Dean v. Shoemart,
G.R. No. 195956, 48226, December 14, G.R. No. 148222, August 15,
March 11, 2015. 1942. 2003.
Intellectual creations Visible signs capable 1. Inventions: Any technical
in the Iiterary and of distinguishing solution of a problem in any
artistic domain [Sec. goods (i.e. trademarks), field of human activity
172, IP Code]. services (i.e. service which is new, involves an
marks), and the inventive step, and is
enterprise itself (i.e. industrially applicable [Sec.
tradenames) [Kho v. 21, IP Code; Kho v. Court
Court of Appeals, G.R. of Appeals, G.R. No.
No. 11578, March 19, 11578, March 19, 2002).
2002). 2. Utility model [Sec. 109, IP
Code]
3. Industrial designs and
layout design (Sec. 112.1,
IP Code
Creation must be Capability of the mark 1 . Inventions
original, i.e. created to distinguish the a. Novelty [Secs. 23-24,
by creator's own skill, goods and services of IP Code]
labor, and judgment an enterprise [Kho v. b. Inventive step [Sec. 26,
[Ong Ching Kian Court of Appeals, G.R. IP Code]
Chuan v. CA, G.R. No. 11578, March 19, c. Industrial applicability
130360, August 15, 2002; see Sec. 123.1 [Sec. 27, IP Code]
2021 ]. for marks that cannot 2. Utility model [Sec. 109, IP
be registered]. Code]
a. Novelty [Secs. 23-24,
IP Code]
b. Industrial applicability
[Sec. 27, IP Code]
3. Industrial designs and
layout designs (Sec.
112.1, IP Code)
a. New or ornamental
character (Sec. 113.1 ,
IP Code
From the moment of From a valid From the grant of the patent
creation (Sec. 172, IP registration (Sec. 122, (Pearl & Dean v. Shoemart,
Code]. IP Code; see Zuneca G.R. No. 148222, August 15,
Pharmaceutical v. 2003)).
Natrapharm, G.R. No.
211850, September 8,
2020.
General rule: during Certificate of Twenty (20) years from filing
the life of the author registration shall date of application (Sec. 54, IP
and for fifty (50) remain in force for ten Code]. This cannot be
years after his death (10) years, but this may renewed.
Sec. 213.1, IP Code. be renewed Secs. 145
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Special cases: to 146, IP Code].
Joint authorship:
during life of the last
surviving author and
for fifty years after his
death [Sec. 213.2, IP
Code].
Anonymous or
pseudonymous
works: fifty (50) years
from the date on
which the work was
first lawfully published
[Sec. 213.3, IP Code].
Works of applied art:

twenty-five (25) years
from date of making
[Sec. 213.4, IP Code].
Photographic works
and audio-visual
works produced
analogous to
photography or any
process for making
audio-visual
recordings: fifty (50)
years from publication
and, if unpublished,
fifty (50) from making
[Secs. 213.5 to 213.6,
IP Code.
2. What are the standards or requisites for involve an inventive step. On the other hand,
patentabi Iity? an industrial design needs to be new or
ornamental in order to be protected under the
Answer: A patentable invention is any IP Code.
technical solution of a problem in any field of
human activity which is: A patent lasts for a maximum, non-renewable
a. new, term of 20 years, while a utility model enjoys a
b. involves an inventive step and non-renewable term of 7 years. On the other
c. is industrially applicable. hand, an industrial design enjoys a term of 5
years, which may be renewed for not more than
It may be, or may relate to, a product, or 2 consecutive periods of 5 years each. The
process, or an improvement of any of the aforementioned terms of protection shall be
foregoing [Sec. 21, RA 8293). reckoned from the filing date of the application
for a patent, utility model or an industrial
3. Differentiate Patents from Utility Models design.
and Industrial Designs
4. Differentiate Marks vs. Collective Marks
Answer: An invention must have an inventive v. Trade names.
step in order for it to be patentable. A utility
model on the other hand may or may not Answer: A mark is any visible sign capable of
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INTELLECTUALPROPERTY LAW COMMERCIALLAW PRE-WEEK

distinguishing the goods (trademark) or No. 228165, (2021). The test of dominancy is
services (service mark) of an enterprise and also explicitly incorporated into law in Section
shall include a stamped or marked container of 155.1 of the IP Code.
goods [Sec. 121 .1 , RA 8293].
The Dominancy Test focuses on the similarity
A collective mark is any visible sign of the prevalent features -- if the competing
designated as such in the application for trademark contains the main, essential or
registration and capable of distinguishing the dominant features of another, and confusion
origin or any other common characteristic, or deception is likely to result, then
including the quality of goods or services of infringement takes place. Duplication is not
different enterprises which use the sign under necessary; nor is it necessary that the
the control of the registered owner of the infringing label should suggest an effort to
collective mark [Sec. 121.2, RA 8293]. imitate. To determine the resemblance the
appearance, sound, meaning, and overall
A trade name refers to the name or impressions generated by the marks shall be
designation identifying or distinguishing an considered.
enterprise [Sec. 121.3, RA 8293].
This is distinguished from the abandoned
5. How is trademark ownership acquired? Holistic Test, which requires that the entirety of
the marks in question be considered in
Answer: Ownership of a trademark is acquired resolving confusing similarity. Under this test,
by its registration and actual use. Prior use no comparison of words is not the only
longer determines the acquisition of ownership determining factor. The trademarks in their
over a mark [Zuneca Pharmaceutical v. entirety as they appear in their respective
Natrapharm, Inc., G.R. No. 211850, Sept. 8, labels or hang tags must also be considered in
2020 cf. Sec. 122 and 124.2, IPC]. relation to the goods to which they are
attached.
6. Differentiate trademark infringement
and unfair competition. N.B.: Kolin v. Kolin [Caguioa]
Answer: Trademark infringement and unfair 8. What is the doctrine of secondary

competition differs in at least three ways [Del meaning?
Monte Corp. v. CA, G.R. No. L-78325, January
25, 1990]: "(1) Infringement of trademark is the Answer: The doctrine of secondary meaning
unauthorized use of a trademark, whereas refers to "a word or phrase originally incapable
unfair competition is the passing off of one's of exclusive appropriation with reference to an
goods as those of another. (2) In infringement article of the market, because geographically or
of trademark fraudulent intent is unnecessary otherwise descriptive, might nevertheless have
whereas in unfair competition fraudulent intent been used so long and so exclusively by one
is essential. (3) In infringement of trademark producer with reference to his article that, in
the prior registration of the trademark is a that trade and to that branch of the purchasing
prerequisite to the action, whereas in unfair public, the word or phrase has come to mean
competition registration is not necessary." that the article was his product" [Ang v.
Teodoro, G.R. No. L-48225, December 14,
7. Person X seeks to register the 1942].
trademark "Lokin". Person Y however
opposes this, contending that it 9. What is the doctrine of fair use in
resembles and is confusingly similar copyright?
with its registered trademark "LOKIN".
What test should we use to determine Answer: Under the doctrine of fair use, the use
trademark resemblance? of copyrighted work for criticism, news
reporting, teaching (including multiple copies
Answer: We use the Dominancy Test, as the for classroom use), research and similar
Holistic Test has already been abandoned purposes is not an infringement of copyright
by the SC in the case of Kolin Electronics [Sec. 185.1, RA 8293].
(KECI) v Kolin Philippines International, G. R.
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Broadly speaking, it is a privilege, in persons
other than the owner of the copyright, to use
the copyrighted material in a reasonable
manner without his consent, notwithstanding
the monopoly granted to the owner by the
copyright. It is meant to balance the
monopolies enjoyed by the copyright owner
with the interests of the public and of society.
10. What are the periods of protection for

moral rights under existing copyright
laws?
Answer:
Moral Right Term
Right of Attribution or Lasts during the

Right of Paternity lifetime of the author
[Sec. 193.1, RA and in perpetuity
8293). after his death
[Sec.198.1, RA 8293,
as amended by RA
103721
Right to make any Coterminous with the

alterations of his work economic rights [Sec.
prior to, or to withhold 198.1, RA 8293, as
it from publication amended by RA
[Sec. 193.2) 10372).
Right to object to any

distortion, mutilation
or modification of, or
other derogatory
action in relation to his
work which would be
prejudicial to his honor
or reputation [Sec.
193.3).
Right to restrain the

use of his name with
respect to any work
not of his own creation
or in a distorted
version of his work
[Sec. 193.4)
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SPECIAL LAWS COMMERCIAL LAW PRE-WEEK

affiliates supervised or regulated by the BSP;
SPECIAL LAWS insurance companies, pre-need companies
and all other persons supervised or regulated
by the Insurance Commission; those who are:
1. Differentiate a covered transaction from a. Securities dealers, brokers, salesmen,
a suspicion transaction in the Anti- investment houses and other similar
Money Laundering Act. entities managing securities or
rendering services as investment
Answer: A covered transaction is a agent, advisor, or consultant
transaction in cash or other equivalent b. Mutual funds, close - end investment
monetary instrument involving a total amount in companies, common trust funds, pre -
excess of Php 500,000 within one banking day need companies and other similar
[Sec. 3(b)]. entities
c. Foreign exchange corporations, money
For Casinos or "covered persons under Section changers, money payment, remittance
3(a)(8)," a single casino transaction involving and transfer companies and other
an amount in excess of Php 5,000,000 or its similar entities, and
equivalent in any other currency. d. Other entities administering or
otherwise dealing in currency,
Suspicious Transactions are transactions commodities or financial derivatives
with covered institutions, regardless of the based thereon, valuable objects, cash
amount involved, where any of the following substitutes and other similar monetary
circumstances exist: instruments or property supervised or
a. there is no underlying legal or trade regulated by the Securities and
obligation, purpose or economic Exchange Commission (SEC).
justification;
b. the client is not properly identified; 3. What is the Safe Harbor Provision?
c. the amount involved is not
commensurate with the business or Answer: The Safe Harbor Provision states that
financial capacity of the client; no administrative, criminal or civil proceedings
d. taking into account all known shall lie against any person for having made a
circumstances, it may be perceived covered transaction report in the regular
that the client's transaction is performance of his duties and in good faith,
structured to avoid being the subject of whether or not such reporting results in any
reporting requirements under this Act; criminal prosecution under this Act or any other
e. Any circumstance relating to the Philippine law [Sec. 9).
transaction which is observed to
deviate from the profile of the client 4. How is Money Laundering committed?
and/or the client's past transactions
with the covered institution; Answer: Money laundering is committed when
f. The transaction is in any way related to a person does the following: transacts said
an unlawful activity or offense under monetary instrument or property; converts,
this Act that is about to be, is being or transfers, disposes of, moves, acquires,
has been committed [Sec. 3(b-1)]. possesses or uses said monetary instrument or
property; conceals or disguises the true nature,
2. Are pawnshops covered by the Anti- source, location, disposition, movement or
Money Laundering Act? What are the ownership of or rights with respect to said
other institutions covered? monetary instrument or property; attempts or
conspires to commit money laundering
Answer: Yes, pawn shops are covered offenses referred to in paragraphs (a), (b) or
institutions under AMLA. The other covered (c); aids, abets, assists in or counsels the
institutions are banks, non-banks, quasi- commission of the money laundering offenses
banks, trust entities, foreign exchange dealers, referred to in paragraphs (a), (b) or (c) above;
pawnshops, money changers, remittance and and performs or fails to perform any act as a
transfer companies and other similar entities result of which he facilitates the offense of
and all other persons and their subsidiaries and money laundering referred to in paragraphs (a),
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SPECIAL LAWS COMMERCIALLAW PRE-WEEK

(b) or (c) above. 8. Suppose a person is indulging in money
Money laundering is also committed by any laundering borne from selling drugs. Is
covered person who, knowing that a covered or a court order necessary to inquire into
suspicious transaction is required under this his bank deposits?
Act to be reported to the Anti-Money
Laundering Council (AMLC), fails to do so (Sec. Answer: No. No court order shall be required
4, RA 10365]. in the following cases: kidnapping for ransom
under Article 267 of the RPC, Sections 4, 5, 7
5. Does the AMLC have the authority to ,8 ,9, 10, 12, 13, 14, 15 and 16 of RA No. 9615,
inquire into bank deposits? hijacking and other violations under RA No.
6235, destructive arson and murder as defined
Answer: Yes. The AMLC may inquire into or under the RPC, felonies or offenses of a nature
examine any particular deposit or investment, similar to those mentioned in Section 3(i) (1),
including related accounts, with any banking (2), and (12) which are punishable under the
institution or non-bank financial institution upon penal laws of other countries; and terrorism
order of any competent court in cases of and conspiracy to commit terrorism as defined
violation of this Act when it has been and penalized under RA No. 9372.
established that there is probable cause that
the deposits or investments involved are 9. Does the Court have an alternative as to
related to an unlawful activity as defined in Sec. forfeiture?
3(i); or to any money laundering offense under
Sec. 4. Answer: Yes, the court may, instead of
enforcing the order of forfeiture of the monetary
6. Can the RTC issue a TRO or a writ of instrument or property or part thereof or interest
injunction against an AMLC freeze therein, accordingly order the convicted
order? offender to pay an amount equal to the value of
said monetary instrument or property subject to
Answer: No. Only the CA and the SC can the conditions in Sec. 12(c).
issue a temporary restraining order or writ of
injunction against any freeze order issued by 10. Following #9, does this apply to criminal
the AMLC [Sec. 1O]. forfeitures only?
7. Can the AMLC refuse to render Answer: No, the provision applies to both civil
assistance if a foreign state asks for and criminal forfeiture.
such if it is investigating a money
laundering case? What are the valid 11. Is a text sent via Messenger legally
causes of refusal? recognized?
Answer: Yes, as long as it informs the foreign Answer: Yes. A text sent via Messenger falls
State of any valid reason for not executing the within the definition of an electronic data
request or for delaying the execution thereof message in Sec. 5. Electronic data message
[Sec. 13a]. refers to information generated, sent, received
or stored by electronic, optical or similar
The grounds of refusal are the following: if the means. Furthermore, pursuant to Sec. 6,
action sought by the request contravenes any information shall not be denied legal effect,
provision of the Constitution or the execution of validity or enforceability solely on the grounds
a request is likely to prejudice the national that it is in the data message purporting to give
interest of the Philippines unless there is a rise to such legal effect, or that it is merely
treaty between the Philippines and the referred to in that electronic data message.
requesting State relating to the provision of
assistance in relation to money laundering 12. How does the law recognize electronic
offenses. documents?
Answer: Electronic documents shall have the

legal effect, validity or enforceability as any
other document or legal writing [Sec. 7, RA
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8792). 16. Is the reliability of an electronic data
message or electronic document on the
13. How does the law treat electronic manner in which it was generated,
documents in relation to written stored or communicated, and of the
documents in evidence? manner in which its originator was
identified, the only factor to assess its
Answer: For evidentiary purposes, an evidentiary weight?
electronic document shall be the functional
equivalent of a written document under existing Answer: No, explicit in Sec. 12 is that other
laws. relevant factors may also be assessed.
This Act does not modify any statutory rule 17. Did A violate any provision in RA 8792 if
relating to the admissibility of electronic data she obtained access to B's electronic
messages or electronic documents, except the document and shared it to C for the
rules relating to authentication and best latter's survey project without the
evidence [Sec. 7, RA 8792). consent of B?
14. What are the two general presumptions Answer: Yes, according to Sec. 32, except for
relating to electronic signatures, and the purposes authorized under this Act, any
the exception. person who obtained access to any electronic
key, electronic data message, or electronic
Answer: According to Sec. 9, these are as document, book, register, correspondence,
follows: information, or other material pursuant to any
a. The electronic signature is the powers conferred under this Act, shall not
signature of the person to whom it convey to, or share the same with any other
correlates; and person.
b. The electronic signature was affixed by
that person with the intention of signing 18. What are the general signs of
or approving the electronic document. insolvency?
The exception lies if the person relying on the Answer: As provided by Sec. 4 (s), it is when
electronically signed electronic document the financial condition of a debtor that is:
knows or has notice of defects in or unreliability a. Generally unable to pay liabilities as
of the signature or reliance on the electronic they fall due on the ordinary course of
signature is not reasonable under the business (hence illiquid); or
circumstances. b. Has liabilities that are greater than its
or his assets (balance sheet insolvent).
15. Can an electronic data message or
electronic document be denied 19. Can a municipality be a debtor under the
admissibility based on the sole ground FRIA?
that it is electronic form?
Answer: No. Section S(d) provides the
Answer: No, it is clear in Sec. 12 that in any exclusion of national and local government
legal proceeding, nothing in the application of agencies as debtors under the law.
the rules on evidence shall deny the
admissibility of an electronic data message or 20. What are the two circumstances that
electronic document in evidence on the sole qualify a debtor for rehabilitation?
ground that it is in electronic form.
Answer: According to Sec. 4(gg), a) the
continuance of operation is economically
feasible; and b) its creditors can recover more,
by way of the present value of payments
projected in the plan, if the debtor continues as
a going concern than if it is immediately
liquidated.
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21. What is liquidation? b. Prohibits or otherwise serves as the
legal basis rendering null and void the
Answer: According to Sections 119 and 131 , it results of any attempt to collect or
is a judicial insolvency proceeding by which the enforce a claim against the debtor after
debtor's assets are reduced and converted to the commencement date, unless
cash in order to discharge the claims against otherwise allowed under the FRIA;
the debtor. c. Serves as the legal basis for rendering
null and void any setoff after the
22. What is the remedy of suspension of commencement date of any debt owed
payments? to the debtor by any of the debtor's
creditors;
Answer: Based on Sec. 94, it is where an d. Serves as the legal basis for rendering
individual debtor files a judicial insolvency null and void the perfection of any lien
proceeding by which the debtor's assets are against the debtor's property, after the
reduced and converted to cash in order to commencement date; and
discharge the claims against the debtor. The e. Consolidates the resolution of all legal
debtor, however, should possess sufficient proceedings by and against the debtor
property to cover all his debts but foresees the to the court; however, the court may
impossibility of meeting them when they allow the continuation of cases on other
respectively fall due. courts where the debtor had initiated
the suit [Sec. 17].
It shall also be attached in his petition the
following: (a) a schedule of debts and liabilities; 25. Differentiate the 3 types of rehabilitation
(b) an inventory of assess; and (c) a proposed proceedings.
agreement with his creditors.
Answer: A court-supervised proceeding is a
23. How is a Suspension of Payments Order judicial proceeding and may be voluntary or
taken into effect? involuntary. Meanwhile, a pre-negotiated
proceeding is an insolvency proceeding
Answer: It is issued within 5 working days if the involving negotiation of terms between the
court finds the petition sufficient in form and debtor and the creditor(s). It commences as an
substance and remains effective from the time extrajudicial proceeding but terminates as a
of the filing of the petition until the termination judicial proceeding. Lastly, an out-of-court
of the proceedings. proceeding is an insolvency proceeding
involving a consensual contract between the
Because of this order, no creditor except those debtor and the creditor(s). Unlike pre-
exempt shall institute proceedings to collect its negotiation rehabilitation, no petitions are filed
claim from the time of filing until the termination with the court.
of the proceedings. On the other hand, there is
an injunction against the debtor prohibiting him 26. Differentiate voluntary from involuntary
from a) disposing of his property except those rehabilitation.
used in the ordinary operations of commerce or
industry in which he is engaged; and b) making Answer: A voluntary rehabilitation refers to
any payment outside of the necessary or proceedings initiated by the debtor, which may
legitimate expenses of his business. be a sole proprietorship, a partnership, a stock
or a non-stock corporation. On the other hand,
24. What are the effects of a an involuntary rehabilitation is a proceeding
Commencement Order? initiated by the creditors [Secs. 12, 13, 14).
Answer: Upon issuance, said order has the 27. What are the requirements for
following effects: involuntary rehabilitation?
a. Vests the rehabilitation receiver with all
the powers and functions provided for Answer: The requirements are as follows:
this Act, subject to the approval by the a. The claim(s), or aggregate thereof,
court of the performance bond filed by must amount to at least Php 1 million or
the rehabilitation receiver; at least 25% of the subscribed capital
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stock or partners' contributions, rehabilitation of the debtor; c) Preparing and
whichever is higher. recommending a Rehabilitation Plan; and d)
b. There is no genuine issue of fact or law Implementing the approved Rehabilitation Plan
on the claims of the creditors; and that [Sec. 31).
the due and demandable payments
have not been made for at least 60 31. What is the test to determine if the
days; or the debtor has failed generally rehabilitation receiver has a conflict of
to meet its liabilities as they fall due interest?
(illiquidity); or at least one creditor,
other than the petitioner(s), has Answer: According to Sec. 40, an individual is
initiated foreclosure proceedings deemed to have a conflict of interest if he is so
against the debtor that will prevent the situated as to be materially influenced in the
debtor from paying its debts as they exercise of his judgment for or against any
become due or will render it insolvent. party to the proceedings.
28. When is a Commencement Order An individual may have a conflict of interest if:
issued? a. He is a creditor, owner, partner or
stockholder of the debtor;
Answer: If the petition for rehabilitation is b. He is engaged in a line of business
sufficient in form and substance, it shall issue a which competes with that of the debtor;
Commencement Order within five (5) working c. He is, or was, within five (5) years from
days from the filing of the petition. the filing of the petition, a director,
officer, owner, partner or employee of
The rehabilitation proceedings shall the debtor or any of the creditors, or the
commence upon the issuance of the auditor or accountant of the debtor;
Commencement Order. d. He is, or was, within two (2) years from
the filing of the petition, an underwriter
29. What are the effects of a Stay or of the outstanding securities of the
Suspension Order? debtor;
e. He is related by consanguinity or
Answer: It has the following effects: affinity within the fourth civil degree to
a. Suspending all actions or proceedings, any individual creditor, owners of a sole
in court or otherwise, for the proprietorship-debtor, partners of a
enforcement of claims against the partnership- debtor or to any
debtor; stockholder, director, officer, employee
b. Suspending all actions to enforce any or underwriter of a corporation-debtor;
judgment, attachment or provisional or
remedies against the debtor; f. He has any other direct or indirect
c. Prohibiting the debtor from selling, material interest in the debtor or any of
encumbering, transferring or disposing the creditors.
in any manner any of its properties
except in the ordinary course of 32. Who can remove a rehabilitation
business; and receiver and on what grounds?
d. Prohibiting the debtor from making any
payment of its liabilities outstanding as Answer: The receiver may be removed at any
of the commencement date except as time by the court, either by (1) motu propio or
may be provided herein [Sec. 16). (2) motion by any creditor(s) holding more than
30. Who is a rehabilitation receiver? What 50% of the total obligations of the creditor, on
are their duties? the following grounds:
a. Incompetence, gross negligence,
Answer: Any qualified person, natural or failure to perform or failure to exercise
juridical, may serve as a receiver [Sec. 28). the proper degree of care in the
Said receiver has the following duties: a) performance of his duties and powers;
Preserving and maximizing the value of the b. Lack of particular or specialized
assets of the debtor during the rehabilitation competency required by the specific
proceedings; b) Determining the viability of the case;
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c. Illegal acts or conduct in the 37. What are the two important
performance of his duties and powers; requirements for a rehabilitation plan?
d. Lack or qualification or presence of any
disqualification; Answer: Economic feasibility and present
e. Conflict of interest that arises after his value recovery. A rehabilitation is feasible if: a)
appointment; and the debtor has assets that can generate more
f. Manifest lack of independence that is cash if used in its daily operations than if sold;
detrimental to the general body of the b) liquidity issues can be addressed by a
stakeholders [Sec. 32). practicable business plan that will generate
enough cash to sustain daily operations; and c)
The Implementing Rules added failure, without the debtor has a definite source of financing to
just cause, to perform any of the powers and properly implement the Rehabilitation Plan
functions under the Rules; or any of the [Wonder Book Corp. v. Philippine Bank of
grounds for removing a trustee under the Communications (2012)).
general principles for trusts [FR Rules, Rule 2,
Sec. 27) as grounds for removal. The Rehabilitation Plan must contain such
relevant information to enable a reasonable
33. Can the management committee be investor to make an informed decision on the
sued for any claim? feasibility of the Plan [FR Rules, Rule 2, Sec.
61 (BB)].
Answer: No, the receiver, the management
committee, and all persons they engage are The restoration of the insolvent debtor to a
not subject to any action, claim or demand for condition of successful operation and solvency
any act or omission in good faith in the exercise must result in better present value recovery for
of their powers and functions [Sec. 41]. the creditors.
34. Is it possible for the debtor and the 38. Suppose that one class of creditors, by
creditor to have an offset? its majority, disapproved of the
rehabilitation plan. However, all the
Answer: Yes, the debtor and the creditor have other classes approved the plan by its
the right to set off their debts against each majority. Is the Plan deemed approved
other; only the balance, if any, shall be allowed or rejected?
in the proceedings [Sec. 124).
Answer: Rejected. The Plan must be approved
35. If the claim has become final, what are by all classes of creditors whose rights are
the only acceptable grounds for it to be adversely modified or affected. Otherwise, it is
set aside? deemed rejected. The Plan is approved by a
class of creditors if members of the said class
Answer: According to Sec. 25, it can only be holding more than 50% of the total claims of the
set aside by grounds of fraud, accident, class vote in favor of the Plan [Sec. 64).
mistake or inexcusable neglect.
39. When can a procedure for rehabilitation
36. What is a rehabilitation plan? involuntarily become a proceeding for
liquidation?
Answer: It is a plan by which the financial well-
being and viability of an insolvent debtor can be Answer: It is when a creditor objects to the
restored using various means including, but not plan and the court finds the debtor acted in bad
limited to debt forgiveness, debt rescheduling, faith, or that it is not possible to cure the defect,
reorganization or quasi-reorganization, dacion the court shall convert the proceedings into one
en pago, debt to equity conversion, sale of the for liquidation.
business, setting up of new business entities,
or other similar arrangements as may be It can also happen if there is a showing that the
approved by the court or the creditors [Sec. rehabilitation of the insolvent debtor is no
4(ii); Somera]. longer economically feasible or does not
provide better present value recovery for the
creditors, rehabilitation may be converted into
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liquidation. realize the objectives, targets or goals
set forth therein, including the timelines
40. What are the effects if the creditors have and conditions for the settlement of the
confirmed the rehabilitation plan? obligations due to the creditors and
other claimants;
Answer: Confirmation has the following e. the commission of fraud in securing the
effects: approval of the Rehabilitation Plan or
a. The Plan and its provisions shall be its amendment; and
binding upon the debtor and all persons f. Other analogous circumstances as
who may be affected by it; may be defined by the rules of
b. The debtor shall comply with the procedure [Sec. 74).
provisions of the Plan and shall take all
actions necessary to carry out the Plan; 42. How is a pre-negotiated rehabilitation
c. Payments shall be made to the initiated?
creditors in accordance with the
provisions of the Plan; Answer: An insolvent debtor, either by itself or
d. Contracts and other arrangements jointly with any of its creditors, may file a
between the debtor and its creditors verified petition for approval of the Pre-
shall be interpreted as continuing to Negotiated Rehabilitation Plan that has the
apply to the extent that they do not approval of creditors holding at least 2/3 of the
conflict with the provisions of the total liabilities of the debtor, including - secured
Rehabilitation Plan; creditors holding more than 50% of the total
e. Any compromises on amounts or secured claims; and unsecured creditors
rescheduling of timing of payments by holding more than 50% of the total unsecured
the debtor shall be binding on creditors claims [Sec. 76).
regardless of whether the Plan is
successfully implemented; and Within five working days, and after
f. Claims arising after approval of the determination that the petition is sufficient in
Plan that are otherwise not treated by form and substance, the court shall issue an
the Plan are not subject to any Order [Sec. 77).
Suspension Order [Sec. 69).
43. What is the period and effect of the
The court has a maximum period of one year approval of the plan?
from the date of filing to confirm a
Rehabilitation Plan. If no Rehabilitation Plan is Answer: Within 10 days from the date of the
confirmed, the proceedings may be converted second publication of the Order, the court shall
into one for liquidation [Sec. 72). approve the Rehabilitation Plan unless an
objection is submitted.
41. When can it be considered that there is
a failure of rehabilitation? The court has a maximum period of 120 days
from the date of the filing of the petition to
Answer: There is failure of rehabilitation in the approve the Rehabilitation Plan. If the court
following cases: fails to act within the same period, the Plan
a. dismissal of the petition by the court; shall be deemed approved.
b. the debtor fails to submit a
Rehabilitation Plan; Approval of a Plan has the same legal effect as
c. under the Rehabilitation Plan confirmation of a Plan in Court-Supervised
submitted by the debtor, there is no Rehabilitation. It also results in a cram down,
substantial likelihood that the debtor as it binds not only the debtor but also all
can be rehabilitated within a persons affected by it.
reasonable period;
d. the Rehabilitation Plan or its 44. Explain an Out-of-Court Rehabilitation
amendment is approved by the court and its minimum requirements.
but in the implementation thereof, the
debtor fails to perform its obligations Answer: It is an extrajudicial insolvency
thereunder, or there is a failure to proceeding of an Out-of-Court or Informal
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SPECIAL LAWS COMMERCIALLAW PRE-WEEK

Restructuring Agreement (OCRA), or a The notice must invite creditors to participate in
restructuring of the claims negotiated between the negotiation for the OCRA and inform them
the debtor and the creditor(s). No petitions are that the agreement would bind all creditors if
filed with the court, though the debtor and/or the minimum vote requirements were met [Sec.
the creditor may seek court assistance in 85].
implementation.
46. Explain the cram down effect.
In an OCRA, the debtor remains in possession
of the continuation of incumbent management Answer: Notwithstanding the rejection of the
control. creditors of the Rehabilitation Plan, the court
may nonetheless confirm the Rehabilitation
Pending negotiation and finalization of the Plan in what is known as a cram down.
OCRA, there may be a standstill period that
allows the debtor not to pay liabilities as they The effect of the cram down is to bind the
fall due and prevents creditors from enforcing debtor and all persons who may be affected,
their claims [Somera]. whether or not they participated in the
proceedings or opposed the plan.
The minimum requirements are the following:
a. The debtor must agree to the out-of- A cram down is permitted only if all of the
court or informal restructuring/ workout following circumstances are present:
agreement or Rehabilitation Plan; a. The Rehabilitation Plan complies with
b. It must be approved by creditors the requirements specified in the FRIA;
representing at least 67% of the b. The receiver recommends confirmation
secured obligations; of the Rehabilitation Plan;
c. It must be approved by creditors c. The shareholders, owners or partners
representing at least 75% of the of the debtor lost at least their
unsecured obligations; and controlling interest as a result of the
d. It must be approved by creditors Rehabilitation Plan; and
holding at least 85% of the total d. The Rehabilitation Plan would likely
liabilities, secured or unsecured, of the provide the objecting class or creditors
debtor [Sec. 84]. with compensation which has a net
present value greater than that which
45. What is a standstill period/agreement? they would have received if the debtor
were under liquidation [Sec. 64].
Answer: This refers to the period agreed upon
by the debtor and its creditors to enable them 47. Can liquidation and rehabilitation
to negotiate and enter into an out-of-court or happen at the same time?
informal restructuring/workout agreement or
rehabilitation plan. It may include provisions Answer: No. Liquidation is a judicial insolvency
identical with or similar to the legal effects of a proceeding by which the debtor's assets are
commencement order [Financial Rehabilitation reduced and converted to cash in order to
Rules, Rule 1, Sec. S(q)]. discharge the claims against the debtor [Secs.
119 and 131; Somera].
The standstill period/agreement is effective
and enforceable not only against contracting The concept of liquidation is thus diametrically
parties but also against other creditors, opposed to that of rehabilitation, and both
provided that: cannot be undertaken at the same time
a. Such agreement is approved by [Philippine Veterans Bank Employees Union-
creditors representing more than 50% NUBE v. Vega, G.R. No.105364 (2001)].
of the total liabilities of the debtor;
b. Notice of the standstill agreement is 48. Differentiate Voluntary liquidation vs.
published in a newspaper of general involuntary liquidation vs. conversion.
circulation in the Philippines once a
week for 2 consecutive weeks; Answer: Voluntary liquidation is a liquidation
c. The standstill period does not exceed proceedings instituted by the debtor. An
120 days from the date of effectivity. involuntary liquidation proceeding is instituted
Page 33 of 42
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by a creditor or a group of creditors. g. Direct all creditors to file their claims
Meanwhile, a conversion is when the court- with the liquidator within the period set
supervised or pre-negotiated rehabilitation by the rules of procedure;
proceeding is converted by the court into h. Authorize the payment of
liquidation proceedings. administrative expenses as they
become due;
49. List the instances when there is i. State that the debtor and creditors who
conversion of rehabilitation to are not petitioner/s may submit the
liquidation proceedings. names of other nominees to the
position of liquidator; and
Answer: Under the FRIA, court-supervised or j. Set the case for hearing for the election
pre- negotiated rehabilitation proceedings may and appointment of the liquidator,
be converted in the following instances: which date shall not be less than thirty
a. Within 10 days from receipt of the (30) days nor more than forty-five (45)
receiver's report, a court finding that days from the date of the last
the debtor is insolvent and there is no publication [Sec. 112).
substantial likelihood of substantial
rehabilitation [Sec. 25(c)]. 51. What are the rules as to the
b. If no Rehabilitation Plan is confirmed determination of claims?
within 1 year from filing the petition to
confirm the Plan [Sec. 72). Answer:
c. If termination is due to failure or a. Within 20 days from assuming office,
rehabilitation or dismissal of the petition the liquidator shall prepare a
for reasons other than technical preliminary registry of claims.
grounds [Sec. 75). b. Secured creditors who have waived
d. Upon motion filed by the insolvent their security or have fixed the value of
debtor for conversion into liquidation the property subject of the security
proceedings [Sec. 90). shall be considered unsecured.
c. The registry shall be available for public
50. What is a liquidation order? Give at least inspection and publication notice shall
three things that it entails. be provided to stakeholders [Sec. 123).
d. The debtor and the creditor have the
Answer: Such order results in the dissolution right to set off their debts against each
of a juridical debtor, however, the individual other; only the balance, if any, shall be
debtor is only discharged upon termination of allowed in the proceedings [Sec. 124).
the proceedings [Somera]. e. Within 30 days from expiration of the
period for filing of applications for
An LO shall: recognition of claims, interested parties
a. Declare the debtor insolvent; may challenge claims to the court.
b. Order the liquidation of the debtor and, f. Upon the expiration of the 30-day
in the case of a juridical debtor, declare period, the liquidator shall submit the
it as dissolved; registry of claims containing the claims
c. Order the sheriff to take possession not subject to challenge. Such claims
and control of all the property of the shall become final upon filing of the
debtor, except those that may be register.
exempt from execution; g. Claims that have become final may be
d. Order the publication of the petition or set aside only on grounds of fraud,
motion in a newspaper of general accident, mistake or inexcusable
circulation once a week for two (2) neglect [Sec. 125).
consecutive weeks; h. The liquidator shall submit disputed
e. Direct payments of any claims and claims to court for final approval [Sec.
conveyance of any property due the 126).
debtor to the liquidator;
f. Prohibit payments by the debtor and
the transfer of any property by the
debtor;
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52. Is restructuring of both secured and property and real rights.
unsecured claims possible?
Moreover, Credits that do not enjoy any
Answer: Yes. A liquidation order issued by a preference with respect to specific property are
court will not affect the right of a secured satisfied in the order established under Article
creditor to enforce its lien, subject to the 2244 of the Civil Code. Credits of any other
secured creditor's waiver of rights under such kind of class (nonpreferred, common credit) not
lien in order to prove its claim in the liquidation included in Articles 2241 , 2242 and 2244 will
proceedings and share in the distribution of the not enjoy any preference.
debtor's assets.
In satisfying several preferred credits
53. Differentiate a general secured creditor registered with the Register of Deeds, the rule
from a secured creditor: is priority of credits in the order of the time of
registration while preferred credits in Art. 2244
Answer: A General Unsecured Creditor refers (14) enjoy preference in order of priority of the
to a creditor whose claim or a portion thereof is dates of the instruments and the judgments.
neither secured, preferred nor subordinated
under the FRIA. On the other hand, a Secured
Creditor refers to a claim secured by a lien,
which is a statutory or contractual claim or
juridical charge on real or personal property
that legally entitles a creditor to resort to said
property for payment of the debt or claim
secured.
54. What are the pertinent provisions

considered in the rules on preference of
credits?
Answer: Under Article 110 of Republic Act No.

44 (as amended) or the Labor Code of the
Philippines, workers enjoy first preference as
regard to their wages and other monetary
claims in the event of bankruptcy or liquidation
of an employer's business. Notwithstanding the
provisions under the Civil Code on the
preference of credits or any other provision of
law to the contrary, unpaid wages and
monetary claims will be paid in full before
claims of the government and other creditors
may be paid.
Under Article 2247 of the Civil Code, duties,

taxes and fees due to the state or any
subdivision thereof pertaining to a specific
movable property enjoy absolute preference
over all other claims. Thereafter, if there are
two or more credits with respect to the same
specific movable property, they will be satisfied
pro rata.
Article 2241 of the Civil Code enumerates the

special preferred credits with respect to a
specific movable property while Article 2242 of
the Civil Code enumerates the special
preferred credits with respect to an immovable
Page 35 of 42
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2022 BOC SUPPLEMENTS
COMMERCIAL LAW
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SUPPLEMENTSAND CORRECTIONS COMMERCIALLAW
INSURANCE LAW
[Supplemental Discussion] Element of intent vis-a-vis misrepresentation [pg. 36]
There is no need to distinguish between concealment and fraud because the rules pertinent to both
are similar [Carale]. In this regard, it shall be noted that a concealment, whether intentional or
unintentional, entitles the injured party to rescind a contract of insurance [Sec. 27]. Thus, like in
concealment, intent is not essential to entitle the insurer to rescind on the ground of misrepresentation.
If a representation is false in a material point, whether affirmative or promissory, the injured party is
entitled to rescind the contract from the time when the representation becomes false [Sec. 45].
TRANSPORTATION LAW*
*The discussions here supersede the discussions in the BOC Reviewer on the Warsaw
Convention.
Montreal Convention disembarking [Article 17(1 ), Montreal

Convention].
2. Damage sustained in case of
Applicability destruction or loss of, or of damage
The Montreal Convention applies to all
to, checked baggage upon condition
international carriage of persons, baggage or only that the event which caused the
cargo performed by aircraft for reward. It destruction, loss or damage took place
applies equally to gratuitous carriage by aircraft on board the aircraft or during any
performed by an air transport undertaking period within which the checked
[Article 1(1), Montreal Convention]. baggage was in the charge of the
carrier [Article 17(2), Montreal
International Carriage Convention].
International carriage means any carriage in a. Exception: The carrier is not
which, according to the agreement between liable if and to the extent that
the parties, the place of departure and the the damage resulted from the
place of destination, whether or not there be a inherent defect, quality or vice
break in the carriage or a transshipment, are of the baggage [Article 17(2),
situated either: Montreal Convention].
1. within the territories of two States b. In the case of unchecked
Parties; or baggage, including personal
2. within the territory of a single State items, the carrier is liable if the
Party if there is an agreed stopping damage resulted from its fault
place within the territory of another or that of its servants or agents
State, even if that State is not a State [Article 17(2), Montreal
Party [Article 1(2), Montreal Convention].
Convention]. c. Note: The passenger is entitled
to enforce against the carrier
When a carrier is liable for damages the rights which flow from the
An air carrier is liable for damages under the contract of carriage if:
following cases: i. the carrier admits the
1. Damage sustained in case of death loss of the checked
or bodily injury of a passenger upon baggage;
condition only that the accident which ii. the checked baggage
caused the death or injury took place has not arrived at the
on board the aircraft or in the course of expiration of twenty-
any of the operations of embarking or one days after the date
on which it ought to
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SUPPLEMENTSAND CORRECTIONS COMMERCIAL LAW

have arrived [Article air [Article 18(4), Montreal
17(3), Montreal Convention].
Convention]. 4. Damage occasioned by delay in the
3. Damage sustained in the event of carriage by air of passengers,
the destruction or loss of, or baggage or cargo [Article 19,
damage to, cargo upon condition only Montreal Convention]
that the event which caused the a. Exception: the carrier shall not
damage so sustained took place during be liable for damage
the carriage by air [Article 18(1), occasioned by delay if it proves
Montreal Convention]. that:
a. Exception: the carrier is not i. It and its servants and
liable if and to the extent it agents took all
proves that the destruction, or measures that could
loss of, or damage to, the cargo reasonably be required
resulted from one or more of to avoid the damage;
the following: ii. It was impossible for it
i. Inherent defect, quality or them to take such
or vice of that cargo; measures [Article 19,
ii. Defective packing of Montreal Convention].
that cargo performed
by a person other than Prima Facie Evidence
the carrier or its Receipt by the person entitled to delivery of
servants or agents; checked baggage or cargo without complaint is
iii. An act of war or an prima facie evidence that the same has been
armed conflict; delivered in good condition and in accordance
iv. An act of public with the document of carriage or with the record
authority carried out in preserved by the other means [Article 31 (1),
connection with the Montreal Convention].
entry, exit or transit of
the cargo [Article 18(2),
Periodto File
Montreal Convention]. In the case of damage, the person entitled to
b. Note: The period of the
delivery must complain to the carrier forthwith
carriage by air does not extend
after the discovery of the damage, and, at the
to any carriage by land, by sea latest, within seven days from the date of
or by inland waterway
receipt in the case of checked baggage and
performed outside an airport. If, fourteen days from the date of receipt in the
however, such carriage takes
case of cargo [Article 31 (2), Montreal
place in the performance of a
Convention].
contract for carriage by air, for
the purpose of loading, delivery
In the case of delay, the complaint must be
or transshipment, any damage
made at the latest within twenty-one days from
is presumed, subject to proof to
the date on which the baggage or cargo have
the contrary, to have been the
been placed at his or her disposal [Article
result of an event which took
31 (2), Montreal Convention].
place during the carriage by air.
General Rule: If no complaint is made within
If a carrier, without the consent
the times aforesaid, no action shall lie against
of the consignor, substitutes
the carrier [Article 31 (4), Montreal Convention].
carriage by another mode of
Exception: In the case of fraud [Article 31 (4),
transport for the whole or part
Montreal Convention].
of a carriage intended by the
agreement between the parties
Note: Every complaint must be made in writing
to be carriage by air, such
[Article 31 (3), Montreal Convention].
carriage by another mode of
transport is deemed to be
within the period of carriage by
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SUPPLEMENTS AND CORRECTIONS COMMERCIAL LAW

Treatmentof carriageto be Limitationof liabilityto Passengers
performedby severalsuccessive Death or bodily injury of a passenger
carriers 1 . For damages arising in case of death
A carriage to be performed by several or bodily injury of a passenger not
successive carriers is deemed to be one exceeding 100,000 Special Drawing
undivided carriage if it has been regarded by Rights for each passenger, the carrier
the parties as a single operation, whether it had cannot exclude or limit its liability,
been agreed upon under the form of a single 2. For damages arising in case of death
contract or of a series of contracts [Article 1 (3), or bodily injury to the extent that they
Montreal Convention]. exceed for each passenger 100,000
Special Drawing Rights, the carrier
Note: It does not lose its international character shall not be liable for damages IF it
merely because one contract or a series of proves that:
contracts is to be performed entirely within the a. Such damage was not due to
territory of the same State [Article 1 (3), the negligence or other
Montreal Convention]. wrongful act or omission of the
carrier or its servants or agents;
or
Limitationof Liabilityin Carriageof
b. Such damage was solely due
Baggageand Cargo to the negligence or other
The Montreal Convention changed the limits of wrongful act or omission of a
liability in relation to delay, destruction and/or third party [Art. 21 , Montreal
loss of baggage or cargos as ff: Convention] (revised to 128
1. In the carriage of baggage, the liability 821 SDRs).
of the carrier in the case of destruction,
loss, damage or delay is limited to
Delay in carriage of persons
1 ,000 Special Drawing Rights for each In the case of damage caused by delay as
passenger x x x; (revised to 1 288 specified in Art. 19 in the carriage of persons,
SDRs). the liability of the carrier for each passenger is
a. Exception: the passenger has limited to 4,150 Special Drawing Rights [Art.
made, at the time when the 22, Montreal Convention] (revised to 5 346
checked baggage was handed SDRs).
over to the carrier, a special
declaration of interest in
delivery at destination and has
When LimitsAre Not Applicablein
paid a supplementary sum if Carriageof Personsand Baggage
the case so requires. In the case of damage caused by delay in the
i. In that case the carrier carriage of persons, and in the case of
will be liable to pay a destruction, loss, damage or delay in the
sum not exceeding the carriage of baggage, the limits shall not apply if
declared sum, unless it it is proved that:
proves that the sum is 1 . The damage resulted from an act or
greater than the omission of the carrier, its servants or
passenger's actual agents;
interest in delivery at 2. Done with intent to cause damage or
destination. recklessly; and
2. In the carriage of cargo, the liability of 3. With knowledge that damage would
the carrier in the case of destruction, probably result;
loss, damage, or delay is limited to a 4. In the case of such act or omission of a
sum of 17 Special Drawing Rights per servant or agent, it shall also be proved
kilogram x x x [Article 22, Montreal that such servant or agent was acting
Convention] (revised to 22 SDRs). within the scope of its employment
[Article 22(5), Montreal Convention].
Note: The limitations of liability shall not

prevent the court from awarding, in addition,
the whole or part of the court costs and of the
Page 39 of 42
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other expenses of the litigation incurred by the
Previous Revised
plaintiff, including interest.
limit limit (SDRs)
• Exception: if the amount of the
(SDRs) (as revised
damages awarded, excluding court
(as revised in 2019)
costs and other expenses of the
in 2009)
litigation, does not exceed the sum
which the carrier has offered in writing 113100
Art 21 128 821
to the plaintiff within a period of six (Compensation
months from the date of the occurrence
in case of
causing the damage, or before the Death or Injury
commencement of the action, if that is
of Passenger)
later [Article 22(6), Montreal
Convention]. Art. 22(1) 4 694 5346
(Damage
Limitationof liability for Checked caused by
Baggages delay in
1. The carrier is Iiable for damage ca"iage of
sustained in case of destruction or loss persons)
of, or of damage to, upon the following
condition: Art. 22(2) 1 131 1 288
a. The event which caused the (Destruction,
destruction, loss or damage loss, damage or
took place on board the aircraft delay in case of
or during any period within ca"iage of
which the checked baggage baggage)
was in the charge of the carrier.
2. The carrier is not liable if and to the Art. 22(3) 19 22
extent that the damage resulted from (Destruction,
the inherent defect, quality or vice of loss, damage or
the baggage. delay in case of
3. The carrier admits the loss of the ca"iage of
checked baggage, or if the checked cargo)
baggage has not arrived at the
expiration of twenty-one days after the
date on which it ought to have arrived,
the passenger is entitled to enforce
against the carrier the rights which flow
from the contract of carriage.
Limitationof liability for Unchecked

Baggages
The carrier is liable for unchecked baggage,
including personal items, if the damage
resulted from its fault or that of its servants or
agents.
Unless otherwise specified, in this Convention

the term baggage" means both checked
baggage and unchecked baggage.
Note: As noted the limits of liability established

under Articles 21 and 22 of the Montreal
Convention has been revised in 2019 to reflect
as ff:
Page 40 of 42
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SUPPLEMENTSAND CORRECTIONS COMMERCIALLAW
CORPORATION LAW
[Correction] Intra-corporate relationship test [pg. 138]
Under the relationship test, there is an intra-corporate controversy when the conflict is:
1. Between the corporation, partnership, or association and the public;
2. Between the corporation, partnership, or association and the State insofar as its franchise,
permit, or license to operate is concerned;
3. Between the corporation, partnership, or association and its stockholders, partners,
members, or officers; and
4. Among the stockholders, partners, or associates themselves [Medical Plaza Makati
Condominium Corp. v. Cullen, 720 Phil. 732, 742-743 (2013)).
INTELLECTUAL PROPERTY LAW

[Correction] IP Rights Comparison Table [pg. 209)
Copyrights Trademarks Parents
As to the Scope of Protection
Literary and artistic works Any visible sign capable of Any technical solution of a
which are original intellectual distinguishing the goods problem in any field of human
creations in the literary and (trademark) or services (service activity which is new, involves
artistic domain protected mark) of an enterprise from that an inventive step and is
from the moment of their of another and shall include a industrially applicable (Sec. 21,
creation (Sec. 172.1, RA stamped or marked container of RA 8293; Kho v. Court of
8293). goods [Sec. 121 .1 , RA 8293). Appeals, 379 SCRA 410
(2002)).
In relation thereto, a trade name
means the name or designation
identifying or distinguishing an
enterprise.
Where Registered
The National Library (Sec. Intellectual Property Office (IPO) Intellectual Property Office
191, RA 8293) (IPO)
When Protection Starts
Upon creation Upon issuance of the trademark Upon issuance of the letters of
certificate patent by the IPO
Term of Protection
Generally, up to 50 years 10 years 20 years

AFTER the death of the
author
Mode of Acquisition
Literary and artistic works To acquire rights in a mark, The right to a patent belongs to
are original intellectual registration is required [Sec. the inventor, his heirs, or
creations in the literary and 122, RA 8293). assigns.
Page 41 of 42
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artistic domain protected

from the moment of their However, well-known marks are When two or more persons
creation [Sec. 172.1, RA protected even without have JOINTLY made an
8293]. registration. invention, the right to a patent
shall belong to them jointly
Works are protected by the Nevertheless, when the well- [Sec. 28, RA 8293].
sole fact of their creation, known mark is not registered, its
irrespective of their mode or protection is limited, as it only HOWEVER, when two or more
form of expression, as well prevents the registration of persons have made the
as of their content, quality confusingly similar marks that are invention SEPARATELY AND
and purpose [Sec. 172.2, RA used for identical or similar goods INDEPENDENTLY OF EACH
8293]. or services (Sec. 123.1(e), RA OTHER, the right to the patent
8293]. 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 or, the
earliest priority date [Sec. 29,
RA 8293].
Page 42 of 42
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INSURANCE COMMERCIAL LAW PRE-WEEK

INSURANCE COMMERCIALLAW PRE-WEEK

Note: Concealment is the failure to disclose

Misrepresentation is a false representation

Just like concealment, misrepresentation is

A warranty is a statement or promise by the

The violation of a material warranty, or other

TRANSPORTATION LAW COMMERCIAL LAW PRE-WEEK

TRANSPORTATION LAW deterioration of

2. Differentiate common carriers from 3. What is the standard of diligence

Binding Effect Answer: Registered owners are liable for

TRANSPORTATION LAW COMMERCIAL LAW PRE-WEEK

Answer: In case of death or injury to passengers with

TRANSPORTATION LAW COMMERCIAL LAW PRE-WEEK

13. What are the requisites for a common Answer: YES.

TRANSPORTATION LAW COMMERCIAL LAW PRE-WEEK

TRANSPORTATION LAW COMMERCIAL LAW PRE-WEEK

TRANSPORTATION LAW COMMERCIAL LAW PRE-WEEK

TRANSPORTATIONLAW COMMERCIALLAW PRE-WEEK

TRANSPORTATIONLAW COMMERCIALLAW PRE-WEEK

Note: Under Art. 17 of the Montreal

Note Further: The limits on liability under Art.

CORPORATION LAW COMMERCIAL LAW PRE-WEEK

CORPORATION LAW COMMERCIAL LAW PRE-WEEK

CORPORATION LAW COMMERCIAL LAW PRE-WEEK

CORPORATION LAW COMMERCIAL LAW PRE-WEEK

CORPORATION LAW COMMERCIAL LAW PRE-WEEK

CORPORATION LAW COMMERCIAL LAW PRE-WEEK

CORPORATION LAW COMMERCIAL LAW PRE-WEEK

INTELLECTUAL PROPERTY LAW COMMERCIAL LAW PRE-WEEK

INTELLECTUAL PROPERTLY LAW

To promote creativity Identifying the origin or "Bring[ing) new designs and

INTELLECTUAL PROPERTY LAW COMMERCIAL LAW PRE-WEEK

Works of applied art:

INTELLECTUALPROPERTY LAW COMMERCIALLAW PRE-WEEK

Answer: Trademark infringement and unfair 8. What is the doctrine of secondary

INTELLECTUAL PROPERTY LAW COMMERCIAL LAW PRE-WEEK

10. What are the periods of protection for

Right of Attribution or Lasts during the

Right to make any Coterminous with the

Right to object to any

Right to restrain the

SPECIAL LAWS COMMERCIAL LAW PRE-WEEK

SPECIAL LAWS COMMERCIALLAW PRE-WEEK

Answer: Electronic documents shall have the

SPECIAL LAWS COMMERCIAL LAW PRE-WEEK

SPECIAL LAWS COMMERCIAL LAW PRE-WEEK

SPECIAL LAWS COMMERCIAL LAW PRE-WEEK

SPECIAL LAWS COMMERCIAL LAW PRE-WEEK

SPECIAL LAWS COMMERCIAL LAW PRE-WEEK

SPECIAL LAWS COMMERCIALLAW PRE-WEEK