OBLIGATIONS ​– Juridical necessity to give, to do, or not to do.

ELEMENTS OF OBLIGATION:
✓ ​Active Subject – ​Creditor/Obligee ✓ ​Passive Subject – ​Debtor/Obligor ✓ ​Prestation –
Object/Subject Matter ✓ ​Efficient Cause – ​Legal/Juridical Tie
SOURCES:
1. Law – ​there should be a law, can’t be
presumed. ​2. Contracts –
Meeting of minds > Offer > Accepted ​3. Quasi-Contracts – ​no meeting of minds
a. Solutio Indebiti – ​undue payment. ​b. Negotiorum Gestio – u ​ nauthorized
management. ​4. Delicts (Crimes) - ​acts or omissions punishable by law, if accused:
a. Convicted – ​civil & criminal
obligation. ​b. Acquitted – ​civil obligation ​only.
• ​Did not commit act, no civil obligation.
5. Quasi-delicts – ​tort, culpa, negligence.
Start Result Quasi-Contracts ​Lawful Benefit ​Quasi-Delicts ​Lawful Injury/Damages ​Delicts ​Unlawful
Injury/Damages
TO GIVE: ​(POSITIVE, REAL)
✓ Whether ​specific or generic, ​you can’t go to the court for specific performance in case of refusal. ✓
Specific – CAN’T ​be extinguished through
other parties. ✓ ​Generic – CAN ​be extinguished through
other parties.
TO DO: ​(POSITIVE, PERSONAL)
✓ Specific performance by court NOT allowed
in case of refusal, ONLY damages are allowed because of breach of contract.
NOT TO DO: ​(NEGATIVE, PERSONAL)
✓ Anything done shall be undone at the
Debtor’s expense.
FRUITS:
• ​Determinate thing​: right belongs to Creditor from the time the obligation to deliver arises.
TIME Obligation to Deliver Arises:
• ​With Suspensive Condition – ​from the time the condition is fulfilled.
• ​With Period; with suspensive effect – ​when period arises.
• ​Without period and condition – ​upon perfection of the contract (meeting of minds).
DELIVERY: CONSTRUCTIVE:
✓ ​Traditio Symbolica
✓ ​Traditio Longa Manu – ​mere consent or
agreement.
✓ ​Traditio Brevi Manu – ​objects is already in
the hands of the debtor.
✓ ​Traditio Constitutum Posesorium – ​vendor
continues in possession.
✓ ​Quasi-Traditio – ​with documents.
DAMAGES – ​harm done and the sum of money that can be recovered.
SOURCES:
1. FRAUD ​(DOLO)
a. Causal Fraud ​(Causante) ​– voidable ​b. Incidental Fraud ​(Incidente) ​– valid
2. NEGLIGENCE ​(CULPA)
a. Contractual ​– with existing contract. ​b. Aquiliana ​– without existing contract. ​c. Criminal ​– with or
without existing
contract.
DILIGENCE:
✓ As required by law ✓ As stipulated by parties ✓ ​Absence of 1 & 2​, diligence of a good father
of a family.
DEGREE OF DILIGENCE ​Stipulated by parties
Increase Decrease
​ ommon Carrier
Valid Void C
Stipulated: GFF Required by Law: ​utmost care
Void Extraordinary ​Agency Req. by Law: ​extraordinary
Stipulated: GFF
Valid Diligence GFF
GENERAL RULE: ​“No one is liable in fortuitous events.”
Except: ​✓ When law so provides
Page ​1 ​of ​21
✓ When parties stipulate ✓ Nature of the obligation requires
assumption of risks. ​(Example: Insurance)
• ​Res perit Domino ​“The thing perishes with the owner”
3. DELAY ​(MORA)
a. Solvendi ​(Debtor)
• ​Ex re – ​real obligation, to give.
• ​Ex persona – ​personal obligation, to do. ​b. Accipiendi ​(Creditor) ​c. Compensatio Morae ​– ​both
debtor and
creditor. ​d. Contravention of Tenor – ​violation of
terms.
GENERAL RULE: ​“No demand. No delay” ​Except: ​✓ When law so provides ✓
​ Contract stipulates ✓
Time is of the essence ✓ Demand would be useless ✓ Reciprocal obligation
KINDS: ​(MENTAL)
• ​M – ​Moral
• ​E – ​Exemplar
• ​N – ​Nominal
• ​T – ​Temperate
• ​A – ​Actual/Compensatory
• ​L – ​Liquidated
Liab./Responsibility Demandable Court-Reduce
​ egligence √ ​√
Fraud √ ​× N
DEBT:
​ OID Written Principal (√) Interest ​(√)
Oral ​Principal (√) Interest ​(×) V
• ​“No delay. No penalty.”
• The creditor can’t be compelled to accept partial payment. ​EXCEPT: If there is a stipulation.
❖ ​Prima Facie – “​Disputable/Assumption”
RIGHTS OF CREDITOR:
1. Exact fulfillment/to demand payment =
court. 2. Exhaust the properties of debtor. ​EXCEPT:
from the execution ​Writ attachment → Public Sale → Proceeds ​3. ​Accion Pauliana – ​to rescind. To
impugn
(question/challenge) the acts of the debtor. ✓ Designed to ​defraud ​creditor. ✓ Creditor ​deprived ​right to
enforce
claim. 4. ​Accion Subrogatoria – ​to exercise rights of
the Debtor.
ACTS OF DEBTOR:
EXCEPT: ​If there are remedies.
KINDS OF OBLIGATION:
1. ​Demandable at once
✓ ​Pure/Simple ​– no period/condition ✓ ​Resolutory – ​with condition. ✓ ​With Resolutory Effect – ​with
period. 2. ​With a period
✓ Benefit of both creditor & debtor. ✓ Cannot be demanded before due
date, court can ONLY fix period. 3. ​With Condition ​4. ​With Condition and period
“WILL IT HAPPEN?”
Fulfillment of Obligation Before After MAYBE (not sure): ​condition
➢ ​Suspensive ​No obligation Obligation arises ​➢ ​Resolutory ​Obligation
arises
To rescind: Donates (gratuitous) Donee: ​BF (√) GF (√) ​Sells (Onerous) Buyer: ​BF (√) GF (×)
Obligation end (ext.) ​YES (sure): ​Period
❖ Condition must not be impossible and not contrary to law, morals, public policy, public order, and good
customs.
FULFILLMENT OF CONDITION:
1. ​Potestative – ​depends on sole will of one of
the parties.
If Debtor: ​Suspensive: ​VOID ​Resolutory: ​VALID I​ f Creditor: ​Suspensive: ​VALID ​Resolutory: ​VALID
Page ​2 ​of ​21
2. ​Casual – ​depends on chance ​(valid) o​ r third
party ​(valid). ​3. ​Mixed – ​depends on:
✓ Will of one of the parties & third
party ​(VALID). ​✓ Will of one of the parties & chance
(VALID).
❖ ​DEEMED FULFILLED PRINCIPLE: ​“When the debtor voluntarily prevented the fulfillment of the
condition, the condition is deemed fulfilled.”
Pending fulfillment; rights
Principal Fruits ​Resolutory ​CR DR S
​ uspensive ​DR CR
SUBJECT MATTER: ​(Before Fulfillment) L ​ OST ​Fortuitous Event: ​EXTINGUISHED
Fault of DR: ​LIABLE (Value + Damages) IMPAIRED Fortuitous Event: ​CR BEARS LOSS
Fault of DR: ​LIABLE (Spec.Per. + Damages) ​IMPROVED By Nature: ​CR BEARS IMPROVEMENT
Efforts of DR: ​DR given right to usufruct
DEBTOR DEPRIVED OF PERIOD: ​(IGIVA)
• ​I – ​Debtor ​INSOLVENT ​(total or partial).
• ​G – ​Fails to ​GIVE ​(guaranty or security).
• ​I – ​guaranty or security: ​IMPAIRED ​(fault DR) ​or lost ​(FE/fault of DR).
• ​V – ​DR ​VIOLATES ​undertaking.
• ​A – ​DR attempts to ​ABSCOND.
Prestation “Choice” Alternative Obligation ​2 or more DR. unless stipulated F ​ acultative Obligation ​1 (with
substitute)
Debtor if stipulated ​Conjoint Obligation ​2 or more Fulfillment:
ALL ​Obligation with a penal clause
Obligation Exting.?
Liable: Damages? ALTERNATIVE
VS.
FACULTATIVE
FE: ​(×) (×) ​Fault-DR ​(×) (×)
​ ault-DR ​(×) (√)
FE: ​(√) (×) F
2 OR MORE DEBTOR OR CREDITOR:
1. JOINT – ​“to each his own”
▪ ​If silent, ​presumed joint. ​2. SOLIDARY – ​“all for one, one for all”
▪ When the law so provides or stipulated.
MODE OF EXTINGUISHMENT OF OBLIGATION:
1. PAYMENT OR PERFORMANCE
✓ ​By Whom:
▪ Debtor, representative/agent, estate (executor/admin.)
▪ Third Person (interested in fulfillment of obligation liable if principal debtor can’t pay) ✓ ​To Whom:
▪ CR., representative/agent, estate (executor/admin.)
▪ Third Person (redounded to the benefit of the Creditor)
❖ ​Presumed Benefit:
CR/DOUBT: burden of proof = DR
Except: ​Ratification, Subrogation, Estoppel
✓ ​When:
Principal/ Recovery? ​Paid ​before ​maturity:
➢ ​DR ​“aware” ​of
period
​ ​DR ​“not aware” ​of
(×) – waiver of right to period ➢
period
(√) + Interest + Fruits
​ aturity (not aware)
On or After M
(×) Only Interest + fruits
✓ ​Where: To give specific thing:
➢ ​With stipulation ​Place as stipulated ​➢ ​Without stipulation ​Where object is located @perfection of
contract
To give generic thing or to pay money:
​ ​Without stipulation ​Where debtor resides
➢ ​With stipulation ​Place as stipulated ➢
✓ ​How: To pay (money): ​➢ ​With
stipulation
Currency as stipulated
➢ ​Without
stipulation
Legal Tender
Page ​3 ​of ​21
To give: ​➢ ​Specific ​As stipulated, no substitute ​➢ ​Generic ​As stipulated, neither
inferior/superior ​To do: ​➢ As stipulated
➢ ​If poorly done: ​undo @the expense of the debtor.
❖ ​SPECIAL FORMS OF PAYMENT:
A. Application of payment
▪ Gives DR privilege (right to choose)
▪ 2 or more obligation is due
​ pply proportionately ​(<CR apply to most onerous) ​B. Dation en payment
▪ ​If silent: a
▪ Payment in kind, ONLY 1 CR, DR solvent. ​C. Payment by Cession
▪ DR insolvent, 2 or more CR, ​obligation partially extinguished. ​D. Tender of payment and
Consignation
▪ CR refuses, money is deposited in court with notice to the CR. ​If approved, obligation extinguished.
➢ ​Consignation allowed w/o prior
T.O.P.:
A.o.P ​Payment
by Cession
Dation in Payment
T.O.P. & Consignation
- Multiple obligation s are ​ALL ​due and demand- able.
- Payment not enough.
Debtor is insolvent
Debtor need not be insolvent
T.O.P. – A​ ct of the DR of offering to his CR what is due to him. All properties are given up to satisfy the needs of
creditors (2 or more)
Does not affect all the debtor’s properties . Plurality of the creditors is not required.
CONSIGNATION ​– CR refuses to accept payment, deposit thing due to the judicial authority.
No transfer of ownership
Transfer of property Partial extinguish- ment of debt
Extinguish
(TRAIT)
o ​T – ​2 or more persons claiming
right. ​o ​R – ​CR refuses to issue
RECEIPT ​w/o just cause. ​o ​A – ​Creditor ​ABSENT ​o ​I – ​CR becomes
INCAPACITATED ​to receive payment. ​o ​T – TITLE ​is lost.
▪ ​DR pays: incapacitated: o​ bligation extinguished. ​If CR benefitted or money was kept.
2. LOSS OF THE THING DUE
✓ ​Applicable if: ​determinable/specific ✓ ​Not applicable: ​generic (genus
nunguam perit)
▪ ​LOST – ​perishes, goes out of commerce, disappears (existence unknown/ cannot be recovered).
3. CONDONATION/REMISSION
✓ Essentially gratuitous, nature:
donation.​ ✓ ​Requirements: Essential ​➢ Capacity of Donor (CR) & Donee (DR)
➢ Donative Intent ➢ Acceptance (DR) ​Formal ​➢ ​Personal Property: ​P5000 up (writing)
➢ ​Real Property: ​Public Instrument
4. COMPENSATION
✓ 2 persons, CR & DR of each other.
a. ​Conventional - ​by
agreement b. ​Legal – ​by operation of
law ✓ ​Requirements:
▪ Principally bound DRs & CRs.
▪ Both debts: payable in money, in kind/quality or both.
▪ Both obligation: ​due
▪ ​Both obligation: ​liquidated & demandable
▪ ​NO: ​controversy or retention by third person.
c. ​Facultative – ​one party
can claim compensation, the other cannot. d. ​Judicial – ​decree by court, in case where there is
counterclaim.
Page ​4 ​of ​21
pays even without the
✓ ​Compensation NOT allowed: consent of the DR.
when • ​“First in time, First in
one of the obligation arose right”
from: • If new DR fails to pay, can CR collect
▪ Deposit original DR?
▪ Bailee in Commodatum
▪ Obligation to give gratuitous Delegacion: ​➢ ​YES ​Time of delegacion; New
support (present/future) DR insolvent ➢ ​NO ​After of delegacion

▪ Obligation arising from

commission on penal offenses: Expromission: ​➢ ​NO ​Time of expromission New
civil liability. DR insolvent ➢ ​YES ​Time of expromission Orig.DR
aware & didn’t object to expromission ➢ ​YES ​Time
of expromission Orig.DR’s insolvency is
5. CONFUSION/
MERGER known to the
✓ CR & DR, one public. ➢ ​NO ​After of expromission
person.
• Mixed Novation:
6. NOVATION Must be REAL +
✓ Changing the object (real) PERSONAL
or
condition (real) ✓
SUBSTITUTION – ​Debtor
▪ ​Delegacion – ​personal CHARACTERISTICS:
novation. Original DR (MACRO)
must be discharged.
• ​M – Mutuality: ​bind both contracting
​ riginal DR)​
(Initiative: O
parties. Validity: can’t be left
▪ ​Expromission –
with will of one of them.
​ ew
personal ​(Initiative: N
DR or third person​) • ​A – Autonomy: ​liberty/freedom to

• ​SUBROGATION – ​CR. stipulate

(Personal) a. ​Conventional - ​by .
agreement b. ​Legal – ​by operation • ​C – Consensuality: ​perfected by
of law mere
▪ When a CR pays another Consen
CR who is preferred even t.
without consent of DR. • ​R – Relativity of contracts: ​take
▪ When a third person who is interested in the effect
fulfillment of the obligation
 to
parties.
ELEMEN
• ​O - Obligatoriness ​& compliance
TS:
in
• ​ESSENTIAL – ​without them, there is
good
no
faith.
contract- Cause, Object, Consent
KIND (COC)
S:
• ​NATURAL – ​deemed included except
• ​NOMINATE Vs. if
INNOMINATE
stipulated not to
include.
➢ ​Do ut des ​I give that you may give. ➢ ​
​
Do ut facias ​I give that you may do. ➢ • ​ACCIDENTAL ​– included if
Facio ut des ​I do that you may give. ➢ ​ stipulated.
Facio ut facias ​I do that you may do.

❖ An offer becomes INEFFECTIVE

• ​PRINCIPAL Vs.
“BEFORE”
ACCESSESORY
acceptance:
• ​CONSENSUAL Vs. REAL Vs. (DICI) ​✓ ​D -
FORMAL Death

(COC Vs. COC + DEL. Vs. COC ✓ ​I -

+ DOC.) Insolvency

• ​GRATUITOUS Vs. ONEROUS: ✓ ​C – Civil

Liberality Interdiction

• ​UNILATERAL Vs. ✓ ​I –
BILATERAL Insanity

• ​COMMUTATIVE: ​Exchange of
values

• ​ALEATORY: ​based on
chance

• ​AUTOMATIC

• ​ADHESION
Liable PERIOD TO DECIDE Can offer
or sell?
(damages) ​➢ ​Without consideration
(option money)
√√
➢ ​Without consideration √ ​× ​➢ ​With earnest pay (down payment)
√√
INCAPACITATED: ​(CHIPUD)
✓ ​Unemancipated Minors – ​incapacitated to
give consent (below 18 y/o).
✓ ​Insane/Demented Person – ​except: lucid
interval.
✓ ​Deaf-Mute
✓ ​Civil Interdiction – ​as if dead.
➢ ​Mortis Causa (√) ​➢ ​Inter-vivos (×)
✓ ​Hospitalized Lepers
✓ ​Prodigals/Spend Thrills
VICES OF CONSENT: ​(VIMFU)
• ​V – Violence ​(physical pain)
▪ Serious/ irresistible force
• ​I – Intimidation ​(mental pain)
▪ Well-grounded fear, imminent danger, must be unlawful.
• ​M – Mistake ​(Error)
▪ If serious: Annulment
▪ If NOT: Reformation
• ​F – Fraud ​▪ Insidious words, machination
• ​U – Undue Influence
▪ Professional Relationship (Ex. Lawyer-client)
▪ Consanguinity/Affinity (Ex. Aunt, uncle)
▪ Religious Affiliation (Ex. Priest, Parishioners)
NO FRAUD:
✓ ​Concealment ​– failure to disclose acts
without duty to disclose​.
Except: with duty to disclose (fraud). ✓ ​ ​Mere exaggerations in trade ​– ads
​ ​Mere expression of Opinion ​–
▪ Dealer’s talk: ​Caveat Emptor ​– “​buyer beware” ✓
Except: O​ pinion of an Expert.
OBJECTS OF CONTRACTS:
✓ ​Things – ​existing/future
▪ Should come to existence.
▪ Retroactive ​(emtio rae speratae) ​✓ ​Hope – ​with hope (√); vain hope (×)
✓ ​Inheritance – ​only present inheritance (√);
future (×). ✓ ​Right – ​Transmissible (√); Intransmissible
(×).
CAUSE OF CONTRACTS:
✓ ​Lawful ​✓ ​If inadequate (lesion) ​✓ ​Fictitious/Simulated
▪ Absolute ​(void)
▪ Relative ​(effect True Agreement) ​✓ ​False : (VOID)
❖ ​Motive – ​not an essential element ​(with or
without: VALID)
FORMS OF CONTRACT – ​any form (oral, written, P.I.)
EXCEPT:
✓ For validity – ​failure: VOID
✓ For enforceability – Statute of fraud.
✓ For convenience
INTERPRETATION: ​to give effect ​– ​“true intention”
• ​Words – ​clear & unambiguous: literal meaning.
▪ ​Provision: ​written prevail over printed.
▪ ​Amount: ​words prevail over figures.
▪ ​2 or more: ​“I” – solidary; “We” – joint.
• ​Acts – ​contemporaneous, subsequent.
• ​Customs and usages
F ​– Fraud / ​A ​– Accident / ​M ​– Mistake / ​I –
​ Inequitable Conduct
Remedy: B ​ efore meeting of minds: ​Annulment ​After meeting of minds: ​Reformation
OPTION:
✓ ​Reformation or specific performance
▪ Specific Performance to Reformation ​(×) ​✓ ​Rescission to specific performance
▪ Specific Performance to Rescission​(√)
REFORMATION NOT ALLOWED:
✓ ​Wills – ​except by the testator
✓ ​Simple donation Inter-vivo – ​if no condition
imposed.
✓ ​Real Obligation
Page ​6 ​of ​21
DEFECTIVE CONTRACTS:
1. RESCISSIBLE – ​least defective.
Defect: ​lesion (damage) ​(GACTS)
• ​G – ​made by ​GUARDIAN
▪ ​Lesion: ​more than 1⁄4 value.
▪ ​Rescind: ​within 4 years from
the time incapacity ceases.
• ​A – ​made by representative of
ABSENTEES = ​property
▪ ​Lesion: ​more than 1⁄4 value.
▪ ​Rescind: ​within 4 years from
the time his (absentee).
Whereabouts are known,
EXCEPT: within 2 years, if:
o ​Boarded airplane
o ​Boarded Vessel
o ​Sent to war
• ​C – ​made to defraud ​CREDITORS.
(Accion Pauliana)
• ​T – THINGS ​in litigation made
without consent of litigant or
court.
• ​S – SPECIFICALLY ​declared by law
to be rescissible.
2. VOIDABLE – ​valid until annulled.
Defect: ​consent.
▪ One of the contracting parties –
incapacitated.
▪ Consent – vitiated ​(VIMFU)
- To annul within 4 years’ time ​MF-discovery
/ VIU – cease.
- ​Except: ​marriage- 5 years
• Vitiated by VIMFU
• One of the contracting parties
incapacitated.
- ​RATIFICATION – ​retroacts on the day the
contract was made. Cleans defect.
3. UNENFORCEABLE – ​validable.
Defect: ​without effect unless ratified.
- Both contracting parties are incapacitated.
- Made without authority.
- Do not comply with statute of fraud.
(SALSAR)
• ​S – SPECIAL PROMISE – ​to answer
debt, default, miscarriage of
another.
• ​A – AGREEMENT ​not to be
performed within 1 year from the
making thereof.
• ​L – LEASING: ​period longer than 1
year. Sale of real property or any
interest therein.
• ​S – SALE ​of goods, chattels or
things in action @least P500.
• ​A – AGREEMENT ​made in
consideration of mortgage other
than mutual promise to marry,
enforceable even if oral ONLY.
• ​R – REPRESENTATION ​as to the
credit of a third person.
Sale of Real Property Enforceable?
Seller & Buyer
Third Person ​NO
• ​ORAL
WITH
(×)
(√)
(×) ​(×)
NO
• ​WRITING
(√) (×) ​
W/ ​ NO
• ​PUBLIC INST.
W/
(√) (√)
4. VOID/INEXISTENT – ​most defective.
Defect: ​without effect cannot be
ratified/period to question. ​( ICAD)
• ​O – OBJECT/CP: ​contrary to law, morals...
• ​O – OBJECT: ​outside the commerce of men.
• ​O – OBJECT: ​did not exist at the time of
transaction.
• ​I – INTENTION ​of the parties relative to the
principal object: cannot be ascertained.
• ​C – CONTEMPLATE ​an impossible service.
• ​A – ABSOLUTELY ​simulated or fictitious.​
• ​D – DECLARED void ​by law.
DOWNPAYMENT DELIVERY
DOWNPAYMENT DELIVERY
DOWNPAYMENT DELIVERY
DOWNPAYMENT DELIVERY

Page ​7 ​of ​21

SALES

SALES VS. BARTER:

​ is car to C) ​➢ ​Cash: ​P1M (Sale) ​➢ ​Trade-in: ​Cash-600 / TI-400

1. Manifestation: ​(Ex. B ​sells h
(sale) Cash-400 / TI-600 (sale)

2. Absence of Manifestation: ​(Ex. B t​ ransfers

his car to C) ​➢ ​Cash: P
​ 1M (Sale) ​➢ ​Kind: P
​ 1M (Barter) ​➢ ​Cash-600 / Kind-400 (Sale) ​➢
Cash-400 / Kind-600 (Barter) ​➢ ​Cash-500 / Kind-500 (Sale)

SALES VS. CPW (Contract for a Piece of Work):

➢ ​MASSACHUSETTS: Object: ​Same with New York Rule

✓ Available/Regular Stock (Sale) ✓ Specially/Manufactured (CPW) ​English Rule:
Materials > Labor = Sale Labor > Materials = CPW

OBLIGATIONS OF THE VENDOR (SELLER):

​ . ​To ​TRANSFER OWNERSHIP (TITLE) t​ o buyer

1. ​To effect ​DELIVERY 2
• ​VOIDABLE: ​Can annul if third party is in bad faith.
• ​VOID: ​Stolen ​3. ​To ​WARRANT
• ​EXPRESS: ​As stipulated
• ​IMPLIED: ​o ​Against Eviction: Except i​ f waived.
▪ Buyer ​deprived ​of object:
 • ​Right: ​existing @ the time sale
• ​Seller: ​given opportunity to defend title. ​o ​Against Hidden Defects:
▪ ​Defects NOT Hidden – ​caveat emptor (buyer beware)
▪ ​Defects Hidden ​– caveat venditor (seller beware)

Seller: Defect “If waived” Aware ​(√) ​VOID ​Not Aware ​(√) ​VALID

​ ​NOT ​liable for damages.

▪ ​Defects: If Seller: Good Faith –
VENDOR’S LIABILITY IN CASE OF EVICTION: ​(VICED)

• ​V – Value ​of the thing

• ​I – Income ​or fruits
• ​C – Cost ​of suit which cause the eviction
• ​E – Expenses ​of the contract
• ​D – Damages ​and Interest

→ ​If vendor acted in good faith

IF VENDOR ACTED IN GOOD FAITH:

1. ​Value of the thing sold only

*waiver consciente (​ without knowledge of eviction)

2. ​No liability
*waiver intencionada ​(with knowledge of eviction)

TYPES OF WAIVER

1. ​Waiver Intentionada – s​ eller not liable. ​2. Waiver Consiente ​– seller liable up to

ANIMALS:

1. Disease:
➢ Contagious – ​VOID ​➢ NOT Contagious – ​VALID, ​VOID IF
dies within ​3 Days ​from the date of purchase and existed at that time.

2. Defects: if hidden: BUYERS’ option:

 ​ to annul,
within 40 days. ​➢ ​Accion Redhibitoria –
because object is unfit for the use intended. ➢ ​Accion Quanti Minoris ​– to reduce
price
▪ NO WARRANTY: Caveat Emptor
• Fairs, public auction, livestock sold as condemned.

​ ithin the commerce of

o ​Merchantability: w
man. ​o ​Fit for the purpose:
Seller Liable General: ​(√) ​Specific, if stipulated: ​(√)
FMV @ ​ the time of
eviction.

Page ​8 ​of
21
 RIGHTS OF THE UNPAID VENDOR ▪ ​Y & Z repurchase what W & X
(SELLER): (√)
sold? ​
1. ​Stoppage in transit
2. ​Possessory lien ​3. ▪ ​Y rep. what W & X sold? ​(√)
Resale ​4. ​Cancel ▪ ​Z rep. what W & X sold? ​(√)
✓ ​Adjacent/Ad joint Landowners
OBLIGATIONS OF THE VENDEE • ​RURAL: ​(Agricultural) ​✓ Not
(BUYER): > 1 hectare​, & ✓ ​Buyer ​–
already owns a rural
1. ​To ACCEPT delivery ​2. ​To PAY – • ​RURAL: ​(Agricultural) ​✓ Not
terms ​TERMS: ​Ownership > 1 hectare​, & ✓ ​Buyer ​–
AFTER already owns a rural
deliver
• ​RURAL: ​(Agricultural) ​✓ Not
y
> 1 hectare​, & ✓ ​Buyer ​–
Risk of
already owns a rural
loss on FE
land ✓ ​Can A/AJLO repossess​? ​(√)
A. On TRIAL or Satisfaction Seller Seller (RPD) On • ​URBAN ​(City) ​✓ So situated –
SALE or Return Buyer Buyer (RPD) B. LUMPSUM – majority part: ​no
no increase or decrease in price. practical use. EXCEPT: ​if there
➢ Discrepancy (Estimate < Actual): Should is a right to be exercised. ✓
not Acquired for ​speculation.
exceed 1⁄4. ➢ If seller insists delivery of excess COURT - ​least injury to give access. ❖ ​Right of
between actual and estimate: Buyer’s Pre-emption – ​if not given: ​Right of
Option: Redemption – 2 or more – ​most beneficial.
✓ ​Rescind/Cancel ​contract ​+ PRESUMTION OF EQUITABLE MORTGAGE NOT
Damages ​✓ ​Agree – ​Specific performance FOR SALE: ​❖ When place with ​right to repurchase
C. INSTALLMENT
➢ PERSONAL PROPERTY – ​RECTO is usually
LAW inadequate. ❖ When ​buyer ​retains
✓ ​DR default ​installment: part = PP ❖ ​Buyer e​ xtends period of
• 1 or more – Seller – to redemption. ❖ ​Seller ​retains
exact fulfillment. possession ❖ ​Seller p​ ays taxes ❖
• 2 or more – ​Altern. Remedies I​ . Exact fulfillment Real intention – ​mortgage
– ​S demands payment; Seller – Ordinary CR – NO ✓ ​Higher than debt: excess ​belong
right to foreclose to
❖ ​Public Sale: buyer. ✓ ​Lower than debt: deficiency ​–
proceeds: Buyer pays. ​II. Cancel Sale: ​B returns
interest can sell his undivided object/ Seller
interest. returns payment. ​III. Foreclose the Chattel
Mortgage
➢ LEGAL ​✓ ​Co-owners: ​(e.g. W, X, Y, Z > - deficiency: ​no recovery, stip. – ​VOID -
excess: ​belongs to seller, stip. (B) – ​VALID ​➢
W, X – REAL PROPERTY (Realty Installment Buyer
absolute sale to Buyer Protection
can): Act)
Proportionat ✓ ​RIBPA (MACEDA ​LAW)
e: • ​NOT ​applicable to: ✓ ​Sale or
Financing – ​Industrial
 Lots ✓ ​Sale or financing – ​Commercial rate.
Buildings ✓ ​Sale to tenants – ​Land Reform
• Accept the stated area and reject the
Cod
excess. ​(c) Actual Area is not of the
e
quality ​specified
• Applicable to: ​Residential Lots
DR default installment​: Without
additional interest/penalty. ​Grace
Period​: ✓ Payment: ​<2 years (60
days)
​2 years (1 mo. /yr.) ​✓ ​Available once
every 5 years ​✓ ​Condominium:
• Reduction of price if the inferior
Residential, Commercial, Industrial:
value not exceed 1/10 of the
✓ ​SELLER: cancels – refund: ​✓ ​50% amount
paid ​✓ ​+ 5% ​per year after 5 yrs. ​D. REDEMPTION price/rate agreed upon.
➢ CONVENTIONAL – based on • Rescind if inferior value exceed
stipulation 1/10 of the price/rate agreed upon.
✓ ​Repossession Period:
• ​With Stipulation – ​max. of ​10
DOUBLE
yrs.
SALE:
• ​Without Stipulation – 4 years ​❖ ​Pacto de
retro sale (death of seller), can heir 1. PERSONAL
repurchase? – NO. ​The owner of the undivided PROPERTY
✓ ​Traditio longa manu - ​mere pointing • 1​ST ​Possession in good
object. ✓ ​Traditio brevi manu - ​already in faith
possession of the vendee (buyer) at the time
of sale. Delivery, no longer required. ✓ • In public instrument (construction
Traditio constitutum possessiorium – delivery) – ​public instrument is
vendor (seller) continuous to have preferred over private
possession of the thing not as owner but as instrument ​(same rule with real
tenant ​or ​lessee. ✓
​ ​Emtio spei – ​hope, property)
present thing, uncertain. ✓ ​Emtio re
separate – ​future thing expected 2. REAL
to come in existence, certain. ✓ PROPERTY
Absolutely ​Simulated S ​ ale – • 1​st ​register in good faith
VOID.
• 1​st ​possession in good
faith
• Present the oldest title
SALE OF REAL
ESTATE:
PERSONS NOT LIABLE FOR BREACH OF
(a) Actual < Stated
WARRANTY: ​(SAMPO)
Area
• ​S ​– ​Sheriff
• Reduction of price ​if actual area <
1/10 of Stated • ​A ​– ​Auctioner
• Rescind the sale if ​actual area > 1/10 of • ​M ​– ​Mortgagee
stated (​ b) Actual Area > Stated Area • ​P – Pledgee
• Accept and pay contract
 • ​O – Other persons ​→ to sell by virtue of another agent. → ​Del Credere Agent –
authority in fact/ in law. agent & surety at the
same
time.

AGEN
CY
NOTICE OF
REVOCATION:
- ​founded upon Trust and
Confidence.
→ ​Newspaper, ​to bind 3​rd ​parties: ​must
be done the same manner as ​Notice of
✓ ​By Operation of Appointment EXCEPT: ​if the parties to
Law ​✓ ​Express ​✓ be notified have actual knowledge.
Implied
• ​Principal & Agent both present –
receipt of Power of Atty. Is without OBLIGATIONS OF an
objection. AGENT:
• ​Principal & Agent both NOT
present: ​o ​Acknowledgement ​of 1. To observe instruction of the
receipt of
Principal –
the ​Power of Atty.​ ​o ​Failure to reply:
deemed not have exceeded authority. ​2.
(Acceptance)
To give everything to P, ​even if not
→ If required is to do act: the agent: owing
habitually engaged. ✓ ​Parties:
P. ​3. To make accounting of
• ​Principal – ​capacitated transactions, ​stipulation to the
party. contrary: ​VOID
• ​Agent – ​presumed w/
compensation. → ​If A exceeds authority, s​ till binding
to P,
✓ ​2 or More: object belongs to A = ​authorized to
sell → ​ ​P’s option: ​Consider – A
• ​Principal –
fulfilled his
solidary.
• ​Agents – ​joint. ​EXCEPT: authority or
stipulated – ​solidary.​ EXCEPT: ratify.
acts of dominion which needs
Special Power of Atty. 4. To advance funds:
(×)
NOTICE OF AGENCY’S EXCEPT: ​If stipulated: ​(√)​,
APPOINTMENT: except: ​if P insolvent ​(×)

→ ​Newspaper (published) or Notice AGENT – ​if

​
Letter – authorized:
 ✓ To sell → to mortgage ​(×) ✓​ To mortgage → 1. With Stipulation​: (√) & ​(P designates
to sell ​(×) ​✓ To lend money → to be Agent)
borrower​(×) ✓ ​ To borrow money → to be
or ​2. If not
lender int. = ​current
prohibited:
rate ​(√) ​✓ To sell on credit → obligation to
→ ​1&2: ​notorially, incompetent,
make list = ​of
insolvent.
ALL buyers on credit ​otherwise:
ALL CASH
If Prohi
is VOID
TO APPOINT
SUB-AGENT:

Page ​10 ​of

21
EXTINGUISHMENT OF AGENCY: ​(EDWARD)
• ​E – ​Expiration of term
• ​D – ​Death of P or A: to sell goods = heirs
➢ Take care (GFF) & give notice to P ➢ Agency by operation of law
(necessity). ​D​eath – ​EXCEPT: ​constituted for the benefit of P or A, or 3​rd ​person (stip pour autrui),
I​nsolvency, ​C​ivil Interdiction, and ​I​nsanity.
• ​W – Withdrawal ​by agent
• ​A – Accomplishment ​of purpose.
• ​R – Revocation ​of agency – (P) @ will, with or without cause. ​EXCEPT: ​Valid Reason – ​must be with
cause.
• ​D – Dissolution ​of the firm which established the agency.
→ ​Quasi Traditio – e ​ xecution of Public
Instrument.
CREDIT TRANSACTIONS
Ownership Purpose A. MUTUUM – ​simple
DR To consume ​
loan ​ B. COMMODATUM ​Bailor (CR) To use
Object ​Obligation ​Contracts Exp.
MM ​Money
Fungible
To pay To replace
Onerous Gratuitous
DR
CM ​Non-
fungible If fungible ​(display/exhibi tion)
To return ​Essentially Gratuitous
Ord. ​(bailee) ​Ex-Ord.
Actual use (50% bailee/ 50% bailor)
LOSS WHO SUFFERS?
1. ​In mutuum: ​Res Perit Domino = DR ​2. In Commodatum: ​RPD = Bailor E ​ XCEPT:
✓ ​BAILEE – ​guilty of delay ✓ ​BAILEE – ​uses object of CM:
purpose – different from what was agreed upon. ✓ ​BAILEE – ​guilty of ingratitude –
 able to save. ✓ ​BAILEE – ​allows others to use,
EXCEPT: ​members of household if not prohibited.
✓ ​BAILEE – ​leases to others. ✓ If object ​delivered – ​with appraisal
​ t​ hings:
SECURITY: ​collateral ​(Sangla) –
Objects Possession
• ​Pledge ​Movable CR/pledgee
• ​Antichresis ​Immovable CR/
antichretic CR
Movable
• ​Mortgage ​➢ ​Chattel ​➢ ​Real Estate ​
Immovable
DR/ mortgagor DR/ mortgagor
1. PLEDGE:
✓ Similar to Recto Law
• Foreclosure then Public Sale → ​with notice: ​→ ​Deficiency or excess: ​belongs/ suffered by CR.
• ​Pledge (CR) – ​ use object = ​NO, E
​ XCEPT: If stipulated or necessary to preserve value.
• ​Bidders:
Highest Bidder(s)? ​Only 1 ​(×) ​EXCEPT: after 2​nd ​notice M
​ ore than 2 (​ √) T
​ ie (bet. DR & 3rd ​
​ person)
(√) DR
• Pledge is ​indivisible ​(on > 1 object) applicable even to heirs.
• Accessory follows Principal.
2. CHATTEL MORTGAGE ​(Movable)
• ​Foreclosure: f​ rom loan: →​Deficiency: D ​ R pays →​Excess: M ​ ortgagor (DR) owns
• ​Guaranty – ​insurer of debt, subsidiary liable, with benefit of excussion, EXCEPT if waived.
• ​Surety – ​insurer of prompt payment, solidarily liable, no benefit of excussion.
• ​Deposit – ​safe keeping.
➢ ​Judicial – ​movable or
immovable. ➢ ​Extra-judicial – ​movable,
agreement.
Page ​11 ​of ​21
➢ ​Necessary – ​in • ​Fixed Term – ​dissolved, if partnership
compliance continues, it will be ​converted i​ nto
with law. (e.g. partnership at will.
guest-hotels, • ​Fixed Term – ​dissolved, if partnership
passengers-common continues, it will be ​converted i​ nto
carrier) partnership at will.

3. By Estoppel 4. Life ​• ​At will – ​if • ​Fruits/Income ​DR CR-to be applied

DR’s
partners agree → continue
obligation.
• ​Taxes/expenses ​DR CR-to be charged
Real
Estate to
Mortgage DR
tichresi
3. REAL ESTATE
MORTGAGE
• ​Possession ​DR CR/pledgee
 ✓ ​Accessory contract, ​mortgagor landlord
can sell t​ he object even ​without • ​I – ​Interest ​to
​ f the mortgagee.
consent o loan.
​ y
• ​D – ​Debt b
installment.
PARTNERS
HIP PERSONALI
TY:

✓ ​2 or more persons bind to contribute

money, property or industry to a common 1. De jure – ​exist in fact and in law,
​ ​2
fund with intention of earning profit. ✓ contract:
or more persons – exercise same • ​P3000 or more – ​P.I. & reg. SEC,
profession otherwise: De Facto
(GP
• ​Immovable – ​description, signed by
P)
parties, P.I., registered to SEC, ​otherwise:
VOID ​2. De Facto – ​exist in fact, not in law
NO PRESUMPTION OF LIABILI
PARTNERSHIP: TY:

1. 3​rd ​persons – ​not partners to each 1. Unlimited – ​General: ​ALL

other, partners.
nor parties to 3​rd ​person, EXCEPT: • ​Original – ​up to ​separate
estoppel: property.
• ​In pais – ​silence, declarations, • ​Newly
made others believe.
Admitted:
• ​By Deed – ​with
✓ ​Existing at the time of
documents.
admission – ​up to C​ ontributed
• ​By Laches – ​by passage of Cap.​ ​EXCEPT: stipulation. ✓
time. ​2. Arising after admission – ​up to
Co-ownership/Co-possession
separate ​property. ​2. Limited – a
​ t least 1
→​Purpose​: enjoyment/preservation ​3. general partner; at least
Sharing of gross returns 4. Prima Facie
1 limited
presumption – sharing of net
partner.
returns, ​EXCEPT:
​ ontri.Cap.,
• ​Limited Partner – ​up to C
(GAWID)
EXCEPT: Liable up to Separate Prop.
• ​G ​– Payment of If:
Goodwill
✓ Participate in management ✓
• ​A ​– ​Annuity ​(widow or Allow your partnership to use
representative) your name in the Partnership’s
of a firm name, EXCEPT: ​o ​Such
partner. name is also name of
• ​W – ​Wage: ​employee or ​Rent: the general partner. ​o ​Name
 is already used when he Perit Domino” L
​ OSS borne by PARTNERSHIP:
joined the partnership. 1. ​If the thing contributed is ​fungible. ​2.
Contributed for the purpose of ​selling.
SHARE IN THE CONTRIBUTION: ​(As to 3. ​If the thing ​can’t be kept without
Object) deterioration
.
→ ​Universal – ​not allowed to husband &
wife
CLASSIFICATIONS OF
→ guilty of concubinage/adultery. ​1.
PARTNERS:
Universal Partnership of Present
Property (UP-PP) – ​contributed to the
partnership. 1.
• ​Fruits ​– accessory follows Contribution
the principal – partnership. • To effect ​delivery​; day agreed
• ​Future upon/ without need-demand.
Property: • To ​warrant ​the thing – against
→without stipulation – eviction.
partners →with stipulation – • Make additional ​contribution ​–
ownership: ​Partnership imminent loss or/& contribution
(Others) = VALID,​ EXCEPT: necessary to save partnership.
Inheritance, Legacy, ✓ ​Capitalist: YES, ​EXCEPT:
Donation, EXCEPT: ​fruits = stipulation or insolvent.
VALID Otherwise – can be compelled
to sell his interest. ✓
2. Universal Partnership of Profits Industrial: NO, ​EXCEPT:
(UP-P) ​Highest Bidder(s)? ​Contribution stipulation
Ownership: ​Partner .
Right to Use: ​Partnership • Make ​Alterations ​–
Future Property ​Ownership: ​Partnership Immovable
Gratuitous: ✓ ​Minor ​(not important) ​–
Partner administration – ​YES ​✓ ​Major
*if through industry, FP will (important) – ​NO, e​ ven
go to partnership
beneficially, ​EXCEPT​: stip.

Page ​12 ​of

2. To engage in another
21
business

→ ​Particular (General Partnership) – • ​Capitalist ​→ Not similar: Y

​ ES
allowed →similar: ​NO ​EXCEPT: stipulated.
Otherwise: ​– profit: partnership
to husband &
wife – Loss:
partner
• ​Industrial ​→similar or not: N
​ O ​EXCEPT:
LOSS due to FORTUITOUS EVENT – ​“Res
stipulated Otherwise: ​Partner’s option: (√) ​✓ Proportionate ​(√) EXCEPT:
​ rp
(​Expulsion o ​ rofit​=Partnership) + • Onerous due to Partners.
Damages
• Due to Partnership is not yet due.

​ ​person​, RULE: Joint ;

3. Liability – ​3rd • Partner when received payment
EXCEPT not a managing partner.

(SOLIDAR
Y): PROPERTY
RIGHTS:
• ​Partner: ​course of business,
receive money = misappropriation
1. ​To specific partnership profit.
• ​Partnership: ​course of business,
2. ​Interest – surplus –
receive money =
profit/loss:
misappropriation
• ​If with stipulation: ​→ if ​VALID
• ​Commit torts:
as stipulated: (a) Share in P/L
Quasi-delict
(b) Share in profit –
stipulation.
→ In the eyes of the 3​rd ​persons, partners
→​ALL ​Partners
are
(​√)
equally liable
→ Share in loss – w/out stipulation (c)
(joint)
Exempting – partner:
→
→ Profit ​(×) ​→ Loss
Preference:
(×) →
​ EXCEPT:
→ Partnership CRs – partnership’s
industrial
assets. →Separate CRs – separate
assets → ​Receipt of payment ​(partner • ​If without stipulation: ​➢ ​Capitalist:
and Capital Contribution ➢ ​Industrial

partnership → Profit – ​interest or just equitable

creditors): share (JES) → ​ Loss – ​exempt → if
silent: Share of Capital ​– Partner
with least Capital Contribution. ➢
APPLICATION OF
Capitalist-Industrial Partner – ​2
PAYMENT
different rights in the
• If DR assigns application share.
of payment.
• If DR waives AOP, if 3. ​To participate in management – Who
partner: will
be managing➢ ​Managing
partners? ​(d)partner
One –
✓ Partnership Credit ​(√) appointment
✓ Proportionate ​(√) ​➢ * Article of Partnership ​–
Not managing partner power is irrevocable ​without
✓ Partnership Credit ​(√) ​✓ Own Credit just cause.
 Page ​13 ​of
21
→ can ​EXECUTE ALL ​acts of admin. = ​GOOD FAITH, ​despite objection of other partners ​* Not Article of
Partnership ​– power is revocable. ​(e) 2 or more
* With stipulation –​should act as 1, can’t be alleged. ​EXCEPT: ​grave/ irreparable injury to partnership. ​* Without
stipulation – ​should act as 1, anyone can act, ​EXCEPT​:
o ​If managing partner objects –
​ artners ​if tie. ​o ​Controlling interest.
majority of partners, ​if tie. ​o ​Controlling interest, ​if tie. ​o ​Majority of ​ALL p
→ ​No one Appointed – ​Mutual Agency RULE:
✓ Every partner/ agent/ partnership,
anyone can act EXCEPT:
▪ A partner objects – majority of all partners, ​tie – C.I.
▪ ​Unusual ​Acts: Acts of Dominion, requires consent of ALL partners, EXCEPT: ✓ A partner has been
authorized. ✓ Bus. Of Partnership was
abandon.
UNUSUAL ACTS: ​must be presented to ALL partners ​(SACRED.D)
• ​S ​– ​Submit ​partnership claims/ liability to arbitration.
• ​A – Assign ​partnership property – trust = CRs
• ​C – Confess ​judgment
• ​R – Renounce ​/ Abandon partnership claims.
• ​E – Enter ​into compromise.
• ​D – Dispose ​goodwill.
• ​D – Do ​any act = impossible= partnership continue business.
DISSOLUTION:
1. Without Violation ​of partnership
agreement.
• ​Term expires
• ​By will – ​one, some, or all partners
• ​Expulsion – ​a partner
• ​Fulfillment – ​purpose
2. With Violation – ​partnership agreement
3. Quo Warranto – ​de facto
• ​Direct Attack – ​office of the Solicitor General
• ​Collateral Attack - ​(×)
4. Legislative Act – ​if Congress possess a ​law
which makes business of partnership illegal.
5. Loss of the thing
• ​To be contributed – ​RPD = ​LOSS ​→UP-PP: (​√) ​→UP-P: (​√)
• ​Contributed only ​usufructuary, ​LOSS = P ​ artner, ​EXCEPT: ​o ​Fungible ​o ​To be sold ​o ​Can’t be kept
without
deterioration →UP-PP: (​ ×) ​→UP-P: (​√)
6. D – Death, I – Insolvency, C – Civil
Interdiction, I – Insanity, J Judicial ​(DICI-J)
LIQUIDATION: ​Winding Up?
(a) With Stipulation – ​as stipulated ​(b) Without Stipulation – ​not guilty. All dead-
legal rep of last surviving partner.
General Limited
*Outside CR *Outside CR *Inside CR *Limited
-obligation -share in profits, if any -return on contri. cap. *Return on Contributed Cap.
*General -obligation -share in profits, if any -return on contri. cap. *Share in Profit, if any
CORPORATION
✓ ​artificial being created by operation of law with the right of succession and powers (express, implied,
incidental), attributes and properties expressly authorized by law incidental to its existence.
Artificial being = person = citizenship = ​THEORIES:
Page ​14 ​of ​21
• ​Incorporation ​– laws ​observed office ​4. ​Incorporators: ​names,
in companies ✓ ​Philippine Laws nationality and
= Domestic ✓ ​Foreign Laws residence 5. ​Capital: ​Profit =
➢ Resident: ​E.T.B. ​➢ stocks/shares 6. ​Board of Directors:
Non-resident: ​N.E.T.B. Names, Nationality &
• ​Control test ​– citizenship of Residenc
owners. e.
• ​Domiciliary ​– principal
office. KINDS OF
SHARES:
KINDS of
CORPORATION:
1. Capital shares 2. Founder’s share
1. Public 2. – exclusive right ​3. Redeemable
Quasl-public: “as if” 3. shares ​(Callable Shares) –​
Private
with or without RE, provided
such redemption will ​not ​result
INCORPORATO to:
RS:
➢ Insolvency of the
corporation ➢ Difficulty in
1. Of legal age 2. At least 5 but not more paying maturing
than 15 ​(natural obligations ​4.
person) ​3. ​Majority: ​Resident of the Preferred shares
Philippines ➢ Dividends – CP, C/NP, NC/P, NC/NP ➢
Assets ​5. Common shares ​(Gambler’s
Primary Franchise​: right to organize a Shares) –​
corporation. below par (x) ​6.
Promoter share
ARTICLES OF NOT ALLOWED to HAVE NO PAR:
INCORPORATION: (BITPuB)

1. ​Name: ​neither similar, nor • ​B ​– Banks

confusingly • ​I ​– Insurance companies
similar to existing corps 2. ​Purpose: • ​T ​– Trust companies
principal and secondary ​3. Principal
• ​Pu ​– Public institutions
 • ​B ​– Buildings and loan corporate
associations property
.
TO VOTE: ​with or without v​ oting rights,
they can vote in: ​(A-ASIIMID) ❖ ​Treasurer’s Affidavit: ​at least
25% of:
➢ ​MAJORITY of B.O.D & MAJORITY of ➢ ​Authorized Cap. Stock ​=
Sh./M; par /
ACS = ​no par ➢ ​Subs. Paid ​=
A ​– ​Amendment/Adoption: ​by money/property
laws; (@FM
EXCEPT: p ​ ower to amend by V)
laws is already delegated to the
B.O.D by 2/3 votes of Sh. /M. SECURITY of EXCHANGE and
COMMISSION:
➢ ​MAJORITY of B.O.D & 2/3
Sh./M: •
REJECTS:

A ​– ​Amendment ​of articles in 1. Purpose: ​unconstitutional,

Incorporation ​S ​– ​SLEMP ​of all or illegal/
substantially all of immoral, contrary to gov’t. ​2. ​Treasury’s
corporate profits property. ​I –
​ Affidavit: ​False 3. Failure to meet
Incurring​/creating/increasing minimum ​Filipino
bonded ownership. ​4. Failure to
indebtedness. ​I ​– ​Increase​/decrease observe ​form
of capital stock ​M ​– ​Merger ​or prescribed. ​5. Failure to submit:
consolidation ​I ​– ​Investment ​to favourable
another company ​D ​–
Dissolution

S ​– Sales / ​B ​– Lease / ​E ​– Exchange / ​M ​– Mortgage / ​P

– Pledge

➢ Of ​all or substantially all

Page ​15 ​of

21
• ​ACCEPTS: commence operation ​within 2
(Approved) years​; otherwise
✓ Then ​issue “Certificate automatically dissolve.
of
Incorporation” ​(birth of Corp.) ✓ Exercise COMMENCE
Secondary franchise ✓ To OPERATIONS:
ELECTI 1. QUORUM ​– as required by
ON: laws
✓ Absence: ​1⁄2 + 1
1. BOARD: (Majority)
• ​Directors ​– by
stockholders 2. COMPENSATION ​– reasonable (per
(Cumulative or straight (√)) ​✓ ​Not diem &
convicted by final judgment = allowance
imprisoned: ​more than 6 years ✓ ​ s)
Not ​violated corporate code within ​5
✓ if given – ​max 10% of NI before
years ​prior to election. ✓ Must ​own at IT of
least 1 share, ​EXCEPT: ​→ by-laws
preceding
require greater or other number
year
otherwise.

3. To Create EXECUTIVE
• ​Trustees – ​non-stock
COMMITTEE
(Cumulative(x)) ✓ ​ ​Not ​convicted by
final judgment = imprisoned: ​more than ✓ If allowed – by laws
6 years ✓​ ​Not ​violated corporate code ✓ at least majority:
within ​5 B.O.D
✓ to exercise such power as may
years ​✓ Must be a member of the
be
corp.
delegated by
B.O.D
2.
OFFICERS:
EXCE
• ​President ​– member of
PT:
B.O.D ✓ Presides meeting of
▪ Acts that require shareholders’
shareholders & B.O.D
approval
Except: if in the By-Laws.
▪ Amend by laws
• ​Secretary ​– resident citizen of
the Philippines. ▪ Distribute cash dividends
(Impliedly include stock
• ​Treasurer ​– no
dividends)
requirement.
▪ Fill up vacant seat in the B.O.D

→ ​Incompatible OFFICE: ​one

VACANCIES:
person:
Grounds:
P&S /
P&T ➢ Removal, expiration of
terms,
increase ​in # of BOD = SHs ➢
BOARD OF
Others: remaining members of
DIRECTORS:
 constitute ​quorum ➢
BOD: ​✓ ​With quorum ​= Vote of such D does ​not
necessary or
BOD
approval
✓ ​Without quorum ​= Otherwise: ​needs
SHs SHs approval – ​2/3
• ​Management: ​1. Managing 2.
▪ Amend acts previously approved by Managed; → Majority of BOD and
the B.O.D. majority of SHs:
EXCEP
→ B.O.D declares cash dividends while T:
stock dividends needs 2/3 of shareholder’s
approval.
▪ Shareholders: ​o
Substantial = ​20% of
4. To ENTER
outstanding Sh. ​o ​1/3
CONTRACTS:
Outstanding Sh.
• ​Regular/Ordinary:
​
✓5With
→ ​Max of 3​rd, ​E
years​ person:
XCEPT: ​natural
​ BOD ➢
➢ ​with quorum = resources.
​ SHs ✓ With
without quorum =
own Directors: 5. To ACQUIRE OWN
➢ Fair and reasonable ➢ SHARES:
Presence of such Director
not ​necessary to
▪ Interlocking Directors

✓ Provided corporation has RE,

EXCEPT:
redeemabl
e.

Page ​16 ​of

21
✓ To remove ​DELIQUENT ​subscription:
Subscriber:
▪ ​Not delinquent​: rights
o ​vote (√) ​o ​dividends (√)
▪ ​Delinquent: ​rights
o ​vote (x) ​o ​dividends (√)
➢ ​Cash – ​ to be applied to
unpaid subscription. ➢ ​Stock –​ to be withheld
until full payment of subscription. ​To qualify as BIDDER, pay:
▪ unpaid ​subscription,​ unpaid ​expenses, interest
▪ ​HIGHEST bidder ​– least # of shares
▪ ​NO bidders ​– corporation ✓ To remove ​FRACTIONAL ​shares ✓ To pay ​DISSENTING ​shares
→ Appraisal right – payment = ​FV
of shares o ​ ​Options:
→ To accept will = 1/3 → To exercise appraisal right,
EXCEPT: ​* Act=abandoned by corp.
/ rejected-SEC
o ​APPRAISAL COMMITTEE ​– 3 members,
Chosen BY:
▪ (1) By SHs ​(Dissenting)
▪ (1) By Corp.
▪ (1) By rep. of both Corp and SHs
o ​Who bears expense of Committee?
- recorded amount:
▪ 1M = ​SHs
▪ more than 1M = ​Corporation
6. To ISSUE NEW SHARES ​– from unissued
shares. ✓ SHs given PRE-EMPTIVE right, ​EXCEPT:
▪ In ​compliance ​with law → required public offering of shares.
▪ To ​acquire ​property needed by corporation.
▪ To ​pay ​creditors.
7. To OBSERVE:
✓ ​Threefold duties: ​(OLD)
• ​O ​– Obedience to by laws
• ​L ​– Loyalty to the Corporation
• ​D ​– Diligence
✓ ​Underlying Doctrines:
• ​Trust Fund Doctrine: ​capital stock = separated by assets ✓ Do not issue shares ​until
​ n
fully paid. ✓ to ​be not liable o
watered shares: ➢ ​object in writing – ​ send
to secretary
• ​Piercing the Veil of Corporate Functions: ​SH’s CRs – can’t collect from corp. ​EXCEPT: ​using corp. to
commit fraud.
• ​Special Circumstances Doctrine – ​ Duty of Disclosure to SHs what’s happening to the Corporation.
• ​Doctrine of Bus. / Corp. Opportunity – ​ related to loyalty to the Corporation.
• ​Doctrine of Limited Capacity – ​ all acts must be ​within​:
(express, implied, incidental) =
intra-vires
outside = ​ultra-vires
→​

(a) Legal
✓ ​executed ​– can be
​ y stockholder ✓ ​executory –
ratified b ​ should be abandoned ​(b) Illegal ​– cannot be ratified
✓ ​those involved;
liable (members of BOD)
SUITS: ​(Corporation can sue and can be sued)
• ​Corporation (de jure) vs. 3​rd ​person or SHs
• ​SHs:
✓ ​Derivative​: SHs vs. Board ✓ ​Individual:​ SHs vs. Corp ✓ ​Representative​: SHs vs. Corp
​ ​party vs. Corporation
• ​3rd
✓ 2 or more – same class = ​class suit
MEETINGS:
1. BOARD:
• ​Regular ​– once a month
• ​Special ​– as need arises
Page ​17 ​of ​21
• ​Place ​– anywhere
• ​Attendance ​– ​personal (√) proxy (x)
2. SHAREHOLDERS:
✓ ​Regular ​– once a year, as fixed in by
laws, if silent, any day in April ✓ ​Special ​– as need arises ✓ ​Place ​– within city / municipality of
Principal Office
✓ ​If practicable​: Principal Office ✓ ​Attendance ​– ​personal (√), proxy (√)
Foreign Corporations
With License
Without License ​1. Sue? (√) (x), EXCEPT: ​Violation of property rights ​2. Be sued? (√) (√)
Intellectual property rights:
​ ​Copyright ​✓ ​Patent
✓ ​Trade Name/Mark ✓
DISSOLUTION:
1. Automatic:
• ​Expiration of term as fixed in the Articles of Incorporation ​→ Max. term = ​50 years EXCEPT: ​if
intended, max of 50 years per extension.
• ​Non-use → ​ ​failure ​to commence within 2
years from issuance of ​Certificate of Incorporation
2. Grounds:
• ​Non-use → ​ ​Failure ​to resume operation within
5 years from Stoppage of Operation.
• ​Legislative Enactment
• ​Quo-Warranto ​– Office of the Solicitor General/ direct attack.
• ​Amendment of Aol ​– shortening life of corporation.
• ​Judicial ​– by order of the court.
LIQUIDATION: ​winding up = 3 years
✓ ​ALL ​actions for/against Corporation – be filed ✓ ​After 3 years -​ pending actions – receiver
→ To reserve enough funds to meet pending
act, ​EXCESS: ​Shareholders.
NEGOTIABLE INSTRUMENT
PURPOSE:
• Facilitate exchange
• Substitute money
• Accommodation of Secondary Contracts
• Increase credit circulation
PARTIES:
Promissory Note Bill of Exchange
• ​Primary Liable ​Maker Acceptor
Indorser Drawer
• ​Secondary Liable ​
REQUISITES:
1. In writing & signed by maker or drawer. ✓ ​ ​True Name: ​complete/
abbreviation/ misspelled ✓ ​Assumed Name: ​trade/ business/
alias ✓ ​Symbols/signature
2. Contain unconditional promise or order to
pay sum certain in money.
• ​Subsequent events does not cure non-negotiability ​of Non- negotiable Instrument.
• ​Sum Certain:
✓ With interest ✓ Installment: stated, with acceleration clause ✓ ​If silent: c​ hoice: holder
(N) / DR (NN) ✓ With dollar exchange rate
whether fixed or current ✓ With cost of collection or
Atty.’s Fee
3. Payable to:
• ​Order ​- of a specific person
- Specific person or order ➢ ​PAYEE:
- (√) B - (√) B & C (both should
indorse) - (√) B or C (either can
indorse) ➢ ​INDORSEE:
- (√) L / L 60.00 (×) / L
40.00 remaining unpaid - (√) L & M
Page ​18 ​of ​21
- (×) L 50.00 & M overdue ✓ ​Fixed Date ​✓ ​Determinable
50.00 - (√) L or M Future time ​– time
• ​Bearer certain to
- so expressed come.
bearer - Specified ❖ ​Time ​-
person or KNOWN:
bearer. - Order of fictitious before/at/upon/after - ​UNKOWN:
person. - Does not purport to name any at/after
person. - Only or
last 5. Bill of Exchange
indorsement: (B.of.E)
Blank - Drawee must be named or indicated
with
4. Payable reasonable
on: certainty.
✓ ​Demand ​– expressed, no
date,
 maturity.
DRAWE
E: 2. Real Defense ​– can be used against
any
- ​(√) ​W - ​(√) ​W and Y - ​(×) ​W or Y
holder ​(HIDC/HFV) ​❖ Incomplete and
(alternative) - ​(×) ​W, in his absence
undelivered ❖ Minority or other form of
Y (succession)
incapacity ❖ Forgery ❖ Fraud in Factum
or in Esse Contractus ❖ Discharge at or
• ​AGENT: ​to be not liable: after maturity ❖ Illegality of contract ❖
✓ Sign within scope of Material Alteration (if silent: Personal)
authority ✓ Disclose-principal
✓ Indicate in what capacity TO
NEGOTIATE:
• ​Agent with limited
authority: • ​Order ​– indorsement ​+ delivery
​
✓ ​Sgd. Name: ​Per Procuration / Per
• ​Bearer ​– delivery → A person who
Proc.
negotiated through
/ P.P. /
delivery ​is ​only ​liable to the
p.p.
party whom he presented the
note.
DEFENS
ES:
INDORSEME
NT:
1. Personal
Defense
1. Special ​Pay to C (B) 2 ​ . Qualified ​Pay to C, w/o
(a) Can be used ​ _________ (B)
recourse (@ your own risk) (B) ​3. Blank _
against: 4. Conditional ​Pay to C, If..... (B)
✓ HFV whose title did not Pending fulfilment of the
come condition:
from a HIDC ✓ HFV whose title come
from a • ​Maker ​– o
​ ption to disregard
HIDC, but he is party to the defect. condition and pays:
(b) Cannot be used against: ✓ Obligation extinguished ✓
✓ HIDC ✓ HFV whose title Without incurring any liability
came from a ✓ C holds money in trust of B
HIDC not a party to the until C fulfills condition
defect.
❖ Incomplete but delivered ❖ Complete • ​Maker ​– m
​ ay honor/respect condition
but Undelivered ❖ Absence or failure of → Maker can refuse to pay, such
Consideration ❖ Illegal Consideration refusal
❖ Fraud Inducement ❖ Insertion of
wrong date/ discharge by
payment before
 protest/presentment/notice of
5. Facultative ​Pay to C, notice of Dishonor waived, (B) dishonor/ Protest

• ​WAIVER: ​(a) face of instrument: 6. Restrictive

binds all parties (​ b) indorsement: • Prohibits further negotiation of
binds indorser Instrument: ​Pay to C only (B)
• ​Waiver of

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• Constitute Indorsee as mere a
Agent: party secondarily liable ​if he is
Pay to C for collection an accommodation party.
(B)

• Vest title to the Indorsee in trust for

Another: ​Pay to C in trust for D (B) ADMISSIO
N:

• ​MAKER ​– admits:
INTERVENING PARTIES: ​(there is
Compensation) ➢ Existence & Capacity of the
Payee ➢ I will pay according to the
→ ​Discharged =​ tenor of
compensation → ​Can be the
revived (negotiation): instrument.
​ ew party ​(√) p
(√) n ​ rior party ​(×)
intervening party – in order to • ​DRAWEE/ACCEPTOR ​–
avoid multiplicity of suits admits:
➢ Existence & Capacity of the Payee
STRIKE OUT ➢ Existence, Capacity, and Authority
(INDORSERS): of
- Only allowed if: the Drawer ➢ Signature of the drawer
genuine ➢ ​“I will pay according
to tenor of
(a) ​No prior parties ​(new parties only) ➢
Never ​strike out the PAYEE ➢ ​Only if ​the acceptanc
last indorsement is blank. e.”
EXCEPTION: ​Renegotiation
(b) Prior parties • ​DRAWER ​– admits:
➢ Intervening parties ​not ​liable ➢ Evidence and Capacity of the
anymor Payee. ➢ If Presented →Accepted
→ Paid:
e.
If Dishonored → Necessary
Procedures Observed → ​“I will
→ A party primary liable can collect from
 pay.” ​ ther than
(a) ​Payable elsewhere o
WARRANTIES the
(Liabilities)
usual place/business of Drawee ​(b)
Indorsers Qualified General ​ payable ​after ​sight.
Fix maturity –

(Special
)
KINDS OF
• Indorsement is genuine
ACCEPTANCE:
in all aspect it purports to
be
(a) Absolute (b)
(√) (√)
Qualified ​– accepted
(√) (√)
➢ ​Payable @: ​place
➢ ​Payable if:
• Good title ​(√) (√) condition
• ​Cap​acity of primary
parties
(√) (√) DISHONORED BY
(√) (√) NON-ACCEPTANCE:

• ​N​o ​ y N.A. to
1. To give Notice of Dishonor b
PSL
knowledge/defect/value within 24 hours​; ​EXCEPT: ​N.O.D. not
less required On due date: ​PFP (×) /
(√) - collect from PSL (√)
(√) -

✓ ​PFP ​→ ​accepted ​→ ​due

date:
• ​I​nstrument is valid &
subsisting o ​PFP (×) ​o ​Collect from PSL
- (√) (√) ✓ ​Dishonored by
- (√) Nonpayment:
o ​Collect from PSL (×) ​o
• If ​presented → accepted Give N.O.D. by NP to PSL (√)
→ paid → if dishonored –
“I will pay.”
2. To protest
- (​ √)
- (​ √) a. Notary Public (NP) b. Absence of
NP – ​rep. & 2 witnesses

BILLS I
→ bill
PRESENTMENT FOR ACCEPTANCE
(B.of.E)

- Unless stipulated.
 - Every part accepted in the hands of
a
HIDC is ​considered
bill.

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21
PRESENTMENT FOR
PAYMENT

PRESENTMENT OF
CHECK

PRESENTMENT OF BILL OF
EXCHANGE

NOT COVERED BY NEGOTIABLE

INSTRUMENTS LAW (NIL): ​(a) ​Warehouse

receipt: ​not sum certain in

money. ​(delivery of goods) ​(b) ​Bill
of Lading: ​goods not money ​(c)
Letter of Credit: ​Payable to specified
person. ​(d) Postal Money Order: ​Payable
to specified
person. (e) ​Certificate of Stock: ​not
sum certain in money with condition # of
Shares. (f) ​Quedan: ​sweet (g) ​Treasury
Warrant: ​Subject to Condition.

DISCHARGE OF NEGOTIABLE
INSTRUMENT:

1. Instrument
(PP-IPO)
✓ ​Payment ​in due course
by/on
behalf of Principal DR. ✓
Payment ​in due course by
 accommodated party. ✓
Intentional Cancellation ​of the
Instrument. ✓ ​Principal DR ​becomes the
holder
@/after maturity ✓ ​Other means:
discharge-simple
obligatio
n

2. Person secondary liable

(DD-IVER)
✓ ​Discharge ​of instrument ✓
Discharge ​of Prior Party/ Payment
made by prior party ✓ By a
valid tender of payment ​–
prior party ✓ ​Intentional cancellation
of his
signature ✓ ​Release ​of the Principal DR ✓
By ​extension ​of the time payment.

-NRB
F

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