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OBLIGATIONS
– Juridical necessity to give, to do, or not to do. TIME Obligation to Deliver Arises:
 With Suspensive Condition – from the time
ELEMENTS OF OBLIGATION: the condition is fulfilled.
 Active Subject – Creditor/Obligee  With Period; with suspensive effect – when
 Passive Subject – Debtor/Obligor period arises.
 Prestation – Object/Subject Matter  Without period and condition – upon
 Efficient Cause – Legal/Juridical Tie perfection of the contract (meeting of
minds).
SOURCES:
1. Law – there should be a law, can’t be DELIVERY:
presumed. CONSTRUCTIVE:
2. Contracts –  Traditio Symbolica
Meeting of minds > Offer > Accepted  Traditio Longa Manu – mere consent or
3. Quasi-Contracts – no meeting of minds
agreement.
a. Solutio Indebiti – undue payment.
b. Negotiorum Gestio – unauthorized  Traditio Brevi Manu – objects is already in
management. the hands of the debtor.
4. Delicts (Crimes) - acts or omissions
 Traditio Constitutum Posesorium – vendor
punishable by law, if accused:
a. Convicted – civil & criminal continues in possession.
obligation.  Quasi-Traditio – with documents.
b. Acquitted – civil obligation only.

 Did not commit act, no civil obligation.

DAMAGES – harm done and the sum of money that
can be recovered.
5. Quasi-delicts – tort, culpa, negligence.

SOURCES:
Start Result
1. FRAUD (DOLO)
Quasi-Contracts Lawful Benefit a. Causal Fraud (Causante) – voidable
Quasi-Delicts Lawful Injury/Damages b. Incidental Fraud (Incidente) – valid
Delicts Unlawful Injury/Damages
2. NEGLIGENCE (CULPA)
TO GIVE: (POSITIVE, REAL) a. Contractual – with existing contract.
 Whether specific or generic, you can’t go to b. Aquiliana – without existing contract.
the court for specific performance in case of c. Criminal – with or without existing
refusal. contract.
 Specific – CAN’T be extinguished through
other parties. DILIGENCE:
 Generic – CAN be extinguished through  As required by law
other parties.  As stipulated by parties
 Absence of 1 & 2, diligence of a good father
TO DO: (POSITIVE, PERSONAL) of a family.
 Specific performance by court NOT allowed DEGREE OF DILIGENCE
in case of refusal, ONLY damages are Stipulated by Increase Valid
parties Decrease Void
allowed because of breach of contract.
Common Stipulated: GFF Void
Carrier Required by Law: utmost care Extraordinary
NOT TO DO: (NEGATIVE, PERSONAL)
Agency Req. by Law: extraordinary Valid
 Anything done shall be undone at the
Stipulated: GFF Diligence GFF
Debtor’s expense.

GENERAL RULE: “No one is liable in

FRUITS:
fortuitous events.”
 Determinate thing: right belongs to Creditor
from the time the obligation to deliver
Except:
arises.
 When law so provides

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 When parties stipulate RIGHTS OF CREDITOR:

 Nature of the obligation requires
assumption of risks. (Example: 1. Exact fulfillment/to demand payment =
Insurance) court.
2. Exhaust the properties of debtor. EXCEPT:
 Res perit Domino from the execution
“The thing perishes with the owner” Writ attachment → Public Sale → Proceeds
3. Accion Pauliana – to rescind. To impugn
3. DELAY (MORA) (question/challenge) the acts of the debtor.
a. Solvendi (Debtor)  Designed to defraud creditor.
 Ex re – real obligation, to give.  Creditor deprived right to enforce
 Ex persona – personal obligation, to claim.
do. 4. Accion Subrogatoria – to exercise rights of
b. Accipiendi (Creditor) the Debtor.
c. Compensatio Morae – both debtor and
creditor. ACTS OF DEBTOR:
d. Contravention of Tenor – violation of To rescind:
terms. Donates (gratuitous) Donee: BF (√) GF (√)
Sells (Onerous) Buyer: BF (√) GF (×)
GENERAL RULE: “No demand. No delay” EXCEPT: If there are remedies.
Except:
 When law so provides KINDS OF OBLIGATION:
 Contract stipulates 1. Demandable at once
 Time is of the essence  Pure/Simple – no period/condition
 Demand would be useless  Resolutory – with condition.
 Reciprocal obligation  With Resolutory Effect – with
period.
KINDS: (MENTAL) 2. With a period
 M – Moral  Benefit of both creditor & debtor.
 E – Exemplar  Cannot be demanded before due
date, court can ONLY fix period.
 N – Nominal
3. With Condition
 T – Temperate 4. With Condition and period
 A – Actual/Compensatory
“WILL IT HAPPEN?”
 L – Liquidated Fulfillment of Obligation
Before After
Liab./Responsibility Demandable Court-Reduce MAYBE (not sure):
condition
Fraud √ ×
 Suspensive No obligation Obligation arises
Negligence √ √
 Resolutory Obligation Obligation end
arises (ext.)
DEBT: YES (sure): Period

Oral Principal (√) Interest (×) VOID  Condition must not be impossible and not
Written Principal (√) Interest (√) contrary to law, morals, public policy, public
order, and good customs.
 “No delay. No penalty.”
 The creditor can’t be compelled to accept FULFILLMENT OF CONDITION:
partial payment. EXCEPT: If there is a 1. Potestative – depends on sole will of one of
stipulation. the parties.

 Prima Facie – “Disputable/Assumption” If Debtor: Suspensive: VOID Resolutory: VALID

If Creditor: Suspensive: VALID Resolutory: VALID

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2. Casual – depends on chance (valid) or third 2 OR MORE DEBTOR OR CREDITOR:

party (valid).
3. Mixed – depends on: 1. JOINT – “to each his own”
 Will of one of the parties & third  If silent, presumed joint.
party (VALID). 2. SOLIDARY – “all for one, one for all”
 Will of one of the parties & chance  When the law so provides
(VALID). or stipulated.

 DEEMED FULFILLED PRINCIPLE: “When the MODE OF EXTINGUISHMENT OF OBLIGATION:

debtor voluntarily prevented the fulfillment
of the condition, the condition is deemed 1. PAYMENT OR PERFORMANCE
fulfilled.”  By Whom:
 Debtor, representative/agent,
Pending fulfillment; rights estate (executor/admin.)
Principal Fruits  Third Person (interested in
Resolutory CR DR fulfillment of obligation liable
Suspensive DR CR if principal debtor can’t pay)
 To Whom:
SUBJECT MATTER: (Before Fulfillment)  CR., representative/agent,
LOST Fortuitous Event: EXTINGUISHED estate (executor/admin.)
Fault of DR: LIABLE (Value + Damages)  Third Person (redounded to
the benefit of the Creditor)
IMPAIRED Fortuitous Event: CR BEARS LOSS
Fault of DR: LIABLE (Spec.Per. + Damages)
 Presumed Benefit:
IMPROVED By Nature: CR BEARS IMPROVEMENT
CR/DOUBT: burden of proof = DR
Efforts of DR: DR given right to usufruct

Except: Ratification, Subrogation, Estoppel

DEBTOR DEPRIVED OF PERIOD: (IGIVA)
 I – Debtor INSOLVENT (total or partial).
 When:
 G – Fails to GIVE (guaranty or security).
Principal/ Recovery?
 I – guaranty or security: IMPAIRED (fault
Paid before maturity:
DR) or lost (FE/fault of DR).
 DR “aware” of (×) – waiver of right to
 V – DR VIOLATES undertaking.
period period
 A – DR attempts to ABSCOND.
 DR “not aware” of (√) + Interest + Fruits
period
Prestation “Choice”
On or After Maturity (×) Only Interest + fruits
Alternative Obligation 2 or more DR. unless
(not aware)
stipulated
Facultative Obligation 1 (with Debtor if
 Where:
substitute) stipulated
To give specific thing:
Conjoint Obligation 2 or more Fulfillment:
 With stipulation Place as stipulated
ALL
Obligation with a  Without stipulation Where object is located
penal clause @perfection of contract

To give generic thing or to pay money:

Obligation Liable:  With stipulation Place as stipulated
Exting.? Damages?  Without stipulation Where debtor resides
ALTERNATIVE FE: (×) (×)
Fault-DR (×) (×)
VS.
 How:
To pay (money):
FE: (√) (×)
FACULTATIVE  With Currency as stipulated
Fault-DR (×) (√)
stipulation
 Without Legal Tender
stipulation

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To give: (TRAIT)
 Specific As stipulated, no substitute o T – 2 or more persons claiming
 Generic As stipulated, neither right.
inferior/superior o R – CR refuses to issue
To do:  As stipulated RECEIPT w/o just cause.
 If poorly done: undo @the o A – Creditor ABSENT
expense of the debtor. o I – CR becomes
INCAPACITATED to
 SPECIAL FORMS OF PAYMENT: receive payment.
A. Application of payment o T – TITLE is lost.
 Gives DR privilege (right to
choose)  DR pays: incapacitated:
obligation extinguished. If CR
 2 or more obligation is due
benefitted or money was kept.
 If silent: apply proportionately
(<CR apply to most onerous)
2. LOSS OF THE THING DUE
B. Dation en payment
 Applicable if: determinable/specific
 Payment in kind, ONLY 1 CR,
 Not applicable: generic (genus
DR solvent.
nunguam perit)
C. Payment by Cession
 LOST – perishes, goes out of
 DR insolvent, 2 or more CR,
commerce, disappears
obligation partially
(existence unknown/ cannot
extinguished.
be recovered).
D. Tender of payment and Consignation
 CR refuses, money is
3. CONDONATION/REMISSION
deposited in court with notice
 Essentially gratuitous, nature:
to the CR. If approved,
donation.
obligation extinguished.
 Requirements:
Essential  Capacity of Donor (CR) & Donee (DR)
 Consignation allowed w/o prior
 Donative Intent
T.O.P.:
 Acceptance (DR)

Payment Dation in T.O.P. &

Formal  Personal Property: P5000 up (writing)
A.o.P
by Payment Consignation  Real Property: Public Instrument
Cession
- Multiple Debtor is Debtor T.O.P. 4. COMPENSATION
obligation insolvent need not – Act of the DR of  2 persons, CR & DR of each other.
s are ALL be offering to his CR a. Conventional - by
due and insolvent what is due to him.
demand-
agreement
All Does not CONSIGNATION –
able. b. Legal – by operation of
properties affect all CR refuses to
law
are given the accept payment,
- Payment up to debtor’s deposit thing due  Requirements:
not  Principally bound DRs & CRs.
satisfy the properties to the judicial
enough.
needs of . Plurality authority.  Both debts: payable in money,
creditors of the in kind/quality or both.
(2 or more) creditors  Both obligation: due
is not  Both obligation: liquidated
required.
& demandable
No transfer Transfer
of of
 NO: controversy or retention
ownership property by third person.
Partial Extinguish
extinguish- c. Facultative – one party
ment of can claim compensation,
debt the other cannot.
d. Judicial – decree by court,
in case where there is
counterclaim.

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CONTRACTS
 Compensation NOT allowed: when
one of the obligation arose from: CHARACTERISTICS: (MACRO)
 Deposit  M – Mutuality: bind both contracting
 Bailee in Commodatum parties. Validity: can’t be left with
 Obligation to give gratuitous will of one of them.
support (present/future)  A – Autonomy: liberty/freedom to
 Obligation arising from stipulate.
commission on penal offenses:  C – Consensuality: perfected by mere
civil liability. Consent.
 R – Relativity of contracts: take effect
5. CONFUSION/ MERGER to parties.
 CR & DR, one person.
 O - Obligatoriness & compliance in
good faith.
6. NOVATION
 Changing the object (real) or
KINDS:
condition (real)
 NOMINATE Vs. INNOMINATE
 SUBSTITUTION – Debtor
 Delegacion – personal
 Do ut des I give that you may give.
novation. Original DR
must be discharged.  Do ut facias I give that you may do.
(Initiative: Original DR)  Facio ut des I do that you may give.
 Expromission – personal  Facio ut facias I do that you may do.
(Initiative: New DR or
third person)  PRINCIPAL Vs. ACCESSESORY
 SUBROGATION – CR. (Personal)  CONSENSUAL Vs. REAL Vs. FORMAL
a. Conventional - by agreement
(COC Vs. COC + DEL. Vs. COC + DOC.)
b. Legal – by operation of law
 When a CR pays another  GRATUITOUS Vs. ONEROUS: Liberality
CR who is preferred even  UNILATERAL Vs. BILATERAL
without consent of DR.
 COMMUTATIVE: Exchange of values
 When a third person who
is interested in the  ALEATORY: based on chance
fulfillment of the  AUTOMATIC
obligation pays even
 ADHESION
without the consent of
the DR.
 “First in time, First in right” ELEMENTS:
 If new DR fails to pay, can CR  ESSENTIAL – without them, there is no
collect original DR? contract- Cause, Object, Consent (COC)
 NATURAL – deemed included except if
Delegacion:
 YES Time of delegacion; New DR insolvent stipulated not to include.
 NO After of delegacion  ACCIDENTAL – included if stipulated.

Expromission:
 An offer becomes INEFFECTIVE “BEFORE”
 NO Time of expromission New DR insolvent
acceptance: (DICI)
 YES Time of expromission Orig.DR aware & didn’t
 D - Death
object to expromission
 YES Time of expromission Orig.DR’s insolvency is  I - Insolvency
known to the public.  C – Civil Interdiction
 NO After of expromission  I – Insanity

 Mixed Novation:
Must be REAL + PERSONAL

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 Inheritance – only present inheritance (√);

PERIOD TO DECIDE Can offer Liable future (×).
or sell? (damages)  Right – Transmissible (√); Intransmissible
 Without consideration √ √ (×).
(option money)
 Without consideration √ × CAUSE OF CONTRACTS:
 With earnest pay √ √  Lawful
(down payment)
 If inadequate (lesion)
 Fictitious/Simulated
INCAPACITATED: (CHIPUD)
 Absolute (void)
 Unemancipated Minors – incapacitated to  Relative (effect True Agreement)
give consent (below 18 y/o).  False : (VOID)
 Insane/Demented Person – except: lucid
 Motive – not an essential element (with or
interval.
without: VALID)
 Deaf-Mute
 Civil Interdiction – as if dead. FORMS OF CONTRACT – any form (oral, written, P.I.)

 Mortis Causa (√)  Inter-vivos (×) EXCEPT:

 Hospitalized Lepers  For validity – failure: VOID
 Prodigals/Spend Thrills  For enforceability – Statute of fraud.
 For convenience
VICES OF CONSENT: (VIMFU)
 V – Violence (physical pain) INTERPRETATION: to give effect – “true intention”
 Serious/ irresistible force  Words – clear & unambiguous: literal
 I – Intimidation (mental pain) meaning.
 Well-grounded fear, imminent  Provision: written prevail over
danger, must be unlawful. printed.
 M – Mistake (Error)  Amount: words prevail over
 If serious: Annulment figures.
 If NOT: Reformation  2 or more: “I” – solidary; “We” –
 F – Fraud joint.
 Insidious words, machination  Acts – contemporaneous, subsequent.
 U – Undue Influence  Customs and usages
 Professional Relationship
(Ex. Lawyer-client) F – Fraud / A – Accident / M – Mistake / I – Inequitable Conduct
 Consanguinity/Affinity
(Ex. Aunt, uncle) Remedy:
Before meeting of minds: Annulment
 Religious Affiliation
After meeting of minds: Reformation
(Ex. Priest, Parishioners)

NO FRAUD: OPTION:
 Concealment – failure to disclose acts  Reformation or specific performance
without duty to disclose.  Specific Performance to Reformation
Except: with duty to disclose (fraud). (×)
 Mere exaggerations in trade – ads  Rescission to specific performance
 Dealer’s talk: Caveat Emptor –  Specific Performance to Rescission(√)
“buyer beware”
 Mere expression of Opinion – REFORMATION NOT ALLOWED:
Except: Opinion of an Expert.
 Wills – except by the testator

OBJECTS OF CONTRACTS:  Simple donation Inter-vivo – if no condition

 Things – existing/future imposed.
 Should come to existence.
 Real Obligation
 Retroactive (emtio rae speratae)
 Hope – with hope (√); vain hope (×)

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DEFECTIVE CONTRACTS: - Do not comply with statute of fraud.

1. RESCISSIBLE – least defective. (SALSAR)
Defect: lesion (damage) (GACTS)  S – SPECIAL PROMISE – to answer
 G – made by GUARDIAN debt, default, miscarriage of
 Lesion: more than ¼ value. another.
 Rescind: within 4 years from  A – AGREEMENT not to be
the time incapacity ceases. performed within 1 year from the
 A – made by representative of making thereof.
ABSENTEES = property  L – LEASING: period longer than 1
 Lesion: more than ¼ value. year. Sale of real property or any
 Rescind: within 4 years from interest therein.
the time his (absentee).  S – SALE of goods, chattels or
Whereabouts are known, things in action @least P500.
EXCEPT: within 2 years, if:  A – AGREEMENT made in
o Boarded airplane consideration of mortgage other
o Boarded Vessel than mutual promise to marry,
o Sent to war enforceable even if oral ONLY.
 C – made to defraud CREDITORS.  R – REPRESENTATION as to the
(Accion Pauliana) credit of a third person.
 T – THINGS in litigation made
without consent of litigant or Sale of Real Property Enforceable?
court. Seller & Third
Buyer Person
 S – SPECIFICALLY declared by law
NO DOWNPAYMENT (×) (×)
to be rescissible.  ORAL DELIVERY
(×)
WITH DOWNPAYMENT (√)
DELIVERY

2. VOIDABLE – valid until annulled. NO

Defect: consent.  WRITING DOWNPAYMENT
DELIVERY (√) (×)
W/
 One of the contracting parties – NO
incapacitated.  PUBLIC DOWNPAYMENT (√) (√)
INST. DELIVERY
 Consent – vitiated (VIMFU) W/
- To annul within 4 years’ time MF-discovery
4. VOID/INEXISTENT – most defective.
/ VIU – cease.
Defect: without effect cannot be
- Except: marriage- 5 years
ratified/period to question. ( ICAD)
 Vitiated by VIMFU
 O – OBJECT/CP: contrary to law, morals…
 One of the contracting parties
 O – OBJECT: outside the commerce of men.
incapacitated.
- RATIFICATION – retroacts on the day the  O – OBJECT: did not exist at the time of

contract was made. Cleans defect. transaction.

 I – INTENTION of the parties relative to the

3. UNENFORCEABLE – validable. principal object: cannot be ascertained.

Defect: without effect unless ratified.  C – CONTEMPLATE an impossible service.

- Both contracting parties are incapacitated.  A – ABSOLUTELY simulated or fictitious.

- Made without authority.  D – DECLARED void by law.

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SALES
VENDOR’S LIABILITY IN CASE OF EVICTION: (VICED)

SALES VS. BARTER:

 V – Value of the thing
 I – Income or fruits
1. Manifestation: (Ex. B sells his car to C)
 Cash: P1M (Sale)  C – Cost of suit which cause the eviction
 Trade-in: Cash-600 / TI-400 (sale)  E – Expenses of the contract
Cash-400 / TI-600 (sale)  D – Damages and Interest

2. Absence of Manifestation: (Ex. B transfers  If vendor acted in good faith

his car to C)
 Cash: P1M (Sale) IF VENDOR ACTED IN GOOD FAITH:
 Kind: P1M (Barter)
 Cash-600 / Kind-400 (Sale) 1. Value of the thing sold only
 Cash-400 / Kind-600 (Barter) *waiver consciente (without knowledge of
 Cash-500 / Kind-500 (Sale)
eviction)

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

2. No liability
*waiver intencionada (with knowledge of
 MASSACHUSETTS: Object: Same with New York Rule
eviction)
 Available/Regular Stock (Sale)
 Specially/Manufactured (CPW)
TYPES OF WAIVER
English Rule:
Materials > Labor = Sale
1. Waiver Intentionada – seller not liable.
Labor > Materials = CPW
2. Waiver Consiente – seller liable up to
FMV @ the time of eviction.

OBLIGATIONS OF THE VENDOR (SELLER):

ANIMALS:

1. To effect DELIVERY
1. Disease:
2. To TRANSFER OWNERSHIP (TITLE) to buyer
 Contagious – VOID
 VOIDABLE: Can annul if third party is in
 NOT Contagious – VALID, VOID IF
bad faith.
dies within 3 Days from the date of
 VOID: Stolen
purchase and existed at that time.
3. To WARRANT
 EXPRESS: As stipulated
2. Defects: if hidden: BUYERS’ option:
 IMPLIED:
within 40 days.
o Against Eviction: Except if waived.
 Accion Redhibitoria – to annul,
 Buyer deprived of object:
because object is unfit for the use
 Right: existing @ the time sale
intended.
 Seller: given opportunity to  Accion Quanti Minoris – to reduce
defend title. price
o Against Hidden Defects:  NO WARRANTY: Caveat Emptor
 Defects NOT Hidden – caveat
 Fairs, public auction,
emptor (buyer beware)
livestock sold as
 Defects Hidden – caveat
condemned.
venditor (seller beware)
o Merchantability: within the commerce of
Seller: Defect “If waived”
man.
Aware (√) VOID o Fit for the purpose:
Not Aware (√) VALID Seller Liable
General: (√)
 Defects: If Seller: Good Faith – Specific, if stipulated: (√)
NOT liable for damages.

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RIGHTS OF THE UNPAID VENDOR (SELLER): interest can sell his undivided interest.
1. Stoppage in transit
 LEGAL
2. Possessory lien  Co-owners: (e.g. W, X, Y, Z > W, X –
3. Resale absolute sale to Buyer can):
Proportionate:
4. Cancel
 Y & Z repurchase what (√)
W & X sold?
OBLIGATIONS OF THE VENDEE (BUYER):  Y rep. what W & X sold? (√)
1. To ACCEPT delivery  Z rep. what W & X sold? (√)
2. To PAY – terms  Adjacent/Ad joint Landowners
Ownership
 RURAL: (Agricultural)
TERMS: Risk of loss
 Not > 1 hectare, &
AFTER on FE  Buyer – already owns a rural
delivery
land
A. On TRIAL or Satisfaction Seller Seller (RPD)  Can A/AJLO repossess? (√)
On SALE or Return Buyer Buyer (RPD)  URBAN (City)
B. LUMPSUM – no increase or decrease in price.  So situated – majority part: no
 Discrepancy (Estimate < Actual): Should not practical use. EXCEPT: if
exceed ¼. there is a right to be exercised.
 If seller insists delivery of excess between  Acquired for speculation.
actual and estimate: Buyer’s Option: COURT - least injury to give
 Rescind/Cancel contract + access.
Damages  Right of Pre-emption – if not given: Right of
 Agree – Specific performance Redemption – 2 or more – most beneficial.
C. INSTALLMENT PRESUMTION OF EQUITABLE MORTGAGE NOT FOR
 PERSONAL PROPERTY – RECTO LAW SALE:
 DR default installment:  When place with right to repurchase is usually
 1 or more – Seller – to exact inadequate.
fulfillment.  When buyer retains part = PP
 2 or more – Altern. Remedies  Buyer extends period of redemption.
I. Exact fulfillment – S demands payment;  Seller retains possession
Seller – Ordinary CR – NO right to foreclose  Seller pays taxes
 Public Sale: proceeds:  Real intention – mortgage
 Higher than debt: excess belong to
buyer.  Traditio longa manu - mere pointing object.
 Lower than debt: deficiency –
Buyer pays.  Traditio brevi manu - already in possession
II. Cancel Sale: B returns object/ Seller of the vendee (buyer) at the time of sale.
returns payment.
Delivery, no longer required.
III. Foreclose the Chattel Mortgage
- deficiency: no recovery, stip. – VOID  Traditio constitutum possessiorium –
- excess: belongs to seller, stip. (B) – vendor (seller) continuous to have
VALID
 REAL PROPERTY (Realty Installment Buyer possession of the thing not as owner but as
Protection Act) tenant or lessee.
 RIBPA (MACEDA LAW)  Emtio spei – hope, present thing, uncertain.
 NOT applicable to:
 Sale or Financing – Industrial  Emtio re separate – future thing expected
Lots to come in existence, certain.
 Sale or financing – Commercial
 Absolutely Simulated Sale – VOID.
Buildings
 Sale to tenants – Land Reform
Code
 Applicable to: Residential Lots
DR default installment: Without SALE OF REAL ESTATE:
additional interest/penalty. (a) Actual < Stated Area
Grace Period:
 Reduction of price if actual area <
 Payment: <2 years (60 days)
⪰ 2 years (1 mo. /yr.) 1/10 of Stated
 Available once every 5 years  Rescind the sale if actual area > 1/10
 Condominium: Residential,
Commercial, Industrial: of stated
 SELLER: cancels – refund: (b) Actual Area > Stated Area
 50% amount paid
 Accept and pay contract rate.
 + 5% per year after 5 yrs.
D. REDEMPTION  Accept the stated area and reject the
 CONVENTIONAL – based on stipulation excess.
 Repossession Period:
 With Stipulation – max. of 10 yrs.
(c) Actual Area is not of the quality specified
 Without Stipulation – 4 years
 Pacto de retro sale (death of seller), can heir
repurchase? – NO. The owner of the undivided

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 Reduction of price if the inferior  Agents – joint. EXCEPT: stipulated –

value not exceed 1/10 of the solidary. EXCEPT: acts of dominion
price/rate agreed upon. which needs Special Power of Atty.
 Rescind if inferior value exceed 1/10
of the price/rate agreed upon. NOTICE OF AGENCY’S APPOINTMENT:

DOUBLE SALE:  Newspaper (published) or Notice Letter –

1. PERSONAL PROPERTY another agent.
 1 Possession in good faith
ST
 Del Credere Agent – agent & surety at the
 In public instrument (construction same time.
delivery) – public instrument is
preferred over private instrument
(same rule with real property) NOTICE OF REVOCATION:

rd
2. REAL PROPERTY  Newspaper, to bind 3 parties: must be
 1 register in good faith
st done the same manner as Notice of
 1 possession in good faith Appointment EXCEPT: if the parties to be
st

 Present the oldest title notified have actual knowledge.

PERSONS NOT LIABLE FOR BREACH OF WARRANTY:

(SAMPO) OBLIGATIONS OF an AGENT:
 S – Sheriff
 A – Auctioner 1. To observe instruction of the Principal –
 M – Mortgagee deemed not have exceeded authority.
2. To give everything to P, even if not owing
 P – Pledgee
P.
 O – Other persons  to sell by virtue of
3. To make accounting of transactions,
authority in fact/ in law.
stipulation to the contrary: VOID

 If A exceeds authority, still binding to P,

AGENCY object belongs to A = authorized to sell
 P’s option: Consider – A fulfilled his
- founded upon Trust and Confidence. authority or ratify.

 By Operation of Law 4. To advance funds: (×)

 Express EXCEPT: If stipulated: (√), except: if P
 Implied insolvent (×)
 Principal & Agent both present –
receipt of Power of Atty. Is without AGENT – if authorized:
objection.  To sell → to mortgage (×)
 Principal & Agent both NOT present:  To mortgage → to sell (×)
o Acknowledgement of receipt of  To lend money → to be borrower(×)
the Power of Atty.  To borrow money → to be lender int. = current
o Failure to reply: (Acceptance) rate (√)
 If required is to do act: the  To sell on credit → obligation to make list = of
ALL buyers on credit otherwise: ALL CASH
agent: habitually engaged.
 Parties:
TO APPOINT SUB-AGENT:
 Principal – capacitated party.
1. With Stipulation: (√) & (P designates Agent)
 Agent – presumed w/ compensation.
or
2. If not prohibited:
 2 or More:
 1&2: notorially, incompetent, insolvent.
 Principal – solidary.

If Prohibited, ALL actions of Sub-Agent is VOID.

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EXTINGUISHMENT OF AGENCY: (EDWARD)  BAILEE – leases to others.

 If object delivered – with appraisal
 E – Expiration of term
 D – Death of P or A: to sell goods = heirs SECURITY: collateral (Sangla) – things:
 Take care (GFF) & give notice to P
 Agency by operation of law Objects Possession
(necessity).  Pledge Movable CR/pledgee
Death – EXCEPT: constituted for the benefit of P or  Antichresis Immovable CR/
rd
A, or 3 person (stip pour autrui), Insolvency, Civil antichretic CR
Interdiction, and Insanity.  Mortgage
 Chattel Movable DR/ mortgagor
 Real Estate Immovable DR/ mortgagor
 W – Withdrawal by agent
 A – Accomplishment of purpose.
 R – Revocation of agency – (P) @ will, with
1. PLEDGE:
or without cause.
 Similar to Recto Law
EXCEPT: Valid Reason – must be with cause.
 D – Dissolution of the firm which
 Foreclosure then Public Sale → with
established the agency.
notice:
→ Deficiency or excess: belongs/ suffered
 Quasi Traditio – execution of Public
by CR.
Instrument.
 Pledge (CR) – use object = NO, EXCEPT:
If stipulated or necessary to preserve
value.
CREDIT TRANSACTIONS
 Bidders:
Ownership Purpose Highest Bidder(s)?
A. MUTUUM – simple DR To consume Only 1 nd
(×) EXCEPT: after 2 notice
loan
B. COMMODATUM
More than 2 (√)
Bailor (CR) To use
Tie (bet. DR & (√) DR
3rd person)
Object Obligation Contracts Exp.

 Pledge is indivisible (on > 1 object)

MM Money To pay Onerous DR
Fungible To replace Gratuitous applicable even to heirs.
CM Non- To return Essentially Ord.  Accessory follows Principal.
fungible Gratuitous (bailee)
If fungible Ex-Ord. 2. CHATTEL MORTGAGE (Movable)
(display/exhibi Actual use  Foreclosure: from loan:
tion)
(50% →Deficiency: DR pays
bailee/ →Excess: Mortgagor (DR) owns
50% bailor)

 Guaranty – insurer of debt, subsidiary

LOSS WHO SUFFERS? liable, with benefit of excussion,
EXCEPT if waived.
1. In mutuum: Res Perit Domino = DR
2. In Commodatum: RPD = Bailor EXCEPT:  Surety – insurer of prompt payment,
 BAILEE – guilty of delay solidarily liable, no benefit of
 BAILEE – uses object of CM: excussion.
purpose – different from what was
agreed upon.
 Deposit – safe keeping.
 BAILEE – guilty of ingratitude –
 Judicial – movable or
able to save.
immovable.
 BAILEE – allows others to use,
 Extra-judicial – movable,
EXCEPT: members of household if
agreement.
not prohibited.

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 Necessary – in compliance 3. By Estoppel

with law. (e.g. guest-hotels, 4. Life
passengers-common carrier)  At will – if partners agree → continue
 Fixed Term – dissolved, if partnership
Real Estate Antichresis continues, it will be converted into
Mortgage
partnership at will.
 Possession DR CR/pledgee
 Fruits/Income DR CR-to be applied
LIABILITY:
DR’s obligation.
 Taxes/expenses DR CR-to be charged
1. Unlimited – General: ALL partners.
to DR
 Original – up to separate property.
3. REAL ESTATE MORTGAGE  Newly Admitted:
 Accessory contract, mortgagor can sell  Existing at the time of
the object even without consent of the admission – up to Contributed
mortgagee. Cap. EXCEPT: stipulation.
 Arising after admission – up to
separate property.
2. Limited – at least 1 general partner; at least
PARTNERSHIP
1 limited partner.
 Limited Partner – up to Contri.Cap.,
 2 or more persons bind to contribute money,
EXCEPT: Liable up to Separate Prop. If:
property or industry to a common fund with
intention of earning profit.
 Participate in management
 2 or more persons – exercise same profession  Allow your partnership to use
(GPP) your name in the Partnership’s
firm name, EXCEPT:
NO PRESUMPTION OF PARTNERSHIP: o Such name is also name of
the general partner.
3 persons – not partners to each other,
rd
1. o Name is already used when
rd
nor parties to 3 person, EXCEPT: estoppel: he joined the partnership.
 In pais – silence, declarations, made
others believe. SHARE IN THE CONTRIBUTION: (As to Object)
 By Deed – with documents.
 By Laches – by passage of time.  Universal – not allowed to husband & wife
2. Co-ownership/Co-possession → guilty of concubinage/adultery.
→Purpose: enjoyment/preservation 1. Universal Partnership of Present
3. Sharing of gross returns Property (UP-PP) – contributed to the
4. Prima Facie presumption – sharing of net partnership.
returns, EXCEPT: (GAWID)
 Fruits – accessory follows the
 G – Payment of Goodwill
principal – partnership.
 A – Annuity (widow or representative)
 Future Property:
of a partner.
→without stipulation – partners
 W – Wage: employee or Rent: landlord
→with stipulation – ownership:
 I – Interest to loan.
Partnership (Others) = VALID,
 D – Debt by installment.
EXCEPT: Inheritance, Legacy,
Donation, EXCEPT: fruits = VALID
PERSONALITY:

2. Universal Partnership of Profits (UP-P)

1. De jure – exist in fact and in law, contract:
Highest Bidder(s)?
 P3000 or more – P.I. & reg. SEC,
Contribution Ownership: Partner
otherwise: De Facto
Right to Use: Partnership
 Immovable – description, signed by
Future Property Ownership: Partnership
parties, P.I., registered to SEC,
Gratuitous: Partner
otherwise: VOID *if through industry, FP will go to
2. De Facto – exist in fact, not in law partnership

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 Preference:
 Particular (General Partnership) – allowed → Partnership CRs – partnership’s assets.
to husband & wife →Separate CRs – separate assets
 Receipt of payment (partner and
LOSS due to FORTUITOUS EVENT – “Res Perit Domino” partnership creditors):
LOSS borne by PARTNERSHIP:
1. If the thing contributed is fungible. APPLICATION OF PAYMENT
2. Contributed for the purpose of selling.  If DR assigns application of
3. If the thing can’t be kept without payment.
deterioration.  If DR waives AOP, if partner:
 Managing partner
 Partnership Credit (√)
CLASSIFICATIONS OF PARTNERS:
 Proportionate (√)
 Not managing partner
1. Contribution
 Partnership Credit (√)
 To effect delivery; day agreed upon/
 Own Credit (√)
without need-demand.
 Proportionate (√)
 To warrant the thing – against eviction.
EXCEPT:
 Make additional contribution –
 Onerous due to Partners.
imminent loss or/& contribution
 Due to Partnership is not yet due.
necessary to save partnership.
 Partner when received payment
 Capitalist: YES, EXCEPT:
not a managing partner.
stipulation or insolvent.
Otherwise – can be compelled
PROPERTY RIGHTS:
to sell his interest.
 Industrial: NO, EXCEPT:
1. To specific partnership profit.
stipulation.
2. Interest – surplus – profit/loss:
 Make Alterations – Immovable
 If with stipulation:
 Minor (not important) –
→ if VALID as stipulated:
administration – YES
(a) Share in P/L
 Major (important) – NO, even
(b) Share in profit – stipulation.
beneficially, EXCEPT: stip.
→ALL Partners (√)
→ Share in loss – w/out stipulation
2. To engage in another business
(c) Exempting – partner:
 Capitalist
→ Profit (×)
→ Not similar: YES
→ Loss (×)
→similar: NO EXCEPT: stipulated.
→ EXCEPT: industrial
Otherwise: – profit: partnership
 If without stipulation:
– Loss: partner
 Capitalist: Capital Contribution
 Industrial
 Industrial
→similar or not: NO EXCEPT: stipulated
→ Profit – interest or just equitable
Otherwise: Partner’s option:
share (JES)
(Expulsion or profit=Partnership) + Damages
→ Loss – exempt
→ if silent: Share of Capital – Partner
Liability – 3 person, RULE: Joint ; EXCEPT
rd
3.
with least Capital Contribution.
(SOLIDARY):
 Capitalist-Industrial Partner – 2
 Partner: course of business, receive
different rights in the share.
money = misappropriation
 Partnership: course of business,
3. To participate in management – Who will
receive money = misappropriation
be managing partners?
 Commit torts: Quasi-delict (d) One – appointment
* Article of Partnership – power is
rd
 In the eyes of the 3 persons, partners are irrevocable without just cause.
equally liable (joint)

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→ can EXECUTE ALL acts of admin. = GOOD  Direct Attack – office of the Solicitor
FAITH, despite objection of other partners General
* Not Article of Partnership – power is
 Collateral Attack - (×)
revocable.
(e) 2 or more
4. Legislative Act – if Congress possess a law
* With stipulation –should act as 1, can’t be
alleged. EXCEPT: grave/ irreparable injury to which makes business of partnership illegal.
partnership.
* Without stipulation – should act as 1, 5. Loss of the thing
anyone can act, EXCEPT:  To be contributed – RPD = LOSS
o If managing partner objects – →UP-PP: (√)
majority of partners, if tie. →UP-P: (√)
o Controlling interest, if tie.
 Contributed only usufructuary, LOSS =
o Majority of ALL partners if tie.
Partner, EXCEPT:
o Controlling interest.
o Fungible
o To be sold
→ No one Appointed – Mutual Agency
RULE: o Can’t be kept without
 Every partner/ agent/ partnership, deterioration
anyone can act EXCEPT: →UP-PP: (×)
 A partner objects – majority →UP-P: (√)
of all partners, tie – C.I.
 Unusual Acts: Acts of 6. D – Death, I – Insolvency, C – Civil
Dominion, requires consent
Interdiction, I – Insanity, J Judicial (DICI-J)
of ALL partners, EXCEPT:
 A partner has been
authorized.
 Bus. Of Partnership was LIQUIDATION: Winding Up?
abandon.
(a) With Stipulation – as stipulated
UNUSUAL ACTS: must be presented to ALL partners (b) Without Stipulation – not guilty. All dead-
(SACRED.D) legal rep of last surviving partner.
 S – Submit partnership claims/
liability to arbitration. General Limited
 A – Assign partnership property – *Outside CR *Outside CR
trust = CRs *Inside CR *Limited
 C – Confess judgment -obligation
-share in profits, if any
 R – Renounce / Abandon
-return on contri. cap.
partnership claims.
*Return on *General
 E – Enter into compromise. Contributed Cap. -obligation
 D – Dispose goodwill. -share in profits, if any
 D – Do any act = impossible= -return on contri. cap.
partnership continue business. *Share in Profit, if any

DISSOLUTION:
CORPORATION
1. Without Violation of partnership
agreement.  artificial being created by operation of law
 Term expires with the right of succession and powers (express,
 By will – one, some, or all partners implied, incidental), attributes and properties
 Expulsion – a partner expressly authorized by law incidental to its
 Fulfillment – purpose existence.

2. With Violation – partnership agreement Artificial being = person = citizenship = THEORIES:

3. Quo Warranto – de facto

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 Incorporation – laws observed in NOT ALLOWED to HAVE NO PAR: (BITPuB)

companies
 Philippine Laws = Domestic  B – Banks
 Foreign Laws  I – Insurance companies
 Resident: E.T.B.  T – Trust companies
 Non-resident: N.E.T.B.  Pu – Public institutions
 Control test – citizenship of owners.
 B – Buildings and loan associations
 Domiciliary – principal office.

KINDS of CORPORATION: TO VOTE: with or without voting rights, they can

1. Public vote in: (A-ASIIMID)
2. Quasl-public: “as if”
3. Private  MAJORITY of B.O.D & MAJORITY of Sh./M;

INCORPORATORS: A – Amendment/Adoption: by laws;

EXCEPT: power to amend by laws is
1. Of legal age already delegated to the B.O.D by 2/3
2. At least 5 but not more than 15 (natural votes of Sh. /M.
person)
3. Majority: Resident of the Philippines  MAJORITY of B.O.D & 2/3 Sh./M:

Primary Franchise: right to organize a corporation. A – Amendment of articles in Incorporation

S – SLEMP of all or substantially all of
ARTICLES OF INCORPORATION: corporate profits property.
I – Incurring/creating/increasing bonded
1. Name: neither similar, nor confusingly indebtedness.
similar to existing corps I – Increase/decrease of capital stock
2. Purpose: principal and secondary M – Merger or consolidation
3. Principal office I – Investment to another company
4. Incorporators: names, nationality and D – Dissolution
residence
S – Sales / B – Lease / E – Exchange / M – Mortgage / P – Pledge
5. Capital: Profit = stocks/shares
6. Board of Directors: Names, Nationality &  Of all or substantially all corporate
Residence. property.

KINDS OF SHARES:  Treasurer’s Affidavit: at least 25% of:

 Authorized Cap. Stock = par /
1. Capital shares ACS = no par
2. Founder’s share – exclusive right  Subs. Paid = money/property
3. Redeemable shares (Callable Shares) – (@FMV)
with or without RE, provided such
redemption will not result to: SECURITY of EXCHANGE and COMMISSION:
 Insolvency of the corporation
 Difficulty in paying maturing  REJECTS:
obligations 1. Purpose: unconstitutional, illegal/
4. Preferred shares immoral, contrary to gov’t.
 Dividends – CP, C/NP, NC/P, NC/NP 2. Treasury’s Affidavit: False
 Assets 3. Failure to meet minimum Filipino
5. Common shares (Gambler’s Shares) – ownership.
below par (x) 4. Failure to observe form
6. Promoter share prescribed.
5. Failure to submit: favourable
recommendation from the
appropriate gov’t agency in charge
of the activity you are proposing.

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 ACCEPTS: (Approved)  to exercise such power as may be

 Then issue “Certificate of delegated by B.O.D
Incorporation” (birth of Corp.)
 Exercise Secondary franchise EXCEPT:
 To commence operation within 2  Acts that require shareholders’
years; otherwise automatically approval
dissolve.  Amend by laws
 Distribute cash dividends (Impliedly
COMMENCE OPERATIONS: include stock dividends)
 Fill up vacant seat in the B.O.D
ELECTION:
VACANCIES: Grounds:
1. BOARD:
 Directors – by stockholders  Removal, expiration of terms,
(Cumulative or straight (√)) increase in # of BOD = SHs
 Not convicted by final judgment =  Others: remaining members of
imprisoned: more than 6 years BOD:
 Not violated corporate code within 5  With quorum = BOD
years prior to election.  Without quorum = SHs
 Must own at least 1 share, EXCEPT:
 by-laws require greater or other  Amend acts previously approved by the
number otherwise. B.O.D.

 Trustees – non-stock (Cumulative(x))  B.O.D declares cash dividends while stock

 Not convicted by final judgment = dividends needs 2/3 of shareholder’s
imprisoned: more than 6 years approval.
 Not violated corporate code within 5
years 4. To ENTER CONTRACTS:
 Must be a member of the corp.  Regular/Ordinary:
rd
 With 3 person:
2. OFFICERS:  with quorum = BOD
 President – member of B.O.D  without quorum = SHs
 Presides meeting of  With own Directors:
shareholders & B.O.D Except: if  Fair and reasonable
in the By-Laws.  Presence of such Director
 Secretary – resident citizen of the not necessary to
Philippines. constitute quorum
 Treasurer – no requirement.  Vote of such D does not
necessary or approval
 Incompatible OFFICE: one person: Otherwise: needs SHs
P&S / P&T approval – 2/3
 Management:
1. Managing
BOARD OF DIRECTORS:
2. Managed;
1. QUORUM – as required by laws  Majority of BOD and majority of SHs:
 Absence: ½ + 1 (Majority) EXCEPT:
 Interlocking Directors
2. COMPENSATION – reasonable (per diem &  Shareholders:
allowances) o Substantial = 20% of
 if given – max 10% of NI before IT of outstanding Sh.
preceding year o 1/3 Outstanding Sh.

3. To Create EXECUTIVE COMMITTEE  Max of 5 years, EXCEPT: natural resources.

 If allowed – by laws
 at least majority: B.O.D 5. To ACQUIRE OWN SHARES:
 Provided corporation has RE, EXCEPT:
redeemable.

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 To remove DELIQUENT subscription:  Underlying Doctrines:

Subscriber:  Trust Fund Doctrine: capital
 Not delinquent: rights stock = separated by assets
o vote (√)  Do not issue shares until
o dividends (√) fully paid.
 Delinquent: rights  to be not liable on
o vote (x) watered shares:
o dividends (√)  object in writing – send
 Cash – to be applied to to secretary
unpaid subscription.
 Stock – to be withheld  Piercing the Veil of Corporate
until full payment of Functions: SH’s CRs – can’t
subscription. collect from corp. EXCEPT:
To qualify as BIDDER, pay: using corp. to commit fraud.
 unpaid subscription, unpaid
expenses, interest  Special Circumstances
 HIGHEST bidder – least # of shares Doctrine – Duty of Disclosure
 NO bidders – corporation to SHs what’s happening to
 To remove FRACTIONAL shares the Corporation.
 To pay DISSENTING shares
 Appraisal right – payment = FV  Doctrine of Bus. / Corp.
of shares Opportunity – related to
o Options: loyalty to the Corporation.
 To accept will = 1/3
 To exercise appraisal right,  Doctrine of Limited Capacity –
EXCEPT: all acts must be within:
* Act=abandoned by corp.
(express, implied, incidental) =
/ rejected-SEC
intra-vires
o APPRAISAL COMMITTEE – 3 members, outside = ultra-vires

Chosen BY: (a) Legal
 (1) By SHs (Dissenting)  executed – can be
 (1) By Corp. ratified by
 (1) By rep. of both Corp and SHs stockholder
 executory – should
o Who bears expense of Committee? be abandoned
- recorded amount: (b) Illegal – cannot be ratified
 1M = SHs  those involved;
 more than 1M = Corporation liable (members of
BOD)
6. To ISSUE NEW SHARES – from unissued
shares. SUITS: (Corporation can sue and can be sued)
 SHs given PRE-EMPTIVE right, EXCEPT:

rd
 In compliance with law  required Corporation (de jure) vs. 3 person or SHs
public offering of shares.  SHs:
 To acquire property needed by  Derivative: SHs vs. Board
corporation.  Individual: SHs vs. Corp
 To pay creditors.  Representative: SHs vs. Corp

rd
3 party vs. Corporation
7. To OBSERVE:  2 or more – same class = class suit
 Threefold duties: (OLD)
 O – Obedience to by laws
MEETINGS:
 L – Loyalty to the Corporation
 D – Diligence 1. BOARD:
 Regular – once a month
 Special – as need arises

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 Place – anywhere
 Attendance – personal (√) proxy (x)
NEGOTIABLE INSTRUMENT
2. SHAREHOLDERS:
 Regular – once a year, as fixed in by PURPOSE:
laws, if silent, any day in April
 Facilitate exchange
 Special – as need arises
 Substitute money
 Place – within city / municipality of
 Accommodation of Secondary Contracts
Principal Office
 Increase credit circulation
 If practicable: Principal Office
 Attendance – personal (√), proxy (√) PARTIES:

Promissory Note Bill of Exchange

Foreign With Without
 Primary Liable Maker Acceptor
Corporations License License
 Secondary Indorser Drawer
1. Sue? (√) (x), EXCEPT: Liable
Violation of
property rights
REQUISITES:
2. Be sued? (√) (√)
Intellectual property rights: 1. In writing & signed by maker or drawer.
 Trade Name/Mark  True Name: complete/
 Copyright
abbreviation/ misspelled
 Patent
 Assumed Name: trade/ business/
alias
DISSOLUTION:  Symbols/signature

1. Automatic: 2. Contain unconditional promise or order to

 Expiration of term as fixed in the pay sum certain in money.
Articles of Incorporation
 Max. term = 50 years EXCEPT: if  Subsequent events does not cure
intended, max of 50 years per non-negotiability of Non-
extension. negotiable Instrument.
 Non-use  Sum Certain:
 failure to commence within 2  With interest
years from issuance of Certificate  Installment: stated, with
of Incorporation acceleration clause
 If silent: choice: holder
2. Grounds: (N) / DR (NN)
 Non-use  With dollar exchange rate
 Failure to resume operation within whether fixed or current
5 years from Stoppage of  With cost of collection or
Operation. Atty.’s Fee
 Legislative Enactment
 Quo-Warranto – Office of the Solicitor 3. Payable to:
General/ direct attack.  Order - of a specific person
 Amendment of Aol – shortening life of - Specific person or order
corporation.  PAYEE:
 Judicial – by order of the court. - (√) B
- (√) B & C (both should
indorse)
LIQUIDATION: winding up = 3 years - (√) B or C (either can
indorse)
 ALL actions for/against Corporation – be filed
 INDORSEE:
 After 3 years - pending actions – receiver
- (√) L / L 60.00 (×) / L
 To reserve enough funds to meet pending
40.00 remaining unpaid
act, EXCESS: Shareholders.
- (√) L & M

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- (×) L 50.00 & M 50.00  Incomplete but delivered

- (√) L or M  Complete but Undelivered
 Bearer  Absence or failure of Consideration
- so expressed bearer  Illegal Consideration
- Specified person or  Fraud Inducement
bearer.  Insertion of wrong date/ discharge by
- Order of fictitious payment before maturity.
person.
- Does not purport to 2. Real Defense – can be used against any
name any person. holder (HIDC/HFV)
- Only or last  Incomplete and undelivered
indorsement: Blank  Minority or other form of incapacity
 Forgery
4. Payable on:  Fraud in Factum or in Esse Contractus
 Demand – expressed, no date,  Discharge at or after maturity
overdue  Illegality of contract
 Fixed Date  Material Alteration (if silent: Personal)
 Determinable Future time – time
certain to come. TO NEGOTIATE:
 Time
- KNOWN:  Order – indorsement + delivery
before/at/upon/after  Bearer – delivery
- UNKOWN: at/after  A person who negotiated through
delivery is only liable to the party
5. Bill of Exchange (B.of.E) whom he presented the note.
- Drawee must be named or indicated with
INDORSEMENT:
reasonable certainty.
1. Special Pay to C (B)
DRAWEE:
2. Qualified Pay to C, w/o recourse (@ your own risk) (B)
- (√) W 3. Blank __________ (B)
- (√) W and Y 4. Conditional Pay to C, If….. (B)
- (×) W or Y (alternative) Pending fulfilment of the condition:
- (×) W, in his absence Y (succession)
 Maker – option to disregard condition
 AGENT: to be not liable: and pays:
 Sign within scope of authority  Obligation extinguished
 Disclose-principal  Without incurring any liability
 Indicate in what capacity  C holds money in trust of B
until C fulfills condition
 Agent with limited authority:
 Sgd. Name: Per Procuration / Per Proc.  Maker – may honor/respect condition
/ P.P. / p.p.  Maker can refuse to pay, such refusal
is not a dishonor, C has no recourse.
DEFENSES:
5. Facultative Pay to C, notice of Dishonor waived, (B)
1. Personal Defense
(a) Can be used against:
 WAIVER:
 HFV whose title did not come
(a) face of instrument: binds all parties
from a HIDC
(b) indorsement: binds indorser
 HFV whose title come from a
 Waiver of protest/presentment/notice
HIDC, but he is party to the
of dishonor/ Protest
defect.
(b) Cannot be used against:
6. Restrictive
 HIDC
 Prohibits further negotiation of
 HFV whose title came from a
Instrument: Pay to C only (B)
HIDC not a party to the defect.

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 Constitute Indorsee as mere Agent: WARRANTIES (Liabilities)

Pay to C for collection (B)
 Vest title to the Indorsee in trust for Indorsers Qualified General
(Special)
Another: Pay to C in trust for D (B)
 Indorsement is genuine (√) (√)
in all aspect it purports
to be
INTERVENING PARTIES: (there is Compensation)  Good title (√) (√)
 Capacity of primary (√) (√)
 Discharged = compensation parties
 Can be revived (negotiation):  No (√) -
knowledge/defect/value
(√) new party
less
(√) prior party  Instrument is valid & - (√)
(×) intervening party – in order to subsisting
avoid multiplicity of suits  If presented  accepted - (√)
 paid  if dishonored
– “I will pay.”
STRIKE OUT (INDORSERS):
- Only allowed if:

(a) No prior parties (new parties only) PRESENTMENT FOR ACCEPTANCE (B.of.E)
 Never strike out the PAYEE
 Only if the last indorsement is blank. - Unless stipulated.
EXCEPTION: Renegotiation (a) Payable elsewhere other than the
(b) Prior parties usual place/business of Drawee
 Intervening parties not liable (b) Fix maturity – payable after sight.
anymore.

KINDS OF ACCEPTANCE:
 A party primary liable can collect from a
party secondarily liable if he is an (a) Absolute
accommodation party. (b) Qualified – accepted
 Payable @: place
 Payable if: condition
ADMISSION:

 MAKER – admits:
DISHONORED BY NON-ACCEPTANCE:
 Existence & Capacity of the Payee
 I will pay according to the tenor of 1. To give Notice of Dishonor by N.A. to PSL
the instrument. within 24 hours;
EXCEPT: N.O.D. not required
 DRAWEE/ACCEPTOR – admits: On due date: PFP (×) / collect from PSL (√)
 Existence & Capacity of the Payee
 Existence, Capacity, and Authority of  PFP  accepted  due date:
the Drawer o PFP (×)
 Signature of the drawer genuine o Collect from PSL (√)
 “I will pay according to tenor of  Dishonored by Nonpayment:
acceptance.” o Collect from PSL (×)
o Give N.O.D. by NP to PSL (√)
 DRAWER – admits:
 Evidence and Capacity of the Payee. 2. To protest
 If Presented Accepted  Paid: a. Notary Public (NP)
If Dishonored  Necessary b. Absence of NP – rep. & 2 witnesses
Procedures Observed  “I will pay.”

BILLS IN SET – 2 or more parts  bill

- Every part accepted in the hands of a

HIDC is considered bill.

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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
obligation

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.

-NRBF

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