Merc Bar Ops Notes

8/9/2019 Merc Bar Ops Notes

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Letters of Credit

Q: What is a letter of credit?

A letter of credit (L/C) is an engagement by a bank made at the request of a customer that the bank (issuer) will honor

the draft or other demand for payment upon compliance with the conditions stated in the credit.

Q: What is the nature of a letter of credit?

It is a commercial transaction. It is NOT a negotiable instrument because it does not hae all of the requisites ofnegotiability.

Q: Who are the parties to a letter of credit?

!he original parties are the buyer/importer, the issuing bank " and the seller/beneficiary/exporter . #ther parties may

include the advising/notifying bank " the confirming bank " the paying bank " and the negotiating bank.

$uyer/Importer %rocures the L/C and obliges himself to reimburse the issuing bank upon receipt of thedocument of title from the seller

Issuing $ank !he bank which issues the letter of credit and undertakes to pay the seller upon receiptof the draft/documents of title" and to surrender these documents of title to the buyerupon reimbursement.

&eller/$eneficiary/'porter e ships the goods to the buyer and deliers the documents of title to the issuing bankto recoer payment Adising/*otifying $ank $ank that coneys to seller eistence of credit. Incurs no liability at allConfirming $ank $ank which lends credence to the L/C issued by the lesser known issuing bank. +irectly

liable to pay the seller %aying $ank $ank which ,ndertakes to encash the drafts drawn by the seller *egotiating $ank (optional) bank which buyer may approach to hae drafts discounted instead of going to

place of issuing bank to claim payment.

Q: What is the Doctrine of Independence-

In determining compliance with the L/C" bank only needs to examine only the shipping documents presented by the

seller. $ank DOES NOT determine whether the main contract of sale (between the buyer and seller) has been strictlycomplied with. Banks deal only ith DOCUMENTS and not ith goods, services or obligations to hich they relate. !he

bank has no duty to erify whether the goods described in the L/C actually tallies with what was loaded in the ship.

Q: What is the !raud "xception #rinciple-

It is an eception to the +octrine of Independence" wherein the bank may be enoined or preented from paying the

draft when the beneficiary presents documents containing fraudulent representations so that he can draw on the

credit.

Q: What is the Doctrine of $trict %ompliance?

It requires that the documents tendered by the seller/beneficiary must strictly conform to the terms of the L/C. the

correspondent bank who accepts a faulty tender of the drafts by the beneficiary may not later recoer from the issuing

bank or the buyer and thus acts on its own risk should it accept such drafts.

Q: hat are the essential conditions of a letter of credit-

0. !hat it be issued in faor of a definite person and not to order" 1. It be limited to a fied and specified amount" or to

one or more undetermined amounts" but within a maimum the limits of which hae to be stated eactly.

Q: hat is a $tandby &etter of %redit?

It is a bank2issued option on a loan inoling three parties3 the issuing bank" the party requesting" and the beneficiary.


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Q: hat is an Irrevocable &etter of %redit?

#ne that obligates the issuing bank to honor drafts drawn in compliance with the credit. It cannot be cancelled nor

modified without the consent of !LL the parties.

Q: hat is a 'evocable &etter of %redit?

#ne that can be cancelled any time before payment. It seres as a means of !""!N#$N# payment" but NOT as a

guarantee of payment.

Q: hat is a +raft-

Also called a Bill of "xchange" is an order written by an eporter/seller instructing an importer/buyer to pay a specified

amount of money at a specified time. A trade draft is one where the drawee is the buyer. A bank draft is one where the

drawee is the bank and is usually drawn according to the terms of a letter of credit.

Q: +istinguish a 4eoling L/C from a *on24eoling L/C.

A Non%re&ol&in' L(C is one that is alid for one transaction only. A "e&ol&in' L(C is one that is alid for se&eral

transactions oer a gien period of time.

Q: +istinguish a *on2Cumulatie from a Cumulatie L/C.

A Non%Cumulati&e L(C is one which any amount not used by the beneficiary during the specified period may not be

drawn against in a later period) A Cumulati&e L(C is one where undrawn amounts may be carried o&er to future

periods.

$nsurance Law

Q: What is a %ontract of Insurance?

It is an agreement whereby one undertakes for a consideration to indemnify another against loss" damage" or liability

arising from an unknown or contingent eent. !est3 depends on nature of promise" act required to be performed" nature

of agreement.

Q: hat are the 'lements of a contract of insurance-

0. Insured has insurable interest" 1. Insured is subect to risk of loss by happening of designated peril" 5. Insurer

assumes risk" 6. Assumption of risk is part of general scheme to distribute actual losses among a large group of persons

bearing a similar risk" 7. In consideration of insurer8s promise" insured pays a premium.

Q: hen is a contract of insurance perfected-

&ince it is a consensual contract" it is perfected the moment there is a meetin' of the minds) Co'nition theory 9

perfected when insured has knowledge of acceptance and approal by insurer of application.

Q: $s a contract of suretyship an insurance contract*

( contract of suretyship is an insurance contract if the surety is doing an insurance business.

Q: hat constitutes +oing Insurance $usiness-

:aking/proposing to make3 0. (s insurer " any insurance contract" 1. (s surety " any contract of suretyship as a ocation"

not as mere incident" 5. Any other insurance business like reinsurance.

Q: hat are the characteristics of an insurance contract-


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An insurance contract is aleatory" oluntary" eecutory" synallagmatic" compensatory" a contract uberrimae fides" and

personal. (!+ES C,-)

Aleatory Chance is a predominant factor Q: $oer who has an accident insurance policy with father as beneficiary" slipped and diedwhen head hit one of the posts of the boing ring. Can dad claim-!: ;es. $oer who enters the ring does not epect to die. &lipping and head hitting the post isaccidental and coered by the policy. (!leatory.

inds3#rdinary/?eneral/#ld Line

Insured pays a specific premium eery year until he dies. !he policyacquires a surrender alue after 5 years

Limited %ayment Insured pays premiums for a limited period. If dies within the period"beneficiary is paid@ if outlies period" he does not get anything

'ndowment Insured pays premium for specified period. #utlies period" facealue paid@ if not" his beneficiary receies the benefit

!erm Insurance Insured pays once only" and is insured for a specified period. +ieswithin period" beneficiary benefits@ outlies period" no one benefits.

Industrial Life Insurance entitling insured to pay premiums weekly or monthly butthe face alue is %1" or less and the words Bindustrial policy areprinted on the policy


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Q: hat past eent may be insured-

A past eent the happening or non2happening of which is unknown to the parties at the time of the perfection of the

contract may be insured against.

Q: hat is Insurable Interest -

It is eery interest in property" whether real or personal" or any relation thereto" or liability in respect thereof" of such nature

that a contemplated peril might directly damnify the insured.

Q: hat is Insurable Interest in &ife?

It is the interest which a person has in his life or the interest which he may hae in the lies of other persons3 0. #n whom

he depends wholly or in part for education or support" 1. ,nder legal obli'ation to him to pay money" to delier property"

or to render serice" 5. ,pon whose life any estate or interest ested in him depends.

Q: hen should insurable interest in life eist-

It should eist at the time insurance is taken)

Q: :ay an office insure the life of its manager with a proision that the proceeds shall be paid to the company and heirs in

equal proportions-

;es" because it has an insurable interest on the serices of the manager as his death or illness would materially and

inuriously affect the corporation.

Q: D took an insurance policy on the life of his girlfriend" who died. Can D claim-

*o. A person does not hae an insurable interest in the life of another who is a mere friend" friendship alone does not fall

under any one of the three categories.

Q: hat is insurable interest in property -

It is eery interest in property whether real or personal or any relation thereto" or liability in respect thereof" of such a

nature that the contemplated peril might directly cause damage to the insured.

Q: hat may insurable interest in property consist of-

It may consist of 0. An eisting interest" 1. An inchoate interest founded on an eisting interest" and 5. An epectancy

coupled with an eisting interest in that out of which the epectancy arises.

Q: hat is Double Insurance?

+ouble Insurance eists where the same person is insured by se&eral insurers separately in respect to the same subect

and interest. 4equisites3 0. !he person insured is the same" 1. !here are 1 or more insurers insuring separately" 5. !here

is identity of sub2ect matter " 6. Identity of interest insured" 7. Identity of the risk(peril insured against

Q: hat is the nature of the liability of the seeral insurers in double insurance-

!he insurers are deemed co%insurers. 'ach one is bound to contribute ratably to the loss in proportion to the amount for

which he is liable under his contract.

Q: hat is 4einsurance-

A contract by which an insurer procures a third person to insure him against loss or liability by reason of such original

insurance


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Q: +istinguish double insurance and 4einsurance

+ouble insurance 4einsuranceInoles the same interest An insurance of different interests!he insurer remains in such capacity !he insurer becomes an insured in relation to the reinsurer !he insured in the first contract is a party in interest in thesecond contract

!he original insured has no interest in the reinsurancecontract

Q: hat is the %remium in insurance contracts-

It is the consideration paid to an insurer for undertaking to indemnify the insured against a specified peril.

Q: what is the principle of cash to carry?

&aid principle requires payment of the premium before the contract of insurance can be alid and binding. !his is because

the insurer" upon issuance of the policy" is immediately eposed to liability for the risks insured against" so it is entitled to

be paid for etending protection immediately upon eposure.

Q: name at least 5 instances when an insured is entitled to a return of the premium paid.

!he insured is entitled to a return of the 34OLE premium3 0. If the thing insured was ne&er eposed to the risks insured

against" 1. hen the contract is &oidable due to the fraud or misrepresentation of the insurer" 5. hen the insurer ne&erincurred a liability)

Q: what is a %over )ote-

It is a temporary insurance co&era'e. It is alid for E days unless etended or renewed upon approal of the Insurance

Commission. *o separate premium" apart from that paid on the policy" is required for the issuance of the coer note. !he

policy should be issued within E days after issuance of the coer note.

Q: hat is %oncealment?

It is a neglect to communicate that which a party knows and ought to communicate to the other party. It is a ne'ati&e act

and the insurer has no duty to erify" he only needs to proe it eists. 4equisites3 0. !he matter concealed must be

material" 1. !here must be an obli'ation for the insured to reeal the concealed matter" 5. #ther party has no means to

ascertain" 6. *o warranty eists.

Q: hen is a fact material-

hen knowledge of such fact would hae affected the decision of the insurer to enter into the contract in estimating the

risk or in fiing the premium.

Q: hat is a 4epresentation-

It is an oral or written statement of a fact or condition" affecting the risk" made by the insured to the insurer tending to

$ND,CE the insurer to assume the risk.

Q: hat is a warranty-

A statement or promise by the insured set forth in the policy itself or incorporated in it by proper reference" the untruth or

nonfulfillment of which renders the policy +O$D!5LE by the insurer" whether he was in fact preudiced or not. It may be

epress" implied" affirmatie (asserts eistence of a fact)" or promissory (the insured stipulates that certain facts or

conditions shall eist).

Q: hat is a condition-

#ne that is intended to secure for the insurer the best obtainable eidence of the fact of loss and amount of any loss.


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Q: hat is the effect of concealment or misrepresentation or breach of warranty or condition-

!he inured party is entitled to "ESC$ND the policy in case of concealment or misrepresentation or breach of a warranty

or condition.

If the breach is fraudulent" the insurer is freed from liability from the start as the contract is &oid ab initio. If there is no

fraud" the insurer is freed from the contract the moment the breach occurs and is entitled to retain the premiums

corresponding to the period up to the time of the breach.

Q: hat are the prerequisites to recoery for loss in Insurance-

!here must be Notice of Loss and -roof of Loss) *otice must be immediately gien unless delay is waied by the

insurer. %roof must be gien according to the best eidence obtainable.

Q: hat is the effect of payment by insurer to the assured of the indemnity-

It operates as a subro'ation" or an equitable assignment of all remedies the assured may hae against the third party

who caused the damage. !he right of subrogation attaches upon payment by the insurer of the insurance claims of the

assured. As subrogee" the insurer steps into the shoes of the assured and may eercise only those rights that the

assured may hae against the wrongdoer who caused the damage.

Q: hat is the Incontestability %lause?

In life insurance policies" the insurer cannot inoke the material misrepresentation of the insured to rescind the contract

after the lapse of T3O 6E!"S from the date the policy became effectie because of the incontestability clause.

Trust "eceipts Law

Q: What is a *rust 'eceipt *ransaction?

A trust receipt transaction between an entruster and an entrustee whereby the entruster and entrustee" who owns or

holds absolute title or security interest oer certain specified goods" documents or instruments. 4eleases the same to

the possession of the entrustee upon the latter8s eecution and deliery to the etruster

Q: What are the rights of the entruster?

a. !o receie the proceeds of the sales of the goods" etc. released under a trust receipt to the entrustee to the etent

of the amount owing to the entruster b. !o the return of the said good" etc. case they could not be soldc. !o cancel the trust in case the entrustee defaults" take possession of the goods" etc." and sell the same at public or

priate sale

Q: Who is the entrustee and hat are his obl

An entrustee is the person haing or taking possession of goods" documents or instruments under s trust receipt

transaction" and any successor in interest of such person for the purpose or purposes specified in a trust receipt.

e is obliged to3a. !o hold the goods etc. in trust for the entruster and to dispose of them strictly I accordance with the terms of the

trust receiptb. !o receie the proceeds of the sale of the good" etc. in trust for the entruster and o turn oer the same to the

entruster to the etent of the amount owing to the entruster c. !o insure the goods for their total alue against loss from fire" theft" pilferage or other casualtiesd. !o keep the goods" etc. or the proceed thereof" whether in money or whateer form" separate and capable of

identification as property of the entruster e. !o return the goods" etc. to the entruster in case they could not be sold or upon demand of the entruster.

Q: What can be instituted against an entrustee corporation hich failed to turn over the proceeds of the sale, or to

return unsold goods, and ho shall be liable?


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'stafa under Article 507 (b) of the 4eised %enal Code" may be instituted. ,nder the !rust receipts law" when a iolation

or offense is committed by a corporation" partnership" association or other uridical entities" the penalty proided shall be

imposed the directors" officers" employees or other officials or persons therein responsible for the offense.

Q: What remedies are available for violations of the *rust 'eceipts &a?

a. =ile 'stafa charges +)g v. #eopleb. +emand of deficiency of the amount coered by the trust receipt + &andl v -etrobank

=ile for damages as acquittal in 'stafa does not dissole ciil liability (intola vs Insular Bank

NE#OT$!5LE $NST",0ENTS

>I*+& #= *'?#!IA$L' I*&!4,:'*!&

F3 D eecuted an instrument" requiring A to pay %7" on Gune 07" 106 to $.a) +ifferentiate a promissory note from a bill of echange.b) Is the instrument in this case a promissory note or a bill of echange-

A3a) A promissory note is a promise" while a bill of echange is an order. In a promissory note" payment is to be made by themaker@ in a bill of echange" payment is to be made by the person to whom it is addressed.b) !he instrument is a bill of echange. A bill of echange is an unconditional order in writing" addressed by one person toanother" signed by the person giing it" requiring the person to whom it is addressed to pay on demand" at a fied ordeterminable future time" a sum certain in money to order or to bearer. ere" the instrument is addressed to A" requiringhim to pay a sum certain in money at a fied date to $. ence" the instrument is a bill of echange.

C#:%L'!I#* A*+ +'LI


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F3 D sold goods under the trade name" B$. e eecuted a promissory note" payable to C" and signed thereon B$. C suedD for the amount due under the promissory note. D disowned the check" pointing out that he did not sign it under hisname. 4ule on DHs contention.

A3 DHs argument is untenable. *IL 0J states that one who signs in a trade or assumed name will be liable to the sameetent as if he had signed in his own name. In this case" D signed the instrument under his trade name" B$. !herefore" Dis liable for the amount due under the promissory note" notwithstanding his name did not appear thereon.

F3 D entered into a business transaction with ;" whereunder the latter would delier goods to the former. D maderepresentations to ; to the effect that the latter ought to course his goods through $. Later" $ signed a promissory notewith DHs name" indicating thereon that he was doing so under the authority of D. $ then issued the instrument in faor of ;.; sued D for the amount due under the promissory note. Can ; be held liable thereon-

A3 ;es@ D can be held liable for the amount due under the promissory note. *IL 1 states that where the instrumentcontains or a person adds to his signature words indicating that he signs for or on behalf of a principal" or in arepresentatie capacity" he is not liable on the instrument if he was duly authoriKed. In this case" the instrument wassigned by $ and contained words indicating that he was doing so under the authority of D. :oreoer" D represented $ to ;as his agent@ therefore" D can be held liable under the instrument signed by $.

F3 D eecuted a promissory note payable to A or his order. A indorsed the instrument to $" a minor. !hereafter" $ indorsedthe instrument to C. C eentually sued D for the amount due under the promissory note. D raised the defense that $ was aminor. +ecide.

A3 $Hs defense is untenable. *IL 11 states that Bthe indorsement or assignment of the instrument by a corporation or byan infant passes the property therein" notwithstanding that from want of capacity the corporation or infant may incur noliability thereon. ence" although $ is a minor" his indorsement transferred title thereto to C. !hus" C can sue D for theamount due under the note.

F3 A issued a promissory note" payable to the order of $. $ specially indorsed the note to C. + stole the note from C andforged the latterHs signature thereon. + then sold the note to '" who indorsed the same to =" a holder in due course.a) +istinguish real defenses from personal defenses.b) Is forgery a real defense or a personal defense-c) &uppose that = should sue C upon the note@ can the latter be held liable therefor-d) &uppose that = should sue A or $ upon the note@ can the latter be held liable therefor-

A3

a) A real defense is one that is aailable against all holders" een ones in due course. A personal defense is one that isaailable only against holders not in due course.b) =orgery is a real defense. *IL 15 states that Bwhen a signature is forged or made without authority of the personwhose signature it purports to be" it is wholly inoperatie" and no right to retain the instrument" or to gie a dischargetherefor" or to enforce payment thereof against any party thereto" can be acquired through or under such signature unlessthe party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.c) C cannot be held liable to = under the note. *IL 15 states that a forged signature is wholly inoperatie" and no right toenforce payment thereof against any party thereto can be acquired through or under such signature unless the partyagainst whom it sought to enforce such right is precluded from setting up the forgery or want of authority. In this case" CHssignature was forged on the instrument by +. ence" CHs signature is wholly inoperatie" and = cannot enforce paymentthereunder.d) *either A nor $ can be held liable under the note. =orgery is a real defense that is aailable een against holders in duecourse. In this case" = acquired title to the note through CHs forged signature. ence" een granting that = was a holder indue course" A and $ can aoid liability by raising the defense of forgery against =.

C#*&I+'4A!I#*F3

A and $ eecuted a contract with C" whereby they were granted the use of the latterHs Hsystem of collectionsH.&ubsequently" A and $ eecuted the following promissory note3B =or and in consideration of a > and agreement entered into this day with us by C" whereby we are entitled to the use ofsaid companyHs system of collections" we hereby" for alue receied" promise to pay to said C" or order the sum of onehundred fifty pesos we hereby acknowledge the receipt of a true copy of this entire agreement.!hereafter" C indorsed the note in faor of +.

+ then sued A and $ for payment under the note. A and $ raised the defense that the instrument was non2negotiable" particularly in iew of the fact that it made mention of the contract between A" $ and C. 4ule on this defense.


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A3!he defense is untenable. *IL 5 states that an unqualified order or promise to pay is unconditional within the

meaning of the *IL though coupled with3(0) an indication of a particular fund out of which reimbursement is to be made" or a particular account to be debited withthe amount@ or (1) a statement of the transaction which gies rise to the instrument.In this case" the promissory note merely mentioned the contract between A" $ and C which gae rise to the instrument.!herefore" its negotiability was not affected by said statement@ the promise thereunder is unconditional" notwithstandingsuch statement.

F3 A was the acting president of D $ank. e was also interested in starting a lumber business. A had three accounts3

a personal one and one held as treasurer with D $ank" and one held as treasurer of the lumber business" with ; $ank. A withdrew %0k from the personal account with D $ank. A thereafter withdrew %0k from the account with ;

$ank" resulting in an oerdraft of %J.k.&ubsequently" A procured M $ank to eecute a note payable to D $ank. M receied no alue for the note.

:oreoer" A and M agreed that the note was for the purpose of the latter lending its name to the former. A deposited the note with D $ank. D then sued M $ank upon the note. M $ank raised the defense that D $ank had

notice through A that it eecuted the note as an accommodation party.a) hat is an accommodation party-b) 4ule on M $ankHs defense.

A3

a) An accommodation party is one who signs the instrument as maker" drawer" acceptor" or indorser without receiingalue therefor" and for the purpose of lending his name to some other person.b) M $ankHs defense is untenable. *IL 1N states that an accommodation party is liable on the instrument to a holder foralue" notwithstanding that such holder" at the time of taking the instrument" knew him to be only an accommodation partyIn this case" M $ank signed the note as maker" without receiing alue therefor" and for the purpose of lending its name to

A. M $ank is therefore an accommodation party. $ut the mere fact that D $ank had notice of M $ankHs status asaccommodation party does not bar recoery thereon.

*'?#!IA!I#*F3 +istinguish negotiation from assignment.

A3*egotiation takes place when a negotiable instrument is transferred from one person to another in such manner

as to constitute the transferee as holder thereof. An assignment" on the other hand" is a mere transfer of rights or interests

without constituting the assignee as a HholderH as defined under the *IL.*egotiation gies rise to the aailability of defenses under the *IL" such as forgery. &uch defenses are notaailable in case of assignment.

F3 'plain the two methods of negotiation. A3

!he two methods of negotiation are indorsement and deliery. Indorsement consists of the signature of theindorser" usually on the back of the instrument. It has a dual significance. =irst" it constitutes the transfer or sale of theinstrument to the indorsee or transferee. &econd" it signifies the agreement of the indorser to answer for the amountrepresented by the instrument" in case of default of the primary party (generally the maker).

+eliery applies to a bearer instrument. #ne who negotiates by deliery does not warrant that he will pay in casethe primary party fails to pay.

F3 'plain the different kinds of indorsements. A3!here are two general classifications for indorsements3 special or blank" and restrictie" qualified or conditional.

!he former classification has to do with the future method of negotiation@ future negotiation is by further indorsement"when the indorsement is special" while future negotiation is by deliery" when the indorsement is in blank. !he latterinoles the scope of the liability assumed by the indorser. !he liability of the indorser is merely that of assignor in aqualified indorsement. !he liability of the indorser is both as assignor and as indorser in an unqualified indorsement.

F3 :r. A makes an order instrument in faor of :r. $. :r. $ indorses the instrument in blank. !hereafter" the instrument isspecially indorsed by :r. C in faor of :r. +.a) Is the instrument payable to bearer-b) ow can :r. + negotiate the instrument-


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A3a) !he instrument was conerted from an order instrument to a bearer one upon the indorsement thereof in blank.oweer" its subsequent special indorsement by :r. C in faor of :r. + reconerted the same into an order instrument.b) ,nder *IL 56" an instrument specially indorsed may only be further negotiated by way of indorsement. !hus" :r. + (asspecial indorsee) may only negotiate the same by way of indorsement. Although 6 states that a bearer instrumentspecially indorsed may still be negotiated by deliery" the said proiso is inapplicable considering that" at common law" itmust be construed as to be referring to an instrument originally bearable. !hus" an order instrument later conerted into abearer one by irtue of an indorsement in blank falls beyond the scope of 6. =urthermore" the last indorsement is *#!in blank" as proided under *IL N" (e).

4I?!& #= !' #L+'4

F3 hat are the rights of the holder in due course- A3(0) to hold the instrument free from any defect of title of prior parties" and free from defenses aailable to prior partiesamong themseles@ and(1) to enforce payment of the instrument for the full amt thereof against all parties liable thereon

F3 A and $ signed two notes as accomodation indorsers for D Company. !he proceeds were originally intended for

payment of brewery supplies. A dierted the notes@ one such note was indorsed to ; $ank as collateral security for apromissory note which he earlier issued in the $ankHs faor.

A and $ incurred in default" prompting the $ank to sue upon the notes. A and $ argued that ; $ank was not a

holder in due course.Is ; $ank a holder in due course in this case-

A3 A holder in due course is a holder who has taken the instrument under the following conditions3

(0) !hat it is complete and regular upon its face@(1) !hat he became the holder of it before it was oerdue" and without notice that it has been preiously dishonored" ifsuch was the fact@(5) !hat he took it in good faith and for alue@ and(6) !hat at the time it was negotiated to him" he had no notice of any infirmity in the instrument or defect in the title of theperson negotiating it.In this case" ; $ank accepted the note as consideration of the debt owed by the indorser" A. !his makes ; $ank a holderfor alue" and therefore a holder in due course.

F3 D issued a promissory note in faor of A Company. A deposited the note with $ $ank. &eeral additional depositswere made by A with $@ seeral withdrawals were also made. 'entually" $ $ank sued D@ D contended that $ was not aholder for alue.

as D a holder for alue in this case- A3

;es@ D was a holder for alue in this case. In the case of :erchantsH *ational $ank . &ta. :aria &ugar" it was heldthat Bfirst debits must be charged against the first credits. Applying said rule" the note must be deemed in consideration ofthe first amounts withdrawn by A in the series of transactions that had taken place from the moment that the note wasdeposited with $. !herefore" $ was a holder for alue as to the note. $ can thus sue upon the note.

LIA$ILI!I'& #= %A4!I'&F3 ho are the parties primarily liable- ho are the parties secondarily liable-

A3!he parties primary liable are those who" by the terms of the instrument" are absolutely liable to pay the same.

!hese are the maker of a promissory note and the acceptor of a bill.!he parties secondarily liable are those who are required to pay in case of dishonor after presentment made

before the primary parties. !hese are the indorsers of both a note and a bill" and the drawer of a bill.

F3 A issues a promissory note in faor of $" a minor. $ indorses the note in faor of C. C indorses in faor of +. +

sues A upon the note" but the latter raises the defense of $Hs minority.Is A liable to + under the promissory note-

A3;es@ A is liable to + under the promissory note. *IL 11 states that title to property under the instrument passes"

although the minor or corporation incurs no liability thereon. *IL E states that the maker of a promissory note warrants


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the payeeHs capacity to indorse. In this case" A is the maker of a promissory note payable to $. In so eecuting the note" Awarranted $Hs capacity to indorse. !herefore" A cannot raise the defense of $Hs minority.

%4'&'*!:'*! =#4 %A;:'*!F3 D issued a promissory note in faor of A. A sued D upon the note. D raised the defense that A had yet to present thenote before him for payment. Is the contention correct.

A3 *o@ D is incorrect. *IL states that presentment for payment is not necessary to charge the person primarily liableon the instrument.

F3 D issued a promissory note in faor of A. A indorsed the note in faor of $. $ thereafter sued A upon the note. +ecide. A3 A cannot sue $ upon the note. Indorsers of a promissory note are secondary parties. !hey cannot be proceededagainst until the note is presented before the maker for payment" and dishonored. In this case" $ has yet to present thenote before D for payment. ence" A" as indorser" cannot be proceeded against by $ as of yet.

F3 hen is presentment for payment dispensed with- A3(0) where after the eercise of reasonable diligence presentment as required by this Act cannot be made@(1) where the drawee is a fictitious person@ and(5) by waier of presentment" epress or implied

F3 hen is an instrument dishonored by non2payment- A3(0) if it is duly presented for payment and payment is refused or cannot be obtained@ or

(1) presentment is ecused and the instrument is oerdue and unpaid

*#!IC' #= +I&#*#4F3 !o whom must notice of dishonor be gien-

A3(0) the drawer@(1) each indorser@ and(5) any drawer or indorser to whom such notice is not gien is discharged

F3 ho may gie notice of dishonor- A3

*otice may be gien by or on behalf of the holder or by or on behalf of any party to the instrument who might becompelled to pay it to the holder" and who" upon taking it up" would hae a right to reimbursement from the party to whom

the notice is gien.

F3 hat is the effect of notice of dishonor here notice is gien by or on behalf of the holder" it inures to the benefit of all subsequent holders and all prior

parties who hae a right of recourse against the party to whom it is gien.

here notice is gien by or on behalf of a party entitled to gie notice" it inures to the benefit of the holder and allparties subsequent to the party to whom notice is gien.

F3 hat is the required form of the notice of dishonor- A3

!he notice may be in writing or merely oral and may be gien in any terms which sufficiently identify theinstrument" and indicate that it has been dishonored by non2acceptance or non2payment. It may in all cases be gien bydeliering it personally or through the mails.

F3 hen may notice of dishonor be waied- A3

*otice of dishonor may be waied either before the time of giing notice has arried or after the omission to giedue notice" and the waier may be epressed or implied.

F3 hen is notice of dishonor dispensed with- A3

*otice of dishonor is dispensed with when" after the eercise of reasonable diligence" it cannot be gien to ordoes not reach the parties sought to be charged.

+I&CA4?'


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F3 ow is a negotiable instrument discharged- A3

A negotiable instrument is discharged3(0) $y payment in due course by or on behalf of the principal debtor@

(1) $y payment in due course by the party accommodated" where the instrument is made or accepted for hisaccommodation@

(5) $y the intentional cancellation thereof by the holder@

(6) $y any other act which will discharge a simple contract for the payment of money@

(7) hen the principal debtor becomes the holder of the instrument at or after maturity in his own right.

F3 hen are secondary parties discharged- A3(0) $y any act which discharges the instrument@

(1) $y the intentional cancellation of his signature by the holder@

(5) $y the discharge of a prior party@

(6) $y a alid tender or payment made by a prior party@

(7) $y a release of the principal debtor unless the holderHs right of recourse against the party secondarily liable isepressly resered@

(E) $y any agreement binding upon the holder to etend the time of payment or to postpone the holderHs right to enforcethe instrument unless made with the assent of the party secondarily liable or unless the right of recourse against suchparty is epressly resered.

F3 hat is the right of a party who discharges the instrument- A3

here the instrument is paid by a party secondarily liable thereon" it is not discharged@ but the party so paying it isremitted to his former rights as regard all prior parties" and he may strike out his own and all subsequent indorsementsand against negotiate the instrument" ecept3

(0) here it is payable to the order of a third person and has been paid by the drawer@ and(1) here it was made or accepted for accommodation and has been paid by the party accommodated.

F3 'plain the concept of renunciation by a holder of a negotiable instrument. A3

!he holder may epressly renounce his rights against any party to the instrument before" at" or after its maturity. An absolute and unconditional renunciation of his rights against the principal debtor made at or after the maturity of theinstrument discharges the instrument. $ut a renunciation does not affect the rights of a holder in due course withoutnotice. A renunciation must be in writing unless the instrument is deliered up to the person primarily liable thereon.

:A!'4IAL AL!'4A!I#*F3 D issued a note" which was guaranteed by A and $. !he note was transferred to the ; $ank of Commerce. ; $anksued upon the guarantee. A and $ interposed the defense of material alteration" i.e. that makerHs wife signed theinstrument after eecution and deliery of the guarantee. Is the contention correct-

A3 ;es@ the contention is correct. &ignature by makerHs wife after issuance changes number of parties to the instrument@ itis therefore material.

ACC'%!A*C'F3 hat is acceptance as defined under the *IL-It is an acceptance completed by deliery or notification.

F3 hat are the formal requisites of acceptance- A3(0) must be in writing@

(1) must be signed by drawee@ and


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(5) and must not epress that performance shall be made by any other manner than payment of money.

F3 hen is a drawee allowed to accept the bill of echange- A3 A drawee is allowed to accept the bill of echange within 16 hours after presentment.

%4'&'*!:'*! =#4 ACC'%!A*C'F3 hen is presentment for acceptance required-

A3(0) here the bill is payable after sight" or in any other case" where presentment for acceptance is necessary in order tofi the maturity of the instrument@ or(1) here the bill epressly stipulates that it shall be presented for acceptance@ or(5) here the bill is drawn payable elsewhere than at the residence or place of business of the drawee.In no other case is presentment for acceptance necessary in order to render any party to the bill liable.

F3 hat is the effect of failure to make presentment- A3 It results in the release of the drawer and indorser.

F3 hen is a bill treated as dishonored by non2acceptance- A3(0) hen it is duly presented for acceptance and such an acceptance as is prescribed by this Act is refused or can not beobtained@ or(1) hen presentment for acceptance is ecused and the bill is not accepted.

C'C>&F3 +efine a check

A3 A check is a bill of echange drawn on a bank payable on demand.

F3 hat are the different kinds of checks- A cashierHs or managerHs check is one drawn by a bank on itself" and its issuance has the effect of acceptance.

!he bank may be held primarily liable as the maker of a note. A memorandum check is one where the word Bmemorandum or Bmemo is written across its face" signifying that

the drawer will pay the holder absolutely" without the need of presentment. It is drawn on a bank and thus has the sameeffect as an ordinary check. If passed to a third person" it will be alid in his hands like any other check. Although it neednot be presented at the bank" if it is so presented" it is generally accepted by the bank.

A traelerHs check is a negotiable instrument upon which the holderHs signature ust appear twice on theinstrument3 first when it is issued" and again when it is cashed. It is used by traelers as the safest and most conenient

substitute for money.

F3 hen must a check be presented for payment- hat is the effect of delay in presentment- A3 It must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liabilitythereon to the etent of the loss caused by the delay.

Transportation Law

3hat are common carriers*

Common carriers are persons" corporations" firms or associations engaged in the business of carrying or transportingpassengers or goods or both" by land" water" or air" for compensation" offering their serices to the public. (Art. 051" CiilCode of the %hilippines)

Distin'uish common carrier from a pri&ate carrier

A common carrier is distinguished from a private carrier wherein the carriage is generally undertaken by specialagreement and it does not hold itself out to carry goods for the general public. !he distinction is significant in the sensethat the rights and obligations of the parties to a contract of priate carriage are goerned principally by their stipulations"not by the law on common carriers.

Carria'e of #oods


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3hat is etraordinary dili'ence in a contract of carria'e of 'oods*

It is that etreme measure of care and caution which persons of unusual prudence and circumspection obsere forsecuring and presering their own property or rights. !his eacting standard imposed on common carriers in a contract ofcarriage of goods is intended to tilt the scales in faor of the shipper who is at the mercy of the common carrier once thegoods hae been lodged for shipment. !hus" in case of loss of the goods" the common carrier is presumed to hae beenat fault or to hae acted negligently. !his presumption of fault or negligence" howeer" may be rebutted by proof that thecommon carrier has obsered etraordinary diligence oer the goods.

3hat is the time frame for the duty of the common carrier to eercise etraordinary dili'ence*

!he eercise of etraordinary diligence lasts from the time the goods are unconditionally placed in the possession of" andreceied by" the carrier for transportation until the same are deliered" actually or constructiely" by the carrier to theconsignee" or to the person who has a right to receie them. &oadmasters %ustoms $ervices, Inc. vs. lodel Brokerage%orporation and ' 0 B Insurance %orporation@ .'. )o. 123445, 6anuary 17, 8711.

3hen does the common carrier7s presumption of ne'li'ence arise*

A common carrier is presumed to hae been negligent if it fails to proe that it eercised etraordinary igilance oer thegoods it transported. hen the goods shipped are either lost or arried in damaged condition" a presumption arisesagainst the carrier of its failure to obsere that diligence" and there need not be an epress finding of negligence to hold itliable.

!o oercome the presumption of negligence" the common carrier must establish by adequate proof that it eercised

etraordinary diligence oer the goods. It must do more than merely show that some other party could be responsible forthe damage.

Carria'e of -assen'ers

A common carrier is bound to carry the passengers safely as far as human care and foresight can proide" using theutmost diligence of ery cautious persons" with a due regard for all the circumstances (Art. 077)

3hen does a common carrier in a contract of carria'e of passen'ers presumed to be ne'li'ent*

In case of death of or inuries to passengers" common carriers are presumed to hae been at fault or to hae actednegligently" unless they proe that they obsered etraordinary diligence. (Article 07E" Ciil Code of the %hilippines)

3hat is the duration of the liability of a common carrier in a contract of carria'e of passen'ers*

Commencement3 =rom the moment the person who purchases the ticket (or token or card) presents himself at theproper place and in a proper manner to be transported with a bona fide intent to ride the coach (


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"e8uisites:

0. Contracts for carriage of goods1. $y sea5. !o and from %hilippine ports6. In foreign trade

3hat 'o&erns the ri'ht and obli'ations of common carriers in a Contract of Carria'e of #oods by Sea*

In all matters not regulated by the Ciil Code" the rights and obligations of common carriers are goerned by the Code of

Commerce and special laws. !hus" the Carriage of ?oods by &ea Act supplements the Ciil Code by establishing aproision limiting the carrier8s liability in the absence of a shipper8s declaration of a higher alue in the bill of lading.>nsorth *ransportation International +#hils., Inc. vs. %ourt of (ppeals and #ioneer Insurance and $urety%orporation, .'. )o. 15587, 6uly 85, 8717.

3hat is the prescription on claims for loss of9 or dama'e to9 car'oes sustained durin' transit under the Carria'eof #oods by Sea*

,nder &ection 5 (E) of the Carriage of ?oods by &ea Act" notice of loss or damages must be filed within three days ofdeliery.

,nder the same proision" howeer" a failure to file a notice of claim within three days will not bar recoery if a suit isnonetheless filed within one year from deliery of the goods or from the date when the goods should hae been deliered.

Inasmuch as neither the Ciil Code nor the Code of Commerce states a specific prescriptie period on the matter" theCarriage of ?oods by &ea Act (C#?&A) O which proides for a one2year period of limitation on claims for loss of" ordamage to" cargoes sustained during transit O may be applied suppletorily to the case at bar. Wallem #hilippines$hipping, Inc. vs. $.'. !arms, Inc., .'. )o. 151@43, 6uly 3, 8717 .

Liability under CO#S!:

0. :aimum of P7 per package or" if not shipped in packages" per customary freight unit (e.g. metric ton)

1. *ature and alue of goods may be declared by shipper and inserted in bill of lading@ declaration is prima facieeidence and not conclusie on carrier

5. &hipper and carrier may agree on another maimum amount" but not more than the amount of damage actuallysustained

3hat is the relationship between the consi'nee and the arrastre operator akin to*

It is akin to that eisting between the consignee and/or the owner of the shipped goods and the common carrier" or thatbetween a depositor and a warehouseman.

Does the limitation on reco&ery for dama'es apply if the &alue of the car'o shipment is communicated to thearrastre operator*

*o. aing been duly informed of the actual inoice alue of the merchandise under its custody and haing receied

payment of arrastre charges based thereon" the arrastre operator cannot therefore insist on a limitation of its liability underthe contract to less than the alue of each lost cargo. hat is essential is knowledge beforehand of the etent of the riskto be undertaken by the arrastre operator" as determined by the alue of the property committed to its care. !his definesits responsibility for loss of or damage to such cargo and ascertains the compensation commensurate to such riskassumed. (sian *erminals, Inc. vs. Daehan !ire and -arine Insurance %o., &td., .'. )o. 121134, !ebruary 4, 8717 .

3hat is a bill of ladin'*

A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and to delier them ata specified place to a person named or on his or her order. It operates both as a receipt and as a contract. It is a receiptfor the goods shipped and a contract to transport and delier the same as therein stipulated.

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As a receipt" it recites the date and place of shipment" describes the goods as to quantity" weight" dimensions"identification marks" condition" quality" and alue.

As a contract" it names the contracting parties" which include the consignee@ fies the route" destination" and freight rateor charges@ and stipulates the rights and obligations assumed by the parties. >nsorth *ransportation International+#hils., Inc. vs. %ourt of (ppeals and #ioneer Insurance and $urety %orporation, .'. )o. 15587, 6uly 85, 8717

3hat is a frei'ht forwarder*;

!he term Bfreight forwarder refers to a firm holding itself out to the general public (other than as a pipeline" rail" motor" orwater carrier) to proide transportation of property for compensation and" in the ordinary course of its business" (0) toassemble and consolidate" or to proide for assembling and consolidating" shipments" and to perform or proide for break2bulk and distribution operations of the shipments@ (1) to assume responsibility for the transportation of goods from theplace of receipt to the place of destination@ and (5) to use for any part of the transportation a carrier subect to the federallaw pertaining to common carriers. >nsorth *ransportation International +#hils., Inc. vs. %ourt of (ppeals and #ioneerInsurance and $urety %orporation, .'. )o. 15587, 6uly 85, 8717.

3hat is the liability of a frei'ht forwarder*

A freight forwarder8s liability is limited to damages arising from its own negligence" including negligence in choosing thecarrier@ howeer" where the forwarder contracts to delier goods to their destination instead of merely arranging for their

transportation" it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes theresponsibility of a carrier" which actually eecutes the transport" een though the forwarder does not carry themerchandise itself. >nsorth *ransportation International +#hils., Inc. vs. %ourt of (ppeals and #ioneer Insurance and$urety %orporation, .'. )o. 15587, 6uly 85, 8717.

Law on Secrec o! "ank De#osits

3hat is the purpose*

- !o gie encouragement to the people to deposit their money in banking institutions- !o discourage priate hoarding so that the same may be properly utiliKed by banks in authoriKed loans to assist in the

economic deelopment of the country.

-rohibited !cts:

- !he deposits/inestments in bonds may not be eamined" inquired or looked into by any person" goernment official"

bureau or office- It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those

mentioned in &ection two hereof any information concerning said deposits.

3hat are the deposits considered as of an absolutely confidential nature

- All deposits of whateer nature with banks or banking institutions in the %hilippines- Including inestments in bonds issued by the ?oernment of the %hilippines" its political subdiisions and its

instrumentalities

Eceptions:

- ,pon written permission of the depositor - In cases of impeachment- ,pon order of a competent court in cases of bribery or dereliction of duty of public officials- In cases where the money deposited or inested is the subect matter of the litigation.

#arnishment of Deposits< $ncludin' 1orei'n Deposits

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!he prohibition against eamination of or inquiry into a bank deposit under 4epublic Act 067 does not preclude its being

garnished to insure satisfaction of a udgment. Indeed there is no real inquiry in such a case" and if eistence of the

deposit is disclosed the disclosure is purely incidental to the eecution process.

$NTELLECT,!L -"O-E"T6 CODEQ) 3hat are the intellectual property ri'hts that should be re'istered*

• !rademarksQ A*; isible sign capable of distinguishing the goods (trademarks) or serices (serice

marks) of an enterprise must be registered• %atentsQ !echinical &olution of a problem in any field of human actiity which is new (noel inention) and

industrially applicable must be registered• CopyrightsQ an intangible incorporeal right to certain Literary" Artistic" scholarly" scientific works.

Q) 3hat is the difference between the three*

Trademarks -atents Copyri'hts

Applicability ?oods and serices of an enterprise (as

to distinguish it from others)

!o any technical solution of

a problem in any field of

human actiity which is

noel" inentie and

industrially applicable

Literary" Artistic" &cholarly and

&cientific works

4equirement

s

4egistrable and within 5 years from

application declaration of actual use

*oelty" inentie step and

industrially applicable

#riginality and epression

!erm 0 years subect to indefinite renewal for

periods of 0 years each

1 years from filing date of

application

+uring Author8s lifetime and for

7 years after his deathIn Goint ownership" during the

lifetime of the last suriing

author and for 7 years from

the makingIn Applied art" it is for 17 years

from date of making%hotographic and audio2isual

work for 7 years from

publication and if unpublished"

7 yrs from makingow created


18/22

offering it for sale" the world

is free to copy and use it

with impunity.Ideas once disclosed to

public without protection of

a alid patent are subect to

appropriation.

to the person who

commissioned the

work"CopyrightQ to the

creator,*L'&& there is a

written stipulation

to the contrary

(sec 0J.6 I%C)

Infringement ,se by others without the

registrant8s consent of a reproduction

or colorable imitation of his

trademark" tradename or serice

mark with the purpose of causing to

misled the public that such goods or

serices are those of registrant.

!he making" using offering

for sale selling or importing

of a patented product or a

product obtained directly on

indirectly from patented

process or the use of a

patented process without

the authoriKation of the

patentee constitutes patent

infringement

A copy of

substantial

portions of a

copyrighted work

4emedy for

infringement

+amages" inuction"

impounding and destruction

of goods.

Ciil action for damages"

inunction" receie

reasonable royalty if

damages cannot be readily

ascertained or inadequate

and destruction

damages"

inunction"

impounding of

sales inoices and

other documents

eidencing sales

and destruction of

goods. 4ight to file

will prescribed in 1

years.

Q) 3hat is fair use principle*!here is no infringement of copyright for criticism" comment" news reporting and teaching including multiply

copies for classroom purposes.Q) 3hat is the difference of ori'inal work &is%=%&is deri&ati&e work*

+eriatie works are dramtiKations" translation adaptation abridgement arrangements and other alterations ofliterary or artistic works or collection of literary scholarly or artistic works and compilation of data and other materials of theoriginal work" which are original by reason of the selection" coordination or arrangement of their contents.Q) !re works of the 'o&ernment copyri'htable*

*#. howeer prior goernment approal shall be necessary for eploitation of such work for profit" which mayamong other things" require payments of royalties but no prior approal or conditions shall be required for statues rules"regulations speeches" lectures sermons etc pronounced read and rendered in public. *eertheless" author of thesespeeches etc shall hae eclusie right of making a collection of his work.Q) $s utility model patentable*

.*o. ,nder 4A J1N5" sec.0N.5 can no longer be patented" it can only be registered for years after date of filing

of the application without possibility of renewal. A utility model is a technical solution to a problem in any field of humanactiity which is new and industrially applicable. !here is no inentie step3hat are the tests of patent infrin'ement*

'conomic interest test 9 when the process2discoerer8s economic interest are compromisedLiteral infringement test 9 if one makes uses or sells an item that contains all the elements of the patent claim. It is

satisfied by eactness rule which states that the item is used and sold conforming to eactly to the patent claim and toaddition rule which use eactly the same elements added with other different element.

+octrine of equialentsQ) 3hat is doctrine of e8ui&alents*

It proides that infringement takes place when a deice appropriates prior inention by incorporating innoatieconcept and although with some modification and change performs substantially the same function in the substantially thesame way to achiee substantially the same result(&mith . Court of Appeals)


19/22

Q) 3hat is &oluntary licensin' &is%=%&is compulsory licensin'*


20/22

o !o attract" promote and welcome productie inestments from foreign indiiduals" partnerships

corporations" and goernments (including political subdiisions) in actiities which significantly contribute

to national industrialiKation and socioeconomic deelopment to the etent is allowed in such actiity by

the Constitution and releant laws@o !o significantly epand lielihood and employment opportunities for =ilipinos@o !o enhance economic alue of farm products@o !o promote the welfare of =ilipino consumers@o !o epand the scope" quality and olume of eports and their access to foreign markets@ and/or o !o transfer releant technologies in agriculture" industry and support serices.o !o supplement to =ilipino capital and technology in those enterprises sering mainly the domestic market.

?43 *o restrictions on etent of foreign ownership of eport enterprises. In domestic market enterprises"

foreigners can inest as much as one hundred percent (0R) equity.

'3 In areas included in the negatie list.

Q: What is a !oreign Investment under the !I(?

A foreign inestment is an equity inestment made by a non2%hilippine national in the form of foreign echange and/or

other assets actually transferred to the %hilippines and duly registered with the Central $ank which shall assess and

appraise the alue of such assets other than foreign echange.

Q: What is Adoing business in the #hilippines under the !I(?

0. soliciting orders" serice contracts" opening offices" whether called SliaisonS offices or branches@1. appointing representaties or distributors domiciled in the %hilippines or who in any calendar year stay in the

country for a period or periods totalling one hundred eighty (0J) days or more@5. participating in the management" superision or control of any domestic business" firm" entity or corporation in the

%hilippines@ and6. any other act or acts that imply a continuity of commercial dealings or arrangements" and contemplate to that

etent the performance of acts or works" or the eercise of some of the functions normally incident to" and in

progressie prosecution of" commercial gain or of the purpose and obect of the business organiKation3

It does not include the following3

0. mere inestment as a shareholder by a foreign entity in domestic corporations duly registered to do business

and/or the eercise of rights as such inestor@1. haing a nominee director or officer to represent its interests in such corporation@5. appointing a representatie or distributor domiciled in the %hilippines which transacts business in its own name

and for its own account.

Q: What is an Aexport enterprise under the !I(?

An eport enterprise is one which produces goods for sale" or renders serices to the domestic market entirely or if

eporting a portion of its output fails to consistently eport at least sity percent (ER) thereof.

$% What are alloed registration reCuirements of investments on )on#hilippine )ationals

ithout need of prior approal" a non2%hilippine national and not otherwise disqualified by law may upon registration with

the &'C" or with the $ureau of !rade 4egulation and Consumer %rotection ($!4C%) of the +!I in the case of single

proprietorships" do business or inest in a domestic enterprise up to 0R of its capital" unless participation of non2

%hilippine nationals in the enterprise is prohibited or limited to a smaller percentage by eisting law and/or limited to a

smaller percentage by eisting law and/or under the proisions of this Act.

!he &'C or $!4C%" as the case may be" shall not impose any limitations on the etent of foreign ownership in an

enterprise additional to those proided in this Act3 %roided" howeer" !hat any enterprise seeking to aail of incenties

under the #mnibus Inestment Code of 0NJ must apply for registration with the $#I" which shall process such

application for registration in accordance with the criteria for ealuation prescribed in said Code3 %roided" finally" !hat a


21/22

non2%hilippine national intending to engage in the same line of business as an eisting oint enture in his application for

registration with &'C.

Q: What are alloed =oreign Inestments under the !I(?

• 'port 'nterprises!hose whose products and serices do not fall within Lists A and $ of the =oreign Inestment *egatie List

proided under &ection J hereof is allowed up to one hundred percent (0R) ownership.

'port enterprises which are non2%hilippine nationals shall register with $#I and submit the reports that may berequired. $#I shall adise &'C or $!4C%" as the case may be" of any eport enterprise that fails to meet the

eport ratio requirement. !he &'C or $!4C% shall thereupon order the non2complying eport enterprise to

reduce its sales to the domestic market to not more than 6R of its total production@ failure to comply with such

&'C or $!4C% order" without ustifiable reason" shall subect the enterprise to cancellation of &'C or $!4C%

registration" and/or the penalties proided in &ection 06 hereof.

• +omestic 'nterprises*on2%hilippine nationals may own up to one hundred percent (0R) of domestic market enterprises unless

foreign ownership therein is prohibited or limited by eisting law or the =oreign Inestment *egatie List under

&ection J hereof.

Q: What are those included in the !oreign Investment )egative &ist?

a) List A" resered to %hilippine nationals by mandate of the Constitution and specific laws.

b) List $" areas of actiities and enterprises pursuant to law3

o defense2related actiities" requiring prior clearance and authoriKation from +epartment of *ationa

+efense (+*+) to engage in such actiity" such as manufacture" repair" storage and/or distribution of

firearms" ammunition" lethal weapons" military ordnance" eplosies" pyrotechnics and similar materials

unless specifically authoriKed" with a substantial eport component" to a non2%hilippine national by the

&ecretary of *ational +efense@ or

o hae implications on public health and morals" such as the manufacture and distribution of dangerous

drugs@ all forms of gambling@ nightclubs" bars" beerhouses" dance halls@ sauna and steambath houses

and massage clinics.

o &mall and medium2siKed domestic market enterprises with paid2in equity capital less than the equialent

of fie hundred thousand ,& dollars (,&P7") are resered to %hilippine nationals" unless they

inole adanced technology as determined by the +epartment of &cience and !echnology. 'por

enterprises which utiliKe raw materials from depleting natural resources" with paid2in equity capital of less

than the equialent of fie hundred thousand ,& dollars (,&P7") are likewise resered to %hilippine

nationals.

o Amendments to List $ may be made upon recommendation of the &ecretary of *ational +efense" or the

&ecretary of ealth" or the &ecretary of 'ducation" Culture and &ports" indorsed by the *'+A" or upon

recommendation motu propio of *'+A" approed by the %resident" and promulgated by %residential

%roclamation.

c) List C" areas of inestment in which eisting enterprises already sere adequately the needs of the economy

and the consumer and do not require further foreign inestments" as determined by *'+A applying the criteria

approed by the %resident and promulgated in a %residential %roclamation.


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Merc Bar Ops Notes

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