Institute of Law tend to have, which is, the exchange or circulation of products. 2. Single acts: Act which manifests the intention to engage habitually in commerce. Examples: Throwing open to the public a shop or establishment; public announce.
Presumption of habituality Exists from the moment a person who intends to engage in commerce announces through circulars, newspapers, handbills, posters exhibited to the public, or in any other manner whatsoever, an establishment which has for its object some commercial operations. (Art. 3 of code of commerce) Disqualifications from Engaging in Commerce A. Absolute disqualifications: 1. those serving the penalty of civil interdiction; 2. those judicially declared insolvent; 3. those who are absolutely disqualified under special laws. B. Relative Disqualifications: 1. Certain government officials, such as judicial officers, prosecutors, department heads, collectors, and custodian of government funds 2. Money and commercial brokers 3. those who are under relative disqualification under special laws 4. Members of Congress. 5. President, Vice President, members of the Cabinet and their deputies or assistants. 6. Members of the Constitutional Commission.
7. President, Vice President, Members of the Cabinet , Congress, Supreme Court and the Constitutional Commission, Ombudsman with respect to any loan, guaranty, or other form of financial accommodation for any business purpose by any government- owned or controlled bank to them. ABSOLUTE INCAPACITY Extends through out the Philippines Effect of act is null and void RELATIVE INCAPACITY Extends only to the territory where the officer is exercising his functions Effect is to subject the violator to disciplinary action or punishment
Acts of Commerce (Commercial Transactions) 1) Those acts contained in the Code of Commerce and 2) all others of analogous character. The Code of Commerce does not attempt anywhere to define what commercial transactions are. It only specifies two general classes. Moreover, an act need not be performed by the merchant in order that it may be considered an act of commerce. (Cia Agricola de Ultramar v. Reyes, 4 PHIL
2) Governing Law (in successive order): 1) Code of Commerce; 2) commercial usage; and 3) Civil Code. Commercial Registry 1. A book where entries are made of merchants and of documents affecting their commercial transactions; OR 2. An office established for the purpose of copying and recording verbatim certain classes of documents of commercial nature. Nature of Registration
1. By individual merchants – optional; 2. By corporations – compulsory, as it is the fact of registration which creates the Corporation; 3. Partnerships with a capital of P3,000 or more or where the contributions consist of real estate properties – Compulsory, as provided by Art.1772 of the Civil Code; 4. Philippine Vessels – a. With more than 3 tons gross – compulsory b. With gross tonnage of 3 tons or less – optional. Effect of Failure to Register An individual merchant who fails to register cannot request the inscription of any document in the mercantile registry, nor take advantage of its effects (Art. 18, Code of Commerce) Failure to register the articles of incorporation of a corporation will not create the corporation. Failure to register a partnership does not affect the existence of juridical personality, whether or not it has P3, 000 or more or real estate properties on contributions by the partners.(Bar Review Materials in Commercial Law, J. Miravite, 2005 ed.) 2
Required Books of Merchants 1. Under the Code of Commerce a. Book of inventories and balances b. Journal c. ledger d. Books for copies of letters and telegrams. 2. Under special laws; e.g stock and transfer book under the corporation Code 3. Under the National Internal Revenue Code. Commercial Contracts Those entered into by, merchants in the pursuit of their activities as such merchants, those involving articles of commerce, or those defined as such contract by certain special commercials laws. An agreement between two or more merchants or non-merchants bonding themselves to give or to do something in commercial transactions. (Del Viso 88 cited in Miravite BarReview Materials in Commercial law.) Governing Laws:
1. Code of Commerce- primary 2. Civil Code- suppletory (Art. 18, Civil Code) But in case of inconsistency. The lather prevails except as to contracts explicitly governed by the former such as bottomry and respondentia. Formalities: General Rule: Need not be in any particular form Exception: 1. Contracts required by the code or special laws to be in writing or in a certain form.
2. Foreign contracts executed abroad, required by foreign law to be in a particular form. Perfection: General Rule: Commercial contracts are consensual as to perfection. Exception: When the Code of commerce requires specific forms such as charter parties and loans on bottomry and respondentia. Exact moment of perfection: General Rule: All contracts, whether civil or commercial, are perfected from the moment the offeror has notice of the offeree’s acceptance. (Cognition Theory; Art.1319, Civil Code) Exception: Under Art.54 of the Code of Commerce, commercial contracts entered into by correspondence are perfected from the moment an answer is made accepting the offer or the condition by which the latter may be modified. (Manifestation Theory) 3
However, Justice Vitug believes that Article 54 is applicable only to contracts still specially governed by the Code of Commerce. Joint Account (cuentas en participacion) A business arrangement of merchants where other merchants agree to contribute the amount of capital agreed upon, and participating in the favorable or unfavorable results thereof in the proportion they may determine. (Art;239) Distinctions between Joint Account and Partnership (2000 Bar Exam) JOINT ACCOUNT
No firm name No common fund No juridical personality Only ostensible partner manages Liquidation done by ostensible partner Liquidation done by ostensible partner PARTNERSHIP Has a firm name Has common fund Has juridical personality All general partners liable to third persons All general partners manage Liquidation entrusted to any partners.
LETTER OF CREDIT ( LC) (2000, 2002, 2005 Bar Exams) That issued by one merchant to another for the purpose of attending to a commercial transaction (Art. 567) An instrument issued by a bank on behalf on one of its customers, authorizing an individual or firm to draw on the bank or one of its correspondents for its account under certain conditions of the credit. (Commercial Law Review, C Villanueva, 2004 ed.) An engagement by a bank or other person made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit.
(Prudential Banks vs. CA, 216 SCRA 257). Through it, the bank merely substitutes its own promise to pay for the promise to pay of one of its customers who in return promises to pay the bank the amount of funds mentioned in the letter of credits or commitment fees mutually agreed upon. Letters of credit are in effect absolute undertakings to pay the money advanced or the amount for which credit is given on the faith of the instrument. They are primary obligations and not
Commercial Law Study GuideCentralized Bar Operations 2007
Far Eastern UniversityInstitute of Law accessory contracts and while they are security arrangements, they are not converted thereby into contracts of guaranty. (Metropolitan vs. Daway) A letter of credit is a commercial transaction because it is one of the contracts provided for by the Code of Commerce not repealed by the Civil Code. (Bar Review Materials in Commercial Law, Miravite, 2005 ed.) Essential conditions: 1. Issued in favor of a definite person and not to order; 2. Amount fixed and specified. (Art. 568) Note: If any of these essential conditions is not present, the instrument is merely considered as a letter of recommendation. Duration: a. Upon the period fixed by the parties: or b. If none is fixed, 6 months from its date if used in the Philippines, or 12 months if used abroad.
(Art. 572) Note: The LC becomes void if it is not used within the period applicable. Perfection: LC are perfected from the moment the correspondent bank makes payment to persons in whose favor the LC has been opened. (Belman, Inc. vs. Central Bank, 104 Phil. 887) Parties 1. Applicant/buyer/importer – one who purchases the goods, procures the LC, and obliges himself to reimburse the issuing bank upon receipt of the documents of title.
2. Issuing/opening bank – one which issues the LC, and undertakes to pay the seller upon receipt of the draft and proper documents of title from the seller and to surrender them to the buyer upon reimbursement; and 3. Seller/exporter/beneficiary – one who sells the goods to the buyer, and who delivers the draft and documents to the issuing bank to recover payment. The number of parties may be increased. Modern letters of credit are usually not made between natural persons. They involve bank- to bank transactions. 4. Advertising/ Notifying Bank – the correspondent bank (agent) of the opening bank through which it advises the beneficiary of the LC. 5. Confirming Bank – bank which, upon the request of the beneficiary, confirms the LC issued. 6. Paying Bank – bank on which the drafts are to be drawn, which
may be the opening bank or another bank not in the city of the beneficiary. 7. Negotiating Bank – bank in the city of the beneficiary which buys or discounts the drafts contemplated by the LC, if such draft is to be drawn on the opening bank or on another designated bank not in the city of the beneficiary. A mere advertising or notifying bank is not liable for a breach of the letter of credit, while a confirming bank is liable in case of breach thereof.
An advertising bank is bound only to check the apparent authenticity of the letter of credit. (Bank of America NT. & SA vs. CA, G.R. No. 105395, December 10, 1993) Nature: The LC is the financial devise (mode of payment) developed a s a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying.
Stages: 1. Contract of sale between the buyer and seller 2. Application for LC by the buyer with the bank 3. Issuance of LC by the bank 4. shipping of goods by the seller 5. Execution of draft and tender of documents by the seller 6. Redemption of draft (payment)and obtaining of documents by the issuing bank 7. reimbursement to the bank and obtaining of documents by the buyer Commercial Law Study GuideCentralized Bar Operations 2007
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