OBLIGATIONS • Determinate thing: right belongs to Creditor

– Juridical necessity to give, to do, or not to do.
ELEMENTS OF OBLIGATION:
 Active Subject – Creditor/Obligee
 Passive Subject – Debtor/Obligor
 Prestation – Object/Subject Matter
from the time the obligation to deliver
arises.
TIME Obligation to Deliver Arises:
• With Suspensive Condition – from the time
the condition is fulfilled.

 Efficient Cause – Legal/Juridical Tie • With Period; with suspensive effect – when
period arises.
SOURCES: • Without period and condition – upon
perfection of the contract (meeting of
1. Law – there should be a law, can’t be
minds).
presumed.
2. Contracts –
DELIVERY:
Meeting of minds > Offer > Accepted
CONSTRUCTIVE:
3. Quasi-Contracts – no meeting of minds
 Traditio Symbolica
a. Solutio Indebiti – undue payment.
b. Negotiorum Gestio – unauthorized  Traditio Longa Manu – mere consent or
management. agreement.
4. Delicts (Crimes) - acts or omissions
 Traditio Brevi Manu – objects is already in
punishable by law, if accused:
the hands of the debtor.
a. Convicted – civil & criminal obligation.
b. Acquitted – civil obligation only.  Traditio Constitutum Posesorium – vendor
continues in possession.
Did not commit act, no civil obligation.
 Quasi-Traditio – with documents.

5. Quasi-delicts – tort, culpa, negligence.

Start Result
DAMAGES – harm done and the sum of money that
Quasi-Contracts Lawful Benefit
can be recovered.
Quasi-Delicts Lawful Injury/Damages
Delicts Unlawful Injury/Damages SOURCES:
1. FRAUD (DOLO)
TO GIVE: (POSITIVE, REAL) a. Causal Fraud (Causante) – voidable
 Whether specific or generic, you can’t go to b. Incidental Fraud (Incidente) – valid
the court for specific performance in case of
refusal. 2. NEGLIGENCE (CULPA)
 Specific – CAN’T be extinguished through a. Contractual – with existing contract.
other parties. b. Aquiliana – without existing contract.
 Generic – CAN be extinguished through c. Criminal – with or without existing
other parties. contract.

TO DO: (POSITIVE, PERSONAL) DILIGENCE:

 Specific performance by court NOT allowed  As required by law
in case of refusal, ONLY damages are
 As stipulated by parties
allowed because of breach of contract.
 Absence of 1 & 2, diligence of a good father
of a family.
NOT TO DO: (NEGATIVE, PERSONAL)
DEGREE OF DILIGENCE
 Anything done shall be undone at the
Stipulated by Increase Valid
Debtor’s expense. parties Decrease Void
Common Stipulated: GFF Void
FRUITS: Carrier Required by Law: utmost care Extraordinary

Page 1 of 24
Agency Req. by Law: extraordinary Valid Interest (√)
Stipulated: GFF Diligence GFF

GENERAL RULE: “No one is liable in • “No delay. No penalty.”

fortuitous events.” • The creditor can’t be compelled to accept
partial payment. EXCEPT: If there is a
Except: stipulation.
 When law so provides
 When parties stipulate  Prima Facie – “Disputable/Assumption”
 Nature of the obligation requires
assumption of risks. (Example:
Insurance)

RIGHTS OF CREDITOR:
Res perit Domino
“The thing perishes with the owner”
1. Exact fulfillment/to demand payment =
court.
3. DELAY (MORA)
2. Exhaust the properties of debtor. EXCEPT:
a. Solvendi (Debtor)
from the execution
• Ex re – real obligation, to give.
Writ attachment → Public Sale → Proceeds
• Ex persona – personal obligation, to
3. Accion Pauliana – to rescind. To impugn
do.
(question/challenge) the acts of the debtor.
b. Accipiendi (Creditor)  Designed to defraud creditor.
c. Compensatio Morae – both debtor and  Creditor deprived right to enforce
creditor. claim.
d. Contravention of Tenor – violation of 4. Accion Subrogatoria – to exercise rights of
terms. the Debtor.

GENERAL RULE: “No demand. No delay” ACTS OF DEBTOR:

Except: To rescind:
 When law so provides  Contract Donates (gratuitous) Donee: BF (√) GF (√)
stipulates Sells (Onerous) Buyer:
 Time is of the essence
 Demand would be useless EXCEPT: If there are remedies.
 Reciprocal obligation

KINDS: (MENTAL) KINDS OF OBLIGATION:

• M – Moral 1. Demandable at once

• E – Exemplar  Pure/Simple – no period/condition

 Resolutory – with condition. 
• N – Nominal With Resolutory Effect – with
• T – Temperate period.
2. With a period
• A – Actual/Compensatory
 Benefit of both creditor & debtor.
• L – Liquidated
 Cannot be demanded before due
date, court can ONLY fix period.
Liab./Responsibility Demandable Court-Reduce 3. With Condition
Fraud √ × 4. With Condition and period
Negligence √ √
“WILL IT HAPPEN?”
Fulfillment of Obligation
DEBT: Before After
MAYBE (not sure):
Oral Principal (√) Interest (×) VOID condition
 Suspensive No obligation Obligation arises

Page 2 of 24
  Resolutory Obligation Obligation end Alternative Obligation 2 or more DR. unless
arises (ext.) stipulated
YES (sure): Period Facultative Obligation 1 (with Debtor if
substitute) stipulated
 Condition must not be impossible and not Conjoint Obligation 2 or more Fulfillment:
contrary to law, morals, public policy, ALL
public order, and good customs. Obligation with a penal clause

FULFILLMENT OF CONDITION:
1. Potestative – depends on sole will of one of Obligation Liable:
the parties. Exting.? Damages?
ALTERNATIVE FE: (×) (×)
If Debtor: Suspensive: VOID Fault-DR (×) (×)
Resolutory: VALID If Creditor: VS.
Suspensive: VALID Resolutory: VALID
FACULTATIVE
FE: (√)
2. Casual – depends on chance (valid) or third
party (valid). Fault-DR (×)
3. Mixed – depends on:
 Will of one of the parties & third
party (VALID).
 Will of one of the parties & chance
(VALID). 2 OR MORE DEBTOR OR CREDITOR:

 DEEMED FULFILLED PRINCIPLE: “When the

1. JOINT – “to each his own”  If
debtor voluntarily prevented the silent, presumed joint.
fulfillment of the condition, the condition
2. SOLIDARY – “all for one, one for all”
is deemed
 When the law so provides
fulfilled.”
or stipulated.

Pending fulfillment; rights MODE OF EXTINGUISHMENT OF OBLIGATION:

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

DEBTOR DEPRIVED OF PERIOD: (IGIVA) I  Presumed Benefit:

– Debtor INSOLVENT (total or partial). CR/DOUBT: burden of proof = DR
G – Fails to GIVE (guaranty or
security).
Except: Ratification, Subrogation, Estoppel
• I – guaranty or security: IMPAIRED
(fault DR) or lost (FE/fault of DR).
 When:
• V – DR VIOLATES undertaking.
Principal/ Recovery?
A – DR attempts to ABSCOND.
Paid before maturity:
Prestation “Choice”

Page 3 of 24
  DR “aware” of (×) – waiver of right to If approved, obligation
period period extinguished.

 DR “not aware” of (√) + Interest + Fruits

period  Consignation allowed w/o prior
T.O.P.:
On or After Maturity (×) Only Interest + fruits
(not aware)
A.o.P Payment Dation in T.O.P. &
by Payment Consignation
 Where: Cession
To give specific thing: - Multiple Debtor is Debtor T.O.P.
obligation s insolvent need not – Act of the DR of
 With stipulation Place as stipulated are ALL due be offering to his CR
 Without stipulation and insolvent what is due to
Where object is located
demandable. him.
@perfection of contract
All Does not CONSIGNATION –
properties affect all CR refuses to
To give generic thing or to pay money: are given the accept payment,
up to debtor’s deposit thing due
 With stipulation Place as stipulated - Payment
satisfy the properties to the judicial
not enough.
 Without stipulation Where debtor resides needs of . Plurality authority.
creditors of the
(2 or more) creditors
 How:
is not
To pay (money): required.

 With No transfer Transfer

Currency as stipulated
stipulation of of
ownership property
 Without Legal Tender
Partial Extinguish
stipulation
extinguish-
ment of
debt
To give:

 Specific As stipulated, no substitute

 Generic As stipulated, neither
(TRAIT) o T – 2 or more persons
inferior/superior
claiming
To do:  As stipulated right.
 If poorly done: undo @the o R – CR refuses to issue
expense of the debtor.
RECEIPT w/o just
cause. o A – Creditor
 SPECIAL FORMS OF PAYMENT: ABSENT o I – CR
A. Application of payment becomes INCAPACITATED to
 Gives DR privilege (right to receive payment.
choose) o T – TITLE is lost.
 2 or more obligation is due
 If silent: apply proportionately  DR pays: incapacitated:
(<CR apply to most onerous) B. obligation extinguished. If CR
Dation en payment benefitted or money was kept.
 Payment in kind, ONLY 1 CR, DR
solvent. 2. LOSS OF THE THING DUE
C. Payment by Cession  Applicable if: determinable/specific
 DR insolvent, 2 or more CR,  Not applicable: generic (genus nunguam
obligation partially perit)
extinguished.  LOST – perishes, goes out of
D. Tender of payment and Consignation commerce, disappears
(existence unknown/ cannot
 CR refuses, money is deposited
be recovered).
in court with notice to the CR.

Page 4 of 24
  Delegacion – personal
3. CONDONATION/REMISSION novation. Original DR must
 Essentially gratuitous, nature: be discharged. (Initiative:
donation. Original DR)
 Requirements:  Expromission – personal
(Initiative: New DR or third
Essential  Capacity of Donor (CR) & Donee (DR)
person)
 Donative Intent
SUBROGATION – CR. (Personal)
 Acceptance (DR)
a. Conventional - by agreement
Formal  Personal Property: P5000 up (writing)
b. Legal – by operation of law
 Real Property: Public Instrument
 When a CR pays another
CR who is preferred even
4. COMPENSATION without consent of DR.
 2 persons, CR & DR of each other.  When a third person who
a. Conventional - by is interested in the
agreement fulfillment of the
b. Legal – by operation of obligation pays even
law without the consent of the
DR.
 Requirements:
 Principally bound DRs & CRs. • “First in time, First in right”
If new DR fails to pay,
 Both debts: payable in money,
can CR collect original DR?
in kind/quality or both.
 Both obligation: due Delegacion:
 Both obligation: liquidated  YES Time of delegacion; New DR insolvent
& demandable  NO After of delegacion
 NO: controversy or retention
by third person.
Expromission:
c. Facultative – one party  NO Time of expromission New DR insolvent
can claim compensation,  YES Time of expromission Orig.DR aware & didn’t
the other cannot. object to expromission
d. Judicial – decree by court,
 YES Time of expromission Orig.DR’s insolvency is
in case where there is
known to the public.
counterclaim.
 NO After of expromission

 Compensation NOT allowed: when

one of the obligation arose from:
 Deposit
 Bailee in Commodatum
 Obligation to give gratuitous
support (present/future)
 Obligation arising from
commission on penal offenses:
civil liability.
5. CONFUSION/ MERGER  CR & DR, one
person.
6. NOVATION
 Changing the object (real) or
condition (real)
 SUBSTITUTION – Debtor
• Mixed Novation:
Must be REAL + PERSONAL
CONTRACTS
CHARACTERISTICS: (MACRO)
• M – Mutuality: bind both contracting
parties. Validity: can’t be left with will of
one of them.
• A – Autonomy: liberty/freedom to
stipulate.
• C – Consensuality: perfected by mere
Consent.
• R – Relativity of contracts: take effect
to parties.
• O - Obligatoriness & compliance in
good faith.

KINDS:

Page 5 of 24
 • NOMINATE Vs. INNOMINATE  Deaf-Mute

 Civil Interdiction – as if dead.

 Do ut des I give that you may give.
 Mortis Causa (√)  Inter-vivos (×)
 Do ut facias I give that you may do.
 Hospitalized Lepers
 Facio ut des I do that you may give.
 Facio ut facias I do that you may do.  Prodigals/Spend Thrills

• PRINCIPAL Vs. ACCESSESORY VICES OF CONSENT: (VIMFU)

• V – Violence (physical pain)
• CONSENSUAL Vs. REAL Vs. FORMAL
 Serious/ irresistible force
(COC Vs. COC + DEL. Vs. COC + DOC.)
• I – Intimidation (mental pain)
• GRATUITOUS Vs. ONEROUS: Liberality  Well-grounded fear, imminent danger,
must be unlawful.
• UNILATERAL Vs. BILATERAL
• M – Mistake (Error)
• COMMUTATIVE: Exchange of values
 If serious: Annulment
• ALEATORY: based on chance  If NOT: Reformation
• AUTOMATIC • F – Fraud
 Insidious words, machination
• ADHESION
• U – Undue Influence
 Professional Relationship
ELEMENTS: (Ex. Lawyer-client)
• ESSENTIAL – without them, there is no  Consanguinity/Affinity
contract- Cause, Object, Consent (COC) (Ex. Aunt, uncle)
 Religious Affiliation
• NATURAL – deemed included except if
(Ex. Priest, Parishioners)
stipulated not to include.

• ACCIDENTAL – included if stipulated. NO FRAUD:

 Concealment – failure to disclose acts
without duty to disclose. Except: with duty
 An offer becomes INEFFECTIVE “BEFORE” to disclose (fraud).
acceptance: (DICI)
 Mere exaggerations in trade – ads
 D - Death
 Dealer’s talk: Caveat Emptor –
 I - Insolvency “buyer beware”

 C – Civil Interdiction  Mere expression of Opinion – Except:

Opinion of an Expert.
 I – Insanity
OBJECTS OF CONTRACTS:
 Things – existing/future  Should come to
existence.
PERIOD TO DECIDE Can offer or Liable  Retroactive (emtio rae speratae)
sell? (damages)  Hope – with hope (√); vain hope (×)
 Without consideration √ √  Inheritance – only present inheritance (√);
(option money) future (×).
 Without consideration √ ×  Right – Transmissible (√); Intransmissible
 With earnest pay (down √ √ (×).
payment)
CAUSE OF CONTRACTS:
INCAPACITATED: (CHIPUD)
 Lawful
 Unemancipated Minors – incapacitated to  If inadequate (lesion)
give consent (below 18 y/o).  Fictitious/Simulated
 Absolute (void)
 Insane/Demented Person – except: lucid
 Relative (effect True Agreement)
interval.

Page 6 of 24
  False : (VOID)  Rescind: within 4 years
from the time incapacity
 Motive – not an essential element (with or
ceases.
without: VALID)
• A – made by representative of
FORMS OF CONTRACT – any form (oral, written, ABSENTEES = property
P.I.) EXCEPT:  Lesion: more than ¼ value.
 For validity – failure: VOID  Rescind: within 4 years
 For enforceability – Statute of fraud. from the time his
 For convenience (absentee).
Whereabouts are known,
INTERPRETATION: to give effect – “true intention”
EXCEPT: within 2 years, if:
• Words – clear & unambiguous: literal
meaning. o Boarded airplane o
 Provision: written prevail over Boarded Vessel o
printed.
Sent to war
 Amount: words prevail over figures.
 2 or more: “I” – solidary; “We” – • C – made to defraud CREDITORS.
joint. (Accion Pauliana)
• Acts – contemporaneous, subsequent.
• T – THINGS in litigation made
• Customs and usages
without consent of litigant or court.
F – Fraud / A – Accident / M – Mistake / I – Inequitable Conduct • S – SPECIFICALLY declared by law to
be rescissible.
Remedy:
Before meeting of minds: Annulment
After meeting of minds: Reformation 2. VOIDABLE – valid until annulled.
Defect: consent.

OPTION:  One of the contracting parties –

 Reformation or specific performance incapacitated.
 Specific Performance to Reformation  Consent – vitiated (VIMFU) - To annul
(×)
within 4 years’ time MF-discovery / VIU
 Rescission to specific performance
 Specific Performance to Rescission(√) – cease.

- Except: marriage- 5 years

REFORMATION NOT ALLOWED:
• Vitiated by VIMFU
 Wills – except by the testator
• One of the contracting parties
 Simple donation Inter-vivo – if no condition
incapacitated.
imposed.
- RATIFICATION – retroacts on the day the
 Real Obligation
contract was made. Cleans defect.
DEFECTIVE CONTRACTS:

1. RESCISSIBLE – least defective. Defect: 3. UNENFORCEABLE – validable.

lesion (damage) (GACTS) Defect: without effect unless ratified.

• G – made by GUARDIAN - Both contracting parties are incapacitated.

 Lesion: more than ¼ value. - Made without authority.
- Do not comply with statute of fraud.

Page 7 of 24
 (SALSAR) SALES
• S – SPECIAL PROMISE – to answer
debt, default, miscarriage of SALES VS. BARTER:

another.
1. Manifestation: (Ex. B sells his car to C)
• A – AGREEMENT not to be  Cash: P1M (Sale)
performed within 1 year from the  Trade-in: Cash-600 / TI-400 (sale)
making thereof. Cash-400 / TI-600 (sale)

• L – LEASING: period longer than 1

year. Sale of real property or any
interest therein.
• S – SALE of goods, chattels or things
in action @least P500.
• A – AGREEMENT made in
consideration of mortgage other
than mutual promise to marry,
enforceable even if oral ONLY.
2. Absence of Manifestation: (Ex. B transfers
his car to C)
 Cash: P1M (Sale)
 Kind: P1M (Barter)
 Cash-600 / Kind-400 (Sale)
 Cash-400 / Kind-600 (Barter)
 Cash-500 / Kind-500 (Sale)
SALES VS. CPW (Contract for a Piece of Work):

• R – REPRESENTATION as to the  MASSACHUSETTS: Object: Same

with New York Rule
credit of a third person.  Available/Regular Stock (Sale) 
Specially/Manufactured (CPW)

English Rule:
Materials > Labor = Sale
4. VOID/INEXISTENT – most defective. Defect:
Labor > Materials = CPW
without effect cannot be ratified/period to
question. (ICAD)
• O – OBJECT/CP: contrary to law, morals… OBLIGATIONS OF THE VENDOR (SELLER):
• O – OBJECT: outside the commerce of men.
1. To effect DELIVERY
• O – OBJECT: did not exist at the time of
2. To TRANSFER OWNERSHIP
transaction. (TITLE) to buyer
• I – INTENTION of the parties relative to the • VOIDABLE: Can
principal object: cannot be ascertained. annul if third party
is in bad faith.
• C – CONTEMPLATE an impossible service. • VOID: Stolen
• A – ABSOLUTELY simulated or fictitious. 3. To WARRANT
• D – DECLARED void by law.

Page 8 of 24
 • EXPRESS: As
stipulated  If vendor acted in good faith
IMPLIED:
o Against Eviction: Except if waived. IF VENDOR ACTED IN GOOD FAITH:
 Buyer
deprived of 1. Value of the thing sold only *waiver
object: consciente (without knowledge of eviction)
• Right: existing
@ the time sale 2. No liability
• Seller: given *waiver intencionada (with knowledge of
opportunity to defend title. o eviction)
Against Hidden Defects:
 Defects TYPES OF WAIVER
NOT
Hidden –
1. Waiver Intentionada – seller not liable.
caveat
emptor 2. Waiver Consiente – seller liable up to FMV
(buyer @ the time of eviction.
beware)
 Defects ANIMALS:
Hidden –
caveat 1. Disease:
venditor  Contagious – VOID
(seller  NOT Contagious – VALID, VOID IF
beware) dies within 3 Days from the date of
purchase and existed at that time.
Seller: Defect “If waived”
Aware (√) VOID
2. Defects: if hidden: BUYERS’ option:
Not Aware (√) VALID
within 40 days.
 Accion Redhibitoria – to annul,
 Defects: If because object is unfit for the use
Seller: intended.
Good Faith  Accion Quanti Minoris – to reduce
– NOT price
liable for
 NO WARRANTY: Caveat Emptor
damages.
Fairs, public auction,
livestock sold as
VENDOR’S LIABILITY IN CASE OF EVICTION: (VICED)
condemned.
o Merchantability:
• V – Value of the thing within the commerce of man.
• I – Income or fruits o Fit for the purpose:
• C – Cost of suit which cause the eviction Seller Liable
• E – Expenses of the contract General: (√)
• D – Damages and Interest Specific, if stipulated: (√)

Page 9 of 24
 interest can sell his undivided interest.

 LEGAL
 Co-owners: (e.g. W, X, Y, Z > W, X –
absolute sale to Buyer can):
Proportionate:
 Y & Z repurchase what (√)
W & X sold?
 Y rep. what W & X sold? (√)
 Z rep. what W & X sold? (√)
TERMS: Ownership Risk of loss  Adjacent/Ad joint Landowners
AFTER on FE
delivery RURAL: (Agricultural)
 Not > 1 hectare, &
A. On TRIAL or Satisfaction Seller Seller (RPD)  Buyer – already owns a rural land
On SALE or Return Buyer Buyer (RPD)  Can A/AJLO repossess? (√)
B. LUMPSUM – no increase or decrease in price. URBAN (City)
 Discrepancy (Estimate < Actual): Should not  So situated – majority part: no
exceed ¼. practical use. EXCEPT: if there is
 If seller insists delivery of excess between a right to be exercised. 
actual and estimate: Buyer’s Option: Acquired for speculation. COURT
- least injury to give access.
 Rescind/Cancel contract +
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 inadequate.
exact fulfillment.  When buyer retains part = PP
• 2 or more – Altern.  Buyer extends period of redemption.
Remedies  Seller retains possession
I. Exact fulfillment – S demands payment;  Seller pays taxes
Seller – Ordinary CR – NO right to foreclose   Real intention – mortgage
Public Sale: proceeds:
 Higher than debt: excess belong to
buyer.
 Lower than debt: deficiency –
Buyer pays.
II. Cancel Sale: B returns object/ Seller
returns payment.
III. Foreclose the Chattel Mortgage
- deficiency: no recovery, stip. – VOID
- excess: belongs to seller, stip. (B) –
VALID
 REAL PROPERTY (Realty Installment Buyer
Protection Act)
 RIBPA (MACEDA LAW)
NOT applicable to:
 Sale or Financing – Industrial
Lots
 Sale or financing – Commercial
Buildings
 Sale to tenants – Land Reform
Code
Applicable to: Residential Lots DR
default installment: Without
additional interest/penalty.
Grace Period:
 Payment: <2 years (60 days)
⪰ 2 years (1 mo. /yr.)
 Available once every 5 years
 Condominium: Residential,
Commercial, Industrial:
 SELLER: cancels – refund:
 50% amount paid
 + 5% per year after 5 yrs.

Page 10 of 24
D. REDEMPTION RIGHTS OF THE UNPAID VENDOR (SELLER):
 CONVENTIONAL – based on 1. Stoppage in transit
stipulation  Repossession
2. Possessory lien
Period:
• With Stipulation – max. of 10 3. Resale
yrs. 4. Cancel
• Without Stipulation – 4
years  Pacto de retro sale (death of seller), can
heir repurchase? – NO. The owner of the undivided OBLIGATIONS OF THE VENDEE (BUYER):
1. To ACCEPT delivery
2. To PAY – terms

 Traditio longa manu - mere pointing object.

 Traditio brevi manu - already in possession of the vendee (buyer) at
the time of sale. Delivery, no longer required.
 Traditio constitutum possessiorium – vendor
(seller) continuous to have possession of the
thing not as owner but as tenant or lessee.
 Emtio spei – hope, present thing, uncertain.
 Emtio re separate – future thing expected to come in existence,
certain.
 Absolutely Simulated Sale – VOID.

SALE OF REAL ESTATE:

(a) Actual < Stated Area
• Reduction of price if actual area < 1/10 of Stated
• Rescind the sale if actual area > 1/10 of stated
(b) Actual Area > Stated Area
• Accept and pay contract rate.
• Accept the stated area and reject the excess.
(c) Actual Area is not of the quality specified

Page 11 of 24
 • Reduction of price if the inferior value
not exceed 1/10 of the price/rate
agreed upon.
• Rescind if inferior value exceed 1/10 of
the price/rate agreed upon.
DOUBLE SALE:
1. PERSONAL PROPERTY
• 1ST Possession in good faith
• In public instrument (construction
delivery) – public instrument is
preferred over private instrument
(same rule with real property)
2. REAL PROPERTY
• 1st register in good faith
• 1st possession in good faith
• Present the oldest title
PERSONS NOT LIABLE FOR BREACH OF WARRANTY:
(SAMPO)
• S – Sheriff
• A – Auctioner
• M – Mortgagee
• P – Pledgee
• O – Other persons  to sell by virtue of
authority in fact/ in law.
AGENCY
- founded upon Trust and Confidence.
 By Operation of Law
 Express
 Implied
• Principal & Agent both present –
receipt of Power of Atty. Is without
objection.
• Principal & Agent both NOT present:
o Acknowledgement of receipt of the
Power of Atty.
o Failure to reply: (Acceptance)
 If required is to do act: the
agent: habitually engaged.
 Parties:
• Principal – capacitated party.
• Agent – presumed w/ compensation.
 2 or More:
• Principal – solidary.
• Agents – joint. EXCEPT: stipulated –
solidary. EXCEPT: acts of dominion
which needs Special Power of Atty.
NOTICE OF AGENCY’S APPOINTMENT:
 Newspaper (published) or Notice Letter –
another agent.
 Del Credere Agent – agent & surety at the
same time.
NOTICE OF REVOCATION:
 Newspaper, to bind 3rd parties: must be done
the same manner as Notice of Appointment
EXCEPT: if the parties to be notified have
actual knowledge.
OBLIGATIONS OF an AGENT:
1. To observe instruction of the Principal –
deemed not have exceeded authority.
2. To give everything to P, even if not owing
P.
3. To make accounting of transactions,
stipulation to the contrary: VOID
 If A exceeds authority, still binding to P,
object belongs to A = authorized to sell
 P’s option: Consider – A fulfilled his
authority or ratify.
4. To advance funds: (×) EXCEPT: If
stipulated: (√), except: if P
insolvent (×)
AGENT – if authorized:
 To sell → to mortgage (×)
 To mortgage → to sell (×)
 To lend money → to be borrower(×)
 To borrow money → to be lender int. = current rate
(√)
 To sell on credit → obligation to make list = of ALL
buyers on credit otherwise: ALL CASH
TO APPOINT SUB-AGENT:
1. With Stipulation: (√) & (P designates Agent)
or
2. If not prohibited:
 1&2: notorially, incompetent, insolvent.
Page 12 of 24
  BAILEE – guilty of ingratitude – able
If Prohibited, ALL actions of Sub-Agent is VOID. to save.
EXTINGUISHMENT OF AGENCY: (EDWARD)  BAILEE – allows others to use,
EXCEPT: members of household if
• E – Expiration of term not prohibited.

• D – Death of P or A: to sell goods = heirs  BAILEE – leases to others.

 Take care (GFF) & give notice to P  If object delivered – with appraisal


Agency by operation of law
(necessity). SECURITY: collateral (Sangla) – things:
Death – EXCEPT: constituted for the benefit of P or A,
or 3rd person (stip pour autrui), Insolvency, Civil Objects Possession
Interdiction, and Insanity. Pledge Movable CR/pledgee
Antichresis Immovable CR/
• W – Withdrawal by agent antichretic CR
• A – Accomplishment of purpose. Mortgage
• R – Revocation of agency – (P) @ will, with or  Chattel Movable DR/ mortgagor
 Real Estate Immovable DR/ mortgagor
without cause.
EXCEPT: Valid Reason – must be with cause.
• D – Dissolution of the firm which established
the agency. 1. PLEDGE:
 Similar to Recto Law
 Quasi Traditio – execution of Public
Instrument. • Foreclosure then Public Sale → with
notice:
→ Deficiency or excess: belongs/ suffered
by CR.
• Pledge (CR) – use object = NO, EXCEPT: If
CREDIT TRANSACTIONS
stipulated or necessary to preserve value.
Ownership Purpose
A. MUTUUM – simple DR To consume • Bidders:
loan Highest Bidder(s)?
B. COMMODATUM Bailor (CR) To use Only 1 (×) EXCEPT: after 2nd notice
More than 2 (√)
Object Obligation Contracts Exp. Tie (bet. DR & (√) DR
3rd person)
MM Money To pay Onerous DR
Fungible To replace Gratuitous
• Pledge is indivisible (on > 1 object)
CM Non- To return Essentially Ord. applicable even to heirs.
fungible Gratuitous (bailee) Ex- • Accessory follows Principal.
If Ord.
fungible Actual use
(display/exhibi
(50% 2. CHATTEL MORTGAGE (Movable)
tion)
bailee/ Foreclosure: from loan:
50% bailor) →Deficiency: DR pays
→Excess: Mortgagor (DR) owns
LOSS WHO SUFFERS?
• Guaranty – insurer of debt, subsidiary
1. In mutuum: Res Perit Domino = DR liable, with benefit of excussion,
EXCEPT if waived.
2. In Commodatum: RPD = Bailor EXCEPT:
 BAILEE – guilty of delay
• Surety – insurer of prompt payment,
 BAILEE – uses object of CM: purpose
solidarily liable, no benefit of
– different from what was agreed
excussion.
upon.

Page 13 of 24
 • Deposit – safe keeping.
 Judicial – movable or 1. De jure – exist in fact and in law, contract:
immovable. • P3000 or more – P.I. & reg. SEC,
 Extra-judicial – movable, otherwise: De Facto
agreement. • Immovable – description, signed by
 Necessary – in compliance parties, P.I., registered to SEC, otherwise:
with law. (e.g. guest-hotels, VOID
passengers-common carrier) 2. De Facto – exist in fact, not in law
3. By Estoppel
Real Estate Antichresis
4. Life
Mortgage
Possession DR CR/pledgee • At will – if partners agree → continue
Fruits/Income DR CR-to be applied • Fixed Term – dissolved, if partnership
DR’s obligation. continues, it will be converted into
Taxes/expenses DR CR-to be charged partnership at will.
to DR
LIABILITY:
3. REAL ESTATE MORTGAGE
 Accessory contract, mortgagor can sell 1. Unlimited – General: ALL partners.
the object even without consent of the • Original – up to separate property.
mortgagee. • Newly Admitted:
 Existing at the
time of admission – up
to Contributed Cap. EXCEPT:
stipulation.
PARTNERSHIP
 Arising after admission – up to
separate property.
 2 or more persons bind to contribute money,
property or industry to a common fund with 2. Limited – at least 1 general partner; at least 1
intention of earning profit. limited partner.
 2 or more persons – exercise same profession • Limited Partner – up to Contri.Cap.,
(GPP) EXCEPT: Liable up to Separate Prop. If:
 Participate in management
NO PRESUMPTION OF PARTNERSHIP:  Allow your partnership to use
your name in the Partnership’s
1. 3rd persons – not partners to each other, nor firm name, EXCEPT:
parties to 3rd person, EXCEPT: estoppel: o Such name is also
• In pais – silence, declarations, made name of the general
others believe. partner.
• By Deed – with documents. o Name is already used
• By Laches – by passage of time. 2. Co- when
ownership/Co-possession he joined the partnership.
→Purpose: enjoyment/preservation
3. Sharing of gross returns SHARE IN THE CONTRIBUTION: (As to Object)
4. Prima Facie presumption – sharing of net
returns, EXCEPT: (GAWID)  Universal – not allowed to husband & wife →
• G – Payment of Goodwill guilty of concubinage/adultery.
• A – Annuity (widow or representative) 1. Universal Partnership of
of a partner. Present Property (UP-PP) –
• W – Wage: employee or Rent: landlord contributed to the partnership.
I – Interest to loan. • Fruits – accessory
• D – Debt by installment. follows the principal –
partnership.
PERSONALITY:

Page 14 of 24
 • Future Property: 1. If the thing contributed is fungible.
→without stipulation – 2. Contributed for the purpose of selling.
partners →with 3. If the thing can’t be kept without
1.
To specific partnership profit.
2. Interest – surplus – profit/loss:
If with stipulation:
→ if VALID as stipulated:
(a) Share in P/L
(b) Share in profit – stipulation. →ALL
Partners (√)
→ Share in loss – w/out stipulation
(c) Exempting – partner:
→ Profit (×)
→ Loss (×)
→ EXCEPT: industrial
If without stipulation:
 Capitalist: Capital Contribution
 Industrial
→ Profit – interest or just equitable
share (JES)
(Expulsion or profit=Partnership) + Damages
→ Loss – exempt
→ if silent: Share of Capital – Partner
3. Liability – 3rd person, RULE: Joint ; EXCEPT (SOLIDARY): with least Capital Contribution.
• Partner: course of business, receive  Capitalist-Industrial Partner – 2
money = misappropriation different rights in the share.
• Partnership: course of business, 3.
receive money = misappropriation To participate in management – Who will
Commit torts: Quasi-delict be managing partners?
(d) One – appointment
 In the eyes of the 3 persons, partners are equally
rd * Article of Partnership – power is
irrevocable without just cause.
liable (joint)
stipulation – deterioration.
ownership:
Partnership (Others) = VALID,
EXCEPT: Inheritance, Legacy, CLASSIFICATIONS OF PARTNERS:
Donation, EXCEPT: fruits = VALID
1. Contribution
2. Universal Partnership of Profits • To effect delivery; day agreed upon/
(UP-P) without need-demand.
Highest Bidder(s)?
• To warrant the thing – against eviction.
Contribution Ownership: Partner
• Make additional contribution –
Right to Use: Partnership
imminent loss or/& contribution
Future Property Ownership: Partnership necessary to save partnership.
Gratuitous: Partner  Capitalist: YES, EXCEPT:
*if through industry, FP will go to
partnership
stipulation or insolvent.
Otherwise – can be compelled
to sell his interest.
 Particular (General Partnership) – allowed
 Industrial: NO, EXCEPT:
to husband & wife
stipulation.
• Make Alterations – Immovable
LOSS due to FORTUITOUS EVENT – “Res Perit Domino”
LOSS borne by PARTNERSHIP:

Page 15 of 24
  Minor (not important) –
administration – YES
 Major (important) – NO, even
beneficially, EXCEPT: stip.

2. To engage in another business

Capitalist
→ Not similar: YES
→similar: NO EXCEPT: stipulated.
Otherwise: – profit: partnership
– Loss: partner
• Industrial
→similar or not: NO EXCEPT: stipulated
Otherwise: Partner’s option:
 Preference:
→ Partnership CRs – partnership’s assets.
→Separate CRs – separate assets
 Receipt of payment (partner and partnership
creditors):

APPLICATION OF PAYMENT
• If DR assigns application of
payment.
• If DR waives AOP, if partner:
 Managing partner
 Partnership
Credit (√)
 Proportionate
(√)
 Not managing partner
 P
artnership Credit (√)
 O
wn Credit (√)
 P
roportionate (√)
EXCEPT:
• Onerous due to Partners.
• Due to Partnership is not yet due.
• Partner when received payment not a
managing partner.

PROPERTY RIGHTS:

Page 16 of 24
 → 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
which makes business of partnership illegal.
alleged. EXCEPT: grave/ irreparable injury to
partnership.
5. Loss of the thing
* Without stipulation – should act as 1,
anyone can act, EXCEPT: • To be contributed – RPD = LOSS
o If managing partner objects – →UP-PP: (√)
majority of partners, if tie. o →UP-P: (√)
Controlling interest, • Contributed only usufructuary, LOSS =
if tie. o Majority of ALL Partner, EXCEPT: o Fungible o To
partners if tie. be sold o Can’t be kept without
o Controlling interest. deterioration
→UP-PP: (×)
→ No one Appointed – Mutual Agency RULE: →UP-P: (√)
 Every partner/ agent/ partnership,
anyone can act EXCEPT:
6. D – Death, I – Insolvency, C – Civil
 A partner objects – majority of
Interdiction, I – Insanity, J Judicial (DICI-J)
all partners, tie – C.I.  Unusual
Acts: Acts of Dominion, requires
consent of ALL partners, EXCEPT:
 A partner has been LIQUIDATION: Winding Up?
authorized.
 Bus. Of Partnership was (a) With Stipulation – as stipulated
abandon. (b) Without Stipulation – not guilty. All deadlegal
rep of last surviving partner.
UNUSUAL ACTS: must be presented to ALL partners
(SACRED.D) General Limited
• S – Submit partnership claims/ *Outside CR *Outside CR
liability to arbitration. *Inside CR *Limited
• A – Assign partnership property – -obligation
trust = CRs -share in profits, if any -
• C – Confess judgment return on contri. cap.

• R – Renounce / Abandon *Return on *General

partnership claims. Contributed Cap. -obligation
• E – Enter into compromise. -share in profits, if any -
return on contri. cap.
• D – Dispose goodwill.
*Share in Profit, if any
• D – Do any act = impossible=
partnership continue business.

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

2. With Violation – partnership agreement

Artificial being = person = citizenship = THEORIES:

3. Quo Warranto – de facto

Page 17 of 24
 • Incorporation – laws observed in
companies NOT ALLOWED to HAVE NO PAR: (BITPuB)
 Philippine Laws = Domestic
 Foreign Laws  Resident: E.T.B. • B – Banks
 Non-resident: N.E.T.B. • I – Insurance companies
• Control test – citizenship of owners. • T – Trust companies
Domiciliary – principal office. • Pu – Public institutions
• B – Buildings and loan associations
KINDS of CORPORATION:
1. Public
TO VOTE: with or without voting rights, they can
2. Quasl-public: “as if”
vote in: (A-ASIIMID)
3. Private

 MAJORITY of B.O.D & MAJORITY of Sh./M;

INCORPORATORS:

A – Amendment/Adoption: by laws;
1. Of legal age EXCEPT: power to amend by laws is
2. At least 5 but not more than 15 (natural already delegated to the B.O.D by 2/3
person) votes of Sh. /M.
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
ARTICLES OF INCORPORATION: S – SLEMP of all or substantially all of
corporate profits property. I –
1. Name: neither similar, nor confusingly similar Incurring/creating/increasing bonded
to existing corps indebtedness. 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
5. Capital: Profit = stocks/shares
S – Sales / B – Lease / E – Exchange / M – Mortgage / P – Pledge
6. Board of Directors: Names, Nationality &
Residence.
 Of all or substantially all corporate
property.
KINDS OF SHARES:

 Treasurer’s Affidavit: at least 25% of:

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

Page 18 of 24
 appropriate gov’t agency in charge of
the activity you are proposing.
• ACCEPTS: (Approved)
 Then issue “Certificate of
Incorporation” (birth of Corp.)
 Exercise Secondary franchise
 To commence operation within 2
years; otherwise automatically
dissolve.
COMMENCE OPERATIONS:
ELECTION:
3. To Create EXECUTIVE COMMITTEE  If
allowed – by laws
 at least majority: B.O.D
 to exercise such power as may be
delegated by B.O.D
EXCEPT:
 Acts that require shareholders’ approval
 Amend by laws
 Distribute cash dividends (Impliedly include
stock dividends)
 Fill up vacant seat in the B.O.D VACANCIES:

1. BOARD: Grounds:
• Directors – by stockholders
 Removal, expiration of terms, increase
(Cumulative or straight (√))
in # of BOD = SHs
 Not convicted by final judgment =
 Others: remaining members of BOD:
imprisoned: more than 6 years
 With quorum = BOD
 Not violated corporate code within 5
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 B.O.D.
number otherwise.
 B.O.D declares cash dividends while stock
• Trustees – non-stock (Cumulative(x)) dividends needs 2/3 of shareholder’s
 Not convicted by final judgment = approval.
imprisoned: more than 6 years
 Not violated corporate code within 5 4. To ENTER CONTRACTS:
years Regular/Ordinary:
 Must be a member of the corp.  With 3rd person:
 with quorum = BOD 
2. OFFICERS: without quorum = SHs  With
• President – member of B.O.D own Directors:
 Presides meeting of shareholders  Fair and reasonable
& B.O.D Except: if in the By-Laws.  Presence of such Director not
Secretary – resident citizen of the necessary to constitute
Philippines. 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;
 Majority of BOD and majority of SHs:
1. QUORUM – as required by laws
EXCEPT:  Interlocking
 Absence: ½ + 1 (Majority)
Directors  Shareholders: o
Substantial = 20% of
2. COMPENSATION – reasonable (per diem &
outstanding Sh.
allowances)
o 1/3 Outstanding Sh.
 if given – max 10% of NI before IT of
preceding year
 Max of 5 years, EXCEPT: natural resources.

5. To ACQUIRE OWN SHARES:

Page 19 of 24
  Provided corporation has RE, EXCEPT:  Underlying Doctrines:
redeemable. Trust Fund Doctrine: capital
 To remove DELIQUENT subscription: stock = separated by assets
Subscriber:  Do not issue shares until
 Not delinquent: rights o vote (√) o fully paid.
dividends (√)  to be not liable on
 Delinquent: rights o vote (x) o watered shares:
dividends (√)  object in writing – send
 Cash – to be applied to unpaid to secretary
subscription.
 Stock – to be withheld until full • Piercing the Veil of Corporate
payment of subscription. To Functions: SH’s CRs – can’t
qualify as BIDDER, pay: collect from corp. EXCEPT:
 unpaid subscription, unpaid expenses, using corp. to commit fraud.
interest
 HIGHEST bidder – least # of shares • Special Circumstances
 NO bidders – corporation Doctrine – Duty of
 To remove FRACTIONAL shares Disclosure to SHs what’s
 To pay DISSENTING shares happening to the
Corporation.
 Appraisal right – payment = FV of
shares o Options:
• Doctrine of Bus. / Corp.
 To accept will = 1/3
Opportunity – related to
 To exercise appraisal right,
loyalty to the Corporation.
EXCEPT:
* Act=abandoned by corp.
• Doctrine of Limited Capacity –
/ rejected-SEC
all acts must be within:

o APPRAISAL COMMITTEE – 3 members, (express, implied,

Chosen BY:  (1) By SHs incidental) = intra-vires
(Dissenting)  (1) By Corp.
outside = ultra-vires
 (1) By rep. of both Corp and SHs

(a) Legal
o Who bears expense of Committee?
 executed – can be
- recorded amount: ratified by
 1M = SHs stockholder
 more than 1M = Corporation  executory – should
be abandoned
6. To ISSUE NEW SHARES – from unissued (b) Illegal – cannot be ratified
shares.  those involved;
 SHs given PRE-EMPTIVE right, EXCEPT: liable (members of
 In compliance with law  required BOD)
public offering of shares.
SUITS: (Corporation can sue and can be sued)
 To acquire property needed by
corporation.
Corporation (de jure) vs. 3rd person or SHs
 To pay creditors.
SHs:
 Derivative: SHs vs. Board
7. To OBSERVE:
 Individual: SHs vs. Corp
 Threefold duties: (OLD)
 Representative: SHs vs. Corp
• O – Obedience to by laws
3rd party vs. Corporation
• L – Loyalty to the Corporation
 2 or more – same class = class suit
• D – Diligence

Page 20 of 24
MEETINGS: LIQUIDATION: winding up = 3 years

1. BOARD:  ALL actions for/against Corporation – be filed

• Regular – once a month  After 3 years - pending actions – receiver
• Special – as need arises  To reserve enough funds to meet pending act,
• Place – anywhere EXCESS: Shareholders.
• Attendance – personal (√) proxy (x)

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

PARTIES:
Foreign With Without
Promissory Note Bill of
Corporations License License
Exchange
1. Sue? (√) (x), EXCEPT: Primary Liable Maker Acceptor
Violation of
• Secondary Indorser Drawer
property rights
Liable
2. Be sued? (√) (√)
Intellectual property rights: REQUISITES:
 Trade Name/Mark
 Copyright
1. In writing & signed by maker or drawer.
 Patent
 True Name: complete/
abbreviation/ misspelled
DISSOLUTION:  Assumed Name: trade/ business/
alias
1. Automatic:
 Symbols/signature
Expiration of term as fixed in the
Articles of Incorporation
2. Contain unconditional promise or order to pay
 Max. term = 50 years EXCEPT: if sum certain in money.
intended, max of 50 years per
extension.
• Subsequent events does not cure
Non-use non-negotiability of Nonnegotiable
 failure to commence within 2 years Instrument.
from issuance of Certificate of • Sum Certain:
Incorporation
 With interest
 Installment: stated, with
2. Grounds: acceleration clause
Non-use  If silent: choice: holder
 Failure to resume operation within 5 (N) / DR (NN)
years from Stoppage of Operation.
 With dollar exchange rate
• Legislative Enactment whether fixed or current
• Quo-Warranto – Office of the Solicitor  With cost of collection or
General/ direct attack. Atty.’s Fee
• Amendment of Aol – shortening life of
corporation. 3. Payable to:
• Judicial – by order of the court.

Page 21 of 24
 Order - of a specific person - DEFENSES:
Specific person or order 
PAYEE: 1. Personal Defense (a) Can be used
against:
- (√) B
 HFV whose title did not come
- (√) B & C (both should
from a HIDC
indorse)
 HFV whose title come from a
- (√) B or C (either can
HIDC, but he is party to the
indorse)  INDORSEE:
defect.
- (√) L / L 60.00 (×) / L
(b) Cannot be used against:
40.00 remaining unpaid
 HIDC
- (√) L & M
 HFV whose title came from a
- (×) L 50.00 & M 50.00
HIDC not a party to the defect.
- (√) L or M
 Incomplete but delivered
Bearer
 Complete but Undelivered
- so expressed bearer
 Absence or failure of Consideration
- Specified person or
 Illegal Consideration
bearer.
 Fraud Inducement
- Order of fictitious person.
 Insertion of wrong date/ discharge by
- Does not purport to
payment before maturity.
name any person.
- Only or last indorsement:
2. Real Defense – can be used against
Blank
any holder (HIDC/HFV)
 Incomplete and undelivered
4. Payable on:
 Minority or other form of incapacity
 Demand – expressed, no date,
overdue  Forgery
 Fraud in Factum or in Esse Contractus
 Fixed Date
 Determinable Future time – time  Discharge at or after maturity
certain to come.  Illegality of contract
 Time  Material Alteration (if silent: Personal)
- KNOWN:
TO NEGOTIATE:
before/at/upon/after
- UNKOWN: at/after
• Order – indorsement + delivery

5. Bill of Exchange (B.of.E) • Bearer – delivery

 A person who negotiated through
- Drawee must be named or indicated with
reasonable certainty. delivery is only liable to the party whom he
presented the note. INDORSEMENT:
DRAWEE:
1. Special Pay to C (B)
- (√) W
2. Qualified Pay to C, w/o recourse (@ your own risk) (B)
- (√) W and Y
3. Blank __________ (B)
- (×) W or Y (alternative)
4. Conditional Pay to C, If….. (B) Pending
- (×) W, in his absence Y (succession)
fulfilment of the condition:

• AGENT: to be not liable:

• Maker – option to disregard condition
 Sign within scope of authority
and pays:
 Disclose-principal
 Obligation extinguished
 Indicate in what capacity
 Without incurring any liability
 C holds money in trust of B
• Agent with limited authority:
until C fulfills condition
 Sgd. Name: Per Procuration / Per Proc.
/ P.P. / p.p.

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 • Maker – may honor/respect condition • DRAWEE/ACCEPTOR – admits:
 Maker can refuse to pay, such refusal  Existence & Capacity of the Payee
is not a dishonor, C has no recourse.  Existence, Capacity, and Authority of
the Drawer
5. Facultative Pay to C, notice of Dishonor waived, (B)  Signature of the drawer genuine
 “I will pay according to tenor of
• WAIVER: acceptance.”
(a) face of instrument: binds all
parties • DRAWER – admits:
(b) indorsement: binds indorser  Evidence and Capacity of the Payee. 
• Waiver of protest/presentment/notice If Presented Accepted  Paid:
of dishonor/ Protest If Dishonored  Necessary
Procedures Observed  “I will pay.”
6. Restrictive
• Prohibits further negotiation of
Instrument: Pay to C only (B)
• Constitute Indorsee as mere Agent:
Pay to C for collection (B)
• Vest title to the Indorsee in trust for WARRANTIES (Liabilities)
Another: Pay to C in trust for D (B)
Indorsers Qualified General
(Special)
Indorsement is genuine (√) (√)
INTERVENING PARTIES: (there is Compensation) in all aspect it purports
to be
 Discharged = compensation  Good title (√) (√)
Can be revived (negotiation):
Capacity of primary (√) (√)
parties
(√) new party
No (√) -
(√) prior party
knowledge/defect/value
(×) intervening party – in order to less
avoid multiplicity of suits
Instrument is valid & - (√)
subsisting
STRIKE OUT (INDORSERS):
If presented  accepted - (√)
- Only allowed if:  paid  if dishonored
– “I will pay.”
(a) No prior parties (new parties only)
 Never strike out the PAYEE  Only if
the last indorsement is blank.
PRESENTMENT FOR ACCEPTANCE (B.of.E)
EXCEPTION: Renegotiation
(b) Prior parties - Unless stipulated.
 Intervening parties not liable (a) Payable elsewhere other than the usual
anymore. place/business of Drawee
(b) Fix maturity – payable after sight.
 A party primary liable can collect from a party
secondarily liable if he is an accommodation
party. KINDS OF ACCEPTANCE:

(a) Absolute
ADMISSION: (b) Qualified – accepted
 Payable @: place
• MAKER – admits:
 Payable if: condition
 Existence & Capacity of the Payee
 I will pay according to the tenor of the
instrument. DISHONORED BY NON-ACCEPTANCE:

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 1. To give Notice of Dishonor by N.A. to PSL  Principal DR becomes the holder
within 24 hours; @/after maturity
EXCEPT: N.O.D. not required  Other means: discharge-simple
On due date: PFP (×) / collect from PSL (√) obligation

 PFP  accepted  due date: 2. Person secondary liable (DD-IVER)

o PFP (×) o Collect  Discharge of instrument
from PSL (√)  Discharge of Prior Party/ Payment
 Dishonored by Nonpayment: made by prior party
o Collect from PSL (×) o  By a valid tender of payment – prior
Give N.O.D. by NP to PSL party
(√)
 Intentional cancellation of his
signature
2. To protest  Release of the Principal DR  By
a. Notary Public (NP) extension of the time payment.
b. Absence of NP – rep. & 2 witnesses

BILLS IN SET – 2 or more parts  bill

- Every part accepted in the hands of a -NRBF

HIDC is considered bill.

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.

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