Mercantile Law 2019 Syllabus.docx 2k1m1d

MERCANTILE LAW 2019 BAR SYLLABUS

LETTERS OF CREDIT AND TRUST RECEIPTS A. Basic Concepts 1. Doctrine of independence The independence principle of a letter of credit emphasizes that the contracts involved in a letter of credit arrangement are to be maintained in a state of perpetual separation. 2. Fraud exception principle Fraud exception exist when the beneficiary, for the purpose of drawing on the credit, fraudulently present to the confirming bank, documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue. 3. Doctrine of strict compliance The doctrine of strict compliance provides that the documents tendered by the seller or beneficiary must strictly conform to the of the letter of credit. 4. Warehouseman’s lien The following claims are included in the warehouseman’s lien: 1. All lawful charges for storage and preservation of the goods; 2. All lawful claims for money advanced, interest, insurance, transportation, labor, weighing, coopering and other charges and expenses in relation to such goods; and

3. All reasonable charges and expenses for notice and ments of the sale, and the sale of goods where default had been made in satisfying the warehouseman’s lien. B. Rights and obligations of parties Entruster The following are the rights of an entruster: 1. He is entitled to the proceeds from the sale of goods, documents or instruments; 2. He is entitled to the return of goods, documents or instruments in case of non-sale; 3. He may enforce all other rights conferred on him under the Trust Receipts Law; 4. He may cancel the trust, take possession of goods, documents and instruments, and sell the goods in public sale in case of default; and 5. He may purchase the goods at the intended public sale. Entrustee The following are the obligations of the entrustee: 1. Hold the goods, documents or instruments in trust for the entruster; 2. Dispose of them strictly in accordance with the and conditions of the trust receipt; 3. Receive the proceeds in trust for the entruster and turn over the same to the entruster to the extent of the amount owing to the entruster or as appears on the trust receipt;

4. Insure the goods for their total value against loss from fire, theft, pilferage orother casualties; 5. Keep said goods or proceeds thereof whether in money or whatever form, separate and capable of identification as property of the entruster; and 6. Observe all other and conditions of the trust receipt not contrary to the provision of the Trust Receipts Las. The following are the obligations of the entrustee: 1. Return the goods, documents or instruments in the event of nonsale or upon demand of the entruster; and 2. Observe all other and conditions of the trust receipt not contrary to the provisions of the Trust Receipts Law. Applicant (Buyer) The buyer obliges himself to reimburse the issuing bank when the latter complies with the of the letter Bank The obligations of the issuing bank are the following: 1. To make a payment to or to the order of a third party 2. To authorize another bank to effect such payment 3. To authorize another bank to negotiate

Beneficiary (Seller) The seller shall ship the goods to the buyer and deliver the documents of title and draft to the issuing bank or confirming bank to recover payment. C. Remedies available The Entruster may: 1. Cancel the trust; and 2. Take possession of the proceeds realized therefrom; or 3. Take possession of the goods, documents or instruments subject of the trust and sell them at a public or private sale 4. File an action for specific performance to compel entrustee to pay the loan 5. File a criminal action for estafa 6. Claim for damages under Article 33 of the NCC

NEGOTIABLE INSTRUMENTS LAW A. Requisites of negotiability The requisites are the following 1. Must be in writing and signed by the maker or drawer; 2. Must contain an unconditional promise to pay or order a sum certain in money; 3. Must be payable on demand or at a fixed or determinable future time; 4. Must be payable to order or bearer; and

5. When the instrument is addressed to a drawee, he must be named of otherwise indicated therein with reasonable certainty, B. Forgery and material alteration Forgery When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge thereof, or to enforce payment thereof against the party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up forgery or want of authority. Material alteration An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. C. Negotiation Negotiation is the transfer of the instrument from one person to another so as to constitute the transferee a holder thereof. D. Rights of a holder 1. Holder in due course Like any other holder, a holder in due course may enforce the instrument and sue thereon in his own name. He also holds the instrument free from any defect of title of prior parties, free from defenses of prior parties among themselves, and he may enforce

payment of the instrument for full amount thereof against all parties liable thereon. 2. Defenses against the holder Real Defense / Absolute Defense Those that attach to the instrument itself and are available against all holders, whether in due course or not, but only by the parties raise them. Personal defense / equitable defense Those which are available only against a person not a holder in due course or a subsequent holder who stands in privity with him. E. Checks A check is a bill of exchange drawn on a bank payable on demand.

INSURANCE A. Basic concepts 1. What may be insured? a. A future contingent event resulting in loss or damage b. A past unknown event resulting in loss or damage 2. Insurable interest It is an interest arising from the relation of the party obtaining the insurance as will justify a reasonable expectation of advantage from the continuance of his life. 3. Double insurance and over insurance

a. Double insurance exists when the same person/property is insured by several insurers separately, in respect to the same subject and interest. b. Over-insurance exists when the insured takes out an insurance over the property insured in an amount which is in excess of the value of his insurable interest. 4. Reinsurance Reinsurance is a contract by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance. 5. No fault, suicide, and incontestability clause a. No fault clause – Any claim for death or bodily injuries sustained by a enger or a third party shall be paid without the necessity of proving fault or negligence of any kind provided the total indemnity in respect of any person shall be fifteen thousand pesos for motor vehicles.