University of Perpetual Help System - Isabela Campus

Minante Uno, Cauayan City, Isabela

College of Business and Accountancy

Syllabus in Law on Partnership & Corporation

Course Code: LAW 400 Pre-requisite: Obligations and Contracts

Course Title: Negotiable Instrument Law Co-requisite:
Credit Units 3 Semester First Semester
Total Contact Hours: 54 Academic Year 2015-2016

Course Description:
This course was made a part of Commercial Law for business students. Enables the students to understand the legal provisions or articles of the law in partnerships and Corporation laws. This
course is likewise served as guideline for Accountancy Students in their preparation for the CPA Board Examination.

Course Objectives:
1. The student will learn the law of partnerships and corporations, including the forms of business organizations, partnerships and corporations.

2. The student will learn to "think critically" in law, and in the area of partnerships and corporations. This will be accomplished through the multiple-choice quizzes, the postings to the
discussion forums and assignments.

3. The students will learn to draft a more complex partnership agreement, to prepare articles of incorporation, bylaws, the minutes meeting of the corporation, and the corporate forms
related to the organization of a corporation.

4. The student will improve their study skills and will improve how they study law.

Course Requirements:
Quizzes Recitation Group Activities
Assignments Seatwork
Major Requirements: Prelim: _________________________ Midterm: ______________________ Final: _____________________________

Prepared by: Noted by: Approved by:

 REYGIE P. LOPEZ, CPA JONATHAN B. DE VEYRA, CPA, MBA WARREN L. CALILUNG, Ed.D.
Instructor Dean, College of Business and Accountancy School Director
Teaching Time Valuing Evaluation
Term Specific Objectives Subject Matter Methodology (in line with the Vision and
Aid Frame Mission of the University) Tools
P 1. Understand the Principal Characteristics
NEGOTIABLE INSTRUMENT LAW
1. Principal Characteristics of Negotiable Instrument
of Negotiable Instrument a) Negotiability

R
2. Functions of Negotiable Instrument b) Accumulation of secondary contracts
3. Incidents in the life of a Negotiable
Instrument 2. Functions of Negotiable Instrument
4. a) It serve as a substitute for money Interactive Lectures White 18 Hrs Social concern Quizzes
board
E
b) It increases the purchasing medium in circulation.
c) It is intended like money to have a definite value to be Critical judgment
taken at sight without the need of investigating into the Graded Recitation Group
outside facts. Independence Activities
d) When genuine, it ought to serve as the equiv. of money.
L 3. Incidents in the life of a negotiable instrument Seat Work Competence
a) Issue Assignment
b) Negotiation Due Care
I c)
d)
Presentment for acceptance
Acceptance
Group Discussion
e) Dishonor by non-acceptance Fairness Seatwork
f) Presentment for payment
g) Dishonor by non-payment Objectivity
M h)
i)
Notice of dishonor
Protest
j) Discharge Truthfulness

I 4. Requisites of negotiable instrument

a) It must be in writing and signed by the maker or drawer.
Competence
b) It must contain an unconditional promise or order to pay a
sum certain in money. Honesty
c) It must be payable on demand or at a fixed or determinable
N future time.
d) It must be payable to order or to bearer.
e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
certainty.
A 5. Most common forms of negotiable instrument
a) Promissory note
b) Bill of Exchange

R
c) Check

6. Provisions, stipulations, omissions and other matters in an

instrument not affecting negotiability.
a) When the sum payable is to be paid with interest

Y b) When the sum payable is to be paid by stated installments

c) When the sum payable is to be paid by stated installments,
 with a provision that upon default in payment of any
installment or of interest, the whole shall become due.
d)

Mechanically incomplete but delivered instrument (Sec. 14)

This refers to an instrument which is wanting in a material particular
such as the amount of the instrument and it is delivered to another
for him to fill the blank or blanks and negotiate it either for his own
benefit or that of the person making the instrument.

LAW ON NEGOTIABLE INSTRUMENTS

page 02
Mechanically incomplete and undelivered instrument (Sec. 15)
This refers to an instrument which is wanting in a material
particular such as the amount of the instrument or the name of
the payee, and it is undelivered.

Mechanically complete but undelivered instrument (Sec. 16)

This refers to an instrument which is complete in form but not
delivered.

Signature by procuration
Procuration means the act of appointing another as one’s agent
or attorney. A signature by procuration operates as notice that
the agent has but a limited authority to sign, and the principal is
bound only in case the agent in so signing acted within the
actual limits of his authority (Sec. 21).

Forgery
By forgery it meant the counterfeit making or fraudulent
alteration of any writing, and may consist in the signing of
another’s name, or the alteration of an instrument in the name,
amount, description of the person and the like, with intent to
defraud. The signature that is forged or made without authority
is wholly inoperative.

Accommodation party
It is one who has signed the instrument as maker, drawer,
acceptor or indorser, without receiving value therefor, and for
the purpose of lending his name to some other person. (Sec.
29)
Modes of transfer of negotiable instrument
1. By assignment
2. By operation of law
3. By negotiation.
Kinds of indorsement
1. Special indorsement – it specifies the person
to whom or to whose order the instrument is
to be payable.
2. Blank indorsement - it specifies no indorsee.
3. Restrictive indorsement - an indorsement
that either:
 prohibits the further negotiation of
the instrument.
 constitutes the indorsee the agent
of the indorser.
 Vests title in the indorsee in trust
for or to the use of some other
person.
4. Qualified indorsement - it constitutes the
indorser a mere assignor of the title to the
instrument. It does not impair the negotiable
character of the instrument.
5. Conditional indorsement - this is an
indorsement which is subject to the
happening of a condition.

1 NEGOTIABILITY OF INSTRUMENT
2 FUNCTIONS AND KINDS OF NEGOTIABLE INSTRUMENT
3 CONSTRUCTION OF AMBIGUOUS INSTRUMENT
4 FORGERY AND ITS EFFECT
5 CONSIDERATION
6 ACCOMODATION PARTY
7 MANNER AND CONSEQUENCE OF TRANSFER OF INST.
8 STRIKING OUT INDORSEMENTS
9 REQUISITES OF HOLDER IN DUE COURSE
10 DEFENSE OF PARTIES
11 DISCHARGE OF NEGOTIABLE INSTRUMENTS AND THE PARTIES
SECONDARILY LIABLE
 Valuing
Teaching Time (in line with the Vision Evaluation
Term Specific Objectives Subject Matter Methodology
Aid Frame and Mission of the Tools
University)
I - GENERAL PROVISIONS GENERAL PROVISIONS OF CORPORATION
1. Know the definition, concept and attributes of a 1. Corporation, concept, attributes
M Corporation. a. Artificial being
b. Created by the operation of law
2. Enumerate the Classification of corporations
3. Determined the Components of Corporations c. It has the right of succession
4. Understands the concept and other terms of d. It has the power, attributes and properties expressly
I Capital authorized by law or incidents to its existence Interactive Lectures White
board
18 Hrs Critical
judgment
5. Discern the different classification of Shares.
2. Classifications of Corporations
a. As to whether shares of stock are issued or not Graded Recitation Fairness
D -stock corporation
-Non-stock corporation
Accountability
b. As to the state or country under whose laws it was
created Seat Work
Accuracy
T -domestic corporation
-foreign corporation
c. As to number of persons composing them Group Discussion Competence
-corporation aggregate

E -corporation sole
d. As to whether its purpose is public or private
Competence

-public corporation Objectivity

-private corporation

R e. As to whether its purpose is religious or not

-ecclesiastical or religious corporation Persistence
-lay corporation
f. As to whether its purpose is charitable or not

M -eleemosynary corporation
-civil corporation
g. As to their legal right to corporate existence
-de jure corporation
-de facto corporation
h. As to their relation to another corporation or other
corporations
-parent or holding corporation
-subsidiary corporation
i. As to whether its share may be held by the public or
not
-close corporation
-open corporation
 j. Other classifications
- corporation by prescription and
- Corporation by estoppel

3. Components of Corporation
a. Corporators
b. Incorporators
c. Stockholders
d. Members

4. Capital stock and other terms, concept

a. Capital stock
b. Legal capital
c. Stated capital
d. Capital

5. Classes of shares of stock under the corporation code

II - INCORPORATION AND ORGANIZATION PRIVATE
CORPORATIONS
1. Identify the contents and forms of Articles of
Incorporation.
2. Determined the purposes and requirements in
Amendment of articles of incorporation.
3. Knowing the steps and procedures in
Organizing a Private Corporation
a. Common stock
b. Preferred stock
c. Founders Share Redeemable shares
d. Treasury shares
II. INCORPORATION AND ORGANIZATION PRIVATE
CORPORATIONS
1. Contents of the articles of incorporation
a. The name of the corporation
b. The purpose or purposes of the corporation
c. The place of the principal office which must be in the
Philippines
d. The term of existence
e. Names, nationalities and residences of the
incorporators
f. Number, names, nationalities and residences of the
directors or trustees
g. The amount of authorized capital stock in lawful
money of the Philippines, the number of shares into
which it is divided, and the par value of each.
h. The names of the subscriber, nationalities, number of
shares subscribed, amount subscribed and amount
paid in
i. Other matters not consistent with law and which the
incorporators may deem necessary or convenient
j. The name of the temporary treasurer elected
(treasurer-in-trust)
k. Notarial acknowledgement
l. Treasurer’s affidavit
 2.
3.
III - BOARD OF DIRECTORS/TRUSTEES/OFFICERS
III - BOARD OF DIRECTORS/TRUSTEES/OFFICERS
1. Understand the concept and functions of BOD,
1. BOD or trustees, concept and main functions
Trustees.
2. Identify the Qualifications of Director, Trustees
3. How to elect Directors or Trustees
4. To Recognized who are the Corporate officers
5. Know the function and concept of
2.
Management Committee
6. Comprehend how, when and where the
meetings of BOD/Trustees to be held.
7. Determine who will fill up on the vacancies in
the Board of Directors or Trustees
8. Established the rule on contracts between
corporations with interlocking directorate
9. Determine what are the Liabilities of directors
or trustees for damages
3.
Amendment of the articles of incorporators (sec.16)
a. Purpose
b. Vote required
c. Requirements of amendments
d. Effectivity
e. Grounds when articles of incorporation or
amendment may be rejected or disapproved
Organization of Corporation
a. Corporate name
b. Corporate Term
c. Commencement of corporate existence
d. Effects of non-use of corporate charter and
continuous in operation of a corporation
e. Minimum capital stock required of stock corporations
f. Amount of capital stock to be subscribed and paid for
purposes of incorporation.
g. De facto corporations
h. Corporation by estoppel
a. To exercise corporate powers
b. To conduct all corporate business
c. To control and hold corporate property. (sec.23)
Qualifications of a director or trustees
a. He must be the owner of at least 1 share of stock
which shall stand in his name on the books of the
corporation. Any director who ceases to be the owner
of at least 1 share of stock shall also cease to be a
director.
b. Majority of the directors or trustees must be
residents of the Philippines
c. The number must not be less than 5 nor more than 15
Election of directors or trustees
a. They are elected at the meeting called for the
purpose
b. There must be present in person or by the
representative authorized by written proxy;
-the owners of the majority of the outstanding capital
stock, if a stock corporation
-the majority of the members, if anon-stock
corporation
 c. The election must be by ballot if requested by any
voting stockholder or member. If there is no such
request, voting may be made through other methods
like the raising of the hands
d. No delinquent stock shall be voted
4. Corporate officers
a. President
b. Treasurer
c. Secretary
d. Other officers as may be provided in the by-laws
5. Executive committee
a. Executive committee concept
b. Functions
6. Meeting of directors or trustees
a. Quorum
-concept
-quorum in meeting of directors or trustees
b. Vote required to have a valid corporate act
c. Directors or trustees cannot attend or vote by proxy
at board meetings

7. Vacancies in the office of directors and trustees

a. Causes of vacancy
-removal
-expiration of term
-increase in the number of directors
-resignation
-abandonment
-disqualification
b. Filing of vacancy
-by the stockholders or members
-by the board of directors or trustees

c. Reporting requirements on election and vacancies

- Election of directors, trustees or officers
- Death or resignation of a director, trustee or officer
or when they in any manner cease to hold office

8. Rule on contracts between corporations with interlocking

directorate
a. There is no fraud
b. The contract is fair and reasonable under the
circumstances
c. If the interest of the interlocking director in one
corporation or corporation is merely nominal, he shall be
subject to the following conditions insofar as the
 corporation or corporations are concerned.
-that his presence in the board meeting in which the
contract was approved was not necessary to
constitute a quorum at such meeting
-that his vote was not necessary for the approval of
the contract
9. Liability of directors or trustees for damages
a. Grounds for liability to pay damages
-by willingly and knowingly voting for or assenting to
patently unlawful acts of the corporation
-by being guilty of gross negligence or bad faith in
directing the affairs of the corporation
-by acquiring any personal or pecuniary interest in
conflict with their duty as such directors or trustees
b. Nature of liability
c. To whom liable
d. Contracts between corporations with interlocking
directors
e. Disloyalty of a director

IV - POWERS OF CORPORATIONS, ULTRA VIRES ACTS,

BY-LAWS, and VOTING TRUST AGREEMENT IV - POWERS OF CORPORATIONS, ULTRA VIRES ACTS, BY-
1. Identify the different Powers of LAWS AND VOTING TRUST.
Corporation 1. Kinds of power
a. Express powers
2. Determine the concept of Ultra-vies Acts b. Implied powers
c. Incidental powers
2. Ultra-vires acts
3. Understand the By-Laws a. Concept
b. Distinguish from illegal act
4. Know the concept, effect, and requisites c. Effect of ultra-vires act which is not illegal
of Voting Trust d. Requisites for ratification of an ultra-vires act which is
not illegal
5. Recognized the rules on voting by 3. By-laws
stockholders or members a. By-laws concept
b. Requisite of valid by-laws
c. When by-laws are adopted and filled
d. Contents of by-laws
e. Amendment repeal, or adoption of new by-laws
f. Distinction between articles of incorporation and by-
laws
4. Voting trust
a. Concept
b. Effect of the voting trust agreement
c. Requisite and limitation of voting trust agreement
 d. Distinction between proxy and voting trust agreement
5. Rules on voting by stockholders or members
a. Voting shares or member
-2/3 of outstanding capital stock or 2/3 of members
entitled to vote
-majority of the outstanding capital stock or majority
of the members
b. Voting and non-voting shares or members
-2/3 of outstanding capital stock or 2/3 of members
entitled to vote
-majority of the outstanding capital stock or majority
of the members
Term Specific Objectives Subject Matter Methodology Teachin Time Valuing Evaluation
g Aid Frame (in line with the Tools
vision and Mission
of the University)
I STOCKS AND STOCKHOLDERS STOCKS AND STOCKHOLDERS
1. Recognized how to become a Stockholder 1. How one becomes a stockholder

F 2. Know the subscription concepts, forms and

kinds
-by subscription of unissued shares
-by purchase of treasury shares
3. Determined what are the consideration for -by transfer from a stockholder
stocks
Interactive Lectures White 18 Hrs Social concern Quizzes
I 4. Knowing the different kinds of Dividends and
its concept.
2. Subscription
- concept, form, and kinds board
5. Identify what are Corporate Books and - Pre-incorporation subscription Critical judgment
Records. - Issuance of Certificate of Stocks Graded Recitation Group

N II CORPORATE BOOKS AND RECORDS

- Interest on unpaid subscription
- Payment of balance of subscription
Independence Activities

- Liability of directors for watered stock Seat Work Competence

III MERGER AND CONSOLDATION - Delinquency sale Assignment
A IV APPRAISAL RIGHT
- Effect of delinquency
- When sale may be questioned
Due Care
- Court action to recover unpaid subscription
Group Discussion
V NON-STOCK CORPORATIONS - Rights of unpaid shares Fairness Seatwork

L VI CLOSE CORPORATIONS
- Lost or destroyed certificate
Objectivity
3. Consideration for stocks
VII SPECIAL CORPORATIONS - Cash Truthfulness
S VIII DISSOLUTION
- Payment for services
- Payment for Liabilities Competence
- No consideration
IX FOREIGN CORPORATIONS
Honesty
4. Dividends. Concept
X MISCELLANEOUS PROVISIONS Kinds of dividends
- Cash dividends
- Property dividends
- Stock dividends
- Bond dividends
- Scrip dividends
- Liquidating dividends
- Composite dividends

5. Corporate Books and Record

a. Books to be kept; stock transfer agent
b. Right to financial statement
MERGER AND CONSOLDATION
1. Plan of merger or consolidation
2. Stockholders’ or members’ approval
3. Articles of merger or consolidation
4. Securities and Exchange Commission’s approval and
effectivity of merger and consolidation
5. Effects of merger or consolidation

APPRAISAL RIGHT
1. Instances of appraisal right
2. How right is exercised
3. Effect of demand and termination of right
4. When right to payment ceases
5. Who bears costs of appraisal
6. Notation on certificate(s), right of transferee

NON-STOCK CORPORATIONS
1. Definition
2. Purposes
3. Right to vote
4. Non-transferability of membership
5. Termination of membership
6. Election and term of trustees
7. Place of meetings
8. Rules of distribution
9. Plan of distribution of assets

CLOSE CORPORATIONS
1. Definition and applicability of title
2. Articles of Incorporation
3. Validity of restrictions on transfer of shares
4. Issuance or transfer of stock of a close corporation in
breach of qualifying conditions
5. Agreements by stockholders
6. When board meeting is unnecessary or improperly
held
7. Pre-emptive right in close corporations
8. Amendment of articles of Incorporation
9. Deadlocks
10. Withdrawal of stockholder or dissolution of
corporation
SPECIAL CORPORATIONS
1. Incorporation
2. Pre-requisites to incorporation
3. Board of Trustees
4. Classes of Religious Corporations
5. Corporation Sole
6. Articles of Incorporation
7. Submission of Articles of Incorporation
8. Acquisition and alienation of property
9. Filling of vacancies
10. Dissolution
11. Religious societies

DISSOLUTION
1. Methods of dissolution
2. Voluntary dissolution where no creditors are affected
3. Voluntary dissolution where creditors are affected
4. Dissolution by shortening corporate term
5. Involuntary dissolution
6. Corporate liquidation

FOREIGN CORPORATIONS
1. Definition and rights of foreign corporation
2. Application to existing foreign corporations
1. Application for a license
2. Issuance of a license
3. Who may be a resident agent
4. Resident agent; service of process
5. Law applicable
6. Amendments to Articles of Incorporation or by-
laws of foreign corporations
7. Amended license
8. Merger or consolidation involving a foreign
corporation licensed in the Philippines
9. Doing business without license
10. Revocation of license
11. Issuance of certificate of revocation
12. Withdrawal- foreign corporation

MISCELLANEOUS PROVISIONS
1. Outstanding capital stock defined
2. Designation of governing boards
3. Incorporation and other fees
4. Stock ownership in certain corporations
5. Annual reports of corporations
 6. Confidential nature of examination results
7. Rule-making power of the Securities and Exchange
Commission
8. Violations of the code
9. Amendment or repeal
10. Repealing clauses
11. Separability of provisions
12. Applicability to existing corporations
13. Effectivity

GRADING SYSTEM:
Quizzes 40% Major Exams 33.33%
Recitation 25% Class Standing 66.67%
Seatwork/Assignment 20% Total Grade 100%
Attendance 15%
Total Class Standing 100%

TEXTBOOK:
Law on Partnership and Private Corporations – By Atty. Carlos B. Suarez and Atty. Alexander O. Suarez

BOOK REFERENCES
1. Pointers in Business Law for CPA reviewees – By; Carlos B. Suarez and Alexander O. Suarez
2. Notes in Business Law – By: Fidelito R. Soriano
3. The Law on Partnership and Private Corporation – By Hector S. De Leon

SUPPLEMENTARY READINGS:

WEBSITES:

SUGGESTED MOVIES OR OTHER MULTI MEDIA MATERIALS