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INSURANCE ............................................................................ 11
INTRODUCTION.............................................................................................. 11
GOVERNING LAWS ............................................................................................................11
CHARACTERISTICS OF AN INSURANCE CONTRACT ............................................................11
GENERAL CONCEPT ........................................................................................ 11
PERFECTION OF INSURANCE CONTRACT ....................................................... 11
RIGHTS OF PARTIES ........................................................................................ 11
INSURABLE INTEREST ..................................................................................... 11
LIFE INSURANCE ................................................................................................................11
PROPERTY INSURANCE .....................................................................................................11
FRAMED ............................................................................................................................12
PREMIUMS ..................................................................................................... 12
PAYMENT OF PREMIUM....................................................................................................12
PARTIAL PAYMENT............................................................................................................12
GRACE PERIOD ..................................................................................................................12
ACKNOWLEDGMENT.........................................................................................................12
CREDIT EXTENSION ...........................................................................................................12
ESTOPPEL ..........................................................................................................................12
INCONTESTABILITY CLAUSE ........................................................................... 13
RESCISSION OF INSURANCE CONTRACT ........................................................ 13
CONCEALMENT .................................................................................................................13
FALSE REPRESENTATION ...................................................................................................13
OMISSION .........................................................................................................................13
BREACH OF WARRANTY ....................................................................................................13
LOSS ............................................................................................................... 13
SUICIDE .......................................................................................................... 13
BENEFICIARY .................................................................................................. 13
REVOCABILITY ...................................................................................................................13
FORFEITURE OF INTEREST .................................................................................................14
LIABILITY ........................................................................................................ 14
INSURER LIABLE ................................................................................................................14
INSURER NOT LIABLE.........................................................................................................14
TYPES OF INSURANCE .................................................................................... 14
DOUBLE INSURANCE .........................................................................................................14
OVERINSURANCE ..............................................................................................................14
UNDER INSURANCE ...........................................................................................................15
REINSURANCE ...................................................................................................................15
NO PROVE CLAUSE ......................................................................................... 15
ALL RISK CLAUSE ............................................................................................ 15
PROPER DEVIATION ....................................................................................... 15
CORPORATION LAW ............................................................... 16
RASF! U N I V E R S I T Y O F S A N C A R L O S | PAGE 1 OF 16
BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
(c) On or at a fixed period after the occurrence of a specified But nothing in this section shall alter or repeal any statute
event, which is certain to happen, though the time of requiring in certain cases the nature of the consideration to be
happening be uncertain. stated in the instrument.
An instrument payable upon a contingency is not negotiable,
and the happening of the event does not cure the defect. Rationale
JD: These are not a requisites for negotiability under Section 1.
(c) Fixed period after the occurrence of a specified event certain Exclusio unius est expressio alterius.
to happen
• I promise to pay to the order of X P10,000 on the death of his PAYABLE ON DEMAND
father – NEGOTIABLE SECTION 7. When Payable on Demand. — An instrument is
JD: It is negotiable because it is payable at a determinable future payable on demand —
time (Do NOT say fixed). Death is an event which is certain to (a) Where it is expressed to be payable on demand, or at sight,
happen though the time of happening is uncertain. or on presentation; or
(b) In which no time for payment is expressed.
• I promise to pay to the order of X P10,000 10 days after the Where an instrument is issued, accepted, or indorsed when
death of his father – NEGOTIABLE overdue, it is, as regards the person so issuing, accepting, or
indorsing it, payable on demand.
• I promise to pay to the order of X P10,000 10 days before the
death of his father – NOT NEGOTIABLE (b) No time for payment expressed
JD: It is not negotiable because the date of payment is not • I promise to order of X P10,000 – NEGOTIABLE
determinable. The law uses “after”. “Before” makes it uncertain. JD: Negotiable, although the instrument does not specify the
maturity date, as it is considered payable on demand.
ADDITIONAL PROVISIONS
SECTION 5. Additional Provision Not Affecting Negotiability. — PAYABLE TO ORDER
An instrument which contains an order or promise to do any SECTION 8. When Payable to Order. — The instrument is
act in addition to the payment of money is not negotiable. But payable to order where it is drawn payable to the order of a
the negotiable character of an instrument otherwise specified person or to him or his order. It may be drawn
negotiable is not affected by a provision which — payable to the order of —
(a) Authorizes the sale of collateral securities in case the (a) A payee who is not maker, drawer, or drawee; or
instrument be not paid at maturity; or (b) The drawer or maker; or
(b) Authorizes a confession of judgment if the instrument be (c) The drawee; or
not paid at maturity; or (d) Two or more payees jointly; or
(c) Waives the benefit of any law intended for the advantage (e) One or some of several payees; or
or protection of the obligor; or (f) The holder of an office for the time being.
(d) Gives the holder an election to require something to be Where the instrument is payable to order the payee must be
done in lieu of payment of money. named or otherwise indicated therein with reasonable
But nothing in this section shall validate any provision or certainty.
stipulation otherwise illegal.
PAYABLE TO BEARER
(d) Election of alternative obligation SECTION 9. When Payable to Bearer. — The instrument is
• I promise to pay to the order of X P10,000 and to deliver 5 sacks payable to bearer —
of rice – NOT NEGOTIABLE (a) When it is expressed to be so payable; or
• I promise to pay to the order of X P10,000 or to deliver 5 sacks (b) When it is payable to a person named therein or bearer; or
of rice on December 5, 2019 – NOT NEGOTIABLE (c) When it is payable to the order of a fictitious or non-existing
JD: Right of choice must belong to the holder. person, and such fact was known to the person making it so
• I promise to pay to the order of X P10,000 or to deliver 5 sacks payable; or
of rice on December 5, 2019 at the option of the holder - (d) When the name of the payee does not purport to be the
NEGOTIABLE name of any person; or
(e) When the only or last indorsement is an indorsement in
OMISSIONS blank.
SECTION 6. Omission; Seal; Particular Money. — The validity
and negotiable character of an instrument are not affected by (a) Payable to bearer
the fact that — • I promise to pay to the order of X, bearer, P10,000 – NOT
(a) It is not dated; or NEGOTIABLE
(b) Does not specify the value given, or that any value has been JD: “Bearer” is descriptive of X.
given therefor; or • I promise to pay bearer – NEGOTIABLE
(c) Does not specify the place where it is drawn or the place • I promise to pay possessor – NEGOTIABLE
where it is payable; or X • I promise to pay to any holder – NEGOTIABLE
(d) Bears a seal; or
(e) Designates a particular kind of current money in which
payment is to be made.
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
(a)That the instrument is genuine and in all respects what it RIGHTS OF THE HOLDER
purports to be; HOLDER
(b)That he has a good title to it; SECTION 191. Definition and Meaning of Terms . — In this Act,
(c)That all prior parties had capacity to contract; unless the context otherwise requires —
(d)That he has no knowledge of any fact which would impair xxxxx
the validity of the instrument or render it valueless. "Holder" means the payee or indorsee of a bill or note, who is
But when the negotiation is by delivery only, the warranty in possession of it, or the bearer thereof;
extends in favor of no holder other than the immediate xxxxx
transferee.
The provisions of subdivision (c) of this section do not apply to Holder
persons negotiating public or corporation securities, other Must be the payee or indorsee. May be the holder of a bearer
than bills and notes. instrument or order instrument.
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
Question: Is the holder considered a holder in due course • M made a promissory note payable to the order of P. Admitted
in the problem that he acquire the instrument through fraud so
Ruling: State Investment House never inquired into the title of it is defective. P negotiated it to A who negotiated it to B. B is a
the indorser. State Investment House should have inquired as to holder of a promissory note acquired by P through fraud
whether the consideration had been delivered. Failing in this therefore his title is defective. B had notice of P’s defective title.
respect, the holder is deemed guilty of gross negligence May B exercise the rights of a holder in due course?
amounting to legal absence of good faith contrary to Section JD: B is not a holder in due course under Section 52 because of
62(c). Thus, State Investment House is not a holder in due such notice. A, however, is presumed to be a holder in due course
course. The drawer may validly raise the defense of failure of under Section 59. Thus, B acquired title through a holder in due
consideration as it is a defense which can be interposed against course. Furthermore, even if B has knowledge of the defect, since
a holder not in due course. he was not a party to such fraud, he may exercise the rights of a
holder in due course. B may exercise the rights of A.
RIGHTS OF A HOLDER
SECTION 51.Right of Holder to Sue; Payment. — The holder of
a negotiable instrument may sue thereon in his own name; and
payment to him in due course discharges the instrument.
Rights of a holder
1. Right to sue
2. Right to receive payment
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
LIABILITIES OF PARTIES proceedings on dishonor be duly taken, he will pay the amount
PRIMARILY LIABLE thereof to the holder, or to any subsequent indorser who may
SECTION 60.Liability of Maker. — The maker of a negotiable be compelled to pay it.
instrument by making it engages that he will pay it according
to its tenor, and admits the existence of the payee and his then Parties secondarily liable
capacity to indorse. • Drawer (Sec. 61)
• General indorser (Sec. 66)
SECTION 62.Liability of Acceptor. — The acceptor by accepting
the instrument engages that he will pay it according to the Basis for secondary liability
tenor of his acceptance; and admits — “Engages that on due presentment the instrument will be
(a)The existence of the drawer, the genuineness of his accepted or paid, or both, according to its tenor, and that if it be
signature, and his capacity and authority to draw the dishonored, and the necessary proceedings on dishonor be duly
instrument; and taken, he will pay the amount thereof to the holder, or to any
(b)The existence of the payee and his then capacity to indorse. subsequent indorser who may be compelled to pay it” (common
provision)
Parties liable
• Parties primarily liable JD: There has to be due presentment for payment and there must
• Parties secondarily liable be proper notice if dishonored
• Assignees
ASSIGNEES
Parties primarily liable SECTION 65.Warranty Where Negotiation by Delivery and So
• Maker of a promissory note (Sec. 60) Forth. — Every person negotiating an instrument by delivery
• Drawee-acceptor: subject to the condition that the drawee or by a qualified indorsement warrants —
accepts (Sec. 62) (a) That the instrument is genuine and in all respects what it
o Bill of exchange: drawee liable only upon acceptance purports to be;
unless and until he cancels (Sec. 127) (b) That he has a good title to it;
o Check: the bank is liable only upon certification (Sec. 189) (c) That all prior parties had capacity to contract;
(d) That he has no knowledge of any fact which would impair
JD: Correlate Section 62 with the validity of the instrument or render it valueless.
SECTION 127. Bill Not an Assignment of Funds in Hands of But when the negotiation is by delivery only, the warranty
Drawee. — A bill of itself does not operate as an assignment of extends in favor of no holder other than the immediate
the funds in the hands of the drawee available for the payment transferee.
thereof, and the drawee is not liable on the bill unless and until The provisions of subdivision (c) of this section do not apply to
he accepts the same. persons negotiating public or corporation securities, other
than bills and notes.
SECTION 189. When Check Operates as an Assignment. — A
check of itself does not operate as an assignment of any part Assignees
of the funds to the credit of the drawer with the bank, and the Persons negotiating by delivery or by qualified indorsement
bank is not liable to the holder, unless and until it accepts or JD: Those who negotiated the instrument by delivery are NOT to
certifies the check. be considered secondarily liable because they are liable only for
violation of warranties carried. There is no provision for secondary
SECONDARILY LIABLE liability.
SECTION 61.Liability of Drawer. — The drawer by drawing the
instrument admits the existence of the payee and his then
capacity to indorse; and engages that on due presentment the
instrument will be accepted or paid, or both, according to its
tenor, and that if it be dishonored, and the necessary
proceedings on dishonor be duly taken, he will pay the amount
thereof to the holder, or to any subsequent indorser who may
be compelled to pay it. But the drawer may insert in the
instrument an express stipulation negativing or limiting his
own liability to the holder.
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
DEFENSES that the instrument is genuine and in all respects what it purports
PERSONAL AND REAL DEFENSES to be thus liable for their warranty.
JD: Pertains to an instrument incomplete upon delivery. ONE-LINER: A holder in due course cannot enforce such
instrument because, to him, it is not a valid contract.
ONE-LINER: A holder in due course can enforce such defective
instrument, completed without authority, because it is valid and • Instrument with the sum payable in blank was stolen from the
effectual for all purposes in his hands. drawer. It was completed without authority and negotiated
without authority. P negotiated to A, then A to B, B to C.
• M made a promissory note wherein the amount was left in JD: M can validly raise the defense that the blank was completed
blank. The instrument was negotiated to P, A, B, then C. M without authority and the instrument was negotiated without
authorized the amount of P10,000 be filled up. It was filled up in authority. Thus, the contract is invalid in the hands of any holder,
the amount of P100,000. which includes a holder in due course. P, A, and B as liable as
JD: C, presumably a holder in due course, can collect the entire indorsers.
P100,000. It is as if the instrument was filled up strictly in
accordance with the authority given. For P, A and B, they warrant
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
FAILURE TO REPORT
SECURITY BANK V. CA, 301 SCRA 537
Ruling: Drawer was declared guilty of negligence for failure to
report such burglary inside the office including a cabinet
containing the subject checks. The drawer never reported such
robbery to the police nor the drawee. The checks were
fraudulently encashed. The drawer was held liable for the entire
amount.
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
Existence of insurable interest in property EXCEPTIONS: There can be recovery even if no premiums are paid
GENERAL RULE: There can only be property recovery if such 1. P- Partial payment
insurable interest exists at the time of the effectivity of the policy 2. L- Life and industrial life insurance grace period
AND at the time of the loss. 3. A- Acknowledgment
4. C- Credit extension
EXCEPTIONS: 5. E- Estoppel
1. F- Framed
2. A- PARTIAL PAYMENT
3. C- Co-owner
4. T- Two or more things MAKATI TUSCANY V. CA
5. S- Succession Ruling: Partial payment is declared as a valid stipulation.
JD: When there are two or more things covered by a policy, the JD: If no premiums have been paid but death occurred within the
transfer of one will not affect such recovery. grace period, there can be recovery by way of exception.
Payment of premium
GENERAL RULE: Premiums must be paid so that, in case of death
or loss, there can be recovery. Otherwise if unpaid, there can be
no recovery. This is the cash and carry rule which was asked thrice
in the Bar.
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
Applying Section 48, it is the phrase “during the lifetime” which No suicide clause
is key. Thus, once the insured dies, the plan may no longer be JD: If there is no suicide clause, we have to check whether the
contested. insured was sane or insane. If insane, there must be recovery
under Section 183. If sane, this may be contested. If it has become
• The insured made a material concealment by failing to disclose incontestable, then there can be recovery. If the policy has been
that he is suffering from a pre-existing disease. He died 3 days contested, there can be no recovery. This is the only instance
thereafter. where there can be no recovery.
JD: Following the Aban and Cedia case, the insurer can no longer
contest that. What prevails under these is that the insured must KEY PHRASE: NO SECURITY COUNCIL
be alive when the contract is contested. This is very unfair. The No Suicide Clause
entire provision should have been construed . Thus, if the insured Sane + Contested
dies, the contract may still be contested within the 2 year period.
BENEFICIARY
RESCISSION OF INSURANCE CONTRACT REVOCABILITY
SECTION 11. The insured shall have the right to change the
Grounds for rescission beneficiary he designated in the policy, unless he has expressly
1. C- Concealment waived this right in said policy. Notwithstanding the foregoing,
2. R- Representation which is false in the event the insured does not change the beneficiary during
3. O- Omission his lifetime, the designation shall be deemed irrevocable.
4. W- Warranty breach
JD: Take note of the change introduced under RA 10607. Before,
CONCEALMENT as a rule, the designation of a beneficiary is revocable, unless
Sec. 27 A concealment whether intentional or unintentional otherwise expressly provided. However, there is now a provision
entitles the injured party to rescind a contract of insurance. saying it is irrevocable. That is when the insured has not changed
the beneficiary during his lifetime.
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
If one insurer has overpaid, then such insurer can recover from the other
insurers who have underpaid.
OVERINSURANCE
SECTION 83. In case of an over insurance by several insurers
other than life, the insured is entitled to a ratable return of the
premium, proportioned to the amount by which the aggregate
sum insured in all the policies exceeds the insurable value of
the thing at risk.
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
REINSURANCE
SECTION 97. A contract of reinsurance is one by which an
insurer procures a third person to insure him against loss or
liability by reason of such original insurance.
NO PROVE CLAUSE
JD: Not included in the syllabus but this is a favorite question in the Bar.
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BATCH BRAVEHEART MERCANTILE LAW TRANSCRIPT JUSTICE DIMAAMPAO
CORPORATION LAW
RASF! U N I V E R S I T Y O F S A N C A R L O S | PAGE 16 OF 16