Business Law Discussion - 28 September 2024

COLLEGE OF BUSINESS MANAGEMENT BSBA-MAJOR IN MARKETING BUSINESS LAW CORE 5 Coverage (Midterm) Learning Topics to be Objectives Discussed 1) Obligation 2) Contract II Obligations and...

COLLEGE OF BUSINESS MANAGEMENT BSBA-MAJOR IN MARKETING BUSINESS LAW CORE 5 Coverage (Midterm) Learning Topics to be Objectives Discussed 1) Obligation 2) Contract II Obligations and 3) Essential elements of a valid Contracts contract 4) Types of contracts and their enforceability 5) Contract remedies and performance 6) Remedies for breach of contract Coverage (Midterm) Learning Topics to be Objectives Discussed 1) Negligence, strict liability and intentional torts III Tort and Business 2) Defenses and remedies in tort cases Liability 3) Product liability and consumer protection 4) Elements of negligence and defenses 5) Principles of damages and compensation References: Introduction to Law, Suarez Rolando A., Sixth Edition Reviewer in Commercial Law, Sundiang Sr. and Aquino Reviewer, Real Excellence Republic Act No. 386 or the New Civil Code of the Philippines Republic Act No. 11232 or the Revised Corporation Code of the Philippines OBLIGATION Article 1156, NCC – An obligation is a juridical necessity to give, to do or not to do. “An obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor), the observance of a determinate conduct (the giving, doing, or not doing), and in case of breach, may demand the satisfaction from the assets of the latter” (Arias Ramos). JURIDICAL NECESSITY It is a juridical necessity because in case of non- compliance, the courts of justice may be called upon to force its fulfillment or in default thereof, the economic value that it represents. ESSENTIAL ELEMENTS OF OBLIGATION 1. Active subject (creditor or obligee) 2. Passive subject (debtor/obligor) 3. Prestation (subject matter) 4. Vinculum juris/Efficient cause/Juridical tie ESSENTIAL ELEMENTS OF OBLIGATION Active subject (creditor or obligee) The person in whose favor the obligation is constituted or the one who can demand the performance of the obligation ESSENTIAL ELEMENTS OF OBLIGATION Passive subject (debtor/obligor) The person who is required to perform the obligation. ESSENTIAL ELEMENTS OF OBLIGATION Prestation (subject matter of the obligation) Either to give, to do or not to do. ESSENTIAL ELEMENTS OF OBLIGATION Vinculum juris/Efficient Cause/Juridical Tie The reason why the obligation exists which can be any of the five (5) sources of obligation ILLUSTRATION Through an agreement, Camilla promised to give an iPhone 15 to Michelle. Debtor/obligor – ? Creditor/obligee – ? Prestation – ? Efficient cause – ? ILLUSTRATION Through an agreement, Camilla promised to give an iPhone 15 to Michelle. Debtor/obligor Camilla Creditor/obligee Michelle Prestation giving the iPhone 15 Efficient cause agreement or contract SOURCES OF OBLIGATION 1) Law; 2) Contracts; 3) Quasi-contracts; 4) Acts or omissions punished by law; and, 5) Quasi-delicts. - Article 1157, NCC SOURCES OF OBLIGATION 1) LAW; 2) Contracts; 3) Quasi-contracts; 4) Acts or omissions punished by law; and, 5) Quasi-delicts. - Article 1157, NCC SOURCES OF OBLIGATION Obligations arising from law are those expressly provided in the New Civil Code or in special laws. These are demandable. (Art.1158, NCC) SOURCES OF OBLIGATION Obligations arising from law are those expressly provided in the New Civil Code or in special laws. These are demandable. (Art.1158, NCC) Examples: Duty of support Duty to pay taxes SOURCES OF OBLIGATION 1) Law; 2) CONTRACTS; 3) Quasi-contracts; 4) Acts or omissions punished by law; and, 5) Quasi-delicts. - Article 1157, NCC SOURCES OF OBLIGATION Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (Art. 1159, NCC) SOURCES OF OBLIGATION Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (Art. 1159, NCC) Once a contract is entered into, the parties are bound by its terms and cannot, without valid reason withdraw therefrom. SOURCES OF OBLIGATION 1) Law; 2) Contracts; 3) QUASI-CONTRACTS; 4) Acts or omissions punished by law; and, 5) Quasi-delicts. - Article 1157, NCC SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. Nominate quasi-contracts ✓ Negotiorum gestio ✓ Solutio indebiti Innominate quasi-contracts SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. Nominate quasi-contracts ✓ Negotiorum gestio – Whoever voluntary takes charge of the agency or management of the business and property of another, without any power from the latter, is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to do so. This juridical relation does NOT arise in either of these instances: SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. Nominate quasi-contracts Negotiorum gestio This juridical relation does NOT arise in either of these instances: 1. When the property or business is not neglected or abandoned; 2. If in fact the manager has been tacitly authorized by the owner (Article 2144, NCC) ILLUSTRATION Arthur left his rice field and went to Hong Kong for a one-month vacation. Kenneth seeing the palay ready for harvest, harvested the same, and sold them to Lance. Kenneth borrowed from Norjanna’s Bank to prepare the rice field for the next batch. Is there a negotiorum gesto between Arthur and Kenneth? ILLUSTRATION Arthur left his rice field and went to Hong Kong for good. Kenneth seeing the palay ready for harvest, harvested the same, and sold them to Lance. Kenneth borrowed from Norjanna’s Bank to prepare the rice field for the next batch. Is there a negotiorum gesto between Arthur and Kenneth? SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. Nominate quasi-contracts Negotiorum gestio This juridical relation does NOT arise in either of these instances: 1. When the property or business is not neglected or abandoned; 2. If in fact the manager has been tacitly authorized by the owner (Article 2144, NCC) SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. Nominate quasi-contracts ✓ Solutio indebiti – the juridical relation which is created when something is received when there is no right to demand it and it was unduly delivered through mistake SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. Nominate quasi-contracts ✓ Solutio indebiti Requisites: 1. There is no right to receive the thing delivered 2. The thing is delivered through mistake SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. Innominate quasi-contracts When funeral expenses are borne by a third person, without the knowledge of those relatives who were obliged to give support to the deceased, said relatives shall reimburse the third person, should the latter claim reimbursement. (Article 2165, NCC) ILLUSTRATION Jollibee, resident of an island struck by a storm, found a decaying body of Wendys and buried the same without intention for it to be a gratuitous act. Finding McDo, father of the Wendys, demanded reimbursement for the cost of burial. Is there an obligation to reimburse on the part of McDo? SOURCES OF OBLIGATION Obligations arising from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of the New Civil Code. Innominate quasi-contracts When funeral expenses are borne by a third person, without the knowledge of those relatives who were obliged to give support to the deceased, said relatives shall reimburse the third person, should the latter claim reimbursement. (Article 2165, NCC) SOURCES OF OBLIGATION 1) Law; 2) Contracts; 3) Quasi-contracts; 4) ACTS OR OMISSIONS PUNISHED BY LAW; and, 5) Quasi-delicts. - Article 1157, NCC SOURCES OF OBLIGATION Obligations arising from criminal offenses are governed by penal laws subject to the provisions of Article 2177 and of the pertinent provisions of Chapter 2, Preliminary Title on Human Relations, Title XVII of the New Civil Code. Article 2177, NCC. Responsibility for fault and negligence under the preceding article is entirely separate and distinct from the civil liability arising from negligence under the Revised Penal Code. But the plaintiff cannot recover damages twice for the same act or omission of the defendant. SOURCES OF OBLIGATION Delict is an act or omission punishable by law which may be governed by the Revised Penal Code, other penal laws, or the Title on Human Relations under the New Civil Code. SOURCES OF OBLIGATION Delict is an act or omission punishable by law which may be governed by the Revised Penal Code, other penal laws, or the Title on Human Relations under the New Civil Code. Revised Penal Code: Article 100. Civil liability of a person guilty of felony – Every person criminally liable for a felony is also civilly liable. Under the Revised Rules of Court, whenever a criminal action is instituted, the civil action is impliedly instituted therewith. SOURCES OF OBLIGATION Delict is an act or omission punishable by law which may be governed by the Revised Penal Code, other penal laws, or the Title on Human Relations under the New Civil Code. Revised Penal Code: Article 104. What is included in civil liability – The civil liability established in Articles 100, 101, 102, and 103 of this Code includes: 1. Restitution; 2. Reparation of the damage caused; 3. Indemnification for consequential damages. SOURCES OF OBLIGATION Delict is an act or omission punishable by law which may be governed by the Revised Penal Code, other penal laws, or the Title on Human Relations under the New Civil Code. Proof necessary: 1. Criminal liability – proof beyond reasonable doubt 2. Civil liability – preponderance of evidence SOURCES OF OBLIGATION Delict is an act or omission punishable by law which may be governed by the Revised Penal Code, other penal laws, or the Title on Human Relations under the New Civil Code. Acquittal of accused: a. Acquittal because accused did not do the act complained of – no civil liability b. Acquittal due to reasonable doubt – there can still be civil liability SOURCES OF OBLIGATION 1) Law; 2) Contracts; 3) Quasi-contracts; 4) Acts or omissions punished by law; and, 5) QUASI-DELICTS. - Article 1157, NCC SOURCES OF OBLIGATION Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this chapter. – Article 2176, New Civil Code of the Philippines Quasi-delict is used to designate those obligations which do not arise from law, contracts, quasi-contracts or criminal offences. The concept of liability in quasi- delictual cases is embodied in Chapter 2, Title XVII of the Civil Code. SOURCES OF OBLIGATION Requisites: a. There must be an act or omission; b. There must be fault or negligence; c. There must be damage caused; d. There must be a direct relation of cause and effect between the act or omission and the damage ILLUSTRATION While driving recklessly, Jonathan hit Dixie Jan and the latter was injured. Requisites: a. There must be an act or omission – driving recklessly; b. There must be fault or negligence – there was negligence since the required degree of care was not met; c. There must be damage caused – there was damage to the Dixie Jan who was injured; d. There must be a direct relation of cause and effect between the act or omission and the damage – the cause of the damage was the recklessly driving of the Jonathan SOURCES OF OBLIGATION QUASI-DELICT Vicarious Liability: Article 2180. The obligation imposed by article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom — one is responsible. Acts done by: Who is responsible? Minor children who live in their company The father, in case of his death or incapacity, the mother Minors and incapacitated persons Guardians Employees in the service of the branches in which they are employed or on the Owners and managers of establishment or occasion of their functions enterprise Employees and household helpers acting within the scope of their assigned tasks, even Employers if the employer is not engaged in any business or industry Special agent, except when the damage was caused by the official to whom the task The State done properly pertains Pupils and student or apprentices, so long as they remain in their custody Teachers or heads of establishments of arts and trade Defense: The responsibility shall cease when the persons above-mentioned prove they observed all the diligence of a good father of a family to prevent damage. NATURE AND EFFECTS OF OBLIGATIONS From the viewpoint of the subject matter of the obligation, it may either be: Real Obligation to give a specific thing or to give a generic thing; or Personal Obligation to do or not to do. NATURE AND EFFECTS OF OBLIGATIONS OBLIGATION OF A PERSON OBLIGED TO GIVE SOMETHING A person obliged to give something has the following obligation: He is obliged to take care of it with the proper diligence of a good father of a family, EXCEPT if the law or stipulation of the parties requires another standard of care. (Article 1163, NCC) Notes: If the parties have agreed on the kind of diligence to be observed, that which is stipulated shall be observed If there is no agreement, the proper diligence of a good father of a family shall be observed. If the law requires that a specific kind of diligence shall be observed, this prevails over any kind of agreement. ILLUSTRATION A stipulation that Sittie Inc., will carry its passengers by using ordinary diligence is void for the law specifically requires that a common carrier shall carry its passengers "safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all circumstances." (Article 1755, NCC) NATURE AND EFFECTS OF OBLIGATIONS OBLIGATION TO GIVE A DETERMINATE THING The obligation to give a determinate thing includes the obligation to deliver all its accessions and accessories, even though they may not have been mentioned. (Article 1166, NCC) Q: When is a thing specific or determinate and when is it generic or indeterminate? A: A thing is specific or determinate when it is capable of particular designation. A thing is generic or indeterminate when it refers to a class, and cannot be pointed out with the particularity. ILLUSTRATION A thing is specific or determinate when it is capable of particular designation. Example: This Toyota Avanza Veloz Car with Plate No. NCV 7290. A thing is generic or indeterminate when it refers to a class, and cannot be pointed out with the particularity. Example: A house. NATURE AND EFFECTS OF OBLIGATIONS EFFECT OF OBLIGATION TO DELIVER A SPECIFIC THING AND A GENERIC THING There is a great difference. General Rule: The obligation to deliver a specific thing is extinguished by a fortuitous event. NATURE AND EFFECTS OF OBLIGATIONS Fortuitous event is an event which cannot be foreseen, or which, although foreseeable, are inevitable. NATURE AND EFFECTS OF OBLIGATIONS FORTUITOUS EVENT To constitute a fortuitous event, the following elements must concur: a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations must be independent of human will; b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible to avoid; c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal manner; and, d) the obligor must be free from any participation in the aggravation of the injury or loss. NATURE AND EFFECTS OF OBLIGATIONS Fortuitous event is an event which cannot be foreseen, or which, although foreseeable, are inevitable. Note: Caso fortuito is a fortuitous event independent of the will of the obligor but not of other human wills. Example of this are war, fire, robbery, and murder while force majeure are events which are totally independent of the will of every human being. The term generally applies to a natural accident. Example of this are earthquake, lightning, and volcanic eruption. NATURE AND EFFECTS OF OBLIGATIONS EFFECT OF OBLIGATION TO DELIVER A SPECIFIC THING AND A GENERIC THING Exceptions: 1) When expressly provided by law; 2) When expressly agreed upon by the parties; 3) When the nature of the obligation requires the assumption of risk. (Art. 1174, NCC) 4) The debtor is guilty of dolo, malice or bad faith, has promised the same thing to two or more persons who does not have the same interest 5) The debtor contributed to the loss (Tan v. Inchausti & Co., G.R. No. L-6472, Mar. 7, 1912) 6) The possessor is in bad faith 7) The obligor is guilty of fraud, negligence or delay or if he contravened the tenor of the obligation (Juan Nakpil v. United Construction Co., Inc. v. CA, G.R. No. L-47851, Apr. 15, 1988) NATURE AND EFFECTS OF OBLIGATIONS EFFECT OF OBLIGATION TO DELIVER A SPECIFIC THING AND A GENERIC THING The obligation to deliver a generic thing is NOT extinguished by fortuitous events. ILLUSTRATION ✓ Joharrah is obliged to give Jonalyn this book. Before Joharrah can deliver it to Jonalyn, her library was burned and said book was likewise burned. Here, the obligation to deliver is ______________. ✓ Samer is obliged to give Genrev a ballpen. If said ballpen is lost, it can be replaced by another ballpen. Here, the obligation to deliver is ______________. EFFECTS OF OBLIGATIONS If a person obliged to do something fails to do it, or if he does it in contravention of the tenor of the obligation, the effects are as follows: 1) The obligation shall be executed at his cost (debtor's cost); 2) It may be decreed that what has been poorly done be undone. (Article 1167, NCC) EFFECTS OF OBLIGATION NOT TO DO If the obligation consist in not doing, and the obligor does what has been forbidden him, it shall be undone at his expense. (Article 1168, NCC) DEBTOR IS IN DEFAULT FROM THE TIME OF DEMAND Those obliged to deliver or to do something are in default from the time of demand, judicial or extrajudicial. Without this demand, the debtor is not in default. In the following instances, however, demand is not needed: When the obligation expressly so provides; When the law expressly so provides; When the time of essence of the contract; When demand would be useless, as when the obligor has rendered it beyond his power to perform (Article 1169, NCC) EFFECT IS THERE IS FRAUD, NEGLIGENCE OR DELAY Those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any matter contravene the tenor thereof, ARE LIABLE FOR DAMAGES. EFFECTS OF OBLIGATIONS If a person obliged to do something fails to do it, or if he does it in contravention of the tenor of the obligation, the effects are as follows: 1) The obligation shall be executed at his cost (debtor's cost); 2) It may be decreed that what has been poorly done be undone. (Article 1167, NCC) REMEDIES FOR BREACH OF DELAY OBLIGATIONS TO GIVE Determinate thing-specific performance only if it is legally and physically possible. Substitute performance is not possible. Generic thing-specific or substitute performance. The creditor can have another person to have such kind of thing be delivered at the cost of the debtor plus damages. OBLIGATIONS TO DO Substitute performance only, since forcing the obligor to comply would violate the constitutional prohibition against involuntary servitude. OBLIGATIONS NOT TO DO and the obligor does it, the creditor may have it undone at the expense of the debtor. REMEDIES FOR BREACH OF DELAY SPECIFIC PERFORMANCE is an equitable remedy where the court orders the breaching party to fulfil its obligations under the terms of the contract. This could include requiring the defendant to deliver the goods or services promised in the agreement; SUBSTITUTE PERFORMANCE means the obligation will be performed by a third party at the expense of the defaulting party; also known as “right to cover”, it ensures that the aggrieved party can obtain performance of a contract from a third party in case of non-performance (inability or breach) by the counterparty who fails to perform and the right to recover the consequent loss suffered by the performing party. KINDS OF DAMAGES 1) Moral Damages 2) Exemplary Damages 3) Nominal Damages 4) Temperate Damages 5) Actual Damages 6) Liquidated Damages KINDS OF DAMAGES 1) Moral Damages – for moral anguish, besmirched reputation, sleepless nights, serious anxiety, etc. 2) Exemplary Damages – to deter others from committing the same act. 3) Nominal Damages – to vindicate a right. The assessment of nominal damages is left to the discretion of the court. 4) Temperate Damages – when the exact amount of the damages cannot be determined. 5) Actual Damages – to compensate the aggrieved party for actual losses suffered. 6) Liquidated Damages – damages agreed upon by the parties. RESPONSIBILITY ARISING FROM FRAUD (DOLO) 1) It is demandable in all obligations. Any waiver of an action for future fraud is void. (Article 1171, NCC) 2) Liability due to fraud cannot be reduced by the courts. 3) There is deliberate intention to cause damage. RESPONSIBILITY ARISING FROM NEGLIGENCE (CULPA) 1) It is also demandable but such liability may be regulated by the courts according to the circumstances. 2) It can be reduced in certain cases. 3) There is no deliberate intention to the case damage. KINDS OF OBLIGATION ✓ Pure obligation vs. conditional obligation ✓ Alternative vs. facultative obligation ✓ Joint obligation vs. solidary obligation ✓ Divisible obligation vs. indivisible obligation ✓ Obligation with penal cause DEFINITION AND ILLUSTRATION ✓ Pure obligation – it is an obligation without a condition or a term and therefore, it is demandable at once. I promise to pay you PhP100,000.00 upon demand. DEFINITION AND ILLUSTRATION ✓ Conditional obligation – it is one with condition I will give a car to you if you pass the CPA board examinations this year. In this example, the condition is a suspensive one because the giving of the car depends on the results of the examination to be given this 2023. I will give you my car today but if you fail in CPA board examinations to be given this year, I will be the owner of the car again. In this example, the condition is a resolutory one because the happening of the condition extinguishes the obligation. DEFINITION AND ILLUSTRATION ✓ Alternative obligation – it is one where out of the two or more prestations which will be given, only one is due I will give you any of the following: My 24 karat gold right worth 1M or my Avanza 2020 model, worth 1M, or my residential lot in the province worth 1M. In this example, I can give any of the three properties I have mentioned and if give one of them, I have complied with the obligation. DEFINITION AND ILLUSTRATION ✓ Facultative obligation – it is one where only one prestation has been agreed upon but the obligor may render another in substitution I promise to give my niece my 14 karat gold ring worth P60,000.00 but it is agreed that I could give her a secondhand car with the same value as substitute. DEFINITION AND ILLUSTRATION ✓ Joint obligation – in a joint obligation, an obligor answers only for a part of the entire liability X and Y borrowed PhP1,000.00 from A and it is agreed that they are joint debtors of A. X will only be liable to pay PhP500.00. This is because they are joint debtors. KINDS OF OBLIGATION ✓ Solidary obligation – where both or all of the debtors can be held liable for the whole liability they have incurred X and Y borrowed PhP1,000.00 from A and it is agreed that they are solidary debtors. X can be held liable for the whole PhP1,000.00 and so is Y. The creditor can run against both or against any one of them because they are solidary debtors. KINDS OF OBLIGATION ✓ Divisible obligation – a divisible obligation is an obligation which is capable of partial performance. A agreed to deliver 500 kilos of rice to B. Here, the subject matter is capable of partial performance in the sense that the parties may agree that A will deliver 250 kilos of rice today and another 250 kilos of rice tomorrow. KINDS OF OBLIGATION ✓ Indivisible obligation – an obligation which is not capable of partial performance A agreed to deliver Toyota Fortuner. Here, the subject matter is not capable of partial performance because the car cannot be divided into two. KINDS OF OBLIGATION ✓ Obligation with penal cause – in obligations with a penal clause, the penalty shall substitute the indemnity for the damages and payment of interest in case of non-compliance ✓ X agreed to finish the painting job of the CBM Building within 60 days. It was stipulated that in case of delay, X will be liable to pay a penalty of PhP1,000.00 per day of delay, if it turns out therefore that X fails to finish the painting job within the 60 days and it was only on the 65th day that he finished the job, X will be liable to pay a penalty of P5,000.00. EXTINGUISHMENT OF OBLIGATIONS Obligations are extinguished by any of the following reasons: Article 1231, NCC. Obligations are extinguished: 1) By payment or performance; 2) By the loss of the thing due; 3) By the condonation or remission of the debt; 4) By the confusion or merger of the rights of creditor and debtor; 5) By compensation; 6) By novation. Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in the Code. Thank you.