INTRODUCTION

Commerce
-It is that branch of human
activity, the purpose of which is
to bring products to the
consumer
by
means
of
exchanges or operations which
tend to supply and extend to
him, habitually, with intent to
gain at the proper time and
place in good quality and
quantity.

Commerce and trade are

used interchangeably although
the former is more commonly
used in
and the latter in
domestic
ones.(Pandect
of
Commercial
Law
and
jurisprudence,
justice
Jose
Vitug, 1997 ed.)
Commercial Law
-It is that branch of private
law
governing
acts
of
commerce
(Business
intercourse) and/or the juridical
relations arising from such
commercial acts.(Pandect of
commercial
law
and
jurisprudence,
justice
Jose
Vitug, 1997ed.)
Law
of
Merchants/
Lex
Mercatoria
- An old international law of
merchants
and
mariners
growing out of their customary
practices. It was a law practiced
and enforced by businessman
and ship owners in their own
courts
without
professional
judges or lawyers. (Tristan
Catindig, Notes on Selected
Commercial Laws)

Law
Merchant/Lex
Mercatoria
-An old international law of
merchants
and
mariners
growing
out
of
their
customary practices. It was a
law practiced and enforced by
businessman and ship owners
in their own courts without
professional
judges
or
lawyers. (Tristan Catindig,
Notes
on
Selected
Commercial Laws)
Commercial Laws in the
Philippines
A.Code
of
Commerce
(Portions still in force)
1.Merchants, Commercial
registries,
Book
of
Merchants,
General
provisions on Commercial
Contracts (Arts. 1-63)
2.Joint
Accounts
(Arts.
239-243)
3.Transfers
of
nonnegotiable
credits(Arts.
347- 348)
4. Commercial Contracts
of Overland Transportation
(Art. 349-379)
5. Letters of Credits (567572)
6. Maritime Commerce
(Art. 573-869)
B. Special Laws
1. Corporation Code
2. Negotiable Instruments
Law
3. Insurance Code
4. Insolvency Law
5. Securities
Regulations
Code
6. Public Service Law
7. General Banking Law

8. Warehouse Receipts Law

9. Chattel Mortgage Law
10. Others
C. New Civil Code (repealed
certain contracts in the Code of
Commerce)
1. Sales
2. Partnership
3. Agency
4. Loan
5. Deposit
6. Guaranty

Merchant
- middleman between the
consumer and manufacturer; a
merchant must do business in
his own name

A. Filipino Merchants
1. Natural Person
Qualifications:
a. Legal capacity to engage in
commerce(capacity)
i. of legal age (18years)
ii. has free disposition of
property

2. Juridical person
Qualifications:
a. industrial
or
company

B. Foreign Merchants
Those engaged in business in
thePhilippines1.
As to capacity to contract:
- governed by the laws of
their country2.
As to the creation of their
establishments,
their
mercantile operations and
the jurisdiction of our courts:
- governed by the Code of
Commerce
Note: The Corporation Code
applies to corporations.
Foreigners and companies
created abroad may engage
in commerce subject to the
laws of their country with
respect to their capacity to
contract,

xxx Those, who having

legal capacity to engage in
commerce, habitually devote
themselves thereto xxx
(Art 1, Code of Commerce)

b.
habitually
engaged
commerce (habituality)

b. b. organized in accordance
with existing legislation

in

commercial

Foreign corporations and

partnerships
can
engage
business here,provided they
get a license from the SEC.For
insurance companies, they
need a certificate of authority
from
the
Insurance
Commission. Banks need a
license from the Monetary
Board.
Code of Commerce governs:
regards the creation of their
establishments in Philippine
territory,
their mercantile operations,
and
1 The Code of Commerce sets
it at 21 years, but RA 6809

lowered the majority age to

18 years
the jurisdiction of the courts
of the Philippines.
But if theres a special
treaty, the treaty governs
Habituality
1. Series of acts:
the
repetition
and
continuation of commercial acts
in such manner that they are
related to each other by reason
of the commercial or end which
they tend to have, which is, the
exchange or circulation of
products
2. Single Acts:
- Ac which manifests the
intention to engage habitually
in commerce Ex. Throwing open
to the public a shop or
establishment;
public
announcements, etc.
Presumption
of
Habituality - exists from the
moment a person who intends
to
engage
in
commerce
announces through circulars,
newspapers, handbills, posters
exhibited to the public, or in
any other manner whatsoever,
an establishment which has for
its object some commercial
operations. (Art. 3, Code of
Commerce)
Disqualifications
from
Engaging in Commerce
A. Absolute Disqualifications
The following cannot engage in
commerce nor hold office or
have any direct, administrative,
or financial intervention in

commercial
or
industrial
companies:
1. those serving the penalty
of civil interdiction
2. Those judicially declared
insolvent
3. Those who are absolutely
disqualified
under
special
laws
B.
Relative
Disqualifications
The following cannot engage
in the commerce,either in
person or by proxy, nor can
they hold any office or have
any direct, administrative or
financial
intervention
in
commercial
or
industrial
companies, within the limits
of the districts,provinces or
towns
in
which
they
discharge their duties:
1. Justices of the Supreme
Court, judges and officials of
the department of public
prosecutors
in
active
service. This provision shall
not be applicable to the
municipal mayors, judges or
prosecuting attorneys, nor
to those who by chance are
temporarily discharging the
functions
of
judges
or
prosecuting attorneys.
2. Administrative, economic
or military heads
of districts, provinces or posts
3. Employees engaged in the
collection
and
administration of funds of
the State, appointed by the
Government.Persons who by
contract
administer
and
collect temporarily or their
representatives
are
exempted.

4. Stock
and
commercial
brokers of whatever class they
may be.
5. Those who by virtue of laws
or special provisions, may not
engage in commerce in a
determinate territory.
6. Members of Congress(87
Consti)
7. President, Vice President,
Cabinet members and their
deputies or assistants (87
Consti)
8. Members of Constitutional
Commission (87 Consti)
9. President, Vice President,
Members of the Cabinet,
Congress, Supreme Court and
the
Constitutional
Commission,Ombudsman with
respect to any loan,guaranty,
or other form of financial
accommodation
for
any
business purpose by any
government-owned
or
controlled bank to them (Art
XI, Sec. 16,87 Consti)
Absolute
Incapacity
Extends
throughout
the
Philippines

Relative
Incapacity
Extends only
to
the
territory
where
the
officer
is
exercising his
functions
Effect of act is Effect is to
null and void
subject
the
violator
to
disciplinary
action
or
punishment
Acts
of
Commerce
(Commercial Transactions)

1. Those acts contained in the

Code of Commerce and
2. 2. all others of analogous
character
The Code of Commerce does
not attempt anywhere to
define
what
commercial
transactions are. It only
specifies two general classes.
Moreover, an act need not be
performed by the merchant in
order
that
it
may
be
considered
an
act
of
commerce (Cia Agricola de
Ultramar v. Reyes, 4 PHL 2)
Governing law (successive
order)
1. Code of Commerce
2. Commercial Usage
3. Civil Code
Commercial Registry
1. A book where entries are
made of merchants and of
documents affecting their
commercial transactions; OR
2. An office established for
the purpose of copying and
recording verbatim certain
classes of documents of
commercial nature.
Nature of Registration
1. By individual - OPTIONAL
2. By
corporations
COMPULSORY, as it is the fact
of registration which creates
the Corporation
3. Partnerships with a capital
of 3,000 or more or where the
contributions consist of real
estate
properties
COMPULSORY (1772, Civil
Code)

4. Philippine Vessels
a. With more than 3 tons gross COMPULSORY
b. With gross tonnage of 3 tons
or less - OPTIONAL
Effect of Failure to Register
- An individual merchant
who fails to registrar cannot
request the inscription of any
document in the mercanile
registry, nor take advantage of
its effects (Art. 18, Code of
Commerce)
- Failure to register the
articles of incorporation of a
corporation will not create the
corporation
- Failure to register a
partnership does not affect
the
existence
of
juridical
personality, whether or not it
has P3,000 or more or real
estate
properties
on
contributions by the partners.
Required
Books
of
Merchants
1. Under
the
Code
of
Commerce
a. Book of inventories and
balances
b. Journal
c. ledger
d. Books for copies of letters
and telegrams.
2. Under special laws; e.g stock
and transfer book under the
corporation Code
3. Under the National Internal
Revenue Code.
Commercial Contracts
- Those entered into by,
merchants in the pursuit of

their
activities
as
such
merchants, those involving
articles of commerce, or
those
defined
as
such
contract by certain special
commercial laws.

An agreement between two

or more merchants or nonmerchants
bonding
themselves to give or to do
something
in
commercial
transactions. (Del Viso 88
cited in Miravite Bar Review
Materials in Commercial law.)
Governing Laws:
1. Code
of
Commerceprimary
2. Civil Code- suppletory (Art.
18, Civil Code)

But in case of inconsistency.

The lather prevails except as
to
contracts
explicitly
governed by the former such
as
bottomry
and
respondentia.
Enforceability of Contracts
i. Commercial contracts shall
be valid, whatever the form
and language,provided their
existence is shown by any
means established by the civil
law
EXCEPT
when
the
contract exceedsP300 (the
equivalent of 1,500 pesetas),
it cannot be proved by the
testimony of a witness alone.
There must be some other
evidence.
Efficacy of Contracts
General Rule:
Commercial contracts are
consensual, so a written

instrument is not necessary.

(simply put, need not be in any
particular form)
Exception: in the ff cases in Art
52
Contracts stated in the Code
or in special laws which must
be reduced to writing or require
forms or formalities necessary
for their efficacy
Contracts executed in a
foreign country in which the law
requires certain instruments,
forms or formalities for their
validity,although Philippine law
does not require them. (simply
put, foreign contracts executed
abroad, required by foreign law
to be in a particular form.)
ii. if these contracts do not
satisfy
the
circumstances
respectively required, it shall
not give rise to obligations or
causes of action
Perfection:
General Rule:
Commercial
contracts
are
consensual as to perfection.
Exception:
When the Code of commerce
requires specific forms such as
charter parties and loans on
bottomry and respondentia.
Exact moment of perfection:
General Rule:
- All contracts, whether civil
or commercial, are perfected
from the moment the offeror
has notice of the offerees
acceptance.(Cognition Theory;
Art.1319, Civil Code)

Exception:
- Under Art.54 of the Code
of Commerce, commercial
contracts entered into by
correspondence are perfected
from the moment an answer
is made accepting the offer or
the condition by which the
latter may be modified.
(Manifestation Theory)
Note: Art. 54 (Manifestation
Theory) is applicable only to
contracts
still
specially
governed by the Code of
Commerce.