COMMERCIAL LAW – MOCK BAR 2015-2016

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Questions:

(1) a. What is Infringement? (2 pts)

b. What are the tests to determine infringement? (2 pts)
c. What are the remedies for infringement? (3 pts)

Suggested Answers:

(a) Infringement refers to copying of substantial portions of a copyrighted work.

(b) Tests

(1) Literal infringement

(2) Doctrine of Equivalents

(c) Remedies

(a) Injunction restraining such infringement. The court may also order the defendant
to desist from an infringement, among others, to prevent the entry into the channels
of commerce of imported goods that involve an infringement, immediately after
customs clearance of such goods.
(b) Pay to the copyright proprietor or his assigns or heirs such actual damages,
including legal costs and other expenses, as he may have incurred due to the
infringement as well as the profits the infringer may have made due to such
infringement, and in proving profits the plaintiff shall be required to prove sales only
and the defendant shall be required to prove every element of cost which he claims,
or, in lieu of actual damages and profits, such damages which to the court shall appear
to be just and shall not be regarded as penalty.
(c) Deliver under oath, for impounding during the pendency of the action, upon such
terms and conditions as the court may prescribe, sales invoices and other documents
evidencing sales, all articles and their packaging alleged to infringe a copyright and
implements for making them.
(d) Deliver under oath for destruction without any compensation all infringing copies
or devices, as well as all plates, molds, or other means for making such infringing
copies as the court may order.
(e) Such other terms and conditions, including the payment of moral and exemplary
damages, which the court may deem proper, wise and equitable and the destruction
of infringing copies of the work even in the event of acquittal in a criminal case.

(2) Salve Bud, a single mother, went to All Life Insurance Company to procure a life insurance
with face value of Php10M. In her application form, she stated that she was born on September
1, 2000; gainfully employed as a janitress in coffee shop earning Php10,000 a month; and,
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named her only child as her beneficiary. The premium she needs to pay is Php5,000 a month.
She signs the application form, the policy is issued and she starts to pay. A day after, she met an
accident and died. As a result, her mother filed a notice of claim for the beneficiary. Should All
Life Insurance Company grant the claim? (3 pts.)

Suggested Answer:

Yes, since there was already a perfected contract of insurance. The elements of a contract of
insurance have already concurred: (1) The insured has an insurable interest; (2) The insured is
subject to a risk of loss by the happening of a designated peril; (3) The insurer assumes the
risk of loss; (4) Such assumption of risk is part of a general scheme to distribute the actual
losses among a large group of persons bearing similar risk; (5) in consideration of the insurer’s
promise, the insured pays a premium.

(3) Tracy Belarmino decided to go on a vacation in the United States. She made an economy
class reservation in the HK-New York flight of World Airlines. It was confirmed however, due to
error, cancelled said reservation. Expecting that some cancellations of booking will be made
before the flight time, the supervisor decided to withhold the information. However, no one
decided to cancel bookings, as a result of which, in the HK-New York leg, she was upgraded to
Business Class, which she didn’t like. But due to lack of options, she transferred. Upon her
return to Manila, she filed a case against the airline company. Should her case succeed? (5 pts.)

Suggested Answer:

Yes, because in misleading Tracy Belarmino, into purchasing said tickets in conviction that
they had confirmed reservations for the same, when in fact they had none, the airline
company willfully and knowingly placed itself into the position of having to breach its
aforesaid contract with Tracy.

(4) Jo Vee issues in favor of Jo Cee a postdated crossed check in payment of the 12 dozens of
apples the latter delivered the former. Jo Cee sold and negotiated the check to Apples Inc. at a
discount. Apples Inc. did not ask Jo Vee the purpose of crossing the check. Since Jo Cee failed to
deliver the apples, Jo Vee ordered the drawee bank to stop payment of the check. As a result,
Apples Inc. failed to collect from Jo Vee.

a. What are the effects of crossing a check? (2 pts)

b. Is Jo Vee’s defense of lack of consideration as against Jo Cee also available as against
Apples Inc.? (3 pts)
Suggested Answers:

(a) 1. The check may not be encashed but only deposited in a bank; 2. The check may only
be negotiated once; 3. The act of crossing the check serves as a warning to the holder
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that the check has been issued for a definite purpose so that he must inquire if he has
received a check pursuant to that purpose.
(b) Yes, not being a holder in due course.

(5) Joan Norpheth has in her name 10,000 shares of stocks in Bee Telecoms. She delivered it to
Pocholo Azardon who now claims to be the real owner, however, was refused recognition and
registration by Bee Telecoms. Is the refusal justified? (5 pts)

Suggested Answer:

The refusal is justified. For a valid transfer of stocks, there must be strict compliance with that
prescribed by law: (a) There must be delivery of the stock certificate (b) The certificate must
be endorsed by the real owner or attorney in fact or other persons legally authorized to make
the transfer (c) To be valid as against third parties, must be recorded in the books of the
corporation.

In the case above, there was delivery without endorsement, hence, may be refused
recognition and registration.

(6) Mini Family 11 is the biggest 24-hour convenience store in the Philippines, with over 2000
branches in the nationwide. It has its own building in Makati City where it holds its corporate
office and where stockholders’ meetings and Board of Directors’ meetings are held. One of the
best-selling products of Mini Family 11 is its fried chicken. Mark Velayo, one of the customers in
its Cebu branch, with full excitement, waited after a long queue just to taste said chicken. When
finally he was to eat it, she smelled something different and when she tried to slice it up, he
saw that instead of chicken, it was a fried rat. Due to what happened, he decided to file a case
against Mini Family 11 in the appropriate court in Cebu. As counsel of Mini Family 11, how will
you defend the company? (5 pts)

Suggested Answer:

As counsel of Mini Family 11, I would pose the following defense: Improper Venue. Section 14
(3) of the Corporation Code precisely requires each corporation to specify in its articles of
incorporation the place where the principal office of the corporation is to be located which
must be within the Philippines. The purpose of this requirement is to fix the residence of a
corporation in a definite place, instead of allowing it to be ambulatory. Actions cannot be
filed against a corporation in any place where it maintains its branch offices. To allow such
action would create confusion and work untold inconvenience to said entity.

(7) Chevy Ace uses a lamp at home inside her bedroom. One night, she was so dizzy that when
she got home, she turned it up to high resulting in damage to her property. She now claims for
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losses arising from said damage with Bonfire Insurance Co., which it denied. Was the insurance
company justified in denying the claim? (5 pts)

Suggested Answer:

In the absence of negligence, it is compensable, being one that began as a friendly fire which
became a hostile fire.

(8) a. How is a dissenting director removed? (2 pts)

b. When does a share become delinquent? (1 pt)
c. Are owners of delinquent stocks entitled to cash dividends? (2 pts)

Suggested Answers:

(a) By a vote of stockholders holding or representing t least two-thirds of the outstanding

capital stock at a meeting, regular or special called for that purpose, with previous
notice to all stockholders of the intention to propose such removal at the meeting.
(b) A share becomes delinquent when after 30 days from the date payment becomes due
and payable, no payment by the stockholder is made.
(c) Section 71 of the Corporation Code is clear. Even if the subscription is declared
delinquent, the stockholder does not lose his right to dividends, except that any cash
dividend due on delinquent stock shall first be applied to the unpaid balance on the
subscription plus cost and expenses, while stock dividends shall be withheld from the
delinquent stockholder until his unpaid subscription is fully paid.

(9) ABC Corporation sold all its assets to DEF Corporation. It complied with all the requisites of
the law. One of the creditors of ABC Corporation collected from the latter however found out
that there are no assets left. Hence, the creditor sued DEF Corporation for collection. Will the
case prosper? (5 pts)

(10) a. What are the purposes of the Secrecy of Bank Deposits Law? (2 pts)

b. What are the exceptions to the rule that bank deposits are absolutely confidential? (3
pts)

Suggested Answer:

(a) 1. To encourage people to deposit money in banks; 2. To discourage private hoarding

of money.
(b) Exceptions are as follows:
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a. Examination made in the course of a special or general examination of a bank

that is specifically authorized by the Monetary Board after being satisfied that
there is a reasonable ground to believe that a bank fraud or serious irregularity
has been or is being committed and that it is necessary to look into the deposit
to establish such fraud or irregularity;
b. In an examination made by an independent auditor hired by the bank to
conduct iuts regular audit provided that the examination is for audit purposes
only and the results thereof shall be for the exclusive use of the bank;
c. Upon written permission of the depositor;
d. In cases of impeachment;
e. Upon order of a competent court in cases of bribery or dereliction of duty of
public officials;
f. In cases where money deposited or invested is the subject matter of the
litigation;
g. In cases of unexplained wealth

(11) Explain the concept of divisional applications? (2 pts)

Suggested Answer:

The concept comes into play when two or more inventions are claimed in a single application
but are of such a nature that a single patent may not be issued for them. The applicant is thus
required to divide, that is, to limit the claims to whichever invention he may elect, whereas
those inventions not elected may be made subject of separate applications which are called
divisional applications.

(12) Miles Insurance & Reinsurance Brokers Inc. was listed as the no. 1 broker in the Philippines
for 3 consecutive years in terms of premium. It generated Php20B premium for all the 20
insurance companies it deals with, representing hundreds of thousands of customers. However,
little did it know that one of its clients is a financier of Al Qaeda terrorist group.

a. As counsel of the company, what steps will you take to ensure that your
organization is compliant with the Anti-Money Laundering Act? (5 pts)
b. Differentiate “covered transactions” from “suspicious transactions” (3 pts)
c. Which court has jurisdiction over money laundering cases? (2 pts)
d. In the scenario above, is there any liability on the part of Miles? (3 pts)

Suggested Answers:

(a) As a covered institution, I will make sure that:

a. There is proper due diligence conducted on all customers;
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b. There is an Anti-Money Laundering Manual in place;

c. Trainings on AMLA are conducted;
d. Records are retained for the period required by law.

(b) Covered transactions are those transactions in cash or cash equivalent monetary
instrument involving a total amount in excess of Php500,000.oo within one banking
day. Meanwhile, Suspicious Transaction are those with transactions within covered
institution, regardless of the amount involved, where any of the following
circumstances exist: (a) there is no underlying legal trade/justification/purpose; (2)
the client is not properly identified; (3) the amount involved is not commensurate
with the business or financial capacity of the client; (4) It may be perceived that the
client’s transaction is structured in order to avoid being the subject of reporting
requirements under the law; (5) any circumstance relating to the transaction which is
observed to deviate from the profile of the client and/or the client’s past transactions
with the covered institution; (6) transaction is in any way related to an unlawful
activity or offense under the law that is about to be, is being or has been committed;
and (7) any transaction that is similar or analogous to any of the foregoing.

(c) RTC shall have jurisdiction to try all cases on money laundering while Sandiganbayan
will try those committed by public officers and private persons in conspiracy with
them.

(d) If Miles did proper due diligence before the entity became a client and assuming they
have reported either or both covered or suspicious transactions and retention period
have been followed, there shall be no liability on their part.

(13) Rodel Hidalgo, a prominent businessman, owns 50% of all the shares of stocks in Whiten
Me Corporation. Due to old age, he wants to be more liquid, hence, decided to sell of his
shares. Alex Medina, his long-time assistant in another company, wanted to buy some of the
shares, but he does not have enough money to do so. As a result, he offered to buy said shares
and in exchange of said shares, will act as the General Manager of Whiten Me Corporation. Mr.
Hidalgo consults you as his lawyer. What will your advice be? (5 pts)

Suggested Answer:

Shares of stocks shall not be issued in exchange for future services. Labor and services given
for payment must have been performed for or actually rendered to the corporation.

(14) a. Explain the concept of independence principle in Letter of Credit. (2 pts)

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b. Is a letter of credit a substitute for money? Why? (2 pts)

c. Discuss the Fraud Exception Principle in Letter of Credit. (2 pts)

d. Explain the concept of Strict Compliance. (2 pts)

Suggested Answers:

(a) Independence Principle- in a letter of credit transaction, the engagement of the

issuing bank is to pay the seller or beneficiary of the credit once the draft and the
required documents are presented to it. The so called Independence Principle assures
the seller or the beneficiary of prompt payment independent of any breach of the
main contract and precludes the issuing bank from determining whether the main
contract is actually accomplished or not. Under this principle, the bank assumes no
responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal
effect of any document, or for the general and/or particular conditions stipulated in
the documents or superimposed thereon.
(b) No. The bank merely substitutes its own promise to pay for the promise to pay of one
of its customers, who in turn promises to pay the bank the amount of funds
mentioned in the letters of credit plus credit or commitments fees mutually agreed
upon.
(c) Fraud Exception Principle is an exception to the independence principle. The
untruthfulness of a certificate accompanying a demand for payment under a standby
letter of credit may qualify as fraud sufficient to support an injunction against
payment.
(d) Letters of credit are to be strictly complied with which documents, and shipping
documents must be followed as stated in the letter. There is no discretion in the bank
or trust company to waive any requirements. The terms of the letter constitutes an
agreement between the purchaser and the bank

(15) AG Logistics operates in all countries in Europe. Knowing the potential here in the
Philippines, it scouted for tenders and in one of the tenders it participated which was organized
by GS Corporation, AG Logistics won. It applied for a license to operate in the Philippines. One
of the requirements of the GS Corporation is to procure a Performance Bond. It engaged the
services of S&M Brokers.

a. Under the Anti-Money Laundering Act, can the Compliance Officer of S&M Brokers
refuse to engage business with S&M Brokers on account of failure to provide Articles
of Incorporation and By-Laws? (7 pts)
b. On the assumption that the Compliance Officer can refuse to engage business with
S&M and it does not do so despite failure to submit the said AOI and By-Laws, what
provision of the Anti Money Laundering Act is violated? What are the penalties? (3
pts)
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Suggested Answers:

(a) Yes, because being a foreign corporation, it will not be able to provide its Articles of
Incorporation and By-Laws because what it merely has to have to be able to transact
business in the Philippines is a License to Transact Business.
(b) It violates the requirement of the law on proper customer due diligence, which
penalties include imprisonment and fine.

(16) Mr. X draws a bill of exchange against Mr. Y in favor of Mr. W for Php200,000.00
requesting the drawee to pay on December 24, 2015. Mr. W endorses the instrument to Mr. Z
on September 1, 2015 and presents it for acceptance on September 15. The bill is dishonored.
Mr. Z sues Mr. W for payment, Will the case prosper? (5 pts)

Suggested Answer:

No, because Section 85 is clear, every negotiable instrument is payable at the time fixed
therein.

(17) Valix Bus Inc. failed to deliver the goods loaded by Mr. XYZ on time to Mr. ABCD. As a
result, the latter refused to accept the goods. Is the refusal justified? (4 pts)

Suggested Answer:

The refusal is not justified. Mere delay in the delivery of goods does not entitle one the right
to refuse the goods. There is just a breach contract which entitles the consignee to damages.

(18) What is the force and effect of Warsaw Convention to the Philippines? Explain its
application. (3 pts)

Suggested Answer:

Warsaw Convention has the force and effect of law in this country. It applies to all
international transportation of persons, baggage or goods performed by an aircraft
gratuitously or for hire.