RFBT - Random Q&As (Part 3)

RANDOM Q&As ON REGULATORY FRAMEWORK ON BUSINESS TRANSACTIONS (PART 3) based on lectures by Atty. Dante de la Cruz, CPA (CPAR; 2016)

Q: IF THE TERMS OF THE CONTRACT ARE VAGUE, HOW CAN THE INTENTIONS OF THE PARTIES BE DISCERNED? A: As a general rule, the manifest intentions and their subsequent acts following the creation of the contract must be referred to. If not apparent, refer to the written provisions. If still vague, see the printed ones. Particularly in negotiable instruments, words must be referred first over figures As to gratuitous contracts (those involving no exchange such as donations), misinterpretation of contracts favor those transmitting the least rights. Thus, if vague as to being a commodatum or donation, the contract will be treated as if commodatum since commodatum transmits rights the least. Commodatum is merely the loan of the use of the thing, while donation confers ownership over the thing As to onerous contracts (those involving an exchange such as sale or loan), misinterpretation favor contracts providing more benefit to the parties involved. Thus, if the contract is unclear as to the rate and term of interest, the larger rate and the longer term shall be considered the terms of the contract

of mutuum – the loan of money and other fungible goods for their consumption, such as food Food can be the subject matter of commodatum as long as it is not consumed and it is returned to the bailor, such as when it is merely for display

Q: IS AN ORALLY-CONSTITUTED PARTNERSHIP STILL VALID EVEN IF REAL PROPERTY WAS CONTRIBUTED? A: Generally, partnerships can be made orally, the contract being perfected on the consent of the parties alone. If the parties contribute real property regardless of value, the partnership must be turned into writing, otherwise void The partnership is void as to third persons, which means it cannot validly make transactions with them. But the partnership remains valid between the partners

Q: DIFFERENTIATE REAL ESTATE MORTGAGE AND CHATTEL MORTGAGE Q: CAN FOOD BE THE SUBJECT MATTER OF COMMODATUM? A: As mentioned, commodatum is the loan of the use of something, where the debtor/bailee promises to return the thing with the same quality as it was given to him. Normally, food is the subject matter

A: Both are credit transactions involving real and personal property, respectively, as security to a loan. Also, both doesn’t require actual delivery of the subject matter – otherwise, the transaction would become a pledge. Pactum de non aliendo is void in both mortgages

However, real estate mortgage is merely consensual – it doesn’t require documents to be valid. To bind third persons to the contract, the mortgage must be registered. On the other hand, chattel mortgages are formal contracts, requiring registration in the Registry and in an Affidavit of Good Faith

Q: CAN A THIRD PERSON MORTGAGE HIS PROPERTY IN FAVOR OF A DEBTOR? A: This is validly allowed under credit transaction laws. In case the debtor fails to pay, the creditor can even foreclose (sell) the third person’s property. However, if the proceeds from the sale is insufficient to cover the loan, the creditor cannot claim from the third person since he is not his debtor As a general rule under mortgages, deficiencies in the proceeds can be recovered unless stipulated/even if not stipulated

of kind, the partnership will always be dissolved If the contribution was lost after delivery, only those contributed in usufruct will cause dissolution – i.e. those whose use is contributed in the partnership, not ownership

Q: CAN CORPORATIONS EXTEND THEIR TERMS INDEFINITELY?

A: Corporations, through a 2/3 favorable vote of voting shareholders and majority of Board members, can indefinitely extend their 50-year lives. However, this can only be done within 5 years before the term expiration Term shortening, though, can be done anytime

Q: IF AN AGENT SELLS A THING BELONGING TO HIS PRINCIPAL WITHOUT THE LATTER’S CONSENT, IS THE PRINCIPAL BOUND? A: Generally, principals are bound for every act of their agents within their authority. However, especially in a sale, agents must disclose their principal so as not to be liable to the transaction themselves

Q: WHEN WILL LOSS OF PROPERTY CAUSE THE DISSOLUTION OF PARTNERSHIP?

A: Loss of partner contribution into the common fund can cause the dissolution of the partnership depending on when the loss occurred and the kind of contribution. When the loss occurred before delivery, regardless

There is one exception. If the agent sells something that belongs to the principal, despite lack of disclosure of the principal’s existence, the principal is bound to the sale