INTRODUCTION ON THE STUDY OF divine will.

It is expressed directly in
LAW writings of the sect or denomination.
c. Human Positive Law – consists of
Concept of Law principles promulgated by the State
In its general and abstract sense, law has and which generally imposes a
been defined as a science of moral laws sanction in case of non-observance.
founded on the rational nature of man that Examples are the Philippine
governs his free activity for the realization of Constitution, statutes passed by the
the individual and social ends of life under an Congress and ordinances enacted by
aspect of mutual conditional dependence. local governments. Human Positive
Law may be classified into the
In its specific and concrete sense, law is a following:
rule of conduct, just and obligatory, 1. According to function
formulated by legitimate power for common i. Substantive law – that which
observance and benefit. creates, defines, establishes
rights and duties, such as the
Sources of Law Civil Code of the Philippines and
1. Constitution the Revised Penal Code
2. Acts passed by the legislature and the ii. Procedural, remedial or
ordinance enacted by the local adjective law – that which
governments. These include the Civil determines the process of
Code of the Philippines (RA 386 which enforcing such rights and
took effect on August 30, 1950). duties, such as the Rules of
3. Judicial decisions Court
4. Administrative regulations 2. According to scope
i. Private Law – that which
Classification of Law regulates the relations of the
1. Natural Law members of a community with
-consists of specific principles derived one another, such as the Civil
from nature (such as law of gravity and Code
the law of supply and demand), or based ii. Public Law – that which is
on morality or equity (such as not concerned with regulating the
recovering payment voluntarily made for relations of individuals with the
a debt that has prescribed), and which State and the organization and
are binding upon human society in the conduct of the government,
absence of or in addition to positive law. such as the Political Law, Penal
Law and Remedial Law.
2. Positive Law 3. According to force or effect
a. Divine Positive Law – consists of laws i. Mandatory Laws – those which
promulgated by the Supreme Being require something to be done
and expressed directly through some ii. Permissive Laws – those that
writings like the bible. The ten allow discretion on the part of
commandments fall under this law the individual on their
b. Divine-Human Positive Law – consists application
of precepts established by authorities iii. Prohibitory Laws – those that
within a religious sect or denomination forbid an act to be done.
and whose formulation is inspired by

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 1
 c. Price certain in money or its
equivalent.

2. Natural Elements—
a. Warranty against eviction;
b. Warranty against hidden defects;

THE LAW ON SALES 3. Accidental Elements — those which may

be present or absent in the stipulation.
Legal Basis:
RA 386 or the New Civil Code of the
Philippines Provisions as to Subject Matter
1. The thing must be licit and the vendor
A. Nature, forms and requisites must have a right to transfer the
ownership thereof at the time it is
Definition delivered. (Art 1459)
By the contract of sale one of the contracting
parties obligates himself to transfer the The seller must be the owner of the
ownership of and to deliver a determinate subject sold. (Nemo dat quod non habet -
thing, and the other to pay therefor a price "no one can give what they do not have")
certain in money or its equivalent. But the seller only needs to be the owner
A contract of sale may be absolute or upon delivery, and not necessarily upon
conditional. (Art. 1458) perfection of the contract of sale.

Essential Characteristics 2. A thing is determinate if at the time the

a. Consensual; contract is entered into, the thing is
b. Bilateral/ reciprocal; capable of being made determinate
c. Onerous; without the necessity of a new or further
d. Generally, commutative; agreement between the parties. (Art
e. Principal; 1460)
f. Nominate;
g. Title and not Mode — A mode is the legal 3. Things having a potential existence may
means by which dominion or ownership is be the object of the contract of sale.
created, transferred or destroyed, but
title is only the legal basis by which to The efficacy of the sale of a mere hope or
affect dominion or ownership. Sale by expectancy is deemed subject to the
itself does not transfer or affect condition that the thing will come into
ownership; the most that sale does is to existence.
create the obligation to transfer
ownership. It is tradition (delivery as a The sale of a vain hope or expectancy is
consequence of sale) that actually void. (Art 1461)
transfers ownership. [San Lorenzo Dev.
Corp. v. CA] 4. Goods may be existing or future goods.
Future goods are those still to be
Elements/ Requisites a. Manufactured or printed;
1. Essential Elements — b. Raised, or future agricultural products;
a. Consent or Meeting of the Minds; c. Acquired by seller after perfection of
b. Determinate subject matter; contract, or after-acquired property;

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 2
 d. Things whose acquisition depends Form of the Contract of Sale
upon a contingency that may or may Subject to the provisions of the Statute of
not happen. (Art 1462) Frauds and of any other applicable statute, a
contract of sale may be made in writing, or
5. Things subject to a resolutory condition by word of mouth, or partly in writing and
may be the object of the contract of sale. partly by word of mouth, or may be inferred
(Art 1465) from the conduct of the parties. (Art 1483)

Provisions as to Price *Statute of Frauds (see Art. 1403 par 2)

1. If the consideration of the contract
consists partly in money, and partly in Conditions
another thing, the transaction shall be Failure to comply with condition imposed
characterized by the manifest intention of upon perfection of the contract results in
the parties. failure of a contract, while the failure to
comply with a condition imposed on the
If such intention does not clearly appear, performance of an obligation only gives the
it shall be considered a barter if the value other party the option either to refuse to
of the thing exceeds the amount of the proceed with sale or waive the condition.
money or its equivalent; otherwise, it is a [Laforteza v. Machuca]
sale. (Art 1468)

2. Gross inadequacy of price does not affect B. Earnest money as distinguished from
a contract of sale, except as it may option money
indicate a defect in the consent, or that Different contract; Principal vs. subsidiary
the parties really intended a donation or
some other act or contract. (Art 1470) Whenever earnest money is given in a
contract of sale, it shall be considered as
3. If the price is simulated, the sale is VOID, part of the price and as proof of the
but the act may be shown to have been in perfection of the contract. (Art 1482)
reality a donation, or some other act or
contract. (Art 1471) Option Contract
An option imposes no binding obligation on
4. The fixing of the price can never be left to the person holding the option aside from the
the discretion of one of the contracting consideration (option money) for the offer.
parties. However, if the price fixed by one Until accepted (exercised), it is not treated
of the parties is accepted by the other, as a sale.
the sale is perfected. (Art 1473)
If the option is without any consideration, the
5. Where the price cannot be determined, offeror may withdraw his offer by
the contract is inefficacious. However, if communicating such withdrawal to the
the thing or any part thereof has been offeree at any time before acceptance. If it is
delivered to and appropriated by the founded upon a consideration, the offeror
buyer he must pay a reasonable price cannot withdraw his offer before the lapse of
therefor. the period agreed upon. [Tuazon v. Del
Rosario-Suarez 2010]
What is a reasonable price is a question
of fact dependent on the circumstances
of each particular case. (Art 1474) C. Rights/ obligations of vendor and
vendee

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 3
 The unpaid seller of goods loses his lien
Obligations of the vendor/seller thereon:
a. To transfer ownership; a. When he delivers the goods to a
b. To deliver with fruits and accessories; carrier or other bailee for the purpose
c. To warrant the object sold; (waivable of transmission to the buyer without
since this is not an essential element) reserving the ownership in the goods
d. To preserve the thing from perfection to or the right to the possession thereof;
delivery, otherwise he can be held liable b. When the buyer or his agent lawfully
for damages. obtains possession of the goods;
c. By waiver thereof. (Art 1529)
Rights of the vendor/seller
General Remedies of the Seller (Breach of 2. Right of Stoppage in Transitu. — available
Contract) to the unpaid seller if
1. If Buyer Refuses to Pay — maintain an a. He has parted with the possession of
action against buyer for the price of the goods; and
goods. (Art 1595) b. If the buyer is or becomes insolvent.
2. If Buyer Refuses to Accept and Pay — (Art 1530 par 1)
action for damages, measured as the
estimated loss directly and naturally How Exercised
resulting in the ordinary course of events 1) Obtaining actual possession;
from the buyer's breach. (Art 1596) 2) Giving notice of the claim. — either to
a. The person in actual possession; or
3. When Seller May Totally Rescind — Where b. His principal.
a. the goods have not been delivered to
the buyer, and 3. Right of Resale
b. the buyer a. Where the goods are of perishable
i. has repudiated the contract of sale, nature, or
or b. where the seller expressly reserves
ii. has manifested his inability to the right of resale in case the buyer
perform his obligations thereunder, should make default, or
or c. where the buyer has been in default in
iii. has committed a breach thereof. the payment of the price for an
(Art 1597) unreasonable time, an unpaid seller
having a right of lien or having
Unpaid Seller of Goods stopped the goods in transitu may
A seller is unpaid resell the goods.
a. When the whole of the price has not been
paid or tendered; 4. Right to Rescind
b. When a bill of exchange or other Applies in case there has been
negotiable instrument has been received a. Express stipulation or reservation;
as conditional payment, and the condition b. Unreasonable default.
on which it was received has been broken
by reason of the dishonor of the There must be notice to the buyer or there
instrument, the insolvency of the buyer, must be an overt act showing an intention to
or otherwise. (Art 1525) rescind. (Art 1534)

Rights of an Unpaid Seller Obligations of the vendee/buyer

1. Possessory Lien a. Pay the Price (Art 1582)

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 4
 When seller cannot show title to the 2. Accept or keep the goods and maintain
subject matter, then he cannot compel an action against the seller for damages
the buyer to pay the price. [Heirs of for the breach of warranty;
Severina San Miguel v. CA] 3. Refuse to accept the goods, and maintain
an action against the seller for damages
When Buyer May Suspend the Payment of for the breach of warranty;
the Price: 4. Rescind the contract of sale and refuse to
1. If there is a well-grounded fear. receive the goods or if the goods have
2. The fear is because of: already been received, return them or
i) A vindicatory action or action to offer to return them to the seller and
recover, or recover the price or any part thereof
ii) A foreclosure of mortgage. (Art which has been paid. (Art 1599)
1590)

b. Accept Delivery of the Subject Matter D. Warranties

(Arts 1582-1585)
1. Buyer’s Right to Inspect Before A warranty is a statement or representation
Acceptance (Arts 1481 and 1584[1]); made by the seller of goods,
2. When Buyer Refuses to Accept (Art contemporaneously and as part of the
1588) — Since delivery of subject contract of sale, having reference to the
matter is an obligation on the part of character, quality or title of the goods, and
the seller, the acceptance thereof by by which he promises or undertakes to
the buyer is not a condition for the insure that certain facts are or shall be as he
completeness of delivery. [La Fuerza then represents them. [Ang v. CA]
v. CA]
D.1 Express Warranties (in relation to
If the refusal is justified, the buyer has consumer laws)
no duty to return the goods to the
seller; mere notice to seller of the Breach of an express warranty makes seller
refusal will suffice. The buyer may liable for damages. The following requisites
make himself a voluntary depositary. essential to establish an express warranty:
(Art 1587)
a. it must be an affirmation of fact or any
c. When There is Acceptance (Art 1585) promise by the seller relating to the
1. Express acceptance; subject matter of the sale;
2. When buyer does an act which only an b. natural tendency of such affirmation or
owner can do; promise is to induce the buyer to
3. Failure to return after reasonable purchase the thing; and
lapse of time. c. buyer purchases the thing relying on such
affirmation or promise thereon.
Rights of the vendee/buyer [Carrascoso, Jr. v. CA]
Remedies of Buyer in case of Breach of
Warranty Warranties for Consumer Products in RA
The buyer may, at his election: 7394
1. Accept or keep the goods and set up Warranties in Supply of Services —
against the seller, the breach of warranty a) There is an (implied) warranty that the
by way of recoupment in diminution or service will be rendered with due care
extinction of the price; and skill.

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 5
b) Where the consumer, expressly or by If the immovable sold should be
implication, makes known to the seller encumbered with any non-apparent
the particular purpose for which the burden or servitude, not mentioned in the
services are required, there is an agreement, of such a nature that it must
(implied) warranty that the services will be presumed that the vendee would not
be reasonably fit for that purpose. have acquired it had he been aware
thereof, he may ask for the rescission of
D.2 Implied Warranties the contract, unless he should prefer the
appropriate indemnity. Neither right can
a. That seller has the right to sell; be exercised if the non-apparent burden
or servitude is recorded in the Registry of
b. Against Eviction (Arts 1548 - 1560) Property, unless there is an express
warranty that the thing is free from all
Seller must be summoned in the suit for burdens and encumbrances.
eviction at the instance of the buyer (Art
1558), and be made a co-defendant or a Remedy is rescission or sue for damages
third-party defendant (Art 1559) if made within one year from execution of
deed.
A dacion en pago is governed by the law
of sales, and contracts of sale come with But if one year has already lapsed,
warranties, either express or implied. The remedy is only for damages.
implied warranty in case of eviction is
waivable and cannot be invoked if the d. Against Hidden Defects (Arts 1561,
buyer knew of the risks or danger of 1566-1580)
eviction and assumed its consequences.
[Luzon Dev. Bank v. Enriquez 2011] Requisites to recover because of Hidden
Defects:
The prescriptive period to file a breach 1. Defect must:
thereof is six (6) months after the a. be hidden;
delivery. Mere notification is not b. exist at perfection of contract;
sufficient. c. ordinarily have been excluded from
the contract; and
A breach of this warranty requires the d. be important to render the thing unfit
concurrence of the following or considerably decreases fitness; and
circumstances:
The vendor shall not be answerable for
1. The purchaser has been deprived of patent defects or those which may be
the whole or part of the thing sold; visible, or for those which are not visible if
2. This eviction is by a final judgment; the vendee is an expert who, by reason of
3. The basis thereof is by virtue of a right his trade or profession, should have
prior to the sale made by the vendor; known them.
and
4. The vendor has been summoned and 2. Action must be instituted within the
made co-defendant in the suit for statute of limitations.
eviction at the instance of the vendee.
Redhibitory Defect — a defect that renders a
c. Against Non-Apparent Servitudes thing useless or so diminishes its usefulness
(Art 1560) or value that it must be presumed that the
buyer would not have bought it or would

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 6
have paid a lesser price if aware of the
defect. E.1 Personal property – Recto Law

Remedies: In a contract of sale of personal property the

1. Withdrawal or rescission (accion price of which is payable in installments, the
redhibitoria) + damages; vendor may exercise any of the following
remedies:
Prescriptive period generally 6 months
from delivery except if involving defects 1. Specific Performance — Exact fulfillment
of animals, 40 days. of the obligation, should the vendee fail
to pay;
2. Proportionate reduction in the price 2. Rescission — Cancel the sale, should the
(accion quanti minoris) + damages. vendee's failure to pay cover two or more
installments;
3. If due to the hidden defect the thing sold 3. Foreclosure — Foreclose the chattel
should be lost: mortgage on the thing sold, if one has
1. If seller aware — Return the price + been constituted, should the vendee's
refund expenses of contract + failure to pay cover two or more
damages; installments.
2. If not aware — same except for
damages. In this case, he shall have no further
action against the purchaser to recover
e. As to Fitness or Quality of Goods any unpaid balance of the price. Any
(Arts 1562, 1565, 1599) agreement to the contrary shall be VOID.
(Art 1484)
In order to enforce the implied warranty that
the goods are reasonably fit and suitable to Recto Law
be used for the purpose which both parties Recto Law (embodied in Art. 1484 of the
contemplated, the following must be NCC) prevents mortgagee from seizing
established: mortgaged property, buying it at foreclosure
1. that the buyer sustained injury because sale for a low price and then bringing the suit
of the product; against the mortgagor for a deficiency
2. that the injury occurred because the judgment. [Magna Financial Services Group
product was defective or unreasonably v. Colarina]
unsafe; and finally
3. the defect existed when the product left In a case, mortgagor-buyer never bought the
the hands of the petitioner. subject vehicle from the financing company
but from a third party, and merely sought
f. Sale of Goods by Sample (Art 1565) financing from the mortgagee for its full
— there is a warranty of purchase price. Consequently, Art 1484 does
merchantability. not apply against financing company.
[Equitable Savings Bank v. Palces 2016]
Merchantable Quality — Fit for the general
purpose of a thing, and not necessarily the Generally, mutual restitution is required in
particular purpose for which it has been case of rescission. As a way of exception, a
acquired. stipulation that the installments or rents paid
shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be
E. Installment sales

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 7
unconscionable under the circumstances. b. If the contract is cancelled, the seller shall
(Art 1486) refund to the buyer the cash surrender
value equivalent to 50% of the total
E.2 Real Property – Maceda Law 1.3.5.3 payments made, and after five years of
PD 957 / Condominium Act installments, an additional 5% every year
but not to exceed 90% of total payment
Contract to Sell made. Thus, if installment paid
The parties may stipulate that ownership in i. 2 – 5 years — 50%;
the thing shall not pass to the purchaser until ii. > 5 years — 50% + 5% for every year.
he has fully paid the price. (Art. 1478) iii. But in no case shall exceed 90%.

Maceda Law recognizes in conditional sales c. In case the installments paid were less
of all kinds of real estate seller’s right to than two years, the seller shall give the
cancel the contract upon non-payment of an buyer a grace period of not less than 60
installment by the buyer, which is simply an days.
event that prevents the obligation of the
vendor to convey title from acquiring binding d. If the buyer fails to pay the installments
force. due at the expiration of the grace period,
the seller may cancel the contract after
How Cancellation of Contract Can Be 30 days from receipt by the buyer of the
Effected. notice of cancellation or demand for
The cancellation of the contract under the rescission by notarial act.
Maceda Law must follow the following steps:
a. First, seller should extend the buyer a *Under the Maceda Law, the right of the
grace period of at least 60 days from the buyer to refund accrues only when he has
due date of the installments. paid at least two years of installments.
b. Second, at end of grace period, seller [Manuel Uy & Sons v. Valbueco, Inc. 2013]
shall furnish buyer with a notarial notice
of cancellation or demand for rescission,
effective 30 days from buyer’s receipt F. Extinguishment of a contract of sale
thereof; a mere notice or letter, would not
suffice. [McLaughlin v. CA] Conventional Redemption
c. Third, for contracts covering more than Conventional redemption shall take place
two years of payments, there must be a when the vendor reserves the right to
return to the buyer of the cash surrender repurchase the thing sold. (Art 1601)
value. [Villdara, Jr. v. Zabala]
d. Until and unless seller complies with The right of redemption, in the absence of an
these mandatory requirements, contract express agreement, shall last four years
to sell remains valid and subsisting. from the date of the contract. Should there
[Communities Cagayan v. Nanol 2012] be an agreement, the period cannot
exceed ten years.
Important Features.
a. After having paid installment for at least However, the vendor may still exercise the
two (2) years, the buyer is entitled to a right to repurchase within thirty days from
mandatory grace period of one month for the time final judgment was rendered in a
every year of installment payments civil action on the basis that the contract was
made, to pay the unpaid installments a true sale with right to repurchase. (Art
without interest. 1606)

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 8
How Is Redemption Effected? (Art 1616) Once vendor fails to redeem the property
In order to exercise the right to redeem, only within the stipulated period, irrevocable title
tender of payment is sufficient; shall be vested in the vendee by operation of
consignation is not required after tender is law. [Vda. de Rigonan v. Derecho]
refused. When tender is not possible,
consignation should be made. Under a sale a retro, failure of buyer to
consolidate his title under Art 1607 does not
A formal offer to redeem accompanied by a impair such title and ownership because the
tender of redemption price is not essential method prescribed thereunder is merely for
where the right is exercised through a the purpose of registering and consolidating
judicial action within the redemption period titles to the property.
and simultaneously depositing the [Cadungog v. Yap]
redemption price. [Lee Chuy Realty Corp. v.
CA]
Legal Redemption
Disposition of Fruits Legal redemption is the right to be
If at the time of the execution of the sale subrogated, upon the same terms and
there should be on the land, visible or conditions stipulated in the contract, in the
growing fruits, there shall be no place of one who acquires a thing by
reimbursement for or prorating of those purchase or dation in payment, or by any
existing at the time of redemption, if no other transaction whereby ownership is
indemnity was paid by the purchaser when transmitted by onerous title. (Art 1619)
the sale was executed.
Legal redemption is in the nature of a
Should there have been no fruits at the time privilege created by law partly for reasons of
of the sale and some exist at the time of public policy and partly for the benefit and
redemption, they shall be prorated between convenience of the redemptioner, to afford
the redemptioner and the vendee, giving the him a way out of what might be a
latter the part corresponding to the time he disagreeable or an inconvenient association
possessed the land in the last year, counted into which he has been thrust.
from the anniversary of the date of the sale.
(Art 1617) It is intended to minimize co-ownership.

Article 1617 on the disposition of fruits of Under the Civil Code

property redeemed applies only when the a. Among Co-Heirs ( Art 1088)
parties failed to provide a sharing Heirs who actually participated in the
arrangement thereof; otherwise, the parties execution of the extrajudicial settlement,
contractual stipulations prevail. [Almeda v. which included the sale to a third person of
Daluro] their pro indiviso shares in the property, are
bound by the same; while the co-heirs who
Effect When No Redemption Made (Art 1607) did not participate are given the right to
— Consolidation redeem their shares pursuant to Art 1088.
[Cua v. Vargas]
If the vendee succeeds in proving that the
transaction was indeed a pacto de retro, the When seller a retro dies, right to redeem
vendor is still given a period of thirty days cannot be exercised by a co-heir alone, since
from the finality of the judgment within the right belonged in common to all the
which to repurchase the property. heirs. [De Guzman v. CA]

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 9
b. Among Co-Owners ( Art 1620) Written notice of sale is mandatory,
The right of redemption may be exercised by notwithstanding actual knowledge of a co-
a co-owner only when part of the community owner, in order to remove all uncertainties
property is sold to a stranger, not when sold about the sale, its terms and conditions, as
to another co-owner because a new well as its efficacy and status. [Verdad v. CA]
participant is not added to the co-ownership.
[Fernandez v. Tarun]

Redemption by co-owner redounds to the

benefit of all co-owners; and 30-day
redemption period, begins from written
notice served by seller to the party entitled
to exercise such redemption right, [Guillen v.
CA]

The requisites for the exercise of legal THE LAW ON CREDIT

redemption are as follows: TRANSACTIONS
1. there must be co-ownership;
2. one of the co-owners sold his right to a Legal Basis:
stranger; RA 386 or the New Civil Code of the
3. the sale was made before the partition of Philippines
the co-owned property;
4. the right of redemption must be exercised PLEDGE, CHATTEL MORTGAGE AND REAL
by one or more co-owners within a period ESTATE MORTGAGE
of thirty days to be counted from the time
he or they were notified in writing by the Provisions Common to Pledge and Mortgage
co-owner vendor; and [Art. 2085]
5. the vendee must be reimbursed the price a. Constituted to secure the fulfillment of a
of the sale. [Calma v. Santos] principal obligation.
b. Pledgor or mortgagor must be the
When Period of Legal Redemption Begins absolute owner of the thing pledged or
(Art 1623) mortgaged.
The 30-day period for the commencement of c. The persons constituting the pledge or
the right to exercise the legal redemption mortgage have the free disposal of their
right, even when such right has been property, and in the absence thereof, that
recognized to exist in a final and executory they be legally authorized for the
court decision, does not begin from the entry purpose.
of judgment, but from the written notice
served by the seller to the party entitled to Note: Third persons who are not parties to
exercise such redemption right. [Guillen v. the principal obligation may secure the latter
CA] by pledging or mortgaging their own
property. [Art. 2085]
Interpretation of Art 1623 where there is a
need for notice in writing, should always tilt d. Cannot exist without a valid obligation,
in favor of redemptioner and against buyer, but may be constituted to guarantee the
since the purpose is to reduce the number of performance of a voidable or
participants until the community is unenforceable contract. [Art. 2052]
terminated. [Hermoso v. CA]

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 10
e. Debtor retains the ownership of the thing
given as a security. Elements
f. When the principal obligation becomes a. There is property pledged/ mortgaged by
due, the thing pledged or mortgaged may way of security for the payment of the
be alienated for the payment to the principal obligation
creditor. [Art. 2087] b. There is a stipulation for automatic
appropriation by the creditor in case of
Indivisibility non-payment of the principal obligation
A pledge or mortgage is indivisible, even within the stipulated period.
though the debt may be divided among the
successors in interest of the debtor or of the Effect
creditor. The nullity of the pactum commissorium
does not affect the validity of the contract of
Therefore, the debtor’s heir who has paid a pledge (or mortgage). The creditor may
part of the debt cannot ask for the recover the credit from the proceeds of a
proportionate extinguishment of the pledge foreclosure sale effected in accordance with
or mortgage as long as the debt is not law [Gomez-Somera].
completely satisfied. (Art 2089)

The indivisibility of a pledge or mortgage is PLEDGE

not affected by the fact that the debtors are Is a contract constituted to secure the
not solidarily liable. (Art 2090) fulfillment of a principal obligation where the
thing pledged, which may be a movable, or
Exception to the Principle of Indivisibility: an incorporeal right evidenced by a
When several things are pledged or document, is placed in the possession of the
mortgaged, each thing for a determinate creditor or a third person by common
portion of the debt, the pledges or mortgage, agreement. [Art. 2093 in relation to Art.
are considered separate from each other. 2085]
But when the several things are given to
secure the same debt in its entirety, all of Essential Requisites
them are liable for the debt, and the creditor 1. Constituted to secure the fulfillment of a
does not have to divide his action by principal obligation
distributing the debt among the various 2. The pledgor must be the absolute owner
things pledged or mortgaged. Even when of the thing pledged
only a part of the debt remains unpaid, all 3. The pledgor must have the free disposal
the things are still liable for such balance. of the property, or is legally authorized
[Art. 2089; Tolentino] for the purpose.

Third party pledgors/mortgagors Provisions Applicable Only to Pledge

Third persons who are not parties to the a. Transfer of possession to the creditor or
principal obligation may secure the latter by to third person by common agreement is
pledging or mortgaging their own property. essential [Art. 2093].
(Art. 2085) b. All movables within the commerce of man
may be pledged as long as they are
Pactum Commissorium susceptible of possession [Art. 2094].
The creditor cannot appropriate the things c. Incorporeal rights may be pledged. The
given by way of pledge or mortgage, or instruments representing the pledged
dispose of them. Any stipulation to the rights shall be delivered to the creditor; if
contrary is null and void. (Art 2088) negotiable, must be indorsed [Art. 2095].

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 11
 c. General Rule: Has no right to use the
d. Pledge shall take effect against 3rd thing or to appropriate its fruits without
persons only if the following appear in a authority from the owner. If he does so, or
public instrument: misuses it in any way, the owner may ask
1. Description of the thing pledged. that the thing be judicially or
2. Date of the pledge [Art. 2096]. extrajudicially deposited. [Art. 2104]

e. The thing pledged may be alienated by Exception: When the preservation of the
the pledger or owner only with the thing pledged requires its use, it must be
consent of the pledgee. Ownership of the used by the creditor only for that
thing pledged is transmitted to the purpose.
vendee or transferee as soon as the
pledgee consents to the alienation, but d. May cause the public sale of the thing
the latter shall continue to have pledged if, without fault on his part, there
possession [Art. 2097]. is danger of destruction, impairment or
f. Creditor has the right to retain the thing diminution in value of the thing. The
in his possession or in that of a third proceeds of the auction shall be a
person to whom it has been delivered, security for the principal obligation [Art.
until the debt is paid [Art. 2098]. 2108].

In case of doubt as to whether a transaction Rights/Obligations of Pledgor

is a pledge or a dation in payment, the a. Takes responsibility for the flaws of the
presumption is in favor of pledge, the latter thing pledged [Art. 2101 in relation to Art.
being the lesser transmission of rights and 1951].
interests. [Manila Banking Corp. v. Teodoro, b. Cannot ask for the return of the thing
G.R. No. 53955 (1989)] against the will of the creditor, unless and
until he has paid the debt and its interest,
with expenses in a proper case [Art.
2105].
c. Subject to the right of the pledgee under
Requirements to bind the parties and Article 2108, pledgor is allowed to
third persons substitute the thing which is in danger of
a. For the pledge to take effect between the destruction or impairment without any
parties, the thing pledged is placed in the fault on the part of the pledgee with
possession of the creditor or a third another thing of the same kind and
person [Art. 2093] quality [Art. 2107].
b. For the pledge to take effect as against d. May require that the thing be deposited
third persons, a description of the thing with a 3rd person, if through the
pledged and the date of the pledge negligence or willful act of the pledgee
should appear in a public instrument [Art. the thing is in danger of being lost or
2096] impaired [Art. 2106].

Rights/Obligations of Pledgee The pledgee can temporarily entrust the

a. The pledgee cannot deposit the thing physical possession of the chattels
pledged with a 3rd person, unless there is pledged to the pledger without
a contrary stipulation [Art. 2100 (1)]. invalidating the pledge. The pledgor is
b. Pledgee is responsible for the acts of his regarded as holding the pledged property
agents or employees with respect to the merely as trustee for the pledgee. The
thing pledged [Art. 2100 (2)]. type of delivery will depend upon the

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 12
 nature and the peculiar circumstances of 2. A personal property is offered to secure
each case. [Yuliongsiu v. PNB, G.R. No. L- the fulfillment of the principal obligation
19227 (1968)] 3. The mortgagor must be the absolute
owner of the thing mortgaged; and
A pledgee cannot become the owner of, 4. The persons constituting the mortgage
nor appropriate to himself, the thing have the free disposal of their property,
given in pledge. If by the contract of and in the absence thereof, that they be
pledge the pledgor continues to be the legally authorized for the purpose.
owner of the thing pledged during the 5. Must be recorded in the Registry of
pendency of the obligation, it stands to Property (only to bind third persons)
reason that in case of loss of the
property, the loss should be borne by the Objects of Chattel Mortgage
pledgor. [PNB v. Atendido, G.R. No. L- General Rule: All personal property shall be
6342 (1954)] subject to mortgage, agreeably to the
provisions of this Act, and a mortgage
When extinguished executed in pursuance thereof shall be
If the thing pledged is returned by the termed chattel mortgage.
pledgee to the pledgor or owner, the pledge
is extinguished. Any stipulation to the Exception: Jurisprudence provides that
contrary shall be void. [Art. 2110(1)] immovable/ real properties may be the
object of a chattel mortgage when
If subsequent to the perfection of the pledge, 1. parties validly agree/consent to treat
the thing is in the possession of the pledgor them as movable/personal properties,
or owner, there is a prima facie presumption and
that the same has been returned by the 2. no third persons are prejudiced by such
pledgee. This same presumption exists if the an agreement [Makati Leasing and
thing pledged is in the possession of a third Finance Corp v. Wearever Textile Mills,
person who has received it from the pledgor G.R.No. L-58469 (1983)]
or owner after the constitution of the pledge.
[Art. 2110(2)] Requirements to bind the parties and
third persons
A statement in writing by the pledgee that General rule: The chattel mortgage shall not
he renounces or abandons the pledge is be valid against any person unless the
sufficient to extinguish the pledge. For this mortgage is recorded in the office of the
purpose, neither the acceptance by the register of deeds.
pledgor or owner, nor the return of the thing
pledged is necessary, the pledgee becoming Exception: It shall be valid between the
a depositary. [Art. 2111] parties

Place of Recording
The mortgage must be recorded in the office
CHATTEL MORTGAGE of the register of deeds:
Is a contract whereby personal property is 1. If the mortgagor resides in the Philippines
recorded in the Chattel Mortgage Register as at the time of making the mortgage - of
a security for the performance of an the province in which the mortgagor
obligation [Art. 2140]. resides at the time of making the same.
2. If the mortgagor resides outside the
Essential Requisites Philippines – of the province in which the
1. There must be a principal obligation property is situated

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 13
3. If the province in which the property is mortgaged property, the payment of the
situated and the province of the part of the credit secured by the property
mortgagor’s place of residence are which said third person possesses, in the
different – it shall be recorded in both terms and with the formalities which the
provinces. [Sec. 5, Chattel Mortgage Law] law establishes. (Art. 2129)
c. Right to foreclose the chattel mortgage to
Rights/Obligations of Mortgagor the extent of the obligation secured.
a. Mortgagor’s Right to Alienate the
Collateral - The mortgagor must have the When extinguished
written consent of the mortgagee to sell 1. Payment/satisfaction of the principal
or pledge personal property. obligation
b. A mortgagor in default may prevent the 2. Foreclosure of mortgage
foreclosure sale of the mortgaged
property by paying the amount due on Foreclosure – is the remedy available to
the mortgage and the reasonable costs the mortgagee by which he subjects the
and expenses before the sale. [Sec. 13, mortgaged property to the satisfaction of
Chattel Mortgage Law] – Equity in the obligation secured by the mortgage
Redemption not Right of redemption by causing its alienation in accordance
since there is no statute that vests the with the procedures allowed by law.
right of redemption over personal
property. In general, an action for foreclosure of a
c. Continued Possession of the property mortgage is limited to the amount
d. Right over the surplus - In case of mentioned in the mortgage, except when
foreclosure, surplus shall be paid to the the mortgage contract intends to secure
mortgagor future loans or advancements.
e. Although the law is silent on the matter,
there is a corollary obligation for the
mortgagor to pay the deficiency. [Gomez- Pledge vs. Chattel Mortgage
Somera citing PAMECA Wood Treatment Plant, Pledge Chattel Mortgage
Inc. v. Court of Appeals, G.R. No. 106435 Delivery of Personal Property
(1999)] Delivery is required for Not required
validity
Rights/Obligations of Mortgagee Registration in the Chattel Mortgage
a. Right to possess - a mortgagee, unlike a Register
pledgee, is generally not in possession of Not necessary; Necessary for
the collateral unless and until the Public document is enough validity of
principal debtor defaults and the to bind third persons the CM against third
persons
mortgagee seeks to foreclose. [Gomez-
Right to Excess of Proceeds of Sale
Somera]
The excess goes to the
pledgee/creditor, unless The excess goes to
*Right of possession of the collateral is
otherwise stipulated the debtor/
conditioned upon fact of actual default of Note: In legal pledge, the mortgagor
debtor, and this may be subject to excess goes to the debtor
controversy, hence foreclosure cannot be [Art. 2121, CC]
the first recourse since the sheriff has no Right to Recover Deficiency
duty or authority Creditor/ mortgagee is not Creditor/ mortgagee
entitled to recover any can recover from
b. The creditor (mortgagee) may claim from deficiency after the the debtor/
a third person in possession of the property is sold, mortgagor, except

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 14
 notwithstanding contrary if covered by Recto connection with real property already
stipulation Law mortgaged belonging to the mortgagor is
valid.
b. A stipulation in a registered (or recorded)
real estate mortgage that all property
taken in exchange or replacement by the
REAL ESTATE MORTGAGE mortgagor (after acquired property) shall
Is a contract whereby the debtor secures to become subject to the mortgage is
the creditor the fulfillment of a principal binding. [Gomez-Somera]
obligation (real security transaction),
immediately making immovable property or Rights/Obligations of Mortgagor
real rights answerable to the principal a. Mortgagor’s Right to Alienate the
obligation in case it is not complied with at Collateral - The mortgagor must however
the time stipulated. obtain the written consent of the
mortgagee to sell or pledge the real
Essential Requisites property mortgaged.
1. Must be constituted to secure the b. Continued Possession of the property
fulfillment of a principal obligation; c. In case of judicial foreclosure:
2. Must be recorded in the Registry of The mortgagor may exercise the equity of
Property; redemption during the period of grace
3. Must be subjected to the condition that in order to extinguish the mortgage and
when the principal obligation becomes retain ownership of the collateral by
due, the collateral may be alienated for paying the mortgage obligation.
payment to the creditor; [Top Rate International Services, Inc. v. IAC,
4. Mortgagor must be the absolute owner of G.R. Nos. L-67496 and L-68257 (1986)]
the immovable or alienable real rights;
5. Mortgagor must have free disposal of the Period of grace: If the court finds the
property or is legally authorized for the complaint (judicial foreclosure) to be well-
purpose. [Art. 2085, 2087, 2125] founded, it shall order the mortgagor to
pay the amount due with interest and
Requirements to bind the parties and other charges within a period of not less
third persons than 90 days nor more than 120 days
The real estate mortgage must be recorded from the entry of judgment
in the Registry of Property in order to be
validly constituted. [Art. 2125] d. In case of extra-judicial foreclosure of
mortgage:
The mortgage would still be binding between Debtor/ Mortgagor (who must be a
the parties even if the instrument is not natural person), his successors in interest
recorded. [Art. 2125, CC] has the right to redeem the property sold
within 1 year from and after the date
Objects of Real Estate Mortgage of sale.
a. Immovables
b. Alienable real rights over immovables. If the debtor is a juridical person and the
mortgagee is a bank, quasi-bank or trust
Future property CANNOT be an object of entity, then there is no right of
mortgage; however: redemption. However, juridical
a. A stipulation subjecting to the mortgage mortgagors may redeem the property
improvements which the mortgagor may before the registration of the TCT to the
subsequently acquire, install or use in buyer, which is similar to the equity of

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 15
 redemption. The TCT must be registered
within three months after the
foreclosure.

Note: A real estate mortgage may be

extrajudicially foreclosed only if there is a
special power inserted or attached to the
document in which the real estate
mortgage appears.

e. Right over the surplus - In case of

foreclosure, the mortgagor is entitled to
the surplus, if any, after payment of the
proceeds of the sale.
f. Although the law is silent on the matter,
there is a corollary obligation for the
mortgagor to pay the deficiency. [Gomez-
Somera citing PAMECA Wood Treatment Plant,
Inc. v. Court of Appeals, G.R. No. 106435
(1999)]

Rights/Obligations of Mortgagee
a. Mortgagee is entitled to recover
deficiency. This extends to judicial
foreclosure of mortgage arising out of the
settlement of estate, but NOT to
extrajudicial foreclosure arising out of the
same. (Heirs of Sps. Maglasang v Manila
Banking Corp.)
b. Right to collect deficiency - if the
deficiency is embodied in a judgment, it is
referred to as deficiency judgment.
c. Action for recovery of deficiency may be
filed even during redemption period.
d. Action to recover prescribes after 10
years from the time the right of action
accrues.
e. Mortgagee may waive the right to
foreclose his mortgage and maintain a
personal action for recovery of the
indebtedness. Mortgagee cannot have
both remedies. This is because he only
has one cause of action, the non-payment
of the mortgage debt.

When extinguished
1. Payment/satisfaction of the principal
obligation
2. Foreclosure of mortgage

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 16
 2) Failing to keep sufficient funds or to
maintain a credit to cover the full
amount of the check if presented within
a period of 90 days from the date
appearing thereon.

Elements
a) A person has sufficient funds when
he makes or draws and issues a
check;
b) Fails to keep such funds or maintain
a credit to cover the full amount if
presented within 90 days;
c) Subsequently dishonored.

THE BOUNCING CHECKS LAW

Legal Basis:
Evidence of knowledge of insufficient
BP 22 – An Act Penalizing the making or
funds
drawing and issuance of a check without
sufficient funds or credit and for other
The making, drawing and issuance of a
purposes
check payment of which is refused by the
drawee because of insufficient funds in or
A. Requisites to be liable under BP 22
credit with such bank, when presented
within ninety (90) days from the date of
Checks without insufficient funds
the check, shall be prima facie evidence of
BP 22 may be violated in 2 ways:
knowledge of such insufficiency of funds
1) Making or drawing and issuing any
or credit.
check to apply on account or for value,
knowing at the time of issue that he
Exceptions to the presumption of
does not have sufficient funds in or
knowledge of insufficient funds
credit with the drawee bank for the
1. Check is presented after 90 days from
payment of such check in full upon its
the date of the check;
presentment, and was subsequently
2. When drawer pays the amount or
dishonored;
makes arrangement within 5 banking
days after receiving notice of
Elements
dishonor.
a) A person makes or draws and issues
3. No proof that notice was received by
any check;
drawer.
b) To apply on account or for value;
c) Knows at the time of issue that he
does not have sufficient funds;
Duty of Drawee
d) Subsequently dishonored, or would
have been dishonored had not the
It shall be the duty of the drawee of any
drawer, without any valid reason,
check, when refusing to pay the same to
ordered the bank to stop payment.
the holder thereof upon presentment,
-to cause to be written, printed, or
stamped

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 17
 -in plain language thereon, or attached the purpose of issuance
thereto, Deceit is an element Deceit is NOT an element
-the reason for drawee's dishonor or Check issued in Making or drawing and
refusal to pay the same payment of a pre- issuing any check to apply
-Provided, That where there are no existing obligation on account or for value
The drawer is given The drawer is given 5
sufficient funds in or credit with such
3 days from receipt days
drawee bank, such fact shall always be
of demand letter or
explicitly stated in the notice of dishonor notice of dishonor to
or refusal. (Sec. 3) pay the amount due
Failure to pay within Failure to pay within said
said period is prima period is prima facie
Credit Construed facie evidence of evidence of knowledge of
deceit drawer of insufficiency of
The word "credit" as used herein shall be funds
construed to mean an arrangement or Payment is NOT a Payment is a defense if
understanding with the bank for the defense made before the filing of
information
payment of such check. (Sec 4)

B. Comparison with Estafa [Art. 315 (2)

(d) Revised Penal Code]

Article 315. Swindling (estafa). - Any person who

shall defraud another by any of the means
mentioned herein below shall be punished by:

4th. xxx
2. By means of any of the following false
pretenses or fraudulent acts executed prior to or
simultaneously with the commission of the fraud:
xxx
(d) By post-dating a check, or issuing a check in
payment of an obligation when the offender
therein were not sufficient to cover the amount of
the check. The failure of the drawer of the check
to deposit the amount necessary to cover his
check within three (3) days from receipt of notice
from the bank and/or the payee or holder that
said check has been dishonored for lack of
insufficiency of funds shall be prima facie
evidence of deceit constituting false pretense or
fraudulent act.

BP 22 vs Estafa through issuance of

false checks
Article 315 (2) (d) BP 22
Malum in se Malum prohibitum - There
is a violation regardless of

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 18
 of product related deaths, illness and
injuries;
e) to assure the public of the consistency of
standardized products.

Promulgation and Adoption of Consumer

Product Standards (Art 7)
The concerned department (DoH, DA, DTI)
shall establish consumer product quality
and safety standards which shall consist of
one or more of the following:

a) Requirements to performance,
composition, contents, design,
construction, finish, packaging of a
consumer product;
b) Requirements as to kind, class, grade,
dimensions, weights, material;
c) Requirements as to the methods of
sampling, tests and codes used to
check the quality of the products;
d) Requirements as to precautions in
storage, transporting and packaging;
THE CONSUMER PROTECTION ACT e) Requirements that a consumer product be
marked with or accompanied by clear and
adequate safety warnings or instructions,
Legal Basis: or requirements respecting the form of
RA 7394 – The Consumer Act of the warnings or instructions.
Philippines
Injurious, Dangerous and Unsafe Products
Consumer Product Quality and Safety (Art 10)
Whenever the departments find, by their
State Policies (Art 5) own initiative or by petition of a consumer,
It shall be the duty of the State: that a consumer product is found to be
a) to develop and provide safety and quality injurious, unsafe or dangerous, it shall, after
standards for consumer products, due notice and hearing, make the
including performance or use-oriented appropriate order for its recall, prohibition or
standards, codes of practice and methods seizure from public sale or distribution.
of tests;
b) to assist the consumer in evaluating the The ban on the sale and distribution of a
quality, including safety, performance and consumer product adjudged injurious, unsafe
comparative utility of consumer products; or dangerous, or imminently injurious shall
c) to protect the public against unreasonable stay in force until such time that its safety
risks of injury associated with consumer can be assured or measures to ensure its
products; safety have been established.
d) to undertake research on quality
improvement of products and Imported Products (Art 15)
investigation into causes and prevention Any consumer product offered for
importation into the customs of the

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 19
Philippine territory shall be refused
admission if such product: The act or practice of a seller or supplier is
deceptive when it represents that:
1) Fails to comply with an applicable a) A consumer product or service has the
consumer product quality and safety sponsorship, approval, performance,
standard or rule; characteristics, ingredients, accessories,
2) Is or has been determined to be injurious, uses, or benefits it does not have;
unsafe and dangerous; b) A consumer product or service is of a
3) Is substandard; or particular standard, quality, grade, style,
4) Has material defect. or model when in fact it is not;
c) A consumer product is new, original or
Consumer Products for Export (Art 16) unused, when in fact, it is in a
The rule on safety not apply to any consumer deteriorated, altered, reconditioned,
product if: reclaimed or second-hand state;
a) It can be shown that such product is d) A consumer product or service is available
manufactured, sold or held for sale for to the consumer for a reason that is
export from the Philippines, or that such different from the fact;
product was imported for export, unless e) A consumer product or service has been
such consumer product is in fact supplied in accordance with the previous
distributed in commerce for use in the representation when in fact it is not;
Philippines; and f) A consumer product or service can be
b) Such consumer product or the packaging supplied in a quantity greater than the
thereof bears a stamp or label stating that supplier intends;
such consumer product is intended for g) A service, or repair of a consumer product
export and actually exported. is needed when in fact it is not;
h) A specific price advantage of a consumer
“Consumer products and services" means product exists when in fact it does not;
goods, services and credits, debts or i) The sales act or practice involves or does
obligations which are primarily for personal, not involve a warranty, a disclaimer of
family, household or agricultural purposes, warranties, particular warranty terms or
which shall include but not limited to food, other rights, remedies or obligations if the
drugs, cosmetics, and devices. (Sec 4.q) indication is false; and
j) The seller or supplier has a sponsorship,
approval, or affiliation he does not have.
Deceptive Sales Acts and Practices
Chain distribution plans or pyramid sales
Prohibition against Deceptive Sales Acts or schemes shall not be employed in the sale of
Practices (Art 50) consumer products. (Art 53)
A deceptive act or practice by a seller or
supplier in connection with a consumer "Chain distribution plans" or "pyramid
transaction violates this Act whether it sales schemes" means sales devices
occurs before, during or after the whereby a person, upon condition that he
transaction. An act or practice shall be makes an investment, is granted by the
deemed deceptive whenever the producer, manufacturer of his representative a right to
manufacturer, supplier or seller, through recruit for profit one or more additional
concealment, false representation of persons who will also be granted such right
fraudulent manipulation, induces a consumer to recruit upon condition of making similar
to enter into a sales or lease transaction of investments: Provided, That the profits of the
any consumer product or service. person employing such a plan are derived

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 20
primarily from the recruitment of other conform to the warranty, the warrantor
persons into the plan rather than from the will perform any obligation under the
sale of consumer products, services and warranty.
credit: Provided, further, That the limitation
on the number of participants does not b) Express warranty – operative from
change the nature of the plan. (Art 4.k) moment of sale. – All written warranties or
guarantees issued by a manufacturer,
No business entity shall conduct any home producer, or importer shall be operative from
solicitation sale of any consumer product or the moment of sale.
service without first obtaining a permit from
the Department (DTI).
Labelling and Packaging
"Home solicitation sale" means consumer
sales or leases which are personally solicited All consumer products domestically sold
by any person or organization by telephone, whether manufactured locally or imported
person-to-person contact or by written or shall indicate the following in their respective
printed communication other than general labels of packaging (Art 77):
advertising or consummated at the buyer's
residence or a place of business, at the a) Its correct and registered trade name or
seller's transient quarters, or away from a brand name;
seller's regular place of business. (Art 4.am) b) Its duly registered trademark;
c) Its duly registered business name;
d) The address of the manufacturer,
Product Service and Warranty importer, re-packer of the consumer
product in the Philippines;
In addition to the Civil Code provisions on e) Its general make or active ingredients;
sale with warranties, the following provisions f) The net quality of contents, in terms of
shall govern the sale of consumer products weight, measure or numerical count
with warranty (Art 68): rounded of to at least the nearest tenths
in the metric system;
a) Terms of express warranty. – Any seller or g) Country of manufacture, if imported; and
manufacturer who gives an express warranty h) If a consumer product is manufactured,
shall: refilled or repacked under license from a
principal, the label shall so state the fact.
1) Set forth the terms of warranty in clear
and readily understandable language and
clearly identify himself as the warrantor; Special Packaging of Consumer Products for
2) Identify the party to whom the warranty is the Protection of Children
extended; The concerned department may establish
3) State the products or parts covered; standards for the special packaging of any
4) State what the warrantor will do in the consumer product if it finds that:
event of a defect, malfunction of failure to a) The degree or nature of the hazard to
conform to the written warranty and at children in the availability of such product,
whose expense; by reason of its packaging, is such that
5) State what the consumer must do to avail special packaging is required to protect
of the rights which accrue to the warranty; children from serious personal injury or
and serious illness resulting from handling and
6) Stipulate the period within which, after use of such product; and
notice of defect, malfunction or failure to

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 21
b) The special packaging to be required by
such standard is technically feasible, •Lemon Law
practicable and appropriate for such RA 10642 – An Act Strengthening Consumer
product. Protection in the Purchase of Brand New
Motor Vehicle
Additional Labeling Requirements for Food
The following additional labeling Coverage (Sec 4)
requirements shall be imposed by the This Act shall cover brand new motor
concerned department for food: vehicles purchased in the Philippines
reported by a consumer to be in
a) Expiry or expiration date, where nonconformity with the vehicle’s
applicable; manufacturer or distrib utor’s standards or
b) Whether the consumer product is semi- specifications within twelve (12) months
processed, fully processed, ready-to-cook, from the date of original delivery to the
ready-to-eat, prepared food or just plain consumer, or up to twenty thousand (20,000)
mixture; kilometers of operation after such delivery,
c) Nutritive value, if any; whichever comes first. The following causes
d) Whether the ingredients use are natural or of nonconformity shall be excluded:
synthetic, as the case may be;
e) Such other labeling requirements as the (a) Noncompliance by the consumer of
concerned department may deem the obligations under the warranty;
necessary and reasonable. (b) Modifications not authorized by the
manufacturer, distributor, authorized
dealer or retailer;
Consumer Rights (c) Abuse or neglect of the brand new
motor vehicle; and
•Price Tag Act (d) Damage to the vehicle due to accident
It shall be unlawful to offer any consumer or force majeure.
product for retail sale to the public without
an appropriate price tag, label or marking “Nonconformity” refers to any defect or
publicly displayed to indicate the price of condition that substantially impairs the use,
each article and said products shall not be value or safety of a brand new motor vehicle
sold at a price higher than that stated which prevents it from conforming to the
therein and without discrimination to all manufacturer’s or distributor’s standards or
buyers: specifications, which cannot be repaired, but
excluding conditions resulting from
Provided, That lumber sold, displayed or noncompliance by the consumer of his or her
offered for sale to the public shall be tagged obligations under the warranty, modifications
or labeled by indicating thereon the price not authorized by the manufacturer or
and the corresponding official name of the distributor, abuse or neglect, and damage
wood: due to accident or force majeure (Sec 3.k)

Provided, further, That if consumer products

for sale are too small or the nature of which Repair Attempts (Sec 5)
makes it impractical to place a price tag At any time within the Lemon Law rights
thereon price list placed at the nearest point period, and after at least four (4) separate
where the products are displayed indicating repair attempts by the same manufacturer,
the retail price of the same may suffice. distributor, authorized dealer or retailer for
the same complaint, and the nonconformity

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 22
issue remains unresolved, the consumer may RA 10142 or the Financial Rehabilitation and
invoke his or her rights under this Act. Insolvency Act (FRIA) of 2010

The repair may include replacement of parts A. Definition of Terms

components, or assemblies.
Insolvent shall refer to the financial
Disclosure on Resale (Sec 10) condition of a debtor that is generally unable
Should the returned motor vehicle be made to pay its or his liabilities as they fall due in
available for resale, the manufacturer, the ordinary course of business or has
distributor, authorized dealer or retailer shall, liabilities that are greater than its or his
prior to sale or transfer, disclose in writing to assets. (Sec 4.p)
the next purchaser of the same vehicle the
following information: Debtor shall refer to, unless specifically
excluded by a provision of this Act, a sole
(a) The motor vehicle was returned to the proprietorship duly registered with the DTI, a
manufacturer, distributor, authorized partnership duly registered with the SEC, a
dealer or retailer; corporation duly organized and existing
(b) The nature of the nonconformity which under Philippine laws, or an individual debtor
caused the return; and who has become insolvent as defined herein.
(c) The condition of the motor vehicle at (Sec 4k)
the time of the transfer to the
manufacturer, distributor, authorized *The term debtor does not include banks, insurance
dealer or retailer. companies, pre-need companies, and national and
local government agencies or units. (sec 5)

The responsibility of the manufacturer,

Claim shall refer to all claims or demands of
distributor, authorized dealer or retailer
whatever nature or character against the
under this section shall cease upon the sale
debtor or its property, whether for money or
of the affected motor vehicle to the first
otherwise, liquidated or unliquidated, fixed or
purchaser.
contingent, matured or unmatured, disputed
or undisputed, including, but not limited to;
(1) all claims of the government, whether
national or local, including taxes, tariffs and
customs duties; and (2) claims against
directors and officers of the debtor arising
from acts done in the discharge of their
functions falling within the scope of their
authority.

B. Suspension of payments
An individual debtor who, possessing
sufficient property to cover all his debts
but foreseeing the impossibility of
meeting them when they respectively fall
FINANCIAL REHABILITATION AND
due, may file a verified petition that he be
INSOLVENCY declared in the state of suspension of
payments by the court.
Legal Basis:

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 23
He shall attach to his petition, as a minimum: 25% of the subscribed capital stock or
(a) a schedule of debts and liabilities; (b) an partners' contributions, whichever is higher,
inventory of assess; and (c) a proposed may initiate involuntary proceedings against
agreement with his creditors. (Sec 94) the debtor by filing a petition for
rehabilitation with the court if:
Individual debtor shall refer to a natural (a) there is no genuine issue of fact on law on
person who is a resident and citizen of the the claim/s of the petitioner/s, and that
Philippines that has become insolvent as the due and demandable payments
defined herein. (Sec 4.o)
thereon have not been made for at least
sixty (60) days or that the debtor has
failed generally to meet its liabilities as
C. Rehabilitation
they fall due; or
Rehabilitation shall refer to the restoration
(b) a creditor, other than the petitioner/s, has
of the debtor to a condition of successful
initiated foreclosure proceedings against
operation and solvency, if it is shown that its
the debtor that will prevent the debtor
continuance of operation is economically
from paying its debts as they become due
feasible and its creditors can recover by way
or will render it insolvent. (Sec 13)
of the present value of payments projected
in the plan, more if the debtor continues as a
Court Action:
going concern than if it is immediately
Within ten (10) days from receipt of the
liquidated. (Sec 4.gg)
report of the rehabilitation receiver the court
may:
Types
a. (Grant) Give due course to the petition
I. COURT-SUPERVISED REHABILITATION
upon a finding that:
a.1 Voluntary Proceeding - proceedings
 The debtor is insolvent; and
initiated by the debtor. (Sec 4.rr)
 There is a substantial likelihood for the
debtor to be successfully rehabilitated;
When approved by the owner in case of a
sole proprietorship, or by a majority of the
b. Dismiss the petition upon a finding that:
partners in case of a partnership, or in case
 Debtor is not insolvent;
of a corporation, by a majority vote of the
 The petition is a sham filing intended only
board of directors or trustees and authorized
to delay the enforcement of the rights of
by the vote of the stockholders representing
the creditor/s or of any group of creditors;
at least 2/3 of the outstanding capital stock,
 The petition, the Rehabilitation Plan and
or in case of non-stock corporation, by the
the attachments thereto contain any
vote of at least 2/3 of the members, in a
materially false or misleading statements;
stockholder's or member's meeting duly
or
called for the purpose, an insolvent debtor
 The debtor has committed acts of
may initiate voluntary proceedings under this
misrepresentation or in fraud of its
Act by filing a petition for rehabilitation with
creditor/s or a group of creditors (Sec
the court and on the grounds hereinafter
25.b)
specifically provided. (Sec 12)

c. Convert the proceedings into one for the

a.2 Involuntary Proceeding - proceedings
liquidation of the debtor upon a finding that:
initiated by creditors. (Sec 4.r)
 The debtor is insolvent; and
 There is no substantial likelihood for the
Any creditor or group of creditors with a
debtor to be successfully rehabilitated as
claim of, or the aggregate of whose
determined in accordance with the rules
claims is, at least P1,000,000.00 or at least
to be promulgated by the Supreme Court.

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 24
 total liabilities, secured and unsecured, of
II. PRE-NEGOTIATED REHABILITATION the debtor.
An insolvent debtor, by itself or jointly with
any of its creditors, may file a verified Commencement order
petition with the court for the approval of a The rehabilitation proceedings shall
pre-negotiated Rehabilitation Plan which commence upon the issuance of the
has been endorsed or approved by creditors Commencement Order. It shall be deemed to
holding at least 2/3 of the total liabilities of have commenced from the DATE OF FILING
the debtor, including secured creditors of the petition, which is also termed the
holding more than 50% of the total secured commencement date.
claims of the debtor and unsecured creditors
holding more than 50% of the total The commencement order primarily
unsecured claims of the debtor. The petition contains:
shall include as a minimum: 1. a declaration that the debtor is under
(a) a schedule of the debtor's debts and rehabilitation,
liabilities; 2. the appointment of a rehabilitation
(b) an inventory of the debtor's assets; receiver,
(c) the pre-negotiated Rehabilitation Plan, 3. a directive for all creditors to file their
including the names of at least three (3) verified notices of claim, and
qualified nominees for rehabilitation 4. an order staying claims against the
receiver; and debtor.
(d) a summary of disputed claims against
the debtor and a report on the The effects of the court's issuance of a
provisioning of funds to account for Commencement Order shall retroact to the
appropriate payments should any such date of the filing of the petition and shall:
claims be ruled valid or their amounts
adjusted. a) vest the rehabilitation receiver with all
the powers and functions, such as
III. OUT-OF-COURT OR INFORMAL i) the right of access, and
RESTRUCTURING AGREEMENTS OR ii) the right to review and obtain records
REHABILITATION PLANS to which the debtor's management
For an out-of-court or informal and directors have access, including
restructuring/workout agreement or bank accounts of whatever nature of
Rehabilitation Plan to qualify xxx, it must the debtor,
meet the following minimum requirements:
b) prohibit or otherwise serve as the legal
(a) The debtor must agree to the out-of-court basis for rendering null and void the
or informal restructuring/workout results of any extrajudicial activity or
agreement or Rehabilitation Plan; process to
(b) It must be approved by creditors i) seize property,
representing at least sixty-seven (67%) of ii) sell encumbered property, or
the secured obligations of the debtor; iii) otherwise attempt to collect on or
(c) It must be approved by creditors enforce a claim against the debtor
representing at least seventy-five percent after the commencement date unless
(75%) of the unsecured obligations of the otherwise allowed;
debtor; and
(d) It must be approved by creditors holding c) serve as the legal basis for rendering null
at least eighty-five percent (85%) of the and void

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 25
 i) any set-off after the commencement The rehabilitation receiver shall have the
date of any debt owed to the debtor following minimum qualifications:
by any of the debtor's creditors; a. A citizen of the Philippines or a resident of
ii) the perfection of any lien against the the Philippines in the six (6) months
debtor's property after the immediately preceding his nomination;
commencement date; b. Of good moral character and with
acknowledged integrity, impartiality and
d) consolidate all legal proceedings by and independence;
against the debtor to the court; and c. Has the requisite knowledge of insolvency
e) exempt the debtor from liability for taxes and other relevant commercial laws, rules
and fees, including penalties, interests and procedures, as well as the relevant
and charges thereof due to the national training and/or experience that may be
government or the LGU as provided in necessary to enable him to properly
Section 19 of the Act. discharge the duties and obligations of a
rehabilitation receiver; and
Effectivity and Duration of Commencement d. Has no conflict of interest: Provided, That
Order such conflict of interest may be waived,
Unless lifted by the court, the expressly or impliedly, by a party who
Commencement Order shall be for the may be prejudiced thereby. (Sec 29)
effective for the duration of the rehabilitation
proceedings for as long as there is a The rehabilitation receiver shall be deemed
substantial likelihood that the debtor will be an officer of the court with the principal duty
successfully rehabilitated. of
1. preserving and maximizing the value of
Stay or suspension order the assets of the debtor during the
Stay or Suspension Order shall: rehabilitation proceedings,
(1) suspend all actions or proceedings, in 2. determining the viability of the
court or otherwise, for the enforcement of rehabilitation of the debtor,
claims against the debtor; 3. preparing and recommending a
(2) suspend all actions to enforce any Rehabilitation Plan to the court, and
judgment, attachment or other 4. implementing the approved Rehabilitation
provisional remedies against the debtor; Plan.
(3) prohibit the debtor from selling,
encumbering, transferring or disposing in Management committee
any manner any of its properties except Upon motion of any interested party, the
in the ordinary course of business; and court may appoint and direct the
(4) prohibit the debtor from making any rehabilitation receiver to assume the powers
payment of its liabilities outstanding as of of management of the debtor, or appoint a
the commencement date except as may management committee that will undertake
be provided herein. (Sec 16.q) the management of the debtor upon clear
and convincing evidence of any of the
Rehabilitation receiver following circumstances:
Rehabilitation receiver shall refer to the
person or persons, natural or juridical, (a) Actual or imminent danger of dissipation,
appointed as such by the court pursuant to loss, wastage or destruction of the
this Act and which shall be entrusted with debtor’s assets or other properties;
such powers and duties as set forth herein. (b) Paralyzation of the business operations of
(Sec 4.hh) the debtor; or

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 26
(c) Gross mismanagement of the debtor or dacion en pago, debt-equity conversion and
fraud or other wrongful conduct on the sale of the business (or parts of it) as a going
part of, or gross or willful violation of this concern, or setting-up of new business entity
Act by existing management of the as prescribed in Section 62 hereof, or other
debtor Or the owner, partner, director, similar arrangements as may be approved by
officer or representative/s in management the court or creditors. (Sec 4.ii)
of the debtor. (Sec 36)
The court shall have a maximum period of
No person may be appointed as a one (1) year from the date of the filing of the
rehabilitation receiver, member of a petition to confirm a Rehabilitation Plan.
management committee, or be employed by
the rehabilitation receiver or the If no Rehabilitation Plan is confirmed within
management committee if he has a conflict the said period, the proceedings may, upon
of interest. (Sec 40) motion or motu proprio, be converted into
one for the liquidation of the debtor.

An individual shall be deemed to have a Cram down effect

conflict of interest if he is so situated as to A restructuring/workout agreement or
be materially influenced in the exercise of his Rehabilitation Plan that is approved pursuant
judgment for or against any party to the
proceedings. Without limiting the generality of to an informal workout framework (Out-of-
the foregoing, an individual shall be deemed to Court or Informal Restructuring Agreement)
have a conflict of interest if: shall have the same legal effect as
confirmation of a Plan under the court-
(a) he is a creditor, owner, partner or supervised rehabilitation.
stockholder of the debtor;
(b) he is engaged in a line of business which
competes with that of the debtor;
(c) he is, or was, within five (5) years from
the filing of the petition, a director, officer,
owner, partner or employee of the debtor or D. Liquidation
any of the creditors, or the auditor or
accountant of the debtor;
(d) he is, or was, within two (2) years from Types
the filing of the petition, an underwriter of I. VOLUNTARY LIQUIDATION
the outstanding securities of the debtor; An insolvent debtor may apply for liquidation
(e) he is related by consanguinity or affinity by filing a petition for liquidation with the
within the fourth civil degree to any
individual creditor, owners of a sale court. The petition shall be verified, shall
proprietorship-debtor, partners of a establish the insolvency of the debtor and
partnership- debtor or to any stockholder, shall contain, whether as an attachment or
director, officer, employee or underwriter of as part of the body of the petition;
a corporation-debtor; or
(f) he has any other direct or indirect material
interest in the debtor or any of the creditors. (a) a schedule of the debtor's debts and
liabilities including a list of creditors with
Rehabilitation plan their addresses, amounts of claims and
Rehabilitation Plan shall refer to a plan by collaterals, or securities, if any;
which the financial well-being and viability of (b) an inventory of all its assets including
an insolvent debtor can be restored using receivables and claims against third
various means including, but not limited to, parties; and
debt forgiveness, debt rescheduling, (c) the names of at least three (3) nominees
reorganization or quasi-reorganization, to the position of liquidator.

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 27
At any time during the pendency of court- the report of the rehabilitation receiver the
supervised or pre-negotiated rehabilitation court may:
proceedings, the debtor may also initiate xxx
c. Convert the proceedings into one for the
liquidation proceedings by filing a motion in liquidation of the debtor upon a finding that:
the same court where the rehabilitation  The debtor is insolvent; and
proceedings are pending to convert the  There is no substantial likelihood for the
rehabilitation proceedings into liquidation debtor to be successfully rehabilitated as
proceedings. (Sec 90) determined in accordance with the rules to
be promulgated by the Supreme Court.

II. INVOLUNTARY LIQUIDATION Sec 72. xxx If no Rehabilitation Plan is

Three (3) or more creditors the aggregate of confirmed within the said period, the
whose claims is at least either proceedings may upon motion or motu propio,
Php1,000,000,00 or at least 25% of the be converted into one for the liquidation of the
debtor.
subscribed capital stock or partner's
contributions of the debtor, whichever is Sec 75. xxx if the termination of
higher, may apply for and seek the (rehabilitation) proceedings is due to failure of
liquidation of an insolvent debtor by filing a rehabilitation or dismissal of the petition for
petition for liquidation of the debtor with the reasons other than technical grounds, the
proceedings shall be immediately converted to
court. The petition shall show that: liquidation.

(a) there is no genuine issue of fact or law on

the claims/s of the petitioner/s, and that Liquidation order
the due and demandable payments Upon the issuance of the Liquidation Order:
thereon have not been made for at least a) the juridical debtor shall be deemed
one hundred eighty (180) days or that the dissolved and its corporate or juridical
debtor has failed generally to meet its existence terminated;
liabilities as they fall due; and b) legal title to and control of all the assets
(b) there is no substantial likelihood that the of the debtor, except those that may be
debtor may be rehabilitated. exempt from execution, shall be deemed
vested in the liquidator or, pending his
This also applies at any time during the election or appointment, with the court;
pendency of or after a rehabilitation court- c) all contracts of the debtor shall be
supervised or pre-negotiated deemed terminated and/or breached,
rehabilitation proceedings. (Sec 91) unless the liquidator, within ninety (90)
days from the date of his assumption of
office, declares otherwise and the
Conversion of rehabilitation to contracting party agrees;
liquidation proceedings d) no separate action for the collection of an
During the pendency of court-supervised or unsecured claim shall be allowed.
pre-negotiated rehabilitation proceedings, -Such actions already pending will be
the court may order the conversion of transferred to the Liquidator for him to
rehabilitation proceedings to liquidation accept and settle or contest. If the
proceedings at any other time upon the liquidator contests or disputes the claim,
recommendation of the rehabilitation the court shall allow, hear and resolve
receiver that the rehabilitation of the debtor such contest except when the case is
is not feasible. Thereupon, the court shall already on appeal. In such a case, the suit
issue the Liquidation Order. may proceed to judgment, and any final
and executory judgment therein for a
Sec 25. Within ten (10) days from receipt of

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 28
 claim against the debtor shall be filed and *Secured creditor shall refer to a creditor
allowed in court; and with a secured claim. (Sec 4.kk)
e) no foreclosure proceeding shall be
allowed for a period of 180 days.
Liquidator
Liquidator shall refer to the natural person
Rights of secured creditors or juridical entity appointed as such by the
The Liquidation Order shall not affect the court and entrusted with such powers and
right of a secured creditor to enforce his lien duties as set forth in this Act: Provided, That,
in accordance with the applicable contract or if the liquidator is a juridical entity, it must
law. A secured creditor may: designated a natural person who possesses
all the qualifications and none of the
(a) waive his right under the security or lien, disqualifications as its representative, it
prove his claim in the liquidation being understood that the juridical entity and
proceedings and share in the distribution the representative are solidarity liable for all
of the assets of the debtor; or obligations and responsibilities of the
(b) maintain his rights under the security or liquidator. (Sec 4.w)
lien:
(Sec 119) The liquidator shall be deemed an
If the secured creditor maintains his rights officer of the court with the principal duly of
under the security or lien: preserving and maximizing the value and
recovering the assets of the debtor, with the
end of liquidating them and discharging to the
(1) the value of the property may be fixed in extent possible all the claims against the
a manner agreed upon by the creditor debtor. The powers, duties and responsibilities
and the liquidator. When the value of the of the liquidator shall include, but not limited
property is less than the claim it secures, to:
the liquidator may convey the property to (a) to sue and recover all the assets, debts and
the secured creditor and the latter will be claims, belonging or due to the debtor;
admitted in the liquidation proceedings as (b) to take possession of all the property of the
a creditor for the balance. If its value debtor except property exempt by law from
exceeds the claim secured, the liquidator execution;
(c) to sell, with the approval of the court, any
may convey the property to the creditor property of the debtor which has come into
and waive the debtor's right of his possession or control;
redemption upon receiving the excess (d) to redeem all mortgages and pledges, and
from the creditor; so satisfy any judgement which may be an
(2) the liquidator may sell the property and encumbrance on any property sold by him;
(e) to settle all accounts between the debtor
satisfy the secured creditor's entire claim and his creditors, subject to the approval of
from the proceeds of the sale; or the court;
(3) the secure creditor may enforce the lien (f) to recover any property or its value,
or foreclose on the property pursuant to fraudulently conveyed by the debtor;
applicable laws. (g) to recommend to the court the creation of a
creditors' committee which will assist
him in the discharge of the functions and
*Lien shall refer to a statutory or contractual which shall have powers as the court deems
claim or judicial charge on real or personal just, reasonable and necessary; and
property that legally entitles a creditor to (h) upon approval of the court, to engage such
resort to said property for payment of the professional as may be necessary and
reasonable to assist him in the discharge of
claim or debt secured by such lien. (Sec 4.t) his duties.

In addition to the rights and duties of a

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 29
rehabilitation receiver, the liquidator, shall
have the right and duty to take all reasonable If the debtor and creditor are mutually
steps to manage and dispose of the debtor's debtor and creditor of each other one debt
assets with a view towards maximizing the
proceedings therefrom, to pay creditors and shall be set off against the other, and only
stockholders, and to terminate the debtor's the balance, if any shall be allowed in the
legal existence. liquidation proceedings. (Sec 124)

Qualifications of the Liquidator: The liquidator shall resolve disputed claims

a) be a citizen of the Philippines or a and submit his findings thereon to the court
resident thereof for six (6) months for final approval. The liquidator may
immediately preceding his nomination; disallow claims. (Sec 126)
b) be of good moral character and with
acknowledged integrity, impartiality and Liquidation of Plan
independence; Within three (3) months from his assumption
c) have the requisite knowledge of into office, the liquidator shall submit a
insolvency and other relevant commercial Liquidation Plan to the court.
laws, rules and procedures, as well as the
relevant training and/or experience that The Liquidation Plan shall, as a minimum,
may be necessary to enable him to 1. enumerate all the assets of the debtor not
properly discharge the duties and exempt from execution,
obligations of a liquidator; and 2. a list of all creditors and their claims
d) have no conflict of interest: Provided, that which have been duly proved as shown in
such conflict of interest may be waived, the final registry of claims, and
expressly or impliedly, by a party who 3. a proposed mode and schedule of
may be prejudiced thereby. liquidation of the assets and payment of
the claims.
An individual shall be deemed to have a 4. make provisions for, among others,
conflict of interest if he is so situated as to disputed claims and any action for
be materially influenced in the exercise of his rescission or nullity of certain
judgment for or against any party to the transactions.
proceedings.

Determination of claims
Within twenty (20) days from his assumption
into office the liquidator shall prepare a
preliminary registry of claims of secured and
unsecured creditors.

Secured creditors who have waived their

security or lien, or have fixed the value of
the property subject of their security or lien
by agreement with the liquidator and is
admitted as a creditor for the balance shall
be considered as unsecured creditors. xxx All
claims must be duly proven before being
paid. (Sec 123)

*Unsecured creditor shall refer to a

creditor with an unsecured claim. (Sec 4.qq)

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 30
 PHILIPPINE COMPETITION ACT (b) The following agreements, between or
among competitors which have the object
Legal Basis: or effect of substantially preventing,
RA 10667 or the Philippine Competition Act restricting or lessening competition shall be
prohibited (Object and Effect Prohibition):
A. Definition and scope of application
Domestic — The Act shall be enforceable (1) Setting, Kmiting, or controlling
against ANY person or entity engaged in any production, markets, technical
trade, industry and commerce in RP. development, or investment;
(2) Dividing or sharing the market, whether
International — It shall likewise be applicable by volume of sales or purchases,
to international trade having direct, territory, type of goods or services,
substantial, and reasonably foreseeable buyers or sellers or any other means;
effects in trade, industry, or commerce in RP,
including those that result from acts done (c) Agreements other than those specified in
outside RP. (a) and (b) of this section which have the
object or effect of substantially preventing,
The Act shall NOT APPLY to restricting or lessening competition shall also
1. the combinations or activities of workers be prohibited:
or employees nor
2. to agreements or arrangements with their -Provided, those which contribute to
employers when such combinations, improving the production or distribution of
activities, agreements, or arrangements goods and services or to promoting technical
are designed solely to facilitate collective or economic progress, while allowing
bargaining in respect of conditions of consumers a fair share of the resulting
employment. benefits, may not necessarily be deemed a
violation of this Act.
B. Prohibited acts
An entity that controls, is controlled by, or is
Anti-competitive agreements (Sec 14) under common control with another entity or
Agreement refers to any type or form of entities, have common economic interests,
contract, arrangement, understanding, and are not otherwise able to decide or act
collective recommendation, or concerted independently of each other, shall not be
action, whether formal or informal, explicit or considered competitors for purposes of this
tacit, written or oral (Sec 4.b) section.

(a) The following agreements, between or Abuse of dominant position (Sec 15)
among competitors, are per se prohibited: Dominant position refers to a position of
economic strength that an entity or entities
(1) Restricting competition as to price, or hold which makes it capable of controlling
components thereof, or other terms of the relevant market independently from any
trade; or a combination of the following:
(2) Fixing price at an auction or in any form competitors, customers, suppliers, or
of bidding including cover bidding, bid consumers. (Sec 4.g)
suppression, bid rotation and market
allocation and other analogous practices Market refers to the group of goods or
of bid manipulation; services that are sufficiently interchangeable
or substitutable and the object of

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 31
competition, and the geographic area where commercial usage, have no connection
said goods or services are offered (Sec 4.i); with the transaction;
4) Price Discrimination — Setting prices or
Relevant market refers to the market in other terms or conditions that
which a particular good or service is sold and discriminate unreasonably between
which is a combination of the relevant customers or sellers of the same goods or
product market and the relevant geographic services:
market, defined as follows (Sec 4.k):
Provided, that the following shall be
(1) A relevant product market considered permissible price differentials:
comprises all those goods and/or services a) Socialized pricing for the less
which are regarded as interchangeable or fortunate sector of the economy;
substitutable by the consumer or the b) Price differentials which reasonably or
customer, by reason of the goods and/or approximately reflect differences in
services’ characteristics, their prices and the cost of manufacture, sale, or
their intended use; and delivery resulting from differing
methods, technical conditions, or
(2) The relevant geographic market quantities;
comprises the area in which the entity c) Price differential or terms of sale
concerned is involved in the supply and offered in response to the competitive
demand of goods and services, in which price of payments, services, or
the conditions of competition are changes in the facilities furnished by a
sufficiently homogenous and which can be competitor; and
distinguished from neighboring areas d) Price changes in response to changing
because the conditions of competition are market conditions, marketability of
different in those areas. goods or services, or volume.

It shall be prohibited for one or more entities 5) Exclusive Dealings — Imposing

to abuse their dominant position by engaging restrictions on the lease or contract for
in conduct that would substantially prevent, sale or trade of goods or services
restrict, or lessen competition, including: concerning where, to whom, or in what
1) Predatory Pricing — Selling goods or forms goods or services may be sold or
services below cost with the object of traded, such as:
driving competition out of the relevant a) fixing prices, or
market. b) giving preferential discounts or rebate
2) Imposing barriers to entry — or upon such price, or
committing acts that prevent competitors c) imposing conditions not to deal with
from growing within the market in an competing entities, where the object
anti-competitive manner, except those or effect of the restrictions is to
that develop in the market as a result of prevent, restrict or lessen competition
or arising from substantially:
1. a superior product or process,
2. business acumen, or Provided, that the following shall not be
3. legal rights or laws; prohibited or rendered unlawful:
1) Permissible franchising;
3) Commercial Tying — Making a 2) Agreements protecting intellectual
transaction subject to acceptance by the property rights, confidential
other parties of other obligations which, information, or trade secrets;
by their nature or according to

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 32
6) Tying and Bundling — Making supply of Merger or acquisition agreements that
particular goods or services dependent substantially prevent, restrict or lessen
upon the purchase of other goods or competition in the relevant market or in the
services from the supplier which have no market for goods or services as may be
direct connection with the main goods or determined by the Commission shall be
services to be supplied; prohibited.
7) Abuse of Monopsony Buying Power —
Directly or indirectly imposing unfairly low Merger refers to the joining of two (2) or
purchase prices for the goods or services more entities into an existing entity or to
of, among others, marginalized form a new entity (Sec 4.j)
agricultural producers, fisherfolk, micro-,
small-, medium-scaled enterprises, and If within the relevant periods, the Phil.
other marginalized service providers and Competition Commission (PCC) determines
producers; that such agreement is prohibited and does
8) Excessive Pricing — Directly or not qualify for exemption, the PCC may:
indirectly imposing unfair purchase or a) Prohibit the implementation of the
selling price on their competitors, agreement;
customers, suppliers, or consumers, b) Prohibit the implementation of the
agreement unless and until it is modified
Provided that prices that develop in the by changes specified by the PCC.
market as a result of or due to a superior c) Prohibit the implementation of the
product or process, business acumen or agreement unless and until the pertinent
legal rights or laws shall not be party or parties enter into legally
considered unfair prices; and enforceable agreements specified by the
PCC.
9) Output Restriction — Limiting
production, markets, or technical Exceptions (Sec 21)
development to the prejudice of Merger or acquisition agreement prohibited
consumers, Provided, that limitations that under Section 20 of this Chapter may,
develop in the market as a result of or nonetheless, be exempt from prohibition by
due to a superior product or process, the Commission when the parties establish
business acumen, or legal rights or laws either of the following:
shall not be a violation.
(a) The concentration has brought about or
Any conduct which contributes to improving is likely to bring about gains in
production or distribution of goods or efficiencies that are greater than the
services within the relevant market, or effects of any limitation on competition
promoting technical and economic progress, that result or likely to result from the
while allowing consumers a fair share of the merger or acquisition agreement; or
resulting benefit may not necessarily be (b) A party to the merger or acquisition
considered an abuse of dominant position. agreement is faced with actual or
imminent financial failure, and the
*Conduct refers to any type or form of agreement represents the least anti-
undertaking, collective recommendation, competitive arrangement among the
independent or concerted action or practice, known alternative uses for the failing
whether formal or informal. entity’s assets.

Prohibited mergers and acquisitions

(Sec 20) C. Covered transactions

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 33
 percentage set out above, as the
Thresholds for compulsory notification case may be, before the proposed
As per PCC Resolution No. 02-2020, acquisition; or
effective 01 March 2020, parties to a B. of an interest in a non-corporate
merger or acquisition are REQUIRED to entity, the entity would hold an
provide notification when: aggregate interest in the non-
a) SIZE OF PARTY. The aggregate annual corporate entity that entitles the
gross revenues in, into or from the entity or entities to receive more than
Philippines, or value of the assets in the the following percentages of the
Philippines of the ultimate parent entity of at profits of the non-corporate entity or
least one of the acquiring or acquired assets of that non-corporate entity on
entities, including that of all entities that the its dissolution:
ultimate parent entity controls, directly or a. 35% or
indirectly, exceeds P6B; AND b. 50%, if the entity or entities
b) SIZE OF TRANSACTION. The value of the acquiring the interest are already
transaction exceeds P2.4B: entitled to receive more than the
percentage set out immediately
Aggregate value [1] Gross revenues above before the proposed
PH of the asset in generated by [2] acquisition.
the PH of assets acquired
IN One being OR [1 and 2] IN PH
acquired Notifying entity
OU Acquiring entity AND [1] IN or INTO; [2] OUT
a) Parties to a merger or acquisition that
T
IN Acquiring entity AND [1] IN or INTO; [2] IN satisfy the thresholds are required to notify
& and the PCC before the execution of the
OU OUT collectively
T definitive agreements relating to the
transaction.

With respect to a proposed acquisition of (1) Acquisition refers to the purchase of

voting shares of a corporation or (2) an securities or assets, through contract or
interest in a non-corporate entity other means, for the purpose of obtaining
1) If the aggregate value of the assets in PH control by:
that are owned by, OR (1) One (1) entity of the whole or part of
2) the gross revenues from sales in, into, or another;
from P H of the corporation or non- (2) Two (2) or more entities over another; or
corporate entity or by entities it controls, (3) One (1) or more entities over one (1) or
other than assets that are shares of any more entities; (Sec 4.a)
of those corporations, exceed P2.4B; AND
3) If as a result of the proposed acquisition Control refers to the ability to substantially
A. of the voting shares of a corporation, influence or direct the actions or decisions of
the entity would own voting shares of an entity, whether by contract, agency or
the corporation that, in the aggregate, otherwise.
carry more than the following
percentages of the votes attached to b) Ultimate parent entity is the juridical
all the corporation's outstanding entity that, directly or indirectly, controls a
voting shares: party to the transaction, and is not controlled
a. 35% or by any other entity.
b. 50%, if the entity or entities
already own more than the Period of notifications

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 34
Should the Philippine Competition All procurement of the national government,
Commission deem it necessary, it may its departments, bureaus, offices and
request further information that are agencies, including state universities and
reasonably necessary and directly relevant colleges, government-owned and/or
to the prohibition from the parties to the controlled corporations, government
agreement before the expiration of the 30- financial institutions and local government
day period referred. The issuance of such a units, shall, in all cases, be governed by
request has the effect of extending the these principles:
period within which the agreement may not
be consummated for an additional 60 days, a) Transparency in the procurement process
beginning on the day after the request for and in the implementation of
information is received by the parties: procurement contracts.
Provided, That, in no case shall the total b) Competitiveness by extending equal
period for review by the Commission of the opportunity to enable private contracting
subject agreement exceed 90 days from parties who are eligible and qualified to
initial notification by the parties. participate in public bidding.
c) Streamlined procurement process that
Exceptions will uniformly apply to all government
All notices, documents and information procurement. The procurement process
provided to or emanating from the shall be simple and made adaptable to
Commission shall be subject to advances in modern technology in order
confidentiality rule except when the release to ensure an effective and efficient
of information contained therein is with the method.
consent of the notifying entity or is d) System of accountability where both the
mandatorily required to be disclosed by law public officials directly or indirectly
or by a valid order of a court of competent involved in the procurement process as
jurisdiction, or of a government or regulatory well as in the implementation of
agency, including an exchange. procurement contracts and the private
parties that deal with government are,
Confidential business information refers when warranted by circumstances,
to information which concerns or relates to investigated and held liable for their
the operations, production, sales, shipments, actions relative thereto.
purchases, transfers, identification of e) Public monitoring of the procurement
customers, inventories, or amount or source process and the implementation of
of any income, profits, losses, expenditures awarded contracts with the end in view of
(Sec 4.e) guaranteeing that these contracts are
awarded pursuant to the provisions of this
Act and its IRR, and that all these
contracts are performed strictly according
GOVERNMENT PROCUREMENT to specifications.
LAW

Legal Basis: B. Scope and application (Sec 4)

RA 9184 or the Government Procurement This Act shall apply to the Procurement of
Reform Act Infrastructure Projects, Goods, and
Consulting Services, regardless of source of
A. General principles (Sec 3) funds, whether local or foreign, by all
branches and instrumentalities of

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 35
government, its departments, offices and management and related services; and (vi)
agencies, including GOCCs and LGUs. other technical services or special studies.
(Sec 4.f)

C. Definition of terms Infrastructure Projects - include the

construction, improvement, rehabilitation,
D. Procurement procedures demolition, repair, restoration or
Procurement - refers to the acquisition of maintenance of roads and bridges, railways,
Goods, Consulting Services, and the airports, seaports, communication facilities,
contracting for Infrastructure Projects by the civil works components of information
Procuring Entity. Procurement shall also technology projects, irrigation, flood control
include the lease of goods and real estate. and drainage, water supply, sanitation,
With respect to real property, its sewerage and solid waste management
procurement shall be governed by the systems, shore protection, energy/power and
provisions of RA 8974, entitled "An Act to electrification facilities, national buildings,
Facilitate the Acquisition of Right-of-Way Site school buildings, hospital buildings and other
or Location for National Government related construction projects of the
Infrastructure Projects and for Other government. (Sec 4.k)
Purposes", and other applicable laws, rules
and regulations. (Sec 4.n) Preparation of bidding documents
Bidding Documents - refer to documents
Goods - refer to all items, supplies, materials issued by the Procuring Entity as the basis
and general support services, except for Bids, furnishing all information necessary
consulting services and infrastructure for a prospective bidder to prepare a bid for
projects, which may be needed in the the Goods, Infrastructure Projects, and
transaction of public businesses or in the Consulting Services to be provided. (Sec 4.c)
pursuit of any government undertaking,
project or activity, whether in the nature of Procuring Entity - refers to any branch,
equipment, furniture, stationery, materials department, office, agency, or
for construction, or personal property of any instrumentality of the government, including
kind, including non-personal or contractual state universities and colleges, GOCCs,
services such as the repair and maintenance government financial institutions (GFIs), and
of equipment and furniture, as well as LGUs procuring Goods, Consulting Services
trucking, hauling, janitorial, security, and and Infrastructure Projects. (Sec 4.o)
related or analogous services, as well as
procurement of materials and supplies The Bidding Documents shall be prepared by
provided by the procuring entity for such the Procuring Entity following the standard
services. (Sec 4.h) forms and manuals prescribed by the GPPB.
The Bidding Documents shall include the
Consulting Services - refer to services for following (Sec 17):
Infrastructure Projects and other types of (a) Approved Budget for the Contract;
projects or activities of the Government (b) Instructions to Bidders, including
requiring adequate external technical and criteria for eligibility, bid evaluation
professional expertise that are beyond the and post-qualification, as well as the
capability and/or capacity of the government date, time and place of the pre-bid
to undertake such as, but not limited to: (i) Conference (where applicable),
advisory and review services; (ii) pre- submission of bids and opening of
investment or feasibility studies; (iii) design; bids;
(iv) construction supervision; (v) (c) Terms of Reference;

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 36
 (d) Eligibility Requirements; (b) A general statement on the criteria to
(e) Plans and Technical Specifications; be used by the Procuring Entity for the
(f) Form of Bid, Price Form, and List of eligibility check, the short listing of
Goods or Bill of Quantities; prospective bidders, in the case of the
(g) Delivery Time or Completion Schedule; Procurement of Consulting Services,
(h) Form and Amount of Bid Security; the examination and evaluation of
(i) Form and Amount of Performance Bids, and post-qualification;
Security and Warranty; and, (c) The date, time and place of the
(j) Form of Contract, and General and deadline for the submission and
Special Conditions of Contract. receipt of the eligibility requirements,
the pre-bid conference if any, the
Specifications for the Procurement of submission and receipt of bids, and
Goods shall be based on relevant the opening of bids;
characteristics and/or performance (d) The Approved Budget for the Contract
requirements. Reference to brand names to be bid;
shall not be allowed. (Sec 18) (e) The source of funds;
(f) The period of availability of the
*Approved Budget for the Contract Bidding Documents, and the place
(ABC) - refers to the budget for the contract where these may be secured;
duly approved by the Head of the Procuring (g) The contract duration; and,
Entity, as provided for in the General (h) Such other necessary information
Appropriations Act and/or continuing deemed relevant by the Procuring
appropriations, in the case of National Entity. (Sec 21)
Government Agencies; the Corporate Budget
for the contract approved by the governing Receipt and opening of bids
Boards, pursuant to E.O. No. 518, series of The Bids and Awards Committee (BAC) shall
1979, in the case of GOCCs, GFIs and State determine the eligibility of prospective,
Universities and Colleges; and the Budget for based on the bidders' compliance with the
the contract approved by the respective eligibility requirements within the period set
Sanggunian, in the case of LGUs. (Sec 4.a) forth in the Invitation to Bid.

Invitation to bid  A bid shall have two (2) components,

In line with the principle of transparency and namely the technical and financial
competitiveness, all Invitations to Bid for components which should be in
contracts under competitive bidding shall separate sealed envelopes, and which
be advertised by the Procuring Entity in shall be submitted simultaneously.
such manner and for such length of time as  The bids shall be received by the BAC on
may be necessary under the circumstances, such date, time and place specified in the
in order to ensure the widest possible invitation to bid.
dissemination thereof, such as, but not  Bids submitted after the deadline shall
limited to, posting in the Procuring Entity's not be accepted. (Sec 25)
premises, in newspapers of general  The BAC shall publicly open all bids at the
circulation, the G-EPS and the website of time, date, and place specified in the
the Procuring Entity, if available. bidding documents. The minutes of the
bid opening shall be made available to
The Invitation to Bid shall contain, among the public upon written request and
others: payment of a specified fee. (Sec 29)
(a) A brief description of the subject
matter of the Procurement; Bid evaluation
Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 37
Prior to Bid evaluation, the BAC shall Rated Responsive Bid (HRRB)" in the case
examine first the technical components of of Consulting Services. (Sec 34)
the bids using "pass/fail" criteria to
determine whether all required documents Failure of Bidding
are present. Only bids that are determined to There shall be a failure of bidding if:
contain all the bid requirements of the a) No bids are received;
technical component shall be considered for b) No bid qualifies as the Lowest Calculated
opening and evaluation of their financial Responsive Bid or Highest Rated
component. (Sec 30) Responsive Bid; or,
c) Whenever the bidder with the highest
The ABC shall be the upper limit or ceiling for rated/lowest calculated responsive bid
the Bid prices. Bid prices that exceed this refuses, without justifiable cause to
ceiling shall be disqualified outright from accept the award of contract, as the case
further participating in the bidding. There may be.
shall be no lower limit to the amount of the
award. (Sec 31) Under any of the above instances, the
contract shall be re-advertised and re-bid.
For the procurement of Goods and The BAC shall observe the same process and
Infrastructure Projects, the BAC shall set the new periods according to the same
evaluate the financial component of the bids. rules followed during the first bidding. After
The bid with the lowest calculated price shall the second failed bidding, however, the BAC
be referred to as the "Lowest Calculated may resort to negotiated procurement. (Sec
Bid." (Sec 32) 35)

For the Procurement of Consulting

Services, the Bids of the short listed bidders Single Calculated/Rated and Responsive Bid
shall be evaluated and ranked using Submission
numerical ratings in accordance with the A single calculated/rated and responsive bid
evaluation criteria, which shall include shall be considered for award if it falls under
factors such as, but not limited to, any of the following circumstances:
experience, performance, quality of
personnel, price and methodology. The Bid a) If after advertisement, only one
with the highest calculated rating shall be prospective bidder submits a Letter of
the "Highest Rated Bid." (Sec 33) Intent and/or applies for eligibility check,
and meets the eligibility requirements or
Post-qualification criteria, after which it submits a bid,
Post-qualification is the stage where the which is found to be responsive to the
bidder with the Lowest Calculated Bid or the bidding requirements;
Highest Rated Bid, undergoes verification b) If after the advertisement, more than one
and validation whether he has passed all the prospective bidder applies for eligibility
requirements and conditions as specified in check, but only one bidder meets the
the Bidding Documents. eligibility requirements or criteria, after
which it submits a bid which is found to
If the bidder with the Lowest Calculated Bid be responsive to the bidding
or Highest Rated Bid passes all the criteria requirements; or
for post-qualification, his Bid shall be c) If after the eligibility check, more than
considered the "Lowest Calculated one bidder meets the eligibility
Responsive Bid (LCRB)" in the case of requirements, but only one bidder
Goods and Infrastructure or the "Highest

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 38
 submits a bid, and its bid is found to be Head of the Procuring Entity - refers to: (i)
responsive to the bidding requirements. the head of the agency or his duly authorized
official, for national government agencies; (ii)
Award, implementation and termination the governing board or its duly authorized
of the contract official, for GOCCs; or (iii) the local chief
 Within a period not exceeding fifteen (15) executive, for local government units.
calendar days from the determination and Provided, That in a department, office or
declaration by the BAC of the LCRB or agency where the procurement is
decentralized, the Head of each decentralized
HRRB, and the recommendation of the
unit shall be considered as the Head of the
award, the Head of the Procuring Entity or
Procuring Entity subject to the limitations and
his duly authorized representative shall
authority delegated by the head of the
approve or disapprove the said
department, office or agency. (Sec 4.j)
recommendation.
 In case of approval, the Head of the
Procuring Entity or his duly authorized
F. Alternative methods of procurement
representative shall immediately issue
Subject to the prior approval of the Head of
the Notice of Award to the bidder with
the Procuring Entity or his duly authorized
the Lowest Calculated Responsive Bid or
representative, and whenever justified by
Highest Rated Responsive Bid.
the conditions provided in this Act, the
 Within ten (10) calendar days from
Procuring Entity may, in order to promote
receipt of the Notice of Award, the
economy and efficiency, resort to any of the
winning bidder shall formally enter into
following alternative methods of
contract with the Procuring Entity.
Procurement (Sec 48):
 The Procuring Entity shall issue the
Notice to Proceed to the winning bidder
a) Limited Source Bidding, otherwise
not later than seven (7) calendar days
known as Selective Bidding - a method of
from the date of approval of the contract
Procurement that involves direct invitation to
by the appropriate authority. All notices
bid by the Procuring Entity from a set of pre-
called for by the terms of the contract
selected suppliers or consultants with known
shall be effective only at the time of
experience and proven capability relative to
receipt thereof by the contractor. (Sec 37)
the requirements of a particular contract;

*For Contract implementation see Annexes

Limited Source Bidding may be resorted to only
D, E & F of the IRR (Pages 116 to 128) in any of the following conditions:
a) Procurement of highly specialized types
of Goods and Consulting Services which are
E. Disclosure of relations known to be obtainable only from a limited
number of sources; or
In addition to the proposed contents of the
b) Procurement of major plant components
Invitation to Bid as mentioned under, all where it is deemed advantageous to limit
bidding documents shall be accompanied by the bidding to known eligible bidders in
a sworn affidavit of the bidder that he or she order to maintain an optimum and uniform
or any officer of their corporation is not level of quality and performance of the
plant as a whole. (Sec 49)
related to the Head of the Procuring Entity
by consanguinity or affinity up to the
b) Direct Contracting, otherwise known
third civil degree. Failure to comply with
as Single Source Procurement - a method
the aforementioned provision shall be a
of Procurement that does not require
ground for the automatic disqualification of
elaborate Bidding Documents because the
the bid. (Sec 47)
supplier is simply asked to submit a price

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 39
quotation or a pro-forma invoice together
with the conditions of sale, which offer may d) Shopping - a method of Procurement
be accepted immediately or after some whereby the Procuring Entity simply requests
negotiations; for the submission of price quotations for
readily available off-the-shelf Goods or
Direct Contracting. - Direct Contracting may be ordinary/regular equipment to be procured
resorted to only in any of the following directly from suppliers of known
conditions: qualification; or
a) Procurement of Goods of proprietary
nature, which can be obtained only from
the proprietary source, when patents, Shopping may be resorted to under any of the
trade secrets and copyrights prohibit others following instances:
from manufacturing the same item; a) When there is an unforeseen
b) When the Procurement of critical contingency requiring immediate
components from a specific purchase: Provided, however, That the
manufacturer, supplier or distributor is amount shall not exceed P50,000; or
a condition precedent to hold a contractor b) Procurement of ordinary or regular office
to guarantee its project performance, in supplies and equipment not available in
accordance with the provisions of his the Procurement Service involving an
contract; or, amount not exceeding P250,000: Provided,
c) Those sold by an exclusive dealer or however, That the Procurement does not
manufacturer, which does not have sub- result in Splitting of Contracts: Provided,
dealers selling at lower prices and for which further, That at least three (3) price
no suitable substitute can be obtained at quotations from bona fide suppliers shall be
more advantageous terms to the obtained.
Government. (Sec 50)
The above amounts shall be subject to a
periodic review by the GPPB. For this purpose,
c) Repeat Order - a method of Procurement
the GPPB shall be authorized to increase or
that involves a direct Procurement of Goods decrease the said amount in order to reflect
from the previous winning bidder, whenever changes in economic conditions and for other
there is a need to replenish Goods procured justifiable reasons. (Sec 52)
under a contract previously awarded through
Competitive Bidding; e) Negotiated Procurement – a method of
Procurement that may be resorted under the
When provided for in the Annual Procurement extraordinary circumstances provided for in
Plan, Repeat Order may be allowed wherein Section 53 of this Act and other instances
the Procuring Entity directly procures Goods that shall be specified in the IRR, whereby
from the previous winning bidder the Procuring Entity directly negotiates a
whenever there arises a need to replenish
goods procured under a contract previously contract with a technically, legally and
awarded through Competitive Bidding, subject financially capable supplier, contractor or
to post-qualification process prescribed in the consultant.
Bidding Documents and provided all the
following conditions are present: Negotiated Procurement shall be allowed only
a) The unit price must be equal to or lower in the following instances:
than that provided in the original contract; a) In cases of two failed biddings, as
b) The repeat order does not result in splitting provided in Section 35 hereof;
of requisitions or purchase orders; b) In case of imminent danger to life or
c) Except in special circumstances defined in property during a state of calamity, or
the IRR, the repeat order shall be availed of when time is of the essence arising from
only within six (6) months from the date of natural or man-made calamities or other
the Notice to Proceed arising from the causes where immediate action is
original contract; and, necessary to prevent damage to or loss of
d) The repeat order shall not exceed 25% of life or property, or to restore vital public
the quantity of each item of the original services, infrastructure facilities and other
contract. (Sec 51)

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 40
 public utilities;
c) Take-over of contracts, which have been
rescinded or terminated for causes
provided for in the contract and existing
laws, where immediate action is necessary
to prevent damage to or loss of life or
property, or to restore vital public services,
infrastructure facilities and other public
utilities;
d) Where the subject contract is adjacent
or contiguous to an on-going
infrastructure project, as defined in the
IRR: xxx; or,
e) Subject to the guidelines specified in the
IRR, purchases of Goods from another
agency of the Government, such as the
Procurement Service of the DBM, which is
tasked with a centralized procurement of
commonly used Goods for the government
in accordance with Letters of Instruction No.
755 and EO No. 359, series of 1989. (Sec
53)

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 41
 Law on Other Business authorized to perform banking functions in
the Philippines, are insured with PDIC. As for
Transactions Philippine banks with branches outside the
country, RA 9576 stipulates that subject to
the approval of the Board of Directors, any
PDIC LAW insured bank with branch outside the
Philippines may elect to include for insurance
Legal Basis: its deposit obligations payable at such
RA 3591 or An act establishing the Philippine branch.
Deposit Insurance Corporation, defining its
powers and duties for other purpose, as Foreign currency deposits are also insured by
amended by RA 9302 and RA 9576. PDIC pursuant to RA 6426 (“An act instituting
a foreign currency deposit system in the
Philippines, and for other purposes”) and
Insurable deposits Central Bank (CB) Circular No. 1389.
The term ‘deposit’ means the unpaid balance Depositors may receive payment in the same
of money or its equivalent received by a currency in which the insured deposit is
bank in the usual course of business and for denominated.
which it has given or is obliged to give credit
to a commercial, checking, savings, time or Exclusions from deposit insurance coverage
thrift account, or issued in accordance with as stipulated in R.A. No. 9576:
Bangko Sentral rules and regulations and
other applicable laws, together with such 1. Investment products such as bonds,
other obligations of a bank, which, consistent securities and trust accounts;
with banking usage and practices. 2. Deposit accounts which are unfunded,
fictitious or fraudulent;
The term “insured deposit” means the 3. Deposit products constituting or
amount due to any bona fide depositor for emanating from unsafe and unsound
legitimate deposits in an insured bank net of banking practices;
any obligation of the depositor to the insured 4. Deposits that are determined to be
bank as of date of closure, but not to exceed proceeds of an unlawful activity as
Five hundred thousand pesos (P500,000.00). defined under the Anti-Money Laundering
Law.
PDIC provides a maximum deposit insurance
coverage of PhP500,000 per depositor per
bank. It covers all types of bank deposits in Maximum liability
banks whether denominated in local or The maximum deposit insurance coverage of
foreign currencies. All deposit accounts of a Five hundred thousand pesos (P500,000.00)
depositor in a closed bank maintained in the provided in Section 4(g) of Republic Act
same right and capacity shall be added 3591, as amended herein, shall be paid by
together. the Corporation (Sec 4 RA 9576)

Except for the exclusions stipulated in RA In determining such amount due to any
9576, deposits of all commercial banks, depositor, there shall be added together all
savings and mortgage banks, rural banks, deposits in the bank maintained in the same
private development banks, cooperative right and capacity for his benefit either in his
banks, savings and loan associations, as well own name or in the name of others. A joint
as branches and agencies in the Philippines account regardless of whether the
of foreign banks and all other corporations conjunction ‘and,’ ‘or,’ ‘and/or’ is used, shall

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 42
be insured separately from any individually- deposits, and that in any case where the
owned deposit account: Provided, That (1) If PDIC is not satisfied as to the viability of a
the account is held jointly by two or more claim for an insured deposit, it may require
natural persons, or by two or more juridical final determination of a court of competent
persons or entities, the maximum insured jurisdiction before paying such claim.
deposit shall be divided into as many equal
shares as there are individuals, juridical The PDIC shall commence the determination
persons or entities, unless a different sharing of insured deposits due the depositors of a
is stipulated in the document of deposit, and closed bank upon its actual takeover of the
(2) If the account is held by a juridical person closed bank. The PDIC shall give notice to
or entity jointly with one or more natural the depositors of the closed bank of the
persons, the maximum insured deposit shall insured deposits due them by whatever
be presumed to belong entirely to such means deemed appropriate by the Board of
juridical person or entity Directors: Provided, That the PDIC shall
publish the notice once a week for at least
Provided, further, That the aggregate of the three (3) consecutive weeks in a newspaper
interests of each co-owner over several joint of general circulation or, when appropriate,
accounts, whether owned by the same or in a newspaper circulated in the community
different combinations of individuals, juridical or communities where the closed bank or its
persons or entities, shall likewise be subject branches are located.
to the maximum insured deposit of Five
hundred thousand pesos (P500,000.00). Payment of an insured deposit to any person
by the PDIC shall discharge the PDIC, and
Provided, finally, That, in case of a condition payment of a transferred deposit to any
that threatens the monetary and financial person by the new bank or by an insured
stability of the banking system that may bank in which a transferred deposit has been
have systemic consequences, as determined made available shall discharge the PDIC and
by the Monetary Board, the maximum such new bank or other insured bank, to the
deposit insurance cover may be adjusted in same extent that payment to such person by
such amount, for such a period, and/or for the closed bank would have discharged it
such deposit products, as may be from liability for the insured deposit.
determined by a unanimous vote of the
Board of Directors in a meeting called for the Except as otherwise prescribed by the Board
purpose and chaired by the Secretary of of Directors, neither the PDIC or such other
Finance, subject to the approval of the insured bank shall be required to recognize
President of the Philippines. as the owner of any portion of a deposit
appearing on the records of the closed bank
Requirements for Claims under a name other than that of the
Whenever an insured bank shall have been claimant, any person whose name or interest
closed by the Monetary Board, payment of as such owner is not disclosed on the records
the insured deposits on such closed bank of such closed bank as part owner of said
shall be made by the PDIC as soon as deposit, if such recognition would increase
possible either (1) by cash or (2) by making the aggregate amount of the insured
available to each depositor a transferred deposits in such closed bank.
deposit in another insured bank in an
amount equal to insured deposit of such The PDIC may withhold payment of such
depositor: Provided, however, That the PDIC, portion of the insured deposit of any
in its discretion, may require proof of claims depositor in a closed bank as may be
to be filed before paying the insured required to provide for the payment of any

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 43
liability of such depositor as a stockholder of 2. Disclosure by any official or employee of
the closed bank, or of any liability of such any banking institution to any
depositor to the closed bank or its receiver, unauthorized person of any information
which is not offset against a claim due from concerning said deposit (RA 1405, Sec.
such bank, pending the determination and 3).
payment of such liability by such depositor
or any other liable therefor. Acts not covered by the prohibition
Non-bank official or employee is not covered
Unless otherwise waived by the PDIC, if the by the prohibition. Neither is disclosure by a
depositor in the closed bank shall fail to bank official or employee of information
claim his insured deposits with the about bank deposit in favor of a co-employee
Corporation within two (2) years from actual in the course of the performance of his
takeover of the closed bank by the receiver, duties covered by the prohibition.
or does not enforce his claim filed with the
corporation within two (2) years after the
two-year period to file a claim as mentioned Deposits covered
hereinabove, all rights of the depositor 1. All deposits of whatever nature with
against the PDIC with respect to the insured banks or banking institutions found in the
deposit shall be barred. Philippines.
2. Investments in bonds issued by the
THE SECRECY OF BANK DEPOSITS Philippine government, its branches, and
institutions (R.A. 1405, Sec. 2).
Legal Basis: 3. Trust accounts
RA 1405 or an Act Prohibiting disclosure of or
inquiry into, deposits with any Banking Meaning of the phrase "of whatever nature
Institution and kind"
R.A.1405 is no longer limited to deposits
Purpose governed by the law on loans giving rise to
The purposes of RA 1405 are: creditor-debtor relationship but it covers
1. Encourage deposit in banking institutions; fund of whatever nature so long as the bank
and may use and utilize it in authorized loans
2. Discourage private hoarding so that
banks may lend such funds and assist in Exceptions
the economic development of the Instances where examination or disclosure of
country. information about deposits can be allowed:

1. Upon written consent of the depositor (RA

Prohibited acts 1405, Sec. 2)
The following are the prohibited acts in RA 2. In cases of impeachment
1405: 3. Upon order of competent court in cases of
1. Examination/inquiry/looking into all bribery or dereliction of duty of public
deposits of whatever nature with banks or officials
banking institutions in the Philippines 4. In cases where the money deposited or
(including investment in bonds issued by invested is the subject matter of the
the government) by any person, litigation
government official or office (RA 1405,
Sec. 2). Other Instances:
a. Upon order of the Commissioner of
Internal Revenue in respect of the bank
Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 44
 deposits of a decedent for the purpose of unsafe or unsound banking practices (RA
determining such decedent’s gross estate 3591, as amended, Sec. 8)
(NIRC, Sec. 6[F][1])

b. Upon the order of the Commissioner of i. With court order:

Internal Revenue in respect of bank a. In cases of unexplained wealth under
deposits of a taxpayer who has filed an Sec. 8 of the Anti-Graft and Corrupt
application for compromise of his tax Practices Act (PNB v. Gancayco, L-
liability by reason of financial incapacity 18343, September 30, 1965)
to pay his tax liability b. In cases filed by the Ombudsman and
upon the latter’s authority to examine
c. The Commissioner of Internal Revenue is and have access to bank accounts and
authorized to inquire into bank deposits records (Marquez v. Desierto, GR
of a specific taxpayer upon request for 138569, September 11, 2003)
tax information from a foreign tax
authority pursuant to an international j. Without court order: If the AMLC
convention or agreement on tax matters determines that a particular deposit or
to which the Philippines is a party investment with any banking institution is
related to the following:
d. In case of dormant accounts/deposits for a. Hijacking,
at least 10 years under the Unclaimed b. Kidnapping,
Balances Act (Act No. 3936, Sec. 2) c. Murder,
d. Destructive Arson, and
e. Violation of the Dangerous Drugs Act.
e. The prohibition against examination of f. Acts of Terrorism or in violation of
bank deposit does not preclude its Human Security Act.
garnishment to satisfy a judgment g. In case the law is repealed,
against the depositor (Oñate v. Abrogar, superseded or modified by any law to
G.R. No. 107303, February 21, 1994) the contrary.

Inspection by the Ombudsman

f. Presidential Commission on Good In order that the Ombudsman may inspect a
Government (PCGG) may require the bank deposit: (PILA-Ho)
production of bank records material to its 1. There must be a case pending in court;
investigation (Opinion of the Secretary of 2. The account must be clearly identified;
Justice, February 27, 1987) 3. The inspection must be limited to the
subject matter of the pending case;
4. The inspection may cover only the
g. The Anti-Money Laundering Council
account identified; and
(AMLC) may inquire into any deposit with
5. The bank personnel and the account
any bank in case of violation of the RA
holder must be notified to be present
9160 or the AMLA if there is probable
during the inspection (Marquez v.
cause that it is related to an unlawful
Desierto, G.R. No. 135882, June 27, 2001;
activity (RA 9160, as amended, Sec. 11)
Office of the Ombudsman v. Ibay, G.R.
No. 137538, September 3, 2001).
h. The PDIC and the BSP may examine
deposit accounts and all information Foreign currency deposits
related to them in case of a finding of

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 45
Foreign currency deposits are covered by deposit should be allowed to prevent an
R.A. 6426otherwise known as the “Foreign injustice and for equitable grounds. The
Currency law was enacted to encourage foreign
Deposits Act”. currency deposit and not to benefit a
wrongdoer (Salvacion v. Central Bank of
Secrecy of foreign currency deposits the Philippines, G.R. No. 94723, August
GR: Foreign currency deposits cannot be 21, 1997).
inquired or looked into. All foreign currency
deposits are absolutely confidential (RA 5. The Commissioner of Internal Revenue is
6426, Sec. 8). authorized to inquire into bank deposits
of the following:
XPNs: a. A decedent to determine his estate;
1. The depositor has given his written and
permission. b. Any taxpayer who has filed for an
2. Where the funds deposited in a joint application for compromise of his tax
foreign currency savings account liability
belonged exclusively to one of the c. A specific taxpayer upon request for
depositors and were held in trust for him tax information from a foreign tax
by the other depositor and the other authority pursuant to an international
depositor unilaterally closed the joint convention or agreement on tax
account and transferred the funds to her matters to which the Philippines is a
personal account, the latter cannot party (NIRC, Sec. 6 [f]).
invoke the exemption from court
processes under RA 6426 because she is 6. AMLC may inquire into any deposit with a
not the owner of the deposit in the bank or financial institution in case of
account. Consequently, the depositor who violation of RA 9160 if there is probable
owned the funds can have her enjoined cause that it is related to an unlawful
from making withdrawals from her activity (RA 9160, Sec. 11).
personal account (Van Twest v. Court of
Appeals, G.R. No. 106235, February 10, 7. Upon ex parte application by a law
1994). enforcer authorized by the Anti-Terrorism
Council, the justices of the CA designated
3. A father who sued his daughter for as special court to handle anti-terrorism
illegally withdrawing funds from his cases may authorize the examination of
foreign currency deposit and transferring deposits in a financial institution upon
to another bank in the name of her sister, finding probable cause of the commission
can inquire into the deposit of the sister, of terrorism or conspiracy to commit
because the money deposited belongs to terrorism (RA 9372, Sec. 27-28).
him (China Banking Corp. v. CA, G.R. No.
140687, December 18, 2006). 8. PDIC and BSP may examine deposit
accounts and all information related to
them in case of a finding of unsafe or
unsound banking practices (RA 3591, as
4. The exemption from court process of amended, Sec. 8).
foreign currency deposits under RA 6426
cannot be invoked by a foreign transient 9. AMLC can investigate (a) any property of
who raped a minor, escaped and was held funds related to financing terrorism; (b)
liable for damages to the victim. The property or funds of any person if there is
garnishment of his foreign currency probable cause to believe he is

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 46
 committing or attempting or conspiring to should be allowed to prevent injustice and
commit terrorism or financing terrorism for equitable grounds. The law was enacted
(RA 10168, Sec. 10) to encourage foreign currency deposit and
not to benefit a wrongdoer (Salvacion v.
Central Bank of the Philippines).
Garnishment of deposits including TRUTH IN LENDING ACT
foreign deposits
Garnishment of a bank deposit does not Legal Basis:
violate the law RA 3765 or The Truth in Lending Act

The prohibition against examination or Purpose

inquiry does not preclude its being garnished It is hereby declared to be the policy of the
for satisfaction of judgment. The disclosure is State to protect its citizens from a lack of
purely incidental to the execution process awareness of the true cost of credit to the
and it was not the intention of the legislature user by assuring a full disclosure of such cost
to place bank deposits beyond the reach of with a view of preventing the uninformed use
judgment creditor (PCIB v. CA, G.R. No. of credit to the detriment of the national
84526, January 28, 1991). economy.

Garnishment of foreign currency deposits Obligation of creditors to persons to

GR: Foreign currency deposits shall be whom credit is extended
exempt from attachment, garnishment, or Any creditor shall furnish to each person to
any other order or process of any court, whom credit is extended, prior to the
legislative body, government agency or any consummation of the transaction, a clear
administrative body whatsoever (RA 6426, statement in writing setting forth, to the
Sec 8). extent applicable the following information:
1) The cash price or delivered price of the
XPN: The application of Sec. 8 of RA 6426 property or service to be acquired;
depends on the extent of its justice. The 2) The amounts, if any, to be credited as
garnishment of a foreign currency deposit down payment and/or trade-in;
should be allowed to prevent injustice and 3) The difference between the amounts set
for equitable grounds, otherwise, it would forth under clauses (1) and (2);
negate Article 10 of the New Civil Code 4) The charges, individually itemized, which
which provides that “in case of doubt in the are paid or to be paid by such person in
interpretation or application of laws, it is connection with the transaction but which
presumed that the lawmaking body intended are not incident to the extension of credit;
right and justice to prevail (Salvacion v. 5) The total amount to be financed;
Central Bank of the Philippines, G.R. 94723, 6) The finance charge expressed in terms of
August 21, 1997). pesos and centavos; and
7) The percentage that the finance charge
The foreign currency deposit of a transient bears to the total amount to be financed
foreigner who illegally detained and raped a expressed as a simple annual rite on the
minor Filipina can be garnished to satisfy the outstanding unpaid balance of the
award for damages to the victim. The obligation.
exemption from garnishment of foreign
currency deposits under R.A. 6426 cannot be Covered and excluded transactions
invoked to escape liability for the damages Applicable to all creditors engaged in the
to the victim. The garnishment of the following types of credit transactions:
transient foreigner’s foreign currency deposit

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 47
a) Any loans, mortgages, deeds of trust, any court of competent jurisdiction. When
advances and discounts; the aggrieved is entitled to a recovery, the
b) Any conditional sales contract, any creditor shall be liable for reasonable
contract to sell, or sale or contract of sale attorney's fees and court costs. The one year
of property or services, either for present period is reckoned from the date of demand.
or future delivery, under which part or all
of the price is payable subsequent to the Any person who willfully violates any
making of such sale or contract; provision of this Act or any regulation issued
c) Any rental-purchase contract; thereunder shall be fined by P1K - P5K or
d) Any contract or arrangement for the hire, imprisonment for 6 months - 1 year, or both.
bailment, or leasing of property; THE ANTI-MONEY LAUNDERING
e) Any option, demand, lien, pledge, or other
ACT
claim against, or for delivery of, property
or money;
Legal Basis:
f) Any purchase, or other acquisition of, or
RA 9160 or The Anti-Money Laundering Act
any credit upon the security of, any
of 2001 as amended by RA No 9194, 10167,
obligation or claim arising out of any of
10365, 10927
the foregoing; and
g) Any transaction or series of transactions
Purpose, policies and Principles
having a similar purpose or effect.
Policy of the law
a) To protect and preserve the integrity of
Considering that the specific purpose of the
the Philippine financial system, including
law is the full disclosure of the true cost of
the confidentiality of bank accounts.
credit, the following categories of credit
b) To ensure that the Philippines shall not be
transactions are outside the scope of the
used as a money laundering site for the
above regulations:
proceeds of any unlawful activity.
a) Credit transactions which do not involve
c) To extend cooperation, consistent with
the payment of any finance charge by the
Philippines' foreign policy, in
debtor; and
transnational investigations and
b) Credit transactions in which the debtor is
prosecutions of persons involved in
the one specifying a definite and fixed set
money laundering activities wherever
of credit terms such as
committed.
1. bank deposits,
d) To protect life, liberty and property from
2. insurance contracts,
acts of terrorism and to condemn
3. sale of bonds, etc.
terrorism and those who support and
finance it; and to make the financing of
Consequences of non-compliance with terrorism a crime against the Filipino
obligation people, against humanity and against the
The creditor shall be liable to such person in law of nations.
the amount of P100 or in an amount equal to e) To recognize and to adhere to
twice the finance charge required by such international commitments to combat the
creditor in connection with such transaction, financing of terrorism.
whichever is the greater, except that such f) To reinforce the fight against terrorism by
liability shall not exceed P2,000 on any credit preventing and suppressing the
transaction. commission of said offenses through
freezing and forfeiture of property or
Action to recover such penalty may be funds while protecting human rights.
brought by such person within one year from
the date of the occurrence of the violation, in
Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 48
Purpose (d) A sound risk management system to
Because the objective of money laundering identify, assess, mitigate, monitor, and
is to get the illegal funds back to the control risks associated with money
individual who generated them, launderers laundering/terrorism financing is
usually prefer to move funds through stable essential.
financial systems. Money laundering activity (e) Timely and effective domestic and
may also be concentrated geographically international cooperation and established
according to the stage the laundered funds coordination mechanism are critical in the
have reached. The Anti-Money Laundering investigation and prosecution of money
Act (AMLA) of 2001 or RA 9160 therefor laundering/terrorism financing and
criminalizes unlawful activities such as graft associated unlawful activities.
and corrupt practices, fraudulent practices, (f) The implementation of AML laws, rules
robbery and extortion, swindling and and regulations shall conform to
plunder, amongst other activities. international AML/CTF standards and best
practices.
Governing Principles (g) The observance of the constitutional
The anti-money laundering/ counter- requirements on due process, and
terrorism financing (AML/CTF) regime of the injunction against ex post facto laws and
Philippines shall be governed by the bills of attainder.
following principles:

(a) The AMLC (AML Council), as the country’s

financial intelligence unit, is vested by Definition of terms
law with independence to perform its Monetary instrument” refers to:
mandate. It upholds the continuous (1) coins or currency of legal tender of the
development of a team of highly ethical Philippines, or of any other country;
and professional personnel and (2) drafts, checks and notes;
implements efficient processes in the (3) securities or negotiable instruments,
delivery of its mandate. bonds, commercial papers, deposit
(b) The AML/CTF laws, rules and regulations certificates, trust certificates, custodial
and other relevant issuances are receipts or deposit substitute
implemented using a risk-based approach instruments, trading orders, transaction
in a way that responds to the need to tickets and confirmations of sale or
bring the financially excluded into the investments and money market
regulated financial sector, while at the instruments; and
same time maintaining effective (4) other similar instruments where title
safeguards and effective controls against thereto passes to another by
money laundering/terrorism financing endorsement, assignment or delivery.
risks.
(c) A strong compliance culture, good Unlawful activities
governance and observance of high Unlawful activities refer to any act or
ethical standards in the conduct of omission, or series or combination thereof,
business are good foundations for an involving or having direct relation, to the
effective AML/CTF regime. It will be following:
developed and sustained through (1) Kidnapping for ransom under Article 267 of
capacity building and deterrence of Act No. 3815, otherwise known as the Revised
violations through imposition of Penal Code, as amended;
appropriate, proportionate and dissuasive (2) Sections 3, 4, 5, 7, 8 and 9 of Article Two of
Republic Act No. 9165, otherwise known as
sanctions.

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 49
 the Comprehensive Dangerous Drugs Act of (20) Violations of Sections 78 to 79 of Chapter
2002; IV, of Presidential Decree No. 705, otherwise
(3) Section 3 paragraphs B, C, E, G, H and I of known as the Revised Forestry Code of the
Republic Act No. 3019, as amended; Philippines, as amended;
otherwise known as the Anti-Graft and (21) Violations of Sections 86 to 106 of Chapter
Corrupt Practices Act; VI, of Republic Act No. 8550, otherwise known
(4) Plunder under Republic Act No. 7080, as as the Philippine Fisheries Code of 1998;
amended; (22) Violations of Sections 101 to 107, and 110
(5) Robbery and extortion under Articles 294, of Republic Act No. 7942, otherwise known as
295, 296, 299, 300, 301 and 302 of the the Philippine Mining Act of 1995;
Revised Penal Code, as amended; (23) Violations of Section 27(c), (e), (f), (g) and
(6) Jueteng and Masiao punished as illegal (i), of Republic Act No. 9147, otherwise known
gambling under Presidential Decree No. 1602; as the Wildlife Resources Conservation and
(7) Piracy on the high seas under the Revised Protection Act;
Penal Code, as amended and Presidential (24) Violation of Section 7(b) of Republic Act
Decree No. 532; No. 9072, otherwise known as the National
(8) Qualified theft under Article 310 of the Caves and Cave Resources Management
Revised Penal Code, as amended; Protection Act;
(9) Swindling under Article 315 of the Revised (25) Violation of Republic Act No. 6539,
Penal Code, as amended; otherwise known as the Anti-Carnapping Act
(10) Smuggling under Republic Act Nos. 455 of 2002, as amended;
and 1937;; (26) Violations of Sections 1, 3 and 5 of
(11) Violations under Republic Act No. 8792, Presidential Decree No. 1866, as amended,
otherwise known as the Electronic Commerce otherwise known as the decree Codifying the
Act of 2000; Laws on Illegal/Unlawful Possession,
(12) Hijacking and other violations under Manufacture, Dealing In, Acquisition or
Republic Act No. 6235; destructive arson and Disposition of Firearms, Ammunition or
murder, as defined under the Revised Penal Explosives;
Code, as amended; (27) Violation of Presidential Decree No. 1612,
(13) Terrorism and conspiracy to commit otherwise known as the Anti-Fencing Law;
terrorism as defined and penalized under (28) Violation of Section 6 of Republic Act No.
Sections 3 and 4 of Republic Act No. 9372; 8042, otherwise known as the Migrant
(14) Financing of terrorism under Section 4 and Workers and Overseas Filipinos Act of 1995,
offenses punishable under Sections 5, 6, 7 as amended by Republic Act No. 10022;
and 8 of Republic Act No. 10168, otherwise (29) Violation of Republic Act No. 8293,
known as the Terrorism Financing Prevention otherwise known as the Intellectual Property
and Suppression Act of 2012: Code of the Philippines;
(15) Bribery under Articles 210, 211 and 211-A (30) Violation of Section 4 of Republic Act No.
of the Revised Penal Code, as amended, and 9995, otherwise known as the Anti-Photo and
Corruption of Public Officers under Article 212 Video Voyeurism Act of 2009;
of the Revised Penal Code, as amended; (31) Violation of Section 4 of Republic Act No.
(16) Frauds and Illegal Exactions and 9775, otherwise known as the Anti-Child
Transactions under Articles 213, 214, 215 and Pornography Act of 2009;
216 of the Revised Penal Code, as amended; (32) Violations of Sections 5, 7, 8, 9, 10(c), (d)
(17) Malversation of Public Funds and Property and (e), 11, 12 and 14 of Republic Act No.
under Articles 217 and 222 of the Revised 7610, otherwise known as the Special
Penal Code, as amended; Protection of Children Against Abuse,
(18) Forgeries and Counterfeiting under Exploitation and Discrimination;
Articles 163, 166, 167, 168, 169 and 176 of (33) Fraudulent practices and other violations
the Revised Penal Code, as amended; under Republic Act No. 8799, otherwise
(19) Violations of Sections 4 to 6 of Republic known as the Securities Regulation Code of
Act No. 9208, otherwise known as the Anti- 2000; and
Trafficking in Persons Act of 2003;

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 50
(34) Felonies or offenses of a similar nature iii. Providing a registered office;
that are punishable under the penal laws of business address or
other countries.” accommodation, correspondence
or administrative address for a
Same Conduct Approach. — In determining company, a partnership or any
whether or not a felony or offense punishable other juridical person or legal
under the penal laws of other countries is "of arrangement; and
a similar nature" so as to constitute an iv. Acting as (or arranging for another
unlawful activity under the AMLA, it is person to act as) a nominee
sufficient that both the Philippines and the shareholder for another person.
other jurisdiction criminalize the conduct or
activity underlying the offense, regardless of
4) Persons, including lawyers,
whether both countries place the offense
accountants and other professionals,
within the same category, or denominate the
who provide any of the following
offense under the same nomenclature.
services:
a) Managing of client money,
securities or other assets;
Covered persons b) Management of bank, savings,
The following are the covered persons under securities or other assets;
the AMLA: c) Organization of contributions for
the creation, operation or
a) The following financial institutions: management of companies; and
1) Persons supervised and/or regulated d) Creation, operation or
by BSP, including their subsidiaries management of juridical persons or
and affiliates, which are also covered arrangements, and buying and
persons, supervised and/or regulated selling business entities.
by the BSP.
2) Persons supervised or regulated by IC. 5) Casinos, including internet-based
3) Persons supervised or regulated by casinos and ship-based casinos, with
SEC. respect to their casino cash
transactions related to their gaming
b) The following Designated Non-Financial operations.
Businesses and Professions or DNFBPs:
1) Jewelry dealers. The term 'covered persons' shall EXCLUDE
2) Dealers in precious metals, and lawyers and accountants acting as
dealers in precious stones. independent legal professionals
3) Company service providers, which, as 1. in relation to information concerning
a business, provide any of the their clients or
following services to third parties: 2. where disclosure of information would
i. Acting as a formation agent of compromise client confidences or the
juridical persons; attorney-client relationship:
ii. Acting as (or arranging for another
person to act as) Provided, that these lawyers and
 a director or corporate accountants
secretary of a company, 1. are authorized to practice in the
 a partner of a partnership, or Philippines and
 a similar position in relation to 2. shall continue to be subject to the
other juridical persons; provisions of their respective codes of

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 51
 conduct and/or professional or 12 of this act; and (b) property or funds of
responsibility. any person or persons in relation to whom
there is probable cause to believe that such
person or persons are committing or
Money laundering, terrorism and attempting or conspiring to commit, or
financing and asset forfeiture participating in or facilitating the financing of
Money laundering is committed by: the aforementioned sections of this Act
a) Any person who, knowing that any (terrorism activities) (Section 35, RA 11479)
monetary instrument or property
represents, involves, or relates to the Authority to freeze
proceeds of any unlawful activity: Upon the issuance by the court of a
preliminary order of proscription or
1) transacts said monetary instrument or designation under section 25 of this Act, the
property; AMLC, either upon its own initiative or at the
2) converts, transfers, disposes of, request of the ATC, is hereby authorized to
moves, acquires, possesses or uses issue ex parte order to freeze without delay:
said monetary instrument or property; (a) Any property or funds that are in any way
3) conceals or disguises the true nature, related to financing of terrorism as
source, location, disposition, defined and penalized under RA 10168
movement or ownership of or rights and violation of Sections 4, 5, 6, 7, 8, 9,
with respect to said monetary 10, 11 or 12 of this act;
instrument or property; (b) Property or funds of any person or
4) attempts or conspires to commit ML persons in relation to whom there is
offenses referred to in (1), (2), or (3) probable cause to believe that such
above; person or persons are committing or
5) aids, abets, assists in, or counsels the attempting or conspiring to commit, or
commission of the ML offenses participating in or facilitating the
referred to in (1), (2), or (3) above; financing of the aforementioned sections
and of this Act (terrorism activities) (Section
6) performs or fails to perform any act as 36 par 1, RA 11479)
a result of which he facilitates the
offense of ML referred to in items (1), The freeze order shall be effective upon the
(2), or (3) above. period not exceeding 20 days. Upon petition
filed by the AMLC before the expiration of
b) Any covered person who, knowing that a the period, the effectivity of the freeze order
covered or suspicious transaction is may be extended upto a period not
required under the AMLA to be reported exceeding six (6) months upon the order of
to the AMLC, fails to do so. the Court of Appeals (CA). (Section 36 par
2, RA 11479)
Authority of the Anti-Money Laundering
Council (AMLC) to investigate, inquire and *Preliminary Order of proscription
examine bank deposits -Where the court (CA) has determined that
xxx the AMLC, either upon its own initiative probable cause exists on the basis of the
or at the request of the Anti-Terrorism verified application which is sufficient in form
Council (ATC), is hereby authorized to and substance, that the issuance of an order
investigate: (a) any property or funds that of proscription is necessary to prevent the
are in any way related to financing or commission of terrorism, he/she shall, within
terrorism as defined and penalized under RA 72 hours from filing of the application, issue
10168 or violation of Sections 4, 6, 7, 10, 11 a preliminary order of proscription declaring

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 52
that the respondent is a terrorist and an e) has been commingled with other
outlawed organization or association xxx. monetary instruments or property
belonging to either the offender himself
*Designation of Terrorist individual, groups or a third person or entity, thereby
or persons, organizations or associations rendering the same difficult to identify or
-Pursuant to the obligations under United be segregated for purposes of forfeiture.
Nations Security Council Resolution (UNSCR)
No. 1373, the ATC shall automatically adopt
the UNSC consolidated list of designated Preventive measures and obligations of
individual, groups or persons, organizations covered persons
or associations designated and/or identified
as a terrorist, one who finances terrorism, or  Prohibited accounts
a terrorist organization or group.
"Covered Transaction" refers to (not
Asset Forfeiture necessarily prohibited but shall be reported
The following rules shall be observed in asset to the AMLC):
forfeiture proceedings: 1) A transaction in cash or other equivalent
a) No prior criminal charge, pendency of a monetary instrument exceeding P500K
case, or conviction for an unlawful activity within one (1) banking day;
or ML offense is necessary for the 2) A transaction with or involving jewelry
commencement or the resolution of a dealers, dealers in precious metals and
petition for civil forfeiture. dealers in precious stones in cash or
b) No asset shall be attached or forfeited to other equivalent monetary instrument
the prejudice of a candidate for an exceeding P1M.
electoral office during an election period. 3) A casino cash transaction exceeding P5M
or its equivalent in other currency.
Petition for Civil Forfeiture — Upon
determination that probable cause exists "Suspicious Transaction" refers to a
that any monetary instrument or property is transaction, regardless of amount, where any
in any way related to an unlawful activity or of the suspicious circumstances is
ML offense, the AMLC shall file with the RTC, determined, based on suspicion or, if
through the OSG, a verified petition for civil available, reasonable grounds, to be existing.
forfeiture.
1) There is no underlying legal or trade
Equal Value Assets — Other monetary obligation, purpose or economic
instrument or property of equal value may justification;
be included in the Petition where the 2) The client is not properly identified;
monetary instrument or property that should 3) The amount involved is not
be subject of forfeiture: commensurate with the business or
financial capacity of the client;
a) cannot be located despite due diligence; 4) It may be perceived that the client’s
b) has been substantially altered, destroyed, transaction is structured in order to avoid
diminished in value or otherwise rendered being the subject of reporting
worthless by any act or omission; requirements;
c) has been concealed, removed, converted, 5) Any circumstance relating to the
or otherwise transferred; transaction which is observed to deviate
d) is located outside the Philippines or has from the profile of the client and/or the
been placed or brought outside the client’s past transactions with the
jurisdiction of the court; or covered institution;

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 53
6) The transaction is in a way related to an existence and true identity of the owners of
unlawful activity or offense that is about such accounts.
to be, is being, or has been committed;
7) Any analogous or similar transactions to Anonymous accounts, accounts under
the foregoing. fictitious names, and all other similar
accounts shall be absolutely prohibited. Peso
Reporting of Covered and Suspicious and foreign currency non-checking
Transactions. — numbered accounts shall be allowed.
Covered persons shall report to the AMLC all
covered transactions and suspicious
transactions within five (5) working days Beneficial ownership
from occurrence thereof, unless the AMLC Beneficial owners refers to those individuals
prescribes a different period not exceeding or natural persons who ultimately own or
fifteen (15) working days. control the customer, or those for whom
another person conducts a transaction.
When reporting covered or suspicious Money launderers and terrorists routinely
transactions to the AMLC, covered use the cloak of anonymity to prevent the
institutions and their officers and employees AMLC and law enforcement agencies (LEAs)
are prohibited from communicating directly to track them down. In the case of the AMLC,
or indirectly, in any manner or by any they also seek to avoid freezing and
means, to any person or entity, the media, forfeiture of their assets obtained through
the fact that a covered or suspicious criminal activities.
transaction report was made, the contents
thereof, or any other information in relation In many well-publicized cases, criminal
thereto. Neither may such reporting be elements and a number of high-ranking
published or aired in any manner or form by public figures have used dummies, including
the mass media, electronic mail, or other non-governmental organizations (NGOs), and
similar devices. In case of violation thereof, individuals, to hide their identities. These
the concerned officer and employee of the criminals then use these dummies to
covered institution and media shall be held conduct multiple financial transactions
criminally liable. involving multiple accounts in the millions of
pesos, thereby blurring the illegal source of
the funds.
 Customer due diligence
Customer Identification - Covered institutions The AMLC Guidelines on beneficial ownership
shall: for all banks, insurance companies, and
a) Establish and record the true identity of other covered persons, provide that covered
its clients based on official documents. persons must identify beneficial owners.
b) Maintain a system of verifying the true Covered persons must conduct the risks
identity of their clients; and posed by the customer and the beneficial
c) In case of corporate clients, require a owners. If they pose a high risk for money
system of verifying their legal existence laundering or terrorism financing, validation
and organizational structure, as well as of information must be performed by the
the authority and identification of all covered person. The Guidelines therefore
persons purporting to act on their behalf. promote transparency and dissuade criminal
elements, and would-be money launderers
NOTE: The BSP may conduct annual testing and terrorists from hiding their identities.
solely limited to the determination of the

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 54
Record keeping requirements
Record Keeping. — All records of all
transactions of covered institutions shall be
maintained and safely stored for five (5)
years from the dates of transactions.

With respect to closed accounts, for at least

five (5) years from the dates when they were
closed.

Safe Harbor
NO administrative, criminal or civil
proceedings shall lie against any person
1. For having made a Covered Transaction
Report or an Suspicious Transaction
Report
2. In the regular performance of his duties
and
3. In good faith,
4. Whether or not such reporting results in
any criminal prosecution under the AMLA
or any other Philippine law.

Communicating, directly or indirectly, in any

manner or by an means, to any person, the
fact that a covered or suspicious transaction
report was made, the contents thereof, or
any other information in relation thereto.

NOTE: If the reporting is done by any person

in the regular performance of his duties in
good faith, no administrative, criminal or civil
proceedings shall lie against said person,
whether or not such reporting results in any
criminal prosecution under this Act of any
other law.

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 55
 C. Legal recognition and communication
of electronic data messages and electronic
documents
D. Electronic commerce in carriage of
goods
E. Electronic transactions in government

Ease of Doing Business and

Efficient Delivery of Government
Service Delivery Act

A. Policy, construction and interpretation

B. Definition of terms
C. Coverage and scope
D. Reengineering of systems and
procedures
E. Citizen’s charter 8.8.6 Accessing
Intellectual Property Law (except government services
provisions under Part 1) F. Streamlined procedures for the
issuances of permits and licenses
A. Patents G. Violations, jurisdiction, penalties, and
B. Trademark, Service Marks and Trade immunity
Names
C. Copyright

Data Privacy Act

LABOR LAW
A. Definitions
B. Scope of application Legal Basis:
C. Data Privacy Principles PD 442 or the Labor Code of the Philippines
D. Processing of personal data
E. Security measures for protection of The State shall afford protection to labor,
personal data promote full employment, ensure equal work
F. Rights of Data Subject opportunities regardless of sex, race or creed
G. Data breach notification and regulate the relations between workers
H. Outsourcing and subcontracting and employers. The State shall assure the
agreements rights of workers to self-organization,
I. Registration and compliance collective bargaining, security of tenure, and
requirements just and humane conditions of work. (Sec 3)

Labor Standards
Electronic Commerce Act Basic pay
The normal hours of work of any employee
A. Principles shall not exceed eight (8) hours a day. (Sec
B. Application 8.7.3 Definition of terms 83) Hours worked shall include (a) all time
during which an employee is required to be

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 56
on duty or to be at a prescribed workplace; paid for the overtime work, an additional
and (b) all time during which an employee is compensation equivalent to his regular wage
suffered or permitted to work. Rest periods plus at least 25% thereof. Work performed
of short duration during working hours shall beyond eight hours on a holiday or rest day
be counted as hours worked. (Sec 84) shall be paid an additional compensation
equivalent to the rate of the first eight hours
Wage paid to any employee shall mean the on a holiday or rest day plus at least thirty
remuneration or earnings, however percent (30%) thereof. (Art 87)
designated, capable of being expressed in
terms of money, whether fixed or Emergency overtime work
ascertained on a time, task, piece, or Any employee may be required by the
commission basis, or other method of employer to perform overtime work in any of
calculating the same, which is payable by an the following cases:
employer to an employee under a written or
unwritten contract of employment for work 1. When the country is at war or when any
done or to be done, or for services rendered other national or local emergency has
or to be rendered and includes the fair and been declared by the National Assembly
reasonable value, as determined by the or the Chief Executive;
Secretary of Labor and Employment, of 2. When it is necessary to prevent loss of
board, lodging, or other facilities customarily life or property or in case of imminent
furnished by the employer to the employee. danger to public safety due to an actual
(Art 97) or impending emergency in the locality
caused by serious accidents, fire, flood,
Basic Wage — All the remuneration or typhoon, earthquake, epidemic, or other
earnings paid by an employer to a worker for disaster or calamity;
services rendered on normal working days 3. When there is urgent work to be
and hours but does not include : performed on machines, installations, or
a) COLA; equipment, in order to avoid serious loss
b) Profit sharing payments; or damage to the employer or some other
c) Premium pay; cause of similar nature;
d) 13th month pay; or 4. When the work is necessary to prevent
e) Other monetary benefits. loss or damage to perishable goods; and
5. Where the completion or continuation of
Wage Salary the work started before the eighth hour is
Compensation paid for Compensation for necessary to prevent serious obstruction
manual skilled or higher or
or prejudice to the business or operations
unskilled labor superior level of
employment of the employer.
Compensation for labor Relates to a position or
office For purposes of computing overtime and
Shall not be subject to
other additional remuneration as required by
execution, attachment NOT Exempt
or garnishment except this Chapter, the "regular wage" of an
for debts incurred for employee shall include the cash wage only,
food, shelter, clothing without deduction on account of facilities
and medical
provided by the employer. (Art 90)
attendance.

Overtime premium Night shift differential

Work may be performed beyond eight (8) Every employee shall be paid a night shift
hours a day provided that the employee is differential of not less than 10% of his
regular wage for each hour of work

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 57
performed between ten o’clock in the Every employee who has rendered at least
evening and six o’clock in the morning. (Art one year of service shall be entitled to a
86) yearly service incentive leave of five days
1. 110% of Basic Hourly Rate; with pay. (Art 95)
2. Employees working between 10 PM - 6
AM of the next day; The phrase “one year of service” of the
3. NOT waivable, founded on public policy. employee means service within twelve (12)
months, whether continuous or broken,
Holiday premium reckoned from the date the employee
Every worker shall be paid his regular daily started working. The period includes
wage during regular holidays, except in retail authorized absences, unworked weekly rest
and service establishments regularly days, and paid regular holidays.
employing less than ten (10) workers;
Maternity leave
The employer may require an employee to RA 11210 - 105-Day Expanded Maternity
work on any holiday but such employee shall Leave Law
be paid a compensation equivalent to twice 1) Increased maternity leave with full pay;
his regular rate; (Art 94)
a) 105 days for natural or cesarean
Regular Holidays (CY 2022): delivery;
January 1 New Year’s Day b) 60 days for miscarriage or emergency
April 9 Araw ng Kagitingan termination of pregnancy.
April 14 Maunday Thursday
(varies)
April 15 Good Friday 2) Option to extend maternity leave for
(varies) additional thirty (30) days without pay;
May 1 Labor Day -Notify ER at least 45 days before end of
June 12 Independence Day maternity leave to avail of extension.
August 29 National Heroe’s Day
November 30 Bonifacio Day
December 25 Christmas Day 3) Additional fifteen (15) days with full pay
December 30 Rizal Day for solo parents;
As Holding of General
designated Elections (Art 94)
4) Combinations of prenatal and postnatal
by law
leave;
Double Holiday Rule -Compulsory postnatal at least 60 days.
a) If unworked = 200%
b) If worked = 300% 5) Maternity leave regardless of frequency;
c) If falls on a rest day = 390% 6) Allocation of maternity leave credits;
a) allocate up to seven (7) days of said
13th month pay benefits to the child's father, whether or
All employers are hereby required to pay all not the same is married to the female
their employees receiving a basic salary of worker.
not more than P1,000 a month, regardless of b) alternate caregiver who may be a
the nature of their employment, a 13th- relative within the fourth degree of
month pay not later than December 24 of consanguinity or the current partner of
every year. (PD 851) the female worker sharing the same
household.
Leaves c) In the event the beneficiary female
8.9.1.7 Service incentive leave worker dies or is permanently
incapacitated, the balance of her

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 58
 maternity leave benefits shall accrue to (3) Parent left solo or alone with the
the father of the child or to a qualified responsibility of parenthood while the
caregiver. spouse is detained or is serving
7) Maternity leave after termination of sentence for a criminal conviction for
service; at least one (1) year;
a) occurs not more than fifteen (15) (4) Parent left solo or alone with the
calendar days after the termination of responsibility of parenthood due to
an employee's service, as her right physical and/or mental incapacity of
thereto has already accrued. spouse as certified by a public medical
b) such period is not applicable when the practitioner;
employment of the pregnant woman (5) Parent left solo or alone with the
worker has been terminated without just responsibility of parenthood due to
cause. legal separation or de facto separation
8) Voluntary working arrangement during the from spouse for at least one (1) year,
maternity leave period. as long as he/she is entrusted with the
custody of the children;
Paternity leave (6) Parent left solo or alone with the
(Sec 3 RA 8187) responsibility of parenthood due to
 Is granted to all married male employees declaration of nullity or annulment of
in the private sector, regardless of their marriage as decreed by a court or by a
employment status. church as long as he/she is entrusted
 Government employees are also entitled with the custody of the children;
to the paternity leave benefit. (7) Parent left solo or alone with the
 Entitled to full pay, consisting of basic responsibility of parenthood due to
salary, for the 7 days of paternity abandonment of spouse for at least
leave, for up to the first four (4) one (1) year;
deliveries. (8) Unmarried mother/father who has
1) A married male employee; preferred to keep and rear her/his
2) Cohabiting with spouse; child/children instead of having others
3) Has applied for PL; care for them or give them up to a
4) Legitimate spouse gave birth or had a welfare institution;
miscarriage. (9) Any other person who solely provides
 In the event that the paternity leave is parental care and support to a child or
not availed of, it shall not be convertible children;
to cash and shall not be cumulative. (10) Any family member who
assumes the responsibility of head of
Parental leave for solo parent family as a result of the death,
RA 8972 abandonment, disappearance or
Solo parent - any individual who falls under prolonged absence of the parents or
any of the following categories (Sec 3): solo parent.

(1) A woman who gives birth as a result of A change in the status or circumstance of the
rape and other crimes against chastity parent claiming benefits under this Act, such
even without a final conviction of the that he/she is no longer left alone with the
offender: Provided, That the mother responsibility of parenthood, shall terminate
keeps and raises the child; his/her eligibility for these benefits.
(2) Parent left solo or alone with the
responsibility of parenthood due to In addition to leave privileges under existing
death of spouse; laws, parental leave of not more than seven

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 59
(7) working days every year shall be
granted to any solo parent employee who Pension, Retirement and other benefits
has rendered service of at least one (1) year.
(Sec 8) I. PENSION
1. Monthly Pension
*The seven-day parental leave shall be non- (a) The monthly pension shall be the highest
cumulative. of the following amounts:

*In the event that the parental leave is not (1) The sum of the following:
availed of, said leave shall not be  ₱300.00; plus
convertible to cash unless specifically  20% of the average monthly salary
agreed upon previously. credit; plus
 Two percent (2%) of the average
monthly salary credit for each credited
year of service in excess of ten (10)
SOCIAL SECURITY LAW years; or
(2) 40% of the average monthly salary
Legal Basis: credit; or
RA 11199 or the Social Security Act of 2018 (3) ₱1,000.00: Provided, That the monthly
pension shall in no case be paid for an
Definitions aggregate amount of less than sixty
(60) months.
Scope and Coverage (Sec 9)
1) The SS Law mandates that all (b) Notwithstanding the preceding
employees including kasambahays or paragraph, the minimum pension shall be
domestic workers not over sixty (60) ₱1,200.00 for members with at least ten (10)
years of age shall be members of the SSS credited years of service and ₱2,400.00 for
(Sec 9). The law also mandates those with twenty (20) credited years of
compulsory coverage of the Self- service: Provided, That the Commission,
Employed as stated in Sec 9-A which upon determination of actuarial soundness,
provides that self-employed includes, but may provide pension increase than the
not limited to, the following: amounts specified herein.
a) All self-employed professionals;
b) Partners and single proprietors of (c) Additional Benefit Allowance. - Pursuant
businesses; to Memorandum from the Executive
c) Actors and actresses, directors, Secretary dated 22 February 2017, by
scriptwriters and news correspondents authority of the President of the Republic of
who do not fall within the definition of the Philippines, an additional monthly benefit
the term “employee” in Sec 8 (d) of allowance amounting to ₱1,000.00 shall be
this Act; given to all retirement, death, and disability
d) Professional athletes, coaches, pensioners receiving monthly pensions in or
trainers and jockeys; and after January 2017.
e) e) Individual farmers and fishermen.
2. Dependent’s Pension
2) OFWs, sea-based or land-based, are Where monthly pension is payable on
compulsory members as provided for account of death, permanent total disability
under Sec 9-B. or retirement, dependents’ pension
equivalent to 10% of the monthly pension or
₱250.00, whichever is higher, shall also be

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 60
paid for each dependent child conceived on  The monthly pension shall be suspended
or before the date of the contingency but not upon the reemployment or resumption of
exceeding five (5), beginning with the self-employment of a retired member who
youngest and without substitution: Provided, is less than sixty-five (65) years old.
That where there are legitimate and
illegitimate children, the former shall be III. DEATH BENEFITS
preferred. Upon the death of a member who has paid at
least thirty-six (36) monthly contributions
*Dependents – The dependents shall be the prior to the semester of death, his primary
following: beneficiaries shall be entitled to the monthly
a. The legal spouse entitled by law to receive pension: Provided, That if he has no primary
support from the member; beneficiaries, his secondary beneficiaries
b. The legitimate, legitimated or legally adopted,
shall be entitled to a lump sum benefit
and illegitimate child who is unmarried, not
equivalent to thirty-six (36) times the
gainfully employed, and has not reached
twenty-one (21) years of age, or if over monthly pension.
twenty-one (21) years of age, he is
congenitally or while still a minor has been If he has not paid the required thirty-six (36)
permanently incapacitated and incapable of monthly contributions, his primary or
self-support, physically or mentally: and secondary beneficiaries shall be entitled to a
c. The parent who is receiving regular support lump sum benefit equivalent to the monthly
from the member. (Sec 8.e) pension times the number of monthly
contributions paid to the SSS or twelve (12)
II. RETIREMENT BENEFITS times the monthly pension, whichever is
 A member who has paid at least 120 higher.
monthly contributions prior to the
semester of retirement and who: *Beneficiaries – The dependent spouse until
(1) has reached the age of sixty (60) he or she remarries, the dependent legitimate,
years and is already separated from legitimated or legally adopted, and illegitimate
employment or has ceased to be self- children, who shall be the primary
employed; or beneficiaries of the member: Provided, That
(2) has reached the age of sixty-five (65) the dependent illegitimate children shall be
years, shall be entitled for as long as he entitled to 50% of the share of the legitimate,
lives to the monthly pension: Provided, legitimated or legally adopted children:
That he shall have the option to receive Provided, further, That in the absence of the
his first eighteen (18) monthly pensions in dependent legitimate, legitimated or legally
lump sum discounted at a preferential adopted children of the member, his/her
rate of interest to be determined by the dependent illegitimate children shall be
SSS. entitled to 100% of the benefits. In their
absence, the dependent parents who shall be
the secondary beneficiaries of the member.
 A covered member who is sixty (60) years
In the absence of all the foregoing, any other
old at retirement and who does not
person designated by the member as his/her
qualify for pension benefits under
secondary beneficiary. (Sec 8.k)
paragraph (a) above, shall be entitled to a
lump sum benefit equal to the total
IV. PERMANENT DISABILITY BENEFIT
contributions paid by him and on his
Upon the permanent total disability of a
behalf: Provided, That he is separated
member who has paid at least thirty-six (36)
from employment and is not continuing
monthly contributions prior to the semester
payment of contributions to the SSS on
of disability, he shall be entitled to the
his own.

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 61
monthly pension: Provided, That if he has not One arm 50
paid the required thirty-six (36) monthly One foot 31
One leg 46
contributions, he shall be entitled to a lump
One ear 10
sum benefit equivalent to the monthly Both ears 20
pension times the number of monthly Hearing of one ear 10
contributions paid to the SSS or twelve (12) Hearing of both ears 50
times the monthly pension, whichever is Sight of one eye 25
higher. (Sec 13-A.a)
V. FUNERAL BENEFIT
The following disabilities shall be deemed A funeral grant equivalent to ₱12,000.00
permanent total (Sec 13-A.d): shall be paid, in cash or in kind, to help
defray the cost of funeral expenses upon the
(1) Complete loss of sight of both eyes; death of a member, including permanently
(2) Loss of two limbs at or above the ankle or totally disabled member or retiree. (Sec 13-
wrists; B)
(3) Permanent complete paralysis of two
limbs; VI. SICKNESS BENEFIT
(4) Brain injury resulting to incurable (a) A member who has paid at least three (3)
imbecility or insanity; and monthly contributions in the twelve-month
(5) Such cases as determined and approved period immediately preceding the semester
by the SSS. of sickness or injury and is confined therefor
for more than three (3) days in a hospital or
If the disability is permanent partial, and elsewhere with the approval of the SSS,
such disability occurs before thirty-six shall, for each day of compensable
(36) monthly contributions have been confinement or a fraction thereof, be paid by
paid prior to the semester of disability, the his employer, or the SSS, if such person is
benefit shall be such percentage of the lump unemployed or self-employed, a daily
sum benefit described in the preceding sickness benefit equivalent to 90% of his
paragraph with due regard to the degree of average daily salary credit.
disability as the Commission may determine.
(Sec 13-A.e) VII. MATERNITY LEAVE BENEFIT
A female member who has paid at least
If the disability is permanent partial and three (3) monthly contributions in the
such disability occurs after thirty-six (36) twelve-month period immediately preceding
monthly contributions have been paid the semester of her childbirth or miscarriage
prior to the semester of disability, the benefit shall be paid a daily maternity benefit
shall be the monthly pension for permanent equivalent to 100% of her average daily
total disability payable not longer than the salary credit for period provided under RA
period designated in the following schedule: 11210 or the 105-Day Expanded Maternity
Leave Law.
Complete and
No. of VIII. UNEMPLOYMENT, INSURANCE OR
permanent loss
Mos.
of/use of INVOLUNTARY SEPARATION BENEFITS
One thumb 10 A member who is not over sixty (60) years of
One index finger 8
age who has paid at least thirty-six (36)
One middle finger 6
One ring finger 5 months contributions twelve (12) months of
One little finger 3 which should be in the eighteen-month
One big toe 6 period immediately preceding the
One hand 39 involuntary unemployment or separation

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 62
shall be paid benefits in the form of monthly compulsory coverage takes effect and
cash payments equivalent to 50% of the every month thereafter during his
average monthly salary credit for a employment, the employer shall deduct
maximum of two (2) months: Provided, That and withhold from such employee’s
an employee who is involuntarily monthly salary, wage, compensation or
unemployed can only claim unemployment earnings, the employee’s contribution.
benefits once every three (3) years:  EE’s contribution is based on the monthly
Provided, further, That in case of salary credits, the schedule and the rate
concurrence of two or more compensable of contributions, which shall also apply to
contingencies, only the highest benefit shall self-employed, voluntary, and other
be paid, subject to the rules and regulations members.
that the Commission may prescribe. (Sec 14-
B) II. EMPLOYER’S CONTRIBUTION (Sec 19)
 Beginning on the last day of the month
Exemptions from tax, legal process and when an employee’s compulsory
lien coverage takes effect and every month
All laws to the contrary notwithstanding, the thereafter during his employment, his
SSS and all its assets and properties, all employer shall pay, with respect to such
contributions collected and all accruals covered employee, the employer’s
thereto and income or investment earnings contribution in accordance with the
therefrom as well as all supplies, equipment, schedule provided in this Act.
papers or documents shall be exempt from  Notwithstanding any contract to the
any tax, assessment, fee, charge, or customs contrary, an employer shall not deduct,
or import duty; and all benefit payments directly or indirectly, from the
made by the SSS shall likewise be exempt compensation of his employees covered
from all kinds of taxes, fees or charges, and by the SSS or otherwise recover from
shall not be liable to attachments, them the employer’s contributions with
garnishments, levy or seizure by or under respect to such employees.
any legal or equitable process whatsoever,
either before or after receipt by the person
or persons entitled thereto, except to pay Contributions from self-employed
any debt of the member to the SSS. No tax member
measure of whatever nature enacted shall  The contributions to the SSS of the self-
apply to the SSS, unless it expressly revokes employed member shall be determined in
the declared policy of the State in Section 2 accordance with the schedule provided in
hereof granting tax-exemption to the SSS. this Act
Any tax assessment imposed against the SSS  The contributions of self-employed
shall be null and void. (Sec 16) persons earning ₱1,000.00 monthly or
below may be reduced by the
Employee’s and employer’s Commission.
contributions  The monthly earnings declared by the
Contribution – The amount paid to the SSS self-employed member at the time of his
by and on behalf of the members in registration shall remain the basis of his
accordance with the schedule provided in monthly salary credit, unless he makes
this Act. (Sec 8.i) another declaration of his monthly
earnings, in which case such latest
I. EMPLOYEE’S CONTRIBUTION (Sec 18) declaration becomes the new basis of his
 Beginning on the last day of the monthly salary credit. (Sec 19-A)
calendar month when an employee’s

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 63
Remittance of contributions Make or cause to be made and a fine of not
 The contribution shall be remitted to the false statement or more than P5,000
representation as to any pesos (Art 172
SSS within the first ten (10) days of compensation paid or RPC)
each calendar month following the received
month for which they are applicable or Makes or causes to be
within such time as the Commission may made any false statement
of a material fact in any
prescribe. claim for any benefit or
 Every employer required to deduct and to application for loan
remit such contributions shall be liable for Obtain or receive any Fine - not less than
their payment and if any contribution is money or check without ₱5k nor more than
being entitled thereto with ₱20k and
not paid to the SSS as herein prescribed, intent to defraud any Imprisonment - not
the delinquent employer shall pay member, employer or the less than 6 yrs and
besides the contribution a penalty SSS 1 day nor more
thereon of 2% per month from the date than 12 yrs
Buys, sells, offers for sale, Fine - not less than
the contribution falls due until paid. uses, transfers or takes or ₱5k nor more than
gives in exchange, or ₱20k, or
Method of collection and payment pledges or gives in pledge imprisoned - not
Payment may be made in cash, checks, any stamp, coupon, ticket, less than 6 yrs and
book or other device for the 1 day nor more
stamps, coupons, tickets, or other collection or payment of than 12 yrs or
reasonable devices that the Commission may contributions both, at the
adopt. (Sec 23) discretion of the
court.
with intent to defraud,
Employment records and reports alters, forges, makes or
 Each employer shall immediately report counterfeits any stamp, Fine - not less than
to the SSS the names, ages, civil status, coupon, ticket, book or ₱5k nor more than
occupations, salaries and dependents of other device prescribed by ₱20k, or
the Commission for the imprisoned - not
all his employees who are subject to collection or payment of less than 6 yrs and
compulsory coverage. any contribution required 1 day nor more
 Every employer shall keep true and herein than 12 yrs or
accurate work records for such period and uses, sells, lends, or has in both, at the
his possession any such discretion of the
containing such information as the altered, forged or court.
Commission may prescribe, in addition to counterfeited materials
an "Annual Register of New and makes, uses, sells or has in
Separated Employees" which shall be his possession any such
altered, forged, material in
secured from the SSS. Such records shall imitation of the material
be open for inspection by the SSS or its used in the manufacture of
authorized representatives quarterly or as such stamp, coupon, ticket,
book or other device
often as the SSS may require.
fails or refuses to comply Fine - not less than
 Each employer shall require, as a with the provisions of this ₱5k nor more than
condition to employment, the Act or with the rules and ₱20k, or
presentation of a registration number regulations promulgated by imprisoned - not
the Commission less than 6 yrs and
secured by the prospective employee
1 day nor more
from the SSS. than 12 yrs or
both, at the
Penal Clauses (Sec 28) discretion of the
court.
Prohibited Act Penalty
failure or refusal to register Fine - not less than
Causing any payment to be Prision correccional
employees or himself, in ₱5k nor more than
made where none is in its medium and
case of the covered self- ₱20k, and
authorized to be paid; maximum periods
employed or to deduct imprisoned - not

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 64
contributions from the less than 6 yrs and
employees’ compensation 1 day nor more
and remit the same to the than 12 yrs
SSS
who receives or keeps funds Art. 217 of the RPC
or property belonging, on the
payable or deliverable to Malversation of
the SSS public funds or
shall appropriate the same, property – penalty
or shall take or depends on the
misappropriate, or shall amount.
consent, or through
abandonment or
negligence, shall permit any
other person to take such
property or funds, wholly or
partially, or shall otherwise
be guilty of
misappropriation of such
funds or property
after deducting the monthly Art 315 of the RPC
contributions or loan on Swindling
amortizations from his (estafa) – penalty
employee’s compensation, depends on the
fails to remit the said amount.
deduction to the SSS within
thirty (30) days from the
date they became due

Atty. Ellan Get N. Tingson, CPA (from codal provisions, San Carlos notes by RGL, UP Reviewer) Page 65