Business Laws and Regulations
What business law tests
Business Laws and Regulations tests the legal rules governing obligations and contracts, sales, agency, partnership, credit transactions, negotiable instruments, insolvency, and cooperatives. The exam is code-based: identify the legal relationship, the applicable Civil Code or special law, and the consequence.
Core rules
- Obligations arise from law, contracts, quasi-contracts, delicts, and quasi-delicts. A contract requires consent, object, and cause.
- In a contract of sale, ownership transfers upon delivery unless the parties reserve title; in a contract to sell, ownership is reserved until full payment.
- Agency may be express or implied; an agent must act within authority. A contract by an agent without authority does not bind the principal unless ratified.
- In partnership, an industrial partner shares profits but is generally not liable for losses; a partner contributing both capital and industry bears losses as a capitalist to the extent of capital.
- Negotiable instruments: a holder in due course takes free from personal defenses, but not real defenses.
Worked example
A and B sign a deed saying B may possess the land but ownership will transfer only after full payment of the price. B has not paid in full and demands transfer. This is a contract to sell, not a sale. Ownership remains with A, and B cannot compel transfer until the condition is met. If the deed had transferred ownership immediately with no reservation, nonpayment would not prevent transfer; A remedy would be collection, not automatic rescission.
Traps
Do not confuse earnest money with option money. Do not treat an agent undisclosed authority as always binding. Do not assume all defects in negotiable instruments are real defenses. Partnership loss-sharing depends on the agreement and partner type.