CORPORATE CONTRACT LAW

LEGAL MAXIMS
A MANS WORD IS HIS BOND.

PERFECTED BY MERE CONSENT, AND FROM THAT MOMENT THE PARTIES ARE BOUND NOT ONLY TO THE FULFILLMENT OF WHAT HAS BEEN EXPRESSLY STIPULATED BUT ALSO TO ALL THE CONSEQUENCES WHICH, ACCORDING TO THEIR NATURE, MAY BE IN KEEPING WITH GOOD FAITH, USAGE AND LAW.
ARE

CONTRACTS

Art. 1315, Civil Code of the Philippines

WITH CORPORATE ENTITIES SHOULD HAVE THE SAME FORCE AND EFFECTS AS CONTRACTS ENTERED INTO BY LEGALLY CAPACITATED NATURAL PERSONS .
IN OR

CONTRACTS ENTERED

BY

PARTIES SHOULD OCCUPY THE PRIMARY VALUE IN THE COMMERCIAL WORLD.

OF

THE CONTRACTUAL EXPECTATION

NO LAW IMPAIRING BE PASSED.

THE

OBLIGATION

OF

CONTRACTS SHALL

Sec. 10, Art. III (Bill of Rights), 1997 Constitutions

CORPORATE CONTRACT LAW LEVELS

I. FROM

THE

PERSON OF THE CORPORATE PARTY

THE OF

THAT DEAL WITH ESSENTIAL REQUISITE CONTRACT LAW

EXISTENCE/QUALITY OF THE CONSENT MANDATED UNDER

THE

STATE HAS LEGAL STANDING TO QUESTION DEFECT IN THE CORPORATE PERSON (QUO WARRANTO)
THE

ONLY

II. FROM

THE

UNDERLYING SOCIAL CONTRACTS

OVER

PREFERENCE OF CREDITORS ASSETS OF BUSINESS ENTERPRISE

OWNERS

OVER THE

STOCKHOLDERS MANDATED TO MAINTAIN INVESTMENTS THE BUSINESS ENTERPRISE FOR THE CORPORATE TERM OWNERS HAVE MANAGEMENT PROFITS III. FROM
THE
AND

IN

ENTITLED

TO THE

POWER OF CORPORATE PARTY

TO

DEAL WITH THE CAPACITY OF THE CORPORATE PARTY ENTER INTO CONTRACTS/TRANSACTIONS UNDER: ARTICLES OF INCORPORATION BY-LAWS

ULTRA VIRES DOCTRINE

CENTRALIZED MANAGEMENT DOCTRINE

CORPORATE CONTRACT LAW

FROM THE PERSON OF CORPORATE PARTY
I. PRE-INCORPORATION CONTRACTS Both Parties Fully Aware that the Corporate Party is Yet to be Incorporated Promoters Contracts

A. PROMOTERS CONTRACTS B. PRE-INCORPORATIONS SUBSCRIPTION AGREEMENTS

II. INCORPORATED CONTRACTS At Least One Party Believed that There Was a Validly Incorporated Corporate Party
A. DE JURE CORPORATE CONTRACTS B. DE FACTO CORPORATE CONTRACTS C. CORPORATION BY ESTOPPEL CONTRACTS D. OTHER CONTRACTS
BOTH
PARTIES KNEW THERE WAS NO

CORPORATION

III. POST-DISSOLUTION CONTRACTS The Corporate Personality Has Been Dissolved

A. NEW BUSINESS CONTRACTS B. FOR DISSOLUTION CONTRACTS

CORPORATE CONTRACT LAW

FROM THE UNDERLYING SOCIAL CONTRACTS
I. UNDERLYING SOCIAL CONTRACT
IN

BUSINESS SETTING
A. PREFERENCE

CREDITORS OVER OWNERS ASSETS OF THE BUSINESS ENTERPRISE

OF

OVER THE

B. STOCKHOLDERS

INVESTMENTS IN CORPORATE TERM

MANDATED TO MAINTAIN THEIR BUSINESS ENTERPRISE DURING THE

ARE

C. THE MANAGEMENT

AND

PROFITS

OF THE

BUSINESS

ENTERPRISE LIES IN THE HANDS OF THE OWNERS

II. TRUST FUND DOCTRINE THE ASSETS OF THE CORPORATION TO THE EXTENT OF ITS CAPITAL STOCK REPRESENT A TRUST FUND FOR THE PROTECTION OF THE CREDITORS CLAIMS.
1. DURING
THE LIFE OF THE

CORPORATION,

NO ASSETS MAY

BE RETURNED TO THE STOCKHOLDERS WHEN THERE ARE OUTSTANDING OBLIGATIONS

2. DIVIDENDS 3. THE
ITS

CAN ONLY BE DECLARED OUT OF UNRESTRICTED

RETAINED EARNINGS CORPORATION IS WITHOUT AUTHORITY TO REPURCHASE OWN SHARES OF STOCK, EXCEPT IN INSTANCES

MANDATED BY LAW

4.

THE

CORPORATION

CANNOT

WAIVE

OR

CONDONE

SUBSCRIPTIONS RECEIVABLES

5. THE

CORPORATION CANNOT REDUCE ITS CAPITAL STOCK TO INSOLVENCY,

THE PREJUDICE OF CREDITORS

6. UPON 7. UPON

ALL

SUBSCRIPTIONS

RECEIVABLES

AUTOMATICALLY BECOME DUE AND PAYABLE DISSOLUTION, ALL ASSETS OF THE CORPORATION

SHALL FIRST BE APPLIED FOR THE PAYMENT OF ALL ITS OBLIGATIONS

CORPORATE CONTRACT LAW

FROM THE POWER OF CORPORATE PARTY
I. ARTICLES
OF INCORPORATION

CHARTER

HIGHEST FORM OF CORPORATE CONTRACT

AND

COVERS THE CAPACITY CORPORATE PARTY BINDS BOTH CORPORATE PARTIES

II. BY-LAWS

POWER
AND

OF

THE

INTRA-CORPORATE

EXTRA-

INTRAMURAL RELATIONSHIP

CONTRACT

FOR

INTRA-CORPORATE

IS NOT BINDING ON EXTRA-CORPORATE PARTIES INTENDED TO REGULATE INTERNAL MATTERS CANNOT CONTRAVENE THE CHARTER OR THE LAWS

III.

ULTRA VIRES DOCTRINE

CONTRACTS/TRANSACTIONS WHICH ARE PROHIBITED BY LAW CONTRACTS OUTSIDE POWERS
THE

EXPRESS/IMPLIED/ INCIDENTAL

CONTACTS WITHIN CORPORATE POWERS BUT AGENT

IV. CENTRAL

BY IMPROPER

MANAGEMENT DOCTRINE

BUSINESS JUDGMENT RULE COURTS CANNOT SUBSTITUTE THE JUDGMENT OF BOD BOD/AGENTS CANNOT BE HELD PERSONALLY LIABLE