Mercantile and Taxation Law Bar Review Flashcards

This set of vocabulary flashcards covers essential legal doctrines and definitions from Mercantile and Taxation Law, derived from Philippine Bar Exam questions and answers spanning 2005 to 2024.

Doctrine of Separate Juridical Personality

A principle of law which ordains that a corporation has a legal personality separate from the stockholders, directors, and officers composing it.

Limited Liability Rule

The rule where the liability of a stockholder who is not a director, officer, or agent is limited to his subscription to the capital stock of the corporation.

Control Test

A test to determine the nationality of a corporation based on the citizenship of the individuals who exercise control over the entity.

Grandfather Rule

A method used to determine the locus of beneficial ownership and control in a corporation when there is doubt as to the nationality, applied by tracing the ownership through several layers of corporate stockholders.

Alter Ego Theory

A ground for piercing the corporate veil which requires complete domination of finances, policy, and business practice so that the corporate entity has no separate mind, will, or existence of its own.

Amotion

The premature ousting of a director or officer from his post in the corporation.

Trust Fund Doctrine

The principle where the capital stock, property, and other assets of a corporation are regarded as equity in trust for the payment of corporate creditors.

Doctrine of Apparent Authority

The principle where a corporation is estopped from denying an agent's authority if it knowingly permits an officer or agent to act within the scope of such authority and holds him out to the public as possessing the power to do those acts.

Corporation by Estoppel

A doctrine stating that when an association is attacked for causes attendant at the time a contract was entered into, the party who dealt with it as a corporation cannot deny its corporate existence.

Ultra Vires Act

An act or activity performed by a corporation that is outside of its express, implied, or incidental powers as set out in its articles of incorporation or the Corporation Code.

Pre-Emptive Right

The right of stockholders to subscribe to any and all issuance or disposition of shares of any class by the corporation in proportion to their shareholding to prevent dilution of equity.

Watered Stocks

Stocks issued for a consideration less than its par or issued value or for a consideration in any form other than cash valued in excess of its fair value.

Nell Doctrine

The general rule that where one corporation sells or transfers all its assets to another corporation, the latter is not liable for the debts and liabilities of the transferor, subject to specific exceptions.

Theory of Cognition

The theory applied to insurance contracts where the contract is perfected only from the time the applicant comes to know of the acceptance of the offer by the insurer.

Barratry

Any willful misconduct on the part of the master or crew of a vessel in pursuance of some unlawful or fraudulent purpose without the consent of the owner and to the prejudice of the owner's interest.

Incontestability Clause

A provision stating that after a life insurance policy has been in force during the lifetime of the insured for a period of $2$ years, the insurer cannot prove the policy void or rescindable due to concealment or misrepresentation.

Cash-and-Carry Rule

The general rule in insurance that no policy or contract is valid and binding unless and until the premium thereof has been paid.

Double Insurance

A situation where the same person is insured by several insurers separately in respect to the same subject, interest, and risk.

Common Carrier

Persons, corporations, firms or associations engaged in the business of carrying or transmitting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

General Average Loss

A loss resulting from a deliberate sacrifice of part of the ship or cargo to save the remaining property from a common peril, entitling the owner of the sacrificed property to indemnification from those saved.

Bare Boat Charter

Also known as a demise charter, it is a contract where the charterer is given possession as well as command and control of the navigation of a vessel, effectively converting the owner into a private carrier.

Money Laundering

A crime whereby the proceeds of an unlawful activity are transacted making it appear that they originated from legitimate sources.

Safe Harbor Provision (AMLA)

A provision protecting any person from administrative, criminal, or civil proceedings for having made a CTR or STR in the regular performance of duties and in good faith.

Doctrine of Equivalents

A patent law doctrine where infringement occurs if a device appropriates a prior invention by incorporating its innovative concept and performing the same function in substantially the same way to achieve the same result.

Dominancy Test

A trademark test focusing on the similarity of the prevalent or dominant features of competing trademarks that might cause confusion, mistake, or deception.

Holistic Test

A trademark test that necessitates a consideration of the entirety of the marks as applied to the products, including labels and packaging.

Fair Use Doctrine

A statutory limitation on copyright where the use of a copyrighted work for criticism, comment, news reporting, or teaching is not considered infringement.

Lifeblood Doctrine

The principle that revenue raised from taxation is essential for the government to activate and operate, without which the state cannot survive.

Symbiotic Relationship

The reciprocal relation of protection and support between the state and taxpayers, where the state provides protection and the taxpayer supports it through taxes.

Tax Pyramiding

The imposition of a tax upon another tax, which has no basis in law or fact.

De Minimis Benefits

Facilities or privileges offered by an employer that are of relatively small value and intended to promote health, goodwill, or efficiency, and are not considered compensation subject to income tax.

Optional Standard Deduction (OSD)

A deduction option where a taxpayer may claim an amount not exceeding $40\%$ of gross sales or gross receipts without presenting proof of expenses.

Destination Principle

A VAT principle providing that the destination of the goods determines taxation, where exports are zero-rated for outside consumption and imports are taxed for internal consumption.

Letters of Authority (LOA)

The official document that grants a revenue officer the power to examine the accounting books and records of a taxpayer.