NCPAR HQ02 Contracts Dominggo

Northern CPAR: Business Laws – Law of Contracts
NORTHERN CPA REVIEW

Rm. 412 Pelizloy Building, Lower Session Rd., Baguio City
Contact Numbers: 09294891758; 09272128204
E-mail: ncpar@yahoo.com
ATTY. ANDRIX DOMINGO, CPA
BUSINESS LAWS
The wonderful law of CONTRACTS
Contract
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service.
Elements of a contract
1. Essential elements
a. Consent
b. Object
c. Cause of the obligation
2. Natural Elements
3. Accidental elements
Classification of Contracts
1. According to perfection
a. Consensual
b. Real
c. Formal or Solemn
2. According to Cause
a. Onerous
→such as sale and barter
b. Gratuitous
Where one party receives no equivalent consideration
c. Remuneratory
The cause is the service
3. According to importance or dependence of one upon another
a. Principal
b. Accessory
c. Preparatory
One which serves as a means by which other contracts may be entered into
4. According to name
a. Nominate
b. Innominate
Those without any name under the law.
5. According to risk or fulfillment
a. Commutative
Those where the parties give equivalent values
b. Aleatory
Those whose fulfillment depends upon chance
6. According to the parties Obligated
a. Unilateral
Those where only one of the parties is obligated to give or to do something
b. Bilateral
Those where both parties are required to give or do something
7. According to subject matter
a. Contracts involving things
b. Contracts involving rights or credits
c. Contracts involving services
8. According to the time of fulfillment
a. Executed
b. Executory
One that has not yet been performed.
9. According to the number of persons physically entering into the contract.
1
Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ02
a. Ordinary
Where two parties are represented by different persons
b. Auto-contract
Where only one person represents the two opposite parties to the contract
10. According to the number of persons who participated in the drafting of the contract
a. Ordinary
→both parties participated in the drafting of the contract
b. Contract of adhesion
→only one party drafted the contract
Stages of a Contract
1. Preparation or conception
2. Perfection or birth
3. Consummation or death or termination
Characteristics of contract.
1. Liberty of contract or freedom to stipulate
The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order or public policy
2. Mutuality of Contracts
The contract must bind both contracting parties
3. Relativity of Contracts
Contracts take effect only between the parties, their assigns and heirs, except where the rights and obligations are
not transmissible:
a. By law
b. By stipulation; or
c. By nature
•What is stipulation “pour autrui”?
It is a stipulation in a contract clearly and deliberately conferring a favor upon a third person who has a right
to demand its fulfillment provided he communicates his acceptance to the obligor before its revocation.
4. Consensuality of Contract
Contracts are perfected by mere consent
5. Obligatory force of contract and compliance in good faith
Obligations arising from contracts shall have the force of law between the contracting parties and should be
complied with in good faith.
ESSENTIAL REQUISITES OF CONTRACTS
I. CONSENT OF THE CONTRACTING PARTIES
→ is the manifestation of the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract
Nature of advertisements
• Business advertisements of things for sale are not definite offers, but mere invitations to make an offer
• Advertisements for bidders are merely invitations to make proposals and the advertiser is not bound to accept the
highest or lowest bidder
• Option
→ is a contract whereby the offeror gives the offeree a certain period within which to buy or not to buy a certain
object for a fixed price.
Rules on Acceptance
1. The acceptance must be absolute and unqualified.
2. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his
knowledge. The contract in such a case is presumed to have been entered into the place where the offer
was made.
3. Acceptance may be express or implied
4. An offer made through an agent is accepted from the time it is communicated to him.
What causes will render an offer ineffective?
• Death, civil interdiction, insolvency of either party before acceptance is conveyed ;
• Revocation, rejection of withdrawal of the offer before acceptance is communicated;
• Qualified acceptance of the offer as the acceptance is really a counter-offer; and
• Expiration of the period of time given to the offeree within which he must signify his acceptance.
What are the characteristics of consent?
It is intelligent – there is capacity to act;
It is free and voluntary – There is no vitiation of consent by reason of violence or intimidation; and
It is conscious and spontaneous – there is no vitiation of consent by reason of mistake, undue influence, or fraud
2
Rules on consent
1. The parties must have the capacity to enter into a contract.
The following cannot give consent to a contract:
a. Unemancipated minors
b. Insane or demented persons
c. Deaf mutes who do not know how to write
2. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable.
3. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is
voidable.
Simulated contract
→A contract that does not intend to have any legal effect on or a change, in the juridical situation of the
parties.
What are the kinds of simulation
a. Absolute – when the contract does not really exist and the parties do not intend to be bound at all.
Absolutely simulated or fictitious contracts are void;
b. Relative – when the (apparent) contract entered into by the parties is different from their true (hidden or
disguised) agreement. The parties are bound by their real agreement provided it does not prejudice a third
person and is lawful;
•What services may be the object of a contract
All services which are not contrary to law, morals, good customs, public order, or public policy.
•What rights may be the object of a contract?
All rights may be the object of a contract except those which are intransmissible by their nature, or by
stipulation, or by provision of law.
Cause of Contracts
It is the essential reason why a party enters into a contract.
Cause of Contracts
1. Onerous contracts – the cause for each contracting party is the prestation or promise of a thing or service by the
other.
2. Remuneratory contract – the cause is the service or benefit which is remunerated.
3. Gratuitous, lucrative, or contract of pure beneficence- the cause is the liberality of the benefactor.
•What is motive in a contract?

Motive is purely personal reason which a party has in entering into a contract.
Lesion
→ is inadequacy of the cause.
As a general rule, lesion shall not invalidate a contract except in the following:
1. When there was fraud, mistake and undue influence.
2. In cases provided by law, such as when the ward or absentee suffer lesion by more than one-fourth of the
value of the object of the contract.
DEFECTIVE CONTRACTS
a. Rescissible contracts – They are valid because all the essential requisites of a contract are present but by
reason of injury or damage to one of the parties or to third persons, such as creditors, the contract
may be rescinded;
b. Voidable contracts – They are also valid until annulled unless there has been ratification.
c. Unenforceable contracts – They cannot be sued upon or enforced in court by reason of statutory defects
unless they are ratified; and
d. Void or inexistent contracts – They have no effect at all and cannot be ratified.
Rescissible Contracts
→ is one which has the essential requisites of a contract but which may set aside by reason of injury or damage
to third persons.
The following are rescissible contracts
1. Those entered into by guardians whenever the ward whom they represent suffer lesion by more than one-
fourth of the value of the things which are the object thereof.
2. Those agreed to in representation of absentees, if the latter suffer lesion by more than one-fourth of the value
of the things which are the object thereof.
3. Those undertaken in fraud of creditors when the latter cannot in any manner collect the claims due them.
4. Those which refer to things under litigation if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority.
5. All other contracts specially declared by law to be subject to rescission.
NOTA BENE:
The action for rescission must be brought within the period allowed by law.
The prescriptive period is 4 years from the date of the contract except in the following:
3
a. For persons under guardianship – 4 years from termination of incapacity.
b. For absentees – 4 years from the time the absentee’s domicile is known
Nota Bene:
Alienation indicating bad faith – When it is attended by circumstances that have been denominated by our courts
as “badges of fraud.”
Voidable Contracts
A voidable contract is one that is defective by reason of the incapacity or vitiated consent of one to the
parties.
The following are voidable or annullable contracts
1. Those where one of the parties is incapable giving consent to a contract.
The following are incapable of giving consent to a contract.
a. Unemancipated minors
b. Insane or demented persons
c. Deaf-mutes who do not know how to write.
2. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
•Annulment
Annulment is the action brought to set aside a voidable contract.
NOTA BENE:
1. When action must be brought (prescriptive period);
The action for annulment must be brought within four (4) years which period shall begin:
a. In cases of intimidation, violence, or undue influence, from the time the defect in the consent ceases.
b. In case of mistake or fraud, from the time of discovery of the same
c. In cases of minority or other incapacity of a party, from the guardianship ceases.
2. Who may bring action for annulment
The action for annulment may be instituted by all who are thereby obliged principally or subsidiarily. It may
be brought by the following:
a. The guardian of the incapacitated person during the latter’s incapacity.
b. The incapacitated person after he has attained capacity.
c. The party whose consent is vitiated by mistake, violence, intimidation, undue influence or fraud
3. Effect of loss of thing while in the possession of the party who has right to bring the action for
annulment
a. If lost through his fault , the action for annulment is extinguished, whether such party is incapacitated or his
consent is vitiated.
b. If lost without his fault and such party is incapacitated , he can still bring an action for annulment.
However, he will be required to return the value of the thing and its fruits and only up to the extent that he
has been benefited.
•Ratification
is the adoption or affirmation a contract which is defective
Unenforceable Contracts
→ is one that cannot be enforced unless ratified.
•The following are unenforceable contracts
1. Those entered into the name of another by one without authority or legal representation, or who acted
beyond his powers;
2. Those that do not comply with the Statute of Frauds.
•Statute of Frauds is a statute designed to prevent the commission of fraud by requiring certain contracts to
be in writing and to be subscribed by the party charged.
The following contracts must be in writing, otherwise, they are unenforceable.
a. An agreement that by its term is not to be performed within a year from the making thereof:
b. A special promise to answer for the debt, default, or miscarriage of another.
c. An agreement in consideration of marriage, other than mutual promise to marry.
d. Sale of goods, chattels or things in action at a price not less than P500.00
e. An agreement for the leasing of a real property or of an interest for more than one year.
f. Sale of real property or an interest therein
g. A representation as to the credit of a third person.
How may an unenforceable contract under the Statute of Frauds be ratified?
a. By failure to object to the presentation of oral evidence to prove the contract; and
b. By acceptance of benefits under the contract.
4
Void or Inexistent Contracts
→ is one which has no force and effect from the very beginning, as if it had never been entered into and which
cannot be validated either by time or ratification.
What are the classes of void contracts?

They are:
a. Inexistent contracts or those where a requisite or some of the essential requisites of a contract are lacking or
where the formalities prescribed by law for validity are not complied with; and
b. Illegal or Illicit contracts or those where the essential requisites of a contract are present but the cause, object,
or purpose is contrary to law, morals, etc.
The following contracts are void from the very beginning:
a. Those whose cause, object or purpose is contrary to law, morals, good customs, public order, or public policy.
b. Those which are absolutely simulated or fictitious.
c. Those whose object or cause did not exist at the time of the transaction.
d. Those whose object is outside the commerce of men.
e. Those which contemplate an impossible service.
f. Those where the intention of the parties relative to the principal object of the contract cannot be ascertained.
g. Those expressly prohibited or declared void by law.
Cases when recovery may be made despite the parties being in pari delicto in illegal contracts
1. The payor may recover interest he paid in excess of the interest allowed by usury laws together with interest from
the date of payment.
2. A party may recover, if public interest will be subserved, money or property delivered for illegal purpose provided
he repudiates the contract before the purpose has been accomplished or before any damage has been caused to a
third person.
An incapacitated person who is a party to an illegal contract may recover, if the interest of justice so demands,
money or property delivered by him.
3. A person may recover, if public policy is thereby enhanced, what he has paid or delivered. If the agreement is not
illegal per se but is merely prohibited and the prohibition by law is designed for his protection.
4. Any person may recover any amount he has paid in excess of the price fixed by law for any article or commodity.
5. A laborer may demand additional compensation for service rendered beyond the maximum number of hours of
labor in a contract where he undertakes to work longer than the maximum hour fixed.
6. A laborer may recover the deficiency in a contract where he accepts a wage lower than the minimum wage set by
law.
Rule when contract is divisible or indivisible and there are illegal terms
1. If divisible – the legal terms may be enforced; the illegal terms are void, hence, they may not be enforced.
2. If indivisible – the whole is void; hence no part thereof may be enforced.
FORM OF CONTRACTS
Obligatory force of contracts in whatever form, exceptions
State the rules governing the form of contracts
(1) General Rule – A contract shall be obligatory or binding in whatever form it may have been entered into
provided all the essential requisites (consent, object and cause and in certain specified contracts, delivery or
form) for its validity are present
(2) Exceptions – In the following cases, the form of the contract is essential:
(a)when the law requires that the contract be in some form to be valid
(b)when the law requires that a contract be in some form to be enforceable or proved in a certain way; and
(c)when the law requires that a contract be in a certain form for the convenience of the parties.
•A public instrument
is one which is sworn to before a notary public or other officer authorized to administer oaths.
REFORMATION OF INSTRUMENTS
→is a remedy in equity by means of which a written instrument is made or construed so as to express or conform to
the real intention of the parties when some error or mistake has been committed.
Who may ask for reformation
1. If the mistake was mutual – by either party, or his successors in interest, such as his heirs or assigns.
2. In other cases – the injured party, or his heirs or assigns.
When reformation is not available
1. In case of the following:
a. Simple donations inter vivos wherein no condition is imposed.
b. Wills
c. When the real agreement is void.
2. When one of the parties has brought an action to enforce the contract, he canot subsequently ask for its
reformation.
5
INTERPRETATION OF CONTRACTS
→is the determination of the meaning of the terms or words used by the parties in the contract.
Rules on interpretation of contracts
1. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of the stipulations shall control.
2. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former
3. However, general the terms of a contract may be, they shall not be understood to comprehend things that are
distinct and cases that are different from those upon which the parties intended to agree
4. If the stipuation of any contract should admit of several meanings, it shall be understood as bearing that import
which is most adequate to render it effectual.
5. The various stipulations of a contract shall be interpreted together, although attributing to the doubtful ones that
sense which may result from all of them taken jointly.
6. Words which may have different significations shall be understood in that which is most keeping with the nature
and object of the contract.
7. The usage or custom of the place shall be borne in minds in the interpretation of the ambiguities of a contract,
and shall fill the omission of stipulations which are ordinarily established.
8. The interpretation of obscure words or stipulations in a contract shall not favor a party who caused the obscurity
Rules when it is absolutely impossible to settle doubts under the preceding rules
1. When the doubts refer to the incidental circumstances of a gratuitous contract, the least transmission of rights
and interests shall prevail.
2. If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests
3. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may
have been the intention or will of the parties, the contract shall be null and void.
Quizzer
1. Which of the following can be considered as a feature of a void contract?
a. subject to ratification
b. it exists
c. action or defense of nullity is subject to prescription
d. novation cannot apply
2. L entered into a contract of mortgage with X. T, the clerk of L typed the document. Due to T’s negligence, the
document made was that of sale instead of mortgage.
a. The remedy is annulment.
b. Parties may go to court for interpretation.
c. Parties may enforce their right because it is enforceable.
d. Reformation of instrument is proper.
3. These persons are bound by contracts except:
a. third persons b. assigns c. heirs d. parties
4. Liable for the loss of the subject matter by fortuitous event
a. Creditor c. both creditor and debtor
b. Debtor d. none of them
5. S offers to sell his house to B for P100,000. B asks him if he would accept P80,000. Which of the following is
correct?
a. Because of ambiguity, both offers are terminated by operation of law.
b. B’s response is a counter-offer effectively terminating the P100,000 offer and instigating an offer for P80,000.
c. B’s response is a rejection of the P100,000 offer, and there is no offer for P80,000 because it is too indefinite
to be an offer.
d. B’s response is a mere inquiry, theP100,000 offer by S is still there.
6. Example no 1: Guardian of W, sold W’s house valued at P50,000 for P37,500 or a lesion by ¼ of the value
Example no. 2: S sold his house valued at P50,000 for only P10,000 because S did not know the true value of the
house.
a. Both contracts are rescissible c. No. 2 is voidable because there is an error
b. Only No. 1 is rescissible d. Both contracts are valid and enforceable
7. B company bought out a competitor, C Corporation, with a stipulation that C Corporation should not thereafter
engage in any business in the Philippines unless consented to and approved by B Company.
a. The stipulation is defective subject to ratification.
b. The stipulation is valid because the parties are free to enter into any stipulation, terms and cond itions such as
this one.
c. The stipulation is unenforceable as there was no showing that the sale was done in writing.
d. The stipulation is void because it is contrary to public policy.
8. Which of the following is not valid?
a. Mutual promise to marry entered into orally.
b. Sale of immovable property orally entered into.
6
c. One of the parties in a contract is incapable of giving consent.
d. The stipulation is void because it is contrary to public policy.
9. D forced C to execute a promissory note
a. Contract is rescissible because the contract is fraudulent.
b. The contract is void.
c. C cannot demand payment from D because the contract is unenforceable.
d. Contract remains to be valid.
10. Example no 1: S sold to B in a private instrument his land. Later, B wanted to have the sale registered but
registration requires a public instrument; In here, B may compel S to execute the needed public
instrument.
Example no. 2: S sold to B orally his land. After B paid S he wants to register the in his name but he needed a
public instrument of sale. In here, B may compel S to execute the needed public instrument.
a. Both examples are false c. Only the second is true
b. Only the first is true d. Both examples are true
11. In a contract of sale executed by S and B, it appears S sold his motor vehicle to B for P50,000. It turned out
however, S has three motor vehicles. Gallant valued P80,000, Hi-Ace Van valued P70,000. and a jeep valued at
P60,000. Which of the following is correct?
a. The contract shall be reformed because there was mistake.
b. The parties can ask for interpretation because the word motor vehicle is ambiguous.
c. The parties can ask for annulment of the contract.
d. There is no contract.
12. An agreement in restraint of trade or establishing monopoly is:
a. perfectly valid b. voidable c. unenforceable d. void
13. Three of the following are rescissible, which is not?
a. Sale of property under litigation made by defendant without the consent of plaintiff or authority of the court.
b. Those made to defraud creditors when the latter have no other means to recover their claims.
c. Those agreed upon in representation of absentees, if the absentee suffers lesion by more than ¼ of the value
of the property subject of the contract.
d. Contract of sale and the price is unusually inadequate resulting to lesion.
14. S and M agreed in print that S, debtor for P30,000, will work as a servant of M without pay until she could find
money with which to pay her debt. S failed to comply with her obligation, Under this premise, which of the
following statement is correct?
a. The agreement to work as a servant is void because it is immoral.
b. To act as a servant without pay is unconstitutional because this is equivalent to involuntary servitude.
c. The agreement to work without pay since written is enforceable.
d. The contract to work without pay as a servant until the debt is paid is void.
15. In order that a stipulation in favor of a third person would be valid and binding upon the parties thereto, the
following are requisites; except:
a. There must be a stipulation in favor of a third person.
b. The contracting parties must have clearly and deliberately conferred a favor upon that third person.
c. The third person communicated his acceptance to the obligor before its revocation.
d. That there must be an existing agency between either of the contracting parties and the third person.
16. Statement no. 1 – Dolo incidente entitles the person against whom it was employed the right to seek the
annulment of the contract.
Statement no. 2 – A stipulation pour autrui is an exception to the rule on relativity of contracts
a. both are true c. no.1 is true; no.2 is false
b. both are false d. no.1 is false; no.2 is true
17. S owns an oil painting. Being in need of money, S sold the painting to B for P1, 000. After the sale it was
discovered that the painting was valuable and worth P5,000.
a. S may rescind the contract due to lesion or inadequacy of cause.
b. S may annul the contract because of fraud.
c. S may annul the contract on the ground of error.
d. B is entitled to the benefit of the contract because it is valid and binding.
18. A, bachelor lawyer, raped W. Upon learning this, F, the father of W, was able to force A to marry W under pain
of being sued and disbarred from the practice of his profession. Which statement is correct?
a. The marriage may be annulled on the ground of force or violence.
b. The marriage may be annulled on the ground of threat and intimidation.
c. The defective marriage may, however, be ratified.
d. There was no defect, the marriage was perfectly valid.
19. In an “invitation” to bid, B proposes the following:
7
“I will buy the property for P100,000 and if the bid of any other offeror shall be considered the best in terms of
amount and conditions, I am to equal that offer”
a. The offer is speculative, because it cannot be considered as against another offer which is certain.
b. The offer is considered a counter offer.
c. This is a continuing offer which is very certain.
d. The advertiser is not bound to accept the highest bidder.
20. Statement no. 1 – If the cause is not stated in the contract it is presumed that it is unlawful.
Statement no. 2 – The action for rescission is subsidiary it cannot be instituted except when there is no other legal
means to obtain reparation for damages suffered.
a. both statements are true c. only the first is false
b. both are false d. only the first is true
21. G was appointed guardian of S, the latter being 16 years old. S sold his parcel of land in writing to B valued at
P100,000 for P75,000 suffering lesion by ¼ of the value. What is the status of the contract?
a. Rescissible b. Unenforceable c. void d. voidable
22. One of the stipulations contained in the contract between M Company and its employees is that the company
shall pay a bonus to employees of the company who shall continue its employment for at least 2 consecutive
years, unless he quits or is discharged before the expiration of the period of 2 years. X, an employee of the
company was discharged without just cause, just one week before the completion of the two-year period.
a. X is not entitled to the bonus because his discharge was in accordance with the contract.
b. X is not entitled to the bonus because the employer’s right to terminate is superior than the right of the
employee to be employed.
c. X is entitled to the bonus whether the discharge is with or without cause.
d. X is entitled to the bonus because the debtor company has voluntarily prevented the happening of the
condition.
23. Statement no. 1 – If one party was mistaken and the other acted fraudulently or inequitably in such a way that the
instrument does not state their true intention, the former may ask for the annulment of the
instrument.
Statement no. 2 – The statement of a false cause in contracts shall render them void if it should not be proven
that they were founded upon another cause which is true and lawful.
24. Must be in writing to be enforceable:
a. Lease of land for 12 months c. Both a and b
b. Lease of car for 18 months d. None of a and b
25. D owes C P500. However, C’s right has already prescribed. Notwithstanding the knowledge of this fact, D paid
the amount. Realizing this mistake D wants to recover the amount he paid.
a. D can recover on the ground of mistake
b. D can recover because his obligation is not enforceable
c. D can recover otherwise C will be enriched at the expense of D
d. D cannot recover
26. Three of the following contracts are void. Which is the exception?
a. Those whose cause, object or purpose is contrary to law, morals, good custom, public order or public policy.
b. Those which are absolutely simulated or fictitious.
c. Those whose cause or object did not exist at the time of the transaction.
d. Those where both parties are incapable of giving consent to a contract.
27. X is a former government employee, suffered from severe paranoia and was confined in the mental hospital in
2000. After his release, he was placed under the guardianship of his wife to enable him to get his retirement pay.
In 2004, he became a mining prospector and sold some mining claims. In 2006, he wants to annul the sale
claiming that he was not mentally capacitated at the time of sale. The sale in question was:
a. Rescissible b. Void c. voidable d. valid
28. Which of the following is not presumed to be legal subrogation?
a. When a creditor pays another creditor who is preferred
b. When a third person, not interested in obligation, pays with the approval of the debtor.
c. When a third person interested in the obligation pays even without the approval of the debtor.
d. None of them
29. Essential Requisites of a contract:
a. Consent b. Cause c. subject d. all of them
30. Which of the following instruments is not subject to reformation?
a. simple donations inter vivos wherein no condition is imposed.
b. Wills
c. When agreement is void
8
d. All of the above
31. Valid, binding and enforceable until annulled
a. rescissible contract c. voidable contract
b. void ab initio contract d. validable contract
32. In three of the following defective contracts, ratification cleanses the defect. Which is the exception?
a. both parties are incapable of giving consent
b. sale of immovable property or interest therein orally entered into.
c. sale of a piece of land thru an agent and the authority is oral.
d. contracts is void the offer being ineffective.
33. S makes an offer to B on January 1, 2007. B makes known his acceptance in a letter sent January 2 and received
by S on January 5. Meantime, on January 3, S became insane.
a. The contract is voidable because one party is insane.
b. There is already a meeting of minds, the contract is perfected.
c. The contract is voidable because one party is insane.
d. The contract is void the offer being ineffective.
34. Based on the same facts, except S is not insane but only a minor at the time the acceptance is communicated to
him.
a. There is no meeting of minds between the parties, therefore void.
b. The contract is not binding because the party is incapacitated.
c. The contract is binding between the parties.
d. The contract is unenforceable.
35. Which of the following contract is voidable?
a. Those whose object is outside the commerce of men.
b. Those which are absolutely fictitious.
c. Those where one of the parties is incapacitated.
d. Those which contemplate an impossible service.
36. X, after the death of his father, sold his inheritance though its amount has not yet been determined to B, for a
consideration of P50,000.
a. The contract is valid only if the inheritance valued at least equal or more than P50,000.
b. The contract is rescissible.
c. The contract is void if nothing remains of the inheritance to be turned over to B.
d. Contract is void, future inheritance cannot be the object of sale.
37. X alleged that Y promised to give him one hectare of land. This is in consideration of X’s meritorious services to
Y. Y pleads in defense that since the promise was not in writing, it is unenforceable under the Statute of Frauds.
Decide.
a. The promise is unenforceable because it is not in writing.
b. The Statute of Frauds is applicable because A has rendered services.
c. The Statute of Frauds is inapplicable here, because the promise to give the land is not a sale of real property.
d. The Statute of Frauds can apply to partially executed contract.
38. Statement no. 1 – In voidable contracts, there is no need to ratify the same before they can be considered valid.
In unenforceable contracts, however ratification is mandatory before they can be considered
enforceable.
Statement no. 2 – “There is undue influence if insidious words or machinations was employed by a party on the
other just to obtain the latter’s consent, without which the latter would not have entered into the
contract.

39. Three of the following are void contracts. Which is the exception?
a. contracts where the cause is immoral.
b. contracts to prevent a known supporter of a political rival from voting for his candidate for a valuable
consideration.
c. contracts with valid consideration but with unlawful motives.
d. absolutely simulated contracts.
40. Statute of Frauds is applicable to
a. executed contract
b. oral contract of loan
c. contract not to be performed within a year from the making thereof
d. mutual promise to marry
41. Which of the following is correct?
a. An action to enforce judicially a natural obligation prescribes in 4 years.
b. An action for annulment is imprescriptible.
9
c. An action to declare a contract void is not subject to prescription.
d. An action for rescission of contract prescribes in five years counted from the execution of the contract.
42. Which of the following contracts is not rescissible?
a. Those which are entered into by guardians whenever the wards whom they represent suffer a lesion of more
than ¼ of the value of the object of the contract.
b. Those executed in representation of an absentee, if the latter suffer a lesion more than ¼ of the value of the
object of the contract.
c. Those where one of the parties is incapable of giving consent to a contract.
d. Those undertaken in fraud of creditors when the latter cannot in any other manner collects the claims due
them.
43. Which of the following contracts is voidable?
a. Those where both parties are incapable of giving consent to a contract.
b. Those undertaken in Fraud of creditors when the latter cannot in any manner collect the claims due them.
c. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
d. Those whose object is outside the commerce of men.
44. Which of the following contracts is rescissible?
a. Those where one of the parties is incapable of giving consent to a contract.
b. Those where both parties are incapable of giving consent to a contract.
c. Those which are entered into by guardians whenever the wards whom they represent suffer a lesion of more
than ¼ of the value of the object of the contract.
d. Those which are absolutely simulated or fictitious.
45. A offered Tamiya cars to B for P1, 000 each. B answered by letter that he was willing to purchase not 20 but 30
pieces at said price of P1, 000 each. Is the contract perfected?
a. No, because there is qualified acceptance which constitutes an offer by the buyer.
b. Yes, there is perfected sale because the number of pieces is only incidental matter in the sale.
c. Yes, because the letter of acceptance was already sent by the offeree.
d. No, because there is no offer yet of A that is certain.
46. Statement no. 1 – One of the parties at the time of making the offer or acceptance was already insane, the contract
is voidable.
Statement no. 2 – If before the acceptance is conveyed to the offeror, either of the parties becomes insane, the
contract is void, that is, the offer is noneffective.
a. Both statements are incorrect.
b. Both statements are correct.
c. First statement is correct, while the second is incorrect.
d. First statement is incorrect, while the second is correct.
47. A, a minor sold to B a parcel of land registered in his name misrepresenting to the latter that he is of legal age.
Having been mislead as to the true age of A, B entered into the contract. Is the contract voidable?
a. It is voidable because the seller is a person incapable of giving consent to the contract being a minor.
b. It is voidable because of mistake on the part of B when he thought that A was of legal age.
c. It is not voidable, but rather void because of lack of consent of A, who is only a minor being in good faith.
d. It is not voidable because of the fraud committed by the minor seller and the buyer being in good faith.
48. A, a director of X corporation, through an agent bought the shares of stocks of another stockholder without
revealing to the seller stockholder that negotiations were in progress to enhance the value of the shares. The sale is
defective contract being:
a. Void, because of fraud committed by A against the other stockholder.
b. Voidable because of mistake on the part of the seller stockholder.
c. Rescissible because of the damage suffered by the seller.
d. Voidable due to the fraud, concealment by A against a fellow stockholder.
49. A promised to give B a car as reward after B has killed C. Later, after the killing, the contract was changed to a
lease of a big house for a certain period. The contract of lease is:
a. Void b. Unenforceable c. voidable d. rescissible
50. S orally sold to B a parcel of land for which the latter paid P 1M. B now wants to register the sale so that he can
have a Transfer Certificate of Title in his name. Decide.
a. S cannot be compelled to execute the public document of sale because the sale is unenforceable.
b. S can be compelled to execute the pubic document of sale because the sale is enforceable.
c. The sale is void and therefore cannot be registered.
d. S cannot be compelled to execute the public document of sale because the sale is voidable.
51. S orally leased to R his parcel of land for a term of two years. The contract is:
a. Rescissible b. Voidable c. unenforceable d. void
52. A verbal agreement was made between A and B whereby A agreed to sell and B agreed to buy A’s farm for P100,
000.00. The price was paid. Possession was not given nor the deed delivered. Both being refused. The contract is:
10
53. A borrowed money from B with C as guarantor. The contract of loan of P1M was not in writing while the
guaranty was written. B now is demanding payment from C because A failed to pay. Is C liable?
a. C is liable because the guaranty is enforceable although the loan is void it being oral.
b. C is not liable because the accessory contract of guaranty is void since the principal contract of loan is void.
c. C is liable because the guaranty is enforceable.
d. C is not liable because the contract of loan is in amount exceeding P500.00 which must be in writing to be
enforceable.
54. A was having his house repaired by B, who needed certain materials. So A told the storeowner, “Give B the
materials. I shall be responsible. I shall stand good.” This was orally entered into.
a. The contract is unenforceable because A made an oral agreement to answer for the default of another, that is,
B.
b. The contract is enforceable because A did not make a special promise to answer for the default of another
person.
c. The contract shall be enforceable if there is ratification by A.
d. The contract shall be enforceable if it has been executed.
55. A and B mutually promised to marry each other. The promise being verbal and without witnesses to the promise.
A did not marry B. B is now suing A for damages. Decide.
a. The contract is unenforceable hence A is not liable.
b. The contract is unenforceable because mutual promise to marry is covered by the Statute of Frauds.
c. A is liable for damages even if the contract is unenforceable.
d. A may be liable for damages because mutual promise to marry is not covered by Statute of Frauds.
56. A and B orally agreed that A would sell and B would buy A’s radio for P200 three years from the date of the
agreement. At the end, of the three years, A refused to hand over the radio although B was willing to pay. Is A
bound to deliver the radio sold?
a. A is obliged to deliver what he sold since it was an enforceable agreement.
b. A is obliged to deliver if B is ready to pay the price.
c. A is not bound to deliver because the sale is unenforceable.
d. A is not bound to deliver because the sale is void,
57. A forced B to sell him his ring. B sued for annulment, but A had already lost the ring thru fortuitous event. Is A
liable for the loss?
a. A is liable for the loss even if it was due to fortuitous event because of his bad faith.
b. A is not liable because the loss was without his fault.
c. A is liable to pay damages if he cannot replace the ring.
d. A is not liable because no one shall be responsible for the loss of a thing due to fortuitous event.
58. A was forced by B to sign a contract. C a creditor of A wants to annul the contract. Is C allowed by law to do so?
a. No, because a third person cannot assail a contract.
b. Yes, because the contract is voidable and C is damaged.
c. No, because a third person cannot assail a voidable contract.
d. Yes, a third person can annul a rescissible contract.
59. To defraud his creditors, A sold his real property to B. B now seeks to register the sale. X, a creditor seeks to
prevent the registration on the ground that it is a rescissible contract. Despite X’s objection may the land be
registered in B’s name?
a. No, because the contract is rescissible and therefore without effect.
b. No, because the sale is void and after annulment is not binding.
c. Yes because the contract although voidable is valid and binding.
d. Yes, because the contract although rescissible is valid, binding and enforceable before rescission.
60. A made a donation to B. Later, A contracted several debts. What A has left as assets are much less than his
present liabilities. May the donation be rescinded?
a. No, because the debts were incurred after the donation has been made.
b. No, if A gave guaranty or security for his debts.
c. Yes, because the donation is rescissible being in fraud of creditors.
d. Yes, because A has become insolvent after the donation.
61. To defraud his creditor, A sold his property to B (who is in good faith). Later, B sold the property to C. who is in
bad faith. May the creditor rescind the sale?
a. Yes, because the third person, C is in bad faith.
b. No, because the third person, B is in good faith.
c. No, because the contract is voidable and not rescissible.
d. Yes, because the contract is rescissible.
62. To defraud his creditor, A sold his house to X. When however the creditor wanted to collect his credit, somebody
lent A enough money. Is the sale rescissible?
a. Yes, because it was entered into in fraud of creditors.
11
b. No, because the creditor can collect the credit due him.
c. No, because the debtor has become in good faith w hen he was lent enough money to pay his debts.
d. Yes, because the debtor was in bad faith when he sold the house to X.
63. A orally sold to B his house at 16 Kiko St, Malate, Manila. In the written deed of sale, both forgot the true
number of the house and instead wrote on the contract, “18 Kiko St, Malate, Manila”. The remedy shall be:
a. Annulment of a voidable contract because of mutual mistake.
b. Reformation if instrument because of lack of meeting of minds.
c. Reformation of instrument because of mutual error.
d. Declaration of nullity of the contract because of the uncertainty of the intention as to the object.
64. A loan for P800 was orally contracted. May the lender recover the sum lent?
a. No, because the contract is unenforceable.
b. No, because the contract must be in writing to be valid.
c. Yes, if the debtor ratifies the loan.
d. Yes, because the contract is enforceable.
65. When his father died but before the delivery of the property to him, a son sold his share of the property inherited.
Is sale valid?
a. No, because future inheritance cannot be sold.
b. Yes, because future inheritance can be object of the contract.
c. Yes, because what has been sold is present inheritance.
d. No, because the son was not the owner due to lack of delivery to him.
66. Element without which there cannot be a contract is:
a. essential element c. accidental element
b. natural element d. none of the above
e. none of the above.
67. Contracts take effect only to the parties, their assigns and heirs except where the rights and obligations arising
therefrom:
a. Is not transmissible by their nature.
b. Is not transmissible by stipulation of the parties.
c. Is not transmissible by provision of law.
d. All of the above
e. None of the above.
68. Where damages is caused to either of the contracting parties or to a third person, the contract may be:
a. annulled c. all of the above
b. rescinded d. none of the above
e. ratified
69. When the contract lacks one of the essential elements, the contract is:
a. Void c. rescissible
b. Voidable d. all of the above
e. none of the above
70. The act by mean by virtue of which efficacy is given to a contract, which suffers from a vice of curable nullity.
a. Ratification c. rescission
b. Resolution d. all of the above
71. Is a remedy in equity by means of which a written instrument is made or constructed so as to express or conform
to the real intention of the parties when some error or mistake has been committed?
a. Ratification c. resolution
b. Reformation d. all of the above
72. Although contracts bind only contracting parties, their assigns and heirs, in the following instances, third persons
are bound thereby:
a. in case of stipulation pour autri
b. in contracts creating real rights
c. in contracts intended to defraud the creditors
d. all of the above
73. A qualified acceptance constitutes:
a. an absolute acceptance
b. a meeting of the minds between the parties
c. counter offer
d. all of the above
12
74. An offer becomes ineffective if, before acceptance is conveyed, either parties become:
a. civilly interdicted c. insolvent
b. insane d. all of the above
75. A contract where consent is given through mistake, violation or intimidation is:
a. Void c. rescissible
b. Unenforceable d. all of the above
76. The span of time wherein a person is in possession, temporarily, of all his mental faculties:
a. lucid interval c. prescriptive period
b. option period d. reglementary period
77. Contracts entered into in a state of drunkenness or during hypnotic spell is:
a. Voidable c. unenforceable
b. Void d. rescissible
78. An offer made through an agent is accepted from the time acceptance is communicated to:
a. the principal
b. the agent
c. both the principal and the agent
d. the household member of the family
79. The essential or impelling reason why the parties enter into a contract:
a. Motive c. profit
b. Cause d. all of the above
80. The statement of a false cause in contracts shall render the contracts:
a. Voidable c. unenforceable
b. Void d. rescissible
e.none of the above
81. If mistake, fraud or accident has prevented a meeting of the minds of the parties, the proper remedy is:
a. Annulment c. rescission
b. Reformation d. resolution
e.none of the above
82. The following contracts are valid:
a. Rescissible c. unenforceable
b. Annullable d. all of the above
83. A contract entered into in the name of another by one who has no authority or legal representation is:
a. Void c. annullable
b. Rescissible d. unenforceable
e.none of the above
84. Business advertisements of the things for sale are:

a. definite offer c. counter offer
b. invitation to make an offer d. acceptance of the offer
e.none of the above
85. The following is an example of a real contract:

a. contract of pledge c. contract of commodatum
b. contract of deposit d. all of the above
A - In case of divisible contract, if the illegal terms can be separated from the legal ones, that the latter can be
enforced.
B – The defense of illegality of contracts is available to third persons whose interests are directly affected.
a. both are true b. both are false c. first is false d. second is false
86. A and B entered into an oral sale of the former’s car for P 1M which amount has been credited to his bank
account although the car has not yet been delivered to the latter. Can B compel A to execute the deed of sale of
the car?
a. No, because the sale is unenforceable. c. Yes, if A used the money paid to him.
13
b. Yes, because it is enforceable. d. No, because the sale is void.
87. On January 20, 2002 A and B agreed verbally to form a partnership on January 25, 2004.
a. The contract is void because future property can’t be contributed to a universal partnership of all present
property.
b. It is voidable if the parties marry each other before they form the partnership.
c. Unenforceable because it is not in writing.
d. Void because there is no public instrument of their agreement.
88. A orally leased to B his car for a term of 2 years. B has not taken possession of the car and A has not received any
rental. The contract is:
a. Unenforceable b. valid and binding c. rescissible d. voidable
89. Based on the preceding number, if the object were a house, the contract shall be:
90. If the object were a parcel of land, the contract is:
91. A being the eldest, sold the minor sister’s parcel of land in the name of the latter and by virtue thereof, the latter
was able to finish high school. The contract is:
a. Void b. Unenforceable c. rescissible d. voidable
92. Without authority from A, B sold in B’s name the land of A to X who was in good faith. The contract is:
a. void because B was not the owner at the time of the perfection of the sale
b. unenforceable because B had no authority to sell A’s land
c. voidable because of the fraud committed by B against A
d. valid sale provided B is the owner upon delivery.
93. Based on the preceding no., if the sale in A’s name the contract is:
a. void, because B was not the owner at the time of the perfection of the sale
b. unenforceable because B had no authority to sell A’s land
c. voidable because of the fraud committed by B against A
d. valid sale provided B is the owner upon delivery
94. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may
have been the intention or will of the parties. The contract shall be:
a. voidable due to lack of meeting of minds c. interpreted for there is doubt
b. void d. reformed to express the true intention of the parties.
95. A sent B a letter wherein the former offered to sell his car to the latter for Php 1M. B signed to show intention
that he may buy the same. In A’s letter, he gave B two weeks to raise the amount. After one week, A raised the
price to Php 1.5M. Can B compel A to accept the Php 1M first offered by A and deliver him the car?
a. Yes since, there was already offer and acceptance.
b. Yes, because A cannot change his offer without the consent of B.
c. Yes, because A cannot withdraw the offer within two weeks as he is under estoppel.
d. No, because there was no acceptance yet of the offer.
96. A sold a parcel of land to B by word of mouth and delivered to the latter the Transfer Certificate of Title of the
land. Can B compel A to execute the deed of sale of the land?
a. B cannot compel A to execute the deed of sale being oral is unenforceable.
b. B cannot compel A, because the sale is void being oral.
c. B can compel A, because the contract is enforceable due to the delivery of the TCT to him.
d. B can compel A, because the sale is merely voidable and therefore binding until annulled.
97. Statement no. 1 – As a rule, contracts take effect only between the parties.
Statement no. 2 – Mere incidental benefit of the third person is enough for stipulation pour autri to exist provided
he accepts the same.
a. first statement is true, second statement is true

b. first statement is true, while the second statement is false
c. both statements are false
d. first statement is false, while the second statement is true
98. Three of the following are objects of contracts, except:
a. Those things within the commerce of men.
b. Services which are not contrary to law, morals, good customs.
c. Intransmissible rights
d. Heredity rights
99. A contract wherein both contracting parties are incapable of giving consent and yet ratified by the guardian of
either of the parties is: Voidable
a. Rescissible b. c. unenforceable d. void
100.Which one of the following constitutes fraud?
14
a. Misrepresentation made not in bad faith.
b. Misrepresentation by a third person and both parties were mistaken.
c. Usual exaggeration in trade or dealer’s / sale’s talk.
d. Failure to disclose facts when there is a duty to reveal them as when the parties are bounded by confidential
reasons.
101.These are principles in contracts. Which is not?
a. freedom or autonomy of contracts c. perfection by mere consent
b. relativity of contracts d. binding on third persons
102. Statement no. 1 – If the cause is not stated in the contract it is presumed that it does not exist and therefore
the contract is void.
Statement no. 2 – In order that a contract may be voidable, there must be damage.
a. Both statements are false. c. First statement is false, while the second is true.
b. Both statements are true. d. First statement is true, while the second is false.
103.The action to annul a voidable contract is extinguished by:
a. Novation b. Ratification c. rescission d. estoppel
104.Which of the following contracts is not void ab intio?
a. Those whose object is outside the commerce of men.
b. Those whose object did not exist at the time of transaction.
c. Those which contemplate an impossible service.
d. Those undertaken in fraud of creditors.
105.Contract which cannot be sued upon unless ratified, thus as if they have no effect yet:
a. Voidable b. Rescissible c. void d. unenforceable
106.Which of the following contracts is valid?
a. Oral contract of agency giving authority to an agent to sell the land of the principal.
b. Oral partnership agreement where immovables are contributed.
c. Oral contract of sale of an immovable entered into by an agent who was given oral authority by the principal.
d. Oral agreement to answer all the expenses for the wedding reception if A marries B.
107.A sold to B a genuine bottle of Fundador brandy. However, upon delivery the former substituted a fake. B now
wants to annul the sale. Decide.
a. The contract is void ab initio therefore, it can be annulled.
b. The contract can be annulled since it is voidable due to fraud.
c. The contract cannot be annulled because it is only incidental fraud.
d. There is dolo incidente therefore, it can be annulled.
108.G was appointed as the guardian of M who owns a parcel of land valued at Php 1M. M sold the land only for Php
0.7M to B. The contract was defective because:
a. Unenforceable b. Rescissible c. voidable d. void
109.S was intimidated by B to sell to the latter his parcel of land at a very low price. C, the creditor of S was thus
damaged since the former has no other means of collecting from S. The remedy of S is :
a. Rescission c. have it declared by the Court as void
b. Annulment d. reformation of the contract
110.Which of the following contracts must be in writing to be enforceable?
a. Acts and contracts for the creation, transmission, modification, extinguishments of real rights.
b. The cession, repudiation, renunciation of heredity rights.
c. Contract of guaranty
d. Contract of partnership
111.A sold in writing to B his stereo set for Php 600.00. There is no delivery from A and no payment of the price
from B. Contract is:
a. Voidable c. void
b. Unenforceable d. enforceable
112.S sold his parcel of land only for Php 1M although the value of the same is Php 2M. He thus suffered a damage
or lesion in the sale due to the inadequacy of the price. Therefore, the contract is:
a. Voidable b. Unenforceable c. valid, not defective d. rescissible
113. Statement no. 1 – In case of doubt, a contract purporting to be sale shall be construed as mortgage.
Statement no. 2 – In annulment of contracts, there shall always be mutual restitution of both parties thereof.
a. First statement is false, while the second is true. c. Both statements are true.
b. Both statements are false. d. First statement is true, while the second is false.
114. Statement no. 1 – Just like voidable and unenforceable contracts, rescissible contracts may also be ratified.
Statement no. 2 – In case of fraud or mistake, the action for annulment must be made within four years from the
commission of the vice of consent.
a. Both statements are true. c. First statement is true, while the second is false.
15
b. Both statements are false. d. First statement is false, while the second is true.
115.D, fearing that his creditor C would go after his only parcel of land to satisfy his claim for payment of D’s debt,
sold his land to X who did not know of D’s intention. Decide.
a. C can ask for annulment of the sale as this is a voidable contract.
b. C may ask for damages against S since he was damaged by the sale.
c. C can file an action for rescission of the sale.
d. C cannot as ask for the rescission of the sale.
116.A without authority from B sold the latter’s car in the name of the latter. The contract is therefore:
117. Statement no. 1 – A threatened B with an administrative charge for immorality if the latter does not marry her
because she is already pregnant with their child. Fearing that she may do so, B married her. The contract
of marriage is therefore voidable because of threat.
Statement no. 2 –A simple mistake of account may give rise to the annulment of the contract because of mistake.
a. First statement is false, while the second is true.
b. Both statements are false.
c. Both statements are true.
d. First statement is true, while the second is false.
118. A appointed B to sell his land:
Statement no. 1 – If the authority of B is oral and the sale is in public instrument, the sale is void.
Statement no. 2 – If the authority of B is in writing and the sale is oral, the contract is unenforceable.
a. First statement is false, while the second is true.
b. First statement is true, while the second is false.
c. Both statements are true.
d. Both statements are false.
119.In three of the following the contract is cleansed of its defect by ratification. Which is not so ratified?
a. Contract where the creditor was damaged by the act of the debtor who intended to defraud him.
b. Contract entered into by a person incapable of giving consent.
c. Sale of chattels orally entered into for a price not less than five hundred pesos.
d. Lease of real property for more than one year orally entered into.
120.A gave B one million pesos for the latter to kill C. Before B could accomplish his criminal intent to kill C, A
changed his mind and demanded the return of the money from B. Decide:
a. A cannot recover the payment he made to B because it was a void contract which does not allow recovery by
the guilty party.
b. A cannot recover the money because the contract is unenforceable.
c. A can recover the money although the contract is void since the crime was not committed.
d. No recovery and both A and B will be prosecuted for their crime.
121.Because A wants to sell his land to B but the latter does not want to buy the same, A forced B to buy his land.
The contract is:
a. not binding upon B since his consent was vitiated
b. unenforceable as against B but not against A
c. may be ratified expressly and tacitly by A
d. valid, binding and enforceable
122.D borrowed a sum of money from C with G as guarantor. The loan is in writing but the guaranty is oral. D failed
to pay C. Who now is demanding payment from G? Can G be compelled to pay?
a. Yes, because he is the guarantor obliged to pay in case the debtor defaults.
b. No, because the guaranty is void having been orally made.
c. No, because the guaranty is unenforceable against G, it being oral.
d. Yes, because the guaranty is enforceable, writing not needed.
123.A and B agreed on February 3, 2000 that B will construct the house of A on January 2002. The contract was
orally entered into. B received a down payment from A with the balance payable after completion of the house.
The contract is:
a. Voidable because it is not in public instrument
b. Enforceable even if not in writing, having been ratified.
c. Unenforceable because it is not in writing and yet performance there is after one year from perfection.
d. Void because it is not in writing as required by law.
124.S sold to B a fake Rolex watch on January 3, 2001. On January 13, 2001, B discovered that the watch he bought
from A was an imitation. The law provides that he can annul the sale as a voidable contract within four years.
Prescription starts from:
a. January 3, 2001 when the sale was perfected.
b. The time of delivery of the watch to B.
c. The time they first walked about the sale of the watch.
d. January 13, 2001 when the fraud was discovered.
16
125.A and B agreed on a contract of pledge. However, they entered into a contract of mortgage in the honest belief
that the mortgage and pledge are the same. May the instrument be reformed:
a. No, the document cannot be reformed since the contract is void.
b. No, it cannot be changed. They are bound by the document which speaks for itself.
c. Yes, it cannot be reformed because it does not express the true agreement of the parties.
d. No, it cannot be reformed because there was no meeting of minds between the parties and the remedy is
annulment of contract.
126.A and B entered into a contract of mortgage. However, as written the document states it is a contract of sale with
right of repurchase, the error due to the fault of the clerk/typist. Hence:
a. The contract of sale must be annulled since it is voidable.
b. The instrument has to be enforced as it is the proof of the agreement between the parties.
c. Because of the negligence of the parties in signing without first reading the instrument, they are bound by the
contents of the same.
d. The instrument may be reformed because it does not express the true agreement of the parties.
127.S sold to B his parcel of land worth one million pesos for only half a million pesos. After the sale and realizing his
damage, S is now seeking to set aside the sale. Decide:
a. The contract is voidable because of mistake of the seller.
b. It is rescissible because of the lesion or damage suffered by S.
c. S has the right for an increase in the price to prevent unjust enrichment on the part of B.
d. The sale is valid, binding and enforceable because as a rule, lesion or inadequacy of cause or price in a sale
does not invalidate a contract.
128.D borrowed a sum of money from C with a certain rate of interest. C now wants to increase the rate of interest
without the consent of D. What principle in contracts prohibits C from doing so?
a. autonomy of contracts d. consensuality of contracts
b. relativity of contracts e. obligatory force and compliance in good faith
c. mutuality of contracts
129.Three of the following contracts must be in writing to be valid. Which is the exception?
a. Contract of partnership where immovables are contributed.
b. Contract of agency to sell the land of the principal.
c. Contract where the amount involved exceeds five hundred pesos.
d. Negotiable instruments.
130.A threatened to kill B if the latter would not marry the former’s daughter who was pregnant with B’s child.
Intimidated, B married A’s daughter against his will.
a. The contract is not voidable because the threat was made by a third person not by one of the parties.
b. The contract is not voidable because the claim for marriage is just or legal and therefore consent is not
vitiated.
c. The contract is not voidable since B has to answer for it is his fault that A’s daughter became pregnant.
d. Voidable is the contract due to intimidation even if employed by a third person.
131.The following are attributes of a voidable contract. Which is not?
a. It is binding, valid and enforceable before annulment.
b. Damage is material to be voidable contract.
c. It can be ratified and ratification has retroactive effect.
d. The capacitated cannot allege the incapacity of the other party.
132.The following are attributes of a rescissible contract, except:
a. It is valid until rescinded.
b. Damage or lesion is absolutely material.
c. Third person whose interest is affected may ask for rescission.
d. It is a principal remedy of the creditor to collect his credit.
133. Statement no. 1 – Contracts take effect not only between the parties but also their heirs and assigns and the
heir is liable beyond the value of the property he received from the decedent.
Statement no. 2 – In stipulation pour autrui, the third person must communicate his acceptance or the stipulation
before its revocation.
a. Both statements are correct.
b. Both statements are incorrect.
c. First statement is correct, while the second is incorrect.
d. First statement is incorrect, while the second is correct.
-----End of Handouts-----
17

NCPAR HQ02 Contracts Dominggo

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

NCPAR HQ02 Contracts Dominggo

Uploaded by

Copyright:

Available Formats

Northern CPAR: Business Laws – Law of Contracts

NORTHERN CPA REVIEW

•What is motive in a contract?

What are the classes of void contracts?

a. both are true c. no.1 is true; no.2 is false

84. Business advertisements of the things for sale are:

85. The following is an example of a real contract:

a. first statement is true, second statement is true

You might also like