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College of Business, Economics, Accountancy and Management

Accountancy Department
Second Semester A.Y. 2012-2013
Accounting Review 2
Quiz II Contracts
Direction: Read and solve the following problems. Write the letter of your best answer on the space provided before
each number. Erasures are not allowed and considered wrong.
___1. When bilateral contracts are vitiated with vices of consent, they are rendered
a. Rescissible
b. Void
c. Unenforceable
d. Voidable
___2. Contracts take effect only between the parties or their assigns and heirs, except where the rights and obligations
arising from the contract are not transmissible by their nature, by stipulation, or by provision of law. In the latter case, the
assigns or the heirs are not bound by the contracts. This is known as the principle of
a. Relativity of Contracts
c. Mutuality of contracts
b. Freedom to stipulate
d. Obligatory force of contracts
___3. The following contracts, except one, are void ab initio. Which is the exception?
a. That whose object is outside the commerce of men.
b. That whose object did not exist at the time of the transaction.
c. That which contemplates an impossible service.
d. That which is undertaken in fraud of creditors.
___4. S, minor, owns a specific property valued at P50,000. B, capacitated, by means of fraud induced S to sell his
property to him for P30,000 which S did so. The contract is in writing. Which is correct?
a. The contract is valid and binding from the start.
b. The contract remains unenforceable because it falls under the Statute of Frauds.
c. The contract is rescissible because the ward suffered lesion by more than the value.
d. The contract is voidable and B can ask for annulment within the period prescribed by law.
___5. This is not a characteristic of a void or inexistent contract.
a. The right to raise a defense of illegality cannot be waived.
b. The action or defense for declaration of the nullity or inexistence of the contract does not prescribe.
c. It is not subject to ratification.
d. Defense of illegality of the contract is available to third persons whose interest are not directly affected.
___6. Reformation is not the proper remedy if
a. The mutual mistake of the parties causes the failure of the instruments to disclose their real agreement.
b. One party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does
not show their true intention.
c. There was mistake, fraud, inequitable conduct or accident which prevented the meeting of the minds of the
contracting parties.
d. The true intention of the contracting parties is not expressed in the instrument purporting to embody the
agreement by mistake, fraud, inequitable conduct or accident.
___7. The following contracts are defective. Which one is unenforceable?
a. Contract of sale by which a guardian acquired the property of the ward without the approval of the court.
b. Contract of sale by which a city mayor acquires a portion of the city part pursuant to a city ordinance enacted
by City Council.
c. Contracts whose object is outside the commerce of man.
d. Those were both parties are incapable of giving consent to a contract.
___8. Which of the following is not a requisite of fraud?
a. There must be misrepresentation or concealment.
b. The fraud must be serious.
c. A party is induced by fraud to enter into contract.
d. The fraud is employed by both parties upon each other.
___9. Which of the following is not correct in rescission?
a. Cannot be availed when the party who has been damaged has other legal remedy.
b. The person who seeks rescission must be able to return what he ought to return.
c. The object of the contract is not in the possession of third persons who have acquired it in good faith.
d. Can be demanded by any of the contracting parties.
___10. A contract in which a person literally contracts with himself is
a. Adhesion contract
b. Auto contract
c. Accessory contract d. Unilateral contract

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___11. The statement Contracts shall be obligatory in whatever form they have been entered into provided all the
requisites for their validity are present refers to
a. Real contract
b. Consensual contract
c. Formal contracts
d. Solemn contracts
___12.The pre-nuptial agreement of H and W, husband and wife, provides for complete separation of property. Later, H,
with violence and intimidation forced W to sell to him (H), Ws pieces of jewelry. The sale is
a. Rescissible, if W suffered a lesion of more than of the value of the property.
b. Voidable, because the consent of W is vitiated.
c. Unenforceable, if the value is at least P500.
d. Void, because husband and wife are not allowed to sell property to each other.
___13. 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.
a. Rescission
b. Annulment
c. Reformation
d. Consideration
___14. This is an accessory contract.
a. Sales
b. Mutuum
c. Commodatum
d. Mortgage
___15. These are real contracts, except
a. Commodatum
b. Deposit
c. Pledge
d. Chattel mortgage
___16. B, a minor, bought some kilos of rice and other necessaries from S, a capacitated person. The contract is
a. Rescissible
b. Unenforceable
c. Voidable
d. Valid
___17. X entered into a written contract with Y for the sale of his car at the price of P210,000. Subsequently, F told X that
the purchase price is very low as it can command a price of at least P250,000. X wanted to increase the purchase price of
his car to P250,000. This cannot be done by X because of what principle of contract?
a. Freedom of contract b. Mutuality of contract c. Relativity of contract d. Consensuality of contract
___18. A brought a car from B, a minor, for P100,000. One week later, A discovered that B was a minor at the time of sale
so he filed a complaint in court to annul the sale. Will the action prosper?
a. Yes, B being a minor is incapacitated to enter into a contract.
b. No, the right to annul the sale is given to B.
c. Yes, B cannot file the action to annul the sale because he is a minor.
d. No, unless there is lesion of more than of the value of the property.
___19. I. A void contract produces no effect whereas rescissible contract is valid until annulled.
II. The action or defense for the declaration of the inexistence of a void contract does not prescribe.
a. True, True
b. False, False
c. False, True
d. True, False
___20. I. An oral sale of land made by its owner is unenforceable if executor.
II. Sale of land made by agent without written authority from the owner thereof if void.
a. True, True
b. False, False
c. False, True
d. True, False
___21. I. A contract as a general rule must be written to have force and effect as a valid agreement.
II. A formal or solemn contract is perfected by the delivery of the object of contract.
a. False, True
b. True, True
c. False, False
d. True, False
___22. I. A contract entered into by a minor is void.
II. A contract where the amount involved exceeds P500 needs to be in writing to be valid.
a. False, False
b. True, True
c. False, True
d. True, False
___23. A defective contract where damage or lesion is essential is
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
___24. A defective contract because it is entered into in the name of another without or in excess of authority or it is verbal
but required by statute of fraud to be in writing
a. Unenforceable
b. Voidable
c. Void
d. Rescissible
___25. I. In reformation of instruments, it is necessary that there is meeting of minds of the parties to the contract,
otherwise annulment of the contract shall be the remedy if fraud, accident, mistake or inequitable conduct prevented the
meeting of minds.
II. In the interpretation of contracts, doubts on the incidental circumstances of onerous contracts shall be resolved
in favor of greatest reciprocity of interest and if gratuitous, least transmission of rights and interest.
a. True, True
b. False, False
c. False, True
d. True, False
___26. S sold to B his land valued at P1,000,000 only for the price of P700,000, thus resulting to inadequate price. The
sale is
a. Rescissible
b. Voidable
c. Unenforceable
d. Valid and binding
___27. It refers to the stage of the contract life where the parties have performed their respective obligations and contract
is terminated.
a. Preparation
b. Conception
c. Perfection
d. Consummation
___28. An absolutely simulated or fictitious contract is
a. Void
b. Voidable
c. Rescissible
d. Unenforceable

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___29. The principle that contracting parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient provided they are not contrary to law, moral, good customs, public order or public policy.
a. Liberty of contract
b. Relativity of contract c. Consensuality of contract
d. Mutuality of contract
___30. A law, to aid in human memory, or to prevent injustice due to faulty memory, which requires that certain contracts
must be in writing otherwise unenforceable.
a. Pactum commissorium
b. Statute of limitation c. Law on sales
d. Statute of frauds
___31. The following contracts are valid, except
a. A contract where a party gave his consent while in a state of drunkenness.
b. A contract where a party have his consent because the other party threateed to sue him for an unpaid debt.
c. A contract where A gave his consent because B threatened to kill As spouse.
d. A contract where the wife sells her property to her husband because of intimidation.
___32. A offered to sell her watch to B for P1,000. B offered to buy the watch for P800 but it was rejected by A. When B
turned to go away. A called him and said she is now willing to sell the watch for P800. May B refuse to buy said watch?
a. No, because Bs offer of P800 was accepted by A.
b. No, there is a meeting of the minds between the parties or the subject matter and the cause of the contract.
c. Yes, because B made a counter offer which was rejected by A.
d. Yes, because the agreement is under the Statute of Frauds.
___33. Which of the following need not be in writing to be enforceable?
a. An agreement for the sale of goods, chattels, or things in action at a price not less than P500.
b. An agreement for the leasing for a period longer than one year, or for the sale of real property or of an interest
c. A representation as to the credit of a third person.
d. A mutual promise to marry.
___34. Which of the following contract is enforceable?
a. Oral sale of immovable property for a price of P400.
b. Oral sale of movable property for a price of P10,000.
c. Oral contract of loan for P1,000.
d. Oral agreement made in consideration of marriage.
___35. In a contract of sale of a hardware store, it was stipulated that the seller shall not open or have any interest
directly or indirectly in any hardware store either in his own name or in the name of another or have connection with or be
employed in any hardware store for a period of one year or within 3 kilometers from Brgy. Ginebra, San Miguel, Bulacan.
Are these stipulations/restrictions upon the seller valid?
a. No, the agreement is contrary to public policy as the seller is deprived of a means of livelihood.
b. No, the stipulations are in restraint of trade.
c. Yes, the restrictions imposed are only on a limited scale.
d. Yes, as long as the agreement is made in writing.
___36. 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 as the 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 enforceable binding until annulled.
___37. Three of the following may be objects of contracts, except
a. Those things within the commerce of man.
b. Services which are not contrary to law, morals, and good customs.
c. Intransmissible rights.
d. Hereditary rights
___38. I. Contract of lease of a parcel of land for a term of one year must be written otherwise unenforceable.
II. Contract of sale of a parcel of land must be in public instrument otherwise unenforceable.
a. False, True
b. True, True
c. True, False
d. False, False
___39. The action to annul a voidable contract is extinguished by
a. Novation
b. Ratification
c. Rescission
d. Estoppel
___40. Which of the following constitutes an offer?
a. Business advertisements of things for sale.
b. Advertisements for bidders.
c. An offer made through an agent.
d. Before acceptance is conveyed, either of the parties dies, civilly interdicted, becomes insane or insolvent.

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___41. A sold to B a genuine bottle of Fundador brandy. However, upon delivery the former substitute a fake, B now wants
to annul the sale. Decide.
a. The contract is void ab initio therefore 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.
___42. I. An offer made by the principal is accepted from the time acceptance is conveyed to him by his agent.
II. The object of a contract may be future things including future inheritance.
a. True, True
b. False, False
c. False, True
d. True, False
___43. Which of the following contracts must be in writing to be enforceable?
a. Acts and contract for the creation, transmission, modification, extinguishment of real rights.
b. The cession, repudiation, renunciation of hereditary rights.
c. Contract of guaranty.
d. Contract of partnership.
___44. D, fearing that his creditor C, would go after his only parcel of land to satisfy his claim for payment of Ds debt, sold
his said land to X who did not know of Ds intention. Decide.
a. C can ask for annulment of the sale as this is voidable contract.
b, C may ask for damages against X since he was damaged by the sale.
c. C can file an action for rescission of the sale.
d. C cannot ask for rescission of the sale.
___45.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 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.
___46. A 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 4 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 talked about the sale of the watch.
d. January 13,2001 when the fraud was discovered by B.
___47. I. If the cause is not stated in the contract, it is presumed that it does not exist.
II. Lesion or inadequacy of cause as a rule invalidates a contract.
a. True, True
b. False, False
c. False, True
d. True, False
___48. 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 a voidable contract.
c. It can be ratified and ratification has retroactive effect.
d. The capacitated cannot allege the incapacity of the other party.
___49. 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.
___50. A promised to give B a car as reward after B has killed C. Later, after 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
___51. 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 the 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 which must be in writing to be

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___52. 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 Xs objection, may the ;land be registered in
Bs name?
a. No because the contract is rescissible and therefore without effect.
b. No because the sale is voidable 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.
___53. 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.
___54. Element without which there cannot be a contract.
a. Essential element
b. Natural element
c. Accidental element
d. All of the above
___55. I. In case of divisible contract, if the illegal terms can be separated from the legal ones, the latter can be enforced.
II. The defense of illegality of contracts is available to third persons whose interests are directly affected.
a. True, True
b. False, False
c. True, False
d. False, True
___56. 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 vitiated consent.
b. Void for want of meeting of minds.
c. Interpreted for there is doubt.
d. Reformed to express the true intention of the parties.
___57. I. G, guardian of W, sold Ws house valued at P50,000 for P37,500 or a lesion by of the value.
II. 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 rescissible.
c. No. 2 is voidable because there is an error or mistake.
b. Only I is rescissible.
d. Both contracts are valid and enforceable.
___58. In order that a stipulation in favor of a third person to be valid and binding upon the parties thereto, the following
are the requisites, except
a. There must be a stipulation favor of 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. There must be an existing agency between either the contracting parties and the third person.
___59. S and M agreed in print that S, debtor for P3,000 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
statements is correct?
a. The agreement to work as a servant is void because it is immoral.
b. To act as servant without pay is considered payment of debt.
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 being contrary to public policy.
___60. 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, one week before the completion of the two-year period. Which is correct?
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 employers right to terminate is superior than the right of 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

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