Professional Documents
Culture Documents
RFBT.O-1601
LAW ON OBLIGATIONS
MARGINAL NOTES
REVIEW NOTES
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 past service or benefit being remunerated.
4. According to name
a. Nominate
b. Innominate
Those without any name under the law.
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
4. Consensuality of Contract
Contracts are perfected by mere consent
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.
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.
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.
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3. Gratuitous, lucrative, or contract of pure beneficence- the cause is
the liberality of the benefactor.
Lesion
→ is inadequacy of the cause.
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.
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:
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.
Annulment
Annulment is the action brought to set aside a voidable
contract.
Ratification
is the adoption or affirmation a contract which is defective
Unenforceable Contracts
→ is one that cannot be enforced unless ratified.
FORM OF CONTRACTS
Obligatory force of contracts in whatever form, exceptions
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.
INTERPRETATION OF CONTRACTS
→is the determination of the meaning of the terms or words used
by the parties in the contract.
3. Based on the same facts, except S is not insane but only a minor
at the time the acceptance is communicated to him.
A. The contract is binding between the parties.
B. There is no meeting of minds between the parties, therefore
void.
C. The contract is not binding because the party is incapacitated.
D. The contract is unenforceable.
4. 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 not liable because the loss was without his fault.
B. A is liable to pay damages if he cannot replace the ring.
C. A is not liable because no one shall be responsible for the loss
of a thing due to fortuitous event.
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D. A is liable for the loss even if it was due to fortuitous event
because of his bad faith.
14. Liable for the loss of the subject matter by fortuitous event
A. Creditor C. both creditor
and debtor
B. Debtor D. none of the
above
17. 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.
18. 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
25. 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. valid and binding C. rescissible
B. unenforceable D. voidable
26. Based on the preceding number, if the object were a house, the
contract shall be:
A. valid and binding C. unenforceable
B. rescissible D. voidable
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32. A without authority from B sold the latter’s car in the name of the
latter. The contract is therefore:
A. rescissible
B. voidable
C. unenforceable
D. void
37. 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 mere inquiry, theP100,000 offer by S is still
there.
C. B’s response is a counter-offer effectively terminating the
P100,000 offer and instigating an offer for P80,000.
D. 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.
49. A loan for P800 was orally contracted. May the lender recover the
sum lent?
A. No, because the contract is unenforceable.
B. Yes, because the contract is enforceable.
C. No, because the contract must be in writing to be valid.
D. Yes, if the debtor ratifies the loan.
51. 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. The contract to work without pay as a servant until the debt
is paid is void.
C. To act as a servant without pay is unconstitutional because
this is equivalent to involuntary servitude.
D. The agreement to work without pay since written is
enforceable.
57. 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 inapplicable here, because the
promise to give the land is not a sale of real property.
C. The Statute of Frauds is applicable because A has rendered
services.
D. The Statute of Frauds can apply to partially executed
contract.
59. 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 where both parties are incapable of giving consent to a
contract.
C. Those which are absolutely simulated or fictitious.
D. Those whose cause or object did not exist at the time of the
transaction.
60. 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. B is entitled to the benefit of the contract because it is valid
and binding.
D. S may annul the contract on the ground of error.
65. 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.
B. No, because the creditor can collect the credit due him.
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C. No, because the debtor has become in good faith when 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.
66. 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.
B. Yes, if A used the money paid to him.
C. No, because the sale is void.
D. Yes, because it is enforceable.
69. 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. voidable because of the fraud committed by B against A
C. unenforceable because B had no authority to sell A’s land
D. valid sale provided B is the owner upon delivery
74. 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.
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D. First statement is incorrect, while the second is correct.
75. 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. not defective
D. rescissible
76. 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. No, because there was no acceptance yet of the offer.
B. Yes since, there was already offer and acceptance.
C. Yes, because A cannot change his offer without the consent
of B.
D. Yes, because A cannot withdraw the offer within two weeks
as he is under estoppel.
78. 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. Voidable is the contract due to intimidation even if employed
by a third person.
C. The contract is not voidable because the claim for marriage is
just or legal and therefore consent is not vitiated.
D. The contract is not voidable since B has to answer for it is his
fault that A’s daughter became pregnant.
87. 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
B. interpreted for there is doubt
92. A and B agreed on June 3, 2012 that B will construct the house of
A on March 2014. 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. Unenforceable because it is not in writing and yet
performance there is after one year from perfection.
C. Enforceable even if not in writing, having been ratified.
D. Void because it is not in writing as required by law.
94. 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 of instrument because of mutual error.
C. Reformation if instrument because of lack of meeting of
minds.
D. Declaration of nullity of the contract because of the
uncertainty of the intention as to the object.
96. 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.
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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.
A. no. 1 is false; no. 2 is true
B. both are true
C. both are false
D. no. 1 is true; no. 2 is false
101. A contract entered into in the name of another by one who has no
authority or legal representation is:
A. void
B. unenforceable
C. rescissible
D. annullable
102. 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. Yes, because the contract although rescissible is valid, binding
and enforceable before rescission.
C. No, because the sale is void and after annulment is not
binding.
D. Yes because the contract although voidable is valid and
binding.
104. 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. 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.
C. It is rescissible because of the lesion or damage suffered by S.
105. 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. enforceable
B. voidable
C. unenforceable
D. void
106. 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
107. 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. No, because the son was not the owner due to lack of
delivery to him.
D. Yes, because what has been sold is present inheritance.
116. 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. No recovery and both A and B will be prosecuted for their
crime.
D. A can recover the money although the contract is void since
the crime was not committed.
121. A offered T-rex toy 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. Yes, there is perfected sale because the number of pieces is
only incidental matter in the sale.
B. Yes, because the letter of acceptance was already sent by the
offeree.
C. No, because there is no offer yet of A that is certain.
D. No, because there is qualified acceptance which constitutes
an offer by the buyer.
A. rescissible
B. void
C. voidable
D. valid
126. 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. The sale is void and therefore cannot be registered.
C. S cannot be compelled to execute the public document of
sale because the sale is voidable.
D. S can be compelled to execute the pubic document of sale
because the sale is enforceable.
129. 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.
130. 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,
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RFBT RFBT.O-1601.Law on Obligations
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 void.
D. A is not bound to deliver because the sale is unenforceable.
RFBT.O-1601
LAW ON OBLIGATIONS
MARGINAL NOTES
134. Which of the following contracts is rescissible?
A. Those where one of the parties is incapable of giving consent
to a contract.
B. 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.
C. Those where both parties are incapable of giving consent to a
contract.Those which are absolutely simulated or fictitious.