(CPA REVIEW SCHOOL OF THE PHILIPPINES REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS COVERAGE: Contracts Direction: Read and sclect the best answer for the following questions. 1. refers to 8 meeting of minds bereen two persons whereby one binds himself, with respect to the other, o give something orto render some service Ii one of he five sources of civil obligation. Obligation t . Contract © Right 4. Civil ation 2. Which ofthe following characteristics of contracts pertain to relativity of contract? ‘Tt means thatthe contractual provisions constiut de law between the parties. Obligations arising ftom contracts have the force of inbetween the contracting parties and shouldbe complied within good faith. . Itmeans tha the validity and performance of contract cannot be left the will foaly one of the parties ‘but must be mutually decided by all contacting parties. ‘© Htmeans thatthe contracts binding caly upon the contracting parties and their secessos such as bers or signees and third persous are not generally llowed to assall a contact. 4. Itmeans thatthe parties may establish such stipulations, clauses, terms, and conditions as they may deem ‘convenient provided they are not contrary ola, morals, good customs, public order ot public policy. 3. Which ofthe following characters of contracts pertains to autonomy of contrat? { Itmeans that be putes may esblsh uch stipulations, clase, temas, and condions as they may deem convenient provided they are not contrary te a, moral, good customs, publi order ox publi pole. 8 ltmean that contacts are generally perfected by mere consent except incase real cont tht require delivery of subject mater and formal or solemn convacis which reuse exeuton of formality requied bylaw T means that contract should not be contrary to aw. \ 4. itmeans that contcts hou ot contain doubt or ambiguity to avoid confusion and misunderstanding in the perfomance of contact. 4 Which ofthe following types of elements of sontract pertain to essential element of contracts? ; {They refer to those which are reuired inorder fora contact to exist sich 85 consent ofthe contacting parts, objet certain whichis he subject mater ofthe contact and cause of te obligation which must be esiblised. These elements may not be waived by the pats. 1 They refer to those tat exist in eran contact unless st aside or suppressed by the parties such as ‘warty agaist eviction and waranty against hidden defects in a contact of sale, These elements may be waived by pares as Log asthe waivers td in good fui ‘© They refer to those that do aot normally exist in a contact unless stipulated bythe parties sch strms of ayient, intrest te or place of payment. ‘5. Which ofthe following statements best describes a real contract? 1 Itis contract perfected by mere consent such as contact of esse and contrat of sale ‘Its a contract porfcted bythe delivery ofthe abject of the coutact such as contacts of deposit, of pledje, of lun and of commodatun, This h contact which must be i the form provided by lw for their perfection such as contract of donation involving immovable propery, together with the acceptance by the donee, must be in a public instrument to bevalid 4. ish contact involving every of ul propery 6. Which of thd following statements best describes an onerous contract? ‘8 It isle contract whereby there is an exchange of valuable consideration such as contracts of sale and ‘artes. For each contacting party, the cause is the pestation or the promise of e thing or servic by the Bb. Itisp contact whereby one party reosives no equivalent consideration such as contracts of donation and datum, These contracts are refered to a contracts of pare beneficence, the cause of which i the [berality ofthe benefactor. ‘& Itisa contract whereby the cause here is the service or benefit remunerated. ‘contract wherein ther is no cause or consideration, eee ered (CRAG. Regulatory Framework For Business Tansactons (RFBT 8602) Page 1of247. Which of the following satemeate best describes principal coutract? ‘8 It is a contact whose existence depends upon another centruc. The examples are contacts of pledge, of hate morgage, antites, gurantee of real ede mortgage which i dependest upon the principal of loan, 'b, tis a contract which serves as a means by which other contracts may be entered into suchas contracts of gency and parership. lise contact that can standby itself suchas contracts of sale and los. 4. It isa contact which has « mame under the Civil Code or special iaw such as contacts of sale, loan nd Iisa contract without any name und the Cit “de ce speci! law. 8, Which ofthe following statements bex describes aletary contrat? 4 leis a contact whereby the paris give equivalent vsucs such as contracts fsle end barter hence, there is rel fulitnent. ». Ieise const whos fulliltnent depends upon chance sich as insurance cotract. This contact where caly ane ofthe parties is ebigned o give or to do something such as contacts of commodacur snd ettous deposit 4. Its. conract where both partes ae requind to give o to do Something soch as contacts of sale and tare tie contract whereby the object of he other party is lio the cause of the other party and vice versa such as contacts fale and bare. 9. Which ofthe following contract best describes aato-coutrnet? a. Itisa contact which bas been performed, Bb. Itisa contact wherein ove person coucts with himself. ‘contact wherein one party has aneady prepared form of a contact, containing the stipulations be ‘ud he simply asks te other pat "o agree wo ther Ths wants to enter ato the contract. 4. tis a contrac that es nt yet bers perionaed. 10. The falling are the innominate contracts, except ‘2 Dout des I piv ta you may give) b. out facie give that you may do.) © Faciout ds do that vou ray give.) 4 Favio ut facas (do that you may’ o,) Fac uc des (do mot do that you may not do.) 11 The fllowing se the order ef prionty regudng rules that shall povern innominate contacts, except 18 The stipulation of the paris b. The provisions of Obl ations and Contacts © Thole goverrng the most analogous contacts 4. The customs ofthe piece © The provisioss of Tax Code 12, Which ofthe following satemeutsperining (othe stagos of contact refers to preparation or conception stage? “It refers tothe fist stage tat involves prelimicary negodations and bargaining, discussion of tems and conditions wilt ue arival yet ofa definite agreement - 1, Icrefere to the second sag thet perzin othe point when thee is meeting of minds between the partis ona dente subject mat and valid ens, . Ttrofers to the lst stage tht periins tothe pot when the contact has been filled resulting in its scomplisunent 13, Freedom to contact is one of the liberties ofthe people ofthe sate as gurenteed by due process clause, Tis means that he contacting partes may establish such stplations, clauses, rms and conitons ar they may deem convenient, provided they are not eortary tothe fellow Las 5. Religion Morals Good evsoms Public order Public policy 14, An audit staff and an autiting fico orally ented into « coutactof employment whereby itis stipulated that ‘overtime premium ard hlidty oy eve waived. Is the waver valid? ‘a Yes becasse of matuaiy of conmact, 1B, Yas because of autenoniyof contact ©. Nobecause i is ntray’ to law ard public poiey. 4 Nowbeeause itis entered ina orally bet nota wsting. i (CRAR Rrgulatory Framewor for Business Traxacsons (RFBT 8602) Page 2 0f 24 pepege15, In an action for ejectment, the lessee interposed the defense that the contrac of lease authorized them to continue ‘ceupying the premises so long as they paid ther rents. Is the defense of the lesee tenable? ‘a No because it violates mutuality of contact which provides thatthe contact must bind both contacting, parties and its validity or compliance cannot be lft othe will of one of them. 'b. Yes because itis stipulated in the contract. ¢. Nobecauseit is contrary to morals and good customs. 4. Yes because it doesnot violate public order and public policy. 16, A stipulation provides thatthe student's scholarship is good only if he contiaues inthe same school, and that he ‘waives his right to wansfer to another school without refunding the equivalent of his scholarship in cash is nell and void because it is contrary to 2 Law Morals Public onder 4. Public policy 17.A stipulation which provides thet in the event of nonpayment of the debt at maturity thatthe creditor may “appropriate for himself the thing given as security is mull and void because it is contrary to Morals '. Good customs © Law 4. Public order 18, A stipulation which provides that « pesca shill mary & person in consideration of money is mull and void ‘eeause itis contrary 10 «Law 'b.Morals and good customs ‘e Pablic order 4. Publicpoliey 19, The fellowing stipulations for common carer shall be considered unressonabe, unjust and contrary to public policy, therefore null and void, except ‘2 That the goods ae wansported at the risk ofthe owner or shipper. ', That the common carer need not observe any diligence inthe exstody ofthe goods. , Thatthe common cartier will nt be liable for any loss, destruction, or deterioration of the goods, ‘4. A.stipuation berweea the common eartir and the shipper or owner limiting the ibility ofthe formes for the loss, destruction, of deterioration of the goods to a degre less than extraordinary diligence if in ‘writing and supported by a valuable consideration. 20, The following stipulations for common cartier shall be considered unreasonable, unjust and contrary to public policy, therefore null and void, except ‘2 That the common carir shall exercise a degre of eligence less than that of good father of a family, or of aman of ondinary prudence inthe vigilance aver the movables transported. b. That the common carrer shall exercise a degree of diligence lss than that of extraordinary diligence the transportation of passengers. ‘e. That the common cartier shall not be responsible forthe act or omission of hs or its employees. 44. That the common carrie’ liability for acts commited by thieves, or of robbers who do not ast with grave cor irresistible threat, violence er fore, is dispensed with or diminished, That the common carer is not responsible forte loss, destruction, or deterioration of goods on account ofthe defective condition of the car, veicle, ship, airplane or other equipment used in the contract of carriage {Thacthe common cartier i not responsible for the acts of robbers who act with grave or iresistible threat, violence or fore, o tat the smmon carrier's responsiblity is dispensed with or diminished incase of ‘cts of robbers who act with grave or iresistibe tes 21, The hotel-keeper and the guess agree that the responsibility of the former asset forth in Articles 1998 to 2001 of Civil Code regarding necesary deposits brought by the guests is suppressed or diminished. 1t was also stipulated thatthe hotetkeeper is free from responsibilty to tho effect that he is not isle for the aces brought by the guest Are the stipulations valid? * ‘They are always vod for being contrary to nw and public policy. ‘They ae valid if agreed to in writing, ‘& They are valid provided the hotel-keepet properly posted the notices containing the waiver inthe rooms. ‘They ae only vod if they are entered in orally. 22. A stipulation in a contract of loan providing for 1D% interest per month is ‘a. Usurious . Unconseionsble © Voidable 4. Rescisible Page 3 0f 2423, Two persons agreed in a contract which provides for the concealment ofa public offense or the suppression of evidence or the stifling ofa criminal prosecution fora certain consideration. Is the stipulation valid? 1 Yes brome may of ones provide hts iy or opine eat ee othe wil ene b, Yes because the obligatory force ofa contac bind both contracting parties, «No because the stipulation is contrary io law and public policy. 4. No because the stipulation is contrary to mutuality of contract ‘24 An agement was entered ino by the parties which provides tha either on of them aay terminate the contract forthe vicluton of any ofits terms and conditions. Is this stpulition valid? ‘No bectuse it violates mutuality of contact which provides that its validity or compliance cannot be let tothe wll of one of them, '. Yes because the validity er compliance is wot enely left to te will of one ofthe cootractng partis, but itmerely gives the one party the right o declare such contact cancelled and of no effet in case of broach of contact by other party. ‘No because it violates the freedom to ent nto contact 4. Yes because the right to resend contrat cannot be waive. 25. The cont provides that the determination ofthe perfomance Is lef 10 ofa thin pron. Is tb aplaton valid? ‘Noes itis contr tol, meas, good estoms, publi order or publi policy No been it viouesmutaliy of conta. Yes semis the determination of the performance of cotact may be left to «tind person, whose decison sel not bo binding unt it bas born made Kaowa to bth contacting pats 4. Yes because he determination of he thd person is cbiatory whether or not tis evidently inequitable, 26, What isthe remedy ofthe parties in caso the determination of the performance of contrast of third person is evidently inequitable? ‘The contract shouldbe declared nll and void. 1 The contrat should be rescinded. ‘© The court shall decide what is equitable under the circumstances. 4. The cout shall eave the satus ofthe contract 27, Relativity of contact provides that contract tks effect only between the following, except ‘a Contracting partes i. Assign of contracting parties Heirs of ccmtacting parties 4. Third persons 28, Obligtions and rights arising from contracts are generally transmissible to the paris’ eis and assigns. The {ellowing reconsidered intransmissble, except 1. Those which are purely personal. 'b. Those which ate provided by law to be intransmssible. {© Those which are stipulated bythe party tobe itranmisil 44. Those which ae based on commecial ansactions. 29. A person died leaving liabilities, Are the heirs lable for the obligations ofthe decedent? ‘2 No because there is no privity between them andthe decedent. No because the heirs ae nt the contracting putes. ‘e Yes even beyond the property they received because contacts take effect between the parties, their assigns and heirs 4. Yes but not beyond the property they received because thee is privity betwoen them and their predecessor. + 30.74 stipulation which i considered an exception to the relativity of contracts called ‘Stipulation pour aura Stipulation in fivor ofthe bers 6, Stpulation in faver of assigns 4._Scpulation in fvor of contacting psties 31. The following ae the requisites of stipulation pour aur or stiplation in fivor of third person, except ‘There must be stipulation in favor of thd person. '. The stipulation should bea part, not the whole, ofthe contract. ‘e. The contacting parties mast have clearly and deliberately conferred a favor upon a third person and not & mere incidental benefit o interest. ‘Ths favorable stipulation should not be captioned or compensated by any kindof obligation whatever ‘The third person must have communiated his aceptzace to the obligor before its revocation. One ofthe contacting partes doesnot bear the legal representation or authorization ofthe third party. “The aipulaten in favor of third person must be specified in writing. enon. ‘Toda Baculaary Framework For Buciass Tansectons (RFBT 8602) Page 4 of 24| 22. Te fallen cnenig glo oh ee core xe A rake ea cl rasan now | favored, Before acceptance by the tid prion, the contacting partis; by mutual agreement, may modify the sonal or revolt Amore incidental interest or bene not within te doctrine of stipulation pour ets 4. The stipulation pou au sllexiss even ithe contacts considered null nd voi. 33. A mortgages his land fo B andthe mortgage is registered in Registry of Property. Afterwards, A sels the land to . Is the mortgage contrat binding pon C? Nobecause Cis nota party 0 the contact. 'b, Nobecause there is no peiviy between Band C. © Yes even if the mortgage contracts not egistered. 4. Yes teceasein contre creating el sighted pono win come into possesion of the ojet of be contact rebound thereby, subject tothe provisions ofthe Morgage Law and Land Registation Laws. 34 Ais a coditor of B, In order to escape the lability to A,B sell all his property to C. May A ask for rescission of the contrast of sale between B and C? a. Na because A is not party tothe coatract, b, Ni bosause A has no right of rescission & Yep because creditors are protected in eases of contract intended to defraud ther, @Yébeven ifthe right of levy and execution and accion subrogstoria are stil Available, a iat in’ hs Xai cn pt ‘damages against X? Ste iieacveiseae, t Simitteersotee | Bee eee TE thet I ache ereaigst fe 36. A borrowed P10,000 from B and entered into « contract of rel estate mortgage involving hit ca. A is also indebed to Cin the amount of P100,000 but the later cannct attach the ear because ofthe mortgage, May C file an actoa fr declaration of ally of contrat of realestate morgage? Yes because a void contract may be assailed by a third person directly affecfe by suc void contrat. Bb, No because C is ot a pany othe conmact, ©. Na becuse it willbe violative of relative of contact. 4. Yes butoaly A and B wil gv consent the ut. 37, Asan cation to relay of conta, which contracts may eased by atid person? ‘Valdebleconract a bean 38. Consensual contracts ar perfected by ‘a Delivery ofthe object of «contrac. '. Execution of formalities requied by law. ©. Mere consent by contacting partes. 4. Provisions ofthe law, 39, Real contracts are perfected by ‘Delivery ofthe object ofa contact, i. Execution of formalities required by law. ©. Mere consent by contracting partes. 2 ipso 40, Real cont, such as contracts of deposit of pledge, of loan or muttum and of commodatum are perfected by ‘a Delivery ofthe object of a contract. , Execution of formalities required bylaw, Mere consent by contacting partes. 4 Provisions ofthe law. 41, Whatisthg nature of eontract to constte a pladg, «depos, oan ra commodetun? a Realconrat 1 Consensual contact 6. Formal contract, eersap ye pesepneenerpaemeeeee renee TT TEE CHAR. Regulatory Framework For Business Tanactions (RFBT 8602) Page 5 of 240.Femntmncuns eyed | : eee » eel Tees 43, Asa genera rule, contracts sal be obligntoy, in whatever frm they may have ben entered int, provided all {he essential requisites for ther validity are present. However, whon he lw requires that aconirct bein some form ioe th it maybe vali ov efeceabi, ort contac be proved in cern way, the requirement is volute and iospentabe. The following coma a qi tobe in certain form to be vali alo know a5 formal contract or seleai contracts, except 8 Negotiable insrumenis must be made sty nth form provided by the Negotiable instruments Law to te valid in xdoed to be considered negotibl ', Contre of mange mist have mariage cense and authority of soleniing ofr Doiations of personal propery in exces ofP,000 mast be made and accepted in wing tobe valid 4 Donssons of teal pepe mst be made and accepted in publi estat tbe valid. The anevei agement iclating the piel an intrest ofthe contract of lean must be specified in Writing tobe valid forthe contit af attest tobe valid. £ Theapreemeotto pay interest ia a coats of oan mos on writing tobe valid 4 Regisration of chatel morgage is ese ot valid Aone of pare ru apr o righ ae cotibtd mat Be i x pb fname, wath ap iaveaey of rel atached tae, tbe val Sale of a pec of land by the agent i the name of he principal, the authority ofthe age must bein ‘ptog tei te land must be in writing obo vali. 4. Sale of commuiyscojugal property By oe of the spouses, thre mat be autor given by the oer spoure tthe selling spouse 4 The ease of personal property fra prod longer tan on year should bon wring ob valid 44, Which of the following sa valid agreement or stipulation? {Ora greener to pay 2% por oni ives based on the principal amount of he loan 8 Oral contac: af atch « Writen conto of sale cf apiece of land by an agen inthe name of the principal wherein the opent has coral thoi to sel te an 44. Orat contact of parsership wherein te delivery of money wil be dove afr 5 years. 45. The following au! appea in a pubic document inorder to insur its efficacy or for mere convenience but not for fas valdiy, except 4 Acts or contracts wet have for their objec the setion, transmission, modification or extinguishment or real gis «ver taorable property. . 1b, The cession, repudiation f renunciation of heraiary tights or of those ofthe conjugal partnership of aa. . 6 The power nadsinisterpropety, or any oer pene which has fr its objet an at appearing or which should appear ic 2 public dcewect. or shoul prejudice a third person 4 The esson of actions o rights proceeding from an act appearing in «public document 2. Contract uf ease of movable property 46. Which contract must be in writen insert, iter public dceument or private document, in order to insur ts cicny or former cone fence but not Frits valiiy? ‘2 Contracis where the snout involved exveds ive huadred pesos, 1. Contract where the contacting partis ate capaci Contracts whove ho subject marr is wovabl o rena property <4. Contras whe perforined witha one year rom ne making eter, 47. If the law rogues documeat or eter spec! form to» contact fr mere convenience but not for validity or ‘enforceabty, ha sche right of tho eoatacting pares onea the contact is perfected? The souracting pois may anal the contac Bb. The couemstng poms is noscind the contact. & The oourartin races may comgc! exch other ta nbserve the fora or document required by law. 4 The eceusctng putise need uot eveewe te ried or. 48, From the moment of prfection ofa contac, what the exten ofits binding eet? ‘a The artier ace bound only to te fulfillment oF what's been enpresey stipulated inthe contrat. 1 The parties ve brund ene the natal consequences of te coatact © The parts are bound na oly tothe flment of wat hasbeen expressly stipulate inthe contract but lo to all the cousequenses whic, according ther ature, may be in keeping with good faith, usege tnd lew. 4. Thoperis are not bound by whit is not stpulted in the contrast rn CAR Regltory FrancwerE for Basin: Tanactn: (REBT 8602) Page 6 of 2449. How sto anu of te contract determined bythe cove ‘Contract is what the parties choose to call them. '. Contract is determined by the stipulations ofthe partes. © Contract is determined by the prizcples of law. 4. Contracts determined by the surounding circumstances. 50. Asa general ru, no one may contrac in the namo of another without being authorized by the later or unless he ‘nas by law a right to represent him. What i the status of contact entered into inthe name of another by one who ts osulory or ep epeseition or who bas ated beyond hs powers? a Rescisible B. Unenforceable & Voidable| 4. Nulland void SI, An owner of hacienda did not authorize his wife and children to sll the sud hacienda but upon being informed that they had done 60 instead of refusing to enforce ofthe sal, ae proceeded to collect in installment the amount of promissory note given tothe purchase. Can the buyer of th hacienda enfore the contract of sale of and? ‘No because the contract is unenforceable considering the wife and chien has no authority to sell the land, 'b, No because the contract i rescissible considering that tis entered into to defraud the creditors. ©. Yes because the contact is only voiduble and therefore enforceable. Yes because the contact becomes enforcesble upon the collection of the purchase price which is considered an implied ratification. 52. Tho following are the essential requisites of consensual contract, except ‘Execution of formality or solemnity required by law ‘6. Consent ofthe contacting partes {Object certain which is the subject mater ofthe contact 4. Cause ofthe obligation which is established 453. The following are the essential requisite of real contracts, except Delivery of the subject matter ‘Const of the contracting parties ‘Object cern which isthe subject mater of he contract (Cause ofthe obligation which is established Executin of formality or solemnity required by law paper 54. The flowing eth exe rue of foal roles cea, eept Delivery ofthe subject mater ‘Consent of the contracting parties ‘Object certain which isthe subject mater of the contract ‘Cause ofthe obligation whichis established Execution of formality or solemnity required bylaw 155. Irefers to the meeting of minds between the contacting partes as regards tothe object and cause of cont. It ‘one ofthe esenial elements of contact. ‘Execution of formality or solemnity required by law ', Content ofthe contracting parties ©. Object certain which isthe subject mater of the contract 4. Cause ofthe obligation which is established 56, Which ofthe following statements concering the concep of conseat is iacorrect? '& Consent is manifested by the meeting ofthe offer and the acceptance upon the thing andthe cause which are to constitute the contact ', The oer must be cerisn ad the acceptance absolute, ©. A qualified acceptance constitutes a counteroffer. <4. Consent must be expressed but nt implied. 57. Tf the tery being flowed by te New Cri Code of te Pippin forthe deterinatoa of monet perfection of ones tise ther falloed lpi justin Pe Meiestion ry The cou ered ten he omen ih epics declared rade 1 Expedion tory The contacts pete ftom the momen! he ofre tanscl the notiction of tcteptinc tote ere Recaption theory = The contact is perf rom the moment thatthe nolfzaton of acceptance i ithe Idsf the fre «4 Coputive teary ~The contact is perited fom the moment the offeee’s acceptance comes tothe Anowledge of he offer. Dee aa Sa pseer-memenerpsepmreser-ememsena rrr eed (CRAR.- Regulator Framework For Busines Transactions (RFBT 8602) Page 7 of 24‘58. When does the acceptance made by letter or telegram bind the offre? ‘2. From the ime he seat his offer. '. From the time the soceptance was seat by the other pat. ‘From the time the acceptance came tothe knowiedge ofthe offre. 44. From the time the parties signed the written contract. 59. A contract entered into trough lotr, telegram or telephone is presumed to have been entered in what place? ‘Inthe place where the offer was made, '. Inthe place where the acceptance wes mede, e.Inthe place where the writen contract was signed. 4d. Inthe place where the object of the contract can be found. 60. The following are the requisites of an offer, except Temust be definite. emus be uncertain, emus be complete lemust be intentional (61. A offes his watch to B for PS0O. said tht he wil buy it for PASO Is the contract perfected? ‘2. Yes because the consent is manifested. b. Yes provided B wil py PASO. fe. No because there i a delivery ofthe watch, 4. No bacause a qualified aceptance constitutes counteroffer. (2. On January 1.2011 A wrote a leer to B offering him to lease a building. On January 22011, B sent alter to A ‘advising him that his offer was accopted. This ler was received by A nt 2:55pm that day. On the same day, in the morning, at 11:25, A had already writen a letr to B, withdrawing the offer to lease the building, The letter revoking the offer wa rceived by Bat 3:55pm. Is the cotrat perfected? ‘Yes because the offer was accepted by B before dhe revocation was received by him 3. Yes beonuse the contract s perfected from the moment B send the letier of acceptance. No because before the acceptance is known, the offer can be revoked, it not being necessary, inorder for ‘the revocation to have the effect of impeding the perfection of the contac, that it be known to the offer. 4. No because the contract is perfected only bythe execution of written contrect. £63, The following sutements concerning consent ar core, except ‘An acceptance may be expressed or implied. ‘The person making te offer may fix the time, place and manner of acceptance, all of which must be complied with ‘An offer made through an agent is accepted from the ne acceptance is communicated to his principal, ‘When the offerer has allowed the offeree a certain period to accep, the offer may be withérawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon & ‘consideration, someting paid or promised. (64, Before the acceptance is conveyed, an offer becomes ineffective upon the happening ofthe following to either offeror or acceptor, except ‘2. Civil interdiction b. Insanity Death 4. Insolvency fe. Sickness re 65. A offered B to purchase his car A allowed B two weeks to accept he offer. A and B also ented into contract of ‘option forthe two weeks allowance and B paid P200 forthe option. Can A withdraw the offer before acceptance byB? ‘a Yes booause an offer may be withdrawn by offerer before the acceptance is communicated. '. No because the option contact is supported bya consideration. ©. No because the offer cannot be withdrawn once given, 4. Yes because the contract isnot yet perfet, 6. A department store advertises a Christmas sale cf men’s and women’s shoes, those of men at price of P20 and above, and those of women’s at PIO and above. Gan anyone ofthe public make an acceptance ofthe offer? ‘Yes because business advertisements of things forsale are definite offers. ', No because business advertisements are hers invitations to make an offer. Yes because those who advertises ae est 4. No because an offer cannot be made advertisement. GEAR Mepulatony Premewor, For Busnes Hansactons (RFBT 8602) Page 8 of 24isthe highest bidder. Is ABC bound to accept the 67. ABC ne. nakesanadvertsent fo bidders of tad 2 ‘offer ofthe highest bidder? 8. Yes because adverisomens for bidders are definite offers. . No because advertisements for bidders are simply invitation to make proposals, Yes because in auction sale the highest bidder always the winner. 4: No because the lowest bidder should be the winner, ‘8. The following persons cannot give consent toa contrac, except ‘2. Unemancipated minors Insane except during lid interval ‘e. Demented persons 44. Deafsmutes who do not know how to write ‘Blind persons who cannot speak (69. What is the status ofa contract entered into between a person who can give consent and en unemancated minor, {insane or demented persons or deaf-mutes who do aot know bow to write? ‘8 Voidable onthe par of the incapacitated person '. Voidable onthe part of the capacitated person © Uenforceable 4. Nilland void 70. What isthe status ofa contract entered into between an unemencipated minor and eh insane or demented person? & Voidable b Rescisible & Uenforceable @. Nulland void 7. Acoma eer ne ein A its nna pra, ar A rtf Be cet (sae cbensaeenc mathe tea Sates ; thd us of contre ented into dring aid ater? Pefety valid Vaidable sible ‘Ueaferceable 1. Whi guetta don sup ovale B Rochatie | 26 & Mitadvoir 14, Wat sa of cone hin consents waned whe cosa vad epee? evaded Vola Vans ooe © Void and voidable 4 Void and unenforceable a neeek pre 17, The following are the requisites of consent, excopt Itshould be intelligent. It should be fre, It should be spontancous It should be vitintod. 176, What isthe stars of « contract entered into wherein consent is givea through fraud, undue influence, mistake, intimidation or violence (F-U-M-I-V)? ‘& Voidable B. Rescissible © Uenforceable Nall and void aese ee CAR. Regulatory Framework For Business Transactions (RFBT 8602) Page 90f2477. Which of the following vices of consent if ccmmined by a third person who didnot take part inthe comtrac may ‘anno or take te contact voidable atte judisial discretion ofthe court? ‘Fraud and undue influence { . Intimidation and violence 1 Fraud, undue influence and vielenee 4. Iminidatin, violence and wade influence 78, The following rypes of mistakes may result io invalidity or videbilty ofa contact, except ‘4. Mistake which shoold refer tothe subtce of the thing which isthe object ofthe contract. 1, Mistake which should refer to those conditions which have principally moved one or both partes to enter into the contact ‘6 Mistake as to identity or qualifications of ove of th parties wherein such identity or qualifications have been the principal cause of the contrac. 4. Marval error as tothe egal effect of an agreement when the real purpose of the partes is frustrate. © Simple mistake of account. 78, The following erors do not vtiate consent, except ‘Error as othe solvency ofthe othar party. b._Exrorasto themetive ofthe py. & Erroras we estimates. 4d. Error as to bass of cont, 80. A and B entered into s contract of sale of apiece of land, not knowing that the ssid property has already been the object of another sale under different terms an conditions, ky their duly representatives. What isthe status of the second contract? a. Roseis . Voideble © Usenoreeable 4. Nall and void ‘When one of the partes is unable to read, oF ifthe contract sin a Janguege not understood by him, and mistake or fraud is alleged. sho shal shoulder the burden of proof incase of lansut arising fom this contract? ‘a The person alleging mistake ofaud, The person enforcing the contrac, ‘eThird person interested inthe contract, Any person 82, One of the pemies agrees 12 an upset pice in a contact of selo with full knowledge of the favorable oF unfavorable pecsibiies wih respect tothe essential elcunsstances of the coutact. What is the status of the conte? 1 Voidabis bacacse there is matte fa the upset price, b. Null und voia bousise ups: price is orobited by Faw in any ype of contact. © Valid and wit defee:becacse theve is 0 mise ifthe pacty alleging it knew the doubt, contingency sr isk effecting the oe! ofthe contract, |. Unenforoesisbecavse it ioetes statue of frauds. 483. I one of the parties believed that ho received a certain aricunt asa lees. which the other delivered as a real epost, what I the status ofthe contact” ‘2. Voreable certeact af lan on the part ofthe firs party. 1b. Voideble contact of real deposit on the part ofthe second pasty. Valid cones of lo and eepasi oa both partes, 84, Which ofthe following sutements is correct? 1. Thereis viclence when ip erder to wrest conseat, serous or isistible force is employed. Theres intimidation whe one ofthe contrasting parties 1s compelled by a reasonable and well-grounded fear of an imminent ard grave evil upon his pecion or property cr upen ‘he person or property of his spouse, descendans or ascendant, give his consent & Both end b. Neither nor It Tonly 4 Menly 85. The following ae the requisites of violence to vitate conseat, except ‘a. There mest be physical force 'b. The physica! Yosce mas he ie sistible ¢. Itrefers to moral force ar compulsion. 4. The force must he te deterring exe in giving the consent tothe contact er CAR ~ Regulatory Framework, For Business Honsactinus (RFBT 8602) Page 10 of 2486, The: flows ar the requisites of intimidation to vitiate consent, except ‘Tht intimidation must be the determining cause of the consent. 1. The threatened at must be just or lawl. The threat must be rel and serious, 4 itmust produce a reasonable and well grounded fea. 87, A borrowed money from B. Upon failure of A to pay the loan, B threatened A to flew collection suit against A if the later will nt execute the contract of mortgage. As a result ofthe threat, A enteced into the contact of mortgage. What isthe satus ofthe contract of mortgage? Void because teat i egal. . Voidabie because the consent of A is vtiated Valid and binding because the claim of Bis just end leg 4 Unenforceable because there is violation of statute of fraud 88. Which ofthe following statements is correet? 1 There is undue influence when a person takes improper advantage of his power over the will of another, Aepeiving the later ofa reasonable freedom of choige. UL There ig fad when, through insidious words or machinations of one ofthe contracting partie, the other is indo ec: into a contrac whic, Without then, be woul othe agreed cis @ erly 89, Which of the following statment is lacorret? ‘Violence or intimidation shall annul te obligation, although tray have been employed by atid person ‘wh didnot ake pain the contact, Failure to disclose fas, when there is duyto revel hem, as when th partes are hound by confidential Felton, constiuts fra. & Amer expression ofan opinion does ot signily fraud, unless made by an expert and the oer party has relied onthe former's special knowledge. 4. The usual exaggerations in trade, when the otber party had an opportunity to know the fits are in themselves fraudulet. : \ 90, The followihg ar the requisites of faut vat a concen, except 1 Itnisthave been employed by on ofthe conuasting pris only. | mbt have induced te oter party to enter nto the contre. . Iembst have been serious. 4. Its result inj or damage tothe party asking for eaten of contrat. 51.5 ot edi ont a oe tno nh oda. int hats a csana ascanesassai £ Pep eataccaiemants > pecorino Pie ee $2. Tah olin wo sd finn ahns yA etd in act ith, White ey wa Tonskfr mines of cnt bem titi 5 Tetskerdaape tones how san To phe denge tc tee ce, To fist of tn can el cant 93. The felling statements axe correct, except a. Misppreenation by third person doesnot vit consent, unless such misrpreeotaion bas created fbi mistake and th sun is mitt 5. Misepresenation made in good fit is ot andlet but may costae emer. In ordr that fraud may mae a contact voiable, shouldbe serous and shuld not ave been employed by bth contacting partis 44 Incidental rau may etl the injured party for annulment of contact ‘94, Whats the offct when both partios use fraud reciprocally? ‘2 Any.ofthe parties may ask for annulment of contract. The contact is voidable for both parties. The fraud of one compensates that ofthe other, and neither party can ack for ennulent ofthe contact because they are in pai delicto, 4. Any ofthe parties may ask for damages (CRAR.- Regulator Framework, For usines: Tansactins (RFBT 8602) Page 11 of 249S. What isthe status of absolutely simulted er Bettious contact? ‘a. Voidable '. Null and void whichis subject to action for declaration of lity ©. Unenforceable 4 Rescissible 96. What isthe status of relatively siwlated contract? ‘2. Allcontacts are void, '. The intended contract i valid but the stated contrat is void requiring reformation of instrument. The contract is voidable 4. The contact is unenforsasble, 97, Which ofthe following staements is correct? p 1. In absolute simulation, there is color of « contact, without any substance thereof, the parties not having any intention robe bound, TI. Inrelative simulation, the partes have an agreement which they conceal under the guise of another contrac. @ Bothtand it . Neithe nor I ©. Toaly @ Menly ‘98. What isthe remedy of the partes in case of relatively simulated contract? ‘a Ask for annulment of contract. 1. Ask for declaration of wll of contract. Ask for reformation of instrument. Ask for rvcissio of contract, 98, What is the remedy ofthe parties in case of absolutely simulated contract? Ask for annulment of contract. ‘Aak for declaration of wut of contact. [Ask for reformation of instrument. ‘Ask for rescission of contact eree 100, Ierefers tothe promise or conduct to be performed inthe performance of the contractual, and may consist ‘of giving, doing or not doing a hing. It isthe thing, right or service which i the subject mattar ofthe obligation, arising fom the contact. tis one ofthe essondal elements of eonvact ‘a. Execution of fonnality or slemnity required by law 1. Concent ofthe contrasting pares Object certain whicn is the subject matter of the contract Cause of the obligor which is established 101. The following we the requisites of en object ofa contract, except ‘8 The object most he within the commerce of men, mer be erm cvtnry to lw, mer pod exams, publ ede publ pole © Kemustbe ingossible. Teast be deterviateas to ts kind. 102. The following objects may be considered an object ofa contract, except a. Future shings bi Hereditary cigs ©. Allright which are nt intransmissible 4. Future inheritance © Allservices aot contrary to law, moral, good casts, public order or public policy 103, Before Don Lasel dies, his heirs enter into an agreement forthe partition ofthe estate oftheir father. What ‘is the ears ofthe contract? ‘a Voidable Null and void because the subject matters fotre inheritance © Unenforceable 4. Rescisible 104, After Don Miguel died, one ofthe eis entered ito contract renouncing his right to inherit. What isthe ‘status ofthe contact? ‘Valid and binding because the subject mater isa bereditary right B. Nalland void ©. Unenforveable a. Rescisible an (CRAR= Regulatory Framework Fer Busnes: Transactions (RFET 8602) Page 12 0f 24105. _Itrefers tothe immediat end proximate purpose ofthe contractor the essential reason which impels the contracting parties to enter into it and which explains and justifies the ceatin of the obligation through such contract, It is one of the essential elements of contrat ‘Object of contract ‘Cause of contract Consent of contract orm of contrast eee 106. Which ofthe following statements concering the cause of the contract is incorrect? In onerous contracts the cause is understood to be, foreach contacting party, the pretation or promise of a thing or service by the othe. ‘i. In remuneratary contracts, the cause i the service or benefit whic i remunerated ‘© In-contracts of pure beneficence or gratuitous contrac, the caus is the mere liberality or generosity of the eet . The cause of accessory contract should be different from the very cause or consideration ofthe principal contract. 107. Which ofthe following statements is incorrect? Contracts without cause of with unlawful cause produce no effect whatever and are considered mull and void. T. —Contracts without motive or with unlawful motive produce no effct whatever and are consiered null and void. Tooly only Both land Neither por It 108, Which ofthe fotlowing statements is incorrect? ‘The statement ofa false cause in contracts shal render them void, if t should not be proved that they ‘were founded upon another cause which ise and lawl 1. Aldhough the cause is not steed in the contract, itis presumed that it exists and is lawful, unless the ‘ebtor proves the conzay, & Asageneral rile lesion oF inadequacy of cause shall invalidate «contract. 4 The particular motives ofthe partes in entering imo a contact are differen fem the caus thervof. 109, _When, there having been 2 meeting of minds of the parties to the contract, their tue intention is not ‘expressed inthe instrument purporting to embody the agreement, by reason of mistake, aud, inequitable condvet ‘or accident, wit isthe remedy of one ofthe partis? 2. Ask for annulment of the contract because the consent is vite. 1 Ask for reformation ofthe instrument to the end that suck tu intention may be expresed. Ask for rescission ofthe contrat. Ask for indemnification for damages. 110. fmistake, fraud, inequitable conduct or accident has prevented a meeting of the minds of the pasties, ‘what i the proper remedy? ‘8 Ask for reformation ofthe instrument. ‘Ask for annalmest ofthe contact & Ask for rescission of the contract. Ask for indemnification for damages. 111, The following are the instances wherein reformation ofthe instrument isthe proper remedy, except When a mutual mistake of the parties results to the failure of tho instrument to diselose ther real agreement. b, If one party was mistken and the other acted fraudulently or inoguitbly in such » way that the instrument does not show their rue intention, © When one party was mistaken and the other knew or believed tha the instrument did not state their reel agreement, but concealed that fact from the former. ‘When through the ignorance lack of skill, negligence or bad faith on the part of the person drafting the instrument or ofthe clerk or pst, the instrameat does not express the true intention of the parties. © Iftwo parties agree upon the mortgage or pledge of real or person propery, but the instrument stats thatthe property is sold absolutely or with aright of repurchase, £ When one of the parties was induced to edter into a contact through fraud, undue influence, mistake, imtimidation or vieleace. 112, There shall be no reformation of instrument the following cases, except ‘Simple donation inter vivos wherein no condition is imposed or unconditional simple donation Wills whether holographic or notarial ‘When the real agreement is void Contract of pact de retro sale CBAR - Rygaletry Framework For Business Vansactions (RFBT 8602) aree113, The fellowing may ask fr the reformation ofan instrument, except Either party ifthe mistake is mutual, Injured party ‘Successor initoest, heirs and assigns of injured pty Gauty party 114. One of the partes has brought an action to enferce the instrument, may he subsequently ask for its reformation? ‘Yes because the remedies are available as successive rights. ' Nobbecouse there has been an election as between inconsistent remedies. «Yes because the injured party can never be estopped. Noi theres stipulation to that effect, aes 115. the terms ofa contac are clear and leve no doubt upon the intention ofthe contracting paris, how ‘all he cour apply or interpret the provisions ofthe contract? ‘The intent ofthe contracting parties shell sil be construed. b. The literal meaning ofits stipulation shall coat. 6, The hidden meaning should be determined 4. The contrat shall be enforced even if contrary to In, 116. In case of conflict between the evident intention of the panies and the words of contract, which shall prevail? ‘The words or letter ofthe contract shal prevail over the intention ofthe pate, The intention ofthe parties shal prevall over the word ofthe contrac. ‘The contract shall be annulled because of ambiguity, ‘The contract shall be declared all and void, Keer 117, The following re the rules for interpreting or construing & contrast, except 1 Inorder to judge the intention ofthe conracting parties, this contemporaneous and subsequent acts shal be principally considered, 1b. However general the terms of a contract may be, they shall not be understood to comprehend things thst are distinct and cases that are differeat from those upon which the parties intended to ugre. ‘© Ifsome stipulation of any contract should admit several meanings, it shal be understood es bearing thet import whichis most adequate o render in effectual. 44. The various stipulations ofa contract shall be interpreted together, attributing to the doubeful ones that sense which may reslt fom al of them taken jointly. ©. Ifthe contract is clear, the judge must interpret and construe i in order to determine the hidden motive of the contracting parties 118. The following are the rales for interpreting or construing a contract, except ‘© Words which may have different signfiations shall be understood in that which is most in keeping with the ature and object ofthe contact, . The usage or custom of the place shall be bore in mind in the interpretation of the ambiguities of « ‘contract, and shal fl the omissions of stipulations which are ordinarily established, 6. The interpreution of obscure words or stipulations in a contact shall not favor the party who caused the obscurity ‘4 Whonever the contract provides for paymeat of penalty in case of breach, it shall be interpreted liberally in favor ofthe avarding of pest. 119. When is impossible to settle doubts bythe rules established in the preceding numbers, and the doubts refer to incidental eiumstances of a gratuitous contract such at donation or commodatun, what shall be the Interpretation ofthe contact? 4 The doubt sal be stdin favor ofthe greatest reciprocity of intrest. '. The greatest transmission of rights and interes ball prevail The least transmission of rights and interest ball preva, 4. The contact is nll and vod 120, When itis impossible to settle doubs by the rules established in te preceding numbers andthe doubts ‘refer to incidental circumstances of an onerous coract such as sil or lease, what shall be the interpretation of the contact? ‘The east transmission of rights and inert shall preva, 1b. The doubt shall be setted in favor of the greatest reciprocity of interest. ©. The greatest ransmission of rights and interest shall prev 4. The doubt shall be resolved in favor ofthe debtor. ———— (CRAG Replitry Fromewrk For Basins Tancacons (RFBT 8602) Page 14 of 24m1 ntact is susceptible of being interreted sx sl with igh of nds oan with snaset cm se ‘The conmet isle with ait of purchase 8. Theconmct an aboot sale © The contmet i leue 4 The conmet i loan wth equitable morgage. i 122, the doubts are cas upon the principal objet ofthe contr in sch away that i canot be kaown what ‘may hav ben th iteston or wil of the pares, wat sal be tbe nso th conzact? ‘= Valid and binding & voidebe © Nulland void 4 Unentorceable Indicate the proper order fom last defective to most defective contract. Rescisible contract is a coutrac that bas caused « particular damage to one ofthe parties orto a third person, and which for equitable reasons may be set aide even if itis valid. : ‘Voidable or anslable contact is contract in which the consent of one party i defective, either because of want of gapacty or because its vitiated, but which contract is valid until seaside by competeat cout. ‘Unenfofeeable contact isa contact that for some reason cannot be enforced, unless itis ratified inthe ‘ar provided by law. - Void or inexstent contrat is an absolut mulity and produces no effect, as ifthad never been executed or entered into and cannot be ratified, = a winen-r ZRF TE b I-f-m-w © U-I-1v-m a i-m-n- 124. It is contract that has caused a particular damage to one ofthe parties orto third person, and which for ‘equitable reasons may be set aside even iftis valid issble Veitable ve peer 128. The following are th characteristics of reacssble contracts except ‘They are valid and binding until rescinded. They are not susceptible of ratification but convalidated by prescription. ‘Thejproper legal remedy isan action fr rescission of contract. ‘may not be assailed by the third persons affected by i. the rescission, chey are no longer effective and will result to mutual restitution. 126. are the two types of rescssble contacts? ‘contracts entered into by the debtor in fraud of ereditors, ‘Thote entered into by guardians or representatives in behalf of wards or absentee when the later suffer lesion by more than % value ofthe things which were the object thereof. Both A and B [Neither A nor B. ve ep 127, Thefollowing contracts are intended to defraud creditor and therefore rescisibe, except ‘& Those undertaken in fravd of creditors when the later cannot in any other manner collet the claims due them, '. Thoie which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval ofthe litigants or of competent judicial authority. © Payments mado in a state of insolvency for obligations fo whote fulfillment the debtor could not be ‘compelled athe time they were effected. 4. All Contracts by virtue of which the debtor alienstes property by gratuitous ttle when the donor did not reset sufficient property to pay all debts contracted efore the donation, 16 Alionations by onerous tile when made by persoxs against whom some judgment has been rendered in any instance or some writ of attachment hss been issued. £ Conmracts entered into by an insolvent person if he does not retin sufficient property to pey his obligations. '& Those entered into between two incapacitated persons. eR Reena puepaesneecmmemene rer C8AR, Regulatory Framework For Business Trsnactions (RFBT 8602) Page 15 of 24128. Which contact is reseissible? ‘4 Those which are entered into by guardians whenever the wards they represent sufer lesion by more than ‘4 the value ofthe things which are the object thereof. '. Those agreed upon in representation of ebsenees ifthe Iter suffer more than % the value of te things which ae the object thereof, Bot A and B, ‘Neither A nor B, ao 129, It isa remedy granted by law to the contracting parties and evento third persons, to secure the reparation fof damages caused to them by a contract oven if this sSould be valid, by means ofthe restoration of things to ‘heircondition at the moment price to the celebration of said contract. a Annulment of contact Bb. Rescission of contract ©. Declaration of mult of contract 4. Ratification of cont 130. _ The following are the requisites in order that an action for rescission of« contrat or accion pauliana may Prosper, except ‘The contract must be rescissble. The party asing fr reecisson must have no ote egal ans to btn reparation for daages ser by hm, ‘& The person demanding rescission ust be abie in remura whatever he may be obliged to restore if rescission is granted, 44. The things which are the object of the contract must not have passed legally tothe possesion ofa third person tting in god tet © The aston for rescission must bo brought within the prescriptive period of 1 year. 131, The following sttements ccnceming essiasion of contracts ae corse, except |The action for rescission isa remedy of lest resort because it can be instituted even when the party suffering samage as no other legal mau to obtain repartio for the same, ‘Rescission shall be only tothe extent aecessry ta cover the damages cased, ‘Rescission creates the obligation to rete the things which were the abject of the contract, together with ‘heir fruits, ard the price with its imerest: consequently, it can be eazried out only when he who demands scission can retum whatever may be obliged oresore. 4. Ressission will act prosper wer the things which arc the object of the contract are legally in the possession of thnd persors who di mat actin bad faith. © Incase rescission isnot pesitle, the indewty for damages may be demanded ftom the person causing the loss, The action for rescssiou may be filed only by a contracting party but net by a third person affected by such rscissible contect. 532, What sth tity of hire peso wo sou in a hth he hing! bein ed of cx? 4 Heshalnoeei he roe for Garages seed by te on 2ttun of lation whence It haul be inosine bam etre heme 1 Hostal nat be sb for caneges © Heshall bela tor dope ven ibe ca ret the iings alent 133, Whatis the prescriptive period ofan action for recissica? 134, The following are the rules to be observed in counting the 4yeer prescriptive period of an action for rescission, except 1 For icapecitated persons cr under guendanship, 4 years shall be counted from the termination of the wards incapesiry For absentes, 4 year: chal be counted fro the date the domicile of ahsecte is known. & For contacts intended wo dezand credit, 4 yeur: shall Le counted fie the kaontedgeof the contract. 4. For comiacts intended to defrud ceeditar but invelving izinovable, 4 years shall be counted from the registration of the sal, © Forallrescisible contacts, 4 years shal be couvtod fom the dx of he contact. "Business Mosssctons (REBT BEOD, Page 16 of 24135. It is a contract in which the consent of one party is defective, 136, 137. 138. 139. er because of want of capacity oF because ts wine, bt whic contr vd unt seaside by a compote cou. Voidable Unenforeeable Void aece The filling athe charnctisis of idle covtts, wee until annulled. cent {ee scope ofraieation hich exthguse te aon or amen. ‘Afr the alent heya no mgr ele andl et mal station ‘The proper ea ome aaah oth ined part) ion fo nln of ona, They may be esd by eid peso ‘The following contacts are voidable or annullable, even though there may have been no damage to the ‘contracting parties, except ‘a Those where one ofthe patios i incapable of giving consent to a contact. 1b. Those where the consect is vitated by fraud, undue influence, roistake, intimidation or violence ‘& Those where the contracts do not comply with satte of fraud What is the prescriptive period ofan action for annulment? 4 years 10 years 6 years S years ‘The following are the rules to be observed in counting the 4-year period for prescription ofan action for annulment, except ‘4 In cases of intimidation, violeace or undue influence, 4-year period shall begin from the time the defect of the consent ceases. '. ncases of fraud or mistake, 4-year period shall begia from the time ofthe discovery ofthe same. ‘& In cases of contracts entered into by wards or incapacitated persons, 4-year peviod shall begin ffom the time the guardianship or incapacity ceases. For all voidable contracts, 4-year period shal be counted from the date of contact. apoe 140. Which of the following extinguishes the action to annul a voidsbe contact? ML Ceasing ofthe intimidation, vilenoe or undue influence Discovery ofthe mistake or fraud easing ofthe guardisnship Ratification epor ‘The folowing statements concerning ratification ae corect, except ‘Ratification may be effected expressly or tcily. Ratification may be effected by the guardian ofthe incapacitated person. Retiiction requires conformity of the contacting party who has no right to bring the action for ‘annulment Ratification cleanses the contract from all its defects fom the moment twas consisted, pee 142, The following may ask for annulment of voidable contacts, except Guardian of minor Guardian of n insane or dementd person Party whose consents vitied Party wbo is capable or the party who committed the vices of consent pore 143, The following statements pertaining to the effects of annulment of contrac rw correct, except ‘© The contracting parties shall restore to each other the things which have boon the subject matter of the contact with thir fruits and the peice with bees In obligations to render service, the value thereof shall be the basis for damages. ‘When the defect ofthe contract consists in te incapacity of one ofthe partes, the incapacitated person is not obliged to make any restitution except Insofar as hes been benefited by the thing or price received by him. 4 Annulment of contmct may be availed toby th capacitated contracting party or by the contracting pasty ‘who viiated the consent of the ther party. oF Gea aogny Pancwor for Bataan Tanncton (AFET 8007) Page 17 of 24144. The following statements pertaining othe effects of annulment of contract are correct, except ‘& Whenever the person obliged by the degree of annulment to retur the thing cannot do so because it bas been lost through his ful, he shall return the fruits received and the value of the thing atthe time ofthe 4, ‘isi inres rm he ane dt, ‘action for annulment of contracts shall be extinguished when th thing which isthe object thereof is lost thorough the fraud o fault of the person who has aright to institute the proceedings. Ifthe loss of action is based upon the incepaity of anyone ofthe contracting partes, the loss of the thing Shall not bean obstacle tothe sucess of the atin, unless suid loss took place through the fraud or fault ofthe plain 4. One ofthe contacting parties may be compelled to restore what in vite ofthe deere of annulment he is ‘bound to return even if the ether doos not restore what incumbent upon him 445, llsaconact ht for some reson cao beefed, nest iran the mans provide by ev. sible Voidable Unenforcesble Void aeee 146. The following are the characteristics of uneaforoeable contracts, except ‘They ae valid but not enforoeable by court action, ‘They ae susceptible of ratification which makes the contract enforceable. ‘Thetis no proper legal remedy bu to leave the contact a iti. ‘They may be assailed by third persons. 147. The following contracts ae unenforceable unless they are rfid, except ‘Those entered into in the name of another person by one who has been given mo authority or legal ‘representative or who has acted beyond his powers. ‘Those that do not comply withthe statute of frauds ‘Those where both partes are incapatle of giving consent to contrac. ‘Those which are absolutely simulated or fictitious epee 148. It refers to term which isa descriptive of statutes which require certain clases of contracts to be in ‘writing and regulates the formalities of contrast necessary fo reader it enforceable and to prevent aud or perjury. Statutory constuction Statute of faud Statute of liberty Statute of freedom 149, The following executory contracts shall be in writing to be enforceable uner statute of faud, except ‘An agreement that by its tems isnot tobe performed within a year from the making thereof. ‘A special promise 10 answer forthe debt, default or miscarriage of another. ‘Aa agroement made in consideration of uarrage, other than a mutual promise to mary. ‘Aa agreement forthe sale of goods, chattel o things inaction at a price not less than PS00, ‘Aa agreement forthe leasing of real property fora pried longer than one year regardless of rent. ‘An agreement for the sale of rel property or of an interes therein regardless of price. ‘A represeaation to the credit ofa thd person ‘An agreement forthe loan of sum of money exceeding P500. 150. The following statements concerning ratification of unenforeable contracts are tus, except The sale of property made by a person without authority of te owner is unenforceable in the beginning but afterwards it becomes perfectly valid bythe rtfisation ofthe owner. Contracts infringing State of Praids are ratified by the failure to object to the presentation of oral ‘evidence to prove the same or bythe acceptance of benefits under them. ‘6 When 2 contract is enforceable under the Statute of Frauds, and « public document is necessary for the registration inthe Registy of Deeds, the partos may compel eachother to execute the required form. “Motion to dismiss may stil be availed in an seton filed for enact flfllment even the contract has already been ratified, 151. The following statements concerning raifiation of unenforceable contracts are tue, except ‘Ine contract where both partis are incapable of giving consent, express or implied ratification by the ‘arent, or guardian, asthe ease maybe, of one of the contracting parties shall give the contract the same a en saeer seeps serene taste ORAL. Regulatory Framework For Busines Transactions (RFBT 8602) Page 19 of 241 160, The feliowing statements canceming voll conteets are correct, except ‘When the agreenent is nc illegal per st but is merely protibite, and che prohibition by law is designed forthe protection ofthe plaintif, he may, if publi plicy is thereby enhanced, recover what he bas paid or delivered. 'b. Where one of the partis to an illegal contrect is incopabe of giving consent, the courts may, if the interest of justice so demands allow recovery of money or property delivered bythe incapacitated person. © When money is pid or property delivered for an illegal purpose, the contract may be repudiated by ene the parties before the purpose has beea ~-comnlisbed oF befor any damage hes been caused to third Person. in such case, the courts n=+ """ ie interest will thas be sub served, allow the party epuditing the contact to recover th “ery. 4 Interest paid in excess of the interes sllowed by the usury laws may be recovered by the debtor, with interest hereon from the date of payment. Contracts tha re products of originally void contet are also nll and void. £. Void contracts may be asuiled by thin persons whose interests are not directly affected by the nullity of the contact, 161. Wie" the mulity of the contract proceeds from the legality ofthe cause or objec of the contact and the ‘et constitutes a criminal offense, which ofthe following is nesrreet? ‘4. When bath parties are in par elict, they shall have no aston against each other. '. Both criminals shall be prosscuted, They on recover the proceed ofthe rime. The instruments ofthe crime shall be forfeited in favor ofthe government. © IFonly one ofthe partes is guilty, the innocent one may claim what be has given and shall not be bound te comply with his promise 162, Ufthe act in which the untawful or forbiden cause consists docs not constitute «criminal offense, which ‘ofthe fliowing rules ae correct? 1. When the faves onthe pst of both cootractng partes, neither cay recover what he bas given by virtue of| the contractor dsicand the pecformance ofthe odhersundertaking D. When only on of the contacting puties it at fash. he canzot recover what he has given by reason of the contract of ask forthe annulment of what hat been promised to him. The ether, who is not at fault, may deca the etum of what be kas given without any obligtion to comply with his promise a Noiter nce I b Bothtand tt & Lonly Moni 163. isa rea! ond gratuitous contrast whereia one cf the pestis detivers to another, either something not ‘consumable so th the leer may we he sme fora cert tne and ret it ‘Conse af eonamecata B. Contras of ease & Contact afissn Contrast of deposit. 164, eis areal and onerous or gratulions contract wherein one cf the putss delivers to another money or ‘other consumable thing, upon the codition that he san aroun f Wie came kind and quality sell be paid. ‘Contract of commu, B. Contac of ease © Conteact of loan or matwumn 4. Conivact of deposit 4165. Tei real and onerous or grtsitousconrac: wherein a prconreccves a thag belonging to anothet, with the ‘obligation of safely Keeping it and of reaming the sare an te tho sfekceping ofthe thing delivered Js the principal urpose of te contact. © Contact of osn or mieuum 2 Contact of deposit, 166. is an accessory centri wich mut be in witig if executory to be enforceable whereby a person subsidiary binds intel the retort Tal he obligation ofthe pnp debtor in eae the lamer should fal to do 8 Cont of gusty 1B Contret of surety ©. Contrst of pledge 4 Cont ef tongage rec sn (CRA Regulatory Frame Tor usiners Tantus (FBT 8602) Page 20 of 24ia is annual say hi cmon is ein ioe csi crane eee ye ove peers oe soem rome a ee ia —panem tn — > ee : ee 168. ts consensual and onerous conzact wherein one pasty binds himself to give another the enjoyment or use of ‘thing for price ceca, and fora period which ray be definite or indefinite Contract of oan or mut Contract of ease Contract of depesit (Contact of commodsrum aper For the following scenario, determine the status ofthe contract entered into: (A)-Valié and Binding (B)-Rescissible (C)- ‘Voidable (D)-Unenforceabio(E)-Null and Void 169.4, # nor, sold in writing his ballpen to B, a capaciated person for I,000. The book vale of the ballpen is PI,500 50 A ‘sufeeds letion by more than the vale ofthe hing which isthe object tere, 170.A, the debto and B, dhe credo entered int contact of loan secure by pero of A. To dead B, A sod all his properties to C (Stas of contact of sl) | 171.G, te guadian of minor M, sold in writing the bout end lot of Mt sling price of P7M when ts ook vane is PIOM. ‘The ale i without prior approval of guardanship cour 172.00 tanuny 1, 2015, Fhe guardian of insane Z, orally sold a phone of Zn snare at sling price of P749 whens book vu is P1060 o's rior. The payment is to be made on Feary 2, 2016 while delivery ibe made only 1, 2018. 173.A only soid piece of lad to B in the sount of F200,000 peyable four Ivalients, B already paid #50,000, ‘eprevening the fst installment. r 176A ages te nd of Ps ane Bly. Tn bry of At wing dB a ey ade whe poviae pecto 175. and B frst Saencomrrt pean wb askt wi a i a Tho iB. 00 ch 196 ely eed at pein famed yas fom ty. Thy fl os plo a Scie sno i cn one mania ‘oftheselingrice to A 178.4 so in writing the land ofB in B's name without he nt's consent thi person. Asn eli pew foot “The performance and payment of price shall be dove ater 5 180.4, agent of, orally sod the house of Po Bata pice of PARP, The suborty of Ais natin wring. Payment and delivery ‘nivenot yer Been mace, 181. orally entered into conrac of baer wih B involving a cellphone acd a laptop. Te values of he clio and laptop ‘se PS,000 and PS,000, respectively. The exchacge wil bappen ae 6 rons. 112. Coneat of herp executed in private instant lavoving nd and busing 183.Conenc of Pledge extered ina primte instrument withthe description and dite ofthe thing to be pledged but witout livery of thing pledge, 184 Orly agreed conmact of dnstion of cellphone with fur markt valve of P10,000 completed by delivery by donor and seceptance bj donee. 185.4 married man of manze years donate «parcel of land to a gil of 16 subject tothe conto tat the later bal cobait “Wh him ad such contin is accepted by he ge 16.A mother sold two sponds to a daughter and he late, intr, retold the came Fishpond to her tpfaher. 197.4 Filipino ledsed parcel of land to a foreigner for 99 years with an option o bay the propery wihin SO years provided tht the later sal become aFlipino, 188.4 writen comma fo the ranstr of pve of land at sn amount of 900,000 with fit market value of PIM. Delivery and Payment have at yet ben made, NN GEAR. Rgguletory Framework Fer Business Transactions (RFBT 8602) Page 21 of 24189.An orl const of real estate mortage over plece of nd owt by third person entered into hy 8 creitr-bank and third ‘arson o secure the obligation ofa debtor, 190.An oral cootrct of comma of specific bag without delivery of he bag, 19. Wrinencontrct of chanel morgage over shares of tocks without registrson ia Cate Mortgage Registry. 192-The minor sold in writing his personal property to a cpeciied person at price of P74000 when is book val fs ‘eo,oco 198.The wife cra sold land whichis a comzmunic-rrapety aid person without te consent of the husband at pre of 60,000 whens book value P100,000 194.8 defendant in en ation reinvidcaoria sold tne subject movcbe toa hed person during the pendency ofthe action at a ‘Price of P7000 when its Bock valve is PLO,000, 195.Onl contract sale fa cliphone with rc oT P4O0 bdr and paymet wil ede er IS months 196 Ore conrct of es fcr with nln oF S00 fra easter of 10 years. 197.Ora cout ofl of pie of and with a prce of 499 bdetivry a payment wile rade afer | oth 198-An orl contrac of guaran 199.4 wren contrast of sl of lcs of nd witha pre of 499 benveen x rented and insane pesca 200.Am ora contact of ee of Bs coleustc tapie of 499 clea by Ain B's same without ator fom B, 201.An ot contacto ease of land wit «teem of 15 mouth, Advance rental payment has been made byes ose. 202.6, the munrian of M, a mine, erly sold M's cetphaae at « selling price of PSO0 to an insane person. Delivery and aymeat hve no! yet been mode 203.M, an insane orally sold a shabu et a pice ofH,000 akhough its bok vale is P00, to an insane person Devry and Payment ave not yer been mace, 204.Am orl conractof ese of had Sr ata of | your enfeod ito between A, 2 minor end an insane person. 205.An or conic of sae of house il a rie of PAM and book we ef PAM eiered nto by eller to xcape Habit this ‘xedtors, Deliver and payee Lave mut yer Been made, 206.4 doomton of nowe and tai ure in pivatsisromen by the dsbtor whe bas a peoding civil action without reserving ‘coough proper for is bligisons. 207.4 only ener nt » contract of sbseigion ot 100 shares of stocks ef ABC Comporton ata pice of PSOO, Payment of ‘Ge subseribed ches will happen afer one monk 208. orl contac of ale of Iphone aa pic of P,000 between shard and fe who ae covered by sbslute community ‘or conjugal prope rere. Deuvesy an payin? wil hspren ar 2 io ts 209.A writan convact of sale of sar with 2 prise of P70.090 and book value af 09,000 berweenhasbind and wife whe are ‘covered by regs of absolure cr complete sparton of property The husbuod poined a gua to the wil o sign the ‘onze Deliver ad parzent ve a! ye een ae 210-The represerative of an absecie rally sld a bike of te late acm pice of P4O,000 when is book vale Is P0000, The buyer bas already pid tho price, 211. The gursn oly purchased the hike of hs noe cid a price of BSO0 whens took value fs P80. 212-The minor orally col the cr of his puri he lane's name withowt pir consent. The sale is made at pic of P30, 000 tad the car has & book vatee of P5000. The buyer hus ead pala he ee the aoe, 213.As oral conus of sale uf a cellphone betaren two capncitatd resem atu price of F499 when is book value is P700, Delivery and payment wil be made fe thee yeas, 2IGA Sea ld child exalt enares nm a cutract of explayment at «model of «men's magazine without pemisson fom DOLE. 21S.A 17-year old student only euered ni a cata of service involving cena inereoure with a prostnte a price of 800 ‘whic wil be perfonned fr 2 years. Payment has moet Dee meds 216.4 16-year ol sudent rat ented int 2 Sear couac of lease of cara arent cf PSOO/yer with a lesing company. 217A writen const of doaton of cllpbane witha value OT PS,201 wih scsopance seo ede i writing made bya masied reat his ins conebine nr EOE NN PAR Regulator Franework for aaa Tacictrn: (RFBT BCOZ) Page 22 of 24218.Aa orl cone of sae of land with selling price f PSM and book vale of PLOM wherein delivery sal be made ater 3 ‘years. Te buyer has wlready ald a down payment of PLM ete perfection ofthe contact. 219.4 writen contact of sale of planet upter a eling pie of PLOM. £220.An ol conc of sale of forest land x nstioalpck a sling price ofPIOOM with partial paymeat of 20M. 221.4 is judgment debtor in an ation to colt a sum of money. A writ of atacinnt hasbeen issued aguinst A. The car ofA isthe rst fo be levied. A sold in writing his laptop at selling pce of PSO to B, £222. Witten conc of sle of Presidential Chopper to President Rodrigo Dutra sling price of PIOM when its Bock valve ‘stl PSOM. 23,Weite contact of eal estat mortgage catered into by A and Baer B hestned to file colection suit aginst A 1A wil not execute the reece mortgage fo secur his marred and demandsbeobligton to pay stim of mney 724 Wien contr of sl of cliphone at price of PS00 ese by A and Baer B pinto a gun to A's wife inorder for A to ‘ave comet, 225.Oral contact of sale of sit ata price of PS00 enter between SM and A after the slelady of SM said that A is ‘bandsore wearing that Thi has aveady pid the pie 226,Wrineneoatrc of sl of tubtnic Coach Bug betwos A and B ta price of P1000. A the eof delve, A delivered a coumaraed Coach Bag. 227.0nl contact ented between A and B whea A tought thatthe contract ir one of commodatum while B thought dat the ‘contract is one of eal dopo 228. Writen contact of jel in saleby ston exter by he highest bier anc seller at price ofP10,000 when the bidding ‘isheld witout vag noe to bidders tha the abeioaner wil employ aby bidder, 229.8 farmer nd bank etre into a contract of loan amounting o S00 with realestate mortgage over he fr’ land. The ‘umount of eash ha already been delivered to the farmer. However, the bank's legal counsel executed deed paco de et stl, (Status of court of om and rel eae morn 230.0nd souract of anichresis catered into berwoes the debtor and creditor with consensual agreement oa the pricipal ant ‘ners of he loan, 231. Writen conract of sle of piece of land ats price of PIM when its book value is PIM. The purchaser is heal curt ‘ge inthe levy and execution of such and for aici of aden debt. 252, Writes conc of sl of lptp ata price of P10,00 tered ato by an insane agent, in bebalf of is apaiaed principal, ‘witha domes corporation. 233.Oral contact of ease of ptp for a period of 3 year coed iano betwen demented etee anda insane eter, pererted rng he od ineral of the ter The etl it PS0D per month 254.0ral contact of agesey entered into between a minor agent and an adutprincpal when the comission & PSOD per ‘euaition. 235,Witen contrat of sale of minors bag entered ft by his parent ata price of P60D when is ook valve i PBOD with ‘Cees Puble Account. 236.0ral conc of ieaefor2 years of aber’ bike at ae of PS0D per moth when prevling monthly rental is P800 pec ‘month entered nto by his lpn represeataive wih avy. 237A sod B are nepoising the sale of a specific hous tad lot owned by A. During the negation, A ln love with B. This ‘Prompted A oust donate the howe en lotto B, Sich donasion was sealed by a ist, 2. snd B are ongoing the sale of specific condominu uit wth & market value of P50,000 owned by A. Dring the egointion, B are his life sary to A. Because the lie store of B is 90 touching, A decided Yo just doses his ‘condominium uit B ubich is emred ato and accept ray. 259.0ral conc of sale ofa bot of rugby at a price of P200 between ACE Hardware Corporation and an I8-yesr od person edict to ughy entered iv daring the ac interval of he ler. 240, Weinen contacto ale ofa specie chickensutering ftom bid anda specific cow suffering fom mad cow disete at 2 ‘rice of 400 eared into between & demented partner and eminor. 241, Writes coor of sal offre nhertance entered intaby the heirs of preecesor before is death 242.0n cont of subscription of shares of stocks betvedp a subscriber and compration with amount of PSOO with delivery ‘snd payment to be made alr ene month, 243.Onl conract of sale of siares of socks between an esting tackholder and prospective investor wih amount of P00, Delivery and payment will happen ater oe week Dee (GEAR ~ Regulatory Framework For Burnss Tansactons (RFBT G602) Page 23 of24Distinctions among Defective Contracts : Rescissible Contract ‘Voidable Contract Unenforceable Void Contract Contract Te | Vaid aligned | Vaan dng wa Valder eae] val | Yau tamale your aon As to Lal | Aon x Reiaios ‘etn fr Realnzat ~~} Nose “aoa Fr Dean Remedy 0 ty inure ay Presiive [ear ar Wr No Pape Ped ferad of iin Capt ar] NG wea wan bat | Way ed eae T The Heal pa Raton | ey "be combined by vw conneverse ne. sich wat | prespt, She, decsion of ono ly tone ich ae fetes of toile pers may be cout ‘Asalinant |W aay be ocala By © Wd |W canoe be waalad Wy |W cane be asad by @ ‘by a tin | peson affected by it third person. ‘third peso, peso ‘Exunples | Thove whlch a enced Tmo | a These where one of te | a Those etered lta by gusdians whenever tie | pares Is incapable of | the name. of encber ‘wards they represent suter | giving consent 10 | person by one who has Jeson by more tan Je he | — Somme bem given ao euhorty ot value ofthe things which ae |.” Thoae where the | toga” receseniative ot the objec hereof, consent Ts vitntod by | who has acted beyond his | publi poliy b. Those agreed "upon in| fui, undue influence, | powers. 1b, Those which are representation of aboeuess, | miso, intimidation or |b Those that donot | absolutly simalned Ifthe liter sufer more tan | violence, comply withthe te of |. Those whose cause oF Ye the value of the things fms, objet id not eit at ‘which are the objet here Those whee both| the tine of te Those underakan In ud of panies ace incapable of | treustion. creditors whew the er ‘Bving “conset” o | d, Those whore cbectis faonot in ey other mannee Sonic cutie te commerce cole the elms due ter, ofa 4 Thowe which refer to tings ¢ Thom mich nde iignion if they Dave contemplate "an teen coteed to by the Impossible serves. Sefendant without” the Those where be Jaowlege and approval of intestoa" of be the liars or of competent ares rlave 10 the Iasi naborty, Pincipal object Payments made ina state of inet be asennad insolvency fr obligations to a Thowe exeetly ‘woe flier the dbo prohibited or declared ould not be compelled ‘oid by lew the ine they wee effet. All conmets by irae of ‘which the debtor ales ropery by gritos tile When the” diner dent revere suffer propery 6 pay. al debs contacted before the donation. Je Alienions by eneroas ide when made by persons seit "whom "some [Begect has ben rendered | my insance oF some writ of auchmea bat been foes, Jb, Contaty entered int bya Ieslvent person if he does not ein Sie! propery , {ope hs obligations. ee (CAR Regulatory Framework For Business Transactions (RFBT 8602) Page 24 0f 24