CONTRACTS HANDOUT

FAR EASTERN UNIVERSITY

BUSINESS LAW REVIEW

1. Without which there will be no contract, except:

a. Consent of contracting parties
b. Object certain
c. Cause of obligation
d. Warrant against hidden defects

2. Contracts that are perfected by mere consent.

a. Consensual
b. Real
c. Formal or Solemn
d. Onerous

3. Contracts that are perfected by the delivery of the object of the contract such as
depositum, pledge, and commodatum.
a. Consensual
b. Real
c. Formal or Solemn
d. Onerous

4. Contracts that must be in the form provided by law for their perfection.
a. Consensual
b. Real
c. Formal or Solemn
d. Onerous

5. Those where there is an exchange of valuable consideration. For each contracting party,
the cause is the prestation or the promise of a thing or service.
a. Consensual
b. Real
c. Formal or Solemn
d. Onerous

6. Stages of a contract, except:

a. Preparation or Conception
b. Perfection
c. Exchange or Discussion
d. Consummation or Termination

7. The warranty against hidden defects in a contract of sale is an example of:

a. Natural Element
b. Accidental Element
c. Original Element
d. Essential Element

8. They refer to particular stipulations of the parties in a contract.

a. Natural Element
b. Accidental Element
 c. Original Element
d. Essential Element

9. The element of a contract without which a contract would not exist are know as.
a. Natural Element
b. Accidental Element
c. Original Element
d. Essential Element

10. A solemn contract has the following essential elements:

a. Consent of the contracting parties, object certain and cause or consideration
b. Consent of the contracting parties, object certain, cause or consideration, and delivery
of the object
c. Consent of the contracting parties, object certain, cause or consideration, delivery of
the object, and formalities required by law
d. Consent of the contracting parties, object certain, cause or consideration and
formalities required by law

11. Correct or Incorrect Statements

I. Business advertisement of things for sale are definite offers.
II. Advertisements for bidders are merely invitations to make proposals and the
advertiser is not bound to accept the highest or lowest bidder, unless the contrary
appears.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

12. Correct or Incorrect Statements

I. Contracts agreed to in a state of drunkenness or during a hypnotic spell are
voidable.
II. A contract where consent is given through mistake violence, intimidation, undue
influence or fraud is voidable.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

13. Correct or Incorrect Statements

I. Absolutely Simulated Contracts – one where the parties do not intend to bound at
all. Being fictitious it is void.
II. Relatively Simulated Contract – one where the parties conceal their true
agreement. The parties here are bound by their real agreement provided it does
not prejudice a third person.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

14. Correct or Incorrect Statements

 I. The interpretation of obscure words or stipulations in a contract shall not favor a
party who caused the obscurity.
II. Rescission of a contract shall be only to the extent necessary to cover the
damages caused.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

15. Correct or Incorrect Statements

I. Rescission cannot take place when the object of the contract is legally in the
possession of third persons who acted in bad faith.
II. A voidable contract is binding until it is annulled by a proper action in court.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

16. Correct or Incorrect Statements

I. Ratification requires conformity of the contracting party who has no right to
bring the action for annulment
II. Ratification cleanses the contract from all its defects form the moment the
ratification was made.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

17. Correct or Incorrect Statements

I. A contract where both parties are incapable of giving consent is voidable
II. Contracts that are required to be in writing under the Statue of Frauds may be
enforced if benefits have been accepted under them.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

18. Correct or Incorrect Statements

I. A void contract may be ratified
II. The right to set up the defense of illegality of a contract may be waived.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

19. Correct or Incorrect Statements

I. The defense of illegality of contracts is not available to third persons whose
interests are not directly affected
II. A contract which is the direct result of a previous illegal contract is also void and
inexistent
a. Only First statement is correct
 b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

20. Correct or Incorrect Statements

I. Reformation is a remedy availed of to express the real intent of the parties to a
contract whether oral or written.
II. The donation by a person of his organ which will take upon his death is valid.
a. Only First statement is correct
b. Only Second statement is correct
c. Both statements are correct
d. Both Statements are incorrect

21. A contract was entered into between Y and Z. X induces Y to violate the contract. Can Z
file an action for damages against X?
a. No because A is not a party to the contract
b. No because it will be violative of relativity of contract.
c. Yes even if X has no knowledge of the contract between Y and Z
d. Yes because any third person who induces another to violate his contract
shall be liable for damages to the other contracting party.

22. As a general rule, contracts are perfected by

a. Delivery of the object of a contract
b. Execution of formalities required by law
c. Mere consent by contracting parties
d. Provisions of the law

23. From the moment of perfection of a contract, what is the extent of its binding effect?
a. The parties are bound only to the fulfillment of what has been expressly
stipulated in the contract
b. The parties are bound only to the natural consequences of the contract
c. The parties are bound not only to the fulfillment of what has been expressly
stipulated in the contract but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law.
d. The parties are not bound by what is not stipulated in the contract

24. How is the nature of the contract determined?

a. Contract is what the parties choose to call them
b. Contract is determined by the stipulations of the parties
c. Contract is determined by the principle of law
d. Contract is determined by the surrounding circumstances

25. Real contracts, such as deposit, pledge and commodatum are perfected by
a. Delivery of the object of a contract
b. Execution of formalities required by law
c. Mere consent by contracting parties
d. Provisions of the law

26. As a general rule, no one may contract in the name of another without being authorized
by the latter or unless he has by law a right to represent him. What is the status of a
 contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers?
a. Rescissible
b. Unenforceable
c. Voidable
d. Null and void

27. An owner of a hacienda did not authorize his wife and children to sell the said hacienda
but upon being informed that they had done so, instead of demanding the annulment of
the sale, he proceeded to collect in installments the amount of promissory note given to
the purchase. Can the buyer of the hacienda enforce the contract of sale of land?
a. No because the contract in unenforceable considering the wife and children has
no authority to sell the land
b. No because the contract is rescissible considering that it is entered into to defraud
the creditors
c. Yes because the contract is only voidable and therefore enforceable
d. Yes because the contract becomes enforceable upon the collection of the
purchase price, which is considered an implied ratification.

28. Which of the following statements concerning the concept of consent is incorrect?
a. The meeting of the officer and the acceptance upon the thing and the cause
manifests consent, which are to constitute the contract.
b. The offer must be certain and the acceptance absolute.
c. A qualified acceptance constitutes
d. A consent must be expressed but not implied

29. When does the acceptance made by letter or telegram bind the offerer?
a. From the time he sent his offer
b. From the time the acceptance was sent by the other party
c. From the time the acceptance came to the knowledge of the offerer.
d. From the time the parties signed the written contract

30. A sold a land to B orally in the amount of P200, 000 payable in four installments. B
already paid P50, 000 representing the first installment. What is the status of the contract?
a. Voidable because not in writing
b. Unenforceable because not in writing
c. Valid and binding because already executed
d. Null and void

31. A, agent of P, sold the land of P to B orally. The authority of A is not in writing and B
has already paid the whole purchase price to A. What is the status of the contract?
a. Voidable on the part of P
b. Unenforceable because not in writing
c. Valid and binding because already executed
d. Null and void because the authority is not in writing

32. A and B entered into a partnership to be formed two years from today orally. They will
contribute P5, 000 cash each. What is the status of contract of partnership?
a. Null and void
b. Unenforceable
 c. Voidable
d. Valid and binding

33. A and B entered into a partnership to be formed 3 years from today orally. The will
contribute a piece of land, a building and P2, 000. What is the status of contract of
partnership?
a. Null and void
b. Unenforceable
c. Voidable
d. Valid and binding

34. A, a minor, sold the Cellphone of his brother, an adult, orally at a selling price of P500.
The buyer, an insane person, already paid P100 of the selling price to A. what is the
status of the contract of sale?
a. Voidable if in A’s name because the contracting parties are both incapacitated
b. Unenforceable if in his brother’s name because of the lack of authority
c. Voidable if in his brother’s name because of the incapacity of the buyer
d. Null and void because of the presence of the characteristics of voidability and
unenforceability.

35. What is the nature of responsibility or liability of two or more payees when there has
been payment of what is not due?
a. Solidary
b. Joint
c. Pro-rata
d. Subsidiary

36. In the following instances, proprietors or owners are responsible for the damages caused,
except
a. By the explosion of machinery which has not been taken care of with due
diligence, and the inflammation of explosive substances which have not been
kept in a safe and adequate place.
b. By excessive smoke, which may be harmful to persons or property.
c. By the falling of trees situated at or near highways or lanes if caused by force
majeure
d. By emanations from tubes, canals, sewers or deposits of infectious matter,
constructed without precautions suitable to the place.

37. What is the status of a contract wherein a contract is wanting and wherein a contract is
vitiated, respectively?
a. Valid and voidable
b. Voidable and void
c. Void and voidable
d. Void and unenforceable

38. The following are the requisites of consent, except

a. It should be intelligent.
b. It should be free.
c. It should be spontaneous.
d. It should be vitiated.
39. What is the status of a contract entered into wherein consent is given through fraud,
undue influence, mistake, intimidation or violence?
a. Voidable
b. Rescissible
c. Unenforceable
d. Null and void

40. Which of the following vices of consent if committed by third person who did not take
part in the contract will annul or make the contract voidable?
a. Fraud and undue influence
b. Intimidation and violence
c. Fraud, undue influence and violence
d. Intimidation, violence and undue influence

41. The following types of mistakes, may result to invalidity or voidability of a contract,
except
a. Mistake, which should refer to the substance of the thing which is the object of
the contract.
b. Mistake which should refer to those conditions which have the principally move
ne or both parties to enter into the contract.
c. Mistake as to identity or qualifications of one of the parties wherein such identity
or qualifications have been mistaken the principal cause of the contract.
d. Simple mistake of account

42. A and B entered into a contract of sale of piece of land, not knowing that the said
property has already been the object of another sale under different terms and conditions,
by their duly representatives. What is the status of the second contract?
a. Rescissible
b. Voidable
c. Unenforceable
d. Null and void

43. When one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, who shall shoulder the burden of
proof?
a. The person alleging the mistake or fraud.
b. The person enforcing the contract.
c. The third person interested in the contract.
d. Any person.

44. One of the parties agrees to an upset price with full knowledge of the favorable or
unfavorable possibilities with respect to the essential circumstances of the contract. What
is the status of the contract?
a. Voidable because there is mistake in the upset price.
b. Null and void because law prohibits upset price.
c. Valid and without defect because there is no mistake if the party alleging it knew
the doubt, contingency or risk affecting the object of the contract.
d. Unenforceable because it violates statute of frauds.

45. If one of the parties believed that he received a certain amount as a loan, which the other
delivered as a real deposit, what is the status of the contract?
 a. Voidable contract of loan on the part of the first party.
b. Voidable contract of real deposit on the part of the second party.
c. Valid contracts of loan and deposit on both parties.
d. Null and void because of want consent.

46. Least Defective to Most Defective

I. Voidable
II. Rescissible
III. Unenforceable
IV. Void
a. I, II, III, IV
b. II, III, I, IV
c. II, I, III, IV
d. III, II, I, IV

47. An oral contract of sale of a computer worth P20,000 between Seller (a minor) and Buyer
(an insane person). The computer has been delivered and the price has been paid.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

48. A written contract of sale of a computer worth P20,000 between Seller (a minor) and
Buyer (an insane person). The computer has not been delivered and the price has not been
paid.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

49. An oral sale of a lot worth P50,000 between Seller and Buyer. S has not delivered the lot
but B has given a down payment of P5,000.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

50. A deed of sale of a lot worth P100,000 between Seller and Buyer. Seller has not delivered
the lot, and Buyer has not given any payment. The sale is in writing but has not yet been
acknowledged by the parties before a notary public.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void
51. A written contract of sale of a specific car between S and B. The car actually belonged to
O and was sold by S in the name of O without the latter’s authority. The car is still in the
possession of O although B has remitted the price of P60,000 to S.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

52. A certificate of bank deposit entered into between Depositor and Bank. Depositor has
really no deposit in the bank but the bank made it appear that D had a deposit so that D
could use the certificate of bank deposit to apply for a visa at a foreign embassy.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

53. A written contract of sale entered into by guardian on behalf of his ward, Minor, and
Buyer (25 years old). The sale had its object a specific ring with a value of P40,000
belonging to Minor but was sold by Guardian for only P28,000. Buyer has paid the price
in full and obtained possession of the ring.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

54. A written contract of sale entered into by guardian on behalf of his ward, Minor, and
Buyer (25 years old). The sale had its object a specific ring with a value of P40,000
belonging to Guardian and sold for only P28,000. Buyer has paid the price in full and
obtained possession of the ring.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

55. A written contract of sale of a lot between Seller and Buyer for P50,000. The lot is the
only property of Seller who sold it to defraud his Creditor. Buyer was aware of the
fraudulent intent of Seller in selling the lot to him.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

56. A donation of a gold ring worth P4,000 made by D to C. The donation of the gold ring by
D and its acceptance were made orally with D simultaneously delivering the ring to C.
a. Valid
b. Rescissible
 c. Voidable
d. Unenforceable
e. Void

57. A written contract of sale entered into between Seller and Buyer. The object is the right
lung of Seller. B has paid he price amounting to P200,000.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

58. An oral contract of commodatum whereby M, 17 years old, lent his cellphone to B, 20
years old for a week.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

59. An oral contract of lease of a lot by Lessor and Lessee for a period 2 years at a monthly
rental of P20,000 with Lessee being required to pay a month rental of P20,000 with
Lessee being required to pay a month deposit of P20,000. Lessor has not delivered the
lot, neither lessee has given the one month deposit.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

60. A written contract of sale of a lot between Seller and Buyer for P50,000. The lot is the
only property of Seller who sold it to defraud his Creditor. Buyer was not aware of the
fraudulent intent of Seller in selling the lot to him.
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void

61. What is the prescriptive period of an action for annulment?

a. 4 years
b. 10 years
c. 6 years
d. 5 years

62. Which of the following extinguishes the action to annul a voidable contract?
a. Ceasing of the intimidation, violence or undue influence
b. Discovery of the mistake or fraud
c. Ceasing of the guardianship
d. Ratification
63. The following may ask for annulment of voidable contracts, except
a. Guardian of a minor
b. Guardian of an insane or demented person
c. Party whose consent is vitiated
d. Party who is capable

64. It refers to a term which is a descriptive of statutes which require certain classes of
contracts to be in writing and regulates the formalities of contract necessary to render it
enforceable and to prevent fraud or perjury.
a. Statutory construction
b. Statute of fraud
c. Statute of liberty
d. Statute of freedom

65. Relativity of contract provides that it takes effect only between the following except
a. Contracting parties
b. Assign of contracting parties
c. Heirs of contracting parties
d. Third persons

66. A contract with a cause distinct from the selling price is

a. Lesion
b. Cession
c. Dation
d. Option

67. The inadequacy of cause, like an insufficient price for a thing sold
a. Lesion
b. Cession
c. Dation
d. Option

68. Where reformation is allowed

a. Simple donation inter-vivos where in no condition is imposed
b. Contract of mortgage fraudulency made as a contract of sale
c. Wills
d. When the real agreement is void

69. The process of intentionally deceiving others by producing the appearance of a contract
that really does not exist
a. Absolute simulation
b. Fraud
c. Relative simulation
d. Misrepresentation

70. The process of intentionally deceiving others by producing the appearance of a contract
which is different from the true agreement
a. Absolute simulation
b. Fraud
c. Relative simulation
d. Misrepresentation
71. One of the following is not correct in joint obligations
a. There are as many debts as there are debtors
b. There are as many credits as there are creditors
c. The debts and/or credits are considered distinct and separate from one another
d. The insolvency of one of the debtor shall make the other debtors liable

72. If a third person pays for the debtor with the consent of the debtor, he
a. Can recover only in so far as the payment has been beneficial to the debtor
b. Can recover the amount he has paid but he shall not acquire the rights of the
creditor
c. Can recover the amount he has paid or the payment that has benefited the debtor
whichever is lower
d. Can recover the amount he has paid and he shall acquire the rights of the creditor
such as those arising from a mortgage, guaranty or penalty

73. Kenny is indebted to Max with Ronald as guarantor. Max assigns the credit to Jordan,
who in turn assigns the credit to Ronald. Which is correct?
a. The obligation of Kenny is extinguished
b. The assignment to Ronald did not affect the obligation of Ronald as guarantor
c. The assignment by Max to Jordan extinguished the guaranty
d. Ronald becomes the creditor of Kenny

74. Rescission of contract can take place

a. When the things which are the object of the contract are legally in possession of
third persons who acted in good faith
b. When the party seeking rescission can perform only as to part and rescind as to
another
c. When the seller cannot return the installment paid to him by the buyer
d. When he who demands rescission can return whatever he may be obliged to
restore

75. In order that fraud may make a contract voidable.

a. It may be incidental but both parties should not be in pari delicto
b. It may be serious and the parties must be in pari delicto
c. It may incidental but should have been employed by both parties
d. It should be serious and should have not have been employed by both contracting
parties.

76. A contract where consent is given through mistake, violence, intimidation, undue
influence or fraud is
a. Rescissible
b. Voidable
c. Unenforceable
d. Void

77. When in order to wrest consent, serious or irresistible force is employed:

a. Violence
b. Mistake
c. Intimidation
d. Fraud
78. When one of the contracting parties is compelled by a reasonable and well-grounded fear
of an imminent and grave evil upon his person or property, or upon the person or
property of spouse, descendants or ascendants to give his consent, there is
a. Violence
b. Mistake
c. Intimidation
d. Undue influence

79. When through insidious words or machinations of one of the contracting parties, the other
is induced to enter into a contract which, without them he would not have agreed, there is
a. Fraud
b. Mistake
c. Intimidation
d. Undue influence

80. A contract with a cause distinct from the selling price is

a. Lesion
b. Cession
c. Dation
d. Option