2ND YUN'S CUP

LAW ON OBLIGATIONS AND CONTRACTS

ACCOUNTANCY PHILIPPINES FB GROUP
July 3, 2020

THEME: Unleashing the Legal Powers within You

FOR REACHING 4K MEMBERS IN ACCOUNTANCY PHILIPPINES FB GROUP
July 3, 2020, 3:00 PM
QUESTION#1:
Under Article 1305 of the Revised Civil Code of the Philippines, an obligation is a juridical
necessity to give, to do or not to do.
ANSWER: FALSE
EXPLANATION:
An obligation is defined in Article 1156. Article 1305 defines a contract.

QUESTION#2:
Ben (38) is the guardian of Bernard (17) and the latter sold his watch to Bert (21) for 12,
000. The actual fair market value of the watch is 20,000. What is the status of the contract?
ANSWER: VOIDABLE
EXPLANATION:
It's not the guardian (Ben) who sold the watch that's why it is not a rescissible contract.
Since it was Bernard (unemancipated minor) who sold the watch, therefore the contract is
voidable.

QUESTION#3:
Aeron owes Aron 40,000 due on July 30. Aron owes Aeron the following debts: 15,000 due
on July 5, 8,000 due on July 15, 10,000 due on July 20 and 5,000 due on July 25. Three days
after the maturity date of his obligation amounting to 10,000 to Aeron, Aron assigned his
credit right to Aries. Aron did not notify Aeron about it. It was only on July 24 when Aries
went to Aeron to collect that Aeron learned of the assignment. In this case, Aries may
collect from Aeron by how much?
ANSWER: 7K
EXPLANATION:
Under Article 1285, if the assignment was without the knowledge of the debtor, he can set
up compensation of all debts maturing before the time he obtains knowledge of the
assignment.

Aeron's debt to Aron ---40,000

Aron's debt to Aeron which Aeron can compensate
July 5------15,000
July 15 ----8,000
July 20 ----10,000
Total -------33,000

Net amount
= 40K -33K = 7K

QUESTION#4:

True/False
I. An oral contract of lease of a lot by Mary (lessor) and Anne (lessee) for a period of 2 years
at a monthly rental of 25,000 with the lessee being required to pay a one-month deposit of
25,000. Anne has not given the one-month deposit, but has started occupying the lot. The
contract is valid but unenforceable.
II. An oral contract of sale of a computer worth 30,000 between Baby (seller), 17, and Babe
(buyer), an insane person. The computer has been delivered but the price is not yet paid.
The contract is valid but unenforceable.
ANSWER: FALSE, TRUE
EXPLANATION:
I. Although the contract was entered orally, the Statute of Frauds does not apply because
the contract is partly executed since Anne has started occupying the lot. Therefore, the
contract is valid and enforceable.
II. Although the contract was entered orally, the Statute of Frauds does not apply because
the contract is partly executed since the computer has been delivered. However, the
contracting parties are both incapacitated (minor and insane), therefore the contract is
valid but unenforceable.

QUESTION#5:
Apple, Banana and Chico are solidary debtors of Durian in the amount of 18,000.
Subsequently, Durian renounced the share of Banana. Banana accepted the renunciation of
his share. On due date, Apple paid Durian 12,000. Apple demanded reimbursement from
Chico but the latter is insolvent. In this case, Apple may demand from Banana by how
much?
ANSWER: 3K
EXPLANATION:
The renounced party still has a share in insolvency since the obligation is solidary.
Share in insolvency
(18,000/3)/2 = 3,000

QUESTION#6:
It refers to the theory being followed by the New Civil Code of the Philippines for the
determination of moment of perfection of contract. It is the theory followed in Philippine
Jurisdiction.
ANSWER: COGNITIVE/COGNITION THEORY
EXPLANATION:
Cognitive Theory states that the contract is perfected from the moment the offeree's
acceptance comes to the knowledge of the offeror. Since it was Bernard (unemancipated
minor) who sold the watch, therefore the contract is voidable.

QUESTION#7:
In which of the following independent cases is the payor of the debtor's debt not
subrogated to the rights of the creditor?
A. Jasmine owes Jessica 12,000. The obligation is guaranteed by Janine. Janine pays Jessica
with the knowledge of Jasmine.
B. Jasmine owes Jessica 12,000. The obligation is guaranteed by Janine. Janine pays Jessica
without the knowledge of Jasmine.
C. Jasmine owes Jessica 12,000. The obligation is guaranteed by Janine. Jadine pays Jessica
without the knowledge of Jasmine.
D. Jasmine owes Jessica 12,000. The obligation is secured by a pledge of Janine's ring to
Jessica. Jasmine also owes Jadine, 9,000. Jadine pays Jessica without the knowledge of
Jasmine.
ANSWER: C
EXPLANATION:
Choice A:
Subrogation is applicable since Janine (a 3rd person INTERESTED in the fulfilment of an
obligation, i.e. a guarantor) pays the creditor WITH the knowledge of debtor.
Choice B:
Subrogation is applicable since Janine (a 3rd person INTERESTED in the fulfilment of an
obligation, i.e. a guarantor) pays the creditor even WITHOUT the knowledge of debtor.
Choice C:
Subrogation NOT applicable since Jadine (a 3rd person NOT interested in the fulfilment of
an obligation, i.e. a guarantor) pays the creditor WITHOUT the knowledge of debtor.
Choice D:
Subrogation is applicable since Jadine (a creditor) pays the Jessica (another creditor) even
WITHOUT the knowledge of debtor.

QUESTION#8:
On February 1, 2016, Crisnalyn, 17 years old, sold her only car to Jaymar, 22 years old. The
sale was without the knowledge of Florame, the guardian of Crisnalyn. Assuming that an
annulment case is filed today:
A. Jaymar cannot bring the action for annulment.
B. Crisnalyn may bring the action for annulment.
C. Neither Crisnalyn nor Jaymar may bring an action for annulment.
D. One answer is incorrect.
ANSWER: D.
EXPLANATION:
The prescriptive period for Crisnalyn to annul the contract started to run on January 31,
2017 when she turned into 18. Counting from January 31, 2017 up to today July 2, 2020, 3
years and 5 months have already expired. Crisnalyn has 7 months remaining to annul the
contract. However, the right to annul is not applicable to the capacitated party (Jaymar).

QUESTION#9
Denzel obtained a loan from Eduardo amounting to 40,000 which is payable in 8 equal
monthly installments. The loan bears interest of 1% per month which Denzel agreed to give
to Mac Steven, a student whom Denzel is sending to school. To secure the loan, Denzel
executed a chattel mortgage on his car. Although Denzel has been paying the monthly
interest to Eduardo, Denzel could noy pay any of the installments due. In view thereof,
Denzel proposed, and Eduardo accepted, that Denzel should give instead a diamond ring to
Eduardo in place of the loan of 40,000 within two months from their new agreement. Mac
Steven was notified and consented to the novation. All the following statements are correct,
except
A. Denzel's obligation to give Eduardo 40,000 is not yet extinguished by novation.
B. The accessory contract of chattel mortgage is extinguished.
C. The new contract extinguished Denzel's liability to pay interest to Mac Steven.
D. All of the foregoing are incorrect except A.
ANSWER: A
EXPLANATION:
As a rule, the extinguishment of principal obligation as a result of novation carries with the
extinguishment of the accessory obligations except if the accessory obligation was
established for the benefit of 3rd persons who did not consent to the novation.

In this case, Mac Steven (a 3rd person) to whom the benefit of accessory obligation was
established, consented to the novation that's why the payment of interest is extinguished.
Similarly, the chattel mortgage (another accessory contract) is also extinguished because
the principal obligation is extinguished by means of novation.

QUESTION#10:
What is the status of a contract wherein consent is wanting and wherein consent is vitiated,
respectively?
ANSWER: VOIDABLE AND VOID
EXPLANATION:
1. Want means “lack". Lack of one of the essential requisites of a contract (consent) renders
it void.
2. If the consent is vitiated by mistake, violence, intimidation, undue influence and fraud,
then the contract is voidable

QUESTION#11:
Which of the following obligations is not valid?
A. If the debtor will give his cow or will kill the friend of the creditor.
B. If the debtor promises to pay as soon as she has the means to pay.
C. If the debtor will be the mistress of the creditor or if the debtor wants will give 500,000
to the creditor.
D. If the debtor will give his car if the creditor will pass the CPA exam and if the creditor
will fail, the creditor will have sexual intercourse with the debtor for one week. For 12, 000.
The actual fair market value of the watch is 20,000. What is the status of the contract?
ANSWER: C
EXPLANATION:
A. 1st prestation - valid
2nd prestation - void
B. Obligation with a period - valid
C. 1st prestation - void
2nd prestation - void (potestative on the part of debtor, suspensive condition)
D. Principal - valid
Accessory - void

Another Explanation:
Yung sa Choice A, alternative right? Yung first prestation valid while second is void. Since
may isang valid prestation, yun ang magsusubsist kaya di siya totally void.
Choice B
Valid yan kasi with a period (has the means to pay)
Choice C
Another alternative right? Eh kaso both prestations are void kasi yung 2nd prestation ay
isang potestative on the part of debtor subject to suspensive condition. Since both
prestations are void, yun na po answer.
Choice D
Yung accessory lng void and take note the nullity of the accessory does not carry with it the
nullity of principal

QUESTION#12:
The following contracts are rescissible, except
A. Those which refer to things under litigation if they have been entered into by the
defendant with the knowledge and approval of the litigants or of competent judicial
authority.
B. Those undertaken in fraud of creditors but the latter can still collect the claims due them
through other means.
C. Those entered into by guardians whenever the wards whom they represent suffer lesion
by one-fourth of the value of the things which are the object of the contract.
D. All of the foregoing are perfectly valid contracts.

ANSWER: D
EXPLANATION:
Following contracts are perfectly valid (not rescissible) because of...
A. With knowledge and approval of litigants....
B.. Creditors can still collect the claims
C. Lesion by one-fourth
D. To be rescissible ---must be more than ¼

QUESTION#13:
Tom and Jerry are the owners of adjacent poultry and piggery farms. One day, Jerry got sick
and failed to visit his farm. When Tom noticed that Jerry was not again around during the
second day, he himself took care of the animals by feeding them and cleaning the pig and
poultry pens. A did this for the next four days until Jerry returned. Tom incurred necessary
and useful expenses amounting to 7,000 in the process. Under the circumstances, Jerry is
obliged to reimburse Tom for such expenses which the latter incurred by reason of what
specific source of obligation?
ANSWER: NEGOTIORUM GESTIO
EXPLANATION:
Negotiorum Gestio (a quasi-contract) is a voluntary management of the properties and
affairs of another. The gestor is entitled to reimbursement.

QUESTION#14:
If one of the parties believed that he received a certain amount of loan, which the other
delivered as a real deposit, what is the status of the contract?
ANSWER: VOID
EXPLANATION:
There is want of consent (no meeting of minds)

QUESTION#15:
True or False
I. A stipulation that demand shall not be required in order to make the debtor in delay is
generally to the advantage of the creditor.
II. The absence of stipulation on liability in case of fortuitous event is generally to the
disadvantage of the creditor.
ANSWER: TRUE, TRUE
EXPLANATION
I. If demand is not required, then the debtor is automatically in delay when maturity date
arrives. Therefore, it is generally to the advantage of creditor.

II. If no stipulation in case of loss through fortuitous events, the debtor as a rule is totally
released from his obligation. Therefore, it is generally to the disadvantage of creditor.

QUESTION#16:
Identify

I. A secondary contract to a valid obligation whereby a party ensures the performance of

another of an obligation or undertaking in favour of another party but the liability of
guarantor is solidary, direct, primary and absolute although he possesses no direct or
personal interest over the obligations nor does he receive any benefit thereon. ____________

II. An accessory contract which must be in writing if executory to be enforceable whereby a

person subsidiarily binds himself to the creditor to fulfil the obligation of the principal
debtor in case the latter should fail to do so. ___________
ANSWER:
I.SURETYSHIP
II. GUARANTY
EXPLANATION:
Suretyship (a 3rd person is solidarily liable) at Guaranty (a 3rd person is subsidiarily
liable)

QUESTION #17:
Julie May obtained a loan of 100,000 from Julie Ann with Jolly as guarantor. Julie Ann, on
the other hand, owes Jolly 100,000. Both debts are due. All of the following are incorrect,
except

I. Both Julie May's debt to Julie Ann and Julie Ann's debt to Jolly are extinguished by legal
compensation.
II. If Julie May cannot pay and Julie Ann sues Jolly, Jolly can put up compensation because
Julie Ann owes her 100,000.
III. If Julie Ann sues Julie May, Julie May may not put up the defense of compensation as to
what Julie Ann owes Jolly.
IV. If Julie Ann sues Julie May, Julie May may successfully put up the defense of
compensation because Julie Ann owes Jolly, Julie May's guarantor.
ANSWER: II and III
EXPLANATION:
Explanation:

I. Incorrect
Julie May and Jolly are not principal creditors and debtors of each other
because Jolly is a guarantor.
IV. Incorrect
It is not Julie May (principal debtor) who can set up compensation as regards what Julie
Ann (principal creditor) owes the guarantor. It's the other way around, i. e. guarantor

QUESTION#18:
Which of the following contracts is/are valid and enforceable?
I. A 5-month contract for the supply of carabao meat by Aldwin to Romel. Although the
slaughter of carabao is prohibited by law, the contract is now on its 2nd month and Aldwin
has made carabao meat deliveries worth 25,000.
II. A contract of donation of a lot between Debbie, 32, and Marjorie, 25. The donation and
acceptance are in a private document. Marjorie has since occupied the lot.
III. A contract of lease between James, 21 and Harold, 28. The lease which was entered
orally, had for its object a drilling equipment, and had a duration of 2 1/2 years. The
drilling equipment is now in the possession of Harold who has paid the rental of 900,000
for the first month to James.
IV. A contract of sale between Carlo, 27 and Analyn, 17 1/2, of a computer worth 25,000.
No document was signed by Carlo as seller and Analyn as buyer who has given a
downpayment of 5,000. Carlo is set to deliver the computer upon full payment of the price.

V. An oral contract of commodatum whereby Mario lent his cellphone to Josephine for a
week. They are both of legal age.
ANSWER: III AND V ONLY
EXPLANATION:
Explanation:
I. Void- The object is prohibited by law.
II. Void-Donation and acceptance of real property must be in public instrument.
IV. Voidable-Analyn is an unemancipated minor (17 1/2)

QUESTION#19 :
D promised to give C 20 sacks of rice when B, C's father dies within a year. The obligation of
D to C is:
A. extinguished upon the happening of the condition
B. arises upon the happening of the condition
C. extinguished upon the arrival of the period
D. arises upon the arrival of the period
ANSWER: B
EXPLANATION:

The obligation is subject to a suspensive condition because there is a time period provided
for the death of C.

A condition may or may not happen. Similarly, B may or may not die within a year since a
death is certain to happen but its actual happening cannot be ascertained.

Another Explanation:
D po ang sagot pag walang time period

QUESTION# 20:
Raffa, the owner of a business, appointed Sharky as his agent to manage it. Raffa authorized
Sharky to borrow money for the business. Sharky himself is the one who lends the money
at the current rate of interest. The contract of loan in such case is considered as what type
of contract?
ANSWER: AUTO-CONTRACT
EXPLANATION:
An auto-contract is a contract whereby a person is contracting with himself.
In above case, Sharky contracted with himself as a manager and a lender.

QUESTION #21:
Minerva is indebted to Malfoy for 150,000 which is already due. Minerva offers to give a
certified check to Malfoy to settle the debt.

All of the following statements are correct, except:

I. If Malfoy accepts the certified check, Minerva's obligation is not automatically
extinguished.
II. If Malfoy refuses to accept the check, Minerva may not replace the check with 150,000
pieces of 1 peso coin and compel Malfoy to accept it.
III. If Malfoy refuses to accept the check, Minerva may replace the check with 7,500 pieces
of 20 peso bill, and if Malfoy refuses to accept it, Minerva may resort to consignation.
IV. If Malfoy refuses to accept the check, Minerva cannot consign her payment in court.
ANSWER: NONE OF THE FOREGOING/ ALL ARE CORRECT
EXPLANATION:
We are looking for incorrect statements.

I. Correct
-Acceptance of check and other mercantile documents does not produce payment until
encashed.
II. Correct
-1 peso coin is a valid legal tender up to Php. 1,000 amount of obligation.
III. Correct
-All bills are valid legal tender up to any amount.
IV. Correct
-Check is not a valid legal tender. If there is no valid legal tender, no consignation shall take
place when the creditor refuses to accept the payment.

QUESTION#22:
Harry and Hermione entered into a contract where they made it appear that Harry was
mortgaging his lot and building to Hermione to secure a contract of loan. The truth,
however, was that Harry was selling his lot and building to Hermione. All of the following
statements are incorrect, except:
I. The parties are not bound by the contract of loan and mortage.
II. The parties are bound by the contract of sale.
III. Harry and Hermione entered into a relatively simulated contract.
IV. The contract entered into between Harry and Hermione is not an absolutely simulated
contract.
ANSWER: ALL OF THE FOREGOING
EXPLANATION:
Relatively simulated po kaso yung contract kaya binding to the real agreement, not to the
ostensible one

QUESTION#23:
Dilraba Dilmurat, Zhang Yunlong and Dylan Wang are liable juntos o separadamente to
Shen Yue, 24,000. On due date, Dilraba Dilmurat was insolvent. How much may Shen Yue
collect from Dylan Wang?
ANSWER:24K
EXPLANATION:
Juntos o separadamente means "joint and severally", therefore the debtors are solidarily
liable. Despite any insolvency, the creditor may still collect the entire original amount since
the debtors will share the insolvency.

QUESTION#24:
True or False

I. The prescriptive period for civil action based on oral contract is 6 years.
II. The prescriptive period for civil action based on written contract is 10 years.
III. The prescriptive period for civil action based on quasi-contract is 6 years.
IV. The prescriptive period for civil action based on quasi-delict or tort is 10 years.
ANSWER: TRUE, TRUE, TRUE, FALSE
EXPLANATION:
The prescriptive period for civil action based on quasi-delict or tort is 4 years.

QUESTION# 25:
X (70) died leaving properties estimated at 1,500,000 to his sons, A (25), B (21) and C (17).
Subsequently, C sold one-fourth of his inheritance to Y (26) for 150,000, although his share
was still to be delivered. What is the status of the contract?
ANSWER: VOIDABLE
EXPLANATION:
The object is valid because it is already an existing inheritance. However, C is an
unemancipated minor. Therefore, the contract is voidable.

Quizzer's tip: Pag status of contract ang tanungan, always consider the age of contracting
parties. Always consider 1M times yan