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PART I. True or False.

1. Contracts must bind both parties, its validity or termination cannot be left to the will of one of them.
a. FALSE.
b. Its validity or compliance, not termination, cannot be left to the will of one of them. (Art. 1308)
2. Unenforceable contracts are susceptible of ratification.
a. TRUE.
b. Unenforceable, unless they are ratified. (Art. 1403)
3. Contracts are perfected by mere consent.
a. FALSE.
b. This statement is only the general rule. An exception – real contracts such as deposit, pledge and commodatum,
are not perfected until the delivery of the object of the obligation. (Art. 1316)
4. Ratification requires conformity of the contracting parties.
a. FALSE.
b. Ratification does not require the conformity of the contracting party who has no right to bring the action for
annulment. (Art. 1395)
5. Mistake as to the qualifications of one of the parties vitiates consent.
a. FALSE.
b. It will only vitiate consent when such qualification or identity have been the principal cause of the contract. (Art.
1331)
6. Contracts take effect between their parties, assigns and heirs.
a. FALSE.
b. The statement is not absolute as when the rights and obligations arising from the contract are not transmissible by
their nature, or by stipulation, or by provision of law. (Art. 1311)
7. A mere expression of an opinion does not signify fraud.
a. FALSE.
b. This is not absolute. It will only signify fraud when it is made by an expert and the other party has relied on the
expert’s special knowledge. (Art. 1341)
8. Incidental fraud invalidates a contract.
a. FALSE.
b. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both
contracting parties. Incidental fraud only obligates the person employing it to pay damages. (Art. 1344)
c. Dolo incident is fraud that does not have such a decisive influence and by itself cannot cause the giving of consent;
it refers only to some particular or accident of the obligation.
9. In contracts of pure beneficence, the cause is the liberality of the benefactor.
a. TRUE.
10. The contract is void if the cause is not stated in the contract.
a. FALSE.
b. Although the cause is not stated, it is presumed that it exists and is lawful, unless the debtor proves the contrary.
11. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient.
a. TRUE.
12. Acceptance by letter or telegram binds the offeror from the time the letter or telegram is sent.
a. FALSE.
b. It binds the offerer from the time it came to his knowledge. (Art. 1319(2))
13. An offer made through the agent is accepted from the time acceptance is communicated to the agent.
a. TRUE.
14. There is violence when in order to wrest consent, serious or irresistible force is employed.
a. TRUE.
15. Failure to disclose facts constitutes fraud.
a. FALSE.
b. Failure to disclose facts will constitute fraud only when there is a duty to reveal them, as when parties are bound
by confidential relations. (Art. 1339)
16. Real contracts, such as mutuum, pledge and guaranty are not perfected until the delivery of the object of the obligation.
a. FALSE.
b. Real contracts such as deposit, pledege and commodatum, not mutuum and guaranty, are not perfected until the
delivery of the object of the obligation. (Art. 1316)
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17. Contracts of pure beneficence are contracts without cause.

a. FALSE.
b. In contracts of pure beneficence, the cause is the mere liberality of the benefactor. (Art. 1350)
18. If the cause is not stated in the contract, it exists and is lawful.
a. FALSE.
b. It is presumed to be valid and existing, unless otherwise proven by the debtor.
19. A contract may be voidable even though there may have been no damage to the contracting parties.
a. TRUE.
20. The action or defense for the declaration of the inexistence of a contract prescribes in 10 years.
a. FALSE.
b. The action or defense for the declaration of the inexistence of a contract does not prescribe. (Art. 1410)
21. Acts and contracts which have for their objects the creation transmission, modification or extinguishment of real rights over
immovable property must be in a public instrument to be valid and binding.
a. FALSE.
b. not for validity but for greater efficacy
c. Art. 1358 does not require such form in order to validate the act or contract, but only to insure its efficacy.
(Doliendo v. Depino)
22. Contract of lease for 2 years is unenforceable if not in writing.
a. FALSE.
b. An agreement for the leasing for a longer period than one year of real property or of an interest therein, should be
in writing, otherwise it will be unenforceable. (Art. 1403(2e)
c. only if lease of real property
23. An action for rescission of a contract entered into to defraud a creditor will prosper 4 years from actual discovery of fraud.
a. FALSE.
b. from time of registration
24. Undue influence shall annul the obligation, although it may have been employed by a third person who did not take part in
the contract.
a. TRUE.
25. Rescission shall be only to the extent necessary to cover the damage caused by a contract in fraud of a creditor.
a. TRUE.
26. A conveyance is presumed to be in fraud of creditor if made by a debtor after a suit is filed against him while it is pending.
a. FALSE.
b. Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment
has been issued. (Art. 1387)
c. conveyance must be onerous title
27. A contract which is void on its face cannot be the subject of reformation.
a. FALSE.
b. The action for reformation of instruments presupposes that there is a valid existing contract between the parties,
and only the document does not correctly express the terms of their true agreement.
c. When the real agreement is void, there can be no reformation.
d. only the subject of reformation is the real intention of the parties
28. Once a contract is perfected, though the same is not in the form required by law, the contracting parties may compel each
other to observe that form.
a. FALSE.
b. If the law requires a document or other special form, the contracting parties may compel each other to observe
that form, once the contract has been perfected. (Art. 1357)
c. TRUE
29. Lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence.
a. FALSE.
b. Except in cases specified by law, lesion or inadequacy of shall not invalidate a contract, unless there has been
fraud, mistake or undue influence. (Art. 1355)
30. The cause in a lucrative contract is the liberality of the benefactor.
a. TRUE.
31. An offer may become ineffective upon insolvency of either party before acceptance is conveyed even if the insolvency is not
judicially declared.
a. TRUE.
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32. A contract of sale entered into between spouses is void.

a. FALSE.

PART II. Multiple Choice.

1. On February 11, 2003, Perfecto offered to sell his house and lot to Reynaldo for P1,500,000.00. Perfecto told Reynaldo that he
was giving Reynaldo up to February 28, 2003 to decide whether or not to buy the house and lot. Reynaldo accepted the option
but did not give anything to Perfecto to support the option given to him. On May 20, 2003, Perfecto found another buyer who
was ready to buy the house and lot for P2,000,000.00. Perfecto wants to ask you whether he can still withdraw the offer he
made to Reynaldo. Decide.
a. Yes, Perfecto may withdraw the offer because he stands to gain an added profit of P500,000.00 and this will be
more than enough to pay damages to Reynaldo.
b. Yes, Perfecto may withdraw the offer by just informing Reynaldo of such fact.
i. When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at any
time before acceptance by communicating such withdrawal, except when the option is founded upon a
consideration.
ii. In this case, the option was not founded upon any consideration.
c. No, Perfecto may not withdraw the offer because the option was accepted by Reynaldo although Reynaldo did not
give anything in support thereof.
d. No, Perfecto may not withdraw his offer until the lapse of the period given to Reynaldo to exercise his option.

2. Elements that accompany certain contracts unless set aside or suppressed by the parties, are known as:
a. Natural elements
i. These exist as part of the contract even if the parties do not provide for them because the law creates
them.
b. Essential elements
i. These are those that without such, there can be no contract. These are consent, object and cause.
c. Accidental elements
i. These are those which are agreed upon by the parties and which cannot exist without being stipulated.
d. Original elements

3. A contract where both parties are required to render reciprocal prestations, are known as:
a. Bilateral contract
b. Unilateral contract
c. Gratuitous contract
d. Commutative contract

4. Contracts take effect only between the contracting parties, their assigns and heirs except in cases where obligations and rights
arising from the contracts are not transmissible by their nature, or by stipulation or by provision of law. This principle is known
as:
a. Relativity of contracts
b. Mutuality of contracts
i. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one
of them. (Art. 1308)
c. Obligatory force of contracts
i. Obligations arising from contracts have the force of law between the contracting paties and should be
complied with in good faith. (Art. 1159)
d. Liberty of contracts

5. Obligations arising from contracts have the force of law between … (question incomplete)
a.
b.
c. ANSWER
d.
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6. One of the following is not a real contract:

a. Pledge
b. Commodatum
c. Lease
i. The contract of lease may be of things or of work and service. (Art. 1642)
d. Mutuum

7. On May 1, 2002, S offered to sell a specific car to B for P500,000.00. B sent his letter of acceptance to S on May 8, 2002. On May
10, 2002, however, S died in a vehicular accident and his secretary received the letter or acceptance on May 12, 2002 unaware
that S had already died.
a. The contract was perfected on May 8, 2002 when B sent his letter of acceptance.
i. Definitely wrong. Acceptance made by letter or telegram does not bind the offeror until from the time
it came to his knowledge.
b. The contract was perfected on May 12, 2002 when the secretary of S received the letter.
i. Defnitely wrong. Secretary was not the offeror.
c. The contract was not perfected because the offer of S became ineffective when he died.
i. Under the theory of manifestation, offer and acceptance takes effect only from the time knowledge
is acquired by the person to whom it is directed. If during the intervening time, the offer or
acceptance is extinguished by death/insanity, such offer or acceptance has no more effect.
d. The contract was perfected on May 1, 2002 because the acceptance made by B on May 8, 2002 retroacts to
the date of the offer.

8. Mistake in three of the following will make a contract voidable. Which one will not?
a. Mistake as to the substance of the thing which is the object of the contract
b. Mistake as to the principal conditions which principally moved one or both parties to enter into the contract.
c. Mistake as to the identity or qualifications of one of the parties, where identity or qualifications have been the
principal cause of the contract.
d. Simple mistake of account.

In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract,
or those conditions which have principally moved one or both parties to enter into the contract.

A simple mistake of account shall give rise to its correction. (Art. 1331)

9. It is the employment of serious or irresistible force to obtain consent.

a. Intimidation
i. There is intimidation 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 his spouses, descendants or ascendants, to give his consent.
b. Threat
c. Violence
d. Moral coercion

10. It is present 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 his spouse, descendants, and ascendants to obtain
consent:
a. Violence
b. Physical coercion
c. Intimidation
d. Mistake
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PART III. Status of Contracts

QUESTION ANSWER
1. Contacts undertaken in fraud of creditors when the latter cannot in any other manner collect
Rescissible
the claims due them.
2. Sale of private agricultural land to a former Filipino citizen. Void
3. The contract has a false cause. Void
4. Contract of sale where the consideration is in Chinese Yuan. Valid
5. Oral sale of immovable for P450. Unenforceable
6. Sale of large cattle contained in a private instrument. Void
7. Sale of a guardian of the property of the ward valued at P100,000 for P70,000. Rescissible
8. Oral lease of a car for 3 years. Valid
9. Oral contract for the sale of a bag where the bag will be delivered after 18 months and the
Unenforceable
payment shall be made upon delivery.
10. Absolute deed of sale where the price is not indicated. Valid
11. Contract where the signature of one of the contracting parties is forged. Void
12. One of the contracting parties is relatively incapacitated. Void
13. One of the contracting parties lacks juridical capacity. Void
14. One of the contracting parties is 20 years of age. Valid
15. A contact entered into by a person while insane during a lucid interval. Valid
16. Contract where one party is a minor and the other party is insane. Unenforceable
17. Contacts which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial Rescissible
authority.
18. Voidable
19. Contacts where the consent is vitiated by mistake, violence, intimidation, undue influence or
Voidable
fraud.
20. A contract entered into in representation of another without authority. Unenforceable