lOMoARcPSD|7626788

lOMoARcPSD|7626788

CONTRACTS- DIAGNOSTIC EXERCISES

TEST 1 – MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.

1. A meeting of minds between two persons whereby one binds himself with
respect to the other to give something or to render some service is known as:
a. Obligation
b. Consent
c. Contract
d. Stipulation
2. The stages of a contract according to the order of their accurence are:
a. Birth, conception, and consummation
b. Conception, consummation, and birth
c. Conception, birth, and consummation
d. Consummation, conception, and birth
3. The elements of a contract without which a contract would not exist are known as:
a. Accidental elements
b. Natural elements
c. Special elements
d. Essential elements
4. Consensual 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 and formalities required by law.
d. Consent of the contracting parties, object certain, delivery of the
object, and formalities required by law.
5. A real contract has the following essential elements:
a. Consent of the contracting parties, object certain and cause or consideration
 lOMoARcPSD|7626788

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 and formalities required by law
d. Consent of the contracting parties, object certain, delivery of the
object, and formalities required by law
6. A solemn or formal 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 and formalities required by law.
d. Consent of the contracting parties, object certain, delivery of the
object, and formalities required by law.
7. Elements that accompany certain contracts unless set aside or suppressed by
the parties are known as:
a. Natural elements
b. Accidental elements
c. Essential elements
d. Original elements
8. The warranty against hidden defects in a contract of sale is an example of:
a. Natural elements
b. Accidental elements
c. Original elements
d. Stipulated elements
9. They refer to particular stipulations of the parties in a contract:
a. Accidental elements
b. Natural elements
c. Inherent elements
 lOMoARcPSD|7626788

d. Essential elements
10. One of the following is a natural element of a sales contract.
a. Terms of payment
b. Rate of interest
c. Place of delivery
d. Warranty against eviction
11. A contract that can stand by itself is known as:
a. Accessory contract
b. Principal contract
c. Commutative contract
d. Gratuitous contract
12. A contract that does not have any special name under the law is known as:
a. Nominate contract
b. Innominate contract
c. Special contract
d. Nominal contract
13. A contract where both parties are required to do or to give something is known as a:
a. Bilateral contract
b. Unilateral contract
c. Gratuitous contract
d. Commutative contract
14. A contract where the parties contemplate a real fulfillment, hence, equivalent
values are given is known as:
a. Commutative contract
b. Gratuitous contract
c. Onerous contract
d. Aleatory contract
 lOMoARcPSD|7626788

15. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided they are not contrary to law,
morals, good customs, public order or public policy. This is known as a principle
of:
a. Liberty of contract
b. Mutuality of contract
c. Relativity of contract
d. Obligatory force of contract
16. The contract must bind both contracting parties; its validity, or compliance
cannot be left to the will of one of them. This is known as the principle of:
a. Mutuality of contract
b. Relativity of contract
c. Consensuality of contract
d. Freedom to contract
17. Contracts take effect only between the contracting parties, their assigns and
heirs, except in cases where the obligations and rights arising from the
contract are not transmissible by their nature, or by stipulation, or provision
of law. This principle of contract is known as:
a. Relativity of contract
b. Mutuality of contract
c. Obligatory force of contract
d. Liberty of contract
18. D borrowed P500,000.00 from C. D died without having paid his loan obligation
to C. He left S, his son and heir, properties worth P400,000.00.
a. S is liable to C for P500,000.00
b. S is liable to C for P400,000.00
c. S is liable to C for P100,000.00
d. S is not liable at all because he should not be made to shoulder the
obligation of his father.
19. contract may be enforced by or against a third person, except:
 lOMoARcPSD|7626788

a. In the case of stipulation pour autrui

b. When a third person induces another to violate his contract
c. In case of contracts intended to defraud creditors.
d. When the benefit to the third person is merely incidental
20. The principle that contracts are perfected by mere consent is known as:
a. Consistency of contract
b. Consensuality of contract
c. Consummation of contract
d. Mutuality of contract
21. Obligation arising from contracts have the force of law between the contracting
parties and should be complied with in good faith. From perfection, the parties
are bound not only for the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. This is known as the principle of:
a. Consummation of contract
b. Consensuality of contract
c. Obligatory force of contract and compliance in good faith
d. Mutuality of contract
22. One of the following is not a real contract:
a. Pledge
b. Commodatum
c. Deposit
d. Sale
23. D borrowed P100,000.00 from C. the obligation is secured by a mortgage on
D’s land and building. C registered the mortgage with the register of Deeds.
Thereafter, D sold the land and building to X who was not personally aware of
the existence of the mortgage at the time of sale since only the photocopy of
the transfer certificate of title which did not yet contain the annotation of the
mortgage was shown to him . It was
 lOMoARcPSD|7626788

only when he went to the Register of Deeds to register the sale of the land and
building to him that he learned of the mortgage.
a. C can collect from D and if D cannot pay, C can foreclose the mortgage
although the land and building are now owned by X.
b. C can collect from D, but if D cannot pay, C cannot foreclose the mortgage
because X was not aware of the existence of the mortgage at the time he
bought the land and building.
c. C cannot collect from D. He can only go after the mortgage which was
given as security.
d. C cannot foreclose the mortgage because X was not a party thereto.
24. It is the manifestation of the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract.
a. Consideration
b. Contract
c. Consent
d. Cause
25. On June 1, 2010, S offered to sell his only car to B for P100,000.00. B accepted
the offer by mailing his letter of acceptance on June 10, 2010. On June 12,
2010, B revoked his previous acceptance and mailed his letter of revocation on
the same date. S received the letter of revocation on June 15, 2010.
a. The contract was perfected on June 14,2010 when s received B’s letter of
acceptance.
b. The contract was not perfected because at the time the acceptance was
received, the parties were no longer of one mind.
c. The contract was perfected on June 10, 2010 when B sent his letter of acceptance.
d. The perfection of the contract retroacts to June 1, 2010 when the offer was made.
26. On May 1, 2010, S offered to sell a specific car to B for P500,000.00. B sent his
letter of acceptance to S on May 8, 2010. On May 10, 2010, however, S died in
a vehicular
 lOMoARcPSD|7626788

accident and his secretary received the letter of acceptance on May 12, 2010
unaware that S had already paid.
a. The contract was perfected on May 8, 2010 when B sent his letter of acceptance.
b. The contract was perfected on May 12, 2010 when the secretary of S
received the letter of acceptance.
c. The contract was not perfected because the offer of S became ineffective
when he died.
d. The contract was perfected on May 1, 2010 because the acceptance made
by B on May 8, 2010 retroacts to the date of the offer.
27. Three of the following instances will render an offer ineffective before
acceptance is conveyed. Which one will not?
a. Civil interdiction of either party
b. Insolvency of either party
c. Insanity of either party
d. Intoxication of either party
28. S offers to sell his car to B for P125,000.00 cash. B accepts the offer but is
willing to pay only P120,000.00.
a. The contract was perfected at the price of P125,000.00 .
b. The contract was perfected at the price of P120,000.00.
c. The contract was perfected at the price of P122,500.00, the average
price of the offer and the acceptance.
d. The contract was not perfected because the acceptance by B was
qualified and it constituted a counter-offer.
29. P appointed A as his agent to sell P’s only Honda Civic car for P400,000.00
cash. On November 7, 2010, A, pursuant to the authority granted to him by P,
offered to sell the car to B at the price of P400,000.00. B accepted the offer on
November 8, 2010 by sending a letter of acceptance to A, which letter of
acceptance was received by A on November 9, 2010. On November 10, 2010, A
informed P that B had accepted the offer.
 lOMoARcPSD|7626788

a. The contract was perfected on November 8, 2010 when B sent his

letter of acceptance.
b. The contract was perfected on November 9, 2010 when A received the
letter of acceptance.
c. The contract was perfected on November 10, 2010 when A notified P,
the true owner of the car, that B had accepted the offer.
d. The contract was perfected on November 7, 2010, since the
acceptance by B retroacts to the date of the offer.
30. On July 1, 2010, Serrano offered to sell his only Mercedes Benz car for
P1,000,000.00 to Benitez who was interested in buying the same. In his letter to
Benitez, Serrano stated that he was giving Benitez up to July 31, 2010 to make
up his mind whether to buy the car or not. On July 25, 2010, Serrano personally
went to Benitez to inform him that he was no longer willing to sell the car unless
the price was increased to P1,400,000.00 because another buyer was
interested in buying the car for the said amount of P1,400,000.00.
a. Benitez may compel Serrano to sell to him the car for P1,000,000.00
b. Serrano may validly withdraw his offer to Benitez because the option
was not founded upon a consideration.
c. Serrano may not withdraw his offer until after the lapse of the option period
that he gave to Benitez.
d. The increase in price made by Serrano was not valid because it was made
within the option period.
31. Rockman and Company published an advertisement in the newspapers which
reads as follows “INVITATION TO BID: Construction of the company’s
warehouse located at 123 Luzon Street, Sta. Quiteria, Quezon City.” The
advertisement also included the specifications of the warehouse to be
constructed. Three companies submitted their bids: ABC Company, with a bid
price of P4,500,000.00; DEF Company, P4,750,000.00; and GHI Company,
P5,000,000.00. After considering the financial capability, reputation and
experience of the bidders, the kind and quality of materials to be used and other
 lOMoARcPSD|7626788

factors, Rockman and Company accepted the bid of DEF Company. ABC
Company, the lowest bidder, now questions the award made by Rockman and
Company to DEF Company which submitted a higher bid.
a. The award to DEF Company is voidable because it was only the
second lowest bidder.
b. ABC Company should be the winning bidder having submitted the lowest bid.
c. The award to DEF Company is valid because Rockman and Company was
not bound to accept the lowest bidder.
d. The award to DEF Company is void by reason of Rockman’s violation of the terms of
the invitation to bid.
32. One of the following is incapable of giving his consent.
a. Insane persons
b. Deaf-mutes who do not know how to write
c. Deaf-mutes who know how to read
d. Unemancipated minors
33. A contract entered into by an incapacitated person is:
a. Void
b. Voidable
c. Rescissible
d. Void
34. Contracts entered into in a state of drunkenness or during hypnotic spell are:
a. Valid
b. Voidable
c. Rescissible
d. Void
35. A contract entered into by an insane person during a lucid interval is:
a. Valid
b. Voidable
c. Rescissible
 lOMoARcPSD|7626788

d. Void
36. Aside from fraud and undue influence, the following are the vices of consent, except:
a. Violence.
b. Intimidation.
c. Mistake.
d. Dealer's talk.
37. 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, which
identity or qualifications have been the principal cause of the contract.
d. Simple mistake of account.
38. It involves the employment of serious or irresistible force to obtain consent.
a. Intimidation.
b. Threat.
c. Violence.
d. Moral coercion.
39. 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 give his consent.
a. Violence.
b. Physical coercion.
c. Intimidation.
d. Mistake.
40. One of the following contracts is not vitiated by intimidation or violence, and
hence valid.
a. A contract of sale which was signed by a party because his arm was being
twisted by a .third person.
 lOMoARcPSD|7626788

b. A contract of sale which was entered into because the other party was
pointing a gun at his wife.
c. A contract where a party was compelled to assign his property to the other to
pay a just debt because the latter threatened to sue him in court if he does
not pay his debt.
d. A contract of donation of a parcel of land which a party signed because the
other party threatened to burn his house.
41. It exists when a person takes improper advantage of his power over the will of
another depriving the latter of a reasonable freedom of choice.
a. Intimidation
b. Duress
c. Threat
d. Undue influence
42. Fraud-exists in three of the following. Which is the exception?
a. When through the 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 to.
b. When there is a failure to disclose facts, when there is. A to reveal them, as
when the parties are bound by confidential relations.
c. When there, is an expression of an opinion by an expert which turned out to
be wrong, and other party relied upon such expert knowledge.
d. When the misrepresentation refers to the usual exaggerations in. trade, and'
the other party had an opportunity to know the facts.
43. Abuiencia, who knew that his ring was embellished with glass, told Banzon that
the embellishment was emerald. Banzon, who knew that his watch was gold-
plated, told Abuiencia that it was made of pure gold. Banzon, believing that
Abulencia's ring was embellished with emerald, and Abuiencia; believing that
Banzon's watch was made of pure gold, then entered into a contract whereby
they exchanged their respective
 lOMoARcPSD|7626788

articles. A week later, Banzon discovered that the ring was adorned only with
an ordinary glass.
a. The contract may be annulled at the instance of Banzon since he
discovered the fraud.
b. b. The contract may be annulled at the instance of Abulencia since
Banzon also employed fraud.
c. The contract is void because of the bad faith of both parties, hence, it
shalt not produce any effect.
d. Neither' party may ask for annulment since both are guilty of fraud. The
contract, thereof is valid.
44. An absolutely simulated contract is:
a. Void.
b. Voidable
c. Valid
d. Unenforceable
45. One of the following statements does not pertain to relatively simulated contract.
a. The parties conceal their real agreement.
b. The parties are bound by their real agreement provided it does not
prejudice third persons.
c. The parties are bound by their real agreement provided it is not contrary
to law, morals, public order or public policy.
d. The parties do not intend to be bound at all.
46. Servando and Bernardo entered into a contract where they made it appear that
Servando was mortgaging his lot and building to Bemardo to secure a contract
of loan. The truth, however, was that Servando was selling his lot and building
to Bernardo. Which of the followings statements is true?
a. The parties are bound by the contract of sale.
b. The parties are bound by their contract of loan and mortgage.
c. The parties are not bound at all
 lOMoARcPSD|7626788

d. The parties are bound by the contract of sale only when third persons are affected.
47. One of the following is not a requisite of the object of a contract.
a. It must be within the commerce of men.
b. If it is a right, it must be intransmissible.
c. It must not be contrary to law, morals, good customs, public order or public policy.
d. It must be determinate as to its kind or capable of being made determinate
without the need of the parties entering into a new agreement.
48. S and B orally entered into a contract whereby S sold his one-year production of
eggs in his poultry farm to B for P50,000.00 which amount B immediately gave in
cash to S. the contract between S and B is:
a. Void because the object was not existing at the time of the execution
of the contract.
b. Valid because future things may be the object of contracts.
c. Ressiscible because B will likely suffer damage if the eggs do not
come into existence.
d. Unenforceable because the contract was not in writing.
49. A died leaving properties estimated at P1,000,000 00 to his sons S and T.
Subsequently, S sold one-half of his inheritance to X for P3,000,000.00,
although his share was still to be delivered.
a. The contract is valid since the inheritance is an existing inheritance.
b. The contract is void because what S sold is future inheritance which may not
be the object of a contract as a rule.
c. The contract is resissible.
d. d. The contract is unenforceable.
50. A contract whose cause is the promise of a thing or service by the other party is:
a. Onerous contract.
b. Gratuitous contract.
c. Lucrative contract.
d. Remuneratory contract.
 lOMoARcPSD|7626788

51. A contract whose cause is the liberality of the benefactor is:

a. A gratuitous contract or contract of pure beneficence.
b. A remuneratory contract
c. An aleatory contract
d. An onerous contract.
52. S sold his only car for P100,000.00 to B. Unknown to S, B bought the car from
him so that he could use the same in a bank robbery. What is the status of the
sale of the car by S to B?
a. The sale is void because the motive of B is illegal.
b. The sale is valid because the illegality of the motive of the parties to the
contract does not have any effect on its validity.
c. The sale is voidable because of the failure of B to disclose his motive to S.
d. The sale is rescissible at the instance of S because he would be
damaged by the illegal motive of B.
53. One of the following is not a requisite of cause in a contract. Which is it?
a. It must exist.
b. It must be lawful.
c. It must not be false.
d. It must be clearly stated in the contract.

54. D and C entered into a contract wherein D agreed to give to C P50,000.00 within
30 days from the date of the execution of their agreement, which, however, does
not state the consideration received by D from C. What is the status of the
contract between D and C?
a. The contract is void because. the cause is riot stated in the contract.
b. The contract is valid because the cause is presumed to exist and that it is lawful.
c. The contract is rescissible because D suffered damage by reason of absence
of cause.
d. The contract is valid provided another contract is executed between D and C
to state the cause.
 lOMoARcPSD|7626788

55. The defective contracts arranged according to the degree of their

defectiveness from the least defective to the most defective are:
a. voidable, rescissible, unenforceable, and void contracts.
b. rescissible, unenforceable, voidable, and void contracts.
c. rescissible, voidable, unenforceable, and void contracts.
d. unenforceable, rescissible, voidable, and void contracts.
56. The following are characteristics of rescissible contracts, except:
a. they may be set aside for equitable reasons.
b. they are valid until rescinded.
c. the action to rescind them prescribes.
d. the action to rescind them are not available to third persons even if their
interests are directty affected.
57. The following contracts are rescissible, except:
a. Those entered into by guardians whenever the wards whom they represent
suffer lesion by more than one- fourth of the value of the things which are
the object of the contract
b. Those entered into in representation of absentees, if the latter suffer lesion by
more than one-fourth of the value of the things which are the object of the
contract.
c. Those undertaken in fraud of creditors but the latter can still collect the claims
due them through other means.
d. Those 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 authority.

58. G, the guardian of M, a minor, sold the fish harvested from the fishpond of M for P7,
400.00. The fish, however, had a value of P10, 000.00.
a. The sale is rescissible because M suffered lesion by more than one-fourth
of the value of the fish sold.
b. The sale is voidable because M is a minor.
 lOMoARcPSD|7626788

c. The sale is unenforceable because G sold the fish without approval of the courts.
d. The sale is void because the object is outside the commerce of men.
59. The following are the requisites of a rescissible payment except:
a. The debt is already due.
b. the debtor is insolvent.
c. the debtor pays the debt.
d. the payment is not yet due.'
60. Rescission of a contract will prosper in one of the following cases. Which is it?
a. When there are other legal means to obtain reparation of the damages caused.
b. When he who demands rescission cannot return whatever he may be
obliged to restore.
c. When the object of the contract is in the possession of a third person who
purchased the property of the debtor in bad faith.
d. When the action to bring rescission has prescribed.

61. D owes the following creditors: X, P50, 000.00; Y, P60, 000.00; and Z, P90,
000.00. He has assets valued Pt P400,000.00. Subsequently, D donated, among
his assets a parcel of land valued at P250,000.00 to C. The donation and
acceptance were made in a public instrument. The donation of the land made by
D to C is:
a. Ressiscible, because it was presumed to have been made in fraud of creditors.
b. Unenforceable, because D was not authorized by his creditors.
c. Void, because the donation and acceptance should be registered.
d. Voidable, because D does not have the free disposal of his property.
62. C filed a complaint in court against D to collect a money debt
amounting to P500,000.00. After due hearing, the court rendered judgement in
favor of C. Shortly after the rendition of the judgment and before C has collected
D's debt, D sold a parcel of land to X. Z, another creditor, learned of the sale
made by D to X and now files an action to rescind the sale.
 lOMoARcPSD|7626788

a. The right to rescind the sale is exclusively

granted to because it was he who first learned of
the sale and he has still to file a claim to collect D's
debt.
b. The right to rescind the sale is exclusively
granted to C because it was he who obtained a
favorable judgement and he has not yet collected
D's debt.
c. Both C and Z have a right to rescind the sale
since the sale is presumed in fraud of creditors
having been made by party against whom
judgment has been rendered.
d. Neither C nor Z has a right to rescind the sale.
63. R, the representative of A, an absentee, sold the corn
with a value of P30,000.00 and the palay with a value
of P50,000.00,harvested from A's agricultural farm for
a total price ofP50,000.00. A, whose domicile was
subsequently known, was informed of the sale made
by G. Based on the foregoing facts, which of the
following statements incorrect?
a. A may seek payment of an additional P30,000.00 to recover the
damages suffered.
b. A may just seek rescission of the sale of
the corn to recover the damages he
suffered.
c. A may seek rescission of the sale of part of the
corn and part of the rice to the extent of the
damages he sustained.
d. A may seek the recission of the total sale to
recover damages he suffered
lOMoARcPSD|7626788