Navotas Polytechnic College

Bangus Street, NBBS-Kaunlaran

Navotas City

College of Business Administration

Law on Obligations and Contracts

Final Examination

I. Multiple Choice. (1 point for every correct answer)

1. A meeting of minds between two persons whereby one binds himself with respect
to the other to give something or render some service.
a. Covenant b. contract c. pact d. treaty e. obligation 2. The elements of a
contract without which a contract would not exist. a. Essential elements b. Natural
Elements c. Accidental Elements d. Pure Elements
3. The essential elements of a consensual contract are the following, except:
a. Consent of the contracting parties
b. Object certain which is the subject of the contract
c. Cause of the obligation which must be established
d. Warranty of the parties that they will perform their respective obligations. 4. A
contract where the cause with respect to each contracting parties is the prestation
or the promise of a thing or service by the other is:
a. Onerous Contract
b. A gratuitous contract
c. Renumeratory Contract
d. An aleatory Contract
5. A contract where one party receives no valuable consideration and the cause is
the liberality of the benefactor is:
a. A gratuitous contract
b. A renumeratory contract
c. An onerous contract
d. A commutative contract
6. It refers to the stage of a contract which involves preliminary negotiations,
bargaining and discussion of terms and condition, with no arrival yet of a definite
agreement.
a. Conception b. perfection c. consummation d. termination 7. The principle that
the contracting parties may establish such stipulation, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order or public policy.
a. Principle of Autonomy of Contract
b. Principle of Relativity of Contract
c. Principle of Consensuality of Contract
d. Principle of Mutuality of Contract
8. It refers to the principle that contracts take effect only between the contracting
parties, their assigns and their heirs.
a. Principle of Autonomy of Contract
b. Principle of Relativity of Contract
c. Principle of Consensuality of Contract
d. Principle of Mutuality of Contract
9. Contracts shall have the force of the law between the contracting parties and must
be performed in good faith.
a. Principle of Autonomy of Contract
b. Principle of Relativity of Contract
c. Principle of Obligatory of Contract
d. Principle of Mutuality of Contract
10. The contract must bind both the contracting parties. Its validity or compliance
cannot be left to the will of one of them.
a. Principle of Autonomy of Contract
b. Principle of Relativity of Contract
c. Principle of Obligatory of Contract
d. Principle of Mutuality of Contract
11. The manifestation of the meeting of the offer and acceptance upon the thing and
the cause which are to constitute the contract.
a. Consent b. Proposal c. Negotiating d. Bargaining
12. It refers to the money paid by the offeree to the offeror to bind the latter in case
the offeror grants the offeree the privilege to accept an offer within a certain
period of time.
a. Earnest Money b. Option Money c. Down Payment d. Deposit
13. Who among the following can give consent to a contract?
a. Unemancipated minor
b. Insane or demented person
c. Deaf mute who knows how to write
d. None of the above
14. It takes place 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. Undue Influence c. Moral Coercion d. Violence
15. As a rule, the following may be object of a contract, except:
a. Things which are not outside the commerce of men
b. Services which are not contrary to law, morals, good customs, public order or
public policy
 c. Transmissible rights
d. Future inheritance
16. The following are the requisites for the reformation of a contract, except: a. There
must be a meeting of minds of the parties to the contract. b. The true intention
of the parties is not expressed in the instrument. c. The failure of the instrument
to express the true intention of the parties is due to mistake, fraud, inequitable
conduct or accident.
d. The instrument executed by the parties should be a public instrument. 17. A
contract which has all the essential requisites of a contract but which may be set
aside by reason of equity on account of damage to one of the parties or upon third
person is a:
a. Voidable contract b. Rescissible Contract c. Void Contract d.
Unenforceable Contract
18. 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 prescribed.
d. The action to rescind them is not available to third persons even if their
interests are directly affected.
19. Which of the following contracts are unenforceable?
a. Contract entered into by one in the name of another without authority or legal
representation or who has acted beyond his powers.
b. Contract that does not comply with the Statutes of Fraud.
c. Contract where both parties are incapable of giving consent to a contract.
d. All of the above.
20. Three of the following statements pertain to the cause of a contract, while one
refers to motive:
a. It is the essential reason of contract.
b. It is always known to the contracting parties.
c. Its illegality does not affect the validity of the contract.
d. There will be no contract without it.
21. An absolutely simulated contract is:
a. Void. b. Voidable. c. Unenforceable. d. Valid with respect to the parties.
22. It exists when one of the contracting parties is compelled to by a reasonable and
well-founded fear of imminent grave evil upon his person or property, or upon
the person or property of his spouse, descendant, or ascendant to give consent.
a. Intimidation b. Violence c. Physical Coercion d. Undue Influence
23. Unenforceable contracts can be assailed by:
a. The contracting parties b. Third parties c. both (a) & (b) d. Neither (a) nor
(b)
24. The following contracts are void and inexistent, except:
a. Those whose cause, object or purpose is contrary to law, morals, good
 custom, public order.
b. Those which are absolutely simulated or fictitious.
c. Those whose cause or object will come to exist at some future time. d. Those
where the intention of the parties relative to the principal object of the contract
cannot be ascertained.
25. Through insidious words or machinations, A was able to induce B to enter into a
contract which without them B would not have agreed to it. There is: a. Undue
Influence
b. Fraud
c. Mistake
d. Misrepresentation

II. Discussion. Using the ILAC (Issue; Law; Application; and Conclusion) format resolve the
issues with supporting law or jurisprudence.

1. On March 16, 2021, Sunni Corporation offered a retirement package worth Php10
Million to Salvador as an option for early retirement. The endorsement letter
accompanied by the retirement package provided an instruction which stated
“should you accept this offer for early retirement, kindly affix your signature above
your name”.

On March 20, 2021, Salvador received the letter and the contract of retirement
package but did not sign immediately the contract.

After 30 days, Salvador mailed the retirement contract to his office with his
corresponding signature indicating that he accepted the terms and condition of the
retirement contract.

On April 1, 2021, Sunni Corp. through its HR dept. sent a letter of withdrawal of offer
to Salvador which duly received by his daughter Salve.

Resolve the following:

(a) Salvador claimed that there was already a perfected contract when he mailed the
original copy of the retirement package contract to the HR dept. and he did not
personally received the letter of withdrawal of offer. Decide whether or not the
claim of Salvador is valid. (5 points)
(b) Decide whether or not the offer was validly withdrawn. (5 points)

2. RC entered into a contract of lease with JT over a commercial space along C-4
Road, Navotas City for a period of 2 years. After a year, RC offered to sell the
same property to JT for Php20 Million. RC gave JT the 1 year to decide whether
to accept the offer. 10 months after the offer was made, RC sold the same
 property to Rovi for Php25 Million.
Resolve the following:
(a) When the original contract of lease expired, Rovi did not renew the contract
and demanded JT to vacate the property. JT contended that he was deprived
of his right of first refusal and that he had 2 months to decide on the option
whether to accept the offer or not. Is JT’s claim valid? (2issues here) (10
points)

3. Ram obtained a loan in the amount P10M with interest from Mar. As collateral,
Ram offered his LB Bank bonds worth P15M for the payment of the principal
loan. The said transaction was denominated as contract of sale.

Ram defaulted his payment thus, Mar consolidated the LB bonds of Ram in his
favor. Ram filed case for reformation of instrument before the Regional Trial
Court of Quezon City.

Resolve the following:

(a) Decide whether or not the instrument denominated as Contract of Sale be

reformed? (5 points)
(b) Mar claimed that the contract of sale executed by Ram is valid because all the
essential requisites of contract are present, therefore not subject to
reformation. Do you agree? (5 points)

4. On February 19, 1994, Anton, as lessor, entered into a Contract of Lease with Peri,
as lessee, over the subject lot and the improvements thereon owned and
registered to Anton. The Lease Contract provides for a lease term of 20 years
with monthly rentals at the following rates: (a) ₱5,000.00 beginning March 1994;
(b) ₱6,000.00 after the 5th year; (c) ₱7,000.00 after the 10th year; and (d)
₱8,000.00 after the 15th year and until the termination of the lease, and for Peri
to construct on the leased land a building that should become property of Anton
upon termination of the lease contract, and to pay realty taxes for both the land
and improvements.

Sometime in May 2004, Anton died and Antonio, being an adopted son and heir
of Anton, filed with the RTC of Malabon City a complaint for annulment of lease
contract, against Peri, due to alleged breached of obligations under the contract
of lease.

Sometime in June 2004, Antonio signed an instrument named Deed of

Assignment, assigning the rights of Anton in the lease contract to Rafi for a
consideration of Php500,000.00.
Peri refused to recognize the validity of the Deed of Assignment in favor of Rafi
 but continue to deposit the rental fees to Antonio’s bank account. Rafi then filed
a case for rescission of contract of lease.

Resolve the following:

(a) Decide whether or not the contract of lease should be rescinded. Explain your
answer. (5 points)
(b) Is Rafi the proper party to rescind the contract of lease? (5 points)

5. BEA Realty is a corporation engaged in the building and development of

condominium units. Sometime in 2005, it started the construction of a
condominium project called BEA Park Condominium Building located along Jorge
St., Pasay City. However, printed advertisements were made indicating therein
that the said project was to be built in Makati City. In December2005, Kate,
agreed to buy a unit from the above project by paying a reservation fee and,
thereafter, down payment and monthly installments. On June 18, 2006,
respondent and the representatives of petitioner executed a Contract to Sell. In
the said Contract, it was indicated that the condominium project is located in
Pasay City.

More than two years after the execution of the Contract to Sell, Kate, through
her counsel, wrote BEA Realty a letter dated October 30, 2008 demanding the
return of ₱800,500.00, representing the payments she made, on the ground that
she subsequently discovered that the condominium project was being built in
Pasay City and not in Makati City as indicated in its printed advertisements.

However, instead of answering respondent's letter, petitioner sent her a written

communication dated November 30, 2008 informing her that her unit is ready for
inspection and occupancy should she decide to move in.

Treating the letter as a form of denial of her demand for the return of the sum
she had paid to BEA Realty, Kate filed a complaint with the Expanded National
Capital Region Field Office (ENCRFO) of the Housing and Land Use Regulatory
Board (HLURB) seeking the annulment of her contract with BEA Realty, the
return of her payments, and damages.

Resolve the following:

(a) Resolve whether or not the contract to sell is a voidable contract. (5 points)
(b) Resolve whether BEA Realty was guilty of fraud and if so, whether such fraud
 is sufficient ground to nullify its contract with Kate. (5 points)
6. Ari, a married man, donated a parcel of land to Chinky, a minor of 17 years old,
subject to condition that Chinky shall become his mistress. The donation was duly
accepted by Chinky and her parents. After the perfection of the donation, Chinky
became the mistress of Ari. When Ari died, his widowed wife Becky, took
possession of the land. Subsequently, Chinky filed an action for recovery of the
property. Defendant Becky advanced the defense that the contract of donation is
inexistent because of the illegality of the cause; consequently, it has not
produced anu effect whatsoever. Plaintiff, Chinky however, contented that what
is illegal is the motive of the donor and not the cause, since the contract in this
case is one pure beneficence.

Resolve the following:

(a) Describe the character of the contract whether it is unenforceable, void or

inexistent. Explain your answer. (5 points)

7. Andy is married to Annie. After 5 years, they decided to live separately from each
other without filing the proper case in court. Instead, they drafted an agreement
which states among others, we agreed to separate mutually and voluntarily; we
renounced all rights and obligations against each other; we will not object to
anyone to have or commit to another relationship; and we will not oppose any
attempt to remarry again by anyone to anybody. The document was duly
notarized by Atty. Pa-Amin.

(a) Resolve whether or not the agreement between Andy and Annie is valid?
Explain your answer. (5 points)

8. On February 14, 1980, EB was granted Free Patent No. 7113118 over a piece of
agricultural land located in San Francisco, Agusan del Sur, covered by Original
Certificate of Title No. P-9053. Under the law, the sale of a parcel of agricultural
land covered by a free patent during the five-year prohibitory period under the
Public Land Act is void. Reversion of the parcel of land is proper.

On June 15, 1983, well within the five-year prohibitory period, EB sold the land to
ME. EB died on January 16, 1991. His son OB claimed that prior to his death, he
allegedly told his wife, NB to nullify the sale made to ME and have the Transfer
Certificate of Title No. T-5477 cancelled because the sale was within the five-year
prohibitory period. Thus, on June 23, 1993, NB and her son OB filed a Complaint
for Nullity of Title and Reconveyance of Title against ME, and the Register of
Deeds of Agusan del Sur.
ME filed his Answer, arguing that the sale was made in good faith and that in
purchasing the property, they relied on EB’s title. ME likewise claimed that under
the pari delicto doctrine, the parties to a controversy are equally culpable or
guilty, they shall have no action against each other, and it shall leave the parties
where it finds them.

Resolve the following:

Can ME claimed to apply the doctrine of in pari delicto where public policy would
be violated? Explain your answer. (10 points)