Here Is Where The Parties Provide For Their Offers and Bargain With Each Other."

Law on Contract (Part - One)
1) It is a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service.
a. Quasi-contract
b. Crime
c. Quasi-delict
d. Contract
ELEMENTS OF CONTRACTS
 ESSENTIAL - those without which the contract cannot exist, i.e., Consent, object, consideration. In
some contracts, form and delivery is essential too.
 NATURAL - those which exist as part of the contract even if the parties do not stipulate it because
the law is deemed written therein. Example: Warranty against eviction in a contract of sale or the
warranty against hidden defects.
 ACCIDENTAL - those which are agreed upon by the parties and which cannot exist without being
stipulated. Example: stipulation for interest.
2) Which primarily distinguishes a contract from quasi-contract and quasi-delict?

a. Presence of prestation
b. Presence of vinculum
c. Presence of consent
d. None of the above
3) Which of the following principles regarding obligations arising from contract is incorrect?
a. Obligations arising from contracts have the force of law between contracting parties.
b. Obligations arising from contracts should be complied with in good faith.
c. Both a and b
d. Neither a nor b
4) It is the stage of contract when the parties come to agree on the terms of the contract.
a. Conception stage
b. Perfection stage
c. Consummation stage
STAGES OF A CONTRACT
 Negotiation – covers the period from the time the prospective contracting parties indicate interest
in the contract to the time the contract is perfected “Here is where the parties provide for
their offers and bargain with each other.”
 Perfection – takes place upon the concurrence of the essential elements of the contract
 Consummation – begins when the parties perform their respective undertakings under the
contract resulting to the eventual extinguishment of the contract
Note:
Negotiation is also called as Preparation or Conception or Generacion
Perfection is also called as Birth
Consummation is also called as Death
5) In which stage of contract is consent between the parties not yet present?
a. Conception stage
b. Perfection stage
c. Consummation stage
1|P a g RLACO/DSALES/NVALDERRAM
6) D borrowed P100,000 cash from C and signed a one-year interest bearing promissory note with
24% interest per annum. At the maturity date of the note, C refused to pay the P24,000 interest
and invoked that the legal interest is only 6% per annum. What principle of contract requires D
to pay the agreed rate of 24% interest per annum?
a. Obligatory force of contract
b. Mutuality of contract
c. Relativity of contract
d. Autonomy of contract
CHARACTERISTICS OF A CONTRACT
 Obligatoriness: force of law
 Autonomy: free to stipulate
 Mutuality: essential equality; in equal footing
 Relativity: binding upon contracting parties
Pwede sya i declare n court n void ang interest
7) R enrolled in a Review Center for a face to face review. Due to the pandemic, the face to face
review agreed by the contracting parties becomes legally impossible. R demanded for the refund
of his tuition fees on the ground of fortuitous event. However, instead of refunding the whole
tuition fees, the Review Center insisted on returning only the 50% of the fees and asked R to
attend the online review class. However, R disagreed with the proposal. Despite R’s objection,
the Review Center proceeded with the online review class and returned only 50% of the fees to
R. What principle of contract is violated by this action of the Review Center?
8) E is an employee of a big auditing firm. E was granted a signing bonus amounting to P1,000,000
by the auditing firm for topping the CPALE. The contract of employment provides that E must
stay in the firm for a period of at least one year. In case he failed to stay for at least one year in
the firm, he must return the said signing bonus to the firm. E voluntarily agreed to such
stipulation. What principle of contract allows E and his employer to enter to make such provision
in the contract of employment?
AUTONOMY
EXAMPLES OF VOID STIPULATIONS:
•Pactum commissorium: automatic appropriation of the things given by way of pledge or mortgage, in
case of non-payment of principal obligation
•Pactum de non alienado: forbidding the owner from alienating the
immovable mortgaged
•Pactum leonina: excluding one or more partners from any share in the profits or lossShould any of the
foregoing is stipulated, it is considered as if not written at all.
9) Except in case of property regime regarding marriage settlement, what shall govern the
relationships, rights and obligations of husband and wife who validly entered into a contract of
marriage?
a. Provisions of pre-nuptial agreement
b. Provisions of Family Code of the Philippines
c. Customs in the Philippines
d. Provisions of Bible
10) Which of the following stipulations agreed by the contracting parties is valid?
a. A stipulation allowing the common carrier to exercise a diligence lower than the diligence
of good father of a family for the transportation of goods
b. A stipulation allowing the common carrier to exercise a diligence lower than extraordinary
diligence for the transportation of passengers
c. A stipulation exempting hotel-keepers from liability in case of loss of things brought
inside the hotel by the guests
d. A stipulation prohibiting an audit manager of auditing firm from transferring
to a major competitor in the NCR for a maximum period of 3 years
11) A ordered a Chicken Joy from a famous fast-food chain. Due to negligence, the fast-food chain
delivered a friend towel instead of fried chicken. B, the boyfriend of A, demanded payment for
damages from the fast-food chain but the latter refused. This prompted B to file a civil action for
breach of contract against the fast-food chain. What principle of contract is violated when B filed
the action against the fast-food chain?
c. Relativity of contract - Dapat si A ang mag kaso.
RELATIVILITY
General rule: Contracts take effect only between the contracting parties, as well as their assigns and
heirs.
Exceptions:
1)Where the contract contains a stipulation in favor of a third person.
2)Where the third person comes into possession of the object or a contract creating a real right.
3)Where the contract is entered into in order to defraud a third person.
4)Where the third person induces a contracting party to violate his contract.
12) D is a student of a university. D lives in a dormitory near the university. Due to the adverse
effects of the pandemic, the university stopped its operations. The said dormitory is affected as D
didn’t renew the lease agreement. This prompted the owner of dormitory to file a case against
the university. Will the action prosper?
a. Yes based on stipulation pour autrui
b. No because it is in violation of the principle relativity of contract
c. Yes based on principle of abuse of rights
d. No because the university does not have juridical personality when it stops its operation
13) Which of the following contracts may be assailed by a third person?

a. Voidable contract
b. Rescissible contract
c. Both a and b
d. Neither a nor b
Recessible Voiddable Unenforable Void

One of the contracting One of the contracting Any of the contracting One of the contracting
parties or third parties (but not the guilty parties parties or third
person one) or third person whose
injured/defrauded *including heirs, interest is directly
persons whose
assigns, or successors- affected
rights are
*including heirs, in-interest
prejudiced with
assigns, or successors- *including heirs,
respect to one of
in-interest assigns, or successors-
the contracting
in-interest
parties
*including heirs,
assigns, or successors-
in-interest
14) Which of the following contracts is not allowed to be assailed by a third person?
a. Unenforceable contract
b. Void contract
c. Both a and b
d. Neither a nor b
15) H and W are legally married since 2001. On 2021, H and K secretly entered into a bigamous
marriage ( nag pakasal sa iba na kasal na). On year 2022, H died. W filed an action for
declaration of nullity of the bigamous marriage between H and K. Will the action prosper?
c. Yes in order to determine the true heir
d. No because W is not a party to the second contract of marriage
16) Loydie has an exclusive contract with ABZ-ZBN. While his contract with the said network is still in
effect, AMG convinced Loydie to have a movie project with them. After the release of the movie,
ABZ-ZBN filed an action for damages against AMG. Will the action prosper?
c. Yes because AMG induced Loydie to violate his contract with ABZ-ZBN
d. No because there is no privy of interest between AMG and ABZ-ZBN
17) D has a matured obligation amounting to P100,000 to C. Despite repeated demands from C, D
refused to pay the obligation. This prompted C to file a civil action to collect a sum of money
before the trial court which ruled in favor of C. C filed a motion for issuance of writ of attachment
to execute the judgment debt against D. When D obtained knowledge of the issuance of writ of
attachment, he immediately sold his only land to G, his girlfriend, who has knowledge of the
pending action. This prompted D to file an action for the cancellation of the sale of land of D to
G. Will the action prosper?
c. Yes because the contract of sale is intended to defraud C
d. No because C is not a party to the contract of sale
18) D borrowed P1,000,000 cash from C. M mortgaged his land to secure the loan of D. The deed of
mortgage is registered in the Registry of Deeds and annotated to the title of the said land.
Afterwards, M absolutely sold the said land to B, who immediately possessed the land. D
defaulted in the payment of his loan to C. This prompted C to foreclose the mortgage on the
land. May C foreclose the land already possessed and owned by B?
c. Yes because the mortgage is registered
d. No because C is not a party to the contract of sale of land
19) Which of the following types of elements of contract is necessary for validity of contract?
a. Essential elements
b. Natural elements
c. Accidental elements
ESSENTIAL ELEMENTS OF A CONTRACT
 Consent
 Object
 Cause or consideration
Note:
ESSENTIAL - those without which the contract cannot exist, i.e., Consent, object, consideration.
In some contracts, form and delivery is essential too.
NATURAL - those which exist as part of the contract even if the parties do not stipulate it because
the law is deemed written therein. Example: Warranty against eviction in a contract of sale or the
warranty against hidden defects.
ACCIDENTAL - those which are agreed upon by the parties and which cannot exist without being
stipulated. Example: stipulation for interest.
OTHER ESSENTIAL ELEMENTS - in some cases, delivery is required for the perfection of the
contract; in others, there are formal requirements.
Real Contracts - are those which are perfected by delivery, thus, delivery is an essential element to its
perfection. Real contracts include:
 Deposit
 Pledge
 Commodatum - a gratuitous loan of movable property to be used and returned by the borrower.
 Loan or Mutuum
20) Which of the following is a natural element in a contract of sale?
a. Determinate thing
b. Price certain in money or its equivalent
c. Warranty against eviction
d. Meeting of minds of buyer and seller
COC
21) Which of the following is an accidental element in a contract of loan?

a. Cash or consumable thing
b. Delivery of cash or consumable thing
c. Meeting of minds of lender and borrower
d. Agreement to pay interest
22) Which of the following is not an essential element of a consensual contract?

a. Consent of the contracting parties
b. Object certain which is the subject matter of the contract
c. Cause of the obligation which is established
d. Delivery of subject matter of contract - real
23) Which of the following is not an essential element of a real contract?

d. Delivery of subject matter of contract
e. Execution of solemnity required by law
General rule: No form is required in order to make the contract binding and effective between the
parties thereto.
Exceptions:
1)those which are required to be in some form in order that they may be valid.
2)those which are required to be in some form in order that they may be enforceable or in order that
they may be proved in a certain way
Examples of formal contracts

 Donation of personal property valued in excess of P5,000
 Donation of immovable property regardless of value (must be in a public instrument)
 Contract of partnership where an immovable property is contributed thereto (must be in a public
instrument)
Contract of agency authorizing an agent to sell a piece of land or any interest therein (in order for
the sale to be valid)
Sale through an agent

GENERAL RULE: If the contract is unauthorized, or entered into by one on behalf of another without
authorization, the contract is unenforceable.
EXCEPTION: If the unauthorized contract relates to the sale of a parcel of land, in which case, the
contract is void pursuant to Article 1874 of the Civil Code.
 Sale of large cattle
24) Which of the following is not an essential element of a solemn contract?

d. Delivery of subject matter of contract
e. Execution of solemnity required by law
25) Which of the following contracts is perfected by the execution of the formality required by law for
its validity?
a. Consensual contract
b. Solemn contract
c. Real contract
26) Which of the following contracts is perfected by the delivery of the subject matter of contract?
a. Contract of loan
b. Contract of sale
c. Contract of partnership
d. Contract of common carrier
27) Which of the following contracts is perfected by mere consent?

a. Contract of deposit - Reeal
b. Contract of antichresis - Formal
c. Contract of subscription of shares of stocks
d. Contract of marriage -Compliance with Family code
28) Which of the following contracts must be in a public instrument in order to be valid and
enforceable?
a. Contract of sale of personal property at a price of P500 or more
b. Contract of lease of real property for a period longer than one year
c. Contract of donation of immovable property
d. Contract of guaranty
29) L lend and delivered P100,000 cash to B as consideration for the oral contract of loan. They orally
agreed that B will pay 24% interest per annum. After one month, L filed an action against to B to
compel B sign the deed of loan with principal of P100,000 with 24% interest per annum. In which
agreement may L legally compel B to sign?
a. Contract of loan of P100,000
b. Agreement to pay 24% interest per annum
c. Both a and b
d. Neither a nor b
Interest should be in - writing
30) S orally sold a specific car to B at a price of P100,000. B paid earnest money amounting to
P10,000 at the date of oral agreement. G orally guaranteed the balance of P90,000 in favor of S
who accepted the said undertaking. Which agreement may be legally compel by a court action to
execute the deed?
a. Contract of sale - have earnest money
b. Contract of guaranty - should be in writing
c. Both a and b
d. Neither a nor b
31) In which of the following contracts is the service compensated the cause of the agreement?
a. Onerous contract - Thing
b. Gratuitous contract - gratuitious liberality
c. Remuneratory contract
32) Which of the following contracts is essentially gratuitous?
a. Contract of commodatum
b. Contract of loan - If with interest onerous if no interest gratiousus
c. Contract of agency - Pwedeng may sahod or pwedeng wlang sahod
33) Which of the following contracts can stand by itself?

a. Contract of sale
b. Contract of pledge
c. Contract of guaranty
d. Contract of mortgage
34) Which of the following contracts is a preparatory contract?

a. Contract of sale
b. Contract of partnership
c. Contract of common carrier
d. Contract of loan
contracts entered into for the creation of another contract (i.e. agency, the principal gives authority to
the agent through a Special Power of Attorney)
35) Which of the following contracts means “I do that you may give”?
a. Do ut des
b. Do ut facias
c. Facio ut des
d. Facio ut facias
 As to whether or not a name is given:

 Nominate
 Innominate
Do ut des, (I will give so that you may give),
Do ut facias, ( I will give so that you may do)
Facio ut facias, ( I will do that you may do)
Facio ut des ( I will do that you may give)
Do - give
F - Do
36) What shall primarily govern an innominate contract?

a. The stipulation of the parties
b. The provisions of Obligations and Contracts
c. The rules governing the most analogous contracts
d. The customs of the place
37) Which of the following is a commutative contract?

a. Contract of donation
b. Contract of commodatum
c. Contract of lease
d. All of the above
The commutative contract is one in which the contracting parties give and receive an equivalent or
reciprocal value.
38) It is a contract whose fulfilment depends upon chance.

a. Contract of adhesion
b. Aleatory contract
c. Unilateral contract
d. Reciprocal contract
39) It is also known as “fine print contract” or “take it or leave it contract.

a. Contract of adhesion
b. Onerous contract
c. Bilateral contract
d. Executory contract
40) What is the extent of the binding effect of a contract?

a. The parties are bound only up to the fulfilment of what has been expressly stipulated in
the contract.
b. The parties are bound only by the consequences of contract.
c. The parties are bound not only to the fulfilment 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.
41) How shall the court determine the nature of contract entered by the contracting parties?
a. By the principles of law -1st
b. By the stipulation of parties - 2nd
c. By the customs of the place - 3rd
d. By religious doctrine
42) It refers to the meeting of minds between the contracting parties as regards the object and
cause of contract.
a. Consent
b. Prestation
c. Consideration
d. Formality
43) What theory is followed by the New Civil Code of the Philippines to determine the exact moment
of perfection of contract entered through telegram?
a. Reception theory
b. Manifestation theory
c. Cognitive theory
d. Expedition theory
Cognition Theory – follows that the acceptance takes effect from the time the offerer knew (or has
knowledge) of the acceptance of the offeree.
44) What is the disputable place of perfection entered through telegram?

a. In the place where the offer was accepted
b. In the place where the offer was made
c. Domicile of offerer
d. Domicile of acceptor
45) Which of the following statements about consent is incorrect?

a. A qualified acceptance constitutes a counter-offer.
b. The person making the offer may fix the time, place and manner of acceptance, all of
which must be complied with.
c. An offer made through an agent is accepted from the time acceptance is communicated
to the agent not necessarily to the principal.
d. An acceptance must be expressed but never implied. - merong constructive
46) Which of the following statements about acceptance is incorrect?

a. An option contract unsupported by consideration or option premium is valid
and binding and may not be withdrawn.
b. Business advertisements are mere invitations to make an offer.
c. Advertisements for bidders are simply invitations to make proposals.
d. None of the above.
47) Who among the following is capacitated to give consent to a contract?

a. Demented person
b. Minor
c. Insane person
d. Person with lucid interval
Deaf mute - capacitated
Who don’t know how to write in capacited
48) S, an adult, sold in writing his specific motorcycle to B, a minor, at a price of P10,000. What is
the status of the contract of sale?
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
49) I, an insane, leased in writing a real property to B, a demented person, at a monthly rental of
P10,000 for five years. What is the status of the contract of lease?
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
50) M, a minor, lent and delivered P5,000 cash to N, a minor. Afterwards, N remitted the cash to his
mother who used the said cash to buy groceries for the family. What is the status of contract of
loan?
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
May ratification of 1 party - mother used for groceries
51) D delivered a specific laptop to B intended as a contract of deposit. Unfortunately, B thought the
delivery is by virtue of a contract of commodatum. What is the status of this real contract?
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
No meeting of minds
52) Using the same data in preceding number, what is the legal remedy available to injured party?
a. Action for declaration of nullity of contract
b. Action for rescission of contract
c. Action for annulment of contract
d. Action for reformation of instrument
53) H and W are legally married. They entered into a pre-nuptial agreement of complete separation
of property. During their marriage, H threatened to kill W with a loaded gun which prompted the
latter to sign a deed of sale of his specific car to H at a price of P100,000. What is the status of
the contract of sale of car?
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
54) Using the same data in preceding number, what is the legal remedy available to injured party?
55) Which of the following vices of consent if committed by a third person may result to voidability of
contract?
a. Mistake and/or Fraud
b. Fraud and/or Undue Influence
c. Mistake and/or Undue Influence
d. Violence and/or Intimidation
56) D borrowed P200,000 cash from C. At the maturity date of the loan, D failed to pay his
obligation. As a result, C sent a demand letter to D stating that “He will be constrained to file the
necessary action against D if the latter will not sign the deed of mortgage on his land.” Due to
this threat, D mortgaged in writing his specific land in favor of C. What is the status of the
contract of mortgage?
a. Perfectly valid
b. Voidable
c. Unenforceable
d. Void
Legal threat
57) S sold an authentic Coach Bag to B at a price of P10,000. At the date of delivery, S delivered a
counterfeited Coach Bag. What is the status of the contract of sale?
a. Perfectly valid
b. Voidable
c. Unenforceable
d. Void
Causal fraud or dolo causante - Refers to fraud without which consent would not have been given. - contract
is voidable
Incidental fraud or dolo incidente - Refers to fraud wituhout which consent would have still been given but
the person giving it would have agreed on different terms - valid contract but the party employing it is liable
for damages
58) Using the same data in preceding number, what is the legal remedy available to B?
b. Action for indemnification for damages for breach of contract
59) A and B are identical twins. A applied for a life insurance. At the date of medical examination, A
asked B, who is physically fit, to attend. After the examination, the insurance company approved
the application for life insurance covering the health of A. What is the status of the contract of
life insurance?
a. Perfectly valid
b. Voidable
c. Unenforceable
d. Void
60) Using the same data in preceding number, what is the legal remedy available to the insurance
company?
b. Action for indemnification for damages for breach of contract
61) Which type of fraud will make the contract voidable?

a. Dolo causante
b. Dolo incidente
c. Mutual fraud
d. Reciprocal fraud
10 | P a RLACO/DSALES/NVALDERRAM
62) Which of the following statements is incorrect?
a. Misrepresentation by a third person does not vitiate consent, unless such
misrepresentation has created substantial mistake and the same is mutual.
b. Failure to disclose facts, when there is duty to reveal them, as when the parties are
bound by confidential relations, constitutes fraud.
c. The usual exaggerations in trade, when the other party had an opportunity
to know the facts, are in themselves fraudulent.
d. A mere expression of an opinion does not signify fraud, unless made by an expert and
the other party has relied on the former’s special knowledge.
No fraud exists in the following cases:

 Usual exaggerations in trade, when the other party had an opportunity to know the facts
 In case of a mere expression of an opinion, unless made by an expert and the other party has
relied on the former’s special knowledge.
 In case of misrepresentations by a third person, unless such misrepresentation has created
substantial mistake and the same is mutual.
If the misrepresentation was made in good faith. However, the same may constitute
error or mistake.
63) What is the status of absolutely simulated contract?

a. Rescissible
b. Voidable
c. Unenforceable
d. Void
Absolutely Simulated Contract - where the parties do not intend to be bound at all.
 It is void for being fictitious.

 The parties may thus recover from each other what they may have given under the contract.
 It is a contract not really desired or intended to produce legal effects by the parties.
 The simulation must be on the part of both parties.
Relatively Simulated Contract - where parties conceal their true agreement.

 The parties here are bound to their real agreement provided it does not prejudice a third person
and is not intended for any purpose contrary to law, morals, good customs, public order, and public
policy
64) Using the same data in preceding number, what is the legal remedy available to the injured
party?
65) What is the status of the intended contract in case there is relative simulation?
a. Valid and binding
b. Voidable
c. Unenforceable
d. Void
party?
67) It refers to the promise or conduct to be performed in the fulfilment or rendition of the
obligations of contract and it may consist of giving, doing or not doing a thing.
a. Consideration
b. Prestation
c. Consent
d. Delivery
68) Which of the following is not a requisite of an object of contract?
a. It must be within the commerce of men.
b. It must be illicit.
c. It must be possible.
d. It must be determinate as to its kind.
69) Which of the following may become the subject matter of contract?
a. Vain hope
b. Public land
c. Hereditary right
Bawal ang future inheritance
70) What is the status of the contract if there is no prestation?

a. Rescissible
b. Voidable
c. Unenforceable
d. Void
party?
-End-

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Law on Contract (Part - One)

2) Which primarily distinguishes a contract from quasi-contract and quasi-delict?

Pwede sya i declare n court n void ang interest

13) Which of the following contracts may be assailed by a third person?

Recessible Voiddable Unenforable Void

21) Which of the following is an accidental element in a contract of loan?

22) Which of the following is not an essential element of a consensual contract?

23) Which of the following is not an essential element of a real contract?

Examples of formal contracts

Sale through an agent

24) Which of the following is not an essential element of a solemn contract?

27) Which of the following contracts is perfected by mere consent?

Interest should be in - writing

33) Which of the following contracts can stand by itself?

34) Which of the following contracts is a preparatory contract?

 As to whether or not a name is given:

36) What shall primarily govern an innominate contract?

37) Which of the following is a commutative contract?

38) It is a contract whose fulfilment depends upon chance.

39) It is also known as “fine print contract” or “take it or leave it contract.

40) What is the extent of the binding effect of a contract?

44) What is the disputable place of perfection entered through telegram?

45) Which of the following statements about consent is incorrect?

46) Which of the following statements about acceptance is incorrect?

47) Who among the following is capacitated to give consent to a contract?

Who don’t know how to write in capacited

May ratification of 1 party - mother used for groceries

61) Which type of fraud will make the contract voidable?

No fraud exists in the following cases:

63) What is the status of absolutely simulated contract?

 It is void for being fictitious.

Relatively Simulated Contract - where parties conceal their true agreement.

70) What is the status of the contract if there is no prestation?

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