RFBT.O 1602.law On Contracts Withanswers

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
RFBT.O-1601
LAW ON OBLIGATIONS
Academic Knowledge Engineer “Home of Topnotch Professionals!”
MARGINAL NOTES
REVIEW NOTES
Contract
A contract 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.
Elements of a contract
1. Essential elements
a. Consent
b. Object
c. Cause of the obligation
2. Natural Elements
3. Accidental elements
Classification of Contracts
1. According to perfection
a. Consensual
b. Real
c. Formal or Solemn
2. According to Cause
a. Onerous
→such as sale and barter
b. Gratuitous
Where one party receives no equivalent consideration
c. Remuneratory
The cause is the past service or benefit being remunerated.
3. According to importance or dependence of one upon another

a. Principal
b. Accessory
c. Preparatory
One which serves as a means by which other contracts may
be entered into
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RFBT RFBT.O-1601.Law on Obligations
4. According to name
a. Nominate
b. Innominate
Those without any name under the law.
5. According to risk or fulfillment

a. Commutative
Those where the parties give equivalent values
b. Aleatory
Those whose fulfillment depends upon chance
6. According to the parties Obligated

a. Unilateral
Those where only one of the parties is obligated to give or to
do something
b. Bilateral
Those where both parties are required to give or do
something
7. According to subject matter

a. Contracts involving things
b. Contracts involving rights or credits
c. Contracts involving services
8. According to the time of fulfillment

a. Executed
b. Executory
One that has not yet been performed.
9. According to the number of persons physically entering into the

contract.
a. Ordinary
Where two parties are represented by different persons
b. Auto-contract
Where only one person represents the two opposite parties
to the contract
10. According to the number of persons who participated in the

drafting of the contract
a. Ordinary
→both parties participated in the drafting of the contract
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TT RFBT.O-1604.Error Fraud and Non-Compliance RFBT
b. Contract of adhesion
→only one party drafted the contract
Stages of a Contract
1. Preparation or conception
2. Perfection or birth
3. Consummation or death or termination
Characteristics of contract
1. Liberty of contract or freedom to stipulate
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
2. Mutuality of Contracts
The contract must bind both contracting parties
3. Relativity of Contracts
Contracts take effect only between the parties, their assigns and
heirs, except where the rights and obligations are not
transmissible:
a. By law
b. By stipulation; or
c. By nature
What is stipulation “pour autrui”?

It is a stipulation in a contract clearly and deliberately conferring a
favor upon a third person who has a right to demand its
fulfillment provided he communicates his acceptance to the
obligor before its revocation.
4. Consensuality of Contract
Contracts are perfected by mere consent
5. Obligatory force of contract and compliance in good faith

Obligations arising from contracts shall have the force of law
between the contracting parties and should be complied with in
good faith.
ESSENTIAL REQUISITES OF CONTRACTS

I. CONSENT OF THE CONTRACTING PARTIES
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→ is the manifestation of the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute
the contract
Nature of advertisements
 Business advertisements of things for sale are not definite
offers, but mere invitations to make an offer
 Advertisements for bidders are merely invitations to make
proposals and the advertiser is not bound to accept the
highest or lowest bidder
Option
→ is a contract whereby the offeror gives the offeree a certain
period within which to buy or not to buy a certain object for a
fixed price.
Rules on Acceptance
1. The acceptance must be absolute and unqualified.
2. Acceptance made by letter or telegram does not bind the
offerer except from the time it came to his knowledge. The
contract in such a case is presumed to have been entered
into the place where the offer was made.
3. Acceptance may be express or implied
4. An offer made through an agent is accepted from the time it
is communicated to him.
What causes will render an offer ineffective?

 Death, civil interdiction, insolvency of either party before
acceptance is conveyed ;
 Revocation, rejection of withdrawal of the offer before
acceptance is communicated;
 Qualified acceptance of the offer as the acceptance is really a
counter-offer; and
 Expiration of the period of time given to the offeree within
which he must signify his acceptance.
What are the characteristics of consent?

 It is intelligent – there is capacity to act;
 It is free and voluntary – There is no vitiation of consent by
reason of violence or intimidation; and
 It is conscious and spontaneous – there is no vitiation of
consent by reason of mistake, undue influence, or fraud .
Rules on consent
1. The parties must have the capacity to enter into a contract.
The following cannot give consent to a contract:
a. Unemancipated minors
b. Insane or demented persons
c. Deaf mutes who do not know how to write
2. Contracts agreed to in a state of drunkenness or during a
hypnotic spell are voidable.
3. A contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable.
Simulated contract
→A contract that does not intend to have any legal effect on or a
change, in the juridical situation of the parties.
What are the kinds of simulation

a. Absolute – when the contract does not really exist and the
parties do not intend to be bound at all. Absolutely simulated
or fictitious contracts are void;
b. Relative – when the (apparent) contract entered into by the
parties is different from their true (hidden or disguised)
agreement. The parties are bound by their real agreement
provided it does not prejudice a third person and is lawful;
What services may be the object of a contract?

All services which are not contrary to law, morals, good
customs, public order, or public policy.
What rights may be the object of a contract?

All rights may be the object of a contract except those which
are intransmissible by their nature, or by stipulation, or by
provision of law.
Cause of Contracts
It is the essential reason why a party enters into a contract.
Cause of Contracts
1. Onerous contracts – the cause for each contracting party is the
prestation or promise of a thing or service by the other.
2. Remuneratory contract – the cause is the service or benefit which
is remunerated.
3. Gratuitous, lucrative, or contract of pure beneficence- the cause is
the liberality of the benefactor.
What is motive in a contract?

Motive is purely personal reason which a party has in entering into a
contract.
Lesion
→ is inadequacy of the cause.
As a general rule, lesion shall not invalidate a contract except in the

following:
1. When there was fraud, mistake and undue influence.
2. In cases provided by law, such as when the ward or absentee
suffer lesion by more than one-fourth of the value of the object of
the contract.
DEFECTIVE CONTRACTS
a. Rescissible contracts – They are valid because all the essential
requisites of a contract are present but by reason of injury or
damage to one of the parties or to third persons, such as
creditors, the contract may be rescinded;
b. Voidable contracts – They are also valid until annulled unless
there has been ratification.
c. Unenforceable contracts – They cannot be sued upon or enforced
in court by reason of statutory defects unless they are ratified;
and
d. Void or inexistent contracts – They have no effect at all and
cannot be ratified.
Rescissible Contracts
→ is one which has the essential requisites of a contract but which
may set aside by reason of injury or damage to third persons.
The following are rescissible contracts

1. Those entered into by guardians whenever the ward whom
they represent suffer lesion by more than one-fourth of the
value of the things which are the object thereof.
2. Those agreed to in representation of absentees, if the latter
suffer lesion by more than one-fourth of the value of the
things which are the object thereof.

3. Those undertaken in fraud of creditors when the latter
cannot in any manner collect the claims due them.
4. 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.
5. All other contracts specially declared by law to be subject to
rescission.
NOTA BENE:
The action for rescission must be brought within the period
allowed by law.
The prescriptive period is 4 years from the date of the contract
except in the following:
a. For persons under guardianship – 4 years from termination of
incapacity.
b. For absentees – 4 years from the time the absentee’s
domicile is known
Nota Bene:
Alienation indicating bad faith – When it is attended by
circumstances that have been denominated by our courts as
“badges of fraud.”
Voidable Contracts
A voidable contract is one that is defective by reason of the
incapacity or vitiated consent of one to the parties.
The following are voidable or annullable contracts

1. Those where one of the parties is incapable giving consent to
a contract.
The following are incapable of giving consent to a contract.
a. Unemancipated minors
b. Insane or demented persons
c. Deaf-mutes who do not know how to write.
2. Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
Annulment
Annulment is the action brought to set aside a voidable
contract.

NOTA BENE:
1. When action must be brought (prescriptive period);
The action for annulment must be brought within four (4)
years which period shall begin:
a. In cases of intimidation, violence, or undue influence,
from the time the defect in the consent ceases.
b. In case of mistake or fraud, from the time of discovery of
the same
c. In cases of minority or other incapacity of a party, from
the guardianship ceases.
2. Who may bring action for annulment

The action for annulment may be instituted by all who are
thereby obliged principally or subsidiarily. It may be brought
by the following:
a. The guardian of the incapacitated person during the
latter’s incapacity.
b. The incapacitated person after he has attained capacity.
c. The party whose consent is vitiated by mistake, violence,
intimidation, undue influence or fraud
3. Effect of loss of thing while in the possession of the party who

has right to bring the action for annulment
a. If lost through his fault, the action for annulment is
extinguished, whether such party is incapacitated or his
consent is vitiated.
b. If lost without his fault and such party is incapacitated,
he can still bring an action for annulment. However, he
will be required to return the value of the thing and its
fruits and only up to the extent that he has been
benefited.
Ratification
is the adoption or affirmation a contract which is defective
Unenforceable Contracts
→ is one that cannot be enforced unless ratified.
The following are unenforceable contracts

1. Those entered into the name of another by one without
authority or legal representation, or who acted beyond his
powers;
2. Those that do not comply with the Statute of Frauds.
Statute of Frauds is a statute designed to prevent the commission

of fraud by requiring certain contracts to be in writing and to be
subscribed by the party charged.
The following contracts must be in writing, otherwise, they are

unenforceable.
a. An agreement that by its term is not to be performed within a
year from the making thereof:
b. A special promise to answer for the debt, default, or
miscarriage of another.
c. An agreement in consideration of marriage, other than
mutual promise to marry.
d. Sale of goods, chattels or things in action at a price not less
than P500.00
e. An agreement for the leasing of a real property or of an
interest for more than one year.
f. Sale of real property or an interest therein
g. A representation as to the credit of a third person.
How may an unenforceable contract under the Statute of Frauds

be ratified?
a. By failure to object to the presentation of oral evidence to
prove the contract; and
b. By acceptance of benefits under the contract.
Void or Inexistent Contracts

→ is one which has no force and effect from the very beginning,
as if it had never been entered into and which cannot be validated
either by time or ratification.
What are the classes of void contracts?

They are:
a. Inexistent contracts or those where a requisite or some of
the essential requisites of a contract are lacking or where the
formalities prescribed by law for validity are not complied
with; and
b. Illegal or Illicit contracts or those where the essential
requisites of a contract are present but the cause, object, or
purpose is contrary to law, morals, etc.

The following contracts are void from the very beginning:
a. Those whose cause, object or purpose is contrary to law,
morals, good customs, public order, or public policy.
b. Those which are absolutely simulated or fictitious.
c. Those whose object or cause did not exist at the time of the
transaction.
d. Those whose object is outside the commerce of men.
e. Those which contemplate an impossible service.
f. Those where the intention of the parties relative to the
principal object of the contract cannot be ascertained.
g. Those expressly prohibited or declared void by law.
Cases when recovery may be made despite the parties being in

pari delicto in illegal contracts
1. The payor may recover interest he paid in excess of the
interest allowed by usury laws together with interest from
the date of payment.
2. A party may recover, if public interest will be subserved,

money or property delivered for illegal purpose provided he
repudiates the contract before the purpose has been
accomplished or before any damage has been caused to a
third person.
An incapacitated person who is a party to an illegal contract

may recover, if the interest of justice so demands, money or
property delivered by him.
3. A person may recover, if public policy is thereby enhanced,

what he has paid or delivered. If the agreement is not illegal
per se but is merely prohibited and the prohibition by law is
designed for his protection.
4. Any person may recover any amount he has paid in excess of

the price fixed by law for any article or commodity.
5. A laborer may demand additional compensation for service

rendered beyond the maximum number of hours of labor in a
contract where he undertakes to work longer than the
maximum hour fixed.
6. A laborer may recover the deficiency in a contract where he

accepts a wage lower than the minimum wage set by law.
Rule when contract is divisible or indivisible and there are illegal

terms
1. If divisible – the legal terms may be enforced; the illegal
terms are void, hence, they may not be enforced.
2. If indivisible – the whole is void; hence no part thereof may
be enforced.
FORM OF CONTRACTS
Obligatory force of contracts in whatever form, exceptions
State the rules governing the form of contracts

(1) General Rule – A contract shall be obligatory or binding in
whatever form it may have been entered into provided all the
essential requisites (consent, object and cause and in certain
specified contracts, delivery or form) for its validity are
present
(2) Exceptions – In the following cases, the form of the contract
is essential:
(a)when the law requires that the contract be in some form
to be valid
(b)when the law requires that a contract be in some form to
be enforceable or proved in a certain way; and
(c)when the law requires that a contract be in a certain form
for the convenience of the parties.
A public instrument
is one which is sworn to before a notary public or other officer
authorized to administer oaths.
REFORMATION OF INSTRUMENTS
→is a remedy in equity by means of which a written instrument is
made or construed so as to express or conform to the real
intention of the parties when some error or mistake has been
committed.
Who may ask for reformation

1. If the mistake was mutual – by either party, or his successors
in interest, such as his heirs or assigns.
2. In other cases – the injured party, or his heirs or assigns.
When reformation is not available

1. In case of the following:
a. Simple donations inter vivos wherein no condition is
imposed.
b. Wills
c. When the real agreement is void.
2. When one of the parties has brought an action to enforce the

contract, he cannot subsequently ask for its reformation.
INTERPRETATION OF CONTRACTS
→is the determination of the meaning of the terms or words used
by the parties in the contract.
Rules on interpretation of contracts

1. If the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of
the stipulations shall control.
2. If the words appear to be contrary to the evident intention of
the parties, the latter shall prevail over the former
3. However, general the terms of a contract may be, they shall
not be understood to comprehend things that are distinct
and cases that are different from those upon which the
parties intended to agree
4. If the stipuation of any contract should admit of several
meanings, it shall be understood as bearing that import which
is most adequate to render it effectual.
5. The various stipulations of a contract shall be interpreted
together, although attributing to the doubtful ones that sense
which may result from all of them taken jointly.
6. Words which may have different significations shall be
understood in that which is most keeping with the nature and
object of the contract.
7. The usage or custom of the place shall be borne in minds in
the interpretation of the ambiguities of a contract, and shall
fill the omission of stipulations which are ordinarily
established.
8. The interpretation of obscure words or stipulations in a
contract shall not favor a party who caused the obscurity

Rules when it is absolutely impossible to settle doubts under the
preceding rules
1. When the doubts refer to the incidental circumstances of a
gratuitous contract, the least transmission of rights and
interests shall prevail.
2. If the contract is onerous, the doubt shall be settled in favor
of the greatest reciprocity of interests
3. If the doubts are cast upon the principal object of the
contract in such a way that it cannot be known what may
have been the intention or will of the parties, the contract
shall be null and void.
MULTIPLE CHOICE QUESTIONS

1. Essential Requisites of a contract:
A. Consent C. subject
B. Cause D. all of them
2. Raymoon makes an offer to Andrew on January 10, 2014. Andrew

makes known his acceptance in a letter sent January 12, 2014 and
received by Raymoon on January 20, 2014. Meantime, on January
15, 2014, Raymoon became insolvent.
A. There is already a meeting of minds, the contract is
perfected.
B. The contract is voidable because one party is insolvent.
C. The contract is void the offer being ineffective.
D. The contract is voidable because one party is incapacitated.
3. Based on the same facts, except S is not insane but only a minor
at the time the acceptance is communicated to him.
A. The contract is binding between the parties.
B. There is no meeting of minds between the parties, therefore
void.
C. The contract is not binding because the party is incapacitated.
D. The contract is unenforceable.
4. A forced B to sell him his ring. B sued for annulment, but A had
already lost the ring thru fortuitous event. Is A liable for the loss?
A. A is not liable because the loss was without his fault.
B. A is liable to pay damages if he cannot replace the ring.
C. A is not liable because no one shall be responsible for the loss
of a thing due to fortuitous event.
D. A is liable for the loss even if it was due to fortuitous event
because of his bad faith.
5. Element without which there cannot be a contract is:

A. natural element C. essential
element
B. accidental element D. all of the above
6. When the contract lacks one of the essential elements, the

contract is:
A. Voidable C. void
B. Rescissible D. all of the above
7. Although contracts bind only contracting parties, their assigns and

heirs, in the following instances, third persons are bound thereby:
A. in case of stipulation pour autrui
B. in contracts creating real rights
C. in contracts intended to defraud the creditors
D. all of the above
8. A qualified acceptance constitutes:

A. counter offer
B. an absolute acceptance
C. a meeting of the minds between the parties
D. all of the above
9. The essential or impelling reason why the parties enter into a
contract:
A. Motive C. cause
B. Profit D. all of the above
10. The statement of a false cause in contracts shall render the

contracts:
A. Voidable C. unenforceable
B. Void D. rescissible
11. Business advertisements of the things for sale are:

A. definite offer C. invitation to
make an offer
B. counter offer D. acceptance of
the offer

12. A contract wherein both contracting parties are incapable of
giving consent and yet ratified by the guardian of either of the
parties is:
A. Voidable C. unenforceable
B. Rescissible D. void
13. These persons are bound by contracts except:

A. Assigns C. third persons
B. Heirs D. parties
14. Liable for the loss of the subject matter by fortuitous event
A. Creditor C. both creditor
and debtor
B. Debtor D. none of the
above
15. Valid, binding and enforceable until annulled

A. rescissible contract C. void ab initio
contract
B. voidable contract D. validable
contract
16. Which of the following contract is voidable?

A. Those where one of the parties is incapacitated.
B. Those whose object is outside the commerce of men.
C. Those which are absolutely fictitious.
D. Those which contemplate an impossible service.
17. Three of the following are void contracts. Which is the exception?
A. contracts where the cause is immoral.
B. contracts to prevent a known supporter of a political rival
from voting for his candidate for a valuable consideration.
C. contracts with valid consideration but with unlawful motives.
D. absolutely simulated contracts.
18. S orally leased to R his parcel of land for a term of two years. The
contract is:
A. rescissible
B. voidable
C. unenforceable
D. void

19. Contracts take effect only to the parties, their assigns and heirs
except where the rights and obligations arising therefrom:
A. Is not transmissible by their nature.
B. Is not transmissible by stipulation of the parties.
C. Is not transmissible by provision of law.
D. All of the above
20. Where damages is caused to either of the contracting parties or

to a third person, the contract may be:
A. Rescinded C. reformed
B. annulled D. ratified
21. An offer becomes ineffective if, before acceptance is conveyed,

either parties become:
A. civilly interdicted C. insolvent
B. insane D. all the above
22. Contracts entered into in a state of drunkenness or during

hypnotic spell is:
A. Void C. unenforceable
B. Voidable D. rescissible
23. If mistake, fraud or accident has prevented a meeting of the

minds of the parties, the proper remedy is:
A. Reformation C. annulment
B. Rescission D. resolution
24. The following is an example of a real contract:

A. contract of pledge C. contract of
commodatum
B. contract of deposit D. all of the above
25. A orally leased to B his car for a term of 2 years. B has not taken
possession of the car and A has not received any rental. The
contract is:
A. valid and binding C. rescissible
B. unenforceable D. voidable
26. Based on the preceding number, if the object were a house, the
contract shall be:
A. valid and binding C. unenforceable
B. rescissible D. voidable
27. If the object were a parcel of land, the contract is:

A. valid and binding C. unenforceable
B. rescissible D. voidable
28. Statement no. 1 – As a rule, contracts take effect only between

the parties.
Statement no. 2 – Mere incidental benefit of the third person is
enough for stipulation pour autri to exist provided he accepts the
same.
A. Both statements are true
B. first statement is true, while the second statement is false
C. first statement is false, while the second statement is true
D. Both statements are false
29. These are principles in contracts. Which is not?

A. binding on third persons
B. freedom or autonomy of contracts
C. relativity of contracts
D. perfection by mere consent
30. The action to annul a voidable contract is extinguished by:

A. novation
B. ratification
C. rescission
D. estoppel
31. Which of the following contracts must be in writing to be

enforceable?
A. Acts and contracts for the creation, transmission,
modification, extinguishments of real rights.
B. The cession, repudiation, renunciation of heredity rights.
C. Contract of partnership
D. Contract of guaranty
32. A without authority from B sold the latter’s car in the name of the
latter. The contract is therefore:
A. rescissible
B. voidable
C. unenforceable
D. void

33. Because A wants to sell his land to B but the latter does not want
to buy the same, A forced B to buy his land. The contract is:
A. not binding upon B since his consent was vitiated
B. valid, binding and enforceable
C. unenforceable as against B but not against A
D. may be ratified expressly and tacitly by A
34. D borrowed a sum of money from C with a certain rate of interest.

C now wants to increase the rate of interest without the consent
of D. What principle in contracts prohibits C from doing so?
A. autonomy of contracts
B. relativity of contracts
C. mutuality of contracts
D. obligatory force and compliance in good faith
35. The following are attributes of a voidable contract. Which is not?

A. It is binding, valid and enforceable before annulment.
B. Damage is material to be voidable contract.
C. It can be ratified and ratification has retroactive effect.
D. The capacitated cannot allege the incapacity of the other
party.
36. Which of the following can be considered as a feature of a void
contract?
A. subject to ratification
B. novation cannot apply
C. it exists
D. action or defense of nullity is subject to prescription
37. S offers to sell his house to B for P100,000. B asks him if he would
accept P80,000. Which of the following is correct?
A. Because of ambiguity, both offers are terminated by
operation of law.
B. B’s response is a mere inquiry, theP100,000 offer by S is still
there.
C. B’s response is a counter-offer effectively terminating the
P100,000 offer and instigating an offer for P80,000.
D. B’s response is a rejection of the P100,000 offer, and there is
no offer for P80,000 because it is too indefinite to be an offer.
38. Which of the following is not valid?

A. Mutual promise to marry entered into orally.
B. Sale of immovable property orally entered into.
C. The stipulation is void because it is contrary to public policy.
D. One of the parties in a contract is incapable of giving consent.
39. An agreement in restraint of trade or establishing monopoly is:

A. perfectly valid
B. voidable
C. void
D. unenforceable
40. One of the stipulations contained in the contract between M

Company and its employees is that the company shall pay a bonus
to employees of the company who shall continue its employment
for at least 2 consecutive years, unless he quits or is discharged
before the expiration of the period of 2 years. X, an employee of
the company was discharged without just cause, just one week
before the completion of the two-year period.
A. X is not entitled to the bonus because his discharge was in
accordance with the contract.
B. X is not entitled to the bonus because the employer’s right to
terminate is superior than the right of the employee to be
employed.
C. X is entitled to the bonus whether the discharge is with or
without cause.
D. X is entitled to the bonus because the debtor company has
voluntarily prevented the happening of the condition.
41. Statement no. 1 – Dolo incidente entitles the person against

whom it was employed the right to seek the annulment of the
contract.
Statement no. 2 – A stipulation pour autrui is an exception to the
rule on relativity of contracts
A. both are true
B. no.1 is false; no.2 is true
C. both are false
D. no.1 is true; no.2 is false
42. Example no 1: S sold to B in a private instrument his land. Later, B
wanted to have the sale registered but registration requires a
public instrument; In here, B may compel S to execute the needed
public instrument.
Example no. 2: S sold to B orally his land. After B paid S he wants
to register the in his name but he needed a public instrument of

sale. In here, B may compel S to execute the needed public
instrument.
A. Both examples are false
B. Both examples are true
C. Only the first is true
D. Only the second is true
43. Must be in writing to be enforceable:

A. Lease of land for 12 months
B. Lease of car for 18 months
C. Both a and b
D. None of a and b
44. Which of the following is not presumed to be legal subrogation?

A. When a creditor pays another creditor who is preferred
B. When a third person, not interested in obligation, pays with
the approval of the debtor.
C. When a third person interested in the obligation pays even
without the approval of the debtor.
D. None of them
45. Statute of Frauds is applicable to

A. contract not to be performed within a year from the making
thereof
B. executed contract
C. oral contract of loan
D. mutual promise to marry
46. Which of the following contracts is voidable?

A. Those where both parties are incapable of giving consent to a
contract.
B. Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
C. Those undertaken in Fraud of creditors when the latter
cannot in any manner collect the claims due them.
D. Those whose object is outside the commerce of men.
47. A verbal agreement was made between A and B whereby A

agreed to sell and B agreed to buy A’s farm for P100, 000.00. The
price was paid. Possession was not given nor the deed delivered.
Both being refused. The contract is:
A. rescissible
B. voidable
C. unenforceable
D. void
48. A was forced by B to sign a contract. C a creditor of A wants to
annul the contract. Is C allowed by law to do so?
A. No, because a third person cannot assail a contract.
B. Yes, because the contract is voidable and C is damaged.
C. Yes, a third person can annul a rescissible contract.
D. No, because a third person cannot assail a voidable contract.
49. A loan for P800 was orally contracted. May the lender recover the
sum lent?
A. No, because the contract is unenforceable.
B. Yes, because the contract is enforceable.
C. No, because the contract must be in writing to be valid.
D. Yes, if the debtor ratifies the loan.
50. Is a remedy in equity by means of which a written instrument is

made or constructed so as to express or conform to the real
intention of the parties when some error or mistake has been
committed?
A. ratification
B. resolution
C. reformation
D. all of the above
51. S and M agreed in print that S, debtor for P30,000, will work as a
servant of M without pay until she could find money with which
to pay her debt. S failed to comply with her obligation, Under this
premise, which of the following statement is correct?
A. The agreement to work as a servant is void because it is
immoral.
B. The contract to work without pay as a servant until the debt
is paid is void.
C. To act as a servant without pay is unconstitutional because
this is equivalent to involuntary servitude.
D. The agreement to work without pay since written is
enforceable.
52. In an “invitation” to bid, B proposes the following:

“I will buy the property for P100,000 and if the bid of any other
offeror shall be considered the best in terms of amount and
conditions, I will to equal that offer”
A. The offer is speculative, because it cannot be considered as
against another offer which is certain.
B. The offer is considered a counter offer.
C. This is a continuing offer which is very certain.
D. The advertiser is not bound to accept the highest bidder.
53. The span of time wherein a person is in possession, temporarily,

of all his mental faculties:
A. option period
B. prescriptive period
C. lucid interval
D. reglementary period
54. The following contracts are valid:
A. rescissible
B. annullable
C. unenforceable
D. all of the above
55. A and B mutually promised to marry each other. The promise

being verbal and without witnesses to the promise. A did not
marry B. B is now suing A for damages. Decide.
A. The contract is unenforceable hence A is not liable.
B. The contract is unenforceable because mutual promise to
marry is covered by the Statute of Frauds.
C. A may be liable for damages because mutual promise to
marry is not covered by Statute of Frauds.
D. A is liable for damages even if the contract is unenforceable.
56. A, a minor sold to B a parcel of land registered in his name

misrepresenting to the latter that he is of legal age. Having been
mislead as to the true age of A, B entered into the contract. Is the
contract voidable?
A. It is voidable because the seller is a person incapable of giving
consent to the contract being a minor.
B. It is voidable because of mistake on the part of B when he
thought that A was of legal age.
C. It is not voidable because of the fraud committed by the
minor seller and the buyer being in good faith.

D. It is not voidable, but rather void because of lack of consent
of A, who is only a minor being in good faith.
57. X alleged that Y promised to give him one hectare of land. This is
in consideration of X’s meritorious services to Y. Y pleads in
defense that since the promise was not in writing, it is
unenforceable under the Statute of Frauds. Decide.
A. The promise is unenforceable because it is not in writing.
B. The Statute of Frauds is inapplicable here, because the
promise to give the land is not a sale of real property.
C. The Statute of Frauds is applicable because A has rendered
services.
D. The Statute of Frauds can apply to partially executed
contract.
58. Which of the following instruments is not subject to reformation?

A. simple donations inter vivos wherein no condition is imposed.
B. Wills
C. When agreement is void
D. All of the above
59. Three of the following contracts are void. Which is the exception?
A. Those whose cause, object or purpose is contrary to law,
morals, good custom, public order or public policy.
B. Those where both parties are incapable of giving consent to a
contract.
C. Those which are absolutely simulated or fictitious.
D. Those whose cause or object did not exist at the time of the
transaction.
60. S owns an oil painting. Being in need of money, S sold the painting
to B for P1, 000. After the sale it was discovered that the painting
was valuable and worth P5,000.
A. S may rescind the contract due to lesion or inadequacy of
cause.
B. S may annul the contract because of fraud.
C. B is entitled to the benefit of the contract because it is valid
and binding.
D. S may annul the contract on the ground of error.
61. D forced C to execute a promissory note

A. Contract is rescissible because the contract is fraudulent.

B. The contract is void.
C. Contract remains to be valid.
D. C cannot demand payment from D because the contract is
unenforceable.
62. A made a donation to B. Later, A contracted several debts. What A

has left as assets are much less than his present liabilities. May
the donation be rescinded?
A. No, because the debts were incurred after the donation has
been made.
B. No, if A gave guaranty or security for his debts.
C. Yes, because the donation is rescissible being in fraud of
creditors.
D. Yes, because A has become insolvent after the donation.
63. A, a director of X corporation, through an agent bought the shares

of stocks of another stockholder without revealing to the seller
stockholder that negotiations were in progress to enhance the
value of the shares. The sale is defective contract being:
A. Void, because of fraud committed by A against the other
stockholder.
B. Voidable due to the fraud, concealment by A against a fellow
stockholder.
C. Voidable because of mistake on the part of the seller
stockholder.
D. Rescissible because of the damage suffered by the seller.
64. Statement no. 1 – If the cause is not stated in the contract it is

presumed that it is unlawful.
Statement no. 2 – The action for rescission is subsidiary it cannot
be instituted except when there is no other legal means to obtain
reparation for damages suffered.
A. only the first is false
B. both statements are true
C. both are false
D. only the first is true
65. To defraud his creditor, A sold his house to X. When however the
creditor wanted to collect his credit, somebody lent A enough
money. Is the sale rescissible?
A. Yes, because it was entered into in fraud of creditors.
B. No, because the creditor can collect the credit due him.
C. No, because the debtor has become in good faith when he
was lent enough money to pay his debts.
D. Yes, because the debtor was in bad faith when he sold the
house to X.
66. A and B entered into an oral sale of the former’s car for P 1M
which amount has been credited to his bank account although the
car has not yet been delivered to the latter. Can B compel A to
execute the deed of sale of the car?
A. No, because the sale is unenforceable.
B. Yes, if A used the money paid to him.
C. No, because the sale is void.
D. Yes, because it is enforceable.
67. L entered into a contract of mortgage with X. T, the clerk of L

typed the document. Due to T’s negligence, the document made
was that of sale instead of mortgage.
A. The remedy is annulment.
B. Reformation of instrument is proper.
C. Parties may go to court for interpretation.
D. Parties may enforce their right because it is enforceable.
68. Without authority from A, B sold in B’s name the land of A to X

who was in good faith. The contract is:
A. valid sale provided B is the owner upon delivery.
B. void because B was not the owner at the time of the
perfection of the sale
C. unenforceable because B had no authority to sell A’s land
D. voidable because of the fraud committed by B against A
69. Based on the preceding no., if the sale in A’s name the contract is:
A. void, because B was not the owner at the time of the
perfection of the sale
B. voidable because of the fraud committed by B against A
C. unenforceable because B had no authority to sell A’s land
D. valid sale provided B is the owner upon delivery
70. A sold to B a genuine bottle of Fundador brandy. However, upon

delivery the former substituted a fake. B now wants to annul the
sale. Decide.
A. The contract is void ab initio therefore, it can be annulled.
B. The contract can be annulled since it is voidable due to fraud.
C. There is dolo incidente therefore, it can be annulled.

D. The contract cannot be annulled because it is only incidental
fraud.
71. Statement no. 1 – Just like voidable and unenforceable contracts,

rescissible contracts may also be ratified.
Statement no. 2 – In case of fraud or mistake, the action for
annulment must be made within four years from the commission
of the vice of consent.
A. Both statements are true.
B. Both statements are false.
C. First statement is true, while the second is false.
D. First statement is false, while the second is true.
72. Example no 1: Guardian of W, sold W’s house valued at P50,000

for P37,500 or a lesion by ¼ of the value
Example no. 2: S sold his house valued at P50,000 for only
P10,000 because S did not know the true value of the house.
A. Both contracts are rescissible
B. Both contracts are valid and enforceable
C. Only No. 1 is rescissible
D. No. 2 is voidable because there is an error
73. Three of the following are rescissible, which is not?

A. Sale of property under litigation made by defendant without
the consent of plaintiff or authority of the court.
B. Contract of sale and the price is unusually inadequate
resulting to lesion.
C. Those made to defraud creditors when the latter have no
other means to recover their claims.
D. Those agreed upon in representation of absentees, if the
absentee suffers lesion by more than ¼ of the value of the
property subject of the contract.
74. Statement no. 1 – Contracts take effect not only between the
parties but also their heirs and assigns and the heir is liable
beyond the value of the property he received from the decedent.
Statement no. 2 – In stipulation pour autrui, the third person must
communicate his acceptance or the stipulation before its
revocation.
A. Both statements are correct.
B. Both statements are incorrect.
C. First statement is correct, while the second is incorrect.
D. First statement is incorrect, while the second is correct.
75. S sold his parcel of land only for Php 1M although the value of the
same is Php 2M. He thus suffered a damage or lesion in the sale
due to the inadequacy of the price. Therefore, the contract is:
A. voidable
B. unenforceable
C. not defective
D. rescissible
76. A sent B a letter wherein the former offered to sell his car to the
latter for Php 1M. B signed to show intention that he may buy the
same. In A’s letter, he gave B two weeks to raise the amount.
After one week, A raised the price to Php 1.5M. Can B compel A to
accept the Php 1M first offered by A and deliver him the car?
A. No, because there was no acceptance yet of the offer.
B. Yes since, there was already offer and acceptance.
C. Yes, because A cannot change his offer without the consent
of B.
D. Yes, because A cannot withdraw the offer within two weeks
as he is under estoppel.
77. A contract where consent is given through mistake, violence or

intimidation is:
A. void
B. unenforceable
C. rescissible
D. none of the above
78. A threatened to kill B if the latter would not marry the former’s
daughter who was pregnant with B’s child. Intimidated, B married
A’s daughter against his will.
A. The contract is not voidable because the threat was made by
a third person not by one of the parties.
B. Voidable is the contract due to intimidation even if employed
by a third person.
C. The contract is not voidable because the claim for marriage is
just or legal and therefore consent is not vitiated.
D. The contract is not voidable since B has to answer for it is his
fault that A’s daughter became pregnant.

79. X, after the death of his father, sold his inheritance though its
amount has not yet been determined to B, for a consideration of
P50,000.
A. The contract is valid only if the inheritance valued at least
equal or more than P50,000.
B. The contract is void if nothing remains of the inheritance to
be turned over to B.
C. The contract is rescissible.
D. Contract is void, future inheritance cannot be the object of
sale.
80. The following are attributes of a rescissible contract, except:

A. It is valid until rescinded.
B. It is a principal remedy of the creditor to collect his credit.
C. Damage or lesion is absolutely material.
D. Third person whose interest is affected may ask for
rescission.
81. B company bought out a competitor, C Corporation, with a

stipulation that C Corporation should not thereafter engage in any
business in the Philippines unless consented to and approved by B
Company.
A. The stipulation is defective subject to ratification.
B. The stipulation is valid because the parties are free to enter
into any stipulation, terms and conditions such as this one.
C. The stipulation is unenforceable as there was no showing that
the sale was done in writing.
D. The stipulation is void because it is contrary to public policy.
82. Which of the following contracts is not void ab intio?

A. Those whose object is outside the commerce of men.
B. Those undertaken in fraud of creditors.
C. Those whose object did not exist at the time of transaction.
D. Those which contemplate an impossible service.
83. In a contract of sale executed by S and B, it appears S sold his

motor vehicle to B for P50,000. It turned out however, S has three
motor vehicles. Gallant valued P80,000, Hi-Ace Van valued
P70,000. and a jeep valued at P60,000. Which of the following is
correct?
A. The contract shall be reformed because there was mistake.

B. The parties can ask for interpretation because the word
motor vehicle is ambiguous.
C. There is no contract.
D. The parties can ask for annulment of the contract.
84. S sold to B a fake 2013 model Lebron James pair of shoes on

February 3, 2013. On March 10, 2014, B discovered that the shoes
he bought from A was an imitation. The law provides that he can
annul the sale as a voidable contract within four years.
Prescription starts from:
A. February 3, 2013 when the sale was perfected.
B. March 10, 2014 when the fraud was discovered.
C. The time of delivery of the shoes to B.
D. The time they first talked about the sale of the shoes.
85. In order that a stipulation in favor of a third person would be valid

and binding upon the parties thereto, the following are requisites;
except:
A. There must be a stipulation in favor of a third person.
B. That there must be an existing agency between either of the
contracting parties and the third person.
C. The contracting parties must have clearly and deliberately
conferred a favor upon that third person.
D. The third person communicated his acceptance to the obligor
before its revocation.
86. In three of the following the contract is cleansed of its defect by

ratification. Which is not so ratified?
A. Contract entered into by a person incapable of giving
consent.
B. Sale of chattels orally entered into for a price not less than
five hundred pesos.
C. Contract where the creditor was damaged by the act of the
debtor who intended to defraud him.
D. Lease of real property for more than one year orally entered
into.
87. If the doubts are cast upon the principal object of the contract in
such a way that it cannot be known what may have been the
intention or will of the parties. The contract shall be:
A. voidable due to lack of meeting of minds
B. interpreted for there is doubt

C. reformed to express the true intention of the parties.
D. Void
88. An offer made through an agent is accepted from the time

acceptance is communicated to:
A. both the principal and the agent
B. the principal
C. the agent
D. the household member of the family
89. A and B entered into a contract of mortgage. However, as written
the document states it is a contract of sale with right of
repurchase, the error due to the fault of the clerk/typist. Hence:
A. The contract of sale must be annulled since it is voidable.
B. The instrument has to be enforced as it is the proof of the
agreement between the parties.
C. Because of the negligence of the parties in signing without
first reading the instrument, they are bound by the contents
of the same.
D. The instrument may be reformed because it does not express
the true agreement of the parties.
90. Raymundo, bachelor Certified Public Accountant, inflicted physical

injuries to Bibi Gandang Reyna. Upon learning this, Juan Reyna,
the father of Bibi Gandang Reyna, was able to force Raymundo to
marry her under pain of being sued in the Professional Regulation
Commission for revocation of his license. Which statement is
correct?
A. There was no defect, the marriage was perfectly valid.
B. The marriage may be annulled on the ground of force or
violence.
C. The marriage may be annulled on the ground of threat and
intimidation.
D. The defective marriage may, however, be ratified.
91. G was appointed guardian of S, the latter being 17 and ¾ years

old. S sold his parcel of land in writing to B valued at P100,000 for
P65,000 suffering lesion by more than ¼ of the value. What is the
status of the contract?
A. voidable
B. rescissible
C. unenforceable
D. void
92. A and B agreed on June 3, 2012 that B will construct the house of
A on March 2014. The contract was orally entered into. B received
a down payment from A with the balance payable after
completion of the house. The contract is:
A. Voidable because it is not in public instrument
B. Unenforceable because it is not in writing and yet
performance there is after one year from perfection.
C. Enforceable even if not in writing, having been ratified.
D. Void because it is not in writing as required by law.
93. Contract which cannot be sued upon unless ratified, thus as if

they have no effect yet:
A. voidable
B. rescissible
C. unenforceable
D. void
94. A orally sold to B his house at 16 Kiko St, Malate, Manila. In the
written deed of sale, both forgot the true number of the house
and instead wrote on the contract, “18 Kiko St, Malate, Manila”.
The remedy shall be:
A. Annulment of a voidable contract because of mutual mistake.
B. Reformation of instrument because of mutual error.
C. Reformation if instrument because of lack of meeting of
minds.
D. Declaration of nullity of the contract because of the
uncertainty of the intention as to the object.
95. Which of the following is correct?

A. An action to enforce judicially a natural obligation prescribes
in 4 years.
B. An action for annulment is imprescriptible.
C. An action to declare a contract void is not subject to
prescription.
D. An action for rescission of contract prescribes in five years
counted from the execution of the contract.
96. Statement no. 1 – If one party was mistaken and the other acted
fraudulently or inequitably in such a way that the instrument does
not state their true intention, the former may ask for the
annulment of the instrument.
Statement no. 2 – The statement of a false cause in contracts shall
render them void if it should not be proven that they were
founded upon another cause which is true and lawful.
A. no. 1 is false; no. 2 is true
B. both are true
C. both are false
D. no. 1 is true; no. 2 is false
97. Statement no. 1 – A threatened B with an administrative charge

for immorality if the latter does not marry her because she is
already pregnant with their child. Fearing that she may do so, B
married her. The contract of marriage is therefore voidable
because of threat.
Statement no. 2 –A simple mistake of account may give rise to the
annulment of the contract because of mistake.
A. Both statements are false.
B. Both statements are true.
C. First statement is false, while the second is true.
D. First statement is true, while the second is false.
98. G was appointed as the guardian of M who owns a parcel of land

valued at Php 1M. M sold the land only for Php 0.7M to B. The
contract was defective because:
A. unenforceable
B. rescissible
C. voidable
D. void
99. A sold a parcel of land to B by word of mouth and delivered to the

latter the Transfer Certificate of Title of the land. Can B compel A
to execute the deed of sale of the land?
A. B cannot compel A to execute the deed of sale being oral is
unenforceable.
B. B cannot compel A, because the sale is void being oral.
C. B can compel A, because the sale is merely voidable and
therefore binding until annulled.
D. B can compel A, because the contract is enforceable due to
the delivery of the TCT to him.
100. Three of the following contracts must be in writing to be valid.
Which is the exception?
A. Contract of partnership where immovables are contributed.

B. Contract where the amount involved exceeds five hundred
pesos.
C. Contract of agency to sell the land of the principal.
D. Negotiable instruments.
101. A contract entered into in the name of another by one who has no
authority or legal representation is:
A. void
B. unenforceable
C. rescissible
D. annullable
102. To defraud his creditors, A sold his real property to B. B now seeks
to register the sale. X, a creditor seeks to prevent the registration
on the ground that it is a rescissible contract. Despite X’s
objection may the land be registered in B’s name?
A. No, because the contract is rescissible and therefore without
effect.
B. Yes, because the contract although rescissible is valid, binding
and enforceable before rescission.
C. No, because the sale is void and after annulment is not
binding.
D. Yes because the contract although voidable is valid and
binding.
103. In three of the following defective contracts, ratification cleanses

the defect. Which is the exception?
A. both parties are incapable of giving consent
B. sale of immovable property or interest therein orally entered
into.
C. contracts is void the offer being ineffective.
D. sale of a piece of land thru an agent and the authority is oral.
104. S sold to B his parcel of land worth one million pesos for only half
a million pesos. After the sale and realizing his damage, S is now
seeking to set aside the sale. Decide:
A. The contract is voidable because of mistake of the seller.
B. The sale is valid, binding and enforceable because as a rule,
lesion or inadequacy of cause or price in a sale does not
invalidate a contract.
C. It is rescissible because of the lesion or damage suffered by S.

D. S has the right for an increase in the price to prevent unjust
enrichment on the part of B.
105. A sold in writing to B his stereo set for Php 600.00. There is no
delivery from A and no payment of the price from B. Contract is:
A. enforceable
B. voidable
C. unenforceable
D. void
106. A being the eldest, sold the minor sister’s parcel of land in the
name of the latter and by virtue thereof, the latter was able to
finish high school. The contract is:
A. void
B. unenforceable
C. rescissible
D. voidable
107. When his father died but before the delivery of the property to
him, a son sold his share of the property inherited. Is sale valid?
A. No, because future inheritance cannot be sold.
B. Yes, because future inheritance can be object of the contract.
C. No, because the son was not the owner due to lack of
delivery to him.
D. Yes, because what has been sold is present inheritance.
108. A and B agreed on a contract of pledge. However, they entered

into a contract of mortgage in the honest belief that the mortgage
and pledge are the same. May the instrument be reformed:
A. No, the document cannot be reformed since the contract is
void.
B. No, it cannot be reformed because there was no meeting of
minds between the parties and the remedy is annulment of
contract.
C. No, it cannot be changed. They are bound by the document
which speaks for itself.
D. Yes, it can be reformed because it does not express the true
agreement of the parties.
109. Statement no. 1 – In case of doubt, a contract purporting to be

sale shall be construed as mortgage.

Statement no. 2 – In annulment of contracts, there shall always be
mutual restitution of both parties thereof.
A. First statement is false, while the second is true.
B. First statement is true, while the second is false.
C. Both statements are false.
D. Both statements are true.
110. Which one of the following constitutes fraud?

A. Failure to disclose facts when there is a duty to reveal them
as when the parties are bounded by confidential reasons.
B. Misrepresentation made not in bad faith.
C. Misrepresentation by a third person and both parties were
mistaken.
D. Usual exaggeration in trade or dealer’s / sale’s talk.
111. A - In case of divisible contract, if the illegal terms can be

separated from the legal ones, that the latter can be enforced.
B – The defense of illegality of contracts is available to third
persons whose interests are directly affected.
A. both are true
B. both are false
C. first is false
D. second is false
112. The act by mean by virtue of which efficacy is given to a contract,
which suffers from a vice of curable nullity.
A. resolution
B. rescission
C. ratification
D. all of the above
113. D borrowed a sum of money from C with G as guarantor. The loan

is in writing but the guaranty is oral. D failed to pay C. Who now is
demanding payment from G? Can G be compelled to pay?
A. Yes, because he is the guarantor obliged to pay in case the
debtor defaults.
B. No, because the guaranty is void having been orally made.
C. No, because the guaranty is unenforceable against G, it being
oral.
D. Yes, because the guaranty is enforceable, writing not needed.
114. Which of the following contracts is valid?

A. Oral contract of agency giving authority to an agent to sell the
land of the principal.
B. Oral partnership agreement where immovables are
contributed.
C. Oral agreement to answer all the expenses for the wedding
reception if A marries B.
D. Oral contract of sale of an immovable entered into by an
agent who was given oral authority by the principal.
115. A made a donation to B. Later, A contracted several debts. What A

has left as assets are much less than his present liabilities. May
the donation be rescinded?
A. Yes, because the donation is rescissible being in fraud of
creditors.
B. No, if A gave guaranty or security for his debts.
C. Yes, because A has become insolvent after the donation.
D. No, because the debts were incurred after the donation has
been made.
116. A gave B one million pesos for the latter to kill C. Before B could
accomplish his criminal intent to kill C, A changed his mind and
demanded the return of the money from B. Decide:
A. A cannot recover the payment he made to B because it was a
void contract which does not allow recovery by the guilty
party.
B. A cannot recover the money because the contract is
unenforceable.
C. No recovery and both A and B will be prosecuted for their
crime.
D. A can recover the money although the contract is void since
the crime was not committed.
117. Statement no. 1 – If the cause is not stated in the contract it is

presumed that it does not exist and therefore the contract is void.
Statement no. 2 – In order that a contract may be voidable, there
must be damage.
B. Both statements are false.
C. First statement is false, while the second is true.
D. First statement is true, while the second is false.

118. D owes C P500. However, C’s right has already prescribed.
Notwithstanding the knowledge of this fact, D paid the amount.
Realizing this mistake D wants to recover the amount he paid.
A. D can recover on the ground of mistake
B. D cannot recover
C. D can recover because his obligation is not enforceable
D. D can recover otherwise C will be enriched at the expense of
D
119. Which of the following contracts is not rescissible?

A. Those which are entered into by guardians whenever the
wards whom they represent suffer a lesion of more than ¼ of
the value of the object of the contract.
B. Those where one of the parties is incapable of giving consent
to a contract.
C. Those executed in representation of an absentee, if the latter
suffer a lesion more than ¼ of the value of the object of the
contract.
D. Those undertaken in fraud of creditors when the latter
cannot in any other manner collects the claims due them.
120. A appointed B to sell his land:

Statement no. 1 – If the authority of B is oral and the sale is in
public instrument, the sale is void.
Statement no. 2 – If the authority of B is in writing and the sale is
oral, the contract is unenforceable.
B. First statement is false, while the second is true.
C. First statement is true, while the second is false.
D. Both statements are false.
121. A offered T-rex toy cars to B for P1, 000 each. B answered by
letter that he was willing to purchase not 20 but 30 pieces at said
price of P1, 000 each. Is the contract perfected?
A. Yes, there is perfected sale because the number of pieces is
only incidental matter in the sale.
B. Yes, because the letter of acceptance was already sent by the
offeree.
C. No, because there is no offer yet of A that is certain.
D. No, because there is qualified acceptance which constitutes
an offer by the buyer.

122. D, fearing that his creditor C would go after his only parcel of land
to satisfy his claim for payment of D’s debt, sold his land to X who
did not know of D’s intention. Decide.
A. C can ask for annulment of the sale as this is a voidable
contract.
B. C cannot as ask for the rescission of the sale.
C. C may ask for damages against S since he was damaged by
the sale.
D. C can file an action for rescission of the sale.
123. X is a former government employee, suffered from severe

paranoia and was confined in the mental hospital in 2000. After
his release, he was placed under the guardianship of his wife to
enable him to get his retirement pay. In 2004, he became a
mining prospector and sold some mining claims. In 2006, he
wants to annul the sale claiming that he was not mentally
capacitated at the time of sale. The sale in question was:
A. rescissible
B. void
C. voidable
D. valid
124. S was intimidated by B to sell to the latter his parcel of land at a

very low price. C, the creditor of S was thus damaged since the
former has no other means of collecting from S. The remedy of S
is
A. rescission
B. have it declared by the Court as void
C. annulment
D. reformation of the contract
125. Statement no. 1 – In voidable contracts, there is no need to ratify

the same before they can be considered valid. In unenforceable
contracts, however ratification is mandatory before they can be
considered enforceable.
Statement no. 2 – “There is undue influence if insidious words or
machinations was employed by a party on the other just to obtain
the latter’s consent, without which the latter would not have
entered into the contract.
A. both are true
B. both are false
C. no. 1 is true; no. 2 is false
D. no. 1 is false; no. 2 is true
126. S orally sold to B a parcel of land for which the latter paid P 1M. B
now wants to register the sale so that he can have a Transfer
Certificate of Title in his name. Decide.
A. S cannot be compelled to execute the public document of
sale because the sale is unenforceable.
B. The sale is void and therefore cannot be registered.
C. S cannot be compelled to execute the public document of
sale because the sale is voidable.
D. S can be compelled to execute the pubic document of sale
because the sale is enforceable.
127. On January 20, 2002 A and B agreed verbally to form a

partnership on January 25, 2004.
A. The contract is void because future property can’t be
contributed to a universal partnership of all present property.
B. It is voidable if the parties marry each other before they form
the partnership.
C. Void because there is no public instrument of their
agreement.
D. Unenforceable because it is not in writing.
128. Three of the following are objects of contracts, except:

A. Those things within the commerce of men.
B. Intransmissible rights
C. Services which are not contrary to law, morals, good customs.
D. Heredity rights
129. Statement no. 1 – One of the parties at the time of making the
offer or acceptance was already insane, the contract is voidable.
Statement no. 2 – If before the acceptance is conveyed to the
offeror, either of the parties becomes insane, the contract is void,
that is, the offer is noneffective.
A. Both statements are incorrect.
B. Both statements are correct.
C. First statement is correct, while the second is incorrect.
D. First statement is incorrect, while the second is correct.
130. A and B orally agreed that A would sell and B would buy A’s radio
for P200 three years from the date of the agreement. At the end,
of the three years, A refused to hand over the radio although B
was willing to pay. Is A bound to deliver the radio sold?
A. A is obliged to deliver what he sold since it was an
enforceable agreement.
B. A is obliged to deliver if B is ready to pay the price.
C. A is not bound to deliver because the sale is void.
D. A is not bound to deliver because the sale is unenforceable.
131. A borrowed money from B with C as guarantor. The contract of

loan of P1M was not in writing while the guaranty was written. B
now is demanding payment from C because A failed to pay. Is C
liable?
A. C is liable because the guaranty is enforceable although the
loan is void it being oral.
B. C is liable because the guaranty is enforceable.
C. C is not liable because the accessory contract of guaranty is
void since the principal contract of loan is void.
D. C is not liable because the contract of loan is in amount
exceeding P500.00 which must be in writing to be
enforceable.
132. A promised to give B a car as reward after B has killed C. Later,

after the killing, the contract was changed to a lease of a big
house for a certain period. The contract of lease is:
A. rescissible
B. void
C. unenforceable
D. voidable
133. A was having his house repaired by B, who needed certain

materials. So A told the storeowner, “Give B the materials. I shall
be responsible. I shall stand good.” This was orally entered into.
A. The contract is unenforceable because A made an oral
agreement to answer for the default of another, that is, B.
B. The contract shall be enforceable if there is ratification by A.
C. The contract shall be enforceable if it has been executed.
D. The contract is enforceable because A did not make a special
promise to answer for the default of another person.

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
RFBT.O-1601
LAW ON OBLIGATIONS
Academic Knowledge Engineer “Home of Topnotch Professionals!”
MARGINAL NOTES
134. Which of the following contracts is rescissible?
A. Those where one of the parties is incapable of giving consent
to a contract.
B. Those which are entered into by guardians whenever the
wards whom they represent suffer a lesion of more than ¼ of
the value of the object of the contract.
C. Those where both parties are incapable of giving consent to a
contract.Those which are absolutely simulated or fictitious.
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REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

Academic Knowledge Engineer “Home of Topnotch Professionals!”

3. According to importance or dependence of one upon another

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5. According to risk or fulfillment

6. According to the parties Obligated

7. According to subject matter

8. According to the time of fulfillment

9. According to the number of persons physically entering into the

10. According to the number of persons who participated in the

What is stipulation “pour autrui”?

5. Obligatory force of contract and compliance in good faith

ESSENTIAL REQUISITES OF CONTRACTS

What causes will render an offer ineffective?

What are the characteristics of consent?

What are the kinds of simulation

What services may be the object of a contract?

What rights may be the object of a contract?

What is motive in a contract?

As a general rule, lesion shall not invalidate a contract except in the

The following are rescissible contracts

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The following are voidable or annullable contracts

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2. Who may bring action for annulment

3. Effect of loss of thing while in the possession of the party who

The following are unenforceable contracts

Statute of Frauds is a statute designed to prevent the commission

The following contracts must be in writing, otherwise, they are

How may an unenforceable contract under the Statute of Frauds

Void or Inexistent Contracts

What are the classes of void contracts?

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Cases when recovery may be made despite the parties being in

2. A party may recover, if public interest will be subserved,

An incapacitated person who is a party to an illegal contract

3. A person may recover, if public policy is thereby enhanced,

4. Any person may recover any amount he has paid in excess of

5. A laborer may demand additional compensation for service

6. A laborer may recover the deficiency in a contract where he

Rule when contract is divisible or indivisible and there are illegal

State the rules governing the form of contracts

Who may ask for reformation

When reformation is not available

2. When one of the parties has brought an action to enforce the

Rules on interpretation of contracts

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MULTIPLE CHOICE QUESTIONS

2. Raymoon makes an offer to Andrew on January 10, 2014. Andrew

5. Element without which there cannot be a contract is:

6. When the contract lacks one of the essential elements, the

7. Although contracts bind only contracting parties, their assigns and

8. A qualified acceptance constitutes:

10. The statement of a false cause in contracts shall render the

11. Business advertisements of the things for sale are:

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13. These persons are bound by contracts except:

15. Valid, binding and enforceable until annulled

16. Which of the following contract is voidable?

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20. Where damages is caused to either of the contracting parties or

21. An offer becomes ineffective if, before acceptance is conveyed,

22. Contracts entered into in a state of drunkenness or during