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Marketing and Law Department
Law 11 Essentials of Philippine Business Law
DEPARTMENTAL MIDTERM EXAMS
1st SEMESTER SY 2007-2008
August 25, 2007, (Sat) 9:00-11:00 am
AGUAS, CHAN, GONZALES, LAUENGCO, NOLIDO, SANTIAGO
SET A
INSTRUCTIONS:
1.
2.
3.
4.
5.
6.

Label your bluebooks as BB#1, BB#2, BB#3, BB#4, BB#5 and BB#6 on the upper
left hand corner of each bluebook.
Write your SEAT NUMBER and SET on the upper right hand corner of each
bluebook.
Do not write your name, section or teachers name.
Use only BLACK or BLUE INK. No pencils are allowed.
Place your answers to particular questions in the proper bluebook, as indicated in the
examination question sheet.
Penalty for violating any of the above instructions is a five (5) point deduction on
your score.

GENERAL INSTRUCTIONS:
Answer each problem LOGICALLY, SEQUENTIALLY and CONCISELY, CITING THE
APPROPRIATE LEGAL BASIS. Violation of any rule will warrant the appropriate
deductions. Answers without the appropriate legal basis will warrant the lowest point credit.
Partial credit will be given to wrong answers. A totally unresponsive answer will warrant no
credit.
FOR QUESTIONS 1 and 2 use BLUE BOOK 1
1)
James owns three animals a horse, a cow and a carabao. James entered into an agreement
with John whereby in exchange for ten thousand pesos James would deliver his horse to John within
three days but in the same agreement James was given the right to substitute the cow or carabao in
place of the horse if James so wished. On the due date as James was about to deliver the horse , the
horse died of a heart attack and James grief stricken shot the cow and then the carabao. John was
angry at James for shooting the cow and carabao and demanded that James pay the value of the
carabao in accordance with the law. James said he was not liable for damages. Who is correct and
why? ( 8 points)
2)
A was obligated to pay B P1,000,000 and C P500,000 both on July 10,2007. On the due date
A could not pay either of the creditor so he assigned his car worth P500,000 to both of them as
payment by cession. Due to fortuitous events the car depreciated in value and was sold only for
P250,000 so B and C demanded the balance of the debt of P1,250,000 from A . A in his defense
countered that the lessening of value was due to fortuitous events and hence A stated that he was only
liable for P1,000,000 . Who is correct and why? ( 8 points)

FOR QUESTIONS 3 and 4 use BLUE BOOK 2

3)
Jonathan, Richard and Sam opened up a restaurant, for which they needed capital in the
amount of Php3,000,000.00. To speed up the release, they decided to borrow money individually,
though by accident they all wound up borrowing from the same bank, Banco de Oro, Wilson St.
Branch. Each was therefore indebted to BDO in the amount of Php1,000,000.00 payable within ten
years at a specified rate of interest. Their attempt to keep their scheme secret was short-lived - when

the business did not take off as they expected, they all defaulted on their payments starting at the
fourth month, and by the seventh month, despite demands made by the bank on each of them, they all
failed to pay. It was then that BDO discovered that the 3 borrowers came from the same venture.
BDO approached you for help in solving this delinquent account, particularly on how to collect the
outstanding balances of each borrower. To start with, what legal principle is applicable here:
( 6 points)
What would you advise BDO? ( 2 points)
4)
After returning to Manila, Samantha received a letter from BPI advising her of her delinquent
status on her loan. Samantha replied that she had paid her loan while she was on vacation at Baguio,
to the BPI Family Savings Bank along Session Road. BPI replied that the BPI Family Savings Bank
was not an authorized collector of BPI loans, to which Samantha retorted How was I to know? Your
logo was everywhere, including your company slogan about taking depositors far away. Who is
correct and why? ( 8 points)

FOR QUESTIONS 5 and 6 use BLUE BOOK 3

5)
Angel buys from the canteen everyday. Ali, man at the canteen selling the hotdog took a
liking to her. One day, she bought a hotdog and coke, and paid Ali with a 100 peso bill. Ali wanting
to strike up a conversation with her and make her stay longer gave her a 500 peso bill on top of her
change for the 100. When Angel got the extra change she did not even smile and left without thanking
Ali. The next day, Ali decided to ask for his money back from the ingrate Angel. Is Angel obliged to
return the money? What is the source of her obligation if any? ( 8 points)
6)
Jinggoy sold to Nene on July 5, a horse name Ping for P 20,000 to be delivered on July 20
without need for demand. Jinggoy agreed that in the alternative that he cannot deliver Ping to Nene,
he will deliver instead one of his Pajero. Nene gave the payment immediately.
However, on July 15, Jinggoy sold Ping to Manny for 25,000 which Manny promptly paid.
On July 19, before Jinggoy could deliver Ping to either Nene or Manny, Typhoon Egay flooded the
stable and caused the death of Ping. What is the liability of Jinggoy, if any, to each of the party?
Explain your answer. If Ping gave birth to a colt named Kiko on July 17, who has the right to Kiko?
( 8 points)

FOR QUESTIONS 7 and 8 use BLUE BOOK 4

7)
Contractor X agreed to build a new road for the government from Manila to Bicol at a price
of
P 20 billion. Contractor X did so for the Manila to Laguna stretch. But when work started for the
Laguna to Bicol leg, a fierce war erupted between the government and a new secessionist movement
called Lupang Malaya. Every now and then, workers of Contractor X would be caught in the
crossfire, and this resulted to occasional deaths of workers. Unable to bear the untimely death of his
workers and also the economic cost of such deaths, Contractor X told the government that he was
backing out of the contract. The government refused as no other contractor will do the work, and it
promised to shoulder the cost of all workers deaths as an incentive to Contractor X. The government
further argued that as the creditor, it could not be compelled to accept partial performance of the
obligation. Because of the issue, Contractor X filed a case in court. If you were the judge, will you
allow the termination of the contract, and on what legal basis? ( 8 points)
8)
Susy and Geno borrowed jointly and/or severally P 1 million from Ronald, and promised to
pay on 25 August 2007. On the due date, the debtors offered to pay, but Ronald refused to accept the
payment because he did not like the way Geno was being cozy with Susy, who was Ronalds crush.
As a result, Geno went to court to undertake the consignation process. After the court pronounced a
valid consignation, Susy, using all her charms, asked permission to withdraw the money. Ronald
readily agreed, not knowing that Susy was just doing what Geno told her to do. The day after the
withdrawal, Ronald saw Susy and Geno engaged in a public display of affection. Angered, Ronald
followed Geno to his house, and demanded immediate payment of the P 1 million. Geno refused since
he had used the money for his and Susys wedding expenses. Geno argued that the court had
pronounced that a valid consignation had been made.
a. Can Geno refuse to pay Ronald? Please briefly justify your answer. ( 4 points)
b. Can Ronald require Geno to pay P 1 million? Please briefly justify your answer. ( 4 points)

FOR QUESTIONS 9 and 10 use BLUE BOOK 5

9)
Mel and Ampy entered into an agreement whereby Mel will provide Ampy services as a
property consultant for as long as Ampy provides Mel office stationeries and other office
consumables. Their contract had a provision, which allowed either party to rescind the contract in
the event that either violated the terms thereof. One day Ampy requested Mel for assistance in
evaluating the terms of a lease agreement with a third party. Mel refused saying that evaluation of
lease contracts is not within his expertise. Ampy then sent notice to Mel saying that by his refusal, he
has violated the terms of the agreement. She then stopped providing Mel office paper and other
consumables. Mel sued Ampy questioning the propriety of the rescission. After five years the courts
found the rescission valid. Mel then said that in spite of such finding Ampy should still pay damages
for not providing office consumables for the five year period in as much as it is only when the courts
confirmed the decision did
the rescission validly take place. Ampy argued that she had the right to extra-judicial rescission and
her right was confirmed. Mel said that while she had the right to rescind extra-judicially, by filing the
case he questioned the propriety of her exercise and therefore the rescission was held in abeyance
during the time of the suit. Rescission therefore only took place at the time the court confirmed her
right to rescind it, which is five years later. Who is correct and why? ( 8 points)
10)
Janice donated land to Gary with the condition that Gary will build a school therein and not
use the property for any other reason. Gary received the land and caused the title to be placed in his
name, with the annotation of Janices prohibition. He then put up a school therein accordingly. Ten
years later Gary decided that the area where the land stands is not ideal for a school and closed the
school down. He then used the same as a training and livelihood for the squatters in the area. Janice
heard of this and immediately demanded that Gary return the land to her. Gary refused. Janice filed
suit causing the rescission of the donation. Gary, in defense said that their contract did not provide for
the remedy of rescission. Besides he said that the land is in his name and he did comply with her
requirement. He therefore consolidated his ownership over the land and now enjoys the full rights to
use the same as he pleases. What kind of obligation is involved here and should the courts rescind the
contract? ( 8 points)

FOR QUESTIONS 11 and 12 use BLUE BOOK 6

11)
Angelika bought and received from Carabaos Milk, Inc. 100 cartons of milk upon Angelikas
promise to pay that very afternoon. Although Angelika had not yet paid, she sold the 100 cartons of
milk to Bongbongs Sari-Sari Store owned by Bongbong Tan. Carabaos Milk, Inc. now sues for the
recovery of the 100 cartons of milk from Bongbong Tan. Will the action prosper? Explain.
( 8 points)
12)
A, B and C are joint and several debtors of D in the amount of P60,000 payable on July 31,
2007, without need of demand. D allows C an extension of 2 years within which to pay his portion of
the indebtedness. Upon maturity of the debt and upon demand by D, should A and B pay the entire
obligation to D, may they compel C to reimburse them with his share without waiting for the 2-year
period?
( 8 points)

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