BUSINESS LAW

Contract of Sales
I. Identification: Basic Concept and principles
__________________ 1. Principle that the owner bears the loss.
__________________ 2. Principle that the buyer bears the loss.
__________________ 3. Principle that the seller bears the loss.
__________________ 4. A unilateral promise to buy or to sell which is not accepted.
__________________ 5. The unpaid sellers legal power to retain control of possession of goods.
__________________ 6. Sellers responsibility for the title of the thing they sold and for any hidden defects.
__________________ 7. Where the owner joins the bid without reserving such right.
__________________ 8. The sale of a thing not yet in existence but may exist in the future.
__________________ 9. It is also known as sale of hope.
__________________10. An agreement whereby one party concedes to another for a determinate period the power
(option) to decide whether a principal contract will be celebrated.
__________________11. Also called ARRAS, proof of perfection of contract of sale.
__________________12. Unpaid sellers power to resume possession of the goods.
__________________13. A document of title in which it is stated that the goods referred to therein will be delivered to
the buyer, or to the order of any person named in such document.
__________________14. Goods to be manufactured, raised or acquired by the seller often the perfection of the contract
of sale.
__________________15. Goods that cannot be used without being consumed.
__________________16. When goods are in such a state that the buyer would be bound to accept the delivery.
__________________17. A real estate mortgage in the form of conventional redemption or absolute sale.
__________________18. The right to be subrogated upon the same term and condition stipulated in the contract in the
place of one who acquired the thing by onerous tide.
__________________19. The preferential right of an adjoining owner of an urban land to purchase the adjoining property
before it is sold to a stranger.
__________________20. A contract by which one transfer to another his right against a third person in consideration of a
price certain in money or its equivalent.
TRUE OR FALSE
21. Contract of sale may be absolute but not conditional.___________
22. The delivery of movable property may likewise be made by the mere consent or agreement of the
contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if
the latter already had it in his possession for any other reason.__________
23. A contract to sell, even if accepted by the buyer is not an absolute sale.__________
24. In sale by sample, be it understood that the bulk is like the sample.__________
25. There is no automatic rescission in sale of movable and immovable property.__________
26. The expenses for the execution and registration of the sale shall be borne by the vendor, even if there is a stipulation
to the contrary.__________
27. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent or that
the parties really intended it donation or some other act or contract._________
28. The vendee a retro, is subrogated to the vendors rights and actions.__________
29. The sole owner of a thing may sell an undivided interest therein.__________
30. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed
by one of the parties is accepted by the other, the sale is perfected.________
31. Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right to do
so, he is not bound to return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept
them. If he voluntarily constitutes himself a depository thereof, he shall be liable as such._________
32. If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the
adjoining land of smaller area shall be preferred; and should both lands have the same arm the one who first
requested the redemption.__________
33. The ownership in the thing shall not pass to the purchaser until he has fully paid the price.________
34. The vendor need not be the owner at the time the sale is perfected. It is sufficient that he is the owner at the time
thing sold is delivered.__________
35. If the consideration of the contract consists partly in money and partly in another thing it shall be considered a
barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its
equivalent.__________
36. There may be a contract of sale of goods, whose acquisition by the seller depends upon contingency which may or
may not happen.__________
37. Where the seller of goods has avoidable title thereto, but his title has not been avoided at the time of the sale, the
buyer acquires a title to the goods even if he acquired it in bad faith.
38. Warranty against eviction is ordinarily waivable anytime even impliedly.__________
39. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the
price.__________

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40. The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for
the payment has been fixed in the contract._________
41. In the sale of real estate for a lump sum price (LSP), the seller cannot ask for an increase in the price even if the land
is more than that stated within the boundaries.__________
42. ARRAS is a proof of perfection of the contract of option.__________
43. In sale, the obligation of the vendor is extinguished; while in dation in payment, obligation is created. __________
44. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should be movable property. __________
45. IN COD (cash on delivery), the carrier is the agent of the seller to deliver the goods to the buyer at the point of
destination. In transit buyer will bear the loss__________
46. An assignment of a credit, right or action shall, produce no effect as against third persons, unless it appears in a
public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real
property. __________
47. The vendor is bound to deliver the thing sold and its accessories and accession in the condition in which they were
upon the perfection of the contract. All the fruits shall pertain to the vendee from the time the obligation to deliver the
thing arises. __________
48. Sale of a vain hope or expectancy is governed by conditional sale. __________
49. Contract of sale is sometimes a real contract. __________
50. Emptio rei speratae is the sale of thing which is expected to come into existence, the quality and quantity of which
are unknown. __________
51. Statement 1: Sale is a consensual contract; therefore delivery or payment is not essential for perfection.
Statement 2: The vendor is responsible to the vendee for any hidden faults or defects in the thing sold only if he was
aware thereof
a. Both are true
c. No.1 is true; No.2 is false
b. Both are false
d. No.1 is false; No.2 is true
52. Statement 1: The sale of a mere hope or expectancy is conditioned that the thing will come into existence and the
price is always fixed.
Statement 2: The sole owner of a thing can sell an undivided interest therein.
a. Both are true
c. No.1 is true; No.2 is false
b. Both are false
d. No.1 is false; No.2 is true

53. Statement No. 1: Things subject to a resolutory condition cannot be the object of the contract of sale.
Statement No. 2: If the price is stimulated, the contract of sale is voidable.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
54. Statement No. 1: The ownership in the thing shall not pass to the purchaser until he has fully paid the price in
contract to sell.
Statement No. 2: If at the time the contract of the sale is perfected, the thing which is the object of the contract has
been partially lost, the contract shall be without effect
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
55. Statement No. 1: Where the seller of goods has avoidable title thereto, but his tide has not been avoided at the time
of the sale, the buyer acquire a tide to the goods whether or not the acquisition is in good faith.
Statement No. 2: If several persons, jointly and in the saw contract should sell an undivided immovable with a tight
of repurchase, none of them may exercise this right for more than his respective share.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
56. Statement No. 1: Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in
the contract, in the place of one who acquires a thing by purchase or dation in payment or by any other transaction
whereby ownership is transmitted by onerous title.
Statement No. 2: The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price,
or if no period for the payment has been fixed in the contract.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
57.

58.

59.

Statement No. 1: Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on
the remainder, unless such part delivery has been made under such circumstances as to show an intent to waive the
lien or right of retention.
Statement No. 2: Where the price cannot be determined in a contract of sale, the contract is inefficacious but may be
ratified.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
S sold to B a specific car for P20,000 payable in four equal instalments. S delivered the car to B but required to
mortgage it back to S to answer for the unpaid installments. B paid the 1 st instalment, but the last three he failed to
pay. S foreclosed the mortgaged property and sold it at public auction for P13,000.
a. S can recover from B the balance of P2,000.
b. S can recover from B & balance of P2,000 if there is stipulation to that effect.
c. S cannot recover the deficiency any more even if there is stipulation to that effect.
d. None of the above.
The vendor
a.
is liable to the vendee for hidden fault or defect of the thing sold even if he is not aware thereof

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b.

is not liable to the vendee for hidden fault or defect of the thing sold if he is not aware
thereof
c.
is liable to the vendee for hidden fault or defect of the thing sold if he is not aware
thereof if stipulated
d. Answer not given.
60. When it is stipulated that the repurchase of the property sold could be made at any time, the
repurchase shall be exercised
a. Within four years from the date of the contract
b. Within ten years from the date of the contract
c. After ten years from the date of the contract
d. None of them.
61. B imports electric fans from China and specifically asks for 220 volts fans. The fans arrived duly labelled 220 volts
and sell them to the public as such. Later, it turned out that the fan has been mislabelled by the manufacturer and
were only good for 110 volts.
a. B is liable to the vendee for any hidden defects in the thing sold even though he was not ware
thereof.
b. B is not liable because he was in good faith, and this is shown by specifically asking for 220 volts.
c. B is not liable under the principle of lot the buyer beware
d. B is liable because the vendee did not enjoy legal and peaceful possession of the object of sale.
62. S sold to B a parcel of land for a lump sum of P50,000 the contract states that the area is 500
square meters. Subsequently, it was ascertained that the area included within the boundaries is really 550 square
meters.
a. S is bound to deliver 500 square meters and B to pay P50,000.
b. S is bound to deliver 500 square meters and B to pay P55,000.
c. S or B can rescind the We because there is no meeting of minds.
d. None of the above.
63. In the succeeding question, if the land contains 445 square meters, which of the following is correct?
a. S is bound to deliver 500 square meters and B to pay P50,000.
b. S is bound to deliver 445 square meters and B to pay P44,500.
c. B may rescind the sale because the lack in area is more than 1/10 of the total area.
d. None of the above.
64. S enter into a contract with B whereby S sold his land orally to B. The land has been delivered and the money has
been paid. Is the oral sale of the land valid?
a. The contract is not valid because it is not in writing as required by the Statue of Frauds.
b. The contract is not valid because the contract is not made in public instrument.
c. The contract is unenforceable.
d. The contract is valid because the contract is already perfected and executed.
65. G, guardian of W, sold Ws house and lot worth P480,000 for P240,000.
a. The contract can be rescinded because of inadequacy of price.
b. The contract cannot be rescind because of inadequacy of price.
c. The contract cannot be rescind because all essential elements of the contracts are present.
d. The contract cannot be rescinded but can be annulled on the ground of minority of the word. (W)
66. X Shoe Store, Inc. entered into a separate contracts with two movie stars, B1 and B2. With B1, the agreement was
that the Shoe Store shall deliver at a specified date or a price of P1,000 a pair of shoes of a specified brand which the
store had been manufacturing for the general public but which at the time of the contract had already been sold out,
and with B2, the agreement was that the shoe store shall deliver at a specified date for a price of P2,000 a pair of
shoes to be made specially for him in accordance with a design submitted by him. What is the nature of these two
contracts?
a. Contract for piece of work
c. Agency to sell
b. Sale
d. Combination of A and B
67. A, B and C are co-owners of an undivided parcel of land. B sold his 1/3 interest to C absolutely. Which is correct?
a. A may exercise his right of redemption on the interest sold by B to C.
b. A cannot exercise the right of redemption because the sale was made in favor of a co-owner.
c. The sale made by B to C is void because it was not made in favor of a stranger.
d. A may redeem only of the interest sold by B to C.
68. In No. 47 suppose, instead of selling his interest to C, B sold it to X. Who can exercise the right of redemption?
a. Both A and C.
c. C but not A
b. A but not C
d. A, B, and C
69. Which of the statements is not true?
a. In sale or return ownership is transferred to the buyer upon delivery
b. Warranty against hidden defects is an accidental element of a contract of sale
c. In sale the obligation of the buyer is not only the payment of the price
d. In dacion en pago, an obligation is extinguished while in contract of sale, obligation arise.

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70. A borrowed from B P200,000. To secure payment of the loan, A mortgaged his house and lot to B. The mortgage is
duly recorded. Then, without the consent of B, A sold and delivered the house and lot to C and C took possession of
the house and lot.
a. The sale to C is void.
b. A cannot transfer ownership to C because B did not give his consent to the sale
c. A is liable to B for damages
d. Ownership is transferred to C subject to the right of mortgagee B.
71. Delivery of movable may be made by the delivery of the keys of the place or depository where the movables are dept
or stored. This kind of delivery is called:
a. Traditio longa manu
c. Traditio clavium
b. Traditio brevi manu
d. Traditio constituturn possessorium
72. If immovable property should have been sold to different vendees, the ownership shall be transferred to the person
a. Who have first taken possession in good faith.
b. Who presents the oldest title in good faith.
c. Who in good faith recorded it in the Registry of Property
d. Who have paid in good faith the purchase price in full
73. In the preceding question, if movable property, it shall belong to the person
a. Who have paid in good faith the purchase price in full
b. Who in good faith first recorded it in the Registry of Property
c. Who presents the oldest title in good faith.
d. Who have first taken possession in good faith
74. Statement No. 1: If the property is sold for nonpayment of taxes due and not made known to the vendee before the
sale, the vendor is still liable for warranty against eviction.
Statement No. 2: The expropriation of property for public use is also governed by contract of sale.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
75. Statement No. 1: Sale of future inheritance is void; while the sale of hereditary right is valid the seller is liable for his
character as an heir.
Statement No. 2: An unpaid seller has no right of rescission.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
76. In three of the following there is no warranty against hidden f=defects of animals.
Which is the exception?
a. Animals sold at fairs
b. Livestock sold as condemned, declared known to the buyer
c. Animals sold at public auction
d. None of the above
77. In three of the following the sale is void. Which is the exception?
a. Sale of animals suffering from contagious diseases
b. Sale of animals if the used or service for which they are acquired has been stated in the contract and
they are found to be unfit therefore
c. Sale of a vain hope or expectancy
d. Sale of hereditary right
78. S, 16 years old, sold to B, of legal age, a specific diamond ring for P10,000. Later, B sold it to X, which of the
following statements is incorrect?
a. S has a voidable title because at the time of sale he is a minor
b. X, if in good faith, shall become the owner upon the delivery to him
c. X, if in bad faith, shall also be the owner, except that his title is voidable
d. B has got a valid title even if he acquired the ring from a person who is incapacitated
79. In sale with a right to repurchase, if redemption is to be made, which of the following will not be
paid by the seller to the buyer?
a. Price paid by the buyer
b. Expenses in the execution of the sales contract paid by the buyer
c. All necessary expenses on the thing sold and to be redeemed
d. Interest of the price paid by the buyer
80. S offers to B 100 radio sets for P50,000 payable in 30days with 10% interest per annum. B cables
S to advise that he accepts provided the interest is reduced to 5%. If S and B are both merchants and there is no
further 5 communication between them relating to the terms, them
a. B has made a counter offer
b. The contract is formed incorporating only the terms of S
c. The contract is perfected with Bs reduced interest rate becoming part of the agreement
d. None of the above
81. S offered for sale to B 10 cavans of wigwag rice. B asks S price per cavan. S told B
that the price per sacks is P5.00 over the price in the Divisoria market. The price is
a. Certain, because it has got reference to another thing which is certain
b. Not certain, parties will go to court

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c.
d.

Not certain because the price at Divisoria Market is not stated

None of the above

82. S sell to B his 1988 Couger car, and leaves to B to determine the price. B refuses to fix the price
buts book the car for his use. Which of the following statements is correct?
a. No sale, because the price is not fixed by the parties
b. There is sale, B must pay a reasonable price
c. No sale until a third person fixes the price
d. S may go to court and ask for damages
83. B imports electric fans from china and specifically asks for 220 volts fans. The fans arrived dully
labelled 220 volts and sells them to the public as such. Later, it turned out that the fans have been mislabelled by the
manufacturer and were only good for 110 volts.
a. B is liable to the vendee for any hidden defects in the sold even though he was not aware thereof
b. B is not liable because he in good faith, and this shown by specifically asking for 220 volts
c. B is liable because under the principle of let the buyer beware
d. B is liable because the vendee did not enjoy legal and peaceful possession of the object of sale.
84. Three of the following are conditional sale. Which is the exception?
a.. Sale expectancy
b. Sale with a right to repurchase
c. Sale of a vain hope
d. Sale subject to a contingency
85. S sold a piece of pasture land to B. On the same day S sold it again to X. Both sales were made in private documents,
bearing the same date. Neither of the purchasers succeeded in taking physical possession of the land because if was
already in the possession of another person under a contract of lease for one year, executed by S a month before, also
in a private document. Who is the right owner of the land, on the supposition that both purchasers acted in good
faith? Why?
86. A bought a truck from B payable in installment secured a chattel mortgage executed by A on the truck, As additional
security, As brother, C, executed a real estate mortgage in favor of B
A defaulted in the payment of several installment, consequently, B filed an action for replevin , repossessed the truck,
and foreclosed the chattel mortgage.
Can B proceed against the other properties of A and the real estate mortgage executed by C to recover the deficiency
if any, after the chattel mortgage foreclosure? Explain
87. S sold to B a KUBOTA water pump by description. Although the description was completely correct as described
by S, the machine would not work properly for which it has been bought. Can B refuse to pay the price of the sale?
Why?
88. S sold car for P300,000 to B. Despite his knowledge of this defect, S obtained a waiver from B of the latters right
under the warranty against hidden defects. Subsequently, the car was wrecked due to the recklessness of B who only
the discovered the defects when the FMV of the car was P250, 000. Choose the best answer.
a. S is still liable to reimburse B 50,000 plus damages and he must pay damages
b. The waiver is void because S knew of the defect
c. S is not liable anymore because the car got loss due to the recklessness of B
d. The liability of S remains to be P300,000 because of breach of warranty against hidden
defect.
89. Which is not a characteristic of contract of sale?
a. Onerous
c. Consensual
b. Gratuitous
d. Commutative
90. Here, physical delivery is not necessary because buyer is already in possession of the thing sold:
a. Traditio longe manu
c. Traditio symbolica
b. Traditio brevi manu
d. Traditio constitutum posessorium

Few things are impossible to diligence and skill. Great works are performed not by strength but by perseverance
-Samuel Johnson