CONTRACTS withdrew his offer.
a) What is the effect of the withdrawal of Marvin's offer? (2%)

Consensual vs. Real Contracts; Kinds of Real Contracts
(1998)
 Distinguish consensual from real contracts and name at least four
(4) kinds of real contracts under the present law. [3%]
SUGGESTED ANSWER:
CONSENSUAL CONTRACTS are those which are perfected by mere consent
(Art. 1315. Civil Code). REAL CONTRACTS are those which are perfected by
the delivery of the object of the obligation. (Art. 1316, Civil Code) Examples of
real contracts are deposit, pledge, commodatum and simple loan (mutuum).
Consideration; Validity (2000)
Lolita was employed in a finance company. Because she could not account
for the funds entrusted to her, she was charged with estafa and ordered
arrested. In order to secure her release from jail, her parents executed a
promissory note to pay the finance company the amount allegedly
misappropriated by their daughter. The finance company then executed an
affidavit of desistance which led to the withdrawal of the information against
Lolita and her release from jail. The parents failed to comply with their
promissory note and the finance company sued them for specific
performance. Will the action prosper or not? (3%)
SUGGESTED ANSWER:
The action will prosper. The promissory note executed by Lolita's parents is
valid and binding, the consideration being the extinguishment of Lolita's civil
liability and not the stifling of the criminal prosecution.
ALTERNATIVE ANSWER:
The action will not prosper because the consideration for the promissory note
was the non-prosecution of the criminal case for estafa. This cannot be done
anymore because the information has already been filed in court and to do it
is illegal. That the consideration for the promissory note is the stifling of the
criminal prosecution is evident from the execution by the finance company of
the affidavit of desistance immediately after the execution by Lolita's parents
of the promissory note. The consideration being illegal, the promissory note is
invalid and may not be enforced by court action.
Contract of Option; Elements (2005)
Marvin offered to construct the house of Carlos for a very reasonable price of
P900,000.00, giving the latter 10 days within which to accept or reject the
offer. On the fifth day, before Carlos could make up his mind, Marvin
SUGGESTED ANSWER:
 The withdrawal of Marvin's offer will cause the offer
to cease in law. Hence, even if subsequently accepted, there could be no
concurrence of the offer and the acceptance. In the absence of concurrence of
offer and acceptance, there can be no consent. (Laudico v. Arias Rodriguez,
G.R. No. 16530, March 31, 1922) Without consent, there is no perfected
contract for the construction of the house of Carlos. (Salonga v. Farrales,
G.R. No. L-47088, July 10, 1981) Article 1318 of the Civil Code provides
that there can be no contract unless the following requisites concur: (1)
consent of the parties; (2) object certain which is the subject matter of the
contract; and (3) cause of the obligation.
Marvin will not be liable to pay Carlos any damages for withdrawing the offer
before the lapse of the period granted. In this case, no consideration was
given by Carlos for the option given, thus there is no perfected contract of
option for lack of cause of obligation. Marvin cannot be held to have breached
the contract. Thus, he cannot be held liable for damages.
b) Will your answer be the same if Carlos paid Marvin P10,000.00 as
consideration for that option? Explain. (2%)

ALTERNATIVE ANSWER:
My answer will be the same as to the perfection of the contract for the
construction of the house of Carlos. No perfected contract arises because of
lack of consent. With the withdrawal of the offer, there could be no
concurrence of offer and acceptance.
My answer will not be the same as to damages. Marvin will be liable for
damages for breach of contract of option. With the payment of the
consideration for the option given, and with the consent of the parties and
the object of contract being present, a perfected contract of option was
created. (San Miguel, Inc. v. Huang, G.R. No. 137290, July 31, 2000)
Under Article 1170 of the Civil Code, those who in the performance of their
obligation are guilty of contravention thereof, as in this case, when Marvin
did not give Carlos the agreed period of ten days, are liable for damages.
ALTERNATIVE ANSWER:
My answer will not be the same if Carlos paid Marvin P10,000.00 because an
option contract was perfected. Thus, if Marvin withdrew the offer prior to the
expiration of the 10-day period, he breached the option contract. (Article
1324, Civil Code)
 Roland to enter into contracts and the impairment of his freedom to play and
c) Supposing that Carlos accepted the offer before Marvin could enjoy basketball.
communicate his withdrawal thereof? Discuss the legal consequences. Can Roland be bound by the contract he entered into with Lady Love or can
(2%)
 he disregard the same? Is he liable at all? How about Sweet Taste? Is it liable
to Lady Love?

SUGGESTED ANSWER:
SUGGESTED ANSWER:
A contract to construct the house of Carlos is perfected. Contracts are
Roland is bound by the contract he entered into with Lady Love and he
perfected by mere consent manifested by the meeting of the offer and the
cannot disregard the same, under the principles of obligatoriness of
acceptance upon the thing and the cause which are to constitute the
contracts. Obligations arising from contracts have the force of law between
contract. (Gomez v. Court of Appeals, G.R. No. 120747, September 21,
the parties.
2000)

SUGGESTED ANSWER:
Under Article 1315 of the Civil Code, Carlos and Marvin are bound to fulfill
Yes, Roland is liable under the contract as far as Lady Love is concerned. He
what has been expressly stipulated and all consequences thereof. Under
is liable for damages under Article 1170 of the Civil Code since he
Article 1167, if Marvin would refuse to construct the house, Carlos is entitled
contravened the tenor of his obligation. Not being a contracting party, Sweet
to have the construction be done by a third person at the expense of Marvin.
Taste is not bound by the contract but it can be held liable under Art. 1314.
Marvin in that case will be liable for damages under Article 1170.
The basis of its liability is not prescribed by contract but is founded on
quasi-delict, assuming that Sweet Taste knew of the contract. Article 1314 of
the Civil Code provides that any third person who induces another to violate
Inexistent Contracts vs. Annullable Contracts (2004)
his contract shall be liable for damages to the other contracting party.
Distinguish briefly but clearly between Inexistent contracts and annullable
contracts.
 ALTERNATIVE ANSWER:
It is assumed that Lady Love knew of the contract. Neither Roland nor Sweet
SUGGESTED ANSWER:
 Taste would be liable, because the restriction in the contract is violative of
Article 1306 as being contrary to law morals, good customs, public order or
INEXISTENT CONTRACTS are considered as not having been entered into
public policy.
and, therefore, void ob initio. They do not create any obligation and cannot
be ratified or validated, as there is no agreement to ratify or validate. On the
other hand, ANNULLABLE or VOIDABLE CONTRACTS are valid until
Nature of Contracts; Privity of Contract (1996)
invalidated by the court but may be ratified. In inexistent contracts, one or
Baldomero leased his house with a telephone to Jose. The lease contract
more requisites of a valid contract are absent. In anullable contracts, all the
provided that Jose shall pay for all electricity, water and telephone services in
elements of a contract are present except that the consent of one of the
the leased premises during the period of the lease. Six months later. Jose
contracting parties was vitiated or one of them has no capacity to give
surreptitiously vacated the premises. He left behind unpaid telephone bills
consent.
for overseas telephone calls amounting to over P20,000.00. Baldomero
refused to pay the said bills on the ground that Jose had already substituted
him as the customer of the telephone company. The latter maintained that
Nature of Contracts; Obligatoriness (1991)
Baldomero remained as his customer as far as their service contract was
Roland, a basketball star, was under contract for one year to play-for-play
concerned, notwithstanding the lease contract between Baldomero and Jose.
exclusively for Lady Love, Inc. However, even before the basketball season
Who is correct, Baldomero or the telephone company? Explain.
could open, he was offered a more attractive pay plus fringes benefits by
Sweet Taste, Inc. Roland accepted the offer and transferred to Sweet Taste.
SUGGESTED ANSWER:
Lady Love sues Roland and Sweet Taste for breach of contract. Defendants
The telephone company is correct because as far as it is concerned, the only
claim that the restriction to play for Lady Love alone is void, hence,
person it contracted with was Baldomero. The telephone company has no
unenforceable, as it constitutes an undue interference with the right of
contract with Jose. Baldomero cannot substitute Jose in his stead without
the consent of the telephone company (Art. 1293, NCC). Baldomero is,
therefore, liable under the contract.
Nature of Contracts; Relativity of Contracts (2002)
Printado is engaged in the printing business. Suplico supplies printing paper
to Printado pursuant to an order agreement under which Suplico binds
himself to deliver the same volume of paper every month for a period of 18
months, with Printado in turn agreeing to pay within 60 days after each
delivery. Suplico has been faithfully delivering under the order agreement for
10 months but thereafter stopped doing so, because Printado has not made
any payment at all. Printado has also a standing contract with publisher
Publico for the printing of 10,000 volumes of school textbooks. Suplico was
aware of said printing contract. After printing 1,000 volumes, Printado also
fails to perform under its printing contract with Publico. Suplico sues
Printado for the value of the unpaid deliveries under their order agreement.
At the same time Publico sues Printado for damages for breach of contract
with respect to their own printing agreement. In the suit filed by Suplico,
Printado counters that: (a) Suplico cannot demand payment for deliveries
made under their order agreement until Suplico has completed performance
under said contract; (b) Suplico should pay damages for breach of contract;
and (c) with Publico should be liable for Printado’s breach of his contract
with Publico because the order agreement between Suplico and Printado was
for the benefit of Publico. Are the contentions of Printado tenable? Explain
your answers as to each contention. (5%)
SUGGESTED ANSWER:
No, the contentions of Printado are untenable. Printado having failed to pay
for the printing paper covered by the delivery invoices on time, Suplico has
the right to cease making further delivery. And the latter did not violate the
order agreement (Integrated Packaging Corporation v. Court of Appeals,
(333 SCRA 170, G.R. No. 115117, June 8, [2000]).
Suplico cannot be held liable for damages, for breach of contract, as it was
not he who violated the order agreement, but Printado.
 Suplico cannot be
held liable for Printado’s breach of contract with Publico. He is not a party to
the agreement entered into by and between Printado and Publico. Theirs is
not a stipulation pour atrui. [Aforesaid] Such contracts do could not affect
third persons like Suplico because of the basic civil law principle of relativity
of contracts which provides that contracts can only bind the parties who
entered into it, and it cannot favor or prejudice a third person, even if he is
aware of such contract and has acted with knowledge thereof. (Integrated
Packaging Corporation v. CA, supra.)
Rescission of Contracts; Proper Party (1996)
In December 1985, Salvador and the Star Semiconductor Company (SSC)
executed a Deed of Conditional Sale wherein the former agreed to sell his
2,000 square meter lot in Cainta, Rizal, to the latter for the price of
P1,000,000.00, payable P100,000.00 down, and the balance 60 days after
the squatters in the property have been removed. If the squatters are not
removed within six months, the P100,000.00 down payment shall be
returned by the vendor to the vendee, Salvador filed ejectment suits against
the squatters, but in spite of the decisions in his favor, the squatters still
would not leave. In August, 1986, Salvador offered to return the P100,000.00
down payment to the vendee, on the ground that he is unable to remove the
squatters on the property. SSC refused to accept the money and demanded
that Salvador execute a deed of absolute sale of the property in its favor, at
which time it will pay the balance of the price. Incidentally, the value of the
land had doubled by that time.
Salvador consigned the P 100,000.00 in court, and filed an action for
rescission of the deed of conditional sale, plus damages. Will the action
prosper? Explain.

SUGGESTED ANSWER:
No, the action will not prosper. The action for rescission may be brought only
by the aggrieved party to the contract. Since it was Salvador who failed to
comply with his conditional obligation, he is not the aggrieved party who may
file the action for rescission but the Star Semiconductor Company. The
company, however, is not opting to rescind the contract but has chosen to
waive Salvador's compliance with the condition which it can do under Art.
1545, NCC.
ALTERNATIVE ANSWER:
The action for rescission will not prosper. The buyer has not committed any
breach, let alone a substantial or serious one, to warrant the
rescission/resolution sought by the vendor. On the contrary, it is the vendor
who appears to have failed to comply with the condition imposed by the
contract the fulfillment of which would have rendered the obligation to pay
the balance of the purchase price demandable. Further, far from being
unable to comply with what is incumbent upon it, ie., pay the balance of the
price - the buyer has offered to pay it even without the vendor having
complied with the suspensive condition attached to the payment of the price,
thus waiving such condition as well as the 60-day term in its favor The
stipulation that the P100,000.00 down payment shall be returned by the
vendor to the vendee if the squatters are not removed within six months, is
also a covenant for the benefit of the vendee, which the latter has validly
waived by implication when it offered to pay the balance of the purchase
price upon the execution of a deed of absolute sale by the vendor. (Art. 1545,
NCC)
Aleatory Contracts; Gambling (2004)
A. Mr. ZY lost P100,000 in a card game called Russian poker, but he had no
more cash to pay in full the winner at the time the session ended. He
promised to pay PX, the winner, two weeks thereafter. But he failed to do so
despite the lapse of two months, so PX filed in court a suit to collect the
amount of P50,000 that he won but remained unpaid. Will the collection suit
against ZY prosper? Could Mrs. ZY file in turn a suit against PX to recover
the P100,000 that her husband lost? Reason. (5%)
SUGGESTED ANSWER:
A. 1. The suit by PX to collect the balance of what he won from ZY will not
prosper. Under Article 2014 of the Civil Code, no action can be maintained
by the winner for the collection of what he has won in a game of chance.
Although poker may depend in part on ability, it is fundamentally a game of
chance.
2) If the money paid by ZY to PX was conjugal or community property, the
wife of ZY could sue to recover it because Article 117(7) of the Family Code
provides that losses in gambling or betting are borne exclusively by the loser-
spouse. Hence, conjugal or community funds may not be used to pay for
such losses. If the money were exclusive property of ZY, his wife may also sue
to recover it under Article 2016 of the Civil Code if she and the family needed
the money for support.
 (A). Can the labor unrest be considered a fortuitous event? (1%)
ALTERNATIVE ANSWER (2):
A. (2). Mrs. ZY cannot file a suit to recover what her husband lost. Art 2014
of the Civil Code provides that any loser in a game of chance may recover his
loss from the winner, with legal interest from the time he paid the amount
lost. This means that only he can file the suit. Mrs. ZY cannot recover as a
spouse who has interest in the absolute community property or conjugal
partnership of gains, because under Art. 117(7} of the Family Code, losses
are borne exclusively by the loser-spouse. Therefore, these cannot be charged
against absolute community property or conjugal partnership of gains. This
being so, Mrs. ZY has no interest in law to prosecute and recover as she has
no legal standing in court to do so.
Contract to Sell vs. Conditional Contract of Sale (2012)
No.X. a) A contract to sell is the same as a conditional contract of sale. Do
you agree? Explain your answer. (5%)
SUGGESTED ANSWER:
No. A contract to sell is a species of conditional sale. The contract to sell does
not sell a thing or property; it sells the right to buy property. A conditional
sale is a sale subject to the happening or performance of a condition, such as
payment of the full purchase price, or the performance of other prestation to
give, to do or not to do. Compliance with the condition automatically gives
the right to the vendee to demand the delivery of the object of the sale. In a
contract to sell, however, the compliance with the condition does not
automatically sell the property to the vendee. It merely gives the vendee the
right to compel the vendor to execute the deed of absolute sale.
Rescission of Contract; Fortuitous Event (2008)
No.XVIII. AB Corp. entered into a contract with XY Corp. whereby the former
agreed to construct the research and laboratory facilities of the latter. Under
the terms of the contract, AB Corp. agreed to complete the facility in 18
months, at the total contract price of P10 million. XY Corp. paid 50% of the
total contract price, the balance to be paid upon completion of the work. The
work stated immediately, but AB Corp. later experienced work slippage
because of labor unrest in his company. AB Corp.'s employees claimed that
they are not being paid on time; hence, the work slowdown. As of the 17th
month, work was only 45% completed. AB Corp. asked for extension of time,
claiming that its labor problems is a case of fortuitous event, but this was
denied by XY Corp. When it became certain that the contruction could not be
finished on time, XY Corp. sent written notice cancelling the contract, and
requiring AB Corp. to immediately vacate the premises.
SUGGESTED ANSWER:
No. The labor unrest cannot be considered a fortuitous event under Art. 1174
of the Civil Code. A fortuitous event should occur independent of the will of
the debtor or without his participation or aggravation (Paras, Civil Code
Annotated, vol. IV, 2000 ed., p 159). As mentioned in the facts, labor unrest
of the employees was caused by AB Corp.'s failure to pay its employees on
time.
(B). Can XY Corp. unilaterrally and immediately cancel the contract?
SUGGESTED ANSWER:
No, XY Corp. cannot unilaterally and immediately cancel the contract. In the
absence of any stipulation for automatic rescission, rescission must be
judicial (Art. 1191, Civil Code).
(C). Must AB Corp. return the 50% downpayment? (2%)

SUGGESTED ANSWER:
AB Corp. need not return the 50% down payment because 45% of the work
was already completed, otherwise, XY Corp. would be unjustly enriching
itself at the expense of AB Corp.

Stipulation; Arbitration Clause (2009)

No. XI. TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if
the statement is false. Explain your answer in not more than two (2)
sentences.

(A). A clause in an arbitration contract granting one of the parties the power
to choose more arbitrators than the other renders the arbitration contract
void. (1%)

SUGGESTED ANSWER:

True. The Civil Code provides that “Any clause giving one of the parties power
to choose more arbitrators than the other is void and of no effect” (Art 2045,
NCC).
 MCQ 68. The following are the ways by which innominate contracts are regulated,
except:
63. Which of the following statements is correct? a) By the stipulation of the parties.
a) All contracts are perfected by mere consent.
 b) By the general principles of quasi-contracts and delicts

b) All contracts are perfected by delivery of the object. c) By the rules governing the most analogous nominate contracts.
c) All contracts are required to be in writing.
 d) By the customs of the place.

d) All contracts are required to have a valid consideration.

71. The following are solemn contracts (Contracts which must appear in
writing), except:
64. It is a principle which holds that parties are bound not only by what has
been expressly provided for in the contract but also to the natural a) Donations of real estate or of movables if the value exceeds P5,000.00.

consequences that flow out of such agreement. b) Stipulation to pay interest in loans.
a) Obligatory force of contracts c) Sale of land through an agent (authority must be in writing).
b) Mutuality of contracts d) Construction contract of a building.
c) Autonomy of contracts
d) Relativity of contracts 72. The following are rescissible contracts, except:
a) Entered into by guardian whenever ward suffers damage more than 1⁄4 of
65. It is a principle which holds that contracts must be binding to both value of property.

parties and its validity and effectivity can never be
b) Agreed upon in representation of absentees, if absentee suffers lesion by
left to the will of one of the parties.
more than 1⁄4 of value of property.
a) Obligatory force of contracts
c) Contracts where fraud is committed on creditor (accion pauliana).
b) Mutuality of contracts
d) Contracts entered into by minors.
c) Autonomy of contracts
d) Relativity of contracts
73. The following are the requisites before a contract entered into in fraud of
creditors may be rescinded, except:
66. It refers to the rule that a contract is binding not only between parties
but extends to the heirs, successors in interest, and assignees of the parties, a) There must be credited existing prior to the celebration of the contract.

provided that the contract involved transmissible rights by their nature, or by b) There must be fraud, or at least, the intent to commit fraud to the
stipulation or by law. prejudice of the creditor seeking rescission.
a) Obligatory force of contracts c) The creditor cannot in any legal manner collect his credit (subsidiary
b) Mutuality of contracts
 character of rescission)


c) Autonomy of contracts
 d) The object of the contract must be legally in the possession of a 3rd
d) Relativity of contracts person in good faith.

67. It is rule which holds that the freedom of the parties to contract includes
the freedom to stipulate, provided the stipulations are not contrary to law,
morals, good customs, public order or public policy.
a) Obligatory force of contracts
b) Mutuality of contracts
 c) Can be confirmed or ratified.
c) Autonomy of contracts

d) Relativity of contracts
74. The following are the characteristics of a voidable contract, except:
a) Effective until set aside.

b) May be assailed/attacked only in an action for that purpose.



d) Can be assailed only by either party.
75. The following are void contracts, except:
a) Pactum commissorium

b) Pactum de non alienando between Atty. Buko and Mr. Lacas is ---
c) Pactum leonina
 a) void because of the absence of consent from the owner, Mr. Lacas.
b) valid because all of the essential requisites of a contract are present.
d) Pacto de retro
c) unenforceable because Michael Fermin had no authority but he sold
the car in the name of Mr. Lacas, the owner.
76. The borrower in a contract of loan or mutuum must pay interest to the
d) rescissible because the contract caused lesion to Atty. Buko.
lender.
a) If there is an agreement in writing to the effect.
 85. Which of the following contracts is void?
b) As a matter of course.
 a) An oral sale of a parcel of land.
b) A sale of land by an agent in a public instrument where his authority
c) If the amount borrowed is very large.
from the principal is oral.
d) If the lender so demands at the maturity date.
c) A donation of a wrist watch worth P 4,500.00.
d) A relatively simulated contract
79. If one of the parties to the contract is without juridical capacity, the
contract is:
86. Which of the following expresses a correct principle of law? Choose the
a) voidable
 best answer.
b) rescissible
 a) Failure to disclose facts when there is a duty to reveal them, does not

c) void
 constitute fraud.


d) unenforceable b) Violence or intimidation does not

render a contract annullable if employed not by a contracting party but by a
80. When both parties to the contract are minors, the contract is: third person.

a) voidable
 c) A threat to enforce one’s claim through competent authority, if the claim is
legal or just, does not vitiate consent.
b) rescissible

d) Absolute simulation of a contract always results in a void contract.
c) void

d) unenforceable 87. Aligada orally offered to sell his two- hectare rice land to Balane for P
10Million. The offer was orally accepted. By agreement, the land was to be
81. When the consent of one of the parties was vitiated, the contract is: delivered (through execution of a notarized Deed of Sale) and the price was to
a) voidable be paid exactly one-month from their oral agreement.

b) rescissible

Which statement is most accurate?
c) void
 a) If Aligada refuses to deliver the land on the agreed date despite payment by
d) unenforceable Balane, the latter may not successfully sue Aligada because the contract is
oral.
83. Consent was given by one in representation of another but without b) If Aligada refused to deliver the land, Balane may successfully sue f or
authority. The contract is: fulfillment of the obligation even if he has not tendered payment of the
a) voidable purchase price.

b) rescissible c) The contract between the parties is rescissible.
c) void d) The contract between the parties is subject to ratification by the
d) unenforceable parties.

84. Michael Fermin, without the authority of Pascual Lacas, owner of a car, 88. Which of the following statements is wrong?
sold the same car in the name of Mr. Lacas to Atty. Buko. The contract a) Creditors are protected in cases of contracts intended to defraud them.
b) Contracts take effect only between the parties, their assign and heirs, a) Sale of EGM’s car by KRP, EGM’s agent, whose authority is not reduced
except in case where the rights and obligations arising from the contract are into writing.

not transmissible by their nature, or by stipulation or by provision of law.
b) Sale of EGM’s piece of land by KRP, EGM’s agent, whose authority is
c) If a contract should contain some stipulation in favor of a third person, he
not reduced into writing.
may demand its fulfillment provided he communicated his acceptance to the
c) Sale of EGM’s car by KRP, a person stranger to EGM, without EGM’s
obligor before its revocation.
consent or authority.
d) In contracts creating real rights, third persons who come into
d) Sale of EGM’s piece of land by KRP, a person stranger to EGM, without
possession of the object of the contract are not bound thereby.
EGM’s consent or authority.

89. Which phrase most accurately completes the statement – Any third
person who induces another to violate his contract:
a) shall be liable for damages only if he is a party to the same
contract.

b) shall be liable for damages to the other contracting party.
c) shall not be liable for damages to the other contracting party.

d) shall not be liable for damages if the parties are in pari delicto.

91. The characteristics of succession are as follows, except:

a) It is a legal contract.
b) Only property, rights and obligations to the extent of the value of the
inheritance are transmitted.

c) The transmission takes place only at the time of death.
d) The transmission takes place either by will or by operation of law.

98. Which phrase most accurately completes the statement – If at the time
the contract of sale is perfected, the thing which is the object of the contract
has been entirely lost:
a) the buyer bears the risk of loss.
b) the contract shall be without any effect.

c) the seller bears the risk of loss.

d) the buyer may withdraw from the contract.

99. A contract granting a privilege to a person, for which he has paid a

consideration, which gives him the right to buy certain merchandise or
specified property, from another person, at anytime within the agreed period,
at a fixed price. What contract is being referred to?
a) Option Contract
b) Contract to Sell
c) Contract of Sale
d) Lease

100. Which of the following contracts of sale is void?