Professional Documents
Culture Documents
LECTURE NOTES
CONTRACTS
I. Identification Basic Concept/ Principles
__________ 1. Limitations imposed by laws on ones capacity to act.
__________ 2. The proposal to make a contract.
__________ 3. The unconditional and unqualified agreement to the offer.
__________ 4. Remedy in equity by which a written instrument is made to conform to the real
intentions of the parties.
__________ 5. False notion of a thing or a fact.
__________ 6. Agreement that do not appear on the face of the contract and do not bind either party.
__________ 9. When one takes improper advantage of his power or relationship over another.
__________10. The fear of displeasing a person to whom respect and obedience are due.
__________11. It affects the substance of the agreement and without it the party would not have
consented.
__________12. The declaration of a fictitious intent manifested deliberately and by agreement of the
parties.
__________13. A remedy to make ineffective a contract validly entered into where there is pecuniary
prejudice or lesion, by restoration of things to their original condition.
__________14. The fact which explains and justifies the creation of an obligation.
__________15. A ground to modify a contract when there is substantial change in facts or conditions
affecting contract.
__________16. The term used to cover various acts such as confirmation, acknowledgement, and
ratification proper.
__________17. Wherein a person’s admission or representation is rendered conclusive upon him and
cannot be disproved against the person relying thereon.
__________18. Wherein there is a full return of a person’s mind to sanity.
__________19. Refers to standardized contracts offered to consumers on essentially take it or leave
it basis.
__________20. Instances showing possibility of fraud.
TRUE OR FALSE
__________ 2. The right to set up the defense of illegality in void contract can be waived.
__________ 3. Stipulation por autrui is an exception to the rule on consensuality of contracts.
__________ 4. Failure to disclosed facts, when there is a duty to reveal them, as when confidential
relations bind the parties constitutes fraud.
__________ 5. Contracts take effect only between the contracting parties.
__________ 6. Real contracts are perfected by mere consent.
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__________ 7. When the real agreement of the parties stated in a contract is void the parties can ask
true intention is not expressed in reason of mistake, fraud, inequitable conduct or accident, one of the
__________12. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency
of either party before acceptance is conveyed
__________13. Acceptance made by letter or telegram does not bind the offerer except from the time
it came to this knowledge. The contract, in such a case, is presumed to have been entered
into in the place where the offer was made
__________14. Legal life of a contract starts in the conception stage
__________15. Misrepresentation made in good faith is not fraudulent but may constitute error.
__________16. If one party was mistaken and the other acted fraudulently or in such a way that the
instrument does not show their true intention, the former may ask for the annulment of the
instrument.
__________17. Mutual promise to marry if orally entered into is unenforceable.
__________18. In the case of an illegal contract where there is a criminal offense, the parties cannot be
prosecuted if they are both in pari-delicto.
“ It is in your moments of decision that your destiny is shaped.”
-A. Robbins-
fraud.
__________26. An advertisement containing some terms of the offer in print needs no further negotiation
but an offer by itself.
__________27. Lesion is inadequacy of the cause of a contract.
__________28. The rule on mutuality of contracts provides that contracts takes effect between the
parties, the heirs, assigns, except in cases where the rights and obligations arising from contract are not
__________29. Husband and wife cannot absolutely sell property to each other.
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__________30. Contracts entered by demented persons during lucid interval are perfectly valid.
__________31. In voidable contracts, there is no need to ratify the same before they can be
considered valid. In unenforceable contracts, however, ratification is necessary before they can be
considered enforceable.
be that of annulment.
__________34. A party who has brought an action to enforce an instrument can still later ask for its
reformation.
__________35. A contract, which is direct result of a previous illegal contract, is also void and existent.
__________36. Contracts invalidly agreed upon maybe reformed in cases established by law.
__________37. The statement of a false cause in contracts shall render them void, if it should not
be proved that they were founded upon another cause, which is true and lawful.
__________38. Gross inadequacy of the price does not affect the validity of contracts as a rule.
__________39. The determination of the performance may be left to a 3rd person whose decision
shall be binding immediately.
__________40. The interpretation of obscure words or stipulation in a contract shall not favor the
MULTIPLE CHOICE
41. S offers to sell his CAR 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 counter-offer effectively terminating the P100, 000 offer and
instigating an offer for P80, 000.
c. B’s response is a rejection of the P100, 000 offer, and there is no offer for P80,
000 because it is too indefinite
d. B’s response is a mere inquiry, the P100, 000 offer by S is still in force.
42. By this principle, the validity and efficacy of the contract cannot be left to the will of one of the
contracting parties.
a. Relativity of contract c. Mutuality of contract
b. Obligatoriness of contract d. Freedom of contract
43. This principle means that contracts take effect only upon the contracting parties, their assigns or
successors-in-interest
a. Relativity of contract c. Mutuality of contract
b. Obligatoriness of contract d. Freedom of contract
44. B forced S to sell him (B) a masterpiece painting for P1M.Subsequently, B sold it to X for P 2M, a
good faith purchaser. S is entitled to
a. Rescind the contract with B plus damages
b. Recover the painting from X but no damages
c. Recover damages from B
d. Annul the contract plus damages
45. Which of the following is correct?
a. An action to enforce judicially a natural obligation prescribes in 4 years
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50. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. Which of the following constitutes a definite offer?
a. An offer made through an agent
b. Business advertisement of things for sale
c. Advertisement for bidders
d. All of the above
51. Example No. 1: The husband, by intimidation, was able to obtain the consent of his wife, with regards
to the sale of a piece of land to him belonging to the wife for P1 million. The contract is voidable
because there was intimidation.
Example No. 2: In the above example, the right of the wife is to go to court and file a motion for
annulment within four (4) years from the time intimidation ceased.
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. An agreement in restraint of trade.
a. Perfectly valid c. Unenforceable
b. Voidable d. Void
53. Rescission of contract can take place in this case:
a. When the things, which are the object of the contract, are legally in the possession
of third persons who acted in good faith.
b. When he demands rescission can return whatever he may be obliged to restore.
c. When the party seeking resolution can perform only as to part and rescind as to
remainder.
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d. When the seller cannot return the installment paid to him by the buyer.
54. Which of the following contracts is required to be in writing to be enforceable?
a. An agreement that by its terms 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 made in consideration of marriage, other than a mutual promise to
marry.
d. All of the above.
55. S makes an offer to B on January 1, 2014. B makes known his acceptance in a letter sent on January
2, and received by S on January 10. Meantime, on January 5, S becomes insane.
a. The contract is voidable because one party is insane
b. There is already a meeting of minds, the contract is perfected
c. The contract is not binding because there is no meeting of minds
d. Contract is unenforceable.
56. In the preceding number S is perfectly sane but only an unemancipated minor of the time the
acceptance is communicated to him.
a. There is no meeting of minds between the parties, unless ratified by the guardian
of S.
b. The contract is not binding because the party is incapacitated
c. The contract is binding between the parties (but voidable)
d. Contract is valid.
57. In a contract, as written, D promises to pay C P10, 000 on September 15, 2014. The consideration
received by D is not stated in the contract. Decide.
a. The contract is valid because the cause is always presumed to exist.
b. The contract is valid so long as it in writing
c. The contract is valid because cause is not essential to a contract
d. The contract is void because the cause is not stated.
58. The stage of “conception” of a contract is:
a. When the contract is fully executed
b. When the parties come to an agreement
c. When negotiations are in progress
d. When there is a meeting of the parties’ minds.
59. Which of the following contracts is rescissible?
a. Those where one of the parties is incapable of giving consent to a contract
b. Those where both parties are incapable of giving consent to a contract
c. 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.
d. Those which are absolutely simulated or fictitious.
60. Contracts that cannot be sued upon unless ratified:
a. Voidable c. Rescissible
b. Unenforceable d. Void
61. Contract that is made for a valuable consideration is:
a. Onerous c. Onerous and Gratuitous
b. Gratuitous d. Aleatory
62. Who is liable for the loss of subject matter by fortuitous event?
a. Creditor c. Both creditor and debtor
b. Debtor d. None of them
63. These persons are bound by contracts:
a. Contracting parties c. Heirs
b. Assigns or Assign d. All of them
64. L entered into a contract of lease with X. T, the clerk of L, typed the document. Due to T’s negligence,
the document made was that of sale instead of lease.
a. The remedy is annulment
b. Parties may go to court for interpretation
c. Parties may enforce their right because it is enforceable
d. Remedy is reformation
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65. In a contract of sale executed by S and B, it appears S sold his motor vehicle to B and B bought it for
P10, 000. It turned out however, S has three motor vehicles. Gallant valued P80, 000: Hi-Ace van
valued P70, 000; and a Jeep valued P60, 000. Which of the following is correct as remedy?
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. The parties can ask for annulment of the contract
d. There is no contract.
66. Which of the following can be considered as feature of the void contract?
a. Subject to ratification
b. They exist
c. Action or defense for nullity is subject to prescription
d. It is imprescriptible as a defense
67. Statement No.1: The interpretation of obscure words or stipulation in a contract shall not favor the
party who caused the obscurity.
Statement No. 2: Gross inadequacy of the price does not affect the validity of contracts unless it can
be shown that there was fraud, force or violence, error or mistake, undue influence, or threat or
intimidation attending the execution 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
68. S entered into a contract with B by threatening B that if B does not agree to make the contract, S would
publish defamatory matter concerning B’s wife.
a. The contract is valid because the defamatory matter to be published does not
relate to B, the contracting party.
b. The contract is voidable because such publication when carried out whether true
or not will cause serious harm to B and his wife
c. The contract is unenforceable but B is entitled to damages the moment the
publication is made.
d. Contract is void.
69. 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. 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
70. Because of the intimidation employed by X, a third person, S sold his car to B.This contract is:
a. Void c. Unenforceable
b. Voidable d. Rescissible
71. B called C by the telephone to guaranty the debt of D to C. The contract between B and C is:
a. Unenforceable c. Rescissible
b. Voidable d. Annullable
72. An obligation which cannot be enforced by court action, but which is binding on the party who makes
it in conscience and according to natural justice is called
a. Civil obligation c. Pure obligation
b. Natural obligation d. Simple obligation
73. Contract which has no effect at all and cannot be ratified is a/an:
a. Unenforceable c. Voidable
b. Void contract d. All of them
74. Statute of Frauds is applicable to
a. Partially executed
b. Oral contract of loan when the amount involved is less than P500
c. Contract not to be performed within a year from the making thereof
d. All of the above.
75. An incidental element of a contract
a. Implied warranty
b. Payment of interest in a loan
c. Delivery of the object in contract of pledge
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108. The offeror need not know the acceptance by the offeree is the theory of:
a. Cognition c. Expedition
b. Manifestation d. B or C
109. 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 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.
110. Example No.1- W 16 years old, sold his house valued at P1 M for P50, 000 or a lesion by more than
one-fourth of the value of the said house.
Example No.2- A sold his land orally to B. The contracts are:
a. Both contracts are unenforceable
b. No. 1 is rescissible; while No.2 is unenforceable
c. 1st is voidable; while 2nd is unenforceable
d. Both contracts are binding
111. Statement No.1:Pledge is an example of a formal contract
Statement No.2: Innominate contracts are exclusively regulated by the stipulations of the parties.
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
112. Statement No.1: Validable contracts can be voided within the period allowed by law.
Statement No.2: There is undue influence if insidious words or machinations were 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 c. No.1 is true; No. 2 is false
b. Both are false d. No.1 is false; No. 2 is true
113. B1 Company bought out a competitor, B2 Corporation, with a stipulation that B2 Corporation should
not thereafter engage in any business in the Philippines unless consented to and approved by B1
Company.
a. The stipulation is defective but 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 as done in writing
d. The stipulation is void because it is contrary to public policy.
st
114. 1 S. Place and modes of payment are example of natural elements
2nd S. Agency, partnership and sale are example of preparatory & consensual contracts
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
115. All are void contracts except:
a. Those whose object is outside the commerce of men.
b. Those which are relatively simulated or fictitious.
c. Those with unlawful consideration.
d. Those which contemplate an impossible service.
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“In the province of the mind, the mind cannot distinguish what is reality from what is vividly imagined.’”
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