OBLIGATIONS AND CONTRACT October 2011 PLEASE FINISH THIS EXAM IN AN HOUR and a HALF. GOOD LUCK!!

PART I. ( 2 points each) 1. When the terms of the agreement are clear and explicit that they do not justify an attempt to read into any alleged intention of the parties, the term are to be understood ___________. A Figuratively D. Completely B. Solitary E. Literally C. Evidently 2. Contracts shall be obligatory in whatever form they may have been entered into provided , A fraud was not employed to secure the arties consent. . B. all the requisites for their validity are present . C. they have been notarized D all parties are capacitated to enter such contracts E all the requisites for their enforceability are present. 3. Being a __________contract, sale is perfected by___________and from that moment the parties may reciprocally demand performance A real/ delivery . B. real /consent . C..consensual / mere consent D consensual/delivery E None of the Above 4. Parties to a/an ________agreement cannot expect the aid of the law the courts leave them as they are , because they are deemed ___________ or in equal fault . A unenforceable/persona non grata B. void/ in mutuo delicto C..voidable/in pari delcito D. void/in pari delicto E. valid/in pari delicto

B. Void

D. Voidable and Unenforceable

12. When a contract is________ it is the duty of both parties to __________ that which they have respectively received and to place each other as far as practicable ____________. A. invalidated/ surrender /against each other B .rescinded/ return/ in his original condition C. avoided/ return/ as far away from each other. D.. rescinded/ pay / against each other E. None of the above 13. Novation is_________ . The intent to novate ( animus novandi) must appear by express agreement of the parties or by their clear and unmistakeable acts. A always presumed . B. sometimes presumed . C. never presumed D always valid E. None of the above. 14. ____________are those which arise from the same cause and in which each party is a debtor and creditor of the other , such that the obligation of one is dependent upon the obligation of another. A . Reciprocal obligations B. Unilateral obligations C.. Consensual contracts 15. A. B. C. D. E. D. Mutuality of contracts E. Valid Contracts

Which does not belong to the group? Novation Expromision Delagation Subrogation Compensation

5. An absolutely simulated or fictitious contract is __________ : A. Voidable D. Rescissible B. Unenforceable E. None C. Invalid 6. The nomenclature used by the contracting parties to describe a contract _______________. A determines its validity. B does not determine its nature C. does not make it automatically legal. D. determines its nature . E.. does not 7. In obligations with a penal clause, the general rule is that the penalty serves as a/an ______________for the indemnity for damages and the payment of interest in case of non-compliance. A option D. addition B. substitute E. alternative C. evidence. 8. When the parties to a sale intended to be bound by the contract but it did not reflect the actual purchase price of the property , there is _________ and the contract ______________. A absolute simulation/becomes void B. relative simulation/ remains valid and enforceable C. invalidity/ remains unenforceable D. relative simulation/ becomes void. E. absolute simulation/ remains valid and enforceable .. 9. The term ______________ is descriptive of statutes which require certain classes of contracts to be in writing to prevent fraud and perjury in the enforcement of obligations. A. Statue of Frauds D. Statue of Fraud B. Statute of Limitations E. None of the above C..Statute of Frauds 10. When a verbal contract has been completed, executed or partially consummated, its enforceability , A will not be barred by the Statues of Fraud. . B. will be barred by the Statute of Frauds C. will be guaranteed by the Statute of Frauds. D.. is ensured. E None of the above, 11. ________________ contracts are ratification. A Voidable C. Rescissible susceptible to

PART II. ( 5 points each) A. 30 Points Eduardo was granted a loan by XYZ Bank for the purpose of improving a building which XYZ leased from him. Eduardo, executed the promissory note ("PN") in favor of the bank, with his friend Recardo as co-signatory. In the PN, they both acknowledged that they are "individually and collectively" liable and waived the need for prior demand. To secure the PN, Recardo executed a real estate mortgage ( SANGLA) on his own property. When Eduardo defaulted on the PN, XYZ stopped payment of rentals on the building on the ground that legal compensation had set in. Since there was still a balance due on the PN after applying the rentals, XYZ foreclosed the real estate mortgage over Recardo's property. Recardo opposed the foreclosure on the ground that he is only a co-signatory; that no demand was made upon him for payment, and assuming he is liable, his liability should not go beyond half the balance of the loan. Further, Recardo said that when the bank invoked compensation between the rentals and the amount of the loan, it amounted to a new contract or novation, and had the effect of extinguishing the security since he did not give his consent (as owner of the property under the real estate mortgage) thereto.

a.
b.

Can XYZ Bank balidly assert legal compensation? Does Recardo have basis under the Civil Code for claiming that the original contract was novated?

PART III.

Read the following carefully and answer the questions as fully and completely as you can.

3.

MEMORANDUM OF AGREEMENT

KNOW ALL MEN BY THESE PRESENTS: This Agreement, made and entered into this first day of January , 2011 at Makati , by and between: MEDIA ASIAN GROUP, INC. (MAGI), a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office address at 2295 Jannov Bldg Pasong Tamo Extension, Makati City, Philippines, herein represented by JONAS VARGAS and referred to as MAGI -andNU MEDIA INC. (NMI) , a corporation duly organized and existing under and by virtue of the laws of South Korea, with principal office address at Chungdayong District, Seoul, South Korea, and represented by PARK SHIN LEE; WITNESSETH THAT: WHEREAS, MAGI is engaged in distribution in the Philippines of various computer games for retail and for site licensing; WHEREAS, MAGI recognizes the need for expanding its catalog of games and for this purpose intends to enter into agreements with game developers and publishers particularly in South Korea; WHEREAS, NMI is a corporation existing and duly registered in South Korea and is primarily engaged in the business of creating games for the internet to be distributed in and out of South Korea.; WHEREAS, MAGI proposes to conduct a market test of NMIs games in the Philippines and NMI, in turn, agrees to create a demo account for MAGI for said purpose; NOW THEREFORE, for and in consideration of the foregoing premises and the mutual covenant of the parties as hereinafter contained, MAGI and NMI execute this Memorandum of Agreement provided as follows: 1. NMI shall allow MAGI to have temporary access to their game/s , without any fee or charge, by downloading such game/s from its website. NMI may also opt to provide MAGI with free CD copies of its game/s. NMI cease from providing such access as soon as MAGI violates any provision of this Agreement. 2. NMI agrees to authorize MAGI to make use of said game/s in a market research to evaluate the viability of said game/s in the Philippines. MAGI undertakes to exert efforts to generate exposure for NMIs game/s in the Philippines Said market research will last for a period of three months from the date of signing and execution of this Memorandum of Agreement and may be extended for a longer period upon the mutual agreement of both parties in writing. MAGI shall have the sole right to determine whether an extension is necessary or not.

MAGIs authority to use the games during the period shall include such other rights as may be necessary and relevant to the conduct of the market research such as, but not limited to, the use or display of the game logos, trade names or trademarks in promotional materials or for publicity purposes. Should MAGI use the games beyond the authority given to it, MAGI shall be obliged to pay NMI or , the South Korean Game Publishers Association (SKGPA) if NMI so chooses, Php 10 Million Pesos as reparation/damages. 4. No warranties with respect to the features or capabilities of the game/s or of the NMIs software are created by this Agreement . 5. MAGI shall have the right of first refusal should NMI decide to distribute, retail, market or license its products ,subject of the aforementioned market research, in the Philippines within or during the three-month period or its extension.
QUESTIONS: 1. From what source/s are the obligations derived in the above example? What are the sources of obligation under the Civil Code? (5 points) 2. Name at least three(3) obligations that can be found in the above example and identify who are the obligee/obligor in each. ( 5 pts).

3.

The above Agreement states that there shall be no fee or charge involved. Can the agreement be considered void for being without any cause or consideration. Why ?Explain. (5 points). 4. Assume that the foregoing Agreement was not written. Would such failure to put the agreement in writing violate the Statute of Frauds under 1403? Why? Explain (5 points) 4.1 When does a contract become unenforceable? (5 points) 5. What is a conditional obligation? How does it differ from a pure obligation? (5 pts) 5.1 Is there any such conditional obligation in the foregoing example? If there is/are, what type/s of conditional obligation are they? Explain . ( 5 points) 6. Suppose SKGPA argues that the agreement is invalid because NMI and MAGI did not seek its prior consent before placing their name on the agreement, can SKGPA have the contract avoided or declared null and void? Why? (5 pts) 6.1 Can the contract be rescinded? Why ( 5pts) 6.2 What is a stipulation pour autrui? Give your own example of such? (5 pts.)

7.

Suppose a few days after the start of the three-month period NMI and MAGI again entered into a second contract which provides that NMI shall :in addition to its rights in the Philippines, MAGI shall also have the rights to also distribute, retail, market or license its products in Thailand, Singapore and Vietnam where MAGI also has offices for a fee of $150,000 a month for each country of operation NMI thus charged MAGI $150,000 for its Philippine operations for the month of January. MAGI argued that in far as the Philippines was concerned, there was still a no fee, no charge policy as the 3 month period in the first contract has yet to expire. NMI argues that the 2nd contract has novated the old one. Which side do you agree with ? What is novation? Which contract should prevail in the instant situation? Why? Explain. (5) points).