286, 21 22. 23 24. 2. 26. 27. 28 29, Sen ation when inorder to wrest CONSent, gy, imi Theres intimidation wr employed cous or irresisti ssrepresentation made in good faiths not fraudulent hy may constitute errr lidate consent, it shoulg der that mistake may inval te 120% the substance ofthe thing which is the object ofthe reiatact, or to those consitions which have principajy saved one or both parties to enter into the contract Js ojaim through competent auth A threat to enforce one's claim 7 ity. the claim is ust or legal, does not viiate consent. I the obligatior Violence or intimidation shall not annul igation, ifit was employed by a third person who did not take part in the contract. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential rela. tions, constitutes fraud Contracts must bond both contracting parties, their validity or compliance cannot be left to the will of one of them, Contracts take effect only between the contracting parties, Consensual contracts are not perfected until the delivery ‘of the object of the obligation. Real contracts are perfected by mere consent. Ifthe cause is not stated in the contract, tisunawta itis presumed that 34 36. 39. 40, when the real agreement ofthe parties stated ina contractis Void, the parties can ask for reformation of the instrument. y provision of the law on contracts, where the amount in- Paved in the contract exceeds P500,00, t must appear in Writing or in a public instrument. A contracted a loan of 5,000.00 from B which is not reduced in public instru- Frent or writing. B cannot recover the loan because the Contract is not valid Consummation of a contract is manifested by the offer and acceptance. The statement of a false cause in contracts shail render them void, ifit should not be proved that they were founded upon another cause which is true and lawful. Annulment is available only to persons who are obliged principally or subsidiarily. tis not available to third persons. Ifmistake, fraud, iriequitable conduct, or accident has pre- vented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment ofthe contract. Cause is the essential or more proximate purpose which the parties have in view in entering into the contract. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requi- sites for their validity are present. ‘When, there having been a meeting of the minds of the par- ties to a contract, their true intention is not expressed by rea- son of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the'reformation of the instrument.288 41 43. 45, 46. 47. 48, 49, 50, ce ent Qualified acceptance is considered a counter-offey the death, ci ‘omes ineffective upon ; ferecanty or insolvency of either party before tance is conveyed INterdig. accep. the offeree a certain When the offerer has allowed peri toaccept, the offerer may withdraw the offer at anytime legram does not bj ‘Acceptance made by letter or tel in the offerer except rom the time itcame to his knowledge. The contract, in such a case, is presumed to have been en: tered into in the place where the offer was made. Ifone orboth debts are voidable, the same may be com, pensated provided they are not yet avoided. ‘An agreement by its term is to be performed within a year ‘rom the making thereof is enforceable even if entered inte orally. ‘An offer made through an agentis perfected from the time acceptance is communicated to the principal Misrepresentation made in good faith is not fraudulent but may constitute error. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both Contracting parties. Incidental fraud only obliges the per- ‘son employing itto pay damages, fone party was mistaken and the other acted fraudulently Pin Such a way that the instrument does not show theit {tue intention, the former may ask f the tusinten 'y ask for the annulment of 83, 55, 56. a7. 58. 59, 60 61 Business Law eccPARefewme) 289 jen the offerer has allowed the Offere vrcePt, the offer may be withdrawn ¢ geceptance by communicating such when the option is founded upon a con, thing paid or promised, © a certain period at any Mutual promise to marry, if orally entered into, is unenforce- able The action for annulment on the ground of fraud shall be brought within four (4) years from the time of the perfection of the contract. In the case of an illegal contract, where there is a criminal offense, the parties cannot be prosecuted ifthey are both in par-delicto. Persons who are capable cannot allege the incapacity of those with whom they contracted. The action for rescission is subsidiary. It cannot be insti- tuted except when there is no other legal means to obtain reparation for damages suffered Void contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. Delivery of the subject is necessary to the perfection of contract of sales. An offer becomes effective even with the death of either Party after acceptance is conveyed. When one party is insane and the other is an unemanci- Pated minor, the contract is unenforceable. Accidental elements of a contract are those agreed upon by the parties, and cannot exist without being stipulated.1 22g IN CONTRACTS INCLUDING EXAMINATION QUESTIONS EXERCISES PAST CPA MULTIPLE CHOICE Wich ofthe following is not arequisite forthe validity gy, contract? 4. Delivery of the thing t a. Consen e. None of the above b. Object . Cause or consideration Before acceptance is conveyed, an offer becomes ings, fective upon the: a. Death 4. Involvency of either pa b. Civilinterdiction e. Allofthe above " c. Insanity X alleged that Y promised to give X one hectare of land, This is consideration of Y's meritorious services to Y. Y leads in defense that since the promise was not in writ- ing, itis unenforceable under the Statute of Frauds. De- cide. a. The promise is unenforceable because it was not in wting, . The Statute of Frauds is applicable because A has ren- dered services, © The Statute of Frauds is inapplicable, because the Promise to give the land is not a sale of real proy d. The Statute cay oeeae (of Frauds can ay emaean ipply to partially executed 5 6 ness Law (FOr CPAReviewens) 291 the stipulation in a contract to the effect that the debtor ghould remain aS a Servantin the house and in the service other creditor $0 10g as she had not paid her debt is void pecause itis: Contrary to customs. Contrary to public policy. Contrary to law and morality. None of the above X, after the death of his father, sold his inheritance to B though its amount has not yet been detemined, for a con- sideration of P50,000. a. The contract is valid only if the inheritance values at least equal or more than P50,000 b. The contractis rescissible. c. The contract is valid even though nothing remains of the inheritance to be tumed overto B. d, Contract is void, future inheritance cannot be the ob- ject of sale. Which of the llowing contracts is v a. Those which objectis outside the commerce of men. b. Those which contemplate an impossible service. those where the intention of the parties relative to the Principal object of the contract cannot be ascertained Those expressly prohibited or declared void by law. €. Allofthe above. Statement No. 1: If the contract is entered into without au- thority, the contract is validable.292 racs take effect only between jy, in case Whey Signs and heirs, excep! ince MF oblg sons arising from the contract are f nights ane ye by theirnature, oF by stipulation or by pray trans ne heir isnot liable beyond the value of rye Sroperty ne received from the decedent. Statement No.2: Cont parties, their a ¢. ‘No. 1iStTUe No. 28 fag a. Both are true 4. No. false No.2 te b. Bothare false Juctantly and against her good sense and judgmen, . foeorarte entered into a contract for the delivery of ¢ ‘Corazon for a price of P18,000. Contractis: tables to a. Void c. Unenforceable b. Voidable d. Valid 9. Gwias appointed guardian of S, the latter being 16 years old. S sold his parcel of land in writing to B valued at 100,000 for P75,000, suffering lesion by 1/4 of the value Whats the status of the contract? a. Rescissible ¢. Enforceable b. Unentorceable 4. Voidable 10. Which is the least defective contract? a. Rescissible contract b. Voidable contract cc. Unenforceable contract d. Void contract 11. Which of the following contract is not rescissble? 3. Those which ae entered into by quardians whenever fe are eptom they represent suffer lesion of more fthe value of the object of the contract. 12. 13, usiness Law (For CPA Reviewses) Those executed in representation of an absentee, if the latter suffer a lesion of more than 1/4 of the value of the “object of the contract ‘Those where one of the parties is incapable of giving consent toa contract. Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. Those which refer to things under litigation ff they have been entered into by the defendant without the know edge and approval of the litigants or of competent judi cial authority. ‘Statement No. 1: The iegal life of a contract begins from its perfection stage. While the death of the contract is the per- formance or fulfillment of the obligation Stament No. 2: Misrepresentation made in good faith is not fraudulent, but may constitute error and renders the con- tract voidable. goon Both are true Both are false No. 1 is true; No. 2 is false No. 1 is false; No. 2s true A contract where both parties are incapable of giving con- sentis a. Rescissible b. Voidable c. Void d. None of the above ©. Unenforceable14 15, 16 17. 69 ~ entre the following contracts are void. Which is the gy, Three of ception? Those whose cause, object OF PUFPOSE is Contrary jg 8 np morals, good customs, Public order OF Public pojiy lated or ficttioy high are absolutely simul Ps Nese which cause oF object aid not exist atthe time oy ction, 6 ee Nhere both parties ate incapable of giving oon, sent to a contract. § sold his car to B because of the intimidation of the latte, Scan ratify the contract S can ratify the sale with the conformity of B. B has the right to ask for annulment B has only four years to ask for annulment. aose Three of the following are rescissible, which is not? a. Sale of property under litigation made by a defendant without the knowledge of the plaintiff and authority of the court. b. Those made to defraud creditors when the creditors has no other means to recover his claim, ©. Those agreed upon in representation of absentees, if the absentee suffers lesion by more than 1/4 of the value of the property subject of the contract. d. None of the above. Sand M agreed in print that S, who is the debtor for P3,000 willwork as a servant of M without pay until she could find heen which 7 pay her debt. Meantime, S absconded ligation and failed to c 2 cea -omply with her promise. Un cent Which of the following statements is cor- 18. 19. 20. ip pusiness Law (For CPA Revieweos 295 The agreement to work as a is immoral. p, Toactas a servant without pay is unconstitutional be- cause this is equivalent o involuntary servitude, The obligation to pay is enforceable because thi accordance with law. fehl) 4g, Allofthe above servantis void because it nich of the following contracts is not required to appear wrrpublic document? a pp a. Acts and contracts which have for their object the cre- ation, transmission, modification or extinguishment of real rights over immovable property, sales of real prop- erty or of an interest b. The cession, repudiation or renunciation of hereditary rights. ¢. The power to administer property d. Sale of immovable property, e, None of the above. In order that a stipulation in favor of a third person in acon- tract would be valid and binding upon the parties thereto, three of the requisites are mentioned in the following enu- meration. Which among them is nota requisite? a. There mustbe a stipulation in favor of a third person. b. The contracting parties must have clearly and deliber- ately conferred a favor upon that third person. c. The third person communicated his. acceptance to the obligor before its revocation That there must be an existing agency between either of the contracting parties and the third person. A contract whereby the offeree is given by the offeror a certain period of time within which to buy or not to buy a certain thing for a certain price is called: @. Option contract &. Contractto sel b. Contractofsale * d. Barter———Sertracy st 24. Which of the following statement s false? atuitous. mission is essentially grat Remission special mode of payment Fhe liability of a guarantor is primary. Inatternative obligations, the debtor is required to pe, form only one prestation. . nose 22. Which of he following is presumed not to be legal supra, gation? 2. Whena creditorpays another cfeditor who is preferreg =. When a third person, not interested in the obligation pays with the approval of the debtor. , ¢. When a third person interested in the obligation, pays even without the approval of the debtor. d. None of them. 23. Dis indebted to C for P10,000. For the purpose of de. frauding C, D sold his only parcel of land to X valued 10,000. X had no knowiedge of the intention of D. The contract between D and X is binding. The contract is voidable because Dis in bad faith ¢. The right of C is to rescind the contract because the transaction is fraudulent. d. The contract between D and X rescissible. oo 24. In order to defraud C, his creditor, D by means of force compelied B to buy his (D's) land. B has no knowledge of such fact. a b c a As to C, the contract is rescissible ‘Aso B, the contract is voidable Both of (a) and (b) "None of (a) and (b) 26. 2. 28. the duty not to recover what has voluntari though payment was no longer required Natural obligation eec ‘ obligation B. Moral obligation 4. None ofthe above been paid x Company bought out a competitor, Y, with a stipulation that Y should thereafter not engage in any business in the Philippines without the consent of X Company. a. The stipulation is not valid because the parties as a rule have no absolute freedom to stipulate terms and conditions in a contract. b. The stipulation is not valid because this is against pub- lic policy. ¢. The stipulation is valid, only itwill create a monopoly in trade. d. The stipulation is valid. It can be ratified. Statement No. 1: Mutual promise to marry if orally entered into is unenforceable Statement No. 2: Violence or intimidation shall not annul the obligation, ifit was employed by a third person who did not take part in the contract. a. Bothare true b. Both are false c. No. 1is true; No. 2is false d. No. 1is false; No. 2is true Dis indebted to C in the sum of P10,000. For the purpose of avoiding the claims of C, D donated all his properties worth the same amount to X.° The contract is absolutely simulated. : The contract is rescissible. The contract is merely voidable. The contract is void. aegp298. 29. 30. 34 22, Inthree ofthe following, the transaction IS Void, Why, the exception? @. Authonty ofthe agent ally made in Sale of immovaye roperty 4 Sracotract of prtnerstip wheneverimmovale pron ertyis contributed. Dowes C P500, However, C's right has already prescribeq Notwithstanding the knowledge of this fact, D paid the amount. Realizing this mistake, D wants to recover the amount he paid a. Dcan be made to recover on ground of mistake. can be made to recover on the ground that his ot gation is not legally enforceable. D can be made to recover because this, the expense of D. 4. Dcannotrecover. c enrich ¢ at Which of the following contracts is voidable? a. Those whose object is outside the commerce of men, b. Those which are absolutely fictitious. ©. Those where one of the parties is incapacitated. 4. Those which contemplate an impossible service. %, a former government employee, suffered from severe Bean end was confined in the mental hospital in 2017, Arh ‘cease he 2s placed under the guardianship of lable him to get | became a mning nin 92ths retirement pay In 2018, he Pector and sold some mining claims. 3 34, 36. * example No. 2: S sold his house valued at ipess Law (FOrCPARevewees) 200 028, he sued to annul the sale claim meray capacitated at the tim ng het he was not of Sale. The sale in ques- ©. Voidable 4. Valid ample No. 1:, guardian of W, sold W's house valued at eer for P37,500 or alesion by one-fourth ofthe value 50,000 or only 1,000 because S did not know the true value of the house, a. Both contracts are rescissible b. Only No. 1 is rescissible. c. No. 2is voidable because there is an error or mistake. 4. Both contracts are valid and enforceable. 81 Company bought out a competitor, B2 Corporation, with a stipulation that B2 Corporation should not thereafter en- gage in any business in the Philippines unless consented toand 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. ‘The stipulation is unenforceable as there was no show- ing that the sale was done in writing, The stipulation is void because itis contrary to public policy. Statement No. 1: In voidable contracts, there is no need to fafify the same before they can be considered valid. in un- enforceable contracts, ratification is mandatory before they can be considered enforceable.36. 38, __—_—__—— cons — ~Lenta ‘There is undue influence ifinsidious cor machinations Mtrer’s consent, without which the ther just to obtain the latter's com ich the latte, Jet ig not have entered into the contract, c. No. Tistrue; No, 2 Both are true 02st 6 Both are false d. No. 1is false; No. iste tiles the persi ment No. 1: Dolo incidente ent Person aga, a was employed the right to seek the annulment the contract. Statement No.2: stipulation pour autrui {o the rule on relativity of contracts. aN exception &. Both are true ©. No. Tistrue; No. 2s false b. Bothare false d. No. Tisfalse; No. 2istue Example No. 1-W, 16 years old, sold his house valued at 1 M for P50,000 ora lesion by more than one-fourth of the value of the said house. Example No_2:S sold his house valued at Pi M for only 400,000 because S did not know the true value thereof a. Both examples are unenforceable b. No. 1 is rescissible: while No. 2 is unenforceable c. No. 2is unenforceable 4. Both contracts are binding D forced C to lend him P10,000. The is oe fe promissory noteisin 4 Contract remains to be valid b. The contract is rescissible b pie cont le because the contract is © The contracts void, 4. Cannot demand pay tract unten Payment from D because the con- im XL 39) 40. 4 on July 15, 2017, X entered into a contract with Y. On Feb- wary 10. 2018, X discovered that fraud was committed at the time he entered into the contract, a fraud that vitiated his consent. The action for annulment shall be bought. a. b ©. 4. Within three years from the time of the fraud Within four years from February 10, 2018 Within four years from the time A entered into the con- tract On February 10, 2018 One of the stipulations contained in the contract between MCompany and its employees is that the company shal pay. bonus to employees of the company who shall con- tinue its employment for at least 2 consecutive years, un- less he quits or is discharged before the exoiration of the period of 2 years. X, an employee of the company was discharged just one week before the completion of the two- year period a b. Statement No. X is not entitled to the bonus because his discharge was in accordance with the contract. Xs not entitled to the bonus, because the employer's right to terminate is superior than the right of the em- ployee to be employed. Xis entitled to the bonus whether the discharge is with or without cause. Xs entitiea to the bonus because the debtor company has voluntarily prevented the happening of the condition. ‘one party was mistaken and the other acted fraudulently or inequitably in such a way that the in- strument does not show their true intention, the former may ask for the annulment of the instrument.42 43, 44 4d ( ety tatement of a false cause in lo. 2: The st coy sztement le 2.1 vod thud not be proven ip ere Heended upon another caused WHICH is trug ang t lawtul. c. No. tis true; No. ig joth are true false & Bohare alse 4. No.118!alse; No. 2istne vmenthereis coneurence afofferand acceptance, thers is c. Consent ent a. Payne d. None of the above b. Revocation Essential requisites of a contract c. Subject d. Allofthem a. Consent b. Cause Which of the following instruments is not subject to refor- mation? ‘a. Simple donations inter vivos wherein no condition is imposed b. Wills When the real agreement is void 4. Allofthe above ‘Simulation of Contract ~ Absolute or relative. Relative when: a. Parties not bound at all b. The contract is void ©. The parties conceal their true agret ement None of the above orcemen \ 4. _ wpusiness Law (For CPA Reviewses ee yi wich of ey contract is enforceable even if not reduced in J. Contract executed by one of the parties in a contract Representation as to the credit of a third person Lease of immovable for a period longer than one year ‘Agreement for the sale of immovable property intimidated B to marry his daughter. Aftera year, B would n for annulment but could not to do so be- cause A was around to intimidate him. The marriage con- tract is — a. Rescissible ©. Void b. Voidable d. Unenforceable 48. The following, except one, are the characteristics of a void orinexistent contract. Which is the exception? 49, The defense of illegality of the contract is available to third persons whose interests are not directly affected They are not subject ratification The right to raise defense of illegality cannot be waived. The action or defense for declaration of their nullity or inxistence of the contract does not prescribe. Dowes C P10,000. But the debt prescribed. Later, against the consent of D, X pays C P10,000. a b. c, 4. X.can recover from D P10,000 because the latter was enriched at the expense of X X has no right X cannot recover from D what he paid Both D and C are liable to X50. 51 52. 53, Cont ee 1e person sold a house an, jan of an insan Make aero alee valued at P100,000, toB, bu longi ida lot Th Yer for the approval ofthe court. The contractig, 74,000 with 4, Unenforceable a. Valid b. Rescissible e. Void c. Voidable sfitin a contract betwe ‘Aconferment of @ direct benef een, persons in favor of third person who must accept a Beneft before the same is withdrawn is known as: a. Policitacion ». Stipulation por autrui c. Donation propter nuy 4. Counter-otfer invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. ‘Statement No. 2: Accidental elements of a contract are those agreed upon by the parties, and cannot exist without being stipulated a. Botharetrue b. Both are false ©. No. Tistrue; No. 2is false d. No. tis alse; No. 2istrue Statement No. 4: The action for annulment on the ground of fraud shall be bought within 4 years fror Perfection of contract. * mine time tine ‘Statement No. 2: If valid contract is novated to a void Contract, both contracts are considered void, WA. 55. 56, 57, 1 ousiness Law (For CPA Reviewses 305 ©. No. 1 is true; No. 2s false a. Bothare true 4. No. 1 isfalse; No. 2is true 2 Both are false contract with a false cause is — cc. Unenforceable a. Voidable d. Allofthe above b. Void ‘Three of the following are void contracts, Which is the ex- ception? a. Contracts where the cause is immoral 2 Contracts to prevent a known supporter of a political rival from voting for his candidate for a valuable con- sideration. ¢, Contracts with valid consideration but with unlawful motives. 4. Absolutely simulated contracts. Which of the following contract is not valid? Mutual promise to marry entered into orally Sale of immovable property orally entered into ¢. One of the parties in a contract is incapable of giving consent 4. None of the above D forced C to lend him P10,000. The promissory note is in writing. ‘a. The contract is rescissible because the contract is fraudulent b. The contract is void cc. C cannot demand payment from D because the con- tractis unenforceable 4. Contract remains to be valid