CPA REVIEW

BUSINESS LAW ATTY. MACMOD

CONTRACTS

I. Identification Basic Concept/ Principles

__________ 1. The proposal to make a contract.

__________ 2. Limitations imposed by laws on ones capacity to act.
__________ 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.
__________ 7. It occurs when to wrest consent, serious or irresistible force is employed.
__________ 8. When one party is compelled by reasonable or well grounded fear of a grave
evil upon his person, family or property.
__________ 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

__________ 1. Statute of fraud is for validity and enforceability.

__________ 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.
__________ 7. When the real agreement of the parties stated in a contract is void the parties can
ask for reformation of the instrument.
__________ 8. Consummation of a contract is manifested by the offer and acceptance.

“ It is in your moments of decision that your destiny is shaped.”

-A. Robbins-
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__________ 9. Annulment is available only to persons who are obliged principally or

subsidiary. It is not available to third persons
__________10. Cause is the essential or more proximate purpose, which the parties have in
view in entering into the contract. It voids the contract if unlawful like motive.
__________11. When, there having been a meeting of the minds of the parties to a contract,
their true intention is not expressed in reason of mistake, fraud, inequitable
conduct or accident, one of the parties may ask for the reformation of the
instrument
__________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.
__________19. Just like in voidable contracts, rescission is a primary or principal action.
__________20. Observance of certain forms are necessary for validity in contracts under statute
of fraud.
__________21. To be valid, unenforceabsle contracts must first be ratified.
__________22. A threat to enforce a legal claim is not a ground that can vitiate consent.
__________23. The liability of a 3rd person who induces another to violate a contract is based on
quasi-contract.
__________24. Most contracts in the Civil Code are formal or solemn contracts.
__________25. There can be no action for the reformation of instrument if the real agreement is
void.
__________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 transmissible by their nature, by law or by
stipulation.
__________29. Husband and wife cannot absolutely sell property to each other.
__________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.
__________32. A mere expression of opinion can never result to fraud.
__________33. If the contract does not reflect the true intention of the parties, the main action
should 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.
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__________40. The interpretation of obscure words or stipulation in a contract shall not favor
the party who caused the obscurity.
MULTIPLE CHOICE

41. S offers to sell his house 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 P10, 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 fraudulently induces S to sell him (B) a masterpiece painting for P10, 000.
Subsequently, B sold it to X for P12, 000, 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
b. An action for annulment of contract is imprescriptible
c. An action to declare contract void is not subject to prescription
d. An action for rescission of contract prescribes in five (5) years counted from the
execution of the contract
46. The following contracts should observe the Statute of Frauds, except:
a. Guaranty
b. Lease of personal property longer than one year
c. Representation as to the credit of a third person
d. Lease of real property longer than one year
47. An “invitation to bid”, B proposes the following:
“I will buy the property for P10, 000 if the bid of any other offerrors or bidders shall be
considered the best terms of amount and conditions, I am to equal that offer”.
a. The offer is speculative, because it cannot be considered as against another offer which
is certain
b. The offer is considered a counter offer
c. This is a continuing offer which is very certain
d. The advertiser is not bound to accept the higher bidder
48. In the preceding question, which of the following statements is correct?
a. If there is no more offer made, the contract is perfected on the offer of B because he will
be considered as the highest bidder
b. However, if another bidder, X, bidder P15, 000, he will be considered as the highest
bidder and the contract is perfected
c. In letter (b), if X increases his bid for P20, 000, and no more bids equals his bid, the
contract is perfected for P20, 000
d. Answer is not given
49. On July 15, 2004, X entered into a contract with Y. On February 10, 2005, X discovered that
fraud was committed at the time he entered
a. Within three years from the time of the fraud
b. Within four years from February 10, 2005
c. Within four years from the time A entered into the contract
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d. On February 10, 2005

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.
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, 2009. 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, 1997. 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
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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
65. 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
66. 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
67. 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.
68. 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
69. 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
70. 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
71. 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
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72. 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

73. 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.
74. 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
d. All of the above
75. Statement No. 1: A threat to enforce one’s claim through competent authority, if the claim is
just or legal does not vitiate consent.
Statement No.2: Contracts entered into during a lucid interval are valid. Contracts agreed into
a state of drunkenness or during a hypnotic spell are binding.
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 defective contracts, ratification cleanses the defects. Which is the
exception?
a. Both parties are incapable of giving consent
b. Sale of immovable property or interest orally entered into
c. Sale of piece of land thru an agent the authority is oral
d. Contracts entered into by a person who has been given no authority
77. Valid until annulled unless there has been ratification
a. Rescissible contract c. Voidable contract
b. Inexistence contract d. None of the above
78. 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?
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.
79. Example 1 – S sold to B in private instrument his land. Later, B wanted to have the sale
registered, but registration requires a public instrument. In here, B may compel S to execute
the needed public instrument.
Example 2 – S sold to B orally his specific land. After B paid S the price of the sale, he wants
to register the land in his name but he needed a public instrument of sale. In here B may
compel S to execute the needed public instrument.
a. Both examples are false c. Only 2 is true
b. Only 1 is true d. Both examples are true.
80. Statement No.1: Ratification of voidable contract is necessary for its validity.
Statement No.2: One can ask for the annulment of a contract based on dolo incidente.
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
81. S was forced by X to sign a contract with B for the sale of specific property for P10, 000. C a
creditor of X is prejudiced by the contract. What can S do?
a. S may ask for annulment of the contract
b. S may ask for rescission of the contract
c. S may ask C to declare the contract avoided
d. C may ask for the annulment of the contract.
82. In the preceding number, what can C do?
a. C may ask for rescission of the contract
b. C may ask for the reformation
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c. C may ask S to declare the contract voided
d. C may ask for the annulment of the contract.

83. Which of the following contracts is voidable?

a. Those where both parties are incapable of giving consent to a contract.
b. Those undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due to them.
c. Those where the consent is vitiated by mistake, violence, intimidation, undue influence
or fraud
d. Those whose object is outside the commerce of men
84. Statement No. 1: A stipulation in a contract of lease, which provides that the tenant shall
have the right to continue in possession of the leased premises so long as he pays monthly
rentals thereon, is a valid stipulation.
Statement No. 2: The seller sold to a minor some necessaries in the amount of P600. The
goods were delivered to the minor who, in turn paid the purchase price therefore. The
contract is unenforceable.
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
85. S and B orally agree that S would sell and B wound buy S’s radio for P400, two years from
the date of the agreement. At the end of the two-year period, S refused to deliver the radio
although B was willing to pay.
a. B can compel S to deliver because B is willing to pay the price.
b. The contract falls under the Statue of Frauds, therefore unenforceable.
c. No Statue of Frauds because the price is less than P500.
d. The object is movable, oral contract is enforceable.
86. This kind of defective contract refers to that contract which is validly agreed upon because
all the essential elements exits, but courts can nullify it when there is damage or prejudice to
one of the parties or to a third person. Its enforcement would cause injustice by reason of
some external facts.
a. Voidable contract c. Rescissible Contract
b. Void or Inexistence Contract d. Unenforceable Contract
87. Must be in writing to be enforceable:
a. Lease of land for 12 months c. Both of a and b
b. Lease of car for 18 months d. None of a and b
88. S, a minor, owns a specific property valued P50, 000. B, Capacitated, by means of fraud
induced S to sell his property to him (B) for P10, 000 which S did so. The contract is in
writing.
a. The contract is binding from the start
b. The contract remains unenforceable because it falls under the Statue of Frauds.
c. The contract is rescissible because the ward suffered lesion by more then one-fourth of
the value.
d. The contract is void.
89. A contract entered into in violation of right of first refusal is:
a. Rescissible d. Void
b. Voidable e. None of the above
c. Unenforceable
90. A, a bachelor lawyer, raped W twice. Upon learning this, “F” the father of W, was able to
force A to marry W under pain of being sued in court and debarred from the practice of his
law profession. Which statement is correct?
a. The marriage may be annulled on the ground of force or violence
b. The marriage may be annulled on the ground of threat or intimidation
c. The defective marriage, may, however, be ratified
d. There was no defect, the marriage was perfectly valid
91. S owns an oil painting. Being in need of money, S sold the painting to B for P1, 000. After
the sale it was discovered that the painting was valuable and worth P5, 000.
a. S may rescind the contract on ground of lesion or inadequacy of cause
b. S may rescind the contract on ground of fraud
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c. S may annul the contract on the ground of error
d. B is entitled to the benefit of the contract because it is valid and binding

92. Statement No. 1: An agreement which, by its terms and conditions, is to be performed within
a year from the making thereof is unenforceable even if entered into orally.
Statement No. 2: A contract involving fraud (dolo incidente) 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
93. Type of defective contract that creates no rights and impose no obligation, but are susceptible
of ratification.
a. Voidable contracts c. Rescissible Contracts
b. Unenforceable Contracts d. Void Contracts
94. 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
c. C cannot demand payment from D because the contract is unenforceable
d. Contract remains to be valid
95. Which of the following contract is not valid?
a. Mutual promise to marry entered into orally
b. Sale of immovable property orally entered into
c. One of the parties in a contract is incapable of giving consent
d. Sale of immovable property thru an agent
96. Three of the following are void contracts. Which is the exception?
a. Contracts where the cause is immoral
b. Contracts to prevent a known supporter of a political rival from voting for his
candidate for a valuable consideration
c. Contracts with a valid consideration but with unlawful motives
d. Absolutely simulated contracts
97. Contract with a false cause is
a. Voidable c. Unenforceable
b. Void d. All of the above
98. Statement No.1: The action for annulment on the ground of fraud shall be brought within 4
years from the time of the perfection of contract.
Statement No.2: If a valid contract is novated to a void contract, both contracts are
considered void.
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
99. Statement No.1: Advertisements for bidders are simply 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. 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
100. A conferment of a direct benefit in a contract between two persons in favor of a third person
who must accept such benefit before the same is withdrawn is known as:
a. Policitacion c. donation propter nuptias
b. Stipulation por autrui d. Counter-offer
101. The guardian of an insane person sells a house and a lot belonging to the latter valued at
P100, 000 to B, buyer for P74, 000 with the approval of the court. The contract is:
a. Valid d. Unenforceable
b. Rescissible e. Void
c. Voidable
102. The following, except one, are the characteristics of void or inexistent contract. Which is
the exception
a. The defense of illegality of the contract is available to third person whose interests are
not directlty affected
b. They are not subject to ratification
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c. The right to raise defense of illegality cannot be waived
d. The action or defense for declaration of their nullity or inexistence of the contract does
not prescribe
103.A intimidated B to marry his daughter. After a year, B would like to file an action for
annulment but could not do so because A was around to intimidate him. The marriage
contract is
a. Rescissible c. Void
b. Voidable d. Unenforceable
104. Which of the following contract is enforceable even if not reduced in writing.
a. Lease of car for 2 years
b. Representation as to the credit of a third person
c. Lease of immovable for a period longer than one year.
d. Agreement for the sale of immovable property.
105. Simulation of Contract - Absolute or relative. Relative when:
a. Parties not bound at all
b. The contract is void
c. The parties conceal their true agreement
d. None of the above
106. Which of the following instruments is not subject to reformation?
a. Simple donations inter vivos wherein no condition imposed
b. Wills
c. When the real agreement is void
d. All of the above
107. Essential requisites of a contract:
a. Consent c. Subject
b. Cause d. All of them
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. Statement No.1: If one party was mistaken and the other acted fraudulently or inequitably in
such a way that the instrument does not show their true intention, the former may ask for
the annulment of the instrument.
Statement No.2: The statement of a false cause in contracts shall render them void, if it
should not be proven that they were founded upon another caused which is true and
lawful.
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
110. 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.
111. 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 building 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
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112. Statement No.1: Dolo incidente entitled the person against whom it was employed the
right to seek the annulment of the 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
113. 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 was 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
114. 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.
115. Example No.1: G, guardian of W, sold W’s house valued at P50, 000 for P37, 500 or a
lesion by one-fourth of the value.
Example No.2: S sold his house valued at P50, 000 for only P10, 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.2 is voidable because there is an error or mistake.
d. Both contracts are valid and enforceable.
116. X, a former government employee, suffered from severe paranoia and was
confined in the mental hospital in 1989. After his release he was placed under
the guardianship of his wife to enable him to get his retirement pay. In 1992,
he became a mining prospector and sold some mining camps. In 1995 he sue
to annul the sale claiming that he was not mentally capacitated at the time of
sale. The sale in question was
a. Illegal
b. Void
c. Voidable
d. Valid
117. Which of the following contracts is void and inexistent?
a. Those whose object is outside the commerce of men.
b. Those of which are absolutely fictitious.
c. Those with unlawful consideration.
d. Those which contemplate an impossible service.

END
“We are what we think. All that we are arises with our thoughts. With our thoughts,
we make our world.”
The Buddha
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