Excel Professional Services, Inc.

Management Firm of Professional Review and Training Center (PRTC)

Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Since 1977
CPA REVIEW
RFBT.3602 VILLEGAS/APRADO/MAGUMUN/CELIZ
Contracts (RA 386) May 2024
LECTURE NOTES

Contract 5. Consensuality – contracts are perfected by mere

consent, and from that moment the parties are bound
It is a meeting of minds between two persons whereby not only to the fulfillment of what has been expressly
one binds himself, with respect to the other, to give stipulated but also to all the consequences which
something, or to render some service. (Art. 1305) according to their nature, may be in keeping with good
faith, usage and law (Art. 1315)
Stages in Making a Contract
Essential Requisites of a Contract
1. Conception or Generation – the first stage where the
parties begin their initial negotiation and bargaining for I. Consent
the formation of the contract ending at the moment of II. Object certain or subject matter; and
agreement of the parties; III. Cause or consideration (Art. 1318)
2. Perfection or Birth – the parties had a meeting of
minds as to the object, cause or consideration and Note: In real contracts, the delivery of the object of the
other terms and conditions of the contract; contract is required as a further requisite.
3. Consummation or fulfillment – the last stage which
consists in their performance or fulfillment by the I. Consent
parties of their obligation under the term of the
perfected contract. It is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to
Characteristics of a Contract constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a
1. Autonomy – it is the freedom of the parties to contract counter-offer. (Art, 1319)
and stipulate provided the stipulations are not contrary
to law, morals, good customs, public order or public Requisites:
policy (Art. 1306)
1. Legal capacity of the contracting parties;
2. Mutuality – the contract must bind both contracting 2. Manifestation of the conformity of the contracting
parties and its validity or compliance cannot be left to parties;
the will of one of them (Art. 1308) 3. Parties’ conformity to the object, cause, terms and
condition of the contract must be intelligent,
However, the termination of the contract does not spontaneous and free from all vices of consent; and
necessarily require mutuality, and it can be validly 4. The conformity must be real.
left to one party by agreement or under a
resolutory facultative condition. Offer

3. Obligatoriness – contracts shall be obligatory in It is defined as an expression of willingness to contract on

whatever form they may have been entered into, certain terms, made with the intention that it shall become
provided all the essential requisites for validity are binding as soon as it is accepted by the person to whom it
present (Art. 1356) is addressed. It must be definite, intentional, and
complete.
4. Relativity
General Rule: Contracts take effect only between Rules on advertisements as offers
the parties or their assigns and heirs.
Exceptions: 1. Business advertisements – not a definite offer, but
a. Rights and obligations that are not mere invitation to make an offer, unless it appears
transmissible by their nature, or by the otherwise. (Art 1325)
stipulation or by provisions of law (Art 1311) 2. Advertisement for bidders – simply invitation to make
b. Stipulation pour autrui (stipulation in favor of a proposals and advertiser is not bound to accept the
third person) – benefits clearly and highest or lowest bidder, unless the contrary appears.
deliberately conferred by parties to a contract (Art. 1326)
upon third persons (Art. 1311) and which
stipulation is merely part of a contract entered Requisites of Valid Acceptance
into by the parties, neither of whom acted as
agents of third person and which favor can be 1. Must be absolute; a qualified acceptance constitutes
demanded by the third person if duly accepted counter-offer (Art. 1319);
by him before it could be revoked. 2. No specified form but when the offeror specifies a
c. Third persons coming in possession of the particular form, such must be complied with.
object of contract creating real rights subject
to the provisions of Mortgage Law and the Persons incapacitated to give consent
Land Registration Law (Art. 1312) 1. Deaf-mutes who do not know how to read and write;
d. Contracts entered into in fraud of creditors 2. Insane or demented persons, unless the contract was
(Art. 1313) entered into during a lucid interval;
e. When a third person induces a party to violate 3. Minors (Art. 1327)
a contract (Art. 1314) 4. Persons under guardianship
5. Persons suffering from civil interdiction

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4. Services which are contrary to law, morals, good

customs, public order or public policy;
Vices of Consent 5. Impossible things or services; and
6. Objects which are not possible of determination as to
1. Mistake – refers to mistake of facts, not of law, thus their kind.
rendering the contract voidable, unless mistake of law
involves mutual error as to the legal effect of an III. Cause
agreement when the real purpose of the parties is
frustrated. (Art. 1334) It is the essential or more proximate purpose which moves
the contracting parties to enter into the contract. It is the
2. Intimidation – when one of the contracting parties is immediate and direct cause which justifies the creation of
compelled by a reasonable and well-grounded fear of an obligation through the will of the contracting parties.
an imminent and grave evil upon his person or
property of his spouse, descendants or ascendants, to Requisites:
give his consent. (Art. 1335 [2]) It must:
1. Exist;
3. Violence – when in order to wrest consent, serious or 2. Be true; and
irresistible force is employed. (Art. 1335) 3. Be licit.

However, a threat to one’s claim through competent Note: Although the cause is not stated in the contract, it is
authority, if the claim is just or legal, does not vitiate presumed that it exists and is lawful unless the debtor
consent. (Art. 1335 [4]) proves the contrary. (Art 1345)

Note: Violence or intimidation shall annul the Kinds of Cause

obligation, although it may have been employed by a
third person who did not take part in the contract. 1. Cause of onerous contracts – the prestation or promise
(Art. 1336) of a thing or service by the other.
2. Cause for remuneratory contracts – the service or
4. Undue Influence – when a person takes improper benefit remunerated.
advantage of his power over the will of another, 3. Cause for gratuitous contracts – the mere liberality of
depriving the latter of a reasonable freedom of choice. the donor or benefactor; it does not involve any
(Art. 1337) material thing but rather it involves only the
generosity of the benefactor.
5. Fraud – when through the insidious words or 4. Accessory – identical with cause of principal contract,
machinations of one of the contracting parties, the from which the accessory derived its life and
other is induced to enter in to a contract which, existence.
without them, he would not have agreed to. (Art 1338)
Formality
Kinds of Fraud to Vitiate Consent
General Rule: Form is not required in consensual
a. Causal fraud (dolo causante) – it is employed contracts.
by one party prior to or simultaneous with the
creation or perfection of the contract to secure Exceptions: When the law requires a contract to be in
the consent of the other. writing for its:
b. Incidental fraud (dolo incidente) – it is 1. Validity (formal contracts);
committed in the performance of the 2. Enforceability (under Statute of Frauds); or
obligation, and its existence merely results in 3. For convenience of parties.
breach of an already existing contract, which
entitles the injured party to damages. (Art. Formalities required in specific contracts
1170)
1. Donations
II. Object a. Personal property – if the value exceeds
P5,000, the donation and acceptance must be
It is the subject matter of the contract. It can be a thing, both written (Art. 748)
right or service arising from a contract.
b. Real property:
Requisites: i. Donation must be in a public
1. Determinate or determinable; instrument specifying therein the
2. Existing or potentially to exist subsequent to the property donated and value of charges
contract; which done must satisfy;
3. Must be licit; ii. Acceptance must be written, either in
4. Within the commerce of man; and the same deed of donation or in a
5. Transmissible. separate instrument, but shall not take
effect unless it is done during the
General rule: All things or services may be the object of lifetime of the donor;
contracts. iii. If acceptance is in a separate
instrument, the donor shall be notified
Exceptions: thereof in an authentic form, and this
1. Things outside the commerce of men; (Art. 1347) step shall be noted in both
2. Intransmissible rights; instruments.
3. Future inheritance, except in cases expressly
authorized by law;

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(Art. 749) 2. Innominate – those which lack name or

individuality, and are not regulated by special
2. Partnership where real property is contributed provisions of law.
a. There must be a public instrument regarding
the partnership; Reformation of Instruments
b. The inventory of the realty must be made,
signed by the parties, and attached to the It is a remedy to conform to the real intention of the
public instrument. (Art. 1773) parties due to mistake, fraud, inequitable conduct,
accident. (Art. 1359)
3. Antichresis – the amount of the principal and interest
must be in writing. (Art. 2134) Requisites:
1. There is a meeting of the minds of the parties to a
4. Sale or Agency to sell real property or an interest contract;
therein – authority of the agent must be in writing, 2. The parties’ true intention is not expressed in the
otherwise, the sale shall be void. (Art. 1874) instrument;
3. Such failure of the instrument to express the parties’
5. Stipulation to charge interest – interest must be intention is by reason of mistake, accident, relative
stipulated in writing (Art. 1956) simulation, fraud, or inequitable conduct;
4. The facts upon which relief by way of reformation of
6. Chattel mortgage – personal property must be the instrument is sought are put in issue by the
recorded in Chattel Mortgage register. (Art. 2140) pleadings; and
5. There is strong, clear and convincing proof of mistake,
Kinds of Contracts accident, relative simulation, fraud, or inequitable
conduct.
A. According to perfection or formation
1. Consensual – perfected by meeting of the minds of Prescriptive period in reformation of instruments: within
the parties (Art. 1305) 10 years from the date of the execution of the instrument,
2. Real – requires for their perfection both the since the suit is based on a written document.
consent of the parties, and the delivery of the
object by one party to the other Interpretation of Contracts
3. Solemn – that which the law requires that they be
in some particular form (e.g. writing) If the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal
B. According to the degree of dependence meaning of its stipulations shall control.
1. Principal – that which can exist independently of
other contracts If the words appear to be contrary to the evident intention
2. Accessory – that which cannot exist without a valid of the parties, the latter shall prevail over the former. (Art.
principal contract 1370)
3. Preparatory – that which is not the end by itself,
but only a means for the execution of another In order to judge the intention of the contracting parties,
contract. their contemporaneous and subsequent acts shall be
principally considered. (Art. 1371)
C. According to their form
1. Common or informal – those which require no However general the terms of a contract may be, they
particular form shall not be understood to comprehend things that are
2. Special or Formal – those which require a distinct and cases that are different from those upon which
particular form the parties intended to agree. (Art. 1372)

D. According to their nature of the vinculum which they If some stipulation of any contract should admit of several
produce meanings, it shall be understood as bearing that import
1. Unilateral – those which give rise to an obligation which is most adequate to render it effectual. (Art. 1373)
only to one of the parties
2. Bilateral – those which give rise to reciprocal The various stipulations of a contract shall be interpreted
obligations for both parties. together, attributing to the doubtful ones that sense which
may result from all of them taken jointly. (Art. 1374)

E. According to the risks involved Words which may have different significations shall be
1. Commutative – those where each of the parties understood in that which is most in keeping with the
acquire an equivalent of his prestation and such nature and object of the contract. (Art. 1375)
equivalent is pecuniarily appreciable and already
determined from the moment of the perfection of The usage or custom of the place shall be borne in mind in
the contract. the interpretation of the ambiguities of a contract, and
2. Aleatory – those which are dependent upon the shall fill the omission of stipulations which are ordinarily
happening of an uncertain event, thus, charging established. (Art. 1376)
the parties with the risk of loss or gain.
The interpretation of obscure words or stipulations in a
F. According to their names of norms regulating them contract shall not favor the party who caused the
1. Nominate – those which have their own name and obscurity. (Art. 1377)
individuality, and are regulated by provisions of
law. When it is absolutely impossible to settle doubts by the
rules established in the preceding articles, and the doubts
refer to incidental circumstances of a gratuitous contract,

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the least transmission of rights and interests shall prevail.

If the contract is onerous, the doubt shall be settled in II. Voidable Contracts
favor of the greatest reciprocity of interests.
Are those where consent is vitiated either by the
If the doubts are cast upon the principal object of the incapacity of one of the contracting parties or by mistake,
contract in such a way that it cannot be known what may violence, intimidation, undue influence or fraud. These
have been the intention or will of the parties, the contract contracts are binding, unless they are annulled by a
shall be null and void. (Art. 1378) proper action in court. It is susceptible of ratification.
(Art. 1390)
DEFECTIVE CONTRACTS
Note: Annulment may be had even if there be no damage
I. Rescissible Contracts to the contracting parties.

These are contracts validly constituted but nevertheless Characteristics:

may be set aside due to a particular economic damage or 1. Effective until set aside;
lesion caused to either of the parties or to a third person. It 2. Can be ratified;
may be set aside on whole or in part, up to the extent of 3. Can be assailed only by the party whose consent was
the damage caused. (Art. 1381) defective or his heirs or assigns;
4. May be attacked indirectly or collaterally, by way of
Characteristics of Rescissible contract defense to an action under the contract by way of a
1. It has all the elements of a valid contract; counterclaim.
2. It has a defect consisting of an injury to one of the
contracting parties or to a third person; Classes of voidable contracts:
3. It is valid and effective until rescinded; 1. Those where one of the parties is incapable of
4. It can be attached only directly; and giving consent; and
5. It is susceptible of convalidation only by 2. Those where the consent is vitiated by mistake,
prescription. violence, intimidation, undue influence or fraud.
(Art. 1390)
Contracts that may be rescinded:
1. Under Art. 1381, those Note: An action for annulment may be instituted by all
a. Entered into by guardians whenever the wards who are thereby obliged principally or subsidiarily. He who
whom they represent suffer lesion by more has capacity may not invoke the incapacity of the party
than ¼ of value of the property (Art. 1381 with whom he has contracted no can those who exerted
[1]); intimidation, violence or undue influence or employed
fraud or caused mistake base their action upon these flaws
If a guardian alienates properties of the of the contract.
ward without judicial approval, the
contract is unenforceable for lack of Causes of extinction of an action to annul
authority (Art. 1403 par 1); 1. Prescription – the action for annulment must be
commenced within 4 years depending on the ground
b. Agreed upon in representation of the stated.
absentees, if absentee suffers lesion by more a. Under Art 1381 no.1 – within 4 years from the
than ¼ value of the property (Art. 1382 [2]); time of the termination of the incapacity of the
ward;
c. Contracts where rescission is based on fraud b. Under Art. 1381 no. 2 – within 4 years from
committed on creditor and cannot collect the the time the domicile of the absentee is
claim due (accion pauliana) (Art. 1381 [3]); known; or
c. Under Art. 1381 nos. 3&4 & Art. 1382 - within
d. Contracts where the object involved is the 4 years from the time of the discovery of
subject of litigation; contract entered into by fraud.
defendant without knowledge or approval of
litigants or judicial authority (Art 1381 [4]); 2. Ratification – cleanses the contract of its defects from
the moment it was constituted. (Art 1396)
e. Payment by an insolvent – on debts which are
not yet due; prejudices the claim of others a. Express – the desire of the innocent party
(Art. 1382); to validate the contract is clearly
manifested verbally or formally in writing
f. Provided for by law (Arts. 1526, 1534, 1538, b. Implied – it is the knowledge of the reason
1539, 1542, 1556, 1560, 1567 & 1659) which renders the contract voidable and
such reason having ceased, the person
2. Payments made in state of insolvency (Art. 1382) who has a right to invoke it should execute
a. Plaintiff has no other means to maintain an act which necessarily implies an
reparation; intention to waive his right (Art. 1393)
b. Plaintiff must be able to return whatever he
may be obliged to return due to rescission; 3. By loss of the thing which is the object of the contract
c. The things must not have been passed to third through fraud or fault of the person who is entitled to
persons in good faith; annul the contract. (Art. 1401)
d. It must be made within 4 years (Art. 1382) 4. If the minor is guilty of active misrepresentation of his
age.
Note: Rescission of contract creates an obligation of
mutual restitution of the objects of the contract, their III. Unenforceable Contracts
fruits, and the price with interest.

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Those contracts which cannot be enforced by action or

complaint, unless they have been ratified by the party or
parties who did not give consent thereto.

An unenforceable contract is valid although it produces no

legal effect.

Characteristics of Unenforceable Contracts

1. It cannot be enforced by a proper action in court;
2. It may be ratified;
3. It cannot be assailed by a third person;
4. May only be assailed as a way of defense, not by direct
action; and
5. The defect of unenforceable contract is of a permanent
nature and it will exist as long as the contract is not
duly ratified. The mere lapse of time cannot give
efficacy to the contract.

Kinds of unenforceable contracts

1. Those entered into in the name of another person by
one who has been given no authority/legal
representation or acted beyond his powers;

Note: A contract of sale over a piece of land

entered into by an agent whose authority is not in
writing, even if he acted beyond the scope of his
authority is void, not merely unenforceable. (Art.
1874)

2. Those that do not comply with the Statute if Frauds;

and

3. Those where both parties are incapable of giving

consent to a contract. (Art. 1403)

IV. Void/ Inexistent Contracts

A void or inexistent contract is one which has no force and

effect from the very beginning, as if it had never been
entered into, and which cannot be validated either by time
or ratification. A void or inexistent contract is equivalent to
nothing; it is absolutely wanting in civil effects.

Characteristics of Void Contracts

1. The contract produces no effect whatsoever either
against or in favor of anyone; hence it does not create,
modify, or extinguish the juridical relation to which it
refers;
2. No action for annulment is necessary, because nullity
exists ipso jure; a judgment of nullity would merely be
declaratory;
3. It cannot be confirmed or ratified; and
4. If it has been performed, the restoration of what has
been given is in order.

Note: The defect or inexistence of a contract is permanent.

It cannot be cured by ratification nor prescription.

The following contracts are inexistent and void from the

beginning:
1. Those whose cause, object or purpose is contrary to
law, morals, good customs, public order or public
policy;
2. Those which are absolutely simulated or fictitious;
3. Those whose cause or object did not exist at the time
of the transaction;
4. Those whose object is outside the commerce of men;
5. Those which contemplate an impossible service;
6. Those where the intention of the parties relative to the
principal object of the contract cannot be ascertained;
7. Those expressly prohibited or declared void by law.

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CONTRACT MC QUESTIONS

1. The validity and efficacy of the contract cannot be left d. All of them
to the will of one of the contracting parties.
a. Relativity of contract 8. Acceptance of an offer made by letter or telegram shall
b. Mutuality of contract bind the offeror:
c. Obligatoriness of contract a. From the time the offeree has knowledge of the
d. Freedom of contract offer.
2. This principle means that contracts take effect only b. From the time the offeree sent his acceptance.
upon the contracting parties, their assigns or c. From the time the acceptance is communicated.
successors-in-interest d. From the time the offeror made the offer.
e. Relativity of contract
f. Mutuality of contract 9. Essential requisites of a contract:
g. Obligatoriness of contract a. Consent
h. Freedom of contract b. Cause
c. Subject
3. Consent is manifested by the meeting of the offer and d. All of them
the acceptance upon the thing and the cause which
are to constitute the contract. Which of the following 10. An incidental element of a contract
constitutes a definite offer? a. Implied warranty
a. An offer made through an agent b. Payment of interest in a loan
b. Business advertisement of things for sale c. Delivery of the object in contract of pledge
c. Advertisement for bidders d. All of the above
d. All of the above
11. S1 - A threat to enforce one’s claim through
4. An agreement in restraint of trade. competent authority, if the claim is just or legal does
a. Perfectly valid not vitiate consent.
b. Voidable S2 - Contracts entered into during a lucid interval are
c. Unenforceable valid. Contracts agreed into a state of drunkenness or
d. Void during a hypnotic spell are binding.
a. Both are true
5. Contract that is made for a valuable consideration is: b. Both are false
a. Onerous c. No.1 is true; No. 2 is false
b. Gratuitous d. No.1 is false; No. 2 is true
c. Onerous and Gratuitous
d. Aleatory 12. Which of the following contract is not valid?
a. Mutual promise to marry entered into orally
6. The stage of “conception” of a contract is: b. Sale of immovable property orally entered into
a. When the contract is fully executed c. One of the parties in a contract is incapable of
b. When the parties come to an agreement giving consent
c. When negotiations are in progress d. Sale of immovable property thru an agent
d. When there is a meeting of the parties’ minds.
13. A conferment of a direct benefit in a contract between
7. These persons are bound by contracts: two persons in favor of a third person who must accept
a. Contracting parties such benefit before the same is withdrawn is known
b. Assigns or Assign as:
c. Heirs a. Policitacion

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b. Stipulation por autrui a. Rescissible contract

c. Donation propter nuptias b. Inexistence contract
d. Counter-offer c. Voidable contract
d. None of the above
14. The offeror need not know the acceptance by the
offeree is the theory of: 23. Because of the intimidation employed by X, a third
e. Cognition person, S sold his car to B. This contract is:
f. Manifestation a. Void
g. Expedition b. Voidable
h. B or C c. Unenforceable
d. Rescissible
15. Statement No.1: Dolo incidente entitles the person
against whom it was employed the right to seek the 24. B called C by the telephone to guaranty the debt of D
annulment of the contract. to C. The contract between B and C is:
Statement No.2: Innominate contracts are exclusively a. Unenforceable
regulated by the stipulations of the parties. b. Voidable
a. Both are true c. Rescissible
b. Both are false d. Annullable
c. No.1 is true; No. 2 is false
d. No.1 is false; No. 2 is true 25. This kind of defective contract refers to that contract
which is validly agreed upon because all the essential
16. Which of the following instruments is not subject to elements exits, but courts can nullify it when there is
reformation? damage or prejudice to one of the parties or to a third
a. Simple donations inter vivos wherein no condition person. Its enforcement would cause injustice by
imposed reason of some external facts.
b. Wills a. Voidable contract
c. When the real agreement is void b. Void or Inexistence Contract
d. All of the above c. Rescissible Contract
d. Unenforceable Contract
17. The following contracts should observe the Statute of
Frauds, except: 26. P, who was in Hongkong, made an overseas call to A,
a. Guaranty his friend, to sell P’s lot in Quezon City immediately as
b. Lease of personal property longer than one year P needed cash. Accordingly, A sold the lot to B. The
c. Representation as to the credit of a third person deed of sale is in a public document. The sale of P’s lot
d. Lease of personal property for one year is:
a. Valid
18. Which of the following contracts is required to be in b. Rescissible
writing to be enforceable? c. Unenforceable
a. An agreement that by its terms is not to be d. Void
performed within a year from the making thereof.
b. A special promise to answer for the debt, default 27. All are incorrect about contracts except one
or miscarriage of another. a. Voidable contracts are also called validable
c. An agreement made in consideration of marriage, contracts
other than a mutual promise to marry. b. Stipulation pour autrui is an exception to mutuality
d. All of the above. of contracts
c. Fraud in inducement is a ground to nullify a
19. Contracts that cannot be sued upon unless ratified: contract
a. Voidable d. Void contracts are unenforceable but not vice
b. Unenforceable versa
c. Rescissible
d. Void 28. The following, except one, are the characteristics of
void or inexistent contact. What is the exception?
20. Which of the following can be considered as feature of a. They are not subject to ratification.
the void contract? b. The right to raise defense of illegality cannot be
a. Subject to ratification waived.
b. They exist c. The defense of illegality of the contract is available
c. Action or defense for nullity is subject to to third persons whose interest is not directly
prescription affected.
d. It is imprescriptible as a defense d. The action or defense for declaration of the nullity
or inexistence of the contract does not prescribed.
21. In three of the following defective contracts,
ratification cleanses the defects. Which is the 29. Mistake in three of the following will not make a
exception? contract voidable. Which one will not?
a. Both parties are incapable of giving consent a. Mistake as to the substance of the thing which is
b. Sale of immovable property or interest orally the object of the contract.
entered into b. Mistake as to the principal conditions which
c. Sale of piece of land thru an agent the authority is principally moved one or both parties to enter into
oral the contract.
d. Contracts entered into by a person who has been c. Mistake as to the identity or qualifications of one of
given no authority the parties, which identity or qualifications have
been the principal cause of the contract.
22. Valid until annulled unless there has been ratification d. Simple mistake of account.

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requires a public instrument. In here, B may compel S

30. Statute of Frauds is applicable to to execute the needed public instrument.
a. Partially executed contract
b. Oral contract of loan when the amount involved is S sold to B orally his specific land. After B paid S the
less than P500 price of the sale, he wants to register the land in his
c. Contract not to be performed within a year from name but he needed a public instrument of sale. In
the making thereof here B may compel S to execute the needed public
d. All of the above. instrument.
a. Both examples are false c. Only 2 is true
31. When bilateral contracts are vitiated with vices of b. Only 1 is true d. Both are true.
consent, they are rendered
a. rescissible. 38. Ratification of voidable contract is necessary for its
b. void. validity.
c. unenforceable. One can ask for the annulment of a contract based on
d. voidable dolo incidente.
a. Both are true c. I is true, II is false
32. Lino entered into a contract to sell with Ramon, b. Both are false d. I is false, II is true
undertaking to convey to the latter one of the five lots
he owns, without specifying which lot it was, for the 39. S was forced by X to sign a contract with B for the sale
price of P1 million. Later, the parties could not agree of specific property for P10,000. C a creditor of X is
which of five lots he owned Lino undertook to sell to prejudiced by the contract. What can S do?
Ramon. What is the standing of the contract? a. S may ask for annulment of the contract
a. Unenforceable. b. S may ask for rescission of the contract
b. Voidable. c. S may ask C to declare the contract avoided
c. Rescissible. d. C may ask for the annulment of the contract.
d. Void.
40. In the preceding number, what can C do?
33. One of the following statements concerning ratification a. C may ask for rescission of the contract
of a voidable contract is false. Which is it? b. C may ask for the reformation
a. Ratification extinguishes the action to annual c. C may ask S to declare the contract voided
avoidable contract. d. C may ask for the annulment of the contract.
b. Ratification cleanses the contract from all its
defects from the moment it was constituted. 41. Which of the following contracts is voidable?
c. Ratification requires the conformity of the party a. Those where both parties are incapable of giving
who has no right to bring the action for consent to a contract.
annulment. b. Those undertaken in fraud of creditors when the
d. Ratification may be made by the guardian of the latter cannot in any other manner collect the
incapacitated person, or the incapacitated person claims due to them.
upon attaining capacity, or the party whose c. Those where the consent is vitiated by mistake,
consent was vitiated. violence, intimidation, undue influence or fraud
d. Those whose object is outside the commerce of
34. The following agreements are covered by the Statute men
of Fraud. Which is not?
a. An oral agreement which by its terms is not to be 42. A stipulation in a contract of lease, which provides that
performed within one year from the making the tenant shall have the right to continue in
thereof. possession of the leased premises so long as he pays
b. An oral special promise to answer for the debt, monthly rentals thereon, is a valid stipulation.
default or miscarriage of another.
c. An oral agreement in consideration of marriage. The seller sold to a minor some necessaries in the
d. An oral contract of partnership where the amount of P600. The goods were delivered to the
contribution in money or personal property minor who, in turn paid the purchase price therefore.
amounts to P3,000 or more. The contract is unenforceable.
a. Both are true c. No.1 is true; No. 2 is false
35. S owns an oil painting. Being in need of money, S sold b. Both are false d. No.1 is false; No. 2 is true
the painting to B for P1, 000. After the sale it was
discovered that the painting was valuable and worth 43. S and B orally agree that S would sell and B wound
P5, 000. buy S’s radio for P400, two years from the date of the
a. S may rescind the contract on ground of lesion agreement. At the end of the two-year period, S
or inadequacy of cause refused to deliver the radio although B was willing to
b. S may rescind the contract on ground of fraud pay.
c. S may annul the contract on the ground of error a. B can compel S to deliver because B is willing to
d. B is entitled to the benefit of the contract pay the price.
because it is valid and binding b. The contract falls under the Statue of Frauds,
therefore unenforceable.
36. Contract which has no effect at all and cannot be c. No Statue of Frauds because the price is less
ratified is a/an: than P500.
a. Unenforceable c. Voidable d. The object is movable, oral contract is
b. Void contract d. All of them enforceable.

37. S sold to B in private instrument his land. Later, B 44. This kind of defective contract refers to that contract
wanted to have the sale registered, but registration which is validly agreed upon because all the essential

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elements exits, but courts can nullify it when there is a. Minority c. Marriage
damage or prejudice to one of the parties or to a third b. Deaf-mute d. Insanity
person. Its enforcement would cause injustice by
reason of some external facts. 54. Which of the following statements is correct?
a. Voidable contract c. Rescissible Contract a. All contracts are perfected by mere consent.
b. Void Contract d. Unenforceable Contract b. All contracts are perfected by delivery of the
object.
45. S1 – Reformation of the instrument interprets the c. All contracts are required to be in writing.
contract in order to express the true intention of the d. All contracts are required to have a valid
parties. consideration.
S2 – An onerous contract is interpreted in favor of
greatest reciprocity of interest. 55. It is a principle which holds that a contract must bind
a. Both are true both parties; its validity or compliance cannot be left
b. Both are false to the will of one of them.
c. S1 is true, S2 is false a. Obligatory force of contracts
d. S1 is false, S2 is true b. Autonomy of contracts
46. S1 – In case of conflict between a general provision c. Mutuality of contracts
and a special provision, the customs of the place shall d. Relativity of contracts
prevail.
S2 – A natural obligation is based on positive and 56. It refers to the rule that a contract is binding not only
equity law. between parties but extends to the heirs, successors in
a. Both are true interest, and assignees of the parties, provided that
b. Both are false the contract involved transmissible rights by their
c. S1 is true, S2 is false nature, or by stipulation or by law.
d. S1 is false, S2 is true a. Obligatory force of contracts
b. Autonomy of contracts
47. S1 – Motive is an essential element of a contract. c. Mutuality of contracts
S2 – Illegal motive makes the contract voidable. d. Relativity of contracts
a. Both are true
b. Both are false 57. It is a rule which holds that the freedom of the parties
c. S1 is true, S2 is false to contract includes the freedom to stipulate, provided
d. S1 is false, S2 is true the stipulations are not contrary to law, morals, good
customs, public order or public policy.
48. Must be in writing to be enforceable: a. Obligatory force of contracts
a. Lease of land for 12 months c. Both of a and b b. Autonomy of contracts
b. Lease of car for 18 months d. None of a and b c. Mutuality of contracts
d. Relativity of contracts
49. Which of the following is not a characteristic of a
contract? 58. The following are rescissible contracts, except:
a. Autonomy c. Mutuality a. Entered into by guardian whenever ward suffers
b. Relativity d. Effectivity damage more than ¼ of value of property.
b. Agreed upon in representation of absentees, if
50. The following are the essential requisites of contracts absentee suffers lesion by more than ¼ of value of
except: property.
a. Negotiation c. Consent c. Contracts where fraud is committed on creditor
b. Object d. Cause (accion pauliana).
d. Contracts entered into by minors.
51. I. In case of a personal property, if value exceeds
Php5,000, the donation and acceptance must both be 59. The following are essential elements of a contract,
written. except:
II. In case of a real property, donation must be in a a. Consent c. Object
public instrument if value exceeds Php20,000, b. Delivery d. Cause
specifying therein the property donated and value of
charges which donee must satisfy. 60. It is manifested by the meeting of the offer and
a. Both statements are correct. acceptance with respect to the thing and cause which
b. Both statements are incorrect. is the subject matter of the contract.
c. Statement I is correct while statement II is a. Consent c. Policitation
incorrect. b. Motive d. Object
d. Statement I is incorrect while statement II is
correct. 61. The following are defective contracts, except:
a. Voidable c. Natural
52. The following contracts must appear in a public b. Rescissible d. Unenforceable
instrument except:
a. Donation of real properties. 62. If both parties are minors, the contract is:
b. Donation of personal property below P5,000. a. Unenforceable c. Rescissible
c. Partnership where immovable property or real b. Voidable d. Void
rights are contributed to the common fund.
d. None of the above. 63. In case of payments made in state of insolvency, the
contract is:
53. Which of the following is not a restriction on one’s a. Unenforceable c. Rescissible
capacity to enter into a contract? b. Voidable d. Void

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64. If a real property is donated, the contract must appear b. Perfection

in: c. Consummation
a. Writing d. Delivery
b. Public instrument
c. registered 75. All of the following are real contracts, except:
d. Public instrument and registered a. Sale
b. Pledge
65. In the immediately preceding problem, the contract c. Deposit
must appear in that form for: d. Commodatum
a. Validity
b. Enforceability 76. If the person is not authorized, the remedy to make it
c. Bind the parties valid is:
d. Bind third persons a. Ratification
b. Annulment
66. The following contracts can be reformed, except: c. Rescission
a. Simple donation inter vivos wherein no condition is d. Declaration of absolute nullity
imposed
b. Simple donation mortis causa wherein a condition 77. The following are grounds for ineffective offer, except:
is imposed a. Death
c. Wills b. Insanity
d. When the real agreement is void c. Minority
d. Civil interdiction
67. Acceptance made by letter or telegram does not bind
the offerer except from the time it came to his 78. If both parties are prohibited to enter into a contract,
knowledge the effect is:
a. Cognition theory a. Voidable
b. Manifestation theory b. Rescissible
c. Declarative theory c. Unenforceable
d. Creation theory d. Void

68. In order to commit causal fraud: 79. It is one giving a person for a consideration a certain
a. It must be serious and unilateral period within which to accept the offer of the oferrer.
b. Serious and bilateral a. Option contract
c. Committed by both parties b. Earnest contract
d. Committed after the creation of the contract c. Perfected contract
d. Policitation
69. A contract which is onerous in nature is interpreted:
a. Against both parties 80. S1 – Business advertisements are definite offers.
b. Against the party who made it onerous S2 – A contract entered into during lucid interval is
c. With the least transmission of rights voidable.
d. In favor of greatest reciprocity of interest a. Both statements are true
b. Both statements are false
70. A contract must bind both parties, its validity cannot c. S1 is true, S2 is false
be left to one of the parties. d. S1 is false, S2 is true
a. Autonomy of contract
b. Mutuality 81. S1 - If both parties are insane, the contract is void.
c. Relativity S2 – Stipulation pour autrui is valid even though not
d. Obligatory force of contract accepted by the third person.
a. Both statements are true
71. It is an innominate contract which means “I do that b. Both statements are false
you may give.” c. S1 is true, S2 is false
a. Do ut des d. S1 is false, S2 is true
b. Do ut facias
c. Facio ut des 82. S1 - A contract entered into during hypnotic spell is
d. Facio ut facias void.
S2 – If there is mistake, the contract is
72. Contracts take effect only between the parties, their unenforceable.
heirs and assigns. a. Both statements are true
a. Mutuality b. Both statements are false
b. Relativity c. S1 is true, S2 is false
c. Consensual d. S1 is false, S2 is true
d. Obligatory
83. The following parties are incapacitated to enter into a
73. It is the act of making it binding to third persons contract, except:
a. Delivery a. Husband and wife selling properties to each other
b. Registration b. Minors
c. Placing it in a public document c. Insane
d. Placing it in a private document d. Demented person

74. It is the stage in the life of a contract wherein the 84. There is _______ when in order to wrest consent,
parties perform their respective obligations. serious or irresistible force is employed.
a. Preparation a. Violence

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b. Intimidation b. 2 years d. Imprescriptible

c. Fraud
d. Undue influence 95. In case of mistake of fraud, the action for annulment
must be commenced –
85. S1 – The usual exaggerations in trade, when the other a. Within 4 years from discovery of the same
party had an opportunity to know the facts, are in b. Within 4 years from the time the defect of consent
themselves fraudulent. ceases
S2 – Incidental fraud only obliges the person c. Within four years from the time guardianship
employing it to pay damages. ceases
a. Both statements are true d. Within 3 years from registration
b. Both statements are false
c. S1 is true, S2 is false 96. The following falls under the Statute of Fraud except:
d. S1 is false, S2 is true a. Agreement that by its term is not to be performed
within a year from the making thereof
86. S1 – Impossible things or services cannot be the b. A special promise to answer for the default, debt
object of a contract. or miscarriage of another
S2 – Contracts are perfected by mere consent and the c. An agreement made in consideration of marriage,
delivery of the thing. other than the mutual promise to marry
a. Both statements are true d. Donation of immovable property
b. Both statements are false
c. S1 is true, S2 is false 97. S1 – Ratification extinguishes the action to annul a
d. S1 is false, S2 is true voidable contract.
S2 – Unenforceable contracts cannot be assailed by
87. S1 – Real contract requires consent and the delivery of third persons
the thing to create the contract. a. Both statements are true
S2 – Statute of frauds require the contract to appear b. Both statements are false
in a public instrument. c. S1 is true, S2 is false
a. Both statements are true d. S1 is false, S2 is true
b. Both statements are false
c. S1 is true, S2 is false 98. S1 – The action or defense for the declaration of the
d. S1 is false, S2 is true inexistence of a contract prescribes.
S2 – Natural obligations grants a right of action to
88. S1 – In pari delicto doctrine applies if the contract is enforce their performance.
unenforceable. a. Both statements are true
S2 – The quantity of object of a contract need not be b. Both statements are false
determinate provided it is capable of coming into c. S1 is true, S2 is false
existence. d. S1 is false, S2 is true
a. Both statements are true
b. Both statements are false 99. S1 – Pedro, a senior high student and 16 years old,
c. S1 is true, S2 is false married Juana his childhood sweetheart aged 15 years
d. S1 is false, S2 is true old. The marriage is –
a. Valid d. Unenforceable
89. It is the act of deliberately deceiving others, by b. Voidable e. Void
feigning or pretending by agreement, the appearance c. Unenforceable
of a contract which is either non-existent or concealed.
a. Policitation c. Simulation 100. Miguel, 16 years old, buys medicine for his ailing
b. Lesion d. Motive mother in a drugstore. The contract is
a. Valid
90. The following are classification of cause, except: b. Voidable
a. Motive c. Gratuitous c. Unenforceable
b. Onerous d. Remuneratory d. Void
e. Unenforceable
91. It is any damage caused by the fact that the price is
unjust or inadequate. 101. Pedro and Miguel are contending parties in a piece
a. Motive c. Simulation of land. They agreed to settle the matter in court.
b. Lesion d. Cognition While the case was pending, Pedro, without the
approval of the court or of Miguel sold the property to
92. One the cause of which is the service or benefit which Juan. The status of contract is –
is rewarded. a. Rescissible d. Void
a. Onerous c. Remuneratory b. Voidable e. Unenforceable
b. Gratuitous d. Natural c. Unenforceable

93. There shall be no reformation in the following cases, 102. Pedro authorized B to sell his watch for P10,000. B
except: sold it for P8,0000. What is the status of the sale?
a. When the real agreement is void a. Rescissible d. Void
b. Failure to express true intention of parties b. Voidable e. Unenforceable
c. Wills c. Unenforceable
d. When the real agreement is void
103. Pedro authorized B to sell his watch for P10,000. B
94. The action to claim for rescission must be commenced sold it for P12,0000. What is the status of the sale?
within a period of ___: a. Valid d. Void
a. 1 year c. 4 years b. Voidable e. Unenforceable

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c. Unenforceable upon the person or property of his spouse, descendants,

and ascendants to obtain consent:
104. The theory which states that the contract is
perfected the moment the offeree sends his a. Violence
acceptance to the offeror. b. Physical coercion
a. Cognition theory c. Expedition Theory c. Intimidation
b. Reception theory d. Manifestation Theory d. Mistake
e. Fraud
105. S1 – Simple mistake of account makes the
contract does not vitiate consent. FOCUS
S2 – Incidental fraud obliges the person liable to pay “Keep your dreams alive. Understand to achieve anything
for damages. requires faith and belief in yourself, vision, hard work,
S3 – Fraud committed against the creditor makes the determination, and dedication. Remember, all things are
contract Rescissible possible for those who believe.”
a. All are true d. Only S2 is false End of RFBT.3602
b. All are false e. Only S3 is true
c. Only S1 is true
106. S1 – In consensual contract, delivery is required at
the time of consummation.
S2 – In a real contract, delivery is required the time of
the perfection of the contract.
a. All are true c. Only S1 is false
b. All are false d. Only S2 is false

107. Which of the following statements is correct?

a. Offers in interrelated contracts are perfected upon
consent.
b. Offers in interrelated contracts require a single
acceptance.
c. Business advertisements are definite offers that
require specific acceptance.
d. Advertisements for bidders are only invitations to
make proposals and the advertiser is not bound to
accept the highest/lowest bidder, unless it appears
otherwise

108. The following are void contracts, except:

a. Pactum commissorium
b. Pactum de non alienando
c. Pactum leonine
d. Pacto de retro

109. Contracts take effect only between the parties or

their assigns and heirs, except where the rights and
obligations arising from the contract are not transmissible
by their nature, by stipulation, or by provision of law. In
the latter case, the assigns or the heirs are not bound by
the contracts. This is known as the principle of
a. Relativity of contracts
b. Freedom to stipulate
c. Mutuality of contracts
d. Obligatory force of contracts

110. A contract where both parties are required to render

reciprocal prestations, are known as:

a. Bilateral contract
b. Unilateral contract
c. Gratuitous contract
d. Commutative contract

111. One of the following is not a real contract:

a. Pledge
b. Commodatum
c. Lease
d. Mutuum

112. It is present when one of the contracting parties is

compelled by a reasonable and well grounded fear of an
imminent and grave evil upon his person or property or

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i
Desiderio P. Jurado, Civil Law Reviewer, 2019