Bar Exam Questions - OBLICON

PHILIPPINE BAR EXAMINATIONS

OBLIGATIONS AND CONTRACTS QUESTIONS 1988-2016

Submitted by: Maria Therese Louise C. Miguel 3D; ID No. 14-182

Bar Question (1988) Suspensive and Resolutory Conditions Distinguish between the effects of suspensive conditions upon an obligation

and resolutory

SUGGESTED ANSWER: It is evident that a resolutory condition affects the obligation to which it is attached in a manner which is diametrically opposed to that of a suspensive condition. If the suspensive condition is fulfilled, the obligation arises or becomes effective if the resolutory condition is fulfilled, the obligation is extinguished. If the first is not fulfilled, the juridical relation is created; if the second is not fulfilled, the juridical relation is consolidated. In other words, in the first, rights are not yet acquired, but there is a hope or expectancy that they will soon be acquired; in the second, rights are already acquired but subject to the threat of extinction. MIGUEL’S ANSWER: A suspensive condition is a condition imposed upon an obligation and the happening of which gives rise to the demandability of the the fulfillment of such obligation. The obligation will only arise upon the fulfillment of the suspensive condition. Resolutory conditions on the other hand, are conditions that signify the extinguishment of the obligation that is immediately imposed upon the other party. The happening of the resolutory condition ends the obligation of the parties and extinguishes the right of the other party to the prestation agreed upon.

Bar Question (1988) Alternative and Facultative Obligations Define alternative and facultative obligations SUGGESTED ANSWER: Alternative obligations refer to those juridical relations which comprehend several objects or prestations which are due, but the payment or performance of one of them would be sufficient. On the other hand, facultative obligations refer to those juridical relations where only one object or prestation has been agreed upon by the parties to the obligation, but the obligor may deliver or render another in substitution. MIGUEL’S ANSWER: An alternative obligation is one where the debtor is bound by different prestations but wherein only one is due. It can be performed alternatively and the performance of one of 1

them is sufficient to extinguish the obligation. A facultative obligation on the other hand is one where the debtor is bound to perform one prestation with a right to choose another prestation as substitute. Bar Question (1988) Joint and Solidary Obligations Define joint and solidary obligations SUGGESTED ANSWER: When there is a concurrence of two or more creditors or two or more debtors in one and the same obligation, such obligation may be either joint or solidary. A joint obligation may be defined as an obligation where there is a concurrence of several creditors or several debtors, or of several creditors and debtors, by virtue of which each of the creditors has a right to demand, while each of the debtors is bound to render compliance with his proportionate part of the prestation which constitutes the object of the obligation. In other words each of the creditors is entitled to demand the payment only of a proportionate part of the credit, while each of the debtors is liable for the payment of only a proportionate part of the debt. A solidary obligation, on the other hand, may be defined as an obligation where there is a concurrence of several creditors or several debtors, or of several creditors and debtors, by virtue of which each of the creditors has a right to demand, while each of the debtors is bound to render entire compliance with the prestation which constitutes the object of the obligation. In other words, each of the creditors is entitled to demand the payment of the entire credit, while each of the debtors is liable for the payment of the entire debt. MIGUEL’S ANSWER: An obligation is joint if there are either two or more and where the entire obligation is to be paid or performed proportionately by all of the debtors. An obligation is a solidary obligation if each creditor if there are multiple has the right to demand from any of the debtors the obligation that is due.

Bar Question (1988) Solidary Obligations A, B and C borrowed P12,000 from X. This debt is evidenced by a promissory note wherein the three bound themselves to pay the debt jointly and severally. However, according to the note, A can be compelled to 2

pay only on June 15, 1962, B can be compelled to pay only on June 15, 1964, while C can be compelled to pay only on June 15, 1966. On June 15, 1962, X made a demand upon A to pay the entire indebtedness but the latter aid only P4,000. Subsequently, because of A’s refusal to pay the balance, X brought an action against him for collection of the amount. Will such an action prosper? Reasons. SUGGESTED ANSWER: For the present, the action will not prosper. It is of course true that the obligation here is solidary and that its solidary character is not destroyed by the fact that the debtors are bound by different periods for payment is expressly provided for in Art. 1211 of the Civil Code. However, in solidary obligations of this type, the right of the creditor is limited to the recovery of the amount owed by the debtor whose obligation has already matured, leaving in suspense his right to recover the shares corresponding to the other debtors whose obligations have not yet matured. This restriction upon the creditor’s right does not destroy the solidary character of the obligation, because ultimately, he can still compel one and the same debtor, if that is his wish, to pay the entire obligation. Therefore, in the instant case, X shall have to wait for June 15, 1964, when B’s obligation shall have matured, and for June 15, 1966, when C’s obligation shall have matured. On June 15, 1966, he can collect P4,000 from either A or B. On June 15, 1966, he can again collect another P4,000 from either A or B or C. MIGUEL’S ANSWER: The action of X will not prosper. The obligation of A, B and C is solidary, however they are bound by different periods meaning the fulfillment of their obligation is imposed with an agreement of a period on which their obligation will be demandable. The obligation being solidary, X may require payment from any of the debtors, however as discussed it is subject to a period, making the choices of X limited to the debtors from whom the obligation is due and demandable.

Bar Question (1988) Forms of payment Under the Civil Code, what are the different special forms of payments? SUGGESTED ANSWER: Under the Civil Code there are actually four special forms of payment. They are (1) application of payment; (2) dation in payment; (3) payment by cession; and (4) tender of

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payment and consignation. Strictly speaking, however, application of payment by its very nature, is not a special form of payment. MIGUEL’S ANSWER: The special forms of payments are Dacion en pago, payment by cession and consignation.

Bar Question (1988) Consignation What are the special requisites of consignation in order that it shall produce the effect of payment? SUGGESTED ANSWER: In order that consignation shall produce the effect of payment, it is not only essential that it must conform with all of the requisites of payment, but it is also essential that certain special requirements prescribed by law must be complied with. The debtor must show: (1) that there is a debt due; (2) that the consignation has been made either because the creditor to whom the tender of payment was made refused to accept the payment without just cause, or because any of the cause stated by law for effective consignation without previous tender of payment exists; (3) the previous notice of the consignation had been made given to the persons interested in the fulfillment of the obligation; (4) that the thing or amount due had been placed at the disposal of judicial authority; (5) that after the consignation had been made, the persons interested in the fulfillment of the obligation had been notified thereof. MIGUEL’S ANSWER: Consignation requires that there be and existing valid debt which is due, a prior valid tender of payment, a refusal by the creditor to accept such tender of payment without any valid reason, a prior notice of consignation to the interested parties, the thing due deposited with the court and another notice to interested parties subsequent to the consignation.

Bar Question (1988) Novation Suppose that under an obligation imposed by a final judgement, the liability of the judgement debtor is to pay the amount of P6,000 but both the judgement debtor and the judgement creditor subsequently entered into a contract reducing the liability of the former to only P4,000 is there and implied novation which will have the effect of 4

extinguishing the judgement obligation and creating a modified obligatory relation? Reasons. SUGGESTED ANSWER: There is no implied novation in this case. We see no valid objection to the judgement debtor and the judgement creditor in entering into an agreement regarding the monetary obligation of the former under the judgement referred to. The payment by the judgement debtor of the lesser amount of P4,000, accepted by the creditor without any protest or objection and acknowledged by the latter as in full satisfaction of the money judgement, completely extinguished the judgement debt and released the debtor from his pecuniary liability. Novation results in two stipulations—one to extinguish an existing obligation, the other to substitute a new one in its place. Fundamental it is that novation effects a substitution or modification of an obligation by another or an extinguishment of one obligation by the creation of another. In the case at hand, we fail to see what new or modified obligation arose out of the payment by judgement debtor of the reduced amount of P4,000 to the creditor. Additionally, to sustain novation necessitates that the same be so declared in unequivocal terms clearly and unmistakably shown by the express agreement of the parties or by acts of equivalent import—or that there is complete and substantial incompatibility between the two obligations. MIGUEL’S ANSWER: There is no implied novation, what is present is a partial remission of P2,000. The amount of P4,000 is still due and demandable. An implied novation is said to have occurred only if there is no declaration that the old obligation is extinguished by the new one but the old and new obligations are incompatible and cannot co-exist. In this case, the obligations are not incompatible, there is still a debt due although the amount was reduced.

Bar Question (1988) Contract Merle offered to sell her automobile to Violy for P60,000. After inspecting the automobile, Violy offered to buy it for P50,000. This offer was accepted by Merle. The next day, Merle offered to deliver the automobile, but Violy being short of funds, secured postponement of the delivery, promising to pay the price “upon arrival of the steamer, Helena” the steamer however never arrived because it was wrecked by a typhoon and sank somewhere off the 5

Coast of Samar. (1) Is there a perfected contract in this case? Why? (2) Is the promise to pay made by Violy conditional or with a term? Why? (3) Can Merle compel Violy to pay the purchase price and to accept the automobile? Why? SUGGESTED ANSWER: (1) Yes, there is a perfected contract because there is already a concurrence between the offer and the acceptance with respect to the object and the cause which shall constitute the contract. Such concurrence is manifested by the acceptance made by Merle of the offer made by Violy. (2) I submit that the promise to pay made by Violy is not conditional, but with a term. The promise is to pay the P50,000 upon arrival in this port of the steamer, Helena, not if the steamer Helena shall arrive in this port. Hence, the promise is with regard to the date of arrival and not with regard to the fact of arrival. (3) Yes, Merle can compel Violy to pay the purchase price and to accept the automobile. She will, however have to wait for the date when the steamer, Helena, would have arrived were it not for the shipwreck. After all, there is already a perfected contract. MIGUEL’S ANSWER: (1) Yes, there is a perfected contract. A contract is deemed perfected upon the concurrence of the essential requisites provided for by Art. 1318 of the Civil Code. There is consent as shown by acceptance of both parties of the offers and counter-offers of one another, there is an object agreed upon which is the automobile and a cause which is the promise to pay by Violy of the amount agreed upon for the automobile. There is a meeting of the minds by the parties upon the object and the cause therefore there is already a perfected contract. (2) The promise to pay is subject to a term. The stipulation agreed upon by the parties is that payment would be effected “upon arrival” therefore such is a question of when rather than if. An obligation is subject to a term if the stipulation is certain to happen, and on the other hand subject to a condition if the stipulation is future and uncertain. In this case, the arrival is sure to happen thereby making it a question of when rather than if. (3) Yes, Merle can compel Violy to pay the price and accept the automobile as there was already a perfected contract.

Bar Question (1989) Implied Contract and Quasi-contract 6

Distinguish and implied contract from a quasi-contract. SUGGESTED ANSWER: An implied contract requires consent of the parties. A quasi-contract is not predicated on consent, being a unilateral act. The basis of an implied contract is the will of the parties. The basis of a quasi-contract is law to the end that there be no unjust situation. MIGUEL’S ANSWER: An implied contract is different from a quasicontract in terms of the presence of consent. In an implied contract, the consent of the parties is present although it is not expressly given, it is deducible from the conduct of the parties. A quasicontract on the other hand, does not require the consent of the parties but is an obligation based on equity and ensuring that there be no unjust enrichment between the parties.

Bar Question (1989) Dation in payment What is dation in payment and how is it distinguished from assignment of property? SUGGESTED ANSWER: Dation in payment is a special form of payment whereby property is alienated to the creditor in satisfaction of a debt in money. Assignment of property, or payment by cession is a special form of payment whereby the debtor cedes or assigns his property to his creditors so that the proceeds thereof will be applied in payment of his debts. MIGUEL’S ANSWER: Dation in payment is the alienation by the debtor of property in favor of the creditor for the purpose of satisfying his debt. Dation in payment is different from assignment of property in terms of different factors. In assignment of property, the properties ceded are all properties of the debtor, in dation in payment, what is delivered is only a specific property which is considered an equivalent of the outstanding monetary obligation of the debtor. In assignment of property, it is necessary that the debtor be in a state of insolvency while in dation in payment there is no such requirement. Also, dation in payment is a form of novation of the contract while assignment is not.

Bar Question (1989) Rescission of Contracts 7

X offered to buy the house ad lot of Y for P300,000. Since X had only P200,000 in cash at the time, he proposed to pay the balance of P100,000 in four (4) equal monthly installments. As the title to the property was to be immediately transferred to the buyer, X to secure the payment of the balance of purchase price, proposed to constitute a first mortgage on the property in favor of Y. Y agreed to the proposal so that on April 15, 1987, the contract of sale in favor of X was constituted and on the same date (April 15, 1987), X constituted the said first mortgage. When the first installment became due. X defaulted in the payment thereof. Y now brings an action to rescind the contract of sale, which X opposed. How would you decide the conflict? Give your reasons. SUGGESTED ANSWER: Y can rescind. Specific performance and rescission are alternative remedies in breach of reciprocal obligations. The contract is only partly consummated. The price is not fully paid. The mortgage is an accessory contract of guarantee and can be waived by the creditor who can avail of his remedies in the principal contract. MIGUEL’S ANSWER: Y cannot rescind. Jurisprudence provides that slight breaches of the contract will not justify rescission. In this case X can be deemed to have substantially complied with the contract of sale paying 2/3 of the purchase price. In order to justify rescission, the breach of the contract should be substantial that it would defeat the object of the parties in entering into the contract, that there is substantial breach, cannot be said in this case.

Bar Question (1989) Perfection of Contract X came across an advertisement in the Manila Daily Bulletin about the rush sale of three slightly used Toyota cars, Model 1989 for only P200,000 each. Finding the price to be very cheap and in order to be sure that he gets one unit ahead of the others, X immediately phoned the advertiser Y and place an order for one car. Y accepted the order and promised to deliver the ordered unit on July 15, 1989. On the said date, however, Y did not deliver the unit. X brings and action to compel Y to deliver the unit. Will such an action prosper? Give your reasons. SUGGESTED ANSWER: The contract in this case has been perfected. However, the contract is unenforceable under the Statute of Frauds.

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The action will prosper if there is no objection to the oral evidence, which amounts to a waiver of the stature of frauds. MIGUEL’S ANSWER: Yes, the action of X may prosper provided that there be no objection to the oral evidence presented regarding the oral agreement entered into by X and Y. While there is a perfected contract, it is unenforceable for failure to comply with the Satute of Frauds, because it is an agreement for the sale of goods at a price not less than P500, it is required to be in writing. However, the Civil Code also provides that contracts infringing the Stature of Frauds may be ratified provided that there be a failure to object to the presentation of oral evidence to prove the same.

Bar Question (1989) Estoppel What do you understand by estoppel? What are the different kinds of estoppel? Explain. The Civil Code enumerates only 3 kinds of estoppel: estoppel in pais and estoppel by deed; and jurisprudence gives a third, namely: estoppel by laches. Estoppel in pais or by conduct arises when one by his act, representation, oral admission or by his silence induces another to believe certain facts to exist and the other realize an act on such belief. Estoppel by deed is that by virtue of which a party to a deed and his privies are precluded from asserting as against the other party any right or title in derogation of the deed or any fact asserted therein. MIGUEL’S ANSWER: Estoppel is a bar from denying or asserting something to the contrary from that which has already been previously established as the truth by his own representations. The Civil Code classifies estoppel into two (2) namely estoppel by deed and estoppel in pais. Estoppel by deed is the kind of estoppel which is in writing which bars such parties from asserting anything to the contrary of what is in the written document. Estoppel in pais on the other hand, is estoppel arising from conduct that amounts to a representation of facts.

Bar Question (1989) Civil Obligation and Natural Obligation

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How is a civil obligation distinguished from a natural obligation? Give an example of a natural obligation SUGGESTED ANSWER: Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. Example of a natural obligation: when a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. MIGUEL’S ANSWER: Civil obligations are obligations that can be enforced through a civil suit, it is an obligation which gives rise to a cause of action. Natural obligations on the other hand are obligations do not grant a cause of action, it is an obligation that is merely based on equity. An example of a natural obligation is when a third party pays for the debt of another which the obligor is not legally bound to pay because it has prescribed but the debtor voluntarily reimburses such third person, the obligor cannot recover what he has paid.

Bar Question (1990) Nullity of Contracts X was the owner of a 10,000 square meter property. X married Y and out of their union, A, B and C were born. After the death of Y, X married Z and they begot as children, D, E and F. After the death of X, the children of the first and second marriages executed and extrajudicial partition of the aforestated property on May 1, 1970. D, E and F were given a one thousand square meter portion of the property. They were minors at the time of the execution of the document. D was 17 years old, E was 14 and F was 12; and they were made to believe by A, B and C that unless they sign the document they will not get any share. Z was not present then. In January 1974, D,E and F filed an action in court to nullify the suit alleging they discovered the fraud only in 1973. (a) Can the minority of D,E and F be a basis to nullify the partition? Explain your answer. (b) How about fraud? Explain your answer. SUGGESTED ANSWER: (a) Yes, minority can be a basis to nullify the partition because D, E and F were not properly represented by their 10

parents or guardians at the time they contracted the extra-judicial partition. (b) In the case of fraud, when through insidious words or machinations of one party the other is induced to enter into the contract without which he would not have agreed to, the action still prosper because under Art. 1391 of the Civil Code in case of fraud, the action for annulment may be brought within four years from the discovery of the fraud. MIGUEL’S ANSWER: (a) Yes, minority can be the basis of nullifying the partition. Minority is one of the restrictions provided for in the Civil Code that limits a persons capacity to act or enter into certain agreements. D,E, and F not being represented by parents or guardians can be the basis to nullify the partition. (b) If fraud was present, the action will also prosper as fraud is considered as a vitiation of consent, which makes the contract voidable there being a lack of one of the essential requisites of a contract.

Bar Question (1990) Freedom to Stipulate The Japan Air Lines (JAL), a foreigner corporation licensed to do business in the Philippines, executed in Manila a contract of employment with Maritess Guapa under which the latter was hired as a stewardess on the aircraft plying the Manila-Japan-Manila route. The contrast specifically provides that (1) the duration of the contract shall be two (2) years, (2) notwithstanding the above duration, JAL may terminate the agreement at any time by giving her notice in writing ten (10) days in advance, and (3) the contract shall be construed as governed under and by the laws of Japan and only the court in Tokyo, Japan shall have jurisdiction to consider any matter arising from or relating to the contract. JAL dismissed Maritess on the fourth month of her employment without giving her due notice. Maritess then filed a complaint with the Labor Arbiter for reinstatement, backwages and damages. The lawyer of JAL contends that neither the Labor Arbiter nor any other agency or court in the Philippines has jurisdiction over the case in view of the above provision (3) of the contract which Maritess voluntarily signed. The contract is the law between her and JAL. Decide the issue. 11

SUGGESTED ANSWER: Labor Legislations are generally intended as expressions of public policy on employer-employee relations. The contract therefore, between Japan Air Lines and Maritess may apply only to the extent that its provisions are not inconsistent with Philippine labor laws intended particularly to protect the employees. Under the circumstances, the dismissal of Maritess without complying with Philippine labor law would be invalid and any stipulation in the contract to the contrary is considered void. Since the law of the forum in this case is the Philippine law, the issues should be resolved in accordance with Philippine law. MIGUEL’S ANSWER: The lawyer of JAL is wrong. Although the parties have the freedom to stipulate anything they want in the contract it is still subject to the rule that it is not contrary to law, morals, good customs and public policy. The stipulations in the employment contract must still be in compliance with labor laws in the Philippines as these labor laws were created in order to protect the rights of laborers in the Philippines, stipulations violating such is contrary to law and public policy.

Bar Question (1991) Nature of Contracts; Obligatoriness Roland, a basketball star, was under contract for one year to playfor-play exclusively for Lady Love, Inc. However, even before the basketball season could open, he was offered a more attractive pay plus fringes benefits by Sweet Taste, Inc. Roland accepted the offer and transferred to Sweet Taste. Lady Love sues Roland and Sweet Taste for breach of contract. Defendants claim that the restriction to play for Lady Love alone is void, hence, unenforceable, as it constitutes an undue interference with the right of Roland to enter into contracts and the impairment of his freedom to play and enjoy basketball. Can Roland be bound by the contract he entered into with Lady Love or can he disregard the same? Is he liable at all? How about Sweet Taste? Is it liable to Lady Love? SUGGESTED ANSWER: Roland is bound by the contract he entered into with Lady Love and he cannot disregard the same, under the principles of obligatoriness of contracts. Obligations arising from contracts have the force of law between the parties.

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Yes, Roland is liable under the contract as far as Lady Love is concerned. He is liable for damages under Article 1170 of the Civil Code since he contravened the tenor of his obligation. Not being a contracting party, Sweet Taste is not bound by the contract but it can be held liable under Art. 1314. The basis of its liability is not prescribed by contract but is founded on quasi-delict, assuming that Sweet Taste knew of the contract. Article 1314 of the Civil Code provides that any third person who induces another to violate his contract shall be liable for damages to the other contracting party. MIGUEL’S ANSWER: Roland is bound by the contract he entered into with lady love. Roland’s defense is unmeritorious and has no legal basis. Roland is liable for breach of contract for violating his obligation with Lady Love. Sweet Taste can also be held liable for inducing Roland to violate his contract.

Bar Question (1991) Ownership Pablo sold his car to Alfonso who issued a postdated check in full payment therefor. Before the maturity of the check. Alfonso sold the car to Gregorio who later sold it to Gabriel. When presented for payment, the check issued by Alfonso was dishonored: by the drawee bank for the reason that he, Alfonso, had already closed his account even before he issued his check. Pablo sued to recover the car from Gabriel alleging that he (Pablo) had been unlawfully deprived of it by reason of Alfonso’s deception. Will the suit prosper? SUGGESTED ANSWER: No. The suit will not prosper because Pablo was not unlawfully deprived of the car although he was unlawfully deprived of the price. The perfection of the sale and the delivery of the car was enough to allow Alfonso to have a right of ownership over the car, which can be lawfully transferred to Gregorio. Art. 559 applies only to a person who is in possession in good faith of the property, and not to the owner thereof. Alfonso, in the problem, was the owner, and, hence Gabriel acquired the title to the car. Nonpayment of the price in a contract of sale does not render ineffective the obligation to deliver. The obligation to deliver a thing is different from the obligation to pay its price. MIGUEL’S ANSWER: No, the suit will not prosper. Gabriel has the right to the car as he bought it in good faith from Alfonso who was then its rightful owner. The payment of the price and the delivery of the car was enough to perfect the sale and vest ownership to 13

Alfonso. Pablo’s resort would be to sue Alfonso for violation of BP 22 or the bouncing checks law for issuing a check knowing that it has no funds to pay another.

Bar Question (1991) Period; Suspensive In a deed of sale of a realty, it was stipulated that the buyer would construct a commercial building on the lot while the seller would construct a private passageway bordering the lot. The building was eventually finished but the seller failed to complete the passageway as some of the squatters, who were already known to be there at the time they entered into the contract, refused to vacate the premises. In fact, prior to its execution, the seller filed ejectment cases against the squatters. The buyer now sues the seller for specific performance with damages. The defense is that the obligation to construct the passageway should be with a period which, incidentally, had not been fixed by them, hence, the need for fixing a judicial period. Will the action for specific performance of the buyer against the seller prosper? SUGGESTED ANSWER: No. the action for specific performance filed by the buyer is premature under Art. 1197 of the Civil Code. If a period has not been fixed although contemplated by the parties, the parties themselves should fix that period, failing in which, the Court may be asked to fix it taking into consideration the probable contemplation of the parties. Before the period is fixed, an action for specific performance is premature. It has been held in Borromeo vs. CA (47 SCRA 69), that the Supreme Court allowed the simultaneous filing of action to fix the probable contemplated period of the parties where none is fixed in the agreement if this would avoid multiplicity of suits. In addition, technicalities must be subordinated to substantial justice. The action for specific performance will not prosper. The filing of the ejectment suit by the seller was precisely in compliance with his obligations and should not, therefore, be faulted if no decision has yet been reached by the Court on the matter. MIGUEL’S ANSWER: No, the action for specific performance will not prosper since a period has not been fixed yet. There can be no delay yet if there is no period fixing the time when the obligation must be fulfilled.

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Bar Question (1992) Liability; Solidary Obligation In June 1988, X obtained a loan from A and executed with Y as solidary co-maker a promissory note in favor of A for the sum of P200,000.00. The loan was payable at P20,000.00 with interest monthly within the first week of each month beginning July 1988 until maturity in April 1989. To secure the payment of the loan. X put up as security a chattel mortgage on his car, a Toyota Corolla sedan. Because of failure of X and Y to pay the principal amount of the loan, the car was extrajudicially foreclosed. A acquired the car at A's highest bid of P120,000.00 during the auction sale. After several fruitless letters of demand against X and Y, A sued Y alone for the recovery of P80.000.00 constituting the deficiency. Y resisted the suit raising the following defenses: a) That Y should not be liable at all because X was not sued together with Y. b) That the obligation has been paid completely by A's acquisition of the car through "dacion en pago" or payment by cession. c) That Y should not be held liable for the deficiency of P80,000.00 because he was not a co-mortgagor in the chattel mortgage of the car which contract was executed by X alone as owner and mortgagor. d) That assuming that Y is liable, he should only pay the proportionate sum of P40,000.00. Decide each defense with reasons. SUGGESTED ANSWER: (a) This first defense of Y is untenable. Y is still liable as solidary debtor. The creditor may proceed against any one of the solidary debtors. The demand against one does not preclude further demand against the others so long as the debt is not fully paid. (b) The second defense of Y is untenable. Y is still liable. The chattel mortgage is only given as a security and not as payment for the debt in case of failure to pay. Y as a solidary co-maker is not relieved of further liability on the mortgage. (c) The third defense of Y is untenable. Y is a surety of X and the extrajudicial demand against the principal debtor is not inconsistent with a judicial demand against the surety. A suretyship may co-exist with a mortgage. (d) The fourth defense of Y is untenable. Y is liable for the entire prestation since Y incurred a solidary obligation with X. (Arts. 1207, 1216. 1252 and 2047 Civil Code; Bicol Savings and Loan Associates vs. Guinhawa 188 SCRA 642)

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MIGUEL’S ANSWER: (a) Y is wrong. The obligation being solidary, A can demand payment from any of the debtors at whatever amount but not exceeding that which is due and subject to Y’s right to reimburse X’s share in the debt. (b) Y is wrong. Obligation has not been extinguished as there is still a deficiency of P80,000 that X and Y must still pay A. The car was merely a security provided by them to ensure A that they would pay but does not equate or amount to dacion en pago or cession which may extinguish the obligation. (c) Y is wrong. Y is still a surety of X and can still be held liable as a surety despite the existence of a mortgage. (d) Y is wrong. A can demand the the whole P80,000 from any of the debtors the obligation being solidary. Y cannot be said to be liable for only P40,000 but for the entire amount subject to his right to get reimbursement from X of his proportionate share. Bar Question (1993) Extinguishment; Loss; Impossible Service In 1971, Able Construction, Inc. entered into a contract with Tropical Home Developers, Inc. whereby the former would build for the latter the houses within its subdivision. The cost of each house, labor and materials included, was P100,000.00. Four hundred units were to be constructed within five years. In 1973, Able found that it could no longer continue with the job due to the increase in the price of oil and its derivatives and the concomitant worldwide spiraling of prices of all commodities, including basic raw materials required for the construction of the houses. The cost of development had risen to unanticipated levels and to such a degree that the conditions and factors which formed the original basis of the contract had been totally changed. Able brought suit against Tropical Homes praying that the Court relieve it of its obligation. Is Able Construction entitled to the relief sought? SUGGESTED ANSWER: Yes, the Able Construction. Inc. is entitled to the relief sought under Article 1267, Civil Code. The law provides: "When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part." MIGUEL’S ANSWER: Yes, the court may grant the relief sought by Able Construction Inc. The Civil Code provides that the court may release the obligor from his responsibility when the service has become so difficult that it has gone beyond the expectations of the 16

parties. However, the intention of the parties must still prevail, it is only when the courts deem that the difficulty goes beyond the intention and expectation of the parties that courts may intervene.

Bar Question (1994) Extinguishment; Loss Dino sued Ben for damages because the latter had failed to deliver the antique Marcedes Benz car Dino had purchased from Ben, which was—by agreement—due for delivery on December 31, 1993. Ben, in his answer to Dino's complaint, said Dino's claim has no basis for the suit, because as the car was being driven to be delivered to Dino on January 1, 1994, a reckless truck driver had rammed into the Mercedes Benz. The trial court dismissed Dino's complaint, saying Ben's obligation had indeed, been extinguished by force majeure. Is the trial court correct? SUGGESTED ANSWER: a) No. Article 1262, New Civil Code provides, "An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay. b) The judgment of the trial court is incorrect. Loss of the thing due by fortuitous events or force majeure is a valid defense for a debtor only when the debtor has not incurred delay. Extinguishment of liability for fortuitous event requires that the debtor has not yet incurred any delay. In the present case, the debtor was in delay when the car was destroyed on January 1, 1993 since it was due for delivery on December 31, 1993. (Art. 1262 Civil Code) c) It depends whether or not Ben the seller, was already in default at the time of the accident because a demand for him to deliver on due date was not complied with by him. That fact not having been given in the problem, the trial court erred in dismissing Dino's complaint. Reason: There is default making him responsible for fortuitous events including the assumption of risk or loss. If on the other hand Ben was not in default as no demand has been sent to him prior to the accident, then we must distinguish whether the price has been paid or not. If it has been paid, the suit for damages should prosper but only to enable the buyer to recover the price paid. It should be noted that Ben, the seller, must bear the loss on the principle of res perit domino. He cannot be held answerable for damages as the loss of the car was not imputable to his fault or fraud. In any case, he can recover the value of the car from the party 17

whose negligence caused the accident. If no price has been paid at all, the trial court acted correctly in dismissing the complaint. MIGUEL’S ANSWER: The trial court is wrong. The defense of loss of the thing due to a fortuitous event can only be used if the obligor is not yet in delay. In this case the car was due to be delivered on December 31, 1993, Ben was already in delay when he lost the car due to the accident, he cannot therefore use the defense loss due to fortuitous event.

Bar Question (1994) Extinguishment; Novation In 1978, Bobby borrowed P1,000,000 from Chito payable in two years. The loan, which was evidenced by a promissory note, was secured by a mortgage on real property. No action was filed by Chito to collect the loan or to foreclose the mortgage. But in 1991, Bobby, without receiving any amount from Chito, executed another promissory note which was worded exactly as the 1978 promissory note, except for the date thereof, which was the date of its execution. 1) Can Chito demand payment on the 1991 promissory note in 1994? 2) Can Chito foreclose the real estate mortgage if Bobby fails to make good his obligation under the 1991 promissory note? SUGGESTED ANSWER: 1) Yes, Chito can demand payment on the 1991 promissory note in 1994. Although the 1978 promissory note for P1 million payable two years later or in 1980 became a natural obligation after the lapse of ten (10) years, such natural obligation can be a valid consideration of a novated promissory note dated in 1991 and payable two years later, or in 1993. All the elements of an implied real novation are present: a) an old valid obligation; b) a new valid obligation; c) capacity of the parties; d) animus novandi or intention to novate; and e) The old and the new obligation should be incompatible with each other on all material points (Article 1292). The two promissory notes cannot stand together, hence, the period of prescription of ten (10) years has not yet lapsed. 2) No. The mortgage being an accessory contract prescribed with the loan. The novation of the loan, however, did not expressly include the mortgage, hence, the mortgage is extinguished under Article 1296 of the NCC. The contract has been extinguished by the novation or extinction of the principal obligation insofar as third parties are concerned. 18

MIGUEL’S ANSWER: 1) Yes, Chino can demand payment on the 1991 promissory note. The 1978 promissory note can be considered as the consideration for the new 1991 promissory note thereby renewing the period of prescription starting from the issuance of the new promissory note. 2) No, the mortgage was extinguished when the first promissory note to which it was attached prescribed. Mortgage being merely an accessory contract, is extinguished once the contract to which it was attached is extinguished.

Bar Question (1996) Rescission of Contracts; Proper Party In December 1985, Salvador and the Star Semiconductor Company (SSC) executed a Deed of Conditional Sale wherein the former agreed to sell his 2,000 square meter lot in Cainta, Rizal, to the latter for the price of P1,000,000.00, payable P100,000.00 down, and the balance 60 days after the squatters in the property have been removed. If the squatters are not removed within six months, the P100,000.00 down payment shall be returned by the vendor to the vendee, Salvador filed ejectment suits against the squatters, but in spite of the decisions in his favor, the squatters still would not leave. In August, 1986, Salvador offered to return the P100,000.00 down payment to the vendee, on the ground that he is unable to remove the squatters on the property. SSC refused to accept the money and demanded that Salvador execute a deed of absolute sale of the property in its favor, at which time it will pay the balance of the price. Incidentally, the value of the land had doubled by that time. Salvador consigned the P 100,000 in court, and filed an action for rescission of the deed of conditional sale, plus damages. Will the action prosper? Explain. SUGGESTED ANSWER: No, the action will not prosper. The action for rescission may be brought only by the aggrieved party to the contract. Since it was Salvador who failed to comply with his conditional obligation, he is not the aggrieved party who may file the action for rescission but the Star Semiconductor Company. The company, however, is not opting to rescind the contract but has chosen to waive Salvador's compliance with the condition which it can do under Art. 1545, NCC. MIGUEL’S ANSWER:

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Bar Question (1996) Nature of Contracts; Privity of Contract Baldomero leased his house with a telephone to Jose. The lease contract provided that Jose shall pay for all electricity, water and telephone services in the leased premises during the period of the lease. Six months later. Jose surreptitiously vacated the premises. He left behind unpaid telephone bills for overseas telephone calls amounting to over P20,000.00. Baldomero refused to pay the said bills on the ground that Jose had already substituted him as the customer of the telephone company. The latter maintained that Baldomero remained as his customer as far as their service contract was concerned, notwithstanding the lease contract between Baldomero and Jose. Who is correct, Baldomero or the telephone company? Explain. SUGGESTED ANSWER: The telephone company is correct because as far as it is concerned, the only person it contracted with was Baldomero. The telephone company has no contract with Jose. Baldomero cannot substitute Jose in his stead without the consent of the telephone company (Art. 1293, NCC). Baldomero is, therefore, liable under the contract. MIGUEL’S ANSWER: The telephone company is correct. The telephone company contracted with Baldomero, Jose is not included in that contract. As far as the telephone company is concerned, the obligation to pay the bills lies with Baldomero regardless of whether or not he is the one using it. Baldomero cannot refuse to pay.

Bar Question (1997) Conditional Obligations; Promise In two separate documents signed by him, Juan Valentino "obligated" himself each to Maria and to Perla, thus - 'To Maria, my true love, I obligate myself to give you my one and only horse when I feel like It." - and -'To Perla, my true sweetheart, I obligate myself to pay you the P500.00 I owe you when I feel like it." Months passed but Juan never bothered to make good his promises. Maria and Perla came to consult you on whether or not they could recover on the basis of the foregoing settings. What would your legal advice be? SUGGESTED ANSWER: I would advise Maria not to bother running after Juan for the latter to make good his promise. [This is because a promise is not an actionable wrong that allows a party to recover 20

especially when she has not suffered damages resulting from such promise. A promise does not create an obligation on the part of Juan because it is not something which arises from a contract, law, quasicontracts or quasi delicts (Art, 1157)]. Under Art. 1182, Juan's promise to Maria is void because a conditional obligation depends upon the sole will of the obligor. As regards Perla, the document is an express acknowledgment of a debt, and the promise to pay what he owes her when he feels like it is equivalent to a promise to pay when his means permits him to do so, and is deemed to be one with an indefinite period under Art. 1180. Hence the amount is recoverable after Perla asks the court to set the period as provided by Art. 1197, par. 2. MIGUEL’S ANSWER:

Bar Question (1998) Liability; Solidary Liability Joey, Jovy and Jojo are solidary debtors under a loan obligation of P300,000.00 which has fallen due. The creditor has, however, condoned Jojo's entire share in the debt. Since Jovy has become insolvent, the creditor makes a demand on Joey to pay the debt. 1) How much, if any, may Joey be compelled to pay 2) To what extent, if at all, can Jojo be compelled by Joey to contribute to such payment? SUGGESTED ANSWER: 1. Joey can be compelled to pay only the remaining balance of P200.000, in view of the remission of Jojo's share by the creditor. (Art. 1219, Civil Code) 2. Jojo can be compelled by Joey to contribute P50.000 Art. 1217. par. 3, Civil Code provides. "When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his codebtors, in proportion to the debt of each." Since the insolvent debtor's share which Joey paid was P100,000, and there are only two remaining debtors - namely Joey and Jojo these two shall share equally the burden of reimbursement. Jojo may thus be compelled by Joey to contribute P50.000.00. MIGUEL’S ANSWER: 1) Joey can be compelled to pay the remaining demandable debt of P200,000. Since the creditor has condoned 21

Jojo’s entire share, the creditor can only demand for the shares of Joey and Jovy. Since the obligation is solidary, Joey can be compelled to pay for the entire remaining balance after subtracting Jojo’s share. 2) Jojo can be compelled to pay P50,000 which is half of the share of Jovy, a co-debtor who has become insolvent. The Civil Code provides that when one or more of the solidary co-debtors are insolvent, his share will be borne by his co-debtors.

Bar Question (1998) Extinguishment; Compensation/Set-Off; Banks X, who has a savings deposit with Y Bank in the sum of P1,000,000.00 incurs a loan obligation with the said Bank in the sum of P800.000.00 which has become due. When X tries to withdraw his deposit, Y Bank allows only P200,000 to be withdrawn, less service charges, claiming that compensation has extinguished its obligation under the savings account to the concurrent amount of X's debt. X contends that compensation is improper when one of the debts, as here, arises from a contract of deposit. Assuming that the promissory note signed by X to evidence the loan does not provide for compensation between said loan and his savings deposit, who is correct? SUGGESTED ANSWER: Y bank is correct. An. 1287, Civil Code, does not apply. All the requisites of Art. 1279, Civil Code are present. In the case of Gullas vs. PNB [62 Phil. 519), the Supreme Court held: "The Civil Code contains provisions regarding compensation (set off) and deposit. These portions of Philippine law provide that compensation shall take place when two persons are reciprocally creditor and debtor of each other. In this connection, it has been held that the relation existing between a depositor and a bank is that of creditor and debtor, x x x As a general rule, a bank has a right of set off of the deposits in its hands for the payment of any indebtedness to it on the part of a depositor." Hence, compensation took place between the mutual obligations of X and Y bank. MIGUEL’S ANSWER:

Bar Question (1998) Consensual vs. Real Contracts; Kinds of Real Contracts 22

Distinguish consensual from real contracts and name at least four (4) kinds of real contracts under the present law. SUGGESTED ANSWER: Consensual Contracts are those which perfected by mere consent (Art. 1315. Civil Code). Real Contracts those which are perfected by the delivery of the object of obligation. (Art. 1316, Civil Code) Examples of real contracts deposit, pledge, commodatum and simple loan (mutuum).

are are the are

MIGUEL’S ANSWER: Consensual contracts are contracts that are perfected by mere consent of the parties, from that moment of consent, the parties are already bound to fulfill the obligation agreed upon. Real contracts on the other hand are contracts that are perfected by the delivery of the object. Delivery is required for real contracts to be valid in addition to the presence of the other essential elements of a contract. Examples of real contracts are deposit, pledge, commodatum, and mutuum.

Bar Question (1999) Conditional Obligations; Resolutory Condition In 1997, Manuel bound himself to sell Eva a house and lot which is being rented by another person, if Eva passes the 1998 bar examinations. Luckily for Eva, she passed said examinations. (a) Suppose Manuel had sold the same house and lot to another before Eva passed the 1998 bar examinations, is such sale valid? Why? (b) Assuming that it is Eva who is entitled to buy said house and lot, is she entitled to the rentals collected by Manuel before she passed the 1998 bar examinations? Why? SUGGESTED ANSWER: (a) Yes, the sale to the other person is valid. However, the buyer acquired the property subject to a resolutory condition of Eva passing the 1998 Bar Examinations. Hence, upon Eva’s passing the bar, the rights of the other buyer terminated and Eva acquired ownership of the property. (b) Under Art. 1164, there is no obligation on the part of Manuel to deliver the fruits (rentals) of the thing until the obligation to deliver the thing arises. As the suspensive condition has not been fulfilled, the obligation to sell does not arise. MIGUEL’S ANSWER: (a) The sale is valid. If the buyer bought the house and lot in good faith, without knowledge of the obligation of 23

Manuel to Eva, the buyer need not return the property to Eva because he bought it in good faith and for value. If however he was made aware of the agreement between Manuel and Eva, he is obliged to return such property as the ownership is subject to the condition of Eva passing the bar exam. (b) No, Eva is not entitled to the rentals of the house and lot prior to her passing the bar examinations. The right to the fruits of the object will only be vested upon the other party once he has the right to demand for the thing that is the object of the contract. Eva only had the right to demand for the house and lot upon the happening of the condition, therefore she has no right to demand for the rentals prior to that.

Bar Question (2000) Loss of the thing due; Force Majeure Kristina brought her diamond ring to a jewelry shop for cleaning. The jewelry shop undertook to return the ring by February 1, 1999." When the said date arrived, the jewelry shop informed Kristina that the Job was not yet finished. They asked her to return five days later. On February 6, 1999, Kristina went to the shop to claim the ring, but she was informed that the same was stolen by a thief who entered the shop the night before. Kristina filed an action for damages against the jewelry shop which put up the defense of force majeure. Will the action prosper or not? SUGGESTED ANSWER: The action will prosper. Since the defendant was already in default not having delivered the ring when delivery was demanded by plaintiff at due date, the defendant is liable for the loss of the thing and even when the loss was due to force majeure. MIGUEL’S ANSWER: The action will prosper. The defense of force majeure or fortuitous event can be used when there is an unforeseen event that prevents the obligor from performing his obligation. However, the Civil Code provides that for it to be a valid defense, the obligor must not be in default. In this case, since the obligor was already in default, he cannot invoke the defense of fortuitous event.

Bar Question (2000) Consideration; Validity 24

Lolita was employed in a finance company. Because she could not account for the funds entrusted to her, she was charged with estafa and ordered arrested. In order to secure her release from jail, her parents executed a promissory note to pay the finance company the amount allegedly misappropriated by their daughter. The finance company then executed an affidavit of desistance which led to the withdrawal of the information against Lolita and her release from jail. The parents failed to comply with their promissory note and the finance company sued them for specific performance. Will the action prosper or not? SUGGESTED ANSWER: The action will prosper. The promissory note executed by Lolita's parents is valid and binding, the consideration being the extinguishment of Lolita's civil liability and not the stifling of the criminal prosecution. MIGUEL’S ANSWER: The action will prosper. The promissory note is valid and can therefore give rise to a cause of action upon nonfulfillment. The parents failing to pay, the finance company can therefore sue them for the payment of the amount due.

Bar Question (2000) Conditional Obligations Pedro promised to give his grandson a car if the latter will pass the bar examinations. When his grandson passed the said examinations, Pedro refused to give the car on the ground that the condition was a purely potestative one. Is he correct or not? SUGGESTED ANSWER: No, he is not correct. First of all, the condition is not purely potestative, because it does not depend on the sole will of one of the parties. Secondly, even if it were, it would be valid because it depends on the sole will of the creditor (the donee) and not of the debtor (the donor). MIGUEL’S ANSWER: No, he is not correct. A potestative condition is a condition whose fulfillment is depenedent on the sole will of one of the parties. The condition imposed by Pedro of his grandson passing the bar is not a potestative condition, it is a mixed condition as its fulfillment is dependent on chance and upon the will of the parties.

Bar Question (2000) Extinguishment; Condonation 25

Arturo borrowed P500,000.00 from his father. After he had paid P300,000.00, his father died. When the administrator of his father's estate requested payment of the balance of P200,000.00. Arturo replied that the same had been condoned by his father as evidenced by a notation at the back of his check payment for the P300,000.00 reading: "In full payment of the loan". Will this be a valid defense in an action for collection? SUGGESTED ANSWER: It depends. If the notation "in full payment of the loan" was written by Arturo's father, there was an implied condonation of the balance that discharges the obligation. In such case, the notation is an act of the father from which condonation may be inferred. The condonation being implied, it need not comply with the formalities of a donation to be effective. The defense of full payment will, therefore, be valid. When, however, the notation was written by Arturo himself. It merely proves his intention in making that payment but in no way does it bind his father (Yam v. CA, G.R No. 104726. 11 February 1999). In such case, the notation was not the act of his father from which condonation may be inferred. There being no condonation at all the defense of full payment will not be valid. MIGUEL’S ANSWER: It is a valid defense if the condonation was done by the father. If the notation at the back of the check was written by the father then it may be deemed an implied condonation of the remaining balance of the loan.

Bar Question (2001) Extinguishment; Extraordinary Inflation or Deflation On July 1, 1998, Brian leased an office space in a building for a period of five years at a rental rate of P1,000.00 a month. The contract of lease contained the proviso that "in case of inflation or devaluation of the Philippine peso, the monthly rental will automatically be increased or decreased depending on the devaluation or inflation of the peso to the dollar." Starting March 1, 2001, the lessor increased the rental to P2,000 a month, on the ground of inflation proven by the fact that the exchange rate of the Philippine peso to the dollar had increased from P25.00=$1.00 to P50.00=$1.00. Brian refused to pay the increased rate and an action for unlawful detainer was filed against him. Will the action prosper? Why?

26

SUGGESTED ANSWER: The unlawful detainer action will not prosper. Extraordinary inflation or deflation is defined as the sharp decrease in the purchasing power of the peso. It does not necessarily refer to the exchange rate of the peso to the dollar. Whether or not there exists an extraordinary inflation or deflation is for the courts to decide. There being no showing that the purchasing power of the peso had been reduced tremendously, there could be no inflation that would justify the increase in the amount of rental to be paid. Hence, Brian could refuse to pay the increased rate. MIGUEL’S ANSWER: The action will not prosper. For the defense of inflation or deflation to be valid, there must be an official pronouncement or declaration

Bar Question (2001) Extinguishment; Assignment of Rights The sugar cane planters of Batangas entered into a long-term milling contract with the Central Azucarera de Don Pedro Inc. Ten years later, the Central assigned its rights to the said milling contract to a Taiwanese group which would take over the operations of the sugar mill. The planters filed an action to annul the said assignment on the ground that the Taiwanese group was not registered with the Board of Investments. Will the action prosper or not? Explain briefly. SUGGESTED ANSWER: The action will prosper not on the ground invoked but on the ground that the farmers have not given their consent to the assignment. The milling contract imposes reciprocal obligations on the parties. The sugar central has the obligation to mill the sugar cane of the farmers while the latter have the obligation to deliver their sugar cane to the sugar central. As to the obligation to mill the sugar cane, the sugar central is a debtor of the farmers. In assigning its rights under the contract, the sugar central will also transfer to the Taiwanese its obligation to mill the sugar cane of the farmers. This will amount to a novation of the contract by substituting the debtor with a third party. Under Article 1293 of the Civil Code, such substitution cannot take effect without the consent of the creditor. The formers, who are creditors as far as the obligation to mill their sugar cane is concerned, may annul such assignment for not having their consent thereto. MIGUEL’S ANSWER: The action will prosper. The assignment should be annulled. The assignment of the rights by Central Azucarera to the Taiwanese group amounts to a novation of the contract with the substitution 27

of the debtor. For there to be a valid substitution, consent of the creditor must be obtained. In this case, the consent of the farmers was not obtained by the Central Azucarera before assigning the rights to the Taiwanese group. The assignment is therefore invalid.

Bar Question (2001) Liability; Lease; Joint Liability Four foreign medical students rented the apartment of Thelma for a period of one year. After one semester, three of them returned to their home country and the fourth transferred to a boarding house. Thelma discovered that they left unpaid telephone bills in the total amount of P80,000.00. The lease contract provided that the lessees shall pay for the telephone services in the leased premises. Thelma demanded that the fourth student pay the entire amount of the unpaid telephone bills, but the latter is willing to pay only one fourth of it. Who is correct? Why? SUGGESTED ANSWER: The fourth student is correct. His liability is only joint, hence, pro rata. There is solidary liability only when the obligation expressly so states or when the law or nature of the obligation requires solidarity (Art. 1207, CC). The contract of lease in the problem does not, in any way, stipulate solidarity. MIGUEL’S ANSWER: The fourth student is correct. The obligation is a joint obligation. When the obligation concerns multiple debtors without stating the nature of the obligation of each, it is presumed that the obligation is joint. There is solidary obligation only when the parties intend that the obligation be solidary. Solidary obligations are never presumed and must be specifically stated in the agreement, otherwise, the default rule is that it is a joint obligation.

Bar Question (2002) Extinguishment; Compensation Stockton is a stockholder of Core Corp. He desires to sell his shares in Core Corp. In view of a court suit that Core Corp. has filed against him for damages in the amount of P 10 million, plus attorney’s fees of P 1 million, as a result of statements published by Stockton which are allegedly defamatory because it was calculated to injure and damage the corporation’s reputation and goodwill. The articles of incorporation of Core Corp. provide for a right of first refusal in favor 28

of the corporation. Accordingly, Stockton gave written notice to the corporation of his offer to sell his shares of P 10 million. The response of Core corp. was an acceptance of the offer in the exercise of its rights of first refusal, offering for the purpose payment in form of compensation or set-off against the amount of damages it is claiming against him, exclusive of the claim for attorney’s fees. Stockton rejected the offer of the corporation, arguing that compensation between the value of the shares and the amount of damages demanded by the corporation cannot legally take effect. Is Stockton correct? Give reason for your answer. SUGGESTED ANSWER: Stockton is correct. There is no right of compensation between his price of P10 million and Core Corp.’s unliquidated claim for damages. In order that compensation may be proper, the two debts must be liquidated and demandable. The case for the P 10million damages being still pending in court, the corporation has as yet no claim which is due and demandable against Stockton. MIGUEL’S ANSWER: Stockton is correct. In order for there to be a valid compensation, one of the requisites that Art. 1279 of the Civil Code provides is that the debts be liquidated and demandable. In this case, since the claim for damages is still pending in court, the amount has not been liquidated yet therefore one of the requisites for a valid compensation is lacking.

Bar Question (2002) Nature of Contracts; Relativity of Contracts Printado is engaged in the printing business. Suplico supplies printing paper to Printado pursuant to an order agreement under which Suplico binds himself to deliver the same volume of paper every month for a period of 18 months, with Printado in turn agreeing to pay within 60 days after each delivery. Suplico has been faithfully delivering under the order agreement for 10 months but thereafter stopped doing so, because Printado has not made any payment at all. Printado has also a standing contract with publisher Publico for the printing of 10,000 volumes of school textbooks. Suplico was aware of said printing contract. After printing 1,000 volumes, Printado also fails to perform under its printing contract with Publico. Suplico sues Printado for the value of the unpaid deliveries under their order agreement. At the same time Publico sues Printado for damages for breach of contract with respect to their own printing agreement. In the suit filed by Suplico, Printado 29

counters that: (a) Suplico cannot demand payment for deliveries made under their order agreement until Suplico has completed performance under said contract; (b) Suplico should pay damages for breach of contract; and (c) with Publico should be liable for Printado’s breach of his contract with Publico because the order agreement between Suplico and Printado was for the benefit of Publico. Are the contentions of Printado tenable? Explain your answers as to each contention SUGGESTED ANSWER: No, the contentions of Printado are untenable. Printado having failed to pay for the printing paper covered by the delivery invoices on time, Suplico has the right to cease making further delivery. And the latter did not violate the order agreement (Integrated Packaging Corporation v. Court of Appeals, (333 SCRA 170, G.R. No. 115117, June 8, [2000]). Suplico cannot be held liable for damages, for breach of contract, as it was not he who violated the order agreement, but Printado. Suplico cannot be held liable for Printado’s breach of contract with Publico. He is not a party to the agreement entered into by and between Printado and Publico. Theirs is not a stipulation pour atrui. [Aforesaid] Such contracts do could not affect third persons like Suplico because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof. (Integrated Packaging Corporation v. CA, supra.) MIGUEL’S ANSWER: The contentions of Printado are unmeritorious. Printado failed to comply with his obligation to pay Suplico for the printing papers that Suplico has delivered, Suplico therefore had the right to stop making further delivery until Printado complies with their obligation. Suplico cannot be held liable for damages as it was Printado who breached the contract because of their non-payment despite the prior deliveries made by Suplico of the printing papers. Suplico cannot be held liable for the failure of Printado to comply with Printado’s obligation to Publico as Suplico is not part of the contract between the prior two.

Bar Question (2003) Conditional Obligations Are the following obligations valid, why, and if they are valid, when is the obligation demandable in each case? a) If the debtor promises to pay as soon as he has the means to pay; b) If the debtor promises 30

to pay when he likes; c) If the debtor promises to pay when he becomes a lawyer; d) If the debtor promises to pay if his son, who is sick with cancer, does not die within one year. SUGGESTED ANSWER: (a) The obligation is valid. It is an obligation subject to an indefinite period because the debtor binds himself to pay when his means permit him to do so (Article 1180, NCC). When the creditor knows that the debtor already has the means to pay, he must file an action in court to fix the period, and when the definite period as set by the court arrives, the obligation to pay becomes demandable 9Article 1197, NCC) (b) The obligation ―to pay when he likes‖ is a suspensive condition the fulfillment of which is subject to the sole will of the debtor and, therefore the conditional obligation is void. (Article 1182, NCC). (c) The obligation is valid. It is subject to a suspensive condition, i.e. the future and uncertain event of his becoming a lawyer. The performance of this obligation does not depend solely on the will of the debtor but also on other factors outside the debtor’s control (d) The obligation is valid. The death of the son of cancer within one year is made a negative suspensive condition to his making the payment. The obligation is demandable if the son does not die within one year (Article 1185, NCC). MIGUEL’S ANSWER: (a) VALID. It is an obligation subject to an indefinite period and is demandable upon the fixing of the period by the parties or through the courts. (b) VOID. The obligation is an obligation subject to a potestative condition which according to the Civil Code are considered void. (c) VALID. The obligation is an obligation subject to a suspensive condition and is demandable upon the occurrence of the condition or as in this case upon him becoming a lawyer. (d) VALID. The obligation is subject to a suspensive condition. It is demandable upon the end of 1 year if his son has not died by then.

Bar Question (2003) Liability; Solidary Obligation; Mutual Guaranty A,B,C,D, and E made themselves solidarity indebted to X for the amount of P50,000.00. When X demanded payment from A, the latter refused to pay on the following grounds. a) B is only 16 years 31

old. b) C has already been condoned by X c) D is insolvent. d) E was given by X an extension of 6 months without the consent of the other four co-debtors. State the effect of each of the above defenses put up by A on his obligation to pay X, if such defenses are found to be true. SUGGESTED ANSWER: (a) A may avail the minority of B as a defense, but only for B’s share of P 10,000.00. A solidary debtor may avail himself of any defense which personally belongs to a solidary codebtor, but only as to the share of that co-debtor. (b) A may avail of the condonation by X of C’s share of P 10, 000.00. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him or pertain to his own share. With respect to those which personally belong to others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible. (Article 1222, NCC). (c) A may not interpose the defense of insolvency of D as a defense. Applying the principle of mutual guaranty among solidary debtors, A guaranteed the payment of D’s share and of all the other co-debtors. Hence, A cannot avail of the defense of D’s insolvency. (d) The extension of six (6) months given by X to E may be availed of by A as a partial defense but only for the share of E, there is no novation of the obligation but only an act of liberality granted to E alone. MIGUEL’S ANSWER: (a) The share of that co-debtor would be deducted from the total amount due. The minority of one of the solidary co-debtors is a valid defense and would benefit his codebtors (b) The part of C will be deducted from the total amount that is due and demandable from the remaining co-debtors. (c) The co-debtors would have to shoulder the share of an insolvent co-debtor in proportion to their share in the debt (d) The extension would benefit A only as to the share of E. The amount that is demandable would therefore be reduced to an amount subtracting the share of E until his share becomes due and demandable.

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Bar Question (2004) Inexistent Contracts vs. Annullable Contracts Distinguish briefly but clearly between Inexistent contracts and annullable contracts. SUGGESTED ANSWER: Inexistent Contracts are considered as not having been entered into and, therefore, void ab initio. They do not create any obligation and cannot be ratified or validated, as there is no agreement to ratify or validate. On the other hand, Annullable or Voidable Contracts are valid until invalidated by the court but may be ratified. In inexistent contracts, one or more requisites of a valid contract are absent. In anullable contracts, all the elements of a contract are present except that the consent of one of the contracting parties was vitiated or one of them has no capacity to give consent. MIGUEL’S ANSWER: Inexistent contracts are contracts that have no force and effect from the beginning and which cannot be ratified by lapse of time. An annullable contract or a voidable contract on the other hand are contracts which are valid until annulled. Voidable contracts are subject to ratification.

Bar Question (2005) Contract of Option; Elements Marvin offered to construct the house of Carlos for a very reasonable price of P900,000.00, giving the latter 10 days within which to accept or reject the offer. On the fifth day, before Carlos could make up his mind, Marvin withdrew his offer. a) What is the effect of the withdrawal of Marvin's offer? SUGGESTED ANSWER: The withdrawal of Marvin's offer will cause the offer to cease in law. Hence, even if subsequently accepted, there could be no concurrence of the offer and the acceptance. In the absence of concurrence of offer and acceptance, there can be no consent. (Laudico v. Arias Rodriguez, G.R. No. 16530, March 31, 1922) Without consent, there is no perfected contract for the construction of the house of Carlos. (Salonga v. Farrales, G.R. No. L47088, July 10, 1981) Article 1318 of the Civil Code provides that there can be no contract unless the following requisites concur: (1)

33

consent of the parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation. Marvin will not be liable to pay Carlos any damages for withdrawing the offer before the lapse of the period granted. In this case, no consideration was given by Carlos for the option given, thus there is no perfected contract of option for lack of cause of obligation. Marvin cannot be held to have breached the contract. Thus, he cannot be held liable for damages. MIGUEL’S ANSWER: The withdrawal of the offer means that there can be no contract. A contract would only be born upon the meeting of the minds of the parties and the acceptance of the offer of one by the other. There being no offer, acceptance cannot be effected thereby eliminating the possibility of having a contract. b) Will your answer be the same if Carlos paid Marvin P10,000.00 as consideration for that option? Explain. SUGGESTED ANSWER: My answer will be the same as to the perfection of the contract for the construction of the house of Carlos. No perfected contract arises because of lack of consent. With the withdrawal of the offer, there could be no concurrence of offer and acceptance. MIGUEL’S ANSWER: Yes, my answer will be the same. Since there is no perfected contract, no obligation arises. c) Supposing that Carlos accepted the offer before Marvin could communicate his withdrawal thereof? Discuss the legal consequences. SUGGESTED ANSWER: A contract to construct the house of Carlos is perfected. Contracts are perfected by mere consent manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Gomez v. Court of Appeals, G.R. No. 120747, September 21, 2000) Under Article 1315 of the Civil Code, Carlos and Marvin are bound to fulfill what has been expressly stipulated and all consequences thereof. Under Article 1167, if Marvin would refuse to construct the house, Carlos is entitled to have the construction be done by a third person at the expense of Marvin. Marvin in that case will be liable for damages under Article 1170. MIGUEL’S ANSWER: If the offer was accepted before it was withdrawn there is a valid contract that can be the source of obligations arising from their agreements. 34

Bar Question (2007) Obligations What are the obligations without an agreement? Give examples of situations giving rise to this type of obligation. SUGGESTED ANSWER: Obligations without an agreement are obligations that do not arise from contract such as those arising from: 1) delicts 2) quasi-delicts 3) solutio indebiti 4) negotiorum gestio and 5) all other obligations arising from law

Bar Question (2008) Compensation Eduardo was granted a loan by XYZ Bank for the purpose of improving a building which XYZ leased from him. Eduardo, executed the promissory note in favor of the bank with his friend Recardo as co-signatory. In the PN, they both acknowledged that they are “individually and collectively” liable and waived the need for prior demand. To secure the PN, Recardo executed a real estate mortgage on his own property. When Eduardo defaulted on the PN, XYZ stopped payment of rentals on the building on the ground that legal compensation had set in since there was still a balance due on the PN after applying the rentals. XYZ foreclosed the real estate mortgage over Recardo’s property. Recardo opposed the foreclosure on the ground that he is only a co-signatory; that no demand was made upon him for payment, and assuming he is liable, his liability should not go beyond half the balance of the loan. Further, Recardo said that when the bank invoked compensation between the rentals and the amount of the loan, it amounted to a new contract or novation and had the effect of extinguishing the security since he did not give his consent (as owner of the property under the real estate mortgage) thereto. (a) (b) (c)

Can XYZ Bank validly assert legal compensation? Can Recardo’s property be foreclosed to pay the full balance of the loan? Does Recardo have basis under the Civil Code for claiming that the original contract was novated?

SUGGESTED ANSWER: (a) XYZ may validly assert the partial compensation of both debts, but it should be facultative compensation because not all of the 5 requisites of legal compensation are present. The payment of the 35

rentals by XYZ Bank is not yet due, but the principal obligation of loan where both Eduardo and Recardo are bound solidarily and therefore any of them is principally bound to pay the entire loan, is due and demandable without need of demand. XYZ Bank may declare its obligation to pay rentals as already due and demand payment from any of the two debtors. (b) No, because there was no prior demand on Ricardo, depriving him of the right to reasonably block the foreclosure by payment. The waiver of prior demand in the PN is against public policy and violates the right to due process. Without demand, there is no default and the foreclosure is null and void. Since the mortgage, insofar as Ricardo is concerned is not violated, a requirement under Act 3135 for a valid foreclosure of real estate mortgage is absent. In the case of DBP vs Licuanan, it was held that: “the issue of whether demand was made before the foreclosure was effected is essential. If demand was made and duly received by the respondents and the latter still did not pay, then they were already in default and foreclosure was proper. However, if demand was not made, then the loans had not yet become due and demandable. This meant that respondents had not defaulted in their payment and the foreclosure was premature”. (c) None of the three kinds of novation is applicable. There is no objective novation, whether express or implied, because there is no change in the object or principal conditions of the obligation. There is no substitution of debtors, either. Compensation is considered as abbreviated or simplified payment and since Recardo bound himself solidarily with Eduardo, any facultative compensation which occurs does not result in partial legal subrogation. Neither Eduardo nor Recardo is a third person interested in the obligation under Art. 1302 of the Civil Code MIGUEL’S ANSWER: (a) XYZ may assert compensation. The requisites for a valid application of compensation are present in this case. XYZ and Eduardo are creditors of one another, Eduardo as to the promissory note that is due and XYZ as to the rentals which are also due, both debts are demandable and both consists in debts of a sum of money that is liquidated and demandable. All of the requisites for compensation are present and this XYZ may validly apply compensation in the fulfillment of the debt of Eduardo to them. (b) Recardo’s property may be foreclosed upon proper showing that demand was made upon him and he failed to pay, without which foreclosure cannot be effected. (c) None. There is no novation in this case as there was no change in object, condition, or debtor. 36

Bar Question (2008) Felipe borrowed $100 from Gustavo in 1998, when the Phil P - US$ exchange rate was P56 - US$1. On March 1, 2008, Felipe tendered to Gustavo a cashier's check in the amount of P4,135 in payment of his US$ 100 debt, based on the Phil P - US$ exchange rat at that time. Gustavo accepted the check, but forgot to deposit it until Sept. 12, 2008. His bank refused to accepted the check because it had become stale. Gustavo now wants Felipe to pay him in cash the amount of P5,600. Claiming that the previous payment was not in legal tender, and that there has been extraordinary deflation since 1998, and therefore, Felipe should pay him the value of the debt at the time it was incurred. Felipe refused to pay him again, claiming that Gustavo is estopped from raising the issue of legal tender, having accepted the check in March, and that it was Gustavo's negligence in not depositing the check immediately that caused the check to become stale. (a) (b) (c)

Can Gustavo now raised the issue that the cashier's check is not legal tender? Can Felipe validly refuse to pay Gustavo again? Can Felipe compel Gustavo to receive US$100 instead?

SUGGESTED ANSWER: (a)

(b)

(c)

No, because Gustavo is guilty of estoppel by laches. He led Felipe to believe he could pay by cashier’s check, and Felipe relied that such cashier check would be encashed this extinguishing his obligation. Because of Gustavo’s inaction of more than six months the check became stale and Felipe will be prejudiced if he will be required to pay $100 at the exchange rate ofP56 to $1. The exchange should be the rate at the time of payment Yes, if the payment is valid. Since the bank considered the cashier’s check as being stale for not having been encashed on time, then the cashier’s check may be issued again. At any rate, nonpayment of the amount to Gustavo would constitute unjust enrichment Yes, Felipe can compel Gustavo to pay $100. Under RA 529, as amended by RA 4100, Payment can only be in Philippine currency as it would be against public policy, null and void and of no effect. However, under RA 8183, payment may be made in the currency agreed upon, and the rate of exchange to be followed is at the time of payment.

MIGUEL’S ANSWER: (a) Gustavo cannot use the defense that the check was not legal tender because he has already accepted it. Gustavo’s acceptance of 37

the check was tantamount to a valid payment thereby extinguishing the obligation. While a check is not legal tender, Gustavo is bound by estoppel from questioning it as he accepted it despite knowing such. (b) Yes, Felipe can refuse to pay Gustavo again. The acceptance of the payment of Felipe by Gustavo effectively extinguished his obligation to him. Gustavo was negligent in not encashing the check immediately and Felipe should not be faulted for that. (c) Yes if it was the currency agreed upon by the parties, otherwise, Felipe should pay in Philippine peso which is the legal tender in the Philippines. Bar Question (2008) AB Corp. entered into a contract with XY Corp. whereby the former agreed to construct the research and laboratory facilities of the latter. Under the terms of the contract, AB Corp. agreed to complete the facility in 18 months, at the total contract price of P10 million. XY Corp. paid 50% of the total contract price, the balance to be paid upon completion of the work. The work stated immediately, but AB Corp. later experienced work slippage because of labor unrest in his company. AB Corp.'s employees claimed that they are not being paid on time; hence, the work slowdown. As of the 17th month, work was only 45% completed. AB Corp. asked for extension of time, claiming that its labor problems is a case of fortuitous event, but this was denied by XY Corp. When it became certain that the contruction could not be finished on time, XY Corp. sent written notice cancelling the contract, and requiring AB Corp. to immediately vacate the premises. (a) (b) (c)

Can the labor unrest be considered a fortuitous event? Can XY Corp. unilaterally and immediately cancel contract? Must AB Corp. return the 50% downpayment?

the

SUGGESTED ANSWER: (a) Labor unrest is not a fortuitous event that will excuse AB Corp. from complying with its obligation of constructing the research and laboratory facilities of XY Corp. the labor unrest, which may even be attributed in large part to AB Corp. itself, is not the direct cause of non-compliance by AB Corp. It is independent of its obligation. It is similar to the failure of a DBP borrower to pay her loan just because her plantation suffered losses due to the cadang-cadang disease. It does not excuse compliance with the obligation. (b) Yes, XY Corp. may unilaterally cancel the obligation but this is subject to the risk that the cancellation of the reciprocal obligation being challenged in court and if AB Corp. succeeds, then XY Corp. will be declared in default and be liable for damages

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(c) No, under the principle of quantum meruit, AC Corp. has the right to retain payment corresponding to his percentage of accomplishment less the amount of damages suffered by XY Corp. because of the delay or default.

Bar Question (2012) Elements of an Obligation The following are the elements of an obligation except: A. B. C. D.

Juridical/Legal Tie Active Subject Passive Subject Consideration

SUGGESTED ANSWER: D. Consideration Bar Question (2011) Upon the proposal of a third person, a new debtor substituted the original debtor without the latter’s consent. The creditor accepted the substitution. Later, however, the new debtor became insolvent and defaulted in his obligation. What is the effect of the new debtor’s default upon the original debtor? A. The original debtor is freed of liability since novation took place and this relieved him of his obligation. B. The original debtor shall pay or perform the obligation with recourse to the new debtor. C. The original debtor remains liable since he gave no consent to the substitution. D. The original debtor shall pay or perform 50% of the obligation to avoid unjust enrichment on his part. SUGGESTED ANSWER: A. The original debtor is freed of liability since novation took place and this relieved him of his obligation.

Bar Question (2011) When bilateral contracts are vitiated with vices of consent, they are rendered A. rescissible. B. void. C. unenforceable. D. voidable. SUGGESTED ANSWER: D. Voidable 39

Bar Question (2011) An agent, authorized by a special power of attorney to sell a land belonging to the principal succeeded in selling the same to a buyer according to the instructions given the agent. The agent executed the deed of absolute sale on behalf of his principal two days after the principal died, an event that neither the agent nor the buyer knew at the time of the sale. What is the standing of the sale? A. B. C. D.

Voidable. Valid. Void. Unenforceable.

SUGGESTED ANSWER: B. Valid Bar Question (2011) 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 SUGGESTED ANSWER: A. Relativity of Contracts Bar Question (2011) A buyer ordered 5,000 apples from the seller at P20 per apple. The seller delivered 6,000 apples. What are the rights and obligations of the buyer? A. He can accept all 6,000 apples and pay the seller at P20 per apple. B. He can accept all 6,000 apples and pay a lesser price for the 1,000 excess apples. C. He can keep the 6,000 apples without paying for the 1,000 excess since the seller delivered them anyway. D. He can cancel the whole transaction since the seller violated the terms of their agreement. SUGGESTED ANSWER: A. He can accept all 6,000 apples and pay the seller at P20 per apple. Bar Question (2011) 40

Lino entered into a contract to sell with Ramon, undertaking to convey to the latter one of the five lots he owns, without specifying which lot it was, for the price of P1 million. Later, the parties could not agree which of five lots he owned Lino undertook to sell to Ramon. What is the standing of the contract? A. Unenforceable. B. Voidable. C. Rescissible. D. Void SUGGESTED ANSWER: D. Void Bar Question (2011) Rudolf borrowed P1 million from Rodrigo and Fernando who acted as solidary creditors. When the loan matured, Rodrigo wrote a letter to Rudolf, demanding payment of the loan directly to him. Before Rudolf could comply, Fernando went to see him personally to collect and he paid him. Did Rudolf make a valid payment? A. No, since Rudolf should have split the payment between Rodrigo and Fernando. B. No, since Rodrigo, the other solidary creditor, already made a prior demand for payment from Rudolf. C. Yes, since the payment covers the whole obligation. D. Yes, since Fernando was a solidary creditor, payment to him extinguished the obligation. SUGGESTED ANSWER: B. No, since Rodrigo, the other solidary creditor, already made a prior demand for payment from Rudolf. Bar Question (2011) Allan bought Billy’s property through Carlos, an agent empowered with a special power of attorney (SPA) to sell the same. When Allan was ready to pay as scheduled, Billy called, directing Allan to pay directly to him. On learning of this, Carlos, Billy's agent, told Allan to pay through him as his SPA provided and to protect his commission. Faced with two claimants, Allan consigned the payment in court. Billy protested, contending that the consignation is ineffective since no tender of payment was made to him. Is he correct? A. No, since consignation without tender of payment is allowed in the face of the conflicting claims on the plaintiff. B. Yes, as owner of the property sold, Billy can demand payment directly to himself. C. Yes, since Allan made no announcement of the tender. D. Yes, a tender of payment is required for a valid consignation.

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SUGGESTED ANSWER: A. No, since consignation without tender of payment is allowed in the face of the conflicting claims on the plaintiff. Bar Question (2011) X sold Y 100 sacks of rice that Y was to pick up from X’s rice mill on a particular date. Y did not, however, appear on the agreed date to take delivery of the rice. After one week, X automatically rescinded the sale without notarial notice to Y. Is the rescission valid? A. Yes, automatic rescission is allowed since, having the character of movables and consumables, rice can easily deteriorate. B. No, the buyer is entitled to a customary 30-day extension of his obligation to take delivery of the goods. C. No, since there was no express agreement regarding automatic rescission. D. No, the seller should first determine that Y was not justified in failing to appear SUGGESTED ANSWER: A. Yes, automatic rescission is allowed since, having the character of movables and consumables, rice can easily deteriorate. Bar Question (2011) Roy and Carlos both undertook a contract to deliver to Sam in Manila a boat docked in Subic. Before they could deliver it, however, the boat sank in a storm. The contract provides that fortuitous event shall not exempt Roy and Carlos from their obligation. Owing to the loss of the motor boat, such obligation is deemed converted into one of indemnity for damages. Is the liability of Roy and Carlos joint or solidary? A. Neither solidary nor joint since they cannot waive the defense of fortuitous event to which they are entitled. B. Solidary or joint upon the discretion of Sam. C. Solidary since Roy and Carlos failed to perform their obligation to deliver the motor boat. D. Joint since the conversion of their liability to one of indemnity for damages made it joint. SUGGESTED ANSWER: D. Joint since the conversion of their liability to one of indemnity for damages made it joint. Bar Question (2011) A natural obligation under the New Civil Code of the Philippines is one which A. The obligor has a moral obligation to do, otherwise entitling the obligee to damages. B. Refers to an obligation in writing to do or not to do. C. The obligee may enforce through the court if violated by the obligor. 42

D. Cannot be judicially enforced but authorizes the obligee to retain the obligor’s payment or performance. SUGGESTED ANSWER: D. Cannot be judicially enforced but authorizes the obligee to retain the obligor’s payment or performance. Bar Question (2011) Anne owed Bessy P1 million due on October 1, 2011 but failed to pay her on due date. Bessy sent a demand letter to Anne giving her 5 days from receipt within which to pay. Two days after receipt of the letter, Anne personally offered to pay Bessy in manager's check but the latter refused to accept the same. The 5 days lapsed. May Anne’s obligation be considered extinguished? A. Yes, since Bessy’s refusal of the manager’s check, which is presumed funded, amounts to a satisfaction of the obligation. B. No, since tender of payment even in cash, if refused, will not discharge the obligation without proper consignation in court. C. Yes, since Anne tendered payment of the full amount due. D. No, since a manager’s check is not considered legal tender in the Philippines. SUGGESTED ANSWER: B. No, since tender of payment even in cash, if refused, will not discharge the obligation without proper consignation in court. Bar Question (2011) The presence of a vice of consent vitiates the consent of a party in a contract and this renders the contract A. Rescissible. B. Unenforceable. C. Voidable. D. Void. SUGGESTED ANSWER: C. Voidable. Bar Question (2012) Obligation It is a conduct that may consist of giving, doing, or not doing something. A. B. C. D.

Obligation Juridical necessity Prestation Contract

SUGGESTED ANSWER: C. Prestation 43

Bar Question (2012) Delay A debtor is liable for damages in case of delay if he is guilty of any of the following except: A. B. C. D.

Default (mora) Mistake Negligence Breach through contravention of the tenor thereof

SUGGESTED ANSWER: B. Mistake Bar Question (2012) Delay This term refers to delay on the part of both the debtor and creditor in reciprocal obligations A. B. C. D.

Mora accipendi Mora solvendi Compensation morae Solution indebiti

SUGGESTED ANSWER: C. Compensation morae

Bar Question (2012) Delay The following are requisites of mora solvendi, except A. Obligation pertains to the debtor and is determinate, due, demandable and liquidated B. Obligation was performed on its maturity date C. There is a judicial or extrajudicial demand by the creditor D. Failure of the debtor to comply with such demand SUGGESTED ANSWER: B. Obligation was performed on its maturity date

Bar Question (2012) Fortuitous Event 44

A debtor may still be held liable for loss or damages even if it was caused by a fortuitous event in any of the following instances, except: A. The debtor is guilty of dolo, malice or bad faith, has promised the same thing to tow or more persons who do not have the same interest B. The debtor contributed to the loss C. The thing to be delivered is generic D. The creditor is guilty of fraud, negligence or delay or if he contravened the tenor of the obligation SUGGESTED ANSWER: C. The thing to be delivered is generic

Bar Question (2012) Solidary Obligation Buko, Fermin and Toti bound themselves solidarily liable to pay Ayee the amount of P5,000. Suppose Buko paid the obligation, what is his right as against his co-debtors A. B. C. D.

Buko Buko Buko Buko

can can can can

ask for reimbursement from Fermin and Toti sue Fermin and Toti for damages sue for rescission claim a refund from Ayee

SUGGESTED ANSWER: A. Buk can ask for reimbursement from Fermin and Toti

Bar Question (2012) Solidary Obligation Buko, Fermin and Toti bound themselves solidarily to pay Ayee the sum of P10,000. When the obligation became due and demandable, Ayee sued Buko for the payment of the P10,000. Buko moved to dismiss on the ground that ther was failure to implead Fermin and Toti who are indispensable parties. Will the motion to dismiss prosper? Why? A. Yes, because Fermin and Toto should have been impleaded as their obligation is solidary B. No, because the creditor may proceed against anyone of the solidary debtors or some or all of them simultaneously C. No, because a motion to dismiss is a prohibited pleading 45

D. Yes, because Fermin and Toto should also pay their share of the obligation SUGGESTED ANSWER: B. No, because the creditor may proceed against anyone of the solidary debtors or some or all of them simultaneously

Bar Question (2012) Solidary Obligation Buko, Fermin and Toti are solidary debtors of Ayee. Twelve (12) years after the obligation became due and demandable, Buko paid Ayee and later on asked for reimbursement of Fermin’s and Toti’s shares. Is Buko correct? Why? A. No, because the obligation has already prescribed B. Yes, because the obligation is solidary C. No, because in solidary obligation anyone of the solidary creditors can pay the entire debt D. Yes, because Fermin and Toti would be unduly enriched at the expense of Buko SUGGESTED ANSWER: A. No, because the obligation has already prescribed.

Bar Question (2012) Buko, Fermin and Toti are solidary debtors under a loan obligation of P300,000 which has fallen due. The creditor has, however, condoned Fermin’s entire share in the debt. Since Toti has become insolvent, the creditor makes a demand on Buko to pay the debt. How much, if any may Buko be compelled to pay? A. B. C. D.

P P P P

200,000 300,000 100,000 150,000

SUGGESTED ANSWER: A. P 200,000

Bar Question (2012) Payment 46

Dina bought a car from Jai and delivered a check in payment of the same. Has Dina paid the obligation? Why? A. No, not yet. The delivery of the promissory notes payable to order or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. B. Yes, because a check is a valid legal tender of payment. C. It depends. If the check is a manager’s check or cashier’s check it will produce the effect of payment. If it’s an ordinary check, no payment. D. Yes, because a check is as good as cash. SUGGESTED ANSWER: A. No, not yet. The delivery of the promissory notes payable to order or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

Bar Question (2012) Compensation The following are the requisites of legal compensation, except: A. That each of the obligors is bound principally and that he be the same time a principal creditor of the other B. That both debts consist in s asum pf money or if the things due are consumable, they be the same kind, and also of the same quality if the latter has been stated C. That the two (2) debts are not yet due D. That they be liquidated and demandable SUGGESTED ANSWER: C. That the two (2) debts are not yet due.

Bar Question (2012) Contracts Which of the following statements are correct? A. B. C. D.

All All All All

contracts contracts contracts contracts

are are are are

perfected by mere consent perfected by delivery of the object required to be in writing required to have a valid consideration 47

SUGGESTED ANSWER: D. All contracts are required to have a valid consideration

Bar Question (2012) Contracts It is a principle which holds that parties are bound not only by what has been expressly provided for in the contract but also to the natural consequences that flow out of such agreement. A. B. C. D.

Obligatory force of contracts Mutuality of contracts Autonomy of contracts Relativity of contracts

SUGGESTED ANSWER: A. Obligatory force of contracts

Bar Question (2012) It is a principle which holds that contracts must be binding to both parties and its validity and effectivity can never be left to the will of one of the parties A. B. C. D.

Obligatory force of contracts Mutuality of contracts Autonomy of contracts Relativity of contracts

SUGGESTED ANSWER: B. Mutuality of contracts

Bar Question (2012) It refers to the rule that a contract is binding not only between the parties but extends to the heirs, successors in interest and assignees of the parties, provided that the contact involved transmissible rights by their nature or by stipulation of law. A. B. C. D.

Obligatory force of contracts Mutuality of contracts Autonomy of contracts Relativity of contracts

SUGGESTED ANSWER: D. Relativity of contracts

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Bar Question (2012) Contracts It is a rule which holds that the freedom of parties to contract includes the freedom to stipulate, provided the stipulations are not contrary to law, morals, good customs, public order or public policy. A. B. C. D.

Obligatory force of contracts Mutuality of contracts Autonomy of contracts Relativity of contracts

SUGGESTED ANSWER: C. Autonomy of contracts

Bar Question (2012) Contracts The following are the ways by which innominate contracts are regulated except: A. B. C. D.

By By By By

the the the the

stipulation of the parties general principles of quasi-contracts and delicts rules governing the most analogous nominate contracts customs of the place

SUGGESTED ANSWER: B. By the general principles of quasi-contracts and delicts

Bar Question (2012) Contracts The following are solemn contracts (contracts which must appear in writing), except: A. Donations of real estate or of movables if the value exceeds P5,000 B. Stipulation to pay interest in loans C. Sale of land through an agent (authority must be in writing) D. Construction contract of a building SUGGESTED ANSWER: D. Construction contract of a building

Bar Question (2012) 49

Contracts The following are rescissible contracts, except: A. Entered into by guardian whenever ward suffers damage more that ¼ of value of property B. Agreed upon in representation of absentees, if absentee suffers lesion by more than ¼ value of property C. Contracts where fraud is committed on creditor (accion pauliana) D. Contracts entered into by minors. SUGGESTED ANSWER: D. Contracts entered into by minors

Bar Question (2012) Contracts The following are requisites before a contract entered into in fraud of creditors may be rescinded except: A. There must be credit existing prior to the celebration of the contract B. There must be fraud, or at least, the intent to commit fraud to the prejudice of the creditor seeking rescission C. The creditor cannot in any legal manner collect his credit (subsidiary character of rescission) D. The object of the contract must be legally in the possession of a 3rd person in good faith SUGGESTED ANSWER: D. The object of the contract must be legally in the possession of a 3rd person in good faith Bar Question (2012) The following are the characteristics of a voidable contract, except: A. B. C. D.

Effective until set aside May be assailed/attacked only in an action for that purpose Can be confirmed or ratified Can be assailed only by either party

SUGGESTED ANSWER: D. Can be assailed only by either party

Bar Question (2012) Void Contracts 50

The following are void contracts except: A. B. C. D.

Pactum commisorium Pactum de non alienando Pactum leonine Pacto de retro

SUGGESTED ANSWER: D. Pacto de retro

Bar Question (2012) Right to the Fruits of the Thing Due The creditor has the right to the fruits of the thing from the time: A. B. C. D.

The The The The

thing is delivered obligation to deliver the thing arises contract is perfected fruits are delivered

SUGGESTED ANSWER: B. The obligation to deliver the thing arises

Bar Question (2012) Contracts If one of the parties to the contract is without juridical capacity, the contract is: A. B. C. D.

Voidable Rescissible Void Unenforceable

SUGGESTED ANSWER: C. Void

Bar Question (2012) Contracts When both parties to the contract are minors, the contract is A. B. C. D.

Voidable Rescissible Void Unenforceable 51

SUGGESTED ANSWER: D. Unenforceable

Bar Question (2012) Contracts When the consent of one of the parties was vitiated, the contract is A. B. C. D.

Voidable Rescissible Void Unenforceable

SUGGESTED ANSWER: A. Voidable

Bar Question (2012) Obligation An obligation which is based on equity and natural law is known as A. B. C. D.

Pure Quasi-contract Civil Natural

SUGGESTED ANSWER: D. Natural

Bar Question (2012) Contract Consent was given by one in representation of another but without authority. The contract is: A. B. C. D.

Voidable Rescissible Void Unenforceable

SUGGESTED ANSWER: D. Unenforceable

Bar Question (2012) Contract 52

Michael Fermin, without the authority of Pascual Lacas owner of a car, sold the same car in the name of Mr. Lacas to Atty. Buko. The contract between Atty. Buko and Mr. Lacas is A. Void because of the absence of consent from the owner, Mr. Lacas B. Valid because all the essential requisites of a contract are present C. Unenforceable because Michael Fermin had no authority but he sold the car in the name of Mr. Lacas, the owner D. Rescissible because the contract cause lesion to Atty. Buko SUGGESTED ANSWER: C. Unenforceable because Michael Fermin had no authority but he sold the car in the name of Mr. Lacas, the owner

Bar Question (2012) Contracts Which of the following contracts is void? A. An oral sale of a parcel of land B. A sale of land by an agent in a public instrument where his authority from the principal is oral C. A donation of a wrist watch worth P4,500 D. A relatively simulated contract SUGGESTED ANSWER: B. A sale of land by an agent in a public instrument where his authority from the principal is oral

Bar Question (2012) Oral Contracts Aligada orlly offered to sell his two-hectares rice land to Balane for P10 million. The offer was orally accepted. By agreement, the and was to be delivered (through execution of a notarized deed od sale) and the price was to be paid exactly one month from their oral agreement. Which statement is most accurate? A. If Aligada refuses to deliver the land on the agreed date despite payment by Balane, the latter may not successfully sue Aligada because the contract is oral B. If Aligada refused to deliver the land, Balane may successfully sue for fulfillment of the obligation even if he has not tendered payment of the purchase price 53

C. The contract between the parties is rescissible D. The contract between the parties is subject to ratification by the parties SUGGESTED ANSWER: D. The contract between the parties is subject to ratification by the parties

Bar Question (2012) Contracts Which of the following statements is wrong? A. Creditors are protected in cases of contracts intended to defraud them B. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law C. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation D. In contracts creating real rights, third persons who come into possession of the object of the contract are not bound thereby SUGGESTED ANSWER: D. In contracts creating real rights, third persons who come into possession of the object of the contract are not bound thereby

Bar Question (2013) Form of Contracts Lito obtained a loan of Php 1,000,000 from Ferdie payable within one year. To secure payment, Lito executed a chattel mortgage on a Toyota Avanza and a real estate mortgage on a 200-square meter piece of property. (a) Would it be legally significant from the point of view of validity and enforceability if the loan and the mortgages were in public or private instruments? (b) Lito’s failure to pay led to the extra-judicial foreclosure, Lito tendered a manager’s check to Ferdie to redeem the property. Ferdie refused to accept payment on the ground that he wanted payment in cash; the check does not qualify as legal tender and does not include the interest payment. Is Ferdie’s refusal justified? 54

SUGGESTED ANSWER: (a) From the point of view of validity and enforceability there would be legal significance if the mortgage was in a public or private instrument. As for the loan, there is no legal significance except if interest were charged on the loan, in which case the charging of interest must be in writing. A contract of loan is a real contract and is perfected upon the delivery of the object of the obligation (Art. 1934, Civil Code). Thus, a contract of loan is valid and enforceable even if it is nether in a private nor in a public document. As a rule contracts shall be obligatory in whatever form they may have been entered into provided all the essential requisites for their validity are present. With regard to its enforceability, a contract of loan is not among those enumerated under Article 1403(2) of the Civil Code, which are covered by the Statute of Frauds. It is important to note other contracts where pesos must appear in requirement is not for greater efficacy.

that under Article 1358 of the Civil Code, all the amount involved exceeds five hundred writing, even a private one. However, the the validity of the contract, but only for its

With regard the chattel mortgage, Act No. 1508, the Chattel Mortgage Law, requires an affidavit of good faith stating that the chattel mortgage is supposed to stand as security for the loan; thus for validity of the chattel mortgage it must be in a public document and recorded in the Chattel Mortgage Register in the Registry of Deeds. A real estate mortgage under the provisions of Article 2125 of the Civil Code requires that in order that a mortgage may be validly constituted the document in which it appears must be recorded. If the instrument is not recorded, the mortgage is nevertheless valid and binding between the parties. Hence for validity of both chattel and real estate mortgages, they must appear in a public instrument. But for purposes of enforceability, it is submitted that the form of the contract, whether in a public of private document, would be immaterial. Also, under Article 1358, acts and contracts which have for their object the creation or transmission of real rights over immovable property must be in a public document for greater efficacy and a real estate mortgage is a real right over immovable property. (b) Ferdie’s refusal is justified. A check, whether a manager’s check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the oblige or creditors. Mere delivery of checks 55

does not discharge the obligation under a judgement. A check shall produce the effect of payment only when they have been cashed or when through the fault of the creditor, they have been impaired (Art. 1249, Civil Code). However, it is not necessary that the right of redemption be exercised by delivery of legal tender. A check may be used for the exercise of right of redemption, the same being a right and not an obligation. The tender of a check is sufficient to compel redemption but is not in itself a payment tht relives the redeemer from his liability to pay the redemption price. Redemption within the period allowed by law is not a matter of intent but a question of payment or valid tender of full redemption price within the said period. Whether the redemption is being made under Act 3135 or under the general banking law, the mortgagor or his assignee is required to tender payment to make said redemption valid. Moreover, Ferdie’s refusal was justified on the ground that the amount tendered does not include interest. In order to effect the redemption of the foreclosed property, the payment to the purchaser must include the following sums: (a) the bid price; (b) the interest on the bid price, computed at one per centum per month; and (c) the assessments or taxes, if any, paid by the purchaser with the same rate of interest. MIGUEL’S ANSWER: (a) There would only be legal significance if the mortgage was in a public or private instrument, it does not matter for the loan. A contract of loan is valid regardless if it be in a private or public document. For the mortgage on the other hand, its validity would be dependent upon it being in a public document. (b) Ferdie’s refusal is justified. A check is not considered as legal tender. The creditor may validly refuse to accept the debtor’s offer of payment if it is payment through a check.

Bar Question (2013) Solidary Obligation A, B,C and D are the solidary debtors of X for P40,000. X released D from the payment of his share of P10,000. When the obligation became due and demandable, C turned out to be insolvent. Should the share of insolvent debtor C be divided only between the two other remaining debtors, A and B? 56

A. Yes, remission of D’s share carries with it total extinguishment of his obligation to the benefit of the solidary debtors B. Yes, the Civil Code recognizes remission as a mode of extinguishing an obligation. This clearly applies to D C. No, the rule is that gratuitous acts should be restrictively construed, allowing only the least transmission of rights. D. No, as the release of the share of one debtor would then increase the burden of other debtors without their consent. SUGGESTED ANSWER: D. When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each. Additionally, D was released only from his share of P10,000, not from the solidary tie that binds him to A, B and C.

Bar Question (2013) Delay Gary is a tobacco trader and also a lending investor. He sold tobacco leaves to Homer for delivery within a month although the period for delivery was not guaranteed. Despite Gary’s efforts to deliver on time, transportation problems and government red tape hindered his efforts and he could only deliver after 30 days. Homer refused to accept the late delivery and to pay on the ground that the agreed term had not been complied with. As lending investor, Gary granted a P1,000,000 loan to Isaac to be paid within two years from execution of the contract. As security for the loan, Isaac promised to deliver to Gary his Toyota Innova within seven (7) days, but Isaac failed to do so. Gary was thus compelled to demand payment for the loan before the end of the agreed two-year term. Was Homer justified in refusing to accept the tobacco leaves? A. Yes, Homer was justified in refusing to accept the tobacco leaves. The delivery was to be made within a month. Gary’s promise of delivery on a ‘best effort’ basis made the delivery uncertain. The term therefore was ambiguous. B. No, Homer was not justified in refusing to accept the tobacco leaves. He consented to the terms and conditions of the sale and must abide by it. Obligations arising from contract have the force of law between the contracting parties. C. Yes, Homer was justified in his refusal to accept the delivery. The contract contemplates an obligation with a term. Since the delivery was made after 30 days, contrary to the terms agreed 57

upon, Gary could not insist that Homer accept the tobacco leaves. D. No, Homer was not justified in refusing to accept the tobacco leaves. There was no terms in the contract but a mixed condition. The fulfillment of the condition did not depend purely on Gary’s will but on other factors, e.g. the shipping company and the government. Homer should comply with his obligation SUGGESTED ANSWER: B. It is clear under the facts that the period of delivery of the tobacco leaves was not guaranteed. Gary anticipated other factors which may prevent him from making the delivery within a month. True enough transportation problems and government redtape did. Such slight delay was, thus excusable. Obligations arising from contract have the force of law between the contracting parties and should be complied with in good faith. Can Gary compel Isaac to pay his loan even before the end of the two-year period? A. Yes, Gary can compel Isaac to immediately pay the loan. Noncompliance with the promised guaranty or security renders the obligation immediately demandable. Isaac lost his right to make use fo the period. B. Yes, Gary can compel Isaac to immediately pay the loan. The delivery of the Toyota Innova is a condition for the loan. Isaac’s failure to deliver the car violated the condition upon which the loan was granted. It is but fair for Gary to demand immediate payment. C. No, Gary cannot compel Isaac to immediately pay the loan. The delivery of the car as security for the loan is an accessory contract; the principal contract is still the P1,000,000 loan. Thus, Isaac can still make use of the period. D. No, Gary cannot compel Isaac to immediately pay the loan. Equity dictates that Gary should have granted a reasonable extension of time for Isaac to deliver his Toyota Innova. It would be unfair and burdensome for Isaac to pay the P1,000,000 simply because the promised security was not delivered. SUGGESTED ANSWER: A. Non-compliance with the promised guaranty or security renders the obligation immediately demandable. Isaac lost his right to make use of the period. Under Article 1198(2) of the Civil Code, the debtor shall lose every right to make use of the period when he does not furnish to the creditor the guaranties and securities which he has promised. 58

Bar Question (2014) Consignation Dorotea leased portions of her 2,000 sq.m lot to Monet, Kathy, Celai and Ruth for five (5) years. Two (2) years before the expiration of the lease contract, Dorotea sold the property to PM Realty and Development Corporation. The following month, Dorotea and PM Realty stopped accepting rental payments from all the lessees because they wanted to terminate the lease contracts. Due to the refusal of Dorotea to accept rental payments, the lessees, Ruth et al., filed a complaint for consignation of the rentals before the Regional Trial Court (RTC) of Manila without notifying Dorotea. Is the consignation valid? SUGGESTED ANSWER: The consignation is not valid. Article 1257 of the Civil Code provides that in order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. Moreover, Article 1258 of the same code provides that consignation having been made, the interested parties shall also be notified thereof. In this case Dorotea, an interested party was not notified of the consignation. The consignation is therefore not valid for noncompliance with Article 1257. MIGUEL’S ANSWER: Consignation is not valid. For consignation to be valid, there must be intitial and subsequent notification given to all interested parties. In this case, Dorotea, an interested party was not notified, thereby making the consignation invalid.

Bar Question (2014) Novation J.C. Construction (J.C.) bought steel bars from Matibay Steel Industries (MSI) which is owned by Buddy Batungbacal. J.C. failed to pay the purchased materials worth P500,000 on due date. J.C. persuaded its client Amoroso with whom it had receivables to pay its obligation to MSI. Amoroso agreed and paid MSI the amount of P50,000. After two (2) other payments, Amoroso stopped making further payments. Buddy filed a complaint for collection of the balance of the obligation and damages against J.C. J.C. denied any liability claiming that its obligation was extinguished by reason of novation which took place when MSI accepted partial payments from 59

Amoroso on its behalf. Was the obligation of J.C. Construction to MSI extinguished by novation? Why? SUGGESTED ANSWER: No, the obligation of J.C. Construction to MSI was not extinguished by novation. Under Article 1292 of the Civil Code, in order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligation be on every point incompatible with each other. Novation by substitution of debtor requires the consent of the creditor as provided in Article 1923 of the Civil Code. This requirement is not present as in this case. In Magdalena Estates Inc. v Rodriguez it was ruled that the mere fact that the creditor received payment from a third person does not constitute novation and does not extinguish the obligation of the original debtor. Since there was no novation, the obligation of the original debtor is not extinguished. Thus the obligation of J.C. Construction to MSI subsists. MIGUEL’S ANSWER: The obligation of JC Construction to MSI was not extinguished. For there to be novation by substitution of the debtor, the consent of the creditor must be taken. The mere fact that MSI received payment from Amoroso does not necessarily imply that there was substitution.

Bar Question (2015) Fortuitous Event X, a dressmaker, accepted clothing materials from Karla to make two dresses for her. On the day X was supposed to deliver Karla's dresses, X called up Karla to say that she had an urgent matter to attend to and will deliver them the next day. That night, however, a robber broke into her shop and took everything including Karla's two dresses. X claims she is not liable to deliver Karla's dresses or to pay for the clothing materials considering she herself was a victim of the robbery which was a fortuitous event and over which she had no control. Do you agree? Why? SUGGESTED ANSWER: No, I do not agree. The obligation involved in this case is an obligation to do, since X’s obligation is to make dresses for Karla. Under Article 1167 of the Civil Code, if a person obliged to do something fails to do it, the same shall be executed at his cost. Although X may not be compelled to deliver the dresses to Karla, she may he held liable for the cost of having another person to

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make the dresses for Karla, which including the cost of the materials. MIGUEL’S ANSWER: No, I do not agree. Article 1167 of the Civil Code provides that if a person obliged to do something fails to do it, the same shall be executed at his cost. In this case, X failed to do his obligation of making the dresses of Karla, therefore the obligation must be executed at his cost. Furthermore, X cannot use the defense of fortuitous event as X is already in delay, according to Article 1165 of the Civil Code, if the obligor delays, he shall be responsible for fortuitous event until he has effected delivery.

Bar Question (2015) Requisites to a Contract: Consent Jackie, 16, inherited a townhouse. Because she wanted to study in an exclusive school, she sold her townhouse by signing a Deed of Sale and turning over possession of the same to the buyer. When the buyer discovered that she was still a minor, she promised to execute another Deed of Sale when she turns 18. When Jackie turned 25 and was already working, she wanted to annul the sale and return the buyer's money to recover her townhouse. Was the sale contract void, voidable or valid? Can Jackie still recover the property? Explain. SUGGESTED ANSWER: The contract of sale is voidable. Where one of the parties is incapable of giving consent to a contract, the contract is voidable. (Art. 1390, Civil Code.) It appears that only Jackie was incapacitated by virtue of her minority. Jackie cannot recover the property. First, since the contract is voidable, Jackie only had 4 years from the time she attained the age of majority to bring the action for annulment of the contract (Art. 1391, Civil Code). In this case, Jackie should have brought the action for annulment of the contract within four years after turning eighteen years old, or up until the age of twenty-two. Since she is already 25 years old. the period for bringing the action has prescribed. Second, Jackie may he considered to have actively misrepresented as to her age. Thus, she will be bound to the contract under the principle of estoppel. MIGUEL’S ANSWER: The contract is voidable. Since Jackie was only sixteen when she entered into the contract, she was still incapable of giving her consent thereby making the contract voidable for lack of one of the essential requisites of a valid contract. 61

Jackie cannot recover the property anymore because the action has already prescribed. Jackie has 4 years upon reaching the age of majority to bring an action to annul the contract. More than 4 years had already passed, action has therefore prescribed.

Bar Exam Question (2015) Remission of Obligation lya and Betty owed Jun P500,000 for advancing their equity in a corporation they joined as incorporators. Iya and Betty bound themselves solidarity liable for the debt. Later, Iya and Jun became sweethearts so Jun condoned the debt of P500,000 May lya demand from Betty P250,000 as her share in the debt? Explain with legal basis. SUGGESTED ANSWER: No, lya may not demand reimbursement from Betty. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him or her to reimbursement from his co-debtors (Art. 1220, Civil Code). MIGUEL’S ANSWER: No, the condonation of the entire debt in favor of one of the creditor has the effect of extinguishing the whole debt to the benefit of his co-debtors.

Bar Exam Question (2015) Joint and Solidary Obligations Juancho, Don and Pedro borrowed P150,000 from their friend Cita to put up an internet cafe orally promising to pay her the full amount after one year. Because of their lack of business know-how, their business collapsed. Juancho and Don ended up penniless but Pedro was able to borrow money and put up a restaurant which did well. Can Cita demand that Pedro pay the entire obligation since he, together with the two others, promised to pay the amount in full after one year? Defend your answer. SUGGESTED ANSWER: No, Cita may not demand payment of the entire obligation from Pedro. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation 62

requires solidarity (Art. 1207, Civil Code). In this case, there is no indication that they bound themselves solidarity to pay Cita, nor does the law or nature of the obligation require solidarity. Hence, Juancho, Don and Pedro’s obligation is joint, and Cita can only demand payment of 1/3 of the obligation from Pedro, which is presumed to be his share in the obligation in the absence of stipulation to the contrary (Art. 1208, Civil Code). MIGUEL’S ANSWER: No, Cita may not demand payment of the entire amount from just one of the debtors. Solidary liability is never presumed. For the obligation to be considered solidary it must be expressly specified in the agreement. There being no specification as to the nature of the liability of the debtors, it is presumed that there be joint liability. Cita can therefore only demand an amount that is in proportion to the debt of each of the co-debtor.

Bar Question (2015) Delay and Solution Indebiti Sara borrowed P50,000 from Julia and orally promised to pay it within six months. When Sara tried to pay her debt on the 8th month, Julia demanded the pavment of interest of 12% per annum because of Sara’s delay in payment. Sara paid her debt and the interest claimed by Julia. After rethinking, Sara demanded back from Julia the amount she had paid as interest. Julia claims she has no obligation to return the interest paid by Sara because it was a natural obligation which Sara voluntarily performed and can no longer recover. Do you agree? Explain. SUGGESTED ANSWER: No, I do not agree with Julia. For a creditor to be entitled to compensatory interest, the debtor must be in delay. As a rule, in order for delay to exist, demand must have been made. In this case, there was no demand made upon the expiration of the 6month period; thus, Sara cannot be considered in delay, and is not liable to pay compensatory interest. There being no obligation to pay compensatory interest, Julia must return the interest mistakenly paid since she was not entitled thereto, and delivery was made merely through mistake. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises (Art. 2154, Civil Code). MIGUEL’S ANSWER: No, I do not agree. Julia must return the amount paid by Sara as interest as not doing so would amount to unjust enrichment. For interest to accrue, the debtor must be in delay, and 63

for there to be delay, there must be demand. In this case, there was no demand made by Julia against Sara, therefore Sara was not in delay and is not required to pay for the interest. The interest must be returned to Sara.

Bar Question (2015) Civil and Natural Obligations Distinguish civil and natural obligations. SUGGESTED ANSWER: Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof (Art. 1423, Civil Code). MIGUEL’S ANSWER: Civil obligations are obligations that can be enforced through a civil suit, it is an obligation which gives rise to a cause of action. Natural obligations on the other hand are obligations do not grant a cause of action, it is an obligation that is merely based on equity.

Bar Question (2016) Dacion en pago Butch got a loan from Hagibis Corporation (Hagibis) but he defaulted in the payment. A case for collection of a sum of money was filed against him. As a defense, Butch claims that there was already an arrangement with Hagibis on the payment of the loan. To implement the same, Butch already surrendered five (5) service utility vehicles (SUVs) to the company for it to sell and the proceeds to be credited to the loan as payment. Was the obligation of Butch extinguished by reason of dacion en pago upon the surrender of the SUVs? Decide and explain. SUGGESTED ANSWER: NO SUGGESTED ANSWER FROM REPUTABLE SOURCE AVAILABLE YET MIGUEL’S ANSWER: Yes, the obligation is extinguished by reason of dacion en pago. There is dacion en pago when the debtor alienates property in favor of the creditor, with the constn of the latter to satisfy monetary obligation. In this case, Butch alienated his SUVs in 64

favor of Hagibis Corporation and such was credited as payment for the loan that he owes the corporation. It is presumed that the loan is equivalent to the SUVs as Hagibis and Butch had agreed to this arrangement already.

Bar Question (2016) Novation Jerico, the project owner, entered into a Construction Contract with Ivan for the latter to construct his house. Jojo executed a Surety undertaking to guarantee the performance of the work by Ivan. Jerico and Ivan later entered into a Memorandum of Agreement (MOA) revising the work schedule of Ivan and the subcontractors. The MOA stated that all the stipulations of the original contract not in conflict with said agreement shall remain valid and legally effective. Jojo filed a suit to declare him relieved of his undertaking as a result of the MOA because of the change in the work schedule. Jerico claims there is no novation of the Construction Contract. Decide the case and explain. SUGGESTED ANSWER: NO SUGGESTED ANSWER FROM REPUTABLE SOURCE AVAILABLE YET MIGUEL’S ANSWER: Jerico is correct. There is no novation. Novation exists when there is a change in the object, condition or debtor or when the terms of the old contract and the new contract are incompatible and incapable of being reconciled. In this cae, the mere change in the work schedule does not render the old contract incompatible with the new contract and does not change the object of the contract which is still to construct Jerico’s house.

Bar Question (2016) Peter and Paul entered into a Contract to Sell whereby Peter, the lot owner, agreed to sell to Paul his lot on November 6, 2016 for the price of Pl , 000,000.00 to be paid at the residence of Peter in Makati City at 1 :00 p.m. If the full price is paid in cash at the specified time and place, then Peter will execute a Deed of Absolute Sale and deliver the title to Paul. On November 6, 2016, Paul did not show up and was not heard of from that date on. In view of the nonperformance by Paul of his obligation, Peter sent a letter to Paul that he is expressly and extra-judicially declaring the Contract to Sell rescinded and of no legal and binding effect. Peter further 65

stated that failure on the part of Paul to contest the rescission within thirty (30) days from receipt of said letter shall mean that the latter agreed to the rescission. Paul did not reply to this letter for five (5) years. Thus, Peter decided to sell his lot to Henry in 2021. After hearing that Henry bought the lot, Paul now questions the sale of the lot to Henry and files a complaint for nullification of the sale. [a] Is the exercise by Peter of his power to rescind extra-judicially the Contract to Sell the proper and legal way of rescinding said contract? Explain. [b] In case Paul made a downpayment pursuant to a stipulation in the Contract to Sell, what is the legal remedy of Peter? SUGGESTED ANSWER: NO SUGGESTED ANSWER FROM REPUTABLE SOURCE AVAILABLE YET MIGUEL’S ANSWER:

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