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September 18, 2017 | Author: Mr. Copernicus | Category: Guarantee, Annulment, Void (Law), Misrepresentation, Private Law
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Business Law: Obligations and Contracts CPA reviewer...


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susmess LAW Quiz - Law on contracts -~ PART I


1. Statements: In case of doubt 1 a contract purporting to be sale shall be constnued as mortgage. .

In annulment of contracts, there 5ha1|vig be mutual restitution of both parties thereof. a. First statement is false, second is true b. Both are false

c. Both are true d. First statement is true; second is false

2. Statements: sb




4. Mutual error as to the legal affed of an agree when the purpose of the parties is frustrated may result in the reformation of the instrument. Mutual mistake of the panies and the instrument does not express the true agreement will make the contract voidable. a. Both statements are false c. First is true, second is false. b. Both are true. d. First is false; second is true.



5. A without authority from B sold the latter's car in the name of the latter. The contract is therefore: a. Rescissible c. unenforceable

b. voiaaue



Just luke voidable and unenforceable contracts, rescissible contracts may also be ratified. In case of fraud or mistake, the action for annulment must be made within four years from the commission of the vice of consent. a. Both statements are true c. First is tnue, second is false b. Both are false d. First is false; second is true 3. D, fearing that his creditor C, would go after his only pared of land no satisfy his claim for payment of D's debt, sold his said land to X who did not know of D's intention. Decide: a. C can ask for annulment of the sale as this is voidable contract. b. c may ask for damages against X since he was damaged by the sale. c. C can file an action for rescission of the sale. => . d. c cannot ask for the rescission of the sale.

d. void

6. A threatened B with an administrative charge for immorality if the latter does not marry her because she is already pregnant with their child. Fearing that she may do so, B married her. *@ The contract of marriage is therefore voidable because of threat. A simple mistake of account may give rise to the annulment of the contract because of mistake. a. First statement is false; second is true c. Both are true b. Both are false d. First is true; second is false 7. A appointed B to sell his land: If the authority of B is oral and the sale is in public instrument, the sale is void.If the authority of B is in writing and the sale is oral, the contract is unenforceable. a. The first statement is false, c. Both are tnue the second is true d. Both are false b. The first is true; second is false 8. In threeof the following the contract is cleansed of its defect bv ratification. which is not so


fatlfled a. Contract where the creditor was damaged by the act of the debtor intended to defraud him. b. Contract entered into by a person incapable of giving consent. c. Sale of chattels orally entered into for a price not less than five hundred pesosd. Lease of real property for more than one var orally entered into.



9. A gave B One Million pesos for the latter to kill C. Before B could accomplish his criminal intent to kill c, A changed his mind and demanded the return. of the money from B. Decide: a. A cannot recover the payment he made to B because nt wasa void contract which does not allow recovery by the guilty party. A cannot recover the money because the contract is unenforceable. b. c. A can recover the money although the contract is void since the crime was not committed. d. No recovery and both A and B will ,prosecuted for their crime.


10. Because A wants to sell has land to B but the latter does not want to buy the same, A forced

B to buy his land. The contract: a. Not binding upon B since his consent waf, vmated . b. It is unenforceable as against B but not against A. c. May be ratified expressly Or tacitly by A. d. It is valid, binding and enforceable. 11. D borrowed a sum of money from C with G as guarantor. The loan is in wrrtln9 but the Can guaranty is oral. D failed to pay C. who now is demandln9 payment from G? G be compelled to nav' a. yes, because he is the guarantor obliged to pay in case the debtor defaults. b. no, because the guaranty is void having been orally made. c. No, because the guaranty is unenforceable against G, lt being oral. d. Yes, because the guaranty is enforceable, writing not needed. A and B agreed on February 3, 2000 tlnat B wrl| construct the house of in rn January 2002.




The contrad was orally entered into. B received a down payment from


the balance

payable afcer completion of Lhe houae. The contract. as:

a. voudabte because it not m pubhr instrument. b. Enforceable even If not in wntmq, havmg been raufued. . . wrrtnng and yet performance there ns after o e yn c. unenforceable because lt. rs not an


from perfectron . d. Void because rt as not in writmg as required bv law.

.D _Q-F' c=~-


13. A sold to B a fake Rolex watch on January 3, 2001. On January 13, 2001, 8 discovered that the watch he bought from A waa an rmrtatron. The law provsdes that he can annul the sate as a vordable contract withm four years. Prescnotaon stans from: a. January 3, 20o1 when the sale was perfected b. The time of dehvery of the watch to B. c. The trme they fust talked about the sale of the watch. d. January 13, 2001 when the fraud was drscovered by B.


14. A and B agreed on a contract of pledge. However, they entered unto a contract of mortgage in the honest belief that the mortgage and oledge are the same. The snstrument may be reformed: a. No, the document cannot be reformed slnce the contract ls vold. b. no, it cannot be changed. They are bound by the document which speaks for itself, c. yes, it can be reformed because it does not express the true agreement of the partues. d. Not, lt cannot be reformed because there was no meeting of mmds between the parties and the remedy is annulment of contract.


15. A and B entered into a contract of mortgage. However, as written the document states it is a contract of sale with right of repurchase, the error due to the fault of the clerk/typist. Hence' a. The contrad of sale must be annulled since it is voidable, b. The instrument has to be enforced as is for it is the proof of the agreement between the parties.



Because of the negligence of the parties ln signing without first reading the instrument, they are bound by the contents of the same. d. The instrument may be reformed because lt does not express the true agreement of the parties.




16. S sold to B his parcel of land wonh one million pesos for only half a million pesos. Alter the sale and realizing his damage, S is now seeking to set aside the sale. Decide: a. The contract is voidable because of mistake of the seller. b. It is rescissible because of the.lesi;mor damage suffered by S. c. S has the right for an increase in the price to prevent unjust enrichment on the part of B. d. The sale is valid, binding and enforceable because as a rule lesion or inadequacy o cause or price in a sale dow not invalidate a contract. 17. If the cause is not stated in the contract, lt is presumed that lt does not exist. Lesion or inadequacy of Cause as a rule invalidates a contract. a. First statement is false, second is true. b. First is true, second is false. c. Both are true. d. Both are false.


18. 8 borrowed a sum °f.M0"¢Y from C with a cenain rate of interest. C now wants to increase dolngat8>"of interest without the consent of D. What principle m contracts prohibits C from a. Autonomy of contracts b. Relativity of contracts c. Mutuallty of contracts

d. Consensuality of contracts e. Obligatory force and compliance in ood faith g

19. Three of the following contracts must be in writng to be valid. Which is the exception? a. Contract of partnership where imrnovables are contributed. b. Contract of agency to sell the land of the principal.

I l8ei1g!'fhe éf888r4s'616 un the name of the latter and by virtue 24{@'~ thereof the latter was able to tlnish high school. The contract is: a. void c. Rescisssble b. Unenforceable d. voidable


25. wthout authority from A, B sold in B's name the land of A to X who was in good faith. The contract is: a. void because B was not the owner at the tme of the perfection of the sale. b. Unenforceable, because B had no authority to sell A's land. c. voidable, because of the fraud committed by B against A. d. Valid sale provided 8 is owner upon delivery.



26. Based on the preceding no., rf the sale m A's name, the contract is: a. void, because B was not the owner at the time of the perfection of the sale. b. unenforceable, because B had no authority to sell A's land. c. voidable, because of the fraud committed by B agasnst A. d. valid sale provided B is owner upon dehvery.

27. If the doubts are cast upon the principal object of the contract in such a way that it canna be known what may have been the intention or will of the panies. The contract shall be: a. voidable due to lack of meeting of minds. b. void c. Interpreted for there is doubt.

d. Reformed to express the true intention of the parta. 14

28. A offered 20 Tamiya cars to B for P1,000.00 each. B answered by letter that he was willing to purchase not 20 but 30 pieces at said price of P1,000.00 each. ls the contract perfected? a. No, because there is qualined acceptance which constitutes an offer by the buyer. b. yes, there is perfected sale because the number of pieces is only incidental matter in the sale. c. yes, because the letter of acceptance was already sent by the offeree. d. No, because there is no offer yet of A that is certain.


29. Statements:

If one of .the parties at the time of making the ffore or acceptance wa I d msa contract is v0dable. s a rea y ne the If before the acceptance is conveyed to the offerer, eithe of th mes . contract isvoid, that is, the offer is noneffective. r e na nec insane, me a. Both statements are incorrect. c. First is correct, second is inc b. Both are correct.


d. Saond is correct, mst is incorrect.

30. A, a minor sold to B a parcel of land fe9istered in his name misrepresenung to the latter that he is of legal age. Having been mlsled as to the true age of A, B entered into the contract. 15 me contract voldable° a. Its 0voadable because the seller is a person incapable of giving consent to a contract being a b. It us voldable because of mistake on the pan of B c.

he he

It is not voidable but rather vold because of lack :Yr conse T38" `E28' A "ps of legal age. IS ON y 3 Mlnof wlthout


It is not voidable because of the fraud good falth.


ml . treo bv the mlnor seller and the buyer being in

corporation, through an agent reveahng to the seller stockholder bought the shares of stocks ar another stockholder without being | that negotiations were in progress no enhance the value of the shares. The sale ns defective contract because of fraud committed by A against the other stockhoider. a. Vo`d, v0.

d. An of the above

e. none of the above

53. Contracts take ef¥ect only the parties, their assigns and heirs except where the rights and obligations arising therefrom: a. Is not transmissible by their nature b. Is not transmissible bY stipulation of the names c. Is not transmissible by provision of law d. All of tne above e. none of the above 54. Where damagw is caused to either of the contracting M418 or to a third person the contract may be: a. Annulled b. Rescinded c. Raunea 1



d. An of the above e. none of the above

_ END-



D 1. Must be in writing to be enforceable: a. Lease of land for 12 months b. Lease of car for 18 months

c. Both a and b

d. none of a and b

2. Which of the following ls not a requisite for the valldlty of a contract?

a. Consent

b. Object


c. Cause

d. Dellvery

D 3. o owes c ps00.

However, C's right has already prescribed. Nofwltzhstandlngthe knowledge °f thus m, D pald the amount. Realizing this mistake, D wants to recover the amount he paid. a. D can recover on the ground of mistake b. D can recover because hls obllgatlon ls not enforceable c. D can recover otherwise C will be enriched at the expense of D d. D cannot recover


. 4. Three of the following contracts are void. Which ls the exception? a. Those who cause, object or purpose is contrary to law, morals, good custom, public order or public policy . b. Those which are absolutely simulated or fictitious Those whose cause or object did not exist at the time of the transaction C. d. Those where both parties are incapable of giving consent to a contract


5. x, a former government employee, suffered from severe paranoia and was confined in the mental hospital In 2000. After his release he was placed under the guardianship of his wife to enable him to get his retirement pay. In 2004 he became a mining prospector and sold some mining claims. In 2006, he wants to annul the sale claiming that he was not mentally capacitated at the time of sale. The sale in question was a.


b. Void

d. Valid

C. voidabbe

6. which of the following is not presumed to be legal subrogation? a. when a creditor, pays another creditor who is preferred b. when a third person, not lnter8ted ln obligation, pays with the approval of the debtor c. when a third person interested ln the obligation pays even without the. approval of the debtor d. none of them . *WJ 7. Essential requisites of a contract: 65,¢9ll**'/a u Z`f2_]6*'3* c. Subct d. All of them a. Consent b. Cause



8. Which of the following Instruments is not subjed to reformation? a. Simple donations inter vivos wherein no condition is imposed


b. wills c. when the agreement Is void d. All of the above 9. valid, binding and enforceable until annulled a. Rescisslble contract b. void and ab initio contract



c. voidable contract

10. In three of the following defective contracts, ratification deanses exception? . a. Both parties are incapable of giving consent b. Sale of immovable propeny or Interest therein orally entered into c. Sale ofpieoe of land thru an agent and the authority is oral d. contracts entered into by a person who has been given no authority

d. Validable contract

the defect. which

as the

makes an offer to B on January 1, 2007. B makes known his acceptance In a letter sent un January 2, A 11. S and received by S on January 5. meantlme, on January 3, S became insane The contract ls voidable because one party is insane D. There is already a meeting of minds, the contract is nerfecrecs c. The contract is not bmding because there is no meeting of minds d. The contract is void the offer being ineffective. a.


12. Based on the same facts except S ls sans . but only a minor at the time the acceptance as communicated to him. a.

There is no meeting of minds between the parties, therefore void.

Tne contract is not bmcilng because the party is incapacitated The contract is binding between the parties d. The contract is unenforceabte. D. C.


I 13. which of the following contract ls voidable? men vo-1 a. Those whose object is outslde the commerce of b. Those whlch are absolutely llctlllous c. Those where one of the partles is incapacitated d. Those whlch contemplate an lmposslble servlce.



14. The .stlpulation in a contract to the effect that the debtor should remam as a §ervant In the house and in the servrce of her creditor so long af. sre hao r|ol pald her debt is void because it Is.

a. Contrary to good custom b. Contrary to public policy C

c. Contrary to law and morality d. Contrary to public order.

15. X, after the death of his father, sold his inheritance though its amount has not yet been determined to B, for a consideration of PS0,000. a. The contrad is valid only lf the inheritance valued at least equal or more than P50,000 b. The contract ls rescissible C. The contract ls void lf nothing remains of the inheritance to be turned over to B d. Contract ls void, future inheritance cannot be the object of sale


16. x alleged that Y promised to glve him one hectare of land. This ls ln consideration of X's meritorious services to Y. Y pleads ln defense that since the promise was not in writing, it is unenforceable under'

the statute of Frauds. Decide. a. The promise is unenforceable because it is not ln writing b. The Statute of Frauds is applied because A has rendered services c. The Statute of Frauds is inapplicable here, because the promise to give the land ls not a sale

of real property


d. The statute of Frauds can apply to partially executed contract 17. statement no. I: In voidable contracts, there ls no need to ratify the same before they can be

considered validTIn unenforceable contracts, however ratification is mandatory before they can be considered enforceable. T Statement No 2: "There ls undue influence if insidious words or machinations was employed by a party on the other just to obtain the lattef's consent, without which the latter would not have entered .into the

contractt. a. Both are true b.

Both are false

c. No.1 is true while no.2 is false d. No.1 is false while no.2 is true


18. Three of the following are void contracts. which ls the exception?


19. Statute of Frauds is appiicable to a. executed contract b. oral contract of loan ' c. contract not to be performed within a year from the making thereof d. mutual promise to marry.



a. Contracts where the cause is immoral b. contracts to prevent a known supporter of a political rival from vaing for his candidate for a valuable consideration c. Contracts with valld consideration but with unlawful motives d. Absolutely simulated contracts

20. Which of the following is correct?

a. An action to enforce judicially a natural obligatlon prescrlbes In 4 years b. An action for annulment of contract is lmprescrlptible c. An action to declare a contract vold is not subject to prescription d. *\3n8;§§>" for resclsslon of contract prescnbes ln five (5) years counted from the ex

ion of the

Subs8qu6|'\¥ly,BsoidR(Dx fn p1 21. 8 frauduientiy ammces S to sen to him (B) a masterpiece paunu for P120,000, a good faith purchasér. s is entitled to "Q r 00,000. a. Annul the contract with B plus damages D. Recover the painting from x but no damages Recover damages from B Annu# the contract between B andx



Which uma followl contracts is not rescossible? a. Those whlch 8"9 entered lnto by guardlans whenever the wams. whom they represent surfer a l . n more than 'A of the lesson of more than 'A of the value of the object of the contract. Those executeo in representation of an absentee, af the latter suffer a 8510 b.

value of the object of the mmm c. d, Those undertaken in fraud of credltors when the latter canno

due them C,

23. when there is concurrence of offer and acceptance, there ls: a. Consummation Conception b.

d. Consideration

c. Consent


24. wmch of the following contracts is voldable?

cr a. Those where both parties are incapable of giving consent to a C0(1[ Those undertaken in fraud a creditors when me latfer cannot tn any b. co¥lect the ctaims due them . . flue or c. Those where the consent is vitiated by mistake, violence, bntimidatron, undue M nce

fraud d. Those whose object is outside the commerce of men


25. Which of the following contracts is resclssible? a. Those where one of the parties ls incapable of giving consent to a contract

b. Those where both parties are incapable of giving consent to a contract c. Those which are entered into by guardians whenever the wards whom they represent suffer a lesion of more than 'A of the value of the object of the contract d. Those which are absolutely simulated or Hctitious. 26. which of the following can be considered as a feature of a void contract?


a. Subjed to ratmcation b. It exists c. Action or defense of nulltty is subject to prscriptlon d. Novation cannot apply


27. L entered into a contract of mortgage with X. T, the clerk of L, typed the docummt.

Due to T's

neghgence, the document made was that of sale instead of mortgage .

The remedy is annulment Parties may go to court fur interpretation C. parties may enforce their right because it is enforceable d. Reformauon of instrument is proper a. b.


28. These persons are bound by contracts, except; a. Third persons o. Assigns


29. Liable for the loss of the subject matter by fortuitous event: a. Creditor c. Both creditor and debtor b. Debtor d. none of them


30. Sfollowlng offers. to is sellcorrect? his house to B for P 100 000. BI asks him lf h a. b.



d. parties

whuch- of the e would acce pt 80,000. P

Because of ambiguity, both offers are terminated by operation of law B's es e is a co u n r-o ' . ' offer and.1nst|gating . ps0foogéf te ffer effectlvely termnnatmg the P 100,000 an offer for B's response is a rejection of the P 100,000 offer, and th

indefinite to be an offer. d.

c. Heirs

s no

ere |

offer for

P80,000 because it as too

B's response is a mere inquiry, the P 100,000 offer by S is still ln force

31. Example no. 1: G, guardian of w, sold W's house valued at P50, ooo for P371 soo or a lesson by 'A of me value. Example no. 2: S sold hls house valued at P50, 000 for only P10, 000 because 5 dia not know me true value (N the house. a. Both contracts are resdssible. b. Of*y no. 1 is resdssuble c. no.2 is voidable because there ls an error or mlstake. a. 50:91 are valid and enforceable.





32. B thereafznye bought out a oompecimr, C Corporation, with a stipulation that C Corporation should not a. 9398 In any business ln the phlllpplnes unless consented to and approved by B company, The stipulation is defective but subject to ratihcation . b. We stipulation ls valld because the parties am free to enter lmo any stipulation, terms and such as this one. c. We stipulation is unenforceable as there was no showing that the sale was done ln wrltlng d. The stspulation is void because it ls wntrary to public policy.



33. which of the following is not valid? a. mutual promise to marry entered into orally Sale of immovable propeny orally entered into . nsent c. One of the parties in a contract is incapable of QWIUQ co Mortgagor of an immovable cannot alienate it w1thout the mortgagee d. 34.

's conse r n'


D forced C to execute a promissory note. a. Contract is rescissible because the contract is fraudukt D. The contract is void . C cannot demand payment from D because the contract ns unenforceable C. d.



Contract remains to be valid .

35. Example 1- S sold to B in a private instrument his land. Later, B wanted to have the sale reglstered; but reglstratlon requires a public instrumentz In here, B may compel S to execute the needed public Instrument. Example 2- S sold to B orally hls land. After B pald S the price he wants to reglster the land ln his name but he needed a public instrument of sale. In here B may compel S to execute the needed public

instrument. a.

Botn examples are false

b. only the first ls true


c. Only the second is true d. Both exampies are tme

36. In a contract of sale executed by S and B, it appears s sold his motor vehicle to B for P50,000. It turned out however, s has three motor vehicles. Gallant valued P80,000: Hi-Ace van valued P70,000, and a Jeep valued P60,000. which of the following is correct? a. The contract shall be reformed because there was mistake b. The parties can ask for interpretation because the word Motor vehicle is ambiguous. c. The panies can ask for annulment of the contract d. There ls no contract.


37. An agreement in restraint of trade or establishing monopoly is: a. Perfectly valld b. voidable c. unenforceable

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38. Three of the following are resclsslble, which is not? a. Sale of property under litigation made by defendant without the. consent of plaintiff or authority of

d. Void

the court. b. Those made to defraud aedltors when the latter have no other means to recover their claims lesion b m 4 c. Those agreed upon ln representation of absentees, if the absentee s ffe '




of the value of the property subject of the contract




ore than 1/4

d. Contract of sale and the price is unusually inadequate resulting to lesion 39. S and M agreed ln print that S, debtor for P3.000, will work as a servant of M wlthout pay until she could llnd money with which to pay her debt. S failed to comply with her obligation, under this premise, which of the following statements ls correct? a. The agreement to work as a servant is void because it ls immoral. b. To act as a servant without pay is unconstitutional because this is equivalent to involuntary servitude c. The agreement to work without pay since written ls enforceable. d. The contract to work without pay as a servant until the debt is paid is vold. 40. Which of the following contracts ls not required to appear in a public document? a. Acts and contracts which have for their objectthe creation, transmission madmcauon or extlngulshment of real rights over immovable propeny. b. The cesslon, repudlatlon or renundation of hereditary rights c. The power to administer property d. Sale ol' immovable propeny

41. In order that a stipulation in favor of a thlrd person would be valid and binding upon the pawes tnemw the following are the requlsltes, except; . ' a. There must be a stipulation in favor of a third person. b. The contracting parties must have clearly and deliberately conferred a favor upon that third person. c. The third person communicated his acceptance to the obligor before its revocation. d. That there must be an existing agency between either of the contracting parties and the third. person.

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42. Statement NQ_J,: Dolo U1 Incld ente entitles the person against whom It was employed the rtght to seek se annulment of the contract.

5ta.tement..,hL0._7.; A stapulation



Both are true


Both are false


KLU1 ls an exception to the rule on relativity of contracts. c. No. 1 is true, no. 2 ls false d. No. I ls false; No. 2 is true

43. E1
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