THE LAW ON CONTRACTS

I. MULTIPLE CHOICE (CHOOSE THE BEST ANSWER)

1. On October 18, 2020, X sent a letter accepting the obligation. The contract of mortgage was registered
offer of Y to sell a specific horse together with with the Register of deeds. Later, X sold the lot to Z
P500,000.00 representing the purchase price. On who was not aware of the mortgage. When X failed to
October 19, 2020, however, Y became insolvent and pay the loan, Y decided to foreclose the mortgaged
received the letter of acceptance together with the property. May Z oppose the foreclosure?
payment the following day. May X insist on the delivery
of the horse? a. Yes, because he was not bound by the contract of
mortgage.
a. Yes, because he accepted the offer and paid the purchase b. No, because he was bound by the mortgage upon its
price. registration.
b. No, because the offer became ineffective. c. Yes, because he was a purchaser in good faith and for
c. Yes, because there was a perfected contract of sale. value.
d. No, because the acceptance became ineffective upon d. No, because he was not a party to the mortgage contract.
insolvency of the seller. e. None of the above.
e. None of the above.
6. X sold a laptop to Y for P30,000.00. After the delivery
2. X authorized Y to sell his property to Z for P1M. of the laptop, Y was informed by a neighbor that a
Accordingly, Y made the offer pursuant to the authority similar item is being sold for a lower amount of
granted to him. Later, Z communicated his acceptance P22,000.00. May Y set aside the contract?
to Y on October 18, 2020. Unfortunately, Y died the
following day before he could inform X of the a. Yes, because there was fraud on the part of the seller.
acceptance. May X refuse to deliver the property? b. No, because of the principle of mutuality of contract.
c. Yes, because the buyer suffered lesion exceeding ¼ of
a. Yes, because he has no knowledge of the acceptance. the value of the property.
b. No, because the contract was already perfected on d. No, because there was already a perfected contract of
October 18, 2020. sale.
c. Yes, because the authority of Y was extinguished upon e. None of the above.
his death.
d. No, because Z accepted the offer before the death of Y. 7. X learned that a grocery store will be constructed
e. None of the above. adjacent to his lot. Anticipating the rush of customers,
X improved his land for pay parking and incurred
3. X died leaving an estate worth P5M. Before the P100,000.00. Later, however, the contract for the
delivery of their respective shares, the heirs sold the construction of the grocery store did not push through.
entire inheritance to Y. May the heirs later on assail the Is X entitled to claim damages by reason of the
validity of the contract? cancellation of the contract?

a. Yes, because unliquidated properties cannot be the object a. Yes, because the contract impliedly conferred upon him a
of a contract. favor or benefit.
b. No, because future things may be the object of a b. No, because he is a stranger to the contract.
contract. c. Yes, because incidental benefit gave him the right to
c. Yes, because future inheritance cannot be the object of a recover damages.
contract. d. No, because there is a stipulation pour autrui.
d. No, because the heirs will have a full right over the e. None of the above.
inheritance after its delivery.
e. None of the above. 8. X and Y executed a contract of sale but their real
intention is a donation. Since no third person was
4. X sold his house and lot to Y for P5M. The contract, prejudiced, may the donor recover the property
however, did not state any consideration. May X file an donated?
action for declaration of nullity of the contract and
recover his property from Y? a. Yes, because the contract was absolutely simulated or
fictitious.
a. Yes, because the contract is void due to absence of b. No, because the parties are bound to their real
consideration. agreement.
b. No, because consideration is presumed to exist. c. Yes, because there should be less transmission of rights
c. Yes, because mutual restitution is a consequence of void in a gratuitous contract.
contracts. d. No, because courts will not afford any remedy to parties
d. No, because the proper action is reformation of who simulated a contract.
instrument. e. None of the above.
e. None of the above.
5. X mortgaged his land to Y as securtity for a loan

“It is wiser to find out than to suppose.” –Mark Twain 1

II. FILL IN THE TABLE

DEFECTIVE CONTRACTS
RESCISSIBLE VOIDABLE UNENFORCEABLE VOID
Major
Characteristic

Name of the
Action

Grounds

Proper Party

Kind of Attack

Effects

Ratification

Prescription

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“It is wiser to find out than to suppose.” –Mark Twain 2