Title II. - CONTRACTS interest of a person is not sufficient.

The
contracting parties must have clearly and
CHAPTER 1
deliberately conferred a favor upon a third
GENERAL PROVISIONS person. (1257a)

Art. 1305. A contract is a meeting of minds Art. 1312. In contracts creating real rights,
between two persons whereby one binds third persons who come into possession of
himself, with respect to the other, to give the object of the contract are bound thereby,
something or to render some service. subject to the provisions of the Mortgage
(1254a) Law and the Land Registration Laws. (n)

Art. 1306. The contracting parties may Art. 1313. Creditors are protected in cases of
establish such stipulations, clauses, terms contracts intended to defraud them. (n)
and conditions as they may deem
Art. 1314. Any third person who induces
convenient, provided they are not contrary to
another to violate his contract shall be liable
law, morals, good customs, public order, or
for damages to the other contracting party.
public policy. (1255a)
(n)
Art. 1307. Innominate contracts shall be
Art. 1315. Contracts are perfected by mere
regulated by the stipulations of the parties,
consent, and from that moment the parties
by the provisions of Titles I and II of this
are bound not only to the fulfillment of what
Book, by the rules governing the most
has been expressly stipulated but also to all
analogous nominate contracts, and by the
the consequences which, according to their
customs of the place. (n)
nature, may be in keeping with good faith,
Art. 1308. The contract must bind both usage and law. (1258)
contracting parties; its validity or compliance
Art. 1316. Real contracts, such as deposit,
cannot be left to the will of one of them.
pledge and Commodatum, are not perfected
(1256a)
until the delivery of the object of the
Art. 1309. The determination of the obligation. (n)
performance may be left to a third person,
Art. 1317. No one may contract in the name
whose decision shall not be binding until it
of another without being authorized by the
has been made known to both contracting
latter, or unless he has by law a right to
parties. (n)
represent him.
Art. 1310. The determination shall not be
A contract entered into in the name of
obligatory if it is evidently inequitable. In
another by one who has no authority or legal
such case, the courts shall decide what is
representation, or who has acted beyond his
equitable under the circumstances. (n)
powers, shall be unenforceable, unless it is
Art. 1311. Contracts take effect only between ratified, expressly or impliedly, by the person
the parties, their assigns and heirs, except in on whose behalf it has been executed,
case where the rights and obligations arising before it is revoked by the other contracting
from the contract are not transmissible by party. (1259a)
their nature, or by stipulation or by provision
CHAPTER 2
of law. The heir is not liable beyond the value
of the property he received from the ESSENTIAL REQUISITES OF CONTRACTS
decedent.
GENERAL PROVISIONS
If a contract should contain some stipulation
Art. 1318. There is no contract unless the
in favor of a third person, he may demand its
following requisites concur:
fulfillment provided he communicated his
acceptance to the obligor before its (1) Consent of the contracting parties;
revocation. A mere incidental benefit or
(2) Object certain which is the subject matter or lowest bidder, unless the contrary
of the contract; appears. (n)
(3) Cause of the obligation which is Art. 1327. The following cannot give consent
established. (1261) to a contract:
SECTION 1. - Consent (1) Unemancipated minors;
Art. 1319. Consent is manifested by the (2) Insane or demented persons, and deaf-
meeting of the offer and the acceptance mutes who do not know how to write.
upon the thing and the cause which are to (1263a)
constitute the contract. The offer must be
Art. 1328. Contracts entered into during a
certain and the acceptance absolute. A
lucid interval are valid. Contracts agreed to
qualified acceptance constitutes a counter-
in a state of drunkenness or during a
offer.
hypnotic spell are voidable. (n)
Acceptance made by letter or telegram does
Art. 1329. The incapacity declared in Article
not bind the offerer except from the time it
1327 is subject to the modifications
came to his knowledge. The contract, in such
determined by law, and is understood to be
a case, is presumed to have been entered
without prejudice to special disqualifications
into in the place where the offer was made.
established in the laws. (1264)
(1262a)
Art. 1330. A contract where consent is given
Art. 1320. An acceptance may be express or
through mistake, violence, intimidation,
implied. (n)
undue influence, or fraud is voidable.
Art. 1321. The person making the offer may (1265a)
fix the time, place, and manner of
Art. 1331. In order that mistake may
acceptance, all of which must be complied
invalidate consent, it should refer to the
with. (n)
substance of the thing which is the object of
Art. 1322. An offer made through an agent is the contract, or to those conditions which
accepted from the time acceptance is have principally moved one or both parties to
communicated to him. (n) enter into the contract.
Art. 1323. An offer becomes ineffective upon Mistake as to the identity or qualifications of
the death, civil interdiction, insanity, or one of the parties will vitiate consent only
insolvency of either party before acceptance when such identity or qualifications have
is conveyed. (n) been the principal cause of the contract.
Art. 1324. When the offerer has allowed the A simple mistake of account shall give rise to
offeree a certain period to accept, the offer its correction. (1266a)
may be withdrawn at any time before
Art. 1332. When one of the parties is unable
acceptance by communicating such
to read, or if the contract is in a language not
withdrawal, except when the option is
understood by him, and mistake or fraud is
founded upon a consideration, as something
alleged, the person enforcing the contract
paid or promised. (n)
must show that the terms thereof have been
Art. 1325. Unless it appears otherwise, fully explained to the former. (n)
business advertisements of things for sale
Art. 1333. There is no mistake if the party
are not definite offers, but mere invitations
alleging it knew the doubt, contingency or
to make an offer. (n)
risk affecting the object of the contract. (n)
Art. 1326. Advertisements for bidders are
Art. 1334. Mutual error as to the legal effect
simply invitations to make proposals, and the
of an agreement when the real purpose of
advertiser is not bound to accept the highest
the parties is frustrated, may vitiate consent. Art. 1341. A mere expression of an opinion
(n) does not signify fraud, unless made by an
expert and the other party has relied on the
Art. 1335. There is violence when in order to
former's special knowledge. (n)
wrest consent, serious or irresistible force is
employed. Art. 1342. Misrepresentation by a third
person does not vitiate consent, unless such
There is intimidation when one of the
misrepresentation has created substantial
contracting parties is compelled by a
mistake and the same is mutual. (n)
reasonable and well-grounded fear of an
imminent and grave evil upon his person or Art. 1343. Misrepresentation made in good
property, or upon the person or property of faith is not fraudulent but may constitute
his spouse, descendants or ascendants, to error. (n)
give his consent.
Art. 1344. In order that fraud may make a
To determine the degree of intimidation, the contract voidable, it should be serious and
age, sex and condition of the person shall be should not have been employed by both
borne in mind. contracting parties.
A threat to enforce one's claim through Incidental fraud only obliges the person
competent authority, if the claim is just or employing it to pay damages. (1270)
legal, does not vitiate consent. (1267a)
Art. 1345. Simulation of a contract may be
Art. 1336. Violence or intimidation shall absolute or relative. The former takes place
annul the obligation, although it may have when the parties do not intend to be bound
been employed by a third person who did not at all; the latter, when the parties conceal
take part in the contract. (1268) their true agreement. (n)
Art. 1337. There is undue influence when a Art. 1346. An absolutely simulated or
person takes improper advantage of his fictitious contract is void. A relative
power over the will of another, depriving the simulation, when it does not prejudice a third
latter of a reasonable freedom of choice. The person and is not intended for any purpose
following circumstances shall be considered: contrary to law, morals, good customs, public
the confidential, family, spiritual and other order or public policy binds the parties to
relations between the parties, or the fact their real agreement. (n)
that the person alleged to have been unduly
SECTION 2. - Object of Contracts
influenced was suffering from mental
weakness, or was ignorant or in financial Art. 1347. All things which are not outside
distress. (n) the commerce of men, including future
things, may be the object of a contract. All
Art. 1338. There is fraud when, through
rights which are not intransmissible may also
insidious words or machinations of one of the
be the object of contracts.
contracting parties, the other is induced to
enter into a contract which, without them, he No contract may be entered into upon future
would not have agreed to. (1269) inheritance except in cases expressly
authorized by law.
Art. 1339. Failure to disclose facts, when
there is a duty to reveal them, as when the All services which are not contrary to law,
parties are bound by confidential relations, morals, good customs, public order or public
constitutes fraud. (n) policy may likewise be the object of a
contract. (1271a)
Art. 1340. The usual exaggerations in trade,
when the other party had an opportunity to Art. 1348. Impossible things or services
know the facts, are not in themselves cannot be the object of contracts. (1272)
fraudulent. (n)
Art. 1349. The object of every contract must indispensable. In such cases, the right of the
be determinate as to its kind. The fact that parties stated in the following article cannot
the quantity is not determinate shall not be be exercised. (1278a)
an obstacle to the existence of the contract,
Art. 1357. If the law requires a document or
provided it is possible to determine the
other special form, as in the acts and
same, without the need of a new contract
contracts enumerated in the following article,
between the parties. (1273)
the contracting parties may compel each
SECTION 3. - Cause of Contracts other to observe that form, once the contract
has been perfected. This right may be
Art. 1350. In onerous contracts the cause is
exercised simultaneously with the action
understood to be, for each contracting party,
upon the contract. (1279a)
the prestation or promise of a thing or
service by the other; in remuneratory ones, Art. 1358. The following must appear in a
the service or benefit which is remunerated; public document:
and in contracts of pure beneficence, the
(1) Acts and contracts which have for their
mere liberality of the benefactor. (1274)
object the creation, transmission,
Art. 1351. The particular motives of the modification or extinguishment of real rights
parties in entering into a contract are over immovable property; sales of real
different from the cause thereof. (n) property or of an interest therein a governed
by Articles 1403, No. 2, and 1405;
Art. 1352. Contracts without cause, or with
unlawful cause, produce no effect whatever. (2) The cession, repudiation or renunciation
The cause is unlawful if it is contrary to law, of hereditary rights or of those of the
morals, good customs, public order or public conjugal partnership of gains;
policy. (1275a)
(3) The power to administer property, or any
Art. 1353. The statement of a false cause in other power which has for its object an act
contracts shall render them void, if it should appearing or which should appear in a public
not be proved that they were founded upon document, or should prejudice a third
another cause which is true and lawful. person;
(1276)
(4) The cession of actions or rights
Art. 1354. Although the cause is not stated in proceeding from an act appearing in a public
the contract, it is presumed that it exists and document.
is lawful, unless the debtor proves the
All other contracts where the amount
contrary. (1277)
involved exceeds five hundred pesos must
Art. 1355. Except in cases specified by law, appear in writing, even a private one. But
lesion or inadequacy of cause shall not sales of goods, chattels or things in action
invalidate a contract, unless there has been are governed by Articles, 1403, No. 2 and
fraud, mistake or undue influence. (n) 1405. (1280a)
CHAPTER 3
CHAPTER 4
FORM OF CONTRACTS
REFORMATION OF INSTRUMENTS (n)
Art. 1356. Contracts shall be obligatory, in
whatever form they may have been entered Art. 1359. When, there having been a
into, provided all the essential requisites for meeting of the minds of the parties to a
their validity are present. However, when the contract, their true intention is not expressed
law requires that a contract be in some form in the instrument purporting to embody the
in order that it may be valid or enforceable, agreement, by reason of mistake, fraud,
or that a contract be proved in a certain way, inequitable conduct or accident, one of the
that requirement is absolute and parties may ask for the reformation of the
instrument to the end that such true Art. 1367. When one of the parties has
intention may be expressed. brought an action to enforce the instrument,
he cannot subsequently ask for its
If mistake, fraud, inequitable conduct, or
reformation.
accident has prevented a meeting of the
minds of the parties, the proper remedy is Art. 1368. Reformation may be ordered at
not reformation of the instrument but the instance of either party or his successors
annulment of the contract. in interest, if the mistake was mutual;
otherwise, upon petition of the injured party,
Art. 1360. The principles of the general law
or his heirs and assigns.
on the reformation of instruments are hereby
adopted insofar as they are not in conflict Art. 1369. The procedure for the reformation
with the provisions of this Code. of instrument shall be governed by rules of
court to be promulgated by the Supreme
Art. 1361. When a mutual mistake of the
Court.
parties causes the failure of the instrument
to disclose their real agreement, said CHAPTER 5
instrument may be reformed.
INTERPRETATION OF CONTRACTS
Art. 1362. If one party was mistaken and the
Art. 1370. If the terms of a contract are clear
other acted fraudulently or inequitably in
and leave no doubt upon the intention of the
such a way that the instrument does not
contracting parties, the literal meaning of its
show their true intention, the former may ask
stipulations shall control.
for the reformation of the instrument.
If the words appear to be contrary to the
Art. 1363. When one party was mistaken and
evident intention of the parties, the latter
the other knew or believed that the
shall prevail over the former. (1281)
instrument did not state their real
agreement, but concealed that fact from the Art. 1371. In order to judge the intention of
former, the instrument may be reformed. the contracting parties, their
contemporaneous and subsequent acts shall
Art. 1364. When through the ignorance, lack
be principally considered. (1282)
of skill, negligence or bad faith on the part of
the person drafting the instrument or of the Art. 1372. However general the terms of a
clerk or typist, the instrument does not contract may be, they shall not be
express the true intention of the parties, the understood to comprehend things that are
courts may order that the instrument be distinct and cases that are different from
reformed. those upon which the parties intended to
agree. (1283)
Art. 1365. If two parties agree upon the
mortgage or pledge of real or personal Art. 1373. If some stipulation of any contract
property, but the instrument states that the should admit of several meanings, it shall be
property is sold absolutely or with a right of understood as bearing that import which is
repurchase, reformation of the instrument is most adequate to render it effectual. (1284)
proper.
Art. 1374. The various stipulations of a
Art. 1366. There shall be no reformation in contract shall be interpreted together,
the following cases: attributing to the doubtful ones that sense
which may result from all of them taken
(1) Simple donations inter vivos wherein no
jointly. (1285)
condition is imposed;
Art. 1375. Words which may have different
(2) Wills;
significations shall be understood in that
(3) When the real agreement is void. which is most in keeping with the nature and
object of the contract. (1286)
Art. 1376. The usage or custom of the place qualification of one or both parties, the
shall be borne in mind in the interpretation of agreement is of personal nature and
the ambiguities of a contract, and shall fill terminates on the death of the party who is
the omission of stipulations which are required to render such service.
ordinarily established. (1287)
1. True. Contracts requiring special
Art. 1377. The interpretation of obscure personal qualifications terminate upon
words or stipulations in a contract shall not the death of the party required to
favor the party who caused the obscurity. perform.
(1288)
Art. 1378. When it is absolutely impossible to
2. When a compromise agreement is given
settle doubts by the rules established in the
judicial approval, it becomes more than a
preceding articles, and the doubts refer to
contract binding upon the parties.
incidental circumstances of a gratuitous
contract, the least transmission of rights and 1. True. Judicial approval of a
interests shall prevail. If the contract is compromise agreement makes it
onerous, the doubt shall be settled in favor of binding and enforceable.
the greatest reciprocity of interests.
If the doubts are cast upon the principal
object of the contract in such a way that it 3. A contract which requires, in addition to
cannot be known what may have been the the above, the delivery of the object of the
intention or will of the parties, the contract agreement, as in a pledge or commodatum,
shall be null and void. (1289) is commonly referred to as a formal contract.

Art. 1379. The principles of interpretation 1. False. A contract requiring delivery of

stated in Rule 123 of the Rules of Court shall an object, like a pledge or
likewise be observed in the construction of commodatum, is not necessarily a
contracts. (n) formal contract.

4 Escalation clauses are not void per se.

1. True. Escalation clauses are not
inherently void; they can be valid if
properly drafted.

5. The determination of the performance

may be left to a third person, whose decision
shall not be binding until it has been made
known to one of the contracting parties.
1. True. Performance determination by a
third person is not binding until
communicated to one of the
contracting parties.

True of False
1. Where acts stipulated in a contract require 6. Once the minds of the contracting parties
the exercise of special knowledge, genius, meet, a valid contract exists whether it is
skill, taste, ability, experience judgment, reduced to writing or not.
discretion, integrity, or other personal
 1. True. A valid contract exists once the policy, are deemed written into the
parties’ minds meet, regardless of contract.
whether it is in writing.

13. It is a fundamental rule that contracts,

7. It is correct to conclude that contracts once perfected, bind both contracting
adhesion are invalid per se. parties.
1. False. Contracts of adhesion are not 1. True. Once perfected, contracts bind
invalid per se; they are scrutinized for both parties.
fairness.

14. If a contract should contain some

8. A contract of adhesion becomes void only stipulation in favor of a third person, he may
when the dominant party takes advantage of demand its fulfillment provided he
the weakness of the other party. communicated his acceptance to the obligor
after its revocation.
1. True. A contract of adhesion becomes
void if the dominant party exploits the 1. True. A third party can demand
weaker party. fulfillment of a contract stipulation in
their favor if they communicate
acceptance before revocation.
9. The freedom of contract is not absolute.
1. True. The freedom of contract is not
15. Among contracts which are transmissible
absolute and can be limited by law.
are those which are purely personal, either
by provision of law, such as in cases of
partnerships and agency, or by the very
10. Contracts are law between the parties, nature of the obligations arising therefrom,
and they are bound by its stipulations. such as those requiring special personal
1. True. Contracts are law between the qualifications of the obligor.
parties, and they are bound by their 1. False. Contracts that are purely
stipulations. personal, such as those requiring
special personal qualifications, are not
transmissible.
11. It is a rule that a contract freely entered
between the parties should be respected,
though a contract is not the law between the 16. Laws in force at the time the contract
parties. was made generally govern its interpretation
1. False. A contract is considered the and application.
law between the parties and should be 1. True. Laws in force at the time the
respected. contract was made govern its
interpretation and application.

12. It is a general rule that provisions of

applicable law, especially provisions relating 17. There must be mutuality between the
to matters affected with public policy, are not parties based on their essential equality to
deemed written into the contract. which is repugnant to have one party bound
1. False. Provisions of applicable law, by the contract leaving the other free
especially those related to public therefrom.
 1. True. There must be mutuality Inc.'s office and reported the loss. The
between the parties, and one party representative he spoke to told him that his
cannot be bound while the other is card would be immediately included in the
free. circular of lost cards.
18. A contract containing a condition which Again, on April 20, 2016, X called up Y, Inc.
makes its fulfillment dependent exclusively to reiterate his report on the loss of his card.
upon the uncontrolled will of one of the P Inc.'s representative advised him to put
contracting parties, is valid. into writing the notice of loss and to submit
it. X promptly wrote a letter dated April 20,
1. False. A contract dependent on the
2016 confirming the loss and sent it to Y, Inc.
uncontrolled will of one party is
which received it on April 22, 2016. On April
generally not valid.
21, 2016, a day before receiving the written
notice, Y, Inc. issued a special cancellation
bulletin informing its accredited
19. It is basic that there can be contract in establishments of the loss of the cards of the
the absence of the element of agreement, or enumerated holders, including X's.
of mutual assent of the parties.
Unfortunately, it turned out that somebody
1. False. A contract requires mutual used X's card on April 19 and 20, 2016 to
assent or agreement between the buy commodities worth 300,000. Y then
parties. billed X for that amount. X informed Y, Inc.
he would not pay for the purchases made
after April 19, 2016, the day he notified Y,
20. A contract of lease is generally Inc. of the loss. After the investigation and
transmissible to the heirs of the lessor or the review, Y, Inc., confirmed that it was not X
lessee. who used his credit card on April 19 and 20,
2016. Nonetheless, Y, Inc. insisted on
1. True. A contract of lease is generally
collecting within 15 days from notice. It cited
transmissible to the heirs of the lessor
their stipulation no. 1 which states: "Holder's
or lessee.
responsibility for all charges made through
Multiple Choice Questions the use of the card shall continue until a
reasonable time after receipt by the Card
1. Those which are perfected by the mere Issuer of written notice of loss of the Card
agreement of the parties. and its actual inclusion in the Cancellation
a. Formal Bulletin." Is stipulation no. 1 valid?
b. Real a. Yes, because the contracting parties can
c. Consensual establish any terms and conditions.
d. Principal b. Yes, because such stipulation is not
2 Those which require not only the consent contrary to law or public policy.
of the parties for their perfection, but also c. No, because that is repugnant to the
the delivery of the object by any one party to principle of relativity of contracts.
the other. d. No, the stipulation in question is just as
repugnant to public policy. The effectivity of
a. Formal the cancellation of the lost card rests on an
b. Real act entirely beyond the control of the
c. Consensual cardholder.
d. Principal
4. Those which give rise to an obligation for
3. On August 20, 2011, X applied with Y, Inc. only one of the parties.
for a credit card. On April 18, 2016, X
discovered the loss of his credit card. On a. Informal
April 19, 2016, a Sunday, he called up P b. Formal
c. Unilateral 10. The elements of tort interference
d. Bilateral are the following, except:
5. The contract must bind both contracting a. Existence of a valid contract.
parties; its validity or compliance cannot be b. The third person is in good faith.
left to the will of one of them. c. Knowledge on the part of the third person
of the existence of a contract.
a. Autonomy of contract
d Interference of the third person is without
b. Relativity of contract
legal justification.
c. Formality of contract
d. Mutuality of contract
6. Contracts take effect only between the
parties, their assigns and heirs except in
11. The following are the stages in the
case where the rights and obligations arising
life of a contract, except:
from the contract are not transmissible by
their nature, or by stipulation or by provision a. Preparation
of law. b. Perfection
c. Consummation
a. Autonomy of contract
d. None of the above
b. Relativity of contract
c. Formality of contract 12. Begins from the time the prospective
d. Mutuality of contract contracting parties manifest their interest in
the contract and ends at the moment of
7. The requisites of a stipulation pour
agreement of the parties.
autrui or a stipulation in favor of a third
person are the following, except: a. Preparation
b. Perfection
a. There must be a stipulation in favor of a
c. Consummation
third person.
d. None of the above
b. The stipulation must be a part of the
contract. 13. Is constituted from the moment a person
c. The contracting parties must have clearly receives a thing belonging to another, with
and deliberately conferred a favor upon a the obligation of safely keeping it and of
third person, a mere incidental benefit or returning the same.
interest.
d. The third person must have a. Pledge
communicated his acceptance to the obligor b. Deposit
before its revocation. c. Formal contract
d. Commodatum
8. Any third person who induces another to
violate his contract shall be liable for 14. Those in which each of the parties
damages to the other contracting party. aspires to procure for himself a benefit
through the giving of an equivalent or
a. Quasi interference compensation.
b. Delict interference
c. Legal interference a. Onerous
d. Tort interference b. Formal
c. Unilateral
9. A contract is in the stage of conception d. Gratuitous
when?
15. X offers to sell his house to Y for
a. There is meeting of the minds P1,000,000. Y requested if he would accept
b. Negotiations are in progress P950,000. Which of the following is correct?
c. The parties come to an agreement
d. The contract is perfect
a. The contract is void because there is no b. Relativity of contract
consent. c. Formality of contract
b. Y's response is a counter-offer because it d. Consensuality of contract
is not absolute.
21. Those which have for their object the
c. Y's response is a mere request, hence, the
establishment of a condition is law which is
offer is still effective.
necessary as a preliminary step towards the
d. Y's response is a counter-offer because it
celebration of another subsequent contract.
is qualified.
a. Principal
16. Those where each of the parties has to
b. Preparatory
account the acquisition of an equivalent of
c. Accessory
his prestation, but such equivalent, although
d. Formal
pecuniarily appreciable, is not yet
determined, at the moment of the 22. Those which can subsist independently
celebration of the contract, since it depends from other contracts and whose purpose can
upon the happening of an uncertain event, be fulfilled by themselves.
thus charging the parties with the risk of loss
or gain. a. Preparatory
b. Accessory
a. Unilateral c. Formal
b. Commutative d. Principal
c. Aleatory
d. Gratuitous 23. D borrowed a sum of money from C with
a certain rate of interest. C now wants to
17. Those which have their own individuality increase the rate of interest without the
and are regulated by special provisions of consent of D. What principle in contracts
law. prohibits C from doing so?
a. Nominate a. autonomy of contracts
b. Unilateral b. relativity of contracts
C Innominate c. mutuality of contracts
d. Gratuitous d. consensuality of contracts
18. Those which lack individuality and are 24. Spouses H and W leased the property to
not regulated by special provisions of law. X Corp. The lease contract specifically states
in its Provision No. 1 that "the term of this
a. Nominate
lease shall be 14 years commencing from
b. Unilateral
April 1, 1978, and may be renewed for a like
c. Innominate
term at the option of the lessee."
d. Gratuitous
On 13 February 1991, a year before the
19. Is a contract whereby almost all of its
expiration of the contract of lease, H and W,
provisions are drafted by one party.
notified X Corp. that they were no longer
a. Nominate interested in renewing the lease. X Corp.
b. Contract of adhesion replied that it was exercising its option to
c. Auto-contract renew their lease under the same terms with
d. Gratuitous additional proposals.
20. The contracting parties may establish a. An express agreement which gives the
such stipulations, clauses, terms and lessee the sole option to renew the lease is
conditions as they may deem convenient, not valid on the parties.
provided they are no contrary to law, morals, b. The lessee has a right to elect whether to
good customs, public order, or public policy. continue with the lease or not, once he
exercises his option to continue and the
a. Autonomy of contract
lessor accepts, both parties are thereafter 30. The exceptions in relativity of contracts
bound by the new lease agreement. are the following, except:
c. The option, which is provided in the same
a. Contracts are not transmissible by their
lease agreement, is not fundamentally part
nature.
of the consideration in the contract.
b. Contracts are not transmissible by
d. The right of renewal does not constitute a
stipulation.
part of the lessee's interest in the land.
c. Contracts are not transmissible by
25. It is a meeting of minds between two provision of law.
persons whereby one binds himself, with d. None of the above.
respect to the other, to give something or to
31. The exceptional cases to the principle of
render some service.
relativity of contracts are the following,
a. Law except:
b. Contract a. If a contract should contain some
c. Obligation stipulation in favor of a third person, he may
d. Memorandum of Agreement demand its fulfillment provided he
communicated his acceptance to the obligor
26. Those which can exist only as a
before its revocation.
consequence of, or in relation with, another
b. In contracts creating personal rights.
prior contract.
a. Principal
b. Preparatory c. Creditors are protected in cases of
c. Accessory contracts intended to defraud them.
d. Formal
d. Any third person who induces another to
27. Those which give rise to reciprocal violate his contract.
obligations for both parties.
32. Which of the following may not be the
a. Informal object of a contract of sale?
b. Formal
a. Things having a potential existence;
c. Unilateral
b. The sale of vain hope or expectancy;
d. Bilateral
c. Future goods;
28. Is a contract whereby the parties, by d. Answer not given
making reciprocal concessions, avoid
33. X sold to Y a patented laptop. However,
litigation or put an end to one already
upon delivery the former substituted a fake.
commenced.
Y now wants to annul the sale. Decide.
a. Compromise agreement
a. The contract is void.
b. Auto-contract
b. The contract can be annulled as it is dolo
c. Contract of adhesion
causante.
d. Memorandum of agreement
c. There is dolo incidente therefore, it can be
29. The following are the rules in innominate annulled.
contract, except: d. The remedy is damages.
a. Stipulations of the parties. 34. Those which are perfected by the mere
b. The provisions of business law on agreement of the parties.
obligations and contracts.
a.Consensual contract
c. The rules governing the most analogous
b. Real contract
nominate contracts.
c. Formal contract
d. The customs of the place.
d. Unilateralcontract
35. Those which require not only the consent b. Commutative
of the parties for the perfection, but also the c. Aleatory
delivery of the object by any one party to the d. Gratuitous
other.
41. A sent B a letter wherein the former
a. Consensual contract offered to sell his car to the latter for Php 1M.
b. Real contract B signed to show intention that he may buy
c. Formal contract the same. In A's letter, he gave B two weeks
d. Unilateral contract to raise the amount. After one week, A raised
the price to Php 1.5M. Can B compel A to
36. Takes place when the parties agree upon
accept the Php 1M first offered by A and
the essential elements of the contract.
deliver him the car?
a. Preparation
a Yes, since there was already offer and
b. Perfection
acceptance.
c. Consummation
b. Yes, because A cannot change his offer
d. None of the above
without the consent of B.
c. Yes, because A cannot withdraw the offer
within two weeks as he is under estoppel.
d. No, because there was no acceptance yet
37. The parties fulfill or perform the terms of the offer.
agreed upon in the contract, culminating in
its extinguishment.
42. The creditor is given the right to retain
a. Preparation his debtor's movable property in his
b. Consummation possession, or in that of a third person to
c. Perfection whom it has been delivered, until the debt is
d. None of the above paid.
38. One of the parties delivers to another, a Pledge
either something not consumable so that the b. Deposit
latter may use the same for a certain time c. Formal contract
and return it. d. Commodatum
a. Pledge 43. When the law requires that a contract be
b. Deposit in some form in order that it may be valid or
c. Formal contract enforceable, or that a contract be proved in a
d. Commodatum certain way, that requirement is absolute
39. Those in which one of the parties and indispensable.
proposes to give to the other a benefit a. Consensual contract
without any equivalent or compensation. b. Real contract
a. Onerous с. Formal contract
b. Formal d. Unilateral contract
c. Unilateral 44. In February 2016, X Corp. contracted the
d. Gratuitous services of Y Construction Supply. The latter
40. Those where each of the parties acquires was to supply labor and materials, for the
an equivalent of his prestation and such construction of two cafeterias. The terms and
equivalent is pecuniarily appreciable and conditions of the contract between X Corp.
already determined from the moment of the and Y was expressed in the purchase orders
celebration of the contract. and progress billings in partial payment of
the project, X Corp. drew and issued Check
a. Unilateral No. 01234 and delivered the same to Y.
However, the said check was dishonored rendered was a controlling motive for the
upon its presentment for payment on the establishment of the contract.
ground that it was drawn against insufficient d. When the demand would be useless, as
funds. when the obligor has rendered it beyond his
power to perform.
Y was able to complete the project and
turned the same over to X Corp. The total 3. Delay in the fulfillment of an obligation, by
amount due as of the final billing dated reason of a cause imputable to the debtor.
November 26, 2016, was P486,409.
a. Mora solvendi
However, despite Y's written demand for
b. Mora accipiendi
payment, X Corp. failed to settle the balance
c. Compensatio morae
of its obligation. Is the contract binding
d. Creditor's default
between the contracting parties?
4. Delay of the creditor to accept the delivery
a. No, because the contract must be
of the thing which is the object of the
formalized in a public instrument.
obligation.
b. No, the agreement should be written in a
separate document and not to be included in a. Mora solvendi
the purchase orders and progress billings. b. Mora accipiendi
c. Yes, the terms and conditions of the c. Compensatio morae
contract expressed in the purchase orders d. Debtor's default
and progress billings must govern the
contractual relation of the parties.
d. Yes, because the meeting of the minds
was put into writing.
45. Contracts take effect only to the parties,
their assigns and heirs except where the 5. Default on the part of both parties
rights and obligations arising therefrom: because neither has completed their part in
their reciprocal obligation.
a. Are not transmissible by their nature.
b. Are not transmissible by stipulation of the a. Mora solvendi
parties. b. Mora accipiendi
c. Are not transmissible by provision of law. C. Compensatio morae
d. All of the above d. Debtor's default

Stages in the life of a contract 6. When the amount is known or is

determinable by inspection of the terms and
1. Preparation or Negotiation conditions of the relevant promissory notes
2. Perfection or birth of the contract and related documentation.
3. Consummation of the contract
a. Debt is due
b. Debt is demandable
CHAPTER 2 C. Debt is liquidated
d. Debt is unliquidated
2. In the following instances, demand is not
necessary, except: 7. Is the legal invasion of a legal right.

a. In unilateral obligation. a. Injury

b. When the obligation or the law expressly b. Grievance
so declares. c. Damage
c. When from the nature and the d. Damages
circumstances of the obligation it appears 8. Is the hurt, loss or harm which results from
that the designation of the time when the the injury.
thing is to be delivered or the service is to be
a. Loss 14. The omission to do something which a
b. Grievance reasonable man, guided by those
C. Damage considerations which ordinarily regulate the
d. Damages conduct of human affairs, would do; or the
doing of something which a prudent and
9. Is the recompense or compensation
reasonable man would not do.
awarded for the damage suffered.
a. Breach of contract
a. Loss
b. Fraud
b. Grievance
C. Negligence
c. Damage
d. Delay
d. Damages
15. It is want of care required by the
10. Which is not a mode of voluntary breach
circumstances.
of the obligation?
a. Breach of contract
a. Fraud
b. Negligence
b. Delict
C. Delay
c. Negligence
d. Fraud
d. Delay
16. Is that conduct that naturally or
reasonably creates undue risk or harm to
others.
a. Negligence
b. Breach of contract
11. It refers to all kinds of deception that C. Fraud
would lead an ordinarily prudent person into d. Delay
error after taking the circumstances into
account.
a. Contravention of the tenor of the 17. Fault or negligence of obligor by virtue of
obligation. which he is unable to perform his obligation
b. Mora arising from a pre-existing contract.
c. Culpa
a. Culpa contractual
d. Dolo
b. Culpa civil
12. Is basically a deception used by one c. Culpa criminal
party prior to or simultaneous with the d. Culpa aquiliana
contract, in order to secure the consent of
18. Fault or negligence of a person, whose
the other.
failure to observe the required diligence to
a. Incidental fraud the obligation causes damage to another.
b. Subsidiary fraud
a. Culpa civil
C. Causal fraud
b. Culpa contractual
d. Contributory fraud
C. Culpa aquiliana
13. That which is not serious in character and d. Culpa criminal
without which the other party would have
19. Which statement describes culpa
entered into the contract anyway.
contractual?
a. Incidental fraud
a. The proof of the contract and of its breach
b. Subsidiary fraud
is sufficient prima facie to warrant recovery.
c. Causal fraud
b. The negligence of the defendant is
d. Contributory fraud
substantive and independent.
C. The source of the liability is the a. If, being able to save either the thing
defendant's negligent act or omission itself. borrowed or his own thing, he chose to save
d. Proof of due diligence in the selection and the former.
supervision of employees is available as a b. If he devotes the thing to any purpose
defense. different from that for which it has been
loaned.
20. Negligence is merely incidental to the
C. If he keeps it longer than the period
performance of an obligation already existing
stipulated, or after the accomplishment of
because of a contract. This pertains to:
the use for which the commodatum has been
a. Culpa civil constituted.
b. Culpa contractual d. If the thing loaned has been delivered with
c. Culpa aquiliana appraisal of its value, unless there is a
d. Culpa criminal stipulation exempting the bailee from
responsibility in case of a fortuitous event.
21. Negligence is direct, substantive, and
independent. This pertains to: 26. The depositary is liable for the loss of the
thing through a fortuitous event, except:
a. Culpa civil
b. Culpa contractual a. If it is so stipulated.
c. Culpa aquiliana b. If he delays its return.
d. Contractual negligence C. If he uses the thing with the depositor's
permission.
22. This requires proof beyond reasonable d. If he allows others to use it, even though
doubt. he himself may have been authorized to use
a. Culpa civil the same.
b. Culpa contractual 27. The officious manager shall be liable for
c. Culpa aquiliana any fortuitous event, except:
d. Culpa criminal a. If he assumed the management in good
faith.
b. If he undertakes risky operations which
23. Defense of a good father of a family in the owner was not accustomed to embark
the selection and supervision of employees is upon.
a proper or complete defense. C. If he has preferred his own interest to that
of the owner.
a. Culpa civil
d. If he fails to return the property or
b. Culpa contractual
business after demand by the owner.
c. Culpa aquiliana
d. Culpa criminal 28. A presumption which may be
contradicted or overcome by other evidence.
24. Which one of the following is not a
requisite of mora solvendi? a. Conclusive presumption
b. Disputable presumption
a. The obligation is demandable and
C. Definite presumption
liquidated.
d. Questionable presumption
b. The debtor delays performance.
C. The obligation is not necessarily 29. The following are instances of disputable
demandable. presumptions, except:
d. The creditor judicially or extrajudicially
requires the debtor's performance. a. That there was a sufficient consideration
for a contract.
25. In commodatum, the bailee is liable for b. Whenever a party has, by his own
the loss of the thing, even if it should be declaration, act, or omission, intentionally
through a fortuitous event, except: and deliberately led to another to believe a
particular thing true, and to act upon such
belief, he cannot, in any litigation arising out purchase price every month until September
of such declaration, act or omission, be 5, 1999 and thereafter at the rate of
permitted to falsify it. P381,000 or 3.81% of the purchase price
c. That persons acting as copartners have every month, with the fifth of every month as
entered into a contract of copartneship. the cut-off date for said increases. Are the
d. That an obligation delivered up to the 3% and 3.81% stipulated monthly interest
debtor has been paid. valid?
30. Is the power of one person to demand of a. Yes, because the Usury Law has been
another, as a definite passive subject, the suspended by a certain Central Bank
fulfillment of a prestation to give, to do, or Circular.
not to do.
b. No, because the Court will temper interest
a. Real right rates if they are unconscionable.
b. Personal right
C. Yes, because the parties are free to
C. Actual right
stipulate on the interest to be imposed on
d. Private right
monetary obligations.
31. Is the power belonging to a person over a
d. No, because what is only required is that
specific thing, without a passive subject
the interest due should be that stipulated in
individually determined, against whom such
writing, and in the absence thereof, the rate
right may be personally exercised.
shall be 12% per annum.
a. Real right
34. One of the following is a determinate
b. Personal right
thing
C. Actual right
d. Private right a. A car with plate no. AB123
b. A red book
32. The object thereof is designated merely
C. A black cellphone
by its class or genus without any particular
d. A 10 inch. laptop
designation or physical segregation from all
others of the same class. 35. Is the power of one person to demand of
another, as a definite passive subject, the
a. Generic thing
fulfillment of a prestation to give, to do, or
b. Determinate thing
not to do.
c. Specific thing
d. Movable thing a. Personal right
b. Real right
33. Spouses H and W obtained from A and B
c. Definite right
a loan amounting to P6,000,000 at 3%
d. Indefinite right
interest per month. The loan was secured by
a mortgage on a parcel of land. Thereafter,
the parties executed a Contract of Sale
conveying the mortgaged property in favor 36. X, an official of TESDA, boarded the LRT
of A and B. Subsequently, A and B gave H to be able to arrive in Caloocan in time for
and W an exclusive option to repurchase the her 3 pm meeting when her handbag was
land for P10,000,000. This was embodied in a slashed and the contents were stolen by an
document denominated as an Option to Buy. unidentified person. Among those stolen
On this same document, A and B were her wallet and the government-issued
acknowledged receipt of a total sum of cellular phone. She then reported the
P10,000,000 as consideration for the incident to the police authorities; however,
purchase of the land. The Option to Buy the thief was not located, and the cellphone
provided that if the option is exercised after was not recovered. She also reported the
December 5, 1998, the purchase price shall loss to her immediate superior, and she
increase at the rate of P300,000 or 3% of the requested that she be freed from
accountability for the cellphone. The COA 41. Are those which arise from the same
Auditor denied her request on the ground cause, and which each party is a debtor and
that she lacked the diligence required in the a creditor of the other, such that the
custody of government property and was obligation of one is dependent upon the
ordered to pay the purchase value. Is X obligation of the other?
liable?
a. Reciprocal obligation
a. No, X is not is liable because riding the b. Unilateral obligation
LRT is not a negligent act more so because C. Natural obligation
X's mode of transit was influenced by time d. Specific obligation
considerations.
42. It signifies all of those things which are
b. Yes, X is liable because putting her
produced by the thing which is the object of
cellphone in her bag is not sufficient care of
the obligation as well as all of those which
a cellphone while traveling on board the LRT.
are naturally or artificially attached thereto.
C. Yes, X is liable as she should have rode a
jeep or bus. a. Determinate thing
d. No, X is not liable as she boarded the LRT b. Generic thing
to be able to arrive in Caloocan in time for C. Accessions
her 3 pm meeting. d. Accessories
37. Is the power belonging to a person over a 43. It signifies all of those things which have
specific thing, without a passive subject for their object the embellishment, use or
individually determined, against whom such preservation of another thing which is more
right may be personally exercised. important and to which they are not
incorporated or attached.
a. Personal right
b. Real right a. Determinate thing
C. Definite right b. Generic
d. Indefinite right C. Accessions
d. Accessories
38. These are the spontaneous products of
the soil, and the young and other products of 44. D borrowed P50,000 from C. C dies
animals. before he has collected the debt leaving S,
his son as heir. Which of the following
a. Real fruits
statements is correct?
b. Natural fruits
C. Industrial fruits a. S cannot collect because the credit right is
d. Civil fruits personal to C.
b. S can collect from D although D and C did
39. These are the produced by lands of any
not agree that the right to the debt will pass
kind through cultivation or labor.
on to the heirs of C.
a. Real fruits C. S can collect only if D and C agreed that
b. Natural fruits the right to the debt will pass on the heirs of
C. Industrial fruits C.
d. Civil fruits d. S cannot collect because the law prohibits
the transmission of the credit right.
40. These are the rents of buildings, the price
of leases of lands and other property and the 45. Which one of the following is not a
amount of perpetual or life annuities or other requisite of mora accipiendi?
similar income.
a. An offer of performance by the debtor who
a. Real fruits has the required capacity.
b. Natural fruits b. The offer must be to comply with the
C. Industrial fruits prestation as it should be performed.
d. Civil fruits
C. The creditor refuses the performance d. Nominal damages
without just cause.
51. Damages are imposed, by way of
d. An offer of performance by the creditor
example for the public good, in addition to
who has the required capacity.
the moral, temperate, liquidated or
46. One is entitled to an adequate compensatory damages.
compensation only for such pecuniary loss
a. Actual damages
suffered by him as he has duly proved. Such
b. Exemplary damages
compensation is referred to as:
c. Liquidated damages
a. Moral damages d. Nominal damages
b. Actual damages
52. The voluntary relinquishment or
C. Nominal damages
abandonment, express or implied, of a legal
d. Temperate damages
right or advantage.
47. This damages includes physical suffering,
a. Waiver
mental anguish, fright, serious anxiety,
b. Condonation
besmirched reputation, wounded feelings,
c. Compensation
moral shock, social humiliation, and similar
d. Force majeure
injury.
53. Imports a dishonest purpose or some
a. Moral damages
moral obliquity or conscious doing of a
b. Actual damages
wrong.
C. Nominal damages
d. Temperate damages a. Fraud
b. Bad faith
48. Are damages adjudicated in order that a
c. Damage
right of the plaintiff, which has been violated
d. Injury
or invaded by the defendant, may be
vindicated or recognized, and not for the 54. Is any event which cannot be foreseen,
purpose of indemnifying the plaintiff for any or which, though foreseen, inevitable.
loss suffered by him?
a. Accident
a. Moral damages b. Injury
b. Actual damages C. Fortuitous event
C. Nominal damages d. Calamity
d. Temperate damages
55. Which is not an element of a fortuitous
49. Damages which may be recovered when event?
the court finds that some pecuniary loss has a. The event that constituted the caso
been suffered but its amount cannot, from fortuito must have been impossible to
the nature of the case, be provided with foresee or, if foreseeable, impossible to
certainty. avoid.
b. The occurrence must have been such as to
a. Moral damages
render it impossible for the debtors to fulfill
b. Actual damages
their obligation in a normal manner.
C. Nominal damages
C. The obligor must have been free from any
d. Temperate damages
participation in the aggravation of the
50. Are those agreed upon by the parties to a resulting injury to the creditor.
contract, to be paid in case of breach d. The cause of the unforeseen and
thereof. unexpected occurrence, must have been
dependent of human will
a. Moral damages
b. Actual damages 56. Which is not an element of a fortuitous
c. Liquidated damages event?
a. The cause of the breach of the obligation but W set up the defense that the robbery
must be independent of the will of the extinguished her obligation. Is W liable?
debtor.
a. No, because the robbery, took place
b. The event must be such as to render it
without any concurrent fault on W's part.
impossible for the debtor to fulfill his
b. No, because the incident was unforeseen.
obligation in a normal manner.
C. Yes, because the conduct of W in
C. The event must be neither unforeseeable
returning alone to her house in the evening
or unavoidable.
carrying jewelry of considerable value would
d. The debtor must be free from any
have been negligence per se.
participation in, or aggravation of the injury
d. Yes, because W committed delay.
to the creditor.
61. The following statement describes culpa
57. A thing is determinate when it is
contractual. Which is not?
particularly designated or physical
segregated from all other of the same class. a. There is a pre-existing contractual
relation.
a. Indeterminate thing
b. The proof of the contract and of its breach
b. Generic thing
is sufficient prima facie to warrant recovery.
c. Specific thing
c. The negligence of the defendant is
d. Immovable thing
substantive and independent.
58. When does delay begins? d. The source of the liability of the defendant
is the breach of contract.
a. Delay begins from the time the obligor
actually defaulted from his obligation. 62. Which statement describes culpa
b. Delay begins from the time the obligee aquiliana?
demands from the obligor the performance
a. Proof of due diligence in the selection and
of the obligation.
supervision of employees is not available as
C. Delay begins from the time the obligor
a defense.
defaulted from his obligation within a
b. The liability of the employers is based
reasonable time from the maturity of his
upon the principle that the negligence of the
obligation.
employee is conclusively presumed to be the
d. Delay begins from the time the obligor
negligence of the employer.
defaulted from his obligation within 5 days
c. There is no pre-existing contractual
from the maturity of his obligation.
relation.
59. Which of the following is not a requisite d. The source of the liability of the defendant
of default? is the breach of contract.
a. That the obligation be demandable and 63. The following statement describes culpa
already liquidated. aquiliana. Which is not?
b. That the debtor delays performance.
a. The liability of the employers is based
C. That the debtor defaulted on maturity
upon the principle that the negligence of the
date of the obligation.
employee is prima facie presumed to be the
d. That the creditor requires the performance
negligence of the employer.
judicially and extrajudicially.
b. Proof of due diligence in the selection and
60. W received from X a pendant with supervision of employees is not available as
diamonds to be sold on commission basis, a defense.
but which W failed to subsequently return c. The source of the liability is the
because of a robbery committed upon her in defendant's negligent act or omission itself.
the evening of January 16, 2018 while d. There is no pre-existing contractual
walking alone in a dark alley carrying the relation.
said pendant. X filed an action against Parta
W for recovery of the pendant or its value,
64. A presumption which is irrebuttable upon 15,202 cartons of fresh pineapples into the
the presentation of the evidence and any cargo hold of a vessel. The vessel was
evidence tending to rebut the presumption is docked at the port of Davao City and the
not admissible. goods were to be transported by it to the
port of Inchon, Korea. B, Inc. insured the
a. Uncertain presumption
shipment with J Co.
b. Disputable presumption
C. Questionable presumption C, Inc. loaded and stowed the cargoes
d. Conclusive presumption aboard the vessel. The vessel set sail from
the port of Davao City and arrived at the port
65. The following are instances of disputable
of Inchon, Korea. It was then discovered
presumptions, except:
upon discharge that some of the Paineapple
a. That money paid by one to another was cartons of the banana shipment and 2,185
due to the latter. cartons of the pineapple shipment were so
b. That a thing delivered by one to another damaged that they no longer had
belonged to the latter. commercial value. B, Inc. filed a claim for the
C. That prior rents or installments had been damages. J Co. evaluated the claim and
paid when a the later one is produced. thereafter sent a check in the amount of
d. The tenant is not permitted to deny the $210,266.43 to B Inc., the
title of his landlord.
latter then issued a subrogation receipt to J
66. Which of the following is not an Co. Thereafter J Co. instituted an action for
obligation of the debtor in specific real damages against C, Inc.
obligation?
Is C, Inc., under obligation to observe the
a. To deliver the specific or determinate extraordinary degree of diligence in the
thing which he has obligated himself to give. conduct of its business.?
b. To deliver the accessions and accessories.
a. Yes, because its participation was to load
c. To pay damages in case of breach of the
the cargoes on board the vessel which
obligation.
requires utmost care.
d. To take care of the thing with
b. No, because its participation was to load
extraordinary diligence.
the cargoes on board the vessel which
67. Which of the following is not a right of requires ordinary care.
the debtor in generic real obligation? c. No, because if there is no law or contract
stating the degree of diligence which is to be
a. To ask for performance of the obligation. observed in the performance of an obligation
b. To compel specific performance. then that which is expected of a good father
C. To ask that the obligation be complied of a family shall be required.
with at the expense of the debtor. d. None of the above.
d. To recover damages in case of breach of
the obligation. 70. The following statements explains
negligence, except:
68. Extreme care that a person of unusual
prudence exercises to secure rights or a. It it is commonly understood, is conduct
property. that creates an undue risk of harm to others.
b. It is the failure to observe that degree of
a. Ordinary diligence care, precaution and vigilance that the
b. Due diligence circumstances justly demand.
C. Diligence of a good father of a family c. It is expected from, and ordinarily
d. Extraordinary diligence exercised by, a person who seeks to satisfy a
69. B, Inc. contracted C, Inc., a stevedoring legal requirement or to discharge an
company, to load and stow a shipment of obligation.
146,288 cartons of fresh green bananas and
d. It is the omission to do something which a
reasonable man, guided by considerations
that ordinarily regulate the conduct of
human affairs, would do, or doing something
that a prudent and reasonable man would
not do.