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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 and resolutory
conditions upon an obligation
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.
MIGUELS 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.
MIGUELS 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

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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.
MIGUELS 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
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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 As 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 creditors 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 Bs obligation shall have matured, and for June
15, 1966, when Cs 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.
MIGUELS 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.
MIGUELS 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.
MIGUELS 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

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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 stipulationsone 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 importor that
there is complete and substantial incompatibility between the two
obligations.
MIGUELS 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

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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.
MIGUELS 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

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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.
MIGUELS ANSWER: An implied contract is different from a quasi-
contract 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 quasi-
contract 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.
MIGUELS 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

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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.
MIGUELS 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.
MIGUELS 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.
MIGUELS 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.
MIGUELS 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

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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.
MIGUELS 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.

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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.
MIGUELS 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 play-
for-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.
MIGUELS ANSWER: Roland is bound by the contract he entered into
with lady love. Rolands 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 Alfonsos 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. Non-
payment 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.
MIGUELS 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

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Alfonso. Pablos 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.
MIGUELS 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)

15
MIGUELS 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 Ys right to
reimburse Xs 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."
MIGUELS 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
wasby agreementdue 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.
MIGUELS 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
MIGUELS 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.
MIGUELS ANSWER:

19
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.
MIGUELS 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, quasi-
contracts 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.
MIGUELS 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 co-
debtors, 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.
MIGUELS ANSWER: 1) Joey can be compelled to pay the remaining
demandable debt of P200,000. Since the creditor has condoned

21
Jojos 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
Jojos 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.
MIGUELS 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 are
perfected by mere consent (Art. 1315. Civil Code). Real Contracts are
those which are perfected by the delivery of the object of the
obligation. (Art. 1316, Civil Code) Examples of real contracts are
deposit, pledge, commodatum and simple loan (mutuum).
MIGUELS 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
Evas 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.
MIGUELS 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.
MIGUELS 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.
MIGUELS ANSWER: The action will prosper. The promissory note is
valid and can therefore give rise to a cause of action upon non-
fulfillment. 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).
MIGUELS 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.
MIGUELS 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.
MIGUELS 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.
MIGUELS 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.
MIGUELS 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 attorneys 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 corporations 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 attorneys 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.
MIGUELS 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
Printados 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 Printados 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.)
MIGUELS 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 Printados 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 debtors 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).
MIGUELS 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 Bs share of P 10,000.00. A solidary debtor may avail
himself of any defense which personally belongs to a solidary co-
debtor, but only as to the share of that co-debtor.
(b) A may avail of the condonation by X of Cs 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 Ds share and of all the other co-debtors.
Hence, A cannot avail of the defense of Ds 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.
MIGUELS 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 co-
debtors
(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.
MIGUELS 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. L-
47088, 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.
MIGUELS 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.
MIGUELS 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.
MIGUELS 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.

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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 Recardos 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) Can XYZ Bank validly assert legal compensation?
(b) Can Recardos property be foreclosed to pay the full balance
of the loan?
(c) 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
MIGUELS 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) Recardos 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.

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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) Can Gustavo now raised the issue that the cashier's check is not
legal tender?
(b) Can Felipe validly refuse to pay Gustavo again?
(c) Can Felipe compel Gustavo to receive US$100 instead?
SUGGESTED ANSWER:
(a) No, because Gustavo is guilty of estoppel by laches. He led Felipe to
believe he could pay by cashiers check, and Felipe relied that
such cashier check would be encashed this extinguishing his
obligation. Because of Gustavos 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
(b) Yes, if the payment is valid. Since the bank considered the cashiers
check as being stale for not having been encashed on time, then
the cashiers check may be issued again. At any rate, non-
payment of the amount to Gustavo would constitute unjust
enrichment
(c) 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.
MIGUELS ANSWER: (a) Gustavo cannot use the defense that the check was
not legal tender because he has already accepted it. Gustavos 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) Can the labor unrest be considered a fortuitous event?
(b) Can XY Corp. unilaterally and immediately cancel the
contract?
(c) Must AB Corp. return the 50% downpayment?
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

38
(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. Juridical/Legal Tie
B. Active Subject
C. Passive Subject
D. Consideration
SUGGESTED ANSWER: D. Consideration
Bar Question (2011)
Upon the proposal of a third person, a new debtor substituted the original
debtor without the latters 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 debtors 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. Voidable.
B. Valid.
C. Void.
D. 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 Billys 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.

41
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 Xs 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 obligors payment or performance.
SUGGESTED ANSWER: D. Cannot be judicially enforced but authorizes
the obligee to retain the obligors 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 Annes obligation be considered
extinguished?
A. Yes, since Bessys refusal of the managers 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 managers 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. Obligation
B. Juridical necessity
C. Prestation
D. Contract
SUGGESTED ANSWER: C. Prestation

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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. Default (mora)
B. Mistake
C. Negligence
D. 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. Mora accipendi
B. Mora solvendi
C. Compensation morae
D. 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. Buko can ask for reimbursement from Fermin and Toti
B. Buko can sue Fermin and Toti for damages
C. Buko can sue for rescission
D. Buko can 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 Fermins and Totis
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
Fermins 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. P 200,000
B. P 300,000
C. P 100,000
D. P 150,000
SUGGESTED ANSWER: A. P 200,000

Bar Question (2012)


Payment

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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 managers check or cashiers check
it will produce the effect of payment. If its 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. All contracts are perfected by mere consent
B. All contracts are perfected by delivery of the object
C. All contracts are required to be in writing
D. All contracts are 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. Obligatory force of contracts
B. Mutuality of contracts
C. Autonomy of contracts
D. 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. Obligatory force of contracts
B. Mutuality of contracts
C. Autonomy of contracts
D. 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. Obligatory force of contracts
B. Mutuality of contracts
C. Autonomy of contracts
D. Relativity of contracts
SUGGESTED ANSWER: D. Relativity of contracts

48
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. Obligatory force of contracts
B. Mutuality of contracts
C. Autonomy of contracts
D. 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. By the stipulation of the parties
B. By the general principles of quasi-contracts and delicts
C. By the rules governing the most analogous nominate contracts
D. By the 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)

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Contracts
The following are rescissible contracts, except:
A. Entered into by guardian whenever ward suffers damage more
that of value of property
B. Agreed upon in representation of absentees, if absentee suffers
lesion by more than 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. Effective until set aside
B. May be assailed/attacked only in an action for that purpose
C. Can be confirmed or ratified
D. Can be assailed only by either party
SUGGESTED ANSWER: D. Can be assailed only by either party

Bar Question (2012)


Void Contracts

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The following are void contracts except:
A. Pactum commisorium
B. Pactum de non alienando
C. Pactum leonine
D. 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. The thing is delivered
B. The obligation to deliver the thing arises
C. The contract is perfected
D. The 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. Voidable
B. Rescissible
C. Void
D. Unenforceable
SUGGESTED ANSWER: C. Void

Bar Question (2012)


Contracts
When both parties to the contract are minors, the contract is
A. Voidable
B. Rescissible
C. Void
D. Unenforceable

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SUGGESTED ANSWER: D. Unenforceable

Bar Question (2012)


Contracts
When the consent of one of the parties was vitiated, the contract is
A. Voidable
B. Rescissible
C. Void
D. Unenforceable
SUGGESTED ANSWER: A. Voidable

Bar Question (2012)


Obligation
An obligation which is based on equity and natural law is known as
A. Pure
B. Quasi-contract
C. Civil
D. 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. Voidable
B. Rescissible
C. Void
D. 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) Litos failure to pay led to
the extra-judicial foreclosure, Lito tendered a managers 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
Ferdies 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 that under Article 1358 of the Civil Code, all
other contracts where the amount involved exceeds five hundred
pesos must appear in writing, even a private one. However, the
requirement is not for the validity of the contract, but only for its
greater efficacy.
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) Ferdies refusal is justified. A check, whether a managers 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, Ferdies 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.
MIGUELS 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) Ferdies refusal is justified. A check is not considered as legal
tender. The creditor may validly refuse to accept the debtors 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 Ds 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 Garys 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. Garys
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 Garys 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. Non-
compliance 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.
Isaacs 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 non-
compliance with Article 1257.
MIGUELS 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.
MIGUELS 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 Xs 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.
MIGUELS 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.
MIGUELS 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.

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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).
MIGUELS 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

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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 Pedros 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).
MIGUELS 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 Saras 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 6-
month 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).
MIGUELS 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

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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).
MIGUELS 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
MIGUELS 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

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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
MIGUELS 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 Jericos 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

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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
MIGUELS ANSWER:

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