1.

Masigasig owns a vast mango plantation in Pangasinan which he can no longer properly manage
due to a lingering illness. Since he is indebted to Matapat in the amount of 500,000, Masigasig
asks Matapat to manage the plantation and apply the harvest to the payment of his obligation to
him, principal and interest, until his indebtedness shall have been fully paid. Matapat agrees.

a. What kind of contract is entered into between Masigasig and Matapat? Explain.

Masigasig and Matapat agreed to have a contract of antichresis for a vast of mango plantation.
Under Article 2132 of the New Civil Code, by a contract of antichresis the creditor acquires the right to
receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the
interest, and thereafter to the principal of his credit. The essence of the contract of antichresis is the grant
to Matapat of the right to gather fruits of the mango plantation surrendered to him in payment of the debt
of Masigasig, the mango plantation to be returned after the debt is fully satisfied.

b. What specific obligations are imposed by law on Matapat as a consequence of their contract?

Matapat must pay taxes and charges upon the land and bear the necessary expenses and for
preservation and repair which he may deduct from the fruits. (Art, 2135, NCC) The sums spent for the
purposes stated shall be deducted from the fruits harvested.

c. Does the law require any specific form for their contract?

The law requires a specific form for their contract. A formal contract must be in writing. The amount
of the principal obligation and the interest secured must be specified in writing, otherwise the antichresis
will be void. (Art. 2134 NCC)

d. May Masigasig re-acquire the plantation before his entire indebtedness shall have been fully
paid? Explain.
 No. Masigasig cannot reacquire the plantation because he is not yet fully paid for his debt to
Masigasig. In Article 2136 of the New Civil Code specifically provides that the debtor cannot reacquire
the enjoyment of the immovable without first having totally paid what he owes the creditor. However, it
is potestative on the part of the creditor to do so in order to exempt him from his obligation under Art.
2135, NCC. Masigasig cannot re-acquire the enjoyment unless Matapat compels Masigasig to enter again
the enjoyment of the property.

2. Mikaya’s Company is a producer of handbags and pack bags. The company appoints Mautak as
his agent to sell his products in Baguio City.

a. Can Mautak appoint a sub-agent and if he does, what are the effects of such appointment?

Yes. Mautak can appoint a sub-agent. As a general rule, an agent cannot appoint a sub-agent.
However, in the following cases, an agent can appoint a sub-agent: 1. A sub-agent may be appointed if
there is a custom of the trade to appoint a sub-agent. Again, a sub-agent may be appointed where the
nature of the work is such that a sub-agent is necessary. The effects of such appointments will be as
follows. The principal is not represented by the acts of sub agent. Mikaya’s Company is not responsible
for the acts of the sub agent towards third person. And Mautak is responsible for the acts of the sub agent
both to the principal and to the third person. The sub-agent will be under the control of Mautak and
Mikaya will not have the power to direct the sub-agent. In addition, the agent will have to pay the sub-
agent monies from Mikaya’s payment and they cannot add additional amounts to be paid by Mikaya.

b. Mikaya granted Cory Putt the exclusive right to sell his brand of handbags and pack bags in
La Trinidad, Benguet, and the price for his product payable within 60 days delivery, and
promising Cory Putt commission of 20% on all sales. After the delivery of the products to
Cory Putt and before she could sell any of them, her store was completely burned without his
fault together with all of his products. Must Cory Putt pay Mikaya for his lost products?
Why?

No. Because it’s force majeure. He is not liable because there is no negligent act on the part of
Cory Putt. It was so happened that during that time his store was burned which is unforeseen event.
Although the Civil Code states that “a person obliged to give something is also bound to preserve it with
the diligence pertaining to a good father of a family”, it also provides, following the principle of the
Roman law that “no one shall be liable for events which could not be foreseen, or which having been
foreseen were inevitable, with the exception of the cases expressly mentioned in the law or those in which
the obligation so declares.” Which is a common clause contracts that essentially frees both parties from
liability or obligation when an extraordinary event or circumstance beyond the control of the parties.

c. State the basic difference between a contract to sell on the one hand, and a contract of sale, on
the other.

The most significant thing to remember is the effect of each of these two contracts. Generally, in a
Contract to sell, the ownership is not transferred to the buyer upon the execution of the contract. In a
Contract of Sale, the ownership is transferred to the buyer right upon its execution. Reserved in the
vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a
contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the
contract is resolved. Whereas, in a contract to sell, title is retained by the vendor until full payment of the
price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not
a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.
A contract to sell is a contract between the principal/owner and the agent. It is the contract where he gives
the agent the special power to be able to sell his products or services. On the other hand, a contract of
sale, is a contract between the agent and the buyer. This is where the buyer and the agent agree on terms,
payments and the conditions.

d. In case one of the parties fails to comply with his obligations, what are the remedies of the
aggrieved party?

If performance has been offered late or otherwise does not conform to the contract the aggrieved
party will lose its right to terminate the contract unless it gives notice to the other party within a
reasonable time after it has or ought to have become aware of the offer or of the non-conforming
performance.

e. What are the grounds for liability in the performance of obligation?

If Cory Putt is not able to meet the 60-day payable period, that would be a ground for liability.
 3. Matalino and Matalinaw formed a partnership to operate a car repair shop at Aurora Hill, Baguio
City. Matalino provided the capital while Matalinaw contributed his labor and industry. On one
side of their shop, Matalino opened and operated a coffee shop, while on the other hand,
Matalinaw put up a car accessories store.

a. May they engage in such separate business without entering into another contract? Why?

They may engage in or possess an interest in other business ventures (unconnected with the
Company) of every kind and description, independently or with others. The Company shall not have any
rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.
They may each enter into their own separate businesses but they need another contract stating that the
businesses are totally separated from the partnership business. They will also enter into a sub-lease
contract because the coffee shop and accessories shop will be in the same place as the car repair shop.

b. What are the essential requisites of a contract?

Under Article 1318, There is no contract unless the following requisites concur:
1. Consent of the contracting parties
2. Object certain which is the subject matter of the contract.
3. cause of the obligation which is established.

Consent- must be free and given by someone who is sui juris, or one who has capacity to act.
Therefore, it must be freely given by the party and must be an intelligent consent, the party must know
what he is consenting. If the consent of one party is not freely given because such consent was obtained
through fraud, violence intimidation, undue influence, the contract is voidable. This is when it is said that
the consent is vitiated. Object of a contract-must be definite or determinate as to its kind; it must be
lawful or it must be within commence of man. It must likewise be possible, and not in any way contrary
to good customs, morals, public order or public policy. Cause-it must be true and licit. A contract with an
illicit cause produces no effect whatsoever. A contract with a false cause is void unless it, and lawful
resets upon another because which is true.
 4. To secure a loan obtained from a rural bank. Maluwag assigned her leasehold rights over a stall in
the public market in favour of the bank. The deed of assignment provides that in case of default in
the payment of the loan, the bank shall have the right to sell Maluwag’s rights over the market
stall and to apply the proceeds to the payment of the loan.

a. Was the assignment of leasehold rights a mortgage? Why?

No. It was a collateral rather than a mortgage. Collateral and mortgage, while used in similar context,
are not interchangeable terms. For large loans, lenders require some form of a safety net in the case the
borrower is unable to make a payment or completely defaults. In the event the borrower becomes
incapable of making payments, the lender can seize the collateral to make up for their financial loss. A
mortgage, on the other hand, is a loan specific to housing where the real estate is the collateral. When you
take out a mortgage, whether it be from a commercial bank or private lender, one aspect they will always
want to know the value of the home you are purchasing (the collateral). This can help them determine if
their investment is too risky. Very rarely will a lender approve a mortgage larger than the value of the
collateral. Collateral is just one very important piece of what lenders are looking for when evaluating the
risk of a mortgage - and ultimately whether they decide to accept or reject a loan application.

b. Assuming the assignment to be a mortgage, does the provision giving the bank the power to
sell Maluwag’s rights valid? Why?

No. Because the owner has the last say about the leasehold. This could mean that the owner may
terminate the tenant’s interest which then eventually causes the leasehold mortgage to become valueless
over time and not attach to the owner financially.