CONTRACTS

1) S sold his cabinet to B for PhP 5,000. The parties gave their consent freely to the contract before its
perfection. After the delivery of the cabinet to B and his payment of the price to S, B was informed by N
that B paid too much for the cabinet since N knew of a similar item sold for a lower amount. B now
wants to set aside the contract because he believed he got a bad bargain. Can B set aside the contract
on this ground? Decide.

Answer: B may not set aside the contract based on the principle of Mutuality of Contract.

2) A and B entered into a joint venture whereby B agreed to put up a restaurant on the lot of A. N, the
owner of a vacant lot adjacent to A’s lot, learned of the transaction between A and B. Anticipating that
many customers would patronize the restaurant, N decided to improve his vacant lot for parking. He
incurred PhP 20,000 for the improvements. However, A and B mutually cancelled their contract. N
learned of the cancellation and decided that he would sue A and B for damages he allegedly sustained.
N said the PhP 20,000 he spent would no longer be recovered because of the cancellation. Can N
recover from A and B? Decide.

Answer: A is not entitled to sue A and B for the damages he sustained. This is not a case of a
stipulation pour autrui, where the parties in a contract deliberately conferred upon a third person a
favor or benefit. The benefit that would have been received by N from the contract between A and B
was only incidental and did not give him the right to recover damages

3) D borrowed a loan from C amounting ti PhP 200,000. To secure the loan, D mortgaged his lot. C
registered the mortgage with the Register of Deeds. Later, D sold the lot to X who was not aware that
the lot was mortgaged. On the due date of the loan, C demanded payment but D could not pay. C
decided to foreclose the mortgage on the lot. X opposed the foreclosure claiming that he was not bound
by the mortgage since he was not a party thereto. Is X correct? Decide.

Answer: X was bound by the mortgage. Subsequent purchaser is bound by the

mortgage registered in the Register of Deeds even if he is not aware of it. The contract herein is one
which creates real rights therefore third persons who come into possession of the object of contract is
bound thereby. (Art. 1312)

4) On June 1, S offered to sell a specific generator set to B for PhP 30,000. B sent his letter of acceptance
to S on June 8. On June 10, S became insolvent. On June 12, S received the letter of acceptance. Was the
contract perfected? Reason.

Answer: The contract was not perfected because the insolvency of S occurred before hecame to
learn of the acceptance of his offer. It is well settled rule that an offer becomesineffective upon the
insolvency of either party before acceptance is conveyed. (Art. 1323)

5) P gave a special power of attorney to A to sell P’s house and lot for PhP 5M. On May 7, A offered to
sell the house and lot to B at the price of PhP 5M. B accepted the offer on May 8 by sending a letter of
acceptance to A on such date. The letter was received by A on May 10. On May 11, before A could
inform P of the acceptance, P died. Was the contract perfected? Reason.
 Answer: The contract was perfected on May 10 when A received the letter
ofacceptance. An offer made through an agent is accepted from the time acceptance iscommunicated to
him. (Art. 1322)

6) On May 1, S offered to sell his car of PhP 1M to B who was interested in buying the same. S told B he
is giving B until May 31 to decide whether or not to buy the car. On May 25, S personally went to B to
inform him that he was no longer willing to sell the car unless the price was increased to PhP 1.5M
because another buyer was interested in buying the car for the said price. May S validly withdraw the
offer? Reason.

Answer: S may validly withdraw his offer to B and all that S needs to do is to inform B of such
withdrawal. Such withdrawal must be made before the lapse of the period of acceptance,
unless there is an option founded upon a consideration, as something paid or promised. (Art.1324)

7) B purchased 100 pieces of pens from S for a price of Php 41.95 each. When B reached home, he
discovered that the invoice showed a total amount due of PhP 4,915 instead of PhP 4,195. Is the
contract valid?

8) D has been, for more than 10 years, the personal physician of P, an elderly man. D talked to P almost
everyday in the course of giving medical service to P to convince P to donate his lot to D. D reasoned to
P that he is the only one who could take care of P. Because of D’s persistence, P finally signed the deed
of donation where P donates his lot to D, following all the formalities required by law. Is the deed of
donation valid? Reason.

9) A knew that his ring was embellished with glass. But he told B that the embellishment was emerald. B
knew that his watch was gold-plate. But he told A that it was made of pure gold. A, believing that B’s
watch was made of pure gold and B, believing that A’s ring was embellished with emerald, they
exchanged their respective articles. One week later, B discovered that A’s ring was not embellished
with emerald. Can B ask for annulment of the contract? Decide.

10) S and B entered into a contract where they made it appear that S was selling his lot and building to
B. The truth, however, was that S was donating his lot and building to B. What is the status of the
contract? Reason.

11) S and B orally entered into a contract whereby S sold to B his one-year production of rice from his
farm, for PhP 100,000. B gave a downpayment of PhP 20,000 for which S issued a receipt. Is the
contract valid? Reason.

12) A died leaving his properties estimated at PhP 1M to his sons S and T. Subsequently S sold through a
private instrument one-half of his inheritance to B for PhP 300,000, although his share was still to be
delivered. What is the status of the contract? Reason.

13) S sold his car to B for PhP 100,000 so that he can have money to purchase shabu. B knew nothing of
the motive of S. Is the contract valid? Reason.
14) D and C entered into a contract wherein D agreed to give C PhP 50,000 within 30 days from the date
of the execution of their agreement. The consideration received by D from C is not stated in the
agreement. What is the status of the contract? Reason.

15) G, the guardian of M, a minor, sold the fish harvested from the fishpond of M for Php 20,000. The
fish, however, had a value of PhP 30,000. What is the status of the sale?

16) D owes the following creditors: X, PhP 50,000; Y, Php 60,000 and Z, PhP 90,000. He has assets valued
at PhP 40,000. Subsequently, D donated, among his assets, a parcel of land valued at PhP 250,000 to C.
The donation and acceptance were made in a public instrument. What is the status of the donation of
the land made by D to C?

17) C filed a complaint in court against D to collect money debts amounting to PhP 500,000. After due
hearing, the court rendered judgment in favor of C. Shortly after the rendition of the judgment and
before C has collected D’s debt, D sold a parcel of land to X. C2, another creditor, learned of the sale
made by D to X and now files an action to rescind the sale. Who between C and C2 has a right to rescind
the sale? Reason.

18) R, the representative of A, an absentee, sold the corn with a value of PhP 30,000 and the palay with
a value of Php 50,000, harvested from A’s farm for a total price of PhP 50,000. A, whose domicile was
subsequently known, was informed of the sale made by R. May A seek rescission?

19) S, 17 years and 6 months old, sold his bicycle to B, 25, for PhP 20,000. The price is payable in 12
monthly installments. After reaching 18, S continued to collect the remaining 6 installments until the
price was paid in full. Later, S learned that the prevailing for a bicycle of the same kind and quality was
PhP 50,000. Can S annul the contract on the ground of minority? Reason.

20) M, the manager of an electric company, offered to buy a one-square meter lot, from S for PhP
1,0000. M showed to S his power of attorney executed by the electric company and duly signed by the
board of directors. M informed S that the lot would be the sale of an electric post which the electric
company would erect. S agreed to the offer of M. M agreed to come back the following day to give the
company check for the purchase price as well as the written contract. When M returned to the place of
S, S refused to sign the contract and accept the check. S told M that M or the electric company could not
enforce the contract since it was not in writing. Is S correct?

21) On June 1, B, a businessman met by chance C, a building contractor at the lobby of a hotel. Over a
cup of coffee, B informed C that he would be needing the services of C for the construction of a building
that B was planning to put up beginning August 1. B added that he would be paying C the amount of PhP
4M for the construction. C agreed. B gave C a check for PhP 500,000 representing the downpayment.
Except for the table napkin on which B made some sketches of the building, no written contract was
signed by the parties. On August 1, B called C to informed him that the construction would begin in the
next two week. However, C told B that he would no longer want to proceed with the contract and that
he would be returning the downpayment. May B enforce the contract?
22) D was checking out a hotel when he found that he lost his wallet. Since he had no money to pay his
bills, he texted G, a businessman friend to help him. Upon receiving the text message, G texted M, the
hotel manager who knew G since G was a frequent guest of the hotel. The text message read: “Please let
D leave. If he does not pay, I will be the one to pay. No other information was contained in the text
message. Thereafter, D signed a promissory note in favor of the hotel. If D fails to pay the hotel, can the
hotel collect from G? Reason.

23) S, insane, orally sold his radio to B, 17 years old for PhP 400. When T, the mother of S learned about
the sale, she asked S to give to her the amount he had received. S obediently gave the amount of PhP
400 which his mother used to buy their food. Later, can T retrieve the radio to B on the ground that S
was insane and therefore, cannot enter into contracts? Decide.

24) Francis promised to give PhP 20,000 per month by way of support to Mitch, if Mitch agrees to live
with Francis as his wife without the benefit of marriage. Mitch agreed. After 6 months, Francis saw
Mitch with Edgar, her ex-boyfriend. Francis left their home and never came back. Can Mitch still demand
for the monthly support? Decide.

25) B, a student, informed O that he would like to borrow a bicycle which he would use in going to and
from school. O told B that he may get O’s bicycle in O’s room. Later, O was asking for the bicycle back. B
said he would no longer return it because O still owes him money and that he would retain it for as long
as O has not paid. Is B correct? Reason.