REGULATORY FRAMEWORK

LAW ON SALES (PART 1)

1. What is the status of an oral sale of a specific house at a price of P1,000,000 payable at 10 annual installments
when the delivery of the house will happen after three (3) years, but the buyer had already paid P100,000
earnest money at the time of perfection?
 Perfectly valid
 The contract is perfectly valid because the essential requisites are present. There is a contract of sale
already because an earnest money is paid at the time of the perfection, which is a proof of the perfection of
the contract.

2. The following are essential elements of a contract of sale, EXCEPT:

 Warranty against eviction
 Warranty against eviction is a natural element of a contract of sale. It is deemed to exist in the contract in
the absence of contrary stipulations.

3. Which of the following is NOT a right of an unpaid seller?

 Right to declare the sale null and void
 Even if the seller is unpaid, the seller has no right to declare the sale null and void since the sale is valid in
the first place.

4. Suho sold his house and lot to Beauty. After the sale, Beauty leased back the property to Suho. What type of
constructive delivery is present?
 Traditio constitutum possessorium
 This is a delivery that takes place when the vendor continues to be in possession of the thing sold after the
sale but in another capacity, such as that of a lessee or depositary. This applies to both movables and
immovables.

5. Alex transferred to Bing a parcel of land for the price of P120,000; Bing will pay P50,000 in cash and, for the
difference, will convey his car for P70,000. What kind of contract is this?
 Barter
 The contract shall be one of sale or barter depending on the manifest intention of the parties. However, in
this case, the intention does not clearly appear. The contract is one of barter because the value of the thing
given as part of consideration exceeds the monetary consideration.

6. It is a contract where one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other one to pay a certain price in money or its equivalent.
 Contract of sale
 A contract of sale is an agreement between a buyer and a seller whereby the seller agrees to give or deliver
something to the buyer for a certain price, which the buyer agrees to pay. In a contract like this, when the
buyer pays and the seller delivers, the transfer of ownership is also done at the same time.

7. Suho and Beauty entered into a contract of sale of a specific car. They both pointed over that specific car. What
kind of constructive delivery is present?
 Traditio longa manu
 This is delivery of a movable by mere consent or agreement of the parties if the thing cannot be transferred
to the possession of the vendee at the time of sale. This is usually made by merely pointing at the object.
8. Anton promised to sell his car to Tony for P200,000, giving Tony one (1) month to decide whether to buy or
not. Tony accepted the promise and gave a consideration of P10,000 for the one-month period. Which of these
is CORRECT?
 If Tony decides to buy the car, he should only pay P190,000 to Anton.
 In this case, the amount given is option money, which is given as a distinct consideration from that of the
purchase price.

9. In sale or return, when is the ownership of the goods transferred to the buyer?
 Upon delivery of the goods
 The ownership of the goods is transferred to the buyer upon delivery, but the buyer has the option to return
the goods to the seller within the time fixed in the contract, or if no time has been fixed, within a reasonable
time. This is a sale that depends on the discretion of the buyer

10. On January 1, Eugene delivered an electronic calculator to Dave under a sale or return arrangement. Eugene
gave Dave up to March 10 to return the calculator. Before March 10, the calculator was destroyed by fire. Should
Dave pay for the purchase price?
 Yes, because Dave becomes the owner of the calculator upon delivery.
 Dave is bound to pay the purchase price because he is already the owner of the calculator.

LAW ON SALES (PART 2)

1. Which of the following statements concerning the vendor’s liability for hidden defects on the thing sold is
CORRECT?
 The seller is liable for hidden defect regardless of the awareness of the hidden defect and regardless
of the reason for the loss of the thing sold.
 The vendor shall be liable to the vendee for any hidden faults or defects in the thing sold because the
ignorance of the vendor does not relieve him from liability.

2. On January 1, Jun sold in a notarized document a registered land to Judy. On January 2, Jun sold the same land
again to Julie under a notarized deed of sale. Julie registered the deed of sale to Registry of Property on the
same date. On January 3, Jun sold the same land again to Jin under a private deed of sale. Jin took physical
possession of the land on the same date. Who has a better right over the land, assuming all buyers have no
knowledge of sale to one another?
 Julie
 Julie has a better right over the land because he is the first registrant in good faith.

3. Alex sold to Bing a residential house and lot at an installment price of P6,000,000 payable in 50 years at
P10,000 per month. After payment of total installments amounting to P240,000, Bing defaulted on the next
installment. After following the necessary procedures required by law, the contract of sale is properly canceled.
How much cash surrender value is Bing entitled from Alex?
 P120,000
 Since the sale is canceled, the seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to 50% of the total payments made. (P240,000/P10,000 = 24 months or 2 years)
P240,000 x 50% = P120,000

4. Seokjin sold his lot with an area of 100 square meters to Bong at a selling price of P1,000 per square meter.
After the delivery of the lot, Bong discovered that the actual area is only 93 square meters. What is the legal
remedy available to Bong?
 Bong may ask for a proportionate reduction in the price and must pay P93,000.
 Since the lack in area is less than one-tenth of that stated in the contract, the only remedy is to reduce the
price in proportion to the actual square meters.
5. Ailee sold a specific car to Bailey at an installment price of P200,000 payable in 10 monthly installments of
P20,000. In order to secure payment of the price, Bailey executed a chattel mortgage over the said car with a
stipulation that Ailee may recover the deficiency in case the foreclosure resulted in deficiency. After paying
seven (7) monthly installments, Bailey defaulted on the payment of the eighth monthly installment. What is the
remedy available to Ailee?
 Exact fulfillment of the obligation
 Exact fulfillment of the obligation (specific performance) is available should the vendee fail to pay,
regardless of the number of installments defaulted.

6. This type of redemption occurs when the vendor reserves the right to repurchase the thing sold with the
obligation to return to the vendee the price of the sale, expenses of the contract, and necessary and useful
expenses made on the thing sold and to comply with other stipulations which may have been agreed upon.
 Conventional redemption
 The right to redeem must be reserved by the seller through a stipulation to that effect in the contract of
sale. There cannot be conventional redemption unless it has been stipulated upon in the contract of sale.

7. In which of the following cases shall the vendor be liable to the vendee only for the value of the thing sold at
the time of eviction?
 When there is waiver consciente
 When there is waiver consciente, the vendor shall be liable only for the value of the things at the time of
eviction.

8. In case of double sale of real property, who among the buyers shall be preferred?
 Person who first registered the property in good faith
 In the sale of immovable properties to different vendees, in order of priority: (1) First registrant in good
faith; (2) If no one registered the sale, first possessor in good faith; and (3) In the absence of both
registration and possession, person who presents the oldest title in good faith.

9. It is a contract whereby a person transfers his credit, right, or action against a third person to another person
for a consideration, which is certain in money or its equivalent.
 Assignment of credits
 The contract is perfected from the moment the parties agree upon the credit or right assigned and upon the
price, even if neither has been delivered. It partakes the nature of a contract of sale; hence, it is perfected by
mere consent being a consensual contract.

10. It refers to an act of withdrawal from the contract of sale or rescission of a contract of sale.
 Accion redhibitoria
 Accion redhibitoria is the remedy of the vendee to cancel the sale and ask for damages.

LAW ON CREDIT SALES

1. It is constituted from the moment a person receives a thing belonging to another, with the obligation of safely
keeping it and of returning the same.
 Deposit
 It is a contract wherein a person receives a thing belonging to another, with the obligation of safely keeping
it and of returning the same and that the safekeeping of the thing delivered is the principal purpose of the
contract.

2. Which of the following is similar to a chattel mortgage and pledge?

  The object of a contract is a movable property.
 In chattel mortgage and pledge, the object is a movable property. To be valid, the chattel must be registered
in the Chattel Mortgage Registry while the thing pledged needs only actual delivery.

3. Which of the following is a characteristic of a contract of pledge?

 Real
 Pledge is perfected by actual delivery of the thing pledged.

4. Chrissy borrowed P5,000 from James. To secure the debt, Chrissy pledged 50 grams of methamphetamine
(shabu). On the due date, James demanded payment, but Chrissy refused to pay by raising the defense that her
debt is void. May James collect from Chrissy?
 Yes, but if Chrissy cannot pay, James may have to resort to other remedies to satisfy his claim.
 James can collect from Chrissy, but if Chrissy cannot pay, James may have to resort to other remedies than
going after the pledge because the pledge is void.

5. Which of the following CANNOT be an object of pledge?

 Parcel of land
 Immovables cannot be an object of contract of pledge because pledge requires actual delivery for its
perfection.

6. As a general rule, in which of the following contracts is the creditor NOT allowed to recover any deficiency in
the foreclosure sale?
 Conventional pledge
 In conventional pledge, deficiency can never be recovered even if there is a stipulation. Any stipulation for
recovery of deficiency is null and void.

7. It is a contract by virtue of which the debtor delivers to the creditor or a third person a movable or document
evidencing incorporeal rights for securing the fulfillment of a principal obligation with the understanding that
when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions.
 Pledge
 In addition, it is perfected by the delivery of the thing pledged by the debtor who is called the pledgor to the
creditor who is called the pledgee, or to a third person by common agreement. It has no independent
existence of its own and cannot exist without a valid contract.

8. In case the proceeds of the foreclosure sale of real estate mortgage are higher than the principal obligation and
costs, which of these is TRUE?
 The mortgagor is entitled to the excess in the absence of stipulation to the contrary.
 As a general rule, excess belongs to the mortgagor unless there is a stipulation to the contrary.

9. It is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially
subjecting to such security, immovable property, or real rights over immovable property which obligation shall
be satisfied with the proceeds of the sale of said property or rights in case the said obligation is not complied
with at the time stipulated.
 Real mortgage
 In addition, it covers only immovable property and alienable real rights upon immovable and must appear
in a public instrument.

10. Jacob pledged his ring to secure his debt to Edward, amounting to P20,000 payable after 30 days. On the due
date, Jacob defaulted. At a public auction, the ring was sold only for P18,000. Which of these is TRUE?
 Both the debt of P20,000 and the pledge are extinguished.
  The sale of the thing pledged shall extinguish the principal obligation. If the principal obligation is
extinguished, the pledge will also be extinguished. In the case that the proceeds are less than the amount of
debt, the creditor shall not be entitled to recover the deficiency, notwithstanding any stipulation to the
contrary.

BANKING LAWS
1. Isha has the following deposit accounts in a closed bank: Isha, P150,000; and Isha's retail business (sole
proprietorship), P400,000. What is the maximum deposit insurance coverage insofar as Isha is concerned?
 P500,000
 Even if Isha has P550,000 in his deposit account, the maximum deposit insurance coverage is P500,000
only. The excess of P50,000 is not covered.

2. This is the unpaid balance of money or its equivalent received by a bank in the usual course of business.
 Deposit
 These are money or funds placed with a bank that can be withdrawn on the depositor’s order or demand,
such as deposit accounts in the form of savings and current and time deposits. Deposits are characterized
as being in the nature of a simple loan.

3. As a general rule, what is the quantitative threshold for any transaction in cash or other equivalents of a
covered person to be considered a reportable transaction to the Anti-Money Laundering Council (AMLC)?
 A transaction with an amount exceeding P500,000
 A transaction in cash or other equivalent monetary instrument exceeding P500,000 is a covered transaction
under the Anti-Money Laundering Act (AMLA).

4. Which of the following is NOT a predicate crime of money laundering offense?

 Adultery
 This is not a predicate crime under the Anti-Money Laundering Act (AMLA) because it does not involve
money laundering.

5. Under the Republic Act No. 1405, which of the following is NOT considered absolutely confidential in nature?
 Money market placement
 Money market placement is not a kind of deposit.

6. Which of the following coins or currencies may still be replaced by Bangko Sentral ng Pilipinas (BSP) with
compensation to bearer?
 Notes and coins with drawing
 Notes and coins with drawing can still be replaced with compensation to bearer because it is still
identifiable.

7. These are banks that are given all such power necessary to engage in commercial banking in addition to
general corporate powers.
 Commercial banks
 Commercial banking includes the power to accept drafts, issue letters of credits, discounting and
negotiation of negotiable instruments and evidence of debt, accept and create demand deposits, and the
like.

8. Which of the following deposits is NOT insured by Philippine Deposit Insurance Corporation (PDIC)?
 Bank deposit in China Bank which is operating outside Philippine territory
  PDIC only ensures the following:
(1) Banks incorporated under Philippine laws, such as commercial banks, savings banks, mortgage banks,
stock savings and loan associations, development banks, cooperative banks, and rural banks; and (2)
Domestic branches of foreign banks.

9. Daniel has the following deposit accounts in a closed bank: Daniel, P350,000; Daniel and Ezekiel, P600,000.
What is the maximum deposit insurance coverage insofar as Daniel is concerned?
 P600,000
 For the single account, Daniel is entitled to P350,000. For the joint account, he is entitled only to P250,000,
for a total of P600,000. Of the total of P600,000 in the joint account, only P500,000 is insured by PDIC. This
means that each of the depositors is entitled only to P250,000.

10. Which of the following statements concerning the maximum legal tender in the Philippines is INCORRECT?
 For 1-centavo, 5-centavo, and 25-centavo coins - up to P1,000 maximum legal tender
 According to BSP Circular No. 537 Series of 2006, 1-centavo, 5-centavo, 10-centavo, and 25-centavo coins
are legal tender for a maximum of one hundred pesos (P100.00).

SPECIAL LAWS
1. Timothy has total assets worth P2,000,000 and total liabilities amounting to P1,300,000. However, most of his
assets are in the form of fixed assets that cannot be easily sold, while the majority of his liabilities will mature
within one (1) month. Under the Financial Rehabilitation and Insolvency Act (FRIA), what legal remedy shall
Timothy avail?
 Petition for declaration of suspension of payments
 The individual debtor shall file a petition for suspension of payments because he has enough assets to cover
liabilities.

2. It refers to a petition filed by an individual debtor who does not have sufficient funds to cover his liabilities
exceeding P500,000 for him to be discharged from his liabilities.
 Petition for voluntary liquidation of insolvent individual debtor
 For voluntary liquidation, the individual debtor files the petition, but the debtor is insolvent or has no
sufficient assets to cover for the liabilities.

3. Ronel Novela is an employed reporter of ABS-GMA Co. During his free time, he was able to write a novel, True
Love, using the laptop and printer of the company. Who owns the copyright over the novel?
 Ronel Novela
 In the case of original literary and artistic works, copyright shall belong to the author of the work. Also, in
the case of work for hires, if the creation of the object of copyright is not a part of his regular duties, even if
the employee uses the time, facilities and materials of the employer, the copyright belongs to the employee.

4. It refers to a petition filed by an individual debtor who has sufficient properties to cover his liabilities, but he
foresees the impossibility of meeting when they respectively fall due in order to exempt his property from
execution or attachment to be filed by his creditors.
 Petition for declaration of the statement of suspension of payments
 This petition is filed by the individual debtor and the purpose of this is to delay the payment of debts.

5. It refers to any information, whether recorded in a material form or not, from which the identity of an
individual is apparent or can be reasonably and directly ascertained by the entity holding the information.
 Personal information
  Personal information is any piece of information that someone can use to identify, with some degree of
accuracy, a living person. For example, the e-mail address johnsmith@companyx.com is considered
personal data because it indicates there can only be one John Smith who works at Company X.

6. Which is NOT a right of the data subject?

 Right to inspect the personal information of other data subject
 Just as the data subject wants their information to be protected, so do others. The data subject has no right
to inspect the personal information of other data subjects.

7. It refers to an intellectual property that gives an exclusive right to the inventor over his new, inventive, and
useful product, process, or improvement of a product or process.
 Patent
 It is a grant issued by the government through the Intellectual Property Office (IPO) of the Philippines. The
term of a patent shall be 20 years from the filing date of the application.

8. Which intellectual property is created or protected from the moment of registration with the Intellectual
Property Office (IPO)?
 Patent and trademark

9. Which of the following is NOT a sensitive personal information?

 Place of work
 This is a personal information but not considered sensitive personal information.

10. Paul has total assets worth P1,500,000 and total liabilities of P4,000,000. Under the Financial Rehabilitation
and Insolvency Act (FRIA), what legal remedy shall Paul avail to be discharged from his liabilities?
 Petition for voluntary liquidation of insolvent individual debtor
 Since Paul is insolvent, he may avail of the petition for voluntary liquidation.