Oblicon 2010

OBLIGATIONS Atty. Crisostomo A. Uribe

Obligations 1981-2005 Bar Examination Questions 10% In General

Kinds of Obligations 40%

Specific Circumstances affecting obligations 35%

Remedies in case of breach Modes of Extinguishment

10%

5%

Kinds of Obligations 1989 Bar Exam Question No. 15(2)

How is a civil obligation distinguished from a natural obligation? Give an example of a natural obligation.

Essential Elements of Obligations 2007 Bar Exam Question No. V (10%)

What are “obligations without an agreement”? Give five examples of situations giving rise to this type of obligations?

Sources of Obligations 1992 Bar Exam Question No. 13 In fear of reprisals from lawless elements besieging his barangay, X abandoned his fishpond, fled to Manila and left for Europe. Seeking that the fish in the fishpond were ready for harvest, Y, who is in the business of managing fishponds on a commission basis, took possession of the property, harvested the fish and sold the entire harvest to Z. Thereafter, Y borrowed money from W and used the money to buy new supplies of fish fry and to prepare the fishpond for the next crop. a) What is the juridical relation between X and Y during X’s absence? b) Upon the return of X to the barangay, what are the obligations of Y to X as regards the contract with Z? c) Upon X’s return, what are the obligations of X as regards Y’s contract with W? d) What legal effects will result if X expressly ratifies Y’s management and what would be the obligations of X in favor of Y? Explain all your answers.

Sources of Obligations 2004 Bar Exam Question No. V(A)

DPO went to a store to buy a pack of cigarettes worth P225.00 only. He gave the vendor, RRA, a P500-peso bill. The vendor gave him the pack plus P375.00 change. Was there a discount, an oversight, or an error in the amount given? What would be DPO’s duty, if any, in case of an excess in the amount of change given by the vendor? How is this situational relationship between DPO and RRA denominated? Explain.

Compliance with Obligations 1984 Bar Exam Question No. 14

For value received, Pedro promised to deliver to Juan on or before August 15, 1984 a Mercedes Benz with Plate No. 123 which he (Pedro) had just brought home from Germany, as well as a 1984 18” Sony television set. Unfortunately, before the scheduled delivery date, the Mercedes Benz and the television set which Pedro had intended to deliver to Juan were destroyed by an accidental fire. Has the obligation of Pedro been extinguished? Explain.

Kinds of Obligations Pure Obligations G.R. No. L-29900 June 28, 1974 IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased, GEORGE PAY, petitioner-appellant, vs. SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.

“For value received from time to time since 1947, we [jointly and severally promise to] pay to Mr. [George Pay] at his office at the China Banking Corporation the sum of [Twenty Six Thousand Nine Hundred Pesos] (P26,900.00), with interest thereon at the rate of 12% per annum upon receipt by either of the undersigned of cash payment from the Estate of the late Don Carlos Palanca or upon demand”. . . Article 1179 of the Civil Code provides: "Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once."

Kinds of Obligations Pure/Conditional /Obligations with a Term 2003 Bar Exam Question No. 13

Are the following obligations valid, why, and if they are valid, when is the obligation demandable in each case?    

If the debtor promises to pay as soon as he has the means to pay; If the debtor promises to pay when he likes; If the debtor promises to pay when he becomes a lawyer; If the debtor promises to pay if his son, who is sick with cancer, does not die within one year.

Classification/Kinds of Conditions 













According to acquisition or extinguishment of rights  suspensive  resolutory According to whether the fulfillment of condition is dependent upon parties or others  potestative  casual  mixed According to divisibility of condition  divisible  indivisible According to plurality of conditions  alternative or disjunctive  conjunctive  facultative According to whether it is an act or omission  positive  negative According to whether they are stated or merely inferred  express  implied According to whether they can be fulfilled or not  possible  impossible

Classification/Kinds of Terms 









As to influence / effect on obligation  suspensive  resolutory According to source  legal  voluntary  judicial According to whether they are stated of merely inferred  Express  tacit According to the time determined  Original period  Period of grace According to certainty  definite  indefinite

Kinds of Obligations : Conditional Obligations 1988 Bar Exam Question No. 8(b)

Distinguish between the effects of suspensive and resolutory conditions upon an obligation.

Kinds of Obligations : Conditional Obligations 2000 Bar Exam Question No.15(b)

b) 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?

Kinds of Obligations : Conditional Obligations 1999 Bar Exam Question No. 11

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 the 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? (2%) (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? (3%)

Kinds of Obligations : Obligations with a Term 1991 Bar Exam Question No. 13 In a deed of sale of 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?

Kinds of Obligations : Obligations with a Term 1984 Bar Exam Question No. 17

On January 1, 1983, A borrowed P10,000 from B payable on December 1, 1983. As security therefore, A pledged his car to B with an agreement that B could use it. On June 30, 1983, A offered to pay the loan in full and asked for the return of his car. Can A compel B to accept the payment and to return the car? Why?

Kinds of Obligations : Obligations with a Term 1984 Bar Exam Question No. 13

A obtained from B a loan payable within a year. As security for its repayment, A mortgaged his uninsured house. Three months after the loan was given, A’s house was gutted by an accidental fire. Thereupon, B demanded immediate payment from A, who refused to pay contending that the loan was for a one-year period.

Is A’s contention valid? Explain.

Kinds of Obligations Joint and Solidary Obligations 1988 Bar Exam Question No. 9(b)

Define joint and solidary obligations.

Kinds of Obligations Joint and Solidary Obligations 2008 Bar Exam Question No. XV(b) 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 (“PN”) in favor of the bank, with his friend Recardo as cosignatory. 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 Recardo’s property. Recardo’s 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, 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.

Can Recardo’s property be foreclosed to pay the full balance of the loan? (2%)

Kinds of Obligations Joint and Solidary Obligations 1983 Bar Exam Question No. 12

A and B sold 1,000 sacks of rice to X and Y, on X’s request, delivered them to him. X resold the rice, without turning over any part of it or its price to Y. May Y compel A and B deliver what he bought? If so, to what extent?

Kinds of Obligations Joint and Solidary Obligations 2001 Bar Exam Question No.7

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? (5%)

Kinds of Obligations Joint and Solidary Obligations 1984 Bar Exam Question No. 11

A, B and C solidarily promised to pay D the amount of P3,000.00. Unfortunately, C became insolvent. What recourse does D have against A and B? What are the rights of A and B as against each other?

Kinds of Obligations Joint and Solidary Obligations 1998 Bar Exam Question No. 15

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%) 2. To what extent, if at all, can Jojo be compelled by Joey to contribute to such payment? (3%)

Kinds of Obligations Joint and Solidary Obligations 2003 Bar Exam Question No. 14 A, B, C, D and E made themselves solidarily 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.    

B is only 16 years old C has already been condoned by X. D is insolvent. 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.

Kinds of Obligations Obligations with a Penal Clause 1986 Bar Exam Question No. 10 The Betis Furniture Co. undertook to deliver to Mr. Bagongkasal specified pieces of living room, dining room and bedroom furniture, all mad of narra, for a price stated in the contract. The agreement had a penal clause that any violation of the contract would entitle the aggrieved party to damages in the amount of P100,000.00. The furniture delivered by Betis was made, not a narra, but of inferior wood. In a suit to recover damages, Bagongkasal was able to prove that the actual damages he sustained amounted to P200,000.00. He demanded the amount plus the P100,000.00 penalty or total of P300,000.00. Betis, however, countered that if it were liable for damages at all, the maximum award should not exceed P100,000.00 as stated in the penal clause of the contract. Whose claim would you sustain? Why?

Kinds of Obligations Obligation with a penal clause

Gobonseng v. Unibancard G.R. No. 160026

December 10, 2007

AZCUNA, J.

“All charges made through the use of [the] card shall be paid by the UNICARD holder and/or co-obligor within twenty (20) days from the date of the said statement of account without the necessity of demand. These charges or balance thereof remaining unpaid after this 20-day period shall bear interest at the rate of 3% per month and a penalty equivalent to 5% of the amount due for every month or a fraction of a month’s delay… In case it is necessary to collect the account by or thru an attorney-at-law or collection agency, the UNICARD holder and co-obligor shall pay 25% of the amount due which shall in no case be less than P1,000.00, as collection or attorney’s fees, in addition to costs and other litigation expenses.”

Compliance with Obligation : Degree of Diligence Required

MERALCO v. Ramoy G.R. No. 158911 March 4, 2008 AUSTRIA-MARTINEZ, J.

Issue: Whether or not MERALCO was justified in cutting off service to respondents.

Delay 2000 Bar Exam Question No. 14

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 after. 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? (5%)

Delay 1986 Bar Exam Question No. 1

Mr. Mekanico leased some automobile repair equipment to Mr. Masipag, who was opening his auto repair shop. The lease agreement was executed on February 15, 1985. It stipulated that the period was one month only, at the expiration of which Masipag was to return the equipment of Mekanico. The equipment was delivered on February 15, 1985. On March 15, 1985 Mekanico, in a telephone call, asked Masipag to return the leased property that same day. Because this truck broke down, Masipag was unable to comply. Early the next morning, the equipment was burned in an accidental fire that stated in a nearby restaurant and gutted Masipag’s auto repair shop. Mekanico seeks to hold Masipag liable for the value of the lost property plus damages on the ground that he did not return it as agreed upon. Is Mekanico’s claim tenable? Explain.

Compliance with Obligations : Fortuitous Event

FIL-ESTATE PROPERTIES v. GO G.R. No. 165164 August 17, 2007 QUISUMBING, J.

Issue: Whether or not the Asian financial crisis in 1997 is a fortuitous event.

Compliance with Obligations : Fortuitous Event : Robbery

SICAM v. JORGE G.R. NO. 159617 August 8, 2007

AUSTRIA-MARTINEZ, J.

To constitute a fortuitous event, the following elements must concur: (a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations must be independent of human will; (b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal manner; and, (d) the obligor must be free from any participation in the aggravation of the injury or loss.

Compliance with Obligations : Fortuitous Event Vicarious Liability of Employers

VIRGINIA REAL vs. SISENANDO H. BELO G.R. NO. 146224

January 26, 2007 AUSTRIA-MARTINEZ, J.

Issue: Whether or not the fire that originated from leaking fumes from the LPG stove and tank installed at petitioner's fastfood stall is a fortuitous event.

Remedies : Rescission 1996 Bar Exam Question No. 13 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 P100,000.00 in court, and filed an action for rescission of the deed of conditional sale, plus damages. Will the action prosper? Explain.

Remedies Rescission 2008 Bar Exam Question No. XVIII 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 started immediately, but AB Corp. later experience 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 45% complete. 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 construction could not be finished on time, XY corp. sent written notice canceling the contract, and requiring AB Corp. to immediately vacate the premises. Can the labor unrest be considered a fortuitous? (1%) Can XY Corp. unilaterally and immediately cancel the contract? (2%) Must AB Corp. return the 50% down payment? (2%)

Remedies 1983 Bar Exam Question No. 10

A bound himself to deliver to B a 21-inch 1983 model TV set, and the 13 cubic feet White Westinghouse refrigerator, with Motor No. WERT385, which B saw in A’s store, and to repair B’s piano. A did none of these things. May the court compel A to deliver the TV set and the refrigerator and repair the piano? Why? If not, what relief may the court grant B? Why?

Modes of Extinguishment : Payment Integrity of Prestations 1983 Bar Exam Question No. 13

A owes B P20,000 which became due and payable last October 1, 1983. On that date, A offered B P10,000 the only money he then had, but refused to accept the payment. A thereafter met C, B’s 22year old son, to whom he gave the P10,000 with the request that he turn the money over to B. The money was stolen while in C’s possession. Was B justified in refusing to accept the payment of A? May he still recover the full amount of his debt of P20,000? Why?

Modes of Extinguishment : Payment 1986 Bar Exam Question No. 8

Mr. Magaling obtained a judgment against Mr. Mayaman in the amount of P500,000.00. A writ of execution was issued pursuant to which various personal properties of Mayaman were levied upon by the sheriff. An auction sale was scheduled. Before the appointed day of the auction, Mayaman delivered to the sheriff a cashier’s check of Far East Bank in the amount of P200,000.00 and enough cash to cover the remainder of the total amount due. Magaling refused to accept the check and asked the sheriff to proceed with the auction sale. Did Magaling have the right to refuse the payment of part of the obligation with a cashier’s check? Explain.

Modes of Extinguishment : Payment 1981 Bar Exam Question No. 11(b) “S”, an American resident of Manila, about to leave on a vacation, sold his car to “B” for U.S.$2,000.00, the payment to be made ten days after delivery to “X”, a third party depositary agreed upon, who shall deliver the car to “B” upon receipt by “X” of the purchase price. It was stipulated that ownership is retained by “S” until delivery of the car to “X”. Five days after delivery of the car to “X”, it was destroyed in a fire which gutted the house of “X”, without the fault of either “X” or “B”.

b) May seller “S” demand payment in U.S. dollar?

Modes of Extinguishment : Payment 2008 Bar Exam Question No. XVII

Felipe borrowed $100 from Gustavo in 1998, when the Phil P-US$ exchange rate was P56-US$1. On March 1, 2008, Felipe tendered to Gustavo a cashier’s check in the amount of P4,135 in payment of his US$ 100debt, based on the Phil P-US$ exchange rate at the time. Gustavo accepted the check, but forgot to deposit it until Sept.12, 2008. His bank refused to accept 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. Can Gustavo now raise the issue that the cashier’s check is not legal tender? (2%) Can Felipe validly refuse to pay Gustavo again? (2%) Can Felipe compel Gustavo to receive US$100 instead? (1%)

Extinguishment of Obligations : Payment

SABEROLA v. SUAREZ G.R. No. 151227 July 14, 2008 NACHURA, J.:

Issue: Who has the burden of proving that the rate of pay given to the respondents is in accordance with the minimum fixed by the law and that he paid thirteenth month pay, service incentive leave pay and other monetary claims?

Modes of Extinguishment Special Forms of Payment 1989 Bar Exam Question No. 10(a)

a) Under the Civil Code, what are the different special forms of payments?

Modes of Extinguishment Special Forms of Payment 1989 Bar Exam Question No. 8(2)

(2) What is dation in payment and how is it distinguished from assignment of property?

Modes of Extinguishment Special Forms of Payment : Dation in Payment 2009 Bar Exam Question No. XI(d)

TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false. Explain your answer in not more than two (2) sentences. (5%) (d) The renunciation by a co-owner of his undivided share in the co-owned property in lieu of the performance of his obligation to contribute to taxes and expenses for the preservation of the property constitutes dacion en pago.

Modes of Extinguishment Special Forms of Payment Application of Payment 1982 Bar Exam Question No. 16

The debtor owes his creditor several debts, all of them due, to with: (1) an unsecured debt; (2) a debt secured with a mortgage of the debtor’s property; (3) a debt bearing interest; (4) a debt in which the debtor is solidarily liable with another. Partial payment was made by the debtor. Assuming that the debtor had not specified the debts to which the payment should be applied and, on the other hand, the creditor had not specified in the receipt he issued the application of payment, state the order in which the payment should be applied and your reasons therefore.

Modes of Extinguishment Special Forms of Payment : Consignation 1989 Bar Exam Question No. 10(b)

b) What are the special requisites of consignation in order that it shall produce the effect of payment?

Modes of Extinguishment of Obligations : Special Form Of Payment : Consignation

SAN DIEGO v. ALZUL G.R. No. 169501 June 8, 2007 VELASCO, JR., J.

Issue: Whether or not tender of payment will extinguish an obligation.

Modes of Extinguishment Special Forms of Payment : Consignation 1984 Bar Exam Question No. 12

A sold to B a parcel of land with the right to repurchase the same within three years. A tendered the repurchase of price to B within the prescribed period, but B refused to accept it. A then brought an action in court for specific performance. B contends that since A did not deposit the money in court within the stipulated period for repurchase and the period has now lapsed, A can no longer repurchase the property. Is this contention correct? Explain.

Modes of Extinguishment Loss of the thing due / Fortuitous Event 2002 Bar Question No. 17(1) A van owned by Orlando and driven by Diego, while negotiating a downhill slope of a city road, suddenly gained speed, obviously beyond the authorized limit in the area, and bumped a car in front of it, causing severed damage to the car and serious injuries to its passengers. Orlando was not in the car at the time of the incident. The car owner and the injured passengers sued Orlando and Diego for damages caused by Diego’s negligence. In their defense, Diego claims that the downhill slope caused the van to gain speed and that, as he stepped on the brakes to check the acceleration, the brakes locked, causing the van to go even faster and eventually to hit the car in front of it. Orlando and Diego contend that the sudden malfunction of the van’s brake system is a fortuitous event and that, therefore, they are exempt from any liability. Is this contention tenable? Explain. (2%)

Modes of Extinguishment : Condonation 2000 Bar Question No. 7(a)

a) 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? (3%)

Modes of Extinguishment : Compensation 1998 Bar Question No. 14

1. Define compensation as a mode of extinguishing an obligation, and distinguish it from payment. (2%) 2. 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 P200,000.00 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? (3%)

Modes of Extinguishment : Compensation 2009 Bar Question No. XV Sarah had a deposit in a savings account with Filipino Universal Bank in the amount of five million pesos (P5,000,000.00). To buy a new car, she obtained a loan from the same bank in the amount of P1,200,000.00, payable in twelve monthly installments. Sarah issued in favor of the bank post-dated checks, each in the amount of P100,000.00, to cover the twelve monthly installment payments. On the third, fourth and fifth months, the corresponding checks bounced. The bank then declared the whole obligation due, and proceeded to deduct the amount of one million pesos (P1,000,000.00) from Sarah’s deposit after notice to her that this is a form of compensation allowed by law. Is the bank correct? Explain. (4%)

Modes of Extinguishment : Legal Compensation BANK OF THE PHILIPPINE ISLANDS v. COURT OF APPEALS G.R. No. 136202 January 25, 2007 AZCUNA, J Legal compensation under Article 1278 of the Civil Code may take place "when all the requisites mentioned in Article 1279 are present," as follows: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Modes of Extinguishment : Compensation 2008 Bar Question No. XV 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 (“PN”) in favor of the bank, with his friend Recardo as cosignatory. 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 Recardo’s property. Recardo’s 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, 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. Can XYZ Bank validly assert legal compensation? (2%)

Modes of Extinguishment : Compensation 2002 Bar Question No. 9 Stockton is a stockholder of Core Corp. He desires to sell his shares in Core Corp. in vies of a court suit that Core Corp. has filed against him for damages in the amount of P10 million, plus attorney’s fees of P1 million, as a result of statements published by Stockton which are allegedly defamatory because it was calculated to injure and damage the corporation’s reputation and goodwill. The articles of incorporation of Core Corp. provide for a right of first refusal in favor of the corporation. Accordingly, Stockton gave written notice to the corporation of his offer to sell his shares of P10 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 attorney’s 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. It Stockton correct? Give reasons for your answer. (5%)

Modes of Extinguishment : Compensation 1981 Bar Exam Question No. 8

“B” borrowed from “C” P1,000.00 payable in one year. When “C” was in the province, “C’s” 17-year old son borrowed P500.00 from “B” for his school tuition. However, the son spent it instead nightclubbing. When the debt to “C” fell due, “B” tendered only P500.00, claiming compensation o on the P500.00 borrowed by “C’s” son. a) Is there legal compensation? Why? b) Suppose the minor son actually used the money for school tuition, would the answer be different? Reasons.

Modes of Extinguishment : Novation 1994 Bar Exam Question No. 11

In 1978, Bobby borrowed P1,000,000.00 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?

Modes of Extinguishment : Novation

JAPAN AIRLINES v. SIMANGAN G.R. No. 170141

April 2008

REYES, R.T., J.

Modes of Extinguishment Active Subjective Novation 1996 Bar Exam Question No. 12 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 bill 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.

Modes of Extinguishment Objective Novation 1988 Bar Exam Question No. 11(a)

a) Suppose that under an obligation imposed by a final judgment, the liability of the judgment debtor is to pay the amount of P6,000.00 but both the judgment debtor and the judgment creditor subsequently entered into a contract reducing the liability of the former to only P4,000.00. Is there an implied novation which will have the effect of extinguishing the judgment obligation and creating a modified obligatory relations? Reasons.

Modes of Extinguishment : Novation 2008 Bar Question No. XV 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 (“PN”) in favor of the bank, with his friend Recardo as cosignatory. 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 Recardo’s property. Recardo’s 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, 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. Does Recardo have basis under the Civil Code for claiming that the original contract was novated? (2%)

CONTRACTS

Contracts

25% 35%

Governing Law/Jurisdiction

Fundamental Principles/Characteristics Formalities Defective Contracts

5% 35%

Sources of Obligations : Contract Compliance with Obligations : Fortuitous Event Kinds of Obligations : Joint & Solidary Obligations

JOSEPH SALUDAGA v. FEU G.R. No. 179337 April 30, 2008 YNARES-SANTIAGO, J.

Issue: Whether or not the respondents can be held liable under the student-school contract.

Fundamental Characteristics of Contracts Autonomy of Contracts 2001 Bar Exam Question No. 10

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 the dollar.” Starting March 1, 2001, the lessor increased the rental to P2,000.00 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? (5%)

Fundamental Characteristics of Contracts : Autonomy of Contracts

DAISY B. TIU v. PLATINUM PLANS PHIL G.R. No. 163512 February 28, 2007 QUISUMBING, J.

NON INVOLVEMENT PROVISION – The EMPLOYEE further undertakes that during his/her engagement with EMPLOYER and in case of separation from the Company, whether voluntary or for cause, he/she shall not, for the next TWO (2) years thereafter, engage in or be involved with any corporation, association or entity, whether directly or indirectly, engaged in the same business or belonging to the same pre-need industry as the EMPLOYER. Any breach of the foregoing provision shall render the EMPLOYEE liable to the EMPLOYER in the amount of One Hundred Thousand Pesos (P100,000.00) for and as liquidated damages.

Fundamental Characteristics of Contracts Autonomy of Contracts 1996 Bar Exam Question No.18 Alma was hired as a domestic helper in Hongkong by the Dragon Services, Ltd., through its local agent. She executed a standard employment contract designed by the Philippine Overseas Workers Administration (POEA) for overseas Filipino workers. It provided for her employment for one year at a salary of US$1,000.00 a month. It was submitted to and approved by the POEA. However, when she arrived in Hongkong, she was asked to sign another contract by Dragon Services, Ltd. which reduced her salary to only US$600.00 a month. Having no other choice, Alma signed the contact but when she returned to the Philippines, she demanded payment of the salary differential of US$400.00 a month. Both Dragon Services, Ltd. and its local agent claimed that the second contract is valid under the laws of Hongkong, and therefore binding on Alma. Is their claim correct? Explain.

Consensuality of Contracts : Contract of Adhesion METROPOLITAN BANK & TRUST COMPANY v. JIMMY GO G.R. No. 155647 November 23, 2007 NACHURA, J

Issue: Whether or not the trust receipts are valid.

Fundamental Characteristics of Contracts Mutuality of Contracts 2004 Bar Exam Question No. 9 A. The parties in contract of loan of money agreed that the yearly interest rate is 12% and it can be increased if there is a law that would authorize the increase of interest rates. Suppose OB, the lender, would increase by 5% the rate of interest to be paid by TY, the borrower, without a law authorizing such increase, would OB’s action be just and valid? Why? Has TY a remedy against the imposition of the rate increase? Explain. (5%) B. DON, an American businessman, secured parental consent for the employment of five minors to play certain roles in two movies he was producing at home in Makati. They worked at odd hours of the day and night, but always accompanied by parents or other adults. The producer paid the children talent fees at rates better than adult wages. But a social worker, DEB, reported to OSWF that these children often missed going to school. They sometimes drank wine, aside from being exposed to drugs. In some scenes, they were filmed naked or in revealing costumes. In his defense, DON contended all these were part of artistic freedom and cultural creativity. None of the parents complained, said DON. He also said they signed a contract containing a waiver of their right to file any complaint in any office or tribunal concerning the working conditions of their children acting in the movies. Is the waiver valid and binding? Why or why not? Explain. (5%)

Fundamental Characteristics of Contracts Relativity of Contracts 1998 Bar Exam Question No. 2(2) Francis Albert, a citizen and resident of New Jersey U.S.A., under whose law he was still a minor, being only 20 years of age, was hired by ABC Corporation of Manila to serve for two years as its chief computer programmer. But after serving for only four months, he resigned to join XYZ Corporation, which enticed him by offering more advantageous terms. His first employer sues him in Manila for damages arising from the breach of his contract of employment. He sets up his minority as a defense and asks for annulment of the contract on that ground. The plaintiff disputes this by alleging that since the contract was executed in the Philippines under whose law the age of majority is 18 years, he was no longer a minor at the time of perfection of the contract. Suppose XYZ Corporation is impleaded as co-defendant, what would be the basis of its liability, if any? (2%)

Fundamental Characteristics of Contracts Relativity of Contracts 1991 Bar Exam Question No. 9 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?

Classification of Contracts 1998 Bar Exam Question No. 18(2)

2. Distinguish consensual from real contracts and name at least four (4) kinds of real contracts under the present law. (3%)

Stages of Contracts : Perfection 1988 Bar Exam Question No. 11(b)(1)

b) Merle offered to sell her automobile to Violy for P60,000.00. After inspecting the automobile, Violy offered to buy it for P50,000.00. 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 Coast of Samar. Is there a perfected contract in this case? Why?

Essential Elements of Contracts Consent of the Contracting Parties Consent I.

No Consent Given A. B.

II.

Status of the Contract

Fictitious Simulated 1. Absolutely Simulated 2. Relatively Simulated

Void

Consent was Given A.

a. b.

By an incapacitated person 1. Absolute incapacity without juridical capacity without capacity to act I) only 1 of the parties II) both parties 2. Relative incapacity

B.

Void Voidable Unenforceable

Void

By one with capacity 1. Vitiated

2. In the name of another person without the authority of the latter unless he has the authority of the law

Voidable Unenforceable

Essential Elements of Contracts Consent of the Contracting Parties Contract of Option 2005 Bar Exam Question No. IX

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? (2%) (b) Will your answer be the same if Carlos paid Marvin P10,000.00 as consideration for that option? Explain. (2%) (c) Supposing that Carlos accepted the offer before Marvin could communicate his withdrawal thereof? Discuss the legal consequences. (2%)

Essential Elements of Contracts Consent of the Contracting Parties Contract of Option 1996 Bar Exam Question No.14(2) Ubaldo is the owner of a building which has been leased by Remigio for the past 20 years. Ubaldo has repeatedly assured Remigio that if he should decide to sell the building he will give Remigio the right of first refusal. On June 30, 1994, Ubaldo informed Remigio that he was willing to sell the building for P5 Million. The following day, Remigio sent a letter to Ubaldo offering to buy the building at P4.5 Million. Ubaldo did not reply. One week later, Remigio received a letter from Santos informing him that the building has been sold to him by Ubaldo for P5 Million, and that he will not renew Remigio’s lease when it expires. Remigio filed an action against Ubaldo and Santos for cancellation of the sale, and to compel Ubaldo to execute a deed of absolute sale in his favor based on his right of first refusal. 2) If Ubaldo had given Remigio an option to purchase the building instead of a right of first refusal, will your answer be the same? Explain.

Voidable Contracts 1990 Bar Exam Question No. 7 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 an 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 year 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.

Unenforceable Contracts 2009 Bar Exam Question No. I(c)(d)Part I

TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false. Explain your answer in not more than two (2) sentences. (5%) (c) An oral partnership is valid. (d) An oral promise of guaranty is valid and binding.

Unenforceable Contracts 1989 Bar Exam Question No. 13(2)

(2) “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 placed 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 an action to compel “Y” to deliver the unit. Will such action prosper? Give your reasons

Unenforceable Contracts 1982 Bar Exam Question No. 17

“A” and “B” entered into a verbal contract whereby “A” agreed to sell to “B” his only parcel of land for P20,000.00, and “B” agreed to buy at the aforementioned price. “B” went to the bank, withdrew the necessary amount, and returned to “A” for the consummation of the contract. “A” however, had changed his mind and refused to go through with the sale. Is the agreement valid? Will an action by “B” against “A” for specific performance prosper? Reason.

Unenforceable Contracts 1989 Bar Exam Question No. 15(a)(b)

a) Suppose that in an oral contract, which by its terms is not to be performed within one year from the execution thereof, one of the contracting parties has already complied within the year with the obligations imposed upon him by said contract, can the other party avoid fulfillment of those incumbent upon him by invoking the Stature of Frauds? b) One-half of a parcel of land belonging to A and B was sold by X to Y for the amount of P1,500.00. The sale was executed verbally. One year later, A and B sold the entire land to X. Is the sale executed verbally by X to Y valid and binding? Reasons.

Void Contracts 2004 Bar Exam Question No. 2(A)(4)

Distinguish briefly but clearly between: Inexistent contracts and annullable contracts.

Void Contracts 1999 Bar Exam Question No. 12

In 1950, the Bureau of Lands issued a Homestead patent to A. Three years later, A sold the homestead to B. A died in 1990, and his heirs filed an action to recover the homestead from B on the ground that its sale by their father to the latter is void under Section 118 of the Public Land Law. B contends, however, that the heirs of A cannot recover the homestead from him anymore because their action has prescribed and that furthermore, A was in pari delicto. Decide. (5%)

Void Contracts 1981 Bar Exam Question No. 3(b)

“M”, an unwed mother, gave her child for adoption to a childless couple, “B-C”, for which “B-C” paid “M” P20,000.00. In the civil register of births, the father was listed as “father unknown.” Two years later, after “B-C” learned to love the child as their own and adoption proceedings commenced with required publication, “F”, father of the child appeared to oppose the adoption and to seek custody of the child. “M” sided with “B-C” claiming that “F” had abandoned her when he learned that she was pregnant and declaring that she wanted “B-C” to keep the child. Could “B-C” recover the P20,000.00 they had paid from either “F” or “M”? Reasons.