OBLIGATIONS AND CONTRACTS – UNIVERSITY OF PANGASINAN
(QUIZ I - CONTRACTS)
1. Sergio is the registered owner of a 500-square meter
land. His friend Marcelo, who has long been
interested in the property, succeeded in persuading
Sergio to sell it to him. On June 2, 2012, they agreed
on the purchase price of Php. 600,000 and that
Sergio would give Marcelo up to June 30, 2012
within which to raise the amount. Marcelo, in a light
tone usual between them, said that they should seal
their agreement through a case of Jack Daniels
(Black) and Php. 5000 “pulutan” money which he
immediately handed to Sergio and which the latter
accepted. The friends then sat down and drank the
first bottle from the case of bourbon.
On June 15, 2012, Sergio learned of another buyer,
Roberto, who was offering Php. 800,000 in ready
cash for the land. When Roberto confirmed that he
could pay in cash, as soon as Sergio could get the
documentation ready, Sergio decided to withdraw
his offer to Marcelo, hoping to just explain matters
to his friend. Marcelo, however, objected when the
withdrawal was communicated to him, taking the
position that they have a firm and binding
agreement that Sergio cannot simply walk away from
because he has an option to buy that is duly
supported by a duly accepted valuable
consideration.
A) Does Marcelo have a cause of action against
Sergio?
B) Can Sergio claim that whatever they might have
agreed upon cannot be enforced because any
agreement relating to sale of real property must
be supported by evidence in writing and they
never reduced their agreement to writing?
Suggested Answer:
A) Yes, Marcelo has a cause of action against Sergio. As a
rule, an offer can be withdrawn at any time before
acceptance by communicating such withdrawal (art.
1324) except when the option is founded upon a
consideration as something paid or promised. In this
case, although there was no separate consideration for
the option, the offer had already been accepted and
thus, it resulted into a perfected contract of sale
between Marcelo and Sergio. Sale being a consensual
contract is perfected by mere consent.
B) No, Sergio cannot claim that the agreement cannot be
enforced because it was not reduced into writing.
Contracts shall be obligatory, in whatever form they
may have been entered into, provided all the essential
requisites for their validity are present. (art. 1356) In
fact, when the law requires a document or other special
form, as in the acts and enumerated by law, the
contr4acting parties may compel each other to observe
that form, one the contract has been perfected, and this
right may be exercised simultaneously with the action
upon the contract. (art. 1357) Even an oral sale of a
parcel of land is valid between the parties (Campillo vs
CA)
2. Marvin offered to construct the house of Carlos for
a very reasonable price of Php. 900,000, giving the
latter 10 days within which to accept or reject the
 OBLIGATIONS AND CONTRACTS – UNIVERSITY OF PANGASINAN
(QUIZ I - CONTRACTS)
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?
B) Will your answer be the same if Carlos paid
Marvin Php. 10,000 as consideration for that
option? Explain.
C) Supposing that Carlos accepted the offer before
Marvin could communicate his withdrawal
thereof? Discuss the legal consequences.
Suggested Answer:
A) 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 vs
Rodriguez) Without consent, there is no perfected
contract for the construction of the house of Carlos.
(Salonga bs Farrales) Art 1318 provides that there can
be no contract unless the following requisite concur: (1)
Consent of the parties (2) Object 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.
B) My answer will not be the same as to damages. Marvin
will be liable for damages for breach of contract of
option. With the payment of the consideration for the
option given, and with the consent of the parties and
the object of contract being present, a perfected
contract of option was created. (San Miguel Inc. vs
Huang) Under art 1170, those who in t6he performance
of their obligation are guilty of contravention thereof,
as this case, when Marvin did not give Carlos the agreed
period of ten days, is liable for damages.
C) 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 vs CA)
Under art. 1315, Carlos and Marvin are bound to fulfill
what has been expressly stipulated and all
consequences thereof. Under art. 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 art. 1170.
3. Roland, a basketball star, was under contract for
one year to play-for –pay exclusively for Lady Love
Inc. However, even before the basketball season
could open, he was offered a more attractive pay plus
fringe benefits by Sweet Taste Inc. Roland accepted
the offer and transferred to Sweet Taste. Lady Love
sued 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
 OBLIGATIONS AND CONTRACTS – UNIVERSITY OF PANGASINAN
(QUIZ I - CONTRACTS)
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:
I. Rolando is bound by the contact he entered into
with Lady Love and he cannot disregard the same,
under the principle of obligatoriness of contracts
arising from contracts have the force of law between
the parties.
II. Yes, Rolando is liable under the contract as far as
Lady Love is concerned. He is liable for the damages
under art. 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 found on quasi-delict, assuming that Sweet
Taste knew of the contact. Art. 1314 provides that
any third party who induces another to violate his
contract shall be liable for damages to the other
contracting party.
4. Baldomero leased his house with a telephone to
Jose. The lease contract provided that Jose shall pay
for all electricity, water and telephone service 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 Php.
20,000. 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)
Baldomero is, therefore, liable under the contract.
5. 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 Php. 1,000,000, payable Php.
100,000 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
Php. 100,000 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 Php. 100,000 down payment to the vendee, on
 OBLIGATIONS AND CONTRACTS – UNIVERSITY OF PANGASINAN
(QUIZ I - CONTRACTS)
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 Php. 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 of the civil code.
6. Distinguish consensual from real contract and name
at least four (4) kinds of real a contracts under the
present law.
Suggested Answer:
Consensual contracts are those which are perfected by
mere consent (art 1315) while real contracts are those
which are perfected by the delivery of the object of the
obligation. (art. 1316) Examples of real contracts are:
Deposit, Pledge, Commodatum, and Motuum.
7. 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
real estate mortgage on a 200-square meter piece of
property.
Would it be legally significant – from the point of view
of validity and enforceability - if the loan and the
mortgage were in public or private instruments?
Suggested Answer:
With respect to the loan, the same is both valid and
enforceable regardless of whether it is in a private or public
document because 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. A loan is a contract which the law does not require
to be in a particular form in order that it may be valid or
enforceable.
However, with regard to the chattel mortgage, since the
law (art. 1508) requires an affidavit of good faith stating
that the chattel mortgage is supposed to stand as security
for the loan, it is submitted that for validity of the chattel
mortgage, it must be in a public document. A real estate
mortgage under the provision of art. 2125 requires that in
order that a mortgage may be validly conbst5ituted the
document in which it appears must be in record. If it is not,
the mortgage is nevertheless valid and bidding between the
parties. Hence, for validity both chattel and real estate
mortgages must be in a public document. But for purposes
of enforceability, it is submitted that the form of the
contrac6t whether in a public or private document would
be immaterial. (Mobil Oil vs Diocares)
 OBLIGATIONS AND CONTRACTS – UNIVERSITY OF PANGASINAN
(QUIZ I - CONTRACTS)

8. Z, a gambler, wagered and lost Php. 2,000,000 in Suggested Answer:

baccarat, a card game. He was pressured into signing a
Deed of Absolute Sale in favor of the winner covering a
parcel of land with improvements worth Php. 20,
000,000. One month later, the supposed vendee of the
property demanded that he and his family vacate the
property subject of the deed of sale. Was the deed of sale
valid? What can Z do?
Suggested Answer:
The sale is valid. Being pressured to sign the deed of sale
is not equivalent to vitiation of consent. Z however, can
recover his losses from the winner because the law
provides that no action can be manifested by the winner
for the collection of what he has won in any game of
chance. But any loser in a game of chance may recover his
loss from the winner, the legal interests from the time he
paid the amount lost. (ART. 2014)
I. No, the transfer of the properties in the name of X
was without cause or consideration and it was made
for the purpose of holding these properties in trust
for the siblings of X. If the transfer was by virtue of
sale, the same is void for lack of cause or
consideration. Hence, the action to declare the sale
void imprescriptible.
II. No, I do not agree. A trust was created in favor of
the siblings of X when their father A transferred the
titles in his name. The facts are clear that X was to
hold these assets for his siblings until they reach
the age of majority. An action to recover property
based on an implied trust prescribes in ten years
from the time the title was issued in favor of the
trustee. In the case presented, only five years had
lapsed from the issuance of the title hence, the
action has not yet prescribed.

9. Mr. A, a businessman, put several real estate

properties under the name of his eldest son X
because at the time, X was the only one of legal age
among his four children. He told his son he was to
hold those assets for his siblings until they become
adults themselves. X then got married. After 5 years,
Mr. A asked X to transfer the titles over three
properties to his three siblings, leaving two
properties for himself. To A’s surprise, X said that he
can no longer be made to transfer the properties to
his siblings because more than 5 years have passed
since the titles were registered in his name. Do you
agree? Explain.