CLASS ACTIVITY

1. S, minor, owns a specific property valued at P50,000. B, capacitated, by means of fraud induced S to sell his property
to him for P30,000 which S did so. The contract is in writing. Which is correct? (ABELLO)
a. The contract is valid and binding from the start.
b. The contract remains unenforceable because it falls under the Statute of Frauds.
c. The contract is rescissible because the ward suffered lesion by more than ¼ the value.
d. The contract is voidable and B can ask for annulment within the period prescribed by law.

The answer is letter A. The contract is valid and binding from the start. According to Article 1327, unemancipated minors;
insane or demented persons, and deaf-mutes who do not know how to write cannot give consent to a contract. Therefore,
a contract entered into of a party incapable of giving consent to a contract is voidable. And as stated in Article 1390, a
voidable contract is valid and binding until it is annulled by a proper action in court. In the situation above, even if S, a
minor, vitiated his consent to the contract by fraud, the contract is still valid and binding from the start but falls into a
voidable kind of contract.
Letter B is incorrect. A contract that failed to comply with the Statutes of Frauds is an unenforceable contract but in the
situation stated above the contract is already executed and as stated in the fundamental principles relative to the Statute
of Frauds, the rule that makes a contract unenforceable due to non-compliance with the Statutes of Frauds is applicable
only to completely executory contracts.
Letter C is also incorrect. The contract entered into by S is not a rescissible contract because in the first place, there is no
guardian involved in the contract. And as stated in Article 1381, one kind of a rescissible contract is a contract which was
entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of
the things which are the object thereof.
Letter D is also incorrect because B in the execution of sale, performed his duties by fraud and as provided by law, the
guilty party should not be rewarded for successfully hiding the fraud and has no rights to bring action against the innocent
party.

2. This is not a characteristic of a void or inexistent contract. (ANUNCIACION)

a. The right to raise a defense of illegality cannot be waived.
b. The action or defense for declaration of the nullity or inexistence of the contract does not prescribe.
c. It is not subject to ratification.
d. Defense of illegality of the contract is available to third persons whose interest are not directly affected.

Letter D is not a characteristic of a void or inexistent contract because according to Article 1421, "The defense of illegality
of contracts is not available to third persons whose interests are not directly affected" but the statement shows that the
third persons whose interests are not directly affected" but the statement above shows that the third persons are allowed
to bring action to annul the contracts even though his interest is directly affected by the contract.
Characteristics of a void or inexistent contract are as follows:
In general, the right to raise a defense of illegality cannot be waived. Hence, the illegality of the contract can be raised
even on appeal. (LetterA)
According to Article 1410, if a contract is void a party thereto can always bring a court action to declare it void or
inexistent, and a party against whom a void contract is sought to be enforced, can always raise the defense of nullity,
despite the passage of time. (LetteB)
According to article 1409, a void contract cannot be ratified unlike in an unenforceable contract, a void contract remains
void even if a down payment has been made or a benefit has been accepted by a party. (Letter C)

___3. Reformation is not the proper remedy if (ASINAS)

a. The mutual mistake of the parties causes the failure of the instruments to disclose their real agreement.
b. One party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does
not show their true intention.
c. There was mistake, fraud, inequitable conduct or accident which prevented the meeting of the minds of the
contracting parties.
d. The true intention of the contracting parties is not expressed in the instrument purporting to embody the
agreement by mistake, fraud, inequitable conduct or accident.

The answer is letter C

Because according to Article 1359 paragraph 2,
If mistake, fraud, inequitable conduct, or accident, has prevented the meeting of the minds of the parties, the proper
remedy is not reformation but annulment.
Letter A is not the answer because according to Article 1361, when mutual mistake causes the failure of the instrument to
disclose the real agreement the said instrument may be reformed.

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Letter B is not the answer because according to Article 1362 if one party is mistaken and the other acted fraudulently or
inequitably, in such a way that the instrument does not show the true intention, the former may ask for reformation.
Letter D is not the answer because according to Article 1359 paragraph 1, if the true intention is not expressed in the
instrument purporting to embody the agreement by reason of mistake, fraud, inequitable conduct or accident, one of the
parties may ask for reformation to the end that such true intention may be expressed.

___4. The following contracts are defective. Which one is unenforceable? (AUSTRIA)
a. Contract of sale by which a guardian acquired the property of the ward without the approval of the court.
b. Contract of sale by which a city mayor acquires a portion of the city part pursuant to a city ordinance enacted
by City Council.
c. Contracts whose object is outside the commerce of man.
d. Those were both parties are incapable of giving consent to a contract.

D is the answer because under article 1403 paragraph 3 contracts are unenforceable where both parties are incapable of
giving consent to a contract.
A is not the answer because contracts entered into in behalf of wards is a type of a rescissible contracts. Rescissible
contracts are valid and enforceable.
B is not the answer because it is valid and enforceable by law.
C is not the answer because contracts whose object is outside the cimmerce of man is a type of a void contract. Void
contract is also called inexistent contract. It is absolutely null and void.

___5. Which of the following is not a requisite of fraud? (BARQUILLA)

a. There must be misrepresentation or concealment.
b. The fraud must be serious.
c. A party is induced by fraud to enter into contract.
d. The fraud is employed by both parties upon each other.

Under the Article 1338, there is a direct statement of the requisites of causal fraud. Referring to the choices stated:
A-- This is the first requisite of fraud. Misinterpretation or concealment of a material fact with knowledge of its falsity will
result to fraud. (Articles 1338, 1339)
B-- This is the second requisite of fraud. Fraud must be serious as stated in Article1344.
C-- This is the fifth requisite of fraud. Fraud must have induced the consent of the other contracting party which is done
through machinations or insidious words of the contracting parties.
D--This choice is the answer because it is in contradiction to what is stated in requisite 3. The fraud must have been
employed by ONLY ONE of the contracting parties. The choice states that fraud is employed by both parties so it is wrong
that makes it the answer.

___6. Which of the following is not correct in rescission? (BATHAN)

a. Cannot be availed when the party who has been damaged has other legal remedy.
b. The person who seeks rescission must be able to return what he ought to return.
c. The object of the contract is not in the possession of third persons who have acquired it in good faith.
d. Can be demanded by any of the contracting parties.

Choices A, B, and C are enumerated as requisites before the remedy of rescission can be availed.
(A) is correct because it is stated in article 1383 that rescission is subsidiary only and not a principal remedy. If the
damaged party has other legal remedy then he cannot avail rescission. Thus it can be availed only if the injured party
proves that he has no other legal means aside from rescinding the contract.

(B) is correct because the main purpose of rescission is to restore the parties to their original situation. The person who
seeks rescission must return to the other party the object of the contract with its fruits.

( C ) is also a requisite to avail rescission. If the object of the contract is in the possession of a third party who acted in
good faith then the remedy would be to demand indemnity for damages from the person who caused the loss

(D) is not correct because rescission can only brought by the person injured , his heirs or successors in interest, and the
creditors entitled to subrogation. Thus cannot be demanded by any of the parties.

___7. A contract in which a person literally contracts with himself is (BOBIHIS)

a. Adhesion contract b. Auto contract c. Accessory contract d. Unilateral contract

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The answer is B. Because an auto-contract is described to be where only one person represents the two opposite parties
to the contract. An example is when an agent lends money to his principal whom he represents as borrower. Therefore, it
literally means a person contracting with himself.
A is not the answer because the definition of adhesion contract is where most of the terms of which do not result from
mutual negotiation between the parties as they usually prescribed in printed forms prepared by one party to which the
other may “adhere” if he chooses but which he cannot change.
The above statement does not refer to an accessory contract because an accessory contract is one which is dependent
upon another contract it secures or guarantees for its existence and validity.
D is not the answer because a unilateral contract is defined to be a contract which creates an obligation on the part of only
one of the parties.

___8.The pre-nuptial agreement of H and W, husband and wife, provides for complete separation of property. Later, H,
with violence and intimidation forced W to sell to him (H), W’s pieces of jewelry. The sale is (CAGUBCOB)
a. Rescissible, if W suffered a lesion of more than ¼ of the value of the property.
b. Voidable, because the consent of W is vitiated.
c. Unenforceable, if the value is at least P500.
d. Void, because husband and wife are not allowed to sell property to each other.

The answer in this situation is letter B; it is voidable because H, husband of W, used violence and intimidation force to sell
the jewelry of his wife to him in which it is a violation of consent. Article 1390 states that if one party is incapacitated to
give consent and vitiated the consent it is classified as VOIDABLE.
Letter A is not the answer because one of the requisites of rescission is there must be damage to another party or to a
third party. In this situation, there is no actual damage suffered by his wife so that it is not a rescissible contract.
While, letter C is also wrong because Statute of Fraud is not applicable in this situation. As what the law said, Statute of
Fraud is applicable only to a contract that is completely executory and not to contracts which are totally executed or
partially executed. In the scenario above, the sale was already performed by the party so that Statute of fraud is not
applicable to it.
Letter D is also not the correct answer. Even though the sale of property between husband and wife is prohibited by law or
void, there’s an exception with this rule. If there’s an agreement that the property of husband and wife is completely
separate, they can sell a property between them in which in the situation above it is clearly stated that the property of H
and W is completely separated therefore, they can sell their property to each other.

___9. This is an accessory contract. (CARANDANG)

a. Sales b. Mutuum c. Commodatum d. Mortgage

Sales, Mutuum, and Commodatum are Principal contract. It is because it does not depend for its existence and validity
upon another contract but is an indispensable condition for the existence of an accessory contract. Meanwhile, mortgage
is an accessory contract for it depends its existence on another contract. It secures or guarantees for its existence and
validity.

___10. These are real contracts, except (DALANON)

a. Commodatum b. Deposit c. Pledge d. Chattel mortgage

First, real contracts are those which are perfected not merely by consent but by delivery, actual or constructive, of the
object of the obligation. These contracts have for their purpose restitution because they contemplate the return by a part
of what has been received from another. With this definition, choices a, b and c are considered real contracts where:
A. Commodatum is one of which one of the parties delivers to another something not consumable so that the latter may
use the same for a certain time and return it.
B. Deposit is a naked bailment of goods to be kept for the depositor without reward, and to be returned when he shall
require it.
C. Pledge is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable or instrument
evidencing incorporeal rights for the purpose of securing the fulfilment of a principal obligation with the understand that
when the obligation is fulfilled the thing delivered shall be returned with all its fruits and accessions.
On the other hand, letter D. Chattel mortgage is define as a transfer of personal property as security for a debt or
obligation in such form that, upon failure of the mortgagor to comply with the terms of the contract the title to the property
will be in the mortgagee. In a chattel mortgage, there is only a transfer of personal right and the delivery of the chattel,
which is the mortgage, is not necessary to perfect the contract. This statement is in contrast with the meaning of real
contract in which to perfect the contract, there must be delivery of the object.

___11. B, a minor, bought some kilos of rice and other necessaries from S, a capacitated person. The contract is
(DATOR)

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 a. Rescissible b. Unenforceable c. Voidable d. Valid

Article 1329 states that the incapacity declared in article 1327 is subject to modifications determined by law, and is
understood to be without prejudice to special disqualifications established in the laws. My interpretation is that the
incapacity can be modified by law. They can give consent to other things. Buying a kilo of rice, which is a food and
considered as necessaries, is one of the things incapacitated or unemancipated person can give a valid consent.

Why not
a. rescissible contracts are valid because all the essential requisites of a contract exist but by damaging one of the parties
or a third person, the contract may be rescinded. In this situation there's no damage done to either of the party.

b. unenforceable contracts are those that cannot be enforced or given effect in a court of law or sued upon by reason of
certain defects provided by law until and unless ratified according to law. There are agreements within the scope of
statute of frauds which are not legally enforceable in court, and this situation is not included.

c. this may be the closest to this situation because a voidable contract is that which possess all the essential requisites of
a valid contract but one of the parties is incapable of giving consent or consent is vitiated by mistake, violence,
intimidation, undue influence or fraud. B might be a minor but as stated above, article 1329 subjects these persons or the
article to modification.

___12. X entered into a written contract with Y for the sale of his car at the price of P210,000. Subsequently, F told X that
the purchase price is very low as it can command a price of at least P250,000. X wanted to increase the purchase price of
his car to P250,000. This cannot be done by X because of what principle of contract? (DE CASTRO)
a. Freedom of contract b. Mutuality of contract c. Relativity of contract d. Consensuality of contract

Letter A is incorrect because freedom of contract means the mutual agreement and free will to enter in the contract
(legaldictionary.com). Thus, such principle does not apply to the situation since it is already assumed that they already
willingly obliged themselves to enter on the contract. But the statement that shows the other preference of X does not
applies.
Letter B is correct because according to article 1308, the contract must bind both parties and the validity or fulfillment of
cannot be left to the walk of one of the contracting parties. It is applicable to the situation since it is assumed that upon
entering a contract, it is assumed that the consent, object and cause of the contracts is mutually agreed upon. And the
want of X to change the stipulated price is not appropriate and the original agreed price.
Letter c is incorrect because as article 1311 implies that contracts take effect only between parties, their assigns and
heirs. It does not apply because there no other parties involved and the situation lies only between X and Y while F is only
the one who induced X for the want of appraisal of the price.
Letter d is incorrect since consensuality of the contract denotes a mere agreement among parties. It means consensus
among parties. Thus, it is not applicable

___13. A brought a car from B, a minor, for P100,000. One week later, A discovered that B was a minor at the time of sale
so he filed a complaint in court to annul the sale. Will the action prosper? (DOMONDON)
a. Yes, B being a minor is incapacitated to enter into a contract.
b. No, the right to annul the sale is given to B.
c. Yes, B cannot file the action to annul the sale because he is a minor.
d. No, unless there is lesion of more than ¼ of the value of the property.

My answer is letter B. (No, the right to annul the sale is given to B.) Because A is not qualified to be entitled to bring action
for rescission. These are the persons entitled to bring action:
(1) The injured party or the defrauded creditor
(2) His heirs, assigns or successors in interest
(3) The creditors of the above entitled to subrogation
According to article 1397, persons who are capable cannot allege the incapacity of those with whom they contracted.
Not letter A because it will only matter to be incapacitated if B filled` the annulment.
Not letter C because B has the right to file the annulment because he owns the object and he will be the one to suffer the
damage.
Not letter D since there is no lesion involved and no guardianship mentioned

___14. I. A void contract produces no effect whereas rescissible contract is valid until annulled.
II. The action or defense for the declaration of the inexistence of a void contract does not prescribe. (EPAN)
a. True, True b. False, False c. False, True d. True, False

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Statement no.1 is false because it should be "Rescissible Contract is valid until rescinded." Rescission is the proper
remedy for rescissible contract which is caused by lesion while annulment is the proper remedy for voidable contract
which is caused by vitiation of consent.
Statement no.2 is true because it is clearly stated in article 1410 that "The action or defense for the declaration of the
inexistence of a void contract does not prescribe." It is so because a void contract has no effect at all, therefore it's
unnecessary to bring an action to make it void but it is better to have a judicial declaration of nullity so that it can give
peace of mind to the parties and to avoid the parties to take law into their own hands.

___15. I. An oral sale of land made by its owner is unenforceable if executory.

II. Sale of land made by agent without written authority from the owner thereof if void. (ESCAREZ)
a. True, True b. False, False c. False, True d. True, False

In statement 1, an oral sale made by its owner is unenforceable if executory. This is true because it is said in the
agreements under statute of fraud that those real property sold orally is unenforceable unless it has been partially
executed.
In the 2nd statement, it is said that the sale of land made by an agent without authority from the owner or principal thereof
if void. This is also true because under the form of validity of contract, if the sale of land is made through an agent, it
should be in writing otherwise the sale is void. In other words, the sale made in statement 2 is void because it lacks
written authority.

___16. I. A contract as a general rule must be written to have force and effect as a valid agreement.
II. A formal or solemn contract is perfected by the delivery of the object of contract. (EVANGELISTA)
a. False, True b. True, True c. False, False d. True, False

I. It is not true that as a general rule a contract must be written to have force and effect as a valid agreement. According to
the agreement within the scope of the Statute of Frauds, to be enforceable, a contract does not have to be in writing. In
fact, most contracts made orally are legally enforceable. According also to article 1356, Contracts shall be obligatory, in
whatever form they may have been entered into, provided all the essential requisites for their validity are present. So as a
general rule, a contract may be oral or written. The contract may be oral, or in writing, or partly oral and partly in writing. It
may be express when the parties expressly set forth their intentions, or implied when their intentions may be inferred from
their actions or conduct.
II. A formal or solemn contracts are those where the law requires that a contract be in some form to be valid. A special
formalities are essential before contract may be perfected. For example, a donation of real property cannot be perfected
until it is embodied in a public instrument. It is the real contracts that the delivery of the object is needed for the perfection
of the contract.

___17. I. A contract entered into by a minor is void.

II. A contract where the amount involved exceeds P500 needs to be in writing to be valid. (FALEJO)
a. False, False b. True, True c. False, True d. True, False

Statement I is not correct because a contract entered into by a minor under 18 is voidable upon his/her reaching majority.
Voidable is distinguished from void in that it means only that a thing can become void, but is not necessarily so.
So, choices B and D are definitely not the answer as proven above that Statement I is false. Meanwhile,
Statement II is correct because a contract where the amount involved exceeds P500 must be in writing to be enforceable,
meaning valid and binding against either party.

___18. I. In reformation of instruments, it is necessary that there is meeting of minds of the parties to the contract,
otherwise annulment of the contract shall be the remedy if fraud, accident, mistake or inequitable conduct prevented the
meeting of minds.
II. In the interpretation of contracts, doubts on the incidental circumstances of onerous contracts shall be resolved
in favor of greatest reciprocity of interest and if gratuitous, least transmission of rights and interest. (FLORENTINO)
a. True, True b. False, False c. False, True d. True, False

In the first statement, according to article 1359, it is necessary to have a meeting of minds between the contracting parties
to have a reformation, otherwise, annulment is the remedy if fraud, accident, mistake or inequitable conduct prevented the
meeting of minds of the contracting parties.
In the second statement, according to the rules in case doubts are impossible to settle, if the contract is onerous, doubts
should be settled in favor of the greatest reciprocity of interest. If gratuitous, such interpretation should be made which
would result in least transmission of rights and interests.

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___19. S sold to B his land valued at P1,000,000 only for the price of P700,000, thus resulting to inadequate price. The
sale is (GINGOYON)
a. Rescissible b. Voidable c. Unenforceable d. Valid and binding
The Contract is Valid and Binding because it possess all the essential elements of a contract Object: Seller- Land, Buyer:
Money; Cause: Seller: Money, Buyer- Land. Consent, although the consent is not stated it is presumed that both party
consented because a contract already exist especially that it is not stated that S is incapable of giving consent (a minor, a
mentally incapacitated person) even though the price is unjust when it is proven that it is known to both contracting parties
and both still consented the contract is considered as valid and binding.
A Rescissible contract are those validly agreed upon because all the essential elements exist and, therefore, legally
effective, but in the cases established by law, the remedy of rescission is granted in the interest of equity. It is not a
Rescissible Contract because the following contracts are rescissible:
1. Those whic are entered into by guardians whenever the wards whom they represent suffer lesion by more than 1/4 of
the value of the object.
-Although S suffer lesion of more than 1/4 the object it is not applicable because he is capable of giving consent of his
own.
2. Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number. - He is
not an absentee.
3. Those undertaken in fraud of creditors. -They are not debtor and creditor of each other.
4. Those entered under litigation if they are entered into by the defendant w/out the knowledge and approval of the
ligitants or of competent judicial authority -it is not under litigation and both parties are knowledgeable about the unjust
price. 5. All other contracts especially declared by law to be subject of rescission.
Unenforceable Contracts are those that cannot be enforced in court or sued upon by reason of certain defects provided by
law until and unless they are ratified according to law. - In this case there is no defect because it not entered into in the
name of another by one without, or acting in excess of authority, it is not those that do not comply with the statute of fraud,
it is not those were both parties are incapable of giving consent.
Voidable contract are also valid until annulled unless there has been ratification. In a voidable contract, the defect is
caused by vice of consent. -In this case there is no vice of consent. The vices of consent are mistake, fraud, violence,
undue influence and intimidation. In this case none of these exist.

___20. The following contracts are valid, except (GONZALES)

a. A contract where a party gave his consent while in a state of drunkenness.
b. A contract where a party have his consent because the other party threatened to sue him for an unpaid debt.
c. A contract where A gave his consent because B threatened to kill A’s spouse.
d. A contract where the wife sells her property to her husband because of intimidation.

Letter D is my answer because it is a void contract. According to Article 1490 the general rule, a contract entered into by
husband and wife is null and void.
Letter A which is in the state of drunkenness is a voidable contract hence it is valid. According to Article 1328 "Contracts
agreed to in a state of drunkenness or during a hypnotic spell are voidable.
Letter B is valid. The threat to sue is valid because it is a legal claim.
Letter C is voidable hence it is also valid because according to Article 1390, "Contract is voidable or annullable, even
though there may have been no damage to the contracting parties when the contract is vitiated by mistake, VIOLENCE,
intimidation, undue influence or fraud.

___21. A offered to sell her watch to B for P1,000. B offered to buy the watch for P800 but it was rejected by A. When B
turned to go away. A called him and said she is now willing to sell the watch for P800. May B refuse to buy said watch?
(JIMENO)
a. No, because B’s offer of P800 was accepted by A.
b. No, there is a meeting of the minds between the parties or the subject matter and the cause of the contract.
c. Yes, because B made a counter offer which was rejected by A.
d. Yes, because the agreement is under the Statute of Frauds.

Letter C is the answer. B made a counter offer which was rejected by A. Therefore, there had been no settled contract
between the parties. Thus, when A called B and told him B that she is now willing to sell her watch for P800, it can be
considered as a new offer which B may accept or reject.
Letter A is not the answer because evidently in the above situation, B's offer to buy the watch for P800 was rejected by A.
Letter B is not the answer because there had been no meeting of minds between the parties. On the first offer of A to B,
which is to sell the watch for P1000, B made a counter-offer to buy it for only P800. B's counter-offer can be considered as
a rejection to the original offer of A which in effect had extinguished A's first offer and as a new offer for A as well.
However, A rejected B's counter-offer. Therefore, there had been no meeting of mind at all between the two parties.

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Letter D is not the answer because the agreement is not under the statute of frauds since there has been no fully settled
agreement or we may say that there has been no agreement at all tp be guided by the statute of frauds.

___22. Which of the following contract is enforceable? (LAJA)

a. Oral sale of immovable property for a price of P400.
b. Oral sale of movable property for a price of P10,000.
c. Oral contract of loan for P1,000.
d. Oral agreement made in consideration of marriage.

Choice "C" is enforceable because contract involving loan is not stated or included in Article. It is an exclusively list that it
cannot be changed. The article should be interpreted and memorize perfectly that no words should be changed, added or
deducted from the statement.
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing,
and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without
the writing, or a secondary evidence of its contents:
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
Choice "D" is unenforceable as stated above, it is unenforceable unless in writing. It means that for the agreement to
become enforceable, it should be in writing. An oral agreement of it is an unenforceable one.
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or
pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the
auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names
of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;
Letter "B" is unenforceable because as mentioned above that it should be in writing to be enforceable. A movable property
is a kind of chattel. The sale of it not less than P500 should be in writing to be enforceable. It means that an oral sale of it
having an amount of P10 000, which is not less than P500, is an unenforceable contract as stated in Statute of Fraud.
(e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
Letter "A" is unenforceable as stated in above. An immovable property is a real property. It needs to be in writing to be
enforceable. So oral sale of immovable property is an unenforceable contract.

___23. In a contract of sale of a hardware store, it was stipulated that the seller shall not open or have any interest directly
or indirectly in any hardware store either in his own name or in the name of another or have connection with or be
employed in any hardware store for a period of one year or within 3 kilometers from Brgy. Ginebra, San Miguel, Bulacan.
Are these stipulations/restrictions upon the seller valid? (LEGASPI)
a. No, the agreement is contrary to public policy as the seller is deprived of a means of livelihood.
b. No, the stipulations are in restraint of trade.
c. Yes, the restrictions imposed are only on a limited scale.
d. Yes, as long as the agreement is made in writing.

Yes, because the restriction imposed is only on a limited scale. The answer would be different if the seller is forbidden to
engage in business within the Philippines, or during his lifetime he cannot engage in hardware store or to engage in this
kind of business he must obtain the written consent of the buyer, for this contrary to public policy considered by the court
as restraint of trade.
Letter D is also not the answer because it is not always valid if the agreement is made in writing, we should consider first
the concept of liberty to contract. That the contracting parties may establish such stipulations, clauses, terms, and
conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or
public policy.

___24. A sold a parcel of land to B by word of mouth and delivered to the latter the Transfer Certificate of Title of the land.
Can B compel A to execute the deed of sale of the land? (LIBANG)
a. B cannot compel A to execute the deed of sale as the sale being oral is unenforceable.
b. B cannot compel A because the sale is void being oral,
c. B can compel A because the contract is enforceable due to the delivery of the TCT to him.
d. B can compel A because the sale is merely voidable and therefore enforceable binding until annulled.

Under Article 1403 of Unenforceable Contracts, those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases, an agreement hereafter made shall be unenforceable by action, unless the same, or some

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note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of
the agreement cannot be received without the writing, or a secondary evidence of its contents.
Included with this is the sale of real property or an interest therein regardless of the price. Considering land as a real
property, the contract entered must be in writing.
But, in accordance with Article 1405, contracts infringing the Statute of frauds, referred to in No. 2, article 1403, are ratified
by the failure to object to the presentation of oral evidence to prove the same, or by acceptance of benefits under them. In
this case is no longer executory and therefore the Statute does not apply.
Given the following information, letter A is incorrect since the contract becomes valid and enforceable upon the delivery of
TCT to B. Letter B comes wrong because despite being oral, A can be compelled since there is delivery of the object.
Letter D is wrong as well because the contract becomes enforceable not merely voidable thus, annulment shall not be
applied.

___25. Three of the following may be objects of contracts, except (MAGTUBO)

a. Those things within the commerce of man.
b. Services which are not contrary to law, morals, and good customs.
c. Intransmissible rights.
d. Hereditary rights

Intransmissible rights because according to the law under Article 1347 , as a general rule, all rights may be the object of a
contract. The exceptions are when they are intransmissible by their nature, or by stipulation, or by provision of law.
Therefore, Intransmissible right cannot be an object of the contract.
A. One of the requisites of things as object of contract is the thing must be within the commerce of men, that is, it can
legally be the subject or object of commercial transaction.
B. One of the requisites of services as object of contract is that, it must not be impossible, physically or legally. It is
considered legal when services are not contrary to law, morals and good customs.
D. As a general rule, all rights may be the object of a contract, the only exception under the law is intransmissible right.
Therefore, hereditary rights may be an object of contracts because it is an example of transmissible rights or rights that
can be transmitted.

___26. I. Contract of lease of a parcel of land for a term of one year must be written otherwise unenforceable.
II. Contract of sale of a parcel of land must be in public instrument otherwise unenforceable. (MALDIA)
a. False, True b. True, True c. True, False d. False, False
The answer is both false because on the first statement, according to the law it requires that the lease of property for more
than one year must be in writing in order to be enforceable. But as stated in the first statement it is a lease of a property
for one year only in which according to the law it is both acceptable and enforceable if the property is either made orally or
in writing provided that the property is lease one year or less.
The second statement is false also because in selling a property it is not required to be in public instrument in order to
become enforceable unless if it is needed for the convenience of the third party. The case which requires in the form of
public instrument commonly happens if the property is donated because it is for the convenience of a third party.

___27. Which of the following constitutes an offer? (MANAYAO)

a. Business advertisements of things for sale.
b. Advertisements for bidders.
c. An offer made through an agent.
d. Before acceptance is conveyed, either of the parties dies, civilly interdicted, becomes insane or insolvent.

The answer is letter C because Article 1322 states that an offer made through an agent is accepted from the time the
acceptance is communicated to him. The question asks for an answer which constitutes an offer that makes the statement
in letter C correct. Letter A is wrong because Article 1325 states that unless it appears otherwise, business advertisements
of things for sale are not definite offers but a mere invitations to make an offer. Letter B is like A because Article 1326
states that advertisements for bidders are simply invitations to make proposals. Letter D does not constitute an offer
because it is considered ineffective in accordance with Article 1323 which states that before acceptance is conveyed,
when either of the parties dies, civilly interdicted, becomes insane or insolvent makes the offer ineffective.

___28. A sold to B a genuine bottle of Fundador brandy. However, upon delivery the former substitute a fake, B now wants
to annul the sale. Decide. (MATANGUIHAN)
a. The contract is void ab initio therefore can be annulled.
b. The contract can be annulled since it is voidable due to fraud.
c. The contract cannot be annulled because it is only incidental fraud.
d. There is dolo incidente therefore it can be annulled.

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ANSWERS: A. this is not the correct answer. According to the Law 'void ab initio' is to be treated as an invalid from the
beginning, therefore it cannot be annulled because there is no existence of the contract. Thus, the given scenario is a
valid contract although it is an incidental fraud but is not subject for annulment.
B. This is not the correct answer. Based from the scenario, this is an example of an incidental fraud which is a valid
contract and not subject for annulment. On the other hand, a voidable contract which is a ground for annulment is a
causal fraud.
C. This is the correct answer. According to the Law, an incidental fraud has no effect on the validity of the contract since
the fraud was employed in the performance of the contract. Since the scenario above is an example of an incidental fraud,
therefore it is a valid and enforceable contract which is not subject for annulment but liable only for damages because the
fraud was not the principal inducement that led B to give his consent to A.
D. This is not the correct answer. A dolo incidente is not subject to be annulled for the reason of the fraud was made upon
the performance of the contract. Thus, an incidental fraud only obliges the person employing it to pay damages.

___29. I. An offer made by the principal is accepted from the time acceptance is conveyed to him by his agent.
II. The object of a contract may be future things including future inheritance. (MAXIMO)

a. True, True b. False, False c. False, True d. True, False

Statement I is false because the agent does not have the right to receive the acceptance of the offer made by the principal
himself unless the agent is authorized to do so.
Statement II is fase because future inheritance does not exist at the time of the contract and its existence is hard to
determine that makes it void

___30. Which of the following contracts must be in writing to be enforceable? (MENDOZA)

a. Acts and contract for the creation, transmission, modification, extinguishment of real rights.
b. The cession, repudiation, renunciation of hereditary rights.
c. Contract of guaranty.
d. Contract of partnership.

Contracts of guaranty or suretyship needs to be in writing for it to be enforceable because this type contract is merely
subsidiary or collateral to the promise of another and will not thereby becomes the primary liable to the contract but only
as a substitute in case the person primarily liable to the debt defaulted. Another reason for it to be in writing is because the
statute of frauds requires it to be in writing to be enforceable because it entails a person to assume the responsibility of
the payment of the debt of another in case of default and to reduce if not to eliminate the frauds involve in this kind of
contract that is present in the past. (art. 1403)
There are three exceptions to this rule.
(1) If the third person makes the promise to the debtor instead of to the creditor, the promise does not have to be in
writing.
(2) If the third person promises to be primarily responsible for the debt, the promise is outside the statute. For example:
(3) Even if the third person makes the promise to the creditor and promises only to be responsible for the debt if the
debtor defaults, an oral promise will be enforceable if the third person’s main purpose for making the promise is for his
own benefit. This is called the “Main Purpose” rule.
A&B is not the answer because this types of contracts does not require to be in writing because they already are binding
and enforceable from the moment that they are conceive provided that they contain the essential requisites in their
creation especially the consent of the parties involve. And also the contracts enumerated in art 1358 are valid and
enforceable though not contained in a public document since putting it in a public document is required only for the
convenience and greater protection of the parties.
Also a ruling by the court of appeals regarding this kind of contracts states that though not consigned in a public
instrument, is nevertheless valid and binding among the parties and that the among the parties and that the form required
in article 1358 of the civil code is not essential to the validity or enforceability of the transactions but only for convenience.
Stated further that none the less, it is a settled rule that the failure to observe the proper form prescribed by article 1358
does not render the acts or contracts enumerated therein invalid. It has been uniformly held that the form required under
the said article is not essential to the validity or enforceability of the transaction, but merely for convenience and to ensure
its efficacy. (Estate and heirs of Pedro C Gonzales vs heirs of Marcos Perez)(G.R. No. 169681)
D is also not the answer because a contract of partnership is not required to be in writing for it is created through mere
consent of the parties involved and thus can be created orally without the need of writing. None the less if immovables are
contributed, it must be in a public instrument to which shall be attached a signed inventory of the immovable property
contributed. (arts.1771,1773)

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___31. D, fearing that his creditor C, would go after his only parcel of land to satisfy his claim for payment of D’s debt, sold
his said land to X who did not know of D’s intention. Decide. (NORA)
a. C can ask for annulment of the sale as this is voidable contract.
b, C may ask for damages against X since he was damaged by the sale.
c. C can file an action for rescission of the sale.
d. C cannot ask for rescission of the sale.

My answer is d. C cannot ask for rescission of the sale because according to the law, before the remedy of rescission may
be availed of, the object of the contract must not be legally be in the possession of third persons who did not act in bad
faith. Also, rescission is only a subsidiary remedy and not a principal remedy. In case of damages, the first remedy is the
restitution in which both parties will restore what they received. Then, if restitution is not applicable the next one is the
indemnification in which the injured party can ask for the damages.
a. C can ask for annulment of the sale as this is voidable contract. This is wrong because according to the law, annulment
will take effect only for the declaration of the inefficacy of a contract based on a defect or vice in the consent of one of the
contracting parties and in this case there are no vices of consent that are involved. This is not a voidable contract because
both parties are incapable of giving consent.
b. C may ask for damages against X since he was damaged by the sale. This statement is incorrect because in the first
place this case need not be set aside for rescission, then if this cannot be cured by rescission, C doesn't have the right to
ask for damages for there's no really damages happened in the sale.

___32.In three of the following the contract is cleansed of its defect by ratification. Which is not so ratified? (OLFATO)
a. Contract where the creditor was damaged by the act of the debtor intended to defraud him.
b. Contract entered into by a person incapable of giving consent.
c. Sale of chattels orally entered into for a price not less than five hundred pesos.
d. Lease of real property for more than one year orally entered into.

The correct answer is letter A because a contract where the creditor was damaged by the act of the debtor intended to
defraud him is rescissible contract, according to Art. 1381. It is also one of the requisites in order that fraud of creditors
may be a valid ground for rescission, thus not subject to ratification.
B. Contract entered into by a person incapable of giving consent is a voidable contract and are susceptible of ratification,
according to Article 1390. Therefore, it is not the correct answer.
As stated in Article 1403, the following contracts are unenforceable, unless they are ratified:
1. Those entered into in the name of another by one without, or acting in excess of, authority;
2. Those that do not comply with the Statute of Frauds
 Agreement for sale of goods, chattels, or things in action, at a price not less than 500php
 An agreememnt for the leasing for a longer period than ine year, or for the of real property or of an
interest therein.
3. Those where both parties are incapable of giving
Thus letters C & D are not the answer because unenforceable contracts are subject to ratification.

___33. A sold to B a fake Rolex watch on January 3, 2001. On January 13, 2001, B discovered that the watch he bought
from A was an imitation. The law provides that he can annul the sale as a voidable contract within 4 years. Prescription
starts from (ORNALES)
a. January 3,2001 when the sale was perfected.
b. The time of delivery of the watch to B.
c. The time they first talked about the sale of the watch.
d. January 13,2001 when the fraud was discovered by B.

Letters A, B and C are wrong because it is not stated in article 1391. According to Article 1391 The action for annulment
shall be brought within 4 years. This period shall begin, in case of mistake or fraud, from the time of the discovery of the
same. The defect of a voidable contract is caused by vices of consent and one party is incapable of giving consent. And in
the scenario there is a fraud. This means that prescription time should begin upon the discovery of fraud because before
discovery the innocent party is unaware of the reason which renders the contract voidable thus the guilty party is not
rewarded for hiding the mistake or fraud.

___34. I. If the cause is not stated in the contract, it is presumed that it does not exist.
II. Lesion or inadequacy of cause as a rule invalidates a contract. (PABLICO)
a. True, True b. False, False c. False, True d. True, False

Statement I is false because Article 1354 states that although the cause is not stated in the contract, it is presumed that it
exists and is lawful, unless the debtor proves the contrary. Statement II is False, the general rule is that the lesion or

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inadequacy of cause does not itself invalidate a contract except when there has been fraud, mistake, or undue influence
and in cases specified by law.

___35. The following are attributes of a voidable contract. Which is not? (PANGANIBAN)
a. It is binding, valid and enforceable before annulment.
b. Damage is material to a voidable contract.
c. It can be ratified and ratification has retroactive effect.
d. The capacitated cannot allege the incapacity of the other party.

Letter B is my answer because damage to a party is not material for a contract to be voidable but for a rescissible one.
What matters to a voidable contract is the vitiate of consent or one of the parties is incapacitated. A, C or D is not my
answer because all of those are attributes of a voidable contract. Because according to article 1390 these contracts are
binding unless they are annulled by a proper action in court, they are susceptible of ratification. Also a capacitated party
cannot allege the incapacity of the other is correct because it is stated in article 1397

___36. The following are attributes of a rescissible contract, except (PINEDA)

a. It is valid until rescinded.
b. Damage or lesion is absolutely material.
c. Third person whose interest is affected may ask for rescission.
d. It is a principal remedy of the creditor to collect his credit.

Letter A is wrong because according to the law, a rescissible contract is valid unless rescinded.
Letter B is wrong because one of the requisites of rescission is that there must be lesion or pecuniary prejudice to one of
the parties or to a third person, thus, lesion is absolutely material. In addition, the lesion that must have been suffered by
the injured party must be more than one-fourth of the value of the things which are the object thereof.
Letter C is wrong because rescission is remedy granted by law to the contracting parties and sometimes to to a third
person in order to secure reparation of damages by means of restorations of things. So it is clear that a third person may
also ask for rescisson if his interest is affected.
Letter D is the correct answer because according to ART. 1383. The action for rescission is subsidiary; it cannot be
instituted except when the party suffering damage has no other legal means to obtain reparation for the same.
Meaning rescission can only be availed of if the injured party proves that he has no other legal means aside from
rescinding the contract to obtain redress for the damages, therefore rescission is not the principal remedy, in fact, it is the
last resort.

___37. A promised to give B a car as reward after B has killed C. Later, after killing, the contract was changed to a lease
of a big house for a certain period. The contract of lease is (SILVA)
a. Void b. Unenforceable c. Voidable d. Rescissible

The defect of the contract is that its cause-- to kill C, is illegal.

Letter B. is wrong because according to Article 1403, the defect of unenforceable contract is caused by lack of form,
authority or capacity of both parties not cured by prescription
According to Article 1390, the defect of voidable contract is caused by vice of consent. Therefore letter C is wrong.
Letter C is also not the answer because according to Article 1380, the defect of recissible contracts is caused by injury or
damage either to one of the parties or to a third person.
The answer is letter A. According to 1409, one of the defects of a void contract is those whose CAUSE, object or purpose
is contrary to law, morals, good customs, public order or public policy.
Moreover, According to Article 1422, A contract which is the direct result of a previous illegal contract, is also void and
inexistent.
An illegal contract is void and inexistent and cannot, therefore give rise to a valid contract. Therefore, even if the contract
was changed to contract of lease, the contract is still void because the original contract is void.

___38. A borrowed money from B with C as guarantor. The contract of loan of P1M was not in writing while the guaranty
was written. B now is demanding the payment from C because A failed to pay. Is C liable? (SUMADSAD)
a. C is liable because the guaranty is enforceable although the loan is void it being oral.
b. C is not liable because the accessory contract of guaranty is void since the principal contract of loan is void.
c. C is liable because the guaranty is enforceable.
d. C is not liable because the contract of loan is in amount exceeding P500 which must be in writing to be
enforceable.
To be enforceable, a contract does not have to be in writing. However, there are agreements which fall within the scope of
the statute of fraud below, which are not legally enforceable in court although valid, unless the same be in writing.
1) Agreement not to be performed within 1 year from making thereof

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2) Promise to answer for the debt, default, or miscarriage of another.
3) Agreement in consideration of marriage other than mutual promise to marry
4) Agreement for sale of goods, etc. at price not t less than 500
5) Agreement for leasing for a longer period than 1 year
6) Agreement for the sale of property of an interest therein.
7) Representation as to the credit of a third person.
Letter C is the correct answer because of number 2 as enumerated above. It is enforceable because it is in a written
contract. In a guaranty, the promise is merely a subsidiary or collateral to the promise of another (the original or principal
debtor). If the promise is an original or an independent one, that is, if the promisor becomes thereby primarily liable for the
payment of debt, the promise is not within the statute and may be proved by oral evidence.
Letter A is wrong because the loan is not void. Contracts can be in written or oral form. Also, all the requisites for a
contract to be valid are present. The requisites are consent of the contracting parties, object certain which is the subject
matter of the contract and the cause of the obligation which is established.
Letter B is wrong because the principal contract is not void. Just like letter A, all requisites for a contract to be valid are
present.
Letter D is wrong because of number 4 as stated above. Contracts exceeding 500.00 PHP must be in writing to be
enforceable against a party unless there is a delivery or partial or full payment, in which case, it is taken out of the
operation of frauds and the contract may be enforced even if made orally. Since the guaranty was in writing, then, C is
liable.

___39. To defraud his creditors, A sold his real property to B. B now seeks to register the sale. X, a creditor, seeks to
prevent the registration on the ground that it is a rescissible contract. Despite X’s objection, may the land be registered in
B’s name? (TOLENTINO)
a. No because the contract is rescissible and therefore without effect.
b. No because the sale is voidable and after annulment is not binding.
c. Yes because the contract although voidable is valid and binding.
d. Yes because the contract although rescissible is valid, binding and enforceable before rescission.

According to article 1380, contracts,validly agreed upon may be rescinded in the cases established by law. Rescissible
Contracts are those validly agreed upon because all the essential elements exist and therefore legally EFFECTIVE, but by
reason of economic injury or damage to one of the parties or to the third persons, such as creditors, contract may be
rescinded. In addition, Article 1381 classifies contracts undertaken in fraud of creditors when the latter cannot in any other
manner collect the claims due to them as rescissible.
Thus:
A. is wrong, because a contract that is rescissible is with effect.
B&C. are both wrong, because fraud of creditors is classifed as a rescissible contract.
D. is the answer, because the reasoning states the correct principle and B can still register the sale since the contract is
not yet rescinded.

___40. A loan for P800 was orally contracted. May the lender recover the sum lent? (TRINIDAD)
a. No because the contract is unenforceable.
b. No because the contract must be in writing to be valid.
c. Yes if the debtor ratifies the loan.
d. Yes because the contract is enforceable.
 According to Article 1953 of the Civil Code of the Philippines (CCP), a person who receives a loan of money or
any other fungible thing acquires the ownership thereof and is bound to pay to the creditor an equal amount of the
same kind and quality. Hence, he has the obligation to return to you the amount that he borrowed on the date and
time that you have agreed upon. If he fails to comply with his obligation, you shall have the right to institute an
action against him for the collection of his indebtedness to you.
 According to article 1403, the following are unenforceable, unless ratified:
o Those entered into the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers.
o Those that do not comply with the statute of frauds.
o Those where both parties are incapable of giving consent to a contract.

A. It is not the answer because in a general rule of the law, oral loan contract is as enforceable and valid as written
contract. Also, it doesn’t violate any of the requisites to be unenforceable that is subject to ratification for validity.
B. It is not the answer because according to the law and article of the civil code, 1953, oral contract is enforceable
does making the debtor liable of his obligation even without written contract.
C. It is not the answer because ratification is for unenforceable contract. Hence, the oral loan contracted doesn’t
need to be ratified because it is already enforceable and valid.

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D. It is the answer because the lender has the right to recover the sum of money lent with accordance to their
contract. The essential elements are all present also, meeting of mind or consent, the cause, and the object is not also
violated or absent thus making it enforceable and valid

___41. I. In case of divisible contract, if the illegal terms can be separated from the legal ones, the latter can be enforced.
II. The defense of illegality of contracts is available to third persons whose interests are directly affected.
(UNTALAN)
a. True, True b. False, False c. True, False d. False, True

Statement 1 is true according to Article 1420 which states that, In case of a divisible contract if illegal terms can be
separated from legal ones, the latter may be enforced. In support for this is the definition of divisible contract which is a
contract according to dependence of part, when one part of the contract may be satisfactorily performed independently of
other parts, this is called the separability principle.
Statement 2 is also true because according to the law when a third person's interest is directly affected, the third person
has a right and obligation under the contract. In support for this is the Article1421 which states that, the defense of
illegality of contract is not available to the third person whose interest are not directly affected. As long as his interest is
directly affected by contract, the third person may avail the defense of illegality.
Letters B, C and D are not the answers, the reason above explains why

___42. I. G, guardian of W, sold W’s house valued at P50,000 for P37,500 or a lesion by ¼ of the value.
II. S sold his house valued at P50,000 for only P10,000 because S did not know the true value of the house.
(PUBLICO)
a. Both contracts rescissible. c. No. 2 is voidable because there is an error or mistake.
b. Only I is rescissible. d. Both contracts are valid and enforceable.

The Answer is Letter D,both contracts are valid and enforceable. A contract is basically an agreement to do or not to do
something. Saying a contract is valid and enforceable, a contract must be lawful and all requisites for its validity must be
present the pertains in Article 1318, which both statements contain all the requisites.
According to Article 1381 a contract is recissible if the wards suffers lesion by more than one fourth of the value of the
things. So that statement one is not subject for recsission.
In statement II it is assumed that the contract is valid and enforceable because it is presumed that S know the true value
of the house and the law does not protect individual from damages arising from ignorance. Lesion is applicable only to the
wards or absentee who suffered damage that is more than one fourth of the real value of the property.
Letter A is not the answer, because in statement I, "W" didn't suffer lesion. It is stated in the law that in order to suffer
lesion there must be more than one fourth of the value. Statement II is valid and enforceable because law does not
protect individual from damages arising from ignorance. So that is not rescissible contract.
Letter B is not the answer because the statement I is not a type of recissible contract.
Letter C is not the answer because it is the responsibility of the seller to know the real worth of the house. He cannot use
his ignorance as an excuse because it is stated that ignoratia legis non excusat.

___43. S and M agreed in print that S, debtor for P3,000 will work as a servant of M without pay until she could find
money with which to pay her debt. S failed to comply with her obligation. Under this premise, which of the following
statements is correct? (REDUBLO)
a. The agreement to work as a servant is void because it is immoral.
b. To act as servant without pay is considered payment of debt.
c. The agreement to work without pay since written is enforceable.
d. The contract to work without pay as a servant until the debt is paid is void being contrary to public policy.

D is correct because to work as a servant without pay until the debt is paid is unlawful and unconstitutional because it is
equal to involuntary servitude. And also, it is in contrary to public policy, so it is void. Because in accordance with Article
1347. 3rd paragraph. All services which are not contrary to law, morals, good customs, public order, or public policy may
likewise be the object of a contract, and Article 1352. Contracts without cause, or with unlawful cause, produce no effect
whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.
*A is incorrect because even if to work as a servant is void, it is not immoral
*B is incorrect because like in the above statement, to work as a servant for payment of the debt is unlawful and in
contrary to public policy.
* C is incorrect because the agreement to work without pay is unenforceable.

____44. One of the stipulations contained in the contract between M company and its employees is that the company
shall pay a bonus to employees of the company who shall continue its employment for at least 2 consecutive years unless

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he quits or is discharged before the expiration of the period of 2 years. X, an employee of the company was discharged
without just cause, one week before the completion of the two-year period. Which is correct? (REFRAN)
a. X is not entitled to the bonus because his discharge was in accordance with the contract.
b. X is not entitled to the bonus because the employer’s right to terminate is superior than the right of employee to
be employed.
c. X is entitled to the bonus whether the discharge is with or without cause.
d. X is entitled to the bonus because the debtor company has voluntarily prevented the happening of the
condition.

ANSWER is letter D. X is entitled to the bonus because the debtor company has voluntarily prevented the
happening of the condition.
Because according to the THE LABOR CODE OF THE PHILIPPINES PRESIDENTIAL DECREE NO. 442, AS
AMENDED, ART. 279, an employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full back wages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. That’s why X is entitled to receive bonus as to his full back wages that refer to all
compensations, including allowances and other benefits with monetary equivalent that should have been earned
by the employee but was not collected by him or her because of unjust dismissal. It includes all the amounts he or
she could have earned starting from the date of dismissal up to the time of reinstatement.
My Answer is not Letter A, B or C
Because based on Security Tenure Section 1 “In case of project employment or employment covered by
legitimate contracting or subcontracting arrangements, no employee shall be dismissed prior to the completion of
the project or phase thereof for which the employee was engaged, or prior to the expiration of the contract
between the principal and contractor unless the dismissal is for just or authorized cause subject to the
requirements of due process or prior notice, or is brought about by the completion of the phase of the project or
contract for which the employee was engaged”. The just cause termination, usually serious or grave in nature and
attended by willful or wrongful intent or they reflected, is not entitled to payment of separation benefits as provides
in Article 282. Right to terminate is superior than the right of employee to be employed has particular cause of
action actually contemplates in two distinct situations: one is a case where the employee commits an act which is
improper and which transgresses an established rule of conduct, and the other is what is commonly known as
insubordination.

DLSL CPA Board Operation – Business Law

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