LAW ON OBLIGATIONS AND CONTRACTS AND THE NEGOTIABLE

INSTRUMENTS LAW

SUSANA ELAINE SANTIAGO

QUIZ 1
Instruction. Answer each essay questions concisely and with legal basis. Answer without
any legal basis shall not be given any credit. Use a separate sheet for your answer. Do not
forget to write your complete name.

Problem 1

JOHN is the owner of a parcel of land located in Cordon, Isabela with an area of 1,000
square meters. When he married his long time girlfriend, LUDY, they decided to
establish and build their residence in the said lot. JOHN and LUDY engaged the services
of BONG, their trusted building contractor, who committed to finish the house in 6
months for a fee anointing to Five Million Pesos (PhP5,000,000.00). The terms and
conditions of their contract were reflected in the Construction Agreement that they
executed.
1. Enumerate and discuss the essential requisites of an obligation. (10 points)
a) An active subject, who has the power to demand the prestation, known as the
creditor or oblige.
b) A passive subject, who is bound to perform the prestation, known as the debtor
or obligor.
2. In the given problem, determine and discuss the essential requisites of the obligation.
(10 points)
a)

Problem 2

The definition of obligation provided by Article 1156 is said to be in its passive aspect.
Explain why is this the observation. (10 points)

 Passive aspect of obligation – The definition of commitment is in its passive

aspect. Meaning, that our law just stresses the duty of the debtor when it talks of
commitment as a juridical need.

Problem 3

Refer to Problem 1, if the parties agreed for the construction of the house orally, will
there be a valid obligation? (10 points)

 No. There are key elements for a contract to be consider valid, these are (a)
agreement, (b)Capacity, (c ) Consideration, and (d) intention. Under these
elements are characteristics that must be considered and one of these is, it is best
to have a written contract in place.
Problem 4

Distinguish real obligation from personal obligation and give examples of each kind. (10
points)

 Real Obligation - it means legal obligation that is connected with real property.
It is a duty that corresponds to real right. It is also an obligation of a person that
refers to those duties that a person must perform in return for the rights that s/he
exercises. Example is Mortgage.
 Personal Obligation - It means any liability or other obligation accrued,
incurred, or payable by the company. It is also an obligation to do or to render
services.
SUSANA ELAINE SANTIAGO

QUIZ 2
Instruction. Answer each essay questions concisely and with legal basis. Answer without
any legal basis shall not be given any credit. Use a separate sheets of paper for your
answer. Do not forget to write your complete name.

Problem 1

May a person incur obligations even without entering into any contract or voluntary
agreement? Explain your answer. (10 points)

 Completely. Verbal or composed assertions are legally binding commitments, a

few are lawfully enforceable. At that point, to human existence, there's another
side—nonlegal, in case you will—that is moral. The only thing that upholds, or
way better, strengthens is your humility and conscience.

Say, on the off chance that somebody makes a difference you without your
having inquired for help, or amplifies a kindness, or out of the blue does unto you
an act of kindness—then in all these scenarios, you have got caused an ethical
commitment without having entered into a verbal or composed legally binding
assertion. In rare cases, you get an unexpected inheritance from someone…the
same thing. You're committed to the one who granted to you.

Problem 2

JOAN lend NICOL the amount of PhP10,000.00 as loan due for payment on June 30,
2020. Upon maturity of the obligation, NICOL paid JOAN the amount of PhP20,000.00
which the latter received. Is JOAN oblige to return the PhP10,000.00 over payment of
NICOL even if the two did not agree on such terms? Why? (10 points)

 No. Discussing interest starts with the principal, amount your account starts
with. This could be the starting amount of loan. Interest, in its simple form, is
calculated as a percent of the principal. Maturing obligations means the principal
and/or interest on an insured debt obligation payable on a specific date for which
one is primarily liable.

Problem 3

JUDY, in the evening of June 12, 2020, was robbed by JEFF while she was on her way
home to Brgy. Patul, Santiago City. JEFF took her wallet containing PhP10,000.00 and
forcibly grabbed JUDY’s cellphone but the latter resisted. Because of her resistance, the
cellphone was dropped to ground breaking its screen and was totally disintegrated.

1. What is the liability of JEFF, if any, with regard to the PhP10,000.00. Why? (10
points)
  Since Jeff is describe as the robber in the scenario, Jeff is liable for the loss of
Php 10,000.00 of Judy.

2. What is the liability of JEFF, if any, with regard to the JUDY’s cellphone. Why? (10
points)

 Jeff forcible tries to grab Judy’s cellphone together with her money. Therefore,
he is liable for the breaking of the cellphone.

Problem 4

DAME was driving his car on his way home. While he was driving, he switched on his
radio and his favor song “Pusong Bato” was playing. When the song reached its chorus,
he couldn’t help himself but to sing in unison. When he sang the chorus, he sang it from
the heart and when he reached the highest note of the song, he closed his eyes and when
he opened his eyes, he was surprise to see ALLEN in front his car. He tried to avoid
ALLEN but it was too late. He hit ALLEN and sustained injuries and incurred expenses
amounting to PhP100,000.00. Is DAME liable to pay the expenses incurred? Why? (10
points)

 Yes, Dame is liable for what he caused to Allen. He (Dame) is not supposed to
be using his phone while he is driving in the street especially in the residential
area.
SUSANA EAINE SANTIAGO

QUIZ 3
Instruction. Answer each essay questions concisely and with legal basis. Answer without
any legal basis shall not be given any credit. Use separate sheets of paper for your
answer. Do not forget to write your complete name.

Problem 1

Distinguish specific/determinate thing from generic/indeterminate thing. What is the

significance of knowing the distinction? (10 points)

 Determinate is an undefined expression involving some operation between two

quantities is called determinate form if it evaluates to a single number value or
infinity.
 Indeterminate form is an expression involving two functions whose limit cannot
be determined solely from the limits of the individual functions.

Problem 2

JOANA, a well known businesswoman, bought the ten door apartment of JUSTINE for
PhP10,000,000.00 in March 5, 2020. However, despite the sale, JUSTINE did not yet
deliver the possession of the apartment to JOANA. The apartment is full occupied and is
earning rental income in the amount of PhP100,000.00 per month. Because of the
demand of JOANA, JUSTINE delivered the possession of the apartment to JOANA only
on June 5, 2020. Who is entitled to rental incomes from March 2020 to June 2020? Why?
(10 points)

 If Justine and Joana agreed that upon receiving the full payment of the Rental
Apartment, Joana should have the possession of the rent from March to June
then Joanna must be the one in possession with the monthly rental even in
Justin’s neglect to transfer of the possession.x

Problem 3

MOY, in celebration of his 60th birthday in September 25, 2020, ordered a cake from his
favorite bakeshop owned by JODIE. The cake was however delivered a day after. The
law provides that before a party may be held in default, demand to comply with his
obligation is necessary. Here, considering that MOY did not may any demand from
JODIE, he cannot be held liable for default. Do you agree? Why? (10 points)

 Yes. Considering what the law says, it needs to be demanded for the responded
be held liable at any cost for not delivering the cake in day of the party.
Problem 4

Distinguish causal fraud from incidental fraud. (10 points)

 Casual Fraud (Dolo Causante) - it is a fraud in getting the consent to a contract.

It renders the contract defective and subject it to annulment at the same time
giving the innocent party a right also to ask for damages.
 Incidental Fraud (Dolo Incidente) - it is a fraud in the performance of an
obligation. It renders the guilty party liable for damages. It does not affect the
contract’s validity.

5. What is the kind of fraud that is considered as a ground for liability under Article 1170
of the New Civil Code. Explain. (10 points)

 Under Article 1170 of the Civil Code of the Philippines, those who in the
performance of their obligation are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
Pursuant to said article, private respondent is liable for damages. (lawphil.net)
SUSANA ELAINE SANTIAGO

QUIZ 4
Instruction. Answer each essay questions concisely and with legal basis. Answer without
any legal basis shall not be given any credit. Use separate sheets of paper for your
answer. Do not forget to write your complete name.

Problem 1

Discuss the stages of a contract. (10 points)

1. Contract Preparation - Identifying needs, establish goals, and define risks. Properly
identifying the needs, reasons, and ultimate goals that require a contract makes any
decisions down the line much easier.
2. Author the Contract - When drafting or authoring the terms of the contract, it’s
important to pay attention to specific wording. Any ambiguity leaves contracts up for
interpretation, even down to a comma. State and country laws also need to be taken into
consideration. This is especially true if the two parties are in different locations.
3. Negotiate the Contract - Email and offline documents can be confusing and cause
costly mistakes. A single source of truth for conversations and contracts will result in
quicker negotiations and a contract that provides visibility for both sides.
4. Get Approval before finalizing the contract - Simply put, whoever needs to approve the
contract receives a notification and can view, edit, and comment on the contract in real
time.

Problem 2

AARON and EDISON entered into a contract not specifically provided in the Civil Code.
Is the contract valid and binding? Why? (10 points)

Problem 3

What makes a contract valid? (10 points)

 The Civil Code defines a contract as “a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to
render some service.” For there to be a valid contract, these three elements must
be present: consent, object, and cause.

Problem 4

What is a rescissible contract? (5 points)

 A rescissible contract is one that was entered into legally by the contracting
parties but has resulted in economic damage to one of the parties or an outside
party. The court can therefore rescind, or set aside, the contract for equitable
reasons.
Problem 5

Distinguish annulment of a voidable contract from ratification of a voidable contract. (5

points)
 Annulment of a voidable contract - A voidable contract may be invalidated
through the remedy of annulment, which restores the parties to the positions they
would have had if the contract had not been made. Such annulment is applicable
even though the contract has not yet cause damage to the contracting parties.
 Ratification of a voidable contract- Ratification is the procedure to correct a
voidable contract and requires all parties to the contract to negotiate new terms
that eliminate the issue that made it voidable. ... If one or both parties no longer
wishes to be bound by the contract, it can be voided on the grounds that one
party could not legally sign.

Problem 6

What is an unenforceable contract? (5 points)

 An unenforceable contract is one which cannot be enforced in a court of law on
account of some technical defects like want of a written form or stamp. Some
unenforceable contract can be enforced in a court of law if the technical defect is
removed.

Problem 7

What are the characteristics of a void or in-existent contract? (5 points)

1. Cannot be ratified.
2. Set up defense of illegality cannot be waived.
3. Action or defense for the declaration of the inexistence of a contract does not
prescribe.
4. The defense of illegality of contracts is not available to third persons whose
interest are not directly affected.
5. Void and inexistent as a direct result of previous illegal contract.
SUSANA ELAINE SANTIAGO

QUIZ 5
Instruction. Answer each questions concisely and with legal basis. Answer without any
legal basis shall not be given any credit. Use a separate sheet for your answer. Do not
forget to write your complete name.

Question 1
How do negotiable instruments play an important role in trade and commerce? (5 points)
 The negotiable instruments promote non-cash transactions, making it convenient
to pay the exact amount, dully accounted, explainable to tax officials. There
must be a consideration (sale of goods, borrow/lending of money) for the
amount contained in the instrument, otherwise, the instrument is called
‘accommodation..’ which is not considered legal in some circumstances.
 Some such instruments can be negotiated to a third party(often called
‘discounted to’) and the concept of ‘holder in due course comes in, legally
inheriting the rights to claim the committed amount.

Question 2
Is negotiable instrument a legal tender? Why? (5 points)


Question 3
In case of doubt as to the negotiability of an instrument, should it be held negotiable or
not? Why? (5 points)
 Clearly, it depends on what’s within the instrument, and how doubtful a case
they can make. However who created the instrument is mindful of any
uncertainty that can be claimed: as the premise to translate from. In the event
that the ambiguity’s in there, in a plain exacting sense, at that point the creator is
dependable for putting it in and maybe held so. The receivers craved take maybe
(in case it comes to it) judged as a sensible elucidation of the instrument. The
provider may honor that take. It was there for the taking.

Question 4
Distinguish negotiable promissory note from a negotiable bill of exchange. (5 points)
 A promissory note is a negotiable instrument that allows the holder to transfer
that instrument in the same way that cash can be transferred.
 A bill of exchange is a negotiable instrument signed and issued by the drawer
authorizing the drawee to pay unconditionally at a fixed future date a sum
certain in money to the payee or holder.

Question 5
What are the formal requirements of a negotiable bill of exchange? (5 points)
 It must be in writing and signed by the maker
 It must contain an unconditional order to pay a sum certain in money
 It must be payable on demand, or at a fixed or determinable future time
  It must be payable to order or to bearer
 The drawee must be named or otherwise indicated therein with reasonable
certainty

Question 6
Who are the original parties to a promissory note and a bill of exchange. Identify them. (5
points)
 Promissory Note- Drawer and Payee
 Bill of Exchange - Drawer, drawee, and payee.

Question 7
Determine and explain whether the following are negotiable instruments or not. (4 points
each)
a. A bill of exchange signed by W addressed to X states: Please pay Y or order
PhP10,000.00. NOT A NEGOTIABLE INSTRUMENT
b. I promise to pay X PhP10,000.00 within 10 days before I retire from government
service. NEGOTIABLE INSTRUMENT
c. I promise to pay X or order PhP10,000.00 on or before September 30, 2016 following
the terms and conditions executed by W this date. NEGOTIABLE INTRUMENT
d. I promise to pay X PhP10,000.00 or if he wants a brand new 6 cubic feet refrigerator.
NOT A NEGOTIABLE INSTRUMENT
e. W, maker of a promissory note which reads: I promise to pay X or order PhP50,000.00
after I sell my car. The following day, W was able to sell his car. NEGOTIABLE
INSTRUMENT.