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University of Nueva Caceres School of Law Obligation and Contracts Final Examinations I. A. What is the status of a contract of sale of a real property which was orally made? Explain your answer. Answer: The status of a contract of sale of a real property which was orally made is a valid contract. The Civil Code provides that the elements for a valid contract are consent, object, and cause or consideration, but for real property, delivery is an additional element. Moreover, same law states that a contract as a general rule does not have a form but it could either be oral or written as to its classification. Here, the contract of sale of a real property was made only orally, therefore it consisted of all the essential elements of a valid contract regardless of its form. Thus, the contract ’ s status is a valid contract although it was not reduced into writing. B. Is a deed of sale of a real property which was not notarized valid? What would be its implications? Explain your answer. Answer: Yes. A deed of sale of a real property which was not notarized is valid. Under the law, private documents which are executed by a person is binding only as to both parties, namely the executor of such document and the other party. However, for such document to be used in transacting to the public, it has to be notarized by a lawyer which transforms said document from private to public in character. In this case, the deed of sale of a real property can only be considered as a private document and not a public document as it is not duly notarized by a lawyer and therefore such document cannot be used or presented in transacting with the agencies of the government and to the public, but only to the other party and the executor of such deed of sale of a real property. Hence, the deed of sale of a real property can only be used within the bounds of the transaction of the two parties and nothing more, it being only a private document. II. Spouses Benjamin C. Mamaril and Sonia P. Mamaril (Spouses Mamaril) are jeepney operators. They park their passenger jeepneys every night at the Boy Scout of the Philippines (BSP) for a fee per month for each unit. As usual, all these vehicles were parked inside the BSP compound one evening. However, the following morning, one of the vehicles was missing and was never recovered. According to the security guards Cesario Pe (Pe) and Vicente Gaddi (Gaddi) of AIB
Security Agency, Inc. (AIB) with whom BSP had contracted (Guard Service Contract) for its security and protection, a male person who looked familiar to them took the subject vehicle out of the compound. Is BSP liable on the Guard Service Contract and the parking ticket issued? Answer: No. BSP is not liable on the Guard Service Contract and the parking ticket issued. The Civil Code states that a party may be liable for damages if due to his negligence, a damage was caused to another. Here, the Spouses Mamaril are jeepney operators who park their passenger jeepneys every night at the BSP for a fee per month for each unit. However, the following morning, one of the vehicles was missing and was never recovered. According to the security guards Pe and Gaddi of AIB with whom BSP had contracted for its security and protection, a male person who looked familiar to them took the subject vehicle out of the compound. Clearly, it was the security guards Pe and Gaddi, they being employees of AIB under the Guard Service Contract contracted by the BSP whom had the liability to the Spouses Maril as it was them who did not exercise due diligence in their work and let such event to happen under the said contract. Consequently, under the same law, the contract of letting someone enjoy or make use of such property in exchange of a thing such as money is a lease contract. In this case, Spouses Mamaril who are jeepney operators park their passenger jeepneys every night at the BSP for a fee per month for each unit which shows that they have entered into a contract of lease with BSP. Therefore, the BSP is not in any way obligated or responsible for whatever may happen to the property of Spouses Maril as they have already complied with their obligations under the contract which is to let the Spouses lease the parking area inside the BSP compound. III. Krystal owns a parcel of land covered by TCT No. 12345 in Angeles City, due to severe financial constraints, Krystal sold the property to RBP Corporation, a foreign corporation based in South Korea. Subsequently, RBP Corporation sold the property to Gloria, one of its most valued clients. Wanting her property back, Krystal, learning of the transfer of the property from RBP Corporation to Gloria, sued both of them in the Regional Trial Court (RTC) for annulment of sale and for reconveyance. She alleged that the sale by RBP Corporation to Gloria was void because RBP Corporation was a foreign corporation prohibited by the Constitution from acquiring and owning lands in the Philippines. Will Krystal’s suit for annulment of sale and reconveyance prosper? Explain your answer. Answer: No. Krystal’s suit for annulment of sale and reconveyance will not prosper. Under the Doctrine of Pari Delicto, the parties who are both liable or who acted in bad faith cannot as a remedy file against the other to go after the other party for their actions which caused for them to incur damages. In this instance, Krystal who owns a parcel of land covered by TCT No. 12345 in Angeles City, sold said property to RBP Corporation, despite knowing it to be a foreign
which can be subsequently declared as void or annulled unless it be ratified. Both contracts may be enforced but may be subsequently be unenforceable after it is rescinded or annulled. Cite the legal basis from the Civil Code and explain the effects on enforceability. VI. Nina and Olive entered into a contract over email for the sale of a rare art piece for ₱250,000. Olive claims the contract is unenforceable because there was no written signature or physical meeting. Nina insists it is binding. Was the contract perfected? Is a digital exchange of consent valid under the Civil Code? Answer: Yes. The contract was perfected. Under the laws including the Civil Code, digital exchange of consent is valid. For a contract to be perfected, it is essential that the elements of consent, object, and cause or consideration be satisfied. In this case, the communication through email by both parties Nina and Olive shows that the element of consent was present. Moreover, the rare art piece represents the 2nd^ element, the object. Finally, the payment of ₱ 250,000 for such object, the rare art piece satisfied the 3 rd^ and last element of a contract. Hence, the contract was perfected, having all the elements of contract present. Furthermore, jurisprudence provides that mere like sign or affirmative words, phrases or gestures as a digital exchange is considered as valid consent for a contract of sale under the law such as in the case of online shopping, provided that the other elements of a contract be satisfied. VII. Lucio agreed to sell his farm to Ramon for ₱1.5 million. Their agreement was reduced to writing by Lucio’s assistant, but the document mistakenly stated that the object was “residential lot” instead of “agricultural land.” A. Under Article 1359, what remedy is available to Lucio? B. What conditions must be met for this remedy to be granted? Answer: Under Article 1359 of the Civil Code, the remedy is available to Lucio is the reformation of the contract. The said law provides that in cases there are mistakes or errors committed in the course of the perfection of a contract, such contract can be reformed to include the original intents of the parties, provided that: 1.) That said reformation will inure to the benefit of both parties; 2.) That the contract being subject to reformation is not a void contract; 3.) That said reformation was done with the consent of the other party and; 4.) That the reformation will
not include any additional modifications not contemplated by both parties but only to correct such mistakes or errors committed. Here, Lucio agreed to sell his farm to Ramon for ₱1. million. Their agreement was reduced to writing by Lucio’s assistant, but the unfortunately, the document mistakenly stated that the object was “residential lot” instead of “agricultural land.” Hence, said mistake only being a clerical in nature and is with the consent of the party as it was expressly stipulated that the property that was sold was a farm land, the reformation of said contract is in order. VIII. Kiks leased his building to Tin for ten years at Php 1,200,000.00 per year, payable within the first ten days of the current year. The lease included a clause stating that in case of breach, Tin would pay five monthly rentals and attorney’s fees. Five year s into the lease, Tin terminated the lease and offered to pay five monthly rentals. Kiks sued for the rentals due for the remaining five years. Tin contends that her liability should be limited to five monthly rentals and attorney’s fees. Is there a penalty clause in the lease agreement? Explain briefly. As between Kiks and Tin, who is correct? Explain briefly. Answer: Yes. There is a penalty clause in the lease agreement. Under the Civil Code, accessory penalty may be included in the contract for violation or breach of such contract apart from the principal obligation to be paid. Here, Kiks leased his building to Tin for ten years at Php 1,200,000.00 per year, payable within the first ten days of the current year. The lease included a clause stating that in case of breach, Tin would pay five monthly rentals and attorney’s fees. Said clause clearly indicates that the intention of such clause is to provide penalty for breach of said contract which means the failure to pay within the first ten days of the current year or to be in default of such payment. As between Kiks and Tin, it is Kiks who is correct in her contention. Their contract of lease clearly indicate that the penalty clause provided in said contract was particularly for the default in payment or failure to pay within the first ten days of the current year and not for the remaining 5 years rental due. In this case, Tin terminated the lease and offered to pay five monthly rentals. Tin undeniably misinterpreted the application of said penalty clause in the lease of contract as her offer to pay 5 monthly rentals cannot be considered as payment for the penalty since she did not fail to pay within the time prescribed or in default of such payment, but she unilaterally terminated the lease contract. Therefore, Kiks, correctly contended and sued for the rentals due for the remaining five years. IX.
XI.
Allan and Bernice executed a Deed of Absolute Sale covering a parcel of land, but both parties understood that it was only to serve as security for a loan. Allan now claims ownership as the deed appears valid on its face. What is the nature of the contract and who owns the land? Answer: The nature of the contract is a valid one. The Civil Code provides that the elements for a valid contract are consent, object, and cause or consideration, but for real property, delivery is an additional element. Here, Allan and Bernice executed a Deed of Absolute Sale covering a parcel of land, but both parties understood that it was only to serve as security for a loan. Therefore, it is clear that the element of consent was present, the object which is the parcel of land and the cause which is serve as security for a loan. Consequently, the land is now owned by the one who loaned to them as they surrendered the ownership to said person after they executed a Deed of Absolute Sale covering the said parcel of land which they understood that it was to be used as security for a loan.
