SAMPLE BAR QUESTIONS Obligations are extinguished by payment/performance.

Asian Construction and Development Corp. v. Mero

1) Delay + Tender/Consignation + Damages Structures, Inc. (2021)

Bar Question Application: Creditor made no prior demand; debtor

paid the principal in full; the accessory penalty cannot
D owes C ₱500,000 payable on June 30. On June 30, D
survive the extinguishment of the principal obligation
went to C’s house to pay in cash, but C refused to issue a
absent the conditions for mora.
receipt unless D agreed to pay an additional “processing
fee.” D left with the money and did not consign it in court. Conclusion: Penalty is not recoverable.
On August 1, C sued D for collection plus damages for
delay. Is D in delay and liable for damages?

ALAC
3) Alternative vs Facultative + Loss + Fortuitous
Answer: Yes. D is in delay and may be liable for Event
damages.
Bar Question
Legal Basis: Delay begins only upon judicial or
D bound himself to deliver to C either (a) specific car X or
extrajudicial demand, subject to exceptions; filing the
(b) specific car Y (D has the choice). Before D
complaint is a judicial demand when extrajudicial demand
communicated his choice, car X was destroyed by a
is not proven. Civil Code of the Philippines (1949); Pineda
fortuitous event. Later, D chose car Y but delayed
v. Zuñiga Vda. de Vega (2019)
delivery. Car Y was then stolen during the delay. Is D
Tender of payment does not by itself extinguish the
liable?
obligation when the creditor refuses; debtor must
generally resort to consignation to be released, and ALAC
consignation alone may suffice in specified cases
(including unjust refusal to issue a receipt). De Leon v. Answer: Yes, for the loss of car Y after delay.
Manufacturers Life Insurance Co. (Phils.) Inc. (2021)
Legal Basis: Those who incur in delay are liable for
Application: C’s refusal to issue a receipt was unjust, damages; delay arises upon demand (or its exceptions).
but D did not consign. Without consignation, the Civil Code of the Philippines (1949)
obligation was not extinguished; once C filed suit, D was In obligations, those guilty of fraud/negligence/delay or
placed in default by judicial demand. who contravene tenor are liable for damages. Civil Code
of the Philippines (1949)
Conclusion: D is in delay from judicial demand and may Fortuitous event generally excuses liability, but not where
be liable for damages/interest. debtor is already in delay (fortuitous event exception by
delay is a standard pairing in this chapter). Based on
internal knowledge of Philippine law.

2) Penal Clause + Demand (Mora) + Application: Loss of car X before choice generally leaves
Extinguishment by Full Payment car Y as remaining object. Once D delays delivery of car Y
(after demand or applicable exception), subsequent loss
Bar Question (theft) during delay does not excuse him.

A loan note provides: “Pay ₱1,000,000 on Dec. 31 with Conclusion: D is liable for the loss of car Y and damages.
3% monthly penalty for delay.” Debtor paid the full
principal on Jan. 15. Creditor never sent a demand letter
before Jan. 15. After receiving payment, creditor sued to
collect the penalty for the Jan. 1–15 period. Can the 4) Solidary Liability Not Presumed + Wording “We
penalty still be recovered? promise to pay” + Demand
ALAC Bar Question
Answer: No. A, B, and C signed a promissory note stating: “We
promise to pay X ₱900,000 on demand.” It does not say
Legal Basis: Debtor incurs delay only from judicial or
“solidary.” X sued A alone for the entire ₱900,000 without
extrajudicial demand, unless demand is excused under
making any prior demand letter. (a) Is the liability
Art. 1169. Civil Code of the Philippines (1949)
solidary? (b) Is A in delay?
A penal clause is accessory and cannot exist
independently of the principal obligation; when the ALAC
principal is extinguished by full payment, the penalty is
likewise extinguished, especially where no demand Answer: (a) No, it is presumed joint. (b) A is in delay
placed debtor in delay prior to extinguishment. Social from judicial demand (filing of complaint) if no
Security System v. Moonwalk Development & Housing extrajudicial demand is proven.
Corp. (1993)
Legal Basis: Solidary liability exists only when expressly suspensive condition, so rescission is unavailable.
stated, or when law/nature requires it; otherwise Resolve.
presumption is division into shares. Civil Code of the
Philippines (1949) ALAC
Delay begins from judicial/extrajudicial demand;
Answer: Seller may seek rescission if the agreement is a
complaint can serve as judicial demand. Civil Code of the
contract of sale, not a contract to sell.
Philippines (1949); Pineda v. Zuñiga Vda. de Vega (2019)
Legal Basis: A contract of sale is perfected upon
Application: “We promise to pay” without “solidarily” is
meeting of minds as to object and price; absent an
insufficient to create solidarity; X may recover only A’s
express stipulation reserving title until full payment, it is
share in principle. As to delay, absent proof of demand
not a contract to sell. Taok v. Conde (2023)
letter, filing suit places A in default.
In a contract to sell, full payment is a positive
Conclusion: Joint obligation; delay runs from judicial suspensive condition; non-fulfillment is not breach, and
demand. rescission is unavailable because there is no existing
obligation to convey title. Taok v. Conde (2023)
In reciprocal obligations (sale), the injured party may
choose rescission or fulfillment with damages in case of
5) Novation Not Presumed + “Collect from Third substantial breach. Taok v. Conde (2023)
Party” Arrangement
Application: Since the agreement contains object, price,
Bar Question and no express title reservation, it is a contract of sale;
nonpayment is substantial breach.
D owes C ₱2,000,000. Later, C agreed in writing: “You
may pay from the proceeds that T will remit to you; I will Conclusion: Rescission under Art. 1191 is available.
collect directly from T.” T never consented and did not
pay. C sued D. D claims the obligation was extinguished
by novation because C agreed to collect from T. Decide.
7) Extinguishment by Payment +
ALAC Foreclosure/Collection Choice (Election of
Remedies) + Delay
Answer: No novation; D remains liable.
Bar Question
Legal Basis: Obligations are extinguished by novation
only under Art. 1231 and related rules. Asian Construction C loaned D ₱3,000,000 secured by real estate mortgage.
and Development Corp. v. Mero Structures, Inc. (2021) D defaulted. C filed a collection case and, while it was
Novation requires express and unequivocal declaration of pending, also initiated foreclosure. D argues C cannot do
extinguishment, or total incompatibility; mere permission both; also claims he is not in delay because there was no
to collect from a third party does not constitute novation demand letter. Is D correct?
absent clear substitution and consent. Asian Construction
and Development Corp. v. Mero Structures, Inc. (2021) ALAC
A debtor’s obligation is not extinguished by a separate
Answer: C cannot pursue both collection and foreclosure;
contract with a third party absent clear novation or
D may still be in delay from judicial demand.
creditor’s express conformity. Metro Concast Steel Corp.
v. Allied Bank Corp. (2013) Legal Basis: For a loan secured by mortgage, creditor
may file personal action for collection or real action for
Application: The arrangement is at most an
foreclosure, but not both (mutually exclusive). Pineda v.
accommodation on mode/source of payment; no clear
Zuñiga Vda. de Vega (2019)
extinguishment nor third-party consent to substitution.
Delay begins from judicial/extrajudicial demand; filing suit
Conclusion: No novation; D remains liable to C. is judicial demand placing debtor in default if extrajudicial
demand is not proven. Civil Code of the Philippines
(1949); Pineda v. Zuñiga Vda. de Vega (2019)
Liability for damages arises for
6) Contract of Sale vs Contract to Sell + fraud/negligence/delay/contravention. Civil Code of the
Suspensive Condition + Remedy of Rescission Philippines (1949)

Bar Question Application: C must elect remedy; cannot

simultaneously collect and foreclose. On delay, absence
Seller and Buyer signed an “Agreement” for a house and of demand letter is not fatal if judicial demand exists via
lot stating the price and payment terms. It does not state complaint.
that title transfer is conditioned on full payment. Buyer
failed to pay the balance. Seller filed an action for Conclusion: D is correct on election of remedies; not
rescission under Art. 1191. Buyer argues it’s a contract to necessarily correct on delay.
sell; failure to pay is not a breach but non-fulfillment of a
8) Payment/Extinguishment + Accessory (Consignation is a mode within payment rules.) De Leon
Stipulations + “Processing fees” after full payment (2021)

Bar Question Application: Competing claimants fall squarely under

the exception allowing consignation without prior tender.
Debtor fully paid the principal loan. After payment,
Creditor demanded additional “service charges” and Conclusion: Consignation is proper; D should avoid
threatened suit. Debtor claims the obligation is delay/interest if procedural requisites are complied with.
extinguished and accessory charges cannot be collected.
Resolve.

ALAC 10) Solidary by Nature/Law + Partnership Loan Use

+ Liability
Answer: Generally, yes—upon full payment, the principal
obligation is extinguished; accessory obligations Bar Question
dependent on it cannot subsist unless validly due prior to
extinguishment. A and B are partners. A borrowed money from C “for the
partnership business,” and the proceeds were used for
Legal Basis: Payment/performance extinguishes partnership operations. The partnership later failed and C
obligations. Asian Construction and Development Corp. v. sued A and B. B argues he never signed and is not liable.
Mero Structures, Inc. (2021) Is B liable?
Accessory penal clause cannot exist without principal;
once principal is fully paid, penalty is extinguished and ALAC
cannot be demanded after. Social Security System v.
Moonwalk Development & Housing Corp. (1993) Answer: Potentially yes, depending on proof that the
Delay/penalty typically requires demand to make mora loan was for partnership purposes and benefited the
exist (absent exceptions). Civil Code of the Philippines partnership; partners may be held solidarily liable to a
(1949) third party in such circumstances.

Application: If charges are in the nature of penalties for Legal Basis: Solidary liability exists when law or the
delay or accessory fees not properly triggered before full nature of the obligation requires it. Civil Code of the
payment, they cannot be demanded after Philippines (1949)
extinguishment. When a loan is contracted for partnership purposes and
proceeds are used in furtherance of the partnership
Conclusion: Debtor’s position should prevail, subject to business, partners may be held solidarily liable to the
proof the fees were not independently due. creditor. Bendecio, et al. v. Bautista (2021)
Obligations arise from contracts; liability for damages
arises for delay/fraud/negligence/contravention where
applicable. Civil Code of the Philippines (1949)
9) Consignation Alone (No Tender Needed) +
Multiple Claimants + Delay/Interest Application: If the debt is shown to be a partnership
obligation, B cannot evade liability merely by non-
Bar Question signature.

D owes C ₱800,000 due today. Two persons (C and X) Conclusion: B may be held liable; solidarity depends on
both claim to be the rightful creditor because the the nature/law as applied to partnership dealings.
promissory note was allegedly assigned. D is unsure
whom to pay and files a consignation case without prior
tender to either claimant. Is consignation valid? Is D in
delay? 11) Suspensive Condition + Demandability + “Non-
breach” framing
ALAC
Bar Question
Answer: Consignation may be valid even without prior
tender; D should not be in delay if consignation is C promised to pay D ₱300,000 “if D obtains a
properly made. government permit by Sept. 30.” D did not obtain the
permit. D sued C for breach and damages. Is C liable?
Legal Basis: Consignation alone is sufficient even
without prior tender when two or more persons claim the ALAC
same right to collect. De Leon v. Manufacturers Life
Insurance Co. (Phils.) Inc. (2021) Answer: No, if the obligation was subject to a suspensive
Delay starts from judicial/extrajudicial demand. Civil Code condition that did not happen.
of the Philippines (1949)
Legal Basis: Pure obligations are demandable at once;
Obligations are extinguished by payment/performance,
conditional obligations depend on the condition’s
which includes proper legal deposit when payment
happening; resolutory conditional obligations are
cannot be made directly due to lawful causes.
demandable at once. Civil Code of the Philippines (1949) Legal Basis: Novation must be clearly and unequivocally
In conditional obligations, acquisition of rights depends established; substitution of debtor requires creditor’s
upon the happening of the event constituting the express consent. Bendecio, et al. v. Bautista (2021)
condition. Civil Code of the Philippines (1949) For novation to extinguish the old obligation, it must be
Damages for breach declared in unequivocal terms or old/new obligations
(fraud/negligence/delay/contravention) presuppose a must be incompatible in every respect. Asian
demandable obligation. Civil Code of the Philippines Construction and Development Corp. v. Mero Structures,
(1949) Inc. (2021)
Obligations are extinguished by novation under Art. 1231.
Application: The permit is a suspensive condition; non- Asian Construction (2021)
fulfillment means no right to demand arose; hence no
breach. Application: Mere acceptance of payment may be
ambiguous; without clear assent to release D and accept
Conclusion: No liability for breach/damages. X as new debtor, D remains liable.

Conclusion: D remains liable absent clear creditor

consent.
12) “Pay when my means permit” = Period + Court
Fixing (Art. 1197 idea) + Delay

Bar Question 14) “We promise” Joint Debt + Indivisibility ≠

Solidarity
D signed: “I promise to pay C ₱200,000 when my means
permit.” After two years, C sued for collection. D argues Bar Question
the debt is not yet due because his means do not permit.
Decide. A, B, and C promised to deliver one specific racehorse to
X (only one horse exists). Contract is silent on solidarity.
ALAC Horse delivery is indivisible. X sued A alone to compel
delivery and damages. Is A alone liable for the entire
Answer: The obligation is deemed one with a period; the
obligation?
court may fix the period, and upon judicial demand, delay
consequences may follow. ALAC

Legal Basis: “Pay when my means permit” is deemed an Answer: Not necessarily; indivisibility does not
obligation with a period subject to Art. 1197. Civil Code of automatically create solidarity.
the Philippines (1949)
Delay begins from judicial demand. Civil Code of the Legal Basis: Solidary liability exists only when expressly
Philippines (1949) stated or when law/nature requires it. Civil Code of the
Damages may be imposed for delay/contravention. Civil Philippines (1949)
Code of the Philippines (1949) Indivisibility does not necessarily give rise to solidarity,
and solidarity does not imply indivisibility. Civil Code of
Application: The stipulation does not make it purely the Philippines (1949)
conditional; it is treated as with a period to be fixed by Damages for contravention/delay may be claimed upon
the court if necessary. breach. Civil Code of the Philippines (1949)

Conclusion: Court may fix period; suit may prosper Application: The obligation is indivisible (one horse), but
depending on fixing and demand. if not solidary, enforcement generally requires proceeding
against all debtors for full compliance.

Conclusion: X generally must proceed against all

13) Novation (Substitution of Debtor) + Creditor debtors; A alone is not automatically bound for the whole.
Consent Indispensable

Bar Question
15) Contract Perfection + Clear Terms + Parol
D owes C ₱1,000,000. D and X agreed that X will assume
Evidence (Contract Law link)
the debt. D informed C after the fact. C did not expressly
agree but later accepted one small payment from X. C Bar Question
then sued D. D claims there was novation by substitution
of debtor. Resolve. Seller and Buyer executed a written agreement for sale
stating price and schedule. Buyer later claims there was
ALAC an oral side agreement extending payment by one year.
Seller sues for rescission for nonpayment. Buyer offers
Answer: No novation unless creditor’s consent to
testimony of the oral agreement. Should the court admit
substitution is clear; novation is never presumed.
it, and is rescission proper?
ALAC

Answer: Generally no admission of parol evidence to

vary clear written terms unless properly brought under
exceptions; rescission may be proper for substantial
breach in a reciprocal contract of sale.

Legal Basis: Contract of sale perfected upon meeting of

minds as to object and price; written terms govern absent
title-reservation stipulation. Taok v. Conde (2023)
Substantial breach (failure to pay) entitles injured party to
rescission under Art. 1191 (as discussed by the Court).
Taok v. Conde (2023)
Parol evidence cannot be admitted to alter clear terms
unless exceptions are properly pleaded. Taok v. Conde
(2023)

Application: Buyer’s oral extension contradicts the

written schedule; without proper pleading of an
exception, it should be excluded; failure to pay supports
rescission.

Conclusion: Parol evidence excluded; rescission may be

granted.
1) Tender vs Consignation + Delay (Mora) + Penal 2) Determinate Thing + Fortuitous Event + Debtor
Clause (Accessory) in Delay (Liable Even for Fortuitous)

Bar Question Bar Question

D borrowed ₱2,000,000 from C, payable “on demand” S sold to B a specific generator (serial no. 1234) for
with 2% monthly penalty for delay. On March 1, D went ₱800,000, delivery on June 30. On June 30, B appeared
to C’s office to pay the entire principal plus agreed ready to pay, but S asked to “move delivery to July 15”
interest. C refused to accept unless D also paid an because the generator was still being tested. B agreed
additional “documentation fee” not found in the note, and verbally.
C also refused to issue a receipt unless the fee was paid.
D left and, fearing trouble, deposited the money in his On July 10, B sent a demand letter requiring delivery on
own safe. or before July 12 due to an urgent project. S ignored the
letter. On July 13, a typhoon flooded S’s warehouse and
On April 15, C filed a collection suit against D for (a) destroyed the generator. S claims the obligation is
₱2,000,000, (b) interest, and (c) penalties from March 1 extinguished because the thing was lost by a fortuitous
to April 15. D argues: (i) he already tendered payment event. B sues for damages.
March 1 so he is not in delay; (ii) penalties cannot run
because he attempted to pay; and (iii) at any rate the Is S liable?
penalty is unconscionable.
ALAC
Resolve whether D is liable for penalty and delay
Answer: Yes. S is liable because he was already in delay
damages.
when the determinate thing was lost; in delay, the debtor
ALAC bears risk even for fortuitous events.

Answer: D is generally liable for penalty/delay Legal Basis: If the obligor delays, he is responsible for
consequences from judicial demand, because tender any fortuitous event until delivery. Civil Code of the
alone did not extinguish the obligation; however, the Philippines (1949)
penalty cannot be demanded for a period when no mora Those obliged incur in delay from judicial or extrajudicial
existed, and the principal may be extinguished only by demand, subject to exceptions. Civil Code of the
proper consignation. Philippines (1949)
A determinate obligation is extinguished by loss without
Legal Basis: Debtor incurs delay only from judicial or debtor’s fault and before he incurred in delay. Civil
extrajudicial demand, subject to exceptions. Civil Code Code of the Philippines (1949)
of the Philippines (1949)
Consignation alone is sufficient even without prior Application: The generator is determinate. B made an
tender when, without just cause, the creditor extrajudicial demand (July 10 letter) for earlier delivery; S
refuses to give a receipt. De Leon, et al. v. The ignored it. By July 13, S was in delay. Thus, even though
Manufacturers Life Insurance Company (Phils.) Inc., et al. the typhoon is fortuitous, S bears the risk because the
(2021) loss occurred after delay.
A penal clause is accessory; when the principal
Conclusion: S remains liable for damages; the obligation
obligation is extinguished by full payment, the penalty is
is not extinguished by fortuitous event.
likewise extinguished; and in obligations to pay money,
mora does not arise absent demand. Social Security
System v. Moonwalk Development & Housing
Corporation, et al. (1993)
3) “Pay When Able” + Period vs Condition + Partial
Application: C’s unjust refusal to issue a receipt placed Novation by Conduct
D in a situation where consignation was the correct route.
Bar Question
D did not consign; hence the obligation was not
extinguished as of March 1. Still, penalties for “delay” D signed an acknowledgment: “I owe C ₱500,000 payable
presuppose mora, which generally arises only upon when my means permit.” Two months later, D
demand—here, at the latest, from the filing of the voluntarily began paying ₱10,000 monthly for six months,
complaint (judicial demand). then stopped. C demanded full payment and sued. D
argues the debt is not yet demandable because his
Conclusion: D is not automatically freed by tender. D
“means do not permit,” and claims the monthly payments
may be liable for penalty/delay consequences from
were mere “financial assistance,” not recognition of
judicial demand, but the computation depends on proof
demandability.
of a prior demand and on whether D properly consigns to
stop further accrual. Decide whether the obligation is already due and
demandable.

ALAC
Answer: Yes. D’s partial performance indicates the Application: C’s “Noted” is not an unequivocal release
obligation has become due and demandable under the of D nor an express consent to substitution. T’s failure
modified arrangement; the “when my means permit” does not discharge D.
stipulation is treated as involving a period, and conduct
may amount to partial novation of principal conditions. Conclusion: No novation; D remains liable.

Legal Basis: “Pay when my means permit” is treated as

an obligation with a period contemplated by the parties.
Civil Code of the Philippines (1949) 5) Potestative Condition (Void Condition) + “Best
Novation may be partial; a change in the period to Efforts” Payment + Demandability
comply with the obligation is a change in a principal
condition affecting performance. Tomimbang v. Bar Question
Tomimbang (2009)
D signed: “I will pay C ₱1,000,000 if I decide to, based
Those who contravene the tenor of obligations or are in
on my best efforts.” D later paid ₱200,000. C demanded
delay are liable for damages (once demandable). Civil
the balance; D refused, saying the condition depends on
Code of the Philippines (1949)
his will so no obligation exists. C sues.
Application: D’s consistent monthly payments strongly
Is the obligation void? What is the effect of D’s partial
show recognition that payment was already required and
payment?
that the original “means permit” condition/period was
effectively altered by agreement and conduct, similar to ALAC
partial novation of the payment condition.
Answer: The condition dependent solely on debtor’s will
Conclusion: The obligation is due and demandable; D is void; the obligation is treated as demandable, and
cannot indefinitely suspend payment by invoking his partial payment supports enforceability rather than
subjective assessment of “means.” voidness.

Legal Basis: Conditions dependent solely on debtor’s

will may be void. Tible v. Aquino (1975)
4) Novation Not Presumed + Third-Party Payment Pure obligations are demandable at once; conditional
Source + No Extinguishment obligations depend on the condition. Civil Code of the
Philippines (1949)
Bar Question Partial performance may evidence modification of
principal conditions (partial novation) or recognition of
D owes C ₱3,000,000. D entered into a separate supply
obligation’s demandability. Tomimbang v. Tomimbang
contract with T, expecting T’s payments to fund D’s debt
(2009)
to C. D then wrote C: “Please collect directly from T; once
T pays you, my loan is settled.” C replied: “Noted,” but Application: “If I decide to” is potestative. D’s partial
never signed any new agreement releasing D. T later payment indicates recognition of the debt. Courts may
defaulted and did not pay. C sued D. D claims the debt treat the debtor-will condition as void and enforce the
was extinguished because C agreed to collect from T. obligation as demandable.
Rule on D’s defense. Conclusion: D cannot evade liability by invoking a purely
potestative condition; C may recover the balance.
ALAC

Answer: The defense fails. The original obligation is not

extinguished absent clear novation or creditor’s express
consent to substitute debtor or extinguish the old 6) Loss of Thing + Presumption of Fault + Natural
obligation. Calamity Exception

Legal Basis: Novation requires an unequivocal Bar Question

declaration of extinguishment or total incompatibility; it is
D must deliver to C a specific sculpture on May 1. On
never presumed. Asian Construction and Development
April 20, while the sculpture was stored in D’s studio, it
Corporation v. Mero Structures, Inc., et al. (2021)
was destroyed by fire. D claims fortuitous event. C argues
A debtor’s obligation is not extinguished by a separate
D is presumed at fault because the thing was lost in D’s
contract with a third party unless there is clear evidence
possession. D proves that the fire was caused by a
of novation or creditor’s express conformity. Metro
lightning strike during a typhoon.
Concast Steel Corporation, et al. v. Allied Bank
Corporation (2013) Is D presumed at fault? Is the obligation extinguished?
Substitution of debtor requires the express consent of
the creditor; otherwise the original debtor remains liable. ALAC
De Cortes, et al. v. Venturanza, et al. (1977)
Answer: The presumption of fault applies to loss in
debtor’s possession, but it does not apply in case of
storm/natural calamity; if D proves loss without fault and 8) Compensation (Set-off) +
before delay, the obligation is extinguished. Demandability/Liquidation + Delay

Legal Basis: Loss in debtor’s possession creates a Bar Question

presumption of fault, but this presumption does not
apply in case of earthquake, flood, storm, or other natural A owes B ₱400,000 due today. B owes A ₱450,000 but B
calamity. Civil Code of the Philippines (1949) disputes the amount, claiming some items require final
A determinate obligation is extinguished if lost without accounting and are subject to adjustment. A refuses to
debtor’s fault and before delay. Civil Code of the pay and claims legal compensation extinguished his debt.
Philippines (1949) B sues for collection and interest for delay.
Debtor bears risk for fortuitous events if he is in delay.
Rule on compensation and delay.
Civil Code of the Philippines (1949)
ALAC
Application: The loss occurred before May 1 and there is
no showing D was already in delay. D’s proof of Answer: Legal compensation does not apply if B’s debt
lightning/typhoon supports fortuitous event; the to A is not liquidated/demandable; A’s refusal may place
presumption of fault is inapplicable due to storm. him in delay upon demand.
Conclusion: D is not presumed at fault; obligation is Legal Basis: Delay arises from judicial or extrajudicial
extinguished if absence of fault is established. demand. Civil Code of the Philippines (1949)
Obligations may be extinguished by compensation under
Art. 1231. Asian Construction and Development Corp. v.
Mero Structures, Inc., et al. (2021)
7) Suspensive Condition + Partial Novation + Legal compensation requires mutual debts that are due,
Demandability (Trick: Condition “Deleted”) demandable, and liquidated (standard doctrine). Based
on internal knowledge of Philippine law.
Bar Question
Application: Since B’s alleged debt is unliquidated due
C lent D ₱1,000,000, stating: “Pay only after the
to accounting disputes, compensation cannot operate by
renovations of your house are completed.” Before
law to extinguish A’s due debt. Upon B’s demand
renovations were completed, C demanded that D start
(including judicial demand), A may be in delay.
paying monthly installments “to show good faith.” D
complied for five months, then stopped and claimed the Conclusion: No legal compensation; A may be liable for
debt is still not due because renovations are incomplete. interest/damages from demand.
C sues for the balance.

Decide.

ALAC 9) Condonation vs Mere Forbearance + Novation

Not Presumed (Tricky email)
Answer: D’s obligation is already due and demandable
because the parties’ subsequent agreement and D’s Bar Question
partial performance resulted in a partial novation
C emailed D: “Don’t worry about your debt for now. We’ll
deleting the original suspensive condition.
talk when you’re stable.” Later, C sued for collection. D
Legal Basis: Conditional obligations depend on the claims the email is (a) condonation/remission, or (b)
condition’s happening; absent fulfillment, there is novation changing the due date. C insists it was only
generally no demandable right. Civil Code of the forbearance and no extinguishment was intended.
Philippines (1949)
Decide.
Partial novation occurs when principal conditions are
modified; change in period/condition affecting ALAC
performance can constitute partial novation, proven by
partial performance. Tomimbang v. Tomimbang (2009) Answer: The email is generally neither condonation nor
Those who contravene the tenor of the obligation or delay novation unless there is clear, unequivocal intent to
are liable for damages (once demandable). Civil Code of extinguish or to replace the obligation; mere
the Philippines (1949) extension/forbearance is not novation.

Application: The original stipulation deferred payment, Legal Basis: Novation requires unequivocal declaration
but later, both agreed to commence installments; D’s or incompatibility; it is never presumed. Asian
payments show acceptance. The condition was effectively Construction and Development Corp. v. Mero Structures,
removed. Inc., et al. (2021)
A mere extension of the period or change in mode of
Conclusion: D cannot rely on the original condition; the payment does not constitute novation absent clear
debt is due and demandable. incompatibility/intent to extinguish. Tible v. Aquino (1975)
Obligations are extinguished only by the modes under
Art. 1231. Asian Construction (2021)

Application: “Don’t worry for now” is vague; it suggests

tolerance, not extinction. Without clear intent to remit
(condonation) or to extinguish/replace (novation), the
original obligation stands.

Conclusion: No extinguishment; C may collect.

10) Contract Perfection (Consensuality) + Statute

of Frauds (Enforceability) + Partial Performance

Bar Question

S and B orally agreed on sale of a residential lot for

₱2,500,000, payable in installments. B paid ₱500,000 and
built a fence on the lot with S’s knowledge. Two years
later, S refused to execute a deed, invoking the Statute of
Frauds. B sues for specific performance.

Is the oral sale enforceable?

ALAC

Answer: Yes, if sufficiently partially performed; the

Statute of Frauds generally applies to executory contracts
and may not bar enforcement where there is partial
performance.

Legal Basis: Contracts are perfected by mere consent

(consensuality). Lim Jr. v. San, et al. (2004)
Unenforceable contracts under the Statute of Frauds may
become enforceable by partial performance/acceptance
of benefits (doctrine; not in provided sources). Based on
internal knowledge of Philippine law.
Obligations arise from contracts and are demandable
once perfected and enforceable. Civil Code of the
Philippines (1949) (as to enforceability consequences via
breach/delay, when applicable)

Application: B’s partial payment and improvements with

S’s knowledge support partial performance taking the
contract out of the Statute of Frauds.

Conclusion: The oral sale is enforceable; B may seek

specific performance.
40 Balanced Bar-Style Questions (Longer + dation in payment extinguished the loan, or alternatively
Trickier) with Model ALAC + 2–3 Legal Bases novation occurred.

Each problem mixes obligations/kinds, ALAC

extinguishment, and contracts (incl. voidable consent, Answer: D must prove a clear agreement that the truck
novation, sale vs contract to sell). I kept them longer and was accepted as equivalent performance; novation is not
layered with distractions, but the core issues remain presumed.
within your coverage. Legal Basis: Payment includes performance “in any
other manner.” Asian Construction and Development
Corporation v. Mero Structures, Inc. (2021) (Art. 1231
context)
1) Tender/Consignation + Delay + Penal Clause Novation requires unequivocal declaration or total
incompatibility; it is never presumed. Asian Construction
Problem: D executed a promissory note in favor of C: and Development Corporation v. Mero Structures, Inc.
“₱1,200,000 payable on demand, with 3% monthly (2021)
penalty from default.” On March 1, D went to C’s office Consent/meeting of minds is essential; allegations against
with manager’s checks for the full principal and accrued a written/accepted arrangement require convincing proof.
interest. C refused, insisting D first sign a “quitclaim” Lim Jr. v. San, et al. (2004)
waiving any counterclaims and also pay a Application: C’s acceptance and use indicate possible
“documentation fee” not in the note. C also refused to acceptance as payment, but the determinative fact is the
issue an official receipt unless those were paid. D emailed parties’ intent at delivery (payment vs mere custody).
C that he was ready to pay anytime and kept the checks. Novation cannot be inferred from ambiguous conduct
On April 20, C sued for principal and penalty from March alone.
1. D argues: (i) there was tender so no delay; (ii) C’s Conclusion: If intent to accept as payment is proven,
refusal is unjust; (iii) penalty cannot run. obligation extinguished to that extent; otherwise, loan
subsists.
ALAC
Answer: D is not released by tender alone; delay/penalty
generally attaches upon demand, and proper relief
required consignation in the face of unjust refusal.
3) Sale vs Contract to Sell + Suspensive Condition
Legal Basis: Payment means performance; obligation is
+ Rescission
extinguished by payment/performance. Civil Code of the
Philippines (1949) (Art. 1333 et seq. excerpt contains Problem: Seller S and Buyer B signed an “Agreement”
consent vices; for payment modes, see Art. 1231 in Asian for land: price ₱3,000,000; ₱500,000 down; balance in 12
Construction and Development Corporation v. Mero months. The document is silent on “title reserved until full
Structures, Inc. (2021)) payment.” B paid the downpayment and took possession.
Obligations are extinguished by payment/performance After 10 months, B stopped paying and demanded more
and other modes; novation rules and Art. 1231 time, claiming the deal is a contract to sell so S cannot
enumeration are reaffirmed. Asian Construction and rescind under Art. 1191. S sues for rescission and
Development Corporation v. Mero Structures, Inc. (2021) damages.
Tender without proper legal deposit does not necessarily
extinguish; creditor’s refusal to accept/issue receipt ALAC
triggers need for consignation (Based on internal Answer: It is a contract of sale; rescission under Art.
knowledge of Philippine law, Arts. 1256–1258). 1191 is available upon substantial breach.
Application: C’s additional conditions were not part of Legal Basis: Full payment is suspensive condition only in
the obligation; D should have proceeded to consignation a contract to sell; if no express title reservation, it is a
to stop accrual. Penalty generally requires default/mora, contract of sale perfected by consent, object, and price.
usually pegged to demand; the suit is at least judicial Taok v. Conde, et al. (2023)
demand. Reciprocal obligations in a sale may be rescinded for
Conclusion: D remains liable until valid substantial breach, with damages. Taok v. Conde, et al.
payment/consignation; penalty exposure depends on (2023)
mora after proper demand. Application: Silence on title reservation points to sale,
not contract to sell; B’s nonpayment is substantial
breach.
Conclusion: Rescission is proper.
2) Dation in Payment + Novation Not Presumed

Problem: D owes C ₱5,000,000 due. After default, D

offered a truck “in full settlement.” C accepted 4) Parol Evidence Trap + Clear Written Terms +
possession and used it for business but did not execute Rescission
any deed of transfer; later C sued for the remaining
₱5,000,000 claiming the truck was merely “for Problem: In the same “Agreement,” the schedule clearly
safekeeping” and there was no written dacion. D asserts states balance payable “on or before Dec. 31.” B offers
testimony that S orally agreed “no strict deadline” and
payment “when able.” S objects under the parol evidence
rule and insists rescission. B says parol evidence is
allowed because the written contract “fails to express 7) Mistake + Assumption of Risk
true intent.”
Problem: Buyer B bought antique “as is.” Later B claims
ALAC mistake: he knew authenticity was uncertain but still
Answer: Parol evidence is generally inadmissible to vary bought. He sues to annul. Seller argues no mistake
clear terms unless exceptions are properly pleaded; because buyer knowingly assumed risk.
rescission may proceed if breach substantial.
Legal Basis: Parol evidence cannot alter clear written ALAC
terms unless exceptions are properly pleaded; sale vs Answer: No mistake that vitiates consent if party knew
contract-to-sell analysis applies. Taok v. Conde, et al. the doubt/contingency/risk.
(2023) Legal Basis: No mistake if party alleging it knew
Contracts are perfected by consent; consent-vitiation doubt/contingency/risk. Civil Code (1949) (Art. 1333)
claims require proof. Lim Jr. v. San, et al. (2004) Voidable contracts require vitiated consent by mistake,
Application: If B failed to properly plead the exception, etc. Civil Code (1949) (Art. 1390)
oral “no deadline” should be excluded; breach stands. Application: “As is” plus knowledge of doubt negates
Conclusion: Written deadline controls; rescission mistake.
available. Conclusion: No annulment on mistake.

5) Fraud (Voidable) + Prescription (4 years) 8) Mutual Error of Legal Effect (Art. 1334) +
Voidable
Problem: A executed a deed of sale in 2016. In 2025, A
sues to annul, claiming buyer committed fraud by Problem: Parties signed a document thinking it was a
concealing that the land was under a pending lease, but the legal effect was a sale because of the
government taking. Buyer argues prescription. A claims wording and consideration structure. Both intended only
discovery was only in 2023 after receiving a notice. lease. One party sues for annulment.

ALAC ALAC
Answer: Action is timely only if filed within 4 years from Answer: Mutual error as to legal effect that frustrates
discovery of fraud. real purpose may vitiate consent.
Legal Basis: Contracts with consent vitiated by fraud are Legal Basis: Mutual error on legal effect may vitiate
voidable. Civil Code (1949) (Art. 1390) consent. Civil Code (1949) (Art. 1334)
Annulment must be brought within 4 years from Voidable contracts include those where consent is vitiated
discovery of fraud. Civil Code (1949) (Art. 1391) by mistake. Civil Code (1949) (Art. 1390)
Fraud definition and related consent principles. Civil Code Application: If real purpose frustrated, consent vitiated.
(1949) (Art. 1338) Conclusion: Contract voidable.
Application: Count 4 years from proven discovery date;
2025 filing is timely if discovery in 2023 is established.
Conclusion: Prescription depends on proof of discovery.
9) Ratification (Tacit) + Waiver of Annulment

Problem: Minor sold property at 17. Upon turning 19, he

6) Intimidation by Third Person + Voidable continued accepting installment payments and executed
a receipt “full payment received.” At 22 he sues to annul
Problem: X sold land to Y. X later sues for annulment, for incapacity. Buyer claims ratification.
claiming Y’s “bodyguards” threatened him though Y
personally said nothing. Y argues intimidation must come ALAC
from contracting party. Resolve. Answer: Action likely barred by tacit ratification if, after
incapacity ceased, he performed acts implying waiver.
ALAC Legal Basis: Ratification extinguishes action to annul.
Answer: Contract is voidable even if intimidation was Civil Code (1949) (Art. 1392)
employed by a third person who did not take part. Tacit ratification occurs when, with knowledge of voidable
Legal Basis: Intimidation definition and factors. Civil cause and after it ceases, party performs an act implying
Code (1949) (Art. 1335) waiver. Civil Code (1949) (Art. 1393)
Violence/intimidation annuls obligation even if employed Ratification cleanses from moment constituted. Civil Code
by a third person. Civil Code (1949) (Art. 1336) (1949) (Art. 1396)
Voidable contracts include those with vitiated consent. Application: Receipt and acceptance after majority
Civil Code (1949) (Art. 1390) indicate tacit ratification.
Application: If intimidation proven, contract voidable. Conclusion: Annulment fails.
Conclusion: Third-person intimidation is actionable.
10) Who May Sue for Annulment + Estoppel-like ALAC
Limitation Answer: Yes, if thing lost through fraud/fault of party who
has right to annul (plaintiff), action extinguished.
Problem: A defrauded B into signing a contract. Later A Legal Basis: Annulment action extinguished when object
sues to annul claiming the contract is voidable for fraud. lost through fraud/fault of person with right to sue. Civil
May A sue? Code (1949) (Art. 1401)
Application: Buyer at fault; action barred.
ALAC
Conclusion: Annulment extinguished.
Answer: No; the party who employed fraud cannot base
action on that flaw.
Legal Basis: Those who employed fraud cannot base
their action upon these flaws. Civil Code (1949) (Art.
14) Potestative Condition (Performance) + “Best
1397)
Efforts”
Voidable contracts are binding unless annulled. Civil Code
(1949) (Art. 1390) Problem: D signed MOA acknowledging “outstanding
Application: A is barred. obligation,” stating he will “exert best effort to pay.” D
Conclusion: A cannot sue for annulment on his own later argues the obligation is void because payment
fraud. depends solely on his will.

ALAC
Answer: The obligation remains; only the potestative
11) Restitution After Annulment + Fruits/Interest condition affecting performance is void.
Legal Basis: Potestative condition affecting performance
Problem: Court annuls a voidable sale due to does not void the obligation itself; it only voids the
intimidation. Buyer already leased the property and condition. Yupangco, et al. v. O.J. Development (2021)
earned rents. Seller used the price to earn interest. What Application: “Best efforts” does not extinguish the
must be restored? obligation to pay.
Conclusion: Debt enforceable.
ALAC
Answer: Parties must restore the subject with fruits and
the price with interest, subject to statutory exceptions.
Legal Basis: Upon annulment, parties restore the things
15) Novation vs “Collect from Third Party”
with fruits, and the price with its interest. Civil Code
(1949) (Art. 1398) Problem: Creditor C told D: “I will collect from T; you pay
Voidable contracts binding unless annulled. Civil Code me only if T pays you.” T refused to pay. D claims
(1949) (Art. 1390) novation; C sues D. Decide.
Application: Buyer returns property + rents; seller
returns price + interest. ALAC
Conclusion: Mutual restitution. Answer: No novation.
Legal Basis: Novation requires express/extinction or
total incompatibility; permission to collect from third
party is not novation. Asian Construction (2021)
12) Incapacity Restitution Limited to Benefit Obligation not extinguished by separate third-party
contract absent clear novation/creditor conformity. Metro
Problem: Minor sold a laptop and spent the money on Concast Steel v. Allied Bank (2013)
gambling. Contract annulled. Buyer demands full Application: T’s nonpayment not force majeure; D still
restitution. Minor claims he was not benefited. Rule. liable.
Conclusion: D remains liable.
ALAC
Answer: Minor must restitute only insofar as benefited.
Legal Basis: Incapacitated person not obliged to
restitution except insofar as benefited. Civil Code (1949)
16) Force Majeure Misuse + Third-Party Default
(Art. 1399)
Application: Gambling expenditure may show no Problem: D argues inability to pay bank loan because his
benefit; factual. customer defaulted, and he expected those funds. He
Conclusion: Restitution limited. claims “force majeure.” Bank sues. Rule.

ALAC
Answer: Not force majeure; does not extinguish loan.
13) Loss of Object Through Fault of Plaintiff Legal Basis: Third-party default affecting debtor’s funds
(Annulment Extinguished) is not force majeure and does not extinguish obligation to
creditor not party to that contract. Metro Concast (2013)
Problem: Buyer seeks annulment for fraud, but after Extinguishment modes enumerated under Art. 1231.
filing, buyer intentionally destroyed the item. Seller Asian Construction (2021)
claims action extinguished. Correct?
Application: Bank’s claim stands. ALAC
Conclusion: D liable. Answer: Contract voidable if undue influence proven
considering relationship and weakness/distress.
Legal Basis: Undue influence definition and factors
(confidential/family/spiritual relations; mental weakness;
17) Compromise as Novation ignorance; financial distress). Civil Code (1949) (Art.
1337)
Problem: After dispute, parties executed a compromise Voidable contracts include those with vitiated consent.
changing payment structure and releasing some claims. Civil Code (1949) (Art. 1390)
One party later sues on the old contract. Effect? Application: Facts fit undue influence indicators; proof
required.
ALAC
Conclusion: Annulment may be granted.
Answer: Compromise may novate prior obligation if
intended as substitute/incompatible.
Legal Basis: Novation requires express or total
incompatibility. Asian Construction (2021)
21) Period vs Condition + “When my means
Application: Compromise replacing obligations may
permit”
extinguish prior terms.
Conclusion: Enforce compromise if novation shown. Problem: D acknowledged debt: “Pay when my means
permit.” After 5 years with no payment, C sues. D says
not yet due. How treat?

18) Consensuality + Burden to Prove Vitiation ALAC

Answer: It is treated as obligation with a period subject
Problem: Seller alleges he was deceived into sale, but to court fixing; not purely discretionary non-
deed is clear and he accepted price. He claims fraud demandability.
without documentary proof. Decide. Legal Basis: “Pay when my means permit” is treated as
a period-type stipulation (Based on internal
ALAC
knowledge of Philippine law, Art. 1180/1197). Consent
Answer: Fraud must be proven; mere allegation
to obligation is binding; parties’ conduct matters. Lim Jr.
insufficient.
v. San (2004)
Legal Basis: Contract of sale is consensual; allegations
Application: Court may fix period; debt cannot be
of vitiated consent must be established by evidence;
indefinitely postponed.
courts weigh circumstances. Lim Jr. v. San (2004)
Conclusion: C may seek judicial fixing and payment.
Fraud definition. Civil Code (1949) (Art. 1338)
Application: If proof lacking, contract stands.
Conclusion: No annulment absent convincing evidence.
22) Sale vs Contract to Sell + Downpayment
Forfeiture

19) “Threat to Sue” Not Intimidation Problem: Agreement says: “Buyer pays ₱300,000
‘reservation fee’; if Buyer fails to pay balance, reservation
Problem: C told D: “If you don’t sign this deed of sale, I
is forfeited and seller may sell to others.” There is object
will file a collection case on your overdue debt.” D signed
and price. Buyer fails to pay; Seller keeps fee and sells
and later sues for annulment due to intimidation. Rule.
property to another. Buyer sues claiming seller must
ALAC rescind and return money. Rule.
Answer: Not intimidation if threat is to enforce a
ALAC
just/legal claim through competent authority.
Answer: If it’s a contract to sell with suspensive
Legal Basis: Threat to enforce a just/legal claim through
condition of full payment, non-fulfillment renders it
competent authority does not vitiate consent. Civil Code
ineffective; rescission not the remedy; forfeiture depends
(1949) (Art. 1335)
on stipulation validity.
Voidable contracts require vitiated consent. Civil Code
Legal Basis: Full payment is suspensive condition in
(1949) (Art. 1390)
contract to sell; non-fulfillment is not breach; rescission
Application: If the debt is just/legal, no intimidation.
unavailable. Taok (2023)
Conclusion: Contract not voidable on that ground.
Application: Key is whether title transfer was expressly
conditioned; if yes, contract to sell.
Conclusion: Treat per contract classification; rescission
may be improper.
20) Undue Influence + Confidential Relation

Problem: Elderly widow sold property to her financial

adviser at low price. Adviser had control over finances
and prepared documents. Widow sues for annulment due 23) Voidable vs Void + Timing
to undue influence.
Problem: Party alleges fraud and says contract is “void continued sending demand letters to D. C sues D. D
ab initio,” filing suit 12 years later. Opponent argues it’s claims substitution/novation. Rule.
only voidable and prescribed. Decide.
ALAC
ALAC Answer: No novation absent clear creditor consent
Answer: Fraud makes contract voidable, not void; action releasing D.
prescribes in 4 years from discovery. Legal Basis: Novation requires unequivocal declaration
Legal Basis: Fraud-vitiated contracts are voidable. Civil or incompatibility. Asian Construction (2021)
Code (1949) (Art. 1390) Application: Acceptance of one payment is ambiguous;
Prescriptive period 4 years from discovery of fraud. Civil no clear release.
Code (1949) (Art. 1391) Conclusion: D remains liable.
Application: 12 years likely barred absent late discovery
proof.
Conclusion: Prescribed if discovery was long ago.
27) Payment “In Any Other Manner” + Release of
Security Only

24) Restitution Where Thing Lost Through Problem: Debtor claims debt extinguished because
Defendant’s Fault creditor released a pledge and issued letter “account
settled,” but later creditor shows principal note remains
Problem: Contract annulled. Defendant must return a unpaid. Debtor argues release equals payment. Decide.
thing but cannot because it was lost due to his fault.
What must he return? ALAC
Answer: Release may evidence payment but is not
ALAC conclusive; must show satisfaction of principal.
Answer: Value at time of loss + fruits received + interest Legal Basis: Payment includes other forms but must
from loss date. satisfy obligation. Asian Construction (2021) (Art. 1231);
Legal Basis: If thing cannot be returned because lost principle of performance in other manner.
through fault of person obliged to return, he returns fruits Separate instruments may not extinguish principal absent
+ value at time of loss + interest from same date. Civil clear basis. Metro Concast (2013)
Code (1949) (Art. 1400) Application: “Account settled” is strong evidence;
Application: Defendant at fault triggers Art. 1400. creditor must explain; court evaluates intent and
Conclusion: Monetary restitution + fruits + interest. accounting.
Conclusion: Depends on proof of satisfaction.

25) Annulment by Third Parties

(Principal/Subsidiary Obligors) 28) Mutual Error + Ratification by Conduct

Problem: Surety who paid creditor seeks annulment of Problem: Parties mistakenly executed a deed with wrong
principal contract between creditor and debtor, alleging legal effect (sale instead of mortgage). Later, the
debtor was defrauded. Debtor does not sue. Can surety supposed “seller” accepted rental payments and referred
sue? to the other as “owner” in emails. Years later he sues for
annulment based on mistake. Defense?
ALAC
Answer: Generally yes if thereby obliged subsidiarily; but ALAC
surety cannot invoke defects personal to debtor if barred Answer: Tacit ratification may bar annulment if acts
by rules and evidence. imply intention to waive after knowledge.
Legal Basis: Action for annulment may be instituted by Legal Basis: Mutual error may vitiate consent. Civil Code
all who are thereby obliged principally or subsidiarily. Civil (1949) (Art. 1334)
Code (1949) (Art. 1397) Tacit ratification standard. Civil Code (1949) (Art. 1393)
Application: Surety has standing; must still prove fraud Ratification extinguishes action. Civil Code (1949) (Art.
and observe prescription. 1392)
Conclusion: Possible standing, merits depend on proof Application: Emails/acceptance may imply waiver after
and timing. knowledge.
Conclusion: Annulment may be barred.

26) Novation by Substitution of Debtor (Need

Creditor Consent) 29) Fraud + Third Person’s Acts + Voidable

Problem: D and X agreed X will assume D’s debt to C. Problem: Buyer’s agent used machinations to induce
They notified C. C accepted one payment from X but seller to sign; buyer claims no knowledge. Seller sues
buyer for annulment. Buyer says fraud must be by have sold without payment. Buyer says remedy is
contracting party personally. Rule. rescission, not annulment. Decide.

ALAC ALAC
Answer: Fraud vitiating consent makes contract Answer: Nonpayment is breach in sale, not lack of
voidable; if fraud is attributable to the contracting party consent; rescission (Art. 1191) is proper remedy.
through agent, buyer cannot escape. Legal Basis: Sale perfected upon meeting of minds;
Legal Basis: Fraud definition. Civil Code (1949) (Art. failure to pay is substantial breach justifying rescission.
1338) Taok (2023)
Voidable contracts include fraud-vitiated consent. Civil Consent principles; if consent exists, contract is not
Code (1949) (Art. 1390) inexistent. Lim Jr. v. San (2004)
Application: Agency attribution is fact-based; seller Application: Seller’s consent existed at execution;
must prove fraud. remedy is resolution/rescission.
Conclusion: Possible annulment if fraud proven. Conclusion: Rescission, not annulment.

30) Burden/Quality of Proof in Consent Vitiation 33) Effect of Annulment on Services Rendered

Problem: Seller claims intimidation but continued to deal Problem: Contract for consultancy is annulled for
with buyer, cashed checks, and even sought additional intimidation. Consultant already rendered 6 months
payments after signing. He sues for annulment 3 years service. Client demands full return of all fees and refuses
later. Decide. to pay further; consultant claims value of service as
damages.
ALAC
Answer: Claim is weak; courts weigh subsequent ALAC
conduct; proof must be convincing. Answer: In obligations to render service, value thereof is
Legal Basis: Courts consider age, relationship, conduct basis for damages in restitution.
at time and subsequent thereto in assessing vitiation. Lim Legal Basis: Upon annulment, mutual restitution; in
Jr. v. San (2004) service obligations, value of service is basis for damages.
Intimidation definition and threat-to-sue rule. Civil Code Civil Code (1949) (Art. 1398)
(1949) (Art. 1335) Application: Court will assess value of services
Application: Subsequent acts undermine claim of rendered.
coerced consent. Conclusion: Consultant may recover value; fees may be
Conclusion: Annulment likely denied. adjusted.

31) Outstanding Obligation MOA + Loan vs 34) Restitution + Interest + Fruits Timing
Investment Character
Problem: After annulment, seller must return price with
Problem: Parties signed “investment agreement” but interest; seller argues interest runs only from judgment.
later executed MOA acknowledging “outstanding Buyer argues from time of payment. Rule.
obligation” and reimbursement schedule. Debtor claims it
remained investment (risk of loss), not loan; thus no ALAC
demandable repayment. Decide. Answer: Price must be returned with its interest
(typically from payment/receipt, depending on context),
ALAC consistent with Art. 1398.
Answer: MOA acknowledging outstanding obligation is Legal Basis: Return price with its interest. Civil Code
treated as loan; reimbursement is demandable. (1949) (Art. 1398)
Legal Basis: Subsequent MOA acknowledging Application: Interest attaches as part of restitution;
outstanding obligation construed as loan; “best efforts” precise start date is fact/law dependent.
clause does not void obligation. Yupangco (2021) Conclusion: Interest is due as restitution.
Application: Acknowledgment converts to definite
obligation to pay.
Conclusion: Demandable loan.
35) Voidable Contract Effective Until Annulled

Problem: Party claims fraud, but before any annulment

32) Annulment vs Rescission Confusion case, the other party assigns the contract rights to a third
person. Assignor argues assignment void because original
Problem: Buyer failed to pay; seller sues to annul contract void. Decide.
contract claiming “lack of consent” because he would not
ALAC
Answer: Voidable contracts are valid and binding until
annulled; rights may be assigned subject to annulment. Application: Continued performance and claiming
Legal Basis: Voidable contracts are binding unless benefits imply waiver after defect ceased.
annulled. Civil Code (1949) (Art. 1390) Conclusion: Annulment may be barred.
Application: Until annulled, contract produces effects.
Conclusion: Assignment stands unless/until annulment.

39) Voidable Contract + Loss of Thing + Fault

Allocation
36) Prescription Defense in Fraud Annulment
Problem: Buyer seeks annulment for fraud. The property
Problem: Contract executed 2015. Plaintiff claims was later destroyed by a fire caused by buyer’s
discovered fraud in 2016 but filed annulment in 2022. negligence. Seller argues annulment barred because
Plaintiff argues he was “still negotiating” so prescription object lost through fault of plaintiff. Buyer says loss
paused. Decide. shouldn’t matter. Decide.

ALAC ALAC
Answer: Likely prescribed; negotiations do not suspend Answer: Action is extinguished if object lost through fault
statutory period absent legal basis. of the party entitled to sue, except where action is based
Legal Basis: 4-year period from discovery of fraud. Civil on incapacity (different rule).
Code (1949) (Art. 1391) Legal Basis: Annulment action extinguished when object
Fraud makes contract voidable. Civil Code (1949) (Art. lost through fraud/fault of the person with right to sue;
1390) incapacity has different treatment. Civil Code (1949) (Art.
Application: Discovery 2016 → deadline 2020; filing 1401)
2022 late. Application: Buyer at fault; action barred.
Conclusion: Prescribed. Conclusion: Annulment extinguished.

37) Extinguishment Enumeration + “Other causes” 40) Composite: Sale vs Contract to Sell + Fraud
Claim + Prescription
Problem: D argues obligation extinguished because the
contract was “rescinded,” but he points only to his Problem: S and B signed an agreement with object and
unilateral letter “I rescind.” C argues rescission requires price; silent on title reservation. B failed to pay. S
judicial action or basis; D cites Art. 1231. Decide. demanded rescission. B countersued claiming S
fraudulently misrepresented area, discovered 6 years
ALAC ago, and seeks annulment. S argues: (i) it’s a sale;
Answer: Art. 1231 lists rescission as “other cause” remedy is rescission; (ii) fraud annulment is prescribed.
governed elsewhere; unilateral rescission depends on the Resolve.
governing rule (e.g., Art. 1191 and jurisprudence) and is
not automatic by mere letter unless contract/law permits. ALAC
Legal Basis: Art. 1231 enumerates extinguishment Answer: Agreement is a sale; rescission is available;
modes; “other causes… such as annulment, rescission…” fraud-annulment may be prescribed if beyond 4 years
governed elsewhere. Asian Construction (2021) from discovery.
Application: D must show proper ground/procedure for Legal Basis: Sale vs contract-to-sell distinction;
rescission. rescission under Art. 1191 for substantial breach in sale.
Conclusion: Letter alone insufficient absent legal basis. Taok (2023)
Fraud makes contract voidable; annulment prescribes 4
years from discovery. Civil Code (1949) (Arts. 1390–1391)
Fraud definition. Civil Code (1949) (Art. 1338)
38) Implied Ratification + Continued Performance Application: Silent title reservation → sale; nonpayment
→ rescission. If B discovered misrepresentation 6 years
Problem: Employee signed a contract under alleged ago, annulment is time-barred.
undue influence. After influence ceased, he continued Conclusion: Rescission likely granted; annulment
performing for two years, requested benefits under the dismissed for prescription.
contract, and only sued after termination. Employer
pleads ratification.

ALAC
Answer: Tacit ratification may be found.
Legal Basis: Tacit ratification defined. Civil Code (1949)
(Art. 1393)
Ratification extinguishes action. Civil Code (1949) (Art.
1392)
Undue influence definition. Civil Code (1949) (Art. 1337)