LEGAL ASPECTS OF BUSINESS

Atty. Jericho B. del Puerto

6/26/2014 10:32 PM . All Rights Reserved. Page 1 of 7
LAW ON CONTRACTS
Worksheet 2

NAME: _________________________________ (SURNAME, FIRST NAME)
Instructions: Please responsively answer the following questions. Kindly make sure to cite your legal
basis, which may be a provision of law, rules, or jurisprudence (check the footnotes of the book drafts
for reference). Each item carries twenty (20) points each.
When answering, follow this format: (I) answer the Issue, (R) cite the applicable Rule, (A) then Apply
the rule to the problem, and (C) make a Conclusion. Thus, your answers should not exceed six (6)
short sentences. Keep this in mind as this is how you will answer also in the exams.
Afterwards, please convert this word document (.docx) to pdf by clicking Save As and thereafter
choosing PDF. You are reminded to keep a copy of this worksheet to serve as your reviewer/notes for
the exams. Late or failure to submit merits an automatic score of 80.
Deadline: 28 June 2014, 12:00 midnight
Submit to: jericho.delpuerto@gmail.com

SAMPLE
On his 55
th
birthday, a senior vice-president and prospective (next-in-line) president of a
multinational corporation invited the senior officers of the corporation for lunch. They went
to a five star hotel and dined therein. After their sumptuous meal, the senior vice-president
paid via credit card. However, when the card was swiped, it did not permit any transaction.
Sensing there was a problem, the guests started to feel uneasy and uncomfortable especially
when other customers of the restaurant started looking at them. To avoid any further
inconvenience, the president of the corporation took out his credit card and asked the
waiter to use it. He told everyone that it was his gift to the senior vice-president. The
presidents credit card worked and the bill was paid. Later on, when the senior vice-
president asked his bank regarding his credit card, he was informed that there was a
technical difficulty around the time it was swiped. Does the vice-president have an action for
breach of contractual obligations against the bank considering that the meal was paid for by
the president? Explain.

Answer: Yes, the vice-president has an action for breach of contractual obligations against the bank.
In Osmundo Canlas v. Court of Appeals, banks are required to observe diligence more than that of a
good father of a family. By failing to inform the vice-president of the technical difficulty, the bank
failed to observe the required diligence. Hence, the bank may be held liable for breach of
contractual obligations.
LEGAL ASPECTS OF BUSINESS
Atty. Jericho B. del Puerto

6/26/2014 10:32 PM . All Rights Reserved. Page 2 of 7
1. Veronica and Betty are best friends who grew up together. Both reached their career
heights when they became the corporate president of their respective firms. Veronica
ran a IT Company, while Betty operated a Manufacturing firm. Sometime thereafter,
they entered into a contract wherein Veronicas IT company will be providing
software that would run the manufacturing firm of Betty. With Php20 million as
contract price, the two executed a written agreement. During the signing of the
contract, Betty presented her authorization documents consisting of a board
resolution and secretarys certificate clearly detailing her powers to enter into the
said transaction. On the other hand, Veronica was unable to bring her authorization
documents and instead made an undertaking to present it later. Trusting her best
friend, Betty continued with the transaction and paid the contract price in full as
agreed upon. A week after, Veronica wrote to Betty profusely and sincerely
apologizing to the latter and informing her that the contract cannot push through as
Veronica failed to obtain the approval of the IT companys board of directors. To
protect herself and save her career, Betty was constrained to write a demand letter
against the IT Company demanding to perform their obligations as stated in the
written agreement executed by Veronica considering their manufacturing firm was
depending on the release of the software for their production next month. In
response, the Chairman of the IT firm sent a reply letter stating that Veronica was
never authorized by the board and thus the company did not give its consent
resulting in the agreement being void. Betty wrote a response letter saying that the
agreement is valid and binding as the same is merely unenforceable. Is the agreement
void or unenforceable?

Answer:



LEGAL ASPECTS OF BUSINESS
Atty. Jericho B. del Puerto

6/26/2014 10:32 PM . All Rights Reserved. Page 3 of 7
2. Matt and Jerome met in a convention for marketing executives in Makati City. Both
got along together as they shared similar ideas on how to effectively market products
and services. They kept in touch by having coffee now and then at a coffee shop. In
one of their meetings, Matt proposed to Jerome to form a startup marketing company
that would primarily cater to small and medium businesses. Fascinated at the
concept and realizing the potential, Jerome readily agreed to Matts proposal. Both
agreed to separately raise Php100,000.00 each for 6 months. After the said period,
the two met with Matt excited to finally start the business. Matt had sacrificed a lot to
save the money by scrimping on his transportation, snack, lunch, movie dates, etc.
Unfortunately, Matt was deeply saddened when he learned that Jerome was not that
equally interested as the latter was not able to reach the agreed amount. In fact,
Jerome was only able to raise Php10,000.00. Hence, a week after, Matt sent a demand
letter against Jerome to make good his promises. In response, remembering what he
learned in MBA school, Jerome wrote to Matt stating that Jerome could not be
compelled by Matt as nobody could be forced into a business as that would be
contrary to the principle of autonomy. Matt, who happened to be an MBA title holder
as well, replied informing Jerome that the contract they entered into is valid as the
essential requisites of a valid contract are present. Which of the two is correct?
Explain.

Answer:






LEGAL ASPECTS OF BUSINESS
Atty. Jericho B. del Puerto

6/26/2014 10:32 PM . All Rights Reserved. Page 4 of 7

LEGAL ASPECTS OF BUSINESS
Atty. Jericho B. del Puerto

6/26/2014 10:32 PM . All Rights Reserved. Page 5 of 7
3. Philip is a senior executive of a multinational company. For the upcoming Christmas
celebrations, he decided to buy a Porsche automobile as a gift to himself for all the 40
years of hard work. Thus, he called Fast Cars, Inc. (FCI) and negotiated with the
latters sales executive for the said car. On the phone, Philip and the sales executive
agreed to the price and terms of payment. As a matter of practice, Philip told the sales
executive that his consent will only be complete if he executes a contract of sale.
Thus, he requested for the contract of sale to be forwarded to his office once it is
prepared. Consequently, the sales executive sent a copy of the contract of sale
already signed by FCIs authorized representative the following day. Philip read the
contract, signed it, placed it inside an envelope, which was sealed, and sent it to FCI.
The envelope reached FCI immediately within the day. For unknown reasons, the
envelope was not opened for more than three (3) weeks. During this time, Philip got
irritated and annoyed why he has not yet received a response. He, thus, called FCI and
informed the same sales executive that he was no longer proceeding with his
purchase of a Porsche car. After the call, the sales executive looked for the envelope,
opened it, and saw that it was signed by Philip already. The sales executive hurriedly
called Philip and informed him that there has already been a perfected contract as
they had already received the signed contract of sale with Philips signature on it
three (3) weeks before. Thus, the sales executive pushed for the continuation of the
sale. Is the sales executive correct? Explain.

Answer:




LEGAL ASPECTS OF BUSINESS
Atty. Jericho B. del Puerto

6/26/2014 10:32 PM . All Rights Reserved. Page 6 of 7
4. iLove to Bake Corp. obtained a loan from a bank. After executing the loan contract,
the same was notarized in order to make it into a public document. Subsequently,
iLove to Bakes president realized that there was an error on the length of
amortizations to pay instead of the agreed 48 months, it only provided for 24
months. When this was pointed out to the bank, the manager said that the contract
cannot be changed since it was already executed and notarized. Is the bank manager
correct? Explain.

Answer:




LEGAL ASPECTS OF BUSINESS
Atty. Jericho B. del Puerto

6/26/2014 10:32 PM . All Rights Reserved. Page 7 of 7
5. Peter offered to sell his Porsche car for P6M to John who accepted the same and paid
the amount. Weeks later, Peter remembered that he had upgraded the cars engine
previously and he paid P1M for it. He never included the same in his computation for
his offer. May Peter claim the P1M from John? Explain.

Answer: