Sample problems for Credit Transactions:

I. Nelson Paguio borrowed from the Bureau of Animal Industry three bulls for breeding
purposes for a period of one year, later on renewed for another year as regards one bull. The
loan was subject to the payment by Nelson of a breeding fee of 10% of the book value of the
bulls. Nelson kept and used the bull (the loan of which was renewed) for four years after the
period stipulated in the contract until it was killed by stray bullets during a raid conducted by
the Moro Islamic Liberation Front. Nelson claims that he should be relieved from the
obligation of paying for the value of the bulls. Moreover, he asserts that the Bureau of
Animal Industry should bear the loss as the owner of the bull. Is Nelson Paguio relieved from
the duty of paying for the value of the bull? (10 points)

II. Leny Lazaro lent her car to Brian Gomez without informing the latter that the brakes of the
car are not working properly. While handing the keys to Brian, Leny informed him that she
was not able to have the car checked, and thus advised Brian to bring the car to a mechanic
for a maintenance check. Brian failed to do so. Brian met an accident.

a. What kind of contract did Leny and Brian enter into? (4 points)
b. Should Leny be held responsible for the damages sustained by Brian? (3 points)
c. If Leny fails to pay Brian, may Brian opt to retain the car pending Leny's payment to him
of damages? (3 points)