1. Jo-Ann asked her close friend, Aissa, to buy some groceries for her in the supermarket.

Was
there a nominate contract entered into between Jo-Ann and Aissa? In the affirmative, what was
it? Explain. 5%

SUGGESTED ANSWER:
Yes, there was a nominate contract. On the assumption that Aissa accepted the request of her close
friend Jo-Ann to but some groceries for her in the supermarket, what they entered into was a nominate
contract of Agency. Article 1868 of the New Civil Code provides that by the contract of agency a person
binds himself to render some service or to do something in representation or on behalf of another, with
the
consent or authority of the latter.

2. A, upon request, loaned his passenger Jeepney to B to enable B to bring his sick wife from
Paniqui. Tarlac to the Philippine General Hospital in Manila for treatment. On the way back to
Paniqui, after leaving his wife at the hospital, people stopped the passenger Jeepney. B stopped
for them and allowed them to ride on board, accepting payment from them just as in the case of
ordinary passenger Jeepneys plying their route. As B was crossing Bamban, there was an onrush
of Lahar from Mt Pinatubo, the Jeep that was loaned to him was wrecked. 1) What do you call
the contract that was entered into by A and B with respect to the passenger Jeepney that
wasloaned by A to B to transport the latter's sick wife to Manila? 2) Is B obliged to pay A for the
use of the passenger jeepney? 3) Is B liable to A for the loss of the Jeepney?

SUGGESTED ANSWER:
1) The contract is called "commodatum". [Art. 1933. Civil Code). COMMODATUM is a contract by which
one of the parties (bailor) delivers to another (bailee) something not consumable so that the latter may
use it for a certain time and return it.
2) No, B is not obliged to pay A for the use of the passenger Jeepney because commodatum is essentially
gratuitous. (Art. 1933. Civil Code]
3) Yes, because B devoted the thing to a purpose differentfrom that for which it has been loaned (Art.
1942, par. 2,Civil Code)

3. A foreign manufacturer of computers and a Philippine distributor entered into a contract

whereby the distributor agreed to order 1,000 units of the manufacturer's computers every
month and to resell them in the Philippines at the manufacturer's suggested prices plus 10%. All
unsold units at the end of the year shall be bought back by the manufacturer at the same price
they were ordered. The manufacturer shall hold the distributor free and harmless from any
claim for defects in the units. Is the agreement one for sale or agency?(5%)

SUGGESTED ANSWER:
The contract is one of agency, not sale. The notion of sale is negated by the following indicia: (1) the
price is fixed by the manufacturer with the 10% mark-up constituting the commission; (2) the
manufacturer reacquires the unsold units at exactly the same price; and (3) warranty for the units was
borne by the manufacturer.

4. As an agent, AL was given a guarantee commission, in addition to his regular commission, after
he sold 20 units of refrigerators to a customer, HT Hotel. The customer, however, failed to pay
 for the units sold. AL’s principal, DRBI, demanded from AL payment for the customer’s
accountability. AL objected, on the ground that his job was only to sell and not to collect
payment for units bought by the customer. Is AL’s objection valid? Can DRBI collect from him or
not? Reason. (5%)

SUGGESTED ANSWER:
No, AL's objection is not valid and DRBI can collect from AL. Since AL accepted a guarantee commission,
in addition to his regular commission, he agreed to bear the risk of collection and to pay the principal
the proceeds of the sale on the same terms agreed upon with the purchaser (Article 1907, Civil Code)
Agency; Real E

5. CX executed a special power of attorney authorizing DY to secure a loan from any bank and to
mortgage his property covered by the owner’s certificate of title. In securing a loan from MBank,
DY did not specify that he was acting for CX in the transaction with said bank. Is CX liable for the
bank loan? Why or why not? Justify your answer. (5%)

SUGGESTED ANSWER:
CX is liable for the bank loan because he authorized the mortgage on his property to secure the loan
contracted by DY. If DY later defaults and fails to pay the loan, CX is liable to pay. However, his liability is
limited to the extent of the value of the said property. ALTERNATIVE ANSWER: CX is not personally liable
to the bank loan because it was contracted by DY in his personal capacity. Only the property of CX is
liable. Hence, while CX has authorized the mortgage on his property to secure the loan of DY, the bank
cannot sue CX to collect the loan in case DY defaults thereon. The bank can only foreclose the property
of CX.

6. Before he left for Riyadh to work as a mechanic, Pedro left his Adventure van with Tito, with the
understanding that the latter could use it for one year for his personal or family use while Pedro
works in Riyadh. He did not tell Tito that the brakes of the van were faulty. Tito had the van
tuned up and the brakes repaired. He spent a total amount of P15,000.00. After using the
vehicle for two weeks, Tito discovered that it consumed too much fuel. To make up for the
expenses, he leased it to Annabelle. Two months later, Pedro returned to the Philippines and
asked Tito to return the van. Unfortunately, while being driven by Tito, the van was accidentally
damaged by a cargo truck without his fault. a) Who shall bear the P15,000.00 spent for the
repair of the van? Explain. (2%) b) Who shall bear the costs for the van's fuel, oil and other
materials while it was with Tito? Explain. (2%) c) Does Pedro have the right to retrieve the van
even before the lapse of one year? Explain. (2%) d) Who shall bear the expenses for the
accidental damage caused by the cargo truck, granting that the truck driver and truck owner are
insolvent? Explain. (2%)

7. In order to secure a bank loan, XYZ Corporation surrendered its deposit certificate, with a
maturity date of 01 September 1997 to the bank. The corporation defaulted on the due
repayment of the loan, prompting the bank to encash the deposit certificate. XYZ Corporation
questioned the above action taken by the bank as being a case of pactum commissorium. The
bank disagrees. What is your opinion?

SUGGESTED ANSWER:
We submit that there is no pactum commissorium here. Deposits of money in banks and similar
institutions are governed by the provisions on simple loans (Art. 1980. Civil
Code). The relationship between the depositor and a bank is one of creditor and debtor. Basically this is
a matter of compensation as all the elements of compensation are present in this case (BPI vs. CA, 232
SCRA 302).

8. Samuel borrowed P300,000.00 housing loan from the bank at18% per annum interest. However,
promissory note contained a proviso that the bank "reserves the right to increase interest within
the limits allowed by law," By virtue of such proviso, over the objections of Samuel, the bank
increased the interest rate periodically until it reached 48% per annum. Finally, Samuel filed an
action questioning the right of the bank to increase the interest rate up to 48%. The bank raised
the defense that the Central Bank of the Philippines had already suspended the Usury Law. Will
the action prosper or not? Why? (5%)

SUGGESTED ANSWER:
The action will prosper. While it is true that the interest ceilings set by the Usury Law are no longer in
force, it has been held that PD No. 1684 and CB Circular No. 905 merely allow contracting parties to
stipulate freely on any adjustment in the interest rate on a loan or forbearance of money but do not
authorize a unilateral increase of the interest rate by one party without the other's consent (PNB
v. CA, 238 SCRA 2O [1994]]). To say otherwise will violate the

9. Olivia owns a vast mango plantation which she can no longer properly manage due to a lingering
illness. Since she is indebted to Peter in the amount of P500.000.00 she asks Peter to manage
the plantation and apply the harvest to the payment of her obligation to him, principal and
interest, until her indebtedness shall have been fully paid. Peter agrees. 1) What kind of contract
is entered into between Olivia and Peter? Explain. 2) What specific obligations are imposed by
law on Peter as a consequence of their contract? 3) Does the law require any specific form for
the validity of their contract? Explain 4) May Olivia re-acquire the plantation before her entire
indebtedness shall have been fully paid? Explain.

1. A contract of antichresis was entered into between payment of the loan. However, the loan was not
paid on Olivia and Peter. Under Article 2132 of the New Civil Code, by a contract of antichresis the
creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to
apply them to the payment of the interest, and thereafter to the principal of his credit.
SUGGESTED ANSWER:
2. Peter must pay taxes and charges upon the land and bear the necessary expenses for preservation
and repair which he may deduct from the fruits. (Art, 2135, NCC)
SUGGESTED ANSWER:
3. The amount of the principal and interest must be specified in writing, otherwise the antichresis will be
void. (Art. 2134,
NCC)
SUGGESTED ANSWER:
4. No. Art. 2136 specifically provides that the debtor cannot re-acquire the enjoyment of the immovable
without first having totally paid what he owes the creditor. However, it is potestative on the part of the
creditor to do so in order to exempt him from his obligation under Art. 2135, NCC, The debtor cannot re-
acquire the enjoyment unless Peter compels Olivia to enter again the enjoyment of the property.
 10. AB sold to CD a motor vehicle for and in consideration of P120,000.00 to be paid in twelve
monthly equal installments of P10,000,00, each installment being due and payable on the 15th
day of each month starting January 1997. To secure the promissory note, CD (a) executed a
chattel mortgage on the subject motor vehicle, and (b) furnished a surety bond issued by Philam
life, CD failed to pay more than two (2) installments, AB went after the surety but he was only
able to obtain three-fourths (3/4) of the total amount still due and owing from CD. AB seeks
your advice on how he might, if at all, recover the deficiency. How would you counsel AB?

SUGGESTED ANSWER:
Yes, he can recover the deficiency. The action of AB to go after the surety bond cannot be taken to mean
a waiver of his right to demand payment for the whole debt, The amount received from the surety is
only payment pro tanto, and an action may be maintained for a deficiency debt.

11. In the province, a farmer couple borrowed money from the local merchant. To guarantee
payment, they left the Torrens Title of their land with the merchant, for him to hold until they
pay the loan. Is there a - a) contract of pledge, b) contract of mortgage, c) contract of
antichresis, or d) none of the above? Explain.

12. In 1982, Steve borrowed P400.000.00 from Danny, collateralized by a pledge of shares of stock
of Concepcion Corporation worth P800,000,00. In 1983, because of the economic crisis, the
value of the shares pledged fell to only P100,000.00. Can Danny demand that Steve surrender
the other shares worth P700,000.00?

SUGGESTED ANSWER:
a) No. Bilateral contracts cannot be changed unilaterally. A pledge is only a subsidiary contract, and
Steve is still indebted to Danny for the amount of P400,000.00 despite the fall in
the value of the stocks pledged.
b) No. Danny's right as pledgee is to sell the pledged shares at a public sale and keep the proceeds as
collateral for the loan. There is no showing that the fall in the value of the pledged property was
attributable to the pledger's fault or fraud. On the contrary, the economic crisis was the culprit. Had the
pledgee been deceived as to the substance or quality of the pledged shares of stock, he would have had
the right to claim another thing in their place or to the immediate payment of the obligation. This is not
the case here.