Question 1

The guarantor paid the obligation of the debtor when demand is made. Can he ask for reimbursement?

Accepted Answer

The guarantor has the right to seek reimbursement from the debtor after paying the obligation, as the payment was made on behalf of the debtor. The benefit of excussion (the right to insist that the creditor first exhaust the debtor's assets before turning to the guarantor) is a right that can be waived by the guarantor, and waiving this right does not affect the guarantor's right to reimbursement.

Question 2

The following statements are correct, except:

Accepted Answer

A continuing chattel mortgage is not possible because a chattel mortgage is a security interest in personal property that is perfected by filing a financing statement. A financing statement is valid for five years, and it must be renewed in order to remain effective. A continuing chattel mortgage would not be valid because it would not be possible to renew the financing statement indefinitely.

Question 3

A obtained a loan from Metrobank. As security, he delivered and deposit certificate maturing on April 29, 2011. A failed to pay, hence, the bank encashed the deposit certificate. A contended that it is pactum commissorium. Is A correct?

Accepted Answer

The act done was a matter of compensation. (BPI v. CA, 232 SCRA 302. Art. 1980, NCC)

Question 4

A entered into a contract whereby he obligated himself to pay B on or before September in the form of Australian currency. When the obligation became due and demandable, A delivered to B Australian currency. Is A correct?

Accepted Answer

A is correct in offering Australian currency because the parties agreed upon this form of payment in their contract. Contracts are binding as to the terms and conditions agreed upon by the parties, as long as these terms do not violate law, morals, good customs, public order, or public policy.

Question 5

A & B entered into a contract of loan in the amount of ₱1M with interest at 192% per annum. When the obligation became due and demandable B failed to pay despite demand, hence, A filed a complaint against B. On the interest rate, what is a valid contention of B?

Accepted Answer

The interest rate of 192% per annum is unconscionably high and can be declared void by the court on the grounds of being contrary to morals. The court has the discretion to adjust the interest rate to a more reasonable level.

Question 6

X and Y entered into a contract. X agreed to deposit ₱50,000 with Y's account to make it appear that Y had sufficient capitalization in forming an incorporation. They agreed that Y should return the money plus 12% interest within 30 days. What is the nature of the contract?

Accepted Answer

Commodatum is a contract where one of the parties delivers to another something not consumable, so that the latter may use it for a certain time and then return it. In this case, X delivered the money to Y so that Y could use it to make it appear that he had sufficient capitalization in forming an incorporation. Y was under obligation to return the money and it was only for purposes of exhibiting that he had sufficient capital. Therefore, the contract is a commodatum.

Question 7

Which of the following statements is not true about the dragnet clause?

Accepted Answer

The dragnet clause is not different from a continuing mortgage clause; rather, it is another term for the same concept. Both terms refer to a provision that allows a mortgage to secure future advances or debts, not just the initial loan amount.

Question 8

What is a contract of precarium?

Accepted Answer

A contract of precarium is essentially a type of loan for use, similar to commodatum, but with the distinctive feature that the lender (bailor) can demand the return of the loaned item at any time, making it revocable at the will of the lender.

Question 9

A entered into a contract of loan with a bank. They stipulated that if there will be a law or BSP circular that will allow the increase in the interest rate, the bank will increase it. Is the stipulation valid?

Accepted Answer

The stipulation is not valid because it lacks a corresponding de-escalation clause, which would allow for a decrease in the interest rate under similar circumstances. This creates an imbalance and could be considered unfair or one-sided.

Question 10

Which of the following is correct if the interest rate in a loan is void?

Accepted Answer

When the interest rate in a loan is void, the creditor can still recover the principal amount of the loan and is entitled to the legal rate of interest as compensation, even though the agreed-upon interest rate is nullified. This ensures that the creditor is not unduly penalized for an illegal interest rate, while also protecting the debtor from usurious practices.

Question 11

A checked in at ABC Hotel Corporation with his valuables. While shopping nearby, she left the room for half a day but when she went back, all his valuables were gone as her room was ransacked with the use of force. She filed a complaint for damages. Is the hotel keeper liable?

Accepted Answer

The answer of A checked in at ABC Hotel Corporation...

Question 12

A obtained ₱50,000.00 from B to be placed in A's safety deposit box. What is the nature of the contract?

Accepted Answer

The contract is a deposit because it involves A holding onto B's money for safekeeping, which is the essence of a deposit agreement.

Question 13

In case of contract of deposit, the depository has the following rights or obligations except:

Accepted Answer

The depository's right to make use of the thing deposited is not a general right or obligation in a contract of deposit. Typically, the depository is required to keep the thing safe and return it upon request, without using it unless explicitly permitted by the depositor.

Question 14

What is the nature of the contract of rent of safety deposit boxes?

Accepted Answer

The contract for the rent of safety deposit boxes is considered a lease. This is because it involves the rental of a physical space (the safety deposit box) for a specified period in exchange for payment, fitting the definition of a lease agreement.

Question 15

When is the hotelkeeper shall be liable for the loss of the things belonging to the guests?

Accepted Answer

The answer of When is the hotelkeeper shall be liable...

Question 16

A lent money to B in the amount of ₱3M and executed a mortgage over his house and lot to secure the payment of the obligation with a condition that if he fails to pay, A shall became the owner of the property. Is the stipulation valid?

Accepted Answer

The stipulation is not valid because it constitutes a pactum commissorium, which is prohibited by law. This occurs when a property automatically becomes the property of the creditor in the event of non-payment, without the need for any form of foreclosure or auction.

Question 17

In the question above, suppose B failed to pay and A foreclosed the mortgage. Is A entitled to the balance?

Accepted Answer

The law on pledge applies to the law on mortgage, but if there is no inconsistency between the two laws, then the law on mortgage will apply. In this case, there is no law that prohibits the recovery of deficiency under the mortgage laws, so A is entitled to the balance.

Question 18

A & B entered into a contract of pledge, where B delivered his car to A as security for the payment of an obligation in the amount of ₱2M. For failure of B to pay what is the remedy of A?

Accepted Answer

The answer of A & B entered into a contract...

Question 19

To secure the payment of his obligation, A pledged to his surety C, his car who sold the car after paying the obligation of A. The obligation was ₱2M but the car was sold for only ₱1M. Can the surety recover the deficiency?

Accepted Answer

In the context of a pledge, when the pledged property is sold to cover the debt and the sale proceeds are less than the amount owed, the creditor (in this case, the surety) cannot claim the remaining balance from the debtor. This is based on the principle that the risk of the pledged property not covering the full amount of the debt is borne by the creditor.

Question 20

A obtained a loan from B secured by a mortgage over his house & lot. B failed to pay hence, A foreclosed the mortgage but it was sold for less than the amount of the obligation. Can B recover the deficiency?

Accepted Answer

A can recover the deficiency because the general rule in mortgage foreclosures is that if the proceeds from the sale of the mortgaged property are insufficient to cover the debt, the mortgagee (A in this case) is entitled to claim the deficiency from the mortgagor (B). There is no prohibition in the law against the recovery of any deficiency remaining after the foreclosure and sale of the mortgaged property.

Quiz 22: Contractual Obligations and Liabilities