MOCK BAR EXAMINATION QUESTIONS IN

COMMERCIAL LAW



1. Which of the following reflects a correct legal precept?

a. Private corporations under the Corporation Code are created by law.
b. A private corporation may always be held civilly liable for negligent acts
committed by its employees.
c. The corporate obligations are, as a rule, not the obligations of the corporate
officers as long as the absence of liability of the latter is reflected in the
corporate by laws.
d. Private corporations under the Corporation Code may either be de facto or
de jure.

2. Which of the following is in conformity with both law and jurisprudence?

a. The separate personality of a corporation may be disregarded when an
incorporator dominates and controls the outstanding capital stock.
b. Shareholders cannot maintain a suit in their own names to recover corporate
property.
c. A corporation does not fall within the constitutional protection against
unreasonable searches and seizures.
d. A corporation has a right against self-incrimination.

3. Ten persons, all Filipinos, and acting as incorporators, filed an application for the
incorporation of XYZ Bank, Inc. Which of the following is correct?

a. The incorporators are not disqualified by reason of their nationality.
b. XYZ Bank, Inc. may issue no-par value shares as long as the consideration
thereof is not less than P5.00.
c. The incorporators must all be Philippine residents.
d. None of the above.

4. When the articles of incorporation provide for non-voting shares, the holders of such
shares shall nevertheless be entitled to vote on the following matters, except:

a. Dissolution of the corporation.
b. Sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of corporate property. Amendment of the articles of
incorporation.
c. Incurring, creating, increasing or assignment of bonded indebtedness.

5. ABC Corporation, a private corporation engaged in the business of importing used cars
from Japan was issued a certificate of incorporation by virtue of R.A. 27890. Because of
a failed business transaction, ABC Corporation sued Mr. X for a damage arising from the
latters alleged breach of its contractual obligations.

a. Mr. X cannot allege lack of legal capacity to sue of ABC Corporation in its
motion to dismiss because it has a legal personality conferred by law.
b. Mr. X cannot allege lack of legal capacity in its motion to dismiss because it
is not allowed to attack the existence of the corporation collaterally.
c. ABC Corporation is a de jure corporation and its existence can be attacked
only through a quo warranto proceeding.
d. Attacking the existence of ABC Corporation may be done through a motion
to dismiss because its creation is void.

6. No 1 - Within five (5) years from issuance of its certificate of incorporation, the newly-
formed corporation must formally organize and commence business operations. Failure
to do so within such period is a ground for dissolution. No. 2 - Every member of the
board of every corporation must own at least one (1) share of stock standing in his
name in the books of the corporation.

a. Both statements are false.
b. Both statements are true.
c. The first statement is true; the second is false.
d. The second statement is true; the first is false.

7. A corporation was formed by fifteen (15) incorporators and its certificate of incorporation
was duly issued. A year after its attainment of juridical personality, the stockholders, who
are themselves the members of the board adopted a resolution, providing for the
following (i) That all of the corporations issued stock of all classes, exclusive of treasury
shares, shall be held of record by not more than a specified number of persons, not
exceeding twenty (20); (ii) That all of the issued stock of the corporation shall be subject
to certain specified restrictions; and (iii) That the corporation shall not list in any stock
exchange or make any public offering of any of its stocks of any class.

a. The corporation is a close corporation because the resolution contains the
elements of a close corporation;
b. The corporation is de facto because although it has a certificate of
incorporation, the provisions in the resolution should have been contained n
the articles.
c. The corporation is an open corporation. The corporation is a corporation by
estoppel because although it operates as a corporation, it did not comply with
certain legal requirements for the establishment of a close corporation.

8. Which of the following is correct?

a. The secretary of a corporation must be a citizen of the Philippines and a
resident of the Philippines. He must be also a member of the board.
b. The members of the board are liable whenever they vote for unlawful acts.
c. If there are only ten (1) directors elected although the articles of incorporation
provide for fifteen (15) directors, the quorum in a board meeting is eight (8).
d. A director may be removed by the vote of all the stockholders in any meeting.

9. Which of the following acts could be ratified by a vote representing at least 2/3 of the
outstanding capital stock?

a. Acts of directors or trustees who are guilty of gross negligence or bad faith in
directing the affairs of the corporation;
b. An attempt by a director to acquire or actual acquisition of any interest
adverse to that of the corporation in respect of any matter reposed upon him
in confidence;
c. Acts of directors constituting an approval of patently unlawful acts;
d. Acquisition of a business opportunity which should belong to the corporation,
thereby acquiring profits which should belong to the corporation.

10. The pre-emptive right extends to the right to subscribe;

a. Only to new issues of shares arising out of an increase of the capital stock.
b. Only to the issuance of previously unissued portions of the outstanding
capital stock.
c. To all issues of shares or dispositions of shares of any class;
d. To all issues or dispositions of shares of any class other than redeemable or
treasury shares.

11. The following are the requisites for the corporate power to acquire its own shares. Which
is the exception?

a. The corporation must have unrestricted earnings in its books to cover the
purchase of the shares except in the case of redeemable shares.
b. The acquisition must be for the sole purpose of acquiring shares in order to
eliminate fractional shares.
c. The acquisition must be for a legitimate purpose.
d. The corporation must have unrestricted earnings in its books to cover the
purchase of shares.

12. Which of the following is correct?

a. Dividends may be declared out of a reappraisal surplus or revaluation
increment because they constitute profits.
b. Dividends are profits but not all profits are dividends.
c. All dividends are taxable as income of the stockholder.
d. The declaration of any kind of dividend requires the assent of at least 2/3 of
the outstanding capital stock.

13. X subscribed to 1,000 shares of stock in ABC He paid 50% of the subscription but such
subscription was later on declared delinquent. The total liability of X, including the
balance, accrued interest, costs and other expenses amounted to P50,000. Which
bidder is considered the highest bidder in the delinquency sale?

a. A bid of P45,000 for 500 shares;
b. A bid of P43,000 for 504 shares;
c. A bid of P50,000 for 900 shares;
d. A bid of P40,000 for 300 shares;

14. No. 1 Holders of delinquent shares are not entitled to dividends. No. 2 A transfer of
shares to a non-stockholder is binding to the corporation as long as the transfer is in a
public document.

a. Both statements are true.
b. Both statements are false.
c. No 1 is true; No. 2 is false.
d. No. 2 is true; no. 1 is false.


15. No. 1 A foreign corporation intending to sue in Philippine courts must always have a
license to engage in business n the Philippines. No. 2 A foreign corporation engaged
in business in the Philippines may sue and be sued n the Philippines.

a. Both statements are false.
b. Both statements are true.
c. No. 1 is true; No. 2 is false.
d. No. 1 is false; no. 2 is true.

16. Which of the following is not a negotiation of a negotiable instrument?

a. Delivery to the payee of an instrument payable to bearer;
b. Delivery to the payee of an instrument payable to bearer Jose.
c. Delivery of an instrument payable to the order of Superman.
d. indorsement and delivery of an instrument payable to the order of Jose.

17. An indorsement is restrictive if:

a. it is indorsed to Jose.
b. it is indorsed to Jose or bearer.
c. it is indorsed to Jose in trust for my child.
d. It is indorsed to the order of Jose.

18. The instrument is payable to bearer if

a. it is payable to the order of cash.
b. it is payable to cash.
c. it is payable to the order of the King of the Philippine Islands.
d. it is payable as in all of the above.

19. X wants to lend money to third persons but asks his friend, B to sign promissory notes of
the borrowers as the lender/ payee. As payee, B indorses the notes to X. B receives no
consideration for lending his name.

a. X is a party accommodated.
b. B is an accommodation party.
c. B is not an accommodation party.
d. B is not a party to the note, but X is.

20. D issues a note payable to the order of P. P indorses the note thus: To A. Sgd P.

a. A is an assignee.
b. A may negotiate to B by delivery alone.
c. A may negotiate to B by indorsement completed by delivery.
d. A cannot negotiate the note any further.

21. The following instrument is negotiable assuming all other requisites are present:

a. I promise to pay Pedro Santos P50,000
b. Pay to X or his order P50,000 and deliver 10 sacks of rice.
c. I promise to pay to the order of P P50,000 and such other sums he may be
entitled to.
d. I promise to pay O or bearer P50,000 with interest.

22. Which among the following has a conditional promise hence, non-negotiable?

a. To D. Pay to the order of P P50,000. Sgd. DR.
b. To D. Pay to the order of P P50,000 out of my money in your hands. Sgd
DR.
c. I promise to pay P or his order P30,000 on the day his father passes away.
d. None of the above is conditional.

23. X indorses a note sans recourse and delivers it to B.

a. If B cannot collect from the maker, B can never collect from X.
b. If B cannot collect from the maker, B can collect from X after giving him a
notice of dishonor.
c. If B cannot collect from the maker because of forgery of the latters
signature, B cannot collect from X.
d. If B cannot collect from the maker because of forgery of the latters
signature, B can collect from X.

24. Drawer issues a check to the order of P drawn against O Bank. Through illegal means,
F gets hold of the check, indorses the check to himself by forging Ps signature, and
deposits it in his account in M Bank which indorses the check for clearing with the
words All prior indorsements guaranteed.Which is correct?

a. P can still collect from Drawer.
b. O Bank is liable to Drawer for reimbursement of the amount deducted from
the account of Drawer.
c. M Bank is liable to O Bank as an indorser.
d. All of the above.

25. No. 1 The maker engages to pay according to the tenor of his acceptance. No. 2 - The
indorser warrants that the instrument is genuine only n certain cases.

a. Both are false.
b. Both are true.
c. No. 1 is true; No. 2 is false.
d. No. 1 is false; No. 2 is true.

26. Which of the following statements is not legally true?

a. Common carriers are required to cater to every member of the public.
b. To be a common carrier, an entity must have a certificate of public
convenience.
c. Travel agencies as such are common carriers.
d. It is possible for a customs broker to be a common carrier if it transports
goods for a fee.

27. Which could be availed of as a complete defense by a common carrier?

a. All forms of fortuitous events;
b. The doctrine of last clear chance in case of collisions.
c. Contributory negligence of the plaintiff.
d. None of the above.

28. The common carriers duty to observe extraordinary diligence in the vigilance over the
goods;

a. ends when they are temporarily unloaded in transit.
b. ends when the goods are lost in transit.
c. begins upon the execution of a bill of lading.
d. ends when the shipper has availed of his right of stoppage in transitu.

29. The doctrine of inscrutable fault applies

a. when there is collision.
b. when a vessel makes a wrong maneuver in the second zone of collision.
c. when there is no evidence as to which vessel is negligent.
d. whenever a collision occurs.

30. A commercial vessel was sunk when it was overtaken by a typhoon in the ocean. It was
established that the ship was unseaworthy but would have successfully completed the
voyage had it not been for the typhoon.

a. The ship owner may invoke fortuitous event as a defense.
b. The ship agent may be held liable in case the ship owner is not found.
c. The ship agent may not be held liable because he is acting for a disclosed
principal.
d. No one is liable.

31. The doctrine of limited liability may not be availed of as a defense in the following cases.
Which is the exception?

a. The vessel is insured.
b. If there are expenses incurred when the vessel was repaired before its loss.
c. If there are liabilities under the Workmens Compensation Law.
d. There is no exception.

32. Which stipulation is not void?

a. That the shipper will be liable only for P500.00 per baggage.
b. That the shipper will be liable for P500.00 only per luggage except if the
shipper or passenger declares a higher value.
c. The shipper will be liable only for P500.00 per baggage whatever be the
value declared.
d. All are void.

33. When a passenger is carried gratuitously by a common carrier;

a. the duty of extraordinary diligence of the carrier ceases.
b. the duty of extraordinary diligence of the carrier continues for a limited
period.
c. the duty of extraordinary diligence may be lessened by stipulation.
d. there is only a duty to observe ordinary diligence.

34. X insured his house against fire. During the effectivity of the insurance, he sold the
house to Y without a corresponding change in the policy but X continued to pay the
premiums. If a loss occurs;

a. X can recover from the policy because there was no change in the policy.
b. X can recover because he is the one who is paying the premiums.
c. Y can recover because he is the owner.
d. The insurer may legally refuse to pay.

35. In answer to a question in the insurance application on whether or not he had suffered
from a heart ailment, X answered NO. Two years after the policy became effective, X
died of a liver ailment.

a. Recovery may be had under the policy because the ailment concealed was
not the cause of death.
b. Recovery cannot be had because of a material concealment.
c. Recovery cannot be had because of material misrepresentation.
d. Recovery can be had.

36. The insurer is entitled to the payment of premiums as soon as the thing insured is
exposed to the peril insured against, except

a. if there is an agreement to the contrary.
b. if the insurer waives the premium in the meantime.
c. if the insured deposits a check.
d. none of the above.

37. Which is false?

a. Terrorists cannot be insured because they are public enemies.
b. A wife has an insurable interest in the life of her creditor.
c. The insured shall have the right to change his beneficiary as a rule.
d. The interest of a beneficiary continues even if his negligence caused the
death of the insured.

38. No. 1 - When there is double insurance, there is always over insurance. No. 2 - A
contract of suretyship can never be an insurance contract.

a. Both are true.
b. Both are false.
c. No. 1 is false; No. 2 is true.
d. No. 1 is true; No. 2 is false.

39. D deposited 500 bags of cement in the warehouse of W. The latter issued a negotiable
warehouse receipt to D. Five months after, O came to the warehouse to claim the goods
alleging that the cement deposited by D were merely stolen by the latter. At the same
time D arrived in the warehouse claiming the cement and presenting the warehouse
receipt. Confronted with conflicting claims of ownership, W should ;

a. deliver the cement to O because he is the owner.
b. deliver the cement to D because he is the depositor.
c. deliver the cement to D because he is the holder of the warehouse receipt.
d. compel the claimants to interplead so the court could decide who has the
right to the goods.

40. V is a vegetable buyer. He goes to Baguio City, buys vegetable in bulk and after filing up
his truck, he travels to Divisoria and sells all the contents of his truck.
a. V must prepare an affidavit listing his creditors, the amount of their credits
and their due dates.
b. V must notify his creditors before selling all the contents of the truck.
c. V does not have to perform any of the above acts if his business is not
registered.
d. V does not have to perform any of the above because his sale is in the
ordinary course of business.

41. M mortgaged his concrete house located in a rented lot to B. The deed of mortgage
which is embodied in a public instrument is denominated as a chattel mortgage.

a. The mortgage is totally void because the house is a real property.
b. The mortgage is binding even to third persons because it is in a public
instrument.
c. If the debt is not paid, B cannot foreclose the mortgage.
d. If the debt is not paid, B can foreclose the mortgage.

42. Which among the following is not a function of the Bangko Sentral ng Pilipinas?

a. As official depositary of the Philippine government.
b. As financial adviser of the Philippine government.
c. As fiscal agent of the Philippine government.
d. As the watchdog of government funds.

43. No. 1 A bank may be may lend to a single borrower more than fifteen (15%) of the
banks unimpaired capital. No. 2 A deposit in a bank in foreign currency may be
inquired into provided the depositor gives his consent, orally or in writing.

a. Both are false.
b. Both are true.
c. No. 1 is true; no. 2 is false.
d. No. 1 is true; no. 2 is false.

44. It is a bank which creates or accepts demand deposits subject to withdrawal by checks
and primarily organized to carry on the business of accepting drafts and issuing letters of
credit, discounting and negotiating promissory notes, receiving deposits, buying and
selling foreign exchange and gold and silver bullion and lending money against the
borrowers security in property.
a. Rural bank;
b. Thrift bank;
c. Universal bank;
d. Commercial bank.

45. No. 1 - The Ombudsman may inquire into the bank deposit of a public officer whose
case is pending criminal investigation in the Ombudsman even if there is no actual case
filed in court. No. 2 - A writ of garnishment directed to a bank deposit is prohibited by
law.

a. Both are false.
b. Both are true.
c. No. 1 is false; No. 2 is true.
d. No. 1 is true; No. 2 is false

46. X imports goods from Japan through a letter of credit issued by National Bank. When the
goods arrived in Manila, X had no money to pay for the balance of the importation. He
therefore, executed a trust receipt agreement with the bank. X got hold of the gods and
sold the same but failed to remit to the bank the proceeds of the sale corresponding to
his balance.

a. X is only civilly liable to the bank.
b. X may be sued for theft by the bank;
c. X may be sued for estafa.
d. X may be deprived of his import license .

47. The distribution of dividends from capital and the acquisition of corporate shares without
corporate unrestricted retained earnings is not allowed by law because of:

a. The trust fund doctrine.
b. The corporate opportunity theory.
c. The corporate entity doctrine.
d. None of the above.

48. Jose and his wife, Perla, opened and maintained the following accounts with Allied
Bank Recto. (a) Savings deposit P300,000; (b) Demand deposit P400,000; (c)
Time deposit - P350,000. They also have the same deposits with the same
amount in Allied Bank Makati. If Allied bank becomes insolvent the Philippine
Deposit Insurance Corporation will be bound to be liable to the spouses for its
insurance liability equivalent to

a. two deposits.
b. one deposit.
c. six deposits.
d. three deposits.

49. Mendoza claims P 50,000.00 for the loss of both of his suitcases during his flight
from Manila to Davao via Philippine Air Lines. However, PAL is willing to pay only P
4,000.00 on the ground that the airline ticket stipulates that unless a higher value is
declared, any claim for loss cannot exceed P 2,000.00 for each baggage. Mr.
Mendoza has not declared a greater value, despite the fact that the clerk had called
his attention to the stipulation in the ticket. Mr. Mendoza sues the airline company.
The refusal of the airline company to pay the claim is:

a. not valid as it is not in accordance with law.
b. not valid as it is contrary to public policy.
c. valid because Mr. Mendoza did not pay any freight.
d. valid because no declaration had been made on the actual value of the
baggage and Mr. Mendoza did not pay the corresponding freight charges.

50. A check upon which the holders signature must appear twice, one to be affixed by
him at the time it is issued and the second or counter-signature, to be affixed by him
before it is paid, otherwise it is incomplete, is called:

a. certified check
b. stale check
c. travellers check
d. answer not given

51. One of the following has no insurable interest in the life of Alberto:

a. his wife
b. his mother
c. his mistress
d. his daughter

52. An instrument is rendered non-negotiable if;

a. there is an indication of a particular fund out of which reimbursement is to be
made.
b. there is an indication of a particular account to be debited with the amount.
c. the instrument is payable out of a particular fund.
d. answer not given.

53. When can a corporation deny pre-emptive right to stockholders?

a. Where a stockholder is delinquent in the payment of unpaid balance of his
subscription.
b. Where the articles of incorporation so provides.
c. Where the shareholder does not pay fifty percent of the value of the shares to
be subscribed.
d. None of the above

54. The following shall produce the effect of payment of debts:

a. Delivery of check
b. Tender of Central Bank notes
c. Delivery of promissory note
d. answer not given

55. What are watered stocks?

a. Stocks issued for a consideration less than P10.
b. Stocks issued for a consideration more than its par or issued value.
c. Stocks issued for a consideration less than its par or issued value.
d. None of the above

56. When does a stock become delinquent?

a. When no payment is made within fifteen (15) days from the date as fixed in
the subscription contract or in the call made by the Board of Directors.
b. When no payment is made within two (2) months as fixed in the contract or
call.
c. When no payment is made within one (1) month from date as fixed in the
contract or call.
d. None of the above.

57. This is not negotiation of a negotiable instrument.

a. Assignment
b. Delivery of a bearer instrument
c. Indorsement completed by delivery of an instrument payable to order
d. Delivery of an instrument to the payee

58. Ultra vires acts are acts of a corporation which are:

a. Exercised by the Board of Directors but not ratified by the stockholders.
b. Not within the corporate powers conferred by the Code or articles of
incorporation.
c. Necessary and incidental to the exercise of the powers conferred upon the
corporation.
d. None of the above

59. Contracts for water transportation from foreign ports to Philippine ports are primarily
governed by:

a. The Civil Code of the Philippines
b. The Code of Commerce
c. Salvage Law
d. Public Service Act
e. Carriage of Goods by Sea Act

60. Why is a de facto corporation not considered a de jure corporation?

a. Because it failed to incorporate under existing statutory authority.
b. The corporations exercise of corporate powers is not recognized by the
courts for reason of public policy.
c. Its corporate existence may be challenged in court by any taxpayer.
d. None of the above.

61. Which one of the following is not a characteristic of a voting trust agreement?

a. A voting trust is created for the purpose of conferring upon the trustee the
right to vote and other rights pertaining to the shares.
b. A voting trust is irrevocable during the time stipulated.
c. The stockholder remains the beneficial or equitable owner of the shares while
the trustee is the legal owner.
d. All voting trust agreements shall not exceed five (5) years.

62. As used in the Corporation Code, outstanding capital stock means:

a. The same as authorized capital stock.
b. The same as subscribed capital stock.
c. It represents the paid up capital stock.
d. The total shares issued to subscribed or stock holders, whether or not, fully or
partially paid, as long as there is a binding subscription agreement, except
treasury shares.

63. Which is not a consequence of the corporations separate personality?

a. The corporation has a nationality or citizenship.
b. The corporation may sue but it cannot be sued.
c. The corporation may acquire and dispose of properties.
d. The corporation may enter into contracts with another corporation.

64. Under the provisions of the Carriage of Goods by Sea Act, claim has to be made for
the damage sustained by goods.

a. The claim should be made upon receipt when the damage or average could
be ascertained from the outside.
b. The claim should be made within twenty four (24) hours from receipt when
the damage or average could be ascertained from the outside.
c. The claim should be made within twenty four (24) hours from receipt when
the damage or average could be ascertained only upon opening the package.
d. The claim should be made within three (3) days from receipt when the
damage or average could be ascertained from the outside.

65. A policy of insurance is contestable:

a. if it is a life insurance policy
b. within 2 years from its inception or last reinstatement
c. on the ground of concealment or misrepresentation
d. if all the above is present

66. Which of the following conforms with the requirements of the Corporation Code?

a. Every incorporator must be residents of the Philippines, must be a natural
person and must own or subscribe to at least one share of stock.
b. Corporators are those who compose a corporation and is a term which
includes stockholders, members and incorporators.
c. Incorporators are those who originally compose the corporation, whose
names are mentioned in the articles of incorporation majority of whom have
signed the said articles.
d. An incorporator in a domestic corporation may be an alien and a non-
resident.

67. The pre-emptive right if not denied by the corporation generally extends to all issues
of shares in proportion to a stockholders shareholdings. Even if not denied, the right
does not extend to certain specified issuances enumerated below. Which is the
exception?

a. Shares to be issued in compliance with laws requiring stock offerings to the
public.
b. Shares to be issued in good faith with the approval of the stockholders
representing 2/3 of the outstanding capital stock in exchange for property
needed for corporate purposes.
c. Shares to be issued to incorporators.
d. Shares to be issued in payment of a previously contracted debt.

68. The acquisition of shares and the declaration of cash dividends require that the
corporation has unrestricted retained earnings. The law also requires that shares
should not be issued below its par or issued value. These requirements is a
consequence of the.

a. The theory of separate personality.
b. The doctrine of limited capacity.
c. The trust fund doctrine.
d. The doctrine of general capacity.

69. The Board of Directors alone may declare the following type of dividends, except in
case of;

a. cash dividends
b. property dividends
c. stock dividends
d. script dividends

70. The following are the corporate officers of a corporation, except:

a. President
b. Vice-President
c. Treasurer
d. Secretary

71. In the following cases, the Trust Fund Doctrine is violated, except:

a. When the corporation allows the issuance of watered stocks.
b. When there is payment of dividends without unrestricted retained earnings.
c. When the corporation releases or condones payment of the unpaid
subscription.
d. None of the above.

72. Which of the following are prohibited considerations for the issuance of stocks?

a. goodwill
b. past services
c. accounts receivables
d. None of the above

73. The following are remedies available to a corporation to enforce payment of stocks
except:

a. Mandamus
b. Extra-judicial sale
c. Withholding of stock dividends
d. Deduction from cash dividends

74. In the following instances, appraisal right may be exercised, except:

a. Investment of corporate funds in another business or purpose.
b. Extension of term
c. Appointment of an executive committee.
d. Reduction of term.

75. Which of the following cannot be a close corporation?

a. mining corporation
b. stock exchange
c. educational institution
d. All of the above

76. In the following instances, approval of the majority of the board and concurrence of
the stockholders representing 2/3 of the outstanding capital stock is necessary in the
exercise of the powers except:

a. To deny pre-emptive right.
b. To adopt, amend or repeal the by-laws.
c. To increase or decrease capital stock.
d. To declare stock dividends.

77. A person has an insurable interest on the life of his:

a. friend
b. grandfather
c. spouse

78. All provisions and stipulations in insurance contracts are prepared by the Insurer,
thus they are:

a. pro-forma contracts
b. contracts of adhesion
c. unilateral contracts

79. The cause or consideration in insurance contracts is:

a. the premium
b. the proceeds
c. gratuitous

80. Concealment in insurance is:

a. hiding the truth
b. failure to communicate
c. telling lies

81. The extent of insurable interest in non-life insurance depends on:

a. the desire of the assured
b. the value of the thing to be insured
c. unlimited

82. If a thing insured under a fire insurance policy is lost or destroyed by some other
means other than fire, the policy remains compensable.

a. if the loss or destruction was a consequence of the effort to save the thing
insured from being burned;
b. if lost or destroyed because of volcanic lava
c. if lost or destroyed because of an earthquake

83. Insurable interest on the thing insured and insurance interest on the policy in
property insurance or non-life insurance must be reposed on one and the same
person:

a. at the inception of the contract and at the time of the loss;
b. at the tine of the loss
c. at the inception of the contract of insurance.

84. A life insurance policy could no longer be questioned after two (2) years that the
policy had been in force counted from:

a. the inception of the policy
b. the last reinstatement
c. at the inception of the policy or from its last reinstatement

85. To be compensable, the thing insured under a fire insurance policy must be lost or
destroyed:

a. by a hostile fire
b. by a friendly fire
c. by voluntary scorching

86. A public enemy who cannot be the object of a life insurance contract is one:

a. who is a fugitive and has a prize on his head
b. an American or Canadian
c. a citizen of a country with whom the Philippines is at war.

87. It is a written statement by the master of vessel, attested by a proper judicial officer
or a notary, to the effect that damage suffered by the ship or her voyage was caused
by storms or other perils of the sea, without any negligence or misconduct on his
part.

a. Masters Certificate
b. Bill of Lading
c. Affidavit of Desistance
d. Maritime Protest
e. Maritime Complaint

88. This established rule provides that the liability of the ship owner or agent, arising
from the operation of a ship, is limited to the vessel, equipment and freight during the
voyage.

a. Error in Extremis Rule
b. Doctrine of Declared Limitation in Maritime Law
c. Real Nature of Maritime Law
d. Doctrine of Presumed Negligence of Common Carriers

89. This doctrine is a recognition by the courts that the fiduciary standards could not be
upheld where the fiduciary is acting for two entities with competing interests. It rests
on fundamentally on the unfairness of a corporate officer or director taking
advantage of a prospect for his own personal benefit when the interest of the
corporation justly needs protection.

a. Corporate Entity Doctrine
b. Corporate Interest Doctrine
c. Business Judgment Rule
d. Corporate Opportunity Doctrine.

90. It is a legal scheme whereby a debtor, who has sufficient assets but who may be
unable to meet his obligations as and when they fall due, may petition for more time
within which to settle such obligations.

a. Insolvency Proceedings
b. Suspension of Payments
c. Corporate Rehabilitation
d. Voluntary Insolvency

91. It is a business or service engaged in regularly supplying the public with some
commodity or service of public consequence such as electricity, gas, water,
transportation, telephone or telegraph service.

a. Public Service
b. Public Corporation
c. Public Utility
d. Commodities Trader

92. As applied in Transportation Laws, which of the following is a not an element of a
fortuitous event?

a. The cause of the unforeseen and unexpected occurrence, or the failure of the
debtor to comply with his obligations, must be independent of human will;
b. It must be impossible to foresee the event which constitutes the case fortuito,
or if it can be foreseen, it must be impossible to avoid;
c. The debtor was blameless
d. The occurrence must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner;
e. The obligor must be free from any participation in the aggravation of the injury
resulting to the creditor.

93. It is the substitution of one person in the place of another with reference to lawful
claim or right, so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or securities.

a. Assignment of Rights
b. Substitution of Creditors
c. Subrogation

94. Samsung invented a cellular phone that can also play digital music or MP3s. It
applied for the issuance of letters patent.

a. The invention is not patentable because it is a combination of old functions
which does not produce a new result.
b. The invention is patentable because it is a new product which is beneficial to
the public.
c. The invention is not patentable because Samsung is a foreign corporation
and it should file its application in its home country.
d. The invention is patentable because it combines existing elements, a cellular
phone and a digital music player, and produces a new and useful result,
namely, the convenience of having two gadgets in one.

95. Lucky Me registered its trademark, Ang Sarap Pancit Palabok with the Intellectual
Property Office. Nissin subsequently introduced its new product, Ang Sarap Pinoy
Ramen. Lucky Me sued for trademark infringement.

a. Nissin is not guilty of trademark infringement because the trademark Ang
Sarap is descriptive, hence not capable of exclusive appropriation.
b. Nissin is not guilty of trademark infringement because its product, Pinoy
Ramen, belongs to a different category from Lucky Mes product, Pancit
Palabok.
c. Nissin is guilty of trademark infringement because it did not register its
trademark Ang Sarap Pinoy Ramen.
d. Nissin is guilty of trademark infringement because the trademark Ang Sarap
is fanciful and arbitrary, hence capable of exclusive appropriation.

96. Center Book Store is the publisher of the book Legal Journal. It donated one copy to
the Library of the U.E. College of Law. The Library, in order to preserve the original
book, reproduced one copy of the Journal for lending to the Universitys students for
room use. Is the U.E. Law Library liable for copyright infringement.

a. No. The reproduction is consistent with fair use.
b. Yes. Only the National Library is allowed to reproduce books and other
works.
c. No. The copy of the Journal is marked For Room Use Only and is therefore
not made available to the public outside of the Library.
d. Yes. The law only allows a library to photocopy a book if it is fragile or rare.

97. The Credit Foundation of the Philippines is a non-stock corporation, which handles
deposit of funds from its members and lends the same funds to the general public. It
is composed of at least 100 natural persons, each of whom has deposited some
amount of money into the Foundation. It applied with the Bangko Sentral for authority
to organize itself into a bank. May the Foundation be granted the said authority?

a. Yes. It qualifies as a bank because its funds are obtained from more than 20
persons.
b. Yes. The Bangko Sentral has the full discretion and expertise to grant
authorities to register as banking institution.
c. No. Only stock corporations can be organized as a bank.
d. No. The word Philippines as part of a corporate name is reserved for
government owned or controlled corporations.

98. Allan purchased 2005 Civic V-tech from Honda Cars Manila (HCM) for P950,000,
payable in twenty-four (24) monthly installments. Allan executed a promissory note
and a chattel mortgage to secure payment thereof. Allan failed to pay four (4)
installments. Thereafter, Allan sold the car to Magtanggol, a purchaser in good faith
and for value. What would be the effect of the sale on the chattel mortgage contract?

a. The chattel mortgage is extinguished as Magtanggol is a purchaser in good
faith and for the value.
b. The chattel mortgage is not extinguished as it is an accessory contract.
Hence, HCM can still foreclose the same.
c. The chattel mortgage is extinguished because the SCM is stopped in not
foreclosing the mortgage after Allan is in default in two installments.
d. The chattel mortgage is not extinguished because the mortgagees right to
foreclose the same is in rem.

99. What is the so-called Grandfather Rule under the Corporation Code?

a. It is a rule that determines the nationality of a corporation on the basis of the
place where the foreign corporation is incorporated or registered?
b. It is a rule that determines the nationality of a corporation on the basis of the
nationality of the majority of the stockholders.
c. It is a rule that determines the nationality of the corporation on the basis of
the nationality of its officers and directors.
d. All of the above
e. None of the above

100. The following are the outstanding characteristics of an insurance contract EXCEPT:

a. It is an aleatory contract.
b. It is a contract of indemnity
c. It is a risk distributing device
d. All of the above
e. None of the above


ANSWER KEY IN COMMERCIAL LAW

1. D
2. B
3. D
4. D
5. D
6. A
7. A
8. C
9. D
10. C
11. B
12. B
13. C
14. B
15. A
16. B
17. C
18. D
19. C
20. C
21. D
22. B
23. D
24. D
25. B
26. D
27. D
28. D
29. C
30. B
31. D
32. B
33. C
34. D
35. D
36. D
37. D
38. A
39. D
40. D
41. D
42. D
43. A
44. D
45. A
46. C
47. A
48. B
49. D
50. C
51. C
52. C
53. B
54. B
55. C
56. C
57. A
58. B
59. A
60. D
61. D
62. D
63. B
64. C
65. B
66. D
67. C
68. C
69. C
70. B
71. D
72. D
73. A
74. D
75. D
76. B
77. C
78. B
79. A
80. B
81. B
82. A
83. A
84. C
85. A
86. C
87. D
88. C
89. D
90. B
91. C
92. C
93. C
94. D
95. D
96. C
97. D
98. B
99. B
100. E