BL Testbank

BUSINESS LAW
OBLIGATIONS
Kinds of obligation 6. The following except one are duties which are imposed upon the debtor obliged to give a
1. This class of obligations are created or established at the same time, out of the same cause determinate thing. Which is the exception?
and which result in mutual relationship of creditor and debtor between the parties A. To take care of the thing with the proper diligence of a good father of a family
A. Conventional obligations C. Unilateral obligations B. To deliver a thing which must be neither of superior nor inferior quality
B. Reciprocal obligations D. Collective obligations C. To deliver all accessions and accessories
D. To pay damages in case of breach of the obligation
2. Palatiwala sold to Palapangako her watch for P3,000. There was no agreement regarding the
delivery date and the time for payment. Later, Palatiwala effected delivery but Palapangako 7. When the fulfillment of the condition depends on chance or upon the will of a third person
failed to pay the price. Is Palapangako in delay in paying the purchase price? A. Potestative C. Mixed
A. No, the general rule provides " No demand, No delay B. Casual D. Void
B. No, unless there is stipulation that demand is not necessary
C. Yes, if demand would be useless 8. "I will give you this ring provided that if I like to have it back, you return the same to me " The
D. Yes, this involves reciprocal obligation obligation is
A. Void, because the fulfillment depends upon the solve will of the debtor
3. I. 100 kilos of 1st class sugar raised in P's plantation B. Void, because the ftjlfillment depends upon the solve will of the creditor
II. A 1999 Honda CRV colored green C. Valid, because the condition merely causes the loss of rights already acquired
A. Both arc generic things C. Only the first is generic D. Valid, if the creditor will voluntarily return the ring.
B. Both are specific things D. Only the second is generic
9. J agreed to pay his debt and in case of non-payment, to render free service as a servant. Is
4. In an obligation to give an indeterminate thing, what rights are available to the creditor? the obligation valid.
1st answer - To ask for the performance of the obligation A. No, the obligation to pay and to render service as a servant are contrary to law and
2nd answer - To recover damages in case of breach of the obligation morals.
3rd answer - To ask that the obligation be complied with at the expenses of the debtor B. Yes, if the services will be rendered in satisfaction of the debt and in case of non-
A. B. C. D. performance, the proper remedy is specific performance
1st answer True True True False C. No, the nullity of the condition carries with it the nullity of the principal obligation
2nd answer True True False False D. Yes, in so far as the obligation to pay but not as regards the undertaking to render
3rd answer True False False False domestic services for free.
5. In an obligation to give a determine thing, what rights are available to the creditor? 10. L and E agreed in writing that E will work as a servant of L without pay until he could find
1st Answer - To compel specific performance money with which to pay his indebtedness amounting to P50,000. E failed to comply with his
2nd Answer - To recover damages in case of breach of the obligation promise. Which of the following statements is not correct?
3rd Answer - To ask that the obligation be complied with at the expense of the debtor. A. L may sue E for the breach of contract to act as servant without pay as this agreement is
A. B. C. D. in writing and voluntarily signed by the parties thereto.
B. The obligation to pay is enforceable because this is accordance with law
1st Answer True True True False
C. To act as a servant without pay is unconstitutional because this is equivalent to involuntary
2nd Answer True True False False
servitude
3rd Answer True False False False
D. The agreement to work as a servant is void because it is immoral
October 2004 Page 1 of 47
BUSINESS LAW
D. Only the second obligation is subject to resolutory condition

11. In an obligation which reads " Palapangako will give his car to Palahintay if Palahintay will
marry Palaasa not later than December 31, 1999. Which of the following statements is not
correct?
A. If on June 30,1999, Palaasa dies, without marriage, the marriage is impossible to take
place.
B. If today is January 1, 2000, and without the marriage taking place, the obligation is
extinguished because the period indicated has lapsed.
C. If on December 1,1999, Palahintay marries Palaasa the obligation to give the car
becomes due and demandable.
D. If on July 1,1999, Palaasa marries Masugid, the obligation is extinguished because
marriage between Palaasa and Palahintay is impossible to take place.
12. M gave J a parcel of land on condition that J will never go to horse races. One year later, J
went to the horse races. As a result,
A. J has to return both the land and the fruits he had received therefrom from the moment M
had given him the land
B. J has to return both the land and the fruits he had received therefrom from the moment M
had violated the condition.
C. J has to return only the land
D. J has to return the land and the fruits, only if stipulated
13. E, a manufacturer of locks, hired A for 2 years, on the condition that for 5 years, A should not
engage in competitive locks business. After one year, A left for reasons of health. Shortly
afterwards, after regaining his health, A competed with E, who now seeks to restrain him from
such competition, will the action prosper?
A. No, the restriction is void, because it is an unreasonable restraint of trade
B. Yes, it is a reasonable restraint, considering that it was only for 5 years.
C. No, the contract of employment for 2 years was not completed because of a justifiable
reason
D. Yes, if E will allow A to complete the 2 years services agreed upon.
14. I. I will give you my car, but you should not marry M this year
II. I will give you my car, but only after you can prove that by the end of this year, you have
not married M.
A. Both obligations are subject to resolutory conditions.
B. Both obligations are subject to suspensive conditions
C. Only the first obligation is subject to resolutory condition
BUSINESS LAW
15. When the fulfillment of the suspensive condition depends upon the sole will of the debtor 21. Facultative as distinguished from alternative obligation
A. The obligation is valid but the condition is void A. The right of choice is given only to the debtor
B. The condition will be merely disregarded. B. Various things arc due, but the giving of one is sufficient
C. Both the obligation and condition will be valid C. If one of the prestations is illegal, the others may be valid and the obligation remains
D. The obligation shall be void D. If it js impossible to give all except one, that last one must still be given
16. A condition which if imposed on an obligation will be disregarded and will therefore make the 22. 1st Statement. The loss or deterioration of the thing intended as a substitute through the
obligation immediately demandable. negligence of the obligor, does not render him liable.
A. If Lala kills Lele C. If Lolo commits suicide 2nd Statement. A person alternatively bound by different prestations shall completely perform
B. If Lili passes the board exams D. If Lulu will not rise from the dead. one of them
A. B. C. D.
17. "I will give you this car provided that if I like to have it back, you will return the same to me." 1st Statement True True False False
The obligation is 2nd Statement True False True False
A. Void, because the fulfillment depends upon the will of the debtor
B. Void, because the fulfillment depends upon the will of the creditor 23. This obligation is demandable at once
C. Valid, if the agreement is in writing and signed by the parties A. With a suspensive condition
D. Valid, because the condition merely causes the loss of right already acquired B. With a period in diem
C. When my means permit me to do so
18. Which of the following is wrong in alternative obligations? D. When it depends on the happening of a specified event
A. The obligor shall completely perform one of them
B. The obligee cannot be compelled to receive part of one and part of the other undertaking 24. The creditor may already demand fulfillment of the obligation
C. The right of choice belongs to the creditor, unless it has been expressly granted to the A. With a suspensive condition C. With a period in diem
debtor B. When my means permit me to do so D. With a period ex die
D. The debtor shall have no right to choose those prestations which are impossible
25. Considered obligation with a period
19. When among the prestations whereby he is alternatively bound, only one is practiceable I. When my means permit me to do so III. When I can afford it
A. The debtor's obligation is extinguished II. When I am able to IV. When I have money
B. The debtor is liable to pay damages if the prestations were lost even through fortuitous A. Only I C. I, II and III
event B. I and II D. I, II, III, and IV
C. The debtor shall lose the right of choice
D. The debtor is liable to pay damages if the prestations were lost thru his fault 26. When the law speaks of days or nights, it shall be understood that
1st Answer. Days - from sunrise to sunset.
20. When only one prestation has been agreed upon, but the obligor may render another in 2nd Answer. Nights - from sunset to sunrise
substitution, A. B. C. D.
A. There is no obligation C. The obligation is facultative
1st Answer True True False False
B. The obligation is alternative D. The obligee can refuse the substitute
2nd Answer True False True False

BUSINESS LAW
27. Mabait borrowed P10,000 from Maawain on Dec. 25, 1998. The debt is evidenced by a 31. Obligations shall be considered solidary under these following rules. Which is the exception to
promissory note executed by Mabait wherein she promised to pay as soon as she has the the rule?
money or as soon as possible. Maawain made several demands upon Mabait for payments, A. When the prestation is indvisible and there are two or more debtors and creditors
the first, an oral demand was made on May 2, 1999 and the last written demand was dated B. When solidarity is expressly stipulated in the obligation
November 25, 1999 but up to now, no payment of the debt, will the case prosper? C. When the law expressly provides for solidarity
A. Yes, Mabait is in default since May 2,1999. D. When solidarity is required from the nature of the obligation
B. Yes, Mabait is in default since November 25,1999
C. No, the obligation is subject to a suspensive condition Questions 32 thru 36 are based on the following information.
D. No, the obligation is one with a period and the period has not arrived yet A, B and C executed a promissory note binding themselves to pay P9,000 to X, Y and Z. The note
is now due and demandable.
28. When may the courts fix the periods?
1st Answer - If the duration of the period depends upon the will of the debtor 32. Can the creditors proceed against A alone for the payment of the entire debt
2nd Answer - If the debtor binds himself to pay when his means permit him to do so A. No, each creditor can collect only P3,000 from A.
3rd Answer - If the debtor binds himself to pay as soon as possible. B. Yes, either X, Y or Z can collect P9,000 from A.
A. B. C. D. C. No, each creditor can collect only P1,000 from A.
st
1 Answer True True True False D. Yes, since the promissory note is silent with respect to the rights of the creditors, the
2nd Answer True True False False obligation is presumed to be solidary.
3rd Answer True False False False
33. Suppose that C is insolvent can A and B be held liable for his share in the obligation?
29. If an obligation is with a penal clause A. Yes, the debt shall be presumed to be divided into as many equal shares as there are
1st Statement - Proof of actual damages suffered by the creditor is not necessary in order that debtors.
the penalty may be demandeD. B. Yes, but A and B will be liable proportionately.
2nd Statement - When the debtor is guilty of fraud in the fulfillment of the obligation, the creditor C. No, the debts are considered distinct from one another
can demand payment of damages and interest in addition to the penalty. D. No, only either A and B but not both will be liable.
A. B. C. D.
34. Suppose that the obligation was about to prescribe, but X wrote a letter to A demanding for
1st Statement True True False False
payment of the entire debt, will this have the effect of interrupting the running of the period of
2nd Statement True False True False
prescription?
A. Yes, because the demand made by X covers the entire debt and will therefore inure to the
Joint and solidary obligation benefit of the other creditors.
30. Indivisibility as distinguished from solidarity. B. Yes, insofar as A is concerned but not with regard to B and C.
A. Plurality of subject is indivisible. C. No, because the demand should have been made to all the debtors
B. When the obligation is converted into one of indemnity for damages because of breach, D. No, all the creditors should have made the demand.
the character of the obligation remains
C. Refers to the legal tie or vinculum 35. Using No. 34 and prescription sets in, how much can Y collect from A?
D. Refers to the prestation which constitutes the object of the obligation A. P9,000 C. P1,000
B. P3,000 D. P 0

BUSINESS LAW
36. Using No. 35, how much can X collect from A? Specific Circumstances Affecting Obligations in General
A. P9,000 C. P1,000 41. Which of the following is not a requisite of fraud?
B. P3,000 D. P 0 A. There must be a misrepresentation or concealment
B. The fraud must be serious
37. Palangiti, Palabati, and Palakaway solidarily owe Mapagpatawad and Mapagpaubaya C. A party is induced by fraud to enter into contract
P30,000. Mapagpatawad remitted the entire obligation in favor of Palangiti. The effect is D. The fraud is employed by both parties upon each other
A. Palangiti cannot recover from Palabati and Palakaway bacause remission in her favor
extends to the benefit of Palabati and Palakaway 42. An action to impugn the acts of a debtor to defraud the creditor is
B. Palangiti can recover from Palabati and Palakaway their respective share of the debt A. Accion redhibitoria C. Accion pauliana
C. The obligation is not extinguished until Palangiti collects from Palabati and Palakaway B. Accion subrogatoria D. Accion reivindicatoria
D. The obligation is not yet extinguished until Mapagpaubaya is paid by Mapagpatawad of
her share of the credit 43. Kaakit-akit, wife of Mahinahon and daughter of Kabigha-bighani, while employed in a jewelry
store owned by Maginhawa embezzled P100,000 belonging to said jewelry store. In order to
38. Payment by a solidary debtor shall entitle him to reimbursement from his co-debtors, except if prevent her criminal prosecution for estafa, Mahinahon and Kabigha-bighani signed a
such payment was made document obligating themselves jointly and severally to pay Maginhawa the amount
A. Before the obligation is due embezzled plus interest. Because of their failure to comply with their promise, Maginhawa
B. After the obligation has prescribed brought an action against Mahinahon and Kabigha-bighani. Will the action prosper?
C. In compliance with the demand to him by the creditor A. Yes, both knowingly and voluntarily agreed to assume the obligation of Kaakit-akit
D. After the obligation became due and demandable and notice of payment was made to him B. No, Kabigha-bighani should not have been included because Kaakit-akit is no longer
under his authority
39. A and R promised to deliver a particular car valued at P500,000 to M. If M demands the C. Yes, but only in so far as Mahinahon is concerned because husband and wife are required
delivery from A and R and it is only R who is willing to deliver. Which of the following is the right by law to support each other
of M? D. No, it is considered contrary to public policy to allow parties to make an agreement
A. To ask from R thee delivery of the car because the object is indivisible designed to prevent prosecution for crimes.
B. To ask from A and R the monetary consideration of P500,000 representing the value of
the car plus damages 44. If the law or contract does not state the diligence which is to be observed in the performance
C. To ask from A the payment of damages of an obligation, the obligor is expected to observe.
D. To ask from A the delivery of the car plus damages A. Ordinary diligence C. Diligence of a father of a good family
B. Extraordinary diligence D. Utmost care
40. N, R and J solidarily bound themselves to deliver to S a Honda motorcycle valued at P60,000.
The obligation was not fulfilled through the fault of J. Thereupon S filed an action in court 45. Culpa aquiliana as distinguished from culpa contractual
against N and the court awarded P72,000 to S representing the value of the motorcycle plus A. Proof of due diligencc in the selection and supervision of employees is not available as a
damages. Which of the following situations is valid? defense.
A. If N pays S the P72,000, N can collect from R and J P24,000 each. B. Proof of the contract and of its breach is sufficient prima facie to warrant recovery
B. S has to collect P24,000 each from N, R and J to satisfy the court's award of P72,000 C. The negligence of the defendant is merely an incident in the performance of the obligation
C. N can refuse to pay the penalty because it should be charged against J, the guilty party. D. The source of liability is the defendant's negligent act or omission itself
D. If S succeeds in collecting the P72,000 from N, N in turn can collect from R P20,000 and
from J P32,000.
BUSINESS LAW
46. Culpa as distinguished from dolo 51. X, a bus driver, driving negligently, killed his passenger B and pedestrian C. As a result
A. Waiver of an action to enforce liability may be waived 1. B may proceed against X's employer and the source of liability is the crime committed by
B. Liability may be reduced by the courts A or culpa criminal
C. There is deliberate intention to cause damage or prejudice 2. B may proceed against X's employer and the source of liability is the breach of contract of
D. Responsibility arising therefrom is demandable. carriage or culpa contractual
3. C may proceed against X's employer and the source of liability is the crime committed by
47. It is not a source of liability from an existing obligation which will entitle the injured party to A or culpa criminal.
damages 4. C may proceed against X's employer and the source of liability is the quasi-delict
A. Mora or delay committed by A or culpa aquiliana
B. Culpa aquiliana or negligence committed in the performance of a spontaneous act A. 1,2 and 3 C. 2,3 and 4
C. Dishonesty, malice or bad faith in thee performance of an existing valid obligation B. 1,2 and 4 D. 1,2,3 and 4
D. Contravention of the tenor of the obligation
52. A passenger on a truck was hurt, but in a criminal case against the driver, said driver was
48. A, a jeepney driver, driving recklessly, caused serious physical injuries to his passenger B and acquitted. The victim now sues the owner of the truck for culpa contractual. May the suit still
pedestrian C.As a result, which of the following is not correct? prosper?
A. B may proceed against A for culpa criminal A. No, this will constitute double jeopardy
B. B may proceed against A for culpa contractual B. No, the acquittal means that the guilt of the accused was not proven by proof beyond
C. C may proceed against A for culpa aquiliana reasonable doubt
D. C may proceed against A for culpa criminal C. Yes, it is sufficient for him to prove the existence of the contract of carriage and the
injuries suffered.
49. A passenger in a taxi was hurt because of the driver's negligence. As a result D. Yes, provided he can prove the negligence of the driver.
A. The passenger may bring a civil case of culpa contractual against the driver and owner of
the taxicab company 53. In quasi-delict, the liability of a person who is held liable for the fault or negligence of another
B. The owner is not liable if he can prove that he exercised due diligence in the selection and person who is under his care or responsibility shall cease if
supervision of the driver. A. There was contributory negligence on the part of the person injured.
C. The passenger must prove the existence of the contract of carriage and that there was a B. He was not present at the time of the act, hence it was not possible to him to prevent the
breach because he did not arrive at his destination unhurt. damage.
D. The passenger must prove that there was negligence on the part of the driver. C. He observed ordinary diligence to prevent the damage.
D. He observed the diligence of a father of a good family.
50. A passenger on a bus was hurt but the driver was acquitted. The victim now sues the owner of
the bus for culpa contractual. May the suit still prosper? Rules of loss, deteriorations, improvement
A. No, this will constitute double jeopardy 54. One is not a requisite needed in order that obligation shall be extinguished by loss or
B. No, the guilt of the accused was to proven by proof beyond reasonable doubt destruction of a thing due
C. Yes, provided the victim can prove the negligence of the driver A. When the obligation is to deliver the house located at 123 Recto Avenue, Manila
D. Yes, it is sufficient for him to prove the existence of the contract of carriage and the B. When the thing is lost without the fault of the debtor
injuries suffered C. When the obligation is to deliver a brand new Honda Car colored orange
D. When the thing is lost before the debtor incurred delay

BUSINESS LAW
55. M, a car dealer, is obliged to give P at M's option, either his Toyota car, his Honda civic car or 59. Within what period must recovery be made if the debtor did not know that payment was not yet
his Nissan car due?
1st Statement - If the Toyota car and the Honda car were destroyed through M's fault and later A. Before maturity with regard to both what was paid and the interest
the Nissan car was lost by a fortuitous event, M can npt be held liable B. Even after maturity with regard to both the interest and what was paid
2nd Statement - If the Toyota car and the Honda car were destroyed by a fortuitous event and C. Before maturity with regard to what was paid and even after maturity with regard to the
later the Nissan car was lost through M's fault, M should be held liable interest
A. B. C. D. D. Before maturity with regard to interest and even after the maturity with regard to what was
st
1 Statement True True False False paid
60. What may be recovered if the debtor knew that payment was not yet due?
56. What is the effect of the loss of the prestations in alternative obligation where the right of A. Only what was paid C. Both the interest and what was paid
choice belongs to the creditor and the loss is due to the fault of the debtor. B. Only the interest D. No recovery can be had
1st Answer - If only one remains the obligation still subsists, but if ceases to be alternative as it
becomes a simple obligation. 61. If a third person pays with the knowledge and consent of the debtor, the payor is entitled to
2nd Answer - If 2 or more objects remain, the obligation still subsists and the choice is limited to 1st Answer. Reimbursement of what he paid
the remaining objects. 2nd Answer. Subrogation to creditor's rights
3rd Answer - If none remains, the obligation is extinguished because the debtor chose not to A. B. C. D.
give anything. 1st Answer True True False False
A. B. C. D. 2nd Answer True False True False
1st Answer True True True False
2nd Answer True True False False 62. If a third person pays without the debtor's knowledge or against his will, the payor is entitled to
3rd Answer True False False False 1st Answer. Reimbursement of what he paid
2nd Answer. Subrogation to creditor's rights
Extinguishment of Obligations in General A. B. C. D.
57. Unless it is otherwise stipulated, the extra-judicial expenses required by the payment of the 1st Answer True True False False
obligation shall be for the account of 2nd Answer True False True False
A. The debtor C. Both creditor and the debtor
B. The creditor D. Neither debtor nor creditor 63. R is the creditor or S in the amount of P50,000. G is the guarantor of S. S paid R P20,000. T, a
friend of S not knowing the partial payment made by S, paid R the P50,000 without the
58. There being no express stipulation and if the undertaking is to deliver a determinate thing, the knowledge of S. What is the effect of this payment on the obligation?
payment shall be made A. The obligation is extinguished but T can demand reimbursement from G in the amount of
A. At the domicile of the debtor P50,000.
B. At the domicile of the creditor B. The obligation is extinguished but T can demand reimbursement from S in the amount of
C. Wherever the thing might be at the moment the obligation was constituted P50,000.
D. Wherever the thing might be at the moment the obligation is to be fulfilled C. The obligation is not extinguished because Ts payment was made without the knowledge
of S

BUSINESS LAW
D. The obligation is extinguished but T can recover P30,000 from S, but he can not proceed 64. Palakindat owes Palaiyak P 20,000 which was due on December 20, 1999. On that date,
against the guarantor G. Palakindat offered P 10,000, the only money he then had, but Palaiyak refused to accept the
payment. Thereafter Palakindat met, Palaluha, Palaiyak's 23 years old daughter, to whom she
gave the P10,000 with the request that she him the money over to her mother. The money was
stolen while in Palaluha's possession. How much may Palaiyak still recover from Palakindat?
A. P 20,000 C. P 15,000
B. P 10,000 D. P 0
65. Mapagkalinga and Mapagmahal entered into a contract of loan P 4 M whereby Mapagmahal
obligated herself to pay in US dollars. If the obligation is now due and demandable, may the
stipulation to pay in US dollars be enforced?
A. Yes, if Mapagmalial so desires, otherwise he may elect to pay in Philippines cuirency
B. No, the stipulation to pay in currency oiher than the Philippine currency is void
C. Yes, the parties in a loan undertaking can stipulate that the same maybe paid in a
currency other than the Philippine currency.
D. No, the obligation must be paid in using Philippine currency.
66. Which of the following is not true?

A. A creditor is not bound to accept a check in satisfaction of his debt, because a check even
if good when offered, does not meet the requirements of legal tender
B. The Phil, peso bills when attempted to be exported, as when carried in excess of that
allowed by Central Bank regulation maybe deemed to have been taken out of domestic
circulation as legal tender and thus treated as commodity
C. The obligation of a debtor who had agreed to pay in dollars in a foreign bills of exchange,
shall be discharged in Phil currency measured at the prevailing rates exchange at the time
the obligation was incurred
D. The purchasing power or value of money or currency depends upon, can come into being
can be created or brought about by law enacted by the legislative department of the
government
67. If a third person pay an obligation. What are the rights, which are available to him if he pays
the obligation with the knowledge and consent of the debtor?
1st Answer - He can recover from the debtor the entire amount, which he has paid
2nd Answer - He is subrogated to all of the rights of the creditor.
A. B. C. D.

BUSINESS LAW
68. A debtor owes his creditor several debts, to wit C. The property is alienated by the debtor to the creditor in satisfaction of a debt in money
1. An unsecured debt D. The effect is to release the debtor for the net proceeds of the things ceded or assigned
2. A debt bearing interest
3. A debt secured with a mortgage of the debtor's property 74. Cession as distinguished from dacion en pago
Later, partial payment was made by the debtor, without specifying the debts to which the A. Does not affect all the assets of the debtor
payment should be applied and on the other hand, the creditor had not specified in the receipt B. Transfers ownership upon delivery
to be issued the application of payment, this is the order in which the payment should be C. Not an act of novation
applied, D. Does not require plurality of creditors
A. 1, 2, 3 C. 2, 3, 1
B. 3, 2, 1 D. 3, 1, 2 75. The leviable properties of the debtor are transferred to the creditors to be sold and from the
proceeds, the creditors are paid. There is
69. The expenses of consignation, when properly made shall be charged against A. Consignation C. Cession
A. The debtor C. Both creditor and the debtor B. Delegacion D. Dacionenpago
B. The creditor D. Neither debtor nor creditor
76. In payment by cession or when the debtor cedes or assigns his property to his creditors in
70. If the consignation having been made, the creditor should authorize the debtor to withdraw the payment of his debt, he shall be released from his obligations
same A. Only to the extent of the net proceeds of the thing assigned
1st Answer. The creditor shall lose every preference which he may have over the thing B. To the full extent of debtor's obligation
2nd Answer. The co-debtors, guarantors and sureties shall be released C. Only to the extent allowed by the creditors
A. B. C. D. D. Only to the extent allowed by the debtors
st
1 Answer True True False False
2nd Answer True False True False 77. It presupposes not only that the obligor is able, ready and willing, but also more so, in the act
of performing his obligation.
71. This is not a special form of payment A. Promissory note C. Tender of payment.
A. Dacion en pago C. Tender of payment and consignation B. Bill of exchange D. Obligation to sell
B. Payment by cession D. Application of payment
78. Maganda, Mayumi and Mahinhin are jointly liable to Matulungin in the amount of P 9,000.
72. Payment by cession as distinguished from dation in payment Matulungin assigns the entire credit to Maganda without the consent of Mayumi and Mahinhin.
A. The debtor is not necessarily in a state of financial difficulty In this case
B. The effect is to release the debtor for the net proceeds of the things ceded or assigned. A. Mayumi and Mahinhin will not be liable to Maganda
C. The property is alienated by the debtor to the creditor in satisfaction of a debt in money. B. Maganda becomes the new creditor and may demand from Mayumi and Mahinhin P4,500
D. What is delivered by the debtor, is merely a thing to be considered as the equivalent of the each
performance of the obligation C. Maganda's share in the obligation is extinguished because of confusion in his person
D. The obligation is extinguished because of conftision
73. Three of the following are for dacion en pago; which is for cession?
A. What is delivered by the debtor is merely a thing to be considered as the equivalent of the 79. In three of the following cases, compensation is not proper. Which is the exception?
performance of the obligation A. Depositum C. Mutuum
B. The debtor is not necessarily in a state of financial difficulty B. Commodatum D. Gratuitous support
BUSINESS LAW
80. In the extinguishment of obligations, this shall take place when two persons in their own right D. There is personal novation
are debtors and creditors of each other
A. Confusion or merger C. Payment or performance 87. A obliged himself to give B P100,000 if B places among the top 10 in the CPA board exams.
B. Compensation D. Novation Subsequently, they agreed that A will give B P100,000 if B merely passes the CPA board
exams. This is example of
81. Legal compensation is allowed when one of the debts A. Real Novation C. Mixed novation
A. Arises from a sale of real property made by a minor to a capacitated person B. Personal Novation D. Implied Novation
B. Arises from the obligation of a depositary
C. Consists in civil liability arising from a penal offense 88. When a third person assumes the payment of the obligation even without the knowledge &
D. Arises from a claim for support by gratuitous title consent of the debtor but with the consent of the creditor
A. There is subrogation
82. In which of the following debts is legal compensation proper? B. There is dele gacion if debtor is released
A. When one of the debts arises from the obligation of a depository C. There is expromission if debtor is released
B. When one of the debts arises from a voidable contract D. There is novation
C. When one of the debts arises from a claim for support by gratuitous title
D. When one of the debts consists in civil liability arising from penal offense 89. The right of the creditor to exercise all the rights and bring all the actions available to the
debtor except those which are inherent in his person.
83. A change of the person or object of the obligation is A. Accion subrogatoria C. Accion reinvindicatoria
A. Compensation C. Novation B. Accion pauliana D. Accion quanti minor is
B. Confusion D. Remission
90. A owes B P11,000 due on July 2, 2003. B owes A P6,000 due on July 3, 2003 and P4,000 due
84. The substitution of an obligation by another which modifies or extinguishes it by changing its on July 10, 2003. B owes C P11,000 due on July 3,2003. On July 3,2003 B cannot pay C so B
object or principal condition or substituting the person of the debtor or subro gating a third assigns to C her credit of P11,000 against A, without the knowledge of A. On July 10, 2003, C
person in the rights of another is tries to collect from A the P11,000. How much can C compel A to pay?
A. Compensation C. Subrogation A. P11,000 C. P5,000
B. Novation D. Confusion of rights B. P9,000 D. P1,000
85. There is novation of the obligation if Comprehensive

1st Statement. The period for payment is shortened from 5 years to 3 years 91. 1st Statement. A solidary creditor cannot assign his rights without the consent of the other
2nd Statement. The period for payment is extended from 3 years to 5 years solidary creditors
A. B. C. D. 2nd Statement. Proof of actual damages suffered by the creditor is not necessary in order that
1st Statement True True False False the penalty maybe demanded
2nd Statement True False True False A. B. C. D.
st
1 Statement True True False False
86. If an obligation is modified by changing the object and also changing the principal condition 2nd Statement True False True False
A. There is mixed novation
B. The original obligation remains
C. There is real novation
BUSINESS LAW
CONTRACTS Formalities of Contracts

Concepts & Classification 7. To be valid, the following contracts should be in writing, except:
1. A contract in which a person literally contract with himself is A. Contract to pay interest on loan
A. Auto contract C. Commutative contract B. Contract of donation of real property
B. Accessory contract D. Bilateral contract C. Contract giving authority to an agent to sell a piece of land
D. Contract made in consideration of marriage
2. The statement "contracts shall be obligatory in whatever form they have been entered into
provided all the requisites for their validity are present" refers to 8. Which of the following contracts is valid?
A. Consensual contracts C. Solemn contracts A. Oral contract of agency giving authority to an agent to sell the land belonging to the
B. Real contracts D. Assessory contracts principal
B. Oral partnership agreement where immovable property is contributed.
Elements & Stages C. Oral contract of sale of an immovable property entered into by an agent who was given
3. The contract must bind both contracting parties, its validity or compliance cannot be left to the authority orally by the principal
will of one of them, this stresses D. Oral agreement to answer all expenses for the wedding reception if A marries B
A. Consensuality of contract C. Relativity of contract
B. Mutuality of contract D. Freedom of contract Interpretation and Reformation of Contract
9. The determination of the meaning of the terms or words used by the parties in the contract
Persons Bound A. Reformation C. Interpretation
4. A owes B P10,000 with 12% interest. B owes C P1,200. It was agreed between A and B that A B. Rescission D. Annulment
would give the interest of P1,200 to C and C communicated his acceptance of the stipulation
between A and B. There is 10. 1st Statement If the terms of the contract are clear, the literal meaning of its stipulation shall
A. Stipulation pour atrui C. Compensation control
B. Pactum commissorium D. Assignment 2nd Statement The evident intention of the parties shall prevail over the words of the contract
A. B. C. D.
Consent 1st Statement True True False False
5. With respect to contracts, it is the agreement of the will of one party with that of another with 2nd Statement True False True False
respect to the object and consideration
A. Consent C. Option 11. Reformation is not the proper remedy if
B. Offer D. Invitation A. The mutual mistake of the parties causes the failure of the instrument to disclose their real
agreement
6. The action for annulment of a voidable contract of marriage due to vitiated consent caused by B. One party was mistaken and the other acted fraudulently or inequitably in such a way that
violence is the instrument does not show their true intention
A. 4 years from the time the violence ceases C. There was mistake, fraud, inequitable conduct or accident which prevented the meeting of
B. 5 years from the time the violence ceases* the minds of the contracting parties
C. 4 years from the celebration of marriage D. The true intention of the contracting parties is not expressed in the instrument purporting
D. 5 years from the celebration of marriage to embody the agreement by reason of mistake, fraud, inequitable conduct or accident

BUSINESS LAW
12. A remedy in equity by means of which a written instrument k made or construed so as to 18. The action to annul a voidable contract shall be brought by
express or conform to the real intention of the parties when some error or mistake has been A. The party responsible for the defect of consent
committed B. The incapacitated party upon reaching the age of majority
A. Rescission C. Reformation C. The party whose consent is vitiated by one of the causes that vitiate consent
B. Annulment D. Consideration D. Both (B) and (C)
13. In which of the following is reformation not allowed? 19. The action for the annulment of a voidable contract due to vitiated consent caused by mistakes
A. When the real agreement is void of fraud is four years counted from
B. Wills A. The date the contract if perfected
C. Simple donation inter-vivos when no condition is imposed B. The date the contract is terminated
A. A and B C. B and C C. The date the mistake or fraud is committed
B. A and C D. A, B and C D. The date the mistake or fraud is discovered
Defective Contracts 20. Contracts which cannot be sued upon unless ratified, thus it is as if they have no effect yet are:
14. A remedy granted by law to the contracting parties and even third persons, in order to secure A. Rescissible C. Unenforceable
reparation of damages caused them by a contract, even if it be valid, by means of the B. Voidable D. Void
restoration of things to their condition prior to the celebration of the contract
A. Rescission C. Reformation 21. The following contracts are defective. Which one is unenforceable?
B. Annulment D. Consideration A. Contract of sales by which a guardian acquires the property of his word without the
approval of the court
15. Which of the following is not correct in rescission? B. Contract of sales by which a city mayor acquires a portion of Ihe city part pursuant to a
A. Cannot be availed when the party who has been damaged has other legal remedy city ordinance enacted by the City Council
B. The person who seeks rescission must be able to return what he ought to return C. Contracts whose objects is outside the commerce of man
C. The object of the contract is not in the possession of third persons who have acquired it in D. These were both parties are incapable of giving consent to a contract
good faith
D. Can be demanded by any of the contracting parties 22. An action to annul a contract where one of the parties is incapable of giving consent to the
contract is extinguished by
16. A intimidated B to marry A's pregnant daughter. After a year B would like to file an action for A. Rescission C. Ratification
the annulment of the marriage but could not do so because A was around to intimidate him. B. Novation D. Subrogation
The marriage contract is
A. Rescissible C. Unenforceable 23. The defects inherent to unenforceable contracts consists either in the fact that they were
B. Voidable D. Void entered into in excess or without any authority or, they do not comply with the Statute of
Frauds, or both contracting parties are incapacitated. Such kind of contract is susceptible of
17. C had E kidnapped and tortured for refusing to sell his (E's) land to C. As E could no longer convalidation only by
bear the physical pain inflicted upon him, he signed a document of sale in favor of C.The sale A. Ratification C. Prescription
is B. Enforcement thru the court D. Reformation
A. Void C. Valid
B. Voidable D. Unenforceable
BUSINESS LAW
24. Ratification cleanses the defect of the following, except 29. Which of the following statements is legally correct?
A. A contract to sell an immovable or interest therein entered into orally A. An action for annulment of a contract is imprescriptible
B. A contract where both parties are incapable to give consent B. An action to enforce judicially a natural obligation is prescriptible
C. A contract entered into by another who has been given no authority C. An action for rescission of a contract prescribes in four years counted from the execution
D. A contract of sale of a piece of land thru an agent whose authority was given orally by the of the contract
principal D. An action to declare a contract void is imprescriptible
25. This contract is without effect unless ratified 30. This is not a characteristic of a void or inexistent contract.
A. Marriage between first-degree cousins C. Contract between two insane persons A. The right to raise a defense of illegality cannot be waived
B. Contract with stipulation pour atrui D. Donation between husband and wife B. The action or defense for declaration of the nullity or inexistence of the contract does not
prescribe
26. This contract is without effect unless ratified C. Not subject to ratification
A. Marriage between firstdegree cousins D. Defense of illegality of the contract is available to third persons whose interest are not
B. Contract of sale between two insane persons directly affected
C. Contract of sale between a guardian and his ward
D. Donation between husband and wife 31. Which of the following does not invalidate the contract?
A. Want of cause C. Unlawful cause
27. In 1999, at age 17, D sold a piece of land to E for P3M, payable at P1M in 1999. P1M in 2000 B. False cause D. Inadequacy of cause
and P1M in 2001. In 2002, A wants to annul the contract on the ground of minority.
Will the action prosper? 32. 1st Contract A donated to B a real property, the donation is made orally.
A. Yes, provided D was then acting in good faith 2nd Contract A sold to B a real property, the sale is made orally.
B. Yes, D has four years to ask for the annulment of the contract A. B. C. D.
C. No, the contract is not defective since D voluntarily sold the property 1st Contract Valid Valid Void Void
D. No, the acceptance of the installment payments amounted to ratification of the sale. 2nd Contract Valid Void Valid Void
28. In 1999, at age 16, A sold his land for P4M payable at P1M in 1999, P1M in 2000, P1M in 33. This is a not a void contract
2001 and P1M in 2002. In 2004, A wants to annul the contract on the ground of minority. Will A. Those whose objects are outside the commence of men
his action prosper? B. Those which are relatively simulated
A. No, A is allowed to ask for annulment of the contract only within 4 years from the C. Those whose cause, object or purpose is contrary to law, morals, good customs, public
perfection of the contract order or public policy
B. Yes, A has 4 years counted from the time he becomes of legal age to ask for annulment of D. Those where the intention of the parties relative to the principal object of the contract
the contract cannot be ascertained.
C. No, the acceptance of the installment payments amounted to ratification of the sale.
D. Yes, provided A was then acting in good faith when he sold the property 34. Which of the following contracts is not void ab initio?
A. That whose object is outside the commence of men
B. That whose object did not exist at the time of transaction
C. That which contemplates an impossible service
D. That which is undertaken in fraud of creditors
BUSINESS LAW
35. The following contracts, except one, are void ab initio. Which is the exception? PARTNERSHIP
A. That whose object is outside the commerce of men. Nature and as Distinguished from Corporation
B. That whose object did not exist at the time of the transaction 1. Characteristic of partnership as a contract
C. That which contemplates as impossible service A. Formal C. Gratuitous
D. That which is undertaken in fraud of creditors. B. Preparatory D. Innominate
36. One of the following is void 2. Unless it is otherwise stipulated, a partnership begins
A. Policitation C. Stipulation pour atrui A. from the moment one of the partners effects his contribution
B. Pactum commissorium D. Waiver intentionada B. from the moment all of the partners effect their contributions
C. from the moment of the execution of the contract
37. The following are void contracts, except D. from the moment the public instrument is executed and signed by the partners
A. A contract whereby X promised to live as the common-law-wife of Y without the benefit of
marriage in consideration of P1,000,000. Elements and Kinds
B. An agreement whereby A is to render service as a servant to B without compensation as 3. He does not participate in the management and is not known as a partner to the public
long as A has not paid him debt. A. limited partner C. dormant partner
C. A stole the car of B. Later they entered into a contract whereby B would not prosecute A in B. silent partner D. secret partner
consideration of P100,000.
D. A stipulation in a contract of lease whereby the landlord can go to court to eject the tenant 4. The following are the effects of unlawful partnership, except
in case of failure of the latter to pay the rent agreed upon. A. The profits shall be confiscated in favor of the government
B. The instruments or tools and proceeds of the crime shall be forfeited in favor of the
38. Three of the following contracts are defective. Which is valid? government
A. Oral contract of sale of an immovable property entered into by an agent who was given C. The contribution of the partners shall be confiscated in favor of the government
authority orally by the principal D. The contract is void ab initio and the partnership never existed in the eyes of the law
B. Oral contract of agency giving authority to an agent to sell the land belonging to the
principal 5. M, T and E decided to form a universal partnership of all present property. The contract of
C. Oral partnership agreement where immovable property is contributed partnership was executed on October 10, 1999 but they commenced business on October 18,
D. Oral agreement to answer all expenses for the wedding reception if P marries A 1999. One of the following is not correct?
A. If the partnership is for 15 years, but one of the partners withdraws from the partnership
Comprehensive on the 12th year, the firm is dissolved
39. 1st Statement. When one of the parties has brought an action to enforce the instrument, he B. The partnership began its existence on October 10,1999.
cannot subsequently ask for its reformation. C. If after the expiration of its term, the partners continue to transact business, the
2nd Statement. The injured party may seek rescission, even after he has chosen fulfillment if partnership is converted to a partnership at will
the latter should become impossible. D. In the absence of any partnership agreement specifically covering the division of losses
A. B. C. D. among the partners, they will be deemed to share thee losses in accordance with their
1st Statement True True False False capital contributions

BUSINESS LAW
6. 1st Statement - Articles of universal partnership entered into without specification of its nature, Questions 9 & 10 are based on the following information.
only constitute a universal partnership of profits A, B and C formed a universal partnership of profits, with the following as their contributions:
2nd Statement - Persons who are prohibited from giving each other any donation or advantage A - 4 hiectares of sugar cane plantation
cannot enter into universal partnership B - 4 hectares of banana plantation
A. B. C. D. C - 2 hectares of coconut plantation
1st Statement True True False False They agreed that the partnership shall use the property contributed and its fruits, but the ownership
2nd Statement True False True False shall be retained by the partner making the contribution. During the existence of the partnership, A
won a sweepstakes prize of P10M, B was employed by SMC with a monthly salary of P100,000
Questions 7 & 8 are based on the following information. and C inherited a 2 hectare agricultural land from his father.
J, A and H formed a universal partnership of profits with the following contributions:
J 2 hectares of land with a 2-storey building 9. As a result,
A 30 Fx's taxi cabs A. The partnership shall be entitled to the ownership of the properties contributed
H Fuel and oil B. The firm is entitled to the salary of B because this was acquired during the existence of
They agreed that the partnership shall use the property contributed and its fruits, but the ownership the partnership
shall be retained by the partner making the contribution. During the existence of the partnership, J C. The prize won by A shall be turned over to the partnership because it was won during the
was employed by Delicious Corporation with a monthly salary of P75,000, A won P10,000 in a existence of the partnership
sweepstakes draw and H bought a brand new Pajero. D. The prize, the salary and the inheritance will not belong to the partnership
7. Which of the following is correct? 10. Which of the following statements is true?
A. The partnership shall be the owner of the properties contributed A. The firm is not entitled to the salary of B
B. The price won by A shall belong to the partnership because it was won during the B. The firm is not entitled to the prize of A
existence of the partnership C. The fruits of the agricultural land shall pertain to the partnership
C. The salary and the Pajero shall both belong to the partnership D. The use of the agricultural land shall pertain to the partnership
D. The partnership is entitled to the salary of J because this was acquired during the
existence of the partnership 11. A, B, and C decided to pool their resources and form a universal partnership of all present
property. The contract of partnership was executed on January 15, 1998, but they commenced
8. Assuming the building, the Fx's and fuel and oil were destroyed by fortuitous event after business on February 15,1998. Which of the following statements is false?
effecting the contributions, who bears the risk of loss? A. The partnership began its existence on January 15,1998
1st Answer - Applying the principle of "res perit domino" the loss shall be borne by J, A and H. B. If after the expiration of its term the partners continue to transact business, the partnership
2nd Answer - Applying the rule "No one shall be liable for fortuitous events the loss shall be is converted into a partnership at will
borne by the partnership because the loss occurred after the contributions were effected C. If the partnership is for five (5) years but on the fourth year C dies, the partnership is
A. B. C. D. dissolved
st D. In the absence of any partnership agreement specifically covering division of losses
among the partners, they will be deemed to share the losses in accordance with their
capital contributions

BUSINESS LAW
12. A, B, and C formed a Universal Partnership of profits. The partners are the owners of the 15. A limited partner who takes active participation in the management of the partnership shall
following: become
A - 20 Mazda cars A. A managing partner C. Liable as a general partner
B -14 Tamaraw FX B. A general partner D. An ostensible partner
C -18 Corolla cars
The parties agreed that the use and fruits of the object shall pertain to the partnership. Which 16. A, B and C were partners in a dry goods business. A was the manager of the firm. The
of the following statements is true? warehouse of X Mall was burned and all the dry goods and hardware items were damaged. A
A. The partnership upon delivery shall be the owner of the object contributed proposed to purchase for P5,000 the dry goods and for P4,000 the hardware items. The price
B. Upon dissolution, the objects shall be converted into cash and the proceed shall be was so low, that A expected to make a 25% profit on the deal. B and C objected to the
divided equally among the partners including the fruits proposed transactions. Which is correct?
C. During the term of the partnership, the contributing partner remains to be the naked owner A. A, the managing partner can validly carry out the proposal inspite of the objectives of the
of the object contributed by but upon dissolution all objects contributed are to be other partners
converted into cash and proceeds shall be divided equally among the three partners B. A, the managing partner can carry out the proposal with respect to the dry goods over the
D. During the term of the partnership, the loss of the objects contributed shall be bome by objections of the other partners
the partners concerned C. A cannot validry bind the partnership in this transactions
D. A should first get the consent of the other partners
Rules of Management
13. R and M entered into a contract of partnership for the purpose of buying and selling textbooks, 17. The following are the rules in case a managing partner collects a demandable debt from a
with the former as capitalist partners and the latter as industrial partner. It was agreed that R person who also owes the partnership a demandable debt, except
shall contribute P20,000 to the common fund on August 15, 2002. Upon the arrival of the A. The sum collected shall be applied to the partnership credit
designated date R failed to deliver the contribution he promised. B. It shall be applied to the two credits iii proportion to their amounts
A. M must make a demand upon R for the deliver of his contribution to render R in default. C. The sum shall be fully applied to the partnership credit, if the receipt given is for the
B. The contract of partnership becomes void because R failed to give his contribution to the account of the partnership.
common fund. D. The debtor has the right to have the payment applied in his debt to the partner it if should
C. M can compel R to deliver his contribution with interest and/or damages without the be more onerous to him.
necessity of demand.
D. The contract of partnership was never perfected because there was no delivery of 18. L is the managing partner in R and L partnership. M is indebted to L for P100,000 and to the
contributions by the partners. partnership for P300,000. When both debts mature, M pays L P100,000 and L issues a
receipts for her personal credit The payment of P100,000 shall be applied
14. An industrial partner who engages in a separate business without the consent of the other A. To the debt owing to the partnership
partners B. To the debt owing to L
A. If there was a profit in his transaction he can be held liable as a debtor of the firm plus C. in favor of L and in favor of the partnership
damages D. in favor of L and in favor of the partnership
B. may be excluded from the partnership
C. To give to the partnership whatever profits or benefits he may have derived from his
separate business
D. Either A, or B, or C

BUSINESS LAW
Distribution of Profits and Losses 25. A, B and C are partners contributing services, P20,000 and P40,000 respectively. The
19. X, Y, and Z to form Y Partnership to engage in import-export business. The partners agreed distribution of P80,000 which represents net assets, shall be
that the profit will be divided on the following ratio: X-20%, Y-30%, Z-50%, but no agreement A. A = P20,000; B = P20,000; C = P40,000 C. A = P32,000; B=P16,000; C = P32,000
as to losses. After one year of operation, there was a loss of P10,000. How will you apportion B. A = P 5,000; B = P25,000; C = P50,000 D. A = P26,667 ; B = P26,667; C = P26,667
this loss if the capital contribution are as follows: X - P20,000; Y - P15,000; Z - P5,000.
A. According to their capital contribution: X-P5,000; Y-P3,750; Z-P1,250 26. A, B and C are partners contributing services, P40,000 and P80,000 respectively. The
B. Equally among X, Y, and Z distribution of P60,000 loss shall be
C. X-P2,000; Y-P3,000; Z-P5,000 A. A = P15,000; B = P15,000; C = P30,000 C. A = P0; B = P20,000; C = P40,000
D. A third party may be called to make the distribution B. A = P20,000; B = P20,000; C = P20,000 D. A = P0; B = P30,000; C = P30,000
20. R, E and G agreed that the partnership profit will be divided 20%, 30%, 50% respectively, but 27. A, B and C are partners contributing services, P40,000 and P80,000 respectively. The
there is no agreement as to losses. After one year of operation, there was a loss of P100,000. distribution of P60,000 whic represents net assets shall be
If the capital contribution of the partners are - R P200,000; E P150,000 and G P50,000, the, A. A = P15,000; B = P15,000; C = P30,000 C. A = P0; B = P20,000; C = P40,000
loss will be distributed as follows: B. A = P20,000; B = P20,000; C = P20,000 D. A = P0; B = P30,000; C = P30,000
A. R - P50,000; E - P37,500; G - P12,500 C. According to their capital contributions
B. R - P33,333; E - P33,333; G - P33,333 D. R - P20,000; E - P30,000; G-P50,000 Rights and liabilities of partners
28. Three of the following are rights of a partner, which one is not right to
Questions 21 thru 23 are based on the following information. A. associate another person to his share.
A, as partner contributed P30,000, B as partner contributed P15,000, and C as capitalist-industrial B. admit another partner
partner contributed P30,000 and his services in the partnership. After payment of all liabilities and C. inspect and copy partnership book
expenses, only P150,000 remain as partnership assets. D. ask dissolution of the firm at the proper time.
21. The share of A is 29. A partnership suffered in the first year of its operation. J, a capitalist partner refused to
A. P60,000 C. P27,500 contribute additional share to the capital. Can the other partners compel J to sell to them his
B. P67,500 D. P55,000 interest on the ground of J's refusal?
A. No, because the sale of J's interest will dissolve the partnership.
22. The share of C is B. Yes, because J's refusal reflects his lack of interest in the continuance of the partnership.
A. P60,000 C. P27,500 C. Yes, provided that J paid the value of his interest
B. P67,500 D. P55,000 D. No, because there is actually no imminent loss of the business
23. The share of B is 30. A partner is a debtor to the partnership for whatever he promise to contribute. As a
A. P60,000 C. P27,500 consequence, the partnership may institute against the delinquent-partner,
B. P67,500 D. P55,000 I. Accion Pauliana
II. Accion subrogatoria
24. A, B and C are partners contributing services, P20,000 and P40,000 respectively. The A. Only I C. Only II
distribution of P80,000 profit shall be B. I and II D. Neither I nor II
A. A = P20,000; B = P20,000; C = P40,000 C. A = P32,000; B = P16,000; C = P32,000
B. A = P 5,000; B = P25,000; C = P50,000 D. A = P26,667; B = P26,667; C = P26,667
BUSINESS LAW
31. If a partner assigns his interest in the partnership to his personal creditor or to a third person 35. If the partnership is solvent and there was a profit ofP 30,000, and there was no stipulation as
for value, the assignee acquires the right to to the sharing in the profits, the participation of the partners on the profit will be
A. Demand an accounting of partnership affairs A. Equally, P 10,000 each for A, B, and C C. Just and equitable distribution
B. Inspect the books and records of the partnership B. Equally between A and B only D. The court will intervene
C. Receive the partnership-assignor's share of the profits
D. Interfere in the management of the partnership Modes of Dissolution
36. A, B, and C, are partners who contributed P30,000, P15,000 and industry respectively. After
32. A person cannot be admitted into the partnership without the consent of payment of all liabilities and expenses, only P18,000 remain as partnership assets. A will get
A. all the partners A. P9,000 C. P6,000
B. majority of the partners B. P12,000 D. P5,000
C. partners representing the controlling interest
D. 2/3 of the partners 37. L, M, N, and O are partners. They contributed capital as follows: L, P30,000; M, P30,000; N,
P20,000 and O, as the industrial partner, his services. The partnership's remaining assets after
33. R and C were partners engaged in buying and selling land. After they had bought a piece of all obligations have been paid is P100,000. The share of the partners in dissolution shall be
land, R asked C to sell his share to him for the price invested by C. R who now completely A. L-P25,000; M-P25,000; N-P25,000; O-P25,000
owns the land, sold it for a huge profit to I. C would not have sold his share had he known that B. L-P30,000; M-P30,000; N-P20,000; O-P20,000
a big offer had been made by I. R alleged that he should not be blamed on the ground.that C. L-P37,500; M-P37,500; N-P5,000; O-None
after all he did not make any false concealment to C, that is, he did not tell C that nobody D. L-P36,000; M-P36,000; N-P24,000; O-P4,000
wanted the land, may C bring an action for damages against R?
A. Yes, R had the duty not only to make any false concealment but also to abstain from all 38. If a partner is insolvent the first order of preference in the distribution of his assets is
kinds of concealment insofar as the partnership was concerned. A. Partnership creditors
B. Yes, whether or not C is aware of the offer made by I B. Partner's contribution in the partnership
C. No, the sale was made after the partnership was terminated C. Separate creditors of the debtor
D. No, C willfulry, voluntarily and knowingly sold his share to R D. Pro-rata between the separate creditors and the partnerships creditors
Questions 34 & 35 are based on the following information. 39. Partners A, B and C met a tragic accident. A and B instantly died on the spot, while C was
A and B established a partnership by contributing P 80,000 each. C, not being a partner allowed his brought to the hospital but died a few hours later. Who may wind-up partnership affairs?
name to be included in the firm name of the partnership. A. legal representative of A
B. legal representative of B
34. The partnership was insolvent and after exhausting all the remaining assets, there was left a C. legal representative of C
liability to third persons amounting to P 30,000.The creditors can compel D. the court.should appoint a representative who will wind-up the affairs.
A. C to pay the P 30,000 remaining liability
B. A, B, and C to pay P 10,000 each Limited partnership
C. A or B to pay the P 30,000 remaining liability 40. A substituted limited partner
D. A or B to pay P 15,000 each A. A buyer of right of the deceased partner
B. A person admitted as a limited partner by the other partners
C. An assignee admitted to all the rights of the assignor
D. A legal representative of a limited partner
BUSINESS LAW
41. Which of the following is true with respect to a limited partner: 45. A limited partnership has A, as general partner, B, as limited partner, and C, as industrial
A. Must not own limited-partnership interests in other competing limited partnership partner contributing P50,000; P50,000; and services respectively. The partnership failed and
B. Is automatically an agent for the partnership with apparent authority to bind the limited after disposing all its assets to pay partnership debts there still remains a note payable in the
partnership in contract sum of P30,000. Against whom can the creditor demand payment?
C. Has no liability to creditors even if he takes part in the control of the business as long as A. Only A C. A = P15,000; B = P0 ; C = P15,000
he is held out at being a limited partner B. A = P15,000; B = P15,000; C = P0 D. A = P10,000; B = P10,000; C = P10,000
D. Must contribute money and/or property only
46. As regards a limited partner, which of the following is correct?
42. In the preceding number, if B partner did not deliver the last P50,000 to the partnership, the A. He is automatically an agent for the partnership with apparent authority to bind the limited
effect will be: partnership in a contract
A. B holds as trustee for and in behalf of the partnership the P50,000 B. He cannot own limited partnership interest in other competing limited partnership
B. B is considered a debtor of the partnership of P50,000 plus interest without the need of a C. He has no liability to creditors even if he takes part in the control of the business as long
demand as he is held out as being a limited partner
C. B may be expelled from the firm plus the damages incurred D. He can contribute money and/or property but not services
D. B is considered a debtor of me firm for P50,000 plus interest after demand is made
Comprehensive
43. A, B, and C formed a limited partnership, with A as a general partner, while B and C as limited 47. Which of the following is not correct?
partners, with the following contributions: A. A partnership begins from the moment of the execution of the contract, unless it is
1. A contribute a specific parcel of land. otherwise stipulated.
2. B to contribute P100,000, the first P50,000 upon formation, and the last P50,000,10 days B. Persons who are prohibited from giving each other any donation or advantage cannot
after formation enter into universal partnership.
3. C contributed a specific car as was stated in the article of partnership C. A particular partnership has for its object determinate things, their use or fruits, or a
If the partnership was dispossessed of the land contributed by A after delivery to the specific undertaking or the exercise of a profession or vocation.
partnership by the real owner, the effect will be D. Articles of universal partnership; entered without specifications of its nature, only
A. A is considered a debtor of the partnership constitute a universal partnership of all present property.
B. A is considered a trustee of the land for and in behalf of the partnership
C. The partnership will be dissolved 48. 1st Statement - The arrival of the term of a partnership with a fixed term or period shall not
D. A is to answer for warranty against eviction dissolve the partnership if the partners continue with the business of the partnership but such
partnership maybe terminated anytime dependent on the will of the continuing partners.
44. Absent any contrary provisions in the agreement, under which of the following circumstances 2nd Statement - A partnership with a capital of P3,000 or more, in money or property, must be
will a limited partnership be dissolved? in a public instrument and registered with the SEC, in order for the partnership to be able to
A. A limited partner dies and his estate is insolvent maintain an action, in its own name against third party.
B. A persona] creditor of a general partner obtains a judgment against the general partner's A. B. C. D.
interest in the limited partnership st
C. A general partner retires and all the remaining general partners do not consent to continue 2nd Statement True False True False
D. A limited partner assigns his partnership interest to an outsider and the purchaser
becomes a substituted limited partner

BUSINESS LAW
CORPORATION 7. Must be a natural person

Nature and Classes of Corporation A. stockholder C. incorporator
1. Three of the following are attributes of a corporation. Which is the exception? B. subscriber D. highest bidder
A. Created by agreement of the incorporators
B. An artificial being 8. This group of persons may not be incorporators of a corporation in the Phils.
C. Has right of succession A. 15 Japanese citizens who are resident of Quezon City
D. Has powers, attributes and properties expressly authorized by law or incident to its B. 10 Resident aliens and 5 non-resident aliens
existence. C. 10 Americans residing in the Phils and 5 Filipinos residing in Australia
D. 15 Filipinos who are residents of USA
2. Which of thee following is the disadvantage of forming a corporation?
A. The free & ready transferability of ownership 9. The articles of incorporation is required to state the name, nationalities and residence of
B. The shareholders are not liable for the debts of the business persons who shall act as directors or trustees until the first regular directors or trustees are
C. Because of the power of succession, the existence of the entity is not affected by the duly elected and qualified. This requirement is intended to provide a basis by which the SEC
personal vicissitudes of the individual stockholders could determine whether the articles of incorporation has complied with the requirement that
D. The subservience of minority stockholders to the wishes of the majority subject only to A. At least majority of the directors or trustees are residents of the Phils
equitable restraints B. At least majority of the directors or trustees are citizens of the Phils
C. 2/3 of the directors or trustees are residents of the Phils
3. The following except one are common characteristics of partnership and corporation. Which is D. 2/3 of the directors or trustees are citizens of the Phils
the exception?
A. The individuals composing both organizations have little voice in the conduct of he Board of Directors/Corporate Officers
business 10. He must be a member of the board
B. Can act only through agents A. president C. treasurer
C. Both are business organizations composed of a number of individuals B. secretary D. incorporator
D. Both have juridical personality separate and distinct from that of individuals composing it
11. He must be a resident citizen
4. Corporations created, not for private gain nor profit, but for charitable purposes A. president C. treasurer
A. Ecclesiastical corporation C. Coiporation sole B. secretary D. chairman of the board
B. Eleemosynary corporation D. Lay corporation
12. He cannot be the secretary of the corporation
5. The right given to the corporation itself to operate its business, with all the powers and A. president C. chairman of the board
attributes conferred upon it. B. treasurer D. incorporator
A. Primary franchise C. Pre-emptive right
B. Secondary franchise D. Appraisal right 13. The following are qualifications of a corporate director, except:
A. Must own at least one share of stock
Requirements for Organization B. Must continuously own at least one share during his term as director
6. Should not be more than fifteen (15) C. Majority of the directors are citizens of the Philippines.
A. stockholders C. incorporators D. Ownership of shares must bec recorded in the books of the corporation.
B. subscribers D. members
BUSINESS LAW
14. Not a valid qualifications of directors in a stock corporation as stated in the by-laws 20. These powers cannot be exercised by the executive committee, except
A. A director must be a holder of at least P10,000 paid up shares as security for his action A. to fill-up vacancy in the board
B. A stipulation that at least two-thirds of the director must be resident of the Philippines B. to distribute cash dividend
C. A stipulation that the one-share be owns at the time he was elected as director may be C. to increase the minimum number of shares needed before a shareholder may qualify to
disposed off by him without forfeiting his directorship be a member of the board
D. That five (5) shares of the capital stock must be registered in the name of such director D. to enter into contract for the supply of goods needed by the corporation
15. J is one of the directors of Delightful Corporation. Later, she sold all her shares to K. 21. A, B, C, D and E are the members of the board while C, D and E are the members of the
Subsequently, a meeting of the board of directors was held and both J and K attended said executive committee. If A is removed by the stockholders and B has resigned due to poor
meeting, each claiming the right to participate in the deliberation of the board. J contented that health, who will fill-up the vacancy?
she has the right to continue as director until the stockholders could elect her successor. On 1st answer - The vacancy caused by A's removal will be filled-up by the stockholders
the other hand, K argued that having purchased all of Js shares she has the right to take the 2nd answer - The vacancy caused by B's resignation will be filled up by the remaining members
latter's place in the board. Which of the following is not correct? of the board
A. Both J and K are disqualified to sit as directors in me Board of Directors A. B. C. D.
B. J cannot qualify as she disposed all the shares. st
C. K cannot qualify, as she must have to be elected by the stockholders. 2nd Statement True False True False
D. K can qualify because a stockholder as well as the heirs and assigns of a stockholder of
the same corporation has the right of succession 22. If there are 9 members of the board and the by laws provide for the creation of an executive
committee, the minimum number of its members is
16. In a meeting to elect the officers only 9 out of 11 members of the board attended. How many A. 7 C. 4
votes will be needed to elect the President of the Corp.? B. 5 D. 3
A. 9 C. 6
B. 7 D. 5 23. The executive committee shall act by
A. unanimous vote C. 2/3 vote
17. Unless the by-laws provide otherwise regular meetings of the board of directors or trustees B. majority vote D. vote
shall be held
A. monthly C. weekly 24. 1st Statement. A majority of the number of directors or trustees as fixed in the articles of
B. quarterly D. annually incorporation shall constitute a quorum for the transaction of corporate business, and every
decision of at least a majority of the directors or trustees present at a meeting at which there is
18. Not one of the three-fold duties of the directors a quorum shall be valid as a corporate act, except for the election of the officers which shall
A. They must be obedient C. They must be diligent require the vote of a majority of all the members of the board.
B. They must be loyal D. They must be efficient 2nd Statement. No person convicted by final judgment of an offense punishable imprisonment
for a period exceeding five (5) years, or a violation of the corporation code committed within six
19. The duty to make disclosure, where otherwise there would be a great and unfair inequality of (6) years prior to the date of his election or appointment, shall qualify as a director, trustee or
bargaining position by the use of inside position as regards relation of directors to officer of any corporation.
stockholders. A. B. C. D.
A. Special circumstances rule C. Doctrine of corporate opportunity
B. Trust fund theory D. Incorporation theory
BUSINESS LAW
2nd Statement True False True False Operations of a corporation

25. Except for one, every corporation whose charter expires by its own limitation, or annulled by
forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any
other manner shall nevertheless be continued as a body corporate for 3 years after the time
when it would have been dissolved for the purpose of the following. The exception is
A. Prosecuting and defending suite by or against it and enabling it to settle and close its
affairs
B. To dispose and convey its property
C. To distribute its assets
D. Continuing the business for which it was established
26. A distribution by a corporation of shares held by it in another corporation is

A. Cash dividend C. Property dividend
B. Scrip dividend D. Stock dividend
27. Cash dividend as distinguished from stock dividend

A. Corporate capital is increased
B. Concurrence of the stockholders is required
C. Involves disbursement to the stockholders of accumulated earnings
D. Being part of corporate property, maybe reached by corporate creditors
28. Stock corporation are prohibited from retaining surplus profits in excess of 100% of their paid-
in-capital stock. Three of the following enumerations are exception. Which does not belong to
the exception?
A. When justified by definite corporate expansion projects or programs approved by the
board of directors
B. When there is prior approval by the stockholders holding 2/3 of the outstanding capital
stock
C. When the corporation is prohibited under any loan agreement with any financial institution
or creditor
D. When it can be clearly shown that such retention is necessary such as providing for
probable contingencies.
29. Dada, Dede, Didi, Dodo and Dudu are directors of a corporation, two days before the meeting
of the board, where by a unanimous vote, a resolution declaring a 50% stock dividend was
passed, Dada and Dede sold and transferred all their shares. The transfers were duly
registered in the books of the corporation immediately after the sale. Is the dividend
declaration legal?
BUSINESS LAW
A. Yes, Dada and Dede are still qualified to sit as members of the board in hold over capacity Voting Requirements
until their successors shall have been elected and qualified. 34. Any director of a corporation may be removed from office by a vote of
B. No, at the time the resolution was passed, Dada and Dede were no longer qualified to sit A. Majority of the members of the board C. 2/3 of the stockholders present
as directors since they are both no longer stockholders B. Majority of the stockholders present D. 2/3 of the outstanding capital stock
C. Yes, the vote of Dada and Dede were not necessary to the approval of the resolution
D. No, if the other members of the board were not inform of the transfers made. 35. Which of the following corporate acts requires the approval of the majority of the outstanding
capital stock or of the members of the private corporation?
30. After 3 years of operation, ABC, a domestic corp. wanted to declare dividends to its A. To invest corporate funds in another corporation or business.
stockholders. The treasurer reported a net income after tax of P4 million. One million is being B. To adopt by laws
appropriated for the acquisition of the machineries to be bought 2 months from now. The C. To dissolve the corporation
treasurer likewise reported an increase in the value of the land previously bought to be used D. To amend the articles of incorp oration
as plant site from 3 million to 5 million. What amount of dividend can be declared by the
board? 36. The stockholders or members may delegate to the board of directors or trustees the power to
A. 9 million C. 4 million amend or repeal the by-laws or adopt new by-laws by
B. 8 million D. 3 million A. majority vote C. 2/3 vote
B. unanimous vote D. vote
31. Corporate acts performed outside of its express, incidental or implied powers
A. ultra-vires acts C. intra-vires acts 37. The board of directors or trustees may amend or repeal the by-laws or adopt new by-laws by
B. illegal acts D. legal acts A. majority vote C. 2/3 vote
B. unanimous vote D. vote
32. A corporation was organized for the purpose of engaging in the buying and selling of home
appliances. Which of the following is not correct? Classes of Stocks
A. The buying and selling of motor vehicles would be ultra-vires although it is itself lawful. 38. Shares of stock cannot be issued if the consideration received is (are)
B. The buying and selling of unlicensed firearms would be ultra-vires act A. money C. previous services rendered
C. The buying and selling of refrigerators would be ultra-vires act. B. property D. promissory notes
D. The buying and selling of contraband goods would be an illegal act.
39. Shares of stock as distinguished from certificate of stock
33. At an annual meeting of stockholders, a resolution was approved empowering the president of A. It is evidence of right or interest
the corporation to enter into a contract with a New York firm. Can the president validfy act by B. It cannot be issued if the subscription is not fully paid
virtue of such resolution? C. It refers to the right over corporate management, profit and surplus
1st Answer - Yes, the action of the stockholders was approved during annual stockholders D. It is a tangible personal property
meeting
2nd Answer - No, the power to contract for and in behalf of the corporation resides primarily in 40. 1st Statement - Treasury shares shall have no voting rights as long as such stock remains in
the board of directors. treasury.
A. B. C. D. 2nd Statement Shares of stock shall not be issued in exchange for future services
1st Answer True True False False A. B. C. D.
2nd Answer True False True False 1st Statement True True False False
BUSINESS LAW
41. The class of shares which has been indorsed in blank and, therefore transferable by mere Modes of Dissolution & Liquidation
delivery 46. A corporation is deemed dissolved
A. Condominium shares C. Common shares A. Ceased operation for at least 5 years.
B. Street certificate D. Founders shares B. No commencement of business transaction within 2 years from issuance of certificate of
incorporation
42. Desirable Corporation through its board of directors, by resolution, released J from the C. A member of the board is convicted of an offense
payment of her remaining unpaid subscription. Later the corporations was declared insolvent D. Majority of the members of the board are dead
and P was duly appointed assignee who upon assuming her position found out that D has an
unpaid subscription of P4,000. Subsequently, P brought action to recover from D the amount 47. Which of the following does not bring about corporation dissolution?
representing her unpaid subscription and against J, the recall of the release order. Which of A. Failure to formally commence within 2 years from issuance of certificate of incorporation
the following is not correct? B. By legislative dissolution
A. The payment of unpaid subscription is immediately demandable whether or not a "call C. By insolvency
order" has been made by the board of directors. D. By expiration of corporate term
B. Insolvency of the corporation makes all unpaid subscription immediately demandable
C. The release of J from her unpaid subscription is void under thee "Trust fund Doctrine". Comprehensive
D. D is considered released by invoking that J another subscriber has been released by the 48. One of the following statements is not correct
board A. A stipulation that no stockholder shall transfer any share to any other person without
notifying the corporate secretary in writing is void
Questions 43 & 44 are based on the following information. B. Stock dividend cannot be issued to a person who is not a stockholder in payment of the
Assume that the unpaid subscription of A for 10 shares of stock with a par value of P100 each is services rendered
P400 and the interest, expenses and costs of sale amounts to P100. C. A stipulation that the corporation shall have the right to acquire for itself under the same
condition, the shares intended to be transferred is valid under the doctrine of first refusal.
43. Who is the highest bidder if the bids are as follows: D. An ultra-vires act of a corporation can be ratified with the consent of the majority of all
A. P400 for 3 shares C. P500 for 7 shares stockholders when the rights of the state or of the directors are not involved.
B. P450 for 4 shares D. P500 for 8 shares
49. Which of the following statements is correct?
44. How many shares will A get? A. Treasury stock sold for less than their par or issued value are considered "watered stock"
A. 7 shares C. 3 shares and as such as prohibited by law.
B. 6 shares D. 2 shares B. Five but not more than fifteen juridical and natural persons, majority of whom are
residents of the Phils may form a private corporation
Powers, Duties, Rights & Obligations of Stockholders C. No par value shares of stock cannot be issued by banks, trust companies, insurance
45. Regular meetings of stockholders or members shall be held companies, building and loan association and public utilities.
A. monthly C. semi-annual D. Membership in non-stock corporation and rights arising therefrom are personal and non-
B. quarterly D. annually transferable and therefore cannot be transferred even if provided in the articles of
incorporation or in the by-law.

BUSINESS LAW
50. 1st statement - If the surplus profits of the stock corporation reaches the level equal to its paid- 5. 1st Statement Where the instrument is payable to order the payee must be named or
up capital, the SEC may compel the corporation to declare dividends, otherwise it will be liable otherwise indicated therein with reasonable certainty.
for a surtax on improperly accumulated surplus. 2nd Statement Where the instrument is addressed to a drawee, he must be named or
2nd statement - In a corporation, two or more positions may be held concurrently by the same otherwise indicated therein with reasonable certainty.
person, except that no one person shall act as President and chairman of the Board. A. B. C. D.
A. B. C. D. 1st Statement True True False False
1st Statement True True False False 2nd Statement True False True False
6. Which of the following instruments is negotiable?
NEGOTIABLE INSTRUMENTS A. Pay to bearer, D P 10,000. Reimburse yourself out of the rental of my house in Manila.
Negotiability of Instrument To B. Sgd.E
1. Omissions that do not effect the negotiability of an instrument, except B. Pay to D P 10,000 or his order out of the rental of my house in Manila.To B. Sgd. E.
A. It is not dated. C. Pay to D P 10,000 and reimburse yourself out of the rental of my house in Manila.To B.
B. Does not specify the value given Sgd. E.
C. Does not specify the place where it is drawn D. Pay to the order of D P 10,000. Reimburse yourself out of the rental of my house in
D. Does not name the payee where the instrument is payable to order Manila.To B.Sgd. E.
2. "I promise to pay B or order P 100,000, one month after B's father dies. The instrument is 7. Which of the following is a negotiable bill of exchange?
A. Negotiable from the time B's father dies A. Pay to the order of R the sum of P 20,000. Sgd. S
B. Subject to a condition. To A or M
C. Non-negotiable because payment is indefinite B. Pay to the order of R the sum of P 20,000 SgD.S
D. Payable at a determinable future time To A or in her absence to M
C. Pay to the order of R or J the sum of P 20,000.
3. When is a negotiable instrument payable to order? Sgd.S. To A or M
A. When drawn payable to the order of a specified person or to him or his order D. Pay to the order of R and J Hie sum of P 20,000
B. When payable to the order of a fictitious or non-existing person and such fact was known Sgd.S. To A and M
to the person making it
C. When the name of the payee does not purport to be the name of any person 8. This provision renders a note non-negotiable
D. When the only or last indorsement is an indorsement in blank A. A promises to pay to the order of B the sum of US $1,000 payable in pesos at the rate of
exchange prevailing on August 14, 2002.
4. Maturity of an undated negotiable instrument issued and payable 30 days after sight is B. A promises to pay B P1,000 with 12% interest thereon.
computed from; C. A promises to pay B P1,000 and all costs, charges and expenses including reasonable
A. date of issue C. date of last indorsement attorney's fees.
B. date of first indorsement D. date of first presentation for acceptance D. A promise to pay B P1,000 in two equal installments, the first payable on August 14, 2002
and the second on September 14, 2002.

BUSINESS LAW
9. Which of the following is not negotiable? 14. Which of the following is non-negotiable?
A. I promise to pay B or order P10,000 on or before September 14, 2002 in payment of the A. I bind myself to pay B or bearer P10,000. Sgd.A
purchase price of the merchandise I bought from him. Sgd. A B. I acknowledge being indebted to B in the amount or P10,000 Sgd. A
B. Pay to the order of B P20,000 on or before September 14, 2002 and charge the same to C. I promise to pay to the order of B P10,000. Sgd. A
my account. To C, Sgd. A D. I agree to pay B or order P10,000 on demand, Sgd. A
C. Pay to the order of B P30,000 out of my deposit with you. To C, Sgd. A
D. Pay to B or order P40,000 for payment under contract of August 14, 2002. To C Sgd. A 15. Not negotiable because it is in favor of a specified person and not to order
A. Letter of credit C. Bill of lading
10. Which of the following instruments is not negotiable for the reason that the instrument is not B. Treasury warrant D. Postal money order
payable at a determinable future time?
A. 30 days after demand, drawer A directs drawee B to pay C or order P10,000 16. Not negotiable because it is an order to pay out of a particular fund
B. 20 days after me death of R, I promise to pay to the order of P10,000. Sgd.Q A. Certificate of stock C. Bill of lading
C. 10 days after A passes the CPA board Exam. I promise to pay to the order of B P10,000. B. Postal money order D. Check
Sgd.C
D. On or before February 28, 2002, I promise to pay A or his order P10,000. Sgd B. 17. The following except one are not negotiable because they are without an unconditional
promise or order to pay a sum certain in money, the exception is
11. This is not negotiable A. Letter of credit C. Certificate of stock
A. I promise to pay to the order of myself P10,000 signed by A, the maker B. Bill of lading D. Warehouse receipt
B. Pay to the order of the Commissioner of Internal Revenue P10,000 to ABC bank. Sgd. A
C. I promise to pay to order P10,000. Sgd A 18. Which of the following is not negotiable?
D. Pay to the order of X, Y and Z, P10,000. To B.Sgd A A. Pay to B or order P10,000 on or before December 31, 2000. Sgd. A To C
B. Pay to B or order P10,000 notice of dishonor waived.Sgd A To C
12. The following are negotiable, except C. Pay to B or order P10.000 or to deliver two horses at the option of the holder. Sgd A To C
A. Drawer A directs drawee B to pay C or order P10,000, 30 days after demand D. Pay to B or order P10,000 or to deliver 10 sacks of rice. Sgd A To C
B. Drawer A directs drawee B to pay C or order P10,000, 30 days after C passes the CPA
board examinations. Functions & Kinds of Negotiable Instruments
C. A promises to pay B or order P10,000 within 30 days after the death of C. 19. The following are functions of a negotiable instrument
D. A promises to pay B or order P10,000 on or before August 14, 2002. A. It increases purchasing power in circulation
B. It increases credit circulation
13. Not considered as negotiable instruments C. As substitute for money
A. Treasury warrant D. As legal tender
B. Letter of credit A. A only C. A, B, and C
C. Bill of lading B. A and B D. A, B, C and D
D. Document of title
A. A only C. A, B and C
B. A and B D. A, B, C and D

BUSINESS LAW
20. The following are functions of a negotiable instrument. Choose the exception. 26. A delivered to B the following instrument
A. It increases credit circulation August 14, 2001
B. As substitute for money "One month after date, I promise to pay to B P10,000 Sgd. A" B indorsed the note in
C. As legal tender blank before maturity and delivered it to C for value. When due, A refused to pay and C sued
D. It increases purchasing power in circulation B. Could C recover from B?
A. No, C could not sue B and hold him liable as an indorser because the instrument is
21. Generally considered as negotiable instrument payable to a specified person.
A. Certificate of deposit B. No, the instrument is not negotiable because it is neither payable to order or to bearer.
B. Due bill C. Yes, provided C gives notice of dishonor to B, otherwise B is discharged from liability
C. Warehouse receipt D. Yes, the endorsement will be considered as an assignment, hence B will be liable as an
D. Postal money order assignor of the instrument
A. A only C. A, B and C
B. A and B D. A, B, C and D 27. The liability may either be primary or secondary
A. Acceptor C. Drawer
Parties & their Liabilities B. Maker D. Accommodation party
22. Which is not correct? The acceptor by accepting a negotiable instrument
A. Admits the capacity of the payee to endorse 28. M issued to P, accommodated party, a negotiable promissory note for P 20,000. P endorsed it
B. Admits the genuineness of the drawer's signature to A, then A to B and B to C.
C. Admits the genuineness of the endorser's signature Which one, of the following is not correct?
D. Admits that he will pay it according to the tenor of his acceptance A. M can collect from P, if M will pay C
B. P may directly pay C
23. What is the liability of the person indorsing specially an instrument originally payable to-bearer C. Between M and P, M is secondarily liable while P is principally liable
1st answer - His liability is that of a general indorser. D. M is only secondarily liable because he is a mere accommodation maker
2nd answer - He is not liable as an indorser, except only to such holders who make title through
his indorsement. 29. Papa issued to Pepe, accommodated party, a negotiable promissory note for P100,000. Pepe
A. B. C. D. indorsed it to Pipi, then Pipi to Popo, then Popo to Pupu. One of the following is not correct?
st
1 Statement True True False False A. Between Papa and Pepe, Papa is secondarily liable while Pepe is primarily liable
2nd Statement True False True False B. Between Papa and Pepe, both are primarily liable
C. Papa can collect from Pepe, if Papa will pay Pupu
24. In a blank indorsement, the indorser renders himself D. Pepe may directly pay Pupu
A. Primarily liable C. Solidarily liable
B. Secondarily liable D. Subsidiary liable 30. Which of the following is not correct?
A. Where the instrument is negotiated back to a prior party, all intervening indorsements are
25. The indorser who simply signs his name renders himself liable to all subsequent holders as not necessary to the holder's title.
A. Primarily liable C. Secondarily liable B. Where the instrument is originally payable to order, the holder may not strike out the
B. Solidarily liable D. Subsidiarily liable payee's indorsement.
C. The indorser whose indorsement is struck out and all indorsers are thereby relieved from
liability on the instrument.
BUSINESS LAW
D. The holder may at anytime strike out an indorsement which is not necessary to his title. 36. The writing of the name of the indorser on the instrument itself or upon a paper attached
thereto in evidence of his transaction of the title to it, or of his assuring its payment or both.
31. Which of the following statements is not correct? A. Allonge C. Signature by procuration
A. Where the instruments is payable on demand and it is negotiated after an unreasonable B. Forgery D. Indorsement
length of time after its issue, the holder is not deemed a holder in due course.
B. A holder in due course is always a holder for value 37. An indorsement where the indorser becomes a mere assignor of the title to the instrument
C. A holder for value may not be a holder in due course A. Special C. Qualified
D. An accommodation party is liable to holder for value only if such holder at the time of B. Blank D. Conditional
taking the instrument is not aware that he is only an accommodation party.
38. Indorsement made by a person not otherwise a party to the instrument, who places therein his
32. The following are instances when a drawee bank may refuse to pay checks drawn against it signature in blank before delivery
except one A. Blank C. Facultative
A. If the drawer's deposit is insufficient to cover the amount indicated in the check B. Special D. Irregular
B. If there is a stop payment by the drawer
C. If the drawer is insolvent 39. Which of the following is a restrictive endorsement Pay to J
D. If the bank receives notice of the drawer's death. A. In trust for E, Sgd.M
B. If he passes the CPA examination. Sgd.E
33. AKO issued a bearer note to IKAW. The note is negotiated by delivery by Ikaw to Iyo. Iyo to C. At his own risk. Sgd.E
Kanya, Kanya to Akin, Akin to Sila, Sila to Kayo. Kayo can hold liable D. Notice of dishonor waived. Sgd.E
A. Iyo C. Akin
B. Sila D. Kanya 40. This is not a restrictive indorsement
A. Pay to A for collection C. Pay to A at his own risk
34. A issued a promissory note to the order of B for P10,000 payable on Sept. 30, 2001 in B. Pay to A only D. Pay to A in trust for B
payment of a TV set sold by B to A. B failed to deliver the TV set to A and instead transferred
the note to C for value but without indorsement. Which of the following is valid. 41. Rights acquired by the indorsee under a restrictive indorsement except
A. C is deemed a holder for value when B transferred the note to him A. To receive payment of the instrument
B. C becomes a holder in due course when B indorsed the note to C on Oct 9, 2001. B. To bring any action thereon that the indorser could bring
C. C has no right to compel B to make the proper indorsement to him C. To transfer his rights as such indorsee where the form of the indorsement authorizes him
D. C cannot collect from A because of A's defense of lack of consideration to do so.
D. Subsequent indorsees acquire the title of the indorsees prior to the first indorsee under
Indorsements the restrictive indorsement.
35. This endorsement of P 10,000 face value promissory note would simply be an assignment
A. Pay to A and B P 10,000 Sgd C 42. Indorsement where the indorser enlarges his liability by waiving the usual demand and notice
B. Pay to A P 6,000 the remaining unpaid amount Sgd C of dishonor
C. Pay to A P 6,000 and B P 4,000 Sgd C A. Qualified C. Restrictive
D. Pay to A and/or B P 10,000 Sgd C B. Facultative D. Conditional

BUSINESS LAW
43. Where an indorsement is conditional, may the maker make payment although the condition
has not been fulfilled? 48. A issued a note payable to bearer. He delivers the note to B. B indorsed the note specially to
A. Yes, he may disregard the condition without incurring any liability C, then C negotiates the note by delivery to D. Which of the following is not correct?
B. Yes, he may disregard the condition but he becomes liable if the indorsee fails to fulfill the A. D can enforce the note against C C. D can enforce the note against A
condition. B. D can enforce the note against B D. C can enforce the note against B
C. No, the indorsees indorsement becomes part of the contract
D. No, the person who received payment will hold the proceeds subject to the right of the 49. M issues a promissory note payable to P or bearer. Which of the following is not correct?
conditional indorser. A. If indorsed by P to A and A also indorses it to B, B may negotiate the note to C by delivery.
B. If indorsed by P to A and A also indorses it to B, P is liable to A and B
44. What indorsements are not necessary to the holder's title? C. If indorsed by P to A and A also indorses it to B, and B negotiates the note to C by
1st answer - Any indorsement thereon, where the instrument is originally payable to bearer delivery. A is liable to B and C.
2nd answer - All indorsements subsequent to the blank indorsement, where the instrument is D. If P negotiates the note to A by delivery and A indorses it to B, B may negotiate the note to
originally payable to order. C by delivery.
A. B. C. D.
st
1 Answer True True False False 50. A made a negotiable promissory note in favor of B who negotiated it to C under the following
2nd Answer True False True False indorsements.
"Pay to C after passing thee CPA examination in October 1999". At maturity of the note, C
45. M issues a promissory note payable to P or bearer. If P indorses the note to A, which of the presented it to A for payment and it was duly paid, C did not pass the CPA examination. Which
following is correct? of the following is correct?
A. A must also indorse to negotiate the note A. The promissory note is not negotiable because of the condition imposed
B. If A merely negotiates by delivery to B, P is liable to B because of his indorsement to A B. The promissory note becomes negotiable because the condition was satisfied.
C. If A merely negotiates by delivery to B, B becomes a holder even if P indorsed it to A. C. A had no right to pay C and, therefore can be compelled to pay again
D. The instrument is converted to an order instrument. D. A may disregard the condition and make payment whether the condition is fulfilled or not.
46. M issued to P, accomodated party, a negotiable promisory note for P10,000. P endorsed it to Consideration
A, A to B, B to C. Which one of the following is incorrect? 51. Every negotiable instrument is presumed to have been issued for a valuable consideration.
A. M can collect from P, if M will pay C The presumption is
B. P may directly pay C A. Prima facie C. Absolute
C. Between M and P, M is secondarily liable while P is principally liable B. Conclusive D. Final
D. P can collect from M, if P will pay C
Manner and Consequence of Transfer of Instruments
47. What are the effects of indorsement after maturity? 52. A transfer of negotiable instrument where the holder of the instrument dies and his title thereto
1st Answer - There is assignment and not negotiation is transferred to his heirs or personal representative is
2nd Answer - The holder cannot be deemed a holder in due course A. By assignment C. By operation of law
B. By negotiation D. By accommodation
A. B. C. D.
1st Answer True True False False 53. Title to a negotiable instrument passes by operation of law in the following manner except
2nd Answer True False True False A. By the death of the holder C. By dacion en pago
BUSINESS LAW
B. By banruptcy of the holder D. By cession 59. A promissory note reads "I promise to pay B or order P 100,000. Sgd A." Then B made a
qualified indorsement to C. On maturity, if A dishonors the instrument due to forgery, that his
54. When the instrument is complete but undelivered, delivery is presumed to have been made in signature has been forged, the effect is
favor of the holder, the presumption is A. C can collect from B, if he is a holder in due course
A. Conclusive whether holder in due course or for value B. C can collect from B, even if he is not a holder in due course
B. Prinia-facie whether holder in due course or for value C. C can collect from B, regardless of whether or not he is a holder in due course
C. Conclusive if holder for value and prima facie if holder in due course A. A only C. C only
D. Prima-facie if holder for value and conclusive if holder in due course B. B only D. A, B and C
55. Negotiation as distinguished from assignment Holder in Due Course

A. Refers generally to an ordinary contract 60. The payee or indorsee of a bill or note, who is in possession of it or the bearer thereof
B. Does not warrant the solvency of prior parties A. Holder C. Heir
C. Transferee is a holder B. Assignee D. Creditor
D. Subject to both real and personal defenses
61. Under the Negotiable Instrument Law, which of the following requirements must be met for a
56. This is negotiation as distinguished from assignment transferee of order paper to become a holder?
A. The transferee is subject to both real and personal defenses. I. Transferee should be in possession of the note
B. The transferor does not warrant the solvency of prior parties. II. Endorsement of transferor and delivery to the transferee
C. The transferee may acquire a title better than that of the prior party A. I only C. Either I or II
D. The transferor is liable even without notice of dishonor B. II only D. Both I and II
57. A issues a bill payable to the order of B. Later, B without endorsing the bill transfers for a 62. A issues a bill payable to the order of B. Later B without endorsing the bill transfers for a
consideration said bill to C. The following are the valid effects of the transfer, except: consideration said bill to C. The following, except one, are the valid effects of the transfer. The
A. The bill is merely assigned arid not negotiated exception is
B. C becomes a holder A. C becomes a holder
C. C acquires the right to have the endorsement of B B. C acquires the right to have the indorsement of B
D. The transfer vests in C such title as B had thereon C. The transfer vests in C such title as B had thereon
D. The bill is merely assigned and not negotiated
Dishonored Instruments and its Effects
58. A promissory note reads "I promise to pay B or order P 100,000. Sgd A." Then B made a 63. A issued a promissory note payable to B or order for P10,000 for 10 bottles of whisky sold by
qualified indorsement to C. On maturity, A dishonors the instrument due to his insolvency, As a B to A. Later B negotiated the note to C. Subsequently, A discovered that only 5 bottles of
result. whisky are genuine. As a result
A. C can collect from B, if he is a holder in due course A. C can enforce the note against A for P10,000 regardless of whether C is holder in due
B. C can collect from B, regardless of whether or not he is a holder in due course course of not.
C. C cannot enforce the instrument against B B. C cannot enforce the note against A for p10,000 even if he is a holder in due course
A. A only C. C only C. C can enforce the note against A only for P5,000 regardless of whether he is a holder in
B. B only D. A and B due course or not
D. C can enforce the note against A only for P5,000 if he is not a holder in due course.
BUSINESS LAW
64. A, knowing that there is no such person by the name of B, makes out and signs a promissory 69. This is an example of a real defense
note payable to B or order. A delivers the note to C. C in turn delivers the note to D without A. Acquisition of the instrument by force
indorsement. Later, D delivers the note to E, a holder in due course, which of the following is B. Acquisition of the instrument with illegal consideration
correct? C. Fraud in inducement
A. Being payable to order, the note can be negotiated by indorsement and delivery D. Fraud in factum
B. E has no right to collect from C because a person negotiating an instrument merely by
delivery is liable only to the immediate transferee. Forgery and Alternation of Negotiable Instruments
C. E becomes holder only if D will indorse the instrument 70. M makes a negotiable promissory note for P1,000 payable to the order of P. P negotiated the
D. The instrument is not-negotiable because it is payable to the order of a non-existing note to A who, with the consent of P, raises the amount to P7,000, and thereafter indorses it to
person B, B to C and C to D.
Which of the following is not correct?
65. A makes a negotiable note to bearer and delivers it to B for safekeeping. The note is A. P and A are liable to D for P7,000 regardless of whether D is a holder in due course or
negotiated by B to C. Can A refuse to pay C on the ground that the note was originally not.
delivered to B for a special purpose only? B. B and C would be liable to D for P7,000 regardless of whether D is a holder in due course
A. Yes, A can prove that he delivered the instrument to B only for a special purpose or not.
B. No, where the instrument is in the hands of any holder, a valid delivery thereof by all C. M is liable to D for P1,000 regardless of whether D is a holder in due course or not.
parties prior o him so as to make them liable to him is conclusively presumed. D. M is liable to D for P1,000 if D is a holder in due course
C. Yes, because B negotiated the note without authority
D. No, if C is a holder in due course 71. The effects of a forged signature or one made without authority of the person whose signature
it purports to be, except.
Defense of Parties A. The instrument is wholly inoperative
66. Which of the following is not a personal defense? B. No right to retain the instrument
A. Absence of consideration C. Non-delivery of a complete instrument C. No right to give a discharge therefor
B. Forgery of a signature D. Failure of consideration D. No right to enforce payment through or under such signature can be required
67. This is a personal defense 72. M makes a note payable to the order of P who indorses it to A. F obtained possession of the
A. Absolute defense C. Real defense note fraudulently forges A's signature and indorses it to B who in turn indorses it thus "Pay to
B. Equitable defense D. National defense C, without recourse" and deliver the note to C. C can
A. Enforce the instrument against M and P
68. X obtains the signature of Y for authograph purpose. X writes a negotiable promissory note B. Enforce the instrument against A
above Y's signature. The note was validly negotiated to Z who is a holder in due course. What C. Enforce the instrument against B
kind of defense canY avail against Z. D. Cannot enforce the note against F
A. Personal defense C. Equitable defense
B. Real defense D. Qualifies defense 73. Papa makes a note payable to the order of Pepe who indorses it to Pipi. Popo obtains
possession of the note fraudulently, forges Pipi's signature and indorses it to Pupu, who in turn
indorses it to Pedro, without recourse. Pedro can enforce the instrument against
A. Papa C. Pipi
B. Pepe D. Pupu
BUSINESS LAW
74. M makes a negotiable promissory note for P10,000 with the name of the payee in blank. The 79. M makes a negotiable promissory note in favor of P payable on Dec. 25,1999 with the
note is stolen by, P who inserts his name as payee and then indorses the note to A, then A to following successive indorsements P to A, A to B and B to C. On the due date, M is paying C,
B, and B to C, who is a holder in due course. On maturity, C cannot enforce the note against but C extends the payment up to Dec. 25, 2000. Which of the following is not correct
A. M C. A A. C may still enforce the instrument against M.
B. P D. B B. If M becomes insolvent on December 25, 2000, P, A, and B are discharged from their
obligation
75. A issued a negotiable promissory note to the order of B for P 10,000 payable in 30 days after C. If the indorsers consented to the extension of time and M becoming insolvent on Dec 25,
date. Later B, endorsed the note to C.Then X stole the note from C, forged the signature of C 2000, the indorsers are still liable.
and negotiated it to D, and D to E, E to F, the holder. On maturity of the note, which of the D. If before Dec 25, 2000, C cancels the signature of P as indorser, P, A, B and the
following statement is not correct? instrument are discharged.
A. F can collect from either D or E because their signatures are genuine and the note is
operative against them 80. If a holder alters the amount of a negotiable promissory note from P10,000 to P40,000, then
B. F can collect from A because A can not put up forgery as his defense as his signature is negotiates it to an indorsee,
genuine A. The indorsee can require the maker to pay P40,000 if he is a holder in due course
C. F can not collect from C because it was C's signature which was forged B. The indorsee can require the maker to pay P10,000 if he is not a holder in due course
D. F can not collect from B because B is a party prior to the forgery C. The indorsee can require the maker to pay P10,000 if he is a holder in due course
D. The indorsee cannot require the maker to pay because of forgery whether or not he is a
76. A who has a current account in a local bank employs B as a bookkeeper. While in his employ holder in due course
B forges A's signature to a check which finally finds its way to the bank; the bank pays the
check and debits A's account with the amount appearing on the check. A objects to the action 81. M makes a promissory note for P2,000 payable to the order of P. P negotiates the note to A
of the bank and files a suit against the bank for the recovery of the amount of the check who with the consent of P raises the amount to P20,000 and thereafter indorses to B. B to C
debited to his account. The bank sets up a defense that A has been negligent in having and C to D, who is a holder in due course. Which of the following is in correct
permitted B to have access to his papers. In whose favor should the judgment be rendered? A. B can recover P2,000 as against M (the original amount)
A. Judgment should be rendered in favor of the bank. A's negligence in hiring B and allowing B. P and A are liable to D for P2,000 (the original amount)
to have access to the check was the proximate cause of the act C. P and A are liable to D for P20,000
B. Judgment should be rendered in favor of A. When a signature is forged, it is wholly D. B and C are liable to D for the full amount of 20,000
inoperative, and no right to retain the instrument, or to enforce payment thereof against
any party thereto. 82. Holder H altered the amount of a negotiable note from P10,000 to P110,000 then negotiated
C. Judgment should be modified that is A may claim only on-half of the amount of the check the note to P. As a result
D. Against A, but he can go after B, the guilty party. A. If P is a holder in due course, he can require the maker to pay PI 10,000
B. If P is not a holder in due course, he can require the maker to pay only the original sum of
77. An alteration committed by a stranger to a negotiable instrument is P10,000
A. policitacion C. option contract C. P cannot require the maker to pay because of forgery whether or not he is a holder in due
B. spoliation D. material alteration course
D. P can collect P10,000 from the maker if P is a holder in due course
78. When the material alteration of the instrument is made by a stranger, it is
A. Strangulation C. Intrusion
B. Negotiation D. Spoliation
BUSINESS LAW
83. M makes a promissory note for P 4,000 payable to the order of P. P negotiates the note to A 87. Which of the following does not discharge a negotiable instrument?
who, with the consent of P raises the amount to P 40,000 and thereafter indorses it to B. B to A. Intentional cancellation of the instrument by the holder
C and C to D, who is not a holder in due course. In this case B. Payment by the party primarily liable to holder or his authorized representative?
A. B can be held liable for P 40,000 by D C. Payment by maker of a promissory note before maturity date
B. C is not liable to D D. Voluntary surrender of the instrument by the holder to the maker without collecting
C. D can recover only P 4,000 as against M
D. P and A are liable to D for P 40,000 each Bills of Exchange
88. Which of the following is not a characteristic of a bill of exchange?
84. 1st Statement: Where a complete instrument is in the hands of a holder in due course, a valid A. original parties are the drawer, drawee, payee and acceptor
delivery thereof by all prior parties is prima facie presumed thereby allowing the party liable to B. acceptance is generally required
set up the defense of want of delivery. C. drawer is primarily liable
2nd Statement: When a signature is forged or made without the authority of the person whose D. contains an unconditional order
signature it purports to be, the instrument is wholly inoperative
A. B. C. D. 89. A bill of exchange to which document is attached when presentment for payment or
st
1 Statement True True False False acceptance is made
2nd Statement True False True False A. Trade acceptance C. Clean bill of exchange
B. Bank acceptance D. Documentary bill of exchange
85. The following are instances when a drawee bank may refuse to pay checks drawn against it
A. If there is a " stop payment" issued by the drawer 90. A bill of exchange may be treated as a promissory note
B. When the bank receives notice of the drawer's death A. When the drawee and the payee are the same person
C. If the drawer's deposit is insufficient B. When the drawer and the payee are the same person
D. If the drawer is insolvent C. When the drawee and the drawer are the same person
A. A only C. A, B and C D. All of them
B. A and B D. A, B, C and D
91. This is not a requisite of a valid acceptance for honor
Discharge of Negotiable Instruments and the Parties Secondarily Liable A. There must be consent of the holder
86. 1st Statement: A check must be presented for payment within a reasonable time after its issue B. The acceptor for honor is party already liable on the instrument
or the drawer will be discharged from liability thereon C. The acceptance for honor must be in writing and signed by the acceptor for honor
2nd Statement: Where the drawer of the check procures it to be accepted or certified, the D. The bill must have been previously protested for non-acceptance or for better security
drawer and all indorsers are discharged from liability
A. B. C. D. 92. Three of the following are requisites of valid acceptance for honor. Which is not?
A. The bill must have been previously protested for non-acceptance or for better security
B. There must be consent of the holder
C. The acceptor for honor must be party already liable on the instrument
D. The acceptance for honor must be in writing and signed by the acceptor for honor

BUSINESS LAW
CONTRACT OF SALE 6. On September 25, 2001, A sent a telegram to B in Cebu, offering to sell to B his house and lot
Nature for P2M, cash. On the same date, B sent to A a telegram offering to buy A's same house and
1. A seller sold to a buyer a brand new car at a price of P500,000. At the time of sale, the buyer lot for P2M. Is there a perfected contract?
has only P200,000 cash and his old car with a fair market value of P300,000 which he offered A. No, because both telegram are mere offers
as payment of the purchase price which was accepted by the seller. The nature of the contract B. Yes, a promise to buy and sell a determinate thing for a price certain is reciprocally
is demandable.
A. Barter C. Sales C. No, because B did not offer to buy the house and lot for cash.
B. Exchange D. Partly sales and partly barter D. Yes, being a consensual contract, it is perfected by, mere consent
2. Dacion en pago as distinguished from sale 7. Which of the following may not be the object of a contract of sale?
A. The cause is the price A. Thing having a potential existence
B. There is no pre-existing obligation or credit B. The sale of hope or expectancy
C. A mode of extinguishing an obligation in the form of payment C. Future inheritance
D. There is greater freedom of choice between the parties. D. Things subject to a resolutory condition
3. Dacion en pago as distinguished from sale 8. J is the sole owner of one hectare of land. In need of money, she sold of the land without
A. The cause is the price specifying which portion she is selling to H. In this case, the sale is
B. The object exist and is specific A. Void, because co-ownership is discouraged by law
C. There is no pre-existing obligation B. Void, because the part is not determinate
D. There is a greater degree of freedom in fixing the price C. Valid, only if J has paid the purchase price
D. Valid as the sole owner of a thing may sell an undivided interest therein
4. Sales as distinguished from dation in payment, in sale
A. There is a pre-existing obligation or credit 9. A husband, in his capacity as the head of the family sold the paraphernal property (exclusive
B. The cause is the price property) of his wife, without his wifes consent. The sale is
C. It is a mode of extinguishing an obligation in the form of payment A. Rescissible C. Unenforceable
D. There is less freedom of choice among the parties B. Voidable D. Void
Requisites Earnest Money and Option Money

5. 1st Statement - Will you buy this watch for P1,000? 10. When the offeror has allowed the offeree certain period to accept the offer, the offer cannot be
2nd Statement - I am willing to buy your car. withdrawn
A. B. C. D. A. after it is accepted
1st Statement An offer An offer Not an offer Not an offer B. before it is accepted
2nd Statement An offer Not an offer An offer Not an offer C. if the offeree has paid a consideration for the option
D. regardless whether the offeree gave an option money or not
11. The proof of perfection of a contract of sale is

A. Payment of option money C. payment of the whole purchase price
B. Payment of earnest money D. By a qualified acceptance
BUSINESS LAW
Rights and Obligations of Vendor 16. A sold his banca to B for P10,000. After A received the price, he pointed at the banca moored
12. The following are cases when delivery does not transfer ownership over the thing sold, except nearby and told B, "that is the banca you bought, it is at your disposal". B kept silent. There
A. In case of express reservation by the seller until certain conditions have been fulfilled, was delivery of banca to B by
particularly the full payment of the purchase price. A. Constitutum possessorium C. Traditio longa manu
B. In case of implied reservation of title as when goods are deliverable to the order of the B. Traditio brrevi manu D. Quasi-traditio
seller or his agent.
C. In sale or approval, or on trial or on satisfaction. 17. Which of the following statements is not correct?
D. In sale or return within seven days. A. The vendor is bound to deliver the thing sold and its accessions and accessories in the
condition in which they were upon the perfection of the contract
13. A and B entered into a "contract to sell" in private writing involving a specific parcel of land for B. All the fruits of the thing sold shall pertain to the vendor from the day on which the
P2M. B paid 50% of the purchase price, the balance payable in 3 years. A delivered the land contract was perfected
to B. What is the effect of the delivery of the land to B? C. The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the
A. B is the owner because there was delivery already price, or if no period for the payment has been fixed in the contract
B. B's ownership before it is converted into real ownership must compel A to execute a deed D. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing
of sale in a public instrument which is the object of the sale.
C. The partial payment made B the owner of the land
D. A is still the owner because the price is not yet totally paid 18. If the thing sold should be lost in consequence of the hidden faults and the vendor was aware
of them, the vendor shall
14. A bought a car from B, a minor, for P100,000. One week later, A discovered that B was a minor A. Return the purchase price and refund the expenses of the contract, with damages
at the time of sale so he filed a complaint in court to annul the sale. Will the action prosper? B. Return the purchase price and refund the expenses of the contract, without damages
A. Yes, B being a minor is incapacitated to enter into contract C. Return the purchase price and interest thereon, with damages
B. No, the right to annul the sale is given to B D. Return the purchase price and interest thereon and refund the expenses of the contract
C. Yes, B cannot file the action to annul the sale because he is a minor
D. No, unless there is lesion of more than 1/4 of the value of the property 19. P1 and P2 are co-owners of a piece of land and they named and authorized A to sell their
land. Who will be liable to A for the payment of his commission?
15. The vendor A. both P1 and P2 jointly
A. Is liable to the vendee for hidden fault or defect of the thing sold even if he is not aware B. both P1 and P2 solidarily only if stipulated
thereof C. both P1 and P2 solidarily even without stipulation.
B. Is not liable to the vendee for hidden fault or defect of the thing sold only if he is not aware D. 50% from P1 and 50% from P2
thereof
C. Is liable to the vendee for hidden fault or defect of the thing sold if he is not aware thereof Righs and Obligations of Vendee
if stipulated 20. The ownership passes to the buyer on delivery when goods are delivered to the buyer
D. Is riot liable to the vendee if stipulated A. On sale or return C. On sale or trial
B. On sale or approval D. On sale or satisfaction

BUSINESS LAW
21. When goods are delivered to the buyer on "sale or return" for a period of seven days, 26. A sold a piece of land to R binding himself not to sell the same to another person. On the
ownership of the goods passes to the buyer, following day, A sold the land to C who immediately took possession in good faith. In this case,
A. Upon perfection of the contract the proper remedy of R is to
B. Upon delivery of the goods A. Institute an action for the annulment of the sale to C
C. Upon expiration of seven days B. Institute an action for the recovery of the land
D. Upon acceptance by the buyer of the offer of the seller. C. Institute an action for damages against A
D. None since there is no cause of action against A
22. A sells to B her car for P300,000 on a "sale or return within 10 days" after delivery. On the 5 th
day after delivery, the car was lost through fortuitous event. Who bears the loss? Remedies of Unpaid Seller
A. A under the principle of "res perit domino" 27. U owns 2 parcels of land, one situated in Manila and the other situated in Cavite. He is
B. B and he must pay the purchase price indebted to S for P100,000. When he failed to pay, S filed an action and attached the land
C. Both A and B jointly situated in Manila. After the issuance of the writ of attachment, he sold the land situated in
D. No one because the loss was due to a fortuitous event Cavite to O. Is the sale to O considered fraudulent which may render the contract
rescissible?
23. If the same immovable property is sold to different vendees, the ownership shall belong to the A. No, because the sale did not affect the property attached
vendee B. Yes, and the contract is void if O acted in bad faith
A. Who presents the oldest title in good faith C. No, because there is no foreclosure yet of the property belonging to U
B. Who takes possession thereof in good faith D. Yes, because a writ of attachment has been issued against U
C. Who registers the sale in good faith in the Registry of Property
D. Who effects full payment Warranties
28. The following are implied warranties in a contract of sale, except
24. On April 1, 2002, A sold a specific race horse to B for P100,000 the horse was hit by a A. Reasonably fit for the purpose for which it was intended
lightning and died. B. Merchantable in quality
A. B can require A to deliver to him another race horse C. Right to sell the thing at the time the contract is perfected
B. A can require B to pay P100,000 but he must deliver another race horse to B D. Free from charges and encumbrances not made known to the buyer
C. A can require B to pay P100,000 but he has no obligation to deliver another race horse to
B 29. Warranty against eviction in a contract of sale is.
D. B is not obliged to pay A A. An essential element C. An incidental element
B. A natural element D. An accidental element
25. D, a minor sold to E his parcel of land for P900,000. From the proceeds of the sale, D
deposited P200,000 in the bank, spent for food, clothing and other personal expenses 30. Not a requisite for warranty against eviction.
P200,000, joined a tour abroad costing P200,000, lost in gambling P200,000 and loaned A. The vendee is deprived in whole or in part of the thing purchased by virtue of a final
P100,000 to F who became insolvent. Upon reaching the age of majority, D flies an action for judgment
annulment which the court granted. E was required to return the land to D and D was made to B. The judgment is based on a right prior to the-sale or an act iinputable to the vendor.
return to E the amount of C. There is waiver on the part of the vendee
A. P200,000 C. P600,000 D. The vendor was summoned in the suit for eviction at the instance of the vendee.
B. P400,000 D. P700,000

BUSINESS LAW
31. The sale of an animal with a disease is Legal Redemption

A. valid if the disease is not contagious 37. The mode of extinguishing a contract of sale by which a person is subrogated upon the same
B. void if the animal will die within three days from date of purchase terms and conditions stipulated in the contract in the place of one who acquires a thing by
C. void if the animal dies within three days from delivery onerous title
D. unenforceable unless both patties ratify the sale A. Compensation C. Legal redemption
B. Novation D. Conventional redemption
Sale with a Right to Repurchase or Conventional Redemption
32. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed 38. A and B are co-owners of a one hectare rural land. A sold his share to Y. C, an adjoining
as landowner is interested in buying the share, which A sold to Y. Which of the following is
A. pacto de retro sale C. legal redemption correct?
B. equitable mortgage D. subrogation A. B can redeem what A sold to Y if Y already owns a rural land
B. B can redeem what A sold to Y even if Y does not own any rural land
33. This shall take place when the vendor reserves the right to repurchase the thing sold C. As adjoining landowner C has a superior right to redeem what A sold to Y.
A. policitacion C. equitable mortgage D. C can redeem what A sold to Y whether or not Y already owns a rural land.
B. conventional redemption D. legal redemption
39. An agricultural land is owned by A and D pro-indiviso. D sells his part to R, who is the owner
34. A owns a piece of land and sells it to B with a right of repurchase within one year from the of the adjoining land. When A learned of the sale, he tried to redeem the portion sold by D by
date of sale. Can B sell the land he purchased from A to C, a third party? reimbursing R with the purchase price and expenses. Which is not correct?
A. Yes provided the sale is with the consent of A. A. A can compel R to permit redemption
B. No, B is not yet the absolute owner of the land. B. A co-owner of a thing may exercise the right of redemption in case the shares of the other
C. Yes, but A can still redeem the land from C. co-owners or any one of them are sold to a third person
D. No, third parties that acquire real property are bound by prior contracts affecting such C. The sale to R is valid but A can elect to exercise his right of redemption
property even if the third person is not a party thereto. D. The sale to R is valid and as adjoining land owner he is the one entitled to redemption
35. A, B and C are co-owners of a parcel of land, A sold his 1/3 share on Sept 1, 2001. B his 1/3 40. E owns a piece of property and sells it to S with a right or repurchase within one year from the
share on Sept 12, 2001, and C his 1/3 share on Sept 25, 2001, all to D and with the right of date of sale. If S sells the property to T, which of the following is not correct?
repurchase. Which of the following is correct? A. The sale is valid because things subject to a resolutory condition maybe the object of a
A. A may redeem the entire property from D if he is required by D to do so. contract of sale
B. A may redeem the entire property even if D allows him to redeem 1/3 share only. B. E can still exercise her right of redemption against T
C. A may redeem his 1/3 share even if D requires him to redeem the whole property. C. The sale is void because it is a conditional sale
D. A may redeem his 1/3 share if D allows him to do so. D. T acquires the property but subject to the right of conventional redemption
36. Where it is stipulated that the repurchase of the property sold could be made at any time, the 41. A owns a parcel of land, which he sells to B with a 3 year redemption period. After the second
repurchase shall be exercised year, A dies, leaving his children C, D and E as his heirs. Which of the following is not correct?
A. Within four years, from the date of contract A. As A can repurchase the whole thing, so any among C, D and E may repurchase the
B. Within ten years from the date of the contract whole thing.
C. After ten years after the date of the contract B. A can redeem his 1/3 share, B his 1/3 share and C his 1/3 share if B does not require all
D. Within six years from the date of the contract of them or any one of them to redeem the whole property.
BUSINESS LAW
C. B may demand that all the co-heirs come to an agreement upon the repurchase of the 47. Ownership is retained despite delivery, except
whole thing sold. A. commodatum C. universal partnership of profits
D. B cannot be compelled to consent to a partial redemption. B. mutuun D. on dial or satisfaction
Comprehensive 48. Mutuum as distinguished from commodatum

42. 1st Statement. If the same thing should have been sold to different vendees, the ownership A. Essentially gratuitous
shalt be transferred to the person who may have first taken possession thereof in good faith. B. Bailor retains ownership of the tiling loaned
2nd Statement. The vendor is responsible to the vendee for any hidden faults or defects in the C. Object is generally non-consumabje
thing sold, even though he was not aware thereof? D. Loan for consumption
A. B. C. D.
1st Statement True True False False 49. Commodatum as distinguished from rnutuum
2nd Statement True False True False A. Subject matter is money or other consumable thing
B. Maybe gratuitous or maybe onerous
Credit Transactions C. Ownership is transferred to the borrower
43. A contract of loan is D. May involve real or personal property
A. A consensual contract C. A formal contract
B. A real contract D. A solemn contract 50. Commodatum as distinguished from mutuum
A. Refers to personal property
44. Commodatum as distinguished from mutuum B. The debtor returns an equal amount of the same kind
A. object is money or consumable or fungible thing. C. Ownership of the thing loaned to borrower is retained by the lender
B. ownership is transferred to the borrower D. Loan maybe either gratuitous or onerous
C. object or tiling loaned must be returned by the borrower
D. maybe gratuitous or onerous 51. Judicial deposit as distinguished from extra-judicial deposit
A. Safekeeping is the primary purpose
45. 1st Statement - The bailee in commodatum acquires the use of the thing loaned and its fruits B. Object maybe movable or immovable property
2nd Statement - Movable or immovable property maybe the object of commodatum C. Constituted by the will of the parties
A. B. C. D. D. Depositary keeps the thing by the voluntary will of the depositor.
st
52. An assignor of credit warrants
A. Solvency of the debtor C. Assurance of payment
B. Collectibility D. Existence and legality of credit
46. 1st Statement. Commodatum is essentially gratuitous.
2nd Statement. Condonation is essentially gratuitous 53. One whereby the bailor may demand the thing loaned at will
A. B. C. D. A. Mutuum C. Precarium
st
1 Statement True True False False B. Commodatum D. Mandatum

BUSINESS LAW
54.1st Statement. The bailor in commodatum need not be the owner of the thing loaned AGENCY
2nd Statement. When there are 2 or more bailees to whom a thing is loaned in the same Nature, Form and Kinds
contract, they are liable solidarily 1. P sends a letter to A in Cavite, authorizing A to sell his specific car for P90,000. If no reply is
A. B. C. D. made by A, is there a presumption of implied agency between the two of them?
1st Statement True True False False A. None, because as between persons who are absent, acceptance of the agency cannot be
2nd Statement True False True False presumed from the silence of the agent
B. Yes, because no reply was send; there is an implied acceptance or implied consent
55. As a rule, when a creditor assigns his credit in good faith. C. Yes, unless A is habitually engaged in the business of selling and buying cars
A. He warrants the existence of the credit at the time of assignment D. None, acceptance must always be expressed
B. He warrants the legality of the credit at the time of assignment
C. He warrants the solvency of the debtor at the time of assignment. 2. A promissory note is signed in behalf of the principal by an agent as follows:
A. Only A and C C. Only B and C Juan dela Cruz
B. Only A and B D. A, B and C By: Rey Santos, Per. Proc.
This operates as notice that the agent has
56. Which of the following is not correct? A. Unlimited authority to sign for and in behalf of the principal
A. A movable or immovable property maybe the object of commodatum B. A limited authority to sign, and the principal is bound only in case the agent in so signing
B. The bailor in commodatum need not be the owner of the thing loaned acted within thee actual limit of his authority, otherwise the principal is not liable to all
C. A stipulation that the bailee may make use of the fruits of the thing loaned is valid. C. A limited authority to sign, but the principal is bound even in case the agent in so signing
D. The bailor is obliged to pay for the ordinary expenses for the use and preservation of the acted beyond the actual limits of his authority
thing, loaned D. A limited authority to sign and the principal is liable only to the extent of the said authority
given the agent
57. The government authorized all rural banks to grant agricultural loans to deserving farmers
affected by the calamity brought by Mt. Mayon eruption. S, a deserving fanner borrowed from 3. A CPA was making a balance sheet audit of a coal dealer's business. Later the CPA at his own
L Rural Bank the amount of P200,000 payable on Oct. 10, 2001. Thinking that the fury of Mt. expense engaged an engineer to survey the coal piles and to report to the accountant the
Mayon will last for at least 6 months and to cultivate the land will be futile, instead of quantity in each pile. The engineer in due performance of his work purchased necessary
cultivating. S bought a passenger jeepney and some home appliances. On Oct. 10, 2000, the supplies for which he did not pay. Has the vendor of these supplies an enforceable claim
bank came to know the situation and immediately thereafter made several demands for against the accountant.
payment but S failed to pay. If the bank files an action in court for payment of the loan, will the A. No, the engineer was not the agent of the CPA but was an independent contractor
action prosper? B. No, the claim should be against both the CPA and the engineer
A. Yes, the land is not yet suited for cultivation C. Yes, the engineer is an extension of the personality of the CPA
B. No, the obligation is not yet due D. Yes, the obligation of the engineer was to produce a given result, the report of his survey.
C. Yes, S losses his right to the period
D. No, S's decision to use the loan proceeds for other purpose was done observing the 4. Which of the following statements is not correct?
diligence of a good father of a family A. J appointed A in writing as her agent to sell her specific parcel of land for P1M. A sold it
orally to T. The contract between A and T is valid.
B. J orally appointed K to sell a house on a parcel of land belonging to R. K sold the house
orally to A.The contracts between J and K, and K and A are both valid

BUSINESS LAW
C. G appoints C as his agent to sell his land for P1M. C sold it to R in writing. The sale made 8. The following are obligations of the agent, except
by C to R is not valid A. In the execution of the agency, the agent shall act in accordance with the instructions of
D. R wrote D, his brother to sell his specific parcel of land. The land was purchased by G but the principal
D did not forward the money to R. R now wants to recover the parcel of land. R can B. Shall be bound to advance the necessary funds, except when the principal is insolvent
recover because the authority of D is not a special power of attorney. C. Shall finish the business already begun on the death of the principal, should delay entail
any danger
5. Which of the following statements is false? D. In case a person declines an agency, he is bound to observe the diligence of a good
A. P in writing appoints A as his agent to sell his specific parcel of land for P40,000. A sold it father of a family in the custody and preservation of the goods forwarded to him by the
orally to X. The contract of A and X is valid owner until the latter should appoint an agent
B. B wrote A, his sister, to sell his parcel of land. The land was purchased by X, but A did not
forward the money to B. B now wants to recover the parcel of land. B can recover 9. M appointed R and Z as her agents to sell her specific property for P100,000, on cash basis.
because the authority of S is not in special power of attorney Solidarity has been agreed upon. Can M hold Z liable if R sell the property for P80,000?
C. P orally appoints A as his agent to sell his land for P40,000. A sold it to X in writing. The A. Yes, because the obligation is solidary
sale by A to X is not valid. B. No, because the appointment of 2 or more agents in one and the same obligation is joint
D. P orally appointed A to sell a house on a parcel of land belonging to X. A sold it to B orally. and any stipulation to the contrary is void.
The contract by P and A, and A and B are valid C. Yes but only for Z's share that is P10,000.
D. No, because R acted beyond the scope of his authority
Obligations of Agents and Principals
6. This is not a fundamental obligation of the agent 10. P appointed A1 and A2 as co-agents, to sell the specific car of P forP10,000, cash basis.
A. To render an accounting of the transaction Solidarity has been agreed upon. Later, A1 sold the car to X but only for P8,000. Can P hold
B. To subordinate his interest in favor of his principal if there is a conflict of interest A2 liable?
C. To borrow if he is authorized to lend A. Yes, because the obligation is solidary
D. Not to carry out the agency, even if feat is the instruction of the principal, if he knew it B. No, because A1 acted beyond the scope of his authority
would result is a loss or damage to his principal C. No, only P1,000, that is A2's share of the P2,000
D. No, because the appointment of two or more agents in one and the same obligation is not
7. M is authorized by G to sell the latter's washing machines for P5,000 each with 10% solidary even if it is stated
commission. One day M sells one washing machine to C on credit (payable in 90 days) but for
a price of P6,000. If G does not ratify this sale on credit, he can collect cash payments from M 11. P appoints A1 and A2 as his agents. A1 and A2 agreed to be bound solidarily. Suppose A1
A. P4,500 (P5,000 less P500 commission) performed the agency negligently which caused damage to P, can P hold A2 liable for
B. P5,000 (the price without commission) damage?
C. P5,400 (P6,000 less P600) 1st answer - Yes, if A1 acted within the scope of his authority.
D. P6,000 (the selling price) 2nd answer - No, if Al acted beyond the scope of his authority
A. B. C. D.
st

BUSINESS LAW
12. V appoints M as her agent giving M general powers to administer her fish pond in Bulacan and PLEDGE & MORTGAGE
an agricultural land in Nueva Ecija. Subsequently. V appointed R, another agent, to administer Nature
and sell the land situated in Nueva Ecija. Which of the following statements is not correct? 1. The following are essential requisites common to the contracts of pledge and mortgage,
A. The authority of M to administer the property in Bulacan is not revoked and shall continue. except,
B. The authority of M to administer the property in Nueva Ecija is impliedly revoked A. That they are constituted to secure the fulfillment of a principal obligation
C. There is an implied revocation of the authority to administer the property in Nueva Ecija B. That the pledgor or mortgagor is the absolute owner of the thing pledged or mortgaged
but the authority to administer the property in Bulacan remains. C. That the contract is registered with the Register of Deeds
D. Both authorities will be revoked because the agency with general powers is inseparable. D. That the person constituting the contract has free disposal of his property or that he is
authorized legally for the purpose
13. The principal is not liable for the expenses incurred by the agent
A. When the agent has complied with his obligations by acting according to the principal's 2. The following, except one, are the requisites essential to the contracts of pledge and
instructions mortgage. The exception is
B. When the agent incurred them with knowledge than an unfavorable result would ensue A. They are constituted to secure the fulfillment of a principal obligation
and the principal was aware of it B. The pledge or mortgagor be the absolute owner ofthe tiling pledged or mortgaged
C. When it was stipulated that the agent would only be allowed a certain sum C. The pledgor or mortgagor be the principal debtors
D. When the expenses were incurred without the fault of the agent. D. The persons constituting the pledge or mortgage have free disposal of their property and
in the absence thereof, that they be legally authorized for the purpose
14. If two or more persons have appointed an agent for a common transaction or undertaking,
their liability to the agent for all consequences of the agency is 3. 1st Statement. The creditor cannot appropriate the thing pledged or mortgaged, or disposed of
A. Solidary C. Subsidiary them. Any stipulation to the contrary is void.
B. Joint D. Secondary 2nd Statement. The contract of pledge or mortgage may secure all kinds of obligations be they
pure or subject to a suspensive or resolutory condition.
Extinguishment of Agency A. B. C. D.
15. 1st Statement. The agency is revoked if the principal directly manages the business entrusted 1st Statement True True False False
to the agent, dealing directly with third persons. 2nd Statement True False True False
2nd Statement. When 2 or more principals have granted a power of attorney for a common
transaction, anyone of them may revoke the same without the consent of the others 4. Not an element of contract of pledge and mortgage
A. B. C. D. A. Maybe used to pay the obligation
1st Statement True True False False B. Can stand alone
2nd Statement True False True False C. Pledgor or mortgagor must be the absolute owner
D. Pledgor or mortgagor must have a free disposal of the thing pledged
5. This is an accessory contract

A. sales C. commodatum
B. mutuum D. mortgage

BUSINESS LAW
6. Similarity between real estate mortgage and antichresis 12. If the proceeds of the sale of the thing pledged and sold at public auction is less than the
A. the property is delivered to the creditor principal obligation, can the creditor recover the deficiency from the debtor?
B. the subject matter is a real property 1st Answer - No, the creditor is not entitled to recover the deficiency from the debtor.
C. the creditor acquires the right to receive the fruits of the property 2nd Answer - Yes, if there is a stipulation to that effect in the contract of pledge.
D. the creditor is obtiged to pay the taxes and charges upon the estate A. B. C. D.
7. Pledge as distinguished from chattel mortgage 2nd Answer True False True False
A. an accessory contract
B. to secure a principal obligation 13. In case of foreclosure of the personal property mortgaged, where such thing was previously
C. debtor must have the free disposal of the property sold to the buyer on an installment basis and the proceeds of the sale at public auction is less
D. creditor is in possession of the object than the principal obligation, can the creditor recover the deficiency from the debtor?
1st Answer- No, the creditor is not entitled to recover the deficiency from the debtor.
8. Chattel mortgage as distinguished from pledge 2nd Answer - Yes, if there is a stipulation to that effect in the contract of sale with mortgage.
A. Delivery of the personal property is necessary A. B. C. D.
B. Registration is necessary for its validity st
C. If the property is sold, the debtor is not entitled to the excess
D. If the property is sold, the creditor is not entitled to recover the deficiency
9. Chattel mortgage as distinguished from pacto de retro sale 14. A stipulation in a mortgage of real property fixing a "tipo" or minimum price at which the
A. A principal and independent contract property shall be sold, to become operative in the event of a foreclosure sale at public auction
B. The title and possession are transferred to the vendee is
C. Cannot appropriate to himself the property mortgaged, nor dispose of it. A. Valid C. Rescissible
D. Seller may exercise the right to repurchase. B. Voidable D. Void
10. Real estate mortgage as distinguished from pledge Pledge

A. The debtor is entitled to the excess of the proceeds if stipulated 15. Not an essential requisite of pledge
B. The debtor shall not be entitled to the excess of the proceeds A. The thing pledged be placed in the possession of the debtor or of a third person by
C. The creditor is not entitled to the excess of the proceeds common agreement
D. The creditor cannot recover any deficiency B. It is constituted to secure the fulfillment of a principal obligation
C. The pledgor is the absolute owner of the thing pledged
11. Real estate mortgage distinguished from other security arrangements D. The person constituting the pledge have the free disposal of the property
A. There is need of affidavit of good faith
B. To bind third persons it must be constituted on a public instrument 16. This not a characteristic of pledge
C. A debtor can alienate the property witliout the creditor's consent A. Bilateral C. Consensual
D. Redemption is made before sale at public auction. B. Nominate D. Real

BUSINESS LAW
17. A contract of pledge is 22. A pledges her ring to F to secure a P10,000 obligation payable in two years. One year
A. A real contract because it is perfected by the delivery of the thing pledged thereafter, F gives a note in writing to A stating that the debt need not be secured and that A
B. An accessory contract because it has no independent existence of its own may get the ring back at her most convenient time. As a result,
A. Only A C. Both A and B A. The principal obligation and the contract of pledge are both extinguished.
B. Only B D. Neither A nor B B. Only the principal obligation is extinguished but not the contract of pledge because A did
not get back the ring.
18. Objects of pledge, except C. Both the principal obligations and the contract of pledge are not extinguished because A
A. Negotiable instruments C. Pieces of jewelry did not get back the ring
B. Shares of stock D. Piece of land D. The pledge is extinguished and F is constituted as a depository.
19. Should there be a reasonable ground to fear the destruction or impairment of the thing 23. L pledged his shares of stock to M to secure his obligation. Later, L sold his shares to J. As a
pledged, without the fault of the pledgee, what is the obligation of the pledgee and what then is result
the right of the pledgor. A. L can compel M to surrender the shares certificate to J.
1st Answer - The pledgee is bound to advice the pledgor, without delay of any danger to he B. J can compel M to deliver the shares certificate to him.
thing pledged C. The refusal of M to surrender the shares certificate will invalidate thee sale
2nd Answer - The pledgor can demand the return of the thing pledged upon offering another D. M can refuse to surrender the shares certificates.
thing is pledge which is of the same kind as the former and not of inferior quality.
A. B. C. D. 24. 1st Statement. Any stipulation authorizing the pledgee to appropriate the thing pledged is void
1st Answer True True False False and without effect.
2nd Answer True False True False 2nd Statement. If after the auction sale, the thing pledged is not sold, the pledgee can
appropriate the thing pledged
20. The public auction sale was held on April 24, 2002, which was the next business day after the A. B. C. D.
scheduled date of sale on April 23, 2002 was declared a special public holiday. Is the sale 1st Statement True True False False
valid? 2nd Statement True False True False
A. No, pretermission of holiday applies only when the last day of a given period for doing an
act falls on a holiday 25. If the thing pledged is foreclosed and there is deficiency can the pledgee recover from the
B. Yes, where the day or the last day for doing any act required or permitted by law falls on a pledgor?
holiday, the act maybe done on the next succeeding business day A. Yes, if stipulated C. Yes, whether or not there is stipulation
C. No, unless there is a highest bidder who acted in good faith B. No, even if stipulated D. No, unless stipulated in writing
D. Yes, even if the mortgagor is not aware of the rule on pretermission of holiday
26. Which of the following statements is not correct?
21. A owes B P 500 and as security, A pledged his diamond ring. Later A borrowed again P 200. A. The sale of the thing pledged shall extinguish the principal obligation, whether or not the
As a result proceeds of the sale are equal to the amount of the principal obligation, interest and
A. B has a right to retain the tiling until the P 700 is paid expenses in a proper case
B. B has aright to retain the thing until the P 500 is paid B. If the price of the sale of the thing pledged is more than the obligation, the debtor shall not
C. A has a right to demand that tiling be deposited with a third person be entitled to the excess unless it is otherwise agreed
D. B has the right to use the thing pledged until the pledgee effects payment of the obligation C. If the price of the thing pledged is less than the obligation, the creditor shall not be entitled
to recover the deficiency, unless it is otherwise agreed
BUSINESS LAW
D. At the public auction, the pledgor or owner may bid and he shall have a better right if he 32. A contract of chattel mortgage is
should offer the same terms as the highest bidder A. A formal contract because of its validity, registration in the chattel mortgage register is
Indispensable
27. V, a minor, owns a necklace and sold it to L for P20,000. Later, L borrowed from T P30,000 B. An accessory contract because it is for the purpose of securing the performance of a
and as security pledged thee necklace to T. L failed to pay and T foreclosed the pledge, sold it principal obligation
at public auction for P25,000 to N. Which of the following statements is correct? A. Only A C. Both A and B
A. The title of L is not valid, therefore the pledge of the necklace to T is also not valid B. Only B D. Neither A nor B
because in pledge, the pledgor must be the owner.
B. If N is in bad faith (he has knowledge that V, the original owner is a minor) ownership will 33. An oath in a contract of chattel mortgage wherein the parties severally swears that the
not pass to N mortgage is made for the purpose of securing the obligation specified in the conditions thereof
C. The deficiency of P5,000 can be recovered if there is a stipulation to mat effect. and for no other purposes and that the same is a just and valid obligation and one not entered
D. The deficiency of P5,000 cannot be recovered by T from L into for the purpose of fraud is
A. Oath of allegiance C. Affidavit of good faith
28. A, minor, sold his ring to B for P 4,000. Later, B borrowed P 6,000 from C and as security B. Antichresis D. Equity of redemption
pledged the ring to C. B failed to pay C and the latter foreclosed the pledge, sold it at public
auction for P 5,000 to X. As a result, 34. A mortgaged his car to B for P200,000. A failed to pay his obligation. B sold it at public auction
A. The title of B is not valid, therefor the pledge of the ring to C is also not valid because in for P180,000. Can B recover the deficiency?
pledge the pledgor must be the owner A. Yes, even without stipulation C. No, even if there is stipulation
B. The deficiency of P1,000 cannot be recovered by C from B B. Yes, only if tliere is stipulation D. No, unless there is stipulation
C. The deficiency of P1,000 can be recovered if there is a stipulation to that effect
D. If X is in bad faith (X has knowledge that A, the original owner is a minor) ownership will 35. A mortgaged his car to B for P200,000. A failed to pay his obligation. B sold it at public auction
not pass to B for for P220,000 can A recover the excess?
A. Yes, even without stipulation C. No, even if there is stipulation
29. A pledged his watch to B for P20,000. A failed to pay his obligation. B sold it at public auction B. Yes, only if there is stipulation D. No, unless there is stipulation
for P18,000. Can B recover the deficiency?
A. Yes, even without stipulation C. No, even if there is stipulation 36. In case the seller forecloses the chattel mortgage due to buyer's default in two installments
B. Yes, if here is stipulation. D. No, if there is stipulation and there is deficiency. Can the seller recover from the buyer?
A. yes, if stipulated C. yes, whether or not there is stipulation
30. A pledged his watch to B for P20,000. A failed to pay his obligation. B sold it at public auction B. no, even if stipulated D. no, unless stipulated in writing
for P22,000, can A recover the excess?
A. Yes, even without stipulation C. No, even if there is stipulation 37. For failure of the debtor to pay two installment payments, the creditor foreclosed the chattel
B. Yes, if there is stipulation D. No, only if there is stipulation mortgage constituted to secure the obligation amounting to P200,000. The proceeds
amounted to P220,000. In this case
Chattel Mortgage A. the debtor gets the P20,000 if stipulated
31.This are real contracts, except B. the debtor gets the P20,000 even if not stipulated
A. commodatum C. pledge C. the creditor gets the excess even if not stipulated
B. deposit D. chattel mortgage D. the creditor gets the excess whether or not it is stipulated.

BUSINESS LAW
38. A sold his piano to B for P20,000 payable in installment. A chattel mortgage was constituted on 42. A gets a loan of P1M from B, which becomes due on October 1, 2003 and mortgaged his
the piano. B defaulted in two installment payments. A demanded payment of the unpaid house as security for the debt. On June 30, 2003, the mortgaged house was completely
obligation amounting to P120,000 and a writ of attachment was issued and the piano was sold destroyed by fire thru the fault of C. A week later, B demanded payment from A. Is B's demand
for P100,000. Can A still recover the deficiency? valid?
1st answer - No, the foreclosure of the piano extinguished B's obligation A. No, the destruction of the house was not thru the fault of A.
2nd answer - Yes, if stipulated that in case of foreclosure the buyer will pay any deficiency B. No, the obligation is one with a definite period, which is deemed intended for the benefit of
A. B. C. D. both the debtor and creditor
st
1 Statement True True False False C. Yes, the debt becomes demandable unless A can give another security equally
2nd Statement True False True False satisfactory.
D. Yes, the debt becomes demandable even if A can give another security equally
39. In a contract of sale of personal property the price of which is payable by installment, the satisfactory.
vendor may foreclose the chattel mortgage on the thing sold should the vendee's failure to pay
cover two or more installments. If the mortgaged property is sold at public auction and the 43. 1st statement - In all cases of extrajudicial sale of real estate mortgage, the mortgagor may
proceeds of sale are less than the unpaid balance of the purchased price, the vendor redeem the property at any time within the term of one year from and after the date of
A. Can recover the deficiency from the vendee registration of the sale.
B. Can recover the deficiency from the vendee if it is stipulated 2nd statement - In judicial foreclosure of real estate mortgage, the general rule is that the
C. Cannot recover the deficiency from the vendee mortgagor cannot exercise his right of redemption after the confirmation of the sale by the
D. Cannot recover the deficiency except if stipulated otherwise court.
A. B. C. D.
Real Estate Mortgage 1st Statement True True False False
40. J mortgaged his residential land to R as guarantee for the payment of P500,000 loan of J. 2nd Statement True False True False
They agreed that J will not sell the land while the obligation exists. Before the maturity of the
mortgage, C offered to buy the land from J. Comprehensive
A. J cannot sell the land to C because of the agreement not to sell 44. 1st Statement. Shares of stock can be the object of pledge or mortgage
B. J can sell the land to C only if R consents in writing 2nd Statement. Real estate mortgage is an accessory contract
C. J can sell the land to C despite the agreement not to sell A. B. C. D.
D. J cannot sell the land to C unless J pays R the obligation st
41. A borrowed from B P 200,000, and as security, he mortgaged his land to B. The parties
agreed that if the property mortgaged is sold at public auction, the value shall not exceed P
200,000 Which of the following statements is not correct?
A. The stipulation is void, the property mortgaged must be sold to the highest bidder
B. If the property is sold for P 220,000, the excess amount of P 20,000, shall belong to A, as
the mortgagor
C. If the property is sold for P 180,000, the deficiency can be recovered by B from A
D. If the property is sold for P 180,000, the deficiency can be rccovered only if there is a
stipulation to that effect

BUSINESS LAW
Answer Key Partnership

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

BUSINESS LAW
12. B 32. C 52. C 72. C 92. C 9. C 19. A 29. C 39. C

13. D 33. B 53. D 73. D 10. C 20. A 30. B 40. C
14. B 34. D 54. D 74. A
15. A 35. C 55. C 75. B
16. B 36. D 56. C 76. B
17. A 37. C 57. B 77. B
18. D 38. D 58. C 78. D
19. C 39. A 59. D 79. D
20. C 40. C 60. A 80. C
Contract of Sale
1. C 11. B 21. B 31. A 41. A 51. B
2. C 12. D 22. B 32. B 42. C 52. D
3. B 13. D 23. C 33. B 43. B 53. C
4. B 14. B 24. C 34. C 44. C 54. A
5. B 15. A 25. C 35. C 45. C 55. B
6. A 16. C 26. C 36. B 46. A 56. D
7. C 17. B 27. D 37. C 47. B 57. C
8. D 18. A 28. C 38. B 48. D
9. C 19. C 29. B 39. D 49. D
10. C 20. A 30. C 40. C 50. C
Agency
1. A 4. D 7. B 10. B 13. C
2. B 5. B 8. B 11. A 14. A
3. A 6. C 9. D 12. D 15. A
Pledge & Mortgage

1. C 11. C 21. B 31. D 41. D
2. C 12. B 22. D 32. C 42. C
3. A 13. B 23. D 33. C 43. A
4. B 14. D 24. B 34. A 44. A
5. D 15. A 25. B 35. A
6. B 16. C 26. C 36. B
7. D 17. C 27. D 37. B
8. B 18. D 28. B 38. D

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BUSINESS LAW

D. Only the second obligation is subject to resolutory condition

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66. Which of the following is not true?

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85. There is novation of the obligation if Comprehensive

CONTRACTS Formalities of Contracts

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CORPORATION 7. Must be a natural person

2nd Statement True False True False Operations of a corporation

26. A distribution by a corporation of shares held by it in another corporation is

27. Cash dividend as distinguished from stock dividend

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55. Negotiation as distinguished from assignment Holder in Due Course

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Requisites Earnest Money and Option Money

11. The proof of perfection of a contract of sale is

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31. The sale of an animal with a disease is Legal Redemption

Comprehensive 48. Mutuum as distinguished from commodatum

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5. This is an accessory contract

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10. Real estate mortgage as distinguished from pledge Pledge

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Answer Key Partnership

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12. B 32. C 52. C 72. C 92. C 9. C 19. A 29. C 39. C

Pledge & Mortgage

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