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MCQ - Commercial Law Review
MCQ - Commercial Law Review
COMMERCIAL LAW
3. Ten persons, all Filipinos, and acting as incorporators, filed an application for the
incorporation of XYZ Bank, Inc. Which of the following is correct?
4. When the articles of incorporation provide for non-voting shares, the holders of such
shares shall nevertheless be entitled to vote on the following matters, except:
5. ABC Corporation, a private corporation engaged in the business of importing used cars
from Japan was issued a certificate of incorporation by virtue of R.A. 27890. Because of
a failed business transaction, ABC Corporation sued Mr. X for a damage arising from the
latter’s alleged breach of its contractual obligations.
a. Mr. X cannot allege “lack of legal capacity to sue’ of ABC Corporation in its
motion to dismiss because it has a legal personality conferred by law.
b. Mr. X cannot allege “lack of legal capacity” in its motion to dismiss because it
is not allowed to attack the existence of the corporation collaterally.
c. ABC Corporation is a de jure corporation and its existence can be attacked
only through a quo warranto proceeding.
d. Attacking the existence of ABC Corporation may be done through a motion
to dismiss because its creation is void.
6. No 1 - Within five (5) years from issuance of its certificate of incorporation, the newly-
formed corporation must formally organize and commence business operations. Failure
to do so within such period is a ground for dissolution. No. 2 - Every member of the
board of every corporation must own at least one (1) share of stock standing in his
name in the books of the corporation.
9. Which of the following acts could be ratified by a vote representing at least 2/3 of the
outstanding capital stock?
13. X subscribed to 1,000 shares of stock in ABC He paid 50% of the subscription but
such subscription was later on declared delinquent. The total liability of X, including the
balance, accrued interest, costs and other expenses amounted to P50,000. Which
bidder is considered the highest bidder in the delinquency sale?
14. No. 1 – Holders of delinquent shares are not entitled to dividends. No. 2 – A transfer
of shares to a non-stockholder is binding to the corporation as long as the transfer is in a
public document.
15. No. 1 – A foreign corporation intending to sue in Philippine courts must always have
a license to engage in business n the Philippines. No. 2 – A foreign corporation engaged
in business in the Philippines may sue and be sued n the Philippines.
a. it is indorsed to Jose.
b. it is indorsed to Jose or bearer.
c. it is indorsed to Jose in trust for my child.
d. It is indorsed to the order of Jose.
19. X wants to lend money to third persons but asks his friend, B to sign promissory
notes of the borrowers as the lender/ payee. As payee, B indorses the notes to X. B
receives no consideration for lending his name.
a. X is a party accommodated.
b. B is an accommodation party.
c. B is not an accommodation party.
d. B is not a party to the note, but X is.
20. D issues a note payable to the order of P. P indorses the note thus: “To A. Sgd P”.
a. A is an assignee.
b. A may negotiate to B by delivery alone.
c. A may negotiate to B by indorsement completed by delivery.
d. A cannot negotiate the note any further.
21. The following instrument is negotiable assuming all other requisites are present:
22. Which among the following has a conditional promise hence, non-negotiable?
24. Drawer issues a check to the order of P drawn against O Bank. Through illegal
means, F gets hold of the check, indorses the check to himself by forging P’s signature,
and deposits it in his account in M Bank which indorses the check for clearing with the
words” All prior indorsements guaranteed”.Which is correct?
28. The common carrier’s duty to observe extraordinary diligence in the vigilance over the
goods;
30. A commercial vessel was sunk when it was overtaken by a typhoon in the ocean. It
was established that the ship was unseaworthy but would have successfully completed
the voyage had it not been for the typhoon.
31. The doctrine of limited liability may not be availed of as a defense in the following
cases. Which is the exception?
a. That the shipper will be liable only for P500.00 per baggage.
b. That the shipper will be liable for P500.00 only per luggage except if the
shipper or passenger declares a higher value.
c. The shipper will be liable only for P500.00 per baggage whatever be the
value declared.
d. All are void.
34. X insured his house against fire. During the effectivity of the insurance, he sold the
house to Y without a corresponding change in the policy but X continued to pay the
premiums. If a loss occurs;
a. X can recover from the policy because there was no change in the policy.
b. X can recover because he is the one who is paying the premiums.
c. Y can recover because he is the owner.
d. The insurer may legally refuse to pay.
a. Recovery may be had under the policy because the ailment concealed was
not the cause of death.
b. Recovery cannot be had because of a material concealment.
c. Recovery cannot be had because of material misrepresentation.
d. Recovery can be had.
36. The insurer is entitled to the payment of premiums as soon as the thing insured is
exposed to the peril insured against, except
38. No. 1 - When there is double insurance, there is always over insurance. No. 2 - A
contract of suretyship can never be an insurance contract.
39. D deposited 500 bags of cement in the warehouse of W. The latter issued a
negotiable warehouse receipt to D. Five months after, O came to the warehouse to claim
the goods alleging that the cement deposited by D were merely stolen by the latter. At
the same time D arrived in the warehouse claiming the cement and presenting the
warehouse receipt. Confronted with conflicting claims of ownership, W should ;
40. V is a vegetable buyer. He goes to Baguio City, buys vegetable in bulk and after filing
up his truck, he travels to Divisoria and sells all the contents of his truck.
a. V must prepare an affidavit listing his creditors, the amount of their credits
and their due dates.
b. V must notify his creditors before selling all the contents of the truck.
c. V does not have to perform any of the above acts if his business is not
registered.
d. V does not have to perform any of the above because his sale is in the
ordinary course of business.
41. M mortgaged his concrete house located in a rented lot to B. The deed of mortgage
which is embodied in a public instrument is denominated as a chattel mortgage.
42. Which among the following is not a function of the Bangko Sentral ng Pilipinas?
43. No. 1 – A bank may be may lend to a single borrower more than fifteen (15%) of the
bank’s unimpaired capital. No. 2 – A deposit in a bank in foreign currency may be
inquired into provided the depositor gives his consent, orally or in writing.
45. No. 1 - The Ombudsman may inquire into the bank deposit of a public officer whose
case is pending criminal investigation in the Ombudsman even if there is no actual case
filed in court. No. 2 - A writ of garnishment directed to a bank deposit is prohibited by
law.
47. The distribution of dividends from capital and the acquisition of corporate shares
without corporate unrestricted retained earnings is not allowed by law because of:
48. Jose and his wife, Perla, opened and maintained the following accounts with Allied
Bank Recto. (a) Savings deposit – P300,000; (b) Demand deposit – P400,000; (c)
Time deposit - P350,000. They also have the same deposits with the same
amount in Allied Bank Makati. If Allied bank becomes insolvent the Philippine Deposit
Insurance Corporation will be bound to be liable to the spouses for its insurance
liability equivalent to
a. two deposits.
b. one deposit.
c. six deposits.
d. three deposits.
49. Mendoza claims P 50,000.00 for the loss of both of his suitcases during his flight
from Manila to Davao via Philippine Air Lines. However, PAL is willing to pay only P
4,000.00 on the ground that the airline ticket stipulates that unless a higher value is
declared, any claim for loss cannot exceed P 2,000.00 for each baggage. Mr.
Mendoza has not declared a greater value, despite the fact that the clerk had called
his attention to the stipulation in the ticket. Mr. Mendoza sues the airline company.
The refusal of the airline company to pay the claim is:
50. A check upon which the holder’s signature must appear twice, one to be affixed by
him at the time it is issued and the second or counter-signature, to be affixed by him
before it is paid, otherwise it is incomplete, is called:
a. certified check
b. stale check
c. traveller’s check
d. answer not given
51. One of the following has no insurable interest in the life of Alberto:
a. his wife
b. his mother
c. his mistress
d. his daughter
a. Delivery of check
b. Tender of Central Bank notes
c. Delivery of promissory note
d. answer not given
a. When no payment is made within fifteen (15) days from the date as fixed in
the subscription contract or in the call made by the Board of Directors.
b. When no payment is made within two (2) months as fixed in the contract or
call.
c. When no payment is made within one (1) month from date as fixed in the
contract or call.
d. None of the above.
a. Assignment
b. Delivery of a bearer instrument
c. Indorsement completed by delivery of an instrument payable to order
d. Delivery of an instrument to the payee
59. Contracts for water transportation from foreign ports to Philippine ports are primarily
governed by:
61. Which one of the following is not a characteristic of a voting trust agreement?
a. A voting trust is created for the purpose of conferring upon the trustee the
right to vote and other rights pertaining to the shares.
b. A voting trust is irrevocable during the time stipulated.
c. The stockholder remains the beneficial or equitable owner of the shares while
the trustee is the legal owner.
d. All voting trust agreements shall not exceed five (5) years.
64. Under the provisions of the Carriage of Goods by Sea Act, claim has to be made for
the damage sustained by goods.
a. The claim should be made upon receipt when the damage or average could
be ascertained from the outside.
b. The claim should be made within twenty four (24) hours from receipt when
the damage or average could be ascertained from the outside.
c. The claim should be made within twenty four (24) hours from receipt when
the damage or average could be ascertained only upon opening the package.
d. The claim should be made within three (3) days from receipt when the
damage or average could be ascertained from the outside.
66. Which of the following conforms with the requirements of the Corporation Code?
67. The pre-emptive right if not denied by the corporation generally extends to all issues
of shares in proportion to a stockholder’s shareholdings. Even if not denied, the right
does not extend to certain specified issuances enumerated below. Which is the
exception?
68. The acquisition of shares and the declaration of cash dividends require that the
corporation has unrestricted retained earnings. The law also requires that shares
should not be issued below its par or issued value. These requirements is a
consequence of the.
69. The Board of Directors alone may declare the following type of dividends, except in
case of;
a. cash dividends
b. property dividends
c. stock dividends
d. script dividends
a. President
b. Vice-President
c. Treasurer
d. Secretary
71. In the following cases, the Trust Fund Doctrine is violated, except:
72. Which of the following are prohibited considerations for the issuance of stocks?
a. goodwill
b. past services
c. accounts receivables
d. None of the above
73. The following are remedies available to a corporation to enforce payment of stocks
except:
a. Mandamus
b. Extra-judicial sale
c. Withholding of stock dividends
d. Deduction from cash dividends
a. mining corporation
b. stock exchange
c. educational institution
d. All of the above
76. In the following instances, approval of the majority of the board and concurrence of
the stockholders representing 2/3 of the outstanding capital stock is necessary in the
exercise of the powers except:
a. friend
b. grandfather
c. spouse
78. All provisions and stipulations in insurance contracts are prepared by the Insurer,
thus they are:
a. pro-forma contracts
b. contracts of adhesion
c. unilateral contracts
a. the premium
b. the proceeds
c. gratuitous
82. If a thing insured under a fire insurance policy is lost or destroyed by some other
means other than fire, the policy remains compensable.
a. if the loss or destruction was a consequence of the effort to save the
thing insured from being burned;
b. if lost or destroyed because of volcanic lava
c. if lost or destroyed because of an earthquake
83. Insurable interest on the thing insured and insurance interest on the policy in
property insurance or non-life insurance must be reposed on one and the same
person:
84. A life insurance policy could no longer be questioned after two (2) years that the
policy had been in force counted from:
85. To be compensable, the thing insured under a fire insurance policy must be lost or
destroyed:
a. by a hostile fire
b. by a friendly fire
c. by voluntary scorching
86. A public enemy who cannot be the object of a life insurance contract is one:
87. It is a written statement by the master of vessel, attested by a proper judicial officer
or a notary, to the effect that damage suffered by the ship or her voyage was caused
by storms or other perils of the sea, without any negligence or misconduct on his
part.
a. Master’s Certificate
b. Bill of Lading
c. Affidavit of Desistance
d. Maritime Protest
e. Maritime Complaint
88. This established rule provides that the liability of the ship owner or agent, arising
from the operation of a ship, is limited to the vessel, equipment and freight during the
voyage.
89. This doctrine is a recognition by the courts that the fiduciary standards could not be
upheld where the fiduciary is acting for two entities with competing interests. It rests
on fundamentally on the unfairness of a corporate officer or director taking
advantage of a prospect for his own personal benefit when the interest of the
corporation justly needs protection.
90. It is a legal scheme whereby a debtor, who has sufficient assets but who may be
unable to meet his obligations as and when they fall due, may petition for more time
within which to settle such obligations.
a. Insolvency Proceedings
b. Suspension of Payments
c. Corporate Rehabilitation
d. Voluntary Insolvency
91. It is a business or service engaged in regularly supplying the public with some
commodity or service of public consequence such as electricity, gas, water,
transportation, telephone or telegraph service.
a. Public Service
b. Public Corporation
c. Public Utility
d. Commodities Trader
93. It is the substitution of one person in the place of another with reference to lawful
claim or right, so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or securities.
a. Assignment of Rights
b. Substitution of Creditors
c. Subrogation
94. Samsung invented a cellular phone that can also play digital music or MP3s. It
applied for the issuance of letters patent.
95. Lucky Me registered its trademark, “Ang Sarap Pancit Palabok” with the Intellectual
Property Office. Nissin subsequently introduced its new product, “Ang Sarap Pinoy
Ramen”. Lucky Me sued for trademark infringement.
96. Center Book Store is the publisher of the book Legal Journal. It donated one copy to
the Library of the U.E. College of Law. The Library, in order to preserve the original
book, reproduced one copy of the Journal for lending to the University’s students for
room use. Is the U.E. Law Library liable for copyright infringement.
97. The Credit Foundation of the Philippines is a non-stock corporation, which handles
deposit of funds from its members and lends the same funds to the general public. It
is composed of at least 100 natural persons, each of whom has deposited some
amount of money into the Foundation. It applied with the Bangko Sentral for authority
to organize itself into a bank. May the Foundation be granted the said authority?
a. Yes. It qualifies as a bank because its funds are obtained from more
than 20 persons.
b. Yes. The Bangko Sentral has the full discretion and expertise to grant
authorities to register as banking institution.
c. No. Only stock corporations can be organized as a bank.
d. No. The word “Philippines” as part of a corporate name is reserved for
government owned or controlled corporations.
98. Allan purchased 2005 Civic V-tech from Honda Cars Manila (HCM) for P950,000,
payable in twenty-four (24) monthly installments. Allan executed a promissory note
and a chattel mortgage to secure payment thereof. Allan failed to pay four (4)
installments. Thereafter, Allan sold the car to Magtanggol, a purchaser in good faith
and for value. What would be the effect of the sale on the chattel mortgage contract?
99. What is the so-called “Grandfather Rule” under the Corporation Code?
100. The following are the outstanding characteristics of an insurance contract EXCEPT:
a. It is an aleatory contract.
b. It is a contract of indemnity
c. It is a risk distributing device
d. All of the above
e. None of the above
ANSWER KEY IN COMMERCIAL LAW
1. D 49. D 97. D
2. B 50. C 98. B
3. D 51. C 99. B
4. D 52. C 100. E
5. D 53. B
6. A 54. B
7. A 55. C
8. C 56. C
9. D 57. A
10. C 58. B
11. B 59. A
12. B 60. D
13. C 61. D
14. B 62. D
15. A 63. B
16. B 64. C
17. C 65. B
18. D 66. D
19. C 67. C
20. C 68. C
21. D 69. C
22. B 70. B
23. D 71. D
24. D 72. D
25. B 73. A
26. D 74. D
27. D 75. D
28. D 76. B
29. C 77. C
30. B 78. B
31. D 79. A
32. B 80. B
33. C 81. B
34. D 82. A
35. D 83. A
36. D 84. C
37. D 85. A
38. A 86. C
39. D 87. D
40. D 88. C
41. D 89. D
42. D 90. B
43. A 91. C
44. D 92. C
45. A 93. C
46. C 94. D
47. A 95. D
48. B 96. C