FINAL PRE-BOARD EXAMINATION

Regulatory Framework for Business Transaction

Instruction: Choose the best answer for each the following items . Mark only one answer for each item
the special answer sheet provided strictly no erasure allowed.

1. Which of the following is not negotiable under the negotiable instrument law?
a. Pay to E or order P20,000. (Sgd. M)
To: A-accepted and payable 60 days from today
b. Pay to the order of JP20,000 (Sgd. E)
To: N- accepted for 10,000.
c. Pay to P or order P20,000 (Sgd. J)
To: C- accepted if P tops the CPA board exams.
d. Pay to T P10,000 30 days after sight (Sgd. G)
To: H- accepted payable on Oct. 27, 2014

2. One is not negotiable

a. A promises to pay to the order of P10,000 with 12% interest thereon where the period for
which interest is to be counted is not specified.
b. A promises to pay or order of B P1,000 in for monthly installment beginning June 12, 2016
with a provision that if A defaults in the payment of any installment the entire balance
including the unpaid installment shall become due and demandable
c. A promises to pay to the order of B the sum of US$1,000 payable in pesos at the rate of
exchange prevailing in January 1,2016
d. A promises to pay to the order of B P1,000 with an agreement to pay attorneys fees and
cost of collection

3. A promissory note reads

“I promise to pay B or order P100,000. Sgd. A”

B negotiated the note to C later, Y stole the note from C. Y indorsed the notr to D. which of the
following statement is correct?

a. If A pays D in good faith, A’s obligation is extinguished

b. D can collect from B
c. D cannot collect from A
d. D can collect from C

4. A promissory note reads:

“I promise to pay B P10,000. Sgd. A”

B assigned the note C. Later Y, stole the note from C. which of the following statement is
correct?
 a. If A pays to Y in good faith, A’s obligation is extinguished
b. C can collect from B
c. C can collect from either A or B
d. C can collect from A

5. Consider the two statement:

Statement 1 – an instrument originally payable to the order maybe converted into a bearer
instrument .
Statement 2 – an instrument originally payable to bearer maybe converted into an order
instrument
a. True, True B. False, false C. False, true d. True, false

6. Which of the following statement is correct?

a. If the maker is an infant, the promissory note is not negotiable
b. Love and affection can be a valid consideration
c. Indorsement of an infant transfer transfers title a negotiable instrument
d. Parties prior to the infant can escape liability by invoking such infancy

7. A promissory note reads:

“I promise to pay to the order of B P10,000 day after date”Sgd. A

A issued the promissory note to B who indorsed it to C. Then X stole the note from C, forged the
note from C and negotiated it to D and D to E and E to F, the holder.

Questions:

1. Can collect from A on maturity ?

2. If after giving the proper notice of dishonor to all the parties secondary liable can F collect
from B?

Answers:

1. Yes, because the signature of A is genuine and the instrument as regarded A was complete
and delivered
2. Yes, as an indorser B warrants that the instrument is genuine and that it is valid and
subsisting
a. Both answer are correct c. First is correct, second is wrong
b. Both answer is wrong d. First is wrong, Second is wrong

8. Using the preceding number

Questions:
1. Can F collect from C? 2. Against whom can F collect?

Answer :

1. No, because C’s signature or indorsement was forged therefore it is wholly inoperative
 2. F can collect from either D or E because their signature are genuine and the instrument
becomes operative against them.
a. Both answer are correct c. first is correct, second is wrong
b. Both answer are wrong d. first is wrong, second is correct

9. A delivers to B a promissory note payable to the order of B without the specifying the amount
but A authorized B to place the amount of P500 in the promissory note which was signed by A.
B, in violation of the instruction of A placed P5,000 as the amount payable. Later B indorsed the
note to C, the holder C
a. Can recover from either A or B
b. Cannot recover from either A or B, if he knows the defect
c. Cannot recover from A but can recover from B if he knows the defect
d. Cannot recover from A but can recover from B if he does not know the defect

10. A made a promissory note payable in the order of B. A delivered it to B who negotiated it to C. C
indorsed the note to D who is 16 years old D indorsed it to E who later indorsed it to F, the
holder, F presented the note to A who dishonored the instrument. Which is correct?
a. F can hold B and C liable but not D and E
b. F can hold D and E Liable but not B and C
c. D’s indorsement passes title to E and F making D liable as indorser
d. F can collect all the indorsers liable except D

11. One is not a condition to be a holder in due course

a. That it is complete and regular upon face
b. That he became the holder of it before it was overdue and without notice that it had been
previously dishonored if such was the fact
c. That at the time was negotiated to him it has no infirmity or defect in the title of the person
negotiating it
d. That he took it in good faith and for value

12. A issued a negotiable promissory note to B. there was a total failure of consideration. B indorsed
the note to C, holder in due course. C indorsed the note to D who knew of the failure of the
consideration Which is correct?
a. D may collect from A c. D may collect only from B
b. D may collect only from C d. D may collect from either B or C but not from
A

13. A is included though simple fraud (fraud in inducement) committed by B to issue a promissory
note in favor of B. B indorsed the note to C. C has noticed of fraud but did not take part from it.
C, indorsed the note to D, a holder in due course, D indorsed the note to E who knows how the
note was obtained but without being a party to the fraud. Which is correct? E is
a. Not a holder in due course and the defense of fraud in inducement can be set-up against
him
b. A holder in due course having derived his title from D, a holder in due course
 c. A holder in due course but he cannot recover from A because he knows how the note was
obtained
d. Not a holder in due course but has all right of such holder in respect of A, B and C having
derived his title from D

14. The note read as follows:

I Promise to pay B or order P200,000, 30 days after date. Sgd. A. the above proimissory note
issued by A to B on Feb. 8, 2016 for the lancer car sold by B to A. A few days later, Feb. 15,2016 ,
A was deprived of the car because it turned out to be a stolen car and the true owner was able
to recover it from A. On Feb. 25,2016 , B negotiated the promissory note to C Terms-50%
payable on Feb. 25, 2016 as agreed upon. On Feb. 27, 2016 , C learned the unlawful
consideration between A and B. Despite such knowledge, C paid the 100,000 balance on Feb. 28,
2016. On maturity of the instrument,
a. C can collect the P200,000 because he become the holder in due course prior to his
knowledge of the unlawful consideration
b. C cannot collect because he is only a holder for value and A has a personal defense
c. C is not a holder in due course but he is still can collect P200,000 from A because the note
was negotiated to him prior to his knowledge of the unlawful consideration
d. C can collect only the first P100,000

15. A makes a note payable to the order of B. the note is indorsed successively by B to C D to E to F
the present holder. Suppose the note is dishonored in the hands of F, which of the following is
correct?
a. If F gives notice only to D, the notice operates also a notice to E , a party subsequent to D
b. If D after having been given notice by F, gives notice to E, the effect would make E still liable
to the instrument
c. If F gives notice to E, E may notify B,C and D
d. If F gives notice to D, the notice operates to B and C

16. A makes a notes payable to B or order. The following are the indorsers of the note in the order
of their indoresement: B-C-D-F-(holder)-G (subsequent holder). The note is dishonored in the
hands of F by mere delivery. A did not pay. One is not correct?
a. Given by F to B, insures to the benefit of C,D,E and G
b. To C inures to the benefit of D, E and G
c. To D inures to the benefit of E and G
d. To E inures to the benefit of B,C,D and G

17. A makes an note payable to bearer and delivers to B. in turn, B negotiated by mere delivery to C
,
Who indorses it specially to D. D negotiates it by special indorsment to E, who neagotiates it to F
by mere delivery. A did not pay. One is not correct?
a. F may go after E, his immediate transferor
b. F cannot hold D liable because F did not acquire title through the indorsment of D
 c. D can hold c liable as C is not only his immediate transferor but he got his title through C’s
special indorsment
d. F can hold B liable because they are parties prior to F

18. When a bill of exchange is payable on demand, presentment must be made

a. On the days it falls due c. within a reasonable time after the issue
b. Before the maturity date d. within a reasonable time after the last indorsement thereof

19. This is not allowed

a. Pay to the order of A and B P10,000 c. Pay to the order of A and B P10,000
To C and D Sgd. E To C or D Sgd. E
b. Pay to the order of A or B P10,000 d. Pay to the order of A or B P10,000
To C and D Sgd. E To C Sgd. E

20. Statement 1- instrument falling due or becoming payable on Saturday are to be presented for
payment at the option of the holder, on the next succeeding business day or before 12:00 noon
on Saturday when the entire day is not a holiday
Statement 2- A waiver of protest, whether in the case of a foreign bill of exchange or other
negotiable instrument is deemed to be a waiver only of a formal protest and not presentment
and notice of dishonor
a. True, true b. false, true c. true, false d. false, false

21. The articles of incorporation differ from the by-laws in that the articles of incorporation are
a. The rules of action adopted by a corporation for its internal government
b. Adopted before or after incorporation
c. A condition precedent in the acquisition by a corporation of a juridical personality
d. Approved by the stockholders if adopted after the incorporation

22. If the remaining directors constitute a quorum they can fill up the vacancy
a. In the case of removal of a director c. if there is an increase in the number of
directors
b. In case of the expiration of term of a director d. in case of the resignation of a
director

23. A,B,C,D,E,F and G are the duly elected directors for 2016 of Delicious Corporation whose article
of incorporation provide for 7 directors. On August 1, 2016, Directors A,B,C,D and E meet to fill
the two vacancies in the board brought about by the valid removal of F for disloyalty to the
corporation and the death of G. In the said meeting, the remaining directors voted for X to
replace F and Y, a son of G, to replace his father. Both X and Y are owners of atleast one share
of stock of a corporation. The election of X and Y by the remaining directors
a. Valid for both X and Y C. Valid with respect to X, not valid with respect to Y
b. Not valid for X and Y d. Not valid with respect to X and valid with
respect to Y
24. In the meeting of the board of directors of Gold Corporation a construction company held on
March 31,2016 directors A,B,C,D and E were present among the 9 directors. The meeting had
for its agenda the following:
I. The appointment of the treasurer
II. The approval of the contract for the purchase of the cement worth P50,000
from X supplies Co.

When the voting take place, Directors A,B,C, and D voted for the election of Y as the new
treasurer , and directors A,B, and C voted for the approval of the contract with X supplies

a. Both corporate acts are valid

b. Both corporate acts are not valid
c. The election of Y as a new treasurer is valid, the approval of the contract with X supplies is
not valid
d. The election of Y as a new treasurer is not valid, the approval of the contract with X supplies
is valid

25. Stock dividends differ from cash dividend in that stock dividends
a. Do not increase the legal capital
b. Involves the disbursement of corporate funds
c. Require the approval of both the board of directors and the stockholders
d. Once received by the stockholders, are beyond the reach of corporate creditors

26. The board of directors of the corporation consist of nine (9) members where two (2) were
removed and two (2) have resigned, who fills up vacancy?
First answer—the remaining members of the board
Second answer – the stockholders
a. Both answer are true c. Only the first answer is true
b. Both answer are false d. Only the second answer is true

27. Using number 26, except that three (3) have resigned, who fills up the vacancy?
Firs answer—the remaining members of the board
Second answer—the stockholders
a. Both answer are true c. Only the first answer is true
b. Both answer are false d. Only the second answer is true

28. May rightfully question an ultra-vires acts of a corporation, except

a. Stockholders b. State c. Competitors d. Creditors, if fraud is charged

29. As regards treasury shares, which is not correct?

a. They have no voting rights as long as they remain in the treasury
b. They are considered as part of earned or surplus profits and therefore distributable as
dividends
c. They are not entitled to dividends
 d. They may be distributed as property dividend if there are retained earnings arising from the
business of the corporations.

30. A corporate officer or director cannot, take advantage for their personal benefit a business
opportunity which the corporation is financially able to undertake.
a. Doctrine of corporate fiction c. Doctrine of corporate opportunity
b. Trust fund doctrine d. Doctrine of limited capacity

31. The assets of the corporation as represented by its capital stock are to be maintained
unimpaired that there can be distribution of such assets among the stockholders without
provision being first made for the payment of corporate debts.
a. Doctrine of corporate fiction c. Doctrine of corporate opportunity
b. Trust fund doctrine d. Doctrine of limited capacity

32. The corporation shall be deemed dissolved and its corporate powers cease, if from the date of
its incorporation, it does not formally organize and commence the transaction of its business or
the construction of its works within
a. 4 years b. 3 years c. 2 years d. 5 years

33. A representative action where a stockholder brings an action in the name and in behalf of the
corporation and any relief obtained belongs to the corporation and not to the stockholders
individually or collectively
a. Individual suit b. Derivative suit c. Representative suit d. Corporate suit

34. A non-voting stock may vote in the following corporate acts, except in case of
a. Approval of the compensation of directors
b. Merger or consolidation
c. Increase or decrease in capital stock
d. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the
corporate property

35. One of the following acts maybe performed by the executive committee of a corporation. Which
is it?
a. Declaration of stock dividends
b. Filing of vacancies in the board of directors
c. Amendment or repeal of the by-laws or adoption of new by-laws
d. Approval of contracts in the ordinary course of business

36. A corporation may acquire its own shares for a legitimate purpose provided it has unrestricted
retained earnings. In which of the following acquisition is the requirement of unrestricted
earnings not imposed?
a. When the acquisition is made to eliminate fractional shares
b. When delinquent shares are acquired in a delinquency sale
 c. When redeemable shares are repurchased in accordance with the terms provided in the
articles of incorporation
d. When shares are acquired from stockholders who exercise their appraisal right

37. Statement 1- A corporation has the power to do all acts not expressly or impliedly prohibited
Statement 2- No person convicted by final judgment of violation of the Corporation Code,
regardless of the punishment imposed shall qualify as a director, trustee, or officer of any
corporation.
a. Both are true b. Both are false c. Only the first is true d. Only
the second is true

38. Statement 1- Where the capital stock is divided into par value shares and no par value shares,
the 25% subscriptions requirement shall be based on the amount of authorized capital stock in
case of par value shares and for no par value shares it is based on the entire number of
authorized no par value shares.
Statement 2- All persons who assumes to act as a Corporation knowing it to without authority to
do so shall be liable as general partners off all debts, liabilities and damages incurred or arising
as results thereof.
a. Both are true b. Both are false c. Only the first is true d. Only the second is true

39. Statement 1- The corporation secretary must be the director and a resident and citizen of the
Philippines.
Statement 2- The by-laws of a corporation may create an executive committee, composed of
not less than three (3) members to be appointed by the board of directors
a. Both are true b. Both are false c. Only the first one is true d. Only the second is true

40. Statement 1- The stockholders of a stock corporation have the power to declare dividends out
of the unrestricted retained earnings which shall be payable in cash, in property or in stock to all
stockholders on the basis of the outstanding shares held by them.
Statement 2- Cash dividends and stock dividends are declared by the board with the
concurrence of the stockholders representing at least 2/3 of the outstanding capital stock.
a. Both are true b. Both are false c. Only the first is true d. Only the second is true

41. A and B entered into a universal parstnership of all present property. At the time of their
agreement, A had a Four-door apartment which he inherited from his father 3 years earlier. B on
the other hand has a fishpond which he acquired in the dacion en pago from C. During the first
year of partnership, rentals collected on the four-door apartment amounted to 480,000; while
fish harvested from the fishpond where sold for P300,000. During the same period B received by
way of donation a vacant lot from an uncle. The partners had a stipulation that future property
shall belong to the partnership. Which of the following is not belong to the common fund of the
partnership?
a. Fishpond b. Rental of P480,000 c. Apartment d. Vacant land
42. A and B entered in to a universal partnership of profits, at the time of the execution of the
articles of partnership, A had a two-door apartment which he inherited from his father 3 years
earlier. B on the other hand, had a fleet of taxis which he purchased 2 years before. In the first
year of the partnership, A earned P500,000 as a radio talent while B won P100,000 in the lotto.
During the same period, rentals of P120,000 where collected from the apartment, while fair
revenues of P200,000 where realized from the operation of the fleet of taxis. Which of the
following belongs to the partnership?
a. Two-door apartment c. Salary of P500,000
b. Lotto winnings of P1,000,000 d. Fleet of taxis

43. A partnership whereby the partners contribute to a common fund all the property actually
belonging to them at the time of constitution of the partnership, with the intention of dividing
the same among themselves, as well as the profits which they may acquire therewith is.
a. Universal partnership of all present property c. Particular partnership
b. Universal partnership of profits d. Partnership at will

44. A, B and C, capitalist partners, each contributed P10,000 and D, the industrial partner
contributed his services. Suppose X is the creditor of the firm amounting to 90,000 after getting
the 30,000 capital assets of the partnership which is correct? X can recover
a. Php P20,000 each from A,B and C only
b. Php P60,000 From either A or B or C
c. Php P15,000 each from A,B,C and D
d. Php P15,000 each from A,B and C but D is exempt because he is an industrial partner.

45. A, B and C are partners. D is admitted as a new partner. Will D be liable for partnership
obligations contracted prior to his admission to the partnership?
a. No, only for those contracted after his admission
b. Yes, and his liability would extend to his own individual property
c. Yes, but his liability will extend only to his share in the partnership property and not to his
own individual property
d. Yes, as if he had been an original partner

46. A, B and C are capitalist partners, each contributed P10,000. After exhausting the assets of the
firm’s indebtedness amounts to P90,000. It was stipulated from liability. Which is correct?
a. A may recover his original capital of P10,000
b. The creditors may collect P30,000 each from A, B, and C
c. A can recover P20,000 each from B and C should he be required to pay the creditors
d. The creditors can recover P45,000 each from B and C

47. A and B orally agreed to form a partnership two years from today, each one to contribute
P1,000. If at the arrival of the period, one refuses to go ahead with the agreement, can the other
inforce the agreement?
a. Yes, because the partnership in the contract is not governed by the statute of frauds
b. Yes, because the prior agreement was voluntary made
 c. No, because the agreement merely oral and executory
d. No, since the agreement is to be enforced after one year from the making thereof, the same
should be in a public instrument to be enforceable

48. A, B, and C are partners each contributing P10,000, The firm’s indebtedness amounts to
P90,000. It was stipulated that A would be exempted from liability. Assuming that the capital of
P30,000 is still in the firm, which of the following is not correct?
a. The creditors may get the P30,000 and still collect each P20,000 from A, B and C
b. A can recover P10,000 each from B and C should He (A) be required to pay the creditors
c. A cannot recover his original capital of P10,000
d. The creditors can recover P45,000 each from B and C

49. Which of the following losses will not cause the dissolution of a partnership?
a. Loss before delivery of a specific thing which a partner had a promise to contribute to the
partnership
b. Loss of a specific thing after its delivery to and acquisition of its ownership by the
partnership from the partner who contributed the same
c. Loss after delivery of a specific thing where the partner contributed only its use and
enjoyment where such partner reserved the ownership thereof
d. Loss before delivery of a specific thing where the partner promise to contribute only its use
and enjoyment reserving the ownership thereof

50. A newly admitted general partner is liable to creditors existing at the time of his admission and
his liability is up to his
a. Capital contribution only if there is stipulation
b. Separate property even if there is stipulation
c. Capital contribution even if there is stipulation
d. Separate property only if there is stipulation

51. Using the preceding number, but the obligations where contracted after his admission, which of
the following is correct? He is
a. Liable to the creditors before after his admission up to his personal property
b. Liable to the creditors before and after his admission only up his capital contribution
c. Liable to the creditors before his admission up to his capital contribution and to the
creditors after his admission up to his separate property
d. Not liable to creditors existing before his admission

52. A and B are partners engaged in the real estate business. A learned that C was interested in
buying a certain parcel of land owned by the partnership[p, even for a higher price. Without
informing B of C’s offer A was able to convince B to sell him (A) his (B’s) share in the partnership.
Then A sold the land at a big profit. Which of the following is correct?
a. A is liable to B for the latter’s share in the profit
b. C is liable to B for the latter’s share in the profit
c. A new partnership is formed between A and C
 d. The sale of the land to C is void since it was without the knowledge of B

53. A and B are partners in a real estate business. A and B where approached by X who offered to
buy a parcel of land owned by the partnership. Thereafter B sold A, B’s share in the partnership.
Then A sold the land to X at a big profit. Which is correct?
a. The sale of the land to X is void c. B may rescind the contract between A and X
b. A is liable to B for B’s share in the profits d. A is not liable to B for any share in the profits

54. A, B and C are capitalist partners while D is an industrial partner. A the managing partners
engaged personally in a business that is the same as the business of the partnership without the
consent of the other partners. As a result,
a. If there are losses the partnership will bear the losses
b. If there are profits the profits will be shared by A and the partnership
c. If there are profits, A will give the profits to the partnership
d. A will be excluded from the partnership and will pay damages

55. A, a managing partner is B’s creditor to the amount of P1,000 already demandable. B also owes
the partnership P1,000 also demandable. A collects P1,000 from B. One is not correct.
a. If A gives a receipt for the partnership it is the partnership’s credit that has been collected
b. If A gives a receipt for his own credit, it is A’s credit that has been collected
c. If A gives a receipt for his own credit, P500 will be given to him P500 to the partnership
d. B may decide that he is paying only A’s credit if the personal credit of A is more onerous to
B.

56. A and B are equal partners AB Partnership by contributing P50,000 each of June 1, 2016. On July
1, 2016, the partnership contracted an obligation to pay Z the amount of P180,000 on August
31, 2016. On August 10, 2016, C was admitted as a new partner. C contributed P50,000. How
will the obligation be paid?
a. A P60,000; B P60,000; C P60,000 c. A P180,000; B P180,000; C P50,000
b. A P90,000; B P90,000; C None d. A P65,000; B P65,000; C P50,000

57. A, B and C are equal partners in ABC partnership. On April 29, 2016, C died. Not knowing that C
is dead, on May 2, 2016, A contracted a liability to D who also did not know about the death of
C. The liability is P90,000. After D exhausted the net assets of the partnership in the amount of
P60,00, he can collect
a. P30,000 from A or P30,000 from B
b. P15,000 from A and P15,000 from B
c. P10,000 from the estate of C, P10,000 from A and P10,000 from B
d. P30,000 from the estate of C or P30,000 from B or P30,000 from C

58. A, B and C are partners. Their contributions are as follows: A, P60,000; B P40,000 and C services.
The partners agreed to divide profits and losses in the following proportions: A, 35%; B, 25% and
C, 40%. If there is a losses of P10,000, how should said the said loss be shared by the partners?
a. A, P6,000; B, P4,000; C, nothing c. A, P3,500; B, P3,500; C, P3,000
 b. A, P3,000; B, P2,000; C, P5,000 d. A, P3,500; B, P2,500; C, P4,000

59. A, B and C are equal partners in ABC Partnership. The partnership is indebted to D for P150,000.
Partner A is indebted to E for P20,000. D attached and took all the assets of the partnership
amounting to P90,000. B and C are solvent while A is insolvent and that he owns is land valued
at P15,000. Which is correct?
a. E has priority to the land of A as separate creditor
b. D has priority to the land of A to cover A’s share of the P60,000 remaining liability of the
partnership
c. B and C have priority to the land of A if they paid D the P60,000 remaining liability of the
partnership
d. D and E shall both have priority to the land of A in proportion of their claim of P60,000 and
P20,000 respectively

60. A, B and C are partners. A is an industrial partner. During the first year of operation the firm
realized a profit of P60,000. During the second year, the firm sustained a loss of P30,000. So the
net profit for the two years of the operation was only P30,000. In the articles of Partnership, it
was agreed that A, the industrial partner would get 1?3 of the profit but would not share in the
losses. How much will A, the industrial partner get? A will
a. Get only P20,000 which is 1/3 of the profit of the 1st year of operation
b. Get only P10,000 which is 1/3 of the net profit
c. Get only P20,000 in the first year and none in the second year
d. Share in the loss in the second year

61. S a minor, sold her bracelet to B for P8,000. Later B, needing money to pay her daughter’s
tuition fee, borrowed P15,000 from C and a security, pledged the bracelet to the latter. B failed
to Pay C resulting in to the auction sale of the bracelet in favor of D for P10,000 only. Which of
the following statement is correct?
a. The title of B over the bracelet is not valid, hence the pledge as well as the sale of said
bracelet is likewise defective. The pledger must be the owner of the thing pledged
b. The deficiency of P5,000 may still be recovered by C from B if there is a stipulation to this
effect
c. C can no longer recover the deficiency of P5,000 from B. The pledged together with the sale
is valid. The voidable title of B is valid because it is not yet annulled
d. If D was a purchaser in bad faith as he knew the defective title of B over the bracelet from S,
ownership will not pass to him (D)

62. In the preceding number, assuming what was executed by B in favor of C was a valid chattel
mortgage which was eventually forclosed and the bracelet was sold to d at the public auction for
the same amount, which is statement is correct?
a. The title of B over the bracelet is not valid, hence the chattel mortgage, as well as the sale of
said bracelet is likewise defective. The mortgagor must be the owner of the thong
mortgaged
b. The deficiency of P5,000 may still be recovered by c from B
 c. C can no longer recover the deficiency of P5,000 from B as the mortgage, together with the
foreclosure sale, was valid. The title of B was still valid
d. If D was a purchaser in bad faith as he knew of the defective title of B over the bracelet,
ownership will not pass to him (D)

63. S sold to B a specific car for P200,000 payable in four equal installments. S delivered the car to B
but required B to mortgage it back to S to answer for the unpaid installments. B paid the 1st and
2nd installments but he failed to pay the balance. S foreclosed the mortgaged property and sold
it at public auction for P80,000. As a result,
a. S can recover from B the balance of P20,000
b. S can recover from B the balance of P20,000 if there is a stipulation to that effect
c. S cannot recover the deficiency any more even if there is stipulation to that effect
d. S cannot recover the deficiency except if there is stipulation

64. Which of the following is not correct as regards pledged and mortgaged
a. The creditors can foreclose the things pledged or mortgage in case of non-payment of the
obligation
b. The things pledged or mortgaged are delivered to the creditors to secure the fulfillment of
the obligation
c. In case of default, the creditors cannot appropriate the thing pledged or mortgage even if
stipulated
d. A pledge or mortgage cannot exist without a valid obligation

65. In real estate mortgage, the mortgagor can sell the property mortgaged
a. Only if with the oral consent of the mortgage
b. Only if with the written consent of the mortgagee
c. if not prohibited to sell
d. Even without the consent of the mortgagee

66. Which of the following statement I true?

a. Any stipulation in a contract of pledge authorizing the pledge to sell the thing pledge if the
pledger cannot pay is void
b. In mortgage, the mortgagee is entitled to the entire proceeds of the sale of the thing
mortgaged
c. In mortgage and in pacto de retro sale, the title of the property which is the subject matter
of the contract is transferred to the other party
d. Real estate mortgage is an accessory contract

67. A mortgaged his residential land to B as a guarantee for the payment of P400,000 obligations to
B. they agreed that A should not sell the land while the obligation exists. Before the maturity of
the mortgage, C offered to buy the land from A. Which is correct?
a. A cannot sell the land to C because of the agreement not to sell
b. A can sell the land to C only if B consents in writing
c. A can sell the land to C despite the agreement not to sell
 d. A cannot sell the land to C unless A pays the obligation
68. Statement 1- the sale of the thing pledged shall extinguished the principal obligation provided
the proceeds of the sale are equal to the amount of the principal obligation
Statement 2- if the price of the sale is more than the amount of the obligation, the debtor shall
be entitled to the excess, unless it is otherwise agreed
a. Both are true b. Both are false c. Only the first is true d. Only the second is true

69. Statement 1- if the price of the sale is less than the amount of the obligation the creditor shall
not be entitled to recover the deficiency except if there is a stipulation to the country
Statement 2- if two or more things are pledged, the pledger may choose which he will cause to
be sold, unless there is a stipulation to the contrary
a. Both are true b. Both are false c. Only the first is true d. Only the second is true

70. Statement 1- In sale at public auction, the pledger or owner may be a bidder and shall have a
better right if he should offer the same terms as the highest bidder
Statement 2- Pledge is a real contract.
a. Both are true b. Both are false c. Only the first is true d. Only the second is true

71. Which of the following is correct?

a. A contract of agency must be in writing to be a valid agreement
b. A sale of personal property made by an agent without authority from the owner is void
c. A sale of a piece of land made by an agent with the oral authority from the owner is void
d. An un-emancipated minor cannot be appointed as agent

72. In which of the following act may a person not appoint as agent?
a. To represent the principal in a wedding ceremony where the principal is a principal sponsor
b. To vote for the principal during the meetings of stockholders where the principal is a
stockholder
c. To represents the principal in a baptismal ceremony where the principal is the father of the
child to be baptized
d. To attend a meeting of a board of directors of a corporation where the principal is a director

73. To improve the financial condition of his principal, an agent with general powers of
administration given to him by the principal in writing, sold two parcel of land, one for less than
the price appearing in the inventory prepared by the principal and the other for the double the
price that appeared in the aforesaid inventory. Which is correct?
a. Both contracts cannot be enforced against the principal
b. Both contracts are binding upon the principal
c. The sale for double the price appearing in the inventory is binding upon the principal
d. The sale for less than the price appearing in the inventory is binding upon the principal

74. A offered to sell for P12,000,000 her house and lot to B who was interested in buying the same.
In her letter to B, A stated that she is giving B a period of one month within which to raise the
amount and that soon as B is ready, they will sign the dead of sale. Five days before the
 expiration of the one month period. A went to B and told her that she is no longer willing to sell
the property unless the price is increased to P15,000,000. Which is correct?
a. B may compel A to accept the P12,000,000 first offered
b. A may compel B to pay P15,000,000
c. A and B should shoulder the P3,000,000 difference
d. B cannot compel A to accept the P12,000,000 first offered

75. A, 17 years old, sold to B of legal age, her necklace worth P20,000 for P15,000. Later, B sold the
necklace to C for P20,000. Which of the following statement is correct?
a. A has got a voidable title because at the time of sale, she is a minor
b. A can ask for rescission of the sale to C because she suffered lesion of more than ¼ of the
value of the property
c. If C is in bad faith, C becomes the owner of the necklace upon delivery to him but his title is
voidable
d. A can ask for the annulment of the sale to C because at the time of sale she is a minor.

76. Goods are deemed in transit

a. When the buyer accepts delivery of the goods upon arrival at destination
b. When the buyer intercepts and lawfully takes possession of the goods at any point before
destination
c. From the time they are delivered by the seller to a common carrier or other bailee for
transmission to the buyer, up to the time that the buyer or his agent takes delivery of the
goods from the carrier or bailee.
d. When the carrier or bailee, upon arrival of the goods at destination acknowledges to the
buyer or his agent that he is holding the goods as bailee for the letter

77. Good are deemed no longer in transit

a. If the goods are rejected by the buyer for a valid reason and the carrier or other bailee
continues in possession of them, even if the seller has refused to receive them back
b. From the time they are delivered to a carrier by land, water or air for the purpose of
transmission to the buyer
c. From the time they are delivered to a bailee for the purpose of transmission to the buyer
until the buyer or his agent in that behalf, takes delivery of them from such bailee
d. If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer of his agent
in that behalf

78. This serves as a proof of the perfection of the contract of sale

a. Dacion en pago b. Option money c. Delivery d. Arras

79. Emptio spei as distinguished from emptio rei speratae

a. Sale of a future thing c. Its quantity and quality are unknown
b. Should come into existence d. Sale of a present thing

80. This is not an essential element of a contract of sale

a. Subject matter which should be determinate
b. Consent of the contracting parties
c. Warranty against eviction
d. Consideration which is certain in money or its equivalent