Lanzuela, Hanzel

Lapiz, Sharlene May

Lee, Mei Yin
Lopez, Benhur
Macarembang, Hanan

CPAR

Obligations

1. 1st Statement: In alternative obligations, it is the communication of which prestation to perform made by the
debtor shall convert the alternative obligation into a pure or simple one.
2nd Statement: In case of a joint obligation, the co-debtors may be held liable for the share of an insolvent co-
debtor
A. B. C. D.
1st Statement True False True False
2nd Statement True False False True

2. A mango tree in the land of O is reclining towards the road. All of a sudden, without a storm or an earthquake or
even strong wind, the tree falls hitting a car belonging to X causing a P200,000 damage. The liability of O to X
arises from
A. Contract C. Delict
B. Quasi-contract D. Quasi-delict

3. S agreed to sell B his land and B agreed to pay P10,000 if X will pass CPA Exams of 2002. X passed.
Meantime, interest earned is P1,200, while the fruits harvested is P2,000.
A. S will deliver the land to B
B. B will pay S the price of the sale
C. Combination of A and B
D. Combination of A and B, together with the fruits and interest

4. The buyer has the right to the fruits of the thing from:
A. Time of delivery C. Time contract of sale is perfected
B. Time of obligation to deliver it arises D. Time fruits are delivered

5. The delay of the part of the creditor to accept the performance of an obligation
A. Dolo incidente C. Dolo causante
B. Mora accipiendi D. Mora solvendi

6. Rose obliges herself to give Jack 1 dozen of eggs on January 15, 2003. When the date arrived, Rose failed to
deliver despite repeated demands from Jack. Jack’s remedy is:
A. Compel Rose to deliver the eggs plus damages.
B. Compel Rose to pay the amount of the eggs.
C. Rescind the contract.
D. Ask a 3rd person to deliver the eggs to him but chargeable to Rose.

7. Debtor obliged himself to deliver to creditor 100 cavans of rice on June 1, 2001. On said date, D failed to make
delivery despite repeated demands by C. In this case:
A. C has no remedy under the law
B. C can compel D to deliver 100 cavans of rice plus damages
 C. C may ask a third person to deliver 100 cavans of rice to him, the value recoverable from
D plus damages
D. None of the above.

8. D obliges himself to pay C P100,000 in 30 days plus a penalty of P20,000 if A fails to pay the obligation in due
time. D failed to pay his obligation in 30 days. C can demand from D
A. The principal amount of P100,000 plus the penalty of P20,000 plus interest.
B. The principal amount of P100,000 plus legal interest.
C. The principal amount of P100,000 plus the penalty of P20,000, plus interest, plus damages.
D. The principal amount of P100,000 plus the penalty of P20,000.

9. Paula obliged herself to give to Cathy her BMW car on October 10, 2004 but she failed to deliver on that date.
On the following day, a lighting completely destroyed the car.
A. Paula is still liable for she is in default already.
B. Paula is no longer liable there being no demand, there is no delay and the thing is lost due to fortuitous
event
C. Cathy can demand for a substitute.
D. Paula is not liable even if she is in default.

10. Statement 1: Just before the obligation became due and demandable, the debtor proposed to the creditor that
he would give him a specific car instead of paying P150, 000.00, and which proposal was accepted by the
creditor. Here, there is extinguishment of an obligation by way of dacion en pago.
Statement 2: After substitution in facultative obligations, the loss of the principal through the fault or negligence
of the debtor shall render him liable for damages in favor of the creditor.
A. B. C. D.
Statement 1 True False True False
Statement 2 True False False True

11. The buyer has the right to the fruits of the thing from:
A. Time of delivery C. Time contract of sale is perfected
B. Time of obligation to deliver it arises D. Time fruits are delivered

12. Which of the following is not a ground for damages?

A. Promising to deliver the same thing to two different persons not having the same interest therein.
B. Performance of an act which impairs the strict and faithful fulfillment of the obligation.
C. Non-performance of an obligation with respect to time.
D. None of the above.

13. The standard of care that a person obliged to give something must observe in the preservation of the specific
thing subject matter of an obligation.
A. That diligence of a good father of a family
B. That diligence which the parties have stipulated on
C. That diligence which the law provides
D. All of the above

14. The initial standard of care that a person is obliged to give something must observe in the preservation of the
specific thing subject matter of an obligation.
A. That diligence of a good father of a family.
B. That diligence which the parties have stipulated on.
 C. That diligence which the law provides.
D. None of the above.

15. 1st Statement: Mr. X waived in advance his right to sue Mr. A, if A will cause him injury due to A’s negligence.
The waiver is void.
2nd Statement: Dolo incidente or fraud in the celebration of contacts is a ground to annul the obligation.
A. B. C. D.
1 Statement
st
True False True False
2nd Statement True False False True

8. A promissory note signed by D and dated March 15, 2002 is worded as follows, “I promise to pay C the sum
of Fifty Thousand Pesos (P50,000) provided that if she should fail in the October, 2002 CPA Examination, she
shall return to me said amount.” The above note gives rise to an obligation with
A. Suspensive condition C. Resolutory condition
B. Casual condition D. None of the above

16. DR promised to give DE, his grandson, a car if the latter will pass the bar examinations. When his grandson
passed the said examinations, which of the following statements is true?
A. DR may refuse to deliver because the condition is purely a potestative one.
B. The obligation is valid because the condition depends upon the sole will of the donor.
C. Both the obligation and the condition are ineffective because they depend upon the sole will of the donor.
D. The obligation is valid although potestative because they depend upon the sole will of the donee.

17. “Conrado will continue giving Pedro the latter’s meal allowance until the end of this year”, is an obligation subject
to:
A. a resolutory period C. a resolutory condition
B. a suspensive condition D. a suspensive period

18. Which of the following is not an obligation with a period?

A. Obligation payable within 2 years
B. Obligation payable within a reasonable time
C. Obligation payable on or before a given date in the future
D. None of the above

19. 1st Statement: “To Maria, my true love, I obliged myself to give you my one and only horse when I feel like it.
2nd Statement: “To Perla my true sweetheart, I obliged myself to pay you the P500.00 I owe you when I feel like
it.
A. B. C. D.
1st Statement Void Valid Void Valid
2nd Statement Void Valid Valid Void

20. 1st Statement: “To Maria, my true love, I obliged myself to give you my one and only horse when I feel like it.
2nd Statement: “To Perla my true sweetheart, I obliged myself to pay you the P500.00 I owe you when I feel like
it.
A. B. C. D.
1st Statement Enforceable Not Enforceable Enforceable Not Enforceable
2nd Statement Enforceable Not Enforceable Not Enforceable Enforceable
21. On July 1, 1997, A signs a promissory note and binds himself to pay X P100,000 plus 15% per annum interest
on June 30, 1999
A. Before June 30, 1999. X can demand payment
B. If on June 30, 1998 A is paying X, X cannot refuse the payment
C. Because the period is for the benefit of the debtor A can compel creditor X to accept payment any date
before June 30, 1999
D. Because the period is for the benefit of the debtor and creditor, X can refuse any tendered payment before
June 30, 1999.
22. D obliged to give C, either object No.1 valued P15,000 or object No. 2 valued P10,000; or object No. 3 valued
P5,000. All the objects were lost due to D’s fault in the following order stated.
A. D’s obligation is extinguished
B. D’s obligation is to pay the value of object No.1 plus damages
C. C’s right id to demand the value of any of the object plus damages
D. None of the above

23. A obliged himself to deliver to B his dog, his cow, his carabao, his elephant or his crocodile and gave B the right
of choice. The first two were lost due to fortuitous event and the last three were lost due to A’s fault.
A. Creditor, B may convert to cash any of them plus damages.
B. Debtor A may convert to cash the value of the last one lost plus damages.
C. A may rescind the contract plus damages.
D. Creditor, B may convert to cash any of the last three plus damages.

24. Effect of the loss of the thing in a facultative obligation. Which is incorrect?
A. Before substitution: if the principal thing is lost due to fortuitous event, there is no more obligation.
B. Before substitution: if the substitute thing is lost due to debtor's fault, there is no more obligation.
C. After substitution, if the principal thing is lost, the debtor is no longer liable even if it was lost due to his fault.
D. None of the above

25. Debtor’s A, B, C and D are liable to creditors E, F, G and H in the amount of P200,000. Assuming passive
solidarity exists among A, B, C and D, how much can E and F collect from A?
A. P 50,000 C. P150,000
B. P100,000 D. P200,000

26. Debtor’s A, B, C and D are liable to creditors E, F, G and H in the amount of P400,000. Assuming passive
solidarity exists among A, B, C and D, how much can E and F collect from A?
A. P100,000 C. P350,000
B. P200,000 D. P400,000

27. A, B and C are solidary debtors of X for 9,000. Later, C paid X the whole obligation. Which of the following is
considered a false statement as to the effects of C paying X the whole obligation
A. C becomes a creditor for reimbursement
B. After C paid X the whole obligation, the same is converted into a joint obligation of reimbursement
C. If the debtor A becomes insolvent C can collect from B P6,000
D. None of the above

28. Which of the following is not a valid stipulation?

A. A stipulation that the mortgagor cannot enter into a second mortgage without the consent of the first
mortgagee and such violation will make the obligation due and demandable
B. A stipulation in chattel mortgage on installment sale where the object sold is mortgaged back to the seller to
answer for the unpaid installments or upon failure to pay any installment due, all installment shall become
due and payable, the mortgagee is given the right to foreclose and sell the property at public auction to
 recover the unpaid balance.
C. A stipulation in a mortgage or real property authorizing the mortgagee to have the mortgaged property sold
without the necessity of an action in court.
D. None of the above.

29. Which of the following obligation is void?

A. Obligation payable within a reasonable time
B. Obligation payable if the debtor cannot make a circle at the same time a square
C. Obligation payable of the debtor cannot make a dead man alive
D. None of the above

30. “ I will give you this book provided that if I like to have it back, you will return the same to me”
A. The obligation is void, because the fulfillment depends upon the will of the debtor
B. The obligation is void, because the fulfillment depends upon the will of the creditor
C. The obligation is valid because the condition merely causes the loss of rights already acquired
D. Combination of A and B

31. Statement 1: In alternative obligations, it is the communication of which pre-station to perform made by the
debtor shall convert the alternative obligation into a pure or simple one.
Statement 2: In case of a joint obligation, the co-debtors may be held liable for the share of an insolvent co-
debtor.
A. B. C. D.
Statement 1 True False True False
Statement 2 True False False True

32. Which of the following is not a ground for the extinguishment of an obligation?
A. Remission D. Death of either debtor or creditor
B. Merger E. None of the above
C. Compensation

33. Which of the following is not a ground for the extinguishment of an obligation?
A. Remission D. Death of either debtor or creditor
B. Merger E. None of the above
C. Compensation

34. This is a classification of obligations where there are several prestations due and the complete performance of
all shall extinguish the obligation. Identify this.
A. Facultative obligation. C. Alternative obligation.
B. Conjoint/conjunctive obligation. D. Obligation with a penal clause.

35. A owes B P5,000. C is the guarantor of A. A was able to pay B P3,000, thus leaving P2,000 unpaid. X, against
the will of A and without the knowledge of the partial payment made by A, paid B the sum of P5,000. How does
this payment affect the obligation?
A. The obligation is extinguished. X, however, cannot recover any amount from A since the payment was
made against will of A. Instead, A can demand payment from C, the guarantor to the amount of P5,000.
B. The obligation is extinguished. X however, can demand only P2,000 from A as this is the amount which
benefited A. Instead, A can demand payment from C, the guarantor, to the amount of P5,000.
C. The obligation is extinguished. X can demand P2,000 from A, but if A cannot pay, X cannot ordinarily
proceed against guarantor C because having paid against the will of A, X is not entitled to subrogation
 D. X’s payment, having been made against the will of A does not extinguish the obligation.

36. After many of years of shopping in the Metro Manila area, housewife HW has developed the sound habit of
making cash purchases only, none on credit. In one shopping trip to Mega Mall, she got the shock of her
shopping life for the first time, a store’s smart salesgirl refused to accept her coins in payment for a purchase
worth not more than one hundred pesos. HW was paying seventy pesos in 25-centavo coins and twenty fives
pesos in 10-centavo coins. Strange as it may seem, the salesgirl told HW that her coins were not “legal tender”.
Do you agree with the salesgirl in respect for the 10-centavo coins and 25-centavo coins the legal tender is up to
P50.00 only.
1st Statement: No, because for the 10-centavo coins and 25-centavo coins the legal tender is up to P50.00 only
2nd Statement: All coins issued by the Central Bank in any amount are considered legal tender.
A. B. C. D.
1 Statement
ST
True False True False
2nd Statement True False False True

37. Requisites of application of payment, except

A. Debts are all due C. Two or more debts
B. Debts are of different kinds D. One debtor and one creditor

38. When the debtor abandons and assigns all his properties in favor of his creditors for the latter to sell and satisfy
their credits, this is:
A. Application of payment C. Dacion en pago
B. Assignment in favor of creditors D. Expromission

10. When the debtor abandons and assigns all his properties in favor of his creditors for the latter to sell and
satisfy their credits, this is:
A. Payment by cession C. Dacio en pago
B. Application of payment D. Expromission

39. When the debtor’s property are not enough at the moment to pay all his debt in full. This conditions is called:
A. Antichresis C. insolvency
B. Pactu commissorio D. suspension of payment

40. Insolvency of the debtor is required in:

A. Dation in payment C. Tender of payment and consignation
B. Payment by cession D. Application of payment

41. A obliged himself to deliver to B his 7650 Nokia cellphone or as a substitute he may deliver his cute kitten. After
substitution was made, the former was lost due to A’s fault.
A. A is liable and must pay damages.
B. A will simply deliver his cute kitten plus damages for the loss of the cellphone.
C. The loss has no effect to the obligation.
D. Obligation was extinguished.

42. D owes C P10,000 payable on December 25, while C owes D P10,000 payable on December 30. In here, C can
set up compensation (or cum pondere) on December 25, and this is called:
A. Legal C. Judicial or “set-off”
B. Partial D. Facultative
43. 1st Statement: D owes C P10,000 due on December 25, C owes D P6,000 on December 25. D’s obligation is
guaranteed by G. On the due date if D is insolvent G is liable to C for P10,000, the latter (G) cannot set up
compensation because he is not a principal debtor.
2nd Statement: D owes C P10,000 payable on December 25. Later, D through intimidation, was able to make C
sign a promissory note stating that C is indebted to D for the same amount. In here, D cannot be required to pay
C P10,000 because he (D) can set up compensation against C.
A. B. C. D.
1 Statement
st
True False True False
2nd Statement True False False True

44. When the third person assumes the payment of the obligation without the knowledge or against the will of the
debtor but with the consent of the creditor, there is
A. Delegacion C. Subrogation
B. Expromission D. Novation

Effect of New Debtor’s Insolvency or Nonfullment of the Obligation in Expromision

45. A owes B – P10,000. Without the consent of A, B agreed with C’s proposal (C is suitor of A) to answer for A’s
obligation for which A vehemently objected to but could not do anything. The following week all of C’s properties
were destroyed by fire, hence he could no longer pay the P10,000 obligation.
A. A’s obligation is revived. C. A must answer for ½ of the obligation.
B. A’s obligation is not revived. D. B cannot collect at all.
46. Which of the following is not a special mode of payment?
A. Tender of payment C. Dacion en pago
B. Cession D. None of the above

47. Which does not result in the extinguishment of obligations?

A. Rescission. C. Arrival of resolutory period.
B. Happening of suspensive condition. D. Compromise.

48. Which statement is correct about extinguishment of obligation?

A. Condonation is generally gratuitous.
B. Prescription is a primary mode of extinguishing an obligation.
C. Agency wherein novation is effected must be in writing and thru a Special Power of Attorney.
D. Confusion or merger rights may occur in the person of a guarantor.

49. Statement 1: "I promise to pay within 2 years" is an obligation with a period, the creditor having a right to
demand payment within 2 years from the date of the instrument.
Statement 2: Ten sacks of corn cannot be compensated (legal compensation) by ten sacks of rice.
A. B. C. D.
Statement 1 True False True False
Statement 2 True False False True

50. 1st Statement: The creditor may be compelled to accept payment in checks as long as the check is negotiable
2nd Statement: An obligation payable “should the client die of diabetes” is an obligation subject to a period
A. B. C. D.
1st Statement True False True False
2nd Statement True False False True
Contracts

1. Which of the following is not a valid stipulation?

A. A stipulation that the mortgagor cannot enter into a second mortgage without the consent of the first
mortgagee and such violation will make the obligation due and demandable
B. A stipulation in chattel mortgage on installment sale where the object sold is mortgaged back to the seller to
answer for the unpaid installments or upon failure to pay any installment due, all installment shall become
due and payable, the mortgagee is given the right to foreclose and sell the property at public auction to
recover the unpaid balance.
C. A stipulation in a mortgage or real property authorizing the mortgagee to have the mortgaged property sold
without the necessity of an action in court.
D. None of the above.

2. Neither an essential nor accidental element of a contract

A. Cause or consideration C. Warranty against eviction
B. Consent D. Penal cause in a contract

3. Neither an essential nor natural element of a contract

A. Cause or consideration C. Warranty against eviction
B. Consent D. Penal cause in a contract

4. “Contracts must bind both parties and their efficacy or validity cannot be left to the sole will of any one of them.”
A. Freedom or liberty of contracts C. Relativity of Contracts
B. Consensual nature of contracts D. Mutuality of Contracts

5. 1st Statement: A threat to enforce one’s claim through competent authority, if the claim is just or legal, does not
vitiate consent
2nd Statement: Contracts entered into during a lucid interval are valid. Contracts agree to in a state of
drunkenness or during a hypnotic spell are binding
A. B. C. D.
1st Statement True False True False
2nd Statement True False False True

6. Which of the following contracts is enforceable even if not reduced in writing.

A. Representation as to the credit of a third person
B. Agreement for the sale of immovable property
C. Contract executed by one of the parties in a contract
D. Lease of immovable for a period longer than one year

7. In a contract, as written, D promises to pay C P10,000 on September 15, 1997. The consideration received by D
is not stated in the contract.
A. The contract is valid because the cause is always presumed to exist
B. The contract is valid so long as it is in writing
C. The contract is valid because cause is not essential to a contract
D. The contract is void because cause is not stated

8. D is indebted to C in the sum of P10,000. For the purpose of avoiding the claims of C, D donated all his
properties worth the same amount to X.
A. The contract is absolutely simulated C. The contract is merely voidable
B. The contract is rescissible D. The contract is void
9. In which case is the right of rescission not available?
A. The ability to restore what he has received by virtue of the contract.
B. The property must have passed to the hands of a third person who bought the same in good faith and for
value.
C. Bought within the proper prescriptive period.
D. None of the above.

10. In three of the following defective contracts, ratification cleanses the defects. Which is not susceptible of
ratification?
A. Both parties are incapable of giving consent
B. Sale of land thru an agent where the authority is orally given
C. Sale of immovable or any interest therein orally entered into
D. Contracts entered into by a person who has been given no authority

11. One is a void and inexistent contract.

A. Those which are absolutely simulated or fictitious.
B. Those which are outside the commerce of man.
C. Those contrary to law.
D. Those which contemplate an impossible service.

14. The following, except one, are void or inexistent contracts.

A. Those which are absolutely simulated for fictitious.
B. Those which are outside the commerce of man.
C. Those whose cause or object did not exist at the time of transaction.
D. Those which contemplate a very difficult service.

12. The following, except one, are void or inexistent contracts. Which is it?
A. Those which are absolutely simulated or fictitious.
B. Those which are outside the commerce of man.
C. Those whose cause or object did not exist at the time of transaction.
D. Those which contemplate a possible service.

13. A, a person of legal age and an agent of X, sold 10 grams of shabu to B who is a minor of 16 years. The shabu
was sold for P600 which is actually less than its actual market value of P1,000 thereby incurring a loss of P400
on the part of X. Worse, the contract of sale was not reduced into writing. What is the status of the contract?
A. The contract of sale is voidable because one party is a minor.
B. The contract is rescissible because of lesion.
C. The contract is unenforceable considering it was orally done.
D. The contract is void.
14. “Mutual promise to marry” between would-be husband and wife, orally entered into is
A. A validable contract C. Unenforceable contract
B. A void contract D. None of the above

15. Which of the following is the most defective contract among the following?
A. A and B both minor entered into a contract of sale involving chocolate worth P400.
B. Contract of sale wherein a car worth P1M is contributed but not reduced in a public instrument.
C. A contract of sale wherein one party sold to the other his hereditary rights under the pain of being raped.
D. A compromised agreement between two government officials to settle an ANTI-GRAFT CASE
16. Which is the most defective contract among the following?
a. A & B, both minors entered into a contract of sale involving chocolate worth P400.
b. Contract of partnership wherein a car worth P1M is contributed but not reduced in a public instrument.
c. A contract of sale wherein one party sold to the other his hereditary rights under the pain of being raped.
d. A compromise between Senator Lacson and Pre. GMA to hide the evidence against Jose Pidal, to achieve
peace and reconciliation for the country.

17. S agreed to sell B 100 cases of napkins with the name of B’s restaurant on the napkins. In the enforceable
contract, it was specified that delivery will take place on April 15, 2000 which is one (1) month after S and B
signed the contract. B wanted the napkins by April 15 because the grand opening of the restaurant was
scheduled for April 17. On April 11, S tells B that the has too many orders and will not be able to deliver the
napkins. What options does B have?
I. Treat it as a present breach of contract and cancel the contract
II. Wait for a reasonable time to see if S will deliver
III. Ask a third person to perform the obligation at the expense of S but no damages
A. I only C. Either I or II
B. II only D. Either I or II or III

18. 1st Example: The husband by intimidation, was able to obtain the consent of his wife, with regards to the sale of
a piece of land belonging to the wife for P1M. The contract is voidable because there was intimidation
2nd Example: In the above example, the right of the wife is to go to court and file a motion for annulment within
four (4) years from the time intimidation ceased
A. B. C. D.
1st Example True False True False
2nd Example True False False True

19. 1st Statement: The defense that a contract is unenforceable is subject to prescription.
2nd Statement: In solution indebiti the contract violated is the premature payment of the obligation.
A. B. C. D.
1 Statement
st
True False True False
2nd Statement True False False True

20. 1st Statement: The guardian sold to a minor his car for P200,000 although its FMV is P400,000 or ½ lesion.
2nd Statement: A lawyer purchased the property of his friend’s client pending litigation in the court where both
lawyers are practicing for P700,000 but with a FMV of P1,000,000. The contracts are:
A. B. C. D.
1st Statement Valid Rescissible Void Voidable
2nd Statement Valid Void Void Valid

4. 1st Statement: A contract whose cause or object did not exist at the time of the transaction is a detective
contract which cannot be remedied by providing a cause or object as the case may be in the contract.
2nd Statement: The nullity of the accessory obligation of the penal clause does not carry with it the nullity of the
principal obligation which remains in force and demandable. Determine whether
A. B. C. D.
1 Statement
st
True True False False
2nd Statement True False True False

21. When the object of the contract is outside the commerce of man, the contract is:
 a. Rescissible
b. Voidable
c. Unenforceable
d. Void
22. Which of the following is not a rule in the interpretation of contracts?
a. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing
that import which is most adequate to render the contracts effectual.
b. Word which may have different significations shall be understood in that which is most in keeping with the
nature and object to the contract.
c. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts
shall be principally considered.
d. Although the cause is not stated in the contact, it is presumed that it exists and is lawful, unless the
debtor proves the contrary.

23. Contracts are effective and binding only between the parties, their assigns and their heirs. Three of the following
enumerations are exceptions as provided by law. Which does not belong to the exception?
a. Where there is stipulation in favor of a third party
b. Where one of the parties to the contract dies and thereafter a suit is filed on the basis of the contract.
c. Where the obligation arising from contract are not transmissible by their nature.
d. Where the obligation arising from contract are not transmissible by stipulation or by provision of law.

24. In order that fraud may make a contract voidable:

a. It may be incidental but should have been employed by both parties.
b. It should be serious and the parties must be in pari delicto.
c. It should be serious and should not have been employed by both contracting parties.
d. It may be incidental but both parties should not be in pari delicto.
25. A and B who are both unemancipated minors entered into a contract. The contract entered into by and between
them is:
a. Rescissible
b. Unenforceable
c. Voidable
d. Void
26. A, guardian of B, sold B’s house and lot worth 480,000 for 240,000.
a. The contract can be rescinded because of inadequacy of price.
b. The contract cannot be rescinded because there is no fraud, mistake or undue influence.
c. The contract cannot be rescinded because all elements of contract are present.
d. The contract cannot be rescinded because it expressly provided by law as one of the contract which
cannot be rescinded.

27. X enters into a contract with Y whereby X sold his land orally to Y. The land has been delivered and the money
has been paid. Is he oral of sale of the land valid?
a. The contact is not valid because it is not in writing as required by Statute of Frauds.
b. The contact is not valid because the contract is not made in a public instrument.
c. The contract is unenforceable.
d. The contract is valid because the contract is already perfected and executed.

28. On July 15, 1986, X entered into a contract with Y. On February 10, 1987, X discovered that fraud was committed
at the time he entered into the contract, a fraud that vitiated his consent. The action for annulment shall be brought:
a. Within three years from the time of the fraud.
b. Within four years from February 10, 1987
c. Within four years from the time A entered into the contract
 d. On February 10, 2987

29. On September 1, 1987, A entered into a contract with B whereby A sells to B 5,000 sacks of sugar to be
delivered on the 15th and to be paid in full on the 30th. There was no agreement for rescission based on nonpayent. A
did not deliver on the 15th but in the 30th, he was willing and offering to deliver but B did not make payment on said
date and so A did not like it and refuse to make delivery. Decide.
a. A cannot rescind the contract for nonpayment of the price.
b. A cannot refuse to deliver the goods
c. B is entitled to recover damages
d. A can rescind the contract for nonpayment of the price

30. The stipulation in a contract to the effect that the debtor should remain as a servant in the house and in the
service of her creditor so long as she had not paid her debt is void because it is:
a. contrary to good customs
b. contrary to public policy
c. contrary to law and morality
d. answer not given

31. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. Which of the following constitutes an offer?
a. an offer made through an agent
b. business advertisement of things for sale
c. advertisement of bidders
d. answer not given
32. When one of the parties to a contract is compelled to give his consent by a reasonable and well-grounded fear an
imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or
ascendants, there is
a. violence
b. intimidation
c. undue influence
d. answer not given
33. Simulation of a contract may be absolute or relative. It is relative when:
a. the parties do not intent to be bound at all;
b. the contract is void;
c. the parties conceal their true agreement;
d. answer not given
34. The proper remedy is annulment of contract and not reformation when;
a. mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties.
b. a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement;
c. one party was mistaken and the other knew or believed that the instrument did not state their real
agreement, but concealed the fact from the former;
d. answer not given.

35. The action to annul a voidable contract, such a contract where one of the parties is incapable of giving consent to
the contract is extinguished by:
a. novation
b. rescission
c. ratification
d. answer not given
36. Contracts enterd into a state of drunkenness or during a hypnotic spell are:
a. void
b. valid
c.voidable
d. legal

37. Reluctantly and against her good sense and judgment, Rosemarie entered into a contract for the delivery of 5
tables to Coarazon for price of 15,000. Contract is:
a. void
b. voidable
c. unenforceable
d. valid
38. Through insidious words or machinations, A was able to induce B to enter into a contract which without them B
would not have agreed to it. There is:
a. Undue influence
b. Fraud
c. Mistake
d. Misrepresentation

39. A intimidated B to marry A’s daughter. After a year, B would like to file an action for annulment but could not do
so because A was around to intimidate him. The marriage contract is:
a. Rescissible
b.Voidable
c. Void
d. Unenforceable

40. The following, except one, are the characteristics of void or inexistent contract. Which is the exception?
a. The defense of illegality of a contract is available to tird persons whose interest is not directly affected
b. They are not subject to ratification
. The right to illegality cannot be waived
c. The right to raise defense of illegality cannot be waived
d. The action for defense for declaration of their nullity or inexistence of the contract does not prescribe.

41. Which of the following contracts is not unenforceable?

a. That were both parties are incapable of giving consent.
b. That were one party is incapable of giving consent
c. That which is entered into the name of another person by one who has been given no authority or legal
representation.
d. That which does not comply with Statute of Frauds.

42. Contracts which cannot be sued upon unless ratified, thus it is as if they have no effect yet are;
a. Voidable
b. Rescissible
c. Void
d. Unenforceable

43. Which of the following contract is valid?

a. Oral contract of agency giving authority to an agent to sell the land belonging to the principal
b. Oral partnership agreement where immovable property is contributed
 c. Oral contract of sale of an immovable property entered into by an agent who was given authority orally by
the principal
d. Oral agreement to answer all expenses for the wedding reception of A marries B

44. Contracts entered into during lucid interval are

a. Unenforceable
b. Voidable
c. Void
d. Perfectly valid
45. Three of the following may be valid objects of a contract, except:
a. All that are within the commerce of man
b. All services which are not contrary to law
c. Impossible things or services
d. All rights that are transmissible
46. A contract executed by two or more parties and one of the parties is not capable of giving consent. The contract
is:
a. Voidable
b. Rescissible
c. Void
d. Unenforceable

47. Three of the following contracts are void. Which one is not?
a. Oral contract of partnership of three or more partners and capital contribution is more than P3,000.00 in
cash
b. Written contract contemplating impossible services
c. Oral contract of partnership where real estate is contributed as capital
d. Agent’s authority to sell property is given orally
48. A contract which has no effect at all
a. Rescissible
b. Voidable
c. Unenforceable
d.Void
49. A contract where one party receives no valuable consideration and the cause is the liberality of the benefactor is
a. A gratuitous contract
b. A unilateral contract
c. An onerous contract
d. A commutative contract
50. A contract which cannot e ratified
a. Rescissible
b. Voidable
c. Unenforceable
d.Void

Partnership

1. Which of the following is not a particular partnership

A. A partnership formed by two lawyer for the practice of law profession
B. A partnership formed for the purpose of constructing a building
C. A partnership formed for the acquisition of immovable property and reselling it for profit
D. None of the above.
2. The following are effects of unlawful partnership, except:
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 government
C. The contribution of the partners shall be confiscated in favor of the government
D. The contract is void ab initio and the partnership never existed in the eyes of the law.
3. A partner who does not participate in the management of the affairs of the partnership and whose connection
with it is not made known to the public is called:
A. Silent-secret partner C. Dormant partner
B. Nominal partner D. Silent-ostensible partner

4. A, B, and C wish to go into the business together to bottle mineral water. Each contributed P50,000, but C
wanted to limit his liability to the extent of his contribution, and his name to appear in the partnership name.
Which form of partnership as business organization should they choose?
A. General partnership
B. Limited partnership
C. No partnership organization is available
D. Limited partnership, but C must be a general and limited partners at the same time

5. Every contract of partnership having a capital of P3,000 or more in money or property shall appear in a public
instrument which must be recorded in the Securities and Exchange Commission. Failure to comply with said
requirements
A. Will not affect the liability of a partnership and the members thereof to third persons
B. Will render the partnership void
C. Will not give the partnership a legal personality
D. Will give the partnership a de facto existence

6. A, B, and C formed a Limited Partnership, each contributing P10,000. However, the articles of partnership was
not recorded or registered with the SEC. Which of the following is an incorrect statement.
A. Not valid as a limited partnership
B. It is considered as a general partnership
C. The partnership still possessed of juridical personality distinct and separate from the partner
D. None of the above

7. Statement 1: For failure to register the Certificate of Limited Partnership with the Securities and Exchange
Commission (SEC), any and all contracts entered into by such partnership with third persons shall be considered
void. There was, absolutely, no partnership at all to speak of.
Statement 2: When an unlawful partnership is dissolved by a judicial decree, all the contribution as well as the
profits shall be confiscated by the State
A. B. C. D.
Statement 1 True False True False
Statement 2 True False False True
8. A, B and C are partners where C as a capitalist partner is engaged in the same business in which the
partnership is engaged in. In this situation,
A. the partnership may oust C from the partnership and at the same time avail of C’s profit in her separate
business
B. the partnership may oust C from the partnership
C. the partnership may avail of C’s profits in her separate business
D. the partnership has nothing to do with C since it is her right to engage in any business
9. K is an industrial partner. Besides his services, he also contributed capital to the partnership. There is no
agreement or stipulation as to the profits or losses. The share of K in the profit is
A. the remaining partners will determine his share in profits
B. combination of C and D below
C. such share as may be just and equitable under circumstances
D. Pro-rata to his contributions

10. A, B and C formed a partnership, with A and B as general partners and C as limited partner. The firm’s name is
A & B Partnership. After one (1) year of operation, the partnership incurred a loss of P12,000. X is the creditor.
X can collect:
A. P6,000 from A C. Nothing from C
B. P12,000 from A or B D. P12,000 from A, B, and C

11. A, B and C partners. Their contributions are as follows: A, P60,000; B, P40,000; C, services. The partners did
not agree on how to divide profits and losses. If there is a loss of P10,000, how should the said loss of P10,000,
how should the said loss of P10,000 be shared by the partners?
A. A, P6,000; B, P4,000 C, nothing C. A, 3,500; B, 3,500 C, 3,000
B. A, 3,000; B, 2,000 C, P5,000 D. A, 3,500; B, 2,500 C, 4,000

12. K is an industrial partner. Besides his services, he also contributed capital to the partnership. There is no
agreement or stipulation as to the profits or losses. The share of K in the profit is
A. The remaining partners will determine his share in profits
B. Combination of C and D below.
C. Such share as may be just and equitable under circumstances
D. Pro-rata to his contributions.

13. A, B, and C formed a general partnership. Later, C shared his interest with X in the partnership. In here, X is
considered:
A. An associate of a partner C. Sub-partner
B. Stranger to the partnership D. all of the above

14. One or more but less than all the partners have no authority to perform the following, EXCEPT:
A. Renounce a partnership claim
B. Submit a partnership claim or liability to arbitration
C. Convey partnership property in the ordinary course of partnership business
D. Do any act, which would make it impossible to carry on the ordinary business of the partnership

15. Which of the following statements is (are) usually correct regarding general partner’s liability
I. All general partners are jointly and severally liable for partnership torts.
II. All general partners are liable only for those partnership obligations they actually authorized.
A. I only C. Both I and II
B. II only D. Neither I or II

16. Which of the following statements is correct concerning liability when a partner in a general partnership commits
a tort while engaged in partnership business?
A. The partner committing the tort is the only party liable.
B. The partnership is the only party liable.
C. The partnership and each partner are jointly and severally liable.
D. Each partner is liable to pay an equal of any judgment.
17. A, B and C are partners in ABC Company. D introduced himself as a partner in ABC Company to X, who in the
belief of such introduction extended a P60,000 credit to ABC Company. These facts are known by A who did not
oppose. Who shall be held liable to X?
A. Since X extended the credit to ABC Company, a partnership liability exists, thus, partner A, B and
C and D are liable
B. Only A, who knows the transaction and D are partners by estoppel are liable pro-rata to X.
C. D who represented himself as partner in ABC Company is liable
D. A, and C who benefited in the P60,000 credit shall be liable to X

18. A and B are the general partners and C the limited partner of X & Co. partnership. After one year, D was
admitted as a new limited partner. If the partnership suffered a loss of P12,000, who are liable?
A. A and B C. A, B and D
B. A, B and C D. All of them

19. A, B, and C, capitalist partners, contributing P30,000, P20,000 and P10,000 respectively, and D, the industrial
partner contributed his services. Suppose X, a customer, is the creditor of the firm to the amount of P180,000.
How can X recover the P180,000?
A. X must sue the firm and get P60,000. X can still recover the balance of P120,000 from the four partners
jointly, that is, P40,000 each.
B. X can recover from the firm P60,000. X can still recover the balance of P120,000 from the capitalist partners
only
C. X can recover from the firm P60,000. X can still recover the balance of P120,000 from any of the partners
solidarily
D. X can recover from the firm P60,000 and can no longer recover the balance of P120,000.

20. A, B and C capitalist partners, contributed P10,000 each and D, the industrial partner contributed his services.
Suppose X, is the creditor of the firm to the amount of P90,000 after getting the P30,000 assets of the
partnership
A. X can recover P20,000 each from A, B and C only
B. X can recover P60,000 from either A, B and C only
C. X can recover P15,000 each from A, B, C and D
D. X can recover P15,000 each from A, B and C but D is exempt because he is an industrial partner

21. A, B and C formed a limited partnership with A, as general partner, B as limited partner and C as industrial
partner. A and B contributed P50,000 each. The partnership failed and after disposing all its assets to pay
partnership debts there still remains a note payable in the sum of P30,000. Against whom can the creditor
demand payment of the note of P30,000?
A. Only A is liable to pay the P30,000 indebtedness
B. A and C are liable to pay P15,000 each
C. A and B are liable to pay P15,000 each
D. A, B and C are liable to pay P10,000 each

22. A, B and C are partners of A and Company. They agreed that in case of loss, the share of A is 50%, B 30% and
C 20%. After three years total assets of A and Company is P100,000 as against total liability of P112,000. If D is
the only creditor, D can collect from A
A. P6,000 D. P4,000
B. P12,000 E. P8,000
C. None of the above
23. A, B and C are partners of A and Company. They agreed that in case of loss, the share of A is 50%, B 30% and
C is 20%. After three years, total assets of A and Company is P100,000 as against total liability of P112,000. If
D is the only creditor, D can collect from A
A. P6,000 D. P4,000
B. P12,000 E. P8,000
C. None of the above

24. Emong, Jack and Bova are partners with Bova as managing partner. Carla is indebted to Bova in the amount of
P50,000 and P150,000 to the partnership. Both debts are due and demandable. Carla paid Bova P20,000 and
he issued his own receipt.
a. The whole P20,000 should be applied to indebtedness of Carla to Bova as he issue his receipt.
b. Equal sharing, 50% shall go to Bova and 50% to the partnership.
c. P5,000 should go to Bova and P15,000 should be for the partnership.
d. P6,666,666 should go to Bova and the balance to the partnership.

25. 1st Statement: A person admitted as a partner into an existing partnership is liable for all the obligations of the
partnership before his admission as though he had been a partner when incurred and that such liability will
extend to his own individual property.
2nd Statement: In the absence of stipulation, the share of each partner in the profits and losses shall be equal to
each other.
A. B. C. D.
1st Statement True False True False
2nd Statement True False False True

26. 1st Statement: A person admitted as a partner into an existing partnership is not liable for obligations of the
partnership contracted before his admission.
2nd Statement: On dissolution the partnership is not terminated, but continues until winding up of partnership
affairs is completed.
A. B. C. D.
1 Statement
st
True False True False
2nd Statement True False False True

27. Which of the following is a ground for the court to dissolve a general partnership?
A. Death of a partner
B. Termination of the term
C. Business cannot be carried except at a loss
D. Civil interdiction of a partner
E. All of the above

28. One is a mode of dissolving partnership that requires decree of court:

A. Death of partner
B. When a specific thing promised by a partner is lost before delivery
C. Business can only be carried on at a loss
D. Accomplishment of the purpose of partnership

29. Unless otherwise provided in a general partnership, which of the following is correct when a partner dies?
Deceased partner’s administrator His estate would be free The partnership is
would automatically become partner from any liabilities automatically dissolved
A. Yes Yes Yes
 B. Yes No No
C. No Yes No
D. No No Yes

30. Unless otherwise provided in a general partnership, which of the following is correct when a partner dies?
His Administrator Automatically Extinguishment of all Dissolution of the
becomes a partner his Liabilities Partnership
A. Yes Yes Yes
B. Yes No No
C. No Yes No
D. No No Yes

31. A, B, C and D partners with A and B as the capitalist partners and C and D as the industrial partners. In due
course of business, the firm incurs a contractual debt in favor of X. After X has exhausted the assets of the firm
a balance of P10,000 remains unpaid. X files an action against C and D because A and B are already out of the
country
A. C and D are not liable because they are the industrial partners
B. C and D may be held liable for P10,000 because they are solidary debtors
C. C and D are liable for P5,000 each because A and B are out of the country
D. C and D are liable for P2,500 each because they are joint debtors

32. A, B, and C formed a general partnership with a gross capital of P90.000. They agree that the profit and loss
sharing is: A – 50%; B – 25%; C – 25%. Upon dissolution and after exhausting the partnership capital, X has still
a collectible amount of P30.000 from the firm. Suppose there is no profit and loss sharing and A contributed
P24.000; B – P21,000; C – P15,000. How much is the obligation of C to X?
A. P30,000 C. P 7,500
B. P 15,000 D. P10,000

33. A, B, and C formed a general partnership with a gross capital of P90.000. They agree that the profit and loss
sharing is: A – 50%; B – 25%; C – 25%. Upon dissolution and after exhausting the partnership capital, X has still
a collectible amount of P30.000 from the firm. How much can X collect from C alone.
A. P 7,500 C. P30.000
B. P15,000 D. P10,000

34. X, Y and Z formed a general partnership decided to contribute P200,000 each. The partnership and has started
its operations although X was able to contribute only P140,000. They also agreed the X & Y be exempted from
losses. Upon dissolution there was an outstanding obligation to Mr. A in the amount of P720,000. A exhausted
the capital of P540,000, leaving a P180,000 balance. Which statement based on the foregoing is true?
A. The share of X is nothing based on the agreement.
B. The share of X is 1/3 of P180,000 or P60,000 being a general partner.
C. Z will have to absorb the whole P180,000 per agreement minus X’s share of P60,000.
D. X is liable for P60,000 to the partnership and P40,000 to Mr. A.

35. X, Y and Z formed a general partnership decided to contribute P200,000 each. The partnership and has started
its operations although X was able to contribute only P140,000. They also agreed the X & Y be exempted from
losses. Upon dissolution there was an outstanding obligation to Mr. A in the amount of P720,000. A exhausted
the capital of P540,000, leaving a P180,000 balance, if X is a limited partner in their partnership named Z and
Co. which is correct?
a. X has no share in the balance being a limited partner
 b. X will only have to pay his unpaid contribution of P60,000
c. Z will have to absorb the whole P180 per agreement minus X’s share of P60,000
d. X is liable for P60,000 to the partnership and P40,000 to Mr. A

36. A, B, C and D are partners. Their contributions are as follows: A – P50,000; B – P30,0000; C – P20,000; D
services. The partnership incurred obligations to third persons which the firm was unable to pay. After exhausting all
the assets of the partnership, there still is an unpaid balance of P10,000? How much should each partner be liable
for?
A. A - P5,000; B - P3,000; C - P2,000; D - none
B. A - P2,500; B - P2,500; C - P2,500; D - P2,500
C. A - P4,000; B - P3,000; C - P2,000; D - P1,000
D. A - P4,000; B - P4,000; C - P4,000; D - none

37. A, B and C formed partnership engaged in appliance business. A and B were general partners while C was a
limited partner. Later, B and C got married, and afterwards A sold his interest to B. Based on the facts
presented, is the partnership dissolved?
A. No, the marriage of B and C will not dissolve the partnership unless there is judicial approval
B. The selling of A’s interest to B will not dissolve the partnership because the spouses can enter into a
particular partnership
C. No, the marriage of B and C and the selling of A’s interest to B converts the partnership into a universal
partnership
D. Yes, when B acquired the interest of A it became a sole proprietorship therefore the partnership is dissolve

38. 1st statement: The arrival of the term of a partnership with a fixed term or period shall not dissolve the partnership
but such partnership may be terminated anytime dependent in the will of the continuing partners.
2nd statement: The general rule is that the loss of the specific thing contributed to the partnership dissolves the
partnership when only the use of the thing is contributed by the partner and such thing after its transfer to the
partnership which used the same form sometime was subsequently lost, the partnership is not dissolve. Which is
correct?
A. B. C. D.
1st Statement False True True False
2nd Statement False True False True

39. A substituted limited partner is

A. A buyer of right of the deceased partner
B. A person admitted as a limited partners by the other partners
C. An assignee admitted to all the rights of the assignor
D. A legal representative of a limited partner

40. Which of the following is not correct? In a limited partnership composed of A, B and C, the contribution may be
as follows:
A. A property (limited partner); B – services (general partner); C cash (general partner)
B. A cash (limited partner); B – property (general partner); C services (general partner)
C. A services (limited partner); B - cash (general partner); C services (general partner)
D. A cash (limited partner); B – cash (general partner); C services (general partner

41. Which of the following statements is correct?

A. A partnership contract is not covered by statute of fraud
B. A limited partnership is one having at least one general partner or one limited partner and the limited partner
shall not be liable for the obligations of the partnership
 C. A limited partner who contribute industry to the firm becomes liable as a general partner
D. The contract of partnership is void is it contains a stipulation which exclude a partner from sharing in the
profits of the firm

42. All are correct except:

a. Limited partner cannot be an industrial partner too.
b. A managing partner is always a general partner.
c. Persons not allowed to donate to each other cannot form Universal Partnership.
d. As to liability to creditors of the partnership an industrial partner is considered a general partner

43. In partnership which of the following is incorrect?

A. Stipulation exempting any kind of partner in a partnership from profit and loss sharing is void as to third
person
B. Unlawful partnership is dissolved by court decree, the capital contribution of the partners shall be
confiscated in favor of the state.
C. In case of tie in a joint management in a partnership, the matter will be decided by the controlling interest.
D. All of the above

44. One of the following statements is false:

A. Limited partner cannot be an industrial partner
B. A managing partner is always a general partner
C. Persons not allowed to donate to each other cannot form Universal Partnerships
D. As to liability to creditors of the partnership an industrial partner is considered a general partner.

45. One who takes charge of wing up of partnership affairs upon dissolution.
a. Silent partner
b. Ostensible partner
c. General partner
d. Liquidating partner

46. A capitalist partner is engaged for his own account in an operation which is of the kind of business in which the
partnership is engaged. Said partner can be:
a. Compelled to sell his interest in the partnership to the other capitalist partners
b. Compelled to dissolve or discontinue the operation of his business
c. Compelled to bring to the common funds of the partnership any profits accruing to him from his
transactions
d. Denied his share in the profits of the partnership

47. Partnership as distinguished from corporation

a. Acquires juridical personality upon approved by the SEC and issuance of certificate
b. Has limited liability
c. Created by operation of law
d. No power of succession

48. Essential elements or feature of a partnership, except

a. Must have a lawful object or purpose
b. There must be a contribution of money, property or industry to a common fund
c. With intention to divide and contribute whatever profits they make to other people
d. Must be established for the common benefit or interest of the partners
49. The minimum capital in money or property except when immovable property or real rights thereto are contributed,
that will require the contract of partnership to be in a public instrument and be registered with SEC
a. P5,000.00
b. P10,000.00
c. P3,000.00
d. P30,000.00

50. One of the following is not a requisite of a contract of partnership. Which is it?
a. There must be a valid contract
b. There must be a mutual contribution of money, property or industry to a common fund
c. It is established for the common benefit of the partners which is to obtain profits and divide the same
among themselves
d. The articles are kept secret among the members.

Corporation

1. Which of the following is a disadvantage of forming a corporation?

A. The existence of the entity is not affected by the personal vicissitudes or of the individual stockholder
B. Free and ready transferability or ownership of shares
C. Subservience of minority stockholders to the wishes of the majority subject only to equitable restraints
D. The shareholders are not liable for the debts of the business

2. Which of the following is the disadvantage of forming a corporation?

A. The free and ready transferability of ownership
B. The shareholders are not liable for the debts of the business.
C. Because of the power of succession, the existence of the entity is not affected by the personal vicissitudes
of the individual stockholders.
D. The subservience of minority stockholders to the wishes of the majority subject only to equitable restraints.

3. Plaintiffs filed a collection action against “X” Corporation. Upon execution of the court’s decision, “X” Corporation
was found to be without assets. Thereafter plaintiffs filed an action against its present and past stockholder
including “Y” Corporation which owned substantially all of the stock of “X” Corporation. The two corporation
have the same board of directors and “Y” Corporation financed the operations of “X” Corporation. May “Y”
Corporation be held liable because there was delay.
A. Yes, under the principle of “Corporate Opportunity” of Interlocking Director
B. Yes, under the principle of “Trust Fund Doctrine”
C. No, under the doctrine of “Separate Entity”
D. Yes, under the principle of “Piercing the veil of corporate entity”

4. This group of persons may not form a corporation and be incorporators in a corporation in the Philippines
A. Fifteen Spanish citizens who are residents of Manila
B. Ten resident aliens and four aliens in Singapore
C. Eleven Filipinos who are residents of San Francisco, California
D. Seven American residing in the Philippines and two Filipinos residents of Hawaii

5. A corporation cannot be an incorporator, because only natural persons may become incorporators, except
A. Cooperative as incorporator of Rural Bank
 B. Eleemosynary corporations
C. Charitable organizations incorporated under the Philippines Laws
D. Corporation sole

6. A, B and C are Filipinos who are residents of the Philippines. D, E and F are Filipinos who are non-residents, G
and H are Japanese nationals residing in the Philippines. I and J are Japanese who are nonresidents.
A. A, B, D, E and F may form a corporation in the Philippines
B. D, J, I, A and H may form a corporation in the Philippines
C. A, G, H, E and J may form a corporation in the Philippines
D. none of the above

7. Shares deposited by the seller or his agent with a bank or third party to be delivered to the buyer or subscriber
only upon the fulfillment of the stipulated suspensive condition
A. Promotion shares C. Redeemable shares
B. Founders shares D. Escrow shares

8. What need not be submitted outrightly to the SEC during incorporation stage.
A. Articles of incorporation C. Treasurer’s Affidavit
B. By-laws D. Bank Certification

9.The required minimum authorized capital stock for stock corporation is

a. Not less than P5,000
b. 25% must be subscribed and 25% must be paid
c. At least 25% must be subscribed and at least 25% must be paid but not less than P5,000
d. None as a rule provided the paid up capital is not below P5,000.

10. The required minimum authorized capital stock for stock corporation is:
A. Not less than P5,000
B. 25% must be subscribed and 25% must be paid
C. At least 25% must be subscribed and at least 25% must be paid but not less than P5,000
D. Correct answer not given

11. Suppose SPAGHETTI Corporation has an authorized capital stock of P100,000 divided into 1000 shares of
stock with par value of P100 each.
Subscibers
A – 100 shares and paid P8,000 D – 50 shares and paid P5,000
B – 160 shares and paid P 100 E – 200 shares and paid P 600
C – 250 shares and paid P4,000
Which will qualify the pre-incorporation subscription requirement?
A. Combination of A and E C. Combination A and B
B. Combination of C and D D. All of the above

12. Suppose SPAGHETTI Corporation has an authorized capital stock of P100, 000 divided into 1,000 shares of
stocks with a par value of P100 each.
A – 100 shares and paid P8,000 D – 50 shares and paid P5,000
B – 160 shares and paid P 100 E – 200 shares and paid P600
C – 250 shares and paid P4,000
Which will not qualify as pre-incorporation subscription requirement?
a. Combination of A and E c. Combination of A and B
b. Combination of C and D d. Combination of B and D
13. Which of the following conditions will allow corporate formation and allow Securities and Exchange Registration?
Authorized capital Subscribed capital Paid-in capital
A. P200,000 P50,000 P12,500
B. 50,000 12,500 3125
C. 100,000 25,000 6,250
D. 60,000 15,000 6,250

14. Which of the following situations complies with the requirement of the law for corporate formation and
registration?
Authorized Capital Subscribed Capital Paid-up Capital
a. P 50,000.00 P12,500.00 P 3,125.00
b. P 60,000.00 P15,000.00 P 10,000.00
c. P100,000.00 P20,000.00 P 7,000.00
d. All of the above

15. Is a by-law provision of “X” Corporation “rendering ineligible or if elected, subject of removal, a director if he is
also a director in a corporation whose business is in competition with or is antagonist to said corporation” valid
and legal
A. Yes, under the principle of “corporate opportunity”
B. No, under the principle of “separate entity”
C. Yes, provided it is approved by 2/3 of the outstanding capital stock
D. Yes, under the principle, “of vested interest”

16. Which of the following must be obtained in a Corporation’s Articles of Incorporation?

A. Names of stockholders
B. Name of the temporary treasurer
C. Provisions for issuance of par and no par value shares
D. Quorum voting requirement

17. One of the following is a ground for the suspension or revocation of the Article of Incorporation by the SEC.
A. Failure to organize and commence business operation with in 2 years from incorporation.
B. Continuous inoperation or inactivity for 5 years after it has organized and commenced business transactions
for one year.
C. Corporation has commenced its operation and subsequently become continuously inoperative for 2 years.
D. Corporation has failed to commence and start to operate due to causes beyond its control.

18. One of the following is a ground for the suspension or revocation of the certificate of Incorporation by the SEC.
a. Failure to organize and commence business operation with in 2 years from incorporation.
b. Continuous in-operation or inactivity for 5 years after it has organized and commenced business
transactions for one year.
c. Corporation has commenced its operation and subsequently become continuously inoperative for 2 years.
d. Corporation has failed to commence and start to operate due to causes beyond its control.

19. A, B, C, D and E organized a corporation. An article of incorporation was prepared, signed and acknowledge
before a notary public and filet with the SEC. The corresponding certificate of incorporation was issued. It turned
out, however, that A, B, and C are not residing in the Philippines. What is the status of the corporation?
A. De jure corporation D. Corporation by prescription
 B. De facto corporation E. None of the above
C. Corporation by estoppel

20. Which is correct about a B.O.D. member?

a. He is entitled to compensation as a matter of right.
b. He must be a citizen of the Philippines
c. He is disqualified to be one if convicted of the crime of murder before
d. He can be removed by votes representing 2/3 of the outstanding capital stocks in all cases

21. “ A” was one of the directors of “X” Corporation. “B” obtained a judgment against “A” and had all of “A’s “ shares
of stock in “X” Corporation. A meeting was held and both “A” and “B” appeared in said meeting, each claiming
the right to participate in the deliberation of the board. “A” contended that he had the right to continue as director
until the stockholders could elect his successor.
“B” on the other hand, contended that having purchased all of “A’s” share he had the right to take the latter’s
place in the board. Under the rule of directorship, which of the following is false?
A. Both A and B are disqualified to sit as directors in the Board of Directors
B. A cannot qualify as he disposed all his shares. The requirement is that a director must continuously have at
least one share in the corporation
C. B can qualify because a corporation as well as the heirs of stockholders of same corporation has got a right
of succession
D. B cannot also qualify if he claims succession to A. He must have to be elected by the stockholders. The
position is personal and does not allow substitution.

22. In no case shall the total yearly compensation of directors, exceed

A. 5% of the net income before income tax during the preceding year
B. 10% of the net income before income tax during the preceding year
C. 10% of the net income after income during the preceding year
D. 10% of the net income before income tax during the current year

23. Which of the following statement is correct regarding corporate officers of a stock corporation?
A. An officer may not simultaneously may or not be a stockholder of the same corporation
B. Corporate Secretary may or not be a stockholder of the same corporation
C. Stockholders always have the right to elect a corporation officers
D. An officer of a corporation is required to own at least one share of the corporation’s stock

24. Qualification of trustee of non-stock corporation:

A. Trustees must be member of the corporation
B. Majority of the trustees must be resident of the Philippines
C. Trustees of non-stock corporation may be more than 15 members
D. All of the above.

25. A corporation 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

26. Directors or trustees who willfully and knowingly vote for or assent to patently unlawfully act of the corporation or
who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal
or pecuniary interest in conflict with their duty shall be liable
A. As a trustee for the corporation
 B. Criminally for violation of the corporation code
C. Jointly and severally liable for the damages suffered by the corporation
D. None of the above.
27. The assets of the corporation as represented by its capital stock are to be maintained unimpaired that there can
be no distribution of such assets among the stockholders without provision being first made for the payment of
corporate debts
A. Doctrine of corporate fiction C. Trust fund doctrine
B. Doctrine of corporate opportunity D. Doctrine of limited capacity

28. Cash dividends as distinguished form 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.

29. The following are the requisites, except one, for valid declaration and/or issuance of stock dividend
A. Existence of original and unissued shares
B. Dividend declaration is made by the Board of Directors and approved by 2/3 of the outstanding capital stock
C. It is issued to increase the authorized capital
D. Existence of unrestricted retained earnings

30. For past four years of its commercial operation, MY TRUST CO. an insurance company has been earning
tremendously in excess of 100% of the corporation’s paid in capital. All of the stockholders want that they share
in the profits of the corporation by way of dividends but the Board of Directors remained unmoved.
1st Question – Can the stockholders compel the Board of Directors to declare dividends.
2nd Question – If there is a plan for a definite corporate expansion is it true that the BOD cannot be compelled to
declare dividends even if the profit exceed 100% of the paid up capital.
A. B. C. D.
1st Statement Yes No No Yes
2nd Statement Yes No Yes No

31. To enter into management contracts, as a rule

A. Majority X of the board and majority of the outstanding capital stock or of the members of both the managing
and managed corporations
B. Majority of the quorum of the board and 2/3 of the outstanding capital stock or of the members
C. Majority vote of the board and majority of the outstanding capital stock or of the members
D. 2/3 of the outstanding capital stock or of the members.

32. Place of meetings of stockholders and members. Which one is incorrect?

A. Stockholders: City or municipality where the principal office of the corporation is located
B. Members: Any place even outside the principal office of the corporation if stated in the by-laws by must be
within the Philippines and stated in the notice of meeting.
C. Members: Any place even outside the principal office of business if stated in the by-laws but must be within
the Philippines even if not stated in the notice of meeting.
D. Stockholders: Meeting held outside the principal place of business is valid except if all stockholders are
present or represented.

33. Which statement is correct?

A. The Board of Directors may hold its meeting outside the municipality or city where its principal place of
 business is located and the directors may attend by proxy, while the stockholders' meeting must by held in
the city or municipality where the principal place of business of the corporation is located and the
stockholders may attend personally or by proxy.
B. The Board of Directors may hold its meeting outside the municipality or city where its principal place of
business is located and the directors must attend personally and not by proxy; while the stockholders
meeting must by held in the city or municipality where the principal place of business of the corporation is
located and the stockholders may attend personally or by proxy.
C. The Board of Directors must hold its meeting only within the municipality or city where its principal place of
business is located and the directors must attend personally and not by proxy; while the stockholders'
meeting may be held within or even outside the city or municipality where the principal place of business of
the corporation is located and the stockholders may attend personally or by proxy.
D. The Board of Directors may hold its meeting outside the municipality or city where its principal place of
business is located and the directors may attend by proxy; while the stockholders' meeting must held in the
city or municipality where the principal place of business of the corporation is located and the stockholders
must be in attendance personally.

34. Which of the following is (are) valid consideration for the purchase of stocks of a corporation?
I. Real estate
II. A negotiable promissory note in money
III. Monetary consideration for services to be performed
A. I only C. Both I and III
B. II only D. Both II and III

35. The “Manila Cigar Company” was organized with a capital stock of P50,000 divided into 500 shares of P100 a
share. “X” subscribed for 20 shares and paid P500 upon his subscription leaving unpaid account thereof the
sum of P1,500. Five years later, the company was declared insolvent and “A” was duly appointed assignee who
upon assuming his position, found that “X” has an unpaid subscription in the amount of P1,500.
Prior to the company’s declaration of insolvency, its board of directors, by resolution, released “W” (another
subscriber) from the payment of his “W” remaining unpaid subscription. The assignee brought action to recover
from “X” the amount representing his unpaid subscription and against W, the recall of the release order. Which
of the following statements is incorrect?
A. Insolvency of the corporation makes all unpaid subscription immediately demandable
B. The release of W of his unpaid subscription is void under the Trust Fund Doctrine
C. X is considered released by invoking that W, another subscriber has been released by the board.
D. The payment of unpaid subscription is immediately demandable whether or not a “call order” has been
made by the board of directors
36. The right given to a stockholder to dissent and demand payment of the fair value of his shares in all of the
following except:
A. In case of merger or dissolution
B. Sale of all corporate assets
C. Shorten corporate term only.
D. Divert corporate funds to another purpose

37. A shareholders’ option to subscribe to allotment of shares in proportion to his holdings of outstanding shares,
before new shares are offered to others
A. Voting right C. Ultra vires act
B. Pre-emptive right D. Appraisal right

38. Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his
 share/s in three of the following corporate acts. Which is the exception?
A. In case of any amendment to the articles of incorporation which has the effect of changing or restricting the
rights of any stockholder or class of shares
B. In case of merger or consolidation
C. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of
the corporate assets and property of the corporation
D. In case of incurring, creating, or increasing bonded indebtedness

39. In which of the following can a dissenting stockholder exercise the right of appraisal?
A. Amendment of the articles to increase authorized capital stock
B. Amendment of the articles to change corporate name
C. Amendment of the articles to transfer location of the principal office
D. In case of merger

40. In one of the following cases, appraisal right is not available.

A. In case of merger or consolidation.
B. In case of increase or decrease of corporate term.
C. In case of increase or decrease of capital stock.
D. Diversion of Corporate funds for another purpose other than its primary or secondary purposes.

41. In one of the following cases, appraisal right is not available.

a. In case of merger or consolidation.
b. In case of increase or decrease of capital stock.
c. In case of increase or decrease of corporate term.
d. Diversion of Corporate funds for another purpose other its primary or secondary purposes

42. In 1999, Corporation “A” passed a board resolution removing “X” from his position as manager of said
corporation. The by-laws of “A” corporation provides that the officers are the president, general-manager,
treasurer and secretary. Upon complaint filed with the SEC, it held that the general manager could be removed
by mere resolution of the board of directors. On motion for reconsideration, “X” alleged that he could only be
removed by the affirmative vote of the stockholders representing 2/3 of the outstanding capital stock. Is “X’s”
contention legally tenable?
A. No, the vote required is majority of the board and 2/3 OCS consenting
B. Yes, the voting requirements is only 2/3 of the outstanding capital stock
C. No, the required vote is MBD consented by MOCS
D. No, the voting requirement is only majority of the Board of Directors

43. What is the voting proportion required enabling the corporation to invest, its funds in another corporation or
business for a purpose similar to its primary purpose?
A. majority vote of its Board of Directors
B. majority of its Board of Directors and ratified by a majority of its outstanding capital stock
C. majority vote of its Board of Directors and ratified by 2/3 vote of its outstanding capital stock
D. majority of its Board of Directors and ratified by 2/3 of its stockholders

44. Any director of a corporation may be removed from office by a vote of

A. Majority of the members of the board
B. Majority of the stockholders present
C. 2/3 of the stockholder present
D. 2/3 of the outstanding capital stock
45. To adopt by-laws
A. Majority of the outstanding capital stock or of the members
B. Majority vote of the board and of the outstanding capital stock or of the members
C. 2/3 of the outstanding capital stock or of the members
D. Majority vote of the board and 2/3 of the outstanding capital stock or of the members

46. To revoke the power granted to the board to make by-laws.

A. Majority vote of the board and of the outstanding capital stock of the members
B. 2/3 of the outstanding capital stock or of the members
C. Majority of the quorum of the board and 2/3 of the outstanding capital stock or of the members
D. Majority of the outstanding capital stock or of the members

47. To delegate to the board of directors or trustees the power to amend or repeal the by-laws or adopt new by-laws
A. Majority of the outstanding capital stock or of the members
B. Majority vote of the board and of the outstanding capital stock or of the members
C. 2/3 of the outstanding capital stock or of the members
D. Majority vote of the quorum of the board and 2/3 of the outstanding capital stock or of the members

48. One of the following corporate acts requires a majority vote of the Board plus 2/3 of Outstanding Capital Stocks.
a. Declaration of Property Dividends. c. Election of Corporate Officers.
b. Declaration of Stock Dividends d. Filling up of Board Vacancy.

49. One of the following corporate acts require a majority of the Board and the vote or written assent of the
stockholders representing at least 2/3 of the Outstanding Capital Stock.
A. Declaration of the stock dividend
B. Amendment of the Articles of Incorporation
C. The power to extend corporate life
D. The power to sell corporate property

50. “By the Board of Directors” and approval of not less than 2/3 of all stocks, outstanding and entitled to vote are
the prescribed vote in three of the following, which is the exemption?
A. adoption of new by-laws
B. declaration of stock dividends
C. to incur, create or increase bonded indebtedness
D. to amend the articles of incorporation