Nation’s Foremost CPA Review Inc.

: Business Laws
LAW ON PARTNERSHIP

1. Which of the following is not correct?

a. A- cash (Ltd.); B – cash (Gen.); C – service (Gen)
b. A- property (Ltd.); B – cash (Gen.); C – service (Gen)
c. A- service (Ltd.); B – cash (Gen.); C – service (Gen)
d. A- cash (Ltd.); B – property (Gen.); C – service (Gen)

2. A and B orally agreed to form a partnership two years from today, each one to contribute
P10, 000.00. At the arrival of the said date, if one refuses to go ahead with the
agreement, can the other enforce the agreement?
a. Yes, since the agreement is to be enforced after one year from the making thereof, the
same should be in writing to be enforceable.
b. Yes, because the prior agreement was voluntarily made.
c. Yes, because the contract of partnership is not governed by the Statute of Frauds.
d. No, because the agreement was merely oral.

3. If a partner is insolvent, the first in the order of preference in the distribution of his
assets is:
a. Partnership creditors

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b. Partner’s contribution to the partnership
c. Separate creditors of the debtor

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d. Pro-rata between the separate creditors and the partnership creditors.

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4. The following except one, are common characteristics of partnership and corporation.
Which is the exception? rs e
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a. The individuals composing both organizations have little voice in the conduct of the
business.
b. Both can only act through agents.
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c. Both are business organizations composed of a number of individuals.

d. Both have juridical personalities separate and distinct from that of the members
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composing it.
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5. Which of the following is not a requisite prescribed by law in order that the partnership
may be held liable to a third party for the acts of one of the partners.
a. The partners bind the partnership by acquiescence for obligations he may have
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contracted in good faith.

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b. The partner must have the authority to bind the partnership.

c. The contract must be in the name of the partnership or for its own account.
d. The partner must act on behalf of the partnership.
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6. X, Y and Z are partners in Ace & Co. W represented himself as a partner in the said
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partnership to A, who on the faith of such representation, granted P1M loan to the
partnership. Assuming only X and Y consented to such representation, who shall be
liable to A?
a. Since the partnership benefited from the credit extended by A, all partners X, Y and Z
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are liable.
b. Only X, Y and W are partners by estoppel and are liable pro rata.
c. Since the loan was extended to the partnership, all the partners and W are liable.
d. Only W who made the representation shall be liable.

7. A, B, and C are general partners in the merchandising firm. Having contributed equal
amounts to the capital, they also agreed on equal distribution of whatever profit is
realized per fiscal period. After two years of operation however, C conveys her whole
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 Nation’s Foremost CPA Review Inc.: Business Laws
interest in the partnership to D, without knowledge and consent of A and B. Is the
partnership dissolved?
a. The partnership is not dissolved because the conveyance of a partner’s interest in the
partnership does not of itself dissolve the partnership.
b. The partnership is not dissolved because the assignment made by C of his whole
interest was without the knowledge and consent of A and B.
c. The partnership was dissolved because the assignee, D automatically becomes a new
partner and strictly speaking, there is a new entity.
d. It is dissolved because C has ceased to be a partner because of the assignment of his
whole interest to D.

8. Based on the preceding facts:

a. D can participate in the management of the partnership.
b. D cannot inspect the books nor copy them for any information on the partnership
affairs as a partner can.
c. C has ceased to have the rights to use the partnership property.
d. C cannot take part in the control of the business anymore.

9. Still based on the same facts:

a. If A and B want to dissolve the partnership, C as a partner need not consent

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thereto because he had assigned his interest to D.
b. D may ask the court for its dissolution being the assignee of C’s interest in the

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partnership.
c. A, B and D may dissolve the partnership even without the consent of C.

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d. A, B and C cannot dissolve the partnership without the consent of D.
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10.Spouses A and B formed a limited partnership to engage in real estate business and A
contributed P1M only. Is the partnership between the spouses valid?
a. The partnership is not valid because the spouses cannot enter into a limited
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partnership.
b. The partnership is valid because spouses can enter into a partnership, limited or
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general, universal or particular.

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c. The partnership is not valid because spouses cannot enter into any kind of
partnership for business except conjugal partnership.
d. The partnership is valid because spouses are prohibited to enter into a universal
partnership only.
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11.••A corporation cannot enter into a partnership contract with natural person but with
a juridical person it can.
••A general partner is always the capitalist in a limited partnership.
a. Both statements are false c. Both are true
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b. First is true, second is false d. First is false, second is true

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12.W, X, Y and Z organized a general partnership with W and X as industrial partners

and Y and Z as capitalist partners. Y contributed P.5 M and Z contributed P.2 M to the
common fund. By a vote of the partners, W and X were appointed managing partners,
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without specification of their duties and powers. A applied as secretary and B applied
as accountant of the partnership. The hiring of A was decided upon by W and X but
was opposed by Y and Z. Whose decision shall prevail?
a. The decision of W and X shall prevail because the hiring is an act of management
and as managers they can do so.
b. That of Y and Z shall prevail because they are the capitalist partners.
c. The decision of Y and Z because they have the controlling interest.
d. The decision of W and X because it is an act of ownership.
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 Nation’s Foremost CPA Review Inc.: Business Laws

13.In the same problem as aforementioned, suppose the hiring of B was decided upon by
W and Z, but was opposed by X and Y, whose decision shall prevail?
a. The decision of W and Z because W is the managing partner and the hiring is an
act of administration.
b. The decision of X and Y because in case of tie in the decision of managing
partners, that of the controlling interest shall prevail.
c. That of W and Z because Z is also a capitalist partner.
d. None of the decision because of the statement of equal rights.

14.If a partner is insolvent, the first in the order of preference is:

a. Partnership creditors
b. Partner’s contribution to the partnership.
c. Separate creditors of the partner.
d. Pro rata between the separate creditors and the partnership creditors.

15.A, B and C are partners in partnership “DA KING RAYMOND” to engage in buy and
sell of carabao milk. A and B contributed P10, 000.00 each while C contributed his
service. After payment of the partnership liabilities to creditors, only P6, 000.00
remains. In the absence of stipulation to the contrary the share of C shall be:

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a. Equal to the share of A c. P2,000.000
b. Equal to the share of B d. Nothing

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16.X, Y and Z are partners who contributed equally to the capital of the partnership. A

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owes the partnership P9, 000.00. Z collected from A P3, 000.00 before X and Y could
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receive anything from A, who later became insolvent and therefore, they could not
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collect their shares.
a. Partner Z shall share the P3, 000.00 with his co-partners X and Y.
b. Z cannot be required to share what he already received from A.
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c. X and Y should first exhaust all remedies to collect from A.

d. X and Y can automatically deduct from the capital contribution of Z in the
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partnership their respective shares in the p3, 000.00.

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17.A and B are partners in a real estate business. The partnership owns a parcel of land
which C desires to buy. C contacted A and informed him of his intention to buy the
said land. A did not tell B such intention of C. A bought B out of the partnership and
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afterwards sold the land to C at a profit.

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a. The partnership was dissolved when A became the sole owner.

b. The sale is void because it was without the knowledge of B.
c. A is not liable to B for his share of the profits.
d. A is liable to B for his share in the profits.
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18.A, B and C are partners in “RAY MOON” Company to engage in the sale of beer under
the full moon on summer days even in cases of conflagration and very very hot coffee
on rainy days even in case of inundation. D represented himself as a partner in the
partnership to E who, on the belief of such representation, extended credit of P50,
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000.00 to the partnership. Assuming only B and C consented to such representation,

who shall be liable to E?
a. All of A, B, C, and D are liable because of partnership liability for the credit
extended to the partnership by E.
b. B, C and D are partners by estoppels and thus, are liable to E.
c. Partners A, B and C are liable to E for the benefit extended to them.
d. Only D who made the representation is liable to E.

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 Nation’s Foremost CPA Review Inc.: Business Laws
19.May contribute money, property or industry to a common fund.
a. Limited partner c. Both limited and general partner
b. General partner d. Both limited and industrial partner

20.One of the following incidents as a cause for involuntary dissolution of the

partnership,
a. Termination of the definite term of partnership.
b. Insolvency of a partner.
c. Express will of a partner in a partnership at will.
d. Expulsion of a partner for cause as stated in the Articles of part.

21.The following are disqualified to form a universal partnership, except one:

a. Brother and sister
b. Husband and wife
c. Those guilty of adultery or concubinage
d. Those guilty of the same offense, if the partnership is entered into consideration of
the same

22.A is a capitalist partner and B the industrial one. A engaged personally in the same
kind of business as that of the partnership:

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a. If there are losses, the partnership will bear the losses.
b. If there are profits, they will be shared by A and the partnership.

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c. If there are profits, A shall give them to the partnership.
d. A may be excluded from the partnership with liability for damages.

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23.Suppose in the same facts as aforementioned, B engages in business on his own
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account but different from that of the partnership.
a. If there are profits, B and the partnership shall share equally.
b. If there are losses, B and the partnership shall equally share.
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c. B may be excluded from the partnership but without damages.

d. B may be excluded from the partnership with damages.
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24.A and B are capitalist partners while C is an industrial partner. Both A and B equally
contributed P15, 000.00 to each to the capital. A contractual liability in favor of X was
incurred in the amount of P40, 000.00. After the exhausting partnership assets there
is a balance recoverable from:
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a. A and B only
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b. A, B and C
c. A, B and C and C can get reimbursement from A and B.
d. A, b and C without reimbursement from A and B in C’s favour.
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25.In the aforementioned facts, suppose A, B and C agreed that one of them shall not be
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liable to the creditors, is the agreement valid?

a. The stipulation that one of them shall not be liable to the creditors is voidable at
the instance of the creditors.
b. It shall be void agreement even among the partners because partnership is for
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common benefit and interest.

c. It shall be void insofar as the creditors are concerned.
d. It shall be voidable among the partners themselves.
26.A, B and C are partners in a partnership engaged in retail with each contributing P20,
000.00 each. D is admitted as a new partner with a contribution of P8, 000.00. At the
time of his admission, the partnership has a pre-existing obligation to E in the amount
of P80, 000.00.
a. D is not liable to E for this obligation incurred when he was not yet a partner.
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 Nation’s Foremost CPA Review Inc.: Business Laws
b. D is liable to E up to his personal assets which were not contributed.
c. D is liable up to his capital contribution.
d. D is liable up to his capital contribution in favor of creditors but with right of
reimbursement from A, B and C.

27.••The partners are liable to third persons jointly or equally for torts or quasi-delict
committed by any partner in the conduct of the business or with authority of the
partners.
••For contractual liability, their liability shall be solidary and all partners are liable.
a. Both are false statements c. First is false, second is true
b. Both are true d. First is true, second is false

28.••The partnership shall be bound in the contract entered into by the partner who has
no authority provided the third person is in good faith although the act of the partner
is not in usual way of business.
••The partner’s acts although not in the usual way of conducting the business shall
bind the partnership provided he was authorized by his co-partners.
a. Both statements are true c. First is true, second is false
b. Both are false d. First is false, second is true

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29.A and B are partners with A as the managing partner. C owes A P10, 000.00 and the
partnership P30, 000.00 which are now both due. A issued a receipt for the payment

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of C in the amount of P10, 000.00 in his own name. The payment shall be applied to:
a. This partnership credit totally.

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b. The credit of A only since the receipt is in his name.
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c. The payment shall be applied equally in both credits.
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d. The payments shall be applied proportionately to both credits.

30.A, B and C are partners who contributed equally to the capital. D without the
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knowledge of the death of C contracted with A who also was unaware of the death of
C. The liability of A is P90, 000.00. How much can D collect after exhausting
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partnership assets in the amount of P60, 000.00.

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a. P30, 000.00 from any one of A, B and C.

b. P15, 000.00 each from A and B.
c. P10, 000.00 from each of A and B and P10, 000.00 from C’s estate.
d. The partners are not liable beyond their capital contribution because the
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partnership was already dissolved at the time of liability.

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