OBLIGATIONS – DIAGNOSTIC EXERCISES

TEST 1 – MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.

1. The following are the requisite of an obligation, except:

a. Passive subject, debtor or obligor
b. Active subject, creditor or oblige
c. Efficient cause
d. Demand
2. Obligations may arise from any of the following, except:
a. Contracts
b. Quasi-contracts
c. Law
d. Prestation
3. It is the voluntary administration of the property of another without his consent.
a. Negotiorum gestio
b. Solution indebiti
c. Quasi-delict
d. Contracts
4. It is a wrong committed without any pre-existing relations between the parties.
a. Natural obligation
b. Quasi-delict
c. Quasi-contract
d. Crime
5. Unless the law or the stipulations of the parties require another standard of care, every
person obliged to give something is also abliged to take care of it with:
a. Extra-ordinary diligence
b. Diligence of a father of a good family
c. Diligence of a good father of a family
 d. Good diligence of a father of a family
6. The creditor has a right that is enforceable against a definite passive subject. The right is
known as:
a. Personal right
b. Real right
c. Natural right
d. Civil right
7. It is a thing that is particularly designated or physically segregated from all others of the
same class.
a. Generic thing
b. Indeterminate thing
c. Determinate thing
d. Real thing
8. One of the following is determinate thing. Which is it?
a. A cow
b. A horse
c. A Toyota car with engine no. 12345, body no. 35787 and plate no. ABC 123.
d. A ring with diamond embellishment
9. Demand must be made on the due date of the obligation in order for delay to exist in
one of the following cases. Which is it?
a. When it was stipulated by the parties that demand need not be made.
b. When the law provides that demand need not be made.
c. When the obligation does not indicate whether demand must be made or not on
due date.
d. When time is of the essence of the contract.
10. This refers on the delay on the part of the creditor.
a. Mora solvendi ex re
b. Compensation morae
c. Mora solvendi ex personae
 d. Mora accipiendi
11. There shall be no liability for loss due to fortuitous events in one of the following cases.
Which is it?
a. When the debtor delays.
b. When the parties so stipulated that there shall be liability even in case of loss due to
fortuitous events.
c. When the nature of the obligation requires the assumption of risks.
d. When the obligation is to deliver a determinate thing and there was no stipulation as
to the liability of the debtor in case of loss due to fortuitous events.
12. The following are the remedies of the creditor to pursue his claims against the debtor,
except to:
a. Pursue the property owned and in possession of the debtor.
b. Exercise all the rights and vring all the actions of the debtor (accion subrogatoria)
c. Impugn the acts which the debtor may have done to defraud his creditors (accion
pauliana)
d. Compel the debtor to perform the service in obligations to do.
13. D borrowed P50,000 from C. C dies before he has collected the debt leaving S, his son,
as heir. Which of the following statements is correct?
a. S can collect from D although D and C did not agree that the credit right will pass on
to the heirs of C.
b. S cannot collect because the credit right is personal to C.
c. S can collect only f D and C agreed that the credit right will pass on the heirs of C.
d. S cannot collect because the law prohibits the transmission of the credit right.
14. D is obliged to give C a specific car if C passes the CPA Licensure Examination. D’s
obligation is an example of:
a. A pure obligation
b. An obligation with a suspensive condition
c. An obligation with a resolutory condition
d. An obligation with a period
15. One of the following obligations is not immediately demandable.
a. Pure obligation
b. Obligation with a resolutory condition
c. Obligation with an in diem period
d. Obligation with ex die period
16. One of the following is a void obligation:
a. D is obliged to give C P5,000.00 if C does not go to the moon.
b. D is obliged to give C P5,000.00 if D does not go to Baguio.
c. D is obliged to give C P5,000.00 if C does not go to Baguio.
d. D is obliged to give C P5,000.00 if D wins first prize in the sweepstakes on a ticket
that he had already purchased.
17. D is obliged to give C P10,000.00 if X dies. This is an example of:
a. An obligation with a suspensive condition
b. An obligation with a resolutory condition
c. An obligation with a period
d. A pure obligation
18. When the debtor binds himself to pay when his means permit him to do so, the
obligation is:
a. An obligation with a resolutory condition
b. A pure obligation
c. An obligation with a suspensive condition
d. An obligation with a suspensive period
19. Whenever a period is designated in an obligation, the said period shall be presumed to
have been established for the benefit of:
a. The debtor
b. The creditor
c. Both the debtor and the creditor
d. Neither of the parties
20. The debtor shall lose the right to make use of the period in the following cases, except
when he:
a. Becomes insolvent.
b. Violates any undertaking in consideration of which the creditor agreed to the eriod.
c. Attempts to abscond.
d. Does not furnish any guaranty or security to the creditor.
21. An obligation ceases to be alternative and becomes a simple obligation in the following
cases, except when:
a. The debtor has communicated his choice to the creditor.
b. The right of choice has been expressly granted to the creditor and his choice has
been communicated to the debtor.
c. Among the several prestations that are due only one is practicable.
d. Three prestations are due but one of them is unlawful or impossible.
22. D s obliged to give C a specific watch, a specific ring, or a specific bracelet. The parties
agreed that C will have the right to choose the thing which will be given to him. Before C
could make his choice, the watch and the ring are lost through D’s fault, successively.
What is the right of C?
a. C may choose the delivery to him of the bracelet, or the price of watch or the price
of the ring plus damages.
b. C cannot choose the price of the watch or the price of the ring because the said
objects have already been lost.
c. C can only choose to have the bracelet because anyway, D can still perform his
obligation.
d. C can only choose to have delivery of the bracelet or the price of the ring which was
the last item that was lost plus damages.
23. D is obliged to give C a specific ring. The parties agreed that D may give a specific
bracelet as substitute. Which of the following statements is true?
a. If the ring is lost through a fortuitous event before substitution, the obligation is
extinguished.
 b. If the bracelet is lost through a fortuitous event before the substitution, the
obligation is extinguished.
c. If the ring is lost through a fortuitous event after substitution, the obligation is
extinguished.
d. If the ring is lost through the debtor’s fault after substitution, the debtor shall pay
damages.
24. A, B, C and D are obliged to give V, W, X, Y and Z P20,000.00.
a. V may collect from A P20,000.00
b. V may collect from A P5,000.00
c. V may collect from A P1,000.00
d. V may collect from A P4,000.00
25. A, B, C and D joint debtors, are obliged to give V, W, X, Y and Z, solidary creditors,
P20,000.00.
a. V may collect from B P20,000.00
b. V may collect from B P4,000.00
c. V may collect from B P5,000.00
d. V may collect from B P1,000.00
26. A, B, C and D, solidary debtors, are obliged to give V, W, X, Y and Z, joint creditors,
P20,000.00.
a. V may collect from B P20,000.00
b. V may collect from B P4,000.00
c. V may collect from B P5,000.00
d. V may collect from B P1,000.00
27. A, B, C and D, solidary debtors, are obliged to give V, W, X, Y and Z, solidary creditors,
P20,000.00.
a. V may collect from B P20,000.00
b. V may collect from B P4,000.00
c. V may collect from B P5,000.00
d. V may collect from B P1,000.00
28. A, 25, B, 35, and C, 17, are solidary debtors of X in the amount of P9,000.00.
a. X may collect from A P9,000.00
b. X may collect from A P6,000.00
c. X may collect from A P1,000.00
d. X may collect nothing because the obligation is voidable, C being a minor.

29. The following obligations are divisible, except an obligation:

a. To give definite things.
b. Which has for its object the execution of a certain number of days of work.
c. Which has for its object the accomplishment of work by metrical units.
d. Which by its nature is susceptible of partial performance.
30. In obligations with a penal clause, the creditor as a rule may recover from the debtor in
case of breach the following:
a. The penalty as agreed upon, plus damages and interest.
b. The penalty and damages.
c. The penalty and interest.
d. Only the penalty
31. Consider the following statements:
I. The nullity of the principal obligation carries with it the nullity of the penal
clause.
II. The nullity of the principal obligation does not carry with it the nullity of the
penal clause.
III. The nullity of the penal clause carries with it the nullity of the principal
obligation.
IV. The nullity of the penal clause does not carry with it the nullity of the principal
obligation.
a. Statements I and III are true.
b. Statements I and IV are true.
c. Statements II and III are true.
 d. Statements II and IV are true.
32. D borrowed from C P50,000.00. the obligation is secured by a chattel mortgage on D’s
Toyota car. Subsequently, D paid C P20,000.00. unknown to D, T, a third person, pays C
P50,000.00 believing that D still owed C such amount.
a. T can recover P50,000.00 from D. if D cannot pay, T can foreclose the mortgage on
D’s Toyota car.
b. T can recover nothing from D because he paid C without the knowledge and consent
of D.
c. T can recover P30,000.00 from D. If D cannot pay, T can foreclose the mortgage on
D’s Toyota car.
d. T can recover P30,000.00 from D. if D cannot pay, T cannot foreclose the mortgage
on D’s Toyota car.
33. The following statements concerning payment by cession are true, except one. Which is
it?
a. The creditors become the owners of the properties of the debtor that were ceded to
them.
b. Payment by cession extinguishes the obligation only to the extent covered by the
proceeds of the sale of the debtor’s properties.
c. The debtor must be insolvent.
d. Cession affects all the properties of the debtor except those exempt from execution.
34. D obtained from ABC Bank a loan of P12,000.00 payable at the end of 10 years. Before
maturity, an extraordinary inflation supervened causing the value of the debt to fall to
P4,000,000.00 on the date of maturity. On due date, D must pay ABC Bank:
a. P12,000,00.00
b. P4,000,000.00
c. P36,000,000.00
d. P3,000,000.00
35. D borrowed from XYZ Bank P2,000,000.00 payable at the end of 5 years. Before
maturity, an extraordinary deflation supervened causing the value of the debt to rise to
P5,000,000.00 on the date of maturity. On due date, B must pay XYZ Bank:
a. P2,000,000.00
b. P5,000,000.00
c. P800,000.00
d. P20,000,000.00
36. The money or currency which the debtor may compel the creditor to accept in payment
of a debt, whether public or private, is known as:
a. Notes payable to order
b. Legal tender
c. Bill of exchange
d. Mercantile document
37. The delivery and transmission of ownership of a thing by the debtor to the creditor as
an accepted equivalent of performance is known as:
a. Payment by cession
b. Dation in payment
c. Application of payment
d. Consignation
38. D owes C the following debts: P6,000.00 due on June 12; P6,000.00 due on June 15;
P6,000.00 due on June 18; and P6,000.00 due in June 20. All debts are unsecured except
the debt due on June 20 which is secured by a pledge of D’s diamond ring to C. By
agreement, the benefit of the term on the 4 debts was granted to C. assuming that D
has P6,000.00 on June 18 and is ready to pay C, which of the following statements is
correct?
a. D may apply his payment of P6,000.00 to any of the debts due on June 12, June 15,
and June 18 since they are all due as of June 18.
b. D may apply his payment only to the debt due on June 20 because it is the most
burdensome to him.
 c. D must apply the payment proportionately to the debts due as of June 18 at
P2,000.00 each.
d. D may apply the payment to any of the four debts.
39. The offer made by the debtor to pay his obligation to his creditor is known as:
a. Consignation
b. Tender of payment
c. Application of payment
d. Dation in payment
40. Consignation alone wihout any tender of payment is sufficient in the following cases,
excpt:
a. When the creditor is absent or unknown or does not appear at the place of
payment.
b. When the creditor presents the title to the obligation for collection.
c. When without just cause, the creditor refuses to give a receipt.
d. When two or more persons claim the same right to collect.
41. M owes P P10,000.00. the obligation is evidenced by a promissory note. Subsequently, P
assigned the note to A, A to B, B to C, and C back to M. the obligation of M is
extinguished by:
a. Compensation
b. Confusion
c. Condonation
d. The obligation is not extinguished because there was no payment.
42. In order that condonation may extinguish an obligation involving a movable property
whose value exceeds P5,000.00 –
a. It is sufficient that the condonation and the acceptance are in writing, even a private
one.
b. It is required that the condonation and the acceptance be in a public instrument.
c. The delivery of the document evidencing the debt is sufficient since the property is
movable.
 d. The condonation and the acceptance may be made orally.
43. One of the following is not a requisite of legal compensation, which is it?
a. That each one of the obligors be bound principally, and that he be at the same time
a principal creditor of the other.
b. That the two debts be due.
c. That both debts be liquidated and demandable.
d. That the debts are payable at the same place.
44. Henry, husband, and Wilma, wife, are legally separated. By order of the court which
decreed the legal separation, Henry is obliged to give a monthly support of P10,000.00
to Wilma payable within the first five days of the month. Wilma owes Henry P10,000.00
by way of a business loan. On the other hand, Henry has not yet given Wilma’s support
of P10,000.00 for this month. Both debts are already due. Which of the following
statements is correct?
a. Both debts are extinguished by legal compensation because both are already due.
b. Wilma can claim compensation but not Henry.
c. Henry can claim compensation but not Wilma.
d. Neither one may claim compensation because the debts are not of the same kind.
45. D owes C P10,000.00 with G as guarantor. C, on the other hand, owes D, P8,000.00.
both debts are already due but D is insolvent. In this case –
a. C may collect from G P10,000.00
b. C may collect from G P2,000.00 because a guarantor can set up compensation as
regards what the creditor owes the principal debtor.
c. C may collect nothing from G because D is insolvent.
d. C may collect P8,000.00 from G.
46. D borrowed P50,000.00 from C. subsequently, D proposed to C that T would assume his
(D’s) debt. C accepted the proposal of D. This substitution of the debtor is known as –
a. Expromision
b. Delegacion
c. Tradition
 d. Dation en pago
47. Refer to the facts of No. 46. Assume also that on due date, T could not pay because of
his insolvency which was in fact subsisting but was known to D or of public knowledge at
the time that D delegated his debt. In this case –
a. C can revive D’s debt because T’s insolvency was already existing at the time that D
delegated his debt.
b. C can revive D’s debt whether or not he (D) was aware of T’s insolvency since he (D)
proposed the substitution.
c. C cannot hold D liable because his (D’s) obligation was extinguished when he was
substituted by T.
d. The novation is void because D did not take steps to determine the solvency of T
when he (D) delegated his debt.
48. D obliged himself to give 5 grams of “shabu” to C. later, the parties agreed that D would
instead give to C 5 sacks of rice. Which of the following statements is correct?
a. The novation is void because the original obligation is void. Hence, C cannot demand
the delivery of 5 sacks of rice from D.
b. The novation is valid because the new obligation is valid. Hence, C can demand the
delivery of 5 sacks of rice from D.
c. The original obligation although void is validated by the new obligation. Hence, C can
demand the delivery of 5 sacks of rice from D.
d. The new obligation is only voidable because had not yet performed the original
obligation at the time of the novation. Accordingly, the new obligation is binding and
C may demand the delivery of 5 sacks of rice from D until the new obligation is
annulled by a proper action in court.
49. On July 1, 2010, D obliged himself to give C P50,000.00 if C will marry X on or before
December 31, 2010. The condition of the obligation is a:
a. Positive condition
b. Negative condition
c. Joint condition
 d. Impossible condition
50. Refer to No. 49. Which of the following statements is incorrect?
a. The obligation of D is demandable if C marries X on or before December 31, 2010.
b. The obligation of D is extinguished if it is already January 1, 2011 and C has not yet
married X.
c. The obligation of D is extinguished on December 2, 2010 if X dies on the same date
and C has not yet married X.
d. The obligation is demandable if C marries X on January 1, 2011.
51. On July 1, 2010, D obliged himself to give C a specific car if C will not marry X on or
before December 31, 2010. The condition of the obligation is a:
a. Positive condition
b. Negative condition
a. Divisible condition
b. Impossible condition.
52. Refer to N. 51. Which of the following statements is incorrect?
a. The obligation of D is demandable if C marries X on January 1, 2011.
b. The obligation of D is demandable on December 2, 2010 if X dies on the same date
and D has not yet married X.
c. The obligation of D is demandable if it is already January 1, 2011 and D has not yet
married X.
d. The obligation is demandable if C marries X on December 2. 2010.
53. D owes C P5,000.00. T, a third person and without any intention to be reimbursed by D,
paid the debt without the consent of D. C accepted the payment.
a. The payment did not extinguish the debt of D to C because it was made without the
consent of D.
b. The payment did not extinguish the debt because it was not made by D himself.
c. The payment is considered valid because it was accepted by the creditor.
d. The payment may be considered valid if T had the intention to be reimbursed.
54. A mode of extinguishing obligations up to their concurrent amount when two persons
are principal debtors and creditors of each other is called:
a. Novation
b. Payment
c. Compensation
d. Merger
55. D owes C P6,000.00. No date for payment was stipulated by the parties.
a. C cannot require D to pay because there is no date for payment.
b. C can require D to pay at anytime.
c. D is not liable to C because the obligation is void there being no date of payment.
d. D is not required to pay unless C goes to cpurt and asks the court to fix a period for
the payment.
56. Under a contract executed on November 1, 2010, D obliged himself to give a specific
horse to C on December 10, 2010. On December 8, 2010, C demanded the delivery of
the horse but D did not comply. The following day, the horse was struck by lightning and
died instantly.
a. The obligation of D is extinguished because the loss is due to fortuitous event and D
was not in default.
b. The obligation of D is not extinguished because D can deliver another horse.
c. The obligation of D is not extinguished because D was in default.
d. The obligation of D is not extinguished because the demand was not made on due
date.
57. Which of the following is not considered a conditional obligation?
a. D to pay c P5,000.00 as soon as D has the means.
b. D to pay c P5,000.00 if C marries X.
c. D to pay c P5,000.00 if C tops the CPA Examinations.
d. D to pay C if X dies of malaria.
58. The distinction between merger and compensation is that in merger:
a. The two debts may be payable at different places.
 b. Two persons are in their own right debtors and creditors of each other.
c. The debtor and creditor may agree on the set-off of debts that are not yet due.
d. The debtor and the creditor refer to only one person.
59. The passage of time as a mode of acquiring or losing a right including the
extinguishment of an obligation is called:
a. Remission
b. Novation
c. Prescription
d. Merger
60. Legal compensation shall not be proper in three of the following cases. Which is the
exception?
a. Commodatum
b. Civil liability arising from a criminal offense
c. Gratuitous support
d. Bank deposit
61. Cecilia, the owner of a sari-sari store, purchased several bags of “Dulcita” candy worth
of P5,000.00 from Olga, an authorized dealer of the product. On due date, Cecilia, who
sells the candies at P1.00 each, tendered her payment to Olga consisting of 5,000 pieces
of P1.00 coins.
a. Olga may refuse to accept the payment and demand that she be paid in bills.
b. Olga may not refuse to accept the payment because what Cecilia was offering as
payment is money circulated in the Philippines.
c. Cecilia may consign the payment in court if Olga refuses to accept it.
d. The tender made by Cecilia was valid because the P1.00 coins came from her sales
and she had plenty of them.
62. Dominico and Domingo are jointly and severally liable to Crispino for P100,000.00. the
obligation is due on June 30, 2010. On June 25, 2010, Domingo paid the whole amount
of the note to Crispino. If Domingo reimburses Dominico on July 15, 2010, Dominico is
entitled to receive from Domingo:
 a. P50,000.00 plus interest from June 25 to July 15, 2010.
b. P50,000.00 plus interest from June 25 to June 30, 2010.
c. P50,000.00 plus interest from June 30 to July 15, 2010.
d. P50,000.00 with no interest because Dominico paid the note before due date.
63. One of the following statements does not pertain to dacion en pago. Which is it?
a. Ownership of the thing is transferred to the creditor.
b. The debtor must be insolvent.
c. It does not affect all the properties of the debtor.
d. It does not require plurality of creditors.
64. One of the following does not apply to payment by cession. Which is it?
a. Ownership of the debtor’s properties is transferred to the creditor.
b. The debtor must be insolvent
c. It affects all the properties of the debtor except from execution.
d. There are several creditors.
65. A, B and C are solidarily liable to X for P30,000.00. A pays X the whole amount due. C,
however, is insolvent.
a. A alone will bear the share of c who is insolvent since he (A) made the payment.
b. A can collect from B P10,000.00.
c. A can collect from B P15,000.00.
d. A can demand a refund of P10,000.00 from X pertaining to C’s share since C is
insolvent.
66. Anna Almeda, Belinda Bersola, and Claudia Cabrera executed the following promissory
note:
“ I promise to pay Dolores Dominguez or order the sum of P30,000.00 on June
30, 2010.
(Sgd.) Anna Alameda
(Sgd.) Belinda Berso;a
(Sgd.) Claudia Cabrera”

On June 30, 2010, Dolores Dominguez can collect from Anna Almeda:
 a. P10,000.00
b. P30,000.00
c. P20,000.00
d. Nothing, because the note is void since it says “I promise” but was signed by three
persons.
67. One of the following is a valid obligation. Which is it?
a. D promised to give C P50,000.00 if C will not swim across the Pacific Ocean.
b. D promised to give C P50,000.00 if D goes to Tokyo.
c. D promised to give C P50,000.00 if C can fly to the moon.
d. D promised to give C P50,000.00 if C gives him 5 grams of marijuana.
68. An obligation where various prestations are due but the performance of all of them is
required in order to extinguish the obligation is known as:
a. Alternative obligation
b. Facultative obligation
c. Conjunctive obligation
d. Simple obligation
69. A, B and C are solidary debtors of X in the amount of P9,000.00. subsequently, X
renounced the share of A. A accepted the renunciation of his share. On due date, B paid
X P6,000.00. B demanded reimbursement from C but C is insolvent. In this case:
a. B may demand the payment of P3,000.00 from A.
b. B may not demand any payment from A because the share of A had already been
renounced or condoned.
c. B may demand P1,500.00 from A representing A’s share in C’s insolvency.
d. B may demand from A P4,500.00 so that their sharing in the total debt is equal.
70. D is indebted to C for P20,000.00 which is due on June 10. C owes D 15,000.00 which is
due on June 5. On June 8, C assigned his credit rights to T. D gave his consent to the
assignment but did not reserve his right to the compensation. On June 10, how much
may T collect from D?
a. P20,000.00
 b. P15,000.00
c. P5,000.00
d. Nothing.
71. On May 1, 2010, D executed a written undertaking obliging himself to deliver 100 sacks
of rice to C on May 31, 2010. On May 28, 2010, C demanded the delivery of 100 sacks of
rice from D but D did not comply. The following day, a fire of undetermined origin
destroyed D’s warehouse together with about 500 sacks of rice stored therein and from
which D intended to get 100 sacks of rice for delivery to C.
a. D’s obligation to deliver 100 sacks of rice to C is extinguished, the cause of the loss
being a fortuitous event.
b. D’s obligation to deliver 100 sacks of rice to C is not extinguished because he can get
100 sacks of rice from other sources.
c. D’s obligation to deliver 100 sacks of rice to C is not extinguished because D was in
default.
d. D’s obligation is to pay damages because he was in default.
72. On June 1, 2009, Demetrio obtained a loan of P100,000.00 from Cornelio. The loan,
which is payable on or before June 1, 2010, is secured by a chattel mortgage on
Demetrio’s brand-new Toyota car with plate number XYZ 123. On February 1, 2010,
while Demetrio was opening thr trunk of his car at the parking lot of a grocery store to
place the groceries he had just purchased, three unidentified men approached him and
took his car at gunpoint. He reported the carnapping to the authorities but his car has
not been recovered.
a. Cornelio may demand immediate payment of the loan unless Demetrio gives
another security therefore.
b. Cornelio may demand payment only on June 1, 2010 because Demetrio has the
benefit of the period and the loss of the car was due to force majeure.
c. Cornelio may no longer demand payment since the loan was extinguished by reason
of the loss of the car due to fortuitous event.
 d. Cornelio may demand immediate payment even if Demetrio offered another
security because the car is determinate and could not be replaced.
73. The estate of X who died recently, shows among other documents/contracts, the
following:
I. A certificate from Harvard University granting a scholarship to X. X was subjected
to exhaustive examination and interviews before he was granted the scholarship.
He was supposed to start studying at Harvard in 3 months’ time.
II. Articles of partnership of XYZ Enterprise showing X as a general partner.
III. A stock certificate of DEF Corporation showing X as the owner of P5,000.00
shares of stock.
IV. A promissory not amounting to P100,000.00 executed by M in favor of X. the
note is due after 90 days.

Which of the rights of X arising from the said documents/contacts will be transmitted to
the heirs of X?

a. I and II
b. II and III
c. III and IV
d. I and IV
74. The following statements pertain to either payment by cession or dacion en pago.
I. The debtor is insolvent.
II. Ownership of the thing/s is transferred to he creditor/s.
III. Plurality of creditors is required.
IV. Obligations are totally extinguished as a rule.
a. Statement I and IV pertain to payment by cession.
b. Statement I and III pertain to dacion en pago.
c. Statement II and IV pertain to dacion en pago.
d. Statement III and IV pertain to payment by cession.
75. The return of what has been paid by mistake is known as:
 a. Solution indebiti
b. Negotiorum gestio.
c. Quasi-delict.
d. Natural obligation.

Items 76, 77, and 78 are based on the following information:

Dolores borrowed P15,000.00 from Consuelo. On due date, Dolores was not able
to pay but she promised to give Consuelo a specific ring, a specific bracelet, or a
specific necklace, in payment of the debt. Consuelo accepted the offer of
Dolores.

76. What kind of obligation is the new obligation of Dolores?

a. Facultative obligation
b. Compound obligation
c. Alternative obligation
d. Simple obligation
77. How was the obligation of Dolores to pay P15,000.00 extinguished?
a. By compensation
b. By novation
c. By confusion
d. By condonation
78. Assume that before Dolores could deliver any of the ring, bracelet or necklace, the ring
and the bracelet were lost successively through the fault of Dolores. In this case:
a. Consuelo may demand the payment of the price of the ring or the price of the
bracelet plus damages, or the delivery of the necklace.
b. Dolores may deliver the necklace to Consuelo without any obligation to pay
damages.
c. Dolores may deliver the necklace to Consuelo with the obligations to pay damages
because the ring and the necklace were lost through her fault.
 d. Consuelo may demand the payment of the price of the bracelet which was the last
item that was lost, plus damages.
79. D obtained a loan of P100,000.00 from C. D used the amount as placement fee for a job
in the Middle East. The loan agreement showed that the loan was payable within one
year with interest at 6% per annum. However, there was no provision saying that the
rigths and obligations of the parties would be transmitted to their heirs or successors-in-
interest. Before maturity, D died leaving his son as heir. Which of the following is
correct?
a. C cannot collect from S because no mention was made in the agreement between D
and C that the rights and obligations of the parties would be transmitted to their
heirs.
b. C can collect from S although no mention was made in the agreement that rights
and obligations would be transmitted to the heirs.
c. C cannot collect from S because the obligation is personal to D.
d. C cannot collect from S because the law prohibits the transmission of the obligation.
80. Hilario, husband, and Wynona, wife, are legally separated. By order of the court which
decreed the legal separation, Hilario is obliged to give a monthly support of P20,000.00
to Wynona payable in advance within the first five days of the month. Wynona owes
Hilario P20,000.00 by way of loan. On the other hand, Hilario has not yet given
Wynona’s support of P20,000.00 for the preceding month and another P20,000.00 for
the present month. All the debts are already due. Based on the foregoing facts, which of
the following statements is incorrect?
a. If Wynona demads her support for the preceding month, Hilario may set up
compensation as regards the loan that Wynona owes him.
b. If Wynina demands her support for the current month, Hilario may claim
compensation as regards the loan that Wynona owes him.
c. If Hilario demands the payment of the loan, Wynona may set up compensation as
regards her support for the preceding month that Hilario owes her.
 d. If Hilario demands payment of the loan, Wynona may set up compensation as
regards her support for the current month that Hilario owes her.
81. One of the following is not demandable at once. Which is it?
a. D to give his car to C. No date was fived by the parties for the date of the delivery.
b. D to give his car to C until C completes his course in BS Accountancy.
c. D to give his car to C antil X dies.
d. D to give C his car should C enroll in BS Accountancy.
82. D owes C the following debts: P6,000.00 due on January 1; P6,000.00 due on January 15;
P6,000.00 due on January 31; P6,000.00 due on February 15; P6,000.00 due on February
28; and P6,000.00 due on March 15. All the debts are unsecured except the one on
February 28. The parties stipulated that C may demand payment on or before due date
of each debt. Assume that today is February 16. D, however, has not yet paid any of the
debts. He has in possession P6,000.00 which he intends to pay C.
a. D may apply the payment to the debt due on February 28 because it is the most
burdensome to him.
b. D may apply the payment to any of the five unsecured debts.
c. D may apply the payment to any of the four debts that have become due as of
today, February 16.
d. D may apply the payment to all of the debts that have become due as of today,
February 16, proportionately at P1,500.00 each.
83. D made a promise to give a ring to C. Before D could deliver a ring to C, C borrowed D’s
ring. After a week, D demanded the return of the ring that he had lent to C. c refused to
return the ring claiming that there was compensation between his obligation to return
the ring of D and D’s obligation to give him a ring. Based on the foregoing facts, which of
the following atatements is incorrect?
a. C entitled to claim compensation.
b. C is not entitled to claim compensation.
c. D may oppose the compensation being claimed by C.
 d. Only D may claim the compensation should C demand the delivery of a ring from
him (D).
84. Maila made a non-negotiable promissory note with Pia as payee. Pia assigned the note
to Aiko, Aiko signed the note to Bea, Bea assigned the not to Carmina, Carmina ssigned
the note to Helen, and Helen assigned it back to Maila.
a. Maila’s obligation is extinguished by condonation.
b. Maila’s obligation is extinguished by confusion.
c. Maila’s obligation is extinguished by compensation.
d. Maila’s obligation is not extinguished because the note is not negotiable.
85. Lafuente is a lessee of Oberon’s building. Under the lease contract, Lafuente must pay
the monthly rental of P10,000.00 to Oberon at Oberon’s office within the first 5 days of
the month in advance. On the sixth month of the lease, Lafuente went to Oberon’s
office to pay the rental but he as told by Elcano, an employee of Oberon, that Oberon
wsa confined at the hospital. Elcano told Lafuente that he could entrust the payment to
him. Santiago, a son of Oberon, who happened to be around, however, demanded that
Lafuente must pay to him claiming that as Oberon’s son, he was the one authorized to
receive the payment. Given the situation where you do not know to whom you will give
your payment, which of the following mode of payment would you avail yourself of if
you were Lafuente?
a. Dacion en pago
b. Payment by cession
c. Consignation
d. Application of payment
86. D promised to give C 10 sacks of rice when X, C’s father, dies. The obligation of D to C s:
a. An obligation with a suspensive condition.
b. An obligation with a resolutory condition.
c. An obligation with a period.
d. A pure obligation.
87. D bought a plane ticket for Hong Kong from Wings Travel Company. Later, however, D
cancelled his flight to Hong Kong because of the SARS epidemic in the place. Upon being
informed of the cancellation, Wings Travel told D that D could get the refund of his
plane ticket within two days. In the meantime, D thought of going instead to Australia so
he called Wings Travel to send him a ticket for Brisbane promising to pay the cost of the
ticket in two days. Assuming that the refund due to D for his unused plane ticket to
Hong Kong is of the same amount as the cost of his plane ticket to Australia, D two days
later need not pay Wings Travel by reason of:
a. Confusion.
b. Novation.
c. Compensation.
d. Condonation.
88. On a certain year, D was obliged under a contract executed on March 1 to deliver an
agricultural land to C on April 1. D, however, actually delivered the land and the fruits
thereof to C on May 1. C had the right to the fruits of the agricultural land beginning on:
a. March 1
b. April 1
c. May 1
d. The period should be fixed by the court so that it can be determined when C is
entitled to the fruits.
89. Refer to the foregoing number. C became the owner of agricultural land and the fruits
thereof on:
a. March 1
b. April 1
c. May 1
d. The period should be fixed by the court so that it can be determined when C actually
became the owner of the agricultural land and its fruits.
90. The right of C before the delivery, on one hand, and his right after the delivery, on the
other hand, of the agricultural land and its fruits, to him are referred to as:
 a. Personal right and real right, respectively.
b. Real right and personal right, respectively.
c. Both are considered a personal right.
d. Both are considered real right.
91. Assuming that in No. 88, D did not deliver the land and its fruits to C. instead, he
delivered the same to X, who was in good faith when he acquired the land and its fruits,
on April 30.
a. X is the rightful owner of the land.
b. C is the rightful owner of the land.
c. C has a right of action against X.
d. C cannot ask for damages against D.
92. Which of the following is not a proper remedy for the creditor?
a. To compel the debtor to make the delivery, if the obligation is to deliver a
determinate thing.
b. To ask that the obligation be complied with at the expense of the debtor, if the
obligation is to deliver a generic thing.
c. To compel the debtor to perform the obligation, if the obligation is an obligation to
do.
d. To ask the debtor that what has been done be undone, if the obligation is an
obligation not to do.
93. The delivery of the creditor of mercantile documents such as checks shall produce the
effect of payment:
a. Upon the delivery.
b. When they have been cashed.
c. When through the fault of the debtor they have been impaired.
d. When they are deposited in the bank.
94. Which of the following statements concerning delay is incorrect?
a. There is no delay in obligations not to do.
 b. Delay, as a rule, exists, when the debtor does not perform his obligation on the date
it is due.
c. Demand, as a rule, is required, in order for delay to exists.
d. When time is of the essence of the contact, delay on part of the debtor exists
despite the absence of demand.
95. When the debtor and the creditor agree to a dacion en pago (transfer of ownership of
property to the creditor to settle a monetary obligation), before such transfer of
ownership, there is actually a:
a. Compensation
b. Confusion
c. Condonation
d. Novation
96. The delivery of mercantile documents such as checks will produce the effect of
payment:
a. When through the fault of the creditor they have been impaired.
b. Upon delivery of the mercantile document.
c. When they are certified by the bank.
d. When they are presented to the bank for payment.
97. XYZ is a cooperative store. On July 1, 2010, it paid the Government of the City of Manila
certain taxes believing that it owed the same. After six months, XYZ learned that it was
not subject to the said taxes. Accordingly, it sought to recover the said taxes it
previously paid. The obligation of the Government of the City of Manila to return the
said taxes paid is based on:
a. Negotiorum gestio.
b. Solution indebiti.
c. Quasi-delict.
d. The Government is exempt from giving tax refunds.
98. S sold 100 bottles of imported “Fundador” brandy to B who paid immediately the price
thereof amounting to P20,000.00. S promised to deliver the brandy to B within one
 week from their agreement. On the agreed date of delivery, S delivered to B 100 bottles
of fake “Fundador” brandy. The contract between S and B is:
a. Voidable
b. Void
c. Valid
d. Rescissible
99. D obtained a loan from C amounting to P50,000.00 which is payable in 10 equal monthly
installments. The loans bears interests of 1% per month which D agreed to give to T, a
student whom C is sending to school. To secure the loan, D executed a chattel mortgage
on his car. Although D has been paying the monthly interest to T, D could not pay any of
the installments due. In view thereof, D proposed, and C accepted that D should give
instead a diamond ring to C in place of the loan of P50,000.00 within two months from
their new agreement. T, however, was not notified of the new obligation. Based on the
forgoing facts, which of the following statements is incorrect?
a. D’s obligation to give C P50,000.00 is extinguished by novation.
b. The accessory contract of the chattel mortgage is extinguished by the new
agreement between D and C.
c. T is a party to the original agreement between D and C.
d. The new contract did not extinguish D’s liability to pay interest to T.
Alternative obligation and facultative obligation are similar in which of the following
respects?
100. Alternative obligation and facultative obligation are similar in which of the
following respects?
a. The right of choice may be given either to the debtor or creditor.
b. Several prestations are due.
c. Only one prestation is due but the debtor may render another in substitution.
d. The obligation becomes a simple obligation once the choice of the prestation is
made and communicated.
101. D borrowed P5,000.00 from C. the obligation is payable in full after 30 days. In
which of the following cases is D justified in making a consignation of his payment in
court?
a. If C refuses to accept the payment in the form of a check which is certified by the
bank to be supported by sufficient funds.
b. If C refuses to accept the payment consisting of 5,000 pieces of P1.00 coins.
c. If C refuses to accept the first instalment in the form of a P1,000.00 bill, D
promising to pay the balance of the debt in 4 equal monthly installments.
d. If C refuses to accept the payment consisting of 250
pieces of P20.00 bills.
102. Which of the following condonations will not extinguish
the debtor’s obligation?
a. The condonation is in a public instrument. The acceptance is made
orally. The condonation involves a computer printer whose value
is P4,000.00.
b. The condonation and the acceptance are in a public instrument.
The condonation involves a parcel of land.
c. The condonation and the acceptance are made orally with the
creditor delivering to the debtor simultaneously the promissory
note amounting to P10,000.00.
d. The condonation is in a public instrument. The acceptance is made
in a private instrument. The condonation involves a television set
worth P20,000.00.
103. In which of the following independent cases is the payor of the
debtor’s debt not subrogated to the rights of the creditor?
a. D owes C P10,000.00. The debt is secured by a pledge of D’s ring
to C. D also owes X, P8,000.00. X pays C P10,000.00 without the
knowledge of D.
 b. D owes C P10,000.00. the debt is secured by a pledge of D’s ring to
C. X pays C P10,000.00 with the consent of D.
c. D owes C P10,000.00. the obligation is guaranteed by G. G pays C
P10,000.00 without the knowledge of D.
d. D owes C P10,000.00. The obligation is guaranteed by G. X pays C
P10,000.00 without the knowledge of D.
104. S sold his only horse to B for P10,000.00 cash. The parties agreed
that S shall deliver the within one week from their agreement. Nothing is
mentioned in the agreement on how the horse will be cared for by S
before delivery.
a. S must take care of the horse with the diligence of a good father of
a family before delivery.
b. S need not take care of the horse because nothing was mentioned
in the agreement on how the horse will be cared for.
c. S must take care of the horse with extraordinary diligence.
d. The absence of a stipulation on how the horse must be cared for
renders the sale void because such stipulation is an essential
element of the contract.
105. D owes C the following debts: P3,000.00 due on August 10;
P3,000.00 due on August 15; and P3,000.00 due on August 25which is
secured by a pledge of D’s ring. If today is August 22, and D pays C
P3,000.00 with neither D nor C designating the debt to which the
payment shall pay, the payment shall be applied:
a. To the debt due on August 10, following the “first-due, first-pay”
basis.
b. To the debts due on August 10, August 15, and August 20,
proportionately at P1,000.00 each.
c. To the debt due on August 25, since it is the most onerous to D.
d. To all the debts proportionately at P750.00 each.
106. M executed a promissory note payable to P for P100,000.00. the
note, which bears interest at 2% per month, is payable after 60 days. On
the date of maturity, P proceeded to M’s place to collect but when M
demanded the presentation of the promissory note, P could not present it
claiming that it had been lost. M is able and willing to pay the whole
amount due including the interest but he is at loss on what to do because
P does not have the instrument. On the other hand, if he does not pay the
amount due, the interest on the principal will continue to accrue. If you
were M, the remedy that you will likely avail yourself of is:
a. Dacion en pago
b. Payment by cession
c. Consignation
d. Application of payment
107. A, B,C, and D owe X, Y and Z the sum of P12,000.00. based on the
foregoing data, which of the following statements is incorrect?
a. The obligation is joint.
b. There are seven distinct debts in the obligation.
c. Each debtor is liable only for a total P3,000.00.
d. Each creditor is entitled to collect a maximum of P4,000.00.
108. P took a public bus in going to his office. Although P paid his fare,
the bus conductor does not issue to him a ticket. Along the way, the met
an accident causing a slight injury to P and other passengers. If P is to
recover damages from the bus owner, the source of te bus owner’s
liability is:
a. Contract
b. Quasi-delict
c. Law
d. P cannot recover any amount because no ticket was not issued.
109. One of the following obligations is void. Which is it?
 a. D to give C P50,000.00 if C does not run 100 miles without
stopping.
b. D to give C P50,000.00 when D has the means.
c. D to give C P50,00000 if D buys a brand-new car.
d. D to give C P50,000.00 if C runs for barangay chairman next year.
110. Which of the following obligation is a pure obligation and is
demandable at once?
a. D to allow C to use D’s car until December 31, 2011.
b. D to allow C to use D’s car until C finishes his course in accounting.
c. D to give C his car. No mention is made when D shall give the car.
d. D to give C a car if C finishes his course in accounting.
111. On January 1, 2010, D obtained a loan of P100,000.00 from C. the
loan is secured by a chattel mortgage on D’s car and is payable on
December 31, 2010. On September 26, 2010, the car was taken at
gunpoint from D while he was starting its engine at the parking lot of a
department store.
a. D’s loan obligation is extinguished. However, D must give a
property which C may sell to satisfy his claim.
b. D’s loan obligation is subsists. However, C may demand its
immediate payment unless D gives another security.
c. D’s loan obligation subsists. However, C may not demand
immediate payment since the loss of the security was without the
fault of D. D, moreover, is not required to give a new security.
d. D’s obligation is extinguished together with the mortgage since
the loss of the car was without the fault of D.
112. A and B are the owners of adjacent poultry and piggery farms. One
day, B got sick and failed to visit the farm. When A noticed that B was not
again around during the second day, he himself took care of the animals
by feeding them and cleaning the pig and poultry pens. A did this for the
next three days until B returned. A incurred necessary and useful
expenses amounting to P5,000.00 in the process. Under the
circumstances, B is obliged to reimburse A for such expenses which the
latter incurred by reason of:
a. Contract
b. Solutio indebiti
c. Negotiorum gestio
d. Quasi-delict
113. D has a savings deposit with XYZ Bank in the amount of P20,000.00
which D may withdraw anytime from the bank. He also has a loan
obligation to XYZ Bank amounting to P20,000.00 which has become due.
D wants to withdraw his savings deposit but XYZ Bank informs D that it
has claimed compensation of D’s deposit and his loan obligation.
a. Both D and XYZ Bank may claim compensation.
b. Neither D nor Xyz bank may claim compensation
c. Only D may claim or oppose compensation
d. Only XYZ Bank may claim or oppose compensation
114. Which of the following is an indivisible obligation?
a. To give a rendition tonight of Handel’s “Messiah” in a concert at
the Folks Arts Theater.
b. To construct a pavement measuring 2 meters wide and 10 meters
long.
c. To lecture for 5 Saturdays in a tax seminar.
d. To pay a loan obligation of P100,000.00 in 10 equal monthly
installments.
115. Devera obtained a loan of P50,000.00 from Centeno who is
engaged in the business of financing. The written contract of the parties
provides that the loan shall bear interest of 12% per annum and shall be
paid in full together with the interest at the end of 12 months at
Centeno’s business office. On due date, Devera proceeded to Centeno’s
business office to pay his debt but the place was padlocked and shows no
signs that it had been occupied for some time. Devera is now at a loss on
what to do as Centeno did not forward his present address to him. Devera
does not want to have any outstanding obligation at the end of the year
and incur further interest. Which course of action will you recommend to
Devera?
a. Tender of payment
b. Compensation
c. Consignation
d. Application of payment
116. D borrowed P100,000.00 from C. the parties agreed at the time
the obligation was constituted that should D so desire, he may give his
agricultural land to C by way of dacion en pago to pay his loan obligation
on due date. The obligation of D to C is:
a. A conjunctive obligation
b. A simple obligation
c. An alternative obligation
d. A facultative obligation
117. One of the distinctions between a facultative obligation and an
alternative obligation is that in an alternative obligation.
a. Only one thing is principally due.
b. The right of choice belongs to the debtor alone.
c. If the obligation to give a principal thing is void, the obligation to
give the substitute is also void.
 d. If all prestations except one are impossible, that which is possible
must still be given.
118. D stole the carabao of C. D was arrested, tried in court and
convicted. Aside from being sentenced to a prison term, D was also
ordered by the court to return the carabao. However, the carabao died
before D could deliver it to C.
a. D is not liable to C if the cause of the death of the carabao is a
fortuitous event.
b. D is laible to C only if the carabao died because of D’s fault.
c. D is liable to C whatever may be the cause of death of the carabao.
d. D has no liability to C whatever may be the cause of the death of
the carabao because his obligation to return the carabao was due
to an order of the court and not on his own volition.
119. Under a contract between 0 and C, D is obliged to deliver 10 bags
of detergent soap to C 10 days after the execution of their agreement. On
due date, D delivered to C 10 bags of detergent soap which he mixed
with chalk.
a. The contract entered into between D and C is voidable because of
the.-fraud employed by D.
b. The contract is valid. The fraud employed by D does not affect the
validity' of the contract but D is obliged to pay damages to C.
c. The contract is void because of the fraud employed by D in the
performance of his obligation.
d. The contract is rescissible because of the damages suffered by C.
120. D obtained a loan from C in the amount of P50,000.00. Unable to
give cash on due date in payment of his loan obligation, D proposed to C
that he would be giving instead his diamond ring to settle his debt. C
agreed and accepted the ring from D. The new agreement between D
and C involved both:
 a. Novation and application of payment.
b. Novation and dacion en pago.
c. Compensation and payment by cession.
d. Confusion and tender of payment.
121. Salas and Bersamin entered into a contract whereby Salas would
deliver 5 pieces of genuine Rolex wristwatches to Bersamin. Salas
proposed to Bersamin that should Salas deliver 5 units of fake pieces of
Rolex wristwatches by reason of financial difficulties on his part,
Bersamin would not sue him for damages on the ground of fraud.
Bersamin accepted the proposal. On due date, Salas delivered 5 pieces of
fake Rolex wristwatches. Upon discove ry of the fraud, Bersamin sues
Salas for damages. Salas contends that he cannot be held liable for
damages because Bersamin waived his right to hold him (Salas) liable on
the ground of fraud if the reason thereof is the financial difficulties of
Salas.
a. Bersamin cannot sue Salas for damages because the reason for
the waiver is valid, i.e., financial difficulties of Salas, which is a
valid reason for the waiver.
b. Bersamin can sue Salas for the annulment of the contract since it
is voidable.
c. Bersamin can sue Salas for damages because the waiver he made
is void. Nonetheless, the contract is valid.
d. Bersamin can sue Sales for the rescission of the contract since it is
rescissible.
122. B ordered 10 boxes of "X" shirts worth P2,000.00 per box from S paying
immediately the total, price of P20,000.00. While inspecting the goods after their
delivery to his store, B discovered that one box was missing. Upon being informed, S
apologized for the error and promised to refund the price of P2,000.00 within three
days as there was no more stock of "X" shirts available. In the meantime, B ordered and
 received from S one box of "Y" shirts which was also worth P2,000.00 promising to pay
the same within three days. On the third day, assuming that S had not yet refunded the
price of the undelivered "X" shirts to B, B need not pay S the price of "Y" shirts by
claiming:
a. consignation.
b. Compensation.
c. condonation.
d. novation.
123. The following are obligations with a term or period, except?
a. D to give C P50,000.00 on December 1, 2011.
b. D to give C P50,000.00 on Christmas day next year.
c. D to give C P50,000.00 upon the death of C's father.
d. D to give C P50,000.00 if C's father dies within 2 years.
124. A, B and C are liable, in solidum to X for P12,000.00. X renounced the share
of A who accepted it. Later, B becomes insolvent.
a. X can collect from C P8,000.00.
b. X can collect from C P4,000.00.
c. X can collect from C P12,000.00.
d. X can collect nothing from C.
125. Ace Realty Company (Ace) ordered 6 units of "Borden of typewriters from
Central Office Machines (Central) at the price units P8,000.00 per unit. However, Central
delivered to Ace 6 units of "Remington" typewriters, a superior brand, which was priced
P8,500,00 per unit. Central informed Ace that it will bill the latter for the “Remington
typewriters at P8,000.00 only. Ace refused to accept the "Remington" typewriters.
a. Centra;l can compel Ace to the accept the "Remington" typewriters since they
are of superior quality.
b. Central cannot compel Ace to the accept the "Remington" typewriters although
they are of superior quality.
 c. Central can compel Ace to accept the "Remington" typewriters since Ace is
required to pay only the price of "Borden" typewriters.
d. Central can compel Ace to accept the "Remington" typewriters since all that is
required of Central is to deliver a typewriter that can perform the same function
as the one that was ordered.
126. Prime Engineering Review Center (PERC) stated in the leaflets it distributed last
January that any reviewee who places first in licensure examinations for engineers this
year will receive a cash prize of P150,000.00.
a. The obligation of PERC is subject to a suspensive condition.
b. The obligation of PERC is subject to a resolutory condition.
c. The obligation of PERC is a pure obligation.
d. The obligation of PERC is an obligation with suspensive period.
127. Three of the following statements pertain to natural obligation. Which one does
not?
a. It is not enforceable in a court of justice.
b. Obligation exists by reason of equity and moral justice.
c. If performed voluntarily, recovery can no longer be made.
d. There is juridical necessity to perform
128. D has a grains warehouse in Davao, while C has a grains in Cebu. D borrowed 10
sacks of rice worth P10,000.00 from C for D's customer in Cebu. Later, C borrowed sacks
of rice which was also worth P10,000.00 from D for C's in Davao. Both the obligations
are already due. Transport costs to Davao amount to P1,000.00, while those for Cebu
amount to P800.00.
a. D and C need not pay each other since their debts compensated each other.
b. D and C need not pay each other since their debts compensated each other,
except for the delivery charges which C must pay to D in the amount of P200.00
(P1,000.00 less P800.00).
c. Compensation cannot take place because the debts are payable at different
places.
 d. D must pay C P10,800.00, while C must pay D P11,000.00.
129. D owes C P20,000.00 due on March 25. C, on the other hand, owes D the
following debts: P8,000.00 due on March 1, P3,000.00 due on March 8, P5,000.00 due
-on March 14, and P2,000.00 due on March 24. On March 18 , C assigned his credit right
to T without informing D who learned of the assignment on March 20. On March 25, T
may collect from D:
a. P20, 000:00.
b. P2, 000.00.
c. P4,000.00.
d. None, because the assignment made by C was without the knowledge of D.
130. D owes C P20,000.00 due on March 15. C, on the other hand, owes D the
following debts: P8,000.00 due on March 1, P3,000.00 due on March 8, P5,000.00 due
on March 14. On March 12, C assigned his right to T with notice to D but with D not
giving his consent to the assignment. On March 15, T can collect from u:
a. P20,000.00.
b. P9,000.00.
c. P4,000.00.
d. None, because the assignment made by C was without the consent of D.
131. On December 1, 2009, Miss Santos, a professor of Manila College, engaged the
services of Lepanto Transport to bring her class to Calamba, Laguna in time for the Rizal
Day celebration on December 30, 2009 which would start at nine o'clock in the morning,
The contract signed by the parties specified that a bus would be in the school premises
at six o'clock in the morning and would leave at exactly 6:320 a. m. However, Lepanto
Transport failed to send a busy on the date, time and place agreed upon.
CONTRACTS- DIAGNOSTIC EXERCISES
TEST 1 – MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.

1. A meeting of minds between two persons whereby one binds himself with respect to
the other to give something or to render some service is known as:
a. Obligation
b. Consent
c. Contract
d. Stipulation
2. The stages of a contract according to the order of their accurence are:
a. Birth, conception, and consummation
b. Conception, consummation, and birth
c. Conception, birth, and consummation
d. Consummation, conception, and birth
3. The elements of a contract without whicj a contract would not exist are known as:
a. Accidental elements
b. Natural elements
c. Special elements
d. Essential elements
4. Consensual contract has the following essential elements:
a. Consent of the contracting parties, object certain and cause or consideration.
b. Consent of the contracting parties, object certain, cause or consideration and
delivery of the object.
c. Consent of the contracting parties, object certain, cause or consideration and
formalities required by law.
 d. Consent of the contracting parties, object certain, delivery of the object, and
formalities required by law.
5. A real contract has the following essential elements:
a. Consent of the contracting parties, object certain and cause or consideration
b. Consent of the contracting parties, object certain, cause or consideration and
delivery of the object
c. Consent of the contracting parties, object certain, cause or consideration and
formalities required by law
d. Consent of the contracting parties, object certain, delivery of the object, and
formalities required by law
6. A solemn or formal contract has the following essential elements:
a. Consent of the contracting parties, object certain and cause or consideration.
b. Consent of the contracting parties, object certain, cause or consideration and
delivery of the object.
c. Consent of the contracting parties, object certain, cause or consideration and
formalities required by law.
d. Consent of the contracting parties, object certain, delivery of the object, and
formalities required by law.
7. Elements that accompany certain contracts unless set aside or suppressed by the parties
are known as:
a. Natural elements
b. Accidental elements
c. Essential elements
d. Original elements
8. The warranty against hidden defects in a contract of sale is an example of:
a. Natural elements
b. Accidental elements
c. Original elements
d. Stipulated elements
9. They refer to particular stipulations of the parties in a contract:
a. Accidental elements
b. Natural elements
c. Inherent elements
d. Essential elements
10. One of the following is a natural element of a sales contract.
a. Terms of payment
b. Rate of interest
c. Place of delivery
d. Warranty against eviction
11. A contract that can stand by itself is known as:
a. Accessory contract
b. Principal contract
c. Commutative contract
d. Gratuitous contract
12. A contract that does not have any special name under the law is known as:
a. Nominate contract
b. Innominate contract
c. Special contract
d. Nominal contract
13. A contract where both parties are required to do or to give something is known as a:
a. Bilateral contract
b. Unilateral contract
c. Gratuitous contract
d. Commutative contract
14. A contract where the parties contemplate a real fulfillment, hence, equivalent values
are given is known as:
a. Commutative contract
b. Gratuitous contract
 c. Onerous contract
d. Aleatory contract
15. The contracting parties may establish such stipulations, clauses, terms and conditions as
they may deem convenient provided they are not contrary to law, morals, good
customs, public order or public policy. This is known as a principle of:
a. Liberty of contract
b. Mutuality of contract
c. Relativity of contract
d. Obligatory force of contract
16. The contract must bind both contracting parties; its validity, or compliance cannot be
left to the will of one of them. This is known as the principle of:
a. Mutuality of contract
b. Relativity of contract
c. Consensuality of contract
d. Freedom to contract
17. Contracts take effect only between the contracting parties, their assigns and heirs,
except in cases where the obligations and rights arising from the contract are not
transmissible by their nature, or by stipulation, or provision of law. This principle of
contract is known as:
a. Relativity of contract
b. Mutuality of contract
c. Obligatory force of contract
d. Liberty of contract
18. D borrowed P500,000.00 from C. D died without having paid his loan obligation to C. He
left S, his son and heir, properties worth P400,000.00.
a. S is liable to C for P500,000.00
b. S is liable to C for P400,000.00
c. S is liable to C for P100,000.00
 d. S is not liable at all because he should not be made to shoulder the obligation of his
father.
19. A contract may be enforced by or against a third person, except:
a. In the case of stipulation pour autrui
b. When a third person induces another to violate his contract
c. In case of contracts intended to defraud creditors.
d. When the benefit to the third person is merely incidental
20. The principle that contracts are perfected by mere consent is known as:
a. Consistency of contract
b. Consensuality of contract
c. Consummation of contract
d. Mutuality of contract
21. Obligation arising from contracts have the force of law between the contracting parties
and should be complied with in good faith. From perfection, the parties are bound not
only for the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith,
usage and law. This is known as the principle of:
a. Consummation of contract
b. Consensuality of contract
c. Obligatory force of contract and compliance in good faith
d. Mutuality of contract
22. One of the following is not a real contract:
a. Pledge
b. Commodatum
c. Deposit
d. Sale
23. D borrowed P100,000.00 from C. the obligation is secured by a mortgage on D’s land
and building. C registered the mortgage with the register of Deeds. Thereafter, D sold
the land and building to X who was not personally aware of the existence of the
 mortgage at the time of sale since only the photocopy of the transfer certificate of title
which did not yet contain the annotation of the mortgage was shown to him . It was
only when he went to the Register of Deeds to register the sale of the land and building
to him that he learned of the mortgage.
a. C can collect from D and if D cannot pay, C can foreclose the mortgage although the
land and building are now owned by X.
b. C can collect from D, but if D cannot pay, C cannot foreclose the mortgage because X
was not aware of the existence of the mortgage at the time he bought the land and
building.
c. C cannot collect from D. He can only go after the mortgage which was given as
security.
d. C cannot foreclose the mortgage because X was not a party thereto.
24. It is the manifestation of the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract.
a. Consideration
b. Contract
c. Consent
d. Cause
25. On June 1, 2010, S offered to sell his only car to B for P100,000.00. B accepted the offer
by mailing his letter of acceptance on June 10, 2010. On June 12, 2010, B revoked his
previous acceptance and mailed his letter of revocation on the same date. S received
the letter of revocation on June 15, 2010.
a. The contract was perfected on June 14,2010 when s received B’s letter of
acceptance.
b. The contract was not perfected because at the time the acceptance was received,
the parties were no longer of one mind.
c. The contract was perfected on June 10, 2010 when B sent his letter of acceptance.
d. The perfection of the contract retroacts to June 1, 2010 when the offer was made.
26. On May 1, 2010, S offered to sell a specific car to B for P500,000.00. B sent his letter of
acceptance to S on May 8, 2010. On May 10, 2010, however, S died in a vehicular
accident and his secretary received the letter of acceptance on May 12, 2010 unaware
that S had already paid.
a. The contract was perfected on May 8, 2010 when B sent his letter of acceptance.
b. The contract was perfected on May 12, 2010 when the secretary of S received the
letter of acceptance.
c. The contract was not perfected because the offer of S became ineffective when he
died.
d. The contract was perfected on May 1, 2010 because the acceptance made by B on
May 8, 2010 retroacts to the date of the offer.
27. Three of the following instances will render an offer ineffective before acceptance is
conveyed. Which one will not?
a. Civil interdiction of either party
b. Insolvency of either party
c. Insanity of either party
d. Intoxication of either party
28. S offers to sell his car to B for P125,000.00 cash. B accepts the offer but is willing to pay
only P120,000.00.
a. The contract was perfected at the price of P125,000.00 .
b. The contract was perfected at the price of P120,000.00.
c. The contract was perfected at the price of P122,500.00, the average price of the
offer and the acceptance.
d. The contract was not perfected because the acceptance by B was qualified and it
constituted a counter-offer.
29. P appointed A as his agent to sell P’s only Honda Civic car for P400,000.00 cash. On
November 7, 2010, A, pursuant to the authority granted to him by P, offered to sell the
car to B at the price of P400,000.00. B accepted the offer on November 8, 2010 by
 sending a letter of acceptance to A, which letter of acceptance was received by A on
November 9, 2010. On November 10, 2010, A informed P that B had accepted the offer.
a. The contract was perfected on November 8, 2010 when B sent his letter of
acceptance.
b. The contract was perfected on November 9, 2010 when A received the letter of
acceptance.
c. The contract was perfected on November 10, 2010 when A notified P, the true
owner of the car, that B had accepted the offer.
d. The contract was perfected on November 7, 2010, since the acceptance by B
retroacts to the date of the offer.
30. On July 1, 2010, Serrano offered to sell his only Mercedes Benz car for P1,000,000.00 to
Benitez who was interested in buying the same. In his letter to Benitez, Serrano stated
that he was giving Benitez up to July 31, 2010 to make up his mind whether to buy the
car or not. On July 25, 2010, Serrano personally went to Benitez to inform him that he
was no longer willing to sell the car unless the price was increased to P1,400,000.00
because another buyer was interested in buying the car for the said amount of
P1,400,000.00.
a. Benitez may compel Serrano to sell to him the car for P1,000,000.00
b. Serrano may validly withdraw his offer to Benitez because the option was not
founded upon a consideration.
c. Serrano may not withdraw his offer until after the lapse of the option period that he
gave to Benitez.
d. The increase in price made by Serrano was not valid because it was made within the
option period.
31. Rockman and Company published an advertisement in the newspapers which reads as
follows “INVITATION TO BID: Construction of the company’s warehouse located at 123
Luzon Street, Sta. Quiteria, Quezon City.” The advertisement also included the
specifications of the warehouse to be constructed. Three companies submitted their
bids: ABC Company, with a bid price of P4,500,000.00; DEF Company, P4,750,000.00;
 and GHI Company, P5,000,000.00. After considering the financial capability, reputation
and experience of the bidders, the kind and quality of materials to be used and other
factors, Rockman and Company accepted the bid of DEF Company. ABC Company, the
lowest bidder, now questions the award made by Rockman and Company to DEF
Company which submitted a higher bid.
a. The award to DEF Company is voidable because it was only the second lowest
bidder.
b. ABC Company should be the winning bidder having submitted the lowest bid.
c. The award to DEF Companyis valid because Rockman and Company was not bound
to accept the lowest bidder.
d. The award to DEF Company is void by reason of Rockman’s violation of the terms of
the invitation to bid.
32. One of the following is incapable of giving his consent.
a. Insane persons
b. Deaf-mutes who do not know how to write
c. Deaf-mutes who know how to read
d. Unemancipated minors
33. A contract entered into by an incapacitated person is:
a. Void
b. Voidable
c. Rescissible
d. Void
34. Contracts entered into in a state of drunkenness or during hypnotic spell are:
a. Valid
b. Voidable
c. Rescissible
d. Void
35. A contract entered into by an insane person during a lucid interval is:
a. Valid
 b. Voidable
c. Rescissible
d. Void
36. Aside from fraud and undue influence, the following are the vices of consent, except:
a. Violence.
b. Intimidation.
c. Mistake.
d. Dealer's talk.
37. Mistake in three of the following will make a contract voidable. Which one will not?
a. Mistake as to the substance of the thing which is the object of the contract.
b. Mistake as to the principal conditions which principally moved one or both parties to
enter into the contract.
c. Mistake as to the identity or qualifications of one of the parties, which identity or
qualifications have been the principal cause of the contract.
d. Simple mistake of account.
38. It involves the employment of serious or irresistible force to obtain consent.
a. Intimidation.
b. Threat.
c. Violence.
d. Moral coercion.
39. It is present when one of the contracting parties is compelled by a reasonable and well-
grounded fear of an imminent and grave evil upon his person or property, or upon the
person or property of his spouse, descendants, and ascendants, to give his consent.
a. Violence.
b. Physical coercion.
c. Intimidation.
d. Mistake.
40. One of the following contracts is not vitiated by intimidation or violence, and hence
valid.
 a. A contract of sale which was signed by a party becausehis arm was being twisted by
a .third person.
b. A contract of sale which was entered into because the other party was pointing a
gun at his wife.
c. A contract where a party was compelled to assign his property to the other to pay a
just debt because the latter threatened to sue him in court if he does not pay his
debt.
d. A contract of donation of a parcel of land which a party signed because the other
party threatened to burn his house.
41. It exists when a person takes improper advantage of his power over the will of another
depriving the latter of a reasonable freedom of choice.
a. Intimidation
b. Duress
c. Threat
d. Undue influence
42. Fraud-exists in three of the following. Which is the exception?
a. When through. the insidious words or machinations of one. of the contracting-
parties, the other is. induced to enter into a contract which, without them, he would
not have agreed to.
b. When there is a failure to disclose facts,, when there is. A to reveal them, as when
the parties are bound by confidential relations.
c. When there, is an expression of an opinion by an expert which turned. out to be
wrong, and other party relied upon such expert knowledge.
d. When the misrepresentation refers to the usual exaggerations in. trade, and' the
other party had an opportunity to know the facts.
43. Abuiencia, who knew that his ring was embellished with glass, told Banzon that the
embellishment was emerald. Banzon, who knew that his watch was gold-plated, told
Abuiencia that it was made of pure gold. Banzon, believing that Abulencia's ring was
embellished with emerald, and Abuiencia; believing that Banzon's watch was made of
 pure gold, then entered into a contract whereby they exchanged their respective
articles. A week later, Banzon discovered that the ring was adorned only with an
ordinary glass.
a. The contract may be annulled at the instance of Banzon since he discovered the
fraud.
b. b. The contract may be annulled at the instance of Abulencia since Banzon also
employed fraud.
c. The contract is void because of the bad faith of both parties, hence, it shalt not
produce any effect.
d. Neither' party may ask for annulment since both are guilty of fraud. The contract,
thereof is valid.
44. An absolutely simulated contract is:
a. Void.
b. Voidable
c. Valid
d. Unenforceable
45. One of the following statements does not pertain to relatively simulated contract.
a. The parties conceal their real agreement.
b. The parties are bound by their real agreement provided it does not prejudice third
persons.
c. The parties are bound by their real agreement provided it is not contrary to law,
morals, public order or public policy.
d. The parties do not intend to be bound at all.
46. Servando and Bernardo entered into a contract where they made it appear that
Servando was mortgaging his lot and building to Bemardo to secure a contract of loan.
The truth, however, was that Servando was selling his lot and building to Bernardo.
Which of the followings statements is true?
a. The parties are bound by the contract of sale.
b. The parties are bound by their contract of loan and mortgage.
 c. The parties are not bound at all
d. The parties are bound by the contract of sale only when third persons are affected.
47. One of the following is not a requisite of the object of a contract.
a. It must be within the commerce of men.
b. If it is a right, it must be intransmissible.
c. It must not be contrary to law, morals, good customs, public order or public policy.
d. It must be determinate as to its kind or capable of being made determinate without
the need of the parties entering into a new agreement.
48. S and B orally entered into a contract whereby S sold his one-year production of eggs in
his poultry farm to B for P50,000.00 which amount B immediately gave in cash to S. the
contract between S and B is:
a. Void because the object was not existing at the time of the execution of the
contract.
b. Valid because future things may be the object of contracts.
c. Ressiscible because B will likely suffer damage if the eggs do not come into
existence.
d. Unenforceable because the contract was not in writing.
49. A died leaving properties estimated at P1,000,000 00 to his sons S and T. Subsequently,
S sold one-half of his inheritance to X for P3,000,000.00, although his share was still to
be delivered.
a. The contract is valid since the the inheritance is an existing inheritance.
b. The contract is void because what S sold is future inheritance which may not be the
object of a contract as a rule.
c. The contract is resissible.
d. d. The contract is unenforceable.
50. A contract whose cause is the promise of a thing or service by the other party is:
a. Onerous contract.
b. Gratuitous contract.
c. Lucrative contract.
 d. Remuneratory contract.
51. A contract whose cause is the liberality of the benefactor is:
a. A gratuitous contract or contract of pure beneficence.
b. A remuneratory contract
c. An aleatory contract
d. An onerous contract.
52. S sold his only car for P100,000.00 to B. Unknown to S, B bought the car from him so
that he could use the same in a bank robbery. What is the status of the sale of the car by
S to B?
a. The sale is void because the motive of B is illegal.
b. The sale is valid because the illegality of the motive of the parties to the contract
does not have any effect on its validity.
c. The sale is voidable because of the failure of B to disclose his motive to S.
d. The sale is rescissible at the instance of S because he would be damaged by the
illegal motive of B.
53. One of the following is not a requisite of cause in a contract. Which is it?
a. It must exist.
b. It must be lawful.
c. It must not be false.
d. It must be clearly stated in the contract.

54. D and C entered into a contract wherein D agreed to give to C P50,000.00 within 30 days
from the date of the execution of their agreement, which, however, does not state the
consideration received by D from C. What is the status of the contract between D and C?
a. The contract is void because. the cause is riot stated in the contract.
b. The contract is valid because the cause is presumed to exist and that it is lawful.
c. The contract is rescissible because D suffered damage by reason of absence of
cause.
 d. The contract is valid provided another contract is executed between D and C to state
the cause.
55. The defective contracts arranged according to the degree of their defectiveness from
the least defective to the most defective are:
a. voidable, rescissible, unenforceable, and void contracts.
b. rescissible, unenforceable, voidable, and void contracts.
c. rescissible, voidable, unenforceable, and void contracts.
d. unenforceable, rescissible, voidable, and void contracts.
56. The following are characteristics of rescissible contracts, except:
a. they may be set aside for equitable reasons.
b. they are valid until rescinded.
c. the action to rescind them prescribes.
d. the action to rescind them are not available to third persons even if their interests
are directty affected.
57. The following contracts are rescissible, except:
a. Those entered into by guardians whenever the wards whom they represent suffer
lesion by more than one- fourth of the value of the things which are the object of
the contract
b. Those entered into in representation of absentees, if the latter suffer lesion by more
than one-fourth of the value of the things which are the object of the contract.
c. Those undertaken in fraud of creditors but the latter can still collect the claims due
them through other means.
d. Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent
judicial authority.

58. G, the guardian of M, a minor, sold the fish harvested from the fishpond of M for
P7,400.00. The fish, however, had a value of P10,000.00.
 a. The sale is rescissible because M suffered lesion by more than one-fourth of the
value of the fish sold.
b. The sale is voidable because M is a minor.
c. The sale is unenforceable because G sold the fish without approval of the courts.
d. The sale is void because the object is outside the commerce of men.
59. The following are the requisites of a rescissible payment except:
a. the debt is already due.
b. b. the debtor is insolvent.
c. c. the debtor pays the debt.
d. d. the payment is not yet due.'
60. Rescission of a contract will prosper in one of the following cases. Which is it?
a. When there are other legal means to obtain reparation of the damages caused.
b. When he who demands rescission cannot return whatever he may be obliged to
restore.
c. When the object of the contract is in the possession of a third person who
purchased the property of the debtor in bad faith.
d. When the action to bring rescission has prescribed.

61. D owes the following creditor's: X, P50,000.00; Y, P60,000.00; and Z, P90,000:00. He has
assets valued Pt P400,000.00. Subsequently, D donated, among his assets a parcel of
land valued at P250,000.00 to C. The donation and acceptance were made in a public
instrument. The donation of the land made by D to C is:
a. Ressiscible, because it was presumed to have been made in fraud of creditors.
b. Unenforceable, because D was not authorized by his creditors.
c. Void, because the donation and acceptance should be registered.
d. Voidable, because D does not have the free disposal of his property.
62. C filed a complaint in court against D to collect a money debt amounting
to P500,000.00. After due hearing, the court rendered judgement in favor of C. Shortly
after the rendition of the judgment and before C has collected D's debt, D sold a parcel
 of land to X. Z, another creditor, learned of the sale made by D to X and now files an
action to rescind the sale.
a. The right to rescind the sale is exclusively granted to because it was he who first
learned of the sale and he has still to file a claim to collect D's debt.
b. The right to rescind the sale is exclusively granted to C because it was he who
obtained a favorable judgement and he has not yet collected D's debt.
c. Both C and Z have a right to rescind the sa!e since the sale is presumed in fraud of
creditors having been made by party against whom judgment has been render ed.
d. Neither C nor Z has a right to rescind the sale.
63. R, the representative of A, an absentee, sold the corn with a value of P30,000.00 and the
palay with a value of P50,000.00, harvested from A's agricultural farm for a total price of
P50,000.00. A, whose domicile was subsequently known, was informed of the sale made
by G. Based on the foregoing facts, which of the following statements incorrect?
a. A may seek payment of an additional P30,000.00 to recover the damages suffered.
b. A may just seek rescission of the sale of the corn to recover the damages he
suffered.
c. A may seek rescission of the sale of part of the corn and part of the rice to the extent
of the damages he sustained.
d. The partnership cannot adopt a name which does not include the name of at
least one of the partners.
62. Ornussa, the owner of a vacant lot, leased the same to Florida under an
agreement that the rental shall be paid by Florida at the rate of 10% of the annual net
income of the flower business that she would put up on the lot. A private agreement
was signed by the parties. In the first year of operations, Ornussa received from. Florida
the amount of P20,000.00 representing 10% of the net income of the flower shop
business.
a. Ornussa is a partner of Florida by her mere receipt of the share of the net profits
of the flower business of Florida.
b. The relationship of Ornussa and Florida is only that of a lessor and lessee.
c. Ornussa and Florida have a dual contract: partnership and lease.
d. Ornussa and Florida are not partners; neither are they lessor and lessee because
their agreement was not in a public instrument.
63. LIFE Company, a partnership engaged in the water distribution business, is
composed of partners Larredo, Ingles, Filler and Encanto. One, day, Larredo was driving
the firm's delivery truck beyond the speed limit in order to serve its customers, when he
rammed into and caused extensive damage on the parked car of Tertullo.
a. Only Larredo can be held liable for damages by Tertullo.
b. LIFE Company and Larredo are solidarily liable for damages to Tertullo.
c. LIFE Company and the four partners are solidarily liable for damages to
Tertulbo_
d. LIFE Company and the four partners are jointly liable for damages to Tertullo.
64. A person admitted as a partner into an existing partnership shall be liable up to
the extent of his separate assets, for what obligations?
a. Obligations of the partnership existing at the time of his admission only if there
was a stipulation.
b. Obligations of the partnership incurred after his admission only if there was a
stipulation.
C. Obligations of the partnership incurred before and after his admission even if
there was no stipulation.
d. Obligations of the partnership incurred before hisadmission if there was a
stipulation, and those incurred after his admission even if there was no stipulation.
65. PARAGON Enterprises, a partnership engaged in the garments manufacturing
business, is composed of partners Pacis, Ramas and Gonzales. During the year,
PARAGON bought a computerized embroidering machine amounting to P300,000.00
from Tadena with the following stipulation: down payment of P50,000.00; balance to be
paid in amount equal to 20% of the monthly net profits of PARAGON until the full
amount is paid.
a. Tadena is an actual partner of Pacis, Ramas and Gonzales :Turing the time that
he receives a share of the profits of PARAGON as payment of the purchase price of the
machine.
b. Tadena is only a partner by estoppel of Pacis, Ramas and Gonzales during the
time that-he receives a share of the profits of PARAGON as payment of the purchase
price of the machine.
c. Tadena is not a partner of Pacis, Ramas and Gonzales whether before or after he
has received the full payment of the purchase price of the machine from PARAGON.
d. Tadena is only a nominal partner of Pacis, Ramas and
Gonzales during the time that he receives a share of the profits of PARAGON as payment
of the purchase price of the machine

66. MAGIC Company is a partnership composed of Martha, Agnes,

Glenda, Irene and Candice, with Martha as manager who is authorized to collect the
credits of the partnership. Theresa owes Martha P4,000.00 which is due on December
10. She also owes MAGIC Company P6,000.00 which is due on December
20. On December 15, Theresa tendered payment in the amount of P4000.00 to Martha
in payment of her debt to the latter.
Martha issued her -own receipt acknowledging the payment.
a. The payment will be applied proportionately to the credits of MAGIC and Martha
in the amount of P1,600.00 and P2,400.00, respectively.
b. The payment will be applied in its entirety to Martha's credit.
c. The payment will be applied in its entirety to MAGIC's credit.
d. The payment will be applied equally to the two debts of
Theresa.

67. Aseron, the managing partner of ACE Company, was driving the delivery truck of
the firm when he rammed it into an electric post resulting in damages to the vehicle
amounting to P50,000.00.
To make up for accident, Aseron worked long hours for the firm and was able to
increase its sales from P5,000,000.00 to P15,000,000.00.
a. Aseron will no longer be liable for damages to ACE because he was able to
generate unusual revenues for the firm through his extraordinary efforts.
b. Aseron will still be liable to the firm for damages but the amount will be
equitably reduced since he was able to generate unusual profits for the firm through his
extraordinary efforts.
c. Aseron's obligation to the firm for damages will be extinguished by
compensation since ACE is also liable to him for the extraordinary efforts he exerted to
increase its sales.
d. Aseron and ACE will share equally in the damages of P50,000.00.-
68. Trevor owes P3,000.00 to CHAMP Company, a partnership composed of
Charles, Harry, Albert, Mark and Prince, with Mark as the manager who is authorized to
collect all credits of the firm. He also owes Charles the amount of.P6,000.00. Both debts
are already due. Trevor gives. P3,000.00 to Charles in payment of his debt to the latter.
Charles thus issues his own receipt.
a. Payment will be applied proportionately to the two credits at P1,000.00 for
Charles' credit and PP2,000.00 for CHAMP's credit.
b. Payment will be applied equally to the two credits.
c. Payment will be applied in its entirety to Charles' credit.
d. Payment will be applied in its entirety to CHAMP'S credit.

69. Barranda wrote Salvador a letter wherein he placed an order for a laptop
computer worth P80,000.00. In writing the letter, Barranda used a stationery which had
for its letterhead "Barranda and Bermudez, Real Estate Agents." Bermudez is not really a
partner of Barranda but they agreed to use the said letterhead to give a semblance of
bigness by making it appear that the two of them are partners. Salvador delivered the
laptop computer but Barranda defaulted in his payment of its price.
Against whom may Salvador proceed?
a. Barranda only since Bermudez is not his partner.
b. Barranda only since the purchase of the laptop computer is his personal
transaction
c. Barranda and Bermudez since they are partners in so far as Salvador is
concerned.
d. "Barranda and Bermudez, Real Estate Brokers," only since an actual partnership
was created between Barranda and Bermudez and it has a personality separate and
distinct from the two.
70. Daoang and Depante have been partners for more than 5 years in the purified
water business. At the start of the sixth year, Daoang assigned his interest in the
partnership to Trinidad, but Depante objected on the ground that he did not want
Trinidad to be his partner.
a. Trinidad automatically became a partner of Depante when Daoang conveyed his
interest to him.
b. Daoang and Depante continue to be partners despite Daoang's conveyance of his
interest to Trinidad.
c. The partnership between Daoang and Depante was automatically dissolved
when Daoang conveyed his interest to Trinidad.
d. The conveyance by Daoang of his interest in the partnership to Trinidad entitled
the latter to inspect the books, and participate in the management, of the partnership.

71. Palacios, Atienza, Tablante, Elamparo, Robledo, Ocampo and

Sajenes are partners in PATEROS Poultry Farms. Palacios, Atienza and Tablante have
been appointed as managers of the firm with the stipulation that none shall act without
the consent of the other two. On the date of the scheduled delivery of 500 kilos of
frozen dressed chickens ordered by Caintacky Restaurant, heavy rains caused a power
failure and made transport difficult due to landslides. A local resident offered to
purchase the dressed chickens (which were already thawing) at 80% of the contract
price. However, only Palacios and Atienza were around to, decide as Tablante, who was
on business trip for the firm, could not be contacted due to poor communication signals.
a. Palacios and Atienza cannot decide by themselves because the managing
partners must act with unanimity.
b. Palacios and Atienza may decide by themselves since any further delay would
result in more losses to the firm.
c. Palacios and Atienza can decide by themselves since they constitute the majority
among the managing partners, which is the required vote notwithstanding a stipulation
that one cannot act without the consent of the other managers.
d. The absence of Tablante cannot be alleged since there was a stipulation. that
none of the managing partners shall act without the consent of the others.
72. Querubin, Roces and Solis are partners in a law firm. Querubin was appointed as
judge of the Regional Trial Court. Such appointment:
a. suspends the participation of Querubin in the management of the firm without
causing the dissolution of-the partnership.
b. prohibits the inclusion of the name of Querubin in the firm name without
dissolving the partnership.
c. results in the dissolution of the partnership.
d. merely requires the disclosure of Querubin's appointment to the court without
dissolving the partnership.

73. Braganza, Ortiz and Nevado want to form a partnership with Braganza
contributing P500,000.00; Ortiz, office equipment; and Nevado, his services. If the three
were to form a limited partnership, who among them will be the limited partner/s?
a. Either Braganza or Ortiz or both of them.
b. Either Ortiz or Nevado or both of them.
c. Either Braganza or Nevado or both of them.
d. All the three must be limited partners.
74. Refer,to the preceding number. Assume that the three decide to form a general
partnership: As a result, which of the following is incorrect?
a. Any of the three may be appointed as manager.
b. All of them may be appointed as managers.
c. Only Nevado may be appointed as manager because he only contributes his
services.
d. Any two of them may be appointed as managers

75. CROWN Enterprises is composed of partners Chuck who contributed

P50,000.00;Rainier, P20,000.00; Oscar, P40,000.00; Waldorf, P10,000.00; and
Nelson, P5,000.00. No one was appointed as manager. Two proposed contracts were
voted upon by the partners during a meeting which took place as follows:
Contract I - Voting for approval of the contract were Chuck and
Rainier; voting for rejection were Oscar, Waldorf and Nelson.
Contract II - Voting for approval were Chuck and Rainier; voting for rejection were Oscar
and Waldorf; Nelson abstained.
Which of the foregoing contracts are considered approved?
a. Both contracts.
b. Neither of two contracts.
c. Contract I only.
d. Contract II only.

16. MACK's Restaurant is a partnership composed of Manalo, Alferez, Cancio and

Kilayco, with Manalo as the manager whose contribution is80% of the firm's capital
Manalo made Ongpauco- his associate by assigning one-half of his share in the
firm to the latter. Did Ongpauco become a partner in the firm?
a. Yes, because Manalo is the manager.
b. No, because the other partners must give their consent in order that Ongpauco
may be admitted to the partnership.
c. Yes, because the assignment by Manalo of his share in the firm did not affect his
ownership of the controlling interest.
d. No, because the assignment by Manalo of his share in the firm diminished his
interest in the partnership.
77. A partner is a co-owner with his partners of specific partnership property. Such
co-ownership:
a. allows a partner to assign his right in such property.
b. allows a partners to use such property for partnership purposes.
c. entitles the spouse, children and other relatives of the partner to claim support
from such property.
d. gives the private creditors of a partner to attach his right in such property.
78. CLEAN Laundry Services. Company is a partnership composed of Carpio, Legaspi,
Encinas, Alzate and Noval. Without the knowledge of the other partners, Carpio used a
coat brought to the shop by a customer for dry-cleaning in a party he attended.
The coat was accidentally stained with food sauce during the said party. Who will be
liable to the customer for damages?
a. Carpio only since he used the coat without the knowledge of the other
partners.
b. CLEAN Laundry Services Company and Carpio solidarily.
c. CLEAN Laundry Services Company and all the partners jointly.
d. CLEAN Laundry Services Company and all the partners solidarily.
79. A limited partner is prohibited on account of his claim against the partnership
from performing the following acts, except:
a. To receive or hold as collateral security any partnership property.
b. To receive from a general partner or the partnership any payment,
conveyance or release from liability, if partnership assets are not sufficient to
discharge partnership liabilities to outside creditors.
c. Transact business with the partnership.
d. None of the foregoing.
80. Lazarte, a limited partner in Bellevue Company, Ltd., received the amount of
P100,000.00 representing his contribution which was being returned on the date
stipulated in the certificate.
Partnership records, however, showed that the firm had liabilities of P220,000.00 which
arose before Lazarte received the return of his contribution, and assets of only
P90,000.00 after such return of contribution.
a. Lazarte is bound to bring back to the partnership the amount of P100,000.00
plus interest,- thereon. '
b. Lazarte is bound to give the partnership P220,000.00 plus interest thereon.
c. Lazarte is bound to give the partnership P130,000.00 plus interest.
d. Lazarte is not bound to return to the partnership any amount, because he
received the return of his contribution pursuant to a contractual stipulation.

TEST II - MATCHING TYPE. Indicate your answers by writing the letter representing the
statement or phrase that best describes, defines or explains the numbered items.

Terms
1. Partnership 12. Limited partnership
2. Particular partnership 13. Winding up
3. Partnership for a fixed term 14. Partnership for a particular
4. Partnership by estoppel undertaking
5. Capitalist partner 15. Universal partnership of
6. Dissolution profits
7. Substituted limited partner 16. Termination
8. Delectus personae 17. Partnership at will
9. General partnership 18. Limited partner
10. Subsidiary liability 19. Industrial partner
11. Universal partnership of all 20. General partner present property
Statements
A. He contributes his services to the partnership.
B. All the partners are general partners.
C. A period is stipulated for the existence of the partnership.
D. Refers to the process of settling the business or affairs of the partnership after
dissolution.
E. Two or more persons bind themselves to contribute money, property or industry
to a common fund with the intention of dividing the profits among themselves.
F. Property belonging to each partner at the time of the establishment of the
partnership as well as the profits realized therefrom belongs to the partnership.
G. The pro rata liability for partnership obligations of the partners, including
industrial ones, to the extent of their separate property after partnership assets have
been exhausted.
H. The principle that a person is free to choose those whom he wants to be
associated in partnership.
1. A partnership whose existence may be terminated at any time by the partners.
J. A partner who is liable only to the extent of his contribution to the partnership.
K. A partnership which comprises all that the partners may acquire by their work or
industry during the existence of the partnership.
L. A partnership where there is at least one general partner and at least one limited
partner.
M. The change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the business.
N. It has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession.
0. A partner who is liable to the extent of his separate property when all the
partnership assets have been exhausted.
P. He contributes money and/or property to the common fund of the partnership.
Q. A person admitted to all the rights of a limited partner who has died or who has
assigned his interest in the partnership.
R. The point when all partnership affairs are wound up.
S. It is not in 'reality a partnership but is considered as one with respect to those
who, by reason of their conduct or admission, are precluded from denying its existence.
T. A partnership organized for a certain purpose which when attained will cause the
dissolution of the partnership.
U. None of the foregoing.
TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word
`FALSE" if the statement is false.
1. An artificial person like a corporation, may be a partner in a partnership.
2. A limited partner may contribute money and/or property to a partnership but
not services.
3. A partnership has a personality separate and distinct from each of the partners.
4. A partnership begins from the moment of the execution of the contract, unless a
different date is stipulated.
5. A partnership whose capital in money or property amounts to P3,000.00 or more
does not acquire juridical personality if the contract is not recorded with the Securities
and Exchange
Commission.
6. The sharing of gross returns does not of itself establish a partnership even if the
persons sharing them have a joint or, common interest in the property from which the
returns are derived.
7. In a universal partnership of all present property, the partners may stipulate that
future property shall belong to the partnership but the stipulation cannot include
property acquired by inheritance, legacy or donation.
8. In a universal partnership of profits, property belonging to each partner at the
time of the establishment of the partnership shall continue to pertain to each partner
with only the usufruct passing on to the partnership.
9. Articles of universal partnership entered into without specification of its
nature, only constitute a universal partnership of all present property.
10. A man and a woman living together as husband and wife without the benefit of
marriage may enter into a universal partnership.
11. A partnership for a fixed term or a particular undertaking which is continued
after the expiration of the term or the attainment of the undertaking becomes a
partnership at will.
12. Spouses can validly enter into a particular partnership with each other.
13. The profits and losses of the partnership shall be divided equally among the
partners if they have no profit and loss sharing agreement.
14. A stipulation exempting a capitalist partner from losses is valid.
15. When a partner has been appointed manager in the articles of partnership, he
may be removed without just cause by the vote of the partner owning the controlling
interest.
16. An industrial partner can engage in business for himself if it is of a kind different
from the partnership business even without the consent of the other partners.
17. All partners including industrial ones shall be liable pro rata with all their
separate property after the partnership assets have been exhausted.
18. The partnership shall bear the loss of things which are contributed to the
partnership to be sold.
19. A newly-admitted partner is liable for partnership debts contracted before his
admission to the extent of his contribution, unless there is a contrary stipulation.
20. A partner may associate another person with him in his share but the person
admitted shall not be admitted to the partnership without the consent of all the
partners.
21. The partnership shall be solidarily liable with all the partners if one partner
acting within the scope of his apparent authority receives money or property of a third
person and misapplies it.
22. When a partner is not authorized to act for the partnership and the act of the
partner is not for apparently carrying on the business, the partnership shall be bound by
the act of such partner if the third person was not aware of the partner's lack of
authority.
23. Notice to any partner relating to partnership affairs is notice to the partnership.
24. The private creditor of a partner shall have preference over such partner's
separate property.
25. A general partnership is automatically dissolved by reason of the insanity of a
partner.
26. After dissolution, a partnership is still bound by the act of a partner authorized to
act for the partnership with respect to the completion of transactions begun before
dissolution.
27. A partnership intended to be formed as a limited partnership but without the
word "Limited" or "Ltd." appended to its name shall be considered as a general
partnership.
28. A partner may be a limited and general partner at the same time.
29. As a rule, a limited partner shall be liable as a general partner if he allows the use
of his surname to be included in the partnership name.
30. A limited partner may assign his interest to another person.
ANSWERS TO DIAGNOSTIC EXERCISES
TEST I - MULTIPLE CHOICE
1. C 21. D 41. D 61. D
2. A 22. B 42. B 62. B
3. D 23. D 43. C 63. C
4. C 24. C 44. D 64. D
5. D 25. D 45. B 65. C
6. D 26. B 46. B 66. B
7. C 27. D 47. D 67. B
8. C 28. D 48. C 68. C
9. C 29. C 49. A 69. C
10. D 30. D 50. C 70. B
11. D 31. C 61. D 71. B
12. C 32. B 52. A 72. C
13. B 33. D 53. A 73. A
14. C 34. A 54. A 74. C
15. C 35. D 55. B 75. D
16. C 36. D 56. A 76. B
17. B 37. C 57. B 77. B
18. A 38. D 58. A 78. D
19. C 39. D 59. B 79. C
20. C 40. B 60. B 80. A
TEST II -MATCHING TYPE
1. E 6. M 11. F 16. R
2. N. 7. Q 12. L 17.
3. C 8. H 13. D 18. J
4. S 9. B 14. T 19. A
5. P 10. G 15. K 20. 0

654 PARTNERSHIP

TEST III - TRUE OR FALSE

 1. FALSE 11. TRUE 21. TRUE
2. TRUE 12. TRUE 22. FALSE
3. TRUE 13. FALSE 23. TRUE
4. TRUE 14. FALSE 24. TRUE
5. FALSE 15. FALSE 25. FALSE
6. TRUE 16. FALSE 26. TRUE
7. TRUE 17. TRUE 27. TRUE
8. TRUE 18. TRUE 28. TRUE
9. FALSE 19. TRUE 29. TRUE
10. FALSE 20. TRUE 30. TRUE

SALES- DIAGNOSTIC EXERCISES

TEST I- MULTIPLU CHOICE- select the best answer by writing the letter of you choice.
1. A contract whereby one of the parties obligates himself to transfer the ownership of and to
deliver a determinate thing and the other to pay therefor a price certain in money or its
equivalent is a contract of:
a. Barter
b. Sale
c. Dacion en pago
d. Mortgage
2. The following are the essential elements of a contract of sale, except:
a. Consent of the contracting parties
b. Subject matter which should be determinate
c. Price which is certain in money or its equivalent
d. Warranty against eviction and against hidden defects
3. The following are the characteristics of a contract of sale, except:
a. principal , which means that a contract of safe can stand by itself
b. real, which requires the delivery of the object of the contract of sale for its perfection.
c. onerous, where rights are required in exchange of a valuable consideration.
d. Bilateral, which means that both parties are bound reciprocally to each other.
4. One of the following characteristics of dacion en pago is also characteristic of a contract of
sale. Which is it?
a. There is a pre-existing credit.
b. Obligations are extinguished.
c. There is less freedom in fixing the price.
d. Ownership of the object is transferred to the other party.
5. The following are characteristics of a contract of sale except for one which refers to
payment by cession. Which characteristic refers to payment by cession?
a. There is no pre-existing credit.
b. The cause or consideration is the price.
c. There is more freedom in fixing the price.
d. Assignee of the property acquires the right to sell the thing but not the ownership thereof.
6. The following items pertain to either a contract- of sale or a contract to sell.
I. Ownership of the thing sold is transferred upon delivery.
II. Ownership of the thing is transferred to the buyer at some future time.
III. The risk of loss is on the buyer.
IV. The risk of loss is on the seller.
Based on the above data, which of the following is correct?
a. Items I and III pertain to a contract to sell.
b. Items II and III pertain to a contract to sell.
c. Items II and IV pertain to a contract of sale.
d. Items I and III pertain to a contract of sale.
7. One of the following is not a requisite of the object of a contract of sale. Which is it?
a. It must be within the commerce of men.
b. It must be licit.
c. It must be determinate or determinable.
d. Vendor must have the right to transfer the ownership ofthe thing at -the time of sale.
8. The following items pertain to either emptio rei sperati or emptiospei.Based on the above
information, which of the following iscorrect?
a. Items I and iI pertain to emptio rei sperati,
 b. Items II and III pertain.to emptiospei.
c. Items II and III pertain to emptio rei sperati.
d. Items III and IV pertain to emptiospei
11. process of manufacturing for its customers at the time the orders were received. Michael
Barkley, who is 7' tall and wears size 18shoes, was provided three days later, with a pair that
was specially made for him since Armstrong does not make shoes of his size. What kind of
contracts were entered into for the shoes provided to the two basketball players?
a. The contract for the pair of shoes provided to Charles Jordan is a contract for a piece of
work, while that for Michael Barkley is a contract of sale.
b. The contract for the pair of shoes provided to Charles Jordan is a contract of sale, while that
for Michael Barkley is a contract for a piece of work.
c. Both contracts are contracts of sale.
d. Both contracts are contracts for a piece of work.
12. S and B entered into a contract whereby S transferred to B a specific car for the price of
P200,000.00, while B gave to SP90,000.00in cash and a diamond ring worth P110,000.00.The
heading of the written contract signed by the parties reads “Contract of Sale".
a. The contract is void because the intention of the parties is void since the value of the
diamond ring is more than the monetary consideration given.
b. The contract is a valid contract of sale as intended by the parties regardless of whether the
monetary consideration is more or less than the value of the property consideration.
c. The contract is a valid contract of barter since the value of the property given is more than
the monetary consideration. The intention of the parties is immaterial.
d. The contract is partly a contract of barter and partly a contract of sale.
13. The price in a contract of sale is certain, except:
a. When the parties have fixed or agreed upon a, definite amount.
b. If the price is certain with 'reference to another thing certain.
c. If the fixing of the price is left to the discretion of one of the contracting parties and the
price fixed is not accepted by the other party.
d. If the price fixed is that which the thing sold would have on a definite day or in a particular
exchange or market.
14. On January 1, S orally sold to B a specific ring for P450.00. The parties agreed that S shall deliver
the ring to B on January 5, while B shall pay the price on January 7.
a. The contract is perfected on January 5, when the ring is delivered by S to B.
b. The contract is perfected on January 1, when the parties had a meeting of mind on the
object and the price.
c. The contract is perfected on January 7, when the price is paid, since both parties would by
then have performed their obligations in the contract.
d. There is no perfected contract because the sale was made orally.
15. A sum of money paid, or a thing delivered upon the making of a contrast  for the sale of goods,
to bind the bargain, the delivery and acceptance of which makes the final assent of both parties
to the contract.
a. Option money
b. Earnest money
c. Reservation money
d. Down payment
16. S orally offered to sell a certain diamond ring .to B for P50, 000.00. B accepted the offer and to
prove that he was in earnest, he gave S P1, 000.00. The parties agreed that the delivery of the
ring and the payment of the price would be made 30 days later. On due date:
a. S may collect from B P50,000.00.
b. S may collect from B P49,000.00.
c. S cannot enforce payment because the contract was not reduced to writing.
d. S cannot enforce payment because there was no contract of sale yet.
17. On June It 2010, S sold to B 50 units of machines which were scheduled to arrive from Japan the
following day on board the, vessel "MT Nippon Maru". The sale was evidenced by an invoice
identifying each machine by serial number. Each machine was priced at P10,000.00.
Unknown to the parties, 30 units were damaged beyond repair by seawater on May 31, 2010.
Based on the foregoing, which of the following statements is incorrect?
a. B may rescind the whole contract.
b. B may demand delivery of the remaining 20 units and pay the price therefor.
c. S may require payment of the whole shipment from B since S was not aware of the damage
caused on the machines at the time of sale.
d. S has no option to rescind the whole contract or require payment of the remaining 20 units.
18. It refers to the delivery of the thing sold from hand to hand in case of movables, or the taking of
possession with respect to immovables, in the presence and with the consent of the vendor.
a. Actual or real delivery.
b. Traditioconstitutum possessorium.
c. Traditio longa manu.
d. Traditiobrevimanu.
19. On May 1 , 2010, S sold to B through a private instrument 20 sacks of corn stored in the only
warehouse of S. On May 10, 2010, S delivered the keys to the warehouse to B. The delivery
made by S to B is known as:
a. constructive delivery by legal formalities.
b. symbolic delivery by traditioclavium.
c. traditio Tonga mane.
d. traditiobrevi mane,
20. Delivery of incorporeal property may be made through any of the following means, except:
a. execution of a public document.
b. placing the titles of ownership in the possession of the vendee.
c. use by the vendee of his rights, with the debtor's consent.
d. execution of private instrument.
21. One of the following statements on the transfer of ownership of the thing in "sale on trial" is
incorrect. Which is it?
a. Ownership of the thing is transferred to the vendee when he signifies his approval or
acceptance to the vendor.
b. Ownership of the thing is transferred to the vendee when he does an act adopting the
transaction.
c. Ownership of the thing is transferred to the vendee if the time fixed for the return of the
thing has expired and the vendee retains the thing without giving notice of rejection or
acceptance to the vendor.
d. Ownership of the thing is transferred to the vendee upon
e. delivery.
22. On March 1, 2010, S sold and delivered to B a television set for P10,000.00 "on sale or return"
giving B up tO March.16, 2010 within which to return the television set. On March 10, 2010, the
television set was burned through no fault of B. Based on the foregoing, which of the following
statements is incorrect?
a. B must pay' the price of the television set.
b. S must bear the loss since the time for the return of the television set had not yet expired.
c. The ownership of the television set was transferred to B upon delivery to him.
d. B must bear the loss of the television set.
23. In one of the following cases, delivery of the goods to a carrierfor the purpose of transmission to
the buyer transfers ownershipto the latter. Which one is it?
a. When by the terms of the bill of lading, the goods are tobe delivered to the seller or his
agent.
b. When by the terms of the bill of lading, the goods are tobe delivered to the order of the
buyer or his agent butthe seller retains the bill of lading.
c. When the seller draws a bill of exchange on the buyerfor the price of the ' goods and
transmits such bill ofexchange and the bill of lading to the buyer to secureacceptance or
payment of the bill of exchange and thebuyer dishonors the bill of exchange.
d. When the owner does not reserve the right ofpossession or ownership of the thing sold
upon deliveryto the carrier.
24. In a contract of sale of personal property the price of which ispayable in installments, the vendor
may exercise any of thefollowing remedies, except to:
a. exact fulfillment of the obligation, should the vendee failto pay any number of installments.
b. cancel the sale, should the vendee's failure to pay covertwo or more installments.
c. foreclose the chattel mortgage on the property if thevendee's failure to pay cover two or
more installmentsand recover any deficiency after the foreclosure sale ifthey have
stipulated it.
d. foreclose the chattel mortgage on the property if thevendee's failure to pay cover two or
more installmentsbut he may no longer recover any deficiency after theforeclosure sale.
25. Baldomero bought a residential house and lot from Sta. AnaRealty for P250,000.00 giving a
down payment of P10,000.00and promising to pay the balance of P240,000.00 in 20 years
ininstallments of P1,000.00. After paying 72 installments,Baldomerodefaulted in the payment of
the 73rd installment and subsequent ones. Despite the grace- period he had earned, hewas not
able to make any further payments. Accordingly, Sta.Ana Realty cancelled the sale. How much
cash surrender valueis Baldomero entitled to receive?
a. P45,100.00.
b. P39,600.00.
c. P36,000-00.
d. P41,000-00.
26. S stole a ring belonging to 0. Subsequently, the ring was offeredfor sale at a public auction
where X, who was not aware that thering was stolen, bought it. A few weeks later, 0 saw the
ring andrecognized it as his. Based on the foregoing information, whichof the following
statements is correct?
a. 0 may recover the ring from X without reimbursing Xsince 0 was unlawfully deprived of the
ring.
b. 0 may recover the ring from X but he has to reimburse Xsince X acquired title to the ring.
c. 0 may no longer recover the ring even if he is willing toreimburse X.
d. X did not acquire title to the ring since the auctioneerhad no valid title thereto.
27. Where the seller of goods has a voidable title thereto, but his titlehas not been avoided at the
time of the sale, the buyer acquirestitle' to the goods. Such acquisition of title has the following
requisites, except the:
a. buyer must have bought the goods in good faith.
b. buyer must have bought them for value.
c. buyer bought them without notice of the seller's defect oftitle.
d. party from whom the seller obtained the goods must ratify the sale.
28. An unpaid seller has the following rights, except:
a. A lien on the goods or the right to retain them for theprice while he is in possession of them.
b. In case of insolvency of the buyer, a right of stoppingthe goods in transitu after he has
parted with thepossession of them.
c. A right of repurchase.
d. A right to rescind.
29. An unpaid seller loses his lien on the goods in the followingcases, except:
a. when he delivers the goods to a carrier or other baileefor the purpose of transmission to the
buyer withoutreserving the right of ownership in the goods.
b. when the buyer or his agent lawfully obtains possessionof the goods.
c. when the seller waives his possessory lien.
d. when he has obtained judgment for the price of thegoods.
30. Three of the following are the requisites in order that an unpaidseller may exercise his right of
stoppage of transitu. Which oneis not?
a. The seller is unpaid.
b. The seller has not parted. with the possession of thegoods.
c. The goods are in transit.
d. The buyer is or becomes insolvent.
31. Goods are still in transit:
a. If the buyer or his agent obtains delivery of the goodsbefore their arrival at the appointed
destination.
b. when the carrier acknowledges possession of the goodsas bailee for the buyer after the
arrival of the goods atthe place of destination.
c. if the carrier or other bailee wrongfully refuses to deliverthe goods to the buyer or his agent.
d. if the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if theseller has refused to received them back.
32. An unpaid seller's right to resell the goods is available in thefollowing cases, except:
a. if the goods are of a perishable nature.
b. when the seller reserved the right to resell the goods.
c. when the buyer has defaulted in the payment of the pricefor an unreasonable time.
d. when the seller has lost his lien on the goods.
33. Barrameda bought a piece of land from Sarmiento for a lumpsum of P120,000.00. Aside from
mentioning the boundaries inthe contract which is required in the sale of real estate,
thecontract also states that the piece of land consists of1,000square meters. Before delivery,
Sarmiento discovered that thepiece of land actually contains 1,200 square meters.
a. Sarmiento must deliver all the1,200 square meters; Barrameda must pay P120,000.00plus
an additionalamount for the excess of 200 square meters.
b. Sarmiento is required to deliver only1,000square meters; Barrameda must pay the contract
price of P120,000.00.
c. Sarmiento must deliver all the1,200square meters;Barrameda has to pay only P120,000.00.
d. Neither party is required to perform the obligation b ecause of mistake.
34. Sison sold a registered piece 'of land to Bautista on May 1,2010in a public instrument. On May 3,
2010, Sison sold in a privateinstrument the same piece of land to Cruz, who took
physicalpossession of the land. Neither buyer was aware of the sate made to the other.
a. The land belongs to Bautista.
b. The land belongs to Cruz.
c. The land still belongs to Sison, because both sales arevoid.
d. The land 'should be divided equally between Bautistaand Cruz to give effect to both sales.
35. Refer No. 34. Assume that on May.5, 2010, Sison sold the Landin a public instrument to
Domingo who was not aware of the twoprevious sales. Domingo then registered the sale with
theRegister of Deeds.
a. The land belongs to Bautista.
b. The land belongs to Cruz.
c. The Ind belongs to Domingo.
d. The land will be equally divided among the three buyers.
36. On June1,2010, Sanchez sold to Borlaza in a private instrument a certain computer. Two days
later, Sanchez orally sold the same computer to Contreras who immediately took possession of
the computer. Neither party was aware of the sale made to the other.
a. The computer belongs to Borlaza.
b. The computer belongs to Contreras.
c. The computer will be co-owned by Borlaza and Contreras to give effect to both sales.
d. Both sales are void. Accordingly, Sison will still be the owner.
37. This refers to the implied warranty on the part of the seller that he has the right to sell the thing
at'the time when ownership is to pass, and that the buyer from that time shall have and enjoy
legal and peaceful possession of the thing.
a. Warranty against hidden defects.
b. Warranty against eviction.
c. Warranty of ownership.
d. Warranty of possession.
38. Three of the following are the requisites in order that the vendee may enforce the vendor's
liability in case of eviction. Which one is not?
a. There must be a final judgment depriving the vendee of a part or the whole of the thing
sold.
b. The vendee must have appealed from such judgment rendered 2gainst him.
c. The deprivation of the vendee is based on a right prior to the sate or an act imputable to the
vendor.
d. The vendor is notified of the suit at the instance of the vendee.
39. This refers to an encumbrance imposed upon an immovable for the benefit of another
immovable belonging to a different owner.
a. Easement or servitude
b. Real estate mortgage
c. Pledge
d. Chattel mortgage.
40. Three following are the requisites in order that the buyer may inform the seller's liability for
hidden defects Which one is not?
a. The defects of the thing sold must not be patent or visible.
 b. The ducts render the thing unfit for the use for which it is intended, or which diminish its
fitness for such use to an extent that had the buyer been aware thereof, he would not have
bought it.
c. The defects must be existing at the time of sale.
d. The defects must be capable of determination by an expert.
41. Alessandra purchased from Rose Tan's Department Store, two pieces of imported identical
bathrobe, one of which was embroidered with "HIS" and the other with "HERS", which she
planned to give to his friends Jules and Assunta as a wedding present. She inspected the items
very carefully with the assistance of the store clerk before paying for them. While she was
wrapping them shortly after she arrived home, she noticed that the hem of the 'HERS" bathrobe
had disintegrated because it was loosely sewn, which damage was not apparent because of the
many colors of the apparel.
a. Alessandra can rescind the sale of both pieces of bathrobe.
b. Alessandra can rescind only the sale of the bathrobe marked "HERS"
c. Alessandra cannot rescind because she should have inspected the item well when she
bought it.
d. Alessandra must pay for both pieces of bathrobe.
42. The vendor shall be liable for the death of the animal sold when the following requisites are
present, except:
a. the disease existed at the time of sale.
b. the disease is the cause of the death of the animal.
c. the disease must be redhibitory.
d. the animal dies within 3 days from the time of purchase.
43. The justified refusal of the buyer to accept the goods produces the following effects, except:
a. buyer has no duty to return the goods, unless otherwisestipulated.
b. title to the goods does not pass in to him,
c. buyer shall not be obliged to pay the price.
d. buyer is obliged to constitute himself as depositary untilhe returns the goods.
44. In three of the following cases, the buyer is not entitled tosuspend the payment of the price.
Which one will give him theright to suspend payment?
a. Disturbance in the possession or ownership of the thingpurchased.
b. The seller gives him security for the return of the price.
c. It has been stipulated that the buyer shall pay the price notwithstanding any disturbance.
d. The disturbance is a mere act of trespass.
45. A contract of sale with a right to repurchase and other contractsincluding a contract purporting
to be an absolute sale shall bepresumed to be an equitable mortgage in the following
cases,except when the:
a. price of sale with right to repurchase to repurchase isunusually inadequate.
b. vendor remains in possession of the thing sold.
c. period to repurchase the property is extended.
d. vendee binds himself to pay the taxes due.
46. An owner of a rural land has the right of legal redemption of an adjoining rural land sold if the
following requisites are present,except when the:
a. adjoining rural land is not' separated by any apparentservitudes for the benefit  of other
estates..
b. land sold does not exceed one hectare.
c. grantee owns another rural land.
d. grantee owns an urban land.
47. This refers to the right of a n adjoining owner of an urban land tobe given preference to the
purchase of a small piece of urbanland which is held for speculation before it offered for sale
toothers.
a. Right of subrogation.
b. Right of redemption.
c. Right of pre-emption.
d. Right of repurchase.
48. A, B, and C, are co-owners of an undivided parcel, of land. OnMay 1, A sold his share to X; on
June 1, 13 sold his share also to X; and on July 1, C sold his share also to X. Each sale was witha
right to repurchase.
a. X may compel A, B and C to come to an agreement torepurchase the whole land.
b. Each co-owner may exercise his right of redemption on the whole property including the
share of the other two co-owners.
c. Each co-owner may exercise his right of redemption onlywith respect to his share.
d. Any two of the three co-owners may redeem theproperty proportionately.
49. R, S and T are co-owners of an undivided parcel of land. R sold his 1/3 interest to T in  a deed of
absolute sale. Which is correct?
a. S may exercise the right of redemption on the interestsold by R to T.
b. cannot exercise the right of redemption.
c. The sale made by R to T is voidable.
d. S may redeem only 1/2 of the interest sold byR to T.
50. T steals the goods of 0 and deposits them in the warehouse ofW. W issues to T a warehouse
receipt which by its ternsindicates that goods are to be delivered to the order of T T,thereafter.
negotiates the receipt to H who purchases me document in good faith and for value.
a. H may obtain delivery of the goods from W because Hwas an innocent purchaser for value.
b. H can obtain delivery of the goods from W because the issuance of the ware house receipt
to T conferred a valid1 e to him over the goods.
c. H can obtain delivery of the goods from IV because the acquisition b y H of the warehouse
receipt in good faith; cured the defect in T's title.
d. H cannot obtain delivery of the goods because heacquired whatever title T had over such
goods, which isthe title of a thief.
51. O delivered certain goods to C, a common carrier, which issued to O a bill of lading stating that
the goods are to be delivered tobearer. Without O's fault, the bill of lading was stolen by T
w°;-.othereafter negotiated the document by mere delivery to H ,purchaser for value and
without notice of the defect in the title ofT.
a. The negotiation of the bill of lading by T to H is not validbecause of T's defective title.
b. The negotiation of the bill of lading by T to H is valid. T'sdefective title does not have any
effect on the validity ofthe negotiation.
c. H may not obtain delivery of the goods from C becauseH acquired whatever title T had over
the document.
d. H acquired title to the document but not to the goods.
52. D , obtained from C a- loan amounting to P50,000.00, the same being secured by a mortgage on
D's lot. Thereafter, C assignedhis credit right to T with notice to D. Based on the foregoing
facts, which of the following statements is incorrect?
a. T cannot collect from D if D does not give his consent tothe assignment.
b. T can collect from D. D's consent to the assignment isnot required.
c. T can collect from D and if D cannot pay, T can foreclosethe mortgage on the lot.
 d. The notice to D of the assignment is sufficient. D must make his payment to T and no longer
to C.
53. A kind of mortgage which, although lacking some formality, formof words, or requisites
prescribed by law, shows the intention ofthe parties to charge real property as security for debt
andcontains nothing impossible or contrary to law is known as:
a. legal mortgage.
b. equitable mortgage.
c. conventional mortgage.
d. voluntary mortgage.
54. If a movable property is sold separately to two or more different vendees, ownership shall
belong to the person:
a. who in good faith first paid the purchase price in full.
b. who in good faith first recorded the sale in the Registryof Property.
c. who in good faith presents the oldest title.
d. who in good faith first took possession of the property.
55. A contract of sale is perfected upon:
a. compliance with the requirements of the law as to form.
b. delivery of the object of the contract.
c. the meeting of the minds. on the thing which is the object ofthe contract and upon the
price.
d. demand.
56. It is a contract by virtue of the terms of which the parties theretopromise and obligate
themselves to enter into another contract ata future time, upon the happening of certain
events, or thefulfillment of certain conditions.
a. Contract of adhesion
b. Contract of option
c. Contract of sale
d. Auto-contract
57. A contract of sale is not a:
a. principal. contract.
b. nominate contract.
c. consensual. contract.
d. real contract.
58. The following may not be valid objects of. a contract of sale,except:
a. objects outside the commerce of men.
b. Illicit things.
c. Future goods.
d. impossible service.
59. This is a kind of constructive delivery where the vendor remainsin possession of the property
sold, such as by virtue of a, leaseagreement with the vendee.
a. traditio longs manu.
b. traditiobrevimanu.
c. traditioconstitutumpossessorium.
d. delivery to common carrier.
60. When the goods are delivered to the buyer, the ownership thereof passes to the buyer in:
a. sale on approval.
b. sale or return.
c. sale on trial.
 d. contract to sell.
61. S promised to sell his car to B for P200,000.00 giving B 30 days to decide. B accepted the
promise of S and informed S that he (B) would make known his decision before the lapse of 30
days. He also gave S P2,000.00 as consideration so that S would hold on to his promise. The
contract entered into between S and B and the consideration given by B to S are known as:
a. Option contract and option money, respectively.
b. Contract of sale and earnest money, respectively.
c. Contract of sale and down payment, respectively.
d. Contract to sell and reservation money, respectively.
62. Refer to No. 61.
a. S may withdraw his offer to sell before the lapse of 30days by informing B.
b. S may not withdraw his offer before the lapse of 30 days.
c. S may withdraw the offer by returning the amount of P2,000.00 that was paid to him by B.
d. S may withdraw his offer even before the lapse of 30days if a favorable price, i.e., more than
P200,000.00, isoffered to him by another prospective buyer.
63. The Recto Law applies to which of the following examples of sale?
a. Sale of a car on straight term.
b. Sale of house and lot on installment.
c. Sale of car on installment where the buyer constituted a mortgage on his truck.
d. Sate of a piano on installments where the buyer constituted a chattel mortgage on the
piano.
64. S sold to B a lot through a deed of absolute sale duly acknowledged before a. notary public.
Three days later, S soldthe same lot to X, also through a deed of sale dulyacknowledged before a
notary public. X had the sale registeredwith the Register ofDeeds. Neither B nor X was aware of
thesale made by S to the other and neither took physicalpossession of the lot. Who is the
present owner of the lot?
a. B, because he was the first purchaser in good faith.
b. X, because he registered the sale in good, faith.
c. Neither B nor X.
d. S, as long as he does not surrender physical possessionof the lot.
65. Purchased from S a laptop computer worth P100,000.00. The terms of sale provide for a down,
payment of P20,000.00 with thebalance payable in 8 equal monthly installments secure
thebalance, S required B to execute a chattel mortgage on thelaptop computer and a real
mortgage on B's lot. B complied withall the requirements but defaulted in the payment of, the
third andfourth installments. These remedies are available to S exceptone. Which is it?
a. Cancel the sale.
b. Exact fulfillment of the obligation.
c. Foreclose the real mortgage and thereafter recover anydeficiency from B.
d. Foreclose the chattel mortgage and thereafter foreclosethe real mortgage in case of
deficiency.
66. S and B entered into a contract whereby S transferred to B a specific piano for the price of
P80,000.00, while B gave to S cashof P30,000.00 and a diamond ring worth P50,000.00. What
kindof contract was entered into between S and B?
a. A contract of barter.
b. A contract of sale.
c. The contract is partly a contract of barter and partly acontract of sale.
d. The contract is an innominate contract because theintention of the parties cannot be
determined.
67. One of the distinctions between option money and earnestmoney is that earnest money is:
a. the consideration paid for the purpose of holding one tohis promise to buy or sell a
determinate thing for acertain period of time.
b. not part of the purchase price.
c. proof of the perfection of the contract of sale.
d. paid before the perfection of the contract of sale.
68. This refers to the warranty of the seller that he has the right tosell the thing at the time when
ownership is to pass, and which can be enforced if the buyer is deprived pf the property sold by
afinal judgment in court.
a. Warranty against hidden defects.
b. Warranty of merchantable quality.
c. Warranty against eviction.
d. Warranty of possession.
69. P, who was in Hong Kong, made an overseas call to A, hisfriend, to sell P's lot in Quezon City
immediately as P neededcash. Accordingly, A sold the lot to B. The deed of sale was in apublic
document. The sale of P's lot is:
a. valid.
b. rescissible.
c. unenforceable.
d. void.
70. One of the distinctions between a contract of sale and a contractfor a piece work is that a
contract for a piece of work:
a. is not governed by the Statute of Frauds.
b. refers to a contract for the delivery goods which aremanufactured in the ordinary course of
businessalthough the same are not available.
c. has for its parties the vendor and the vendee.
d. has for its consideration the price of the thing.
71. A and B are co-owners of a rural lot not exceeding 1hectare.The lot is surrounded on its four
sides as follows: on the North,by the road; on the East, by the lot of X consisting of 2 hectares;on
the South, by the lot of Y consisting of 2 '/2 hectares; and onthe West, by Z's lot consisting of 2 ¾
hectares. A sells hisundivided interest in the agricultural lot to T, who owns severalhectares of
rural land in the area. Who has the right of legalredemption over the undivided interest in the
lot sold by A to T?
a. B
b. X
c. Y
d. Z
72. It is an affirmation of fact or any promise by the seller relating to the thing which has a natural
tendency to induce the buyer to induce the buyer to purchase the same, relying on such
promise or affirmation.
a. Cordon
b. False representation
c. Warranty
d. Sellers talk
73. In one of the following cases, the ownership of the thing object ofthe contract is transferred to
the other party upon delivery.
a. Contract to sell.
b. Agency to sell.
 c. Sale or return.
d. Sale on approval.
74. Under the "Realty Installment Buyer Act", the buyer of real estateon installment payments may
pay an installment defaultedwithout additional interest if he has paid at least two years
ofinstallments.The law is applicable to sales/transactionsinvolving:
a. industrial lots.
b. commercial buildings.
c. residential lots.
d. sales to tenants under the Land Reform Law.
75. S, the owner of a rent-a-car business, leased one of his cars to Bfor one month. On the day of
the expiration of the lease andwhile B was still in physical possession of the car, B offered tobuy
the car from S for P200,000.00. Believing the price to be agood one, S readily accepted B's offer
and then and thereexecuted a deed of absolute sale in favor of B who immediatelypaid
the price in cash. Thereafter, B drove away from place of S.
a. The delivery of the car by S to B is by constitutumposssessorium.
b. This delivery of the car by S to B is by traditio longa manu.
c. The delivery of the carby S to B istraditiobrevi man
d. There was no delivery because B should have turnedover the physical possess on of the car
to & upon theexpiration of the lease so that could make the properdelivery to him upon
the execution of the contract ofsale.
76. B called on S at the shoe factory of S for the latter to make a pairof shoes which B would be
needing in the play "Romeo andJuliet." B provided S with the description of the pair of shoes
thathe wanted since S did not manufacture the kind of shoes that Bneeded. S quoted a price of
P1,000.00 which B agreed to payupon delivery to him of the pair of shoes: Since S and B
hadbeen neighbors for a long time, their agreement was sealed witha handshake.
a. The contract between S and B becomes enforceable if Shad already completed making the
pair of shoes.
b. The contract between S and B becomes enforceable if Bhad already paid the amount agreed
upon for the work.
c. The contract between S and B is enforceable even if it isstill executory.
d. The contract cannot be enforced by either party becauseit was not in writing.
77. Which of the following contracts of sale is void?
a. Oral sale of a piece of land made through an agentwhose authority is in a public instrument.
b. Sale of a piece of land in a public instrument madethrough an agent whose authority was
given orally bythe principal.
c. Sale of a piece of land in a private instrument made through an agent whose authority is in a
publicinstrument.
d. Sale of a piece of land in a public instrument made.through an agent whose authority is in a
privateinstrument.
78. D deposited his goods in the warehouse of W who issued to D awarehouse receipt stating that
the goods are to be delivered tobearer. Thereafter, A obtained possession of the
warehousereceipt from D in exchange for what A claimed to be a bar ofgold, which, however,
was discovered by D to be fake. Ddemanded the return of the warehouse receipt from A but
thesame had already been negotiated by A to H who purchased thedocument for value, in good
faith and without notice that D wasdeprived possession thereof by fraud. The negotiation by A
to His:
a. voidable.
b. valid.
 c. void.
d. rescissible.
79. B purchased a pair of leather shoes from the store of S. Shortlyafter leaving the store, B decided
to return and requested S, theowner, to place a protective rubber covering on the sole of
eachshoe. Since the job required at least 30 minutes to complete, Bleft the store of S to shop at
the neighboring stores. When hereturned to the store.of S after 30 minutes, the pair of shoes
wasnowhere to be found. It turned out that C, a sales clerk, had soldthe pair of shoes that B
bought to X, another customer.
a. X acquired ownership of the pair of shoes earlier boughtby B.
b. X did not acquire ownership of the pair of shoes earlierbought by B.C.
c. B remained the owner of the pair of shoes that he hadbought despite its sale to X.
d. S reacquired ownership of the pair of shoes when it wasbrought to him for additional work.
80. S sold 500 shares of stock of San Manuel Corporation to B at P50.00 per share. The transfer of
the ownership of the shares of stock may be made through any of the following means, except:
a. execution of the sale in a public instrument.
b. The giving by S to B of the, power to vote in the stockholders' meeting of San Manuel
Corporation and its exercise thereof by B.
c. the indorsement by S of the stock certificate. covering the 500 shares of stock and its placing
it in the possession of B.
d. the issuance by S of the official receipt for the full payment of the purchase price of the
shares by B.
81. Which of the following documents of title requires indorsementand delivery for its negotiation?
a. A warehouse receipt which states that the goods are tobe delivered to bearer.
b. A bill of lading which states that the goods are to bedelivered to the order of a specified
person but suchperson indorsed it in blank.
c. A warehouse receipt which states that the goods are tobe delivered to bearer but the
bearer indorsed it to aspecified person.
d. A bill of lading which states that the goods are to bedelivered to a specified person.
82. S and B executed a deed of absolute sale involving a parcel ofland supposedly containing 2,000
square meters. B paid a lumpsum of P2,200,000.00 for the purchase. Based on the
foregoingfacts, which of the following statements is .correct?
a. If the parcel of land is actually*'2,200 square meters inarea, S has to deliver only 2,000
square meters. Thereofand B must pay P2,200,000.00 as agreed upon.
b. If the parcel of land is actually1,800 square meters inarea, S must deliver only 1,800 square
meters and Bhas to pay only the price equivalent to 1,800 squaremeters.
c. Ifthe parcel of land actually contains2,200squaremeters, S must deliver all of 2,200 square
meters with Bstill paying the amount of P2,200,000.00.
d. If the parcel of land actually contains2,200squaremeters, S must deliver all of2,200 square
meters but Bmust pay a proportionate amount for the additional 200square meters in
addition to the price of P2,200,000.00.
83. S sold a specific parcel of land separately to the followingpersons: on July 1, 2010, to X, in a
public document; on July 5,2010 in a private document to Y, who took physical possessionof the
larld; and on July 9, 2010, to Z, who registered the salewith the Register of Deeds. Neither X, Y
nor Z was aware of thesale made to the other two buyers. Who is the owner of the parcel of
land?
a. X, because he was the first purchaser.
b. Y; because he took physical possession.
c. Z, because he registered the sale.
 d. S, because the multiple sales he made rendered eachsale a void contract.
84. In which of the following cases is the seller not obliged to makeany payment to the buyer for
breach of warranty againsteviction?
a. When such warranty has not been agreed upon,
b. When there was no stipulation exempting the seller fromliability.
c. When there was a stipulation exempting the seller (whowas in good faith) from breach of
warranty and thewaiver was made by the buyer without knowledge of therisks of eviction.
d. When there was a stipulation exempting the seller (whowas in good faith) from breach of
warranty and thewaiver was made by the buyer with knowledge of therisks of eviction.
85. Mother Lilly purchased from Santiago Farmsfour horses withdifferent colors: a white, a gray, a
black, anda brown, whichMother Lilly intended to use in a movie to be starred in by fourmovie
actors eachone of whom represents one of the colors. Each horse was certifiedto be fit by the
veterinarian who washired by the parties to examine them. Mother Lilly paid aseparate price for
each of the horses. the filming of themovie, the brown horse was always sick and could not
functionas the three others. It was subsequently discovered that it wassuffering from an
incurable heart ailment.
a. Mother Lilly may ask for the rescission of the sale of the brown horse only since she paid a
separate price foreach of the horses.
b. Mother Lilly may ask for the rescission of the sale of allthe horses.
c. Mother Lilly may not ask for rescission of the sale of anyhorse because she freely entered
into the contract ofsale.
d. Mother Lilly is bound by the sale of all the four horsesand must honor such contract because
the veterinarian certified that all horses were fit.
86. The buyer is obliged to pay interest for the period between the delivery of the thing sold and the
payment of the price in thefollowing cases, except if:
a. there is a stipulation to pay interest.
b. there is no such stipulation but the thing sold producesfruits or income.
c. the buyer is in default, from the time of judicial or extra-judicial demand for the payment of
the price.
d. none of the foregoing.
87. Earnest money possesses three of the following characteristics.Which is the exception? a. It is
part of the purchase price.
b. is proof of the perfection of the contract of sale.
c. It is paid at the time of the perfection of the contract of sale.
d. It is paid as a consideration for the purpose of holdingone to his promise to buy or sell a
determinate thing fora certain period.
88. S sold his farm lot to B with S reserving his right to repurchasethe property within five years
from the date of the sale. Basedon the foregoing facts, which of the following statements
isincorrect?
a. The sale is subject to a suspensive condition.
b. B may validly sell the lot to third person against whomS may exercise the right to repurchase
provided the right is registered
c. B is subrogated to the rights and actions of S.
d. B's ownership of the lot becomes irrevocable if S fails toexercise his right to repurchase
within the period stated.
89. D borrowed P50,000.00 from C. The obligation is secured by amortgage of D's house and lot.
Thereafter, C assigned his creditright to T. Based on the foregoing facts, which of the
followingstatements is incorrect?
 a. The consent of D to the assignment is not required inorder that T may collect from D.
b. The assignment of the credit right did not carry with it theassignment of the mortgage.
c. If D pays C before D was notified of the assignment, D isreleased from liability.
d. The assignment, to bind third persons, must be in apublic instrument and recorded with the
Registry ofProperty.
90. A contract of sale possesses three of the followingcharacteristics. Which is the exception?
a. Bilateral, since the parties are bound by reciprocalprestations.
b. Commutative, because the parties give almostequivalent values.
c. Onerous, since there is an exchange of valuableconsideration.
d. Real, because the object of sale must be delivered forthe perfection of the contract.
91. S sold his lot to B reserving his right to repurchase the samewithin 5 years from the date of the
execution of their agreement.The sale together with the right to repurchase was registeredwith
the Register of Deeds. Two years after the execution of thesale. B sold the same lot to X who
was not aware that Sreserved his right to repurchase the lot.
a. The sale by S to B is subject to a suspensive condition.
b. The sale by S to B is subject to a resolutory condition.
c. The sale by S to B is subject to a condition which isneither suspensive or resolutory.
d. The sale by S to B is absolute without any condition.
92. Refer to Item 91.
a. S may repurchase the lot from X within the five-yearperiod although X was not aware of the
reservation ofthe right to repurchase.
b. S may not repurchase the lot because X was not awareof the reservation of the right.
c. S may repurchase the lot from X if X was aware of such reservation.
d. The sale by B to X is void because the acquisition of thelot by B from S is subject to a
contingency.
93. B wanted to buy the car of S for P100,000.00 and to show thathe was in earnest, he gave to S
P2,000.00 which S accepted.There was no written -instrument signed by S and B toincorporate
their agreement. Based on the foregoing, which of the following statements does not pertain to
the contract?
a. B, thereafter, needs to pay P98,000.00.
b. The giving of earnest money binds S and B to a contractof sale.
c. B, thereafter, must pay C the amount of P100,000.00.
d. The contract between S and B is enforceable althoughthere was no written agreement
between them.
94. When the buyer is justified in refusing to accept the goods beingdelivered to him and has
relayed such refusal to the seller, suchrefusal produces the following effects, except:
a. buyer has no duty to return the goods unless stipulated.
b. title to th e goods does not pass to the buyer.
c. buyer is not obliged to pay the price.
d. buyer automatically becomes a depositary of the goods
95. The unpaid seller, in addition to his right to retain the goods whilehe is in possession of them,
has the following rights: except theright:
a. of stoppage in transitu.
b. to resell the goods.
c. to rescind the sale.
d. to bid when the goods are resold.
96. One of the following is a natural element of a contract of sale.
a. The price of the goods.
 b. The goods sold.
c. The stipulation to pay interest on the purchase price ofthe goods.
d. The seller's warranty against hidden defects.
97. On January 1, 2010, Santos offered to sell his only diamond ringfor P50,000.00 cash to Bersola
who was interested in buying thesame. Santos told Bersola that he was giving the latter up
toJanuary31,2010to decide whether to buy the ring or not.Bersola agreed to the option and
gave Santos option money ofP500.00. On January18,2010, Santos found another buyerwho was
willing to pay P70,000.00cash. Santos personallyvisited Bersola to inform him that he was
withdrawing his offerunless Bersola agreed to buy the ring for P70,000.00.
a. Santos may validly withdraw the offer without being heldliable for breach of contract since
it would be unfair tohim if he would receive only P50,000.00 as the price ofhis ring when
another person is willing to buy it at ahigher amount.
b. Bersola is bound to pay P70,000.00 if he were to availhimself of his option to buy the ring.
c. Santos cannot withdraw the offer because the option isfounded upon a consideration of
P500.00.
d. Bersoia needs to pay only P49,500.00 if he decides tobuy the ring since the option money of
P500.00 that hepaid forms part of the purchase price.
98. S and B executed a deed of absolute sale duly acknowledgedbefore a notary public whereby S
conveyed his car to B forP100,000.00. B, however, informed. S that he would be goingaway on a
business trip and that he would be taking the car fromthe place of S when he returned after two
weeks. Three daysafter the sale of the car to B, S sold the same car to X through adeed of
absolute sale which was also acknowledged before notary public. X then drove the sar away
from the place of S andhad the sale recorded with the Land Transportation Office whichissued
to him a certificate of registration of the car in his name.Neither B nor X was aware of the sale
made to the other until Breturned from his business trip.
a. Preference shall be given to B since the car was firstsold to him.
b. X did not acquire title to the car because S was nolonger the owner when the sale was made
to him.
c. X acquired titl e to the car because S appeared to be theowner in the record of the Land
Transportation Office.
d. S remained the owner of the car because the sale made to one buyer nullified the sale to
the other.
99. D gives his ring worth P25,000.00 to C in consideration of C'sgiving of P10,000.00and a bracelet
worth P15,000.00to D.Based on the. foregoing facts, which of the following statementsis
incorrect?
a. The transaction between D and C is a sale if theyintended it to be a contract of sale.
b. The transaction between D and C is a barter if theyintended it to be a contract of barter.
c. The transaction is barter regardless of the intention ofthe parties because the bracelet is of
more value thanP10,000.00.
d. The transaction is barter if the intention of the partiescannot be determined.
100. S, the proprietor of a rent-a-car enterprise, sold his business andhis fleet of 10 cars to B
for a lump sum of P3,000,000.00. Sphysically delivered the permits and other papers for
theoperation of the business and the vehicles to B at the latter'soffice except for one car which
the parties agreed shall be leasedby S for one month while he was winding up his affairs in
thePhilippines as he was then leaving for abroad. In the meantime,the contract of sale and the
contract of lease, though already signed by the parties, have not been acknowledged before
anotary public, and hence, were still private instruments.
a. The ownership of the car leased by S remained with S.
 b. The ownership of the car leased by S has beentransferred to B although there was no
physical deliverythereof to B.
c. The execution of the private instrument for the sale ofthe business and the cars likewise
transferredtheownership to B of the car leased by S.
d. Both the contract of sale and the contract of lease mustbe acknowledged before a notary
public by the partiesbefore the ownership of the car leased by S istransferred to B.
101. King Gems Company, a jewelry manufacturer, shipped fivedozen necklaces to Queen
Jewelry Store. The shipment wasmade under a written agreement allowing Queen Jewelry
Storeto return the necklaces within a period of one month fromdelivery. Based on the foregoing
facts, which of the followingstatements is incorrect?
a. Title to the necklaces passed to Queen upon delivery.
b. If Queen does not return the necklaces within onemonth, the sale to it becomes absolute.
c. If the necklaces are destroyed by fire without the fault ofQueen, Queen need not pay the
price thereof.
d. If the necklaces are destroyed through the fault ofQueen, Queen must pay the price thereof
to King GemsCompany.
102. On January 3,2010,D deposited his goods with W,warehouseman, who issued a
warehouse receipt which statesthat the goods are to be delivered "to the order of D". On
January5, 2010 D indorsed the receipt to A. On January8,2010,however, D sold the goods
represented by the receipt to X whoinformed W immediately of the sale to him of the goods by
D. At that time, W was not aware that D had indorsed the receipt to A.
a. A acquired title to the goods as represented by thereceipt at the time such receipt was
indorsed to him
b. X acquired title to the goods because at the time of thesale to him, W, the warehouseman
was not yet awarethat D had indorsed the receipt to A.
c. D retained ownership of the goods because he cannotindorse the receipt to one person and
sell the goods to another.
d. W will be bound to deliver the goods to X.
103. One of the following statements pertaining to a sale by auction isincorrect. Which is it?
a. A sale by public auction is perfected when theauctioneer announces its perfection by the fall
of thehammer, or in any other manner.
b. Before perfection, any bidder may retract his bid.
c. Before perfection, the auctioneer may withdraw thegoods unless the auction was
announced to be withoutreserve.
d. The seller may validly participate in the bidding without prior notice to the bidders.
104. S sold a laptop computer to B for P120,000.00 with B giving apayment of P10,000.00
and promising to pay the balanceinequal monthly installments. B likewise executed a chattel 11
mortgage on the computer and a real mortgage on his lot to secure the payment of the balance
of the purchase price.Afterpaying the first two installments, B defaulted in the payment ofnext
three installments. S may avail himself of any of thefollowing remedies except to:
a. Atexact fulfillment of the obligation.
b. cancel the sale.
c. foreclose the chattel mortgage and recover anydeficiency during the foreclosure sale if
there is anagreement to that effect.
d. foreclose the real mortgage and recover the deficiencyduring the foreclosure sale even if
there is no agreement to that effect.
105. B bought from Century Properties, Inc.- a 1,000 square-meter lot located beside the
Manila International Airport on which he intended to construct a warehouse condominium. The
 terms of the sale provided for the payment of the contract price of P300,000.00 in 60 equal
monthly installments of P5,000.00 each. After having paid 36 installments, B defaulted in
thepayment of the succeeding - installments. As a consequence,Century cancelled the sale. B
now wants to claim the return ofthe cash surrender value of the payments he had made
pursuantto the "Realty Installment Buyer Act", otherwise known as theMaceda Law.
a. B is entitled to a cash surrender value of50% ofP180,000.00, or P90,000.00 under the
Maceda Law.
b. B is entitled. to a cash surrender value of 55% ofP180,000.00, or P99,000.00 under the
Maceda Law.
c. B is entitled to a cash surrender value of90% ofP180,000.00, or P162,000.00 under the
Maceda Law.
d. B cannot invoke the Maceda Law for thereturn of any ofthe payments he had made for the
lot he purchased.
106. S shipped FOB Manila, perishable goods worth P50,000.00 to Bwho is based in Cebu. B
remitted a check amounting toP50,000.00 for the price of the goods. While the carrier was onits
way to Cebu, S was informed by his bank that the checkissued by B was dishonored for
insufficient funds. On further inquiry, he learned that B had become insolvent. Accordingly, S
obtained physical possession of the goods from the carrier Afterratifying B. S resold the goods.
Case A - If the goods are resold for P52,000.00, the profit ofP2 000 00 belongs to B
since title had already passed to him.
Case B - If he proceeds of sale, net of incidental expensesa rated to P4 ,000.00, S can recover
the loss of P3,O00.00from B.
a. Born Cases are true
b. Cases are false.
c. Case A is true. Case B is false.
d. Case A is false. Case B is true.
107. B visited a store selling lamps, light bulbs and similar items. He informed the sellerthat
he was buying 2units of a50-watt “Philips” bulb. Though he intended to use the 2 bulbs for the
headlight of his car, he did not inform the seller of his purpose.Thereafter, he installed the 2
units of “Phillips" bulb on his car but they did  not function. Based on the foregoing, which of the
following statements is incorrect?
a. The seller is liable for breach of warranty of fitness for aparticular purpose.
b. The seller is not liable for breach of warranty of fitnessfor a particular purpose because the
buyer did not relyon the seller's skill or judgment.
c. The seller is not liable to B since the seller's warranty isonly for merchantability, or that the
bulbis fit for thegeneral purpose for which it was intended.
d. There is no warranty of fitness for a particular purposesince the bulb was sold to B under its
trade name.
108. S delivered a diamond ringto B for B's necklace worthP10,000.00and cash of P15,000.00
which B is scheduled todeliver one week after their agreement. The contract between Sand B
was not in writing. The contract between S and B is:
a. an enforceable contract of barter.
b. an enforceable contract of sale.
c. can enforceable contract that is partly a sale and partly abarter.
d. a sale but it is unenforceable not being in writing and the cash to be paid by B is at least
P500.00.
109. These contracts are presented to you for evaluation:
 I. A contract for the delivery of an article which ismanufactured in the ordinary course of
business, but thearticle was not available at the time of the contract wasexecuted.
II. A contract for the delivery' of an article to bemanufactured specially for the customer
and upon hisspecial order.
In your evaluation of the said contracts:
a. Both contracts refer to a contract of sale.
b. Both contracts refer to a contract for a piece of work.
c. I refers to a contract of sale; II refers to a contract for apiece of work.
d. I refers to a contract for a piece of work; It refers to acontract of sale.
110. These statements are presented to you:
I. The sale of a thing having a potential existence is noteffective if the thing does
not come into existence.
II. sale of hope or expectancy produces effects even ifthe thing hoped for does not
come into existence.
In your evaluation of the foregoing statements:
a. Both are true.
b. Both are false.
c. Only Statement I is true.
d. Only Statement II is true.
111. The following terms are presented to you:
I. Contract to sell.
II. Sale or return.
III. Sale on trial.
IV. Agency to sell.
Upon the delivery of the goods by the owner thereof to the other party, ownership is
not transferred in:
a. I, II and III
b. I, III and IV
c. I, II and IV
d. II, III and IV
e. 111.
112. Salvosa shipped FOB Manila goods worth P20,000.00 to Bordelo who is based in Davao
City. While the carrier was on a stopover in Cebu City, Salvosa was informed by his bank that the
check issued by Bordelo was dishonored by reason of insufficiency of funds. He also learned
from the Credit Bureau that Bordelo had become insolvent, Accordingly, Salvosa notified the
carrier that he was taking possession of the goods.
The right availed of by Salvosain the situation is known as the right of:
a. stoppage to transitu.
b. Subrogation.
c. attachment.
d. garnishment.
113. Refer to No. 112. After obtaining actual possession of the goods, Salvosa offered them
for sale at public auction. Based on the foregoing facts, which of the following statements
isincorrect pertaining to the sale of the goods?
a. Salvos--4 mabidtthyae public auction provided there isnotice of his participation.
b. The buyer of the goods at the public auction acquires Title to the goods as against Bordelo.
c. If the goads are soldt P19a,000.00 net of cost of sellingand other expenses, Salvosa may
recover the amount ofP1,000.00 from Bordelo.
 d. If the goods are sold at P22,000.00net of cost of sellingand other expenses, the profit of
P2,000.00 belongs toSalvosa.
114. Antonio, Benito, Carmelo and Donato are co-owners ofan agricultural lot which they
inherited from their parents.Antonio sold his undivided share in the property to Teodulfo.Either
Benito, Carmelo and Donato may purchase Antonio'sshare in the property from Teodulfo by
virtue of their right of
a. legal redemption.
b. pre-eruption.
c. conventional redemption.
d. consolidation.
115. C, owner of certain goods, deposited the goods with W, awarehouseman, who issued to
D a warehouse receipt which states that The goods are to be delivered to the order of D.
Dmay negotiate the warehouse receipt by any of the followingmeans; except by:
a. mere delivery.
b. indorsement completed by delivery.
c. blank indorsement completed by delivery.
d. indorsementto bearer completed by delivery.
116. Palmares ordered from Superstar sportswear Company, a sportswear manufacturer,
2 dozens of jackets and jogging pantsStyledand designed by Palmares for the use of his
basketballteam. This was notthe type of sportswear normallymanufactured by Superstar. The
price agreed upon by theparties was P72,000.00. After the articles were manufactured,Palmares
refused to accept them and claimed that he was notliable since the contractdid not. comply with
the Statute ofFrauds.
a. Palmares is liable although the contract was not inwriting.
b. The contract is a contract of sale.
c. The contract is a contract to sell.
d. There was no contract at all because no writing wasexecuted by the parties.
117. It refers to the right which the vendor reserves to himself torepurchase the thing sold,
with the obligation to reimburse thevendee of the price, the expenses of the contract, any
otherlegitimate payments made therefor and the necessary and usefulexpenses made on the
thing sold.
a. Conventional redemption.
b. Legal redemption.
c. Equity of redemption.
d. Right of pre-emption.
118. The following are characteristics of certain contracts:
I. Nominate
II. Real
III. Aleatory
IV. Commutative
A conract for the sale of a sweepstakes ticket is considered-as:
a. IandII.
b. I and IV.
c. I and 111.
d. III and IV.
119. These statements are presented to you for evaluation:
I. Option money is part of the purchase price.
II. Earnest money is proof of the perfection of the contract of sale.
 In your evaluation of the said statements:
a. Both are true.
b. Both are false.
c. Only I is true.
d. Only II is true.
120. S sold a computer to B for P120,000.00 under the followingterms: P20,000.00 down;
balance payable in 10 equal monthlyinstallments with an acceleration clause. To secure
payment ofthe balance, B executed a chattel mortgage on the computer anda real mortgage on
his lot. After paying the first two installments,B defaulted in the payment of the third, fourth
and fifthinstallments. S wants to recover in full the balance ofP80,000.00 even in case of
deficiency so he consults you onwhich of the following courses of action to take to achieve
thatpurpose:
I. Exact fulfillment of the balance by suing B and have thecomputer sold for the
execution of the judgment againstB.
II. Foreclose the chattel mortgage on the computer.
III. Foreclose the real mortgage on the lot.
Based on your evaluation of the foregoing data, the course ofaction that you will likely
recommend to S to achieve his purposeis:
a. Either I or II.
b. Either Ii or III.
c. Either I or Ill.
d. Any of I, II or III.
121. On January 5, Samonte, who was going abroad as an immigrant,offered to sell his car for
P150,000.00 to Baldriga. He informedBaldriga, however, that he wanted to rent the car for
P1,000.00per day up to January 15 as soon as the sale is executed since
his flight was not scheduled until the 16TH. Baldriga acceptedboth offers, and accordingly, he and
Samonte executed acontract of sale and a contract of lease simultaneously on thesame day,
January 5. All the while, Samonte remained inphysical possession of the car until January 10
when the car wasstolen without his fault. The car was never recovered.
a. Samonte must bear the loss by returning the sum of P50,000.00since,Baldriga did not
become the ownernot having obtained physical possession thereof.
b. Baldriga must bear the loss because he acquiredownership of the car despite its lack of
physical deliveryto him.
c. Both Samonte and Baldriga must share equally in the oss.
d. Samonte must bear the loss by returning P150,000.00less P5,000,00, the rental of the
car for 5 days, in partialcompensation.
122. S, who is based in Manila, shipped FOB Cebu goods worthP50,000.00 to B. While the
goods were on their way to Cebu, Swas informed by his bank that the check remitted by B
wasdishonored for insufficient funds. Accordingly, S notified thecarrier not to proceed with the
delivery and that he was takingpossession of the goods. Based on the foregoing facts,
whichremedy is available to S?
a. Resale of the goods.
b. Rescission of the sale.
c. Either resale or rescission of the goods, at the option ofS.
d. Newer resale nor rescission.
123. Before perfection in a sale by auction:
I. Any bidder may withdraw his bid.
 II. The auctioneer may withdraw the goods from the saleunless the auction has been
announced to be without reserve.
The statement is true for:
a. Both I and ll.
b. Neither I nor II.
c. I only.
d. II only.
124. The following contracts of sale are presented to you:
I. S sold a certain ring to B. It turned out that the ring wasstolen from 0, its true
owner.
II. S, a jewelry store sold a certain ring to B. The ring,however, actually belongs to 0
who had lost it a few days earlier.
III. S, a pawnshop, sold at a public auction a certain ringwith B as the winning
bidder.0, however, is the trueowner of the ring but the pawnshop thought it
wasowned by X, a defaulting borrower of the pawnshop.
In your evaluation of the above sales, B acquired title to the ringin:
a. I and II.
b. II and Ill.
c. I and 111.
d. none of the three contracts.
125.
126. Refer to No.125. O may recover the ring. from B without theneed of reimbursement in:
a. I only.
b. II only.
c. Ill only.
d. All three contracts.
127. S sold a brand-new electric typewriter to B for P20,000.00 on acredit term of 30days.
The agreement between the partiesprovides that B may return the typewriter within the same
period.Ten days after delivery to B, burglars entered the office of B andcarted away various
valuables including the typewriter he boughtfrom S.
a. B must pay the price of the typewriter to S.
b. B is not obliged to pay the price of the typewriterbecause the loss thereof was without his
fault.
c. S must shoulder the loss because B's ownership of thetypewriter was not absolute since he
had the option to,return it within 30 days.
d. The loss must be shared equally by S and B in fairness to both.
128. The following statements are presented to you:
I. A bearer document of title if it is specially indorsed canbe negotiated thereafter only by
indorsement completedby delivery.
II. A bearer negotiable instrument if it is specialty indorsedbe negotiated thereafter only by
indorsementcompleted by delivery.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only I is true.
d. Only 11 is true.
129. S sold to B a specific car for P200,000.00. The terms of the sateprovide the following:
down payment of P40,000.00; balancepayable in 8 equal monthly installments of P20,900.00
 each, witha real estate mortgage to be executed by B on his lot to secured the said balance.
After paying 3 installments, B defaulted thpayment of 3 more installments. Based on the
foregoing facts,the following remedies were presented to B:
I. Exact fulfillment of the obligation.
II. Cancel the sale.
III. Foreclose the real mortgage on the lot and recover anydeficiency in the foreclosure sale.
If you were B, the remedy that you may avail yourself of is:
a. Either I or ll.
b. Either II or Ill.
c. Either I or Ill
d. Any of the three remedies presented.
130. An. unpaid seller may avail himself of the following remedies, except the right to:
a. retain the goods while he is in possession of them.
b. resume possession of the goods at any time while theyare in transit.
c. buy the goods at any public sale if he decides to resellthem.
d. rescind the sale.
131. S sold his lot to X on April 1, 2010. The deed of sale was dulyacknowledged by the
parties before a notary public. However,X did not take physical possession of the lot.On April
10,2010, S sold the same lot to Y under a deed of sale which wasstill to be notarized. Y
immediately took physical possession ofthe lot. Y was not aware of the previous sale to X. When
Xvisited the property, he found Y already building a structurethereon. It was also then that he
discovered that S had sold thesame lot to Y.
a. The lot belongs to X.
b. The lot belongs to Y.
c. The lot will be co-owned by X and Y in fairness to both ofthem since they were in good faith.
d. The lot still belongs to S until it can be determined whobetween X and Y  is the owner of the
lot.
132. A contract of sale is perfected upon the:
a. full payment of the purchase price by the buyer.
b. delivery of the object of the contract to the buyer.
c. meeting of minds between seller and the buyer on theobject and the price.
d. acknowledgment of the deed of sale by the seller and the buyer before a notary public.
133. These statements are presented to you:
I. It is part of the purchase price.
II. It is paid before the contract of sale is perfected.
III. When given, it entitles the party making the payment to hold the recipient from
offering the object of the contract to other persons within the period agreed
upon.
IV. It is proof the perfection of the contract of sale.
Based on your evaluation of the foregoing statements, which ofthe following is true?
a. I and III refer to option money.
b. II and III refer to option money.
c. II and IV refer to earnest money.
d. III and IV refer to option money.
134. Orlando is the owner of an agricultural lot consisting of 9,000 square meters (or 9
hectare). The lot is surrounded on theNorth by Nonato's lot consisting of 7,000 square meters;
on theEast, by Espino's lot consisting of 6,500 square meters; on-theSouth, by Serrano's lot
consisting of 8,500 square meters; andon the West, by the road, across which was Wagan's
 lotconsisting of 6,300 square meters. Orlando donates the lot toBenito, his brother, who is the
owner of several rural lots in thearea. Of the adjoining owners, only Serrano expressed to
Benitohis desire to redeem the lot. The right of legal redemption isavailable to:
a. Serrano because it was only he who offered to redeemthe lot.
b. Wagan because he is the owner of the smallest adjoining lot.
c. Espino because he is the owner of the smallest lot that isnearest to the lot of Benito.
d. None of the adjoining owners may avail himself of theright of legal redemption including
Nonato.
135. Barrameda visited the furniture store of Farrales to buy windowframes for his house
.which was. undergoing construction. Notfinding any window frame. of his liking, he made a
sketch of thedesign he wanted and asked Farrales if he- could make fourpieces of the
specification for delivery after one week. Farralesanswered that he could at the price of
P2,000.00. per frame. Thewindow frames ordered by Barrameda was of such odd shapeand
design that when completed and installed, Barrameda'shouse would be the only one in the
community that hadwindows of such type. Barrameda left the sketch with Farraleswho did. not
ask any down payment since he had previouslytransacted with Barrameda and knew him.
During all the timethat Barrameda and Farrales were dealing with each other,Arnulfo, the
assistant of Farrales, was present. When the window frames were finished, Farrales proceeded
to the house of Barramed to deliver them but Barrameda refused to accept them saying that he
had changed his mind, and that at any rate, the contract was unenforceable, not being in
writing.
a. The contract is enforceable because the sketch made byBarrameda was sufficient to bind
him.
b. The contract is enforceable because Arnulfo can testifyin cou rt to prove its existence.
c. The contract is enforceable even if no writing wasexecuted by the parties.
d. The contract is unenforceable because no writing wassubscribed by the pa rt ies.
136. Refer to the preceding number. What contract was entered intobetween Barrameda
and Farrales?
a. Contract of sale.
b. Contract for a piece of work.
c. Contract to sell.
d. An innominate contract.
137. A contract for a piece of work is different from a contract of salein that in a contract for
a piece of work:
a. the Statute of Frauds does not apply.
b. the article object of the contract is manufactured orprocured in the ordinary course of
business.
c. there is usually a stock which is kept on hand and madeavailable to anyone.
d. the article is not available, there is no change ormodification of it when it is ordered by the
customer.
138. Which of the following statements is common to both sale or return and sale on trial?
a. Ownership of the thing is transferred upon delivery to thebuyer.
b. Ownership of the thing is transferred to the buyer atsome future time.
c. Ownership of the thing may be reverted to the sellershould the buyer return it within the
time agreed upon.
d. In case the thing is lost through a fortuitous event after the lapse of the time to keep or
return it and the buyerwas still in possession of it, the risk of loss is with thebuyer.
139. The full payment of the price is a positive suspensive conditionin:
 a. contract to sell.
b. contract of sale.
c. sale or return.
d. sale on trial.
140. The non-payment of the price is a negative resolutory conditionin:
a. contract to sell.
b. contract of sale.
c. contract of agency to sell.
d. sale on approval.
141. When there is a stipulation exempting the vendor from theobligation to answer for
eviction and the vendee made the waiverwith knowledge of the risks of eviction and assumed
theconsequences, such waiver is known as:
a. waiver intencionada.
b. waiver consciente.
c. forfeiture of rights.
d. surrender of rights.
142. In case of eviction, the vendor shall be liable to the vendee only for the value of the
thing sold at the time of eviction in which ofthe following cases?
a. When there is waiver intencionada
b. When there is waiver conscience
c. When the vendor was in bad faith and there was nostipulation exempting the vendor from
liability in case ofeviction.
d. When the vendor was in bad faith and there wasstipulation exempting the vendor from
liability in case of eviction.
143. S and B entered into a contract for the sale of the car of S to B for P100,.000.00. In
reality, however, B did not give any amountto S because the latter intended to donate the car to
B. In thiscase:
a. The contract between S and B is void because the priceis simulated.
b. The contract between S and B is a valid contract ofdonation.
c. The contract between S and B is a void contract ofdonation.
d. The contract between S and B is a valid contract of sale.
144. On July 1, Serena sold to Berbola through a private instrument aspecific piano for
P20,000.00. Simultaneous with the sale, theparties agreed that Serena would lease the piano for
one weekin preparation for a concert after which Berbola could physically get the piano. Before
the week was over, Serena sold the samepiano, also in a private instrument and for P25,000.00,
toJezebel who immediately loaded the piano in her van. NeitherBerbola nor Jezebel was aware
of the sale made to the other. Who is the owner of the piano?
a. Berbola
b. Jezebel
c. Berbola and Jezebel, as co-owners.
d. Serena who retained ownership because of Berbola andJezebel's conflicting rights.
145. B bought two carabaos, one male and one female, from, S. Hepaid P2,000.00and
P3,000.00, respectively, for the animalswhich he intended to use for breeding. Later, the
femalecarabao was found unfit for breeding because of a redhibitorydefect.
a. B can rescind the sale of the female carabao onlybecause he paid a separate price for it.
b. B can rescind the sale of both animals because hewould not have bought the male carabao
without thefemale carabao.
c. B cannot rescind the sale of either animal under the "letthe buyer beware" rule.
 d. B can rescind the sale of both animals only if he hadpaid a single price for both them.
146. What may the consideration consist of in an option contract in order to bind the
offerer?:
a. Monetary.
b. Other things or undertakings.
c. Either (a) or (b).
d. May not be a valuable consideration, i.e., may begratuitous.
147. The following statementspertaining to sale by auction arepresented to you:
I. The auctioneer may not withdraw the goods from theauction sale if the sale was
announced to be withoutreserve.
II. The auctioneer may withdraw the goods from the auctionsale if the sale was announced
to be with reserve.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
148. Under the Maceda Law, in determining the number ofinstallments paid by the buyer,
the following payments areincluded, except:
a. down payments.
b. deposits.
c. option money.
d. none of the foregoing.
149. Necessaries. include everything indispensable for sustenance,clothing and medical
attendance, and which of the following?
a. Dwelling
b. Education
c. Transportation
d. All of the foregoing.
150. While her parents were away on a visit to the province, M, 17 years old, entered. into a
contract for the purchase of textbooksprescribed in his course and an evening gown. Which sale
to Mis/are considered valid and binding, i.e., not voidable?
a. sale of the textbooks.
b. The sale of the evening gown.
c. Both (a) and (b).
d. Neither (a) nor (b) because a minor is incapable of givingconsent.
151. B bought a refrigerator from S for P20,000.00 which is payable in20 installments at
P1,000.00 per month. After paying6 installments, B defaulted in the payment of the seventh and
eight installments. Should S decide to enact fuiftilment of theobligation, how much, as a rule,
may S collect from B?
a. The total amount of installments defaulted, i.e.,P2,000.00.
b. The remaining balance of P14,000.00.
c. Either (a) or (b) at the option of S.
d. Neither (a) nor (b) because S has to wait for the sale ofthe property to third persons.
152. A, B and C were the co-owners of a lot in the ratio of 1:2:1. Adied. He was succeeded to
the property by S, his son and heir.Who may redeem the. lot of A from S?
a. B, because as the owner of a bigger portion, he enjoyspreference in the exercise of the right
of legalredemption.
 b. C, so that he and B will have an equal share in the lot.
c. B and C, in proportion to the share of each in the lot.
d. Neither B nor C may exercise the right of legalredemption.
153. When is the vendor bound to deliver the thing sold?
a. If the vendee has not paid him the price.
b. If no period for the payment of the price has been fixedin the contract.
c. If the buyer has been given the benefit of the period.
d. None of the foregoing.
154. These statements concerning the double sale of an immovableare presented to you:
I. The first buyer who was in good faith at the time the salewas made to him, remains in
good faith notwithstandingthat he subsequently obtains knowledge of the secondsale.
II. In order that the second buyer may be given preferencehe must possess good faith from
the time of sale in his favor until the registration of the same.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement 11 is true.-
155. A credit right is considered to be in litigation:
a. as soon as a complaint is filed by the creditor against thedebtor.
b. when the debtor has filed his answer to the complaint.
c. when the case is scheduled for pre-trial conferencebetween the parties.
d. when the trial has started.
156. D owed C P100,000.00. The debt is evidenced by a promissorynote and secured by a
mortgage of D's lot. Before due date, Cassigned his credit right to T by executing a deed of
assignmentbut without the parties informing D. On due date, T went to D tocollect the debt at
which time D learned of the assignment.
a. T cannot collect from D because the latter was not informed of the assignment at the time it
was made.
b. T can collect from D but if D cannot pay, T can foreclose the mortgage in the lot.
c. T can collect from if D cannot pay, T can foreclosethe mortgage which is deemed assigned
together with the credit right.
d. T can only go after C, the assignor, since theassignment was without D's knowledge.
157. What does the assignor of a credit warrant?
a. The legality and existence of the credit.
b. The solvency of the debtor.
c. Both (a) and (b).
d. Neither (a) nor (b).
158. The right of pre-emption differs from the right of redemption inthat in pre-emption:
a. the action is directed against the buyer.
b. the action is directed against the seller.
c. the right arises after the sale.
d. there can be a rescission of the originalsale.
159. The following are certain modes of acquisition of propert :
I. Purchase
II. Dacionenpago
III. Succession
IV. Donation
 Legal redemption is available when the transferee acquired theproperty through:
a. I or II.
b. III or IV.
c. I or Ill.
d. II or IV.
160. A sale between husband and wife is valid in which of thefollowing cases?
a. When a separation of property has Teen agreed upon inthe marriage settlements or when
there has been ajudicial separation of property.
b. When price of the sale is a moderate amount.
c. When the object of the sale is a necessary such as foodor clothing.
d. When the spouses are living separately.

TEST II - MATCHING TYPE. Indicate your answers by writing the letterrepresenting the statement
or phrase that best describes, defines orexplains the numbered items.

Terms
1. Barter 13. Document of title
26. Pactumcommissorium 39. Sale on trial
2. Piece of work 14. Bill of lading
27. Conventional redemption 40. Absolute incapacity
3. Price 15. Sale or return
28. Vendor 41. Payment by cession
4. By-bidders/puffers 16. Dacionenpago
29. Relative incapacity 42. Future goods
5. Policitacion 17. Fungible goods
30. Waiver consciente 43. Bearer document of title
6. Symbolic delivery 18. Straight sale
31. Emptiospei 44. Waiver intencionada
7. Traditioconstitutum 19. Emptio rei sperati
possessorm 45. Traditio brevi menu
32. Legal formalities 20. Earnest money
33. Necessaries 46. Assignment of credit
8. Unpaid seller. 47. Bailee
34. Stoppage in transitu 21. Traditio longa manu
9. Warranty against eviction 48. Redhibitory defect
35. Order.document of title
10. Accion redhibitoria 22. Possessory lien
36. Right of pre-emption 49. Auction
11. Legal redemption 23. Eviction
37. Warehouse receipt 50. Option money
12. Equitable mortgage 24. Easement or servitude
38. Vendee 25. Accionquanti minor's

Statements
a. Ownership of a thing istransferred to the creditor to settle amonetary obligation.
b. Lacks formalities but nevertheless shows the real intention ofthe pa rt ies to create a
specific property to secure theperformance of an obligation.
c. They refer to interchangeable goods such as grain, oil, etc., that allow one to be
replaced by another without loss of value.
d. Proof of the perfection of a contract of sale.
e. Includes a warehouseman, carrier or other person who receives the possession or
custody of the thing delivered.
f. Even professional inspection is not sufficient to discover it.
g. Exercised by the seller by obtaining actual possession of the goods or by giving notice to
the carrier or other bailee having actual possession of the goods.
h. It is made by the buyer with knowledge of the risk of eviction, hence, the seller will not
have any liability if the buyer is evicted.
i. Ownership is transferred to buyer upon delivery but he has the option to revert such
ownership to the seller.
j. Ownership of the thing sold is retained by the seller despite delivery to the buyer, but
the latter agrees to pay the price if he finds the thing satisfactory.
k. Delivery that takes place when the buyer who was in possession of the thing sold at the
time of sale continues in possession of the same as an owner.
l. Negotiated by indorsement.
m. Sale of property to the highest bidder.
n. The party in a contract of sale who is obligated to transfer the ownership of and to
deliver a determinate thing.
o. The consideration paid for the purpose of holding one to his promise to buy or sell a
determinate thing for a certain period of time, which consideration is separate and
distinct from the purchase price.
p. Applies to persons who, under certain circumstances,- cannot purchase certain
property.
q. The person obligated to pay the price of the thing purchased.
r. Delivery of a movable by mere agreement of the parties if thething cannot be
transferred to the vendee at the time of sale.
s. Negotiated by mere delivery.
t. It is made by the buyer without knowledge of the risk of eviction.
u. The consideration of the contract is another thing.
v. Applies to persons who cannot bind themselves in a contractincluding a contract of sale.
w. A document used as proof of the possession or control of thegoods, or authorizing or
purporting to authorize the possessor ofthe document to transfer or receive, either by
indorsement or bydelivery, the goods represented by such document.
x. Right given to an adjoining owner of an urban land to purchasethe same ahead of others
if such land is held for speculation.
y. Delivery through the execution of a public document.
z. The deprivation by final judgment of the vendee of the whole or a part of the thing sold
based on a right prior to the sale or an act imputable to the vendor.
aa. Refer to goods to be manufactured, raised or acquired by the seller.
bb. The sale of hope or expectancy.
cc. Includes one who has received as conditional payment for the goods a negotiable
instrument but the condition' has been broken by reason of the dishonor of the
instrument or the insolvency of the buyer.
dd. Include everything indispensable for sustenance, dwelling, clothing, medical
attendance, education and transportation.
ee. The balance is payable in its entirety after the payment of an initial sum.
 ff. A contract for the delivery at a certain price of an article to be manufactured specially
for the customer and upon his special order, and not for the general market.
gg. The sum stipulated as the equivalent of the thing sold.
hh. The right to be subrogated upon the same terms and conditionsstipulated in the
contract, in the place of one who acquires athing by purchase or dation in payment, or
by any othertransaction whereby ownership is transmitted by onerous title.
ii. Seller's undertaking that the buyer shall enjoy legal and peacefulpossession of the thing
sold.
jj. A stipulation in a contract of sale involving an immovable that thesale is automatically
rescinded upon failure of the buyer to pay the price.
kk. Delivery of the keys of the place where a movable is kept orstored.
ll. Contract for the storage of goods for a compensation.
mm. Buyer's remedy which involves the proportionate reduction in theprice of the
thing purchased.
nn. A unilateral promise to buy or sell a thing which is not acceptedby the promissee.
oo. An unpaid seller's right to retain the goods for the price while heis in possession of
them.
pp. Remedy of buyer to withdraw from the sale andask fordamages.
qq. An encumbrance imposed upon an immovable for the benefit ofanother immovable
belonging to a different owner.
rr. A person employed by the seller or auctioneer to raise the pricein an auction sale.
ss. A document issued by a common carrier acknowledging thereceipt of the goods and
agreeing to transport and deliver themto a specified place.
tt. Right of seller to repurchase the thing sold and the exercise ofwhich was reserved by the
seller at the time of sale.
uu. Delivery that takes place when the seller continues in possessionof the thing sold after
the sale but as lessee, depositary orotherwise.
vv. The creditors are given the right to sell the debtor's propertiesand apply the proceeds to
their respective claims.
ww. It has for its purpose the transfer to another person of the right tocollect the
debt.
xx. Sale of an expected thing.
yy. None of the foregoing.

TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word “FALSE" if the
statement is false.
1. Warranty against eviction is inherent in a contract of sale; hence,it is an essential element
thereof.
2. Dacionenpago partakes of the nature of a sale; hence, there ismore freedom in fixing the price
of the thing conveyed.
3. Acontract for a piece of work must comply with the Statute ofFrauds. Accordingly, it must be in
writing to be enforceable ifthe price is P500.00or more.
4. A sales contract requires the delivery of the thing sold for itsperfection.
5. If the consideration received for a thing is another thing and amonetary consideration and the
intention of the parties does notclearly appear, the contract, will be considered a contract ofbarter if the
value of the property consideration is greater thanthe monetary consideration.
6. Ina contract to sell, the full payment of the price is a- suspensivecondition which upon
-fulfillment will require the execution of acontract of sale.
7. It is not necessary that the vendor of a thing must be the ownerthereof at the time of sale as
long as he can transfer itsownership to the buyer upon delivery.
8. The sale of hope or expectancy is valid even if the thing hopedfor does not come into existence.
9. If the sale of a piece of land is made through an agent, theauthority of the agent must be in
writing for the sale to be valid.
10. In a sale by auctionan, Any bidder may retract his bid before tiesale is perfected.
11. If a "by-bidder` or "puffer is employed by a seller without noticein sale by auction, the sale ma/
be treated as fraudulent by thebuyer.
12. The ownership of the thing sold is transferred upon theperfection of the contract of sale.
13. A unilateral promise to buy or sell a determinate thing at acertain price is binding upon the
promissor if the promise issupported by a consideration distinct from the price.
14. Earnest money is part of the purchase price of a thing; hence,deductible from the total selling
price.
15. In sale of personal property payable in installments, the sellermay exact fulfillment of the buyers
obligation when the buyerdefaults in the payment of one or more installments.
16. In sale of real property where the buyer has defaulted after paying at least 2 years installments,
he shall be entitled to pay,without additional interest, the unpaid installments due within thegrace
period earned by him.
17. The purchase by a guardian of the property of the person underhis guardianship is valid.
18. The buyer shall be entitled to the fruits of the thing sold from thetime of the perfection of the
contract.
19. The delivery of incorporeal property may be made through theexercise by the vendee of his
rights with the consent of thevendor.
20. If goods are sold on "sale or return", the risk of loss of the thingsold remains with the seller after
its delivery to the buyer.
21. In "sale on approval", the buyer becomes the owner of the thingupon delivery, but he may
revert such ownership to the seller byreturning it.
22. The delivery of specific goods to a carrier or other bailee for thepurpose of transmission to the
buyer generally .transfersownership of the goods to the buyer.
23. When a thing is purchased from a merchant's store, fair ormarket, the buyer acquires title to the
thing although the sellermay have stolen it or acquired it from a thief.
24. A warehouse receipt is also a contract between thewarehouseman. and the depositor of the
goods.
25. A bearer document of title becomes an order document of title ifit is specially indorsed.
26. The delivery of an order document of title without anyindorsement does not constitute
negotiation.
27. A negotiable document of title of title becomes non-negotiable if it is stamped with the r-nark
" non- negotiable.
28. If the goods told are in the possession of a third person, the seller is deemed to have delivered
the goods to the buyer if the third person acknowledges to the buyer that he holds the goods in the
buyer's behalf.
29. If a period has been fixed for the payment of the price which has not yet arrived, the seller in
the meantime is bound to deliver the thing sold.
30. An unpaid seller exercising his right to resell the goods may buy the goods either directly or
indirectly.
31. When an unpaid seller exercises his right of stoppage in transit, the contract of carriage ceases,
the carrier becoming liable as a depositary.
32. If real estate is sold for a lump sum, the vendor is bound to deliver all that is included within the
boundaries stated in the contract although the actual area is greater than that stated in the contract.
33. If the same immovable is sold to two or more persons who are all in good faith, ownership shall
belong to the buyer who first paid its price.
34. In order that the buyer may enforce the seller's liability for breach of warranty against eviction,
the judgment depriving the buyer of the thing must first be appealed by the buyer.
35. The vendor's liability for breach of warranty against eviction, may be validly waived by the
vendee. However, the vendor will still be liable if the waiver was made by the vendee without
knowledge of the risks of eviction.
36. As a rule, the vendor shall not be liable for a non-apparent easement that is recorded in the
Registry of Property.
37. The vendor shall be liable generally for any defect on the thing sold even if he was not aware
thereof.
38. When animals are sold as a pair, the vendee may ask for the rescission of the sale of both
animals although only one of them suffers from a redhibitory defect.
39. The sale of animals suffering from contagious diseases is voidable. ls sold at
40. There is no warranty against hidden defects of animal sold at fairs or at public auctions, or of
animals sold as condemned.
41. Acceptance of the goods by the buyer generally discharges theseller from his liability for any
breach of warranty.
42. if the buyer is justified in refusing to accept the goods, he shallbe obliged to hold the goods as
depositary.
43. The buyer is obliged to pay interest on the price of the goods forthe period between the delivery
of the goods and the payment ofthe price if the thing sold produces fruits or income.
44. The buyer may suspend the payment of the price of the thingpurchased by reason of trespass
on the thing.
45. A stipulation that the sale of an immovable is automatically rescinded upon the default of the
buyer in the payment of theprice is valid.
46. In conventional redemption, the creditors of the vendor maymake use of the right of
redemption against the vendee althoughthey have not exhausted the properties of the vendor.
47. In case of doubt, a contract purporting to be a sale with a right torepurchase shall be construed
as an equitable mortgage.
48. For an assignment of credit to be binding against third persons ifa movable property is involved,
the same must be in a. public instrument and recorded in the Registry of Property.
49. A debtor who has paid his creditor before he learns of theassignment of his debt shall be
released from his liability to theassignee.
50. The debtor's consent is required for the validity of theassignment of the credit made by his
creditor to another person.

ANSWERS TO DIAGNOSTIC EXERCISES

SALES

1. B 6. D
2. D 7. D
3. B 8. B
4. D 9. C
5. D 10. C
 11. B 59. C
12. B 60. B
13. C 61.A
14. B 62.B
15. B 63.D
16. B 64.B
17. C 65.D
18. A 66.A
19. B 67.C
20.D 68.C
21.D 69.D
22. B 70.A
23. D 71.A
24. C 72.C
25. A 73.C
26. B 74.C
27. D 75.C
2 8. C 76.C
29. D 77.B
30. B 78.B
31,D 79.A
32.D 80.D
33.C 81.C
34.A 82.C
35. C 83.C
36. B 84.D
37.B 85.B
38.B 86. D
39. A 87. D
40.D 88. A
41.A 89. B
42. C 90.D
43.D . 91. B
44. A 92. A
45.C 93. C
46. D 94. D
47. C 95.D
48. C 96. D
49. B 97. C
50. D 98. C
51.B 99. C
52.A 100. B
53.B 101. C
54. D 102. A
55. C 103. D
56. B 104. C
57.D 105. A
58. C 106. D
107. A 136. B
108. A 137. A
109. A 138.D
110. B 139. A
111. A 140. B
112. A 141. A
113. A 142. B.
114. A 143. B
115. B 144. A
116. C 145.B
117. A 146. C
118. B 147..A
119. C 148. D
120. D 149. D
121. C 150. A
122. B 151. A
123. D 152. D
124. A 153. C
125. B 154.A
126. A 155. B
127. A 156.C
128. C 157. A
129. D 158. B
130. C 159. A
131. A 160. A
132. C
133. B
134.D
135. C

TEST II.- MATCHING TYPE

1.U 18.EE
2.FF 19. XX
3.GG 20. D
4. RR 21.R
5. NN 22.OO
6.KK 23. Z
7. UU 24. QQ
8.CC 25. MM
9. II 26. JJ
10. PP 27. TT
11.HH 28. N
12.B 29. P
13. W 30. T
14.SS 31.BB
15. I 32. Y
16.A 33. DD
17.C 34.G
35. L 43. S
36.X 44.H
37. LL 45. K
38.Q 46. ww
39. J 47. E
40. V 48. F
41. W 49.M
42. AA 50. O
21. FALSE
22. TRUE
23. TRUE
24. TRUE

25. TRUE
26. TRUE
27. FALSE
TEST III- TRUE OR FALSE 28. TRUE
29. TRUE
1.FALSE 30. FALSE
2.FALSE 31. TRUE
3.FALSE 32. TRUE
4. FALSE 33. FALSE
34. FALSE
5.TRUE 35. TRUE
6.TRUE 36. TRUE
7.TRUE 37. TRUE
8.TRUE 38. TRUE
9.TRUE 39. FALSE
10. TRUE 40. TRUE
11. TRUE 41. FALSE
12. FALSE 42. FALSE
13. TRUE 43. TRUE
14. TRUE 44. FALSE
15. TRUE 45. FALSE
16. TRUE 46. FALSE
17. FALSE 47. TRUE
18. TRUE 48. FALSE
19. TRUE 49. TRUE
20. FALSE 50. FALSE
'

AGENCY -- DIAGNOSTIC EXERCISES

TEST I - MULTIPLE CHOICE, Select the best answer by writing theletter of your choice.
1. A contract whereby a person binds himself to render some service or to do something in
representation or in behalf of another, with the consent and authority of the latter.
a. Contract for lease of services
b. Contract of agency
c. Contract for a piece of work
d. Contract to sell
2. One of the following is not a characteristic of the contract of agency.
a. Consensual
b. Accessory
c. Nominate
d. Preparatory
3. P, 25 years old, appointed A, 17 years old, as his agent to ,sell certain goods for
P20,000.00. Thereafter, A sold the goods to B for the said amount. P, however, learned
that the price of the goods had increased to P22,000.00 so he sought to disaffirm the
sale made by A to B, and brought an action to recover the goods from B on the ground
that A's act was voidable, A being a minor, and hence, could not be an agent.
a. The sale is valid because the principal is capable.
b. The sale is void, because A is a minor and therefore, cannot be an agent.
c. The sale is voidable, because A is a minor.
d. The sale is unenforceable, because A exceeded his authority.
4. Pantaleon appointed Arturo as the manager of his coconut plantation in Quezon
Province. After managing the plantation for 10 years, Arturo informed Pantaleon that on
account of failing, Arturo, was turning over the administration of the plantation to
Bartolome, an experienced coconut plant administrator. Arturo also informed Pantaleon
that he had givesa general power of attorney to Bartolome and that if such authority
were not sufficient,Pantaleon could send to Bartolome a new power of attorney or
appoint a manager of his choice. Pantaleon neither repudiated the designation of
Bartolome nor appointed a new agent. Instead, he allowed Bartolome to manage the
 plantation and continued to receive the reports on the plantation from the latter
without any protest. Was Bartolomean agent of Pantaleon?
a. No, because Pantaleon himself, did not give a general power of attorney to
Bartolome.
b. No, because the designation of Bartolome as manager by Arturo was without
Pantaleon's authority.
c. Yes, Bartolome became an agent of Pantaleon because of Pantaleon's failure to
repudiate the agency.
d. Yes, because Bartolome was highly qualified to administer the plantation.
5. One of the following acts may be delegated by a principal to his agent. Which is it?
a. Vote during- the meeting of stockholders of a corporation where the principal is a
stockholder.
b. Attend meetings of the board of directors of corporation where the principal is a
director.
c. Purchase land in the Philippines of which the principal is an alien.
d. Represent the principal in a marriage ceremony where the principal is a party to the
marriage contract.
6. One of the following acts requires a special power of attorney granted by the principal
to his agent. Which is it?
a. To make gifts to employees in the business managed by , the agent.
b. To borrow money which is urgently needed to preserve the property of the principal
under the administration of the agent.
c. To make payments for purchases in the ordinary course of the business.
d. To lease the real property of the principal to another person for more than one year.
7. One of the following acts requires only a general power of attorney, not a special power
of attorney, for the agent. Which is it?
a. To bind the principal in a contract of partnership.
b. To loan money of the principal.
 c. To enter into a contract by which the ownership of an immovable is transmitted or
acquired gratuitously or for a valuable consideration.
d. To make such payments as are usually considered acts of administration.
8. Pedro, a Filipino who was on a business trip in Timbuktu, learned that Federico, also a
Filipino, was interested in buying his lot located in Fairview, Quezon City. To take
advantage of the opportunity, he made an overseas call to Almario, his business'
associate who was in Manila, to sell the lot in his (Pedro's) behalf, to Federico, for
P1,000,000.00 cash. Almario thus sold the lot promptly to Federico. The contract of sate
was in a public instrument which was signed by Almario in behalf of Pedro as seller, and
Federico as buyer. The said contract of sale is:
a. Valid, because it is in a public instrument and Almario was duly authorized to
represent Pedro.
b. Void, because the authority of Almario was not in the form required by law.
c. Unenforceable, because Pedro did not sign the contract of sale and so he had no
consent thereto.
d. Rescissible, because the contract was entered into in representation of an absentee.
9. P, the owner of a certain car, wanted to sell the car. A learned that P was selling the car.
Without the authority of P, A sold the car in his (A's) name to B. What is the status of the
sale of the car?
a. Valid between A and B but A must be able to transfer theownership of the car to B
at the time of delivery.
b. Unenforceable against P because he did not authorize Ato sell the car.
c. Void because A was not the owner of the car at the time of sale.
d. Voidable becau se the sale was without the consent of P.
10. Purefine Corporation (Purefine) published in the Manila Bulletinthat it was appointing
Armando Arcos(Armando) as its dulyauthorized agent for the sale of "Purofino" flour,
one of itsproducts. With the authority, Armando sold "Purofino" flour tobakeshops all
over Luzon. After three years, Purefinerevoked Armando's authority by giving a notice of
revocation toArmando and publishing a notice of revocation in the
 PhilippineStar.Despite the revocation, Armando still sold50 bags of"Purofino" flour to
Barbie's Bakeshop, a single proprietorshipowned by Barbie Barredo, who did not read
the notice ofrevocation of Armando's authority in the Philippine Star. BarbieBarredo
now wants to have the flour she had ordered deliveredto her by Purefine but Purefine
seeks to set aside the sale of 50bags of flour to Barbie's Bakeshop.
a. Purefine is not obliged to deliver50bags of flourbecause Barbie Barredo is deemed
to have known ofthe revocation of Armando's authority.
b. Purefine is obliged to deliver 50 bags of flour to BarbieBarredo because the latter did
not read the publication ofthe revocation of Armando's authority.
c. Purefine is obliged to deliver 50. bags of flour because the revocation was not
binding upon Barbie Barredosince it was published in another newspaper.
d. Purefine is not obliged to deliver50bags of flourbecause the notice of revocation to
Armando issufficient.
11. Precision Appliances Corporation (Precision), which is based inMetro Manila, sent a
letter with a special power of attorney, toAlberto Aguado (Alberto), an agent dealing
with appliances, inthe latter's office in Cebu, appointing Alberto as the agent ofPrecision
to sell its new appliances. The letter, which was sentthrough LBC Courier Services, was
duly received by AlbertoAguado, who signed in the logbook of LBC. Alberto,
however,did not respond to the letter. Based on the foregoing data:.,
a. An agency was created between Precision and Albertoby the implied acceptance of
Alberto of the agency.
b. No agency was created between Precision and Albertobecause Alberto did not
respond to the letter.
c. An agency was created by the ratification of" Albertowhen he duly received the
letter with a special power ofattorney.
d. No agency was created because of the inaction of Alberto.
12. The following statements refer either to authority or instruction given by the principal to
his agent.
 I. Relates to the kind of business or transaction upon which the agent is
commissioned to act.
II. Concerns the principal and the agent.
III. Refers to the mode of action by the agent in carrying out the agency.
IV. Third persons can require the agent to present it to them since they are
chargeable with knowledge thereof.
V. You are to determine whether the above statements pertain to authority or
instruction.
a. I and II refer to authority.
b. I and IV refer to authority.
c. II and IV refer to instruction.
d. III and IV refer to instruction.
13. Pamela, a'professional singer based in Cebu, authorized Allona, also a professional
singer, to go to Manila to look for a nightclub where Pamela could sing. When Allona
arrived in Manila, she presented herself, not Pamela, as the singer, to the Twinkle Night
Club which engaged her services to sing nightly for two months at the club. Based on
the foregoing information, which of the following statements is correct?
a. Pamela has a right of action against Twinkle Night Club.
b. twinkle Night Club has a right of action against Pamela.
c. The contract between Allona and Twinkle Night Club is a valid contract between '
them, not between Pamela and Twinkle Night Club.
d. The contract between Allona and Twinkle Night Club is void because Pamela was not
the party thereto.
14. Paramount Auto Corporation (Paramount), an authorized dealer of Honda cars,
appointed Armando as its agent to sell the cars of the company. The authority of
Armando includes the giving of a discount of P20,000.00 to customers who pay in cash.
One day, Carmina, a customer, went to the company's car center and told Armando that
she wanted to buy a car with a sales price of P600,000.00. However, as she only had
P550,000.00, she told Armando that she would take the car if Armando agreed to a
 discount of P50,000 00. Armando agreed end sold the car to Carmina at P550,000 00 in
behalf of the corporation What is the status of the sale made by Armando to Carmine?
a. Voidable at the instance of Paramount because it did not give its cor vierit to ttir,
tialo at the discount of P50,000.00
b. Unenforceable against Paramount, the principal, because Armando acted beyond 
the scope of his authority.
c. Void, because the additional discount of P30,000.00 given by Armando was not
authorized by Paramount.
d. Rescissible, because Paramount suffered' damage of P30,000.00.
15. Perez gave Almendras a special power of attorney wherein it was written that
Almendras was being authorized to sell the two cars of Perez. However, Perez and
Almendras had an understanding that Almendras should sell only one of the cars.
Almendras sold the two cars to Bernarte who was not aware of the instruction given by
Perez to Almendras.
a. Perez is bound by the sale of only one car in accordance with his understanding with
Almendras.
b. Perez is bound by the sale of the two cars because that is what is contained in the
special power of attorney as written.
c. Perez is 'not bound at all by the sale of either one or both of the two cars because
Almendras violated the instructions given by Perez.
d. Perez will be bound by the sale of one or both cars at his option.
16. Ponciano gave a power of attorney to Alfonso for the sale of his 2 cars, a Toyota and a
Lancer. Their agreement included, among other provisions, the following:
I. Alfonso shall be entitled to a commission of 10% based on the actual selling
price of the cars which Ponciano fixed. at a minimum of P400,000.00 for the
Toyota; and P500,000.00 for the Lancer; and
II. Alfonso need not render to Ponciano any accounting of his transactions as long
as Alfonso turns over the actual selling price of the cars net of the commission of
10 %. Alfonso was able to sell the Toyota to Teodolfo for P410,000.00; and the
 Lancer for P500,000.00 to Leonclo who gave Alfonso a tip of P20,000.00. After
the sale, Ponciano demanded from Alfonso an accounting of the transactions
that he had made but Alfonso refused claiming that it was enough that he turned
over the net selling price of P810,000.00 (P900,000 less 10% of P900,060.00 as
commission) to Ponciano as agreed to by the two of them. Decide.\
a. Alfonso need not render an accounting to Poncianobecause that was their
agreement.
b. Alfonso must account and deliver to Ponciano only thesum of P900,000.00.
c. Alfonso must account and deliver to PoncianoP910,000.00.
d. Alfonso must account and deliver to PoncianoP930,000.00.
17. The following statements pertain to either a commission agent ora brokef.
I. He has a relation not only with his principal, and thebuyers or sellers, but'also
with the property which is theobject of the transaction.
II. Maintains no relation with the thing he purchases orsells.
III. The goods-are placed in his_possession and disposal.
IV. He is merely an intermediary whose function is to bringthe parties to the
transaction.
V. Determine whether the above statements pertain to commissionagent or
broker.
a. I and Ill pertainto.a commission agent.
b. I and IV pertain to a commission agent.
c. II and Ill pertain to a broker.:.
d. I and IV pertain to a broker.
18. The principal is not liable for the expenses incurred by the agentin the following, except
when:
a. although the agent acted in contravention of theprincipal's instructions, the
principal wishes, to availhimself of the benefits derived from the contract.
b. it, was stipulated that the agent would be allowed only acertain sum.
 c. the agent incurred 'them with the knowledge that anunfavorable result would
ensue, if the principal was notaware thereof .
d. the expenses were due to the fault of the agent.
19. When two persons contract with regard to the same immovable thing, one of them with
the agent, and the other with the principal, and the contracts are incompatible with
each other, ownership shall belong to the:
a. first purchaser in good faith.
b. one who first completed the payment of the price in good faith.
c. one who first registered in good faith the transaction.
d. one who presents the oldest title who must be in good faith.
20. An agency is impliedly revoked in three of the following cases. Which is the exception?
a. When a hew agent is appointed for the same business or transaction.
b. When the principal directly manages the business entrusted to the agent, dealing
directly with third persons.
c. When a special power of attorney is .granted to another agent pertaining to a
special matter involved in a general power of attorney issued to a previous agent.
d. When the desire of the principal is help the agent manage the business.
21. Penelope appointed Alicia as her agent to sell a set of bakery equipment for P50,000.00'
with an ordinary commission of 10% and a guarantee commission of 15%. Alicia is
authorized to sell on credit. Alicia was able to sell, in behalf of Penelope, the bakery
equipment for P50,000.00 to Nicole who issued a check dated ten days after the sale.
On the tenth day, however, the check was dishonored by the bank because Nicole did
not have sufficient funds for it.
a. Alicia is liable to Penelope because she must bear the risk of collecting the price
from Nicole.
b. Alicia is not liable to Penelope because the dishonor of the check was without
Alicia's fault.
c. Alicia is not liable to Penelope because she is not the purchaser but Nicole.
d. Alicia is liable to Penelope because she acted beyond the scope of her authority.
22. P appointed A as his agent. The authority of A did not authorize A to appoint a
substitute but it did not also prohibit him from appointing one. In this case:
a. A may appoint a substitute because he is not prohibited from doing so in his
authority but he shall be liable for the acts of the substitute.
b. A may not appoint a substitute because there is no express provision in his
appointment from P allowing him to appoint one.
c. A may appoint a substitute but he shall be liable for the acts of the substitute only
when the substitute is notoriously incompetent or insolvent.
d. A may appoint a substitute only when the substitute is designated in the authority
given by P to A.
23. The following cases are presented to you for evaluation:
I. A bilateral contract depends upon the agency.
II. The agency is a means of fulfilling an obligationpreviously contracted.
III. The agency is one where the a partner was appointedmanager in the contract of
partnership and the removalof the partner from the management is
unjustifiable.
In which of the above cases is the principal not allowed to revokethe agency?
a. I and II.
b. II and Ill.
c. I and III
d. I, II and IIL
24. Which of the following is not a mode of extinguishing an agency?
a. Death, civil interdiction, insanity or insolvency of theprincipal or agent.
b. Accomplishment of the purpose of the agency.
c. Expiration of the period for which the agency wasconstituted.
d. Continued losses on the part of the principal or agent.
25. X, Y and Z. co-owners of a house and lot, appointed A to sellthe house and lot at a price
of not less P1,500,000.00 cash withA being entitled to a commission of 10 %0 of the
 selling price. Awas able to sell the house for P1,800,000.00 cash. How muchcommission
may A collect from X?
a. P150,000.00.
b. P180,000.00.
c. P60,000.00,
d. P50,000.00,
26. R, S and T, each one owning a separate lot, appointed A in oneinstrument to sell their
respective lots. Under the agreement, Awill receive a commission of 10% of the selling
price of each lot.A was able to sell the lot of R for P100,000.00; the lot of S
forP200,000.00; and the lot of T for P300,000.00. How muchcommission may A collect
from R?
a. P60,000.00.
b. P10,000.00.
c. P20,000.00.
d. P30,000.00.
27. This is an agency that comprises one or more specifictransactions of the principal.
a. Special agency.
b. General agency.
c. Agency couched in general terms.
d. Agency couched in specific terms.
28. P, owner of a certain car, authorized A to sell the car forP100,000.00 cash. A, however,
sold the car in the name of P forP110,000.00 but on credit. B, the buyer, knew at the
time of thetransaction that A's authority was to sell the car of P on cashbasis. The
contract entered into by A is:
a. Void because B was aware of A's limit of authority. Inthis case, A is not liable
because he did not undertake toget P's ratification.
b. Valid because the transaction, although it was for credit,was more advantageous to
P. Accordingly, P will beliable.
 c. Unenforceable against P because A acted in excess ofhis authority. Thus, A alone will
be liable.
d. Rescissible, because P will suffer damage if the salesprice is not paid by B.
29. P entinio appointed Anzures as commission agent to sellPentinio's goods for P10,000.00
cash. Anzures, however, sold the goods on credit for P11,000.00 without Pentinio's
consent. Based on the foregoing facts, which of the following options areavailable to
Pentinio?
I. Pentinio may demand immediate payment in P11,000.00 cash.
II. Pentinio may demand immediate payment in P10,000.00 cash. However,
Anzures shall be entitled to keep the excess of P1,000.00 when he collects the
price ofP11,000.00.
III. Pentinio may ratify the sale on credit for P11,000.00 and wait for the amount to
be collected.
a. Either I or III.
b. Either II or 111.
c. Either I or II.
d. I only.
30. P leads B to believe that A is his (P's) agent. However, A is not really the agent of P.
Later, B transacted with A believing that A is the agent of P. What kind of agency was
created here?
a. Agency by ratification.
b. Agency by appointment.
c. Agency by estoppel.
d. Agency by necessity.
31. Consider the following statements:
I. An agency may be constituted in the common interest 'of the principal and the
agent.
II. An agency may be constituted in the interest of a third person who, has accepted
the stipulation in his. favor. The death of the principal extinguishes the agency,
 as a rule. However, the death of the principal does not extinguish an agency if
the reason why the agency was created is:
a. Reason I only.
b. Reason II only.
c. Either Reason I or Reason II.
d. Neither Reason I nor Reason. II.
32. An agent who contracts in the name of the principal is not liable in one of the following
cases. Which is it?
a. If the agent expressly bound himself.
b. If the agent acted beyond the limits of his authority without giving the party he
contracted with sufficient notice of his powers.
c. If the other party knew that the agent exceeded his authority and the agent
undertook to secure the principal's ratification but the principal did not ratify the
contract.
d. If the other party knew that the agent acted in excess of his authority but the agent
did not undertake to secure the principal's ratification.
33. A, a duly authorized agent of P, wrote a letter to X on May 1, 2010 offering to sell P's
only Mercedes Benz car for P2,000,000.00 cash. On May 3, 2010, X wrote a letter to A
stating that he accepted all the terms of the offer, which letter was received by A on
May 5, 2010. Before A could relay such acceptance to P, P died in a vehicular accident
on May 6, 2010.
a. The contract was not perfected because P, the real party to the sale, died before the
acceptance came to hisknowledge.
b. The contract was perfected on May 1, 2010.
c. The contract was perfected on May 3, 2010.
d. The contract was perfected on May 5, 2010.
34. P published the appointment of A as P's agent in the ManilaBulletin. For5 years, A, as P's
agent, dealt with the publicincluding X. On June 1, 2010, P revoked A's authority by
 givingthe latter a notice of revocation. The revocation was publishedin the Philippine
Star. A month later, X, who was ignorant of therevocation, sold goods to A as P's agent.
a. P is not obliged to pay for the goods because thepublication of the revocation of A's
authority is sufficientnotice.
b. P is obliged to pay for the goods since X was not awareof the revocation of A's
authority.
c. P is obliged to pay for the goods because the revocationshould have been published
in the same newspaper.
d. P is not obliged to pay for the goods because the noticeof revocation to A is
sufficient.
35. P appointed A as his agent to sell the appliance products of P.The agreement between P
and A provides for the payment to Aof a5% ordinary commission and a10% guarantee
(or delcredere) commission. A sold several appliances to B forP20,000.00the same being
payable after 30 days. When Awent to B's place to collect the price of the appliances,
B,together with the appliances that were sold, was nowhere to befound:
a. A is liable to P for the price of the appliances because Amust bear the risk of
collecting.
b. A is not liable to P for the price of the appliancesbecause it was not his fault that B
should disappear.
c. P must bear the risk of collection because he is theowner of the appliances.
d. A is liable to P because A acted beyond the scope of hisauthority.
36. An agent acting in the name of the principal shall not be liable tothe third-person with
whom he contracts:
a. When he expressly binds himself.
b. When he exceeds the limit of his authority without givingthe third person sufficient
notice of his powers.
c. When the third person knew of the agent's lack ofauthority and the agent undertook
to get the principal'sratification but failed to get the same.
 d. When the third person knew of the agent's lack ofauthority but the agent did not
undertake to. get theprincipal's ratification.
37. P appointed A as his agent to sell the goods belonging to P for acommission of 10%.
Thereafter, A sold the goods of P to B on30-days credit term for P20,000.00 without
authority from P. Thegoods have a cash price of P19,000.00. Which of the followingis
not an option available to P?
a. P may demand immediate payment from A of theamount of P18,000.00.(P20,000
less 10 %).
b. P may demand immediate payment from A the amountof P17,100.00 (P19,000.00
less 10%)
c. P may demand payment from A of the amount ofP18,000.00 (P20,000.00 less 10%)
when A collects fromB after 30 days.
d. P may choose not to ratify the sale.
38. Which of the following acts does not require a special power ofattorney for the agent?
a. To effectnovations which put an end to obligations already in existence at the time
the agency was constituted.
b. To make gifts to the employees in the business managed by the agent.
c. To bind the principal in a contract of partnership.
d. To lease any real property to another person for more than a year.
39. P gave a general power of attorney to A to sell P's products all over the Philippines. After
three years, P revoked A's authority by giving a notice of revocation to A. P also had the
revocation published in the Manila Bulletin. Despite the revocation, A still sold P's
products to X who had been a regular customer for the past 3 years and who was also
known to P. However, X did not read the notice of revocation in the Manila Bulletin.
a. P is bound by the sale.
b. The contract is unenforceable against P.
c. A is not liable on the sale.
d. X must be specially informed of the revocation.
40. P gave a special power of attorney to A to sell P's house and lot. On May 1, 2010, A sold
the house and lot to X through a deed of absolute sale which was duly acknowledged
before a notary public. On May 5, 2010, P sold the house and lot to Y not knowing that A
had already sold the same to X. Although, the deed of sale in favor of Y had not yet been
acknowledged before a notary public by P and Y, Y immediately took. possession of the
house and lot. X and Y were not aware of the sale made to the other.
a. X is the owner of the house and lot.
b. Y is the owner of the house and lot.
c. X and Y will become co-owners of the house and lot.
d. P remains the owner of the house and lot.
41. The principal may delegate to an, agent the performance 'of one of the following acts:
a. The power to attend and vote at the meetings of directors of a corporation of which
the principal is a director.
b. The power to represent the, principal in a marriage ceremony where the principal is
the groom.
c. The power to vote in the elections of officials for public office while the principal is
abroad.
d. The power to vote in the election of directors of a corporation of which the principal
is a stockholder.
42. Which of the following statements pertaining to a contract of agency is incorrect?
a. The death of the principal extinguishes the agency.
b. An agent may be a natural person. or an artificial person like a corporation.
c. A guarantee commission agent is not liable to the principal if he cannot collect the
price of sale from the buyers.
d. A contract of agency is presumed to be for a compensation.
43. P gave a general power of attorney to A. During the year, A entered into a lease contract
involving two lots of P as follows:
I. Lease of a lot located in Manila to X for a period of 5 years with an annual rental
of P60,000.00.
 II. Lease of a lot located in Quezon City to Y on a month- to- month basis at a
monthly rental of P5,000.00.
Which of the two leases is valid and binding upon P?
a. I only.
b. II only.
c. Both I and II..
d. Neither I nor II.
44. Which of the following is not a characteristic of the contract of agency?
a. Onerous, which means that an agency is-presumed- tobe for a compensation.
b. Real, which means that the. principal must deliver theobject to the agent for the
perfection of the contract.
c. Principal, which means that a contract of agency can stand by itself.
d. Preparatory, which means that the a contract 'of agencyis a means by which other
contracts will be entered into.
45. P delivered to A a power of attorney authorizing A to sell goodsfor P10,000.00 on cash
basis.. A was able to sell the goods forP10,500.00, also on cash basis, to X, who upon
learning of A'sauthority as regards the selling price, sought to annul the sale.
a. X may successfully annul the sale because A exceededhis authority.
b. X may not successfully annul the sale because A actedin a manner more
advantageous to P.
c. X may successfully annul the sale because there wasno instruction given by P to A to
sell more thanP10,000.00.
d. X may successfully annul the sale because no mentionwas made on A's authority
that he could sell only at theprice of P10,000.00.
46. P appointed A as his agent. For more than 5 years, A transactedbusiness with the
general public including X. On the sixth yearof the agency, P revoked the authority of A
as his agent by givinga notice of revocation to A and causing the publication of
therevocation in the Manila Bulletin on the same day that P revokedA's authority. Three
months thereafter, X, who was not aware ofthe revocation of A's authority, in the
 course of his usualbusiness transactions with A as P's agent, sold and deliveredgoods to
A. X now sues P for the price of the goods.
a. P is liable to X because X did not read the publication ofthe revocation of A's-power.
b. P is not liable because the revocation as published isbinding upon any person
including X although X has notread the publication.
c. P is liable to X because P should .'have speciallyinformed X that A's authority had
been revoked.
d. P is liable because A was a customer of long standingand must be given the benefit
of the doubt.
47. P gave a general power of attorney to A .During the year, Aentered into two lease
contracts involving properties belonging toP as follows:
I. Lease of a drilling equipment located in Manila to X for aperiod of 2 years with
an annual rental of P120,000.00.
II. Lease of a lot located in Quezon City to Y on a month-to- month basis at a
monthly rental of P5,000.00.
Which of the two leases is valid and binding upon P?
a. I only.
b. II only.
c. Both I and Ii.
d. Neither I nor 11.
48. P appointed A as his exclusive agent to sell generators on cashbasis in Davao City. As A
had to leave for Europe for a one-month pleasure trip, he asked P to allow him to
appoint asubstitute to take his place during his absence, to which Pagreed. A selected S
as his substitute. S sold generators on aterm of 60 days. The accounts resulting from
these sales laterproved to be uncollectible. Based on the foregoing, whichof
thefollowing statement/s are/is false?
I. A will be liable to P if S is notoriously incompetent orinsolvent without prejudice
to the right of P to go after S.
II. A will not be liable to P if S is not notoriouslyincompetent or insolvent.
 III. A will be liable to P whether or not S is notoriouslyincompetent or insolvent
without prejudice to the right ofP to go after S.
a. I and II are false.
b. I and III are false.
c. II and III are false.
d. Only Iii is false.
49. P gave a special power of attorney to A to sell a piece of Landbelonging to P. On April 1,
P was able to sell the land to X. ' Thesale was in a public instrument with X taking
immediate physicalpossession of the land. A learned of the -sale made by P
butnonetheless, he sold the same piece of land to Y. The sale wasin a public instrument
which Y registered in the Register ofDeeds. Neither X nor Y knew of the sale made to the
other.
a. The piece of land belongs to X.
b. The piece of land belongs to Y.
c. The piece of land shall be owned jointly by X and Y since no one was aware of the
sale made to the other.
d. The ownership of the piece of land remains with P sinceneither X nor Y is entitled to
the land.
50. S sold a piece of land belonging to his father F, to B. In thedeed of absolute sale which
was acknowledged before a notarypublic, S signed as the agent of F. The fact, however,
was that no power of attorney was executed in favor of $ by his father. Later, in the
presence of two witnesses, F told B that he would abide by the sale executed by S.
a. The sale was void at the start but was validated upon the ratification by F.
b. The sale remained void despite the ratification by F.
c. The sale was valid from the start since it was made in a public instrument and F, the
owner, agreed to abide by the same.
d. The sale was merely unenforceable at the start but was ratified when F agreed to
abide by the same.
51. Almirante was given a general power of attorney by Pamplona to manage Polaris
Building which is owned by Pamplona. During the month of November 2010, Almirante
made the following payments:
I. Purchase price of the adjacent lot which was acquired by Pamplona.
II. Salaries and wages of the building employees for November 2010.
III. Service fee of Otis Elevators for the maintenance of the building elevator.
IV. Cost of electrical and other building supplies.
Based on the foregoing facts, which of the payments will be binding on Pamplona?
a. I, II and III.
b. II, Ill and IV.
c. I, II and IV.
d. I, Ill and IV.
52. Alcantara and Adviento were appointed as agents by Precious Rugs and Carpets, Inc.
to sell its products. Since Alcantara and Adviento would be working together, the
general power of attorney granted to them indicated that their liability to Precious
would be solidary. In -a trip to Davao, Alcantara, without the knowledge of Adviento,
purchased rugs and carpets in behalf of Precious at a discounted price of P20,000,00
using the funds that they had collected from their sales. When the company learned of
the purchase, it sought to recover the amount of P20,000.00 from Alcantara and
Adviento.
a. Alcantara alone will be liable for P20,000.00 to Precious.
b. Alcantara and 'Adviento will be liable jointly at P10,000.00 each to Precious.
c. Either Alcantara or Adviento may be held liable by Precious for P20,000.00 since
their liability is solidary.
d. The purchase of the carpets and rugs is voidable; hence, the amount of P20,000.00
may be recovered from the seller of the said items.
53. P, 30 years old, gave a special power of attorney to A, 17 yearsold, to sell 2 lots (Lot X
and Lot Y) belonging to P. The contractof agency provided for a term of 2years from the
 date ofexecution. Before reaching the age of 18, A was able to sell LotX. After turning18
years old and before the expiration of thetwo-year term, he also sold Lot Y.
a. The sale of both Lot X and Lot Y are binding on P.
b. The sale of both Lot X and Lot Y are not binding on P.
c. Only the sale of Lot X is binding on P.
d. Only the sale of Lot Y is binding on P.
54. P gave a. special power of attorney to A to buy 1,000 shares ofstock of EXXO
Corporation which was then being traded at thestock exchange at P50.00 per share. P
instructed A to make thepurchase within two days and advance the purchase price
ofP50,000.00 plus the stock transaction tax, commission and otherexpenses which
amounted to P3,000.00. With the instruction, Amade the purchase and received the
stock certificate for theshares. However, three, days thereafter and before A was ableto
get his reimbursement from P for the advances he had made,the price of EXXO shares
went down to P45.00 per share. P nowis having second thoughts on making the
reimbursement to A.
a. P is liable to A only for P48,000.00 [(1,000 shares xP45.00) + P3,000.00.]
b. P is liable to A for P53,000.00 [(1,000 shares x P50.00)+ P3,000.00.]
c. P is not liable at allbecause the transaction resulted in aloss.
d. A alone will shoulder the loss because the risk of loss ispart of his job as an agent.
55. Refer to No. 54. Assuming that the circumstances show that P isliable to A for the
amount advanced by A, but P is unwilling tomake the reimbursement, A can retain
possession of the stockcertificate until he receives the reimbursement. Such right
ofretention is also a security which is in the nature of a:
a. chattel mortgage.
b. legal pledge.
c. real mortgage.
d. antichresis.
56. Which of the following contracts entered into by the agent isbinding upon the principal
although the agent's authority is ageneral power of attorney?
 a. Sale of a piece of land.
b. Lease of a piece of land to a third person for a period of2 years.
c. Gifts made to employees in the business managed bythe agent.
d. Contract of partnership with the principal as partner.
57. P, in Manila, wrote a letter to T, who is based in Cebu, informingthe latter that he (P)
had given a power of attorney to A to sellP's goods. For more than5 years, T dealt with A
for thepurchase of P's goods. On the sixth- year, P gave a notice to Athat he was
revoking the latter's authority.Despite therevocation of his authority, A sold goods to T
who was not awarethat A's authority had been revoked. The revocation of A'sauthority
was published in the Manila Bulletin but T was not able to read it. Although T had paid
the price to A who kept theproceeds to himself, the goods had not yet been delivered to
T.So ,T demanded delivery from P.
a. P is not obliged to deliver the goods because he hadalready revoked A's authority.
b. P is obliged to deliver the goods because the revocationof A's authority was not
binding on T.
c. P is not obliged to deliver the goods because P had notyet received the price of the
goods.
d. P is not obliged to deliver the goods because T ispresumed to have read the
publication of the revocationof A's authority.
58. Which of the following does not extinguish.an agency?
a. Dissolution of the corporation that entrusted the agency.
b. Insanity of the agent.
c. Continued business losses of the agent for at least 2years.
d. Insolvency of the agent.
e.
59. P gave a special power of attorney to A to lease a building at agood location where P
could put up an auto supply business. Afound a building at a good location that
belonged to T at Banauein Quezon City, but seeing the brisk business in the area,
Apresented himself as the lessee instead of P. Accordingly, Alease contract was
 executed between A as lessee, and T aslessor, who was not aware of the agency
between P and A.Based on the foregoing facts, the following statements' arepresented
to you for evaluation:
I. P and T shall have no right of action against each other.
II. The contract of lease is a valid and binding contractbetween A and T.
III. P can go after A for damages for preferring his interestover that of P.
In your evaluation of the foregoing facts and statements:
a. I and II are true.
b. I and ill are true.
c. II and Ill are true.
d. All are true.
60. P appointed Al and A2 as his agents to manage P's grocerystore. The general power of
attorney given by P to the agentsindicated that their liability to P shall be solidary.One
day, atruck salesman visited the store and offered to sell his delivery,truck for a
discounted price. Al, who was the only one at thestore at that time, purchased the truck
in P's behalf since he believed that the store really needed a vehicle in the delivery
ofgoods from suppliers and to customers. Moreover, he thoughtthat the transaction
was a good one since the truck was beingsold at a discounted price. Al paid - the price
out of hiscollections from grocery sales. When P learned of the purchase,he sought to
disaffirm the sale and recover the amount paid forthe purchase.
a. Both Al and A2. are liable to P for the amount paid forthe delivery truck.
b. Only Al can be held liable by P for the return of the amount paid for the delivery
truck.
c. P cannot hold the agents liable because the transactionbenefited P.
d. P and Al should shoulder the purchase price equally infairness to Al whose only
concern was the benefit to thebusiness of the transaction.
61. P, the owner of a condominium, gave a general power ofattorney to A manage the
building. P and A, however, had aprivate understanding that A should not lease any unit
 to aforeigner., For the month of October 2010, A entered into thefollowing leases of
two condominium units:
I. Unit 2, to F, a Filipino, for a period of 2 years
II. Unit 5, to J, a Japanese, who was in a business trip to the Philippines, for 3
months.
Based on your review of the foregoing statements:
a. Both lease contracts are valid and binding on P.
b. Both lease contracts are not binding on P,
c. Only I is valid and binding on P.
d. Only II is valid and binding on P.
62. Which of the following is a valid delegation by the principal to hisagent?
a. The purchase by the agent of a land located in Manila.The principal is an American.
b. The exercise of the voting right in the local elections.The principal is Filipino who is a
qualified voter like theagent.
c. The lease of a vehicle for the use of the principal who isa duly licensed driver, for
two months.
d. The attendance at the board meetings of a corporationof which the principal is a
director.
63. P, the owner of a lot, gave an oral authority to A to sell the' lot. Athus sold the lot to Bin
P's name in a public instrument. Shortlyafter the sale, P sent B a telegram informing him
that he (P) wasratifying the sale. B, however, had already changed his mindand
informed P that he (B) was withdrawing from the contract.
a. P and B became bound by the contract of sale at thetime of execution because it
was in. a public instrument.
b. P and B became bound by the contract of sale at the time that P ratified the sale.
c. P and. B never became bound by the contract of sale because it was not susceptible
of ratification.
d. B can no longer withdraw from the contract because Phad made an earlier
ratification of it,
64. P gave a general power of attorney to A to manage P's business in Manila. While P was
in Bacolod City, he made a call to A to sell P's lot located in Sampaloc. A thus sold the lot
to X presenting the general power of attorney given to hies by P. The sale to X was in a
public instrument. Thinking that A had not yet sold the lot, P sold the same lot to Y with
whom he was meetingin Bacolod and who was interested in the tot. X was not aware
ofthe sale entered into by A with X. The sale to P was likewise in a public instrument.
a. The lot belongs to X.
b. The lot belongs to Y.
c. Neither X nor Y is entitle.
d. The tot will be owned jointlyby Xand to Y.
65. Which of the following contracts entered into by the agent isbinding upon the principal
although the agents authoritygeneral power of attorney?
a. Sale of a building.
b. Lease of a piece of land to a third person for aperiod of2 years.
c. Customary gifts to charity.
d. Contract of partnership with the principal as partner.
66. A has been the agent of P for the past 3 years in the purchase palay in different
provinces of Luzon. The authority given by P toA provided that A need not render an
accounting of his transactions, One day, A chanced upon a wholesaler of P SOYwho
offered to sell them to A at the discounted price of P500,00 per sack. A purchased all
the palay using his own money and stored them at his warehouse. Every time that P
needed palay ,A would get them from his stock and made it appear that he bought them
from a supplier at the regular price of P600.00, which was the same purchase price of
palay in his earlier transactions.
a. A must account to P all the profits that he obtained from the transaction.
b. A need not account to P the profits that he obtained because he used his own
money.
 c. A need not render an accounting of his transactions because he was not obligated
to do so under pf power of attorney given to him by P.
d. A cannot be held liable for damages because he passed on the palay to P at the
purchase price of his previous transactions.
67. The following statements pertain to the appointment by the agent of a substitute:
I. If the agent was authorized to appoint a substitute but the substitute was not
designated, the agent will not be liable to the principal if the substitute
appointed was not notoriously incompetent or insolvent.
II. If the agent was authorized to appoint a substitute but the substitute was
designated, the agent will not be liable to the principal even if the substitute was
notoriously incompetent or insolvent.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
68. The following statements pertain to the appointment of an agent:
I. If the announcement of the appointment of an agent is by special information,
the person appointed will be considered a duly authorized agent with respect to
the person who received the special information.
II. If the announcement of the appointment of an agent is made by public
advertisement, such as by publication in a newspaper of general circulation, the
person appointed will be considered as agent with regard to any person who
reads the publication.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
69. P, 28 years old, gave a power of attorney to A, 17, to sell antique furniture.
Pursuant to the authority, A sold an antique table for P30,000.00 to B, who is insane,
and an antique desk for P20,000.00 to C, 35 years old. Which of the foregoing contracts
is valid?
a. The contract of agency.
b. The sale of the antique table.
c. The sale of the antique desk.
d. None of the foregoing contracts is valid.
70. These statements are presented to you:
I. A general agency may be couched in specific terms.
II. A special agency may be couched in general terms:
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
71. P, who owns a lot, gave A, his agent, the authority to sell the lot. In which of the
following cases is the sale of the lot unenforceable?
Form of A's Authority Form of Contract of Sale
a. Oral Public Instrument
b. Private Instrument Public Instrument
c. Public Instrument Oral
d. Public Instrument Private Instrument
72. These statements are presented to you:
I. An agent acts for himself and for his principal.
II. A partner acts for himself, for the partnership, and for his partners.
In your evaluation of the foregoing statements:
a. Only Statement I is true.
b. Only Statement II is true.
 c. Both statements are true.
d. Both statements are false.
73. These statements are presented to you:
I. Agency and partnership are preparatory contracts.
II. Partnership is a branch of the. law on agency.
In your evaluation, of the foregoing statements:
a. Both statements are true.
b. Both statement are false..
c. Only Statement I is true.
d. Only Statement ii is true.
74. Agency is different from negotiorumgestio because in agency:
a. There is a meeting of minds.
b. The legal relation is created by law.
c. The one who acts follows his own judgment and the presumed will of the owner.
d. No representation has been agreed upon.
75. Sampaca, manufacturer of "Dreamland" beds, and Bergonio entered into a contract
with the following terms: Sampaca was to furnish beds to Bergonio who just pay the
price within 30 days from the receipt of the shipment, minus a discount of 25%. What
contract was entered into between Sampaca and Bergonio?
a. Contract of sale
b. Contract of agency to sell
c. Contract to sell
d. Contract of-consignment
76. These statements are presented to.you:
I. If the agent has been empowered to borrow money in behalf of his principal, he
may himself be the lender at the current rate of interest.
II. If' the agent ,has been authorized to lend the money of his principal, he may
himself be a borrower even without the principal's consent provided the interest
is higher than the current rate.
 In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
77. Paladino, the owner of a grocery store, gave a. general power of  attorney to Almiro to
manage the business. Almiro was given theauthority to borrow money for the business.
at I% interest per month. Almiro himself is the one who lends the money at suchinterest
rate. Thus, in the said contract of loan, Almiro entersinto the contract in his own behalf
as lender and representsPaladino as borrower. The contract of loan in such a case
isconsidered as:
a. An auto-contract,
b. analeato ry contract.
c. aremuneratory contract.
d. a gratuitous contract.
78. Principe, the owner of a BMW car, gave a power of attorney to Agerico to sell it. A week
later, Principe gave another power of attorney to Anastacio to sell the same car without
giving notice thereof to Agerico. Agerico was able to sell the car to Borsalino. When
Borsalino demanded the delivery of the car, Principe refused to do 'so claiming that,
Agerico's authority to sell the car was impliedly revoked by the authority given to
Anastacio.
a. Agerico's authority was impliedly revoked by the appointment of Anastacio to sell
the car.
b. Agerico's authority to sell the car was not revoked despite the new authority given
to Anastacio.
c. Agerico's authority did not co-exist with that given to Anastacio.
d. The authority given to both agents is considered nullified because of conflict.
79. Statement I- A stipulation exempting the agent from theobligation to render. an account
of his transactions is validprovided the principal does not suffer any damage.
 Statement II- A stipulation that the agent will advance thenecessary funds to carry out
the agency is void.
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
80. Pastorfide, an importer of fire extinguishers, gave Angeles theexclusive authority to
distribute the product in Laoag City. Theauthority provided that all sales should be on
cash basis, but nomention was made whether or not Angeles could appoint a.substitute.
Without notifying Pastorfide, Angeles appointedSulpicio, a reasonably prudent man, as
his substitute when hewent on a one-month Asian cruise. Sulpicio sold the
fireextinguishers on a term of 60 days. The sales later proved to beuncollectible.
a. Pastorfide cannot proceed against Angeles because thelatter acted in good faith in
appointing a substitute.
b. Neither can he proceed against Sulpicio because thelatter was a reasonably prudent
man.
c. Pastorfide can only proceed against Angeles fordamages since Sulpicio was not
notoriously incompetentor insolvent.
d. Pastorfide can proceed only against Sulpicio becauseAngeles exercised prudence
when he appointed as his substitute one who was not notoriously incompetent
orinsolvent.
81. Pastorfide can proceed against Angeles and Sulpicio forthe uncollectible account and
other damages that hesustained by him.A was appointed by P to sell the latter's car for a
cash price ofP100,000.00. However,A was able to sell the car forP120,000.00 cash.
a. A must turn over only the amount of P100,000.00 to Pwhose only right was to
demand the cash price agreedupon. Thus, the A keeps the excess of P20,000.00
b. A must turn over the amount of P120,000.00 to P sinceA must account all that he
had received in carrying outthe agency. Besides, A did not act in excess of
hisauthority because the sale he made was more beneficialto P.
 c. A must turn over the amount of P100,000.00 to P sinceA acted in excess of authority
when he sold the car formore than P100,000.00.
d. A must turn over the amount of P120,000.00 to P, but Pmust eventually give the
excess of P20,000.00 to A.
82. P, the owner of several properties including a certain car,appointed A to manage them.
Later, the car was repossessedby the bank on account of P's default in the payment of a
loanobligation for which the car was given as security by way ofchattel mortgage. During
the auction sale, A, in his personalcapacity, was able to buy the car since his bid was the
highestamong 10 bidders. His purchase of the car was without theknowledge of A. What
is the status of the sale?
a. Valid, because A bought the car fair and square as hisbid was the highest among 10
bidders.
b. Voidable, because an agent cannot acquire by purchaseany property of the principal
placed under hisadministration without the principal's consent.
c. Void, because the purchase of the car by A was aviolation of his fiduciary duty to P.
d. Unenforceable, because the acquisition of the car by Awas without P's consent.
83. P gave a power of attorney to A to sell a certain piano. Before Acould find a buyer, P was
able to sell the piano to X through aprivate instrument and informed A about it.
Nonetheless, A stillsold the piano to Y who immediately took possession of thepiano.
Neither X nor Y knew of the sale made to the other.Whose contract will prevail?
a. The contract with X.
b. The contract with Y.
c. Neither, because of conflict of interest.
d. Both contracts with X and Y becoming co- owners of thepiano.
84. Refer to No. 83. Who will be liable for damages to the partywhose contract will be
rejected?
a. P, because he disregarded the authority he gave to when he made the sale to X.
b. A, because he w as in bad faith when he made the saleto Y although he had
knowledge of the previous. Salemade by P.
 c. Both A and. P will share equally in the payment ofdamages.
d. Neither A nor B; because both contracts will be honored.
85. Principal appointed Agent for. a period of two years:
I. Principal may., revoke the agency before the end of thetwo-year period.
II. Agent may withdraw' 1Mem the agency before the end ofthe two-year period.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement 11 is true.
86. These statements are presented to you
I. A special power to sell includes the power to mortgage
II. A special power to mortgage excludes the power to sell.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
87. Almonte was given general powers of administration by Pampilowho was suffering from
financial difficulties. In order to helpPampilo, Almonte sold the former's lot for double
its marketprice, which amount was more than enough to improvePampilo's financial
condition.Is Pampilo bound by the salemade by Almonte?
a. Yes, because the transaction resulted in saving Pampilofrom his financial difficulties.
b. Yes, because an agent is not considered to haveexceeded his authority if he acted in
a manner moreadvantageous to this principal.
c. No,.becauseAlmonte acted in excess of authority.
d. Yes, because the disposition of any property belongingto Pampilo is embraced in the
authority he gave toAlmonte.
 88. Primicias gave a special power of attorney Amper to sell to the lot former's lot for
P100,000.0Amper offered toLetada who, however, was willing only to lend P100,000.00
andtake a mortgage on the lot. Amper thus mortgaged the lot andreceived the loan
proceeds of P100,000.00. Which contract wasbinding on Primicias?
a. The loan obligation of P100,000.00.
b. The real mortgage on the lot.
c. Both(a) and(b), because the transactions wereadvantageous to Primicias. He getsP
100,000.00, while the mortgage allowed him to retain title to the lot.
d. Neither' (a) nor (b) because Amper acted in excess ofauthority.
89. Pomeranz; the owner of three cars, authorized Abrazado to sellCar I for P600,000.00;
Car 2 for P400,000.00; and Car 3 forP700,000.00, all on cash basis. Later, Abrazado gave
anaccount of his transactions to Pomeranz as follows:
I. Car 1 - sold for P590,000.00 cash.
II. Car 2 - sold for P450,000.00 in three equal monthly installments of P150,000.00.
III. Car 3 - sold for P720,000.00 cash.
The sale that is binding on Pomeranz is the sale of:
a. Car 1 and Car 3.
b. Car 2 and Car 3.
c. Car 3 only.
d. None of the three cars, because Abrazado acted inexcess of authority in each case.
90. The following acts require a special power of attorney, except:
a. To loan the money of the principal.
b. To borrow money in behalf of the principal.
c. To submit questions to arbitration.
d. To lease real property for one year or less.

TEST II - MATCHING TYPE. Indicate your answers by writing the letter representing the
statement or phrase that best describes, defines or explains the numbered items.
Terms

1. Agency 11. Broker

2. Fiduciary 12. Del credere commission
3. Implied agency 13. Civil interdiction
4. Express agency 14. Principal
5. General agency 15.Agent
6. Special agency 16.Compromise
7. General power of attorney 17.Arbitration
8. Special power of attorney 18.Revocation
9.Substitute 19.Withdrawal
10.Commission agent 20.Instructions

Statements
A. The receipt thereof by the agent, ' in addition to the ordinarycommission, will make the
agent bear the risks of collection.
B. The person who gives authority to another to perform a certain act in the former's
behalf.
C. It comprises all the business of the principal.
D. The nature of the relationship of the principal and the agent, which is founded on trust
and confidence.
E. This refers to the act of the principal of terminating the agency at will.
F. He serves as intermediary between his principal and the buyer or seller and has no
relation to the property subject matter of the transaction.
G. A contract whereby a person binds himself to render some service or to do something in
representation or in behalf of another, with the consent and authority of the latter.
H. A person appointed by the agent to perform the tasks entrusted to him by the principal.
I. This refers to the submission of the controversy to a third person for decision and which
will require a special power of attorney when made by an agent in behalf of his
principal.
J. A contract whereby the parties agree to make reciprocal concessions to avoid or end a
litigation, and the performance of which by an agent will require a special power of
attorney from the principal.
K. A mode of extinguishment of an agency when the agent terminates the agency by giving
notice of such termination to the principal.
L. A person who performs a service or does something in representation or in behalf of
another with the latter's consent and authority.
M. A penalty which deprives a person of the right to manage or dispose his property and
which will cause the extinguishment of an agency if imposed upon the principal or the
agent.
N. The authority required when the act to be performed by an agent is an act of ownership
or strict dominion, a gratuitous act, or an act where-trust and confidence is the essence
of the agreement.
O. They refer to the orders given by the principal to his agent relating to the manner by
which the agency shall be carried out.
P. An agency that is inferred from the acts of the principal or from his silence or inaction,
or from his failure to repudiate the agency knowing that another person is acting in his
behalf without authority.
Q. The authority given by the principal to his' agent when the act tobe performed is an act
of administration.
R. An agency that is entered into orally or in writing.
S. An agency that comprises one or more specific transactions.
T. A person who buys and sells goods consigned or delivered to him by his principal, for a
compensation known as commission.
U. None of the foregoing
TEST III - TRUE OR FALSE, Write the word "TRUE" if the statement is true, and the word
'FALSE" if the statement is false.
1. Legal.capacity of the agent is not necessary for the validity of his acts since they are
considered to be those of the principal.
2. When the sale of a piece of land is made through an agent, the authority of the
agent must be in writing for the sale to be valid.
3. The right to vote during elections for a public office may be delegated by a person to
his agent since it is a right that the principal may lawfully do.
4. A general agency may be couched in specific terms.
5. A special agency may be couched in general terms.
6. The agent may borrow money in behalf of the principal even without a special
power of attorney if the same is urgent and indispensable for the preservation of the
property under the administration of the agent.
7. Payments made by the agent, whether or not they are considered as acts of
administration, require only a general power of attorney from the principal.
8. Customary gifts for charity, when made by an agent, requires a special power of
attorney.
9. An agent is deemed to have impliedly accepted an agency if the principal transmits
to him by letter or telegram a power of attorney with respect to the business in
which he is habitually engaged as an agent and the agent did not reply to the letter
or telegram.
10. If the announcement of the appointment of an agent is by special information, and
the announcement of the revocation of the appointment is made by public
advertisement, the person to whom the special information was given is bound by
the revocation although he has not read the advertisement.
11. If an agent acts with the authority of the principal but in his (agent's) own name, the
third person with whom the agent had contracted shall have no right of action
against the principal unless the contract involves things belonging to the principal.
12. An agent is bound to advance the necessary funds for the accomplishment of the
agency although there is no stipulation that the agent shall make such advances.

13. Third persons are bound to know whether an agent is acting within his authority or
not and thus can require-the agent to present his power of attorney.
14. The agent may, even without the consent of the principal, borrow the money of the
principal which is under his (agent's) custody or administration.
15. A stipulation between the agent and the principal that the agent need not render an
accounting of his transactions is valid.
16. The agent shall be liable for damages if there being a conflict between his interest
and that of the principal, he should prefer his own.
17. An agent may appoint a substitute if the power of attorney does not contain any
prohibition to the agent from doing so.
18. The liability of two or more agents appointed simultaneously by the principal is
solidary.
19. An agent who acts within the scope of his authority and in the name of his principal
shall not be liable to the third person with whom he contracts unless he expressly
bound himself.
20. If an agent acts in excess of authority and the person with whom he contracts knows
of such fact, the agent shall not be liable if he did not undertake to get the
principal's ratification.
21. A commission agent can sell on credit even without the consent of his principal.
22. The principal and the agent may stipulate that the principal shall be liable for the
expenses of the agency up to a certain amount only.
23. When two or more principals have appointed an agent for a common transaction or
undertaking, they shall be jointly liable for all the consequences of the agency.
24. The principal shall reimburse the agent the sums advanced by the latter even if the
business or undertaking was not successful provided that the agent is free from all
fault.
25. The agent has the right to retain in pledge the things which are the object of the
agency until the principal pays him the indemnity for all damages which the
execution of the agency may have caused the agent, without fault or negligence on
his part.
26. When two persons contract with regard to the same thing, one of them with the
agent, and the other with the principal, and the two contracts are incompatible with
each other, the principal shall be liable for damages to the person whose contract
shall be rejected if the agent acted in good faith.
27. The insolvency of the agent does not cause the extinguishment of the agency as long
as the principal is not insolvent.
28. The principal may terminate an agency at will although a bilateral contract depends
upon it.
29. An agency is not terminated by the death of the principal if it was constituted in the
common interest of the principal and the agent.
30. Although the agent knows of the death of the principal, he must finish the business
that he had already begun on the death of the principal.

ANSWERS TO DIAGNOSTIC EXERCISES

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

TEST II- MATCHING TYPE

1. G 8. N
2. D 9. H
3. P 10. T
4. R 11. F
5. C 12. A
6. S 13. M
7. Q 14. B
15. L 19. K
16. J 20. O
17. I
18. E

TEST III- TRUE OR FALSE

1. TRUE
2. TRUE
3. FALSE
4. TRUE
5. TRUE
6. TRUE
7. FALSE
8. FALSE
9. TRUE
10. FALSE
11. TRUE
12. FALSE
13. TRUE
14. FALSE
15. FALSE
16. TRUE
17. TRUE
18. FALSE
19. TRUE
 20. TRUE
21. FALSE
22. TRUE
23. FALSE
24. TRUE
25. TRUE
26. TRUE
27. FALSE
28. FALSE
29. TRUE
30. TRUE

PARTNERSHIP - DIAGNOSTIC EXERCISES

TEST I - MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.
1. A contract where two or more persons bind themselves to contribute money, property
or industry to a common fund with the intention of dividing the profits among
themselves.
a. Voluntary association.
b. Corporation
c. Partnership
d. Sale proprietorship.
2. One of the following is not a characteristic of contract of partnership.
a. Real, in that the partners must deliver their contribution in order for the partnership
contract to be perfected.
b. Principal, because it can stand by itself.
c. Preparatory, because it is a means by which other contracts will be entered into.
d. Onerous, because the parties contribute money property or industry to the common
fund.
3. 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.
4. 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 the Securities and Exchange Commission (SEC).
a. P5,000.00.
b. P10,000.00.
c. P3,000.00
d. P30,000.00.
5. If the partnership has the minimum capital mentioned in No. 4, but the contract is not in
a public instrument or the same is not recorded with the SEG, the partnership:
a. is void.
b. is voidable.
c. does not acquire juridical personality
d. still acquires juridical personality.
6. Joseph and Edward entered into a universal partnership of all present property. At the
time of their agreement, Joseph had afour-door apartment which he inherited from his
father 3 yearsearlier. Edward, on the other hand, had a fishpond which heacquired
by dacionenpago from Robert. During the first year ofthe partnership, rentals collected
on the four-door apartmentamounted to P480,000.00; while fish harvested from
thefishpond were sold for P300,000.00. During the same period,Edward received by way
of donation a vacant lot from an uncle.The partners had a stipulation that future
property shall belong tothe partnership. Which of the. following does not belong to
thecommon fund of the partnership?
a. Fishpond.
b. Rental of P480,000.00
c. Apartment.
d. Vacant land.
7. Vincent and James entered into a universal partnership ofprofits. At the time of the
execution of the articles of partnership,Vincent had a two-door apartment which he
inherited from hisfather 3 years earlier. James, on the other hand, had a fleet oftaxis
which he purchased 2 years before. In the first year of thepartnership, Vincent earned
P500,000.00 as a radio talent, whileJames won P1,000,000.00 in the lotto. During the
same period,rentals of P120,000.00 were collected from the apartment, whilefare
revenues of P200,000.00 were realized from the operationof the fleet of taxis. Which of
the following belongs to thepartnership?
a. Two-door apartment.
b. Lotto winnings of P1,000,000.00.
 c. Salary of P500,000.00.
d. Fleet of taxis.
8. A partnership formed for the exercise of a profession which isduly registered is an
example of,
a. Universal partnership of profits.
b. Universal partnership of all present property.
c. Particular partnership
d. Partnership by estoppel.
9. Three of the following partnership contracts are void. Which onis not?
a. A universal partnership of all present property betweenhusband and wife.
b. A universal partnership of profits between a man and woman living together as
husband and wife without thebenefit of marriage.
c. A particular partnership between husband and wife.
d. A universal partnership of profits between a private individual and a public officer.
10. John, Albert and Wilfred are partners in JAW Enterprises. Nothaving established yet
their credit standing, the three partnersrequested Simon, a well-known businessman, to
help themnegotiate a loan from Carlos, a money lender. With the consentof John, Albert
and Wilfred, Simon represented himself as apartner of JAW Enterprises. Thereafter,
Carlos granted a loan ofP150,000.00to JAW Enterprises. What kind of partner isSimon?
a. Managing partner.
b. Liquidating partner.
c. Ostensible partner.
d. Partner by estoppel.
11. Refer to No. 10. Assuming that JAW Enterprises was unable topay the loan on due date
at which time the assets of thepartnership amounted only to P120,000.00. From whom
mayCarlos collect the payment?
a. Simon only for the whole amount of P120,000.00.
b. John, Albert and Wilfred who are liable jointly forP50,000.00 each.
 c. JAW Enterprises for its assets of, P120,000.00;thereafter John, Albert and Wilfred
from their separateproperty at P10,000.00 each.
d. JAW Enterprises for its assets of P120.000.00;thereafter, John, Albert, Wilfred and
Simon from theirseparate assets at P7,500.00 each.
12. Teresa, Olga, Pamela and Sonia, partners in TOPS CompanyLimited, a trading company,
have contributions of P50,000.00each. Teresa and Olga are general partners; Pamela, a
limitedpartner; and Sonia, a general-limited partner. TOPS CompanyLimited purchased
merchandise on credit from Moret Sales Co.amounting to P180,000.00. On due date,
however, TOPSCompany Limited was unable to pay. Accordingly, Moret SalesCo. filed a
case of collection against the partnership which bythen had assets amounting to
P150,000.00. From whom mayMoret Sales Co. collect the sum of P180,000.00?
a. The partnership for its assets of P150,000.00; thereafter,from Teresa and Olga at
P15,000.00 each from theirseparate assets.
b. Teresa and Olga only at P90,000.00 each from theirseparate assets.
c. The partnership for its assets of P150,000.00;thereafter, from Teresa, Olga, and
Sonia at P10,000.00each from their separate property. However, Sonia canrecover
P5,000.00 each from Teresa and Olga.
d. Teresa, Olga and Sonia at P60,000.00each.Thereafter, Sonia can recover from Teresa
and OlgaP30,000.00 each.
13. Which of the following. losses will not cause the dissolution of apartnership?
a. Loss before delivery of a specific thing which a partnerhas promised to contribute to
the partnership.
b. Loss of a , specific thing after its delivery to andacquisition of its ownership by the
partnership from thepartner who contributed the same.
c. Loss after delivery of a specific thing where the partnercontributed only its use and
enjoyment, he havingreserved the ownership thereof.
d. Loss before delivery of a specific thing where the partnerpromised to contribute
only its use and enjoyment,reserving the ownership thereof.
14. Gregory, Edmond and Mark are partners in GEM Company withcontributions of
P10,000.00, P40,000.00and P50,000.00,respectively. Their agreement shows that they
will share in the profits in the ratio of 2:3:4. During the year, the partnership sustained a
loss of P9,000.00. How shall this loss be divided among the partners?
a. Equally at P3,000.00 each.
b. Gregory, P900.00; Edmond, P3,600.00; and Mark, P4,500.00.
c. Gregory, P2,000.00; Edmond, P3,000.00; and Mark, P4.000.00.
d. The partners must establish first a loss sharing agreement before-the loss may be
divided because they failed to have an agreement on the division of loss.
e. 15.
15. Which of the following stipulations is valid?
a. A stipulation excluding a capitalist partnerfrom profits.
b. A stipulation exempting a capitalist partner from losses.
c. A stipulation exempting an industrial partner from losses.
d. A stipulation excluding an industrial partner from profits.
16. A partner can engage in business for himself without the consent of his co-partners if he
is:
a. a capitalist partner whether or not the business he willengage in is of the same kind
as or different from thepartnership business.
b. an industrial partner whether or not the business he willengage in is of the same
kind as or different from thepartnership business.
c. a capitalist partner and the business he will engage in isof a kind different from the
partnership business.
d. an industrial partner and the business he will engage Inis of a kind different from the
partnership business.
17. Which of the following statements is false when no one amongthe partners was
appointed as manager?
a. Each partner will be considered as agent of the partnership.
 b. Any one may make an important alteration in the immovable property of the
partnership without theeided it is useful to the consent of the others pro
partnership.
c. In c as e the act of one partner is opposed by another, thedecision of the majority of
the partners will prevail.
d. In case of a tie in the voting, the tie shall be resolved bythe vote of the partner
owning the controlling interest.
18. The following statements pertain either to a partner appointed asmanager in the
articles of partnership or through a documentafter the formation of the partnership.
I. He may be removed as manager only for a just or lawfulcause by the vote of the
partners owning the controllinginterest.
II. He may be removed as manager with or without just orlawful cause by the vote of
the partner owing thecontrolling interest.
III. He may perform all acts of administrator despite theopposition of his partners
provided he is in good faith.
IV. He may perform all acts of administration in good faithbut opposing partners may
resort to his removal if hepersists.
Based on the foregoing:
a. I and Ill pertain to a partner appointed as manager in thearticles of partnership.
b. Iand Ill pertain to a partner appointed as managerthrough a document after the
formation of thepartnership
c. IIand Ill pertain to a partner appointed through adocument after the formation
of the partnership.
d. I and IV pertain to a partner appointed as manager in thearticles of partnership
19. Campos, Urbano, Tamesis and Encanto are partners in CUTECompany each one
contributing P300,000.00 except for Encantowho is an industrial partner. The partners
agreed that Camposshall be exempted from liability to third persons. Three years
ofcontinued losses after the formation of the partnership resulted inunpaid partnership
 liabilities to third persons amounting toP500,000.00. Partnership assets have also been
reduced toP200,000.00.From whom may third persons collect thepartnership debts?
a. From the partnership assets of P200,000.00; thereafter,fromthe partners for their
separate , assets atP100,000.00 each except Campos who was exemptedfrom
liability to third persons by agreement.
b. From the partnership assets of P200,000.00; thereafter,from the partners for their
separate assets atP100,000.00 each except for Encanto since an industrialpartner
does not share in the losses.
c. From the partnership assets of P200,000.00; thereafter,from all the partners for
their separate assets atP75,000.00 each including Campos and Encanto:
d. From the partnership assets of P200,000.00; thereafter, from Urbano and Tamesis
only for their separate assetsat P150,000.00since Campos was exempted
fromliability by agreement, while Encanto, being an industrialpartner is not liable for
losses.
20. The partnership will bear the risk of the loss of three of thefollowing things. Which is the
exception?
a. Things contributed to be sold.
b. Fungible things or those that cannot be kept withoutdeteriorating.
c. Things contributed so that only their use and fruits will befor the common benefit.
d. Things brought and appraised in the inventory.
21. A partner's interest in the partnership is his share of the profitsand surplus which he
may assign to a third person. Which of thefollowing statements concerning such right is
correct?
a. The conveyance of a partner's interest will cause thedissolution of the partnership.
b. The assignee becomes a partner.
c. The assignee has a right to interfere in the managementof the partnership business.
d. The assignee has the right to receive the profits whichthe assigning partner would
otherwise be entitled to.
22. Torres is indebted for P5,000.00 to MACE Trading Company, apartnership managed by
Mendoza to whom Torres also owesP10,000.00.The two debts which are both
demandeb!e areunsecured. Torres remits P4,500.00 to Mendoza in payment ofhis debt
to him. Accordingly, Mendoza issues a receipt for hisown credit. To which credit should
the payment be applied?
a. To Mendoza's credit because the payment made byTorres is intended for his debt to
Mendoza who issueshis own receipt
b. To both the partnership credit and Mendoza's credit proportionately at P1,500.00
and P3,000.00, respectively.
c. To Mendoza's credit because its amount is greater than that of the partnership
credit.
d. To the partnership credit because the managing partnershould not prefer his own
interest to that of thepartnership.
23. In three of the following wrongful acts of partners,thepartnership is solidarily liable with
all the partners to thirdpersons. Which one is the exception?
a. For loss or injury caused to a third person by reason ofthe wrongful act or omission
of a partner acting in theordinary course of business.
b. Where a partner acting within the scope of his apparentauthority receives money or
property of a third personand misapplies it.
c. Where the partnership receives money or property of athird person in the ordinary
course of business and suchmoney or property is misapplied by a partner while it is
inthe custody of the partnership.
d. For loss or injury caused to a third person by reason ofthe use of partnership
property by a partner for personalpurpose.
24. Benito, Ignacio, Gregorio, Artemio and Servando are partners inBIGAS Company which is
engaged in the buying and selling ofrice. Benito is the manager. Ignacio was also given a
specialpower of attorney by the partnership to buy a van for thecompany. No other
power was given to all the partners. In whichof the. following acts or contracts is the
partnership not boundby the act of the partner?
 a. Ignacio buying rice for the partnership from Teodoro whohas no knowledge of
Ignacio's lack of authority.
b. Ignacio buying a van for the partnership from Teresa.
c. Gregorio buying a van for the partnership from Thelmawho has no knowledge of
Gregorio's lack of authority.
d. Benito selling rice for the partnership.
25. Assuming that no fraud is committed by or consented to by thepartner concerned,
which of the following statements is false?
a. Notice to any partner relating to partnership affairs while already a partner is notice
to the partnership.
b. Knowledge of a partner acting on the particular matter acquired by him while
already a partner is knowledge of the partnership.
c. Knowledge of a partner acting on the particular matter obtained by him before he
became a partner is knowledge of the partnership provided he still remembers the
same.
d. Knowledge of partner not acting on the particular matter obtained by him before he
became a partner is knowledge of the partnership.
26. Which of the following statements is incorrect?
a. Partnership creditors are preferred as to partnership assets.
b. Partnership creditors are preferred as to each partner's separate assets.
c. A partner's separate creditors are preferred as to the partner's separate assets.
d. A partner's separate creditors may attach a partner's share in the partnership assets.
27. The change in the relation of the partners caused by any ceasing to be associated in the
carrying on the business is known as:
a. termination of the partnership.
b. winding up of partnership affairs.
c. liquidation of the partnership business.
d. dissolution of the partnership.
28. A decree by the court is necessary to dissolve a general partnership based on three of
the following grounds. Which one will not require such decree but 'will cause the
automatic dissolution of the partnership?
a. The business of the partnership can only be carried on at a loss.
b. A partner is shown to be of unsound mind.
c. A partner has been guilty of such conduct as tends to affect prejudicially the carrying
on of the business.
d. A partner is civilly interdicted.
29. Three of the following will cause the automatic dissolution of a general partnership.
Which one will not?
a. When any event makes it unlawful the partnership to be carried on or , for carry it
on in partnership.
b. Expulsion of any partner from the In accordance with such a power conferred by the
agreement between the partners.
c. A partner becomes in any way incapable of performing his part of the partnership
contract.
d. The insolvency of a partner or of the partnership
30. When is the partnership not bound by the act/s of a partner after dissolution in the
following cases?
a. Acts necessary to wind up partnership affairs.
b. Acts to complete transactions begun before dissolution,
c. New .transactions where the third person is a previous creditor and there was a
publication of the dissolution in a newspaper of general circulation in the place or
places where the business had been carried on but such third person has not read it.
d. New -transactions where the third person is a new creditor and there was
publication of the dissolution in a newspaper of general circulation in the place or
places where the business had been carried on but such creditor has not read it.
31. The partnership is not bound in three of the following acts of a partner after dissolution.
However, it is bound in one. Which is it?
 a. Where the partner acting is insolvent.
b. When it is unlawful to carry on the-business.
c. When the partner has no authority to wind up partnership affairs and the third
person is a previous creditor who had no knowledge of the, partner's lack of
authority.
d. When a partner has no authority to wind up partnership affairs and the third person
is a new creditor who has not read the publication of the lack of authority of the
partnerin a newspaper of general circulation in the place orplaces where the
partnership business is carried on.
32. What is the order of payment of liabilities of a dissolved generalpartnership using the
code number representing each liability?
I. Those owing to partners other than for capital or for profits.
II. Those owing to creditors other than partners.
III. Those owing to partners in respect of profits.
IV. Those owing to partners in respect of capital,
a. I, II,Ill,IV.
b. II, I, IV, Ill.
c. II, I, Ill, IV.
d. I, II, IV, Ill.
33. In a limited partnership where there are 4 partners:
a. All the partners must be limited partners.
b. The number of limited partners must be equal to the number of general partner,
that is, 2:2.
c. The number of limited partners must be greater than the number of general
partners, that is, 3:1.
d. It is enough that there is one limited partner; the rest may all be general partners.
34. A limited partner may contribute:
a. Money and/or property.
b. Money and/or services.
 c. Property and/or services.
d. Services-only.
35. A. limited partner shall be liable as general partner in three of the following cases.
Which one is the exception?
a. When he is a general-limited partner as stated in the certificate.
b. When he takes part in the control of the business.
c. When he participates in the management of the business.
d. When his surname which appears in the partnership name is also the surname of a
general partner.
36. Which of the following omissions will make a partnership formed as a limited
partnership liable as a general partnership?.
I. The certificate is not signed and sworn -to by all the partners.
II. The certificate is not registered with the Securities and Exchange Commission.
III. The partnership name does not include the word
IV. "Limited" or "Ltd.", its abbreviation, in the certificate.
a. I and 11.
b. II and III.
c. I and III.
d. I, II and III.
37. A person admitted to all the rights of a limited partner who has died or has assigned his
interest in the partnership is known as:
a. An ostensible partner.
b. A liquidating partner.
c. A substituted limited partner.
d. A general-limited partner.
38. If the assignee does not become the partner referred to in the preceding number, his
rights do not include:
a. The receipt of the assignor's share of the profits.
b. The receipt of the assignor's other compensation by way of income.
 c. The return. of the assignor's contribution.
d. The inspection of partnership books or account of partnership transactions.
39. What is the order of payment of liabilities of a dissolved limited partnership using the
code number representing each liability?
I. Those owing to general partners other than for capital or for profits. .
II. Those owing to creditors including limited partners, except those to limited
partners on account of their contributions and general partners.
III. Those owing to limited partners by way of their share in the profits and other
compensation by way of income.
IV. Those owing to limited partners in respect to the capital of their contributions.
V. Those owing to general partners in respect of capital.
VI. Those owing to general partners in respect of profits.
a. I, II, Ill, IV, V,, Vl.
b. II, I, Ill, IV, V, VI.
c. II, I, Ill, IV, VI, V.
d. II, Ill, IV, I, VI, V.
40. Which of the following will not cause the automatic dissolution of a limited partnership?
a. Death of a general partner.
b. Death of a limited partner.
c. Insolvency of a general partner,
d. Insanity of a general partner.
41. One of the distinctions between a partnership and a corporation is that a partnership:
a. May be formed by one person.
b. Is created by operation of law.
c. Acts through a board of directors.
d. May exist for an indefinite period.
42. Belinda, Ara, Rica and Klaudia are partners in BARK Enterprises, a pet shop, with Belinda
contributing P50,000.00; Ara, P20,000.00; and Rica, P30,000.00. Klaudia is an industrial
 partner and manages the partnership. Based on the foregoing information, which of the
following statements is false?
a. Belinda may engage in the buying and selling of, rice without the consent of the
other partners.
b. Klaudia may engage in the buying and selling of rice without the consent of the
other partners.
c. Klaudia is not liable for the losses of the partnership.
d. Klaudia may be held liable by third persons for partnership debts with her separate
property.
43. Josephine. Ellen, Wilma, Edith and Lydia are partners in JEWEL Company, Ltd. Josephine,
Ellen and Wilma are general partners, Edith is a general-limited partner, while Lydia is a
limited partner. Based on the foregoing information, which of the following statements
is false?
a. Josephine, Ellen and Wilma may be held liable with their separate property after the
exhaustion of partnership assets.
b. Edith may participate in the management. of the partnership.
c. Edith may not be held liable with her separate property for partnership debts after
the exhaustion of partnership assets.
d. Lydia may not be held liable with her separate property for partnership debts after
the exhaustion of partnership assets.
44. Which of the following will not cause the automatic dissolution of a general
partnership?
a. Death of a partner.
b. Insolvency of a partner.
c. When the partnership business becomes unlawful.
d. Insanity of a partner,
45. Wilma, Olga and Wynona agreed to form a limited partnership with Wilma and Olga as
general partners contributing P50,000.00 each, and Wynona as limited partner
contributing P100,000.00. The partnership which is to engage in the trading of garments
 was named "WOW Garments Co., Limited" as indicated in the certificate signed and
sworn to by the partners before a notary public. However, the certificate was not filed
with the Securities and Exchange Commission. In the meantime, the partners already
begun operating the business and transacting with third persons.
a. The partnership entered into by the Wilma, Olga and Wynona is void.
b. The partnership will be 'considered a general partnership.
c. Accordingly, all partners will be liable with their separate - property after the
exhaustion of partnership assets.
d. The partnership will be- considered a limited partnership as indicated in its name.
Only Wilma and Olga will be liable with their separate property after the exhaustion
of partnership assets. Wilma, Olga and Wynona will be considered separately as sole
proprietors with each one having a capital equivalent to their respective
contributions.
46. Fernando, Filoteo, Fortunato and Fulgencio are partners in the firm F4 Enterprises which
is engaged in the trading of fertilizers. Fernando contributed P50,000.00; Filoteo,
P30,000.00; and Fortunato, P20,000.00. Fulgencio is an industrial partner and manages
the partnership. Based on the foregoing facts, which of the following statements is
incorrect?
a. Fernando may engage in the business of trading car spare parts without the consent
of the other partners.
b. Filoteo may be validly exempted from losses incurred by the partnership by
agreement of the partners.
c. Fulgencio may not engage in the car repair business without the consent of his co-
partners.
d. Fuigencio is exempt from losses although there is no agreement among the
partners.
47. Bettina, Erlinda, Amanda, Ursula, Teresa and Yolanda are partners in BEAUTY
Enterprises, a dealer in cosmetics and other beauty products, with contributions of
 P60,000.00, P50,000.00, P40,000.00, P30,000.00, P20,000.00, and P10,000.00,
respectively. No one was appointed as manager in the articles of partnership.
a. Bettina is the manager because she made the biggest investment.
b. Every act in the ordinary course of the business will have to be decided by the
majority determined on a per head basis.
c. Every act in the ordinary course -of the business will-have to be decided by the
controlling interest (biggest investment) although the partners owning them.do not
constitute the majority.
d. All the partners are agents or managers of the partnership and any one of them may
perform acts of administration.
48. Which of the following will nvt cause the automatic dissolution of a general partnership?
a. Death of a capitalist, partner.
b. Insolvency of a capitalist partner.
c. Insanity of an industrial partner.
d. Civil interdiction of an industrial partner.
49. PATOK Enterprises, a partnership engaged in the business of renting out video films, is
owned by Patricia, Alice, Tina, Olga, and Kaye, with Kaye as the manager. Diana owes
PATOK Enterprises P6,000.00 and Olga, P4,000.00. Both debts are unsecured and are
already due. Diana pays Olga P4,000.00 for which Olga issues her own receipt.
a. The payment should be applied to Olga's credit only.
b. The payment should be applied to PATOK's credit only.
c. The payment should be divided proportionately between PATOK and Olga, at
P2,400.00 and P1,600.00, respectively.
d. The payment should be divided equally between PATOK and Olga at P2,000.00 each.
50. Federico, Alberto. Sofronio and Teodoro are partners in FAST Motorparts Company, a
dealer of car spare parts Federico, Alberto and Sofronio invested P500.000 00,
P200,000.00 and P300,000.00, respectively. Teodoro is an industrial partner who
manages the partnership. The partners have stipulated that Federico shall be exempt
from liability to third persons. At the end of three years, the assets of the partnership
 have dwindled to P220,000.00 while its liabilities to third persons have a balance of
P340,000.00. How much ultimately will be the share of each partner after payment to
third persons and the settlement among the partners?
a. P30,000.00 for each partner
b. Federico, P60,000.00; Alberto, P24,000.00, Sofronio, P36,000.00, and Teodoro,
none.
c. Federico, none; Alberto, P48,000.00; Sofronio, P72,000.00; and Teodoro, none.
d. Federico, none; Alberto, Sofronio and Teodoro P40,000.00 each.
51. John Solanda and Sons is a partnership composed of threenpartners, namely:Robert
Solanda, Simon Solanda,, andTheodore Solanda. The partners are the sons of John
Solandawho has retired from business but who suggested that theyinclude his name in
the firm to give them an advantage since heis well-known in the business community.
I. John Solanda shall have all the rights of a general partner.
II. John Solanda shall have all the liabilities of a generalpartner.
Based on the foregoing facts:
a. Both statements are true.
b. Both statements are false.
c. Statement I is true; Statement 11 is false.
d. Statement I is false; Statement 11 is true.
52. The following partnership contracts were presented to you forevaluation:
I. A partnership engaged in the sale of office supplies with a capital of
P100,000.00broken down into: cash, P30,000.00; office supplies for sale,
P50,000.00; andoffice equipment, P20,000.00. The agreement is in a private
instrument.
II. A partnership engaged in the lease of office spacesa capital of
P700,000.00broken down into landP100,000.00; building, P500,000.00; cash,
P80,000.00 and office equipment, P20,000.00. The agreement is ina public
instrument attached to which is the inventory ofthe land and the building signed
 by the partners. Then agreement is not recorded with the Securities
andExchange Commission.
III. A partnership engaged in the trading of computerswhose name is "Lamont
Enterprises, Ltd." It has a totalcapital of P500,000.00 broken down into
P100,000.00cash and computers worth P400,000.00, contributed byboth general
and limited partners. The agreement wassubscribed and sworn to by all the
partners before anotary public but not recorded with the Securities and
Exchange Commission.
Based on the foregoing:
a. Each partnership has a separate juridical personality.
b. I and II have separate juridical personality.
c. II and Ill have separate juridical personality.
d. None of the partnerships has a separate juridicalpersonality.
53. GREAT Company, a partnership engaged in the distribution. Ofgenerators, is composed
of George, Roland, Edmond, Albertand Troy. George is the managing partner. During the
month ofApril, the following transactions were - entered into by thefollowing partners
in behalf of the partnership. without anyauthority:
I. The sale of a generator by Roland to Juan Torres whowas not aware that Roland had
no authority. JuanTorres has paid for the generator which is due fordelivery.
II. The purchase of a car by Edmond from Intrepid Motorswhose owner was not aware
of Edmond's lack ofauthority. The car and the price are due for delivery
andpayment, respectively.
Based on the foregoing, the partnership is bound by:
a. Transaction I only.
b. Transaction II only.
c. Both Transactions I and II.
d. Neither transaction I nor II.
54. MARK Company isa partnership engaged in the tradingbusiness, with Marquez,
Alconcer, Ramos, and Kanapi aspartners. Marquez, Alconcer and Ramos are capitalist
 partners,contributingP100,000.00,P60,000.00, and P40,000.00,respectively. Kanapi is an
industrial partner. The partners havea stipulation that Marquez shall not be liable for
partnershipliabilities. After three years of continued losses, the partnershipincurred
liabilities of P200,000.00at which time its assets haddwindled to P140,000.00. After
partnership assets have been exhausted, partnership creditors may go after the
separate
assets of:
a. All the partners
b. Marquez, Alconcer and R ,rnos, but not those of Kanapi,
c. Alconcer, Ramos and Kanapi, but not those of Marquez,
d. Alconcer and Ramos oni,k
55. Sibal, Untalan, Pareho, Eusebio, and Rances are partners in SUPER Enterprises whose
business is car painting and repairs. All partners are capitalist partners with Sibal as
manager. After five years of operations, Rances resigned from the partnership. Although
Sibal was aware of the resignation of Rances, he still bought gallons of car paint from
Masterpaint owned by Marcelo who had been dealing with SUPER for the past 5 years,
and car spare parts from Supremeparts, owned by Salviejo who was transacting for the
first time with SUPER. The dissolution of SUPER was published in the Manila Bulletin but
neither Marcelo nor Salviejo read it. Neither one knew at the time they transacted with
Sibal that the partnership had been dissolved.
a. SUPER is liable to both Masterpaint and Supremeparts.
b. SUPER is liable to Masterpaint only.
c. SUPER is liable to Suprereparts only.
d. SUPER is not liable to both Masterpaint and Supremeparts.
e. SUPER is not liable to both Masterpaint andSupremeparts.
56. TRIUMPH Company, a partnership engaged in the buying and selling of car spare parts,
has for its partners and their respective contributions the following: Tomas, P10,000.00;
Ramon, P20,000,00; Ignacio; P30,000.00; Urbano; P40,000.00; Marcos,P100,000.00;
Pablo, P200,000.00; and Hilario, P300,000.00. Noone was appointed as manager of the
 partnership. In the course of the operation of the partnership, Tomas proposed to buy
carspare parts from Dominion Motors, but his proposal wasopposed by Ramon. A voting
among the partners took placeand Ignacio, Urbano and Marcos sided with Tomas, while
Pabloand Hilario sided with Ramon.
a. The group of Tomas, Ignacio, Urbano and Marcos willprevail because they
constitute the majority.
b. The group of Ramon, Pablo and Hilario will prevailbecause they own the
controlling interest.
c. None will prevail because no one was appointed asmanager of the partnership.
d. The partners will have to appoint a manager in order toresolve the conflict.
57. Refer to No. 56. Assuming that when the voting took place,Marcos abstained, Ignacio
and Urbano sided with Tomas, while Pablo and Hilario sided with Ramon.
a. None will prevail because the voting was equal.
b. The group of Ramon, Pablo and Hilario will prevailbecause they own the controlling
interest.
c. None will prevail because no one was appointed as manager of the partnership.
d. The partners will have to appoint a manager in order toresolve the conflict.
58. Refer to No. 57. Assume the same facts except that in the articles of partnership, Tomas,
Ramon, Ignacio, Urbano and Marcos were appointed managers. In the course of the
operation of the partnership, Tomas proposed to buy car spare parts fromDominion
Motors, but his proposal was opposed by Ramon. Avoting among the managing partners
took place and Ignacio andUrbano sided with Tomas, while Marcos sided with sided
with Ramon.
a. The group of Tomas, Ignacio and Urbano will prevailbecause they constitute the
majority of the managingpartners.
b. The group of Ramon and Marcos will prevail becausethey own the controlling
interest among the managingpartners.
c. The conflict will have to be referred to Pablo and Hilariobecause they represent the
controlling interest among allthe partners.
 d. The partners will have to agree that all of them must bemanagers in order to resolve
the conflict.
59. Refer to No.58.Supposing that when the voting among themanaging partners took
place, Ignacio sided with Tomas.Urbano abstained, while Marcos sided with Ramon.
a. None will prevail because the voting was equal.
b. The group of Ramon and Marcos will prevail becausethey own the controlling
interest among the managingpartners.
c. The conflict will have to be referred to Pablo and Hilariobecause they represent the
controlling interest among allthe partners.
d. The conflict will have to be referred to an arbiter for itsresolution.
60. Donna, Emma, Alma and Rona are partners in DEAR Company with Donna as manager
Tricia owes DEAR Company P6,500.00 and Donna, in Donna's personal capacity,
P4,500.00.Tricia's debt to Donna is secured by a pledge of her diamondring.Both debts
are already due. Tricia pays P4,500.00 to Donna and tells her that the same, is in
payment of her debt toDonna. Donna, thus, issues her personal receipt.
a. The payment of P4,500.00willbe appliedproportionately to the two credits: to the
partnershipcredit at P2,475.00; to Donna's credit at P2,025.00. This is because
Donna should not place her interestbefore that of DEAR Company.
b. The payment of P4,500.00 will be applied entirely toDonna's credit.The payment will
be applied in partial payment of thepartnership credit of P5,500.00; hence, there
will be a balance of P1,000.00.
c. Tricia, Donna and DEAR Company will have to agree asto which credit the payment
shall apply.
61. Which of the following statements concerning. the name of apartnership is false?
a. The partnership name may include the name of only oneof the partners.
b. The partnership name may include-the names of two ormore, but not all of the
partners.
c. The partnership name may include the names of all thepartners.
 d. The partnership cannot adapt a name which does not include the name of at least
one of the partners.
62. Ornussa, the owner of a vacant sot, leased the same to Floridaunder an
agreement that the rental, shall be paid by Florida at therate of 10% of the ann,wai
net income of the Power business thatshe would put up on the lot A private
agreem ent was signed bythe parties.In the first year of operations, Omussa
receivedfrom. Florida the arnount of P20,000.00 representing 10% of thenet income of
the flower shop business.
a. Ornussa s a partner of Florida by her mere receipt of the share of the net profits of
the flower business of Florida.
b. The relationsihp of Ornussa and Florida is only that of alessor and lessee.
c. Ornussa and Fiorida have a dual contract: partnershipand lease.
d. Omussa and Florida are not partners; neither are theylessor and lessee because
their agreement was not in apublic instrument.
63. LIFE Company, a partnership engaged in the water distributionbusiness, is composed of
partners Larredo, ingles, Filter andEncanto. One day, Larredo was driving the firm's
delivery truckbeyond the speed limit in order to serve its customers, when herammed
into and caused extensive damage on the parked car ofTertullo.
a. Only Larredo can be held liable for damages by Tertullo.
b. LIFE Company and Larredo are solidarity liable for damages to Tertullo.
c. LIFE Company and the four partners are solidarity liablefor damages to Tertullo.
d. LIFE Company and the four partners are jointly liable fordamages to Tertullo.
64. A person admitted as a partner into an existing partnership shallbe liable up to the
extent of his separate assets, for whatobligations?
a. Obligations of 'the partnership existing at the time of hisadmission only if there was
a stipulation.
b. Obligations of the partnership incurred after hisadmission only if there was a
stipulation.
 c. Obligations of the partnership incurred before and afterhis admission even if there
was no stipulation.
d. Obligations of the partnership incurred before his admission if there was a
stipulation, and those incurred after his admission even if there was no stipulation.
65. PARAGON Enterprises, a partnership engaged in the garments manufacturing business,
is composed of partners Pacis, Ramas and Gonzales. During the year, PARAGON bought
a computerized embroidering machine amounting to P300,000.00 from Tadena with the
following stipulation: down payment of P50,000.00; balance to be paid in amount equal
to 20% of the monthly net profits of PARAGON until the full amount is paid.
a. Tadena is an actual partner of Pacis, Ramas and Gonzales :Turing the time that he
receives a share of the profits of PARAGON as payment of the purchase price of the
machine.
b. Tadena is only a partner by estoppel of Pacis, Ramas and Gonzales during the time
that he receives a share of the profits of PARAGON as payment of the purchase price
of the machine.
c. Tadena is not a partner of Pacis, Ramas and Gonzales whether before or after he has
received the full payment of the purchase price of the machine from PARAGON.
d. Tadena is only a nominal partner of Pacis, Ramas and Gonzales during the -tame that
he receives a share of the profits of PARAGON as payment of the purchase price of
the machine.
66. MAGIC Company is a partnership composed of Martha, Agnes, Glenda, Irene and
Candice, with Martha as -manager who is authorized to collect the credits of the
partnership. Theresa owes Martha P4,000.00 which is' due on December 10. She also
owes MAGIC Company P6,000.00 which is due-on December 20. On December 15,
Theresa tendered payment in the amount of P4;000.00 to Martha in payment of her
debt to the latter. Martha issued her -own receipt acknowledging the payment.
a. The payment will be applied proportionately to the credits 'of MAGIC and Martha in
the amount of P1,600.00 and P2,400.00, respectively.
b. The payment will be applied in its entirety to Martha's credit.
 c. The payment will be applied in its entirety to MAGIC's credit.
d. The payment will be applied equally to the two debts of Theresa.
67. Aseron, the managing partner of ACE Company, was driving the delivery truck of the
firm when he rammed it into an electric post resulting in damages to the vehicle
amounting to P50,000.00. To make up for accident, Aseron worked long hours for the
firm and was able to increase its sales from P5.000,000.00 to P 15, 000, 000.00.
a. Aseron will no longer be liable for damages to ACE because he was able to generate
unusual revenues for the firm through his extraordinary efforts.
b. Aseron will still be liable to the firm for damages but the amount will be equitably
reduced since he was able to generate unusual profits for the firm through ' his
extraordinary efforts.
c. Aseron's obligation to the firm for damages will be extinguished by compensation
since ACE is also liable to him for the extraordinary efforts he exerted to increase its
sales.
d. Aseron and ACE will share equally in the damages of P50 ,000.00.
68. Trevor owes P3,000.00 to CHAMP Company, a partnership composed of Charles, Harry,
Albert, Mark and Prince, with Mark as the manager who is authorized to collect all
credits of the firm. He also owes Charles the amount of.P6,000.00. Both debts are
already due. Trevor gives, P3,000.00 to Charles in payment of his debt to the latter.
Charles thus issues his own receipt.
a. Payment will be applied proportionately to the two credits at P1,000.00 for Charles'
credit and PP2,000.00for CHAMP's credit.
b. Payment will be applied equally to the two credits.
c. Payment will be applied in its entirety to Charles' credit.
d. Payment will be applied in its entirety to CHAMP'S credit.
69. Barranda wrote Salvador a letter wherein he placed an order fora laptop computer
worth P80,000.00. In writing the letter,Barranda used a stationery which had for its
letterhead"Barranda and Bermudez, Rea! Estate Agents." Bermudez is notreally a
partner of Barranda but they agreed to use the saidletterhead to give a semblance of
 bigness by making it appearthat the two of them are partners. Salvador delivered the
laptop computer but Barranda defaulted in his payment of its price.Against whom may
Salvador proceed?
a. Barranda only since Bermudez is not his partner,
b. Barranda only since the purchase of the laptop computeris his personal transaction
c. B'arranda and Bermudez since they are partners in so faras Salvador is concerned.
d. "Barranda and Bermudez, Real Estate Brokers," onlysince an actual partnership was
created betweenBarranda and Bermudez and it has a personalityseparate and
distinct from the two.
70. Daoang and Depante have been partners for more than 5 yearsin the purified water
business. At the start of the sixth year,Daoang assigned his interest in the partnership to
Trinidad, butDepante objected on the ground that he did not want Trinidad tobe his
partner.
a. Trinidad automatically became a partner of Depantewhen Daoang conveyed his
interest to him.
b. Daoang and Depante continue to be partners despiteDaoang's conveyance of his
interest to Trinidad.
c. The partnership between Daoang and Depante wasautomatically dissolved when
Daoang conveyed his interest to Trinidad.
d. The conveyance by Daoang of his interest in thepartnership to Trinidad entitled the
latter to inspect thebooks, and participate in the management, of thepartnership.
71. Palacios, Atienza, Tablante, Elamparo, Robledo, Ocampo andSajenes are partners in
PATEROS Poultry Farms. Palacios,Atienza and Tablante have been appointed as
managers of thefirm with the stipulation that none shall act without the consent ofthe
other two. On the date of the scheduled delivery of 500 kilosof frozen dressed chickens
ordered by Caintacky Restaurant,heavy rains caused a power failure and made transport
difficultdue to landslides. A `local resident offered to purchase thedressed chickens
(which were already thawing) at 80% of the contract price. However, only Palacios and
 Atienza were aroundto decide as Tablante, who was on business trip for the firm,could
not be contacted due to poor communication signals.
a. Palacios and Atienza cannot decide by themselvesbecause the managing partners
must act with unanimity.
b. Palacios and Atienza may decide by themselves sinceany further delay would result
in more losses to the firm.
c. Palacios and Atienza can decide by themselves sincethey constitute the majority
among the managingpartners, which is the required vote notwithstanding
astipulation that one cannot act without the consent ofthe other managers.
d. The absence of Tablante cannot be alleged since therewas a stipulation that none of
the managing partnersshall act without the consent of the others.
72. Querubin, Roces and Solis are partners in a law firm. Querubinwas appointed as judge of
the Regional Trial Court. Suchappointment:
a. suspends the participation of Querubin in the management of the firm without
causing the dissolution of the partnership.
b. prohibits the inclusion of the name of Querubin in thefirm name without dissolving
the partnership.
c. results in the dissolution of the partnership.
d. merely requires the disclosure of Querubin'sappointment to the court without
dissolving thepartnership.
73. Braganza, Ortiz and Nevado want to form a partnership withBraganza contributing
P500,000.00; Ortiz, office equipment; andNevado, his services. If the three were to form
a limitedpartnership, who among them will be the limited partner/s?
a. Either Braganza or Ortiz or both of them.
b. Either Ortiz or Nevado or both of them.
c. Either Braganza or Nevado or both of them,
d. All the three must be limited partners.
74. Referto the preceding number. Assume that the three decide toform a general
partnership: As a result, which of the following is
 a. Any of the three may be appointed as manager.
b. All of them may be appointed as managers.
c. Only Nevado may be appointed as manager because heonly contributes his services.
d. Any two of them may be appointed as managers
75. CROWN Enterprises is composed of partners Chuck who contributed P50,000.00:
Rainier, P20,000.00; Oscar, P40,000.00; Waldorf, P10,000.00; and Nelson, P5,000.00. No
one was appointed as manager. Two proposed contracts were voted upon by the
partners during a meeting which took place as follows:
Contract I - Voting for approval of the contract were Chuck andRainier; voting for
rejection were Oscar, Waldorf and Nelson.
Contract II - Voting for approval were Chuck and Rainier; voting
for rejection were Oscar and Waldorf; Nelson abstained.
Which of the foregoing contracts are considered approved?
a. Both contracts.
b. Neither of two contracts.
c. Contract I only.
d. Contract II only.
76. MACK's Restaurant is a partnership composed of Manalo,Alferez, Cancio and Kilayco,
with Manalo as the manager whosecontribution is80% of the firm's capitalManalo
madeOngpauco his associate by assigning one-half of his share in thefirm to the latter.
Did Ongpauco become a partner in the firm?
a. Yes, because Manalo is the manager.
b. No, because the other partners must give their consentin order that Ongpauco may
be admitted to thepartnership.
c. Yes, because the assignment by Manalo of his share inthe firm did not affect his
ownership of the controllinginterest.
d. No, because the assignment by Manalo of his share inthe firm diminished his
interest in the partnership.
77. A partner is a co-owner with his partners of specific partnershipproperty. Such co-
ownership:
a. allows a partner to assign his right in such property.
b. allows a partners to use such property for partnership purposes.
c. entitles the spouse, children and other relatives of thepartner to claim support from
such property.
d. gives the private creditors of a partner to attach his rightin such property.
78. CLEAN Laundry Services Company is a partnership composedof Carpio, Legaspi, Encinas,
Alzate and Noval Without theknowledge of the other partners, Carpio used a coat
brought tothe shop by a customer for dry-cleaning in a party he attended,The coat was
accidentally stained with food sauce during thesaid party. Who will be liable to the
customer for damages?
a. Carpio only since he used the coat without theknowledge of the other partners.
b. CLEAN Laundry Services Company and Carpiosolidarily.
c. CLEAN Laundry Services Company and all the partnersjointly.
d. CLEAN Laundry Services Company and all the partnerssolidarily.
79. A limited partner is prohibited on account of his claim against thepartnership from
performing the following acts, except:
a. To receive or hold as collateral security any partnershipproperty.
b. To receive from a general partner or the partnership anypayment, conveyance or
release from liability, ifpartnership assets are not sufficient to dischargepartnership
liabilities to outside creditors.
c. Transact business with the partnership.
d. None of the foregoing.
80. Lazarte, a limited partner in Bellevue Company, Ltd., receivedthe amount of
P100,000.00 representing his contribution whichwas being returned on the date
stipulated in the certificate.Partnership records, however, showed that the firm had
liabilitiesof P220,000.00 which arose before Lazarte received the returnof his
contribution, and assets of only P90,000.00after suchreturn of contribution.
 a. Lazarte is bound to bring back to the partnership theamount of P100,000.00 plus
interest. thereon. "
b. Lazarte is bound to give the partnership P220,000.00plus interest thereon.
c. Lazarte is bound to give the partnership P130,000.00plus interest.
d. Lazarte is not bound to return to the partnership anyamount because he received
the return of hiscontribution pursuant to a contractual stipulation.
e.

TEST If - MATCHING TYPE. Indicate your answers by writing the letterrepresenting the
statement or phrase that best describes, defines orexplains the numbered items.

Terms
1.Partnership 12.Limited partnership
2. Particular partnership 13.Winding up
3.Partnership for a fixed term 14.Partnership for a particular
4.Partnership by estoppelundertaking
5.Capitalist partner 15.Universal partnership of profits
6.Dissolution
7.Substituted limited partner 16.Termination
8.Delectus personae 17.Partnership at will
9.General partnership 18.Limited partner
10.Subsidiary liability 19.Industrial partner
11.Universal partnership of all 20.General partner
present property

Statements

a. He contributes his services to the partnership.

b. All the partners are general partners.
c. A period is stipulated for the existence of the partnership.
d. Refers to the process of settling the business or affairs of the after dissolution.
e. Two or more persons bind themselves to contribute money,property or industry
to a common fund with the intention ofdividing the profits among themselves.
f. Property belonging to each partner at the time of the
g. establishment of the partnership as well as the profits realizedtherefrom belongs
to the partnership.
h. The pro rata liability for partnership obligations of the partners,including
industrial ones, to the extent of their separate propertyafter partnership assets
have been exhausted.
i. The principle that a person is free to choose those whom he wants to be
associated in partnership.
j. A partnership whose existence may be terminated at any time bythe partners.
k. A partner who is liable only to the extent of his contribution to thepartnership.
l. A partnership which comprises all that the partners may acquire by their work or
industry during the existence of the partnership.
m. A partnership where there is at least one general partner and at least one limited
partner.
n. The change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the business.
o. It has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession.
p. A partner who is liable to the extent of his separate property when all the
partnership assets have been exhausted.
q. He contributes money and/or property to the common fund of the partnership.
r. A person admitted to all the rights of a limited partner who has died or who has
assigned his interest in the partnership.
s. The point when all partnership affairs are wound up.
 t. It is not in reality a partnership but is considered as one with respect to those
who, by reason of their conduct or admission, are precluded from denying its
existence.
u. A partnership organized for a certain purpose which when attained will cause the
dissolution of the partnership.
v. None of the foregoing.

TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word 'FALSE"
if the statement is false.
1. An artificial person like a corporation, may be a partner in a
partnership.
2. A limited partner may contribute money and/or proper ty to a
partnership but not services.
3. A partnership has a personality separate and distinct from each of the
partners.
4. A partnership begins from the moment of the execution of the
contract, unless a different date is stipulated.
5. A partnership whose capital in money or property amounts to
P3,000.00 or more does not acquire juridical personality if the contract
is not recorded with the Securities and Exchange Commission.
6. The sharing of gross returns does not of itself establish a partnership
even if the 'persons sharing them have a joint or, common interest in
the property from which the returns are derived.
7. In a universal partnership of all present property, the partners may
stipulate that future property shall belong to the partnership but the
stipulation cannot include property acquired by inheritance, legacy or
donation.
8. In a universal partnership of profits, property belonging to each partner
at the time of the establishment of the partnership shall continue to
 pertain to each partner with only the usufruct passing on to the
partnership.
9. Articles of universal partnership entered into without specification of its
nature, only constitute a universal partnership of all present property.
10. A man and a woman living together as husband and wife without the
benefit of marriage may enter into a universal partnership.
11. A partnership. for a fixed term or a particular undertaking which is
continued after the expiration of the term or the attainment of the
undertaking becomes a partnership at will.
12. Spouses can validly enter into a particular partnership with each other.
13. The profits and losses of the partnership shall be divided equally among
the partners if they have no profit and loss sharing agreement.
14. A stipulation exempting a capitalist partner from losses is valid.
15. When a partner has been appointed manager in the articles of
partnership, he may be removed without just cause by the vote of the
partner owning the controlling interest.
16. An industrial partner can engage in business for himself if it is of a kind
different from the partnership business even without the consent of
the other partners.
17. All partners including industrial ones shall be liable pro rata with all
their separate property after the partnership assets have been
exhausted.
18. The partnership shall bear the loss of things which are contributed to
the partnership to be sold.
19. A newly-admitted partner is liable for partnership debts contracted
before his admission to the extent of his contribution unless there is a
contrary stipulation.
 20. A partner may associate another person with him in his share but the
person admitted shall not be admitted to the partnership without the
consent of all the partners.
21. The partnership shall be solidarily liable-with all the partners in one
partner acting within the scope of his apparent authority receives
money or property of a third person and misapplies it.
22. When a partner is not authorized to act for the partnership and he the
act of the partner is not for apparently carrying on the business, the
partnership shall be bound by the act of such partner if the third person
was not aware of the partner's lack of authority.
23. Notice to any partner relating to partnership affairs is notice to the
partnership.
24. The private creditor of a partner shall have preference over such
partner's separate property.
25. A general partnership is automatically dissolved by reason of the
insanity of a partner.
26. After dissolution, a partnership is still bound by the act of a partner
authorized to act for the partnership with respect to the completion of
transactions begun before dissolution.
27. A partnership intended to be formed as a limited partnership but
without the word "Limited" or "Ltd." appended to its name shall be
considered as a general partnership.
28. A partner may be a limited and general partner at the same time.
29. As a rule, a limited partner shall be liable as a general partner if he
allows the use of his surname to be included in the partnership name.
30. A limited partner may assign his interest to another person.

ANSWERS TO DIAGNOSTIC EXERCISES

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

TEST II- MATCHING TYPE

1. E 11. F
2. N 12. L
3. C 13. D
4. S 14. T
5. P 15. K
6. M 16. R
7. Q 17. I
8. H 18. J
9. B 19. A
10. G 20. O

TEST III- TRUE OR FALSE

1. FALSE
2. TRUE
3. TRUE
4. TRUE
5. FALSE
6. TRUE
7. TRUE
8. TRUE
9. FALSE
10. FALSE
11. TRUE
12. TRUE
13. FALSE
14. FALSE
15. FALSE
16. FALSE
17. TRUE
 18. TRUE
19. TRUE
20. TRUE
21. TRUE
22. FALSE
23. TRUE
24. TRUE
25. FALSE
26. TRUE
27. TRUE
28. TRUE
29. TRUE
30. TRUE

CORPORATIONS – DIAGNOSTIC EXERCISES

TEST I - MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.

1. The articles of incorporation differ from the by-laws in that the articles of incorporation are:

a. the rules of action adopted by a corporation for its internal government.

b. adopted before or after incorporation.

c. a condition precedent in the acquisition by a corporation of a juridical personality.

d. approved by the stockholders if adopted after incorporation.

2. The following may be the consideration of the shares of stock of a corporation, except:

a. actual cash paid to the corporation.

b. previously incurred indebtedness of the corporation.

C. amounts transferred from unrestricted retained earnings.

d. service to be performed by a lawyer on the proposed increase in capital stock of the

corporation.
3. A certificate of stock is distinguished from share of stock in that a share of stock.-

a. is the written evidence of a stockholder's interest in the assets and management of a

corporation.

b. is tangible personal property.

c. is one of the units into which the capital stock is divided.

d. may not be issued if the subscription has not been fully paid.

4. The articles of incorporation of Acme Corporation provide for the issuance of 100,000
shares without par value and an issued price per share of P10.00. At the time of incorporation,
the subscription and paid-up capital should not be less than:

a. P250,000.00 and P62,500.00, respectively.

b. P1,000,000.00 and P250,000.00, respectively.

c. P250,000.00 and P250,000.00, respectively.

d. P250,000.00 and P125,000.00, respectively.

5. Their names are mentioned in the articles of incorporation as originally forming the corporation
and are signatories thereof.

a. Corporators.

b. Stockholders.

C. Incorporators.

d. Members.

6. A corporation acquires juridical personality:

a. upon the filing of the articles of incorporation.

b. upon the filing of the by-laws.

c. upon the issuance of the certificate of incorporation.

d. within 30 days from the receipt of the notice of the issuance of the certificate of
incorporation.

7. A delinquent stockholder is not entitled to the following rights, except the right:

a. to be voted.
b. to vote or be represented in the meetings of stockholders.

c. to dividends.

d. He is not entitled to all the rights of a stockholder.

8. A, B, C, D, F, F and G are the duly elected directors for 2010 of

Excellent Corporation whose articles of incorporation provide for 7 directors. On August 1, 2010,
Directors A, B, C, D and E net to fill two vacancies in the board brought about by the valid removal of F
for disloyalty to the corporation and the death of G. In the said meeting, the remaining directors voted
for X to replace F, and Y, a son of G, to replace his father. Both X and Y are owners of at least one share
of stock of the corporation. The election of X and Y by the remaining directors is:

a. valid for both X and Y.

b. not valid for both X and Y.

c. valid with respect to X; not valid with respect to Y.

d. not valid with respect to X; valid with respect to Y.

9. In the meeting of the board of directors of Grand Corporation, a construction company, held on
August 31, 2010; directors A, B, C, D and E were present among the 9 directors. The meeting had for its
agenda the following:

I. The appointment of a new treasurer.

II. The approval of the contract for the purchase of cement worth P50,000.00 from X
Construction Supplies Co. When the voting took place, directors A, B, C and D voted for the election of Y
as the new treasurer; and directors A, B and C voted for the approval of the contract with X Construction

Supplies.

a. Both corporate acts are valid.

b. Both corporate acts are not valid.

c. The election of Y as the new treasurer is valid; the approval of the contract with X Construction
Supplies is not valid.

d. The election of Y as the new treasurer is not valid; the approval of the contract with X
Construction Supplies is valid.

10. Under this theory, the nationality of a corporation is that of the country under whose laws it was
formed.

a. Control test.
b. Incorporation test.

c. Domiciliary test.

d. Grandfather rule.

11. A corporation created in strict compliance with all the legal requirements and whose right to
exist as a corporation cannot be successfully attacked in a direct proceeding for that purpose by the
State is a:

a. de jure corporation.

b. de facto corporation.

c. corporation by estoppel..

d. corporation by prescription.

12. Stock dividends differ from cash dividends in that stock dividends:

a. do not increase the legal capital.

b. involve disbursements of corporate funds.

c. require the approval of both the board of directors and the stockholders.

d. once received by the stockholders, are beyond the reach of corporate creditors.

13. The subscriber of unpaid shares which are not delinquent shall be entitled to the following
rights, except the right to:

a. vote.

b. inspect corporate books.

c. a stock certificate.

d. dividends.

14. These statements pertaining to the right of a stockholder to inspect the books and records of a
corporation are presented to you for evaluation:

1. The right may be delegated to an agent.

II. The right may be denied if in the past, the stockholder improperly used the information which
he obtained from the books and records of another corporation of which he is also a stockholder.
a. Both statements are true.

b. Both statements are false.

c. Statement. I is true; Statement II is false.

d. Statement I is false; Statement II is true.

15. Under this doctrine, the separate personality of a corporation may be disregarded if it is used for
fraudulent or illegal purpose or to escape the faithful compliance of an obligation:

a. Trust fund doctrine

b. Doctrine of piercing the veil of corporate entity

c. Doctrine of corporate opportunity

d. Doctrine of limited capacity

16. Consolidation differs from merger in that in consolidation:

a. The surviving corporation shall enjoy all the rights, powers and attributes of a corporation under
the Corporation Code.

b. The existing liabilities of the constituent corporations shall be assumed by the surviving
corporation.

c. The corporate existence of all the constituent corporations shall be extinguished and a new
corporation emerges.

d. The surviving corporation shall possess all the rights, privileges, immunities and franchises of the
constituent corporations.

17. The right of a stockholder to demand payment of the fair value of his shares when he dissents
from certain corporate acts is known as:

a. pre-emptive right.

b. appraisal right.

c. redemption right.

d. appreciation right.

18. These statements pertaining to the meetings of directors are presented to you for evaluation:

I. Directors or trustees may attend or vote by proxy at board meetings.

II. The articles of incorporation or the by-laws of a corporation may provide for a greater majority
for its quorum during the meetings of the board of directors.

a. Both statements are true.

b. Both statements are false.

c. Statement I is true; Statement II is false.

d. Statement I is false; Statement II is true.

19. A stock that is issued without consideration or below par value or the issued price is known as:

a. watered stock.

b. delinquent stock.

c. redeemable stock.

d. preferred stock.

20. A non-voting stock may vote in the following corporate acts, except in case of:

a. approval of the compensation of directors.

b. merger or consolidation.

c. increase or decrease in capital stock.

d. sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of
corporate property.

21. Directors may be given compensation through any of the following ways, except by:

a. the vote of the stockholders representing at least a majority of the outstanding capital stock.

b. a provision in the by-laws.

c. the vote of the board of directors If the compensation is a reasonable per diem.

d. the vote of the board of directors if the compensation is other than per diems.

22. A is a director and owns 50% of the outstanding capital stock of Ace Corporation which is
engaged in the trading of computers. Ace Corporation purchased computer tables from Top

Corporation of which A is also a director and owns 15% of its outstanding capital stock. The articles of
incorporation of both corporations provide for 5 directors in the approval of the contract for the said
purchase, A did not attend the meeting of the board of directors of Ace Corporation, while in the
meeting of the board of directors of Top Corporation which was called for the same purpose, directors
A, B, C and D were present with all of them voting for the approval of the contract. Assuming that there
is no fraud and that the contract is fair and reasonable under the circumstances, the contract between
Ace Corporation and Top Corporation is:

a. valid.

b. voidable at the option of Top Corporation.

c. unenforceable against Top Corporation,

d. void because corporations with interlocking directorate should not enter into a contract with
each other.

23. One of the following acts may be performed by the executive committee of a corporation.
Which is it?

a. Declaration of stock dividends.

b. Filling of vacancies in the board of directors:

c. Amendment or repeal of the by-laws or adoption of new by-laws.

d. Approval of contracts in the ordinary course of business.

24. The following statements pertain to the express powers of a corporation.

1. A corporation may establish pension, retirement, and other plans for the benefit of its directors,
trustees, officers and employees.

II. A corporation may make donations for the benefit of a political party or candidate or for
purposes of partisan political activity provided the donations are reasonable.

a. Both statements are true.

b. Both statements are false.

c. Statement I is true; Statement li is false.

d. Statement I is false; Statement II is true.

25. Which of the following by-laws is valid?

a. A by-law which provides that one need not be the owner of a share of stock to become a
director of the corporation.

b. A by-law which provides that that one must be the owner of more than one share of stock of the
corporation to become a director.
c. A by-law which provides that one can continue to be a director throughout his terra although he
has disposed all his shares in the, corporation.

d. A by-law which provides a greater number of directors than that stated in the articles of
incorporation.

26. Winner Corporation, a dealer-manufacturer of garments and with principal office in Caloocan
City, held the meeting of its stockholders in Nasugbu, Batangas, in conjunction with its annual company
outing. Stockholders owning 75% of the capital stock were present, while 25% were duly represented by
proxies. , in the said meeting, the corporation by a vote of the stockholders representing 80%'of the
capital stock, approved the purchase of sewing machines worth P5,000,000.00. The by-laws of the
Corporation provide that contracts in excess of P3,000,000.00 must be ratified by the stockholders.
The contract for the purchase of the sewing machines was unanimously approved by the board
of directors before it was presented to the stockholders for ratification. S, a stockholder who did not
vote for the approval of the resolution, now questions its validity on the ground that the meeting was
held outside the place where the principal office of the corporation is located. Whitt is the status of
the contract for the purchase of the sewing machines?

a. Void.

b. Valid.

c. Unenforceable.

d. Voidable.

27. Which of the following statements pertaining to non-stock corporations is incorrect?

a. Members may vote by mail.

b. The number of trustees may be more than 15.

c. Any incidental income that it may earn may be distributed as dividends to its members.

d. The meetings of members may be held outside the city or municipality where the principal office
of the corporation is located.

28. A corporation may acquire its own shares for a legitimate purpose provided it has unrestricted
retained earnings. In which of the following acquisitions is the requirement of unrestricted retained
earnings not imposed?

a. When the acquisition is made to eliminate fractional shares.

b. When delinquent shares are acquired in a delinquency sale.

c. When redeemable shares are repurchased in accordance with the terms provided in the
articles of incorporation.
d. When shares are acquired from stockholders who exercise their appraisal right.

Items 29, 30 and 31 are based on the following information:

Danilo, a resident of Malolos, Bulacan obtained a loan from the Rural Bank of Sta. Rosa, Nueva Ecija
amounting to P90,000.00. The loan is secured by a pledge of shares of stock of Saint Michael
Corporation covered by 3 stock certificates of 1,000 shares each, which certificates are registered in the
name of Servando, a friend of Danilo. The current market value of the shares based on the records of
the Philippine Stock Exchange is P30.00 per share. Other than the pledge of the shares, no other
document or information is recorded in the books of San Michael Corporation at its office in Pasig City.

29. Who is entitled to vote the shares of stock in the stockholders meeting?

a. Danilo

b. Servando

c. Rural Bank of Sta. Rosa

d. None, the right to vote the shares is suspended file the pledge constituted on the shares is
existing

30. The pledge in order that it may bind third persons requires the

following:

a. The deed of pledge must be accompanied by an affidavit of good faith and recorded in the
Register of Deeds of Pasig.

b. It must be in a public instrument showing a description of the thing pledged and the date of the
pledge and registered in the Register of Deeds of Pasig.

c. The pledge must be in a public instrument showing a description of the thing pledged and the
date of the pledge. Registration in the Register of Deeds is not required.

d. The deed of pledge must be accompanied by an affidavit of good faith and recorded in the
Register of Deeds of Pasig and the province of Bulacan.
31. Danilo pays the Rural Bank of Sta. Rosa the sum of P30,000.00. May Danilo demand the
cancellation of the pledge of 1,000 shares of stock by reason of such payment?

a. No, Danilo has to pay his obligation of P90,000.00 in full before he can demand any cancellation
of the pledge of the'shares of stock.

b. Yes, Danilo can demand cancellation of the pledge of

1,000 shares because the market value of the same is equivalent to the payment of P30,000.00 that was
made.

c. No, Danilo can demand cancellation of the pledge only if he has paid more than 50% of his debt.

d. Yes, Danilo can demand cancellation because the pledge of each of the 3 stock certificates is
independent of one another.

32. S is the registered owner of 500 'shares of stock of XYZ

Corporation whose articles of incorporation provide for 11 directors. In the annual election of
directors for 2010, 12 stockholders filed their certificates of candidacy for the position, namely, A,
B, C, D, E, F. G, H, I, J, K and L. K and L are minority stockholders whom S wishes to elect to represent him
and the other minority stockholders in the board. In the said election of directors, S may cast a
maximum of.

a. 500 votes.

b. 6,000 votes.

c. 5,500 votes.

d. 1,000 votes.

33. One of the distinctions between a partnership and a corporation is that a partnership:

a. is managed by a board of directors.

b. is characterized by the principle of delectus personae.

c. has the right of succession.

d. may be dissolved only with the consent of the State.

34. One of the distinctions between a proxy and a voting trust agreement is that in a voting trust
agreement:
a. the representative acquires legal title to the shares to be voted

b. the exercise of the right to vote is limited to a particular meeting.

c. the representative cannot vote if the stockholder is present during the meeting.

d. the agreement need not be recorded with the Securities and Exchange Commission.

35. Which of the following statements is false concerning treasury shares?

a. They are entitled to dividends.

b. They have no voting right.

c. They may be disposed of for a price lower than the par value provided such price is reasonable.

d. They are not outstanding shares.

36. Which of the following will cause the automatic dissolution of a corporation?

a. Continuous inoperation for a period of at least 5 years.

b. Failure to formally organize and commence the transaction of its business or the construction of
its works within 2 years from its incorporation.

c. Failure to adopt by-laws and submit the same to the Securities and Exchange Commission within
30 days from the receipt of the official notice of the issuance of its certificate of incorporation.

d. Commission by the corporation of an ultra-vires act.

S. A stock that enjoys preferences over other stocks such as with respect to dividends and the
distribution of assets upon liquidation.

T. Shares that have been issued and fully paid for, but subsequently reacquired by the issuing
corporation by purchase, redemption, donation, or through some other lawful means.

U. Those originally forming and composing the corporation whose names appear in the articles of
incorporation and are signatories thereof.

V. A corporation whose shares are not listed in any stock exchange, the ownership is limited to a
few, and the transfer thereof is restricted.

W. That part of the capital stock which is subscribed, whether paid or unpaid.

X. One whose shares may be listed in any stock exchange and thus may be held by the public.
Y. A corporation formed for a private purpose or end. It refers to the total par value of all issued
par value shares, or the total consideration received for all issued no par value shares.

AA. A share of stock without any nominal value appearing on the stock certificate.

BB. A corporation that i3 defectively formed but there is an exercise of corporate powers resulting
from an attempt in good faith to incorporate on the part of its members.

CC. An artificial being created by operation of law, having the right of succession, and the powers,
attributes and properties expressly authorized by law or incident to its existence.

DD. Refers to the total shares of stock issued to subscribers or stockholders, whether or not fully or
partially paid, as long as there is a binding subscription agreement, except treasury shares.

EE. The nationality of a corporation follows that of the country under whose laws it was formed or
organized.

FF. The right of existing stockholders to purchase or subscribe to new issuances or dispositions of
shares, in proportion to their respective stockholdings, before such shares are offered to the public.

GG. The document issued by the Securities and Exchange

Commission which confers juridical personality upon a corporation.

HH. A corporation that owns the shares of another corporation and having power, directly or
indirectly, over the latter including the election of the directors thereof.

Il. They refer to the corporators of a stock corporation.

JJ. The declaration thereof requires the vote of the board of directors and the ratification of the
stockholders.

KK. Also called inherent powers; they may be exercised by a corporation by reason of its very
existence as a corporation.

LL. A corporation that has exercised corporate powers for such a length of time without
interference by the State, and which, by fiction of law, is given the status of a corporation.

MM. It refers to the authority given by a stockholder to another person to vote the shares and which is
generally effective only for a particular meeting.

NN. The document which evidences the interest of a stockholder in a corporation and in its property.

00. A corporation organized under the laws of a country other than the Philippines and whose laws
allow Filipino citizens or corporations to do business in such country.

PP. They refer to the corporators of a non-stock corporation.

QQ. Shares given to the organizers of a corporation which may begiven certain rights and privileges
not enjoyed by other shares, such as the exclusive right to vote and be voted as directors.

RR. It occurs when one, some or all of the directors of one corporation, are also the directors of
another corporation.

SS. Shares that grant the issuing corporation the power to purchase or reacquire them after a
certain period.

IT. The separate personality' of a corporation is disregarded if it is used for an illegal or fraudulent
purpose or to evade faithful compliance of an obligation.

UU. A body within a corporation created pursuant to the by-laws and composed of not less than
three members of the board of directors of a corporation whose function is to take immediate action on
important matters without the necessity of board meetings.

W. The right of a stockholder to demand the payment of the fair value of his shares in case he dissents
from certain corporate acts.

WW. A corporation can exercise only the powers expressly conferred upon it by law and its articles of
incorporation, those implied from such powers expressly granted, and those that are incident to its
existence.

XX. A corporation formed under the laws of the Philippines.

796 CORPORATIONS

YY. The ordinary stock of a corporation which entitles the holder to a

pro rata division of the dividends, without any preference or advantage over other stockholders.

ZZ. They refer to the rules of action adopted by a corporation for its

own government and for the government of its stockholders or

members and those having the direction, management and

control of its affairs.

AAA. A corporate combination whereby the constituent corporations,

except one, lose their separate personalities.

BBB. Applicable generally in times of war when a corporation is

considered an enemy by the country under which it operates

although it may have been formed under the laws of such

country.

CCC. It is not in reality a corporation but is considered as one with

respect to those who are precluded by their admission or

conduct from denying its existence.

DDD. A stock the nominal value of which appears in the stock

certificate.

EEE. A corporate combination whereby the constituent corporations

lose their separate personalities and a new corporation having a

personality of its own emerges.

FFF. It is one of the units into which the capital stock is divided and

represents the intangible interest which an owner has in the

management, profits and assets of the corporation.

GGG. A stock that is sold below its par value or issued price.

HHH. A corporation which has capital stock divided into shares and is

authorized distribute dividends from its surplus profits to its

shareholders on the basis of shares held.

Ill. None of the foregoing.

TEST II - TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word 'FALSE" if the
statement is false.
1. A corporation commences to exist upon the execution of the

articles of incorporation by the incorporators.

2. A subscriber's name may appear in the articles of incorporation

but he may not be an incorporator of the corporation.

3. A stockholder can transfer his shares to another person without

the consent of the other stockholders.

4. A corporation may exist for a period not exceeding 50 years but

its life may be extended several times provided each extension does not exceed 50 years in any single
instance.

CORi 'ORATIONS 797

5. The due existence of a de facto corporation may be attacked

collaterally in a proceeding.

6. All persons who assume to act as a corporation knowing it to be

without authority to do so shall be liable as general partners for

a?l debts and damages arising as a result thereof.

All subscribed shares are issued shares whether or not fully or

partially paid as long as there is a binding subscription

agreement.
8. A share of stock is an intangible personal property.

Redeemable shares may be reacquired by a corporation only if it

has unrestricted retained earnings.

10. Treasury shares, since they are issued, are outstanding shares.

11. Non-voting shares are not allowed to vote in all corporate acts.

12. Shares without par value may be issued for a consideration less

than P5.00 per share.

13. The entire consideration received for the issuance of no-par

shares shall all be treated as capital and no part thereof shall be

available for distribution as dividends.

14. A corporation may be formed for more than one purpose.

15. As a rule; majority of the incorporators of a corporation formed

under Philippine laws must be citizen s of the Philippines.

16. A corporation may be a stockholder of another corporation.

17. A corporation is automatically dissolved if it does not formally

organize, commence the transaction of its business or the

construction of its works within two years from the date of its

incorporation.

18. A director individually and as such can bind the corporation since

he is an agent of the corporation.

19. A director is required to be an owner of at least one share of stock of a corporation. However,
he continues to be a director although he has disposed all his shares provided the term for which he was
elected has not yet expire.

20. A delinquent stock is deprived of all the rights of a stockholder including the right to dividends.

21. The by-taws of a corporation may validly provide that one may be the President and Secretary
or President and Treasurer at the same time.
22. Unless otherwise provided by the articles of incorporation or the by-laws, the quorum in the
meetings of the board of directors is the majority of the-total number of the board of directors.

23. In the meeting of the board of directors, the vote required for the approval of an act is the
majority of those present provided there is a quorum except in the election of the officers which
requires majority of the total number of the board of directors.

24. As a rule, directors of a corporation may be removed with or without cause.

25. When a vacancy in the board arises from the death of a director, such vacancy may be filled by
the remaining directors provided they still constitute a quorum

26. As a rule, directors are not entitled to compensation as such directors but they may receive
compensation if they serve the corporation in another capacity.

27. A contract entered into between a corporation and one of its directors may still be valid even if
such director was present in the board meeting for the approval of the contract.

28. A corporation may validly donate funds to a political party or candidate provided the amount of
the donation is reasonable.

29. The shortening of the corporate existence of a corporation will result in the dissolution of the
corporation upon the expiration of the shortened term.

30. An increase in capital stock requires that at least 25% of the increase in capital stock must be
subscribed and at least 25% of such subscription must be paid.

31. The right of a stockholder to acquire new issues of shares may be denied in the articles of
incorporation.

32. The board of directors may abandon a previously approved act to sell or dispose all or
substantially all of corporate property without any further approval from the stockholders or members.

33. Cash dividends increase the legal capital of a corporation.

34. A provision in the by-laws requiring that one must be the owner of more than one share of stock
to be eligible as director is valid.

35. The by-laws are not required in the acquisition by a corporation of a juridical personality.

36. The stockholders or members cannot delegate to the board of directors the power to amend,
repeal or adopt new by-laws.

37. The meetings of directors may be held in or outside the Philippines, unless the by-laws provide
otherwise.
38. If a meeting of stockholders or members is improperly held or called, the act taken in such
meeting will not be valid even if the act is within the authority of the corporation and all the
stockholders were present or duly represented in such meeting.

39. If a stockholder has pledged his shares to secure a debt, the right to vote the shares is
transmitted automatically to the pledgee.

40. A voting trust agreement enables a stockholder to retain control of the corporation of which he
is a stockholder during the time that the voting trust agreement is in effect although he may have
disposed of all his shares.

41. A trustee in a voting trust agreement acquires legal title to the shares entrusted to him.

42. A subscription contract must be in writing to be enforceable if the amount of the subscription is
P500.00 or more.

43. Shares of stock may be issued for service to be performed at some future time such as that to be
rendered by a lawyer for the increase in the capital stock of a corporation.

44. A subscription is generally an indivisible contract. Accordingly, the certificate of stock therefor
may not be issued unless the subscription and other amounts due from the stockholder have been paid.

45. If no payment is made by a subscriber on the due date of his subscription, his shares becomes
delinquent on the day following.

46. Holders of shares-not fully paid. but which are not delinquent shall have all the rights of a
stockholder except t ;e right to a stock certificate.

47. A stockholder may be denied the right to inspect the books of the corporation -if in the past he
improperly used the information which he obtained from another corporation of which he is also a
stockholder.

48. When a stockholder exercises his appraisal right, all his rights as a stockholder, except the right
to receive payment of the fair value of his shares, will be suspended.

49. The by-laws of a non-stock corporation may validly provide that members may vote by mail.

50. The by-laws of a non-stock corporation may validly provide that meetings of members may be
held outside the city or municipality where the principal office of the corporation is located provided
that such other place must be within the Philippines.

51. The number of trustees in a non-stock corporation may be more than 15.

52. The officers of a non-stock corporation may be elected directly by the members instead of by
the board of trustees.
53. The business of a close corporation may be managed by the stockholders instead of by the
board of directors.

54. In case of deadlocks in the management of the affairs of a close corporation, the Securities and
Exchange Commission may order the corporation to acquire its own shares provided the corporation has
unrestricted retained earnings to cover the shares. .

55. The chief archbishop, rabbi or other religious leader becomes a corporation sole from and after
the filing of the articles of incorporation with the Securities and Exchange Commission.

56. After dissolution, a corporation shall nevertheless continue to exist as a body corporate for 3
years not for continuing the business but for liquidating its affairs.

57. A corporation is dissolved upon the expiration of the period for which it was formed unless the
said period is extended.

58. The continuous inoperation of a corporation for a period of at least 5 years will result in its
automatic dissolution.

59. A foreign corporation may do business in the Philippines by obtaining a license but without the
need of incorporating under Philippine laws.

60. A foreign corporation shall not be allowed to do business in the Philippines if the laws of the
country under which it was incorporated do not allow Philippine corporations or citizens to do business
in the said country.

ANSWERS TO DIAGNOSTIC EXERCISES

CORPORATIONS

TEST I - MULTIPLE CHOICE

1. C 31. A 61. D 91. D

2. D 32. C 62.A 92. C

3. C 33. B 63. D 93. B

4. C 34. A 64.C 94. B

5. C 35. A 65. C 95. A

6. C 36. B 66.C 96. D

7. C 37. D 67. C 97. C

8. D 38. B 68.C 98. A

9. D 39. B 69.C 99. B

10. B 40. D 70. B 100.D

11. A 41. C 71. A 101.A

12. C 42. A 72. C 102.A

13. C 43. B 73. A 103.B

14. A 44. A 74. C 104. D

15. B 45. B 75. D 105. B

16. C 46: B 76. B 106.A

17. B 47. C 77.A 107.C

18. D 48. B 78. C 108.B

19. A 49. C 79. C 109.B

20. A 50. A 80. B 110.C

21. D 51. A 81. A 111. A

22. A 52. B 82. B 112.A

23. D 53. C 83.C 113.D

24. C 54. A 84. B 114.D

25. B 55. B 85. C 115.B

26. B 56. C 86. D 116.B

27. C 57. A 87.A 117.C

28. C 58. A 88. C 118.A

29. B 59. B 89. B 119.B

30. C 60. C 90.C 120.B

802 CORPORATIONS

TEST II -MATCHING TYPE

1. CC 16. 11 31. TT 46. S

2. WW 17. YY 32. NN 47. DDD

3. FFF 18. AA 33. W 48. QQ

4. DD 19. SS 34. 1 49. GGG

5. Z 20. T 35.K 50. E

6. HHH 21. GG 36. 00 51. D

7. XX 22. ZZ 37. BBB 52. RR

8. EE 23. UU 38. N 53. H

9. J 24. KK 39. 6 54. Q

10. Y 25. M 40. G 55. C

11. BB 26. FF 41. V 56. W

12. HH 27. AAA42. CCC 57. EEE

13. X 28. MM43. R 58. P

14. LL 29. JJ 44. PP 59. 0

15. U 30. L 45. F 60. A

TEST III - TRUE OR FALSE

1. FALSE 16. TRUE 31. TRUE 46. TRUE

2. TRUE 17. TRUE 32. TRUE 47. TRUE

3. TRUE 18. FALSE 33. FALSE 48. TRUE

4. TRUE 19. FALSE 34. TRUE 49. TRUE

5. FALSE 20. FALSE 35. TRUE 50. TRUE

6. TRUE 21. FALSE 36. FALSE 51. TRUE

7. TRUE 22. TRUE 37. TRUE 52. TRUE

8. TRUE 23. TRUE 38. FALSE 53. TRUE

9 FALSE 24. TRUE 39. FALSE 54. FALSE

10. FALSE 25. TRUE 40. TRUE 55. TRUE

11. FALSE 26. TRUE 44: TRUE 56. TRUE

12. FALSE 27. TRUE 42. FALSE 57. TRUE

13. TRUE 28. FALSE 43. FALSE 58. FALSE

14. TRUE 29. TRUE 44. TRUE 59. TRUE

15. FALSE 30. TRUE 45. FALSE 60. TRUE

NEGOTIABLE INSTRUMENTS

34. Medardo Medrano makes a note payable to the order of

Pidencio Palomar and Prudencio Perez for P20,000.00. The payees are not partners and neither one
authorized the other to act in his behalf. Based on the foregoing, which of the following is a valid
indorsement?

a. "Pay to Antonio Arevalo, P12,000.00, and to Alberto

Alvarez, P8,000.00.

(Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez."

b. "Pay. to Antonio Arevalo, P14,000.00.

(Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez"

Note: Medardo Medrano has paid a total of P6,000.00

to both payees before the latter made their

indorsements.
c. "Pay to Antonio Arevalo, P14,000.00.

(Sgd.) Fidencio Palomar (Sgd.) Prudencio Perez."

Note: Medardo Medrano has not paid any amount to the payees.

d. "Pay to Antonio Arevalo P20,000.00.

(Sgd.) Pidencio Palomar"

35. Which of the following may be raised as defense against any

holder?

a. Want of consideration.

b. Want of delivery of complete instrument.

c. Insertion of a wrong date.

d. Want of delivery of an incomplete instrument.

36. "Pay to Alberto Alvarez for collection only.

(Sgd.) Ponciano Parcero"

This is an example of:

a. The agency type of restrictive indorsement.

b. The trust type of restrictive indorsement.

c. A qualified indorsement.

d. A conditional indorsement.

37. M makes a promissory note for P10,000.00 payable to the order

of P for merchandise to be delivered by P to him. P, however, was able to deliver to M merchandise

worth P8,000.00 only. P indorsed the note to A, and A to H.

1. If H is a holder in due course, he can collect P10,000.00

from M.

II. If H is not a holder in due course, he can collect

P8,000.00 from M.

a. Both statements are true.

b. Both statement are false.

c. Statement I is true; Statement II is false.

d. Statement I is false; Statement II is true.

38. M makes a note payable to the order of P. P indorses the note to

A, A to B, B to C, C to D, D to E, and E back to A. Based on the

foregoing, which of the following statements is incorrect?

a. A may renegotiate, the promissory note.

b. A cannot go after B, C, D and E.

c. B, C, D and E enjoy temporary defense if A is the holder.

d. If the instrument is renegotiated by A to F, the latter

cannot go after B, C, D and E.

39. Mary Montes and Melany Manalo obtained a loan of

P1CO,000.00 from Patricia Palma. The debtors executed a

promissory note which reads as follows:

NEGOTIABLE INSTRUMENTS

- DIAGNOSTIC EXERCISES

TEST I - MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.

An instrument which is not dated will be considered dated as at

the time of:

a. acceptance.

b. first indorsement.

c. last indorsement.

d. issuance..

2. "I promise to pay P or his order the sum of P10,000.00 30 days

after the death of X". This is an instrument payable:

a. at a determinable futur

b. at an indefinite time, hence, non-negotiable.

c. on demand.

D. upon the fulfillment of a condition.

3. Who among the following is the holder of a negotiable instrument

originally payable to order?

a. The original payee who has negotiated the instrument.

b. The indorsee who is in possession of the instrument.

c. The possessor of the instrument to whom the instrument

was delivered without any indorsement

d. The indorsee who has negotiated the instrument.

4. An instrument payable to bearer may be negotiated through any

of the following means, except by:

a. special indorsement plus delivery.

'b. mere delivery.

c. blank indorsement plus delivery.

d. No delivery is required as long as there is an

indorsement, whether blank or special.

5. The following instruments are presented to you for evaluation;

I. "Pay to the order of Pablo Patricio P20,000.00"

II. "Pay to the order of Pablo Patricio P20,000.00 or deliver,

to him a computer of the same, value at his option."

Ill. "Pay to the order of Pablo Patricio P20,000.00 or deliver

to him a computer of the same value."

IV. "Pay to the order of Pablo Patricia a computer worth

P20,000.00."

Assuming all the other requisites of negotiability are present,

which of the foregoing instruments are negotiable?

a. Instruments I and II.

b. Instruments I and III.

c. Instruments II and Ill.

d. Instruments III and IV

6. The separate paper attached to an instrument on which an

endorsement or acceptance of the instrument is written is called:

a. allonge.

b. memorandum.

c. enclosure.

d. attachment.

7. Assuming all the other requisites of negotiability are present,

which of the following instruments is not payable to bearer?

a. "Pay to the order of Cash."

b. "Pay to the order of Jose Rizal, national hero."

c. "Pay to Pedro Padernal, bearer."

d. "Pay to. Pedro Padernal or bearer."

8. Consider these two statements:

1. An instrument originally payable to order may be

converted into a bearer instrument.

II An instrument originally payable to bearer may be

converted into an order instrument.

In your evaluation of the foregoing statements:

a. Both statements are true.

b. Both statements are false.

c. Statement I is true; Statement II is false.

d. Statement I is false; Statement II is true.

9. Which of the following is a valid address to a drawee so as to

make the instrument negotiable?

a. "To Walter Wenceslao or Wilfredo Wycoco."

b. "To Walter Wenceslao, or in his absence, Wilfredo

Wycoco."

c. "To Walter Wenceslao and Wilfredo Wycoco"

d. "To Walter Wencesiao and another drawee named

Wilfredo."

10. M signs a promissory note payable to the order of P which is

blank as to amount. M delivers the note to P with the instruction

to type the amount of P20,000.00 on the blank. P, however,

types the amount of P50,000.00, and negotiates the same to A,

A to B, B to C, and C to H, a holder in due course. A, B, C and

also H had no knowledge of the wrongful completion of the

blank.

a. H may collect from M nothing because P violated M's

instructions.

b. H may collect from M P20,000.00 the amount M

instructed P to place on the space for the amount.

c. H may collect from M P50,000.00, the amount actually

placed by P.
d. H may collect from A, B or C P20,000.00 since they had

no knowledge of the wrongful completion.

11. R signs a check amounting to P50,000.00 but which is blank as

to the name of payee. He keeps the check in his drawer but S, his secretary, steals it, places her name as
payee on the blank, and negotiates it to A, A to B, B to C, and C to H, holder. A, B, and C have no
knowledge of the theft of the check and its unauthorized completion by S. Based on the foregoing,
which of the following statements is incorrect?

a. H may enforce payment of the check against Rif H is a

holder in due course.

b. H may enforce payment of the check against S,,whether

H is a holder in due course or not.

c. H may enforce payment of the check against A, B and C,

whether H is a holder in due course or not.

d. H may not enforce payment of the check against R,

whether H is a holder in due course or not.

12. M makes a note payable to the order of P. He delivers the note

to P with the instruction that P should keep the same until M has

obtained the proceeds of his loan from the bank. P, . however,

disregarded the instruction of M and indorsed the note to A, A to

B, B to C, and C to H, holder. A, B and C have no knowledge of

P's defective title. Based on the foregoing, which of the following

statements is incorrect?

a. H may enforce payment against M if H is a holder in

due course.

b. H may not enforce payment against M if 'H is not a

holder in due course.

c. H may not enforce payment against A, B and C, whether

H is a holder in due course or not.

d. H may enforce payment against P, whether H is a

holder in due course or not.

13. One of the following can set up the defense of forgery in an

instrument payable to order. Who is it?

a. An indorser, if the maker's signature is forged.

b. The acceptor, if the drawer's signature is forged.

c. A person negotiating by mere delivery if a prior party's

signature is forged.

d. The maker, if an indorsers signature is forged.

14. M makes a note payable to P or bearer and delivers the note to

P. P indorses the note to A. A keeps the note in his drawer but it is stolen by F who negotiates the same
to B by forging A's signature, B indorses the note to C, C indorses the note to H, a holder in due course.
Who among the following can set up the defense of forgery?

a. M, maker.

b. P, payee.

c. A, indorser.

d. Forgery is not available as defense to any party to the

instrument.

15. One of the following is not a restrictive indorsement. Which is it?

a. An indorsement that prohibits the further negotiation of

the instrument.

An indorsement that constitutes the indorser a mere assignor of the title to the instrument.

c. An indorsement that constitutes the indorsee an agent of

the indorser.

d. An indorsement that vests title in the indorsee in trust for

some other person.

16. M makes a note payable to the nrder of P in the amount of

-. P10,000.00. P indorsers the note to A as follows "Pay to A if he

passes the 2010 Bar Examination."

a. M must wait for the condition to be fulfilled before he can

pay A.

b. M may pay. A even if the condition has not been fulfilled

but A has to hold the proceeds subject to the rights of P.

c. M cannot be compelled to pay even if the condition is

fulfilled because the conditional indorsement renders the

instrument non-negotiable.

d. M may pay A even if the condition has not been fulfilled.

The fulfillment of the condition becomes immaterial and

A becomes the absolute owner of the proceeds of the

note.

17. In order that a person may be held liable as an accommodation

party, the following requisites must concur, except:

a. He has signed the instrument as maker, drawer,

acceptor or indorser.

b. He has not received any value for such making, drawing,

accepting or indorsing the instrument.

c. His purpose of signing the instrument is to lend his

name or credit to some other person.

d. The holder must have no knowledge that such person

signed the instrument as an accommodation party.

18. An indorsement where the indorser signs only.his name at the

back of the instrument is a:

a. special indorsement.

b. blank indorsement.

c. qualified indorsement.

d. restrictive indorsement.

19. An indorsement where the indorser waives the benefit of any law

intended for his protection is known as:

a. an absolute indorsement.

b. a facultative indorsement.

c. a conditional indorsement.

d. a successive indorsement.

20. M makes a note payable to the order of P. P specially indorses

the note to A, A specially indorses the note to B, B indorses the note in blank and delivers it to C, C
specially indorses the note to D, D specially indorses the note to H, holder. Which of the indorsements
may H strike out?
a. The special indorsement of P to A.

b. The blank indorsement of B to C.

c. The special indorsement of C to D.

d. The special indorsement of D to H.

21. Which of the following is not a right of a holder in due course?

a. To hold the instrument free from defect of title of prior

parties.

To hold the instrument free from personal defenses available to prior parties among themselves.

c. To enforce payment of the instrument for the full amount

thereof against all parties liable thereon.

d. To hold the instrument free from real defenses available

to the prior parties among themselves.

22. Which of the following statements pertaining to indorsements is

incorrect?

a. The indorsement must be of the whole instrument.

b. The signature of the indorser without additional words is

sufficient.

c. Indorsers are liable in the order in which they indorse.

d. If an instrument is delivered without indorsement,

negotiation takes effect at the time of delivery even if the instrument is subsequently indorsed.

23. M executed a note payable to the order of P. P indorsed the

note to,A, A to B (by qualified indorsement), B to C (by general indorsement), and C (by general
indorsement) to, H, a holder in due course. Later, it was discovered that P was a minor. None, except P,
knew that he was a minor. Who, aside from P, may avail himself of the minority of P as a defense?

a. M, maker.

b. A, qualified indorser.

c. B, general indorser.

d. None, only P may avail himself of his minority as a

defense.

24. Which of the following does not discharge the instrument?

a. Payment in due course by the accommodated party .

b.. Intentional cancellation of the instrument 'by the holder.

c. When the principal debtor becomes the holder in his own

right before maturity.

d. Payment in due course by or on behalf of the principal

debtor.

25. A party secondarily liable is discharged through any of the

following means, except by the:

a. intentional cancellation of his signature by the holder.

b. discharge of a prior party.

c. release of the principal debtor.

d. extension of the time of payment which is assented to by

such party secondarily liable.

26. Which of the following instruments is negotiable?

a. Treasury warrant.

b. Postal money order.

c. Letter of credit.

d. Trade acceptance.

27. An instrument reads as follows:

November 30, 2010

I promise to pay to the order of Paolo Pimentel the sum of

P50,000.00 if he places first in the May 2011 CPA

Examination.

(Sgd.), Mariano Miranda

a. The instrument is valid and negotiable.

b.. The instrument is valid but not negotiable.

c. The instrument is invalid but negotiable.

d. The instrument is invalid and not negotiable.

28. An instrument reads as follows:

I promise to pay to the order of Patrick Pelaez the sum of P50,000.00 sixty (60) days after date.
(Sgd.) Minerva Maceda

The instrument was delivered by Mine. va Maceda on December

1, 2010 to Patrick Pelaez who indorsed and delivered the note

on the same day to Alberto Antonio. Immediately upon receipt,

Alberto Antonio wrote on the note "November 1, 2010" as its

date of issue. The following day, Alberto Antonio indorsed and delivered the note to Herman Hernandez
who knew nothing with respect to the insertion of a different date of issue.

a. Herman Hernandez can collect the amount of the note

from Minerva Maceda on December 31, 2010.

b. Herman Hernandez can collect the amount of the note

from Minerva Maceda on January 30, 2011.

c. Herman Hernandez can collect nothing from Minerva

Maceda because of the insertion of a wrong date.

d. Herman Hernandez can collect the amount of the note

on December 2, 2010 when it was negotiated to him.

29. An instrument. reads as follows:

November 1, 2010

I promise to pay to the order of Perla Persida the surn of

P30,000.00 on November 30, 2010.

(Sgd.) Melba Montinola (Sgd.) Milnore Manuel

(Sgd.) Maila Medina

On November 30, 2010, Perla Persida may collect from Melba

Montinola:

a. P30,000.00.

b. P20,000-00.

C. P10,000.00.

d. Nothing, because the note is void since it reads "I

promise to pay" but it was signed by three makers.

30. At a movie premier, Perfecto Palmares approached Sharon

Morales, the star of the movie, and requested an autograph from

her. Sharon Morales willingly obliged and signed her name at

the bottcm right portion of a white 8" x 11" stationery which

Perfecto Palmares presented to her. Shortly after reaching

home, Perfecto Palmares printed above the signature of Sharon

Morales through his computer the following : "I promise to pay

Perfecto Palmares or his order P50,000.00". Thereafter, Perfecto Palrares negotiated the paper to
Arturo Alvarez, Arturo Alvarez to Bernardo Benitez, and Bernardo Benitez to Henry Hilado, holder.
Alvarez, Benitez, and Hilado knew nothing about how the apparent note came into being.

a. If he is a holder in due course. Henry Hilado can collect

from Sharon Morales,

Whether he is a holder in due course or not, Henry, Hilado cannot collect from Sharon Morales.

c. Whether he is a holder in due course or not, Henry

Hilado cannot collect from Arturo Alvarez.

d. Whether he is a holder in due course or not, Henry

Hilado cannot collect from Bernardo Benitez.

31. M makes a promissory note payable to the order of P for

P10,000.00. P indorses the note to A, and A to B. Thereafter, S indorsed the amount of the note in full to
H to secure his (B's) debt of P8,000.00 to H. Based on the foregoing, which of the following statements is
incorrect?

a. If M has no defenses against H, H may collect

P10,000.00 from M.

b. If M has personal defenses against H, H may collect

P8,000.00 from M.

c. If M has real defenses against H, H may collect nothing

from M.

d. H cannot ccllect anything from M whether M has real or

personal defenses.

32. Which of the following renders an instrument non-negotiable?

a. The promise or order is to pay the amount of the

instrument out of a particular fund.

b. The promise or order to pay is coupled with a statement

of the transaction that gave rise to the transaction.

c. The sum payable is to be paid with costs of collection or

an attorney's fee in case payment is not made at

maturity.

d. The instrument contains a provision authorizing the sale

of collateral securities in case the instrument is not paid

at maturity.
33. Which of the following omissions on the face of an instrument will

render it non-negotiable?

a. The omission of the date of issue.

b. The omission of any statement that value has been

given.

c. The omission of the place where the instrument was

drawn.

d. The omission of the signature of the maker above his

typewritten name.

34. Medardo Medrano makes a note payable to the order of

Pidencio Palomar and Prudencio Perez for P20,000.00. The payees are not partners and neither one
authorized the other to act in his behalf. Based on the foregoing, which of the following is a valid
indorsement?

a. "Pay to Antonio Arevalo, P12,000.00, and to Alberto

Alvarez, P8,000.00.

(Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez."

b. "Pay, to Antonio Arevalo, P14,000.00.

(Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez"

Note: Medardo Medrano has paid a total of P6,000.00

to both payees before the latter made their

indorsements.

c. "Pay to Antonio Arevalo, P14,000.00.

(Sgd.) Fidencio Palomar (Sgd.) Prudencio Perez."

Note: Medardo Medrano has not paid any amount to the payees.

d. "Pay to Antonio Arevalo P20,000.00.

(Sgd.) Pidencio Palomar"

35. Which of the following may be raised as defense against any

holder?

a. Want of consideration.

b. Want of delivery of complete instrument.

c. Insertion of a wrong date.

d. Want of delivery of an incomplete instrument.

36. "Pay to Alberto Alvarez for collection only.

(Sgd.) Ponciano Parcero"

This is an example of:

a. The agency type of restrictive indorsement.

b. The trust type of restrictive indorsement.

c. A qualified indorsement.

d. A conditional indorsement.

37. M makes a promissory note for P10,000.00 payable to the order

of P for merchandise to be delivered by P to him. P, however, was able to deliver to M merchandise

worth P8,000.00 only. P indorsed the note to A, and A to H.

1. If His a holder in due course, he can collect P10,000.00

from M.

11. If H is not a holder in due course, he. can collect

P8,000.00 from M.

a. Both statements are true.

b. Both statement are false.

c. Statement I is true; Statement II is false.

d. Statement I is false; Statement II is true.

38. M makes a note payable to the order of P. P indorses the note to

A, A to B, B to C, C to D, D to E, and E back to A. Based on the

foregoing, which of the following statements is incorrect?

a. A may renegotiate. the promissory note.

b. A cannot go after B, C, D and E.

c. B, C, D and E enjoy temporary defense if A is the holder.

d. If the instrument is renegotiated by A to F, the latter

cannot go after B, C, D and E.

39. Mary Montes and Melany Manalo obtained a loan of

P1C0,000.00 from Patricia Palma. The debtors executed a

promissory note which reads as follows:

We promise to pay Patricia Palma or order P100,000.00 on November 30, 2010.

(Sgd.) Mary Montes (Sgd.) Melany Manalo

To secure the loan, Mary Montes pledged her diamond ring, while Melany Manalo executed a mortgage
on her lot.

a. Mary Montes may demand the return of her diamond

ring if she pays her share of the debt, while Melany .Manalo's share remains outstanding.

b. Melany Manalo may demand the cancellation of the

mortgage on her lot if she pays her share of the debt,

while Mary Montes's share remains outstanding.

c. Both Mary Montes and Melany Manalo must pay the

total amount of the debt before Mary Montes could

demand the return of the diamond ring, and Melany

Manalo the cancellation of the mortgage on her lot.

d. Patricia Palma may demand payment of the amount of

P100,000.00 from either Mary Montes or 1Vlelany

Manalo.

40. M executed a promissory note in the amount of P20,000.00

payable to the order of P. M made the promissory note for

goods purchased by M from P shortly after M obtained the

consent of P whether the latter would accept the promissory note

in the meantime. When P visited M's office to collect the note, M

was not around, but P found on M's table the completed note

that M made for him. Without waiting for M, P took the note.

Based on the foregoing, which of the following statements is

incorrect?
a. P cannot enforce payment of the note if M refuses to pay

it.

b. If P indorses the note to H who knows nothing on how P

obtained the note, H can collect on the note from M.

c. If P indorses the note to H who knows how P obtained

the note from M, H cannot collect from M.

d. If P indorses the note to H, H can collect from M whether

H was aware or not on how the note was obtained by P

since he (H) was not a party to the wrongdoing

committed by P.

41. The following instruments are presented to you for evaluation:

1. "Pay to the order of Pablo Patricio P20,000.00 in goods

which are displayed at your store."

II. "Pay to the order of Pablo Patricio P20,000.00 or deliver

to him a computer of the same value at his option."

Assuming all the other requisites of negotiability are present:

a. Both instruments are negotiable.

b. Both instruments are not negotiable.

c. Instrument I is negotiable; Instrument II is not negotiable.

d. Instrument I is not negotiable; Instrument II is negotiable.

42. The following are two of several requisites of an instrument:

1. The instrument must be payable on demand or at a

fixed or determinable future time.

II. The instrument must be payable to order or to bearer.

a. Both requisites apply to promissory notes only.

b. Both requisites apply to bills of exchange only.

c. Both requisites apply to both promissory notes and bills

of exchange.

d. Requisite I applies to promissory notes; Requisite II

applies to bills of exchange.

43. The attribute of a negotiable instrument which allows it to be

passed from one hand to another similar to money, so as to give

a holder in due course the right to hold the instrument free from

defect of title of prior parties, and free from defenses available to

prior. parties among themselves, and to enforce payment of the

instrument for the full amount thereof against all parties liable

thereon is known as:

a. Assignability.

b. Negotiability.

c. Transferability.

d. Acceptability.

44. An instrument is not payable on demand in one of the following

cases. Which case is it?

a. When the instrument is expressed to be payable at sight.

b. When the instrument is expressed to be payable upon

presentation.

c. When no time for payment is expressed.

d. When the instrument is expressed, to be payable after

the occurrence of a specified event which is certain to happen.

45. Consider the following statements on the interpretation of

instruments:

1. Where the sum payable is expressed in words and also

in figures and there is a discrepancy between the two,

the sum denoted by the words is the sum payable.

II. Where there is a conflict between the written and printed

provisions of the instrument, the printed provisions

prevail.

a. Both statements are true.

b. Both statements are false.

c. Statement I is true; Statement II is false.

d. Statement I is false; Statement II is true.

46. A bill of exchange reads as follows:

January 1, 2011

Pay to the order of Pamela Pineda the sum of

P50,000.00 thirty (30) days after sight.

(Sgd.) Rosita Rodriguez

To: Wilma Warner

The above bill was issued by Rosita Rodriguez to Pamela

Pineda on December 28, 2010 and was presented for

acceptance by Pamela Pineda to Wilma Warner on January 10,

2011.

Based on the foregoing facts, the maturity date of the bill is:

a. January 27, 2011.

b. January 31, 2011.

c. February 9, 2011.

d. January 10, 2011.

47. Ramos draws a bill of exchange payable to the order of Palma.

Palma presents the bill to Wagan, drawee, for acceptance, and

the latter accepts it. Thereafter, Palma indorses the note to

Alunan, Alunan to Bernarte, Bernarte to Hornedo, holder. On

due date, Hornedo presents the bill to Wagan for payment but

Wagan dishonors it claiming that Palma is a minor. Wagan,

Ramos, Alunan and Bernarte claim that they did know that

Palma was a minor at the time that they transacted on the

instrument. Aside from Palma, who may claim the defense of

minority?

a. Ramos.

b. Wagan.

c. Alunan and Bernarte.

d. None of the four.

48. A promissory note reads as follows:

November 1, 2010

I promise to pay Paloma Perez or order the sum of

P20, 000.00.

(Sgd. Maria Montano

The above promissory note was delivered by Maria Montano to Paloma Perez who made the following
indorsement at the back of the promissory note:

Pay to Alona Almonte if she finishes her course in Business Administration.

(Sgd.) Paloma Perez

1. The condition of the indorsement is suspensive.

II. The condition placed on the indorsement renders the

instrument non-negotiable.

III. Maria Montano may waive the fulfillment of the condition

and pay Alona Almonte.

a. All statements are true.

b. I and II are true.

c. II and Ill are true.

d. I and III are true.

49. The acceptor, by accepting the instrument, admits the following,

except the:

a. existence of the payee.

b. capacity of the payee to indorse.

c. genuineness of the drawer's signature.

d. right of the holder to enforce payment of the instrument.

50. The maker, by making the instrument, has the following

liabilities, except:

a. the engagement to pay the instrument according to its

tenor.

b. the admission of the existence of the payee.

C. the admission of the capacity of the payee to indorse the

instrument.

d. the admission of the right of the holder to enforce

payment of the instrument.

51. M makes a promissory note payable to the order of P. P

indorses the note specially to A, A indorses the note in blank and delivers the same to B. B specially
indorses the note to C, C specially indorses the note to D, D indorses the note in blank and delivers it to
E, E specially indorses the note to - H,, holder. Whose indorsement may H strike out?

a. The special indorsement of P to A.

b. The special indorsement of E to H.

c. The blank indorsement made by A.

d. The blank indorsement made by D.

52. M makes a promissory note payable to the order of P and

delivers the same to P. P indorses the note to A who keeps it in his drawer. F steals the note and
negotiates the same to B by forging A's signature. Thereafter, B negotiates the note to C, C to D, and D
to H, a holder in due course. Based on the foregoing information, which of the following statements is
true?

a. H can hold M and P liable because they became bound

under the instrument before the forgery.

b. H cannot hold B, C and D liable because they have no

participation whatsoever in the commission of the forgery.

c. H can enforce the instrument only against F, the forger,

since he is the perpetrator of the forgery.

d. H can enforce instrument against F, B, C and D, but not

against M, P and A.

53. A check must be in writing and signed by the drawer for it to be

negotiable. In addition, a check must have the following

requisite, except:

a. It must contain an unconditional order to pay a sum

certain in money.

b. It must be payable at a fixed or determinable future.

time.

c. It must be payable to order or to bearer.

d. The bank drawee must be named with reasonable

certainty.

54. These two instruments are presented to you for evaluation:

Instrument I

Manila, Philippines

October 21, 2010

Pay to the order of Pedro Panelo the sum of P20,000.00 or deliver to him a brand new Acer computer of
the same value.

(Sgd.) Roberto Ramirez

To: Walter Wenceslao

Instrument II

Manila, Philippines

October 21, 2010

Pay to the order of Pedro Panelo the sum of P20,000.00 and reimburse yourself out of the proceeds of
my loan from PNB which are in your possession.

(Sgd.) Roberto Ramirez

To: Walter Wenceslao

a. Both instruments are negotiable.

b. Both instruments are non-negotiable.

c. Instrument I is negotiable; Instrument II *is non-

negotiable.

d. Instrument I is non-negotiable; " Instrument II is

negotiable.

55. Which of the following is not a promise to pay, and thus will
make an instrument non-negotiable?

a. "I agree to pay P"

b. "I bind myself to pay P"

c. "I acknowledge. my debt to P"

d. "I oblige myself to pay P"

56. An instrument to be negotiable must be payable at a fixed or

determinable future time. Which of the following does not

comply with the said requisite?

a. "I promise to pay P or order on Christmas day 2 years

from now"

b. "I promise to pay P or order on the death of X" -

c. "I. promise to pay P or order 10 days before the death of

X"

d. "I promise to pay P or order before Valentine's Day next

year"

57. Which of the following instruments is not payable to order?

a. "I promise to pay P or his agent P10,000.00"

b. "I promise to pay P or his assigns P10,000.00"

c. "I promise to pay to the order of myself P10,000.00"

d. "Pay to the order of yourself P10,000.00"

58. P executes a promissory note for P20,000.00 indicating therein

that the maker is M and that it is payable to the order of P. Thereafter, he forges the signature of M and
indorses the note to A, A to B, B to C, and C to H, holder. Based on the foregoing data, which of the
following statement is incorrect?

a. H can collect from M if H is a holder in due course.

b. H cannot collect from M whether H is a holder in due

course or not.

c. H can collect from A, B or C whether H is a holder in due

course or not.

d. H can collect from .P whether H is a holder in due course

or not.

59. An instrument reads as follows:

I promise to pay to the order of P the sum of P50,000.00 sixty (60) days after date.

(Sgd.) M

On September 1, 2010, M issued the promissory note to P, P

indorsed the note to A, A to B, and B to C. C indorsed the note

to H on September 20, 2010, but before delivering it to H, C

inserted August 1, 2010 as the date of issue. H is a holder in

due course. The due date of the.promissory note insofar as H is concerned is:

a... October 31, 2010.

b. September 30, 2010.

c. The promissory note becomes demandable at once.

d. The promissory note is avoided because of the insertion

of a wrong date; hence, it is of no use to determine the

date of maturity.

60. Which of the following defenses may a party to an instrument

avail himself of against any holder?

a. Want of delivery of incomplete instrument.

b. Want of authority to complete an instrument that was

delivered.

c. Want of delivery of complete instrument.

d. Want or absence of consideration.

61. M makes a promissory note payable to the order of P for

PHP5,000.00. After delivery to P, P changed the amount to US$5,000.00. Thereafter, P indorsed the note
to A, A to B, B to C, C to D, and D to H. The parties subsequent to P were not aware of the alteration
made by P. Based on the foregoing facts, which of the following statements is incorrect?

a. H can hold M liable for US$5,000.00 if H is a holder in

due course.

b. H can hold M liable for PHP5,000.00 if H is a holder in

due course.

c. H cannot hold M liable for any amount if H is not a holder

in due course.

D. H can hold A, B, C and D liable for US$5,000.00 even if H is not a holder in due course.

62. A holder is a holder in due course if he has taken the instrument

complete and regular on its face and three of the following conditions, except:
a. That he became the holder of the instrument before it

was overdue and without notice that it had been

previously dishonored if such was the fact.

b. That he took it in good faith and for value.

c. That there is. no fraud or illegality affecting the

instrument.

d. That at the time it was negotiated to him, he had no

notice of any infirmity in the instrument or defect in the title of the person negotiating the same.

63. M executed a promissory note as follows:

"I promise to pay P or order P50,00'0.00 or to deliver to him a brand new laptop computer."

(Sgd.) M M.

Based on the foregoing instrument, which of the. following

statements is true?

a. The instrument is negotiable.

b. The obligation is an alternative obligation.

c. The choice as to which prestation will be performed

belongs to P.

d. The obligation is payable at a determinable future time.

64. M executes a promissory note for P10,000.00 payable to the

order of P, a minor. M and P had a private understanding that M

is liable only for the discounted amount of P9,500.00. P

indorsed the note to A, A.tc B, B to C, C to D, and D to H, holder.

a. M may refuse to pay H on the ground that P is a minor.

b. If M dishonors the note, A may refuse to pay H on the

same ground that P is a minor.

c. The indorsement made by P passed title to the

instrument in favor of A.

d. Assuming that P was already of the age of majority at

the time of the execution of the note, M is liable to H for

P9,500.00 since that was the amount that he agreed with P that he should pay.

65. On August 1, 2010, M executed a ' promissory note for

P50,000.00 payable to the order of P which is payable "30 days after date." Thereafter, P indorsed the
note to A, A to B, B to C, C to b, and D to M. The indorsement by D to M was made on August 29, 2010.

a. The obligation on the note was extinguished by merger

or confusion on August 29, 2010.

b. M may reissue/renegotiate the promissory note after it

was indorsed to him.

c. M can go after P, A, B, C and D to collect.

d. M may strike out the indorsement to him by D.

66. M, maker, P, payee, of a.. note payable to the order of P., The

back of the note contains the indorsement of P to A, A to B. B to

C, C to D, and D to H, a holder in due course. Assume the

following independent facts:

1. M is insolvent.

11. Pisaminor.

III. A's signature was forged.-

If C were a qualified indorser, which of the foregoing

independent facts will not affect his liability (i.e., he will, still be

liable) although he was not aware of any of them?

a. I and II.

b. 11 and Ill

c. I and Ill.

d. I, II and Ill.

67 Refer. to the preceding number.. Assuming that C were a general

indorser, which of the foregoing facts enumerated (I, II and III)

will not- affect his liability (i.e., he will still be liable) although he

was not aware' of any of them?

a. I and II.

b. II and Ill.

c. Iand111.

d. I, 11 and Ili.

68., One of the distinctions between negotiation and assignment of a

negotiable instrument is that in assignment the:

a. transferor of the instrumet t warrants the solvency of

prior parties.

transferee of the instrument is subject to both personal and real defenses.

c. transferee of the instrument holds the instrument free

from defect of title of prior parties.

d. transferor is not liable in case no presentment for

payment is made to the party primarily liable and notice of dishonor is not given to such transferor.
69. M made a promissory note in favor of P or order. The note,

which was payable after 60 days from date of issue, amounts to

P100,000.00 and bears interest at 10% 'per annum. After the

delivery of the note to him, P altered the interest rate to 18% per

annum without the knowledge of M and indorsed it to A who

knew nothing of the alteration. Thereafter, A indorsed the note

to H, a holder in due course.

a. H may not collect any amount, whether of the principal

or of the interest, from M..

b. H may collect P100,000.00 and interest at 10% per

annum from M.

c. H may collect P100,000.00 and interest at 18% per

annum from M.

d. H may not collect any amount, whether of the -principal

or of the interest, from A, since A was not aware of the

alteration.

70 Which of the following indorsements is a qualified indorsement?

a. "Pay to Angelo Amores for collection."

b. "Pay to Angelo Amores in trust for Teofilo Tangco."-

c. "Pay to Angelo Amores. Indorser not holden":

d. "Pay to Angelo Amores. Notice of dishonor waived."

71. Manuel Miranda wrote a letter to his goddaughter which reads as

follows:
To Pilar Perez:

Dear Pilar:

I am greatly pleased that you have enrolled in

accounting in response to my continual urging.

I am formally making the promise I have made earlier to you to pay you or your order P500,000.00 or a
brand-new Toyota Corolla, at your option, as soon as you graduate.

Your Godfather,

Sgd.) Manuel Miranda

a. The instrument is valid and negotiable.

b. The instrument is valid but not negotiable.

c. The instrument is not valid but negotiable.

d. The instrument is not valid and not negotiable.

72. M made a promissory note payable to P or bearer. After its

delivery to him, P indorsed the note to A. While the note was in

the possession of A, F stole the note and negotiated it to B by

forging A's signature. Thereafter, B indorsed the note to C, C to

D, and D to H, a holder in due course. - Which of the following

defenses are available to M, P and•A against H?.

1. Forgery of A's signature.

II. Want of delivery of the note by A since the note was

stolen from him.

a. Both defenses are available to M, P and A.

b. Both defenses are not available to M, P and A.

c. Only I is available.
d. Only II is available.

73. The following promissory notes are presented to you:

I promise to pay to the order of Pancho Pineda the sum of P20,000.00 if he passes the CPA Board
Examination.

(Sgd.) Mario Marquez

At the back of the promissory note, the following appears:

Pay to the order of Antonio Abad.

(Sgd.) Pancho Pineda

II.

I promise to pay to the order of Pancho Ptneda the sum of P20,000.00.

(Sgd.) Mario Marquez

At the back of the promissory note, the following appears:

Pay to Antonio Abad only and no other.

(Sgd.) Pancho Pineda

In your evaluation of the foregoing instruments:

a. Both instruments are negotiable in origin but ceased to

be negotiable at the time of indorsement.

b. Both instruments are non-negotiable in origin.

C. Only Instrument I is negotiable in origin but ceased to be

negotiable at the time of indorsement.

d. Only Instrument 11 is negotiable in origin but ceased to be

negotiable at the time of indorsement.

74. M issued a promissory note payable to the order of P for

P50,000.00. Thereafter,-'P indorsed the note to A. While the

note was in the possession of A, F stole it and negotiated it to B

by forging the signature of A. B was not aware of the forgery of

A's signature. B then indorsed the note to H, a holder in due

course. The parties who may raise forgery as a defense are:

a. A and B.

b. M and P.

c. M, P and A..

d. None of the parties may seise forgery as a defense

because H is a holder in due course.

75. Refer to the preceding number. Assume the same farts except

that the note is payable ,to bearer. In such a case, the parties

who may raise forgery as a defense are:

a. A and B.
b. M and P.

c. M, P and A.

d. None of the parties may raise the defense of forgery.

76. M makes a promissory note for P10,000.00 payable to the order

of P. After the issuance to him of the note., P altered the amount to US$10,000.00. P then indorsed the
note to A, A to B, and B to H. Only P knew of the alteration.

The parties and their possible liabilities are:

I: M, P10,000.00.

II. M, US$10,000.00.

Ill. M, nothing.

IV. A and B, P10,000.00.

V. A and B, US$10,000.00.

VI. A and B, nothing.

If H is a holder in due course, the parties from whom he may

collect and the amount of the said parties' liability are:

a. I and IV.

b. II and V.

c. I and V.

d. Ill and VI.

77. A check differs from a bill of exchange because a check;

a. does not require the drawer to have funds with the

drawee.

b. may be drawn against a person other than a bank.

c. is always payable on demard.

d. is required to be presented for acceptance in certain

cases.,

78. The placing of a date in an instrument is necessary in the

following cases, except:

a. to fix the maturity of the instrument.

b. to determine when interest is to run.

c. to fix the prescriptive period.

d. to make the instrument negotiable.

79. A holder is still a holder a holder in due course although:

a. he received the instrument after it has become overdue

but he has no knowledge of it.

b. he received the instrument after it was dishonored and

he has no notice of such dishonor.

c. he did not give any value for it.

d. the instrument was not complete and regular on its face.

80. On May1, 2010, Manolo Montes executed the following

promissory note for goods he purchased from Peter Perez:

(No date)

I promise to pay Peter Perez or order the sum of

P20,000.00 with interest, thirty days after date, in payment of

the goods I purchased from him today. To secure the amount of this note, I hereby pledge my ring which
I authorize Peter Perez to sell in case of my default on due date.
(Sgd.) Manolo Montes

The part of the above instrument that renders it non-negotiable is the phrase or statement:

a. "in payment of the goods that l purchased from him

today."

b. "with interest, thirty days after date."

c. "To secure the. amount of this note, I hereby pledge my

ring which I authorize Peter Perez to sell in case of my default on due date."

The instrument is negotiable notwithstanding the

presence of such phrases or statements in the body

thereof.

81,. Medardo Medrano has an obligation to give 10 sacks of rice

worth P10,000.00 to Pancho Panza, the same being due on

September 5, 2010. Medardo Medrano fails to deliver 10 sacks

of rice to Pancho Panza on due date despite the latter's demand.

Medardo Medrano requested Pancho Panza to give him a, period

of 30 days to give the amount of P10,000.00 or to deliver 10

sacks of rice, assuring Pancho Panza of the payment by issuing the promissory note, shown below.
Pancho Panza agreed to Medardo Medrano's proposal.

September 6, 2010

I promise, to pay Pancho Panza or order the sum of

P10,000.00 or to deliver him 10 sacks of rice.

(Sgd.) Medardo Medrano

a. The new obligation is a facultative obligation.

b. The promissory note is negotiable.

c. Medardo Medrano has the choice whether to give

P10,000.00 or deliver 10 sacks of rice.

d. The instrument is payable at a determinable future time.

82. The following are certain conditions in an instrument or the

transfer thereof:

1. A condition placed on the face of the instrument that the

maker will pay it to the payee upon the fulfillment of the condition.

H. A condition placed on an indorsement that the

instrument wilt be paid upon the fulfillment of the condition.

141. A condition placed upon the delivery of the instrument,

such as when the maker delivers the note to the payee and instructs him not to negotiate the
instrument until the maker obtains the proceeds of his loan.

In your evaluation of the above statements, the instruments that are negotiable or remain negotiable
despite the presence of the condition mentioned are:

a. I and II.

b. 11 and III.

C. I and 111.

d. I, II and Ili.

83. This promissory note was issued by Maila Moreno to Patricia

Pineda on August 1, 2010:

August 1, 2010

I promise to pay Patricia Pineda or order the sum of

P20,000.00 thirty (30) days after date.

(Sgd.) Maila Morena

The note was thereafter indorsed by Patricia Pineda to Alma Alajar, Alma Alajar to Brenda Bermejo, and
Brenda Bermejo to Carmela Castro. On August 30, 2010, Carmelo Castro indorsed the note as follows:

Pay to Maila Morena. I

(Sgd.) Carmela Castro.

a. The promissory note was extinguished when Maila

Morena became the holder.

b. The promissory note was not extinguished when Maila

Morena became the holder.

c. Maila Morena may not renegotiate the instrument after it

was indorsed to her.

d. Maila Morena may go after Patricia Pineda, Alma Alajar,

Brenda Bermejo and Carmela Castro.

84. Refer- to the preceding number. Assuming that the note was

extinguished when it was indorsed by Carmela Castro to Maila

Morena, the cause of the extuinguishment is:

& Confusion.

b. Condonation

c. Compensation.
d. Novation.

85. The following are defenses in a negotiable instrument:

1. Want of delivery of incomplete instrument.

11. Want of authority to complete instrument.

Ill. Want of consideration.

Which of the above defenses may be raised against a holder not

in due course?

a. I and II only.

b. II and III only.

c. I and III only.

d. I, II and III.

86. Which of the following indorsements is a valid negotiation of the

instrument?

a. "Pay to Arnulfo Alvez, P20,000.00" The instrument

shows an amount of P30,000.00.

b. "Pay to Arnulfo Alvez and Benito Baldoz."

c. "Pay to Arnulfo Alvez, P20,000.00, and Benito Baldoz,

P10,0000.00."

d. "Pay to Arnulfo Alvez, P20,000.00 from the amount of

P30,000.00 on this note."

87. M delivers a promissory note payable to the order of P for.

P10,000.00. P alters the amount to P40,000.00 and thereafter

indorses the note to A who had no knowledge of the alteration;

then A to H, holder in due course. Which of the following is

incorrect?

a. H can recover P10,000.00 from M.

b. H can recover P40,000.00 from P.

c. H can recover P40,000.00 from A.

d. H cannot recover any amount from M because M is a

party before the alteration. H cannot also recover from A

because A was not aware of the alteration.

88. The signification by the drawee of his assent to the order of the

drawer.

a. Acceptance

b. Approval

C. Recommendation

d. Indorsement

89. The acceptance that takes place when a drawee to whom a bill

is delivered for acceptance destroys the bill the bill, or refuses

within 24 hours after such deiivery, or within such other period as

the holder may allow, to return the bill accepted or non-accepted,

to the holder.

a. Implied acceptance

b. Qualified acceptance
c. Constructive acceptance

d. Oral acceptance

90. The following are the requisites of actual acceptance of a bill of

exchange, except.

a. It must be in writing.

b. It must be signed by the drawee.

c. There must be delivery or notification thereof.

d. It must express that the drawee will perform his promise

by the payment of money, the delivery of a thing or the

rendering of some service.

91. These statements are presented to you:

1 The holder of a bill may require that the acceptance be

written on the face of the bill, and if such request' is

refused, he may treat.the bill as dishonored.

II. Acceptance of a bill may be made even before . it is

drawn.

a. Both statements are true.

b. Both statements are false.

c. Only Statement I is true.

d. Only Statement II is true.

92. These statements are presented to you:

1. A general acceptance assents without qualification to the

order of the drawer.

II. An acceptance to pay at a particular place is a qualified

acceptance.

a. Both statements are true.

b. Both statements are false.

C. Only Statement I is true.

d. ' Only Statement II is true.

93. These statements are presented to you:

I. The holder may refuse to take a qualified acceptance,

and if he does not obtain an unqualified acceptance, he

may treat the bill as dishonored by non-acceptance.

It, As a rule, a qualified acceptance taken by the holder will

discharge the drawer and indorsers.

a. Both statements are true.

b. Both statements are false.

c. Only Statement I is true.

d. Only Statement II is true.

94. The time within which the drawee is allowed to give his

acceptance is:

a. 12 hours.

b. 24 hours.
C. 48 hours.

d. 72 hours.

95. These statements are presented to you:,

1. A bill may be accepted before it has been signed by the

drawer.

II. A bill cannot be accepted while it is still incomplete.

a. Both statements are true.

b: Both statements are false.

c. Only Statement I is true.

d. Only Statement II is true.

96. These statements are presented to you:

1. A bill may be accepted although it is already overdue.

II. A bill cannot be accepted after it has been previously

dishonored by a refusal to accept, or by non-payment.

a. Both statements are true.

b. Both statements are false.

c. Only Statement I is true.

d. Only Statement II is true.

97. In which of the following cases is presentment for acceptance of

a bill optional?

a. Where the bill is payable after sight, or in any other case,

where presentment for acceptance is necessary to fix the maturity of the instrument.
b. Where the bill expressly stipulates or provides that it

shall be presented for acceptance.

c. Where the bill is drawn payable elsewhere than at the

residence or place of business of the drawee.

d. Where the bill is drawn payable elsewhere than at the

residence or place of business of the drawer.

98. These statements are presented to you:

1. The payee of a bill which is required to be presented for

acceptance must present it for acceptance within a

reasonable time before he can negotiate it

II. A holder of a bill which is required to be presented for

acceptance cannot receive the bill unless it was first

presented for acceptance by the payee.

a. Both statements are true.

b. Both statements are false.

c. Only Statement I is true.

d. Only Statement II is true.

99. These statements are presented to you:

1. Presentment for acceptance can be made on a Saturday

whether the instrument is payable on demand or not.

II. Presentment for payment can be made on a Saturday

only for instruments payable on demand.

a. Both statements are true.

b. Both statetents are false.

c. Only Statement I is true.

d. Only Statement II is true.

100. A formal written statement made by a notary public at the

request of a holder of bill of exchange stating that he has demanded acceptance or payment of the bill,
and that it has been refused, with the reasons, if any, given by the drawee or acceptor for the dishonor.

a. Certification

b. Demand letter

c. Protest

d. Affidavit

101. Protest is required in the case of a:

a. Foreign bill of exchange.

b. Inland bill of exchange.

C. Foreign promissory note.

d. Inland promissory note.

102. Who is qualified to be an acceptor for honor?

a. A person already a party to the bill.

b. A stranger to the bill.

c. Either (a) or (b).

d. Both (a) and (b).

103. Who is qualified to be a payer for honor?

a. A person already a party to the bill.

b. A stranger to the bill.

c. Either (a) or (b).

d. Neither (a) nor (b).

104. An acceptance for honor which does not expressly state for

whose honor it is made is deemed to be for the honor of the:

a. drawee.

b. drawer.

C. acceptor.

d. payee.

105. These statements are presented to you:

I, A bill in set is one composed of several parts, each set

being numbered and containing a reference to the other

parts.

II. In a bill in set, the number of bills depends upon the

number of parts; hence, if there are four parts, there will

be four separate bills.

a. Both statements are true.

b. Both statements are false.

C. Only Statement I is true:

d. Only Statement II is true.

106. R, drawer; W, drawee. The bill is payable to the order of P for

P10,000. Assume the following independent acceptances by W.

1. "Accepted. Payable for P10,000.00. (Sgd.) W"

II. "Accepted. Payable in gold worth P10,000.00. (Sgd. W'

Which of the foregoing is a valid acceptance?

a. I only.

b. 11 only.

c. Both I and II.

d. Neither I nor II.

107. P is the payee of a check on which two diagonal parallel lines

appear on the upper left portion of the check. R is the drawer; W

Bank is the drawee bank. P has a savings account in C Bank

where he regularly deposits checks ,and cash given to him as

payment. What may P do with the check so that he can receive

payment thereon?

a. Cash the check with W Bank only.

b. Deposit the check in his savings account with C Bank

only.

c. Demand paymr, nt of the check against R, the drawer,

only.

d. None of the foregoing.

108. R draws a check for P100,000.00 payable to the order of P and

against his deposit of P2,000,000.00 at W Bank. The check is indorsed by P to H, holder. H delays the
presentment of the check to W Bank. By the time he presents it for payment, W Bank is already
insolvent. R is able to recover P500,000.00 from the Philippine Deposit Insurance Corporation on his
deposit. Will R still be liable to H?
a. Yes, for P100,000.00.

b. Yes, for P75,000.00.

c. Yes, for P25,000.00.

d. No, R will no longer be liable because H's delay in

presenting the check for payment totally discharged him

from liability on the check.

109. Refer to the preceding number. May H go after P, the party who

indorsed the check to him?

a. Yes, for P1.00,000.00 in view of his warranty as an

indorser.

b. Yes, for only P75,000.00.

c. Yes, for only P25,000.00.

d. No, P was discharged by reason of the lack of due

presentment of the check.

110. These statements are presented to you:

1. A check is payable on demand although such fact is not

stated on its face.

II. A check that is post-dated can be deposited even before

the date indicated thereon since a check is always

payable on demand.

In your evaluation of the foregoing statements:

a. Both statements are true.

b. Both statements are false.

c. Only Statement I is true.

d. Only Statement II is true.

111. Which of the following statements on post-dated check is

correct?

a. A post-dated check is payable on, demand starting from

the date of issue.

b. The post-dating of a check converts it into time

instrument.

c. The dishonor of a post-dated check when it is presented

before the date appearing thereon makes the drawer criminally liable.

d. A post-dated check may be cashed with the bank

against which it is drawn before the date indicated thereon.

112. R drew a check against his account with W Bank payable to the

order of P for P20,000.00. F stole the check, forged P's signature, and deposited.the check in his account
with C Bank. After clearing, F withdrew the amount of the check and fled. Who among the following will
shoulder the loss?

a. R.

b. P

c. W Bank,

d. C Bank

113. On October 1, 2010, R bought goods from the store of P

amounting to P10,000.00, issuing a check for P20,000.00

against his account with W Bank. R knew that his fund with W
Bank was insufficient to cover the check. Consequently, the

check was dishonored by W Bank when P presented it for

encashment. What offense may be charged against. R?

a. Violation of Batas Pambansa BIg. 22 (Bounching Checks

Law.)

b. Estafa under the Revised Penal Code.

c. Both (a) and (b).

d. Neither (a) nor (b).

114. The following are some causes of discharge of a prior party to an

instrument.

I. , Discharge of a prior party because the holder failed to

give him a notice of dishonor.

II Discharge of a prior party because he was adjudged a

bankrupt.

Ill. Discharge of a prior party because he was released for

value by the holder.

Which of the foregoing will not discharge subsequent indorsers?

a. I and II.

b. II and III.

c. I and III.

d. 1, II and Ill.

115. M is the maker of a promissory payable to the order of P which is

payable 30 days after date. The note dated August 1, 2010 was
issued on the same day by M to P. P indorsed the note to A, A

to B, and B to H. On September 1, 2010, H renounced

unconditionally his claim on the note against M who accepted the

renunciation. Nonetheless, H still negotiated the note on the

same day to X who had no knowledge of the renunciation. May

X still collect on the note from M and parties subsequent to M?

a. Yes, against M. No, against parties subsequent to M.

b. No, against M. Yes, against parties subsequent to M.

c. Yes, against M and parties subsequent to M.,

d. No, against M and parties subsequent to M.

116. P, by means of fraud, induced M to issue a promissory note

payable to the order of P for P21,000.00. The note was indorsed by P to A, and A to H. A and H had
agreed to a consideration of P20,000.00 (or a discount of P1,000.00). Initially, H gave A the amount of
P18,000.00. Before he could give the balance of P2,000.00 to A, H learned that P's title was defective. Is
H a holder in due course?

a. Yes, for P21,000.00.

b. Yes, for P18,900.00.

c. Yes, for P18,000.00

d. No, he is not a holder in due course because he

obtained knowledge of a defect in the title of a prior party

before he could pay in full to A the agreed consideration

of P20,000.00

117. Refer to the preceding number. Can H still collect on the note

from M?

a. Yes, for P21,000.00.

b. Yes, for P18,900.00.

c. Yes, for P18,000.00.

d. No, he cannot collect at all because he is not a holder in

due course.,

118. Which of the following is a real defense?

a. Illegality of contract expressly so declared in a statute.

b. Illegality of the contract because it was issued for

unlawful consideration.

c. Renunciation before maturity.

d. Fraud in inducement.

119. These statements- are presented to you:

1. An instrument payable on demand has no date of

maturity.

II. When a transfer of an instrument is effected on the date

of maturity, the holder is considered to have taken the instrument when it is already overdue; hence, he
is no longer a holder in due course.

In your evaluation of the foregoing statements:

a. Both statements are true.

b. Both statements are false

c. Only Statement I is true.

d. Only Statement II is.true.

120. Which of the following is a common liability of the drawer, maker

and acceptor?

a. The admission of the genuineness of the signature of

any indorser.

b. The admission of the existence of the payee and his

capacity of the payee to indorse.

c. The admission that the instrument j s covered with

sufficient funds.

The engagement on the payment of the instrument according to its tenor.

TEST 11- MATCHING TYPE. Indicate your answers by writing the letter representing the statement or
phrase that best describes, defines or explains the numbered items.

Terms

1. Issue

2. Holder for value

3. _ Negotiation

4. Accommodation party

5. Presentment for acceptance

6. Presentment for payment

7. Acceptance

8. Assignment

9. Special indorsement

10.Dishonor by non-acceptance

11. Dishonor by non-payment

12.Blank indorsement

13.Notice of dishonor
14.Protest

15.Holder

16.Restrictive indorsement 17.Bill of exchange

18.Qualified indorsement 19.Promissory note

20.Maker

21.Conditional indorsement

22.Irregular or anomalous

indorser

23. Acceptor

24. Exchange

25., Bills in set

26.Fraud in inducement

27.Holder in due course 28.Payee

29.Indorser

30.Drawer

31.Drawee

32.Check

33.Negotiability

34.Indorsee

35.Cognovit actionem 36.Relicta verificatione 37.Ante-dating

38.Acceleration clause 39.Post-dating

40.Immediate party

41.Real defense

42.Personal defense
43.Signature by procuration 44.Forgery

45.Warrant of attorney 46.Value

47. Cognovit note

48. Fraud in factum or in esse

contractus

49.Spoliation

50.Allonge

Statements

A. It exists in those cases in which a person, without negligence,

has signed an instrument which was, in fact, a negotiable instrument, but was deceived as to the
character of the instrument and without knowledge of it.

An alteration made by a stranger to the instrument.

A separate paper attached to a negotiable instrument where an

indorsement or the acceptance of a bill of exchange is written.

D. The authority for confession of judgment before the action is

begun.

E. Any consideration sufficient to support a simple contract.

F. The counterfeit making or fraudulent alteration of any writing,

and may consist in the signing of another's name, or the

alteration of an instrument in the name, amount, description of

the person and the like, with intent to defraud.

G. Includes not only a promise to pay on the part of the maker but

also grants permission to the payee to take judgment against the maker without trial if the maker fails
to pay on maturity date.

H. The act of appointing another as one's agent or attorney and

which operates as a notice that an agent has a limited authority

to sign.

The provision in a negotiable instrument which states that the whole amount on the instrument shall
become due in case of default in the payment of an installment or of interest.

Literally, "his pleading' being abandoned'; it refers to a confession of judgment accompanied by

withdrawal of defense.

K. The party who executes the written promise to pay.

L. The payee or indorsee of a bill or note who is in possession of

the instrument, or the bearer thereof.

M. A, personal defense where a party is deceived into signing for a

larger amount than he intended, or on different terms, in a negotiable instrument.

N. The act of informing the drawer and each indorser that an

instrument has not be been accepted by the drawee, or that it

has not been paid by the acceptor, in the case of bill of

exchange, or by the maker, in the case of promissory note.

An unconditional promise in writing made by one person to

another, signed by the maker, engaging to pay on demand or at

a fixed or determinable future time, a sum certain in money, to

order or to bearer.

The difference in value of the same amount of money in different countries.

A holder who takes the instrument free from defect of title of prior parties and free from personal
defe,ises available to prior parties among themselves.

The person who executes the written order to pay a bill of

exchange.

S. A bill of exchange drawn on a bank which is payable on demand

T. Literally, "he has confessed action': it refers to a written

confession of defendant acknowledging indebtedness to plaintiff

after action has been filed.

U. An indorsement that constitutes the indorser a mere assignor of

the title the instrument; it is usually made by adding to the

indorser's signature the words "without recourse."

V. The transfer of a negotiable instrument from one person to

another in such a manner as to constitute the transferee the

holder thereof.

W. An unconditional order in writing addressed by one person to

another, signed by the person giving it, requiring the person to

whom it is addressed, to pay on demand or at a fixed or

determinable future time, a sum certain in money to order or

bearer.

X. It takes place when an instrument is presented for payment but

payment is refused or cannot be obtained..

The formal declaration drawn up and signed by a notary that he presented a bill of exchange for
acceptance or for payment and that it was refused.

An indorsement that specifies no indorsee and makes the instrument payable to bearer.

AA. The production of the bill of exchange to the drawee for

acceptance.

BB. It grows out of the agreement or the conduct of a particular

person in regard to the instrument which renders it inequitable

for him, though holding legal title, to enforce it against the

defendant, but which is not available against a holder in due

course.

CC. One that attaches to the instrument itself and can be set up

against the whole world including a holder in due course.

DD. It takes place when a bill of exchange is presented for

acceptance and such acceptance is refused or cannot be

obtained.

EE. A method of transferring an instrument whereby the transferee is

merely placed in the position of the transferor and acquires the instrument subject to all defenses that
might have been set up against the original payee.

FF. An indorsement that-.:prohibits the further negotiation of the

instrument, or constitutes the indorsee a mere agent of the

indorser, or vests the. title in the indorsee in trust for some other

person.

GG. The production of a promissory note to the party primarily liable

on the instrument for the .payment of the same, or of a bill of

exchange to the drawee or acceptor for payment.

HH. One who gives valuable consideration for an instrument issued

or negotiated to hi.n.

II. The first delivery of an instrument, complete in form, to a person

who takes it as holder.

JJ. The person who is given the command by the drawer to pay the

payee.

KK. The person or party to whom an instrument is negotiated by

indorsement.

LL. The person who signifies his acceptance to the order of the

drawer.

MM. One that has knowledge of the conditions or limitations placed

upon the delivery of the instrument or the fact that the instrument

was never delivered.

NN. Dating an instrument earlier than the date of issue.

00. An indorsement that is subject to the happening of a contingent

event.

PP. A person who transfers a negotiable instrument by means of an

indorsement.

QQ. The. party to whom a bill of exchange is, drawn payable or in

whose favor a promissory note is made payable.

RR. An indorsement that specifies the person to whom or to whose

order, the instrument is to be payable.

SS. A person who, not otherwise a party to the instrument, places

thereon his signature in blank before. delivery.

TT. He is one who has signed the instrument as maker, drawer,

indorser, or acceptor, without receiving value therefor, and for

the purpose of I3nding his name to some other person.

UU. The attribute that allows a negotiable instrument to be passed

from one person to another so as to give a holder in due course

the right to hold the instrument free from defect of title of prior.

parties and free from'defenses available to prior parties among themselves, and to enforce the full
amount of the instrument against all parties liable thereon.

W. Dating an instrument later than the date of issue.

WW. The signification by the drawee of his assent to the order of the

drawer.

A bill composed of various parts, each part being numbered, and containing a reference to the other
parts, all of which parts constitute but one bill.

YY. None of the foregoing.

TEST 111- TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word 'FALSE" if the
statement is false.

1. An instrument which contains a promise or order to pay a sum of

money which is subject to a condition is negotiable as long as the condition happens.

2. An instrument where no time for payment is expressed is

payable on demand.

3. An instrument payable to a specified person or his agent is

payable to order.

The negotiable character of an instrument is not affected by the fact that it is not dated.

A bill of exchange which is addressed to two or more drawees alternatively does not affect the
negotiable character of an instrument.

Where the name of the payee does not purport to be the name of any person, the instrument is payable
to bearer.

7. Where an instrument is payable to the order of a "fictitious

person", the instrument is still payable to bearer although such person is actually existing as long as he
was not the intended recipient of the payment.

A bearer negotiable instrument is converted into an order negotiable instrument if it is specially

indorsed.

9. An order instrument becomes a bearer instrument if one of

several indorsements is an indorsement in blank.

10. The ante-dating or post-dating of an instrument does not render

it invalid provided it is not done for an illegal purpose.

11. An instrument that it is incomplete but delivered, when

,completed without authority, shall be considered to have been

completed with authority in the hands of a holder in due course.

12. An instrument that is complete but is undelivered shall be

considered validly delivered if it is in the hands of a holder in due

course.

13. If the amount due on an instrument is payable in installments,

the amount and maturity of each installment must be stated so

that the negotiable character of the instrument will not be

affected.

14. When - there is a conflict between the written and printed

provisions of an instrument, the printed provisions will prevail.

15. When an instrument provides for the payment of interest without

specifying the date from which the interest is to run, the interest

runs from the date of the instrument.

16. When an instrument is not dated, it will be dated as of the time it

was issued.

17. When

an instrument containing the words "I promise to pay" is

signed by two or more persons, they are deemed to be jointly

and severally liable:.

18. When a signature is so placed upon the instrument that it is not

clear in what capacity the person making it intended to sign, he

is deemed to be an indorser.

19. When an indorsement is forged in a promissory note payable to

bearer, the party whose indorsement was- forged and all parties

prior to him may raise the defense of forgery against any holder.

20. A pre-existing debt constitutes value and may be the

consideration of an instrument.

21. Want or absence of consideration is a defense against a holder

in due course.

22. A negotiable instrument may not be transferred by assignment.

23. A person signing an instrument as an agent is not liable thereon

provided he is duly authorized, discloses his principal, and indicates that he is signing as an agent.

24. An indorsement made by a minor passes title to the instrument

although he himself does not incur any liability on the instrument.

25. An indorsement may be written on a separate sheet which is

attached to the instrument.

26. As a rule, an indorsement must be of the whole amount of the

instrument.

27. An indorsement to two or more indorsees severally such as "Pay

to A, 10,000.00 and to B. P5,000" is a valid indorsement of the

instrument.

28. An indorsement that prohibits the further negotiation of th,6

instrument renders the instrument non-negotiable.

29. If an indorsement is conditional, the party required to pay the

instrument may disregard the condition and make payment but the indorse must hold the proceeds
subject to the rights of the person indoksing conditionally.

30. If an instrument is indorsed to two or more persons jointly, all of

them must indorse unless one is authorized to indorse for the

others.

31. An instrument negotiable in origin continues to be negotiable

until it is restrictively indorsed or discharged by payment or

otherwise.

32. When an instrument is negotiated to a prior party, the prior .party

can go after the intervening parties for the amount of the

instrument,

33. A holder may still be a holder in due course even if the

instrument is not dated.

34. If an instrument stamped with the words "no sufficient funds" is

negotiated, the holder will no longer be considered a holder in

due course.

35. A personal defense is available only against a holder not in due

course.

36. Every holder is presumed to be a holder in due course.

37. A holder can still collect on the instrument even if he is not a

holder in due course provided he derives his title from a holder in due course and he himself is not a
party to any fraud or illegality affecting the instrument.

38. If a holder has received notice of any defect or infirmity of the

instrument before he has paid the full amount agreed to be paid therefor, he, will be deemed a holder
in due course only to the extent of the amount paid by him.

39. When a negotiable instrument is delivered without any

indorsement, the negotiation takes effect at the time of its first delivery if it is subsequently indorsed.

40. When an instrument originally payable to bearer is specially

indorsed, the person indorsing specially is liable only to such

holders as make title through his indorsement.

41. Indorsers are liable prima facie in the order in which they

indorse.

42. Joint payees or joint indorsees are deemed to indorse jointly and

severally.

43. Payment in good faith before maturity which is made by. the

principal debtor to the holder and without notice that his title is defective discharges the instrument.
44. The cancellation of a negotiable instrument which is made by the

holder is presumed to have been made intentionally.

45. When the principal debtor becomes 'the holder in his own right

before maturity, the instrument is discharged by confusion or merger.

46. An. absolute and unconditional renunciation made by the holder

before, at or after. maturity in favor of the principal. debtor discharges the instrument.

47. A bill of.exchange does not operate as an assignment of funds in

the hands of the drawee and the drawee is not liable until he

accepts the same.

48. The certification of a check by a bank is equivalent to

acceptance, and when procured by the holder, the drawer and

the indorsers are discharged.

49. A check is always payable on demand.

50. The drawer of a bill of exchange need not have funds with the

drawee except in the case of a check.

TEST IV - NEGOTIABLE OR NON-NEGOTIABLE. Indicate your

answers by writing "0" if the instrument is negotiable, and "X" if it is

not.

1.

December 1, 2010
I promise to pay Pablo Patricio' or order

P10,000.00 in two equal monthly installments.

(Sgd.) Manuel Morales

2.

December 1, 2010

Pay to Pablo Patricia or order P10,000.00 and debit my account thereafter.

(Sgd.) Romeo Ramos

To: Walter Wenceslao

3.

(No Date)

I promise. to pay Pablo Patricio or bearer

P10,000.00 thirty (30) days after date.

(Sgd.) Manuel Morales

December 1, 2010

I promise to pay Pablo Patricio or order

P10,000.00 or deliver to him a television set at my

option.

(Sgd.) Manuel Morales

5.

December 1, 2010

Pay to Pablo Patricio or order P10,000.00 representing the purchase price of the ring that I bought from
him yesterday.

(Sgd.) Rompo Ramos

To: Walter Wenceslao

6.

December 1, 2010

Pay to Pablo Patricio or order P10,000.00 if

he passes the May 2011 CPA Board Examination.

(Sgd.) Romeo Ramos

To: Walter Wenceslao

Note: Pablo Patricio eventually passed the May 2011 CPA Board Examination.

December 1, 2010

Pay to the order of Jose Rizal, national hero.

P10,000.00.

(Sgd.) Romeo Ramos

To: Walter Wenceslao

8.
December 1, 2010

I promise to pay Pablo Patricio or order

P10,000.00 and 2 units of Nokia cell phone.

(Sgd.) Manuel Morales

11

9.

December 1. 2010

I promise to pay Pablo Patricio P10,000.00

with interest at 10% per annum.

(Sgd.) Manuel Morales

14

10.

December 1, 2010

I promise to pay Pablo Patricio or order

P10,000.00 sixty (60) days after date. Should I fail to

pay on due date, I hereby authorize Pablo Patricio to foreclose the chattel mortgage that I executed on
my car to secure this debt.

(Sgd.) Manuel Morales

ANSWERS TO DIAGNOSTIC EXERCISES

NEGOTIABLE INSTRUMENTS

TEST I - MULTIPLE CHOICE

1. D 31.D 61. A 91. A

2. A 32.A 62.C 92. C

3. B 33.D 63.B 93. A

4. D 34.B 64.C 94. B

5. A 35.D 65. B 95. C

6. A 36.A 66.B 96. C

7. C 37.A 67. D 97. D

8. C 38.D 68.B 98. B

9 C 39.C 69.B 99. A

10. C 40.D 70.C 100. C

11. A 41.D 71. B 101. A

12. C 42.C 72. B 102. B

13. D 43.B 73. D 103. C

14. D 44.D 74.C 104.. B

15. B 45.C 75. D 105. C

16. B 46.C 76.C 106. A

17. D 47.D 77.C 107. B

18. B 48.D 78. D 108. C

19. B 49.D 79. B 109. D

20. C 50.D 80,D 110. C

21. D 51.B 81. C 111. B

22. 0 52.D 82.B 112. D

23. D 53.B 83. B 113. C

24. C 54.D 84.A 114. A

25. D 55.C 85. D 115. C

26. D 56.C 86.B 116. B

27. B 57.A 87. D 117. B

28. A 58.A 88.A 118. A

29. A 59.B 89. C 119. B

30. B 60.A 90.D 120. B

TEST II -MATCHING TYPE

1. II 11. X 21. 00

2. HH 12. Z 22. SS

3. V 13. N 23. LL

31. JJ 41 CC

32. S 42 BB

33. UU 43 H

4. TT 14. Y

5. AA 15. L

6. GG 16. FF

7. WW 17. W

8. EE 18. U

9. RR 19. 0

10. DD 20. K

TEST III - TRUE OR FALSE

1. FALSE 11. TRUE 21. FALSE

2. TRUE 12. TRUE 22. FALSE

3. FALSE 13. TRUE 23. TRUE

4. TRUE 14. FALSE 24. TRUE

5. FALSE 15. TRUE 25. TRUE

6. TRUE 16. TRUE 26. TRUE

7. TRUE 1.7. TRUE 27. FALSE

8. FALSE 18. TRUE 28. TRUE

9. FALSE 19. FALSE 29. TRUE

10. TRUE 20. TRUE 30. TRUE

31. TRUE

24. P

25. XX

26. M

27. Q

28. QQ

29. PP

30. R

41TRUE

32. FALSE 42. TRUE

33. TRUE 43. FALSE

34. TRUE 44.TRUE

35. TRUE 45. FALSE

36. TRUE 46. FALSE

37. TRUE 47. TRUE

38. TRUE 48. TRUE

39. FALSE 49. TRUE

40. TRUE 50. TRUE

TEST IV - NEGOTIABLE OR NON-NEGOTIABLE

1. X

2. 0

3. 0

4.- X

5. 0

6. X

7. 0

8. X

9. X

10.- 0