Regulatory Framework for Business Transactions: FIRST PRE-BOARD

Batangas CPA Review

Center
“Committed to your CPA review needs”
Atty. Amado R. Villegas, Jr.

1. "I'll give you my car one year after your death". The obligation is
a. Valid, because the event is sure to come.
b. Valid, the obligation is conditional.
c. Valid, but disregard the condition.
d. Void, not legally possible.
e. None of the above.

2. Statement No. 1: Legal compensation takes place by operation of law even if the parties may not be aware
of it.
Statement No. 2: The indivisibility of an obligation necessarily implies solidarity.

a. Both statements are true

b. Both statements are false
c. Statement No. 1 is true while statement No. 2 is false
d. Statement No. 1 is false while statement No. 2 is true

3. Statement No. 1: "I will give you a specific car" if you will not marry X this year (2020). If by the end of
2005, both parties are alive and no marriage has taken place, my obligation is extinguished.
Statement No. 2: "I will give you P 10,000" if you can make a dead man alive. This is an impossible
condition, obligation is not demandable.

a. Both are true c. No. 1 is true, No. 2 is false

b. Both are false d. No. 1 is false; No. 2 is true

4. Which of the following is considered as quasi-contract?

a. Solutio indebiti
b. When the third person, without the knowledge of the debtor, pays the debt
c. Reimbursement due the person who saved property during fire or storm without the knowledge
of the owner.
d. All of the above

5. The act of abandoning all his properties in favor of his creditors so that the latter may cause their sale and
apply the proceeds thereof to their claims proportionately is called:
a. dacion en pago c. payment by cession
b. set off d. tender of payment with consignation

6. Which of the following obligations is not subject to a period?

a. payable soonest
b. payable "little by little"
c. payable whenever "I like it"
d. payable "when my means permits me to"

7. The following, except one, are requisites of payment as a mode of extinguishing an ordinary obligation.
Which is the exception?
a. complete or full payment
b. payment in due course when the obligation is due and demandable
c. payment using negotiable instrument
d. payment using legal tender, except if payable in foreign currency

8. The distinction between period and condition is

a. Period may or may not happen
b. Condition will always happen
c. Period may refer to a past event unknown to the parties
d. Period is certain to happen unlike condition

9. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. Which of the following constitutes a definite offer?
a. An offer made through an agent
b. Business advertisement of things for sale
c. Advertisement for bidders
d. All of the above

10. Rescission of contract can take place in this case:

a. When the things which are the object of the contract are legally in the possession of third
persons who acted in good faith.
b. When he who demands rescission can return whatever he may obliged to restore
c. When the party seeking resolution can perform only as to part and rescind as to remainder
d. When the seller cannot return the installment paid to him by the buyer

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11. Statement No. 1: If the cause is not stated in the contract it is presumed that it is unlawful.
Statement No. 2: The action for rescission is subsidiary; it cannot be instituted except when there is no
other legal means to obtain reparation for damages suffered.
a. Both are true c. No. 1 is true; No. 2 is false
b. Both are false d. No. 1 is false; No 2 is true

12. Statute of Frauds is applicable to

a. partially executed contract
b. oral contract of loan when the amount involved is less than P 500
c. contract not to be performed within a year from the making thereof
d. all of the above

13. In three of the following defective contracts, ratification cleanses the defects. Which is the exception?
a. Both parties are incapable of giving consent
b. Sale of immovable property or interest orally entered into
c. Sale of piece of land thru an agent the authority is oral
d. Contracts entered into by a person who has been given no authority

14. S, a minor, owns a specific property valued P 50,000. B, Capacitated, by means of fraud induced S to sell
his property to him (B) for P 10,000 which S did so. The contract is in writing.
a. The contract is binding from the start
b. The contract remains unenforceable because it falls under the Statute of Frauds.
c. The contract is rescissible because the ward suffered lesion by more than one-fourth of the
value.
d. The contract is void.

15. D forced C to lend him P 10,000. The promissory note is in writing.

a. The contract is rescissible because the contract is fraudulent
b. The contract is void
c. C cannot demand payment from D because the contract is unenforceable
d. Contract remains to be valid

16. Statement No. 1: Dolo incidente entitles the person against whom it was employed the right to seek the
annulment of the contract.
Statement No. 2: A stipulation pour autrui is an exception to the rule on relatively of contracts.

a. Both are true c. No. 1 is true; No. 2 is false

b. Both are false d. No. 1 is false; No. 2 is true

17. B1 Company bought out a competitor, B2 Corporation, with a stipulation that B2 Corporation should not
thereafter engage in any business in the Philippines unless consented to and approved by B1 Company.
a. The stipulation is defective but subject to ratification.
b. The stipulation is valid because the parties are free to enter into any stipulation, terms and
conditions such as this one.
c. The stipulation is unenforceable as there was no showing that the sale was done in writing
d. The stipulation is void because it is contrary to public policy.

18. Which of the following contracts is voidable?

a. Those whose object is outside the commerce of men.
b. Those which are absolutely fictitious.
c. Those where one of the parties is incapacitated.
d. Those which contemplate an impossible service.

19. Which of the following statements is false?

a. Stock dividend cannot be issued to a person who is not a stockholder in payment of the services
rendered
b. A stipulation that no stockholder shall transfer any share to any other person without notifying
the corporate secretary in writing is void
c. An ultra vires act of a corporation can be ratified with the consent of the majority of all
stockholders when the rights of the state or of the creditors are involved
d. A stipulation that the corporation shall have the right to acquire for itself, under the same
condition, the shares intended to be transferred is valid under the "doctrine of first refusal"

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

a. The existence of the entity is not affected by the personal vicissitudes or of the individual
stockholders;
b. Free and ready transferability or ownership of shares
c. Subservience of minority stockholders to the wishes of the majority subject only to equitable
restraints
d. The shareholders are not liable for the debts of the business

21. 1st Statement: Membership in a non-stock corporation, and all rights arising there from cannot be
transferred even if provided in the articles of incorporation or by laws, because membership and the rights
arising therefrom are personal and non-transferable.
2nd Statement: Treasury stocks sold for less than their par or issued value are considered "watered stock"
and as such are prohibited by law. Which is correct?

a. 1st statement is true but 2nd statement is false

b. Both statement are false
c. 1st statement is false but 2nd statement is true
d. Both statement are false

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22. Which of the following corporate acts need to be taken up in a meeting of the stockholders? Mere written
assent of the member or stockholders, even without
consent is enough to bind the corporation.

a. Adoption and repeal of the by-laws

b. Amendment of the Articles of incorporation
c. Increase or decrease of the capital stock
d. Incurring, creating or increasing bonded indebtedness
e. None of the above

23. Directors or trustees who willfully and knowingly vote for or assent to patently unlawfully act of the
corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict with their duty shall be liable
a. As a trustee for the corporation
b. Criminally for violation of the corporation code
c. Jointly and severally liable for the damages suffered by the corporation
d. None of the above

24. Which of the following is not negotiable?

a. "I agree to pay to the order of P, P 30,000". (Sgd. M)
b. "Good to P or order, P 30,000". (Sgd. M)
c. "I promise to pay P or order P 30,000 on June 30". (Sgd. M)
d. "I promise to pay to P or order P 5,000". (Sgd. M)

25. D1, D2 and D3 borrowed from C P 300,000, and as a security, he mortgaged their undivided agricultural
land to C. Subsequently, D1 paid C P 100,000. Is the mortgage on D1's share of the land extinguished?
a. Yes, because the obligation of D1 on the debt is only P 100,000
b. Yes, the obligation of the debtors is joint, D1 is answerable only for P 100,000
c. No, because the obligation is solidary, payment in part shall not extinguish the obligation
secured by the mortgage
d. No, because mortgages are considered indivisible, payment in part shall not extinguish the
mortgage

26. Statement 1: A real mortgage may guarantee future obligation, while a chattel mortgage cannot
guarantee future obligation.

Statement 2: The mortgage has the right to take possession of the chattel  mortgage upon default of the
mortgagor.

a. Both are true c. No. 1 is true; No. 2 is false

b. Both are false d. No. 1 is false; No. 2 is true

27. S, 16 years old, sold to B, of legal age, a specific diamond ring for P 10,000. Later, B sold it to X. Which of
the following statements is incorrect?

a. S has got a voidable title because at the time of sale he is a minor.

b. X, if in good faith, shall become the owner upon delivery to him.
c. X, if in bad faith, shall also be the owner, except that his title is voidable.
d. B has got a valid title even if he acquired the ring from a person who is incapacitated

28. All of the following are obligations of the debtor if the object is a determined thing.
a. To deliver the specific thing promised.
b. To deliver the accession or its accessories even though not agreed upon.
c. To deliver the fruits from the perfection of contract.
d. To take care of the thing promised pending delivery due negligence.

29. Which is not a source of liability to pay damages?

a. Culpa Contractual
b. Fraud in inducement
c. Failure to deliver on the date agreed by the parties
d. Obligator violating the tenor of their agreement with the obligeE

30. All remedies of the obligee in case of breach of obligation to deliver a generic thing except:
a. Right to compel specific performance
b. Right to ask a 3rd person to do it at debtor’s expense
c. Right to convert the obligation to its monetary value
d. Right to ask for another damages

31. A, B and C jointly and severally borrowed P15, 000 from X. To secure its payment, A pledge his ring, B his TV
set, and C his refrigerator. Based on its information, which of the following statements is correct:
a. The debtor are solidarily bound and the pledge on the three things is solidarily
b. The debtors are jointly bound but the pledge on the three things are solidarily
c. The debtors are solidarily bound and the pledge on the three things is indivisible
d. The debtors are liable individually and the character of the three things pledge is divisible

32. When the third person assumes the payment of the obligation without the knowledge or against the will of the
debtor but with the consent of the creditor, there is
a. Delegacion

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b. Expromission
c. Subrogation
d. Novation

33. In tender of payment and consignation: if after consignation is made and the creditor allowed the debtor to
withdraw the thing deposited in court, which of the following statements is incorrect.

a. Co-debtors, guarantors, and sureties are released obligation unless they consented
b. The obligation remain to subsist
c. The obligation is extinguished
d. None of the above

34. When the obligation consists in the delivery of a generic thing whose quality and circumstances have not been
agreed upon:

a. The creditor can demand a thing of superior quality

b. The debtor can deliver of inferior quality
c. The debtor can deliver of superior quality even against the will of the creditor.
d. The purpose and other circumstances shall be taken into consideration in determining the quality of the
object to be delivered.

35. Delivery by the debtor of a specific thing to the creditor in payment of an obligation consisting of money.

a. Assignment of cession of property

b. Dation in payment
c. Tender of payment and consignation
d. Application of payment

36. Which of the following is not a ground for the extinguishment of an obligation?
a. Remission
b. Merger
c. Compensation
d. Death of creditor

37. Which of the following is not legal subrogation?

a. When a creditor pays another creditor who is preferred
b. When a third person, not interested in obligation, pays with the approval of the debtor
c. When a third person interested in the obligation, pays even without the approval of the debtor
d. Answer not given

38. 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 statement 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 D 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.

39. Andy owes Baby P200, 000. 00 demandable and due on September 10, 2019. Baby, on the other hand, owes
Andy P200, 000. 00 demandable and due on or before September 30, 2019. If Baby claims compensation on
September 10, 2019, can Andy rightfully oppose?
a. No. Baby who was giving the benefit of the term, may claim compensation because he could then choose to
pay his debt on September 10, 2019 which is actually “on or before September 30, 2019”.
b. Yes, Andy can properly oppose because for compensation to take place, mutual consent of both parties is
necessary
c. Andy can properly oppose and if Baby still refuses to accept his payment made on September 30, 2019,
Andy can deposit his payment in court.
d. None of the above.

40. Toblerone is a lessee of Codsbury building. Under the lease contract, Toblerone must pay the monthly rental of
P25, 000 to Codsbury at the latter’s office within the first 5 days of the month. On the sixth month of the lease,
Toblerone went to Codsbury’s office to pay the rental but he was told by Goya, an employee to Codsbury, that
the latter was confined at the hospital. Goya told Toblerone that he could entrust payment to him. Hershey, a
son of Codsbury, who happen around, however, demanded that Toblerone must pay to him claiming that as
Codsbury’s son he was the one authorized to receive the payment. Where you do not know to whom you will
give your payment, which of the following modes of payment would you avail yourself of if you were Toblerone?
a. Dacion en pago
b. Payment by cession

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c. Consignation
d. Application of payment

41. D owes the following creditors: X, P20, 000. 00; Y, P30, 000. 00; and Z, P50, 000. 00. D is insolvent so he offers
to assign all his properties (except those exempt from execution) to his creditors in payment of his debts. The
creditors accept the offer and are able to sell the debtor’s properties for P70, 000.00. Based on the foregoing
facts, which of the following statements is incorrect?
a. The special mode of payment availed of by D is payment by cession.
b. D is released from his total liability of P100, 000. 00 even if there is no stipulation to that effect.
c. D is released from his liability only to the extent of P70, 000.
d. The creditors did not become the owners of D’s properties at the time of their assignment
.
42. Three of these are characteristics of payment by cession. Which is the exception?
a. Complete or partial insolvency
b. More than one debt
c. Abandonment of all the debtor’s properties except those exempt from execution
d. One debtor, one creditor

43. In three of the following cases, compensation shall not be proper. Which is the exception?
a. Commodatum
b. Gratuitous support
c. Civil liability arising out of criminal offenses
d. Bank deposit

44. Consignation alone shall extinguish the obligation under the following, except:
a. When the creditor is incapacity to receive payment at the time it is due.
b. When without just cause the creditor refuses to give receipt.
c. When there are two or more persons claim the same right to collect.
d. When the debt is already due and demandable.

45. B brought a gold necklace with a heart-shaped pendant from S for the price of P20,000.00. After payment
of the price, he requested S to put it in a small box and wrap it with a birthday wrapper because he will give
it as a birthday gift to his girlfriend. After the birthday of his girlfriend she happily showed the gold necklace
and expressed her gratitude to B, who discovered that the necklace has a square-shaped pendant and of a
very low quality, which is different from the one he purchased from S. What remedy is available to B against
S in this case?
a. File action for the annulment of the contract of sale
b. File action for rescission of the contract of sale
c. Demand for the return of the purchase price
d. Demand for the payment of damages

46. A wife is about to give birth to a child. Her parent’s in-law called the doctor. Who should pay the doctor?
a. Husband
b. Parents in-law
c. Both husband and parents in law jointly
d. Both husband and parents in law and severally

47. A and B are joint debtors of C for P2,000,000. A‘s consent was obtained by C thru fraud.
a. C can collect the entire P2,000,000 from B
b. C can collect the entire P2, 000,000 from B but the latter can recover from A P1, 000,000.
c. A is liable only to C for P1,000,000 because he can interpose his defense of fraud
d. B is liable to C for his share of P1,000,000.

48. When the creditor pays another creditor who is preferred, even without the debtor’s knowledge, there is:
a. Real novation c. delegacion
b. Expromision d. legal subrogation

49. D obtained from C a loan amounting to P50,000.00, the same being secured by a mortgage on D’s lot.
Thereafter, C assigned his 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 to the assignment
b. T can collect from D. D’s consent to the assignment is not required
c. T can collect from D and D cannot pay, T can foreclose the 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.

50. A and B entered into a contract of mortgage. However, as written, the document states it is a contract of
sale with right of repurchase, the error due to the fault of the clerk/typist. Hence:
a. The contract of the sale must be annulled since it is voidable
b. The instrument has to be enforced as is for it is the proof of the agreement between the parties
c. Because of the negligence of the parties is signing without first reading the instrument, they are bound
by the contents of the same

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d. The instrument may be reformed because it does not express the true agreement of the parties

51. Upon the proposal of the third person, a new debtor substituted the original debtor without the latter’s
consent. The creditor accepted the substitution. Later, however, the new debtor became insolvent and
defaulted in his obligation. What is the effect of the new debtor’s default upon the original debtor?
a. The original debtor is freed of liability since novation took place and this relieved him of his obligation.
b. The original debtor shall pay or perform the obligation with recourse to the new debtor.
c. The original debtor remains liable since he gave no consent to the substitution
d. The original debtor shall pay or perform 50% of the obligation to avoid unjust enrichment on his part.

52. To cancel a contract and restore the parties to their original positions before the contract, the parties should
execute a
a. Novation c. Rescission
e. Compromise
b. Release d. Revocation

53. A seventeen-year old second year accountancy student entered into a contract of lease with his professor
involving accounting book for a period of one semester. The contract between them is:
a. Valid c. void e. rescissible
b. Voidable d. unenforceable

54. In which of these cases will the Statute of Frauds not apply?
a. An oral mutual promise to marry, not to compel marriage but only to recover damages
b. O orally conveys to L a piece of land for the benefits or service already rendered
c. An oral contract of lease of real property for twelve months
d. An oral contract of loan
e. All of the above

55. The mere liberality of the benefactor is the cause in:

a. Onerous contract
b. Contract of pure beneficence
c. Remuneratory contract
d. None of the above

56. Three of the following statements are true. Which one is false?
a. Not only the parties, but their heirs and assigns are bound by their contract
b. Obligations arising from contract have the force of law between the contracting parties and must be
complied with in good faith
c. Fraud committed in the performance of an obligation gives the injured party the right annul the contract
d. Generally, the debtor is not liable for the non-performance of his obligation due to fortuitous event

57. D, fearing that his creditor C, would go after his only parcel of land to satisfy his claim for payment of D’s
debt, sold his land to X who did not know of D’s intention. Decide:
a. C can ask for annulment of the sale as this is violable contract
b. C may ask for damages against X since he was damaged by the sale
c. C can file an action for rescission of the sale
d. C cannot ask for the rescission of the sale

58. Statements:
I. Mutual error as to the legal affect of an agreement when the purpose of the parties is frustrated
may result in the reformation of the instrument.
II. Mutual mistake of the parties and the instrument does not express the true agreement will make
the contract voidable.
a. Both statement are false c. First is true; second is false
b. Both are true d. First is false; second is true

59. Statements:
I. Just like voidable and unenforceable contracts, rescissible contracts may also be ratified.
II. In case of fraud or mistake, the action annulment must be made within four years from the
commission of the vice of consent.
a. Both statements are true c. First is true; second is false
b. Both are false d. First is false; second is true

60. A gave B One Million Pesos for the latter to kill C. before B could accomplish his criminal intent to kill C, A
changed his mind and demanded the return of the money B. Decided:
a. A cannot recover the payment he made to B because it was a void contract which does not allow
recovery by the guilty party
b. A cannot recover the money because the contract is unenforceable
c. A can recover the money although the contract is void since the crime was not committed
d. No recovery and both A and B will prosecuted for the crime

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61. D borrowed a sum of money from C with G as guarantor. The loan is in writing but the guaranty is oral. D
failed to pay C, who now is demanding payment from G. Can G be compelled to pay?
a. Yes, because he is the guarantor obliged to pay in case the debtor defaults
b. No, because the guaranty is void having orally made
c. No, because the guaranty is unenforceable against G, it being oral
d. Yes, because the guaranty is enforceable, writing not needed

62. In three of the following the contract is cleansed of its defect by ratification. Which is not so ratified?
a. Contract where the creditor was damaged by the act of the debtor intended to defraud him
b. Contract entered into by a person incapable of giving consent
c. Sale of chattels orally entered into for a price not less than five hundred pesos
d. Lease of real property for more than one year orally entered

63. Because A wants to sell his land to B but the latter does not want to buy the same, A forced B to buy his
land. The contract:
a. Not binding upon b since his consent was vitiated
b. It is unenforceable as against B but not against A
c. May be ratified expressly or tacitly by A
d. It is valid, binding and enforceable

64. Statements:
I. A threatened B with an administrative charge for immorality if the latter does not marry her
because she is already pregnant with their child. Fearing that she may do so, B married her. The
contract of marriage is therefore voidable because of threat.
II. A simple mistake of account may give rise to the annulment of the contract because of mistake.
a. First statement is false; second is true c. Both are true
b. Both are false d. First is true; second is false

65. A and B agreed on a contract of pledge. However, they entered into a contract of mortage in the honest
belief that the mortgage and pledge are the same. The instrument may be reformed:
a. No, the document cannot be reformed since the contract is void.
b. No, it cannot be change. They are bound by the document which speaks for itself.
c. Yes, it can be reformed because it does not express the true agreement of the parties
d. No, it cannot be reformed because there was no meeting of minds between the parties and the remedy

is annulment of contract.

66. A sold to B a fake Rolex watch on January 3, 2013. On January 13, 2013, B discovered that the watch he
bought from A was an imitation. The law provides that he can annul the sale as a voidable contract within
four years. Prescription start from:
a. January 3, 2013 when the sale was perfected
b. The time of delivery of the watch to B.
c. The time they first talked about the sale of the watch
d. January 13, 2013 when the fraud was discovered by B.

67. Marimar leased to Monica in a public instrument, registered in the Registry of Property, Apartment No. 15
for five (5) years beginning January 1, 2016. On the fourth year, Marimar sold the apartment to Camilla. In
this case, which statement is correct?
a. Camilla must respect the lease contract in favor of Monica up to its expiration
b. The eventual sale of the property to Camilla effectively terminated the lease of the apartment to
Monica.
c. Monica should already vacate the premises because the new owner is Camilla.
d. Marimar could not validly sell the premises to Camilla as she should respect the encumbrance
thereon by way of lease.

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

69. One is in correct about extinguishment of obligation

a. Novation is not absolute but only a relative mode of extinguishment an obligation.
b. Dacion en pago and payment by cession are governed by the law on sale.
c. A stockholder may not compensate what he owes the corporation with his present stockholdings.
d. Loss of a determine thing due to fortuitous event will exempt the debtor even if he stole it but he later
offered to return and the owner refused to accept without valid cause.

70. All are considered other quasi contract except:

a. When, without the knowledge of the person obliged to give support, it is given by a stranger.
b. When funeral expenses are borne by a third person without the knowledge of those obliged to give
support to the deceased.

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c. When a person obliged to support to an insane or other indigent person unjustly refuse to give support
and a third person supported them.
d. When an officious manager assumed in good faith the management of a business even if he is unfit to
carry it to save the property from possible loss even if not imminent.

71. One is incorrect about elements of contracts:

a. Absence of an essential element voids the contracts.
b. Absence of natural or accidental elements may not result to rescission and damages.
c. In policitation, there is meeting of meetings but contract is incomplete hence needs reformation.
d. In stipulation pour autrui consent or acceptance of the third person involved is mandatory.

72. All are essential characteristics of contracts except:

a. Relativity of contract
b. Obligatoriness of contract
c. Autonomy of contract
d. Uniformity of contract or essential equality of contracting parties

73. Statement No. 1: The death, civil, interdiction, insanity or insolvency of either offeror or offeree before acceptance
is known makes the offer ineffective.
Statement No. 2: The cause of a contract is the psychological or personal reason whereas motive is the objective or
juridical.

a. True, true c. True, false

b. False, false d. alse, True

74. The following contracts must appear in a public instrument except:

a. Donation of immovable property
b. Agency to sell land
c. Partnership where immovable property or real rights are contributed
d. When limited partnership is formed

75. Which is correct?

a. Rescission of contracts and rescission or resolution of reciprocal obligation are the same
b. In voidable contracts the defect is external whereas in rescissible contracts the defect is intrinsic
c. Right of way verbally made is unenforeseable for violating statute of fraud
d. Doctrine of in pari delicto is applicable in void contracts

76. In a void contract neither party may seek to enforce it neither can they seek the aid of law. But recovery can be
made by the other party except:
a. The innocent party
b. The debtor who pays usurious interest
c. The party rejecting the void contract before illegal purpose is accomplished
d. The incapacitated party even if he did not object to the wrongdoing

77. Which is most defective?

a. Both parties are incapacitated
b. One of the parties is a minor suffering lesion by more than ½ of the value of his property
c. Contract entered by a debtor to defraud his creditor
d. Contracts involving very difficult service

78. Which of the following contracts is enforceable even if not reduced in writing?
a. Representation as to the credit of a third person
b. Agreement for the sale of immovable property
c. Contract executed by one of the parties in a contract
d. Lease of immovable for a period longer than one year

79. Compensation is not proper when the debts arises in the following, except:
a) Depositum
b) Obligation of a depositary
c) Contract of mutuum
d) Commodatum

80. A person is entitled to adequate compensation only for such pecuniary loss suffered by him as he has duly
proved, except as provided by law or by stipulation. Such payment is referred to as
a) Nominal damages
b) Liquidated damages
c) Compensatory damages
d) Monetary damages

81. Statement 1. If the partner is the sole manager of the partnership and he associate another person with him
in his share in the partnership, the person associated automatically becomes a partner in the partnership
Statement 2. A partner appointed as manager in a contract other than the articles of partnership may be
removed with or without cause
a) Both are true
b) Both are false
c) No.1 is true; No.2 is false
d) No. 1 is false; No.2 is true

82. The liability of the director of trustee for the issuance of watered stock is:
a. Joint c. Mancomunada
b. Solidary d. Pro rata

83. A stockholder’s right to inspect books and records of a corporation will be properly denied if the stockholder:
a. Wants to use corporate stockholder records for a personal business

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b. Employs an agent to into inspect the books and records.
c. Intends to commence a stockholder’s derivative suit.
d. Is investigating management misconduct.

84. The following may be the consideration of the shares of stock of a corporation. Which is the exception:
a. Actual cash paid to the corporation.
b. Previously incurred indebtedness of the corporation.
c. Labor performed for or services actually rendered to the corporation
d. Promissory note.

85. Which of the following is not correct?

A. A solidary creditor can assign his right even without the consent of the other creditors
B. Remission of the debt by any of the solidary creditors shall extinguish the obligation
C. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept
D. The debtor may pay any of the solidary creditors but if any demand has been made by one of them,
payment should be made to him

86. A borrowed Php 200,000 from solidary creditors B and C. on due date, B sent a letter to A demanding
payment of the loan directly to him, but before A could comply, C went to A to collect and so A paid C. Did A
make a valid payment?
A. Yes, because the debtor may pay any of the solidary creditors
B. No, because payment should be made to B
C. Yes, because any of the solidary creditors may demand payment of the whole obligation
D. No, because A should have split the payment because creditors demanded payment.

87. Which of the following is correct?

A. The effect of ta conditional obligation to give, once the condition has been fulfilled, shall retroact to the
day of the constitution of the obligation
B. If the obligation is unilateral, the fruits and interest during the pendency of the condition shall be
deemed to have been mutually compensated
C. If the obligation imposes reciprocal prestations upon the upon the parties, the debtor shall appropriate
the fruits and interests received, unless from the nature and circumstances of the obligation it should be
inferred that the intention was different
D. In an obligation to do and not to do, the parties shall determine, in each case the retroactive effect of
the condition that has been complied with

88. A orally offered to sell his rice land to B for Php8M. B orally accepted the offer. The land is to be delivered
through the execution of a notarized Deed of Sale and the price is to be paid directly two weeks from their
oral agreement. Which of the following is most accurate?
A. If A refuses to deliver the land on the agreed date despite payment made by B, the latter may not
successfully sue A because the contract is unenforceable
B. If A refused to deliver the land, B may successfully sue A for the fulfillment of the obligation before the
payment of the purchase price
C. The contract between A and B is rescissible
D. The contract between A and B is subject to ratification by the parties.

89. If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely
lost, which of the following most accurately completes the statement?
A. The buyer bears the risk of loss
B. The seller bears the risk of loss
C. The contract shall be without any effect
D. The buyer may withdraw from the contract.

90. There shall be no reformation in the following, except

A. Donation inter-vivos where a simple condition is imposed
B. Holographic wills
C. Notarial wills
D. When the real agreement is void

91. To be valid and enforceable, the following contracts should be in writing, except:
A. Contract to pay interest on loan
B. Contract of donation of real property
C. Contract giving authority to an agent to sell a piece of land
D. Contract made in consideration of marriage

92. X borrowed money from Y, X constituted a real estate mortgage over his house to secure the loan. It was
stipulated that in case X could not pay the loan on time, the house would belong to Y. which is correct?
A. Y shall become owner of the house upon default by X by virtue of their written agreement
B. Y shall become the owner of the house by virtue of the default of X
C. Y shall only enjoy the right of alienation over the land
D. Y shall be entitled to the right of appropriation of the land

93. Which of the following is not correct?

A. Ratification extinguishes the action to annul a voidable contract
B. Ratification maybe effected by the guardian of the incapacitated person
C. Ratification cleanses the contract from all its defect from the moment it was constituted
D. Ratification requires the conformity of the contracting party who has no right to bring the action to
annulment

94. A contract of loan is

A. A consensual contract
B. A real contract

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C. A formal contract
D. A solemn contract

95. Which of the following statements is false?

A. In contract to sell, ownership is not transferred to the buyer upon delivery
B. Stoppage in transitu can be exercised by the unpaid seller if the buyer is insolvent and the vendor has
not yet parted with the thing sold
C. The price is considered certain if it is in reference to another thing certain
D. Dock warrant is an example of a negotiable document of title

96. A contract is presumed to have been entered into in the place where the
A. Offer was made
B. Acceptance was made
C. Performance was made
D. Payment was made

97. On February 12, 2016, A sold his only dog to B for P20,000. The parties agreed that B will pay one day after
the results of the May 2016 CPA licensure Examination are released while A will deliver the dog on the day B
pays. If the results were released on May 25, 2016 but the dog gave birth to a puppy on May 24, 2016,
which of the following statements is correct?
A. A is entitled to the puppy because the puppy was born before the obligation to deliver arises
B. A is entitled to the puppy because of the principle that accessory follows the principal
C. B is entitled to the puppy because the contract was perfected on February 12, 2016
D. B is entitled to the puppy because the puppy cannot be separated from the mother do yet

98. A, minor, sold the ring of his brother without authority. The ring has a fair market value of P1M and selling
price was P600,000. The contract is
A. Rescissible
B. Voidable
C. Unenforceable
D. Void

99. A owns a parcel of land which he sells to b with a 3 year redemption period. After the second year, a dies
leaving his children C, D and E as his heirs. Which of the following is not correct?
A. A can repurchase the whole thing, so anyone among C, D and E may repurchase the whole thing
B. C can redeem his 1/3 share, D his 1/3 share and E 1/3 share if B does not require all of them or any
one of them to redeem the whole property
C. B may demand all of the co-heirs that they come to an agreement upon repurchase of the whole thing
sold
D. B cannot be compelled to consent to partial redemption

100. A obtained an interest free loan of P50,000 from B evidenced by a promissory note payable in six
months after date. At maturity A called B by phone to ask an extension of one month and offer to pay 20%
interest on the loan. Enticed by the 20% interest, B agreed to the extension of maturity. Which is correct?
A. The interest is a demandable interest by virtue of an agreement
B. The interest is unenforceable
C. The loan is valid but the interest is void
D. The loan and interest are both demandable

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