MERCANTILE LAW

I – MULTIPLE CHOICE. Read the questions carefully and encircle the letter of
your answer.
1. The substantive law dealing with the sale and distribution of goods, the financing
of credit transactions on the security of the goods sold, and negotiable
instruments.

a. Code of Commerce
b. Commercial law
c. Law on merchants
d. None of the above

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

a. Corporation
b. Partnership
c. Joint venture
d. Cooperative

3. An ________ is one established for or devoted to charitable purposes or those

supported by charity.

a. Aggregate corporation
b. Corporation sole
c. Ecclesiastical corporation
d. Eleemosynary corporation

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

a. Preferred shares
b. Common shares
c. Redeemable shares
d. Treasury shares

5. In order for there to be a valid Stockholders’ or Members’ meeting, there must be a

written notice sent to the address of the stockholder or member of record in the
period prescribed by the statute or law. May an e-mail be included as a mode of
notice?

a. Yes
b. No
c. Maybe
d. I don’t know

6. ________ is a means of structuring companies whereby a parent corporation

holds shares in other corporations.

a. Corporate structuring
b. Corporate layering
c. Corporate stacking
d. Corporate stratifying

7. Promissory note backed by general credit of a corporation and usually not secured
by a mortgage or lien on any specific property.

a. Bond
 b. Debenture
c. Bank note
d. Bill of exchange

8. An indorsement expressly gives up some of his rights under the negotiable

instrument as when the indorser waives notice to make him secondarily liable.

a. Restrictive indorsement
b. Partial indorsement
c. Facultative indorsement
d. Successive indorsement

9. Payment is not acceptance, as acceptance is not payment. Payment of a

negotiable instrument includes acceptance.

a. The 1st statement is true, the 2nd statement is false

b. The 1st statement is false, the 2nd statement is true
c. Both statements are true
d. Both statements are false

10. A. Done by making or drawing and issuing a check to apply on account or for
value knowing at the time of issue that the check is not sufficiently funded
B. By having sufficient funds in or credit with the drawee bank but failing to keep
sufficient funds therein
C. Issuing a postdated check for the payment of an obligation
D. Done by issuing a check to apply to an obligation knowing well that there is no
sufficient amount to cover the check
Which of the following are the means of committing crime against the Batas
Pambansa Blg. 22 or the Bouncing checks law?

a. A and B only
b. C and D only
c. A and C only
d. B and D only

11. Referring to those enumerated in number 10, which of them are the means of
committing the crime of Estafa involving checks?

a. A and B only
b. C and D only
c. A and C only
d. B and D only

12. Ante-dating occurs when a date earlier than the date of issuance is placed on the
instrument, whereas post-dating occurs when a later date is used. Ante-dating or
post-dating is not allowed under the law and renders the ante-dated or post-dated
instrument invalid.

a. The 1st statement is true, the 2nd statement is false

b. The 1st statement is false, the 2nd statement is true
c. Both statements are true
d. Both statements are false

13. The term of a Letter of Credit may be fixed by the parties or in the absence
thereof, _________ from its date if used in the Philippines and ___________ if
used abroad.

a. 1 month; 3 months
b. 3 months; 6 months
c. 6 moths; 1 year
d. 1 year; 3 years
14. Under the Trust Receipts Law, the loss of goods, documents of title, pending
their disposition, irrespective of whether or not it was due to his fault or negligence
shall be borne by the __________

a. Entrustee
b. Entruster
c. Bank
d. Depositor

15. The General Bonded Warehouse Act applies to warehouseman engaged in the
business of receiving commodity for storage including the following transactions,
except:

a. Wherein the warehouseman is obligated to return the very same commodity

delivered to him or to pay its value
b. Wherein in the commodity delivered is to be milled for and on account of its
owner
c. Wherein commodity delivered is commingled with commodity delivered by or
belonging to other persons, and the warehouseman is obligated to return the
commodity of the same kind or to pay its value
d. None of the above

16. Mahiru bought a ticket from Platform lines, a bus company. In her ticket, the bus
number indicated is bus number 25, but she mistakenly thought it was 52 hence
she boarded bus number 52. Minutes later, another passenger claims that she is
the one who is assigned the seat, but Mahiru does not want to leave. The bus
driver, upon checking the ticket informed Mahiru about her mistake; Mahiru then
argued with the passenger and the driver before finally leaving. Upon alighting,
however, the bus moved forward not realizing the compartment door on the side
was not yet closed, thus hitting Mahiru in the process. Was there a breach of
contract of carriage?

a. Yes, because Platform lines through the driver was negligent in exercising
extraordinary diligence
b. No, because Mahiru already alighted from the vehicle, hence terminating the
contract of carriage
c. Yes, because Mahiru was still in the premises of the common carrier when
the accident occurred
d. No, because Mahiru in this case, cannot even be considered a passenger,
which means there is no contract of carriage to begin with

17. Who among the following are not considered as a common carrier?

a. Pipeline operators
b. Electricity distributors
c. Towage operators
d. Tramp service

18. The act of throwing overboard from a vessel part of the cargo, in case of extreme
danger, to lighten the ship.

a. Jettison
b. Deliberate sacrifice
c. Ejection
d. Selective disposal

19. One in which the value of the property insured shall be ascertained at the time of
the loss and the amount of the insurance merely represents the insurer’s
maximum liability.
 a. Running policy
b. Valued policy
c. Open policy
d. Mirror policy

20. Insurable interest in life or health insurance, as well as property insurance, must
exist when the insurance takes effect and loss occur but need not occur in the
meantime.

a. True
b. False
c. Maybe
d. I don’t know

21. The insurer is liable even for suicide if:

a. After the policy becomes incontestable, whether after lapse of statutory 2-

year period or a shorter period provided in the policy
b. It was during the contestable period but made in a state of sanity or it is not
one of the excepted perils
c. Both a and b
d. None of the above

22. It is confined to literary and artistic works which are original creations in the
literary or artistic domain protected from the moment of their creation.

a. Intellectual property
b. Copyright
c. Patent
d. Trademark

23. It is the failure to disclose material information, or the submission of false

material information, with intent to deceive.

a. Inequitable conduct
b. Concealment
c. Fraudulent representation
d. Deception

24. Inventions and any right, title or interest in and to patents and inventions covered
thereby, may be assigned or transmitted by inheritance or bequest or may be the
subject of a license contract.
a. True
b. False
c. Maybe
d. I don’t know

25. Under Republic Act No. 10173 or the Data Privacy Act, large-scale is committed
when personal information of at least _____ is harmed, affected or involved as the
result of other prohibited acts such as malicious disclosure and unauthorized
disclosure, among many.

a. 25 persons
b. 50 persons
c. 75 persons
d. 100 persons

26. The quality, state, or condition of being readily convertible to cash.

a. Liquidity
b. Solvency
 c. Availability
d. Transparency

27. Rehabilitation receivers may be natural or juridical persons. The rehabilitation

receiver may be removed at any time by the court, either motu propio or upon
motion, by the debtor or any creditor holding more than 25% of the total
obligations of the debtor.

a. The 1st statement is true, the 2nd statement is false

b. The 1st statement is false, the 2nd statement is true
c. Both statements are true
d. Both statements are false

28. The contract for the rent of a safety deposit box is not an ordinary contract of
lease because full possession of the box is not given to the renters.

a. True
b. False
c. Maybe
d. I don’t know

29. Under Republic Act No. 1405 or the Secrecy of Bank Deposits Law, deposits
covered by law are considered as absolutely confidential in nature and may not be
examined, inquired or looked into by any person, governmental official, bureau, or
office. The following are exceptions to the absolute confidentiality, except:

a. Upon permission of the depositor, whether written or orally made

b. In case of impeachment
c. Order of a competent court in cases of bribery or dereliction of duty of public
officials
d. Upon order of a competent court in cases where the money deposited or
invested is the subject matter of litigation

30. A crime whereby the proceeds of an unlawful activity are transacted, thereby
making them appear to have originated from legitimate sources.

a. Smuggling
b. Money laundering
c. Dummy accounts
d. Money pawning

II – ESSAY. Read the questions carefully and provide your answer with the proper
legal basis/bases; a mere “Yes” or “No” without further explanation will not be
given any credit. (5 points each)
1. Catriona Cu owned a unit in the Abercrombie Condominium, located at New
Jersey, United States. Catriona was currently on vacation in the Philippines when
she was informed that her payment on the unit was due, thereby prompting her
to send several checks, amounting to the full payment due and for the real estate
taxes as well. Said payments were to be made to a Veronica Venzon, to whom
she likewise sent the package to through FedEx. Catriona sent the package on
November 11, 2016. Venzon, however, claimed that she did not receive any
package, resulting to the non-payment of Catriona’s obligations and the
foreclosure of the unit. Catriona contacted FedEx to inquire about the non-
delivery and was informed that the package was in fact sent but not to Venzon,
but to her neighbor; when she asked about the receipt, FedEx could not provide
the same either. Enrages, On February 15, 2017 filed a complaint for damages
against the common carrier. FedEx, contradicts such claims and avers that they
cannot be held liable as Catriona failed to write a notice of claim within the 45-
day period from the acceptance of the shipment and further claimed that Catriona
should be at fault for misdeclaring the checks as documents. Can FedEx be held
liable?
2. San Tosantita School of Marupok foundation claimed that on July 2017, it
entered into a Contract of Lease for the period of July 2017 to June 2018 with
Lotlot Lim. Before the expiration of the period, the foundation sent another
Contract of Lease for July 2018 to June 2019 for Lotlot’s approval but despite
several follow-ups, the latter failed to return the Contract of Lease. As a result,
the Board of Directors decided not to renew the Contract of Lease anymore.
Allan Albano, the president or officer-in-charge of said foundation, wrote Lotlot
demanding the payment of her back rentals and utility bills with request to vacate
the subject property; Lotlot, however, refused to comply with such demand,
thereby prompting San Tosantita School of Marupok foundation filed a Complaint
for Ejectment against her. Lotlot then averred that there is no proof that Allan was
duly authorized by the Board to issue a demand letter, so the complaint should
be dismissed. Rule on the parties’ contentions.

3. National Lumber Corporation (NALUCO) and Ilocos Norte Institute of Woodwork

and Native arts (INIWAN) entered into an agreement. NALUCO was represented
by Gerald Geronimo, the officer-in-charge, whereas INIWAN was represented by
Bea Bondoc, the president. In the agreement, NALUCO would deliver lumber or
wood to INIWAN, who in return would process such into wood arts that could be
sold as collective or decorative pieces. NALUCO delivered wood to INIWAN for
two consecutive weeks, but the latter failed to comply with its part in the
agreement. NALUCO then demanded that INIWAN comply with its obligation or
pay the amount of the wood delivered, which amounted to P100,000, but to no
avail as it turned out that INIWAN was insolvent. Due to the foregoing, NALUCO
sued INIWAN and impleaded Bea Bondoc as well. Bea Bondoc claimed that she
cannot be held liable for the corporation has a separate and distinct personality
from her. Is Bea correct?

4. Eduardo Equinez opened an account with Silver Savings and deposited 40

treasury warrants, which were subsequently indorsed by Gloria Gomez as
cashier of Silver Savings and deposited such warrants to Silver Savings’ savings
account in Oppabank branch in Kawalan, Minduque City. They were sent for
clearance. Eduardo was not allowed to withdraw from his account, hence he
inquired from Gloria as to why that is the case. Gloria then made some calls to
Oppabank, which subsequently decided to allow Silver Savings to withdraw from
the proceeds of the warrants. In turn, Silver Savings allowed Gomez to make
withdrawals from his own account. Later on, Oppabank informed Silver Savings
that 35 of the warrants had been dishonored by the Bureau of Treasury and
demanded the refund by Silver Savings of the amount it had previously
withdrawn, to make up for the deficit in its account; the demand was however
rejected by Silver Savings. Can Oppabank demand refund against Silver
Savings?