COVERAGE:
The contract of mortgage is valid because future
A. Contract of Pledge, Real Mortgage, Chattel Mortgage,
Other Credit Transactions and Agency
Direction: Read and select the best answer for the following
questions.
1. The following requisites are essential to the contracts of
pledge, real estate mortgage and chattel mortgage except
a. That they be constituted to secure the fulfillment
of a principal obligation such as contract of loan.
b. That the pledgor or mortgagor be the absolute
owner of the thing pledged or mortgaged.
c. That the persons constituting the pledge or
mortgage have the free disposal of their property,
and in the absence thereof, that they be legally
authorized for the purpose.
d. That when the principal obligation becomes due,
the things in which the pledge or mortgage
consists may be alienated for the payment of the
creditor.
e. That the thing pledged or mortgaged be placed
in the possession of the creditor, or of a third
person by common agreement.
2. The following are the kinds of principal obligations that
may be secured by a contract of pledge, of real estate
mortgage or of chattel mortgage, except
a. Pure obligations
b. Conditional obligations whether suspensive
condition or resolutory condition
c. Obligations with a period whether suspensive
period (ex die) or resolutory period (in diem)
d. Natural obligations
e. Rescissible obligations
f. Voidable obligations
g. Unenforceable obligations
h. Null and void obligations
3. When is the pledgor or mortgagor required to be the
owner of the thing pledged or mortgaged for the validity
of contracts of pledge, of real estate mortgage or of chattel
mortgage?
a. At the time the principal obligation is
constituted.
b. At the time the contract of pledge or
mortgage is constituted or perfected.
c. At the time of the failure to pay the principal
obligation.
d. At the time the thing to be pledged or
mortgaged is to be delivered.
4. D borrowed P1,000,000 from C. G, a third person,
mortgaged his land to secure the fulfillment of D'S loan.
Is the contract of mortgage valid?
a. No because D must be the owner of the
mortgaged land.
b. Yes provided G will deliver the land to C.
c. Yes because third persons who are not
parties to the principal obligation may secure
the latter by pledging or mortgaging their
own property.
d. No because G is no privy to the contract of loan.
5. D borrowed P20,000 from C. To secure the fulfillment of
the loan, D mortgaged a land owned by his ailing father.
Which of the following statements is correct?
a.
property may be pledged or mortgaged.
b. The contract of loan is null and void because the
contract of mortgage is null and void.
c. The contract of mortgage will become valid upon
the death of D'S father.
d. The contract of mortgage is null and void
because the mortgagor must be the owner of
the property mortgaged at the time it is
constituted but the contract of loan remains to
be valid.
6. ABC Inc. borrowed P2,000,000 from BPI. ABC Inc. is
under receivership. To secure the fulfillment of the loan,
ABC mortgaged its administrative building. Which of the
following statements is correct?
a. The contract of mortgage is null and void
because the mortgagor has no free disposal of
the thing.
b. The contract of mortgage is valid because the
mortgagor is the absolute owner of the property
mortgaged at the time the mortgage is constituted.
c. The contract of mortgage is null and void because
only natural person may enter in a contract of
mortgage.
d. The contract of mortgage is voidable.
7. It is a stipulation whereby the thing pledged or mortgaged
shall automatically become the property of the creditor in
the event of non-payment of the debt within the term
fixed.
a. Pactum creditarium
b. Pactum commissorium
c. Pactum debitarium
d. Pactum crematorium
8. D borrowed P10,000 from C. To secure the fulfillment of
the loan, D pledged his laptop. The contract of pledge
provides that the creditor-pledgee may automatically
appropriate the laptop upon failure of the debtor-pledgor
to pay the loan. On the date of maturity of the loan, D
failed to pay the loan. Which of the following statements
is correct?
a. C becomes the owner of the laptop.
b. The laptop cannot be alienated for the
payment of the loan.
c. C does not become the automatic owner of
the laptop upon D'S failure to pay the loan
because that provision is considered
pactum commissorium which is contrary
to law and public policy.
d. The contract of pledge is null and void
because of pactum commissorium provision.
9. D borrowed P10,000 from C. To secure the fulfillment of
the loan, D pledged his laptop. On the date of maturity of
the loan, D failed to pay the loan. As a result, D and C
agreed that the pledged laptop shall be owned by C in full
satisfaction of the secured contract of loan. Which of the
following statements is correct?
a. C becomes the owner of the laptop by
reason of dacion en pago which is
governed by Law on Sales.
b. The laptop cannot be alienated for the
payment of the loan.
c. C does not become the automatic owner of
the laptop upon D'S failure to pay the loan
because their subsequent agreement is
 considered pactum commissorium which is
contrary to law and public policy.
d. Their subsequent agreement for the payment
of the loan shall be governed by law on
obligation because that is a novation.
10. The following are the instances where the thing pledged
or mortgaged may be sold or alienated to pay the principal
obligation, except
a. If the pledgor or mortgagor fails to fulfill
certain conditions and such violation would
make the debt due and demandable.
b. If the debtor has lost the right to make use of
the period or where there is an acceleration
clause in the payment of installment.
c. Upon default to pay the obligation at
maturity.
d. Before maturity of the principal obligation.
11. What is the nature of a contract of pledge, of chattel
mortgage, of real estate mortgage or of antichresis?
a. It is divisible if the principal contract is joint.
b. It is indivisible if the principal contract is
solidary.
c. It is divisible whether the principal contract is
joint or solidary.
d. It is indivisible whether the principal
contract is joint or solidary.
12. D borrowed P10,000 from C and pledged his ring and
watch with P4,000 and P6,000 value respectively.
After several days, D pays P4,000 to C. Which of the
following statements is correct?
a. The contract of pledge is extinguished.
b. The contract of loan is extinguished.
c. D cannot demand the release of his ring
because a contract of pledge is indivisible.
d. D may compel C to return the ring because
P4,000 of the loan is already paid.
13. D borrowed from C P 100,000 secured by a mortgage
on D'S two lots (lot 1 and lot 2). D dies leaving E and
F as heirs with E inheriting lot 1 and F lot 2. F pays
P50,000 of the loan. Which of the following statements
is correct?
a. F may ask for the extinguishment of the
mortgage on lot 2.
b. The contract of mortgage is extinguished.
c. The contract of loan is extinguished.
d. F cannot ask for the extinguishment of the
mortgage on lot 2.
14. Using the same data in preceding number, suppose
it is C who dies leaving X and Y as heirs. If D pays
X P50,000, which of the following statements is
correct?
a. X may cancel the mortgage to the prejudice of
Y.
b. X cannot cancel the mortgage to the
prejudice of Y.
c. The contract of mortgage is extinguished.
d. The contract of loan is extinguished.
15. D borrowed P10,000 from C and pledged his ring
and watch with P4,000 and P6,000 value
respectively. They agreed that the ring will secure
P4,000 of the loan and the watch will secure the
balance of the loan. After several days, D pays
P4,000 to C. Which of the following statements is
correct?
a. The contract of pledge on the watch is
extinguished.
b. The contract of loan is fully extinguished.
c. D cannot demand the release of his ring
because a contract of pledge is indivisible.
d. D may compel C to return the ring
because contract of pledge on the ring is
extinguished.
16. A and B jointly borrowed P10,000 from C. In order
to secure their respective obligations, A pledged his
cellphone while B pledged his laptop. At the
maturity date of the loan, A paid P5,000 of the loan.
Which of the following statements is correct?
a. The contract of pledge on the cellphone
is extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his
cellphone because a contract of pledge is
indivisible.
d. The contract of pledge on the laptop is
extinguished.
17. A and B jointly borrowed P10,000 from C. In order
to secure the obligation, A pledged his cellphone
while B pledged his laptop. At the maturity date of
the loan, A paid P5,000 of the loan. Which of the
following statements is correct?
a. The contract of pledge on the cellphone is
extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his
cellphone because a contract of pledge is
indivisible.
d. The contract of pledge on the laptop is
extinguished.
18. It is a contract by virtue of which the debtor
delivers to the creditor or to a third person a
movable, or instrument evidencing incorporeal
rights for the purpose of securing the fulfillment of
a principal obligation with the understanding that
when the obligation is fulfilled, the thing delivered
shall be returned with all its fruits and accessions.
a. Contract of Pledge
b. Contract of Chattel mortgage
c. Contract of Real estate mortgage
d. Contract of Antichresis
19. In case the cause or consideration of the contract of
pledge is not stipulated, what is the cause or
consideration of a contract of pledge?
a. It has no cause or consideration.
b. The cause or consideration of the
principal obligation or contract of loan.
c. The cause or consideration is the liberality
of the pledgor.
d. The cause is the service remenerated.
20. The following are the characteristics of a contract
of pledge, except
 a. Consensual — It is perfected by mere
consent.
b. Accessory — It has no independent
existence of its own because there must be
contract of loan.
c. Unilaterial — It creates an obligation on
the part of the creditor to return the thing
upon the fulfillment of the principal
obligation.
d. Subsidiary — The obligation incurred does
not arise until the fulfillment of the
principal obligation which is secured.
21. The following are the essential requisites of
conventional pledge or contract of pledge, except
a. That it be constituted to secure the
fulfillment of a principal obligation or
contract of loan.
b. That the pledgor be the absolute owner of
the thing pledged.
c. That person constituting the pledge has the
free disposal of his property, and in the
absence thereof, that he be legally
authorized for the purpose.
d. That the thing pledged be placed in the
possession of the creditor, or a third person
by common agreement or there must be
delivery of the thing pledged.
e. That the contract of pledge be
constituted in public document.
22. What is the nature of a contract to constitute a
pledge?
a. Consensual contract
b. Real contract
c. Formal contract
d. Solemn contract
23. What is the legal effect of a promise or contract to
constitute a pledge?
a. It is perfected by delivery of the thing
pledge.
b. It is perfected through the notarization of
the promise.
c. It is perfected by mere consent and gives
rise only to a personal action between
the contracting parties.
d. It gives rise to a real action over the thing
pledged.
24. The following statements pertaining to a promise to
constitute a pledge or mortgage are correct, except
a. It gives rise only to a personal action
between the contracting parties.
b. The contract perfected is a real contract.
c. It creates no real right in the property but
only a right to compel the fulfillment of the
promise but there is no contract of pledge
or contract of mortgage yet.
d. The promissor will be criminally liable if
he mortgages or pledges as unencumbered
things which he knew were subject to some
burden.
25. What is the nature of a contract of pledge?
a. Consensual contract
b. Real contract
c. Formal contract
d. Solemn contract
26. The following may become the object of a contract
of pledge, except
a. All movable
b. Personal property susceptible of
possession.
c. Incorporeal rights which are evidenced by
negotiable instruments, bill of lading,
shares of stocks, bonds, warehouse receipts
and similar documents.
d. Real or immovable properties and rights
thereon.
27. What is the form of contract of pledge to bind the
contracting parties?
a. It must be in a private instrument.
b. It must be in a public instrument.
c. It must be registered in the registry of
deeds.
d. It may be in any form because it is a real
contract.
28. What is the form of Contract of pledge to bind or to
affect third persons?
a. It must be registered in the chattel
mortgage registry.
b. It must be registered in the registry of
deeds.
c. It must be in a public instrument
showing a description of the thing
pledged and the date of the pledge.
d. It must be recorded in the Intellectual
Property Office.
29. The contract of pledge shall cover the following,
except
a. The thing pledged.
b. The fruits, income, dividends or interests
earned or produced by the thing pledged,
unless there is stipulation excluding them.
c. The offspring, when the thing pledged is an
animal, unless there is a stipulation
excluding them.
d. The future inheritance of the pledgor.
30. The following are the rights of the debtor-pledgor,
except
a. To alienate, with the consent of the
pledgee, the thing pledged.
b. To continue to be the owner of the thing
pledged unless it is expropriated.
c. To become the owner of the offspring of
the animal pledged if there is no stipulation
to the contrary but such offspring shall be
subject to the pledge.
d. To ask for the return of the thing pledged
after he has paid the debt and its interest,
with expenses in a proper case.
e. To ask that the thing pledged be judicially
or extra-judicially deposited if it is used
without authority or for a purpose other
than for its preservation.
f. To require that the thing be deposited with
a third person if it is in danger of being lost
or impaired through the negligence or
willful act of the pledgee.
g. To demand the return of the thing pledged,
upon offering another thing in pledge,
provided the latter is of the same kind and
 quality, if there are reasonable grounds to
fear the destruction or impairment of the
thing pledged without the fault of the
pledgee. This right is without prejudice to
the right of the pledgee to have the thing
sold at a public sale.
h. To demand the return of the thing
pledged despite defaulting on the
payment of the secured principal
obligation.
31. In case the thing pledged is alienated by the debtor-
pledgor to third person, what is the effect of the
consent of the pledgee to the alienation made by the
pledgor of the thing pledged to third person?
a. The thing pledged remains to be owned by
the debtor-pledgor
b. The ownership of the thing pledged is
transmitted to the buyer.
c. The creditor-pledgee loses possession of
the thing pledged.
d. The contract of pledge is already
extinguished.
32. What is the remedy of the pledgor-debtor if the
pledgee-creditor use the thing pledged, without the
authority of the owner or should misuse the thing in
any other way?
a. To ask that it be judicially or extra-
judicially deposited.
b. To ask for the return of the thing pledged.
c. To ask for the extinguishment of the
contract of pledge.
d. To ask for the extinguishment of the
contract of loan.
33. What is the remedy of the pledgor-owner if the
thing pledged is in danger of being lost or impaired
through the negligent or willful act of the pledgee?
a. To require that it be deposited with a
third person.
b. To ask for the return of the thing pledged.
c. To ask for the extinguishment of the
contract of pledge.
d. To ask for the extinguishment of the
contract of loan.
34. What is the remedy of the pledgor-owner if there
are reasonable grounds to fear the destruction or
impairment of the thing pledged, without the fault
of the pledgee?
a. To ask for the return of the thing, upon
offering another thing in pledge,
provided the latter is of the same kind as
the former and not of inferior quality
but subject to the right of the pledgee to
sell the said pledged item in public
auction.
b. To require that it be deposited with a third
person.
c. To ask for the extinguishment of the
contract of pledge.
d. To ask for the extinguishment of the
contract of loan.
35. If there are reasonable grounds to fear the
destruction or impairment of the thing pledged,
without the fault of the pledgee, which is correct?
a. The pledgor-owner may ask for the return
of the thing, upon offering another thing in
pledged, provided the latter is of the same
kind as the former and not of inferior
quality even it is already sold in public
auction by the pledgee-creditor.
b. The pledgee-creditor may cause the sale
of the thing pledged at a public sale and
the proceeds of the auction shall be a
security for the principal obligation in
the same manner as the thing originally
pledged. However, the pledgee is bound
to advise the pledgor, without delay, of
any danger to the thing pledged.
c. The right of the pledgor-owner is superior
to the right of the pledgee-creditor.
d. The contract of pledge is extinguished by
the sale of the thing pledged in the public
auction.
36. The following are the obligations of the debtor-
pledgor, except
a. To pay the debt and its interest, with
expenses, in a property case, when they are
due.
b. To pay damages that the pledgee may
suffer by reason of the flaws of the thing
pledged, if he was aware of such flaws but
he did not advise the pledgee of the same.
c. To pay for the expenses which are
necessary for the preservation of the thing
pledged.
d. To warrant the thing pledged for its
quality and merchantability.
37. The following are the rights of the creditor-pledgee,
except
a. To retain in his possession the thing
pledged until the debt is paid.
b. To demand reimbursement of the expenses
made for the preservation of the thing
pledged.
c. To bring actions which pertain to the
owner of the thing pledged in order to
recover it from, or defend it against third
person.
d. To use the thing pledged if he is authorized
to do so, or when its use is necessary of the
preservation of the thing.
e. To cause the sale of the thing pledged at a
public sale, if there is a danger of
destruction, impairment or diminution of
value of the thing pledged without his
fault. The pledgee is bound to advise the
pledgor, without delay, of any danger to the
thing pledged.
f. To collect and receive the amount due if
the thing pledged is a credit which
becomes due before it is redeemed, and to
apply the same to the payment of his claim.
g. If the pledge earns or produces fruits,
income. dividends, or interests, the creditor
shall compensate what he receives with
those which are owing him; but if none are
owing him, or insofar as the amount may
 exceed that which is due, he shall apply it
to the principal. Unless there is a
stipulation to the contrary, the pledge shall
extend to the interest and earnings of the
right pledged.
h. To sell the thing pledged upon default of
the debtor.
i. To appropriate the thing pledged in case
the thing pledged is not sold in first and
second public auctions.
j. To become the automatic owner the
thing pledged upon first default of
debtor to pay the principal obligation at
maturity date.
38. The following are the obligations of creditor-
pledgee, except
a. To take care of the thing pledged with the
diligence of a good father of a family.
b. To be liable for the loss or deterioration of
the thing pledged unless it is due to a
fortuitous event.
c. To be responsible for the acts of his agents
or employees with respect to the thing
pledged.
d. Not to use the thing pledged except when
he is authorized by the owner or when the
use of the thing is necessary for its
preservation.
e. To deliver to the debtor the surplus after
paying his claim from what he has
collected on a credit that was pledged and
which has become due before it is
redeemed.
f. To deposit the thing pledged with a third
person even not authorized by the court.
39. The following are the rights of a third person who
pledges his own movable property to secure debt of
another, except
a. To be indemnified by the debtor if he pays
the creditor.
b. To be subrogated to all the rights of the
creditor against the debtor if he pays the
creditor.
c. To be released from liability in the cases
provided by law.
d. To become principally liable.
40. Grace obtained a loan from Jojo in the amount of
P1M with Mar serving as guarantor. Rody pledged
his cellphone to secure the debt of Grace. If Rody
pays the P1M loan of Grace, which is correct?
a. There will be no legal subrogation if Grace
does not consent to the payment of Rody.
b. Rody cannot collect the PI M from Grace
if the latter does not consent to the
payment of Rody.
c. Rody can collect the PIM from Mar if
Grace will not be able to pay Rody.
d. Mar is not liable to Rody.
41. A third person who pledges his own movable
property to secure the debt of another shall be
released from liability in the following cases and
may ask for the return of the thing pledge from the
pledgee, except
a. If the creditor voluntarily accepts
immovable or other property in payment of
the debt even if the creditor thereafter loses
the same by eviction.
b. If an extension of time is granted to the
debtor by the creditor without pledgor's
consent.
c. If through some act of the creditor, the
pledgor cannot be subrogated to the rights,
mortgages and preferences of the creditor.
d. If the thing pledged is deteriorated on the
fault of the pledgee.
e. If the debtor defaults in the payment of
principal obligation on the maturity
date.
42. If two or more things are pledged, who has the right
to choose which thing will be sold in the absence of
stipulation?
a. Pledgor
b. Pledgee
c. Debtor
d. Government
43. Pledge may be extinguished directly or indirectly.
The following are the modes of extinguishing the
contract of pledge directly, except
a. When the principal obligation secured
by the pledged is extinguished.
b. Return by the pledgee of the thing pledged
to the pledgor or owner.
c. Renunciation or abandonment in writing
by the pledgee of the pledge.
d. Sale of the thing pledged regardless of the
net proceeds.
e. Appropriation of the thing pledged by the
pledgee if the thing pledged is not sold in
the first and second auctions.
44. Which of the following direct modes of
extinguishing contract of pledge impliedly
extinguish the principal obligation or contract of
loan?
I. Return by the pledgee of the thing pledged to the
pledgor or owner.
II. Renunciation or abandonment in writing by the
pledgee of the contract of pledge.
Sale of the thing pledged in public auction in case
of default by debtor regardless of the amount of
the net proceeds of sale.
III. Appropriation of the thing pledged by the pledgee
in case the thing pledged is not sold in the first
and second public auctions.
a. I and II
b. III and IV
c. I and III
d. II and IV
45. Which of the following direct modes of
extinguishing contract of pledge do not impliedly
extinguish the principal obligation or contract of
loan?
I. Return by the pledgee of the thing pledged to
the pledgor or owner.
II. Renunciation or abandonment in writing by
the pledgee of the contract of pledge.
 III. Sale of the thing pledged in public auction in
case of default by debtor regardless of the
amount of the net proceeds of sale.
IV. Appropriation of the thing pledged by the
pledgee in case the thing pledged is not sold
in the first and second public auctions.
a. I and II
b. III and IV
c. I and III
d. II and IV
46. Which of the following stipulations in a contract of
pledge is null and void?
I. A stipulation which provides that the contract
of pledge is not extinguished by the return of
the thing pledged.
II. A stipulation allowing the appropriation by
the pledgee of the thing pledged in case the
same is not sold in the first and second
auctions.
III. A stipulation for the recovery of deficiency in
case the proceeds from the sale of the thing
pledged is less than the amount of the
obligation.
a. I and III
b. I and III
c. I and II
d. I, II and III
47. If the thing is found in the possession of the
pledgor or owner or if the thing is in the possession
of a third person who has received it from the
pledgor or owner, which of the following is
incorrect?
a. There is prima facie presumption that the
contract of pledge is extinguished.
b. There is prima facie presumption that
pledgee returned the thing pledged.
c. There is prima facie presumption that
the contact of loan is extinguished.
48. Which of the following statements is incorrect in
case the pledgee renounces or abandons in writing
the contract of pledge?
a. The contract of pledge is extinguished but
the contract of loan remains.
b. The acceptance by the pledgor is not
necessary for extinguishing contract of
pledge.
c. The pledgee becomes a depositary upon
renunciation if in the meantime, the thing
pledged is not yet returned to the owner.
d. The return of the thing pledged is
necessary for extinguishing the contract
of pledge for this mode of contract of
pledge extinguishment.
49. The following are the formalities required for the
sale of the thing pledged in case of failure of the
debtor to pay the principal obligation, except
a. It must be by public auction.
b. It must be through a notary public.
c. There must be a notice to the debtor and
the owner of the thing pledged, stating the
amount for which the public sale is to be
held.
d. The thing pledged must be sold by the
pledgee at the first auction only.
50. Sale of pledged personal property in contract of
pledge shall be made in
a. Public auction or sale only
b. Private auction or sale only
c. Generally public auction or sale unless
there is agreement for private auction or
sale
d. Generally private auction or sale unless
there is agreement for public auction or
sale
51. The following persons may bid at the public
auction, except
a. The pledgor or owner
b. The pledgee if there are other bidders
c. Third persons
d. The pledgee even if he is the only bidder
52. In case the bids of the pledgor-owner, the pledgee
and a third person are equal and considered the
highest bid, who shall be preferred among them?
a. Pledgee
b. Pledgor-owner
c. Third person
53. What is the effect of sale at public auction of the
thing pledged?
a. It does not extinguish the contract of
pledge.
b. The contract of pledge and
principal/contract of loan obligation shall
be extinguished if the proceeds of the sale
are equal to the amount of the principal
obligation, interest and expenses in a
proper case.
c. The contract of pledge and principal
obligation/contract of loan shall be
extinguished if the proceeds of the sale
exceed the amount of the principal
obligation, interest and expenses in a
proper case.
d. The contract of pledge and principal
obligation/contract of loan shall be
extinguished whether or not the
proceeds of the sale are equal to the
amount of the principal obligation,
interest and expenses in a proper case.
54. If the proceeds of the sale of the thing pledged in
conventional pledge is more than the amount of the
obligation, which of the following statements is
true?
a. The debtor-pledgor shall be entitled to the
excess unless there is an agreement to the
contrary.
b. The creditor-pledgee shall always be
entitled to the excess.
c. The creditor-pledgee shall be entitled to
the excess unless there is an agreement
to the contrary.
d. The debtor-pledgor shall always be entitled
to the excess.
55. If the proceeds of the sale of the thing pledged in
conventional pledge is less than the amount of the
obligation, which of the following statements is
true?
a. The debtor-pledgor shall always pay for
the deficiency.
b. The creditor-pledgee cannot recover the
deficiency even if stipulated.
c. The creditor-pledgee can recover
deficiency only if stipulated.
d. The debtor-pledgor shall pay for the
deficiency if stipulated.
56. If the thing pledged is not sold in the first and
second public auctions, which of the following
statements is incorrect in case of appropriation by
the pledgee of the thing pledged?
a. The creditor may appropriate the thing
pledged validly.
b. The contract of pledge is extinguished if
the creditor decided to appropriate the
thing pledged.
c. The principal obligation/contract of loan
is not extinguished if the creditor
decided to appropriate the thing
pledged.
57. DLSU pledged its notes receivable from a parent to
a factor on January 1, 2016 with remaining term of
30 days or maturity date of January 31, 2016. The
face value of the notes receivable is P 1,000,000
with maturity value of P 1,200,000. The notes
receivable is pledged for a note payable of
P1,100,000 inclusive of interest. If the factor
pledgee collects the P 1,200,000 from the parent on
January 31, 2016, who shall be entitled for the
excess of P100,000?
a. DLSU, the pledgor-debtor
b. Parent
c. Factor, the pledgee-creditor
d. None of the above
58. It is a type of pledge which refers to the right of a
person to retain a thing until he receives payment of
his claim.
a. Conventional pledge
b. Voluntary pledge
c. Agreed pledge
d. Legal pledge or pledge by operation of
law
59. The following are examples of legal pledge, except
a. A possessor in good faith may retain the
movable upon which he has incurred
necessary and useful expenses until he has
been reimbursed therefore.
b. He who has executed work upon movable
has a right to retain it by way of pledge
until he is paid.
c. The depositary may retain the thing
deposited until the full payment of what
may have been due from him by reason of
the deposit.
d. A contract by virtue of which the debtor
delivers to the creditor or to a third
person a movable, or instrument
evidencing incorporeal rights for the
purpose of securing the fulfillment of a
principal obligation with the
understanding that when the obligation
is fulfilled, the thing delivered shall be
returned with all its fruits and
accessions.
60. The provisions on conventional pledge on the
possession, care and sale of the thing as well as on
the termination of the pledge shall be applicable to
legal pledge except with respect to the sale of the
thing as follows. The following are the rules
applicable to legal pledge on the sale of the thing
pledged, except
a. The thing may be sold only after demand
of the amount for which the thing is
retained.
b. The public auction shall take place within
one month after such demand.
c. If without just grounds, the creditor does
not cause the public sale to be held within
such period, the debtor may require the
return of the thing.
d. In case there is deficiency from the public
sale, the pledgee-creditor may still recover
the deficiency even if not stipulated.
e. After payment of debt and expenses, the
remainder of the price of sale shall be
retained by the pledgee creditor.
61. In case of legal pledge or pledge by operation of
law, if the thing held in pledged by operation of law
is sold by the creditor in public auction resulting to
excess, who shall be entitled to the excess?
a. The debtor/owner of the thing sold even
if not stipulated.
b. The creditor or foreclosing party if
stipulated.
c. The creditor or foreclosing party even if
not stipulated.
d. The debtor/owner of the thing sold only if
stipulated.
62. In case of legal pledge or pledge by operation of
law, if the thing held in pledged by operation of law
is sold by the creditor in public auction resulting to
deficiency, may there be recovery of deficiency by
the creditor?
a. No even if stipulated because any
stipulation for recovery of deficiency in of
pledge is void.
b. Yes even if not stipulated.
c. Yes but it must be stipulated by the
contracting parties.
d. No because it is pledged by operation of
law.
63. It is a contract whereby the debtor or third person
secures to the creditor the fulfillment of a principal
obligation, specially subjecting to such security
immovable property or real rights over immovable
property in case the principal obligation is not
complied with at the time stipulated.
a. Contract of Real estate mortgage
b. Contract of Chattel mortgage
c. Contract of Pledge
d. Contract of Antichresis
64. The following are the essential requisites of a
contract of real estate mortgage for its validity,
except
a. That it be constituted to secure the
fulfillment of a principal obligation.
b. That the mortgagor be the absolute owner
of the thing mortgaged.
c. That the person constituting the mortgage
must have the free disposal of his property,
and in the absence thereof, that he be
legally authorized for the purpose.
d. That the document in which the
mortgage appears be recorded in the
Registry of Property.
65. The following are the important characteristics of
contract of real estate mortgage, except
a. Accessory — It cannot exist without a
principal obligation.
b. Indivisible — It creates a lien on the whole
or all of the properties mortgaged, which
lien continues until the obligation it
secures has been fully paid.
c. Inseparable — It subjects the property
upon which it is imposed, whoever the
possessor may be, to the fulfillment of the
obligation for whose security it was
constituted.
d. Real right — It creates a lien on the
property mortgaged.
e. Real contract — It is perfected by the
delivery of the thing mortgaged.
66. Which of the following statements pertains to
equitable mortgage?
a. It is one which is created by the agreement
of the parties.
b. It is one executed pursuant, to an express
requirement of a provision of law.
c. It is one which although lacks certain
formality, form or words or other
requisites provided by statute, shows the
intention of the parties to charge the real
property as a security for a debt and
contains nothing contrary to law.
67. The following may become object of contract of
real estate mortgage, except
a. Immovable property
b. Real property
c. Rights on immovable property
d. Personal property
68. What is the status of contract of real estate
mortgage if the property covered as collateral is a
personal property instead of real property?
a. The contract of real estate mortgage is
always void because the subject matter of
real estate mortgage is immovable
property.
b. The contract of real estate mortgage
may be valid as to the contracting
parties on the basis of doctrine of
estoppel but the third person directly
affected by said void contract may ask
for its declaration of nullity.
c. The contract of real estate mortgage will be
valid to both contracting parties and even
third persons.
d. Third persons who are not directly affected
by the real estate mortgage may ask for the
declaration of nullity of the real estate
mortgage contract.
69. Which of the following statements concerning
formalities of real estate mortgage is incorrect?
a. The real mortgage may be in any form to
be valid since it is a consensual contract.
b. The real mortgage must be in a public
instrument for the convenience of the
parties but not for validity.
c. The real mortgage must be registered in the
Registry of Property to bind third persons.
d. The real mortgage must be in writing to
be valid since it is a formal contract.
70. The contract of real estate mortgage shall cover the
following (R-I-N-G-I-R), except
a. Real property mortgaged
b. Improvements
c. Natural accessions
d. Growing fruits
e. Indemnity granted or owing to the
proprietor from the insurers of the property
mortgaged or in virtue of expropriations
for public use.
f. Rents and income not yet received when
the obligation becomes due
g. Future inheritance of the mortgagor
71. The following stipulations concerning real estate
mortgage are null and void, except
a. A stipulation forbidding the owner from
alienating the immovable mortgaged.
b. A stipulation providing that the mortgagee
shall become the automatic owner of the
property mortgaged upon failure of the
debtor to pay the principal obligation.
c. Tipo or upset price which refers to price set
by the parties as the amount at which the
property at which the property will be sold
at public auction.
d. A stipulation prohibiting a second
mortgage with respect to property
registered under the Torrens System.
72. It refers to the right of mortgagor to redeem the
mortgaged property after his default of the
performance of his obligation by paying the
secured obligation in order to prevent the public
sale of his mortgaged property.
a. Equity of redemption
b. Right of redemption
c. Right of preemption
d. Equity of preemption
73. It refers to the right of the mortgagor to repurchase
the property within a certain period after it was sold
in public auction for the payment of the secured
debt.
a. Equity of redemption
 b. Right of redemption
c. Right of preemption
d. Equity of preemption
74. It refers to the remedy available to the mortgagee
by which he subjects the property mortgaged to the
satisfaction of the obligation secured when the
principal obligation is not paid when due or when
there is any violation of any condition, stipulation
or warranty by the mortgagor.
a. Dation en pago
b. Foreclosure
c. Novation
d. Compensation
75. It is a type of foreclosure made through the filling
of a petition in court under Rule 68 of Rules of
Court and availed of when the deed of real estate
mortgage does not contain a special power of
attorney (SPA) authorizing the extrajudicial
foreclosure by the mortgagee-creditor.
a. Legal foreclosure
b. Conventional foreclosure
c. Judicial foreclosure
d. Extra-judicial foreclosure
76. In case of judicial foreclosure, if upon the trial in
such action the court shall find the facts set forth in
the complaint to be true, it shall ascertain the
amount due to the plaintiff upon the mortgage debt
or obligation, including interest and other charges
as approved by the court, and costs, and shall
render judgment for the sum so found due and
order that the same be paid to the court or to the
judgment obligee. This is known as equity of
redemption of judgment debtor and the amount
shall be paid by the judgment debtor. What is the
period for exercise of equity of redemption in case
of judicial foreclosure?
a. Within a period of not less than 90 days
nor more than 120 days from the entry
of judgment.
b. Within a period of not less than 1 year nor
more than 2 years from the entry of
judgment.
c. Within a period of not less than 90 days
nor more than 1 year from the entry of
judgment.
d. Within a period of not less than 120 days
nor more than 1year days from the entry of
judgment.
77. In case the judgment debtor in judicial foreclosure
failed to exercise his equity of redemption, the
property shall be ordered by the trial court to be
sold at public auction. In such a case, the
foreclosure sale, generally, when confirmed by an
order of the court, shall operate to divest the rights
of all the parties to the action and to vest their
rights in the purchaser. May the judgment debtor
still redeem the property already foreclosed and
sold in public auction?
a. Yes because he has right of redemption
which is I year from the confirmation of
the sale.
b. No he can never redeem the property
because the equity of redemption has
already expired.
c. Yes because he can exercise his equity of
redemption even beyond the 90 days
from entry of judgment or even after the
foreclosure sale itself as long as it is
prior to the court's order of
confirmation of the sale.
d. Yes because his right of redemption is not
subject to a period.
78. Is the right of redemption available to the judgment
debtor in case of judicial foreclosure?
a. Yes in all instances.
b. No except in those cases provided by
special laws.
c. No in all instances.
d. Yes except in those cases provided by
special laws.
79. Under Section 47 of RA No. 8791 (General
Banking Laws), in the event of foreclosure made by
banks, whether judicially or extrajudicially, of any
mortgage on real estate which is security for any
loan or other credit accommodation granted, the
mortgagor or debtor whose real property has been
sold for the full or partial payment of his obligation
shall have the right of redemption. What is the
period for exercise of right of redemption in case of
judicial or extrajudicial foreclosure made by banks?
a. within one year after the sale of the real
estate.
b. within 90 days after the sale of the real
estate.
c. within 6 months year after the sale of the
real estate.
d. within 2 years after the sale of the real
estate.
80. It is a type of foreclosure made in compliance with
Act inserted No. 3135 in the (Real Estate Mortgage
Law) whereby foreclosure sale is made under a
special power of attorney inserted in the real estate
mortgage contract which authorized extrajudicial
foreclosure.
a. Legal foreclosure
b. Conventional foreclosure
c. Judicial foreclosure
d. Extra-judicial foreclosure
81. When a real property is foreclosed and sold under
Act No. 3135 (Real Estate Mortgage Law) in case
of extrajudicial foreclosure of Real Estate
Mortgage, the public auction sale shall be made at
the
a. Province where the property is situated
b. Domicile of the mortgagor
c. Domicile of the mortgagee
d. At any place in the Philippine
82. In all cases of extrajudicial foreclosure made under
Act No. 3135 (Real Estate Mortgage Law), the
following persons may redeem the real property
sold in the public auction, except
a. Debtor-mortgagor
b. Successor in interest of debtor-mortgagor
c. Judgment creditor of the debtor-mortgagor
d. Any person having a lien on the real
property sold subsequent to the mortgagee
or deed of trust
 e. Any third person
83. In extrajudicial foreclosure, sale of foreclosed real
property in contract of real estate mortgage shall be
made in
a. Public auction or sale only
b. Private auction or sale only
c. Generally public auction or sale unless
there is agreement for private auction or
sale
d. Generally private auction or sale unless
there is agreement for public auction or
sale
84. In case of extrajudicial foreclosure of real property
under Act No. 3135 (Real Estate Mortgage Law),
what is the period of the exercise of right of
redemption by the debtor-mortgagor or any other
persons authorized by the said law?
a. Within the term of one year and after
the date of sale or registration of the
sheriffs certificate of foreclosure sale.
b. Within the term of 90 days and after the
date of extrajudicial sale or registration of
the sheriffs certificate of foreclosure sale.
c. Within the term of two years and after the
date of extrajudicial sale or registration of
the sheriffs certificate of foreclosure sale.
d. Within the term of six months and after
the date of extrajudicial sale or registration
of the sheriffs certificate of foreclosure
sale.
85. Notwithstanding Act No. 3135 (Real Estate
Mortgage Law), under Section 47 of RA 8791
(General Banking Laws) what is the period of right
of redemption available to mortgagor-juridical
persons, (corporation, association, or partnership)
in extrajudicial foreclosure made by mortgagee-
bank?
a. Within 3 months after the foreclosure
and sale but not after the registration of
the certificate of foreclosure sale with
the applicable Register of Deeds.
b. Within 6 months after the foreclosure and
sale but not after the registration of the
certificate of foreclosure sale with the
applicable Register of Deeds.
c. Within I year after the foreclosure and sale
but not after the registration of the
certificate of foreclosure sale with the
applicable Register of Deeds.
d. Within 2 years after the foreclosure and
sale but not after the registration of the
certificate of foreclosure sale with the
applicable Register of Deeds.
86. In case the proceeds of the sale from judicial or
extrajudicial foreclosure of Real Estate Mortgage is
higher than the principal obligation and costs,
which is true?
a. The mortgagee may retain the excess in the
absence of stipulation to the contrary.
b. The mortgagor is entitled to the excess
in the absence of stipulation to the
contrary.
c. The mortgagee shall always retain the
excess.
d. The mortgagor shall always recover the
excess.
87. In case the proceeds of the sale from judicial or
extrajudicial foreclosure of Real Estate Mortgage is
lower than the principal obligation and costs, which
is true?
a. The mortgagee may recover the
deficiency in the absence of stipulation
to the contrary.
b. The mortgagor shall not pay the deficiency
in the absence of stipulation to the
contrary.
c. The mortgagee shall always recover the
deficiency.
d. The mortgagor shall always pay the
deficiency
88. Indicate the proper order on how the proceeds of
sale from judicial or extrajudicial foreclosure of
Real Estate Mortgage shall be distributed:
I. Cost of sale.
II. Claim of the person foreclosing the mortgage.
III. Claims of junior encumbrances in the order of
their priority.
IV. Mortgagor or his agent.
a. I-II-III-IV
b. I-III-II-IV
c. II-I- IV-III
d. III-II-I-IV
89. It is a conditional sale of personal property as
security for the payment of a debt, or the
performance of some other obligation specified
therein, the condition being that the sale shall be
void upon the seller paying to the purchaser a sum
of money or doing some other act named. If the
condition is performed according to its terms the
mortgage and sale immediately become void, and
the mortgagee is thereby divested of his title.
a. Contract of Real estate mortgage
b. Contract of Chattel mortgage
c. Contract of Pledge
d. Contract of Antichresis
90. The following are the requisites of chattel
mortgage for its validity, except
a. That it be constituted to secure the
fulfillment of a principal obligation.
b. That the mortgagor be the absolute owner
of the thing mortgaged.
c. That the person constituting the mortgage
must have the free disposal of his property,
and in the absence thereof, that he be
legally authorized for the purpose.
d. That the document in which the mortgage
appears be recorded in the Chattel
Mortgage Register.
e. That an affidavit of good faith must be
appended to the Deed of Chattel of
Mortgage and recorded therewith in the
Chattel Mortgage Register.
91. What is the formality required by law in contract
of chattel mortgage to bind or affect third persons?
a. That an affidavit of good faith must be
appended to the Deed of Chattel of
Mortgage and recorded therewith in the
Chattel Mortgage Register.
b. That the contract of chattel mortgage be
registered in IPO.
c. That the contract of chattel mortgage be in
private instrument.
d. That the contract of chattel mortgage be
registered in Registry of Deeds.
92. The following are the important characteristics of
contract of chattel mortgage, except
a. Accessory — It cannot exist without a
principal obligation or contract of loan.
b. Indivisible — It creates a lien on the whole
or all of the properties mortgaged, which
lien continues until the obligation it
secures has been fully paid.
c. Inseparable — It subjects the property
upon which it is imposed, whoever the
possessor may be, to the fulfillment of the
obligation for whose security it was
constituted.
d. Real contract — It is perfected by
delivery of the personal property
mortgaged.
93. The following may become object of chattel
mortgage, except
a. Personal property
b. Movable property
c. Intangible assets
d. Real or immovable property
94. Is foreclosure still allowed even if the collateral in
contract of chattel mortgage is real property?
a. No because the contract is void.
b. No because the contracting parties are
guilty of estoppel.
c. Yes but foreclosure shall be done under
chattel mortgage law.
d. Yes but foreclosure shall be done under
real estate mortgage law
95. The following are the rules for the place of
registration of Chattel Mortgage, except
a. As a general rule, it must be recorded in
the Chattel Mortgage Register of the
province where the mortgagee resides.
b. It must be recorded in both Chattel
Mortgage Registers of the provinces where
the mortgagor resides and where the
property is located.
c. If the mortgagor is domiciled outside the
Philippines, the mortgage must be
registered in the Chattel Mortgage Register
where the property is located.
d. With respect to motor vehicles. it must be
registered with Chattel Mortgage Register
where the mortgagor resides and with Land
Transportation Office where the motor
vehicles are recorded.
e. With respect to shares of stock, it must be
registered with Chattel Mortgage Register
in the province where the corporation has
its principal office and in the Chattel
Mortgage Register of the province of
domicile of the mortgagor.
f. With respect to vessel, it must be registered
in the office of the Philippine Coast Guard
of the port of documentation of the vessels.
96. Which of the following statements concerning
contract of chattel mortgage is correct?
a. The mortgagee is not obligated to file an
independent action for the enforcement of
his credit or loan secured by a chattel
mortgage. To do otherwise would defeat
the purpose of the chattel mortgage, which
is to give him preference over the
mortgaged chattels for the satisfaction Of
his credit.
b. A mortgagee who sues and obtains a
personal judgment against a mortgagor
upon his credit waives thereby his right to
enforce the mortgage securing it and
therefore no longer allowed to foreclose
the chattel mortgage.
c. Both A and B
d. Neither A nor B
97. What is the grace period granted to mortgagor or
the minimum period required to lapse from the
time of the breach of the condition in Chattel
Mortgage before the mortgagee may extrajudicial
sell or foreclose in the public auction the
mortgaged property? (Equity of Redemption in
Chattel Mortgage)
a. At least 30 days
b. At least 60 days
c. At least 90 days
d. At least 120 days
98. Is there is right of redemption in contract of chattel
mortgage?
a. Yes within a period of one year
b. Yes within a period of three months
c. Yes within a period of six months
d. None
99. When a movable property is foreclosed and sold
under Act No. 1508 for Chattel Mortgage, the
public auction sale by a public officer shall be
made at the public place of municipality
a. Domicile of mortgagor
b. Location of movable property
c. Domicile of mortgagee
d. Either A or B
100. In extrajudicial foreclosure, sale of foreclosed
personal property in contract of chattel mortgage
shall be made in
a. Public auction or sale only
b. Private auction or sale only
c. Generally public auction or sale unless
there is agreement for private auction or
sale
d. Generally private auction or sale unless
there is agreement for public auction or
sale
101. In case the proceeds of the sale from judicial or
extrajudicial foreclosure of Chattel Mortgage is
higher than the principal obligation and costs,
which is true?
a. The mortgagee may retain the excess in the
absence of stipulation to the contrary.
b. The mortgagor is entitled to the excess
in the absence of stipulation to the
contrary.
c. The mortgagee shall always retain the
excess.
d. The mortgagor shall always recover the
excess.
102. In case the proceeds of the sale from judicial or
extrajudicial foreclosure of Chattel Mortgage is
lower than the principal obligation and costs,
which is true?
a. The mortgagee may recover the
deficiency in the absence of stipulation
to the contrary.
b. The mortgagor shall not pay the deficiency
in the absence of stipulation to the
contrary.
c. The mortgagee shall always recover the
deficiency.
d. The mortgagor shall always pay the
deficiency
103. Indicate the proper order on how the proceeds of
sale from judicial or extrajudicial foreclosure of
Chattel Mortgage shall be distributed:
I. Cost of sale.
II. Claim of the person foreclosing the mortgage.
III. Claims of junior encumbrances in the order of their
priority.
IV. Mortgagor or his agent.
a. I-II-III-IV
b. I-III-II-IV
c. II-I-IV-III
d. III-II-I-IV
104. It is a contract whereby the creditor acquires the
right to receive the fruits of an immovable of his
debtor, with the obligation to apply them to the
payment of the interest, if owing, and thereafter to
the principal of his credit.
a. Contract of Real estate mortgage
b. Contract of Chattel mortgage
c. Contract of Pledge
d. Contract of Antichresis
105. The following are the important characteristics of
contract of antichresis, except
a. Accessory — It cannot exist without a
principal obligation or contract of loan.
b. Indivisible — It creates a lien on the whole
or all of the properties used as collateral,
which lien continues until the obligation it
secures has been fully paid.
c. Inseparable — It subjects the property
upon which it is imposed, whoever the
possessor may be, to the fulfillment of the
obligation for whose security it was
constituted.
d. Real right — It creates a lien on the
property mortgaged.
e. Real contract — It is perfected by the
delivery of the thing mortgaged.
106. Which of the following may become the object of
contract of antichresis?
a. Immovable property
b. Movable property
c. Both A and B
d. Neither A nor B
107. In contract of antichresis, what shall be the basis of
measurement of the fruits in its application to the
interest and principal of the loan?
a. The actual market value of the fruits at
the time of the application.
b. The actual market value of the fruits at the
time of harvest.
c. The actual market value of the fruits at the
time of sale of fruits.
d. The actual market value of the fruits at the
time of perfection of the contract of
antichresis.
108. What is the nature of the contract of antichresis?
a. It is a consensual contract perfected by
mere consent.
b. It is a real contract perfected by delivery of
the real property.
c. It is a formal or solemn contract
perfected by the execution of the written
instrument containing the antichretic
agreement together with the amount of
the principal and interest of the loan.
109. Who shall be liable to pay the real property taxes
and expenses necessary for the repair and
preservation of the real property used as collateral
in contract of antichresis?
a. Always antichretic creditor
b. Always debtor
c. Antichretic creditor in the absence of
stipulation to the contrary
d. Debtor in the absence of stipulation to the
contrary
110. Upon non-payment or default of the antichretic
debtor of the principal obligation, may the
antichretic creditor automatically appropriate the
real property used as security?
a. No because it is pactum commissorium
which is prohibited by law and public
policy.
b. Yes because the prohibition against pactum
commissorium is not applicable to contract
of antichresis.
c. Yes because it is the right of the creditor.
d. Yes if it is agreed upon by the parties.
Comparison of Pledge, Real Mortgage, Chatte
Basis of Conventional Pledge Real Estate Mortgage
Difference
Type of Contract Real-By delivery of object Consensual- By mere
as to perfection consent
To bind third Must be in a public Must be registered in the
persons instrument showing a Registry of Property
description of the thing
pledged and the date of the
 pledge
Object of contract Movable or personal
property
Prohibition Applicable
against pactum
commissorium
Indivisibility of Indivisible
the contract
Remedy of Foreclose security and sell
Creditor in case the collateral in public
Of Debtor's action with the proceeds to
default be applied to the unpaid
obligation
As to deficiency Deficiency can never be
recovered even if there is a
stipulation. Any stipulation
for recovery of deficiency
is null and void. (Exception
—Legal Pledge
As to excess of Excess belongs to the
proceeds pledgee-creditor unless
there is stipulation to the
contrary. (Exception Legal
Pledge)
As to The pledgee may
appropriation appropriate the thing
of property pledged if the same is not
sold in two public auctions.
As to selling The pledgor may only sell
of property after the property with the
the pledge or consent of the pledgee.
mortgage b the
owner.
Conduct of sale of Public sale only
foreclosed
property by
creditor
Redemption None but pledgor can
prevent the public sale by
paying the secured
obligation
Name of Contract of Commodatum
Contract
Definition It is a contract wherein one
of the parties delivers to
another, either something not
consumable so that the latter
may use the same for a
certain time and return it.
Subject matter 1. Non-consumable thing
2. Consumable thing but only
for purpose of exhibit
Characteristics 1. Real
2. Essentially gratuitous
111. It is 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 of agency
b. Contract of partnership
c. Contract of sales
d. Contract of pledge
112. The following are the characteristics of a contract of
agency, except
a. Principal — it can stand by itself.
b. Preparatory — It is a means by which
other contracts may be entered into.
Immovable or real
property
Applicable
Indivisible
Foreclose security and
sell the collateral in
public action with the
proceeds to be applied
to the unpaid obligation
Deficiency can be
recovered unless there is
stipulation to the
contrary.
Excess belongs to the
mortgagor unless there
is stipulation to the
contrary.
The mortgagee cannot
appropriate the thing
mortgaged.
The mortgagor can sell
the property. Any
stipulation prohibiting
the mortgagor to sell the
property is void.
GR: Public sale
Exception: Private sale
if stipulated by
contracting parties
Extrajudicial foreclosure
— Equity of redemption
and right of redemption
Judicial foreclosure
Generally equity of
redemption only unless
provided special law.
Contract of Loan or
Mutuum
It is a contract wherein
one of the parties delivers
to another money or other
consumable thing, upon
the condition that the
same amount of the same
kind and quality shall be
paid.
1. Money
2. Consumable thing
1. Real
2. Onerous if there is
interest or gratuitous if
there is no interest.
c. Consensual — It is perfected by mere
consent.
d. Onerous — It is presumed to be onerous
unless declared to be gratuitous.
e. Nominate — it has a name given to it by
law.
f. Bilateral — The parties are bound
reciprocally to it by law.
g. Commutative — The parties give and
receive almost equivalent values.
h. Formal contract — It is perfected by
written special power of attorney.
113. What is the status of the contract of agency in case
the principal is capacitated and the agent is
incapacitated?
a. Voidable
b. Valid and binding
c. Unenforceable
d. Null and void
114. What is the status of the contract entered into by
an agent, who is incapacitated, in behalf of the
principal who is capacitated?
a. Voidable
b. Valid and binding
c. Unenforceable
d. Null and void
115. The following statements pertain to the principal in a
contract of agency, except
a. He is the person whom the agent
represents.
b. He must be capacitated.
c. He gives authority to the other party.
d. He acts and represents the other party.
116. What type of relationship exists between the
principal and agent?
a. Fiduciary relationship based on trust
and confidence.
b. Investor-investee relationship
c. Debtor-creditor relationship
d. Protector-beneficiary relationship
117. Contract of agency may be express or implied. An
agency may be implied from the following, except
a. Acts of the principal
b. Silence of the principal
c. Lack of action of the principal
d. Failure of the principal to repudiate the
agency knowing that another person is
acting in his behalf without authority
e. Special power of attorney
118. What is the status of the written sale of a piece of
land of the principal by the agent in the principal's
name if the authority of the agent is not in writing?
a. Null and void
b. Unenforceable
c. Voidable
d. Rescissible
119. What is the status of the contract entered into by the
agent in behalf of the principal if the act performed by
the agent requires special power of attorney and the
authority of the agent is only general?
a. Voidable
b. Valid and binding
c. Unenforceable
d. Null and void
120. If the agency is couched in general terms, only
general power of attorney is required even if the
principal should state that he withholds no
power, that the agent may execute acts he may
 consider appropriate or even though the agency a
should authorize a general or unlimited y
management. Which of the following acts can e
be performed by the agent in this case? a
a. To administer the property. r.
b. To effect novation. b. T
c. To compromise liability. o
d. To submit questions to arbitration. m
a
k
121. The e
following s
acts u
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 e persons who had read the newspaper
a only.
g c. If the announcement of the appointment is
e by special information, revocation shall be
n made also by special information.
c d. If the announcement of the appointment is
y by public advertisement, revocation of the
p. T appointment shall also be made by public
o advertisement.
p
124. The following are the basic principles of contract of
e
agency, except
rf
a. The agent must act within the scope of his
o
authority.
r
b. The agent may do such acts as may be
m
conducive to the accomplishment of the
a
purpose of the agency.
n
c. The limits of the agent's authority shall be
y
considered exceeded even it has been
o
performed in a manner more advantageous
t
to the principal than that specified by him.
h
e d. The agent must act in behalf of his principal
r and should disclose the principal.
a 125. The following are the effects if the agent acts within
c the scope of his authority but in his (agent's) behalf or
t without disclosing the principal, except
o a. The principal has no right of action against
f the person with whom the agent has
st contracted.
ri b. The person with whom the agent has
c contracted has no right of action against
t the principal.
d c. The agent is directly bound in favor of the
o one with whom he has contracted.
m d. The contract does not bind the third
i person and the principal even if the
n contract involves thing belonging to the
i principal.
o
126. A is authorized by P to sell his car. A sold the car
n
of P to X in his own name and without disclosing P
.
as his principal. Which of the following
122.The acceptance by the agent of the contract of agency statements is correct?
may be express or implied. The following are a. The contract does not bind P because the
considered implied acceptance, except agent acts in his own name.
a. Acts of the agent to carry out the agency. b. The contract is unenforceable as regards to P.
b. Silence or inaction by the agent according
c. The contract is null and void.
to the circumstances.
c. Between persons who are present, if the d. The contract binds P and X because it
principal delivers his power of attorney to involves the property of the principal.
the agent and the latter accepts it without 127. What is the status of the contract entered into by the
any objection. agent in excess of the authority of his principal and
d. Between persons who are absent, when in the name of the principal or by a person without
the principal transmits his power to the authority of another but in the latter's behalf?
agent, and the latter returns it with a. Rescissible unless ratified by the principal
objection. b. Voidable unless ratified by the principal
e. Between persons who are absent, when the c. Unenforceable unless ratified by the
principal entrusts to him by letter or principal
telegram a power of attorney with respect d. Null and void unless ratified by the principal
to the business in which he is habitually 128. What is the status of the contract entered into by the
engaged as an agent, and he did not reply agent in excess of the authority of the principal and
to the letter or telegram. in the agent's name?
123. Which of the following statements is incorrect? a. The contract is enforceable in favor of the
a. When a person is appointed as special agent principal.
through special information, the person b. The contract is rescissible in favor of the
appointed will be considered a duly principal.
authorized agent with respect to the person c. The contract is valid and binding against
who received the special information. the agent.
b. When a person is appointed as special d. The contract is null and void.
agent through a public advertisement, the 129. What is the obligation of a person appointed as an
person appointed will be considered a agent but declines the appointment?
duly authorized agent with respect to a. He shall deliver and return the goods.
 b. He shall pay for the price of the goods.
c. He shall observe diligence of a good
father of a family in the custody and
preservation of the goods.
d. He has no obligation over the goods.
130. The following are the general obligations of an
agent, except
a. To carry out the agency.
b. To be liable for damages through the non-
performance, the principal may suffer.
c. To finish the business already begun on the
death of the principal, should delay entail
any danger.
d. To continue the agency despite the fact
that its execution would manifestly result
in loss or damage.
131. The following are the special obligations of an
agent, except
a. To advance the necessary funds if there was
stipulation to that effect except when the
principal is insolvent.
b. To act in accordance with the instructions of
the principal in the execution of the agency
and in the absence of instructions of the
principal, he shall exercise the diligence of a
good father of a family.
c. No to carry out an agency if the execution
would manifestly result in loss or damage to
the principal.
d. To be liable for damages if there being a
conflict between interest and that of the
principal, he should prefer his own.
e. To lend money to the principal at current
interest rate if he has been authorized to
borrow money.
f. To borrow money of the principal at
current interest rate without the
principal's consent, if the latter has
authorized him to lend principal's money
at interest.
132. The following are the special obligations of an
agent, except
a. To render an accounting of his transactions
and to deliver to the principal whatever he
may have received by virtue of the agency,
even though it may not be owing to the
principal. Any stipulation exempting the
agent from the obligation to render an
account shall be void.
b. To be liable for interest on the sums he has
applied to his own use from the day on
which he did so and those which he still
owes after the extinguishment of the agency.
c. To be responsible not only for fraud, but
also for negligence which shall be judged
with more or less right by the court.
d. To become personally liable for the
contract he entered into in behalf of the
principal if the latter ratified such
contract.
133. The following are the rules that shall be observed as
regards to the liability of agent when he appoints a
substitute, except
a. If the agent is not prohibited to appoint a
substitute, the agent may appoint a
substitute but he shall be responsible for the
acts of the substitute.
b. If the agent is authorized to appoint a
substitute and the principal designated the
person to be appointed as substitute, the
agent is not responsible for the acts of the
substitute.
c. If the agent is authorized to appoint a
substitute and the principal does not
designate the person to be appointed as a
substitute, the agent shall be liable if the
person appointed as substitute is notoriously
incompetent or insolvent man.
d. If the agent is prohibited to appoint a
substitute, the agent cannot appoint a
substitute. If he appoints one, all the acts
of the substitute shall be voidable.
134. What is the degree of liability of two or more agents
if they have been appointed simultaneously?
a. Joint and severally unless agreed otherwise.
b. Joint or proportionate unless agreed
otherwise.
c. Solidary unless agreed otherwise.
d. No liability unless agreed otherwise.
135. What is the degree of liability of two or more
persons (principals) who have appointed a single
agent to the same transaction?
a. Joint unless agreed otherwise.
b. Joint or proportionate unless agreed
otherwise.
c. Solidary unless agreed otherwise.
d. No liability unless agreed otherwise.
136. The general rule is that the agent who acts in the
name of the principal shall not be liable to the party
with whom he contracts. The following are the
exceptions to the general rule, except
a. If the agent expressly binds himself.
b. If the agent exceeds the limits of his
authority without giving such party
sufficient notice of his powers.
c. If the agent acts without the authority of the
principal.
d. If the principal ratifies the acts of the
agent which exceed the limits of his
authority.
137.What is the status of the contract entered into by the
agent without or beyond the authority of the principal
if the other party was aware of the agent's acting
beyond the limits of his authority?
a. If the agent did not undertake to secure the
principal's ratification, the contract shall be
unenforceable.
b. If the agent did not undertake to secure
the principal's ratification, the contract
shall be void.
c. If the agent did not undertake to secure the
principal’s ratification, the contract shall be
voidable.
d. If the agent did not undertake to secure the
principal's ratification, the contract shall be
valid.
138. The following are the rights and obligations of third
persons who have contracted with an agent who has
exceeded his authority, except
a. As to third persons, an act is deemed to have
been performed within the scope of the agent's
authority, if such act is within the power of
attorney, as written, even if the agent has in
fact exceeded the limits of his authority
according to an understanding between the
principal and the agent.
b. A third person cannot set up the fact that the
agent has exceeded his powers, if the principal
has ratified or has signified his willingness to
ratify the agent's acts.
 c. A third person may require the agent to present
his power of attorney or the instructions as
regards the agency.
d. Private or secret orders and instructions of
the principal prejudice third persons who
have relied upon the power of attorney or
instructions shown them.
139. He is a person who buys and sells goods or chattels
consigned or delivered to him by his principal, for
a compensation known as commission.
a. Ordinary agent
b. Partnership agent
c. Commission agent
d. Preferred agent
140. The following are the obligations of a commission
agent, except
a. To be responsible for the goods received
by him in the terms and conditions and as
described in the consignment unless upon
receiving them he should make a written
statement of the damage and deterioration
suffered by the same.
b. To distinguish by countermarks goods of
the same kind and mark which belong to
different owners, and designate the
merchandise respectively belonging to
each principal.
c. To sell the goods on credit.
d. To bear the risk of collection and to pay
the principal the proceeds of the same on
the same terms agreed upon with the
purchaser if he receives on a sale, in
addition to the ordinary commission,
another called a guarantee commission.
e. To be liable for damages if he does not
collect the credits of the principal at the
time, they become due and demandable,
unless he proves that he exercised due
diligence for that purpose.
141. P gives a general power of attorney to A to sell P's
goods for P10,000 cash for a commission. A sells
the goods on a 15-day credit term for P11,000 to B
without authority from P. What is the right of P if
he does not ratify the sale on credit?
a. P may demand immediate payment of
P11,000 from A.
b. P may demand immediate payment of
P10,000 from A and A gets the excess of
P1,000.
c. P may get the excess of P1,000.
d. A cannot be compelled to pay P10,000
immediately.
142. Using the same data in preceding number, what is
the right of P if he ratifies the sale on credit?
a. P may demand P11,000 from A
immediately.
b. P may collect P11,000 upon payment of
B.
c. P may only collect P 10,000.
d. A shall only account P 10,000 to P.
143. The following are the obligations of the
principal in the contract of agency, except
a. To comply with all the obligations which
the agent may have contracted within the
scope of his authority.
b. To be bound for any obligation wherein
the agent exceeded his power if he ratifies
such obligation expressly or tacitly.
c. To be solidarily liable with the agent if he
allowed the latter to act as though he had
full powers when the agent exceeded his
authority.
d. To advance to- the agent the sums
necessary for the execution of the agency
should the agent so request.
e. To reimburse the agent the sums advanced
by the seller even if the business or
undertaking was not successful provided
that the agent is free from fault including
the interest on the sum.
f. To indemnify the agent for all damages
which the execution of the agency may
have caused the latter, without the fault or
negligence on his part.
g. When two or more persons have
appointed an agent for a common
transaction or undertaking, the
principals shall be jointly liable for all
the consequences of the agency.
144. The following are the instances wherein the
principal shall not be liable for the expenses incurred
by the agent, except
a. When the agent acted in contravention
of the principal's instructions and the
principal avails himself of the benefits
derived from the contract.
b. When the expenses were due to the fault
of the agent.
c. When the agent incurred them with
knowledge that an unfavorable result
would ensue if the principal was not aware
thereof.
d. When it was stipulated that the expenses
would be borne by the agent, or that the
latter would be allowed only a certain
amount.
145. What is the right of the agent over the object
of the agency until the principal reimburses him for
the sums necessary for the execution of the agency
which he had advanced and until the principal pays
him the indemnity for all damages in the execution of
the agency?
a. Right to appropriate the property.
b. Right to sell the property.
c. Right to retain in pledge the property or
legal pledge.
d. Right to destroy the property.
146. When two persons contract with regard to the same
movable thing, one of them with the agent, and the
other with the principal, and the two contracts are
incompatible with each other, who between the buyers
shall be preferred?
a. First possessor in good faith.
b. The buyer of the principal.
c. The buyer of the agent.
d. Person with older title.
147. 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 two contracts are
incompatible with each other, who between the buyers
shall be preferred?
a. First registrant in good faith.
b. First possessor in good faith.
c. Buyer with older title.
 d. Buyer of the principal.
e. Buyer of the agent.
148. The following are the modes of extinguishment of
contract of agency, except: (EDWARD)
a. E — Expiration of the period for which
the agency was constituted.
b. D — Death, Civil interdiction, Insanity or
Insolvency of the principal or agent.
c. W — Withdrawal of the agent.
d. A — Accomplishment of the object or
purpose of the agency.
e. R — Revocation of the agency by the
principal.
f. D — Dissolution of the firm or
corporation which entrusted or accepted
the agency.
g. S— Signing of special power of attorney
(SPA) appointing the agent
149. Revocation refers to the act of the principal of
terminating the agency at will. The principal may
revoke the agency at will and compel the agent to
return the document evidencing the agency. The
revocation may be express or implied. The
following acts are considered implied revocation,
except
a. When a new agent is appointed for the same
business or transaction.
b. If 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 an agent with a general power of attorney.
d. When the principal assists the agent.
150. As a general rule, the principal may revoke the
contract of agency at will. The following are the
exceptional instances when contract of agency may
not be revoked at will by the principal, except
a. If a bilateral contract depends upon an agency.
b. If the agency is a means of fulfilling an
obligation already contracted.
c. If a partner appointed a manager of a
partnership in the contract of partnership and
his removal from the management is
unjustifiable.
d. If the agency is coupled with interest.
e. If the agency is for the benefit of the
principal.
151. The following statements concerning revocation are
true, except
a. If the agency has been entrusted for the
purpose of contracting with specified
persons, the principal must give a timely
notice of the revocation to such third
persons.
b. If the agent had general powers, he was
entrusted to contract with general public or
any person, revocation of the agency does
not prejudice third persons who acted in
good faith and without knowledge of the
revocation.
c. Notice of revocation of general powers in a
newspaper of general circulation is
sufficient warning to third persons.
d. Revocation does not bind third persons
who had knowledge thereof.
152. The following statements concerning withdrawal by
the agent are true. except
a. The agent must give notice to the principal
of the withdrawal.
b. The agent must indemnify the principal for
any damage suffered by reason of the
withdrawal.
c. The agent shall not be liable for withdrawal
if it is based upon the impossibility of
continuing the performance of the agency
without grave detriment to himself.
d. The agent Who withdraws should not
take care of the object of the agency if his
reason is valid.
153. As a general rule, the death of the principal
extinguishes the agency. However, the agency is not
extinguished by the death of the principal in the
following exceptional instances, except
a. If the agency has been constituted in the
common interest of the principal and the
agent.
b. If the agency has been constituted in the
interest of a third person who has accepted the
stipulation in his favor.
c. In so far as to finish the business already
begun on the death of the principal, should
delay entail any danger.
d. If the agency has been constituted in favor
of the principal.
154. What is the status of the acts done by the agent after
the death of the principal or other cause of
extinguishment of the agency?
a. The acts are unenforceable because the agency
is already extinguished.
b. The acts are null and void because the agency is
already extinguished.
c. The acts are valid if done with the knowledge of
the death of the principal or of any other cause
of extinguishment and shall be fully effective
with respect to third persons who may have
contracted in bad faith.
d. The acts are valid if done without the
knowledge of the death of the principal or of
any other cause of extinguishment and shall
be fully effective with respect to third
persons who may have contracted in good
faith.
-END-