ReSA The Review School of Accountancy

Tel. # 735-9807 & 734-3989

2000
BUSINESS LAW: Pre-week Lecture
Atty. M. S. Bonafe

1. A, B, and C as partners in a partnership stipulated and mutually agreed that A shall

not share in the profits and losses. Is the agreement valid as among the partners only
and not against third persons?
a. Yes, because among the partners it is valid to exempt one from sharing in the profits
and losses.
b. Yes, valid as long as third persons are not prejudiced.
c. Not valid stipulation exempting a partner from sharing profits and losses.
d. Not valid as against third persons or partnership creditors.

2. A newly admitted partner shall be liable for the pre-existing obligations of the
partnership at the time of his admission in favor of partnership creditors up to the extent
of his capital contribution
An industrial partner shall not share in the losses and his share in the profits shall be
just and equitable under the circumstances.
a. First statement is false, second statement is true.
b. Both are true.
c. Second statement is false, first is true.
d. Both are false statements.

3. Three of the following dissolves a partnership, except:

a. Partnership business has become unlawful.
b. Death, civil interdiction or insolvency of a partner.
c. Expulsion of a partner
d. Partnership business can only be carried on at a loss.

4. Special power of attorney is necessary in the following cases, except

a. To make such payments usually considered as acts of administration;
b. To compromise, to submit questions to arbitration;
c. To bind the principal in a contract of partnership;
d. Any other act of strict dominion.

5. A partner who is liable to the partnership for damages due to his fault may claim
compensation if through his extraordinary efforts in other activities of the partnership
unusual profits have been realized.
A partner shall debtor of the partnership if he fails to deliver his promised contribution
and shall be in delay from the time of a demand from the partnership.
a. Both statements are false.
b. Second statement true, first is false.
c. First is true, second is false.
d. Both are true.

6. A contributed P1M, B contributed P1M, and contributed services. They agreed to

divide the profits and losses equally. In case of loss of P.3M, for how much, if any, is C
liable?
a. Nothing, because an industrial partner is exempt from losses.
b. P.1M but with reimbursement from A and B equally.
c. A and B alone shall shoulder the loss at C's option
d. P 1M

7. Suppose in the preceding case, there was no agreement as to profit-loss sharing,

what will be the share of C in the profit?
a. Equal to the share of A and B;
b. Just and equitable under the circumstances
C. P1M
d. Court to fix his share.

8. Based on the preceding number, what shall be his share in the loss?
a. Equal to the shares of A and B.
b. Just and equitable under the circumstances
C, P1M.
d. None

9. A subscribed to 1,000 shares of stock of X Corporation and paid 25% of the said
subscription. Can he vote all his subscribed shares?
a. No, because the subscription has not been fully paid.
b. No, because his shares have become delinquent shares.
C. Yes, as regards the paid percentage of the subscription.
d. Yes, because shares although unpaid but not delinquent can be voted.

10. X Corporation posted a P1M profit in its realty business and its real estate has
appreciated in value to the tune of P4M. The board then declared dividends computed
on the basis of P5M representing profits and appreciation in value of its real estate. Is
the dividend declaration valid?
a. Not valid because there was no 2/3 ratification by the outstanding capital stock.
b. Valid being based on profits and increments in the value of the corporate assets.
c. Not valid because dividends must come only from the profits.
d. Valid if creditors do not object nor protest against the same.

11. A subscribed to 100 shares of X corporation, paying 25% thereof. Despite the
demand by a for the issuance of stock certificate, the corporation refuses to issue one
corresponding to the 25% paid. Meanwhile, the corporation has become insolvent and A
now refuses to pay his unpaid balance on his subscription. Is the refusal to issue a
stock certificate valid?
a. Not valid, because stock certificate can be issued for the paid portion of the
subscription.
b. Valid, because stock certificate can only be issued after full payment of the
subscription.
C. Valid as regards the unpaid percentage on the subscription.
d. Not valid because only delinquent shares may be denied stock certificate.

12. Based on the facts in the preceding number, can a validly refuse to pay the unpaid
balance on his subscription now that
the corporation has become insolvent?
a. No, under the trust fund doctrine for the protection of creditors.
b. No, under the doctrine of piercing the veil of corporate fiction.
C. Yes, because of the insolvency of the corporation which also extinguished his
obligation to pay the balance.
d. Yes, because of the denial of his right to stock certificate.

13. The by-laws may provide that the holders of the majority of the outstanding capital
stock shall elect all the members of the board.
The by-laws may provide that no officer of the corporation may be required to be a
stockholder.
a. First statement is false, second is true.
b. Second is false, first is true.
C. Both are true.
d. Both are false.

14. Majority of the following must be residents of the Philippines except:

a. Directors
b. Trustees
C. Incorporators
d. Officers

15. Private corporations have the following attributes, except:

a. It is an artificial being created by law.
b. It may be formed or created under special laws or charter.
C. It has the right of succession.
d. It has the powers, attributes and properties expressly authorized by law or incident to
its creation.

16. In three of the following cases, all shares have voting rights, except:
a. Election of directors
b. Increase or decrease of capital stock
C. Dissolution of the corporation
d. Merger or consolidation

17. At the annual meeting of the corporation for the election of five directors, A, B, C, D,
E, F, and G were nominated. A, B, C, D, and E received the highest number of votes
and thus proclaimed as elected. F received ten (10) votes less than E. Subsequently, E
sold his shares to F. Who, between E and F has the right to attend as director?
a. E is the director because his term is one year until his successor is elected and
qualified.
b. F is the director because he has bought the shares of E.
C. Both of them shall be directors.
d. Neither of them shall be director.

18. ABC corporation has an authorized capital stock of P1M divided into 50,000
common shares and 50,000 preferred shares. At its inception, the corporation offered
for subscription all the common shares. However, only 40,000 shares were subscribed.
Recently, the directors thought of raising additional capital and decided to offer to the
public all the authorized shares at their market value. Would X, the stockholder of 4,000
shares has pre-emptive right to the remaining 10,000 shares?
a. Yes, because all stockholders have pre-emptive rights to all issues of shares of any
class in proportion to their shareholdings.
b. No, because pre-emptive right does not apply to unissued shares to be issued.
C. Yes, because pre-emptive right applies only to the issuance of unissued shares.
d. No, because he has waived this right when he subscribed to a part only of the
issuance of shares.

19. Based on the facts of the preceding number, would X also have pre-emptive right to
the 50,000 preferred shares?
a. Yes, because all stockholders have pre-emptive rights to all issues of shares of any
class in proportion to their shareholdings.
b. No, because pre-emptive rights do not apply to the issuance of unissued shares.
C. Yes, because pre-emptive rights apply only to the issuance of unissued shares.
d. No, because X has waived his pre-emptive rights to the issuance of preferred shares
when he subscribed to the common shares.
20. The corporation has a nine-member board of directors. Two of the members sold
their shares while two others are
abroad. To have a quorum, the number required is:
stated in Art of
a. Seven
b. Five
c. Three
d. Four

21. Which of the following requires the approval of the majority of the outstanding
capital stock?
a. Investment of corporate funds in another business or corporation
b. Amendment, repeal or adoption of by-laws
c. Dissolution of the corporation
d. Amendment of the articles of incorporation

22. A director of a corporation may be removed by:

a. Vote of majority of the outstanding capital stock
b. 2/3 of the stockholders
c. majority of the stockholders
d. 2/3 of the outstanding capital stock
23. In the matter of management of the corporation, this is supreme:
a. President
b. Chairman of the Board of directors
C. Stockholders
d. Board of directors

24. Three of the following are requisites for the existence of de facto corporation,
except:
a. Incorporated under a valid law
b. Attempt in good faith to organize
C. Actual use of corporate powers
d. Existing in law and in fact

25. Three of the following are required for incorporators, except:

a. They must be natural persons
C. Not less than five nor more than fifteen b. All of legal age
d. Majority must be citizens of the Philippines

26. A holder in due course has the following rights, except:

a. He holds the instrument free from defects of title of prior parties.
b. Free from defenses of prior parties among themselves.
C. Enforce payment against all parties liable thereon.
d. Holds the instrument as if it were non-negotiable.

27. Which of the following is not negotiable instrument?

a. Pay to the order of Pedro Cruz P1M (Sgd) Jose Santos To: A or B
b. I promise to pay to the order of the bearer P1M. (Sgd) M
C. Due to Bearer P1M or a BMW car worth P1M at his option. (Sgd) M
d. Pay to the order of myself P1M. (Sgd) D To: W
28. Three of the following are requisites to be a holder in due course except:
a. That the instrument is complete and regular upon its face;
b. That the holder took it in good faith and for value
c. That he became the holder of it before it was overdue and without notice that it had
been previously dishonored if such was the fact;
d. That he had no knowledge of any fact whish would impair the validity of the
instrument or render it valueless.
29. A makes a note payable to B or order. The following are the indorsers of the note in
the order of their indorsements: B, C, D, E, F(holder) and G (subsequent holder). The
note is dishonored in the hands of F, who notifies B, C, D, E. Which is not correct?
a. The notice given by F to B operates to the benefit of C, D, E, and G.
b. The notice to C inures to the benefit of D, E, and G.
C. The notice to D inures to the benefit of E and G.
d. The notice to C inures to the benefit of B.

30. Which of the following is negotiable instrument?

a. Pay to bearer C P1M. Reimburse yourself out of the house rentals of my house in
Manila. (Sgd) A To: B
b. Pay to C or his order P1M out of the rentals of my house in Manila. (Sgd) A To: B or
in his absence X.
C. Pay to C P1M (Sgd) A To: B
d. Pay to the order of C and reimburse yourself out of the rentals of my house in Manila.
(Sgd) A To: B and X

31. M makes a note payable to bearer and delivers the same to P who endorses it to X
in this manner: "Payable to X. (Sgd) P." Later X, without indorsing the note delivers the
same to Y. The note is subsequently dishonored by M. May y proceed against M for the
note?
a. No, because the special indorsement of P has made the note to be payable to order
and must be endorsed to negotiate.
b. Yes, because an instrument originally payable to bearer remains to be payable to
bearer despite special indorsement made thereon.
C. Yes, because M, as maker, is absolutely liable to pay the instrument in the hands of
any holder.
d. No, because Y did not acquire title to the instrument due to lack of proper
indorsement.

32. The negotiable instrument is not discharged:

a. When the principal debtor becomes the holder thereof before, at, or after maturity in
his own behalf;
b. By the intentional cancellation of the instrument;
C. By payment in due course by the accommodation.
d. By any other act which discharges a simple contract for the payment of money.

33. Payment by cession as distinguished from dation in payment

a. The debtor is not necessarily in a state of financial difficulty.
b. The effect is to release the debtor for the net proceeds of the things ceded or
assigned.
C. The property is alienated by the debtor to the creditor in satisfaction of a debt in
money.
d. What is delivered by the debtor is merely a thing to be considered as the equivalent
of a performance of the obligation.

34. A owes B P20,000 which became due and payable last June 23, 2001. On that
date, A offered B P10,000, the only money he then had, but B refused to accept the
payment. A thereafter met C, B's 23-year-old son, to whom he gave the P10,000 with
the request that he turn the money over to B. The money was stolen while C's
possession. How much may B still recover from A?
a. P20,000
b. P10,000
c. P15,000
d. P-0

35. If a third persons pays an obligation. What are the rights, which are available to him
if he pays the obligation with the knowledge and consent of the debtor?
First Answer - He can recover from the debtor the entire amount, which he has paid.
Second Answer – He subrogated to all of the rights of the creditor.
a. Both answers are correct.
b. Both answers are wrong
C. Only the first answer is correct
d. Only the second answer is correct

36. A, B and C executed a promissory note binding themselves to pay P9,000 to X, Y

and Z. The note is now due and demandable. Can the creditors proceed against A
alone for the payment of the entire debt.
a. No, each creditor can collect only P3,000 from A.
b. Yes, either X, Y or Z can collect P9,000 from A.
c. No, each creditor can collect only P1,000 from A.
d. Yes, since the promissory note is silent with respect to the rights of the creditors, the
obligation is presumed to be solidary.

37. Using No. 151, suppose that C is insolvent, can A and B be held liable for his share
in the obligation?
a. Yes, the debt shall be presumed to be divided into as many equal shares as there are
debtors.
b. Yes, but A and B will be liable proportionately.
C. No, the debts are considered distinct from one another
d. No, only either A and B but not both will be liable.

38. Using No. 151, suppose that the obligation was about to prescribe, but X wrote a
letter to A demanding for payment of the entire debt, will this have the effect of
interrupting the running of the period of prescription?
a. Yes, because the demand made by X covers the entire debt and will therefore inure
to the benefit of the other creditors.
b. Yes, insofar as A is concerned but not with regard to B and C.
C. No, because the demand should have been made to all the debtors.
d. No, all the creditors should have made the demand

39. Using No. 153 and prescription sets in, how much can Y collect from A?
a. P9,000
b. P3,000
c. P1,000
d. P-0

40. Using No. 154, how much can X collect from A?

a. P9,000
b. P3,000
c. P1,000
d. P-0
41. Indivisibility as distinguished from solidarity.
a. Plurality of subject is indivisible.
b. When the obligation is converted into one of indemnity for damages because of
breach, the character of the obligation remains
C. Refers to the legal tie or vinculum
d. Refers to the prestation with constitutes the object of the obligation.

42. When one of the parties has brought an action to enforce the instrument, he cannot
subsequently ask for its reformation.
The injured party may seek rescission, even after he has chosen fulfillment if the latter
should become impossible.
a. True, true
b. True, false
C. False, true
d. False, false

43. A source of obligation not arising from law

a. Negotiorum gestio
b. Culps aquiliana
c. Solutioindebiti
d. Contract

44. The loss or deterioration of the thing intended as a substitute through the negligence
of the obligor does not render him liable A person alternatively bound by different
prestations shall completely perform one of them
a. True, true
b. False, true
c. True, false
d. False, false

45. There being no express stipulation and if the undertaking is to deliver a determinate
thing, the payment shall be made
a. At the domicile of the debtor
b. At the domicile of the creditor
c. Wherever the thing might be at the moment the obligation was constituted
d. Wherever the thing might be at the amount the obligation is to be fulfilled

46. Demand is not needed to put the debtor in default, except

a. When demand would be useless
b. When the parties so stipulate
C. When time is of the essence
d. When the fixing of the time is the controlling motive for the establishment of the
contract

47. Culpa aquiliana as distinguished from culpa contractual

a. Proof of due diligence in the selection and supervision of employees is not available
as a defense
b. Proof of the contract and of its breach is sufficient prima facie to warrant recovery
c. The negligence of the defendant is merely an incident in the performance of the
obligation
d. The source of liability is the defendant's negligent act or omission itself

48. Culpa is distinguished from dolo

a. Waiver of an action to enforce liability may be waived
b. Liability may be reduced by the courts
C. There is deliberate intention to cause damage or prejudice
d. Responsibility arising therefrom is demandable

49. A passenger on a truck was hurt but in a criminal case against the driver, said driver
was acquitted. The victim now sues the owner of the truck for culpa contractual. May
the suit still prosper?
a. No, this will constitute double jeopardy
b. No, the acquittal means that the guilt of the accused was not proven by proof beyond
reasonable doubt
C. Yes, it is sufficient for him to prove the existence of the contract of carriage and the
injuries suffered.
d. Yes, provided he can prove the negligence of the driver.

50. If the obligor binds himself to perform his obligation "as soon as he shall have
obtained a loan" from a certain bank. This obligation is
a. With a term
b. With a period
c. With a suspensive condition
d. With a resolutory condition
51. One is not a requisite needed in order that obligation shall be extinguished by loss
or destruction of a thing due
a. When the obligation is to deliver the house located at 123 Recto, Avenue, Manila
b. When the thing is lost without the fault of the debtor
C. When the obligation is to deliver a brand new Honda Str colored orange
d. When the thing is lost before the debtor incurred delay

52. It presupposes not only that the obligor is able, ready and willing but also more so,
in the act of performing his obligation
a. Promissory note
b. Bill of exchange
C. Tender of payment
d. Obligation to sell

53. A gets a loan of P1M from B which becomes due on October 1, 2003 and
mortgaged his house as security for the debt.
On June 30, 2003, the mortgaged house completely destroyed by fire thru the fault of C.
A week later, B demanded payment from A. Is B's demand valid? a. No, the destruction
of the house was not thru the fault of A. b. No, the obligation is one with a definite period
which is deemed intended for the benefit of both the debtor and
creditor C. Yes, the debt becomes demandable unless A can give another security
equally satisfactory
d. Yes, the debt becomes demandable even if A can give another security equally
satisfactory 54. An action to impugn the acts of a debtor intended to defraud the creditor
is
a. Accionreivindicatoria
b. Accionsubrogatoria
C. Accionredhibitoria
d. Accionpauliana

55. A owes B P11,000 due on July 2, 2003. Bowes A P6,000 due on July 3, 2003 and
P4,000 due on July 10, 2003. B owes C P11,000 due on July 3, 2003. On July 3, 2003
B cannot pay C so B assigns to C her credit of P11,000 against A, without the
knowledge of A. On July 10, 2003 C tries to collect from A the P11,000. How much can
C compel A to pay?
a. P11,000
b. P 9,000
C. P5,000
d. P1,000

56. The contract must bind both contracting parties, its validity or compliance cannot be
left to the will of one of them, and this is
a. Mutuality of contract
b. Freedom of contract
C. Relativity of contract
d. Obligatoriness of contract

57. By this principle, contracts take effect only upon the contracting parties, their
assigns or successors in interest
a. Mutuality of contract
b. Freedom of contract
C. Relativity of contract
d. Obligatoriness of contract
58. The statement "Contracts shall be obligatory in whatever from they have been
entered into provided all the requisites
for their validity are present" refers to
a. Consensual contracts
b. Real contract
C. Formal contracts
d. Solemn contracts

59. A contract in which a person literally contracts with himself is

a. Adhesion contract
b. Auto contract
C. Accessory contract
d. Unilateral contract

60. If the obligation of the debtor is "I will pay you my debt after I have arrived from
abroad." The obligation is
a. Valid
b. Void
C. Voidable
d. Unenforceable

61. When a third person assumes the payment of the obligation without the knowledge
of the debtor but with the consent of the creditor, there is
a. Delegacion
b. Expromison
C. Subrogation
d. Novation

62. This obligation is demandable at once

a. With a suspensive condition
b. With a period in diem
C. When my means permit me to do so
d. When it depends on the happening of a specified event

63. The following are void contracts, except

a. A contract whereby X promised to live as the common-law-wife of Y without the
benefit of marriage in consideration of P1,000,000
b. An agreement whereby A is to render service as a servant to B without compensation
as long as A has not paid him
debt.
C. A stole the car of B. Later they entered into a contract whereby B would not
prosecute A in consideration of P100,000
d. A stipulation in a contract of lease whereby the landlord can go to court to eject the
tenant in case of failure of the latter to pay the rent agreed upon.

64. N, R and J solidarily bound themselves to deliver to S a Honda motorcycle valued at

P60,000. The obligation was not fulfilled through the fault of J. Thereupon, S filed an
action in court against N and the court awarded P72,000 to S representing the value of
the motorcycle plus damages. Which of the following situation is valid?
a. If N pays S the P72,000, N can collect from Rand J P24,000 each
b. Shas to collect P24,000 each from N, R and I to satisfy the court's award of P72,000
C. N can refuse to pay the penalty because it should be charged against J, the guilty
party.
d. If succeeds in collecting the P72,000 from N, N in turn can collect from R P20,000
and from J P32,000.

65. A, a jeepney driver driving recklessly caused serious physical injuries to his
passenger B and pedestrian C. As a result, which of the following is not correct?
a. B may proceed against A for culpa criminal
b. B may proceed against A for culpa contractual
C.C may proceed against A for culpa aquilana
d. C may proceed against a for culpa criminal

66. X, a bus driver driving negligently, killed his passenger B and pedestrian C. As a
result
1. B may proceed against X's employer and the source of liability is the crime committed
by A or culpa criminal
2. B may proceed against X's employer and the source of liability is the breach of
contract of carriage or culpa contractual.
3. C may proceed against X's employer and the source of liability is the crime committed
by A or culpa criminal.
4. C may proceed against X's employer and the source of liability is the quasi-delict
committed by A or culpa aquiliana,
a. 1, 2 and 3
b. 1, 2 and 4
C. 2, 3 and 4
d. 1, 2, 3 and 4

67. There is novation of the obligation if

1) The period for payment is shortened from 5 years to 3 years.
2) The period for payment is extended from 3 years to 5 years.
a. True, true
b. True, false
C. False. true
d. False, false

68. In a blank indorsement, the indorser renders himself

a. Primarily liable
b. Secondarily liable
C. Solidarity liable
d. Subsidiary liable

69. Real and personal defenses may be raised between

a. Immediate parties
b. Remote parties
C. Intervening parties
d. Subsequent parties

70. This is a real defenses

a. Fraud is inducement
b. Want of consideration
c. Want of delivery of an incomplete instrument
d. Duress in the absence of physical pressure

71. A, with violence in her eyes, intimidated her husband B to sell his exclusive property
to her. The contract of sale is
a. Rescissible
b. Voidable
c. Unenforceable
d. Void

72. B, husband of A, in his capacity as head of the family, sold a parapheral property in
her name to C, without A's consent.
The contract of sale is
a. Rescissible
b. Voidable
c. Unenforceable
d. Void

73. In 1999, at age 16, A sold his land for P4M payable at P1M in 1999, P1M in 2000,
PIM in 2001 and P1M in 2002. In 2004, A wants to annul the contract on the ground of
minority. Will his action prosper? Rohe te
a. No, A is allowed to ask for annulment of the contract only within 4 years from the
perfection of the contract
b. Yes, A has 4 years counted from the time he becomes of legal age to ask for
annulment of the contract
C. No, the acceptance of the installment payments amounted to ratification of the sale
d. Yes, provided A was then acting in good faith when he sold the property
74. This contract is without effect unless ratified
a. Marriage between first degree cousins
b. Contract of sale between two insane persons
C. Contract of sale between a guardian and his ward
d. Donation between husband and wife

75. A, offered to sell to B 100 cartons of sardines at a specified price which was
accepted by B and subsequently delivered his letter of acceptance. In view of the
shortage of the catch of sardines. A failed to deliver the commodities it had offered for
sale. B decided to sue A. Which is correct?
a. The acceptance of the offer only created an option to buy
b. The absence of consideration distinct from the price makes the contract without any
obligatory force
C. The acceptance of the offer to sell by showing the intention to buy for a price certain
creates a bilateral contract to sell and buy
d. The acceptance of the offer to sell constitute a binding contract of sale provided the
option was supported by a sufficient consideration

76. M makes a negotiable promissory note for P10,000 with the name of the payable in
blank. The note is stolen by P who
inserts his name as payee and then indorses the note to A, then A to B, and B to C, who
is a holder in due course. On maturity, C cannot enforce the note against
a. M
b. P
C. A
d. B

77. A issued a note payable to bearer. He delivers the note to B. B indorsed the note
specially to C, then C negotiates the
note by delivery to D. Which of the following is not correct?
a. D can enforce the note against C.
b. D can enforce the note against B.
c. D can enforce the note against A.
d. C can enforce the note against B.

78. This provision renders a note non-negotiable

a. A promises to pay to the order of B the sum of US $1,000 payable in pesos at the
rate of exchange prevailing on August 14, 2002.
b. A promise to pay B P1,000 with 12% interest thereon.
C. A promises to pay B P1,000 and all costs, charges and expenses including
reasonable attorney's fees.
d. A promises to pay B P1,000 in two equal installments, the first payable on August 14,
2002 and the second on September 14, 2002.

79. Which of the following is not negotiable?

a. I promise to pay B or order P10,000 on or before September 14, 2002 in payment of
the purchase price of the merchandise I bought from him. Sgd. A
b. Pay to the order of B P20,000 on or before September 14, 2002 and charge the same
to my account. To C, Sgd. A
C. Pay to the order of B P30,000 out of my deposit with you. To C Sgd A.
d. Pay to B or order P40,000 for payment under contract of August 14, 2002. To C Sgd.
A

80. The following are negotiable except

a. Drawer A directs drawee B to pay C or order P10,000, 30 days after demand
b. Drawer A directs drawee B to pay C or order P10,000, 30 days after C passes the
CPA board examinations
C. A promises to pay B or order P10,000 within 30 days after the death of C
d. A promises to pay B or order P10,000 on or before August 14, 2002

81. This is not negotiable

a. I promise to pay to the order of myself P10,000 signed by A, the maker
b. Pay to the order of the Commissioner of Internal Revenue P10,000 to ABC bank.
Sgd. A
C. I promise to pay to order P10,000. Sgd. A
d. Pay to the order of X, Y and Z, P10,000. TO B. Sgd. A

82. Every negotiable instrument is presumed to have been issued for a valuable
consideration. The presumption is
a. Prima facie
b. Conclusive
C. Absolute
d. Final
83. A, issued a promissory note payable to B or order for P10,000 for 10 bottles of
whisky sold by B to A. Later B negotiated the note to C. Subsequently, A discovered
that only 5 bottles of whisky are genuine. As a result
a. C can enforce the note against A for P10,000 regardless of whether C is holder in
due course or not
b. C cannot enforce the note against A for P10,000 even if he is a holder in due course
C. C can enforce the note against A only for P5,000 regardless of whether he is a
holder in due course or not.
d. C can enforce the note against A only for P5,000 if he is not a holder in course.

84. Which of the following is not negotiable

a. Documentary Bill of Exchange
b. Clean bill of exchange
C. Certificate of deposit
d. Postal money order

85. It contains an order to pay out of a particular fund rendering the instrument beyond
the scope of the negotiable
instrument law
a. Bill of lading
b. Treasury warrant
C. Certificate of stock
d. Warehouse receipt
86. Omissions that do not affect the negotiability of an instrument, except
a. It is not dated
b. Does not specify the value given
C. Does not specify the place where it is drawn
d. Does not name the payee where the instrument is payable to order

87. A delivered to B the following instrument

"One month after date, I promise to pay to B P10,000. Said A" B indorsed the note in
blank before maturity and delivered it to C for value. When due, A refused to pay and C
sued B. Could C recover from B?
a. No, C could not sue B and hold him liable as an indorser because the instrument is
payable to a specified person.
b. No, the instrument is not negotiable because it is neither payable to order or to
bearer.
C. Yes, provided C to gives notice if dishonor to B, otherwise B is discharged from
liability
d. Yes, the endorsement will be considered as an assignment, hence B will be liable as
an assignor of the instrument

88. A, knowing that there is no such person by the name of B, makes out and signs a
promissory note payable to B or order.
A delivers the note to C. C in turn delivers the note to D without indorsement. Later, D
delivers the note to E, a holder in due course, which of the following is correct?
a. Being payable to order, the note can be negotiated by indorsement and delivery.
b. E has no right to collect from C because a person negotiating an instrument merely
by delivery is liable only to the immediate transferee,
c. E becomes holder only if D will indorse the instrument.
d. The instrument is not negotiable because it is payable to the order of a non-existing
person

89. A makes a negotiable note to bearer and delivers it to B for safe keeping. The note
is negotiated by B to C. Can A refuse to pay C on the ground that the note was
originally delivered to B for a special purpose only?
a. Yes, A can prove that he delivered the instrument to B for a special purpose
b. No, where the instrument is in the hands of any holder, a valid delivery thereof by all
parties prior to him so as to make them liable to him is conclusively presumed.
C. Yes, because B negotiated the note without authority.
d. No, if C is a holder in due course.

90. A made a negotiable promissory note in favor of B who negotiated it to C under the
following indorsements. "Pay to C after passing the CPA examination in October 1999".
At maturity of the note, C presented it to A for payment and it was duly paid, C did not
pass the CPA examination. Which of the following is correct?
a. The promissory note is not negotiable because of the condition imposed.
b. The promissory note becomes negotiable because the condition was satisfied.
C. A had no right to pay C and, therefore can compelled to pay again.
d. A may disregard the condition and make payment whether the condition is fulfilled or
not.

91. When the instrument is complete but undelivered, delivery is presumed to have
been made in favor of the holder, the presumption is
a. Conclusive whether holder in due course or for value
b. Prima-facie whether holder in due course or for value
c. Conclusive if holder for value and prima facie if holder in due course
d. Prima-facie if holder for value and conclusive. If holder in due course

92. The indorser who simply signs his name renders himself liable to all subsequent
holders as
a. Primarily liable
b. Solidarily liable
C. Secondarily liable
d. Subsidiarily liable

93. There is no difference between a holder in due course and one who is not, since as
regards them, real and personal
defenses may always be raised if
a. Intervening parties
b. Remote parties
C. Immediate parties
d. Subsequent parties

94. This is a personal defense

a. Absolute defense
b. Equitable defense
C. Real defense
d. National defense

95. A note reads "I promise to pay B or order P1,000, 30 days after B receives the
proceeds of his loan from ABC bank. Sgd A. The instrument is
a. Subject to a condition
b. Payable at a determinable future time
C. Payable on demand
d. Non-negotiable because the payment is indefinite

96. The following are qualifications of a corporate director, except

a. Must own at least one share of stock
b. Must continuously own at least one share during his term as director
C. Majority of the directors are citizens of the Philippines
d. Ownership of shares must be recorded in the books of the corporation

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

a. The free and ready transferability of ownership
b. The shareholders are not liable for the debts of the business
C. Because of the power of succession, the existence of the entity is not affected by the
personal vicissitudes of the individual stockholders
d. The subservience of minority stockholders to the wishes of the majority subject only
to equitable restraints
98. The drawee bank may not refuse to pay checks drawn against it
a. If there is a "stop payment" issued by the drawer
b. If the drawer is insolvent
c. If the drawer's deposits is insufficient
d. When the bank receives notice of the drawer's death

99. Which of the following is the characteristic of partnership as a contract

a. Preparatory
b. Formal
C. Innominate
d. Gratiutous

100. First statement - If the surplus profits of the stock corporation reaches the level
equal to its paid-up capital, the SEC may compel the corporation to declare dividends,
otherwise it will be liable for a surtax on improperly accumulated surplus.
Second statement - In a corporation, two or more positions may be held concurrently
by the same person except that no one person shall act as President and chairman of
the Board
a. Both statements are true
b. Both statements are false
C. Only the first statement is true
d. Only the second statement is true

101. First statement - The arrival of the term of a partnership with a fixed term or period
shall not dissolve the partnership
if the partners continue with the business of the partnership but such partnership maybe
terminated anytime dependent on the will of the continuing partners.
Second statement - A partnership with a capital of P3,000 or more to money or
property, must be in a public instrument and registered with the SEC in order for the
partnership to be able to maintain an action, in its own name against third party
a. Both statements are true
b. Both statements are false
C. Only the first statement is true
d. Only the second statement is true

102. After 3 years of operation, ABC, a domestic corp. wanted to declare dividends to
its stockholders. The treasurer reported a net income after tax of P4 million. One million
is being appropriated for the acquisition of the machineries to be bought 2 months from
now. The treasurer likewise reported an increase in the value of the land previously
bought to be used as plant site from 3 million to 5 million. What amount of dividend can
be declared by the board?
a. 9 million
b. 8 million
C. 4 million
d. 3 million

103. When the goods are delivered to the buyer on "sale or return" for a period of seven
days, ownership of the goods passes to the buyer,
a. Upon perfection of the contract
b. Upon the delivery of the goods
c. Upon expiration of seven days
d. Upon acceptance by the buyer of the offer of the seller

104. Dacion enpago as distinguished from sale

a. The cause is the price
b. The object exist and is specific
C. There is no pre-existing obligation
d. There is a greater degree of freedom in fixing the price

105. A distribution by a corporation of shares held by it in another corporation is

a. Stock dividend
b. Property dividend
C. Sale of capital assets
d. Sale of treasury stock
106. Any director of a corporation may be removed from office by a vote of
a. Majority of the members of the board
b. Majority of the stockholders present
C. 2/3 of the stockholders present
d. 2/3 of the outstanding capital stock

107. A contract as a rule must be in writing to be valid.

A taxpayer is not entitled to interest on the overpayment of tax subject of a refund
because an obligation derived from
law is not presumed.
a. Both statements are true.
b. Both are false.
C. First is false, second is true,
d. Second is false, first is true

108. D is indebted to C in the amount of P200,000 and delivers to c his diamond ring by
way of pledge. If D sells the same diamond ring to T, when will T acquire ownership of
the same?
a. From the time the sale is perfected between D and T
b. From the time T pays the price to D
c. From the time C consents to the sale between D and T
d. From the time T obtains actual possession of the diamond ring

109. A buyer may sue the seller for breach of warranty against hidden defects of things
a. Within 40 days from delivery of the thing sold
b. Within 6 months from delivery of the thing sold
c. Within 1 year from delivery of the things sold
d. Within 4 years from discovery of the fraud

110. Which of these is not a special form of payment?

a. Application of payment
b. Dacion enpago
c. Cessionenpago
d. Tender of payment and consignation

111. The voting requirement needed in declaring cash or property dividend -

a. Majority vote of the board of Directors
b. Majority vote of the Board of Directors plus the vote of a majority of the outstanding
shares
c. Majority vote of the Board of Directors plus the vote of 2/3 of the outstanding shares
d.2/3 votes of the directors plus a majority of the outstanding shares

112. D borrowed from C P1, 000,000 to secure the payment of which the former
verbally agreed to deliver his 4 hectare agricultural land by way of antichresis and to
pay 12% interest per annum. The contract of loan and antichresis -
a. Are both valid
b. Both null and void
c. The loan is valid but the antichresis is null and void
d. The contract of antichresis is valid, but the loan is null and void.

113. S and B agreed on the sale of a four hectare property at Macapagal Boulevard for
the price of P15,000 per square meter on condition that if the price is not paid on a
particular date, the sale will considered automatically cancelled. On the particular date
agreed upon, B did not pay S, but B never asked for a judicial cancellation nor made a
notarial act of recission. In this case
A. The sale is cancelled as per agreement
b. S can validly refuse any subsequent offer to pay by B
c. B can still pay S the price
d. B cannot anymore pay the price simply because the sale is cancelled due to his
failure to pay on the stipulated date

114. Culpa aquiliana as distinguished from culpa contractual:

a. Proof of due diligence in the selection and supervision of employees is not
considered a defense.
b. Proof of the contract and its breach is sufficient to warrant recovery.
C. The negligent of the defendant is only an incident in the performance of the
obligation.
d. The source of liability is the negligent act of the person causing damage to another.

115.A, B, and C executed a promissory note in favor of D, E, and F in the amount of

P9,000.00. Can the creditors proceed against A for the payment of the entire loan?
a. No, each creditor can only collect P3,000 from A.
b. Yes, anyone of the creditors can collect the entire P9,000 from A.
C. No, each of the creditors can only collect P1,000 from each of the debtors.
d. Yes, because the obligation is presumed to be solidary.

116. In the preceding problem, suppose C is insolvent, can B and A be held liable for
his share in the obligation?
a. Yes, because the obligation is presumed to be joint and several.
b. Yes, but A and B shall be liable proportionately.
C. No, because of their joint liability and therefore the debts are distinct from one
another.
d. No, because only either of them can be held liable for the share of C.

117.Still in the preceding problem, suppose the obligation is mixed solidarity can one of
the creditors demand payment of the whole debt from anyone of the debtors?
a. No, because the debts are distinct and separate from one another.
b. Yes, because it is as if there is only one obligation.
C. Yes, provided all of them demand from all of the debtors.
d. No, because despite solidarity, a debtor is liable only for his share.

118. Indivisibility as distinguished from solidarity:

a. Plurality of subject is indispensable.
b. Refers to the creditors and/or debtors.
c. May either be passive or active.
d. Refers to the prestation which constitutes the object of the obligation.

119.Under the Negotiable Instruments Law, to be holder in due course, a person must
have acquired the instrument before it is overdue. Does this apply to the payee to whom
the maker issued an overdue note?
a. Yes, because the payee is still considered a holder under the law.
b. No, because issuance to the payee is not considered a holder under the law.
c. Yes, because the law does not distinguished between payee and subsequent holder.
d. No, because the payee is privy to the contract between himself and the maker.

120.When one of the parties has brought an action to enforce the contract, he cannot
subsequently ask for its reformation.
The injured party may seek rescission even after he has chosen the fulfillment of the
obligation if the latter should become impossible.
a. True, true
b. True, false
c. False, false
d. False, true

121. The creditor has real right to the fruits of the thing from the time they have been
delivered.
The buyer acquires real right to the fruits of the thing from the perfection of the sale. a.
True, true
b. True, false
C. False, true
d. False, false

122. In a natural obligation, the creditor has the right to enforce the performance thereof
it being based on positive law. cul-enforce Solutioindebiti and negotiorum gestio are
quasi-contracts that give rise to civil obligations.
a. False, false
b. False True
C. True, true
d. True, false

123.An oral sale of land made by its owner is unenforceable.

Sale of land made by an agent without written authority from the owner thereof is void.
a. False, false
b. False True
C. True, true
d. True, false

124.A contract as a general rule must be written to have force and effect as a valid
agreement
A formal or solemn contract is one that must be in writing to be valid.
a. True, true
b. False, false
C. False, true
d. True, false

125. A contract of partnership where immovables are contributed must be in public

instrument to be valid.
A limited partnership must be SEC registered to be valid.
a. False, true
b. True, false
C. False, false
d. True, true

126. The principle of autonomy of contracts means that the contacting parties as a rule
may agree upon any stipulation, clause, term and condition.
Relativity of contracts means that contracts take effect not only between the parties but
also their heirs and assigns.
a. False, false
b. True, true
c. False, true
d. True, false

127. Antichresis must be in writing and involves only immovables.

In pledge and Recto Law there is no deficiency liability.
a. False, false
b. True, true
C. False, true
d. True, false

128.A contract entered into by a minor is void.

A contract where the amount involved exceeds P500.00 must be in writing to be valid.
a. True, true
b. False, false
C. False, true
d. True, false

129.A de facto corporation is one which is not registered with the SEC.
In corporation by estoppel, those who misrepresented themselves as forming a
corporation are liable as general partners.
a. False, false
b. True, true
C. False, true
d. True, false

130.If the obligation is solidary, it means there is mutual guaranty among the debtors
and therefore the insolvency of one is shouldered by the others.
Solidarity may exist although the debtors may not be bound by the same term, condition
and manner of performance.
a. False, false
b. True, true
C. True, false
d. False, true

131. In dation in payment, the creditor becomes the owner of the property ceded as
payment of the debt.
In payment by cession, the creditors do not become the owners but are authorized to
sell the properties assigned to them. a. False, false
b. False, true
C. True, true
d. True, false

132. In tender of payment and consignation, the refusal without valid reason of the
creditor to accept the payment of the debtor will extinguish the obligation.
The third person who paid the obligation without the knowledge or against the will of the
debtor is still entitled to reimbursement from the debtor to the extent of the latter's
benefit.
a. False, false
b. True, true
C. False, true
d. True, false

133.A corporation can be a stockholder but not an incorporator.

To be a de jure corporation, it must be existing in law and in fact unlike a de facto one
which exists in fact but not in law.
a. True, true
b. False, false
c. False, true
d. True, false

134. It is indispensable for quasi-delict to exist that there is no pre-existing contractual

relation between the parties.
The unpaid seller cannot recover the thing sold from an innocent purchaser for value.
a. True, true
b. False, false
C. True, false
d. False, true
135. Which of the following is not an essential element of an obligation?
a. Obligor
b. Efficient cause
C. Presentation
d. Creditor

136. It is an obligation which is based on positive law gives a right to enforce its
performance
a. Natural obligation
b. Civil obligation
C. Moral obligation
d. Legal obligation

137. Which of the following is not a source of an obligation?

a. Law
b. Contracts
C. Delicts
d. Damages
e. Quasi-contracts

138.Obligations derived from law are presumed except those found in the Civil Code or
special laws.
Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith
a. Both statements are true.
b. First if false, second is true.
c. Both are false.
d. First is true, second is false.

139. This is a principal kind of quasi-contract arising out of payment by mistake or

undue performance of an obligation:
a. Solutioindebiti
b. Negotiorum gestio
C. Other quasi-contract
d. Quasi-delict

140. Which of the following is not a civil liability arising from delict?
a. Indemnification for consequential damages
b. Rescission
C. Reparation
d. Restitution

141. In quasi-contract there is no consent of the parties thus preventing a meeting of

minds between them.
In quasi-delict there is no intention on the part of a person doing a wrongful act or
omission causing damage to another
a. First is false statement, second is true.
b. First is true, second is false.
c. Both are true.
d. Both are false.

142. This is the kind of diligence that the obligor must observe in the performance of his
obligation to give something:
a. Diligence of a good father of a family.
b. Extraordinary diligence of a good father of a family.
C. Diligence of a father of a good family.
d. Diligence of a good father of a family even if the law or the stipulation requires
another standard of care.
143. The creditor acquires a real right against the debtor from the time the thing should
have been delivered.
The fruits of the thing shall pertain to the creditor from the time they should have been
delivered to him, that is, he has personal right to demand delivery of the fruits existing
after the obligation to deliver the principal thing arises.
a. Both statements are false.
b. Both are true.
c. First is false, second is true.
d. First is true, second is false.

144. In the obligation to deliver a thing, the debtor has to deliver also the accessories
and accessions if they have been mentioned
In obligation to do, specific performance of the debtor's obligation is not available as a
right of the creditor to demand from the obligor.
a. First statement is false, second is true.
b. First is true, second is false.
c. Both are false
d. Both are true.

145. Which if the following is demand necessary to make the debtor in delay in the
performance of his obligation?
a. When the time of performance is of the essence;
b. When the time of performance has been stipulated;
c. When the law so provides
d. When demand would be useless.

146. Liability foe damages in the performance of an obligation arises from the following,
except:
a. Negligence
b. Acts or omissions punished by law.
C. Delay
d. Fraud

147. Liability for damages arising from fraud is demandable and there can be a waiver
of an action for past fraud.
There can be waiver of an action for future negligence but not fraud,
a. Both statements are false.
b. Both are true.
c. First statement is true, second is false
d. Second is true, first is false.

148.A obliged himself to deliver the cans of powdered milk of B from Pangasinan to
Manila. While his truck was traveling on the North expressway, it was hi-jacked by a
band of robbers who also took the cans of milk belonging to B. Is A liable for the loss of
the goods?
a. No, because they were generic things and as they cannot be lost.
b. Yes, because he was in possession of the same at the time of the loss and therefore
presumed at fault.
C. Yes, because there was no stipulation exempting him from loss in case of fortuitous
event.
d. No, because the loss was due to fortuitous event.

149. In which of the following is the debtor still liable despite the fortuitous event causing
the loss of the thing?
a. The thing lost is a specific thing.
b. The performance of the obligation has become impossible.
C. The nature of the obligation does not require the assumption of risk.
d. When the law or the obligation expressly so provides.

150.D borrowed from C a sum of money with a stipulated rate of interest to be paid in
three equal monthly installments from January to March. D paid an amount for which
the latter issued a receipt stating that the payment is for the month of February. In this
case:
a. The installment for the month of March is also considered paid.
b. The installment for the month of January is conclusively presumed to have been paid.
C. The installment for the month of January is distributably presumed paid.
d. The installment for he month of January is not presumed paid.

151. In the preceding case, suppose the receipt does not mention the payment of the
interest, it is:
a. Conclusively presumed the interest has been also paid.
b. Not presumed paid unless proven otherwise.
C. Prima facie presumed to have been paid.
d. Presumed disputably that only the principal has been paid
.
152. Three of the following are the rights of the creditor against the debtor, who fails to
pay his debt, except:
a. Attachment of the debtor's properties or garnishment thereof;

b. Subrogation to the rights of the debtor against third persons;

C. Rescission of contracts entered into by the debtor to defraud him;
d. Send the debtor to jail for non-payment of his debt.

153. Rights acquired in virtue of obligations are transmissible only if so stipulated by the
parties.
The law of the stipulation of the parties to an obligation may provide that the rights
acquired by virtue thereof are not transmissible,
a. First statement is false, second is true,
b. Second is false, first is true.
C. Both are false
d. Both are true.

54. D borrowed a sum of money from C promising to pay after the arrival of the vessel
"Baliktaran" from Cebu. The vessel failed to arrive due to some fortuitous event and
without the fault of D. D's obligation to pay is subject to a:
a. Suspensive condition and therefore not demandable since the vessel did not arrive,
b. Not a condition nor a period but rather is pure obligation and therefore is demandable
at once.
C. Resolutory condition and therefore extinguished upon the failure of the vessel to
arrive.
d. Period which the court may fix.

155. Impossible, unlawful, immoral conditions are not valid and not demandable except
the obligations which depend upon them.
Potestative condition to be void must both be suspensive and dependent on the debtors
will.
a. Both statements are true.
b. Both are false.
c. First is false, second is true.
d. First is true, second is false,

156. D bound himself to deliver either specific object 1 or object 2 to C. If one of the
objects is lost due to fortuitous event and without the fault of D, the effect is:
a. D may still choose which he shall deliver, only the value of the thing lost if he chooses
the same.
b. D cannot choose because among the prestations whereby he is alternatively bound,
only one is practicable.
C. C may choose which of the objects he wants delivered.
d. Obligation of D has been extinguished.

157. In facultative obligation, only one prestation is due but the creditor may be given
the right of choice as to the prestation to be performed.
In alternative obligation the right of choice is always with the debtor.
a. First statement is false, second is true.
b. First is true, second is false.
C. Both are true
d. Both are false.
158. A, B and C borrowed P3M from D, E and F evidenced by a promissory note
worded as follows, to wit: "I promise to pay
D, E and FP3M. (Sgd) A, B and C "How much can D collect from A?
a. P3M
b. P.5M
C. P1.5M
d. P1M

159. In the preceding case, suppose only D is demanding payment, can A still pay any
one of the creditors?
a. No, because the law provides that payment shall be made to the creditor demanding
payment.
b. No, but in case payment is made to a creditor not demanding payment, only his
share of the credit shall be
extinguished.
C. Yes, because payment can be made to any of the solidary creditors.
d. Yes, because payment proportionately can be made to any of the joint creditors of his
share

160. A, B and C bound themselves to deliver to X a specific car worth P3M. Due to the
fault of A, the car was lost. In this
case:
a. X can claim damages from any one of the three for his proportionate part of liability
because the obligation is
indivisible.
b. X claim only from A the whole amount of damages other than the value of the car.
C. Since it is solidary liabilities for damages, X can claim the same from any of the
three.
d. Only A is liable for damages although B and C are liable for their respective shares in
the obligation

161. In obligation with penal clause, proof of actual damages suffered by the creditor is
essential to enforce the penalty
As a rule, the creditor may demand the payment of the penalty, damages and interest in
case of non-performance of the obligation.
a. Both statements are false.
b. First is true, second is false.
c. Both are true.
d. Second is true, first is false,

162. Dowes C P1M. X, without the knowledge or against the will of D paid C P2M. Can
X get reimbursement from D?
a. P2M by way of reimbursement from D to prevent unjust enrichment on the part of D
at the expense of X.
b. P1M only for that is the extent of benefit of D.
C. No reimbursement because the payment was not proper being without the
knowledge or against the will of D.
d. P1M plus interest from the time of payment until reimbursement.

163. In the preceding case:

There is quasi-contract with the obligation to reimburse the third person insofar as the
payment has been beneficial to the debtor.
There is legal subrogation and therefore in case the debtor fails to reimburse the third
person, the latter may go after the mortgage, guaranty or penalty.
a. Both are false statements.
b. Both are true.
c. First is false, second is true.
d. First is true, second is false.

164. Payment made to a third person is valid to extinguish the obligation of the debtor to
the creditor in the following cases, except:
a. After payment to the creditor, the third person acquires the creditor's right.
b. When the creditor ratifies the payment to the third person;
C. When through the creditor's conduct, the debtor was led to believe that the third
person had authority to receive payment:
d. When the third person is subrogated to the rights of the creditor.
165. The following are special forms of payment, except:
a. Dation in payment
b. Tender of payment and consignation
C. Payment by cession
d. Compensation

166. In application of payment, the creditor as a rule shall decide on what debt shall the
payment be applied.
If the period is for the benefit of the debtor he can apply the payment on a debt although
not yet due.
a. Both statements are false.
b. Both are true.
c. First is false, second is true.
d. First is true, second is false.

167. In dation in payment, the creditor becomes owner of the thing alienated as
payment while in payment by cession, the creditors do not become owners of the
properties of the debtor.
In tender of payment and consignation, the tender of payment by itself shall not
extinguish the obligation. If the creditor receives a check as payment and it has been
impaired through his fault; the debtor/drawer shall be released to the extent of the loss.
a. First statement is true, second is false.
b. First is false, second is true.
C. Both are false.
d. Both are true.

168. Three of the following are essential elements of a contract, except:

a. Cause of the obligation which is established.
b. Consent of the contracting parties.
C. Motive of the parties.
d. Object certain which is the subject matter of the contract.
169. Novation of a contract takes place in three of the following, except:
a. Delegacion
b. Expromision
C. Subrogation
d. Assignment

170. Legal compensation shall exist in the following cases, except:

a. That each one of the obligees be the principal creditor of the other and he be at the
same the principal debtor of the other.
b. That both debts be due.
C. That they may be unliquidated and demandable;
d. That they both consist in a sum of money or if consumable also of the same kind and
quality as that stated.

171. S offered his car to B for P1M and giving the latter one week to decide. B in turn
gave S P1,000.00. In this case, there is:
a. Contract of sale of the car with the P1,000.00 as earnest money.
b. Contract of option with the P1,000.00 as option money.
C. Contract to sell of the car at B's option.
d. Contract to sell of the car at S's option.

172. A advertised in the newspaper his parcel of land wanting to sell the same for P1M.
B personally went to the former with cash in hand to buy the subject parcel of land. In
this case:
a. A cannot anymore reject B as buyer of his land;
b. A can still reject B as an offerer in the purchase of his land,
C. A can reject the offer of B unless he properly consigns with the court his payment for
the land;
d. A cannot evade his obligation as seller to B.

173. The following cannot give consent to a contract, except:

a. Minors, except sale of necessaries in life;
b. Insane persons
C. Demented
d. Minors who represent themselves as of legal age to one in good faith.

174. The contract entered into by the persons who cannot give consent is:
a. Void ab initio because actually there is no consent.
b. Unenforceable only because the contract may be ratified.
C. Rescissible because of the damage caused to the person incapacitated.
d. Voidable as there is consent although vitiated or defective,

175. The following are still valid contracts except:

a. Void
b. Unenforceable
C. Voidable
d. Rescissible

176. A defective contract where damage or lesion is essential is:

a. Rescissible
b. Voidable
C. Unenforceable
d. Void

177. A defective contract because it is prohibited by law is:

a. Void
b. Voidable
C. Rescissible
d. Unenforceable

178. A defective contract because it is entered into in the name of another without or in
excess of authority, or it is verbal
a. Unenforceable
b. Void
c. Voidable
d. Rescissible

179. The following even if not in public instrument are valid, binding, and enforceable,
except:
a. Negotiable instruments
b. Sale of land, either by the owner or agent with written authority
C. Agency, pledge, mortgage
d. Partnership contract wherein immovables are contributed

180. In reformation of instruments, it is necessary that there is meeting of minds of the

parties to the contract, otherwise, annulment of contract shall be the remedy if fraud,
accident, mistake or inequitable conduct prevented the meeting of minds.
In the interpretation of contracts, doubts on the incidental circumstances of onerous
contracts shall be resolved in favor of greatest reciprocity of interest and if gratuitous,
least transmission of rights and interest.
a. Both statements are true.
b. Both are false.
C. First is true, second is false
d. First is false, second is true.

181. A sold to be his dog with the agreement that delivery shall be after one week from
sale and the payment of the price after two weeks from delivery. If the dog shall produce
offspring, it shall belong to:
a. If produced before the sale, it shall pertain to the seller;
b. If the puppy shall exist before the actual delivery, it shall pertain still to the seller;
C. The fruits that shall exist after delivery will only be the ones to pertain to the buyer.
d. The fruits after the sale but before delivery shall pertain to the buyer if so stipulated
by the parties to the sale.

182. A contract of sale of vain hope or expectancy is voidable at the option of the buyer
and the action for annulment
brought within the prescriptive period provided by law.
The sale of a mere hope or expectancy is deemed subject to the condition that the thing
will come into existence. a. Both statements are false.
b. First is true, second is false,
c. Both are true.
d. First is false, second is true.

183. A sold B's car in his (A's) name to C without any authority from B. The contract of
sale is:
a. Rescissible
b. Voidable
C. Void
d. Unenforceable
e. Valid

184. A sold B's car in the name of B without authority to C. The sale is:
a. Rescissible b. Voidable C. Unenforceable d. Void

185. A sold B's car with authority to sell but sold it in his (A's) name. The contract is:
a. Rescissible b. Voidable C. Unenforceable d. Void e. Valid

186. A sold his land to B verbally. The sale is:

a. Rescissible b. Voidable C. Unenforceable d. Void

187. S sold to B his land on January 10, 2001. On January 15, an absolute deed of sale
was executed and notarized. On January 20, the sale was registered with the Registry
of Deeds. On January 25, B took actual possession of the land by building a fence
thereon. When did B acquire ownership of the land?
a. On January 10
b. On January 15
C. On January 20
d. On January 25

188. S sold to B his car on January 10, 2001. On January 15, an absolute deed of sale
was executed and notarized. On
January 20, the sale was registered with the LTO. On January 25, B took actual
possession of the car. When did B acquire title to the car?
a. On January 10
b. On January 15
C. On January 20
d. On January 25

189. S sold to B his car with the agreement to deliver the same one week after the sale
on January 10, 2001. In this case:
a. S may demand within reasonable time from the sale the payment of the price from B.
b. Scan demand payment only after he has delivered the car to B.
C. B may demand delivery of the car even before the expiration of the one week period
agreed upon once he pays the price.
d. Payment and delivery shall take place only after one week from sale.

190. S sold to B his car with the agreement that be will pay the price one week after the
sale on January 10, 2001. In this case:
a. B may demand within reasonable time from the sale the delivery of the car.
b. B may demand delivery only after he has paid the price.
C. S may seek payment of the price once he delivers the car
d. Payments and delivery shall take place only after one week from sale.

191. S sold his car to B. No agreement was made on the time and place of delivery and
payment. Hence:
a. The time and place of delivery shall be at the time and place of payment of the price.
b. The time and place of delivery and payment not having been agreed upon, the sale
shall be void.
C. The seller may demand payment first before delivery of the thing sold.
d. The buyer may demand delivery first before payment of the price.

192. The seller must be the owner of the property he sells but his ownership need not
exist on perfection but upon delivery of the thing
A contract of sale may be absolute; conditional, either suspensive or resolutory; or
subject to a contingency, or undivided interest in property, either present or future
except future inheritance,
a. Both are false statements.
b. Both are true statements.
C. First is true, second is false
d. First is false, second is true.

193. A sold his car for the price of P2M to B who shall pay P.5M and deliver to S his
land as consideration for the sale.
There is:
a. Partly sale and partly barter.
b. Barter
C. Innominate contract
d. Sale

194. S delivers to B his car valued at P2M in consideration of B transferring to S his

land worth P1M and the amount of PIM.
There is:
a. Barter
b. Sale
C. Innominate contract
d. Partly sale and partly barter

195. B ordered from S a pair of shoes of the kind and style of which has gone out of
stock. There is:
a. Contract for a piece of work.
b. Contract of lease of service.
c. Contract of agency.
d. Contract of sale.

196. S sold to B his land valued at P1M only for the price of P.7M, thus resulting to
inadequate price. The sale is:
a. Rescissible
b. Voidable
C. Unenforceable
d. Valid

197. S offered his land to B with the understanding that the latter shall fix the price. B,
as agreed upon fixed the price at P2M, although the land's market value was P1.5M. It
is clear, therefore, that S is to benefit from the transaction. Was there sale?
A. No perfected sale as there was no consent on the price.
b. There was perfected sale, fixed by buyer and accepted by the seller.
C. There's valid sale since the buyer was authorized to fix the price.
d. Voidable sale at the option of the buyer due to mistake in the fixing of the price.

198. Which of the following is not constructive delivery in sale?

a. Traditio longa manu
b. Traditio constitum possessorium
C. Thing is placed in the control and possession of buyer
d. Traditio symbolica
199. In "sale or return", the buyer becomes owner of the thing upon delivery while if "on
approval, trial or satisfaction", after approval, express or implied.
Sale between husband and wife is void, unless there is separation of property between
them in the same way that universal partnership between them is also void.
a. Both statements are true.
b. Both are false.
C. First is false, second is true
d. First is true, second is false.
200. S sold to B his dog without knowledge that the animal was suffering from a disease
at the time of the sale. Is the
seller liable for breach of warranty against redhibitory defect of animals?
a. No, because the seller was in good faith when he sold the animals.
b. Yes, if he were aware of the hidden fault or defect.
c. No, because animals unlike things easily can contact some illness.
d. Yes, and good faith is not a defense to avoid liability.

201. S sold to B a thing without knowledge that the thing suffered from a hidden defect.
The parties agreed on the waiver of the warranty by the buyer. Is the seller still liable for
breach of warranty?
a. No, because of the valid waiver of warranty.
b. No, but he must return the price to the buyer without damages.
c. Yes, because the waiver refers only to liability for damages.
d. Yes, if the seller was in bad faith at the time the waiver was made.

202. S sold to B a thing with waiver of warranty against eviction. Eviction took place
subsequently. Is S still liable for breach of warranty against eviction?
a. No, if it was waiver intencionada
b. No, if it were waiver consciente.
C. Yes, even if it was waiver intencionada.
d. No, provided the seller was in good faith in entering into the contract of waiver of
warranty against eviction.

203. B bought from S a second hand motor vehicle which upon inspection by B had
some mechanical troubles. After the sale, the car broke down due to engine trouble
requiring an overhaul of the engine. Is S liable for breach of warranty against hidden
defect?
a. No, because the defect was not hidden but apparent upon inspection by B it being a
second hand car.
b. Yes, because there was no waiver of warranty against hidden defect.
c. Yes, because the seller was in bad faith.
d. No, because it was the fault of the buyer in buying a used car.

204. In which of the following is sale not presumed equitable mortgage?

a. The price of the sale usually adequate.
b. The vendor remains in possession of the thing sold.
C. The vendor allows the extension of time to repurchase the thing sold.
d. The purchaser retains for himself a part of the purchase price.

205. S sold to B a car on installment wherein the latter mortgaged the same car as
security for the price. Failing to pay the installments, the mortgage on the car was
foreclosed. Is B still liable for any deficiency if the seller fails to recover in the
foreclosure sale?
a. Yes, because it is only in case of pledge is the debtor not liable for any deficiency.
b. Yes, if so stipulated upon by the parties.
C. No, unless agreed upon by the parties.
d. No, notwithstanding any stipulation to the contrary.

206. D mortgaged his car to C as security for a loan. Failing in the payment of the loan,
C foreclosed the chattel mortgage and sold the car at public auction. In case of
deficiency, is D liable for it?
a. Yes, in the absence of contrary stipulation.
b. No, because it would be unjust enrichment on the part of creditor.
C. Yes, if so agreed upon by the parties.
d. No, unless stipulated.

207. Based on the preceding case, suppose it was a pledge, would the debtor/pledgor
be liable for the deficiency?
a. No, notwithstanding stipulation to the contrary.
b. No, unless otherwise stipulated.
C. Yes, if so agreed upon.
d. Yes, even in the absence of stipulation.
208. D mortgaged his parcel of land to C as security for a loan. Fearing foreclosure of
the mortgage due to his inability to pay the loan, D sold the land to X without the
consent of C. Is the sale valid?
a. No, unless there was prior consent of the mortgage.
b. Yes, stipulation prohibiting the sale without the consent of the mortgagee shall be
void.
C. Yes, provided the mortgagee was notified before the sale.
d. No, if there was stipulation requiring prior consent.

209. A, B, C are co-owners of a parcel of land. A sold his share to B. Can C redeem the
said share from B?
a. No, unless he was notified of the sale prior to its perfection.
b. No, legal redemption applies only if the interest was alienated by onerous title to a
third person.
C. Yes, because the law frowns upon co-ownership.
d. Yes, provided he pays b the price, expenses of the sale and necessary and useful
expenses on the thing sold.

210. A and B are co-owners of a parcel land. A donated his share to c. Can B redeem
the said share from C?
a. Yes, because the law looks with disfavor at co-ownership.
b. No, because legal redemption applies only in case of onerous alienation.
C. No, unless he enforced his right through court action.
d. Yes, but in proportion to his interest in the land as co-owner.
211. D owes C a sum of money with M as mortgagor of his land to secure the loan. Is
the mortgage valid even if the mortgagor is not the debtor?
a. Yes, provided the mortgagor or pledgor in case of pledge is the absolute owner of the
property mortgaged or pledged.
b. Yes, provided it is in writing and registered.
C. No, the mortgagor/pledgor must be the debtor himself.
d. No, unless the mortgagor is a co-debtor.
212. A, B, and C entered into an oral contract of partnership each contributing P1M
each to the common fund plus other personal properties of the same amount and failed
to register the partnership with the SEC. Is the partnership valid?
a. No, because every contract of partnership having a capital of three thousand pesos
or more in money or property must be in public instrument and registered with the SEC.
b. Yes, because public instrument is necessary only in case of contributions of
immovables.
C. Yes, because a partnership contract can always be oral.
d. No, because registration with the SEC is essential for a partnership to be valid and
acquire juridical personality.

213. P authorized A, a minor, to sell his car for P1M in cash. A sold the said car to X on
installments at a lesser price of P.9M. P is now repudiating the contract with X on the
ground that he is not bound since X contracted with a minor who exceeded his
authority. Decide.
a. P is liable under the contract because it is enough that the principal is capacitated
since he is the one entering into the contract.
b. P is not liable for the sale on installments since it is unenforceable because his agent
acted beyond his powers.
C. P is not liable because the agent is a minor with whom X contracted.
d. P is liable provided the sale is in cash for PIM.

214. Partners A, B, and C contributed: A-P1M; B-P2M; and C-service. After exhausting
the partnership assets, the creditors still have a claim for P.3M. For how much are the
partners liable to the creditors for the partnership liability?
a. Only A and B are liable equally to the creditors being capitalists.
b. Only A and B are liable at '/3 and 73, respectively.
c. All of A, B, and C are liable pro rata to the creditors,
d. C is not liable being an industrial partner who is exempt from losses.

215. A and B are co-owners of a parcel of land from which they derive profits in equal
sharing being co-heirs in inheritance. Is there a partnership?
a. There is a partnership because of the equal sharing of profits.
b. There is no partnership because co-ownership by itself does not establish a
partnership despite the sharing of profits.
c. There is no partnership since in partnership division of profits is not always necessary
among partners.
d. There is partnership they being co-owners and Co-possessors.

216. A and B are partners in Ace partnership. While A was performing his duties as a
partner in the conduct of the business, he negligently caused damage to X, a third
person. Who shall be liable to X and in what capacity?
a. Only the partnership shall be liable it being a juridical person separate and distinct
from the partners.
b. Only A shall be liable for he is the only one at fault.
C. Both A and B shall be liable solidarily to X.
d. A, B, and the Partnership are all liable solidarily to X.

217. Which of the following is not a prohibition on a limited partner?

a. Surname of a limited partner may not appear in the partnership name.
b. Limited partner may not take part in the control of the business.
C. Limited partner may not contribute service.
d. Limited partner may not constitute his assignee as substituted limited partner.

218. A letter of credit is beyond the scope of the negotiable instrument law, because
a. It is in favor of a specified person or not to order
b. It is an order to pay out of a particular fund
C. It is without an unconditional promise or order to pay a sum certain in money
d. It is not payable on demand or at a fixed or determinable future time

219. A, the registered stockholder of 1,000 shares in ABC Corp., pledged the shares to
B by endorsement in blank of the covering stock certificates and execution of a Dee of
Assignment of Shares of Stock, intended as collateral for a loan of Php1-M that was
also supported by a separate promissory note.
Under these facts, is there a valid pledge of the shares of stock?
a. No, because shares of stock are intangible personal properties whose possession
cannot be delivered and, hence, cannot be the subject of a pledge.
b. No, because the pledge of shares of stock requires double registration with the
Register of Deeds of the principal place of business of the corporation and of the
residence of the pledgor.
C. Yes, because endorsement and delivery of the certificates of stock is equivalent to
the transfer of possession of the covered shares to the pledge.
d. Yes, because the execution of the Deed of Assignment of Shares of stock is
equivalent to a lawful pledge of the shares of stock.

220. ABC Corp. issued redeemable shares. Under the terms of issuance, the shares
shall be redeemed at the end of the 10 years from date of issuance, at par value plus a
premium of 10%. Choose the correct statement relating to these redeemable shares.
a. ABC Corp. would need unrestricted retained earnings to be able to redeem the
shares.
b. Corporations are not allowed to issue redeemable shares; thus, the issuance by ABC
Corp. is ultra vires.
c. Holders of redeemable shares enjoy a preference over creditors.
d. ABC Corp. may redeem the shares at the end of 10 years without need for
unrestricted retained earnings provided that, after the redemption, there are sufficient
assets to cover its debts.

221. A, representing himself as an agent of B for the sale of B's car, approached D who
appeared interested in buying the car. At A's prodding, D issued a crossed check
payable to B for P25,000.00 on the understanding that the check would only be shown
to B as evidence of D's good faith and interest in buying the car. Instead, A used the
check to pay for the medical expenses of his wife in B's a doctor, treated her.
Is B a holder in due course (HIDC)?
a. Yes, B is a HIDC because he was the payee of the check and he received it for
services rendered.
b. Yes, B is a HIDC because he did not need to go behind the check that was payable
to him.
C. No, B is not a HIDC because D issued the check only as evidence of good faith and
interest in buying the car.
d. No, B is not a HIDC because B should have been placed on notice: the check was
crossed in his favor and A was not the drawer.
222. Unknown to the other four incorporators, Enrico (who had been given the task of
attending to the Articles of Incorporation of the proposed corporation, misappropriated
the filing fees and never filed the Articles of Incorporation with the Securities and
Exchange Commission (SEC). Instead, he prepared and presented to the proposed
incorporators a falsified SEC certificate approving the Articles. Relying on the falsified
SEC certificate, the latter began assuming and discharging corporate powers.
a. De jure corporation
b. De facto corporation
C. Corporation by estoppels
d. General partnership

223. Preferred shares cannot vote on the proposal

a. To include other corporate officers in the corporation's by laws
b. To issue corporate bonds
c. To shorten the corporate term
d. None of the above

***END***
BUSINESS LAW: PRE-WEEK LECTURE