REGULATORY FRAMEWORK FOR BUSINESS

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
(GWAPO NOTES)
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 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 c. Second statement is false, first is true.
b. Both are 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 compose, 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. c. First is true, second is false.
b. Second statement is true, first is false d. Both are true
6. A contributed P1M, B contributed P1M, and C contributed services, they agreed to divide the profits and
losses equally. In case of loss of P.3M, for how much, if any, C is 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 Cs 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; c. P1M
b. Just and equitable under the circumstances d. Court to fix his share.
8. Based in the preceding number, what shall be his share in the loss?
a. Equal to the shares of a and B c. P1M
b. Just and equitable under the circumstances 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 increment 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 not 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 unpaid 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 obligations 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 c. Both are true
b. Second is false, first is true d. Both are false
14. Majority of the following must be residents of the Philippines except:

a. Directors c. Incoporators
b. Trustees 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 of charter.
c. It has the right of succession.
d. It has the powers, attributes and properties expressly authorized by law ow incident to its creation
16. In the three of the following cases, all shares have voting rights, except:
a. Election of directors c. Dissolution of the corporation
b. Increase or decrease of capital stock 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 receive 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 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 though 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 have pre-emptive right to the remaining 10,000 shares?
a. Yes, because all the stockholders have pre-emptive rights to all issues of shares of any class in
proportion to their shareholdings.
b. No, because pre-emptive rights does not apply to unissued shares to be issued.
c. Yes, because pre-emptive rights 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 the 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:
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 c. Majority of the stockholders
b. 2/3 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 c. Stockholders
b. Chairman of the board of directors d. Board of directors
24. Three of the following are requisites for the existence of de facto corporation, except:
a. They must be natural persons c. Actual use of corporate powers
b. Attempt in good faith to organize 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 payments 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. The 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 indorses 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 operate to the benefit of C, D, E, and G
b. The notice to C inures to the benefit of F, 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 a 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.
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 instruments 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 international cancellation of the instrument.
c. By payment in due course by the accommodator.
d. By any other act which discharges a simple contract for the payments 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, Bs 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
Cs possession. How much may B still recover from A?
a. P20,000 c. P15,000
b. P10,000 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 to the creditor.
a. Both answers are correct. c. Only the first answer are correct
b. Both answers are wrong 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. 36, 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. 36, 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. 38 and prescription sets in, how much can Y collect from A?
a. P9,000 c. P1,000
b. P3,000 d. P -0-
40. Using No. 39, how much can X collect from A?

a. P9,000 c. P1,000
b. P3,000 d. P -0-
41. Indivisibility as distinguished from solidarity.

a. Plurality of subject is indivisible.
b. When the obligation is converted into one of the 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 instruments, 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 c. False, True
b. True, False d. False, False
43. A source of obligation not arising from law

a. Negotiorum gestio c. Culpa aquiliana
b. Solutio indebiti 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 the different prestations shall completely perform one of them
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 the demand would be useless
b. When the parties so stipulate
c. When the time is to 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 defendants 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 c. With a period
b. 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 SIR 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 more so in the act of performing
his obligation
a. Promissory note c. Tender of payment
b. Bill of exchange d. Obligation to sell
53. A gets a loan of P1M from B which becomes due to 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 Bs 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 creditors
a. Accion reivindicatoria c. Accion redhibitoria
b. Acion subrogatoria d. Accion pauliana
55. A owes B P11,000 due on July 2, 2003. B owes 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. 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 c. P5,000
b. P9,000 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 c. Relativity of contract
b. Freedom 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 c. Relativity of contract
b. Freedom of contract d. Obligatoriness of contract
58. The statement Contract shall be obligatory in whatever from they have been entered into provided all
the requisites for their validity are presents refers to
a. Consensual contracts c. Formal contracts
b. Real contracts d. Solemn contracts
59. A contract in which a person literally contracts with himself is

a. Adhesion contract c. Accessory contract
b. Auto 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 c. Voidable
b. Void 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 c. Subrogation
b. Expromison d. Novation
62. This obligation is demandable at once

a. With a suspensive condition c. When my means permit me to do so
b. With a period in diem 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 considering 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 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 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 R and J P24,000 each
b. S has to collect P24,000 each from N, R and j to satisfy the court s award of P72,000
c. N can refuse to pay the penalty because is should becharged against J, the guilty party.
d. If S 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 aquilana
66. X, a bus driver driving negligently, killed his passenger B and pedestrian C. As a result
1. B may proceed against Xs employer and the source of liability is the crime committed by A or culpa
criminal
2. B may proceed against Xs employer and the source of liability is the breach of contract of carriage
or culpa contractual
3. C may proceed against Xs employer and the source of liability is the crime committed by A or culpa
criminal
4. C may proceed against Xs employer and the source of liability is the quasi-delict committed by A or
culpa aquiliana
a. 1, 2 and 3 c. 2, 3 and 4
b. 1, 2 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.
68. In a blank indorsement, the indorser renders himself

a. Primarily liable c. Solidarily liable
b. Secondarily liable d. Subsidiary liable
69. Real and personal defenses may be raised between

a. Immediate parties c. Intervening parties
b. Remote parties d. Subsequent parties
70. This is a real defense

a. Fraud is inducement c. Want of delivery of an incomplete instrument
b. Want of consideration 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 c. Unenforceable
b. Voidable d. Void
72. B, husband of A, in his capacity as head of the family, sold a paraphernal property in her name to C,
without As consent. The contract of sale is
b. Voidable d. Void
73. In 1999, at age 16, A sold his land for P4M payable at P1M in 1999, P1M in 2000, P1M in 2001 and P1M
in 2002. In 2004, A wants to annul the contract on the ground of minority. Will his action prosper?
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 c. A
b. P 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. c. D can enforce the note against A.
b. D can enforce the note against B 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 promises 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 attorneys 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 promise to pay to order P10,000 within 30 days after death of C
d. A promise to pay to order P10,000 on or before August 14, 2002
81. This is not negotiable

a. I promise to pay 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 c. Absolute
b. Conclusive 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 P10,000even 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 c. Certificate of deposit
b. Clean bill of exchange 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 c. Certificate of stock
b. Treasury warrant 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 B P10,000. Sgd 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 instruments to b for a special purpose
b. No, where the instruments 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
indorsement. Pay to C after passing 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 c. Secondarily liable
b. Solidarily liable d. Subsidiary 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 c. Immediate parties
b. Remote parties d. Subsequent parties
94. This is a personal defense

a. Absolute defense c. Real defense
b. Equitable 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 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 drawers death
99. Which of the following is the characteristic of partnership as a contract

a. Preparatory c. Innominate
b. Formal 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 tax 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 c. Only the first statement is true
b. Both statements are false d, Only the second statement is true
101. First Statement The arrival of the term of a partnership with a fixed term or a 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 c. Only the first statement is true
b. Both statements are false 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 c. 4 million
b. 8 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. This is not a fundamental obligation of the agent

a. To render an accounting of the transaction
b. To subordinate his interest in favor of his principal if there is a conflict of interest
c. To borrow if he is authorized to lend
d. Not to carry out the agency, even if that is the instruction of the principal, he knew it would result is
a loss or damage to his principal
105. Dacion en pago 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
106. A distribution by a corporation of shares held by it in another corporation is

a. Stock dividend c. Sale of capital assets
b. Property dividend d. Sale of treasury stock
107. Any director of a corporation may be removed from office by a vote of

a. Majority of the members of the board c. 2/3 of the stockholders present
b. Majority of the stockholders present d. 2/3 of the outstanding capital stock
108. 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 c. First is false, second is true
b. Both are false d. Second is false, first is true
109. 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
110. 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 thing sold
d. Within 4 years from delivery of the thing sold
111. Which of these is not a special form of payment?

a. Application of payment
b. Dacion en pago
c. Cession en pago
d. Tender of payment and consignation
112. 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
113. 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 to pay 12% interes 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
114. 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 rescission. In this case-
a. The sale is cancelled as per agreement
b. S can validly refuse any subsequent offer to pay 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
115. Culpa aquiliana as distinguished from culpa contractual:

a. Proof of due diligence in the selection and supervision of employees is not considered defense.
b. Proof of 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.
116. 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, because of their joint liability and therefore the debts are distinct from one another.
d. Yes, because the obligation is presumed to be solidary.
117. 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.
118. 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 obligator.
c. Yes, provided all of the m demand from all the debtors.
d. No, because despite solidarity, a debtors is liable only for his share.
119. 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.
120. 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 himself and subsequent maker.
d. No, because the payee is privy to the contract between himself and the maker.
121. 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
122. 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 fruit of the thing from the perfection of the sale.
a. True, True b. True, False c. False, true d. False, false
123. In a natural obligation the creditor has the right to enforce the performance thereof it being based on
positive law.
Solutio indebiti and negotiorum gestio are quasi-contracts that give rise to civil obligations.
a. False, false b. False, true c. True, true d. True, false
124. 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.
125. 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
126. 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
127. 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 the 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
128. Antichresis must be in writing and involves only immovables.

In pledge and recto law there is no deficiency liability.
129. 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.
130. A de facto corporation is one which is not registered with the SEC.
In corporation by estoppels, those who misrepresented themselves as forming a corporation are liable as
general partners.
131. 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.
Solidary 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
132. 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.
133. In tender of payment and consignation the refusal without valid reasons 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 latters benefit.
134. 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
135. It is indispensable for quasi-delict to exist that there is no per-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
136. Which of the following is not an essential element of an obligation?

a. Obligor b. Efficient cause c. Presentation d. Creditor
137. It is an obligation which is based on positive law gives a right to enforce its performance
a. Natural obligation c. Moral obligation
b. Civil obligation d. Legal obligation
138. Which of the following is not a source of obligation?

a. Law b. Contracts c. Delicts d. Damage e. Quasi-contracts
139. Obligations derived from law are not presumed except those found in the Civil code or in 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. c. Both are false.
b. First is false, second is true. d. First is true, second is false.
140. This is a principal kind of quasi-contract arising from out of payment by mistake or undue performance
of an obligation:
a. Solutio indebiti b. Negotiorum gestio c. Other quasi-delict d. Quasi-delict
141. Which of the following is not a civil liability arising from delict
a. Indemnification for consequential damages c. Reparation
b. Rescission d. Restitution
142. 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 c. Both are true.
b. First is true, second is false d. Both are false.
143. 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
144. The creditor acquires a real right against the debtor from the time they 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. c. First is false, second is true
b. Both are true d. First is true, second is false.
145. 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 debtors obligation is not available as a right of the
creditor to demand from the obligor.
a. First statement is false, second is true c. Both are false
b. First is true, second is false d. Both are true
146. Which of the following is demand necessary to make the debtor in delay in the performance of his
obligation?
a. When the time of performance is the essence;
b. When the time of performance has been stipulated;
c. When the law so provides;
d. When demand would be useless.
147. Liability for damages in the performance of an obligation arises from the following, except:
a. Negligence c. Delay
b. Acts or omissions punished by law. d. Fraud
148. 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. c. First statement is true, second is false
b. Both are true d. Second is true, first is false
149. A obliged himself to deliver the cans of powdered milk of B from Pangasinan to Manila.
While his truck was travelling 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
150. 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.
151. 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 disputably presumed paid.
d. The installment for the month of January is not presumed paid.
152. 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.
153. Three of the following are the rights of the creditor against the debtor who fails to pay his debt, except:
a. Attachment of the debtors 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.
154. 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. c. Both are false.
b. Second is false, first is true. d. Both are true.
155. 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. Ds 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.
156. 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. c. First is false, second is true.
b. Both are false. d. First is true, second is false.
157. D bound himself to deliver either specific object1 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.
158. 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. c. Both are true.
b. First is true, second is false. d. Both are false.
159. 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 F P3M. (Sgd) A, B and C. How much can D collect from A?
a. P3M c. P1.5M
b. P.5M d. P1M
160. 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.
161. 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 liabililties for damages, C 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 share in the obligation
162. 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. c. Both are true.
b. First is true, second is false. d. Second is true, first is false.
163. D owes 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 the 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.
164. In the preceding case:

There is quasi-contract with the obligation to reimburse in case the debtor fails 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. c. First is false, second is true
b. Both are true d. First is true, second is false
165. 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 creditors right
b. When the creditor ratifies the payment to the third person;
c. When through the creditors 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.
166. The following are special forms of payment, except:

a. Dation in payment c. Payment by cession
b. Tender of payment and consignation d. Compensation
167. 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 tha payment on a debt although not yet due.
a. Both statements are false. c. First is false, second is true.
b. Both are true d. First is true, second is false.
168. 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. c. All are false.
b. First is false, second is true. d. All are true.
169. Three of the following are essential elements of a contract, except:

a. Cause if 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.
170. Novation of a contract takes place in three of the following, except:

a. Delegacion c. Subrogation
b. Expromision d. Assignment
171. 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 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.
172. 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 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 Bs option.
d. Contract to sell of the car at Ss option.
173. 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.
174. 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
175. 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 no consent although vitiated or defective
176. The following are still valid contracts except:

a. Void c. Voidable
b. Unenforceable d. Rescissble
177. A defective contract where damage or lesion is essential is:

a. Rescissble c. Unenforceable
b. Voidable d. Void
178. A defective contract because it is prohibited by law is:

a. Void c. Rescissible
b. Voidable d. Unenforceable
179. A defective contract because it is entered into in the name of another without or in excess of authority,
or it is verbal is:
a. Unenforceable c. Void
b. Voidable d. Rescissble
180. 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
181. 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. c. First is true, second is false.
b. Both are false d. First is false, second is true.
182. A sold to B his dos 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 of
sale
183. 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. c. First is true, second is false.
b. Both are true. d. First is false, second is true.
184. As sold Bs car in his (As) name to C without any authority from B. The contract of sale is:
a. Rescissble b. Voidable c. Void d. Unenforceable e. Valid
185. A sold Bs car in the name of B without authority to C. The sale is:
a. Rescissble b. Voidable c. Unenforceable d. Void
186. A sold Bs car with the authority to sell but sold it in his (As) name. The contract is:
a. Rescissble b. Voidable c. Unenforceable d. Void e. Valid
187. A sold his land to B verbally. The sale is:

188. A, as agent of P with oral authority, sold Ps land in a public instrument, the sale is:
189. With written authority from his principal, the agent sold verbally the land of the principal. The sale is:
190. Without authority from B, A sold the formers land in Bs name. The sale is:
191. Without authority from B, A sold the formers house in Bs name. The sale is:
192. A, with oral authority from P, sold the latters house in writing. The sale is:
a. Rescissble b. Voidable c. Void d. Unenforceable e. Valid
193. A, agent of P, in excess of authority, entered into a contract in the name of P with X who knew the lack
of authority and P did not ratify the contract. The sale is:
194. 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 c. On January 20
b. On January 15 d. On January 25
195. 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 c. On January 20
b. On January 15 d. On January 25
196. 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. S can 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.
197. 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.
198. 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.
199. The seller must be the owner of the property he sells but his ownership need to 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. c. First is true, second is false.
b. Both are true statements. d. First is false, second is true.
200. 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. Party sale and party barter c. Innominate contract
b. Barter d. Sale
201. S delivers to B his car valued at P2M in consideration of B transferring to S his land worth P1M and the
amount of P1M there is:
a. Barter c. Innominate contract
b. Sale d. Party sale and party barter
202. B ordered from S a pair of shoes of the kind and style of which S has gone out of stock.
a. Contract for a piece of work c. Contract of agency
b. Contract of lease of service d. Contract of sale
203. S sold to B his land valued at P1M only for the price of P.7M, thus resulting to inadequate price. The
sale is:
b. Voidable d. Valid
204. 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 lands 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. Theres 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.
205. 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
206. 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 c. First is false, second is true.
b. Both are false. d. First is true, second is false
207. S sold to B hi 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.
208. 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.
209. 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.
210. 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.
211. 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.
212. 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.
213. D mortgaged his car to C as security for a loan. Failing in the payment of the loan, C foreclosed the
chatted 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
214. 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
215. 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 mortgage shall be void.
c. Yes, provided the mortgage was notified before the sale.
d. No. if there was stipulation requiring prior consent.
216. 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.
217. A and B are co-owners of a parcel land. A donates 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 the 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.
218. 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. It is coupled with interest common to the agent and principal.
d. No, unless the mortgagor is a co-debtor
219. In three of the following cases the agency is not revocable, except:
a. It is a means of fulfilling an obligation already contracted.
b. Bilateral contract depends upon it.
c. It is coupled with interest common to the agent and principal.
d. Partner is appointed manager in the articles of the partnership and removal is without just cause
220. If two or more principal appoint a single agent for a common transaction, the liability of the former
shall be solidary.
If two or more agents appointed by a single principal are jointly liable unless solidarity is stipulated.
a. Both statements are false. c. First is false, second is true.
b. Both are true. d. Second is false, first is true.
221. P authorized A to sell his products with 10% commission and 5% guarantee commission. A sold them
to B who failed to pay despite the diligent efforts of a in collecting. Is A still liable for the purchase price?
a. Yes, because of the guarantee commission given to him.
b. No, because he was not at fault in the collection.
c. No, if he returns the guarantee commission.
d. Yes, and he is not entitled anymore to the commissions.
222. In three of the following cases, the agent can appoint a substitute, except:
a. The principal authorized him to appoint a substitute.
b. The principal did not authorize him to appoint a substitute.
c. There is no stipulation as to the appointment of a substitute.
d. The principal forbids the appointment of a substitute
223. P appointed A and B as his agents for a common transaction and they agreed that the latter shall be
solidary liable to the former for damages in case of violations of their obligations as such. When is the agent
at fault the only one liable for damages even if the solidary has been stipulated?
a. If the other agent is not at fault.
b. Both of them shall be liable always since solidary was agreed upon.
c. If the one at fault shall answer for all the damages.
d. If the one at fault acted in excess of authority.
224. 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.
225. 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 for 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 P1M
226. 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 and 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.
227. A and B are co-owners of a parcel of land from which the derive profits in equal sharing being co-heirs
in inheritance. Is there 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 no partnership they being co-owners and co-possessors.
228. A and B are partners in Ace partnership. While A was performing his duties as a partner in the conduct
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.
229. 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.
230. 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 money
d. It is not payable on demand or at fixed or determinable future time
231. 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 Deed 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 share of stocks?
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 pledgee.
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.
232. ABC Corp. issued redeemable shares. Under the terms of the issuance, the shares shall be redeemed at
the end of 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. 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.
233. A representing himself as an agent of B for the sale of Bs car, approached D who appeared interested
in buying the car. At As 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 Ds good faith and interest in buying
the car. Instead, A used the check to pay for the medical expenses of his wife in Bs clinic after B, 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.
234. 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
represented 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 estoppel
d. General partnership
235. Preferred shares cannot vote on the proposal __________________.

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

REGULATORY FRAMEWORK FOR BUSINESS

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REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

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

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

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

15. Private corporations have the following attributes, except:

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

23. In the matter of management of the corporation, this is supreme:

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

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

27. Which of the following is not negotiable instrument?

30. Which of the following is a negotiable instrument?

32. The negotiable instrument is not discharged:

33. Payment by cession as distinguished from dation in payment

40. Using No. 39, how much can X collect from A?

41. Indivisibility as distinguished from solidarity.

43. A source of obligation not arising from law

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

47. Culpa aquiliana as distinguished from culpa contractual

48. Culpa is distinguished from dolo

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

62. This obligation is demandable at once

63. The following are void contracts, except

67. There is novation of the obligation if

68. In a blank indorsement, the indorser renders himself

69. Real and personal defenses may be raised between

70. This is a real defense

74. This contract is without effect unless ratified

78. This provision renders a note non-negotiable

79. Which of the following is not negotiable?

80. The following are negotiable except

81. This is not negotiable

84. Which of the following is not negotiable

86. Omissions that do not affect the negotiability of an instrument, except

87, A delivered to B the following instrument:

94. This is a personal defense

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

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

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

104. This is not a fundamental obligation of the agent

105. Dacion en pago as distinguished from sale

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

107. Any director of a corporation may be removed from office by a vote of

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

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

112. The voting requirement needed in declaring cash or property dividend

115. Culpa aquiliana as distinguished from culpa contractual:

119. Indivisibility as distinguished from solidarity:

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

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

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

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

136. Which of the following is not an essential element of an obligation?

138. Which of the following is not a source of obligation?

164. In the preceding case:

166. The following are special forms of payment, except:

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

170. Novation of a contract takes place in three of the following, except:

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

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

176. The following are still valid contracts except:

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

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