BUSINESS LAW

BY
SORIANO

Submitted to:

Prof. Ardee Dela Cruz

Submitted by:

Dancel, Regine May

Marty, Ira Rhomela

Flores, Donna
OBLIGATIONS DIAGNOSTIC EXERCISES
TEST 1 MULTIPLE CHOICE. Select the best answer by writing the letter of
your choice.

1. The following are the requisite of an obligation, except:

a. Passive subject, debtor or obligor
b. Active subject, creditor or oblige
c. Efficient cause
d. Demand
2. Obligations may arise from any of the following, except:
a. Contracts
b. Quasi-contracts
c. Law
d. Prestation
3. It is the voluntary administration of the property of another without his
consent.
a. Negotiorum gestio
b. Solution indebiti
c. Quasi-delict
d. Contracts
4. It is a wrong committed without any pre-existing relations between the
parties.
a. Natural obligation
b. Quasi-delict
c. Quasi-contract
d. Crime
5. Unless the law or the stipulations of the parties require another
standard of care, every person obliged to give something is also
obliged to take care of it with:
a. Extra-ordinary diligence
b. Diligence of a father of a good family
c. Diligence of a good father of a family
d. Good diligence of a father of a family
6. The creditor has a right that is enforceable against a definite passive
subject. The right is known as:
a. Personal right
b. Real right
c. Natural right
d. Civil right
7. It is a thing that is particularly designated or physically segregated
from all others of the same class.
a. Generic thing
b. Indeterminate thing
c. Determinate thing
d. Real thing
8. One of the following is determinate thing. Which is it?
a. A cow
b. A horse
c. A Toyota car with engine no. 12345, body no. 35787 and plate no.
ABC 123.
d. A ring with diamond embellishment
9. Demand must be made on the due date of the obligation in order for
delay to exist in one of the following cases. Which is it?
a. When it was stipulated by the parties that demand need not be
made.
b. When the law provides that demand need not be made.
c. When the obligation does not indicate whether demand must be
made or not on due date.
d. When time is of the essence of the contract.
10. This refers on the delay on the part of the creditor.
a. Mora solvendi ex re
b. Compensation morae
c. Mora solvendi ex personae
d. Mora accipiendi
11. There shall be no liability for loss due to fortuitous events in one
of the following cases. Which is it?
a. When the debtor delays.
b. When the parties so stipulated that there shall be liability even in
case of loss due to fortuitous events.
c. When the nature of the obligation requires the assumption of risks.
d. When the obligation is to deliver a determinate thing and there was
no stipulation as to the liability of the debtor in case of loss due to
fortuitous events.
12. The following are the remedies of the creditor to pursue his
claims against the debtor, except to:
a. Pursue the property owned and in possession of the debtor.
b. Exercise all the rights and bring all the actions of the debtor (accion
subrogatoria)
 c. Impugn the acts which the debtor may have done to defraud his
creditors (accion pauliana)
d. Compel the debtor to perform the service in obligations to do.
13. D borrowed P50, 000 from C. C dies before he has collected the
debt leaving S, his son, as heir. Which of the following statements is
correct?
a. S can collect from D although D and C did not agree that the credit
right will pass on to the heirs of C.
b. S cannot collect because the credit right is personal to C.
c. S can collect only f D and C agreed that the credit right will pass on
the heirs of C.
d. S cannot collect because the law prohibits the transmission of the
credit right.
14. D is obliged to give C a specific car if C passes the CPA Licensure
Examination. Ds obligation is an example of:
a. A pure obligation
b. An obligation with a suspensive condition
c. An obligation with a resolutory condition
d. An obligation with a period
15. One of the following obligations is not immediately demandable.
a. Pure obligation
b. Obligation with a resolutory condition
c. Obligation with an in diem period
d. Obligation with ex die period
16. One of the following is a void obligation:
a. D is obliged to give C P5,000.00 if C does not go to the moon.
b. D is obliged to give C P5,000.00 if D does not go to Baguio.
c. D is obliged to give C P5,000.00 if C does not go to Baguio.
d. D is obliged to give C P5,000.00 if D wins first prize in the
sweepstakes on a ticket that he had already purchased.
17. D is obliged to give C P10,000.00 if X dies. This is an example of:
a. An obligation with a suspensive condition
b. An obligation with a resolutory condition
c. An obligation with a period
d. A pure obligation
18. When the debtor binds himself to pay when his means permit
him to do so, the obligation is:
a. An obligation with a resolutory condition
b. A pure obligation
c. An obligation with a suspensive condition
d. An obligation with a suspensive period
19. Whenever a period is designated in an obligation, the said period
shall be presumed to have been established for the benefit of:
a. The debtor
b. The creditor
c. Both the debtor and the creditor
d. Neither of the parties
20. The debtor shall lose the right to make use of the period in the
following cases, except when he:
a. Becomes insolvent.
b. Violates any undertaking in consideration of which the creditor
agreed to the period.
c. Attempts to abscond.
d. Does not furnish any guaranty or security to the creditor.
21. An obligation ceases to be alternative and becomes a simple
obligation in the following cases, except when:
a. The debtor has communicated his choice to the creditor.
b. The right of choice has been expressly granted to the creditor and
his choice has been communicated to the debtor.
c. Among the several prestations that are due only one is practicable.
d. Three prestations are due but one of them is unlawful or impossible.
22. D s obliged to give C a specific watch, a specific ring, or a
specific bracelet. The parties agreed that C will have the right to
choose the thing which will be given to him. Before C could make his
choice, the watch and the ring are lost through Ds fault, successively.
What is the right of C?
a. C may choose the delivery to him of the bracelet, or the price of
watch or the price of the ring plus damages.
b. C cannot choose the price of the watch or the price of the ring
because the said objects have already been lost.
c. C can only choose to have the bracelet because anyway, D can still
perform his obligation.
d. C can only choose to have delivery of the bracelet or the price of
the ring which was the last item that was lost plus damages.
23. D is obliged to give C a specific ring. The parties agreed that D
may give a specific bracelet as substitute. Which of the following
statements is true?
a. If the ring is lost through a fortuitous event before substitution, the
obligation is extinguished.
 b. If the bracelet is lost through a fortuitous event before the
substitution, the obligation is extinguished.
c. If the ring is lost through a fortuitous event after substitution, the
obligation is extinguished.
d. If the ring is lost through the debtors fault after substitution, the
debtor shall pay damages.
24. A, B, C and D are obliged to give V, W, X, Y and Z P20,000.00.
a. V may collect from A P20,000.00
b. V may collect from A P5,000.00
c. V may collect from A P1,000.00
d. V may collect from A P4,000.00
25. A, B, C and D joint debtors, are obliged to give V, W, X, Y and Z,
solidary creditors, P20,000.00.
a. V may collect from B P20,000.00
b. V may collect from B P4,000.00
c. V may collect from B P5,000.00
d. V may collect from B P1,000.00
26. A, B, C and D, solidary debtors, are obliged to give V, W, X, Y and
Z, joint creditors, P20,000.00.
a. V may collect from B P20,000.00
b. V may collect from B P4,000.00
c. V may collect from B P5,000.00
d. V may collect from B P1,000.00
27. A, B, C and D, solidary debtors, are obliged to give V, W, X, Y and
Z, solidary creditors, P20,000.00.
a. V may collect from B P20,000.00
b. V may collect from B P4,000.00
c. V may collect from B P5,000.00
d. V may collect from B P1,000.00
28. A, 25, B, 35, and C, 17, are solidary debtors of X in the amount of
P9,000.00.
a. X may collect from A P9,000.00
b. X may collect from A P6,000.00
c. X may collect from A P1,000.00
d. X may collect nothing because the obligation is voidable, C being a
minor.

29. The following obligations are divisible, except an obligation:

a. To give definite things.
b. Which has for its object the execution of a certain number of days of
work.
 c. Which has for its object the accomplishment of work by metrical
units.
d. Which by its nature is susceptible of partial performance.
30. In obligations with a penal clause, the creditor as a rule may
recover from the debtor in case of breach the following:
a. The penalty as agreed upon, plus damages and interest.
b. The penalty and damages.
c. The penalty and interest.
d. Only the penalty
31. Consider the following statements:
I. The nullity of the principal obligation carries with it the nullity of
the penal clause.
II. The nullity of the principal obligation does not carry with it the
nullity of the penal clause.
III. The nullity of the penal clause carries with it the nullity of the
principal obligation.
IV. The nullity of the penal clause does not carry with it the nullity of
the principal obligation.
a. Statements I and III are true.
b. Statements I and IV are true.
c. Statements II and III are true.
d. Statements II and IV are true.
32. D borrowed from C P50,000.00. the obligation is secured by a
chattel mortgage on Ds Toyota car. Subsequently, D paid C
P20,000.00. unknown to D, T, a third person, pays C P50,000.00
believing that D still owed C such amount.
a. T can recover P50,000.00 from D. if D cannot pay, T can foreclose
the mortgage on Ds Toyota car.
b. T can recover nothing from D because he paid C without the
knowledge and consent of D.
c. T can recover P30,000.00 from D. If D cannot pay, T can foreclose
the mortgage on Ds Toyota car.
d. T can recover P30,000.00 from D. if D cannot pay, T cannot
foreclose the mortgage on Ds Toyota car.
33. The following statements concerning payment by cession are
true, except one. Which is it?
a. The creditors become the owners of the properties of the debtor
that were ceded to them.
 b. Payment by cession extinguishes the obligation only to the extent
covered by the proceeds of the sale of the debtors properties.
c. The debtor must be insolvent.
d. Cession affects all the properties of the debtor except those exempt
from execution.
34. D obtained from ABC Bank a loan of P12,000.00 payable at the
end of 10 years. Before maturity, an extraordinary inflation supervened
causing the value of the debt to fall to P4,000,000.00 on the date of
maturity. On due date, D must pay ABC Bank:
a. P12,000,00.00
b. P4,000,000.00
c. P36,000,000.00
d. P3,000,000.00
35. D borrowed from XYZ Bank P2,000,000.00 payable at the end of
5 years. Before maturity, an extraordinary deflation supervened
causing the value of the debt to rise to P5,000,000.00 on the date of
maturity. On due date, B must pay XYZ Bank:
a. P2,000,000.00
b. P5,000,000.00
c. P800,000.00
d. P20,000,000.00
36. The money or currency which the debtor may compel the
creditor to accept in payment of a debt, whether public or private, is
known as:
a. Notes payable to order
b. Legal tender
c. Bill of exchange
d. Mercantile document
37. The delivery and transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent of performance is
known as:
a. Payment by cession
b. Dation in payment
c. Application of payment
d. Consignation
38. D owes C the following debts: P6,000.00 due on June 12;
P6,000.00 due on June 15; P6,000.00 due on June 18; and P6,000.00
due in June 20. All debts are unsecured except the debt due on June 20
 which is secured by a pledge of Ds diamond ring to C. By agreement,
the benefit of the term on the 4 debts was granted to C. assuming that
D has P6,000.00 on June 18 and is ready to pay C, which of the
following statements is correct?
a. D may apply his payment of P6,000.00 to any of the debts due on
June 12, June 15, and June 18 since they are all due as of June 18.
b. D may apply his payment only to the debt due on June 20 because
it is the most burdensome to him.
c. D must apply the payment proportionately to the debts due as of
June 18 at P2,000.00 each.
d. D may apply the payment to any of the four debts.
39. The offer made by the debtor to pay his obligation to his creditor
is known as:
a. Consignation
b. Tender of payment
c. Application of payment
d. Dation in payment
40. Consignation alone without any tender of payment is sufficient in
the following cases, except:
a. When the creditor is absent or unknown or does not appear at the
place of payment.
b. When the creditor presents the title to the obligation for collection.
c. When without just cause, the creditor refuses to give a receipt.
d. When two or more persons claim the same right to collect.
41. M owes P P10,000.00. the obligation is evidenced by a
promissory note. Subsequently, P assigned the note to A, A to B, B to
C, and C back to M. the obligation of M is extinguished by:
a. Compensation
b. Confusion
c. Condonation
d. The obligation is not extinguished because there was no payment.
42. In order that condonation may extinguish an obligation involving
a movable property whose value exceeds P5,000.00
a. It is sufficient that the condonation and the acceptance are in
writing, even a private one.
b. It is required that the condonation and the acceptance be in a public
instrument.
 c. The delivery of the document evidencing the debt is sufficient since
the property is movable.
d. The condonation and the acceptance may be made orally.
43. One of the following is not a requisite of legal compensation,
which is it?
a. That each one of the obligors be bound principally, and that he be
at the same time a principal creditor of the other.
b. That the two debts be due.
c. That both debts be liquidated and demandable.
d. That the debts are payable at the same place.
44. Henry, husband, and Wilma, wife, are legally separated. By order
of the court which decreed the legal separation, Henry is obliged to
give a monthly support of P10,000.00 to Wilma payable within the first
five days of the month. Wilma owes Henry P10,000.00 by way of a
business loan. On the other hand, Henry has not yet given Wilmas
support of P10,000.00 for this month. Both debts are already due.
Which of the following statements is correct?
a. Both debts are extinguished by legal compensation because both
are already due.
b. Wilma can claim compensation but not Henry.
c. Henry can claim compensation but not Wilma.
d. Neither one may claim compensation because the debts are not of
the same kind.
45. D owes C P10,000.00 with G as guarantor. C, on the other hand,
owes D, P8,000.00. both debts are already due but D is insolvent. In
this case
a. C may collect from G P10,000.00
b. C may collect from G P2,000.00 because a guarantor can set up
compensation as regards what the creditor owes the principal
debtor.
c. C may collect nothing from G because D is insolvent.
d. C may collect P8,000.00 from G.
46. D borrowed P50,000.00 from C. subsequently, D proposed to C
that T would assume his (Ds) debt. C accepted the proposal of D. This
substitution of the debtor is known as
a. Expromision
b. Delegacion
 c. Tradition
d. Dation en pago
47. Refer to the facts of No. 46. Assume also that on due date, T
could not pay because of his insolvency which was in fact subsisting
but was known to D or of public knowledge at the time that D
delegated his debt. In this case
a. C can revive Ds debt because Ts insolvency was already existing
at the time that D delegated his debt.
b. C can revive Ds debt whether or not he (D) was aware of Ts
insolvency since he (D) proposed the substitution.
c. C cannot hold D liable because his (Ds) obligation was extinguished
when he was substituted by T.
d. The novation is void because D did not take steps to determine the
solvency of T when he (D) delegated his debt.
48. D obliged himself to give 5 grams of shabu to C. later, the
parties agreed that D would instead give to C 5 sacks of rice. Which of
the following statements is correct?
a. The novation is void because the original obligation is void. Hence,
C cannot demand the delivery of 5 sacks of rice from D.
b. The novation is valid because the new obligation is valid. Hence, C
can demand the delivery of 5 sacks of rice from D.
c. The original obligation although void is validated by the new
obligation. Hence, C can demand the delivery of 5 sacks of rice from
D.
d. The new obligation is only voidable because had not yet performed
the original obligation at the time of the novation. Accordingly, the
new obligation is binding and C may demand the delivery of 5 sacks
of rice from D until the new obligation is annulled by a proper action
in court.
49. On July 1, 2010, D obliged himself to give C P50,000.00 if C will
marry X on or before December 31, 2010. The condition of the
obligation is a:
a. Positive condition
b. Negative condition
c. Joint condition
d. Impossible condition
50. Refer to No. 49. Which of the following statements is incorrect?
a. The obligation of D is demandable if C marries X on or before
December 31, 2010.
b. The obligation of D is extinguished if it is already January 1, 2011
and C has not yet married X.
c. The obligation of D is extinguished on December 2, 2010 if X dies on
the same date and C has not yet married X.
d. The obligation is demandable if C marries X on January 1, 2011.
51. On July 1, 2010, D obliged himself to give C a specific car if C will
not marry X on or before December 31, 2010. The condition of the
obligation is a:
a. Positive condition
b. Negative condition
a. Divisible condition
b. Impossible condition.
52. Refer to N. 51. Which of the following statements is incorrect?
a. The obligation of D is demandable if C marries X on January 1, 2011.
b. The obligation of D is demandable on December 2, 2010 if X dies on
the same date and D has not yet married X.
c. The obligation of D is demandable if it is already January 1, 2011
and D has not yet married X.
d. The obligation is demandable if C marries X on December 2. 2010.
53. D owes C P5,000.00. T, a third person and without any intention
to be reimbursed by D, paid the debt without the consent of D. C
accepted the payment.
a. The payment did not extinguish the debt of D to C because it was
made without the consent of D.
b. The payment did not extinguish the debt because it was not made
by D himself.
c. The payment is considered valid because it was accepted by the
creditor.
d. The payment may be considered valid if T had the intention to be
reimbursed.
54. A mode of extinguishing obligations up to their concurrent
amount when two persons are principal debtors and creditors of each
other is called:
a. Novation
b. Payment
 c. Compensation
d. Merger
55. D owes C P6,000.00. No date for payment was stipulated by the
parties.
a. C cannot require D to pay because there is no date for payment.
b. C can require D to pay at any time.
c. D is not liable to C because the obligation is void there being no
date of payment.
d. D is not required to pay unless C goes to court and asks the court
to fix a period for the payment.
56. Under a contract executed on November 1, 2010, D obliged
himself to give a specific horse to C on December 10, 2010. On
December 8, 2010, C demanded the delivery of the horse but D did not
comply. The following day, the horse was struck by lightning and died
instantly.
a. The obligation of D is extinguished because the loss is due to
fortuitous event and D was not in default.
b. The obligation of D is not extinguished because D can deliver
another horse.
c. The obligation of D is not extinguished because D was in default.
d. The obligation of D is not extinguished because the demand was not
made on due date.
57. Which of the following is not considered a conditional obligation?
a. D to pay c P5,000.00 as soon as D has the means.
b. D to pay c P5,000.00 if C marries X.
c. D to pay c P5,000.00 if C tops the CPA Examinations.
d. D to pay C if X dies of malaria.
58. The distinction between merger and compensation is that in
merger:
a. The two debts may be payable at different places.
b. Two persons are in their own right debtors and creditors of each
other.
c. The debtor and creditor may agree on the set-off of debts that are
not yet due.
d. The debtor and the creditor refer to only one person.
59. The passage of time as a mode of acquiring or losing a right
including the extinguishment of an obligation is called:
a. Remission
b. Novation
 c. Prescription
d. Merger
60. Legal compensation shall not be proper in three of the following
cases. Which is the exception?
a. Commodatum
b. Civil liability arising from a criminal offense
c. Gratuitous support
d. Bank deposit
61. Cecilia, the owner of a sari-sari store, purchased several bags of
Dulcita candy worth of P5,000.00 from Olga, an authorized dealer of
the product. On due date, Cecilia, who sells the candies at P1.00 each,
tendered her payment to Olga consisting of 5,000 pieces of P1.00
coins.
a. Olga may refuse to accept the payment and demand that she be
paid in bills.
b. Olga may not refuse to accept the payment because what Cecilia
was offering as payment is money circulated in the Philippines.
c. Cecilia may consign the payment in court if Olga refuses to accept
it.
d. The tender made by Cecilia was valid because the P1.00 coins came
from her sales and she had plenty of them.
62. Dominico and Domingo are jointly and severally liable to Crispino
for P100,000.00. the obligation is due on June 30, 2010. On June 25,
2010, Domingo paid the whole amount of the note to Crispino. If
Domingo reimburses Dominico on July 15, 2010, Dominico is entitled to
receive from Domingo:
a. P50,000.00 plus interest from June 25 to July 15, 2010.
b. P50,000.00 plus interest from June 25 to June 30, 2010.
c. P50,000.00 plus interest from June 30 to July 15, 2010.
d. P50,000.00 with no interest because Dominico paid the note
before due date.
63. One of the following statements does not pertain to dacion en
pago. Which is it?
a. Ownership of the thing is transferred to the creditor.
b. The debtor must be insolvent.
c. It does not affect all the properties of the debtor.
d. It does not require plurality of creditors.
64. One of the following does not apply to payment by cession.
Which is it?
a. Ownership of the debtors properties is transferred to the creditor.
b. The debtor must be insolvent
c. It affects all the properties of the debtor except from execution.
d. There are several creditors.
65. A, B and C are solidarily liable to X for P30,000.00. A pays X the
whole amount due. C, however, is insolvent.
a. A alone will bear the share of c who is insolvent since he (A) made
the payment.
b. A can collect from B P10,000.00.
c. A can collect from B P15,000.00.
d. A can demand a refund of P10,000.00 from X pertaining to Cs share
since C is insolvent.
66. Anna Almeda, Belinda Bersola, and Claudia Cabrera executed the
following promissory note:
I promise to pay Dolores Dominguez or order the sum of
P30,000.00 on June 30, 2010.
(Sgd.) Anna Alameda
(Sgd.) Belinda Bersola
(Sgd.) Claudia Cabrera

On June 30, 2010, Dolores Dominguez can collect from Anna Almeda:

a. P10,000.00
b. P30,000.00
c. P20,000.00
d. Nothing, because the note is void since it says I promise but was
signed by three persons.
67. One of the following is a valid obligation. Which is it?
a. D promised to give C P50,000.00 if C will not swim across the Pacific
Ocean.
b. D promised to give C P50,000.00 if D goes to Tokyo.
c. D promised to give C P50,000.00 if C can fly to the moon.
d. D promised to give C P50,000.00 if C gives him 5 grams of
marijuana.
68. An obligation where various prestations are due but the
performance of all of them is required in order to extinguish the
obligation is known as:
a. Alternative obligation
 b. Facultative obligation
c. Conjunctive obligation
d. Simple obligation
69. A, B and C are solidary debtors of X in the amount of P9,000.00.
subsequently, X renounced the share of A. A accepted the renunciation
of his share. On due date, B paid X P6,000.00. B demanded
reimbursement from C but C is insolvent. In this case:
a. B may demand the payment of P3,000.00 from A.
b. B may not demand any payment from A because the share of A had
already been renounced or condoned.
c. B may demand P1,500.00 from A representing As share in Cs
insolvency.
d. B may demand from A P4,500.00 so that their sharing in the total
debt is equal.
70. D is indebted to C for P20,000.00 which is due on June 10. C
owes D 15,000.00 which is due on June 5. On June 8, C assigned his
credit rights to T. D gave his consent to the assignment but did not
reserve his right to the compensation. On June 10, how much may T
collect from D?
a. P20,000.00
b. P15,000.00
c. P5,000.00
d. Nothing.
71. On May 1, 2010, D executed a written undertaking obliging
himself to deliver 100 sacks of rice to C on May 31, 2010. On May 28,
2010, C demanded the delivery of 100 sacks of rice from D but D did
not comply. The following day, a fire of undetermined origin destroyed
Ds warehouse together with about 500 sacks of rice stored therein and
from which D intended to get 100 sacks of rice for delivery to C.
a. Ds obligation to deliver 100 sacks of rice to C is extinguished, the
cause of the loss being a fortuitous event.
b. Ds obligation to deliver 100 sacks of rice to C is not extinguished
because he can get 100 sacks of rice from other sources.
c. Ds obligation to deliver 100 sacks of rice to C is not extinguished
because D was in default.
d. Ds obligation is to pay damages because he was in default.
72. On June 1, 2009, Demetrio obtained a loan of P100,000.00 from
Cornelio. The loan, which is payable on or before June 1, 2010, is
secured by a chattel mortgage on Demetrios brand-new Toyota car
with plate number XYZ 123. On February 1, 2010, while Demetrio was
opening the trunk of his car at the parking lot of a grocery store to
place the groceries he had just purchased, three unidentified men
approached him and took his car at gunpoint. He reported the
carnapping to the authorities but his car has not been recovered.
a. Cornelio may demand immediate payment of the loan unless
Demetrio gives another security therefore.
b. Cornelio may demand payment only on June 1, 2010 because
Demetrio has the benefit of the period and the loss of the car was
due to force majeure.
c. Cornelio may no longer demand payment since the loan was
extinguished by reason of the loss of the car due to fortuitous event.
d. Cornelio may demand immediate payment even if Demetrio offered
another security because the car is determinate and could not be
replaced.
73. The estate of X who died recently, shows among other
documents/contracts, the following:
I. A certificate from Harvard University granting a scholarship to X.
X was subjected to exhaustive examination and interviews before
he was granted the scholarship. He was supposed to start
studying at Harvard in 3 months time.
II. Articles of partnership of XYZ Enterprise showing X as a general
partner.
III. A stock certificate of DEF Corporation showing X as the owner of
P5,000.00 shares of stock.
IV. A promissory not amounting to P100,000.00 executed by M in
favor of X. the note is due after 90 days.

Which of the rights of X arising from the said documents/contacts will

be transmitted to the heirs of X?

a. I and II
 b. II and III
c. III and IV
d. I and IV
74. The following statements pertain to either payment by cession or
dacion en pago.
I. The debtor is insolvent.
II. Ownership of the thing/s is transferred to the creditor/s.
III. Plurality of creditors is required.
IV. Obligations are totally extinguished as a rule.
a. Statement I and IV pertain to payment by cession.
b. Statement I and III pertain to dacion en pago.
c. Statement II and IV pertain to dacion en pago.
d. Statement III and IV pertain to payment by cession.
75. The return of what has been paid by mistake is known as:
a. Solution indebiti
b. Negotiorum gestio.
c. Quasi-delict.
d. Natural obligation.

Items 76, 77, and 78 are based on the following information:

Dolores borrowed P15,000.00 from Consuelo. On due date,

Dolores was not able to pay but she promised to give Consuelo a
specific ring, a specific bracelet, or a specific necklace, in
payment of the debt. Consuelo accepted the offer of Dolores.

76. What kind of obligation is the new obligation of Dolores?

a. Facultative obligation
b. Compound obligation
c. Alternative obligation
d. Simple obligation
77. How was the obligation of Dolores to pay P15,000.00
extinguished?
a. By compensation
b. By novation
c. By confusion
d. By condonation
78. Assume that before Dolores could deliver any of the ring,
bracelet or necklace, the ring and the bracelet were lost successively
through the fault of Dolores. In this case:
 a. Consuelo may demand the payment of the price of the ring or the
price of the bracelet plus damages, or the delivery of the necklace.
b. Dolores may deliver the necklace to Consuelo without any
obligation to pay damages.
c. Dolores may deliver the necklace to Consuelo with the obligations
to pay damages because the ring and the necklace were lost
through her fault.
d. Consuelo may demand the payment of the price of the bracelet
which was the last item that was lost, plus damages.
79. D obtained a loan of P100,000.00 from C. D used the amount as
placement fee for a job in the Middle East. The loan agreement showed
that the loan was payable within one year with interest at 6% per
annum. However, there was no provision saying that the rights and
obligations of the parties would be transmitted to their heirs or
successors-in-interest. Before maturity, D died leaving his son as heir.
Which of the following is correct?
a. C cannot collect from S because no mention was made in the
agreement between D and C that the rights and obligations of the
parties would be transmitted to their heirs.
b. C can collect from S although no mention was made in the
agreement that rights and obligations would be transmitted to the
heirs.
c. C cannot collect from S because the obligation is personal to D.
d. C cannot collect from S because the law prohibits the transmission
of the obligation.
80. Hilario, husband, and Wynona, wife, are legally separated. By
order of the court which decreed the legal separation, Hilario is obliged
to give a monthly support of P20,000.00 to Wynona payable in
advance within the first five days of the month. Wynona owes Hilario
P20,000.00 by way of loan. On the other hand, Hilario has not yet
given Wynonas support of P20,000.00 for the preceding month and
another P20,000.00 for the present month. All the debts are already
due. Based on the foregoing facts, which of the following statements is
incorrect?
 a. If Wynona demands her support for the preceding month, Hilario
may set up compensation as regards the loan that Wynona owes
him.
b. If Wynina demands her support for the current month, Hilario may
claim compensation as regards the loan that Wynona owes him.
c. If Hilario demands the payment of the loan, Wynona may set up
compensation as regards her support for the preceding month that
Hilario owes her.
d. If Hilario demands payment of the loan, Wynona may set up
compensation as regards her support for the current month that
Hilario owes her.
81. One of the following is not demandable at once. Which is it?
a. D to give his car to C. No date was fived by the parties for the date
of the delivery.
b. D to give his car to C until C completes his course in BS
Accountancy.
c. D to give his car to C until X dies.
d. D to give C his car should C enroll in BS Accountancy.
82. D owes C the following debts: P6,000.00 due on January 1;
P6,000.00 due on January 15; P6,000.00 due on January 31; P6,000.00
due on February 15; P6,000.00 due on February 28; and P6,000.00 due
on March 15. All the debts are unsecured except the one on February
28. The parties stipulated that C may demand payment on or before
due date of each debt. Assume that today is February 16. D, however,
has not yet paid any of the debts. He has in possession P6,000.00
which he intends to pay C.
a. D may apply the payment to the debt due on February 28 because
it is the most burdensome to him.
b. D may apply the payment to any of the five unsecured debts.
c. D may apply the payment to any of the four debts that have
become due as of today, February 16.
d. D may apply the payment to all of the debts that have become due
as of today, February 16, proportionately at P1,500.00 each.
83. D made a promise to give a ring to C. Before D could deliver a
ring to C, C borrowed Ds ring. After a week, D demanded the return of
 the ring that he had lent to C. c refused to return the ring claiming that
there was compensation between his obligation to return the ring of D
and Ds obligation to give him a ring. Based on the foregoing facts,
which of the following statements is incorrect?
a. C entitled to claim compensation.
b. C is not entitled to claim compensation.
c. D may oppose the compensation being claimed by C.
d. Only D may claim the compensation should C demand the delivery
of a ring from him (D).
84. Maila made a non-negotiable promissory note with Pia as payee.
Pia assigned the note to Aiko, Aiko signed the note to Bea, Bea
assigned the not to Carmina, Carmina signed the note to Helen, and
Helen assigned it back to Maila.
a. Mailas obligation is extinguished by condonation.
b. Mailas obligation is extinguished by confusion.
c. Mailas obligation is extinguished by compensation.
d. Mailas obligation is not extinguished because the note is not
negotiable.
85. Lafuente is a lessee of Oberons building. Under the lease
contract, Lafuente must pay the monthly rental of P10,000.00 to
Oberon at Oberons office within the first 5 days of the month in
advance. On the sixth month of the lease, Lafuente went to Oberons
office to pay the rental but he as told by Elcano, an employee of
Oberon, that Oberon was confined at the hospital. Elcano told Lafuente
that he could entrust the payment to him. Santiago, a son of Oberon,
who happened to be around, however, demanded that Lafuente must
pay to him claiming that as Oberons son, he was the one authorized to
receive the payment. Given the situation where you do not know to
whom you will give your payment, which of the following mode of
payment would you avail yourself of if you were Lafuente?
a. Dacion en pago
b. Payment by cession
c. Consignation
d. Application of payment
86. D promised to give C 10 sacks of rice when X, Cs father, dies.
The obligation of D to C s:
 a. An obligation with a suspensive condition.
b. An obligation with a resolutory condition.
c. An obligation with a period.
d. A pure obligation.
87. D bought a plane ticket for Hong Kong from Wings Travel
Company. Later, however, D cancelled his flight to Hong Kong because
of the SARS epidemic in the place. Upon being informed of the
cancellation, Wings Travel told D that D could get the refund of his
plane ticket within two days. In the meantime, D thought of going
instead to Australia so he called Wings Travel to send him a ticket for
Brisbane promising to pay the cost of the ticket in two days. Assuming
that the refund due to D for his unused plane ticket to Hong Kong is of
the same amount as the cost of his plane ticket to Australia, D two
days later need not pay Wings Travel by reason of:
a. Confusion.
b. Novation.
c. Compensation.
d. Condonation.
88. On a certain year, D was obliged under a contract executed on
March 1 to deliver an agricultural land to C on April 1. D, however,
actually delivered the land and the fruits thereof to C on May 1. C had
the right to the fruits of the agricultural land beginning on:
a. March 1
b. April 1
c. May 1
d. The period should be fixed by the court so that it can be determined
when C is entitled to the fruits.
89. Refer to the foregoing number. C became the owner of
agricultural land and the fruits thereof on:
a. March 1
b. April 1
c. May 1
d. The period should be fixed by the court so that it can be determined
when C actually became the owner of the agricultural land and its
fruits.
90. The right of C before the delivery, on one hand, and his right
after the delivery, on the other hand, of the agricultural land and its
fruits, to him are referred to as:
a. Personal right and real right, respectively.
b. Real right and personal right, respectively.
c. Both are considered a personal right.
d. Both are considered real right.
91. Assuming that in No. 88, D did not deliver the land and its fruits
to C. instead, he delivered the same to X, who was in good faith when
he acquired the land and its fruits, on April 30.
a. X is the rightful owner of the land.
b. C is the rightful owner of the land.
c. C has a right of action against X.
d. C cannot ask for damages against D.
92. Which of the following is not a proper remedy for the creditor?
a. To compel the debtor to make the delivery, if the obligation is to
deliver a determinate thing.
b. To ask that the obligation be complied with at the expense of the
debtor, if the obligation is to deliver a generic thing.
c. To compel the debtor to perform the obligation, if the obligation is
an obligation to do.
d. To ask the debtor that what has been done be undone, if the
obligation is an obligation not to do.
93. The delivery of the creditor of mercantile documents such as
checks shall produce the effect of payment:
a. Upon the delivery.
b. When they have been cashed.
c. When through the fault of the debtor they have been impaired.
d. When they are deposited in the bank.
94. Which of the following statements concerning delay is incorrect?
a. There is no delay in obligations not to do.
b. Delay, as a rule, exists, when the debtor does not perform his
obligation on the date it is due.
c. Demand, as a rule, is required, in order for delay to exists.
d. When time is of the essence of the contact, delay on part of the
debtor exists despite the absence of demand.
95. When the debtor and the creditor agree to a dacion en pago
(transfer of ownership of property to the creditor to settle a monetary
obligation), before such transfer of ownership, there is actually a:
 a. Compensation
b. Confusion
c. Condonation
d. Novation
96. The delivery of mercantile documents such as checks will
produce the effect of payment:
a. When through the fault of the creditor they have been impaired.
b. Upon delivery of the mercantile document.
c. When they are certified by the bank.
d. When they are presented to the bank for payment.
97. XYZ is a cooperative store. On July 1, 2010, it paid the
Government of the City of Manila certain taxes believing that it owed
the same. After six months, XYZ learned that it was not subject to the
said taxes. Accordingly, it sought to recover the said taxes it previously
paid. The obligation of the Government of the City of Manila to return
the said taxes paid is based on:
a. Negotiorum gestio.
b. Solution indebiti.
c. Quasi-delict.
d. The Government is exempt from giving tax refunds.
98. S sold 100 bottles of imported Fundador brandy to B who paid
immediately the price thereof amounting to P20,000.00. S promised to
deliver the brandy to B within one week from their agreement. On the
agreed date of delivery, S delivered to B 100 bottles of fake
Fundador brandy. The contract between S and B is:
a. Voidable
b. Void
c. Valid
d. Rescissible
99. D obtained a loan from C amounting to P50,000.00 which is
payable in 10 equal monthly installments. The loans bears interests of
1% per month which D agreed to give to T, a student whom C is
sending to school. To secure the loan, D executed a chattel mortgage
on his car. Although D has been paying the monthly interest to T, D
could not pay any of the installments due. In view thereof, D proposed,
and C accepted that D should give instead a diamond ring to C in place
of the loan of P50,000.00 within two months from their new
 agreement. T, however, was not notified of the new obligation. Based
on the forgoing facts, which of the following statements is incorrect?
a. Ds obligation to give C P50,000.00 is extinguished by novation.
b. The accessory contract of the chattel mortgage is extinguished by
the new agreement between D and C.
c. T is a party to the original agreement between D and C.
d. The new contract did not extinguish Ds liability to pay interest to T.
Alternative obligation and facultative obligation are similar in which
of the following respects?
100. Alternative obligation and facultative obligation are similar in
which of the following respects?
a. The right of choice may be given either to the debtor or creditor.
b. Several prestations are due.
c. Only one prestation is due but the debtor may render another in
substitution.
d. The obligation becomes a simple obligation once the choice of
the prestation is made and communicated.
101. D borrowed P5,000.00 from C. the obligation is payable in full
after 30 days. In which of the following cases is D justified in making a
consignation of his payment in court?
a. If C refuses to accept the payment in the form of a check which
is certified by the bank to be supported by sufficient funds.
b. If C refuses to accept the payment consisting of 5,000 pieces of
P1.00 coins.
c. If C refuses to accept the first instalment in the form of a
P1,000.00 bill, D promising to pay the balance of the debt in 4
equal monthly installments.

d. If C refuses to accept the payment consisting

of 250 pieces of P20.00 bills.

102. Which of the following condonations will not

extinguish the debtors obligation?
 a. The condonation is in a public instrument. The
acceptance is made orally. The condonation involves
a computer printer whose value is P4,000.00.

b. The condonation and the acceptance are in a public

instrument. The condonation involves a parcel of
land.

c. The condonation and the acceptance are made orally

with the creditor delivering to the debtor
simultaneously the promissory note amounting to
P10,000.00.

d. The condonation is in a public instrument. The

acceptance is made in a private instrument. The
condonation involves a television set worth
P20,000.00.

103. In which of the following independent cases is the

payor of the debtors debt not subrogated to the rights of
the creditor?

a. D owes C P10,000.00. The debt is secured by a

pledge of Ds ring to C. D also owes X, P8,000.00. X
pays C P10,000.00 without the knowledge of D.

b. D owes C P10,000.00. the debt is secured by a

pledge of Ds ring to C. X pays C P10,000.00 with the
consent of D.

c. D owes C P10,000.00. the obligation is guaranteed by

G. G pays C P10,000.00 without the knowledge of D.
 d. D owes C P10,000.00. The obligation is guaranteed
by G. X pays C P10,000.00 without the knowledge of
D.

104. S sold his only horse to B for P10,000.00 cash. The

parties agreed that S shall deliver the within one week from
their agreement. Nothing is mentioned in the agreement on
how the horse will be cared for by S before delivery.

a. S must take care of the horse with the diligence of a

good father of a family before delivery.

b. S need not take care of the horse because nothing

was mentioned in the agreement on how the horse
will be cared for.

c. S must take care of the horse with extraordinary

diligence.

d. The absence of a stipulation on how the horse must

be cared for renders the sale void because such
stipulation is an essential element of the contract.

105. D owes C the following debts: P3,000.00 due on

August 10; P3,000.00 due on August 15; and P3,000.00 due
on August 25which is secured by a pledge of Ds ring. If
today is August 22, and D pays C P3,000.00 with neither D
nor C designating the debt to which the payment shall pay,
the payment shall be applied:

a. To the debt due on August 10, following the first-

due, first-pay basis.
 b. To the debts due on August 10, August 15, and
August 20, proportionately at P1,000.00 each.

c. To the debt due on August 25, since it is the most

onerous to D.

d. To all the debts proportionately at P750.00 each.

106. M executed a promissory note payable to P for

P100,000.00. the note, which bears interest at 2% per
month, is payable after 60 days. On the date of maturity, P
proceeded to Ms place to collect but when M demanded
the presentation of the promissory note, P could not
present it claiming that it had been lost. M is able and
willing to pay the whole amount due including the interest
but he is at loss on what to do because P does not have the
instrument. On the other hand, if he does not pay the
amount due, the interest on the principal will continue to
accrue. If you were M, the remedy that you will likely avail
yourself of is:

a. Dacion en pago

b. Payment by cession

c. Consignation

d. Application of payment

107. A, B,C, and D owe X, Y and Z the sum of P12,000.00.

based on the foregoing data, which of the following
statements is incorrect?
 a. The obligation is joint.

b. There are seven distinct debts in the obligation.

c. Each debtor is liable only for a total P3,000.00.

d. Each creditor is entitled to collect a maximum of

P4,000.00.

108. P took a public bus in going to his office. Although P

paid his fare, the bus conductor does not issue to him a
ticket. Along the way, the met an accident causing a slight
injury to P and other passengers. If P is to recover damages
from the bus owner, the source of the bus owners liability
is:

a. Contract

b. Quasi-delict

c. Law

d. P cannot recover any amount because no ticket was

not issued.

109. One of the following obligations is void. Which is it?

a. D to give C P50,000.00 if C does not run 100 miles

without stopping.

b. D to give C P50,000.00 when D has the means.

c. D to give C P50,00000 if D buys a brand-new car.

 d. D to give C P50,000.00 if C runs for barangay
chairman next year.

110. Which of the following obligation is a pure obligation

and is demandable at once?

a. D to allow C to use Ds car until December 31, 2011.

b. D to allow C to use Ds car until C finishes his course

in accounting.

c. D to give C his car. No mention is made when D shall

give the car.

d. D to give C a car if C finishes his course in

accounting.

111. On January 1, 2010, D obtained a loan of P100,000.00

from C. the loan is secured by a chattel mortgage on Ds
car and is payable on December 31, 2010. On September
26, 2010, the car was taken at gunpoint from D while he
was starting its engine at the parking lot of a department
store.

a. Ds loan obligation is extinguished. However, D must

give a property which C may sell to satisfy his claim.

b. Ds loan obligation is subsists. However, C may

demand its immediate payment unless D gives
another security.
 c. Ds loan obligation subsists. However, C may not
demand immediate payment since the loss of the
security was without the fault of D. D, moreover, is
not required to give a new security.

d. Ds obligation is extinguished together with the

mortgage since the loss of the car was without the
fault of D.

112. A and B are the owners of adjacent poultry and

piggery farms. One day, B got sick and failed to visit the
farm. When A noticed that B was not again around during
the second day, he himself took care of the animals by
feeding them and cleaning the pig and poultry pens. A did
this for the next three days until B returned. A incurred
necessary and useful expenses amounting to P5,000.00 in
the process. Under the circumstances, B is obliged to
reimburse A for such expenses which the latter incurred by
reason of:

a. Contract

b. Solutio indebiti

c. Negotiorum gestio

d. Quasi-delict
113. D has a savings deposit with XYZ Bank in the amount
of P20,000.00 which D may withdraw anytime from the
bank. He also has a loan obligation to XYZ Bank amounting
to P20,000.00 which has become due. D wants to withdraw
his savings deposit but XYZ Bank informs D that it has
claimed compensation of Ds deposit and his loan
obligation.

a. Both D and XYZ Bank may claim compensation.

b. Neither D nor Xyz bank may claim compensation

c. Only D may claim or oppose compensation

d. Only XYZ Bank may claim or oppose compensation

114. Which of the following is an indivisible obligation?

a. To give a rendition tonight of Handels Messiah in a

concert at the Folks Arts Theater.

b. To construct a pavement measuring 2 meters wide

and 10 meters long.

c. To lecture for 5 Saturdays in a tax seminar.

d. To pay a loan obligation of P100,000.00 in 10 equal

monthly installments.
115. Devera obtained a loan of P50,000.00 from Centeno
who is engaged in the business of financing. The written
contract of the parties provides that the loan shall bear
interest of 12% per annum and shall be paid in full together
with the interest at the end of 12 months at Centenos
business office. On due date, Devera proceeded to
Centenos business office to pay his debt but the place was
padlocked and shows no signs that it had been occupied for
some time. Devera is now at a loss on what to do as
Centeno did not forward his present address to him. Devera
does not want to have any outstanding obligation at the
end of the year and incur further interest. Which course of
action will you recommend to Devera?

a. Tender of payment

b. Compensation

c. Consignation

d. Application of payment

116. D borrowed P100,000.00 from C. the parties agreed

at the time the obligation was constituted that should D so
desire, he may give his agricultural land to C by way of
dacion en pago to pay his loan obligation on due date. The
obligation of D to C is:

a. A conjunctive obligation

b. A simple obligation

c. An alternative obligation
 d. A facultative obligation

117. One of the distinctions between a facultative

obligation and an alternative obligation is that in an
alternative obligation.

a. Only one thing is principally due.

b. The right of choice belongs to the debtor alone.

c. If the obligation to give a principal thing is void, the

obligation to give the substitute is also void.

d. If all prestations except one are impossible, that

which is possible must still be given.

118. D stole the carabao of C. D was arrested, tried in

court and convicted. Aside from being sentenced to a
prison term, D was also ordered by the court to return the
carabao. However, the carabao died before D could deliver
it to C.

a. D is not liable to C if the cause of the death of the

carabao is a fortuitous event.

b. D is liable to C only if the carabao died because of Ds

fault.

c. D is liable to C whatever may be the cause of death

of the carabao.
 d. D has no liability to C whatever may be the cause of
the death of the carabao because his obligation to
return the carabao was due to an order of the court
and not on his own volition.

119. Under a contract between 0 and C, D is obliged to

deliver 10 bags of detergent soap to C 10 days after the
execution of their agreement. On due date, D delivered to
C 10 bags of detergent soap which he mixed with chalk.

a. The contract entered into between D and C is

voidable because of the.-fraud employed by D.

b. The contract is valid. The fraud employed by D

does not affect the validity' of the contract but D is
obliged to pay damages to C.

c. The contract is void because of the fraud employed

by D in the performance of his obligation.

d. The contract is rescissible because of the damages

suffered by C.

120. D obtained a loan from C in the amount of

P50,000.00. Unable to give cash on due date in payment of
his loan obligation, D proposed to C that he would be
giving instead his diamond ring to settle his debt. C agreed
and accepted the ring from D. The new agreement
between D and C involved both:

a. Novation and application of payment.

b. Novation and dacion enpago.

 c. Compensation and payment by cession.

d. Confusion and tender of payment.

121. Salas and Bersamin entered into a contract whereby

Salas would deliver 5 pieces of genuine Rolex wristwatches
to Bersamin. Salas proposed to Bersamin that should Salas
deliver 5 units of fake pieces of Rolex wristwatches by
reason of financial difficulties on his part, Bersamin would
not sue him for damages on the ground of fraud. Bersamin
accepted the proposal. On due date, Salas delivered 5
pieces of fake Rolex wristwatches. Upon discovery of the
fraud, Bersamin sues Salas for damages. Salas contends
that he cannot be held liable for damages because
Bersamin waived his right to hold him (Salas) liable on the
ground of fraud if the reason thereof is the financial
difficulties of Salas.

a. Bersanding cannot sue Salas for damages because

the reason for the waiver is valid, i.e., financial
difficulties of Salas, which is a valid reason for the
waiver.

b. Bersamin can sue Salas for the annulment of the

contract since it is voidable.

c. Bersamin can sue Salas for damages because the

waiver he made is void. Nonetheless, the contract is
valid.

d. Bersamin can sue Sales for the rescission of the

contract since it is rescissible.
122. B ordered 10 boxes of "X" shirts worth P2,000.00 per box from S
paying immediately the total, price of P20,000.00. While inspecting the
goods after their delivery to his store, discovered that one box was
missing. Upon being informed, apologized for the error and promised to
refund the price ofP2,000.00 within three days as there was no more
stock of "X" shirts available. In the meantime, B ordered and received
from Sone box of "Y" shirts which was also worth P2, 000.00 promising
to pay the same within three days. On the third day, assuming that S
had not yet refunded the price of the undelivered "X" shirts to B, B
need not pay S the price of "Y" shirts by claiming:
a. Consignation.
b. Compensation.
c. Condonation.
d. Novation.
123. The following are obligations with a term or period, except?
a. D to give C P50, 000.00 on December 1, 2011.
b. D to give C P50, 000.00 on Christmas day next year.
c. D to give C P50, 000.00 upon the death of C's father.
d. D to give C P50, 000.00 if C's father dies within 2 years.
124. A, B and C are liable, in solidum to X for P12,000.00. X renounced
the share of A who accepted it. Later, B becomes insolvent.
a. X can collect from C P8,000.00.
b. X can collect from C P4,000.00.
c. X can collect from C P12,000.00.
d. X can collect nothing from C.
125. Ace Realty Company (Ace) ordered6units of "Bordenoftypewriters
from Central Office Machines (Central) at the priceunitsP8,000.00 per
unit. However, Central delivered to Ace 6 units of "Remington"
typewriters, a superior brand, which was priced P8,500,00 per unit.
Central informed Ace that it will bill the latter for the Remington
 typewriters at P8,000.00 only. Ace refused to accept the "Remington"
typewriters.
a. Central can compel Ace to the accept the "Remington"
typewriters since they are of superior quality.
b. Central cannot compel Ace to the accept the "Remington"
typewriters although they are of superior quality.
c. Central can compel Ace to accept the "Remington" typewriters
since Ace is required to pay only the price of "Borden"
typewriters.
d. Central can compel Ace to accept the "Remington" typewriters
since all that is required of Central is to deliver a typewriter that
can perform the same function as the one that was ordered.
126. Prime Engineering Review Center (PERC) stated in the leaflets it
distributed last January that any reviewee who places first in licensure
examinations for engineers this year will receive a cash prize of
P150,000.00.
a. The obligation of PERC is subject to a suspensive condition.
b. The obligation of PERC is subject to a resolutory condition.
c. The obligation of PERC is a pure obligation.
d. The obligation of PERC is an obligation with suspensive period.
127. Three of the following statements pertain to natural obligation.
Which one does not?
a. It is not enforceable in a court of justice.
b. Obligation exists by reason of equity and moral justice.
c. If performed voluntarily, recovery can no longer be made.
d. There is juridical necessity to perform
128. D has a grains warehouse in Davao, while C has a grains in Cebu.
D borrowed10sacks of rice worthP10,000.00 from C for D's customer in
Cebu. Later, C borrowed sacks of rice which was also worth P10,000.00
from D for C's in Davao. Both the obligations are already due. Transport
 costs to Davao amount to P1,000.00, while those for Cebu amount to
P800.00.
a. D and C need not pay each other since their debts compensated
each other.
b. D and C need not pay each other since their debts compensated
each other, except for the delivery charges which C must pay to
D in the amount of P200.00(P1,000.00 less P800.00).
c. Compensation cannot take place because the debts are payable
at different places.
d. D must pay C P10,800.00, while C must pay D P11,000.00.
129. D owes C P20,000.00 due on March 25. C, on the other hand,
owes D the following debts: P8,000.00due on March1,P3,000.00 due on
March 8, P5,000.00 due -on March 14, andP2,000.00 due on March 24.
On March 18 , C assigned his credit right to T without informing D who
learned of the assignment on March 20. On March 25, T may collect
from D:
a. P20, 000:00.
b. P2, 000.00.
c. P4,000.00.
d. None, because the assignment made by C was without tthe
knowledge of D.
130. D owes C P20,000.00 due on March 15. C, on the other hand,
owes D the following debts: P8,000.00 due on March 1,P3,000.00 due
on March 8, P5,000.00 due on March 14. On March 12, C assigned his
right to T with notice to D but with D not giving his consent to the
assignment. On March 15, T can collect from u:
a. P20,000.00.
b. P9,000.00.
c. P4,000.00.
d. None, because the assignment made by C was without the
consent of D.
 131. On December 1, 2009, Miss Santos, a professor of Manila
College, engaged the services of Lepanto Transport to bring her class
to Calamba, Laguna in time for the Rizal Day celebration on December
30, 2009 which would start at nine o'clock in the morning, The contract
signed by the parties specified that a bus would be in the school
premises at six o'clock in the morning and would leave at exactly 6:320
a. m. However, Lepanto Transport failed to send a busy on the date,
time and place agreed upon.

CONTRACTS- DIAGNOSTIC EXERCISES

TEST 1 MULTIPLE CHOICE. Select the best answer by writing the letter of
your choice.

1. A meeting of minds between two persons whereby one binds himself

with respect to the other to give something or to render some service
is known as:
a. Obligation
b. Consent
c. Contract
d. Stipulation
2. The stages of a contract according to the order of their accurence are:
a. Birth, conception, and consummation
b. Conception, consummation, and birth
c. Conception, birth, and consummation
d. Consummation, conception, and birth
3. The elements of a contract without which a contract would not exist
are known as:
a. Accidental elements
b. Natural elements
c. Special elements
 d. Essential elements
4. Consensual contract has the following essential elements:
a. Consent of the contracting parties, object certain and cause or
consideration.
b. Consent of the contracting parties, object certain, cause or
consideration and delivery of the object.
c. Consent of the contracting parties, object certain, cause or
consideration and formalities required by law.
d. Consent of the contracting parties, object certain, delivery of the
object, and formalities required by law.
5. A real contract has the following essential elements:
a. Consent of the contracting parties, object certain and cause or
consideration
b. Consent of the contracting parties, object certain, cause or
consideration and delivery of the object
c. Consent of the contracting parties, object certain, cause or
consideration and formalities required by law
d. Consent of the contracting parties, object certain, delivery of the
object, and formalities required by law
6. A solemn or formal contract has the following essential elements:
a. Consent of the contracting parties, object certain and cause or
consideration.
b. Consent of the contracting parties, object certain, cause or
consideration and delivery of the object.
c. Consent of the contracting parties, object certain, cause or
consideration and formalities required by law.
d. Consent of the contracting parties, object certain, delivery of the
object, and formalities required by law.
7. Elements that accompany certain contracts unless set aside or
suppressed by the parties are known as:
a. Natural elements
b. Accidental elements
c. Essential elements
d. Original elements
8. The warranty against hidden defects in a contract of sale is an example
of:
a. Natural elements
b. Accidental elements
c. Original elements
 d. Stipulated elements
9. They refer to particular stipulations of the parties in a contract:
a. Accidental elements
b. Natural elements
c. Inherent elements
d. Essential elements
10. One of the following is a natural element of a sales contract.
a. Terms of payment
b. Rate of interest
c. Place of delivery
d. Warranty against eviction
11. A contract that can stand by itself is known as:
a. Accessory contract
b. Principal contract
c. Commutative contract
d. Gratuitous contract
12. A contract that does not have any special name under the law is
known as:
a. Nominate contract
b. Innominate contract
c. Special contract
d. Nominal contract
13. A contract where both parties are required to do or to give
something is known as a:
a. Bilateral contract
b. Unilateral contract
c. Gratuitous contract
d. Commutative contract
14. A contract where the parties contemplate a real fulfillment,
hence, equivalent values are given is known as:
a. Commutative contract
b. Gratuitous contract
c. Onerous contract
d. Aleatory contract
15. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient provided they are
not contrary to law, morals, good customs, public order or public policy.
This is known as a principle of:
a. Liberty of contract
b. Mutuality of contract
c. Relativity of contract
d. Obligatory force of contract
16. The contract must bind both contracting parties; its validity, or
compliance cannot be left to the will of one of them. This is known as
the principle of:
a. Mutuality of contract
b. Relativity of contract
c. Consensuality of contract
d. Freedom to contract
17. Contracts take effect only between the contracting parties, their
assigns and heirs, except in cases where the obligations and rights
arising from the contract are not transmissible by their nature, or by
stipulation, or provision of law. This principle of contract is known as:
a. Relativity of contract
b. Mutuality of contract
c. Obligatory force of contract
d. Liberty of contract
18. D borrowed P500,000.00 from C. D died without having paid his
loan obligation to C. He left S, his son and heir, properties worth
P400,000.00.
a. S is liable to C for P500,000.00
b. S is liable to C for P400,000.00
c. S is liable to C for P100,000.00
d. S is not liable at all because he should not be made to shoulder the
obligation of his father.
19. A contract may be enforced by or against a third person, except:
a. In the case of stipulation pour autrui
b. When a third person induces another to violate his contract
c. In case of contracts intended to defraud creditors.
d. When the benefit to the third person is merely incidental
20. The principle that contracts are perfected by mere consent is
known as:
a. Consistency of contract
b. Consensuality of contract
c. Consummation of contract
d. Mutuality of contract
21. Obligation arising from contracts have the force of law between
the contracting parties and should be complied with in good faith. From
perfection, the parties are bound not only for the fulfillment of what
has been expressly stipulated but also to all the consequences which,
 according to their nature, may be in keeping with good faith, usage
and law. This is known as the principle of:
a. Consummation of contract
b. Consensuality of contract
c. Obligatory force of contract and compliance in good faith
d. Mutuality of contract
22. One of the following is not a real contract:
a. Pledge
b. Commodatum
c. Deposit
d. Sale
23. D borrowed P100,000.00 from C. the obligation is secured by a
mortgage on Ds land and building. C registered the mortgage with the
register of Deeds. Thereafter, D sold the land and building to X who
was not personally aware of the existence of the mortgage at the time
of sale since only the photocopy of the transfer certificate of title which
did not yet contain the annotation of the mortgage was shown to him .
It was only when he went to the Register of Deeds to register the sale
of the land and building to him that he learned of the mortgage.
a. C can collect from D and if D cannot pay, C can foreclose the
mortgage although the land and building are now owned by X.
b. C can collect from D, but if D cannot pay, C cannot foreclose the
mortgage because X was not aware of the existence of the
mortgage at the time he bought the land and building.
c. C cannot collect from D. He can only go after the mortgage which
was given as security.
d. C cannot foreclose the mortgage because X was not a party thereto.
24. It is the manifestation of the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract.
a. Consideration
b. Contract
c. Consent
d. Cause
25. On June 1, 2010, S offered to sell his only car to B for
P100,000.00. B accepted the offer by mailing his letter of acceptance
on June 10, 2010. On June 12, 2010, B revoked his previous acceptance
 and mailed his letter of revocation on the same date. S received the
letter of revocation on June 15, 2010.
a. The contract was perfected on June 14,2010 when s received Bs
letter of acceptance.
b. The contract was not perfected because at the time the acceptance
was received, the parties were no longer of one mind.
c. The contract was perfected on June 10, 2010 when B sent his letter
of acceptance.
d. The perfection of the contract retroacts to June 1, 2010 when the
offer was made.
26. On May 1, 2010, S offered to sell a specific car to B for
P500,000.00. B sent his letter of acceptance to S on May 8, 2010. On
May 10, 2010, however, S died in a vehicular accident and his
secretary received the letter of acceptance on May 12, 2010 unaware
that S had already paid.
a. The contract was perfected on May 8, 2010 when B sent his letter of
acceptance.
b. The contract was perfected on May 12, 2010 when the secretary of
S received the letter of acceptance.
c. The contract was not perfected because the offer of S became
ineffective when he died.
d. The contract was perfected on May 1, 2010 because the acceptance
made by B on May 8, 2010 retroacts to the date of the offer.
27. Three of the following instances will render an offer ineffective
before acceptance is conveyed. Which one will not?
a. Civil interdiction of either party
b. Insolvency of either party
c. Insanity of either party
d. Intoxication of either party
28. S offers to sell his car to B for P125,000.00 cash. B accepts the
offer but is willing to pay only P120,000.00.
a. The contract was perfected at the price of P125,000.00 .
b. The contract was perfected at the price of P120,000.00.
c. The contract was perfected at the price of P122,500.00, the average
price of the offer and the acceptance.
d. The contract was not perfected because the acceptance by B was
qualified and it constituted a counter-offer.
29. P appointed A as his agent to sell Ps only Honda Civic car for
P400,000.00 cash. On November 7, 2010, A, pursuant to the authority
granted to him by P, offered to sell the car to B at the price of
P400,000.00. B accepted the offer on November 8, 2010 by sending a
letter of acceptance to A, which letter of acceptance was received by A
on November 9, 2010. On November 10, 2010, A informed P that B had
accepted the offer.
a. The contract was perfected on November 8, 2010 when B sent his
letter of acceptance.
b. The contract was perfected on November 9, 2010 when A received
the letter of acceptance.
c. The contract was perfected on November 10, 2010 when A notified
P, the true owner of the car, that B had accepted the offer.
d. The contract was perfected on November 7, 2010, since the
acceptance by B retroacts to the date of the offer.
30. On July 1, 2010, Serrano offered to sell his only Mercedes Benz
car for P1,000,000.00 to Benitez who was interested in buying the
same. In his letter to Benitez, Serrano stated that he was giving
Benitez up to July 31, 2010 to make up his mind whether to buy the car
or not. On July 25, 2010, Serrano personally went to Benitez to inform
him that he was no longer willing to sell the car unless the price was
increased to P1,400,000.00 because another buyer was interested in
buying the car for the said amount of P1,400,000.00.
a. Benitez may compel Serrano to sell to him the car for
P1,000,000.00
b. Serrano may validly withdraw his offer to Benitez because the
option was not founded upon a consideration.
c. Serrano may not withdraw his offer until after the lapse of the
option period that he gave to Benitez.
d. The increase in price made by Serrano was not valid because it was
made within the option period.
31. Rockman and Company published an advertisement in the
newspapers which reads as follows INVITATION TO BID: Construction
of the companys warehouse located at 123 Luzon Street, Sta. Quiteria,
 Quezon City. The advertisement also included the specifications of the
warehouse to be constructed. Three companies submitted their bids:
ABC Company, with a bid price of P4,500,000.00; DEF Company,
P4,750,000.00; and GHI Company, P5,000,000.00. After considering
the financial capability, reputation and experience of the bidders, the
kind and quality of materials to be used and other factors, Rockman
and Company accepted the bid of DEF Company. ABC Company, the
lowest bidder, now questions the award made by Rockman and
Company to DEF Company which submitted a higher bid.
a. The award to DEF Company is voidable because it was only the
second lowest bidder.
b. ABC Company should be the winning bidder having submitted the
lowest bid.
c. The award to DEF Company is valid because Rockman and Company
was not bound to accept the lowest bidder.
d. The award to DEF Company is void by reason of Rockmans violation
of the terms of the invitation to bid.
32. One of the following is incapable of giving his consent.
a. Insane persons
b. Deaf-mutes who do not know how to write
c. Deaf-mutes who know how to read
d. Unemancipated minors
33. A contract entered into by an incapacitated person is:
a. Void
b. Voidable
c. Rescissible
d. Void
34. Contracts entered into in a state of drunkenness or during
hypnotic spell are:
a. Valid
b. Voidable
c. Rescissible
d. Void
35. A contract entered into by an insane person during a lucid
interval is:
a. Valid
b. Voidable
c. Rescissible
d. Void
36. Aside from fraud and undue influence, the following are the vices
of consent, except:
a. Violence.
b. Intimidation.
c. Mistake.
d. Dealer's talk.
37. Mistake in three of the following will make a contract voidable.
Which one will not?
a. Mistake as to the substance of the thing which is the object of the
contract.
b. Mistake as to the principal conditions which principally moved one
or both parties to enter into the contract.
c. Mistake as to the identity or qualifications of one of the parties,
which identity or qualifications have been the principal cause of
the contract.
d. Simple mistake of account.
38. It involves the employment of serious or irresistible force to
obtain consent.
a. Intimidation.
b. Threat.
c. Violence.
d. Moral coercion.
39. It is present when one of the contracting parties is compelled by
a reasonable and well-grounded fear of an imminent and grave evil
upon his person or property, or upon the person or property of his
spouse, descendants, and ascendants, to give his consent.
a. Violence.
b. Physical coercion.
c. Intimidation.
d. Mistake.
40. One of the following contracts is not vitiated by intimidation or
violence, and hence valid.
a. A contract of sale which was signed by a party because his arm was
being twisted by a .third person.
b. A contract of sale which was entered into because the other party
was pointing a gun at his wife.
c. A contract where a party was compelled to assign his property to
the other to pay a just debt because the latter threatened to sue
him in court if he does not pay his debt.
d. A contract of donation of a parcel of land which a party signed
because the other party threatened to burn his house.
41. It exists when a person takes improper advantage of his power
over the will of another depriving the latter of a reasonable freedom of
choice.
a. Intimidation
b. Duress
c. Threat
d. Undue influence
42. Fraud-exists in three of the following. Which is the exception?
a. When through the insidious words or machinations of one of the
contracting- parties, the other is induced to enter into a contract
which, without them, he would not have agreed to.
b. When there is a failure to disclose facts, when there is. A to reveal
them, as when the parties are bound by confidential relations.
c. When there, is an expression of an opinion by an expert which
turned out to be wrong, and other party relied upon such expert
knowledge.
d. When the misrepresentation refers to the usual exaggerations in.
trade, and' the other party had an opportunity to know the facts.
43. Abuiencia, who knew that his ring was embellished with glass,
told Banzon that the embellishment was emerald. Banzon, who knew
 that his watch was gold-plated, told Abuiencia that it was made of pure
gold. Banzon, believing that Abulencia's ring was embellished with
emerald, and Abuiencia; believing that Banzon's watch was made of
pure gold, then entered into a contract whereby they exchanged their
respective articles. A week later, Banzon
discovered that the ring was adorned only with an ordinary glass.
a. The contract may be annulled at the instance of Banzon since he
discovered the fraud.
b. b. The contract may be annulled at the instance of Abulencia since
Banzon also employed fraud.
c. The contract is void because of the bad faith of both parties, hence,
it shalt not produce any effect.
d. Neither' party may ask for annulment since both are guilty of fraud.
The contract, thereof is valid.
44. An absolutely simulated contract is:
a. Void.
b. Voidable
c. Valid
d. Unenforceable
45. One of the following statements does not pertain to relatively
simulated contract.
a. The parties conceal their real agreement.
b. The parties are bound by their real agreement provided it does not
prejudice third persons.
c. The parties are bound by their real agreement provided it is not
contrary to law, morals, public order or public policy.
d. The parties do not intend to be bound at all.
46. Servando and Bernardo entered into a contract where they made
it appear that Servando was mortgaging his lot and building to
Bemardo to secure a contract of loan. The truth, however, was that
 Servando was selling his lot and building to Bernardo. Which of the
followings statements is true?
a. The parties are bound by the contract of sale.
b. The parties are bound by their contract of loan and mortgage.
c. The parties are not bound at all
d. The parties are bound by the contract of sale only when third
persons are affected.
47. One of the following is not a requisite of the object of a contract.
a. It must be within the commerce of men.
b. If it is a right, it must be intransmissible.
c. It must not be contrary to law, morals, good customs, public order
or public policy.
d. It must be determinate as to its kind or capable of being made
determinate without the need of the parties entering into a new
agreement.
48. S and B orally entered into a contract whereby S sold his one-
year production of eggs in his poultry farm to B for P50,000.00 which
amount B immediately gave in cash to S. the contract between S and B
is:
a. Void because the object was not existing at the time of the
execution of the contract.
b. Valid because future things may be the object of contracts.
c. Ressiscible because B will likely suffer damage if the eggs do not
come into existence.
d. Unenforceable because the contract was not in writing.
49. A died leaving properties estimated at P1,000,000 00 to his sons
S and T. Subsequently, S sold one-half of his inheritance to X for
P3,000,000.00, although his share was still to be delivered.
a. The contract is valid since the inheritance is an existing inheritance.
b. The contract is void because what S sold is future inheritance
which may not be the object of a contract as a rule.
 c. The contract is resissible.
d. d. The contract is unenforceable.
50. A contract whose cause is the promise of a thing or service by
the other party is:
a. Onerous contract.
b. Gratuitous contract.
c. Lucrative contract.
d. Remuneratory contract.
51. A contract whose cause is the liberality of the benefactor is:
a. A gratuitous contract or contract of pure beneficence.
b. A remuneratory contract
c. An aleatory contract
d. An onerous contract.
52. S sold his only car for P100,000.00 to B. Unknown to S, B
bought the car from him so that he could use the same in a bank
robbery. What is the status of the sale of the car by S to B?
a. The sale is void because the motive of B is illegal.
b. The sale is valid because the illegality of the motive of the parties to
the contract does not have any effect on its validity.
c. The sale is voidable because of the failure of B to disclose his
motive to S.
d. The sale is rescissible at the instance of S because he would be
damaged by the illegal motive of B.
53. One of the following is not a requisite of cause in a contract.
Which is it?
a. It must exist.
b. It must be lawful.
c. It must not be false.
d. It must be clearly stated in the contract.
54. D and C entered into a contract wherein D agreed to give to C
P50,000.00 within 30 days from the date of the execution of their
agreement, which, however, does not state the consideration received
by D from C. What is the status of the contract between D and C?
a. The contract is void because. the cause is riot stated in the
contract.
b. The contract is valid because the cause is presumed to exist and
that it is lawful.
c. The contract is rescissible because D suffered damage by reason of
absence of cause.
d. The contract is valid provided another contract is executed between
D and C to state the cause.
55. The defective contracts arranged according to the degree of their
defectiveness from the least defective to the most defective are:
a. voidable, rescissible, unenforceable, and void contracts.
b. rescissible, unenforceable, voidable, and void contracts.
c. rescissible, voidable, unenforceable, and void contracts.
d. unenforceable, rescissible, voidable, and void contracts.
56. The following are characteristics of rescissible contracts, except:
a. they may be set aside for equitable reasons.
b. they are valid until rescinded.
c. the action to rescind them prescribes.
d. the action to rescind them are not available to third persons even if
their interests are directty affected.
57. The following contracts are rescissible, except:
a. Those entered into by guardians whenever the wards whom they
represent suffer lesion by more than one- fourth of the value of the
things which are the object of the contract
b. Those entered into in representation of absentees, if the latter
suffer lesion by more than one-fourth of the value of the things
which are the object of the contract.
 c. Those undertaken in fraud of creditors but the latter can still collect
the claims due them through other means.
d. Those which refer to things under litigation if they have been
entered into by the defendant without the knowledge and approval
of the litigants or of competent judicial authority.

58. G, the guardian of M, a minor, sold the fish harvested from the
fishpond of M for P7, 400.00. The fish, however, had a value of P10,
000.00.
a. The sale is rescissible because M suffered lesion by more than one-
fourth of the value of the fish sold.
b. The sale is voidable because M is a minor.
c. The sale is unenforceable because G sold the fish without approval
of the courts.
d. The sale is void because the object is outside the commerce of men.
59. The following are the requisites of a rescissible payment except:
a. The debt is already due.
b. the debtor is insolvent.
c. the debtor pays the debt.
d. the payment is not yet due.'
60. Rescission of a contract will prosper in one of the following cases.
Which is it?
a. When there are other legal means to obtain reparation of the
damages caused.
b. When he who demands rescission cannot return whatever he may
be obliged to restore.
c. When the object of the contract is in the possession of a third
person who purchased the property of the debtor in bad faith.
d. When the action to bring rescission has prescribed.
61. D owes the following creditors: X, P50, 000.00; Y, P60, 000.00;
and Z, P90, 000.00. He has assets valued Pt P400,000.00.
Subsequently, D donated, among his assets a parcel of land valued at
P250,000.00 to C. The donation and acceptance were made in a public
instrument. The donation of the land made by D to C is:
a. Ressiscible, because it was presumed to have been made in fraud of
creditors.
b. Unenforceable, because D was not authorized by his creditors.
c. Void, because the donation and acceptance should be registered.
d. Voidable, because D does not have the free disposal of his property.
62. C filed a complaint in court against D to collect a money debt
amounting to P500,000.00. After due hearing, the court rendered
judgement in favor of C. Shortly after the rendition of the judgment
and before C has collected D's debt, D sold a parcel of land to X. Z,
another creditor, learned of the sale made by D to X and now files an
action to rescind the sale.
a. The right to rescind the sale is exclusively granted to because it was
he who first learned of the sale and he has still to file a claim to
collect D's debt.
b. The right to rescind the sale is exclusively granted to C because it
was he who obtained a favorable judgement and he has not yet
collected D's debt.
c. Both C and Z have a right to rescind the sale since the sale is
presumed in fraud of creditors having been made by party against
whom judgment has been rendered.
d. Neither C nor Z has a right to rescind the sale.
63. R, the representative of A, an absentee, sold the corn with a
value of P30,000.00 and the palay with a value of
P50,000.00,harvested from A's agricultural farm for a total price
ofP50,000.00. A, whose domicile was subsequently known, was
 informed of the sale made by G. Based on the foregoing facts, which of
the following statements incorrect?
a. A may seek payment of an additional P30,000.00 to recover the
damages suffered.
b. A may just seek rescission of the sale of the corn to recover the
damages he suffered.
c. A may seek rescission of the sale of part of the corn and part of the
rice to the extent of the damages he sustained.

SALES- DIAGNOSTIC EXERCISES

TEST I- MULTIPLE CHOICE- select the best answer by writing the letter of
your choice.

1. A contract whereby one of the parties obligates himself to transfer the

ownership of and to deliver a determinate thing and the other to pay
therefor a price certain in money or its equivalent is a contract of;
a. Barter
b. Sale
c. Dacion en pago
d. Mortgage
2. The following are the essential elements of a contract of sale, except:
a. Consent of the contracting parties
b. Subject matter which should be determinate
c. Price which is certain in money or its equivalent
d. Warranty against eviction and against hidden defects
3. The following are the characteristics of a contract of sale, except:
a. principal , which means that a contract of safe can stand by itself
b. Real, which requires the delivery of the object of the contract of sale for its
perfection.
c. Onerous, where rights are required in exchange of a valuable
consideration.
d. Bilateral, which means that both parties are bound reciprocally to each
other.
4. One of the following characteristics of dacion en pago is also
characteristic of a contract of sale. Which is it?
a. There is a pre-existing credit.
b. Obligations are extinguished.
c. There is less freedom in fixing the price.
d. Ownership of the object is transferred to the other party.
5. The following are characteristics of a contract of sale except for one which
refers to payment by cession. Which characteristic refers to payment by
cession?
a. There is no pre-existing credit.
 b. The cause or consideration is the price.
c. There is more freedom in fixing the price.
d. Assignee of the property acquires the right to sell the thing but not the
ownership thereof.
6. The following items pertain to either a contract- of sale or a contract to
sell.
I. Ownership of the thing sold is transferred upon delivery.
II. Ownership of the thing is transferred to the buyer at some future time.
III. The risk of loss is on the buyer.
IV. The risk of loss is on the seller.
Based on the above data, which of the following is correct?
a. Items I and III pertain to a contract to sell.
b. Items II and III pertain to a contract to sell.
c. Items II and IV pertain to a contract of sale.
d. Items I and III pertain to a contract of sale.
7. One of the following is not a requisite of the object of a contract of sale.
Which is it?
a. It must be within the commerce of men.
b. It must be licit.
c. It must be determinate or determinable.
d. Vendor must have the right to transfer the ownership of the thing at -the
time of sale.
8. The following items pertain to either emptio rei sperati or emptiospei.
Based on the above information, which of the following is correct?
a. Items I and iI pertain to emptio rei sperati,
b. Items II and III pertain.to emptiospei.
c. Items II and III pertain to emptio rei sperati.
d. Items III and IV pertain to emptiospei
11.process of manufacturing for its customers at the time the orders
were received. Michael Barkley, who is 7' tall and wears size 18shoes, was
provided three days later, with a pair that was specially made for him since
Armstrong does not make shoes of his size. What kind of contracts were
entered into for the shoes provided to the two basketball players?
a. The contract for the pair of shoes provided to Charles Jordan is a contract
for a piece of work, while that for Michael Barkley is a contract of sale.
b. The contract for the pair of shoes provided to Charles Jordan is a contract
of sale, while that for Michael Barkley is a contract for a piece of work.
c. Both contracts are contracts of sale.
d. Both contracts are contracts for a piece of work.
12.S and B entered into a contract whereby S transferred to B a specific car for
the price of P200,000.00, while B gave to SP90,000.00in cash and a diamond
ring worth P110,000.00.The heading of the written contract signed by the
parties reads Contract of Sale".
a. The contract is void because the intention of the parties is void since the
value of the diamond ring is more than the monetary consideration given.
b. The contract is a valid contract of sale as intended by the parties
regardless of whether the monetary consideration is more or less than the
value of the property consideration.
 c. The contract is a valid contract of barter since the value of the property
given is more than the monetary consideration. The intention of
the parties is immaterial.
d. The contract is partly a contract of barter and partly a contract of sale.
13.The price in a contract of sale is certain, except:
a. when the parties have fixed or agreed upon a, definite amount.
b. if the price is certain with 'reference to another thing certain.
c. if the fixing of the price is left to the discretion of one of the contracting
parties and the price fixed is not accepted by the other party.
d. if the price fixed is that which the thing sold would have on a definite day
or in a particular exchange or market.
14.On January 1, S orally sold to B a specific ring for P450.00. The parties agreed
that S shall deliver the ring to B on January 5, while B shall pay the price on
January 7.
a. The contract is perfected on January 5, when the ring is delivered by S to
B.
b. The contract is perfected on January 1, when the parties had a meeting of
mind on the object and the price.
c. The contract is perfected on January 7, when the price is paid, since both
parties would by then have performed their obligations in the contract.
d. There is no perfected contract because the sale was made orally.
15.A sum of money paid, or a thing delivered upon the making of a contrast for
the sale of goods, to bind the bargain, the delivery and acceptance of which
makes the final assent of both parties to the contract.
a. Option money
b. Earnest money
c. Reservation money
d. Down payment
16.S orally offered to sell a certain diamond ring .to B for P50,000.00. B accepted
the offer and to prove that he was in earnest, he gave S P1,000.00. The
parties agreed that the delivery of the ring and the payment of the price
would be made 30 days later. On due date:
a. S may collect from B P50,000.00.
b. S may collect from B P49,000.00.
c. S cannot enforce payment because the contract was not reduced to
writing.
d. S cannot enforce payment because there was no contract of sale yet.
17.On June It 2010, S sold to B 50 units of machines which were scheduled to
arrive from Japan the following day on board the, vessel "MT Nippon Maru".
The sale was evidenced by an invoice identifying each machine by serial
number. Each machine was priced at P10,000.00. Unknown to the parties, 30
units were damaged beyond repair by seawater on May 31, 2010. Based on
the foregoing, which of the following statements is incorrect?
a. B may rescind the whole contract.
b. B may demand delivery of the remaining 20 units and pay the price
therefor.
c. S may require payment of the whole shipment from B since S was not
aware of the damage caused on the machines at the time of sale.
 d. S has no option to rescind the whole contract or require payment of the
remaining 20 units.
18.It refers to the delivery of the thing sold from hand to hand in case of
movables, or the taking of possession with respect to immovables, in the
presence and with the consent of the vendor.
a. Actual or real delivery.
b. Traditio constitutum possessorium.
c. Traditio longa manu.
d. Traditio brevi manu.
19.On May 1 , 2010, S sold to B through a private instrument 20 sacks of corn
stored in the only warehouse of S. On May 10, 2010, S delivered the keys to
the warehouse to B. The delivery made by S to B is known as:
a. constructive delivery by legal formalities.
b. symbolic delivery by tradition clavium.
c. traditio Tonga mane.
d. Tradition brevi mane,
20.Delivery of incorporeal property may be made through any of the following
means, except:
a. execution of a public document.
b. placing the titles of ownership in the possession of the vendee.
c. use by the vendee of his rights, with the debtor's consent.
d. execution of private instrument.
21.One of the following statements on the transfer of ownership of the thing in
"sale on trial" is incorrect. Which is it?
a. Ownership of the thing is transferred to the vendee when he signifies his
approval or acceptance to the vendor.
b. Ownership of the thing is transferred to the vendee when he does an act
adopting the transaction.
c. Ownership of the thing is transferred to the vendee if the time fixed for
the return of the thing has expired and the vendee retains the thing
without giving notice of rejection or acceptance to the vendor.
d. Ownership of the thing is transferred to the vendee upon
e. delivery.
22.On March 1, 2010, S sold and delivered to B a television set for P10,000.00
"on sale or return" giving B up to March.16, 2010 within which to return the
television set. On March 10, 2010, the television set was burned through no
fault of B. Based on the foregoing, which of the following statements is
incorrect?
a. B must pay' the price of the television set.
b. S must bear the loss since the time for the return of the television set had
not yet expired.
c. The ownership of the television set was transferred to B upon delivery to
him.
d. B must bear the loss of the television set.
23.In one of the following cases, delivery of the goods to a carrier for the
purpose of transmission to the buyer transfers ownership to the latter. Which
one is it?
a. When by the terms of the bill of lading, the goods are to be delivered to
the seller or his agent.
 b. When by the terms of the bill of lading, the goods are to be delivered to
the order of the buyer or his agent but the seller retains the bill of lading.
c. When the seller draws a bill of exchange on the buyer for the price of the '
goods and transmits such bill of exchange and the bill of lading to the
buyer to secure acceptance or payment of the bill of exchange and the
buyer dishonors the bill of exchange.
d. When the owner does not reserve the right of possession or ownership of
the thing sold upon delivery to the carrier.
24.In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies, except
to:
a. exact fulfillment of the obligation, should the vendee fail to pay any
number of installments.
b. cancel the sale, should the vendee's failure to pay cover two or more
installments.
c. foreclose the chattel mortgage on the property if the vendee's failure to
pay cover two or more installments and recover any deficiency after the
foreclosure sale if they have stipulated it.
d. foreclose the chattel mortgage on the property if the vendee's failure to
pay cover two or more installments but he may no longer recover any
deficiency after the foreclosure sale.
25.Baldomero bought a residential house and lot from Sta. Ana Realty for
P250,000.00 giving a down payment of P10,000.00and promising to pay the
balance of P240,000.00 in 20 years in installments of P1,000.00. After paying
72 installments, Baldomero defaulted in the payment of the 73rd installment
and subsequent ones. Despite the grace- period he had earned, he was not
able to make any further payments. Accordingly, Sta. Ana Realty cancelled
the sale. How much cash surrender value is Baldomero entitled to receive?
a. P45,100.00.
b. P39,600.00.
c. P36,000-00.
d. P41,000-00.
26.S stole a ring belonging to 0. Subsequently, the ring was offered for sale at a
public auction where X, who was not aware that the ring was stolen, bought
it. A few weeks later, 0 saw the ring and recognized it as his. Based on the
foregoing information, which of the following statements is correct?
a. 0 may recover the ring from X without reimbursing X since 0 was
unlawfully deprived of the ring.
b. 0 may recover the ring from X but he has to reimburse X since X acquired
title to the ring.
c. 0 may no longer recover the ring even if he is willing to reimburse X.
d. X did not acquire title to the ring since the auctioneer had no valid title
thereto.
27.Where the seller of goods has a voidable title thereto, but his title has not
been avoided at the time of the sale, the buyer acquires title' to the goods.
Such acquisition of title has the following requisites, except the:
a. buyer must have bought the goods in good faith.
b. buyer must have bought them for value.
c. buyer bought them without notice of the seller's defect of title.
d. party from whom the seller obtained the goods must ratify the sale.
28.An unpaid seller has the following rights, except:
a. A lien on the goods or the right to retain them for the price while he is in
possession of them.
b. In case of insolvency of the buyer, a right of stopping the goods
in transitu after he has parted with the possession of them.
c. A right of repurchase.
d. A right to rescind.
29.An unpaid seller loses his lien on the goods in the following cases, except:
a. when he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the right of ownership in the
goods.
b. when the buyer or his agent lawfully obtains possession of the goods.
c. when the seller waives his possessory lien.
d. when he has obtained judgment for the price of the goods.
30.Three of the following are the requisites in order that an unpaid seller may
exercise his right of stoppage of transitu. Which one is not?
a. The seller is unpaid.
b. The seller has not parted. with the possession of the goods.
c. The goods are in transit.
d. The buyer is or becomes insolvent.
31.Goods are still in transit:
a. If the buyer or his agent obtains delivery of the goods before their arrival
at the appointed destination.
b. when the carrier acknowledges possession of the goods as bailee for the
buyer after the arrival of the goods at the place of destination.
c. if the carrier or other bailee wrongfully refuses to deliver the goods to the
buyer or his agent.
d. if the goods are rejected by the buyer, and the carrier or other bailee
continues in possession of them, even if the seller has refused to received
them back.
32.An unpaid seller's right to resell the goods is available in the following cases,
except:
a. if the goods are of a perishable nature.
b. when the seller reserved the right to resell the goods.
c. when the buyer has defaulted in the payment of the price for an
unreasonable time.
d. when the seller has lost his lien on the goods.
33.Barrameda bought a piece of land from Sarmiento for a lump sum of
P120,000.00. Aside from mentioning the boundaries in the contract which is
required in the sale of real estate, the contract also states that the piece of
land consists of1,000square meters. Before delivery, Sarmiento discovered
that the piece of land actually contains 1,200 square meters.
a. Sarmiento must deliver all the1,200 square meters; Barrameda must pay
P120,000.00plus an additional amount for the excess of 200 square
meters.
b. Sarmiento is required to deliver only1,000square meters; Barrameda must
pay the contract price of P120,000.00.
c. Sarmiento must deliver all the1,200square meters; Barrameda has to pay
only P120,000.00.
d. Neither party is required to perform the obligation because of mistake.
34.Sison sold a registered piece 'of land to Bautista on May 1,2010in a public
instrument. On May 3, 2010, Sison sold in a private instrument the same
piece of land to Cruz, who took physical possession of the land. Neither buyer
was aware of the sate made to the other.
a. The land belongs to Bautista.
b. The land belongs to Cruz.
c. The land still belongs to Sison, because both sales are void.
d. The land 'should be divided equally between Bautista and Cruz to give
effect to both sales.
35.Refer No. 34. Assume that on May.5, 2010, Sison sold the Landin a public
instrument to Domingo who was not aware of the two previous sales.
Domingo then registered the sale with the Register of Deeds.
a. The land belongs to Bautista.
b. The land belongs to Cruz.
c. The Iand belongs to Domingo.
d. The land will be equally divided among the three buyers.
36.On June1,2010, Sanchez sold to Borlaza in a private instrument a certain
computer. Two days later, Sanchez orally sold the same computer to
Contreras who immediately took possession of the computer. Neither party
was aware of the sale made to the other.
a. The computer belongs to Borlaza.
b. The computer belongs to Contreras.
c. The computer will be co-owned by Borlaza and Contreras to give effect to
both sales.
d. Both sales are void. Accordingly, Sison will still be the owner.
37.This refers to the implied warranty on the part of the seller that he has the
right to sell the thing at the time when ownership is to pass, and that the
buyer from that time shall have and enjoy legal and peaceful possession of
the thing.
a. Warranty against hidden defects.
b. Warranty against eviction.
c. Warranty of ownership.
d. Warranty of possession.
38.Three of the following are the requisites in order that the vendee may enforce
the vendor's liability in case of eviction. Which one is not?
a. There must be a final judgment depriving the vendee of a part or the
whole of the thing sold.
b. The vendee must have appealed from such judgment rendered 2gainst
him.
c. The deprivation of the vendee is based on a right prior to the state or an
act imputable to the vendor.
d. The vendor is notified of the suit at the instance of the vendee.
39.This refers to an encumbrance imposed upon an immovable for the benefit of
another immovable belonging to a different owner.
a. Easement or servitude
b. Real estate mortgage
c. Pledge
d. Chattel mortgage.
40.Three following are the requisites in order that the buyer may inform the
seller's liability for hidden defects Which one is not?
 a. The defects of the thing sold must not be patent or visible.
b. The ducts render the thing unfit for the use for which it is intended, or
which diminish its fitness for such use to an extent that had the buyer
been aware thereof, he would not have bought it.
c. The defects must be existing at the time of sale.
d. The defects must be capable of determination by an expert.
41.Alessandra purchased from Rose Tan's Department Store, two pieces of
imported identical bathrobe, one of which was embroidered with "HIS" and
the other with "HERS", which she planned to give to his friends Jules and
Assunta as a wedding present. She inspected the items very carefully with
the assistance of the store clerk before paying for them. While she was
wrapping them shortly after she arrived home, she noticed that the hem of
the 'HERS" bathrobe had disintegrated because it was loosely sewn, which
damage was not apparent because of the many colors of the apparel.
a. Alessandra can rescind the sale of both pieces of bathrobe.
b. Alessandra can rescind only the sale of the bathrobe marked "HERS"
c. Alessandra cannot rescind because she should have inspected the item
well when she bought it.
d. Alessandra must pay for both pieces of bathrobe.
42.The vendor shall be liable for the death of the animal sold when the following
requisites are present, except:
a. the disease existed at the time of sale.
b. the disease is the cause of the death of the animal.
c. the disease must be redhibitory.
d. the animal dies within 3 days from the time of purchase.
43.The justified refusal of the buyer to accept the goods produces the following
effects, except:
a. buyer has no duty to return the goods, unless otherwise stipulated.
b. title to the goods does not pass in to him,
c. buyer shall not be obliged to pay the price.
d. buyer is obliged to constitute himself as depositary until he returns the
goods.
44.In three of the following cases, the buyer is not entitled to suspend the
payment of the price. Which one will give him the right to suspend payment?
a. Disturbance in the possession or ownership of the thing purchased.
b. The seller gives him security for the return of the price.
c. It has been stipulated that the buyer shall pay the price notwithstanding
any disturbance.
d. The disturbance is a mere act of trespass.
45.A contract of sale with a right to repurchase and other contracts including a
contract purporting to be an absolute sale shall be presumed to be an
equitable mortgage in the following cases, except when the:
a. price of sale with right to repurchase to repurchase is unusually
inadequate.
b. vendor remains in possession of the thing sold.
c. period to repurchase the property is extended.
d. vendee binds himself to pay the taxes due.
46.An owner of a rural land has the right of legal redemption of an adjoining
rural land sold if the following requisites are present, except when the:
 a. adjoining rural land is not' separated by any apparent servitudes for the
benefit of other estates..
b. land sold does not exceed one hectare.
c. grantee owns another rural land.
d. grantee owns an urban land.
47.This refers to the right of a n adjoining owner of an urban land to be given
preference to the purchase of a small piece of urban land which is held for
speculation before it offered for sale to others.
a. Right of subrogation.
b. Right of redemption.
c. Right of pre-emption.
d. Right of repurchase.
48.A, B, and C, are co-owners of an undivided parcel, of land. On May 1, A sold
his share to X; on June 1, 13 sold his share also to X; and on July 1, C sold his
share also to X. Each sale was with a right to repurchase.
a. X may compel A, B and C to come to an agreement to repurchase the
whole land.
b. Each co-owner may exercise his right of redemption on the whole property
including the share of the other two co-owners.
c. Each co-owner may exercise his right of redemption only with respect to
his share.
d. Any two of the three co-owners may redeem the property proportionately.
49.R, S and T are co-owners of an undivided parcel of land. R sold his 1/3
interest to T in a deed of absolute sale. Which is correct?
a. S may exercise the right of redemption on the interest sold by R to T.
b. cannot exercise the right of redemption.
c. The sale made by R to T is voidable.
d. S may redeem only 1/2 of the interest sold by R to T.
50.T steals the goods of 0 and deposits them in the warehouse of W. W issues to
T a warehouse receipt which by its terms indicates that goods are to be
delivered to the order of T, thereafter. negotiates the receipt to H who
purchases me document in good faith and for value.
a. H may obtain delivery of the goods from W because H was an innocent
purchaser for value.
b. H can obtain delivery of the goods from W because the issuance of
the ware house receipt to T conferred a valid to him over the goods.
c. H can obtain delivery of the goods from IV because the acquisition b y H of
the warehouse receipt in good faith; cured the defect in T's title.
d. H cannot obtain delivery of the goods because he acquired whatever title
T had over such goods, which is the title of a thief.
51.O delivered certain goods to C, a common carrier, which issued to O a bill of
lading stating that the goods are to be delivered to bearer. Without O's fault,
the bill of lading was stolen by T who thereafter negotiated the document by
mere delivery to H ,purchaser for value and without notice of the defect in
the title of T.
a. The negotiation of the bill of lading by T to H is not valid because of T's
defective title.
b. The negotiation of the bill of lading by T to H is valid. T's defective title
does not have any effect on the validity of the negotiation.
 c. H may not obtain delivery of the goods from C because H acquired
whatever title T had over the document.
d. H acquired title to the document but not to the goods.
52.D , obtained from C a- loan amounting to P50,000.00, the same being
secured by a mortgage on D's lot. Thereafter, C assigned his credit right to T
with notice to D. Based on the foregoing facts, which of the following
statements is incorrect?
a. T cannot collect from D if D does not give his consent to the assignment.
b. T can collect from D. D's consent to the assignment is not required.
c. T can collect from D and if D cannot pay, T can foreclose the mortgage on
the lot.
d. The notice to D of the assignment is sufficient. D must make his payment
to T and no longer to C.
53.A kind of mortgage which, although lacking some formality, form of words, or
requisites prescribed by law, shows the intention of the parties to charge real
property as security for debt and contains nothing impossible or contrary to
law is known as:
a. legal mortgage.
b. equitable mortgage.
c. conventional mortgage.
d. voluntary mortgage.
54.If a movable property is sold separately to two or more different vendees,
ownership shall belong to the person:
a. who in good faith first paid the purchase price in full.
b. who in good faith first recorded the sale in the Registry of Property.
c. who in good faith presents the oldest title.
d. who in good faith first took possession of the property.
55.A contract of sale is perfected upon:
a. compliance with the requirements of the law as to form.
b. delivery of the object of the contract.
c. the meeting of the minds. on the thing which is the object of the contract
and upon the price.
d. demand.
56.It is a contract by virtue of the terms of which the parties thereto promise and
obligate themselves to enter into another contract at a future time, upon the
happening of certain events, or the fulfillment of certain conditions.
a. Contract of adhesion
b. Contract of option
c. Contract of sale
d. Auto-contract
57.A contract of sale is not a:
a. principal. contract.
b. nominate contract.
c. consensual. contract.
d. real contract.
58.The following may not be valid objects of. a contract of sale, except:
a. objects outside the commerce of men.
b. Illicit things.
c. Future goods.
d. impossible service.
59.This is a kind of constructive delivery where the vendor remains in possession
of the property sold, such as by virtue of a, lease agreement with the vendee.
a. traditio longa manu.
b. Tradition brevi manu.
c. Tradition constitutum possessorium.
d. delivery to common carrier.
60.When the goods are delivered to the buyer, the ownership thereof passes to
the buyer in:
a. sale on approval.
b. sale or return.
c. sale on trial.
d. contract to sell.
61.S promised to sell his car to B for P200,000.00 giving B 30 days to decide. B
accepted the promise of S and informed S that he (B) would make known his
decision before the lapse of 30 days. He also gave S P2,000.00 as
consideration so that S would hold on to his promise. The contract entered
into between S and B and the consideration given by B to S are known as:
a. Option contract and option money, respectively.
b. Contract of sale and earnest money, respectively.
c. Contract of sale and down payment, respectively.
d. Contract to sell and reservation money, respectively.
62.Refer to No. 61.
a. S may withdraw his offer to sell before the lapse of 30days by informing B.
b. S may not withdraw his offer before the lapse of 30 days.
c. S may withdraw the offer by returning the amount of P2,000.00 that was
paid to him by B.
d. S may withdraw his offer even before the lapse of 30days if a favorable
price, i.e., more than P200,000.00, is offered to him by another
prospective buyer.
63.The Recto Law applies to which of the following examples of sale?
a. Sale of a car on straight term.
b. Sale of house and lot on installment.
c. Sale of car on installment where the buyer constituted a mortgage on his
truck.
d. Sate of a piano on installments where the buyer constituted a chattel
mortgage on the piano.
64.S sold to B a lot through a deed of absolute sale duly acknowledged before a.
notary public. Three days later, S sold the same lot to X, also through a deed
of sale duly acknowledged before a notary public. X had the sale registered
with the Register of Deeds. Neither B nor X was aware of the sale made by S
to the other and neither took physical possession of the lot. Who is the
present owner of the lot?
a. B, because he was the first purchaser in good faith.
b. X, because he registered the sale in good, faith.
c. Neither B nor X.
d. S, as long as he does not surrender physical possession of the lot.
65.Purchased from S a laptop computer worth P100,000.00. The terms of sale
provide for a down, payment of P20,000.00 with the balance payable in 8
equal monthly installments secure the balance, S required B to execute a
chattel mortgage on the laptop computer and a real mortgage on B's lot. B
 complied with all the requirements but defaulted in the payment of, the third
and fourth installments. These remedies are available to S except one. Which
is it?
a. Cancel the sale.
b. Exact fulfillment of the obligation.
c. Foreclose the real mortgage and thereafter recover any deficiency from B.
d. Foreclose the chattel mortgage and thereafter foreclose the real mortgage
in case of deficiency.
66.S and B entered into a contract whereby S transferred to B a specific piano
for the price of P80,000.00, while B gave to S cash of P30,000.00 and a
diamond ring worth P50,000.00. What kind of contract was entered into
between S and B?
a. A contract of barter.
b. A contract of sale.
c. The contract is partly a contract of barter and partly a contract of sale.
d. The contract is an innominate contract because the intention of the
parties cannot be determined.
67.One of the distinctions between option money and earnest money is that
earnest money is:
a. the consideration paid for the purpose of holding one to his promise to
buy or sell a determinate thing for a certain period of time.
b. not part of the purchase price.
c. proof of the perfection of the contract of sale.
d. paid before the perfection of the contract of sale.
68.This refers to the warranty of the seller that he has the right to sell the thing
at the time when ownership is to pass, and which can be enforced if the
buyer is deprived pf the property sold by a final judgment in court.
a. Warranty against hidden defects.
b. Warranty of merchantable quality.
c. Warranty against eviction.
d. Warranty of possession.
69.P, who was in Hong Kong, made an overseas call to A, his friend, to sell P's lot
in Quezon City immediately as P needed cash. Accordingly, A sold the lot to
B. The deed of sale was in a public document. The sale of P's lot is:
a. valid.
b. rescissible.
c. unenforceable.
d. void.
70.One of the distinctions between a contract of sale and a contract for a piece
work is that a contract for a piece of work:
a. is not governed by the Statute of Frauds.
b. refers to a contract for the delivery goods which are manufactured in the
ordinary course of business although the same are not available.
c. has for its parties the vendor and the vendee.
d. has for its consideration the price of the thing.
71.A and B are co-owners of a rural lot not exceeding 1hectare.The lot is
surrounded on its four sides as follows: on the North, by the road; on the East,
by the lot of X consisting of 2 hectares; on the South, by the lot of Y
consisting of 2 '/2 hectares; and on the West, by Z's lot consisting of 2
hectares. A sells his undivided interest in the agricultural lot to T, who owns
 several hectares of rural land in the area. Who has the right of legal
redemption over the undivided interest in the lot sold by A to T?
a. B
b. X
c. Y
d. Z
72.It is an affirmation of fact or any promise by the seller relating to the
thing which has a natural tendency to induce the buyer to induce the buyer
to purchase the same, relying on such promise or affirmation.
a. Cordon
b. False representation
c. Warranty
d. Sellers talk
73.In one of the following cases, the ownership of the thing object of the
contract is transferred to the other party upon delivery.
a. Contract to sell.
b. Agency to sell.
c. Sale or return.
d. Sale on approval.
74.Under the "Realty Installment Buyer Act", the buyer of real estate on
installment payments may pay an installment defaulted without additional
interest if he has paid at least two years of installments. The law is applicable
to sales/transactions involving:
a. industrial lots.
b. commercial buildings.
c. residential lots.
d. sales to tenants under the Land Reform Law.
75.S, the owner of a rent-a-car business, leased one of his cars to B for one
month. On the day of the expiration of the lease and while B was still in
physical possession of the car, B offered to buy the car from S for
P200,000.00. Believing the price to be a good one, S readily accepted B's
offer and then and there executed a deed of absolute sale in favor of B who
immediately paid the price in cash. Thereafter, B drove away from place of S.
a. The delivery of the car by S to B is by constitutum posssessorium.
b. This delivery of the car by S to B is by traditio longa manu.
c. The delivery of the car by S to B is traditio brevi man
d. There was no delivery because B should have turned over the physical
possess on of the car to & upon the expiration of the lease so that could
make the proper delivery to him upon the execution of the contract of
sale.
76.B called on S at the shoe factory of S for the latter to make a pair of shoes
which B would be needing in the play "Romeo and Juliet." B provided S with
the description of the pair of shoes that he wanted since S did not
manufacture the kind of shoes that B needed. S quoted a price of P1,000.00
which B agreed to pay upon delivery to him of the pair of shoes: Since S and
B had been neighbors for a long time, their agreement was sealed with
handshake.
a. The contract between S and B becomes enforceable if Shad already
completed making the pair of shoes.
 b. The contract between S and B becomes enforceable if B had already paid
the amount agreed upon for the work.
c. The contract between S and B is enforceable even if it is still executory.
d. The contract cannot be enforced by either party because it was not in
writing.
77.Which of the following contracts of sale is void?
a. Oral sale of a piece of land made through an agent whose authority is in a
public instrument.
b. Sale of a piece of land in a public instrument made through an agent
whose authority was given orally byte principal.
c. Sale of a piece of land in a private instrument made through an agent
whose authority is in a public instrument.
d. Sale of a piece of land in a public instrument made through an agent
whose authority is in a private instrument.
78.D deposited his goods in the warehouse of W who issued to D aware house
receipt stating that the goods are to be delivered to bearer. Thereafter, A
obtained possession of the warehouse receipt from D in exchange for what A
claimed to be a bar of gold, which, however, was discovered by D to be fake.
D demanded the return of the warehouse receipt from A but the same had
already been negotiated by A to H who purchased the document for
value, in good faith and without notice that D was deprived possession
thereof by fraud. The negotiation by A to His:
a. voidable.
b. valid.
c. void.
d. rescissible.
79.B purchased a pair of leather shoes from the store of S. Shortly after leaving
the store, B decided to return and requested S, the owner, to place a
protective rubber covering on the sole of each shoe. Since the job required at
least 30 minutes to complete, B left the store of S to shop at the neighboring
stores. When he returned to the store of S after 30 minutes, the pair of shoes
was nowhere to be found. It turned out that C, a sales clerk, had sold the pair
of shoes that B bought to X, another customer.
a. X acquired ownership of the pair of shoes earlier bought by B.
b. X did not acquire ownership of the pair of shoes earlier bought by B.C.
c. B remained the owner of the pair of shoes that he had bought despite its
sale to X.
d. S reacquired ownership of the pair of shoes when it was brought to him for
additional work.
80.S sold 500 shares of stock of San Manuel Corporation to B at P50.00 per
share. The transfer of the ownership of the shares of stock may be made
through any of the following means, except:
a. execution of the sale in a public instrument.
b. The giving by S to B of the, power to vote in the stockholders' meeting of
San Manuel Corporation and its exercise thereof by B.
c. the indorsement by S of the stock certificate. covering the 500 shares of
stock and its placing it in the possession of B.
d. the issuance by S of the official receipt for the full payment of the
purchase price of the shares by B.
81.Which of the following documents of title requires indorsement and delivery
for its negotiation?
a. A warehouse receipt which states that the goods are to be delivered to
bearer.
b. A bill of lading which states that the goods are to be delivered to the
order of a specified person but such person indorsed it in blank.
c. A warehouse receipt which states that the goods are to be delivered to
bearer but the bearer indorsed it to a specified person.
d. A bill of lading which states that the goods are to be delivered to a
specified person.
82.S and B executed a deed of absolute sale involving a parcel of land
supposedly containing 2,000 square meters. B paid a lump sum of
P2,200,000.00 for the purchase. Based on the foregoing facts, which of the
following statements is .correct?
a. If the parcel of land is actually*'2,200 square meters in area, S has to
deliver only 2,000 square meters. Thereof and B must pay P2,200,000.00
as agreed upon.
b. If the parcel of land is actually1,800 square meters in area, S must deliver
only 1,800 square meters and B has to pay only the price equivalent to
1,800 square meters.
c. If the parcel of land actually contains2,200squaremeters, S must deliver
all of 2,200 square meters with B still paying the amount of
P2,200,000.00.
d. If the parcel of land actually contains2,200squaremeters, S must deliver
all of2,200 square meters but B must pay a proportionate amount for the
additional 200square meters in addition to the price of P2,200,000.00.
83.S sold a specific parcel of land separately to the following persons: on July 1,
2010, to X, in a public document; on July 5,2010 in a private document to Y,
who took physical possession of the land; and on July 9, 2010, to Z, who
registered the sale with the Register of Deeds. Neither X, Y nor Z was aware
of the sale made to the other two buyers. Who is the owner of the parcel of
land?
a. X, because he was the first purchaser.
b. Y; because he took physical possession.
c. Z, because he registered the sale.
d. S, because the multiple sales he made rendered each sale a void contract.
84.In which of the following cases is the seller not obliged to make any payment
to the buyer for breach of warranty against eviction?
a. When such warranty has not been agreed upon,
b. When there was no stipulation exempting the seller from liability.
c. When there was a stipulation exempting the seller (who was in good faith)
from breach of warranty and the waiver was made by the buyer without
knowledge of the risks of eviction.
d. When there was a stipulation exempting the seller (who was in good faith)
from breach of warranty and the waiver was made by the buyer with
knowledge of the risks of eviction.
85.Mother Lilly purchased from Santiago Farms four horses with different colors:
a white, a gray, a black, and a brown, which Mother Lilly intended to use in a
movie to be starred in by four movie actors each one of whom represents one
of the colors. Each horse was certified to be fit by the veterinarian who was
 hired by the parties to examine them. Mother Lilly paid a separate price for
each of the horses. the filming of the movie, the brown horse was always sick
and could not function as the three others. It was subsequently discovered
that it was suffering from an incurable heart ailment.
a. Mother Lilly may ask for the rescission of the sale of the brown horse only
since she paid a separate price for each of the horses.
b. Mother Lilly may ask for the rescission of the sale of all the horses.
c. Mother Lilly may not ask for rescission of the sale of any horse because
she freely entered into the contract of sale.
d. Mother Lilly is bound by the sale of all the four horses and must honor
such contract because the veterinarian certified that all horses were fit.
86.The buyer is obliged to pay interest for the period between the delivery of the
thing sold and the payment of the price in the following cases, except if:
a. there is a stipulation to pay interest.
b. there is no such stipulation but the thing sold produces fruits or income.
c. the buyer is in default, from the time of judicial or extra-judicial demand
for the payment of the price.
d. none of the foregoing.
87.Earnest money possesses three of the following characteristics. Which is the
exception? a. It is part of the purchase price.
b. is proof of the perfection of the contract of sale.
c. It is paid at the time of the perfection of the contract of sale.
d. It is paid as a consideration for the purpose of holding one to his promise
to buy or sell a determinate thing fora certain period.
88.S sold his farm lot to B with S reserving his right to repurchase the property
within five years from the date of the sale. Based on the foregoing facts,
which of the following statements is incorrect?
a. The sale is subject to a suspensive condition.
b. B may validly sell the lot to third person against whom S may exercise the
right to repurchase provided the right is registered
c. B is subrogated to the rights and actions of S.
d. B's ownership of the lot becomes irrevocable if S fails to exercise his right
to repurchase within the period stated.
89.D borrowed P50,000.00 from C. The obligation is secured by a mortgage of
D's house and lot. Thereafter, C assigned his credit right to T. Based on the
foregoing facts, which of the following statements is incorrect?
a. The consent of D to the assignment is not required in order that T may
collect from D.
b. The assignment of the credit right did not carry with it the assignment of
the mortgage.
c. If D pays C before D was notified of the assignment, D is released from
liability.
d. The assignment, to bind third persons, must be in a public instrument and
recorded with the Registry of Property.
90.A contract of sale possesses three of the following characteristics. Which is
the exception?
a. Bilateral, since the parties are bound by reciprocal prestations.
b. Commutative, because the parties give almost equivalent values.
c. Onerous, since there is an exchange of valuable consideration.
 d. Real, because the object of sale must be delivered for the perfection of
the contract.
91.S sold his lot to B reserving his right to repurchase the same within 5 years
from the date of the execution of their agreement. The sale together with the
right to repurchase was registered with the Register of Deeds. Two years after
the execution of the sale. B sold the same lot to X who was not aware that S
reserved his right to repurchase the lot.
a. The sale by S to B is subject to a suspensive condition.
b. The sale by S to B is subject to a resolutory condition.
c. The sale by S to B is subject to a condition which is neither suspensive or
resolutory.
d. The sale by S to B is absolute without any condition.
92.Refer to Item 91.
a. S may repurchase the lot from X within the five-year period although X
was not aware of the reservation of the right to repurchase.
b. S may not repurchase the lot because X was not aware of the reservation
of the right.
c. S may repurchase the lot from X if X was aware of such reservation.
d. The sale by B to X is void because the acquisition of the lot by B from S is
subject to a contingency.
93.B wanted to buy the car of S for P100,000.00 and to show that he was in
earnest, he gave to S P2,000.00 which S accepted. There was no written
-instrument signed by S and B to incorporate their agreement. Based on the
foregoing, which of the following statements does not pertain to the contract?
a. B, thereafter, needs to pay P98,000.00.
b. The giving of earnest money binds S and B to a contract of sale.
c. B, thereafter, must pay C the amount of P100,000.00.
d. The contract between S and B is enforceable although there was no
written agreement between them.
94.When the buyer is justified in refusing to accept the goods being delivered to
him and has relayed such refusal to the seller, such refusal produces the
following effects, except:
a. buyer has no duty to return the goods unless stipulated.
b. title to the goods does not pass to the buyer.
c. buyer is not obliged to pay the price.
d. buyer automatically becomes a depositary of the goods
95.The unpaid seller, in addition to his right to retain the goods while he is in
possession of them, has the following rights: except the right:
a. of stoppage in transitu.
b. to resell the goods.
c. to rescind the sale.
d. to bid when the goods are resold.
96.One of the following is a natural element of a contract of sale.
a. The price of the goods.
b. The goods sold.
c. The stipulation to pay interest on the purchase price of the goods.
d. The seller's warranty against hidden defects.
97.On January 1, 2010, Santos offered to sell his only diamond ring for
P50,000.00 cash to Bersola who was interested in buying the same. Santos
told Bersola that he was giving the latter up toJanuary31,2010to decide
 whether to buy the ring or not. Bersola agreed to the option and gave Santos
option money ofP500.00. On January18,2010, Santos found another buyer
who was willing to pay P70,000.00cash. Santos personally visited Bersola to
inform him that he was withdrawing his offer unless Bersola agreed to buy
the ring for P70,000.00.
a. Santos may validly withdraw the offer without being held liable for breach
of contract since it would be unfair to him if he would receive only
P50,000.00 as the price of his ring when another person is willing to buy it
at a higher amount.
b. Bersola is bound to pay P70,000.00 if he were to avail himself of his option
to buy the ring.
c. Santos cannot withdraw the offer because the option is founded upon a
consideration of P500.00.
d. Bersola needs to pay only P49,500.00 if he decides to buy the ring since
the option money of P500.00 that he paid forms part of the purchase
price.
98.S and B executed a deed of absolute sale duly acknowledged before a notary
public whereby S conveyed his car to B forP100,000.00. B, however,
informed. S that he would be going away on a business trip and that he would
be taking the car from the place of S when he returned after two weeks.
Three days after the sale of the car to B, S sold the same car to X through a
deed of absolute sale which was also acknowledged before notary public. X
then drove the far away from the place of S and had the sale recorded with
the Land Transportation Office which issued to him a certificate of registration
of the car in his name. Neither B nor X was aware of the sale made to the
other until B returned from his business trip.
a. Preference shall be given to B since the car was first sold to him.
b. X did not acquire title to the car because S was no longer the owner when
the sale was made to him.
c. X acquired title to the car because S appeared to be the owner in the
record of the Land Transportation Office.
d. S remained the owner of the car because the sale made to one buyer
nullified the sale to the other.
99.D gives his ring worth P25,000.00 to C in consideration of C's giving of
P10,000.00and a bracelet worth P15,000.00to D. Based on the. foregoing
facts, which of the following statements is incorrect?
a. The transaction between D and C is a sale if they intended it to be a
contract of sale.
b. The transaction between D and C is a barter if they intended it to be a
contract of barter.
c. The transaction is barter regardless of the intention of the parties because
the bracelet is of more value thanP10,000.00.
d. The transaction is barter if the intention of the parties cannot be
determined.
100. S, the proprietor of a rent-a-car enterprise, sold his business and his
fleet of 10 cars to B for a lump sum of P3,000,000.00. S physically delivered
the permits and other papers for the operation of the business and the
vehicles to B at the latters office except for one car which the parties agreed
shall be leased by S for one month while he was winding up his affairs in the
Philippines as he was then leaving for abroad. In the meantime, the contract
 of sale and the contract of lease, though already signed by the parties, have
not been acknowledged before a notary public, and hence, were still private
instruments.
a. The ownership of the car leased by S remained with S.
b. The ownership of the car leased by S has been transferred to B although
there was no physical delivery thereof to B.
c. The execution of the private instrument for the sale of the business and
the cars likewise transferred the ownership to B of the car leased by S.
d. Both the contract of sale and the contract of lease must be acknowledged
before a notary public by the parties before the ownership of the car
leased by S is transferred to B.
101. King Gems Company, a jewelry manufacturer, shipped five dozen
necklaces to Queen Jewelry Store. The shipment was made under a written
agreement allowing Queen Jewelry Store to return the necklaces within a
period of one month from delivery. Based on the foregoing facts, which of the
following statements is incorrect?
a. Title to the necklaces passed to Queen upon delivery.
b. If Queen does not return the necklaces within one month, the sale to it
becomes absolute.
c. If the necklaces are destroyed by fire without the fault of Queen, Queen
need not pay the price thereof.
d. If the necklaces are destroyed through the fault of Queen, Queen must
pay the price thereof to King Gems Company.
102. On January 3,2010,D deposited his goods with W, warehouseman, who
issued a warehouse receipt which states that the goods are to be delivered
"to the order of D". On January5, 2010 D indorsed the receipt to A. On
January8,2010,however, D sold the goods represented by the receipt to X
who informed W immediately of the sale to him of the goods by D. At that
time, W was not aware that D had indorsed the receipt to A.
a. A acquired title to the goods as represented by the receipt at the time
such receipt was indorsed to him
b. X acquired title to the goods because at the time of the sale to him, W, the
warehouseman was not yet aware that D had indorsed the receipt to A.
c. D retained ownership of the goods because he cannot indorse the receipt
to one person and sell the goods to another.
d. W will be bound to deliver the goods to X.
103. One of the following statements pertaining to a sale by auction is
incorrect. Which is it?
a. A sale by public auction is perfected when the auctioneer announces its
perfection by the fall of the hammer, or in any other manner.
b. Before perfection, any bidder may retract his bid.
c. Before perfection, the auctioneer may withdraw the goods unless the
auction was announced to be without reserve.
d. The seller may validly participate in the bidding without prior notice to the
bidders.
104. S sold a laptop computer to B for P120,000.00 with B giving a payment
of P10,000.00 and promising to pay the balance in equal
monthly installments. B likewise executed a chattel 11 mortgage on the
computer and a real mortgage on his lot to secure the payment of the
balance of the purchase price. After paying the first two installments, B
 defaulted in the payment of next three installments. S may avail himself of
any of the following remedies except to:
a. At exact fulfillment of the obligation.
b. cancel the sale.
c. foreclose the chattel mortgage and recover any deficiency during the
foreclosure sale if there is an agreement to that effect.
d. foreclose the real mortgage and recover the deficiency during the
foreclosure sale even if there is no agreement to that effect.
105. B bought from Century Properties, Inc.- a 1,000 square-meter lot
located beside the Manila International Airport on which he intended to
construct a warehouse condominium. The terms of the sale provided for the
payment of the contract price of P300,000.00 in 60 equal monthly
installments of P5,000.00 each. After having paid 36 installments, B defaulted
in the payment of the succeeding - installments. As a consequence, Century
cancelled the sale. B now wants to claim the return of the cash surrender
value of the payments he had made pursuant to the "Realty Installment
Buyer Act", otherwise known as the Maceda Law.
a. B is entitled to a cash surrender value of50% ofP180,000.00, or
P90,000.00 under the Maceda Law.
b. B is entitled. to a cash surrender value of 55% ofP180,000.00, or
P99,000.00 under the Maceda Law.
c. B is entitled to a cash surrender value of90% ofP180,000.00, or
P162,000.00 under the Maceda Law.
d. B cannot invoke the Maceda Law for the return of any of the payments he
had made for the lot he purchased.
106. S shipped FOB Manila, perishable goods worth P50,000.00 to B who is
based in Cebu. B remitted a check amounting toP50,000.00 for the price of
the goods. While the carrier was on its way to Cebu, S was informed by his
bank that the check issued by B was dishonored for insufficient funds. On
further inquiry, he learned that B had become insolvent. Accordingly, S
obtained physical possession of the goods from the carrier After ratifying B. S
resold the goods.
Case A - If the goods are resold for P52,000.00, the profit ofP2 000 00
belongs to B since title had already passed to him.
Case B - If he proceeds of sale, net of incidental expenses a rated to
P4 ,000.00, S can recover the loss of P3,O00.00from B.
a. Born Cases are true
b. Cases are false.
c. Case A is true. Case B is false.
d. Case A is false. Case B is true.
107. B visited a store selling lamps, light bulbs and similar items. He
informed the seller that he was buying 2units of a50-watt Philips bulb.
Though he intended to use the 2 bulbs for the headlight of his car, he did not
inform the seller of his purpose. Thereafter, he installed the 2 units of
Phillips" bulb on his car but they did not function. Based on the foregoing,
which of the following statements is incorrect?
a. The seller is liable for breach of warranty of fitness for a particular
purpose.
b. The seller is not liable for breach of warranty of fitness for a particular
purpose because the buyer did not rely on the seller's skill or judgment.
 c. The seller is not liable to B since the seller's warranty is only for
merchantability, or that the bulb is fit for the general purpose for which it
was intended.
d. There is no warranty of fitness for a particular purpose since the bulb was
sold to B under its trade name.
108. S delivered a diamond ring to B for B's necklace worthP10,000.00and
cash of P15,000.00 which B is scheduled to deliver one week after their
agreement. The contract between Sand B was not in writing. The contract
between S and B is:
a. an enforceable contract of barter.
b. an enforceable contract of sale.
c. Can enforceable contract that is partly a sale and partly a barter.
d. A sale but it is unenforceable not being in writing and the cash to be paid
by B is at least P500.00.
109. These contracts are presented to you for evaluation:
I. A contract for the delivery of an article which is manufactured in the
ordinary course of business, but the article was not available at the
time of the contract was executed.
II. A contract for the delivery' of an article to be manufactured especially
for the customer and upon his special order.
In your evaluation of the said contracts:
a. Both contracts refer to a contract of sale.
b. Both contracts refer to a contract for a piece of work.
c. I refers to a contract of sale; II refers to a contract for a piece of
work.
d. I refers to a contract for a piece of work; it refers to a contract of
sale.
110. These statements are presented to you:
I. The sale of a thing having a potential existence is not effective
if the thing does not come into existence.
II. Sale of hope or expectancy produces effects even if the thing
hoped for does not come into existence.
In your evaluation of the foregoing statements:
a. Both are true.
b. Both are false.
c. Only Statement I is true.
d. Only Statement II is true.
111. The following terms are presented to you:
I. Contract to sell.
II. Sale or return.
III. Sale on trial.
IV. Agency to sell.
Upon the delivery of the goods by the owner thereof to the other
party, ownership is not transferred in:
a. I, II and III
b. I, III and IV
c. I, II and IV
d. II, III and IV
e. 111.
112. Salvosa shipped FOB Manila goods worth P20,000.00 to Bordelo who is
based in Davao City. While the carrier was on a stopover in Cebu City, Salvosa
was informed by his bank that the check issued by Bordelo was dishonored
by reason of insufficiency of funds. He also learned from the Credit Bureau
that Bordelo had become insolvent, Accordingly, Salvosa notified the carrier
that he was taking possession of the goods.
The right availed of by Salvosain the situation is known as the right of:
a. stoppage to transitu.
b. Subrogation.
c. attachment.
d. garnishment.
113. Refer to No. 112. After obtaining actual possession of the goods,
Salvosa offered them for sale at public auction. Based on the foregoing facts,
which of the following statements is incorrect pertaining to the sale of the
goods?
a. Salvos--4 mabidtthyae public auction provided there is notice of his
participation.
b. The buyer of the goods at the public auction acquires Title to the goods as
against Bordelo.
c. If the goads are soldt P19a,000.00 net of cost of selling and other
expenses, Salvosa may recover the amount ofP1,000.00 from Bordelo.
d. If the goods are sold at P22,000.00net of cost of selling and other
expenses, the profit of P2,000.00 belongs to Salvosa.
114. Antonio, Benito, Carmelo and Donato are co-owners of an agricultural
lot which they inherited from their parents. Antonio sold his undivided share
in the property to Teodulfo. Either Benito, Carmelo and Donato may purchase
Antonios share in the property from Teodulfo by virtue of their right of
a. legal redemption.
b. pre-eruption.
c. conventional redemption.
d. consolidation.
115. C, owner of certain goods, deposited the goods with W, a
warehouseman, who issued to D a warehouse receipt which states that The
goods are to be delivered to the order of D. D may negotiate the warehouse
receipt by any of the following means; except by:
a. Mere delivery.
b. Indorsement completed by delivery.
c. Blank indorsement completed by delivery.
d. Indorsement to bearer completed by delivery.
116. Palmares ordered from Superstar sportswear Company, a sportswear
manufacturer, 2 dozens of jackets and jogging pants Styled and designed by
Palmares for the use of his basketball team. This was not the type of
sportswear normally manufactured by Superstar. The price agreed upon by
the parties was P72, 000.00. After the articles were manufactured,Palmares
refused to accept them and claimed that he was not liable since the contract
did not. comply with the Statute ofFrauds.
a. Palmares is liable although the contract was not in writing.
b. The contract is a contract of sale.
c. The contract is a contract to sell.
 d. There was no contract at all because no writing was executed by the
parties.
117. It refers to the right which the vendor reserves to himself to
repurchase the thing sold, with the obligation to reimburse the vendee of the
price, the expenses of the contract, any other legitimate payments made
therefor and the necessary and useful expenses made on the thing sold.
a. Conventional redemption.
b. Legal redemption.
c. Equity of redemption.
d. Right of pre-emption.
118. The following are characteristics of certain contracts:
I. Nominate
II. Real
III. Aleatory
IV. Commutative
A contract for the sale of a sweepstakes ticket is considered-as:
a. I and II.
b. I and IV.
c. I and 111.
d. III and IV.
119. These statements are presented to you for evaluation:
I. Option money is part of the purchase price.
II. Earnest money is proof of the perfection of the contract of sale.
In your evaluation of the said statements:
a. Both are true.
b. Both are false.
c. Only I is true.
d. Only II is true.
120. S sold a computer to B for P120, 000.00 under the following terms:
P20, 000.00 down; balance payable in 10 equal monthly installments with an
acceleration clause. To secure payment of the balance, B executed a chattel
mortgage on the computer and a real mortgage on his lot. After paying the
first two installments defaulted in the payment of the third, fourth and fifth
installments. S wants to recover in full the balance ofP80,000.00 even in case
of deficiency so he consults you on which of the following courses of action to
take to achieve that purpose:
I. Exact fulfillment of the balance by suing B and have the
computer sold for the execution of the judgment against.
II. Foreclose the chattel mortgage on the computer.
III. Foreclose the real mortgage on the lot.
Based on your evaluation of the foregoing data, the course of action
that you will likely recommend to S to achieve his purpose is:
a. Either I or II.
b. Either Ii or III.
c. Either I or Ill.
d. Any of I, II or III.
121. On January 5, Samonte, who was going abroad as an immigrant,
offered to sell his car for P150,000.00 to Baldriga. He informed Baldriga,
however, that he wanted to rent the car for P1,000.00per day up to January
15 as soon as the sale is executed since
 his flight was not scheduled until the 16TH. Baldriga accepted both offers, and
accordingly, he and Samonte executed a contract of sale and a contract of
lease simultaneously on the same day, January 5. All the while, Samonte
remained in physical possession of the car until January 10 when the car was
stolen without his fault. The car was never recovered.
a. Samonte must bear the loss by returning the sum of P50,000.00 since,
Baldriga did not become the owner not having obtained physical
possession thereof.
b. Baldriga must bear the loss because he acquired ownership of the car
despite its lack of physical delivery to him.
c. Both Samonte and Baldriga must share equally in the loss.
d. Kamonte must bear the loss by returning P150, 000.00less P5, 000, 00,
the rental of the car for 5 days, in partial compensation.
122. S, who is based in Manila, shipped FOB Cebu goods worthP50, 000.00
to B. While the goods were on their way to Cebu, S was informed by his bank
that the check remitted by B was dishonored for insufficient funds.
Accordingly, S notified the carrier not to proceed with the delivery and that he
was taking possession of the goods. Based on the foregoing facts, which
remedy is available to S?
a. Resale of the goods.
b. Rescission of the sale.
c. Either resale or rescission of the goods, at the option of S.
d. Newer resale nor rescission.
123. Before perfection in a sale by auction:
I. Any bidder may withdraw his bid.
II. The auctioneer may withdraw the goods from the sale unless the
auction has been announced to be without reserve.
The statement is true for:
a. Both I and ll.
b. Neither I nor II.
c. I only.
d. II only.
124. The following contracts of sale are presented to you:
I. S sold a certain ring to B. It turned out that the ring was stolen
from 0, its true owner.
II. S, a jewelry store sold a certain ring to B. The ring, however,
actually belongs to 0 who had lost it a few days earlier.
III. S, a pawnshop, sold at a public auction a certain ring with B as
the winning bidder.0, however, is the true owner of the ring but
the pawnshop thought it was owned by X, a defaulting borrower
of the pawnshop.
In your evaluation of the above sales, B acquired title to the ring in:
a. I and II.
b. II and Ill.
c. I and 111.
d. None of the three contracts.
125.
126. Refer to No.125. O may recover the ring. from B without the need of
reimbursement in:
a. I only.
 b. II only.
c. Ill only.
d. All three contracts.
127. S sold a brand-new electric typewriter to B for P20,000.00 on a credit
term of 30days. The agreement between the parties provides that B may
return the typewriter within the same period. Ten days after delivery to B,
burglars entered the office of B and carted away various valuables including
the typewriter he bought from S.
a. B must pay the price of the typewriter to S.
b. B is not obliged to pay the price of the typewriter because the loss thereof
was without his fault.
c. S must shoulder the loss because B's ownership of the typewriter was not
absolute since he had the option to, return it within 30 days.
d. The loss must be shared equally by S and B in fairness to both.
128. The following statements are presented to you:
I. A bearer document of title if it is specially indorsed can be negotiated
thereafter only by indorsement completed by delivery.
II. A bearer negotiable instrument if it is specialty indorsed be negotiated
thereafter only by indorsement completed by delivery.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only I is true.
d. Only 11 is true.
129. S sold to B a specific car for P200,000.00. The terms of the sate
provide the following: down payment of P40,000.00; balance payable in 8
equal monthly installments of P20,900.00 each, with a real estate mortgage
to be executed by B on his lot to secured the said balance. After paying 3
installments, B defaulted the payment of 3 more installments. Based on the
foregoing facts, the following remedies were presented to B:
I. Exact fulfillment of the obligation.
II. Cancel the sale.
III. Foreclose the real mortgage on the lot and recover any deficiency in
the foreclosure sale.
If you were B, the remedy that you may avail yourself of is:
a. Either I or ll.
b. Either II or Ill.
c. Either I or Ill
d. Any of the three remedies presented.
130. An. unpaid seller may avail himself of the following remedies, except
the right to:
a. Retain the goods while he is in possession of them.
b. Resume possession of the goods at any time while they are in transit.
c. Buy the goods at any public sale if he decides to resell them.
d. Rescind the sale.
131. S sold his lot to X on April 1, 2010. The deed of sale was duly
acknowledged by the parties before a notary public. However, X did not take
physical possession of the lot. On April 10,2010, S sold the same lot to Y
under a deed of sale which was still to be notarized. Y immediately took
physical possession of the lot. Y was not aware of the previous sale to X.
 When X visited the property, he found Y already building a structure thereon.
It was also then that he discovered that S had sold the same lot to Y.
a. The lot belongs to X.
b. The lot belongs to Y.
c. The lot will be co-owned by X and Y in fairness to both of them since they
were in good faith.
d. The lot still belongs to S until it can be determined who between X and
Y is the owner of the lot.
132. A contract of sale is perfected upon the:
a. full payment of the purchase price by the buyer.
b. delivery of the object of the contract to the buyer.
c. Meeting of minds between seller and the buyer on the object and the
price.
d. Acknowledgment of the deed of sale by the seller and the buyer before a
notary public.
133. These statements are presented to you:
I. It is part of the purchase price.
II. It is paid before the contract of sale is perfected.
III. When given, it entitles the party making the payment to hold
the recipient from offering the object of the contract to other
persons within the period agreed upon.
IV. It is proof the perfection of the contract of sale.
Based on your evaluation of the foregoing statements, which of the
following is true?
a. I and III refer to option money.
b. II and III refer to option money.
c. II and IV refer to earnest money.
d. III and IV refer to option money.
134. Orlando is the owner of an agricultural lot consisting of 9,000 square
meters (or 9 hectare). The lot is surrounded on the North by Nonato's lot
consisting of 7,000 square meters; on the East, by Espino's lot consisting of
6,500 square meters; on-the South, by Serrano's lot consisting of 8,500
square meters; And on the West, by the road, across which was Wagan's lot
consisting of 6,300 square meters. Orlando donates the lot to Benito, his
brother, who is the owner of several rural lots in . Of the adjoining owners,
only Serrano expressed to Benito his desire to redeem the lot. The right of
legal redemption is available to:
a. Serrano because it was only he who offered to redeem the lot.
b. Wagan because he is the owner of the smallest adjoining lot.
c. Espino because he is the owner of the smallest lot that is nearest to the
lot of Benito.
d. None of the adjoining owners may avail himself of the right of legal
redemption including Nonato.
135. Barrameda visited the furniture store of Farrales to buy window frames
for his house .which was. undergoing construction. Not finding any window
frame. of his liking, he made a sketch of the design he wanted and asked
Farrales if he- could make four pieces of the specification for delivery after
one week. Farrales answered that he could at the price of P2,000.00. per
frame. The window frames ordered by Barrameda was of such odd shape and
design that when completed and installed, Barrameda's house would be the
 only one in the community that had windows of such type. Barrameda left the
sketch with Farrales who did. not ask any down payment since he had
previously transacted with Barrameda and knew him. During all the time that
Barrameda and Farrales were dealing with each other, Arnulfo, the assistant
of Farrales, was present. When the window frames were finished, Farrales
proceeded to the house of Barrameda to deliver them but Barrameda refused
to accept them saying that he had changed his mind, and that at any rate,
the contract was unenforceable, not being in writing.
a. The contract is enforceable because the sketch made by Barrameda was
sufficient to bind him.
b. The contract is enforceable because Arnulfo can testify in court to prove
its existence.
c. The contract is enforceable even if no writing was executed by the parties.
d. The contract is unenforceable because no writing was subscribed by the
parties.
136. Refer to the preceding number. What contract was entered into
between Barrameda and Farrales?
a. Contract of sale.
b. Contract for a piece of work.
c. Contract to sell.
d. An innominate contract.
137. A contract for a piece of work is different from a contract of sale in that
in a contract for a piece of work:
a. the Statute of Frauds does not apply.
b. the article object of the contract is manufactured or procured in the
ordinary course of business.
c. there is usually a stock which is kept on hand and made available to
anyone.
d. the article is not available, there is no change or modification of it when it
is ordered by the customer.
138. Which of the following statements is common to both sale or return
and sale on trial?
a. Ownership of the thing is transferred upon delivery to the buyer.
b. Ownership of the thing is transferred to the buyer at some future time.
c. Ownership of the thing may be reverted to the seller should the buyer
return it within the time agreed upon.
d. In case the thing is lost through a fortuitous event after the lapse of the
time to keep or return it and the buyer was still in possession of it, the risk
of loss is with the buyer.
139. The full payment of the price is a positive suspensive condition in:
a. contract to sell.
b. contract of sale.
c. sale or return.
d. sale on trial.
140. The non-payment of the price is a negative resolutory condition in:
a. contract to sell.
b. contract of sale.
c. contract of agency to sell.
d. sale on approval.
141. When there is a stipulation exempting the vendor from the obligation
to answer for eviction and the vendee made the waiver with knowledge of the
risks of eviction and assumed the consequences, such waiver is known as:
a. waiver intencionada.
b. waiver consciente.
c. forfeiture of rights.
d. surrender of rights.
142. In case of eviction, the vendor shall be liable to the vendee only for the
value of the thing sold at the time of eviction in which of the following cases?
a. When there is waiver intencionada
b. When there is waiver conscience
c. When the vendor was in bad faith and there was no stipulation exempting
the vendor from liability in case of eviction.
d. When the vendor was in bad faith and there was stipulation exempting the
vendor from liability in case of eviction.
143. S and B entered into a contract for the sale of the car of S to B for
P100,.000.00. In reality, however, B did not give any amount to S because
the latter intended to donate the car to B. In this case:
a. The contract between S and B is void because the prices simulated.
b. The contract between S and B is a valid contract of donation.
c. The contract between S and B is a void contract of donation.
d. The contract between S and B is a valid contract of sale.
144. On July 1, Serena sold to Berbola through a private instrument a
specific piano for P20,000.00. Simultaneous with the sale, the parties agreed
that Serena would lease the piano for one week in preparation for a concert
after which Berbola could physically get the piano. Before the week was over,
Serena sold the same piano, also in a private instrument and for P25,000.00,
to Jezebel who immediately loaded the piano in her van. Neither Berbola nor
Jezebel was aware of the sale made to the other. Who is the owner of the
piano?
a. Berbola
b. Jezebel
c. Berbola and Jezebel, as co-owners.
d. Serena who retained ownership because of Berbola and Jezebel's
conflicting rights.
145. B bought two carabaos, one male and one female, from, S. He paid
P2,000.00and P3,000.00, respectively, for the animals which he intended to
use for breeding. Later, the female carabao was found unfit for breeding
because of a redhibitory defect.
a. B can rescind the sale of the female carabao only because he paid a
separate price for it.
b. B can rescind the sale of both animals because he would not have bought
the male carabao without the female carabao.
c. B cannot rescind the sale of either animal under the "let the buyer
beware" rule.
d. B can rescind the sale of both animals only if he had paid a single price for
both them.
146. What may the consideration consist of in an option contract in order to
bind the offerer?:
a. Monetary.
 b. Other things or undertakings.
c. Either (a) or (b).
d. May not be a valuable consideration, i.e., may be gratuitous.
147. The following statements pertaining to sale by auction are presented to
you:
I. The auctioneer may not withdraw the goods from the auction sale if
the sale was announced to be without reserve.
II. The auctioneer may withdraw the goods from the auction sale if the
sale was announced to be with reserve.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
148. Under the Maceda Law, in determining the number of installments paid
by the buyer, the following payments are included, except:
a. down payments.
b. deposits.
c. option money.
d. none of the foregoing.
149. Necessaries. include everything indispensable for sustenance, clothing
and medical attendance, and which of the following?
a. Dwelling
b. Education
c. Transportation
d. All of the foregoing.
150. While her parents were away on a visit to the province, M, 17 years
old, entered. into a contract for the purchase of textbooks prescribed in his
course and an evening gown. Which sale to M is/are considered valid and
binding, i.e., not voidable?
a. sale of the textbooks.
b. The sale of the evening gown.
c. Both (a) and (b).
d. Neither (a) nor (b) because a minor is incapable of giving consent.
151. B bought a refrigerator from S for P20,000.00 which is payable in20
installments at P1,000.00 per month. After paying6 installments, B defaulted
in the payment of the seventh and eight installments. Should S decide to
enact fulfillment of the obligation, how much, as a rule, may S collect from B?
a. The total amount of installments defaulted, i.e.,P2,000.00.
b. The remaining balance of P14,000.00.
c. Either (a) or (b) at the option of S.
d. Neither (a) nor (b) because S has to wait for the sale of the property to
third persons.
152. A, B and C were the co-owners of a lot in the ratio of 1:2:1. A died. He
was succeeded to the property by S, his son and heir. Who may redeem the
lot of A from S?
a. B, because as the owner of a bigger portion, he enjoys preference in the
exercise of the right of legal redemption.
b. C, so that he and B will have an equal share in the lot.
c. B and C, in proportion to the share of each in the lot.
 d. Neither B nor C may exercise the right of legal redemption.
153. When is the vendor bound to deliver the thing sold?
a. If the vendee has not paid him the price.
b. If no period for the payment of the price has been fixed in the contract.
c. If the buyer has been given the benefit of the period.
d. None of the foregoing.
154. These statements concerning the double sale of an immovable are
presented to you:
I. The first buyer who was in good faith at the time the sale was made to
him, remains in good faith not withstanding that he subsequently
obtains knowledge of the second sale.
II. In order that the second buyer may be given preference he must
possess good faith from the time of sale in his favor until the
registration of the same.
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement 11 is true.-
155. A credit right is considered to be in litigation:
a. as soon as a complaint is filed by the creditor against the debtor.
b. when the debtor has filed his answer to the complaint.
c. when the case is scheduled for pre-trial conference between the parties.
d. when the trial has started.
156. D owed C P100,000.00. The debt is evidenced by a promissory note
and secured by a mortgage of D's lot. Before due date, C assigned his credit
right to T by executing a deed of assignment but without the parties
informing D. On due date, T went to D to collect the debt at which time D
learned of the assignment.
a. T cannot collect from D because the latter was not informed of the
assignment at the time it was made.
b. T can collect from D but if D cannot pay, T can foreclose the mortgage in
the lot.
c. T can collect from if D cannot pay, T can foreclose the mortgage which is
deemed assigned together with the credit right.
d. T can only go after C, the assignor, since the assignment was without D's
knowledge.
157. What does the assignor of a credit warrant?
a. The legality and existence of the credit.
b. The solvency of the debtor.
c. Both (a) and (b).
d. Neither (a) nor (b).
158. The right of pre-emption differs from the right of redemption in that in
pre-emption:
a. the action is directed against the buyer.
b. the action is directed against the seller.
c. the right arises after the sale.
d. there can be a rescission of the original sale.
159. The following are certain modes of acquisition of property :
I. Purchase
 II. Dacion en pago
III. Succession
IV. Donation
Legal redemption is available when the transferee acquired the property
through:
a. I or II.
b. III or IV.
c. I or Ill.
d. II or IV.
160. A sale between husband and wife is valid in which of the following
cases?
a. When a separation of property has Teen agreed upon in the marriage
settlements or when there has been judicial separation of property.
b. When price of the sale is a moderate amount.
c. When the object of the sale is a necessary such as food or clothing.
d. When the spouses are living separately.

TEST II - MATCHING TYPE. Indicate your answers by writing the letter

representing the statement or phrase that best describes, defines or explains
the numbered items.
Terms
1. Barter 13.Document of title
26.Pactum commissorium 39.Sale on trial
2. Piece of work 14.Bill of lading
27.Conventional redemption 40.Absolute incapacity
3. Price 15.Sale or return
28.Vendor 41.Payment by cession
4. By-bidders/puffers 16.Dacionenpago
29.Relative incapacity 42.Future goods
5. Policitacion 17.Fungible goods
30.Waiver consciente 43.Bearer document of title
6. Symbolic delivery 18.Straight sale
31.Emptiospei 44.Waiver intencionada
7. Traditioconstitutumposse 19.Emptio rei sperati
ssorium 45.Traditio brevi menu
32.Legal formalities 20.Earnest money
33.Necessaries 46.Assignment of credit
8. Unpaid seller 47.Bailee
9. 34. 21.Traditio longa manu
34.Stoppage in transitu 48.Redhibitory defect
9. Warranty against eviction 49.22.
35.Order document of title 22.Possessory lien
10.1Accion redhibitoria 49.Auction
36.Right of pre-emption 23.Eviction
11.Legal redemption 50.Option money
37.Warehouse receipt 24.Easement or servitude
12.Equitable mortgage 25.Accionquanti minor's
38.Vendee
10.
11.Statements
a. Ownership of a thing is transferred to the creditor to settle a monetary
obligation.
b. Lacks formalities but nevertheless shows the real intention of the
parties to create a specific property to secure the performance of an
obligation.
c. They refer to interchangeable goods such as grain, oil, etc., that allow
one to be replaced by another without loss of value.
d. Proof of the perfection of a contract of sale.
e. Includes a warehouseman, carrier or other person who receives the
possession or custody of the thing delivered.
f. Even professional inspection is not sufficient to discover it.
g. Exercised by the seller by obtaining actual possession of the goods or
by giving notice to the carrier or other bailee having actual possession
of the goods.
h. It is made by the buyer with knowledge of the risk of eviction, hence,
the seller will not have any liability if the buyer is evicted.
i. Ownership is transferred to buyer upon delivery but he has the option
to revert such ownership to the seller.
j. Ownership of the thing sold is retained by the seller despite delivery to
the buyer, but the latter agrees to pay the price if he finds the thing
satisfactory.
k. Delivery that takes place when the buyer who was in possession of the
thing sold at the time of sale continues in possession of the same as an
owner.
l. Negotiated by indorsement.
m. Sale of property to the highest bidder.
n. The party in a contract of sale who is obligated to transfer the
ownership of and to deliver a determinate thing.
o. The consideration paid for the purpose of holding one to his promise to
buy or sell a determinate thing for a certain period of time, which
consideration is separate and distinct from the purchase price.
p. Applies to persons who, under certain circumstances,- cannot purchase
certain property.
q. The person obligated to pay the price of the thing purchased.
r. Delivery of a movable by mere agreement of the parties if the thing
cannot be transferred to the vendee at the time of sale.
s. Negotiated by mere delivery.
t. It is made by the buyer without knowledge of the risk of eviction.
u. The consideration of the contract is another thing.
v. Applies to persons who cannot bind themselves in a contract including
a contract of sale.
w. A document used as proof of the possession or control of the goods, or
authorizing or purporting to authorize the possessor of the document
to transfer or receive, either by indorsement or by delivery, the goods
represented by such document.
x. Right given to an adjoining owner of an urban land to purchase the
same ahead of others if such land is held for speculation.
y. Delivery through the execution of a public document.
z. The deprivation by final judgment of the vendee of the whole or a
part of the thing sold based on a right prior to the sale or an act
imputable to the vendor.
aa.Refer to goods to be manufactured, raised or acquired by the seller.
ab.The sale of hope or expectancy.
ac. Includes one who has received as conditional payment for the goods a
negotiable instrument but the condition' has been broken by reason of
the dishonor of the instrument or the insolvency of the buyer.
ad. Include everything indispensable for sustenance, dwelling, clothing,
medical attendance, education and transportation.
ae.The balance is payable in its entirety after the payment of an initial
sum.
af. A contract for the delivery at a certain price of an article to be
manufactured specially for the customer and upon his special order,
and not for the general market.
ag.The sum stipulated as the equivalent of the thing sold.
ah.The right to be subrogated upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by
purchase or dation in payment, or by any other transaction whereby
ownership is transmitted by onerous title.
ai. Seller's undertaking that the buyer shall enjoy legal and peaceful
possession of the thing sold.
aj. A stipulation in a contract of sale involving an immovable that the sale
is automatically rescinded upon failure of the buyer to pay the price.
ak. Delivery of the keys of the place where a movable is kept or stored.
al. Contract for the storage of goods for a compensation.
am. Buyer's remedy which involves the proportionate reduction in
the price of the thing purchased.
an.A unilateral promise to buy or sell a thing which is not accepted by the
promisee.
ao. An unpaid seller's right to retain the goods for the price while he is in
possession of them.
ap.Remedy of buyer to withdraw from the sale and ask for damages.
aq. An encumbrance imposed upon an immovable for the benefit of
another immovable belonging to a different owner.
ar. A person employed by the seller or auctioneer to raise the price in an
auction sale.
as. A document issued by a common carrier acknowledging the receipt of
the goods and agreeing to transport and deliver them to a specified
place.
at. Right of seller to repurchase the thing sold and the exercise of which
was reserved by the seller at the time of sale.
au.Delivery that takes place when the seller continues in possession of the
thing sold after the sale but as lessee, depositary or otherwise.
av. The creditors are given the right to sell the debtor's properties and
apply the proceeds to their respective claims.
aw. It has for its purpose the transfer to another person of the right
to collect the debt.
ax. Sale of an expected thing.
ay. None of the foregoing.
 12.
13.TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is
true, and the word FALSE" if the statement is false.
1. Warranty against eviction is inherent in a contract of sale; hence, it is an essential
element thereof.
2. Dacion en pago partakes of the nature of a sale; hence, there is more freedom in
fixing the price of the thing conveyed.
3. Acontract for a piece of work must comply with the Statute of Frauds. Accordingly, it
must be in writing to be enforceable ifthe price is P500.00or more.
4. A sales contract requires the delivery of the thing sold for itsperfection.
5. If the consideration received for a thing is another thing and amonetary
consideration and the intention of the parties does notclearly appear, the contract,
will be considered a contract ofbarter if the value of the property consideration is
greater thanthe monetary consideration.
6. Ina contract to sell, the full payment of the price is a- suspensivecondition which
upon -fulfillment will require the execution of acontract of sale.
7. It is not necessary that the vendor of a thing must be the ownerthereof at the time
of sale as long as he can transfer itsownership to the buyer upon delivery.
8. The sale of hope or expectancy is valid even if the thing hopedfor does not come
into existence.
9. If the sale of a piece of land is made through an agent, theauthority of the agent
must be in writing for the sale to be valid.
10.In a sale by auctionan, Any bidder may retract his bid before tiesale is perfected.
11.If a "by-bidder` or "puffer is employed by a seller without noticein sale by auction,
the sale ma/ be treated as fraudulent by thebuyer.
12.The ownership of the thing sold is transferred upon theperfection of the contract of
sale.
13.A unilateral promise to buy or sell a determinate thing at acertain price is binding
upon the promissor if the promise issupported by a consideration distinct from the
price.
14.Earnest money is part of the purchase price of a thing; hence,deductible from the
total selling price.
15.In sale of personal property payable in installments, the sellermay exact fulfillment
of the buyers obligation when the buyerdefaults in the payment of one or more
installments.
16.In sale of real property where the buyer has defaulted after paying at least 2 years
installments, he shall be entitled to pay,without additional interest, the unpaid
installments due within thegrace period earned by him.
17.The purchase by a guardian of the property of the person underhis guardianship is
valid.
18.The buyer shall be entitled to the fruits of the thing sold from thetime of the
perfection of the contract.
19.The delivery of incorporeal property may be made through theexercise by the
vendee of his rights with the consent of thevendor.
20.If goods are sold on "sale or return", the risk of loss of the thingsold remains with
the seller after its delivery to the buyer.
21.In "sale on approval", the buyer becomes the owner of the thingupon delivery, but
he may revert such ownership to the seller byreturning it.
22.The delivery of specific goods to a carrier or other bailee for thepurpose of
transmission to the buyer generally .transfersownership of the goods to the buyer.
23.When a thing is purchased from a merchant's store, fair ormarket, the buyer
acquires title to the thing although the sellermay have stolen it or acquired it from a
thief.
24.A warehouse receipt is also a contract between thewarehouseman. and the
depositor of the goods.
25.A bearer document of title becomes an order document of title ifit is specially
indorsed.
26.The delivery of an order document of title without anyindorsement does not
constitute negotiation.
27.A negotiable document of title of title becomes non-negotiable if it is stamped with
the r-nark " non- negotiable.
28.If the goods told are in the possession of a third person, the seller is deemed to
have delivered the goods to the buyer if the third person acknowledges to the buyer
that he holds the goods in the buyer's behalf.
29.If a period has been fixed for the payment of the price which has not yet arrived,
the seller in the meantime is bound to deliver the thing sold.
30.An unpaid seller exercising his right to resell the goods may buy the goods either
directly or indirectly.
31.When an unpaid seller exercises his right of stoppage in transit, the contract of
carriage ceases, the carrier becoming liable as a depositary.
32.If real estate is sold for a lump sum, the vendor is bound to deliver all that is
included within the boundaries stated in the contract although the actual area is
greater than that stated in the contract.
33.If the same immovable is sold to two or more persons who are all in good faith,
ownership shall belong to the buyer who first paid its price.
34.In order that the buyer may enforce the seller's liability for breach of warranty
against eviction, the judgment depriving the buyer of the thing must first be
appealed by the buyer.
35.The vendor's liability for breach of warranty against eviction, may be validly waived
by the vendee.. However, the vendor will still be liable if the waiver was made by
the vendee without knowledge of the risks of eviction.
36.As a rule, the vendor shall not be liable for a non-apparent easement that is
recorded in the Registry of Property.
37.The vendor shall be liable generally for any defect on the thing sold even if he was
not aware thereof.
38.When animals are sold as a pair, the vendee may ask for the rescission of the sale
of both animals although only one of them suffers from a redhibitory defect.
39.The sale of animals suffering from contagious diseases is voidable. ls sold at
40.There is no warranty against hidden defects of animal sold at fairs or at public
auctions, or of animals sold as condemned.
41.Acceptance of the goods by the buyer generally discharges theseller from his
liability for any breach of warranty.
42.if the buyer is justified in refusing to accept the goods, he shallbe obliged to hold
the goods as depositary.
43.The buyer is obliged to pay interest on the price of the goods forthe period between
the delivery of the goods and the payment ofthe price if the thing sold produces
fruits or income.
44.The buyer may suspend the payment of the price of the thingpurchased by reason
of trespass on the thing.
45.A stipulation that the sale of an immovable is automatically rescinded upon the
default of the buyer in the payment of theprice is valid.
46.In conventional redemption, the creditors of the vendor maymake use of the right of
redemption against the vendee althoughthey have not exhausted the properties of
the vendor.
47.In case of doubt, a contract purporting to be a sale with a right torepurchase shall
be construed as an equitable mortgage.
48.For an assignment of credit to be binding against third persons ifa movable property
is involved, the same must be in a. public instrument and recorded in the Registry of
Property.
49.A debtor who has paid his creditor before he learns of theassignment of his debt
shall be released from his liability to theassignee.
50.The debtor's consent is required for the validity of theassignment of the credit made
by his creditor to another person.
14.

15.

16.ANSWERS TO DIAGNOSTIC EXERCISES

17.SALES
18.
1. B 30.30. B
2. D 31.31,D
3. B 32.32.D
4. D 33.33.C
5. D 34.34.A
6. D 35.35. C
7. D 36.36. B
8. B 37.37.B
9. C 38.38.B
10.C 39.39. A
11.B 40.40.D
12.B 41.41.A
13.C 42.42. C
14.B 43.43.D .
15.B 44.44. A
16.B 45.45.C
17.C 46.46. D
18.A 47.47. C
19.B 48.48. C
20.20.D 49.49. B
21.21.D 50.50. D
22.22. B 51.51.B
23.23. D 52.52.A
24.24. C 53.53.B
25.25. A 54.54. D
26.26. B 55.55. C
27.27. D 56.56. B
28.2 8. C 57.57.D
29.29. D 58.58. C
59.59. C 109. 109. A
60.60. B 110. 110. B
61.61.A 111. 111. A
62.62.B 112. 112. A
63.63.D 113. 113. A
64.64.B 114. 114. A
65.65.D 115. 115. B
66.66.A 116. 116. C
67.67.C 117. 117. A
68.68.C 118. 118. B
69.69.D 119. 119. C
70.70.A 120. 120. D
71.71.A 121. 121. C
72.72.C 122. 122. B
73.73.C 123. 123. D
74.74.C 124. 124. A
75.75.C 125. 125. B
76.76.C 126. 126. A
77.77.B 127. 127. A
78.78.B 128. 128. C
79.79.A 129. 129. D
80.80.D 130. 130. C
81.81.C 131. 131. A
82.82.C 132. 132. C
83.83.C 133. 133. B
84.84.D 134. 134.D
85.85.B 135. 135. C
86.86. D 136. 136. B
87.87. D 137. 137. A
88.88. A 138. 138.D
89.89. B 139. 139. A
90.90.D 140. 140. B
91.91. B 141. 141. A
92.92. A 142. 142. B.
93.93. C 143. 143. B
94.94. D 144. 144. A
95.95.D 145. 145.B
96.96. D 146. 146. C
97.97. C 147. 147..A
98.98. C 148. 148. D
99.99. C 149. 149. D
100. 100. B 150. 150. A
101. 101. C 151. 151. A
102. 102. A 152. 152. D
103. 103. D 153. 153. C
104. 104. C 154. 154.A
105. 105. A 155. 155. B
106. 106. D 156. 156.C
107. 107. A 157. 157. A
108. 108. A 158. 158. B
159. 159. A 162.
160. 160. A 163.
161.
164.
165. TEST II.- MATCHING TYPE
166. 1.U 191. 26. JJ
167. 2.FF 192. 27. TT
168. 3.GG 193. 28. N
169. 4. RR 194. 29. P
170. 5. NN 195. 30. T
171. 6.KK 196. 31.BB
172. 7. UU 197. 32. Y
173. 8.CC 198. 33. DD
174. 9. II 199. 34.G
175. 10. PP 200. 35. L
176. 11.HH 201. 36.X
177. 12.B 202. 37. LL
178. 13. W 203. 38.Q
179. 14.SS 204. 39. J
180. 15. I 205. 40. V
181. 16.A 206. 41. W
182. 17.C 207. 42. AA
183. 18.EE 208. 43. S
184. 19. XX 209. 44.H
185. 20. D 210. 45. K
186. 21.R 211. 46. ww
187. 22.OO 212. 47. E
188. 23. Z 213. 48. F
189. 24. QQ 214. 49.M
190. 25. MM 215. 50. O
216. 236. 8.TRUE
217. 237. 9.TRUE
218. 238. 10. TRUE
219. 239. 11. TRUE
220. 240. 12. FALSE
221. 241. 13. TRUE
222. 242. 14. TRUE
223. 243. 15. TRUE
224. 244. 16. TRUE
225. 245. 17. FALSE
226. TEST III- TRUE OR FALSE 246. 18. TRUE
227. 247. 19. TRUE
228. 1.FALSE 248. 20. FALSE
229. 2.FALSE 249. 21. FALSE
230. 3.FALSE 250. 22. TRUE
231. 4. FALSE 251. 23. TRUE
232. 252. 24. TRUE
233. 5.TRUE 253.
234. 6.TRUE 254.
235. 7.TRUE 255.
256. 25. TRUE third person by common
257. 26. TRUE agreement.
258. 27. FALSE 290. 2. In order to bind
259. 28. TRUE third persons, a pledge:
260. 29. TRUE 291. a. must be recorded
261. 30. FALSE with the Register of Deeds.
262. 31. TRUE 292. b. must be in a public
263. 32. TRUE instrument showing a
264. 33. FALSE description of the thing pledged
265. 34. FALSE and the date of the pledge.
266. 35. TRUE 293. c. is sufficient that it
267. 36. TRUE be in a private instrument
268. 37. TRUE showing a description of the
269. 38. TRUE thing pledged and the date of
270. 39. FALSE the pledge.
271. 40. TRUE 294. d. must be
272. 41. FALSE accompanied by an affidavit of
273. 42. FALSE good faith.
274. 43. TRUE 295. 3. The following is
275. 44. FALSE required in order that a chattel
276. 45. FALSE mortgage will bind third
277. 46. FALSE persons.
278. 47. TRUE 296. a. The chattel
279. 48. FALSE mortgage must be accompanied
280. 49. TRUE by an affidavit of good faith and
281. 50. FALSE recorded in the Chattel
282. Mortgage Register.
283. PLEDGE, MORTGAGE AND 297. b. The chattel
ANTICHRESIS - DIAGNOSTIC mortgage must be in a public
EXERCISES instrument showing a
284. MULTIPLE CHOICE. Select description of the thing
the best answer by writing the mortgaged and the date of the
letter of your choice. chattel mortgage. .
285. 1. One of the 298. c. It is sufficient that
distinctions between pledge and the chattel mortgage be in
mortgage is that pledge: writing, public or private.
286. a. is constituted to 299. d. The thing
secure the fulfillment of a mortgaged must be delivered to
principal obligation. the creditor.
287. b. requires absolute 300. 4. The following is
ownership on the part of the required in order that a real
person constituting the security. mortgage will bind third
288. c. requires that the persons,
one constituting the security 301. a. The real mortgage
must have the free disposal of must be accompanied by an
the thing or be legally affidavit of good faith and
authorized for the said purpose. recorded with the Registry of
289. d. requires the actual Property.
delivery of the thing given as 302. b. The real mortgage
security to the creditor or a must be in a public instrument
 showing a description of the of the credit, the wristwatch the
thing mortgaged and the date share of Y, and thenecklace the
of the real mortgage. share of Z. Later, D pays X
303. c. It is sufficient that P10,000.00.
the real mortgage be in writing, 316. a. D can demand the
public or private. extinguishment of the pledge of
304. d. The real mortgage the,ring.
must be recorded in the 317. b. X may release the
Registry of Property. pledge of the ring.
305. 5. When is 318. c. The pledge of the
appropriation by the creditor of ring will remain until the shares
the thing given as security of Yand z are paid by D
allowed in pledge, real 319.
mortgage and chattel 320. d. D can demand the
mortgage? extinguishment of the pledge of
306. a. When the thing thering, wristwatch and
given as security in real necklace because there has
mortgage is not sold at two beenpartial payment.
public auctions. 321.
307. b. When the thing 322. 8. T he following may
given as security in pledge is be the object of pledge, except,
not sold at two public auctions. 323. a. all movables within
308. c. When the thing the commerce of men
given as security in chattel whichsusceptible of possession.
mortgage is not sold at one 324. b. bills of lading.
public auction. 325. c. shares of stock
309. d. No appropriation is 326. d. parcels of land.
allowed in either pledge, real 327. 9. A kind of mortgage
mortgage or chattel mortgage. which lacks the formalities
310. 6. This is a stipulation required by law,but
in pledge or mortgage providing nevertheless shows the
that the ownership of the thing intention of the parties to
given as security will pass to secure adebt with real property
the pledgee or mortgagee upon. is known as:
default of the debtor. 328. a. conventional
311. a. Constitutum mortgage.
possessorium 329. b. voluntary
312. b. mortgage.
Pactumcommissorium 330. c. equitable
313. c. Legal subrogation mortgage.
314. d. Redemption 331. d. legal mortgage.
315. 7. D borrowed 332. 10. The debtor/pledgor
P30,000.00 from C. To secure has the following rights, except
the debt, D pledgedh is ring, to:
wristwatch, and necklace. 333. a. ask for the return
Before the debt could bepaid, C of the thing pledged after he
died leaving X, Y and Z as heirs. has paidthe debt, its interests,
By agreement amongthe heirs and with expenses in a
who inherited the credit, the propercase.
ring would secure theshare of X
334. b. continue to be the 345. c. C cannot collect
owner of the thing pledged from M. D is the one entitled to
unless it isexpropriated. collectthe note from M.
335. c. require the deposit 346. d. C cannot collect
of the thing with a third person from M. He must sell the note at
if it isin danger of being publicauction at maturity if D
impaired or lost through cannot pay.
thenegligence or willful act of 347. 13. A third person who
the pledgee. pledges his property to secure
336. d. alienate the thing another,person's debt is
pledge without the consent of released from liability in the
the pledgee. following cases,except:
337. 11. The 348. a. when the creditor
creditor/pledgee has the voluntarily accepts an
following rights, except to: immovableproperty in payment
338. a. retain the thing in of the debt.
his possession until the debt is 349. b. when the creditor
paid. voluntarily accepts a movable
339. b. use the thing propertyin payment of the debt.
pledged even without authority 350. c. if an extension of
if such useis necessary for its time is granted to the debtor by
preservation. thecreditor with the pledgor's
340. c. demand consent.
reimbursement of the expenses 351. d. if through some
made for thepreservation of the acts of the creditor, the pledgee
thing. cannotbe subrogated to the
341. d. automatically rights, mortgages and
appropriate the thing pledged preferencesof the creditor.
upon defaultof the debtor in the 352. 14. A pledge is
payment of his debt. extinguished through any of the
342. 12. On March 1, 2010, following, except:
D obtained a loan of P10,000.00 353. a. sale of the thing
from C. Tosecure the debt which pledged.
is payable on May 1, 2010, D 354. b. appropriation of
pledged apromissory note the thing pledged after the
amounting to P12,000.00 which thing is notsold at one public
was executedin his favor by M. auction.
The promissory note is due April 355. c. written
25, 2010 andproperly endorsed abandonment of the pledge in
by D to C. writing.
343. a. On April 25, 2010, 356. d. return of the thing
C can collect the note of pledged.
P12,000.00from M. The entire 357. 15. D pledged his 100
proceeds will belong to C. shares of stock of San Miguel
344. b. On April 25, 2010, Corporation toC to secure his
C ccn collect the note of debt of P5,000.00. On due date,
P12,000.00from M. However, he t0 was not ableto pay the debt,
must give P2,000.00 to D. so C caused the sale of the
shares at publicauction, The
 shares of stock were sold at 372. 18. D borrowed
P4,500.00. P100,000.00from C. To secure
358. a. To extinguish the the debt, Dmortgaged his land
obligation, C may recover and building in favor of C. The
thedeficiency of P500.00 from O mortgage isregistered with the
if there in a stipulation tothat Registry of Property. Sometime
effect. later, D soldthe land and
359. b. To extinguish the building to X who was not aware
obligation, C may recover the of the mortgage ofthe land and
deficiency even if there is no building. Based on the above
stipulation to that effect. information, which ofthe
360. c. The obligation is following statements is false?
extinguished even .if there is a 373. a. X must respect the
deficiency of P500.00. mortgage although he was not
Accordingly, C can norecover aparty thereto.
the deficiency. 374. b. X was not bound
361. d. The obligation is by the mortgage because he
extinguished only if the was notof it.
proceeds ofsale amount to 375. c. If C forecloses the
P5,000.00 or more. mortgage and the proceeds of
362. 16. This refers to the theforeclosure sale are not
right of a person to retain a enough to pay for the debt,
thing until hereceives payment Ccan recover the deficiency
of his claim in the cases from D.
provided by law suchas one who 376. d. IfC forecloses the
has executed work on a mortgage and the proceeds of
movable. theforeclosure sale exceed the
363. a. Conventional amount of debt, D is entitledto
pledge. the excess.
364. b. Voluntary pledge. 377. 19. It is the right of the
365. c. Legal pledge. mortgagor to redeem the
366. d. Chattel Mortgage. property that wasmortgaged
367. 17. One of the after it was sold.
following may not be the object 378. a. Equity of
of a real mortgage: redemption.
368. a. Land, buildings, 379. b. Right of
roads and construction of all redemption.
kindsadhered to the soil. 380. c. Right of
369. b. Fertilizer actually subrogation.
used on a piece of land. 381. d. Right of pre-
370. c. Animal houses, emption.
pigeon houses or other breeding 382. 20. A chattel mortgage
placesintended by the owner to may have the following as
be permanently attached to the object, except:
land, including the animals 383. a. motor vehicles.
therein. 384. b. shares of stock.
371. d. Growing fruits that 385. c. vessels.
have been gathered from 386. d. floating docks and
treesplanted on land. structures which are intended
by theirnature and object to
 remain at a fixed place on a with respect to thecontract
river lake or coast. referred to in No. 21?
387. 21. D borrowed 403. a. An immovable
P50,000.00 from C. The belonging to aperson other than
obligation bears interest of10% the debtor may secure the
per annum. To secure the debt, obligation of the debtor.
D agreed with C that thefruits 404. b. The contract
from the agricultural lot of D subsists as long as the
shall answer for the interestand obligation of thedebtor remains
the principal obligation. unpaid.
Assuming the form required by 405. c. The creditor may
lawwas complied with, the appropriate for himself the
contract entered into between D immovableif the debtor fails to
and Cfor the application of the *pay his obligation.
fruits of the lot to the interest 406. d. The debtor may
andprincipal obligation is known be, compelled by the creditor to
as: enterinto the enjoyment of the
388. a. antichresis. immovable if the creditor
389. b. pledge. desires to exempt himself from
390. c. real estate the taxes and chargesupon the
mortgage. estate and the expenses for its
391. d. chattel mortgage. preservationand repair.
392. 22. For its validity, the 407. 25. D pledged his
contract referred to in the computer to secure a loan
preceding number: which he obtained from C. The
393. a. must be in writing, debt which amounts to
whether public or private. P10,000.00 is due after 60 days.
394. b. must be in a public Before the due date, C executed
instrument. an instrument abandoning
395. c. may be in any thepledge.
form, whether oral or written. 408. I. debt of P10,000.00
396. d. may be inferred is extinguished.
from the conduct of the parties. 409. II. The' pledge of the
397. 23. The measurement computer is extinguished even
of the application of the fruits to if Dhas not yet accepted the
the interestand principal renunciation of the pledge.
obligation in the contract 410. III. The pledge is not
referred to in No. 21 isthe actual extinguished until C returns the
value of the fruits at the time ring to D.
they are: 411. IV. The pledge is
398. a. gathered. extinguished even if C has not
399. b. applied. returned the ring to C.
400. c. gathered less 412. Based or the foregoing,
reasonable depreciation, if any, which is false among the
of theimmovable. fourstatements?
401. d. Theapplied less 413. a. I and Ill.
reasonable depreciation, if any, 414. b. II and IV.
ofimmovable. 415. c. I and II.
402. 24. Which of the 416. d. II and III.
following statements is incorrect
417. 26. In a contract of which of thefollowing
pledge, the statements is incorrect?
pledgee/creditormay do 433. a. The sale
thefollowing, except .to: extinguishes the principal
418. a. use the thing obligation regardlessof the
pledged for purposes of amount of the proceeds of sale.
preservation. 434. b. The pledgee can
419. b. retain the thing appropriate the thing pledged if
pledged unl the principal it is not sold at the first public
obligation issatisfied. auction.
420. c. ask for a substitute 435. c. The creditor has
if he was deceived on the no. right to recover deficiency.
substanceor quality of the thing 436. d. The debtor is not
pledged. entitled to the excess of
421. d. Sellthe thing proceedsunless there is an
pledged without notice to agreement.
thepledgor/debtor. 437. 30. Which of the
422. 27. The following are following is a similarity of
the characteristics of a chattel chattel mortgage andpledge?
mortgage,except: 438. a. Deficiency is
423. a. the mortgagor recoverable in case of sale of
must be the absolute owner of the thingpledged/mortgaged.
theproperty mortgaged. 439. b. The object of the
424. b. it is an accessory contract is a movable property.
contract. 440. c. The excess of the
425. c. it involves movable proceeds of sale over the
or immovable property. amount ofthe obligation belongs
426. d. the deed of chattel to the pledgor/mortgagor.
mortgage must be accompanied 441. d. An affidavit of
byan affidavit of good faith to good faith is required to bind
be binding against thirdpersons. thirdpersons.
427. 28. The 'following 442. 31. D borrowed
elements are common in both P100,000.00 from C. The loan is
pledge andmortgage, except: secured by amortgage of T's lot.
428. a. the contract is On due date, D was unable to
constituted to secure the pay.Accordingly, C foreclosed
fulfillment of aprincipal the mortgage*on the lot and
obligation. during thepublic auction, the lot
429. b. the property on was sold for P90,000.00.
which the security is constituted 443. a. C can recover the
must bedelivered to the deficiency from D.
creditor. 444. b. C can recover the
430. c. the debtor must be deficiency from T.
the absolute owner of the 445. c. C can recover the
propertypledged or mortgaged. deficiency from both D and T.
431. d. the debtor- must 446. d. C can no longer
have free disposal of the recover the deficiency.
propertypledged or mortgaged. 447. 32. Consider the
432. 29. In the sale of the following cases:
thing pledged at public auction,
448. I. D owes C Bank. To secure the obligation,
P10,000.00. To secure the debt, P, the president ofAlpine,
D pledgedhis cell phone. D mortgaged his own building in
defaults. The cell phone is sold favor of the bank. Thecontract
forP9,000.00 at the public of loan and deed of mortgage
auction. have been signed by theparties
449. II. D bought a car for but have not been
P360,000.00 from C. The price, acknowledged before a notary
whichispayable in12equal public,
monthly installments 461. a. Alpine Corporation
ofP30,000.00, is secured by a and P are one and the same
chattel mortgage on the person.
car.After paying 2 installments, 462. b. P may validly
D defaults in the payment of 3 mortgage his own property to
installments. C forecloses the secure theobligation of Alpine to
chattel mortgage andthe car is the bank.
sold at the public auction for 463. c. The mortgage is
P280,000.00. not yet binding between the
450. The deficiency is partiessince it has not been
recoverable in: notarized.
451. a. Both I and 11. 464. d. The mortgage
452. b. I only. contract can stand
453. c. II only. independently from the contract
454. d. No deficiency is of loan.
recoverable in both l and U. 465. 35. Pledge and real
455. 33. D pledged his mortgage are similar in what
diamond ring and gold watch to respect?
C to secure adebt of P 10, 466. a. The object of the
000.00 . contract.
456. a. If D defaults and 467. b. Binding effect
the ring and watch are sold at against third persons.
publicauction, C may recover 468. c. Recovery of
any deficiency if the proceeds of deficiency.
sale amount to less than 469. d. The fact that third
P10,000.00. persons may pledge or
457. b. if D defaults, C mortgage theirproperty to
may automatically appropriate secure another person's debt.
for himself the ring and the 470. 36. A, B and C
watch. obtained a loan from X in the
458. c. If D pays C. amount of P60,000.00.To secure
P5,000.00 , D may demand the debt, A pledged his
either the returnof wristwatch; B, his necklace;and
459. d. If C renounces the C, his diamond ring. A pays his
pledge in writing, the share of the debt amountingto
pledgeisextinguished although P20,000.00.
C continues to possess the 471. I. The obligation of A,
ringand the watch B and C is solidary.
460. 34. Alpine Corporation 472. II. The obligation of A,
obtained a loan amounting to B and C is joint.
P1,000,000.00from Eastern
473. III. A may demand the 486. c. D's loan obligation
return of the wristwatch is extinguished by reason of
afterpayment of his share of the theabandonment of the pledge.
debt. 487. d. The pledge of the
474. a. I and III are true. ring is extinguished although D
475. b. II and Ill are true. doesnot accept the renunciation
476. c. I and Ill are false. or has not yet received thering
477. d. II and Ill are false. from C.
478. 37. D obtained an 488. 39. To bind third
interest-bearing loan from. ABC persons, the following contracts
Bank amountingto must comply withcertain
P100,000.00To secure the formalities/requirements:
obligation, D mortgaged his 489. I. A contract of
building to ABC Bank. As added pledge must be in a public
requirement of the loan, a instrumentshowing the date of
fireinsurance on the building the pledge and a description of
was also obtained by D with thething pledged and recorded
ABC Bankas beneficiary. Before with the Registry ofProperty.
the due date of the loan, the 490. II. A contract of real
building wasrazed by fire. estate mortgage must be
479. a. The loan of D recorded withthe Registry of
amounting to P100,000.00 is Property.
extinguishedbut the security 491. III. A contract of
remains. chattel mortgage must contain
480. b. Only the security an affidavitof good faith and be
for the obligation is recorded in the Chattel
extinguished. MortgageRegister.
481. c. The proceeds of 492. a. All statements are
the insurance policy will be the true.
newsecurity of the loan 493. b. I and II are true.
obligation which will subsist. 494. c. I and III are true.
482. d. Both the loan and 495. d. Il and III are true.
the mortgage security 496. 40. Mary Montes and
areextinguished. Melary Manalo obtained a loan
483. 38. D borrowed ofP 100, 000.00from Patricia
P20,000.00 from C. To secure Palma. The debtors executed
'the obligation, Dpledged his apromissory note which reads
ring to C. Before the due date, C as follows:
executed a publicinstrument 497. We promise to pay
stating that he was abandoning Patricia Palma or order
the pledge and informed D P100,000.00on April 30, 2004.
about it. In the meantime, the 498. (Sgd) Mary Montes
ring remained in thepossession 499. (Sgd.) Melany Manalo
of C. 500. To secure the loan, Mary
484. a. D must accept the Montes pledged her diamond
renunciationin order to ring,while Melany Manalo
extinguish thepledge executed a mortgage on her lot.
485. b. C must return the 501. a. Mary Montes may
ring to D to extinguish theto demand the return of her
diamond ring if she pays her
 share of the debt, while 520. d. antichresis.
MelanyManalo's share remains 521. 44. The delivery
outstanding: required in pledge for its
502. b. Melany Manalo perfection and validity is:
may demand the cancellation of 522. a. actual delivery.
themortgage on her lot if she 523. b. execution of public
pays her share of the debt,while instrument.
Mary Montes's share remains 524. c. execution of
outstanding. private document.
503. c. Both Mary Montes 525. d. transfer of title of
and Melany Manalo must pay ownership.
thetotal amount of the debt 526. 45. D obtained a loan
before Mary Montes from C. To secure the debt, D
coulddemand the return of the pledged hisring to C. Before due
diamond ring, and date, C executed a private
MelanyManalo the cancellation documentstating that he was
of the mortgage on her lot. abandoning the pledge. In the
504. d. Patricia Palma may meantime, Cremained in
demand payment of the possession of the ring and D
amountofP100,000.00from has yet to express
either Mary Montes orManalo. hisacceptance of the
505. abandonment of the pledge.
506. 41. As a general rule, 527. a. The pledge of the
any deficiency in the foreclosure ring is extinguished.
sale may berecovered in the 528. b. The pledge is not
following contracts, except in: extinguished until C returns the
507. a. chattel mortgage. ring.
508. b. real mortgage. 529. c. The pledge is not
509. c. conventional extinguished unless D accepts
pledge. the abandonment since it is an
510. d. antichresis. act of generosity.
511. 42. As a general rule, 530. d. The pledge is not
in case of excess of the extinguished because
proceeds of theforeclosure sale theabandonment should be in a
over the creditor's claim, the public instrument.
excess shallbelong to the 531. 46. D contracted the
creditor in: services of T, a tailor, to sew D's
512. a. chattel mortgage. pair of pantswith D providing
513. b. real mortgage. the cloth for the purpose. The
514. c. conventional parties agreedthat Is labor shall
pledge. be P500.00. The security that T
515. d. antichresis. holds for thepayment of the
516. 43. Recording in the labor agreed upon is in the
Registry of Property in the nature of:
appropriate book isrequired for 532. a. chattel mortgage.
the validity of the contract of: 533. b. legal pledge.
517. a. chattel mortgage. 534. c. conventional
518. b. real mortgage. pledge.
519. c. conventional 535. d. antichresis.
pledge.
536. 47. The requirement D's default in thepayment of his
that the thing on which the debt.
security isconstituted must be 547. a. X is bound by the
delivered by the debtor to the pledge made by D to C.
creditor or athird person by 548. b. X is not bound by
common agreement refers to the pledge made by D to C.
the characteristic ofa pledge 549. c. C can sell the ring
being: to satisfy his claim.
537. a. an accessory 550. d. X did not acquire
contract. ownership of the ring from D.
538. b. a real contract 551. 50. D borrowed
539. c. an indivisible P10,000.00 from C the debt
contract being payable in 6months. To
540. d. a consensual secure the debt, D promised to
contract pledge his ringwithin2 weeks.
541. 48. The creation of a Two weeks had already lapsed
lien on the property upon which but D had notyet constituted
it is imposed,whoever may be the pledge.
the possessor of the property, 552. I. C may demand the
to the fulfillmentof the constitution of the pledge.
obligation for whose security it 553. II. D loses the benefit
was constituted refers tothe of the period given to him to
characteristic of a real pay thedebt; hence, C may
mortgage being: demand immediate payment of
542. a. an accessory thedebt.
contract. 554. a. Both statements
543. b. an indivisible are true.
contract 555. b. Both statements
544. c. an inseparable are false.
contract. 556. c. I is true; II is false.
545. d. a real property in 557. d. I is false; II is true.
itself. 558. 51. Carmona, a
546. 49. D obtained a loan creditor of Delantes, telephoned
of P5.000.00from C. The the latter to inform him that he
obligation issecured by a pledge (Carmona) was abandoning the
of D's ring which he delivered to pledge of the ringwhich
C. Both the loan and the pledge Delantes had constituted to
were in a private instrument. secure his loan obligation
While theloan was outstanding. toCarmona amounting to
D sold the ring through a public P20,000.00, Carmona told
instrument to the X who was Delantes thathe would
not aware of the pledge. Under personally deliver the ring to
the deed of sale, D obliged Delantes within one week.
himself to deliver the ring 559. a. Both the loan
physically to X after a week. obligation and the pledge are
Before X could obtain actual extinguishedby the
delivery of the ring,he learned abandonment.
that D had earlier pledged the 560. b. Neither the loan
same and that C wasselling the obligation nor the pledge is
ring in a public sale because of
 extinguishedby the secure the loan with a
abandonment. chattelmortgage on his car. He
561. c. Only the loan made a list containing the
obligation is extinguished. items-belowand asks you to
562. d. Only the pledge is check whether they are correct
extinguished. 573. I. D will no longer be
563. 52. D applied with C liable for deficiency to C in case
for a loan of P100,000.00 at hedefaults in the payment of
10% interest perannum the loan and the car is sold
promising to constitute a atthe foreclosure sale for less
mortgage on his than P200,000.00.
condominiumunit to secure the 574. II. D and C must
loan within one month from the record the deed of chattel
time hereceived the proceeds. mortgage in theChattel
On the strength of D's promise Mortgage Register for the
tofurnish a security, C granted validity of the chattelmortgage.
the loan application and gave D 575. III. D must execute an
theoption to pay the loan on or affidavit of good faith to
before the lapse of one year. beappended to the deed of
D,however, failed to constitute chattel mortgage to bind
the mortgage on his thirdpersons.
condominiumunit within one 576. IV. D will be entitled to
month as he had promised. A the excess of the proceeds of
list containing thefollowing theforeclosure sale over the
possible remedies were loan obligation in case
presented to you by C hedefaults in the payment of
forevaluation. the loan.
564. I. Demand 577. Which of the foregoing
immediate payment of the debt will you relay to D as correct?
from D. 578. a. I, II,and Ill.
565. II. Demand that D 579. b. I, Il and IV.
constitute the mortgage as he 580. c. I, Ill and IV.
had promised. 581. d. II,Illand IV.
566. III. Foreclose the 582. 54. D obtained a loan
mortgage on the condominium of P1,000,000.00 from C. To
to satisfythe claim. secure the debt,D executed
567. Which of the foregoing deed of mortgage covering two
possible remedies may you of his lots, Lot A andLot B, each
validly recommend to C? of which is in the name of D in
568. a. I or 11. the certificate of title
569. b. II or III. 583.
570. c. I or III. 584.
571. d. II or Ill. 585.
572. 53. D, your client, is 586.
applying for a loan of 587.
P200,000.00 with C. He is 588.
proposing to C that he will
589. '
590.
591.
592. PARTNERSHIP - DIAGNOSTIC EXERCISES
593. TEST I - MULTIPLE CHOICE. Select the best answer by writing the
594. letter of your choice.
1. A contract where two or more persons bind themselves to contribute money, property
or industry to a common fund with the intention of dividing the profits among
themselves.
a. Voluntary association.
b. Corporation
c. Partnership
d. Sale proprietorship.
2. One of the following is not a characteristic of contract of partnership.
a. Real, in that the partners must deliver their contribution in order for the partnership
contract to be perfected.
b. Principal, because it can stand by itself.
c. Preparatory, because it is a means by which other contracts will be entered into.
d. Onerous, because the parties contribute money property or industry to the common
fund.
3. One of the following is not a requisite of a contract of partnership. Which is it?
a. There must be a valid contract.
b. There must be a mutual contribution of money, property or industry to a common
fund.
c. It is established for the common benefit of the .partners which is to obtain profits and
divide the same among themselves.
d. The articles are kept secret among the members.
4. The minimum capital in money or property except when immovable property or real
rights thereto are contributed, that will require the contract of partnership to be in a
public instrument and be registered with the Securities and Exchange Commission
(SEC).
a. P5,000.00.
b. P10,000.00.
c. P3,000.00
d. P30,000.00.
5. If the partnership has the minimum capital mentioned in No. 4, but the contract is not
in a public instrument or the same is not recorded with the SEG, the partnership:
a. is void.
b. is voidable.
c. does not acquire juridical personality
d. still acquires juridical personality.
6. Joseph and Edward entered into a universal partnership of all present property. At the
time of their agreement, Joseph had afour-door apartment which he inherited from his
father 3 yearsearlier. Edward, on the other hand, had a fishpond which heacquired
by dacionenpago from Robert. During the first year ofthe partnership, rentals
collected on the four-door apartmentamounted to P480,000.00; while fish harvested
from thefishpond were sold for P300,000.00. During the same period,Edward received
by way of donation a vacant lot from an uncle.The partners had a stipulation that
 future property shall belong tothe partnership. Which of the. following does not
belong to thecommon fund of the partnership?
a. Fishpond.
b. Rental of P480,000.00
c. Apartment.
d. Vacant land.
7. Vincent and James entered into a universal partnership ofprofits. At the time of the
execution of the articles of partnership,Vincent had a two-door apartment which he
inherited from hisfather 3 years earlier. James, on the other hand, had a fleet oftaxis
which he purchased 2 years before. In the first year of thepartnership, Vincent earned
P500,000.00 as a radio talent, whileJames won P1,000,000.00 in the lotto. During the
same period,rentals of P120,000.00 were collected from the apartment, whilefare
revenues of P200,000.00 were realized from the operationof the fleet of taxis. Which
of the following belongs to thepartnership?
a. Two-door apartment.
b. Lotto winnings of P1,000,000.00.
c. Salary of P500,000.00.
d. Fleet of taxis.
8. A partnership formed for the exercise of a profession which isduly registered is an
example of,
a. Universal partnership of profits.
b. Universal partnership of all present property.
c. Particular partnership
d. Partnership by estoppel.
9. Three of the following partnership contracts are void. Which onis not?
a. A universal partnership of all present property betweenhusband and wife.
b. A universal partnership of profits between a man and woman living together as
husband and wife without thebenefit of marriage.
c. A particular partnership between husband and wife.
d. A universal partnership of profits between a private individual and a public officer.
10. John, Albert and Wilfred are partners in JAW Enterprises. Nothaving established yet
their credit standing, the three partnersrequested Simon, a well-known businessman,
to help themnegotiate a loan from Carlos, a money lender. With the consentof John,
Albert and Wilfred, Simon represented himself as apartner of JAW Enterprises.
Thereafter, Carlos granted a loan ofP150,000.00to JAW Enterprises. What kind of
partner isSimon?
a. Managing partner.
b. Liquidating partner.
c. Ostensible partner.
d. Partner by estoppel.
11. Refer to No. 10. Assuming that JAW Enterprises was unable topay the loan on due
date at which time the assets of thepartnership amounted only to P120,000.00. From
whom mayCarlos collect the payment?
a. Simon only for the whole amount of P120,000.00.
b. John, Albert and Wilfred who are liable jointly forP50,000.00 each.
c. JAW Enterprises for its assets of, P120,000.00;thereafter John, Albert and Wilfred from
their separateproperty at P10,000.00 each.
d. JAW Enterprises for its assets of P120.000.00;thereafter, John, Albert, Wilfred and
Simon from theirseparate assets at P7,500.00 each.
12. Teresa, Olga, Pamela and Sonia, partners in TOPS CompanyLimited, a trading
company, have contributions of P50,000.00each. Teresa and Olga are general
partners; Pamela, a limitedpartner; and Sonia, a general-limited partner. TOPS
CompanyLimited purchased merchandise on credit from Moret Sales Co.amounting to
P180,000.00. On due date, however, TOPSCompany Limited was unable to pay.
Accordingly, Moret SalesCo. filed a case of collection against the partnership which
bythen had assets amounting to P150,000.00. From whom mayMoret Sales Co. collect
the sum of P180,000.00?
a. The partnership for its assets of P150,000.00; thereafter,from Teresa and Olga at
P15,000.00 each from theirseparate assets.
b. Teresa and Olga only at P90,000.00 each from theirseparate assets.
c. The partnership for its assets of P150,000.00;thereafter, from Teresa, Olga, and Sonia
at P10,000.00each from their separate property. However, Sonia canrecover
P5,000.00 each from Teresa and Olga.
d. Teresa, Olga and Sonia at P60,000.00each.Thereafter, Sonia can recover from Teresa
and OlgaP30,000.00 each.
13. Which of the following. losses will not cause the dissolution of apartnership?
a. Loss before delivery of a specific thing which a partnerhas promised to contribute to
the partnership.
b. Loss of a , specific thing after its delivery to andacquisition of its ownership by the
partnership from thepartner who contributed the same.
c. Loss after delivery of a specific thing where the partnercontributed only its use and
enjoyment, he havingreserved the ownership thereof.
d. Loss before delivery of a specific thing where the partnerpromised to contribute only
its use and enjoyment,reserving the ownership thereof.
14. Gregory, Edmond and Mark are partners in GEM Company withcontributions of
P10,000.00, P40,000.00and P50,000.00,respectively. Their agreement shows that they
will share in the profits in the ratio of 2:3:4. During the year, the partnership sustained
a loss of P9,000.00. How shall this loss be divided among the partners?
a. Equally at P3,000.00 each.
b. Gregory, P900.00; Edmond, P3,600.00; and Mark, P4,500.00.
c. Gregory, P2,000.00; Edmond, P3,000.00; and Mark, P4.000.00.
d. The partners must establish first a loss sharing agreement before-the loss may be
divided because they failed to have an agreement on the division of loss.
e. 15.
15. Which of the following stipulations is valid?
a. A stipulation excluding a capitalist partnerfrom profits.
b. A stipulation exempting a capitalist partner from losses.
c. A stipulation exempting an industrial partner from losses.
d. A stipulation excluding an industrial partner from profits.
16. A partner can engage in business for himself without the consent of his co-partners
if he is:
a. a capitalist partner whether or not the business he willengage in is of the same kind
as or different from thepartnership business.
b. an industrial partner whether or not the business he willengage in is of the same kind
as or different from thepartnership business.
 c. a capitalist partner and the business he will engage in isof a kind different from the
partnership business.
d. an industrial partner and the business he will engage Inis of a kind different from the
partnership business.
17. Which of the following statements is false when no one amongthe partners was
appointed as manager?
a. Each partner will be considered as agent of the partnership.
b. Any one may make an important alteration in the immovable property of the
partnership without theeided it is useful to the consent of the others pro partnership.
c. In c as e the act of one partner is opposed by another, thedecision of the majority of
the partners will prevail.
d. In case of a tie in the voting, the tie shall be resolved bythe vote of the partner
owning the controlling interest.
18. The following statements pertain either to a partner appointed asmanager in the
articles of partnership or through a documentafter the formation of the partnership.
I. He may be removed as manager only for a just or lawfulcause by the vote of the
partners owning the controllinginterest.
II. He may be removed as manager with or without just orlawful cause by the vote of the
partner owing thecontrolling interest.
III. He may perform all acts of administrator despite theopposition of his partners
provided he is in good faith.
IV. He may perform all acts of administration in good faithbut opposing partners may
resort to his removal if hepersists.
595. Based on the foregoing:
a. I and Ill pertain to a partner appointed as manager in thearticles of partnership.
b. Iand Ill pertain to a partner appointed as managerthrough a document after the
formation of thepartnership
c. IIand Ill pertain to a partner appointed through adocument after the formation of the
partnership.
d. I and IV pertain to a partner appointed as manager in thearticles of partnership
19. Campos, Urbano, Tamesis and Encanto are partners in CUTECompany each one
contributing P300,000.00 except for Encantowho is an industrial partner. The partners
agreed that Camposshall be exempted from liability to third persons. Three years
ofcontinued losses after the formation of the partnership resulted inunpaid
partnership liabilities to third persons amounting toP500,000.00. Partnership assets
have also been reduced toP200,000.00.From whom may third persons collect
thepartnership debts?
a. From the partnership assets of P200,000.00; thereafter,fromthe partners for their
separate , assets atP100,000.00 each except Campos who was exemptedfrom liability
to third persons by agreement.
b. From the partnership assets of P200,000.00; thereafter,from the partners for their
separate assets atP100,000.00 each except for Encanto since an industrialpartner
does not share in the losses.
c. From the partnership assets of P200,000.00; thereafter,from all the partners for their
separate assets atP75,000.00 each including Campos and Encanto:
d. From the partnership assets of P200,000.00; thereafter, from Urbano and Tamesis only
for their separate assetsat P150,000.00since Campos was exempted fromliability by
agreement, while Encanto, being an industrialpartner is not liable for losses.
20. The partnership will bear the risk of the loss of three of thefollowing things. Which
is the exception?
a. Things contributed to be sold.
b. Fungible things or those that cannot be kept withoutdeteriorating.
c. Things contributed so that only their use and fruits will befor the common benefit.
d. Things brought and appraised in the inventory.
21. A partner's interest in the partnership is his share of the profitsand surplus which
he may assign to a third person. Which of thefollowing statements concerning such
right is correct?
a. The conveyance of a partner's interest will cause thedissolution of the partnership.
b. The assignee becomes a partner.
c. The assignee has a right to interfere in the managementof the partnership business.
d. The assignee has the right to receive the profits whichthe assigning partner would
otherwise be entitled to.
22. Torres is indebted for P5,000.00 to MACE Trading Company, apartnership managed
by Mendoza to whom Torres also owesP10,000.00.The two debts which are both
demandeb!e areunsecured. Torres remits P4,500.00 to Mendoza in payment ofhis debt
to him. Accordingly, Mendoza issues a receipt for hisown credit. To which credit should
the payment be applied?
a. To Mendoza's credit because the payment made byTorres is intended for his debt to
Mendoza who issueshis own receipt
b. To both the partnership credit and Mendoza's credit proportionately at P1,500.00 and
P3,000.00, respectively.
c. To Mendoza's credit because its amount is greater than that of the partnership credit.
d. To the partnership credit because the managing partnershould not prefer his own
interest to that of thepartnership.
23. In three of the following wrongful acts of partners,thepartnership is solidarily liable
with all the partners to thirdpersons. Which one is the exception?
a. For loss or injury caused to a third person by reason ofthe wrongful act or omission of
a partner acting in theordinary course of business.
b. Where a partner acting within the scope of his apparentauthority receives money or
property of a third personand misapplies it.
c. Where the partnership receives money or property of athird person in the ordinary
course of business and suchmoney or property is misapplied by a partner while it is
inthe custody of the partnership.
d. For loss or injury caused to a third person by reason ofthe use of partnership property
by a partner for personalpurpose.
24. Benito, Ignacio, Gregorio, Artemio and Servando are partners inBIGAS Company
which is engaged in the buying and selling ofrice. Benito is the manager. Ignacio was
also given a specialpower of attorney by the partnership to buy a van for thecompany.
No other power was given to all the partners. In whichof the. following acts or
contracts is the partnership not boundby the act of the partner?
a. Ignacio buying rice for the partnership from Teodoro whohas no knowledge of
Ignacio's lack of authority.
b. Ignacio buying a van for the partnership from Teresa.
c. Gregorio buying a van for the partnership from Thelmawho has no knowledge of
Gregorio's lack of authority.
d. Benito selling rice for the partnership.
25. Assuming that no fraud is committed by or consented to by thepartner concerned,
which of the following statements is false?
a. Notice to any partner relating to partnership affairs while already a partner is notice
to the partnership.
b. Knowledge of a partner acting on the particular matter acquired by him while already
a partner is knowledge of the partnership.
c. Knowledge of a partner acting on the particular matter obtained by him before he
became a partner is knowledge of the partnership provided he still remembers the
same.
d. Knowledge of partner not acting on the particular matter obtained by him before he
became a partner is knowledge of the partnership.
26. Which of the following statements is incorrect?
a. Partnership creditors are preferred as to partnership assets.
b. Partnership creditors are preferred as to each partner's separate assets.
c. A partner's separate creditors are preferred as to the partner's separate assets.
d. A partner's separate creditors may attach a partner's share in the partnership assets.
27. The change in the relation of the partners caused by any ceasing to be associated
in the carrying on the business is known as:
a. termination of the partnership.
b. winding up of partnership affairs.
c. liquidation of the partnership business.
d. dissolution of the partnership.
28. A decree by the court is necessary to dissolve a general partnership based on
three of the following grounds. Which one will not require such decree but 'will cause
the automatic dissolution of the partnership?
a. The business of the partnership can only be carried on at a loss.
b. A partner is shown to be of unsound mind.
c. A partner has been guilty of such conduct as tends to affect prejudicially the carrying
on of the business.
d. A partner is civilly interdicted.
29. Three of the following will cause the automatic dissolution of a general partnership.
Which one will not?
a. When any event makes it unlawful the partnership to be carried on or , for carry it on
in partnership.
b. Expulsion of any partner from the In accordance with such a power conferred by the
agreement between the partners.
c. A partner becomes in any way incapable of performing his part of the partnership
contract.
d. The insolvency of a partner or of the partnership
30. When is the partnership not bound by the act/s of a partner after dissolution in the
following cases?
a. Acts necessary to wind up partnership affairs.
b. Acts to complete transactions begun before dissolution,
c. New .transactions where the third person is a previous creditor and there was a
publication of the dissolution in a newspaper of general circulation in the place or
places where the business had been carried on but such third person has not read it.
 d. New -transactions where the third person is a new creditor and there was publication
of the dissolution in a newspaper of general circulation in the place or places where
the business had been carried on but such creditor has not read it.
31. The partnership is not bound in three of the following acts of a partner after
dissolution. However, it is bound in one. Which is it?
a. Where the partner acting is insolvent.
b. When it is unlawful to carry on the-business.
c. When the partner has no authority to wind up partnership affairs and the third person
is a previous creditor who had no knowledge of the, partner's lack of authority.
d. When a partner has no authority to wind up partnership affairs and the third person is
a new creditor who has not read the publication of the lack of authority of the
partnerin a newspaper of general circulation in the place orplaces where the
partnership business is carried on.
32. What is the order of payment of liabilities of a dissolved generalpartnership using
the code number representing each liability?
I. Those owing to partners other than for capital or for profits.
II. Those owing to creditors other than partners.
III. Those owing to partners in respect of profits.
IV. Those owing to partners in respect of capital,
a. I, II,Ill,IV.
b. II, I, IV, Ill.
c. II, I, Ill, IV.
d. I, II, IV, Ill.
33. In a limited partnership where there are 4 partners:
a. All the partners must be limited partners.
b. The number of limited partners must be equal to the number of general partner, that
is, 2:2.
c. The number of limited partners must be greater than the number of general partners,
that is, 3:1.
d. It is enough that there is one limited partner; the rest may all be general partners.
34. A limited partner may contribute:
a. Money and/or property.
b. Money and/or services.
c. Property and/or services.
d. Services-only.
35. A. limited partner shall be liable as general partner in three of the following cases.
Which one is the exception?
a. When he is a general-limited partner as stated in the certificate.
b. When he takes part in the control of the business.
c. When he participates in the management of the business.
d. When his surname which appears in the partnership name is also the surname of a
general partner.
36. Which of the following omissions will make a partnership formed as a limited
partnership liable as a general partnership?.
I. The certificate is not signed and sworn -to by all the partners.
II. The certificate is not registered with the Securities and Exchange Commission.
III. The partnership name does not include the word
IV. "Limited" or "Ltd.", its abbreviation, in the certificate.
a. I and 11.
b. II and III.
c. I and III.
d. I, II and III.
37. A person admitted to all the rights of a limited partner who has died or has
assigned his interest in the partnership is known as:
a. An ostensible partner.
b. A liquidating partner.
c. A substituted limited partner.
d. A general-limited partner.
38. If the assignee does not become the partner referred to in the preceding number,
his rights do not include:
a. The receipt of the assignor's share of the profits.
b. The receipt of the assignor's other compensation by way of income.
c. The return. of the assignor's contribution.
d. The inspection of partnership books or account of partnership transactions.
39. What is the order of payment of liabilities of a dissolved limited partnership using
the code number representing each liability?
I. Those owing to general partners other than for capital or for profits. .
II. Those owing to creditors including limited partners, except those to limited partners
on account of their contributions and general partners.
III. Those owing to limited partners by way of their share in the profits and other
compensation by way of income.
IV. Those owing to limited partners in respect to the capital of their contributions.
V. Those owing to general partners in respect of capital.
VI. Those owing to general partners in respect of profits.
a. I, II, Ill, IV, V,, Vl.
b. II, I, Ill, IV, V, VI.
c. II, I, Ill, IV, VI, V.
d. II, Ill, IV, I, VI, V.
40. Which of the following will not cause the automatic dissolution of a limited
partnership?
a. Death of a general partner.
b. Death of a limited partner.
c. Insolvency of a general partner,
d. Insanity of a general partner.
41. One of the distinctions between a partnership and a corporation is that a
partnership:
a. May be formed by one person.
b. Is created by operation of law.
c. Acts through a board of directors.
d. May exist for an indefinite period.
42. Belinda, Ara, Rica and Klaudia are partners in BARK Enterprises, a pet shop, with
Belinda contributing P50,000.00; Ara, P20,000.00; and Rica, P30,000.00. Klaudia is an
industrial partner and manages the partnership. Based on the foregoing information,
which of the following statements is false?
a. Belinda may engage in the buying and selling of, rice without the consent of the other
partners.
b. Klaudia may engage in the buying and selling of rice without the consent of the other
partners.
c. Klaudia is not liable for the losses of the partnership.
d. Klaudia may be held liable by third persons for partnership debts with her separate
property.
43. Josephine. Ellen, Wilma, Edith and Lydia are partners in JEWEL Company, Ltd.
Josephine, Ellen and Wilma are general partners, Edith is a general-limited partner,
while Lydia is a limited partner. Based on the foregoing information, which of the
following statements is false?
a. Josephine, Ellen and Wilma may be held liable with their separate property after the
exhaustion of partnership assets.
b. Edith may participate in the management. of the partnership.
c. Edith may not be held liable with her separate property for partnership debts after the
exhaustion of partnership assets.
d. Lydia may not be held liable with her separate property for partnership debts after the
exhaustion of partnership assets.
44. Which of the following will not cause the automatic dissolution of a general
partnership?
a. Death of a partner.
b. Insolvency of a partner.
c. When the partnership business becomes unlawful.
d. Insanity of a partner,
45. Wilma, Olga and Wynona agreed to form a limited partnership with Wilma and Olga
as general partners contributing P50,000.00 each, and Wynona as limited partner
contributing P100,000.00. The partnership which is to engage in the trading of
garments was named "WOW Garments Co., Limited" as indicated in the certificate
signed and sworn to by the partners before a notary public. However, the certificate
was not filed with the Securities and Exchange Commission. In the meantime, the
partners already begun operating the business and transacting with third persons.
a. The partnership entered into by the Wilma, Olga and Wynona is void.
b. The partnership will be 'considered a general partnership.
c. Accordingly, all partners will be liable with their separate - property after the
exhaustion of partnership assets.
d. The partnership will be- considered a limited partnership as indicated in its name.
Only Wilma and Olga will be liable with their separate property after the exhaustion of
partnership assets. Wilma, Olga and Wynona will be considered separately as sole
proprietors with each one having a capital equivalent to their respective contributions.
46. Fernando, Filoteo, Fortunato and Fulgencio are partners in the firm F4 Enterprises
which is engaged in the trading of fertilizers. Fernando contributed P50,000.00;
Filoteo, P30,000.00; and Fortunato, P20,000.00. Fulgencio is an industrial partner and
manages the partnership. Based on the foregoing facts, which of the following
statements is incorrect?
a. Fernando may engage in the business of trading car spare parts without the consent
of the other partners.
b. Filoteo may be validly exempted from losses incurred by the partnership by
agreement of the partners.
c. Fulgencio may not engage in the car repair business without the consent of his co-
partners.
 d. Fuigencio is exempt from losses although there is no agreement among the partners.
47. Bettina, Erlinda, Amanda, Ursula, Teresa and Yolanda are partners in BEAUTY
Enterprises, a dealer in cosmetics and other beauty products, with contributions of
P60,000.00, P50,000.00, P40,000.00, P30,000.00, P20,000.00, and P10,000.00,
respectively. No one was appointed as manager in the articles of partnership.
a. Bettina is the manager because she made the biggest investment.
b. Every act in the ordinary course of the business will have to be decided by the
majority determined on a per head basis.
c. Every act in the ordinary course -of the business will-have to be decided by the
controlling interest (biggest investment) although the partners owning them.do not
constitute the majority.
d. All the partners are agents or managers of the partnership and any one of them may
perform acts of administration.
48. Which of the following will nvt cause the automatic dissolution of a general
partnership?
a. Death of a capitalist, partner.
b. Insolvency of a capitalist partner.
c. Insanity of an industrial partner.
d. Civil interdiction of an industrial partner.
49. PATOK Enterprises, a partnership engaged in the business of renting out video
films, is owned by Patricia, Alice, Tina, Olga, and Kaye, with Kaye as the manager.
Diana owes PATOK Enterprises P6,000.00 and Olga, P4,000.00. Both debts are
unsecured and are already due. Diana pays Olga P4,000.00 for which Olga issues her
own receipt.
a. The payment should be applied to Olga's credit only.
b. The payment should be applied to PATOK's credit only.
c. The payment should be divided proportionately between PATOK and Olga, at
P2,400.00 and P1,600.00, respectively.
d. The payment should be divided equally between PATOK and Olga at P2,000.00 each.
50. Federico, Alberto. Sofronio and Teodoro are partners in FAST Motorparts Company,
a dealer of car spare parts Federico, Alberto and Sofronio invested P500.000 00,
P200,000.00 and P300,000.00, respectively. Teodoro is an industrial partner
whomanages the partnership. The partners have stipulated thatFederico shall be
exempt from liability to third persons. At theend of three years, the assets of the
partnership have dwindledto P220,000.00while its liabilities to third persons have
abalance of P340,000.00. How much ultimately will be the shareof each partner after
payment to third persons and the settlement among the partners?
a. P30,000.00 for each partner
b. Federico, P60,000.00; Alberto, P24,000.00, Sofronio, P36,000.00, and Teodoro, none.
c. Federico, none; Alberto, P48,000.00;Sofronio,P72,000.00; and Teodoro, none.
d. Federico, none; Alberto, Sofronio and TeodoroP40,000.00 each.
51. John Solanda and Sons is a partnership composed of threenpartners,
namely:Robert Solanda, Simon Solanda,, andTheodore Solanda. The partners are the
sons of John Solandawho has retired from business but who suggested that
theyinclude his name in the firm to give them an advantage since heis well-known in
the business community.
I. John Solanda shall have all the rights of a general partner.
II. John Solanda shall have all the liabilities of a generalpartner.
 596. Based on the foregoing facts:
a. Both statements are true.
b. Both statements are false.
c. Statement I is true; Statement 11 is false.
d. Statement I is false; Statement 11 is true.
52. The following partnership contracts were presented to you forevaluation:
I. A partnership engaged in the sale of office supplies with a capital of
P100,000.00broken down into: cash, P30,000.00; office supplies for sale, P50,000.00;
andoffice equipment, P20,000.00. The agreement is in a private instrument.
II. A partnership engaged in the lease of office spacesa capital of P700,000.00broken
down into landP100,000.00; building, P500,000.00; cash, P80,000.00 and office
equipment, P20,000.00. The agreement is ina public instrument attached to which is
the inventory ofthe land and the building signed by the partners. Then agreement is
not recorded with the Securities andExchange Commission.
III. A partnership engaged in the trading of computerswhose name is "Lamont
Enterprises, Ltd." It has a totalcapital of P500,000.00 broken down into
P100,000.00cash and computers worth P400,000.00, contributed byboth general and
limited partners. The agreement wassubscribed and sworn to by all the partners
before anotary public but not recorded with the Securities and Exchange Commission.
597. Based on the foregoing:
a. Each partnership has a separate juridical personality.
b. I and II have separate juridical personality.
c. II and Ill have separate juridical personality.
d. None of the partnerships has a separate juridicalpersonality.
a. GREAT Company, a partnership engaged in the distribution.
Ofgenerators, is composed of George, Roland, Edmond, Albertand Troy.
George is the managing partner. During the month ofApril, the following
transactions were - entered into by thefollowing partners in behalf of the
partnership. without anyauthority:
I. The sale of a generator by Roland to Juan Torres whowas not aware that Roland had
no authority. JuanTorres has paid for the generator which is due fordelivery.
II. The purchase of a car by Edmond from Intrepid Motorswhose owner was not aware of
Edmond's lack ofauthority. The car and the price are due for delivery andpayment,
respectively.
598. Based on the foregoing, the partnership is bound by:
a. Transaction I only.
b. Transaction II only.
c. Both Transactions I and II.
53. Sibal, Untalan, Pareho, Eusebio, and Rances are partners inSUPER Enterprises
whose business is car painting and repairs.All partners are capitalist partners with
Sibal as manager. Afterfive years of operations, Rances resigned from the
partnership.Although Sibal was aware of the resignation of Rances, he
stillboughtgallons of car paint from Masterpaint owned by Marcelo who had been
dealing with SUPER for the past 5 years,and car spare parts from Supremeparts,
owned by Salviejo whowas transacting for the first time with SUPER. The dissolution
ofSUPER was published in the Manila Bulletin but neither Marcelonor Salviejo read
it.Neither one knew at the time theytransacted with Sibal that the partnership had
been dissolved.
 a. SUPER is liable to both Masterpaint and Supremeparts.
b. SUPER is liable to Masterpaint only.
c. SUPER is liable to Suprereparts only.
d. SUPER is not liable to both Masterpaint and Supremeparts.
599.
600.
601.
602. d. The partnership cannot adopt a name which does not
603. include the name of at least one of the partners.

604. 62. Ornussa, the owner of a vacant lot, leased the same to Florida
605. under an agreement that the rental shall be paid by Florida
at the rate of 10% of the annual net income of the flower business
that she would put up on the lot. A private agreement was signed by
the parties. In the first year of operations, Ornussa received from.
Florida the amount of P20,000.00 representing 10% of the net
income of the flower shop business.
606. a. Ornussa is a partner of Florida by her mere receipt of the
607. share of the net profits of the flower business of Florida.
608. b. The relationship of Ornussa and Florida is only that of a
609. lessor and lessee.
610. c. Ornussa and Florida have a dual contract: partnership
611. @nd lease.
612. d. Ornussa and Florida are not partners; neither are they
613. lessor and lessee because their agreement was not
in a public instrument.

614. 63. LIFE Company, a partnership engaged in the water distribution

615. business, is composed of partners Larredo, Ingles, Filler
and
Encanto. One, day, Larredo was driving the firm's delivery truck
beyond the speed limit in order to serve its customers, when he
rammed into and caused extensive damage on the parked car of
Tertullo..
616. a. Only Larredo can be held liable for damages by Tertullo.
617. b. LIFE Company and Larredo are solidarily liable for
618. damages to Tertullo.
619. c. LIFE Company and the four partners are solidarily liable
620. for damages to Tertulbo_
621. d. LIFE Company and the four partners are jointly liable for
622. damages to Tertullo.

623. 64. A person admitted as a partner into an existing partnership shall

624. be liable up to the extent of his separate assets, for what
625. obligations?
626. a. Obligations of'the partnership existing at the time of his
627. admission only if there was a stipulation.
628. b. Obligations of the partnership incurred after his
629. admission only if there was a stipulation.
630. C. Obligations of the partnership incurred before and after
631. his admission even if there was no stipulation.
632.
633.
634.
635.
636.
637.
638.
639. d. Obligations of the partnership incurred before his
640. admission if there was a stipulation, and those
incurred after his admission even if there was no stipulation.

641. 65. PARAGON Enterprises, a partnership engaged in the garments

642. manufacturing business, is composed of partners Pacis,
Ramas and Gonzales. During the year, PARAGON bought a
643. computerized embroidering machine amounting to
P300,000.00
from Tadena with the following stipulation: down payment of
P50,000.00; balance to be paid in amount equal to 20% of the
monthly net profits of PARAGON until the full amount is paid.
644. a. Tadena is an actual partner of Pacis, Ramas and
645. Gonzales :Turing the time that he receives a share of
the profits of PARAGON as payment of the purchase price
of the machine.
646. b. Tadena is only a partner by estoppel of Pacis, Ramas
647. and Gonzales during the time that-he receives a share
of the profits of PARAGON as payment of the purchase
price of the machine.
648. c. Tadena is not a partner of Pacis, Ramas and Gonzales
649. whether before or after he has received the full
payment
of the purchase price of the machine from PARAGON.
650. d. Tadena is only a nominal partner of Pacis, Ramas and
651. Gonzales during the time that he receives a share of
the profits of PARAGON as payment of the purchase price
of the machine
652.
653. 66 MAGIC Company is a partnership composed of Martha, Agnes,
654. Glenda, Irene and Candice, with Martha as manager who
is
authorized to collect the credits of the partnership. Theresa
655. owes Martha P4,000.00 which is due on December 10. She
also
owes MAGIC Company P6,000.00 which is due on December
656. 20. On December 15, Theresa tendered payment in the
amount
of P4000.00 to Martha in payment of her debt to the latter.
Martha issued her -own receipt acknowledging the payment.
657. a. The payment will be applied proportionately to the
658. credits of MAGIC and Martha in the amount
of P1,600.00 and P2,400.00, respectively.
659. b. The payment will be applied in its entirety to Martha's
660. credit.
661. c. The payment will be applied in its entirety to MAGIC's
662. credit.
663.
664.
665.
666.
667.
668.
669.
670.
671. d. The payment will be applied equally to the two debts of
672. Theresa.
673.
674. 67. Aseron, the managing partner of ACE Company, was driving the
675. delivery truck of the firm when he rammed it into an
electric post
resulting in damages to the vehicle amounting to P50,000.00.
To make up for accident, Aseron worked long hours for the firm
and was able to increase its sales from P5,000,000.00 to
676. P15,000,000.00.
677. a. Aseron will no longer be liable for damages to ACE
678. because he was able to generate unusual
revenues for the firm through his extraordinary efforts.
679. b. Aseron will still be liable to the firm for damages but the
680. amount will be equitably reduced since he was
able to generate unusual profits for the firm through
his extraordinary efforts.
681. c. Aseron's obligation to the firm for damages will . be
682. extinguished by compensation since ACE is also
liable
to him for the extraordinary efforts he exerted to increase
its sales.
683. d. Aseron and ACE will share equally in the damages of
684. P50,000.00.-

685. 68. Trevor owes P3,000.00 to CHAMP Company, a

partnership
686. composed of Charles, Harry, Albert, Mark and Prince, with
Mark
as the manager who is authorized to collect all credits of the firm.
He also owes Charles the amount of.P6,000.00. Both debts are
already due. Trevor gives. P3,000.00 to Charles in payment of
his debt to the latter. Charles thus issues his own receipt.
687. a. Payment will be applied proportionately to the two
688. credits at P1,000.00 for Charles' credit and
PP2,000.00 for CHAMP's credit.
689. Payment will be applied equally to the two credits.
690. Payment will be applied in its entirety to Charles'
credit.
Payment will be applied in its entirety to CHAMP'S credit.
691.
692. 69. Barranda wrote Salvador a letter wherein he placed an order for
693. a laptop computer worth P80,000.00. In writing the
letter,
Barranda used a stationery which had for its letterhead
"Barranda and Bermudez, Real Estate Agents." Bermudez is
not
really a partner of Barranda but they agreed to use the said
letterhead to give a semblance of bigness by making it appear
that the two of them are partners. Salvador delivered the laptop
694.
695.
696.
697.
698.
699.
700.
701. computer but Barranda defaulted in his payment of its price.
702. Against whom may Salvador proceed?
703. a. Barranda only since Bermudez is not his partner.
704. b. Barranda only since the purchase of the laptop computer
705. is his personal transaction
706. c. Barranda and Bermudez since they are partners in so far
707.as Salvador is concerned.
708. d. "Barranda and Bermudez, Real Estate Brokers," only
709.since an actual partnership was created between
Barranda and Bermudez and . it has a personality
separate and distinct from the two.

710. 70. Daoang and Depante have been partners for more than 5 years
711. in the purified water business. At the start of the sixth
year,
Daoang assigned his interest in the partnership to Trinidad, but
Depante objected on the ground that he did not want Trinidad to
be his partner.
712. a. Trinidad automatically became a partner of Depante
713. when Daoang conveyed his interest to him.
714. b. Daoang and Depante continue to be partners despite
715. Daoang's conveyance of his interest to Trinidad.
716. c. The partnership between Daoang and Depante was
717. automatically dissolved when Daoang conveyed his
interest to Trinidad.
718. d. The conveyance by Daoang of his interest in the
719. partnership to Trinidad entitled the latter to inspect the
books, and participate in the management, of the
partnership.
720.
721. 71. Palacios, Atienza, Tablante, Elamparo, Robledo, Ocampo and
722. Sajenes are partners in PATEROS Poultry Farms. Palacios,

Atienza and Tablante have been appointed as managers of the

firm with the stipulation that none shall act without the consent of
the other two. On the date of the scheduled delivery of 500 kilos
of frozen dressed chickens ordered by Caintacky Restaurant,
heavy rains caused a power failure and made transport difficult
due to landslides. A local resident offered to purchase the
dressed chickens (which were already thawing) at 80% of the .
contract price. However, only Palacios and Atienza were around
to, decide as Tablante, who was on business trip for the firm,
could not be contacted due to poor communication signals.
723. a. Palacios and Atienza cannot decide by themselves
724. because the managing partners must act with unanimity.
725.
726.
727.
728.
729.
730. b. Palacios and Atienza may decide by themselves since
731. any further delay would result in more losses to the
firm.
732. c. Palacios and Atienza can decide by themselves since
733. they constitute the majority among the
managing
734. partners, which is the required vote
notwithstanding a
735. stipulation that one cannot act without the
consent of
736. the other managers.
737. d. The absence of Tablante cannot be alleged since there
738. was a stipulation. that none of the managing
partners
739. shall act without the consent of the others.

740. 72. Querubin, Roces and Solis are partners in a law firm. Querubin
741. was appointed as judge of the Regional Trial Court. Such
742. appointment:
743. a. suspends the participation of Querubin in the
744. 'management of the firm without causing the dissolution
745. of-the partnership.
746. b. prohibits the inclusion of the name of Querubin in the
747. firm name without dissolving the partnership.
748. c. results in the dissolution of the partnership.
749. d. merely requires
the disclosure of Querubin's
750. appointment to the court without
dissolving the
751. _ partnership.
752.
753. 73. Braganza, Ortiz and Nevado want to form a partnership with
754. Braganza contributing P500,000.00; Ortiz, office equipment; and
755. Nevado, his services. If the three were to form a limited
756. partnership, who among them will be the limited partner/s?
757. a. Either Braganza or Ortiz or both of them.
758. b. Either Ortiz or Nevado or both of them.
759. c. Either Braganza or Nevado or both of them.
760. d. All the three must be limited partners.
761.
762. 74. Refer,to the preceding number. Assume that the three decide to
763. form a general partnership: As a result, which of the following is
764. incorrect?
765. a. Any of the three may be appointed as manager.
766. b. All of them may be appointed as managers.
767. c. Only Nevado may be appointed as manager because he
768. only contributes his services.
769. d. Any two of them may be appointed as managers

770.
771.

772. 7

773. 7

774.
777
7

77
786.
787.
788.
789.
790.
791.
792. 75. CROWN Enterprises is composed of partners Chuck who
793. contributed P50,000.00; Rainier, P20,000.00;
Oscar,
794. P40,000.00; Waldorf, P10,000.00; and Nelson, P5,000.00. No

one was appointed as manager. Two proposed contracts were

voted upon by the partners during a meeting which took place as
follows:

795. Contract I - Voting for approval of the contract were Chuck

and
Rainier; voting for rejection were Oscar, Waldorf and Nelson.

796. Contract II - Voting for approval were Chuck and Rainier;

voting for rejection were Oscar and Waldorf; Nelson abstained.

797. Which of the foregoing contracts are considered approved?

798. a. Both contracts.
799. b. Neither of two contracts.
800. c. Contract I only.
801. d. Contract Ii only.
802.
803. 16. MACK's Restaurant is a partnership composed of Manalo,
804. Alferez, Cancio and Kilayco, with Manalo as the manager whose
805. contribution is 80% of the firm's capital
Manalo made
806. Ongpauco- his associate by assigning one-half of his share in the
807. firm to the latter. Did Ongpauco become a partner in the firm?
808. a. Yes, because Manalo is the manager.
809. b. No, because the other partners must give their consent
810. in order that Ongpauco may be admitted to
the partnership.
811. c. Yes, because the assignment by Manalo of his share in
812. the firm did not affect his ownership of the
controlling interest.
813. d. No, because the assignment by Manalo of his share in
814. the firm diminished his interest in the partnership.

815. 77. A partner is a co-owner with his partners of specific partnership

816. property. Such co-ownership:
817. a. allows a partner to assign his right in such property.
818. b. allows a partners to use such property for partnership
819. purposes.
820. c. entitles the spouse, children and other relatives of the
821. partner to claim support from such property.
822. d. gives the private creditors of a partner to attach his right
823. in such property.
824.
825.
826.
827.
828.
829.
830.
831.
832.
833. 78. CLEAN Laundry Services. Company is a partnership composed
834. of Carpio, Legaspi, Encinas, Alzate and Noval. Without the
835. knowledge of the other partners, Carpio used a coat
brought to
the shop by a customer for dry-cleaning in a party he attended.
The coat was accidentally stained with food sauce during the
said party. Who will be liable to the customer for damages?
836. a. Carpio only since he used the coat without the
837. knowledge of the other partners.
838. CLEAN Laundry Services Company and
Carpio solidarily.
839. c. CLEAN Laundry Services Company and all the partners
840. jointly.
841. d.CLEAN Laundry Services Company and all the partners
842. solidarily.

843. 79. A limited partner is prohibited on account of his claim against the
844. partnership from performing the following acts, except:
845. a.To receive or hold as collateral security any partnership
846. property.
847. b.To receive from a general partner or the partnership any
848. payment, conveyance or release from liability, if
849. partnership assets are not sufficient to discharge
850. partnership liabilities to outside creditors.
851. c.Transact business with the partnership.
852. d. None of the foregoing.

853. 80. Lazarte, a limited partner in Bellevue Company, Ltd., received

854. the amount of P100,000.00 representing his contribution
which
was being returned on the date stipulated in the certificate.
Partnership records, however, showed that the firm had liabilities
of P220,000.00 which arose before Lazarte received the return
of his contribution, and assets of only P90,000.00 after such
855. return of contribution.
856. a.- Lazarte is bound to bring back to the partnership the
857. amount of P100,000.00 plus interest,- thereon. '
858. b. Lazarte is bound to give the partnership P220,000.00
859. plus interest thereon.
860. c. Lazarte is bound to give the partnership P130,000.00
861. plus interest.
862. d. Lazarte is not bound to return to the partnership any
863. amount, because he received the return
of his contribution pursuant to a contractual stipulation.
864.
865.
866.

867.
868.
869.
870.
871.
872. TEST II - MATCHING TYPE. Indicate your answers by writing the
letter representing the statement or phrase that best describes, defines
or explains the numbered items.
873.
874. Terms

875. 1. Partnership 12. Limited partnership

876. 2. Particular partnership 13. Winding up
877. 3. Partnership for a fixed term 14. Partnership
for a particular
878. 4. Partnership by estoppel undertaking
879. 5. Capitalist partner 15. Universal partnership of
880. 6. Dissolution profits
881. 7. Substituted limited partner 16. Termination
882. 8. Delectus personae 17. Partnership at will
883. 9. General partnership 18. Limited partner
884. 10. Subsidiary liability 19. Industrial partner
885. 11. Universal partnership of all20. General partner
886. present property

887. Statements

888. A. He contributes his services to the partnership.

889. B. All the partners are,general partners.
890. C. A period is stipulated for the existence of the partnership.
891. D. Refers to the process of settling the business or affairs of the
892. partnership after dissolution.
893. E. Two or more persons bind themselves to contribute money,
894. property or industry to a common fund with the
intention of dividing the profits among themselves.
895. F. Property belonging to each partner at the time of the
896. establishment of the partnership as well as the profits
realized therefrom belongs to the partnership.
897. G. The. pro rata liability for partnership obligations of the partners,
898. including industrial ones, to the extent of their separate
property after partnership assets have been exhausted.
899. H. The principle that a person is free to choose those whom he
900. wants to be associated in partnership.
901. 1. A partnership whose existence may be terminated at any time by
902. the partners.
903. J. A partner who is liable only to the extent of his contribution to the
904. partnership.
905.
906.
907.
908.
909.
910.
911.
912. K. A partnership which comprises all that the partners may acquire
913. by their work or industry during the existence of the partnership.
914. L. A partnership where there is at least one general partner and at
915. least one limited partner.
916. M. The change in the relation of the partners caused by any partner
917. ceasing to be associated in the carrying on of the business.
918. N. It has for its object determinate things, their use or fruits, or a
919. specific undertaking, or the exercise of a profession.
920. 0. A partner who is liable to the extent of his separate property
921. when all the partnership assets have been exhausted.
922. P. He contributes money and/or property to the common fund of the
923. partnership.
924. Q. A person admitted to all the rights of a limited partner who has
925. died or who has assigned his interest in the partnership.
926. R. The point when all partnership affairs are wound up.
927. S. It is not in 'reality a partnership but is considered as one with
928. respect to those who, by reason of their conduct or
admission, are precluded from denying its existence.
929. T. A partnership organized for a certain purpose which when
930. attained will cause the dissolution of the partnership.
931. U. None of the foregoing.

932. TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is
933. true, and the word `FALSE" if the statement is false.

934. 1. An artificial person like a corporation, may be a partner in a

935. partnership.
936. 2. A limited partner may contribute money and/or property to a
937. partnership but not services.
938. 3. A partnership has a personality separate and distinct from each
939. of the partners.
940. 4. A partnership begins from the moment of the execution of the
941. contract, unless a different date is stipulated.
942. 5. A partnership whose capital in money or property amounts to
943. P3,000.00 or more does not acquire juridical personality
if the
contract. is not recorded with the Securities and Exchange
944. Commission.
945. 6. The sharing of gross returns does not of itself establish a
946. partnership even if the persons sharing them have a
joint or,
common interest in the property from which the returns are
947. derived.
948. 7. In a universal partnership of all present property, the partners
949. may stipulate that future property shall belong to the partnership
950.
951.
952.
953.
954.
955.
956.
957. but the stipulation cannot include property acquired by
958. inheritance, legacy or donation.
959. 8. In a universal partnership of profits, property belonging to each
960. partner at the time of the establishment of the partnership
shall continue to pertain to each partner with only the usufruct
passing on to the partnership.
961. 9. Articles of universal partnership entered into without
962. specification of its nature, only constitute a universal
partnership of all present property.
963. 10. A man and a woman living together as husband and wife
964. without the benefit of marriage may enter into a universal
965. partnership.
966. 11. A partnership for a fixed term or a particular undertaking which
967. is continued after the expiration of the term or the attainment of
968. the undertaking becomes a partnership at will.
969. 12. Spouses can validly enter into a particular partnership with each
970. other.
971. 13. The profits and losses of the partnership shall be divided equally
972. among the partners if they have no profit and loss sharing
973. agreement.
974. 14. A stipulation exempting a capitalist partner from losses is valid.
975. 15. When a partner has been appointed manager in the articles of
976. partnership,, he may be removed without just cause by the
vote of the partner owning the controlling interest.
977. 16. An industrial partner can engage in business for himself if it is of
978. a kind different from the partnership business even without
the consent of the other partners.
979. 17. All partners including industrial ones shall be liable pro rata with
980. all their separate property after the partnership assets have been
981. exhausted.
982. 18. The partnership shall bear the loss of things which are
983. contributed to the partnership to be sold.
984. 19. A newly-admitted partner is liable for partnership debts
985. contracted before his admission to the extent of his
contribution, unless there is a contrary stipulation.
986. 20. A partner may associate another person with him in his share but
987. the person admitted shall not be admitted to the
partnership without the consent of all the partners.
988. 21. The partnership shall be solidarily liable with all the partners if
989. one partner acting within the scope of his apparent
authority
receives money or property of a third person and misapplies it.
990. 22. When a partner is not authorized to act for the partnership and
991. the act of the partner is not for apparently carrying on the
992.
993.
994.
995. business, the partnership shall be bound by the act of such
996. partner if the third person was not aware of the partner's lack of
997. authority.
998. 23. Notice to any partner relating to partnership affairs is notice to
999. the partnership.
1000. 24. The private creditor of a partner shall have preference over such
1001. partner's separate property.
1002. 25. A general partnership is automatically dissolved by reason of the
1003. insanity of a partner.
1004. 26. After dissolution, a partnership is still bound by the act of a
1005. partner authorized to act for the partnership with respect to the
1006. completion of transactions begun before dissolution.
1007. 27. A partnership intended to be formed as a limited partnership but
1008. without the word "Limited" or "Ltd." appended to its name shall
1009. be considered as a general partnership.
1010. 28. A partnef may be a limited and general partner at the same time.
1011. 29. As a rule, a limited partner shall be liable as a general partner if
1012. he allows the use of his surname to be included in the
1013. partnership name.
1014. 30. A limited partner may assign his interest to another person..
1015.
1016.
1017.
1018.
1019.
1020.
1021.

1022. ANSWERS TO DIAGNOSTIC EXERCISES

1023.
1024. PARTNERSHIP
1025.
1026.
1027. TEST I - MULTIPLE CHOICE
1028.
1029.
1030. 1. C 21. D 41. D 61. D
1031. 2. A 22. B 42. B 62.B
1032. 3. D 23. D 43. C 63. C
1033. 4. C 24. C 44. D 64.D
1034. 5. D 25. D 45. B 65.C
1035. 6. D 26. B 46. 66.B
1036. 7. C 27. D 47.D 67.B
1037. 8. C 28. D 48.C 68.C
1038. 9. C 29. C 49.A 69.C
1039. 10. D 30. D 50.C 70.B
1040. 11. D 31. C 61. D 71. B
1041. 12. C 32.' B 52.A 72. C
1042. 13. B 33. D 53.A 73.A
1043. 14. C 34. A 54.A 74.C
1044. 15. C 35. D 55. B 75.D
1045.16. C 36. D 56.A 76.B
1046. 17. B 37: C 57. B 77. B
1047. 18. A 38. D 58.A 78.D
1048. 19. C 39. D 59. B 79.C
1049. 20. C 40. B 60.B 80.A
1050.
1051.

1052. TEST II -MATCHING TYPE

1053. 1. E 6. M 11. F 16. R

1054.2. N. 7. Q 12. L 17.
1055.3. C 8. H 13. D 18. J
1056.4. S 9. B 14.T 19.A
1057. 5. P 10. G 15. K 20. 0
1058.
1059.
1060. TEST III - TRUE OR FALSE

1061. 1.FALSE 11. TRUE 21. TRUE

1062. 2.TRUE 12. "TRUE 22. FALSE
1063. 3.TRUE 13. FALSE 23. TRUE
1064. 4.TRUE 14. FALSE 24. TRUE
1065. 5.FALSE 15., FALSE 25. FALSE
1066. 6.TRUE 16.' FALSE 26. TRUE
1067. 7.TRUE 17. TRUE 27. TRUE
1068. 8.TRUE 18. TRUE 28. TRUE
1069. 9.FALSE 19. TRUE 29. TRUE
1070. 10.FALSE 20. TRUE
30. TRUE
1071.
1072.
1073.
1074.
1075. ANSWERS TO DIAGNOSTIC EXERCISES
1076.
1. C 19. C 37. C
2. A 20. C 38. D
3. D 21. D 39. D
4. C 22. B 40. B
5. D 23. D 41. D
6. D 24. C 42. B
7. C 25. D 43. C
8. C 26. B 44. D
9. C 27. D 45. B
10. D 28. D 46. B
11. D 29. C 47. D
12. C 30. D 48. C
13. B 31. C 49. A
14. C 32. B 50. C
15. C 33. D 51. D
16. C 34. A 52. A
17. B 35. D 53. A
18. A 36. D 54. A
 55. CORPORATIONS - DIAGNOSTIC
56. EXERCISES
57.
58.
59. TEST I - MULTIPLE CHOICE. Select the best answer by writing the
letter of your choice.
60.
61. 1. The articles of incorporation differ from the by-laws in that
the
62. articles of incorporation are:
63. a. the rules of action adopted by a corporation for its
64. internal government.
65. b. adopted before or after incorporation.
66. c. a condition precedent in the acquisition by a
67. corporation of a juridical personality.
68. d. approved by the stockholders if adopted after
69. incorporation.
70.
71. 2. The following may be the consideration of the shares of
stock of
72. a corporation, except:
73. a. actual cash paid to the corporation.
74. b. previously incurred indebtedness of the corporation.
75. C. amounts transferred from unrestricted retained earnings.
76. d. service to be performed by a lawyer on the proposed
77. increase in capital stock of the corporation.
78.
79. 3. A certificate of stock is distinguished from share of stock in
that
80. a share of stock.-
81. a.' is the written evidence of a stockholder's interest in the
82. assets and management of a corporation.
83. b. is tangible personal property.
84. c. is one of the units into which the capital stock is divided.
85. d. may not be issued if the subscription has not been fully
86. paid.
87. 4. The articles of incorporation of Acme Corporation provide
for the
88. issuance of 100,000 shares without par value and an issued
89. price per share of P10.00. At the time of incorporation, the
90. subscription and paid-up capital should not be less than:
91. a. P250,000.00 and P62,500.00, respectively.
92. b. P1,000,000.00 and P250,000.00, respectively.
93. c. P250,000.00 and P250,000.00, respectively.
94. d. P250,000.00 and P125,000.00, respectively.
95. 5. Their names are mentioned in the articles of incorporation
as
96. originally forming the corporation and are signatories thereof.
97. a. Corporators.
98. b. Stockholders.
99. C. Incorporators.
100. d. Members.
101.
102. 6. A corporation acquires juridical personality:
103. a. upon the filing of the articles of incorporation.
104. b. upon the filing of the by-laws.
105. c. upon the issuance of the certificate of incorporation.
106. d. within 30 days from the receipt of the notice of the
107. issuance of the certificate of incorporation.
108.
109. 7. A delinquent stockholder is not entitled to the following
rights,
110. except the right:
111. a. to be voted.
112. b. to vote or be represented in the meetings of
113. stockholders.
114. c. to dividends.
115. d. He is not entitled to all the rights of a stockholder.
116. 8. A, B, C, D, F, F and G are the duly elected directors for
2010 of
117. Excellent Corporation whose articles of incorporation provide for
118. 7 directors. On August 1, 2010, Directors A, B, C, D and E rnet
119. to fill two vacancies in the board brought about by the valid
120. removal of F for disloyalty to the corporation and the death of G.
121. In the said meeting, the remaining directors voted for X to
122. replace F, and Y, a son of G, to replace his father. Both X and Y
123. are owners of at least one share of stock of the corporation.
124. The election of X and Y by the remaining directors is:
125. a. valid for both X and Y.
126. b. not valid for both X and Y.
127. c. valid with respect to X; not valid with respect to Y.
128. d. not valid with respect to X; valid with respect to Y.
129. 9. In the meeting of the board of directors of Grand
Corporation, a
130. construction company, held on August 31, 2010; directors A, B,
C, D and E were present among the 9 directors. The meeting had for its
agenda the following:
131.
132. I. The appointment of a new treasurer.
133. II. The approval of the contract for the purchase of cement
134. worth P50,000.00 from X Construction Supplies Co.
135. When the voting took place, directors A, B, C and D voted for the
136. election of Y as the new treasurer; and directors A, B and C
137. voted for the approval of the contract with X Construction
138. Supplies.
139. a. - Both corporate acts are valid.
140. b. Both corporate acts are not valid.
141. c. The election of Y as the new treasurer is valid; the
142. approval of the contract with X Construction Supplies is not valid.
143. d. The election of Y as the new treasurer is not valid; the
144. approval of the contract with X Construction Supplies is
145. valid.
146. 10. Under this theory, the nationality of a corporation is that of
the
147. country under whose laws it was formed.
148. a. Control test.
149. b. Incorporation test.
150. c. Domiciliary test.
151. d. Grandfather rule.
152.
153. 11. Acorporation created in strict compliance with all the legal
154. requirements and whose right to exist as a corporation cannot be
155. successfully attacked in a direct proceeding for that purpose by
156. the State is a:
157. a. de jure corporation.
158. b. de facto corporation.
159. c. corporation by estoppel..
160. d. corporation by prescription.
161.
162. 12. Stock dividends differ from cash dividends in that stock
163. dividends:
164. a. do not increase the legal capital.
165. b. involve disbursements of corporate funds.
166. c. require the approval of both the board of directors and
167. the stockholders.
168. d. once received by the stockholders, are beyond the reach
169. of corporate creditors.
170. 13. The subscriber of unpaid shares which are not delinquent
shall
171. be entitled to the following rights, except the right to:
172. a. vote.
173. b. inspect corporate books.
174. c. a stock certificate.
175. d. dividends.
176. 14. These statements pertaining to the right of a stockholder
to
177. inspect the books and records of a corporation are presented to
178. you for evaluation:
179. 1. The right may be delegated to an agent.
180. II. The right may be denied if in the past, the stockholder
181. improperly used the information which he obtained from
182. the books and records of another corporation of which
183. he is also a stockholder.
184. a. Both statements are true.
185. b. Both statements are false.
186. c. Statement. I is true; Statement II is false.
187. d. Statement I is false; Statement II is true.
188. 15. Under this doctrine, the separate personality of a
corporation
189. may be disregarded if it is used for fraudulent or illegal purpose
190. or to escape the faithful compliance of an obligation:
191. a. Trust fund doctrine
192. b. Doctrine of piercing the veil of corporate entity
193. c. Doctrine of corporate opportunity
194. d. Doctrine of limited capacity
195.
196. 16. Consolidation differs from merger in that in consolidation:
197. a. The surviving corporation shall enjoy all the rights,
198. powers and attributes of a corporation under the Corporation
Code.
199. b. The existing liabilities of the constituent corporations
200. shall be assumed by the surviving corporation.
201. c. The corporate existence of all the constituent
202. corporations shall be extinguished and a new
203. corporation emerges.
204. d. The surviving corporation shall possess all the rights,
205. privileges, immunities and franchises of the constituent
corporations.
206. 17. The right of a stockholder to demand payment of the fair
value of
207. his shares when he dissents from certain corporate acts is
208. known as:
209. a. pre-emptive right.
210. b. appraisal right.
211. c. redemption right.
212. d. appreciation right.
213. 18. These statements pertaining to the meetings of directors
are
214. presented to you for evaluation:
215. 1. Directors or trustees may attend or vote by proxy at
216. board meetings.
217. II. The articles of incorporation or the by-laws of a
218. corporation may provide for a greater majority for its
219. quorum during the meetings of the board of directors.
220. a. Both statements are true.
221. b. Both statements are false.
222. c. Statement I is true; Statement II is false.
223. d. Statement I is false; Statement II is true.
224.
225. 19. A stock that is issued without consideration or below par
value or
226. the issued price is known as:
227. a. watered stock.
228. b. delinquent stock.
229. c. redeemable stock.
230. d. preferred stock.
231.
232. 20. A non-voting stock may vote in the following corporate
acts,
233. except.in case of:
234. a. approval of the compensation of directors.
235. b. merger or consolidation.
236. c. increase or decrease in capital stock.
237. d. sale, lease, exchange, mortgage, pledge or other
238. disposition of all or substantially all of corporate property.
239.
240. 21. Directors may be given compensation through any of the
241. following ways, except by:
242. a. the vote of the stockholders representing at least a
243. majority of the outstanding capital stock.
244. b. a provision in the by-laws.
245. c. the vote of the board of directors If the compensation is
246. a reasonable per diem.
247. D. the vote of the board of directors if the compensation is other
than per diems.
248.
249. 22. A is a director and owns 50% of the outstanding capital
stock of
250. Ace Corporation which is engaged in the tradirg of computers.
251. Ace Corporation purchased computer tables from Top
252. Corporation of which A is also a director and owns 15% of its
253. outstanding capital stock. The articles of incorporation of both
254. corporations provide for 5 directors. in the approval of the
255. contract for the said purchase, A did not attend the meeting of
256. the board of directors of Ace Corporation, while in the meeting
257. of the board of directors of Top Corporation which was called for
258. the same purpose, directors A, B, C and D were present with all
259. of them voting for the approval of the contract. Assuming that
260. there is no fraud and that the contract is fair and reasonable
261. under the circumstances, the contract between Ace Corporation
262. and Top Corporation is:
263. a. valid.
264. b. voidable at the option of Top Corporation.
265. c. unenforceable against Top Corporation,
266. d. void because corporations with irrter!ockirig directorate
267. should not enter into a contract with each other.
268.
269. 23. One of the following acts may be perforrnad by the
executive
270. committee of a corporation. Which is it?
271. a. Declaration of stock dividends.
272. b. Filling of vacancies in the board of directors:
273. c. Amendment or repeal of the by-laws or adoption of new
274. by-laws.
275. d. Approval of contracts in the ordinary course of business.
276.
277. 24. The following statements pertain to the express powers of
a,
278. corporation.
279. 1. A corporation may establish pension, ret+,ement, and
280. other plans for the benefit of its directors, trustees,
281. officers and employees.
282. II. A corporation may make donations for the benefit of a
283. political party or candidate or for purposes of partisan
284. political activity provided the donations are reasonable.
285.
286. a. Both statements are true.
287. b. Both statements are false.
288. c. Statement I is true; Statement li is false.
289. d. Statement I is false; Statement II is true.
290.
291. 25. Which of the following by-laws is valid?
292. a. A by-law which provides that one need not be the owner
293. of a share of stock to become a director of the
294. corporation.
295. b. A by-law which provides that that one must be the owner
296. of more than one share of stock of the corporation to
297. become a director.
298. c. A by-law which provides that one can continue to be a
299. director throughout his terra although he has disposed all
300. his shares in the, corporation.
301. d. A by-law which provides a greater number of directors
302. than that stated in the articles of incorporation.
303. 26. Winner Corporation, a dealer-manufacturer of garments
and with
304. principal office in Caloocan City, held the meeting of its
305. stockholders in Nasugbu, Batangas, in conjunction with its
306. annual company outing. Stockholders owning 75% of the
307. capital stock were present, while 25% were duly represented by
308. proxies. , in the said meeting, the corporation by a vote of the
309. stockholders representing 80%'of the capital stock, approved the
310. purchase of sewing machines worth P5,000,000.00. The by-
311. laws of the Corporation provide that contracts in excess of
312. P3,000,000.00 must be ratified by the stockholders. The
313. contract for the purchase of the sewing machines was
314. unanimously approved by the board of directors before it was
315. presented to the stockholders for ratification. S, a stockholder
316. who did not vote for the approval of the resolution, now
317. questions its validity on the ground that the meeting was held
318. outside the place where the principal office of the corporation is
319. located. Whitt is the status of the contract for the purchase of
320. the sewing machines?
321. a. Void.
322. b. Valid.
323. c. Unenforceable.
324. d. Voidable.
325.
326. 27. Which of the following statements pertaining to non-stock
327. corporations is incorrect?
328. a. Members may vote by mail.
329. b. The number of trustees may be more than 15.
330. c. Any incidental income that it may earn may be
331. distributed as dividends to its members.
332. d. The meetings of members may be held outside the city
333. or municipality where the principal office of the corporation is
located.
334.
335. 28. A corporation may acquire its own shares for a legitimate
336. purpose provided it has unrestricted retained earnings. In which
of the following acquisitions is the requirement of unrestricted retained
earnings not imposed?
337. a. When the acquisition is made to eliminate fractional
338. shares.
339. When delinquent shares are acquired in a delinquency
340. sale.
341. c. When redeemable shares are repurchased in
342. accordance with the terms provided in the articles of
incorporation.
343. When shares are acquired from stockholders who exercise their
appraisal right.
344. Items 29, 30 and 31 are based on the following information:
345. Danilo, a resident of Malolos, Bulacan obtained a loan from the
346. Rural Bank of Sta. Rosa, Nueva Ecija amounting to P90,000.00.
347. The loan is secured by a pledge of shares of stock of Saint
348. Michael Corporation covered by 3 stock' certificates of 1,000
349. shares each, which certificates are registered in the name of
Servando, a friend of Danilo. The current market value of the shares
based on the records of the Philippine Stock Exchange is P30.00 per
share. Other than the pledge of the shares, no other document or
information is recorded in the books of San Michael Corporation at its
office in Pasig City.
350. 29. Who is entitled to vote the shares of stock in the
stockholders'
351. meeting?
352. a. Danilo
353. b. Servando
354. c. Rural Bank of Sta. Rosa
355. d. None, the right to vote the shares is suspended h file-
356. the pledge constituted on the shares is existinnig.
357.
358. 30. The pledge in order that it may bind third persons requires
the
359. following:
360. a. The deed of pledge must be accompanied by an affidavit
361. of good faith and recorded in the Register of Deeds of
362. Pasig.
363. b. It must be in a public instrument showing a description of
364. the thing pledged and the date of the pledge and
365. registered in the Register of Deeds of Pasig.
366. c. The pledge must be in a public instrument showing a
367. description of the thing pledged and the date of the
368. pledge. Registration in the Register of Deeds is not
369. required.
370. d. The deed of pledge must be accompanied by an affidavit
371. of good faith and recorded in the Register of Deeds of
372. Pasig and the province of Bulacan.
373.
374. 31. Danilo pays the Rural Bank of Sta. Rosa the sum of
P30,000.00.
375. May Danilo demand the cancellation of the pledge of 1,000
376. shares of stock by reason of such payment?
377. a. No, Danilo has to pay his obligation of P90,000.00 in full
378. before he can demand any cancellation of the pledge of
the'shares of stock.
379. b. Yes, Danilo can demand cancellation of the pledge of
380. 1,000 shares because the market value of the same is
381. equivalent to the payment of P30,000.00 that was made.
382. c. No, Danilo can demand cancellation of the pledge only if
383. he has paid more than 50% of his debt.
384. d. Yes, Danilo can demand cancellation because the
385. pledge of each of the 3 stock certificates is independent
386. of one another.
387.
388. 32. S is the registered owner of 500 'shares of stock of XYZ
389. Corporation whose articles of incorporation provide for 11
390. directors. In the annual election of directors for 2010, 12
391. stockholders filed their certificates of candidacy for the position,
namely, A, B, C, D, E, F. G, H, I, J, K and L. K and L are minority
stockholders whom S wishes to elect to represent him and the other
minority stockholders in the board. In the said election of directors, S
may cast a maximum of.
392. a. 500 votes.
393. b. 6,000 votes.
394. c. 5,500 votes.
395. d. 1,000 votes.
396. 33. One of the distinctions between a partnership and a
corporation
397. is that a partnership:
398. a. is managed by a board of directors.
399. b. is characterized by the principle of delectus personae.
400. c. has the right of succession.
401. d. may be dissolved only with the consent of the State.
402.
403. 34. One of the distinctions between a proxy and a voting trust
404. agreement is that in a voting trust agreement:
405. a. the representative acquires legal title to the shares to be
406. voted..
407. the exercise of the right to vote is limited to a particular meeting.
408. c. the representative cannot vote if the stockholder is
409. present during the meeting.
410. d. the agreement need not be recorded with the Securities
411. and Exchange Commission.
412.
413. 35. Which of the following statements is false concerning
treasury
414. shares?
415. a. They are entitled to dividends.
416. b. They have no voting right.
417. c. They may be disposed of for a price lower than the par
418. value provided such price is reasonable.
419. d. They are not outstanding shares.
420.
421. 36. Which of the following will cause the automatic dissolution
of a
422. corporation?
423. a. Continuous inoperation for a period of at least 5 years.
424. b. Failure to formally organize and commence the
425. transaction of its business or the construction of its
426. works within 2 years from its incorporation.
427. c. Failure to adopt by-laws and submit the same to the
428. Securities and Exchange Commission within 30 days
429. from the receipt of the official notice of the issuance of
430. its certificate of incorporation.
431. d. Commission by the corporation of an ultra-vires act.
432.
433. S. A stock that enjoys preferences over other stocks such as
with
434. respect to dividends and the distribution of assets upon
435. liquidation.
436. T. Shares that have been issued and fully paid for, but
437. subsequently reacquired by the issuing corporation by purchase,
redemption, donation, or through some other lawful means.
438. U. Those originally forming and composing the corporation
whose
439. names appear in the articles of incorporation and are signatories
thereof.
440. V. A corporation whose shares are not listed in any stock
441. exchange, the ownership is limited to a few, and the transfer
442. thereof is restricted.
443. W. That part of the capital stock which is subscribed, whether
paid
444. or unpaid.
445. X. One whose shares may be listed in any stock exchange and
thus
446. may be held by the public.
447. A corporation formed for a private purpose or end.
448. It refers to the total par value of all issued par value shares, or
449. the total consideration received for all issued no par value
450. shares.
451. AA. A share of stock without any nominal value appearing on
the
452. stock certificate.
453. BB. A corporation that i3 defectively formed but there is an
exercise
454. of corporate powers resulting from an attempt in good faith to
incorporate on the part of its members.
455. CC. An artificial being created by operation of law, having the
right of
456. succession, and the powers, attributes and properties expressly
authorized by law or incident to its existence.
457. DD. Refers to the total shares of stock issued to subscribers or
458. stockholders, whether or not fully or partially paid, as long as
459. there is a binding subscription agreement, except treasury
460. shares.
461. EE. The nationality of a corporation follows that of the country
under
462. whose laws it was formed or organized.
463. FF. The right of existing stockholders to purchase or subscribe
to
464. new issuances or dispositions of shares, in proportion to their
465. respective stockholdings, before such shares are offered to the
466. public.
467. GG. The document issued by the Securities and Exchange
468. Commission which confers juridical personality upon a
469. corporation.
470. HH. A corporation that owns the shares of another corporation
and
471. having power, directly or indirectly, over the latter including the
472. election of the directors thereof.
473. Il. They refer to the corporators of a stock corporation.
474. JJ. The declaration thereof requires the vote of the board of
475. directors and the ratification of the stockholders.
476. KK. Also called inherent powers; they may be exercised by a
477. corporation by reason of its very existence as a corporation.
478. LL. A corporation that has exercised corporate powers for such
a
479. length of time without interference by the State, and which, by
fiction of law, is given the status of a corporation.
480. MM. It refers to the authority given by a stockholder to another
person
481. to vote the shares and which is generally effective only for
a
482. particular meeting.
483. NN. The document which evidences the interest of a
stockholder in a
484. corporation and in its property.
485. 00. A corporation organized under the laws of a country other
than
486. the Philippines and whose laws allow Filipino citizens or
487. corporations to do business in such country.
488. PP. They refer to the corporators of a non-stock corporation.
489. QQ. Shares given to the organizers of a corporation which may
be
490. given certain rights and privileges not enjoyed by other shares,
491. such as the exclusive right to vote and be voted as directors.
492. RR. It occurs when one, some or all of the directors of one
493. corporation, are also the directors of another corporation.
494. SS. Shares that grant the issuing corporation the power to
purchase
495. or reacquire them after a certain period.
496. IT. The separate personality' of a corporation is disregarded if
it is
497. used for an illegal or fraudulent purpose or to evade faithful
compliance of an obligation.
498. UU. A body within a corporation created pursuant to the by-
laws and
499. composed of not less than three members of the board of
500. directors of a corporation whose function is to take immediate
501. action on important matters without the necessity of board
502. meetings.
503. W. The right of a stockholder to demand the payment of the fair
504. value of his shares in case he dissents from certain
corporate
505. acts.
506. WW. A corporation can exercise only the powers expressly
conferred
507. upon it by law and its articles of incorporation, those
implied from
508. such powers expressly granted, and those that are incident to its
509. existence.
510. XX. A corporation formed under the laws of the Philippines.
511. YY. The ordinary stock of a corporation which entitles the
holder to a
512. pro rata division of the dividends, without any preference or
advantage over other stockholders.
513. ZZ. They refer to the rules of action adopted by a corporation
for its
514. own government and for the government of its stockholders or
515. members and those having the direction, management and
516. control of its affairs.
517. AAA. A corporate combination whereby the constituent
corporations,
518. except one, lose their separate personalities.
519. BBB. Applicable generally in times of war when a corporation is
520. considered an enemy by the country under which it
operates
521. although it may have been formed under the laws of such
522. country.
523. CCC. It is not in reality a corporation but is considered as one
with
524. respect to those who are precluded by their admission or
525. conduct from denying its existence.
526. DDD. A stock the nominal value of which appears in the stock
527. certificate.
528. EEE. A corporate combination whereby the constituent
corporations
529. lose their separate personalities and a new corporation
having a
530. personality of its own emerges.
531. FFF. It is one of the units into which the capital stock is divided
and
532. represents the intangible interest which an owner has in the
533. management, profits and assets of the corporation.
534. GGG. A stock that is sold below its par value or issued
price.
535. HHH. A corporation which has capital stock divided into shares
and is
536. authorized distribute dividends from its surplus profits to
its
537. shareholders on the basis of shares held.
538. Ill. None of the foregoing.
539. TEST II - TRUE OR FALSE. Write the word "TRUE" if the statement
is true, and the word 'FALSE" if the statement is false.
540.
541. 1. A corporation commences to exist upon the execution of
the
542. articles of incorporation by the incorporators.
543. 2. A subscriber's name may appear in the articles of
incorporation
544. but he may not be an incorporator of the corporation.
545. 3. A stockholder can transfer his shares to another person
without
546. the consent of the other stockholders.
547. 4. A corporation may exist for a period not exceeding 50
years but
548. its life may be extended several times provided each extension
does not exceed 50 years in any single instance.
549. 5. The due existence of a de facto corporation may be
attacked
550. collaterally in a proceeding.
551. 6. All persons who assume to act as a corporation knowing it
to be
552. without authority to do so shall be liable as general partners for
553. a?l debts and damages arising as a result thereof.
554. All subscribed shares are issued shares whether or not fully or
555. partially paid as long as there is a binding subscription
556. agreement.
557. 8. A share of stock is an intangible personal property.
558. Redeemable shares may be reacquired by a corporation only if it
559. has unrestricted retained earnings.
560. 10. Treasury shares, since they are issued, are outstanding
shares.
561. 11. Non-voting shares are not allowed to vote in all corporate
acts.
562. 12. Shares without par value may be issued for a consideration
less
563. than P5.00 per share.
564. 13. The entire consideration received for the issuance of no-
par
565. shares shall all be treated as capital and no part thereof shall be
566. available for distribution as dividends.
567. 14. A corporation may be formed for more than one purpose.
568. 15. As a rule; majority of the incorporators of a corporation
formed
569. under Philippine laws must be citizen s of the Philippines.
570. 16. A corporation may be a stockholder of another corporation.
571. 17. A corporation is automatically dissolved if it does not
formally
572. organize, commence the transaction of its business or the
573. construction of its works within two years from the date of its
574. incorporation.
575. 18. A director individually and as such can bind the corporation
since
576. he is an agent of the corporation.
577. 19. A director is required to be an owner of at least one share
of
578. stock of a corporation. However, he continues to be a director
although he has disposed all his shares provided the term for which he
was elected has not yet exnirec.
579. 20. A delinquent stock is deprived of all the rights of a
stockholder
580. including the right to dividends.
581. 21. The by-taws of a corporation may validly provide that one
may
582. be the President and Secretary or President and Treasurer at the
583. same time.
584. 22. Unless otherwise provided by the articles of incorporation
or the
585. by-laws, the quorum in the meetings of the board of directors is
the majority of the-total number of the board of directors.
586. 23. in the meeting of the board of directors, the vote required
for
587. the approval of an act is the majority of those present provided
588. there is a quorum except in the election of the officers which
589. requires majority of the total number of the board of directors.
590. 24. As a rule, directors of a corporation may be removed With
or
591. without cause.
592. 25. When a vacancy in the board arises from the death of a
director,
593. such vacancy may be filled by the remaining directors provided
they still constitute a quorum
594. 26. As a rule, directors are not entitled to compensation as
such
595. directors but they may receive compensation if they serve the
corporation in another capacity.
596. 27. A contract entered into between a corporation and one of
its
597. directors may still be. valid even if such director was present in
the board meeting for the approval of the contract.
598. 28. A corporation may validly donate funds to a political party
or
599. candidate provided the amount of the donation is reasonable.
600. 29. The shortening of the corporate existence of a corporation
will
601. result in the dissolution of the corporation upon the expiration of
the shortened term.
602. 30. An increase in capital stock requires that at least 25% of
the
603. increase in capital stock must be subscribed and at least 25% of
604. such subscription must be paid.
605. 31. The right of a stockholder to acquire new issues of shares
may
606. be denied in the articles of incorporation.
607. 32. The board of directors may abandon a previously approved
act
608. to sell or dispose all or substantially all of corporate property
609. without any further approval from the stockholders or members.
610. 33. Cash dividends increase the legal capital of a corporation.
611. 34. A provision in the by-laws requiring that one must be the
owner
612. of more than one share of stock to be eligible as director is valid.
613. 35. The by-laws are not required in the acquisition by a
corporation
614. of a juridical personality.
615. 36. The stockholders or members cannot delegate to the board
of
616. 'directors the power to amend, repeal or adopt new by-laws.
617. 37. The meetings of directors may be held in or outside the
618. Philippines, unless the by-laws provide otherwise.
619. 38. If a meeting of stockholders or members is improperly held
or
620. called, the act taken in such meeting will not be valid even if the
621. act is within the authority of the corporation and all the
622. stockholders were present or duly represented in such meeting.
623. 39. If a stockholder has pledged his shares to secure a debt,
the
624. right to vote the shares is transmitted automatically to the
pledgee.
625. 40. A voting trust agreement enables a stockholder to retain
control
626. of the corporation of which he is a stockholder during the time
627. that the voting trust agreement is in effect although he may
have disposed of all his shares.
628. 41. A trustee in a voting trust agreement acquires legal title to
the
629. shares entrusted to him.
630. 42. A subscription contract must be in writing to be
enforceable if the
631. amount of the subscription is P500.00 or more.
632. 43. Shares of stock may be issued for service to be performed
at
633. some future time such as that to be rendered by a lawyer for the
634. increase in the capital stock of a corporation.
635. 44. A subscription is generally an indivisible contract.
Accordingly,
636. the certificate of stock therefor may not be issued unless the
637. subscription and other amounts due from the.stockholder have
638. been paid.
639. 45. If no payment is made by a subscriber on the due date of
his
640. subscription, his shares becomes delinquent on the day
641. following.
642. 46. Holders of shares-not fully paid. but which are not
delinquent
643. shall have all the rights of a stockholder except t ;e right to a
stock certificate.
644. 47. A stockholder may be denied the right to inspect the books
of the
645. corporation -if in the past he improperly used the information
which he obtained from another corporation of which. he is also a
stockholder.
646. 48. When a stockholder exercises his appraisal right, all his
rights as
647. a stockholder, except the right. to receive payment of the fair
value of his shares, will be suspended.
648. 49. The by-laws of a non-stock corporation may validly provide
that
649. members may vote by mail.
650. 50. The by-laws of a non-stock corporation may validly provide
that
651. meetings of members may be held outside the city or
652. municipality where the principal office of the corporation is
653. located provided that such other place must be within the
Philippines.
654. 51. The number of trustees in a non-stock corporation may be
more
655. than 15.
656. 52. The officers of a non-stock corporation may be elected
directly.
657. by the members instead of by the board of trustees.
658. 53. The business of a close corporation may be managed by
the
659. stockholders instead of by the board of directors.
660. 54. In case of deadlocks in the management of the affairs of a
close
661. corporation, the Securities and Exchange Commission may
662. order the corporation to acquire its own shares provided the
663. corporation has unrestricted retained earnings to cover the
664. shares. .
665. 55. The chief archbishop, rabbi or other religious leader
becomes a
666. corporation sole from and after the filing of the articles of
667. incorporation with the Securities and Exchange Commission.
668. 56. After dissolution, a corporation shall nevertheless continue
to
669. exist as a body corporate for 3 years not for continuing the
670. business but for liquidating its affairs.
671. 57. A corporation is dissolved upon the expiration of the period
for
672. which it was formed unless the said period is extended.
673. 58. The continuous in operation of a corporation for a period of
at
674. least 5 years will result in its automatic dissolution.
675. 59. A foreign corporation may do business in the Philippines by
676. obtaining a license but without the need of incorporating under
Philippine laws.
677. 60. A foreign corporation shall not be allowed to do business in
the
678. Philippines if the laws of the country under which it was
incorporated do not allow Philippine. corporations or citizens to do
business in the said country.
679.
680.
681.
682.
683.
684.
685.
686.
687.
688.
689.
690.
691.
692.
693.
694. ANSWERS TO DIAGNOSTIC EXERCISES
695.
696.
697.
698. TEST I - MULTIPLE CHOICE
699.
700. 1. C 31. A 61. D 91. D
701. 2. D 32. C 62. A 92. C
702. 3. C 33. B 63. D 93. B
703. 4. C 34. A 64. C 94. B
704. 5. C 35. A 65. C 95. A
705. 6. C 36. B 66. C 96. D
706. 7. C 37. D 67. C 97. C
707. 8. D 38. B 68. C 98. A
708. 9. D 39. B 69. C 99. B
709. 10. B 40. D 70. B 100. D
710. 11. A 41. C 71. A 101. A
711. 12. C 42. A 72. C 102. A
712. 13. C 43. B 73. A 103. B
713. 14. A 44. A 74. C 104. D
714. 15. B 45. B 75. D 105 .B
715. 16. C 46: B 76. B 106. A
716. 17. B 47. C 77. A 107. C
717. 18. D 48. B 78. C 108. B
718. 19. A 49. C 79. C 109. B
719. 20. A 50. A 80. B 110. C
720. 21. D 51. A 81. A 111. A
721. 22. A 52. B 82. B 112. A
722. 23. D 53. C 83. C 113. D
723. 24. C 54. A 84. B 114. D
724. 25. B 55. B 85. C 115. B
725. 26. B 56. C 86. D 116. B
726. 27. C 57. A 87. A 117. C
727. 28. C 58. A 88. C 118. A
728. 29. B 59. B 89. B 119. B
729. 30. C 60. C 90. C 120. B
730.
731.
732.
733.
734.
735.
736.
737.
738.
739. TEST II -MATCHING TYPE
740. 1. CC 16. 11 31. TT 46. S
741. 2. WW 17. YY 32. NN 47. DDD
742. 3. FFF 18. AA 33. W 48. QQ
743. 4. DD 19. SS 34. L 49. GGG
744. 5. Z 20. T 35. K 50. E
745. 6. HHH 21. GG 36. 00 51. D
746. 7. XX 22. ZZ 37. BBB 52. RR
747. 8. EE 23. UU 38. N 53. H
748. 9. J 24. KK 39. 54. Q
749. 10. Y 25. M 40. G 55. C
750. 11. BB 26. FF 41. V 56. W
751. 12. HH 27. AAA 42. CCC 57. EEE
752. 13. X 28. MM 43. R 58. P
753. 14. LL 29. JJ 44. PP 59.0
754. 15. U 30. L 45. F 60. A
755.
756.
757.
758. TEST III - TRUE OR FALSE
759.
760. 1. FALSE16. TRUE 31. TRUE 46. TRUE
761. 2. TRUE 17. TRUE 32. TRUE 47. TRUE
762. 3. TRUE 18. FALSE 33. FALSE 48. TRUE
763. 4. TRUE 19. FALSE 34. TRUE 49. TRUE
764. 5. FALSE20. FALSE 35. TRUE 50. TRUE
765. 6. TRUE 21. FALSE 36. FALSE 51. TRUE
766. 7. TRUE 22. TRUE 37. TRUE 52. TRUE
767. 8. TRUE 23. TRUE 38. FALSE 53. TRUE
768. 9 FALSE24. TRUE 39. FALSE 54. FALSE
769. 10. FALSE 25. TRUE 40. TRUE 55. TRUE
770. 11. FALSE 26. TRUE 44: TRUE 56. TRUE
771. 12. FALSE 27. TRUE 42. FALSE 57. TRUE
772. 13. TRUE 28. FALSE 43. FALSE 58. FALSE
773. 14. TRUE 29. TRUE 44. TRUE 59. TRUE
774. 15. FALSE 30. TRUE 45. FALSE 60. TRUE
775.
776.
777.
778.
779.
780.
781. NEGOTIABLE INSTRUMENTS
782.
783. 34. Medardo Medrano makes a note payable to the order of
784. Pidencio Palomar and Prudencio Perez for P20,000.00. The
payees are not partners and neither one authorized the other to act in
his behalf. Based on the foregoing, which of the following is a valid
indorsement?
785.
786. a. "Pay to Antonio Arevalo, P12,000.00, and to Alberto
787. Alvarez, P8,000.00.
788. (Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez."
789.
790.
791. b. "Pay. to Antonio Arevalo, P14,000.00.
792. (Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez"
793.
794. Note: Medardo Medrano has paid a total of P6,000.00
795. to both payees before the latter made their
796. indorsements.
797.
798.
799. c. "Pay to Antonio Arevalo, P14,000.00.
800.
801. (Sgd.) Fidencio Palomar (Sgd.) Prudencio Perez."
802.
803. Note: Medardo Medrano has not paid any amount to the payees.
804.
805.
806. d. "Pay to Antonio Arevalo P20,000.00.
807.
808. (Sgd.) Pidencio Palomar"
809.
810. 35. Which of the following may be raised as defense against
any
811. holder?
812. a. Want of consideration.
813. b. Want of delivery of complete instrument.
814. c. Insertion of a wrong date.
815. d. Want of delivery of an incomplete instrument.
816.
817. 36. "Pay to Alberto Alvarez for collection only.
818.
819. (Sgd.) Ponciano Parcero"
820. This is an example of:
821. a. The agency type of restrictive indorsement.
822. b. The trust type of restrictive indorsement.
823. c. A qualified indorsement.
824. d. A conditional indorsement.
825.
826. 37. M makes a promissory note for P10,000.00 payable to the
order
827. of P for merchandise to be delivered by P to him. P, however, was
able to deliver to M merchandise worth P8,000.00 only. P indorsed the
note to A, and A to H.
828. 1. If H is a holder in due course, he can collect P10,000.00
829. from M.
830. II. If H is not a holder in due course, he can collect
831. P8,000.00 from M.
832. a. Both statements are true.
833. b. Both statement are false.
834. c. Statement I is true; Statement II is false.
835. d. Statement I is false; Statement II is true.
836.
837. 38. M makes a note payable to the order of P. P indorses the
note to
838. A, A to B, B to C, C to D, D to E, and E back to A. Based on the
839. foregoing, which of the following statements is incorrect?
840. a. A may renegotiate, the promissory note.
841. b. A cannot go after B, C, D and E.
842. c. B, C, D and E enjoy temporary defense if A is the holder.
843. d. If the instrument is renegotiated by A to F, the latter
844. cannot go after B, C, D and E.
845.
846. 39. Mary Montes and Melany Manalo obtained a loan of
847. P1CO,000.00 from Patricia Palma. The debtors executed a
848. promissory note which reads as follows:
849.
850. NEGOTIABLE INSTRUMENTS
851. - DIAGNOSTIC EXERCISES
852.
853.
854. TEST I - MULTIPLE CHOICE. Select the best answer by writing the
letter of your choice.
855.
856. An instrument which is not dated will be considered dated as at
857. the time of:
858. a. acceptance.
859. b. first indorsement.
860. c. last indorsement.
861. d. issuance..
862.
863. 2. "I promise to pay P or his order the sum of P10,000.00 30
days
864. after the death of X". This is an instrument payable:
865. a. at a determinable futur
866. b. at an indefinite time, hence, non-negotiable.
867. c. on demand.
D. upon the fulfillment of a condition.
868.
869. 3. Who among the following is the holder of a negotiable
instrument
870. originally payable to order?
871.
872. a. The original payee who has negotiated the instrument.
873. b. The indorsee who is in possession of the instrument.
874. c. The possessor of the instrument to whom the instrument
875. was delivered without any indorsement
876. d. The indorsee who has negotiated the instrument.
877.
878. 4. An instrument payable to bearer may be negotiated
through any
879. of the following means, except by:
880.
881. a. special indorsement plus delivery.
882. 'b. mere delivery.
883. c. blank indorsement plus delivery.
884. d. No delivery is required as long as there is an
885. indorsement, whether blank or special.
886.
887. 5. The following instruments are presented to you for
evaluation;
888.
889. I. "Pay to the order of Pablo Patricio P20,000.00"
890.
891. II. "Pay to the order of Pablo Patricio P20,000.00 or deliver,
892. to him a computer of the same, value at his option."
893.
894. Ill. "Pay to the order of Pablo Patricio P20,000.00 or deliver
895. to him a computer of the same value."
896. IV. "Pay to the order of Pablo Patricia a computer worth
897. P20,000.00."
898. Assuming all the other requisites of negotiability are present,
899. which of the foregoing instruments are negotiable?
900. a. Instruments I and II.
901. b. Instruments I and III.
902. c. Instruments II and Ill.
903. d. Instruments III and IV
904. 6. The separate paper attached to an instrument on which an
905. endorsement or acceptance of the instrument is written is called:
906. a. allonge.
907. b. memorandum.
908. c. enclosure.
909. d. attachment.
910. 7. Assuming all the other requisites of negotiability are
present,
911. which of the following instruments is not payable to bearer?
912. a. "Pay to the order of Cash."
913. b. "Pay to the order of Jose Rizal, national hero."
914. c. "Pay to Pedro Padernal, bearer."
915. d. "Pay to. Pedro Padernal or bearer."
916. 8. Consider these two statements:
917. 1. An instrument originally payable to order may be
918. converted into a bearer instrument.
919. II An instrument originally payable to bearer may be
920. converted into an order instrument.
921. In your evaluation of the foregoing statements:
922. a. Both statements are true.
923. b. Both statements are false.
924. c. Statement I is true; Statement II is false.
925. d. Statement I is false; Statement II is true.
926. 9. Which of the following is a valid address to a drawee so as
to
927. make the instrument negotiable?
928. a. "To Walter Wenceslao or Wilfredo Wycoco."
929. b. "To Walter Wenceslao, or in his absence, Wilfredo
930. Wycoco."
931. c. "To Walter Wenceslao and Wilfredo Wycoco"
932. d. "To Walter Wencesiao and another drawee named
933. Wilfredo."
934. 10. M signs a promissory note payable to the order of P which
is
935. blank as to amount. M delivers the note to P with the instruction
936. to type the amount of P20,000.00 on the blank. P, however,
937. types the amount of P50,000.00, and negotiates the same to A,
938. A to B, B to C, and C to H, a holder in due course. A, B, C and
939. also H had no knowledge of the wrongful completion of the
940. blank.
941. a. H may collect from M nothing because P violated M's
942. instructions.
943. b. H may collect from M P20,000.00 the amount M
944. instructed P to place on the space for the amount.
945. c. H may collect from M P50,000.00, the amount actually
946. placed by P.
947. d. H may collect from A, B or C P20,000.00 since they had
948. no knowledge of the wrongful completion.
949.
950. 11. R signs a check amounting to P50,000.00 but which is
blank as
951. to the name of payee. He keeps the check in his drawer but S,
his secretary, steals it, places her name as payee on the blank, and
negotiates it to A, A to B, B to C, and C to H, holder. A, B, and C have
no knowledge of the theft of the check and its unauthorized completion
by S. Based on the foregoing, which of the following statements is
incorrect?
952. a. H may enforce payment of the check against Rif H is a
953. holder in due course.
954. b. H may enforce payment of the check against S,,whether
955. H is a holder in due course or not.
956. c. H may enforce payment of the check against A, B and C,
957. whether H is a holder in due course or not.
958. d. H may not enforce payment of the check against R,
959. whether H is a holder in due course or not.
960.
961. 12. M makes a note payable to the order of P. He delivers the
note
962. to P with the instruction that P should keep the same until M has
963. obtained the proceeds of his loan from the bank. P, . however,
964. disregarded the instruction of M and indorsed the note to A, A to
965. B, B to C, and C to H, holder. A, B and C have no knowledge of
966. P's defective title. Based on the foregoing, which of the following
967. statements is incorrect?
968. a. H may enforce payment against M if H is a holder in
969. due course.
970. b. H may not enforce payment against M if 'H is not a
971. holder in due course.
972. c. H may not enforce payment against A, B and C, whether
973. H is a holder in due course or not.
974. d. H may enforce payment against P, whether H is a
975. holder in due course or not.
976.
977. 13. One of the following can set up the defense of forgery in an
978. instrument payable to order. Who is it?
979. a. An indorser, if the maker's signature is forged.
980. b. The acceptor, if the drawer's signature is forged.
981. c. A person negotiating by mere delivery if a prior party's
982. signature is forged.
983. d. The maker, if an indorsers signature is forged.
984.
985. 14. M makes a note payable to P or bearer and delivers the
note to
986. P. P indorses the note to A. A keeps the note in his drawer but it
is stolen by F who negotiates the same to B by forging A's signature, B
indorses the note to C, C indorses the note to H, a holder in due
course. Who among the following can set up the defense of forgery?
987. a. M, maker.
988. b. P, payee.
989. c. A, indorser.
990. d. Forgery is not available as defense to any party to the
991. instrument.
992.
993. 15. One of the following is not a restrictive indorsement. Which
is it?
994. a. An indorsement that prohibits the further negotiation of
995. the instrument.
996. An indorsement that constitutes the indorser a mere assignor of
the title to the instrument.
997. c. An indorsement that constitutes the indorsee an agent of
998. the indorser.
999. d. An indorsement that vests title in the indorsee in trust for
1000. some other person.
1001.
1002. 16. M makes a note payable to the nrder of P in the amount of
1003. -. P10,000.00. P indorsers the note to A as follows "Pay to A if
he
1004. passes the 2010 Bar Examination."
1005. a. M must wait for the condition to be fulfilled before he can
1006. pay A.
1007. b. M may pay. A even if the condition has not been fulfilled
1008. but A has to hold the proceeds subject to the rights of P.
1009. c. M cannot be compelled to pay even if the condition is
1010. fulfilled because the conditional indorsement renders the
1011. instrument non-negotiable.
1012. d. M may pay A even if the condition has not been fulfilled.
1013. The fulfillment of the condition becomes immaterial and
1014. A becomes the absolute owner of the proceeds of the
1015. note.
1016.
1017. 17. In order that a person may be held liable as an
accommodation
1018. party, the following requisites must concur, except:
1019. a. He has signed the instrument as maker, drawer,
1020. acceptor or indorser.
1021. b. He has not received any value for such making, drawing,
1022. accepting or indorsing the instrument.
1023. c. His purpose of signing the instrument is to lend his
1024. name or credit to some other person.
1025. d. The holder must have no knowledge that such person
1026. signed the instrument as an accommodation party.
1027.
1028. 18. An indorsement where the indorser signs only.his name at
the
1029. back of the instrument is a:
1030. a. special indorsement.
1031. b. blank indorsement.
1032. c. qualified indorsement.
1033. d. restrictive indorsement.
1034.
1035. 19. An indorsement where the indorser waives the benefit of
any law
1036. intended for his protection is known as:
1037. a. an absolute indorsement.
1038. b. a facultative indorsement.
1039. c. a conditional indorsement.
1040. d. a successive indorsement.
1041.
1042. 20. M makes a note payable to the order of P. P specially
indorses
1043. the note to A, A specially indorses the note to B, B indorses the
note in blank and delivers it to C, C specially indorses the note to D, D
specially indorses the note to H, holder. Which of the indorsements
may H strike out?
1044. a. The special indorsement of P to A.
1045. b. The blank indorsement of B to C.
1046. c. The special indorsement of C to D.
1047. d. The special indorsement of D to H.
1048.
1049. 21. Which of the following is not a right of a holder in due
course?
1050. a. To hold the instrument free from defect of title of prior
1051. parties.
1052. To hold the instrument free from personal defenses available to
prior parties among themselves.
1053. c. To enforce payment of the instrument for the full amount
1054. thereof against all parties liable thereon.
1055. d. To hold the instrument free from real defenses available
1056. to the prior parties among themselves.
1057.
1058. 22. Which of the following statements pertaining to
indorsements is
1059. incorrect?
1060. a. The indorsement must be of the whole instrument.
1061. b. The signature of the indorser without additional words is
1062. sufficient.
1063. c. Indorsers are liable in the order in which they indorse.
1064. d. If an instrument is delivered without indorsement,
1065. negotiation takes effect at the time of delivery even if the
instrument is subsequently indorsed.
1066.
1067. 23. M executed a note payable to the order of P. P indorsed the
1068. note to,A, A to B (by qualified indorsement), B to C (by general
indorsement), and C (by general indorsement) to, H, a holder in due
course. Later, it was discovered that P was a minor. None, except P,
knew that he was a minor. Who, aside from P, may avail himself of the
minority of P as a defense?
1069. a. M, maker.
1070. b. A, qualified indorser.
1071. c. B, general indorser.
1072. d. None, only P may avail himself of his minority as a
1073. defense.
1074.
1075. 24. Which of the following does not discharge the instrument?
1076. a. Payment in due course by the accommodated party .
1077. b.. Intentional cancellation of the instrument 'by the holder.
1078. c. When the principal debtor becomes the holder in his own
1079. right before maturity.
1080. d. Payment in due course by or on behalf of the principal
1081. debtor.
1082.
1083. 25. A party secondarily liable is discharged through any of the
1084. following means, except by the:
1085. a. intentional cancellation of his signature by the holder.
1086. b. discharge of a prior party.
1087. c. release of the principal debtor.
1088. d. extension of the time of payment which is assented to by
1089. such party secondarily liable.
1090.
1091. 26. Which of the following instruments is negotiable?
1092. a. Treasury warrant.
1093. b. Postal money order.
1094. c. Letter of credit.
1095. d. Trade acceptance.
1096.
1097. 27. An instrument reads as follows:
1098.
1099.
1100. November 30, 2010
1101.
1102. I promise to pay to the order of Paolo Pimentel the sum of
1103. P50,000.00 if he places first in the May 2011 CPA
1104. Examination.
1105.
1106. (Sgd.), Mariano Miranda
1107.
1108. a. The instrument is valid and negotiable.
1109. b.. The instrument is valid but not negotiable.
1110. c. The instrument is invalid but negotiable.
1111. d. The instrument is invalid and not negotiable.
1112.
1113. 28. An instrument reads as follows:
1114.
1115.
1116. I promise to pay to the order of Patrick Pelaez the sum of
P50,000.00 sixty (60) days after date.
1117.
1118. (Sgd.) Minerva Maceda
1119.
1120. The instrument was delivered by Mine. va Maceda on December
1121. 1, 2010 to Patrick Pelaez who indorsed and delivered the note
1122. on the same day to Alberto Antonio. Immediately upon receipt,
1123. Alberto Antonio wrote on the note "November 1, 2010" as its
1124. date of issue. The following day, Alberto Antonio indorsed and
delivered the note to Herman Hernandez who knew nothing with
respect to the insertion of a different date of issue.
1125. a. Herman Hernandez can collect the amount of the note
1126. from Minerva Maceda on December 31, 2010.
1127. b. Herman Hernandez can collect the amount of the note
1128. from Minerva Maceda on January 30, 2011.
1129. c. Herman Hernandez can collect nothing from Minerva
1130. Maceda because of the insertion of a wrong date.
1131. d. Herman Hernandez can collect the amount of the note
1132. on December 2, 2010 when it was negotiated to him.
1133.
1134. 29. An instrument. reads as follows:
1135.
1136. November 1, 2010
1137. I promise to pay to the order of Perla Persida the surn of
1138. P30,000.00 on November 30, 2010.
1139. (Sgd.) Melba Montinola (Sgd.) Milnore Manuel
1140. (Sgd.) Maila Medina
1141.
1142.
1143. On November 30, 2010, Perla Persida may collect from Melba
1144. Montinola:
1145. a. P30,000.00.
1146. b. P20,000-00.
1147. C. P10,000.00.
1148. d. Nothing, because the note is void since it reads "I
1149. promise to pay" but it was signed by three makers.
1150.
1151. 30. At a movie premier, Perfecto Palmares approached Sharon
1152. Morales, the star of the movie, and requested an autograph from
1153. her. Sharon Morales willingly obliged and signed her name at
1154. the bottcm right portion of a white 8" x 11" stationery which
1155. Perfecto Palmares presented to her. Shortly after reaching
1156. home, Perfecto Palmares printed above the signature of Sharon
1157. Morales through his computer the following : "I promise to pay
1158. Perfecto Palmares or his order P50,000.00". Thereafter, Perfecto
Palrares negotiated the paper to Arturo Alvarez, Arturo Alvarez to
Bernardo Benitez, and Bernardo Benitez to Henry Hilado, holder.
Alvarez, Benitez, and Hilado knew nothing about how the apparent
note came into being.
1159. a. If he is a holder in due course. Henry Hilado can collect
1160. from Sharon Morales,
1161. Whether he is a holder in due course or not, Henry, Hilado cannot
collect from Sharon Morales.
1162. c. Whether he is a holder in due course or not, Henry
1163. Hilado cannot collect from Arturo Alvarez.
1164. d. Whether he is a holder in due course or not, Henry
1165. Hilado cannot collect from Bernardo Benitez.
1166.
1167. 31. M makes a promissory note payable to the order of P for
1168. P10,000.00. P indorses the note to A, and A to B. Thereafter, S
indorsed the amount of the note in full to H to secure his (B's) debt of
P8,000.00 to H. Based on the foregoing, which of the following
statements is incorrect?
1169. a. If M has no defenses against H, H may collect
1170. P10,000.00 from M.
1171. b. If M has personal defenses against H, H may collect
1172. P8,000.00 from M.
1173. c. If M has real defenses against H, H may collect nothing
1174. from M.
1175. d. H cannot ccllect anything from M whether M has real or
1176. personal defenses.
1177.
1178. 32. Which of the following renders an instrument non-
negotiable?
1179. a. The promise or order is to pay the amount of the
1180. instrument out of a particular fund.
1181. b. The promise or order to pay is coupled with a statement
1182. of the transaction that gave rise to the transaction.
1183. c. The sum payable is to be paid with costs of collection or
1184. an attorney's fee in case payment is not made at
1185. maturity.
1186. d. The instrument contains a provision authorizing the sale
1187. of collateral securities in case the instrument is not paid
1188. at maturity.
1189.
1190. 33. Which of the following omissions on the face of an
instrument will
1191. render it non-negotiable?
1192. a. The omission of the date of issue.
1193. b. The omission of any statement that value has been
1194. given.
1195. c. The omission of the place where the instrument was
1196. drawn.
1197. d. The omission of the signature of the maker above his
1198. typewritten name.
1199.
1200. 34. Medardo Medrano makes a note payable to the order of
1201. Pidencio Palomar and Prudencio Perez for P20,000.00. The
payees are not partners and neither one authorized the other to act in
his behalf. Based on the foregoing, which of the following is a valid
indorsement?
1202. a. "Pay to Antonio Arevalo, P12,000.00, and to Alberto
1203. Alvarez, P8,000.00.
1204. (Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez."
1205.
1206. b. "Pay, to Antonio Arevalo, P14,000.00.
1207. (Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez"
1208.
1209. Note: Medardo Medrano has paid a total of P6,000.00
1210. to both payees before the latter made their
1211. indorsements.
1212.
1213. c. "Pay to Antonio Arevalo, P14,000.00.
1214. (Sgd.) Fidencio Palomar (Sgd.) Prudencio Perez."
1215.
1216. Note: Medardo Medrano has not paid any amount to the payees.
1217.
1218. d. "Pay to Antonio Arevalo P20,000.00.
1219. (Sgd.) Pidencio Palomar"
1220.
1221. 35. Which of the following may be raised as defense against
any
1222. holder?
1223. a. Want of consideration.
1224. b. Want of delivery of complete instrument.
1225. c. Insertion of a wrong date.
1226. d. Want of delivery of an incomplete instrument.
1227.
1228. 36. "Pay to Alberto Alvarez for collection only.
1229. (Sgd.) Ponciano Parcero"
1230. This is an example of:
1231. a. The agency type of restrictive indorsement.
1232. b. The trust type of restrictive indorsement.
1233. c. A qualified indorsement.
1234. d. A conditional indorsement.
1235.
1236. 37. M makes a promissory note for P10,000.00 payable to the
order
1237. of P for merchandise to be delivered by P to him. P, however, was
able to deliver to M merchandise worth P8,000.00 only. P indorsed the
note to A, and A to H.
1238. 1. If His a holder in due course, he can collect P10,000.00
1239. from M.
1240. 11. If H is not a holder in due course, he. can collect
1241. P8,000.00 from M.
1242. a. Both statements are true.
1243. b. Both statement are false.
1244. c. Statement I is true; Statement II is false.
1245. d. Statement I is false; Statement II is true.
1246.
1247. 38. M makes a note payable to the order of P. P indorses the
note to
1248. A, A to B, B to C, C to D, D to E, and E back to A. Based on the
1249. foregoing, which of the following statements is incorrect?
1250. a. A may renegotiate. the promissory note.
1251. b. A cannot go after B, C, D and E.
1252. c. B, C, D and E enjoy temporary defense if A is the holder.
1253. d. If the instrument is renegotiated by A to F, the latter
1254. cannot go after B, C, D and E.
1255.
1256. 39. Mary Montes and Melany Manalo obtained a loan of
1257. P1C0,000.00 from Patricia Palma. The debtors executed a
1258. promissory note which reads as follows:
1259.
1260. We promise to pay Patricia Palma or order P100,000.00 on
November 30, 2010.
1261.
1262. (Sgd.) Mary Montes (Sgd.) Melany Manalo
1263.
1264.
1265.
1266. To secure the loan, Mary Montes pledged her diamond ring, while
Melany Manalo executed a mortgage on her lot.
1267. a. Mary Montes may demand the return of her diamond
1268. ring if she pays her share of the debt, while Melany .Manalo's
share remains outstanding.
1269. b. Melany Manalo may demand the cancellation of the
1270. mortgage on her lot if she pays her share of the debt,
1271. while Mary Montes's share remains outstanding.
1272. c. Both Mary Montes and Melany Manalo must pay the
1273. total amount of the debt before Mary Montes could
1274. demand the return of the diamond ring, and Melany
1275. Manalo the cancellation of the mortgage on her lot.
1276. d. Patricia Palma may demand payment of the amount of
1277. P100,000.00 from either Mary Montes or 1Vlelany
1278. Manalo.
1279.
1280. 40. M executed a promissory note in the amount of P20,000.00
1281. payable to the order of P. M made the promissory note for
1282. goods purchased by M from P shortly after M obtained the
1283. consent of P whether the latter would accept the promissory note
1284. in the meantime. When P visited M's office to collect the note, M
1285. was not around, but P found on M's table the completed note
1286. that M made for him. Without waiting for M, P took the note.
1287. Based on the foregoing, which of the following statements is
1288. incorrect?
1289. a. P cannot enforce payment of the note if M refuses to pay
1290. it.
1291. b. If P indorses the note to H who knows nothing on how P
1292. obtained the note, H can collect on the note from M.
1293. c. If P indorses the note to H who knows how P obtained
1294. the note from M, H cannot collect from M.
1295. d. If P indorses the note to H, H can collect from M whether
1296. H was aware or not on how the note was obtained by P
1297. since he (H) was not a party to the wrongdoing
1298. committed by P.
1299.
1300. 41. The following instruments are presented to you for
evaluation:
1301. 1. "Pay to the order of Pablo Patricio P20,000.00 in goods
1302. which are displayed at your store."
1303. II. "Pay to the order of Pablo Patricio P20,000.00 or deliver
1304. to him a computer of the same value at his option."
1305. Assuming all the other requisites of negotiability are present:
1306. a. Both instruments are negotiable.
1307. b. Both instruments are not negotiable.
1308. c. Instrument I is negotiable; Instrument II is not negotiable.
1309. d. Instrument I is not negotiable; Instrument II is negotiable.
1310.
1311. 42. The following are two of several requisites of an
instrument:
1312. 1. The instrument must be payable on demand or at a
1313. fixed or determinable future time.
1314. II. The instrument must be payable to order or to bearer.
1315. a. Both requisites apply to promissory notes only.
1316. b. Both requisites apply to bills of exchange only.
1317. c. Both requisites apply to both promissory notes and bills
1318. of exchange.
1319. d. Requisite I applies to promissory notes; Requisite II
1320. applies to bills of exchange.
1321.
1322. 43. The attribute of a negotiable instrument which allows it to
be
1323. passed from one hand to another similar to money, so as to give
1324. a holder in due course the right to hold the instrument free from
1325. defect of title of prior parties, and free from defenses available to
1326. prior. parties among themselves, and to enforce payment of the
1327. instrument for the full amount thereof against all parties liable
1328. thereon is known as:
1329. a. Assignability.
1330. b. Negotiability.
1331. c. Transferability.
1332. d. Acceptability.
1333. 44. An instrument is not payable on demand in one of the
following
1334. cases. Which case is it?
1335. a. When the instrument is expressed to be payable at sight.
1336. b. When the instrument is expressed to be payable upon
1337. presentation.
1338. c. When no time for payment is expressed.
1339. d. When the instrument is expressed, to be payable after
1340. the occurrence of a specified event which is certain to happen.
1341.
1342. 45. Consider the following statements on the interpretation of
1343. instruments:
1344. 1. Where the sum payable is expressed in words and also
1345. in figures and there is a discrepancy between the two,
1346. the sum denoted by the words is the sum payable.
1347. II. Where there is a conflict between the written and printed
1348. provisions of the instrument, the printed provisions
1349. prevail.
1350. a. Both statements are true.
1351. b. Both statements are false.
1352. c. Statement I is true; Statement II is false.
1353. d. Statement I is false; Statement II is true.
1354.
1355. 46. A bill of exchange reads as follows:
1356.
1357.
1358. January 1, 2011
1359.
1360. Pay to the order of Pamela Pineda the sum of
1361. P50,000.00 thirty (30) days after sight.
1362.
1363. (Sgd.) Rosita Rodriguez
1364. To: Wilma Warner
1365.
1366. The above bill was issued by Rosita Rodriguez to Pamela
1367. Pineda on December 28, 2010 and was presented for
1368. acceptance by Pamela Pineda to Wilma Warner on January 10,
1369. 2011.
1370. Based on the foregoing facts, the maturity date of the bill is:
1371. a. January 27, 2011.
1372. b. January 31, 2011.
1373. c. February 9, 2011.
1374. d. January 10, 2011.
1375.
1376. 47. Ramos draws a bill of exchange payable to the order of
Palma.
1377. Palma presents the bill to Wagan, drawee, for acceptance, and
1378. the latter accepts it. Thereafter, Palma indorses the note to
1379. Alunan, Alunan to Bernarte, Bernarte to Hornedo, holder. On
1380. due date, Hornedo presents the bill to Wagan for payment but
1381. Wagan dishonors it claiming that Palma is a minor. Wagan,
1382. Ramos, Alunan and Bernarte claim that they did know that
1383. Palma was a minor at the time that they transacted on the
1384. instrument. Aside from Palma, who may claim the defense of
1385. minority?
1386. a. Ramos.
1387. b. Wagan.
1388. c. Alunan and Bernarte.
1389. d. None of the four.
1390.
1391. 48. A promissory note reads as follows:
1392.
1393. November 1, 2010
1394. I promise to pay Paloma Perez or order the sum of
1395. P20, 000.00.
1396. (Sgd. Maria Montano
1397.
1398.
1399. The above promissory note was delivered by Maria Montano to
Paloma Perez who made the following indorsement at the back of the
promissory note:
1400.
1401.
1402.
1403. Pay to Alona Almonte if she finishes her course in Business
Administration.
1404.
1405. (Sgd.) Paloma Perez
1406.
1407.
1408. 1. The condition of the indorsement is suspensive.
1409. II. The condition placed on the indorsement renders the
1410. instrument non-negotiable.
1411. III. Maria Montano may waive the fulfillment of the condition
1412. and pay Alona Almonte.
1413. a. All statements are true.
1414. b. I and II are true.
1415. c. II and Ill are true.
1416. d. I and III are true.
1417.
1418. 49. The acceptor, by accepting the instrument, admits the
following,
1419. except the:
1420. a. existence of the payee.
1421. b. capacity of the payee to indorse.
1422. c. genuineness of the drawer's signature.
1423. d. right of the holder to enforce payment of the instrument.
1424.
1425. 50. The maker, by making the instrument, has the following
1426. liabilities, except:
1427. a. the engagement to pay the instrument according to its
1428. tenor.
1429. b. the admission of the existence of the payee.
1430. C. the admission of the capacity of the payee to indorse the
1431. instrument.
1432. d. the admission of the right of the holder to enforce
1433. payment of the instrument.
1434.
1435. 51. M makes a promissory note payable to the order of P. P
1436. indorses the note specially to A, A indorses the note in blank and
delivers the same to B. B specially indorses the note to C, C specially
indorses the note to D, D indorses the note in blank and delivers it to E,
E specially indorses the note to - H,, holder. Whose indorsement may H
strike out?
1437. a. The special indorsement of P to A.
1438. b. The special indorsement of E to H.
1439. c. The blank indorsement made by A.
1440. d. The blank indorsement made by D.
1441.
1442. 52. M makes a promissory note payable to the order of P and
1443. delivers the same to P. P indorses the note to A who keeps it in
his drawer. F steals the note and negotiates the same to B by forging
A's signature. Thereafter, B negotiates the note to C, C to D, and D to
H, a holder in due course. Based on the foregoing information, which of
the following statements is true?
1444. a. H can hold M and P liable because they became bound
1445. under the instrument before the forgery.
1446. b. H cannot hold B, C and D liable because they have no
1447. participation whatsoever in the commission of the forgery.
1448. c. H can enforce the instrument only against F, the forger,
1449. since he is the perpetrator of the forgery.
1450. d. H can enforce instrument against F, B, C and D, but not
1451. against M, P and A.
1452.
1453. 53. A check must be in writing and signed by the drawer for it
to be
1454. negotiable. In addition, a check must have the following
1455. requisite, except:
1456. a. It must contain an unconditional order to pay a sum
1457. certain in money.
1458. b. It must be payable at a fixed or determinable future.
1459. time.
1460. c. It must be payable to order or to bearer.
1461. d. The bank drawee must be named with reasonable
1462. certainty.
1463.
1464. 54. These two instruments are presented to you for evaluation:
1465. Instrument I
1466. Manila, Philippines
1467. October 21, 2010
1468. Pay to the order of Pedro Panelo the sum of P20,000.00 or deliver
to him a brand new Acer computer of the same value.
1469. (Sgd.) Roberto Ramirez
1470. To: Walter Wenceslao
1471.
1472. Instrument II
1473. Manila, Philippines
1474. October 21, 2010
1475.
1476. Pay to the order of Pedro Panelo the sum of P20,000.00 and
reimburse yourself out of the proceeds of my loan from PNB which are
in your possession.
1477. (Sgd.) Roberto Ramirez
1478. To: Walter Wenceslao
1479. a. Both instruments are negotiable.
1480. b. Both instruments are non-negotiable.
1481. c. Instrument I is negotiable; Instrument II *is non-
1482. negotiable.
1483. d. Instrument I is non-negotiable; " Instrument II is
1484. negotiable.
1485. 55. Which of the following is not a promise to pay, and thus will
1486. make an instrument non-negotiable?
1487. a. "I agree to pay P"
1488. b. "I bind myself to pay P"
1489. c. "I acknowledge. my debt to P"
1490. d. "I oblige myself to pay P"
1491.
1492. 56. An instrument to be negotiable must be payable at a fixed
or
1493. determinable future time. Which of the following does not
1494. comply with the said requisite?
1495. a. "I promise to pay P or order on Christmas day 2 years
1496. from now"
1497. b. "I promise to pay P or order on the death of X" -
1498. c. "I. promise to pay P or order 10 days before the death of
1499. X"
1500. d. "I promise to pay P or order before Valentine's Day next
1501. year"
1502.
1503. 57. Which of the following instruments is not payable to order?
1504. a. "I promise to pay P or his agent P10,000.00"
1505. b. "I promise to pay P or his assigns P10,000.00"
1506. c. "I promise to pay to the order of myself P10,000.00"
1507. d. "Pay to the order of yourself P10,000.00"
1508.
1509. 58. P executes a promissory note for P20,000.00 indicating
therein
1510. that the maker is M and that it is payable to the order of P.
Thereafter, he forges the signature of M and indorses the note to A, A
to B, B to C, and C to H, holder. Based on the foregoing data, which of
the following statement is incorrect?
1511. a. H can collect from M if H is a holder in due course.
1512. b. H cannot collect from M whether H is a holder in due
1513. course or not.
1514. c. H can collect from A, B or C whether H is a holder in due
1515. course or not.
1516. d. H can collect from .P whether H is a holder in due course
1517. or not.
1518.
1519. 59. An instrument reads as follows:
1520.
1521.
1522. I promise to pay to the order of P the sum of P50,000.00 sixty
(60) days after date.
1523. (Sgd.) M
1524.
1525.
1526. On September 1, 2010, M issued the promissory note to P, P
1527. indorsed the note to A, A to B, and B to C. C indorsed the note
1528. to H on September 20, 2010, but before delivering it to H, C
1529. inserted August 1, 2010 as the date of issue. H is a holder in
1530. due course. The due date of the.promissory note insofar as H is
concerned is:
1531. a... October 31, 2010.
1532. b. September 30, 2010.
1533. c. The promissory note becomes demandable at once.
1534. d. The promissory note is avoided because of the insertion
1535. of a wrong date; hence, it is of no use to determine the
1536. date of maturity.
1537.
1538. 60. Which of the following defenses may a party to an
instrument
1539. avail himself of against any holder?
1540. a. Want of delivery of incomplete instrument.
1541. b. Want of authority to complete an instrument that was
1542. delivered.
1543. c. Want of delivery of complete instrument.
1544. d. Want or absence of consideration.
1545.
1546. 61. M makes a promissory note payable to the order of P for
1547. PHP5,000.00. After delivery to P, P changed the amount to
US$5,000.00. Thereafter, P indorsed the note to A, A to B, B to C, C to
D, and D to H. The parties subsequent to P were not aware of the
alteration made by P. Based on the foregoing facts, which of the
following statements is incorrect?
1548. a. H can hold M liable for US$5,000.00 if H is a holder in
1549. due course.
1550. b. H can hold M liable for PHP5,000.00 if H is a holder in
1551. due course.
1552. c. H cannot hold M liable for any amount if H is not a holder
1553. in due course.
1554. D. H can hold A, B, C and D liable for US$5,000.00 even if H is
not a holder in due course.
1555.
1556. 62. A holder is a holder in due course if he has taken the
instrument
1557. complete and regular on its face and three of the following
conditions, except:
1558. a. That he became the holder of the instrument before it
1559. was overdue and without notice that it had been
1560. previously dishonored if such was the fact.
1561. b. That he took it in good faith and for value.
1562. c. That there is. no fraud or illegality affecting the
1563. instrument.
1564. d. That at the time it was negotiated to him, he had no
1565. notice of any infirmity in the instrument or defect in the title of
the person negotiating the same.
1566.
1567. 63. M executed a promissory note as follows:
1568. "I promise to pay P or order P50,00'0.00 or to deliver to him a
brand new laptop computer."
1569. (Sgd.) M M.
1570. Based on the foregoing instrument, which of the. following
1571. statements is true?
1572. a. The instrument is negotiable.
1573. b. The obligation is an alternative obligation.
1574. c. The choice as to which prestation will be performed
1575. belongs to P.
1576. d. The obligation is payable at a determinable future time.
1577.
1578. 64. M executes a promissory note for P10,000.00 payable to
the
1579. order of P, a minor. M and P had a private understanding that M
1580. is liable only for the discounted amount of P9,500.00. P
1581. indorsed the note to A, A.tc B, B to C, C to D, and D to H, holder.
1582. a. M may refuse to pay H on the ground that P is a minor.
1583. b. If M dishonors the note, A may refuse to pay H on the
1584. same ground that P is a minor.
1585. c. The indorsement made by P passed title to the
1586. instrument in favor of A.
1587. d. Assuming that P was already of the age of majority at
1588. the time of the execution of the note, M is liable to H for
1589. P9,500.00 since that was the amount that he agreed with P that
he should pay.
1590.
1591. 65. On August 1, 2010, M executed a ' promissory note for
1592. P50,000.00 payable to the order of P which is payable "30 days
after date." Thereafter, P indorsed the note to A, A to B, B to C, C to b,
and D to M. The indorsement by D to M was made on August 29, 2010.
1593. a. The obligation on the note was extinguished by merger
1594. or confusion on August 29, 2010.
1595. b. M may reissue/renegotiate the promissory note after it
1596. was indorsed to him.
1597. c. M can go after P, A, B, C and D to collect.
1598. d. M may strike out the indorsement to him by D.
1599.
1600. 66. M, maker, P, payee, of a.. note payable to the order of P.,
The
1601. back of the note contains the indorsement of P to A, A to B. B to
1602. C, C to D, and D to H, a holder in due course. Assume the
1603. following independent facts:
1604. 1. M is insolvent.
1605. 11. Pisaminor.
1606. III. A's signature was forged.-
1607. If C were a qualified indorser, which of the foregoing
1608. independent facts will not affect his liability (i.e., he will, still be
1609. liable) although he was not aware of any of them?
1610. a. I and II.
1611. b. 11 and Ill
1612. c. I and Ill.
1613. d. I, II and Ill.
1614.
1615. 67 Refer. to the preceding number.. Assuming that C were a
general
1616. indorser, which of the foregoing facts enumerated (I, II and III)
1617. will not- affect his liability (i.e., he will still be liable) although he
1618. was not aware' of any of them?
1619. a. I and II.
1620. b. II and Ill.
1621. c. Iand111.
1622. d. I, 11 and Ili.
1623.
1624. 68., One of the distinctions between negotiation and
assignment of a
1625. negotiable instrument is that in assignment the:
1626. a. transferor of the instrumet t warrants the solvency of
1627. prior parties.
1628. transferee of the instrument is subject to both personal and real
defenses.
1629. c. transferee of the instrument holds the instrument free
1630. from defect of title of prior parties.
1631. d. transferor is not liable in case no presentment for
1632. payment is made to the party primarily liable and notice of
dishonor is not given to such transferor.
1633.
1634. 69. M made a promissory note in favor of P or order. The note,
1635. which was payable after 60 days from date of issue, amounts to
1636. P100,000.00 and bears interest at 10% 'per annum. After the
1637. delivery of the note to him, P altered the interest rate to 18% per
1638. annum without the knowledge of M and indorsed it to A who
1639. knew nothing of the alteration. Thereafter, A indorsed the note
1640. to H, a holder in due course.
1641. a. H may not collect any amount, whether of the principal
1642. or of the interest, from M..
1643. b. H may collect P100,000.00 and interest at 10% per
1644. annum from M.
1645. c. H may collect P100,000.00 and interest at 18% per
1646. annum from M.
1647. d. H may not collect any amount, whether of the -principal
1648. or of the interest, from A, since A was not aware of the
1649. alteration.
1650.
1651. 70 Which of the following indorsements is a qualified
indorsement?
1652. a. "Pay to Angelo Amores for collection."
1653. b. "Pay to Angelo Amores in trust for Teofilo Tangco."-
1654. c. "Pay to Angelo Amores. Indorser not holden":
1655. d. "Pay to Angelo Amores. Notice of dishonor waived."
1656. 71. Manuel Miranda wrote a letter to his goddaughter which
reads as
1657. follows:
1658. To Pilar Perez:
1659. Dear Pilar:
1660. I am greatly pleased that you have enrolled in
1661. accounting in response to my continual urging.
1662.
1663. I am formally making the promise I have made earlier to you to
pay you or your order P500,000.00 or a brand-new Toyota Corolla, at
your option, as soon as you graduate.
1664. Your Godfather,
1665. Sgd.) Manuel Miranda
1666. a. The instrument is valid and negotiable.
1667. b. The instrument is valid but not negotiable.
1668. c. The instrument is not valid but negotiable.
1669. d. The instrument is not valid and not negotiable.
1670.
1671. 72. M made a promissory note payable to P or bearer. After its
1672. delivery to him, P indorsed the note to A. While the note was in
1673. the possession of A, F stole the note and negotiated it to B by
1674. forging A's signature. Thereafter, B indorsed the note to C, C to
1675. D, and D to H, a holder in due course. - Which of the
following
1676. defenses are available to M, P andA against H?.
1677. 1. Forgery of A's signature.
1678. II. Want of delivery of the note by A since the note was
1679. stolen from him.
1680. a. Both defenses are available to M, P and A.
1681. b. Both defenses are not available to M, P and A.
1682. c. Only I is available.
1683. d. Only II is available.
1684.
1685. 73. The following promissory notes are presented to you:
1686.
1687.
1688. I promise to pay to the order of Pancho Pineda the sum of
P20,000.00 if he passes the CPA Board Examination.
1689. (Sgd.) Mario Marquez
1690.
1691.
1692. At the back of the promissory note, the following appears:
1693.
1694. Pay to the order of Antonio Abad.
1695. (Sgd.) Pancho Pineda
1696.
1697.
1698.
1699. II.
1700.
1701. I promise to pay to the order of Pancho Ptneda the sum of
P20,000.00.
1702. (Sgd.) Mario Marquez
1703. I
1704. At the back of the promissory note, the following appears:
1705. Pay to Antonio Abad only and no other.
1706. (Sgd.) Pancho Pineda
1707.
1708.
1709.
1710. In your evaluation of the foregoing instruments:
1711. a. Both instruments are negotiable in origin but ceased to
1712. be negotiable at the time of indorsement.
1713. b. Both instruments are non-negotiable in origin.
1714. C. Only Instrument I is negotiable in origin but ceased to be
1715. negotiable at the time of indorsement.
1716. d. Only Instrument 11 is negotiable in origin but ceased to be
1717. negotiable at the time of indorsement.
1718. 74. M issued a promissory note payable to the order of P for
1719. P50,000.00. Thereafter,-'P indorsed the note to A. While the
1720. note was in the possession of A, F stole it and negotiated it to B
1721. by forging the signature of A. B was not aware of the forgery of
1722. A's signature. B then indorsed the note to H, a holder in due
1723. course. The parties who may raise forgery as a defense are:
1724. a. A and B.
1725. b. M and P.
1726. c. M, P and A..
1727. d. None of the parties may seise forgery as a defense
1728. because H is a holder in due course.
1729. 75. Refer to the preceding number. Assume the same farts
except
1730. that the note is payable ,to bearer. In such a case, the parties
1731. who may raise forgery as a defense are:
1732. a. A and B.
1733. b. M and P.
1734. c. M, P and A.
1735. d. None of the parties may raise the defense of forgery.
1736.
1737. 76. M makes a promissory note for P10,000.00 payable to the
order
1738. of P. After the issuance to him of the note., P altered the amount
to US$10,000.00. P then indorsed the note to A, A to B, and B to H.
Only P knew of the alteration.
1739. The parties and their possible liabilities are:
1740. I: M, P10,000.00.
1741. II. M, US$10,000.00.
1742. Ill. M, nothing.
1743. IV. A and B, P10,000.00.
1744. V. A and B, US$10,000.00.
1745. VI. A and B, nothing.
1746. If H is a holder in due course, the parties from whom he may
1747. collect and the amount of the said parties' liability are:
1748. a. I and IV.
1749. b. II and V.
1750. c. I and V.
1751. d. Ill and VI.
1752.
1753. 77. A check differs from a bill of exchange because a check;
1754. a. does not require the drawer to have funds with the
1755. drawee.
1756. b. may be drawn against a person other than a bank.
1757. c. is always payable on demard.
1758. d. is required to be presented for acceptance in certain
1759. cases.,
1760.
1761. 78. The placing of a date in an instrument is necessary in the
1762. following cases, except:
1763. a. to fix the maturity of the instrument.
1764. b. to determine when interest is to run.
1765. c. to fix the prescriptive period.
1766. d. to make the instrument negotiable.
1767.
1768. 79. A holder is still a holder a holder in due course although:
1769. a. he received the instrument after it has become overdue
1770. but he has no knowledge of it.
1771. b. he received the instrument after it was dishonored and
1772. he has no notice of such dishonor.
1773. c. he did not give any value for it.
1774. d. the instrument was not complete and regular on its face.
1775. 80. On May 1, 2010, Manolo Montes executed the
following
1776. promissory note for goods he purchased from Peter Perez:
1777.
1778. (No date)
1779. I promise to pay Peter Perez or order the sum of
1780. P20,000.00 with interest, thirty days after date, in payment of
1781. the goods I purchased from him today. To secure the amount of
this note, I hereby pledge my ring which I authorize Peter Perez to sell
in case of my default on due date.
1782.
1783. (Sgd.) Manolo Montes
1784.
1785. The part of the above instrument that renders it non-negotiable
is the phrase or statement:
1786. a. "in payment of the goods that l purchased from him
1787. today."
1788. b. "with interest, thirty days after date."
1789. c. "To secure the. amount of this note, I hereby pledge my
1790. ring which I authorize Peter Perez to sell in case of my default on
due date."
1791. The instrument is negotiable notwithstanding the
1792. presence of such phrases or statements in the body
1793. thereof.
1794.
1795. 81,. Medardo Medrano has an obligation to give 10 sacks of rice
1796. worth P10,000.00 to Pancho Panza, the same being due on
1797. September 5, 2010. Medardo Medrano fails to deliver 10 sacks
1798. of rice to Pancho Panza on due date despite the latter's demand.
1799. Medardo Medrano requested Pancho Panza to give him a, period
1800. of 30 days to give the amount of P10,000.00 or to deliver 10
1801. sacks of rice, assuring Pancho Panza of the payment by issuing
the promissory note, shown below. Pancho Panza agreed to Medardo
Medrano's proposal.
1802.
1803. September 6, 2010
1804. I promise, to pay Pancho Panza or order the sum of
1805. P10,000.00 or to deliver him 10 sacks of rice.
1806. (Sgd.) Medardo Medrano
1807.
1808.
1809. a. The new obligation is a facultative obligation.
1810. b. The promissory note is negotiable.
1811. c. Medardo Medrano has the choice whether to give
1812. P10,000.00 or deliver 10 sacks of rice.
1813. d. The instrument is payable at a determinable future time.
1814. 82. The following are certain conditions in an instrument or the
1815. transfer thereof:
1816. 1. A condition placed on the face of the instrument that the
1817. maker will pay it to the payee upon the fulfillment of the
condition.
1818. H. A condition placed on an indorsement that the
1819. instrument wilt be paid upon the fulfillment of the condition.
1820. 141. A condition placed upon the delivery of the instrument,
1821. such as when the maker delivers the note to the payee and
instructs him not to negotiate the instrument until the maker obtains
the proceeds of his loan.
1822.
1823. In your evaluation of the above statements, the instruments that
are negotiable or remain negotiable despite the presence of the
condition mentioned are:
1824. a. I and II.
1825. b. 11 and III.
1826. C. I and 111.
1827. d. I, II and Ili.
1828.
1829. 83. This promissory note was issued by Maila Moreno to
Patricia
1830. Pineda on August 1, 2010:
1831.
1832. August 1, 2010
1833. I promise to pay Patricia Pineda or order the sum of
1834. P20,000.00 thirty (30) days after date.
1835. (Sgd.) Maila Morena
1836.
1837.
1838. The note was thereafter indorsed by Patricia Pineda to Alma
Alajar, Alma Alajar to Brenda Bermejo, and Brenda Bermejo to Carmela
Castro. On August 30, 2010, Carmelo Castro indorsed the note as
follows:
1839. Pay to Maila Morena. I
1840. (Sgd.) Carmela Castro.
1841.
1842. a. The promissory note was extinguished when Maila
1843. Morena became the holder.
1844. b. The promissory note was not extinguished when Maila
1845. Morena became the holder.
1846. c. Maila Morena may not renegotiate the instrument after it
1847. was indorsed to her.
1848. d. Maila Morena may go after Patricia Pineda, Alma Alajar,
1849. Brenda Bermejo and Carmela Castro.
1850.
1851. 84. Refer- to the preceding number. Assuming that the note
was
1852. extinguished when it was indorsed by Carmela Castro to Maila
1853. Morena, the cause of the extuinguishment is:
1854. & Confusion.
1855. b. Condonation
1856. c. Compensation.
1857. d. Novation.
1858.
1859. 85. The following are defenses in a negotiable instrument:
1860. 1. Want of delivery of incomplete instrument.
1861. 11. Want of authority to complete instrument.
1862. Ill. Want of consideration.
1863.
1864. Which of the above defenses may be raised against a holder not
1865. in due course?
1866. a. I and II only.
1867. b. II and III only.
1868. c. I and III only.
1869. d. I, II and III.
1870.
1871. 86. Which of the following indorsements is a valid negotiation
of the
1872. instrument?
1873. a. "Pay to Arnulfo Alvez, P20,000.00" The instrument
1874. shows an amount of P30,000.00.
1875. b. "Pay to Arnulfo Alvez and Benito Baldoz."
1876. c. "Pay to Arnulfo Alvez, P20,000.00, and Benito Baldoz,
1877. P10,0000.00."
1878. d. "Pay to Arnulfo Alvez, P20,000.00 from the amount of
1879. P30,000.00 on this note."
1880.
1881. 87. M delivers a promissory note payable to the order of P for.
1882. P10,000.00. P alters the amount to P40,000.00 and thereafter
1883. indorses the note to A who had no knowledge of the alteration;
1884. then A to H, holder in due course. Which of the following is
1885. incorrect?
1886. a. H can recover P10,000.00 from M.
1887. b. H can recover P40,000.00 from P.
1888. c. H can recover P40,000.00 from A.
1889. d. H cannot recover any amount from M because M is a
1890. party before the alteration. H cannot also recover from A
1891. because A was not aware of the alteration.
1892.
1893. 88. The signification by the drawee of his assent to the order of
the
1894. drawer.
1895. a. Acceptance
1896. b. Approval
1897. C. Recommendation
1898. d. Indorsement
1899.
1900. 89. The acceptance that takes place when a drawee to whom a
bill
1901. is delivered for acceptance destroys the bill the bill, or refuses
1902. within 24 hours after such deiivery, or within such other period
as
1903. the holder may allow, to return the bill accepted or non-
accepted,
1904. to the holder.
1905. a. Implied acceptance
1906. b. Qualified acceptance
1907. c. Constructive acceptance
1908. d. Oral acceptance
1909.
1910. 90. The following are the requisites of actual acceptance of a
bill of
1911. exchange, except.
1912. a. It must be in writing.
1913. b. It must be signed by the drawee.
1914. c. There must be delivery or notification thereof.
1915. d. It must express that the drawee will perform his promise
1916. by the payment of money, the delivery of a thing or the
1917. rendering of some service.
1918.
1919. 91. These statements are presented to you:
1920. 1 The holder of a bill may require that the acceptance be
1921. written on the face of the bill, and if such request' is
1922. refused, he may treat.the bill as dishonored.
1923. II. Acceptance of a bill may be made even before . it is
1924. drawn.
1925. a. Both statements are true.
1926. b. Both statements are false.
1927. c. Only Statement I is true.
1928. d. Only Statement II is true.
1929.
1930. 92. These statements are presented to you:
1931. 1. A general acceptance assents without qualification to the
1932. order of the drawer.
1933. II. An acceptance to pay at a particular place is a qualified
1934. acceptance.
1935. a. Both statements are true.
1936. b. Both statements are false.
1937. C. Only Statement I is true.
1938. d. ' Only Statement II is true.
1939.
1940. 93. These statements are presented to you:
1941. I. The holder may refuse to take a qualified acceptance,
1942. and if he does not obtain an unqualified acceptance, he
1943. may treat the bill as dishonored by non-acceptance.
1944. It, As a rule, a qualified acceptance taken by the holder will
1945. discharge the drawer and indorsers.
1946. a. Both statements are true.
1947.
1948.
1949. b. Both statements are false.
1950. c. Only Statement I is true.
1951. d. Only Statement II is true.
1952.
1953. 94. The time within which the drawee is allowed to give his
1954. acceptance is:
1955. a. 12 hours.
1956. b. 24 hours.
1957. C. 48 hours.
1958. d. 72 hours.
1959.
1960. 95. These statements are presented to you:,
1961. 1. A bill may be accepted before it has been signed by the
1962. drawer.
1963. II. A bill cannot be accepted while it is still incomplete.
1964. a. Both statements are true.
1965. b: Both statements are false.
1966. c. Only Statement I is true.
1967. d. Only Statement II is true.
1968.
1969. 96. These statements are presented to you:
1970. 1. A bill may be accepted although it is already overdue.
1971. II. A bill cannot be accepted after it has been previously
1972. dishonored by a refusal to accept, or by non-payment.
1973. a. Both statements are true.
1974. b. Both statements are false.
1975. c. Only Statement I is true.
1976. d. Only Statement II is true.
1977.
1978. 97. In which of the following cases is presentment for
acceptance of
1979. a bill optional?
1980. a. Where the bill is payable after sight, or in any other case,
1981. where presentment for acceptance is necessary to fix the
maturity of the instrument.
1982. b. Where the bill expressly stipulates or provides that it
1983. shall be presented for acceptance.
1984. c. Where the bill is drawn payable elsewhere than at the
1985. residence or place of business of the drawee.
1986. d. Where the bill is drawn payable elsewhere than at the
1987. residence or place of business of the drawer.
1988.
1989. 98. These statements are presented to you:
1990. 1. The payee of a bill which is required to be presented for
1991. acceptance must present it for acceptance within a
1992. reasonable time before he can negotiate it
1993. II. A holder of a bill which is required to be presented for
1994. acceptance cannot receive the bill unless it was first
1995. presented for acceptance by the payee.
1996. a. Both statements are true.
1997. b. Both statements are false.
1998. c. Only Statement I is true.
1999. d. Only Statement II is true.
2000.
2001. 99. These statements are presented to you:
2002. 1. Presentment for acceptance can be made on a Saturday
2003. whether the instrument is payable on demand or not.
2004. II. Presentment for payment can be made on a Saturday
2005. only for instruments payable on demand.
2006. a. Both statements are true.
2007. b. Both statetents are false.
2008. c. Only Statement I is true.
2009. d. Only Statement II is true.
2010.
2011. 100. A formal written statement made by a notary public at the
2012. request of a holder of bill of exchange stating that he has
demanded acceptance or payment of the bill, and that it has been
refused, with the reasons, if any, given by the drawee or acceptor for
the dishonor.
2013. a. Certification
2014. b. Demand letter
2015. c. Protest
2016. d. Affidavit
2017.
2018. 101. Protest is required in the case of a:
2019. a. Foreign bill of exchange.
2020. b. Inland bill of exchange.
2021. C. Foreign promissory note.
2022. d. Inland promissory note.
2023.
2024. 102. Who is qualified to be an acceptor for honor?
2025. a. A person already a party to the bill.
2026. b. A stranger to the bill.
2027. c. Either (a) or (b).
2028. d. Both (a) and (b).
2029.
2030. 103. Who is qualified to be a payer for honor?
2031. a. A person already a party to the bill.
2032. b. A stranger to the bill.
2033. c. Either (a) or (b).
2034. d. Neither (a) nor (b).
2035. 104. An acceptance for honor which does not expressly state for
2036. whose honor it is made is deemed to be for the honor of the:
2037. a. drawee.
2038. b. drawer.
2039. C. acceptor.
2040. d. payee.
2041.
2042. 105. These statements are presented to you:
2043. I, A bill in set is one composed of several parts, each set
2044. being numbered and containing a reference to the other
2045. parts.
2046. II. In a bill in set, the number of bills depends upon the
2047. number of parts; hence, if there are four parts, there will
2048. be four separate bills.
2049. a. Both statements are true.
2050. b. Both statements are false.
2051. C. Only Statement I is true:
2052. d. Only Statement II is true.
2053.
2054. 106. R, drawer; W, drawee. The bill is payable to the order of P
for
2055. P10,000. Assume the following independent acceptances by W.
2056. 1. "Accepted. Payable for P10,000.00. (Sgd.) W"
2057. II. "Accepted. Payable in gold worth P10,000.00. (Sgd. W'
2058.
2059. Which of the foregoing is a valid acceptance?
2060. a. I only.
2061. b. 11 only.
2062. c. Both I and II.
2063. d. Neither I nor II.
2064.
2065. 107. P is the payee of a check on which two diagonal parallel
lines
2066. appear on the upper left portion of the check. R is the drawer; W
2067. Bank is the drawee bank. P has a savings account in C Bank
2068. where he regularly deposits checks ,and cash given to him as
2069. payment. What may P do with the check so that he can receive
2070. payment thereon?
2071. a. Cash the check with W Bank only.
2072. b. Deposit the check in his savings account with C Bank
2073. only.
2074. c. Demand paymr, nt of the check against R, the drawer,
2075. only.
2076. d. None of the foregoing.
2077.
2078.
2079. 108. R draws a check for P100,000.00 payable to the order of P
and
2080. against his deposit of P2,000,000.00 at W Bank. The check is
indorsed by P to H, holder. H delays the presentment of the check to W
Bank. By the time he presents it for payment, W Bank is already
insolvent. R is able to recover P500,000.00 from the Philippine Deposit
Insurance Corporation on his deposit. Will R still be liable to H?
2081. a. Yes, for P100,000.00.
2082. b. Yes, for P75,000.00.
2083. c. Yes, for P25,000.00.
2084. d. No, R will no longer be liable because H's delay in
2085. presenting the check for payment totally discharged him
2086. from liability on the check.
2087.
2088. 109. Refer to the preceding number. May H go after P, the party
who
2089. indorsed the check to him?
2090. a. Yes, for P1.00,000.00 in view of his warranty as an
2091. indorser.
2092. b. Yes, for only P75,000.00.
2093. c. Yes, for only P25,000.00.
2094. d. No, P was discharged by reason of the lack of due
2095. presentment of the check.
2096.
2097. 110. These statements are presented to you:
2098. 1. A check is payable on demand although such fact is not
2099. stated on its face.
2100. II. A check that is post-dated can be deposited even before
2101. the date indicated thereon since a check is always
2102. payable on demand.
2103. In your evaluation of the foregoing statements:
2104. a. Both statements are true.
2105. b. Both statements are false.
2106. c. Only Statement I is true.
2107. d. Only Statement II is true.
2108.
2109. 111. Which of the following statements on post-dated check is
2110. correct?
2111. a. A post-dated check is payable on, demand starting from
2112. the date of issue.
2113. b. The post-dating of a check converts it into time
2114. instrument.
2115. c. The dishonor of a post-dated check when it is presented
2116. before the date appearing thereon makes the drawer criminally
liable.
2117. d. A post-dated check may be cashed with the bank
2118. against which it is drawn before the date indicated thereon.
2119.
2120. 112. R drew a check against his account with W Bank payable to
the
2121. order of P for P20,000.00. F stole the check, forged P's signature,
and deposited.the check in his account with C Bank. After clearing, F
withdrew the amount of the check and fled. Who among the following
will shoulder the loss?
2122. a. R.
2123. b. P
2124. c. W Bank,
2125. d. C Bank
2126.
2127. 113. On October 1, 2010, R bought goods from the store of P
2128. amounting to P10,000.00, issuing a check for P20,000.00
2129. against his account with W Bank. R knew that his fund with W
2130. Bank was insufficient to cover the check. Consequently, the
2131. check was dishonored by W Bank when P presented it for
2132. encashment. What offense may be charged against. R?
2133. a. Violation of Batas Pambansa BIg. 22 (Bounching Checks
2134. Law.)
2135. b. Estafa under the Revised Penal Code.
2136. c. Both (a) and (b).
2137. d. Neither (a) nor (b).
2138.
2139. 114. The following are some causes of discharge of a prior party
to an
2140. instrument.
2141. I. , Discharge of a prior party because the holder failed
to
2142. give him a notice of dishonor.
2143. II Discharge of a prior party because he was adjudged a
2144. bankrupt.
2145. Ill. Discharge of a prior party because he was released for
2146. value by the holder.
2147. Which of the foregoing will not discharge subsequent indorsers?
2148. a. I and II.
2149. b. II and III.
2150. c. I and III.
2151. d. 1, II and Ill.
2152.
2153. 115. M is the maker of a promissory payable to the order of P
which is
2154. payable 30 days after date. The note dated August 1, 2010 was
2155. issued on the same day by M to P. P indorsed the note to A, A
2156. to B, and B to H. On September 1, 2010, H renounced
2157. unconditionally his claim on the note against M who accepted the
2158. renunciation. Nonetheless, H still negotiated the note on the
2159. same day to X who had no knowledge of the renunciation. May
2160. X still collect on the note from M and parties subsequent to M?
2161. a. Yes, against M. No, against parties subsequent to M.
2162. b. No, against M. Yes, against parties subsequent to M.
2163. c. Yes, against M and parties subsequent to M.,
2164. d. No, against M and parties subsequent to M.
2165.
2166. 116. P, by means of fraud, induced M to issue a promissory note
2167. payable to the order of P for P21,000.00. The note was indorsed
by P to A, and A to H. A and H had agreed to a consideration of
P20,000.00 (or a discount of P1,000.00). Initially, H gave A the amount
of P18,000.00. Before he could give the balance of P2,000.00 to A, H
learned that P's title was defective. Is H a holder in due course?
2168. a. Yes, for P21,000.00.
2169. b. Yes, for P18,900.00.
2170. c. Yes, for P18,000.00
2171. d. No, he is not a holder in due course because he
2172. obtained knowledge of a defect in the title of a prior party
2173. before he could pay in full to A the agreed consideration
2174. of P20,000.00
2175.
2176. 117. Refer to the preceding number. Can H still collect on the
note
2177. from M?
2178. a. Yes, for P21,000.00.
2179. b. Yes, for P18,900.00.
2180. c. Yes, for P18,000.00.
2181. d. No, he cannot collect at all because he is not a holder in
2182. due course.,
2183.
2184. 118. Which of the following is a real defense?
2185. a. Illegality of contract expressly so declared in a statute.
2186. b. Illegality of the contract because it was issued for
2187. unlawful consideration.
2188. c. Renunciation before maturity.
2189. d. Fraud in inducement.
2190.
2191. 119. These statements- are presented to you:
2192. 1. An instrument payable on demand has no date of
2193. maturity.
2194. II. When a transfer of an instrument is effected on the date
2195. of maturity, the holder is considered to have taken the
instrument when it is already overdue; hence, he is no longer a holder
in due course.
2196.
2197. In your evaluation of the foregoing statements:
2198. a. Both statements are true.
2199. b. Both statements are false
2200. c. Only Statement I is true.
2201. d. Only Statement II is.true.
2202.
2203. 120. Which of the following is a common liability of the drawer,
maker
2204. and acceptor?
2205. a. The admission of the genuineness of the signature of
2206. any indorser.
2207. b. The admission of the existence of the payee and his
2208. capacity of the payee to indorse.
2209. c. The admission that the instrument j s covered with
2210. sufficient funds.
2211. The engagement on the payment of the instrument according to
its tenor.
2212.
2213. TEST 11- MATCHING TYPE. Indicate your answers by writing the
letter representing the statement or phrase that best describes,
defines or explains the numbered items.
2214. Terms
2215.
2216. 1. Issue
2217. 2. Holder for value
2218. 3. _ Negotiation
2219. 4. Accommodation party
2220. 5. Presentment for acceptance
2221. 6. Presentment for payment
2222. 7. Acceptance
2223. 8. Assignment
2224. 9. Special indorsement
2225. 10.Dishonor by non-acceptance
2226. 11. Dishonor by non-payment
2227. 12.Blank indorsement
2228. 13.Notice of dishonor
2229. 14.Protest
2230. 15.Holder
2231. 16.Restrictive indorsement 17.Bill of exchange
2232. 18.Qualified indorsement 19.Promissory note
2233. 20.Maker
2234. 21.Conditional indorsement
2235. 22.Irregular or anomalous
2236. indorser
2237. 23. Acceptor
2238. 24. Exchange
2239. 25., Bills in set
2240.
2241. 26.Fraud in inducement
2242. 27.Holder in due course 28.Payee
2243. 29.Indorser
2244. 30.Drawer
2245. 31.Drawee
2246. 32.Check
2247. 33.Negotiability
2248. 34.Indorsee
2249. 35.Cognovit actionem 36.Relicta verificatione 37.Ante-dating
2250. 38.Acceleration clause 39.Post-dating
2251. 40.Immediate party
2252. 41.Real defense
2253. 42.Personal defense
2254. 43.Signature by procuration 44.Forgery
2255. 45.Warrant of attorney 46.Value
2256. 47. Cognovit note
2257. 48. Fraud in factum or in esse
2258. contractus
2259. 49.Spoliation
2260. 50.Allonge
2261.
2262. Statements
2263. A. It exists in those cases in which a person, without
negligence,
2264. has signed an instrument which was, in fact, a negotiable
instrument, but was deceived as to the character of the instrument and
without knowledge of it.
2265. An alteration made by a stranger to the instrument.
2266. A separate paper attached to a negotiable instrument where an
2267. indorsement or the acceptance of a bill of exchange is written.
2268. D. The authority for confession of judgment before the action
is
2269. begun.
2270. E. Any consideration sufficient to support a simple contract.
2271. F. The counterfeit making or fraudulent alteration of any
writing,
2272. and may consist in the signing of another's name, or the
2273. alteration of an instrument in the name, amount, description of
2274. the person and the like, with intent to defraud.
2275. G. Includes not only a promise to pay on the part of the maker
but
2276. also grants permission to the payee to take judgment against the
maker without trial if the maker fails to pay on maturity date.
2277. H. The act of appointing another as one's agent or attorney
and
2278. which operates as a notice that an agent has a limited authority
2279. to sign.
2280. The provision in a negotiable instrument which states that the
whole amount on the instrument shall become due in case of default in
the payment of an installment or of interest.
2281. Literally, "his pleading' being abandoned'; it refers to a
confession of judgment accompanied by withdrawal of defense.
2282. K. The party who executes the written promise to pay.
2283. L. The payee or indorsee of a bill or note who is in possession
of
2284. the instrument, or the bearer thereof.
2285. M. A, personal defense where a party is deceived into signing
for a
2286. larger amount than he intended, or on different terms, in a
negotiable instrument.
2287. N. The act of informing the drawer and each indorser that an
2288. instrument has not be been accepted by the drawee, or that it
2289. has not been paid by the acceptor, in the case of bill of
2290. exchange, or by the maker, in the case of promissory note.
2291. An unconditional promise in writing made by one person to
2292. another, signed by the maker, engaging to pay on demand or at
2293. a fixed or determinable future time, a sum certain in money, to
2294. order or to bearer.
2295. The difference in value of the same amount of money in different
countries.
2296. A holder who takes the instrument free from defect of title of
prior parties and free from personal defe,ises available to prior parties
among themselves.
2297. The person who executes the written order to pay a bill of
2298. exchange.
2299. S. A bill of exchange drawn on a bank which is payable on
demand
2300. T. Literally, "he has confessed action': it refers to a written
2301. confession of defendant acknowledging indebtedness to plaintiff
2302. after action has been filed.
2303. U. An indorsement that constitutes the indorser a mere
assignor of
2304. the title the instrument; it is usually made by adding to the
2305. indorser's signature the words "without recourse."
2306. V. The transfer of a negotiable instrument from one person to
2307. another in such a manner as to constitute the transferee the
2308. holder thereof.
2309. W. An unconditional order in writing addressed by one person
to
2310. another, signed by the person giving it, requiring the person to
2311. whom it is addressed, to pay on demand or at a fixed or
2312. determinable future time, a sum certain in money to order or
2313. bearer.
2314. X. It takes place when an instrument is presented for
payment but
2315. payment is refused or cannot be obtained..
2316. The formal declaration drawn up and signed by a notary that he
presented a bill of exchange for acceptance or for payment and that it
was refused.
2317. An indorsement that specifies no indorsee and makes the
instrument payable to bearer.
2318. AA. The production of the bill of exchange to the drawee for
2319. acceptance.
2320. BB. It grows out of the agreement or the conduct of a particular
2321. person in regard to the instrument which renders it inequitable
2322. for him, though holding legal title, to enforce it against the
2323. defendant, but which is not available against a holder in due
2324. course.
2325. CC. One that attaches to the instrument itself and can be set
up
2326. against the whole world including a holder in due course.
2327. DD. It takes place when a bill of exchange is presented for
2328. acceptance and such acceptance is refused or cannot be
2329. obtained.
2330. EE. A method of transferring an instrument whereby the
transferee is
2331. merely placed in the position of the transferor and acquires the
instrument subject to all defenses that might have been set up against
the original payee.
2332. FF. An indorsement that-.:prohibits the further negotiation of
the
2333. instrument, or constitutes the indorsee a mere agent of the
2334. indorser, or vests the. title in the indorsee in trust for some other
2335. person.
2336. GG. The production of a promissory note to the party primarily
liable
2337. on the instrument for the .payment of the same, or of a bill
of
2338. exchange to the drawee or acceptor for payment.
2339. HH. One who gives valuable consideration for an instrument
issued
2340. or negotiated to hi.n.
2341. II. The first delivery of an instrument, complete in form, to a
person
2342. who takes it as holder.
2343. JJ. The person who is given the command by the drawer to
pay the
2344. payee.
2345. KK. The person or party to whom an instrument is negotiated
by
2346. indorsement.
2347. LL. The person who signifies his acceptance to the order of the
2348. drawer.
2349. MM. One that has knowledge of the conditions or limitations
placed
2350. upon the delivery of the instrument or the fact that the
instrument
2351. was never delivered.
2352. NN. Dating an instrument earlier than the date of issue.
2353. 00. An indorsement that is subject to the happening of a
contingent
2354. event.
2355. PP. A person who transfers a negotiable instrument by means
of an
2356. indorsement.
2357. QQ. The. party to whom a bill of exchange is, drawn payable or in
2358. whose favor a promissory note is made payable.
2359. RR. An indorsement that specifies the person to whom or to
whose
2360. order, the instrument is to be payable.
2361. SS. A person who, not otherwise a party to the instrument,
places
2362. thereon his signature in blank before. delivery.
2363. TT. He is one who has signed the instrument as maker, drawer,
2364. indorser, or acceptor, without receiving value therefor, and for
2365. the purpose of I3nding his name to some other person.
2366. UU. The attribute that allows a negotiable instrument to be
passed
2367. from one person to another so as to give a holder in due
course
2368. the right to hold the instrument free from defect of title of prior.
2369. parties and free from'defenses available to prior parties among
themselves, and to enforce the full amount of the instrument against
all parties liable thereon.
2370. W. Dating an instrument later than the date of issue.
2371. WW. The signification by the drawee of his assent to the order of
the
2372. drawer.
2373. A bill composed of various parts, each part being numbered, and
containing a reference to the other parts, all of which parts constitute
but one bill.
2374. YY. None of the foregoing.
2375.
2376. TEST 111- TRUE OR FALSE. Write the word "TRUE" if the
statement is true, and the word 'FALSE" if the statement is false.
2377. 1. An instrument which contains a promise or order to pay a
sum of
2378. money which is subject to a condition is negotiable as long as the
condition happens.
2379. 2. An instrument where no time for payment is expressed is
2380. payable on demand.
2381. 3. An instrument payable to a specified person or his agent is
2382. payable to order.
2383. The negotiable character of an instrument is not affected by the
fact that it is not dated.
2384. A bill of exchange which is addressed to two or more drawees
alternatively does not affect the negotiable character of an instrument.
2385. Where the name of the payee does not purport to be the name of
any person, the instrument is payable to bearer.
2386. 7. Where an instrument is payable to the order of a "fictitious
2387. person", the instrument is still payable to bearer although such
person is actually existing as long as he was not the intended recipient
of the payment.
2388. A bearer negotiable instrument is converted into an order
negotiable instrument if it is specially indorsed.
2389. 9. An order instrument becomes a bearer instrument if one of
2390. several indorsements is an indorsement in blank.
2391. 10. The ante-dating or post-dating of an instrument does not
render
2392. it invalid provided it is not done for an illegal purpose.
2393. 11. An instrument that it is incomplete but delivered, when
2394. ,completed without authority, shall be considered to have been
2395. completed with authority in the hands of a holder in due course.
2396. 12. An instrument that is complete but is undelivered shall be
2397. considered validly delivered if it is in the hands of a holder in due
2398. course.
2399. 13. If the amount due on an instrument is payable in
installments,
2400. the amount and maturity of each installment must be stated so
2401. that the negotiable character of the instrument will not be
2402. affected.
2403. 14. When - there is a conflict between the written and printed
2404. provisions of an instrument, the printed provisions will prevail.
2405. 15. When an instrument provides for the payment of interest
without
2406. specifying the date from which the interest is to run, the interest
2407. runs from the date of the instrument.
2408. 16. When an instrument is not dated, it will be dated as of the
time it
2409. was issued.
2410. 17. When
2411. an instrument containing the words "I promise to pay" is
2412. signed by two or more persons, they are deemed to be jointly
2413. and severally liable:.
2414. 18. When a signature is so placed upon the instrument that it
is not
2415. clear in what capacity the person making it intended to sign, he
2416. is deemed to be an indorser.
2417. 19. When an indorsement is forged in a promissory note
payable to
2418. bearer, the party whose indorsement was- forged and all parties
2419. prior to him may raise the defense of forgery against any holder.
2420. 20. A pre-existing debt constitutes value and may be the
2421. consideration of an instrument.
2422. 21. Want or absence of consideration is a defense against a
holder
2423. in due course.
2424. 22. A negotiable instrument may not be transferred by
assignment.
2425. 23. A person signing an instrument as an agent is not liable
thereon
2426. provided he is duly authorized, discloses his principal, and
indicates that he is signing as an agent.
2427. 24. An indorsement made by a minor passes title to the
instrument
2428. although he himself does not incur any liability on the
instrument.
2429. 25. An indorsement may be written on a separate sheet which
is
2430. attached to the instrument.
2431. 26. As a rule, an indorsement must be of the whole amount of
the
2432. instrument.
2433. 27. An indorsement to two or more indorsees severally such as
"Pay
2434. to A, 10,000.00 and to B. P5,000" is a valid indorsement of the
2435. instrument.
2436. 28. An indorsement that prohibits the further negotiation of
th,6
2437. instrument renders the instrument non-negotiable.
2438. 29. If an indorsement is conditional, the party required to pay
the
2439. instrument may disregard the condition and make payment but
the indorse must hold the proceeds subject to the rights of the person
indoksing conditionally.
2440. 30. If an instrument is indorsed to two or more persons jointly,
all of
2441. them must indorse unless one is authorized to indorse for the
2442. others.
2443. 31. An instrument negotiable in origin continues to be
negotiable
2444. until it is restrictively indorsed or discharged by payment or
2445. otherwise.
2446. 32. When an instrument is negotiated to a prior party, the prior
.party
2447. can go after the intervening parties for the amount of the
2448. instrument,
2449. 33. A holder may still be a holder in due course even if the
2450. instrument is not dated.
2451. 34. If an instrument stamped with the words "no sufficient
funds" is
2452. negotiated, the holder will no longer be considered a holder in
2453. due course.
2454. 35. A personal defense is available only against a holder not in
due
2455. course.
2456. 36. Every holder is presumed to be a holder in due course.
2457. 37. A holder can still collect on the instrument even if he is not
a
2458. holder in due course provided he derives his title from a holder in
due course and he himself is not a party to any fraud or illegality
affecting the instrument.
2459. 38. If a holder has received notice of any defect or infirmity of
the
2460. instrument before he has paid the full amount agreed to be paid
therefor, he, will be deemed a holder in due course only to the extent
of the amount paid by him.
2461. 39. When a negotiable instrument is delivered without any
2462. indorsement, the negotiation takes effect at the time of its first
delivery if it is subsequently indorsed.
2463. 40. When an instrument originally payable to bearer is
specially
2464. indorsed, the person indorsing specially is liable only to such
2465. holders as make title through his indorsement.
2466. 41. Indorsers are liable prima facie in the order in which they
2467. indorse.
2468. 42. Joint payees or joint indorsees are deemed to indorse
jointly and
2469. severally.
2470. 43. Payment in good faith before maturity which is made by.
the
2471. principal debtor to the holder and without notice that his title is
defective discharges the instrument.
2472. 44. The cancellation of a negotiable instrument which is made
by the
2473. holder is presumed to have been made intentionally.
2474. 45. When the principal debtor becomes 'the holder in his own
right
2475. before maturity, the instrument is discharged by confusion or
merger.
2476. 46. An. absolute and unconditional renunciation made by the
holder
2477. before, at or after. maturity in favor of the principal. debtor
discharges the instrument.
2478. 47. A bill of.exchange does not operate as an assignment of
funds in
2479. the hands of the drawee and the drawee is not liable until he
2480. accepts the same.
2481. 48. The certification of a check by a bank is equivalent to
2482. acceptance, and when procured by the holder, the drawer and
2483. the indorsers are discharged.
2484. 49. A check is always payable on demand.
2485.
2486.
2487.
2488. 50. The drawer of a bill of exchange need not have funds with
the
2489. drawee except in the case of a check.
2490.
2491. TEST IV - NEGOTIABLE OR NON-NEGOTIABLE. Indicate your
2492. answers by writing "0" if the instrument is negotiable, and "X" if
it is
2493. not.
2494. 1.
2495.
2496. December 1, 2010
2497. I promise to pay Pablo Patricio' or order
2498. P10,000.00 in two equal monthly installments.
2499. (Sgd.) Manuel Morales
2500.
2501.
2502. 2.
2503. December 1, 2010
2504. Pay to Pablo Patricia or order P10,000.00 and debit my account
thereafter.
2505. (Sgd.) Romeo Ramos
2506.
2507. To: Walter Wenceslao
2508.
2509. 3.
2510. (No Date)
2511. I promise. to pay Pablo Patricio or bearer
2512. P10,000.00 thirty (30) days after date.
2513. (Sgd.) Manuel Morales
2514.
2515. December 1, 2010
2516.
2517. I promise to pay Pablo Patricio or order
2518. P10,000.00 or deliver to him a television set at my
2519. option.
2520. (Sgd.) Manuel Morales
2521.
2522.
2523. 5.
2524. December 1, 2010
2525.
2526. Pay to Pablo Patricio or order P10,000.00 representing the
purchase price of the ring that I bought from him yesterday.
2527. (Sgd.) Rompo Ramos
2528. To: Walter Wenceslao
2529.
2530.
2531. 6.
2532. December 1, 2010
2533. Pay to Pablo Patricio or order P10,000.00 if
2534. he passes the May 2011 CPA Board Examination.
2535. (Sgd.) Romeo Ramos
2536. To: Walter Wenceslao
2537.
2538. Note: Pablo Patricio eventually passed the May 2011 CPA Board
Examination.
2539.
2540. December 1, 2010
2541. Pay to the order of Jose Rizal, national hero.
2542. P10,000.00.
2543. (Sgd.) Romeo Ramos
2544. To: Walter Wenceslao
2545. 8.
2546.
2547. December 1, 2010
2548. I promise to pay Pablo Patricio or order
2549. P10,000.00 and 2 units of Nokia cell phone.
2550. (Sgd.) Manuel Morales
2551. 11
2552. 9.
2553. December 1. 2010
2554. I promise to pay Pablo Patricio P10,000.00
2555. with interest at 10% per annum.
2556. (Sgd.) Manuel Morales
2557.
2558. 14
2559. 10.
2560.
2561. December 1, 2010
2562. I promise to pay Pablo Patricio or order
2563. P10,000.00 sixty (60) days after date. Should I fail to
2564. pay on due date, I hereby authorize Pablo Patricio to foreclose
the chattel mortgage that I executed on my car to secure this debt.
2565.
2566. (Sgd.) Manuel Morales
2567.
2568.
2569.
2570.
2571.
2572.
2573.
2574. ANSWERS TO DIAGNOSTIC EXERCISES
2575. NEGOTIABLE INSTRUMENTS
2576. TEST I - MULTIPLE CHOICE
2577. 1. D 31.D 61. A 91. A
2578. 2. A 32.A 62.C 92. C
2579. 3. B 33.D 63.B 93. A
2580. 4. D 34.B 64.C 94. B
2581. 5. A 35.D 65. B 95. C
2582. 6. A 36.A 66.B 96. C
2583. 7. C 37.A 67. D 97. D
2584. 8. C 38.D 68.B 98. B
2585. 9 C 39.C 69.B 99. A
2586. 10. C 40.D 70.C 100. C
2587. 11. A 41.D 71. B 101. A
2588. 12. C 42.C 72. B 102. B
2589. 13. D 43.B 73. D 103. C
2590. 14. D 44.D 74.C 104.. B
2591. 15. B 45.C 75. D 105. C
2592. 16. B 46.C 76.C 106. A
2593. 17. D 47.D 77.C 107. B
2594. 18. B 48.D 78. D 108. C
2595. 19. B 49.D 79. B 109. D
2596. 20. C 50.D 80,D 110. C
2597. 21. D 51.B 81. C 111. B
2598. 22. 0 52.D 82.B 112. D
2599. 23. D 53.B 83. B 113. C
2600. 24. C 54.D 84.A 114. A
2601. 25. D 55.C 85. D 115. C
2602. 26. D 56.C 86.B 116. B
2603. 27. B 57.A 87. D 117. B
2604. 28. A 58.A 88.A 118. A
2605. 29. A 59.B 89. C 119. B
2606. 30. B 60.A 90.D 120. B
2607. TEST II -MATCHING TYPE
2608. 1. II 11. X 21. 00
2609. 2. HH 12. Z 22. SS
2610. 3. V 13. N 23. LL
2611. 31. JJ 41 CC
2612. 32. S 42 BB
2613. 33. UU 43 H
2614. 4. TT 14. Y
2615. 5. AA 15. L
2616. 6. GG 16. FF
2617. 7. WW 17. W
2618. 8. EE 18. U
2619. 9. RR 19. 0
2620. 10. DD 20. K
2621. TEST III - TRUE OR FALSE
2622. 1. FALSE 11. TRUE 21. FALSE
2623. 2. TRUE 12. TRUE 22. FALSE
2624. 3. FALSE13. TRUE 23. TRUE
2625. 4. TRUE 14. FALSE 24. TRUE
2626. 5. FALSE15. TRUE 25. TRUE
2627. 6. TRUE 16. TRUE 26. TRUE
2628. 7. TRUE 1.7. TRUE 27. FALSE
2629. 8. FALSE18. TRUE 28. TRUE
2630. 9. FALSE19. FALSE 29. TRUE
2631. 10. TRUE 20. TRUE 30. TRUE
2632. 31. TRUE
2633. 24. P
2634. 25. XX
2635. 26. M
2636. 27. Q
2637. 28. QQ
2638. 29. PP
2639. 30. R
2640. 41TRUE
2641. 32. FALSE 42. TRUE
2642. 33. TRUE 43. FALSE
2643. 34. TRUE 44.TRUE
2644. 35. TRUE 45. FALSE
2645. 36. TRUE 46. FALSE
2646. 37. TRUE 47. TRUE
2647. 38. TRUE 48. TRUE
2648. 39. FALSE 49. TRUE
2649. 40. TRUE 50. TRUE
2650. TEST IV - NEGOTIABLE OR NON-NEGOTIABLE
2651.
2652. 1. X
2653. 2. 0
2654. 3. 0
2655. 4.- X
2656. 5. 0
2657. 6. X
2658. 7. 0
2659. 8. X
2660. 9. X
2661. 10.- 0