PRELIM EXAM ON SPECIAL COMMERCIAL LAWS

INSTRUCTION: Choose the letter that corresponds the correct answer to the given
questions.

1. S agreed to sell B 100 cases of napkins with the name of B’s restaurant on the
napkins. In the enforceable contract, it was specified that delivery will take place on
April 15, 2020 which is one (1) month after S and B signed the contract. B wanted the
napkins by April 15 because the grand opening of the restaurant was scheduled for
April 17. On April 11, S tells B that he has too many orders and will not be able to
deliver the napkins. What option does B have?

I. Treat it as a present breach of a contract and cancel the contract.

II. Wait for a reasonable time to see if S will deliver.

III. Ask a third person to perform the obligation at the expense of S but
no damages.

A. I only

B. II only

C. Either I or II

D. Either I or II or III

2. P, the owner of a piece of residential land orally authorized A to sell the land for
P500,000.00 with 5% commission. Today A sold the land to C. one day later, P sold
the same land to D. Assuming that both buyers are in good faith, who is the lawful
owner.

A. C, being the first buyer.

B. C, because A was given the authority by P.

C. D, because the sale made by A to C is only voidable.

D. D, because the sale between A and C is void.

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3. S, 16 years old, sold to B, of legal age, a specific diamond ring for P10,000.00.
Later, B sold it to X. Which of the following statements is incorrect?

A. X has got a voidable title because in the prior sale, S is a minor.

B. X, if in good faith, shall become the owner upon delivery to him.

C. X, if in bad faith, shall also be the owner, except that his title is voidable.

D. None of the above.

4. A bride-to-be went to a bridal shop to buy a wedding gown, but not finding one of
her own liking, she asked the shop owner to sew one for her using a special fabric.
The cost of the gown is P20,000.00. The bridal shop thus ordered the fabric and
sewed the gown. Unfortunately, the wedding did not push through and the bride-to-
be refused to accept the gown claiming that the agreement was unenforceable not
being in writing. However, the bridal shop asserts that the contract is unenforceable.
Is the bridal shop correct?

A. Yes, the contract is enforceable because the contract does not fall
within the purview of the Statute of Frauds.

B. No, the contract is unenforceable because any contract whose amount is

more than P500.00 should be in writing.

C. No, the contract is void because any contract whose amount exceeds
P5,000.00 should be in a public instrument to be valid.

D. No, the contract is rescissible because of the damage suffered by the

bridal shop.

5. S and B made it appear that they entered into a contract of sale involving the lot
of S for P200,000.00. The contract was signed by both S and B but it was not
acknowledged before a notary public. In reality, B did not give S any amount because
S intended to donate the lot to B. As a result:

A. There is a void sale because of the simulation of price.

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 B. There is a valid contract of donation since it was the intention of the
parties.

C. Both (a) and (b) are correct.

D. Both the sale and the donation are void.

6. Statement 1: Where an unpaid seller has made part delivery of the goods, he may
exercise his right of lien on the remainder, unless such part delivery has been made
under such circumstances as to show intent to waive the lien or right of retention.

Statement 2: In contract to sell, ownership passes to the buyer upon actual or

constructive delivery.

A. Both statements are true.

B. Both statements are false.

C. Only statement 1 is true.

D. Only statement 2 is true.

7. H and W are husband and wife, respectively. H obtained a personal loan from C1.
Thereafter, H sold his only lot to W. Sometime later, H obtained another personal
loan from C2. C1 and C2 demand payment from H, but the latter was unable to pay
because he had become insolvent. Who may question the validity of the sale that H
made to W?

A. C1

B. C2

C. H

D. W

8. S wrote a letter to B promising to sell his car for P200,000.00 cash. B wrote a letter
to S promising to buy the car of S for P200,000.00 cash. B wrote a letter to S
promising to buy the car of S for P200,000.00 cash. What is/are the effect/s of the
bilateral promise to sell and buy?

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 A. Sale on approval

B. Sale or return

C. Both (a) and (b)

D. Neither (a) and (b)

9. Sejanes sold his furniture set to Bautista. The sale is in a public instrument. The
following day, Sejanes sold the same furniture set to Canilang. The sale is in a public
instrument. Neither Bautista nor Canilang had taken physical possession of the
furniture set. Who is the owner of the furniture set?

A. Bautista

B. Canilang

C. Both Baustista and Canilang as co-owners.

D. Sejanes retained ownership of the furniture set because of the conflict of

rights.

10. Refer to the preceding number. Supposing that Canilang had taken physical
possession of the furniture set, who is now the owner of the set?

A. Bautista

B. Canilang

C. Both Bautista and Canilang as co-owners.

D. Sejanes retained ownership of the furniture set because of the conflict of

rights.

11. X Shoe Store, Inc. entered into a separate contracts with two movie stars, B1 and
B2. With B1, the agreement was the Shoe Store shall deliver at a specified date for a
price of P1,000.00 a pair of shoes of a specified brand which the store had been
manufacturing for the general public but which at the time of the contract had
already been sold out, and with B2, the agreement was that the store shall deliver a
specified date for a price of P2,000.00 a pair of shoes to be made specially for him, in

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accordance with a designed submitted by him. What is the nature of these two
contracts?

A. Contract for a piece of work

B. Sale

C. Agency to sell

D. Combination of A and B

12. Statement 1: Emptio rei speratae refers to the sale of hope or expectancy.

Statement 2: Emptio spei refers to the sale of a thing having potential existence.

A. Both statements are true.

B. Both statements are false.

C. Only statement 1 is true.

D. Only statement 2 is true.

13. The sole owner of a thing such as a specific parcel of land may sell:

A. The whole property itself.

B. An undivided interest in the property.

C. A specific portion of the property.

D. Any of the foregoing.

14. Custodio and his friends entered La Pizzeria Restaurant and bought a family-size
pizza. On his way from the counter to the table where his friends were already
seated, he lost his balance and dropped the pizza he was carrying. Since he had not
yet paid for it, he demanded that the restaurant make him another pizza, without
any extra charge. Is Custodio correct?

A. Yes, because having not paid yet the pizza, he has not yet acquired
ownership of it. Accordingly, the restaurant has to bear the loss by reason of
fortuitous event.

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 B. No, because he acquired ownership of the pizza from the time he took it
from the counter.

C. Yes, because he has not yet acquired ownership of the pizza until he and
his friends have partaken of it.

D. No, because he acquired ownership of the pizza from the time he placed
his order for it.

15. On May 1, 2019, S sold to B 20 bags of flour which were on board the vessel
Dona Patricia that was scheduled to arrive in Manila from Cebu. Unknown to the
parties, the 20 bags of flour were drenched by sea water the night before. If you
were B, what remedies are available to you?

A. Withdraw from the contract

B. Accept the flour and pay the price less than the proportionate amount of
the damage.

C. Either (a) or (b)

D. Neither (a) nor (b)

16. Mr. Renato owns a mango tree bearing fruits, ready for harvest. He sells all the
fruits of that tree to Mr. Marcelo who pays Mr. Renato the sum of P5,000.00. Mr.
Renato tells Abalos that he can just harvest the fruits anytime he likes pointing at the
particular tree. For legal purposes, Mr. Renato has fulfilled his obligation to deliver
the mango fruits to Mr. Marcelo by?

A. Traditio Brevi Manu

B. Traditio Longa Manu

C. Traditio Symbolica

D. Answer not given

17. Which of the following obligations of the vendor cannot be waived?

A. To allow the buyer to examine the goods sold.

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 B. To transfer ownership to the buyer.

C. To pay the expenses of the deed of sale.

D. To warrant the thing sold.

18. On January 10, 2019, S sold a piece of land to B in a public instrument. On

January 11, 2019, B paid for the price. On January 12, 2019, B took possession of the
land. On January 13, 2019, B registered the public instrument. Under the
circumstances given, B became the owner on:

A. January 10, 2019

B. January 11, 2019

C. January 12, 2019

D. January 13, 2019

19. The Recto Law is applicable:

A. Sale of car on straight term.

B. Sale of house on installment.

C. Sale of car on installment where the buyer constituted a mortgaged on

his truck.

D. None of the above.

20. The following statements pertains to an auction without reserve, except:

A. It is presumed unless the sale was announced to be with reserve.

B. The auctioneer cannot withdraw the goods from the auction unless no
bid is made within a reasonable time.

C. The auctioneer must accept the highest bid.

D. Its tendency is to produce low prices.

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21. S sold to B a generator set for a price of P300,000.00, under the following terms:
P60,000.00 down; balance payable in twelve equal monthly installments of
P20,000.00. To secure the payment of the balance, B executed a chattel mortgage on
the generator set and real mortgage on his lot. After paying two installments, B
defaulted in the payment of the third and fourth installments. If S decides to exact
fulfillment of the obligation, how much, as a rule, may S demand as payment?

A. P20,000.00

B. P40,000.00

C. P200,000.00

D. Nothing because S is not entitled to such right under the circumstances.

22. Refer to the preceding number. Assuming that S foreclosed the real mortgage on
the lot and the foreclosure sale resulted in a deficiency:

A. S may recover the deficiency by demanding payment from B.

B. S may recover the deficiency by foreclosing the chattel mortgage on the

generator.

C. Either (a) or (b) at the option of S.

D. Neither (a) nor (b)

23. Refer to No. 21. Assuming that S foreclosed the chattel mortgage on the
generator set and the foreclosure sale resulted in a deficiency:

A. S may recover the deficiency by demanding payment from B.

B. S may recover the deficiency by foreclosing the real mortgage on the lot.

C. Either (a) or (b)

D. Neither (a) nor (b)

24. Spectrum Manufacturing Corp. (Spectrum), in Manila, sold certain goods to

Belmont Company (Belmont) which is based in Bacolod City. The contract was CIF
Manila. Spectrum delivered the goods to a carrier, Interisland Transport Services,

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Inc. (Interisland), in Manila. The goods were damage by rain water while the vessel
was en route to Bacolod. As a result, Spectrum sued Interisland for damages. Who
will bear the damages?

A. Spectrum

B. Belmont

C. Interisland

D. All of the foregoing equally.

25. “Sale or return” is different from “sale on trial” because “sale or return”:

A. Is subject to a suspensive condition.

B. Depends upon the quality of the goods.

C. Results in the transfer of ownership and risk of loss upon delivery of the
goods to the buyer.

D. Becomes a sale only after some future time.

26. Jack, an American tourist, lost his camera while he was sight-seeing in Banaue.
The following day, at the lobby of the Banaue Hotel where he was billeted, he saw
Bill, another tourist, holding a camera which looked like the camera that he had lost.
He was very positive that it was his lost camera. It turned out that Bill bought the
camera from a “sari-sari” store which earlier bought it from a tourist guide who
found the camera.

A. Jack may get the camera without reimbursing the need of reimbursing
Bill for the purchase price the latter paid.

B. Jack may get the camera but he must reimburse Bill for the purchase
price.

C. Jack cannot get the camera even if he is willing to reimburse because Bill
bought it from a “merchant’s store.”

D. Jack can no longer get the camera because Bill bought it in good faith.

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27. When does an unpaid seller lose his possessory lien?

A. When he delivers the goods to a carrier or other bailee for the purpose of
transmission in the goods or the right to the possession thereof.

B. When the buyer or his agent lawfully obtains possession of the goods.

C. When the seller has made a waiver of such right.

D. All of the foregoing.

28. What are the effects of the resale of the goods by an unpaid seller?

A. The seller shall not be liable to the original buyer upon the contract of
sale or for any profit made by such resale.

B. The seller may recover damages from the buyer for any loss occasioned
by the breach of the contract of sale.

C. The new buyer acquires a good title as against the original buyer.

D. All of the foregoing.

29. If the price is uncertain:

A. The transaction is void.

B. The price is to be fixed by the court.

C. The buyer must pay a reasonable price.

D. None of the above.

30. S sold to B a parcel of land for a lump sum of P50,000.00. The contract states that
the area is 500 square meters. Subsequently, it was ascertained that the area
included within the boundaries is really 550 square meter.

A. S is bound to deliver 500 square meters and B to pay P50,000.00.

B. S is bound to deliver 500 square meters and B to pay P55,000.00.

C. S or B can rescind the sale because there is no meeting of the minds.

D. None of the above.

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31. In the preceding question, if the land contains 445 square meters, which of the
following is correct?

A. S is bound to deliver 500 square meters and B to pay P50,000.00.

B. S is bound to deliver 445 square meters and B to pay P44,500.00.

C. B may rescind the sale because the lack in area is more than 1/10 of the
total area.

D. None of the above.

32. On February 1, S sold his computer to B for P20,000.00 with B giving a down
payment of P2,000.00. The parties agreed that S would deliver the computer to B on
February 5, at which time B would pay the balance of P18,000.00. No writing was
executed by the parties to incorporate their agreement. On February 5, B demanded
the delivery of the computer and offered the payment of his balance. However S,
who had earlier found another buyer who was willing to buy the computer for
P25,000.00, refused to make the delivery and accept the payment, and instead
offered to return the down payment. S claimed that at any rate, the sale was
unenforceable against him since it was not in writing. Is S correct?

A. Yes, because the sale of movable property whose price is P500.00 or

more should be in writing to be enforceable.

B. Yes, because B had not yet paid the price in full.

C. Yes, because if the sale to B were pursued, S would suffer a loss of

P5,000.00.

D. No, because S was deemed to have ratified the contract when he

accepted the down payment.

33. Somera sells to Buenviaje at P50 per gallon 300 gallons of gasoline stored in his
truck’s tank which, unknown to the parties, contains 500 gallons gasoline. What is
the status of the contract of sale between Somera and Buenviaje?

A. The sale is void because the quantity available is more than the quantity
sold.

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 B. The sale is valid up to 500 gallons of gasoline. Buenviaje must pay for the
additional 200 gallons of gasoline.

C. The sale is valid up to 300 gallons of gasoline. Buenviaje becomes the

owner of 3/5 of the whole stock, while Somera becomes the owner of 2/5
thereof.

D. The sale is rescissible because Somera will suffer lesion of more than 1/4
of the value of the whole stock.

34. 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 S P90,000.00 in 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.

35. Barrameda bought a piece of land from Sarmiento for a lump sum of P120,000.
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 of 1,000 square
meters. Before delivery, Sarmiento discovered that the piece of land actually
contains 1,200 square meters.

A. Sarmiento must deliver all the 1,200 square meters; Barrameda must pay
P120,000.00 plus an additional amount for the excess of 200 square meters.

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 B. Sarmiento is required to deliver only 1,000 square meters; Barrameda
must pay the contract price of P120,000.00.

C. Sarmiento must deliver all the 1,200 square meters; Barrameda has to
pay only P120,000.00.

D. Neither party is required to perform the obligation because of mistake.

36. 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, a 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.

37. B 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. To secure the balance, S required B to execute a chattel
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.

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 D. Foreclose the chattel mortgage and thereafter foreclose the real
mortgage in case of deficiency.

38. S sold to B a lot through a deed of absolute sale duly acknowledge 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.

39. 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 public document. The sale of P’s lot is:

A. Valid.

B. Rescissible.

C. Unenforceable.

D. Void.

40. 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.

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41. 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 other papers for the
operation of the business and the vehicles to B at he latter’s 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.

42. King Gems Company, a jewelry manufacturer, shipped five dozen of 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.

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 D. If the necklaces are destroyed through the fault of Queen, Queen must
pay the price thereof to King Gems Company.

43. S shipped FOB Manila, perishable goods worth P50,000.00 to B who is based in
Cebu. B remitted a check amounting to P50,000.00 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 notifying B, S resold the goods.

CASE A - If the goods are resold for P52,000.00, the profit of P2,000.00 belongs to B
since title had already passed to him.

CASE B - If the proceeds of sale, net of incidental expenses, amounted to P47,000.00,

S can recover the loss of P3,000.00 from B.

A. Both cases are true.

B. Both cases are false.

C. Case A is true; Case B is false.

D. Case A is false; Case B is true.

44. B wanted to buy the car of S for P100,000.00 and to show that he was 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.

45. The following items pertain to either a contract of sale or a contract to sell.

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 I. Ownership of the thing sold is transferred upon delivery.

II. Ownership of the thing 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.