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Regulatory Framework for Business Transactions

CONTENTS

AGENCY............................................................................................................. 1
CONTRACTS...................................................................................................... 5
CORPORATION................................................................................................ 12
NEGOTIABLE INSTRUMENTS.........................................................................31
OBLIGATION.................................................................................................... 46
PARTNERSHIP................................................................................................. 61
PLEDGE, MORTGAGES AND ANTICHRESIS..................................................77
SALES.............................................................................................................. 83
SPECIAL LAWS................................................................................................ 92
COOPERATIVES..................................................................................92
FINANCIAL REHABILITATION AND INSOLVENCY ACT..................100
INSOLVENCY LAW / CORPORATE REHABILITATION.....................103
BOUNCING CHECKS.........................................................................106
PDIC LAW......................................................................................... 108
SECRECY OF BANK DEPOSITS AND UNCLAIMED BALANCES LAW112
GENERAL BANKING LAW................................................................113
LOANS (UNDER GENERAL BANKING LAW)...................................115
ANTI-MONEY LAUNDERING ACT....................................................117
NEW CENTRAL BANK ACT..............................................................119
INTELLECTUAL PROPERTY LAW (R.A 8293).................................121
ANSWER KEY................................................................................................ 124
AGENCY

1. One known to be acting for and in behalf of the principal either because the latter
presented him to be his agent or the people believe him to be acting on behalf of the
principal is:
A. Ostensible agent
B. Implied agent
C. Special agent
D. Universal agent

2. P appointed A as his agent to buy sugar. Thereafter, A drew a bill of exchange for the
price of the sugar in favor of S, the seller. P accepted the bill. After the acceptance of P, A
negotiated the bill to H, a holder in due course. When the sugar was delivered, P refused
to pay the bill on the ground that the sugar was deteriorated. Is P liable?
A. No, the sugar was defective
B. No there is an absence of consideration
C. No, because there is failure of consideration
D. Yes, even if the consideration failed because H is a holder in due course

3. This is a mode of extinguishing an agency:


A. Withdrawal of the principal
B. Partial accomplishment of agency
C. Death of principal but the agency is for the interest of the principal
D. Insanity of the principal

4. In the Contract of Agency, which of the following is not true and incorrect?
A. A, the agent of P, is expressly prohibited from appointing a substitute. A violated this
prohibition by appointing C in his stead. P can refuse to recognize the acts of C but A
is liable for damage to P.
B. A and P appoint C as their agent for a common transaction. A can revoke the agency
even without the consent of P.
C. P sells his dry goods to Q provided P shall be made the manager thereof. Q cannot
revoke the agency of P at will.
D. If A, an agent with the power to appoint a substitute who is not named, appoint P
who is a well-known “ESTAFADOR” in the community, then A must answer for the acts
of P.

5. This is a mode of extinguishing an agency:


A. Death of the principal, but the agency is for the interest of the principal and agent
B. Partial accomplishment of agency
C. Upon withdrawal of the principal
D. Insanity of principal or agent

6. Gliceria appointed Salvacion to sell the former’s car for ₱200,000.00. Salvacion sold the
car to Pamela for ₱200,000.00 but Salvacion acted in her own name. After delivery,
Pamela inspected the car and she found hidden defects in the car. Can Pamela file an
action against Gliceria even when Salvacion acted in her own name?
A. No, under “caveat emptor” let the buyer beware.
B. Yes, because this is a contract involving property belonging to the principal.
C. No, because Salvacion acted in her own name not of the principal.
D. No, because the contract of sale is already perfected.

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7. Mr. Santos authorized Mr. Canlas to sell his car for ₱200,000.00 with 5% agent’s
commission. Mr. Canlas sold the car to Mr. Dizon for ₱250,000.00. For how much is Mr.
Canlas accountable to Mr. Santos?
A. ₱200,000.00
B. ₱190,000.00
C. ₱250,000.00
D. ₱240,000.00

8. A is authorized by B to sell ten books for ₱100.00 each at 10% commission. A sells books
to C on credit but for a price of ₱120.00 each. After ratifying the sale on credit, B can
collect cash payment from C:
A. ₱1,000.00
B. ₱1,200.00
C. ₱1,080.00
D. ₱ 900.00

9. A appointed S to be his agent to administer his farm while A was in world tour but S died
leaving his son of legal age to take care of the farm until A arrived. This is an example of
agency created by:
A. Ratification
B. Estoppel
C. Operation of law
D. Consent of principal

10. Which of the following is not a fundamental obligation of the agent?


A. To subordinate his interest in favor of his principal if there is a conflict of interest
B. To borrow if he is authorized to lend
C. To render an accounting of the transactions
D. Not to carry out the agency even if that is the instruction if he knew it would result in
a loss or damage to his principal

11. 1st Statement: If the agent contracts in the name of the principal and the principal does
not ratify the contract, the contract shall be void if the party with whom the agents
contracted is aware of the limited power granted by the principal.
2nd Statement: A third person cannot set up the fact that the agent has exceeded his
powers if the principal has ratified or has signified his willingness to ratify the agent’s
acts.
A. Both statements are false
B. Both statements are true
C. 1st statement is false, 2nd statement true
D. 1st statement is true, 2nd statement false

12. P has appointed A to manage his business affairs in the USA. Then A died leaving S, his
son, as his only heir. Because there are important transactions that are pending, S
immediately took care of the same. In this connection, S should be regarded as an agent
of P and the relationship is created
A. By appointment
B. By ratification
C. By estoppel
D. By necessity

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13. This kind of agent merely makes the principal and the third person meet and when they
arrive at an agreement or contract becomes entitled to compensation.
A. Broker
B. Factor
C. Commission agent
D. Attorney in fact

14. P appointed A, his agent, with a generally worded authority stating that he withholds no
power from A and that he has allowed him absolute and unlimited powers. Accordingly, A
sold P’s house and lot to X; leased to T an apartment unit for two (2) years; also leased
to W P’s car for five (5) years.
A. All the contracts of A with X, T and W are valid and enforceable.
B. All the contracts of A with X, T and W are unenforceable in so far as P is concerned.
C. The contracts with X and T are unenforceable but the contract with W is valid and
enforceable.
D. The contract with W is unenforceable but the contract with X and T are valid and
enforceable.

15. Which of these is not an act of ownership and, therefore, need not be contained in a
special power of attorney for the agent to possess the same?
A. To make payments which are in the ordinary or usual course of business.
B. To effect novations which put an end to obligations contracted before the agency.
C. To waive an obligation gratuitously.
D. To obligate the principal as a guarantor.

16. The agent, in excess of the authority given to him by his principal, enter into a contract
with a third person. If the principal ratifies the contract, who will be liable to the third
person just in case?
A. Only the principal
B. Only the agent
C. Both principal and agent jointly
D. Both principal and agent solidarily

17. Mario Capistrano, before going to Spain, appointed Julio Castillo as his agent to
administer his properties in the Philippines. Afterwards, Castillo wrote Capistrano that he
(Castillo) was withdrawing from the agency because of failing health. Castillo, in the
same letter said that he appointed Castor Despejo as his substitute and that Capistrano
should extend a new appointment to Despejo. Castor Despejo took over the duties of
Castillo but Capistrano did not bother to appoint Despejo to act as his agent until
Capistrano’s death. Now, Capistrano’s heirs brought an action against Despejo for
accounting. Despejo raised the defense that he was not validly constituted as an agent
of Capistrano. In the case at bar, defense is not tenable because there is:
A. an actual agency
B. an implied agency
C. a general agency
D. answer not given

18. Mariano is authorized by Arnulfo to sell the latter’s washing machines for ₱5,000.00 each
at 10% commission. One day, Arnulfo sells one washing machine to Carlos on credit
(payable in 90 days) but for a price of ₱6,000.00. If Arnulfo does not ratify this sale on
credit, he can collect cash payment from Mariano:
A. ₱4,500 (₱5,000.00 less ₱500.00 commission)
B. ₱5,000 (the price without commission)
C. ₱5,400 (₱6,000.00 less ₱600.00)
D. Answer not given

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19. A promissory note is signed in behalf of the principal by an agent as follows:
Juan dela Cruz
Per Procuration: Manuel S. Canete
This operates as notice that the agent has:
A. Unlimited authority to sign for and in behalf of the principal.
B. A limited authority to sign, and the principal is bound only in case the agent in so
signing acted within the actual limits of his authority.
C. A limited authority to sign, but the principal is bound even in case the agent in so
signing acted outside the actual limits of his authority.
D. Answer not given

20. Mr. Principe constituted Mr. Ajente as his authorized agent to sell the former's Lancer car
for ₱300,000.00 and to pay him a 5% commission on the selling price. Mr. Ajente sold the
car for ₱320,000.00. Mr. Ajente shall remit to Mr. Principe:
A. ₱300,000.00
B. ₱320,000.00
C. ₱285,000.00
D. ₱305,000.00

21. A appoints B to sell his land.


Example 1 - If the authority of B is oral and B sells the land in writing, the sale is valid.
Example 2 - If the authority of B is in writing and B sells the land orally, the sale is valid.
Which is correct?
A. First example is false but second example is true.
B. Both examples are true.
C. Both examples are false.
D. First example is true but the second example is false.

22. Which of the following cases does not terminate the agency?
A. A issued a general power of attorney to B on February 10, 1993 and later issued
another power of attorney to C after notifying B.
B. A writes his principal giving authority to C to take delivery of sugar on behalf of A
without giving time limit for the authority.
C. A, the agent, sues B the principal in court.
D. A writes his principal that he could no longer administer the latter’s property and turn
over the administration to C after rendering his account.

23. 1st Statement: If the principal sends a letter by mail appointing a certain person as his
agent and the latter remains silent about it, such silence cannot be interpreted as
acceptance of the appointment
2nd Statement: If the principal sends a letter by mail appointing a certain person as his
agent in connection with the business in which the latter is habitually engaged and the
latter remains silent about it, an implied agency is created.
A. First statement is true but the second statement is false.
B. Both statements are false.
C. First statement is false but second statement is true.
D. Both statements are true.

24. The principal is not liable for the expenses incurred by the agent:
A. When it was stipulated that the agent would be allowed only a certain sum.
B. When the agent has complied with his obligation by acting according to principal’s
instructions.
C. When the agent incurred them with the knowledge that an unfavorable result would
ensue the principal was not aware of it.

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D. When the expenses were incurred without the fault of the agent.

25. An assignor of credit warrants:


A. Solvency of the debtor
B. Existence and legality of credit
C. Collectibility
D. Assurance of payment

26. A appoints B to sell his land.


Example 1 - If the authority of B is oral and B sells the land in writing, the sale is valid.
Example 2 - If the authority of B is in writing and B sells the land orally, the sale is valid.
Which of the following is correct?
A. Both examples are true
B. Both examples are false
C. First example is true but the second example is false
D. First example is false but the second example is true.

27. X, Y, Z were appointed by R as his agents to administer his building which were rented
by various tenants while R was abroad for three years. In the course of management, X
caused through his fault damage to the building which was assessed at ₱30,000. R can
claim:
A. ₱10,000 from each of X, Y and Z
B. ₱30,000 from X
C. ₱30,000 from Y and Z
D. ₱30,000 from either X, Y Z

28. P appointed A as his agent to buy sugar. Thereafter, A drew a bill of exchange for the
price of the sugar in favor of S, the seller. P accepted the bill. After the acceptance of P, A
negotiated the bill to H, a holder in due course. When the sugar was delivered, P refuse
to pay the bill on the ground that the sugar was deteriorated. Is P liable?
A. No, the sugar was defective
B. No, there is an absence of consideration
C. No, because there is failure of consideration
D. Yes, even if the consideration failed because H is a holder in due course

CONTRACTS

1. Contracts which cannot be sued upon unless ratified, thus it is as if they have no effect
yet are:
A. Voidable
B. Rescissible
C. Void
D. Unenforceable

2. Which of the following contracts is valid?


A. Oral contract of agency giving authority to an agent to sell the land belonging to the
principal
B. Oral partnership agreement where immovable property is contributed
C. Oral contract of sale of an immovable property entered into by an agent who was
given authority orally by the principal
D. Oral agreement to answer all expenses for the wedding reception of A marries B

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3. Mr. Gamboa owes Mr. Evangelista ₱100,000.00. Gamboa knows that on maturity date, he
will not be able to pay Evangelista, and in order to prevent attachment of his property by
Evangelista, Gamboa, before maturity of his debt, executes a contract pretending to sell
to Mr. Sandiego his property. Which of the following statements is not correct?
A. The contract is not valid for lack of consideration
B. The contract is binding between Gamboa and Sandiego
C. The contract being simulated and executed to defraud Evangelista is void
D. Mr. Evangelista can seek rescission of the fictitious contract

4. Which of the following contracts is not unenforceable?


A. That were both parties are incapable of giving consent
B. That were one party is incapable of giving consent
C. That which is entered into the name of another person by one who has been given no
authority or legal representation
D. That which does not comply with the Statute of Frauds

5. In order that fraud may make, a contract voidable:


A. It may be incidental but both parties should not be pari delicto
B. it may be serious and the parties must be in pari delicto
C. It may be incidental but should have been employed by both Parties
D. It should be serious and should have not been employed by both contracting parties

6. Case 1 – A hired B for ₱10,000 to kidnap C, and he paid B in advance. Before B could
kidnap C, A relented and stopped B from performing the contract. The court may not
allow A to recover from B the ₱5,000 he paid in advance.
Case 2 – A, at the point of a gun, compels B to marry him. Since the contract of marriage
is voidable, either. A or B has the. right to file the action for annulment. Determine
whether:
A. Both cases are false
B. Case 1 is true but case 2 is false
C. Case 1 is false but case 2 is true
D. Both cases are true

7. X, a minor sold to Y his parcel of land for ₱100,000. From the proceeds of the sale, X
deposited ₱30,000 in the bank, spent for food, clothing and other personal expenses
₱20,000, joined a tour abroad costing ₱20,000, lost in gambling ₱20,000 and loaned
₱10,000 to Z who became insolvent. Upon reaching the age of 21 years, X files an action
for annulment which the court granted. Y was required to return the land to X and X was
made to return to Y the amount of:
A. ₱30,000
B. ₱40,600
C. ₱80,000
D. ₱70,000

8. Statement I – A contract whose cause or object did not exist at the time of the
transaction is a defective contract which cannot be remedied by providing cause or
object as the case may be in the contract.
Statement II – The nullity of the accessory obligation of the penal clause does carry with
it the nullity of the principal obligation which remains in force and demandable.
Determine whether:
A. Statement l is true but Statement II is false
B. Both statements are false
C. Statement I is false but Statement II is true
D. Both statements are true

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9. When there is concurrence of the offer and acceptance, there is:
A. Payment
B. Consent
C. Acceptance
D. Revocation

10. When the object of the contract is outside the commerce of man, the contract is:
A. Rescissible
B. Voidable
C. Unenforceable
D. Void

11. Three (3) of the following contracts is void. Which is not?


A. Contract in writing contemplating and asking for impossible service
B. Oral authority given to an agent in sale of land
C. Oral partnership agreement where immovable property is contributed
D. Oral partnership agreement when the capital is more than ₱3,000

12. Which of the following is not a rule in the interpretation of contract?


A. If some stipulation of any contract should admit of several meanings, it shall be
understood as bearing that import which is most adequate to render the contracts
effectual.
B. Word which may have different significations shall be understood in that which is
most in keeping with the nature and object to the contract.
C. In order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.
D. Although the cause is not stated in the contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary.

13. Contracts are effective and binding only between the parties, their assigns and their
heirs. Three of the following enumerations are exceptions as provided by law. Which does
not belong to the exception?
A. Where there is a stipulation in favor of a third party.
B. Where one of the parties to the contract dies and thereafter a suit is filed on the basis
of the contract.
C. Where the obligation arising from contract are not transmissible by their nature.
D. Where the obligation arising from contract are not transmissible by stipulation or by
provision of law.

14. In order that fraud may make a contract voidable:


A. It may be incidental but should have been employed by both parties
B. It should be serious and the parties must be in pari delicto
C. It should be serious and should not have been employed by both contracting parties
D. It may be incidental but both parties should not be in pari delicto

15. A and B, who are both unemancipated minors, entered into a contract. The contract
entered into by and between them is:
A. Rescissible
B. Unenforceable
C. Voidable
D. Void

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16. Which of the following contracts cannot be ratified?
A. Those whose cause or object did not exist at the time of the transaction
B. Unauthorized contracts
C. Those where both parties are incapable of giving consent
D. Those that fail to comply with the Statute of Frauds

17. A, guardian of B, sold B's house and lot worth ₱480,000 for ₱240,000.
A. The contract can be rescinded because of inadequacy of price.
B. The contract cannot be rescinded because there is no fraud, mistake or undue
influence.
C. The contract cannot, be rescinded because all elements of contract are present.
D. The contract cannot be rescinded because it is expressly provided by law as one of
the contracts which cannot be rescinded.

18. On July 15, 1986, X entered into a contract with Y. On February 10, 1987, X discovered
that fraud was committed at the time he entered into the contract, a fraud that vitiated
his consent. The action for annulment shall be brought:
A. Within three years from the time of the fraud
B. Within four years from February 10, 1987
C. Within four years from the time A entered into the contract
D. On February 10, 1987

19. X alleged that Y promised to give X one hectare of land. This is in consideration of X's
meritorious service to Y. Y pleads in defense that since the promise was not in writing, it
is unenforceable under the Statute of Frauds. Decide.
A. The promise is unenforceable because it is not in writing.
B. The Statute of Frauds is applied because A has rendered services already.
C. The Statute of Frauds is inapplicable here because the promise to give the land is not
a sale of real property.
D. The Statute of Frauds can apply to partially executed contracts.

20. These persons are bound by contracts.


A. Contracting parties
B. Heirs
C. Assigns or assign
D. All of these

21. Contracts entered into during lucid interval are:


A. Unenforceable
B. Voidable
C. Void
D. Perfectly valid

22. Three of the following may be valid objects of a contract, except:


A. All that are within the commerce of man
B. All services which are not contrary to law
C. Impossible things or services
D. All rights that are transmissible

23. A contract executed by two or more parties and one of the parties is not capable of
giving consent. The contract is:
A. Voidable
B. Rescissible
C. Void
D. Unenforceable

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24. Three of the following contracts are void. Which one is not?
A. Oral contract of partnership of three partners and capital contribution is more than
₱3,000 in cash.
B. Written contract contemplating impossible services.
C. Oral contract of partnership where real estate is contributed as capital.
D. Agent's authority to sell property, is given orally.

25. Three of the following are option money. Which is the earnest money?
A. Given when contract of sale is perfected
B. Given when there is no contract of sale
C. Given to bind the offer or in unilateral promise to sell or buy
D. Given as a separate consideration from purchase price

26. The stipulation in a contract to the effect that the debtor should remain as a servant in
the house and in the service of her creditor so long as she had not paid her debt, is void
because it is:
A. contrary to good customs
B. contrary to public policy
C. contrary to law and morality
D. answer not given

27. Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. Which of the following constitutes an
offer?
A. an offer made through an agent
B. business advertisement of things for sale
C. advertisements for bidders
D. answer not given

28. When one of the parties to a contract is compelled to give his consent 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 or ascendants, there is:
A. Violence
B. Intimidation
C. undue influence
D. answer not given

29. Simulation of a contract may be absolute or relative. It is relative when:


A. the parties do not intent to be bound at all
B. the contract is void
C. the parties conceal their true agreement
D. answer not given

30. The proper remedy is annulment of contract and not reformation when:
A. mistake, fraud, inequitable conduct, or accident has prevented a meeting of the
minds of the parties
B. a mutual mistake of the parties causes the failure of the instrument to disclose their
real agreement
C. one party was mistaken and the other knew or believed that the instrument did not
state their real agreement, but concealed the fact from the former
D. answer not given.

31. The action to annul a voidable contract, such a contract where one of the parties is
incapable of giving consent to the contract, is extinguished by:

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A. novation
B. rescission
C. ratification
D. answer not given

32. Mr. Marcelo Cardenas orders for his workers 1,000 pieces of T-Shirts rangings in size from
small to large from the Lapulapu Garments Mfg. Corp. The specified sizes, although not
then available, are manufactured by said corporation and consigned to its sales outlets
regularly. The contract entered into by Mr. Cardenas with the Lapulapu Garment Mfg.
Corp. is a:
A. contract for pieces of work
B. contract subject to a resolutory condition
C. a contract of sale
D. answer not given

33. Choose the contracts which are voidable.


A. Those undertaken in fraud of creditors when the latter cannot, in any other manner,
collect the claims due them.
B. Those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.
C. Those whose object is outside the commerce of man.
D. Those where both parties are incapable of giving consent to a contract.

34. A contract is in the stage of conception when:


A. There is meeting of the minds
B. Negotiations are in progress
C. The parties come to an agreement
D. The contract is perfected

35. Connie transferred to Violeta a parcel of land for the price of ₱100,000; ₱30,000 to be
paid in cash and for the difference, she will convey her car worth ₱70,000. What kind of
contract is this?
A. Lease contract
B. Contract of sale
C. Obligation to sell
D. Barter

36. Contracts entered into in a state of drunkenness or during, a hypnotic spell are:
A. Void
B. Valid
C. Voidable
D. Legal

37. Reluctantly and against her good sense and judgment, Rosemarie entered into a contract
for the delivery of 5 tables to Corazon for a price of ₱15,000. Contract is:
A. Void
B. Voidable
C. Unenforceable
D. Valid

38. It takes place when the parties do not intend to be bound at all by their agreement.
A. Apparent contract
B. Absolutely simulated contract
C. Relatively simulated contract
D. Deed of assignment

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39. Rescission of a contract can take place in this case:
A. When the things, which are the objects of the contract, are legally in the possession
of third persons who acted in bad faith.
B. When he who demands rescission can return whatever he may be obliged to restore.
C. When the party seeking resolution can perform only as to part and rescind as to
remainder.
D. When the seller cannot return the installments paid to him by the buyer

40. A intimidated B to marry A's daughter. After a year, B would like to file an action for
annulment but could not do so because A was around to intimidate him. The marriage
contract is:
A. Rescissible
B. Voidable
C. Void
D. Unenforceable

41. Through insidious words or machinations, A was able to induce B to enter into a contract
which, without them, B would not have agreed to it. There is:
A. Undue influence
B. Fraud
C. Mistake
D. Misrepresentation

42. The following, except one, are the characteristics of void or inexistent contract. Which is
the exception?
A. The defense of illegality of a contract is available to third persons whose interest is
not directly affected.
B. They are not subject to ratification.
C. The right to raise defense of illegality cannot be waived
D. The action for defense for declaration of their nullity or inexistence of the contract
does not prescribe.

43. It is a contract wherein a person binds himself to render special service or to do


something in behalf of another with consent of the latter.
A. Contract of piece of work
B. Contract of service
C. Contract of agency
D. Contract of exchange

44. The process of intentionally deceiving others by producing the appearance of a contract
which is different from the true agreement is:
A. Relative simulation of a contact
B. Absolute simulation of a contract
C. Annulment of a contract
D. Misrepresentation

45. There shall be no reformation of contract in the following cases, except:


A. In testamentary wills
B. Simple donation intervivos with no condition being imposed
C. Contract of mortgage executed as a contract of sale
D. A contract of sale fraudulently made as a contract of lease

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CORPORATION

1. When the preferred shares are issued by a corporation with a fixed annual dividend on
the face thereof, the effect is:
A. The contract of subscription between the corporation and stockholders subsists
B. The stockholder is a creditor of the corporation
C. The shares of stock become negotiable instruments
D. The stockholder is a plain investor who may benefit or suffer with the financial
success or failure of the corporation

2. Three of the following corporations are not authorized to issue no-par value shares of
stock. Which one is the exception?
A. Industrial companies
B. Insurance companies
C. Trust companies
D. Public utilities

3. The corporation has a nine-member board. Two of the members of the board have
sold their shares while two others are abroad. To have a quorum, this number is required.
A. Seven C. Three
B. Five D. Four

4. 1st Statement: A majority of the directors or trustees of all corporations organized in the
Philippines must be citizen of the Philippines.
2nd Statement: Any two (2) or more positions may be held concurrently by same person,
except that no one shall act as president and secretary or as secretary and treasurer at
the same time.
A. Both statements are not true
B. Only 1st statement is true
C. Only 2nd statement is true
D. Both statements are true

5. 1st Statement: When par value shares are issued above par, the premium or excess is to
be considered as part of the legal capital.
2nd Statement: Shares issued without par value shall be deemed fully paid and non-
assessable and the holder of such shares shall not be liable to the corporation or its
creditors in respect thereto.
A. Only 1st statement is true
B. Only 2nd statement is true
C. Both statements are not true
D. Both statements are true

6. Which of the following corporate acts requires the approval of the majority of the
outstanding capital stock or of the members of the private corporation?
A. To invest corporate funds in another corporation or business
B. To adopt by-laws
C. To dissolve the corporation
D. To amend or repeal by-laws

7. The following are advantages of par value shares of stock, except one:
A. Greater protection to creditors
B. Liability of subscribers for unpaid subscription
C. Unlikelihood of distribution of dividends that are ostensible profits

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D. Ease of sale

8. The following corporations, except one, require all the members of the Board of Directors
shall be Filipino citizens. Which is the exception?
A. Private development banks
B. Registered investment companies
C. Rural banks
D. Financing corporations

9. 1st Statement: In sale of delinquent stocks, the highest bidder is the person who shall
offer to pay the full amount of the balance due on the subscription together with the
accrued interest, cost of advertising and expense of the sale, for its highest number of
shares or fraction thereof.
2nd Statement: After a declaration of stock dividends, the stockholder receives no greater
proportional interest in the assets of the corporation than he had before.
A. Both statements are false
B. Both statements are true
C. 1st statement true, 2nd statement false
D. 1st statement false, 2nd statement true

10. Which of these conditions comply with the minimum requirement of law to corporate
formation?

Authorized Capital Subscribed Capital Paid-up Capital


A. ₱200,000 ₱10,000 ₱10,000
B. 64,000 16,000 4,000
C. 100,000 25,000 12,500
D. 200,000 50,000 10,000

11. 1st Statement: A director is removed from office by a vote of the stockholders holding at
least 2/3 of the outstanding capital stock. The vacancy occasioned by such removal can
be filled by the vote of the majority of the remaining directors if still constituting a
quorum.
2nd Statement: It is illegal to issue watered stocks. However, stocks issued without any
consideration at all is justified if such issues are bonus shares.
A. 1st statement correct, 2nd statement wrong
B. Both statements are correct
C. 1st statement wrong, 2nd statement wrong
D. Both statements are wrong

12. Which of the following statements is correct?


A. To sell, lease, mortgage or otherwise dispose of or some of the corporate assets,
majority vote of directors or trustees and majority of the outstanding capital stock or
of the members is needed
B. To issue stock dividends, majority vote of the quorum of the Board of Directors and
majority of the outstanding capital stock C.
C. To invest corporate funds in another corporation or business majority vote of
directors or trustees and majority of the outstanding capital stock or of the members
is needed
D. To enter into management contract, majority vote of the Board of Directors and
majority of the outstanding capital stock or of the members

13. The following are ways of enforcing payment of unpaid subscription, which is the
exception?
A. Sale at a public auction of delinquent stocks

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B. Denying delinquent stock cash dividends
C. Filing a court action to recover unpaid subscription
D. Denying delinquent stock the right to vote and be voted upon

14. May a director enter into a contract with another corporation of which he is also a
partner?
1st Answer – No, if the vote of such director is not necessary for the approval of the
contract.
2nd Answer – Yes. if the presence of the director concerned is not necessary to constitute
quorum and he does not participate in the board approval of the contract which is
deemed fair and reasonable under the circumstances.
A. 1st answer wrong, 2nd answer correct
B. Both answers are correct
C. 1st answer is correct, 2nd answer is wrong
D. Both answers are wrong

15. As a rule, any provision or matter stated in the Articles of Incorporation may be amended
by the Board of Directors or trustees by:
A. Unanimous vote
B. Majority vote
C. 3/4 vote
D. 2/3 vote

16. Subscriber X has a total 1,000 delinquent share at ₱10 par value, to be sold at public
auction sale. Total amount recoverable includes: Total amount of the delinquent shares,
₱10,000 and total expenses of the sale, ₱5,000. Who will be declared the highest bidder
among the following bidders in the public sale?
A. N who is willing to pay the ₱15,000 for 970 shares
B. P who is willing to pay the ₱15,000 for 900 shares
C. O who is willing to pay the ₱15,000 for 920 shares
D. M who is willing to pay the ₱15,000 for 950 shares

17. The following are corporate acts in which a stockholder of a corporation shall have the
right to dissent and demand payment of the fair value of his shares of stock, except one:
A. In case an amendment to the Articles of Incorporation which has the effect of
changing or restricting the rights of any stockholder
B. In case of merger or consolidation
C. In case of sale, lease, mortgage or other disposal of all or substantially all of the
corporate asset
D. In case of incurring, creating or increasing bonded debts

18. Which of the following statements is not correct?


A. A stockholder is entitled to cast such, number of votes as the number of shares
outstanding entitled to vote in his name times the total number of directors to be
elected shall equal
B. Outstanding shares although with voting rights but have not been fully paid cannot
be voted
C. A stockholder may cumulate his vote for one candidate or may distribute them
among as many candidates but he cannot cast more than the shares outstanding in
his name times the number of directors to be elected
D. Members of the Board of directors are voted by stockholders by means of cumulative
voting

19. A corporate doctrine which holds the stockholders are not personally liable for corporate
debts:

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A. Separate legal entity
B. Piercing the veil of corporate fiction
C. Right of succession
D. Trust fund doctrine

20. 1st Statement – A director is removed from office by a vote of the stockholders holding or
representing at least 2/3 of outstanding capital stock. The vacancy occasioned by such
removal can be filled by the vote of at least a majority of the remaining directors if still
constituting a quorum.
2nd Statement – Treasury shares sold for less than par or issued value are considered
watered stocks and as such are prohibited by law.
A. 1st statement is false, 2nd statement is true
B. Both statements are true
C. Both statements are false
D. 1st statement is true, 2nd statement is false

21. One of the following is a ground for the suspension or revocation of the Certificate of
Incorporation by the SEC.
A. If the corporation has commenced its business transactions and afterwards ceased
operations continuously for a period of at least 5 years
B. If the corporation fails to commence and start to operate and the failure is due to
causes beyond its control
C. If the corporation does not formally commence its business transactions within 2
years from date of incorporation
D. If the corporation has commenced its operations and subsequently become
continuously for 2 years

22. A private corporation organized under the corporation law commences to have corporate
existence and juridical personality and is deemed incorporated from:
A. The date when the Articles of Incorporation is signed the by incorporators.
B. When the Articles of Incorporation and by-laws are presented and received by the
Securities and Exchange Commission and the filling fee is paid.
C. From the date the SEC issues a certificate of incorporation under its official seal.
D. When the Articles of Incorporation is notarized by a Notary Public.

23. The following are the qualifications of incorporators. Choose the exception.
A. Majority of whom must be Filipino
B. Majority of whom are residents of the Philippines
C. All are of legal age
D. Natural persons not less than five but not more than 15.

24. Corporation governed by special laws, aside from the requirements specified under the
corporation laws, in order that their Articles of Incorporation may be approved or
accepted, they must present before the Securities and Exchange Commission:
A. A favorable recommendation from the Ministry of Finance.
B. A copy of previous income tax return and a statement of assets, liabilities and
networth.
C. A favorable recommendation of the appropriate government agency to the effect that
such article or amendment is in according with law.
D. An undertaking to change the name of the corporation if there is already registered
with the SEC a name or a name similar to the name of this corporation.

25. The following are qualifications of a director in a corporation. Choose the exception.
A. Majority of the directors must be Filipino citizens
B. He must own at least one share of the stock in his name

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C. Majority of the corporate directors must be residents of the Philippines
D. He must not have been convicted by final judgment of an offense carrying an
imprisonment exceeding six years or an offense constituting a violation of the
Corporation Code.

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26. The secretary of a stock corporation shall be:
A. A director of the corporation.
B. An incorporator of the corporation.
C. A resident and citizen of the Philippines.
D. Of legal age and citizen of the Philippines.

27. Three of the following enumerations are not authorized to issue no par value shares of
stock. Which is the exception?
A. Insurance companies
B. Industrial companies
C. Public utilities
D. Trust companies

28. Any stockholder of a corporation shall have the right to dissent and demand payment of
the fair value of his share/s in three of the following corporate acts. Which is the
exception?
A. In case of any amendment to the Articles of Incorporation which has the effect of
changing or restricting the rights of any stockholder or class of shares.
B. In case of merger or consolidation.
C. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all
or substantially all of the corporate assets and property of the corporation.
D. In case of incurring, creating or increasing bonded indebtedness.

29. A has a daughter, B; X has a son, Y. A, B, X and Y agree together that Y will marry B. The
agreement is oral. If B later on refuses to marry Y who has spent for the necessary
wedding preparations, X and Y decided to bring an action against A and B, will the
actions prosper? Decide.
A. Between Y and B, the action will not prosper because the agreement is made orally.
B. In case of A and X, the action will prosper because the agreement which was made
orally is enforceable as it is based in the consideration of marriage.
C. As to A and X, the action will not prosper because the agreement is not enforceable
as it was not they who mutually promised to marry each other.
D. The action of X and Y against A and B will prosper because the agreement is based
on the consideration of marriage other than a mutual promise to marry.

30. The authorized capital stock of a corporation is ₱500.000 divided into 1,000 shares with
a par value of ₱100 each. At least ₱25,000 or 250 shares of the authorized capital stock
must be subscribed. The 250 shares were subscribed by 25 subscribers. To meet the
minimum amount of subscription that must be paid:
A. It is enough that 25% of the total subscription is paid, regardless of the amount paid
by each individual.
B. Each and every subscriber must always pay ₱250 which is 25% of their individual
subscription.
C. Seven of the subscribers paid ₱6,250 and the rest of the subscribers did not make
any payment.
D. None of these

31. Which of the following is not a requisite for the existence of a de facto corporation?
A. The existence of a valid statute under which a corporation, with some of the purposes
in question, can be formed.
B. An attempt in good faith to form a corporation according to the requirements of law.
C. As user of corporate powers, there must be a transaction of business in some ways as
if it were a corporation.
D. The organization is not registered with the Securities and Exchange Commission.

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32. For qualifying A to be one of the directors of X, Inc., one share of stock is issued to him.
The agreement is that he will retransfer the stock on ceasing to be a director. A assigned
to B the certificate of stock as a security of a promissory note in another transaction. B is
not aware of the secret agreement of A to retransfer the stock on ceasing to be a
director. Decide.
A. B has a better right to the share than X, Inc. because the certificate of stock is
considered quasi-negotiable.
B. X, Inc. has a better right to the share because no matter how innocent B is, defect of
title of prior parties will not acquire ownership.
C. Having clothed, A apparently will acquire title over the stock. X, Inc. is estopped from
asserting its title over it; hence B has a better right to the share than X, Inc.
D. B acquired no better right than that of the transferor of the share in spite of
innocence of the infirmity of the certificate.

33. Stock corporations are prohibited from retaining surplus profits in excess of 100% of their
paid-in capital stock. Three of the following enumerations are exceptions. Which does not
belong to the exceptions?
A. When justified by definite corporate expansion projects or programs approved by the
board of directors
B. When there is pension plan as agreed in Collective Bargaining Agreement
C. When the corporation is prohibited under any loan agreement with any financial
institution or creditor whether local or foreign from declaring dividends without its
consent
D. When it can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation, such as providing for probable
contingencies

34. In the matter of management of the business affairs of the corporation, this is supreme:
A. Majority of the Stockholders
B. 2/3 of the stockholders
C. Board of Directors
D. President of the Corporation

35. This is the equitable right of stockholders to subscribe to newly issued shares of the
corporation in proportion to their present shares in order to maintain their equity in the
corporation.
A. Right of redemption
B. Concept of corporate entity
C. Right to sue and be sued
D. Pre-emptive right

36. This is a written acknowledgement of an interest of a stockholder in the corporation.


A. Proxy
B. Share of stock
C. Certificate of stock
D. Capital stock

37. These are the persons who sign the Articles of Incorporation, who may or may not be
subscribers of shares.
A. Incorporators
B. Trustees
C. Directors
D. Promoters

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38. Choose the minimum requirement of the Corporation Law to corporate formation.
Authorized Capital Subscribed Capital Paid-In Capital
A. ₱50,000 ₱20,000 ₱5,000
B. 50,000 20,000 4,000
C. 50,000 25,000 5,000
D. 50,000 25,000 6,250

39. They provide and regulate the internal matters of the corporation, such as calling the
Board of Directors’ and Stockholders' meetings.
A. Board of Directors
B. Majority of stockholders
C. By-laws
D. Articles of Incorporation

40. This is an authority to vote in a corporation's stockholders' meeting.


A. Proxy
B. By-laws
C. Certificate of stock
D. Share of stock

41. A gratuitous issue of Treasury shares will result in:


A. Capital surplus
B. Watered stock
C. Additional profit
D. Stock dividend

42. A certificate of stock is not a negotiable instrument because it lacks the requirement of:
A. The instrument must be in writing and signed by the maker or drawer.
B. It must contain an unconditional promise or order to pay a sum certain in money.
C. It must be payable to bearer or order.
D. It must be payable on demand, or at a fixed or determinable future time.

43. One of the following is a limitation on proxies. Which is it?


A. Proxy acquires legal title to the shares of the stockholder
B. A proxy votes even in the presence of the stockholder
C. The proxy is voted only for the meeting for which-it was intended
D. A proxy is irrevocable at any time

44. The number of Board of Trustees in a non-stock corporation:


A. Shall not be less than five but not more than eleven
B. May be more than fifteen upon its organization
C. May be less than five upon its organization
D. Shall not be less than five but not more than fifteen

45. One of the following is a ground for the suspension or revocation of the certificate of
incorporation by the Securities and Exchange Commission.
A. If the corporation has commenced its business transactions and afterwards ceased
operation continuously for a period of at least five years.
B. If the corporation fails to commence and start to operate and the failure is due to a
cause beyond the control of the corporation.
C. If the corporation does not formally commence its business transaction and
subsequently become continuously inoperative for a period of two years.
D. If the corporation has commenced its business transactions and afterwards ceased
operation continuously for a period of at least two years.

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46. Right of the corporation to continue as a juridical entity for the term stated in the Articles
of Incorporation despite the death of any stockholder.
A. Juridical personality
B. Pre-emptive right
C. Right of succession
D. Right of existence

47. Original signatories in the Articles of Incorporation are called:


A. Corporators
B. Promoters
C. Stockholders
D. Incorporators

48. They regulate different internal matters of the corporation such as calling and defining
the conduct of the meeting of the stockholders and directors.
A. Board of Directors
B. By-laws
C. Articles of Incorporation
D. Proxy

49. The document conferring authority to vote stock in a corporate meeting:


A. Power of Attorney
B. Shares of stock
C. Capital stock
D. Proxy

50. The minimum requirement of the Corporation Law to corporate formation.


Authorized Capital Subscribed Capital Paid-In Capital
A. ₱500,000 ₱100,000 ₱35,000
B. 500,000 125,000 31,250
C. 500,000 100,000 20,000
D. 500,000 125,000 25,000

51. Three of the following are attributes of a corporation. Which is the exception?
A. An artificial being
B. Has the right of succession
C. Has powers, attributes and properties expressly authorized by law or incident to its
existence
D. Created by agreement of the incorporators

52. Three of the following are qualifications of the Board of Directors which is the exception?
A. He must own at least one share of the capital stock.
B. At least majority of them are citizens of the Philippines.
C. The shares owned must be recorded in the books of the corporation.
D. He must continuously own at least one share of the stock of the corporation.

53. The voting requirement to increase or decrease capital stock.


A. Majority vote of the board of directors and consented to by the stockholders
representing 2/3 of the outstanding capital stock
B. 2/3 of the board of directors with the consent of majority of the outstanding capital
stock
C. Majority vote of the board of directors with the consent of majority of the outstanding
capital stock
D. Majority vote of the board of directors and 3/4 vote of the outstanding capital stock

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54. A dividend payable partly in cash and partly in stocks, as to class of dividend is a:
A. Optional dividend
B. Property dividend
C. Liquidation dividend
D. Composite dividend

55. Bonds which are not secured by any specific mortgage, lien or pledge or corporate
property but the general credit of the corporation are:
A. Guaranteed bonds
B. Debenture bonds
C. Income bonds
D. Redeemable bonds

56. These are the rules and regulations adopted by the stockholders of a corporation for
the internal government.
A. Rules and Regulations
B. Articles of Incorporation
C. Minutes of the meetings
D. By-laws

57. Which of these conditions comply with the minimum requirement of the law to
corporate formation?

Authorized Capital Subscribed Capital Paid-In Capital


A. ₱100,000 ₱25,000 ₱25,000
B. 64,000 16,000 31,250
C. 200,000 50,000 20,000
D. 200,000 40,000 25,000

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


A. Stock dividend
B. Sales of capital assets
C. Property dividend of actual distribution of corporate assets
D. Sale of treasury stock

59. A corporate certificate of stock is not a negotiable instrument because it lacks the
following requisite:
A. It must be in writing and signed by the maker or drawer.
B. It must be payable on demand, or at a fixed or determinable future time.
C. It must be payable to bearer or order.
D. It must contain an unconditional promise or order to pay a sum certain in money.

60. Corporations organized by private persons performing public function and for profit to
private persons are:
A. Public Corporations
B. Government Controlled Corporations
C. Quasi-Public Corporations
D. Private Corporation

61. This is a document of a corporation acknowledging the interest of a stockholder in


the corporation's assets.
A. Certificate of stock
B. Share of stock
C. Capital stock

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D. Stockholder's equity

62. These are the persons who sign the Articles of Incorporation.
A. Corporators
B. Board of Directors
C. Promoters
D. Incorporators

63. In order that a person be selected as a president of a corporation, he must:


A. Be a citizen and resident of the Philippines
B. Not be a stockholder or direct of a competitor corporation
C. Not be the president of any other corporation
D. Be a director of the corporation

64. The following situation complies with the requirement of the law for corporate
organization and registration.

Authorized Capital Subscribed Capital Paid-In Capital


A. ₱500,000 ₱125,000 ₱25,000
B. 500,000 100,000 25,000
C. 60,000 15,000 5,000
D. 60,000 16,000 4,000

65. Based on the provisions of the Corporation Code of the Philippines, the following will
qualify to corporate formation and registration with the Securities and Exchange
Commission.

Authorized Capital Subscribed Capital Paid-up Capital


A. ₱ 500,000.00 ₱100,000.00 ₱25,000.00
B. 1,000,000.00 250,000.00 50,000.00
C. 78,000.00 19,500.00 4,875.00
D. 200,000.00 100,000.00 50,000.00

66. In a corporation, any two (2) or more positions may be held concurrently by the same
person, except that no one (1) person shall act as:
A. Chairman of the Board and President.
B. Secretary and Treasurer.
C. President and Secretary.
D. Treasurer and Director.

67. The number of the Board of Trustees in a non-stock corporation:


A. May be more than fifteen (15) upon its organization.
B. Shall not be less than 5 but not more than 11 upon organization.
C. Shall not be less than 5 but not more than 15 upon organization.
D. May be less than 5 upon its organization.

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68. A corporation invest its funds in any other corporation or business or for any purpose
other than primary for which it was organized.
A. There is a majority vote the Board of Directors and ratified by the stockholders
representing 2/3 of the outstanding capital stock.
B. It is reasonably necessary to accomplish its secondary purpose, the approval of
the stockholders' not necessary.
C. There is majority vote of the Board of Directs.
D. There is majority vote of the outstanding capital stock.

69. The following are advantages of no-par value share of stock. Which is the exception?
A. No-par value shares allow flexibility in price.
B. The stockholders of no-par value shares are relieved of personal liability for
unpaid stock subscription.
C. It allows the issue of stocks in exchange of property.
D. No-par value shares afford a possible remedy of relief from the evil of over-
capitalization and stock watering.

70. The right to vote at meetings, the right to receive dividends and the right to receive
copies of financial statements is known as:
A. Right of existence
B. Directors right
C. Pre-emptive right
D. Stockholders right

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


A. Stock dividend
B. Sale of capital assets
C. Sale of treasury stock
D. Property dividend

72. They are issued to those who helped in incorporating the company or for services
rendered in launching the welfare of the company.
A. preferred stocks
B. stock in escrow
C. founders stock
D. promotion stocks

73. Any director of a corporation may be removed from office by a vote of the
stockholders holding or representing:
A. majority of the stockholders present
B. 3/4 of the outstanding capital stock.
C. 2/3 of the outstanding capital stock.
D. Majority of the outstanding.

74. Three (3) of the following are attributes of a corporation. Which is the exception?
A. created by agreement of the incorporators
B. an artificial being
C. has right of succession
D. has powers, attributes and properties expressively authorized by the law incident
of its existence.

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75. As regards to corporate by-law, which of the following rules is not correct?
A. To adopt by-laws, majority of the outstanding capital stock is needed.
B. To delegate to the Board of directors or trustees the power to amend or repeal the
by-laws, 2/3 or the outstanding capital stock is needed.
C. To revoke the power delegated to the Board of Directors to adopt a new by-law,
2/3 of the outstanding capital stock or of its members is needed.
D. To amend or repeal the by-law, majority of the Board of Directors and of the
outstanding capital stock is needed.

76. ABC partnership becomes insolvent due to mismanagement an cannot pay its liability
to XYZ Corp. With the approval of its directors and stockholders, XYZ Corp, entered
into a management contract with ABC partnership to manage their partnership
business with the agreement that 50% of the net profits will be applied to the
payment of the partnership debt to the corporation.

QUESTION 1: Can XYZ Corp. validly enter into the above management contract.?
QUESTION 2: Is XYZ Corp. considered a partner of the ABC partnership by the fact
that it is receiving a share of the net profits of the partnership?

ANSWER 1: Yes, a corporation has the power to enter into such management contract
provided the contract is approved by the Board of Directors and majority of the
outstanding capital stock.
ANSWER 2: No, XYZ Corp. cannot be considered a partner because it is receiving a
share of the net profit not as actual share of the profits but merely as payment for
the partnership's obligation to the corporation.
A. 1st answer correct, 2nd answer wrong
B. 1st answer wrong, 2nd answer correct,
C. Both answers are correct.
D. Both answers are wrong.

77. The power to deny pre-emptive rights as a corporation power is classified as:
A. Incidental power
B. Express power
C. Implied power
D. Discretionary power

78. As regard treasury stock, which is not correct?


A. They have no voting rights as longs as they remain in the treasury.
B. They may be distributed as property dividend if there are retained earnings from
operations.
C. They are not entitled to dividends.
D. They are considered part of earned or surplus profits and therefore distributable
as dividends.

79. Issued to those who in some way worked for incorporating the company or for
services rendered in launching the welfare of the corporation is called:
A. common stock
B. promotion stock
C. founder stock
D. shares in escrow

80. P, the president of X Corporation, by virtue of a resolution of the stockholders


empowering to enter into a contract with T Corporation for the purchase of certain
machineries, actually did so. Such contract is:
A. Valid

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B. Rescissible
C. Voidable
D. Unenforceable
E. Void

81. The right of appraisal on the part of stockholders applies in this corporate act,
except:
A. sale of all assets and properties
B. merger or consolidation
C. amendment of Articles of Incorporation discriminating against certain shares
D. increase or decrease in authorized capital stock

82. Statement 1: De jure corporation are not subject to attack, not even by the
government.
Statement 2: De facto corporations are subject to direct attack by the government;
although not subject to collateral attack by private individuals.
A. Both statements are true.
B. Both statements are false.
C. Statement 1 is true, but statement 2 is false.
D. Statement 1 is false, but statement 2 is true.

83. The following defect will preclude the creation of even a de facto corporation:
A. The name of the corporation closely resembles that of a pre-existing corporation
that will tend to deceive the public.
B. The incorporation or a certain number of them are not residents of the
Philippines.
C. Lack of Certificate of Incorporation from the Securities and Exchange Commission.
D. Answer not given

84. The distinction between a proxy and a voting trust is that in a voting trust:
A. The trustee has no legal title to the shares of the transferring stockholder.
B. Indorses after its delivery to the payee.
C. Is liable to the payee and subsequent parties unless he signs for the
accommodation of the payee, in which case he is liable only to all parties
subsequent to him.
D. Answer not given

85. The distinction between subscription of shares from purchase of shares is that in
subscription of shares:
A. It is an independent agreement between the individual and the corporation to buy
shares of stock from it at a stipulated price.
B. It takes place before or after incorporation and is generally paid in installment or
upon call.
C. In case of insolvency of the corporation, the subscription price cannot be enforced
on the theory that the corporation can no longer perform its obligation to deliver
the certificate of stock.
D. Answer not given

86. A corporation created in strict or substantial conformity with the statutory


requirement for incorporation and whose right to exist as a corporation cannot be
successfully attacked even in a direct proceeding for that purpose by the State is
known as a:
A. de jure corporation
B. de facto corporation
C. corporation be estoppels

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D. answer not given

87. One of the characteristics of treasury shares is, that


A. they have the status of outstanding shares.
B. they may not be reissued or sold again.
C. they participate neither in dividends nor in the meetings of the corporation as
voting stocks.
D. Answer not given

88. Which of the following will not qualify an incorporation of a corporation?


A. A minor who is emancipated by voluntary concession or marriage.
B. A married woman without the consent of her husband where the property
involved in the act of incorporation is paraphernal.
C. A corporation
D. Answer not given

89. The Articles of Incorporation is required to state the names, nationalities and
residences of persons who shall act as directors or trustees until the first regular
directors or trustees are duly elected and qualified. This requirement is intended to
provide a basis by which the Securities and Exchange Commissions could determine
whether the Article of Incorporation has complied with the requirement that:
A. at least a majority of the directors or trustees are residents of the Philippines.
B. all of the directors or trustees are residents of the Philippines.
C. 2/3 of the directors or trustee are residents of the Philippines.
D. answer not given

90. The power to revoke corporate franchise for causes specified by law is vested only in
the:
A. President of the Republic of the Philippines
B. Securities and Exchange Commission
C. Court of competent jurisdiction
D. answer not given

91. Corporate dissolution may take place by voluntary inaction which will result in the
cessation of its corporate powers and the corporation shall be deemed dissolved.
Such voluntary inaction may result from:
A. Inaction by the corporation through its failure to formally organize and commence
with the transaction of its business or the construction of its works within two (2)
years from the date of its corporation.
B. Failure of the corporation to submit the annual reports required by the Securities
and exchange Commission for a period of five (5) years.
C. Merger or consolidated with respect to absorbed corporation.
D. answer not given

92. Watered stocks are shares of stock issued by a corporation for a consideration less
than its par or issued value or for a consideration in any form other than cash, valued
in excess of its fair value. In this regard:
A. the issue itself is void.
B. the agreement that it shall be paid for less than its par value is illegal and void
and cannot be enforced.
C. the subscriber or purchaser shall not be liable for the full par value of the shares.
D. answer not given

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93. The voting proportion required to enable a corporation to invest its funds in any other
corporation or business or for any purpose other than its primary purpose:
A. 2/3 vote of the Board of Directors and ratified by majority of the outstanding
capital stock
B. Majority vote of the Board of Directors and ratified by majority of the stockholders
C. Majority vote of the Board of Directors and ratified by 2/3 of the stockholders
D. Majority vote of the Board of Directors and ratified by majority of the outstanding
capital stock

94. Which of the following conditions will allow corporate formation and Securities and
Exchange Commission registration?
Authorized Subscribed Capital ₱3,125
Capital ₱12,500 5,000
A. ₱ 90,000 20,000 5,000
B. 100,000 25,000 6,000
C. 100,000 15,000
D. 60,000 Paid-up Capital

95. An officer of a corporation may hold two or more positions in the corporation but not
as:
A. Chairman of the Board and President
B. President and Treasurer
C. Secretary and Treasurer
D. Vice President and Secretary

96. The right of a corporation to exist as a juridical person during its term as stated in its
Articles of Incorporation despite death of any of its stockholders is:
A. Right of Existence
B. Right of Redemption
C. Right of Succession
D. Pre-emptive Right

97. The interest or right of the owner in the corporation's profits or in the net assets of
the corporation on dissolution is:
A. Dividend
B. Share of stock
C. Certificate of Stock
D. Capital

98. Requirement to effect the amendment of the by-laws of a corporation.


A. Majority vote of the Board of Directors
B. Vote of 2/3 of the outstanding capital stock
C. Majority vote of the Board of Directors and majority vote of the outstanding
capital stock
D. Majority vote of the outstanding capital stock

99. The nationality of a corporation is determined by the place of the controlling


stockholders. This test is:
A. Control test
B. Domicile test
C. Incorporation test
D. Management test

100. The following person cannot be an incorporator of a corporation.


A. A resident alien

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B. A married woman without the consent of the husband payment of her shares is
her paraphernal property
C. A subscriber on the shares of the corporation who pays less his subscription
D. A corporation organized under the laws of the Philippines

101. Any officer of a corporation may hold two (2) or more positions concurrently in a
corporation except that no one person shall be:
A. President and Secretary
B. Chairman and Treasurer
C. Secretary and Treasurer
D. Vice President and Secretary

102. One of the following is not required and does not form part of the three-fold duty of
directors of a corporation. Which one?
A. Duty of Diligence
B. Duty of Loyalty
C. Ditty of Obedience
D. Duty of Efficiency

103. These do not form part of the outstanding capital stock:


A. Bonus shares
B. Treasury shares
C. Founder's shares
D. Redeemable shares

104. A stock which has been issued by a corporation as fully paid up when in fact it is not,
because it has been issued as bonus or otherwise, without any consideration at all,
all or for less than par, or for property, labor, or services at an overvaluation.
A. Promotion stock
B. Treasury stock
C. Watered stock
D. Bonus stock

105. A private corporation commences to have corporate existence, and juridical


personality from the date:
A. The officers of the corporation are elected by the stockholders
B. The incorporators sign the Articles of Incorporation
C. The Articles of Incorporation and by-laws are presented to the SEC
D. The SEC issues its certificate of incorporation under its seal

106. Contracts between a corporation and third persons must be made by or under the
authority of its:
A. Board of Directors
B. Stockholders
C. President and Chief Operating Office
D. General Manager

107. How many number of votes of the Board of Directors are required to change the
name of a corporation?
A. 2/3 vote of all the members of the Board
B. 2/3 vote of all present
C. Majority vote of all present constituting a quorum
D. Majority vote of the Board

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108. Purely ultra vires aces of the officers of a corporation to invest corporate funds in
another business or corporation, i.e. acts not contrary to law, morals, public policy
may be ratified by:
A. The stockholders holding two-thirds (2/3) of the voting power
B. Majority vote of all the members of the Board
C. The stockholders holding one-half (1/2) of the voting power
D. Majority vote of Board of Directors present

109. Cash dividend as distinguished from stock dividend:


A. It does not involve any disbursement
B. It is still part of the corporate asset
C. It increases legal capital
D. It is declared only by Board of Directors

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


A. The subservience of minority stockholders to the wishes of the majority subject
only to equitable restraints
B. The shareholders are not liable for the debts of the business
C. The free and ready transferability of ownership
D. Because of the power of succession, the existence of the entity is not affected by
the personal vicissitudes of the individual shareholders

111. The following are the legal effects of merger or consolidation, except one:
A. The consolidated corporation shall enjoy the same rights, powers, privileges and
immunities and shall be subject to the same duties and obligations of
corporations established under Corporate Law.
B. All actions pending by or against the constituent corporations shall now be
litigated by the consolidated corporation.
C. All properties, interest, claims and the like pertaining to the constituent
corporations shall now pertain to the surviving corporation.
D. The liabilities and obligations or claims against the constituent corporations may
not be assumed by the consolidated corporations because of the theory of
separate legal entity.

112. Statement 1 – After the quasi-reorganization of the corporation has been effected and
approved by SEC, the corporation shall disclose on all its financial statements for a
minimum period of three (3) years the effects of such quasi-reorganization to the
financial condition of the company.
Statement 2 – In quasi-reorganization, for purposes of dividend declaration, the
retained earnings of the company shall be restricted to the extent of the deficit wiped
out by appraisal surplus.

Which is correct?
A. First statement is true but second statement is false
B. Both statements are true
C. First statement is false but second statement is true
D. Both statements are false

113. A corporation where vacancies in the Board of Directors, are filled only by the
remaining members of the Board, is:
A. Open corporation
B. Corporation sole
C. Eleemosynary corporation
D. Close corporation

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114. The following are the requisites, except one for valid declaration and/or issuance of
stock dividend:
A. Existence of original and unissued shares
B. Dividend declarations is made by the Board of Directors and approved by 2/3 of
the outstanding capital Stock
C. It is issued to increase the authorized capital
D. Existence of unrestricted retained earnings

115. The authorized capital stock of a proposed corporation is ₱1,000,000 divided into
10,000 shares with a par value of ₱100 each. The minimum amount of subscription
that must be paid up is:
A. ₱50,000 or 500 shares
B. ₱87,509 or 875 shares
C. ₱75,000 or 750 shares
D. ₱62,500 or 625 shares

116. 1st Statement – No dividends can be declared out of the principal surplus as this could
amount to declaration of dividend out of capital.
2nd Statement – If the surplus profits of the stock corporation reaches the level equal
to its paid-up capital, the SEC may compel the corporation to declare dividends
otherwise it will be liable for a surtax on improperly accumulated surplus.

Which of the following is correct?


A. 1st statement is false but 2nd statement is true
B. Both statements are true
C. Both statements are false
D. 1st statement is true but 2nd statement is false

117. The following, except one, are qualifications of corporate directors:


A. Must continuously own at least one share during their term as directors
B. Must own at least one share of stock
C. Ownership of shares must be recorded in the books of the corporation
D. Majority are citizens of the Philippines

118. In a corporation, two or more positions may be held concurrently by the same person,
except that no one person shall act as:
A. President and Chairman of the Board
B. Secretary and Treasurer
C. Treasurer and Director
D. President and Secretary

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


A. The shareholders are not liable for the debts of the business
B. The subservience of minority stockholders to the wishes of the majority subject
only to equitable restraints
C. Because of the power of succession, the existence of the entity is not affected by
the personal vicissitudes of the individual shareholders
D. The free and ready transferability of ownership

120. 1st Statement — No dividends can be declared out of appraisal surplus as this could
amount to declaration of dividends out of capital.
2nd Statement — If the surplus profits of the stock corporation reaches the level equal
to its paid-up capital, the SEC may compel the corporation to declare dividends
otherwise it will be liable for a surtax on improperly accumulated surplus.

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Which of the following is correct?
A. 1st statement is false but 2nd statement is true
B. Both statements are false
C. 1st statement is true but 2nd statement is false
D. Both statements are true

121. One of the following does not require stockholder's approval:


A. Merger or consolidation
B. Change of corporation name
C. Investment of corporate funds for a purpose outside of the main purpose of the
corporation.
D. Declaration of cash dividend.

122. Under this test, a corporation is a national of the country pursuant to whose laws it is
incorporation:
A. Nationality test
B. Capitalization test
C. Control test
D. Incorporation test

123. Which of the following statements is not correct?


A. In the delinquency sale at public auction, the highest bidder is one who offers to
pay the full of the balance of the subscription plus interest and expenses of the
sale for the highest number of shares.
B. The sale of delinquent stock at public auction can be stopped if the Board of
Directors stops the sale for valid reasons.
C. Payments of unpaid subscription may not be enforced by applying cash dividends
to delinquent stockholders.
D. The Board of Directors shall order, by resolution, the sale of delinquent stock
specifying the amount due plus accrued interest, the place, time and date of the
sale.

124. A stockholder who does not approve the action taken by the Board of Directors in
proposing to amend the Articles of Incorporation is not allowed to withdraw from the
corporation in one of the following instances:
A. Merger or consolidation
B. Investment of corporate funds in another corporation
C. Creating, incurring, increasing or decreasing any bond indebtedness
D. Shorting or prolonging corporate existence

125. 1st Statement – Membership in a non-stock corporation, and all rights arising
therefrom, cannot be transferred even if provided in the Articles of Incorporation or
by laws, because membership and the rights arising therefrom are personal and non-
transferable.

2nd Statement – Treasury stocks sold for less than their par or issued value are
considered "watered stock" and as such are prohibited by law.

Which is correct?
A. 1st statement is true but 2nd statement is false.
B. Both statements are false.
C. 1st statement is false but 2nd statement is true.
D. Both statements are true.

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126. Which of the following statements is not correct?
A. A stockholder is entitled to cast such number of votes as the number of shares
outstanding entitled to vote in his name times the total number of directors to be
elected shall equal.
B. Outstanding shares although with voting rights but have not been fully paid
cannot be voted.
C. A stockholder may cumulate his vote for one candidate or may distribute them
among as many candidates but he cannot cast more than the shares outstanding
in his name times the number of directors to be elected.
D. Members of the Board of directors are voted by stockholders by means of
cumulative voting.

127. A corporate doctrine which holds the stockholders are not personally liable for
corporate debts:
A. Separate legal entity
B. Piercing the veil of corporate fiction
C. Right of succession
D. Trust fund doctrine

128. 1st Statement – A director is removed from office by a vote of the stockholders
holding or representing at least 2/3 of Outstanding capital stock. The vacancy
occasioned by such removal can be filled by the vote of at least a majority of the
remaining directors if still constituting a quorum.
2nd Statement – Treasury shares sold for less than par or issued value are considered
watered stocks and as such are prohibited by law.

A. 1st statement is false, 2nd statement is true


B. Both statements are true
C. Both statements are false
D. 1st statement is true, 2nd statement is false

129. One of the following is a ground for the suspension or revocation of the Certificate of
Incorporation by the SEC.
A. If the corporation has commenced its business transactions and afterwards
ceased operations continuously for a period of at least 5 years.
B. If the corporation fails to commence and start to operate and the failure is due to
causes beyond its control.
C. If the corporation does not formally commence its business transactions within 2
years from date of incorporation.
D. If the corporation has commenced its operations and subsequently become
continuously for 2 years.

NEGOTIABLE INSTRUMENTS

1. A holder not in due course has the following rights, except:


A. He may receive payment and if the payment is in due course, the instrument is
discharged
B. He may sue on the instrument in his own name
C. He cannot recover on the instrument
D. He is entitled to the instrument but holds it subject to the same defense as if it
were non-negotiable

Page 34 of 141
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2. Which is not correct? The acceptor by accepting a negotiable instrument:
A. Admits the existence of the payee and his capacity to endorse
B. Admits the existence of the drawer, the genuineness of his signature and his
capacity to draw the instrument
C. Admits the existence of the endorser, the genuineness of his signature and his
authority to draw the instrument
D. Admits that he will pay it according to the tenor of his acceptance

3. 1st Statement: A check must be presented for payment within a reasonable time after
its issue or the drawer will be discharged from liability thereon.

2nd Statement: Where the holder of a check procures it to be accepted or certified,


the drawer and all indorsers are discharged from liability.
A. Only 1st statement is true
B. Only 2nd statement is true
C. Both statements are not true
D. Both statements are true

4. A makes a note payable B or order. The following are the indorsers of the note in the
order of their indorsements: B, C, D, E, F (holder) and G (subsequent holder). The
note is dishonored in the hands of F, who notifies B, C, D and E.
Which is not correct?
A. The notice given by P to B operates to the benefit of C, D, E and G
B. The notice to C inures to the benefit of D, E and G .
C. The notice to C inures to the benefit of B
D. The notice to D inures to the benefit of E and G

5. Which of the following instruments is negotiable?


A. Pay to bearer C ₱10,000. Reimburse yourself out of the rental of my house in
Manila. To B; (Sgd.) A
B. Pay to C ₱10,000 or his order out of the rental of my house in Manila.
To B; (Sgd.) A
C. Pay to C ₱10,000 and reimburse yourself out of the rental of my house in Manila.
To B; (Sgd.) A •
D. Pay to the order of C ₱10,000. Reimburse yourself out of the rental of my house in
Manila. To B; (Sgd.) A

6. Which of the following is a negotiable bill of exchange?


A. Pay to the order of Y the sum of ₱30,000. (Sgd. X) To, A or in his absence, to B
B. Pay to the order of X the sum of ₱20,000. (Sgd. X) To A or B
C. Pay to the order of X or Y the sum of ₱40,000. (Sgd. C) To A or B
D. Pay to the order of Y the sum of ₱50,000. (Sgd. X) To A and B

7. The holder is required to give notice of dishonor to the drawer to make him liable on
the instrument in one of the following cases:
A. Where the drawer is the person to whom the instrument is presented for payment
B. Where the drawer and the drawee are the same persons
C. Where the drawer has countermanded payment
D. Where the instrument was made or accepted for his accommodation

Page 36 of 141
• • 1.;

Ir

8. When is a negotiable instrument not discharged?


A. When the holder thereof intentionally cancel the instrument
B. When the principal debtor becomes the holder of the instrument before, at or
after maturity in his own right
C. When it is paid in due course by the principal debtor
D. When it is paid in due course by the party accommodated where the instrument is
made or accepted for accommodation

9. When an endorser waives presentment and notice of dishonor, he increases his


liability. His end6rsement is:
A. Alternative endorsement
B. Qualified endorsement
C. Facultative endorsement
D. Restrictive endorsement

10. Which of the following instruments is not negotiable?


A. “I promise to pay A or order ₱20,000.” (Sgd. D)
B. “I promise to pay A or order ₱20,000 on June 30.” (Sgd. E)
C. “I agree to pay to the order of A ₱30,000.” (Sgd. B)
D. “Good for ₱20,000 to A or order.” (Sgd. C)

11. Azcona issued a note to Basco. There was a total failure of consideration. Basco
indorsed the note for a consideration to Cruz who is a holder in due course. Cruz
indorsed the note to Diaz who knew of the failure of consideration. Can Diaz
successfully collect from Azcona?
A. No, because Diaz is not a holder in due course
B. No, although Diaz acquired the rights of Cruz, a holder in due course and he was
not a party to any illegality
C. No, because Diaz knew of the failure of consideration
D. Yes, because Diaz acquired the note for a consideration

12. “I promise to pay to the order of X ₱10,000 30 days after date” (Sgd.) Y, dated blank.

“Pay to the order of X ₱10,000 30 days after sight to Y” (Sgd.) Z, dated 10/15/95.

1st Rule: The maturity date of the above promissory note will be counted 30 days
from the date of the instrument.

2nd Rule: The maturity date of the above bill of exchange will be counted 30 days
from the date the instrument is accepted by Y.
A. Both rules are wrong
B. Both rules are correct
C. 1st rule correct, 2nd rule wrong
D. 1st rule wrong, 2nd rule correct

13. The following, except one, are the requisites of acceptance for honor on a bill:
A. The bill must be previously protested for dishonor by non-acceptance or protested
for better security.
B. The bill is overdue.
C. The holder must give his consent.
D. The acceptor for honor must be a stranger to the bill.

Page 37 of 141
14. Which of the following is not a real defense?
A. Fraud in factum
B. Incomplete and undelivered instrument
C. Insertion of a wrong date
D. Forgery of a signature

15. Under the Negotiable Instruments Law, a certificate of stock is not a negotiable
instrument because it lacks the requisites of:
A. It must contain an unconditional promise or order to pay a sum certain in money
B. It must be payable on demand or at a fixed or determinable future time
C. It must be payable to order or bearer
D. It must be in writing and signed by the maker or drawer

16. A makes a promissory note payable to B or order. B indorses the note to C, then C to
D, D to E and E to F, the holder in whose hands the note is dishonored. F notifies B, C,
D and E about the dishonor of the note and subsequently indorses it to G. Which is
not correct?
A. The notice to C inures to the benefits of D, E and G
B. The notice given by F to B inures to the benefits of C D, E and G
C. The notice to E inures to the benefit of D
D. The notice to D inures to the benefits of E and G

17. Which of the following is not a secondary party?


A. Acceptance for honor
B. Drawer
C. Payor for honor
D. Endorser

18. “I promise to pay to the order of B ₱10,000 30 days after sale" (Sgd.) A. Which of the
following indorsements of the above promissory note is not valid?
A. “Pay to C and D.” (Sgd.) B
B. “Pay to C ₱5,000, balance of this Note.” (Sgd.) B if ₱5,000 has been paid by A
C. “Pay to C ₱5,000 to D ₱5,000” (Sgd.) B
D. “Pay to C and D, partners” (Sgd.) B

19. M makes a ₱10,000 note payable to the order of O who indorses it to A. F obtains
possession of the note fraudulently, forges A's signature, alters the amount to
₱70,000 and endorses it to B who in turn endorses to C. In this case:
A. C can enforce the note against A
B. C cannot enforce the note against any person
C. C can enforce the note against M and O
D. C can enforce the note against B

20. "PAY TO MARIA IN TRUST FOR JESUS" (Sgd.) Jose, is an example of.
A. Conditional endorsement
B. Qualified endorsement
C. Facultative endorsement
D. Restricted endorsement

21. Which of the following is not a requisite to consider a person an accommodation


party?
A. He must not be liable to a holder in due course.
B. He must be a party to the instrument signing as a maker, drawer, acceptor or
endorser.
C. He must not receive value therefor.

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D. He must sign for the purpose of lending his name or credit.

22. Which of the following instruments is not negotiable for the reason that the
instrument is not payable at a determinable future time:
A. "On the death of X, I promise to pay to the order of B ₱1,000." (Sgd.) A
B. "On or before October 30, 2004, I promise to pay B or his order B ₱1,000.” (Sgd.)
A
C. "Sixty days after sight, I promise to pay to the order of B ₱1,000." (Sgd.) A
D. "Ten days before the death of X, I promise to pay B or his order ₱1,000." (Sgd.) A

23. The following except one are the rights of a holder in due course. Which is the
exception?
A. He may enforce payment of the instrument for the full amount thereof against all
parties liable thereon.
B. He may receive payment and if payment is in due course, the instrument is
discharged.
C. He holds the instrument subject to the same defense as if it were nonnegotiable.
D. He may sue on the instrument in his own name.

24. Which of the following instrument is negotiable?


A. "Pay to B or order ₱1,000 and reimburse yourself out of my money in your
hands."(Sgd.) A./(to C)
B. "I hereby authorize you to pay ₱1,000 on our account to the order of X." (Sgd.) A
C. "I promise to pay X or order ₱1,000 on or before October 25." (Sgd.) A
D. "Please let the bearer have ₱1,000 and place to my account and you will oblige."
(Sgd.) A

25. Every person negotiating an instrument by delivery or by a qualified endorsement


warrants the following. Which does not belong to the warranties?
A. That the person negotiating has no liability to a third person
B. That the instrument is genuine in all respects what it supports to be
C. That he has good title to it and that all prior parties have capacity to contract
D. That he has no knowledge of any fact which would impair the validity of the
instrument or render it valueless

26. An instrument is considered payable on demand:


A. When no time of payment is expressed
B. When payable to order
C. When the last endorsement is in blank
D. When the last endorsement is restricted

27. A presented a bill to B, the drawee. B destroyed the bill. What can A do?
A. A may sue B for the destruction of his property
B. A may go after the drawee, for the bill
C. A may no longer collect since the bill was destroyed
D. A may consider the bill as impliedly accepted by B

28. This negotiable instrument is always drawn against a bank:


A. Bill of Exchange
B. Check
C. Due Bill
D. Promissory Note

29. This instrument is negotiable.


A. "I promise to pay ₱20,000." (Signed: Jose Santos)

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B. "Pay Pedro Torres or order ₱20,000 if he marries Maris Cunanan." (Signed: Jose
Santos)
C. "Good to Mario Santos or order, ₱20,000." (Signed: Jose Santos)
D. "I promise to pay Oscar Bamba or order 20 cavans of IR rice in January."

30. When there are three, the drawer, the payee and the drawee, the instrument is a:
A. Promissory note
B. Certificate of Indebtedness
C. Bank check
D. Bill of exchange

31. A bill of exchange may be treated and considered a promissory note:


A. When the drawer and the drawee are the same person
B. When the drawee is fictitious
C. When the instrument is ambiguous
D. All of the above

32. Which of the following instruments is not negotiable?


A. "I agree to pay to the order of A, ₱30,000." (Sgd.) X
B. "Good to A or order, ₱30,000." (Sgd.) X
C. "I promise to pay A or order ₱30,000 on June 30." (Sgd.) X
D. "I promise to pay A or order, ₱50,000." (Sgd.) X

33. The promise or order is conditional, hence non-negotiable.


A. "I promise to pay B or order ₱20,000." (Addressed to Z signed by Y)
B. "Pay to B or order ₱20,000." (Addressed to Z signed by Y)
C. "Pay to B or order ₱20,000 and reimburse yourself out of my money in your
possession." (Addressed to Z signed by Y)
D. "Pay to B or order ₱20,000 out of my money in your possession."

34. An instrument is payable on demand:


A. When payable to order
B. When the last endorsement is in blank
C. When no time of payment is expressed
D. When payable within a period of time

35. Which of the following is not necessary in order to make an instrument negotiable?
A. It must be in writing and signed by the maker.
B. It must contain an unconditional promise or order to pay a sum certain in money.
C. It must be payable on demand or at a fixed future time.
D. It must be payable only to a specific person.

36. An instrument is payable on demand:


A. When no time of payment is expressed
B. When the last endorsement is in blank
C. When the payee is blank
D. When payable to order

37. The following instrument is not negotiable:


A. "Pay to C or order, ₱20,000 with interest at 2.5%." To TP, Signed: M
B. "Pay to order of C within six months from date the sum of ₱20,000 with interest at
12% per annum." To TP, Signed: M
C. "Pay to C or bearer ₱20,000 six months after date. If not paid on due date, I agree
to pay collection and attorney's fees." To TP, Signed: M
D. "Pay to C or order ₱20,000 in installment." To TP, Signed: M "

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38. If an instrument conforms to the following:
1. It must be in writing and signed by the maker or drawer.
2. It must contain an unconditional promise or order to pay a sum certain in money.
3. It must be payable on demand or at a fixed or determinable future time. and
4. It must be payable to order or to bearer, the instrument is a:

A. Check
B. Promissory Note
C. Bill of Exchange
D. Draft

39. Which of the following instruments is negotiable?


A. "Good to Jose dela Paz or order, ₱20,000.00" (Sgd. Pedro Cura).
B. "I hereby authorize you to pay Jose dela Paz or order, ₱20,000.00" (Sgd. Pedro
Cura).
C. "I promise to pay Jose dela Paz or order ₱20,000 worth in sugar." (Sgd. Pedro
Cura).
D. "I promise to pay Jose dela Paz or order ₱20,00 on May.”

40. An indorser of a note or a bill is:


A. Secondarily liable
B. Thirty liable
C. Primarily liable
D. Not liable

41. Which of the following is a necessary requirement in order to make an instrument


negotiable?
A. It must be in writing and signed by the maker
B. It must be payable on demand or at, a fixed or determine future time.
C. It must contain an unconditional promise to pay a sum certain in money.
D. All of the three (3) above

42. On July 1, 2004 A signs a promissory note and binds himself to pay ₱100,000.00 plus
15% per annum interest on June 30, 2005.
A. Before June 30, 2005, X can demand payment.
B. If on June 30, 2005 A is paying X, X cannot refuse the payment.
C. Because the period is for the benefit of the debtor, A can compel creditor X to
accept payment, any date before June 30, 2005.
D. Because the period is for the benefit of the debtor and creditor, X can refuse any
tendered payment before June 30, 2005.

43. A promissory note distinguished from a bill of exchange.


A. It contains an unconditional order.
B. The one who issues it is primarily liable.
C. The one who issues it is secondary liable.
D. There are three (3) parties the drawer, the payee, and the drawee.

44. Which one of the following instruments is negotiable?


A. "I promise to pay C or Order ₱20,000.00 if he will pass the CPA examinations in
October 2005” (Sgd. B)
B. "I promise to pay C or order ₱20,000.00 in four (4) installment." (Sgd. B).
C. "I promise to pay C or order ₱20,000.00 60 days after the death of his father."
(Sgd. D)
D. "I promise to pay C ₱20,000.00." (Sgd. D).

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45. Which of the following instrument is non-negotiable?
A. "Pay to C or order ₱20,000.00 out of money in your possession" (Addressed to A,
signed by B)
B. "Pay to C order ₱20,000.00 and reimburse yourself out of any money in your
possession." (Addressed to A, signed by D)
C. "I promise to pay C or order ₱20,000.00" (Sgd. D)
D. "Pay C or order ₱20,000.00". (Addressed to A. signed D)

46. An endorsement where the indorser adds the phrase "without resource" is called:
A. Blank Indorsement
B. Restrictive Indorsement
C. Qualified Indorsement
D. Conditional Indorsement

47. The drawee bank is not primarily liable:


A. Cashier's cheek
B. Certified check
C. Manager's check
D. Traveler's check

48. If the instrument is payable to the order of a third person,


A. he is liable to all parties subsequent to the payee.
B. he is not liable to any party.
C. he is liable to the payee and to all subsequent parties.
D. he is liable to all parties subsequent to the maker or drawer.

49. Which of the following is not negotiable?


A. Pay to D or order ₱10,000 on before Dec. 31, 1997 (Sgd. E)
B. Pay to A or order ₱10,000 notice of dishonor waived. (Sgd. B)
C. Pay to B or order ₱5,000 of deliver two horses at the option of the holder. (Sgd. C)
D. Pay to C or order ₱10,000 and to deliver 10 sacks of rice (Sgd. D)

50. A bill of exchange &awn on a bank and payable on demand is a:


A. check
B. treasury bill
C. domestic bill
D. bill of lading

51. Which is not correct? The acceptor, by accepting the instrument,


A. admits the existence of the drawer, the genuineness of his signature and his
capacity and authority to draw the instrument.
B. admits the existence of the payee and his capacity to indorse.
C. engages that he will, pay it according to the tenor of his acceptance.
D. admits the existence of the indorser, the genuineness of his signature and
his capacity and authority to draw the instrument.

52. CASE 1: Angel buys a diamond ring for ₱50,000 for which he issued a check. Later
Angel found out the diamond to be an ordinary glass.

CASE 2: Ben obtain the signature of Cris for autograph purpose. Ben writes a
promissory note above Cris' signature and endorses the note to Dan, a holder in due
course.

What kind of defenses may be availed of by the maker?


A. Real defenses in 1st case, personal defense in 2nd case

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B. Personal defense in 1st case, real defense in 2nd case
C. Real defense in both cases
D. Personal defense in both cases

53. Maturity of an undated negotiable instrument issued payable 30 days after sight is
computed from:
A. date of first indorsement
B. date of last indorsement
C. date of first presentation for acceptance
D. date of issue

54. When is a negotiable instrument payable to order?


A. when payable to the order of a specified person or to him or its order
B. when payable to the order of a fictitious or non-existing person, and such fact was
known to the person making it.
C. When the name of the payee does not purport to be the name of any person
D. When the only or last indorsement is an indorsement in blank

55. Which of the following is not a characteristic of a Bill of Exchange:


A. original parties are the drawer, drawee, payee and acceptor
B. acceptance is generally required
C. drawer is primarily liable
D. contains an unconditional order

56. A is the maker of a promissory note for ₱100,000 payable to the order of B who
negotiable the same in favor of C. C loses the note and is found by X who forges the
signature of C and pretending to be C negotiated the note to D, D to E, E to F and F to
G who is a holder in due course. Under the circumstances which of these is not an
incorrect statement?
A. Being a holder in due course, G can recover from maker A.
B. The signature of C being forged, it becomes inoperative and payment cannot be
enforced as against him.
C. E is not liable to F precisely because he was not the one who forged the signature
of C.
D. X is not liable to any party to the instrument since his name does not appear
thereon.

57. The following are all requisites of an acceptance for honor, choose the exception.
A. That the bill must have been previously dishonored by non-acceptance or
protested for better security.
B. That the bill is already overdue.
C. That the acceptance for honor must be with the consent of the holder.
D. That the acceptor for honor must not be a party already liable on the instrument.

58. A check upon which the holder's signature must appear twice, one to be affixed by
him at the time it is issued and the second or counter-signature, to be affixed by him
before it is paid, otherwise it is incomplete, is called:
A. certified check
B. stale check
C. traveller's check
D. answer not given

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59. An instrument is rendered non-negotiable if:
A. There is an indication of a particular fund out of which reimbursement is to be
made.
B. There is an indication of a particular account to be debited with the amount.
C. The instrument is payable out of a particular fund.
D. Answer not given

60. A general indorser is distinguished from the indorser in the a general indorser:
A. Makes either a blank or special indorsement.
B. Indorses after its delivery to the payee.
C. Is liable to the payee and subsequent parties unless he sign for the
accommodation of the payee, in which case he is liable only to all parties
subsequent to him.
D. Answer not given.

61. Presentment for acceptance of a bill of exchange is not necessary:


A. where the bill is payable after sight
B. where the bill is draw payable elsewhere than at the residence or place of
business of the drawee
C. where it is payable at a certain number of days after date
D. answer not given

62. Protest is not necessary:


A. upon dishonor by non-acceptance of a foreign bill appearing on its face to be such
B. upon dishonor by non-payment of a foreign bill appearing on its face to be such, if
not having been previously dishonored by non-acceptance
C. in cases of inland bills and promissory notes.
D. Answer not given

63. The distinction between acceptance for honor and ordinary acceptance is that:
A. In acceptance for honor, protest is not required while in ordinary acceptance,
there must be previous protest.
B. In acceptance for honor, the acceptor is the drawee while in ordinary acceptance,
the acceptor must be a stranger to the bill.
C. In acceptance for honor, the consent of the holder is required while in ordinary
acceptance, such consent is not required.
D. Answer not given

64. Marcelo makes a note payable to the order of Patricio who indorses it to Alfonso. Fidel
obtains possession of the note fraudulently, forges Alfonso's signature and indorses it
to Bartolome who in turn indorses it to Catalino. In this case, Catalino can:
A. enforce the instrument against Marcelo and Patricio.
B. enforce the instrument against Alfonso.
C. enforce the instrument against Bartolome.
D. Answer not given

65. M makes a promissory note for ₱2,000.00 payable to the order of P. P negotiates the
note to A who, with the consent of P, raises the amount to ₱20,000.00 and thereafter
indorses it to B, B to C, and C to D who is not a holder in due course. In this case:
A. D can recover ₱2,000.00 as against M.
B. P and A are liable to D for ₱20,000.00.
C. B and C are not liable to D.
D. answer not given

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66. This is a promissory note: "We promise to pay Dalsa, Cristina and Catherine the sum
of ₱18,000" (Signed) Jeng, Bambi and Gail.
A. Gail is obliged to pay Catherine ₱6,000
B. Gail is obliged to pay Catherine ₱2,000
C. Gail is obliged to pay Catherine ₱12,000
D. Gail is obliged to pay Dalsa, Bambi and Catherine ₱18,000

67. This is not negotiation of a negotiable instrument:


A. Assignment
B. Delivery of a bearer instrument
C. Indorsement completed by delivery of an instrument payable to order
D. Delivery of an instrument to the payee

68. Which of the following instruments is not negotiable because it lacks the requirement
of an unconditional promise or order to pay a sum certain in money?
A. Bill of Exchange
B. Check
C. Certificate of Stock
D. Promissory Note

69. "I promise to pay to bearer, Juan dela Cruz, the sum of ₱20,000". (Signed) Jose Paz.
The promissory note is:
A. Negotiable promissory note payable on demand
B. Negotiable promissory note payable to order
C. Negotiable promissory note payable to bearer
D. Non-negotiable

70. Which of the following instruments is non-negotiable?


A. "Pay to C or order ₱20,000 out of my cash in your possession." (Addressed to T,
signed by D)
B. "Pay to C or order ₱20,000 and reimburse yourself out of my cash in your
possession." (Addressed to T, signed by D)
C. "I promise to pay C or order, ₱20,000." (Signed D)
D. "Pay C or order ₱20,000." (Addressed to T, signed by D)

71. A feature or characteristic of a bill of exchange not found in a promissory note:


A. Promise to pay
B. Order to pay
C. Promise in writing to pay
D. Unconditional promise in writing

72. One of the requisites of a negotiable instrument is that it must contain an


unconditional. promise or order to pay a sum certain in money. Which of the following
denoted non-negotiability?
A. I promise to pay to the order of L the sum of $900 at the DBP Manila
B. I promise to pay to the order of Y the sum of $600 and to deliver one-fourth of the
rice harvest in my farm
C. I promise to pay N or bearer in Manila the sum of ₱18,000 in the Philippine pesos
or U.S. dollars
D. I promise to pay E or bearer in Manila the sum of ₱27,000 in the Philippine pesos
or U.S. dollars, at the option of the holder

73. Eianne signed a promissory note in favor of Flor promising to pay ₱10,000, 30 days
after sight. Who can sue on this note and enforce the obligation?
A. Both Eianne and Flor

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Scanned by CamScanner
B. Only Eianne
C. Only Flor
D. Neither Eianne nor Flor

74. "PAY TO MARIA RAMOS, NOTICE OF DISHONOR WAIVED" is an example of:


A. Special indorsement
B. Facultative indorsement
C. A and B
D. Qualified indorsement
E. Restrictive indorsement

75. The following are functions of a negotiable instrument. Choose the exception:
A. It increases purchasing power in circulation
B. It increases credit circulation
C. As substitute money
D. As legal tender

76. Which of the following instances does not discharge a negotiable instrument?
A. Payment by maker of a promissory note before maturity date
B. Intentional cancellation of the instrument by the holder
C. Payment by party primarily liable to holder or his authorized representative
D. Voluntary surrender of the instrument by the holder to the maker without
collecting

77. Which one of the following promissory notes is not negotiable for reason that the
instrument is not payable in sum certain in money?
A. X promises to pay to the order of A ₱10,000 payable in dollars at the rate of
exchange, prevailing on October 13, 1993
B. X promises to pay to the order of A ₱10,000 with 12% interest thereon
C. X promises to pay to the order of A ₱10,000 in installments
D. X promises to pay to the order of A ₱10,000 in two equal installments, the first
installment payable on September 2, 1993 and the second installment on or
before October 12, 1993

78. Antonio issues a bill to the order of Juan, and Juan indorses it to Pedro. Pedro indorses
the bill to Mario, Mario to Rodolfo and Rodolfo indorses the bill to Jose, the holder.
Which of the following is not true, if Jose decides to strike out any indorsement not
necessary to his title?
A. If Jose cancels the indorsement of Pedro: Pedro is relieved from liability
B. If Jose cancels the indorsement of Juan: Juan, Pedro, Mario and Rodolfo are
relieved from liability
C. If Jose cancels the indorsement of Pedro: Pedro, Mario and Rodolfo are relieved
from liability
D. If Jose cancels the indorsement of Mario: Mario and Rodolfo are relived from
liability

79. A bill of exchange to which no document is attached when presentment for payment
or acceptance is made:
A. Trade acceptance
B. Bank acceptance
C. Clean bill of exchange
D. Documentary bill of exchange

Page 48 of 141
80. Which of the following does not discharge a negotiable instrument?
A. Payment in due course by the accommodated party which the instrument is made
or accepted for his accommodation
B. Payment in due course by the principal debtor
C. Intentional cancellation of the instrument by the maker
D. Payment in due course by the accommodation maker

81. Which of the following is an example of real defense?


A. Acquisition of the instrument by force
B. Acquisition of the instrument for illegal consideration
C. Fraud in the endorsement
D. Fraud in factum

82. Which of the following instruments is not negotiable for the reasons that the
instrument is not payable at a determinable future time?
A. "One week after X passes the CPA Board Examination, I promise to pay to the
order of Y ₱10,000." (Sgd.) Z
B. "Thirty days after demand, Drawer Z directs Drawee Z to pay Y or order ₱10,000."
C. "Ten days after the death of X, I promise to pay to the order of Y ₱10,000.” (Sgd.)
Z
D. On or before October 31, 1993, I promise to pay Y or his order ₱10,000." (Sgd.) Z

83. In the renunciation of the holder of his rights against any party to the instrument,
which of the following statements is false?
A. If the instrument is delivered to the person primarily liable without collecting, it
constitutes oral renunciation
B. If renunciation is made in favor of any party secondarily liable, all parties
subsequent to him are discharged from liability
C. Renunciation will not affect the rights of a holder in due course without notice
D. If the renunciation is made in favor of the party primarily liable, it must be made
before, at or after maturity date

84. The following are instances when a drawee bank may refuse to pay checks drawn
against it, except one:
A. If there is a "stop payment" issued by the drawer
B. When the bank receives notice of the drawer's death
C. If the drawer's deposit is insufficient
D. If the drawer is insolvent

85. The following are functions of a negotiable instrument. Choose the exception.
A. It increases purchasing power in circulation
B. As legal tender
C. As substitute money
D. It increases credit circulation
86.
A check drawn by the bank upon itself and payable to third person:
A. Certified check
B. Manager's check
C. Traveler's check
D. Crossed check

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87. A issues a bill payable to the order of B. Later, B without endorsing the bill transfers
for a consideration said bill to C. The following, except one, are the valid effects of
the transfer:
A. C acquires the right to have the endorsement of B
B. The bill is merely assigned and not negotiated.
C. C becomes a holder
D. The transfer vests in C such title as B had thereon

88. A issues a negotiable promissory note to the order of B for ₱10,000 payable after 30
days after date. Later B indorsed it to C. Then X stole the note from C, forged the
signature of C and negotiated it to D, and D to E, E to F, the holder. On maturity of
the note, which of the following statements is not correct and invalid?
A. F can collect from either D or E because their signatures are genuine and the note
is operative against them
B. F can collect from A because A cannot put up forgery as his defense
C. F cannot collect from C because it was C's signature which was forged
D. F cannot collect from B because B is a party prior to the forgery

89. An instrument is indorsed as follows: "PAYS TO A, FOR B" (Sgd.) C. Then A indorsed
the instrument "Pay to D” (Sgd.) A, in payment of A's personal loan to D, the
instrument was accepted by D as indorsed by A. Is D acting in good faith when he
accepted the instrument as indorsed?
A. Yes, because D is a holder in due course
B. No, because D knew by prior indorsement that A is merely a trustee for B and has
no right to negotiate the instrument
C. Yes, because D acquired the instrument for value
D. No, because D did not get the consent of B

90. Which of the following is non-negotiable?


A. I bind myself to pay B or bearer ₱10,000.00 (Sgd.) A
B. I acknowledge being indebted to B in the amount of ₱10,000.00. (Sgd.) A
C. I promise to pay to the order of B ₱10,000.00. (Sgd.) A
D. I agreed to pay B or order ₱10,000.00 on demand. (Sgd.) A

91. X obtain the signature of Y for autograph purpose. X writes a negotiable promissory
note above Y's signature. The note was validly negotiable to Z who is a holder in due
course. What kind of defense can Y avail against Z?
A. Personal defense
B. Real defense
C. Equitable defense
D. Qualified defense

92. Which of the following is not a personal defense?


A. Absence of consideration.
B. Forgery of a signature
C. Non-delivery of a complete instrument
D. Failure of consideration

93. A issued a promissory note to the order of B for ₱10,000 payable on September 30,
1996 in payment of a TV set sold by B him. B failed to deliver the TV set to A and
instead transferred the note to C for value but without indorsement. Which of the
effects of the transactions listed below is valid?
A. C is deemed a holder in due course when B transferred the note to him.
B. C becomes a holder in due course when B indorsed the note to C on October 4,
1996.

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C. C has no right to compel B to make the proper indorsement to him.
D. C cannot collect from A because of A's defense of lack of consideration.

94. Manuel makes a promissory note for ₱3,000 payable to the order of Pedro. Pedro
negotiated the note to Antonio who, with the consent of Pedro, raise the amount to
₱30,000 and thereafter endorses it to Boy, Boy to Cris, and Cris to Doy, who is a
holder in due course. In this case:
A. Doy can recover ₱30,000 as against Manual.
B. Doy can recover ₱3.000 from Manuel.
C. Pedro and Antonio are liable to Doy for ₱3,000.
D. Boy and Cris are not liable to Doy.

95. Atoy issued a bearer note to Boy. The note is negotiated by delivery by Boy to Cris to
Doc, by Doc to Ely, by Ely to Fe, the holder. Fe can hold liable:
A. Cris
B. Atoy
C. Doc
D. Boy

96. 1st Statement: A holder for value is an endorsee who has both the legal title and the
beneficial interest to the instrument and is subject to both real and personal defenses
available against him.
2nd Statement: A holder in due course is one who possesses both the legal and
beneficial interest, to the instrument but is subject to personal defense only.
A. Both statements are false.
B. First statement is false, second statement is true
C. Both statements are true
D. First statement is true, second statement is false.

97. Which of the following is not a secondary party?


A. Acceptance for honor
B. Drawer
C. Payor for honor
D. Endorser

98. "I promise to pay to the order of B ₱10,000 30 days after sale" (Sgd.) A. Which of the
following indorsements of the above promissory note is not valid?
A. "Pay to C and D". (Sgd.)
B. "Pay to C ₱5,000; balance of this Note" (Sgd.) B if ₱5,000 has been paid by A
C. "Pay to C ₱5,000 to D ₱5,000” (Sgd.) B
D. "Pay to C and D. partners" (Sgd.) B

99. M makes a ₱10,000 note payable to the order of O who indorses it to A. F obtains
possession of the note fraudulently, forges A's signature, alters the amount to
₱70,000 and endorses it to R who in turn endorses to C. In this case:
A. C can enforce the note against A
B. C cannot enforce the note against any person
C. C can enforce the note against M and O
D. C can enforce the note against B

100. "PAY TO MARIA IN TRUST FOR JESUS" (Sgd.) Jose, is example of:
A. Conditional endorsement
B. Qualified endorsement
C. Facultative endorsement
D. Restricted endorsement

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OBLIGATION

1. Cesar pledged his Toyota car to Dan for ₱100,000. Cesar was unable to pay the
obligation two (2) months after the obligation became due and demandable.
Therefore, Dan sold the car at public auction for ₱80,000. Can Dan recover the
deficiency of ₱20,000 from Cesar?

1st Answer: No, he cannot recover the deficiency even if there is stipulation that he
can.
2nd Answer: Yes, he can recover the deficiency even without stipulation.

A. 1st answer correct, 2nd answer wrong


B. Both answers are wrong
C. 1st answer wrong, 2nd answer correct
D. Both answers are correct

2. A, B and C solidarily owe X and Y ₱30,000. X remitted the entire obligation in favor of
A. The effect is:
A. The obligation is not extinguished until A collects from B and C
B. The obligation is not yet extinguished until Y is paid by X of Y's share of the credit
C. A cannot recover from B and C because remission in his favor extend to the
benefit of B and C
D. A can recover from B and C their respective share of the debt

3. When the debtor binds himself to pay when his means permit him to do so, the
obligation is:
A. Conditional
B. Pure
C. Simple
D. With a period

4. When A voluntarily takes charge of the neglected business of B without the latter's
authority where reimbursement must he made for necessary and useful expenses,
there is a:
A. Quasi-delict
B. Quasi-contract
C. Negotiorum gestio
D. Solutio indebiti

5. Mr. Gamboa sold his car for ₱200,000 to Mr. Ramos. There was no fixed date for the
performance of the obligations of both parties. The obligation of Mr. Gamboa as
vendor is:
A. To wait for Mr. Ramos to pay ₱200,000 and deliver the car
B. To deliver the car immediately as this is a perfected contract
C. To deliver the car immediately because the seller's obligation is pure
D. To rescind the contract because no time or date is fixed for the performance of
their respective obligations

6. Which of the following is not void ab initio?


A. That whose object is outside the commerce of men
B. That whose object did not exist at the time of transaction
C. That which contemplates an impossible service

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D. That which is undertaken in fraud of creditors

7. One is not a requisite needed in order that obligation shall be extinguished by loss or
destruction of the thing due:
A. When the thing is lost without the fault of the debtor
B. When the thing lost is generic
C. When the thing is lost before the debtor has incurred delay
D. When the thing lost is specific

8. X obligated himself to pay Y the amount of ₱30,000 30 days after May 31, 1993 plus
a penalty of ₱3,000 if he fails to pay the obligation on the due date. After demand for
payment by Y, X offered to pay on July 30, 1993. Y can demand from X:
A. ₱30,000 plus ₱3,000 legal interest
B. ₱30,000 plus legal interest
C. ₱30,000 plus ₱3,000
D. ₱30,000 plus ₱3,000 plus legal interest plus damages

9. If the obligation of the debtor is "I will pay you my debt after I have arrived from
abroad”, this is:
A. Unenforceable
B. With a period
C. Void
D. Conditional

10. A obliged himself to give B a car if B places among the top ten in the CPA Board
Exam. Subsequently, they agreed that A will give B the car if B merely passes the
CPA Board. This is an example of:
A. Mixed novation
B. Real novation
C. Implied novation
D. Personal novation

11. It is a mode of extinguishing an obligation when two persons in their own right are
creditors of each other:
A. Reformation
B. Novation
C. Compensation
D. Confusion

12. It is a mode of extinguishing an obligation when two persons in their own right are
creditors of each other.
A. Confusion
B. Reformation
C. Compensation
D. Novation

13. A condition which, if imposed on an obligation, will be disregarded and will therefore
make the obligation immediately demandable:
A. If Juan commits suicide
B. If Juan passes the bar examination
C. If Juan kills Pedro
D. If Juan will not rise from the dead

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14. "A sells to B his lot and house in the city if A decides to transfer and live in the
countryside" is an example of:
A. Mixed condition
B. Potestative condition
C. Casual condition
D. Resolutory condition

15. This special form of payment is the conveyance of the ownership of a thing as
accepted equivalent of performance:
A. Dacion in payment or dacion en pago
B. Assignment of property or cession en pago
C. Application of payment
D. Tender of payment and consignation

16. A solidary obligation is one in which each of the debtors is liable for the entire
obligation or debt, and each of the creditor is entitled to the entire credit. Obligations
shall also be considered solidary under the following three exceptions. Which does
not belong to the exception?
A. When solidarity is expressly stipulated in the obligation.
B. When the prestation is indivisible and there are two or more debtors and
creditors.
C. When the law expressly provides solidarity.
D. When solidarity is required from the nature of the obligation.

17. Payment of the obligation by a solidary debtor shall not entitle him to reimbursement
from his co-debtors:
A. If such payment was made before the obligation is due.
B. If such payment was made after the obligation has prescribed or become illegal.
C. If such payment was made in compliance with the demand to him by all the
creditors.
D. If such payment was made after the obligation has become due and demandable
and notice of payment was made only to him.

18. A, B and C secured a loan from X. The promissory note which evidences the
obligation states: "I promise to pay" and signed by A, B and C. The obligation is:
A. Joint
B. Solidary
C. Divisible
D. Indivisible

19. Consignation is a mode of payment which extinguishes an obligation. Which of the


following is not a requisite for consignation?
A. Actual consignation with the proper judicial authorities
B. Prior notice has not been made
C. Existence of a valid debt
D. There must be prior notice of consignation to persons interested in the fulfillment
of the obligation

20. A, B and C are solidary debtors of X in the amount of ₱12,000. X then made a
demand from A but was able to collect ₱8,000 only because X remitted A's share of
₱4,000. How much can A collect from B and C?
A. ₱12,000
B. ₱ 8,000
C. ₱ 6,000
D. ₱ 4,000

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21. The obligation of the employer to pay death benefits and funeral expenses for his
employee's death while in the course of employment as sanctioned by the
Workmen's Compensation Act is one that arises from:
A. law
B. contracts
C. quasi-contracts
D. answer not given

22. Unless the law or the stipulation of the parties requires another standard of care, the
obligation to give a thing carries with it the obligation to take care of it with:
A. extra-ordinary diligence
B. ordinary diligence
C. diligence of a good father of a family
D. answer not given

23. Mr. Montecillo entered into a contract with Mr. Villarojo by which Mr. Montecillo
promised to deliver 1,000 cases of glasswares of the class and at the price stipulated
in the contract. Such delivery was to be made during the months of February and
March, 1991. In this case, no further demand or notice by Mr. Villarojo on Mr.
Montecillo was necessary because:
A. time is of the essence of the contract
B. the obligation expressly so provides
C. the demand would be useless
D. answer not given

24. A borrower who uses the thing for a purpose different from that intended, delays its
return, receives the thing under appraisal, lends it to a third person, or saves his
property instead of the thing borrowed shall be liable even in case of fortuitous event,
because:
A. the nature of the obligation requires the assumption of risk
B. the parties have expressly stipulated such liability
C. the law expressly so provides
D. answer not given

25. When the debtor binds himself to pay when his means permit him to do so, the
obligation is considered one:
A. with a condition dependent upon the debtor's sole will;
B. with a period
C. that is void
D. answer not given

26. When two persons in their own right are reciprocally creditors and debtors of each
other and extinguishes both debts to the concurrent amount. What takes place is
known as:
A. compensation
B. novation
C. confusion or merger
D. remission

27. The following shall produce the effect of payment of debts:


A. Delivery of check
B. Tender of Central Bank notes
C. Delivery of promissory note
D. Answer not given

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28. If the creditor to whom tender of payment has been made refuses without just cause
to accept it, the debtor shall be released from responsibility.
A. assignment of property
B. consignation of the thing or sum due
C. adjudication or dacion en pago
D. answer not given

29. A executes a promissory note in favor B and the promissory note is negotiated by B
and subsequently is indorsed in favor of A. The obligation to pay the promissory note
is thereby extinguished because there is:
A. confusion or merger
B. novation
C. remission
D. answer not given

30. Compensation shall take place when:


A. One of the debts arise from a depositum or from the obligation of a depositary or
of a bailee in commodatum.
B. One of the debts consists in civil liability arising from a penal offense.
C. Two persons, in their own right, are creditor and debtors of each other.
D. Answer not given.

31. The distinction between conventional subrogation and assignment is that in


conventional subrogation:
A. it is a mere cession of right.
B. An obligation is extinguished and another appears.
C. The same obligation, without being extinguished, is transferred to another.
D. Answer not given.

32. On October 4, 1987, A is indebted to B for ₱50,000 for a 20-day period. A proposed to
B that X will pay A's debt and that A will be free from all liabilities. B and X agree to
the proposal. On October 25, 1987, X became insolvent. At the time of delegation, X
was already insolvent but this was not known to A. The insolvency is not of public
knowledge. So, B sues A on the ground that it was A who made the proposal, that A
guaranteed X's solvency. Decide.
A. A is liable because he is presumed to have guaranteed X's solvency.
B. A is not liable because A does not know the insolvency of X at the time of
delegation and neither was the insolvency of public knowledge.
C. A is liable because he did not exercise due diligence in determining the insolvency
of X.
D. A is liable because X agree to the proposal to make himself solidarily liable for the
obligation.

33. A and B are joint creditors mancomunados of X and Y, joint debtors, for a total sum of
₱9,000. A owns 1/3 of the credit and B owns 2/3 of it. But X owns 2/5 of the debts and
Y owns 3/5 of the debts. In this case:
A. B can only collect from X, ₱5,400 and from Y, ₱3,600
B. A can only collect from X, ₱4,500 and from Y, ₱4,500
C. A can only collect from X, ₱3,600 and from Y, ₱5,400
D. B can only collect from X, ₱9,000 and from Y, ₱0

34. X and Y are solidary debtors of A, B, C and D, joint creditors, to the amount of ₱8,000.
How much can a collect from X?
A. A could recover ₱4,000 from X. A, in turn, has to give to B, C and D ₱1,000 each.

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B. A could recover ₱2,000 only from X.
C. A could recover ₱1,000 only from X.
D. A could recover ₱8,000 from X. A, in turn, has to give to B, C and D.

35. Y sold his horse to Z for ₱50,000. No payment has yet been made and the sales
document does not provide the date of delivery. Before delivery and payment, the
horse gave birth to a baby horse.
A. Z is entitled to the baby horse which was horn after the perfection of the contract
B. Y is entitled to the fruit (baby horse) as Z has not paid the price yet
C. Y is entitled to the fruit (baby horse) because it was born before his obligation to
deliver the horse
D. Z should pay additional amount for the baby horse to be entitled to it

36. Mr. Santos sold his car to Mr. Garcia for ₱150,000. No date is fixed by the parties for
the performance of their respective obligations. The obligation of Mr. Santos is:
A. To deliver the car immediately as there is a perfected contract
B. To deliver the car upon payment of Mr. Garcia of ₱150,000
C. To rescind the contract since there is no time fixed for the delivery and payment
of the car
D. To deliver the car within a reasonable time after the demand of Mr. Garcia to
deliver

37. Mr. AB owes Mr. CD ₱150,000 due on August 31, 1987. Mr. AB executed a mortgage
in favor of Mr. CD on Mr. AB's building to guaranty the obligation. On August 10,
1987, the mortgaged building was totally lost due to a strong typhoon. On August 12,
1987, Mr. CD demanded payment from Mr. AB. Is Mr. CD's demand valid?
A. No. The obligation is with a definite period, thus the creditor cannot demand
fulfillment of the obligation as such would be prejudicial to the lights of the
debtor.
B. No. The obligation is extinguished because the obligation is lost due to a
fortuitous event.
C. Yes. The debt becomes due at once because the guaranty was lost even through
a fortuitous event, unless the debtor can mortgage another property that is
equally satisfactory.
D. Yes. The debt becomes due at once because the tenor benefit is given solely to
the creditor thereby giving the creditor the right to demand performance even
before the due date.

38. Mr. ABC is obliged to give Mr. XYZ his only car on July 15, 1987. Mr. ABC did not
deliver on July 15, 1987. On July 20, 1987, an earthquake destroyed the building
where the car was garaged and the car was destroyed. Is Mr. ABC still liable?
A. No. Considering that no demand to deliver was made by Mr. XYZ and the specific
thing was lost due to fortuitous event, the obligation is extinguished.
B. No. The obligation is extinguished even if the debtor is already in default because
the debtor can plead impossibility of performance.
C. Yes. Mr. ABC is already in legal delay, thus the obligation to deliver the lost
specific thing is converted into monetary claim for damages.
D. Yes. The creditor can instead demand for a substitute equivalent in value from the
debtor.

39. A and B are solidary debtors or X, Y and Z, joint creditors to the amount of ₱15,000.
How much can Z collect from B?
A. Z could recover ₱7,500 from B
B. Z could receiver ₱5,000 from B
C. Z could recover ₱16,000 from B. Z in turn has to give X and Y ₱5,000 each.

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D. Z could recover ₱15,000 from B. B in turn can collect from A the amount of
₱7,500

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40. A, B and C borrowed ₱36,000 from X and Y. The three debtors signed a promissory
note dated January 10, 1988 promising to pay the creditors on or before July 10,
1988. How much can X collect from C?
A. ₱18,000
B. ₱ 6,000
C. ₱12,000
D. ₱36,000

41. When the subject matter of the contract is lost through a fortuitous event, who is
liable?
A. The debtor
B. The creditor
C. None of them
D. Both creditor and debtor

42. When two persons are reciprocally debtors and creditors, there is:
A. Consignation
B. Merger
C. Compensation
D. Confusion

43. This is the promissory note: "We promise to pay A, B and C the sum of one hundred
eighty thousand (₱180,000) pesos within 60 days. Signed by X, Y and Z."
A. X is obliged to pay A ₱20,000
B. X is obliged to pay A ₱60,000
C. X is obliged to pay A ₱180,000
D. X is obliged to pay A, B and C ₱180,000

44. OE is obliged to give OR a 1982 Mitsubishi 4-door sedan Lancer with plate number
NBA 123 on September 30, 1989. On October 10, 1989, OE did not yet deliver the car
which was totally destroyed by an earthquake on such date. Is OE still liable?
A. No. The obligation is extinguished. The specific thing was lost due to fortuitous
event and no demand to deliver was made by OR.
B. Yes. OE is in legal delay. OR can claim damages.
C. No. Even if OE is already in default, he can plead impossibility of performance.
D. Yes. OR can instead demand for another car of equivalent value from OE.

45. In this case, advance payment by the debtor is recoverable.


A. If the advance payment is only for interest due.
B. If the creditor demanded for the advance payment and the debtor knew it was
not yet due.
C. If the advance payment is in reciprocity to the advance payment of the other
party.
D. If the debtor was unaware of the period.

46. When the debtor abandons and assigns all his properties in favor of his creditor for
the latter to sell to satisfy his credits, this is;
A. Remission
B. Payment by cession
C. Dation in payment
D. Expromission

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47. This mode of extinguishments of obligation is when two (2) persons, in their own
rights, are creditors and debtors of each other.
A. Merger of confusion
B. Condonation or Remission
C. Compensation
D. Novation

48. A obliges himself to pay X ₱100,000.00 in 30 days plus a penalty of ₱20,000.00 if A


fails to pays the obligation in due time. A failed to pay the obligation in 30 days. X
can demand from A:
A. The principal of ₱100,000.00 plus ₱20,000.00 penalty.
B. The principal of ₱100,000.00 plus ₱20,000.00 penalty, plus legal interest.
C. The principal of ₱100,00.00 plus legal interest.
D. The principal of ₱100,000.00 plus ₱20,000.00 penalty plus legal interest plus
damages.

49. A owes X ₱50,000.00 payable on or before June 30, 2005. S who is not a party to the
contract and without the consent and against the will of A paid X the ₱50,000.00 on
April 2005 when the prevailing rate of interest was 12% per annum.
A. S can ask reimbursement from A in the amount of ₱50,000.00 plus 12% interest
from April to June 30, 2005.
B. S can ask reimbursement from A in the amount of ₱50,000.00
C. S cannot ask reimbursement from A because the payment by S is without the
consent and against the will of A.
D. S can ask refund from X because the payment by S was against the will of A.

50. When an obligation is extinguished because of the passage of time, this is:
A. Fulfillment of resolutory condition
B. Arrival of a resolutory period
C. Prescription
D. Rescission

51. When the debtor abandons or transfers all his properties to the creditors so that the
creditors may sell the properties and out of the net proceeds the creditors recover
their claims this is called:
A. Dacion en pago
B. Tender of payment and consignation
C. Payment of cession
D. Remission

52. When the period is "on or before a date" the debtor has the benefit of the period. This
benefit is lost and the obligation becomes demandable when:
A. The debtor attempts to abscond.
B. After contracting the obligation, the creditor suspects the debtor to becoming
insolvent.
C. The guarantee given by the debtor is not acceptable to the creditor.
D. Demand by the creditor could be useless.

53. A-1 and A-2 are solidary debtors of B-1, B-2 and B-3, joint creditors in the amount of
₱90,000.00. How much can B-3 collect from A-2?
A. B-3 could collect ₱30,000.00 from A-2.
B. B-3 could collect ₱90,00.00 from A-2 and give ₱30,000.00 each to B-1 and B-2.
C. B-3 could collect ₱45,000.00 from A-2 and give ₱15,00.00 each to B-1 and B-2.
D. B-3 could collect ₱15,000.00 from A-2 and ₱15,000.00 from A-1.

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54. Takes place when two persons in their own right, are creditor and debtor of each
other:
A. Remission
B. Confusion
C. Novation
D. Compensation

55. Whenever in an obligation a period is designated, it is presumed to have been


established for the benefits of:
A. both the creditor and the debtor
B. the creditor
C. the debtor
D. the third party

56. An act of liberality whereby a creditor condones the obligation of the debtor
A. Confusion
B. Compensation
C. Remission
D. Novation

57. When the thing deteriorates pending the fulfillment of the suspensive condition
without the fault of the debtor, the impairment is:
A. to be borne by the party who caused the deterioration
B. to be borne partly by the debtor and partly by the creditor
C. to be borne by the debtor
D. to be borne by the creditor

58. A owes B ₱10,000. With consent of both, C pays B ₱5,000. Now B and C are the
creditors of A to the amount of ₱5,000 each. Suppose A has only ₱5,000. Which is
correct?
A. B and C should divide the ₱5,000 equally
B. C should be preferred
C. A may choose who to pay
D. B should be preferred

59. X is under obligation to deliver his Toyota car to Y. However, before delivery, Z
destroys the car. Which one of the following is not correct?
A. X's obligation to give his car to Y is extinguished.
B. X is allowed to recover from Z.
C. Y has a right to bring action against Z.
D. X is not obliged to give Y an equivalent value of her car.

60. An obligation where only the presentation has been agreed upon but the debtor may
render another in substitution is:
A. Conjoint obligation
B. Facultative obligation
C. Simple obligation
D. Alternative obligation

61. XYZ, are solidarily liable to A for ₱30,000 which mature on July 1, 1993. On May 1,
1993, X paid A for the whole amount of the debt. If on December 1, 1993, X will be
reimbursed by Y, the latter will the liable for:
A. ₱10,000 with interest from July 1, 1993 to December 1, 1993
B. ₱10,000 without interest
C. ₱10,000 with interest from May 1, 1993 to July 1, 1993

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D. ₱10,000 with interest from May 1, 1993 to December 1, 1993

62. A thing is not deemed lost when it:


A. perishes
B. disappears in such a way its existence is unknown or it cannot be recovered
C. goes out of commerce
D. deteriorates

63. D is the driver of a passenger bus which is owned and operated by O. While D is
driving said bus, it met an accident through his negligence where P, a passenger, was
injured. D is liable to P for damages which arises from:
A. law
B. quasi-contracts
C. contracts
D. crime
E. quasi-delict

64. A mango tree in the land of O is reclining towards the road. All of a sudden, without a
storm or an earthquake or even strong wind, the tree falls hitting a car belonging to Y
causing a ₱20,000 damage. The liability of O to X arises from:
A. law
B. quasi-contracts
C. contracts
D. crime
E. quasi-delict

65. Ricardo Montejo owes Pablo Mendez ₱15,000. Upon maturity of the debt, Montejo
fails to pay and so Mendez sues him in a complaint. Montejo answers the complaint
and before actual hearing, Mendez assigns the promissory note signed by Montejo to
Alfredo Castro, for ₱10,000.00 because Mendez needs the money badly. Now Castro
demands payment from Montejo. In the case at bar, Montejo is:
A. not liable to Castro for the amount.
B. liable only to the extent of ₱10,000.00 plus cost and interest.
C. liable for the entire amount of ₱15,000.00 plus cost and interest.
D. Answer not given

66. A promissory note signed by Martiniano and dated March 15, 1991 is worded as
follows: "I promise to pay Juanita the sum of Fifty Thousand Pesos (₱50,000.00)
provided that if she should fail in the October, 1991 CPA Examination, she shall return
to me said amount." The above note gives rise to an obligation with:
A. suspensive condition
B. casual condition
C. resolutory condition
D. answer not given

67. Bertulfo and Claudio promise to deliver a particular car valued at ₱100,000.00 to
Manuela on or before September 15, 1991. September 15, 1991 came and upon
demand by Manuela for delivery from Bertulfo and Claudio, Bertulfo was willing to
deliver but Claudio refused to deliver. In the case at bar:
A. An action for specific performance will lie against both Bertulfo and Claudio.
B. Both Bertulfo and Claudio shall be liable for ₱50,000.00 each with damages.
C. Bertulfo shall be liable for ₱50,000.00 without damages and Claudio shall be
liable for ₱50,000.00 and damages.
D. Answer not given

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68. Carlito, Alfredo and Francis owed in solidum ₱15,000 to Ricardo as evidenced by a
promissory note due on September 30, 1991. The note prescribed on September 30,
1991. On October 10, 1991, Carlito paid Ricardo. In this case, Carlito is:
A. entitled to collect ₱5,000.00 each from Alfredo and Francis.
B. not entitled to reimbursement from his co-debtors for the shares of the latter.
C. entitled to recover from Ricardo.
D. answer not given.

69. Carlo and Cleo are solidary debtors of Corrina, Luis, Edward and Abelito, joint
creditors in the amount of ₱20,000. How much can Corrina collect from Carlo?
A. Corrina could collect ₱2,500 from Carlo
B. Corrina could collect ₱10,000 from Carlo. Corrina is then obliged to give ₱2,500
each to Luis, Edward and Abelito
C. Corrina could collect ₱5,000 from Carlo
D. Corrina could collect the whole ₱20,000 from Carlo but will in turn give ₱5,000
each to Luis, Edward and Abelito

70. P.A.U. sold to R.D.E. the former's car on April 1, 1992 for ₱300,000. P.A.U. promised to
deliver the car on April 15, 1992 but R.D.E. did not make any promise as when to pay.
A. P.A.U. on April 5, 1992 can demand payment from R.D.E. because the obligation is
not subject to any condition
B. R.D.E. will be obliged to pay only at or after delivery
C. P.A.U. cannot demand payment until he delivers the car
D. R.D.E. can compel P.A.U. to deliver the car before April 15, 1992 upon payment of
the selling price

71. Mr. Debtor owes Mr. Creditor who has two (2) legitimate emancipated children,
₱50,000 payable on December 31, 1991.
A. If Mr. Debtor dies before December 31, 1991, Mr. Creditor cannot collect from the
heirs of Mr. Debtor
B. If Mr. Debtor dies before December 31, 1991, Mr. Creditor can collect from the
heirs of Mr. Debtor
C. If Mr. Creditor dies, his two (2) legitimate emancipated children cannot recover
from Mr. Debtor his obligation
D. If both Mr. Debtor and Mr. Creditor die, the heirs of Mr. Creditor can collect from
the heirs of Mr. Debtor

72. In an obligation where only one (1) prestation has been agreed upon, but to
extinguish the obligation the debtor is allowed and does render another substitute,
the obligation is:
A. Facultative obligation
B. Simple obligation
C. Alternative obligation
D. Conjoint obligation

73. In a joint obligation, A, B and C are debtors of joint creditors, D, E and F in the
amount of ₱180,000. A's obligation is:
A. Pay D ₱60,000
B. Pay D, E and F ₱180,000
C. Pay D ₱120,000
D. Pay D ₱20,000

74. On June 5, 1991, Jose Dizon of Angeles City is obliged to give to Ruben Sarnia, Jose
Dizon's red crew cab. There was no delivery until June 15, 1991 when the garage of
the red crew cab collapsed due to heavy ash and sand spewed by Mt. Pinatubo and

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the red crew cab was totally destroyed. After the crew cab was destroyed and lost, is
Jose Dizon still liable?
A. No. Even if Jose Dizon was already in default, he could plead impossibility of
performance.
B. Yes. The obligation to deliver the crew cab is changed to pay the equivalent value
because Jose Dizon is in legal delay.
C. No. Because there was no demand by Ruben Sarnia to deliver the crew cab and
the specific object was lost due to fortuitous event. The obligation is extinguished.
D. Yes. Because the contract is perfected.

75. Mr. A. Santos signed a letter addressed and delivered to Mr. S. Aguas. The terms of
the letter are:

 An offer to sell a 500 sq.m. lot for ₱300,000


 An option time up to October 31, 1991 for Mr. S. Aguas to raise the ₱300,000
 Upon payment of the ₱300,000, Mr. A. Santos will execute and sign a Deed of Sale

On October 31, 1991, Mr. A. Santos sent a letter to Mr. S. Aguas asking for a new
price of ₱350,000 for the 400 sq.m. lot.

Can Mr. S. Aguas compel Mr. A. Santos to accept and make him sign and execute a
Deed of Sale?
A. No. Mr. S. Aguas did not accept the offer of Mr. A. Santos.
B. Yes. Mr. A. Santos is already estopped by his signed letter and offer.
C. Yes. There was actual meeting of the minds.
D. Yes. The contract is perfected.

76. If the obligor binds himself to perform his obligation as soon as "he shall have
obtained a loan" from a certain bank, this obligation is
A. With a term
B. Conditional
C. Suspensive
D. Resolutory

77. The ₱1,000-bills issued by the Central Rank and in circulation are considered:
A. Checks
B. Bills of exchange
C. Legal tender
D. Promissory notes

78. One of the following statements is not true:


A. A creditor is not bound to accept a check in satisfaction of his demand, because a
check even if good when offered, does not meet the requirements of legal tender
B. The obligation of a debtor who had agreed to pay in dollars in a foreign bill of
exchange, shall be discharged in Philippine currency measured at the prevailing
rate of exchange at the time the obligation was incurred
C. The Philippine peso bills when attempted to be exported, as when carried in
excess of that allowed by the CB regulation, may be deemed to have been taken
out of domestic circulation as legal tender and thus, treated as a commodity
D. The purchasing power or value of money or currency depends upon, can come
into being, can be created or brought about by a law enacted by the legislative
department of the Government

79. It is one of the essential elements of an obligation:


A. A maker or drawer

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B. An object or prestation
C. A drawee
D. Money

80. It refers to a joint obligation:


A. One in which each debtor is liable for the entire obligation, and each creditor is
entitled to demand the whole obligation
B. One in which either one of the parties is indispensable and the other is not
necessary
C. One in which the obligation of one is a resolutory condition of the obligation of the
other, the non-fulfillment of which entitles the other party to rescind the contract
D. One in which each of the debtors is liable only for a proportionate part of the debt
and each of the creditor is entitled only for a proportionate part of the credit

81. It presupposes not only that the obligor is able, ready and willing, but more so, in the
act of performing his obligation.
A. Promissory note
B. Tender of payment
C. Bill of exchange
D. Obligation to sell

82. It is not a source of liability which will entitle the injured party to damages:
A. Culpa aquiliana or negligence committed in the performance of a spontaneous act
B. Mora or delay
C. Dishonesty, malice or bad faith in the performance of an existing valid obligation
D. Contravention of the tenor of the obligation

83. Jesus owes Maria ₱1,000 on June 30, 1993.


Maria owes Jesus ₱600 due on June 20, 1993.
Maria owes Jesus ₱400 due on June 30, 1993.
Maria owes Jose ₱1,000 due on June 30, 1993.

On June 25, 1993. Maria cannot pay Jose ₱1,000 so she assigns to Jose her credit
of ₱1,900 against Jesus without the knowledge of Jesus. On July 2, 1993, Jose tries to
collect from Jesus the ₱1,000. How much can Jose compel Jesus to pay?
A. Zero
B. ₱1,000
C. ₱ 600
D. ₱ 400

84. The leviable properties of the debtor are transferred to the creditors to be sold and
from the proceeds, the creditors are paid:
A. Pledge
B. Cession
C. Dacion en pago
D. Chattel mortgage

85. The obligation is demandable on the date of the obligation and shall continue to be in
force up to the arrival of the day certain:
A. Resolutory period
B. Suspensive period
C. Indefinite period
D. Legal period

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86. A, B and C secured a loan from D. The promissory note which evidence the obligation
states: "I promise to pay D or order ₱10,000 payable on demand" (Sgd.) A B C. The
obligation is:
A. Solidary
B. Divisible
C. Indivisible
D. Joint

87. Which one of the following is not an element of legal compensation?


A. Debts to be compensated are due and demandable
B. There is controversy or adverse claim over any debts to be compensated
C. There are two or more debts of the same kind
D. There are two persons who are creditors and debtors of each other

88. X, Y and Z joint debtors owe ₱18,000 to A, B and C, solidary creditors. How much can
B collect from X?
A. ₱ 3,000
B. ₱18,000
C. ₱ 9,000
D. ₱ 6,000

89. Which of the examples given below can legal compensation take place?
A. A owes B ₱1,000 due on June 30, 1993. B owes A ₱1,000 due on June 30, 1993
but C has filed an adverse claim against A
B. A owes B ₱1,000 payable October 31, 1993. B owes A ₱1,000 due on October 31,
1993
C. A owes B ₱1,000 with C as guarantor. B owes C ₱1,000
D. A owes B ₱1,000 payable May 31, 1993. B to deliver to A 2 piculs of sugar worth
₱1,000 each on May 31, 1993

90. X and Y are solidary debtors of A, B and C, joint creditors to the amount of ₱30,000.
How much can B collect from X?
A. B can collect ₱30,000 from X. B in turn has to give A and C ₱10,000 each
B. B can collect ₱10,000 from X
C. B can collect ₱15,000 from X
D. B can collect ₱30,000 from X. X in turn can recover from Y the amount of ₱15,000

91. ABC are solidary creditors of X for ₱10,000. A makes a will giving the ₱10,000 debt to
X as legacy. The obligation is extinguished by:
A. Confusion of debt
B. Novation of debt
C. Remission of debt
D. Payment of debt

92. Which of the following is not a special form of payment?


A. Cession
B. Application of payment
C. Consignation
D. Dacion in payment

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93. A owes solidary creditors XYZ ₱10,000. There is remission of the debts when:
A. X borrows ₱10,000 from A
B. X waives partially the obligation of ₱10,000 to A
C. Z makes a will giving the ₱10,000 debt to A as legacy
D. Y tells A that instead of paying ₱10,000, A shall just deliver a ring to Y

94. When the characters of the creditor and the debtor are merged in one and the same
person, there is extinguishment of the obligation by:
A. Compensation
B. Merger of rights
C. Novation
D. Remission

95. X, Y and Z solidarily owe A, B, C, D, joint creditors ₱30,000. How much can A collect
from X?
A. ₱7, 500 only
B. ₱20,000, A in turn has to give ₱5,000 to B, C, and D
C. ₱10,000, A in turn has to give ₱2,500 each to B, C, and D
D. ₱5,000 only

96. A, B, and C solidarily bound themselves to deliver to X a Honda motorcycle. The


obligation was not fulfilled through the fault of A. Thereupon, X filed an action in court
against C and the court awarded ₱36,000 to X. Which of the following situations is
valid?
A. If C pays X the ₱36,000. C can collect from A ₱26,000 and B ₱12,000. Later, B
can ask for reimbursement from A ₱12,000
B. X has to collect ₱12,000 each from A, B, and C to satisfy the courts award of
₱36,000
C. If C pays X ₱36,000, C can collect from B ₱10,000 and from A ₱16,000
D. X cannot collect the whole amount of ₱36,000 from C

97. Diaz is under obligation to give Cruz, at Diaz' option, a car, a pick-up, or a van.

1st Statement: If the car and the pick-up were destroyed by Diaz' own fault and later
Diaz communicated to deliver the van, but got lost by a fortuitous event, Diaz should
not be held liable.
2nd Statement: If the car and the pick-up were destroyed by a fortuitous event and
later the van was lost by Diaz' fault, Diaz should be held liable.
A. 1st statement correct, 2nd statement wrong
B. 1st statement wrong, 2nd statement correct
C. Both statements are correct
D. Both statements are wrong

98. X owes Y ₱40,000. With the consent of both parties, Z pays ₱20,000 which makes Y
and Z creditors of X to the amount of ₱20,000 each. X becomes bankrupt and has
only ₱20,000 assets left.
A. Z should get the ₱20,000
B. Y and Z divide the ₱20,000 equally
C. X may choose whom to pay
D. Y should get the ₱20,000

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PARTNERSHIP

1. Which of the following is not correct? In a limited partnership composed of A, B and


C, the contribution may be as follows:
A. A-cash (limited partner); B-cash (general partner); C-services (general partner)
B. A-property (limited partner); B-services (general partner); C-services (general
partner)
C. A-services (limited partner); B-cash (general partner); C-services (general partner)
D. A-cash (limited partner); B-property (general partner); C-services (general
partner)

2. A and B orally agreed to form a partnership two years from today, each one to
contribute ₱10,000. If at the arrival of the period, one refuses to go ahead with the
agreement, can the other enforce the agreement?
A. Yes, since the agreement is to be enforced after one year from the making
thereof, the same should be in writing to be enforceable
B. Yes, because the prior agreement was voluntarily made
C. Yes. because the partnership contract is not governed by the Statute of Frauds
D. No, because the agreement was merely oral

3. If a partner is insolvent, the first order of preference in the distribution of his assets
is:
A. Partnership creditors
B. Partner's contribution in the partnership
C. Separate creditors of the debtor
D. Pro-rata between the separate creditors and the partnership's creditors

4. The following except one, are common characteristics of partnership and corporation.
Which is the exception?
A. The individuals composing both organizations have little voice in the conduct of
the business
B. Both can act only through agents
C. Both are business organizations composed of a number of individuals
D. Both have juridical personality separate and distinct from that of individuals
composing it

5. Which of the following is not a requisite prescribed by law in order that a partnership
may be held liable to a third party for the acts of one of its partners?
A. The partners bind the partnership by acquiescence for the obligations he may
have contracted in good faith
B. The partner must have the authority to bind the partnership
C. The contract must be in the partnership's name or for its account
D. The partner must act on behalf of the partnership

6. X, Y and Z are partners in Able Co. W represented himself as a partner in Able Co. to
B, who, on the faith of such representation, granted ₱300,000 loan to the
partnership. Assuming only X and Y consented to such representation, who shall be
liable to B?
A. Since the partnership benefited from the credit extended by B, all partners X, Y
and Z are liable
B. Only X, Y and W who are partners by estoppel are liable pro-rate to B
C. Since the loan was extended to the partnership, all the partners and W are liable
D. Only W who made the representation shall be liable to B

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7. Which of the following incidents may be a cause for involuntary dissolution of a
partnership?
A. Expulsion of any partner
B. Termination of the term of the partnership
C. Insolvency of any partner
D. Express will of any partner

8. A limited partnership was formed in 1994 by X as general partner and Y and Z as


limited partners. In 1995, X and Z got married. Did the marriage dissolve or change
the form of the partnership?

1st Answer: Yes, partnership is dissolved by the marriage because there is a change in
equity and status among the partners.

2nd Answer: No, because spouses can enter into a universal partnership.
A. Both answers are correct
B. 1st answer wrong, 2nd answer correct
C. Both answers are wrong
D. 1st answer correct, 2nd answer wrong

9. The following are instances, except one, when a partnership is unlawful. Which is the
exception?
A. A partnership formed for smuggling of contrabands
B. A partnership formed to furnish apartment houses to be used as venue for illegal
gambling
C. A partnership formed for the purpose of buying public lands
D. A partnership formed to create cartel for monopolies

10. Which of the following persons are not disqualified to form a universal partnership?
A. Those guilty of adultery and concubinage
B. Husband and wife
C. Those guilty of the same criminal offense, if the partnership is entered into a
consideration of the same
D. Brother and sister

11. XYZ Partnership composed of three (3) capitalist partners and one industrial partner
suffered business losses. Its remaining assets amounted to ₱100,000. The
partnership is indebted to its supplier, Mr. Cruz, in the amount of ₱160,000. How can
Cruz recover the ₱60,000?
A. Cruz can recover from the partnership ₱100,000 and the balance of ₱60,000 from
the three capitalist partners only
B. Cruz can recover from the partnership ₱100,000 and the balance of ₱60,000 from
any of the partners solidarily
C. Cruz can recover from the partnership ₱100,000 and the balance of ₱60,000 from
the four partners jointly including the industrial partner
D. Cruz can recover from the partnership ₱100,000 only and suffer as his loss in the
balance of P60,000

12. A, B and C formed a limited partnership with A as general partner, B as limited


partner and C as industrial partner. A and B contributed ₱50,000 each. The
partnership failed and after disposing all its assets to pay partnership debts, there
still remains a note payable in the sum of ₱30,000. Against whom can the creditor
demand payment of the note of ₱30,000?
A. A legal representative of a limited partner
B. A and B are liable to pay ₱15,000 each

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C. Only A is liable to pay the ₱30,000 indebtedness
D. A and C are liable to pay ₱15,000 each

13. Types of partnership in which the partners enjoy practically all the profits:
A. General partnership
B. Universal partnership
C. Limited partnership
D. De facto partnership

14. Which of the following is an essential element of partnership?


A. There must be a contribution of money, property, or industry to a common fund
B. It must be an association for profit with the intention to divide the profits among
themselves
C. There must be a valid and voluntary agreement
D. All of them

15. A and B are partners. On June 15, 1992 when the total obligation of the partnership
totals ₱80,000, C was admitted as a new partner. At the time of C's admission, the
partnership creditors were M for ₱50,000 and N for ₱30,000. After June 15, the
partnership borrowed from O ₱20,000 and ₱40,000 from P. On December 15, 1992,
the partnership becomes insolvent leaving an obligation totaling ₱140,000 and
partnership assets amounting to ₱30,000. The creditors are going after the separate
properties of the partners to satisfy their remaining claims. How are the creditors'
claims satisfied?

Answer 1 – M and N can go after the separate properties of A and B but C's separate
properties are not answerable to their claims.

Answer 2 – O and P can go after the separate properties of A, B, and C.

Which of the following is correct?

A. Both answers are wrong


B. Answer 1 is wrong but answer 2 is correct
C. Both answers are correct
D. Answer 1 is correct but answer 2 is wrong

16. A and B are capitalist partners with C as industrial partner. A and B contributed
₱20,000 each to the capital of the partnership. A contractual liability of ₱50,000 was
incurred by the partnership in favor of X. The assets of the partnership have been
exhausted still leaving an unpaid liability of ₱12,000. What are the rights and the
obligation of the partners, if any?
A. A, B and C are liable to X and C after giving his share may ask reimbursement
from A and B, unless otherwise stipulated
B. A and B only
C. C only
D. A, B and C and C has no right for reimbursement from A and B unless expressly
stipulated

17. Which of the following liabilities of the partnership shall rank first in the order of
payment?
A. Those owing to creditors other than partners
B. Those owing to partners in respect to profits
C. Those owing to partners in respect to capital
D. Those owing to partners other than for capital and profits

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18. May contribute money, property or industry to a common fund.
A. Both general and limited partners
B. Limited partners
C. General partners
D. Capitalist partners

19. One who takes charge of the winding up of partnership affairs upon dissolution.
A. Silent partner
B. Ostensible partner
C. General partner
D. Liquidating partner

20. A and B entered into a universal partnership of all present property. The common
property of the partnership shall be:
A. All the properties which belonged to each of the partners at the time of the
constitution of the partnership.
B. All the properties which belonged to each of the partners after the constitution of
the partnership.
C. All the properties which belonged to each of the partners at the time of the
constitution of the partnership as well as the profits which they may acquire
therewith.
D. All the properties which belonged to each of the partners at the time of the
constitution of the partnership as well as properties which each may acquire
thereafter.

21. Which one of the following is not a requisite prescribed by law in order that a
partnership may be held liable to a third party for the acts of one of its partners?
A. The contract must be in the partnership name or for its account.
B. The partner binds the partnership by acquiescence for obligations he may have
contracted in good faith.
C. The partner must act on behalf of the partnership.
D. The partner must have the authority to bind the partnership.

22. A capitalist partner is engaged for his own account in an operation which is of the
kind of business in which the partnership is engaged. Said partner can be:
A. Compelled to sell his interest in the partnership to the other capitalist partners
B. Compelled to dissolve or discontinue the operation of his business
C. Compelled to bring to the common funds of the partnership any profits accruing
to him from his transactions
D. Denied his share in the profits of the partnership

23. A limited partnership named “A, B and C Co. Ltd.” was formed on October 25, 1986
by A as general partner and B and C as limited partners. In 1987, A and B got
married. Did the marriage dissolve or put an end to the partnership?
A. Yes, the partnership is dissolved by the marriage because there is a change in
equity among the partners.
B. No, the marriage did not dissolve the partnership.
C. No, because spouses can enter into a universal partnership.
D. Yes, because spouses cannot enter into a particular partnership or be partners
thereof.

24. X, Y and Z were partners. X is an industrial partner. During the first year of operation,
the firm realized a profit of ₱60,000. During the second year, the firm sustained a
loss of ₱30,000. So the net profit for the two years of operation was only ₱30,000. In
the articles of partnership, it was agreed that X, the industrial partner would get 1/3

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of the profit but would not share in the losses. How much will X, the industrial
partner, get?
A. X will get only ₱20,000 which is 1/3 of the profit of the 1st year of operation
B. X will get only ₱10,000 which is 1/3 of the net profit
C. X will get only ₱20,000 in the first year and none in the second year
D. X will share in the loss in the second year

25. A, B and C, capitalist partners, each contributed ₱30,000, ₱20,000 and ₱10,000
respectively and D, the industrial partner, contributed his services. Suppose X, a
customer, is the creditor of the firm to the amount of ₱180,000. How can X recover
the ₱180,000?
A. X must sue the firm and get ₱60,000 from all the partners including D, the
industrial partner. X can still recover the balance of ₱120,000 from the four
partners jointly.
B. X can recover from the firm ₱60,000. X can still recover the balance of ₱120,000
from the capitalist partners only.
C. X can recover from the firm ₱60,000. X can recover the balance of ₱120,000 from
any of the partners solidarily.
D. X can recover from the firm ₱60,000 and consider the balance of ₱120,000 as
loss.

26. If a partner in a partnership is insolvent, the first order of preference in the


distribution of his assets are:
A. Partnership creditors
B. Partners contribution to the partnership
C. Separate creditors or the debtors
D. Pro-rata between the separate creditors of the debtor and the partnership
creditors

27. X, Y and Z are equal partners to XYZ Partnership. A owes the XYZ Partnership for
₱9,000. Z, a partner, collected from A ₱3,000 before X and Y received anything. Z
issued a receipt on the ₱3,000 as his share of what A owes. When X and Y collected
from A, A was insolvent.
A. Partner Z shall share partners X and Y with the ₱3,000
B. Z cannot be required to share X and Y with the ₱3,000
C. X and Y should first exhaust all remedies to collect from A
D. X and Y can automatically deduct from the capital contribution of Z the
partnership their respective share in the ₱3,000

28. Aguas and Bautista are partners in a real estate partnership. The partnership owns a
piece of land which Castro desired to buy. Castro contacted Aguas and informed him
of his desire to buy the land and Aguas did not tell Bautista about it. Aguas bought
Bautista out of the partnership and afterwards sold the land to Castro with a big
profit.
A. The partnership is dissolved when Aguas became the sole owner.
B. The sale of the land to Castro is void because it was without the knowledge of
Bautista.
C. Aguas is not liable to Bautista for the latter's share in the profits
D. Aguas is liable to Bautista for the latter's share in the profits.

29. A, B and C arc partners in ABC Company. D represented himself as a partner in ABC
Company to E, who, on the belief of such representation, extended a ₱150,000 credit
to ABC Company. Assuming only B and C consented to such representation, who will
be held liable to E?

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A. E extended the credit to ABC Company so a partnership liability exists. Thus, all
the partners A, B, C and D are liable.
B. B, C and D are partners by estoppel and thus, are liable pro-rate to E.
C. Partners A, B and C who benefited from the credit extended by E are liable.
D. D who made the representation is liable to E.

30. One of the following incidents may be a cause for involuntary dissolution of a
partnership. Which is it?
A. Termination of the partnership
B. Insolvency of any partner
C. Express will of any partner
D. Expulsion of any partner

31. A and B are equal partners in AB and Company. Y represented himself as a partner in
AB and Company to Z, who relying on such representation. Extended a ₱50,000
credit to AB and Company. Of the two partners, only B knew and consented to the
representation of Y, who should be held liable to Z?
A. Only Y, who presented himself as partner, is liable.
B. Since the credit was extended to AB and Company, a partnership liability was
created so the two partners and Y are liable.
C. Partners A and B who benefited from the credit extended to the partnership AB
and Company shall be liable to Z.
D. B and Y are partners by estoppel and, thus, are liable to Z.

32. The following persons are disqualified to form a universal partnership. Who are the
exceptions?
A. Brother and sister
B. Husband and wife
C. Those guilty of adultery and concubinage
D. Those guilty of the same criminal offense if the partnership is entered into in
consideration of the same

33. A is the capitalist partner and B is the industrial partner. A engaged personally in the
same kind of business the partnership is engaged in.
A. If there are losses, the partnership will bear the losses.
B. If there are profits, the profits will be shared by A and the partnership.
C. If there are profits, A will give the profits to the partnership.
D. A will be excluded from the partnership and pay damages.

34. A is the managing partner of ABC and Company. X owes A personally and ABC and
Company ₱20,000 each. A collected and received from X ₱10,000 and he issued a
receipt wherein it is stated that the amount is applied against his personal credit.
A. The amount received will be applied in favor of the partnership credit.
B. The amount received will be applied in proportion to both credits.
C. The amount received will be applied in the credit of A.
D. All the partners will decide as to whose favor it will apply.

35. Three of the following are similarities between a partnership and a corporation. Which
is not?
A. The individuals composing both have little voice in the conduct of the business.
B. Both have juridical personality separate and distinct from that of the individuals
composing them.
C. Like a partnership, a corporation can act only through agents.
D. Both are organizations composed of an aggregate of individuals.

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36. A, B and C are general partners in ABC Partnership. A, the managing partner engaged
personally in a business that is the same as business that is the same as the business
of the partnership without the consent of B and C.
A. If there are profits, A will give the profits to the partnership.
B. If there are losses, the partnership will bear the losses.
C. If there are profits, they will be shared by partner A and ABC Partnership.
D. The profits or losses will be shared equally by A and the Partnership.

37. Three of the following are rights of a general partner and also of a limited partner in a
limited partnership. Which is not?
A. To inspect and copy at reasonable hours the books of the partnership and have
them kept at the principal place of business
B. To demand true and full information of all matters affecting the partnership and a
formal account of the partnership affairs
C. To have dissolution and winding up by decree of court
D. None of the above

38. The partnership is insolvent. They are preferred as regards to the partnership
property.
A. Partnership creditors
B. Partners’ separate creditors
C. Partners with respect to their capital
D. Partners with respect to their profits

39. A, B and C are partners in ABC Company. D introduced himself as a partner in ABC
Company to X, who, on the belief of such introduction extended a ₱40,000 credit to
ABC Company. These facts are known to A who did not oppose. Who shall be held
liable to X?
A. Since X extended the credit to ABC Company so a partnership liability exists.
Thus, all the partners A, B, C and D are liable.
B. Only A who knows the transaction and D are partners by estoppel and thus, are
liable pro-rate to E.
C. D who represented himself as partner in ABC Company is liable.
D. A, B and C who benefited in the ₱40,000 credit shall be liable to X.

40. Bears the loss of property contributed to the partnership.


A. Capitalist partner
B. Limited partner
C. Partners contributing usufructuary rights
D. None of the above

41. When cash or property worth ₱3,000 or more is contributed as capital, the Articles of
Co-Partnership shall be in a public instrument and registered with the Securities and
Exchange Commission. If the said requirements are not complied with:
A. It will render the partnership void.
B. It will not affect the liability of the partnership and the partners thereof to third
parties.
C. It will not give a legal personality to the partnership.
D. It will give the partnership a de facto existence.

42. B-1, B-2 and B-3 are equal partners in 3-Brothers Partnership. The partnership is
indebted to PC for ₱150,000. Partner B-1 is indebted to SC for ₱20,000. PC attached
and took all the assets of the partnership amounting to ₱90,000. B-2 and B-3 are
solvent while B-1 is insolvent and all what he owns is a land valued at ₱15,000.
A. SC has priority to the land of B-1 as a separate creditor.

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B. PC has priority to the land of B-1 to cover B-1’s share of the ₱60,000 remaining
liability of the partnership.
C. B-2 and B-3 have priority to the land of B-1 if they paid PC the ₱60,000 remaining
liability of the partnership.
D. PC and SC shall both have priority to the land of B-1 in proportion to their claims
of ₱60,000 and ₱20,000, respectively.

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43. A partnership is not dissolved on the death of a:
A. General partner
B. Industrial partner
C. Limited partner
D. General limited partner

44. A and B are equal partners in A and B Company. C contracted with XYZ and Co. and
represented himself as partner in A and B Company. XYZ and Co. contacted A who
confirmed that C is in fact a partner of A and B Company. XYZ and Co. extended
credit to C for A and B Company in the amount of ₱60,000.00. Who are liable to XYZ
and Co?
A. A and C are partners by estoppel and are liable to XYZ and Co.
B. XYZ and Co. extended the credit to C for A and B Company so a partnership
liability exists, so both partners, A and B together with C are liable.
C. The partnership A and B Company benefited, so it is liable.
D. Only C who made the representation is liable.

45. A, B, C are partners in a trucking and freight business. B and C, without the
knowledge of A, approached X and offered to sell to X all the trucks of the partnership
at a price very much higher than their book value. B and C bought-out A from the
partnership and thereafter X bought all the trucks with a big profit of B and C.
A. The sale of the trucks to X is void because it is without the knowledge and
consent of A.
B. B and C are not liable to A whatsoever.
C. When A was bought-out of the partnership, the partnership was dissolved so A
has no more share in the profit in the sale.
D. No choice

46. When the capital of a partnership is ₱3,000.00 or more, it must be in a public


instrument and must be recorded with the Securities and Exchange Commission (Art.
1772). A, B, and C agreed to form a partnership and each contributed ₱10,000.00 as
capital of the partnership. There was no compliance in the provisions of Art. 1772.
A. The partnership was not established.
B. The partnership did not have juridical personality.
C. The partnership was established and any partner may compel the execution of a
public instrument.
D. The partnership is void

47. A as partner contributed ₱30,000.00; B as partner, ₱15,000.00; and C as industrial


partner, his services in the partnership. After payment of all liabilities and expenses,
only ₱18,000.00 remain as partnership assets. The distribution of the ₱18,000.00
cash shall be:
A. A, ₱12,000.00; B, ₱6,000.00; C, None
B. A, ₱6,000.00; B, ₱6,000.00; C, ₱6,000.00
C. A, ₱9,000.00; B, ₱9,000.00; C, None
D. A, ₱8,000.00; B, ₱4,000.00; C, ₱6,000.00

48. This is the order of preference in the liquidation of a partnership:


A. 1. Outside creditors.
2. Partners with respect to their capital.
3. Partners with. respect to their profit.
4. Partners aside from capital and profit.

B. 1. Partners with respect to their capital


2. Partners with respect to the profit.

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3. Partner aside from their capital and profit.
4. Outside creditors.

C. 1. Outside creditors
2. Partners aside from capital and profit.
3. Partners with respect to their capital
4. Partners with respect to their profit

D. 1. Partners aside from their capital and profit


2. Outside creditor.
3. Partners with respect to their capital.
4. Partners with respect to their profit.

49. Three (3) of the following are rights of a partner. Which one (1) is not?
A. Right to associate another person to his share.
B. Right to admit another partner.
C. Right to inspect and copy partnership book.
D. Right to ask dissolution of the firm at the proper time.

50. The following are similarities between a partnership and a corporation. Which is the
exception?
A. Both have juridical personalities separate and distinct from that of the individuals
composing them.
B. Like a partnership, a corporation can act only through agents.
C. Both are organizations composed of an aggregate of individuals.
D. The individuals composing both have little voice in the conduct of the business.

51. In the partnership of A, B, and C, A was appointed in the Article of Co-partnership as


managing partner. As such manager and acting in good faith:
A. His power is revocable even without his consent.
B. His power can be revocable at any time even without just cause provided that it is
approved by the partners owning the controlling interest.
C. He may execute all acts of administrations despite the opposition of B and C.
D. He can be removed for valid cause even without the vote of the partners owning
the controlling interest.

52. In the ABC partnership, A and B contributed ₱20,000.00 each and C his services.
After paying all creditor of the partnership, only ₱18,000.00 in cash remains. In the
absence of terms to the contrary, the share of C is equal to:
A. ₱6,000.00
B. The share of A
C. The share of B
D. Nothing

53. X and Y established a partnership by contributing each at ₱50,000.00. Z, a third


party, allowed his name to be included in the firm name of the partnership. The
partnership was insolvent and after exhausting all the remaining assets, there was
left a liability to third persons the amount of ₱30,000.00. The creditors can compel:
A. Z to pay the ₱30,000.00 remaining liability.
B. X, Y and Z to pay ₱10,000.00 each.
C. X or Y to pay the ₱30,000.00 remaining liability.
D. X and Y to pay ₱15,000.00 each.

54. W, X, Y and Z formed a partnership. W, X and Y are general partners and contributed
₱50,000.00 each while Z, an industrial partner, contributed his services only. All the

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partners signed an agreement stipulating that the liability of W is limited to his
contribution. After all the assets of the partnership were exhausted, there remain an
unpaid liability of ₱40,000.00. The creditors of the partnership can compel:
A. X and to pay the ₱40,000.00.
B. X, Y, and Z to pay the ₱40,000.00.
C. W, X, Y and Z to pay ₱10,000.00 each and W and Z can demand reimbursement
from X and Y.
D. X and Y to pay the ₱40,000.00.

55. Partner who does not participate in the management though he shares in the profits
or losses:
A. nominal
B. ostensible
C. silent
D. liquidating

56. Which of the following liabilities of the partnership shall be first in the order of
payment?
A. Those owing to partners in respect to capital.
B. Those owing to creditors other than partners.
C. Those owing to partners other than capital and profits.
D. Those owing to partners in respect to profits.

57. Alan, Ben and Cris are partners with capital contribution of ₱15,000, ₱10,000 and
₱5,000, respectively. Suppose on dissolution, the assets of their partnership amount
to only ₱46,000 and it owes Dan the amount of ₱50,000. Cris owes Ely on his
personal account ₱6,000. The partners have no separate personal property except
Cris whose separate property amounts to ₱7,000. Which is correct?
A. Dan and Ely shall divide Cris separate property equally.
B. Dan and Ely shall divide Cris separate property pro-rata.
C. Dan shall be preferred as regards Cris separate property.
D. Ely shall be preferred as regards Cris separate property.

58. X, Y and Z capitalist partners, each contributed ₱10,000 and A, the industrial partner
contributed his industry. The partnership is indebted to B in the amount of ₱90,000.
The remaining assets of the partnership amounted to only ₱30,000. Suppose B got
the ₱30,000, how can be recover the deficiency of his credit?
A. B can recover ₱15,000 each from X, Y, Z and A.
B. B can recover ₱60,000 from either X, Y and Z.
C. B can recover ₱15,000 each from X, Y and Z, but A is exempt because he is an
industrial partner.
D. B can recover ₱20,000 each from X, Y and Z only.

59. The change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the business is:
A. winding up
B. dissolution
C. liquidation
D. termination

Page 81 of 141
60. Which of the following is not correct? In a limited partnership composed of A, B and
C, the contribution may be as follows:
A. A-property (limited partner); B-services (general partner); C-cash (general
partner).
B. A-cash (limited partner); B-property (general partner); C-services (general
partner)
C. A-services (limited partner); B-cash (general partner); C-services (general
partner).
D. A-cash (limited partner); B-cash (general partner): C-services (general partner).

61. Partner who is both a secret and silent partner:


A. limited
B. nominal
C. dormant
D. ostensible

62. A person who directly represent himself or consents or allows himself to be


represented as a partner in an existing partnership or with one or more persons who
are not actually partners is:
A. Partner by estoppel
B. Silent partner
C. Ostensible partner
D. Nominal partner

63. Strictly speaking, the following are all essential elements of a partnership, except.
A. contract or voluntary agreement
B. contribution to a common fund
C. intention to divide profits
D. mutual agency
E. lawful object

64. The following are all grounds for a judicial decree of dissolution, except:
A. Where a partner is guilty of such conduct as tends to prejudicially affect the
partnership.
B. When the business can only be carried at a loss.
C. By any event which makes it unlawful for the partnership to carry on the
business.
D. Where a partner is rendered incapable of performing his part of the agreement.
E. Where a partner is judicially shown to be insane.

65. In A, B, C and D partnership, only B did not deliver his agreed capital contribution in
the form of a specific house and lot. The remedy against him is:
A. Dissolution or annulment of the partnership contract
B. For A, C and D to get back their contribution
C. For specific performance
D. Remedy not indicated

66. A partner in a partnership who is not really a partner, not being a party to the
partnership agreement but is made liable as a partner for the protection of innocent
third, persons is known as:
A. secret partner
B. dormant partner
C. nominal partner or partner by estoppel
D. answer not given

Page 82 of 141
67. A and B are capitalist partners, with C as an industrial partner. A and B contributed
₱15,000.00 each to the capital of the partnership. A contractual liability of
₱40,000.00 was incurred by the partnership in favor of X. In the case at bar, the
capital assets of ₱30,000.00 shall first be exhausted thereby leaving an unsatisfied
liability of ₱10,000.00. X can recover the amount from:
A. A and B only
B. A, B and C
C. A, B and C and C can recover for reimbursement from A and B
D. Answer not given

68. A, B and C are partners engaged in a retail business. Their contribution is ₱20,000.00
each. D is admitted as a new partner with a contribution of ₱8,000.00. At the time of
his admission, the partnership has an outstanding obligation to E in the amount of
₱80,000.00. In this case:
A. D is not liable to E for his obligation.
B. D is liable to E for this obligation so that after the assets of the partnership
amounting to ₱68,000.00 will be exhausted leaving a balance of ₱12,000.00, only
A, B and C shall be liable jointly or pro rata out of their separate property.
C. D is a liable to E for this obligation so that after the assets of the partnership will
be exhausted, leaving a balance of ₱12,000.00, all the partners shall be liable
jointly or pro-rata out of their separate property.
D. Answer not given

69. A, B and C are general partners in ABC partnership. D is a debtor to the partnership in
the amount of ₱15,000. A received from the debtor D the sum of ₱5,000 and issued a
receipt identifying the amount as his share. Then D became insolvent, B and C
cannot collect the ₱10,000.
A. A cannot be compelled to share the ₱5,000 with B and C
B. B and C can charge the capital of A with their share of the ₱5,000
C. A can be compelled to share B and C with the ₱5,000
D. B and C should automatically sue D to collect the ₱10,000

70. M and O are partners of M & O Partnership. M is the managing partner. N owes M
₱10,000 and M & O Partnership ₱30,000. The obligations of N are both due. M
collected from N the debt of N to M in the amount of ₱10,000 and issued a receipt in
the name of M. To which obligation will the ₱10,000 be applied?
A. The whole of the ₱10,000 will be applied to debt of N to M
B. The ₱10,000 will be applied to debt of N to the partnership
C. ₱5,000 each to the debt of N to M and the partnership
D. ₱2,500 to debt of N to M and ₱7,500 to debt of N to the partnership
71. A, B and C are equal partners in D-3 Partnership. On April 29, 1992, partner C died.
Not knowing that C died, on May 1, 1992, A contracted a liability to D who also does
not know the death of C. The liability is ₱90,000. After D exhausted the net assets of
D-3 Partnership in the amount of ₱60,000, he can collect:
A. ₱30,000 from A
B. ₱15,000 from A and ₱15,000 from B
C. ₱10,000 from estate of C; ₱10,000 from A; ₱10,000 from B
D. ₱20,000 from A and ₱10,000 from B

72. This is the order of preference in the liquidation of a general partnership:


A. Outside creditors; Partners as creditors; Partners' capital; Partners' profits
B. Partners as creditors: Outside creditors; Partners' capital; Partners' profits
C. Partners' capital; Outside creditors; Partners as creditors; Partners' profits
D. Outside creditors; Partners' capital; Partners' profits; Partners as creditors

Page 83 of 141
73. C, P and IP are partners. IP is the industrial partner, who, in addition to his services,
also contributed capital to the partnership. There is no stipulation as to the sharing of
profits and losses. The partnership realized profits of ₱21,000. The share of IP in the
profits:
A. C and P will determine IP's share in the profits
B. IP's share in ₱7,000
C. Pro-rata to his contributed capital
D. Nothing, because he is an industrial partner

74. F, G, H and I are partners. They contributed capital as follows: F, ₱50,000; G.


₱30,000; H, ₱20,000 and I, as the industrial partner, his services. The partnership's
obligation to outsiders exceeds the total net assets by ₱18,000. Who and by how
much will the partners be liable for the payment of the ₱18,000?
A. F, ₱9,000; O, 6,400; H, ₱3,000; I, nothing
B. F, ₱4,500; G, 4,500; H, ₱4,500; I, ₱4,500
C. F, ₱6,000; G, 6,000; H, ₱6,000; I, nothing
D. F, ₱4,500; G, 2,700; H, ₱1,800; I, ₱9,000

75. A and B are equal partners in AB Partnership by contributing ₱50,000 each on July 1,
1991. On July 2, 1991, the partnership contracted an obligation to pay Z the amount
of ₱180,000 on August 15, 1991. On August 1, 1991, C was admitted as a new
partner. C contributed ₱50,000. How will the obligation be paid?
A. A, ₱60,000; B, ₱60,000; C, ₱60,000
B. A, ₱90,000; B, ₱90,000; C, none
C. A, ₱65,000; B, ₱65,000; C, ₱50,000
D. A, ₱180,000 or B, ₱180,000 and C; none

76. Ralph and Vi orally agreed to form a partnership. Each contributed cash and personal
properties worth ₱10,000 to a common fund. But they did not register the
partnership with the Securities and Exchange Commission (SEC).
A. The partnership is still valid
B. The partnership is void
C. The partnership is voidable
D. The partnership is unenforceable

77. A partnership which compromises all that the partners may acquire by their work or
industry during the existence of the partnership is:
A. Universal partnership of present property
B. Universal partnership of profits
C. Particular partnership
D. General partnership

78. The share in the profits of a partner is regarded as received by him and thus taxable
although not yet distributed. This principle is known as:
A. Advance reporting of income
B. Actual receipt of income
C. Accrual method of accounting
D. Constructive receipt of income

Page 84 of 141
79. Partnership assets and liabilities are:

Dec. 31, Dec. 31,


1991 1992
Assets ₱200,000.00 ₱ 50,000.00
Liabilities 100,000.00 200.000.00
Capital (A: ₱100,000.00 ₱150,000.00
₱50,000.00 and B:
₱50,000.00)

A & B, general partners, have fully paid their capital contributions. What is the
remedy of creditor C?
A. Collect partnership liability from the partnership
B. Collect partnership liability from A & B capital contributions (including personal
assets)
C. Collect partnership liability from B only
D. Collect partnership liability from A only

80. X, Y and Z are partners. X contributed his services only; Y, ₱40,000; and Z, ₱20,000.
The partnership was liquidated. After payment of the partnership obligations, only
₱18,000 worth of assets remained. How much will be the share of X?
A. Equal to the share of Z
B. ₱6,000
C. Zero
D. Equal to the share of Y

81. Which of the following statements is correct?


A. A partnership contract is not covered by Statute of Fraud.
B. A limited partnership is one having at least one general partner or one limited
partner and the limited partner shall not be liable for the obligations of the
partnership.
C. A limited partner who takes active part in the management of the firm becomes
liable as a general partner.
D. The contract of partnership is void if it contains a stipulation which excludes a
partner from sharing in the profits of the firm.

82. Which of the following statements is correct?


A. An industrial partner who engaged in business for himself may be excluded from
the partnership
B. An industrial partner may not engage in business for himself without the consent
of his co-partner
C. A capitalist partner may engage in the same line of business in which the
partnership is engaged
D. An offending capitalist partner may not be excluded from the partnership

83. Statement 1 – Holding out by certain persons to the public that they are partners
when actually they are not leads to the legal existence of partnership by estoppel in
which case the liability that results is a partnership liability and since there may be
no partnership assets available, the partners in estoppel are equally liable for the
partnership debt with their separate properties.

Statement 2 – Consenting to or permitting another to act as partner of an actual


partnership although the person so acting is not actually a partner of that existing
partnership, in which case any of the actual partners consenting to another person

Page 85 of 141
who is not a member of the partnership is liable but not the partnership. Which is
correct?
A. Both statements are false
B. First statement is true but second statement is false
C. First statement is false but second statement is true
D. Both statements are true

84. Partnership as distinguished from co-ownership:


A. It has juridical personality
B. Created not only by agreement of the parties but also by law
C. Purpose is to make profits
D. Profits are divided in proportion to one's interest
85. The following, except one, are the legal characteristics of partnership, which is the
exception?
A. There is mutual agency among partners
B. The partners are liable pro-rata for the contractual liabilities of the partnership
C. All the partners are liable after exhaustion of partnership assets to the extent of
their personal property
D. It has a juridical personality separate and distinct from the partners

86. Can partners stipulate that the newly admitted partner shall not be held liable for the
obligations of the partnership arising before his admission? Which of the following
answer is not correct?
A. No, because third persons are always protected by law
B. No, because the newly admitted should be deemed to have assumed all the debts
of the partnership upon his voluntary participation in the partnership
C. No, because the subject of the stipulation is that the liability of the new partner
should not be satisfied out of the partnership properly
D. No, because a newly admitted partner is liable with respect to his capital
contribution which forms part of the partnership

87. Statement I – Holding out by certain persons to the public that they are partners
when actually they are not leads to the legal existence of partnership by estoppel in
which case the liability that results is a partnership liability and since there may be
no partnership assets available, the partners in estoppel are equally liable for the
partnership debt with their separate properties.

Statement II – Consenting to or permitting another to act as partner of an actual


partnership although the person so acting is not actually a partner of that existing
partnership, in which case any of the actual partners consenting to another person
who is not a member of the partnership is liable but not the partnership.

Which is correct?
A. First statement is-true but second statement is false
B. Both statements are false
C. Both statements are true
D. First, statement is false but second statement is true

88. Which of the following is a characteristic of partnership as a contract?


A. Formal
B. Innominate
C. Gratuitous
D. Preparatory

Page 86 of 141
89. One who takes active part in the business, but is not known to be a partner by
outside parties is:
A. Silent partner
B. Dormant partner
C. Nominal partner
D. Secret partner

90. Can the partners stipulate that the newly admitted partner shall not be held liable for
the obligations of the partnership arising before his admission? Which of the following
answers is not correct?
A. No because the newly admitted should be deemed to have assumed all the debts
of the partnership upon his voluntary participation in the partnership
B. No, because a newly admitted partner is liable with respect to his capital
contribution which forms part of the partnership
C. No, because third persons are always protected by law
D. No, because the subject of the stipulation is that the liability of the new partner
should not be satisfied out of the partnership properly

91. 1st Statement – The arrival of the term of a partnership with a fixed term or period
shall not dissolve the partnership if the partners continue with the business of the
partnership but such partnership may be terminated anytime dependent on the will
of the continuing partners.

2nd Statement – The general rule is that the loss of the specific thing contributed to
the partnership dissolves the partnership when only the use of the thing is
contributed by the partner and such thing after its transfer to the partnership which
used the same for sometime was subsequently lost, the partnership is not dissolved.

Which is correct?
A. 1st statement is true but 2nd statement is false
B. Both statements are true
C. Both statements are false
D. 1st statement is true but 2nd statement is false

92. May contribute money, property or industry to the common fund:


A. General partner
B. Industrial partner
C. Limited partner
D. Managing partner

93. A limited partner who takes active part in the management of the firm. becomes:
A. a managing partner
B. liable as a general partner
C. a general partner
D. a general partner and a limited partner at the same time

94. Which of the following statements is not correct?


A. A limited partner in a partnership manage the business of the partnership but
cannot perform acts of ownership without the consent of all the limited partners.
B. Valid contribution of a limited partner are money and property but not services.
C. Additional limited partners may be admitted into the limited partnership with the
consent of all the partners.
D. A person who is both a general partner and a limited partner is deemed a limited
partner only with respect to the return of his contribution.

Page 87 of 141
95. A is the managing partner in A & B Company. X is indebted to A for ₱20,000.00 and
to the partnership for ₱60,000.00. When both debts mature, X pays A ₱20,000.00
and the latter issues a receipt for the personal credit. The payment for ₱20,000.00
shall be applied:
A. ¼ in favor of A and ¾ favor of partnership
B. To the whole debt owing to A
C. ½ favor of A and ½ in favor of the partnership
D. To the debt owing to the partnership

96. The common property of a universal partnership shall be:


A. All the properties which shall belong to each of the partners after the constitution
of the partnership
B. All the properties which belong to each of the partners at the time of the
constitution of the partnership
C. All the properties which belong to each of the partners at time of the constitution
of the partnership as well as the profits which they may acquire therewith
D. All the properties which belong to each of the partners at the time of the
constitution of the partnership as well as the properties which each may acquire
thereafter

97. X, Y, and Z are partners and contributed to the partnership ₱40,000, ₱30,000 and
services, respectively. The partnership was later liquidated and after payment of the
partnership indebtedness, only ₱20,000 worth of assets remained. How much is the
share of Z?
A. Zero
B. Equal to the share of X
C. Equal to the share of Y
D. ₱6,000

98. Anton, Ben and Cris are partners in a joint venture engaged in real estate and land
development. Anton, without the knowledge of Ben and Cris offered to sell to Son all
the remaining unsold lots at a price very much higher than the prevailing market
prices. Awhile later, Anton bought out Ben and Cris from the partnership and
thereafter finally sold all the lots at a very big profit.

1st Conclusion: When Anton bought out Ben and Cris from the partnership, the
partnership was dissolved so Ben and Cris have no more share in the profit of the
sale.

2nd Conclusion: The sale of the lots between Anton and Don is void because it was
without knowledge and consent of Ben and Cris.
A. Both conclusions are correct
B. Both conclusions are wrong
C. 1st conclusion wrong, 2nd conclusion correct
D. 1st conclusion correct, 2nd conclusion wrong

99. Which of the following liabilities of the partnership shall rank first in the order of
payment?
A. Those owing to creditors other than partners
B. Those owing to partners in respect to profits
C. Those owing to partners in respect to capital
D. Those owing to partners other than for capital and profits

Page 88 of 141
PLEDGE, MORTGAGES AND ANTICHRESIS

1. Chattel mortgage as distinguished from Pledge:


A. The excess over the amount due after foreclosure goes to the debtor
B. The sale of the object in an auction extinguishes the obligation
C. The delivery of the personal property is necessary
D. The registration of the property in the Registry of Property is not necessary

2. The following are essential requisites common to the Contract of Pledge and
Mortgage except one:
A. That they are constituted to secure the fulfillment of a principal obligation
B. That the pledgor or mortgagor is the absolute owner of the thing pledged or
mortgaged
C. That the contract is registered with the Register of Deeds
D. That the person constituting the contract has free disposal of his property or that
he is authorized legally for the purpose

3. 1st Statement: In all cases of extrajudicial foreclosure, the right of redemption can be
exercised by the mortgagor within one year from and after the juridical registration of
the sale.

2nd Statement: In judicial foreclosure, the mortgagor may still exercise his equity of
redemption after the confirmation of the sale by the court.
A. Both statements are wrong
B. 1st statement correct, 2nd statement wrong
C. Both statements are correct
D. 1st statement wrong, 2nd statement correct

4. Arco mortgaged his land to Bascon as collateral for the payment of a loan obligation.
The mortgage contract provides that Arco cannot sell the land while the obligation
exists. Before maturity of the mortgage, Cruz offered to buy the land from Arco.
A. Arco cannot sell the land because of the stipulation in the contract
B. Arco can sell the land despite the agreement not to sell
C. Arco can sell the land only if Bascon consents in writing
D. Arco cannot sell the land unless he pays the obligation

5. Chattel Mortgage as distinguished from Pledge:


A. The delivery of the personal property Is necessary
B. The registration of the property in the Registry of Property is not necessary
C. The excess over the amount due after foreclosure goes to the debtor
D. The sale in auction of the object extinguishes the obligation

6. D pledged his watch to C for ₱20,000. D failed to pay his obligation on time.

Case 1 – If C sold it at public auction for ₱18,000, C cannot recover the deficiency
even if there is stipulation.

Case 2 – If C sold it at public auction for ₱22,000, D can recover the excess if
stipulated.
A. 1st wrong, 2nd correct
B. 1st correct, 2nd wrong
C. Both cases are correct
D. Both cases are wrong

Page 89 of 141
7. Which of the following is common requisite for Pledge, Chattel Mortgage and
Antichresis?
A. The amount of the principal and interest must be in writing
B. The property must be in the possession of the creditor
C. To bind third persons, they must be duly recorded in the office of Register of
Deeds
D. It is constituted to secure the fulfillment of a principal obligation

Page 90 of 141
8. Which of the following statements is true and correct?
A. Unless otherwise agreed upon by the parties, the sale of the mortgaged property
extinguishes in full the obligation of the mortgagor to the mortgagee
B. Pledge and mortgage are considered principal contracts
C. When the obligation is secured by a pledge or mortgage and it is not paid when
due, the pledgee or mortgagee may dispose the collateral even if there is no
agreement to that effect between the parties
D. In both pledge and mortgage, the creditor is entitled to deficiency judgment

9. Cuenca mortgaged his lot and house to Bascon as collateral for the payment of his
loan obligation. The mortgage contract stipulates that Cuenca cannot sell the
property while the obligation exists. Before maturity of the mortgage, Diaz offered to
buy the property from Cuenca.
A. Cuenca cannot sell the property to Diaz unless he pays the loan obligation
B. Cuenca can sell the property only if Bascon consent to it
C. Cuenca cannot sell the property to Diaz because of the agreement not to sell
while the mortgage exists
D. Cuenca can sell the property to Diaz despite the stipulation in the mortgage
contract not to sell

10. Three of the following are essential requisites of a contract of mortgage. Which one is
not?
A. The person instituting the mortgage has the free disposal of his property
B. The contract must be in writing
C. The mortgagor is the absolute owner of the thing mortgaged
D. The mortgage is constituted to secure the fulfillment of a principal obligation

11. In real mortgage, the following rules are valid, except one:
A. A stipulation in the mortgage contract prohibiting the owner from alienating the
immovable mortgaged is valid
B. The mortgagee may alienate the mortgage credit or assign to a third person in
whole or in part
C. Any stipulation allowing the mortgage creditor to appropriate the property
mortgaged is null and void
D. If alienation of mortgage credit is not registered, it is still valid between the
parties

12. A is indebted to B for ₱20,000. X is the guarantor of A. B is also indebted to A for


₱8,000. How much will X be liable as a guarantor if B sues A and A cannot pay?
A. ₱12,000
B. ₱20,000
C. ₱ 8,000
D. X has no liability

13. Mr. Santos executed a first mortgage of his house in favor of Mr. Dizon on May 15,
1986 to guaranty a mortgage loan of ₱200,000 due for payment on May 15, 1987. On
September 16, 1986, the house was completely destroyed by a typhoon. On
September 18, 1986, Mr. Dizon demanded payment of the loan from Mr. Santos. Is Mr.
Dizon's demand for payment valid?
A. No. The obligation is one with a definite period, so the creditor cannot demand
payment until the definite due date arrives.
B. No. The obligation is extinguished because the object of the obligation is lost due
to a fortuitous event.

Page 91 of 141
C. Yes. The obligation becomes due at once because the tenor benefit is given solely
to the creditor thereby giving the creditor the right to demand performance even
before the due date stipulated.
D. Yes. The obligation becomes due at once because the guaranty was lost even
through a fortuitous event unless the debtor can mortgage another property that
is equally satisfactory.

14. A, B and C borrowed ₱24,000 from Y and Z and signed a promissory note dated
January 15, 1987 and due within six months. How much can Y collect from A?
A. ₱12,000
B. ₱ 4,000
C. ₱ 8,000
D. ₱24,000

15. Mr. Santos secured and Mr. Dizon granted a loan of ₱100,000 due for payment on
December 31, 1988. Mr. Santos executed a first mortgage of his residential house in
favor of Mr. Dizon to guaranty the ₱100,000 loan. On October 19, 1988, the
residential house was totally destroyed by typhoon Unsang. On October 31, 1988, Mr.
Dizon demanded payment of the loan from Mr. Santos. Is Mr. Dizon's demand for
payment valid?
A. No. The obligation is one with a definite date for payment on December 31, 1988
and until that date arrives, Mr. Santos is not liable to pay.
B. No. The object of the obligation was lost through to a fortuitous event and
obligation was extinguished.
C. Yes. The obligation became due at once because the guaranty was lost through a
fortuitous event.
D. Yes. The obligation became due at once because from the tenor benefit the
creditor is given the right to demand performance even before the due date
stipulated.

16. C is the creditor of D in the amount of ₱50,000. G is the guarantor of D. D paid C


partially with ₱20,000. A, not knowing the partial payment and against the will of D
paid C the amount of ₱50,000. What is the effect of this payment in the obligation?
A. The obligation is extinguished. A cannot recover any amount from D but A can
demand reimbursement from C in the amount of ₱50,000.
B. The obligation is extinguished. A can demand ₱30,000 from D because this
amount benefited D, or A, having subrogated into the rights of C can proceed
against guarantor G.
C. The obligation is not extinguished. A's payment against the will of D does not
extinguish the obligation.
D. The obligation is extinguished. A can demand ₱30,000 from D but if D cannot pay,
A cannot ordinarily proceed against guarantor G because A is not entitled to
subrogation.

17. D pledged his Singer Sewing Machine to C for ₱8,000. D was unable to pay the
obligation 60 days after due date. C sold the machine at a public auction for ₱6,000.
A. C cannot recover the deficiency of ₱2,000 even if there is stipulation that he can.
B. C can recover the deficiency of ₱2,000 even without stipulation.
C. C cannot recover the deficiency of ₱2,000.
D. C can recover the deficiency of ₱2,000.

18. B pledged his Rolex watch to C for ₱4,000.00. B failed to pay C the ₱4,000.00 on due
date, C sold the Rolex watch at a public auction to the highest bidder at ₱3,500.00.
A. C can recover the deficiency of ₱500.00 from
B. C can recover the deficiency of ₱500.00 even without stipulation.

Page 92 of 141
C. C cannot recover the deficiency of ₱500.00 unless there is stipulation.
D. C cannot recover the deficiency of ₱500.00 even if there is stipulation.

19. Ben pledge his watch to V.Y. Domingo Agencia for ₱5,000. On due date, Ben failed to
redeem his watch. The pawnshop sold the watch at a public auction to the highest
bidder at ₱4,000.
A. The pawnshop can recover the deficiency of ₱1,000 from Ben
B. The pawnshop cannot recover the deficiency of ₱1,000 unless there is a
stipulation
C. The pawnshop cannot recover the deficiency of ₱1,000 even if there is a
stipulation
D. The pawnshop can recover the deficiency to ₱1,000 even without a stipulation

20. The following are instances of Pledge created by operation of law, except:
A. Hotel keeper retains the things brought into the hotel by the guest who cannot
pay his hotel bills
B. An agent retains in pledge the thing which is the object of the agency
C. A mechanic retains the car he repaired until he is paid
D. A depository retains the things in pledge until full payment of what is due him

21. Basco pledged his Omega watch to Cruz pawnshop for ₱10,000. Basco failed to pay
the pawnshop the ₱10,000 on due date. Cruz sold the Omega watch at a public
auction to the highest bidder at ₱8,000.
A. Cruz can recover the deficiency of ₱2,000 from Basco.
B. Cruz cannot recover the deficiency of ₱2,000 even if there as stipulation.
C. Cruz can recover the deficiency of ₱2,000 even without stipulation.
D. Cruz cannot recover the deficiency of ₱2,000 unless there is stipulation.

22. If the proceeds of the sale of the thing pledged sold at public auction is less than the
principal obligation, can the creditor recover the deficiency from the debtor?
1st ANSWER: No, the creditor is not entitled to recover the deficiency from the debtor.
2nd ANSWER: Yes, if there is a stipulation to that effect in the contract of pledge.
A. 1st answer correct; 2nd answer wrong
B. Both answers are wrong
C. Both answers are correct
D. 1st answer wrong, 2nd answer correct

23. The distinction between a chattel mortgage and a pledge is that in chattel mortgage:
A. the delivery of the personal property is necessary
B. the registration of the property in the Registry of property is not necessary
C. the excess the amount due after foreclosure goes to the debtor
D. answer not given

24. A mortgaged his residential land to B as a guarantee for the payment of ₱400,000
obligation of A. They agreed that A shall not sell the land while the obligation exists.
Before the maturity of the mortgage, C offered to buy the land from A.
A. A cannot sell the land to C because of the agreement not to sell
B. A can sell the land to C only if B consents
C. A can sell the land to C despite the agreement not to sell
D. A cannot sell the land to C unless A pays the obligation

25. O gets a loan of ₱100,000 from P which becomes due on November 23, 1993 and
mortgaged his house as security for the debt. On September 22, 1993, the

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mortgaged house was completely destroyed by fire. A week after, P demanded
payment from O on September 29, 1993. Is P’s demand valid?
A. No, because the obligation is one with a definite period and the demand would be
prejudicial to the rights of the debtor
B. No, the obligation is extinguished because the object of the obligation is lost
through a fortuitous event.
C. Yes, the debt becomes demandable because the period established is for the
benefit of the creditor.
D. Yes, the debt becomes demandable because the collateral was lost through a
fortuitous event.

26. A stipulation whereby the pledgee or mortgagee automatically becomes the owner of
the thing pledged or mortgaged:
A. Pactum commissorium
B. Consolidation of ownership
C. Conventional redemption
D. Consignation

27. Which of the following statements is true and correct?


A. Pledge and mortgage are accessory contracts because they cannot exist by
themselves.
B. In both pledge and mortgage, the creditor is entitled to deficiency judgment.
C. Where an obligation is secured by a pledge or mortgage and it is not paid when
due, the pledgee or mortgagee may dispose of the thing pledged or mortgaged if
there is an agreement to that effect between the parties.
D. Unless otherwise agreed upon by the parties, the sale of the mortgaged property
extinguishes in full the obligation of the mortgagor to the mortgagee.

28. One of the following is not a characteristic of pledge and mortgage:


A. Accessory
B. Consensual
C. Gratuitous
D. Onerous

29. The following are requisites of Pledge except:


A. The disposal of the property by the pledgee
B. Absolute ownership of the property pledged
C. The thing pledged may be placed in the possession of a third person
D. To bind a third person, it must be recorded in the office of the Register of Deeds

30. Pledge and mortgage are accessory contracts. Which of the following statements is
false?
A. They are meant to secure the fulfillment of a principal obligation.
B. They cannot exist if the principal obligation is void.
C. They can exist by themselves.
D. They can secure fulfillment of rescissible obligation.

31. Which of the following statements regarding contract of pledge is not correct?
A. A pledge cannot be constituted unless the thing pledged be placed in the
possession of the creditor
B. Pledge is a real contract because it is perfected by delivery of the thing pledged
C. Pledge is an accessory contract because it needs a principal obligation to exist
D. A pledge cannot be constituted to secure the performance of a voidable or
unenforceable or even a natural obligation

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32. When the mortgage is due and remains unpaid, can the Mortgagee appropriate the
mortgaged property?

1st Answer: No, the only right of the mortgagee-creditor is to foreclose the mortgage.

2nd Answer: Yes, if there is stipulation in the mortgage contract allowing the
mortgagee-creditor to appropriate the property mortgaged.
A. 1st answer correct; 2nd answer wrong
B. 1st answer wrong; 2nd answer correct
C. Both answers are wrong
D. Both answers are correct

SALES

1. M, N and O are co-owners of a parcel of land pro-indiviso. M sold his 1/3 share in the
land to N in an absolute deed of sale. Which is correct?
A. The deed of sale between M and N is void because it was not made in favor of a
third party
B. O may exercise his right of redemption on the interest sold by M to N
C. O may redeem only ½ of the interest sold by M to N
D. O cannot exercise the right of redemption because the sale was made in favor of
a co-owner

2. 1st Statement: If the thing should have been sold to different buyers, the ownership
shall be transferred to the person who may have been in possession thereof in good
faith, if it should be movable property.

2nd Statement: The seller is responsible to the buyer for any hidden defects or faults
in the thing sold only if he was aware thereof.
A. 1st statement true, 2nd statement false.
B. Both statements are false
C. 1st statement false, 2nd statement true
D. Both statements are true

3. When does the buyer of a thing have the right to the fruits of the thing bought?
A. From the time the fruits are delivered
B. From the time the obligation to deliver the thing bought arises
C. From the time the sale is perfected
D. From the time the thing bought is delivered

4. Araneta wrote a letter to Bascon wherein he offered to sell a piece of land. In


Araneta’s letter he gives Bascon a period of two months within which to pay the price
of ₱500,000. After 50 days Araneta told Bascon that he is increasing the price of the
land to ₱700,000. Can Bascon compel Araneta to accept the ₱500,000 first offered
by Araneta and execute the Deed of Sale?
A. No, for Bascon did not signify his acceptance of the offer
B. Yes, because the period of 2 months has not yet expired
C. Yes, because Araneta is already estopped by his signed letter
D. Yes, because there was actual meeting of minds of the parties

5. On July 30, 1995, Arrieta wrote Bascon a letter offering a contract of sale. On August
26, Bascon wrote a letter of complete acceptance of the contract which was received

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by Arrieta on August 31, 1995. But on August 30, 1995, Arrieta had already written
Bascon a letter withdrawing the offer which was received by Bascon on September 1,
1995. Is there a perfected contract between Arrieta and Bascon?

1st Answer: There is a perfected contract between Arrieta and Bascon because
acceptance was made before the withdrawal.
2nd Answer: There is a perfected contract because Arrieta came to know of the
acceptance before Bascon came to know of the withdrawal.
A. Both answers are correct
B. 1st answer correct, 2nd answer wrong
C. Both answers are wrong
D. 1st answer wrong, 2nd answer correct

6. X delivers 10 sets of television to A for the latter to sell them for ₱10,000 each. A
10% commission is agreed upon by the parties. One day A sells one TV Set to a
customer on credit but for a price of ₱12,000. Suppose that X does not consent to the
sale on credit:
A. X may demand ₱10,800 from A
B. X may demand ₱10,000 from A
C. X may consider the contract as unenforceable
D. X may demand ₱9,000 from A

7. Santos sold his Toyota pick-up to Razon for ₱250,000. No date was fixed for the
performance of the obligation by the seller and the buyer. The obligation of the seller
is:
A. To rescind the sale because there is no time fixed for the performance of the
seller and the buyer
B. To deliver the pick-up only after the buyer writes the seller demanding the
delivery of the pick-up
C. To deliver the pick-up after the buyer pays the ₱250,000
D. To deliver the pick-up immediately because the sale is already a perfected
contract

8. Which of the following statements is not correct?


A. Actual delivery of the thing or payment of the price is not required for the
perfection of the sale
B. A stipulation that even when the object is delivered to the buyer, ownership will
not pass until the price is fully paid is not valid
C. A sale is consummated upon delivery of the thing and the payment of purchase
price
D. Sales through letter or telegrams are deemed perfected only when acceptance by
the buyer has been received by the seller

9. The vendor is bound to transfer the ownership of and deliver as well as warrant the
thing which is the object of the sale.

Payment of price is essential to delivery of the thing sold.


A. Both statements are true
B. Both statements are false
C. First statement is true, second statement is false
D. First statement is false, second statement is true

10. Mr. Ayco offered to sell his land to Mr. Cruz for ₱300,000. Mr. Cruz accepted the offer
and paid Mr. Ayco the purchase price. Mr. Ayco delivered the owner's duplicate of the

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Transfer Certificate of Title of the land. Mr. Cruz wants to register the land in his name
but the Register of Deeds asks Mr. Cruz for the Deed of Sale. What can Mr. Cruz do?
A. He may occupy and use the land as a buyer in good faith
B. He cannot compel Mr. Ayco to return the payment because the contract is
unenforceable
C. He may compel Mr. Ayco to execute the Deed of Sale because the contract is valid
D. He may sue Mr. Ayco to return the purchase price under the legal principle that no
one may enrich himself at the expense of another

11. Pacto de Retro sale as distinguished from Mortgage:


A. There is redemption when the principal debt is paid
B. There is no transfer of possession of the thing sold
C. There is no foreclosure unless it is declared as an equitable mortgage
D. There is no transfer of ownership of the thing sold

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12. In sale of the thing pledged at public auction, which of the following statements is not
true and incorrect?
A. The sale of the thing pledged extinguished the obligation
B. The pledgor or owner has a better right if he should after the same terms as the
highest bidder
C. If the price of the sale is less, the pledgee is entitled to recover the deficiency
D. If the price of the sale is more than the principal, interest and expenses, the
pledge is not entitled to the excess

13. Lucy is a lessee of a store in a shopping mall. She orally sells/assigns her right to
Salome. She then allows Salome to occupy the stall. The delivery here in called:
A. Quasi-tradition
B. Actual delivery
C. Traditio longa manu
D. Traditio brevi manu

14. Which of the following is not a characteristic of Sale?


A. Bilateral
B. Gratuitous
C. Consensual
D. Nominate

15. The following are the alternative remedies, except one, available to the buyer in case
of breach of warranty by the seller.
A. Keep the goods and ask for damages
B. Refuse to accept the goods and ask for damages
C. Rescind the sale and return the goods
D. Keep the goods and set up against the seller by way of recoupment in price

16. Which of the following statements is incorrect?


A. In a Contract of Sale, the full payment of the price is in the nature of suspensive
condition and the seller is obligated to transfer ownership of the thing sold.
B. The seller need not be owner of the thing even at perfection of the sale.
C. There may be a transfer of ownership over the thing even if the seller has not
delivered the thing sold to the buyer.
D. In a Contract of Sale, the buyer becomes the owner of the thing sold upon full
payment of the purchase price.

17. One of the following is not an alternative remedy available to a seller of personal
property on installment if buyer defaults.
A. To go to court and ask the court to order delivery of the property
B. To foreclose the chattel mortgage
C. To sue for specific performance
D. To take possession of the property and forfeit the amount paid by buyer

18. A characteristic of the Contract of Sale which involves exchange of value, it is:
A. Commutative
B. Nominate
C. Bilateral
D. Consensual

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19. The period when the minds of the seller and the buyer have met on the subject
matter and the cause of the interest is:
A. Negotiation of the sale
B. Consensus of the sale
C. Consummation of the sale
D. Perfection of the sale

20. One of the following is not a remedy granted to an unpaid seller:


A. Right of stoppage of goods in transit
B. Right of lien over the goods
C. Right to resale
D. Right to demand a security for the payment of the price

21. A Seller sold to a Buyer a piece of jewelry at a price of ₱20,000. The contract
provides that the Buyer will pay the Seller cash of ₱15,000 and for the balance, the
Buyer will give the Seller a microwave oven worth ₱5,000. What is the nature of the
contract?
A. Sale
B. Partly sale and partly barter
C. Barter
D. Commodatum

22. Ownership of the thing sold is transferred/acquired/retained:


A. Retained by the seller in “sale or return”
B. Transferred to the buyer upon constructive or actual delivery of the thing sold
C. Acquired by the buyer upon perfection of the contract
D. Transferred to the buyer upon acceptance of the price

23. If redemption is made, which of the following will not be paid by the seller to the
buyer?
A. Price paid by the buyer
B. Expenses in the execution of the sales contract paid by the buyer
C. All necessary expenses on the thing sold and to be redeemed
D. Interest of the price paid by the buyer

24. On April 10, 1992, Mr. Seller offered to sell to Mr. Buyer a Nissan Sentra car for
₱250,000. Mr. Buyer agreed and both executed a contract wherein Mr. Buyer will pay
Mr. Seller on July 10, 1992 and the same day was appointed the day Mr. Seller would
deliver the car to Mr. Buyer. On May 10, 1992, Mr. Seller sold the car to Mr. Third
Person who took possession. The recourse of Mr. Buyer:
A. Wait for July 10, 1992 and sue Mr. Seller for damages.
B. If Mr. Third Person acted in bad faith, Mr. Buyer may sue Mr. Third Person
C. Mr. Buyer may sue Mr. Seller for damages even before July 10, 1992
D. Even if Mr. Third Person acted in good faith and acquired possession, Mr. Buyer
can compel Mr. Seller to rescind the sale

25. Cecilio had Eduardo kidnapped and tortured for refusing to sell his (Eduardo’s) land to
Cecilio. Eduardo who could no longer bear the physical pains inflicted upon him
signed a document of sale in favor of Cecilio. The sale is:
A. void
B. voidable
C. valid
D. answer not given

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26. X sold his car to Y for ₱50,000. No date was fixed for the performance of the
obligation of the seller and the buyer. The obligation of X is:
A. To deliver the car immediately because the sale is a perfected contract
B. To deliver the car only after Y write to X demanding the delivery of the car
C. To deliver the car after Y pays X the ₱50,000
D. To rescind the contract because there is no time fixed for the delivery

27. Unless there is stipulation to the contrary, the expenses for the execution or
registration of the sale shall be borne by:
A. The Vendee
B. The Vendor
C. The Vendee & Vendor
D. The agent or broker

28. X enters into a contract with Y whereby X sold his land orally to Y. The land has been
delivered and the money has been paid. Is the oral sale of the land valid?
A. The contract is not valid because it is not in writing as required by the Statute of
Frauds.
B. The contract is not valid because the contract is not made in a public instrument.
C. The contract is unenforceable.
D. The contract is valid because the contract is already perfected and executed.

29. To defraud his creditors, A contracted with B by selling a land to B. B now seeks to
register the land with the Register of Deeds. X, a creditor of A seeks to prevent
registration on the ground that the contract is rescindable. Despite X’s objection, may
the land be registered based on the contract in B’s name?
A. The land cannot be registered based on the contract which is rescindable.
B. The land cannot be registered because the contract is in fraud of the creditor.
C. The land can be registered based on the contract because the contract is not yet
rescinded.
D. The land can be registered because the contract is valid and can be attached
collaterally in a land registration proceeding.

30. On September 1, 1987, A entered into a contract with B whereby A sells to B 5,000
sacks of sugar to be delivered on the 15 th and to be paid in full on the 30th. There was
no agreement for rescission based on nonpayment. A did not deliver on the 15 th but
on the 30th, he was willing and offering to deliver but B did not make payment on said
date and so A did not like it and refused to make delivery. Decide.
A. A cannot rescind the contract for nonpayment of the price
B. A cannot refuse to deliver the goods
C. B is not entitled to recover damages
D. A can rescind the contract for nonpayment of the price

31. A wrote a letter to B wherein A offered to sell a piece of land to B for ₱200,000. B
signified his desire to buy the land. In A’s letter, B was given a period of two months
within which to produce the ₱200,000. After 45 days, A told B that the price of the
land is now ₱250,000. Can B compel A to accept the ₱200,000 first offered by A and
execute the Deed of Sale?
A. Yes, because there was actual meeting of the minds of the parties
B. No, for B did not signify his acceptance of A’s offer
C. Yes, because A is already estopped by his signed letter
D. Yes, because the period of two months has not expired

32. Mr. Santos offered to sell his land to Mr. Calma for ₱500,000. Mr. Calma accepted the
offer and paid Mr. Santos ₱500,000 and Mr. Santos delivered the owner's duplicate of

Page 100 of 141


the Transfer Certificate of Title of the land. Mr. Calma wishes to register the land in his
name but the Register of Deeds asked Mr. Calma for the Deed of Sale. What can Mr.
Calma do?
A. Mr. Calma cannot compel Mr. Santos to return the payment because the contract
is not enforceable.
B. Mr. Calma may sue Mr. Santos to return the price under the legal maxim “no one
may enrich himself at the expense of another.”
C. Mr. Calma may compel Mr. Santos to execute a Deed of Sale because the contract
is valid.
D. Mr. Calma may occupy and use the land as a buyer in good faith.

33. Mrs. Gomez sold and delivered her diamond ring to Mrs. Pangan. It was agreed upon
that after ten days, Mrs. Pangan will name and fix the price. On the tenth day, Mrs.
Pangan called up by telephone Mrs. Gomez and stated the price of ₱10,000. Mrs.
Gomez accepted. Is the sale perfected?
A. Yes. The price is stated and named by one of the contracting parties and was
accepted by the other.
B. No. At the time of sale, the price was not fixed.
C. No. The price was left to the discretion of one of the parties.
D. No. At the time of sale, the price is not known.

34. A and B are partners in a real estate business. A and B were approached by X who
offered to buy a parcel of land owned by the partnership. Thereafter, B sold to A B’s
share in the partnership. Then, A sold the land to X at a big profit.
A. A is liable to B for B’s share in the profits
B. The partnership is dissolved when A became the sole owner
C. A is not liable to B for the latter’s share in the profits
D. The sale of the land to X is valid

35. Mr. Guzman sold his owner-type jeep to Mr. Montano for ₱100,000. There was no
fixed date for the performance of the obligations of Mr. Guzman and Mr. Montano. The
obligation of Mr. Guzman is:
A. To deliver the jeep immediately as there is a perfected contract
B. To wait for Mr. Montano to pay ₱100,000 and deliver the jeep
C. To rescind the contract because no time is fixed for the performance of their
respective obligations
D. To deliver the jeep after Mr. Montano demands for the delivery of the jeep

36. Mr. Reyes and Mr. Vitug are good friends. Mr. Reyes sold and delivered his car to Mr.
Vitug. It was agreed and understood that on Sunday, Mr. Reyes will name and fix the
price of the car. Sunday came. Mr. Reyes called Mr. Vitug by telephone and stated
and fixed the price at ₱150,000. Is the sale perfected?
A. Yes. The price was stated and fixed on the date agreed upon.
B. No. The price was left to the discretion of the seller.
C. No. At the time of the sale, the price is not fixed.
D. No. The price fixed by the seller was not accepted by the buyer.

37. Mr. Burgos sold a parcel of land to Mr. Javier for ₱200,000. Mr. Burgos delivered the
Transfer Certificate of Title of the land to Mr. Javier. Later, Mr. Javier wanted to register
the land in his name and he needed a Deed of Sale. What can Mr. Javier do?
A. Mr. Javier may compel Mr. Burgos to execute a Deed of Sale.
B. Mr. Javier cannot compel Mr. Burgos to refund the ₱200,000 because the contract
is not enforceable.
C. Mr. Javier can sue Mr. Burgos for enriching himself at the expense of another.
D. Mr. Javier can possess and utilize the land as a buyer in good faith.

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38. The buyer of a thing has the right to the fruits of the thing:
A. From the time the thing bought is delivered
B. From the time the sale is perfected
C. From the time the obligation to deliver the thing bought arises
D. From the time the fruits are delivered

39. In a sale, this is actual delivery.


A. Execution and signing of the sales document
B. When the goods sold are placed in the control and possession of the buyer
C. Delivery by the seller to the buyer of the key where the goods are kept
D. The buyer is already in actual possession of the goods

40. Mr. Ong leased to Mr. Santos a 5 KVA generator for two years at a lease rental fee of
₱2,000 per month and signed an option in favor of Mr. Santos to buy the generator at
the end of the term of the lease at ₱60,000. All rental fees paid are to be considered
as partial payment of the sale. After 12 months, Mr. Santos was able to pay the rental
fees for nine months and was in arrear for the three months rental fees. Mr. Ong
terminated the lease contract and repossessed the generator. The consequence of
the transaction is:
A. Mr. Ong can collect the rental fees for the three months which are in arrears.
B. Mr. Ong can collect the rental fees for the unexpired 12 months of the lease
contract.
C. When Mr. Ong took possession of the generator, he has no further action against
Mr. Santos.
D. Mr. Ong, in terminating the lease and repossessing the generator, is obliged to
refund the nine months rental fees paid by Mr. Santos.

41. In a sale, the buyer is entitled and has the right to the fruit of the thing sold from the
time:
A. The obligation to deliver the thing sold arises.
B. The sale is perfected.
C. The thing sold is delivered.
D. The fruit of the thing sold is delivered.

42. Mr. AB offered in writing to sell his home and lot for ₱750,000.00 to Mr. CD on July 1,
1989. Mr. CD requested Mr. AB to give him 60 days within which to raise the
₱750,000.00. On August 15, 1989, Mr. AB informed Mr. CD that the price is raised and
now at ₱1,000,000.00. Can Mr. CD compel Mr. AB to sell house and lot at
₱750,000.00 which was offered in writing by Mr. AB?
A. Yes, because Mr. AB is already estoppel by his written offer.
B. Yes, because the 60 days offer has not yet expired.
C. No, because Mr. CD has not accepted the offer of Mr. AB.
D. Yes, because there was already meeting of the minds.

43. In distinguishing Earnest Money from Option Money, Earnest Money is:
A. Given when there is no contract of sale.
B. Given only when there is a perfected contract of sale.
C. Given to bind the offeror in a unilateral promise to sell or buy.
D. Given as a separate consideration from the purchase price.
44. A form of delivery which takes place after seller of the property continues possession
of said property no longer as owner but as a mere possessor:
A. traditio constitutum possessorium
B. traditio clavis
C. traditio brevi manu

Page 102 of 141


D. quasi-traditio

45. When goods are delivered to the buyer on “sale or return” for a period of seven days,
ownership of the goods passes to the buyer:
A. Upon delivery of the goods
B. Upon expiration of seven days
C. Upon acceptance by the buyer of the offer of the seller
D. Upon perfection of the contract

46. A sold B a parcel of land for ₱30,000. The sale is evidenced by a memorandum of
agreement of sale written in Cebuano dialect. One week later, A sold the same parcel
of land to C for ₱40,000 which was evidenced by a formal deed of sale. Upon buying
the property, C, who was aware of the first sale, immediately took possession of the
land and registered the deed of sale in her favor with the Register of Deeds. When
informed of the second sale, B subsequently registered an adverse claim to the
property. The parcel of land shall belong to:
A. B, because she has got an older title
B. C, because the sale was made on a formal deed of sale
C. C, because she is the first to register the deed of sale
D. C, because she is the first to take possession of the land

47. In case redemption is made, which of the following will not be paid by the seller to
the buyer?
A. Expenses incidental to the sale paid by the buyer.
B. All necessary expenses on the thing sold and to be redeemed.
C. The consideration of the sale paid by the buyer.
D. Interest on the price paid by the buyer.

48. Dacion en pago as distinguished from sale:


A. The object is always existing and specific
B. There is a greater degree of freedom in fixing the price
C. There is no pre-existing obligation
D. The cause is the price

49. Which of the following may not be the object of a contract of sale?
A. things having a potential existence
B. the sale of a vain hope or expectancy
C. future goods
D. answer not given

50. When delivery takes place by the mere consent or agreement of contracting parties
as when the vendor merely points to the thing sold which shall thereafter be at the
control and disposal of the vendee if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale, delivery is effected:
A. by traditio symbolica
B. by traditio longa manu
C. by traditio brevi manu
D. answer not given

51. A contract or receipt for the transport of goods and their delivery to the person
named therein to order or to bearer is a:
A. warehouse receipt
B. dock warrant
C. bill of lading
D. answer not given

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52. Sale is distinguished from dation in payment in that in sale:
A. there is a pre-existing obligation or credit.
B. the cause is the price.
C. it is a mode of extinguishing an obligation in the form of payment.
D. Answer not given

53. Mr. Amado Romeo owes the BIR ₱100,000.00 in delinquent taxes and penalties. In
order to evade the payment of the said liability, he executed a deed of sale of his
only parcel of land valued for ₱200,000.00 in favor of his brother, Pablo, where
₱20,000.00 was stated as the purchase price but the BIR has evidence that said price
had never been paid, the purpose of the sale being to prevent the BIR to levy upon
the land to satisfy the tax liability of Mr. Amado Romero. In this case;
A. The BIR may not levy upon the land because the sale is valid.
B. The BIR, without annulling the sale, may levy upon the land of Romeo pursuant to
the provisions of the National Internal Revenue Code.
C. The BIR should first annul the sale before it may levy upon the land pursuant to
the provisions of the National Internal Revenue Code.
D. Answer not given

54. Mr. Renato Tala-od owns a mango tree bearing fruits, ready for harvest. He sells all
the fruit of that tree to Mr. Marcelo Abalos who pays Tala-od the sum of ₱5,000. Tala-
od tells Adalos that he can just harvest the fruits any time he likes pointing at the
particular tree. For legal purposes, Tala-od has fulfilled his obligation to deliver the
mango fruits to Abalos by:
A. traditio brevi manu
B. traditio simbolica
C. traditio longa manu
D. answer not given

55. Antonio sold a piece of land to Renato binding himself not to sell the same to another
person. On the following day, Antonio sold the land to Carlos who immediately took
possession in good faith. In the case at bar, the proper remedy of Renato is to:
A. Institute an action for the annulment of the sale to Carlos.
B. Institute an action for the recovery of the land.
C. Institute an action for damages against Antonio.
D. Answer not given

56. A sold a residential land to B. B paid the consideration. When B wanted to register the
sale at the Register of Deeds, the latter refused to register it and required the
presentation of the certificate of capital gains tax payment. What can B do?
A. B may sue A to refund the consideration paid by B under the maxim, “no one shall
be enriched at the expense of another”.
B. B cannot compel A to return the selling price because the contract is not
enforceable.
C. B may possess the residential land as a buyer in good faith.
D. B may compel A to pay the capital gains tax and secure the Certificate of Capital
Gains Tax payment.

57. Mr. Esguerra, a former government employee, suffered from severe paranoia and was
confined in the mental hospital in 1981. After his release, he was placed under the
guardianship of his wife to enable him to get his retirement pay. In 1984, he became
a mining prospector and sold some mining claims. In 1987, he sued to annul the sale
claiming that he was not mentally capacitated at the time of sale. The sale in
question was:

Page 104 of 141


A. Illegal
B. Valid
C. Voidable
D. Legal

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


A. To allow the buyer to examine the goods sold
B. To transfer ownership to the buyer
C. To pay the expenses of the deed of sale
D. To warrant the thing sold

59. A appoints B as his agent to sell his land. Which of the following is valid?
A. The authority of B is in writing and the sale of the land in favor of is oral
B. The authority of B from A is by way of letter and B sells the land to C in writing
C. The authority of B is oral and B sells the land to C for ₱50,000 in a written
contract of sale
D. The authority of B is in writing but the sale of the land in writing was made
beyond the period expressly set forth by A

60. There is a contract of sale:


A. When the goods are delivered to a distributor on consignment
B. When the manufacturer delivers the goods to an agent where the former retains
the ownership and dictates the term of the sale
C. When the goods are delivered to a person on charge account
D. When goods are delivered to an agent to be sold by him and the agent is not
liable to the manufacturer of the goods

61. A case where Contract of Sale must not necessarily be in writing.


A. Sale of 100 piculs of sugar at ₱400 per picul when there is partial delivery
B. Sale where by its term cannot be performed within one year from the making
thereof
C. Sale of land
D. Sale at public auction

62. A sold and delivered her diamond ring to B. It was agreed upon that within 10 days B
will state and fix the price. On the 10th day, B called up by telephone A and stated the
price at ₱20,000 which A agreed. Is the Sale perfected?
A. No, at the time of the sale the price was not fixed
B. Yes, at the time of the sale the price was already known
C. Yes, the price stated and fixed by the buyer was accepted by the seller
D. No, the price was left to the discretion of one of the parties

SPECIAL LAWS

COOPERATIVES

1. The minimum number of natural persons required to organize a primary cooperative


well.
A. 15 C. 5
B. 10 D. 20

2. A single-purpose cooperative may transform into a multi-purpose cooperative and


may create subsidiaries only after at least:

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A. 2 years of operation
B. 2 years from registration
C. 2 years from cooperation
D. 5 years from registration

3. A cooperative duly registered shall have:


A. Limited Liability
B. Comprehensive Liability
C. Absolute Liability
D. General Liability

4. A cooperative may register for a term not exceeding how many years?
A. 50 C. 20
B. 25 D. 100

5. A cooperative may apply for extension of term but such extension cannot be made
earlier than years prior to the original or subsequent expiry date/dates.
A. 5 C. 3
B. 4 D. 2

6. The minimum subscription of the authorized capital stock of a cooperative is:


A. 25% of the ACS C. 10% of the ACS
B. 30% of the ACS D. 15% of the ACS

7. The minimum paid-up share capital of a cooperative shall be 25% of the total
subscription but not less than:
A. 2,000 C. 5,000
B. 10,000 D. 3,500

8. A cooperative formed and organized under the Cooperative Code acquires juridical
personality from the:
A. Date the CDA issues the certificate of registration
B. Date the directors and officers are duly elected
C. Date the Articles of Cooperation are submitted to the CDA
D. Date indicated in the Articles of Cooperation

9. The Articles of Cooperation and by-laws of the Cooperative may be amended by ____
vote of all members with voting rights.
A. 2/3 C. 1/2
B. 1/3 D. 1/4

10. Contracts executed between private persons and cooperatives prior to the
registration of the cooperative shall be ____ between the parties and upon
registration of the cooperative.
A. Valid C. Voidable
B. Void D. Unenforceable

11. Any registered cooperative may resolve to divide itself into 2 or more cooperatives by
a resolution approved by a vote of ___ of all the members with voting nights.
A. 3/4 C. 1/2
B. 2/3 D. 1/4

12. Any registered cooperative may resolve to merge or consolidate with another
cooperative by a resolution approved by a vote of _____ of all the members with
voting rights.

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A. 3/4 C. 1/2
B. 2/3 D. 1/4

13. Any merger or consolidation of cooperatives shall be effective upon:


A. The issuance of the certificate of merger and consolidation by the CDA
B. The filing of the articles of merger and consolidation with the CDA
C. The election of the directors of the merged and consolidated cooperatives
D. The date indicated in the articles of merger and consolidation

14. It is a cooperative the primary purpose of which is to procure and distribute


commodities to members and non-members.
A. Consumers C. Credit
B. Producers D. Procurement

15. It is a cooperative that undertakes joint production whether agricultural or industrial.


A. Producers C. Farmers
B. Consumers D. Agro-Industrial

16. It is a cooperative engaged in the supply of production inputs to members and


markets their products.
A. Marketing C. Advertising
B. Producers D. Suppliers

17. It is a cooperative which combines 2 or more of the business activities of the different
types of cooperatives.
A. Multi-purpose C. Tri-purpose
B. Bi-purpose D. Complex

18. It is a cooperative the members of which are natural persons.


A. Primary C. Tertiary
B. Secondary D. Natural

19. It is a cooperative the members of which are primary cooperatives.


A. Secondary C. Federation
B. Tertiary D. Union

20. It is a cooperative the members of which are secondary cooperatives.


A. Tertiary C. Federation
B. Primary D. Union

21. The kinds of membership in a cooperative are:


A. Regular and Associate
B. Regular and Special
C. Ordinary and Extra-Ordinary
D. Class A and B

22. An associate who meets the minimum requirements of regular membership continues
to patronize the cooperative for _____ years and signifies his/her intention to remain a
member shall be considered a regular member.
A. 2 C. 3
B. 1 D. 4

23. A cooperative organized by minors shall be considered a ___ cooperative.


A. Laboratory C. Youth
B. Minor D. Young

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Page 108 of 141
24. It is the highest policy-making body of the cooperative.
A. General-Assembly C. Board of Trustees
B. Board of Directors D. Executive Committee

25. What is a delegable power of the GA?


A. To approve contracts entered into by the cooperative
B. To determine and approve amendments to the articles of cooperation
C. To elect or appoint the members of the board of directors and remove them for
cause
D. To approve developmental plans of the cooperatives

26. Only for purposes of prompt and intelligent decision-making, the GA may by a vote of
all its members with voting rights, delegate some of its powers to a smaller body of
the cooperative.
A. 3/4 C. 1/2
B. 2/3 D. 1/4

27. What is the required quorum during a meeting of the GA?


A. At least 25% C. At least 50%
B. At least 20% D. At least 50% plus 1

28. Each member of a primary cooperative shall have only ______ vote/s.
A. 1 C. 3
B. 2 D. 5

29. In case of members of secondary or tertiary cooperatives, they shall have basic
vote/s and as may incentive votes but not to exceed ______ vote/s.
A. 1,5 C. 5,5
B. 1,1 D. 5,1

30. Voting by proxy may be allowed by the bylaws of a cooperative other than a ____
cooperative.
A. Primary C. Tertiary
B. Secondary D. Federation

31. It is where the direction and management of the affairs of the cooperative shall be
vested.
A. Board of Directors
B. General Assembly
C. Executive Committee
D. Office of the President

32. The Board of Directors of a cooperative is composed of:


A. Not less than 5 but not more than 15
B. Not less than 10 but not more than 15
C. Not less than 15 but not more than 20
D. Not less than 10 but not more than 20

33. Who elects the members of the Board of Directors of a cooperative?


A. General Assembly
B. Stockholders
C. Shareholders
D. Executive Committee

34. What is term of the members of the board of directors of a cooperative?

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A. 2 C. 3
B. 1 D. 4

35. First Statement: A director or committee member appointed by any financing


institution need not be a member of the cooperative.
Second Statement: A director or committee member appointed by any financial
institution shall have no powers, rights nor responsibilities except to provide technical
assistance as required by the cooperative.
A. Both statements are true
B. First statement only is true
C. Second statement only is true
D. None of the statements is true

36. Unless the bylaws provide otherwise, what constitutes a quorum for the conduct of
business in board meetings?
A. Majority
B. 2/3
C. 1/2
D. 1/3

37. First Statement: Directors of a cooperative cannot attend or vote by proxy at board
meeting.
Second Statement: A vacancy in the board of directors in a cooperative, other than
by expiration of term, may be filled by the vote of at least a majority of the remaining
directors, if still constituting a quorum.
A. Both statements are true
B. First statement is only true
C. Second statement is only true
D. None of the statements is true

38. First Statement: Loss of confidence shall not be a valid ground for removal of an
officer of a cooperative.
Second Statement: No 2 or more persons with relationships up to the 3 rd civil degree
of consanguinity or affinity nor shall any person engaged in a business similar to that
of the cooperative nor who in any other manner has interests in conflict with the
cooperative shall serve as an appointive officer.
A. Both statements are true
B. First statement is only true
C. Second statement is only true
D. None of the statement is true

39. No additional compensation other than per diems shall be paid to a director of a
cooperative during of existence of any cooperative.
A. First year
B. First 2 years
C. First 3 years
D. First 5 years

40. Unless already fixed in the bylaws, the compensation of all other employees of the
cooperative shall be determined by the:
A. Board of Directors
B. General Assembly
C. Executive Committee
D. Compensation Committee

Page 110 of 141


41. A contract entered into by the cooperative with one or more of its directors, officers
and committee members may be ratified by a vote of all members with voting rights,
present and constituting a quorum in a meeting called for the purpose.
A. 3/4
B. 1/2
C. 1/2+1
D. 2/3

42. An act of disloyalty of a director of a cooperative may be ratified by a vote of all


members with voting rights, present and constituting a quorum in a meeting called
for the purpose.
A. 3/4
B. 1/2
C. 1/2+1
D. 2/3

43. An elected officer of a cooperative may be removed by a vote of all members with
voting rights, present and constituting a quorum in a meeting called for the purpose.
A. 3/4
B. 1/2
C. 1/2+1
D. 2/3

44. Cooperatives with accumulated reserves and undivided net savings of not more than
_____ shall be exempt from all national, city, provincial, municipal or barangay taxes
of whatever name and nature.
A. ₱10 million
B. ₱5 million
C. ₱3 million
D. ₱1 million

45. All tax-free importations of a qualified cooperative shall not be sold nor the beneficia]
ownership thereof be transferred to any person until after _____ years, otherwise, the
cooperative and the transferee or assignee shall be solidarily liable to pay twice the
amount of the imposed tax and/or duties.
A. 5
B. 4
C. 3
D. 2

46. In areas where there are no available notaries public, the judge exercising his ex
officio capacity as notary public, shall render service, free of charge to any person or
group of persons requiring the administration of oath or the acknowledgement of
articles of cooperation and instruments of loan from cooperatives not exceeding:
A. ₱500,000
B. ₱250,000
C. ₱200,000
D. ₱100,000

47. Upon dissolution of a cooperative, what happens to the capital donated to said
cooperative?
A. It is subject to escheat
B. It shall be divided among the members of the cooperative
C. It shall be returned to the donor
D. It shall be donated to another cooperative with a similar purpose

Page 111 of 141


48. No member of the primary cooperative other than the cooperative itself shall own or
hold more than ____ of the share capital of the cooperative.
A. 10%
B. 15%
C. 20%
D. 25%

49. No member shall transfer his shares or interest in the cooperative or any part thereof
unless he has held such share capital contribution or interest for not less than:
A. One year
B. 2 years
C. 3years
D. 5years

50. What capital is raised by the cooperative to strengthen its capital structure?
A. Revolving Capital
B. Retained Capital
C. Reserve Capital
D. Raising Capital

51. It shall not be construed as profit but as an excess of payments made by the
members for the loans borrowed, or the goods and services availed by them from the
cooperative, or the difference of the rightful amount due to the members for their
products sold or services rendered to the cooperative.
A. Net surplus
B. Retained earnings
C. Revenues
D. Income

52. First Statement: The GA of the Cooperative may decrease the amount allocated to
the reserve fund when it already exceeds the share capital.
Second Statement: Upon the dissolution of the Cooperative, the reserve fund shall
not be distributed among the members.
A. Both statements are true
B. First statement only is true
C. Second statement only is true
D. None of the statements is true

53. Where no creditors are affected, the cooperative may be voluntarily dissolved by
_____ vote of the board of directors and by a resolution duly adopted by the
affirmative vote of at least ________ of all the members with voting rights, present and
constituting a quorum at a meeting to be held upon call of the directors.
A. Majority; 3/4
B. 3/4, 3/4
C. 2/3; 3/4
D. Majority; 2/3

54. A cooperative may be dissolved by order of a competent court after due hearing on
the ground/s of:
First: Violation of any law, regulation or provisions of its bylaws
Second: Insolvency
A. First and Second
B. First only
C. Second only

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D. None of the given

55. A cooperative may be dissolved if it has not commenced business and its operation
within years after the issuance of its certificate of registration.
A. 2
B. 3
C. 4
D. 5

56. A cooperative may be dissolved if it has not carried on its business for _____
consecutive years.
A. 2
B. 3
C. 4
D. 5

57. Every cooperative whose charter expires by its own limitation or whose existence is
terminated by voluntary dissolution or through an appropriate judicial proceeding
shall nevertheless continue to exist for _____ years after the time it is dissolved to
wind up its affairs.
A. 3
B. 4
C. 5
D. 6

58. Upon the winding up of the cooperative affairs, any asset distributable to any
creditor, shareholder or member who is unknown or cannot be found shall be given to
the:
A. Federation or union to which the cooperative is affiliated with
B. Government
C. Trustee
D. Any federation or union

59. Every cooperation shall conduct its affairs in accordance with Filipino culture and
experience and the universally accepted principles of cooperation which include the
following, except:
A. Open and Voluntary Membership
B. Democratic Control
C. Unlimited Interest in Capital
D. Division of Net Surplus

60. A duly registered cooperative shall have the following powers and capacities, except:
A. Of succession —
B. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage,
and otherwise deal with such real and personal property as the transaction of the
lawful affairs of the cooperative may reasonably and necessarily require
C. To join federations or unions
D. None of the above

61. No merger or consolidation shall be valid unless approved by ____ of each of the
constituent cooperatives at ____ meetings. The dissenting members shall have the
right to exercise their right ____.

1st Blank:
A. Majority of all the members eligible to vote

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B. (2/3) of all the members
C. (2/3) of all the members eligible to vote
D. Quorum

2nd Blank:
A. Separate General Assembly
B. Special General Assembly
C. Joint General Assembly
D. General Assembly

3rd Blank:
A. To withdraw their vote
B. To withdraw their membership
C. Of appraisal
D. To file a derivative suit

FINANCIAL REHABILITATION AND INSOLVENCY ACT

62. Which debtors are covered by the FRIA?


A. GOCCs
B. Banks and Quasi-Banks
C. Insurance Companies
D. Pre-Need Companies

63. Which debtors are not covered by the FRIA?


A. National and Local Government Agencies or Units
B. DTI-Registered Sole Proprietorship
C. SEC-Registered Partnership
D. Insolvent Individual Debtor as defined by the FRIA

64. It is the financial incapacity of the debtor to pay his liabilities as they fall due in the
ordinary course of business of whenever his liabilities are greater than his assets.
A. Insolvency
B. Suspension of Payments
C. Liquidity
D. Solvency

65. It refers to the postponement, by court order, of the payment of debts of one who
possesses sufficient property to cover all his debts but foresees the impossibility of
meeting them when they respectively fall due.
A. Suspension of Payments
B. Voluntary Insolvency
C. Involuntary Insolvency
D. Preliminary Injunction

66. It is a procedure where the debtor applies to be discharged from his debts and
liabilities.
A. Voluntary Insolvency
B. Involuntary Insolvency
C. Suspension of Payments
D. Special Civil Action

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67. In case of a sole proprietorship, the petition for voluntary insolvency must be
approved by the:
A. Owner
B. Majority of the partners
C. Majority of the directors
D. Owner and spouse

68. In case of partnerships, the petition for voluntary insolvency must be approved by
the:
A. Majority of the partners
B. 2/3 vote of the partners
C. 3/4 vote of the partners
D. All of the partners

69. In case of corporation, the petition for voluntary insolvency must be approved by the:
A. Majority vote of the board of directors or trustees and authorized by the vote of
the stockholders representing at least 2/3 of the outstanding capital stock (or, of
the members)
B. Majority vote of the board of directors or trustees and authorized by the vote of
the stockholders representing at least 1/2 of the outstanding capital stock (or, of
the members)
C. 2/3 vote of the board of directors or trustees and authorized by the vote of the
stockholders representing at least 2/3 of the outstanding capital stock (or, of the
members)
D. 2/3 vote of the board of directors or trustees and authorized by the vote of the
stockholders representing at least 3/4 of the outstanding capital stock (or, of the
members)

70. It refers to a natural person who is a resident and citizen of the Philippines that has
become insolvent.
A. Individual debtor
B. Joint Debtor
C. Resident Debtor
D. Individual Creditor

71. It refers to proceedings initiated by creditors.


A. Involuntary proceedings
B. Voluntary proceedings
C. Creditor’s actions
D. Special proceedings

72. If the liquidator appointed is a juridical entity, it must designate a natural person who
possesses all the qualifications and none of the disqualifications as its representative,
it being understood that the juridical entity and the representative are liable for all
obligations and responsibilities of the liquidator,
A. Solidarily
B. Individually
C. Jointly
D. Primarily

73. It refers to a corporation which has control over another corporation either directly or
indirectly through one or more intermediaries.
A. Parent
B. Mother Unit
C. Subsidiary

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D. Holding Company

74. It refers to the restoration of the debtor to a condition of successful operation and
solvency, if it is shown that its continuance of operation is economically feasible and
its creditors can recover by way of the present value of payments projected in the
plan, more if the debtor continues as a going concern that if it is immediately
liquidated. |
A. Rehabilitation
B. Conservatorship
C. Liquidation
D. Dissolution

75. It refers to a plan by which the financial well-being and viability of an insolvent debtor
can be restored using various means including, but not limited to, debt forgiveness,
debt rescheduling, reorganization or quasi-reorganization, dacion en pago, debt-
equity conversion and sale of the business (or parts of it) as a going concern, or
setting-up a new business entity or other similar arrangements as may be approved
by the court or creditors.
A. Rehabilitation Plan
B. Restoration Plan
C. Conservatorship Plan
D. Liquidation Plan

76. A stay order is an order to:


First: Suspend all actions or proceedings, in court or otherwise, for the enforcement
of claims against the debtor.
Second: Suspend all actions to enforce any judgment, attachment, or other
provisional remedies against the debtor.
Third: Prohibit the debtor from selling, encumbering, transferring or disposing in any
manner any of its properties except in the ordinary course of business.
Fourth: Prohibit the debtor from making any payment of its liabilities outstanding as
of the commencement date except as otherwise provided.
A. All of them
B. First, Second, and Third only
C. First, Third, and Fourth only
D. Second, Third, and Fourth only

77. First Statement: The rehabilitation receiver has the power to sue and recover, with
the approval of the court, all property or money of the debtor paid, transferred or
disbursed in fraud of the debtor or its creditors, or which constitute under preference
of creditor/s.
Second Statement: Unless appointed by the court, the rehabilitation receiver shall
not take over the management and control of the debtor but may recommend the
appointment of a management committee over the debtor in the cases provided by
RA 10142.
A. Both statements are true.
B. Only the first statement is true.
C. Only the second statement is true.
D. None of the statements is true.

78. It is a type of rehabilitation which has been endorsed or approved by creditors


holding at least 2/3 of the total liabilities of the debtor, including secured creditors
holding more than 50% of the total secured claims of the debtor and unsecured
creditors holding more than 50% of the total unsecured claims of the debtor.
A. Pre-negotiated rehabilitation

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B. Out-of-court rehabilitation
C. Informal restricting agreement
D. Liquidation plan

Page 117 of 141


INSOLVENCY LAW / CORPORATE REHABILITATION

79. This shall refer to the financial condition of a debtor that is generally unable to pay its
or his liabilities as they fall due in the ordinary course of business or has liabilities
that are greater than its or his assets.
A. Individual debtor
B. Rehabilitation
C. Liquidation
D. Insolvent/Insolvency

80. This refers to the restoration of the debtor to a condition of successful operation and
solvency, if it is shown that its continuance of operation is economically feasible and
its creditors can recover by way of the present value of payments projected in the
plan, more if the debtor continues as a going concern than if it is immediately
liquidated.
A. Liquidation
B. Rehabilitation
C. Voluntary proceedings
D. Rehabilitation plan

81. This shall refer to a plan by which the financial well-being and viability of an insolvent
debtor can be restored using various means or other arrangements as may be
approved by the court or creditors.
A. Liquidation
B. Rehabilitation
C. Voluntary Proceedings
D. Rehabilitation plan

82. This shall refer to the person or persons, natural or juridical, appointed as such by the
court pursuant to the FRIA and which shall be entrusted with such powers and duties
as set forth therein.
A. Rehabilitation receiver
B. Stakeholder
C. Securities market participant
D. Affiliate

83. An individual debtor who, possessing sufficient property to cover all his debts but
foreseeing the impossibility of meeting them when they respectively fall due, may file
a verified petition that he be declared in the state of suspension of payments by the
court of the province or city in which he has resided for six (6) months prior to the
filing of his petition. He shall attach to his petition the following except:
A. A schedule of debts and liabilities
B. An inventory of assets
C. A proposed agreement with his creditors
D. Certificate of non-forum shopping

84. The following are true in order for an individual debtor to file a petition for suspension
of payment, except:
A. The debtor has sufficient properties to cover all his debts but he foresees the
impossibility of meeting his debts when they respectively fall due
B. The purpose is to suspend or delay the payment of debts
C. The amount of indebtedness is not affected (not reduced or discharged)
D. Answer not given

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85. Statement No. 1: In suspension of payments, the debtor is not insolvent. The debtor
has sufficient assets to over his liabilities.
Statement No. 2: In liquidation, the debtor is insolvent. His assets are insufficient to
cover the debtor's liabilities.
A. Both are true
B. Both are false
C. First is true, second is false
D. First is false, second is true

86. Statement No. 1: Suspension of payments applies to individual debtor only.


Statement No. 2: Rehabilitation applies to business organizations, single
proprietorship, partnership, and corporation.
A. Both are true
B. Both are false
C. First is true, second is false
D. First is false, second is true

87. Excluded from the operation of the FRIA are the following:
A. Banks and quasi-banks
B. Insurance companies
C. Pre-needed companies
D. All of the above

88. Debtors covered by the FRIA:


A. A DTI registered sole proprietorship
B. An SEC registered partnership/corporation (including GOCCs and non-banking
GFIs)
C. An insolvent individual debtor as defined by FRIA
D. All of the above

89. The following are among the minimum requirements included in the petition to
initiate voluntary proceedings by a debtor, except:
A. An inventory of all its assets including receivables and claims against third parties
B. A rehabilitation plan
C. Identification of the creditor, its principal activities and its addresses
D. The names of at least three (3) nominees to the position of rehabilitation receiver

90. In involuntary liquidation of business organizations, the debt or aggregate, of debts


must be at least:
A. ₱1,000,000 or equivalent to 25% of the subscribed capital stock or partners’
contribution, whichever is higher
B. ₱1,000,000
C. 25% of the subscribed capital stock or partners’ contribution
D. ₱500,000

91. The rehabilitation proceedings shall commence upon the issuance of the
Commencement Order, which shall include a Stay or Suspension Order having the
following effects, except:
A. Suspend all actions or proceedings, in court or otherwise, for the enforcement of
claims against the debtor
B. Suspend all actions to enforce any judgment, attachment or other provisional
remedies against the debtor
C. Prohibit the debtor from selling, encumbering, transferring or disposing in any
manner any of its properties except in the ordinary course of business
D. All of the above

Page 119 of 141


92. The rehabilitation receiver shall have the following minimum qualifications, except:
A. A citizen of the Philippines or a resident of the Philippines in the six (6) months
immediately preceding his nomination
B. Of good moral character and with acknowledged integrity, impartiality and
independence
C. Is not blind, deaf, or dumb
D. Has no conflict of interest: Provided, That such conflict of interest may be waived,
expressly or impliedly, by a party who may be prejudiced thereby

93. The following are some of the contents of a rehabilitation plan except for one:
A. Identify the debtor’s role in the implementation of the Plan
B. Ensure that the payments made under the plan follow the priority established and
agreed upon by the parties
C. Include a certified copy of a certificate of tax clearance or evidence of a
compromise settlement with the BIR
D. State the compensation and status, if any, of the rehabilitation receiver after the
approval of the Plan

94. An informal restructuring agreement or rehabilitation plan that is not necessarily


court supervised and that meets the minimum requirements recognized under the
FRIA.
A. Standstill period
B. Out-of-court rehabilitation
C. Cross-border insolvency proceedings
D. Cram down effect

95. The following shall be considered acts of insolvency, except:


A. That such person is about to depart or has departed from the Republic of the
Philippines, with intent to defraud his creditors
B. That he conceals himself to avoid the service of legal process for the purpose of
hindering or delaying the liquidation or of defrauding his creditors.
C. That for a period of thirty (30) days, he has paid, after demand, moneys
deposited with him or received by him in a fiduciary
D. That an execution having been issued against him on final judgment for money,
he shall have been found to be without sufficient property subject to execution to
satisfy the judgment

96. This shall refer to all demands of whatever nature or character against the debtor or
its property, whether for money or otherwise, liquidated or unliquidated, fixed or
contingent, matured or unmatured, disputed or undisputed.
A. Claim
B. Liabilities
C. Administrative expenses
D. Lien

97. Refers to monetary claims against the debtor, including stockholder’s advances that
have been recorded in the debtor's audited financial statements as advances for
future subscriptions.
A. Lien
B. Administrative expenses
C. Claim
D. Liabilities

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98. Refers to a statutory or contractual claim or judicial charge on real or personal
property that legally entitles a creditor to resort to said property for payment of the
claim or debt secured by such.
A. Encumbered property
B. Lien
C. Insolvent debtor’s estate
D. Possessory lien

99. In appointing a receiver, the court should consider whether the company’s financial
situation is serious and whether there is clear and imminent danger that it will lose its
corporate assets if a receiver is not appointed. This is called:
A. Business judgment rule
B. “Close now, hear later” doctrine
C. Jason clause
D. Serious situation test

BOUNCING CHECKS

100. The crime of estafa by issuing a check has the following elements. Which among the
following is not included?
A. Existence of a contract between the parties
B. Postdating or issuance of a check in payment of an obligation a contracted at the
time the check was issued
C. Insufficiency of funds to cover the check
D. Damage to the payee

101. Statement No. 1: A single act can give rise to several offenses, such as estafa and
violation of B.P. 22.
Statement No. 2: Unlike estafa, under B.P. 22, one need not prove that the check was
issued in payment of an obligation, or that there was damage; the damage done is to
the banking system.
A. First is true, second is false
B. First is false, second is true
C. Both are true
D. Both are false

102. Purpose of B.P 22 or the Bouncing Checks Law:


A. B.P. 22 was devised to safeguard the interest of the banking system and the
legitimate public checking account user.
B. B.P. 22 was purposely enacted to prevent the proliferation of worthless checks in
the mainstream of daily business.
C. The purpose of B.P. 22 in declaring the mere issuance of a bouncing check as
malum prohibitum is to punish the offender in order to deter him and others from
committing the offense.
D. All of the above

103. A stale check is a check:


A. That cannot anymore be paid although the underlying obligation still exists
B. That cannot anymore be paid and the underlying obligation under the check is
also extinguished
C. That can still be negotiated or indorsed so that whoever is the holder can claim
payment therefrom

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D. Which has not been presented for payment within a period of 30 days

104. The making, drawing and issuance of a check payment of which is refused by the
drawee because of insufficient funds when presented within 90 days from the date of
the check, shall be prima facie evidence of knowledge of such insufficiency of funds.
Which among the following is an exception to the foregoing statement?
A. When the maker or drawer issues another check in favor of the holder thereof
B. Makes arrangements for payment in full by the drawee of such check within 5
banking days after receiving notice that such check has not been paid by the
drawee
C. When the maker or drawer pays the holder thereof half of the amount due
thereon
D. Makes arrangements for partial payment by the drawee of such check within 5
banking days after receiving notice that such check has not been paid by the
drawee

105. Statement No. 1: Any person who makes or draws and issues any check knowing at
the time of issue that he does not have sufficient funds with the drawee bank, or
having sufficient funds but fails to keep sufficient funds to cover full payment of the
check presented shall be punished by imprisonment or by fine or both such fine and
imprisonment at the discretion of the court.
Statement No. 2: Where the check is drawn by a corporation, company or entity, the
company manager, secretary, and treasurer shall be deemed liable under B.P. 22.
A. Both are true
B. Both are false
C. First is true, second is false
D. Second is true, first is false

106. This is construed to mean an arrangement or understanding with the bank for the
payment of such check.
A. Funds
B. Liability
C. Deposit
D. Credit

107. It shall be the duty of the drawee of any check, when refusing to pay the same to the
holder thereof upon presentment, to cause to be written, printed, or stamped in plain
language thereon, or attached thereto, the reason for drawee’s dishonour or refusal
to pay the same: Provided,
A. That where there are no sufficient funds in or credit with such drawee bank, such
fact shall not be explicitly stated in the notice of dishonour or refusal
B. That where there are no sufficient funds in or credit with such drawee bank, such
fact shall always be explicitly stated in the notice of dishonour or refusal
C. That where there are no sufficient funds in or credit with such drawee bank, such
fact shall only be stated in the notice of dishonour or refusal if allowed by
company bank practice
D. That where there are no sufficient in or credit with such drawee bank such fact
shall only be stated in the notice of dishonour or refusal upon prior agreement

108. In all prosecutions under B.P 22, the introduction in evidence of any unpaid and
dishonored check, having the drawee’s refusal to pay stamped or written thereon or
attached thereto, with the reason therefore as aforesaid shall be:
A. Conclusive Evidence
B. Substantial Evidence
C. Prima Facie Evidence

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D. Circumstantial Evidence

109. Statement No. 1: The offense under B.P. 22 is a continuing offense and may therefore
be prosecuted within the territory where any of the elements have been committed.
Statement No. 2: Each act of drawing and issuing of a bounced check constitutes a
violation of B.P 22.
A. Both are true
B. Both are false
C. First is true. Second is false
D. Second is true. First is false

110. Under the provision of B.P 22, an offense is committed when the following elements
are present, except:
A. Making, drawing, and issuance of any check to apply for account or for value
B. Knowledge of the maker, drawer, or issuer that at the time of issue he does not
have sufficient funds in or credit with the drawee bank for the payment of such
check in full upon its presentment
C. Subsequent dishonour of the check by the drawee bank for insufficient of funds or
credit or dishonour for the same reason had not the drawer ordered the bank to
stop payment
D. Failure to inform the payee of such circumstance

111. Statement No. 1: A postdated check can be dishonored if presented for payment
before its due date.
Statement No. 2: Uncollected deposits are not the same as insufficient funds.
A. Both are true
B. Both are false
C. First is true, Second is false
D. Second is true, First is false

112. Statement No. 1: The notice of dishonour to maker of a check may be in writing or a
mere oral notice.
Statement No. 2: Inaccuracy of description of dishonored checks in the written notice
of dishonour is a fatal defect.
A. Both are true
B. Both are false
C. First is true, Second is false
D. Second is true, First is false

PDIC LAW

113. The following are the three main functions of PDIC, except:
A. Deposit insurer
B. Receiver/liquidator of distressed banks
C. Loan functions
D. Co-regulator of the BSP over banking institutions

114. An employee of a large manufacturing firm earns a salary which is just a bit more
than what he needs for a comfortable living. He is thus able to still maintain a
₱10,000 savings account, a ₱20,000 checking account, a ₱30,000 money market
placement, and a ₱40,000 trust fund in a medium-sized commercial bank. Which of
the four accounts are deemed insured by the PDIC:

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A. The ₱10,000 savings account and the ₱20,000 checking account
B. The ₱30,000 money market placement and the ₱40,000 trust fund
C. The ₱10,000 savings account and the ₱30,000 money market placement
D. The ₱20,000 checking account and the ₱40,000 trust fund

115. X is a depositor for AAA Bank. She has three (3) deposit accounts all under her name.
One, in checking account, one in saving account and another one in time deposit
account. Each account has a balance of ₱250,000. AAA Bank became insolvent.
Philippine Deposit Insurance Corporation closed the Bank. X therefore is unable to
withdraw from all of the accounts. She then filed her claims with the Philippine
Deposit Insurance Corporation. Which statement is most accurate?
A. X can claim a total of ₱500,000 for all the three (3) accounts
B. X can only claim from (1) account of ₱250,000
C. X can claim a total of ₱750,000 from all the three (3) accounts
D. X cannot claim anything from any deposit accounts

116. The amount due to any bona fide depositor for legitimate deposits in an insured bank
net of any obligation of the depositor to the insured bank as of the date of closure,
but not exceed Five Hundred Thousand Pesos (₱500,000).
A. Deposit
B. Insured Deposit
C. Transfer Deposit
D. Trust Funds

117. Statement No. 1: A joint account shall be insured separately from any individually-
owned deposit account.
Statement No. 2: Membership of banks to PDIC is mandatory; hence, all operating
banks are members of PDIC.
A. First is false, Second is true
B. Second is false, First is true
C. Both are false
D. Both are true

118. The PDIC shall not pay deposit insurance for the following accounts or transactions,
except for:
A. Deposit accounts which are unfunded, fictitious or fraudulent
B. Deposit products constituting or emanating from unsafe and unsound banking
practices
C. Deposit accounts that resulted from splitting of deposits
D. Foreign currency deposits

119. What is PDIC’s maximum deposit insurance coverage?


A. ₱150,000
B. ₱1,000,000
C. ₱500,000
D. ₱250,000

120. This occurs whenever a deposit account with an outstanding balance of more than
the statutory maximum amount of insured deposit maintained under the name of
persons is broken down and transferred to two or more accounts in the name of
persons or entities who have no beneficial ownership on transferred deposits in their
names within 120 days immediately preceding or during a bank-declared bank
holiday, or immediately preceding a closure order issued by the Monetary Board for
the purpose of availing of the maximum deposit insurance coverage.
A. Inter-Branch deposits

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B. Transfer deposits
C. Splitting of deposits
D. Insured deposits

121. This means the unpaid balance of money or its equivalent received by a bank in the
usual course of business and for which it has given or is obliged to give credit to a
commercial, checking, savings, time or thrift account.
A. Insured deposit
B. Deposit
C. Transfer deposit
D. Trust fund

122. This refers to the possibility that failure of one bank to settle net transactions with
other banks will trigger a chain reaction, depriving other banks of funds leading to a
general shutdown of normal clearing and settlement activity.
A. Assumption of risk
B. Systematic risk
C. Clearing risk
D. Transaction risk

123. The following are powers of the PDIC, except for:


A. Power of examination of banks
B. Power to secure corrective actions from the Monetary Board
C. Power to underwrite and advance costs of litigation
D. Power to exercise taxation and eminent domain

124. Statement No. 1: The PDIC is exempted from income tax, final withholding tax, value-
added tax on assessments collected from member banks, and local taxes.
Statement No. 2: For purposes of meeting its insurance purposes and its financial
assistance functions, PDIC is authorized to borrow from BSP.
A. Both are true
B. Both are false
C. First is true, Second is false
D. Second is true, First is false

125. PDIC covers only:


A. The risk of a bank closure ordered by the Monetary Board
B. Bank losses due to theft, fire, fortuitous events, force majeure
C. Closure by reason of strike or existence of public disorder revolution or civil war
D. Answer not given

126. Statement No. 1: Deposit insurance coverage is not determined on a per account
basis.
Statement No. 2: Deposits in different banking institutions are not insured separately.
A. Both are true
B. Both are false
C. First is true, Second is false
D. Second is true, First is false

127. The depositor of the closed insured bank has _____ months from date of bank
takeover to file his deposit insurance claim.
A. 6
B. 12
C. 24
D. 36

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128. What happens when the depositor of a closed bank fails to file his claim within the
24-month period?
A. All nights of the depositor with respect to the insured deposit shall be honored
only after successfully filing for an extension within 6 months from the lapse of
the 24-month reglementary period
B. All rights of the depositor with respect to the insured deposit shall no longer be
honored. But he may still make a claim against the assets of the closed bank
C. All rights of the depositor with respect to the insured deposit shall no longer be
honored and he shall be barred from making a claim against the assets of the
closed bank
D. All rights of the depositor with respect to the insured deposit shall still be
honored, but he may only make a claim against the assets of the closed bank

129. The following are required to file deposit insurance claims, except:
A. Depositors who have outstanding obligations with the closed bank regardless of
amount of depositors
B. Depositors with account balances of less than ₱100,000 who have no updated
addresses in the bank records or who have not updated their addresses through
the Mailing Address Updated Form (MAUF) issued by the PDIC
C. Depositors who maintain their accounts under the name of business entities,
regardless of type of account and account balance
D. Answer not given

130. Statement No. 1: Inter-branch deposits are not covered by deposit insurance.
Statement No. 2: The liability of the PDIC for insured deposits rests upon the
existence of deposits with insured bank, not on the negotiability or non-negotiability
of the certificates evidencing these deposits.
A. First is true, Second is false
B. Second is true, First is true
C. Both are false
D. Both are true

131. This is the stage within which the PDIC manages the affairs of the closed bank and
preserves its assets for the benefit of creditors:
A. Receivership
B. Liquidation
C. Examination
D. Rehabilitation

132. This refers to the recovery and conversion of assets into cash for distribution to all
creditors in accordance with the order of creditor preference pursuant to law:
A. Receivership
B. Liquidation
C. Examination
D. Rehabilitation

133. This following are powers of the PDIC as a corporate body, except:
A. To adopt and use a corporate seal
B. To have succession
C. To make contracts
D. Answer not given

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SECRECY OF BANK DEPOSITS AND UNCLAIMED BALANCES LAW

134. All deposits with banks or banking institutions in the country are confidential, and
may not be examined or looked into by any person, government, official, bureau, or
office. However, it does provide exemptions:
A. The depositor gives written permission
B. Cases of impeachment
C. Cases where the money deposited or invested is the subject matter of the
litigation
D. All of the above

135. Deposits that have become dormant for a period of ____ years may be escheated in
favor of the government.
A. 10 years
B. 15 years
C. 20 years
D. 25 years

136. X, a private individual, maintains a dollar deposit with ABC Bank. X is suspected to be
the leader of a Kidnap for Ransom Gang and he is Suspected of depositing all ransom
money in said deposit account which are all in US Dollars. The police want to open
said account to know if there are really deposits in big amounts. Which statement is
most accurate?
A. An approval from the Monetary Board is necessary to open the account
B. The same rules under secrecy of Bank Deposit Act will apply
C. Because the deposit is in US Dollars, it is covered by the Foreign Currency Deposit
Act which allows disclosure only upon written permission of the depositor
D. Approval from the court is necessary to order disclosure of the account

137. The Bank Secrecy Law (RA 1405) prohibits disclosing any information about deposit
records of an individual without court order except:
A. In an investigation by the Ombudsman
B. In an investigation for violation of Anti-Graft and Corrupt Practices
C. In an examination to determine gross estate of a decedent
D. In an impeachment proceeding

138. Which of the following is an exception to the secrecy of bank deposits which are in
the Philippine Pesos, but NOT an exception to the secrecy of foreign currency
deposits?
A. Upon Bangko Sentral ng Pilipinas (BSP) inquiry into or examination of deposits or
investments with any bank when the inquiry or examination is made in the course
of the BSP’s periodic special examination of said bank to ensure compliance with
the Anti-Money Laundering Act (AMLA)
B. Upon Philippine Deposit Insurance Corporation (PDIC) and BSP Inquiry into an
examination of deposit accounts in case there is a finding of unsafe or unsound
banking practice
C. Upon inquiry by the Commissioner of Internal Revenue in the event a taxpayer
files an application to compromise his tax liabilities on the ground of financial
incapacity
D. Upon inquiry in cases of impeachment

139. ____ include credits or deposits of money, bullion, security or other evidence of
indebtedness of any kind, and interest thereon with banks, buildings and loan

Page 127 of 141


associations, and trust corporations, as hereinafter defined, in favor of any person
known to be dead or who has not made further deposits or withdrawals during the
preceding ten years of more.
A. Peso deposits
B. Foreign currency deposits
C. Deposit insurance
D. Unclaimed balances

140. Statement No. 1: Publication of the list of unclaimed balances is intended to


safeguard the night of depositors their heirs and successors to due process.
Statement No. 2: Initially, there should be notice to the depositor of the unclaimed
balance.
A. First is true, Second is false
B. Second is true, First is false
C. Both are true
D. Both are false

141. Within the month of January of every odd year, all banks, building and loan
associations, and trust corporations shall forward to the Treasurer of the Philippines a
statement, under oath, of their respective managing officers, of all credits and
deposits held by them in favor of persons known to be dead, or who have not made
further deposits or withdrawals during the preceding ten years or more, arranged in
alphabetical order according to the names of creditors and depositors, EXCEPT:
A. The names and last known place of residence or post office addresses of the
persons in whose favor such unclaimed balances stand
B. The publication of a list of such unclaimed balance and the amount thereof
C. The amount and the date of the outstanding unclaimed balance and whether the
same is in money or in security, and if the latter, the nature of the same
D. The date when the person in whose favor the unclaimed balance stands died, if
known, or the date when he made his last deposit or withdrawal

142. Statement No. 1: Money-market placement is not covered by R.A 1405 because it is
not deposited in a bank.
Statement No. 2: A co-payee in a check deposited in a bank is likewise a co-depositor
thereof; no written consent of other co-payee is necessitated in an inquiry of the
deposits by the said co-depositor
A. Both are true
B. Both are false
C. First is true, Second is false
D. Second is true, First is false

143. Statement No. 1: Demand drafts cannot be escheated but telegraphic notes can be
escheated.: Statement No. 2: The unclaimed balances may be subject or escheat
proceedings, after proper publication and the depositors still do not lay claim them.
A. Both are false
B. Both are true
C. First is false, Second is true
D. Second is false. First is true

GENERAL BANKING LAW

Page 128 of 141


144. Entities engaged in the lending of funds obtained in the form of deposits from the
public.
A. Pawnshop
B. Lending institutions
C. Investment company
D. Banks

145. Entities engaged in the borrowing of funds through the issuance, endorsement or
assignment with recourse or acceptance of deposit substitutes for purposes of
relending or purchasing or receivables and other obligations.
A. Banks
B. Quasi-Banks
C. Commercial Banks
D. Universal Banks

146. Banks that have authority to exercise, in addition to the powers and functions of
commercial banks, powers of an investment house and the power to invest in non-
allied enterprises.
A. Cooperative banks
B. Universal banks
C. Rural banks
D. Thrift banks

147. Banks that are given all such power necessary to engage in commercial banking in
addition to general corporate powers.
A. Universal banks
B. Quasi-banks
C. Cooperative banks
D. Commercial banks

148. Banks that are created to make needed credit available and readily accessible in the
rural areas for the purpose of promoting comprehensive rural development.
A. Islamic banks -
B. Thrift banks
C. Quasi-banks
D. Rural banks

149. These include savings and mortgage banks, private development banks, and stock
savings and loan associations.
A. Thrift banks
B. Cooperative banks
C. Rural banks
D. Quasi-banks

150. Banks that primarily provide financial, banking and credit services to cooperative
organizations and its members.
A. Commercial banks
B. Universal banks
C. Cooperative banks
D. Quasi-banks

151. The bank created under R.A 6848 to promote and accelerate the socio-economic
development of the Autonomous Region by performing banking, financing and
investment operations and to establish and participate in agricultural, commercial
and industrial ventures based on the Islamic concept of banking.

Page 129 of 141


A. Islamic banks
B. Rural banks
C. Thrift banks
D. Quasi-banks

152. Persons or entities whose principal functions include the lending, investing or
placement of funds or evidences of indebtedness or equity deposited with them,
acquired by them, or otherwise coursed through them, either for their own account or
for the account of others.
A. Banks
B. Quasi-Banks
C. Financial intermediaries
D. Commercial banks

153. This bank was conceived and created as private commercial bank owned by the
Filipino veterans of World War II and deeply imbued and impressed with public
interest.
A. Philippine Veterans Bank
B. Land Bank of the Philippines
C. Development Bank of the Philippines
D. United Coconut Planters Bank

154. Created to finance the acquisition and distribution of agricultural estates for division
and resale to small landlords as well as the purchase of the landholding by the
agricultural lessee.
A. United Coconut Planters Bank
B. Land Bank of the Philippines
C. Development Bank of the Philippines
D. Bangko Sentral ng Pilipinas

155. Its primary purpose is to provide banking services principally to cater to the medium
and long-term needs of agricultural and industrial enterprises with emphasis on small
and medium-scale enterprises
A. Bangko Sentral ng Pilipinas
B. United Coconut Planters Bank
C. Development Bank of the Philippines
D. Land Bank of the Philippines

156. Refers to a branch, subsidiary or affiliate of a foreign banking corporation duly


authorized by BSP to transact offshore banking business in the Philippines.
A. Foreign banks
B. Allied enterprises
C. Financial intermediaries
D. Off-shore banking unit

LOANS (UNDER GENERAL BANKING LAW)

157. Loans, other credit accommodations and guarantees shall exclude:


A. Loans and other credit accommodations secured by obligations of the Bangko
Sentral or of the Philippine Government
B. Loans and other credit accommodations covered by assignment of deposits
maintained in the lending bank and held in Philippines

Page 130 of 141


C. Loans, credit accommodations and acceptances under letters of credit to the
extent covered by margin deposits
D. All of the above

158. The total of loans, credit accommodations and guarantees that may be extended by
a bank to any other person, partnership, association, corporation or other entity shall
at no time exceed 25% of the net worth of such bank.
A. Single Borrower's Limit
B. Ceiling
C. DOSRI accounts
D. Loan

159. The single borrower’s limit (SBL) provides that the total amount of loans, credit
accommodations and guarantees that may be extended by a bank to any person,
partnership, association, corporation or other entity shall at no time exceed _____ of
the net worth of such bank.
A. 20%
B. 25%
C. 30%
D. 35%

160. The total amount of loans, credit accommodations and guarantees may be increased
by an additional _____ of the net worth of such bank provided the additional liabilities
of any borrower are adequately secured by trust receipts, shipping documents,
warehouse receipts or other similar documents transferring or securing title covering
readily marketable, non-perishable goods which must be fully covered by insurance.
A. 15%
B. 12%
C. 10%
D. 6%

161. The prescribed ceilings for SBL shall include:


A. The direct liability of the maker or acceptor of paper discounted with or sold to
such bank and the liability of general endorser, drawer or guarantor who obtains
a loan or other credit accommodation from or discounts paper with or sells papers
to such bank
B. In the case of an individual who owns or controls a majority interest in a
corporation partnership, association or any other entity, the liabilities of said
entities to such bank
C. In the case of a corporation, all liabilities to such ban of all subsidiaries in which
such corporation owns or controls a majority interest
D. All of the above

162. Even if a parent corporation, partnership, association, entity or an individual who


owns or controls a majority interest in such entities has no liability to the bank, the
Monetary Board may prescribe the combination of the liabilities of subsidiary
corporations or members of the partnership, association, entity or such individual
under certain circumstances, including but not limited to any of the following
situations:
A. The parent corporation, partnership, association, entity or individual guarantees
the repayment of the liabilities
B. The liabilities were. incurred for the accommodation of the parent corporation or
another subsidiary or of the partnership or association or entity or such individual
C. The subsidiaries through separate entities operate merely as departments or
divisions of a single entity

Page 131 of 141


D. All of the above

163. Statement No. 1: A bank shall grant loans and other credit accommodations only in
amounts and for the periods of time essential for the effective completion of the
operations to be financed.
Statement No. 2: Dealings of a bank with any of its directors, officers or stockholders
and their related interests shall be upon terms less favorable to the bank than those
offered to others.
A. Both are true
B. Both are false
C. First is false, Second is true
D. Second is false, First is true

164. Outstanding loans and other credit accommodations, deferred letters of credit less
margin deposits and guarantees. Except as specifically provided, total credit
commitment shall be reckoned on credit risk-weighted basis consistent with existing
regulations.
A. Total credit commitment
B. Single borrower’s limit
C. DOSRI account
D. Classified loans

165. The following are requisites for the restrictions on bank exposure to DOSRI accounts,
except:
A. The borrower is a director, officer, or any stockholder of a bank and related
interest
B. He contracts a loan or any form of financial accommodation
C. The loan or financial accommodation is from an insurance company
D. The loan or financial accommodation is in excess of 5% of the capital and surplus
of the lending bank or in the maximum amount permitted by law, whichever is
lower

166. Dealings of a bank with any of its DOSRI shall be upon terms not less favorable to the
bank than those offered to others.
A. Aggregate ceilings
B. Arm’s length rules
C. Individual ceilings
D. Reportorial requirement

167. The monetary board may regulate the amount of loans, credit accommodations and
guarantees that may be extended, directly or in directly, by a bank to its DOSRI, as
well as investments of such bank in enterprises owned or controlled by said DOSRI.
A. Individual ceilings
B. Reportorial requirement
C. Aggregate ceilings
D. Procedural requirement

168. The outstanding loans, credit accommodations and guarantees extended to DOSRI
shall be limited to an amount equivalent to their respective unencumbered deposits
and book value of their paid-in capital contribution in the bank.
A. Arms length rule
B. Aggregate ceilings
C. Ceiling on unsecured loans
D. Individual ceilings

Page 132 of 141


ANTI-MONEY LAUNDERING ACT

169. Covered Persons supervised or regulated by BSP are the following, except:
A. Foreign exchange dealers
B. Money changers
C. Pawnshops
D. None of the above

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170. Covered Persons supervised or regulated by Insurance Commission are the following,
except:
A. Insurance companies
B. Holding companies
C. Insurance agents
D. Real Estate Brokers

171. Covered Persons supervised or regulated by SEC are the following:


A. Securities dealers, brokers, salesmen, investment houses, and other similar
persons managing securities or rendering services, such as investment agents,
advisors, or consultants
B. Mutual funds or open-end investment companies, close-end investment
companies or issuers, and other similar entities
C. Other entities, administering or otherwise dealing in commodities, or financial
derivatives based thereon, valuable objects, cash substitutes, and other similar
monetary instruments or properties, supervised regulated by the SEC
D. All of the above

172. “Suspicious Transaction” refers to a transaction, regardless of amount, where any of


the following circumstances exists, except:
A. There is no underlying legal or trade obligation, purpose or economic justification
B. The client is properly identified
C. The amount involved is not commensurate with the business or financial capacity
of the client
D. Taking into account all known circumstances, it may be perceived that the client’s
transaction is structured in order to avoid being the subject of reporting
requirements under the AMLA

173. “Covered transaction” refers to:


A. A transaction in cash or other equivalent monetary instrument exceeding Five
Hundred Thousand Pesos (₱500,000)
B. A transaction exceeding One Million Pesos (₱1,000,000) in cases of jewelry
dealers in precious metals and dealers in precious stones
C. All of the above
D. None of the above

174. “Unlawful Activity” refers to any act or omission, or series or combination thereof,
involving or having direct relation, to the fallowing, except:
A. Kidnapping for Ransom
B. Plunder
C. Robbery and Extortion
D. None of the above

175. (1) Covered institutions shall maintain accounts only in the true name of the account
owner or holder. The provisions of existing laws to the contrary notwithstanding,
anonymous accounts, accounts under fictitious names, incorrect name accounts and
all other similar accounts shall be ABSOLUTELY prohibited.
(2) When a covered institution acquires the business of another covered institution,
either in whole or as a product portfolio, it is NOT NECESSARY for the identity of all
existing customers to be re-established, Provided, that all customer account records
are acquired with the business and due diligence inquiries do not raise any doubt as
to whether or not the acquired business has fully complied with all the requirements,
business has fully complied with all the requirements under the AMLA and these
Rules.
A. Statement 1 is true, Statement 2 is false

Page 134 of 141


B. Statement 1 is false, Statement 2 is true
C. Both statements are true
D. Both statements are false

NEW CENTRAL BANK ACT

176. The State's central monetary authority charged with the responsibility of
administering the monetary, banking and credit system of the country and is granted
the power of supervision and examination over bank and non-bank financial
institutions performing quasi-banking functions, including savings and loan
associations.
A. Bangko Sentral ng Pilipinas
B. Land Bank of the Philippines
C. Development Bank of the Philippines
D. National Treasury

177. The following are roles of the BSP, except for:


A. Banker of the Government
B. Representation with the National Treasury
C. Representation with the IMF
D. Fiscal Operations

178. The following are BSP privileges and prohibitions, except for:
A. Tax exemption
B. Phase-out of Fiscal Agency Function
C. Non-exemption from Custom Duties
D. Phase-out of Regulatory Powers over the Operations of Finance Corporations and
other Institutions

179. All noted and coins issued by the Bangko Sentral shall be fully guaranteed by the
Government of the Republic of the Philippines and shall be legal tender in the
Philippines for all debts, both public and private.
A. Purchasing power
B. Legal character
C. Interconvertibility of currency
D. Legal tender power

180. Unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts
not exceeding _____ for denominations of twenty-five centavos and above, and in
amounts not exceeding _____ for denominations of ten centavos or less.
A. ₱50, ₱20 C. ₱100, ₱50
B. ₱20, ₱50 D. ₱50, ₱25

181. Checks representing demand deposits do not have legal tender power and their
acceptance in the payment of debts, both public and private, is at the option of the
creditor; Provided, however, that a check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery to the creditor of cash in an
amount equal to the amount credited to his account.
A. Legal tender power
B. Legal character
C. Interconvertibility of currency
D. Purchasing power

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182. The following are grounds for conservatorship for a bank or quasi-bank, except for:
A. A state of continuing liability
B. Unwillingness to maintain a condition of liquidity deemed adequate to protect the
interest of depositors and creditors
C. The bank has willfully violated a cease and desist order
D. Answer not given

183. The following are powers of a conservator, except:


A. To take charge of the assets, liabilities, and the management thereof
B. To reorganize the management of the subject bank
C. To collect all monies and debts
D. To issue a cease and desist order

184. The following are grounds for receivership and liquidation, except for-
A. The bank is unable to pay its liabilities as they become due in the ordinary course
of the business
B. The bank has insufficient realizable assets
C. The bank cannot continue operating without involving probable losses to its
depositors or creditors
D. Answer not given

185. The following are the functions and obligations of a receiver, except for one:
A. The receiver shall immediately gather and take charge of all assets and liabilities
of the institution, administer the same for the benefit of its creditor
B. The receiver may deposit or place the funds of the institution in non-speculative
investments
C. The receiver shall determine as soon as possible, but not later than 90 days from
take over, whether the institution may be rehabilitated or otherwise
D. The receiver shall pay or commit any act that will involve the transfer or
disposition of any asset of the institution

186. No prior hearing is necessary in appointing a receiver and in closing the bank. It is
enough that subsequent judicial review is provided for.
A. Close now-hear later scheme
B. Conservatorship
C. Receivership and Liquidation
D. Closure

187. The following mandatory requirements for bank closure, which one is incorrect:
A. Examination by the appropriate BSP department as to the condition of the bank
B. Examination showing that the condition of the bank is one of insolvency, or that
its continuance in business would involve probable loss to its depositors or
creditors
C. Director shall inform the Monetary Board (MB) in writing of such fact
D. Within 90 days, the MB shall determine and confirm if the bank is insolvent, and if
public interest requires, shall order the liquidation of the bank

188. The following are the effects of receivership and liquidation, except for:
A. The assets of an institution under receivership or liquidation shall be deemed in
custodial legis in the hands of the receiver and shall be exempt from any order of
garnishment, levy, attachment, or execution
B. There will be no preference even if the claimant-depositor obtained writ of
preliminary attachment

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C. The appointment of a receiver does not dissolve the corporation nor does it
interfere with the exercise of corporate rights
D. Interest on loans extended by the BSP are no longer demandable

189. All Philippine notes and coins issued or circulating in accordance with the provisions
of the NCBA.
A. Legal tender C. Cash
B. Money D. Currency

190. An alternative form of obtaining funds from the public, other than deposits, through
the issuance, endorsement, or acceptance of debt instruments for the borrower’s
own account, for the purpose of relending or purchasing of receivables and other
obligations.
A. Demand deposits
B. Peso deposits
C. Emergency loans and advances
D. Deposit substitutes

191. All those liabilities of the Bangko Sentral and of other banks which are denominated
in Philippine currency and are subject to payment in legal tender upon demand by
the presentation of checks.
A. Peso deposits
B. Deposit substitutes
C. Open market operations
D. Demand deposits

INTELLECTUAL PROPERTY LAW (R.A 8293)

192. What is a well-known mark?


A. A mark that is popular and known all over the world
B. A mark that is so declared by a competent and authoritative business based on
its profitability
C. A mark which is declared as such by a judge based on a certain given criteria
D. None of the above

193. When may a mark that is identical with, or confusingly similar to, or constitutes a
translation of a mark considered well-known in Section 123.1, par. e, which is
registered in the Philippines, be registrable?
A. When the goods or service are similar to those with respect to which registration
is applied for
B. Never registrable
C. When the goods or services are not similar to those with respect to which
registration is applied for
D. Always registrable

194. Any visible sign capable of distinguishing goods or services of an enterprise and shall
include a stamped or marked container of goods would be a:
A. Logo C. Geographical Indications
B. Lay-out Design D. Trademark

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195. The term of Broadcast is:
A. Fifty (50) years from the end of the year which they took place
B. Thirty (30) years from the end of the year they took place
C. Twenty (20) years from the date they took place
D. None of the above

196. How may the rights in a mark be acquired?


A. Trademark rights are acquired through intellectual creation
B. Trademark rights are acquired through registration
C. Trademark rights are acquired from the moment of creation
D. Trademark rights are acquired through first use and adoption of mark

197. The term of protection of works of applied arts is:


A. Lifetime of the author, plus fifty (50) years after his death
B. Twenty-five (25) years from the date of making
C. Fifty (50) years from the date of publication, and if unpublished, from the date of
making
D. None of the above

198. The term protection for copyrighted works under Section 172 and 173 is:
A. Lifetime of the author, plus fifty (50) years after his death
B. Twenty-five (25) years from the date of making
C. Fifty (50) years from the date of publication, and if unpublished, from the date of
making
D. None of the above

199. Copyrightable works are protected:


A. After examination
B. From the moment of creation
C. Upon registration
D. Upon adoption

200. In the case of work created by an employee during and in the course of his
employment, ownership of copyright shall be determined based on:
A. Whether or not there is an agreement by the parties
B. Whether or not the creation of the object of copyright is part of his regular duties
C. Whether or not the employee used the time, facilities and materials of the
employer
D. None of the above

201. Any technical solution of a problem in any field of human activity which is new,
involves an inventive step and is industrially applicable shall be patentable. It may
be, or may relate to, a product, or process, or an improvement of any of the
foregoing:
A. Lay-out Design C. Work of Applied Art
B. Patentable Inventions D. Utility Model

202. An application for patent filed by any person who has previously applied for the same
invention in another country which by treaty convention, or law affords similar
privileges to Filipino citizens, shall be considered as filed as of the date of filing the
foreign application:
A. The local application expressly claims priority
B. It is filed within twelve (12) months from the date the earliest foreign application
was filed

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C. A certified copy of the foreign application together with an English translation is
filled with six (6) months from the date of filing in the Philippines
D. All of the above

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203. The term of a patent shall be “___” years from the filing date of the application.
A. Ten (10) C. Twenty (20)
B. Fifteen (15) D. Twenty-five (25)

204. Any interested person may, upon payment of the required fee, petition to cancel the
patent or any claim thereof, or parts of the claim, on any of the following grounds,
except:
A. That what is claimed as the invention is not new or patentable
B. That the patent does not disclose then invention in a manner sufficiently clear
and complete for it to be carried out by any person skilled in the art
C. That the patent is contrary to public order or morality
D. The invention forms part of a prior art

205. (1) Any prior user, who, in good faith was using the invention or has undertaken
serious preparations to use the invention in his enterprise or business, before the
filing date or priority date of the application on which a patent is granted, shall have
the right to continue the use thereof envisaged in such preparations within the
territory where the patent produces its effect.
(2) The right of the prior user may only be transferred or assigned together with his
enterprise or business, or with that part of his enterprise or business in which the use
or preparations for use have been made.
A. Statement 1 is true, Statement 2 is false
B. Statement 2 is true, Statement 1 is false
C. Both statements are true
D. Both statements are false

206. A Government agency or third person authorized by the Government may exploit the
invention even without agreement of the patent owner where:
A. The public interest, in particular, national security, nutrition, health or the
development of other sectors, as determined by the appropriate agency of the
government, so requires.
B. A judicial or administrative body has determined that the manner of exploitation,
by the owner of the patent or his licensee is anticompetitive
C. Both a and b
D. None of the above

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