National Federation of Junior Philippine Institute of Accountants

In cooperation with
Isla Lipana & Co. and CRC-ACE

National mock board examination 2014

February 15-16, 2014

BUSINESS LAW

Instruction: On the answer sheet provided, Shade the letter representing

the best answer for each of the following questions. Necessary
computations should be made on separate sheets of paper. Avoid
making erasures. The scanning machine may invalidate your answer.

1.

Choose the situation which illustrates best the mi nimum requirement of the law to corporate
formation:
Authorized Capital
Subscribed Capital
Paid-in Capital
a. P150,000
P 36,000
P9,000
b. P300,000
P 75,000
P18,750
c. P500,000
P250,000
P125, 000
d. P2,000,000
P500,000
P100, 000

2.

The buy er will acqui re what rights to the fruits of the things bought?
a. Personal right from the time of perfection and real right from the time the fruits arise
b. Real ri ght from the time of perfection but personal ri ght until actual delivery
c. Personal right from the time the fruits arise and real right upon delivery
d. Personal right from the time of perfection and real right upon delivery

3.

The power to sue and be sued as a corporate power is more specifically classified as:
a. Incidental power
c. Implied power
b. Express power
d. Discretionary power

4.

Which of the following is no n-negotiable?

a. I promise to pay to the order of Mr. A the sum of P10,000 at the Banco De Oro M anila;
b. I promise to pay to the order of X the sum of P10,000 or to deliver one-fourth of the
harv est in my farm at his option
c. I promise to pay Y or bearer in M anila the sum of P 10,000 10 days before death of his
horse Petra
d. I promise to pay Z or bearer in Manila the sum of P 10,000 on or before November 15,
2012.

5.

The sale of the hope itself

a. Dacion en pago
b. Payment by cession

6.

Annaliza uses a savings account with a BPI bank. The contract between Annaliza and the
bank is one of:
a. Agency.
b. Commodatum.
c. Deposit.
d. Simple loan.

7.

Nicolas is a partner i n MB Company. Dan is indebted to Nicolas for P200,000 and to the
partners hip for P600,000.When both debts mature, Dan pays Nicolas P200,000 and the
latter issues his personal receipt. The payment for P200,000 shall be applied:
a. P100,00 in favor of Nicolas and P100,000 in favor of the partnershi p
b. To the whole debt owing to Nicolas
c. One-fourth in favor of Nicolas and three-fourths in favor of the partnershi p
d. To the whole debt owing to the partnership

c. Emptio spei
d. Emptio reisperati

d. not dissolved and the remai ning partners may hold the partner liabl e for damages on
account of breach of contract.
48. Notice of dishonor is not required to be given to an indors er in either of the following cases,
except:
a. Where the person is the indorser is the person to whom the instrument is pres ented for
payment.
b. Where the i nstrument was mad or accepted for his accommodation.
c. When the drawee is a fictitious person or a person not having the capacity to contract.
d. Where the drawee and the drawer are the s ame person.
49. Statement I: An acceptance for honor supra protest must be in writing, and indicate that it is
an acceptance for honor.
Statement II: Where a bill has been paid for honor, all parties subsequent to the party for
whose honor i t is paid are discharged, but the payment for honor is subject for revocation.
a. Only statement I is true.
c. Only statement II is true.
b. Both statements are true.
d. Both statements are false.

8.

Where one of the parti es is a def -mute who does not know how to write, the contract is:
a. Void
c. Voidable
b. Valid
d. Unenforceable

9.

Megan makes a promissory note for P1,000,000 payabl e to the order of Paolo. Paolo
negotiates the note to Marie who indorses it to Anne. Bilo stol e the note and raised the
amount to P2,000,000 and thereafter indors es it to Angela, Angela to Angelo, and Angelo to
AJ, who is a holder in due co urse. In this case:
a. Bilo, Angela and Angelo are not liable to AJ
b. AJ can recover P2,000,000 from all parties becaus e he is a holder in due course
c. Megan, Paolo, Marie and Anne are not liable to AJ.
d. Megan, Paolo, Marie and Anne are liable to AJ for P1,000,000.

10. Similarity between real es tate mortgage and antichresis

a. The property is delivered to the creditor
b. The subject matter is a real property
c. The creditor acquires the right to receive the fruits of the property
d. The creditor is obliged to pay the taxes and charges upon the estate

50. I. Obligations are expressly provided by law, they are demandable and enforceable, and
cannot be presumed to exist.
II. Obligations arising from contracts have the force of law between the contracting parti es
and should be complied with good faith.
a. Only statement I is true.
c. Only statement II is true.
b. Both statements are true
d. Both statements are false

11. Len appointed Leng as her agent to sell her hous e in cash for P500,000 with promise to pay
5% commission. Leng using persuasive skills was able to sell it for P750, 000 on credit. After
ratifying the sale with the buyer:
a. Leng must give P500,000 only.
b. Leng must give P750, 000 minus the commission.
c. Leng must give P500,000 minus the commission.
d. Leng must give P750, 000

--END OF EXAMINATION--

12. 1st STATEM ENT If the same car should have been sold to different buyers, the ownership
shall be transferred to the person who may firs t taken possession thereof in good faith.
2nd STATEM ENT The s eller is responsible to the buyer for any hidden defects or faults in the
thing sold only if he was aware thereof.
a. The 1st statement is true, 2nd statement false
b. 1st statement false, 2nd statement true
c. Both statements are false
d. Both statements are true
13. Ronald sold to AL a car for a price of P500,000.00. The contract provides that Al will pay cash
of P200,000.00 and for the balance, Al will give a land worth P300,000. 00. What is the
nature of the contract?
a. Sale
b. Partly sale and partly barter
c. Barter
d. Commodatum
14. Statement No. 1 An oral agreement to answer all expenses for the wedding reception if
Andy marri es Baby is unenforceable

Statement No. 2 An oral contract of sale of a l and is void.

a. False, false.
b. True, true
c. False, true.
d. True, false
15. Which of the following s tatements is false?
a. Non stock corporations can have mo re than 15 trustees at one given time
b. Trust compani es can be close corporations
c. Educational corporations cannot issue no par v alue shares
d. No par value shares cannot be issued for a consideration less than five pesos per share
16. 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-land (limited partner); B-building (general partner); C-services (limited partner)
b. A-check (limited partner); B-tools (general partner); C-car (general partner)
c. A-real property (limited partner), B-l abor (general partner); C-cas h (general partner)
d. A-movables (limited partner); B-money (general partner); C-services (general partner)
17. Which of the following i nstruments is negoti able?
a. Pay to Bearer C P100,000.00 (sgd) X, addressed to Y
b. Pay to C P10,000.00 or his order out of the rental of my house in Manila. (sgd) X, addressed
to Y
c. Pay to C P10,000.00 and reimburs e yourself out of the dividends I may receive from CRCACE.
(sgd) X, addressed to Y
e. Pay to the order of C P10, 000.00. (sgd) X, addressed to Y
18.

1st

Statement The guardi an cannot purchase the property of the ward and any stipul ation
to the contrary is void.
2nd Statement Sale of property between husband and wife is unenforceable if orally
constituted unl ess there is a judicial separation of property.
a. 1st statement is wrong, 2nd statement is correct
b. 1st statement is correct, 2nd statement is wrong.
c. Both statements are correct
d. Both statements are wrong.

19. A contract wherein a person binds himself to fulfill the obligation of the principal debtor in
case the latter should fail to do so:
a. Agency
c. Suretyship
b. Guaranty
d. Dacion en pago
20. Ai pledged her i-phone 5 to Yeng for P20,000. 00. Ai was unabl e to pay the obligation upon
maturity so Yeng sold the phone at public auction for P15,000.00. Which of the following is
correct?
a. The deficiency of P5,000.00 can be recovered

42. Shares classified in the articles of incorporation that may give the holder certain rights and
privileges not enjoyed by the owners of other stocks.
a. Founders shares
c. Treasury shares
b. Watered shares
d. Delinquent shares
43. The partnership is bound to make a good loss if:
a. one partner acting withi n the scope of his apparent authori ty receives money or
property of a third person and misapplies it.
b. the partnership receives money outside the course of its business from a third person
and misapplies it.
c. one partner using the property of the partnership for his own resul ts loss or injury to
any person.
d. one partner acting outside his authority and third person doesnt hav e any knowledge
about his authority.
44. Which of the following statements is true?
a. A period dependi ng upon the sole will of the debtor will invalidate the obligation.
b. In a facultative obligation the ri ght to choos e is given to the debtor unless stipulated.
c. The nullity of the principal obligation carries with it the nullity of the penal ty clause.
d. In an obligation pay able pro rata, there is only one debt and one credit regardl ess of the
number of debtors and creditors.
45. Deliberate intentional evasion of the faithful fulfillment of an obligation
a. mora
b. dolo
c. culpa
d. fault
46. A, B and C are partners in the partnership X engaged in real es tate business. C is the
manager. A parcel of l and the title of which appears i n the name of X(partners hip) is sold by
C to Y in his own name. Which of the following statement is correct?
a. The convey ance by C in his own nam e passes the ti tle of the land to Y.
b. The convey ance by C in his own name passes the equitable interest of X.
c. The convey ance of C in his own name makes Y the owner of the land.
d. The convey ance of the land made by C to Y is void.
47. If a partner decides to withdraw from the partnership without jus tifiable cause and before
the specified expiration of the period, the partnershi p is:
a. dissolved and the remaini ng partners cannot hold the partner liable for damages on
account of breach of contract.
b. dissolved and the remaining partners may hold the partner liable for damages on
account of breach of contract.
c. not dissolved and the remaining partners may continue the business until the specified
period.

36. Holder H altered the amount of a negotiable note from P10,000 to P100,000 then negotiated
the note to I. As a result:
a. If I is a holder in due course, he can requi re the maker to pay P100,000
b. If I is not a holder in due course, he can require the maker to pay the sum of P100,000
c. I cannot require the maker to pay because of the forgery whether or not he is a holder in
due course
d. I is entitl ed to P10,000 if he is a holder in due cours e
37. Not a valid qualification of directors in a stock corporation as stated in the by -laws:
a. A director must be holder of at least P10,000 paid up shares as security for his action
b. A stipulation that at least 2/3 of the di rectors mus t be residents of the Philippines
c. A stipulation that all the shares he owns at the time he was elected as director may be
disposed off by him without forfeiting his directorship
d. That 5 shares of the capital stock must be registered i n the name of such director
38. The voting requi rement to remov e a di rector.
a. Two-thirds (2/3) outs tanding capital stock and majority vote of the board of di rectors.
b. Majority vote of the outstanding capital stock wi th voting ri ghts.
c. Two-thirds (2/3) of the outstanding capital stock with voti ng rights
d. Majority vote of the outstanding capital stock voti ng and non-voting
39. Which of the following is not negotiabl e?
a. Pay to A or order P10,000 notice of dishonor waived
b. Pay to A or order P10,000 on December 25, 2012
c. Pay to A or order P10,000 and deliver two pi glets at the option of the holder
d. Pay to A or order P10, 000 in US dollars on October 1, 2012
40. Which of the following is not correct?
a. A partners hip begins from the moment of the execution of the contract, unless it is
otherwise sti pulated
b. Persons who are prohibited from giving each other any donation or adv antage cannot
enter i nto univers al partnership
c. A particular partnership has for its object determinate things, their use or fruits, or a
specific undertaking or the exercise of a profession or vocation.
d. Articles of universal partnership entered into wi thout specifications of its nature, only
constitutes a universal partnership of all present property.
41. I. In a contract to s ell, ownershi p is retained by the buyer whether or not there is delivery.
The payment in full is a positive suspensive condi tion.
II. In a contract of sale, the buy er becomes the owner upon the delivery of the thi ng sold.
Non-payment of the price is a negative suspensive condi tion.
a. Only statement I is true.
c. Only statement II is true.
b. Both statements are true.
d. Both statements are false
.

b. The deficiency of P5, 000.00 can be recov ered ev en if a contrary stipulation appears
c. The deficiency of P5,000.00 can be recovered if stipulated
d. The deficiency of P5,000. 00 cannot be recov ered even if there is a stipulation
21. 1st Statement If the authori ty is to lease a building to thi rd persons for at leas t one year, a
special power of attorney is necessary.
2nd Statement The authority to s ell a property in behalf of the principal necessarily includes the
authori ty to mortgage.
a. 1st statement is wrong, 2nd statement is correct
c. Both statements are correct
b. 1st statement is correct, 2nd statement is wrong.
d. Both statements are wrong
22. 1st Statement In al ternative obligations, the choice s hall produce no effect except from the
moment it has been communicated.
2nd Statement - In dacion en pago, voluntary acceptance by the creditor of the property
belonging to the debtor will extinguished the enti re obligation unless there is a stipulation to
the contrary
a. Both statements are wrong.
c. 1st statement is correct, 2nd statement is wrong.
b. Both statements are correct.
d. 1st statement is wrong, 2nd statement is correct
23. By specific provisions of law, which of the following need not appear in a public instrument?
a. An assignment of credit, right or action involving real property in order to produce an
effect against third persons.
b. A pledge, describi ng the thing pledged and the date of the pledge, in order to be effective
against third persons.
c. A contract of agency, for the sale of a piece of l and or any interest therein, in order to
consider the sale by the agent as valid.
d. A contract of partners hip having a capital of three thousand pesos or more, in money or
property.
24. Angelo, Andrei, and Gabriel are partners in AGA Partnership. AJ repres ented himself as a
partner to Mae, who on the belief of such representation extended P1M to AGA partnershi p.
Assuming only Angelo and Gabriel consented to s uch representation, who will be held liable
to Mae?
a. AJ only
b. AJ, Angelo, Andrei and Gabriel
c. AJ and AGA partnershi p
d. All except Andrei and AGA partnership.
25. Absent any contrary provisions in the agreement, under which of the following
circumstances will a limited partnershi p be dissolved?
a. A limited partner di es and his estate is insolvent
b. A personal creditor of a general partner obtai ns a judgment agains t the general partners
interest i n the limited partnership.
c. A general partner retires and all remaining general partners do not consent to continue

d. A limited partner assigns his partnership interest to an outsider and the purchaser
becomes a substituted limited partner.
26. The instrument is discharged i n the following ins tances except one?
a. Intentional cancellation of the instrument by the holder.
b. Payment by party primarily liable to holder or his authorized representative.
c. Voluntary surrender of the instrument by the holder to the maker without collecting.
d. Payment by maker of a promissory note before maturity date.
27. To call a meeting for the purpos e of removing a di rector of a corporation the required votes
of the s tockholders is:
a. majority of the stockholders present
b. of the outstandi ng capital stock
c. 2/3 of the outstanding capital stock
d. majority of the outstanding capital stock
28. 1st STATEMENT: A director is removed from office by a vote of the stockholders holding or
repres enting at leas t 2/3 of outstanding capital stock. The v acancy occasioned by such
removal can be filled by the vote of a majori ty of the remai ning directors if still constituting a
quorum.
2nd STATEM ENT: The vacancy in the board occasioned by the death of a director can be
filled by the vote of a majority of the remaining directors if still constituting a quorum.
a. Both statements are true.
b. 1st statement is false, 2nd statement is true.
c. Both statements are false.
d. 1st statement is true, 2nd state is false
29. The following except one are valid considerations in a subscription agreement relative to the
stocks of a corporation:
a. Intangible property
b. Previous corporate obligations
c. Outstanding s hares in exchange for stocks in the ev ent of reclassification or conversion.
d. Promissory notes
30. Pauline and Angela are partners. On September 17, 2011 Gabriel was admi tted as a new
partner. At the time of Gabriel's admission, the partnership was indebted to Angelo for
P50,000 and Judiel for P100,000. After Gabriels admission, the partnership borrowed from
Kael a P200,000 and P400, 000 from Riza. On September 1, 2012, the partnership became
insolvent. The creditors are going after the separate properties of the partners to s atisfy
thei r remaining claims. How are the creditors' claims satisfied?
ANSWER 1: Angelo and Judiel can go after the separate properti es of Pauline, Angela and
Gabri el
ANSWER 2: Kael a and Riza can go after the separate properties of Pauline and Angela but not
of Gabriel
ANSWER 3: All creditors can run after the properties of the three partners

ANSWER 4: All partners shall be liable to the creditors except Gabriel

Which of the following is correct?
a. All answers are correct
b. All answers are wrong.
c. Only answer #1 is wrong,
d. Only answer #4 is correct
31. I promise to pay to bearer, Aileen, the sum of P200,000.00(Sgd) Arianne. The promissory
note is:
a. Negotiabl e promissory note payable on demand.
b. Negotiable promissory note pay able to order.
c. Negoti able promissory note payabl e to bearer.
d. Non-negotiable.
32. 1st Statement The acceptor of a bill may refuse to pay the holder on the ground that the
signature of the drawer is forged.
2nd Statement An instrument is not negotiable if it is payable to the order of a fictitious
person.
a. 1st statement is wrong, 2nd statement is correct
c. Both statements are correct
b. 1st statement is correct, 2nd statement is wrong.
d. Both statements are wrong.
33. The following person cannot be an incorporator of a corporation.
a. A resident alien
b. A marri ed woman without the consent of the husband even if the payment of her shares is
her paraphernal property.
c. A subscriber on the shares of the corporation who pays less than 25% of his subscription.
d. A corporation organized under the laws of the Philippines.
34. 1st Statement No delinquent stock shall be entitled to dividends
2nd Statement No delinquent stock s hall be voted for or be entitled to vote through
repres entation at any stockholders meeti ng.
a. 1st statement is wrong, 2nd statement is correct
c. Both statements are correct
b. 1st statement is correct, 2nd statement is wrong.
d. Both statements are wrong.
35. 1st Statement Mila bound hers elf to pay Paul her indebtedness. This is evidenced by a
promissory note stating therei n the words I acknowledged bei ng indebted to Paul or order
in the amount of Php100,000. Sgd. Mila. The instrument is non-negotiable.
2nd Statement Mila gave Malou a check wherein the only item not filled up is the space for
the amount. Mila instructed the pay ee to place the amount of Php10,000. However, Malou
placed therei n Php100,000. Malou negotiated the check to M arissa who is a holder in due
course. Marissa can hold Mila liable for P100,000.
a. 1st statement is wrong, 2nd statement is correct
c. Both statements are wrong.
b. 1st statement is correct, 2nd statement is wrong.
d. Both statements are correct