Test I- Multiple Choice

1. The defendant in a suit for quasi contract

a. is accused of negligence
b. hes accepted the offer of his action
c. has been enriched unjustly
d. has expressly agreed to the terms of the contract
2. In order to recover in a suit for a breach of contract, which of the following need
not be shown?
a. Formation of a valid contract.
b. The defendant failed to perform.
c. The plaintiff suffered physical injury.
d. The plaintiff suffered economic injury.
3. Which of the following is required for the formation of the contract?
a. consideration c. a writing
b. promise by both parties d. lack of fraud
4. An owner of a large home with one hectare law went on vacation. A retired
neighbor noticed that the grass was getting very high. He took his electric
grass cutter and spent the day cutting the grass. When the owner returned he was
very happy with the performance and expressed his gratitude. The neighbor
a. can recover the reasonable value of the services rendered based on quasi
contract.
b. can recover the usual charge that he charges based upon the contract
implied in-fact.
c. can recover at least the value of the value of the gasoline, depreciation,
and oil used in the
work
d. can recover nothing, since there is no legal duty to pay under the facts
given.
5. Saint Paul School of Business and Law is soliciting bids for a new computer. ABC
Corp. submits a bid of P2,000,000. The contract is given to XYZ Corp. which
submitted a bid of P2, 500,000.
a. Saint Paul is obligated to give the contract to ABC Corp. because it
accepted
with the lowest bid.
b. Saint Paul made an offer which was accepted by XYZ Corp.
c. ABC and XYZ made offers.
d. Saint Paul made an offer, but ABC had no right to accept.
6. S offers to sell B 20 cartoons of mangoes at P50 per kilo. Before B can accept the
offer, S dies.
a. B may accept the offer.
b. The offer terminated when S died.
c. B may accept the offer because the contract between B and S is an option
contract.
d. Th offer is effective until B learns of S death.
7. Barney telephones Fred and tells him that he is offering to n sell his pet dog for
P4,000.
He tells fred that the offer is good for one week.
a. Barney can revoke the offer at any before Fred accepts.
b. Barney cannot accept the offer for one week.
c. If Barney were a pet dog merchant, he would be bound.
 d. Barneys was only an invitation to offer.
8. Luis offers the paint to Rogers house for P25,000. Roger tell him, I cant afford
that price.
Will you do it for P11,000?
a. Luiss was terminated by Rogers counteroffer.
b. Luiss offer was terminated by operation of law.
c. Luiss offer has not terminated. Roger can still accept his offer.
d. Luiss offer has not been rejected by Roger?

9. A letter of acceptance, in answer to an offer made by letter, is effective when

a. deposited in the mail c. signed by the offeree
b. received by the offeror d. written
10. Furniture Warehouse is quitting business. The manager writes to the Law firm of
the Crook and Law and offers to sell the firm a conference table for P10,000. The
letter also states, Because this is a one time offer, you must respond in person.
This offer cannot be modified for any reason.
a. Crook and Law may accept the offer by letter because the mail is always a
reasonable
manner of acceptance.
b. Crook and Law may accept the offer by phone because the time for
acceptance is limited.
c. Crook and Law may accept it in any reasonable manner.
d. Crook and Low must accept in person because the offer requires it to do so.
11. Maryowns an attractive diamond that she originally purchased for P25,000.
Unfortunately, Mary was required to raise cash on short notice and, therefore, sold
her ring to Anna for P5,000.
a. This is not binding contract because Anna received a benefit.
b. This is a binding contract because Marys detriment was excessive.
c. this is a binding contract supported by legally sufficient consideration.
d. We cannot determine if a binding contract existed because a court must
assess Marys
wisdom, considering all relative factors, in determining if the price
constituted valid
consideration.
12. Which of the following is true regarding Statue of Frauds?
a. The writing required is a specific form.
b. Both parties to the contract must sign in in order to satisfy the writing
requirement.
c. Either party to a contract must sign in order to satisfy the writing
requirement.
d. Only the party to be charged need in signs a contract.
13. One of exceptions to the statute of frauds, occurs at times,when
a. there is oral evidence of fraud
b. there is written evidence of fraud
c. the contract is partially performed
d. the contract involves the sale of goods worth of P500 or more.
14. Marylou agrees to sell her couch to Stan. Stan finds the couch that he likes
better and ask Marylou to cancel the contract. Marylou, who had been having
second thoughts anyway, readily agrees. The second agreement agreement
between Marylou and Stan is example of
a. accord and satisfaction c. novation
b. rescission d. delegation
15. Ramon wants to move out of his apartment but he has six months left to run on
his lease. Fred would like to move in Ramos apartment. Ramons landlord agreed to
the substitution and Fred execute a new lease. The parties have agreed to a
a. novation but the landlord can sue Ramon if Fred doesnt pay the rent.
b. novation and Fred only is responsible for the rent
c. rescission but the landlord can sue Ramon if Fred doesnt pay the rent.
d. rescission and the landlord cannot sue Ramon if Fred doesnt pay the rent
16. The transfer of rights created by contract to the third party is
a. an assignment c. never permissible
b. a delegation d. always permissible
17. A paryt is excused from the performance when his performance become
impossible.
Which of the following is not an example of impossibility of performance?
a. The president of the offerror-companies dies.
b. The subject matter of the contract is destroyed.
c. One of the parties to the personal service contracts dies.
d. A change in law makes the performance illegal.
18. When a breach of contract is material, the nonbreaching party
a. May repudiate the contract only
b. has no recourse if there has been partial performance by either party
c. may sue only for anticipatory breach
d. is excused from the performance of contractual duties and has cause of
the action to
sue for damages cause by the breach.
19. Floral Inc. agreed to sell plates 1,000 red roses at P6.00 each, and plates
agrees. A hail storm
Ruined Florals own field which usually, but not always, was Florals supply, but
the neighbors were
all untouched.
a. Floral Inc. is excused from performance because of impossibility.
b. Floral Inc. must provide red roses.
c. Floral is excused by commercial impracticality.
d. Floral Inc. is axcused by the doctrine Act of God.
20. Irma purchase a toaster from AAA appliance. The toaster does not work properly
and
Demands the return of her money. Irma is seeking
a. Reformation c. specific performance
b. Rescission d. compensatory damages
21. Carla and Dot entered into written agreement uder the terms of which
Dot to deliver 13 tones grapes to Carla with in 3 days. The parties made a
mistake because they have
Meant to state delivery would be within 3 days, Dot would seek
a. Specific performance c. reformation
b. Rescission d. an action for damages
22. A contract that has been completed to the extent of 98% is, generally speaking,
An example of
 a. Anticipatory breach c. satisfactory performance
b. Material breach d. substantial performance
23. Which of the following is a duty owed by the principal to the agent?
a. indemnification c. notice
b. loyalty d. accounting
24. which of the following is an irrevocable agency?
a. agency for a term of 5 years.
b. Agency coupled with an interest
c. Gratuitous Agency
d. There is no such thing as an irrevocable agency.
25. Mr. X was appointed general agent of ABC Drugstore. It become necessary to
purchase
An airconditioning unit to keep the drugstore well ventilated in order to protect
the medicines.
The matter had never been discussed with the principal.
a. Mr. X has authority by estoppel to purchase the aircon unit.
b. Mr. X has implied authority to purchase the aircon unit.
c. Mr. X has no authority to purchase the aircon unit.
d. Mr. X has no authority to purchase the aircon as there is no emergency.
26. Which of the following is not implied definition of the partnership?
a. Voluntary agreement c. sharing of profits and losses
b. two or more persons d. limited liability of one or more
partners

27. Which of the following is true regard to general partnership only?

a. Bankruptcy/ insolvency of any partner will cause dissolution of the
partnership.
b. General partners have equal management rights.
c. illegality of partnership purpose will cause dissolution.
d. The partnership can be dissolve by judicial decree.
28. Sam leases a corner lot where he plans to operate a gas station. Sams
landlord,Bert, receives 5% of
Sams monthly gross receipts. Sam and Bert
a. Are general partners in the opration of the gas station.
b. Have formed a limited partnership, because Bert receives money only if a
profit is made.
c. Are tenants in partnership of the corner lot.
d. Have a landlord-tenant relationship and nothing more.
29. Which of the following is not ground for dissolution of a partnership by judicial
decree?
a. death of a partner
b. dissensions between the partners
c. mental in capacity of a partner
d. wrongful act of a partner which destroy the partnership business.
30. Linda hire Cecil to manageher gift shop. Cecils salary is base on a percentage of
sales
Made by the shop. Linda and Cecil must agree on all major management
decisions.
Cecil is otherwise in charge. The relationship between Linda and Cecil is
 a. A partnership because Cecil receives a share of the profits
b. A partnership because Cecil has equal rights of management.
c. Not a partnership because Cecil has no ownership interest in the business
d. Not a partnership because Cecil and Linda did not sign a written
agreement.
31. Ralf and Edna agree to operate a partnership for a period of 3 years. After 2
years,
Edna decided to quit. She inform Ralph and all their customers. Ralph
a. Can sue Edna for a specific performance
b. Cannot sue Edna for specific performance but may sue her for breach of
contract
c. Cannot sue Edna because the partnersip is voluntary.
d. Cannot sue Edna but may continue to operate the partnership.
32. when a limited partnership is formed, a(n)________________ must be filled with
the Securities and
Exchange Commission.
a. Articles of partnership
b. Certificate of limited partnership
c. Affidavit of a limited partner that he will not participate in the
Management of the partnership.
d. Affidavit stating the amount contributed by each limited partner.
33. A certificate of limited partnership may provide that which of the following
Will not dissolve the business?
a. Bankruptcy of a general partner
b. Death of a general partner
c. Illegality of the partnership business
d. Judicial decree
34. An assignment of interest of a limited partner
a. automatically dissolve the partnership
b. makes the assingnee a limited partner with full right.
c. gives the assignee a voice in the management
d. does not dissolve the limited partnership

35. Ann, Bart, and Carla were parners in a profitable restaurant business.
Ann died living her husband, Don, her share in the business.
a. Don is now partner with Bart and Carla
b. Dons will received Anns share of the profits so long as Bart and Carla
Operate the restaurant.
c. Don is entitled to the value of Anns share of the business.
d. Don is a limited partner.
36. Jones and Smith have formed a partnership. Jones contributed P75,000 and
Smith P25,000.
Jones and Smith capital balances at the end of the year showed the same
balances.
A P10,000 profit was realized after the first year of operation. No agreement as
to profit distribution
Exist. Both wish a distribution of profits.
a. Each is entitled to P5,000.
b. Jones is entitled to P7,500 and Smith to P2,500.
c. Neither is entitled to anything
 d. Jones has total say as to profit distribution because he has controlling
interest
In the business
37. The key element of determining if a partnership exist is
a. The intent to associate c. a length of the partnership
agreement
b. a written agreement d. the lack of knowledge among
the partners
38. When two or more persons represent themselves as partners in dealing with a
third person,
When in fact they are not partners at all, the law recognizes
a. A corporation c. a partnership by estoppel
b. A proprietorship d. no partnership at all
39. A formal accounting of partnership affairs is proper
a. only when the partnership is dissolved.
b. only at the end of a taxable year.
c. any time it is requested by a partner.
d. any time it is considered just and reasonable
40. In the absence of partnership agreement
a. a partnership is managed by the senior partner.
b. a partners voice in the management is determine by the amount of capital
contribution
c. all general partners have an equal right in managing the business
d. a court order must determine management authority
41. when a new partner is admitted to an existing partnership
a. any capital contribution made by the new partner could be use to satisfy
existing partnership debts.
b.any capital contribution made by the enw partner could be use to
satisfy future partnership debts.
c. The new partner is personally liable for existing debts.
d. The new partner must inform the partnerships creditors of his
participation
In the partnership.
42. Ted, Fred and Jed enter a partnership. Ted undertakes independent consulting for
an outside firm
Without the consent of Fred or Jed. Teds compensation from the outside firm is
considered
a. His own personal income c. partnership income
b. Real property d. illegal income
43. A partners interest in the partnership consist of
a. a proportionate share of the profits earned and surplus
b. specific real property of the firm
c. specific personal property of the firm
d. a proportionate share of all the chattels of the firm
44. In court action for quasi-delict against a partnership, partners have
a. no liability c. solidary liability
b. individual liability d. joint liability
45. Partners have what liability arising from contracts entered into by the
partnership?
 a. joint c. no liability unless they
ratify
b. solidary d. proportionate
46. X breaches a fiduciary duty to the XYZ partnership. His breach results in a loss
To the partnership of P10,000 and a profit to him of P20,000. He must pay to the
partnership
a. P10,000 representing the loss
b. P30,000
c. Zero, because the loss is compensated against profits which was earned
by the
Partnership through his extraordinary efforts.
d. P20,000
47. Which of the following is not a power of the shareholders/stockholders?
a. elect board of directors
b. elect president of the corporation
c. vote on changes in the by laws
d. bring a derivative suit on behalf of the corporation
48. For which of the following acts is a director most likely to be found personally
liable?
a. investment of corporate funds in a venture that losses money.
b. failure to supervise president actions.
c. creation of new product line which is unsuccessful
d. breach of warranty based on the faulty product manufactured by the
corporation
49. Which of the following statements best describe s an advantage of the
corporate
Form of doing business?
a. Day-to-day management is strictly the responsibility of the directors.
b. Ownership is contractually restricted and is not transferable.
c. The operation of the business may continue indefinitely
d. The business is free from government regulation
If the stockholder
a. Wants to use corporate shareholder records for personal business
b. Employs an agent to inspect the books and records
c. Intends to commence a shareholders derivative suit
d. Is investing management misconduct.
51. A corporate shareholder is entitled to which of the following rights?
a. elect officers c. approve dissolution
b. receive annual dividends d. prevent corporate borrowing
52. For what purpose the corporation will the shareholder of the corporation be
permitted
To file shareholders derivative suit in the name of the corporation?
a. To compel payment of a properly declaired dividend.
b. To enforce a right to inspect corporate records
c. To compel dissolution of the corporation
d. To recover damages from corporate management
For an ultra vires management act.
53. Absent of a specific provision in its articles of incorporation, a corporations
board of directors
Has the power to do all of the following,except:
 a. Repeal the bylaws c. fix compensation of
directors
b. Declare dividends d. amend the articles of
incorporation
54. In general, which of the following statements concerning treasury share is
correct?
a. A corporation may not reaquire its own stock unless specifically authorized
by its articles of incorporation.
b.On issuance of new stock, a corporation has preemptive rights with regard
to its treasury stock.
c. Treasury stock may be distributed as a stock dividend
d. A corporation is entitled to received cash dividend on its treasury stock.
55. whch of the following statement is a general requirement for th merger of two
corporation?
a. the merger plan must be approved unanimously by the shareholders of the
corporation.
b. the merger plan must be approved unanimously by the boards of both
corp.
c.The absorbed corporation must be amend its articles of incorporation.
d. the shareholders of both corporations must be given due notice of a
special meeting,
including a copy or summry of a merger pla.
56. Which of the following actions maybe taken by a corporation by a corporations
Board of Directors witout shareholders approval?
a. Purchasing substantially all of the assets of another corporation
b. Selling substantially all of the corporations assets.
c. Dissolving the corporation.
d. Amending the articles of incorporation.
57. Which of the following is not a duty of a director?
a. declare dividends c. issue stock
b. appoint officers d. sign contracts in behalf of
the corporation
58.A director may be removed by the stockholders for cause
a. at any time
b. only at annual meeting
c. by cumulative voting only
d. only if the by laws permit the stockholders to do so.
59. ultra Vires acts means
a. by a majority c. a quorum is present
b. lawful purpose d. beyond the powers
60. Which of the following would be considered as an ultra vires act of
manufacturing corporation?
a. purchase of raw materials
b. making a political contribution in the coming election
c. purchase of land for a plant site
d. making the loan to pay for the land for a plant site
61. Cummulative is device used
a. to change corporate by laws
b. to elect corporate directors
c. by corporate officers to alter corporate policy
 d. by corporate boards appoint corporate officers
62. Which of the following is subject to the provisions of the Negotiable Instruments
Law?
a. a bill of lading c. a certificate of deposit
b. a wrehuose receipt d. an investment security
63. for which of the following negotiable instrument is bank not an acceptor?
a. a bill of lading c. certificate of deposit
b. certified check d. bank acceptance
64. A trade acceptance usually
a. is an order to deliver goods to a named person
b. provides that the drawer is also the payee
c. is not regarded as as a negotiable intstrument under the NIL
d. must be made payable to the order of a named person.
65. There are several legelly significant differences between a negotiable
intstrument
And a contract right, and the transfer of each. Which of the following
statements is correct?
a. A negotiable instrument is deemed prima facie to have been issued for
consideration , where a contract is not.
b. The transferee of the negotiable instrument and te assignee of the
contract right take free of the most defences.
c. Neither can be transferred without a signed writing or by a transfer of
possession.
d. The statute of frauds apply to both.
66. Shark holds the following instrument:
May 19, 2002
I promise to pay to the order of A.B. Shark P1,000
(one thousand and one hundred pesos) with interest
Thereon at the rate of 12% pr annum.
(Sgd) T.T. Tile
Guaranty
I personally guaranty payment by T.T. Tile.
(Sgd) Abner Jones
The above instrument is
a. Nonnegotiable even though even though it is payable on demand.
b. Nonnegotiable because th numeric amount differs from the written
amount.
c. Negotiable even though a payment date is not specified.
d. Negotiable because of Abners guaranty.
67. The following is in the possession of the Bill North:
On May 30, 2003, I promise to pay Bill North,
The bearer of this document, P3,800.
(Sgd) Joseph Peppers
Re: Auto Purchase Contract.
This instrument is
a. Nonnegotiable because undated.
b. Nonnegotiable because it is not payable to order or bearer.
c. Negotiable even tough it rfers to the contract out of which it arose.
d. Negotiable because it is payable at a definite time.
68. Under the NIL, an indorsement of an instrument for deposit only is an
example of
What type of indorsement?
a. Blank b. qualified c. restrictive d. special
69.Under the NIL, which of the following statements best describes the effect of
indorsing a
Check without recourse?
a. The person has no liability to the prior indorsers.
b. The person maks no promise or guarantee of payment on dishonor.
c. The person gives no warranty protection to later transferees.
d. The person converts the check into order paper.
70. Under the NIL, when an instrument is indorsed Pay to Dee Doe and signed
Faye Maye
Which of the following statements, if any, is(are) true?
Payment of the instrument The instrument Can
Is Guaranteed Furhter Negotiated
a. Yes Yes
b. Yes No
c. No Yes
d. No No
71. one of the requirements to qualify as a holder of a negotiable bearer check is
the transferee must
a. receive check that is originally mad payable to bearer.
b. take the check in goodfaith
c. give value for the check
d. have possession of the check.
72. Undr the NIL , which of the following requirements must be meet for a person
To be a holder in due course
a. The note must be payable to bearer.
b. The note must be negotuiable.
c. All prior holders must have been holders in due course
d. The holder must be the payee of the note.
73. Under the NIL, which of the following circumstances would prevent the person
from
Becoming a holder in due course of an instrument?
a. The person was notified that payment was refused.
b. The person was notified that one of the prior indorsers was discharge.
c. The note was collateral for a loan.
d. The note was purchased at a discount.
74. the value requirement in determining whether a parson is a holder in due course
with respect
To the check will not be satisfied by the taking of th check
a. As a security for an obligation to the extent of th obligation
b. As apayment for an antecedent debt.
c. In exchange for another negotiable instrument.
d. In exchange for a promise to perform services in the future
75. Silver Corp. sold 20 tons of stel to River Corp. with payment to be by Rivers
check.
The price of the steel is fluctuating daily. Silver requested that the amount of
Rivers Check
 Be left blank so that Silver could fill in the current market price. River compied
with Silvers request.
Within two days, Silvr received Rivers check. Although the market price of 20
tons of steel
At the time silvers received check was P80,000, Silver filled in the check for
P100,000
And negotiated it to Hatch Corp. Hatch took the check in good faith, without
notice of
Silvers act o any other defense, and in payment of antecedent debt. River will
a. Not be liable to Hatch, because the check was materially altered by silver.
b. Not be liable to Hatch, because Hatch failed to give value wen it acquired
the check from Silver
c. Be liable to Hatch for P100,000.
d. Be liable to Hatch but only for P80,000.
76. A P5,000 promissory note payable to the order of Neptune is discounted to Bane
by
Blank indorsement for P4,000. King Steals the note from Bane and sells it to
Ott,
Who promise to pay King P4,500. After paying King P3,000, Ott learns that king
stole the note.
Ott makes no further payment to King. Ott is
a. A holder in due course to the extent of P5,000.
b. An ordinary holder to the extent of P4,500.
c. A holder in due course to the extent of P3,333.
d. An ordinqary holder to the extent of P-0-.
77. Under the NIL, which of the following parties will a holder but not be entitled to
the rights
Of a holder in du course?
a. A party who, knowing of a real defense to payment, received an
instrument from a holder in due course.
b. A party who found an instrument payable to bearer.
c. A party who received, as a gift , an instrument from a holder in due
course.
d. A party who, in good faith and without notice of any defect, gave value for
a negotiable instrument.
78. Vince Price has in his possession an otherwise negotiable instrument that reads:
I, Waldo hereby promise to pay to order of Mark the
bearer
Which of the following is true with respect to the above instrument?
a. Marks signature is required to negotiate the instrument.
b. The instrument is nonnegotiable.
c. If mark indorses the instrument, he assumes potentially greater liability
to the subsequent transferees than if he transfers it by mere transfer of
possession.
d. Because the instrument is payable to Marks order, it is a bill of exchange.
79. Blare bought a house and provided the required funds in the form of a certified
check from a bank.
Which of th following statements correctly describes th legal liability of Blare
and the bank?
a. The bank has accepted; therefore, Blare is discharge.
 b. The bank has not accepted; therefore, Blare has the primary liability.
c. Te bank has accepted; therefore, blare has secondary liability.
d. The bank has not accepted; therefore, Blare is without liability.
80. Under the NIL, which of the following are real defenses against a holder in due
course?
Alteration Breach of Contract
a. No yes
b. Yes no
c. Yes Yes
d. No no
81. A makr of a note will have a real defense against the holder in due as a result of
any of
The following conditions, except:
a. Discharge in bankruptcy c. fraud in execution
b. Forgery d. lack of consideration
82. To the extent that a holder of negotiable promissory notes is a holder in due
course,
The holder takes the note free of which of the following defenses?
a. Minority of the maker if it is a defense to enforcement of a simple
contract.
b. Forgery of the makers signature
c. Discharge of the maker in bankruptcy.
d. Nonperformance of a condition precedent.
83. Cobb gave Garson a signed check wit the amount payable left blank.
Garson was to fill in, as the amount, the price of fuel oil Garson was to deliver
to Cobb at
A later date. Garson estimated amount at P700 but told Cogg it would be no
more than P900.
Garson did not deliver the fuel oil but filled in the amount of P1,000 on the
check. Garson then
Negotiated the check to Joseph in satisfaction of a P500 debt with the P500
balance paid to
Garson in cash. Cobb stop payment, and Josephs is seeking to collect P1,000
from Cobb.
Cobbs maximum liability to Joseph will be
a. P-0- b. P500 c. P900 d.
P1,000
84. If goods have been delivered to a buyer pursuant to asale or return contract, the
a. buyer may use the goods but not resell them.
b. seller is liable for the expenses incurred by the buyer in returning the
goods to the seller
c. title to the goods remains to the seller
d. risks of loss to the goods passed to the buyer
85. Under the law on sales, unless the contract provides otherwise, before title to
the goods can pass
From the seller to a buyer, the goods must be
a. Tendered to the buyer c. accepted by the buyer
b. Identified to the contract d. paid for