Obligation baby horse.

(RPCPA, 88-1)
1. Unless the law or the stipulation of the parties required another standard of care, the a. Z is entitled to the baby horse which was born after the perfection of the contract.
obligation to give a thing carries with it the obligation to take care of it with: b. Y is entitled to the fruit (baby horse) as Z has not paid the price yet.
a. Extra ordinary diligence c. Y is entitled to the fruit (baby horse) because it was born before his obligation to deliver
b. Ordinary diligence the horse.
c. Diligence of a good father of a family d. Z should pay additional amount for the baby horse to be entitled to it.
d. Answer not given RPCPA 0591
8. There shall be no liability for loss due to fortuitous events in one of the following cases. Which
2. The buyer of a thing has the right to the fruits of the thing: is it?
a. From the time the thing bought is delivered. a. When the debtor delays.
b. From the time the sale is perfected. b. When the parties so stipulated that there shall be liability even in case of loss due to
c. From the time the obligation to deliver the thing bought arises. RPCPA 1089 fortuitous events.
d. From the time the fruits are delivered. c. When the nature of the obligation requires the assumption of risks.
d. When the obligation is to deliver a determinate thing and there was no stipulation as to
3. The obligation of the employer to pay death benefits and funeral expenses for his employer's the liability of the debtor in case of loss due to fortuitous events.
death while in the course of employment as sanctioned by the Workmen's Compensation Act
is one that arises from: 9. When A voluntarily takes charge of the neglected business of B without the latter's authority
a. Law c. Quasi contract where reimbursement must.be made for necessary and useful expenses, there is a:
b. Contracts d. Answer not given RPCPA, 0591 (RPCPA, 97-2)
a. Quasi delict c. Negotiorum gestio
4. A mango tree in the land of O is reclining towards the road. All of a sudden, without a storm b. Quasi contract d. Solutio indebiti
or an earthquake or even strong wind, the tree falls hitting a car belonging to X causing a
P20,000 damage. The liability of 0 to X arises from: 10. Judy bought two (2) softdrinks at the price of P10.00 each. She paid the store P20.00. The
a. Law d. Delict store give her two softdrinks and coins worth P10.00. What is the source of obligation of
b. Contract e. Quasi-delict Judy?
c. quasi-contract a. Negotiorum gestio c. Solutio indebiti
b. Quasi contract d. Law
5. The following are the requisites of an obligation, except:
a. Passive subject, debtor or obligor 11. S sold 100-bottles of imported "Fundador" brandy to B who paid immediately the price thereof
b. Active subject, creditor, or oblige amounting to P20,000.00. S promised to deliver the brandy to B within one week from their
c. Efficient cause agreement. On the agreed date of delivery, S delivered to B 100 bottles of fake "Fundador"
d. Demand brandy. The contract between S and B is:
a. voidable. c. valid
6. Proof of pecuniary loss is necessary for the award of: d. void d. rescissible.
a. Liquidated damages c. Actual damages .
b. Exemplary damages d. Temperate damages . 12. On a certain year, D was obliged under a contract executed on March 1 to deliver an
agricultural land to C on April 1. D, however, actually delivered the land and the fruits thereof
7. Y sold his horse to Z for P50,000. No payment has yet been made and the sales document to C on May 1. C became the owner of the agricultural land and the fruits thereof on:
does not provide the date of delivery. Before delivery and payment, the horse gave birth to a a. March 1.
 b. April 1. b. Phoebe can sues Kates for the annulment of the contract since it is voidable.
c. May 1. c. Phoebe can sue Kates for damages because the waiver he made is void. Nonetheless,
d. The period should be fixed by the court so that it can be determined when C actually the contract is valid.
became the owner of the agricultural land and its fruits. d. Phoebe can sue Kates for the rescission of the contract since it is rescissible.

13. This obligation is demandable at once: 18. One of the following is a determinate thing. Which is it?
a. pure obligation a. Cow.
b. obligation subject to a resolutory condition b. A horse.
c. obligation with an in diem period c. A Toyota car with engine no. 12345, body no. 34890 and plate no. ABC 123.
d. all of the above d. A ring with diamond embellishment.

14. When the thing deteriorates pending the fulfillment of the suspensive condition without the
fault of the debtor, the impairment is: (RPCPA, 98-1)
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
15. Grelim obliges himself to give his only car to Goliath. What is the kind of prestation in the
given example?
a. Determinate c. Divisible
b. Indeterminate d. Indivisible
16. One of the following obligations is not immediately demandable.
a. Pure obligation.
b. Obligation with a resolutory condition.
c. Obligation with an in diem period.
d. Obligation with an ex die period.
17. Kates and Phoebe entered into contract whereby Kates would- deliver 5 pieces of genuine
Rolex wristwatches to Phoebe. Kates proposed to Phoebe that should she deliver 5 units of
fake pieces of Rolex wristwatches by reason of financial difficulties on her part, Phoebe
would not sue her for damages on the ground of fraud. Phoebe accepted the proposal. On
due date, Kates delivered 5 pieces of fake Rclex wristwatches. Upon discovery of the fraud,
Phoebe sues Kates for damages. Kates contends that she cannot be held liable for damages
because Phoebe waived her right to holdher liable on the ground of fraud if the reason
thereof is the financial difficulties of Kates.
a. Phoebe cannot sue Kates for damages because the reason for the waiver is valid, i.e
financial difficulties of Kates, which is a valid reason for the waiver.
19. This person is liable for the loss of the subject matter by fortuitous event: (RPCPA, 85-2; 88-
1; 89-1)
a. Creditor c. Both a and b
b. Debtor d. None of them
20. The following are the remedies of the creditor to pursue his claims against the debtor, except
to:
a. pursue the property owned and in possession of the debtor.
b. exercise all the rights and bring all the actions of the debtor (accion subrogatoria).
c. impugn the acts which the debtor may have done to defraud his creditors (accion
pauliana).
d. compel the debtor to perform the service in obligations to do.
21. One of the following is a valid obligation. Which is it?
a. D promised to give C P50,000.00 if C will not swim across the Pacific Ocean.
b. D promised to give C P50,000.00 if D goes to Tokyo.
c. D promised to give C P50,000.00 if C can fly to the moon.
d. D promised to give C P50.000.00 if C gives him 5 grams of marijuana..
22. D, on June 19, 2000 obligated himself to C to sell to the latter his house and lot for the very
cheap price of P5,000,000 on condition that C passes the CPA board examinations to be
given in October 2000. In the meantime, not believing that C will pass the board exams, D
sold the house to T sometime in August 2000, In November 2000, C passed the exams
unexpectedly. Who has a better right to the house and lot? Assume that C and T did not
record their transaction with the Registration of Deeds and neither did they take possession.
a. C has a better right to the house and lot because said right goes back to the time when
the obligation was contracted on June 19, 2000 although the condition was complied
with only in November 2000.
 b. Thas a better right since it was sold to him in August, 2000 whereas the condition in
favor of C was complied only sometime in November 2000.
c. Because of the controversy between C and T can decide not to sell the house and lot
anymore.
d. Correct conclusion not given.
23. D borrowed from C P5,000,000 promising to pay upon the sale of his house and lot at 123
Rizal Avenue, Manila. The obligation of D to C is:
a. an obligation with a period
b. an obligation with a potestative condition the fulfillment of which solely depends on the
will of the debtor and therefore void
c. C can collect only when D is able to sell the house and lot
d. only the condition is nullified, but not the obligation in which case C can collect even if
the house and lot is not sold.
24. Mr. AB owes Mr. CD P150,000 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? (RPCPA, 88-1; 88-2-M; 89-1-M;
90-2-M; 93-2-M;)
a. No. The obligation is one with a definite period, thus the creditor cannot demand
fulfillment of the obligation as such would the prejudicial to the rights of the debtor.
b. No. The obligation is extinguished because the obligation is lost through 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, from the tenor benefit is given solely to
the creditor thereby giving the creditors the right to demand performance even before the
date.
25. In the following cases, the debtor loses the right to use the period in which case the obligation
becomes immediately demandable. Choose the exception:
a. When after the obligation is contracted, the debtor becomes insolvent but he gives a
collateral security or guaranty.
b. When he fails to furnish the collateral security that he has promised,
c. When the collateral is impaired whether through his fault or by fortuitous event.
d. When the debtor attempts to abscond.
e. None of the above.
26. D is under obligation to pay C P500,000 on December 15, 2002. Before due date, D wants to
pay C P500,000 but the latter refuses to accept because the obligation is not yet due. Decide,
a. D can compei C to accept payment because when an obligation is with a period, said
period is for. the benefit.of the debtor only.
b. C can refuse to accept payment because when an obligation is with a period, the benefit
is only for the creditor,
c. C can refuse to accept because when an obligation is with a period, said period is
presumed to be for the benefit of both debtor and .creditor.
d. Correct answer not indicated.
27. An obligation with a period:
a. D will pay C P1,000.00 X dies.
b. D will pay C P1,000.00 when X dies of TB.
c. D will pay C P1,000.00 when he finishes his course in Business Administration.
d. None of the-above
28. D is obliged to give C a specific watch, a specific ring, or a specific bracelet. The parties
agreed that C will' have the right to choose the thing which will be given to him. Before C
could make his choice, the watch and the ring are lost through D's fault, successively, What is
the right of C?
a. C may choose the delivery to him of the bracelet, or the price of the watch or the price of
the ring plus damages.
b. C cannot choose the price of the watch or the price of the ring because the said objects
have already been lost.
c. C can only choose to have the bracelet because anyway, D can still perform his
obligation,
d. C can only choose to have delivery of the bracelet or the price of the ring which was the
last item that was lost plus damages.
29. D is obliged to give C a specific ring. The parties agreed that D may give a specific bracelet
as substitute. Which of the following statements is true?
a. If the ring is lost through a fortuitous event before substitution, the obligation is
extinguished.
b. If the bracelet is lost through a fortuitous event before substitution, the obligation is
extinguished.
c. If the ring is lost through a fortuitous event after substitution, the obligation is
extinguished.
d. If the ring is lost through the debtor's fault after substitution, the debtor shall pay
 damages. I. The nullity of the principal obligation carries with it the nullity of the penal clause.
II. The nullity of the principal obligation does not carry with it the nullity of the penal clause.
30. This is the promissory note: We promise to pay A, B and, C the sum of ONE HUNDRED III. The nullity of the penal clause carries with it the nullity of the principal obligation.
EIGHTY THOUSAND (P180,000) PESOS within 60 days. Signed X, Y and Z": IV. The nullity of the penal clause does not carry with it the nullity of the principal obligation.
(RPCPA, 1089; 90-1, 87-2-M; 88-1-M; 88-2-M; 88-2-M; 89-1-M; 90-1-M; 90-2-M; 92-1-M; 92- a. Statements I and III are true.
1-M; 92-2- b. Statements I and IV are true.
M; 95-1-M; 95-1-M; 96-1-M; 96-1-M; 96-2-M; c. Statements II and III are true.
a. X is obliged to pay A P20,000 d. Statements II and IV are true.
b. X is obliged to pay A P60,000
c. X is obliged to pay A P180,000 35. D borrowed from C P100,000 with an agreement that upon failure to pay on due date, a
d. X is obliged to pay A, B and C P180,000. penalty of 20% shall be imposed. On due date, the P100,000 was not paid. C can collect
from D:
31. A, 25 years old, B, 35 years old, and C, 17 years old, are solidary debtors of X in the amount a. P100,000 only
of P9,000.00 b. P100,000 plus penalty
a. X may collect from A 9,000,00. c. P100,000 plus penalty plus interest at 12%
b. X may collect from A 6,000.00. d. P100,000 plus penalty plus interest plus damages
c. X may collect from A 1,000.00,
d. X may collect nothing because the obligation is voidable, C being a minor. 36. In the following cases, interest or damages can be collected by the creditor from the debtor in
addition to the penalty agreed upon.
32. A, B and C obligated themselves to deliver to X specific car worth P300,000. On due date, a. If there is a stipulation to that effect.
said car is not delivered to X due to the fault of A causing a P9,000 damage to the former. In b. If the debtor defaults in the payment of the penalty.
this case: c. Where the debtor commits fraud in the fulfillment of the obligation.
a. X can compel any of A,B and C to pay P309,000. d. All of the above
b. The obligation of A, B and C is presumed to be joint and therefore, X cam compel A, B e. None of a, b, and c
and C to each deliver 1/3 of the car plus damages of P3.000.
c. The obligation of A, B and C is presumed to be joint, but the action is converted into one 37. Dominico and Domingo are jointly and severally liable to Crispino for P100,000.00. The
for damages where X can collect from A, B and C P103,000 each. obligation is due on June 30, 2012. On June 25, 2012, Dominico paid the whole amount of
d. The obligation of A, B and C is presumed to be joint but the action is converted into one the note to Crispino. If Domingo reimburses Dominico on July 15, 2012, Dominico is entitled
for damages where X can collect from A PIO'9,000 and from B and C P100,000 each. to receive from Domingo:
a. P50,000.00 plus interest from June 25 to July 15, 2012.
33. A obliges himself to pay X P100,000 in 30 days plus a penalty of P20,000 if A fails to pay the b. P50,000.00 plus interest from June 25 to June 30, 2012.
obligation in due time. A failed to pay the obligation in 30 days. X can demand from A: c. P50,000.00 plus interest from June 30 to July 15, 2012.
(RPCPA, 90-2) d. P50,000.00 with no interest because Dominico paid the note before due date.
a. The principal of P100,000 plus P20,000 penalty.
b. The principal of P100,000 plus P20,000 penalty, plus legal interest damages. 38. Dodgie owes Cathy the sum of P100,000 guaranteed by Josie. Sasy, a stranger to the
c. The principal of P100,000 plus legal interest. obligation offers to pay Cathy P100,000 and the latter accept the offer of payment. However,
d. The principal of P100,000 plus P20,000 penalty, plus legal interest, plus damages. Dodgie already paid Cathy P45,000. The payment by Sasy is with the knowledge of Dodgie
but against his will. Sasy may recover from Dodgie:
34. Consider the following statements: a. P100,000 and to subrogate to the guaranty
 b. P55,000 and to subrogate to the guaranty
c. P100,000 but not entitled to subrogate to the guaranty
d. P55,000 only because this is the only amount redounded to the benefit of Dodgie.
39. In the following cases, interest or damages can be collected by the creditor from the debtor in
addition to the penalty agreed upon.
a. If there is a stipulation to that effect,
b. If the debtor defaults in the payment of the penalty.
c. Where the debtor commits fraud in the fulfillment of the obligation.
d. All of the above
e. None of a, b, and c
40. D is indebted to C in the amount of P500,000. By dacion en pago D conveyed to C the
ownership of a car with an agreed appraised value of P700,000.
a. The obligation of D to C is automatically extinguished.
b. The obligation of D to C is not extinguished because they agreed to sell the car from
which the payment of P500,000 is to be derived.
c. The obligation of D to C is automatically extinguished and on top of that C has to pay D
P200,000.
d. Correct answer not indicated.
41. The following statements pertain to either payment by cession or dacion en pago.
I. The debtor is insolvent.
II. Ownership of the thing/s is transferred to the creditor/s.
III. Plurality of creditors is required.
IV. Obligations are totally extinguished as a rule.
a. Statements I and IV pertain to payment by cession.
b. Statements I and III pertain to dacion en pago.
c. Statements II and IV pertain to dacion en pago
d. Statements III and IV pertain to payment by cession.
42. A, B and C solidarity owe X and Y P30,000. X remitted the entire obligation in favor of A. The
effect is: (RPCPA, 97-2)
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.
43. Consignation is a mode of payment which extinguishes an obligation. Which of the following
is not a requisite for consignation? (RPCPA, 87-1)
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.
44. When the debtor abandons and assigns all his properties in favor of his creditors for the latter
to sell to satisfy his credits, this is: (RPCPA, 90-1; 90-2-M; 94-2-M )
a. Remission c. Dation in payment
b. Payment by cession d. Expromission
45. D owes the following creditors: X, P20,000.00; Y, P30,000.00; and P50,000.00. D is insolvent
so he offers to assign all his properties (except those exempt from execution) to his creditors
in payment of his debts. The creditors accept the offer and are able to sell the debtor's
properties for P70,000.00. Based on the foregoing facts, which of the following statements is
incorrect?
a. The special mode of payment availed of by D is payment by cession.
b. D is released from his total liability of P100,000.00 even if there is no stipulation to that
effect.
c. D is released from his liability only to the extent of P70,000 in the absence of any
stipulation giving him total release.
d. The creditors did not become the owners of D's properties at the time of their
assignment.
46. Payment under the following cases are valid except:
a. Payment made in good faith in possession of the document evidencing the credit.
b. Payment made to incapacitated person that redounded to his benefit
c. Payment made to 3rd person that redounded to the benefit of the creditor
d. Payment made to the creditor.
47. D obtained from ABC Bank a loan of P12,000,000.00 payable at the end of 10 years. Before
maturity, an extraordinary inflation supervened causing the value of the debt to fall to
P4,000,000.00 on the date of maturity. On due date, D must pay ABC Bank:
a. P12,000,000.00. c. P36,000,000,00
b. P4,000,000.00. d. P3,000,000.00.
48. In order that condonation may extinguish an obligation involving a movable property whose
 value exceeds P5,000.00 him his tape recorder. D consents and gives C the tape recorded. D's obligation is
a. It is sufficient that the condonation and the acceptance are in writing, even a private one. extinguished by:
b. It is required that the condonation and the acceptance must be in a public instrument. a. Payment c. Confusion
c. The delivery of the document evidencing the debt is sufficient since the property is b. Condonation d. Compensation
movable.
d. The condonation and the acceptance may be made orally. 54. When two persons in their own right, are debtors and creditors of each other, there is
a. Confusion c. Novation
49. D owes C the following debts: P6,000.00 due on June 12; P6,000.00 due on June 15; b. condonation d. compensation
P6,000.00 due on June 18; and P6,000.00 due on June 20. All debts are unsecured except
the debt due on June 20 which is secured by a pledge of D's diamond ring to C. By 55. When the characters, of debtor and creditor are merged in the same person with respect to
agreement, the benefit of the term on the four (4) debts was made in favor of C. Assuming the same obligation, there is:
that D has P6,000.00 on June 18 and is ready to pay C, which of the following statements is a. Remission c. Novation
correct? b. compensation d. None of the above
a. D may apply his payment of P6,000.00 to any of the debts due on June 12, June 15, and
June 18 since they are all due as of June 18. 56. Paw, husband, and Ai, wife, are legally separated. By order of the court which decreed the
b. D may apply it only to the debt due on June 20 because it is the most burdensome to legal separation, Paw is obliged to give monthly support of P20,000 to Ai and their children
him. payable within the first five days of the month. Ai owes Paw P10,000 by way of a business
c. D must apply the payment proportionately to the debts due as of June 18 at P2,000,00 loan. On the other hand, Paw has not yet given Ai's support of P20,000 for this month. Both
each. debts are already due. Which of the following statements is correct?
d. D may apply the payment to any of the four debts. a. Both debts are extinguished by legal compensation because both are already due.
b. Ai may claim compensation but not Paw
50. When the characters of creditors and debtor are merged on the same person, the mode of c. Paw may claim compensation but not Ai
extinguishing an obligation is called: (RPCPA, 86-2; 91-l-M; 96-2-M) d. Neither one may claim compensation because the debts are not of the same kind.
a. Confusion or merger c. Novation
b. Compensation d. None of the three 57. D owes C P50,000.00. Subsequently, D proposed to C that T Will assume his (D's) debt. C
accepted the proposal of D. This substitution of debtor is known as
51. Insolvency of the debtor is required in: a. Expromision. c. Tradition.
a. Dation in payment b. Delegation. d. Dacion en pago.
b. Payment by cession
c. Tender of payment and consignation 58. A obliged himself to give B a car if B places among the top ten in the CPA Board Exam.
d. Application of payment Subsequently,, they agreed that A will give B the car if B merely passes the CPA Board. This
is an example of: (RPCPA, 94-2)
52. Delivery of property in satisfaction of a debt in money is: a. Mixed novation c. Implied novation
a. ADJUDICACION EN PAGO b. Real novation d. Personal novation
b. Payment by cession
c. Consignation 59. D obliged himself to give 5 grams of shabu to C. Later, the parties agreed that D would
d. None of the above instead give to C 5sacks of rice. Which of the following statements is correct?
a. The novation is void because the original obligation is void. Hence, C cannot demand
53. D owes C PI,000.00 C tells D that he is willing to forego collection if the latter will just give the delivery of 5 sacks of rice from D.
 b. The novation is valid because the new obligation is valid. Hence, C can demand the will of one of them. This is known as the principle of:
delivery of 5 sacks of rice from D. a. mutuality of contract c. consensuality of contract,
c. The original obligation although void is validated by the new obligation. Hence, C can b. relativity of contract, d. freedom to contract.
demand the delivery of 5 sacks of rice from D.
d. The new obligation is only voidable because D had not yet performed the original 2. DO UT FACIAS:
obligation at the time of the novation. Accordingly, the new obligation is binding and C a. I give that you give
may demand the delivery of 5 sacks of rice from D until the new obligation is annulled by b. I give that you make
a proper action in court. c. I make that you give
d. A make that you make
60. The distinction between conventional subrogation and assignment is that in conventional
subrogation: (RPCPA, 0591) 3. The stipulation in a contract to the effect that the debtor should remain as a servant in the
a. It is a mere cession of right. house and in the service of her creditors so long as she had not paid her debt, is void
b. An obligation is extinguish and another appears. because it is: (RPCPA, 0591)
c. The same obligation, without being extinguished, is transferred to another. a. Contrary to good customs
d. Answer not given. b. Contrary to public policy
c. Contrary to law and morality
61. D owes C. Later, the parties agreed that instead of D paying C, he will just pay X. This is an d. Answer not given.
instance of:
a. Expromission c. Convertional subrogation 4. These persons are bound by contracts. (RPCPA, 35-2; 88-2)
b. Delegacion d. Legal-subrogation a. Contracting parties c. Assigns
b. Heirs d. All of them
62. A owes B P10,000. With consent of both, C pays B P5,000. Now B and C are the creditors of
A to the amount of P5,000 each. Suppose A has only P5,000. Which is correct? (RPCPA, 98- 5. Requisites of a valid cause: (RPCPA, 85-2)
1) a. It must be lawful c. It must be real
a. B and C should divide the P5,000 equally b. It must be true d. All of them
b. C should be preferred
c. A may choose whom to pay 6. D borrowed P500,000.00 from C. D died without having paid his loan obligation to C. He left
d. B should be preferred S, his son and heir, properties worth P400,000.00.
a. S is liable to C for P500,000.00.
63. These novations take place automatically or by operation of law. Choose the exception: b. S is liable to C for P400,000.00.
a. Where a creditor pays another creditor who is preferred. c. S is liable to C for P100,000.00.
b. Where a third person who has no interest in the obligation makes payment with the d. S is not liable at all because he should not be made to shoulder the obligation of his
consent of the debtor. father.
c. Where a third person who has an interest in the obligation makes payment to the
creditor. 7. F owes C P10,000,000, F dies leaving to the only heir S a house and lot valued at
d. None of the above. P7,000,000, S voluntarily pays P10,000,000. Decide:
a. In the first place, S is under no obligation to pay C because the P10,000,000 is not his
CONTRACTS debt.
1. The contract must bind both contracting parties; its validity c compliance cannot be left to the b. S is obligated to pay P10,000,000 because he becomes liable for the debts of his
 predecessor-in-interest.
c. C cannot be compelled to return the excess of P3,000,000 because it is the natural
obligation of an heir to pay the debts of his predecessor-in-interest if S voluntarily paid
P10,000,000.
d. If S paid C P10,000,000 the excess of P3,000,000 should be the subject of an
agreement between S and C because it is unjust to S that he should lose his own money
of P3,000,000.
8. Tadeo owned a vacant lot adjacent to a bigger lot where Star Circus planned to put up a two-
week performance as provided in the lease contract which it executed with Legaspi, the
owner of the bigger lot. In expectation of using his property for a parking lot, Tadeo leveled
his lot and built a small shed which cost him P20,000.00, an amount he had yet to pay the
contractor. Later, however, the circus cancelled the performance, so Tadeo brought a court
action to recover P20,000.00 from the circus and Legaspi. Based on the foregoing
information, which of the following is incorrect?
a. The circus contract took effect only between Star Circus and Legaspi, the parties to the
contract of lease.
b. Tadeo can recover damages from Star Circus and Legaspi by reason of stipulation pour
autrui.
c. Tadeo must pay his own contractor the amount of P20,000.00 because that is the
obligation he alone contracted to pay.
d. Tadeo, as an incidental beneficiary, has no rights under the circus contract.
9. Mr. Santos offered to sell his land to Mr. Calma for P100,000. Mr. Calma accepted the offer
and paid Mr. Santos P100,000and Mr. Santos delivered the owner's duplicate of 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? (RPCPA,
88-2)
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 the Deed of Sale because the contract is
valid.
d. Mr. Calma may occupy and use the land as a buyer in good faith.
10. On June 1, 2012, S offered to sell his only car to B for P100,000.00. B accepted the offer by
mailing his letter acceptance on June 10, 2012. On June 12, 2012, B revoked his letter of
acceptance and mailed his letter of revocation on the same date. S received the letter of
acceptance on June 14, 2012 and the letter of revocation on June 15, 2012.
a. The contract was perfected on June 14, 2012 when S received B's letter of acceptance.
b. The contract was not perfected because at the time the acceptance was received, the
parties were no longer of one mind.
c. The contract was perfected on June 10, 2012 when B sent his letter of acceptance.
d. The perfection of the contract retroacts to June 1, 2012 when the offer was made.
11. Mr. A. Santos signed a letter addressed and delivered to Mr. S. Aguas. The terms of the
letter are:
1. An offer to sell a 500 sq. m. lot for P300,000.00.
2. An option time up to October 31, 1991 for Mr. S. Aguas to raise the P300,000.00.
3. Upon payment of the P300,000.00, 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
P350,000.00 for the 500 sq. m. lot. Can Mr. S. Aguas compel Mr. A. Santos to accept the
P300,000.00 and make him sign and execute a Deed of sale? (RPCPA, 92-2; 96-1-M)
a. No. Mr. S. Aguas did not accept the offer of Mr. S. 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
12. Simulation of a contract may be absolute or relative. It is relative when:(RPCPA, 0591; 96-1)
a. The parties do not intend to be bound at all.
b. The contract is void.
c. The parties conceal their true agreement.
d. Answer not given
13. S sold one of his lots to B for P100,000.00. The lot, located beside a busy street, consisted
of 1,200 square meters and was covered by Transfer Certificate of Title (TCT) No. 12345.
After registering the sale with the Register of Deeds and the issuance to him by the said
office of a new transfer certificate of title in his name, B discovered that deed of sale and the
new title described S's adjoining lot which, although also consisting of 1,200 squares meters,
was covered by TCT No. 12346 and located farther from the street. B learned that C, the
secretary of S, typed the wrong description on the deed of sale. B now approaches you for
advice on which course of action to take. What advice will you give to B?
a. Annulment of the contract because he did not consent the purchase of the lot covered by
TCT No. 12346.
b. Rescission because the erroneous description caused him damages.
c. Reformation because the deed of sale failed to show the true intention of the parties to
the contract.
 d. Declaration of nullity of the contract because it is void ab initio by reason of the wrong d. Neither party may ask for annulment since both are guilty of fraud. The contract, thereof,
object. is valid.

14. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the 18. Ramon, a movie actor who has fathered many children by different women, donated a house
cause which are to constitute the contract. Which of the following constitutes an offer: and lot to Jennilyn believing that the latter is his illegitimate daughter. The deed of donation
(RPCPA, 0591) and its acceptance were in a public instrument and a new certificate of title to the house and
a. An offer made through an agent lot was issued in the name of Jennilyn. A few months later, Ramon discovered that Jennilyn
b. Business advertisement of things for sale. was not his daughter but that of another movie actor. Ramon now wants to annul the
c. Advertisement for bidders. contract.
d. Answer not given a. Ramon may no longer annul the contract because all requisites have been complied with
and a new title already issued in the name of Jennilyn.
15. A contract is in the stage of conception when: (RPCPA, 92-1) b. Ramon may annul the contract on the ground of mistake as to the identity of Jennilyn.
a. There is meeting of the minds. c. Ramon may not annul the contract but he can rescind it because he suffered damages.
b. Negotiations are in progress. d. Ramon need not annul the contract but he can have it.
c. The parties come to the agreement.
d. The contract is perfected. 19. S sold his only car for P100,000.00 to B. Unknown to S, B bought the car from him so that he
could use the same in a bank robbery. What is the status of the sale of the car by S to B?
16. Fraud exists in three of the following. Which is the exception? a. The sale is void because the motive of B is illegal.
a. When through the insidious words or machinations of one of the contracting parties, the b. The sale is valid because the illegality of the motive of the parties to the contract does
other is induced to enter into a contract which, without them, he would not have agreed not have any effect on its validity.
to. c. The sale is voidable because of the failure to disclose his motive to S.
b. When there is a failure to disclose facts, when there is a duty to reveal them, as when d The sale is rescissible at the instance of S would be damaged by the illegal motive of B.
the parties are bound by confidential relations.
c. When there is an expression of an opinion by an expert which turned out to be wrong, 20. Contracts entered into a state of drunkenness or during a hypnotic spell are: (RPCPA, 93-1;
and the other party relied upon such expert knowledge. 97-1)
d. When the misrepresentation refers to the usual exaggerations in trade, and the other a. Void c. Voidable
party had an opportunity to know the facts. b. Valid d. Legal

17. Candelario, who knew that her ring was embellished with glass, told Cordelia that the 21. It takes place when the parties do not intend to be bound at all by their agreement:
embellishment was emerald. Cordelia, who knew that her watch was gold plated, told (RPCPA, 93-1; 96-l; 97-1)
Candelaria that it was made of pure gold. Cordelia, believing that Candelaria's ringwas a. Apparent contract
embellished with emerald, and Candelaria, believing that Cordelia' watch was made of pure b. Absolutely simulated contract
gold, then entered into a contract whereby they exchanged their respective articles. A week c. Relatively simulated contract
later, Cordelia discovered that the ring was adorned.only with an ordinary glass. d. Deed of assignment.
a. The contract may be annulled at the instance of Cordelia since she discovered the fraud.
b. The contract may be annulled at the instance of Candelaria since Cordelia also 22. Clarita and Aging entered into a contract where they made it appear that Clarita was
employed farud. mortgaging her lot and building to Aging to secure a contract of loan. The truth, however, was
c. The contract is void because of the bad faith of both parties; hence, it shall not produce that Clarita do was selling her lot and building to Aging. Which of the followings statements is
any effect. true?
 a. The parties are bound by the contract of sale.
b. The parties are bound by the contract of loan and mortgage,
c. The parties are not bound at all.
d. The parties are bound by the contract of sale only when third persons are affected.
23. Which of the following is not a rule in the interpretation of contracts? (RPCPA, 87-1)
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. Words which may have different significations shall be understood in that which is most
in keeping with the nature and object of 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.
24. The defective contracts arranged according to the degree of their defectiveness from the
least to the most defective are:
a. voidable, rescissible, unenforceable, and void contracts.
b. rescissible, unenforceable, voidable, and void contracts.
c. rescissible, voidable, unenforceable, and void contracts.
d. unenforceable, rescissible, voidable, and void contracts.
25. Which of the following contracts is not rescissible?
a. Those which are entered into by guardian whenever the. wards whom they represent
suffer a lesion of more than 1/4 of the value of the object of the contract.
b. Those executed in representation of an absentee, if the latter suffer a lesion, of more
than 1A of the value of the object of the contract.
c. Those where one of the parties is incapable of giving consent to a contract.
d. Those undertaken in fraud of the creditors when the latter cannot in any other manner
collect the claims due them.
e. Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority.
26. Rescission of contract can take place in this case: (RPCPA, 93-1; 97-1 )
a. When the things which are the object of the contracted are legally in the possession of
third persons who acted in bad faith.
b. When he 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.
27. Which of the following contracts is required to be in writing to be enforceable?
a. An agreement that by its terms is not to be performed within a years from the making
thereof.
b. A special promise to answer for the debt, default or miscarriage of another.
c. An agreement made in consideration of marriage, other than a mutual promise to marry.
d. Sales of goods, chattels or things in action at a price not less than P500.00
e. All of the above.
28. On July 15, 2011, X entered into a contract with Y. On February 10, 2012, 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. (RPCPA, 87-2-M)
a. Within three years from the time of the fraud.
b. Within four years from February 10, 2012
c. Within four years from the time A entered into the contract.
d. On February 10, 2012
29. Leveriza, the owner of an apartment, leased the premises to Toribio. The terms of the lease
provide for a monthly rental of P6,000.00 which shall be paid by Toribio at the residence of
Leveriza about two blocks from the apartment. For the month of December, Toribio we'nt to
the residence of Leveriza but the latter was not around to receive the payment. Not wanting
to go back, Toribio left the payment with Nograles, a neighbor of Leveriza, who promised to
give the payment to Leveriza. However, Nograles spent the amount he received for himself.
Based on the foregoing facts, which of the following statements is incorrect?
a. The payment by Toribio to Nograles is valid since the latter is a neighbor of Leveriza.
b. The payment by Toribio is not valid because Nograles was not authorized to receive the
payment.
c. Leveriza can demand payment from Toribio for the December rental.
d. Toribio can go after Nograles for the amount misspent by Nograles.
30. A contract may be enforced by or against a third person, except:
a. In the case of stipulation pour autrui
b. When a third person induces another to violate his contract.
c. In case of contracts intended to defraud creditors.
d. When the benefit to the third person is merely incidental.
31. In order that fraud may make a contract voidable: (RPCPA, 94-2)
a. It may be incidental but both parties should not be in 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 have been employed by both contracting
parties.
32. A month ago, S, 17 1/2 years old, orally sold his bicycle for P2,000.00 to B, his neighbor, who
was only 16 years old. The mother of S, learned about the sale by S of his bicycle, and
demanded that S give her the amount he received. S thus gave the proceeds of the sale to
his mother who spent the same for the family's daily expenses. F, the father of B, also
learned about the purchase by B of the bicycle when he saw it parked in their door and began
using it almost daily since B bought the bicycle. Based on the foregoing facts, what is now the
status of the sale entered into between S and B?
a. Unenforceable because both parties were incapacitate to enter into the contract.
b. Unenforceable because the sale was not in writing.
c. Validated from inception because of the subsequent acts of the parent of the parties.
d. Voidable because while B was only 16 years old, S was nearing the age of majority-
which is 18 years.
33. The following is considered fraud or fraudulent: (RPCPA, 90-1)
a. Failure to disclose facts when there is duty to reveal them.
b. The usual exaggeration in trade, when the other party had the opportunity to know the
facts.
c. Misrepresentation made not in bad faith.
d. "Caveat Emptor" or let the buyer beware.
34. There shall be no reformation of contract in the following cases, except: (RPCPA, 96-2)
a. In testamentary wills
b. Simple donation inter vivos with no condition being imposed
c. When the real agreement is void
d. A contract of sale fraudulently made as a contract of lease
35. Mr. Burgos sold a parcel of land to Mr. Javier for P200,000. Mr. Burgos delivered the transfer
Certificate of Title of the land to Mr. Javier. Later, Mr. Javier wanted to registers the land to
his name and he needed a Deed of Sale. What can Mr. Javier do? (RPCPA, 89-1)
a. Mr. Javier can compel Mr. Burgos to execute Deed of Sale
b. Mr. Javier cannot compel Mr. Burgos to refund the P200,000 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 posses and utilized the land as a buyer in good faith.
36. To defraud his creditors, A contracted 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 the 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. (RPCPA, 87-2)
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 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 attacked collaterally
in a land registration proceeding.
37. Manang, the guardian of Bata, a minor, bought the fish harvested from the fishpond of Bata
for P7,400.00. The fish, however, had a value of P10,000
a. The sale is rescissible because Bata suffered a lesion by more than one-fourth of the
value of the fish sold.
b. The sale is voidable because Manang is disqualified to buy.
c. The sale is unenforceable because Manang sold the fish without approval of the courts.
d. The sale is void because the object is outside the commerce of men.
38. 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 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: (RPCPA, 93-1;
97-1)
a. Illegal c. Voidable
b. Void d. Valid
39. Porpolio, a wealthy businessman, had often paid the debts of Envelop his younger brother, in
order to maintain the family's good name. One day, Porpolio received a text message in his
ceil phone from Carton a banker, informing him that Envelop had obtained a loan from the
bank but had fallen behind in his payments. Porpolio called him and said "Don't worry, if he
doesn't pay in three months, I will be the one to pay". After three months, Carton sent again
a text message to Porpolio to inform him that Envelop had not made any payments and that
Carton was demanding payment from Porpolio on account of the promise he had made three
months before.
 a. Carton may enforce payment against Porpolio on account of his promise since he had
been paying off the other debts of envelop.
b. Carton may not demand payment from Porpolio because his promise is unenforceable.
c. Carton may enforce payment against Porpolio as the oral promise is sufficient
agreement between them. The requirement of writing is only for convenience.
d. Carton may enforce payment from Porpolio because as a wealthy businessman,
Porpolio should protect his name and that of his family.
40. Stanley, 17 years old, suffered a deep cut on his eyebrow during basketball game. He
requested one of his teammates to call Dr Ramos whose clinic was just a stone's throw from
the basketball court. Later, Dr. Ramos sent a bill to Stanley amounting to P500.00 for the
services he rendered. Stanley refused to pay bill, claiming that, as a minor, he was not liable.
The charge was a reasonable amount.
a. Stanley is not liable because he is a minor and thus incapable of giving consent to
engage the services of the doctor.
b. Stanley is liable although he is a minor because the contract involved a necessary.
c. Stanley is liable only when he reaches the age of majority.
d. The teammate is the one liable because it was he who personally called the doctor.
41. Contracts entered into a state of drunkenness or during a hypnotic spell are: (RPCPA, 93-1;
97-1)
a. Void c. Voidable
b. Valid d. Legal
42. Cecilio had Ricardo kidnapped and tortured Eduardo for refusing to sell his (Eduardo's) laid to
Cecilio. Eduardo who could no longer bear the physical pains inflicted upon him signed a
document of sale in favor of Cecilio. This sale is: (RPCPA, 91-2)
a. Void c. Valid
b. Voidable d. Answer not given
43. S offered to sell to. B his house and lot for P10,000,000. In order to pressure B into buying
said house and lot, T, a very good friend of S, threatened B with death as a result of which B
accepted the offer of S, It turns out now that the market value of the house and lot is
P15,000,000. Is the contract of S and B valid?
a. The contract is valid since it is very clear that S did not apply the intimidation.
b. The contract is voidable because the consent given by B is anyway vitiated even if the
intimidation was employed by a third person.
c. The issue of the contract being voidable is not relevant because B will not have the
contract avoidable because it is actually favorable to him.
d. It is not B but S or T who can file the action for annulment.
44. Reluctantly and against her good sense and judgment, Rosemarie entered for the delivery of
5 tables to Corazon for a price of P15,000. Contract is: (RPCPA, 93-1; 97-1)
a. Void c. Unenforceable
b. Voidable d. Valid .
45. 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 latter on refuses to marry Y who has spent for the necessary wedding
preparations and X and Y bring an action against A and B, will the action prosper? Decide:
(RPCPA 87-2)
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 is based on 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 mutual promise to marry.
46. F disappeared without his whereabouts having been known sometime in 1994. Whereupon
in 1996, W, his wife, sold his house and lot worth P10,000,000 for only P7,000,000 in favor of
T in order to support the family. In 1998, F resurfaced and began staying with his family. In
2003, F decided to file an action to rescind the contract with T. In this case:
a. The contract of W with T is valid and, therefore, rescission will not be available as a
remedy.
b. If F can return the P7,000,000 to T and the house and Ipt has not been sold to a buyer in
good faith, he can validly ask for rescission.
c. Even if F can return the P7,000,000 and the house and lot has not been sold to a buyer
in good faith, rescission will not lie because more than 4 years had elapsed from the
reappearance and, therefore, his right to rescind has already prescribed.
d. Correct remedy not indicated.
47. In a written contract of sale between S and B the true intention of the parties was not
incorporated due to the mistake of S but where B is innocent. Assume that there was a
meeting of the minds between S and B. Who can bring the action for reformation?
a. B only c. Both B and S
b. S only d. Neither B nor S
48. W, a woman, agreed to live with H, a man, as the wife of H without the benefit of marriage in
 exchange for the monthly support of P10,000.00 that H would give to W. Both H and W are
single, of legal age, and there is no legal impediment for them to get married. Their parents
have no objections to the two getting married. Based on the foregoing information, which of
the following statements is true?
a. The-agreement between H and W is valid because they can legally get married if they
want to.
b. The agreement between H and W is void for being contrary to morals.
c. H may legally demand that W live with him as his wife.
d. W may legally demand that H give her the monthly support of P10,000 that he had
promised.
49. Rescission of contract can take place in this case: (RPCPA, 93-1; 97-1 )
a. When the things which are the object of the contracted are legally in the possession of
third persons who acted in bad faith.
b. When he 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.
50. The following, except one, are the characteristics of void or inexistent contract. Which is the
exception? (RPCPA, 93-2)
a. The defense of illegality of the 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 or defense for declaration of the nullity or inexistence of the contract does not
prescribe.
51. This results in the ratification of a contract violative of the Statute of Fraud:
a. Receipt of benefits under the agreement.
b. Failure to object to the presentation of evidence proving the oral agreement.
c. Both (a) and (b)
d. None of (a) and (b)
52. S sold to b P900,000 worth of opium which the latter has already paid, but S has not
delivered the opium.
a. B can compel S by specific performance to deliver the opium;
b. If B cannot compel S to deliver the opium he can at least have the return of his
P900,000;
c. The government can only prosecute S and B for violation of the Dangerous Drugs Act;
d. The government can criminally prosecute S and B and also confiscate the opium and the
P900,000 as the instrument and fruit of the crime respectively.
CONTRACT OF PARTNERSHIP
1. When cash or property worth P3,000 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 requirement are not complied with: (RPCPA,1089)
a. It will be 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.
2. Three (3) of the following are similarities, between a partnership and a corporation. Which is
not? (RPCPA, 88-2; 90-1; 90-1-M)
a. The individual 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.
3. Which of the following statements is not correct? (RPCPA, 93-2)
a. A partnership contract is not covered by the Statute of Fraud.
b. A limited partnership is one having at least one general partner and 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.
4. Joseph and Edward entered into a universal partnership of all present property. At the time of
their agreement, Joseph had a four-door apartment which he inherited from his father 3 years
earlier. Edward, on the other hand, had a fishpond which he acquired by dacion en pago from
Robert. During the first year'of the partnership, rentals collected on the four-door apartment
amounted to P480.000.00; while fish harvested from the fishpond were sold for P300.000.00.
During the same period, Edward received by way of donation a vacant lot from an uncle. The
partners had a stipulation that future property shall belong to the partnership. Which of the
following does not belong to the common fund of the partnership?
a. Fishpond.
 b. Rental of P480,000.00
c. Apartment.
d. Vacant land.
5. Which of the following stipulations is valid?
a. A stipulation excluding a capitalist partner from profits.
b. A stipulation exempting a capitalist partner from losses.
c. A stipulation exempting an industrial partner from losses.
d. A stipulation excluding an industrial partner from profits.
6. Which of the following statements is not correct? (RPCPA, 93-2)
a. A partnership contract is not covered by the Statute of Fraud.
b. A limited partnership is one having at least one general partner and 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.
7. The following persons are disqualified to form a universal partnership. Who are the
exception? (RPCPA, 88-2)
a. Brother and sister
b. Husband and wife
c. Those guilty of adultery and concubinage
d. Those guilty of the same criminal offense in the partnership is entered into consideration
of the same.
8. Gregory, Edmond and Mark are partners in GEM Company with contributions of P10,000.00,
P40,000.00 and P50,000.00 respectively. Their agreement shows that they will share in the
profits in the ratio of 2:3:4. During the year, the partnership sustained a loss of P9,000.00.
How shall this loss be divided among the partners?
a. Equally at P3,000.00 each.
b. Gregory, P900.00; Edmond, P3,600.00; and Mark, P4,500,00.
c. Gregory, P2,000.00; Edmond, P3,000.00; and Mark, P4,000.00.
d. The partners must establish first a loss sharing agreement before the loss may be
divided because they failed to have an agreement on the division of loss.
9. Which of the following statements is false when no one among the partners was appointed as
manager?
a. Each partner will be considered as agent of the partnership.
b. Any one may make an important alteration in the immovable property of the partnership
without the consent of the others provided it is useful to the partnership.
c. In case the act of one partner is opposed by another, the decision of the majority of the
partners will prevail.
d. In case of a tie in the voting, the tie shall be resolved to the vote of the partner owning
the controlling interest.
10. Three (3) of the following are rights of a partner. Which one (1) is not? (RPCPA, 90-1)
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.
11. 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: (RPCPA, 93-1)
a. Advanced reporting of income.
b. Actual receipt of income
c. Accrual method of accounting
d. Constructive receipt of income.
12. The following statements pertain either to a partner appointed manager in the articles of
partnership or through a document after the formation of the partnership.
I. He may be removed as manager only for a just or lawful cause by the vote of the
partners owning the controlling interest.
Il. He may be removed as manager with or without just or Iawful cause by the vote of the
partner owing the controlling interest.
III. He may perform all acts of administrator despite the opposition of his partners provided
he is in good faith.
IV. He may perform all acts of administration in good faith but opposing partners may resort
to his removal if he persists.
Based on the foregoing:
a. I and III pertain to a partner appointed as manager in the articles of partnership.
b. I and III pertain to a partner appointed as manager through a document after the formatio
a of the partnership
c. II and III pertain to a partner appointed through a document after the formation of the
partners lip.
d. I and IV pertain to a partner appointed as manager in the articles of partnership
13. Bears the loss of property contributed to the partnership. (RPCPA, 89-1)
a. Capitalist partner
b. Limited partner
c. Partners contributing usufructory rights.
d. None of t le above.
14. A, B, and C are general partners in ABC Partnership. D is a debtor to the partnership in the
amount of P15,000. A received from debtor D the sum of P5,000 and issued; receipt
identifying the amount as his share. Then D become insolvent, B and C cannot collect the
P10,000. (RPCPA, 88-1-M; 92-1; 96-1-M)
a. A cannot be compelled to share the P5,000 with B and C.
b. B and C can charge the capital of A with their share of I he P5,000.
c. A can by compelled to share B and C with the P5,000.
d. B and C should automatically sue D to collect the P10,000.
15. A is the managing partner in A & B Company. X is indebted to A for P20,000 and to the
partnership for P60,000. When both debts mature, X pays A P20,000 and the latter issued a
receipt for his personal credit. The payment for P20,000 shall be applied: (RPCPA, 95-1)
a. 1/4 in favor of A and 3/4 in favor of partnership.
b. To the whole debt owing to A.
c. 1/2 in favor of A and 1/2 in favor of the partnership.
d. To the debt owing to the partnership.
16. In the partnership of A, B and C, A was appointed in the Article o; Co-partnership as
managing partner. As such manager and acting in good faith: (RPCPA,'90-2)
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 administration despite the opposition of B and C.
cl. He can be removed for valid cause without the vote of the partners owning the
controlling interest.
17. Donna, Emma, Alma and Rona are partners in DEAR Company with Donna as manager,
Tricia owes DEAR Company PS,500.00 and Donna, in Donna's personal capacity, P4
500.00. Tricia's debt to Donna is secured by a pledgu of her diamond ring. Both debts are
already due. Tricia pays P4,500.00 to Donna and tells her that the same is in payment of her
debt to Donna. Donna, thus, issues her personal receipt.
a. The payment of P4,500.00 will be applied proportionately to the two credits: to the
partnership credit at P2,475.00; to Donna's credit at P2,025.00. This is so because
Donna should not place her interest before that of DEAR Company.
b. The payment of P4,500.00 will be applied entirely to Donna's credit.
c. The payment will be applied in partial payment of the partnership credit of P5,500.00;
hence, there will be a balance of PI,000.00.
d. Tricia, Donna and DEAR Company will have to agree as to which credit the payment
shall apply.
18. Torres is indebted for P5,000.00 to MACE Trading Company, a partnership managed by
Mendoza to whom Torres also owes P10,000.00. The two debts which are both demandable
are unsecured. Torres remits P4,500.00 to Mendoza in payment of his debt to him.
Accordingly, Mendoza issues a receipt for his own credit. To which credit should the
payment be applied?
a. To Mendoza's credit because the payment made by Torres is intended for his debt to
Mendoza who issues his own receipt.
b. To both the partnership credit and Mendoza's credit proportionately at P1,500.00 and
P3,000 00 respectively.
c. To Mendoza's credit because its amount is greater than that of the partnership credit.
d. To the partnership credit because the managing partner should not prefer his own
interest to that of partnership.
19. A is the capitalist partner and B the industrial partner. A engaged personally in the same kind
of business the partnership is engaged in: (RPCPA, 87-1-M; 88-2; 89-1-M)
a. If there are losses, the partnership will bear the losses.
b. If there are profits, the profits will 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.
20. Belinda, Erlinda, Amanda, Ursula, Teresa and Yolanda are partners in BEAUTY Enterprises,
a dealer in cosmetics and other beauty products, with contributions of P60,000.00,
P50,000.00, P40,000.00, P30,000.00, P20,000.00, and P10,000.00, respectively. No one
was appointed as manager in the articles of partnership.
a. Belinda is the manager because she made the biggest investment.
b. Every act in the ordinary course of the business will have to be decided by the majority
determined on a per head basis.
c. Every act in the ordinary course of the business will have to be decided by the controlling
interest (biggest investment) although the partners owning them do not constitute the
majority.
d. All the partners are agents or managers of the partnership and any one of them may
perform acts of administration.

21. Three of the following will cause the automatic dissolution of a general partnership. Which
one will not?
a. When any event makes it unlawful for the business of the partnership to be carried on or
for the members to carry it on in partnership.
b. Expulsion of any partner from the business bona fide in accordance with such a power
conferred by the agreement between the partners.
c. A partner becomes in any way incapable of performing his part of the partnership
contract.
d. The insolvency of a partner or of the partnership.
22. 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 inform 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. (Phi! CPA, 88-1; 88-2-M;
90-1-M)
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.
23. A, B and C are partners in ABC Company. D represented himself as a partner in ABC
Company to E, who, on the belief of such representation, extended a P150,000 credit to ABC
Company. Assuming only B and C consented to such representation, who will be held liable
to E? (RPCPA, 88-1; 88-2-M; 89-1-M; 90-1-M; 97-2-M)
a. E extended the credit to ABC Company so a partnership liability exists. Thus all the
partners A, B and C and D are liable.
b. B, C and D are partners by estoppel and, thus, are liable prorate 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.
24. A partner can engage in business for himself without the consent of his co-partners if he is:
a. a capitalist partner whether or not the business he will engage in is of the same kind as
or different from the partnership business.
b. an industrial partner whether or not the business he will engage in is of the same kind as
or different from the partnership business.
c. a capitalist partner and the business he will engage in is of a kind different from the
partnership business.
d. an industrial partner and the business he will engage in is of a kind different from the
partnership-business.
25. A partner's interest in the partnership is his share of the profits and surplus which he may
assign to a third person. Which of the following statements concerning such right is correct?
a. The conveyance of a partner's interest will cause the dissolution of the partnership,
b. The assignee becomes a partner.
c. The assignee has a right to interfere in the management of the partnership business.
d. The assignee has the right to receive the profits which the assigning partner would
otherwise be entitled to.
26. Which of the following right cannot be exercise by an assignee of interest:
A. To get whatever profits the assignor partner would have obtained
B. To avail himself of the usual remedies in case of fraud in the management.
C. To demand information, accounting and inspection of the partnership books
D. The right to participate in the management
a. All of the above c. B, C and D
b. Only C d. C and D
27. Fernando, Filoteo, Fortunato and Fulgencio are partners in the firm F4 Enterprises which is
engaged in the trading of fertilizers Fernando contributed P50,000.00; Filoteo, P30,000.00,
Fortunato, P20,000.00. Fulgencio is an industrial partner and manages the partnership.
Based on the foregoing facts, which of the following statements is incorrect?
a. Fernando may engage in the business of trading car spare parts without the consent of
the other part
b. Filoteo may be validly exempted from losses incurred by the partnership by agreement of
the partners.
c. Fulgencio may not engage in the car repair business without the consent of his co-
partners.
d. Fulgencio is exempt from losses although there is no agreement among the partners.
28. A, B and C capitalist partners, each contributed P30,000, P20,000 and P10,000 respectively
and D, the industrial partner contributed his service. Suppose X a customer, is the creditor of
the firm to the amount of P180,000. How can X recover the P180,000? (RPCPA, 87-2; 90-2-
M; 91-2-M; 92-1-M; 98-1-M)
a. X must sue the firm and get P60,000 from all the partners including B, the industrial
partner. X can still recover the balance of P120,000 from the four partners jointly.
b. X can recover from the firm P60,000. X can still recover the balance of P120,000 from
the capitalist partner only.
c. X can recover from the firm P60,000. X can still recover the balance of P120,000 from
 any of the partners solidary.
d. X can recover from the firm P60,000 and consider the balance of P120,000 as loss.
29. Campos, Urbano, Tamesis and Encanto are partners in C Company each one contributing
P300,000.00 except for Encanto who is an industrial partner. The partners agreed that
Campos shall be exempted from liability to third persons. Three years of continued losses
after the formation of the partnership resulted in unpaid partnership liabilities to third persons
amounting to P500,000.00. Partnership assets have also been reduced to P200,000.00.
From whom may third persons collect the partnership debts?
a. From the partnership assets of P200,000.00; thereafter from the partners for their
separate assets at Pl00,000.00 each except Campos who was e from liability to third
persons by agreement.
b. From the partnership assets of P200,000.00; thereafter from the partners for their
separate assets at P100,000.00 each except for Encanto since an industrial partner does
not share in the losses.
c. From the partnership assets of P200,000.00; thereafter, from all the partners for their
separate assets at P75,000.00 each including Campos and Encanto.
d. From the partnership assets of P200.000.00; thereafter, from Urbano and Tamesis only
for their separate assets at P150,000.00 since Campos was exempted from liability by
agreement, while Encanto, 3eing an industrial partner is not liable for'losses.
30. A and B are partners in buying and selling automobiles. A, by the partner's agreement, was
authorized to buy any immovable's on a cash basis, never on the installment plan. One day A
bought on installment p an a parcel of land with improvements from X, a client. X did not
know of A's lack of authority. A's purchase was made on behalf and in the name of the
partnership. Is the partnership bound?
a. No because A was not really authorized to buy on installment plan and the same is not
"apparently carrying on in the usual way the business of the partnership''.
b. No because A failed to obtain the consent of all partners although he was authorized to
buy any immovables.
c. Yes because although A was not really authorized, still for "apparently carrying on in the
usual way the business of the partnership" A is implicitly authorize j and X did not know
of A's lack of authority
d. Yes because all transaction made by any partners with third person is valid provided, the
latter acted in good forth.
31. A, B and C are partners in an import and export business where customers desiring to place
an order are required to make a deposit of 30% to the partnership. T, a regular customer
deposited P300,000 to partner A who, instead of turning over the money to ABC partnership,
misappropriated it for his own use. In this case:
a. T should sue alone A the misappropriating partner for the amount of P300,000.
b. T can si e A or B or C the partnership of ABC solidarity for the amount of P300,000
c. T can only sue partners A, B and C jointly for P300,00C.
d. Correct remedy not indicated.
32. 24. X, Y and Z are partners in a business with a total capital contribution of P3,000,000. Irt
the course of operating the business, the partnership became indebted to C in the amount of
P4,500,000. subsequently, W was admitted as a new partner with contribution if PI,000,000.
Much later, the partnership became indebted to T in the amount of P4,000,000. . The
partnership is insolvent and the only asset is the original capital of P3,000,000 plus the newly
contributed capital of PI,000,000 of PI,000,000 by W.
a. W is not liable for the obligation of P4,500,000 in favor of C since he was not yet a
partner when it was insured.
b. W is liable for the obligation of P4,5000,000 although contracted before he became a
partner but only up to the extent of his contribution.
c. W is liable for the obligation of P4,500,000 although contracted before he became a
partner up to the extent of his personal property.
d. W is liable for the obligation of P4,500,000 although contracted before he became a
partner but not only up to the extent of his contribution. With respect to the P4,000,000
debt in favor of T, W will be liable for its payment jointly and subsidiary up to the extent of
his personal property because it was incurred when he was already a partner in XYZ
partnership.
33. 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? (RPCPA, 94-1; 94-2)
a. No, because third persons are always protected by law.
b. No, because the newly admitted partner 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 property.
d. No, because a newly admitted partner is liable with respect to his capital contribution
which forms part of the partnership.
34. A, B and 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. Then B and C bought-out A from the partnership and thereafter
X bought all the trucks with a big profit of B and C. (RPCPA, 90-1)
 a. The sale of the trucks to X void because it is without the knowledge and consent of A.
b. B and C are not liable to A whatsoever.
c. B and C are liable to A for his share in the profits in the sale.
d. When A was bought-out of the partnership, the partnership was dissolved so A has no
more share in the profits in the sale.
35. A and B are equal partners in AB and Company. Y presented himself as a partner in AB and
Company to Z who relying on such representation, extended a P50,000 credit to AB and
Company. Of the two (2) partners only B knew and consented to the representation of Y.
Who should held liable to Z? (RPCPA, 88-2)
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 (2) 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 partner by estoppel and, thus, are liable to Z,
36. Teresa, Olga, Pamela and Sonia, partners in TOPS Company Limited, a trading company,
have contributions of P50,000.00 each. Teresa and Olga are general partners; Pamela, a
limited partner; and Sonia, a general-limited partner. TOPS Company Limited purchased
merchandise' on credit from Moret Sales Co. amounting to P180,000.00. On due date,
however, JOPS Company Limited was unable to pay. Accordingly, Moret Sales Co. filed a
case of collection against the partnership which by then had assets amounting to
P150,000.00. From whom may Moret Sales Co. collect the sum of P180,000.00?
a. The partnership for its assets of P150,000.00; thereafter, from Teresa and Olga at
P15,000.00 each from their separate assets.
b. Teresa and Olga only at P90,000.00 each from their separate assets.
c. The partnership for its assets of P150,000.00; thereafter, from Teresa, Olga, and Sonia
at P10,000.00 each from their separate property. However, Sonia can recover P5,000.00
each from Teresa and Olga.
d. Teresa, Olga and Sonia at P60,000.00 each. Thereafter, Sonia can recover from Teresa
and Olga P30,000.00 each.
37. Which of the following losses will not cause the dissolution of a partnership?
a. Loss before delivery of a specific thing which a partner has promised to contribute to the
partnership.
b. Loss of a specific thing, after its delivery to and acquisition of its ownership by the
partnership from the partner who contributed the same.
c. Loss after delivery of a specific thing where the partner contributed only its use and
enjoyment, he reserved the ownership thereof.
d. Loss before delivery of a specific thing where the partner promised to contribute only its
use and enjoy reserving the ownership thereof.
38. Which is not a ground for the automatic dissolution of a partnership?
a. By the death of any partner
b. By the civil interdiction of any partner
c. By the incapacity of any partner to perform his part of the partnership contract
d. By the insolvency of any partner or of the partnership.
39. In which o these cases are the partners solidarity liable for the payment of partnership
obligations?
a. Where the partnership obligation arose out of contract.
b. Where the partnership obligation arose out of equal contract.
c. Where the partnership obligation arose out of delict.
d. Where the partnership obligation arose out of quasi delict.
e. Both C and D
40. A as partner contributed P30,000; B as partner, P15,000; and C, as industrial partner, his
services in the partnership. After payment of all liabilities and expenses, only P18,000 remain
as partnership assets. The dissolution of the P18,000 cash shall be: (RPCPA, 86-2-M; 88-1-
M; 90-1; 90-2; 93-2-M; 96-2-M)
a. A, P12,000; B, P6,000; C, None
b. A, P6,000; B, P6,000; C, P6,000
c. A, P9,000; B, P9,000; C, None
d. A, P8,000; B, P4,000; C, P6,000
41. Sibal, Untalan, Parefio, Eusebio, and Ranees are partners of SUPER Enterprises whose
business is car painting and repairs. All partners are capitalist partners with Sibal as
manager. After five years of operations, Ranees resigned from the partnership. Although
Sibal was aware of the resignation of Ranees, he still bought 50 gallons of car paint from
Masterpaint owned by Marcelo who had been dealing with SUPER for the past 5 years, and
car spare parts from Supremeparts, owned by Salviejo who was transacting for the first time
with SUPER. The dissolution of SUPER was published in the Manila Bulletin but neither
Marce nor Salviejo read it. Neither one knew at the time they transacted with Sibal that the
partnership had been dissolved.
a. SUPER is liable to both Masterpaint and Supremeparts.
b. SUPER is liable to Masterpaint only.
c. SUPER is liable to Supremeparts only.
 d. SUPER is not liable to both Masterpaint Supremeparts. II. John Solanda shall have all the liabilities of a general partner.
Based on the foregoing facts:
42. TRIUMPH Company, a partnership engaged in the buying selling of car spare parts, has for a. Both statements are true.
its partners and their respective contributions the following: b. Both statements are false.
Tomas, P10,000.00; Ramon, P20,000.00; Ignacio, c. Statement I is true; Statement II is false.
P30,000.00; Urbano; P40,000.00; Marcos, d. Statement I is false; Statement II is true.
P100,000.00; Pablo, P200,000.00; and Hilario, P300,000.00.
No one was appointed as manager of the partnership. In the course of the operation of the 46. Which of the following omissions will make a partnership formed as a limited partnership
partnership, Tomas proposed to buy car spare parts from Dominion Motors, but his proposal liable as a general partnership?
was opposed by Ramon. A voting among the partners took place and Ignacio, Urbano and I. The certificate is not signed and sworn to by all the partners.
Marcos sided with Tomas, while Pablo and Hilario sided with Ramon. II. The certificate is not registered with the Securities and Exchange Commission.
a. The group of Tomas, Ignacio, Urbano and Marcos will prevail because they constitute III. The partnership name does not include the word 'Limited" or "Ltd.", its abbreviation, in
the majority. the certificate.
b. The group of Ramon, Pablo and Hilario will prevail because they own the controlling a. I and II. c. I and III
interest. b. II and III d. I, II and III.
c. None will prevail because no one was appointed as manager of the partnership,
d. The partners will have to appoint a manager in order to resolve the conflict. 47. A person admitted to all the rights of a limited partner who has di 2d or assigned his interest
in the partnership is known as-
43. This is the order of preference in the liquidation of a partnership: (RPCPA, 90-1; 92-1; 96-1) a. An ostensible partner.
a. 1.) Outsider; 2.) Partners with respect to their capital; 3.) Partners with respect to their b. A liquidating partner.
profit.; 4.) Partners aside from capital and profit. c. A substituted limited partner.
b. 1.) Partners with respect to their capital; 2.) Partners with respect to their profit.; 3.) d. A general limited partner.
Partners aside from capital and profit; 4.) Outside creditors
c. 1.) Outsider; 2.)' Partners aside from capital and profit 3.) Partners with respect to their 48. A limited partner shall be liable as general partner in three of the following cases. Which one
capital; 4.) Partners with respect to their profit.;. is the exception?
d. 1.) Partners aside from capital and profit; 2.) Outsider; 3.) Partners with respect to their a. When he is a general-limited partner as stated in the certificate.
capital; 4.) Partners with respect to their profit. b. When he makes part in the control of the business.
c. When h= participates in the management of the business.
44. Which of the following statements is incorrect? d. When h s surname which appears in the partnership name is also the surname of a
a. Partnership creditors are preferred as to partnership assets. general partner.
b. Partnership creditors are preferred as to each partner's separate assets.
c. A partner's separate creditors are preferred as to the partner's separate assets. 49. Which of the following will not cause the automatic dissolution of a limited partnership?
d. A partner's separate creditors 'may attach a partner's share in the partnership assets. a. Death of 3 general partner.
b. Death of 3 limited partner.
45. John Solanda and Sons is a partnership composed of three partners, namely: Robert c. Insolvency of a general partner.
Solanda, Simon Solanda, and Theodore Solanda. The partners are the sons of John Solanda d. Insanity of a general partner.
who has retired from business but who suggested that they include his name in the firm to
give them an advantage since he is well-known in the business community. 50. Which of the following is a false statement?
I. John Solanda shall have all the rights of a general partner. a. If a limited partnership will be created, registration is a condition precedent for the
 creation of the limited partnership
b. If one of the partners in a general partnership contributed a building to the partnership,
there must be 3 public instrument and an inventory as a requirement, otherwise the
partnership is void
c. If a limited partnership will be created, registration is a condition subsequent for the
creation of the limited partnership.
d. If a limited partnership is not registered, a general partnership is created.
51. What is the order of payment of liabilities of a dissolved limited partnership using the code
number representing each liability?
I. Those owing to general partners other than for capital or for profits.
II. Those owing to creditors including limited partners, except those1 to limited partners on
account of their contributions and general partners.
III. Those owing to limited partners by way of their share in the profits and other
compensation by way of income.
IV. Those owing to limited partners in respect to the capital of their contributions.
V. Those owing to general partners in respect of capital.
VI. Those owing to general partners in respect of profits.
a. I, II, III, IV, V, VI.
b. II,I, III, IV, V, VI.
c. II, I, III, IV, VI, V.
d. II, III, IV, I, VI, V.
52. Which of the following is not correct? In a limited partnership composed of A, B and C, the
contribution may be as fellows: (RPCPA, 97-2; 98-1)
a. A – cash (limited partner);- B – cash (general partner), C - services (general partner).
b. A – property (limited partner); B - services (general partner); C - cash (general partner).
c. A – services (limited partner); B – cash (general partner)
d. A – cash (limited partner); B – property (general partner); C - services (general partner).
53. The rule is that the designation of the share of the partners in the profits and losses cannot
be entrusted to only one of the partners but to all. However, the rule allows the designation
of the share of the partners to be entrusted to a third which can be questioned or impugned
by the partners if such designation is manifestly inequitable. Within what time should the
action or question be brought?
a. Within one (1) month from the time he had knowledge.
b. Within two (2) months from the time he had knowledge.
c. Within three (3) months from the time he had knowledge.
d. Within six (6) months from the time he had knowledge.
e. Within one (1) year from the time he had knowledge.
54. A limited partnership was orally agreed upon by A , B and C as general partners and D, E
and F as limited partners. Which of these is a correct statement?
a. A valid limited partnership is nevertheless formed.
b. The oral agreement is void under the law and no partnership whether limited or general
will exist.
c. No valid limited partnership is created and there will exist a general partnership where
only A, B and C will be regarded as general partners.
d. No valid limited partnership is created but there will exist a general partnership where all
of A, B, C, D, E and F will be regarded as general partners.
Corporation
1. One of the distinctions between a partnership and a corporation is that a partnership:
a. is managed by a board of directors.
b. is characterized by the principle of delectus personae.
c. has the right of succession.
d. may be dissolved only with the consent of the State.
2. Which of the following is the disadvantage of forming a corporation? (RPCPA, 93-2; 94-2; 96-
1)
a. The free and ready transferability of ownership
b. The shareholders are not liable for the debts of the business.
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 subservience of minority stockholders to the wishes of the majority subject only to
equitable restraint.
3. This share can be acquired by the corporation which issued it even without unrestricted
retained earnings:
a. founder's shares
b. redeemable shares
c. par value shares
d. no-par shares
4. Corporations organized by private persons performing public function and for profits to private
person are: (RPCPA, 1089)
a. Public Corporations
b. Government Controlled Corporations
 c. Quasi-Public Corporations 87-l;-M; 87-2-M; 88-1; 88-2-M; 89-1-M; 1089-M; 90-1-M; 90-2-M; 92-1-M; 94-1-M)
d. Private Corporation a. b. c. d.
Authorized capital P100,000 P100,000 P100,000 P100,000
5. The following are advantages of no-par value share of stock. Which is the exception? Subscribed capital P 20,000 P 20,000 P 25,000 P 25,000
(RPCPA, 90-1) Paid in capital P 5,000 P 4,000 P 5,000 P 6,250
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 10. The articles of incorporation of Acme Corporation provide for the issuance of 100,000 shares
subscription. without par value price per share of P10.00. At the time of incorporation subscription and
c. It allows the issue of stocks in exchange of property. paid-up capital should not be less than:
d. No-par value shares afford a possible remedy of relief from the evil of over capitalization a. P250,000.00 and P62,500.00, respectively.
and stock watering. b. P1,000,000.00 and P250,000.00, respectively.
c. P250,000.00 and P250,000.00, respectively,
6. Which of the following statements pertaining to no-par shares is incorrect? d. P250,000.00 and P125,000.00, respectively.
a. Subscriptions to no-par shares are deemed fully paid and non-assessable.
b. Shares without par value may not be issued for a consideration less than P5.00 per 11. Three of the following enumerations are not authorized to issue no par value shares of stock.
share. Which is the exception? (RPCPA, 87-1)
c. No-par shares may not be issued by banks, trust companies, insurance companies, a. Insurance companies c. Public utilities
public utilities and building and loan associations. b. Industrial companies d. Trust companies
d. Subscriptions to no-par shares in excess of the issued price shall be available for
distribution as stock dividends. 12. 1st Statement: A majority . of the directors or trustees of ail corporations organized in the
Phil, must be citizens of the Phil,
7. The following statements pertaining to the power of a corporal to issue non-voting shares 2nd Statement: Any two (2) or more positions may be held concurrently by the same person,
were presented to you for evaluation: except that no one shall act as president and secretary or as secretary and treasurer at the
I. Those classified as "redeemable" or "preferred" may be deprived of the voting right. same time. (RPCPA, 97-2)
II. All shares of the corporation may be deprived of the voting right. a. Both statements are not true
III. Non-yoting shares may vote in certain corporate acts like in the amendment of the b. Only 1st statement is true
articles of incorporation. c. Only 2nd statement is true
a. I and II are true. d. Both statements are true
b. II and III are true.
c. I and III are true. 13. A private corporation organized under the corporation law commences to have corporate
d. All statements are true. existence and juridical personality and its deemed incorporated from:
(RPCPA, 86-2; 93-1-M; 85-2-M; 96-1-M; )
8. The articles of incorporation differ from the by-laws in that the articles of incorporation are: a. The date when the articles of incorporation is signed by the incorporators.
a. the rules of action adopted by a corporation for its internal government. b. When the articles of incorporation and by-laws are presented and received by the
b. adopted before or after incorporation. Security and Exchange Commission and the filing fee is paid.
c. a condition precedent in the acquisition by a corporation of a juridical personality. c. From the date the SEC issues a certificate of incorporation under its official seal.
d. approved by the stockholders if adopted after incorporation. d. When the articles of incorporation is notarized by a Notary Public.

9. Choose the minimum requirement of the Corporation Law to Corporate formation: (RPCPA, 14. In the amendment of the Articles of Incorporation of a stock corporation, the following is
 necessary: (RPCPA, 86-2) When the voting took place, directors A, B, C and D voted for the election of Y as the new
a. Amendment by the majority vote of the Board of Directors plus a vote or written assent of treasurer; and directors A, B and C voted for the approval of the contract with X Construction
the stockholders representing at least 2/3 of the outstanding capital stock. Supplies.
b. Amendment by a vote of 2/3 of the stockholders. a. Both corporate acts are valid.
c. Amendment by a majority vote of the Board of Directors. b. Both corporate acts are not valid.
d. None of the three. c. The election of Y as the new treasurer is valid; the approval of the contract with X
Construction Supplies is not valid.
15. Which of the following will not qualify as incorporator of a corporation? (RPCPA, 86-2-M; 90- d. The election of Y as the new treasurer is not valid; tie approval of the contract with X
2-M; 91-2; 92-2-M) Construction Supplies is valid.
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 20. Which of tie following is not a qualification of corporators of a stock corporation?
act of incorporation is paraphernal. a. They must be natural persons.
c. A corporation. b. They must be of legal age.
d. Answer not given c. Majority of them must be citizens of the Philippines.
d. They must be subscribers to at least 1 share of stock of trie corporation.
16. Contracts between a corporation and third persons must be made by or under the authority of
its: (RPCPA, 93-1; 96-1) 21. The following, except one are qualifications of corporate directors: (RPCPA, 89-1-M; 94-2;
a. Board of Directors 86-2)
b. Stockholders a. Must continuously own at least one share during their tern as directors.
c. President and Chief Operating Officer b. Must own at least one share of stock.
d. General Manager. c. Ownership of shares must be recorded in the books of corporation.
d. Majority are citizens of the Philippines.
17. An officer of a corporation may hold two or more positions in the corporation but not as:
(RPCPA, 90-1-M; 92-1; 92-2-M; 94-2-M; 97-2-M) 22. The followinc are some of the requisites of a de facto corporation. Choose the exception:
a. Chairman of the Board and President. (RPCPA, 86-2; 87-2-M)
b. President and Treasurer a. Valid law under which it is incorporated.
c. Secretary and Treasurer b. Attempt :o incorporate
d. Vice President and Secretary c. Assumption of corporate power
d. None of the above
18. A Chinese national are not allowed to become:
a. Treasurer c. Director 23. In the amendment of the Articles of Incorporation of a stock corporation, the following is
b. Secretary d. President necessary: (RPCPA, 86-2; ?6-2-M)
a. Amendment by the majority vote of the Board of Director; plus a vote or written assent of
19. In the meeting of the board of directors of Grand Corporation, construction company, held on the stockholders representing at least 2/3 of the outstancing capital stock.
March 31, 2003, doctors A, B, C. D and E were present among the 9 directors. The meeting b. Amendment by a vote of 2/3 of the stockholders.
had for its agenda the following: c. Amendment by a majority vote of the Board of Director,
I. The appointment of a new treasurer. d. None of the three.
II. The approval of the contract for the purchase of cement worth P50,000.00 from X
Construction Supplies Co. 24. Which of the following meeting may be held outside the Philippines?
 I. Board of Directors meetings articles of incorporation provide for 7 directors. On August 1, 2010, Directors A, B,. C, D and
II. Member; meetings of a non stock corporation E met to fill two vacancies in the board brought about by the valid removal of F for disloyalty
III: Stockholders meeting of a corporation going public to the corporation and the death of G. In the said meeting, the remaining directors voted for X
a. I only c. I and III to replace F, and Y, a son of C, to replace his father. Both X and Y are owners of at least
b. I and II d. I, II and III one share of stock of the corporation. The election of X and Y by the remaining directors is:
a. valid for both X and Y.
25. In which of the following corporations will those composing the corporation be liable as b. not valid for both X and Y.
general partners? c. valid with respect to X; not valid with respect to Y.
a. Corporarion by prescription, d. not valid with respect to X; valid with respect to Y
b. De facto corporation.
c. Corporation by estoppel. 30. Which cause of vacancy in the board of directors may be filled by the board of directors if the
d. De jure corporation. remaining directors still constitute a quorum and by the stockholders if such quorum does not
exist?
26. In the following cases, the preemptive right of the stockholders can be denied - choose the a. Removal of a director.
exception, b. Resignation of a director.
a. If it is denied in the articles of incorporation. c. Increase in the number of directors.
b. If the increase in authorized capital stock is to enable the corporation to comply with a d. Expiration of the term of some directors.
law requiring subscription by the public.
c. by a vote of 2/3 of the outstanding shares where the increase in authorized capital stock 31. A is a director and owns 50% of the outstanding capital stock of Ace Corporation which is
is to be exchanged with a property needed for a corporate purpose. engaged in the trading of computers. Ace Corporation purchased computer tables from Top
d. By a vote of a majority of the outstanding shares where the increase in authorized capital Corporation of which A is also a director and owns 15% of its outstanding capital stock. The
stock is to be used for the payment of corporate debts still to be contracted articles of incorporation of both corporations provide for 5 directors. In the approval of the
contract for the said purchase, A did not attend the meeting of the board of directors of Ace
27. Which of these purposes can be combined in just one corporation? Corporation, while in the meeting of the board of directors of Top Corporation which was
a. Bank and trust purposes called for the same purpose, directors A, B, C and D were present with all of them voting for
b. Educational and insurance purposes the approval of the contract. Assuming that there is no fraud and that the contract is fair and
c. Railroad and bank purposes reasonable under the circumstances, the contract between Ace Corporation ahd Top
d. Insurance and railroad purposes Corporation is:
e. All of the above a. valid.
b. voidable at the option of Top Corporation.
28. The certificate of incorporation of Seven Stars Corporation, a trading corporation, was issued c. unenforceable against Top Corporation,
although only 2 of its 5 incorporators are residents of the Philippines. Three, however, are d. void because corporations with interlocking directorate should not enter into a contract
citizens of the Philippines. The corporation created in such a situation is a: with each other.'
a. de jure corporation.
b. corporation by estoppel. 32. One of the following is not required and does not form part of the three-fold duty of directors
c. de facto corporation. of a corporation. Which one? (RPCPA, 92-2; 96-1)
d. No corporation was created at all. a. Duty of Diligence
b. Duty of Loyalty
29. A, B, C, D, E, F and G are the duly elected directors for 2009 of Excellent Corporation whose c. Duty of Obedience
 d. Duty of Efficiency
33. The power to deny pre-emptive rights as a corporate power is classified as: (RPCPA, 98-1)
a. Incidental power c. Implied power
b Express power d. Discretionary power
34. In which of these cases may the right preemption of stockholders be denied?
a. If the right is denied in the articles of incorporation.
b. If the increase in authorized capital stock is for the purpose of complying with a law
requiring subscription by the public.
c. By a vote of 2/3 of the outstanding shares where the increase in authorized capital stock
shall be exchanged for a property needed for a corporate purpose.
d. By a vote of 2/3 of the outstanding shares where the increase in authorized capital stock
shall be used to pay the corporate debts previously contracted
e. All of the above
35. Those regulate different internal matter of the corporation such as calling and defining the
conduct of the meeting of stockholders and directors. (RPCPA, 88-1-M; 88-2; 89-1-M)
a. Board of directors
b. By-laws
c. Article of incorporation
d. Proxy
36. Which of the following by-laws is valid?
a. A by-law which provides that one need not be the owner of a share of stock to become a
director of the corporation.
b. A by-law which provides that that one must be the owner of more than one share of
stock of the corporation to become a director.
c. A by-law which provides that one can continue to be a director throughout his term
although he has disposed all his shares in the corporation.
d. A by-law which provides a greater number of directors than that stated in the articles of
incorporation.
37. As regards to corporate by-laws, which of the following rules is not correct? (RPCPA, 98-1)
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 of the outstanding capital stock is needed.
c. To revoke the power delegated to the Board of Directors to adopt a new by-laws, 2/.3 of
the outstanding capital stock or of its members is needed.
d. To amend or repeal the by-laws, majority of the Board of Directors and of the
outstanding capital stock is needed,
38. The following may be the consideration of the shares of stock of a corporation, except:
a. actual cash paid to the corporation.
b. previously incurred indebtedness of the corporation.
c. amounts transferred from unrestricted retained earnings.
d. service to be performed by a lawyer on the propose increase in capital stock of the
corporation.
39. A corporation may invest its funds in any other corporation or business or for any purpose
other than, primary for which it was organized. (RPCPA, 90-1; 92-1-M; 96-1-M; )
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 Directors.
d. There is majority vote of the outstanding capital stock.
40. A, B, C, D, E, F, G, H and I are directors of Strong Cement Corporation whose articles of
incorporation provide for 9 directors. In the meeting of March 2003, directors A, B, C, D and
E were present to approve a contract for the purchase of cement bags from E who deals in
the said product. The contract was deliberated upon exhaustively by the said directors in the
meeting including E. When the voting took place however, only A, B, C and D who found the
contract fair and reasonable under the circumstances, voted for its approval. The contract
between the corporation and E is:
a. Valid and enforceable.
b. Voidable at the option of the corporation.
c. Unenforceable against the corporation.
d. Void because a corporation must not enter into a contract with any of its directors since a
director occupies a position of trust.
41. One of the following acts may be performed by the executive committee of a corporation,
Which is it?
a. Declaration of stock dividends.
b. Filling of vacancies in the board of directors.
c. Amendment or repeal of the by-laws or adoption of new by-laws.
d. Approval of contracts in the ordinary course of business.
42. This is an authority to vote in a corporation stockholders meeting: (RPCPA, 88-1; 88-2-M) 48. This corporale act is within the implied powers of the corporation -
a. Proxy c. Certificate of stock a. Acts dore in the ordinary or unusual course of business
b. By-laws d. Shares of stock b. Acts done to help or protect employees
c. Act done to increase or expand business
43. Right which the existing stockholders or corporation cannot be deprived without the consent d. Investment of funds in another corporation or for a purpose other than the main purpose
of their right to subscribe or to purchase new stock issued by the corporation or unissued e. All of them
original stock, in proportion to their holdings before it can be offered to others: (RPCPA, 85-2;
88-1-M) 49. Stock corporations are prohibited from retaining surplus pro its in excess of one hundred
a. Right of redemption c. Right to purchase percent (100%) of :heir paid in capital stock. Three of the following enumerations are
b. Pre-emptive right d. None of them exceptions. Which does not belong to the 2 exception? (RPCPA, 87-2)
a. When justified by definite corporate expansions projects or programs approved by the
44. Any stockholder of a corporation shall have the right to dissent and demand payment of the board of directors.
fair value of his shares in three of the following corporate acts. Which is the exception? b. When there is pension plan as agreed in Collecting Bargaining Agreement.
(RPCPA, 87-1; 95-1-M; 96-2-M) c. When the corporation is prohibited under any loan agreement with any financial
a. In case o: any amendment to the articles of incorporation which has the effect of institution or creditor whether local or foreign from declaring dividends without its
changing or restricting the debts of any stockholders or class of shares. consent.
b. In case of merger or consolidation d. When it can be clearly shown that such retention is necessary under special
c. In case of sale, lease, exchange transfer, mortgage, pledge or other disposition of all or circumstances obtaining in the corporation, such as providing for probable contingencies.
substantially all of the corporate assets and property o the corporation.
d. In case of incurring, creating or increasing bonded indebtedness. 50. One of the following is a limitation on proxies. Which is? (RPCPA, 88-2)
a. Proxy acquires legal title to the shares of the stockholders.
45. This is a document of a corporation acknowledging the interest of a stockholder in the b. A pro'y votes even in the presence of the stockholders.
corporation's assets: (RPCPA, 88-L-M; 1089) c. The proxy is voted only for the meeting for which it was intended.
a. Certificate of stock c. Capital stock d. A prox" is irrevocable at any time.
b. Shares of stock d. Stockholder's equity
51. The subscriber of unpaid shares which are not delinquent shall be entitled to the following
46. The following are methods of dissolving a corporation: (RPCPA, 86-2; 91-2-M) rights, except the right to:
a. Expiration of the term a. vote
b. Failure to organize and commence business within two (2) years from date of issuance b. inspect corporate books.
of certificate of incorporation. c. a stock certificate.
c. Shortening of the corporate term d. dividends
d. All of the above
52. These statements pertaining to the meetings of directors we presented to you for evaluation:
47. The contract between corporations with interlocking directors is generally - I. Directors or trustees may attend or vote by proxy at board meetings.
a. .Valid II. The articles of incorporation or the by-laws of a corporation may provide for a greater
b. Voidable majority for its quorum during the meetings of the board of directors.
c. Unenforceable a. Both statements are true.
d. Void b. Both statements are false.
c. Statement I is true; Statement II is false.
 d. Statement I is false; Statement II is true.
53. A stock that is issued without consideration or below par value or the issued price is known
as:
a. watered stock. c. redeemable stock.
b. delinquent stock. d. preferred stock.
54. A non-voting stock may vote in the following corporate acts, except in case of:
a. approval of the compensation of directors.
b. merger or consolidation.
c. increase or decrease in capital stock.
d. sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of
corporate property.
55. Winner Corporation, a dealer-manufacturer of garments and with principal office in Caloocan
City, held the meeting of its stockholders in Nasugbu, Batangas, in conjunction with its annual
company outing. Stockholders owning 75% of the capital stock were present, while 25% were
duly represented by proxies. In the said meeting, the corporation by a vote of the
stockholders representing 80% of the capital stock, approved the purchase of sewing
machines worth P5,000,000.00. The bylaws of the Corporation provide that contracts in
excess of P3,000,000.00 must be ratified by the stockholders, contract for the purchase of
the sewing machines was unanimously approved by the board of directors before it was
presented to the stockholders for ratification." What is the status of the contract for the
purchase of the sewing machines?
a. Void. c. Unenforceable.
b. Valid. d. Voidable.
56. Which of the following statements pertaining to non-stock corporations is incorrect?
a. Members may vote by mail.
b. The number of trustees may be more than 15
c. Any incidental income that it may be distributed as dividends to its members.
d. The meetings of members may be held outside or municipality where the principal off
corporation is located.
57. One of the distinctions between a proxy and a voting trust agreement is that in a voting trust
agreement:
a. the representative acquires legal title to the shares to be voted.
b. the exercise of the right to vote is limited to a particular meeting.
c. the representative cannot vote if the stockholder is present during the meeting.
d. the agreement need not be recorded with the Securities and Exchange Commission.
58. Which of the following statements pertaining to treasury shares is incorrect?
a. Treasury shares are not part of subscribed capital stock.
b. Treasury shares may be disposed of at a price lower than the par or issued price
provided it is reasonable and approved by the board of directors,
c. Treasury shares are not entitled to dividends.
d. Treasury shares, once disposed of, entitle the purchaser or transferee the right to vote.
59. Which of the following statements is false concerning treasury shares?
a. They are entitled to dividends.
b. They have no voting right.
c. They may be disposed of for a price lower than the par value provided such price is
reasonable.
d. They are not outstanding shares.
60. Which of the following will cause the automatic dissolution of a corporation?
a. Continuous inoperation for a period of at least 5 years.
b. Failure to formally organize and commence the transaction of its business or the
construction of its works within 2 years from its incorporation.
c. Failure to adopt by-laws and submit the same to the Securities and Exchange
Commission within 30 days from the receipt of the official notice of the issuance of its
certificate of incorporation.
d. Commission by the corporation of an ultra-vires act.
61. The articles of incorporation of Alco Corporation, a construction company, classify its shares
into voting common stock and non voting preferred stock, and provide for 11 directors. Its by-
laws on the other hand, give the board of directors the authority to approve transactions not
exceeding P2,000,000.00. Any transactions in excess of the said amount have to be ratified
by the stockholders. In which of the following cases may the preferred stock vote?
a. Approval of a loan amounting to P3,000,000.00 from Equitable Bank.
b. Declaration of stock dividends from the unissued common stock.
c. Increase in the number of directors from 11 to 15.
d. Purchase of cement worth P2,500,000.00 from Davao Cement Corporation.
62. There is said to be an unreasonable accumulation of unrestricted retained earnings when
they are in excess of 100% of the paid up capital of the corporation. In the following cases
are the valid defences which a corporate taxpayer may set up to prevent the imposition of a
surcharge, choose the exception
 a. That in the previous year the corporation has already declared dividends. d. I and III apply to proxy.
b. That the retained earnings are intended for a project of expansion already approved by
the board of directors. 65. The articles of incorporation of Alpha Corporation, a construction company, provide for 7
c. That there is an agreement with a bank or other financial institution to which the directors. In the monthly meeting of the board of directors held on April 12, 2004, directors A,
corporation is indebted that dividends shall not be declared without its consent. B, C, D and E were present and the following resolutions were approved:
d. That the unrestricted retained earnings are being held as contingent funds for any I. A resolution for the purchase of 500 pieces of no blocks from Excellent Concrete
unforeseen losses or liabilities. Enterprises, a proprietorship owned by E. B, C, D and E voted to resolution.
e. None of the above. II. A resolution appointing T as the new treasurer corporation. A, B, C and D voted for the
resolution.
63. The articles of incorporation of Power Corporation provide for 15 directors. For the year Based on the foregoing:
2003, only 5 meetings of the board of directors were convened because of the difficulty in a. Both resolutions are valid.
mustering a quorum. In view thereof, some transactions of the corporation which required b. Both resolutions are not valid,
board approval did not materialize resulting in lost profits. In preparation for the annual c. Resolution I is valid; Resolution II is not valid.
meeting of stockholders, the following were considered by the board of directors as possible d. Resolution I is not valid; Resolution II is valid.
solutions for approval of the stockholders:
I. Amending the by-laws reducing the quorum to 6 directors. 66. Record of all stocks in the names of stockholders are contained in:
II. Providing a by-law for the creation of an executive committee consisting of 5 members of a. ledger
the board of directors to act on matters that may be delegated to it by the board/ b. stock and transfer books
III. Providing a by-law allowing directors to send representatives during the board meeting c. journal
provided that the representative is given a special power of attorney. d. Articles of Incorporation
IV. Amending the articles of incorporation reducing the number of directors from 15 to 7 e. none of the above
effective the expiration of the term of the incumbent directors.
Which of the above proposed solutions may you validly recommend for submission to the 67. Other persor s who can vote in corporate meetings besides the p-oxy:
stockholders? a. guardian
a. I or III. c. I or IV b. executor
b. II or IV d. II or III. c. administrator
d. all of the above
64. The following statements concerning representative voting were presented to you for
evaluation: 68. Which of these is an example of a public corporation?
I. The representative acquires legal title to the shares, a. Development Bank of the Philippines
II. It is good only for the meeting for which it was intended. b. The National Development Corporation
III. It is generally revocable, and the stockholder may vote even in the presence of the c. The Philippine Ports Authority
representative. d. None of e, b, and c
IV. The agreement giving the representative the power to vote must be duiy notarized and a e. All of a, t, and c
copy thereof must be submitted to the Securities and Exchange Commission to be
effective and enforceable. 69. S is a stockholder in X Corporation who happens to be indebted to C in the amount of
a. I and IV apply to voting trust agreement. P5,000,000 which became due and payable on December 15, 1999. S sold his stares of
b. I and III apply to voting trust agreement. stock in X Corporation for P10,000,000 in favor of T on August 19,1998 who was not able to
c. I and IV appiy to proxy. record the transaction in the stock and transfer book of X Corporation. Sometime in August
 2000, C sued S in court where the latter was adjudged liable to the former for P5,000,000 b. Directors' right d. Stockholders' right
whereupon the shares of S were garnished by C, Who between C and T is better er titled to
the shares of S? 75. A dividend payable partly in cash and partly in stock, this class of dividend is a: (RPCPA, 89-1)
a. T becausa he legally bought the shares from C way back in August 19,1998. a. Optional dividend
b. T because sale is preferred in the transfer ownershio rather than garnishment. b. Property dividend
c. C has the better right because T did not register his sale n the corporate stock and c. Liquidating dividend
transfer book whereas the garnishment by C is a matter of corporate' record. d. Composite dividend
d. Both of a and b.
76. A gratuitous issue of Treasury shares will result in: (RPCPA, 88-1)
70. A contract entered into by a director with the corporation in which he is a director is generally a. Capital surplus c. Additional profit
considered as voidable. Which is the element which will make the contract valid? b. Watered stock d. Stock dividend
a. That the contract is fair and reasonable under the circumstance.
b. That his presence in the meeting of the board was not counted as part of the quorum. 77. In which of the following corporate acts is the appraisal right not available?
c. That his vote, if at all the voted for his contract, is not necessary for its approval. a. Merger or consolidation.
d. All of the above b. Extension or shortening of corporate existence.
c. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of
71. The Catholic Church of the Philippines may be regarded as en example of: its corporate stock.
a. Stock corporation d. Investment of funds for the accomplishment of the primary purpose of the corporation.
b. Corporation sole
c. Corporation by prescription 78. Which of the following special corporations is required by the Corporation Code to have its
d. Both of b and c number of directors in multiples of 5, i.e., 5, 10 or 15?
e. None of the above a. A stock educational corporation.
b. A non-stock educational corporation.
72. The rule is that the corporation can only be bound by acts of the board of directors acting as c. A corporation sole.
a body and not individually. Which is the exception? d. A religious society.
a. If the directors are themselves the only stockholders of the corporation,
b. If the act of an individual director for the corporation is ratified by the board of directors. 79. A stock corporation is similar to a non-stock corporation in what respect?
c. If the corporation is in estoppel because it misrepresented to the third person that a a. Transferability of shares or of membership.
particular director can bind the company. b. Method of voting directors or trustees.
d. All of the above c. Voting by stockholders or members in person or by proxy.
d. Term of directors or trustees.
73. This is a written acknowledgement or an interest of a stockholder in the corporation: (RPCPA,
88-1) 80. On dissolution, the liquidation of the business of the corporation may be undertaken by:
a. Proxy c. Certificate of stock a. Board of directors or trustees,
b. Share of stock d. Capital stock b. Assignee or assignees appointed by the board of directors.
c. Receiver appointed by the courts.
74. The right to vote at meetings, the right to receive dividends and the right to receive copies of d. All of the above.
financial statements is know as: (RPCPA, 90-1)
a. Right of existence c. Pre-emptive right 81. The time or duration for the winding-up or liquidation is for a period of three (3) years, except:
 a. When the liquidation is to be made by the board of directors. b. The omission of any statement that value has been given.
b. When the winding-up is to be carried out by the assignee or assignees. c. The omission of the place where the instrument was drawn.
c. When the liquidation is ordered to be done by the receiver appointed by the courts. d. The omission of the signature of the maker above his typewritten name.
d. None of the above
7. M executed a promissory note as follows:
Negotiable Instruments "I promise to pay P or order P50,000.00 or to deliver to him a brand new laptop computer."
1. The following are functions of a negotiable instrument. Choose the exception: (RPCPA, 93-2; (Sgd.) M
94-2) Based on the foregoing instrument, which of the following statements is true?
a. it increases purchasing power in circulation. a. The instrument is negotiable.
b. it increases credit circulation. b. The obligation is an alternative obligation.
c. as substitute for money. c. The choice as to which prestation will be performed belongs to P.
d. as legal tender. d. The obligation is payable at a determinable future time.

2. A check upon which the holder's signature must appear twice, one to be affixed by him. at the 8. Which of the following instruments is non-negotiable? (RPCPA, 89-1-M; 92-2; 90-2-M)
time it is issued and he second or counter signature, to be affixed by him before it is paid. a. "Pay to C or order P20,000.00 out of my cash in your possession." (Addressed to T,
Otherwise" it is incomplete, is called; (RPCPA, 0591; 96-1) signed by D).
a. Certified Check c. Traveler's Check b. "Pay to C or order P20,000.00 and reimburse yourself out of my cash in your
b. Stale Check d. Manager's Check possession." (Addressed to T, signed by D).
c. "I promise to pay C or order, P20,000.00." (Signed D).
3. Which of the following instruments is negotiable? d. "Pay C or order P20,000.00." (Addressed to T, signed by D).
a. Treasury warrant. c. Letter of credit
b. Postal money order d. Trade acceptance. 9. An instrument reads as follows:
November 30, 2003
4. A corporate certificate of stock is not negotiable instrument because it lacks the following I promise to pay to the order of Paolo Pimentel the sum of P50,000.00 if he places first in the
requisite of a negotiable instrument. (RPCPA, 88-1-M; 89-1; 96-2-M; j May 2004 CPA Examination.
a. It must be in writing and signed by maker or drawer. (Sgd.) Mariano Miranda
b. It must be payable on demand or at a fixed determinable future time. a. The instrument is valid and negotiable.
c. It must be payable to order or bearer. b. The instrument is valid but not negotiable.
d. It must contain an unconditional promise or order to pay a sum certain in money. c. The instrument is invalid but negotiable.
d. The instrument is invalid and not negotiable.
5. Which of the following is not a promise to pay, and thus will make an instrument non-
negotiable? 10. An instrument is considered payable on demand: (RPCPA, 88-1; 89-1; 1089)
a. "I agree to pay P" a. When no time of payment is expressed
b. "I bind myself to pay P" b. When payable to order
c. "I acknowledge my debt to P" c. When the last endorsement is in blank
d. "I oblige myself to pay P" d. When the last endorsement is restricted.

6. Which of the following omissions on the face of an instrument will render it non-negotiable? 11. A bill of exchange reads as follows: January 1, 2004
a. The omission of the date of issue. Pay to the order of Pamela Pineda the sum of P50.000.00 thirty (30) days after sight. (Sgd.)
 Rosita Rodriguez 15. The maker, by making the instrument, has the following liabilities, except:
To: Wilma Warner a. the engagement to pay the instrument according to its tenor,
The above bill was issued by Rosita Rodriguez to Pamela Pineda on December 28, 2003 and b. the admission of the existence of the payee,
was presented for acceptance by Pamela Pineda to Wilma Warner on January 10, 2004. c. the admission of the capacity of the payee to indorse the instrument.
Based on the foregoing facts, the maturity date of the bill is: d. the admission of the right of the holder to enforce payment of the instrument.
a. January 27, 2004 c. February 9, 2004.
b. January 31, 2004 d. January 10, 2004, 16. Which is not correct? The acceptor by accepting a negotiable instrument: (RPCPA, 97-2; 98-
1)
12. An instrument reads as follows: a. Admits the existence of the payee and his capacity to endorse.
I promise to pay to the order of P the sum of P50.000.00 sixty (60) days after date. b. Admits the existence of the drawer, the genuineness of his signature and his capacity to
(Sgd.) M draw the instrument.
On September 1, 2010, M issued the promissory note to P, P indorsed the note to A, A to B, c. Admits the existence of the endorser, the genuineness of his signature and his authority
and B to C. C indorsed the note to H on September 20, 2010, but before delivering it to H, C to draw the instrument.
inserted August 1, 2010 as the date of issue. H is a holder in due course. The due date of the d. Admits that he will pay it according to the tenor of his acceptance
promissory note insofar as H is concerned is:
a. October 31, 2010. 17. Assuming all the other requisites of negotiability are present, which of the following
b. September 30, 2010. instruments is not payable to bearer?
c. The promissory note becomes demandable at once. a. "Pay to the order of cash."
d. The promissory note is avoided because of the insertion of a wrong date; hence, it is of b. "Pay to the order of Jose Rizal, national hero."
no use to determine the date of maturity. c. "Pay to Pedro Padernal, bearer."
d. "Pay to Pedro Padernal or bearer."
13. Consider the following statements on the interpretation of instruments:
I. Where the sum payable is expressed in words and also in figures and there is a 18. A bill of exchange may be treated and considered a promissory note:
discrepancy between the two, the sum denoted by the words is the sum payable. a. When the drawer and the drawee are the same person.
II. Where there is a conflict between the written and printed provisions of the instrument, b. When the drawee is fictitious
the printed provisions prevail. c. When the instrument is ambiguous
a. Both statements are true. d. All of the above
b. Both statements are false.
c. Statement I is true; Statement II is false. 19. Which of the following statements pertaining to indorsements is incorrect?
d. Statement I is false; Statement II is true. a. The indo sement must be of the whole instrument.
b. The sigrature of the indorser without additional words is sufficient.
14. On August 1, 2003, M executed a promissory note for P50.000.00 payable to the order of P c. Indorsers are liable in the order in which they indorse.
which is payable "30 days after date." Thereafter, P indorsed the note to A, A to B, B to C, C d. If an instrument is delivered without indorsement, negotiation takes effect at the time of
to D, and D to M. The indorsement by D to M was-made on August 29, 2003. delivery even if the instrument is subsequently indorsed
a. The obligation on the note was extinguished by merger or confusion on August 29, 2003.
b. M may reissue/renegotiate the promissory note after it was indorsed to him. 20. M makes a promissory note payable to the order of P. P indorses the note specially to A, A
c. M can go after P, A, B, C and D to collect. indorses the note in blank ard delivers the same to B. B specially indorses the note to C, C
d. M may strike out the indorsement to him by D. specially indorses the note to D, D indorses the note in blank and delivers it to E, E specially
indorses the note to H, holder. Whose indorsement may H strike out?
 a. The special indorsement of P to A.
b. The special indorsement of E to H.
c. The blar k indorsement made by A.
d. The blar k indorsement made by D.
21. M makes a note payable to the order of P. P specially indorses the note to A, A specially
indorses the note to B, B indorses the note in blank and delivers it to C, C specially indorses
the note to D, D specially indorses the note to H, holder. Which of the indorsements may H
strike out?
a. The special indorsement of P to A.
b. The blank indorsement of B to C.
c. The special indorsement of C to D.
d. The special indorsement of D to H.
22. M makes a note payable to the order of P in the amount of P10,000.00. P indorsers the note
to A as follows "Pey to A if he passes the 2004 Bar Examination."
a. M must wait for the condition to be fulfilled before he can pay A.
b. M may pay A even if the condition has not been fulfilled but A has to hold the proceeds
subject to the rights of P.
c. M cannot be compelled to pay even if the condition is fulfilled because the conditional
indorsement renders the instrument non-negotiable.
d. M may pay A even if the, condition has not been fulfilled. The fulfillment of the condition
becomes immaterial and A becomes the absolute owner of the proceeds of the note.
23. One of the following can set up the defense of forgery in an instrument payable to order. Who
is it?
a. An indorser, if the maker's signature is forged.
b. The acceptor, if the drawer's signature is forged
c. A person negotiating by mere delivery if a prior party's signature is forged.
d. The maker, if an indorser's signature is forged.
24. Which of the following is not a right of a holder in due course?
a. To hold the instrument free from defect of title of prior parties.
b. To hold the instrument free from personal defenses available to prior parties among
themselves.
c. To enforce payment of the instrument for the full amount thereof against all parties liable
thereon.
d. To hold the instrument free from real defenses available to the prior parties among
themselves.
25. R signs a check amounting to P50,000.00 but which is blank as to the name of payee. He
keeps the check in his drawer but S, his secretary, steals it, places her name as payee on the
blank, and negotiates it to A, A to B, B to C, and C to H, holder. A, B, and C have no
knowledge of the theft of the check and its unauthorized completion by S. Based on the
foregoing, which of the following statements is incorrect?
a. H may enforce payment of the check against R if H is a holder in due course.
b. H may enforce payment of the check against S, whether H is a holder in due course or
not.
c. H may enforce payment of the check against A, B and C, whether H is a holder in due
course or not.
d. H may not enforce payment of the check against R, whether H is a holder in due course
or not.
26. Which of the following may be raised as defense against any holder?
a. Want of consideration.
b. Want of delivery of complete instrument.
c. Insertion of a wrong date.
d. Want of delivery of an incomplete instrument.
27. M makes a promissory note for P2,000 payable to the order of P. P negotiates the note to A
who with the consent of P raises the amount to P20,000 and thereafter indorses it to B, B to
C, and C to D who is not a holder in due course. In this case: (RPCPA, 91-2; 95-1-M)
a. D can recover P2,000 as against M.
b. P and A are liable to D for P20,000
c. B and C are not liable to D.
d. Answer not given
28. M makes a note payable to the order of P. He delivers the note to P with the instruction that P
should keep the same until M has obtained the proceeds of his loan from the bank. P,
however, disregarded the instruction of M and indorsed the note to A, A to B, B to C, and C to
H, holder. A, B and C have no knowledge of P's defective title. Based on the foregoing, which
of the following statements is incorrect?
a. H may enforce payment against M if H is a holder in due course.
b. H may not enforce payment against M if H is not a holder in due course.
c. H may not enforce payment against A, B and C, whether H is a holder in due course or
not.
d. H may enforce payment against P, whether H is a holder in due course or not.
29. M makes a note payable to P or bearer and delivers the note to P. P indorses the note to A. A
keeps the note in his drawer but it is stolen by F who negotiates the same to B by forging A's
signature, B indorses the note to C, C indorses the note to H, a holder in due course. Who
among the following can set up the defense of forgery?
a. M, maker.
b. P, payee.
c. A, indorser.
d. Forgery is not available as defense to any party to the instrument.
30. At a movie premier, Perfecto Palmares approached Sharon Morales, the star of the movie,
and requested an autograph from her. Sharon Morales willingly obliged and signed her name
at the bottom right portion of a white 8" x 11" stationery which Perfecto Palmares presented
to her. Shortly after reaching home, Perfecto Palmares printed above the signature of Sharon
Morales through his computer the following: "I promise to pay Perfecto Palmares or his order
P50,000.00". Thereafter, Perfecto Palmares negotiated the paper to Arturo Alvarez, Arturo
Alvarez to Bernardo Benitez, and Bernardo Benitez to Henry Hilado, holder. Alvarez, Benitez,
and Hilado knew nothing about how the apparent note came into being.
a. If he is a holder in due course. Henry Hilado can collect from Sharon Morales,
b. Whether he is a holder in due course or not, Henry Hilado cannot collect from Sharon
Morales.
c. Whether he is a holder in due course or not, Henry Hilado cannot collect from Arturo
Alvarez.
d. Whether he is a holder in due course or not, Henry Hilado cannot collect from Bernardo
Benitez.
31. Medardo Medrano makes a note payable to the order of Pidencio Palomar and Prudencio
Perez for P20,000.00. The payees are not partners and neither one authorized the other to
act in his behalf. Based on the foregoing, which of the following is a valid indorsement?
a. "Pay to Antonio Arevalo, P12,000.00, and to Alberto Alvarez, P8.000.00.
(Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez."
b. "Pay to Antonio Arevalo, P14.000.00.
(Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez"
Note: Medardo Medrano has paid a total of P6.000.00 to both payees before the latter made
their indorsements.
c. "Pay to Antonio Arevalo, P14,000.00.
(Sgd.) Pidencio Palomar (Sgd.) Prudencio Perez."
Note: Medardo Medrano has not paid any amount to the payees.
d. "Pay to Antonio Arevalo P20.000.00.
(Sgd.) Pidencio Palomar"
32. 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 Jpse decides to strike out any indorsement not necessary to his title?
(RPCPA, 93-2; 96-1-M)
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 relieved from liability.
33. M makes a promissory note payable to the order of P for P10,000.00. P indorses the note to
A, and A to B. Thereafter, B indorsed the amount of the note in full to H to secure his (B's)
debt of P8,000,00 to H, Based on the foregoing, which of the following statements is
incorrect?
a. If M has no defenses against H, H may collect P10,000.00 from M,
b. If M has personal defenses against H, H may collect P8.000.00 from M.
c. If M has real defenses against H, H may collect nothing from M.
d. H cannot collect anything from M whether M has real or personal defenses.
34. M makes a promissory note payable to the order of P for PHP5,000.00. After delivery to P, P
changed the amount to US$5,000.00. Thereafter, P indorsed the note to A, A to B, B to C, C
to D, and D to H. The parties subsequent to P were not aware of the alteration made by P.
Based on the foregoing facts, which of the following statements is incorrect?
a. H can hold M liable for US$5,000.00 if H is a holder in due course.
b. H can hold M liable for PHP5,000.00 if H is a holder in due course.
c. H cannot hold M liable for any amount if H is not a holder in due course.
d. H can hold A, B, C and D liable for US$5,000,00 even if H is not a holder in due course,
35. A makes a note payable to 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? (RPCPA, 96-
2-M; 97-2)
a. The notice given by F 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.
36. Which of the following instances does not discharge a negotiable instrument? (RPCPA, 93-2;
96-1)
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.
37. A party secondarily liable is discharged through any of the following means, except by the:
a. intentional cancellation of his signature by the holder.
b. discharge of a prior party.
c. release o the principal debtor.
d. extension of the time of payment which is assented to by such party secondarily liable.
Contract of Sales
1. In a sale, the buyer is entitled and has the right to the fruit of the thing sold from the time:
(RPCPA, 1089-M, 90-1; 97-2)
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.
2. Ownership of the thing sold is transferred/acquired/retained: (Phi! CPA, 92-2; 96-1)
a. Retained by the seller in "sale of 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.
3. Cory transferred to Doris a parcel of land for the price of P100,000, P30,000 to be paid in
cash and for the difference, sie will convey her car worth P70,000.
What kind of contract is this? (RPCPA, 92-1-M; 93-1- M; 96-1-M; 96-1)
a. Lease contract c. Obligation to sell
b. Contract of sale d. Barter
4. If the material used in the manufacture of the article is more valuable, it is a contract of sale,
and if the labor or skill is mere valuable than the material used in the manufacture of the
article, it is a contract for a piece of work. This school of thought followed:
a. English rule c. New York rule
b. Massachusetts rule d. Italian rule
5. The price is certain under the following:
I - The parties fixed the price
II - When the parties referred to another thing certain
III - The price is left to the judgment of buyer or the seller
IV - The price is left to the judgment of 3rd person.
a. I, II and III
b. I, II and IV
c. I and II
d. I, II, III and IV
6. Seller sold his only horse to Buyer for P80,000. The parties agreed that Seller shall deliver
the horse one week from the execution of their agreement. Buyer, however, is required to
pay the price immediately in certified check. In the place of Seller and Buyer, it was the
custom :hat anyone selling a horse should place a horseshoes on its hooves. However, this
was not stated in the agreement including how the horse would be cared for before delivery.
a. Seller is not obliged to place a horseshoe on the horse a though it was the custom in the
place because Seller and Buyer did not stipulate about it.
b. Seller is obliged to place a horse shoe on the horse because the observance of custom
or usage in the place becomes part of the contract.
c. Seller is not obliged to take care of the horse before delivery because the caring of the
horse was not stipulated.
d. Seller end Buyer are bound only by the terms stated in their agreement.
7. Somera sells to Beunviaje at P50 per gallon 300 gallons of gasoline stored in his trunk’s tank
which, unknown to the parties, contains 500 gallons gasoline.
What is the status of the contract of sale between Somera and Buenviaje?
a. The sale is void because the quantity is more than the quantity sold,
b. The sale is valid up to 500 gallons of gasoline. Buenviaje must pay for the additional 200
gallons of gasoline.
c. The sale is valid up to 300 gallons of gasoline. Buenviaje becomes the owner of 3/5 of
the whole stock, while Somera becomes the owner of 2/5 thereof.
d. The sale is rescissible because Somera will suffer a lesion of more than 1A of the value
of the whole stock.
8. San Miguel Corporation, which maintains a professional basketball team, entered into a
contract with Armstrong Rubber Company for the latter to provide a pair of rubber shoes to
 the formers two imported basketball players, Charles Jordan and Michael Barkley.
Armstrong Rubber Company was instructed to make a pair for either or both players in case
the company did not manufacture shoes of their size. No pair was, however, immediately
available for both the players. Charles Jordan, who is 6'5 tall and wears size 12 rubber
shoes, was given a pair day from the 300 pairs that Armstrong was in the process of
manufacturing for its customers at the time the orders were received. Michael Barkley, who is
7' tall and wears size 18 shoes, was provided three days later, with a pair that was specially
made for him since Armstrong does not make shoes of 'his size. What kind of contracts were
entered into for the shoes provided to the two basketball players?
a. The contract for the pair of shoes provided to Charles Jordan is a contract for a piece of
work, while that for Michael Barkley is a contract of sale.
b. The contract for the pair of shoes provided to Charles Jordan is a contract of sale, while
that for Michael Barkley is a contract for a piece of work.
c. Both contracts are contracts of sale.
d. Both contracts are contracts for a piece of work.
9. On June 1, 2003, S sold to B 50 units of machines which were scheduled to arrive from
Japan the following day on board, the vessel "MT Nippon Maru" The sale was evidenced by
an invoice identifying each machine by serial number. Each machine was priced at PI
0,000.00.
Unknown to the parties, 30 units were damaged beyond repair by seawater on May 31, 2003.
Based on the foregoing, which of the following statements is incorrect?
a. B may rescind the whole contract,
b. B may demand delivery of the remaining 20 pay the price therefor.
c. S may require payment of the whole shipment since S was not aware of the damage
caused on the machines at the time of sale.
d. S has no option to rescind the whole contract or payment of the remaining 20 units.
10. In one of the following cases, delivery of the goods to a carrier for the purpose of
transmission to the buyer transfers ownership to the latter. Which one is it?
a. When by the terms of the bill of lading, the goods are to be delivered to the seller or his
agent.
b. When by the terms of the bill of lading, the goods are to be delivered to the order of the
buyer or his agent but the seller retains the bill of lading,
c. When the seller draws a bill of exchange on the buyer for the price of the goods and
transmits such bill of exchange and the bill of lading to the buyer to secure acceptance or
payment of the bill of exchange and the buyer dishonors the bill of exchange.
d. When the owner does not reserve the, right of possession or ownership of the thing sold
upon delivery to the carrier.
11. Baldo bought a residential house and lot from Tierra Madre Realty for P250,000.00 giving a
down payment of P10,000.00 and promising to pay the balance of P240,000.00 in 20 years in
monthly Installments of PI,000.00. After paying 72 installments Baldo defaulted in the
payment of the 73rd installment and subsequent ones. Despite the grace period he had
earned he was not able to make any further payments. Accordingly, Tierra Madre Realty
cancelled the sale. How much cash surrender value is Baldomero entitled to receive?
a. P45,100.00 c. P36,000.00
b. P39,600.00 d. P41,000.00
12. Goods are still in transit:
a. if the buyer or his agent obtains delivery of the goods before their arrival at the appointed
destination.
b. when the carrier acknowledges possession of the goods as bailee for the buyer after the
arrival of the goods at the place of destination.
c. if the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his
agent.
d. if the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to received them back.
13. This refers to the implied warranty on the part of the seller that he has the right to sell the
thing at the time when ownership is to pass, and that the buyer from that time shall have and
enjoy legal and peaceful possession of the thing.
a. Warranty against hidden defects.
b. Warranty against eviction.
c. Warranty of ownership.
d. Warranty of possession.
14. This refers to an encumbrance imposed upon an immovable for benefit of another immovable
belonging to a different owner.
a. Easement or servitude c. Pledge
b. Real estate mortgage d. Chattel mortgage
15. The justified refusal of the buyer to accept the goods produces the following effects, except:
a. buyer has no duty to return the goods, unless otherwise stipulated.
b. title to the goods does not pass on to him.
c. buyer shall not be obliged to pay the price.
d. buyer is obliged to constitute himself as depositary until he returns the goods.
16. S, the proprietor of a rent-a-car enterprise, sold his business and his fleet of 10 cars to B for a
lump sum of P3,000,000.00. S physically delivered the permits and other papers for the
operation of the business and the vehicles to B at the latter's office except for one car which
the parties agreed shall be leased by S for one month while he was winding up his affairs in
the Philippines as he was then leaving for abroad. In the meantime the contract of sale and
the contract of lease, though already signed by the parties, have not been acknowledged
before notary public, and hence, were still private instruments.
a. The ownership of the car leased by S remained with S
b. The ownership of the car leased by S has transferred to B although there was no
physical delivery thereof to B.
c. The execution of the private instrument for the business and the cars likewise transferee
ownership to B of the car leased by S.
d. Both the contract of sale and the contract of lease must be acknowledged before a
notary public by the parties before the ownership of the car leased transferred to B.
17. S, a malicious and fraudulent person, sold his house and lot successively to X, Y and Z, all of
whom acted in good faith and for value. X contented himself with his contract and did not
register the sale nor possess the house and lot; Y possessed the same but only intermittently
which enabled Z to buy the house and lot in good faith and registered the sale with the
Register of Deeds, Who among X, Y and Z will have a better right to the house and lot?
a. X as the first buyer in good faith and for value who, has oldest title.
b. Y because he took possession of the house and lot although intermittently.
c. Z as the buyer who first recorded his transaction with the Register of Deeds in good faith.
d. X, Y and Z should share the property in equal proportion after S returns their portion of
the price paid.
18. S sold to B a residential lot said to be containing an area of 1,000 sq. meters at P10,000 per
sq. meter. In this connection, which of these is a correct statement?
a. If the lot should contain 1,500 sq. meters, B can reject the excess of 500 sq. meters, but
if he accepts, B should pay for the excess at the contract rate of P10,000 per sq. meter.
b. If the lot should contain 950 sq. meters only, B can only ask for a proportionate reduction
of the price but not rescission.
c. If the lot should contain 900 sq. meters, B can choose between proportionate reduction
of the price or rescission of the sale.
d. All of the above.
19. Seller and Buyer orally entered into a contract whereby Seller sold his one year production of
eggs in his poultry farm to Buyer for P150,000 which amount immediately gave in cash to
Seller. The contract between Seller and Buyer is:
a. Void because the object was not existing at the time of execution of the contract.
b. Valid because future things may be the object of contracts.
c. Rescissible because buyer will likely suffer damage if the eggs do not come into
existence.
d. Unenforceable because the contract was not in writing.
20. RR, the representative of AA, an absentee, sold the corn with a value of P30,000.00 and the
palay with a value of P50,000 harvested from AA's agricultural farm for a total price of
P50,000. AA, whose domicile was subsequently known, was informed of the sale made by
RR. Based on the foregoing facts, which of the following statements is incorrect?
a. AA- may seek payment of an additional P30,000 to recover the damages suffered.
b. AA may just seek rescission of the sale of the corn to recover damages he suffered.
c. AA may seek rescission of the sale of part of the rice to the extent of the damages he
sustained.
d. AA may seek the rescission of the total sale recover for the damages he suffered.
21. The purpose of this action is to ask for a proportionate reduction of the price
a. Quanti minoris c. Replevin
b. Redhibitory action d. Accion vindicatoria
22. In which of these cases is there no right of legal redemption?
a. Where a co-owner of an undivided immovable sells his interest to a third person,
b. Where the owner of rural property one hectare or less sells his property to a third person
who owns other rural land or lands.
c, Where the owner of urban land which is so small and so situated that it cannot be used
for a practical purpose sells the same to a third person.
d. Where ths co-owner of an undivided immovable property donates his undivided interest
to a third person.
23. If redemption is made, which of the following will not be paid by the seller to the buyer:
(RPCPA, 92-2; 96-1; 98-1-M)
a. Price mad a by the buyer.
b. Expenses in the execution of the sales contract paid by the buwer.
c. All necessary expenses on the thing sold and to be redeemed
d. Interest on the price paid by the buyer.
Contract of Agency
1. P is the owner of a car valued at P600,000 which neighbor A sold to T foi the same amount
without being authorized by P. A turned over the proceeds to P who knowingly received it as
 me consideration for the sale of his car. The relationship of agency created between P and A P320,000.00. Mr. Ajente shall remit to Mr. Principe: (RPCPA, 90-2-M; 91-2-M; 92-2;)
is one a. P300,000.00 c. P285,000.00
a. By appointment d. By necessity b. P320,000.00 d. P395,000.00
b. By ratification e. By operation of law
c. By estoppels 7. A appoints B as his agent to sell his land. Which of the following is valid? (RPCPA, 93-2)
a. The authority of B is in writing and the sale of the land in fa ./or of C is oral.
2. P in the presence of many people including T told the crowd that A is his agent duly b. The authority of B from A is by way of letter and B sells the land to C in writing.
authorized by him to sell his car although that is not factually true. Believing in good faith the t c. The authority of B is oral and B sells the land to C ,:or P50,000.00 in a written contract of
A is indeed an agent of P - T bought the car from A foi P600,000. This agency between P and sale.
A is one created - d. The authority of B is in writing by the sale of the land in writing was made beyond the
a. By appointment d. By necessity period expressly set forth by A,
b. By ratification e. By operation of law
c. By estoppels 8. A commission agent:
a. Has the option to act in his own name.
3. A, B and C validly entered into a contract of partnership for the purpose of buying and selling b. Generally, cannot sell on credit.
car. A or B or C as partners become that agents of ABC partnership which is created - c. May be an agente del credere if he receives guaranty commission.
a. By appointment d. By necessity d. All of the above.
b. By ratifice tion e. By operation of law
c. By estoppels 9. Bears risk of collecting from the buyer the price of the sale.
a. Commission agent c. Quasi-tradition
4. P has appointed A to manage his business affairs in the U.S.A. Then A died leaving S, his b. Delegacion d. Agente del credere
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 10. P appoints A his agent for the purpose of borrowing money and to this end mortgaged
and the relationship is created (chattel) his car. A in excess of authority sells the car to T and the latter knows of his excess
a. By appoirtment d. By necessity of authority. The principal P did not ratify the sale - the status of the contract with T is:
b. By ratifice tion e. By operation of law a. Valid c. Unenforceable
c. By estoppels b. Voidable d. Void

5. A appoints B io sell his land. 11. Which of these agencies is not revocable at the will of the principal?
Example 1 - If the authority of B is oral and B sells the land in writinc, the sale is valid. a. If a bilateral contract depends upon the agency.
Example 2 - T the authority of B is in writing and B sells the land orally, the sale is valid. (Phii b. If the agency is the means of fulfilling an obligation already contracted.
CPA, 93-2; 94-2-M) c. Where the agency is coupled with an interest,
a. First example is false but second example is true. d. All of the above.
b. Both examples are true,
c. Both examples are false. 12. One of the following acts requires a special power of attorney granted by the principal to his
d. First exanple is true but the second example is false. agent. Which is it?
a. To make gifts to employees in the business managed by the agent.
6. Mr. Principe constituted Mr. Ajente as his authorized agent to sell the former's Lancer car for b. To borrow money which is urgently needed to preserve the property of the principal
P300,000.00 and to pay him a 5% commission on the selling price. Mr. Ajente sold tie car for under the administration of the agent.
 c. To make payments for purchases in the ordinary course of the business.
d. To repudiate an inheritance
13. 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.
14. 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 agency contracted is
aware of the limits of the powers 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. (RPCPA,
98-1)
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
15. P, 25 years old, appointed A, 17 years old, as his agent to sell certain goods for P20,000.00.
Thereafter, A sold the goods to B for the said amount. P, however, learned that the price of
the goods had increased to P22,000.00 so he sought to disaffirm the sale made by A to B,
and brought an action to recover the goods from B on the ground that A's act was voidable, A
being a minor, and hence, could not be an agent. Decide.
a. The sale is valid because the principal is capable.
b. The sale is void, because A is a minor and therefore, cannot be an agent.
c. The sale is voidable, because A is a minor.
d. The sale is unenforceable, because A exceeded authority.
16. One of the following acts may be delegated by a principal to his agent. Which is it?
a. Vote during the meeting of stockholders of a corporation where the principal is a
stockholder.
b. Attend meetings of the board of directors of a corporation where the principal is a
director.
c. Purchase land in the Philippines of which the principal is an alien.
d. Represent the principal in a marriage ceremony where the principal is a party to the
marriage contract.
17. Pedro, a Filipino who was on a business trip in Timbuktu, learned that Federico, also a
Filipino, was interested in buying his lot located in Fairview, Quezon City. To take advantage
of the opportunity, he made an overseas call to Almario, his business associate who was in
Manila, to sell the lot in his (Pedro's) behalf, to Federico, for P1,000,000.00 cash. Almario
thus sold the lot promptly to Federico. The contract of sale was in a public instrument which
was signed by Almario in behalf of Pedro as seiller, and Federico as buyer. The said contract
of sale is:
a. Valid, because it is in a public instrument and Almario was duly authorized to represent
Pedro.
b. Void, because the authority of Almario was not in the form required by law.
c. Unenforceable, because Pedro did not sign the contract of sale and so he haetho
consent thereto.
d. Rescissible, because the contract was entered into in representation of an absentee.
18. Precision Appliances Corporation (Precision), which is based in Metro Manila, sent a letter
with a special power of attorney, to Alberto Aguado (Alberto), an agent dealing with
appliances, in the latter's office in Cebu, appointing Alberto as the agent of Precision to sell
its new appliances. The letter, which was sent through LBC Courier Services, was duly
received by Alberto Aguado, who signed in the logbook of LBC. Alberto, however, did not
respond to the letter. Based on the foregoing data:
a. An agency was created between Precision and Alberto by the implied acceptance of
Alberto of the agency.
b. No agency was created between Precision and Alberto because Alberto did not respond
to the letter.
c. An agency was created by the ratification of Alberto when he duly received the letter with
a special power of attorney.
d. No agency was created because of the inaction of Alberto.
19. P, owner of a certain car, authorized A to sell the car for P100,000.00 cash. A, however, sold
the car in the name of P for P110,000.00 but on credit. B, the buyer, knew at the time of the
transaction that A's authority was to sell the car of P on cash basis. The contract entered into
by A is:
a. Void because B was aware of A's limit of authority. In this case, A is not liable because
he did not undertake to get P's ratification.
b. Valid because the transaction, although it was for credit, was more advantageous to P.
Accordingly, P will be liable.
c. Unenforceable against P because A acted in excess of his authority. Thus, A alone will
be liable,
 d. Rescissible, because P will suffer damage if the sales price is not paid by B.
20. Perez gave Almendras a special power of attorney wherein it was written that Almendras was
being authorized to sell the two cars of Perez. However, Perez and Almendras had an
understanding that Almendras should sell only one of the cars. Almendras sold the two cars
to Bernarte who was not aware of the instruction given by Perez to Almendras.
a. Perez is bound by the sale of only one car in accordance with his understanding with
Almendras.
b. Perez is bound by the sale of the two cars because that is what is contained in the
special power of attorney as written.
c. Perez is not bound at all by the sale of either one or both of the two cars because
Almendras violated the instructions given by Perez.
d. Perez will be bound by the sale of one or both cars at his option.
21. The principal is not liable for the expenses incurred by the agent in the following, except:
a. when although the agent acted in contravention of the principal's instructions, the
principal wishes to avail himself of the benefits derived from the contract,
b. when it was stipulated that the agent would be allowed only a certain sum.
c. when the agent incurred them with the knowledge an unfavorable result would ensue, if
the principal was not aware thereof,
d. when the expenses were due to the fault of the agent
22. Which of these agencies is not revocable at the will of the principal?
a. If a bilateral contract depends upon the agency.
b. If the agency is the means of fulfilling an obligation already contracted.
c. Where the agency is coupled with an interest.
d. All of the above.
23. The following are modes of extinguishing an agency, except:
a. death, civil interdiction, insanity or insolvency of the principal or agent.
b. accomplishment of the purpose of the agency.
c. expiration of the period for which the agency was constituted.
d. continued losses on the part of the principal or agent
Contract of Pledge, Mortgage and Antichresis
1. Ben pledged his watch to V.Y. Domingo Agencia for P5,000. On due date, Ben failed to
redeem his watch.
The pawnshop sold the watch at a public auction to the highest bidder at P4,000, (RPCPA,
1089-M; 90-2-M; 98-1; 98-1-M;')
a. The pawnshop can recover the deficiency of P1,000 from Ben
b. The pawnshop cannot recover the deficiency of P1,000 unless there is a stipulation.
c. The pawnshop cannot recover the deficiency of P1,000 even if there is a stipulation.
d. The pawnshop can recover the deficiency of P1,000 even without a stipulation
2. When is appropriation by the creditor of the thing given as security allowed in pledge, real
mortgage and chattel mortgage?
a. When the thing given as security in real mortgage is not sold at two public auctions.
b. When the thing given as security in pledge is not sold at two public auctions.
c. When the thing given as security in chattel mortgage is not sold at one public auction.
d. No appropriation is allowed in either pledge, real mortgage or chattel mortgage.
3. This is a stipulation in pledge or mortgage providing that the ownership of the thing given as
security will pass to the pledgee or mortgagee upon default of the debtor,
a. Constitutum possessoriurn
b. Pactum commissorium
c. Legal subrogation
d. Redemption
4. P appoints A his agent for the purpose of borrowing money and to this end mortgaged
(chattel) his car. A in excess of authority sells the car to T and the latter knows of his excess
of authority. The principal P did not ratify the sale - the status of the contract with T is:
a. Valid c. Unenforceable
b. Voidable d. Void
5. D borrowed 130,000.00 from C. To secure the debt, D pledged his ring, wristwatch, and
necklace. Before the debt could be paid, C died leaving X, Y and Z as heirs. By agreement
among the heirs who inherited the credit, the ring would secure the share of X of the credit,
the wristwatch the share of Y, a necklace the share of Z. Later, D pays X P10,000.00.
a. D can demand the extinguishment of the pledge of the ring.
b. X may release the pledge of the ring.
c The pledge of the ring will remain until the shares of Y and Z are paid by D.
d. D can demand the extinguishment of the pledge of the ring, wristwatch and necklace
because there has been part al payment.
6. Cesar pledgee his Toyota car to Dan for P100,000. Cesar was unable to pay the obligation
two (2) months after the obligation became due and demandable. Wherefore, Dan sold the
car at public auction for P80,000. Can Dan recover the deficiency of P20,000 from Cesar?
1st answer: Mo, he cannot recover the deficiency even is there is a stipulation the he can.
 2nd answer: Yes, he can recover the deficiency even without stipulation. (RPCPA, 97-2; 98-
1-M)
a. 1st answer correct, 2nd answer wrong
b. Both answers are wrong
c. 1st answer wrong, 2nd answer correct
d. Both answers are correct
7. The debtor/pledger has the-following rights, except:
a. to ask for the return of the thing pledged after he has paid the debt, its interests, and with
expenses in a proper case.
b. to continue to be the owner of the thing pledged unless it L expropriated.
c. to require the deposit of the thing with a third person if it is in danger of being impaired or
lost through the negligence or willful act of the pledgee.
d. to alienate the thing pledged without the consent of the pledgee.
8. D borrowed F 100,000.00 from C. To secure the debt, D mortgaged hs land and building in
favor of C. The mortgage is registered with the Register of Deeds. Sometime later, D sold the
land to X who was not aware of the mortgage of the land and building. Based on the above
information, which of the following statements is false?
a. X must respect the mortgage although he was not a party thereto.
b. X was not bound by the mortgage because he was not aware of it.
c. If C forec oses the mortgage and the proceeds of the foreclosurs sale are not enough to
pay for the debt, C can recovar the deficiency from D.
d. If C forezioses the mortgage and the proceeds of the foreclosure sale exceed the
amount of debt, D is entitled tc the excess.
9. D pledged h s computer to secure a loan which he obtained from C, The debt which amounts
to P10,000.00 is due after 6) days. Before the due date, C executed an instrument
abandoning the pledge.
I. D's debt cf P10,000.00 is extinguished,
II. The pledge of the computer is extinguished even if D has not yet accepted the
renunciation of the pledge.
III. The pledge a is not extinguished until C returns the ring to D.
IV. The pledge is extinguished even if C has not returned the ring to C.
Based on the foregoing, which is false among the four statements?
a. I and III c. I and II
b. II and IV d. II and III.
10. A, B and C obtained a loan from X in the amount of P60,000.00. To secure the debt, A
pledged his wristwatch; B, his necklace; and C, his diamond ring, A pays his share of toe
debt amounting to P20,000.00,
I. The obligation of A, B and C is solidary.
II. The obligation of A, B and C is joint.
III. A may demand the return of the wristwatch after payment of his share of the debt.
a. I and III are true c. I and III are false
b. II and III are true. d. II and III are false
11. D pledged his 100 shares of stock of San Miguel Corporation to C to secure his debt of
P5.000.00. On clue date D was not able to pay the debt, so C caused the sale of the shares
auction. The shares of stock were sold at P4,500.00.
a. To extinguish the obligation, C may recover the deficiency of P500.00 from D if there is a
stipulation to that effect.
b. To extinguish the obligation, C may recover the deficiency even if there is no stipulation
to that effect.
c. The obligation is extinguished even if there :s a deficiency of P500.00. Accordingly, C
can no longer recover the deficiency.
d. The obligation is extinguished only if the proceeds of sale amount to P5.000.00 or more.
12. This refers to the right of a person to retain a thing until he receives payment of his claim in
the cases provided by law such as one who has executed work on a movable.
a. Conventional pledge c. Legal pledge
b. Voluntary pledge d. Chattel Mortgage.
13. One of the following may not be the object of a real mortgage:
a. Land, buildings, roads and construction of all kinds adhered to the soil.
b. Fertilizer actually used on a piece of land.
c. Animal houses, pigeon houses or other breeding places intended by the owner to be
permanently attached to the land, including the animals therein.
d. Growing fruits that have been gathered from trees planted on land.
14. It is the right mortgagor t« redeem the property that was mortgage after it was sold.
a. Equity of redemption c. Right of subrogation
b. Right of redemption. d. Right of pre-emption.
15. In a contract of pledge, the pledgee/creditor may do the following, except to:
a. use the thing pledged for purposes of preservation.
b. retain the thing pledged until the principal obligation is satisfied.
c. ask for a substitute if he was deceived on the substance or quality of the thing pledged.
 d. sell the thing pledged without notice to the pledger/debtor. b. Consensual d. Onerous

16. Consider the following cases:
I. D owes C P10,000.00. To secure the debt, D pledged his cell phone. D defaults. The
cell phone is sold for P9,000.00 at the public auction.
II. D bought a car for P360.000.00 from C. The price, which is payable in 12 equal monthly
installments of P30,000.00, is secured by a chattel mortgage on the car. After paying 2
installments, D defaults in the payment of 3 installments. C forecloses the chattel
mortgage and the car is sold at the public auction for P280,000.00.
The deficiency is recoverable in:
a. Both I and II,
b. I only
c. II only
d. No deficiency is recoverable in both I and II.
17. Mary Monies and Meiany Manalo obtained a loan of P100,000.00 from Patricia Palma. The
debtors executed a promissory note which reads as follows:
We promise to pay Patricia Raima or order P100.000.00 on April 30, 2004.
(Sgd.) Mary Monies (Sgd.) Meiany Manalo
To secure the loan, Mary Montes pledged her diamond ring, while Meiany Manalo executed a
mortgage on her lot.
a. Mary Montes may demand the return of her diamond ring if she pays her share of the
debt, while Meiany Manalo's share remains outstanding.
b. Meiany Manaio may demand the cancellation of the mortgage on her lot if she pays her
share of the debt, while Mary Montes's share remains outstanding.
c. Both Mary Montes and Meiany Manalo must pay the total amount of the debt before
Mary Montes could demand the return of the diamond ring, and Meiany Manalo the
cancellation of the mortgage on her lot.
d. Patricia Palma may demand payment of the amount of P100,000,00 from either Mary
Montes or Meiany Manalo.
20. Pledge and mortgage are accessory contracts because they: (Phi! CPA, 95-1)
a. Are meant to secure the fulfillment of a principal obligation.
b. Cannot exist if the principal obligation is void.
c. Can exist by themselves.
d. Cannot secure fulfillment of rescissible obligation.
21. Which of the following statements regarding contract of pledge is not correct? (RPCPA, 96-2)
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.
22. The following are essential requisites common to the contract of pledge and mortgage,
except one: (RPCPA, 97-2)
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.

18. The creation of a lien on the property upon which, it is imposed, whoever may be the
possessor of the property, to the fulfillment of the obligation for whose security it was
constituted refers to the characteristic of a real mortgage being:
a. an accessory contract c. an inseparable contract
b. an indivisible contract d. a real property in itself.

19. One of the following is not a characteristics of pledge and mortgage: (RPCPA, 94-1)
a. Accessory c. Gratuitous