POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

COLLEGE OF ACCOUNTANCY AND FINANCE

Manila

ACCO 4123 – BUSINESS LAW

2ND SEM Y2017 2ND EVALUATION EXAMINATION

January 24, 2018

SPECIFIC INSTRUCTIONS
Select the correct answer for each of the following questions. Mark only one answer for each item by shading the
box corresponding to the letter of your choice on the answer sheet provided. Strictly no erasures allowed. Use
pencil no. 2 only. Any form of cheating will never be tolerated.

MULTIPLE CHOICE QUESTIONS

1. Proof of the perfection of the contract of sale:

a. earnest money; c. goodwill money;
b. option money; d. all are proof of perfection of the contract of
sale
2. What is the nature of a deed of conditional sale devoid of any stipulation that the title is reserved or of
the right to unilaterally rescind until the price is paid?
a. it an absolute sale; c. it a contract to sell;
b. it a conditional sale; d. answer not given.
3. What is usually the positive suspensive condition in a contract to sell that determines the subsequent
transaction between the parties?
a. full payment of the purchase price; c. delivery of the object of sale;
b. delivery of the down payment; d. execution of the contract
4. In relation to question no. 3, what is effect of the non-fulfillment of the suspensive condition?
a. rescission of the contract of sale;
b. it will prevent the obligation to convey title from acquiring an obligatory force;
c. it will prevent the perfection of the contract to sell;
d. all answers are possible consequences of the breach.
5. If the goods are to be manufactured especially for the customer and upon his special order, and not for
the general market, it is a:
a. contract of sale; c. contract to sell;
b. contract for a piece of work; d. contract of conditional sale.
6. Service can be a valid object of a:
a. contract of sale; c. contract to sell;
b. contract of lease of service; d. contract for a piece of work.
7. The sole owner of a thing may sell:
a. an undivided interest therein; c. his right to use the thing;
b. his whole interest therein; d. all of the above.
8. Delivery of a negotiable instrument of title to a bearer:
a. tradicio longa manu; c. tradition constitutum possessorium;
b. tradicio brevi manu; d. quasi tradicio
9. Mr. Manu appointed Mr. Aegis to be his agent to sell clay bricks in Batangas. As agreed upon by the
parties, Mr. Aegis, before delivery, was required to deposit 40% of the total value of the goods based on
the standard retail price provided by Mr. Manu, and after 60 days from delivery, to pay the balance of the
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total value of the goods delivered less 20% thereof as discount normally given to agent as commission.
What was the contract entered into by the parties?
a. contract for a piece of work; c. contract of partnership
b. contract of agency to sell; d. contract of sale
10. Steve and Benhur entered into a contract wherein Steve would deliver to Benhur 50 cavans of dinorado
rice and in consideration thereof, Benhur would deliver to Steve 100 sacks of Japanese sweet corn.
Thereafter due to lack of corn harvest for the year, the parties agreed to set the price for the 100 sacks of
corn using the prevailing market price. What was the contract entered into by Steve and Benhur?
a. sale; c. barter;
b. conditional sale; d. consignment.
11. Which of the following rights may be the object of sale?
a. right to be a partner in a partnership; c. right of usufruct;
b. right to act as an agent of another; d. right of bailee to use the thing loaned.
12. The object sold is equivalent to the price paid:
a. bilateral; c. commutative;
b. onerous; d. aleatory

13. Transmutation of property from one man to another in consideration of some price or recompense in
value:
a. loan; c. exchange
b. sale; d. pledge.
14. Edward’s mother promises to reward him with a specific car if he will pass the board examination this
coming year. In order to finance his review, Edward sells to Ferdie the promised specific car which he
hopes to receive from his mother. Is the sale valid?
a. no, Edward has no absolute right to transfer ownership of the specific car;
b. no, Edward’s ownership of the car is not assured as passing the board is a condition;
c. yes, the specific car whose acquisition by Edward depends on his passing the exam
can be an object of sale;
d. yes, because all things and rights, although not yet in existence, may be the objects
of sale.
15. An instance where the vendee can suspend payment of price:
a. if the vendee has a well grounded fear that his possession would be disturbed by
foreclosure of mortgage;
b. when a third person committed a mere act of trespass;
c. if the vendee’s possession or ownership has been disturbed and the vendor has caused
such disturbance to cease;
d. if the vendor gives security for the return of the price.
16. Andy bought from Leila a parcel of land a cuerpo cierto supposedly containing an area of 5,000 square
meters. Subsequently, when Andy caused the survey of the land, he found out that its area is only 4,200
square meters. What is the remedy of Andy?
a. he is entitled to rescind the contract;
b. he has the right to demand the reduction of the price;
c. Andy may alternatively exercise the two mentioned remedies;
d. answer not given.
17. Goods are considered in transit:
a. when the goods are delivered to a carrier for the purpose of transmission to the buyer
until the latter takes delivery;
b. when the buyer obtains delivery of goods before their arrival at the appointed
destination until notice thereof to the seller;
c. when the goods are still in possession of carrier who acknowledges to the buyer that it
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is holding the goods in behalf of the latter;

d. when the goods are already delivered to the buyer who rejected them.
18. The sale is valid but there is no warranty against hidden defects in this case:
a. sale of condemned animals;
b. sale of animals with contagious diseases;
c. sale of animals unfit for the use stated in the contract;
d. sale of animals unfit for the service agreed upon.
19. Warranty that goods are reasonably fit for the general purpose for which they are sold:
a. warranty of fitness; c. warranty of quality;
b. warranty of condition; d. warranty of merchantability
20. Renunciation of the right of warranty in case of eviction without the knowledge of risks:
a. intencionanda; c. waiver;
b. consciente; d. implied assumption of risks.
21. An essential element of the warranty against eviction:
a. waiver of the warranty; c. deprivation due to final judgment;
b. appeal of the adverse judgment of eviction; d. all of the above.
22. In case of seller’s breach of warranty, the buyer may accept the goods and set up the seller’s breach to
reduce or extinguish the price, this remedy is called:
a. rescission; c. recoupment;
b. action for damages; d. counterclaim.
23. Object of pacto de retro sale:
a. personal property; c. real and personal properties
b. real property; d. all tangible properties.
24. What is the remedy of the seller when the parties really intended a mortgage but the contract states that
it is an absolute sale or sale with right of repurchase?
a. reformation; c. annulment
b. rescission or resolution; d. specific performance
25. An instance where a co-owner may exercise legal redemption:
a. sale by other co-owner of his ideal share to a third person;
b. sale by other co-owner of his ideal share to another co-owner;
c. donation by other co-owner of his ideal share to a stranger;
d. the co-owner may redeem in all stated instances.
26. Which of the following may not be subjects of a contract of sale?
a. future inheritance; c. things having potential existence;
b. future goods; d. things subject of a contingency
27. Bert gave Selena P20,000.00, 10% of the purchase price, for the latter to decide within one week
whether to sell her specific lot to him. Selena then issued an acknowledgement receipt for P20,000.00. Was
there a valid contract of sale?
a. yes, there was a meeting of minds as to the object and price;
b. no, but there is an option contract;
c. yes, Bert’s promise to buy was accepted by Selena;
d. no, there was no contract yet.
28. May services be an object of a contract of sale?
a. no, it is not determinate;
b. yes, the parties may agree on the rate per hour;
c. no, it constitute involuntary servitude;
d. yes, it is capable of being made determinate.
29. What differentiates a sale from barter?
a. object; c. price certain in money
b. consent; d. answer not given
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30. In this transaction, it may be shown that the parties really intended a donation or some other act or
contract:
a. if the price is simulated; c. statement of a false cause
b. gross inadequacy of price; d. all answers are correct.
31. To be considered certain, the price:
a. must be determinate;
b. must be at least capable of being determinate;
c. the determination of which is left to the judgment of a specified person;
d. is with reference to another thing.
32. What is the remedy of the injured party if the price is simulated?
a. declaration of nullity of the contract;
b. rescission or resolution of the contract;
c. reformation;
d. the injured party may avail any of the above-mentioned remedies.
33. A contract of sale differs from a contract of agency to sell because:
a. the seller warrants the thing sold; c. the seller transfers ownership to the agent.
b. the seller accounts the proceeds of the sale; d. all are characteristic of a contract of sale.
34. If the fixing of the price is left to the discretion of one of the contracting parties and the price fixed is
accepted by the other, what is the consequence?
a. the contract is void; c. the contract is voidable
b. no contract will be perfected; d. there is a perfected contract.
35. What is the legal effect of failure to pay the stipulated price after perfection of the contract of sale?
a. the contract is converted into one without cause;
b. the contract is automatically resolved;
c. the seller may demand specific performance;
d. the seller is prevented from conveying the property to the buyer.
36. In auction sale where there is no notice of seller’s right to bid, the seller is not allowed to employ this
person:
a. consignee; c. barker
b. puffer; d. bidder
37. A right acquired by the vendee to a thing sold after the contract is perfected and the object is delivered:
a. personal right; c. inchoate right;
b. ownership; d. colorable title
38. Where the price cannot be determined but the thing or any part thereof has been delivered to and
appropriated by the buyer, what is the reason for his obligation to pay a reasonable price?
a. quasi contract; c. usufruct;
b. contract of lease; d. commodatum
39. Sans Trading delivered to Boy Gana a refrigerator on lease to own basis wherein the latter would pay
Sans Trading a monthly rental of P5,000.00 for six months. Thereafter, Boy Gana failed to pay the rent for
the second month. What is the remedy of Sans Trading?
a. cancel the sale; c. Boy Gana may exercise any of the cited
remedies;
b. exact fulfillment of the obligation; d. Answer not given.
40. When necessaries are sold and delivered to a minor, the sale is:
a. valid and the minor must pay the agreed price;
b. valid and the minor must the reasonable price;
c. voidable and the minor may rescind the contract;
d. voidable and the minor may exact fulfillment of the contract.
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41. Which of the following statements is correct as regards the transactions between husband and wife?
a. sale is void;
b. all donations are void;
c. they may enter into contract of sale only in case of separation in fact;
d. only letters a and b are correct.
42. What is the legal effect when the thing is placed in the control and possession of the vendee even though
the contract of sale is subject to a condition:
a. ownership is transferred to the vendee; c. a contract of sale is consummated;
b. there is actual delivery; d. all answers are the legal effects.
43. There is no implied warranty unless the buyer makes known to the seller the specific purpose and relies
on seller’s skill or judgment:
a. warranty as to the quality for a particular purpose; c. warranty against hidden defects;
b. warranty as to the title of the seller; d. warranty of merchantability
44. What is the general rule when the seller is authorized or required to send the goods to the buyer?
a. delivery of the goods to the carrier is deemed delivery to the buyer;
b. the buyer may treat the delivery to the carrier as delivery to himself;
c. the seller bears the risk of loss until actual delivery to the buyer;
d. the buyer bears the risk of loss even before delivery to the carrier.
45. In this arrangement, the carrier acts for the seller in collecting the purchase price:
a. FOB; b. CIF c. COD d. FAS
46. Where the seller draws on the buyer for the price and transmits the bill of exchange, together with the
bill of lading, to the buyer to secure acceptance or payment of the bill of exchange, what is the legal
consequence?
a. ownership in the goods sold passes to the buyer;
b. the buyer may return the bill of exchange and retain the bill of lading;
c. the seller reserves the right of possession or ownership in the goods;
d. the seller’s possession of the goods terminates upon buyer’s receipt of the bill of lading&bill of
exchange
47. Determination of a price may be left to the judgment of an arbitrator, what is the effect should such
person be unable to fix it?
a. the price is inefficacious;
b. the contract is void because the price must be agreed upon only by the parties;
c. the contract may be valid with reference to a certain thing;
d. the contract is inefficacious.
48. The following persons are relatively incapacitated to enter into a contract of sale by reason of their
relation to the objects of sale, choose the exception:
a. guardians; c. agents;
b. judge; d. foreigners.
49. Andrew’s rich uncle died and left him and his siblings a property in New York. After being informed
of the death of his uncle, Andrew sold to his friend Brenda his share of the London property. Andrew’s
sister, Cathy, questions the transaction for being void. Is the contention of Cathy correct?
a. yes, future inheritance cannot be an object of sale;
b. yes, Andrew’s right to the inherited property is not yet capable of determination;
c. no, sale of a future thing may be subject of a contract of sale;
d. no, Andrew’s right to the New York property is already realized and may be sold.
50. What is the minimum requirement for an object of sale to be valid?
a. the thing must be particularly designated;
b. the thing must be physically segregated from all others of the same class;
c. the thing is capable of being made determinate without the necessity of a new or
further agreement between the parties;
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d. all of the above.

51. If a possessor of a movable property, which was lost or unlawfully deprived from the owner, has
acquired the said movable in good faith at a public sale, can the owner obtain its return from the
possessor?
a. no, possession of a movable property acquired in good faith is equivalent to a title;
b. yes, but the possessor is entitled to reimbursement;
c. no, there was a valid sale and delivery of the thing to the possessor;
n. none of the above.
52. In sale of realty by installments under the Realty Installment Buyer Protection Act, where the buyer
has paid at least two years of installments and the contract is cancelled, what must be refunded to the
buyer?
a. down payment;
b. cash surrender value;
c. fifty percent of the total installments;
d. none, since the seller is not mandated to give refund.
53. It is the act or right of purchasing before others, and exercised before the sale or resale against would-
be vendor:
a. right of pre-emption; c. right of preference;
b. right of legal redemption; d. right of conventional redemption
54. First statement: If a thing sold should be lost in consequence of the hidden faults, and the vendor was
not aware of them, the vendor shall return the price and interest thereon, and reimburse the expenses of
the contract which the vendee might have paid.
Second statement: If two or more animals are sold together, whether for a lump sum or for a separate price
for each of them, and one animal is found to be suffering under a redhibitory defect, its redhibition gives
rise to the redhibition of the other animals.
a. Only first statement is true; c. Both statements are true;
b. Only second statement is true; d. Borth statements are false.
55. A contract of sale is perfected:
a. when the contract is signed by the parties;
b. at the moment there is a meeting of minds;
c. at the moment there is a meeting of minds upon the object and the price;
d. at the moment there is a meeting of minds upon the object and the price, and delivery
of the object to the vendee.
56. A common requisite of pledge and mortgage:
a. the security must be placed in the possession of the creditor;
b. the debtor must have free disposal of the property to be encumbered;
c. the person constituting the contract of security be the absolute owner of thing to be
encumbered;
d. all of the above.
57. What is the consideration in pledge?
a. principal obligation; c. liberality;
b. compensation for the pledge; d. all may be a cause in pledge.
58. An example of a real contract:
a. pledge; c. antichresis;
b. chattel mortgage; d. all of the above.
59. What is the effect when the thing pledged is sold at public auction?
a. if the price of the sale is less than the principal obligation, the creditor can recover the
deficiency;
b. the principal obligation is extinguished;
c. if the price of the sale is more than the obligation, the debtor is entitled to the excess;
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d. the pledge continues over the proceeds of the sale.

60. A procedure to be adopted by the mortgagee to terminate the rights of the mortgagor over the
property:
a. assignment; c. foreclosure;
b. automatic appropriation; d. public auction
61. “Group of debtors” does not cover this group:
a. corporations that are financially related to one another as parent, subsidiaries or affiliates;
b. entities of different organizational forms but related to one another through ownership;
c. partnerships that are owned more than 50% by the same person;
d. single proprietorships that are owned by the same person.
62. Insolvent refers to the financial condition of a debtor that:
a. has liabilities that are greater that its or his liquid assets;
b. is generally unable to pay its or his liabilities as they fall due in the ordinary course of business;
c. has been declared as such by a competent government agency;
d. all of the above.
63. Who may not be a bailor in a commodatum?
a. borrower; c. lessee
b. owner; d. usufructuary
64. Contract of commodatum is similar to a contract of:
a. pledge; c. antichresis
b. donation; d. deposit
65. A contract whereby one person transfers the ownership of non-fungible things to another with the
obligation on the part of the latter to give things of the same kind, quantity and quality:
a. mutuum; c. barter;
b. commodatum; d. sale.
66. Ms. Indai Benda asked for your advice regarding her residential condominium unit purchased on
installments from Sell Company. Indai had paid at least two years of installments but she could not
continue anymore with her obligation to Sell Company and she would certainly default on her payments
for the succeeding installments. Choose your sound advice:
a. request Sell Company to give Indai a grace period within which to pay the installments
without additional interest;
b. file an action for rescission of contract with the HLURB;
c. demand the refund of the cash surrender value for the paid installments;
d. sue for the return of the paid installments.

67. When may a seller’s opinion be considered an express warranty?

a. seller made a statement as an expert which was relied upon by the buyer;
b. seller made an expert representation;
c. seller made an exaggeration of trade in bad faith;
d. buyer made known to seller the particular purpose for which the goods were acquired
and buyer bought the goods based on the judgment or skill of the seller.
68. Which property may not be the object of pledge?
a. shares of stock; c. warehouse receipts;
b. animals; d. building
69. In their deed of mortgage, the parties agreed that the mortgaged property would be considered full
payment without further demand in case of the mortgagor’s default. When the mortgagor defaulted, he
sold the security to a third person. May the mortgagee question the sale of the security based on the
above-cited stipulation?
a. no, the sale made by the mortgagor is not prohibited;
b. no, the stipulation is prohibited;
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c. no, the right of ownership belongs to the mortgagor;

d. all answers are correct.
70. When a debtor’s heir who has paid a part of the debt cannot ask for the proportionate extinction of the
pledge or mortgage, it means that a pledge or mortgage is:
a. a real right;
b. a unilateral contract;
c. indivisible;
d. an accessory contract.
71. What is the effect of a commencement order in rehabilitation proceedings?
a. vest the rehabilitation receiver with powers to review and obtain records to which the
debtor’s management and directors have access;
b. serves as a legal basis for rendering null and void the perfection of any contract entered
into by the creditors;
c. prohibits any extrajudicial activity or process that will render moot the liquidation of
the assets of the debtor;
d. serves as a legal basis to render null and void the results of other cases filed against the
debtor.
72. If an individual is so situated to be materially influenced in the exercise of his judgment for or against
any party to the proceedings, he is deemed:
a. not qualified to be a receiver or an employee of the receiver;
b. to have a conflict of interest;
c. to be barred from participating in the proceedings;
d. all are correct.
73. A ground for rescission or declaration of nullity of certain pre-commencement transactions:
a. transactions were executed with intent to defraud creditors;
b. certain creditors were given preference;
c. transactions provide additional collateral executed within 4 months prior to
commencement of the proceedings;
d. contracts involve accelerated payment of a claim by a co-debtor within 3 months prior
to commencement.
74. A characteristic of a mortgage credit:
a. real right;
b. it may be alienated or assigned to third person;
c. it follows the property;
d. all of the above.
75. Extent of a mortgage:
a. it is limited to the property encumbered;
b. it extends to the property and its fruits and income;
c. it extends to the property and all its accessions, improvements, growing fruits, income,
proceeds of insurance, if any, and just compensation if security is expropriated;
d. none of the above.

((------------------------------- GOOD LUCK ------------------------------------))

Please submit all scannable answer sheets, worksheets, and questionnaires.

ACCO 4123
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ANSWER KEY
2ND EVALUATION EXAMINATION
2ND SEMESTER 2017=2018

SUGGESTED ANSWERS:

1. A 39. B
2. A 40. B
3. A 41. A
4. B 42. B
5. B 43. A
6. B 44. A
7. D 45. C
8. D 46. C
9. D 47. D
10. C 48. D
11. C 49. D
12. C 50. C
13. B 51. B
14. C 52. B
15. A 53. A
16. D 54. A
17. A 55. C
18. A 56. C
19. D 57. D
20. B 58. A
21. C 59. B
22. C 60. C
23. C 61. B
24. A 62. B
25. A 63. A
26. A 64. B
27. B 65. C
28. C 66. C
29. C 67. A
30. D 68. D
31. C 69. D
32. D 70. C
33. A 71. A
34. D 72. B
35. C 73. A
36. B 74. D
37. B 75. C
38. A