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SUAREZ

OBLIGATION
1. Statement no. 1: The creditor may be compelled to accept payment in checks as
long as the check is negotiable.
Statement no. 2: An obligation payable should the client die of diabetes is an
obligation subject to a period.
a. Statement No. 1 is false while statement No.2 is true.
b. Statement No. 1 is true while statement No. 2 is true.
c. Both Statement are false
d. Both Statement are true

2. The buyer has the right to the fruit of the thing from:
a. The time the thing is delivered
b. The time the contract is perfected
c. The time the obligation to deliver the thing arises
d. The time the fruits are delivered

3. Statement no. 1: Just before the obligation became due and demandable, the
debtor proposed to the creditor that he would give him a specific car instead of
paying 150,000.00, and which proposal was accepted by the creditor. Here, there
is extinguishment of an obligation by way of dacion en pago.

Statement no. 2: After substitution in facultative obligations, the loss of the


principal through the fault or negligence of the debtor shall render him liable for
damages in favor of the creditor.
a. Both are true
b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true

4. Meeting in one person of the characteristics of both the debtor and creditor in
one and the same obligation extinguishers the obligation by way of:
a. Novation
b. Compensation or set-off
c. Condonation or remission
d. Merger or confusion

5. Consignation alone, as a special form of payment, may extinguish an obligation


under any of the following instances. Which is the exception?
a. When the creditor is absent, or is unknown or does not appear in the place
of payment.
b. When the creditor is capacitated to receive payment
c. When the creditor refuses to issue receipts
d. When there are two or more persons claiming title to one and the same
obligation
e. When title to the same obligation has been lost

6. Statement no. 1: in alternative obligations, it is the notice of which prestation to


perform made by the debtor shall convert the alternative obligation into a pure or
simple one.

Statement no. 2: In the case of a joint obligation, the co-debtors may be held
liable for the share of an insolvent co-debtor.
a. Both Statement are true
b. Both statement are false
c. Statement no. 1 is true while statement no. 2 is false
d. Statement no. 1 is false while statement no. 2 is true

7. An obligation based on positive law and give right to enforce its performance.
a. Civil Obligation
b. Moral Obligation
c. Legal Obligation
d. Natural Obligation

8. An obligation wherein various things are due, but the payment of one of them is
sufficient to extinguish the obligation is called:
a. Simple obligation
b. Conjoint obligation
c. Alternative Obligation
d. Facultative Obligation

9. An obligation wherein various things are due but the complete performance of all
of them is necessary to extinguish the obligation
a. Facultative obligation
b. Conjoint obligation

c. Alternative obligation
d. Pure or simple obligation

10. Statement no. 1: I will give you 10,000.00 if you will not marry X this year. If by
the end of the year, X entered the convent, my obligation is extinguished.
Statement no. 2: I will give you 10,000.00 when my means permit me to do so.
This is a conditional obligation for the benefit of the debtor.
a. Both are true
b. Both are false
c. No. 1 is true; no. 2 is false
d. No. 1 is false; no. 2 is true

11. Change of persons or objects:


a. Solutio indebiti
b. None of the above
c. Novation
d. Confusion

12. Which of the following is not a ground for the extinguishment of an obligation?
a. Remission
b. Merger
c. Compensation
d. Death of creditor
e. None of the above

13. S owns an oil painting. Being in need of money, S sold the painting to B for
1,000.00. After the sale S discovered that the painting was valuable and worth
5,000.00.
a. B is entitled to the benefit of the contract because it is valid and binding.
b. S may annul the contract on ground of error
c. S may annul the contract on ground of fraud
d. S may rescind the contract on ground of lesion or inadequacy of cause.

14. A and B are jointly and severally liable to C for 20,000.00. A is a minor.
a. C can collect 20,000.00 from B
b. C can collect 10,000.00 from B
c. C can collect 10,000.00 from A that is the share of B.
d. C can collect 20,000.00 because minority is not a defense

15. Every obligation whose performance does not depend upon a future or uncertain
event, or upon a past event unknown to the parties, is demandable at once. This
refers to:
a. Divisible and Indivisible obligation
b. Joint and Solidary obligations
c. Pure obligation
d. Obligations with a period

16. DR promised to give DE, his grandson, a car if the latter will pass the bar
examinations. When his grandson passed the said examinations, which of the
following statement is true?
a. DR may refuse to deliver because the condition is purely a potestative
one.
b. The obligation is valid because the condition depends upon the sole will of
the debtor.
c. Both the obligation and the condition are ineffective because they depend
upon the sole will of the donor.
d. The obligation is valid although potestative because they depend upon the
sole will of the done.

17. A, B and C executed a promissory note worded as follows: We promise to pay to


X, Y and Z the sum of 90,000.00 (Sgd.) A, B and C.
a. A is obliged to pay to X, Y and Z 90,000.00
b. A is obliged to pay to X 30,000.00
c. A is obliged to pay to X 60,000.00
d. A is obliged to pay to X 10,000.00

18. Ill give you my car one year after your death. The obligation is
a. Valid because the event is sure to come
b. Void, not legally possible
c. Valid, the obligation is conditional
d. Valid, but disregard the condition.

19. Statement no. 1: D oblige to give a specific car to C on Dec. 20, 2006. If on the
date stated D did not comply with his obligation, the next day he is considered in
default without the need of demand.

Statement no. 2: S sold to B a specific car for 10,000.00. Both parties promise to
comply with their obligations the day after tomorrow. If on the date stated S
delivers the car to B, but B is not ready to comply with his obligation, from
thereon he is considered in default without the need of a demand.
a. Both are true
b. Both are false
c. No. 1 is true; No. 2 is false
d. No. 1 is false; No. 2 is true

20. It refers to joint obligation:


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

21. Conrad and Charlie are jointly indebted to Pete for 100,000.00. Pete assigned his
interest to Crispin who assigned it back Conrad.
a. The debt is totally extinguished by compensation
b. The debt is totally extinguished by merger
c. The debt is partially extinguished by compensation
d. The debt is partially extinguished by merger

22. In three of the following cases, compensation shall not be proper. Which is the
exception?
a. Commodatum
b. Gratuitous support
c. Civil liability arising out of criminal offenses
d. Bank deposit

23. The passage of time extinguishing obligations. Which is the exception?


a. Prescription
b. Fulfillment of resolutory condtion
c. Arrival of resolutory period
d. Remission

e. Rescission

24. A is indebted to B for 20,000.00. X is the guarantor of A. B is also indebted to A


for 8,000.00. how much will X be liable as guarantor if B sues A, and cannot pay?
a. 12,000.00
b. 20,000.0
c. 8,000.00
d. X has no liability

25. Statement no. 1: The debtor of a thing cannot compel the creditor to receive a
different one, although the latter may be of the same value or more valuable than
that which is due.
Statement no. 2: In dation in payment, ownership of the thing delivered is
transferred to the creditor; while in cession, it merely authorizes the creditor to
convert the property into cash and out of the proceeds to extinguish the
obligation partially.
a. Both are true
b. Both are false
c. No. 1 is true; No. 2 is false
d. No. 1 is false; No. 2 is true

26. I will give you specific car if you will marry X this year, 20016. Which of the
following statement in incorrect?
a. If on December 25, X died, without marriage, my obligation is effective
because one party is dead, marriage is impossible to take place.
b. If on December 25, X died, without marriage, my obligation is extinguished
because one party is dead. Marriage is impossible to take place.
c. If the year has ended, no marriage taking place, both parties are alive, just
the same my obligation is extinguished because the time indicated has
already elapsed
d. If you marry X on December, my obligation is to give you the car

27. Mr. Debtor owes Mr. Creditor who has two (2) legitimate children, 50,000.00
payable on December 31, 2006.
a. If Mr. Debtor dies before December 31, 2006, Mr. Creditor cannot collect
from the heirs of Mr. Debtor.
b. If Mr. Debtor dies before December 31, 2006, Mr. Creditor can collect from
the heirs of Mr. Debtor.

c. If Mr. Creditor dies, his two (2) legitimate emancipated children cannot
recover from Mr. Debtor his obligation.
d. If both Mr. Debtor and Mr. Creditor die, the heirs of Mr. Creditor can collect
from the heirs of Mr. Debtor.

28. A judicial relation known as negotiorum gestio takes place.


a. When a person voluntary takes charge of anothers abandoned business
or property without the owners consent.
b. When something is received and there is no right to demand it and it was
delivered through mistake
c. When a person is appointed by a court to take the property of business of
another.
d. None of the above.

29. A owes B 2,000.00 demandable and due on September 10, 2006. B on the other
hand, owes A 2,000.00 demandable and due on or before September 30, 2006. If
B claims compensation on September 10, 2006, can A rightfully oppose?
a. No. B who was giving the benefit of the term, may claim compensation
because he could then choose to pay his debt on September 10, 2006
which is actually on or before September 30, 2006.
b. Yes, A can properly oppose because for compensation to take place,
mutual consent of both parties is necessary.
c. Yes, A c ab properly oppose and if B still refuses to accept his payment
made on September 30, 2006, A can deposit his payment in court.
d. None of the above.

30. Statement no. 1: Merger taking place in the person of the guarantor shall
extinguish only the secondary contract such as the contract of guaranty but not
the principal obligation.
Statement no. 2: when the debtor promises to pay his obligation whenever his
means permit him to do so the obligations is with a period.
a. Both statement are true
b. Both statement are false
c. Statement no. 1 is true while statement no. 2 is false
d. Statement no. 1 is false while statement no. 2 is true

31. D obliged himself to paint the house of C or to paint the picture of C, in a


standing position, using 10 by 10 canvass. Later because of financial reverses, C
sold his house to X. which of the following statement is correct?
a. The obligation of D is extinguished because he cannot make a choice.
b. D may paint the picture of C
c. D may cancel the contract and ask for damages
d. None of the above

32. D obliged himself to give a specific car to C on December 25, 2006, stipulating
that D is liable even if the thing is lost due to fortuitous event, and without the
need of a demand. On the due date, the car got lost due to fortuitous event.
Which of the following is correct?
a. Obligation remains to subsist, but converted into monetary consideration
b. C can compel D to deliver another car
c. C can require another person to deliver a car, expenses chargeable to D.
d. Obligation is totally extinguished

33. Statement no. 1: The debtor of a thing cannot compel the creditor to receive a
different one, although the latter maybe of the same value or more valuable than
that which is due.
Statement no. 2: In dation of payment, ownership of the thing delivered is
transferred to the creditor; while cession, It merely authorize the creditor to
convert the property into cash and out of the proceeds to extinguish the
obligation partially.
a. Both are true
b. Both are false
c. No.1 is true, no. 2 is false
d. No.1 is false, no.2 is true

34. A is obliged to give B his only car on September 1, 2006. On the said date, A did
not deliver. On September 2, 2006, an earthquake completely destroyed the car.
Is A still liable?
a. No. Considering that no demand to deliver was made by B and the
specific thing was lost due to fortuitous event, the obligation is
extinguished.
b. No. the obligation is extinguished, even if the debtor is already in default
because the debtor can plead impossibility of performance
c. Yes. A is already in legal delay thus the obligation to deliver the lost
specific thing is converted into monetary claim for damages.

d. Yes. The creditor can instead demand for a substitute of equivalent value
from the debtor.

35. A sold his cow to B for 2,500.00. No date was stipulated for the delivery of the
cow. While still in the possession of A, the cow gave birth to a calf.
a. A is entitled to the calf because it was born before his obligation to deliver
the cow arises.
b. A is entitled to the calf as B has not paid the price
c. B is entitled to the calf which was born after the perfection of the contract
d. B, in order to be entitled to the calf, should pay additional cost for the calf
to be agreed upon by both parties.

36. The kind of compensation which may only be raised by the creditor and not by
the debtor in the obligation to give gratuitous support:
a. Judicial compensation
b. Conventional compensation
c. Facultative compensation
d. Legal compensation

37. Statement no. 1: Legal compensation takes place by operation of law even if the
parties may not be aware of it.
Statement no. 2: The indivisibility of an obligation necessarily implies solidarity.
a. Both statement are true
b. Both statement are false
c. Statement no. 1 is true while statement no .2 is false
d. Statement no. 1 is false while statement no. 2 is true

38. Debtor obliged himself to deliver to creditor 100 cavans of rice on 06/01/2001. On
said date, D failed to make delivery despite repeated demands by C. In this case:
a. C has no remedy under the law
b. C can compel D to deliver 100 cavans of rice plus damages
c. C may ask a third person to deliver 100 cavans of rice to him, the value
recoverable from D plus damages
d. None of the above.

39. The kind of compensation which arises by way of proved counterclaim in a case
called:

a.
b.
c.
d.

Legal compensation
Voluntary compensation
Judicial compensation
Facultative compensation

40. Statement no. 1: Payment made to an incapacitated person is good only up to


the extent that he was benefited or up to the amount that he was able to keep.
Statement no. 2: In obligations arising from quasi-contracts, consent of the
parties is not necessary.
a. Both statements are true
b. Both statements are false
c. Statement no. 1 is true while statement no.2 is false
d. Statement no. 1 is false while statement no. 2 is true

41. Solidary debtors A, B and C owes joint creditors X, Y, Z and W 12,000.00. X, T


and Z can collect from A
a. 12,000
b. 6.000
c. 9,000
d. 3,000

42. X, Y and Z solidary bound themselves to pay to solidary creditors A, B and C the
amount of 75,000.00. The loan was secured by a mortgage on Bs land. Out of
gratuity, A, in a public instrument, renounced the obligation in favor of X, with the
formality required by law. In this case, which statement is correct?
a. The principal obligation is extinguished
b. The real estate mortgage is extinguished
c. Both the principal obligation and the mortgage are extinguished by
remission
d. Both the principal and accessory obligations subsist.

43. Which of the following is not an obligation with a period?


a. Payable soonest
b. An obligation payable little by little
c. Will pay you 10,000.00 if I like
d. Payable within 2 years from today
e. All of the above

44. In order that fraud may make a contract voidable


a. It may be serious and the parties must be in pari delicto
b. It may be incidental but both parties should not be in pari delicto
c. It should be serious and should not have been employed by both
contracting parties
d. It may be incidental but should have been employed by both parties

45. Bernie offered Zo a specific parcel of land at a specified price. Bernie gave Zo 60
days within which to accept. Zo agreed.
a. Within 60 days, Bernie cannot withdraw but may increase the price
b. There cant be no withdrawal because the period is binding
c. Bernie may withdraw or increase the price within the 60 day period
d. There can be no withdrawal because there is a perfected option contract

46. I will give you this book provided that if I like to have it back, you will return the
same to me
a. The obligation is void, because the fulfillment depends upon the will of the
debtor
b. The obligation is void, because the fulfillment depends upon the will of the
creditor
c. The obligation is valid, because the condition merely causes the loss of
rights already acquired.
d. Combination of A and B

47. I will give you this book provided that if I like to have it back, you will return the
same to me
a. The obligation is void, because the fulfillment depends upon the will of the
debtor
b. The obligation is void, because the fulfillment depends upon the will of the
creditor.
c. The obligation is valid because the condition merely causes the loss of
rights already acquired
d. Combination of A and B.

48. The following, except one, are requisites of payment as a mode of extinguishing
an ordinary obligation. Which is the exception?
a. Complete or full payment
b. Payment in due course when the obligation is due and demandable
c. Payment using negotiable instrument

d. Payment using legal tender, except if payable in foreign currency.

49. Not ground for damages:


a. Culpa
b. Bad faith
c. Dolo causante
d. Mora

50. Fruits as resulting from spontaneous products of the soil without the intervention
of human labor, as well as animal offspring are:
a. Industrial fruits
b. Civil fruits
c. Natural fruits
d. All of above fruits

CONTRACTS
1. Which of the following can be considered as a feature of a void contract?
a. Subject to ratification
b. They exist
c. Action or defense for nullity is subject to prescription
d. None of them
2. L entered into a contract of lease with X. T, the clerk of L, typed the document.
Due to Ts negligence, the document made was that of sale instead of lease.
a. The remedy is annulment
b. Parties may go to court for interpretation
c. Parties may enforce their right because it is enforceable
d. None of the above
3. These persons are bound by contracts:
a. Contracting Parties
b. Assigns or Assign
c. Heirs
d. All of them
4. Who is liable for the loss of the subject matter by fortuitous event?
a. Creditor
b. Debtor
c. Both creditor and debtor
d. None of them
5. S offers to sell his house to B for P100, 000. B asks him if he would accept P80,
000. Which of the following is correct?
a. Because of ambiguity, both offers are terminated by operation of law.
b. Bs response is a counter- offer effectively terminating the P10, 000 offer and
instigating an offer for P80, 000.
c. Bs response is a more inquiry, the P100, 000 offer by S is still in force.
d. Bs response is a rejection of the P100, 000 offer, and there is no offer for
P80, 000 because it is too indefinite to be an offer.
6. Example No. 1: G, guardian of W, sold Ws house valued at P50, 000 for P37,
500 or a lesion by one-fourth of the value.

Example No. 2: S sold his house valued to P50, 000 for only P10, 000 because S
did not know the true value of the house.
a. Both contracts are rescissible.
b. Only No. 1 is rescissible.
c. No. 2 is voidable because there is an error or mistake.
d. Both contracts are valid and enforceable.
7. B1 Company bought out a competitor, B2 Corporation, with a stipulation that B2
Corporation should not thereafter engage in any business in the Philippines
unless consented to and approved by B1 Company.
a. The stipulation is void because it is contrary to public policy.
b. The stipulation is defective but subject to ratification.
c. The stipulation is valid because the parties are free to enter into any business
in the Philippines unless consented to and approved by B1 Company.
d. The stipulation is unenforceable as there was no showing that the was done
in writing
8. Which of the following contract is not valid?
a. Mutual promise to marry entered into orally
b. Sale of immovable property orally entered into
c. One of parties in a contract is incapable of giving consent
d. None of the above
9. D forced C to lend him P10, 000. The promissory note is in writing.
a. The contract is rescissible because the contract is fraudulent
b. Contract remains to be valid
c. The contract is void
d. C cannot demand payment from D because the contract is unenforceable
10. Example 1 S sold to B in a private instrument his land. Later, B wanted to have
the sale registered, but registration requires a public instrument. In here, B may
compel S to execute the needed public instrument.
Example 2 S sold to B orally his specific land. After B paid S the price of the
sale, he want to registered the land in his name but he needed a public
instrument of sale. In here B may compel S to execute the needed public
instrument.
a. Both examples are also
b. Only 1 is true
c. Only 2 is true
d. Both examples are true
11. In a contract of sale executed by S and B, it appears S sold his motor vehicle to
B and B bought it for P10, 000. It turned out however, S has three motor vehicles.
Gallant valued P80, 000: Hi-Ace van valued P70, 000; and a Jeep valued P60,
000. Which of the following is correct?
a. The contract shall be reformed because there was mistake
b. The parties can ask for interpretation because the word Motor vehicle is
ambiguous.
c. There is no contract.

d. The parties can ask for annulment of the contract


12. An agreement is restraint of trade.
a. Void
b. Perfectly valid
c. Voidable
d. Unenforceable

13. Three of the following are rescissible, which is not?


a. Sale of property under litigation made defendant without the knowledge of
plaintiff and authority of the court.
b. Those made to defraud creditors when the creditors has no other means to
recover his claim
c. Those agreed upon in representation of absentees, if the absentee suffers
lesion by more than of the value of the property subject of the contract.
d. None of the above
14. S and M agreed in print that, debtor for P3, 000 will work as a servant of M
without pay until she could find money with which to pay her debt. Meantime, S
absconded re obligation and failed to comply with her promise. Under this
premise, which of the following statements is correct?
a. The agreement to work as a servant is void because it is immoral
b. To act as a servant without pay is unconstitutional because this is equivalent
to involuntary servitude
c. The obligation to pay is enforceable because this is in accordance with law
d. All of the above
15. Which of the following contracts is not required to appear in a public document?
a. Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property, sales
of real property or of an interest.
b. The cession, repudiation or renunciation of hereditary rights
c. The power to administer property
d. Sale of immovable property
e. None of the above.
16. In order that a stipulation in favor of a third person in a contract would be valid
and binding upon the parties thereto, three of the requisites are mentioned in the
following enumeration. Which among them is not a requisite?
a. There must be a stipulation in favor of a third person.
b. That there must be an existing agency between either of the contracting parties
and the third person.
c. The contracting parties must have clearly and deliberately conferred a favor upon
that third person.
d. The third person communicated his acceptance to the obligor before its
revocation.

17. Statement No. 1: Dolo incidente entitles the person against whom, it was
employed the right to seek the annulment of the contract.
Statement No. 2: A stipulation pour autrui is an exception to the rule on relativity
of contracts.
a. Both are true
c. No. 1 is true; No. 2 is
false
b. Both are false
d. No. 1 is false; No. 2 is
true
18. Example No.1: W, 16 year old, sold his house valued at P1 M for P50, 000 or a
lesion by more than one-fourth of the value of the said house.
Example No. 2: S sold his house valued at P1 M for only P400, 000 because S
did not know the true value thereof.
a. Both examples are unenforceable
b. No. 1 is rescissible; while No. 2 is unenforceable
c. Both contracts are binding
d. No. 2 is unenforceable
19. S owns an oul painting. Being in need of money, S sold the painting to B for P1,
000. After the sale it was discovered that the painting was valuable and worth
P5, 000.
a. B is entitled to the benefit of the contract because it is valid and binding.
b. S may rescind the contract on ground of lesion or inadequency of cause
c. S may rescind the contract on ground of fraud
d. S may annul the contract on the ground the error
20. A, bachelor lawyer, raped W twice. Upon learning this, F the father of W, was
able to force A to marry W under pain of being sued in court and dibarred from
the practice of his law profession. Which statement is correct?
a. There was no defect, the marriage was perfectly valid
b. The marriage may be annulled on the ground of force or violence
c. The marriage may be annulled on the ground of threat of intimidation
d. The defective marriage may, however, be ratified
21. Statement No. 1: If the cause is not stated in the contract it is presumed that it is
unlawful.
Statement No. 2: the action for rescission is subsidiary, it cannot be instituted
except when there is no other legal means to obtain reparation for damages
suffered.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
22. In an invitation to bud, B proposes the following:
I will buy the property for P10, 000 if the bid of any other offerrors or bidders
shall be considered the best terms of amount and conditions, I am to equal that
offer.
a. The offer is speculative, because it cannot be considered as against another
offer which is certain.
b. The offer is considered a counter offer

c. The advertiser is not bound to accept the highest bidder.


d. This is a continuing offer which is very certain
23. In the preceding question, which of the following statements is correct?
a. If there is no more offer made, the contract is perfected on the offer of B
because he will be considered as the highest bidder
b. However, if another bidder, X, bid P15, 000, he will be considered as the
highest bidder and the contract is perfected.
c. In letter (b), if X increase his bid for P20, 000, and no more bid equals his bid,
the contract is perfected for P20, 000
d. Answer not given
24. Reluctantly and against her good sense and judgment, Rosemarie entered into a
contract for the delivery of 5 tables to Corazon for a price of P15, 000. Contract
is:
a. Void
c. Unenforceable
b. Voidable
d. Valid
25. G was appointed guardian of S, the latter being 16 years old. S sold his parcel of
land in writing to B valued at P100, 000 for P75, 000, suffering lesion by pf the
value. What is the status of the contract:
a. Rescissible
c. Enforceable
b. Unenforceable
d. Voidable
26. One of the stipulations contained in the contract between M Company and its
employees is that the company shall pay a bonus to employees of the company
who shall continue its employment for at least 2 consecutive years, unless be
quits or is discharged before the expiration of the period of 2 years. X, an
employee of the company was discharged without just cause, one week before
the completion of the two-year period.
a. X is not entitled to the bonus because his discharge was in accordance with
the contract.
b. X is entitled to the bonus because the debtor company has voluntarily
prevented the happening of the condition.
c. X is not entitled to the bonus, because the employers right to terminate is
superior than the right of the employee to be employed.
d. X is entitled to the bonus whether the discharge is with or without cause.
27. Statement No. 1: if one party was mistaken and the other acted fraudulently or
inequitably in such a way that the instrument does not show their true intention,
the former may ask for the annulment of the instrument.
Statement No. 2: The statement of a false cause in contracts shall render them
void, if it should not be proven that they were founded upon another caused
which is true and lawful.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both are false
d. No. 1 is false; No. 2 is true
28. Must be in writing to be enforceable:
a. Lease of land for 12 months

b. Lease of care for 18 months


c. Both of a and b
d. None of a and b
29. Which of the following is not a requisite for the validity of a contract?
a. Consent
d. Cause or consideration
b. Object
e. None of the above
c. Delivery of the thing
30. D owes C P500. However, Cs right has already prescribed. Notwithstanding the
knowledge of thus fact, D paid the amount. Realizing this mistake, D wants to
recover the amount he paid.
a. D can be made to recover on ground of mistake.
b. D can be made to recover on the ground that his obligation is not legally
enforceable.
c. D can be made to recover because this will enrich C at the expense of D.
d. D cannot recover.
31. Three of the following contracts are void. Which is the exception?
a. Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy.
b. Those which re absolutely stimulated or fictitious.
c. Those where both parties are incapable of giving consent to a contract.
d. Those which cause or object did not exist at the time of the transaction.
32. X, a former government employee, suffered from severe paranoia and was
confined in the mental hospital in 2006. After his release he was placed under the
guardianship of his wife to enable his to get his retirement pay. In 2009, he
became a mining prospector and sold some mining claims. In 2012, he sues to
annul the sale claiming that he was not mentally capacitated at the time of sale.
The sale in question was
a. Illegal
c. Void
b. Valid
d.Voidable
33. Which of the following is presumed not to be legal subrogation?
a. When a creditor pays another creditor who is preferred
b. When a third person, not interested in obligation, pays with the approval of
the debtor
c. When a third person interested in the obligation, pays even without the
approval of the debtor
d. None of them
34. Essential requisites of a contract:
a. Consent
c. Subject
b. Cause
d. All of them
35. Which of the following instruments is not subject to reformation?
a. Simple donations inter vivos wherein no condition is imposed
b. Wills
c. When the real agreement is void
d. All of the above
36. Valid until annulled unless there has been a ratification

a. Rescissible contract
c. Voidable contract
b. Inexistence contract
d. None of the above
37. In three of the following defective contracts, ratification ceases the defects.
Which is the exception?
a. Sale of piece of land thru an agent the authority is oral
b. Sale of immovable property or interest orally entered into
c. Contracts entered into by a person who has been given no authority.
d. Both parties are incapable of giving consent.
38. S makes an offer to B on January 1, 2007. B makes known his acceptance in a
letter sent on January 2, and received by S on January 10. Meantime, on
January 5, S become insane.
a. The contract is voidable because on party is insane
b. The contract is not binding because there is no meeting of minds.
c. There is already a meeting of minds, the contract is perfected.
d. None of the above
39. In the preceding number S is perfectly sane but only an un- emancipated minor
of the time the acceptance is communicated to him.
a. There is no meeting of minds between the parties, unless ratified by the
guardian of S.
b. The contract is not binding because the party is incapacitated
c. The contract is binding between the parties
d. None of the above
40. Which of the following contracts is voidable?
a. Those where one of the parties is incapacitated.
b. Those whose object is outside the commerce of men.
c. Those which are absolutely fictitious.
d. Those which contemplate an impossible service
41. The stipulation in a contract to the effect that the debtor should remain as a
servant in the house and in the service of her creditor so long as she had not
paid her debt is void because it is:
a. Contrary to good custom
b. Contrary to public policy
c. Contrary to law and morality
d. None of the above.
42. X, after the death of his father, sold his inheritance though its amount has not yet
been determined to B, for a consideration of P50, 000.
a. The contract is valid only if the inheritance valued at least equal or more than
p50, 000
b. The contract is rescissible.
c. The contract is valid even though nothing remains of the inheritance to be
turned over to B.
d. Contract is void, future inheritance cannot be the object of sale.
43. X, alleged that Y promised to give X one hectare of land. This is in consideration
Ys meritorious services to Y. Y pleads in defense that since the promise was not
in writing, it is unenforceable under the Statute of Frauds. Decide.

a.
b.
c.
d.

The promise is unenforceable because it is not in writing


The Statute of Frauds is applied because A has rendered services
The Statute of Frauds can apply to partially executed contract.
The Statute of Frauds is inapplicable here, because the promise to give the
land is not a sale of really property.
44. Statement No. 1: In voidable contracts, there is no need to ratify same before
they can be considered valid. In unenforceable contracts, however ratification is
mandatory before they can be considered enforceable.
Statement No. 2: There is undue influence if insidious words or machinations
were employed by a party on the other just to obtain the latters consent, without
which the latter would not have entered into contract.
a. Both are true
c. No. 1 is true; No. 2 is false
b. Both re false
d. No. 1 is false; No. 2 is true
45. Three of the following are void contracts. Which is the exception?
a. Contracts where the cause is immoral
b. Contracts to prevent a known supporter of a political rival from voting for his
candidate for a valuable consideration
c. Contracts with valid consideration but with unlawful motives
d. Absolutely simulated contracts
46. Statute of Frauds is applicable to
a. Contract not to be performed within a year from the making thereof
b. Partially executed contracts
c. Oral contract of loan when the amount involved is less than P500
d. All of the above.
47. Which of the following is correct?
a. An action to enforce judicially a natural obligation prescribes in 4 years
b. An action to declare a contract void is not subject to prescription
c. An action for annulment of contract is imprescriptible
d. An action for rescission of contract prescribes in five (5) years counted from
the execution of the contract.
48. B fraudulently induces S to sell to him (B) a masterpiece painting for P10, 000.
Subsequently, B sold it to X for P12, 000, a good faith purchaser. S is entitled to
a. Rescind the contract with B plus damages
b. Recover the painting from X but no damages
c. Recover damages from B
d. Rescind the contract between B and X
49. Which of the following contracts is not rescissible?
a. Those which are entered into by guardians whenever the wards whom they
represent suffer a lesion of more than of the value of the object of the
contract.
b. Those where one of the parties is incapable of giving consent to a contract.
c. Those executed in representation of an absentee, if the latter suffer a lesion
of more than of the value of the object of the contract.
d. Those undertaken in fraud of 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.
50. When there is concurrence of offer and acceptance, there is
a. Payment
c. Revocation
b. Consent
d. none of the above

PARTNERSHIP

1. Common Property in a universal partnership


a.
b.
c.
d.

All present property and all property that they may acquire thereof
All present property and all profits that they may acquire therewith
All future property
All present property

2. A, B and C are partners of A and Company. They agreed that in case of loss, the
share of A is 50%, B 30%, and C 20%.After three years of total assets of A and
Company is P100,000 as against total liability of P112,000. If D is the only creditor, D
can collect from A,
a.
b.
c.
d.

6,000
12,000
4,000
8,000

3. One or more but less than all the partners have no authority to perform the following
acts, except:
a. Do any act which would make it impossible to carry on the ordinary course of
business
b. Submit a partnership claim or liability to arbitration.
c. Renounce a claim of the partnership
d. Convey partnership property in the ordinary course of business
e. None of the above

4. A, B, and C are partners in ABC Company. D introduced himself as a partner in ABC


Company to X, who in the belief of such introduction, extended a P60,000 credit to ABC
Company. These facts are known by A, who did not oppose. Who shall be liable to X?
a. Since X extended the credit tot the partnership, a partnership liability exists, thus,
partners A, B, C and D are liable.
b. Only A, who knows the transactions and D, are partners by estoppel and liable
pro-rata to X.
c. D who represented himself as partner in ABC Company is liable.
d. A and C who benefited in the P60,000 credit shall be liable to X.
5. Which of the following contracts of partnership may not appear in a public
instrument?
a.
b.
c.
d.

Limited partnership
Partnership where immovable are contributed
Partnership having a capital of 3,000 or more
None of the above

6. The following persons are disqualified to form a universal partnership. Who are the
exception?
a.
b.
c.
d.

Brother and sister


Husband and wife
Those guilty of adultery and concubinage
Those guilty of the same criminal offense, if the partnership is entered into the
consideration of the same

7. May be required additional contribution in case of imminent loss:


a.
b.
c.
d.

Capitalist partner
Limited partner
Industrial partner
None of the above

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


limited partners, with the following contributions:
1. A contribute a specific parcel of land
2. B to contribute P10,000, the first P5,000 upon formation, and the last P5,000, 10
days after formation.
3. C contributed a specific car as was stated in the articles of partnership, when in
fact it was not contributed.
If the partnership was dispossessed of the land contributed by A after delivery to the
partnership by the real owner, the effect will be:
a. A is considered a debtor of the partnership
b. A is considered a trustee of the land for and in behalf of the partnership

c. The partnership will be dissolved


d. A is to answer for warranty against eviction
9. In the preceding number, if B did not deliver the last P5,000 to the partnership, the
effect will be:
a. B holds a trustee for in behalf of the partnership the P5,000
b. B is considered a debtor of the partnership of P5,000 plus interest without the
need of a demand
c. B may be expelled from the firm plus the damages incurred
d. B is considered a debtor of the firm for P5,000 plus interest after a demand is
made
10. A, B and C are partners where C as a capitalist partner is engaged in the same
business in which the partnership is engaged in. In this situation,
a. the partnership may oust C from the partnership and at the same time avail of
Cs profit in her separate business
b. the partnership may oust C from the partnership
c. the partnership may avail of Cs profits in her separate business
d. the partnership has nothing to do with C since it is her right to engage in any
business
11. Antonio is an industrial partner. Besides his service, he also contributed capital in
the partnership. There is no agreement or stipulation regarding profit or losses. His
share on the partnership profit is:
a.
b.
c.
d.

Depends upon the agreement of the other partners


Pro-rata in his interest
Such share that is just and equitable
Combination of B and C

12. Unless otherwise provided in a general partnership agreement, which of the


following statements is correct when a partner dies?
The deceased partners

The deceased

The partnership

executor would

partners estate

automatically become

would be free from dissolved automatically

a partner

any partnership
liability

a.
b.
c.
d.

Yes
Yes
No
No

Yes
No
Yes
No

would be

Yes
No
No
Yes

13. A, B and C wish to go into the business together to bottle mineral water. Each
contributed P50,000 but C wanted to limit his liability to the extent of his contribution,

and his name to appear in the partnership name. Which form of partnership as business
organization should they choose?
a.
b.
c.
d.

General partnership
Limited partnership
No partnership organization is available
Limited

14. A, B and C, capitalist partners, each contributed P30,000, P20,000and P10,000,


respectively; and D, the industrial partner contributed his services. Suppose X, a
customer, is the creditor of the firm to the amount of P180,000. How can X recover the
P180,000?
a. X must sue the firm and get P60,000 from all the partners including D, 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 partners 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 a
loss.
15. A partnership is dissolved:
a. In contravention of the partnership agreement by the express will of any partner
at any time.
b. By any event which makes it unlawful for the business of the partnership to be
carried on or for the members to carry it on in the partnership.
c. When a specific thing which a partner had promised to contribute to the
partnership perishes before its delivery to the partnership
d. By the loss of the thing, whether before or after its delivery to the partnership,
when the partner who contributed it having reserved the ownership thereof, has
only transferred to the partnership the use or enjoyment of the same.
e. All of the above.
16. X, Y and Z are in partnership business. X contributed P10,000, Y contributed
P5,000, and Z his services only. After payment of partnership debts, what remains of the
partnership assets is P6,000 only. In the absence of terms to the contrary, the share of Z
will be equal to:
a.
b.
c.
d.

That of X
2,000
That of Y
Nothing

17. When the manner of management has not been agreed upon, who shall manage
the affairs of the partnership?
a. Capitalist partners

b.
c.
d.
e.

Industrial partners
Capitalist-Industrialist partners
All of the partners
None of the above

18. As a general rule, a partner cannot ask for a formal accounting of the affairs of the
partnership during its existence and before it is dissolved, except:
a.
b.
c.
d.
e.

When he is wrongfully excluded from the partnership business


When the right exists under the terms of any agreement
As provided by the Article 1807
Whenever other circumstances render it just and reasonable
All of the above

19. Sometimes termed as a dormant partner:


a.
b.
c.
d.

Limited partner
Capitalist partner
Secret partner
None of the above

20. Every contract of partnership having a capital of P3,000 or more in money or


property shall appear in public instrument which must be recorded in the Securities and
Exchange Commission. Failure to comply with said requirements
a. will not affect the liability of the partnership and the members thereof to third
persons
b. will render the partnership void
c. will not give the partnership a legal personality
d. will give the partnership a de facto existence
21. A partner in a limited partnership cannot contribute
a.
b.
c.
d.
e.

Cash
Property
Services
Partly cash and partly property
None of the above

22. Statement No. 1: Every partner is responsible to the partnership for damages
suffered by it through his fault, and he may compensate them with the profits and
benefits which he may have earned for the partnership by his industry of work.
Statement No. 2: When an unlawful partnership is dissolved by a judicial decree, the
profits, but not the partners contributions, shall be confiscated in favor of the state.
a.
b.
c.
d.

Both are true


Both are false
1 is true, 2 is false
1 is false, 2 is true

23. Statement No. 1: If property has been promised by a partner as contribution to the
partnership, the fruit arising from the time the property should have been delivered,
should also be given without need of a demand.
Statement No. 2: The partner who has been appointed manager in the Articles of
Partnership may execute al acts of administration despite the opposition of his partners,
unless he should act in bad faith and his power is irrevocable without just or lawful
cause.
a.
b.
c.
d.

Both are true


Both are false
1 is true, 2 is false
1 is false, 2 is true

24. A, B and C formed a general partnership with a gross capital of P90,000. They
agree that the profit and loss sharing is: A-50%, B-25%, and C-25%. Upon dissolution
and after exhausting partnership capital, X has still collectible amount of P30,000 from
the firm. How much can X collect from C alone?
a.
b.
c.
d.

7,500
15,000
30,000
10,000

25. In the preceding question, supposing there is no profit or loss sharing, and A
contributed P24,000, B-P21,000 and C-P15,000. How much is the obligation of C to X?
a.
b.
c.
d.

7,500
15,000
30,000
10,000

26. C, a partner in C partnership, assigns his interest in Y partnership to X, who is


not made a partner. After assignment, X assert the right to
1. Participate in the management of Y partnership
2. Cs share in the surplus profit
3. May compel the other partners that he(X) becomes a partner
X is correct as to which of these rights?
a.
b.
c.
d.

1 and 3
3 only
2 only
2 and 3

27. A and B are partners engaged in the real estate business, A learned that C was
interested in buying a certain parcel of land owned by the partnership, even for a higher
price. Without informing B, A was able to make B sell to him (A) his (Bs) share in the
partnership. Then A sold the land at a higher profit.
a. A is liable to B for the latters share in the profit.

b. C is liable to B for the latters share in the profit.


c. The partnership is dissolved when A become the sole owner.
d. The sale of the land to C is void is void since it was without the knowledge of B.
28. Which of the following may be a cause for involuntary dissolution?
a.
b.
c.
d.

Express will of any partner


Insolvency of any partner
Termination of the term
Expulsion of any partner

29. The remedy of capitalist partners against an industrial partner who engaged in a
business for himself without the expressed permission from the partnership is:
a.
b.
c.
d.

To compel the industrial partner to sell his interest to the said capitalist partners.
To exclude him from the sharing in the profits in the partnership.
To remove him as manager if he is appointed as manager of the partnership.
To expel him from the partnership and claim for damages.

30. Management of a partnership is usually conferred upon the


a.
b.
c.
d.

Manager
President
Partners
None of the above

31. Which of the following is not an element of a partnership?


a. There must be a valid contract.
b. There must be a mutual contribution of money, property or industry to a common
fund.
c. There must be an intent to engage in a lawful business, trade or profession.
d. None of the above.
32. A substituted limited partner is:
a.
b.
c.
d.

a person is admitted as a partner by the other partners


a buyer of right of the deceased partner
an assignee admitted to all the rights of a limited partner
all of the above

33. A partnership having for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation is called:
a.
b.
c.
d.
e.

Partnership by estoppel
Particular partnership
Universal partnership of al present property
Universal partnership of profits
None of the above

34. Which of the following is false?

a. An industrial partner cannot, without the consent of all the other partners, engage
in a business similar to the business of the partnership.
b. As to liability to third persons, an industrial partner is considered as a general
partner.
c. An agreement among the partners that the managing partner shall determine the
share of all partners in the profit is void.
d. All partners including industrial ones can be compelled to give additional
contribution if the purpose is to save the business from certain loss.
35. A, B and C are partners. Their contributions are as follows: A, P60,000; B, P40,000;
and C, services. The partners agreed to divide profits and losses in the following
proportions: A, 35%, B, 25%, and C, 40%. If there is a profit of P10,000, how should the
said profit be distributed among the partners?
a.
b.
c.
d.
e.

A, P6,000; B, P4,000; C, Nothing


A, P3,000; B, P2,000; C, P5,000
A, P3,500; B, P2,500; C, P4,000
A, P3,500; B, P3,500; C, P3,000
None of the above

36. A partnership is dissolved on the death of a:


a.
b.
c.
d.
e.

General partner
Industrial partner
General-Limited partner
Limited partner
None of the above

37. In case of imminent loss of the business of a partnership, the following partners are
required to give additional contribution, except:
a.
b.
c.
d.
e.

Capitalist partner
General partner
Capitalist-Industrialist partner
Industrial partner
None of the above

38. Coverage of Statute of Frauds in a partnership contract, which is the exemption?


a. Promise to answer for the debt, default or miscarriage of another by a
partnership must be in writing
b. If the agreement to reform a partnership shall be performed within a year the
same must be in writing
c. Contracts for the sale of real property or any interest therein or leasing of
partnership immovable property for more than one year must be in writing
d. Sale of partnership personal property at a price not less than P500 must be in
writing, unless there is delivery or payment
39. Which of the following contracts of partnership will not affect its validity even if not in
a public instrument?

a.
b.
c.
d.
e.

Limited partnership
Partnership where immovables are contributed
Partnership having a capital of P3,000 or more
None of the above
All of the above

40. A partner whose connection with the partnership is open and pubic, such as by
including his name in the firm name of the partnership is called:
a.
b.
c.
d.
e.

Nominal partner
Ostensible partner
Secret partner
Dormant partner
None of the above

41. Which of the following statements is correct regarding the division of profits in a
general partnership when the written partnership agreement only provides that losses
be divided equally among the partners?
a.
b.
c.
d.

Based on the partners ratio of contribution to the partnership


based on the partners participation in day to day management
Equally among the partners
Profits will be divided according to the managing partner

42. Which of the following statements is incorrect?


a. An industrial partner who engaged in business for himself may be excluded from
the partnership plus damages.
b. An industrial partner may not engage in business for himself without the consent
of his co-partners.
c. A capitalist partner may engage in the same line of business in which the
partnership is engaged
d. An offending capitalist partner may not be excluded from the partnership.
43. Statement No. 1: The arrival of the term of the partnership with a fixed term or a
period shall not dissolve the partnership of the partners continue with the business of
the partnership but such a partnership may be terminated anytime dependent in the will
of the continuing partners.
Statement No. 2: The general rule is that the loss of the specific thing contributed to the
partnership dissolves the partnership when only the use of the thing is contributed by
the partner and such thing after its subsequently lost, the partnership is not dissolved.
Which is correct?
a.
b.
c.
d.

Both statements are false


Both statements are true
1 is true, 2 is false
1 is false, 2 is true

44. Which of the following statement is correct concerning liability when a partner in a
general partnership commits a tort while engaged in partnership business?
a.
b.
c.
d.

The partnership committing the tort is the only partly liable


The partnership is the only partly liable
The partners are jointly and severally liable
None of the above

45. A limited partner shall not become liable as a general partner unless:
a.
b.
c.
d.
e.

He takes part in the control of the business


He contributes his services to the capital of the firm
His surname appears in the partnership name
The word limited is not added to the partnership
All of the Above

46. A partner whose connection is concealed and has no voice nor say in the
management of the affairs of the partnership is called:
a.
b.
c.
d.
e.

Nominal partner
Secret partner
Silent partner
Dormant partner
None of the above

47. Three of the following are rights of a partner. Which one is not?
a.
b.
c.
d.

Right to associate another person to his share.


Right to admit another partner
Right to inspect and copy partnership books
Right to ask dissolution of the firm at the proper time.

48. A partnership
a. is created by mere agreement of the partners.
b. has a juridical personality separate and distinct from that of each of the partners.
c. may be constituted in any form, except, except where immovable property or real
rights are contributed thereto, in which case a public instrument shall be
necessary.
d. is dissolved by the death of a partner.
e. All of the above.
49. Three of the following do not prove the existence of a valid partnership. Which is the
exception?
a. The sharing of gross receipts
b. There is the intention of dividing the profits among themselves
c. Receipts by a person of a share of the profits for the payment of a partnership
debt by installments
d. When two or more partners are co-owners and they share correspondingly in the
profits made from the sale or use of their property.

50. Can only be made with the consent of all partners:


a.
b.
c.
d.

Waiver or compromise
Sell equipment
Borrow money
None of the above

CORPORATION
1. Which of the following cannot be lawfully exercised by a non-stock corporation?
a.
Pay dividend
b.
Elect trustees
c.
Amend the Articles of Incorporation
d.
Adopt by-laws
2. A bond issue to pay-off prior floating indebtedness of the corporation issuing it is
called
a.
Convertible bond
b.
Equipment bond
c.
Collateral bond
d.
Funding bond
e.
None of the above
3. A bond secured by stocks or other bonds or both which are owned by the debtor,
the securities being deposited with a trustee for the bondholder is called:
a.
Mortgage bond
b.
Collateral trust bond
c.
Equipment bond
d.
Debenture bond
e.
None of the above
4. Involuntary dissolution of the corporation is caused by
a.
an expiration of the period for which it was lawfully formed.
b.
judicial decree of forfeiture or by order of the SEC.
c.
legislative enactment.
d.
failure to organize formally and commence the transaction of its
business within two years from the date of incorporation.
e.
All of the above.
5. To revoke the power granted to the board to make the by-laws.
a.
Majority vote of the board and of the outstanding capital stock of the
members
b.
2/3 of the outstanding capital stock of the members.

c.

Majority of the quorum of the board and 2/3 of the outstanding capital
stock of the members.
d.
Majority of the outstanding capital stock or of the members.
6. A corporate officer or director cannot take advantage their personal benefit in
business opportunity which the corporation is financially able to undertake.
a.
Doctrine of corporate fiction
b.
Trust fund doctrine
c.
Doctrine of corporate opportunity
d.
Doctrine of limited capacity
e.
None of the above
7. One of the following does not require stockholders approval.
a.
Merger or consolidation
b.
Change of corporate name
c.
Investment of corporate funds for a purpose outside of the main
purpose of the corporation
d.
Declaration of cash dividend
8. The required minimum authorized capital stock for stock corporation is:
a.
Not less than P5,000
b.
25% must be subscribed and 25% must be paid
c.
At least 25% must be subscribed and at least 25% must be paid and in
no case shall it be less than P5,000
d.
None
9. Which of the following must be contained in a corporations Articles of
Incorporation?
a.
Names of stockholders
b.
Name of temporary treasurer
c.
Provisions for issuance of par and no par value shares
d.
Quorum voting requirement
10. Shares deposited by the seller or his agent with a bank or third party to be
delivered to the buyer or subscriber only upon the fulfillment of the stipulated
suspensive condition
a.
Promotion shares
b.
Founders shares
c.
Redeemable shares
d.
Escrow shares
11. A corporation cannot be an incorporator in the Philippines because only natural
persons may become incorporators, except
a.
Cooperative as incorporator of rural bank
b.
Eleemosynary corporations
c.
Charitable organizations incorporated under the Philippines laws
d.
Corporation sole
12. Every decision of the directors or trustees shall be valid as a corporate act at
which there is quorum by
a.
Majority of all members of the board
b.
Majority of the directors or trustees present

c.
2/3 vote of the members of the board
d.
2/3 vote of the directors or trustees present
13. The following are expressed powers of a corporation, except:
a.
To sue and be sued
b.
The power of succession
c.
To adopt and use a corporate seal
d.
To amend its Corporate Charter
e.
None of the above
14. The right of pre-emption shall not apply:
a.
When such profit is denied in the corporate charter
b.
To share to be issued in compliance with the laws requiring stock
offering or minimum stock ownership by the public
c.
To share to be issued in good faith with the approval of the
stockholders owning 2/3 of the outstanding capital stock in exchange
for property needed for corporate purpose of a previously contracted
debt
d.
All of the above
e.
None of the above
15. Ultra vires act
a.
Acts which are beyond the powers expressly or impliedly conferred
upon the corporation
b.
Unenforceable
c.
May be ratified by the stockholders
d.
May not be attacked by competitors in business
e.
All of the above
16. The difference of a proxy and a voting trust agreement is
a.
Proxy is required to be notarized
b.
Voting trust agreement is not required to be notarized
c.
Presence of the stockholder in the meeting where the proxy is given
automatically cancels the proxy
d.
Voting trust must only be written
17. A, B, C, D and E organized a corporation. An article of incorporation was
prepared, signed and acknowledge before a notary public and filed with the SEC.
The corresponding certificate of incorporation was issued. It turned out, however,
that A, B and C are not residing in the Philippines. What is the status of the
corporation?
a.
b.
c.
d.
e.

De jure corporation
De facto corporation
Corporation by estoppel
Corporation by prescription
None of the above

18. The SEC may reject the article of incorporation or disapproved any amendments
thereto if

a. It is not substantially in accordance with the form prescribed by law


b. The purpose or purposes of the corporation patently unconstitutional,
illegal or immoral
c. The treasurers affidavit concerning in the amount of capital stock
subscribed and/or paid is false
d. The required percentage of ownership of the capital stock to be owned
by the citizen of the Philippines has not been complied with
e. All of the above
19. Incorporators
a. Any number of natural persons not less than 5 but more than 15
b. Majority are residents of the Philippines
c. Must own or be subscriber to at least 1 share of the capital stock of the
stock corporation to be formed
d. Need not be citizen of the Philippines
e. All of the above.
20. Director or trustees who willfully and knowingly vote for or assent to patently
unlawfully act of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary interest
in conflict with their duty shall be liable
a.
b.
c.
d.

As a trustee for the corporation


Criminally for violation of the corporation code
Jointly and severally liable for the damages suffered by the corporation
None of the above

21. Which of the following is(are) valid consideration for the purchase of stocks of a
corporation
I.
II.
III.
a.
b.
c.
d.

Real estate
A negotiable promissory note in money
Monetary consideration for services to be performed
I only
II only
Both I and III
Both II and III

22. Suppose X Corporation has an authorized capital stock of 100,000 divided into
1000 shares of stock with par value of 100 each Subscribers:
A 100 shares and paid 8,000
B 160 shares and paid 100
C 250 shares and paid 4,000
D 50 shares and paid 5,000
E 200 shares and paid 600

Which of the following subscription will qualify the Pre-subscription requirement


of Incorporation.
a. Combination of A and E
b. Combination of C and D
c. Combination of A and B
d. All of the above
23. Which of the following must be contained in a Corporations Articles of
Incorporation?
a.
b.
c.
d.

Names of stockholders
Name of the temporary treasurer
Provisions for issuance of par and no par value shares
Quorum voting requirement

24. X company is a stock corporation composed of the Reyes family engaged in the
real estate business. Because of the regional crisis, the stockholders decided to
convert their stock corporation into a charitable non-stock and non-profit association
by amending the articles of incorporation.
Could this be legally done?
Would your answer be the same if at the inception. X company is a nonstock corporation to a stock corporation? Why?
Answers:
A. Yes, by amending the articles of incorporation. Be it noted that the
stock coporation is not distributing assets to the stockholders.
B. No, because in a non-stock corporation the members are not entitled
to share in the profit.
a.
b.
c.
d.

Letter A is false; letter B is true


Both answer are false
Letter A is true; letter B is false
Both answers are true

25. Suppose that X Corporation has already issued the 1000 originally authorized
shares of the corporation so that its board of directors and stockholders wish to
increase Xs authorized capital stock. After complying with the requirements of the
law on increase of capital stock, X issued an additional 1000 shares of the same
value. S presently holds 200 shares out of the original 1000 shares. Which of the
following statement is true?
a. S must be offered equivalent 200 shares under his pre-emptive right
of stated in the articles of incorporation

b. Such preemptive right shall only be given if it is stated in the by-laws of


the corporation.
c. The increased in share must be offered first to the stock-holders of
record under the doctrine of first refusal. If they refuse it will be
offered to the general public.
d. If ever there is a preemptive right, the same must be exercised within a
reasonable time as fixed by the board of directors if the articles and the
by-laws are silent.
26. Plaintiffs filed a collection action against X Corporation. Upon execution of the
courts decision, X Corporation was found to be without assets. Thereafter plaintiffs
filed an action against its present and past stockholder including Y Corporation
which owned substantially all of the stocks of X corporation. The two corporations
have the same board directors and Y corporation financed the operations of X
corporation. May Y corporation be held liable for the debts of X corporation?
a. Yes, under the principle of corporate opportunity of interlocking
directors.
b. Yes, under the principle of trust fund doctrine
c. No, under the doctrine of separate entity
d. Yes, under the principle of piercing the veil of corporate entity.
27. Which of the following is a disadvantage of forming a corporation?
a. The existence of the entity is not affected by the personal vicissitudes
or of the individual stockholders;
b. Free and ready transferability or ownership of shares
c. Subservience of minority stockholders to the wishes of the majority
subject only to equitable restraints
d. The shareholders are not liable for the debts of the business.
28. In the matter if managing the business if the corporation, the exercise if
corporate power and handling of corporate properties, this is supreme:
a.
b.
c.
d.

2/3 approval of the stockholders of the corporation


Majority vote of the outstanding capital stockholders of the corporation
Majority vote of the Board of Directors
The president of the corporation

29.To adopt by-laws


a. Majority of the outstanding capital stock or of the members
b. Majority vote of the board and of the outstanding capital stock or of the
members
c. 2/3 of the outstanding stock or of the members

d. Majority vote of the board and 2/3 of the outstanding capital stock or of
the members.
30. In no case shall the total yearly compensation of directors exceeds.
a.
b.
c.
d.

5% of the net income before income tax during the preceding year
10% of the net income before income tax during the preceding year
10% of the net income after income tax during the preceding year
10% if the net income before income tax during the current year

31. Statement no. 1: Directors can attend and vote by proxy at board meetings.
Statement no. 2: The articles of incorporation may expressly provide that
redeemable shares by a corporation may be purchased upon the expiration of a
fixed period, regardless of the existence of unrestricted retained earnings in the
books of the corporation.
a. Both are true
b. Both are false
c. No. 1 is true; No. 2 is false
d. No. 1 is false; No. 2 is true
32. Three of the following statement are true; which is the exception?
a. Redemption of redeemable stock is required even if the corporation at
that time has no unrestricted earnings
b. The requirement that at least 25% of authorized capital must be
subscribed applies only to non-stock corporation
c. Directors are entitled to compensation as a matter of rights
d. Derivatives suits can be filed only by dissenting stockholders.
33. Shall constitute a quorum for the transaction of corporate business
a. 2/3 of the number of directors or trustee
b. Majority of the directors or trustees present
c. Majority of the number of directors or trustee as fixed in the articles of
incorporation
d. of the number of directors or trustee
34. To issue stock dividends
a.
b.
c.
d.

Majority vote of the board and 2/3 of the outstanding capital stock
2/3 of the outstanding capital stock
Majority of the outstanding capital stock
Majority of the quorum of the board and 2/3 of the outstanding capital
stock.

35. An action brought by a stockholder against the corporation for direct violation of
his contractual rights

a.
b.
c.
d.

Representative suit
Individual suit
Derivative suit
Corporate suit

36. To enter into management contracts, as a rule


a. Majority of the quorum of the board and majority of the outstanding
capital stock or of the members of both the managing and managed
corporations
b. Majority of the quorum of the board and 2/3 of the outstanding capital
stock of the managed corporation
c. Majority vote of the board and majority of the outstanding capital stock
or of the members
d. 2/3 of the outstanding capital stock or of the members.
37. Statement no. 1: The corporate powers of a corporation shall be exercised by
the stockholders.
Statement no. 2: The entire consideration received by the corporation for its nopar value shares shall be treated as capital and shall not be available for
distribution as dividends.
a. Both are true
b. Both are false
c. No. 1 is true; No. 2 is false
d. No. 1 is false; No. 2 is true
38. The stockholders or members mentioned in the articles of incorporation
originally forming and composing the corporation and who are signatories thereof
are called
a.
b.
c.
d.
e.

Incorporators
Promoters
Corporators
Subscribers
None of the above

39. Unless the by-laws provide otherwise, written notice of regular meetings shall be
sent to all stockholders or record
a.
b.
c.
d.

At least one day prior to the meeting


At least two days prior to the meeting
At least one week prior to the meeting
At least two weeks prior to the meeting

40. Which of the following is true


a. Delinquent stock can be voted

b. Unpaid stock is necessary delinquent


c. Delinquent stock cannot be sold at public auction
d. Unpaid stocks are entitled to payment of cash dividend
41. A corporation is a citizen of
a.
b.
c.
d.
e.

The state of the country where its principal office is situated


The state country where its principal business is situated
The state or country where it is incorporated
The state or country of its controlling stockholders
All of the above

42. Statement no. 1: the liability of the stockholders for the payment of corporate
debts is limited to the value of the shares.
Statement no. 2: the entire consideration received by the corporation for its nopar value share shall be treated as capital and shall not be available for
distribution as dividends.
a. Both are true
b. Both are false
c. No. 1is true; No. 2 is false
d. No. 1 is false; No. 2 is true
43. Stocks which has been issued by a corporation as fully paid up when in fact it is
not, because it has been issued as bonus or otherwise, without any consideration at
all, or for less than par, or for property, labor or services at an overvaluation.
a.
b.
c.
d.
e.

Watered stocks
Over issued stocks
Treasury stocks
Redeemable stocks
None of the above

44. Which of the following qualifications is necessary in order that one may be
elected secretary of the corporation?
a.
b.
c.
d.
e.

He must be a citizen and a resident of the Philippines


He must be a director of the corporation
He must be a stockholders of the corporation
He must be a secretary of any other corporation
All of the above

45. Three of the following are similarities between a partnership and corporation.
Which is not?
a. The individuals composing both have little voice in the conduct of the
business

b. Both have juridical personality separate and distinct form that 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
46. The right given to stockholder to dissent and demand payment of the fair value
of their shares is called
a.
b.
c.
d.
e.

Right of proxy
Appraisal right
Pre-emptive right
Stock right
None of the above

47. All of the close corporations issued shares shall be held of record by bot more
than
a.
b.
c.
d.

10 persons
15 persons
20 persons
None of the above

48. A bond which is payable to a particular individual whose name is entered on the
books of the corporation as the registered owner is called
a.
b.
c.
d.
e.

Registered bond
Coupon bond
Convertible bond
Guaranteed bond
None of the above

49. The authorized capital stock of a proposed corporation is 100,000 dividend 1,000
shares with a par value of 100 each. At least 25,000 or 250 shares was subscribed
by 25 subscribers. To meet the minimum amount of subscription that must be paid
a. It is enough that 25% of the total subscription is paid, regardless of the
amount paid by each individual subscription
b. Each and every subscriber must always pay 250 which is 25% of their
individual subscription
c. Seven of the subscribers paid 6,250 and the rest of the subscribers
d. None of the above
50. The owners of share in stock corporation are called
a.
b.
c.
d.

Incorporators
Promoters
Members
Stockholders

e. None of the above