SUCCEED REVIEW CENTER

BUSINESS LAW
Final Pre board Examination
1.

A issued a Bill of exchange in favor of B or order for P100, 000. B endorsed it to C and C endorsed it to D. D endorsed it
to E. E endorsed it to F. F then endorsed it to G. G then endorsed it to H the holder. When H presented it to the drawee,
he dishonored the instrument, hence protest was sent to all endorsers. Z, a third party person and a friend of F, then
offered to pay H but surprisingly H refused. As a result of such refusal, which of the following is correct?
a. The note is discharged
b. H has lost his right to collect for all endorsers except A, the maker
c. F and G are discharged
d. H has lost his right to collect from B, C, D and E
2. One of the following statements is false.
a. Limited partner cannot be an industrial partner
b. A managing partner is always a general partner.
c. Persons not allowed to donate to each other cannot from General Partnerships.
d. As a liability to creditors of the partnership an industrial partner is considered a general partner.
3. Manuel bought the Nokia 7650 of Jess for P15, 000 by giving 50% earnest money although delivery of the cell phone
would be after 3 days later. Before delivery however the cell phone was lost due to flood brought by storm.
a. Manuel can recover the P7, 500 he paid to Jess
b. Manuel may ask for another cell phone at no additional cost because Jess is liable.
c. Obligation of Jess to deliver is extinguished by the force majeure event and Manuel cannot recover the amount
paid.
d. The contract of sale should be rescinded.
4. One of the following is not a ground for the suspension or revocation of the Certificate of Inc. by the SEC under
Involuntary dissolution:
a. Refusal to obey lawful SEC orders
b. Failure to adopt by laws.
c. Continuous in-operation or inactivity for 5 yrs after it has organized and commenced business transactions for
one year.
d. Failure to organize and commence business operation with in 2 yrs. from incorporation.
5. In one of the following cases, appraisal right is not available
a. In case of merger or consolidation
b. In case of increase or decrease of corporate term
c. Corporate acts changing the rights of stockholders.
d. Investment of corporate funds to another corporation within its primary purpose
6. One is mode of dissolving partnership that requires decree of court
a. Death of partner
b. When a specific thing promised by a partner is lost before delivery
c. Business can only be carried on at a loss
d. Accomplishment of the purpose
7. P negotiates a P10, 000 negotiable promissory note to A. a changes the amount from P10, 000 to P100, 000 and
transfer it to B. The alteration is poorly done because the changes made were obvious. In this case B can collect from
the maker
a. P100, 000 because that is the tenor of the instrument
b. P10, 000 that is the original tenor
c. P90, 000 the difference between the P100, 000 and P10, 000
d. Nothing even if he is a holder for value
8. X, Y and Z formed a general partnership decided to contribute P200, 000 each. The partnership has started its
operations although X was able to contribute only P140, 000. They also agreed that X and Y be exempted from losses.
Upon dissolution there was an outstanding obligation to Mr. A in the amount of P720, 000.A exhausted the capital of
P540, 000, leaving a P180, 000 balance. Which statement based on the foregoing is true?
a. The share of X is nothing based on the agreement
b. The share of X is 1/3 of P180, 000 or P60, 000 being a general partner.
c. Z will have to absorb the whole P180, 000 per agreement minus Xs share of P60, 000
d. X is liable for P60, 000 to the partnership and P40, 000 to Mr. A
9. In the preceding question, if X is a limited partner in their partnership named Z and Co., which is correct?
a. X has no share in the balance being a limited partner
b. X will only have to pay his unpaid contribution of P60, 000
c. Z will have to absorb the whole P180, 000 per agreement minus Xs share of P60, 000
d. X is liable for P60, 000 to the partnership and P40, 000 to Mr. A
10. Which is the most defective contract among the following?
a. A & B, both minors entered into a contract of sale involving chocolate worth P400
b. Contract of partnership wherein a car worth P1M is contributed but not reduced in a public instrument
c. A contract of sale wherein one party sold to the other his hereditary rights under the pain of being raped.
d. A compromise between Senator Lacson and Pres. P-Noy to hide the evidence against Jose Pidal to achieve
peace and reconciliation for the country
11. Unless otherwise provided in a general partnership, which of the following is correct when a partner dies?
Deceased partners
administration would
His estate would be free
The partnership is
automatically become
from any liabilities
automatically dissolved
partner
a. Yes
Yes
Yes
b. Yes
No
No
c. No
Yes
No
d. No
No
Yes
12. One of the following is negotiable:

13.

14.

15.

16.

17.

18.
19.

20.
21.

22.

23.

24.

25.

26.

27.

a. Pay to the order of A P100T. (Sgd. C)

b. Pay to A or bearer on December 30, 2005 (To: X; Sgd: Y)
c. I promised to pay A or possessor P100T out of my salary from CPAR. (Sgd. B)
d. Pay to order of A P100T for legal services rendered. (To: B; Sgd. C)
Which is correct about BOD member?
a. He is entitled to compensation as a matter of right
b. He must be a citizen of the Philippines
c. He is disqualified to be one if convicted of the crime of rape before
d. He can be removed by votes representing 2/3 of the outstanding capital stocks in all cases
A issued a promissory note payable to B or bearer. A delivered note to B. B indorsed the note to C. C placed
the note in his drawer, which was stolen by the janitor X. X indorsed the note to D by forging Cs signature. D
indorsed the note to E who in turn delivered the note to F, a holder in due course, without endorsement. Which of the
following statement is false?
a. A is liable to F despite the forgery committed because F is a holder in due course.
b. B is liable to F because as an indorse he warrants that the instrument is genuine.
c. C cannot set up forgery because the instrument is payable to bearer negotiable only by delivery, the forged
signature of X is not necessary
d. Forgery here is a real defense for A, B & C
There are 15 members of the board two died and one resigned. By laws did not provide the quorum. At least how many
votes are required to declare cash dividends?
a. 9
c. 5
b. 7
d. 3
First Statement: A stock corporation cannot be converted into a non-stock corporation without dissolving the former
Second Statement: A limited partnership can be concerted to a general partnership by amending its Certificate or
Articles of Partnership.
a. True; True
c. True; False
b. False; False
d. False; True
Which statement is correct?
a. Principle on quasi contracts do not apply in negotiable instrument
b. Warranty against encumbrance is an accidental element
c. Minority is a real defense
d. Sale or return, is a sale subject to suspensive condition
In the following cases, even non voting shares can vote except:
a. a. In Increase of Capital Stock
c. Elections of BODS
b. Amendment of by laws
d. merger of consolidation
The following cannot be acted upon by the Executive Committee except one:
a. Increase of capital stocks
b. Approval of an act requiring BODS approval
c. Declaration of cash or stock dividends
d. Amendments of Articles of Incorporation
All of the following corporation cannot be close corporations except:
a. Trading companies
c. Insurance Companies
b. Banks
d. Educational institutions
The following are correct about non-stock corporations except:
a. No cumulative voting as rule
b. No dividend distribution to its members
c. No transferability of shares in all cases
d. If for ecclesiastical purposes, they are normally tax exempt
One of them is incorrect about obligations
a. In facultative obligation only one presentation is due
b. In alternative obligation all presentations are due
c. In obligation with a penal clause, damages can no longer be imposed in all conditions
d. There is no delay in negative obligation.
A, B and C jointly and severally borrowed P15, 000 from X. To secure its payment, A pledge his ring, B his TV set, and
C his refrigerator. Based on this information, which of the following statements is correct:
a. The debtors are solidarily bound and the pledge on the three things is indivisible
b. The debtors are jointly bound, but the pledge on the three things are solidarily
c. The debtors are jointly bound and the pledge on the three things in indivisible
d. The debtors are liable individually and the character of the three things pledge is indivisible
All are incorrect about contracts except one
a. Voidable contracts are also called validable contracts
b. Stipulation pour autrui is an exception to mutuality of contracts
c. Fraud in inducement is a ground to nullify a contract
d. Void contracts are unenforceable but not vice versa
First Statement: In real estate mortgage, registration in the registry of property is necessary for validity of the contract
Second Statement: Pledge is a real contract whereas Chattel mortgage is a consensual contract.
a. True; True
c. True; False
b. False; False
d. False; True
When an instrument is endorsed pay to John Doe and signed M, which of the following statement is (are) correct?
a. The instrument is not negotiable because the payee is non- existing person
b. The instrument can be further negotiated
c. The instrument becomes payable to order
d. The instrument is considered discharged
First Statement: Corporate officers are elected by the majority of the members of the BODs in a quorom.
Second Statement: A wholly executory ultra vires act can be enforced if consented by all stockholders
a. True; True
c. True; False
b. False; False
d. False; True

28. A person is entitled to adequate compensation only for such pecuniary loss suffered by him as he duly proved, except
as provided by law or by stipulation. Such payment is referred to as:
a. Nominal damages
c. Liquidates damages
b. Compensatory damages
d. Monetary damages
29. Statement 1: A contract whose cause or object did not exist at the time of the transaction is a defective contract, which
cannot be remedied by providing a cause or object as the case may be in contract.
Statement 2: The nullity of the accessory obligation of the penal clause does not carry with it the nullity of the principal
obligation which remains in force and demandable. Determine whether
a.
b.
c.
d.
Statement 1
True
False
False
True
Statement 2
False
False
True
True
30. Mr. Ong issues a check drawn against BPI- Recto to the order of Mr. Ocampo. Without Ong and Ocampos negligence.
A stole the check and forged the signature of Ocampo and deposited it in his name in Metrobank- Espaa. The check
was cleared after Metrobank endorsed it to BPI.
a. Ong shall bear the loss
b. Ocampo shall bear the loss
c. Metrobank shall bear the loss as the collecting bank which accepted and endorsed the forged check
d. BPI- Recto shall bear the loss as the drawee
31. One of the following corporate acts requires a majority of the Board and the vote or written assent of the stockholders
representing at least 2/3 of the Outstanding Capital Stock.
a. Declaration of the stock dividend
c. The power to extend corporate life
b. Amendment of the Articles of Incorporation
d. The power to sell corporate property
32. Which of the following is true?
a. If check is not dated it is not negotiable
b. A bill of exchange is considered promissory note of the drawee after accepting if the drawer and payee are the
same person.
c. One receiving negotiable promissory note payable to order by delivery is called an assignee.
d. Instrument is payable to John Doe (Juan Dela Cruz) or order is an instrument payable to order.
33. B bought from S a specific car for P500, 000 payable in 5 equal monthly installments. There was a chattel mortgage
executed between S and B. First and second installments were paid but the third and fourth month installment he failed
to pay. S foreclosed the mortgage property and was sold at public auction at the price of P200, 000 leaving a balance of
P100, 000. Which of the following statement is correct?
a. S may recover from B the balance of P100, 000
b. The foreclosure proceeding is void
c. S cannot recover from B the balance anymore because he estopped by the provision of Recto Law.
d. The only right of S is to cancel the sale
34. All of the following are incorrect about endorsement except:
a. A maker cannot be holder in due course, when the instrument is endorsed to him
b. A qualified endorser is absolutely not liable to pay even if the instrument is dishonored.
c. A negotiable instrument may be endorsed back to a prior party but it will discharge the instrument
d. When the holder strikes out an endorsement, all prior parties including the person whose signature was struck
out are discharged.
35. Only one of the following statement is false:
a. A derivative suit is always a minority SHs suit
b. The rule that no dividends can be declared without unrestricted retained earnings is not absolute
c. Pre-emptive right maybe denied by the corporation
d. A stockholder declared delinquent loses all his right except to receive FMV of his shares
36. M issued to P, accommodated party, a negotiable promissory note for P10, 000. P endorsed it to A, A to B, B to C.
Which of the following is incorrect?
a. M can collect from P, if M will pay C
b. Between M and P, M is secondarily liable while P is principally liable
c. P may directly pay C
d. P is not liable to C because he is only an accommodated party
37. Which of the following is (are) valid consideration for the purchase of stocks of a corporation?
I.
Real estate
II.
A negotiable promissory note
III.
Monetary consideration for services performed
a. I only
c. Both I and III
b. I and II only
d. Both II and III
38. V signed a blank check he inadvertently left in his desk at his office. P later stole the same, filled in the amount of P50,
000 and a fictitious name as payee. P then endorsed the check in the payee name and passed the check to A;
thereafter, A passed to B; then B to C, and C to D. What is the right of D?
a. D can enforce the instrument against any one of the prior parties except V.
b. D cannot enforce instrument against any one of the prior parties because the instrument is not a valid
instrument and therefore, not negotiable
c. D can enforce instrument against V even if D is not holder in due course because the signature of V is genuine.
d. D can enforce the instrument against V only if D is a holder in due course
39. First Statement: Under the Corporation Code, an executive committee as a little board has no power to fill up vacancy
in the Board of Directors.
Second Statement: Cash dividends can be payable to holders of delinquent stock.
a. True; True
c. True; False
b. False; False
d. False; True
40. Identify the following endorsement:
For deposit only without recourse: Signed by P
a. Restrictive endorsement
b. Qualified endorsement
c. Blank, Qualified, and Restrictive endorsement
d. Restrictive and Qualified endorsement