PARTNERHIP AND CORPORATION LAW

Judge Maximo B. Ancheta Jr.

1. A corporation is being organized with an authorized capital stock of P50, 000. How much thereof
should be subscribed and how much be actually paid?
Amount subscribed Amount paid
Amount subscribed
Amount paid
(a)
P10, 000
P2, 500
(c) P25, 000
P6, 250
(b)
P12, 500
P5, 000
(d) P12, 500
P3, 125
2. Suppose X Corporation has an authorized capital stock of P100, 000 divided into 1, 000 shares of
stock with par value of P100 each.
The following are the subscribers:
A-100 shares and paid P8, 000
D- 50 shares and paid P5, 000
B- 160, 000 shares and paid P 100
E- 200 shares and paid P 600
C 250 shares and paid P4, 000
Which of the following subscription will qualify the Pre-subscription requirement of incorporation?
(a) Combination A and E
(c) combination of A and B
(b) Combination of C and D
(d) all of the above
3. A was one of the directors of x Corporation. B obtained a judgment against A and had all of Az
shares of stock in X Corporation. A meeting was held and both A and B appeared in said meeting,
each claiming the right to participate in deliberation of the board. A contented that he had the right to
take the latters place in the board. Under the rule of directorship, which of the following is false?
(a) both A and B are disqualified to sit as directors in the board of directors.
(b) B can qualify because a corporation, as well as the heirs of stockholders of same corporation has got
a right of succession.
(c) B cannot also qualify if he claims succession to A. He must have to be elected by the stockholders.
The position is personal and does not allow substitution.
(d) B cannot qualify as he disposed all his shares. The requirement is that director must continuously
have at least one share in the corporation.
4. The required minimum authorized capital stock for a stock corporation is:
(a) not less than P5,000
(b) 25% must be subscribed and at least 25% must be paid.
(c) at least 25% must be subscribed and at least 25% must be paid and in no case shall be less than
P5,000
(d) none
5. which of the following condition will allow corporate formation and allow securities and exchange
registration ?
Authorized capital
Subscribed capital
Paid- up capital
(a) P200, 000
P 50, 000
P 9, 500
(b) 100,000
419, 000
12, 000
(c) 60,000
15, 000
6, 000
(d) 50, 000
12, 000
5, 000
6. Which of the following statement is correct regarding corporate officers of a stock corporation?
(a) Stockholders always have the right to elect corporate officers.
(b) an officer may not simultaneously serve as director
(c ) Corporate Secretary may or may not be a stockholders of the same corporation.
(d) An officer of the corporation is required to own at least one (1) share of the corporations stock
7. Statement 1- Foreign corporations transacting business in the Philippines without license may not sue
nor be sued in our courts.

Statement 2 - Holders of subscribed shares not fully paid which are not delinquent shall have all the
rights of a stockholders.
(a) both statement are true
(c) statement 1 is true: statement 2 is false
(b) both statement are false
(d) statement 1 is false: statement 2 is true
8. Plaintiffs filed a collection against X Corporation. Upon execution of the courts decision. X Corporation
was found without to be without assets. Thereafter, plaintiffs filed an action against its present and past
stockholders, including Y Corporation. The two corporations have the same board of 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 doctrine of Corporate Opportunity of interlocking Directors
(b) no, under the doctrine of separate entity of stockholders with the corporation.
(c) yes, under the principle of Piercing the Veil of Corporate Identity
(d) yes, under the principle of Trust Fund Doctrine.

9. which of the following is/are valid consideration for the purchase of stocks corporation?
1.
real estate
2.
a negotiable promissory note in money
3.
Monetary consideration for services to be performed
(a) 1 only
(b) 2 only
(c) both 1 and 3
(d) both 2 and 3
10. Statement 1- the entire consideration received by the corporation for its no-par value shares shall be
treated as capital and shall not be available for distribution as dividends.
Statement 2- the corporate powers of the powers of the corporation shall be exercised by the
stockholders.
(a) both statements are true
(c) statement 1 is true: statement 2 is false
(b) both statements are false
(d) statement 1 is false: statement 2 is true
11. The articles of Incorporation is required to state the name, nationalities and residence of person who
shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified.
This requirement is intended to provide a basis by which the SEC could determine whether the Articles of
Incorporation has complied with the requirement thata. At least majority of the directors or trustees are citizen of the Philippines
b. At least majority of the directors or trustees are resident of the Philippines
c. 2/3 of the directors or trustees are resident of the Philippines .
d. 2/3 of the directors or trustees are citizen of the Philippines .
12. Which of the following is disadvantage of forming a corporation?
a. The shareholders are not liable for the debts of the business
b. Free and ready transferability or ownership of shares.
c. The existence of the entity is not affected by personal vicissitudes of the individual stockholders.
d. Subservience of minority stockholders to the wishes of the majority subject only to equitable restraints.
13. In which of the following corporate acts/powers, as exercised by the Board of Directors, is the consent
of, ratification or approval by the outstanding stockholders of the corporation necessary?
a. The power to change the par value of shares of the corporation
b. The power to invest corporate funds in another corporation where the primary purpose of the two (both)
corporation are similar or related to each other.
c. The power to declare cash dividends only.
d. The power to re-acquire the corporation share

14. Statement 1-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.
Statement 2- Directors can attend and vote by proxy at a board meeting
a. both statements is true
c. statement 1 is true: statement 2 is false
b. both statements is false
d. statement 1 is false: statement 2 is true
15. May organized as a close corporation a. mining companies
c. both of a and b
b. Oil companies
d. none of a and b
16. Three of the following statements are not true. Which is the exception?
a. Directors are entitled to compensation as a matter of right
b. Derivative suits can be filed only by dissenting stockholders.
c. Redemption of redeemable stock is required even if the corporation at the time has no unrestricted
earnings.
d. The requirements that at least 25% of authorized capital must be subscribed apply only to non stock.
17. Statement 1- No par value shares shall be issued without being fully paid since there is no par value
for the share.
Statement 2-Management of a corporation may be delegated to an executive committee, composed of
not less than 3 members of the Board to be appointed by board provided the creation of such executive
committee is provided for in By laws.
a. both statements are true
c. statement 1 is true; statement 2 is false
b. both statements are false
d. statement 1 is false: statement 2 is true
18. To enter into management contracts, as rule:
a. majority of the quorum of the board and 2/3 of the outstanding capital stock of the managed corporation
b. majority vote of the board and majority of the outstanding capital stock or the members of the managed
corporation.
c. 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.
d. 2/3 of both the board and of the outstanding capital stock or of the members of both the managed and
managing corporations.
19. Can issue no-par value shares a. banks
c. both a and b
b. trust companies
d. none of the a and b
20. The holders of non- voting shares shall be entitled to vote on the following matters, except
a. adoption and amendments of By laws
b. Election and removal of directors
c. Merger or consolidation
d. Investment of corporate funds in another corporation or another business.
21. J is one of the directors of Delightful Corporation. Later, she sold all her shares to K. subsequently, a
meeting of the board of directors was held and both J and K attended the meeting, each claiming the right
to participate in the deliberation of the board. J contended that she has the right to continue as directors
until the stockholders could elect her successor. On the other hand, K argued that after having purchased
all of Js shares she has the right to take the latters place in the board. Which of the following is not
correct?
a. K can qualify because as a stockholder, as well as the heirs and assign of a stockholder of the same
corporation she has the right of succession.
b. Both J and K are disqualified to sit as directors in the Board of Directors
c. J can not qualify as she disposed all her shares.

d. K can not qualify as must have to be elected by the shareholders.

22. Statement 2- themembers of the board of directors may fix the number of its members to constitute a
quorum. And every decision of at least a majority of the directors constituting the quorum shall be valid as
a corporate act.
Statement 1- The president of a corporation may or may not be a director.
a. both statements are true
c. statement 1 is true; statement 2 is false
b. both statements are false
d. statement 1 is false; statement 2 is true
23. A is the registered owner of Stock Certificate NO. 000011. He entrusted the possession of said
certificate to his best friend B who borrowed the said certificate to support Bs application for passport.
B sold the shares to X, who bought it in good faith and for value. Can A claim the shares of stocks
from X.
Answer a - No because the certificate of stock were already endorsed by the owner, therefore the
ownership is transferred to a purchaser for value. The principle of estoppels will apply.
Answer b- yes, because B merely borrowed the said certificate to support B s application for passport,
hence it was not endorsed for value.
a. both answer are false
c. only answer a is true
b. both answer are true
d. only answer b is true
24. in 2009, Corporation A passed a board resolution removing X from his position as manager of said
corporation, the BY-laws of A Corporation provides that the officer are the President. General- Manager.
Treasurer and Secretary. Upon complaint filed with the SEC, it held that the general manager could be
removed by mere resolution of the Board of Directors (MBD). On motion for reconsideration, X alleged
that he can only be removed by affirmative vote of stockholders representing 2/3 of the outstanding
capital stock (OCS). Is Xs contention legally tenable?
a. No, the vote required is majority of the MBD and 2/3 OCS consenting
b. No, the required vote is MBD and consented by majority of the OCS.
c. No, the voting requirement is only majority of the MBD.
d. Yes, the voting requirement is only 2/3 of the OCS.
25. Which of the following statement is false?
a. stock dividend cannot be issued to a person who is not stockholder in payment of the service renderd.
b. A stipulation that no stockholder shall transfer any transfer any share to any other person without
notifying the corporate secretary in writing is valid.
c. An ultra vires act of a corporation can be ratified with the consent of the majority of all stockholders
when the rights of the state or of the creditors are not involved.
d. A stipulation that the corporation shall have the right to acquire for itself, under the same condition, the
shares intended to be transferred is valid under the doctrine of first refusal
26. suppose that X Corporation has already issued the 1,000 authorized shares of the corporation so that
its Board of Directors and Stockholders wish to increase X Corporations authorized capital stock. After
complying with the requirements of the law on increase of capital stock, X Corporation issued additional 1,
000 shares. Which of the following statements is true?
a.
S must be offered equivalent 200 shares under his preemptive right if 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.
If ever there is 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.
d.
The increase in share must be offered first to the stockholder of record under the doctrine of first
refusal. If they refuse, it will be offered to the general public.
27. a class of stock which, after the stipulated dividend has been paid in the common stock as well as on the
preferred stock, any surplus is to be paid upon all without distinction is-

a. convertible stock
c. preferred stock as to asset
b. participating preferred stock
d. cumulative preferred stock
28. Is the By-law provision of Corporation rendering ineligible or if elected shall be subject to removal, a
director if he is also a director in a corporation whose business is in competition with or is antagonistic to
said corporationvalid and legal?
a.
Yes, under the principle of Vested Interest
b.
Yes, under the principle of Corporate Opportunity
c.
No, under the principle of Separate entity
d.
Yes, provided it is approved by 2/3 of the OCS.
29. Cash dividend as distinguished from stock dividend
a. does not involve any disbursement
c. it is still part of the corporate asset
b. it is declared only by the board of directors
d. it increase legal capital
30. Statement 1 the articles of Incorporation or by-laws may not limit or completely deny the right to vote
of any class member in a corporation.
Statement2-subscriber for stock shall be liable to the corporation for interest from the date of subscription,
but only if so required in the By-laws.
a.
Both statements are true
b.
Both statements are false
c.
Statement 1 is true; statement 2 is false
d.
Statement 1 is false; statement 2 is true
31. The difference between a proxy and voting trust agreement is a. Proxy is required to be notarized
b. voting trust agreement is not required to be notarized
c. voting trust agreement must only be written
d. presence of the stockholder in the meeting where the proxy is given automatically cancels the proxy.
32. two (2) or more kinds of dividends paid by the corporation is called
a. cash stock dividend
c. Property cash Dividend
b. Composite Dividend
d. Script Dividend
33. Statement 1- there is merger when two or more corporations unite giving rise to a new corporate body
and dissolving the constituent corporation.
Statement2- there is consolidation when two or more corporation unite, one corporation loses its
corporate existence absorbing in itself the other which disappears as a separate corporation
A. Both statements are true
C. Statement 1 is true; statement 2 is false
B. Both statements are false
d. Statement 1 is false; statement 2 is true
34. A form of combination where all the constituent corporations are dissolve and out of them a new one
is formed
a. consolidation.
B. joint venture
c. merger
d. syndication
35. A written promise to pay the money loaned to the corporation but ordinarily it has no specific fund or
property as security for the payment is calleda. Mortgage bond
b. Equipment bond c. Collateral trust bond
d. Debenture bond
36. the asset of the corporation as represented by its capital stock are to be maintained unimpaired that
there can be no distribution of such asset among the stockholders without provision being first made for
the payment of corporate debts.
a. Doctrine of corporate fiction
c. Doctrine of Corporate Opportunity
b. Trust Fund doctrine
d. Doctrine of limited capacity
37. Statement 1- in case of extension of corporate term, and not if shortened, may any dissenting
stockholder exercise his appraisal right.

Statement 2- no dividend shall be issued without the approval of stockholders representing not less than
2/3 of the outstanding capital stock.
a.
Both statement are true
c. statement 1 is true: statement 2 is false
b.
Both statement is false
d. statement 1 is false: statement 2 is true
38. A, B, C, D and E are directors of corporation. Two (2) days before the meeting if the Board, where, by
unanimous vote, a resolution declaring a 50% stock dividend was passed, A, B, and C sold and transferred
all their shares. The transfers were duly registered in the books of the corporation immediately after the sale.
Is the dividend declaration legal?
a. yes A,B and C are still qualified to sit as member of the board in hold-over capacity until their
successors shall have been elected and qualified.
b. yes, the unanimous vote, means all the directors approved the resolution
c. no, A, B and C were no longer qualified to sit as directors at the time the resolution was passed.
d. no. if the other members of the board were not informed of the transfer made
39. Amount equal to the aggregate par value or issued value of the outstanding capital stock
a. legal capital
c. outstanding capital stock
b. unissued capital stock
d. authorized capital stock
40. To remove directors or trustees
a. majority of the quorum of the board and 2/3 of the outstanding capital stock
b. 2/3 of the outstanding capital stock or of the members entitled to vote
c. majority of the outstanding capital stock or of the members entitled to vote
d. majority vote of the board of directors or trustees and 2/3 of the outstanding capital stock
41. Statement 1-treasury shares shall have no voting rights as long as such stock remains in the treasury.
Statement 2- shares of stock shall not be issued in exchange for performed services.
a.
Both statement are true
c. statement 1 is true: statement 2 is false
b.
Both statement is false
d. statement 1 is false; statement 2 is true
42. a distribution by a corporation to its existing stockholders, of shares of stock held by it in another
corporation is considered as:
a. stock dividend
c. sale of treasury shares
b. Property dividend
d. sale of capital assets

Law on Sales, Agency and Credit Transactions

Judge Maximo B. Ancheta Jr.

INSTRUCTIONS: Write TRUE if the statement is correct. Write FALSE if the statement is wrong.
Strictly no erasures!
1. _____ A relative simulated contract is voidable.
2. _____ An absolute simulated contract is void.
3. _____ Grossly inadequate price nullifies a contract of sale.
4. _____ Sale is void if price cannot be determined .
5. _____ Policitation is a unilateral promise to sell only.
6. _____ Option money applies to a perfected sale.
7. _____ Oral sale of real property is void.
8. _____ Recto Law refers to sale of real property by installment.
9. _____ Maceda Law refers to sale of personal property by installment.
10. _____ Buyer pays the expenses for execution and registration of sale.

11. _____ Fruits shall pertain to buyer from perfection of contract.

12. _____ Buyer cannot be compelled to accept partial deliveries.
13. _____ Seller cannot be compelled to accept partial payment.
14. _____ Pacto de retro sale is an absolute sale.
15. _____ Pledge is a real contract.
16. _____ Symbolic delivery is sufficient in pledge.
17. _____ Real property may be valid objects of pledge.
18. _____ Incorporeal rights may also be valid objects of pledge.
19. _____ Pledge is void if immovables are offered.
20. _____ The pledgee cannot appropriate the object pledged for himself.
21. _____ Possession of the pledged object is transferred to pledgee.
22. _____ Pledgee can keep object until principal obligation is fully paid.
23. _____ Pledgor must be the absolute owner of thing pledged.
24. _____ Ownership of object pledged is retained by pledgor.
25. _____ Third person not a party to the contract may pledge his property.
26. _____ Contract of pledge must be in writing, otherwise it is void.
27. _____ The pledgee cannot deposit thing pledged with third person.
28. _____ The pledged object may be delivered to third person.
29. _____ Deficiency is recoverable in contract of pledge.
30. _____ The pledge is valid against third person even if orally made.
31. _____ Pledgee cannot use the thing pledged.
32. _____ Pledgee may use the thing pledged.
33. _____ In mortgage, object is only immovable.
34. _____ In real mortgage, real property is never delivered to creditor.
35. _____ Deficiency of debt is not recoverable from debtor.
36. _____ Mortgagee can appropriate for himself the property.
37. _____ Chattel mortgage may secure future debt..
38. _____ Real mortgage cannot secure future debt.
39. _____ Real mortgage must be accompanied with affidavit of good faith.
40. _____ Mortgagee not entitled to fruits of mortgaged property.
41. _____ Mortgagee pays taxes on property.
42. _____ Antichresis must be in writing, otherwise void.
43. _____ In antichresis, property is not delivered to creditor.
44. _____ In antichresis, debtor pays taxes deductible from sale of fruits.
45. _____ Mortgagor must be the absolute owner of thing mortgaged.
46. _____ Owner of mortgaged property can sell it to third person.
47. _____ In antichresis, creditor is entitled to fruits of real property.
48. _____ Chattel mortgage is formal contract since registration essential.
49. _____ In chattel mortgage, delivery of the propety is required.
50. _____ In chattel mortgage, debtor cant sell thing without written consent of creditor.
51. _____ In chattel mortgage, creditor can recover deficiency judgment from debtor.
52. _____ In chattel mortgage, object is only movable or personal property .
53. _____ The contract of chattel mortgage must be in writing.
54. _____ The contract of lease may be of things, or of work and service.
55. _____ In lease, object may be movables or immovables.
56. _____ Consummable goods cannot be the subject matter of lease.
57. _____ Deposit is a consensual contract.
58. _____ Immovable things can be the object of deposit.
59. _____ Safekeeping may be the principal purpose of deposit.
60. _____ Depositor must be the owner of thing deposited.
61. _____ Deposit may be entered into only in writing.
62. _____ Depositor transfers ownership of thing deposited.
63. _____ In agency, the principal may be natural or juridical person.
64. _____ Agent represents a capacitated person.
65. _____ Agent cannot be removed by principal.
66. _____ Agent can only perform acts of management.

67. _____ Agent cannot perform acts of ownership.

68. _____ Agent may perform acts of ownership.
69. _____ Principal may revoke the agency at will.
70. _____ Seller can still sell to another the thing already sold.
71. _____ Property already pledge can still be pledged to another.
72. _____ All kinds of properties may be pledged.
73. _____ If the principal obligation is valid, the mortgage is also valid.
74. _____ If the principal obligation is void, the mortgaged is also void.
75. _____ Owner of mortgaged property cannot alienate the property.
76. _____ Property already mortgaged cannot be mortgaged to another person.
77. _____ Delivery of property is mandatory in mortgage.
78. _____ Pledgor need not be the debtor.
79. _____ Mortgagor need not be the borrower.
80. _____ Guarantors obligation may be more than the principal obligation.
81. _____ Guaranty must be in writing to be enforceable.
82. _____ Guarantor can be compelled to pay should the principal debtor fails to pay.
83. _____ Surety is entitled to benefit of exhaustion of principal debtors property.
84. _____ In commodatum, the object is either movable or immovable.
85. _____ Commodatum and mutuum are real contracts.
86. _____ In commodatum, bailor transfers ownership of thing loaned.
87. _____ In commodatum, bailor must be owner of thing loaned.
88. _____ In commodatum, bailee bears risk of loss of thing loaned.
89. _____ In mutuum, bailor bears risk of loss of thing loaned.
90. _____ In mutuum, ownership of thing loaned transfers to bailee.
91. _____ Mutuum may be gratuitous or onerous.
92. _____ Commodatum refers to personal property.
93. _____ Subject matter of mutuum maybe a personal property.
94. _____ Consummable goods may be the object of commodatum.
95. _____ Immovable is always the object of commodatum.
96. _____ Bailor in commodatum must be the owner of the thing loaned.
97. _____ Bailor in mutuum need not be the owner of the thing loaned.
98. _____ Bailee cannot retain the thing loaned in commodatum.
99. _____ There may be no obligation to return the thing loaned in commodatum.
100._____ Contract of deposit may be a gratuitous contract.
101._____ There is obligation to return the thing deposited in a contract of deposit.
102._____ Deposit is voluntary when it is made in compliance with legal obligation.
103._____ Contract of deposit maybe perfected by mere consent.
104._____ Contract of deposit must be entered into in writing.
105._____ Depositary may deposit the thing with third person.
106._____ Depositary may make use of the thing deposited.
107._____ Depositary can demand depositor prove his ownership of thing deposited.
108._____ Person binds himself jointly with the principal debtor in surety contract.
109._____ Guarantor may bind himself for more than the principal debtors obligation
110._____ Guaranty may be presumed.
111._____ Guarantor can be compelled to pay the creditor.
112._____ Guarantor of a guarantor cannot use the benefit of excussion.
113._____ Existence of mortgage negates the benefit of excussion.
114._____ Action against the guarantor is personal.
115._____ Commodatum is essentially gratuitous, whereas mutuum may be gratuitous.
116._____ Contract of loan and contract of lease are real contract.
117._____ Object of commodatum is non-consummable or non-fungible thing.
118._____ Guarantors liability is subsidiary/original, while suretys liability is primary
/ collateral.
119._____ Thing deposited may be demanded at will by depositor in irregular deposit.
120._____ Qualifications of guarantor must only be present at the time of perfection of contract.
--- END ---

NEGOTIABLE INSTRUMENTS LAW

Judge Maximo B. Ancheta Jr.
Multiple Choice: Encircle the letter of the correct answer. Strictly no erasures!
1. An accomodation party 11. Qualified indorsement a. Is regarded as a surety
a. Constitutes indorsee as indorsers agent
b. May be primarily liable
b. Is indorsement without recourse
c. Is primarily liable
c. Both (a) and (b) are true
d. All of the above
d. Both (a) and (b) are false
e. Both (a) and (c) are true
e. (a) is true, (b) is false
f. None of the above
f. (a) is false, (b) is true
2.
a.
b.
c.
d.
e.
f.

Negotiation Constitutes transferee as holder

Always requires delivery
Always requires indorsement
All of the above
Both (a) and (b) are true
None of the above

3.
a.
b.
c.
d.
e.
f.

Indorsement Is always written on the instrument

May be done by rubber stamp
Is mandatory
(a) is true, (b) is false
(a) and (b) are true
(a) is false, (b) is true

4.
a.
b.
c.
d.

Blank indorsement Convertible to special indorsement

May be done by any indorser
May be done on a bearer instrument
All of the above

12. Transfer without indorsement a. Transfer transferors title to transferee

b. Constitutes transferee as mere assignee
c. Both (a) and (b) are true
d. (a) is true, (b) is false
e. (a) is false, (b) is true
f. None of the above
13.
a.
b.
c.
d.
e.
f.

Qualified Indorser Cannot raise the defense of forgery

Cannot raise holders title is void
Warrants drawer as capacitated
All of the above
(a) and (b) are true, ( c ) is false
(a) and (c) are false, (b) is true
14. General Indorser a. Warrants solvency of prior party
b. Warrants he has good title to it
c. (a) is true, (b) is false
d. (a) is false, (b) is true

e. Both (a) and (b) are true

f. None of the above
5.
a.
b.
c.
d.
e.
f.

Maker Can invoke personal defense

Can invoke real defense
Cannot invoke payee is insane
All of the above
Both (a) and (b) are true
Both (b) and ( c) are false

6.
a.
b.
c.
d.
e.

Drawer Is not liable at first instance

Admits existence of indorser
May negate his liability
Both (a) and (b) are true
Both (a) and ( c) are true

7.
a.
b.
c.
d.
e.
f.

Acceptor Admits the existence of indorser

Admits the existence of payee
Admits the existence of drawer
All of the above
Both (b) and ( c) are true
Both (a) and (b) are false

8.
a.
b.
c.
d.
e.
f.

Irregular Indorser Is not really a party to instrument

May place his signature after delivery
Is similar to accommodation party
All of the above
None of the above
Both (a) and (c ) are true

9.
a.
b.
c.
d.
e.
f.

Presentment for Payment Is not necessary to charge maker

Must be made before or after maturity
Instrument must be exhibited to drawee
All of the above
None of the above
Both (a) and ( c) are true

10. When signature is forged a. It is wholly inoperative

b. It transfers no title
c. Acceptor is still liable
d. All of the above
e. None of the above
f. (a) and (c ) are true
a.
b.
c.

e.
f.
15.
a.
b.
c.
d.
e.
f.
16.
a.
b.
c.
d.
e.

Both (a) and (b) are true

Both (a) and (b) are false
Negotiable Instrument Is revocable before delivery
Conclusively presumed issued for value
Both (a) and (b) are true
Both (a) and (b) are false
All of the above
None of the above
Bearer Is always in possession of instrument
Is a named payee or indorsee
May or may not be the holder
All of the above
(a) and (b) are true, ( c) is false

17.
a.
b.
c.
d.
e.
f.
18.
a.
b.
c.
d.
e.
f.

Delivery Is either physical or constructive

Presupposes negotiation
Presupposes indorsement
All of the above
None of the above
Both (b) and (c ) are true

Payable to Order Is drawn payable to specified person

May be payable to holder of an office
May be payable to maker or drawer
All of the above
None of the above
Both (b) and (c ) are true

19. Immediate Party

a. Refers to proximity
b. Knows of the defect of title
c. May be an indorser
d. All of the above
e. None of the above
f. Both (b) and (c ) are true
20.
a.
b.
c.
d.
e.
f.

Real defense Attaches to the instrument

Includes fraud in factum
Includes forged signature
All of the above
None of the above
Both (a) and (c ) are true

21. Certification of a check 31. In instrument payable to order, the holder Makes the bank as acceptor
a. Is the possessor of the instrument
May be made by the indorser
b. May be the payee or indorsee
Made by the payee discharges the drawer c. Is the bearer thereof

d.
e.
f.

All of the above

None of the above
Both (b) and (c ) are true

d.

All of the above

e. None of the above
f. Both (a) and ( c) are true

22. Drawee Bank 32. Acceptance of a bill of exchange may be made

a.
Should verify drawers signature
a. Before bill has been signed by drawer
b.
Bears loss if pays forged check
b. While the bill is still incomplete
c.
Guarantees genuineness of payees signature c. When the bill is overdue
d.
All of the above
d. All of the above
e.
None of the above
e. None of the above
f.
Both (a) and (b ) are true
f. Both (a) and (b) are true

a.
b.
c.
d.
e.
f.

23. Crossed Check 33. Instrument payable to bearer is negotiated by Is intended for immediate encashment
a. Proper indorsement plus delivery only
Is intended for deposit
b. Proper indorsement only
Is not to be paid except thru specified bank c. Mere assignment
All of the above
d. All of the above
Both (b) and (c ) are true
e. None of the above
Both (a) and (b) are true
f. Both (a) and (b) are true

a.
b.
c.
d.
e.
f.

24. Refusal to certify a check Is equivalent to dishonor

Makes drawer liable to holder
None of the above
All of the above
Both (a) and (b) are true
(a) is true, (b) is false

a.
b.
c.
d.
e.
f.

a.
b.
c.
d.
e.
f.

34.
a.
b.
c.
d.
e.
f.

I promise to pay to the order of Darna P1.00

Payable to payee so named
Payable to bearer thereof
Is non-negotiable
Payable to maker himself
All of the above
None of the above

25. Drawee bank may refuse to pay check if 35. B / E payable after sight is payable on Check is postdated
a. Date of instrument
Bank receives notice of drawers death b. Date of issue
Stop payment order is issued by drawer c. Date of last indorsement
All of the above
d. Date of first indorsement
None of the above
e. All of the above
Both (a) and (b) are true
f. None of the above
26. Drawee Bank Cannot be compelled to accept check
a.
Has no contractual relationship with payee b.
Is primarily liable upon certification of check c.
All of the above
d.
None of the above
e.
Both (a) and (c ) are true
f.
27.
a.
b.
c.

Foreign Bill Drawn and payable outside Phils.

Drawn in Phils. but payable abroad
Drawn abroad but payable in Phils.

36. Pay to C for collection only Is conditional indorsement

Is special indorsement
Restrictive indorsement No. 3
Qualified indorsement
General indorsement
None of the above

37. When indorsement is undated a. Instrument is non-negotiable

b. Indorsement is overdue
c. Indorsement is dated before maturity

d.
e.
f.

a.
b.
c.
d.
e.
f.

All of the above

None of the above
Drawn and payable in Phils.

d. All of the above

e. None of the above
f. Both (a) and (c ) are true

28. Holder may treat B/E as P/N at his option - 38. Date of undated B/E is based on When drawee and drawer are same person
a. Date of issue
When drawer is incapacitated to contract
b. Date of last indorsement
When drawee is incapacitated to contract
c. Date of first presentment for
acceptance
All of the above
d. Date of first indorsement
None of the above
e. All of the above
Both (a) and (b) are true
f. None of the above
29. Acceptance to pay by acceptor may be made 39.
a.
b.
c.
d.
e.
f.

Drawer need not receive notice of

dishonour
a. When drawer and drawee are the same
b. When drawee is fictitious person
c. When drawer countermanded payment
d. All of the above
e. None of the above
f. Both (a ) and (b) are true

On separate paper
On the face of bill itself
Before bill is drawn
All of the above
None of the above
Both (a) and (c ) are true

30. Undated instrument is considered

dated at time of its a. First indorsement
b. Issue
c. Acceptance
d. Last indorsement
e. All of the above
f. None of the above

40.

B/E addressed to 2 addressees in

alternative is
a. Negotiable
b. Invalid Instrument
c. Joint drawees
d. All of the above
e. None of the above
f. Both (a) and (b) are true
PART II:

MATCHING TYPE

Strictly no erasures!

SET A
1.
2.
3.
4.
5.
6.

____ General Acceptance

____ Qualified Acceptance
____ Bill of exchange
____ Presentment for acceptance
____ Foreign bill
e.
____ General indorser

SET B
a. Accepted, payable only at PNB
b. Check drawn by a bank to another bank
c. Estopped to deny drawers signature
d. Necessary to charge drawer
Need not be drawn against a deposit
f. Notice to debtor is required

7. ____ Restrictive indorsement

8. ____ Acceptance for honor
9. ____ Stale check
10. ____ Travelers check
11. ____ Certified check
12. ____ Crossed check
13. ____ Bank draft
14. ____ Payment for honor
15. ____ Accommodation party
16. ____ Presentment for payment
17. ____ Irregular indorser
18. ____ Payment for honor
19. ____ Certifying bank
20. ____ Assignor

g.
h.
i.
j.
k.
l.

Warranty same as general indorser

Consent of holder not required
Absence of consideration not a defense
Accepted, payable at PNB
Warrants not solvency of prior party
Bill is drawn payable not in drawees
residence
m. Protest is necessary
n. Assignment of funds
o. Renders instrument as non-negotiable
p. Consent of holder required
q. Intended only for deposit with a bank
r. Warrants the solvency of prior party
s. Not presented for payment within 6 months
t. Holders signature must appear twice
u. Release of principal debtor
V. Mere request not sufficient
PART III
ESSAY QUESTIONS

1. Explain whether the following instruments are negotiable or not :

a.
I guaranty to pay
P or order Ten Thousand
U.S Dollars.

( Sgd ) M

b.

December 12,
2015

Due
to P Ten Thousand
Pesos ( P 25,000.00 ).

(Sgd)
M

c.

I promise to
pay P or assign Ten
Thousand Pesos or to
deliver jewelry worth Php
10,000.00

(Sgd) M

d.

December 25, 2015

Pay to the
order of Bearer the sum
of Ten Thousand Pesos.

TO
X
(Sgd) M

e.

January
22, 2005

I promise to
pay P or his agent Ten
Thousand Pesos ( P
5,000.00 ).

(Sgd)
M

2.

I promise to pay P or bearer P10,000 (Sgd) M. P indorsed it to A, X took the instrument

unlawfully, forged the signature of A, and indorsed it to B. B indorsed the note to C. Then C indorsed the
instrument to D, a bolder in due course.
a. Is D entitled to receive P10,000.00 from M? Why?

b. Will your answer be the same if it is payable to order? Why?

3.

Without receiving value and for the purpose of lending his name, A makes a note for P5,000.00,
payable to the order of B who negotiates it to C, the latter knowing A not to be a party for value.

a. May C recover from A if the latter interposes the defense of absence or failure of consideration? Why?

b.

Supposing A receives P300.00 for lending his name will it alter the results of
the case? Why?

- END -