Regulatory Framework for Business Transactions

Batangas CPA Review

Center
“Committed to your CPA review needs”
Atty. Amado R. Villegas, Jr.

A. SALES
1. Statement No. 1 - In a contract of sale, after delivery has been made, the seller has lost ownership and cannot
recover it unless the contract is resolved or rescinded.
Statement No. 2 – In a contract to sell, title over the property generally passes to the buyer upon delivery.
a. Statement No. 1 is true; Statement No. 2 is false.
b. Statement No. 1 is false; Statement No. 2 is true.
c. Both are true
d. Both are false
e. None of the above

2. B, in good faith, bought a diamond ring from a public auction. Later, M identified the ring as the one she had lost
about a year ago in a theft incident. There is no question that M is the true owner. In this case –
a. B should return the ring but is not entitled to reimbursement.
b. B should return the ring but is entitled to reimbursement.
c. B should not return the ring even if there is reimbursement.
d. B should not return the ring but should pay the owner thereof.
e. None of the above.

3. The period of prescription for redhibitory defect based on frauds or defects of animals.
a. ten years from the violation of the obligation.
b. six months from the delivery of the object.
c. 40 days from date of delivery to the buyer.
d. 4 years from the perfection of the contract

4. The thing perishes with the owner.

a. genus nun quam peruit
b. res perit domino
c. waiver consciente
d. caveat emptor
e. caveat venditor

5. When an earnest money has been paid by the buyer to the seller, then:
a. there is necessarily a valid contract of sale
b. it forms part of the purchase price
c. the Statute of Frauds cannot possibly apply
d. all of the above
e. none of the above

6. Which of the following obligations of the vendor cannot be waived:

a. to allow the buyer to examine the goods sold
b. to transfer ownership to the buyer
c. to pay the expenses of the deed of sale
d. to warrant the thing sold
e. correct answer not given

7. S sold to B a parcel of land for a lump sum of P50,000. The contract states that the area is 500 square meters.
Subsequently, it was ascertained that the area included within the boundaries is really 550 square meters.
a. S is bound to deliver 500 square meters and B to pay P50,000
b. S is bound to deliver 500 square meters and B to pay P55,000
c. S or B can rescind the sale because there is no meeting of the minds
d. None of the above

8. In the preceding question, if the land contains 445 square meters, which of the following is correct?
a. S is bound to deliver 500 square meters and B to pay P50,000
b. S is bound to deliver 445 square meters and B to pay P44,500
c. B may rescind the sale because the lack in area is more than 1/10 of the total area
d. None of the above

9. It is the waiver made voluntarily by the vendee without knowledge and assumption of the risks of eviction.
a. consciente
b. intentionada
c. publiciana
d. reivindicatoria
e. pauliana

10. It is the warranty that the goods are reasonably fit for the general purpose for which they are sold.
a. merchantability
b. fitness
c. surety
d. answer not given

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11. It is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of
one who acquires a thing by purchase or dation in payment or by any other transaction where ownership is
transmitted by onerous title.
a. legal title
b. legal pre-emption
c. equitable mortgage
d. legal redemption

12. It is a contract by which one person transfers his rights and actions against a third person in consideration of a
price certain in money or its equivalent.
a. dation in payment
b. assignment of credit
c. payment by cession
d. barter

13. The period of prescription wherein the debtor may exercise his right or redemption.
a. 40 days
b. 30 days
c. six months
d. 2 years
e. 10 years

14. Statement 1 – One who sells an inheritance without enumerating the things of which it is composed, shall only
be answerable for his character as an heir.
Statement 2 - The interest in mutuum must be in writing to be enforceable.
a. Both are true
b. Both are false
c. S1 is true, S2 is false
d. S1 is false, S2 is true

15. FPJ Appliance Store is selling Starstruck vacuum cleaners on a two-week trial. Ping asked the store to deliver to
him one vacuum cleaner. Which of the following is correct.
a. Ping becomes the owner of the vacuum cleaner upon delivery.
b. The sale shall be absolute if Ping will not return the vacuum cleaner after two weeks.
c. Ping can return the vacuum cleaner to the store even if he finds nothing wrong with the quality of the
said cleaner.
d. Ping has to pay the price of the vacuum cleaner if the vacuum cleaner is destroyed by a fortuitous event.
e. Answer not given

16. Britney bought a Toyota Vios car on installment plan, and as a security, she executed a chattel mortgage on it.
She failed to pay three installments. The seller was able to foreclose (sold in pubic auction) the mortgaged car, but
the sum he obtained was less than what Britney still owed him. It had been previously agreed in the deed of sale
that Britney would be liable for any deficiency in this matter. May the seller still recover the deficiency?
a. Yes, the agreement between the seller and the buyer is the law between the parties.
b. Yes, in chattel mortgage, the seller is allowed to recover the deficiency but not in pledge.
c. Yes, otherwise the buyer will be liable for damages for breach of contract
d. No, the seller has already opted to foreclose, hence, he is no longer entitled.
e. No, there being no previous notice to the buyer of the foreclosure.
f. a, b and c
g. d and e
h. Answer not given

17. Greg and Brad entered into an agreement wherein Greg will deliver a particular BMW car to Brad for the price of
P3M. Upon the execution of the contract, Brad advanced the entire P3M to Greg. It was, however, stipulated that the
car shall be delivered to Brad on March 28, 2005. Unfortunately, before the arrival of that date, the BMW was
completely destroyed without any fault of Greg. Can Brad recover the P3M he had already advanced to Greg?
a. Yes, the loss is imputable to the vendor, Greg
b. Yes, the ownership of car belongs to Greg when the car was completely destroyed.
c. No, the car was lost without any fault of Greg.
d. No, the ownership of the car belongs to Brad when the car was completely destroyed.
e. Answer not given

18. Junjun offered to sell for P2M his house and lot to Tonton who was interested in buying the same. In his letter to
Tonton, Junjun stated that he was giving Tonton a period of one month within which to raise the amount and that as
soon as Tonton is ready, they will sign a deed of sale. One week before the expiration of the one-month period,
Junjun went to Tonton and told him that he is no longer willing to sell his property unless the price is increased to
P3M.
a. Tonton can compel Junjun to sell the property for P2M because the one-month period has not yet
elapsed.
b. Tonton can compel Junjun to sell the property at P2M if he already signified his acceptance before the
expiration of the one-month period.
c. Tonton cannot compel Junjun to sell the property at P2M because he never signified his acceptance of
Junjun’s offer.
d. Tonton cannot compel to sell the property at P2M even if he signified his acceptance to Junjun’s offer
because that is not binding on the latter, being merely an accepted unilateral promise.
e. Both b and c
f. Both a and b
g. Both c and d
h. Answer not given

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19. Mendrez shoe store, Inc. entered into separate contracts with two movie stars, Troy and Aubrey. With Troy, the
agreement was that the store shall deliver, at a specified date and for a price of P3,000.00, a pair of Mendrez shoes
which the store had been manufacturing for the general public, but at the time of the contract, had already been
sold out. With Aubrey, the agreement was that the store shall deliver, at a specified date for a price of P4,000.00, a
pair of shoes made specially for her, in accordance with a design submitted by her.
a. both are contracts of sale
b. both are not contracts of sale
c. Troy’s contract is sale, Aubrey’s contract is a piece of work
d. Troy’ contract is piece of work, Aubrey’s contract is sale
e. Troy’s contract is barter, Aubrey’s contract is a piece of work

20. X sold to Y his vehicle for P500,000.00. Upon receipt of the payment, X gave the car keys to Y. However, before
reaching the car, it was bumped by a speeding truck destroying it totally.
a. Under the situation, Y shall bear the loss since there is already a delivery of the vehicle.
b. X shall suffer the loss for Y has yet to have control of the vehicle.
c. Y can insist on the rescission of the contract of sale for the loss of the vehicle.
d. Both parties shall equitable suffer the loss.
e. Y is not liable to pay the price, the object of the contract is already lost.

21. X, a minor, bought a car for P1M from Y. Several days after, Y went to X and insisted that the sale is not valid
considering that at the time of the execution of the contract of sale, X, was a minor, and that real value of the car is
only P500,000.00.
a. Under the situation, the contract between X and Y is deemed void by reason of the minority of X.
b. The contract between X and Y is merely rescissible there being damage to the seller.
c. The contract between X and Y is merely voidable by reason of the minority of X.
d. The contract is valid for the same involves necessaries and X can recover the excess of the consideration
given.
e. The contract is unenforceable, it not being in writing

22. Suppose what was sold to the minor were necessaries such as clothing and medical attendance.
a. Under the situation, the contract between X and Y is deemed void by reason of the minority of X.
b. The contract between X and Y is merely rescissible there being damage to the seller.
c. The contract between X and Y is merely voidable by reason of the minority of X.
d. The contract is valid but the minor must pay a reasonable price therefor.
e. The contract is unenforceable, it not being in writing

23. As a general rule, if the price is simulated, the sale is –

a. Valid d. Rescissible
b. Voidable e. Unenforceable
c. Void

24. Which of the following circumstances would sufficiently raise the presumption of an equitable mortgage instead
of a contract of sale?
a. Sandy sold her house to Carol but remained in possession as lessee.
b. Francis who sold his land to Steven with a right of repurchase for P25,000.00 when its market value is
P250,000.00 at the time of the sale.
c. Celine, who retained P25,000.00 of the P35,000.00 purchase price of the computer set he sold to Charles.
d. All of the above
e. Only a and b

25. I. A bearer negotiable document of title can be negotiated by mere delivery.

II. A negotiable document of title if marked “non-negotiable” can still be further negotiated.
III. The general rule is that the vendor should not deliver the thing sold if the vendee has not paid the
price.
a. All are true. e. II and III are true; I is false
b. All are false. f. II and III are false; I is true
c. I and II are true; III is false g. I and III are true; II is false
d. I and II are false; III is true h. I and III are false; II is true

26. A bought a piece of land on a rate of a certain price for a unit of measure basis. The contract stated a certain
number of square meters but the land included in the boundaries happen to be less.
What are the options/rights of A?
a. The additional square meters must be given to A.
b. A has no further action since rescission is not a remedy following the principle of caveat emptor.
c. A has no further action since the law is explicit that there shall be no other further action by the buyer
against the seller.
d. A may pay only a proportionate reduction of the price.
e. A may rescind the contract, provided that the lack of area be not less than one-tenth of that stated.
f. Both a, d and e.
g. Both b and c
h. None of the above

27. I. The contract of sale is a real contract.

II. The contract of sale is a preparatory contract.
III. The contract of commodatum is perfected from time of the delivery of the object of the contract.
a. All are true. e. II and III are true; I is false
b. All are false. f. II and III are false; I is true
c. I and II are true; III is false g. I and III are true; II is false
d. I and II are false; III is true h. I and III are false; II is true

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28. I. Possession of an immovable, in case of double sale of real property, is superior than registration of the sale
of real property.
II. In case of personal property, the buyer who took possession thereof in good faith is the owner of the thing.
III. The vendee need not appeal the decision in order that the vendor may become liable for eviction.
a. All are true. e. II and III are true; I is false
b. All are false. f. II and III are false; I is true
c. I and II are true; III is false g. I and III are true; II is false
d. I and II are false; III is true h. I and III are false; II is true

29. It is a remedy in case of a hidden defect where withdrawal or rescission of the contract with damages is
allowed.
a. Accion redhibitoria d. Accion quanti minoris
b. Accion subragatoria e. Accion consciente
c. Accion pauliana

30. F4 Company granted Jerry the exclusive right to sell in Mindanao a certain number of F4 T-Shirts, which the
company was manufacturing at the invoice price in Manila, with a discount of P20 percent, the price to be paid at the
end of 60 days whether or not the T-shirts are sold. The contract between Jerry and F4 company is a:
a. Contract of agency to sell
b. Contract of sale
c. Contract to sell
d. Emptio rei speratae
e. Emptio spei

31. Which of the following is not an implied warranty in a contract of sale?

a. Warranty against eviction
b. Warranty against hidden defect
c. Warranty as to fitness
d. Warranty as to merchantability
e. All of the above
f. None of the above

32. The unpaid seller of goods has the right to retain possession of the goods until payment in the following cases.
Which is the exception?
a. Where the goods have been sold without any stipulation
b. Where the goods have been sold on credit but the term of credit has expired
c. Where the buyer becomes insolvent
d. When the buyer or his agent lawfully obtains possession of the goods
e. None of the above

33. Pedro sold his land to Petra. Later on Pedro sold the same to Carlo. Petra in turn sold the same land to Dennis,
who took possession of the land in good faith. Carlo, a purchaser in good faith registered the sale of the land in his
favor. Who is the owner of the land?
a. Carlo because he is the first registrant
b. Ownership of the land shall not be transferred as there is double sale
c. Pedro shall be liable only for damages to Petra
d. Dennis as his predecessor in interest was the first buyer
e. None of the above

34. Antonio sold a piece of land to Renato binding himself not to sell the same to another person. On the following
day, Antonio sold the land to Carlos who immediately took possession in good faith. In the case at bar, the proper
remedy of Renato is to:
a. institute an action for the annulment of the sale to Carlos;
b. institute an action for the recovery of the land;
c. institute an action for damages against Antonio;
d. answer not given

35. Seller sold to a buyer a piece of jewelry at a price of P20,000. The contract provides that the buyer will pay the
seller cash of P15,000 and for the balance, the buyer will give the seller a microwave oven worth P5,000. What is the
nature of the contract?
a. Sale
b. Partly sale and partly barter
c. Barter
d. Commodatum

36. Ownership of the thing is transferred/acquired/retained:

a. Retained by the seller in “sale or return”
b. Transferred to the buyer upon constructive or actual delivery of the thing sold
c. Acquired by the buyer upon perfection of the contract
d. Transferred to the buyer upon acceptance of the price

37. Connie transferred to Violeta a parcel of land for the price of P100,000; P30,000 to be paid in cash and for the
difference, she will convey her car worth P70,000. What kind of contract is this?
a. Lease contract
b. Contract to sell
c. Obligation to sell
d. Barter

38 Which of the following obligations of the vendor cannot be waived?

a. To allow the buyer to examine the goods sold

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b. To transfer ownership to the buyer
c. To pay expenses of the deed of sale
d. To warrant the thing sold

39. Lucy is a lessee of a store in a shopping mall. She orally sells/assigns his right to Salome. She then allows
Salome to occupy the stall. The delivery here is called:
a. Quasi-traditio
b. Actual delivery
c. Traditio longa manu
d. Traditio brevi manu
e. Answer not given

40. Pacto de Retro sale as distinguished from mortgage:

a. There is redemption when the principal debt is paid
b. There is no transfer of possession of the thing sold
c. There is no foreclosure unless it is declared as an equitable mortgage
d. There is no transfer of ownership of the thing sold

41. Which of the following statements is not correct?

a. Actual delivery of the thing or payment of the price is not required for the perfection of the sale
b. A stipulation that even when the object is delivered to the buyer, ownership will not pass until the price
is fully paid is not valid
c. A sale is consummated upon delivery of the thing and the payment of the purchase price
d. Sale through letter or telegrams are perfected only when acceptance by the buyer has been received by
the seller

42. A case where the contract of sale must not necessarily be in writing.
a. Sale of 100 piculs of sugar at P400 per picul when there is partial delivery
b. Sale where by the terms thereof cannot b e performed within one year
c. Sale of land

43. A sold and delivered her diamond ring to B. It was agreed that within ten days B will state and fix the price. On
the 10th day, B called up by telephone A and stated the price at P20,000 which A agreed. Is the sale perfected?
a. No, at the time of the sale the price was not fixed
b. Yes, at the time of the sale the price was already known
c. Yes, the price stated and fixed by the buyer was accepted by the seller
d. No, the price was left to the discretion of one of the parties

44. When does the buyer of a thing have the right to the fruits of the thing bought?
a. From the time the fruits are delivered
b. From the time the obligation to deliver the thing bought arises
c. From the time the sale is perfected
d. From the time thing bought is delivered

45. The seller warrants that he is the owner at the time of the sale.
The seller is liable for breach of warranties only if was in bad faith.
a. Both statements are true.
b. Both are false.
c. First is true, second is false.
d. First is false, second is true.

46. X sold a parcel of land to Y with the agreement that payment is to be made on February 14, 205. It was
stipulated that failure to pay on said date, the sale would automatically be rescinded. Y failed to pay and asked for
extension of time to pay. Decide:
a. Y may still pay and the sale is not rescinded if there was no demand for rescission.
b. The sale is rescinded as per agreement.
c. The sale is rescinded only after demand for payment by the seller.
d. Y may still pay despite rescission of the sale.

47. A, B, and C as brothers purchased from their parents specific portions of a parcel of land as evidenced by three
separate deeds of sale, each deed referring to a particular lot in meters and bounds. A sold his parcel of land to X
and B and C want to redeem the same. Decide:
a. Both B and C may exercise the right of redemption in a pacto de retro sale.
b. Either of B and C may exercise the right of redemption given to them by X.
c. B and C have the right of legal redemption
d. B and C have no right of legal redemption.

48. P is engaged in the printing business while S is his supplier for printing paper. P has contract with R for the
printing of the latter’s school paper. For failure of P to pay for the deliveries of S, the latter stopped its deliveries and
as result P was not able to print the school paper of R. R sued P for breach of contract and the latter is suing S for
damages due to its failure to make deliveries which affected P’s contract with R. Decide:
a. S is not liable for damages for because it has the right of possessory lien as unpaid seller.
b. S is liable for damages because of its failure to make deliveries under its contract with P who
consequently failed to honor its contract with R.
c. P is liable to R for damages but may recover from S for breach of contract.
d. R may claim damages from both S and P because it was damaged due to the fault of both.

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B. AGENCY
1, If the other party has notice that the agent is or may be acting for a principal but has no notice of the principal’s
identity.
a. Disclosed principal
b. Partially disclosed principal
c. Undisclosed principal
d. Agency by estoppel

2. It is one where in consideration of an increased commission the factor or commission agent guarantees to the
principal the payment of debts arising through his agency.
a. Commission agent
b. Guarantee commission
c. Agency couched in general terms
d. Agency couched in specific terms

3. If the other party has notice that the agent is or may be acting for a principal but has no notice of the principal’s
identity.
a. Disclosed principal
b. Partially disclosed principal
c. Undisclosed principal
d. Agency by estoppel

4. A appointed S to be his agent to administer his farm while a was in a world tour but S died leaving his son of legal
age to take care of the farm until a arrived. This is an example of agency created by:
a. Ratification
b. Estoppels
c. Operation of law
d. Consent of the principal

5. The principal is not liable for expenses incurred by the agent:

a. When it was stipulated that the agent would only be allowed a certain sum
b. When the agent has complied with his obligation by acting according to the principal’s instructions
c. When the agent incurred them with knowledge that an unfavourable result would ensue and the
principal was aware of it
d. When the expenses were incurred without the fault of the agent

6. It is a contract wherein a person binds himself to render special service or to do something in behalf of another
with consent of the latter.
a. Contract for a piece of work
b. Guaranty
c. Agency
d. Deposit

7 Mr. Principe constituted Mr. Ajente as his authorized agent to sell the former’s Lancer car for P300,000 and to pay
him a 5% commission based on the selling price. Mr. Ajente sold the car for P320,000. Mr. Ajente shall remit to Mr.
Principe:
a. P300,000
b. P320,000
c. P285,000
d. P305,000

8. The following are requisites of agency, except:

a. aleatory
b. representative
c. consensual
d. fiduciary

9. An agency authorizing only acts of administration.

a. couched in general terms
b. couched in specific terms
c. general
d. special

10. The following must be in writing to be enforceable, except:

a. authority of agent to sell a piece of land
b. contract of guaranty
c. performance of an act for more than one year
d. promise in consideration of marriage

11. Which of the following is not a mode of extinguishing an agency?

a. revocation e. novation
b. withdrawal of the agent f. accomplishment of the object of agency
c. death of the principal g. loss of the thing
d. physical injury of the agent h. Answer not given

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12. Without Pete’s authority, Art (agent) sold Pete’s car to Mark in Pete’s behalf. The contract is:
a. unauthorized d. All of the above
b. subject to ratification e. None of the above
c. unenforceable f. Answer not given

13. In which of the following cases is there a relationship of agent and principal?
a. Where X buys a television set for his own account and then sells it to Y for an increased amount
b. Where X voluntarily manages the business of Y without the latter’s consent
c. Where X was asked by R to look for a buyer of his land
d. Where X was asked by R to look for a buyer of his refrigerator without the authority to enter into
contract
e. All of the above
f. Only a, b and d
g. Only b, c and d
h. Answer not given

14. I. A stipulation exempting the agent from the obligation to render an account shall be valid
II. The general rule is that the vendor should not deliver the thing sold if the vendee has not paid the
price
III. If an agent sells the land of his principal after the latter’s death, the sale will still be valid, if the agent
did not know at the time of the sale that the principal was already dead.
a. All are true.
b. All are false.
c. I and III are true; II is false
d. I and III are false; II is true
e. II and III are true; I is false

15. I. A special power to compromise includes the authority to submit the same to arbitration.
II. An agent is bound to advance the necessary funds in order to effectuate the best interest of his
principal.
III. If the agent has been authorized to lend money at interest, he cannot borrow it without the consent of
the principal.

a. All are true.

b. All are false.
c. I and III are true; II is false
d. I and II are false; III is true
e. I and III are true; I is false

16, I. An agency couched in general terms comprises only acts of ownership.

II. A special power of attorney is necessary to waive any obligation gratuitously on behalf of the principal.
III. A special power to sell excludes the power to mortgage.
a. All are true. e. II and III are true; I is false
b. All are false. f. II and III are false; I is true
c. I and II are true; III is false g. I and III are true; II is false
d. I and II are false; III is true h. I and III are false; II is true

17. Statement I – An agent is personally liable to a third person if the principal ratifies his act.
Statement II – An agent is personally liable when he expressly binds himself to a third person.
a. both statements are true
b. both statements are false
c. I is true, II is false
d. I is false, II is true
e. Answer not given

18 I. A stipulation exempting the agent from the obligation to render an account shall be unenforceable.
II. All acts of the substitute appointed against the prohibition of the principal shall be void.
III. If an agent sells the land of his principal after the latter’s death, the sale will still be valid, if the agent did
not know at the time of the sale that the principal was already dead.
a. All are true. e. II and III are true; I is false
b. All are false. f. II and III are false; I is true
c. I and II are true; III is false g. I and III are true; II is false
d. I and II are false; III is true h. I and III are false; II is true

19. I. A special power to compromise includes the authority to submit the same to arbitration.
II. An agent is bound to advance the necessary funds in order to effectuate the best interest of his principal.
III. If the agent has been authorized to lend money at interest, he cannot borrow it without the consent of the
principal.
a. All are true. e. II and III are true; I is false
b. All are false. f. II and III are false; I is true
c. I and II are true; III is false g. I and III are true; II is false
d. I and II are false; III is true h. I and III are false; II is true

20. A appointed B as his agent for the sale of his house and Lot, giving the latter an authority to negotiate and sign
any document to effect the sale of the house and lot. Without any written document from A, B was able to sell the
house and lot to C. After a week, B found out that the subject house and lot was already sold by A to X.
a. Under the circumstances, C has a better right than X for his transaction with B came earlier than the
transaction between A and X;
b. X has a better right than C for B’s authority is not reduced to writing;
c. C has a better right, for as the agent of A, the transaction between B and C binds A;

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d. None of the above

21. A appointed B as his agent to sell his house and lot with an agreement that B will be entitled to a 10 percent
commission. B found a buyer and referred the same to A. While negotiating, A extended a discount to the buyer
without informing B, the agent.
a. Under the circumstances B can demand from A the commission representing the 10 percent of the
original purchase price;
b. B can only demand from A the amount equivalent to 10 percent of the actual purchase price;
c. A has the right to extend a discount to any buyer even without the consent of B. Hence, B is not entitled
to the amount equivalent to 10 percent of the original purchase price;
d. None of the above.

22. A is an agent of X corporation, an establishment engaged in the business of direct selling. As an agent, he was
given a brochure with pictures of the items available for sale to be shown to prospective buyers. B went over the
brochure and found a picture of a bag to be attractive. Hence, he placed an order to A. When the bag was
delivered, it turned out that the color as reflected in the brochure is different from the actual color of the bag. For
this reason, B did not accept the item delivered.
a. Under the circumstances, B cannot refuse to accept the delivery for there is already a perfected contract
of sale;
b. B has the right not to accept the delivery for the item appeared to be different from that of the picture
depicted in the brochure;
c. cannot refuse to accept the delivery of the item considering that it is a matter of marketing strategy to
make the items more attractive in the brochure;
d. None of the above.

23. A appoints B as his agent to sell his land. Which of the following is valid?
a. The authority of B is in writing and the sale of the land in favor of C is oral
b. The authority of B from A is by way of letter and B sells the land to C in writing
c. The authority of is oral and B sells the land to C for P50,000 in a written contract of sale
d. The authority of B is in writing but the sale of the land in writing was made beyond the period expressly
set forth by A

24. A appoints B to sell his land.

Example 1 – If the authority of B is oral and B sells the land in writing, the sale is valid.
Example 2 – If the authority of B is in writing and B sells the land orally, the sale is valid.
a. First example is false but second example is true
b. Both examples are true
c. Both examples are false
d. First example is true but second example is false

25. S1 – The liability of two or more agents is solidary.

S2 – The liability of two or more bailees is soliday.
S3 – The liability of two or more principals is solidary.
a. All are true. e. II and III are true; I is false
b. All are false. f. II and III are false; I is true
c. I and II are true; III is false g. I and III are true; II is false
d. I and II are false; III is true h. I and III are false; II is true

C. CREDIT TRANSACTIONS
1. Three of the following are essential requisites of a contract of mortgage. Which is not?
a. The person constituting the mortgage has the free disposal of his property
b. The contract must be in writing
c. The mortgagor is the absolute owner of the thing mortgaged
d. The mortgage is constituted to secure the fulfillment of the principal obligation

2. A stipulation where the pledge or mortgagee automatically becomes the owner of the thing pledged or
mortgaged.
a. Pactum commissorium
b. Precarium
c. Conventional redemption
d. Assignment of credit

3. Effect of a contract of antichresis if not the principal and interest is not in writing –
a. valid
b. unenforceable
c. voidable
e. void

4. It is the right of the mortgagor to redeem the mortgaged property after his default in the performance of the
conditions of the mortgage but before the sale of the mortgaged property.
a. equity of redemption
b. right of redemption
c. right of pre-emption
d. judicial redemption

5. The requirement in a contract of pledge so that it will be binding to third persons.

a. writing

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b. public instrument
c. delivery
d. registered

6. The following are real contracts, except:

a. deposit
b. pledge
c. commodatum
d. antichresis

7. A kind of commodatum wherein the bailor may demand the thing at will –
a. at will
b. pure
c. precarium
d. irregular

8. The purpose of the contract of deposit.

a. use
b. consumption
c. payment
d. safekeeping

9. D pledged his ring to C for P20,000.00. D failed to pay his obligation on time despite repeated demands. C sold it
at a public auction for P18,000.00.
a. C can recover the deficiency even without stipulation
b. C can recover the deficiency only if there is a stipulation
c. C can recover the deficiency provided there is reimbursement
d. C cannot recover the deficiency even if there is a stipulation
e. C cannot recover the deficiency unless the contrary is provided

10. A borrowed from B P30,000.00. A offered his specific ring by way of pledge. It was expressly stipulated that
upon non-payment of the debt on time, the ring would belong to B. This forfeiture clause, which traditionally is not
allowed is called:
a. dacion en pago e. pacto reiratorio
b. pacto de retro f. pactum commissorium
c. pacto de non alienado g. both c & d
d. pacto comisorio h. both d & f

11. D1, D2 and D3 borrowed from C P30,000.00. As a security, they mortgaged their undivided agricultural land to
C. Subsequently, D1 paid C P10,000.00. Is the mortgaged on D1’s share extinguished?
a. Yes, payment by one of the debtors extinguished the obligation.
b. Yes, because the obligation is joint and they are liable proportionately.
c. Yes, because of the benefit of division should extend to all the debtors.
d. No, because the obligation is solidary. Payment in part shall not extinguish the obligation.
e. No, because a mortgage is considered indivisible. Payment in part shall not extinguish the obligation.
f. No, because there was no consent of the other debtors.
g. Answer not given

12. The term credit comes from the Latin term “credere” which means:
a. Trust and confidence
b. Delivery
c. Trust
d. Acceptance

13. The following are real contracts, except:

a. Commodatum
b. Mutuum
c. Deposit
d. Sale

14. It is one whereby the bailor may demand the thing loaned at will.
a. Precarium
b. Irregular deposit
c. Consumable
d. Non-consumable

15. Deposits of money in banks and similar institutions, such as saving deposits and current account deposits are
classified as:
a. Commodatum
b. Mutuum
c. Deposit
d. Assignment of credit

16. A and B entered into a contract of loan without providing that it shall earn interest. When the obligation became
due and demandable, can A, the creditor, demand the payment of interest.
a. Yes, it earns legal interest
b. Yes, interest is the accessory and it follows the principal
c. No, since there is no stipulation
d. No, it is usurious interest

17. The following are necessary deposit, except:

a. Gratuitous deposit

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b. In compliance with a legal obligation
c. On the occasion of any calamity
d. By travelers in hotels or inns
e. By travellers with common carriers

18. It takes place when an attachment or seizure of property in litigation is ordered.

a. Foreclosure
b. Attachment of credit
c. Judicial deposit
d. Pacto de retro
e. Legal redemption

19. A guaranty can secure the following obligations, except:

a. Voidable
b. Future
c. Conditional
d. Unenforceable
e. Void

20. The following are the qualifications of the guarantor, except:

a. Possesses integrity
b. Capacity to bind himself
c. Has sufficient property
d. Must be competent

21. S1 – In commodatum, the loss is suffered by the bailor since he is the owner.
S2 – In mutuum, the borrower need to pay the same amount of the same kind and quality
S3 – In judicial deposit, the purpose of the deposit is to preserve the status quo of the case.
a. All are true. e. II and III are true; I is false
b. All are false. f).II and III are false; I is true
c. I and II are true; III is false g. I and III are true; II is false
d. I and II are false; III is true h. I and III are false; II is true

22. To affect or be binding on third persons, a mortgage contract:

a. Written and duly notarized to be in public instrument.
b. Need not be written since it is already binding on the parties.
c. Must be in public instrument and registered.
d. May be in private instrument but must be registered.

23. D borrowed a sum of money from C with G as guarantor. The loan is in writing but the guaranty is oral. D failed
to pay C, who now is demanding payment from G. Can G be compelled to pay?
a. Yes, because he is the guarantor obliged to pay in case the debtor defaults.
b. No, because the guaranty is void having been orally made.
c. No, because the guaranty is unenforceable against G, it being oral.
d. Yes, because the guaranty is enforceable, writing not needed

24. In a real estate mortgage, the mortgagor can sell the property mortgaged:
a. Only if agreed upon.
b. Only if with the written consent of mortgagee.
c. If not prohibited to sell
d. Even without the consent of the mortgagee.

25. Elements of contracts of pledge and mortgage except;

a. Pledgor or mortgagor must be the absolute owner
b. Pledger or mortgagor must have the free disposal of thing pledge.
c. The thing pledge or mortgaged may be appropriated if the debtor cannot pay
d. Pledge and mortgage are accessory contracts.

26. A obtained an interest free loan of P50,000 from B evidenced by a promissory note payable six months after
date. At maturity A called B by phone to ask for an extension of one month and offer to pay 20% interest on the
loan. Enticed by the 20% interest, B agreed to the extension of maturity. Which is correct?
a. The interest is a demandable interest by virtue of an agreement
b. The interest is unenforceable
c. The loan is valid but the interest is void
d. The loan and interest are both demandable

27. Which of the following is not correct?

a. A movable or immovable property maybe the object of commodatum
b. The bailor in commodatum need not be the owner of the things loaned
c. A stipulation that the bailee may make use of the fruits of the thing loaned is valid
d. The bailor obliged to pay for the ordinary expenses for the use and preservation of the thing loaned

- Carpe Diem –
God is with you. Have faith!

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