University of Caloocan City

Final Term Examination

Law on Sales and Credit Transactions

Name:
Course/Yr/Section:

Choose the best answer

1. Which of the following is not a common requisite of pledge, real mortgage and
chattel mortgage?
a. That it be constituted to ensure the fulfillment of a principal
obligation.
b. That the person constituting the security must be the absolute owner of
the property on which the security is being constituted
c. That the person constituting the security must have the free disposal of
the property, and in the absence thereof, that he be legally authorized
for the purpose.
d. That the security agreement must be recorded in the appropriate book in
the Registry of Property.

2. D obtained two loans: one from ABC Bank amounting to P 400,000.00 which bears
interest at 10% per annum and for which he executed a chattel mortgage on his
car; and the other from DEF Bank amounting to P 600,000.00 at 11% interest per
annum and for which he executed a real mortgage on his house and lot. The
documents evidencing both the chattel mortgage and the real mortgage were
acknowledged before a notary public but were not registered in the appropriate
books in the register of Deeds. In case of default in the payment of his
obligation on the part of D
a. Both ABC Bank and DEF Bank may foreclose their corresponding security.
b. Neither ABC Bank nor DEF Bank may foreclose its corresponding security.
c. Only ABC Bank may foreclose its security which is the chattel mortgage
d. Only DEF Bank may foreclose its security which is the real mortgage.

3. Refer to no.2 Assuming that both ABC Bank and DEF Bank may validly foreclose
their security, and the foreclosure sale resulted in a deficiency:
a. Both may recover the deficiency
b. Neither one may recover the deficiency
c. Only ABC Bank may recover the deficiency
d. Only DEF Bank may recover the deficiency

4. D pledged his ring to secure his debt to C amounting to P 20,000.00 payable in

30 days. On due date, D defaulted. At public auction, the ring was sold only
for P 18,000
a. Both the debt of P 20,000.00 and the pledge are extinguished.
b. Neither the debt of P 20,000.00 nor the pledge is extinguished.
c. The pledge is extinguished. The debt will be extinguished when C has
recovered the deficit of P 2,000.00 from D
d. The debt is extinguished. However, the pledge will subsist.

5. Pledge, real mortgage, chattel mortgage and antichresis are similar to one
another with respect to
a. The kind of object of the contract
b. Their binding effect on third persons
c. Their being indivisible
d. The form to make them binding between the parties.

6. D borrowed P 50,000.00 from C. The debt which is due after 3 months, is secured
by a pledge of a painting by a national artist and is worth about 5 times more
than the amount of the debt. D and C has a stipulation that should D default in
his payment, C automatically becomes the owner of the painting. D defaulted.
a. C became the owner of the painting upon the default of D pursuant to
their agreement
b. C must sell the painting in a public sale and if it is not sold at the
first public auction, C already acquires ownership thereof.
c. C did not become the owner of the painting upon the default of D
d. Under no instance may C become the owner of the painting. He must sell it
at public auction not only once but several times until it is sold.

7. Refer to No. 6 The stipulation between D and C that C automatically becomes the
owner of the painting upon D’s default is known as :
a. Constitutum possessorium c. Expromision
b. Pactum commissorium d. Delegacion

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8. D obtained a loan of P 100,000.00 from C. To secure the debt, D pledged his
goods which are currently stored in the warehouse of W. The stipulation of the
parties include the following:

I. The goods will remain in the warehouse of W

II. C will automatically become the owner of the goods if D defaults in the
payment of the loan.

The stipulation/s binding D and C is/are:

a. I only c. Both I and II
b. II only d. Neither I nor II

9. D borrowed 30,000.00 from C pledging as security his ring, necklace and

bracelet with the ring as the most valuable. On due date: D paid the amount of
P 20,000.00 accordingly:
a. D can demand the return of the ring and the necklace the two most
valuable of the three objects of pladege
b. D can demand the return of the necklace and the bracelet, the two least
valuable of the three of the objects of pledge
c. D can demand the return of any of the two objects of pledge at his choice
d. D cannot demand the return of any of the things pledged.

10. D obtained a 12% interest-bearing loan of P 50,000.00 from C and to secure the
debt, D pledged his diamond pendant. On due date, D wrote a letter to C
proposing to relinquish the ownership of the diamond pendant because he did not
have enough money to pay the loan and the interest due although the total
amount due was less that the value of the pendant. C accepted the proposal.
a. Ownership of the pendant was acquired by C by reason of pactum
commissorium.
b. Ownership of the pendant was Acquired by C by reason of dacion en pago.
c. Ownership of the pendant was not acquired by C because the agreement is
void.
d. Ownership of the pendant was not acquired by C because the value thereof
should be of the same amount as the total amount due.

11. For binding affect between parties

I. A chattel mortgage must be recorded in the Chattel Mortgage Register

II. A real mortgage must recorded in the Registry of Property

The following is true with respect to:

a. Both I and II c. I only
b. Neither I nor II d. II only

12. The following are the indirect causes of extinguishment of pledge:

l. Written abandonment of the thing pledged.

ll. Appropriation of the thing pledged if not sold at two public auctions.
lll. Return of the thing pledged.
lV. Sale of the thing pledged.

Which of the above modes of extinguishment will extinguish not only the pledge
but also the principal obligation it secures?

a. I and III.
b. II and IV
c. I and II
d. Ill and

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13. When the thing pledged is in danger of deterioration or impairment without the
fault of the pledgee, the pledger has a right to demand the return the thing
pledged by offering another thing of the same kind and quality. At the same
time, the pledgee has a right to cause the sale of the thing pledged. Who
between the pledger and pledgee is given preferential right?
a. Pledgor
b. Pledgee
c. Either one whoever asserts first the right
d. Neither, because the preferential exercise of the right must be
stipulated

14. The creditor may automatically appropriated for himself the thing on which the
security was constituted upon the default of the debtor in:
a. Pledge
b. Mortgage
c. Anthichresis
d. Automatic appropriation is not allowed in any case

15. D borrowed P5,000.00 from C. To secure the debt, D pledged 50 grams of

“shabu”. On due date, demanded payment but D refused to pay by raising the
defense that this debt is void. May C collect from D?
a. No,because the loan obligation and the pledge are contrary to law
b. Yes, but if D cannot pay, C may foreclose the shabu to satisfy his claim
c. No, because the nullity of the pledge carried with it the nullity of the
loan obligation
d. Yes, but if D cannot pay, C may have to resort to other remedies to
satisfy his claim

16. A written instrument indicates that D received P20,000.00 from C. Later, the
parties executed a written instrument indicating the delivery by D of his
laptop computer to C. In case of doubt, what contract was entered into
between D and C as regards the laptop computer?
a. Pledge
b. Dacion en pago
c. Sale
d. None, the contract is void as to the delivery of the computer.

17. D obtained a loan of P100,000.00, secured by a pledge of diamond ring, from C.

The parties had a stipulation that should D fail to pay the debt on due date.
C may purchase the diamond ring at the current purchase price. Is the
stipulation valid?
a. No, such stipulation is in the nature of pactum commissorium
b. Yes, the purchase of the ring by C at the current price does not come
within the prohibition on pactum commissorium.
c. No, but C can still purchase the ring if it is not sold at two public
auctions.
d. Yes, but C can only purchase the ring if it is not sold at two public
auctions.

18. D borrowed P50,000.00 from C. The parties agreed in a private instrument that
D’s good which are deposited in the warehouse of W would secure the loan by way
of pledge. C never took actual possession of goods, nor did the parties agree
that the goods would remain with W. Was a pledge constituted on the goods
a. Yes, because mere agreement that the goods would secure the debt I
sufficient.
b. No, the goods must be delivered to C, or there must be a common agreement
that the goods would remain in possession of W.
c. Yes, delivery of the goods to the creditor is not required if they are in
the control and possession of a third person.
d. No, the pledge should be in a public instrument for the pledge to be
constituted.

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19. D obtained a 12 month loan at P100,000.00 from C. D constituted a mortgage on
a certain lot which he knew belonged to X. On due date:
a. C cannot collect from D because the obligation is rendered void, D, the
mortgagor, not being the owner of the mortgage lot.
b. C can collect from D because the mortgagor need not be the owner of the
property.
c. C can collect from D because although the mortgage is void, the loan
obligation can stand independently from it.
d. C cannot collect from D because the latter was not authorized by any
power of attorney to mortgage the lot.

20. A real mortgage.

a. Confers ownership of the mortgaged property in the mortgagee upon its
constitution.
b. Creates encumbrance o the real property.
c. Confers ownership of the mortgaged property in the mortgagee if the
principal obligation it secures is not paid on due date.
d. Confers ownership of the mortgaged property in the mortgagee upon default
of the debtor if the parties stipulated about it.

21. A sale with right to repurchase differs from real mortgage in that in sale with
right to repurchase:
a. There is no transfer of ownership of the property.
b. A security is constituted on the property.
c. The contract is indivisible.
d. There is generally a transfer of possession of property.

22. S sold his car to B. There was no fixed date for the performance of their
respective obligations. The obligation of S as vendor is
a. To wait for the buyer to pay the price before he delivers.
b. To deliver immediately since the sale has been perfected
c. To deliver the car after the buyer demands delivery.
d. Rescind the contract for time of performance not fixed.

23. The creditors of the vendor cannot make use of the right of redemption against
the vendee, until after they have exhausted the property of the vendor.
The vendor is responsible to the vendee for any hidden faults or defects in the
thing sold if so stipulated by the parties.

a. First statement is false, second is true

b. Both statements are false
c. First statement is true, second is false
d. Both statements are true

24. P authorized A to sell the former’s car. A sold the car to X. Without knowledge
of the sale to X, P sold the same car to Z. Which of the two buyers shall be
preferred?
a. X, being the buyer of duly authorized agent
b. Z, being the buyer of the principal himself.
c. X, first registrant in good faith for the sale.
d. The first possessor in good faith of the car.

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25. The ownership of the thing sold shall be transferred to the vendee upon
perfection of the contract.
An unaccepted unilateral promise to buy or sell a determinate thing for a price
certain is binding upon the promisor.

a. Both are true

b. Both are false
c. Only the first is true
d. Only the second is true

26. A leased to B a 5 DOC generator for two years at a lease rental fee of P1,000
per month and signed an option in favor of B to buy the generator at the end of
the term of the lease at P60,000. All rental fees paid are to be considered as
partial payment of the sale. After 12 months B was able to pay the rental fees
for 9 months and was in arrears for three months. A terminated the lease
contract and repossessed the generator. The consequence of the transaction is
a. A can collect the rental fees for three months which are in arrears
b. A can collect the rental fees for the unexpired 12 months of the lease
contract
c. When A took possession of the generator, he has no further action against
B
d. A in terminating the lease and repossessing the generator is obliged to
refund the 9 months

27. X sold his car to Y for P50,000. No date was fixed for the performance of the
obligation of the seller and the buyer. The obligation of X is
e. To deliver the car immediately because the sale is a perfected contract
f. To deliver the car only after Y writes to X demanding the delivery of the
car
g. To deliver the car only after Y pays the P50,000
h. To rescind the contract because there is no time fixed for the delivery

28. Statement 1: If the animal sold should die within three (3) days after its
purchase, the vendor shall be liable to the vendee.
Statement 2: The fixing of the price can never be left to the discretion of one
of the contracting parties. However, if the price fixed by one of the parties is
accepted by the other, the sale is perfected.

i. Both are true

j. Both are false
k. Only the first is true
l. Only the second is true

29. Statement 1: Option money is considered as part of the purchase price while
earnest money is not.
Statement 2: The Maceda Law refers to the sale of personal property by
installments while the Recto Law refers to the sale of real property by
installments.

m. Both are true

n. Both are false
o. Only the first is true
p. Only the second is true

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30. Statement 1: Any stipulation exempting the vendor from the obligation to answer
for eviction shall be void.
Statement 2: The vendor is responsible to the vendee for any hidden faults or
defects in the thing sold even if he was unaware thereof.

q. Both are true

r. Both are false
s. Only the first is true
t. Only the second is true

31. Statement 1: The expenses for the execution and registration of the sale shall
be borne by the vendee, unless there is a stipulation to the contrary.
Statement 2: If the same thing should have been sold to different vendees the
ownership shall be transferred to the person who may have taken possession
thereof in good faith.

u. Both are true

v. Both are false
w. Only the first is true
x. Only the second is true

32. Statement 1: The husband and the wife cannot sell property to each other, as a
rule.
Statement 2: The sale of a piece of land or interest therein when made thru an
agent is void unless the agent’s authority is in writing even if the sale itself
is in public instrument and has been registered.

y. Both are true

z. Both are false
aa. Only the first is true
bb. Only the second is true

33. Statement 1: Where the seller of the goods has a voidable title thereto, but
his title has not been avoided at the time of the sale, a buyer in good faith
acquires a title the goods.
Statement 2: If the vendee has renounced the right to warranty in case of
eviction, and eviction should take place, the vendor shall only pay the value
which the thing sold had at the time of sale.

a. Both are true

b. Both are false
c. Only the first is true
d. Only the second is true

34. Statement 1: Unless otherwise agreed, the buyer of goods is not bound to accept
delivery thereof by installment.
Statement 2: In case of doubt, a contract purporting to be an equitable mortgage
shall be construed as a sale with a right to repurchase.

a. Both are true

b. Both are false
c. Only the first is true
d. Only the second is true

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35. Statement 1: The creditors of the vendor cannot make use of the right of
redemption against the vendee, until they have exhausted the property of the
vendor.
Statement 2: Sale is a real contract because delivery is necessary to transfer
ownership to the buyer.

a. Both are true

b. Both are false
c. Only the first is true
d. Only the second is true

36. A contract of sale is not a

a. Principal contract c. Consensual contract
b. Nominate contract d. Real contract

37. It is the right of the mortgagor to redeem the property that was mortgaged
after it was sold
a. Equity of redemption c. Right of subrogation
b. Right of redemption d. Right of pre-emption

38. Statement 1: In contract to sell, the buyer becomes the owner of the thing upon
delivery
Statement 2: In contract to sell, payment of the price is a suspensive condition
a. True, False c. Both are false
b. False, True d. Both are true

39. A sold orally his parcel of land for 5 million. Deliver and payment will be
made 4 months later. When the said date arrived, A refused to deliver the land.
Can B compel A to deliver?
a. Yes, because the sale have been perfected already, obligation of the
parties are reciprocally demandable
b. Yes, because there was an agreement to deliver after four months and that
should be respected by the parties
c. No, because the sale is no effect
d. None of the above are correct

40. In payment of his debt to X, A ceded half of his share in parcel of land he co-
owned with B. B therefore:
a. Has right of pre-emption as co-owner
b. Has right of redemption as co-owner
c. Has no right of redemption or pre-emption since the transfer was not sale
d. Has the right to compel X to buy his ½ share of land to prevent co-
ownership between them

41. A form of delivery which takes place after the seller of property continues in
possession of the said property not as owner but rather as a mere possessor:
a. Traditio constitutum possessorium c. Quasi-traditio
b. Traditio brevi manu d. None of the above

42. When the goods are delivered to the buyer on ‘sale or return’, the ownership
passes to the buyer:
a. Upon delivery of goods
b. Upon expiration of period agreed upon
c. Upon the acceptance of the buyer of the seller’s offer
d. Upon perfection of sale

43. Dacion en pago as distinguish from sale

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 a. The object is always existing and specific
b. There is greater freedom in fixing the price
c. There is no pre-existing obligation
d. The cause is the price

44. The buyer has the rights to the fruits of the thing:
a. From the time fruits have been delivered
b. From the time the obligation to deliver the thing bought arises
c. From the time of perfection of the sale
d. From the time the thing bought is delivered

45. S sold his cat to B for 2,000. No payment has been made and the sales document
does not provide for the date of delivery. Before deliver and payment, the cat
gave birth to a kitten
a. B is entitled the kitten which was born after the perfection of the
contract of sale
b. S is entitled to the fruits as B has not yet paid the price
c. S is entitled to the fruit because it was born before the obligation to
deliver the cat
d. B should pay an additional amount for the kitten to be entitled to it

46. S delivered his car to B by way of sale with the understanding that on day
following the such delivery S will name and fix the price. The said day came
and S telephoned B and stated the fixed price at 1 million. Is the sale
perfected?
a. Yes, because the price was named and fixed on the agreed date
b. No, the price was left to the will of S only
c. Yes, since there was already delivery of the thing sold
d. No, the price fixed by the seller was not accepted by the buyer

47. The following refers to option money, except?

a. Evidence of perfection of sale
b. Consideration distinct from selling price
c. Given to bind the offeror in a unilateral promise to buy or sell
d. All of the above describes option money

48. Refers to warranty of the seller that he has the right to sell the thing at the
time when ownership is to pass, and which can be enforced if the buyer is
deprived of the property sold by a final judgment in the court?
a. Warranty against hidden defects
b. Warranty if merchandise quality
c. Warranty against eviction
d. Warranty of possession

49. Rectolaw applies to which of the following example?

a. Sale of car on a straight term
b. Sale of house and lot in installment
c. Sale of car on installment wherein buyer constituted a mortgage on his
truck
d. Sale of piano on installment wherein the buyer constituted a chattel
mortgage on the piano

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 50. S promised to sell his car to B for 200,000 giving B 30 days to decide. B
accepted the promise of S and informed S that he would make known his decision
before the lapse of 30 days. He also gave S 2,000 as consideration so that S
would hold on to his promise. The contract entered into between S and B and
consideration given by B to S are known as?
a. Option contract and option money
b. Contract of sale and earnest money
c. Contract to sell and option money
d. Option contract and earnest money

END