CPA Review School of the Philippines

Manila
Regulatory Framework for Business Transactions September 20, 2023
Pre-week Lecture DO Dela Cruz

1. Which of the following is not correct?

a. The effect of the conditional obligation to give, once the condition has been fulfilled, shall retroact to the
day of the fulfillment of the condition
b. When the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the
pendency of the condition shall be deemed to have been mutually compensated
c. If the obligation is unilateral, the debtor shall appropriate the fruits and interest received, unless the nature and
circumstances of the obligation it should be inferred that the intention of the persons constituting the same was
different
d. In obligation to do and not to do, the courts shall determine in each case, the retroactive effect of the condition
that has been complied with

2. Which of the following is correct?

a. A solidary creditor can assign his right even without the consent of the others
b. The remission of the whole obligation, obtained by one of the solidary debtors shall entitle him to
reimbursement from his co-debtors
c. The condition not to do an impossible thing shall be considered as not having been agreed upon
d. Obligations for whose fulfilment a day certain has been fixed shall be demandable at once.

3. Upon the proposal of a third person, a new debtor substituted the original debtor without the latter's consent. The
creditor accepted the substitution. Later, however, the new debtor became insolvent and defaulted in his
obligation. What is the effect of the new debtor's default upon the original debtor?
a. The original debtor is freed of liability since novation took place and this relieved him of his obligation
b. The original debtor shall pay or perform the obligation with recourse to the new debtor
c. The original debtor remains liable since he gave no consent to the substitution
d. The original debtor shall pay or perform 50% of the obligation to avoid unjust enrichment on his part

4. A bought a business class ticket from B Airlines. As she cheoked in, the manager downgraded her to economy on
the ground that a Congressman had to be accommodated in the business class. A suffered discomfort and
embarrassment of the downgrade. She sued the airlines for quasi-delict but B Airlines countered that, since her
travel was governed by a contract between them, no quasi-delict could arise. Is the airline correct?
a. No, the breach of contract may in fact be tortious as when it is tainted as in this case with arbitrariness,
gross bad faith and malice
b. No, denying A the comfort and arhenities of the business class as provided in the ticket is a tortious act
c. Yes, since the facts show a breach of contract, not a quasi-delict
d. Yes, since quasi-delict presupposes the absence of a pre-existing contractual relation between the parties

5. A borrowed P1M from B and C who acted as solidary creditors. When the loan, matured, B wrote a letter to A
demanding payment of the loan directly to him. Before A could comply, C went to see him personally to collect
and he paid him. Did A make a valid payment.
a. No, since A should have split the payment between B and C
b. No, since B, the other solidary creditor, already made a prior demand for payment from A
c. Yes, since the payment covers the whole obligation
d. Yes, since C was a solidary creditor, payment to him extinguished the obligation

6. A and B both undertook a contract to deliver to C in Manila a boat docked in Subic. Before they could deliver it,
however, the boat sank in a storm. The contract provides that fortuitous event shall not exempt A and B from their
obligation. Owing to the loss of the motor boat, such obligation is deemed converted into one of indemnity for
damages. Is the liability of A and B joint or solidary?
a. Neither solidary nor joint since they cannot waive the defense of fortuitous event to which they are entitled
b. Solidary or joint upon the discretion of C
c. Solidary since A and B failed to perform their obligation to deliver the motor boat
d. Joint since the conversion of their liability to one of indemnity for damages made it joint

7. A natural obligation under the New Civil Code of the Philippines is one which
a. The obligor has a moral obligation to do, otherwise entitling the obligee to damages
b. Refers to an obligation in writing to do or not to do
c. The oblige may enforce through the court if violated by the obligor
d. Cannot be judicially enforced but authorizes the obligee to retain the obligor's payment or performance
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 8. A writes a promissory note in favor of his creditor, B. It says: “Subject to my option, I promise to pay B Php 1Mor
his order or give Php 1M worth of cement or to authorize him to sell my house worth Php 1M. signed A”. Is the
note negotiable?
a. No, because the exercise of the option to pay lies with A, the maker and debtor
b. No, because it authorizes the sale of collateral securities in case the note is not paid at maturity
c. Yes, because the note is really payable to B or his order, the provisions being merely optional
d. Yes, because an election to require something to be done in lieu of payment of money does not affect
negotiability

9. Can future inheritance be the subject of contract of sale?

a. No, since it will put the predecessor at the risk of harm from a tempted buyer, contrary to public policy
b. Yes, since the death of the decedent is certain to occur
c. No, since the seller owns no inheritance while his predecessor lives
d. Yes, but on the condition that the amount of inheritance can only be ascertained after the obligations of the
estate have been paid

10. S sold his coconut plantation to A Inc. for Php 100M, payable in installments of Php 10M per month with 6%
interest per annum. S married L after 5 months and they chose conjugal partnership of gains to govern their
property relations. When they married, A had an unpaid balance of Php 50M plus interest in S favor. To whom
will A's monthly payments go after the marriage?
a. The principal shall go to the conjugal partnership but the interests to S
b. Both the interest and principal shall go to S since they are his exclusive properties
c. Both principal and interest shall go to the conjugal partnership since these become due after the marriage
d. The principal shall go to S but the interest to the conjugal partnership

11. L entered into a contract to sell with R, undertaking to convey to the latter one of the five lots he owns, without
specifying which lot it was for the price of Php 1M. Later, the parties could not agree which of five lots he owned
L undertook to sell to R. What is the standing of the contract?
a. Unenforceable b. Voidable c. Rescissible d. Void

12. Knowing that the car had a hidden crack in the engine, X sold it to Y without informing the latter about it. In any
event, the deed of sale expressly stipulated that X was not liable for hidden defects. Does Y have the right to
demand from X a reimbursement of what he spent to repair the engine plus damages
a. Yes, X is liable whether or not he was aware of the hidden defects
b. Yes, since the defect was not hidden; X knew of it but he acted in bad faith in not disclosing the fact to Y
c. No, because Y is in estoppel, having changed engine without prior demand
d. No, because Y waived the warranty against hidden defects

13. A Cannery produced sardines in cans known as "Sards". B bought a can of Sard from a store, ate it and suffered
from poisoning caused by a noxious substance found in the sardines. B filed a case for damages against A. Which
of the following defense will hold?
a. The expiry date of the Sards was clearly printed on its can, still the store sold and B bought it
b. B must have detected the noxious substance in the sardines by smell, yet she still ate it
c. A had no transaction with B; she bought the Sards from a store, not directy from B
d. A enjoys the presumption of safeness of its canning procedure and B has not overcome such presumption

14. P sold to M 10grams of shabu worth Php 5,000. As he had no money at the time of the sale, M wrote a promissory
note promising to pay P or his order Php 5,000. P then indorsed the note to X (who did not know about the shabu)
and X to Y. Unable to collect from P, Y then sued X on the note. X set up the defense of illegality of consideration.
Is he correct?
a. No, since X, being a subsequent indorser, warrants that the note is valid and subsisting
b. No, since X, a general indorser, warrants that the note is valid and subsisting
c. Yes, since a void contract does not give rise to any right
d. Yes, since the note was born of an illegal consideration which is a real defense

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 15. Allan bought Billy's property through Carlos, an agent empowered with a special power of attorney to sell the
same. When Allan was ready to pay as scheduled, Billy called, directing Allan to pay directly to him. On learning
of this, Carlos, Billy's agent, told Allan to pay through him as his SPA provided and to protect his commission.
Faced with two claimants, Allan consigned the payment in court. Billy protested, contending that the consignation
is ineffective since no tender of payment was made to him. Is he correct?
a. No, since consignation without tender of payment is allowed in the face of the conflicting claims on the
plaintiff
b. Yes, as owner of the property sold, Billy can demand payment directly to himself
c. Yes, since Allan made no announcement of the tender
d. Yes, a tender of payment is required for a valid consignation.

16. X borrowed money from a bank, secured by a mortgage on the land of Y, his close friend. When the loan matured,
Y offered to pay the bank but it refused since Y was not the borrower. Is the bank's action correct?
a. Yes, since X, the true borrower, did not give his consent to Y's offer to pay
b. No, since anybody can discharge X's obligation to his benefit
c. No, since Y, the owner of the collateral, has an interest in the payment of the obligation
d. Yes, since it was X who has an obligation to the bank

17. On X’s failure to pay his loan to ABC Bank, the latter foreclosed the Real Estate Mortgage he executed in its
favor. The auction sale was set for Dec. 1, 2022 with the notices of sale published as the law required. The sale
was, however, cancelled when Dec. 1, 2022 was declared a holiday and re-scheduled to Jan. 10, 2023 without
republication of notice. The auction sale then proceeded on the new date. Under the circumstance, the auction sale
is
a. Rescissible b. Unenforceable c. Void d. Voidable

18. X is a director in T Corp. who was elected to a 1-year term on February 1, 2022. On April 11, 2022, X resigned
and was replaced by R, who assumed as director on May 17, 2022. On Nov. 21, 2022, R died, S was then elected
in his place. Until which time should S serve as director?
a. April 11, 2023 b. February 1, 2023 c. May 17, 2023 d. Nov. 21, 2023

19. A, the proprietor of a fleet of 10 taxicabs, decided to adopt, as his business name, "A Transport Co. Inc." May this
be allowed?
a. No, it would be deceptive since he is a proprietor, not a corporation
b. No, since "A" is a generic name, not suitable for registration
c. Yes, since his line of business is public transportation
d. Yes, since such name would give his business a corporate identity

20. In a special meeting called for the purpose, 2/3 of the stockholders representing the outstanding capital stock in X.
Co. authorized the company's Board of Directors to amend its By-laws. By majority vote, the Board then
approved the amendment. Is this amendment valid?
a. No, since the stockholders cannot delegate their right to amend the By-laws to the board
b. Yes since the majority of votes in the Board was sufficient to amend the BY-Laws
c. No, because the voting in the Board should have been by majority of a quorum
d. Yes since the votes of 2/3 of the stockholders and majority of the Board were secured

21. A law was passed disqualifying former members of Congress from sitting in the Board of Directors of
government owned or controlled corporations. Because of this, the Board of Directors of ABC Corp, a
government owned and controlled corporation, disqualified C, a former Congressman, from continuing to sit as
one of its members. C objected, however, insisting that under the Corporation Code, members of the board of
directors of corporations may only be removed by vote of stockholders holding 2/3 of its outstanding capital stock
in a regular or special meeting called for that purpose. Is C correct?
a. Yes, since the new law cannot be applied to members of the board of directors already elected prior to its
passage
b. No, since the disqualification takes effect by operation of law, it is sufficient that he was declared no
longer a member of the board
c. Yes, since the provisions of the Corporation Code applies as well to government owned and controlled
corporations
d. No, since the board has the power to oust him even without the new law

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 22. The corporate term of a stock corporation is that which is stated in its articles of incorporation. It may be extended
or shortened by an amendment of the articles when approved by majority of its Board of Directors and
a. Approved and ratified by at least 2/3 of all stockholders
b. Approved by at least 2/3 of the stockholders representing the outstanding capital stock
c. Ratified by at least 2/3 of all stockholders
d. Ratified by at least 2/3 of the stockholders representing the outstanding capital stock

23. ABC Corp. increased its capital stocks from Php10 Million to Php15 Million and, in the process, issued 1,000
new shares divided into Common Shares "B" and Common Shares "C." T, a stockholder owning 500 shares,
insists on buying the newly issued shares through a right of pre-emption. The company claims, however, that its
By-laws deny T any right of pre-emption. Is the corporation correct?
a. No, since the By-Laws cannot deny a shareholder his right o pre-emption.
b. Yes, but the denial of his pre-emptive right extends only to 500 shares.
c. Yes, since the denial of the right under the By-laws is binding on T.
d. No, since pre-emptive rights are governed by the articles of incorporation

24. When one exercises a right recognized by law, knowing that he thereby causes an injustice to another, the latter is
entitled to recover damages. This is known as the principle of
a. Res ipsa loquitur c. Vicarious liability
b. Damnum absque injuria d. Abuse of rights

25. When bilateral contracts are vitiated with vices of consent, they are rendered
a. Rescissible b. Void c. Unenforceable d. Voidable

26. May a spouse freely donate communal or conjugal property without the consent of the other?
a. Absolutely not, since the spouses co-own such property
b. Yes, for properties that the family may spare, regardless of value
c. Yes, provided the donation is moderate and intended for charity or family rejoicing
d. Yes, in a donation mortis causa that the donor may still revoke in his lifetime

27. Contracts take effect only between the parties or their assiens and heirs, except where the rights and obligations
arising from the contract are not transmissible by their nature, by stipulation, or by provision of law. In the latter
case, the assigns of the heirs are not bound by the contracts. This is known as the principle
a. Relativity of contracts c. Mutuality of contracts
b. Freedom to stipulate d. Obligatory force of contracts

28. When the donor gives donations without reserving sufficient funds for his support or for the support of his
dependents, his donations are
a. Rescissible, since it results in economic lesion of more than 25% of the value of his properties
b. Voidable, since his consent to the donation is vitiated by mindless kindness
c. Void, since it amounts to wanton expenditure beyond his means
d. Reducible to the extent that the donations impaired the support due to himself and his dependents

29. Anne owed Bessy P1M due on October 1, 2022 but failed to pay her on due date. Bessy sent a demand letter to
Anne giving her 5 days from receipt within which to pay. Two days after receipt of the letter, Anne personally
offered to pay Bessy in manager's check but the latter refused to accept the same. The 5 days lapsed. May Anne's
obligation be considered extinguished?
a. Yes, since Bessy's refusal of the manager's check, which is presumed funded amounts to a satisfaction of the
obligation
b. No, since tender of payment even in cash, if refused, will not discharge the obligation without proper
consignation in court
c. Yes, since Anne tendered payment of the full amount due
d. No, since a manager's check is not considered legal tender in the Philippines

30. The presence of a vice of consent vitiates the consent of a party in a contract and this renders the contract
a. Rescissible b. Unenforceable c. Voidable d. Void

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 31. A buyer ordered 5,000 apples from the seller at Php 20 per apple. The seller delivers 6,000 apples. What are the
rights and obligations of the buyer?
a. He can accept all 6,000 apples and pay the seller at P20 per apple
b. He can accept all 6,000 apples and pay a lesser price for the 1,000 excess apples
c. He can keep the 6,000 apples without paying for the 1,000 excess since the seller delivered them anyway
d. He can cancel the whole transaction since the seller violated the terms of their agreement

32. X sold to Y 100 sacks of rice that Y was to pick up from X's rice mill on a particular date. Y did not however
appear on the agreed date to take delivery of the rice. After one week, X automatically rescinded the sale without
notarial notice to Y. is the rescission valid
a. Yes, automatic rescission is allowed since, having the character of movables and consumables, rice can
easily deteriorate
b. No, the buyer is entitled to a customary 30-day extension of his obligation to take delivery of the goods
c. No, since there was no express agreement regarding automatic rescission
d. No, the seller should first determine that Y was not justified in failing to appear

33. X bought a land from Y, paying him cash. Since they were friends, they did not execute any document of sale.
After 7 years, the heirs of X asked Y to execute a deed of absolute sale to formalize the verbal sale to their father.
Unwilling to do so, X's heirs filed an action for specific performance against Y. Will their action prosper?
a. No, after more than 6 years, the action to enforce the verbal agreement has already elapsed
b. No, since the sale cannot under the Statute of Frauds be enforced
c. Yes, since X bought the land and paid Y for it
d. Yes, after full payment, the action became imprescriptible

34. A warranty inherent in a contract of sale, whether or not mentioned in it is known as

a. Warranty on quality c. Warranty against eviction
b. Warranty against hidden defects d. Warranty in merchantability

35. In a true pacto de retro sale, the title and ownership of the property sold are immediately vested in the vendee a
retro subject only to the resolutory condition of repurchase by the vendor a retro within the stipulated period. This
is known as
a. Equitable mortgage c. Legal redemption
b. Conventional redemption d. Equity of redemption

36. P sold to M a pair of gecko (tuko) for P50,000. M then issued a promissory note to P promising to pay the money
within 90 days. Unknown to P and M, a law was passed a month before the sale that prohibits and declares void
any agreement to sell gecko in the country. if X acquired the note in good faith and for value, may he enforce
payment on it?
a. No, since the law declared void the contract on which the promissory note was founded
b. No, since it was not X who bought the gecko
c. Yes, since he is a holder in due course of a note which is distinct from the sale of gecko
d. Yes, since he is a holder in due course and P and M were not aware of the law that prohibited the sale of gecko

37. An agent, authorized by a special power of attorney to sell a land belonging to the principal succeeded in selling
the same to a buyer according to the instructions given to the agent. The agent executed the deed of absolute sale
on behalf of his principal two days after the principal died, an event that neither the agent nor the buyer knew at
the time of the sale. What is the standing of the sale?
a. Voidable b. Valid c. Void d. Unenforceable

38. X, who was abroad, phoned his brother, Y authorizing him to sell X's parcel of land in Pasay. X sent the title to Y
by courier service. Acting for his brother, Y executed a notarized deed of absolute sale of the land to Z after
receiving payment. What is the status of the sale?
a. Valid, since a notarized deed of absolute sale covered the transaction and full payment was made
b. Void, since X should have authorized agent Y in writing to sell the land
c. Valid, since Y was truly his brother X's agent and entrusted with the title needed to effect the sale
d. Valid, since the buyer could file an action to compel X to execute a deed of sale

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 39. A borrowed Php 1M from a bank secured by a mortgage on his land. Without his consent, his friend B paid the
whole loan. Since A benefited from the payment, can B compel the bank to subrogate him in its right as
mortgagee of A's land?
a. No, but the bank can foreclose and pay B back
b. No, since B paid for A's loan without his approval
c. Yes, since a change of creditor took place by novation with the bank's consent
d. Yes, since it is but right that B be able to get back his money and, if not, to foreclose the mortgage in the
manner of the bank

40. The husband assumed sole administration of the family's mango plantation since his wife worked abroad.
Subsequently, without his wife's knowledge, the husband entered into an antichretic transaction with a company,
giving it possession and management of the plantation with power to harvest and sell the fruits and to apply the
proceeds to the payment of a loan he got. What is the standing of the contract?
a. It is void in the absence of the wife's consent
b. It is void absent an authorization from the court
c. The transaction is void and can neither be ratified by the wife nor authorized by the court
d. It is considered a continuing offer by the parties, perfected only upon the wife's acceptance or the court's
authorization

41. The right of a mortgagor in a judicial foreclosure 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 or confirmation of
the sale by the court is known as
a. Accion pauliana b. Equity of redemption c. Pacto de retro d. Right of redemption

42. X constituted a chaltel mortgage on a car (valued at Php 1M) to secure a Php 500,000 loan. For the mortgage to
be valid, X should have
a. The right to mortgage the car to the extent of half of its value
b. Ownership of the car
c. Unqualified free disposal of his car
d. Registered the car in his name

43. X, at Y’s request, executed a Real Estate Mortgage on his (X’s) land to secure Y’s loan, from Z. Z successfully
foreclosed the morigage when Y defaulted on the loan but half of obligation remained unpaid. May Z sue X to
enforce his right to the deficiency?
a. Yes, but solidarily with Y
b. Yes, since X's is deemed to warrant that his land would cover the whole obligation
c. No, since it is the buyer at the auction sale who should answer for the deficiency
d. No, because X is not Z's debtor

44. The liability of the partners, including industrial partners for partnership contracts entered into in its name and for
its account, when all partnership assets have been exhausted is
a. Pro-rata b. Joint c. Solidary d. Voluntary

45. X Co., a partnership is composed of A (capitalist partner), B (capitalist partner, and C (industrial partner), If you
were partner A, who between B and C would you have an insurable interest on, such that you may then insure him
a. No one, as there is merely a partnership contract among A, B and C
b. Both B and C, as they are your partners
c. Only C, as he is an industrial partner
d. Only B as he is a capitalist partner

46. X Corp operates a call center that received orders for pizzas on behalf of Y Corp. which operates a chain of pizza
restaurants. The two companies have the same set of corporate officers. After two years, X Corp., dismissed its
call center agents for no apparent reason. The agents filed a collective suit for illegal dismissal against both X and
Y Corp based on the doctrine of piercing the veil of corporate fiction. The latter set up the defense that the agents
are in the employ of X Corp, which is a separate juridical entity. Is the defense appropriate?
a. No, since the doctrine would apply, the two companies having the same set of corporate officers
b. No, the real employer is Y Corp, the pizza company with X Corp., serving as an arm for receiving its outside
orders for pizzas
c. Yes, it is not shown that one company completely dominates the finances, policies and business practices
of the other
d. Yes, since the two companies perform two distinct businesses

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 47. It is settled that neither par value nor book value is an accurate indicator of the fair value of a share of stock of a
corporation. As to unpaid subscription to its shares of stock, as they are regarded as corporate assets, they should
be included in the
a. Capital value b. Book value c. Par value d. Market value

48. In elections for the Board of Trustees of non-stock corporations, members may cast as many votes as there are
trustees to be elected but may not cast more than one vote for one candidate. This is true
a. Unless set aside by the members in plenary session
b. In every case even if the Board of trustees resolves otherwise
c. Unless otherwise provided in the Articles of Incorporation or in the By-Laws
d. In every case even if the majority of the members decide otherwise during the election

49. The rule is that the valuation of the shares of a stockholder who exercises his appraisal rights is determined as of
the day prior to the date on which the vote was taken. This is true
a. Regardless of any depreciation or appreciation in the share's fair value
b. Regardless of any appreciation in the share's fair value
c. Regardless of any depreciation in the share's fair value
d. Only if there is no appreciation or depreciation in the share's fair value

50. EFG Foundation Inc, a non- profit organization, scheduled an election for its six-member Board of Trustees. X, Y
and Z, who are minority members of the foundation, wish to exercise cumulative voting in order to protect their
interest, although the Foundation's Articles and By-Laws are silent on the matter. As to each of the three, what is
the maximum number of votes that he/she can cast
a. 6 b. 9 c. 12 d. 3

51. T Corp has a corporate term of 20 years under its Articles of Incorporation or from June 1 1980 to June 1, 2000.
On June 1; 1991 it amended its Articles of Incorporation to extend its life by 15 years from June 1, 1980 to June 1,
2015. The SEC approved this amendment. On June 1, 2011, however, T Corp decided to shorten its term by 1 year
or until June 1, 2014. Both the 1991 and 2011 amendments were approved by majority vote of its Board of
Directors and ratified in a special meeting by its stockholders representing at least 2/3 of its outstanding capital
stock. The SEC however, disapproved the 2011 amendment on the ground that it cannot be made earlier than 5
years prior to the expiration date of the corporate term, which is June 1, 2014. Is this SEC disapproval correct?
a. No, since the 5-year rule on amendment of corporate term applies only to extension, not shortening of
term
b. Yes, any amendment affecting corporate term cannot be made earlier than 5 years prior to the corporation's
expiration date
c. No, since a corporation can in fact have a corporate life of 50 years
d. Yes, the amendment to shorten corporate term cannot be made earlier than 5 years prior to the corporation's
expiration date

52. X Corp. whose business purpose is to manufacture and sell vehicles, invested its funds in Y Corp, an investment
firm, through a resolution of its Board of Directors. The investment grew tremendously on account of Y Corp.'s
excellent business judgment. But a minority stockholder in X Corp assails the investment as ultra vires. Is he right
and if so, what is the status of the investment?
a. Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders' ratification
b. Yes, it is an ultra vires act of its Board of Directors and thus void
c. Yes, it is an ultra vires act of its Board of Directors but voidable only, subject to stockholders'
ratification
d. Yes, it is an ultra vires act of the corporation itself and consequently, void.

53. The Corporation Code sanctions a contract between two or more corporations which have interlocking directors,
provided there is no fraud that attends it and it is fair and reasonable under the circumstances. The interest of an
interlocking director in one corporation may be either substantial or nominal. It is nominal if his interest
a. Does not exceed 25% of the outstanding capital stock
b. Exceeds 25% of the outstanding capital stock
c. Exceeds 20% of the outstanding capital stock
d. Does not exceed 20% of the outstanding capital stock

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 54. In case of disagreement between the corporation and a withdrawing stockholder who exercises his appraisal right
regarding the fair value of his shares, a three-member group shall by majority vote resolve the issue with finality.
May the wife of the withdrawing stockholder be named to the three member group?
a. No, the wife of the withdrawing shareholder is not a disinterested person
b. Yes, since she could best protect her husband's shareholdings
c. Yes, since the rules do not discriminate against wives
d. No, since the stockholder himself should sit in the three-member group

55. The rule is that no stock dividend shall be issued without the approval of stockholders representing at least 2/3 of
the outstanding capital stock at a regular or special meeting called for the purpose. As to other forms of dividends
a. A mere majority of the entire Board of Director applies
b. A mere majority of the quorum of the Board of Directors applies
c. A mere majority of the votes of stockholders representing the outstanding capital stock applies
d. The same rule of 2/3 vote applies

56. Several American doctors wanted to set up a group clinic in the Philippines so they could render modern medical
services. If the clinic is to be incorporated under our laws, what is the required foreign equity participation in such
a corporation
a. 40% b. 0% c. 60% d. 70%

57. The Board of Directors of XYZ Corp unanimously passed a resolution approving the taking of steps that in reality
amounted to willful tax evasion. On discovering this, the government filed tax evasion charges against all the
company's members of the board of directors. The directors invoked the defense that they have no personal
liability, being mere directors of a fictional being. Are they correct?
a. No, since as a rule only natural persons like the members of the board of directors can commit corporate
crimes
b. Yes, since it is the corporation that did not pay the tax and it has a personality distinct from its directors
c. Yes, since the directors officially and collectively performed acts that are imputable only to the corporation
d. No, since the law makes directors of the corporation solidarily liable for gross negligence and bad faith
in the discharge of their duties

58. The Articles of Incorporation of ABC Transport Co., a public utility, provides for ten members in its Board of
Directors. What is the prescribed minimum number of Filipino citizens in its Board
a. 10 b. 6 c. 7 d. 5

59. In an obligation to give a determinate thing, what rights are available to the creditor?
First Answer - To compel specific performance
Second Answer - To recover damages in case of breach of the obligation
Third Answer - To ask that the obligation be complied with at the expense of the debtor.
a. All answers are correct c. Only the first answer is correct
b. Only the first and second answers are correct d. All answers are Wrong

60. The following contracts, except one, are void ab initio. Which is the exception?
a. That whose object is outside the commerce of men.
b. That whose object did not exist at the time of the transaction
c. That which contemplates an impossible service
d. That which is undertaken in fraud of creditors.

61. S, minor, owns a specific property valued at P50,000. B capacitated, by means of fraud induced S to sell his
property to him for P30,000, which S did so. The contract is in writing. Which is correct?
a. The contract is valid and binding from the start
b. The contract remains unenforceable because it falls under the Statute of Frauds.
c. The contract is rescissible because the ward suffered lesion by more than ¼ of the value.
d. The contract is voidable and B can ask for annulment within the period prescribed by law.

62. Legal compensation is allowed when one of the debts

a. Arises from a sale of real property made by a minor to a capacitated person
b. Arises from the obligation of a depositary
c. Consists in civil liability arising from a penal offense
d. Arises from a claim for support by gratuitous title

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 63. This is not a characteristic of a void or inexistent contract.
a. The right to raise a defense of illegality cannot be waived
b. The action or defense for declaration of the nullity or inexistence of the contract does not prescribe
c. Not subject to ratification
d. Defense of illegality of the contract is available to third persons whose interest are not directly affected

64. Reformation is not the proper remedy if

a. The mutual mistake of the parties causes the failure of the instrument to disclose their real agreement
b. One party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does
not show their true intention
c. There was mistake, fraud, inequitable conduct or accident which prevented the meeting of the minds of
the contracting parties
d. The true intention of the contracting parties is not expressed in the instrument purporting to embody the
agreement by reason of mistake, fraud, inequitable conduct or accident

65. The following contracts are defective. Which one is unenforceable?

a. Contract of sale by which a guardian acquires the property of his ward without the approval of the court
b. Contract of sale by which a city mayor acquires a portion of the city pursuant to a city ordinance enacted by
the City Council
c. Contracts whose object is outside the commerce of man
d. Those were both parties are incapable of giving consent to a contract

66. Which of the following is not a requisite of fraud?

a. There must be a misrepresentation or concealment
b. The fraud must be serious
c. A party is induced by fraud to enter into contract
d. The fraud is employed by both parties upon each other

67. J agreed to pay his debt and in case of non-payment, to render free service as a servant. Is the obligation valid.
a. No, the obligation to pay and to render service as a servant is contrary to law and morals.
b. Yes, if the services will be rendered in satisfaction of the debt and in case of non-performance, the proper
remedy is specific performance
c. No, the nullity of the condition carries with it the nullity of the principal obligation
d. Yes, in so far as the obligation to pay but not as regards the undertaking to render domestic services for
free

68. E, a manufacturer of locks, hired A for 2 years, on the condition that for 5 years, A should not engage in
competitive locks business. After one year, A left for reasons of health. Shortly afterwards, after regaining his
health, A competed with E, who now seeks to restrain him from such competition, will the action prosper?
a. No, the restriction is void, because it is an unreasonable restraint of trade
b. Yes, it is a reasonable restraint, considering that it was only for 5 years.
c. No, the contract of employment for 2 years was not completed because of a justifiable reason
d. Yes, if E will allow A to complete the 2 years services agreed upon.

69. Which of the following is not correct in rescission?

a. Cannot be availed when the party who has been damaged has other legal remedy
b. The person who seeks rescission must be able to return what he ought to return
c. The object of the contract is not in the possession of third persons who have acquired it in good faith
d. Can be demanded by any of the contracting parties

70. A owes B P10,000 with 12% interest. B owes C P1,200. It was agreed between A and B that A would give the
interest of P1,200 to C and C communicated his acceptance of the stipulation between A and B. There is
a. Stipulation pour atrui c. Compensation
b. Pactum commissorium d. Assignment

71. - A donated to B a real property, the donation is made orally.

- A sold to B a real property, the sale is made orally.
a. Both contracts are valid c. Only the first contract is valid
b. Both contracts are void d. Only the second contract is valid

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 72. If an obligation is with a penal clause
Statement A - Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be
demanded.
Statement B - When the debtor is guilty of fraud in the fulfillment of the obligation, the creditor can demand
payment of damages and interest in addition to the penalty.
a. True, True b. False, True c. False, False d. True, false

73. A, B, and C solidarily owe D and E P30,000. D remitted the entire obligation in favor of A without the consent of
E. The effect is
a. A cannot recover from B and C because remission in her favor extends to the benefit of B and C
b. A can recover from B and C their respective share of the debt
c. The obligation is not extinguished until A collects from B and C
d. The obligation is not yet extinguished until E is paid by D of her share of the credit

74. In quasi-delict, the liability of a person who is held liable for the fault or negligence of another person who is
under his care or responsibility shall cease if.
a. There was contributory negligence on the part of the person injured.
b. He was not present at the time of the act, hence it was not possible to him to prevent the damage.
c. He observed ordinary diligence to prevent the damage.
d. He observed the diligence of a father of a good family.

75. What is the effect of the loss of the prestations in alternative obligation where the right of choice belongs to the
creditor and the loss is due to the fault of the debtor?
First Answer: If only one remains the obligation still subsists, but it ceases to be alternative as it becomes a
simple obligation.
Second Answer: If 2 or more objects remain, the obligation still subsists and the choice is limited to the
remaining objects.
Third Answer: If none remains, the obligation is extinguished because the debtor chose not to give anything.
a. All answers are correct c. Only one of the answers is correct
b. Only the first and second answers are correct d. All answers are wrong

76. A owes B P 20,000 which became due on December 20, 2022. On that date, A offered P 10,000, the only money
he then had, but B refused to accept the payment. Thereafter A met, C, B's 23 year old daughter, to whom she
gave the P10,000 with the request that she turn the money over to her mother. The money was stolen while in C's
possession. How much may B still recover from A?
a. P 20.000 b. P 10.000 c. P 15.000 d. P 0

77. A, wife of B and daughter of C, while employed in a jewelry store owned by D embezzled P100,000 belonging to
said jewelry store. In order to prevent her criminal prosecution for estafa, B and C signed a document obligating
themselves jointly and severally to pay D the amount embezzled plus interest. Because of their failure to comply
with their promise, D brought an action against B and C. Will the action prosper?
a. Yes, both knowingly and voluntarily agreed to assume the obligation of A
b. No, C should not have been included because A is no longer under his authority
c. Yes, but only in so far as B is concerned because husband and wife are required by law to support each other
d. No, it is considered contrary to public policy to allow parties to make an agreement designed to prevent
prosecution for crimes.

78. A contract in which a person literally contracts with himself is

a. Adhesion contract b. Auto contract c. Accessory contract d. Unilateral contract

79. The statement "Contracts shall be obligatory in whatever form they have been entered into provided all the
requisites for their validity are present" refers to
a. Real contract b. Consensual contracts c. Formal contracts d. Solemn contracts

80. The pre-nuptial agreement of H and W, husband and wife, provides for complete separation of property. Later, H,
with violence and intimidation forced W to sell to him (H), W's pieces of jewelry. The sale is
a. Rescissible, if W suffered a lesion of more than ¼ of the value of the property
b. Voidable, because the consent of W is vitiated
c. Unenforceable, if the value is at least P500
d. Void, because husband and wife are not allowed to sell property to each other
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 81. This obligation is demandable at once
a. With a suspensive condition c. When my means permit me to do so
b. With a period in diem d. When it depends on the happening of a specified event

82. This contract is without effect unless ratified

a. Marriage between first degree cousins c. Contract of sale between a guardian and his ward
b. Contract of sale between two insane persons d. Donation between husband and wife

83. One of the following is void

a. Policitation b. Pactum commissorium c. Stipulation pour atrui d. Waiver intentionada

84. To be valid and enforceable, the following contracts should be in writing, except:
a. Contract to pay interest on loan c. Contract giving authority to an agent to sell a piece of land
b. Contract of donation of real property d. Contract made in consideration of marriage

85. A condition which if imposed on an obligation will be disregarded and will therefore make the obligation
immediately demandable.
a. If Lala kills Lele c. If Lolo commits suicide
b. If Lili passes the CPA board exams d. If Lulu will not rise from the dead

86. If the law or contract does not state the diligence which is to be observed in the performance of an obligation, the
obligor is expected to observe.
a. Ordinary diligence c. Diligence of a father of a good family
b. Extraordinary diligence d. Utmost care

87. Facultative as distinguished from alternative obligation

a. The right of choice is given only to the debtor
b. Various things are due, but the giving of one is sufficient
c. If one of the prestations is illegal, the others may be valid and the obligation remains
d. If it is impossible to give all except one, that last one must still be given

88. Within what period must recovery be made if the debtor did not know that payment was not yet due?
a. Before maturity with regard to both what was paid and the interest
b. Even after maturity with regard to both the interest and what was paid
c. Before maturity with regard to what was paid and even after maturity with regard to the interest
d. Betore maturity with regard to interest and even after the maturity with regard to what was paid

89. Which of the following is wrong in alternative obligations?

a. The obligor shall completely perform one of them
b. The obligee cannot be compelled to receive part of one and part of the other undertaking
c. The right of choice belongs to the creditor, unless it has been expressly granted to the debtor
d. The debtor shall have no right to choose those prestations which are impossible

90. A remedy in equity by means of which a written instrument is made or construed so as to express or conform to
the real intention of the parties when some error or mistake has been committed
a. Rescission b. Annulment c. Reformation d. Consideration

91. Payment by cession as distinguished from dation in payment

a. The debtor is not necessarily in a state of financial difficulty
b. The effect is to release the debtor for the net proceeds of the things ceded or assigned.
c. The property is alienated by the debtor to the creditor in satisfaction of a debt in money.
d. What is delivered by the debtor is merely a thing to be considered as the equivalent of the performance of the
obligation

92. If a third person pays an obligation. What are the rights, which are available to him if he pays the obligation with
the knowledge and consent of the debtor?
First Answer - He can recover from the debtor the entire amount, which he has paid.
Second Answer - He is subrogated to all of the rights of the creditor.
a. True, True b. True, False c. False, True d. False, False

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 93. I. The loss or deterioration of the thing intended as a substitute through the negligence of the obligor, does not
render him liable
II. A person alternatively bound by different prestations shall completely perform one of them
a. True, true b. True, false c. False, true d. False, false

94. There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be
made
a. At the domicile of the debtor
b. At the domicile of the creditor
c. Wherever the thing might be at the moment the obligation was constituted
d. Wherever the thing might be at the moment the obligation is to be fulfilled

95. Which of the following statements is not correct?

a. The validity and compliance of a contract cannot be left to the will of one of the parties
b. In case of foreclosure and the price of the sale is less than the amount due, the pledgee cannot recover any
deficiency
c. Persons who are prohibited by law to enter into contract of donation cannot form universal partnership
d. Actions for fraud cannot be waived

96. The right of the creditor to exercise all the rights of his debtor to satisfy his claim, except rights which are
inherent and personal on the part of the debtor
a. Action subrogatoria b. Action redhibitoria c. Accion pauliana d. Accion quanti minoris

97. An assignor of credit warrants

a. Solvency of the debtor c. Assurance of payment
b. Collectibility d. Existence and legality of credit

98. A, B and C executed a promissory note binding themselves to pay P9,000 to X, Y and Z. The note is now due and
demandable. Can the creditors proceed against A alone for the payment of the entire debt?
a. No, each creditor can collect only P3,000 from A.
b. Yes, either X, Y or Z can collect P9,000 from A.
c. No, each creditor can collect only P1,000 from A.
d. Yes, since the promissory note is silent with respect to the rights of the creditors, the obligation is presumed to
be solidary.

99. Using the preceding number, suppose that C is insolvent, can A and B be held liable for C's share in the
obligation?
a. Yes, the debt shall be presumed to be divided into as many equal shares as there are debtors.
b. Yes, but A and B will be liable proportionately.
c. No, the debts are considered distinct from one another.
d. No, only either A and B but not both will be liable.

100. Using No. 98, suppose that the obligation was about to prescribe, but X wrote a letter to A demanding for
payment of the entire debt. Will this have the effect of interrupting the running of the period of prescription?
a. Yes, because the demand made by X covers the entire debt and will therefore inure to the benefit of the other
creditors.
b. Yes, insofar as A is concerned but not with regard to B and C.
c. No, because the demand should have been made to all the debtors.
d. No, all the creditors should have made the demand.

101. Using the preceding number, and prescription sets in, how much can Y collect from A?
a. P9,000 b. P3.000 c. P1.000 d. P0

102. Using the preceding number, how much can X collect from A?
a. P9,000 b. P3,000 c. P1,000 d. P0

103. Indivisibility as distinguished from solidarity.

a. Plurality of subject is indivisible.
b. When the obligation is converted into one of indemnity for damages because of breach, the character of the
obligation remains
c. Refers to the legal tie or vinculum
d. Refers to the prestation which constitutes the object of the obligation
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 104. I. When one of the parties has brought an action to enforce the instrument, he cannot subsequently ask for its
reformation.
II. The injured party may seek rescission, even after he has chosen fulfillment if the latter should become
impossible.
a. True, true b. True, false c. False, true d. False, false

105. Culpa aquiliana as distinguished from culpa contractual

a. Proof of due diligence in the selection and supervision of employees is not available as a defense
b. Proof of the contract and of its breach is sufficient prima facie to warrant recovery
c. The negligence of the defendant is merely an incident in the performance of the obligation
d. The source of liability is the defendant's negligent act or omission itself

106. A passenger on a bus was hurt, but in a criminal case against the driver, said driver was acquitted. The victim
now sues the owner of the truck for culpa contractual. May the suit still prosper?
a. No, this will constitute double jeopardy
b. No, the acquittal means that the guilt of the accused was not proven by proof beyond reasonable doubt
c. Yes, it is sufficient for him to prove the existence of the contract of carriage and the injuries suffered.
d. Yes, provided he can prove the negligence of the driver.

107. A owes B P11, 000 due on July 2, 2022. B owes A P6,000 due in July 3, 2022 and P4,000 due on July 10,
2022. B owes C P11,000 due on July 3, 2022. On July 3, 2022 B cannot pay C so B assigns to C her credit of
P11,000 against A, without the knowledge of A. On July 10, 2022, C tries to collect from A the P11,000. How
much can C compel A to pay?
a. P11,000 b. P9,000 c. P5,000 d. P1,000

Questions 108-110: A, B, C and D owe W, Y and Z P9,000. On maturity, how much can W collect from A?
108. If debtors are joint and creditors are joint
a. P2,250 b. P3,000 c. P9,000 d. P750

109. If debtors are joint and creditors are solidary

a. P9,000 b. P750 c. P3,000 d. P2,250

110. If the debtors are solidary and creditors are joint

a. P750 b. P2,250 c. P9,000 d. P3,000

111. Using the same data in No. 110, but the share of debtors A, B, C and D in the indebtedness is 1:2:3:4 and
creditors W, Y and Z is 2:3:5. How much can Y collect from B if debtors are joint and creditors are joint?
a. P1,800 b. P2,700 c. P675 d. P540

112. How much can Z collect from D, if debtors are solidary and creditors are joint?
a. P1,800 b. P1,125 c. P3,600 d. P4,500

113. How much should A pay W, if debtor are joint and creditors are solidary?
a. P180 b. P9,000 c. P2,250 d. P900

114. A lost P100,000 in a card game called pusoy, but he had no more cash to pay in full the winner at the time
session ended. A promised to pay B, the winner, two weeks thereafter. A failed to pay despite the lapse of two
months, so B filed in court a suit to collect the unpaid amount. Will the collection suit against A prosper?
a. Yes, if A made a negotiable promissory note.
b. Yes, whether or not a negotiable promissory note was made by A.
c. No, if A has no property to pay the obligation.
d. No, because pusoy is fundamentally a game of chance.

115. A filed a suit for ejectment against B for non-payment of condominium rentals amounting to P150,000. During
the pendency of the case, B offered and A accepted the full amount due as rentals from B who then filed a
motion to dismiss the suit. Is B correct?
a. Yes, the acceptance of the payment constitutes a waiver of the ejectment case.
b. Yes, because there is a novation.
c. No, the payment should furst result to benefit to A.
d. No, the payment by B of the rentals in arrears is not an abandonment of the ejectment case.
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 116. A was employed as professional driver of B Transit Bus owned by C. In the course of his work, A hit a
pedestrian who was seriously injured and later died in the hospital as a result of the accident. The victim's heirs
sued the driver and the owner of the bus for damages. Which of the following statements is not correct?
a. There is a presumption of negligence on the part of the employer C if a passenger is injured
b. The conviction of A in a criminal case makes C liable for the damages arising from the criminal act
c. The presumption that C is negligent is rebuttable by proof of observance of ordinary diligence
d. The liability of C shall cease when he proves that he observed ordinary diligence to prevent the
damage to passengers and pedestrians

117. N, R and J solidarily bound themselves to deliver to S a Honda motorcycle valued at P60,000. The obligation
was not fulfilled through the fault of J. Thereupon, S filed an action in court against N and the court awarded
P72,000 to S representing the value of the motorycle plus damages. Which of the following situations is valid?
a. If N pays S the P72,000, N can collect from R and J P24,000 each
b. S has to collect P24,000 each from N, R and J to satisfy the court's award of P72,000
c. N can refuse to pay the penalty because it should be charged against J, the guilty party.
d. If S succeeds in collecting the P72,000 from N. N in turn can collect from R P20,000 and from J
P32,000.

118. In which of the following debts is legal compensation proper? When one of the debts
a. Arises from the obligation of a depository c. Arises from a claim for support by gratuitous title
b. Arises from a voidable contract d. Consists in civil liability arising from penal offense

119. A borrowed P10,000 from B on Dec. 25, 2021. The debt is evidenced by a promissory/note executed by A
wherein she promised to pay as soon as she has the money or as soon as possible. B made several demands
upon A for payment, the first, an oral demand was made on May 2, 2022 and the last written demand was dated
September 25, 2022 but up to now, there is no payment of the debt. B sued A, will the case prosper?
a. Yes, A is in default since May 2, 2022
b. Yes, A is in default since September 25, 2022
c. No, the obligation is subject to a suspensive condition
d. No, the obligation is one with a period and the period has not arrived yet

120. On September 25, 2022 sent a telegram to B in Cebu, offering to sell to B his house and lot for P2M, cash. On
the same date, B sent to A a telegram offering to buy A's same house and lot for P2M, Is there a perfected
contract?
a. No, because both telegram are mere offers
b. Yes, a promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
c. No, because B did not offer to buy the house and lot for cash.
d. Yes, being a consensual contract, it is perfected by, mere consent

121. Which of the following statements is not correct?

a. The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which
they were upon the perfection of the contract
b. All the fruits of the thing sold shall pertain to the vendor from the day on which the contract was
perfected
c. The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no
period for the payment has been fixed in the contract.
d. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the
object of the sale.

122. As a rule, which of the following contracts of sale is void?

a. Between two insane persons c. Between husband and wife
b. Between brother and sister d. Between pupil and teacher

123. A and B are co-owners of a one hectare rural land. A sold his ½ share to Y. C, an adjoining land owner is
interested in buying the share which A sold to Y. Which of the following is correct?
a. B can redeem what A sold to Y if Y already owns a rural land
b. B can redeem what A sold to Y even if Y does not own any rural land
c. As adjoining land-owner C has a superior right to redeem what A sold to Y.
d. C can redeem what A sold to Y whether or not Y already owns a rural land.

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 124. A sells to B her car for P300, 000 on a "sale or return within 10 days" after delivery. On the 5th day after
delivery, the car was lost through fortuitous event. Who bears the loss?
a. A under the principle of "res perit domino" c. Both A and B jointly
b. B and he must pay the purchase price d. No one because the loss was due to a fortuitous event

125. P1 and P2 are co-owners of a piece of land and they named and authorized A to sell their land. Who will be
liable to A for the payment of his commission?
a. Both P1 and P2 jointly c. Both P1 and P2 solidarily even without stipulation
b. Both P1 and P2 solidarily only if stipulated d. 50% from P1 and 50% from P2

126. J is the sole owner of one hectare of land. In need of money, she sold ½ of the land without specifying which
portion she is selling to H. In this case, the sale is
a. Void, because co-ownership is discouraged by law
b. Void, because the ½ part is not determinate
c. Valid, only if H has paid the purchase price
d. Valid as the sole owner of a thing may sell an undivided interest therein

127. E owns a piece of land and sells it to S with a right of repurchase within 4 years from the date of sale. If S sells
the property to T, which of the following is not correct?
a. The sale is valid because things subject to a resolutory condition maybe the object of a contract of sale
b. E can still exercise her right of redemption against T
c. The sale is void because it is a conditional sale
d. T acquires the property but subject to the right of conventional redemption

128. In which of the following cases will delivery transfers ownership over the thing sold,
a. In case of express reservation by the seller until certain conditions have been fulfilled, particularly the full
payment of the purchase price.
b. In case of implied reservation of title as when goods are deliverable to the order of the seller or his agent.
c. In sale or approval, or on trial or on satisfaction.
d. In sale or return within seven days

129. A owns a piece of land and sells it to B with a right of repurchase within one year from the date of sale. Can B
sell the land he purchased from A, to C, a third party?
a. Yes, provided the sale is with the consent of A.
b. No, B is not yet the absolute owner of the land.
c. Yes, but A can still redeem the land from C.
d. No, third parties that acquire real property are bound by prior contracts affecting such property even if the
third person is not a party thereto.

130. When goods are delivered to the buyer on "sale or return" for a period of seven days, ownership of the goods
passes to the buyer,
a. Upon perfection of the contract c. Upon expiration of seven days
b. Upon delivery of the goods d. Upon acceptance by the buyer of the offer of the seller

131. In case of foreclosure of the personal property mortgaged, where such thing was previously sold to the buyer
on an installment basis and the proceeds of the sale at public auction is less than the principal obligation, can
the seller recover the deficiency from the buyer?
First Answer - No, the seller is not entitled to recover the deficiency from the buyer.
Second Answer - Yes, if there is a stipulation to that effect in the contract of sale with mortgage.
a. True, trueb. True, false c. False, true d. False, false

132. Statement 1 - If the same thing should have been sold to different vendees, the ownership shall be transferred
to the person who may have first taken possession thereof in good faith.
Statement 2 - The vendor is responsible to the vendee for any hidden faults or defects in the thing sold,
eventhough he was not aware thereof.
a. True, true b. True, false c. False, true d. False, false

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 133. A, B and C are co-owners of a parcel of land, A sold his 1/3 share on Sept 1, 2022. B his 1/3 share on Sept 12,
2022 and C his 1/3 share on Sept 25, 2022, all to D and with the right of repurchase. Which of the following is
correct? A may redeem
a. The entire property from D if he is required by D to do so.
b. The entire property even if D allows him to redeem 1/3 share only
c. His 1/3 share even if D requires him to redeem the whole property.
d. His 1/3 share if D allows him to do so.

134. A owns a parcel of land, which he sells to B with a 3 year redemption period. After the second year, A dies,
leaving his children C, D and E as his heirs. Which of the following is not correct?
a. As A can repurchase the whole thing, so any among C, D and E may repurchase the whole thing.
b. C can redeem his 1/3 share, D his 1/3 share and E his 1/3 share if B does not require all of them or any
one of them to redeem the whole property.
c. B may demand that all the co-heirs come to an agreement upon the repurchase of the whole thing sold.
d. B cannot be compelled to consent to a partial redemption.

135. A bought a car from B, a minor, for P100,000. One week later, A discovered that B was a minor at the time of
sale so he filed a complaint in court to annul the sale. Will the action prosper?
a. Yes, B being a minor is incapacitated to enter into contract
b. No, the right to annul the sale is given to B
c. Yes, B cannot file the action to annul the sale because he is a minor
d. No, unless there is lesion of more than ¼ of the value of the property

136. Which of the following may not be the object of a contract of sale?
a. Thing having a potential existence c. Future inheritance
b. The sale of hope or expectancy d. Things subject to a resolutory condition

137. A, a minor sold his ring to B for P4,000. Later, B borrowed P6,000 from C and as security pledged the ring to
C. B failed to pay C and the latter foreclosed the pledge, sold it at public auction for P5,000 to X. As a result,
a. The title of B is not valid, therefore the pledge of the ring to C is also not valid because in pledge the
pledgor must be the owner
b. The deficiency of P1,000 cannot be recovered by C from B
c. The deficiency of P1,000 can be recovered if there is a stipulation to that effect
d. If X is in bad faith (X has knowledge that A, the original owner is a minor) ownership will not pass to B

138. This shall take place when the vendor reserves the right to repurchase the thing sold
a. Policitacion c. Equitable mortgage
b. Conventional redemption d. Legal redemption

139. A sold his piano to B for P200,000 payable in installment. A chattel mortgage was constituted on the piano. B
defaulted in two installment payments. A demanded payment of the unpaid obligation amounting to P120,000
and a writ of attachment was issued and the piano was sold for P100,000. Can A still recover the deficiency?
First answer - No, the foreclosure of the piano extinguished B's obligation
Second answer - Yes, only if it is stipulated that in case of foreclosure the buyer will pay any deficiency
a. True, True b. True, False c. False, True d. False, False

140. A and B entered into a "contract to sell" in private writing involving a specific parcel of land for P2M. B paid
50% of the purchase price, the balance payable in 3 years. A delivered the land to B. What is the effect of the
delivery of the land to B?
a. B is the owner because there was delivery already
b. B's ownership before it is converted into real ownership must compel A to execute a deed of sale in a
public instrument
c. The partial payment made B the owner of the land
d. A is still the owner because the price is not yet totally paid

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 141. In 2017, at the age of 16, A sold his land to B, of legal age for P4M payable at P1M in 2017, P1M in 2018,
P1M in 2019 and P1M in 2020. In 2022, A wants to annul the contract on the ground of minority. Will his
action prosper?
a. No. A is allowed to ask for annulment of the contract only within 4 years from the perfection of the
contract
b. Yes, A has 4 years counted from the time he becomes of legal age to ask for annulment of the contract
c. No, the acceptance of the installment payments amounted to ratification of the sale.
d. Yes, provided A was then acting in good faith when he sold the property

142. Where it is stipulated that the repurchase of the property sold could be made at any time, the repurchase shall
be exercised
a. Within four years, from the date of contract
b. Within ten years from the date of the contract
c. After ten years after the date of the contract
d. Within six years from the date of the contract

143. A seller sold to a buyer a brand new car at a price of P500,000. At the time of sale, the buyer has only
P200,000 cash and his old car with a fair market value of P300,000 which he offered as payment of the
purchase price which was accepted by the seller. The nature of the contract is
a. Barter b. Exchange c. Sales d. Partly sales and partly barter

144. In 2020, A 17 years old, his land orally to B, of legal age, payable in 3 equal annual installments. B paid in
2020, 2021 and 2022. Which is correct?
a. The sale is unenforceable c. A cannot ask for annulment
b. The sale is voidable d. B can ask for annulment

145. If the thing sold had any hidden fault or defect at the time of the sale and should thereafter be lost by a
fortuitous event but the seller is not aware of the defect, how much can the vendee recover from the vendor, if
the selling price on date of sale is P100,000 and the value on date of loss is P60,000.
a. P100,000 b. P60,000 c. P40,000 d. P0

146. Using the preceding number, except that the loss is through the fault of the vendee, how much can the vendee
recover from the vendor?
a. P100,000 b. P60,000 c. P40,000 d. P0

147. Which of the following contracts is void?

a. Lease of a piece of land made by a minor without a written authority from his parents (the owners)
b. Oral sale of a piece of land made by the owner to an insane person
c. Written sale of a gold necklace made without authority from the owner
d. Written sale of a piece of land with oral authority from the owner

148. Which of the following contracts is valid?

a. Contract of sale between an insane person and a deaf-mute who does not know how to write and
read
b. Contract of donation between a husband and his paramour
c. Contract of sale between husband and wife who are under the conjugal partnership of gains
d. Contract of donation between a wife as donee and her former boyfriend as donor

149. The following may be objects of contract of pledge, except

a. Shares of stocks c. An agricultural land
b. Pieces of jewellery d. A negotiable bill of exchange

150. 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 thing loaned
c. A stipulation that the bailee may make use of the fruits of the thing loaned is valid.
d. The bailor is obliged to pay for the ordinary expenses for the use and preservation of the thing
loaned

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 151. D mortgaged his land to C as security for a loan. Fearing foreclosure of the mortgage due to his inability to pay
the loan, D sold the land to B without the consent of C. Which is correct?
a. The sale is void unless D can give another security
b. B cannot acquire ownership over the land even if D delivers the land to him
c. D cannot sell the land if there is an agreement prohibiting the mortgagor from alienating the land
d. D can sell the land even without the consent of C

152. The loan of movable or immovable things, but not the fruits
a. Mutum b. Delegacion c. Expromission d. Commodatum

153. Agreement giving a person the right to enjoy the thing as well as its fruits
a. Quantum meruit b. Quantum valebant c. Usufruct d. Pacto de retro sale

154. Which of the following statements is not correct?

a. If the thing pledged will be returned by the pledgee, the contract of pledge is extinguished
b. Unlawful partnership is void ab initio
c. Any stipulation allowing the pledge or mortgagee to appropriate the thing pledged or mortgaged is void
d. In case the creditor foreclosed the chattel mortgage, he cannot recover any deficiency in case the
proceeds of the foreclosure sale are less than the unpaid obligation.

155. Commodatum as distinguished from mutuum

a. Object is money or consumable or fungible thing.
b. Ownership is transferred to the borrower
c. Object or thing loaned must be returned by the borrower
d. Maybe gratuitous or onerous

156. For failure of the debtor to pay two installment payments, the creditor foreclosed the chattel mortgage
constituted to secure the obligation amounting to P200,000. The proceeds amounted to P220,000. In this case
a. The debtor gets the P20,000 only if stipulated
b. The debtor gets the P20,000 even if not stipulated
c. The creditor gets the excess even if not stipulated
d. The creditor gets the excess whether or not it is stipulated

157. A mortgaged his car to B for P200,000. A failed to pay his obligation. B sold it at public auction for P180,000.
Can B recover the deficiency?
a. Yes, even without stipulation c. No, even if there is stipulation
b. Yes, only if there is stipulation d. No, unless there is stipulation

158. Using the preceding number, if the sale is for P220,000 can A recover the excess?
a. Yes, even without stipulation c. No, even if there is stipulation
b. Yes, only if there is stipulation d. No, unless there is stipulation

159. Similarity between real estate mortgage and antichresis

a. The property is delivered to the creditor
b. The subject matter is a real property
c. The creditor acquires the right to receive the fruits of the property
d. The creditor is obliged to pay the taxes and charges upon the estate

160. An oath in a contract of chattel mortgage wherein the parties severally swears that the mortgage is made for the
purpose of securing the obligation specified in the conditions thereof and for no other purposes and that the
same is a just and valid obligation and one not entered into for the purpose of fraud is
a. Oath of allegiance c. Affidavit of good faith
b. Antichresis d. Equity of redemption

161. A owes B P500 and as security, A pledged his diamond ring. Later A borrowed again P200. As a result
a. B has a right to retain the thing until the P 700 is paid
b. B has a right to retain the thing until the P 500 is paid
c. A has a right to demand that thing be deposited with a third person
d. B has the right to use the thing pledged until the pledge effects payment of the obligation

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 162. Real estate mortgage as distinguished from pledge
a. The debtor is entitled to the excess of the proceeds if stipulated
b. The debtor shall not be entitled to the excess of the proceeds
c. The creditor is not entitled to the excess of the proceeds
d. The creditor cannot recover any deficiency

163. Should there be a reasonable ground to fear the destruction or impairment of the thing pledged, without the
fault of the pledgee, what is the obligation of the pledge and what then is the right of the pledgor.
First Answer - The pledgee is bound to advice the pledgor, without delay of any danger to the thing pledged
Second Answer - The pledgor can demand the return of the thing pledged upon offering another thing in
pledge which is of the same kind as the former and not of inferior quality.
a. True, true b. True, false c. False, true d. False, false

164. J mortgaged his residential land to R as guarantee for the payment of P500,000 loan of J. They agreed that J
will not sell the land while the obligation exists. Before the maturity of the mortgage, C offered to buy the land
from J. Which of the following statements is correct?
a. J cannot sell the land to C because of the agreement not to sell
b. J can sell the land to C only if R consents in writing
c. J can sell the land to C despite the agreement not to sell
d. J cannot sell the land to C unless J pays R the obligation

165. A contract of pledge is

A. A real contract because it is perfected by the delivery of the thing pledged
B. An accessory contract because it has no independent existence of its own
a. Only A b. Only B c. Both A and B d. Neither A nor B

166. Which of the following statements is not correct?

a. The sale of the thing pledged shall extinguish the principal obligation, whether or not the proceeds of the
sale are equal to the amount of the principal obligation, interest and expenses in a proper case
b. If the price of the sale of the thing pledged is more than the obligation, the debtor shall not be entitled to
the excess unless it is otherwise agreed
c. If the price of the thing pledged is less than the obligation, the creditor shall not be entitled to
recover the deficiency, unless it is otherwise agreed
d. At the public auction, the pledgor or owner may bid and he shall have a better right if he should offer the
same terms as the highest bidder

167. The following are essential requisites common to the contracts of pledge and mortgage, except,
a. That they are constituted to secure the fulfillment of a principal obligation
b. That the pledgor or mortgagor is the absolute owner of the thing pledged or mortgaged
c. That the contract is registered with the Register of Deeds
d. That the person constituting the contract has free disposal of his property or that he is authorized legally
for the purpose

168. First statement - In all cases of extrajudicial sale, the mortgagor may redeem the property at any time within
the term of one year from and after the date of registration of the sale.
Second statement - In judicial foreclosure of real estate mortgage, the general rule is that the mortgagor
cannot exercise his right of redemption after the confirmation of the sale by the court.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are Wrong d. Only the second statement is correct

169. A pledged her ring to F to secure a P10,000 obligation payable in two years. One year thereafter, F gives note
in writing to A stating that the debt need not be secured and that A may get the ring back at her most
convenient time. As a result,
a. The principal obligation and the contract of pledge are both extinguished.
b. Only the principal obligation is extinguished but not the contract of pledge because A did not get back the
ring.
c. Both the principal obligations and the contract of pledge are not extinguished because A did not get back
the ring
d. The pledge is extinguished and F is constituted as a depository.

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 170. This is an accessory contract
a. sales b. mutuum c. commodatum d. mortgage

171. These are real contracts, except

a. commodatum b. deposit c. pledge d. chattel mortgage

172. Ownership is retained despite delivery, except

a. commodatum b. mutuum c. universal partnership of profits d. on trial or satisfaction

173. L pledged his shares of stock to M to secure his obligation, Later, L sold his shares to J. As a result,
a. L can compel M to surrender the shares certificate to J.
b. J can compel M to deliver the shares certificate to him
c. The refusal of M to surrender the shares certificate will invalidate the sale
d. M can refuse to surrender the shares certificates.

174. The creditor cannot appropriate the thing pledged or mortgaged, or disposed of them. Any stipulation to the
contrary is void.
The contract of pledge or mortgage may secure all kinds of obligations be they pure or subject to a suspensive
or resolutory condition.
a. True, true b. True, false c. False, true d. False, false

175. A limited partnership has A, as general partner, B as limited partner and C, as industrial partner contributing
P100,000, P50,000 and services respectively. The partnership failed and after disposing all its assets to pay
partnership debts, there still remains a note payable in the sum of P30,000. Against whom can the creditor
demand payment?
a. A- P30,000 B- P0 C- P0 c. A- P15,000 B- P7,500 C- P7,500
b. A- P15,000 B- P0 C- P15,000 d. A- P10,00 B- P10,00 C- P10,000

176. X, Y, and Z form Y Partnership to engage in import-export business. The partners agreed that the profit will be
divided on the following ratio: X-20%, Y-30%, Z-50%, but no agreement as to losses. After one year of
operation, there was a loss of P10,000. How will you apportion this loss if the capital contributions are as
follows: X-P20,000; Y -P15,000; Z-P5,000.
a. According to their capital contribution: X-P5,000; Y-P3,750; Z-P1,250
b. Equally among X, Y, and Z
c. X-P2,000; Y - P3,000; Z - P5,000
d. A third party may be called to make the distribution

177. M, T and E decided to form a universal partnership of all present property. The contract of partnership was
executed on October 10, 2010 but they commenced business on October 18, 2011. One of the following is not
correct?
a. If the partnership is for 15 years, but one of the partners withdraws from the partnership on the 12 th year,
the firm is dissolved
b. The partnership began its existence on October 10, 2010.
c. If after the expiration of its term, the partners continue to transact business, the partnership is converted to
a partnership at will
d. In the absence of any partnership agreement specifically covering the division of losses among the
partners, they will be deemed to share the losses in accordance with their capital contributions

178. Partners A, B and C met a tragic accident. A and B instantly died on the spot, while C was brought to the
hospital but died a few hours later. Who may wind-up partnership affairs?
a. legal representative of A c. legal representative of C
b. legal representative of B d. the court should appoint a representative who will wind-up the affairs.

179. A, B, and C agreed to form Y Partnership. It was orally agreed that A would contribute P20,000, B P15,000,
and C P5,000. It was also orally agreed that in the event the venture proved to be a financial loss all losses
above the amounts of capital contributed would be assumed by A. There were no other express agreements.
Under these circumstances, which of the following is correct?
a. Profits are to be divided in accordance with the wish of A being the major contributor
b. Profits are to be divided equally
c. The partnership is a nullity because the agreement is not contained in a signed writing
d. Partnership is valid notwithstanding failure to put the agreement in a public instrument
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 180. In the preceding question if after exhausting the partnership capital of P40,000, there is still a liability to X in
the amount of P40,000 the liability of the partners to X will be:
a. A, P20,000; B P15,000; and C P5,000
b. A will shoulder all P40,000 because that was their agreement
c. Another agreement will be executed as to who will answer losses
d. All of them will be liable to X

181. Which of the following is true with respect to a limited partner?

a. Must not own limited-partnership interests in other competing limited partnership
b. Is automatically an agent for the partnership with apparent authority to bind the limited partnership in
contract
c. Has no liability to creditors even if he takes part in the control of the business as long as he is held out as
being a limited partner
d. Should not contribute industry

182. A, B and C formed a Universal Partnership of profits. The partners contributed the following:
A - 20 sewing machines B-14 Furniture & Fixtures C- 4-storey building
The parties agreed that only the use and fruits of the objects contributed shall pertain to the partnership. Which
of the following statements is true?
a. The partnership upon delivery shall be the owner of the objects contributed
b. Upon dissolution, the objects shall be converted into cash and the proceeds shall be divided equally
among the partners including the fruits
c. During the term of the partnership, the contributing partner remains to be the naked owner of the object
contributed but upon dissolution all objects contributed are to be converted into cash and proceeds shall
be divided equally among the three partners
d. During the term of the partnership, the loss of the objects contributed shall be borne by the
partners concerned

183. If a partner assigns his interest in the partnership to his personal creditor or to a third person for value, the
assignee acquires the right to
a. Demand an accounting of partnership affairs
b. Inspect the books and records of the partnership
c. Receive the partner - assignor's share of the profits
d. Interfere in the management of the partnership

184. The partners agreed that only the use and fruits of the objects contributed shall pertain to the partnership
(Universal partnership of profits). Which of the following statements is true?
a. The partnership upon delivery shall be the owner of the objecis contributed
b. Upon dissolution, the objects shall be converted into cash and the proceeds shall be divided equally
among the partners including the fruits.
c. During the term of the partnership, the contributing partner remains to be the naked owner of the object
contributed thereto but upon dissolution all objects contributed are to be converted into cash and proceeds
shall be divided equally among the partners
d. During the term of the partnership, the loss of the objects contributed due to fortuitous events shall
be borne by the partner concerned except if the object contributed is fungible

185. Which of the following is a characteristic of partnership as a contract

a. Preparatory b. Formal c. Innominate d. Gratuitous

186. S and G established a partnership by contributing P200,000 each. F, a classmate allowed his name to be
included in the firm name of the partnership. The partnership was insolvent and after exhausting all the
remaining assets, there remains a liability to third persons amounting to P30,000. The creditors can compel
a. Either S or G or F to pay the P30,000 liability c. S and G to pay P15,000 each
b. Either S or G to pay the P30,000 liability d. S, G and F to pay P10,000 each

187. Using the preceding number, If the partnership is solvent and there is a profit of P30,000, without any
stipulation as regards profit sharing, the participation of the partners on the profit will be
a. Just and equitable share for F, and the remainder, equally between S and G
b. Equally, P10,000 each among S, G and F
c. Equally P15,000 each between S and G
d. The court will intervene
21 | P a g e
 188. A limited partner who takes active participation in the management of the partnership shall become
a. A managing partner c. Liable as a general partner
b. A general partner d. An ostensible partner

189. Three of the following are rights of a partner, which one is not? Right to
a. Associate another person to his share. c. Inspect and copy partnership book
b. Admit another partner d. Ask dissolution of the firm at the proper time.

190. A partnership which comprises all that the partners may acquire by their work or industry during the existence
of the partnership is
a. Universal partnership of present property c. Particular partnership
b. Universal partnership of profits d. General partnership

191. The following are the effects of unlawful partnership, except

a. The profits shall be confiscated in favor of the government
b. The instruments or tools and proceeds of the crime shall be forfeited in favor of the government
c. The contribution of the partners shall be confiscated in favor of the government
d. The contract is void ab initio and the partnership never existed in the eyes of the law

192. As regards a limited partner, which of the following is correct?

a. He is automatically an agent for the partnership with apparent authority to bind the limited partnership in
a contract
b. He can not own limited partnership interest in other competing limited partnership
c. He has no liability to creditors even if he takes part in the control of the business as long as he is held out
as being a limited partner
d. He can contribute money and/or property but not services

193. Absent any contrary provisions in the agreement, under which of the following circumstances will a limited
partnership be dissolved?
a. A limited partner dies and his estate is insolvent
b. A personal creditor of a general partner obtains a judgment against the general partner's interest in the
limited partnership
c. A general partner retires and all the remaining general partners do not consent to continue
d. A limited partner assigns his partnership interest to an outsider and the purchaser becomes substituted
limited partner

194. A, B and C are partners contributing services, P20,000 and P40,000 respectively. The distribution of P80,000
profit shall be
a. A= P20,000 ; B= P20,000 ; C= P40,000
b. A= P 5,000 ; B= P25,000 ; C= P50,000
c. A= P32,000 ; B= P16,000 ; C= P32,000
d. A= P26,667 ; B= P26,667 ; C=P26,667

195. Using the preceding number, if the P80,000 represents net assets, the distribution shall be
a. A= P20,000 ; B= P20,000 ; C= P40,000
b. A= P 5,000 ; B= P25,000 ; C= P50,000
c. A= P32,000 ; B= P16,000 ; C= P32,000
d. A= P26,667 ; B= P26,667 ; C=P26,667

196. A, B and C are partners contributing services, P40,000 and P80,000 respectively. The distribution of P60,000
loss shall be
a. A= P15,000 ; B= P15,000 ; C= P30,000
b. A= P20,000 ; B= P20,000 ; C= P20,000
c. A= P0 ; B= P20,000 ; C= P40,000
d. A= P0 ; B= P30,000 ; C= P30,000

197. Using the preceding number, if the P60,000 represents net assets, the distribution shall be
a. A= P15,000 ; B= P15,000 ; C= P30,000
b. A= P20,000 ; B= P20,000 ; C= P20,000
c. A= P0 ; B= P20,000 ; C= P40,000
d. A= P0 ; B= P30,000 ; C= P30,000
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 198. A limited partnership has A, as general partner, B, as limited partner, and C, as capitalist – industrial partner
contributing P50,000; P50,000; and P50,000 and services respectively. The partnership failed and after
disposing all its assets to pay partnership debts only P30,000 remains. The distribution shall be?
a. A= P10,000 B= P10,000 C= P10,000
b. A= P15,000 B=P15,000 C= P0
c. A= P15,000 B= P0 C= P15,000
d. A= P0 B= P30,000 C= P0

199. He shall preside at all meetings of the directors or trustees as well as of the stockholders or members, unless
the by-laws provide otherwise
a. Chairman of the board b. President c. Secretary d. Treasurer

200. Non-voting shares may vote, except

a. Increase in capital stock b. Merger c. Dissolution d. Management contract

201. Which of the following statements is correct?

a. Treasury stock sold for less than their par or issued value are considered "watered stock" and as such is
prohibited by law.
b. Five but not more than fifteen juridical and natural persons, majority of whom are residents of the Phils
may form a private corporation
c. No par value shares of stock cannot be issued by banks, trust companies, insurance companies,
building and loan association and public utilities.
d. Membership in non-stock corporation and rights arising there from are personal and non-transferable and
therefore cannot be transferred even if provided in the articles of incorporation or in the by-laws.

202. This group of persons may not be the incorporators of a corporation in the Phils.
a. 15 Japanese citizens who are resident of Quezon City
b. 10 Resident aliens and 5 non-resident aliens
c. 10 Americans residing in the Phils and 5 Filipinos residing in Australia
d. 15 Filipinos who are residents of USA

203. Every corporation whose charter expires by its own limitation, or annulled by forfeiture or otherwise, or whose
corporate existence for other purposes is terminated in any other manner shall nevertheless be continued as a
body corporate for 3 years after the time when it would have been dissolved for the purpose of the following,
except
a. Prosecuting and defending suits by or against it and enabling it to settle and close its affairs
b. To dispose and convey its property
c. To distribute its assets
d. Continuing the business for which it was established

204. Which of the following corporate acts requires the approval of the majority of the outstanding capital stock or
of the members of the private corporation?
a. To invest corporate funds in another corporation or business
b. To adopt by laws
c. To dissolve the corporation
d. To amend the articles of incorporation

205. As a rule pre-incorporation subscription is irrevocable for a period of at least

a. 30 days b. 60 days c. 6 months d. 1 year

206. A, B, C, D and E are directors of a corporation. Two days before the meeting of the board, where by a
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 members of the board in hold-over capacity until their
successors shall have been elected and qualified.
b. No, at the time the resolution was passed, A, B and C were no longer qualified to sit as directors
since they are no longer stockholders
c. Yes, unanimous vote means all directors approved the resolution
d. No, if the other members of the board were not informed of the transfers made

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 207. Which of the following is the disadvantage of forming a corporation?
a. The free & ready transferability of ownership
b. The shareholders are not liable for the debts of the business
c. Because of the power of succession, the existence of the entity is not affected by the personal vicissitudes of
the individual stockholders
d. The subservience of minority stockholders to the wishes of the majority subject only to equitable
restraints

208. Cash dividend as distinguished from stock dividend

a. Corporate capital is increased
b. Concurrence of the stockholders is required
c. Involves disbursement to the stockholders of accumulated earnings
d. Being part of corporate property, maybe reached by corporate creditors

209. 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 said meeting, each claiming the right to
participate in the deliberation of the board. J contented that she has the right to continue as director until the
stockholders could elect her successor. On the other hand, K argued that having purchased all of J's shares she
has the right to take the latter's place in the board. Which of the following is not correct?
a. Both J and K are disqualified to sit as directors in the Board of Directors
b. J cannot qualify as she disposed all the shares.
c. K cannot qualify as she must have to be elected by the stockholders.
d. K can qualify because a stockholder as well as the heirs and assigns of a stockholder of the same
corporation has the right of succession

210. The articles of incorporation is required to state the name, nationalities and residence of persons 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 that
a. At least majority of the directors or trustees are residents of the Phils
b. At least majority of the directors or trustees are citizens of the Phils
c. 2/3 of the directors or trustees are residents of the Phils
d. 2/3 of the directors or trustees are citizens of the Phils

211. At an annual meeting of stockholders, a resolution was approved empowering the president of the corporation to
enter into a contract with a New York firm. Can the president validly act by virtue of such resolution?
1st Answer - Yes, the action of the stockholders was approved during annual stockholders meeting
2nd Answer - No, the power to contract for and in behalf of the corporation resides primarily in the board of
directors.
a. True, true b. True, false c. False, true d. False, false

212. If there are 9 members of the board and the by laws provide for the creation of an executive committee, the
minimum number of its members is
a. 7 b. 5 c. 4 d. 3

213. The executive committee shall act by

a. unanimous vote b. majority vote c. 2/3 vote d. ¾ vote

214. In a meeting to elect the officers only 9 out of 11 members of the board attended. How many votes will be needed
to elect the President of the Corp.?
a. 9 b. 7 c.6 d. 5

215. These powers cannot be exercised by the executive committee, except

a. To fill-up vacancy in the board
b. To distribute cash dividend
c. To increase the minimum number of shares needed before a shareholder may qualify to be a member of the
board
d. To enter into contract for the supply of goods needed by the corporation

216. Shares of stock cannot be issued if the consideration received is (are)

a. money b. property c. previous services rendered d. promissory notes
24 | P a g e
 217. He must be a resident citizen
a. president b. secretary c. treasurer d. incorporator

218. He must be a member of the board

a. president b. secretary c. treasurer d. incorporator

219. He cannot be the secretary of the corporation

a. president b. treasurer c. chairman of the board d. incorporator

220. Must be a natural person

a. stockholder b. subscriber c. incorporator d. highest bidder

221. Should not be more than fifteen (15)

a. stockholder b. subscriber c. incorporators d. members

222. Corporate acts performed outside of its express, incidental or implied powers
a. ultra-vires acts b. illegal acts c. intra-vires acts d. legal acts

223. The board of directors or trustees may amend or repeal the by-laws or adopt new by-laws by
a. majority vote b. unanimous vote c. 2/3 vote d. ¾ vote

224. The stockholders or members may delegate to the board of directors or trustees the power to amend or repeal the
by-laws or adopt new by-laws by
a. majority vote b. unanimous vote c. 2/3 vote d. ¾ vote

225. Regular meetings of stockholders or members shall be held

a. monthly b. quarterly c. semi-annual d. annually

226. Unless the by-laws provide otherwise regular meetings of the board of directors or trustees shall be held
a. monthly b. quarterly c. weekly d. annually

227. First Statement - Treasury shares shall have no voting rights as long as such stock remains in treasury.
Second Statement - Shares of stock shall not be issued in exchange for future services.
a. true, true b. true, false c. false, true d. false, false

228. Except as a condition in a loan apreement, the voting trust agreement shall not exceed
a. 6 months b. 1 year c. 3 years d. 5 years

The End!
Goodluck!

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