Philippine School of Business Administration

826 R. Papa St., Sampaloc, Manila

CPA REVIEW
BUSINESS LAW ATTY.
MACMOD
AGENCY, PLEDGE AND MORTGAGES

I. Identification: Basic Concept and principles

__________________ 1. The power of the agent to legally represent the principal.
__________________ 2. A person to whom the agent delegates his powers.
__________________ 3. An agency which comprises only acts of administration.
__________________ 4. An agency which comprises one or more specific transactions.
__________________ 5. A real estate mortgage in the form of conventional redemption or absolute
sale.
__________________ 6. One whose business is to receive and sell goods for a commission.
__________________ 7. Additional commission given when an agent guarantees the payment to the
principal of debts due to him.
__________________8.Contract whereby one delivers to another money or other consumable
things provided the same amount or quality shall be related/paid.
__________________ 9. Contract whereby one delivers to another non-consumable things for the
latter to use and return later.
__________________ 10. A contract wherein the creditor acquires the right to receive fruits of an
immovable of his debtor, with an obligation to apply them to the
principal.
__________________ 11. Contract whereby personal property is recorded in the chattel mortgage
registered as security for the performance of an obligation.
__________________ 12. A stipulation in contract of pledge. Mortgage or anti chresis whereby
creditor is given the power to appropriate for himself the thing given as
security if the principal obligation is not fulfilled.
__________________ 13. In pledge if the price of the sale is less than the principal obligation,
creditor cannot recover the deficiency, notwithstanding any contrary
stipulation.
__________________ 14. A contract whereby the debtor delivers to the creditor a personal property
as a security for a credit.
__________________ 15. A person who binds himself solidarily with the principal debtor for the
payment of an obligation.

TRUE OR FALSE

16. The limits of the agent’s authority shall not be considered exceeded should it have been
performed in manner more advantageous to the principal. __________
17. The principal may revoke the agency at will, and compel the agent to return the document
evidencing the agency. Such revocation may be express or implied. __________
18. In agency, there is fiduciary relation between two persons because it is based on utmost trust and
confidence. __________
19. If the agent is incapacitated, the contract between him and the third person is binding against the
principal, provided the principal is capacitated. __________
20. The general rule is that a guardian cannot purchase the property of a person under guardianship.
However, he may do so at a public auction when done through his agent. __________
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21. To lease property to another person, the authority of the agent must be in a special power of
attorney, if the lease is for one year. __________
22. The responsibility of two or more agents, even though they have been appointed simultaneously,
is not solidary, if solidarity has not been expressly stipulated. If solidarity has been agreed upon,
each of them is responsible for the nonfullfillment of the agency, and for the fault or negligence
of his fellow agents, except in the latter case when the fellow agent acted beyond the scope of
their authority. __________
23. Should the commission agent receive on a sale, in addition to the ordinary commission, another
called a guarantee commission, he shall bear the risk of collection and shall pay the principal the
proceeds of the sale on the same terms agreed upon with the purchaser. __________
24. If the agent is prohibited from appointing a sub-agent, any act executed by the latter is
unenforceable on the part of the principal. __________
25. The agency shall remain in full force and effect even after the death of the principal, if it has been
constituted in the common interest of the latter and of the agent or in the interest of a third person
who has accepted the stipulation in his favor. __________
26. An agency couched in a general terms comprises only acts of administration, even if the principal
should state that he withholds no power or that the agent may execute such acts as he may
consider appropriate, or even though the agency should authorize a general and unlimited
management. __________
27. If the principal directly manages the business entrusted to the agent there is implied revocation of
the agency. __________
28. In agency, there is a meeting of minds between the parties, expressly or impliedly; while in
negotiorium gestio, there is no meeting of minds between the two persons because the relations is
created by operation of law. __________
29. To make customary gifts for charity the authority of the agent must be a special power of
attorney. __________
30. If the agent acted in the name of the principal, but without authority, the contract is voidable
subject to ratification. __________
31. If the thing pledged is returned by the pledgee to the pledgor or owner, the principal obligation is
extinguished. __________
32. A chattel mortgage exists when personal property is recorded in the Chattel Mortgage Register as
a security for the performance of the obligation. __________
33. In chattel mortgage, the mortgagor must execute an affidavit of good faith in order that the
mortgage shall be valid against third person. __________
34. If the thing pledged is sold but the proceeds of the sale is less than the principal obligation, the
pledgee can collect the deficiency from the pledgor. __________
35. Any stipulation in a contract of pledge authorizing the pledgee to sell the thing pledged if the
pledgor cannot pay is void. __________
36. Incorporeal rights, evidenced by negotiable instruments, bills of lading shares of stock, bonds,
warehouse receipts and similar documents may also be pledged. The instrument proving the right
pledged shall be delivered to the creditor, and if negotiable, must be endorsed. __________
37. If the pledge earns, or produces fruits, income, dividends, or interests, the creditor shall
compensate what he receives with those which are owing him but if none are owing him, or
insofar as the amount may exceed that which is due, he shall apply it to the principal. Unless there
is a stipulation to the contrary, the pledge shall extend to the interest and earnings of the right
pledged. __________
38. Pledge is a real contract which is perfected from the time the thing pledge is placed in the
possession of the creditor, or of a third person by common agreement. __________
39. If two or more things are pledged, the pledgee may choose which he will cause to be sold, unless
there is stipulation to the contrary. He may demand the sale of only as many of the things as are
necessary for the payment of the debt. __________
40. Pledge is a consensual contract which is perfected from the time the thing pledged is placed in the
possession of the creditor or of a third person by common agreement. __________
41. If the thing pledged is alienated by the pledgor, consented by the pledgee the ownership and
possession is transmitted to the vendee after alienation. __________
42. In mortgage, the mortgagee is entitled to the entire proceeds of the sale of the thing mortgaged.
__________
43. In chattel mortgage, and in sale con pacto de retro, the title to the subject matter of the contract is
transferred to the other party. __________
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44. If the immovable mortgaged is sold, and the amount realized is less than the mortgage debt, the
buyer of the mortgaged property is liable to pay the deficiency, if any. __________
45. A stipulation forbidding the owner from alienating the immovable mortgage is valid. __________

MULTIPLE CHOICE
46. D1, D2 and D3 borrowed from C P300,000 as a security, he mortgaged their undivided
agricultural land to C, Subsequently, D1 paid C P100,000. Is the mortgage on D1’s share of the
land extinguished?
a. Yes, because the obligation of D1 on the debt is only P100,000
b. Yes, the obligation of the debtors is joint, D1 is answerable only for P100,000
c. No, because the obligation is solidary, payment in part shall not extinguish the
obligation secured by the mortgage.
d. No, because mortgages are considered indivisible, payment in part shall not extinguish
the obligation secured by the mortgage.
47. B wrote S, his sister, to sell his parcel of land. The land was purchased by X, but S did not
forward the money to B. Now wants to recover the parcel of land.
a. B cannot recover because the sale is valid
b. B can recover because the sale between S and X is void, therefore there is no sale
c. B can recover only if B can return the money paid by X to S
d. Answer not given
48. If P leads X to believe that A is his (P’s) agent, when as a matter of fact such is not true, and A
acts on such misrepresentation, there is
a. An implied agency
b. An agency by estoppel
c. An agency by necessity
d. An express agency by words spoken
49. Which of the following statements is true and correct:
a. Pledge and mortgage are accessory contracts because they can not exist by themselves
b. In both pledge and mortgage the creditor is entitled to deficiency judgment
c. Where an obligation is secured by a pledge or mortgage and it is not paid when due
the pledge or mortgagee may appropriate the thing pledge or mortgaged if there is an
agreement to that effect between the parties.
d. Unless otherwise agreed upon by the parties, the sale of the mortgage property
extinguishes in full the obligation of the C offered to buy the land from A.
50. An implied agency may be created by
a. Ratification
b. Lack of action by the principal
c. Silence of the principal
d. All of them
51. D pledge his ring to C for P10,000. D failed to pay his obligation on time. C sold it/at public
auction for P8,000.
a. C can recover die deficiency even without stipulation
b. C cannot recover the deficiency even if there is stipulation
c. C cannot recover the deficiency
d. C can recover the deficiency
52. Without P’s authority, S sold P’s car to B in P’s behalf
a. The transaction entered by S is unauthorized therefore unenforceable
b. The right of B is only against S as a rule
c. The contract can be ratified, hence it is considered as a validable contract
d. All of the above
53. P wrote letter authorizing A to sell his parcel of land situated in Bulacan. The land was purchased
by X, but the agent (A) did not give the money to P the sale of A to X is;
a. Void because the authority of A is not in a public instrument
b. Unenforceable because the authority of A is in a public instrument
c. Inexistent became the authority of A is in private writing
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d. Valid and enforceable

54. P appointed A as his agent to borrow P10,000 from C. A borrowed P10,000 acted in his name but
give the money to his principal, who accept them. Upon maturity, who is liable to C?
a. A only
b. P only
c. Both A and P
d. Contract is void
55. A appoints B as his agent to sell his land , which of the following is valid?
a. The authority of B is in writing but B mortgage it also in writing
b. The authority of B from A is by way of letter and B sells the land to C in writing
c. The authority of B is oral and B sells the land to C for P50,000 in a written conduct of
sale
d. The authority of B is in writing but the sale of the land in writing was made beyond
the period expressly set forth by A.
56. P appointed A as his agent with general powers on January 1. The next day, X transacted business
with A. On January 5, P revoked the agency and published it in a newspaper of general
circulation. However, X did not read the newspaper publication. Mix 5 days, (January 10) X
consummated another transaction with A. Is the additional of A binding against P.
a. Yes, because X is in good faith
b. No, because the agency is considered revoked and its publication is a efficient warning
c. No, because the power is general, there must also be a special power
d. Yes, because there was no special notice send to X.
57. Today, P appointed A1 as his agent covered by general power to lease his car to X for 6 months.
The next day, P appointed A2 with special power to lease the same car to X for 5 months. On the
third day, P directly transacted business with X leasing the car for 2 months. What is the effect of
agency between the parties?
a. The appointment of A1 is the one that is valid because it has got a prior date.
b. The appointment of A2 is the one that is valid because it is covered by a special
power.
c. The agency of A1 and A2 are considered revoked became the principal directly
transacted with X.
d. None of the above.
58. P appointed A as his agent to sell his specific car in cash for P10, 000 with 10% commission. A
using persuasive skills A was able to sell it for P15, 000 on credit. After the sale but before the
payment of the buyer
a. A must give P10, 000 only.
b. A must give P10, 000 minus the commission
c. A must give P15, 000 minus the commission
d. A must give P15, 000 and in turn is to give A P5, 000 as commission.
59. P the owner of a piece of residential land orally authorized A to sell the land for P500.00 with 5%
commission. Today A sold the land to C. One day later P sold the same land to D. Assuming that
both buyers are in good faith, who among them is the lawful owner.
a. C, being the first buyer
b. C, because A was given authority by P.
c. D, because the sale made by A to C is void.
d. None of the above.
60. An agent without any express authority from the principal appointed a subagent to help him carry
out the agency
a. The substitution is void.
b. The substitution is valid but the agent is the only one liable for the acts of the
subagent.
c. Both the agent and subagent are liable to the principal for the acts of the subagent
under the valid substitution.
d. The substitution is valid but the substitute is the only one liable for his own acts.
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e. None of the above.
61. An agent with general powers of administration given to him by the principal in writing desirous
of improving the financial condition of his principal, sold two parcels of rice field, one for less
than the price appearing in the inventory prepared by the principal, and the other for double the
price that appeared in the said inventory.
a. The sale for double the price appearing in the inventory is binding upon the principal.
b. The two contracts cannot be enforced against the principal.
c. The sale for less than the price appearing in the inventory is binding upon the
principal.
d. Both contracts are binding upon the principal.
e. None of the above.

62. A passenger bus while in motion collided with another bus. X, the conductor of the bus was
bodily injured. D, the driver, although not authorize, engaged the services of a physician in the
name of the company. In here, there is an
a. Implied agency b. Agency by estoppel c. Agency by necessity d. None of the above

63. Statement 1: The contract of pledge, gives a right to the creditor to retain the thing in his
possession or in that of a third person to whom it has been delivered, until the debt is paid.
Statement 2: A pledge shall not take effect against third persons if a description of the thing
pledge and the date of the pledge do not appear in a public instrument.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true

64. Statement 1: If the agent dies, the heirs must notify the principal immediately, and must continue
the objective of the agency until it is accomplished or until the principal appoints a new agent.
Statement 2: If the agent is prohibited from appointing a sub-agent any act executed by the latter
is unenforceable, on the part of the principal.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
65. Statement 1: If the agent is incapacitated, the contract between him mid the third person is
binding against the principal, provided the principal is capacitated.
Statement 2: In agency, there is fiduciary relation between two persons because it is based on
outmost trust mid confidence.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
66. Statement 1: The agency shall remain in full force and effect even after the death of the principal,
if it has been constituted in the common interest of the latter and of the agent, or in the interest
of a third person who has accepted the stipulation in his favor.
Statement 2: If subsequent to the perfection of the pledge, the thing pledge is in the possession
of the pledgor or owner, there is a prima facie presumption that the same has been returned by
the pledgee, extinguishing the contract of pledge.

a. Both are true c. No.1 is true; No.2 is false

b. Both are false d. No.1 is false; No.2 is true
67. Statement 1: If the thing pledged is returned by the pledgee to the pledgor or owner, the principal
obligation is extinguished.
Statement 2: In case of pledge of animals, their offspring shall pertain to the pledgor of the
animal pledged and are no longer subject to the pledge, unless stipulated.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
68. Statement 1: If a thing pledge is alienated by the pledgor, consented by the pledgee to the
ownership and possession is transmitted to the vendee after alienation
Statement 2: In sale at public auction, the pledgor or owner may be bid and shall have a better
right if he should off the same terms as the highest bidder.
a. Both are true c. No.1 is true; No.2 is false
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b. Both are false d. No.1 is false; No.2 is true
69. Statement 1: Should the commission agent receive, in addition to the ordinary commission,
another commission called guarantee commission, he shall bear the risk of collection and shall
pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser.
Statement 2: The responsibility of two or more agents, even though they have been appointed
simultaneously, is not solidary if solidarity has not been expressly stipulated. If solidarity has
been agreed upon, each of the agents is responsible for the non-fulfilment of the agency, and for
the fault or negligence of his fellow agents, except in the latter case when the fellow agents
acted upon beyond the scope of their authority.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
70. Statement 1: Every agent is bound to render an account of his transactions and to deliver to the
principal whatever he may have received by virtue of the agency, even though it may not be
owning to the principal. Every stipulation exempting the agent from the obligation to render an
account shall be void.
Statement 2: An agency couched in general term, comprises only acts of administration, even if
the principal should state that he withholds no power or that the agent may execute such acts as
he may consider appropriate, or even though the agency should authorize a general and
unlimited management.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
71. Statement 1: A stipulation in a contract of mortgage stipulating an upset price, at which the
property may be sold is void.
Statement 2: If the immovable mortgaged is sold, and the amount realized is less than the
mortgage debt, the buyer of the mortgaged property is liable to pay the deficiency, if any.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
72. Statement 1: A real mortgage may guarantee future obligation, while a chattel mortgage cannot
guarantee future obligation.
Statement 2: The mortgagee has the right to take possession of the chattel mortgaged upon
default of the mortgagor.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
73. Statement 1: In chattel mortgage, the mortgagor must execute an affidavit of good faith in order
that the mortgage shall be valid against third person.
Statement 2: An agency cannot be revoked if a bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already contracted, or if a partner is appointed manger of a
partnership in the contract of partnership and his removal from the management is unjustifiable.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
74. Statement 1: To lease real property to another person, the authority of the agent must be in a
special power of attorney, if the lease is for one year.
Statement 2: When a sale of a piece of land is made through an agent, his authority must be in
writing otherwise, the sale is unenforceable.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
75. Statement 1: In agency, the agent represents an incapacitated person.
Statement 2: The agent if authorized to borrow money can be the lender, but generally he cannot
be the borrower if he is authorized to lend.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
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76. P appointed A orally as his agent to sell his car for P10, 000. A sold the car to X acted in his (A’s)
name. If upon the delivery the car has hidden defects, is P liable?
a. No, because the contract is unenforceable, it is orally entered into.
b. Yes, because the thing belongs to the principal.
c. No, because the agent acted in his name.
d. None of the above.
77. Agency is extinguished by any of the following causes, EXCEPT
a. By its revocation
b. By the withdrawal of the agent
c. By the death of the agent or of the principal
d. Insolvency of the agent or his heirs.
78. The principal is not liable for the expenses incurred by the agent.
a. If the agent acted in contravention of the principal instruction.
b. Expenses were due to the fault of the agent.
c. Agent incurred them knowing that an unfavourable result would ensue, and the
principal was not aware thereof.
d. All of the above.
79. A commission agent:
a. Has the option to act in his own name
b. Generally, cannot sell on credit
c. May be an agente del credere if he receives guaranty commission
d. All of the above
80. Bears risk of collecting from the buyer the price of the sale.
a. Commission agent
b. Old Debtor in delegacion
c. Guarantor
d. Agente del credere

“A man is what he is because of the thoughts that he allowed to dominate his

mind”.
-Victor