L-NU AA-23-02-01-18

LYCEUM-NORTHWESTERN UNIVERSITY
Tapuac District, Dagupan City

COLLEGE OF BUSINESS EDUCATION

Midterm Examination – Law on Sales, Agency, and Credit Transactions

1st Semester, A.Y. 2020-2021
Prepared by: Judy Anne T. Ramirez, CPA

Name: _______________________ Score:

_________________
Student No: _______________________ Date of Examination:
_________________

I. Identification. Provide the terminology of the statement.

1. This includes any bill of lading, dock warrant, “quedan”, or warehouse

receipt or order for the delivery of goods, or any other document used
in the ordinary course of business in the sale or transfer of goods, as
proof of the possession or control of the goods, or authorizing or
purporting to authorize the possessor of the document to transfer or
receive either by indorsement or by delivery, goods represented by
such document.
2. It includes all chattels personal but not things in action or money of
legal tender in the Philippines. The term includes growing fruits or
crops.
3. This includes their state or condition.
4. This means goods identified and agreed upon at the time a contract of
sale is made.
5. This means that a person either has ceased to pay debts in the
ordinary course of business or cannot pay his debts as they become
due, whether proceedings have been commenced or not.
6. It is the currency which a debtor can legally compel a creditor to
accept in payment of a debt in money when in the right amount.
7. A contract whereby one person transfers the ownership of non-
fungible thngs to another with the obligation on the part of the latter
to give things of the same kind, quantity, and quality.
8. This is designed to prevent the defrauding of creditors by the secret
sale of all or substantially all of merchat’s stock of goods.
9. It is applied to goods in merchandise house refers to that which are
kept for sale.
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10. It means something that is sold everyday, and is constantly

going out of the store and being replaced by other goods.

1. Document title of goods 6. Legal tender

2. Goods 7. Barter
3. Quality of goods 8. Bulk Sales Law
4. Specific goods 9. Stock
5. Insolvent 10. Merchandise

II. Multiple Choice. Choose the best answer from the choices. Write your
letter on the space provided.

1. The contract of barter is perfected from the moment there is

a. A delivery by the contracting parties of things they promised
b. An enjoyment of material possession and neither party shall
alienate the property
c. A meeting of minds upon the things promised by each party in
consideration of the other
d. A transfer of ownership of non-fungible things to another

2. If one of the contracting parties, having received the thing promised

him in barter, should prove that it did not belong to the person who
gave it,
a. He cannot be compelled to deliver that which he offered in
exchange, but he shall be entitled to damages.
b. He can be compelled to deliver that which he offered in
exchange, but he shall be entitled to damages.
c. He cannot be compelled to deliver that which he offered in
exchange, but he shall not be entitled to damages.
d. He can be compelled to deliver that which he offered in
exchange, but he shall not be entitled to damages.

3. S sold to B a parcel of land. Is T, a third person, that is, one who is not
party to a contract, be bound by the sale in case he should later
acquire a right or interest in the property?
a. It depends. The provisions of this Title are subject to the rules
laid down by the Mortgage Law and the Land Registration Law
with regard to immovable property.
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b. Yes. The provisions of this Title are subject to the rules laid
down by the Mortgage Law and the Land Registration Law with
regard to immovable property.
c. No. The provisions of this Title are subject to the rules laid down
by the Mortgage Law and the Land Registration Law with
regard to immovable property.
d. Answer not given.

4. S agreed to sell and deliver to B specific goods. B refused to accept

the goods on the date designated. S was so infuriated that he was
hospitalized for a mild stroke. May S hold B liable for his
hospitalization expense?
a. It depends. The measure of damage is the estimated loss
directly and naturally resulting from the buyer’s breach of
contract. It is conveniently expressed by the formula – the
difference between the contract price, that is the amount of the
obligation which the buyer failed to fulfill, and the market or
current price, that is, the value of the goods which the seller has
left upon his hands.
b. Yes. The measure of damage is the estimated loss directly and
naturally resulting from the buyer’s breach of contract. It is
conveniently expressed by the formula – the difference between
the contract price, that is the amount of the obligation which the
buyer failed to fulfill, and the market or current price, that is,
the value of the goods which the seller has left upon his hands.
c. It depends. If there is no available market in the which the
goods can be sold at the time, the seller is entitled to the full
amount of damage which he has really sustained by the breach
of the contract. Article 1596 allows the seller under “special
circumstances” proximate damages of a greater amount than
the difference between the contract price and market price
when such damages “may be reasonably attributed to the non-
performance of the obligation”.
d. Yes. If there is no available market in the which the goods can
be sold at the time, the seller is entitled to the full amount of
damage which he has really sustained by the breach of the
contract. Article 1596 allows the seller under “special
circumstances” proximate damages of a greater amount than
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the difference between the contract price and market price

when such damages “may be reasonably attributed to the non-
performance of the obligation”.

5. S signed a document purporting to be a sale of parcel of land to B

with a right to repurchase. S claims that what he intended is to
mortgage his property to B for money loaned to him. What remedy is
available to S: reformation or annulment?
a. It depends, the apparent vendor may ask for the reformation of
the instrument.
b. Contract is void. There has been no meeting of the minds.
c. Contract is unenforceable. The sale has to be ratified in writing.
d. Contract is voidable. There is a defect in the consent as to the
buyer.

6. S sold his house to B with a right to repurchase. May B lease the

property, knowing that S will certainly exercise his right of
redemption?
a. No, the vendee can only lease the property once the period of
redemption by the buyer has already expired.
b. Yes, the vendee is subrogated to the vendor’s right and actions.
c. Yes, the sale transfers absolute ownership to the buyer.
d. It depends, the vendee and vendor can unanimously decide on
the contract of lease to avoid conflict once the vendor is to
redeem the property.

7. S sold his house to B with a right to repurchase. Has B the obligation

to respect the lease after exercising his right of redemption?
a. It depends. The vendor who recovers the thing sold shall receive
it free from all charges or mortgages constituted by the vendee,
but he shall respect the leases which the latter may have
executed in good faith, and in accordance with the customs of
the place where the land is situated.
b. No. The vendor who recovers the thing sold shall receive it free
from all charges or mortgages constituted by the vendee, but he
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shall respect the leases which the latter may have executed in
good faith, and in accordance with the customs of the place
where the land is situated.
c. No. The vendor who recovers the thing sold shall receive it free
from all charges or mortgages constituted by the vendee, but he
shall not respect the leases which the latter may have executed
in bad faith, and in accordance with the customs of the place
where the land is situated.
d. Yes. The vendor who recovers the thing sold shall receive it free
from all charges or mortgages constituted by the vendee, but he
shall respect the leases which the latter may have executed in
good faith, and in accordance with the customs of the place
where the land is situated.

8. A, B, C, and D are co-owners of a parcel of land sold to E with a right

of repurchase. May E require all of them to repurchase the whole
property instead of partial purchase by each of them as regards his
own share?
Statement 1: If several persons, jointly and in the same contract,
should sell an undivided immovable with a right of repurchase, none
of them may exercise this right for more than his respective share.
Statement 2: The vendee may demand of all the vendors or co-heirs
that they come to an agreement upon the repurchase of the whole
thing sold; and should they fail to do so, the vendee cannot be
compelled to consent to a partial redemption.
Statement 3: Each one of the co-owners of an undivided immovable
who may have sold his share separately, may independently exercise
the right of repurchase as regards his own share, and the vendee
cannot compel him to redeem the whole property.
a. It depends. Apply statements 1, 2, and 3.
b. It depends. Apply statements 1 and 3.
c. No. Apply statements 1, 2, and 3.
d. Yes. Apply statements 2 and 3.

9. S, being in need of money, sold to B for P500,000, his right to

inheritance from his father who has died telling B that he believes
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that its value is more than P500,000. It turns out that its value is more
than P500,000. It turns out that the value is only P300,000. Is S liable
to B?
a. It depends. The seller of an inheritance warrants only the facts
of his heirship but does not warrant the objects which make up
the inheritance.
b. Yes. The seller sold the inheritance with specification of the
properties to be alienated.
c. No. The seller did not enumerate the things comprising the
inheritance, that is to say, the hereditary rights only.
d. Yes. The seller sold the inheritance without specification of the
properties to be alienated, only the hereditary rights.

10. C, creditor, assigned his credit against D, debtor, to T without

securing the consent of D. Subsequently, D paid C who became
bankrupt. Has T the right to recover from D the payment made to C?
a. Yes. Since the consent of the debtor is not essential in order that
it may produce legal effects, the debtor is not released from the
obligation.
b. Yes. Even if the consent of the debtor is not essential, the notice
results to an obligation by the debtor to still pay T.
c. It depends. If the third person chooses to recover from the
debtor, the latter may demand reimbursement from the creditor.
d. It depends. If the payment is made before notice, the payment
to the original creditor is valid. If the payment is made after or
before notice but debtor had knowledge of the assignment, the
debtor will not be released from the obligation.

11. S exchanged his parcel of land for the new car of B. It turns out
the car was subject to a chattel mortgage and was sold at public
auction for failure of B to comply with the conditions of the mortgage.
What rights are given by law to S?
a. S can recover the parcel of land from B.
b. S can demand fulfillment of the obligation B, thus the
entitlement to the new car of B shall still belong to S.
c. B can withdraw the sale of the new car from the public auction
to fulfill the obligation to S.
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d. S cannot be compelled to deliver the parcel of land. Moreover, S

is entitled to damages.

12. S exchanged his parcel of land for the new car of B. B was
judicially evicted from the land by C who was adjudged the true owner
in an action by him against S. What rights are given by law to B?
Statement 1: B may recover the new car from S with a right to
damages.
Statement 2: B may only demand an indemnity for damages.
Statement 3. B can only recover the new car from S while it is still
possession of S and without prejudice to the rights acquired in good
faith in the meantime by a third person.
a. Statement 1 and 2 are true.
b. Statement 2 and 3 are true.
c. Statement 1 and 3 are true.
d. Statement 1, 2, and 3 are true.

13. The general scheme of The Bulk Sales Law is to declare such
bulk sales fraudulent and void as to creditors of the vendor, or
presumptively so, unless specified formalities are observed such as:
Statement 1: The demanding and giving the of a list of all
creditors
Statement 2: The giving of actual or constructive notice to such
creditors, by record or otherwise,
Statement 3: The making of an inventory
a. Statements are cumulative.
b. Statements are alternative.
c. Statements are incorrect.
d. Statements do not apply to the question.

14. A sale and transfer in bulk under the Bulk Sales Law is any sale,
transfer, mortgage or assignment of:
I. A stock of goods, wares, merchandise, provisions or materials
otherwise than in the ordinary course of trade and the regular
prosecution of the business.
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II. All or substantially all, of the business or trade;

III. All or substantially all, of the fixtures and equipment used in the
business of the vendor, mortgagor, transferor, or assignor.
a. Either I, II, or III.
b. All of I, II, and III.
c. Neither I, II, nor III.
d. Only I and II.

15. The Bulk Sales Law protects or benefits the creditors as follows:
I. It requires the vendor, etc. to deliver to the vendee, etc. a sworn
written statement of the names and addresses of all creditors to whom
said vendor, etc. may be indebted together with the amount of
indebtedness de or to become due;
II. It requires the vendor, etc. at least ten (10) days after the sale, etc.
to make a full detailed inventory showing the quantity and the cost
price of the goods and to notify every creditor of the price, terms, and
conditions of the sale, etc.
a. I is true. II is false.
b. I is false. II is true.
c. I and II are true.
d. I and II are false.

16. Creditors may waive the right to the benefit of the statute or
estop themselves to claim
a. That the sale was invalid because the requirements were not
complied with.
b. That the sale was voidable due to a vice in consent.
c. That the sale was void because there was no meeting of the
minds.
d. That the sale was unenforceable because it has to be in writing.

17. If the statement in the schedule of creditors is fair upon its face
and the buyer has no knowledge of its incorrectness and nothing to
put him on inquiry about it, he will be protected in its purchase.
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a. The sale is valid only as between the vendor and the vendee but
void as against the creditors.
b. In such case, the remedy of the creditor is not against the goods
but to prosecute the seller criminally.
c. The sale is void as to such creditors.
d. It does not affect the validity of the sale as against the creditors.

18. If the vendee has knowledge of the false statement in the

schedule of creditors or the statement is defective on its face, the
vendee accepts it at his peril.
a. The sale is void. The object of the contract of sale, which is an
essential requisite, is not deemed to be complied with.
b. The sale is unenforceable. The written statement should be
ratified to conform with the agreement of both parties.
c. The sale is valid only as between the vendor and the vendee but
void as against the creditors.
d. The sale is voidable. However, it remains to be a valid contract
unless a ratification in the consent has deemed to be complied
with.

19. If the list omits to name certain creditors who are not notified,
a. The sale is void if the omission was fraudulent.
b. The sale remains valid if the omissions was a mistake and not
done in bad faith.
c. The sale is unenforceable. The schedule should be ratified to
include the names of the certain creditors that have been
omitted.
d. The sale is void as to such creditors whether that omission was
fraudulent or not.

20. The bulk sales law does not in any way affect the validity of the
transfer as between the immediate parties thereto.
a. True, a sale not in compliance with the bulk sales statute is
valid against all persons including the creditors.
b. True, a sale not in compliance with the bulk sales statute is
valid against all persons other than creditors.
c. True, a sale in compliance with the bulk sales statute is valid
against all persons other than creditors.
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d. True, a sale not in compliance with the bulk sales statute is void
against all persons other than creditors.

21. A purchaser in violation of the law acquires no right in the

property purchased as against the creditors of the seller.
a. The purchaser subrogates the right of a trustee and the
creditors of the seller should be responsible for the disposition
of the property.
b. His status is that of a trustee or receiver for the benefit of all
the creditors of the seller. He is responsible for the disposition
of the property.
c. There is no contract of sale. A purchaser who acted in bad faith
acquires no right as to the ownership of the property.
d. The creditors of the seller have the right to dispose the property
and demand damages from the purchaser in bad faith.

22. This is a mode to extinguish an agency

a. Death of the principal, but the agency is for the interest of the
principal and agent.
b. Partial accomplishment of the agency.
c. Upon withdrawal of the principal
d. Insanity of principal or agent

23. P authorized his agent to direct and administer his commercial

business, among others “to collect sums of money and exact their
payment by legal means.”
I. A can bring a court action for collection provided he brings it in
the principal’s name under his agency.
II. A needs a special power of attorney to bring a court action
because the agency of A pertains only to acts of administration.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.
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24.
Statement 1: An agency cannot be revoked at principal’s will if the
agency depends upon a bilateral contract.
Statement 2: An agency cannot be revoked at principal’s will if the
agency is for a compensation
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.

25.
Statement 1: Agency is a nominate, principal, unilateral, preparatory,
commutative and generally onerous contract.
Statement 2: Agency is a nominate, accessory, bilateral, preparatory,
commutative and generally onerous contract.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.

26. Ronald authorized Harry to sell his car for P200,000 with 5%
agent’s commission. Harry sold the car to Crookshanks for P250,000.
For how much is Harry accountable to Ronald?
a. P200,000 c. P250,000
b. P190,000 d. P240,000

27. Mar Garci, before going to Spain appointed Jc Legaspi as his

agent to administer his properties in the Philippines. Afterwards,
Legaspi wrote Garci that he (Legaspi) was withdrawing from the
agency because of failing health. Legaspi, in the same letter said that
he appointed Eg Legaspi as his substitute and that Mar should extend
a new appointment to Eg. Eg took over the duties of Jc but Mar did
not bother to appoint Eg to act as his agent until Mar’s death. Now
Mar’s heirs brought an action against Eg for accounting. Eg raised the
defense that he was not validly constituted as an agent of Mar. In the
case at bar, defense is not tenable because there is:
a. An actual agency c. A general agency
b. An implied agency d. Answer not given
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28. The principal is not liable for expenses incurred by the agent
a. When it was stipulated that the agent would only be allowed a
certain sum
b. When the agent has complied with his obligations by acting
according to the principal’s instructions
c. When the agent incurred them with the knowledge that an
unfavorable result would ensue and the principal was aware of
it
d. When the expenses were incurred without the fault of the agent

29.
Statement 1: If the third person contracts with the agent knowing that
the agent exceeds the scope of his authority, the contract is void not
only as against the principal but also as between agent and the third
person
Statement 2: If a third person contracts with the agent knowing that
the agent exceeds the scope of his authority the contract is void as
against the principal but valid between the agent and the third
person.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.

30. X, Y and Z were appointed by R as his agents to administer his

building which was rented by various tenants while R was abroad for
three years. In the course of management, X cause through his fault
damage to the building which was assessed at P30,000. R can claim:
a. P10,000 from each of X, Y and Z.
b. P30,000 from X
c. P30,000 from Y and Z
d. P30,000 from either X, Y and Z

31. Agent was authorized by Principal to sell the latter’s TV set for
P10,000 on the installment plan. A was able to sell it for P10,000 cash
basis.
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I. The sale is not binding upon the principal unless the principal
ratifies it.
II. The sale is not binding upon the principal because the agency
was performed in a manner not included in the agency.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.

32.
Statement 1: In mutuum or loan, one of the parties delivers to another
something not consumable so that the latter may use the same for a
certain time and return it.
Statement 2: Mutuum is essentially gratuitous.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.

33.
Statement 1: In commodatum one of the parties delivers money or
consumable thing upon the condition that the same amount of the
same kind and quality shall be paid.
Statement 2: In commodatum and mutuum ownership of the thing
loan is transferred to the borrower.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.

34.
Statement 1: The bailee in commodatum can lend or lease the object
of the contract to a third person.
Statement 2: When there are two or more bailees to whom a thing is
loaned in the same contract, they are liable jointly.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
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d. Both statements are false.

35.
Statement 1: A contract whereby one person transfers the ownership
of non-fungible things to another with the obligation on the part of the
latter to give things of the same kind, quantity and quality shall be
considered a loan.
Statement 2: Precarium is a kind of mutuum where the bailor may
demand the thing loaned at will.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.

36. D deposits his money by way of a savings account with C Bank.

The contract between D and C is
a. Deposit c. Commodatum
b. Agency d. Mutuum

37.
I. Commodatum and mutuum involve real and personal property.
II. The bailee in commodatum acquires the use of the thing loaned
and its fruits.
a. First statement is true; second statement is false.
b. First statement is false; second statement is true.
c. Both statements are true.
d. Both statements are false.

38. A receives power of attorney from P appointing him as agent

with respect to a particular business transaction. Is A’s silence or
inaction, or lack of objection be deemed an implied acceptance by him
of the agency?
a. It depends. An implied agency arises from acts which carry out
the agency or from silence or inaction according to the
circumstances.
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b. Yes. There was no violent reaction from A as to the appointment

by P. Therefore, the agency is deemed to be an implied
acceptance.
c. No. Agency is a contract, there must be consent by both parties.
d. It depends. An implied agency arises if the principal delivers
power of attorney and the agent receives it without any
objection.

39. A receives power of attorney from P appointing him as agent

with respect to a particular business transaction. A expressly
accepted the agency but he acted in his own name without disclosing
that P was his principal to T, the other contracting party. Has T a right
of action against P?
a. It depends. A is the one directly bound in favor of T as if it was
A’s transaction except when the contract involves things
belonging to P.
b. No. T has the right of action as against A. A is liable for
damages as he acted in bad faith in representing P.
c. Yes. The power of attorney vested A the authority to act with
respect to a particular transaction. Also, P benefited from the
transaction.
d. Answer is not given.

40. A, agent, and P, principal, are very good friends. On many

occasions, P has done favors to A which are more than the value of the
services that A will perform for P. In view of this, is P still bound to
compensate A as his agent?
a. Yes, if A requests for compensation. Otherwise, it may be
considered an agency as gratuitous.
b. No, there are favors done by P to A. It is just not to compensate
A because their actions can be considered offset.
c. Yes. If there was no compensation specified, P should pay A
reasonable value of the latter’s services.
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d. It depends. Should there be no agreement, P is not bound to pay

A. If there is stipulation as to the compensation, P is bound to
pay A.

41. P, Inc. appointed A as its agent in connection with the

company’s business and advertised the appointment in a newspaper.
Before the advertisement, T, a client who happened to drop by, was
informed of the appointment which was revoked also by
advertisement after a few months. A week later, T entered into a
connection with A as agent of P, Inc. Now, T seeks to make P, Inc.
liable, Can T recover from P, Inc.
a. It depends. If the communication of existence of agency is done
through special information, A is considered such with respect
to T. If it is done through public advertisement, A is considered
as such with regard to any person. However, in either use, the
agency is deemed to exist whether there is an agency or not.
b. No. The appointment was advertised in a newspaper. The power
of attorney must be revoked in the same manner in which it was
given. Here, the revocation was advertised. Thus, it affects any
person whether the newspaper has been read or not.

c. Yes. The appointment was advertised in a newspaper. However,

there is a special information made to B prior to the
advertisement. P, Inc. should have informed T through private
communication to revoke the agency with A.
d. Answer is not given.

42. P appointed A, as agent, who in turn, appointed S as subagent

or substitute to perform that which A was supposed to do for P. Is the
substitution valid?
a. Yes. A may appoint a substitute if P has not prohibited him from
doing so.
b. No. Agency is constituted on the ground of mutual trust
between the agent and principal. Appointment of a subagent
violates that trust given by P to A.
c. It depends, the statement lacks information as to whether the
appointment of a subagent is not prohibited by P. Thus, one
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cannot simply presume an authorization if there has been no

aforementioned.
d. No. There is no valid ground as to the appointment of a
subagent. Only the principal is allowed to appoint such should
he feel the need to do so.

43. P appointed A, as agent, who in turn, appointed S as subagent

or substitute to perform that which A was supposed to do for P. Is A
liable to P for damages caused by S’s negligence?
a. No. Since S was negligent, S should be the one liable to P in
answering the damages caused by the substitution.
b. Yes. A may appoint a substitute if P has not prohibited him from
doing so; but A is responsible for the acts of S when S is
notoriously incompetent or insolvent.
c. It depends. The statement lacks information if the negligence
was done in bad faith. Therefore, if it is done good faith, S is not
liable.
d. Yes. A is liable to P for damages. However, A can sue S for the
reimbursement of the damages paid by him.

44. P appointed A, as agent, who in turn, appointed S as subagent

or substitute to perform that which A was supposed to do for P.
Assuming that the substitution was authorized, may A be still liable
for S’s negligence?
a. Yes. With the substitution authorized by P, A is liable for the
negligence of S due to incompetency or insolvency.
b. It depends. A was authorized with the appointment of A as
subagent. Therefore, A is responsible for the acts of S including
his notorious incompetence and insolvency.
c. No. It was authorized by P. Therefore, P may directly sue S for
damages since A has nothing to do with the negligence of S.
d. Yes. It is the appointment of a subagent by A which caused
damages to P. Therefore, A is still liable for S’s negligence
regardless whether there has been a direct involvement or not.
45. P, principal, authorized A, agent, to sell the former’s car for not
less than P500,000. A sold the car for P550,000. Is A entitled to the
P50,000 overprice?
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a. Yes. The agreement of P and A is to sell the car for P500,000.

Therefore, P is entitled to the P500,000 and A is entitled to
P50,000.
b. Yes. A is entitled to the P50,000 overprice. However, A should
inform P to make the entitlement valid.
c. No. A is bound to render an account on the sale of the car for
P550,000.
d. It depends. If there is an agreement that A is entitled to the
excess prior to the sale, then A may keep the P50,000 for
himself.

46. P, principal, authorized A, agent, to sell the former’s car for not
less than P500,000. A sold the car for P550,000. Can A buy the car of
P for P500,000?
a. No. Should there be a conflict between the interest of P and A,
A should prefer that of P.
b. Yes. The sale price of the car is P500,000. A is purchasing the
car with the same amount. Therefore, P will not incur any loss.
c. Yes. The agreement is to sell the car for P500,000. A can
purchase the car without incurring any losses to P.
d. No. A is not authorized to sell to himself either directly or
indirectly. It is his duty to sell at the highest price for the
principal conflicts with his interest to buy at the lowest price
possible.

47. A, agent, went beyond his authority given to him by P, principal,

when he entered into a contract with X.
a. P would still liable to X if P ratifies the contract expressly or
tacitly.
b. The liability of P is solidary with A if P allowed A to act as
though A had full powers.
c. Both statements are correct.
d. Both statements are incorrect.

48. P authorized A to sell former’s car. P sold the car today to X

without informing A who sold the same to Y the following day. Who
has a better right to the car?
a. It depends. The contract with a prior date shall be preferred.
L-NU AA-23-02-01-18

b. X has a better right to the car. Its date of sale is earlier than that
of Y.
c. It depends on who has taken first possession of the car in good
faith.
d. Y has a better right to car since the sale of P to X is not known
to A.

49. A is the agent of P. May A withdraw from the agency at any time
with or without any valid reason?
a. Yes, A may withdraw by giving due notice to P.
b. Yes, A must answer for losses and damages should the
withdrawal caused by the non-fulfillment due to the withdrawal.
c. Both statements are correct.
d. Both statements are incorrect.

50. A is the agent of P. May P revoke the agency at any time with or
without any valid reason?
a. Yes, P may revoke the agency at will. P may also compel A to
return the document evidencing the agency. Such revocation
may be express or implied.
b. Yes. However, P may not revoke the agency if it is created not
only for the interest of the principal but also for the interest of
third persons.
c. Both statements are correct.
d. Both statements are incorrect.

51. Under a contract of bailment, property was received by E from

R.
a. If the contract of bailment is for the sole benefit of the bailor, it
is a mutuum.
b. If the contract of bailment is for the sole benefit of the bailee, it
is a commodatum and gratuitous simple loan or mandatum.
c. If the contract of the bailment is for the benefit of both parties,
it includes a deposit for compensation, pledge, and bailments
for hire.
d. None of the choices is correct.
L-NU AA-23-02-01-18

52. E borrowed from a cavan of rice from R. Is the contract one of

commodatum?
a. The contract is a commodatum since the subject is consumable
goods.
b. It is a commodatum if the purpose of the contract is merely for
exhibition.
c. It does not matter. E has the obligation to return a cavan of rice
to R.
d. It is a commodatum since the purpose of the contract is the
consumption of the consumable goods.

53. E borrowed R’s car to be used by him for 15 days. Now the car
needs major repairs. Is E obliged to pay for the expenses?
a. E is obliged to pay for the expenses for the use and preservation
of the thing loaned.
b. R shall refund E if it profits the former by the expenses.
Provided however that E should inform R before incurring such
expenses.
c. Expenses which arise on the frequent actual use of the thing
should be borne equally by R and E if caused by fortuitous
event.
d. E must take good care of the car with the diligence of a good
father of a family.
54. E borrowed money from R. There was no stipulation to pay
interest. After paying interest, E seeks to recover the amount thereof.
Is R obliged to return the interest paid?
I. If E pays the interest by mistake, then E may recover as
this would be a case of solution indebiti or undue payment.
II. If E voluntarily pays the interest due to moral obligation,
then there can be no recovery as in the case of mutual obligations.

a. Statement 1 is correct.
b. Statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.
L-NU AA-23-02-01-18

55. E borrowed money from R. There was a stipulation to pay

interest which E has not paid. Has R the right to demand interest?
I. The payment must be expressly stipulated.
II. The agreement must be in writing.
III. The interest must be lawful.
a. R has the right to demand interest if Statements I, II, and III are
complied with.
b. R has the right to demand interest if either of the Statements I,
II, or III are complied with.
c. R does not have the right to demand interest.
d. Answer is not given.

Reviewed and Checked by:

Dr. Genoveva Y. Reyes, CPA, MBA

Dean, College of Business Education