CPA Review School of the Philippines

Manila
Final Pre-Board Examination September 16, 2023
Regulatory Framework for Business Transactions Atty. Dela Cruz

1. Upon winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is
unknown and cannot be found shall be escheated and forfeited in favor of the

Old Corporation Code Revised Corporation Code

a. Barangay where such property is located Province where such property is located
b. Province where such property is located City where such property is located
c. City or municipality where such property is located National government
d. National government City or municipality where such property is located

2. Which of the following is considered securities under Securities Regulation Code?

a. Merchandise inventory
b. Options and warrants
c. Investment property
d. Prepaid assets and expenses

3. Which of the following are not considered securities under Securities Regulation Code?

a. Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-backed securities

b. Investment contracts, certificates of interest or participation in a profit sharing agreement, certificates of
deposit for a future subscription
c. Fractional undivided interests in oil, gas or other mineral rights
d. Deed of Lease and Deed of Sale

4. The person engaged in the business of buying and selling securities for the account of others

a. Issuer
b. Broker
c. Dealer
d. Associated person

5. Venus Corporation is 50% owned by Filipinos and 50% owned by Germans. Legaspi Corporation is 60% owned
by Venus Corporation, 25% by other Filipino citizens and the remaining interst by Italians. Does Legaspi
Corporation, a public utility, comply with the minimum Filipino ownership?

a. It cannot be determined
b. Yes under grandfather rule test
c. No under grandfather rule test
d. No under incorporation test

6. Uranus Corporation is 55% owned by Filipinos and 45% owned by Japanese. Albay Corporation is 60% owned
by Uranus Corporation, 30% by other Filipino citizens and the remaining interest by Malaysians. Does Albay
Corporation, a public utility, comply with the minimum Filipino ownership?

a. It cannot be determined
b. Yes under grandfather rule test
c. No under grandfather rule test
d. No under incorporation test

7. It refers to an intellectual property which gives an exclusive right to the inventor over his new, inventive and
useful product, process or an improvement of a product or process.

a. Copyright
b. Trademark
c. Franchise
d. Patent
8. On January 1, 2019, Jasper invented the technology of Cacao Lamp and was using it already for three years. On
January 1, 2022, Justine invented the same technology of Cacao Lamp. Justine made an application for
registration with the Intellectual Property Office. Who has better right over the patent of the technology?

a. Justine
b. Jasper
c. Justine, for 20 years and thereafter, Jasper
d. Jasper, for 20 years and thereafter, Justine

9. On January 1, 2022, Minmin invented the technology of Foyer Touch which he registered in the Intellectual
Property Office of USA on January 2, 2022. On April 1, 2022, Pitpit invented the same technology of Foyer
Touch which he registered in the Intellectual Property Office of the Philippines on April 2, 2022. A certified
copy of Minmin’s application in USA was filed on June 2, 2022 to Intellectual Property Office of the
Philippines. Who has better right over the patent of Foyer Touch in so far as Philippine jurisdiction is
concerned?

a. Minmin
b. Pitpit
c. Both Minmin and Pitpit
d. Neither Minmin nor Pitpit

10. It is an intellectual property that refers to any visible sign capable of distinguishing the goods of an enterprise
and shall include a stamped or marked container of goods.

a. Distinguishing mark
b. Trademark
c. Patent
d. Copyright

11. It refers to the defense in a suit in copyright infringement which pertains to a privilege to use the copyrighted
material in a reasonable manner without the consent of the copyright owner or as copying the theme or ideas
rather than their expression. It is an exception to the copyright owner’s monopoly of the use of the work to
avoid stifling the very creativity which that law is designed to foster.

a. Doctrine of Fair Use

b. Doctrine of Unfair Use
c. Doctrine of Inappropriate Use
d. Doctrine of Authorized Use

12. It refers to a government agency which is considered an independent body entrusted to administer and
implement the provisions of Data Privacy Act, and to monitor and ensure compliance of the country with
international standards set for data protection.

a. National Telecommunication Commission

b. National Privacy Commission
c. National Economic Commission
d. National Power Commission

13. Which of the following is not a general data privacy principle?

a. Personal information must be adequate and not excessive in relation to the purposes for which they are
collected and processed
b. Personal information must be retained only for as long as necessary for the fulfillment of purposes for
which the data was obtained or for the establishment, exercise or defense of legal claims, or for legitimate
business purposes, or as provided by law
c. Personal information must be kept in a form which permits identification of data subjects for no linger than
is necessary for the purposes for which the data were collected and processed
d. Personal information must be processed surreptitiously and expeditiously to achieve the objective of the
company
14. Which is not an accountability of Personal Information Controller for transfer of Personal Information?

a. Each personal information controller is responsible for personal information under its control or custody,
including information that have been transferred to a third party for processing, whether domestically or
internationally, subject to cross-border arrangement and cooperation.
b. The personal information controller is accountable for complying with the requirements of Data Privacy
Act and shall use contractual or other reasonable means to provide a comparable level of protection while
the information are being processed by a third party.
c. The personal information controller shall designate an individual or individuals who are accountable for the
organization's compliance with Data Privacy Act. The identity of the individual(s) so designated shall be
made known to any data subject upon request.
d. The personal information controller is responsible for the processing done by the data subject concerning
his own personal information.

15. This is a policy that prohibits government officer or employee to have any contact with an application except (1)
during the preliminary assessment of the request and evaluation of sufficiency of submitted requirements and
(2) necessary with any requesting party concerning an application or request.

a. Zero-Contact Policy
b. Online Policy
c. Face to face Policy
d. Intangible Policy

16. P, O and A are partners in an import and export business. Customers desiring to place an order for imported
articles are always required to make a deposit of 25% of the total cost of the order. B, a regular customer,
deposited P6,000 to P for his order. P, instead of turning over the said amount to the partnership,
misappropriated it. As a result, which one is not correct?

a. B may institute a claim against the partnership and all the partners
b. The personal liability of the partners is pro-rata.
c. The partnership is bound to make good the loss where one partner acting within the scope of his apparent
authority receives money or property of a third person and misapplies it
d. All the partners are liable solidarily with the partnership for everything chargeable to the partnership

17. The duty to make disclosure, where otherwise there would be a great and unfair relation of directors to
stockholders.

a. Special circumstances rule

b. Doctrine of corporate opportunity
c. Trust fund theory
d. Incorporation theory

18. The drawee bank may not refuse to pay checks drawn against it even

a. If there is a “stop payment” issued by the drawer

b. If the drawer is insolvent
c. If the drawer’s deposit is insufficient
d. When the bank receives notice of the drawer’s death

19. A sells to B a Sony colored TV for P12,000 payable in twelve equal monthly installments beginning May 5,
2023 and every 5th day of each month thereafter. The contract provides that upon failure to pay any installment
due, the whole balance becomes due and demandable. To secure the obligation, a chattel mortgage over the TV
set was executed. When B defaulted on the seventh and eighth installments, A sued B for the payment of the
whole balance of P6,000. The TV set was levied and subsequently sold at a public sale for P5,000. Can A still
recover the deficiency of P1,000 from B?

a. Yes, if there was stipulation to that effect

b. Yes, even though there was no stipulation
c. No, any stipulation allowing recovery is void
d. No, if there was no stipulation to that effect
20. C mortgaged his car to B to secure a P300,000 loan, payable in 10 equal monthly installments. C failed to pay
the 4th and 5th monthly installments. B sold the car at a public auction for P180,000. Can B recover the
deficiency?

a. Yes, even without stipulation

b. Yes, only if there is stipulation
c. No, even if there is stipulation
d. No, unless there is stipulation

21. Using the above data, if the sale is for P240,000, can C recover the excess?

a. Yes, even without stipulation

b. Yes, only if there is stipulation
c. No, even if there is stipulation
d. No, unless there is stipulation

22. Any director of a corporation may be removed from office by a vote of?

a. Majority of the members of the board

b. Majority of the stockholders present
c. 2/3 of the stockholders present
d. 2/3 of the outstanding capital stock

23. Dividends on shares of stocks can only be declared out of unrestricted retained earnings of the corporation.

Answer 1 – True, dividends whether cash or stock can be validly declared only out of unrestricted retained
earnings

Answer 2 – False, during the receivership, the assets and properties of the corporation are being gathered for
conversion into cash in preparation for distribution to creditors

a. Both answers are correct

b. Both answers are incorrect
c. Only Answer 1 is correct
d. Only Answer 1 is incorrect

24. S sold his car to B on installment and a chattel mortgage was constituted on the car. B defaulted in two
installment payments. S foreclosed the chattel mortgage and sold the car at a public auction. If there is
deficiency, can S recover the deficiency?

a. Yes, even without stipulation

b. Yes, only if there is stipulation
c. No, even if there is stipulation
d. No, unless there is stipulation

25. Inadvertently, the SEC approved the Articles of Incorporation and issued a Certificate of Incorporation to
Wholesome Corporation. Thereafter, it was discovered that the incorporators have not completed the required
period of residency in the Philippines. As a result, which of the following is incorrect?

a. The corporation shall be considered as a de-facto corporation

b. The right to exercise corporate powers can be inquired into collaterally in any private suit to which the
corporation may be a party
c. The corporation has no legal personality and the incorporators may be held personally liable for damages
d. The Solicitor General has the right to question or contest the validity of its corporate existence through a
quo-warranto proceedings

26. In case a managing partner collects a demandable debt from his debtor who also owes the partnership a
demandable debt, which of the following is not correct if payment is not enough to cover the two debts?

a. The sum collected shall be applied to the partnership credit

b. It shall be applied to the two credits in proportion to their amounts
c. The debtor has the right to have the payment applied to his debt to the partner if it should be onerous to him
d. The partner cannot apply the payment to his own credit
27. The following are the effects of unlawful partnership, except

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

28. On April 1, 2023, A and B entered into a contract of partnership for the purpose of buying and selling textbooks,
with the former as a capitalist partner and the latter as industrial partner. It was agreed that A shall contribute
P100,000 to the common fund on May 2, 2023. Upon the arrival of the designated date, A failed to deliver the
contribution he promised. As a result

a. B should make a demand upon A for the delivery of his contribution to render A in default
b. The contract of partnership becomes void because A failed to give his contribution to the common fund
c. B can compel A to deliver his contribution with interest and damages without the necessity of demand
d. The contract of partnership was never perfected because there was no delivery of contributions by the
partners

29. Statement 1 – A director is removed from office by a vote of the stockholders holding or representing at least 2/3
of outstanding capital stock. The vacancy occasioned by such removal can be filled by the vote of at least a
majority of the remaining directors if still constituting a quorum

Statement 2 – Treasury shares sold for less than par or issued value are considered “watered stock” and as such
are prohibited by law

a. True, true
b. True, false
c. False, true
d. False, false

30. The following are ways of enforcing payment of unpaid subscription. Which is the exception?

a. Sale at public auction of delinquent stock

b. Denying delinquent stock cash dividend
c. Filing a court action to recover unpaid subscription
d. Denying delinquent stock the right to vote and be voted upon

31. Which of the following corporate acts will not require the approval of the stockholders or of the members of the
private corporation?

a. To amend the by-laws

b. To increase the capital stock
c. To invest corporate funds in another corporation or business
d. To elect the officers of the corporation

32. A, B, C, and D are general partners contributing P20,000, P30,000, P50,000 and industry respectively. At the
time of liquidation, the partnership is indebted to Y for P50,000, to partner A for P30,000 and to partner B for
P20,000. If the assets of the partnership amount only to P20,000, which of the following is correct?

a. Y can collect P20,000 from the partnership and from partners A, B, and C at P10,000 each
b. After exhausting the assets of the partnership amounting to P20,000, Y can collect from partners A, B, C,
and D at P7,500 each
c. Y can collect P20,000 from the partnership P30,000 from either partners A or B or C or D
d. If Y succeeds in collecting the P30,000 from the separate properties of the partners concerned, partners A,
B, and C will be required to make additional contribution

33. A is the listed owner of 10,000 shares with par value of P100/share in ABC Corporation. ABC sued A for the
payment of A’s indebtedness of P1M. A contends that such debt must be compensated by his shares of stocks
with the plaintiff corporation. The contention of A is

a. Valid due to legal compensation

b. Valid by virtue of judicial compensation
c. Untenable since he is not a creditor of the corporation
d. Automatically extinguished if the fair market value of the shares is P1M
34. The articles of incorporation differ from the by-laws in that the articles of incorporation are

a. The rules or action adopted by a corporation for its internal government

b. Adopted before or after incorporation
c. A condition precedent in the acquisition by a corporation of a juridical personality
d. Approved by the stockholders if adopted after the incorporation

35. If the remaining directors constitute a quorum, they can fill up the vacancy

a. In case of removal of a director

b. In case of expiration of term of a director
c. If there is an increase in the number of directors
d. In case of resignation of a director

36. A, B, C, D, E, F, and G are the duly elected directors for 2023 of Kat Corporation whose articles of incorporation
provide for 7 directors. On August 1, 2023, Directors A, B, C, D, and E met to fill the two vacancies in the
board brought about by the valid removal of F for disloyalty to the corporation and the death of G. In the said
meeting, the remaining directors voted for X to replace F and Y, a son of G, to replace his father. Both X and Y
are owners of at least one share of stock of the corporation. The election of X and Y by the remaining directors

a. Valid for both X and Y

b. Not valid for both X and Y
c. Valid with respect to X, not valid with respect to Y
d. Not valid with respect to X, valid with respect to Y

37. In the meeting of the board of directors of Joy Corporation, a construction company held on March 31, 2023,
directors A, B, C, D, and E were present among the 9 directors. The meeting had for its agenda the following:

I. The appointment of new treasurer

II. The approval of the contract for the purchase of cement worth P100,000 from X Supplies Co.

When the voting took place, directors A, B, C, and D voted for the election of Y as the new treasurer, and
directors A, B, and C voted for the approval of the contract with X Supplies. As a result,

a. Both corporate acts are valid

b. Both corporate acts are not valid
c. The election of Y as the new treasurer is valid, the approval of the contract with X supplies is not valid
d. The election of Y as the new treasurer is not valid, the approval of the contract with X supplies is valid

38. The board of directors of a corporation consists of nine (9) members, where two (2) were removed and two (2)
have resigned, who fills up the vacancy?

First answer – the remaining members of the Board

Second answer – the stockholders

a. Both answers are true

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

39. As regards treasury shares, which is not correct?

a. They have no voting rights as long as they remain in the treasury

b. They are considered as part of earned or surplus profits and therefore distributable as dividends
c. They are not entitled to dividends
d. They may be distributed as property dividend if there are retained earnings arising from the business of the
corporations

40. One is not a rescissible contract

a. Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due
them
b. Those which are entered into by guardians wherever the wards whom they represent suffer lesion by more
than ¼ of the value of the things which are the object thereof
c. Those agreed upon in representation of absentees, if the latter suffer a lesion of more than ¼ of the value of
the object of the contract
d. Those where one of the parties is incapable of giving consent to a contract
41. A, B, and C organized ABC and CO, limited, a limited partnership with A as a general partner, B as a limited
partner, and C as an industrial partner, contributing P200,000, P200,000, and industry 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 B C
a. P30,000 P0 P0
b. P15,000 P0 P15,000
c. P10,000 P10,000 P10,000
d. P15,000 P15,000 P0

42. A, B, C and D are partners contributing P20,000, P30,000, P50,000 and industry, respectively. The partnership
failed so the partners decided to dissolve the partnership. At the same time of liquidation, the unpaid obligation
amounted to P100,000 distributed as follows:

To partnership creditor, Y Php 50,000

To partners A 30,000

B 20,000

If the remaining cash amounting to P10,000 was given to Y as partial payment. Which of the following is
correct?

a. Y can collect P10,000 from the separate property of D

b. As an industrial partner, D is not liable to Y
c. A, B and C are liable to Y in proportion to their capital contribution
d. A, B and C are liable to Y at P13,333 each

43. Using the above information, if Y succeeds in collecting the deficiency from the partners concerned, which of
the following is not correct?

a. Only C will be liable to the other partners

b. A and B will not make additional contribution
c. D is entitled to get reimbursement from A, B and C
d. C will pay P35,000 to his partners

44. A, B, C and D are partners in Y & Co., a limited partnership contributing P10,000, P20,000, P30,000 and
P40,000, respectively. A, C and D are the general partners while B is the limited partner. The partnership failed
and the partners decided to dissolve the partnership. At the time of liquidation, the unpaid obligation amounted
to P100,000 distributed as follows:

To partnership creditor Y Php 50,000

To partners A 30,000

B 20,000

If the remaining cash amounting to P20,000 was given to Y as partial payment, which of the following is
correct?

a. Y can collect P7,500 each from the separate properties of the partners
b. Y can collect P30,000 from A, or C or D but not from B
c. B is not liable to Y because B is also a creditor of the partnership
d. Y can collect P10,000 each from A, C and D

45. A issued a check dated April 2, 2022, in favor of B in payment of A's obligation to B amounting to P100,000. B
kept the check in his drawer and failed to encash it due to his busy schedule. On February 16, 2023, B
presented the check to the drawee bank for payment. The bank refused to pay the check for failure of B to
present the check within the reasonable time after its issue. In this case.

a. A's obligation to B is extinguished because the impairment of the check is due to B's fault
b. B can sue the bank because as drawee it is the party primarily liable
c. A's obligation to B is not extinguished because the failure of B to present the check for payment within a
reasonable time did not cause any injury to A
d. When B accepted the check when A tendered payment, A's obligation is extinguished
46. Which of the following statements is correct?

a. When a vacancy in the board arises, such vacancy maybe filled by the remaining directors provided they
still constitute a quorum
b. The officers of a non-stock corporation maybe elected directly by the members instead of by the board of
trustees
c. The number of trustees in a non-stock corporation maybe five (5) but not more than fifteen (15)
d. A director individually and acting as such can bind the corporation because he is an agent of the
corporation

47. Stock dividends differ from cash dividend in that stock dividend

a. Do not increase the legal capital

b. Involves the disbursement of corporate funds
c. Require the approval of both the board of directors and the stockholders
d. Once received by the stockholders, are beyond the reach of corporate creditors

48. A newly admitted general partner is liable to creditors existing at the time of his admission and his liability is up
to his

a. Capital contribution only if there is stipulation

b. Separate property even if there is no stipulation
c. Capital contribution even if there is stipulation
d. Separate property only if there is stipulation

49. Using the preceding number, but the obligations were contracted after his admission, which of the following is
correct? He is

a. Liable to the creditors before and after his admission up to his separate property
b. Liable to the creditors before and after his admission only up his capital contribution
c. Liable to the creditors before his admission up to his capital contribution and to the creditors after his
admission up to his separate property.
d. Not liable to creditors existing before his admission

50. A and B are partners in a real estate business. A and B were approached by X who offered to buy a parcel of land
owned by the partnership. Thereafter B sold to A, B's share in the partnership. Then A sold the land to X at a
big profit. Which is correct?

a. The sale of the land to X is void

b. A is liable to B for B's share in the profits
c. B may rescind the contract between A and X
d. A is not liable to B for any share in the profits

51. A, B and C are capitalist partners while D is an industrial partner. A, the managing partner engaged personally in
a business that is the same as the business of the partnership without the consent of the other partners. As a
result,

a. If there are losses, the partnership will bear the losses

b. If there are profits, the profits will be shared by A and the partnership
c. If there are profits, A will give the profits to the partnership
d. A will be excluded from the partnership and will pay damages

52. A, B, and C are equal partners in ABC Partnership. The partnership is indebted to D for P150,000. Partner A is
indebted to E for P20,000. D attached and took all the assets of the partnership amounting to P90,000. B and C
are solvent while A is insolvent and all that he owns is a land valued at P15,000. Which is correct?

a. E has priority to the land of A as a separate creditor

b. D has priority to the land of A to cover A's share of the P60,000 remaining liability of the partnership.
c. B and C have priority to the land of A if they paid D the P60,000 remaining liability of the partnership.
d. D and E shall both have priority to the land of A in proportion to their claims of P60,000 and P20,000,
respectively.
53. A, B and C are partners. A is an industrial partner. During the first year of operation, the firm realized a profit of
P60,000. During the second year, the firm sustained a loss of P30,000. So, the net profit for the two years of
operation was only P30,000. In the Articles of Partnership, it was agreed that A, the industrial partner would
get 1/3 of the profit but would not share in the losses. How much will A, the industrial partner get? A will

a. Get only P20,000 which is 1/3 of the profit of the 1 year of operation.
b. Get only P10,000 which is 1/3 of the net profit.
c. Get only P20,000 in the first year and none in the second year.
d. Share in the loss in the second year

54. S, a minor, sold her bracelet to B for P8,000. Later, B, needing money to pay her daughter's tuition fee, borrowed
P15,000 from C and as a security, a chattel mortgage was executed on the bracelet to the latter. B failed to pay
C resulting into the auction sale of the bracelet in favor of D for P10,000 only. Which of the following
statements is correct?

a. The title of B over the bracelet is not valid, hence the mortgage, as well as the sale of said bracelet is
likewise defective. The mortgagor must be the owner of the thing mortgaged
b. The deficiency of P5,000 may still be recovered by C from B even if there is no stipulation to this effect
c. C can no longer recover the deficiency of P5,000 from B. The mortgage, together with the sale is valid. The
voidable title of B is valid because it is not yet annulled.
d. If D was a purchaser in bad faith as he knew of the defective title of B over the bracelet from S, ownership
will not pass to him (D).

55. In real estate mortgage, the mortgagor can sell the property mortgaged

a. Only if with the oral consent of the mortgagee

b. Only if with the written consent of the mortgagee
c. If not prohibited to sell
d. Even without the consent of the mortgagee

56. Which of the following statements is true?

a. Any stipulation in a contract of pledge authorizing the pledgee to sell the thing pledged if the pledgor
cannot pay is void
b. In mortgage, the mortgagee is entitled to the entire proceeds of the sale of the thing mortgaged
c. In mortgage and in pacto de retro sale, the title to the property which is the subject matter of the contract is
transferred to the other party
d. Real estate mortgage is an accessory contract

57.A mortgaged his residential land to B as a guarantee for the payment of P400,000 obligations to B. They agreed
that A should not sell the land while the obligation exists. Before the maturity of the mortgage, C offered to buy
the land from A. Which is correct?

a. A cannot sell the land to C because of the agreement not to sell

b. A can sell the land to C only if B consents in writing'
c. A can sell the land to C despite the agreement not to sell
d. A cannot sell the land to C unless A pays the obligation

58. A, 17 years old, sold to B, of legal age, her necklace worth P20,000 for P15,000. Later, B sold the necklace to C
for P20,000. Which of the following statements is correct?

a. A has got a voidable title because at the time of sale, she is a minor
b. A can ask for rescission of the sale to C because she suffered a lesion of more than 1/4 of the value of the
property
c. If C is in bad faith, C becomes the owner of the necklace upon delivery to him but his title is voidable
d. A can ask for the annulment of the sale to C because at the time of sale she is a minor

59. Goods are deemed in transit

a. When the buyer accepts delivery of the goods upon arrival at destination
b. When the buyer intercepts and lawfully takes possession of the goods at any point before destination
c. From the time they are delivered by the seller to a common carrier or other bailee for transmission to the
buyer, up to the time that the buyer or his agent takes delivery of the goods from the carrier or bailee
d. When the carrier or bailee, upon arrival of the goods at destination acknowledges to the buyer or his agent
that he is holding the goods as bailee for the latter
60. Goods are deemed no longer in transit

a. If the goods are rejected by the buyer for a valid reason and the carrier or other bailee continues in
possession of them, even if the seller has refused to receive them back
b. From the time they are delivered to a carrier by land, water or air for the purpose of transmission to the
buyer
c. From the time they are delivered to a bailee for the purpose of transmission to the buyer until the buyer or
his agent in that behalf, takes delivery of them from such bailee.
d. If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf

61. In a contract of sale of personal property, the price of which is payable in installments, the vendor may exercise
any of the following remedies, except

a. Exact fulfillment of the obligation, should the vendee fail to pay any installment
b. Cancel the sale, should the vendee's failure to pay cover two or more installments
c. Foreclose the chattel mortgage on the thing sold, if one has been constituted should the vendee's failure to
pay cover two or more installments
d. Rescind the sale should the vendee fail to pay any installment.

62. A sold to B a parcel of land for P3.8M. The sale is evidenced by a memorandum of agreement of sale written in
the Bicolano dialect. One week later, A sold the same parcel of land to C for P4M. This is evidenced by a
formal deed of sale. Upon buying the property, C, who was aware of the first sale, immediately took possession
of the lot. When informed of the second sale, B subsequently registered an adverse claim to the property. Later,
C registered the deed of sale in her favor. The parcel of land shall belong to

a. B because he has got an older title

b. C because he is the first to register
c. C because he is the first to take possession
d. No one as both sales are void

63. After the death of C, A, C's son, sold his inheritance though its amount has not yet been determined to B for a
consideration of P1,000,000. Which is correct? The contract is

a. Valid if the value of inheritance is at least equal to P1,000,000

b. Valid even though the inheritance to be turned over to B is less than PIM
c. Void as future inheritance cannot be the object of sale
d. Unenforceable, because future inheritance cannot be valid objects of contract of sale.

64. B imported radios from Taiwan and asked for 220 volts radios. The radios arrived clearly labeled 220 volts and
B sold them to the public as such. Later the customer complained that the radios have been mislabeled by the
manufacturer and that they were good only for 110 volts. As a consequence

a. B is liable to the vendees for any hidden defects even though he is not aware
b. B is not liable because he is in good faith
c. B is not liable under the principle of "caveat emptor" or let the buyer beware
d. The vendees may hold the manufacturer liable but not B because B specifically asked for 220 volts

65. X sold his car to Y for P50,000. No date was fixed for the performance of the obligation of the seller and the
buyer. The obligation of X is

a. To deliver the car immediately because the sale is a perfected contract

b. To deliver the car only after Y writes to X demanding the delivery of the car
c. To deliver the car only after Y pays the P50,000
d. To rescind the contract because there is no time fixed for the delivery

66. Statement 1- Unless the contrary appears, advertisements for bidders are simply invitations to make proposals,
and the advertiser is not bound to accept the lowest or highest bid.

Statement 2 - Contracts agreed to in a state of drunkenness or during a hypnotic spell are void.

a. True, true
b. True, false
c. False, true
d. False, false
67. G was appointed as guardian of M, the latter being 17 years old. Later, without authority from G, M sold G's
watch in writing to B valued at P100,000 for P70,000. Suffering lesion by more than 1/4 of the value, the
contract is

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

68. A insured his residential house for P5,000,000 on January 1, 2023. On June 30, 2023 B burned the insured
property. Which is not correct?

a. A can proceed against the insurer and collect the P5,000,000 policy
b. The insurer shall be subrogated to the rights of A after payment to A
c. After payment the insurer shall have the right to proceed against B
d. A should proceed against B, the guilty party and not against the insurer

69. The conception of a contract is when

a. There is meeting of the minds

b. When negotiations are in process
c. When the contract is executed
d. When the parties come to an agreement

70. The following items, pertain to a contract of sale, which pertains to a contract to sell?

a. Ownership of the thing sold is transferred upon delivery

b. Ownership of the thing is transferred to the buyer at some future time
c. The risk of loss is on the buyer upon delivery
d. The risk of loss is on the buyer if the price is not yet fully paid

71. Which of the following statements is false?

a. Treasury shares revert to the unissued shares of the corporation and being in the treasury they don’t have
the status of outstanding shares
b. Shares issued without par value shall be deemed fully paid and non assessable and the holder of such shares
shall not be liable to the corporation or its creditors in respect thereto
c. Redeemable shares may be redeemed regardless of the existence of unrestricted retained earning provided
such redemption would not cause insolvency or inability of the corporation to meet its debt as they mature
d. When par value shares are issued above par, the premium or excess is not to be considered as part o the
legal capital

72. The principle of “caveat emptor” or let the buyer beware will not apply in
a. Sheriff’s sale
b. Sales of animals in pairs
c. Auction sales
d. Sales of livestock as condemned
73. A, B C and D are solidary debtors of X for Php 40,000. X released D from the payment of his share of Php
10,000. When the obligation became due and demandable C turned out to be insolvent. Should the share of the
insolvent debtor C be divided only between the two other remaining debtors, A and B?

a. Yes. Remission of D's share carries with it total extinguishment of his obligation to the benefit of the
solidary debtors.
b. Yes. The Civil Code recognizes remission as a mode of extinguishing an obligation. This clearly applies to
D.
c. No. The rule is that gratuitous acts should be restrictively construed, allowing only the least transmission of
rights.
d. No. As the release of the share of one debtor would then increase the burden of the other debtors without
their consent.

For Questions 74 & 75:

A obtained a loan of Php 300,000 from B payable on March 25, 2023. As security for the payment of his loan,
A constituted a mortgage on his residential house and lot in B's favor. C, a good friend of A, guaranteed and
obligated himself to pay B in case A fails to pay his loan at maturity.
74. If A fails to pay B his loan on March 25, 2023, can B compel C to pay?

a. No. B cannot compel C to pay because as guarantor, C can invoke the principle of excussion, i.e., all
assets of B must first be exhausted.
b. No. B cannot compel C to pay because B has not exhausted the available remedies against A
c. Yes. B can compel C to pay because the nature of C's undertaking indicates that he has bound himself
solidarily with A
d. Yes. B can compel C who bound himself to unconditionally pay in case A fails to pay, thus the benefit of
excussion will not apply.

75. If A sells his residential house and lot to D, can B foreclose the real estate mortgage?

a. Yes. B can foreclose the real estate mortgage because real estate mortgage creates a real right that attaches
to the property

b. Yes. B can foreclose the real estate mortgage, It is binding upon D as the mortgage is embodied in a public
instrument
c. No, B cannot foreclose the real estate mortgage. The sale confers ownership on the buyer, D, who must
therefore consent
d. No. B cannot foreclose the real estate mortgage. To deprive the new owner of ownership and possession is
unjust and inequitable.

76. Cruz lent Jose his car until Jose finish his Bar Examination. Soon after Cruz delivered the car, Jose brought it to
Mitsubishi Cubao for maintenance check-up and incurred a cost of Php 8,000. Seeing the car's peeling and
faded paint, Jose also had the car repainted for Php 10,000. After the Bar Exam, Cruz asked for the return of
his car. Jose said he would return it as soon as Cruz has reimbursed him for the car maintenance and repainting
cost of Php 18,000. Is Jose's refusal justified?

a. No. Jose's refusal is not justified. In this kind of contract, Jose is obliged to pay for all the expenses
incurred for the preservation of the thing loaned.
b. Yes. Jose's refusal is justified. He is obliged to pay for all the ordinary and extraordinary expenses, but
subject to reimbursement from Cruz
c. Yes. Jose's refusal is justified. The principle of unjust enrichment warrants the reimbursement of Jose's
expenses
d. No. Jose's refusal is not justified. The expenses he incurred are useful for the preservation of the thing
loaned. It is Jose's obligation to shoulder these useful expenses.

For Questions 77 & 78:

Gary is a tobacco trader and also a lending investor. He sold tobacco leaves to Homer for delivery within a
month although the period for delivery was not guaranteed. Despite Gary's efforts to deliver on time,
transportation problems and government red tape hindered his efforts and he could only deliver after 30 days.
Homer refused to accept the late delivery and to pay on the ground that the agreed term had not been complied
with. As lending investor, Gary granted a Php IM loan to Isaac to be paid within two years from the execution
of the contract. As security for the loan, Isaac promised to deliver to Gary his Toyota Innova within seven days
but Isaac failed to do so. Gary was thus compelled to demand payment for the loan before the end of the agreed
two year term.

77. Was Homer justified in refusing to accept the tobacco leaves?

a. Yes. Homer was justified in refusing to accept the tobacco leaves. The delivery was to be made within a
month. Gary's promise of delivery on a "best effort" basis made the delivery uncertain. The term therefore
was ambiguous.
b. No. Homer was not justified in refusing to accept the tobacco leaves. He consented to the terms and
condition of the sale and must abide by it. Obligations arising from contracts have the force of law between
the contracting parties
c. Yes. Homer was justified in his refusal to accept delivery. The contract contemplates an obligation with a
term. Since the delivery was made after 30 days, contrary to the terms agreed upon, Gary could not insist
that Homer accepts the tobacco leaves
d. No. Homer was not justified in refusing to accept the tobacco leaves. There was no term in the contract but
a mixed condition. The fulfillment of the condition did not depend purely on Gary's will but on other
factors, e.g., the shipping company and the government. Homer should comply with his obligation.
78. Can Gary compel Isaac to pay his loan even before the end of the two year period?

a. Yes. Gary can compel Isaac to immediately pay the loan. Noncompliance with the promised guaranty or
security renders the obligation immediately demandable. Isaac lost his right to make use of the period.
b. Yes. Gary can compel Isaac to immediately pay the loan. The delivery of the Toyota Innova is a condition
for the loan. Isaac's failure to deliver the car violated the condition upon which the loan was granted. It is
but fair for Gary to demand immediate payment.
c. No. Gary cannot compel Isaac to immediately pay the loan. The delivery of the car as security for the loan
is an accessory contract, the principal contract is still the Php IM loan. Thus, Isaac can still make use of the
period.
d. No. Gary cannot compel Isaac to immediately pay the loan. Equity dictates that Gary should have granted a
reasonable extension of time for Isaac to deliver his Toyota Innova. It would be unfair and burdensome for
Isaac to pay the Php 1M simply because the promised security was not delivered.

79. Which of the following defense is meritorious?

a. An action for recovery of down payment paid under a rescinded oral sale of real property
b. A defense in an action for ejectment that the lessor verbally promised to extend or renew the lease.
c. An action for payment of sum of money filed against one who orally promised to answer another's debt in
case the latter defaults.
d. A defense in an action for damages that the debtor has sufficient, but unliquidated asset to satisfy the credit
acquired when it becomes due.

For Questions 80 & 81:

Arlene owns a row of apartment houses in Kamuning Quezon City. She agreed to lease Apartment No. 1 to
Janet for a period of 18 months at the rate of Php 10,000 per month. The lease was not covered by any contract.
Janet promptly gave Arlene two months deposit and 18 checks covering the rental payment for 18 months. This
show of good faith prompted Arlene to promise Janet that should Arlene decides to sell the property, she would
give Janet the right of first refusal.

80. Not long after Janet moved in, she received news that her application for a Master of Laws scholarship at
King's College in London had been approved. Since her acceptance of the scholarship entailed a transfer of
residence. Janet asked Arlene to return the advance rental payments she made. Arlene refused, prompting Janet
to file an action to recover the payments. Arlene filed a motion to dismiss, claiming that the lease on which the
action is based is unenforceable. If you were the judge, would you grant Arlene's motion?

a. Yes. I will grant the motion because the lease contract between Arlene and Janet was not in writing, hence,
Janet may not enforce any right arising from the same contract
b. No. I will not grant the motion because to allow Arlene to retain the advance payment would amount to
unjust enrichment.
c. Yes. I will grant the motion because the action for recovery is premature; Janet should first secure a judicial
rescission of the contract of lease.
d. No. I will not grant the motion because the cause of action does not seek to enforce any right under the
contract of lease

81. Assume that Janet decided not to accept the scholarship and continued leasing Apartment No. 1. Midway
through the lease period, Arlene decided to sell Apartment No. 1 to Jun in breach of her promise to Janet to
grant her the right of first refusal. Thus, Janet filed an action seeking the recognition of her right of first refusal,
the payment of damages for the violation of this right and the rescission of the sale between Arlene and Jun. Is
Janet's action meritorious?

a. Yes. Under the Civil Code, a promise to buy and sell a determinate thing is reciprocally demandable.
b. No. The promise to buy and sell a determinate thing was not supported by a consideration.
c. Yes. Janet right of first refusal was clearly violated when the property was not offered for sale to her before
it was sold to Jun.
d. No. A right of first refusal involves an interest over real property that must be embodied in a written
contract to be enforceable.

82. Which of the following is not included in the attributes of juridical capacity?

a. Juridical capacity is inherent in every natural person and therefore it is not acquired
b. Juridical personality is lost only through death
c. Juridical capacity is the fitness to be the subject of legal relations
d. Juridical capacity cannot exist without capacity to act
83. The following are the requisites of fortuitous event, except

a. Cause is independent of the will of the debtor

b. The event is unforeseeable / unavoidable
c. Occurrence renders it absolutely impossible for the debtor to fulfill his obligation in normal manner;
impossibility must be absolute not partial; otherwise not force majeure
d. Debtor contributed to the aggravation of the injury to the creditor

84. Buko, Fermin and Toti are solidary debtors under a loan obligation of Php 300,000 which has fallen due. The
creditor has, however, condoned Fermin's entire share in the debt. Since Toti has become insolvent, the creditor
makes a demand on Buko to pay the debt. How much, if any, may Buko be compelled to pay?

a. Php 200,000
b. Php 300,000
c. Php 100,000
d. Php 150,000

85. The following are the ways by which innominate contracts are regulated except

a. By the stipulation of the parties

b. By the general principle of quasi contracts and delicts
c. By the rules governing the most analogous nominate contract
d. By the customs of the place

86. Aligada orally offered to sell his two hectare rice land to Balane for Php 10M. The offer was orally accepted. By
agreement, the land was to be delivered (through execution of a notarized Deed of Sale) and the price was to be
paid exactly one month from their oral agreement. Which statement is most accurate?

a. If Aligada refuses to deliver the land on the agreed date despite payment by Balane, the latter may not
successfully sue Aligada because contract is oral.
b. If Aligada refused to deliver the land, Balane may successfully sue for fulfillment of the obligation even if
he has not tendered payment of the purchase price
c. The contract between the parties is rescissible
d. The contract between the parties is subject to ratification by the parties

87. Which of the following statements is wrong?

a. Creditors are protected in cases of contracts entered to defraud them

b. Contracts takes effect only between the parties, their assign and heirs, except in case where the rights and
obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision
of law
c. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor before its revocation
d. In contracts creating real rights, third persons who come into possession of the object of the contract are not
bound thereby

88. Which phrase most accurately completes the statement – If at the time the contract of sale is perfected, the thing
which is the object of the contract that has been entirely lost

a. The buyer bears the risk of the loss

b. The contract shall be without any effect
c. The seller bears the risk of the loss
d. The buyer may withdraw from the contract

89-91. Georgia works as a legal researcher in a Gen. Prof. Pshp receives a daily rate of PHP 1,000.00 as
compensation. How much will she receive as compensation if the particular day where she reported for work is

89. A special holiday

a. P1,250
b. P1,040
c. P1,300
d. P1,500
90. A special holiday which is also her rest day

a. P1,300
b. P1,040
c. P1,200
d. P1,500

91. A regular holiday which is also her rest day

a. P2,300
b. P2,080
c. P2,600
d. P2,040

92-93: Using the facts in 89 but Georgia was required to render two additional hours of overtime work, how much
will she receive as compensation if the particular day where she performed the overtime work is

92. An ordinary day

a. P1,312.50
b. P1,562.50
c. P1,050
d. P1,250

93. On her rest day

a. P1,312.50
b. P1,378
c. P1,722.50
d. P1,690

94. A married male employee may be able to avail a maximum paternity leave of

a. 7 days
b. 10 days
c. 12 days
d. 14 days

95. Which of the following statements pertaining to treasury shares is correct?

a. Treasury shares are not part of issued capital stock

b. Treasury shares may not be disposed of a price lower than the par or issued price even if it is reasonable
and approved by the board of directors
c. Treasury shares are entitled to vote
d. Treasury shares, once disposed of, entitle the purchaser or transferee the right to dividends

96. If two or more partners have been entrusted with the management of the partnership without a stipulation that
one of them shall not act without the consent of all the others or without specification of their respective duties.
Which of the following is correct?

a. Each one may separately execute all of acts of administration despite the opposition of his partners
b. If any of the managing partners should oppose the act of the others, the decision of majority of all the
partners shall prevail
c. In case any of the managing partners should oppose the act of the others, the matter shall be decided by the
managing partners owning the controlling interest
d. In case of opposition by the other managing partners, the decision of majority of the managing partners
shall prevail

97. In a contract of sale, the parties agreed that the buyer shall be the one to fix the price subject to approval by the
seller. The object was delivered to and accepted by the buyer. After a reasonable period of time, the buyer has
not yet fixed the price but has appropriated the thing. The seller is now demanding for the payment of the price,
in this case, the seller is

a. Entitled to the payment of a reasonable price therefore.

b. Entitled to the payment of the price based on the fair market value at the time of delivery
c. Entitled to the payment of the price based on the fair market value at the time of perfection of the contract
of sale
d. Not entitled to payment of the price because the price has not yet been fixed as agreed upon
98. A, B, C, and D are partners in AB and Company. A parcel of land in the name of AB and Company was sold by
A in the name of AB and Company but without express authority to Y, which of the following is correct?

a. Title to the property passes to Y even if AB and Company is not engaged in buying and selling of land if Y
acted in good faith
b. AB and Company may recover the land if it is not engaged in selling of land
c. If Y donated the land to W, AB and Company could no longer recover such land
d. AB and company may recover the land from Y because the sale made by A to Y is unenforceable

99. Essential elements of chattel mortgage except

a. The object is a personal or movable property

b. The thing mortgaged is not delivered to the creditor
c. The mortgagor cannot sell without the consent of the mortgagee
d. Description of the thing mortgages must appear in a public instrument

100. As an exception to the general rule of perpetual existence, what is the term of one-person corporation (OPC)
under the name of trust or estate, what is its term of existence?

a. 50 years renewable for another term

b. Perpetual existence
c. 50 years subject to unlimited times of renewal
d. It shall be co-terminus with the existence of the trust or estate

The End.
U. I. O. G. D.