PAT Diagnostic Exercise

PARTNERSHIP DIAGNOSTIC EXERCISES
1. A contract where two or more persons bind themselves to contribute money, property or industry to
a common fund with the intention of dividing the profits among themselves.
a. Voluntary association
b. Corporation
c. Partnership
d. Sole proprietorship
ANSWER: C
2. One of the following is not a characteristic of contract of partnership.
A. Real, in that the partners must- deliver their contributions in order for the partnership contract to be
perfected.
B. Principal, because it can stand by itself.
C. Preparatory, because it is a means by which other contracts will be entered into.
D. Onerous, because the parties contribute money, property or industry to the common fund.
ANSWER: A
3. One of the following is not a requisite of a contract of partnership. Which is it?
A. There must be a valid contract.

B. There must be a mutual contribution of money, property or industry to a common fund.
C. It is established for the common benefit of the partners which is to obtain profits and divide the same
among themselves.
D. The articles are kept secret among the members.
ANSWER: D
4. The minimum capital in money or property except when immovable property or real rights thereto.
are contributed, that will require the contract of partnership to be in a public instrument and be
registered with the Securities and Exchange Commission
a. P5,000.00
b. P10,000.00
c. P3,000.00
d. P30,000.00
ANSWER: C
5. If the partnership has the minimum capital mentioned in No. 4, but the contract is not in a public
instrument or the same is not recorded with the SEC, the partnership:
A. is void.
B. is voidable.
C. does not acquire juridical personality
D. Still acquires juridical personality.
ANSWER: D
6. Joseph and Edward entered into a universal partnership of all present property. At the time of their
agreement, Joseph had a four-door apartment which he inherited from his father 3 years earlier.
Edward, on the other hand, had a fishpond which he acquired by dacion en pago from Robert. During
the first year of the partnership, rentals collected on the four-door apartment amounted to P480,000.00
while fish harvested from the fishpond were sold for P300,000.00. During the same period, Edward
received by way of donation a vacant lot from an uncle. The partners had a stipulation that future
property shall belong to the partnership. Which of the following does not belong to the common fund of
the partnership?
a. Fishpond.
b. Rental of P480,000.00
c. Apartment.
d. Vacant land.
ANSWER: D
7. Vincent and James entered into a universal partnership of profits. At the time of the execution of the
articles of partnership, Vincent had a two-door apartment which he inherited from his father 3 years
earlier. James, on the other hand, had a fleet of taxis which he purchased 2 years before. In the first year
of the partnership, Vincent earned P 500,000.00-as a radio talent, while James won P1,000,000.00 in the
lotto. During the same period, rentals of P120,000.00 were collected from the apartment, while fare
revenues of P200,000.00 were realized from the operation of the fleet of taxis. Which of the following
belongs to the partnership?
A. Two-door apartment
B. Lotto winnings of P 1,000,000.00.
C. Salary of P500,00.00
D. Fleet of taxis.
8. A partnership formed for the exercise of a profession which is duly registered is an example of:
A. Universal partnership of profits,

B. Universal partnership of all present property.
C. Particular partnership.
D. Partnership by estoppel.
ANSWER: C
9. Three of the following partnership contracts are void. Which one is not?
A. A universal partnership of all present property between husband and wife.
B. A universal partnership of profits between a man and a woman living together as husband and wife
without the benefit of marriage
C. A particular partnership between husband and wife.
D. A universal partnership of profits between a private individual and a public officer.
ANSWER: C
10. John, Albert and Wilfred are partners in JAW Enterprises. Not having established yet their credit
standing, the three partners requested Simon, a well-known businessman, to help them negotiate a loan
from Carlos, a money lender. With the consent of John, Albert and Wilfred, Simon represented himself
as a partner of JAW Enterprises. Thereafter, Carlos granted a loan of P 150,000.00 to JAW Enterprises.
What kind of partner is Simon?
A. Managing partner.
B. Liquidating partner.
C. Ostensible partner.
D. Partner by estoppel.
ANSWER: D
11. Refer to No, 10. Assuming that JAW Enterprises was unable to pay the loan on due date at which
time the assetS of the partnership amounted only to P 120,000.00. From whom may Carlos collect the
payment?
A. Simon only for the whole amount of P 120,000.00

B. John, Albert and Wilfred who are liable jointly for P50,000.00 each.
C. JAW Enterprises for its assets of P 120,000.00 thereafter John, Albert and Wilfred from their separate
property at Php 10,000.00 each.
D. JAW Enterprises for its assets of P 120,000.00, thereafter, John, Albert, Wilfred and Simon from their
separate assets at P7,500.00 each.
ANSWER: D
12. Teresa, Olga, Pamela and Sonia, partners in TOPS Company Limited, a trading company, have
contributions of P50,000.00 each. Teresa and Olga are general partners; Pamela, a limited partner; and
Sonia, a general-limited partner. TOPS Company Limited purchased merchandiseon credit from Moret
Sales Co. amounting to P180,000.00. On due date, however, TOPS Company Limited was unable to pay.
Accordingly, Moret Sales Co. filed a case of collection against the partnership which by then had assets
amounting to P 150,000.00. From whom may Moret Sales Co. collect the sum of P 180,000.00?
A.The partnership for its assets of P 150,000.00; thereafter, from Teresa and Olga at P 15,000.00 each
from their separate assets.
B. Teresa and Olga only at P90,000.00 each from their separate assets.
C. The partnership for its assets of P 150,000.00; thereafter, from Teresa, Olga, and Sonia at P 10,000.00
each from their separate property. However, Sonia can recover P5,000.00 each from Teresa and Olga.
D. Teresa, Olga and Sonia at P60,000.00 each. Thereafter, Sonia can recover from Teresa and Olga
P30,000.00 each.
ANSWER: C
13.Which of the following losses will not cause the dissolution?
a. Loss before delivery of a specific thing which A promised to contribute to the partnership.
b. Loss of a specific thing after its delivery to and acquisition of its ownership by the partnership from
the partner who contributed the same.
c. Loss after delivery of a specific thing where the partner contributed only its use and enjoyment, he
having reserved the ownership thereof.
d. Loss before delivery of a specific thing where the partner promised to contribute only its use and
enjoyment, reserving the ownership thereof.
ANSWER: B
14. Gregory, Edmond and Mark are partners in GEM Company with contributions of P10,000.00;
P40,000.00 and P50,000.00 respectively. Their agreement shows that they will share in the profits in the
ratio of 2:3:4. During the year, the partnership sustained a loss of P9,000.00. How shall this loss be
divided among the partners?
A. Equally at P3,000.00 each.

B. Gregory, P900.00; Edmond, P3,600.OO, and Mark, P4,500.00.
C. Gregory, P2,000.00; Edmond, and Mark, P4,000.00
D. The partners must establish first a loss sharing agreement before the loss may be divided because
they failed to have an agreement on the division of loss.
ANSWER: C
15. Which of the following stipulations is valid?

a. A stipulation excluding a capitalist partner from profits.
b. A stipulation exempting a capitalist partner from losses.
c. A stipulation exemptifig an industrial partner from
d. A stipulation excluding an industrial partner from profits.
ANSWER: C
16. A Partner can engage in business for himself without the consent of his co-partners if he is:
A. a capitalist partner whether or not the business will engage in is of the same kind as or different from
the partnership business,
B. an industrial partner whether or not the business he will engage in is of the same kind as or different
from the partnership business.
C. a capitalist partner and the business he will is of a kind different from the engage in partnership
business.
D. an industrial partner and the business he will engage in is of j a kind different from the
partnership business.
ANSWER: C
17. Which of the following statements is false when no one among the partners was appointed as
manager?
a. Each partner will be considered as agent of the partnership.
b. Any one may make an important alteration in the immovable property of thE partnership without the
consent of the others provided it is useful to the partnership
c. In case the act of one partner is opposed by another, the decision of the majority of the
partners will prevail.
d. In case of a tie in the voting, the tie shall be resolved by the vote of the partner owning the controlling
interest.
ANSWER: B
18. The following statements pertain either to a partner appointed as manager in the articles of
partnership or through a document after the formation of the partnership,
i. He may be removed as manager only for a just or lawful cause by the vote of the partners owning the
controlling interest.
ii. He may be removed as manager with or without just or lawful cause I by the vote of the partner
owing the controlling interest.
iii. He may perform all acts of administrator despite the opposition of his partners provided he is good
faith.
iv. He may perform all acts of administration in good faith but opposing partners may resort to his
removal if he persists.
Based on the foregoing:
A. I and III pertain to a partner appointed as manager in the articles of partnership.

B. I and III pertain to a partner appointed as manager through a document after the formation of
the partnership
C. II and III pertain to a partner appointed through a document after the formation of the
partnership.
D. I and IV pertain to a partner appointed as manager in the articles of partnership
ANSWER: A
20. The partnership will bear the risk of the loss of three of
the following things. Which is the exception?
a. Things contributed to be sold.
b. Fungible things or those that cannot be kept without deteriorating.

c. Things contributed so that only their use and fruits
will be for the common benefit.

d. Things brought and appraised in the inventory.
ANSWER: C
21. A partner's interest in the partnership is his share of the

profits and surplus which he may assign to a third person,
Which of the following statements concerning such right is
correct?
a. The conveyance of a partner's interest will cause
the dissolution of the partnership.
b. The assignee becomes a partner.
c. The assignee has a right to interfere in the
management of the partnership business.
d. The assignee has the right to receive the profits
which the assigning partner would otherwise be
entitled to.
ANSWER: D
22. Torres is indebted for P5,OOO.00 to MACE Trading
Company, a partnership managed by Mendoza to whom
Torres also owes P 10,000.00. The two debts which are
both demandable are unsecured. Torres remits P4,500.00
to Mendoza in payment of his debt to him.
Accordingly, Mendoza issues a receipt for his own credit.
To which credit should the payment be applied?
a. To Mendoza's credit because the payment made by
Torres is intended for his debt to Mendoza who
issues his own receipt.
b. To both the partnership credit and Mendoza'S
credit proportionately at P 1,500.00 and P3,OOO.OO,
respectively.
c. To Mendoza's credit because its amount is greater
than that of the partnership credit.

d. To the partnership credit because the managing
partner should not prefer hig own interest to that

of the partnership.
ANSWER: B
23. In three of the following wrongful acts of partners,
the partnership is solidarily liable with all the partners to
third persons. Which one is the exception?
a. For loss or injury caused to a third person by
reason of the wrongful act or omission of a partner
acting in the ordinary course of business.
b. Where a partner acting the scope of his
apparent authority receives money or property of a
third person and misapplies it.
c. Where the partnership receives money or property
of a third person in the ordinary course of business
and such money or property is misapplied by a
partner while it is in the custody of the
partnership.
d. For loss or injury caused to a third person by
reason of ' the use of partnership property by a
partner for personal purpose.
ANSWER: D
24. Benito, Ignacio, Gregorio, Artemio and Servando are
partners in BIGAS Company which' is engaged in the
buying and selling of rice. Benito is the manager. Ignacio
was also given a special power of attorney by the
partnership to buy a van for the company. No other power
was given to all the partners. In which of the following acts
or contracts is the partnership not bound by the act of
the partner?
a. Ignacio buying rice for the partnership from
Teodoro who has no knowledge of Ignacio's lack of
authority.
b. Ignacio buying a van for the partnership from
Teresa.
c. Gregorio buying a van for the partnership from
Thelma who has no knowledge of Gregorio's lack of
authority.
d.Benito selling rice for the partnership.
Answer: c
25. Assuming that no fraud is committed by or consented to
by the partner concerned, which of the following
statements is false?
a. Notice to any partner relating to partnership affairs
while already a partner is notice to the
partnership.
b. Knowledge of a partner acting on the particular
matter acquired by him while already a .partner is
knowledge of the partnership.
c. Knowledge of a partner acting on the particular
matter obtained by him before he became a partner
is knowledge of the partnership provided he still
remembers the same
d. Knowledge of partner. not acting on the particular
matter obtained by him before he became a partner
is knowledge of the partnership.
answer: d
26. Which of the following statements is incorrect?

a. Partnership creditors are preferred as to
partnership assets.
b. Partnership creditors are preferred as to each
partner's separate assets.
c. A partner's separate creditors are preferred as to
the partner's separate assets.
d. A partner's separate creditors may attach a
partner's share in the partnership assets.
answer: b
27. The change in the relation of the partners caused by any
ceasing to be associated in the carrying on the business is
known as:
a. termination of the partnership.
b. winding up of partnership affairs.
c. liquidation of the partnership business.
d. dissolution of the partnership.
answer: d
28. A decree by the court is necessary to dissolve a general
partnership based on three of the following grounds.
Which one will not require such decree but will cause the
automatic dissolution of the partnership?
a. The business of the partnership can only be
carried on at a loss.
b. A partner is shown to be of unsound mind.

c. A partner has been guilty of such conduct as tends
to affect prejudicially the carrying on of the
business.
d. A partner is civilly interdicted

Answer: d
29. Three of the following will cause the automatic dissolution
of a general partnership, Which one will not?
a. When any event makes it unlawful for the business
of the partnership to be carried on or for the
members to carry it on in partnership,
b. Expulsion of any partner from the business bona
fide in accordance with such a power conferred by
the agreement between the partners.
c. A partner becomes in any way incapable of
performing his part of the partnership contract.
d. The insolvency of a partner or of the partnership,
Answer: c
30. When is the partnership not bound by the act/ s of a
partner after dissolution in the following cases?
a. Acts necessary to wind up partnership affairs.
b. Acts to complete transactions begun before
dissolution.
c. New transactions where the third person is a
previous creditor and there was a publication of
the dissolution in a newspaper of general
circulation in the place or places where the
business had been carried on but such third
person has not read it.
D. New transactions where the third person is a new
creditor and there was publication of the
dissolution in a newspaper of general circulation in
the place or places where the business had been

Carried on but such creditor has not read it.
Answer: d
31. The partnership is not bound in three of the following
acts of a partner after dissolution. However, it is bound in
one. Which is it?
a. Where the partner acting is insolvent.
b. When it is unlawful to carry on the business.
c. When the partner has no authority to wind up
partnership affairs and the third person is a previous creditor who had no
knowledge of the partner's lack of authority.
d. When a partner has no authority to wind up
partnership affairs and the third person is a new
creditor who has not read the publication of the
lack of authority of the partner in a newspaper of
general circulation in the place or places where the
partnership business is carried on.
answer: c
32. What is the order of payment of liabilities of a dissolved
general partnership using the code number representing
each liability?
I. Those owing to partners other than for capital or
for profits.
II. Those owing to creditors other than partners.
III. Those owing to partners in respect of profits.
IV. Those owing to partners in respect of capital.

A. I, II, III, IV
B. II,I, IV, III
C. II, I, III, IV
D. I, II, IV, III
Answer: b
33. In a limited partnership where there are 4 partners:
a. All the partners must be limited partners.
b. The number of limited partners must be equal to
the number of general partner, that is, 2:2.
c. The number of limited partners must be greater
than the number of general partners, that is, 3: l.
d. It is enough that there is one limited partner; the
rest may all be general partners.
answer: d
34. A limited partner may contribute:
a. Money and/or property.
b. Money and/or services.
c. Property and/or services.
d. Services only.
answer: a
35. A limited partner shall be liable as general partner in three
of the following cases. Which one is the exception?
a. When he is a general-limited partner as stated in the certificate.

b. When he takes part in the control of the business.
c. When he participates in the management of the business.
d. When his surname which appears in the partnership name is also the
surname of the general partner.
Answer: d
36. Which of the following omissions will make a partnership formed as a

limited partnership liable as a general partnership?
I. The certificate is not signed and sworn to by all the
Partners.
II. The certificate is not registered with the Securities

and Exchange Commission.
III. The partnership name docs not include the word
"Limited" or "Ltd.", its abbreviation, in the
certificate.
a. I and II.
b. II and III.
c. I and III.
d. I, II and III.
Answer: d
37. A person admitted to all 'the rights of a limited partner
who has died or has assigned his interest in the
partnership is known as:
a. An ostensible partner.
b. A liquidating partner,
c. A substituted limited partner.
d. A general-limited partner.
answer: c
38. If the assignee does not become the partner referred to in
the preceding number, his rights do not include:
a. The receipt of the assignor's share of the profits.
b. The receipt of the assignor's Other compensation by way of income.
c. The return of the assignor's contribution.
d. The inspection of partnership books or account of partnership

transactions
answer: d
39. What is the order of payment of liabilities of a dßSÖ1ve
limited partnership using the code number representing
each liability?
I. Those owing to general partners other than for
capital or for profits.
II. Those owing to creditors including limited
partners, except those to limited partners on
account of their contributions and general
partners.
III. Those owing to limited partners by way of their
share in the profits and other compensation by
way of income.
IV. Those owing to limited partners in respect to the
capital of their contributions.
V. Those owing to general partners in respect of
capital.
VI. Those owing to general partners in respect of
profits.
A. I, II, III, IV, V, VI.
B. II, I, III, IV, V, VI.
C. II, I, III, IV, VI, V.
D. II, III, IV, I, VI, V.
Answer: d
40. Which of the following will not cause the automatic
dissolution of a limited partnership?
A. Death of a general partner.
b. Death of a limited partner.
c. Insolvency of a general partner.
d. Insanity of a general partner.
answer: b
41. One of the distinctions between a partnership and a
corporation is that a partnership:
a. May be formed by one person.
b. Is created by operation of law.
c. Acts through a board of directors.
d. May exist for an indefinite period.
Answer: d
42. Josephine, Ellen, Wilma, Edith and Lydia are partners in
JEWEL Company, Ltd, Josephine, Ellen and Wilma are
general partners, Edith is a general-limited partner, while
Lydia is a limited partner. Based on the foregoing
information, which of the following statements is false?
a. Josephine, Ellen and Wilma may be held liable
with their separate property after the exhaustion of
partnership assets.
b. Edith may participate in the management of the
partnership.
c. Edith may not be held liable with her separate
property for partnership debts after the exhaustion
of partnership assets.
d. Lydia may not be held liable with her separate
property for partnership debts after the exhaustion
of partnership assets.
answer: c
44. Which of the following will not cause the automatic
dissolution of a general partnership?
a. Death of a partner.
b. Insolvency of a partner.
c. When the partnership bUsiness becomes unlawful.
d. Insanity of a partner.
Answer: d
GROUP 3
1. Which of the following statements is false;
a. A partner has an equal right with his co-partners to possess specific partnership for
partnership purposes.
b. A partner’s right in specific partnership is not subject to payment of legal support
c. A partner’s interest in the partnership may be assigned under certain conditions.
d. In a specific partnership property a partner can assign his right to anyone.
2. The following are not usual ways of carrying on the business of a Partnership
except;
a. Entering into a compromise concerning partnership claim.
b. Renunciation of a partnership claim.
c. A partner may enter into a separate obligation to perform a partnership contract.
d. Disposal or alienation of the goodwill of the business
3. _________ refers to the remains of a fund appropriated for a particular

purpose.
a. Profit
b. Loss
c. Surplus
d. Excess
4. X is concerned with ABC Marketing, a partnership where A is a relative of X. To

secure a better credit X represented himself as having half interest in the firm.
The misrepresentation is believed and relied upon by Z who gave credit to ABC
marketing. A’s role in the partnership is _______
a. partner by estoppel
b. partner by interest
c. managing partner
d. capital partner
5. Which is not one of the status and rights of assignee

a) becomes a partner in the partnership.
b) Entitled to profits to which the assigning partner is entitled.
c) Not entitled to interfere in the administration of the partnership.
d) Can not demand any info or account of the firms transactions or inspect books
6. A _______ desiring to give notice to a partnership of some matters pertaining
to the partnership need not communicate with all partners.
e) Co-partner
f) All partners
g) Third person
h) SEC
7. All partners are liable with the partnership

i. Primarily
ii. Secondarily
iii. Jointly
iv. Solidarily
8. Under Article 1824, the reason for the imposition of the liability for acts or
omission or breach of trust is:
v. Public welfare
vi. Public policy
vii. Public good
viii. Public need
9. _____ is a bar which precludes a person from denying or asserting anything

contrary to that which has been established as the truth by his own deed or
representation
ix. Liability
x. Negligence
xi. Estoppel
xii. Misrepresentation
10. Liability when there is no existing partnership and all those represented as
partners consented to the representation
xiii. estoppel
xiv. pro-rata
xv. separate
xvi. joint
GROUP 4
1. The determination of the value of each partner’s interest in the partnership is a
part of which process?
A. Dissolution
B. Termination
C. Winding up
D. Cancellation of partnership registration
2. After dissolution, the partnership has limited existence for the purpose of the
following, except:
A. making good all outstanding engagements
B. taking and settling all accounts
C. cessation of the relations of the partners among themselves who remain as co-
partners until termination of partnership
D. collecting all the property, means and assets of the partnerships existing at the time
of its dissolution for the benefit of all interested.
3. A partner who breaks off the partnership in bad faith discharges his co-
partners from all liabilities to him and frees himself from his obligations to them.
A. True
B. False, he does not discharge his co-partners from all liabilities to him
C. False, he does not free himself from his obligations to them
D. False, his co-partners must be in bad faith, too
4. These are grounds for dissolution by decree of court, except:

A. Lasting incapacity
B. Refusal, with justifiable cause, to render accounting of partnership affairs
C. Continuous petty arguments whereby partners lose their confidence and
cooperation
D. Business carried on at a loss during application for judicial decree of dissolution but
currently making a profit
5. The winding up of the dissolved partnership may be done judicially upon cause
shown by the following, except:
A. Partner
B. Creditor
C. His legal representative
D. His assignee
6. They are authorized to wind up, except:

A. The partners designated by agreement
B. In the absence of such agreement, all the partners who have not wrongfully
dissolved the partnership
C. The legal representative (executor or administrator) of the last surviving
partner (when all the partners are already dead), not insolvent
D. Receiver appointed by the partnership
7. The following are the powers of the liquidating partner, except:

A. Make new contracts
B. Raise money to pay partnership debts
C. Incur obligations to complete existing contracts or preserve partnership debts
D. Incur expenses necessary in the conduct of litigation
8. A right of a partner who has not caused the dissolution wrongfully:

A. To have partnership property applied for the payment of its liabilities and to receive in
cash or securities his share of the surplus
B. To indemnify for damages other partners who are not guilty of wrongful dissolution
C. To continue the business in the same name during the agreed term of the
partnership, by themselves or jointly with others
D. To possess partnership property but only upon judicial decree should they decide to
continue the business
9. Which of the following is not a cause for dissolution of partnership by change

in membership?
A. Partner retires
B. Partner withdraws
C. Other partners assign their assets to sole remaining partner
D. All the partners assign their rights in partnership property to strangers
10. Person liable to render an account

A. Winding up partner
B. Surviving partner
C. Person continuing the business
D. All of the above
E. A or B only
GROUP 5
1. The following are correct, except:
a. Limited partners contribute to the capital, share in the profits, and
participate in the management of the business.
b. Limited partners are not personally liable for the partnership obligations
beyond their capital contributions
c. Partnership debts are paid out of a common fund and the individual
properties of the general partners.
d. A limited partner may engage in a business similar to that of the
partnership.
2. Allowable transactions of a limited partner:

I. Granting loans to the partnership
II. Receiving or holding as collateral security any partnership
a. Both I and II are correct

b. Both I and II are incorrect
c. Only I is correct
d. Only II is correct
3. The following are conditions that must exist before contributions by a limited
partner can be returned, except:
a. All liabilities of the partnership have been paid
b. The consent of all members has been obtained when the return may be
rightfully demanded
c. The certificate is cancelled or so amended as to set forth the withdrawal
or reduction of the contribution
d. The assets of the partnership are sufficient to pay any unpaid liabilities
4. A limited partner is liable to the partnership for –

I. For the difference between his contribution as actually made and that
stated in the certificate as having been made
II. For any unpaid contribution which he agreed to make at a future time

5. Which of the following pertains to a substituted limited partner?

I. An assignee shall have the right to become a substituted limited partner if
majority of the members consent thereto.
II. Being a substituted limited partner only, he has no right to require any
information or account of the partnership transactions.

6. One of the following is a cause for dissolution of a limited partnership:

a. Misconduct of a limited partner
b. Retirement or death of a limited partner
c. Fraud practiced on the general partner by the limited partner
d. Mutual consent of the partners before the expiration of the firm’s original
term
7. When a limited partnership has been duly dissolved, the partnership liabilities
shall be settled in the following order:
a. 1st those due to creditors
2nd those due to limited partners in respect to profits
3rd those due to general partners in respect to profits
b. 1st those due to general partners in respect to profits

2nd those due to limited partners for return of capital contributed
3rd those due to creditors
c. 1st those due to general partners in respect to profits

2nd those due to creditors
3rd those due to limited partners for return of capital contributed
d. 1st those due to creditors

2nd those due to limited partners in respect to their profits
3rd those due to limited partners for return of capital contributed
8. A certificate of the limited partnership shall be amended when:
a. A general partner retires
b. A person is admitted as a general partner
c. All of the above
d. None of the above
9. The following acts constitute taking “part in the control of the business,”
except:
a. Supervision over a superintendent of the business of the firm
b. Selection of who will be the managing partners
c. Consultation on one occasion with the general partners
d. No exception, all are correct
10. The surname of a limited partner may appear in the partnership when:
a. Such was deliberated on by the partners through a majority vote.
b. It was so stated in the articles of partnership.
c. It is also the surname of another limited partner or all of the limited
partners.
d. It is also the surname of a general partner.
GROUP 6
1. The relationship of third party with principal and agent are described as
follows:
a. An agent’s contract is not his own but his principal’s, a third party’s
liability on such contract is to the principal and not to the agent, and the
liability to such third party is enforceable against the principal, not to the
agent.
b. The relationship of the third party with whom the agent has
contracted, to the principal is the same as that in a contract in which
there is an agent.
A. Both statements are correct

B. Statement A is correct
C. Both statements are incorrect
D. Statement B is correct
2. In the determination of the existence of agency, the following may be

considered except
A. The manner in which the parties designate the relationship
B. The fact that one represents and is acting for another
C. Inference from mere relationship or ties
D. Actual intention or intention naturally inferable from words or actions
3. The following conformed not on the doctrines and principles of implied

agency and agency by estoppel, except
A. Agency by estoppel should be restricted to cases in which the authority is not real
and apparent
B. Implied agency is a fact that need not be proved by deductions or inferences from
other facts because implied agency is an actual agency
C. An apparent agent is not an agent at all and as against the principal has no rights
as an agent but has such right in respect to third person
D. As to third person, the principal is equally liable in both agency by estoppel and
implied agency thus reliance in both cases is not necessary
4. The limits of authority of an agent are not deemed exceeded despite

deviation, if his performance of the agency proved to be more advantageous to
the principal than that specified in the authority.
Thus, the principal cannot be held liable if the limitations of the power created by
him could not have been known by the third person.
A. True, because by the fact that the power could not have been made known is
tantamount to non-disclosure of the principal.
B. False, because principal cannot be bound by acts of the agent beyond the scope of
his authority
C. True, third persons dealing with an agent do so at their risk and are bound to
inquire as to the scope of his power
D. False, because limitation of power of the agent not being known by third the person
is a qualification to the rule when principal is bound by acts of agent beyond his power.
5. In transactions and compensation of agents and / or broker

a. A broker is regarded as the procuring cause if his efforts are the
efficient cause on which the negotiations resulting in a sale begun
b. When there is a close, proximate and causal connection between
the broker’s effort and the principal’s sale of his property, the broker is
entitled to his commission.
A. Statement A is false and B is true
B. Statement B is false and A is true
C. Both statements are true
D. Both statements are false
Choose the correct answer.

1. The agent is bound by his acceptance to carry out the agency and is liable for the
damages which without the diligence of a good father of the family, the principal may
suffer.
a. absolute c. false based on Art. 1884

b. with exception d. agent is not liable unless he has voluntarily bound
himself
2. The agent shall be liable for damages if, there being a conflict between his interests
and those of the principal, he should prefer his own.
a. alwaystrue c. based on Art. 1887

b. exception arises if there is consent from principal d. none of the above
3. If solidarity has been agreed upon, each of the agents is responsible for the non-
fulfillment of the agency, and for the fault or negligence of his fellow agents, except in
the latter case when the fellow agents acted beyond the scope of their authority.
a. true c. not fault or negligence but fraud or negligence of his fellow

agents
b. false d. the exception stated is not correct
4. 1. Del Credere agent can not be held liable to damages arising from sale.
2. The liability of Del Credere agent is contingent depending on the purchase price.
a. 1 & 2 are true c. 1 is true, 2 is false
b. 1 & 2 are false d. 1 is false, 2 is true
5. 1. If the agent has been authorized to lend money at interest, by virtue of such
authority, he can thereafter borrow the same.
2. The agent owes interest on the sums he has applied to his own use from the day on
which he did so including those he owes even after the extinguishment of the agency.
a. 1 & 2 are true c. 1 is true, 2 is false

b. 1 & 2 are false d. 1 is false, 2 is true
1. Which of the following does not amount to ratification?

a. Receipt of premiums and demand for additional security of the principal.
b. Silence of the principal.
c. Act of the principal in collecting by court action part of the loan made to unqualified
buyers.
d. Approval by the principal by the accounts submitted by the agent.
2. The principal is not liable for the expenses incurred by the agent in the following
cases, EXCEPT:
a. If the agent acted in contravention of the principal’s instructions.
b. When the expenses were due to the fault of the agent.
c. When the agent incurred them without knowledge that an unfavorable result would
ensue, if the principal was aware thereof.
d. When it was stipulated that the expenses would be borne by the agent or that the
latter would be allowed only a certain sum.
3. An agency cannot be revoked under the following circumstances, EXCEPT:

a. If the agency has been constituted in the common interest of the principal and the
agent.
b. If it is the means of fulfilling an obligation already contracted.
c. If a partner is appointed manager of a partnership in the contract of partnership and
his removal from the management is unjustifiable.
d. If a bilateral contract depends upon it.
4. In the following statements, which of the following choices is correct?

Statement 1: The termination of the agency will necessarily free the principal from
liability.
Statement 2: Where an agency is created for a fixed period, expiration of such period
ends the agency, even though the purpose for which the agency was created has not
been accomplished.
a. Statement 1 is TRUE.
b. Statement 2 is FALSE.
c. Statement 1 is FALSE.
d. Both statements are TRUE.
5. The agent is not liable for the expenses incurred by him when he incurred them
with knowledge that unfavorable result would ensue and the principal was not unaware
thereof.
a. TRUE
b. FALSE
c. Statement 1 is Misleading
d. With Exception
6. A mode of extinguishment of an agency which does not admit of any exceptions,

EXCEPT:
a. Death of the agent.
b. Withdrawal of the agent.
c. Civil interdiction of the agent.
d. None of the above.
7. The appointment of a new agent for the same business or transaction revokes the
previous agency form the day on which notice thereof was given to the former agent
without prejudice to:
a. Article on agency for purpose of contracting with specified third persons.
b. Revocation of agency not causing prejudice to third persons who acted in good
faith without knowledge of the revocation.
c. Both A & B are TRUE.
d. Both A & B are FALSE.
8. The following, EXCEPT ONE, are TRUE on the principle of Estoppel and
Ratification.
a. Ratification rest on intention; estoppel rest on prejudice.
b. In estoppel, substance is inducement; in ratification, substance is confirmation.
c. Ratification is after the act is done; estoppel is before the act is done.
d. Ratification affects only parts of the transaction; estoppel affects entire transaction.
9. Statement A: If the reason for the extinguishment of agency is not true, the agent
can insist on reinstatement with damages.
Statement B: Implied in every contract is the understanding that it shall be capable of
being carried out legally at the time called for by the contract, thus agency then
terminates if a change in law makes purpose of agency impossible or unlawful.
a. Statement B is TRUE; A is FALSE.
b. Statement B is FALSE; A is TRUE.
c. Both statements are FALSE.
d. Both statements are TRUE.
10. Why solidarity is the rule when 2 or more persons have appointed an agent?
a. To necessarily bind the principal in all the acts of the agent.
b. Because the principals have all concurred in the appointment of the same agent.
c. Because of the common transaction/undertaking.
d. To fix the liability of the principals with particularity since the appointments are
separately done.
GROUP 7
1. Which of the following is true?
a. Express trust come into being by operation of law.
b. Implied trust are those created by intention of the trustor or of the parties.
c. A person who establishes a trust is called the trustee.
d. Express trusts are those created by the direct and positive acts of the parties.
2. It refers to a person who establishes a trust.
a. trustee
b. trustor
c. beneficiary
d. receiver
3. The following are the characteristics of a “Trust” except
a. A trust refers to specific property or to other things.
b. It is fiduciary relationship
c. The legal title is held by one, and the equitable title or beneficial title is held by
another.
d. A trust is created by law or by agreement.
4.Statement No 1. No express trust concerning an immovable or any interested
therein may be proved by parol evidence.
Statement No 2. No particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended.
a. Statement No 1 is True and Statement No. 2 is false
b. Statement No 1 is false and Statement No. 2 is true
c. Both statements are true.
d. Both statements are false
5. The following are implications of an impliedor express trust except:
a. Purchase of property where the title is not given to payer but to another.
b. The Donee who does not get full ownership of Benefit
c. Co-ownership
d. An administrator or executor to the property.
6. It is the right to the beneficial enjoyment of property, the legal title to which is
vested in another.
a. Trust
b. trustee
c. trustor
d. beneficiary
7. How an express trust is created?
a. By conveyance to the trustee by an act inter vivos or mortis causa
b. By admission of the trustor that he holds the property, only as trustee.
c. Both a and b.
8. The following are the effects if the trustee declines except
a. The trust is automatically terminated.
b. The trust ordinarily continues even if the trustee declines.
c. A new trustee has to be appointed; otherwise the trust will not exist.
d. The court will appoint a new trustee, unless otherwise provided for in the trust
instrument.
9. For the trust to be effective, the beneficiary must accept:

a. expressly
b. impliedly
c. presumably
d. all of the above
10. How are express trust ended?

a. Mutual agreement by all the parties.
b. Fulfilment of the resolutory condition.
c. Both a and b
Multiple Choice Questions: Partnership

Answer Item Questions
B 1 The following are essential requisites of a contract of
partnership, except:
A. There must be a valid contract
B. There must be a contribution of money only to the
common fund
C. The partnership must be organized for gain or
profit
D. The partnership should have a lawful object or
purpose, established for the common benefit or
interest of the partners
A 2 The following describes a partnership, except:
A. It is created by contract and law.
B. It has legal or juridical personality.
C. It is created for the purpose of profit.
D. It may appear in any form, except in cases where
real property is contributed in which case a
public instrument is required.
B 3 The effects of an unlawful partnership are the
following, except
A. The contract is void from the very beginning.
B. The contract is voidable from the very beginning.
C. The profits shall be confiscated in favor of the
government.
D. The instrument or tools and proceeds of the crime
shall be forfeited in favor of the government.
C 4 If real properties or real rights in real properties
are contributed without regard of the value,
A. A private document is needed.
B. The contract may be oral or in writing.
C. A document prepared by the notary public in the
presence of the parties is needed.
D. No form is required.
D 5 The following instances do not necessarily establish a
partnership, except:
A. A joint purchase of land by two.
B. An agreement to share the profits and losses on
the sale of land.
C. A common ownership of property
D. A contribution of money, property, or industry to
a common fund for the purpose of doing business
to gain profit.
B 6 Failure to comply with the requirements of execution in
a public instrument for a contract of partnership
having a capital of P3,000 or more
A) Makes the contract void
B) Makes the contract still valid
C) Affects the liability of the partnership to third
persons
D) Affects the liability of the partners/members to
third persons
D 7 A partnership can begin in the following situations
except
A) Its registration in the SEC is not essential to
give it juridical personality.
B) The birth and life of the partnership is
predicated on the mutual desire and consent of the
parties.
C) The consent of the members is enough to create a
partnership.
D) It cannot be commenced at a later date nor can it
be based on a happening of some future contingency.
B 8 The contract-validating inventory requirement
A) Applies to personal rights
B) Requires an inventory of the contributed property
duly signed by the parties to be attached to the
public instrument
C) Is intended to protect the rights of partners
D) Is intended for legalities which cannot be
subject to inscription in the Registry Property that
may or may not prejudice third persons.
A 9 The following are true, except:
A) A partnership with a fixed term cannot be
terminated prior to the expiration of the term.
B) One of the partners may dictate a dissolution at
will but he must act in good faith.
C) The expiration of term fixed or completion of the
undertaking will automatically dissolve a
partnership with a fixed term.
D) A partnership with a fixed term exists through
the agreement of partners (expressly or impliedly)
for its term.
C 10 Which is not true with regards to associations?
A) Any of the members may contract in his own name
with third persons.
B) It shall be governed by the provisions relating
to co-ownership.
C) It can sue due to its legal personality.
D) Fees are usually collected from members to
maintain the organization.
D 11 The following are obligations of a partner with respect
to a contribution of property, except to:
A) Answer for eviction in case the partnership is
deprived of the determinate property contributed.
B) Preserve the property with diligence of a good
father of a family pending delivery.
C) Answer to the partnership for the fruits of the
property the contribution of which he delayed.
D) Indemnify the partners for any damage caused them
by the retention of the property.
B 12 Which analogy is incorrect?

A) Particular partnership : generic things
B) Universal partnership : present property
C) De jure partnership : compliance with some legal
requirements
D) General partnership : no fixed term
C 13 Appraisal of goods or property contributed is made by
the following, except:
A) Stipulation
B) Experts chosen by the partners according to
current prices, if no stipulation
C) In accordance to current prices from which
preceding changes are accounted for
D) In accordance to current prices from which
subsequent changes are accounted for
A 14 A universal partnership may refer to
A) All properties actually belonging to partners
B) All successional rights belonging to partners
C) All future property to be donated to a partner
D) All legacies of a partner
C 15 Which is not true about the obligations of a partner
with respect to the contribution of money?
A) A partner must contribute on the date due.
B) A partner must indemnify the partnership for the
damages.
C) A partner must adjust his interest with respect
to the amount he may have taken.
D) A partner must pay the agreed or legal interest
if he fails to pay on time.
D 16 An industrial partner
A) Becomes the creditor of the partnership for his
work/services.
B) Can be subjected to an action for specific
performance.
C) Can be exempted from liability by mere toleration
of the partnership
D) Cannot engage in the same business or any
business at all to prevent conflict of interest.
D 17 Contribution of partners to the partnership capital
A) Must be unequal
B) Is presumed to be unequal with the absence of any
stipulation.
C) Has to be stipulated in any partnership contract.
D) Is presumed to be unequal with the absence of any
stipulation.
B 18 The following are true regarding future property with
regards to properties owned by partners, except:
A) Contracts regarding successional rights cannot be
made.
B) Generic things are not necessarily precluded as
an object of the partnership.
C) Generally, future property cannot be donated.
D) Certainty of the thing contributed to the
partnership is demanded.
B 19 The following are true about universal partnership of
profits, except:
A) Only the use and fruits of the properties of the
partners becomes common property of all the partners
and the partnership.
B) Properties subsequently acquired by inheritance,
legacy, or donation can be included in the
stipulation, together with their fruits.
C) All profits acquired through the industry or work
of the partners become common property.
D) If stipulated, profits from other property of the
partners may be common.
A 20 Persons who cannot enter into a universal partnership
are the following, except:
A) Persons living together in the same domicile by
amity.
B) Persons living together as husband and wife
without a valid marriage.
C) Persons found guilty of the same criminal
offense, in consideration thereof.
D) Legally married spouses.
C 21 A capitalist partner is not bound to contribute more
than what he agreed to contribute, unless there is
imminent loss of the business. The following are the
requisites for the application of the rule, except:
A) Imminent loss of the business
B) Majority of the capitalist partners are of the
opinion that an additional contribution to the
common fund would save the business.
C) The partner deliberately agrees.
D) There is no agreement.
C 22 The requisites of the obligation of a managing partner
who collects debt are as follows, except:
A) There are at least two debts.
B) Such debts must be one from the partner and the
other to the partnership.
C) At least one debt is demandable.
D) The partner who collects is authorized to manage
and actually manages the partnership.
A 23 When a partner receives his share of a partnership
credit, in whole or in part, then
A) He is obliged to bring to the partnership capital
what he received.
B) He is only obligated to bring to the partnership
capital what he received if there are at least two
credits.
C) He shall keep what he had received when he is a
managing partner.
D) He shall be obligated to bring to the partnership
capital what he received if and only if the other
partners have not collected theirs.
D 24 The statement which is most probably not true regarding
a partner’s obligation and/or responsibility is:
A) A partner is responsible to secure benefits for
the partnership. Hence, all profits earned shall
pertain as a matter of law or right to the
partnership.
B) A partner is a debtor of the partnership for his
industry and he shall be liable for the injury
suffered by it caused by his fault. Hence, there
cannot be any compensation.
C) When unusual profits may have been realized by
the partnership through the extraordinary efforts of
the partner, the courts may mitigate the liability
for damages.
D) No court can equitably lessen the responsibility
of the guilty partner unless it is otherwise
stipulated in the partnership books with regards to
its legal person.
A 25 Which pair is true regarding the risk of loss?
A) Risk of specific thing not fungible : partner who
owns it
B) Things contributed to be sold : partners
C) Fungible things: partners
D) Things brought and appraised in the inventory :
partners
B 26 The following are obligations of the partnership to the
partners, except:
A) To refund the amount disbursed by the partner in
behalf of the partnership.
B) Included in the refund is the interest from the
time of demand.
C) To answer for the obligations contracted by the
partner in good faith in the interest of the
D) To answer for the risks in consequence of its
management.
A 27 If there is no agreement as to the share in the losses
and profits, then each partner shall have a share in
the same proportion to what he may have contributed,
but the following are exceptions to this statement
other than one.
A) The industrial partner shall be entitled to a
share in the losses as may be just and equitable
with regards to other partners.
B) The industrial partner shall also receive a share
in the profits in proportion to his capital if he
had contributed such aside from his services.
C) The industrial partner shall not be liable for
the losses.
D) The industrial partner, under the circumstances,
shall be qualified to share in the profits as may be
just and equitable.
C 28 What is the effect if the partner has entrusted to a
third person the designation of the share of each
partner in the profits and losses?
A) Such designation has no validity.
B) The designation is void whether or not it is
manifestly inequitable.
C) The designation cannot be impugned when the
partner has begun its execution.
D) The designation is not binding even if the
partnership fails to impugn it within a period of
three months.
B 29 Stipulations excluding a partner from any share in
profits or losses has the following effect, except:
A) It is generally void but the partnership will
subsist.
B) It is generally invalid to stipulate that an
industrial partner is excluded from losses.
C) Parties can stipulate unequal shares.
D) A person excluded from any share in the profits
or losses is not intended by the parties to become a
partner.
B 30 The following are true about the appointment of a
partner as a manager, except:
A) A partner appointed as a manager in the articles
of partnership may have such appointment revoked
only if there is just and lawful cause or through
the consent of all partners including the appointee.
B) A partner appointed as a manager in the articles
of partnership shall not execute such acts of
administration when there is opposition of the other
partners.
C) A partner designated as a manager after the
constitution of the partnership may have such
appointment revoked at any time for any cause.
D) Revocation of the appointed manager after the
constitution of the partnership must be voted upon
by the majority of the partners having the
controlling interest.
D 31 Camila Sardines have two managing partners, Daniela and
Romina. There is no specification of their respective
duties nor is there a stipulation that one may not act
without the consent of the other. Which of the
following is false regarding this partnership?
A) Daniela and Romina may separately execute all
acts of administration.
B) In case any of the managing partners oppose to
the acts of the other, the decision of the majority
of partners shall prevail.
C) In case any of the managing partners oppose to
the acts of the other, and the decision of the
partners have tied, the matter shall be decided by
the partners having the controlling interest.
D) In case any of the managing partners oppose to
the acts of the other, the decision of the partner
with the controlling interest shall prevail.
A 32 The partners may stipulate in their Articles of
Partnership that no managing partner may act without
the consent of all the other managing partners. The
following statements are true regarding this matter,
except:
A. A managing partner who acts without the consent
of the others during an imminent danger of grave
or irreparable injury to the partnership shall be
liable to the consequences of his actions may it
be for the partnership’s benefit or not.
B. The unanimous consent of all managing partners is
necessary for the validity of their acts.
C. The absence or disability of the partners may not
be interposed as an excuse or justification to
dispense with the requirement of having the
consent of all.
D. The concurrence of all partners shall be
necessary for any act to be valid.
C 33 When the manner of management has not been agreed upon,
the following rules shall be observed, except:
A. Unanimous consent is necessary for any important
alteration to be made on an immovable property.
B. An important alteration in immovable property is
not contemplated. It must constitute an act of
strict dominion.
C. All partners shall be considered agents of the
partnership and all of them must agree upon all
contracts entered into for such acts to be
binding.
D. If any partner’s refusal of consent is manifestly
prejudicial to the partnership’s interest, the
court’s intervention may be sought.
B 34 Which is true about a subpartnership?
A. A subpartner has the same rights and functions as
a main partner.
B. A subpartnership does not affect the composition,
existence, and operations of the firm.
C. A subpartner is considered a member of the firm.
D. A subpartner may acquire the rights of the
partners and becomes indebted for the
partnership’s debts.
D 35 The following are general rules regarding partnership’s
books, except:
A. The partnership books shall be kept in the place
agreed upon by the partners.
B. The partnership books shall be kept at the
principal place of business of the partnership in
the absence of agreement.
C. Every partner shall have at a reasonable hour
access to and may inspect and copy any of the
partnership books.
D. Every partner shall have for his own account the
right to access the partnership books on the
reasonable hour accorded to his will.
C 36 The following are true regarding the partners’ duty to
render information, except:
A. Mutual trust and confidence requires that there
be no concealment among partners.
B. Good faith not only requires that there be no
false statement. It also requires that there be
no concealment among partners.
C. There is still duty to render information even
though such already appears in the partnership
books.
D. Partners shall render on demand true and full
information of all things affecting the
partnership to any partner or legal
representative of a deceased partner or of a
partner under legal disability.
B 37 A universal partnership may refer to all present
property or all profits. The following refer to a
universal partnership of all profits except for one
which refers to the other kind. Which among the
following refer to a universal partnership of all
present property?
A. It comprises all that the partners may acquire by
their industry or work during the existence of
the partnership.
B. The partners contribute all the property which
belongs to them to a common fund, with the
intention of dividing the same among themselves,
as well as the profits they may acquire
therewith.
C. Only the usufruct over the property of the
partners passes to the partnership.
D. Articles of universal partnership, entered into
without specification of its nature, only
constitute a universal partnership of all
profits.
D 38 The universal partnership of profits
A. Is by which property contributed includes all
those belonging to the partners at the time of
the constitution of the partnership.
B. Presumes that property acquired by partners
subsequently by inheritance, legacy or donation
cannot be included in a stipulation for its
common enjoyment.
C. Presupposes that partners must contribute all
property belonging to them to a common fund.
D. Imposes less obligation because their real and
personal properties are retained by them in naked
ownership.
B 39 A particular partnership has the following
characteristics, except
A. Object must be determinate
B. No specific undertaking required
C. Persons related by affinity may enter such
partnership
D. Exercise of a profession or vocation
A 40 A partnership has a judicial personality separate and
distinct from that of each of the partners. Which
statement does not support the aforementioned?
A. Partners are individually liable for the debts of
the partnership.
B. Immovable property to be acquired must be in the
name of the partnership.
C. Immovable property acquired in the name of the
partnership must also be in the partnership name
if conveyed.
D. The partnership is held responsible for liability
incurred.
C 41 The following are true regarding a partner, except:
A. Every partner must account to the partnership for
any benefit.
B. Every partner must hold as trustee for the
partnership any profits derived by him in any
transaction connected with the formation,
conduct, or liquidation of the partnership or
from any use by him of its property.
C. Each partner is considered in law to be the
disclosed agent of the others.
D. Each partner must always act for the common
benefit in all transactions affecting the
partnership affairs.
B 42 Which is not true about a capitalist partner?
A. He cannot engage in the same or similar business
to which the partnership is engaged.
B. Though he did not acquire knowledge of the
business secrets of the partnership, it is unfair
for him to engage in another but similar kind of
business.
C. If he violates such prohibition, he shall bear
the losses alone.
D. If he violates such prohibition, he must bring to
the common fund any profits he derived from his
transactions.
D 43 What kind of action is an action for accounting?
A. Accion subrogatoria
B. Accion Pauliana
C. Action of Account
D. Action in Personam
A. 44 The following are principal rights of a partner with
regards to his property rights. Which is only a related
right?
A. Rights of access and inspection of partnership
books
B. Rights in specific partnership property
C. Interest in the partnership
D. Rights to participate in the management
D 45 Specific partnership property is not subject to the
following by a partner alone except for one. Which must
not be included?
A. Attachment
B. Execution
C. Injunction
D. Depreciation
D 46 Assets of the partnership after partnership debts and
liabilities are paid and settled and the rights of the
partners among themselves adjusted are known as:
A. Revenue
B. Goodwill
C. Profit
D. Surplus
B 47 Rights of an assignee include the following, except:
A. To receive in accordance with his contract the
profits accruing to the assigning partner
B. To require information or formal account from the
managing or supervising partner
C. To avail himself of the usual remedies provided
by law in the event of fraud in the management
D. To receive the assignor’s interest in case of
dissolution.
B. 48 It means the extinguishment of the charge or attachment
on the partner’s interest in the profits.
A. Remission
B. Redemption
C. Condonation
D. Restitution
A 49 Which is not true about a firm name?
A. It must include the name of at least one of the
partners.
B. It must not be misleading.
C. It must be distinguished from other partnerships.
D. Use of the name of a deceased partner is allowed
as long as it is indicated that said partner is
already deceased.
C 50 May one partner make all the partners liable for the
obligation of the partnership?
A. No, he is the only one that should answer to such
obligation in any circumstance.
B. Yes, he may, provided that he acted personally
for the benefit of his interest.
C. Yes, he may, by entering into a contract in the
name and for the account of the partnership.
D. No, he cannot bind the partnership and the
partners since he is not considered an agent of
the firm when he acts principally for it.
D 51 Except as among the partners, any stipulation against
the liability laid down for the contractual obligations
of the partnership is considered:
A. Rescissible
B. Unenforceable
C. Voidable
D. Void
A 52 Except when authorized by the other partners or unless
they have abandoned the business, one or more but not
all the partners have no authority to the following
except one. Which is not?
A. Enter into a contract of sale for the venture’s
benefit
B. Confess a judgment
C. Submit a partnership claim or liability
D. Assign the partnership property in trust for
creditors
B 53 Real property may be registered or owned in the name of
the following, except:
A. The partnership
B. Creditors of the respective partners
C. One or more or all the partners
D. Third person in trust for the partnership
A 54 May the admission made by a partner after the
dissolution be received against the other partners?
A. Yes, provided that the admission has something to
do with the winding up of the partnership
affairs.
B. Yes, provided that the admission has something to
do with the acts of the partner after the
dissolution.
C. No since the partnership is already dissolved,
thus all affairs concerning the partnership have
ended.
D. No since the life of the partnership has already
ended, judicially or extrajudicially.
B 55 The following are instances where knowledge of a
partner is considered knowledge of the partnership,
except:
A. Knowledge of a partner acting on a particular
matter then present to his mind
B. Knowledge of a partner acting on a particular
matter acquired while a staff
C. Knowledge of any other partner who could and
should have communicated it to the acting partner
D. Each given instance is considered knowledge of
the partnership.
D 56 Blythe, Francine, Kyle, and Seth formed Gold Eggs, a
partnership business within the poultry industry. One
day, Blythe was delivering five trays of fresh eggs to
KimXi Resto using the partnership’s truck. She is under
the influence of alcohol at that time and thus unable
to see the road clearly, causing a severe mishap at the
resto’s entrance. What remedy can the people involved
take in such situation?
A. KimXi Resto can file a case only against the
individual partner (Blythe) who caused the
mishap.
B. The other partners cannot be held responsible in
the liability of their co-partner as it is the
said co-partner who has acted negligent, not all
of them.
C. Francine, one of the partners, may pay for the
liability of Blythe, the guilty partner, and have
the interest of Blythe in the partnership as
recovery whether or not such detail is under the
articles of partnership.
D. KimXi Resto can file a case against the
partnership and whatever damages will be awarded
to it will be paid by the partners and the
partnership. The other partners can recover from
Blythe the amount they have paid for her
negligence.
17 57 Julia, Bea, and Gerald formed Partido Tatsulok, a
partnership within the e-commerce industry. Gerald
received from Joshua, a customer of their business,
P15,000 in payment of his online orders to be delivered
by the end of the month. Gerald however used the
payment to take Julia (who has no knowledge of such
misapplication of money by Gerald) on a date. What is
the most probable remedy for the case?
A. Partido Tatsulok, as a partnership, cannot be
held liable for the misappropriation of the
payment by Gerald, thus, only Gerald can be
liable for such misapplication.
B. Julia, with or without her knowledge, can be held
liable for such misapplication because she went
on a date with Gerald using the money.
C. Partido Tatsulok is liable to Joshua for the
amount of his orders. Julia and Bea can recover
from Gerald what he has misappropriated.
D. Bea who was not involved in any of the
transactions can never be held liable for the
actions of her co-partners.
A 58 Whether guilty or innocent with regards to the
liability of the partnership, the other partners shall
be
A. Solidarily liable
B. Jointly liable
C. Personally liable without regard of partnership
interest
D. Liable pro rata only
C 59 It is a bar which precludes a person from denying or
asserting anything contrary to that which has been
established as the truth by his own deed or
representation, either express or implied
A. Waiver
B. Force Majeure
C. Estoppel
D. Restitution
C 60 The following are true about a person admitted as a
partner in an existing partnership, except:
A. He becomes liable for the debts contracted by the
existing partnership before he entered.
B. His liability is limited only to his share in the
partnership property, unless otherwise stated.
C. His liability is limited up to the extent of his
personal properties with respect to becoming an
agent of the partnership.
D. For obligations contracted and existing at the
time that he is already admitted as a partner, he
shall become liable with regards to partnership
property and his separate property.
B 61 Who will be preferred when the partnership property is
to be disposed?
A. Creditors of the partners
B. Creditors of the partnership
C. Partners
D. Representatives of deceased partners
A 62 It is the point of time the partners cease to carry on
the business together.
A. Dissolution
B. Winding Up
C. Liquidation
D. Termination
C 63 On dissolution the partnership is not terminated, but
continues until the winding up of partnership affairs
is completed. The following instances support this
statement, except:
A. All transactions of the partnership should only
pertain to liquidation or winding up which will
happen over a period of time.
B. The partnership will sell its non-cash assets.
C. The partnership will take on new obligations and
will enter new contracts incongruent with its
termination.
D. The partnership will pay its creditors and
thereafter distribute the remainder to the
partners.
B 64 Dissolution is caused by
A. Remission of any partner
B. Civil interdiction of any partner
C. Condonation of any partner
D. Prescription of amounts due
D 65 On application by or for a partner the court shall
decree a dissolution whenever
A. A partner is declared as one with a sound mind
B. A partner becomes in any other way in full
capability to perform his duties
C. The business of the partnership can be carried on
in gaining profits
D. A partner willfully or persistently commits a
breach of the partnership agreement
D 66 As a rule, when a partnership is dissolved, any of the
partners
A. Cannot collect debts due to the partnership
B. Cannot continue on existing obligations
C. Cannot pay debts of the partnership
D. Cannot bind the partnership
C 67 Camila, Vito, Emma, and Elias established The Killer
Bride Partnership which offers costumes for different
events but more known for their Halloween costumes.
However, Camila died and only Vito knows about it.
Still, Vito entered into a contract with Tatiana. Which
is most probably true in the given situation?
A. If the cause of dissolution is the death of
Camila, Vito knowing such fact makes him as the
only person liable to Tatiana. This is because
the partnership is already dissolved.
B. If the cause of dissolution is the death of
Camila, and though Vito is the only one who knew
about it, the other partners are still solidarily
liable with Vito with regards to the obligation
he has contracted with Tatiana from which no
recovery can be reimbursed to them by Vito.
C. If the cause of dissolution is the death of
Camila, and though Vito is the only one who knew
about it, the other partners are still solidarily
liable with Vito with regards to the obligation
he has contracted with Tatiana from which they
can recover from Vito afterwards.
D. No such action is necessary for the case as Vito
contracted with Tatiana solely, meaning it is
only between the two of them.
A 68 There are exceptions with regards to the binding effect
of the acts of the partners to the partnership on
dissolution. Such exception include an instance where
A. The partner has become insolvent.
B. The partner has authority to wind up the
partnership affairs.
C. The partner is of sound mind.
D. The partnership is continued because of being in
line with the law.
D 69 In order for the liability of a partner to be
discharged, the following persons must agree, except:
A. The partner
B. The other partners
C. The creditors
D. The debtors
B 70 Who is responsible to wind up the partnership?
A. The legal representative/s of the managing
partner, whether or not such partner is already
deceased and with no regard to other surviving
partners.
B. The partner/s who have not wrongfully dissolved
the partnership.
C. The nominal partner/s of the partnership
D. The capitalist-industrial partner/s with regard
to contribution to the firm.
A 71 The following are rights of a partner who has not
caused dissolution wrongfully, except:
A. To have the partnership property applied to
discharge the liabilities of the partners.
B. To have the surplus, if any, applied to pay in
cash the net amount owing to the respective
partners.
C. To be indemnified for damages caused by the
guilty partner.
D. To continue the business in the same name either
by themselves or jointly with others during the
agreed term of the partnership.
D 72 Which is a right of a partner who is entitled to
rescind?
A. Right in personam
B. Right of valuation
C. Right of acquisition
D. Right of lien
D 73 It means that the assets are less than the liabilities.
A. Liquidity
B. Implied Goodwill
C. Incongruency
D. Insolvency
C 74 Upon the dissolution of a commercial partnership, the
succeeding partners or parties have
A. No preference to carry on the business under the
old name
B. No right to carry on the business under the old
name
C. The right to carry on the business under the old
name
D. The power to carry on the business under the old
name
A 75 A right of a partner who retires or dies and the
business is continued without any settlement of
accounts is to have the value of his interest
A. at the date of dissolution ascertained
B. at the date of termination ascertained
C. at the date where all accounts are due with
regards to creditors
D. at the date where it is just and equitable.
C 76 Who has the right to an account of a partner’s
interest?
A. The partner who continues the partnership
B. The creditor/s of the partnership
C. The partner himself or his legal representative
D. The winding-up partner/s
B 77 A limited partnership is where
A. One or all are general partners, or one or all
are limited partners
B. Limited partners may ask for the return of their
capital contributions
C. Limited partners are liable up to the extent of
their personal property
D. Partnership debts are paid out from capital
contributions and personal properties of both
general and limited partners
B 78 The certificate of partnership shall state the
following, except:
A. The character of the business
B. The name and place of residence of each member
and the spouse (if any) and/or legal
representative of such member
C. The location of the principal place of business
D. The amount of cash and a description of and the
agreed value of the other property contributed by
each limited partner
A 79 With regards to contribution, a limited partner is
considered a/an
A. capitalist partner
B. capitalist-industrialist partner
C. industrial partner
D. partner by estoppel
C 80 The surname of a limited partner
A. Shall not appear in the partnership name even if
it is also the surname of a general partner
B. Shall not appear in the partnership name even if
it was already carried under such name knowing
that the limited partner was an admitted partner.
C. Shall not appear in the partnership name and
violation of such will make him liable as a
general partner but only to the partnership
creditors who extend credit to the partnership
without actual knowledge that he is not a general
partner.
D. Shall not appear in the partnership name and
violation of such will make him liable as a
general partner thus affecting his personal
properties and making him acquire the rights of a
general partner.
B 81 If the certificate with regards to the limited
partnership contains a false statement, the one who
suffers the loss by reliance on such false statement
may hold liable
A. The partners or any party in the certificate with
or without knowledge of such false statement
B. The partners or any party in the certificate with
knowledge of such statement
C. The bona fide partner
D. The partnership as a legal entity
C 82 A limited partner
A. Can take part in the control of the business
B. Who takes part in the control of the business
acquires the rights of a general partner.
C. Who takes part in the control of the business
becomes liable as a general partner
D. Can contribute money, property, or industry to
the business
C 83 Additional limited partners may be admitted after
formation of limited partnership by filing for a/an:
A. Dissolution
B. Agreement
C. Amendment
D. Obligatory contract
B 84 As a rule, general partners in a limited partnership
can do:
A. Acts of ownership only
B. Acts of administration only
C. Acts of administration and ownership
D. Acts of fiduciary frontiers
D 85 The rights of a limited partner include:
A. Right to have termination by decree of court
B. Right to have supplementary accounts only of
partnership affairs
C. Right to inspect the partnership books only
D. Right to receive share of profits by way of
income
D 86 A contributor who erroneously believes that he has
become a limited partner
A. Is still liable as a general partner with or
without taking part in the management
B. Is not liable as a general partner if he takes
part in the management
C. Is still liable as a general partner if he
renounces his interest in the profits of the
business
D. Is not liable as a general partner if he has
ascertained such mistake and renounces his
interest in the profits of the business
A 87 He is a partner whose liabilities extend up to his
separate property and his rights are up to the extent
of his contribution.
A. General-limited partner
B. General partner
C. Limited partner
D. Industrial partner
B 88 A limited partner is
A. Not allowed to lend money to the partnership
B. Allowed to transact business with the partnership
C. Not allowed to transact business with other firms
D. Allowed to receive partnership property
A 89 Preference to some limited partners over other limited
partners
A. May be given as to the return of their
contributions
B. Shall not be given whether such partners are
known or not
C. Shall not be given as to their compensation by
way of income
D. Shall not be given as to any matter of essence
risen by such partners
D 90 When may a limited partner receive his share of profits
from the partnership?
A. Any given time by which he demands it
B. Any given time since demand does not necessarily
preclude him from having his share in profits
C. In such a time provided that the assets of the
partnership are at par with its liabilities
D. In such a time provided that the partnership
assets exceed its liabilities to third persons
after payment to limited partners.
D 91 When can the contributions of a limited partner be
returned?
A. Any given time
B. After he has given four months’ notice in writing
to all members
C. When prescription of credit terms of the
partnership arrives
D. When the date specified in the certificate for
its return has arrived
A 92 Liability of a limited partner
A. May be waived with the consent of all the other
partners
B. Shall not be waived for any reasons before and
after dissolution
C. May be waived but will afterwards affect the
right of the partnership creditors
D. Shall not be waived as he is liable to the
partnership
B 93 He is a person admitted to all the rights of a limited
partner who has died or has assigned his interest in
the partnership.
A. Assigned limited partner
B. Substituted limited partner
C. Admitted limited partner
D. Incoming limited partner
A 94 As a rule, the retirement, death, insolvency, insanity,
or civil interdiction of this partner dissolves the
partnership.
A. General partner
B. Limited partner
C. Original partner
D. Nominal Partner
B 95 Who or which shall be liable for all liabilities of a
deceased limited partner?
A. Representative
B. Estate
C. Widow of the deceased partner
D. Surviving partners
D 96 With regards to the liability of a limited partner to
his creditor, the interest may be redeemed with
A. Partnership property
B. Accounts of the partnership
C. Amounts due to the partnership
D. Separate property of any general partner
C 97 Which is given priority over capital?
A. Earnings before taxes
B. Net Credit Sales
C. Profits
D. Income
A 98 The certificate of limited partnership is cancelled
A. When all limited partners cease to be limited
partners.
B. When a person is admitted as a general partner
C. When there is a change in the character of the
business of the partnership
D. When there is a false or erroneous statement in
the certificate.
C 99 Requirements for the cancellation of the certificate of
limited partnership are the following, except:
A. It must be in writing.
B. It must be signed and sworn to by all members.
C. It must be counterchecked by the Office of the
Ombudsman before filing to the SEC.
D. It must be filed for record in the Office of
Securities and Exchange Commission.
C 100 A limited partner who does not take part in the
management of the business of the partnership
A. Is a particular partner to proceedings by or
against a partnership
B. Is not a capital contributor of the partnership
C. Is not a proper party to proceedings by or
against a partnership
D. Is estopped from engaging to other businesses
even if it is different from the business of the
partnership.
C 101 Tiwa and Lalang formed a limited partnership named
Makakaquota. Which is most probably true about the law
it should follow?
A. If created before any provisions of the Code, it
shall be governed in accordance with the new
provisions of such Code.
B. If formed after the given provisions of the Code,
it shall still be governed in accordance with the
old Code if it is formed just six months after
such provisions were made.
C. If formed before any provisions of the Code, it
shall be governed in accordance with the
provisions of the old law.
D. Such partnership shall be dissolved if it was
formed before the provisions of the Code and by
which new provisions of the Code become
available.
TEST BANK
PARNERSHIP & CORPORATION
FR: DIAZ
PARTNERSHIP
1. All present properties are contributed
A. Universal partnership[
B. General partnership
C. Limited partnership
D. None of the above
2. Composed of capitalist and industrial partners

A. Universal partnership
3. Partners shall enjoy practically all the profits:

A. Universal partnership[
4. They have no voice in the management of partnership affairs:

A. Managing partners
B. Silent partners
C. Both A and B
5. They have priority if the partnership is insolvent:

A. Separate creditors
B. Partnership creditors
C. Both A and B
6. May contribute money, property or industry to the common fund:

A. Both general and limited partners
B. Limited partner
C. General partners
D. Capitalist partners
7. One who takes charge of the winding up to partnership affairs upon dissolution:
A. Silent partner
B. General partner
C. Ostensible partner
D. Liquidating partner
8. A, B and C are partners. A contributed his services only; B, P20,000; and C, P10,000.The
partnership was liquidated. After payment of the partnership’s obligation, only P9,000
worth
of assets remained. The share of A will equal to:
A. P3,000
B. Equal of share of B
C. Equal of share of C
9. A and B entered into a universal partnership of all present property. The common
property of
the partnership shall be:
A. All the properties which belonged to each of the partners at the time of the
constitution of the partnership.
B. All the properties which belonged to each of the partners after the constitution of the
partnership.
C. All the properties which belonged to each of the partners at the time of the
constitution of the partnership as well as the profits which they may acquire
therewith.
D. All the properties which belonged to each of the partners at the time of the
constitution of the partnership as well as the profits which they may acquire
thereafter.
10. A capitalist partner engaged for his own account in an operation which is of the kind of
business in which the partnership is engaged. Said partner can be
A. Compelled to sell his interest in the partnership to the other capitalist partners.
B. Compelled to dissolve or discontinue the operation of his business
C. Compelled to bring to the common funds of the partnership any profits accruing
to him from his transactions.
D. Denied his share in the profits of the partnership.
11. If a partner in a partnership is insolvent, the first order of preference in the distribution of
his
assets are:
A. Partnership creditors
B. Partners contribution to the partnership
C. Separate creditors of the debtor
D. Pro-rata between the separate creditors of the debtor and the partnership creditor
12. A, B and C are partners in a partnership. C contributed his industry. After payments of
the
partnership’s obligations, only P6,000 cash remains. No other assets. In the absence of
terms
to the contrary, the share of C in the remaining assets is:
A. Equal to share of A
B. Equal to the share of B
C. P2,000
D. Nothing
13. X, Y and Z are equal partners of Xyz Partnership. A owes the XYZ Partnership for
p9,000.
Z, a partner collected from A, P3,000 before X and Y received anything. Z issued a
receipt
on the P3,000 as his share of what A owes. When X and Y collected from A, A was
insolvent.
A. Partner Z shall share partners X and Y with the P3,000
B. Z cannot be required to share X and Y with the P3,000
C. X and Y should first exhaust all remedies to collect from A.
D. X and Y can automatically deduct from the capital contributions of Z in the
partnership their respective share in the P3,000
14. A and B are partners in a real estate partnership . The partnership owns a piece of land
which
C desired to buy. C contacted A and inform him of his desire to buy the land and A did
not
tell to B about it. A bought B out of the partnership and afterwards sold the land to C with
a
big profit.
A. The partnership is dissolved when A became the sole owner
B. The sale of the land to C is void because it was without the knowledge of B.
C. A is not liable to B for the latter’s share in the profits
D. A is liable to B for the latter’s share in the profits
15. A, B and C are partners in ABC Partnership. D represented himself as a partner in ABC
Partnership to E, who, on the belief of such representation, extended P50,000 credit to
ABC
Partnership. Assuming only B and C consented to such representation, who will be held
liable to E?
A. E extended the credit to ABC Partnership, so a partnership liability exists, thus, all the
partners, A, B and C are liable
B. B, C and D are partners by estoppels and thus, are liable prorate to E
C. Partners A, B and C who benefited from the credit extended by E are liable.
D. D who made the representation is liable to E
16. 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.
A. A is liable to B for B’s share in the profits
B. The partnership is dissolved when A became the sole owner
C. A is not liable to B for the latter’s share in the profits
D. The sale of the land to X is void.
17. One of the following incidents may be a cause for involuntary dissolution of a
partnership.
Which is?
A. Termination of the term of the partnership
B. Insolvency of any partner
C. Express will of any partner
D. Expulsion of any partner
18. A and B are equal partners in AB Partnership. Y presented himself as a partner in AB

Partnership to Z, who relying on such representation, extended P50,000 credit to AB
Partnership. Of the two (2) partners only B knew and consented to the representation of
Y.
Who should be held liable to Z?
A. Only Y, who presented himself as partner is liable.
B. Since the credit was extended to AB Partnership, a partnership liability was created,
so the two (2) partners and Y are liable.
C. Partners A and B who benefited from the credit extended to the partnership AB
Partnership shall be liable to Z.
D. B and Y are partners by estoppel and, thus, are liable to Z.
19. The following persons are disqualified to form a universal partnership. Who are the
exception?
A. Brother and sister
B. Husband and wife
C. Those guilty of adultery and concubinage
D. Those guilty of the same criminal offense, if the partnership is entered into a
consideration of the same.
20. A is the capitalist partner and B the industrial partner. A is engaged personally in the
same
kind of business the partnership is engaged in.
A. If there are losses, the partnership will bear the losses
B. If there are profits, the profits will be shares 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 pay damages.
21. A is the managing partner of ABC Partnership. X owes A personally and ABC
Partnership
P20,000 each. A collected and receive from X, P10,000 and he issued a receipt wherein it
is
stated that the amount is applied against his personal credit.
A. The amount received will be applied in favor the partnership credit
B. The amount will be applied in proportion to both credits
C. The amount received will be applied in the credit of A
D. All the partners will decide as to whose favor it will apply
22. Three (3) of the following are similarities between a partnership and a corporation.
Which is
not?
A. The individuals composing both have little voice in the conduct of the business
B. Both have juridical personality separate and distinct from that of the individuals
composing them.
C. Like a partnership, a corporation can act only through agents
D. Both are organizations composed of an aggregate of individuals
23. A, B and C are general partners in ABC Partnership. A, the managing partner engaged
personally in a business that is the same as the business of the partnership without the
consent of B and C.
A. If there are profits, A will give the profits to the partnership
B. If there are losses, the partnership will bear the losses
C. If there are profits, they will be shared by partner A and the ABC Partnership
D. The profits or losses will be shared equally by A and the ABC Partnership
24. Three (3) of the following are rights of a general partner and also of a limited partner in a
limited partnership. Which is not?
A. To inspect and copy at reasonable hours the books of the partnership and have them
kept at the principal place of business
B. To demand true and full information of all matters affecting the partnership and a
formal account of partnership affairs
C. To have dissolution and winding up by decree of court
25. The partnership is insolvent. These are preferred as regards to the partnership property.
A. Partnership creditors
B. Partners separate creditors
C. Partners with respect to their capital
D. Partners with respect to their profits
26.
27. Bears the loss of property contributed to the partnership
A. Capitalist partner
B. Limited partner
C. None of the above
D. Partners contributing usufructory rights
28. When cash or property worth P3,000 or more is contributed as capital. The Articles of
Co-
Partnership shall be in a public instrument and be registered with the Securities and
Exchange commission. If the said requirements are not complied with:
A. It will render the partnership void.
B. It will not affect the liability of the partnership and the partners to third parties.
C. It will not give a legal personality to the partnership.
D. It will give the partnership a de-facto existence.
29. A, B and C are equal partners in Santos Brothers Partnership. The partnership is indebted
to
PC for P150,000. Partner A is indebted to SC for P20,000 PC attached and took all the
assets
of the partnership amounting to P90,000. B and C are solvent while A is insolvent and all
what he owns is a land valued at P15,000.
A. SC has the priority to the land of A as a separate creditor.
B. PC 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 PC the 60,000 remaining liability
of the partnership.
D. PC and AC shall have priority to the land o A in proportion to their claim of P60,000
and P20,000 respectively
30. A partnership is not dissolved upon the death of a:

A. General partner
B. Industrial partner
C. Limited partner
D. General limited partner
31. A and B are equal partners in AB Partnership C contacted XYZ and Co. and represented
himself as partner in AB Partnership. XYZ and Co. contacted A who confirmed that C is
in
fact a partner of AB Partnership XYZ and Co. extended credit to C for AB Partnership in
the
amount of P60,000. Who is liable to XYZ and Co.?
A. A and C are partners by estoppels and are liable to XYZ and Co.
B. XYZ and Co. extended the credit to C for AB Partnership, so a partnership liability
exists, so both partners, A and B together with C are liable.
C. The AB Partnership benefited, so it is liable
D. Only C who made the representation is liable
32. A, B and C are partners in a trucking and freight business. B and C without the
knowledge
of A approached X and offered to sell to X all the trucks of the partnership at a price very
much higher than their book value. Then B and C bought-out A from the partnership and
thereafter X bought all the trucks with a big profit of B and C.
A. The sale of the trucks to X is void because it is without the knowledge and consent of
A.
B. B and C are not liable to A whatsoever
C. B and C are liable to A for his share in the profits in the sale.
D. When A was bought-out of the partnership, the partnership was dissolved so A has no
more share in the profits in the sale.
33. When the capital (of a partnership) is P3,000 or more, it must be in a public instrument
and
must be recorded with the Securities and Exchange Commission (Article 1772). A, B and
C
agreed to form a partnership and each contributed P10,000 as capital of the partnership.
There was no compliance in the provisions of Article 1772.
A. The partnership was not established
B. The partnership did not have juridical personality
C. The partnership was established and any partner may compel the execution of a
public instrument
D. The partnership is void
34. A, as a partner contributed P30,000; B as partner, P15,000; and C as industrial partner,

his
services in the partnership. After payment of all liabilities and expenses, only P18,000
remain as partnership assets.
A. A, P12,000; B, P6,000; C, None
B. A, P6,000; B, P6,000; C, P6,000
C. A, P9,000; B, P9,000; C, None
D. A, P8,000; B, P4,000; C, P6,000
35. This is the order of preference in the liquidation of a partnership:

A. 1.Outside creditors
2.Partners with respect to their capital
3.Partners with respect to their profit
4.Partners aside from capital and profit
B. 1. Partners with respect to their capital

3.Partners aside from capital and profit
4. Outside creditors
C. 1. Outside creditors
2. Partners aside from capital and profit
3. Partners with respect to their capital
D. 1. Partners aside from capital and profit

2. Outside creditors
3.Partners with respect to their capital
36. Three (3) of the following are rights of a partners. Which one is not?
A. Right to associate another person to his share
B. Right to admit another partner
C. Right to inspect and copy partnership book
D. Right to ask dissolution of the firm at the proper time
37 The following are similarities between partnership and a corporation. Which is the
exception?
A. Both have juridical personalities separate and distinct from that of the individuals
composing them.
B. Like a partnership, a corporation can act only through agents
C. Both are organization of an aggregate of individuals
D. The individuals composing both have little voice in the conduct of the business.
38. In the partnership of A, B and C, A was appointed in the Articles of Co-Partnership as

managing partner. As such manager in good faith:
A. His power is revocable even without consent
B. His power can be revocable at any time even without just cause provided
C. He may execute all acts of administration despite the opposition of B and C
D. He can be removed for valid cause even without the vote of the partners owning the
controlling interest
39. In the ABC Partnership, A and B contributed P20,000 each and C , his services. After
paying all the creditors of the partnership, only P18,000 in cash remains. In the absence
of
terms to the contrary, the share of C is equal to:
A. P6,000
B. The share of A
C. The share of B
D. Nothing
40 . X and Y established a partnership by contributing, each at P50,000. Z, a third party

allowed
his name to be included in the firm name of the partnership. The partnership was
insolvent
and after exhausting all the remaining asset, there was left a liability to third persons the
amount of P30,000. The creditors can compel:
A. Z to pay P30,000 remaining liability
B. X, Y and Z to pay P10,000 each
C. X or Y to pay P30,000 remaining liability
D. X and Y to pay P15,000 each
41. W, X, Y and Z formed a partnership. W, X and Y are general partners and contributed
P50,000 each while Z, an industrial partner contributed his services only. All the partners
signed an agreement stipulating that the liability of W is limited to its contribution After
all
the assets of the partnership were exhausted there remains an unpaid liability of P40,000.
The creditors of the partnership can compel:
A. X and Y to pay the P40,000
B. X, Y and Z to pay the P40,000
C. W, X, Y and Z to pay P10,000 each and W and Z can demand reimbursement
from X and Y.
D. X and Y to pay P40,000
42. A partner in a partnership who is not really a partner, not being a party to the partnership
agreement, but is made liable as a partner for the protection of innocent third persons is
known as
A. Secret partner
B. Dormant partner
C. Nominal partner or partner by estoppel
D. Answer not given
43. A and B are capitalist partners, with C as industrial partner. A and B contributed P15,000
each to the capital of the partnership. A contractual liability of P40,000 was incurred by
the
partnership in favor of X. The capital assets of P30,000 shall first be exhausted thereby
leaving an unsatisfied liability of P10,000. X can recover the amount from:
A. A and B only
B. A, B and C
C. A, B and C and C can recover for reimbursement from A and B
D. Answer not given
44. A, B and C are partners engaged in a retail business. Their contribution is P20,000 each.
D is
admitted as a new partner with a contribution of P8,000. At the time of his admission, the
partnership has an outstanding obligation to E in the amount of P80,000. In this case:
A. D is not liable to E for this obligation
B. D is liable to E for this obligation so that amounting to P68,000 will be exhausted
leaving a balance of P12,000. Only A, B and C shall be liable jointly or pro-rata,
out of their separate property.
C. D is liable to E for this obligation so that after the assets of the partnership will be
exhausted, leaving a balance of P12,000, all the partners shall be liable jointly or pro-
rata, out of their separate property.
D. Answer not given.
45. A, B and C are general partners in ABC Partnership. D is a debtor to the partnership in
the
amount of P15,000. A received from Debtor D the sum of P5,000 and issued a receipt
identifying the amount as his share. Then D became insolvent, B and C cannot collect the
P10,000.
A. A cannot be compelled to share the P5,000 with B and C
B. B and C can charge the capital of A with their share of the P5,000
C. A can be compelled to share B and C the P5,000
D. B and C automatically sue D to collect the P10,000
46. M and O are partners of M & O Partnership. M is the managing partner. N owes M
P10,000
and M & O partnership P30,000. The obligations of N are both due. M collected from N
the
debt of N to M in the amount of P10,000 and issued a receipt in the name of M. To which
obligation will the P10,000 be applied?
A. The whole of the P10,000 be applied to debt of N to M
B. The P10,000 be applied to debt of N to M and to the partnership
C. P5,000 each of debt of N to M and to the partnership
D. P2,500 to debt of N to M and P7,500 debt of N to the partnership
47. A, B and C are partners in D-3 Partnership. On April 29,2010, partner C died. Not
knowing
that C died, on May 1, 2010, A contracted a liability to D who also do not know the death
of
C. The partnership debt is in the amount of P30,000, he can collect
A. P30,000 from A
B. P15,000 from A and P15,000 from B
C. P10,000 from estate of C; P10,000 from A ; P10,000 from B
D. P20,000 from A and P10,000 from B
48. This the order of preference in the liquidation of a general partnership:

A. Outside creditors; Partner as creditors; Partners capital; Partners profit
B. Partner as creditors; Outside creditors; Partners capital; Partners profit
C. Partners capital; Outside creditors; Partner as creditors; Partners profit
D. Outside creditors; Partner capital; Partners profit; Partners as creditors
49. R, S and T are partners. T is the industrial partner who in addition to his services, he also
contributed capital to the partnership. There is no stipulation as to sharing of profits and
losses. The partnership realized profits of P21,000. The share of T in the profits:
A. R and will determine T’s share I, in the profits
B. T’s share is P7,000
C. Pro-rata to his contributed capital
D. Nothing, because he is an industrial partner
50. W, X, Y and Z are partners. They contributed capital as follows: W, P50,000; X,

P30,000;
Y, P20,000 and Z, is an industrial partner, his services. The partnership’s obligation to
outsiders exceed the total net assets by P18,000. Who and by how much will the partners
be
liable for the payment of the P18,000?
W X Y Z
A. P9,000 P5,400 P3,600 0
B. P4,500 P4,500 P4,500 P4,500
C. P6,000 P6,000 P6,000 P6,000
D. P4,500 P2,700 P1,800 P9,000
51. Which of the following is a characteristic of partnership as a contract?
A. Formal
B. Innominate
C. Gratuitous
D. Preparatory
52. One who takes active part in the business, but is not known to be a partner by outside
parties
is:
A. Silent partner
B. Dormant partner
C. Nominal partner
D. Secret partner
53. Can the partners stipulate that the newly admitted partner shall not be held liable for the
obligations of the partnership arising before his admission? Which of the following
statement is not correct?
A. No, because the newly admitted partner should be deemed to have assumed all the
debts of the partnership upon his voluntary participation in the partnership.
B. No, because newly admitted partner is liable with respect to his capital contribution
which forms part of the partnership
C. No, because the third person are always protected by law.
D. No, because the subject of the stipulation is that the liability of the new partner
should not be satisfied out of the partnership property.
54. I. The arrival of the term of a partnership with a fixed term or period shall not
dissolve the
partnership if the partners continue with the business of the partnership but such
partnership may be terminated anytime dependent on the will of the continuing
partners.
II. The general rule is that the loss of the specific thing contributed to the partnership
when
only the use of the thing is contributed by the partner and such thing after its
transfer to
the partnership which used the same or sometime was subsequently lost, the
partnership
is not dissolved.
A. True; False
B. True; True
C. False; False
D. False; True
55. May contribute money, property or industry to the common fund:

A. General partner
B. Industrial partner
C. Limited partner
D. Managing partner
56. A limited partner who takes active part in the management of the firm becomes:
A. A managing partner
B. Liable as a general partner
C. A general partner
D. A general partner and a limited partner at the same time
57. Which of the following statements is not correct?

A. A general partner in a limited partnership manages the business of the
partnership but cannot perform acts of ownership without the consent of the
limited partners
B. Valid contributions of a limited partner are money and property but not services.
C. Additional limited partners may be admitted into the limited partnership with the
consent of all the partners.
D. A person who is both a general partner and a limited partner is deemed a limited
partner only with respect to the return of his contribution.
58. A is the managing partner of A and Company. X is indebted to A for P20,000 and to the
partnership for P60,000. When both debts mature, X pays A P20,000 and the latter issues
a
receipt for his personal credit. The payment for P20,000 shall be applied:
A. ¼ in favor of A and ¾ in favor of the partnership
B. To the whole debt owing to A
C. ½ in favor of A and ½ in favor of the partnership
D. To the debt owing to the partnership
59. Which of the following is an essential element of partnership?

A. There must be a contribution of money, property, or industry to a common fund.
B. It must an association for profit with the intention to divide the profits among
themselves.
C. There must be a valid and voluntary agreement.
D. All of the above.
60. A and B are partners. On June 15, 2009 when the total obligation of the partnership
totaled
P80,000. C was admitted as new partner. At the time C’s admission, the partnership
creditors were M for P50,000 and N for P30,000. After June 15, the partnership borrowed
from O P20,000 and P40,000 from P. On December 15, 2009, the partnership became
insolvent leaving an obligation totaling P140,000 and partnership assets amounting to
P30,000. The creditors are going after the separate properties of the partners to satisfy
their
remaining claims. How are the creditors’ claims satisfied?
Answer 1 - M and N can go after the separate properties of A and B but C’s separates
properties are not answerable to their claims.
Answer 2 – O and P can go after the separate properties of A, B and C.
A. Both answers are wrong

B. Answer 2 is wrong but answer 1 is correct
C. Both answers are correct
D. Answer 2 is correct but answer 1 is wrong
61. A and B are capitalist partners with C as industrial partner. A and B contributed P20,000
each to the capital of the partnership. A contractual liability of P50,000 was incurred by
the
partnership in favor of X. The assets of the partnership had been exhausted still leaving
an
unpaid liability of P10,000. X can recover the amount from:
A. A, B and C and C can recover by way of reimbursement from A and B unless
stipulated otherwise.
B. A and B only
C. C only
D. A, B and C and C has no right for reimbursement from A and B unless expressly
stipulated.
62. Which of the following liabilities of the partnership shall rank first in the order of
payment?
A. Those owing to creditors other than partners
B. Those owing to partners in respect to profits
C. Those owing to partners in respect to capital
D. Those owing to partners other than for capital and profits
63. I. The contribution of a limited partner may be cash, property or service.

II. A limited partner who takes part in the management of the business of the
partnership is
not a general partner but he shall be liable as a general partner.
A. True; True
B. True; False
C. False; False
D. False; True
64. I. A person may be a general and a limited partner in the same partnership at the same
time.
II. A person admitted as a partner into an existing partnership is not liable for partnership
obligations existing before his admission.
A. True; True
B. True; False
C. False; False
D. False; True
65. I. A partner cannot assign his interest in the partnership to a third person without the
consent of the other partners.
II. A partner’s interest in the partnership is his personal property.
A. True; True
B. True; False
C. False; False
D. False; True
66. I. The creditor of each partner shall be preferred to those of the partnership as regards the
partner’s separate property.
II. An industrial partner is exempted from losses but not from partnership liabilities
A. True; True
B. True; False
C. False; False
D. False; True
67. I. An industrial partner with the consent of the other partners can engage in any business
for his own account.
II. An industrial partner is not a general partner.
A. True; True
B. True; False
C. False; False
D. False; True
68. I. A general partner not a managing partner can engage in a business different from the
business of the partnership for his own account without the consent of the other
partners.
II. A general partnership can be formed orally.
A. True; True
B. True; False
C. False; False
D. False; True
69. I. All the partners in a general partnership are considered managing partners if thee is no
stipulation as to who shall act as managing partner.
II. A partner is liable to the partnership for whatever property he agrees to contribute
without necessity of demand.
A. True; True
B. True; False
C. False; False
D. False; True
70. I. If the capital contribution of the partners amount to P3,000 or more the contract of
partnership must be in public a public document, otherwise the contract is void.
II. A contract of partnership is void, whenever immovable property is contributed thereto
if
an inventory of said property is not made, signed by the parties and attached to the
public
document.
A. True; True
B. True; False
C. False; False
D. False; True
71. I. Dissolution does not terminate the partnership.

II. Insanity of a general partner in a limited partnership dissolves the partnership.
A. True; True
B. True; False
C. False; False
D. False; True
72. I. A general partner in a limited partnership has all the rights, powers and liabilities as
though the partnership is not limited.
II. A general partner is personally liable for partnership obligations while a limited
partner is
not liable for partnership liabilities.
A. True; True
B. True; False
C. False; False
D. False; True
73. I. A limited partner is simply a contributor to the partnership.

II. A limited partner has a right to the return of his contribution upon the dissolution of
the
partnership.
A. True; True
B. True; False
C. False; False
D. False; True
CORPORATION
1. The nationality of a corporation is determined by the law of its domicile or place of

principal business. The test is known as:
A. The control theory
B. The full absorption theory
C. The incorporation theory
D. The management theory
2. This is unincorporated business organization created by an instrument by which property

is to be held and managed by trustees for the benefit and profit of such person as may be
or become the holders of transferable certificates evidencing the beneficial interests in the
estate
A. Business Trust
B. Close Corporation
C. Condominium Corporation
D. Joint Stock Company
3. When preferred shares are issued by a corporation with a fixed annual interest on the face
thereof, the effect is:
A. The contract of subscription is between the corporation and the stockholder subsists
B. The stockholder is a plain investor who may rise or fall with the financial success
or failure of the corporation.
C. The stockholder is a creditor of the corporation
D. The shares of stock are negotiable instruments under the Negotiable Instruments Law
4. This class of shares are those issued for no consideration or inadequate consideration:
A. Bonus shares
B. Deferred shares or founders shares
C. Over issued shares
D. Watered shares
5. The power to deny pre-emptive right as a corporate power is classified as an:

A. Express power
B. Incidental power
C. Implied power
D. Discretionary power
6. The power to invest corporate funds in another corporation or business or for any other
purpose as a corporate power is classified as an:
A. Express power
B. Incidental power
C. Implied power
7. The power of conducting commercial contracts (to increase the business) and sponsoring
athletic contest for employees to keep them in good health or maintaining a hospital for
the employees is an example of:
A. Express power
B. Incidental power
C. Implied power
8. To establish pension, retirement, and other plans for the benefits of its directors, trustees,
officers and employees is an example of:
A. Express power
B. Incidental power
C. Implied power
9. A religious order is considered as a:

A. Corporation by prescription
B. Public corporation
C. Corporation sole
D. None of them.
10. Place of residence of a corporation shall be its:

A. Place of incorporation
B. Place of residence of majority of stockholders
C. Place where the principal office is established
D. None of them
11. This shall constitute a quorum for transaction of corporate business:

A. Majority of the members
B. Majority of the stockholders
C. Majority of the directors
D. All of them
12. Juridical personality of a corporation begins:

A. From the date of issuance of certificate of incorporation
B. By agreement of the parties
C. Acknowledgement before a Notary Public
D. None of them
13. Right which the existing stockholders of corporation cannot be deprived without the
consent is their right to subscribe or to purchase new stock issued by the corporation; or
unissued original stock, in proportion to their holdings before it can be offered to others:
A. Right of redemption
B. Pre-emptive right
C. Right to purchase
D. None of them
14. A private corporation organized under the corporation law commences to have corporate
existence and juridical personality and is deemed incorporated from:
A. The date when the articles of incorporation is signed by the incorporators
B. When the articles of incorporation and by laws are presented and received by the
Securities and Exchange Commission and the filing fee is paid
C. From the date the SEC issues a certificate of incorporation under its official seal
D. When the Articles of Incorporation is notarized by a Notary Public
15. The following are the qualifications of incorporators . Choose the exemption:
A. Majority of whom must be Filipinos
B. Majority of whom are residents of the Philippines
C. All are of legal age
D. Natural persons, not less than five but not more than 15.
16. These are the shares of stock which have been issued and fully paid for, but subsequently
reacquired by the issuing corporation:
A. Redeemable shares
B. Treasury shares
C. Founder’s share
D. None of the three
17. In the amendment of the Articles of Incorporation of a stock corporation, the following is
necessary:
A. Amendment by the majority vote of the Board of Directors plus a vote or written
assent of the stockholders representing at lest 2/3 of the outstanding capital
stock.
B. Amendment by a vote of 2/3 of the stockholders
C. Amendment by the majority vote of the Board of Directors
D. None of the three
18. Corporation governed by special laws, aside from the requirements specified under the
corporation laws, in order that their articles of incorporation may be approved or
accepted, must present before the Security and Exchange Commission:
A. A favorable recommendation from the Ministry of Finance
B. A copy of previous income tax return and a statement of assets, liabilities and net
worth
C. A favorable recommendation of the appropriate government agency to the effect
that such articles or amendment is in accordance with law.
D. An undertaking to change the name of the corporation if found that there is already
registered with the SEC a name or a name similar to the name of this corporation
19. The following are some of the requisites of a de facto corporation. Choose the exception:
A. Valid law under which it is incorporated
B. Attempt to incorporate
C. Assumption of corporation power
20. The following are the qualifications of director in a corporation. Choose the exemption:
A. Majority of the directors must be Filipino citizens
B. He must own at least one share of the stock in his name
C. Majority of the corporate directors must be residents of the Philippines
D. He must not have convicted by final judgment of an offense carrying an
imprisonment exceeding 6 years or an offense constituting a violation of the
Corporation Code
21. The secretary of a stock corporation shall be:

A. A director of the corporation
B. An incorporator of the corporation
C. A resident and citizen of the Philippines
D. Of legal age and citizen of the Philippines
22. Directors or trustees who willfully and knowingly vote or assent to patently unlawful act
of the corporation or who are guilty of gross negligence or had faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict with
their duty shall be liable:
A. As trustee for the corporation
B. Criminally for violation of the corporation code
C. Jointly and severally for the damages suffered by the corporation
23. The following are methods of dissolving a corporation:

A. Expiration of the term
B. Failure to organize and commence business within two (2) years from date of
issuance of certificate of incorporation
C. Shortening of the corporate term
D. All of the above
24. Three of the following enumeration are not authorized to issue no par value shares of
stock. Which is the exception?
A. Insurance companies
B. Industrial companies
C. Public utilities
D. Trust companies
25. Any stockholder of a corporation shall have the right to dissent and demand payment of
the fair value of his share/s in three of the following corporate acts. Which is the
exception?
A. In case of any amendment to the articles of incorporation which has the effect of
changing or restricting the rights of any stockholder or class of shares.
B. In case of merger or consolidation
C. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all
or substantially all of the corporate assets and property of the corporation.
D. In case of incurring, creating or increasing bonded indebtedness
26. The authorized capital stock of a proposed corporation is P100,000 divided into 1,000
shares with a par value of P100.00 each. The minimum amount of subscription that must
be paid is:
A. P8,750 or 87.5 shares C. P5,000 or 50 shares
B. P6,250 or 62.5 shares D. P7,500 or 75 shares
27. In the matter of management of the business affairs of a corporation, this is supreme:
A. Majority of the stockholders
B. 2/3 of the stockholders
C. Board of Directors
D. President of the corporation
28. This is the equitable right of stockholders to subscribe to newly issued shares of the
corporation in proportion to their present shares in order to maintain their equity in the
corporation.
A. Right of redemption
B. Concept of corporation entity
C. Right to sue and be sued
D. Pre-emptive right
29. This is a written acknowledgement of an interest of a stockholder in the corporation.

A. Proxy C. Certificate of Stock
B. Share of stock D. Capital Stock
30. These are the persons who sign the Articles of Incorporation, who may or may not be
subscribers of shares
A. Incorporators C. Directors
B. Trustees D. Promoters
31. Choose the minimum requirement of the Corporation Law to corporate formation:
Authorized Capital Subscribed Capital Paid-In Capital

A. P100,000 P20,000 P5,000
B. 100,000 20,000 4,000
C. 100,000 25,000 5,000
D. 100,000 25,000 6,250
32. They provide and regulate the internal matters of the corporation, such as calling the
Board of Directors and Stockholders meetings.
A. Board of Directors C. By-laws
B. Majority of Stockholders D. Articles of Incorporation
33. This is an authority to vote in a corporation stockholders meeting.

A. Proxy C. Certificate of stock
B. By-laws D. Share of stock
34. A gratuitous reissue of Treasury shares will result in:

A. Capital surplus C. Watered stock
B. Additional profit D. Stock dividend
35. Three (3) of the following are similarities between a partnership and a corporation.
Which is not?
A. The individuals composing both have title voice in the conduct of the business
B. Both have juridical personality separate and distinct from that of the individuals
composing them
C. Like a partnership, a corporation can act only through agents
D. Both are organizations composed of an aggregate if individuals
36. One of the following is the limitation on proxies. Which is?

A. Proxy acquires legal title to the shares of the stock
B. A proxy votes even in the presence of the stockholder
C. The proxy is voted only for the meeting for which it was intended
D. A proxy is revocable at any time
37. The number of the Board of Trustees in a non-stock corporation:

A. Shall not be less than five but not more than eleven
B. May be more than fifteen upon its organization
C. May be less than five upon its organization
D. Shall not be less than five but not more than fifteen
38. One of the following is a ground for the suspension or revocation of the certificate of
incorporation by the Securities and Exchange Commission.
A. If the corporation has commenced its business transactions and afterwards
ceased operation continuously for a period of at least five (5) years
B. If the corporation fails to commence and start to operate and the failure is due to
causes beyond the control of the Corporation
C. If the corporation does not formally commence its business transaction and
subsequently become continuously inoperative for a period of two (2) years
39. Right of the corporation to continue as a juridical entity for the term stated in the articles
of incorporation despite the death of any stockholder.
A. Juridical personality C. Right of succession
B. Pre-emptive right D. Right of existence
40. Original signatories in the articles of incorporation are called:
A. Corporators C. Stockholders
B. Promoters D. Incorporators
41. They regulate different internal matters of the corporation such as calling and defining
the conduct of the meeting of stockholders and directors.
A. Board of directors C. Articles of incorporation
B. By-laws D. Proxy
42. The document conferring authority to vote stock in a corporate meeting:

A. Power of attorney C. Capital stock
B. Shares of stock D. Proxy
43. The minimum requirement of Corporation Law to corporate formation.
Authorized Subscribed Capital Paid in Capital

A. P500,000 P100,000 P25,000
B. 500,000 125,000 31,250
C. 500,000 100,000 20,000
D. 500,000 125,000 25,000
44. Three (3) of the following are attributes of a corporation. Which is the exception?
A. An artificial being
B. Has the right of succession
C. Has powers, attributes and properties expressly authorized by law or incident to its
existence
D. Created by agreement of the incorporators
45. Three of the following are qualifications of the Board of Directors. Which is the
exception?
A. He must own at least one (1) share of the capital stock
B. At least majority of them are citizens of the Philippines
C. The shares owned must be recorded in the books of the corporation.
D. He must continuously own at least one )1) share of the stock of the corporation
46. The voting requirement to increase or decrease capital stock

A. Majority vote of the board of directors and consented by the stockholders
representing two-thirds (2/3) of the outstanding capital stock
B. Two-thirds (2/3) vote of the board of directors with the consent of majority of
outstanding capital stock
C. Majority vote of the board of directors and with consent if majority of the outstanding
capital stock
D. Majority vote of the board of directors and three-fourths (3/4) vote of the outstanding
capital stock
47. A dividend payable partly in cash and partly in stocks, as to class of dividend, is a :
A. Optional dividend C. Liquidation dividend
B. Property dividend D. Composite dividend
48. Bonds which are not secured by any specific mortgage lien of pledge or corporate
property but by the general corporation are:
A. Guaranteed bonds C. Income bonds
B. Debenture bonds D. Redeemable bonds
49. These are the rules and guidelines adopted by the stockholders of a corporation for the
internal government.
A. Rules and regulations C. Minutes of the meetings
B. Articles of Incorporation D. By-law
50. Which of these conditions comply with the minimum requirement of the law to corporate
formation?
Authorized Capital Subscribed Capital Paid In Capital

A. P100,000 P25,000 P12,500
B. 64,000 16,000 4,000
C. 200,000 50,000 10,000
D. 200,000 40,000 10,000
51. A distribution by a corporation of shares held by it in another corporation is:

A. Stock dividend
B. Sales of capital asset
C. Property dividend of actual distribution of corporate assets
D. Sale of treasury stock
52. Corporations organized by private persons performing public function and for profit to
private parties are:
A. Public corporations
B. Government controlled corporation
C. Quasi-public corporation
D. Private corporation
53. This is a document of a corporation acknowledging the interest of a stockholder in the

corporation’s assets.
A. Certificate of stock C. Share of stock
B. Capital stock D. Stockholder’s equity
54. In a corporation, any two (2) or more positions may be hels concurrently by the same
person, except that no one (1) person shall act as:
A. Chairman of the Board and President
B. Secretary and Treasurer
C. President and Secretary
D. Treasurer and Director
55. A corporation may invest its funds in any other corporation of business or any purpose
other than the primary purpose for which it was organized, only if:
A. There is majority vote of the Board of Directors and ratified by the stockholders
representing 2/3 of the outstanding capital stock
B. It is reasonably necessary to accomplish its secondary purpose, the approval of the
stockholders not necessary
C. There is a majority vote of the Board of Directors
D. There is majority vote of the outstanding capital stock
56. The following are advantages of no-par value share of stock. Which is the exception?
A. No-par value share allow flexibility in price
B. The stockholders of no-par value shares are relieved of personal liability for unpaid
stock subscription
C. It allows the issue of stock in exchange of property
D. No-par value shares afford a possible remedy or relief from the evil of over-
capitalization and stock watering
57. The right to vote at meetings, the right to receive dividends and the right to receive copies
of financial statements is known as:
A. Right of existence C. Pre-emptive right
B. Directors right D. Stockholder’s right
58. The Garcia Realty Development Corporation has a capital stock of P1,000,000 divided
into 10,000 shares with a par value of p100 each. 5,000 shares are ordinary share and
5,000 shares are 10% preference share. In 2008 there was no declared dividends but in
2009 dividends in the amount of P200,000 were declared. The holders of the preference
share are entitled to receive:
A. P50,000 if cumulative, non-participating
B. P125,000 in non-cumulative, participating
C. P125,000 if cumulative, participating
D. P100,000 if non-cumulative, non-participating
59. Persons who compose the corporation whether as stockholder in a stock corporation or
member in a non-stock corporation, are called:
A. Incorporators C. Promoters
B. Subscribers D. Corporators
60. In three of the following, these persons qualify to be incorporators. Which is the
exception?
A. Must have paid at least 25% of their subscription
B. Natural persons not less than five, not more than 15
C. Majority are residents of the Philippines
D. Need not be citizens of the Philippines
61. Dividends are declared and paid out of the

A. Paid-up capital
B. Capital stock
C. Net income of the current year
D. Unrestricted retained earnings
62. The following defect will preclude the creation of even a de facto corporation:
A. The name of the corporation closely resembles that of a pre-existing corporation that
it will tend to deceive the public
B. The incorporators or a certain number of them are not residents of the Philippines
C. Lack of certificate of incorporation from the Securities and Exchange
Commission
D. Answer not given
63. The distinction between a proxy and a voting trust is that in a voting trust:
A. The trust has a legal title to the shares of the transferring stockholder
B. Unless coupled with interest, is revocable at any time
C. Is not limited to any particular meeting
D. Answer not given
64. The distinction between subscription of shares from purchase of shares is that in
subscription of shares:
A. It is an independent agreement between the individual and the corporation to buy
shares of stock from it at a stipulated price
B. It takes place before or after incorporation and is generally paid in installment
or upon call.
C. In case of insolvency of the corporation, the subscription price cannot be enforced on
the theory that the corporation can no longer perform its obligation to deliver the
certificate of stock
D. Answer not given
65. A corporation created in strict or substantial conformity with the statutory requirements
for incorporation and whose right to exist as a corporation cannot be successfully
attacked even in a direct proceeding for that purpose by the State is known as:
A. De jure corporation C. De facto corporation
B. Corporation by estoppels D. Answer not given
66. One of the characteristics of treasury shares is that:

A. They have the status of outstanding shares
B. They may not be reissued or sold again
C. They participate neither in dividends nor in the meetings of the corporation as
voting stocks
D. Answer not given
67. Which of the following will not qualify as incorporator of a corporation?

A. A minor who is emancipated by voluntary concession or marriage
B. A married woman without the consent of her husband where the property involved in
the act of incorporation is paraphernal
C. A corporation
D. Answer not given
68. The articles of incorporation is required to state the names, nationalities and residences of
persons who act as directors or trustees are duly elected and qualified. This requirement
is intended to provide a basis by which the Securities and Exchange Commission could
determine whether the Articles of Incorporation has complied with the requirement that:
A. At least a majority of the directors or trustees are residents of the Philippines
B. All the directors or trustees are residents of the Philippines
C. 2/3 of the directors or trustees are residents of the Philippines
D. Answer not given
69. The power to revoke corporate franchise for causes specified by law is vested only in the:
A. President of the Republic of the Philippines
B. Securities and Exchange Commission
C. Court of component jurisdiction
D. Answer not given
70. Corporate dissolution may take place by voluntary inaction which will in the cessation of
its corporate powers and the corporation shall be deemed dissolved. Such dissolution may
result from:
A. Inaction by the corporation through its failure to formally organize and
commence with the transaction of its businesses or the construction of its works
within two years from the date of its incorporation
B. Failure of the corporation to submit the annual reports required by the Securities and
Exchange Commission for a period of five years
C. Merger or consolidation with respect to absorbed corporation
D. Answer not given
71. Watered stocks are shares of stock issued by a corporation for a consideration in any
form other than cash valued in excess of its fair value. In this regard:
A. The issue by itself is void
B. The agreement that it shall be paid less than its par or issued value is illegal and
void and can not be enforced
C. The subscriber and purchaser shall not be liable for the full par value of the shares
D. Answer not given
72. The voting proportion required to enable a corporation to invest its funds in any other
corporation on business of for any purpose other than its primary purpose:
A. 2/3 vote of the board of directors and ratified by majority of the outstanding capital
stock
B. Majority vote of the board of directors and ratified by majority of the stockholders
C. Majority of the board of directors and ratifies by 2/3 of the outstanding stockholders
D. Majority of the board of directors and ratified by 2/3 of the outstanding capital
stock
73. An officer of a corporation may hold two or more positions in the corporation but not as:
A. Chairman of the Board and President
B. President and Treasurer
C. Secretary and Treasurer
D. Vice President and Secretary
74. The right of a corporation to exist as juridical person during its term as stated in its
Articles of Incorporation despite the death of any of its stockholders is:
A. Right of existence C. Right of succession
B. Right of redemption D. Pre-emptive right
75. The interest or right of the owner in the corporation’s profits or in the net assets of the
corporation on dissolution is:
A. Dividend C. Certificate of stock
B. Share of stock D. Capital
76. Requirement to effect the amendment of by-laws of a corporation.

A. Majority vote of the board of Directors
B. Vote of 2/3 of the outstanding capital stock
C. Majority vote of the Board of Directors and majority vote of the outstanding
capital stock
D. Majority vote of the outstanding capital stock
77. The nationality of the corporation is determined by the place of the controlling
stockholders. This test is:
A. Control test C. Incorporation test
B. Domicile test D. Capitalalization test
78. The following person can not be incorporator of a corporation.

A. A resident alien
B. A married woman without the consent of the husband even if the payment of her
shares is her paraphernal property
C. A subscriber on the share of the corporation who pays less than 25% of his
subscription
D. A corporation organized under the laws of the Philippines
79. One of the following is not required and does not form part of the three-fold duty of
directors of a corporation. Which one?
A. Duty of diligence C. Duty of obedience
B. Duty of loyalty D. Duty of efficiency
80. These do not form part of the outstanding capital stock:

A. Bonus shares C. Founder’s shares
B. Treasury shares D. Redeemable shares
81. One of the following does not require stockholder’s approval:

A. Merger or consolidation
B. Change of corporate name
C. Investment of corporate funds for a purpose outside of the main purpose of the
corporation.
D. Declaration of cash dividend
82. Under this test, a corporation is a national of the country pursuant to whose laws it is
incorporated:
A. Nationality test C. Control test
B. Capitalization test D. Incorporation test
83. Which of the following statements is not correct?

A. In the delinquency sale at public auction, the highest bidder is one who offers to
pay the full amount of the balance of the subscription plus interest and expenses
of the sale for the highest number of shares.
B. The sale of delinquent stock at public auction can be stopped if the Board of Directors
stops the sale for valid reason.
C. Payment of unpaid subscription may not be enforced by applying cash dividends to
delinquent stockholders.
D. The Board of Directors shall order, by resolution, the sale of delinquent stock
specifying the amount due plus accrued interest, the place, time and date of the sale
84. A stockholder who does not approve the action taken by the Board of Directors in
proposing to amend the Articles of Incorporation is allowed to withdraw from the
corporation in one of the following instances:
A. Merger or consolidation
B. Investment of corporate funds in another corporation
C. Creating, incurring, increasing or decreasing any bonded indebtedness
D. Shortening or prolonging corporate existence
85. I. Membership in a non-stock corporation and all rights arising therefrom cannot be
transferred even if provided in the articles of incorporation or by laws because
membership and the rights arising therefrom are personal and non-transferable.
II. Treasury stocks sold for less than par or issued value are considered “watered stock”
and as
such are prohibited by law. Which is correct?
A. True; False
B. Both statements are false
C. False; True
D. Both statements are true.
TEST BANK
LAW ON PARTNERSHIP & CORPORATION
fr: cpar
PARTNERSHIP
1. One of the following is not a characteristic of a contract of partnership
A. Real, in that the partners must deliver their contributions in order for the
partnership contract to be perfected.
B. Principal, because it can stand by itself.
C. Preparatory, because it is a means by which other contracts will be entered into.
D. Onerous, because the parties contribute money, property or industry to the common
fund.
2. One of the following is not a requisite of partnership. Which is it?

A. There must be a valid contract.
B. There must be a mutual contribution of money, property or industry to a common
fund.
C. It is established for the common benefit of the partners which is to obtain profits and
divide the same among themselves.
D. The articles are kept secret among the members.
3. The minimum capital in money or property except when immovable property or real
rights
thereto are contributed, that will require the contract of partnership to be in public
instrument
and be registered with SEC.
A. P 5,000
B. P10,000
C. P 3,000
D. P30,000
4. X and Y entered into a universal partnership of all present property. At the time of their
agreement. X had a four-door apartment which he inherited from his father 3 years
earlier. Y,
on the other hand, had a fishpond which he acquired by dacion en pago from Z. During
the
first year of the partnership, rentals collected on the four-door apartment amounted to
P480,000; while fish harvested from the fishpond were sold for P300,000. During the
same
period. B received by way of donation a vacant lot from an uncle. The partners had an
stipulation that future property shall belong to the partnership. Which of the following
does
not belong to the common fund of the partnership?
A. Fish pond
B. Rental of P480,000
C. Apartment
D. Vacant lot
5. D and E entered into a universal partnership of profits. At the time of execution of the
articles
of partnership, D had a two-door apartment which he inherited from his father 3 years
earlier.
E on the other hand, had fleet of taxis which he purchased two years before. In the first
year
of the partnership, D earned P500,000 as radio talent while E won P1,000,000 in the
lotto.
During the same period, rentals of P120,000 were collected from the apartment, while
fare
revenues of P200,000 were realized from the operation of the fleet of taxis. Which of the
following belongs to the partnership?
A. Two-door apartment
B. Lotto winnings of P1,000,000
C. Salary of P500,000
D. Fleet of taxis
6. A partnership formed for the exercised of a profession which is duly registered is an

example
of
A. Universal partnership of profits
B. Universal partnership of all present property
C. Particular partnership
D. Partnership by estoppel
7. A, B and C are partners in ABC Enterprises. Not having established yet their credit
standing,
the three partners requested D, a well known businessman, to help them negotiate a loan
from E, a money lender. With the consent of A, B and C, D represented himself as a
partner
of ABC Enterprises. Thereafter, E granted a loan of P150,000 to ABC enterprises. What
kind
of partner is D?
A. Managing partner
B. Liquidating partner
C. Ostensible partner
D. Partner by estoppel
8. Using the preceding number, assuming ABC Enterprises was unable to pay the loan on
due
date at which time the assets of the partnership amounted to P120,000. From whom may
E
collect the payment?
A. D only for the whole amount of P120,000.
B. A, B and C who are liable jointly for P50,000 each.
C. ABC Enterprises for its assets of P120,000; hereafter, A, B and C from their separate
assets at P10,000 each.
D. ABC Enterprises for its assets of P120,000 thereafter, A, B, C and D from their
separate assets at P7,500 each.
9. Which of the following losses will not cause the dissolution of a partnership?
A. Loss before delivery of a specific thing which a partner had promised to contribute to
the partnership.
B. Loss of a specific thing after its delivery to and acquisition of its ownership by
the partnership from the partner who contributed the same.
C. Loss after delivery of a specific thing where the partner contributed only its use and
enjoyment where such partner reserved the ownership thereof.
D. Loss before delivery of a specific thing where the partner promised to contribute only
its use and enjoyment, reserving the ownership thereof.
10. A partner can engage in business for himself without the consent of his co-partners if he
is
A. A capitalist partner whether or not the business he will engage in is of the same kind
as or different from the partnership business.
B. An industrial partner whether or not the business he will engage in is of the same kind
as or different from the partnership business.
C. A capitalist partner and the business he will engage in is of a kind different from
the partnership business.
D. An industrial partner and the business he will engage in is of a kind different from the
11. The partnership will bear the risk of loss of three of the following things, except
A. Things contributed to be sold.
B. Fungible things or those that cannot be kept without deteriorating.
C. Non-fungible things contributed so that only their use and fruits will be for the
common benefit.
D. Things brought and appraised in the inventory.
12. A partner’s interest in the partnership is his share of the profits and surplus which he may
assign to a third person. Which of the following statements concerning such right is
correct?
A. The conveyance of a partner’s interest will cause the dissolution of the partnership.
B. The assignee becomes a partner.
C. The assignee has the right to interfere in the management of the partnership business.
D. The assignee has the right to receive the profits which the assigning partner
would otherwise be entitled thereto.
13. Partnership as distinguished from corporation

A. Acquires juridical personality upon approval by the SEC and the issuance of
certificate.
B. Has limited liability.
C. Created by operation of law.
D. No power of succession.
14. Essential elements or feature of a partnership, except

A. Must have a lawful object or purpose
B. There must be a contribution of money, property or industry to a common fund
C. With intention to divide and contribute whatever profits they make to other
people.
D. Must be established for the common benefit or interest of the partners.
15. Partner who contributes money and/ or property, except

A. General
B. Capitalist
C. Industrial
D. Managing
16. Partner who contributes industry or labor

A. General
B. Capitalist
C. Industrial
D. Managing
17. Partner who contributes both capital and industry

A. General
B. Limited
C. Managing
D. Capitalist-industrial
18. Partner who is liable beyond the extent of his contribution
A. General
B. Limited
C. Industrial
D. Silent
19. Partner who is liable only to the extent of his contribution

A. Limited
B. General
C. Industrial
D. Managing
20. Partner who manages actively the firm’s affairs

A. Silent
B. Liquidating
C. Managing
D. Dormant
21. Partner who does not participate in the management though he shares in the profits or
losses.
A. Liquidating
B. Nominal
C. Ostensible
D. Silent
22. Partner who winds up the affairs of the firm after it has been dissolved
A. Liquidating
B. Managing
C. Industrial
D. Capitalist
23. Partner whose connection with the firm is known to the public
A. Ostensible
B. Secret
C. Silent
D. Nominal
24. Partner whose connection with the firm is concealed or kept secret
A. Ostensible
B. Secret
C. Silent
D. Nominal
25. Partner who is both a secret and silent partner

A. Nominal
B. Ostensible
C. Limited
D. Dormant
26. Partner who is not really a partner but who may become liable as such insofar as third
persons are concerned
A. Nominal
B. Ostensible
C. Silent
D. Secret
27. May contribute money, property or industry to the common fund
A. Limited partner
B. General partner
C. Both limited and general partners
D. Dormant partner
28. May be required to make additional contribution in case of imminent loss:

A. Capitalist partner
B. Limited partner
C. Industrial partner
D. Choices A, B and C
29. A, B and C are partners each contributing P10,000. The firm’s indebtedness amounts to
P90,000. It was stipulated that A would be exempted from liability. Assuming that the
capital
of P30,000 is still in the firm, which of the following is not correct?
A. The creditors may get the P30,000 and still collect each P20,000 from A, B and C.
B. A can recover P10,000 each from B and C should he (A) be required to pay the
creditors.
C. A cannot recover his original capital of P10,000.
D. The creditors can recover P45,000 each from B and C.
30. A newly admitted general partner is liable to creditors existing at the time of his
admission
and his liability is
A. Up to his capital contribution only if there is stipulation.
B. Up to his separate property even there is no stipulation.
C. Up to his capital contribution even if there is stipulation.
D. Up to his separate property only if there is stipulation.
31. Using the preceding number, but the obligations were contracted after his admission,
which of the following is correct?
A. He is liable to the creditors before and after his admission up to his separate property.
B. He is liable to the creditors before and after his admission only up to his capital
contribution.
C. He is liable to the creditors before and after his admission up to his capital
contribution and to the creditors after his admission up to his separate
property..
D. He is not liable to creditors existing before his admission.
32. A and B are partners engaged in the real estate business. A learned that C was interested
in buying a certain parcel of land owned by the partnership, even for a higher price.
Without informing B of C’s offer A was able to convince B to sell to him (A) his (B’s)
share in the partnership. Then A sold the land at a big profit. Which of the following is
correct?
A. A is liable to B for the latter’s share in the profit.
B. C is liable to B for the latter’s share in the profit.
C. A new partnership is formed between A and C.
D. The sale of the land to C is void since it was without the knowledge of B.
33. 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.
34. The following persons are disqualified to form a universal partnership, except
A. Husband and wife
B. Brother and sister
C. Those guilty of adultery and concubinage
D. Those guilty of the same criminal offense; if the partnership is entered into in
consideration of the same.
35. 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.
36. A, a managing partner is B’s creditor to the amount of P1,000 already demandable. B
also owes the partnership P1,000, also demandable. A collects P1,000 from B. One is not
correct.
A. If A gives a receipt for the partnership it is the partnership’s credit that has been
collected.
B. If A gives a receipt for his own credit, it is A’s credit that has been collected.
C. If A gives a receipt for his own credit, P500 will be given to him, P500 to the
partnership.
D. B may decide that he is paying only A’s credit if the personal credit of A is more
onerous to B.
37. The remedy of capitalist partners against an industrial partner who engaged in a business
for himself without the expressed permission from the partnership is:
A. To compel him to sell his interest to the said capitalist partners.
B. To exclude him from sharing in the profits of the partnership.
C. To remove him as manager if he is appointed as manger of the partnership.
D. To expel him from the partnership and claim for damages.
38. A partnership which comprises all the profits that the partners may acquire by their work
or industry during the existence of the partnership is called:
A. Universal partnership of all present property
B. Universal partnership of profits
D. Partnership at will
39. A partnership whereby the partners contribute to a common fund all the property actually
belonging to them at the time of the constitution of the partnership, with the intention of
dividing the same among themselves, as well as the profits which they may acquire
therewith is:
40. A partnership without a definite period of existence and which can be dissolved at any
time by any of the partners is called:
41. A, B and C, capitalist partners, each contributed P10,000 and D, the industrial partner
contributed his services. Suppose X, is the creditor of the firm amounting to P90,000.
After getting the P30,000 capital assets of the partnership, which is correct?
A. X can recover P20,000 each from A, B and C only.
B. X can recover P60,000 from either A, B and C only.
C. X can recover P15,000 each from A, B, C and D.
D. X can recover P15,000 each from A, B and C but D is exempt because he is an
industrial partner.
42. A, B and C are partners. D is admitted as a new partner. Will D be liable for partnership
obligations contracted prior to his admission to the partnership?
A. No, only for those contracted after his admission.
B. Yes, and his liability would extend to his own individual property.
C. Yes, but his liability will extend only to his share in the partnership property and
not to his own individual property.
D. Yes, as if he had been an original partner.
43. A partner who has all the rights, powers and subject to all restrictions of a general partner
but whose liability is, among themselves, limited to his capital contribution is:
A. General partner
B. Limited partner
C. General-limited partner
D. Dormant partner
44. Bears the risk of things contributed to the partnership:

A. General partner
B. Limited partner
C. Partner contributing usufructuary rights over fungible things
D. Partner contributing usufructuary rights over non-fungible things
45. A, B and C, capitalist partners, each contributed P10,000. After exhausting the assets of
the firm,
the firm’s indebtedness amounts to P90,000. It was stipulated that A would be exempted
from
liability. Which is correct?
A. A may recover his original capital of P10,000.
B. The creditors may collect P30,000 each from A, B and C.
C. A can recover P20,000 each from B and C should he be required to pay the creditors.
D. The creditors can recover P45,000 each from B and C.
46. Instances when a partnership is unlawful, except

A. A partnership formed to furnish apartment houses which would be used or
prostitution
B. A partnership formed for the purpose of acquiring parcels of land
C. A partnership formed for gambling purposes.
D. A partnership formed to create illegal monopolies or combinations in restraint of
trade.
47. A and B orally agreed to form a partnership two years from today, each one to contribute
P1,000. If at the arrival of the period, one refuses to go ahead with the agreement, can the
other enforce the agreement?
A. Yes, because the partnership contract is not governed by the Statute of Frauds
B. Yes, because the prior agreement was voluntarily made.
C. No, because the agreement was merely oral and executor
D. No, since the agreement is to be enforced after one year from the making thereof, the
same should be in a public instrument to be enforceable.
48. Where at least one partner is a general partner and the rest are limited partners
A. General partnership
B. Partnership by estoppels
C. Partnership de facto
D. Limited partnership
49. Where all the partners are general partners

A. General partnership
B. Partnership by estoppels
C. Partnership de facto
D. Limited partnership
50. A and B are equal partners in AB Partnership by contributing P50,000 each on June 1,
2010. On July 1, 2010, the partnership contracted an obligation to pay Z the amount of
P180,000 on August 31, 2010. On August 10, 2010, C was admitted as a new partner. C
contributed P50,000. How will the obligation be paid?
A. A P60,000; B P60,000; C P60,000
B. A P90,000; B P90,000; C None
C. A P180,000 or B P180,000 and C P50,000
D. A P65,000; B P65,000; C P50,000
51. A, B and C are equal partners in ABC Partnership. On April 29, 2010, C died. Not
knowing that C is dead, on May 2, 2010, A contracted a liability to D who also did not
know about the death of C. The liability is P90,000. After D exhausted the net assets of
the partnership in the amount of P60,000, he can collect
A. P30,000 from A or P30,000 from B.
B. P15,000 from A and P15,000 from B.
C. P10,000 from the estate of C, P10,000 from A and P10,000 from B.
D. P30,000 from the estate of C or P30,000 from B or P30,000 from C.
52. A, B and C are partners. Their contributions are as follows: A, P60,000; B, P40,000 and
C, services. The partners agreed to divide profits and losses in the following proportions:
A, 35%; B, 25% and C 40%. If there is a loss of P10,000, how should the said loss be
shared by the partners?
A. A P6,000; B P4,000; C nothing
B. A P3,000; B P2,000; C P5,000
C. A P3,500; B P3,500; C P3,000
D. A P3,500; B P2,500; C P4,000
53. Using the preceding number, but the partners did not agree on how to divide profits and
losses. If
there is a loss of P10,000, how should the said loss be shared by the partners?
A. A P6,000; B P4,000; C nothing
B. A P3,000; B P2,000; C P5,000
C. A P3,500; B P3,500; C P3,000
D. A P3,500; B P2,500; C P4,000
54. When the manner of management has not been agreed upon, who shall mange the affairs
of the
partnership?
A. Capitalist partners
B. Industrial partners
C. Capitalist-industrialist partners
D. All of the partners
55. A, B and C are partners in a partnership business. A contributed P10,000, B contributed

P5,000 and C his services only. After payment of partnership debts, what remains of the
partnership assets is P6,000 only. In the absence of stipulation to the contrary, the share
of C will equal to:
A. That of A
B. P2,000
C. That of B
D. Nothing
56. A, B and C are partners in ABC Co. D owes the partnership P4,500. A, a partner,
received from D a share of P1,500 ahead of partners B and C, giving D a receipt for his
share only. When B and C were collecting from D, the latter was already insolvent.
Which of the following is correct?
A. Partner A can be required to share the P1,500 with B and C.
B. A cannot be required to share the P1,500 with B and C.
C. B and C should automatically exhaust first all remedies to collect from D.
D. B and C can automatically deduct from the capital contribution of A in the
partnership, their respective share in the P1,500.
57. A partnership suffered losses in the first year of its operation. A, a capitalist partner,
cannot
contribute an additional share to the capital because of insolvency. Can A be obliged to
sell his
interest to the other partners on the ground of such refusal?
A. Yes, A’ refusal to contribute additional share reflects his lack of interest in the
continuance of the partnership.
B. No, because there is actually no imminent loss of the business.
C. Yes, provided that A is paid the value of his interest.
D. No, because his refusal is justifiable.
58. Which of the following is considered prima facie evidence of the existence of a
partnership?
A. Where payment of interest on a loan depends on the profit of the business.
B. The receipt by a person of a share in the profits.
C. The sharing of gross returns of a business.
D. Where the parties are established as co-owners of a property.
59. A and B are partners, with A as the managing partner. D is indebted to A in the amount
of P10,000 and to the partnership in the amount of P5,000. Both debts are due and
demandable. D paid AP3,000. A issued to D a receipt in his own name. How should the
amount of P3,000 be applied?
A. The P3,000 should be applied to the indebtedness of D to A.
B. The P3,000 should be applied to the indebtedness of D to the partnership.
C. P2,000 should be applied to the indebtedness of D to the partnership and P1,000 to
the indebtedness of D to A.
D. P1,000 should be applied to the indebtedness of D to the partnership and P2,000
to the indebtedness of D to A.
60. Using the preceding no. but A issued to D a receipt in the name of the partnership. How
should the payment of P3,000 be applied?
A. The P3,000 should be applied to the indebtedness of D to A.
B. The P3,000 should be applied to the indebtedness of D to the partnership.
C. P2,000 should be applied to the indebtedness of D to the partnership and P1,000 to
D. P1,000 should be applied to the indebtedness of D to the partnership and P2,000 to
61. A, B, C and D are partners. Their contributions are as follows: A, P50,000; B, P30,000;
C, P20,000; D, services. The partnership incurred obligations to third persons which the
firm was unable to pay. After exhausting the assets of the partnership, there still is unpaid
balance of P10,000 to E. Who are liable to E for the payment of the unpaid balance of
P10,000 and how much should each pay to E?
A. A P5,000; B P3,000; C P2,000; D nothing
B. A P2,500; B P2,500; C P2,500; D P2,500
C. A P4,000; B P3,000; C P2,000; D P1,000
D. A P4,000; B P4,000; C P2,000; D nothing
62. One or more but less than all the partners have no authority to perform the following acts,
except:
A. Do any act which would make it impossible to carry on the ordinary business of the
partnership.
B. Submit a partnership claim or liability to arbitration.
C. Renounce a claim of the partnership.
D. Convey partnership property in the ordinary course of partnership business.
63. 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 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.
64. 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 will get?
A. A will get only P20,000 which is 1/3 of the profit of the 1st year of operation.
B. A will get only P10,000 which is 1/3 of the net profit.
C. A will get only P20,000 in the first year and none in the second year.
D. A will share in the loss in the second year.
65. Three (3) of the following are rights of a partner. Which one (1) is not?
A. Right to associate another person to his share.
B. Right to admit another partner.
C. Right to inspect and copy partnership books
D. Right to ask dissolution of the firm at the proper time.
66. I. Partnership with a capital of three thousand pesos or more, in money or property, shall
appear
in a public instrument, and recorded at SEC. Failure shall not affect the liability of a
partnership and members thereof to third person.
II. When immovable property is contributed, an inventory of said property is needed,
signed by
the parties and attached to the public instrument, otherwise the contract of partnership
is
void.
A. True; True
B. False; False
C. True; False
D. False; True
67. I. Co-ownership or co-possession does not in itself establish a partnership, except when
such co-
owners or co-possessors share in the profits made by the use of the property.
II. The sharing of gross returns does not of itself establish a partnership, except when the
persons
sharing them have a joint or common right or interest in any property from which the
returns
are derived.
A. True; True
B. False; False
C. True; False
D. False; True
68. I. The receipt by a person of a share of the profits of a business is conclusive evidence
that he is a
partner in the business.
II. A partnership of all present property is where the partners contribute all property
which
actually belong to them to a common fund, with the intention of dividing the same
among
themselves, as well as all the profits which they may acquire therewith.
A. True; True
B. False; False
C. True; False
D. False; True(?)
69. I. In a universal partnership of all present property, the property which belong to each of
the
partners at the time of constitution of the partnership becomes a common fund of all
partners
and all profits which they may acquire through inheritance, legacy, or donation cannot
be
included in such stipulation, except the fruits thereof.
II. The universal partnership of profits comprises all that the partners may acquire by
industry or
work during the existence of the partnership. Movable or immovable property which
each
may possess at the time of the celebration of the contract shall continue to pertain
exclusively
to each, only the usufruct passing to the partnership.
A. True; True
B. False; False
C. True; False
D. False; True
70. I. A partnership must have a lawful object or purpose, and must be established for the
common
benefit or interest of the partners.
II. When an unlawful partnership is dissolved by a judicial decree, the profits and
partners’
contributions shall be confiscated in favor of the State.
A. True; True
B. False; False
C. True; False
D. False; True
71. I. A partnership may be constituted in any form, except where immovable property or
real rights
are contributed thereto, in which case a written instrument shall be necessary.
II. Every contract of partnership having a capital of three thousand pesos or more in
money or
property shall appear in a public instrument which must be recorded in the office of
the SEC,
otherwise the partnership is void.
A. True; True
B. False; False
C. True; False
D. False; True
72. I. A contract of partnership is void, whenever immovable property is contributed thereto,

if an
inventory of said property is not made, signed by the parties and attached to the public
instrument.
II. A universal partnership of profits is that in which the partners contribute all the
property
which actually belongs to them to a common fund with the intention of dividing the
same
among themselves, as well as the profits which they may acquired therewith.
A. True; True
B. False; False
C. True; False
D. False; True
73. I. In a universal partnership of profits, the property which belong to each of the partners
at the
time of the constitution of the partnership becomes the common property of all the
partners,
as well as all the profits which they may acquire therewith.
II. A universal partnership of all present property comprises only all that the partners may
acquire by their industry or work during the existence of the partnership.
A. True; True
B. False; False
C. True; False
D. False; True
74. I. A universal partnership of profits comprises all movable or immovable property which
each of
the partners may possess at the time of the celebration of the contract and all that the
partners
may acquire by their industry or work during the existence of the partnership.
II. Future property by inheritance, legacy or donation, including the fruits thereof cannot
be
included in the stipulation regarding the universal partnership of all present property.
A. True; True
B. False; False
C. True; False
D. False; True
75. I. A and B are partners in a universal partnership of profits. Subsequently, A won first
prize in
the sweepstakes. The prize money will belong to the partnership.
II. A and B are partners in a universal partnership of profits. Later A purchased a parcel of
land.
The fruits of said land belong to the partnership.
A. True; True
B. False; False
C. True; False
D. False; True
76. I. Persons who are prohibited from giving each other any donation or advantage cannot
enter into universal or particular partnership.
II. A partnership begins from the moment of the execution of the contract, unless it is
otherwise
stipulated.
A. True; True
B. False; False
C. True; False
D. False; True
77. I. If property has been promised by a partner as contribution to the partnership, the
fruits
Arising from the time the property should have been delivered should also be given
provided
prior demand was made.
II. A partner who has undertaken to contribute a sum of money and fails to do so
becomes a
debtor for the interest and damages from the time he should have complied with his
obligation, without the need of any demand.
A. True; True
B. False; False
C. True; False
D. False; True
78. I. The partners shall contribute equal shares to the capital of the partnership.
II. If there is no agreement to the contrary, in case of an imminent loss of the business of
the
partnership, any partner who refuses to contribute additional share to the capital, to
save the
venture, shall be obliged to sell his interest to the other partners.
A. True; True
B. False; False
C. True; False
D. False; True
79. I. If a partner collects a demandable sum, which was owed to him in his own name,
from a
Person who owed the partnership another sum also demandable, the sum thus
collected shall
be applied to the two credits in proportion to their amounts, even though he may have
given a
receipt for his own credit only, but should he have given it for the account of the
partnership
credit, the amount shall be fully applied to the latter.
II. The risk of specific and determinate things contributed to the partnership so that only
their use
and fruits may be for the common benefit, shall be borne by the partner who owns
them.
A. True; True
B. False; False
C. True; False
D. False; True
80. I. In the absence of stipulation, the share of each partner in the profits and losses shall be
equal
to each other.
II. A stipulation which excludes one or more partners from any share in the profits or
losses is
void, as a general rule.
A. True; True
B. False; False
C. True; False
D. False; True
81. I. The partner who has been appointed manager may execute all acts of administration
despite
the opposition of his partners, unless he should act in bad faith and his power is
irrevocable
without just or lawful cause.
II. When the manner of management has not been agreed upon, none of the partners may,
without the consent of the others, make any important alterations in the property of
the
partnership, even if it may be useful to the partnership.
A. True; True
B. False; False
C. True; False
D. False; True
82. I. Every partner may associate another person with him in his share, provided it is with
the
consent of all of the other partners.
II. The capitalist partners cannot engage for their own account in any operation which is
of the
kind of business in which the partnership is engaged, unless there is stipulation to the
contrary.
A. True; True
B. False; False
C. True; False
D. False; True
83. I. Every partnership shall operate under a firm name, which shall include the name of
one or
more of the partner.
II. All partners, excluding industrial ones, shall be liable pro-rata with all their property
and after
all partnership assets have been exhausted, for the contracts which may be entered into
in the
name of and for the account of the partnership, under its signature, and by a person
authorized
to act for the partnership.
A. True; True
B. False; False
C. True; False
D. False; True
84. I. Persons who are not partners as to each other are not partners as to third persons,
except in
cases of estoppel.
II. An admission or representation made by any partner concerning partnership affairs is
evidence against the partnership.
A. True; True
B. False; False
C. True; False
D. False; True
85. I. A person admitted as a partner into an existing partnership is liable for all the
obligations of
the partnership arising before his admission as though he had been a partner when
incurred
and that such liability will extend to his own individual property.
II. B has worked for M and Co., as procurer of contracts for fertilizers to be manufactured
by the
firm, and as supervisor of the mixing of the fertilizers. However, he had no voice in
the
management of the business except in his task of supervising the mixing of said
fertilizers.
For his service, he is entitled to 35% of the profits in the fertilizer business. He is a
partner in
M and Co.
A. True; True
B. False; False
C. True; False
D. False; True
86. I. C was a bookkeeper in a partnership named “AB”, with a yearly salary amounting t
5% of the
net profits or each year. C, however had no vote at all in the management of the
business. He
is a partner in AB.
II. Unless there is a stipulation to the contrary, the partners shall contribute equal shares
to the
capital of the partnership.
A. True; True
B. False; False
C. True; False
D. False; True
87. I. Every partner may associate another person with him in his share, but the associate
shall not be
admitted in the partnership without the consent of all the other partners, even if the
partner
having an associate should be a manager.
II. Articles of universal partnership, entered into without specification of its nature, only
constitute universal partnership of profits.
A. True; True
B. False; False
C. True; False
D. False; True
Partnership
(2009 Bar Question)
TRUE or FALSE. An oral partnership is valid.
SUGGESTED ANSWER:
TRUE. Partnership is a consensual contract, hence, it is valid even though not in writing.
ANOTHER SUGGESTED ANSWER:

TRUE. An oral contract of partnership is valid even though not in writing. However, if it involves
contribution of an immovable property or a real right, an oral contract of partnership is void. In such a
case, the contract of partnership to be valid, must be in a public instrument (Art. 1771, NCC), and the
inventory of said property signed by the parties must be attached to said public instrument (Art. 1773,
NCC.).
ANOTHER SUGGESTED ANSWER:

TRUE. Partnership is a consensual contract, hence, it is valid even though not in writing. The oral
contract of partnership is also valid even if an immovable property or real right is contributed thereto.
While the law in such a case, requires the partnership to be in a public document, the law does not
expressly declare the contract void if not executed in the required form (Article 1409[7], NCC). And
there being nothing in the law from which it can be inferred that the said requirement is prohibitory or
mandatory (Article 5, NCC), the said oral contract of partnership must also be valid. The interested party
may simply require the contract to be made into a public document in order to comply with the required
form (Article 1357, NCC). The purpose of the law in requiring a public document is simply to notify the
public about the contribution.
(1994 Bar Question)

1. Can two corporations organize a general partnership under the Civil Code of the Philippines?
2. Can a corporation and an individual form a general partnership?
SUGGESTED ANSWER:
1.
a. No. A corporation is managed by its board of directors. If the corporation were to become a
partner, co-partners would have the power to make the corporation party to transactions in
an irregular manner since the partners are not agents subject to the control of the Board of
Directors. But a corporation may enter into a Joint venture with another corporation as long
as the nature of the venture is in line with the business authorized by its charter. (Thdson &
Co., Inc. v. Bolano, 95 Phil. 106).
b. As a general rule a corporation may not form a general partnership with another
corporation or an Individual because a corporation may not be bound by persons who are
neither directors nor officers of the corporation.
However, a corporation may form a general partnership with another corporation or an

individual provided the following conditions are met:
1) The Articles of Incorporation of the corporation expressly allows the corporation to enter
into partnerships;
2) The Articles of Partnership must provide that all partners will manage the partnership,
and they shall be jointly and severally liable; and
3) In case of a foreign corporation, it must be licensed to do business in the Philippines.
c. No. A corporation may not be a general partner because the principle of mutual agency in
general partnership allowing the other general partner to bind the corporation will violate
the corporation law principle that only the board of directors may bind the corporation.
2. No, for the same reasons given in the Answer to Number 2 above.
(1988 Bar Question)

Distinguish co-ownership from partnership.
SUGGESTED ANSWER:
Co-ownership is distinguished from an ordinary partnership in the following ways:
(1) As to creation: Whereas co-ownership may be created by law, contract, succession, fortuitous
event, or occupancy, partnership is always created by contract.
(2) As to purpose: Whereas the purpose of co-ownership is the common enjoyment of the thing or
right owned in common, the purpose of a partnership is to obtain profits.
(3) As to personality: Whereas a co-ownership has no juridical personality which is separate and
distinct from that of the owners, a partnership has.
(4) As to duration: Whereas an agreement not to divide the community property for more than ten
years is not allowed by law such an agreement would be perfectly valid in the case of
partnerships. This is so, because under the law, there is no limitation upon the duration of
partnerships.
(5) As to power of members: Whereas a co-owner has no power to represent the co-ownership
unless there is an agreement to that effect, a partner has the power to represent the
partnership, unless there is a stipulation to the contrary.
(6) As to effect of disposition of shares: If a co-owner transfers his share to a third person, the latter
becomes automatically a co-owner, but if a partner transfers his share to a third person, the
latter does not become a partner, unless agreed upon by all of the partners.
(7) As to division of profits: Whereas in co-ownership the division of the benefits and charges is
fixed by law, in a partnership the division of profits arid losses may be subject to the agreement
of the partners.
(8) As to effect of death: Whereas the death of a co-owner has no effect upon the existence of the
co-ownership, the death of a partner shall result in. the dissolution of the partnership.
Rights and Obligations of Partners Among Themselves

(2012 Bar Question))
A partner cannot demand the return of his share (contribution) during the existence of a partnership. Do
you agree? Explain your answer.
SUGGESTED ANSWER:
Yes, he is not entitled to the return of his contribution to the capital of the partnership, but only to the
net profits from the partnership business during the life of the partnership period. If he is a limited
partner, however, he may ask for the return of his contributions as provided in Art 1856 and 1857, Civil
Code.
(2010 Bar Question)

A, B, and C entered into a partnership to operate a restaurant business. When the restaurant had gone
past break-even stage and started to gamer considerable profits, C died. A and B continued the business
without dissolving the partnership. They in fact opened a branch of the restaurant, incurring obligations
in the process. Creditors started demanding for the payment of their obligations.
Who are liable for the settlement of the partnership’s obligations? Explain?
SUGGESTED ANSWER:
The two remaining partners, A and B, are liable. When any partner dies and the business is continued
without any settlement of accounts as between him or his estate, the surviving partners are held liable
for continuing the business despite the death of C (Articles 1841, 1785, par. 2, and 1833 of the New Civil
Code).
(2001 Bar Question)

Joe and Rudy formed a partnership to operate a car repair shop in Quezon City. Joe provided the capital
while Rudy contributed his labor and industry. On one side of their shop, Joe opened and operated a
coffee shop, while on the other side, Rudy put up a car accessories store. May they engage in such
separate businesses? Why?
SUGGESTED ANSWER:
Joe, the capitalist partner, may engage in the restaurant business because it is not the same kind of
business the partnership is engaged in. On the other hand, Rudy may not engage in any other business
unless their partnership expressly permits him to do so because as an industrial partner he has to
devote his full time to the business of the partnership (Art. 1789, CC).
(1998 Bar Question)

Dielle, Karlo and Una are general partners in a merchandising firm. Having contributed equal amounts to
the capital, they also agree on equal distribution of whatever net profit is realized per fiscal period. After
two years of operation, however, Una conveys her whole interest in the partnership to Justine, without
the knowledge and consent of Dielle and Kaflo.
1. Is the partnership dissolved?

2. What are the rights of Justine, if any, should she desire to participate in the management of the
partnership and in the distribution of a net profit of P360.000.00 which was realized after her purchase
of Una’s interest?
SUGGESTED ANSWER:
1. No, a conveyance by a partner of his whole interest in a partnership does not of itself dissolve the
partnership in the absence of an agreement. (Art. 1813, Civil Code)
2. Justine cannot interfere or participate in the management or administration of the partnership
business or affairs. She may, however, receive the net profits to which Una would have otherwise been
entitled. In this case, P120,000 (Art. 1813, Civil Code)
(1992 Bar Question)

W, X, Y and Z organized a general partnership with W and X as industrial partners and Y and Z as
capitalist partners. Y contributed P50.000.00 and Z contributed P20.000.00 to the common fund. By a
unanimous vote of the partners, W and X were appointed managing partners, without any specification
of their respective powers and duties.
A applied for the position of Secretary and B applied for the position of Accountant of the partnership.
The hiring of A was decided upon by W and X, but was opposed by Y and Z.
The hiring of B was decided upon by W and Z, but was opposed by X and Y.
Who of the applicants should be hired by the partnership? Explain and give your reasons.
SUGGESTED ANSWER:
A should be hired as Secretary. The decision for the hiring of A prevails because it is an act of
administration which can be performed by the duly appointed managing partners, W and X.
B cannot be hired, because in case of a tie in the decision of the managing partner, the deadlock must
be decided by the partners owning the controlling interest. In this case, the opposition of X and Y
prevails because Y owns the controlling interest (Art. 1801, Civil Code).
(1989 Bar Question)

“X” used his savings from his salaries amounting to a little more than P2,000 as capital in establishing a
restaurant. “Y” gave the amount of P4,000 to “X” as “financial assistance” with the understanding that
“Y” would be entitled to 22% of the annual profits derived from the operation of the restaurant. After
the lapse of 22 years, “Y” filed a case demanding his share in the said profits. “X” denied that there was
a partnership and raised the issue of prescription as “Y” did not assert his rights anytime within ten (10)
years from the start of the operation of the restaurant. Is “Y” a partner of “X” in the business? Why?
What is the nature of the right to demand one’s share in the profits of a partnership? Does this right
prescribe?
SUGGESTED ANSWER:
Yes, because there is an agreement to contribute to a common fund and an intent to divide profits. It is
founded upon an express trust. It is imprescriptible unless repudiated.
ALTERNATIVE ANSWER:
No, “Y” is not a partner because the amount is extended in the form of a financial assistance arid
therefore it is a loan, and the mere sharing of profits does not establish a partnership. The right is
founded upon a contract of loan whereby the borrower is bound to pay principal and interest like all
ordinary obligations. Yes, his right prescribes in six or ten years depending upon whether the contract is
oral or written.
Obligations of Partnership/Partners to Third Persons

(2010 Bar Question)
What are the creditors’ recourse/s? Explain.
SUGGESTED ANSWER:
Creditors can file the appropriate actions, for instance, an action for the collection of sum of money
against the “partnership at will” and if there are no sufficient funds, the creditors may go after the
private properties of Aand B (Article 1816,New Civil Code). Creditors may also sue the estate of C. The
estate is not excused from the liabilities of the partnership even if C is dead already but only up to the
time that he remained a partner (Article 1829, 1835, par. 2; NCC, Testate Estate of Mota v. Serra, 47
Phil. 464 [1925]). However, the liability of C’s individual property shall be subject first to the payment of
his separate debts (Article 1835,New Civil Code).
(1993 Bar Question)

A, B and C formed a partnership for the purpose of contracting with the Government in the construction
of one of its bridges. On June 30, 1992, after completion of the project, the bridge was turned over by
the partners to the Government. On August 30, 1992, D. a supplier of materials used in the project sued
A for collection of the indebtedness to him. A moved to dismiss the complaint against him on the ground
that it was the ABC partnership that is liable for the debt. D replied that ABC partnership was dissolved
upon completion of the project for which purpose the partnership was formed.
Will you dismiss the complaint against B if you were the judge?
SUGGESTED ANSWER:
As Judge. I would not dismiss the complaint against A because A is still liable as a general partner for his
pro rata share of 1/3 (Art. 1816, C. C.). Dissolution of a partnership caused by the termination of the
particular undertaking specified in the agreement does not extinguish obligations, which must be
liquidated during the “winding up" of the partnership affairs (Articles 1829 and 1830, par. 1-a, Civil
Code).
Dissolution
(2010 Bar Question)
A. Who are liable for the settlement of the partnership’s obligations? Explain?
B. What are the creditors’ recourse/s? Explain.
SUGGESTED ANSWER:
A. The two remaining partners, A and B, are liable. When any partner dies and the business is continued
without any settlement of accounts as between him or his estate, the surviving partners are held liable
for continuing the business despite the death of C (Articles 1841, 1785, par. 2, and 1833 of the New Civil
Code).
B. Creditors can file the appropriate actions, for instance, an action for the collection of sum of money
against the “partnership at will” and if there are no sufficient funds, the creditors may go after the
private properties of A and B (Article 1816, New Civil Code). Creditors may also sue the estate of C. The
estate is not excused from the liabilities of the partnership even if C is dead already but only up to the
time that he remained a partner (Article 1829, 1835, par. 2; NCC, Testate Estate of Mota v. Serra, 47
Phil. 464 [1925]). However, the liability of C’s individual property shall be subject first to the payment of
his separate debts (Article 1835, New Civil Code).
(1997 Bar Question)

Stating briefly the thesis to support your answer to each of the following cases, will the death – of a
partner terminate the partnership?
SUGGESTED ANSWER:
Yes. The death of a partner will terminate the partnership, by express provision of par. 5, Art. 1830 of
the Civil Code.
(1995 Bar Question)

Pauline, Patricia and Priscilla formed a business partnership for the purpose of engaging in neon
advertising for a term of five (5) years. Pauline subsequently assigned to Philip her interest in the
partnership. When Patricia and Priscilla learned of the assignment, they decided to dissolve the
partnership before the expiration of its term as they had an unproductive business relationship with
Philip in the past. On the other hand, unaware of the move of Patricia and Priscilla but sensing their
negative reaction to his acquisition of Pauline’s interest, Philip simultaneously petitioned for the
dissolution of the partnership.
1. Is the dissolution done by Patricia and Priscilla without the consent of Pauline or Philip valid? Explain.
2. Does Philip have any right to petition for the dissolution of the partnership before the expiration of its
specified term? Explain.
SUGGESTED ANSWER:
1. Under Art. 1830 (1) (c) of the NCC, the dissolution by Patricia and Priscilla is valid and did not violate
the contract of partnership even though Pauline and Philip did not consent thereto. The consent of
Pauline is not necessary because she had already assigned her interest to Philip, The consent of Philip is
not also necessary because the assignment to him of Pauline’s interest did not make him a partner,
under Art. 1813 of the NCC.
ALTERNATIVE ANSWER:
Interpreting Art. 1830 (1) (c) to mean that if one of the partners had assigned his interest on the
partnership to another the remaining partners may not dissolve the partnership, the dissolution by
Patricia and Priscilla without the consent of Pauline or Philip is not valid.
2. No, Philip has no right to petition for dissolution because he does not have the standing of a partner
(Art. 1813 NCC).
(1993 Bar Question)

A, B and C formed a partnership for the purpose of contracting with the Government in the construction
of one of its bridges. On June 30, 1992, after completion of the project, the bridge was turned over by
the partners to the Government. On August 30, 1992, D. a supplier of materials used in the project sued
A for collection of the indebtedness to him. A moved to dismiss the complaint against him on the ground
that it was the ABC partnership that is liable for the debt. D replied that ABC partnership was dissolved
upon completion of the project for which purpose the partnership was formed.
Will you dismiss the complaint against B if you were the judge?
SUGGESTED ANSWER:
As Judge. I would not dismiss the complaint against A because A is still liable as a general partner for his
pro rata share of 1/3 (Art. 1816, C. C.). Dissolution of a partnership caused by the termination of the
particular undertaking specified in the agreement does not extinguish obligations, which must be
liquidated during the “winding up" of the partnership affairs (Articles 1829 and 1830, par. 1-a, Civil
Code).
(1987 Bar Question)

Tomas, Rene and Jose entered into a partnership under the firm name “Manila Lumber.” Subsequently,
upon mutual agreement, Tomas withdrew from the partnership and the partnership was dissolved.
However, the remaining partners, Rene and Jose, did not terminate the business of “Manila Lumber.”
Instead of winding up the business of the partnership and liquidating its assets, Rene and Jose continued
the business in the name of “Manila Lumber” apparently without objection from Tomas. The withdrawal
of Tomas from the partnership was not published in the newspapers.
Could Tomas be held liable for any obligation or indebtedness Rene and Jose might incur while doing
business in the name of “Manila Lumber” after his withdrawal from the partnership? Explain.
SUGGESTED ANSWER:
Yes. Tomas can be held liable under the doctrine of estoppel. But as regards the parties among
themselves, only Rene and Jose are liable. Tomas cannot be held liable since there was no proper
notification or publication.
In the event that Tomas is made to pay the liability to third person, he has the right to seek
reimbursement from Rene and Jose (Articles 1837 to 1840; Goquiolay vs. Sycip, 9 SCRA 663).
Limited Partnership
(1994 Bar Question)
Can a husband and wife form a limited partnership to engage in real estate business, with the wife being
a limited partner?
SUGGESTED ANSWER:
a) Yes. The Civil Code prohibits a husband and wife from constituting a universal partnership. Since a
limited partnership is not a universal partnership, a husband and wife may validly form one.
b) Yes. While spouses cannot enter into a universal partnership, they can enter into a limited
partnership or be members thereof (CIR v. Suter, et al., 27 SCRA 152).
2011-2014 Bar Questions

2014 Bar Question
Timothy executed a Memorandum of Agreement (MOA) with Kristopher setting up a business venture
covering three (3) fastfood stores known as "Hungry Toppings" that will be established at Mall Uno, Mall
Dos, and Mall Tres.
The pertinent provisions of the MOA provides:
1. Timothy shall be considered a partner with thirty percent (30%) share in all of the stores to be
set up by Kristopher;
2. The proceeds of the business, after deducting expenses, shall be used to pay the principal
amount of P500,000.00 and the interest therein which is to be computed based on the bank
rate, representing the bank loan secured by Timothy;
3. The net profits, if any, after deducting the expenses and payments of the principal and
interest shall be divided as follows: seventy percent (70%) for Kristopher and thirty percent
(30%) for Timothy;
4. Kristopher shall have a free hand in running the business without any interference from
Timothy, his agents, representatives, or assigns , and should such interference happen,
Kristopher has the right to buy back the share of Timothy less the amounts already paid on the
principal and to dissolve the MOA; and
5. Kristopher shall submit his monthly sales report in connection with the business to Timothy.
What is the contractual relationship between Timothy and Kristopher?
SUGGESTED ANSWER:
The contractual relationship between Timothy and Kristopher is that of partnership. Article 1767 of the
Civil Code provides that under a contract of partnership, two or more persons bind themselves to
contribute money, property or industry to a common fund, with the intention of dividing the profits
among themsleves. Moreover, article 1769 of the Civil Code states in part that receipt by a person of a
share of the profits of a business is prima facie evidence that he is a partner in the business, provided
that the said profits were not received in payment for debt, as wages, annuity, interest on a loan, or as
consideration for a sale. In this case, the MOA between Timothy and Kristopher stipulated that they
shall share in the profits of the business 30-70. The contributions of the partners include a bank loan
obtained by Timothy and industry in the form of managing the properties by Kristopher. Thus, the
requisites for establishing a contract of partnership are complied with.
(2013 Bar Questions)

In 2005, L, M, N, 0 and P formed a partnership. L, M and N were capitalist partners who contributed
P500,000 each, while 0, a limited partner, contributed P1 ,000,000. P joined as an industrial partner,
contributing only his services. The Articles of Partnership, registered with the Securities and Exchange
Commission, designated L and 0 as managing partners; L was liable only to the extent of his capital
contribution; and P was not liable for losses.
In 2006, the partnership earned a net profit of P800,000. In the same year, P engaged in a different
business with the consent of all the partners. However, in 2007, the partnership incurred a net loss of
P500,000. In 2008,the partners dissolved the partnership. The proceeds of the sale of partnership assets
were insufficient to settle its obligation. After liquidation, the partnership had an unpaid liability
ofP300,000.
(l) Assuming that the just and equitable share of the industrial partner, P, in the profit in 2006 amounted
to P1 00,000, how much is the share of 0, a limited partner, in the P800,000 net profit?
(A) P160,000.
(B) P175,000.
(C) P280,000.
(D) P200,000.
(E) None of the above.
SUGGESTED ANSWER:
(C) P280,000. First, deduct the share of P from the profits. P800,000 less P100,000 is P700,000. Next, get
the share of O by following the proportion that the shares of L, M, N, O is 1:1:1:2, respectively.
(II) In 2007, how much is the share of 0, a limited partner, in the net loss of P500,000?
(A) P 0.
(B) P1 00,000.
(C) P125,000.
(D) P200,000.
(E) None of the above.
SUGGESTED ANSWER:
(D) P200,000 A limited partner shall not become liable a s a general partner unless, in addition to the
exercise of his rights and powers as a limited partner, he takes part in the control of the business (Art
1948, Civil Code). In the absence of stipulation as to profits and losses, the share of each partner in the
losses shall be proportionate to what he may have contributed (Art 1797).
(III) Can the partnership creditors hold L, 0 and Pliable after all the assets of the partnership are
exhausted?
(A) Yes. The stipulation exempting P from losses is valid only among the partners. L is liable because the
agreement limiting his liability to his capital contribution is not valid insofar as the creditors are
concerned. Having taken part in the management of the partnership, 0 is liable as capitalist partner.
(B) No. P is not liable because there is a valid stipulation exempting him from losses. Since the other
partners allowed him to engage in an outside business activity, the stipulation absolving P from liability
is valid. For 0, it is basic that a limited partner is liable only up to the extent of his capital contribution.
(C) Yes. The stipulations exempting P and L from losses are not binding upon the creditors. 0 is likewise
liable because the partnership was not formed in accordance with the requirements of a limited
partnership.
(D) No. The Civil Code allows the partners to stipulate that a partner shall not be liable for losses. The
registration of the Articles of Partnership embodying such stipulations serves as constructive notice to
the partnership creditors.
(E) None of the above is completely accurate.
SUGGESTED ANSWER:
(E) None of the above is completely accurate.
2011 Bar Questions

The liability of the partners, including industrial partners for partnership contracts entered into in its
name and for its account, when all partnership assets have been exhausted is
(A) Pro-rata.
(B) Joint.
(C) Solidary.
(D) Voluntary.
Janice and Jennifer are sisters. Janice sued Jennifer and Laura, Jennifer’s business partner for recovery of
property with damages. The complaint did not allege that Janice exerted earnest efforts to come to a
compromise with the defendants and that such efforts failed. The judge dismissed the complaint
outright for failure to comply with a condition precedent. Is the dismissal in order?
(A) No, since Laura is a stranger to the sisters, Janice has no moral obligation to settle with her.
(B) Yes, since court should promote amicable settlement among relatives.
(C) Yes, since members of the same family, as parties to the suit, are required to exert earnest efforts to
settle their disputes before coming to court.
(D) No, the family council, which would ordinarily mediate the dispute, has been eliminated under the
Family Code.
Trust
Distinguish between express trust and implied trust (1993).
Answer:
Express trust and implied trust may be distinguished from each other in the following ways:
(1) Our New Civil Code defines an express trust as one created by the intention of the trustor or
of the parties, and an implied trust as one that comes into being by operation of law.
(2) Express trusts are those created by the direct and positive acts of the parties, by some
writing or deed or will or by words evidencing an intention to create a trust. On the other
hand, implied trusts are those which, without being expressed, are deducible from the
nature of the transaction by operation of law as matters of equity, in dependently of the
particular intention of the parties.
(3) Thus, if the intention to establish a trust is clear, the trust is express; if the intent to
establish a trust is to be taken from circumstances or other matters indicative of such intent,
then the trust is implied. (Cuayong v. Cuayong, 21 SCRA 1192).
(4) No express trust concerning an immovable or any interest therein may be proved by parol
evidence (Art.1443, NCC.), while the existence of an implied trust may be proved by parol
evidence
(5) Laches and prescription do not constitute a bar to enforce an express trust, at least while
the trustee does not openly repudiate the trust, and make known such repudiation to the
beneficiary, while laches and prescription may constitute a bar to enforce an implied trust,
and no repudiation is required unless there is concealment of the facts giving rise to the
trust. (Fabian v. Fabian, 21 SCRA 213).
Express Trust; Prescription (1997)

On 01 January 1980, Redentor and Remedies entered into an agreement by virtue of which the former
was to register a parcel of land in the name of Remedies under the explicit covenant to reconvey the
land to Remigio, son of Redentor, upon the son's graduation from college. In 1981, the land was
registered in the name of Remedies.
Redentor died a year later or in 1982. In March 1983, Remigio graduated from college. In February 1992,
Remigio accidentally found a copy of the document so constituting Remedies as the trustee of the land.
In May 1994, Remigio filed a case against Remedies for the reconveyance of the land to him. Remedies,
in her answer, averred that the action already prescribed. How should the matter be decided?
SUGGESTED ANSWER:
The matter should be decided in favor of Remigio (trustee) because the action has not prescribed. The
case at bar involves an express trust which does not prescribe as long as they have not been repudiated
by the trustee (Diaz vs. Gorricho. 103 Phil, 261).
Implied Trust (1998)

Juan and his sister Juana inherited from their mother two parcels of farmland with exactly the same
areas. For convenience, the Torrens certificates of title covering both lots were placed in Juan's name
alone. In 1996, Juan sold to an innocent purchaser one parcel in its entirety without the knowledge and
consent of Juana, and wrongfully kept for himself the entire price paid.
1. What rights of action, if any, does Juana have against and/or the buyer?
2. Since the two lots have the same area, suppose Juana flies a complaint to have herself declared sole
owner of the entire remaining second lot, contending that her brother had forfeited his share thereof by
wrongfully disposing of her undivided share in the first lot. Will the suit prosper?
SUGGESTED ANSWER:
1. When, for convenience, the Torrens title to the two parcels of land were placed in Joan's name alone,
there was created an implied trust (a resulting trust) for the benefit of Juana with Juan as trustee of one-
half undivided or ideal portion of each of the two lots. Therefore, Juana can file an action for damages
against Joan for having fraudulently sold one of the two parcels which he partly held in trust for Juana's
benefit. Juana may claim actual or compensatory damage for the loss of her share in the land; moral
damages for the mental anguish, anxiety, moral shock and wounded feelings she had suffered;
exemplary damage by way of example for the common good, and attorney's fees.
Juana has no cause of action against the buyer who acquired the land for value and in good faith, relying
on the transfer certificate of title showing that Juan is the registered owner of the land.
ANOTHER ANSWER:
1. Under Article 476 of the Civil Code, Juana can file an action for quieting of title as there is a cloud in
the title to the subject real property. Second, Juana can also file an action for damages against Juan,
because the settled rule is that the proper recourse of the true owner of the property who was
prejudiced and fraudulently dispossessed of the same is to bring an action for damages against those
who caused or employed the same. Third, since Juana had the right to her share in the property by way
of inheritance, she can demand the partition of the thing owned in common, under Article
494 of the Civil Code, and ask that the title to the remaining property be declared as exclusively hers.
However, since the farmland was sold to an innocent purchaser for value, then Juana has no cause of
action against the buyer consistent with the established rule that the rights of an innocent purchaser for
value must be respected and protected notwithstanding the fraud employed by the seller in securing his
title. (Eduarte vs. CA, 253 SCRA 391)
ADDITIONAL ANSWER:
1. Juana has the right of action to recover (a) her one half share in the proceeds of the sale with legal
interest thereof, and (b) such damages as she may be able to prove as having been suffered by her,
which may include actual or compensatory damages as well as moral and exemplary damages due to the
breach of trust and bad faith (Imperial vs. CA, 259 SCRA 65). Of course, if the buyer knew of the co-
ownership over the lot he was buying, Juana can seek (c) reconvenyance of her one-half share instead
but she must implead the buyer as co-defendant and allege his bad faith in purchasing the entire lot.
Finally, consistent with the ruling in Imperial us. CA. Juana may seek instead (d) a declaration that she is
now the sole owner of the entire remaining lot on the theory that Juan has forfeited his one-half share
therein.
ADDITIONAL ANSWER:
1. Juana can file an action for damages against Juan for having fraudulently sold one of the two parcels
which he partly held in trust for Juana's benefit. Juana may claim actual or compensatory damage for
the loss of her share in the land; moral damages for the mental anguish, anxiety, moral shock and
wounded feelings she had suffered; exemplary damage by way of example for the common good, and
attorney's fees. Juana has no cause of action against the buyer who acquired the land for value and in
good faith, relying on the transfer certificate showing that Juan is the registered owner of the land.
SUGGESTED ANSWER:
2. Juana's suit to have herself declared as sole owner of the entire remaining area will not prosper
because while Juan's act in selling the other lot was wrongful. It did not have the legal effect of forfeiting
his share in the remaining lot. However, Juana can file an action against Juan for partition or termination
of the co-ownership with a prayer that the lot sold be adjudicated to Juan, and the remaining lot be
adjudicated and reconveyed to her.
ANOTHER ANSWER:
2. The suit will prosper, applying the ruling in Imperial vs. CA cited above. Both law and equity authorize
such result, said the Supreme Court.
Strictly speaking, Juana's contention that her brother had forfeited his share in the second lot is
incorrect. Even if the two lots have the same area, it does not follow that they have the same value.
Since the sale of the first lot on the Torrens title in the name of Juan was valid, all that Juana may
recover is the value of her undivided interest therein, plus damages. In addition, she can ask for partition
or reconveyance of her undivided interest in the second lot, without prejudice to any agreement
between them that in lieu of the payment of the value of Juana's share in the first lot and damages, the
second lot be reconveyed to her.
ALTERNATIVE ANSWER:
2. The suit will not prosper, since Juan's wrongful act of pocketing the entire proceeds of the sale of the
first lot is not a ground for divesting him of his rights as a co-owner of the second lot. Indeed, such
wrongdoing by Juan does not constitute, for the benefit of Juana, any of the modes of acquiring
ownership under Art. 712, Civil Code.
Trust; Implied Resulting Trust (1995)
In 1960, Maureen purchased two lots in a plush subdivision registering Lot 1 in her name and Lot 2 in
the name of her brother Walter with the latter's consent. The idea was to circumvent a subdivision
policy against the acquisition of more than one lot by one buyer. Maureen constructed a house on Lot 1
with an extension on Lot 2 to serve as a guest house. In 1987, Walter who had suffered serious business
losses demanded that Maureen remove the extension house since the lot on which the extension was
built was his property. In 1992, Maureen sued for the reconveyance to her of Lot 2 asserting that a
resulting trust was created when she had the lot registered in Walter's name even if she paid the
purchase price. Walter opposed the suit arguing that assuming the existence of a resulting trust the
action of Maureen has already prescribed since ten years have already elapsed from the registration of
the title in his name. Decide. Discuss fully.
SUGGESTED ANSWER:
This is a case of an implied resulting trust. If Walter claims to have acquired ownership of the land by
prescription or if he anchors his defense on extinctive prescription, the ten year period must be
reckoned from 1987 when he demanded that Maureen remove the extension house on Lot No. 2
because such demand amounts to an express repudiation of the trust and it was made known to
Maureen. The action for reconveyance filed in 1992 is not yet barred by prescription. (Spouses Huang v.
Court of Appeals, Sept. 13, 1994).
Trust De Son Tort (2007)

Explain the concept of trust de son tort (constructive trust) and give an example.
SUGGESTED ANSWER:
A constructive trust is a trust NOT created by any word or phrase, either expressly or impliedly, evincing
a direct intention to create a trust, but is one that arises in order to satisfy the demands of justice. It
does not come about by agreement or intention but mainly operation of law and construed as a trust
against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property
which he ought not, in equity and good conscience, to hold (Heirs of Lorenzo Yap v. CA, 371 Phil 523,
1991). The following are examples of constructive trust: 1. Art. 1456 NCC which provides: "If property is
acquired through mistake or fraud, the person obtaining it is, by force of law considered a trustee of an
implied trust for the benefit of the person for whom the property comes." 2. Art 1451 NCC which
provides: "When land passes by succession through any person and he causes the legal title to be put in
the name of another, a trust is established by implication of law for the benefit of the true owner." 3.
Art 1454 NCC which provides: "If an absolute conveyance of property is made in order to secure the
performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If
the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the
reconveyance of the property to him." 4. Art 1455 NCC which provides: "When any trustee, guardian or
any person holding a fiduciary relationship uses trust funds for the purchase of property and causes
conveyance to be made to him or to third person, a trust is established by operation of law in favor of
the person to whom the funds belong."
2011-2014 Bar Questions

An action for reconveyance of a registered piece of land may be brought against the owner appearing on
the title based on a claim that the latter merely holds such title in trust for the plaintiff. The action
prescribes, however, within 10 years from the registration of the deed or the date of the issuance of the
certificate of title of the property as long as the trust had not been repudiated. What is the exception to
this 10-year prescriptive period?
(A) When the plaintiff had no notice of the deed or the issuance of the certificate of title.
(B) When the title holder concealed the matter from the plaintiff.
(C) When fortuitous circumstances prevented the plaintiff from filing the case sooner.
(D) When the plaintiff is in possession of the property.
AGENCY
Agency (2003)
Jo-Ann asked her close friend, Aissa, to buy some groceries
for her in the supermarket. Was there a nominate contract
entered into between Jo-Ann and Aissa? In the affirmative,
what was it? Explain. 5%
SUGGESTED ANSWER:
Yes, there was a nominate contract. On the assumption that
Aissa accepted the request of her close friend Jo-Ann to but
some groceries for her in the supermarket, what they entered
into was a nominate contract of Agency. Article 1868 of the
New Civil Code provides that by the contract of agency a
person binds himself to render some service or to do
something in representation or on behalf of another, with the
consent or authority of the latter.
ALTERNATIVE ANSWER:
Yes, they entered into a nominate contract of lease to service
in the absence of a relation of principal and agent between
them (Article 1644, New Civil Code).
Agency vs. Sale (2000)
A foreign manufacturer of computers and a Philippine
distributor entered into a contract whereby the distributor
agreed to order 1,000 units of the manufacturer's computers
every month and to resell them in the Philippines at the
manufacturer's suggested prices plus 10%. All unsold units at
the end of the year shall be bought back by the manufacturer
at the same price they were ordered. The manufacturer shall
hold the distributor free and harmless from any claim for
defects in the units. Is the agreement one for sale or agency?
(5%)
SUGGESTED ANSWER:
The contract is one of agency, not sale. The notion of sale is
negated by the following indicia: (1) the price is fixed by the
manufacturer with the 10% mark-up constituting the commission; (2)
the manufacturer reacquires the unsold units at exactly the same
price; and (3) warranty for the units was borne by the manufacturer.
The foregoing indicia
units was never intended to transfer to the distributor.
Agency; coupled with an interest (2001)
Richard sold a large parcel of land in Cebu to Leo for P100
million payable in annual installments over a period of ten
years, but title will remain with Richard until the purchase
price is fully paid. To enable Leo to pay the price, Richard
gave him a power-of-attorney authorizing him to subdivide
the land, sell the individual lots, and deliver the proceeds to
Richard, to be applied to the purchase price. Five years later,
Richard revoked the power of attorney and took over the
sale of the subdivision lots himself. Is the revocation valid or
not? Why? (5%)
SUGGESTED ANSWER:
The revocation is not valid. The power of attorney given to
the buyer is irrevocable because it is coupled with an interest:
the agency is the means of fulfilling the obligation of the
buyer to pay the price of the land (Article 1927, CC). In other
words, a bilateral contract (contract to buy and sell the land)
is dependent on the agency.
Agency; Guarantee Commission (2004)
As an agent, AL was given a guarantee commission, in
addition to his regular commission, after he sold 20 units of
refrigerators to a customer, HT Hotel. The customer,
however, failed to pay for the units sold. AL’s principal,
DRBI, demanded from AL payment for the customer’s
accountability. AL objected, on the ground that his job was
only to sell and not to collect payment for units bought by
the customer. Is AL’s objection valid? Can DRBI collect
from him or not? Reason. (5%)
SUGGESTED ANSWER:
No, AL's objection is not valid and DRBI can collect from
AL. Since AL accepted a guarantee commission, in addition
to his regular commission, he agreed to bear the risk of
collection and to pay the principal the proceeds of the sale on
the same terms agreed upon with the purchaser (Article 1907,
Civil Code)
Agency; Real Estate Mortgage (2004)
CX executed a special power of attorney authorizing DY to
secure a loan from any bank and to mortgage his property
covered by the owner’s certificate of title. In securing a loan
from MBank, DY did not specify that he was acting for CX
in the transaction with said bank. Is CX liable for the bank
loan? Why or why not? Justify your answer. (5%)
SUGGESTED ANSWER:
CX is liable for the bank loan because he authorized the
mortgage on his property to secure the loan contracted by
DY. If DY later defaults and fails to pay the loan, CX is liable
to pay. However, his liability is limited to the extent of the
value of the said property. ALTERNATIVE ANSWER: CX
is not personally liable to the bank loan because it was
contracted by DY in his personal capacity. Only the property
of CX is liable. Hence, while CX has authorized the mortgage
on his property to secure the loan of DY, the bank cannot
sue CX to collect the loan in case DY defaults thereon. The
bank can only foreclose the property of CX.
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
And if the proceeds of the foreclosure are not sufficient to All those contracts were executed by B while A was
pay the loan in full, the bank cannot run after CX for the
deficiency.
ALTERNATIVE ANSWER:
While as a general rule the principal is not liable for the
contract entered into by his agent in case the agent acted in
his own name without disclosing his principal, such rule does
not apply if the contract involves a thing belonging to the
principal. In such case, the principal is liable under Article
1883 of the Civil Code. The contract is deemed made on his
behalf (Sy-juco v. Sy-juco 40 Phil. 634 [1920]).
ALTERNATIVE ANSWER:
CX would not be liable for the bank loan. CX's property
would also not be liable on the mortgage. Since DY did not
specify that he was acting for CX in the transaction with the
bank, DY in effect acted in his own name. In the case of
Rural Bank of Bombon v. CA, 212 SCRA, (1992), the Supreme
Court, under the same facts, ruled that "in order to bind the
principal by a mortgage on real property executed by an
agent, it must upon its face purport to be made, signed and
sealed in the name of the principal, otherwise, it will bind the
agent only. It is not enough merely that the agent was in fact
authorized to make the mortgage, if he, has not acted in the
name of the principal. Neither is it ordinarily sufficient that in
the mortgage the agent describes himself as acting by virtue
of a power of attorney, if in fact the agent has acted in his
own name and has set his own hand and seal to the
mortgage. There is no principle of law by which a person can
become liable on a real estate mortgage which she never
executed in person or by attorney in fact".
Appointment of Sub-Agent (1999)
X appoints Y as his agent to sell his products in Cebu City.
Can Y appoint a sub-agent and if he does, what are the
effects of such appointment? (5%)
SUGGESTED ANSWER:
Yes, the agent may appoint a substitute or sub-agent if the
principal has not prohibited him from doing so, but he shall
be responsible for the acts of the substitute:
(1) when he was not given the power to appoint one;
(2) when he was given such power, but without designating
the person, and the person appointed was notoriously
incompetent or insolvent.
General Agency vs. Special Agency (1992)
A as principal appointed B as his agent granting him general
and unlimited management over A's properties, stating that A
withholds no power from B and that the agent may execute
such acts as he may consider appropriate.
Accordingly, B leased A's parcel of land in Manila to C for
four (4) years at P60,000.00 per year, payable annually in
advance.
B leased another parcel of land of A in Caloocan City to D
without a fixed term at P3,000.00 per month payable
monthly.
B sold to E a third parcel of land belonging to A located in
Quezon City for three (3) times the price that was listed in
the inventory by A to B.
confined due to illness in the Makati Medical Center. Rule on
the validity and binding effect of each of the above contracts
upon A the principal. Explain your answers,
SUGGESTED ANSWER:
The agency couched in general terms comprised only acts of
administration (Art. 1877, Civil Code). The lease contract on
the Manila parcel is not valid, not enforceable and not
binding upon A. For B to lease the property to C, for more
than one (1) year, A must provide B with a special power of
attorney (Art. 1878. Civil Code).
The lease of the Caloocan City property to D is valid and
binding upon A. Since the lease is without a fixed term, it is
understood to be from month to month, since the rental is
payable monthly (Art. 1687, Civil Code).
The sale of the Quezon City parcel to E is not valid and not
binding upon A. B needed a special power of attorney to
validly sell the land (Arts. 1877 and 1878, Civil Code). The
sale of the land at a very good price does not cure the defect
of the contract arising from lack of authority
Powers of the Agent (1994)
Prime Realty Corporation appointed Nestor the exclusive
agent in the sale of lots of its newly developed subdivision.
Prime Realty told Nestor that he could not collect or receive
payments from the buyers. Nestor was able to sell ten lots to
Jesus and to collect the down payments for said lots. He did
not turn over the collections to Prime Realty. Who shall bear
the loss for Nestor's defalcation, Prime Realty or Jesus?
SUGGESTED ANSWER:
a) The general rule is that a person dealing with an agent
must inquire into the authority of that agent. In the present
case, if Jesus did not inquire into that authority, he is liable
for the loss due to Nestor's defalcation unless Article 1900,
Civil Code governs, in which case the developer corporation
bears the loss.
Art. 1900 Civil Code provides: "So far as third persons are
concerned, an act is deemed to have been performed within
the scope of the agent's authority, if such act is within the
terms of the power of attorney, as written, even if the agent
has in fact exceeded the limits of his authority according to
an understanding between the principal and the agent.
However, if Jesus made due inquiry and he was not informed
by the principal Prime Realty of the limits of Nestor's
authority. Prime Realty shall bear the loss.
b) Considering that Prime Realty Corporation only "told"
Nestor that he could not receive or collect payments, it
appears that the limitation does not appear in his written
authority or power of attorney. In this case, insofar as Jesus,
who is a third person is concerned, Nestor's acts of collecting
payments is deemed to have been performed within the scope
of his authority {Article 1900. Civil Code). Hence, the
principal is liable.
However, if Jesus was aware of the limitation of Nestor's
power as an agent, and Prime Realty Corporation does not
ratify the sale contract, then Jesus shall be liable (Article allowing the other general partner to bind the corporation
1898. Civil Code).
Termination; Effect of Death of Agent (1997)
Stating briefly the thesis to support your answer to each of
the following cases, will the death - (c) of an agent end an
agency?
SUGGESTED ANSWER:
Yes. The death of an agent extinguishes the agency, by
express provision of par. 3, Art 1919 of the Civil Code.
Quasi-Contracts; Negotiorium Gestio (1992)
In fear of reprisals from lawless elements besieging his
barangay, X abandoned his fishpond, fled to Manila and left
for Europe. Seeking that the fish in the fishpond were ready
for harvest, Y, who is in the business of managing fishponds
on a commission basis, took possession of the property,
harvested the fish and sold the entire harvest to Z. Thereafter,
Y borrowed money from W and used the money to buy new
supplies of fish fry and to prepare the fishpond for the next
crop. a) What is the Juridical relation between X and Y
during X's absence? b) Upon the return of X to the barangay,
what are the obligations of Y to X as regards the contract
with Z? c) Upon X's return, what are the obligations of X as
regards Y's contract with W? d) What legal effects will result if
X expressly ratifies Y's management and what would be the
obligations of X in favor of Y? Explain all your answers.
SUGGESTED ANSWER:
(a) The juridical relation is that of the quasi-contract of
"negotiorum gestio". Y is the "gestor" or "officious manager"
and X is the "owner" (Art. 2144, Civil Code).
(b) Y must render an account of his operations and deliver to
X the price he received for the sale of the harvested fish
(Art, 2145, Civil Code).
(c) X must pay the loan obtained by Y from W because X
must answer for obligations contracted with third persons in
the interest of the owner (Art. 2150, Civil Code),
(d) Express ratification by X provides the effects of an
express agency and X is liable to pay the commissions
habitually received by the gestor as manager (Art. 2149, Civil
Code).
Quasi-Contracts; Negotiorium Gestio (1995)
Armando owns a row of residential apartments in San Juan,
Metro Manila, which he rents out to tenants. On 1 April 1991
he left for the United States without appointing any
administrator to manage his apartments such that uncollected
rentals accumulated for three (3) years. Amparo, a niece of
Armando, concerned with the interest of her uncle, took it
upon herself to administer the property. As a consequence,
she incurred expenses in collecting the rents and in some
instances even spent for necessary repairs to preserve the
property.
1. What Juridical relation between Amparo and Armando, if
any, has resulted from Amparo's unilateral act of assuming the
administration of Armando's apartments? Explain.
2. What rights and obligations, if any, does Amparo have
under the circumstances? Explain.
SUGGESTED ANSWER:
1. Negotiorum gestio existed between Amparo and
Armando, She voluntarily took charge of the agency or
management of the business or property of her uncle without
any power from her uncle whose property was neglected. She
is called the gestor negotiorum or officious manager, (Art.
2144, NCC)
2. It is recommended by the Committee that an enumeration
of any two (2) obligations and two (2) rights as enumerated in
Arts. 2145 to 2152, NCC, would entitle the examinee to full
credit.
Alma was hired as a domestic helper in Hongkong by the
Dragon Services, Ltd., through its local agent. She executed a
standard employment contract designed by the Philippine
Overseas Workers Administration (POEA) for overseas
Filipino workers. It provided for her employment for one
year at a salary of US$1,000.00 a month. It was submitted to
and approved by the POEA. However, when she arrived in
Hongkong, she was asked to sign another contract by Dragon
Services, Ltd. which reduced her salary to only US$600.00 a
month. Having no other choice, Alma signed the contract but
when she returned to the Philippines, she demanded payment
of the salary differential of US$400.00 a month. Both Dragon
Services, Ltd. and its local agent claimed that the second
contract is valid under the laws of Hongkong, and therefore
binding on Alma. Is their claim correct? Explain.
SUGGESTED ANSWER:
Their claim is not correct. A contract is the law between the
parties but the law can disregard the contract if it is contrary
to public policy. The provisions of the 1987 Constitution on
the protection of labor and on social justice (Sec. 10. Art II)
embody a public policy of the Philippines. Since the
application of Hongkong law in this case is in violation of
that public policy, the application shall be disregarded by Court of Appeals (G.R No. 104235, Nov. 10, 1993) the
our Courts. (Cadalin v. POEA. 238 SCRA 762)
ALTERNATIVE ANSWERS;
a) Their claim is not correct. Assuming that the second
contract is binding under Hongkong law, such second
contract is invalid under Philippine law which recognizes as
valid only the first contract. Since the case is being litigated in
the Philippines, the Philippine Court as the forum will not
enforce any foreign claim obnoxious to the forum's public
policy. There is a strong public policy enshrined in our
Constitution on the protection of labor. Therefore, the
second contract shall be disregarded and the first contract will
be enforced. (Cadalin v. POEA, 238 SCRA 762).
b) No, their claim is not correct. The second contract
executed in Hongkong, partakes of the nature of a waiver that
is contrary to Philippine law and the public policy governing
Filipino overseas workers. Art. 17, provides that our
prohibitive laws concerning persons, their acts, or their
property or which have for their object public order, public
policy and good customs shall not be rendered ineffective by
laws or conventions agreed upon in a foreign country. Besides,
Alma's consent to the second contract was vitiated by undue
influence, being virtually helpless and under financial distress
in a foreign country, as indicated by the given fact that she
signed because she had no choice. Therefore, the defendants
claim that the contract is valid under Hongkong law should be
rejected since under the DOCTRINE OF PROCESSUAL
PRESUMPTION a foreign law is deemed similar or identical
to Philippine law in the absence of proof to the contrary, and
such is not mentioned in the problem as having been adduced.
PARTNERSHIP
Composition of Partnerships; Spouses; Corporations (1994)
1) Can a husband and wife form a limited partnership
to engage in real estate business, with the wife being a limited
partner?
2) Can two corporations organize a general partnership under
the Civil Code of the Philippines? 3) Can a corporation and
an individual form a general partnership?
SUGGESTED ANSWER:
1) a) Yes. The Civil Code prohibits a husband and wife from
constituting a universal partnership. Since a limited
partnership is not a universal partnership, a husband and wife
may validly form one. b) Yes. While spouses cannot enter
into a universal partnership, they can enter into a limited
partnership or be members thereof (CIR u. Suter, etal. 27
SCRA 152).
SUGGESTED ANSWER:
2) a) No, A corporation is managed by its board of
directors. If the corporation were to become a partner,
co-partners would have the power to make the corporation
party to transactions in an irregular manner since the partners
are not agents subject to the control of the Board of
Directors. But a corporation may enter into a joint venture
with another corporation as long as the nature of the venture
is in line with the business authorized by its charter. (Tuason
& Co., Inc. v. Bolano, 95 Phil. 106).
b) As a general rule a corporation may not form a general
partnership with another corporation or an individual because
a corporation may not be bound by persons who are neither
directors nor officers of the corporation.
However, a corporation may form a general partnership with
another corporation or an individual provided the following
conditions are met:
1) The Articles of Incorporation of the
corporation expressly allows the corporation to enter
into partnerships;
2) The Articles of Partnership must provide that
all partners will manage the partnership, and they shall be
jointly and severally liable; and
3) In case of a foreign corporation, it must be
licensed to do business in the Philippines.
c) No. A corporation may not be a general partner because
the principle of mutual agency in general partnership
will violate the corporation law principle that only the board
of directors may bind the corporation.
SUGGESTED ANSWER:
3) No, for the same reasons given in the Answer to Number
2 above.
Conveyance of a Partner’s Share Dissolution (1998)
Dielle, Karlo and Una are general partners in a merchandising
firm. Having contributed equal amounts to the capital, they
also agree on equal distribution of whatever net profit is
realized per fiscal period. After two years of operation,
however, Una conveys her whole interest in the partnership to
Justine, without the knowledge and consent of Dielle and
Karlo.
1. Is the partnership dissolved?
12%]
2. What are the rights of Justine, if any, should she desire to
participate in the management of the partnership and in the
distribution of a net profit of P360.000.00 which was realized
after her purchase of Una's interest? [3%]
SUGGESTED ANSWER:
1. No, a conveyance by a partner of his whole interest in a
partnership does not of itself dissolve the partnership in the
absence of an agreement. (Art. 1813. Civil Code)
SUGGESTED ANSWER:
2. Justine cannot interfere or participate in the management or
administration of the partnership business or affairs. She may,
however, receive the net profits to which Una would have
otherwise been entitled. In this case, P120.000 (Art. 1813,
Civil Code)
Dissolution of Partnership (1995)
Pauline, Patricia and Priscilla formed a business partnership
for the purpose of engaging in neon advertising for a term of
five (5) years. Pauline subsequently assigned to Philip her
interest in the partnership. When Patricia and Priscilla learned
of the assignment, they decided to dissolve the partnership
before the expiration of its term as they had an unproductive
business relationship with Philip in the past. On the other
hand, unaware of the move of Patricia and Priscilla but
sensing their negative reaction to his acquisition of Pauline's
interest, Philip simultaneously petitioned for the dissolution
of the partnership.
1. Is the dissolution done by Patricia and Priscilla without
the consent of Pauline or Philip valid? Explain.
2. Does Philip have any right to petition for the
dissolution of the partnership before the expiration of its
specified term? Explain.
SUGGESTED ANSWER:
1, Under Art. 1830 (1) (c) of the NCC, the dissolution by
Patricia and Priscilla is valid and did not violate the contract
of partnership even though Pauline and Philip did not
consent thereto. The consent of Pauline is not necessary
because she had already assigned her interest to Philip. The
consent of Philip is not also necessary because the assignment
to him of Pauline's interest did not make him a partner, under
Art, 1813 of the NCC.
ALTERNATIVE ANSWER:
Interpreting Art. 1830 (1) (c) to mean that if one of the
partners had assigned his interest on the partnership to
another the remaining partners may not dissolve the A should be hired as Secretary. The decision for the hiring
partnership, the dissolution by Patricia and Priscilla without
the consent of Pauline or Philip is not valid.
SUGGESTED ANSWER:
2. No, Philip has no right to petition for dissolution because
he does not have the standing of a partner (Art. 1813 NCC).
Dissolution of Partnership; Termination (1993)
A, B and C formed a partnership for the purpose of
contracting with the Government in the construction of one
of its bridges. On June 30, 1992, after completion of the
project, the bridge was turned over by the partners to the
Government. On August 30, 1992, D, a supplier of materials
used in the project sued A for collection of the indebtedness
to him. A moved to dismiss the complaint against him on the
ground that it was the ABC partnership that is liable for the
debt. D replied that ABC partnership was dissolved upon
completion of the project for which purpose the partnership
was formed. Will you dismiss the complaint against A If you
were the Judge?
SUGGESTED ANSWER:
As Judge, I would not dismiss the complaint against A.
because A is still liable as a general partner for his pro rata
share of 1/3 (Art. 1816, C. C.J. Dissolution of a partnership
caused by the termination of the particular undertaking
specified in the agreement does not extinguish obligations,
which must be liquidated during the "winding up" of the
partnership affairs (Articles 1829 and 1830. par. 1-a, Civil
Code).
Effect of Death of Partner (1997)
Stating briefly the thesis to support your answer to each of
the following cases, will the death - of a partner terminate the
partnership?
SUGGESTED ANSWER:
Yes. The death of a partner will terminate the partnership, by
express provision of par. 5, Art. 1830 of the Civil Code.
Obligations of a Partner (1992)
W, X, Y and Z organized a general partnership with W and X
as industrial partners and Y and Z as capitalist partners. Y
contributed P50,000.00 and Z contributed P20,000.00 to the
common fund. By a unanimous vote of the partners, W and
X were appointed managing partners, without any
specification of their respective powers and duties.
A applied for the position of Secretary and B applied for the
position of Accountant of the partnership.
The hiring of A was decided upon by W and X, but was
opposed by Y and Z.
The hiring of B was decided upon by W and Z, but was
opposed by X and Y.
Who of the applicants should be hired by the partnership?
Explain and give your reasons.
SUGGESTED ANSWER:
of A prevails because it is an act of administration which can
be performed by the duly appointed managing partners, W
and X.
B cannot be hired, because in case of a tie in the decision of
the managing partners, the deadlock must be decided by the
partners owning the controlling interest. In this case, the
opposition of X and Y prevails because Y owns the
controlling Interest (Art. 1801, Civil Code).
Obligations of a Partner; Industrial Partner (2001)
Joe and Rudy formed a partnership to operate a car repair
shop in Quezon City. Joe provided the capital while Rudy
contributed his labor and industry. On one side of their shop,
Joe opened and operated a coffee shop, while on the other
side, Rudy put up a car accessories store. May they engage in
such separate businesses? Why? [5%]
SUGGESTED ANSWER:
Joe, the capitalist partner, may engage in the restaurant
business because it is not the same kind of business the
partnership is engaged in. On the other hand, Rudy may not
engage in any other business unless their partnership
expressly permits him to do so because as an industrial
partner he has to devote his full time to the business of the
partnership [Art. 1789, CC).
Commodatum & Mutuum
Commodatum (1993)
A, upon request, loaned his passenger Jeepney to B to enable
B to bring his sick wife from Paniqui. Tarlac to the Philippine
General Hospital in Manila for treatment. On the way back to
Paniqui, after leaving his wife at the hospital, people stopped
the passenger Jeepney. B stopped for them and allowed them
to ride on board, accepting payment from them just as in the
case of ordinary passenger Jeepneys plying their route. As B
was crossing Bamban, there was an onrush of Lahar from Mt
Pinatubo, the Jeep that was loaned to him was wrecked. 1)
What do you call the contract that was entered into by
A and B with respect to the passenger Jeepney that was
loaned by A to B to transport the latter's sick wife to
Manila? 2) Is B obliged to pay A for the use of the passenger
jeepney? 3) Is B liable to A for the loss of the
Jeepney?
SUGGESTED ANSWER:
1) The contract is called "commodatum". [Art. 1933. Civil
Code). COMMODATUM is a contract by which one of the
parties (bailor) delivers to another (bailee) something not
consumable so that the latter may use it for a certain time
and return it.
2) No, B is not obliged to pay A for the use of the passenger
Jeepney because commodatum is essentially gratuitous. (Art.
1933. Civil Code]
3) Yes, because B devoted the thing to a purpose different
from that for
TRUST
Express Trust; Prescription (1997)
On 01 January 1980, Redentor and Remedies entered into an
agreement by virtue of which the former was to register a
parcel of land in the name of Remedies under the explicit
covenant to reconvey the land to Remigio, son of Redentor,
upon the son's graduation from college. In 1981, the land
was registered in the name of Remedies.
Redentor died a year later or in 1982. In March 1983, Remigio
graduated from college. In February 1992, Remigio
accidentally found a copy of the document so constituting
Remedies as the trustee of the land. In May 1994, Remigio
filed a case against Remedies for the reconveyance of the land
to him. Remedies, in her answer, averred that the action
already prescribed. How should the matter be decided?
SUGGESTED ANSWER:
The matter should be decided in favor of Remigio (trustee) 1. Juana has the right of action to recover (a) her one-half
because the action has not prescribed. The case at bar
involves an express trust which does not prescribe as long as
they have not been repudiated by the trustee (Diaz vs.
Gorricho. 103 Phil, 261).
Implied Trust (1998)
Juan and his sister Juana inherited from their mother two
parcels of farmland with exactly the same areas. For
convenience, the Torrens certificates of title covering both
lots were placed in Juan's name alone. In 1996, Juan sold to
an innocent purchaser one parcel in its entirety without the
knowledge and consent of Juana, and wrongfully kept for
himself the entire price paid.
1. What rights of action, if any, does Juana have against
and/or the buyer? |3%]
2. Since the two lots have the same area, suppose Juana
flies a complaint to have herself declared sole owner of the
entire remaining second lot, contending that her brother had
forfeited his share thereof by wrongfully disposing of her
undivided share in the first lot. Will the suit prosper? [2%]
SUGGESTED ANSWER:
1. When, for convenience, the Torrens title to the two parcels
of land were placed in Joan's name alone, there was created
an implied trust (a resulting trust) for the benefit of Juana
with Juan as trustee of one-half undivided or ideal portion of
each of the two lots. Therefore, Juana can file an action for
damages against Joan for having fraudulently sold one of the
two parcels which he partly held in trust for Juana's benefit.
Juana may claim actual or compensatory damage for the loss
of her share in the land; moral damages for the mental
anguish, anxiety, moral shock and wounded feelings she had
suffered; exemplary damage by way of example for the
common good, and attorney's fees.
Juana has no cause of action against the buyer who acquired
the land for value and in good faith, relying on the transfer
certificate of title showing that Juan is the registered owner
of the land.
ANOTHER ANSWER:
1. Under Article 476 of the Civil Code, Juana can file an
action for quieting of title as there is a cloud in the title to the
subject real property. Second, Juana can also file an action for
damages against Juan, because the settled rule is that the
proper recourse of the true owner of the property who was
prejudiced and fraudulently dispossessed of the same is to
bring an action for damages against those who caused or
employed the same. Third, since Juana had the right to her
share in the property by way of inheritance, she can demand
the partition of the thing owned in common, under Article
494 of the Civil Code, and ask that the title to the remaining
property be declared as exclusively hers.
However, since the farmland was sold to an innocent purchaser
for value, then Juana has no cause of action against the buyer
consistent with the established rule that the rights of an innocent
purchaser for value must be respected and protected
notwithstanding the fraud employed by the seller in securing his
title. (Eduarte vs. CA, 253 SCRA 391)
ADDITIONAL ANSWER:
share in the proceeds of the sale with legal interest thereof,
and (b) such damages as she may be able to prove as having
been suffered by her, which may include actual or
compensatory damages as well as moral and exemplary
damages due to the breach of trust and bad faith (Imperial
vs. CA, 259 SCRA 65). Of course, if the buyer knew of the
co-ownership over the lot he was buying, Juana can seek (c)
reconvenyance of her one-half share instead but she must
implead the buyer as co-defendant and allege his bad faith in
purchasing the entire lot. Finally, consistent with the ruling in
Imperial us. CA. Juana may seek instead (d) a declaration that
she is now the sole owner of the entire remaining lot on the
theory that Juan has forfeited his one-half share therein.
ADDITIONAL ANSWER:
1. Juana can file an action for damages against Juan for having
fraudulently sold one of the two parcels which he partly held
in trust for Juana's benefit. Juana may claim actual or
compensatory damage for the loss of her share in the land;
moral damages for the mental anguish, anxiety, moral shock
and wounded feelings she had suffered; exemplary damage by
way of example for the common good, and attorney's fees.
Juana has no cause of action against the buyer who acquired
the land for value and in good faith, relying on the transfer
certificate showing that Juan is the registered owner of the
land.
SUGGESTED ANSWER:
2. Juana's suit to have herself declared as sole owner of the
entire remaining area will not prosper because while Juan's
act in selling the other lot was wrongful. It did not have the
legal effect of forfeiting his share in the remaining lot.
However, Juana can file an action against Juan for partition
or termination of the co-ownership with a prayer that the lot
sold be adjudicated to Juan, and the remaining lot be
adjudicated and reconveyed to her.
ANOTHER ANSWER:
2. The suit will prosper, applying the ruling in Imperial vs.
CA cited above. Both law and equity authorize such a result,
said the Supreme Court.
Strictly speaking, Juana's contention that her brother had
forfeited his share in the second lot is incorrect. Even if the
two lots have the same area, it does not follow that they have
the same value. Since the sale of the first lot on the Torrens
title in the name of Juan was valid, all that Juana may recover
is the value of her undivided interest therein, plus damages.
In addition, she can ask for partition or reconveyance of her
undivided interest in the second lot, without prejudice to any
agreement between them that in lieu of the payment of the
value of Juana's share in the first lot and damages, the second
lot be reconveyed to her.
ALTERNATIVE ANSWER:
2. The suit will not prosper, since Juan's wrongful act of
pocketing the entire proceeds of the sale of the first lot is not
a ground for divesting him of his rights as a co-owner of the
second lot. Indeed, such wrongdoing by Juan does not
constitute, for the benefit of Juana, any of the modes of
acquiring ownership under Art. 712, Civil Code.
Trust; Implied Resulting Trust (1995)
In 1960, Maureen purchased two lots in a plush subdivision
registering Lot 1 in her name and Lot 2 in the name of her
brother Walter with the latter's consent. The idea was to
circumvent a subdivision policy against the acquisition of
more than one lot by one buyer. Maureen constructed a house
on Lot 1 with an extension on Lot 2 to serve as a guest house.
In 1987, Walter who had suffered serious business losses
demanded that Maureen remove the extension house since
the lot on which the extension was built was his property. In
1992, Maureen sued for the reconveyance to her of Lot 2
asserting that a resulting trust was created when she had the
lot registered in Walter's name even if she paid the purchase
price. Walter opposed the suit arguing that assuming the
existence of a resulting trust the action of Maureen has already
prescribed since ten years have already elapsed from the
registration of the title in his name. Decide. Discuss fully.
SUGGESTED ANSWER:
This is a case of an implied resulting trust. If Walter claims to
have acquired ownership of the land by prescription or if he
anchors his defense on extinctive prescription, the ten year
period must be reckoned from 1987 when he demanded that
Maureen remove the extension house on Lot No. 2 because
such demand amounts to an express repudiation of the trust
and it was made known to Maureen. The action for
reconveyance filed in 1992 is not yet barred by prescription.
(Spouses Huang v. Court of Appeals, Sept. 13, 1994).
SALES
Assignment of Credit vs. Subrogation (1993)
Peter Co, a trader from Manila, has dealt business with Allied
Commodities in Hongkong for five years. All through the
years, Peter Co accumulated an indebtedness of P500,000.00
with Allied Commodities. Upon demand by its agent in
Manila, Peter Co paid Allied Commodities by check the
amount owed. Upon deposit in the payee's account in Manila,
the check was dishonored for insufficiency of funds. For and
in consideration of P1.00, Allied Commodities assigned the
credit to Hadji Butu who brought suit against Peter Co in the
RTC of Manila for recovery of the amount owed. Peter Co
moved to dismiss the complaint against him on the ground
that Hadji Butu was not a real party in interest and, therefore,
without legal capacity to sue and that he had not agreed to a
subrogation of creditor. Will Peter Co's defense of absence of
agreement to a subrogation of creditor prosper?
SUGGESTED ANSWER:
No, Co's defense will not prosper. This is not a case of
subrogation, but an assignment of credit. ASSIGNMENT OF
CREDIT is the process of transferring the right of the
assignor to the assignee. The assignment may be done either
gratuitously or onerously, in which case, the assignment has
an effect similar to that of a sale (Nyco Sales Corp.v.BA
Finance Corp. G.R No.71694. Aug.16, 1991 200 SCRA 637). As a
result of the assignment, the plaintiff acquired all the rights of
the assignor including the right to sue in his own name as the
legal assignee. In assignment, the debtor's consent is not
essential for the validity of the assignment
(Art. 1624; 1475. CC; Rodriguez v. CA, et al, G. R No. 84220,
March 25. 1992 207 SCRA 553).
ALTERNATIVE ANSWER:
No, the defense of Peter Co will not prosper. Hadji Butu
validly acquired his right by an assignment of credit under
Article 1624 of the Civil Code. However, the provisions on
the contract of sale (Article 1475 Civil Code) will apply, and
the transaction is covered by the Statute of Frauds. (Art.
1403 par. (2) Civil Code)
Conditional Sale vs. Absolute Sale (1997)
Distinguish between a conditional sale, on the one hand, and
an absolute sale, on the other hand.
SUGGESTED ANSWER:
A CONDITIONAL SALE is one where the vendor is
granted the right to unilaterally rescind the contract predicated
on the fulfillment or non-fulfillment, as the case may be, of
the prescribed condition. An ABSOLUTE SALE is one
where the title to the property is not reserved to the vendor or
if the vendor is not granted the right to rescind the contract
based on the fulfillment or nonfulfillment, as the case may be,
of the prescribed condition.
Contract of Sale vs. Agency to Sell (1999)
A granted B the exclusive right to sell his brand of Maong
pants in Isabela, the price for his merchandise payable within
60 days from delivery, and promising B a commission of 20%
on all sales. After the delivery of the merchandise to B but
before he could sell any of them, B’s store in Isabela was
completely burned without his fault, together with all of A's
pants. Must B pay A for his lost pants? Why? (5%)
SUGGESTED ANSWER:
The contract between A and B is a sale not an agency to sell
because the price is payable by B upon 60 days from delivery
even if B is unable to resell it. If B were an agent, he is not
bound to pay the price if he is unable to resell it.
As a buyer, ownership passed to B upon delivery and, under
Art. 1504 of the Civil Code, the thing perishes for the owner.
Hence, B must still pay the price.
Contract of Sale; Marital Community Property; Formalities
(2006)
Spouses Biong and Linda wanted to sell their house. They
found a prospective buyer, Ray. Linda negotiated with Ray for
the sale of the property. They agreed on a fair price of P2
Million. Ray sent Linda a letter confirming his intention to
buy the property. Later, another couple, Bernie and Elena,
offered a similar house at a lower price of P 1.5 Million. But
Ray insisted on buying the house of Biong and Linda for
sentimental reasons. Ray prepared a deed of sale to be signed
by the couple and a manager's check for P2 Million. After
receiving the P2 Million, Biong signed the deed of sale.
However, Linda was not able to sign it because she was
abroad. On her return, she refused to sign the document
saying she changed her mind. Linda filed suit for nullification
of the deed of sale and for moral and exemplary damages
against Ray.
Will the suit prosper? Explain. (2.5)

PAT Diagnostic Exercise

Uploaded by

Copyright:

Available Formats

You might also like

PAT Diagnostic Exercise

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PAT Diagnostic Exercise

Uploaded by

Copyright:

Available Formats

PARTNERSHIP DIAGNOSTIC EXERCISES

2. One of the following is not a characteristic of contract of partnership.

3. One of the following is not a requisite of a contract of partnership. Which is it?

A. There must be a valid contract.

A. Universal partnership of profits,

A. Simon only for the whole amount of P 120,000.00

A. Equally at P3,000.00 each.

15. Which of the following stipulations is valid?

Based on the foregoing:

A. I and III pertain to a partner appointed as manager in the articles of partnership.

the following things. Which is the exception?

a. Things contributed to be sold.

b. Fungible things or those that cannot be kept without deteriorating.

will be for the common benefit.

21. A partner's interest in the partnership is his share of the

Which of the following statements concerning such right is

a. The conveyance of a partner's interest will cause

the dissolution of the partnership.

b. The assignee becomes a partner.

c. The assignee has a right to interfere in the

management of the partnership business.

d. The assignee has the right to receive the profits

which the assigning partner would otherwise be

22. Torres is indebted for P5,OOO.00 to MACE Trading

Company, a partnership managed by Mendoza to whom

Torres also owes P 10,000.00. The two debts which are

both demandable are unsecured. Torres remits P4,500.00

to Mendoza in payment of his debt to him.

Accordingly, Mendoza issues a receipt for his own credit.

To which credit should the payment be applied?

a. To Mendoza's credit because the payment made by

Torres is intended for his debt to Mendoza who

issues his own receipt.

b. To both the partnership credit and Mendoza'S

credit proportionately at P 1,500.00 and P3,OOO.OO,

c. To Mendoza's credit because its amount is greater

than that of the partnership credit.

partner should not prefer hig own interest to that

23. In three of the following wrongful acts of partners,

the partnership is solidarily liable with all the partners to

third persons. Which one is the exception?

a. For loss or injury caused to a third person by

reason of the wrongful act or omission of a partner

acting in the ordinary course of business.

b. Where a partner acting the scope of his

apparent authority receives money or property of a

third person and misapplies it.

c. Where the partnership receives money or property

of a third person in the ordinary course of business

and such money or property is misapplied by a

partner while it is in the custody of the

d. For loss or injury caused to a third person by

reason of ' the use of partnership property by a

partner for personal purpose.

24. Benito, Ignacio, Gregorio, Artemio and Servando are

partners in BIGAS Company which' is engaged in the

buying and selling of rice. Benito is the manager. Ignacio

was also given a special power of attorney by the