SMARTS

ANS:C
OBLIGATONS

1. A source of obligation where negligence resulted to

crime:
a)
Culpa contractual
b)
Quasi-contract
c)
Culpa delictual
d)
Culpa aquiliana
ANS: C
2. Which is not a source of obligation?
a)
Law
b)
Culpa aquiliana
c)
Culpa contractual
d)
Quasi-contract
ANS:C

ANS:D
8. Statement No. 1: An obligation which has for its object
the delivery of a delimited generic object may be
lost by reason of fortuitous event.
Statement No. 2: There can be no delay in an obligation
not to do.
a) Both statement are true
b) Both statements are false
c) Statement No. 1 is true while statement No. 2 is false
d) Statement No. 1 is false while statement No. 2 is true
ANS:A

3. Statement No. 1: D oblige himself to give C a specific

car tomorrow. If D failed to deliver tomorrow after
demand is made C may compel D to do his obligation
and may ask for damages.
Statement No. 2: D oblige himself to deliver a car to C
tomorrow. If D failed to deliver tomorrow after demand is
made Cs right is to ask a third person to deliver a car to him
at the expense of D plus damage.
a)
b)
c)
d)

7. Which of the following is not a generic obligation?

a)
Obligation to pay 5,000
b)
Obligation to deliver Toyota INNOVA 2005
c)
Obligation to deliver 50 cavans of rice
d)
Obligation to give a delimited generic object

Both are true

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

ANS:A
4. Which of the following is considered as quasi-contract?
a)
Solutio indebiti
b)
When the third person, without the knowledge of
the debtor, pays the debt
c)
Reimbursement due the person who saved property
during fire or storm without the knowledge of the
owner.
d)
All of the above
ANS:D
5. A judicial relation known as Negotiorum Gestio takes
place.
a)
When a person voluntarily takes charge of
anothers abandoned business or property without
the owners consent.
b)
When something is received and there is no right to
demand it and it was delivered through mistake.
c)
When a person is appointed by a court to take the
property or business of another.
d)
None of the above.
ANS:A
6. The wrongful act or tort which causes loss or harm to
another is called:
a)
Damages
b)
Damage
c) Injury
d) Liability

9. If
a)
b)
c)
d)

the obligation is payable in foreign currency

The obligation is void
The obligation is valid, but the stipulation is void
The creditor can compel the debtor to pay in
foreign currency as per agreement
The stipulation and the obligation are void.

ANS:C
10. Ill give you my car one year after your death. The
obligation is
a)
Valid, because the event is sure to come.
b)
Valid, the obligation is conditional.
c)
Valid, but disregard the condition.
d)
Void, not legally possible.
ANS:D
11. Statement No. 1: The concurrence of more than one
creditor or more than one debtor in one and the
same obligation implies solidarity.
Statement No. 2: In alternative obligations where the
right of choice is exercised by the creditor; consent of
the debtor as to the creditors choice of which prestation
to perform is necessary.
a) Both statements are true
b) Both statements are false
c) Statement No. 1 is true while statement No. 2 is false
d) Statement No. 1 is false while statement No. 2 is true
ANS:B
12. Statement No. 1: I will give you a NOKIA 6610
Phone if you will not marry X this year(2012). If by
the end of 2012, both parties are alive and no
marriage has taken place, my obligation is
extinguished.
Statement No. 2: I will give you 10,000 if I decide to
go to Cebu Ciy tomorrow. This obligation is valid.
a) Both are true
b) Both are false
c) No. 1 is true; No. 2 is false
d) No. 1 is false; No. 2 is true

ANS:B
13. Statement No. 1: If the obligation does not fix a
period, but from its nature and the circumstances, it
can be inferred that a period was intended, the court
may fix the duration therof. Once it is fixed by the
court the parties cannot change the fixed date for
performance.
Statement No. 2: I will give you 10,000 if X dies next
year. This is an obligation with a period.
a) Both are true.
b) Both are false.
c) No. 1 is true; No. 2 is false
d) No. 1 is false; No. 2 is true
ANS:B
14. Which obligation is not valid?
a)
I promise to give you 100,000 on December 25,
2012
b)
I promise to give you 100,000 if my mood
dictates.
c)
I promise to give you 100,000 if your patient
dies.
d)
I promise to give you 100,000 if you pass the
May 2013 CPA Board Examination
ANS:B
15. Which of the following is an obligation with a period
for the benefit of both the debtor and the creditor?
a)
Payable if i like
b)
Payable when you like
c)
Payable on or before December 25, 2012
d)
Payable on December 24, 2012
ANS:D
16. Which of the following obligations is not subject to a
period?
a)
Payable soonest
b)
Payable little by little
c)
Payable whenever I like it
d)
Payable when my means permit me to
ANS:C
17. A and B signed a promisory note o borrow 6,000
from X, Y, and Z, payable in 6 months time. B gave
in pledge a 10,000 diamond ring as security for the
amount borrowed. How much can Y collect from B?
a)
1,000
b)
6,000
c)
2,000
d)
3,000
ANS:A
18. If in the situation given above, the diamond ring is
returned by agreement to B, which of the following
statement is correct?
a)
Principal obligation is extinguished
b)
Only 2,000 of the obligation is extinguished
c)
Only 3,000 of the obligation is extinguished
d)
Accessory obligation is extinguished.
ANS:D

19. A, Band C executed a promisory note worded as

follows:
We promise to pay X, Y and Z the sum of 90,000
(Sgd,) A, B and C
a) A is obliged to pay to X, Y and Z 90,000
b) A is obliged to pay X 30,000
c) A is obliged to pay X 60,000
d) A is obliged to pay X 10,000
ANS:D
20. Statement No. 1: When the fulfillmentof the
suspensive or resolutory condition depends upon the
sole will of the debtor, the conditional obligation shall
be void.
Statement No. 2: If the original obligation is subject to a
suspensive or resolutory condition and the contract is novated
the new obligation shall be under the same conditions unless
otherwise stipulated.
a) Both are true
b) Both are false
c) No. 1 is true; No. 2 is false
d) No. 1 is false; No. 2 is true
ANS:D
21. In contracts and quasi-contracts, the liability of the
debtor who acted in good faith:
a)
Extends to all natural and probable consequences
of the breach of the obligation, and which the
parties have foreseen or could have reasonably
foreseen at the time the obligaiton was constituted.
b)
Extends only to results intended but excluding
exemplary damages
c)
Extends to all damages which may be reasonably
attributable to the nonperformance of the obligation
d)
Extends to all damages which may be renounced in
advanced
ANS:A
22. Statement No. 1: In solution indebiti, damages in
case of non-compliance is the basis of liability.
Statement No. 2: Negligence, as a ground for damages,
refers to the nonperformance of an obligation with respect to
time.
a) Both statements are true
b) Both statements are false
c) Statement No. 1 is false while statement No. 2 is true
d) Statement No. 1 is true while statement No. 2 is false
ANS:B
23. Debtor obliged himself to deliver to creditor 100
cavans of rice on June 1, 2012. On said date, D
failed to make delivery despite repeated demands by
C. In this case:
a)
C has no remedy under the law
b)
C can compel D to deliver 100 cavans of rice plus
damages
c)
C may ask a third person to deliver 100 cavans of
rice to him, the value recoverable from D plus
dameges
d)
Convert obligation to cash.

ANS:C
24. D obliged himself to paint the house of C or to paint
the picture of C in his house (SALA) in an standing
position, using 10 by 10 canvass. Later, because of
financial reverses, C sold his house to X. Which of
the following statements is correct.
a)
The obligation of D is extinguished because he
cannot make a choice
b)
D may just paint the picture of C
c)
D may cancel the contract and ask for damages
d)
Contract is voidable
ANS:C
25. The officious manager or gestor is liable for any
fortuitous event in all of the following, EXCEPT:
a)
If he has undertaken risky operations which the
owner was accustomed to embark upon.
b)
If he has preferred his own interest to that of the
owner.
c)
If he fails to return the property or business after
demand by the owner.
d)
If he assumed the management in bad faith.
ANS:A
26. Statement No.1: D obliges himself to give C a specific
ring, upon failure, to give C 5,000. This is a case of
facultative obligation.
Staement No.2: d obliges himself to give C a specific
ring. However, if he so desires, D may instead give C
5,000. This is an example of an obligation with a penal
clause. Given these examples, which statement is
correct?
a) Both obligations are valid but both are mislabeled as
to their classification as obligations
b) Both obligations are not valid
c) Both obligations are valid and are properly labeled as
to their classification as obligations
d) Both statements are invalid and improperly labeled as
to their classification as obligations
ANS:A
27. A is obliged to give B his only car on September
2012. On the said date, A did not deliver. On
September 2, 2012, an earthquake completely
destroyed the car. Is A still liable?
a)
No. Considering that no demand to deliver was
made by B and the specific thing was lost, due to
fortuitous event, the obligation is extinguished.
b)
No. The obligation is extinguished, even if the
debtor is already in default because the debtor can
plead impossibility of performance.
c)
Yes. A is already in legal delay, thus the obligation
to deliver the lost specific thing is converted into
monetary claim for damages.
d)
Yes. The creditor can instead demand for a
substitute of equivalent value from the debtor.

ANS:D
29. The debtor shall lose every right to make use of the
period except:
a)
When he does not furnish a guaranty or security of
the creditor
b)
When after the obligation has been constituted he
becomes insolvent, unless he gives a guaranty or
security for the debts
c)
When the debtor attempts to abscond
d)
When the debtor violates any undertaking in
considerations of which the creditor agreed to the
period.
ANS:A
30. A owes B 100,000 due on December 12, 2012. A
mortgaged his house to B as guaranty for the debt.
Shortly, however, the mortgaged house was
completely destroyed by typhoon Nitang. Therafter,
B demanded payment from A on October 28, 2012.
Is Bs demand valid?
a)
No. The obligation is one with a definite period,
thus the creditor cannot demand fulfillment of the
obligation as such would be prejudicial to the rights
of the debtor.
b)
No. The obligation is extinguished because the
object of the obligation is lost through a fortuitous
event.
c)
Yes. The debt becomes due at once because the
guaranty was lost even through a fortuitous event,
unless the debtor can mortgage another property
that is equally satisfactory.
d)
Yes. The debt becomes due at once because from
the tenor of the obligation, the period established is
for the benefit of the creditor solely thereby giving
the creditor the right to demand performance even
before the date stipulated.
ANS:C
31. The creditor is entitled to recover damges and
interest in addition to the penalty stipulated:
a)
When the parties so agreed
b)
When the debtor refuses to pay the penalty
c)
When the debtor is guilty of fraud in the fulfillment
of the obligation
d)
All of the above
ANS:B
32. Vin Diesel will continue giving Tommy Lee the
latters meal allowance until he finds a job, is an
obligation subject to:
a)
A resolutory period
b)
A suspensive condition
c)
A resolutory condition
d)
A suspensive period
ANS:C

ANS:A
28. The distinction between period and condition is
a)
Period may or may not happen
b)
Condition will always happen
c)
Period may refer to a past event unknown to the
parties
d)
Period is certain to happen unlike condition

33. D obliged to give C, either object No. 1 valued

15,000; or object No. 2 valued 10,000; or object
No. 3 valued 5,000. All the objects were lost due to
Ds fault in the following order stated.
a)
Ds obligation is extinguished
b)
Ds obligation is to pay the value of object No. 1
plus damages

c)
d)

Cs right is to demand the value of any of the object

plus damages
Pay 5,000 plus damages

ANS:D
34. In question No. 30 if object No. 1 is lost due to
fortuitous event; No. 2 is lost due to debtors fault;
No. 3 is subsisting;
a)
The right of C is to demand the value of object No.
2 plus damages
b)
C has no right because he did not communicate
what object the debtor will deliver
c)
The obligation of D is to deliver object No. 3
d)
Ds obligation is totally extinguished
ANS:C
35. A1, A2, and A3 oblige themselves solidarily to give C
a specific car valued 12,000. On the due date, C
demanded delivery but the debtors failed to deliver.
The next day, while A1 is still in possession of the
car, it got lost due to fortuitous event. The right of C
is
a)
None, obligation is totally extinguished
b)
Proceed against any of the debtors for the value
and damages
c)
Proceed against A1 only, because he is the one is
possession at the time it was lost
d)
Proceed against A2 or A3 but only 4,000 each
ANS:B
36. I will give you a specific car if you will not marry X
this year, C.Y. Which of the following statements is
incorrect?
a)
If on December 25, X died and no marriage took
place, my obligation becomes effective (not
extinguished) because the expected event cannot
occur anymore
b)
If on December 25 you marry X, my obligation is
extinguished because you violated the condition
c)
If the year has ended, and no marriage took place,
both parties are still alive, my obligation becomes
effective (not extinguished) because the time
indicated has already elapsed
d)
If on December 25, X entered the convent, the
obligation can be demanded immediately because it
is clear that the marriage will not take place
anymore.
ANS:D
37. D obliged himself to give C a specific car if the latter
cannot make a circle that is at the same time a
square.
a)
The obligation is impossible, therefore void.
b)
The obligation is void because the condition is
outside the commerce of man.
c)
D cannot be obliged to deliver at all
d)
Valid and enforceable
ANS:D
38. Statement No. 1: In alternative obligations, all the
objects promise by the debtor to the creditor are all
due.
Statement No. 2: In facultative obligations, there are
two objects due but the obligor can deliver one thing due

and the obligation is extinguished.

a) No. 1 is true; No. 2 is false
b) No. 1 is false; No. 2 is true
c) Both are true
d) Both are false
ANS:A
39. A-1 and A-2 are solidary debtors of B-1, B-2 and B-3,
joint creditors in the amount of 90,000. How much
can B-3 collect from A-2?
a)
B-3 could collect 30,000 from A-2
b)
B-3 could collect 90,000 from A-2 and give
30,000, each to B-1 and B-2
c)
B-3 could collect 45,000 from A-2 and give
13,000, each to B-1 and B-2
d)
B-3 could collect 15,000 from A-2 and 13,000
from A-1
ANS:A
40. Statement No. 1: A solidary creditor can assign his
rights even without the consent of the other
creditors.
Statement No. 2: In an obligation that is impossible of
division, the debt can be enforced only by proceeding
against all the debtors. If one of the debtors should be
insolvent, the other shall not liable for his share.
a) Both are true
b) Both are false
c) No. 1 is true; No. 2 is false
d) No. 1 is false; No. 2 is true
ANS:D
41. Statement No.1: Legal, compensation takes place by
operation of law even if the parties may be aware of
it.
Statement No.2: The indivisibility of an obligation
necessarily implies solidarity.
a) Both statements are true
b) Both statement are false
c) Statement No.1 is true while statement No. 2 is false
d) Statement No. 1 is false while statement No. 2 is true
ANS:C
42. Example No. 1: D owes C 10,000 due on December
25. C owes D 6,000 due on December 25. Ds
obligation is guaranteed by G. On the due date D is
insolvent. G is liable to C for 10,000, he(G) cannot
set up compensation because he is not a principle
debtor.
Example No. 2: D owes C 10,000 payable on December
25. Later d through intimidation, was able to make C
sign a promissory note stating that C is indebted to D for
the same amount. In here, D cannot be required to pay
C 10,000 because he (D) can set up compensation
against C.
a) Both examples are true
b) Both are false
c) Only No. 1 is true; No.2 is false
d) Only No.1 is false; No.2 is true
ANS:D

43. Obligaiton may be modified by:

a)
Changing their object or principal conditions
b)
Substituting the person of the debtor.
c)
Subrogating a third person in the rights of the
creditor
d)
All of the above
ANS:D
44. Which of the following is not a special mode of
payment?
a)
Dacion en pago
b)
Payment by cession
c)
Tender of payment
d)
Consignation alone without the need of tender
payment in cases provided for by the law

d)
ANS:C

50. All are secondary modes of extinguishing on

obligation except one:
a)
Compromise
b)
Illegality
c)
Impossibility
d)
Performance
ANS:D
CONTRACTS
1.

ANS:C
45. A and B are solidary debtors of X and Y, solidary
creditors to the amount of 4,000. On the due date
with the consent of Y, X renounced in favor of A the
entire obligation. Which of the following is correct?
a)
B shall give A 2,000
b)
Y can still collect from A or B 2,000
c)
Y can collect from X 2,000
d)
X has no obligation to reimburse Y any amount

2.

ANS:B
48. The following except one, are requisites of payment
as a mode of extinguishng an ordinary obligation.
Which is the exception?
a)
Complete or full payment
b)
Payment in due course when the obligation is due
and demandable
c)
Payment using negotiable instrument
d)
Payment using legal tender, except if payable in
foreign currency

This principle means that contracts take effect only

upon the contracting parties, their assigns or
succesors-in-interest
a. Relativity of contract
b. Obligatoriness of contract
c. Mutuality of contract
d. Freedom of contract

ANS:A
3.

ANS:C
47. A and B are the debtors and X and Y are the creditors
in a solidary obligation to the tune of 80,000. On
due date, X renounced in favor of A the entire
obligation which was validly accepted by A. Which of
the following is true?
a)
B shall give 40,000 to A
b)
Y can collect from X 40,000
c)
Y can still collect from A or B the
d)
A can collect 40,000 from B

By this principle, the validity and efficacy of the

contract cannot be left to the will of one of the
contracting parties.
a. Relativity of contract
b. Obligatoriness of contract
c. Mutuality of contract
d. Freedom of contract

ANS:C

ANS:D
46. The act of abandoning all his properties in favor of his
creditors so that the latter may cause their sale and
apply the proceeds thereof to their claims
proportionally is called:
a)
Dacion en pago
b)
Set off
c)
Payment by cession
d)
Tender of payment with consignation

Temperate damages

B forced S to sell him (B) a masterpiece painting for

1M. Subseuently, B sold it to X for 2M, a good faith
purchaser. S is entitled to
a. Rescind the contract with B plus damages
b. Recover the painting from X but no damages
c. Recover damages from B
d. Annul the contract plus damages

ANS:C
4.

The following contracts should obseve the Statute of

Frauds, except:
a. Guaranty
b. Lease of personal property longer than one year
c. Representation as to the credit of a third person
d. Lease of real property longer than one year

ANS:B
5.

On July 15, 2014, X entered into a contract with Y.

On February 10, 2015, X discovered that fraud was
committed at the time he entered. Remedy of X is to
annul when?
a. Within three years from the time of the fraud
b. Within four years from February 10, 2015
c. Within four years from the time A entered into
the contract
d. On February 10, 2015

ANS:B
ANS:C
49. Proof of pecuniary loss is necessary for the award of:
a)
Liquidated damages
b)
Exemplary damages
c)
Actual damages

6.

Consent is manifestated by the meeting of the offer

and the acceptance upon the thing and the cause
which are to constitute the contract. Which of the
following constitutes a definite order?

a.
b.
c.
d.

An offer made through and agent

Business advertisement of things for sale
Advertisement for bidders
All of the above

An
a.
b.
c.
d.

agreement in restraint of trade

Perfectly valid
Voidable
Unenforceable
Void

ANS:D
8.

Rescission of contract can take place in this case:

a. When the things, which are the object of the
contract, are legally in the possession of third
persons who acted in good faith
b. When he demands rescission can return
whatever he may be obliged to restore
c. When the party seeking resolution can perform
only as to part and rescind as to remainder
d. When the seller cannot return the installment
paid to him bu the buyer

ANS:B
9.

When the parties come to an agreement

When negotiations are in progress
When there is a meeting of the parties minds

ANS:C

ANS:A
7.

b.
c.
d.

13. Which of the following contracts is rescissible?

a. Those where one of the parties is incapable of
giving consent to a contract
b. Those where both parties are incapable of giving
consent to a contract
c. Those which are entered into by guardians
whenever the wards whom they represent suffer
a lesion of more than of the value of the
object of the contract
d. Those which are absolutely simulated of
fictitious
ANS:C
14. Contracts that cannot be sued upon unless ratified:
a. Voidable
b. Unenforceable
c. Rescissible
d. Void
ANS:B

Which of the following contracts is required to be in

writing to be enforceable?
a. An agreement that by its terms is not to be
performed within a year from the making
thereof.
b. A special promise to answer for debt, default or
miscarriage of another.
c. An agreement made in consideration of
marriage, other than a mutual promise to marry.
d. All of the above.

ANS:D
10. S makes an offer to B on January 1, 2014. B makes
known his acceptance in a letter sent on January 2,
and received by S on January 10. Meantime, on
January 5, S becomes insane.
a. The contract is voidable because one party is
insane
b. There is already a meeting of minds, the
contract is perfected
c. The contract is not binding because there is no
meeting of minds
d. Contract is unenforceable
ANS:C
11. In a contract, as written, D promises to pay C
P10,000 on September 15, 2014. The consideration
received by D is not stated in the contract. Decide.
a. The contract is valid because the cause is always
presumed to exist
b. The contract is valid so long as it in writing
c. The contract is valid because cause is not
essential to a contract
d. The contract is void because the cause is not
stated
ANS:A
12. The storage of conception of a contract is:
a. When the contract is fully executed

15. Contract that is made for a valuable consideration is:

a. Onerous
b. Gratuitous
c. Onerous and gratuitous
d. Aleatory
ANS:A
16. Who is liable for the loss of subject matter by
fortuitous event?
a. Creditor
b. Debtor
c. Both creditor and debtor
d. None of them
ANS:D
17. These persons are bound by contracts:
a. Contracting parties
b. Assigns or assign
c. Heirs
d. All of them
ANS:D
18. L entered into a contract of lease with X. T, the clerk
of L, typed the document. Due to Ts negligence, the
document made was that of sale instead of lease.
a. The remedy is annulment
b. Parties may go to court for interpretation
c. Parties may enforce their right because it is
enforceable
d. Remedy is reformation
ANS:D
19. Which of the following can be considered as feature
of the void contract?
a. Subject to ratification
b. They exist
c. Action or defense for nullity is subject to
prescription
d. It is imprescriptible as a defense

ANS:D
20. S entered into a contract with B by threatening B
that if B does not agree to make the contract, S
would publish defamatory matter concerning Bs
wife.
a. The contract is valid because the defamatory
matter to be published does not relate to B, the
contracting party
b. The
contract
is
voidable
because
such
publication when carried out whether true or not
will cause serious harm to B and his wife
c. The contract is unenforceable but B is entitled to
damages the moment the publication is made
d. Contract is void.
ANS:B
21. S1: If the cause is not stated in the contract it is
presumed that it is unlawful.
S2: The action for rescission is subsidiary; it cannot
be instituted except when there is no other legal
means to obtain reparation for damages suffered.
a. Both are true
b. Both are false
c. 1 is true; 2 is false
d. 1 is false; 2 is true
ANS:D
22. Because of the intimidation employed by X, a third
person, S sold his car to B. This contract is:
a. Void
b. Voidable
c. Unenforceable
d. Rescissible
ANS:B
23. B called C by the telephone to guaranty the debt of D
to C. The contract between B and C is:
a. Unenforceable
b. Voidable
c. Rescissible
d. Annullable
ANS:A
24. An obligation which cannot be enforced by court
action, but which is binding on the party who makes
it in conscience and according to natural justice is
called
a. Civil obligation
b. Natural obligation
c. Pure obligation
d. Simple obligation
ANS:B
25. Contract which has no effect at all and cannot be
ratified is a/an
a. Unenforceable
b. Void contract
c. Voidable
d. All of them
ANS:A
26. Statute of fraud is applicable to
a. Partially executed

b.
c.
d.

Oral contract of loan when the amount involved

is less than P500
Contract not to be performed within a year from
the making thereof
All of the above

ANS:C
27. An
a.
b.
c.
d.

incidental element of a contract

Implied warranty
Payment of interest in a loan
Delivery of the object in contract of pledge
All of the above

ANS:B
28. In three of the following defective contracts,
ratification cleanses the defects. Which is the
exception?
a. Both parties are incapable of giving consent
b. Sale of immovable property or interest orally
entered into
c. Sale of piece of land thru an agent the authority
is oral
d. Contracts entered into by a person who has
been given no authority
ANS:C
29. Valid until annulled unless there has been ratified
a. Rescissible contract
b. Inexistence contract
c. Voidable contract
d. None of the above
ANS:C
30. S was forced by X to sign a contract with B for the
sale of specific property for 10,000. C a creditor of X
is prejudiced by the contract. What can s do?
a. S may ask for annulment of the contract
b. S may ask for rescission of the contract
c. S may ask C to declare the contract avoided
d. C may ask for the annulment of the contract
ANS:A
31. In the preceding number, what can C do?
a. C may ask for rescission of the contract
b. C may ask for the reformation
c. C may ask S to declare the contract voided
d. C may ask for the annulment of the contract
ANS:A
32. Which of the following contract is voidable
a. Those where both parties are incapable of giving
consent to a contract
b. Those undertaken in fraud of creditors when the
latter cannot in any other manner collect the
claims due to them
c. Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud
d. Those whose object is outside the commerce of
men
ANS:C
33. S and B agrree that S would sell and B would buy Ss
radio for P400, to years from the date of the

agreement. At the end of the two-year period, S

refused to deliver the radio although B was willing to
pay.
a. B can compel to deliver because B is willing to
pay the price
b. The contract falls under the statute of frauds,
therefore unenforceable
c. No statute of frauds because the price is less
than P500
d. No obkect is movable, oral contract is
enforceable
ANS:B
34. This kind of defective contract refers to that contract
which is validly agreed upon because all the essential
elements exists, but courts nullify it when there is
damage or prejudice to one of the parties or to a
third person. Its enforcement would cause injustice
by reason of some external facts.
a. Voidable contract
b. Void or inexistence contract
c. Rescissible contract
d. Unenforceable contract

d.
ANS:D

40. Three of the following are void contracts. Which is

the exception?
a. Contracts where the cause is immoral
b. Contracts to prevent a known supporter of a
political rival from voting for his candidate for a
valuable consideration
c. Contracts with a valid consideration but with
unlawful motives
d. Absolutely silmulated contracts
ANS:C
41. Contract with a false cause is
a. Voidable
b. Void
c. Unenforceable
d. All of the above
ANS:B
42.

ANS:C
35. Must be in writing to be enforceable
a. Lease of land for 12 months
b. Lease of car for 18 months
c. Both a and b
d. None of a and b
ANS:D
36. A contract entered into in violation of right of first
refusal is:
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
ANS:A
37. Type of defective contract that creates no rights and
impose no obligation, but are susceptible of
ratification.
a. Voidable contracts
b. Unenforceable contracts
c. Rescissible contracts
d. Void contracts
ANS:B
38. D forced C to lend him P10,000. The promissory note
is in writing.
a. The contract is rescissible because the contract
is fraudulent
b. The contract is void
c. C cannot demand payment from D because the
contract is unenforceable
d. Contract remains to be valid
ANS:D
39. Which of the following contract is not valid?
a. Mutual promise to marry entered into orally
b. Sale of immovable property orally entered into
c. One of the parties in a contract is incapable of
giving consent

Sale of immovable property thru an agent

A conferment of a direct benefit in a contract

between two persons in a favor of a third person who
must accept such benefit before the same is
withdrawn is known as:
a. Politicitacion
b. Stipulation por autrui
c. Donation propter nuptias
d. Counter-offer

ANS:B
43. The guardian of an insane person sells a house and a
lot belonging to the latter valued at P100,000 to B,
buyer for P74,000 with the approval of the court. The
contract is:
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
ANS:A
44. Which of the following contract is enforceable even if
not reduced in writing
a. Lease of car for 2 years
b. Representation as to the credit of a third person
c. Lease of immovable for a period longer than one
year
d. Agreement for the sale of immovable property
ANS:A
45. Simulation of contract absolute or relative. Relative
when:
a. Parties not bound at all
b. The contract is void
c. The parties conceal their true agreement
d. None of the above
ANS:C
46. Essential requisites of a contract:
a. Consent
b. Cause
c. Subject
d. All of them

ANS:D
47. The offeror need not know the acceptance by the
offeree is the theory of:
a. Cognition
b. Manifestation
c. Expidition
d. B or C
ANS:D
48. Which of the following instruments is not subject to
reformation?
a. Simple donations inter vivos wherein no
condition imposed
b. Wills
c. When the real agreement is void
d. All of the above
ANS:D
49. S1. Place and modes of payment are example of
natural elements
S2. Agency, partnership and sale are example of
preparatory and consensual contracts
a. Both are true
b. Both are false
c. 1 is true; 2 is false
d. 1 is false; 2 is true
ANS:B
50. All are void contracts except:
a. Those whose object is outside the commerce of
men
b. Those which are relatively simulated of fictitious
c. Those with unlawful consideration
d. Those which contemplate an impossible service
ANS:B
PARTNERSHIP
1. As a general rule, a partner cannot ask for a formal
accounting of the affairs of the partnership during
the existence and before it is dissolved, except
a. When he is wrongfully excluded from the partnership
business
b. When the right exists under the terms of any
agreement
c. As provided by article 1807
d. Whenever other circumstances render it just and
reasonable
e. All of the above
ANS:E
2. Sometimes termed dormant partner
a. Limited partner
c. Secret partner
b. Capitalist partner
d. Both silent & secret
ANS:D
3. Every contract of partnership having a capital P3,000
or more in money or property shall appear in a public
instrument which must be recorded in the Securities
and Exchange Commission. Failure to comply with
said requirements.
a. Will not affect the liability of a partnership and the
members thereof to third
persons.

b. Will render the partnership void

c. Will not give the partnership a legal personality
d. Will give the parnership a de facto existence
ANS:A
4. A, B and C capitalist partners, contributed P10,000
each and D, the industrial partner contributed his
services. Suppose X, is the creditor of the firm to the
amount of P90,000, after getting the P30,000 assets
of the partnership
a. X can recover P20,000 each from A,B and C only
b. X can recover P60,000 from either A,B or C
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
ANS:C
5. A, B and C formed a general partnership A and B as
general partners contributing P60,000 and P40,000
respectively while C is an industrial partner. The
partners agreed that C, the industrial partner is
exempted from liability to third person.Upon
dissolution the partnership suffered a loss consisting
of a liability to X in the amount of P30,000. As
stated, which of the following statement is true
a. C is not liable because it was agreed that the
industrial partner is exempted from
liability to third
person
b. The 30,000 is considered a loss of the partnership and
C as an industrial partner is
exempted up to P10,000
only
c. Each partner is liable P10,000 only
d. A and B are liable for P15,000 each
ANS:C
6. A, B and C are partners. Their contribution are as
follows: A P60,000, B P40,000, and C services. The
partners agreed to divide the profits and losses in
the following proportions: A 35%, B 25%, and C
40%. If there is a profit of P10,000 how should the
said profit of P10,000 be distributed among 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 P2,500, C P4,000
d. A P3,500, B P3,500, C P3,000
ANS:C
7. A, B and C formed a general partnership, each to
contribute P100,000. The partnership began its
operation but Cs contribution is not yet fully paid
leaving a balance of P30,000. The partners agreed
that C exempted from losses. Upon dissolution there
was an outstanding obligation to X in the amount of
P360,000 X therefore exhausted the capital of
P270,000 leaving a balance of P90,000. Under this
premise, which of the following is TRUE:
a. Cs share in the balance of P90,000 is nothing because
this was stipulated
b. Cs share in the balance of P90,000 is P60,000 that is,
his share in the contribution
and his share in the loss
c. Cs obligation to X and the partnership is P50,000
d. Each partner share in the balance
ANS:C

8. In the preceding question, if C is a limited partner and

there is no stipulation that C exempted from losses,
which of the following statement is correct?
a. Cs share in the balance of P90,000 is nothing because
he is only a limited partner
b. Cs share in the balance of P90,000 is P60,000 that is
his share in the loss and his
unpaid contribution
c. Cs share in the balance of P90,000 is only P30,000
d. Each partner share in the balance of P90,000 is only
P30,000
ANS:C
9. A partner who is liable for the payment of partnership
debts to the extent of his separate property after the
partnership assets are exhausted is called
a. Managing partner
c. General partner
b. Limited partner
d. Silent partner
ANS:C
10. B-1, B-2 and B-3 are equal partners in 3-Brothers
Partnership. The partnership is indebted to PC for
P150,000. Partner B-1 is indebted to SC for P20,000.
PC attached and took all the assets of the
partnership amounting to P90,000. B-2 and B-3 are
solvent while B-1 is insolvent and all what he owns is
a land valued at P15,000.
a. SC has priority to the land of B-1 as a separate
creditor
b. PC has priority to the land of B-1 to cover B-1s share
of the P60,000 remaining liability of the partnership
c. B-2 and B-3 have priority to the land of B-1 if they
paid PC the P60,000
remaining
liability
of
the
partnership
d. PC and SC shall both have priority to the land of B-1
in proportion to their claims
of P60,000 and P20,000
respectively
ANS:A
11. A partnership is dissolved on the death of a
a. General partner
d. Limited partner
b. Industrial partner
e. a,b or c
c. General-Limited partner
ANS:E
12. In case of an imminent loss of the business of the
partnership, the following partners are required to give
additional contribution except
a. Capitalist partner
d. Industrial partner
b. General partner
e. None of the above
c. Capitalist-industrial partner
ANS:D
13. Coverage of Statute of Frauds in partnership contact,
which is the exception?
a. Promise to answer for the debt, default of miscarriage
of another by a partnership
must be in writing
b. If the agreement to form a partnership shall be
performed within a year the same must be in writing
c. Contracts for the sale of real property or any interest

therein or leasing of
partnership
immovable
property for more than one year must be in writing
d. Sale of partnership personal property at a price not
less than P500 must be in writing, unless there is a delivery
or payment
ANS:B
14. A, B and C, capitalists partners each contributed
P30,000, P20,000 and P10,000 respectively: and D
the industrial partner contributed his services.
Suppose X a customer is the creditor of the firm to
the amount of P180,000. How can X recover the
P180,000?
a. X must sue the firm and get P60,000 from the
partners including D, the industrial partner. X can still recover
the balance of P120,000 from the four partners jointly
b. X can recover from the firm P60,000. X can still
recover the balance of P120,000
from
the
capitalist
partners only
c. X can recover from the firm P60,000. X can still
recover the balance of P120,000
to any of the partners
solidary
d. X can recover from the firm P60,000 and consider the
balance of P120,000 as a loss
ANS:A
15. Which of the following is not a common fund of a
Universal Partnership Property?
a. All the present property of each partner contributed
b. All the profits that may be derived from such
properties
c. If stipulated, the properties acquired by a partner by
inheritance, legacy or
donation
d. None of the above
ANS:C
16. The following are causes of dissolution of a limited
partnership EXCEPT
a. Death of general partner
b. Retirement of general partner
c. Insanity of a limited partner
d. None of the above
ANS:C
17. A partnership is automatically dissolved, except
a. By the death of any partner
b. By the insolvency of any partner or of the partnership
c. By the civil interdiction of any partner
d. By the insanity of any partner
e. All of the above
ANS:D
18. An industrial partner who engages in a separate
business without the consent of the other partners
a. May be expelled from the Partnership plus damages
b. May be liable as a debtor
c. May be required to gave to Partnership whatever
profits or benefits he may have
derived from his separate
business
d. May be liable as a trustee
e. Both A & C
ANS:A

19. A person who, although not actually a partner, is

made liable for the debts of the partnership to third
person by reason of his acts or omissions is called:
a. Ostensible partner
b. Nominal partner
c. Silent partner
d. Dormant partner
e. None of the above
ANS:B
20. Except when authorized by the other partners, one or
more but less than all the partners have no authority
to:
a. Assign the partnership property in trust for creditors
b. Dispose of the goodwill of the business
c. Confess a judgement
d. Compromise a partnership claim or liability
e. All of the above
ANS:E
21. Which of the following is not a property right of a
partner?
a. His rights in specific partnerships property
b. His interest in the partnership
c. His right to participate in the management
d. To demand true and full information of all things
affecting the partnership
ANS:D
22. Which of the following is considered prima facie
evidence of the existence of a partnership?
a. Where payment of interest on a loan varies with the
profits of the business
b. The receipts by a person of a share of the profits
c. The sharing of gross returns of a business
d. Where the parties are established as co-owners of a
property
ANS:B
23. X, Y and Z are equal partners XYZ Partnership. A
owes the XYZ Partnership for P9,000. Z a partner
collected from A 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
contribution of Z in the partnership their respective
shares in the P3,000
ANS:A
24. A person who takes place of a limited partner who
has died is called
a. Heir
b. Successor in interest
c. Assignor
d. Substituted limited partner
ANS:D
25. If a partner is insolvent, the first order of preference
in the distribution of his assets is
a. Partners contribution to the partnership

b. Partnership creditor
c. Separate creditor of the partner
d. Pro-rata between the separate creditors and partnership
creditors
ANS:C
26. When the manner of management has not been
agreed upon, who shall manage the affairs of the
partnership?
a. Capitalist partners
b. Industrial partners
c. Capitalist-industrial partners
d. All of the partners
e. None of the above
ANS:D
27. X, Y and Z are partnership business X contributed
P10,000, Y contributes P5,000 and Z his services
only. After payment of partnership debts, what
remains of the partnership assets is only P6,000. In
the absence of terms to the contrary, the share of Z
will be equal to
a. That of Y
c. That of X
b. P2,000
d. Nothing
ANS:D
28. A, B and C are partners. Their contributions are as
follows: A P60,000, B P40,000, C services. 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 of P10,000 be shared by the partners?
a. A P6,000, B P4,000 ,C 0
b. A P3,000, B P2,000, C 3,500
c. A P3,500, B P3,500, C P3,500
d. A P3,500, B P2,500, C P4,000
ANS:A
29. 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 inable to pay. After
exhausting the assets of the partnership, there is still
unpaid balance of P10,000. Who are liable for the
payment of the unpaid balance of P10,000? How
much cash?
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
ANS:B
30. A partner whose liability for the partnership debts is
limited to his capital contribution is called:
a. General partner
d. Secret partner
b. Limited partner
e. None of the above
c. General-limited partner
ANS:B
31. A partnership without definite period of existence and

which can be dissolved at any time by any of the

partners is called
a. Universal partnership of all present property
b. Universal partnership of profits
c. Particular partnership
d. Partnership at will
e. None of the above
ANS:D
32. Which of the following provision in Partnership Law
is/are considered directory and not mandatory
a. If the capital is P3,000 or more it must appear in a public
instrument
b. The partnership contact must be recorded with the SEC if
limited partnership
c. If immovable properties is contributed it must appear in a
public instrument
d. B and C
e. A and B
ANS:A
33. A partnership is dissolved:
a. In contravention of the partnership agreement by the
express will of any partner at any time
b. By any event which makes it unlawful for the business of
the partnership to be
carried on or for the
members to carry it on in the partnership
c. When a specific thing which a partner had promised to
contribute to the
partnership perishes before its
delivery to the partnership
d. By the loss of the thing, whether before of after its
delivery to the partnership
when the partner who
contributed it having reserve the ownership thereof, has
only transferred the use or enjoyment of the same
e. All of the above
ANS:E
34. Coverage of Statute of Frauds in partnership contract,
which is the exemption?
a. Promise to answer for the debt, default of miscarriage
of another by a partnership
must
be
in
writing
b. If the agreement to form a partnership shall be
performed within a year the same
must
be
in
writing
c. Contracts for the sale of real property or any interest
therein or leasing of
partnership immovable property for more than one
year must be in writing
d. Sale of partnership personal property at a price not
less than P500 must be in
writing,
unless
there is a delivery or payment

ANS:B
35. X and Y established a partnership by contributing
P100,000 each. Z a third party allowed his name to
be indicated in the firm name of the partnership. The
partnership was insolvent and after exhausting all
the remaining assets, there was left a liability to
third persons the amount of P30,000. The creditors
can compel
a. Z to pay the 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
ANS:B
36. A partner who has all the rights, power and subject to
all restrictions of the general partner but whose
liability is, among themselves limited to his capital
contribution is called
a. General partner
d. Dormant partner
b. Limited partner
e. None of the above
c. General Limited partner
ANS:B
37. Which of the following may be a cause for involuntary
dissolution?
a. Express will of any partner
b. Insolvency of any partner
c. Termination of the term
d. Expulsion of any partner
ANS:B
38. A partner who does not participate in the
management of the affairs of the partnership and
whose connection with it is not made known to the
public is called
a. Ostensible partner
d. Dormant partner
b. Secret partner
e. None of the above
c. Silent partner
ANS:D
39. 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
ANS:C
40. Refers to a partnership whereby the persons who
represents themselves, or consent to another or
others to represent them to anyone that they are
partners
a. General partnership
c. Partnership by estoppel
b. Limited partnership
d. None of the above
ANS:C
41. Bears the risk of things contributed to the partneship
a. Contributing partner
b. Limited partner
c. Partner contributing usufructuary rights
d. All of the above

c. Silent partner
ANS:C
42. Three of the following are the effects if immovable
property is contributed in a partnership but the
contract did not appear in a public instrument. Which
is the exception?
a. A partnership has no judicial personality
b. The parties may compel each other to observe the
required form
c. The parties may request the return of their capital
contribution
d. The contract of partnership is void

ANS:D
48. A limited partner shall not liable as a general partner
unless
a. He takes part in the control of the business
b. He contributes his services to the capital of the firm
c. His surname appears in the partnership name
d. The word limited is not added to the name of the
partnership
e. All of the above
ANS:E

ANS:B
43. Three of the following do not prove the existence of a
valid partnership. Which is the exception?
a. The sharing of gross receipts
b. There is an intention of dividing the profits among
themselves
c. Receipts by a person of the share of the profits for
payment of a partnership debt by installments
d. When two or more persons are co-owners and they share
correspondingly in the profits made from the sale or use
of their property
ANS:B
44. Which of the following is valid?
a. Oral contract of partnership where a partner contributes
real property with a value
less than P3,000
b. Oral contact of partnership where the capital is P3,000 or
more
c. Written contact of universal partnership of present
properties between husband
and wife
d. None of them
ANS:A
45. A partnership
a. Is created by agreements of the partners
b. Has a juridical personality separate and distinct from that
of each of the partners
c. May be constituted in any form, except where immovable
property or real rights
are contributed thereto in
which case a public instrument is necessary
d. All of the above

49. Which of the following statements is correct

concerning liability when a partner in a general
partnership commits a tort while engaged in
partnership business?
a. The partner committing the tort is the only party liable
b. The partnership is the only party liable
c. The partners are jointly and severally liable
d. The partnership and the partners are liable
ANS:D
50. A partner whose connection with the partnership is
open and public such as by including his name in the
firm name of the partnership is called
a. Nominal partner
d. Dormant partner
b. Ostensible partner
e. None
of the above
c. Secret partner
ANS:B

CORPORATION
1.

ANS:D
46. 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
c. Particular partnership
d. Partnership at will
e. None of the above
ANS:B
47. A partner whose connection is concealed and has no
voice nor say in the management of the affair of the
partnership is
a. Nominal partner
d. Dormant partner
b. Secret partner
e. None of the above

The by-laws of a corporation may create an

executive committee, composed of not less than 3
members of the board of directors to be appointed
by the board. The executive committee may act, by
majority vote of all its members on such specific
matters within the competence of the board, as may
be delegated to it in the by-laws or on majority vote
of the board, except:
a. Approval of any action for which shareholders
approval is also required
b. Amendments or repeal of by-laws or adoption of
new by-laws
c. Filing of vacancies in the Board
d.
Distribution of cash dividends
e. All of the above

ANS:E
2.

A corporation
a. May not enter into a contracts of guaranty or
suretyship not in furtherance of its business.
b. Has no implied power to become a partner with
an individual or another corporation
c. May enter into joint venture with individuals
where the nature of the business is within the
scope of its legitimate power
d. May issue or sell stocks to subscriber
e. All of the above

ANS:E
3.

b.
One who has agreed to take stock from the
corporation on the original issue of such stock is
called
a. Incorporators
b. Members
c. Promoters
d. Subscribers
e. None of the above

The business of this corporation can be managed by

the stockholders
a. Close
b. Open
c. Eleemosynary
d. None of the above
e. All of the above

ANS:A
5.

Two or more kinds of dividends paid by the

corporation is called
a. Cash stock
b. Composite
c. Property cash
d. Scrip

ANS:B
6.

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 corporate power
d. None of the above

ANS:D
7.

Which of the following is not required to be included

in the Articles of Incorporation?
a. Duties of the president
b. Name of the corporation
c. Period of existence
d. Location of the principal office

ANS:A
8.

e.

11. Statement 1: The Articles of Incorporation or the bylaws may limit or even completely deny the right to
vote of any class member in a corporation.
Statement 2: Subscribers for stock shall be liable to
the corporation for the interest from the date of
subscription, but only if so required in the by-laws.
a. Both are true
b. Both are false
c. No. 1 is true; N0. 2 is false
d. No. 1 is false; No. 2 is true
ANS:A
12. The interest or rights of the owner in the
management of the corporation in the surplus profits
and on dissolution in the balance of its assets after
the payment of the debt is
a. Certificate of stock
b. Share of stock
c. Dividend
d. Legal capital
e. None of the above
ANS:B
13. A written instrument signed by the proper officers of
the corporation, stating or acknowledging that the
person named therein is the holder of a designated
number of shares of its stock
a. Certificate of stock
b. Share of stock
c. Certificate of incorporation
d. Dividend
e. None of the above
ANS:A

A written promise to pay the money loaned to the

corporation but ordinarily it has no specific fund or
property as security for the payment is called
a. Mortgage bond
b. Collateral trust bond
c. Equipment bond
d. Debenture bond
e. None of the above

ANS:D
9.

d.

ANS:E

ANS:D
4.

c.

To enter into merger and consolidation with

other corporation
To make reasonable donations including those
for the public welfare or for hospital, charitable,
cultural. Scientific, civic and similar purposes
To established pension retirement and other
plans for the benefit of its directors, trustees,
officers, and employees.
None of the above

A form of combination where all the constituent

corporations are dissolved and out of them a new
one is formed.
a. Consolidation
b. Merger
c. Joint venture
d. All of them

ANS:A
10. Which of the following is not an express power of the
corporation?
a. To adopt by-laws and amend or repeal the same

14. The
a.
b.
c.
d.
e.

owners of shares in stock corporation are called

Incorporators
Promoters
Members
Stockholders
None of the above

ANS:D
15. Shares of stock may be issued for
a. Actual cash
b. Tangible or intangible properties
c. Labor performed for or services actually
rendered to the corporation
d. Previously incurred indebtedness by the
corporation
e. All of the above
ANS:E
16. A non-stock corporation
a. May not engage in business
b. One where the capital stock are divided into
shares

c.
d.
e.

No part of the income must be distributed as

dividends
May have 15 board of trustees whose shall have
a term of office of 3 years
All of the above

ANS:E
17. The holders of non-voting shares shall be entitled to
vote on the following matters, except;
a. Amendments of the Articles of Incorporation
b. Sales, lease mortgage, or other disposition of all
or substantially all of the corporate properties
c. Incurring, creating, or increasing bonded
indebtedness
d. Increase or decrease of capital stock
e. None of the above
ANS:E
18. The quorum required by law to elect directors:
presence of owners of
a. Majority of the outstanding capital-voting
b. Majority of the outstanding capital-voting and
non-voting
c. 2/3 of the outstanding capital voting
d. 2/3 of the outstanding capital-voting and nonvoting
ANS:A
19. Dividends shall be declared and paid out of
a. Capital stock
b. Paid in capital
c. Profits earned in selling no par value shares
d. Unrestricted retained earnings
e. None of the above
ANS:D
20. Private corporation which have accepted from the
state grant of a franchise or contract involving the
performance of public duties are called
a. Quasi-public corporation
b. Quasi corporation
c. Eleemosynary corporation
d. Ecclesiastical corporation
e. None of the above
ANS:A
21. If the principal office of CPAR corporation is located
in Manila, stockholders meeting can be held in
a. Isabel Building
b. Las Pinas
c. Muntinlupa
d. All of the above
ANS:D
22. All of the close corporations issued shares shall be
held of record by not more than
a. 10 persons
b. 15 persons
c. 20 persons
d. None of the above
ANS:C
23. A bond which is payable to a particular individual
whose name is entered on the books of the
corporation as registered owner is called
a. Registered bond
b. Coupon bond

c.
d.
e.

Convertible bond
Guaranteed bond
None of the above

ANS:A
24. A corporation, the sole purpose of which is to invest
its capital in a specific property and afterwards
consume that property or extract its value at a profit
is called
a. Quasi corporation
b. Wasting assets corporation
c. Open corporation
d. Eleemosynary corporation
e. None of the above
ANS:B
25. Persons who compose the corporation whether as
stockholders or members are called
a. Incorporators
b. Promoters
c. Corporators
d. Subscribers
e. None of the above
ANS:C
26. The theory of a corporation fiction may be
disregarded under the doctrine of piercing the veil of
corporate entity, when the concept of the legal entity
being used
a. The defeat of public convenience
b. To protect fraud
c. To defend crime
d. To evade or violate a contract or law
e. All of the above
ANS:E
27. Three of the following are similarities between a
partnership and 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 the individuals composing
them
c. Like partnership, a corporation can act only
through agents
d. Both are organizations composed of an
aggregate of individuals
ANS:A
28. The right given to the stockholders to dissent and
demand payment of the fair value of their shares is
called
a. Right of proxy
b. Appraisal right
c. Pre-emptive right
d. Stock right
e. None of the above
ANS:B
29. The following are the attributes of a corporation,
except:
a. It is an artificial being
b. It is created by operation of law
c. It has rights of succession
d. It has the power, attributes and properties
expressly authorized by law or incident to its
existence

e.

None of the above

ANS:E
30. Founders share
a. Are given to the organizers or founders of the
corporation
b. Maybe given special rights and privileges by the
owners of other shares
c. Maybe given the exclusive right to vote and to
be voted for in the election of the directors for
the period not exceeding 5 years
d. All of the above
e. None of the above
ANS:D
31. Which of the following qualifications is necessary in
order that one may be elected treasurer of the
corporation?
a. He must be a citizen and a resident of the
Philippines
b. He must be a director of the corporation
c. He must be a stockholder of the corporation
d. He must be a treasurer of any other corporation
e. None of the above
ANS:E
32. The following are expressed powers of a corporation,
except;
a. To sue and be sued
b. The power of succession
c. To adopt and use a corporate seal
d. To amend its Article of Incorporation
e. None of the above
ANS:E
33. Which of the following statements is false?
a. The secretary must be a citizen and resident of
the Philippines
b. Delinquent stock are necessarily unpaid
c. Treasury stocks are by their very nature
delinquent at the time they are acquired by the
corporation
d. In consolidation, the constituent corporation is
dissolved and out of them a new one is formed
ANS:D
34. Stockholders of the close corporation
a. Given right of pre-emption in the issuance of all
kinds of shares including treasury shares
b. May enter into a written agreement making
them partners among themselves
c. May, for any reason, withdraw from the
corporation and compel it to purchase their
share at their fair value, which shall not be less
than their or issued value, provided the
corporation has sufficient assets to cover its
debts and liabilities exclusive of capital stock.
d. Any of them may, by written petition to the SEC.
compel the dissolution of the corporation
whenever any act of the directors or officers of
this corporation is illegal or fraudulent or
dishonesty or oppressive or whenever corporate
assets are being misapplied.
e. All of the above
ANS:E

35. Statement 1: Stock issued by a corporation in excess

of the amount prescribed or limited by its Article of
Incorporation are void except in the hands of a
bonafide purchaser for value
Statement 2: Treasury shares are part of the
outstanding capital stock of a corporation
a. True; True
b. False; False
c. True; False
d. False; True
ANS:B
36. Incorporators of a corporation
a. Not less the 5 but not more than 15
b. Majority are required to be resident of the
Philippines
c. Must own or must subscribe to at least 1 share
of the capital stock of the corporation
d. All of the above
ANS:D
37. The power to examine the affairs of a corporation in
order to supervise, direct, and control its
management is called
a. Visitorial power of the state
b. Visitorial power of the stockholders
c. Visitorial power of the directors
d. Visitorial power of employees
e. None of the above
ANS:A
38. Which of the following cannot be lawfully exercised
by a non-stock corporation?
a. Pay dividend
b. Elect trustees
c. Amend the Articles of Incorporation
d. Adopt by-laws
ANS:A
39. A bond secured by stocks or other bonds or both
which are owned by the debtor, the securities being
deposited with a trustee for the bondholder is called
a. Mortgage bond
b. Collateral trust bond
c. Debenture bond
d. Equipment bond
e. None of the above
ANS:B
40. Voluntary dissolution of a corporation is caused by
a. Voluntary dissolution where no creditors are
affected
b. Voluntary dissolution where creditors are
affected
c. Amendments of the articles of incorporation
resulting in the shortening of corporate term
d. In case of a corporation sole be submitting to
the SEC a verified declaration of dissolution
e. All of the above
ANS:E
41. Shares of stocks entitling to owner to receive
dividends ahead of the owner of common shares not
only for the year the dividend is declared but also for
prior years where no dividends are declared
a. Participating preferred stock
b. Cumulative preferred stock

c.
d.

Founders stock
Watered stock

c.
d.

ANS:B
42. Stocks lawfully issued by the corporation for money,
property, or services and subsequently properly
reacquired by it are
a. Watered stocks
b. Over issued stock
c. Bonus stock
d. None of the above
ANS:C
43. Treasury share
a. Shall have no voting right as long as they
remain I the treasury
b. Are not entitled to participate in the distribution
of dividends
c. Are not part of the outstanding capital stock
d. May again be disposed of for a reasonable price,
even at less than par, by the Board of Directors
e. All of the above
ANS:E
44. To revoke the power granted to the board to make
by-laws,
a. Majority of the board and of the outstanding
capital stock of the members
b. 2/3 of the outstanding capital stock or of the
members
c. Majority of the quorum of the board and 2/3 of
the outstanding capital stock or of the members
d. Majority of the outstanding capital stock or of
the members
ANS:D
45. Which of the following 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 in public auction
can be stopped if the board of directors stops
the sale for valid reasons
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.
ANS:A
46. One of the following does not require stockholders
approval
a. Merger or consolidation
b. Change of corporate name

Investment of corporate funds for a purpose

outside of the main purpose of the corporation
Declaration of cash dividend

ANS:D
47. Shares deposited by the seller or his agent with a
bank or third party to be delivered to the buyer or
subscriber only upon the fulfilment of the stipulated
suspensive condition
a. Promotion shares
b. Founders share
c. Redeemable shares
d. Escrow shares
ANS:D
48. Every decision of the directors or trustee shall be
valid as a corporate act at which there is a quorum
by
a. Majority of the members of the board
b. Majority of the directors or trustees present
c. 2/3 vote of the members of the board
d. 2/3 vote of the directors or trustees present
ANS:B
49. Which of the following qualifications is necessary in
order that one may be elected president of a
corporation
a. He must be a citizen and a resident of the
Philippines
b. He must not be a stockholders or director of a
competitor corporation
c. He must not be a president of any other
corporation
d. He must be a director of the corporation
ANS:D
50. This share can be acquired by the corporation
a. Founders share
b. Redeemable shares
c.
Par value shares
d. No-par value shares
e. None of the above
ANS:B

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