Law PDF

BUSINESS LAW Atty.
Macmod, CPA
2018 Edition
OBLIGATIONS - 01
I. Identification (Basic Concept/Principles)
_______________________1. Legal reason why courts can take cognizance of a case and give legal
remedies.
_______________________2. The fitness to be the subject of legal relations.
_______________________3. The power to do acts with legal effects.
_______________________4. Rule of conduct promulgated by legislative power and obligatory to all.
_______________________5. Incorporated to the principal naturally or artificially.
_______________________6. Added to the principal for its completeness.
_______________________7. Non-compliance of obligation when it falls due.
_______________________8. It is normally an exempting circumstance in obligations
_______________________9. Negligence resulting to an obligation.
_______________________10. Deliberate act of evading the normal compliance of an
obligation.
_______________________11. One in which a debtor may validly pay a monetary obligation.
_______________________12. Means no partial payment or performance is allowed.
_______________________13. Debtor abandons his property to his creditor as full payment of
obligation.
_______________________14. The deposit of a thing in legal form when the creditor refuses
to accept or cannot receive it.
_______________________15. The legal basis of quasi-contracts.
_______________________16. One person becomes the debtor and creditor of himself.
_______________________17. Two persons became debtor and creditor of each other.
_______________________18. Gratuitous abandonment by the creditor of his rights.
_______________________19. Change of debtor without old debtor’s consent.
_______________________20. Extinguishment of obligation by passage of time.
KINDS OF OBLIGATIONS:
_______________________21. a. Not legally enforceable. / in accordance with natural law.
_______________________ b. Legally enforceable. / in accordance with positive law.

_______________________ c. In accordance with both natural and positive law.
_______________________22. a. Obligation governed by the Civil Code.

_______________________ b. Obligation governed by the Code of Commerce and other special
laws.
_______________________23. a. An obligation without a condition or terms.
_______________________ b. An obligation whose efficacy depends of the fulfillment, or non-
fulfillment of a future and uncertain event.
_______________________ c. An obligation subject to a term.
_______________________24. a. In either case, the obligation is demandable at once.
_______________________25. a. Obligation wherein only one party is liable.
_______________________ b.Obligation wherein obligation is pro-rated among the parties.
_______________________ c. Obligation wherein each party is entitled to or liable for the entire
obligation.
_______________________26. a. Where only one prestation is involved.
_______________________ b.Where all prestation are due and demandable.
_______________________ c. Where only one of the several prestations due had to be performed.
_______________________ d. Where one prestation is due but may be substituted by the debtor
with another
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_______________________27. a. An obligation to give.
_______________________ b. An obligation to do or not to do.
_______________________28. a. An obligation capable of partial performance.

_______________________ b.An obligation incapable of partial performance.
_______________________29. a. An obligation based on law.

_______________________ b. An obligation based on the agreement of the parties.
_______________________30. a. Can stand alone.

_______________________ b. Depends on another obligations.
II. TRUE OR FALSE
____31. In Culpa Aquiliana, negligence is presumed in the injury.

____32. D obliged himself to give C P1,000,000 if the latter would not kill X, a third person. In this case,
both the condition as well as the obligation are valid.
____33. In alternative obligation all things due must be performed.
____34. In a solidary obligation the remission of the whole debt is a donation to all the debtors.
____35. In facultative obligation the right to choose can be given to the creditor.
____36. A person civily liable is also criminally liable.
____37. Every person obliged to give something is also obliged to take care of it with due diligence of
a good father of a family always.
____38. The creditor has the right to the fruits of the thing from the time the obligation is constituted.
____39. An obligation subject to resolutory condition is demandable regardless of the effect of the
happening of the event.
____40. Payment made by the debtor to a third person who is not the creditor will not extinguish the
obligation as a rule.
____41. Any waiver of an action for future fraud if done voluntarily by parties is valid.
____42. An obligation payable “as soon as possible” is an obligation with a period for the benefit the
creditor only.
____43. D obliged himself “to pay C the sum of P50,000 which he owes him when he (D) feels like it”.
This kind of obligation is valid and legally enforceable.
____44. Solidarity may be presumed.
____45. Condonation is generally gratuitous.
____46. Whoever pays on behalf of the debtor with or without his knowledge can compel the creditor
to subrogate him.
____47. Dation in payment is governed by Insolvency Law..
____48. In expromision, the new debtor’s insolvency may revive the original debtor’s obligation.
____49. Negotiorum gestio is a contract based on the principle of unjust enrichment.
____50. When a debtor voluntarily pays an obligation that has prescribed already, he may still recover
under solution indebiti.
51. A source of obligation where negligence resulted to crime:

a. culpa contractual c. culpa delictual
b. quasi-contract d. culpa aquiliana
52. Which is not a source of obligation?

a. Law c. Mora Solvendi
b. Culpa Aquilana d. Quasi Contract
53. Statement No. 1: D oblige himself to give C a Toyota 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 his only car to C tomorrow. If D failed to deliver
tomorrow after demand is made C's right is to ask a third person to deliver a car to him at the
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expense of D plus damage.
a. Both are true c. No. 1 is true; No. 2 is false
b. Both are false d. No. 1 is false; No 2 is true
54. 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.
55. A judicial relation known as Negotiorum Gestio takes place.

a. When a person voluntarily takes charge of another's abandoned business or property
without the owner's 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.
56. The wrongful act or tort which causes loss or harm to another is called:
a. Damages c. Injury
b. Damage d. Liability
57. Which of the following is not a generic obligation?

a. obligation to pay P5,000
b. obligation to deliver Toyota INNOVA
c. obligation to deliver 50 cavans of rice
d. obligation to give a delimited generic object
58. Statement No. 1: An obligation which has for its object the delivery of a "delimited generic" object
may be lost by reason of fortuitous e3vent.
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
59. Also known as punitive damages

a. Moral damages c. Actual damages
b. Exemplary damages d. Nominal damages
60. "I'll 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.
61. 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: Solidarity covers the juridical tie and the object of obligation.
a. Both statements are true
c. Statement No, 1 is true while statement NO.2 is false
d. Statement No. 1 is false while statement NO.2 is true
62. Statement NO. 1: "I will give you a NOKIA Phone if you will not marry X this year. If by the end
of this year, both parties are alive and no marriage has taken place, my obligation is extinguished.
Statement NO. 2: "I will give you P10,000 if I decide to go to Cebu City tomorrow. This obligation
is valid.
b. Both are false d. No. 1 is false; NO.2 is true
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63. 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 thereof. Once it is
fixed by the court the parties cannot change the fixed date for performance.
Statement NO. 2: "I will give you P10,000 if X dies next year." This is an obligation with a period.
b. Both are false d. No. 1 is false; No. 2 is true
64. Which obligation is not valid?

a. "I promise to give you P100,000 on December of the current year"
b. "I promise to give you P100,000 if my mood dictates".
c. "I Promise to give you P100,000 if your patient dies".
d. "I promise to give you P100,000 if you pass the October C.Y. CPA Board Examination."
65. 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, of the current year
d. Payable on December 25 of the current year
66. 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 permits me to"
67. A and B signed a promissory note to borrow P6,000 from X, Y and Z, payable in 6 months time.
B gave in pledge a P10,000 diamond ring as security for the amount borrowed. How much can Y
collect from B?
a. P1,000 c. P2,000
b. P6,000 d. P3,000
68. 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 P2,000 of the obligation is extinguished
c. Only P3,000 of the obligation is extinguished
d. Accessory obligation is extinguished.
69. A, Band C executed a promissory note worded as follows:

We promise to pay X, Y and Z the sum of P90,000
(Sgd,) A, B and C
a. A is obliged to pay to X, Y and Z P90,000
b. A is obliged to pay X P30,000
c. A is obliged to pay X P60,000
d. A is obliged to pay X P10,000
70. Statement No. 1: When the fulfillment of 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.
b. Both are false d. No.1 is false; No. 2is true
71. 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
obligation 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
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72. Statement No. 1: In negotiorum gestio the debtor is also known as officious manager.
Statement No. 2: Force majeure is always an exempting circumstance.
c. Statement No. 1 is false while statement No.2 is true
d. Statement No. 1 is true while statement No.2 is false
73. Debtor obliged himself to deliver to creditor 100 cavans of rice on June 1, 2018. 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 damages.
d. Convert obligation to cash.
74. 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
75. 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.
76. Statement No. 1: D obliges himself to give C a specific ring, upon failure, to give C P5,000. This
is a case of facultative obligation.
Statement No. 2: D obliges himself to give C a specific ring. However, if he so desires, D may
instead give C P5,000. 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.
77. A is obliged to give B his only car on September 1 of the current year. On the said date, A did not
deliver. On September 2 of the current year, 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.
78. A1, A2 and A3 oblige themselves solidarily to give C a specific car valued P12,000. On the due
date, C demanded delivery but the debtors failed to deliver. The next day, while A1 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 P4,000 each.
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79. The debtor shall lose every right to make use of the period except:
a. When he does not furnish a guaranty or security to 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.
80. A owes B P100,000 due on December 12 of the current year. A mortgaged his house to B as
guaranty for the debt. Shortly, however, the mortgaged house was completely destroyed by
typhoon "Nitang". Thereafter, B demanded payment from A before due date. Is B's 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.
81. The creditor is entitled to recover damages and interest in addition to the penalty except:
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. When the debtor is guilty of negligence in the fulfillment of the obligation
82. “Vin Diesel will continue giving Tommy Lee the latter’s meal allowance until he finds a job”, is an
obligation subject to:
a. a resolutory period c. a resolutory condition
b. a suspensive condition d. a suspensive period
83. D obliged to give C, either object No. 1 valued P15,000; or object No. 2 valued P10,000; or object
No. 3 valued P5,000. All the objects were lost due to D’s fault in the following order stated. Remedy
of the creditor if choice is given to him is:
a. D’s obligation is extinguished
b. D’s obligation is to pay the value of object No. 1 plus damages
c. C’s right is to demand the value of any of the object plus damages
d. Pay P5,000 plus damages
84. In question No. 83 if object No. 1 is lost due to fortuitous event; No. 2 is lost due to debtor’s fault;
No. 3 is subsisting; Choice belongs to the debtor. Decide.
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. D’s obligation is totally extinguished.
85. 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
86. 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
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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.
87. 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
88. Statement No. 1: Obligation with an in diem period is demandable at once.

Statement No. 2: In facultative obligations, there are two objects due but the obligor can deliver
one thing due and the obligation is extinguish.
a. No. 1 is true; No. 2 is false c. Both are true
b. No. 1 is false; No. 2 is true d. Both are false
89. A-1 and A-2 are solidary debtors of B-1, B-2 and B-3, joint creditors in the amount of P90,000.
How much can B-3 collect from A-2?
a. B-3 could collect P30,000 from A-2.
b. B-3 could collect P90,000 from A-2 and give P30,000, each to B-1 and B-2.
c. B-3 could collect P45,000 from A-2 and give P13,000, each to B-1 and B-2.
d. B-3 could collect P15,000 from A-2 and P13,000 from A-1.
90. 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. c. No. 1 is true; No. 2 is false
b. Both are false. d. No. 1 is false; No. 2 is true
91. Statement No. 1: Legal, compensation takes place by operation of law even if the parties may not
be aware of it.
Statement No. 2: The indivisibility of an obligation necessarily implies solidarity.
c. Statement NO.1 is true while statement NO.2 is false
d. Statement NO.1 is false while statement NO.2 is true
92. Example NO. 1: D owes C P10,000 due on December 25. C owes D P6,000 due on December 25.
D's obligation is guaranteed by G. On the due date D is insolvent. G is liable to C for P10,000, he
(G) cannot set up compensation because he is not a principle debtor.
Example NO. 2: D owes C P10,000 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 P10,000 because he (D) can set up compensation against C.
a. Both examples are true c. Only No. 1 is true; No.2 is false
b. Both are false d. Only No. 1 is false; No. 2 is true
93. Obligation 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
94. 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 of payment in cases provided for by law
95. A and B are solidary debtors of X and Y, solidary creditors to the amount of P4,000. On the due
date with the consent of Y, X renounced in favor of A the entire obligation. Which of the following
is correct?
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a. B shall give A P2,000
b. Y can still collect from A or B P2,000.
c. Y can collect from X P2,000.
d. X has no obligation to reimburse Y any amount
96. 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 proportionately is called:
a. dacion en pago d. tender of payment with
b. set off consignation
c. payment by cession
97. A and B are the debtors and .X and Yare the creditors in a solidary obligation to the tune of
P80,000. 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 P40,000 to A c. Y can still collect from A or B the
b. Y can collect from X P40,000 d. A can collect P40,000 from B
98. The following, except one, are requisites of payment as a mode of extinguishing 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
99. Proof of pecuniary loss is necessary for the award of:

a. Liquidated damages c. Actual damages
b. Exemplary damages d. Temperate damages
100. All are secondary modes of extinguishing on obligation except one:

a. Compromise c. Impossibility
b. Illegality d. Performance
101. Statement No. 1: Dacion en pago , totally extinguishes the whole obligation.
Statement No. 2: In obligation with penal clauses, it is necessary for the creditor to show proof of
actual damages suffered by him on account of the non-performance of the obligation by the
debtor.
c. Statement No. 1 is true while statement No. 2 is false
d. Statement No. 1 is false while statement No. 2 is true
102. In three of the following cases, facultative compensation shall prosper? Which is the exception?
a. gratuitous support c. mutuum
b. civil liability arising from crime d. depositum
103. Statement No. 1: The creditor may be compelled to accept payment in checks as long as the check
is negotiable.
Statement No. 2: As a rule in payments involving foreign currency, the basis of payment is the
exchange rate at the time of constitution of obligation.
c. Statement No. 1 is true while statement No. 2 is false
d. Statement No. 1 is false while statement No.2 is true
104. Novation changing the creditor without debtor's approval:

a. Subrogation c. Delegacion
b. Expromision d. Conventional novation
105. In tender and consignation: if after consignation is made, the creditor allowed the debtor to
withdraw the thing deposited in court, which of the following statements is incorrect.
a. Co-debtors, guarantors, and sureties are released from the obligation unless they
consented
b. The obligation remain to subsist
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c. The obligation is extinguished
d. Obligation is not extinguished
106. Statements No.1: "I promise to pay within 2 years" is an obligation with a period, the creditor
having a right to demand payment within 2 years from the date of the instrument.
Statement No. 2: Ten sacks of corn cannot be compensated (conventional compensation) by ten
sacks of rice.
a. Both are true c. No. 1 is true, No. 2 is false
b. Both are false d. No. 1 is false, No.2 is true
107. Example 1 - D promised to give C a specific car valued, P1 00,000 after C has killed X. Later, after
the killing the contract was novated instead of giving C a specific car he will just give a specific
land to be delivered on February 28, CY. Meantime, both parties died. In here, the heirs of C may
compel the execution of the second contract, that is, the delivery of the specific land.
Example 2 - S sold to B a specific residential house situated in Bulacan for P1M, unknown to both
parties one (1) hour before the sale the property was totally gutted by fire caused by electrical
defect. In here, B can be required to pay the price of the sale, because the subject is determine
S's obligation to deliver is extinguished, while B's obligation remain to subsist.
a. Both example are true c. Only NO.2 is false, while No. 1
b. Only No.2 is true, while No. 1 is is true
false d. Both examples are false
108. Mr. Debtor owes Mr. Creditor who has two (2) legitimate children, P50,000 payable on December
31 of the current year. Which of the following is correct?
a. If Mr. Debtor dies before December 31 of the current year, Mr. Creditor cannot collect
from the heirs of Mr. Debtor.
b. If Mr. Debtor dies before December 31 of the current year, Mr. Creditor can collect from
the heirs of Mr. Debtor.
c. If Mr. Creditor dies, his two (2) legitimate emancipated children cannot recover from
Mr. Debtor his' obligation.
d. If both Mr. Debtor and Mr. Creditor die, the heirs of Mr. Creditor can collect from the
heirs of Mr. Debtor.
109. On October 4, of the current year, A is indebted to B for P50,000 for a 20-day period. A proposed
to B that X will pay A's debt, and that A will be free from all liabilities. B and X agreed to the
proposal. On October 25 of the current year, when B tried to collect from X, he finds that X is
insolvent. AT the time of delegacion, X was already insolvent but this was not known to A. The
insolvency is not of public knowledge. So B sues A on the ground that it was A who made the
proposal and that A really guaranteed X's solvency. Decide.
a. A is liable because he is presumed to have guaranteed X's solvency.
b. A is not liable, because A does not know the insolvency of X at the time of delegation
and neither was the insolvency of public knowledge.
c. A is liable because he did not exercise due diligence in determining the insolvency of X.
d. A is liable because X agreed to the proposal to make himself solidary liable for the
obligation.
110. D1 and D2 are joint debtors of C1, C2, C3, and C4, solidary creditors to the amount of P1
,000,000. How much can C1 collect from D1?
a. 500,000 c. 250,000
b. 1,000,000 d. 125,000
111. D owes C P10,000 payable on December 25, while C owes D P10,000 payable on December 30.
In here, C can set up compensation (or cum pondere) on December 25, and this is called:
a. Legal c. Judicial or “set-off”
b. Partial d. Facultative
112. An extinguishment of obligation that may result to gift tax is

a. Confusion c. Condonation
b. Compensation d. Annulment
113. 1st Statement: The parties may not agree upon the compensation of debts which are not yet due.
2nd Statement: Anything paid may be recovered with fruits and interests, the obligor NOT being
aware of the period.
a. True, True b. False, False
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c. True, False d. False, True
114. X, Y and Z solidarily bound themselves to pay to solidary creditors A, B and C the amount of
P75,000.00. The loan was secured by a mortgage on B's land. Out of gratuity, A, in a public
instrument, remitted the obligation in favor of X. In this case, which statement is correct?
a. The principal obligation is extinguished
b. The real estate mortgage is extinguished
c. Both the principal obligation and the mortgage are extinguished by remission
d. Both the principal and the accessory obligations subsist.
115. Statement No. 1: Just before the obligation became due and demandable, the debtor proposed to
the creditor that he would give him a specific car instead of paying P150,000.00, and which
proposal was accepted by the creditor. Here, there is extinguishment of an obligation by way of
dacion en pago.
Statement No. 2: After substitution in facultative obligations, the loss of the principal through the
fault or negligence of the debtor shall render him liable for damages in favor of the creditor.
a. Both are true c. No. 1 is true, No.2 is false
b. Both are false d. No. 1is, false, No.2 is true
116. 1st Statement: Partial loss of the thing in an obligation or extreme difficulty to perform is a ground
to modify an obligation.
2nd Statement: Remission even without debtor's ACCEPTANCE is valid if made before due date.
a. True, True c. True, False
b. False, False d. False, True
117. Statement No. 1: “I will give you P10,000 if you pass the May 2019 CPA examination”. On the
first day of the examination, I poisoned you and you failed to take the examination. The next day
my obligation is extinguished because you cannot pass the examinations anymore.
Statement No. 2: “Novation may be presumed.
118. Legal subrogation is presumed in the following cases except:

a. When the creditor pays another creditor who is preferred
b. When a stranger pays the obligation with debtor’s consent
c. When a guarantor pays the obligation
d. When the mortgagor pays the mortgagee
119. Amazed by the skill of X who can paint portraits using paint brushes inserted in his right armpit,
Y entered unto a contract with the former to have his own portrait done and gave X P50,000 as
full payment therefore. After he has started painting the portrait but before its completion, thru
the fault of X, drunk and under the influence of drugs, X was hit by a speeding car causing the
doctors to have his right arm amputated, In this case what is the remedy of Y?
a. Nothing, as the service became impossible by reason of an act independent of the will
of the debtor.
b. Equivalent performance in terms of damages
c. Specific performance by compelling X to go on painting Y's portrait.
d. Substituted performance by allowing a third person to do his portrait with expenses
therefore charged to X.
120. In novation which of the following is incorrect?

a. If the new obligation is void, original obligation shall subsist
b. In expromission, the insolvency of the new debtor shall not revive the action of the
creditor-against the original debtor.
c. If the original obligation is subject to a suspensive condition, the new obligation is not
subject to the same condition unless stated
d. Delegacion if done in good faith shall not revive the old obligation
**END**
“Most people don’t reach their goal not because of lack of talent or intelligence …but due to
…insufficient PASSION. (Quoted)
10
BUSINESS LAW Atty. Macmod, CPA
2018 Edition
CONTRACTS
I. Identification Basic Concept/ Principles
_______________________ 1. Limitations imposed by law on ones capacity to act.
_______________________ 2. The proposal to make a contract.
_______________________ 3. The unconditional and unqualified agreement to the offer.
_______________________ 4. Remedy in equity by which a written instrument is made to conform to
the real intentions of the parties.
_______________________ 5. False notion of a thing or a fact.
_______________________ 6. Agreement that do not appear on the face of the contract and do not
bind either party.
_______________________ 7. It occurs when to wrest consent, serious or irresistible force is
employed.
_______________________ 8. When one party is compelled by reasonable or well-grounded fear of a
grave evil upon his person, family or property.
_______________________ 9. When one takes improper advantage of his power or relationship over
another.
_______________________10. The fear of displeasing a person to whom respect and obedience are
due.
_______________________11. It affects the substance of the agreement and without it the party
would not have consented.
_______________________12. The declaration of a fictitious intent manifested deliberately and by
agreement of the parties.
_______________________13. A remedy to make ineffective a contract validly entered into where
there is pecuniary prejudice or lesion, by restoration of things to their
original condition.
_______________________14. The fact which explains and justifies the creation of an obligation.
_______________________15. A ground to modify a contract when there is substantial change in facts
or conditions affecting contract.
_______________________16. The term used to cover various acts such as confirmation,
acknowledgement, and ratification proper.
_______________________17. Wherein a person’s admission or representation is rendered conclusive
upon him and cannot be disproved against the person relying thereon.
_______________________18. Wherein there is a full return of a person’s mind to sanity.
_______________________19. Wherein due diligence is not a defense
_______________________20. Instances showing possibility of fraud.
TRUE OR FALSE
__________ 1. Statute of frauds is waivable as a defense in a contract.
__________ 2. The right to set up the defense of illegality in void contract can be waived.
__________ 3. Stipulation por autrui is an exception to the rule on consensuality of contracts.
__________ 4. Failure to disclosed facts, when there is a duty to reveal them, as when confidential
relations bind the parties constitutes fraud.
__________ 5. Contracts take effect only between the contracting parties.
__________ 6. Donation of car worth P500K is void if not notarized.
__________ 7. When the real agreement of the parties stated in a contract is void the parties can
ask for reformation of the instrument.
__________ 8. Consummation of a contract is manifested by the offer and acceptance.
__________ 9. Annulment is available only to persons who are obliged principally or subsidiary. It is
not available to third persons
__________10. Cause is the essential or more proximate purpose, which the parties have in view in
entering into the contract. It voids the contract if unlawful like motive.
__________11. When, there having been a meeting of the minds of the parties to a contract, their
true intention is not expressed in reason of mistake, fraud, inequitable conduct or
accident, one of the parties may ask for the reformation of the instrument
__________12. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency
of either party before acceptance is conveyed
__________13. Acceptance made by letter or telegram does not bind the offerer except from the time
it came to this knowledge. The contract, in such a case, is presumed to have been
entered into in the place where the offer was made
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__________14. Legal life of a contract starts in the conception stage
__________15. Misrepresentation made in good faith is not fraudulent but may constitute error.
__________16. If one party was mistaken and the other acted fraudulently or in such a way that the
instrument does not show their true intention, the former may ask for the annulment
of the instrument.
__________17. Mutual promise to marry if orally entered into is unenforceable.
__________18. In the case of an illegal contract where there is a criminal offense, the parties cannot
be prosecuted if they are both in pari-delicto.
__________19. Just like in voidable contracts, rescission is a primary or principal action.
__________20. Observance of certain forms are necessary for validity in contracts under statute of
fraud.
__________21. To be valid, unenforceable contracts must first be ratified.
__________22. A threat to enforce a legal claim is not a ground that can vitiate consent.
__________23. The liability of a 3rd person who induces another to violate a contract is based on
quasi-contract.
__________24. Most contracts in the Civil Code are formal or solemn contracts.
__________25. There can be no action for the reformation of instrument if the real agreement is void.
__________26. An advertisement containing some terms of the offer in print needs no further
negotiation but an offer by itself.
__________27. Lesion is inadequacy of the cause of a contract.
__________28. The rule on mutuality of contracts provides that contracts takes effect between the
parties, the heirs, assigns, except in cases where the rights and obligations arising
from contract are not transmissible by their nature, by law or by stipulation.
__________29. Husband and wife cannot absolutely sell property to each other.
__________30. Contracts entered by demented persons during lucid interval are perfectly valid.
__________31. In voidable contracts, there is no need to ratify the same before they can be
considered valid. In unenforceable contracts, however, ratification is necessary before
they can be considered enforceable.
__________32. A mere expression of opinion can never result to fraud.
__________33. If the contract does not reflect the true intention of the parties, the main action should
be that of annulment.
__________34. A party who has brought an action to enforce an instrument can still later ask for its
reformation.
__________35. A contract, which is direct result of a previous illegal contract, is also void and existent.
__________36. In a face to face transaction cognition theory is applied.
__________37. The statement of a false cause in contracts shall render them void, if it should not be
proved that they were founded upon another cause, which is true and lawful.
__________38. Gross inadequacy of the price does not affect the validity of contracts as a rule.
__________39. Motive is the objective reason whereas cause is the personal reason.
__________40. The interpretation of obscure words or stipulation in a contract shall not favor the
party who caused the obscurity.
“ It is in your moments of decision that your destiny is shaped.”

-A. Robbins-
MULTIPLE CHOICE
41. S offers to sell his CAR to B for P100,000. B asks him if he would accept P80, 000. Which of the
following is correct?
a. Because of ambiguity, both offers are terminated by operation of law.
b. B’s response is a counter-offer effectively terminating the P100, 000 offer and instigating an
offer for P80, 000.
c. B’s response is a rejection of the P100, 000 offer, and there is no offer for P80, 000 because it
is too indefinite
d. B’s response is a mere inquiry, the P100, 000 offer by S is still in force.
42. 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 c. Mutuality of contract
b. Obligatoriness of contract d. Freedom of contract
43. This principle means that contracts take effect only upon the contracting parties, their assigns or
successors-in-interest
a. Relativity of contract c. Mutuality of contract
b. Obligatoriness of contract d. Freedom of contract
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44. B forced S to sell him (B) a masterpiece painting for P1M.Subsequently, B sold it to X for P 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
45. Which of the following is correct?

a. An action to enforce judicially a natural obligation prescribes in 4 years
b. An action for annulment of contract is imprescriptible
c. An action to declare contract void is not subject to prescription
d. An action for rescission of contract prescribes in five (5) years counted from the execution of
the contract
46. The following contracts should observe 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
47. An “invitation to bid”, B proposes the following:

“I will buy the property for P10, 000 if the bid of any other offerrors or bidders shall be considered
the best terms of amount and conditions, I am to equal that offer”.
a. The offer is speculative, because it cannot be considered as against another offer which is
certain
b. The offer is considered a counter offer
c. This is a continuing offer which is very certain
C The advertiser is not bound to accept the higher bidder
48. In the preceding question, which of the following statements is correct?

a. If there is no more offer made, the contract is perfected on the offer of B because he will be
considered as the highest bidder
b. However, if another bidder, X, bidder P15, 000, he will be considered as the highest bidder and
the contract is perfected
c. In letter (b), if X increases his bid for P20, 000, and no more bids equals his bid, the contract
is perfected for P20, 000
d. The advertiser is not bound to accept the higher bidder
49. On July 15, 2017, X entered into a contract with Y. On February 10, 2018 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, 2018
c. Within four years from the time A entered into the contract
d. On February 10, 2018
50. Consent is manifested 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 offer?
a. An offer made through an agent c. Advertisement for bidders
b. Business advertisement of things for sale d. All of the above
51. Example No. 1: The husband, by intimidation, was able to obtain the consent of his wife, with
regards to the sale of a piece of land to him belonging to the wife for P1 million. The contract is
voidable because there was intimidation.
Example No. 2: In the above example, the right of the wife is to go to court and file a motion for
annulment within four (4) years from the time intimidation ceased.
52. An agreement in restraint of trade.

a. Perfectly valid c. Unenforceable
b. Voidable d. Void
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53. 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 by the buyer.
54. 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 the debt, default or miscarriage of another.
c. An agreement made in consideration of marriage, other than a mutual promise to marry.
55. S makes an offer to B on January 1, 2018. 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.
56. In the preceding number S is perfectly sane but only a minor at the time the acceptance is
communicated to him.
a. There is no meeting of minds between the parties, unless ratified by the guardian of S.
b. The contract is not binding because the party is incapacitated
c. The contract is binding between the parties (but voidable)
d. Contract is valid.
57. 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.
58. The stage of “conception” of a contract is:

a. When the contract is fully executed c. When negotiations are in progress
b. When the parties come to an agreement d. When there is a meeting of the parties’ minds.
59. 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 ¼ of the value of the object of the contract.
d. Those which are absolutely simulated or fictitious.
60. Contracts that cannot be sued upon unless ratified:

a. Voidable c. Rescissible
b. Unenforceable d. Void
61. Contracts of sales and partnerships are:

a. Onerous c. Onerous and Gratuitous
b. Gratuitous d. Aleatory
62. Who is liable for the loss of subject matter by fortuitous event?
a. Creditor c. Both creditor and debtor
b. Debtor d. None of them
63. These persons are bound by contracts:

a. Contracting parties c. Heirs
b. Assigns or Assign d. All of them
64. L entered into a contract of lease with X. T, the clerk of L, typed the document. Due to T’s negligence,
the document made was that of sale instead of lease.
a. The remedy is annulment
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b. Parties may go to court for interpretation
c. Parties may enforce their right because it is enforceable
d. Remedy is reformation
65. In a contract of sale executed by S and B, it appears S sold his motor vehicle to B and B bought it
for P10, 000. It turned out however, S has three motor vehicles. Gallant valued P80, 000: Hi-Ace
van valued P70, 000; and a Jeep valued P60, 000. Which of the following is correct as remedy?
a. The contract shall be reformed because there was mistake
b. The parties can ask for interpretation because the word Motor vehicle is ambiguous.
c. The parties can ask for annulment of the contract
d. The parties can rescind the contract.
66. 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
67. Statement No.1: The inadequacy of cause or consideration may void a contract.
Statement No. 2: Simulated contracts are valid but voidable.
a. Both are true c. No.1 is true; No. 2 is false
b. Both are false d. No.1 is false; No. 2 is true
68. 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 B’s 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.
69. Statement No.1: If the cause is not stated in the contract it is presumed that it is unlawful.
Statement No. 2: The action for rescission is subsidiary; it cannot be instituted except when there
is no other legal means to obtain reparation for damages suffered.
70. Because of the intimidation employed by X, a third person, S sold his car to B. This contract is:
a. Void c. Unenforceable
b. Voidable d. Rescissible
71. B called C by the telephone to guaranty the debt of D to C. The contract between B and C is:
a. Unenforceable c. Rescissible
b. Voidable d. Annullable
72. Mr. A rendered accounting services in return for legal services o Mr B is

a. Du ut des contract c. Facio ut des contract
b. Du ut facias contract d. Facio ut facias contract
73. Contract which has no effect at all and cannot be ratified is a/an:
a. Unenforceable c. Voidable
b. Void contract d. All of them
74. Statute of Frauds is applicable to

a. Partially executed
b. Oral contract of loan when the amount involved is less than P500
c. Contract not to be performed within a year from the making thereof
75. An incidental element of a contract

a. Implied warranty
b. Payment of interest in a loan
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c. Delivery of the object in contract of pledge
d. All of the above
76. Statement No. 1: A threat to enforce one’s claim through competent authority, if the claim is just
or legal does not vitiate consent.
Statement No.2: Contracts entered into during a lucid interval are valid. Contracts agreed into a
state of drunkenness or during a hypnotic spell are binding.
77. 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
78. Valid until annulled unless there has been ratification

a. Rescissible contract c. Voidable contract
b. Inexistence contract d. None of the above
79. Example 1 – S sold to B in private instrument his land. Later, B wanted to have the sale registered,
but registration requires a public instrument. In here, B may compel S to execute the needed public
instrument.
Example 2 – S sold to B orally his specific land. After B paid S the price of the sale, he wants to
register the land in his name but he needed a public instrument of sale. In here B may compel S to
execute the needed public instrument.
a. Both examples are false c. Only 2 is true
b. Only 1 is true d. Both examples are true.
80. Statement No.1: Ratification of voidable contract is necessary for its validity.
Statement No.2: Unauthorized contracts are annullable contracts.
81. S was forced by X to sign a contract with B for the sale of specific property for P10, 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.
82. 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.
83. Which of the following contracts 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
84. Statement No. 1: A stipulation in a contract of lease, which provides that the tenant shall have the
right to continue in possession of the leased premises so long as he pays monthly rentals thereon,
is a valid stipulation.
Statement No. 2: The seller sold to a minor some necessaries in the amount of P600. The goods
were delivered to the minor who, in turn paid the purchase price therefore. The contract is
unenforceable.
16
85. S and B orally agree that S would sell and B wound buy S’s radio for P400, two 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 S to deliver because B is willing to pay the price.
b. The contract falls under the Statue of Frauds, therefore unenforceable.
c. No Statue of Frauds because the price is less than P500.
d. The object is movable, oral contract is enforceable.
86. This kind of defective contract refers to that contract which is validly agreed upon because all the
essential elements exits, but courts can 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 c. Rescissible Contract
b. Void or Inexistence Contract d. Unenforceable Contract
87. Must be in writing to be enforceable:

a. Lease of land for 12 months c. Both of a and b
b. Lease of car for 18 months d. None of a and b
88. S, a minor, owns a specific property valued P50, 000. B, Capacitated, by means of fraud induced S
to sell his property to him (B) for P10, 000 which S did so. The contract is in writing.
a. The contract is binding from the start
b. The contract remains unenforceable because it falls under the Statue of Frauds.
c. The contract is rescissible because the ward suffered lesion by more then one-fourth of the
value.
d. The contract is void.
89. A contract entered into in violation of right of first refusal is:

a. Rescissible d. Void
b. Voidable e. None of the above
c. Unenforceable
90. A, a bachelor lawyer, raped W twice. Upon learning this, “F” the father of W, was able to force A to
marry W under pain of being sued in court and disbarred from the practice of his law profession.
Which statement is correct?
a. The marriage may be annulled on the ground of force or violence
b. The marriage may be annulled on the ground of threat or intimidation
c. The defective marriage, may, however, be ratified
d. There was no defect, the marriage was perfectly valid
91. S owns an oil painting. Being in need of money, S sold the painting to B for P1, 000. After the sale
it was discovered that the painting was valuable and worth P5, 000.
a. S may rescind the contract on ground of lesion or inadequacy of cause
b. S may rescind the contract on ground of fraud
c. S may annul the contract on the ground of error
d. B is entitled to the benefit of the contract because it is valid and binding
92. Statement No. 1: An agreement which, by its terms and conditions, is to be performed within a year
from the making thereof is unenforceable even if entered into orally.
Statement No. 2: A contract involving fraud (dolo incidente) is voidable.
93. Type of defective contract that creates no rights and impose no obligation, but are susceptible of
ratification.
a. Voidable contracts c. Rescissible Contracts
b. Unenforceable Contracts d. Void Contracts
94. 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
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95. 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
d. Donations between husband and wife
96. 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 simulated contracts
97. Contract with a false cause is

a. Voidable c. Unenforceable
b. Void d. All of the above
98. Statement No.1: The action for annulment on the ground of fraud shall be brought within 4 years
from the time of the perfection of contract.
Statement No.2: If a valid contract is novated to a void contract, both contracts are considered
void.
99. Statement No.1: Advertisements for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.
Statement No.2: Accidental elements of a contract are those agreed upon by the parties, and cannot
exist without being stipulated.
100. A conferment of a direct benefit in a contract between two persons in favor of a third person who
must accept such benefit before the same is withdrawn is known as:
a. Policitacion c. donation propter nuptias
b. Stipulation por autrui d. Counter-offer
101. 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 d. Unenforceable
b. Rescissible e. Void
c. Voidable
102. The following, except one, are the characteristics of void or inexistent contract. Which is the
exception
a. The defense of illegality of the contract is available to third person whose interests are not
directly affected
b. They are not subject to ratification
c. The right to raise defense of illegality cannot be waived
d. The action or defense for declaration of their nullity or inexistence of the contract does not
prescribe
103.A intimidated B to marry his daughter. After a year, B would like to file an action for annulment but
could not do so because A was around to intimidate him. The marriage contract is
a. Rescissible c. Void
b. Voidable d. Unenforceable
104. 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.
105. Simulation of Contract - Absolute or relative. Relative when:

a. Parties not bound at all
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b. The contract is void
c. The parties conceal their true agreement
d. None of the above
106. 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
107. Essential requisites of a contract:

a. Consent c. Subject
b. Cause d. All of them
108. The offeror need not know the acceptance by the offeree is the theory of:
a. Cognition c. Expedition
b. Manifestation d. B or C
109. One of the stipulations contained in the contract between M Company and its employees is that
the company shall pay a bonus to employees of the company who shall continue its employment
for at least 2 consecutive years, unless he quits or is discharged before the expiration of the period
of 2 years. X, an employee of the company was discharged without just cause one week before
the completion of the two-year period:
a. X is not entitled to the bonus because his discharge was in accordance with the contract.
b. X is not entitled to the bonus, because the employer’s right to terminate is superior than the
right of the employee to be employed.
c. X is entitled to the bonus whether the discharge is with or without cause.
d. X is entitled to the bonus because the debtor company has voluntarily prevented the
happening of the condition.
110. Example No.1- W 16 years old, sold his house valued at P1 M for P50, 000 or a lesion by more
than one-fourth of the value of the said house.
Example No.2- A sold his land orally to B. The contracts are:
a. Both contracts are unenforceable
b. No. 1 is rescissible; while No.2 is unenforceable
c. 1st is voidable; while 2nd is unenforceable
d. Both contracts are binding
111. Statement No.1 Existing contracts can be changed by a new tax law if fair and equitable.
Statement No.2: Existing contracts can be modified by a new law under Police Power.
112. Statement No.1: Validable contracts can be voided within the period allowed by law.
Statement No.2: There is undue influence if insidious words or machinations were employed by a
party on the other just to obtain the latter’s consent, without which the latter would not have
entered into the contract.
113. B1 Company bought out a competitor, B2 Corporation, with a stipulation that B2 Corporation should
not thereafter engage in any business in the Philippines unless consented to and approved by B1
Company.
a. The stipulation is defective but subject to ratification.
b. The stipulation is valid because the parties are free to enter into any stipulation,
terms and conditions such as this one.
c. The stipulation is unenforceable as there was no showing that the sale as done
in writing
d. The stipulation is void because it is contrary to public policy.
114. 1st S. Place and modes of payment are example of natural elements
2nd S. Agency, partnership and sale are example of preparatory & consensual contracts
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115. All are void contracts except:
a. Those whose object is outside the commerce of men.
b. Those which are relatively simulated or fictitious.
c. Those with unlawful consideration.
d. Those which contemplate an impossible service.
---END---
“In the province of the mind, the mind cannot distinguish what is reality from what is vividly imagined.’”
-Being Happy by Matthew Andrews
20
2018 Edition
PARTNERSHIP LAW
I. Identification: Basic Concepts and Principles
1. ____________ One where it is stipulated that some partners are excluded from sharing in
the profits.
2. ____________ A person admitted to all rights of a limited partner who has died or has
assigned his interest in a partnership.
3. ____________ Court here will decree dissolution upon application.
4. ____________ A person who shares in the profits and losses of a partner only.
5. ____________ One who joins in a business but who is not actually a partner; a joint
adventurer.
6. ____________ His contributions will answer for all obligations contracted even before he was
admitted.
7. ____________ Liable up to his capital contributions only.
8. ____________ His powers are irrevocable unless for a valid ground.
9. ____________ In essence, the participation of partners in a partnership.
10. ____________ Not liable for partnership losses unless stipulated.
11. ____________ Includes fruits of property acquired by gratuitous title but excluding said
property.
12. ____________ Presumption of partnership if without specification.
13. ____________ Change in the relation of the partners caused by any partner ceasing to be
Associated with the firm.
14. ____________ The process of setting and winding up partnership affairs.
15. ____________ When a partnership ceases to exist.
TRUE OR FALSE
1. The retirement, death, insolvency or civil interdiction of a limited partner dissolves the limited
partnership.
2. The retirement, death, insolvency, insanity or civil interdiction of a general partner dissolves the
limited partnership.
3. A general partnership is automatically dissolved by the death, insolvency, insanity or civil
interdiction of a partner.
4. The dissolution of the partnership does not of itself discharge the existing liability of any partner.
5. The contributions of a limited partner may be cash or property of the partner.
6. A partnership has a juridical personality separate and distinct from that of each of the partners.
7. When an unlawful partnership is dissolved by a judicial decree, the capital contributions of the
partners shall be confiscated in favor of the State.
8. When an unlawful partnership is dissolved by a judicial decree, the profits shall be confiscated
in favor of the state.
9. Any judgement creditor of a partner may change, attach and execute a partner’s interest in the
partnership.
10. A partner’s right in specific partnership property may be assigned to third persons.
11. The rule on Statute of Fraud does not operate in partnership.
12. Spouses may enter into a particular partnership.
13. A partner’s share can be returned without dissolving and liquidating the partnership.
14. Partnership creditors enjoy preference over partnership property.
15. An assignee of a limited partner’s interest becomes a substituted limited partner.
MULTIPLE CHOICE
1. 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
“FAILURE IS NEVER A FAILURE…. IF YOU LEARN SOMETHING FROM IT”

SAL MARINO
21
2. On application by or for partner the court shall decree a dissolution whenever:
a. A partner becomes in any other way incapable of performing his part of the partnership
contract.
b. A partner has been guilty of such conduct as it tends to affect prejudicially the carrying
on the business.
c. A partner wilfully or persistently commits a breach of the partnership agreement that it
is not reasonably practicable to carry on the business in partnership with him.
d. The business of the partnership can only be carried on at a loss.
e. All of the above
3. 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
4. Supposing A and B acceeded to the wish of C, that his liability is only to the extent of his
contribution but his name was included in the firm name and after several transaction the
partnership incurred a liability to X in the amount of P210,000. Which of the following statements
is true?
a. C is not liable to X.
b. X to get the P150,000, the balance of P60,000 to be divided equally between A and B.
c. Since C is only limited partner by agreement, A and B should pay X but they can ask
reimbursement from him (C), X cannot compel to pay his share.
d. After C paid his share if any, his right is to ask reimbursement from A and B.
5. If a partner is insolvent, the first order of preference in the distribution of his assets is:
a. Partner’ s contribution to the partnership
b. Partnership creditor
c. Separate creditor of the partner
d. Pro-rata between the separate creditors and partnership creditors
6. A person who takes place of a limited partner who has died is called:
a. Heir c. Assignor
b. Successor in interest d. Substituted limited partner
7. 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 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 contribution of Z in the partnership
their respective shares in the P3,000.
8. 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 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 on the profits in the sale
d. When A was bought-out of the partnership, the partnership was dissolved so A has no
more shares in the profits in the sale.
9. 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.
10. 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
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c. His right to participate in the management
d. To demand true and full information of all things affecting the partnership
11. 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
12. 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 d. Dormant partner
b. Nominal partner e. None of the above
c. Silent partner
13. 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 give to the Partnership whatever profits or benefits he may have
derived from his separate business
d. May be liable as a trustee
e. Both A and C
14. The following are causes of dissolution of a limited partnership, EXCEPT:

a. Death of general partner c. Insanity of a limited partner
b. Retirement of general partner d. None of the above
15. Three of the following enumerations are rights of a general partner in a limited partnership,
which are also enjoyed by a limited partner? Which is the exception?
a. To have the books of the partnership kept at the principal place of business of the
partnership, and at a reasonable hour to inspect and copy of them;
b. To have on demand true and full information of all things affecting the partnership and
a formal account of partnership affairs whenever circumstances render it just and
reasonable;
c. To have dissolution and winding up by decree of court;
d. To have all rights and be subject to all the restrictions and liabilities of a partner in a
partnership without limited partners.
e. None of the above.
16. The receipt by a person of a share of the profits of a business is a prima facie evidence that he
is a partner in the business, except where such profits were received in payment:
a. As a debt by instalments
b. As a wages of an employee or rent to a landlord
c. As an annuity to a widow or representative of a decrease partner
d. As interest on a loan
e. All of the above
17. Which of the following contracts of partnership will not affect its validity even if not in a public
instrument?
a. Limited partnership
b. Partnership where immovables are contributed
c. Partnership having a capital of P3000.00 or more
e. All of the above
18. 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
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19. A partnership suffered losses in the first year of its operation. X, a capitalist partner, cannot
contribute an additional share to the capital because of insolvency. Can X be obliged to sell his
interest to the other partners on the ground of such refusal?
a. Yes, X’s refusal to contribute his 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 X is paid the value of his interest.
d. No, because his refusal is justifiable.
20. 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
21. A, B and C are partners of A Co. by contributing P10,000; P20,000 and services, respectively to
the capital. After 5 years, the assets of the partnership is only P9,000. The share of C in the
remaining asset is:
a. Equal to the share of A c. P9,000
b. Equal to the share of B d. Nothing
22. A and B entered into contract of partnership for the purpose of buying and selling generators,
with A as capitalist partner and the latter as industrial partner. It was agreed that A shall
contribute P20,000 to the common fund on September 28, 1997. Upon arrival of the designated
date, A failed to deliver the contribution he promised.
a. B must demand from A the delivery of his contributions to render A in default
b. The contract of partnership becomes void because A failed to give his contribution to
the common fund.
c. B can compel A to deliver his contribution with interest and/or damages without the
necessity of demand.
d. The contract of partnership was never perfected because there was no delivery of
contributions by the partners.
23. A and B were partners. A being the managing partner, invited C to associate with him in his a
share in the partnership. What are the right of the partners?
a. A may have C an associate in his share even without B’s consent.
b. A may not have C as an associate because he is already B’s partner.
c. C may become a partner upon invitation of A, the managing partner.
d. B may refuse to accept C as A’s associate due to conflict of interest.
24. Which of the following statements is correct regarding the division of profits in a general
partnerships when the written partnership agreement only provides that losses be divided
equally among the partners? Profits are to be divided:
a. Based on the partners ratio of contribution to the partnership
b. Based on the partners participation in day to day management
c. Equally among the partners
d. Profits will be divided according to the managing partner
25. Which of the following statements is incorrect?

a. An industrial partner who engaged in business for himself may be excluded from the
partnership plus damages
b. An industrial partner may not engage in business for himself without the consent of his
co-partner
c. A capitalist partner may engage in the same line of business in which the partnership is
engaged
d. An offending capitalist partner may not be excluded from the partnership.
26. 1st Statement: The arrival of the term of 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.
2nd Statement: The general rule is that the loss of the specific thing contributed to the
partnership dissolves the partnership when only the use of the thing is the contribution. Which
is correct?
a. Both statements are false
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b. Both statements are true
c. 1st statement is true but 2nd statement is false
d. 1st statement is false but 2nd statement is true
27. 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
28. A, B and C are partners in X and Company. D represent himself as a partner in X and Company
to E, who on the faith of such representation, extended P10,000 credit to X and Company,
Assuming only A and B consented to such representation, who shall be held liable to E?
a. Since E extended the P10,000 credit to X and Company, a partnership liability exists,
thus, all the partners and D are liable.
b. Only A, B and D are partners by estoppel and, thus, are liable pro-rata to E.
c. Only D, who made the representation shall be liable to E.
d. Only partners, A, B and C who benefited from the credit extended by E shall be liable to
E.
29. A limited partner shall not become 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
30. A partner whose connection is concealed and has no voice nor say in the management of the
affair of the partnership is called:
a. Nominal partner d. Dormant partner
b. Secret partner e. None of the above
c. Silent partner
31. 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.
32. 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
33. 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 called:
34. 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 shall be necessary
d. is dissolved by the death of a partner.
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e. All of the above.
35. A partner shall have the right:

a. to ask that the books of the partnership be kept at the principal place of
business of the firm, and at any reasonable hour have access to and inspect and copy
any of them.
b. to demand true and full information of all things affecting the partnership
c. to share in the profits and surplus assets of the firm.
d. to ask for judicial dissolution.
36. 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.
37. 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 the 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
instalments.
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.
38. 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 contract of partnership where the capital is P3,000 or more
c. Written contract of universal partnership of present properties between husband and
wife.
d. None of them.
39. X, Y and Z are partners, with X contributing P60,000; Y P40,000; and Z service. They agreed to
divide the profits and losses in the following proportions: X, 35%; Y,25%; Z, 40%. If the
partnership incurred a loss of P10,000, how should that loss be shared by the partners?
a. X P6,000; Y P4,000; Nothing
b. X P3,500; Y P2,500; Z P4,000
c. X P5,000; Y P3,500; Z P2,000
d. X P4,500; Y P3,000; Z P2,500
40. A, B, C and D are partners. Per written agreement A and B are general partners while C and D
are limited partners. In their written contract, it appears that the name of the partnership is A
and Company partnership. Upon the death of B, the partnership is dissolved. After exhausting
the assets, A and Company still owes T, P12,000. T can collect
a. P12,000 from A c. P3,000 from C
b. P6,000 from B d. Nothing from D
41. Bears the risk of things contributed to the partnership:

a. Contributing partner
b. Limited partner
c. Partner contributing usufructuary rights
d. All of the above
42. 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
43. 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.
26
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.
44. 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
45. 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, A was able to make B sell to him (A0 his (B’s) share in the partnership.
Then A sold the land at a big profit.
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. The partnership is dissolved when A became the sole owner.
d. The sale of the land to C is void since it was without the knowledge of B.
46. 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
47. X and Y established a partnership by contributing P100,000 each. 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 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 the P30,000 remaining liability
d. X and Y to pay P15,000 each.
48. In the preceding question, if the partnership is solvent and three was a profit P30,000, no
stipulation as to the profit sharing, the participation of the partner on the profit will be
a. Equally, P10,000 each. c. Just and equitable distribution
b. Equally, between X and Y only d. The court will intervene.
49. 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 the industrial partner 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 manager of a partnership.
d. To expel him from the partnership and claim for damages.
50. Management of a partnership is usually conferred upon the:

a. Manager c. Partners
b. President d. None of the above
51. Which of the following is not an element of a partnership?

a. There must be a valid contract.
b. There must be a mutual contribution of money, property or industry to acommon
fund.
c. There must be an intent to engage in lawful business, trade or profession.
d. None of the above.
52. Statement No. 1: The general partners may continue the business of the limited partnership
with partnership property on the death, retirement, civil interdiction or insolvency of another
general partner
Statement No. 2: Any stipulation exempting a general partner, whether capitalist or industrial,
form his pro rate obligation to third persons shall be void, except as among the partners.
a. Both are true c. No.1 is true; No.2 is false
b. both are false d. No.1 is false;No.2 is true
27
53. A substituted limited partner is:
a. a person admitted as a partner by the other partners.
b. a buyer of right of the deceased.
c. An assignee admitted to all the rights of a limited partner.
54.Statement No.1: The risk of specific and determinate things not fungible, 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.
Statement No. 2: A joint account is a sort of informal partnership, with no firm name but with
legal personality.
a. Both are true c. No.1 is true; No.2 is false
b. Both are false d. No.1 is false; No.2 is true
55. Without the written consent or ratification of the specific act by all the limited partners, a general
partner or all of the general partners have no authority to:
a. Do any act in contravention of the certificate.
b. Do any act which would make it impossible to carry on the ordinary business of
the partnership.
c. Confess a judgement against the partnership.
d. Possess partnership property, or assign their rights in specific partnership property,
for other than a partnership purposes.
56. General partners shall have no right to perform the following act without the written consent
or ratification by all the limited partners, except:
a. Admit a person as a general partner.
b. Admit a person as a limited partner, unless the right to do so is given in the
certificate.
c. Continue the business with partnership property on the death, retirement, so is
given in the certificate.
d. To have the partnership books kept at the principal place of business of the
partnership, and at a reasonable hour to inspect and copy any of them.
57. A partnership having for its object determinate things, their use of fruits, or a specific
undertaking, or the exercise of a profession or vocation is called:
a. Partnership by estoppel
b. Particular partnership
c. Universal partnership of all present property
d. Universal partnership of profits.
58. Which of the following statement is false?

a. An industrial partner cannot, without the consent of all the other partners, engage
in a business similar to the business of the partnership.
b. As to liability to third persons, an industrial partner is considered as a general
partner.
c. An agreement among partners that the managing partner shall determine the share
of all partners in the profit is void.
d. All partners including industrial ones can be compelled to give additional contribution
if the purpose is to save the business from certain loss.
59. 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 of X in the amount ofP30,000. As stated, which of the following
statements is true,
a. C is not liable because it was agreed that the industrial partner is exempted from
liability to third person.
b. The P30,000 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.
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d. A and B are liable for P15,000 each.
60. 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 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; BP4,000; 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
61. A, B and C formed a general partnership, each to contribute P100,000. The partnership began
its operation but C’s 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 statement is TRUE.
a. C’s share in the balance of P90,000 is nothing because this was stipulated
b. C’s share in the balance of P90,000 is P60,000 that is, his share in the contribution
and his share in the loss.
c. C’s obligation to X and the partnership is P50,000.
d. Each partner share in the balance
62. 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. C’s share in the balance of P90,000 is nothing because he is only a limited partner.
b. C’s share in the balance of P90,000 is P60,000, that is his share in the loss and his
unpaid contribution.
c. C’s share in the balance of P90,000 is only P30,000.
d. Each partner share in the balance of P90,000 is P30,000.
63. 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
64. 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-1’s 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.
65. 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
66. 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
67. Coverage of Statute of Frauds in partnership contract, 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
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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 delivery or payment.
68. A, B and C, capitalist partners, each contributed P30,000, P20,000 and P10,0000 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 all 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 from
any of the partners solidary.
d. X can recover from the firm P60,000 and consider the balance of P120,000 as a loss.
69. Coverage of Statute of Frauds in partnership contract, which is the exemption?

a. Promise to answer for the debt, default or 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 delivery or payment.
70. A, B and C, capitalist 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 all 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 the 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 from
any of the partners solidary.
d. X can recover from the firm P60,000 and consider the balance of P120,000 as a loss.
71. 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 or after its delivery to the partnership, when
the partner who contributed it having reserved the ownership thereof, has only
transferred the use or enjoyment of the same.
72. 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 contract 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
73. A partnership without a definite period of existence and which can be dissolved at any
time by any of the partners is called:
30
74. A partner whose liability for partnership debts is limited to his capital contribution is
called:
a. General partner c. Secret partner
b. Limited partner d. None of the above
c. General-limited partner
75. 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 unpaid
balance of P10,000. Who are liable for the payment of the unpaid balance of P10,000?
How much each?
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
76. 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, P3,500
c. A, P3,500; B, P3,500; C, P3,500
d. A, P3,500; B, P2,500; C, P4,000
77. X, Y and Z are partnership business. X contributed P10,000, Y contributed P5,000 and Z
his services only. After payment of partnership debts, what remains of the partnership
assets is P6,000 only. 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
78. 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-industrialist partners
d. All of the partners
79. 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
80. Sometimes termed dormant partner:

a. Limited partner c. Secret partner
b. Capitalist partner d. Both Silent & Secret
81. 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 partnership a de facto existence.
82. 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
31
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.
32
SUMMARY QUIZZER IN CORPORATION LAW
A. Identification/ Basic concepts/ Principles
1. Theory that a corporation owes its life from the state.
2. Theory that a corporation is independent of State existence.
3. Theory that a corporation is a group of businessmen only.
4. Theory that a corporation enjoys a distinct personality.
5. Theory that a corporation and its officers/ BOD’S are one.
6. Death of components of a corporation will not affect its life.
7. A body that holds corporate powers.
8. A private corporation performing public functions.
9. A corporation created for charitable purpose.
10. Corporate nationality is determined by its principal office.
11. Corporate nationality is determined by place of organization.
12. Corporate nationality is determined by its principal stockholders.
13. A corporation with at least 200 stockholders and P50 M or more assets.
14. Theory that a corporation cannot declare dividends w/out Surplus profit (URE).
15. Amount fixed by the corporate charter to be subscribed and paid.
16. They represent real equity in a corporation.
17. They represent credit due from the corporation.
18. Shares w/c are not allowed to banks, trust companies, public utility co., insurance co.,
etc.
19. Minimum amount allowed for no par values shares.
20. A Certificate of Stock indorsed in blank by a stockholder and entrusted to a broker.
21. Shares w/c have been issued for a condition.
22. Shares that can be issued even for less than their par value.
23. Shared issued at less than their par value.
24. Refers to a right of a dissenting stockholder.
25. Minority stockholders principal remedy against the majority stockholders.
26. Corporation with not more than 20 stockholders.
27. Can sue and be sued in the Philippines.
28. Can have more than 15 incorporators.
29. Composed of 1 incorporator only.
30. Can only be questioned by the solicitor general.
B. True or False
31. The two-year rule is automatic just like the 5-year rule.
32. Incorporators and corporators must be capacitated to enter into a contract
always.
33. President of the corporation need not to be a stockholder.
34. A resident alien can be a corporate secretary.
35. A board director can be required to own more than 1 share.
36. Majority of board directors must be Resident citizens.
37. Executive officers are elected by majority vote of OCS.
38. An executive committee has the power to amend Board resolutions.
39. Conviction of a crime punishable by 6 yrs. imprisonment disqualified a board
director.
40. Board directors are not entitled to compensation as a rule.
41. Corporate Powers are vested in the Executive officers.
42. Board directors are removed by 2/3 votes of stockholders.
43. Even non-voting shares can vote in the election of officers.
44. Directors are solidarily liable for damages suffered by the corp. due to their acts.
45. Stockholders are liable to pay corporate debts even up to their separate property.
46.Appraisal right can be exercised in the increase of capital stocks.
47. Pre-emptive right can be denied by the corporate charter.
48. Self-dealing directors are prohibited by the Corporation Code.
49. Ultra vires acts are prohibited hence voidable.
50. Cumulative voting is normally allowed in Non-stock Corporation.
51. A delinquent Stockholder loses all his rights.
52. Stockholders can meet anywhere if by laws provided.
53. No transfer of shares is allowed in close corporations.
54. Majority vote of OCS is required to elect Board directors.
55. Stockholders can compel the corporation to declare dividends if there is
33
Surplus profit.
56. Sale of all corporate assets requires approval of all stockholders.
57. Stock dividends cannot be issued to non-stockholders even for services rendered
to the corporation.
58. No dividends can be declared out of capital except liquidating dividends only.
59. Amendments to the articles of incorporation can take effect even w/o SEC
approval.
60. Proxy and VTA must be both notarized.
61. The Holder of a VTA can be elected board director.
62. Shares of Stocks cannot be transferred gratuitously.
63. Stock subscriptions are indivisible contracts.
64. Pre- emptive right in close corporations include treasury shares.
65. De facto corporations must possess a certificate of incorporation from SEC.
66. Board members of school must always be in multiple 5 and 1/5 shall be elected
yearly.
67. Stock corporations can be converted into a Non-stock Corporation.
68. Illegal acts are ultra vires and vice versa.
69. Voluntary dissolution does not require any hearing.
70. Life of a corporation can be extended for another 50 yrs. in the last 6 years of its
life.
71. After dissolution, a corporation can still exist for 3 more years but for
liquidation purposes only.
72. To declare dividends is w/in the express powers of a corporation.
73. The Code of Corporate governance is applicable to all stock corporations.
74. Cumulative voting in stock corporations is mandatory.
75. Authorized capital stock of P1 M requires a paid-up capital of at least P50, 000.
76. Quorum for Board meetings shall be majority of board directors always.
77. Corporate life starts upon filing of Articles. of Inc.
78. Cert. of Inc. can be issued even w/out by laws.
79. Board directors can attend by proxy if by laws provided.
80. Ultra vires can be ratified if consented by all stockholders.
34
2018 Edition
LOANS
Fill in the blanks:
1. The two kinds of loans are a) ____________ also known as b) ____________ and c)
_____________ also known as d) ______________ and e) __________.
2. The subject matter of commodatum is a) ______________ or b) ______________ while

mutuum is c) ______________ or d)______________.
3. According to character, commodatum is a) _____________ while mutuum maybe b)

__________ or c) ______________.
4. According to ownership, in commodatum the a) _______________ retains b) ______________

while in mutuum the c) _______________ or d) ______________ becomes the e)
_____________.
5. According to extinguishment, return of the thing borrowed is allowed in a) _____________ while

in mutuum, it is b) _______________.
6. a) ____________ is a kind of commodatum where the b) ______________ can demand the

return of the thing c) ______________ which can occur when d) _____________ or e)
___________.
7. The two (2) kinds of mutuum are a) _________________ and b) ________________.
8. As to perfection, commodatum and mutuum are a) ______________ which require b)

__________ otherwise, contract is c) _______________.
9. The law on loans is governed by a) ________________, also known as b) ______________

which took effect on c) ________________.
10. a) _____________ may be the object of commodatum if the purpose of the contract is not b)
_______________.
11. a) ____________ or b) _____________ may be the object of commodatum.
12. The liability of two (2) or more bailees to whom a thing is loaned is ________.
13. Usurious contracts and interests formerly punishable under a) ______________ are now under
the determination of b) _______________ thru its c) ________________.
35
2018 Edition
BANKING LAWS AND OTHER COMMERCIAL LAWS
1. The law that created the BSP is a) ____________which became effective in the year b)
___________ but the general law governing all banks is c) _____________ known as
d)____________ which became effective in the year e)_____________.
2. The primary objectives of the BSP is a) ______________________ and b)

______________________.
3. The governing body of BSP is a) ___________________, composed of b) ___________________

and c) ________________ shall come from private sector. The d)_______ shall act as chairman of
the MB.
4. a)________________ are entities engaged in the lending of funds obtained in the form of
b)______________. They must be c) ___________________ and their funds must be from the
public, or deposits of d)___________________.
5. a) ________________ the only bank that can exercise the powers of an investment house. They
have the highest capitalization, whereas b) _________________ have lower capitalization but
higher than thrift banks.
6. a) _________________ are savings and mortgage banks, private development banks, etc.
7. Banks primarily operating for rural developments are a) _________________ whereas banks
primarily created under the Cooperative Code are b) ________________.
8. The bank for central banks is a) ________________ an international organization based in

b) ________________ and its stockholders are c) _______________ and not d)
_______________.
9. Only a) ______________ and b) _______________ are the banks that can accept or create demand
deposits without the approval of BSP.
10. The SBL rule means a) ________________ which is currently limited to b) ______________;
whereas the DOSRI rule means c) __________________ and its purpose is to limit the credit
accommodation granted by the bank to its officers/directors, etc.
11. The term a) ________________ means the grant of small loans to poor or b) ______________ for
their c) ________________.
12. Minors under our banking laws can open a a) ______________ provided they are b)
_____________, c) ______________ and it should only be d) __________________
13. The Law that created PDIC is a)___________ with primary purpose of b) __________________
that shall c) _________________ up to d)_______________ per depositor which can be claimed
by the depositor within e) ______________ from the takeover of the f) ________________ after
the bank is closed due to g) _____________ as ordered by the h) ________________.
14. The law protecting bank deposits from unlawful inquiry is a)____________ otherwise known as
b)______________ and its purpose is to discourage c) ______________ and prohibits the inquiry
into all deposits of any banks without d) ___________________ or e) _______________ or in
certain cases as f) _________________ and g) _________________ even without court order.
15. Under the unclaimed balances law a) __________________ that have become b)
_______________ for a period of c) __________________ may be d) ________________ by the
government after proper e) ________________.
36
16. In a) _______________ the purpose is b) _________________ and the amount of indebtedness is
c) ____________________, whereas in d) _________________, the purpose is e)
_______________ and some creditors may f) ___________________.
17. In Voluntary Insolvency a) ________________ whereas in Involuntary insolvency b)

______________. The former is filed by the c) __________________ whereas the latter is filed by
d) ______________.
18. Filing of Bond is required in a) ___________________________, b) __________________ no bond

is required.
19. _________________ refers to inability to pay one’s debts as they fall due whereas
________________ pertains to the process of recovery and reorganization and is especially
applicable to a ______________ such as ________________ and ________________.
20. Corporate rehabilitations are now under the jurisdiction of _________________ but originally under
___________________.
21. The 3 types of rehabilitation proceedings are _________________, ________________, and

__________________.
22. The creditor/s referred to above must be holding at least ___________ of the debtor’s total
liabilities.
23. The five important parties in a rehabilitation proceeding are _______________,

________________, ________________, ________________, and _________________.
24. ___________________ is the person appointed by the court to oversee the operations of the debtor
but the real management and control of debtor’s operation normally belongs to ________________.
25. The petition for rehabilitation shall be dismissed by the court if ___________________ is not
submitted within _________________ days from the initial hearing.
26. R.A. 8792 is also known as ___________________ , introduced in the year __________________.
27. The principal purpose of the law is to facilitate domestic and international _________________,
whether __________________ or ______________________.
28. _________________________ refers to information generated by ___________________,
___________________ or ______________________.
29. _________________________ refers to a system intended for electronic and similar methods of
communications and data processing.
30. ____________________ a distinctive mark, symbol or sound in electronic form representing the
identity of a person.
31. ______________________ a secret code which secures and defends sensitive information.
32. _____________________ a person who is the source of the electronic document.
33. _____________________ an online service or network or operator of electronic or similar facilities.
34. ___________________ any device by which electronic data are recorded, sent and received, etc.
35. _________________ or ________________________ and ____________________ under the law
carries a minimum fine of ___________________ and imprisonment up to _________________.
37
2018 Edition
ANTI-MONEY LAUNDERING LAW
1. The law governing money laundering is a) _______________________ also known as b)

________________ which took effect on c) __________________.
2. The law criminalizes a) ____________________ and considers it as a b) ______________,
used as financial strategy especially by c) ______________.
3. The term a) _______________ covers all acts wherein b) ______________ are made to appear
as c) _________________.
4. The law provided for a) _______________ criminal acts, and the first five are
b)_____________, c)______________, d)______________, e) _____________ , f)
______________.
5. The law provided for the creation of a) __________ which will act as b) _____________ with
the principal duty of c) ___________________, and is composed of d) __________ as chairman
and as members e) __________________ and f) ______________.
6. The institutions or organizations mandated by the said law to report to AMLC are a)
___________ b) _______________ and c) ________________.
7. The KYC Rule means a) ____________________ which requires the b) ___________ to
establish c) ____________________ based on d) ______________.
8. The transaction covered by the law is any transaction a) _________________ within b)
______________ or c) ______________ if involving d) ______________.
9. Failure of the a) _______________________ to report the above transactions or similar acts
covered by the law is punishable by b) _____________________ whereas breach by
confidentiality is punishable by c) _____________________.
10. The above law still prohibits the AMLC or any financial institution to divulge the balance of a
depositor’s bank account as prohibited by a) ___________________ unless b)
_________________ or c) ___________________ or d)____________.
38
2018 Edition
SECURITIES REGULATION CODE
1. The law regulating the selling of securities like shares of stocks is ________________ effective in
the year _______________.
2. The government agency assigned to implement the law is __________________ headed by the
_________________ and ____________________; all appointed with a term of _______________
and majority of them must be ___________________. It has jurisdiction and supervision Over all
___________________, ___________________,, and _____________________.
3. _________________ are shares participation or interests in a corporation or in commercial

enterprise evidenced by a written instrument or certificate, written or electronic in character.
4. ______________ refers to the obligor or creator of a security.
5. ______________ any person engaged in the business of buying and selling securities for other
person’s account.
6. ______________ any person engaged in the business of buying and selling securities for his own
account.
7. ______________ an organized market place that brings together buyers and sellers of securities.
8. ______________ a general term that includes issues, or persons very close to the issuer who has
knowledge about the securities not available to outsiders.
9. ______________ a person who guarantees the distribution and sale of securities.
10. The law requires the _______________ of securities before they can be sold in public except
______________ and __________________.
11. ______________ a director who is other than officer or employee of a corporation and disqualified
if he owns ________________ of the shares of the said corporation.
12. ______________ refers to the purchase of securities by an investor using the credit of the broker
to pay.
13. ______________ is the sale of security that is not yet owned by the seller.
14. ______________ a transaction where an investor sells a losing security to claim a capital loss and
within 30 days, repurchased it again for a bargain.
39
2018 Edition
LAW ON INTELLECTUAL PROPERTIES
1. The law that governs Intellectual Properties is __________ which took effect on __________.
Intellectual property rights are for __________.
2. The law is divided into 5 parts consisting of __________, __________, __________,
__________, __________.
3. The government office tasked to implement the law is __________ headed by __________
and __________. They must be __________, __________, __________. The __________
must be a lawyer and __________ appointed for a term of __________ with one
__________. The Office is under __________.
4. _______________ in any field of human activity is _______________ provided the 3
requisites are present ____________, _____________, ______________.
5. The term of patent is ______________ from _____________.
6. _______________ is the use of patented product without the authorization of the patentees.
7. _______________ means any visible sign capable of distinguishing the goods, hence,
specifically called ____________; or service hence specifically called ____________ and shall
have a life of ________________.
8. _______________ is the legal protection extended to the owner of the right in an original
work. It shall belong to the _______________ and shall last during his _______________
plus ______________.
9. The 2 rights given to the authorities are _______________ and _________________.
10. Both _______________ and _______________ offer intellectual property protection but the
object of the first is ________________ whereas the second is for ________________.
40

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BUSINESS LAW Atty.

I. Identification (Basic Concept/Principles)

_______________________21. a. Not legally enforceable. / in accordance with natural law.

_______________________ b. Legally enforceable. / in accordance with positive law.

_______________________22. a. Obligation governed by the Civil Code.

_______________________ b.Obligation wherein obligation is pro-rated among the parties.

_______________________28. a. An obligation capable of partial performance.

_______________________29. a. An obligation based on law.

_______________________30. a. Can stand alone.

II. TRUE OR FALSE

____31. In Culpa Aquiliana, negligence is presumed in the injury.

51. A source of obligation where negligence resulted to crime:

52. Which is not a source of obligation?

54. Which of the following is considered as quasi-contract?

55. A judicial relation known as Negotiorum Gestio takes place.

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

59. Also known as punitive damages

64. Which obligation is not valid?

69. A, Band C executed a promissory note worded as follows:

b. If he has preferred his own interest to that of the owner.

85. The distinction between period and condition is

88. Statement No. 1: Obligation with an in diem period is demandable at once.

93. Obligation may be modified by:

94. Which of the following is not a special mode of payment?

99. Proof of pecuniary loss is necessary for the award of:

100. All are secondary modes of extinguishing on obligation except one:

104. Novation changing the creditor without debtor's approval:

112. An extinguishment of obligation that may result to gift tax is

118. Legal subrogation is presumed in the following cases except:

120. In novation which of the following is incorrect?

“ It is in your moments of decision that your destiny is shaped.”

45. Which of the following is correct?

47. An “invitation to bid”, B proposes the following:

48. In the preceding question, which of the following statements is correct?

52. An agreement in restraint of trade.

54. Which of the following contracts is required to be in writing to be enforceable?

58. The stage of “conception” of a contract is:

59. Which of the following contracts is rescissible?

60. Contracts that cannot be sued upon unless ratified:

61. Contracts of sales and partnerships are:

63. These persons are bound by contracts:

72. Mr. A rendered accounting services in return for legal services o Mr B is

74. Statute of Frauds is applicable to

75. An incidental element of a contract

78. Valid until annulled unless there has been ratification

82. In the preceding number, what can C do?

83. Which of the following contracts is voidable?

87. Must be in writing to be enforceable:

89. A contract entered into in violation of right of first refusal is:

97. Contract with a false cause is

105. Simulation of Contract - Absolute or relative. Relative when:

106. Which of the following instruments is not subject to reformation?

107. Essential requisites of a contract:

-Being Happy by Matthew Andrews

“FAILURE IS NEVER A FAILURE…. IF YOU LEARN SOMETHING FROM IT”

3. Which of the following is not a common fund of a Universal Partnership Property?

10. Which of the following is not a property right of a partner?

14. The following are causes of dissolution of a limited partnership, EXCEPT:

25. Which of the following statements is incorrect?

35. A partner shall have the right:

38. Which of the following is valid?

41. Bears the risk of things contributed to the partnership:

46. Which of the following may be a cause for involuntary dissolution?

2. The subject matter of commodatum is a) or b) while

4. According to ownership, in commodatum the a) _ retains b)

6. a) is a kind of commodatum where the b) __ can demand the

7. The two (2) kinds of mutuum are a) _ and b) .

9. The law on loans is governed by a) __, also known as b)

11. a) or b) _ may be the object of commodatum.

3. The governing body of BSP is a) _, composed of b) _

18. Filing of Bond is required in a) _________, b) no bond

21. The 3 types of rehabilitation proceedings are _, , and