LAW ON CREDIT TRANSACTIONS
1.1 PLEDGE, REAL MORTGAGE AND CHATTEL MORTGAGE
1.2 CONTRACT OF AGENCY
Direction: Read and select the best answer for the following questions:
1. The following requisites are essential to the contracts of pledge, real estate mortgage, except
a. That they be constituted to secure the fulfillment of a principal obligation such as contract
of loan.
b. That the pledger or mortgagor be the absolute be the absolute owner of the thing pledged
or mortgaged.
c. That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose.
d. That when the principal obligation becomes due, the things in which the pledge or mortgage
consists may be alienated for the payment of the creditor.
e. That the thing pledged or mortgaged be place in the possession of the creditor, or of a third
person by common agreement.
2. The following are the kinds of principal obligations that may be secured by a contracts of pledge,
or real estate mortgage or of chattel mortgage, except
a. Pure obligations
b. Conditional obligations whether suspensive condition or resolutory condition
c. Obligations with a period whether suspensive period (ex die) or resolutory period (in diem)
d. Natural obligations
e. Rescissible obligations
f. Voidable obligations
g. Unenforceable obligations
h. Null and void obligations
3. When is the pledger or mortgagor required to be the owner of the thing pledged or mortgaged
for the validity of contracts pledge, of real estate mortgage or of chattel mortgage?
a. At the time the principal obligation is constituted.
b. At the time the contract of pledge or mortgage is constituted.
c. At the time of the failure to pay the principal obligation.
d. At the time the thing to be pledged or mortgaged is to be delivered.
4. D borrowed P1,000,000 from C. G, a third person, mortgaged his land to secure the fulfillment
of D’s loan. Is the contract of mortgage valid?
a. No. because D must be the owner of the mortgaged land.
b. Yes, provided G will deliver the land to C.
c. Yes because third persons who are not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property.
d. No, because G is no privy to the contract of loan.
5. It is a stipulation whereby the thing pledged or mortgaged shall automatically become the
property of the creditor in the event of non-payment of the debt within the term fixed.
a. Pactum creditarium
b. Pactum commissorium
c. Pactum debitarium
6.
7.
8.
9.
10.
d. Pactum crematorium
D borrowed P10,000 from C. To secure the fulfillment of the loan, D pledged his laptop. The
contract of pledge provides that the creditor-pledgee may appropriate the laptop upon failure
of the debtor-pledgor to pay the loan. On the date of maturity of the loan, D failed to pay the
loan. Which of the following statements is correct?
a. C becomes the owner of the laptop.
b. The laptop cannot be alienated for the payment of the loan.
c. C does not become the automatic owner of the laptop upon D’s failure to pay the loan
because that provision is considered pactum commissorium which is contrary to law and
public policy.
d. The contract of pledge is null and void because of pactum commissorium provision.
D borrowed P20,000 from C. To secure the fulfillment of the loan, D mortgage a land owned by
his ailing father. Which of the following statements is correct?
a. The contract of mortgage is valid because future property may be pledged or mortgaged.
b. The contract of loan is null and void because the contract of mortgage is null and void.
c. The contract of mortgage will become valid upon the death of D’s father.
d. The contract of mortgage is null and void because the mortgagor must be the owner of the
property mortgaged at the time it is constituted but the contract of loan remains to be valid.
ABC Inc. borrowed P2,000,0000 from BPI. ABC Inc. is under receivership. To secure the
fulfillment of the loan, ABC mortgaged its administrative building. Which of the following
statements is correct?
a. The contract of mortgage is null and void because the mortgagor has no free disposal of the
thing.
b. The contract of mortgage is valid because the mortgagor is the absolute owner of the
property mortgaged at the time the mortgage is constituted.
c. The contract of mortgage is null and void because only natural person may enter in a
contract of mortgage.
d. The contract of mortgage is voidable.
The following are the instances where the thing pledged or mortgaged may be sold or alienated
to pay the principal obligation, except
a. If the pledgor or mortgagor fails to fulfill certain conditions and such violation would make
the debt due and demandable.
b. If the debtor has lost the right to make use of the period or where there is an acceleration
clause in the payment of installment.
c. Upon default to pay the obligation at maturity.
d. Before maturity of the principal obligation.
What is the nature of a contract of pledge, or chattel mortgage, of real estate mortgage or of
antichresis?
a. It is divisible if the principal contract is joint.
b. It is indivisible if the principal contract is solidary.
c. It is divisible whether the principal contract is joint or solidary.
d. It is indivisible whether the principal contract is joint or solidary.
11. D borrowed P10,000 from C and pledged his ring and watch with P4,000 and P6,000 value
respectively. After several days, D pays P4,000 to C. which of the following statements is
correct?
a. The contract of pledge is extinguished.
b. The contract of loan is extinguished.
c. D cannot demand the release of his ring because a contract of pledge is invisible.
d. D may compel C to return the ring because P4,000 of the loan is already paid.
12. D borrowed from C P100,000 secured by a mortgage on D’s two lots (lot 1 and lot 2). D dies
leaving E and F as heirs with E inheriting lot 1 and F lot 2. F pays P50,000 of the loan. Which of
the following statements is correct?
a. F may ask for the extinguishment of the mortgage on lot 2.
b. The contract of mortgage is extinguished.
c. The contract of loan is extinguished.
d. F cannot ask for the extinguishment of the mortgage on lot 2.
13. Using the same data in preceding number, suppose it is C who dies leaving X and Y as heirs. If D
pays X P50,000, which of the following statements is correct?
a. X may cancel the mortgage to the prejudice of Y.
b. X cannot cancel the mortgage to the prejudice of Y.
c. The contract of mortgage is extinguished.
d. The contract of loan is extinguished.
14. D borrowed P10,000 from C and pledged his ring and watch with P4,000 and P6,000 value
respectively. They agreed that the ring will secure P4,000 of the loan and the watch will secure
the balance of the loan. After several days, D pays P4,000 to C. which of the following
statements is correct?
a. The contract of pledge on the watch is extinguished.
b. The contract of loan is fully extinguished.
c. D cannot demand the release of his ring because a contract of pledge is indivisible.
d. D may compel C to return the ring because contract of pledge on the ring is extinguished.
15. A and B jointly borrowed P10,000 from C. In order to secure their respective obligations, A
pledge his cellphone while B pledge his laptop. At the maturity date of the loan, A paid P5,000
of the loan. Which of the following statement is correct?
a. The contract of pledge on the cellphone is extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone because a contract of pledge is indivisible.
d. The contract of pledge on the laptop is extinguished.
16. A and B jointly borrowed P10,000 from C. In order to secure the obligation, A pledged his
cellphone while B pledged his laptop. At the maturity date of the loan, A paid P5,000 of the
loan. Which of the following statements is correct?
a. The contract of pledge on the cellphone is extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone because a contract of pledge is indivisible.
d. The contract of pledge on the laptop is extinguished.
17. It is a contract by virtue of which the debtor delivers to the creditor or to a third person a
movable, or instrument evidencing incorporated rights for the purpose of securing the
fulfillment of a principal obligation with the understanding that when the obligation is fulfilled,
the thing delivered shall be returned with all its fruits and accessions.
a. Contract of pledge
b. Contract of chattel mortgage
c. Contract of real estate mortgage
d. Contract of antichresis.
18. In case the cause or consideration of the contract of pledge is not stipulated, what is the cause
of consideration of a contract of pledge?
a. It has no cause or consideration.
b. The cause or consideration of the principal obligation or contract of loan.
c. The cause or consideration is the liberty of the pledger.
d. The cause is the service remunerated.
19. The following are the characteristics of a contract of pledge, except
a. Consensual – it is perfected by mere consent.
b. Accessory – it has no independent existence of its own because there must be contract of
loan.
c. Unilateral – it creates an obligation on the part of the creditor to return the thing upon the
fulfillment of the principal obligation.
d. Subsidiary – the obligation incurred does not arise until the fulfillment of the principal
obligation which is secured.
20. The following are the essential requisites of conventional pledge or contract of pledge, except.
a. That it be constituted to secure the fulfillment of a principal obligation or contract of loan.
b. That the pledger be the absolute owner of the thing pledged.
c. That the person constituting the pledge has the free disposal of his property, and in the
absence thereof, that he be legally authorized for the purpose.
d. That the thing pledged be placed in the possession of the creditor, or third person by
common agreement or there must be delivery of the thing pledged.
e. That the contract of pledged be constituted in public document.
21. What is the nature of a contract to constitute a pledge?
a. Consensual contract.
b. Real contract.
c. Formal contract
d. Solemn contract
22. What is the legal effect of a promise or contract to constitute a pledge?
a. It is perfected by delivery of the thing pledge.
b. It is perfected through the notarization of the promise.
c. It is perfected by mere consent and gives rise only to a personal action between the
contracting parties.
d. It gives rise to a real action over the thing pledged.
23. The following statements pertaining to a promise to constitute a pledge or mortgage are
correct, except
a. It gives rise only to a personal action between the contracting parties.
b. The contract perfected is a real contract.
c. It creates no real right in the property but only a right to compel the fulfillment of the
promise but there is no contract of pledge or contract of mortgage yet.
d. The promissor will be criminally liable if he mortgages or pledges as unencumbered things
which he knew were subject to some burden.
24. what is the nature of a contract of pledge?
a. Consensual contract
b. Real contract
c. Formal contract
d. Solemn contract
25. The following may become the object of a contract of pledge, except
a. All movable
b. Personal property susceptible of possession.
c. Incorporeal rights which are evidenced by negotiable instruments, bill of lading, shares of
stocks, bonds, warehouse receipts and similar documents.
d. Real or immovable properties and rights thereon.
26. What is the form of contract of pledge to bind the contracting parties?
a. It must be in a private instrument.
b. It must be in a public instrument.
c. It must be registered in the registry of deeds.
d. It may be in any form because it is real contract.
27. What is the form of contract of pledge to bind or to effect third persons?
a. It must be registered in the chattel mortgage registry.
b. It must be registered in the registry of deeds.
c. It must be in a public instrument showing a description of the thing pledged and the date of
the pledge.
d. It must be recorded in the Intellectual Property Office.
28. The contract of pledge shall cover the following, except
a. The thing pledged.
b. The fruits, income, dividends or interests earned or produced by the thing pledged, unless
there is stipulation excluding them.
c. The offspring, when the thing pledged is an animal, unless there is a stipulation excluding
them.
d. The future inheritance of the pledgor.
29. The following are the rights of the debtor-pledgor, except
a. To alienate, with the consent of the pledgee, the thing pledged.
b. To continue to be the owner of the thing pledged unless it is expropriated.
c. To become the owner of the offspring of the animal pledged if there is not stipulation to the
contrary although such offspring but shall be subject to the pledge.
d. To ask for the return of the thing pledged after he has paid the debt and its interest, with
expense in a proper case.
e. To ask that the thing pledged be judicially or extra-judicially deposited if it is used without
authority or for a purposes other than for its preservation.
f. To require that the thing be deposited with a third person if it is in danger of being lost or
impaired through the negligence or willful act of the pledgee.
g. To demand the return of the thing pledged, upon offering another thing in pledge, provided
the latter is of the same kind and quality, if there are reasonable ground to fear the
destruction or impairment of the thing pledged without the fault of the pledgee. This right
is without prejudice to the right of the pledgee to have the thing sold at a public sale.
h. To demand the return of the thing pledged despite defaulting on the payment of the
secured principal obligation.
30. In case the thing pledged is alienated by the debtor-pledgor to third person, what is the effect of
the consent of the pledgee to the alienation made by the pledger of the thing pledged to third
person?
a. The thing pledged remains to be owned by the debtor-pledgor.
b. The ownership of the thing pledged is transmitted to the buyer.
c. The creditor-pledgee losses possession of the thing pledged.
d. The contract of pledge is already extinguished.