REGULATORY FRAMEWORK FOR BUSINESS
TRANSACTIONS
FIRST PRE-BOARD EXAMINATION
VILLEGAS/AGUILAR-APRADO
February 21, 2022
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of
100 items only. The exam is good for three (3) hours. Good luck!
1. Rodman, the President of TF Co, wrote a letter to Gregorio, offering to sell to the latter 5,000 bags of
fertilizer at P100 per bag. Gregorio signed his conformity to the letter-offer, and paid a down-payment of
P50th. A few days later, the Corporate Secretary of TF informed Gregorio of the decision of their BOD not to
ratify the letter offer. However, since Gregorio had already paid the down-payment, TF delivered 500 bags
of fertilizer which Gregorio accepted. TF made it clear that the delivery should be considered an entirely
new transaction. Thereafter, Gregorio sought enforcement of the letter-offer. Is there a binding contract for
the 5,000 bags of fertilizer? Explain.
a. Yes, the contract was ratified
b. Yes, there was novation of the transaction
c. No, Rodman was not authorized by the BOD to enter into the said contract or that he was empowered
to do so
d. No, since there was novation of the contract
2. After many difficult years, which called for sacrifices on the part of the company‘s directors, ABC
Manufacturing Inc was finally earning substantial profits. Thus, the President proposed to the BOD that the
directors be paid a bonus equivalent to 15% of the company‘s net income before tax during the preceding
year. The President‘s proposal was unanimously approved by the BOD. A stockholder of ABC questioned
the bonus. Does he have grounds to object?
a. No, since the decision falls under the Business Judgment Rule
b. No, declaration of bonuses falls under the inherent power of the corporation
c. Yes, this falls under the prohibition of Self-dealing director
d. Yes, the law provides that the total annual compensation of the directors, in the preceding year, cannot
exceed 10% of the company‘s net income before income tax
3. Leonardo is the Chairman and President, while Raphael is a Director of NT Corporation. On one occasion,
NT Co, represented by Leonardo and A Ent, a single proprietorship owned by Raphael, entered into a
dealership agreement whereby NT Co appointed A Ent as exclusive distributor of its products in Northern
Luzon. What is the status of the dealership agreement?
a. Valid
b. Voidable
c. Unenforceable
d. Void
4. An employee of a large manufacturing firm earns a salary which is just a bit more than what he needs for a
comfortable living. He is thus able to still maintain a P10,000 savings account, a P20,000 checking
account, a P30,000 money market placement and a P40,000 trust fund in a medium-size commercial bank.
a. The P10,000 savings account and the P20,000 checking account are deemed insured by the PDIC.
The P10,000 savings account and the P20,000 checking account are covered by the Law on Secrecy
of Bank Deposits.
b. The P10,000 savings account, P20,000 checking account and P30,000 money market placement are
deemed insured by the PDIC. The P10,000 savings account and the P20,000 checking account are
covered by the Law on Secrecy of Bank Deposits.
c. The P10,000 savings account, P20,000 checking account and P40,000 trust fund are deemed
insured by the PDIC. The P10,000 savings account and the P20,000 checking account are covered by
the Law on Secrecy of Bank Deposits.
d. All the P10,000 savings account, a P20,000 checking account, a P30,000 money market placement
and a P40,000 trust fund are covered by both PDIC and Law on Secrecy of Bank Deposits.
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5. After many years of shopping in the Metro Manila area, housewife HW has developed the sound habit of
making cash purchases only, none on credit. In one shopping trip to Mega Mall, she got the shock of her
shopping life for the first time, a store‘s smart salesgirl refused to accept her coins in payment for a
purchase worth not more than one hundred pesos. HW was paying seventy pesos in 25centavo coins and
twenty five pesos in 10 centavo coins. Strange as it may seem, the salesgirl told HW that her coins were
not ―legal tender.
a. Coins 25 cents and below: up to P100 is legal tender
b. Coins 1.00 and below; up to P100 is legal tender
c. Coins 5.00 and below; up to P100 is legal tender
d. Coins 10.00 and below; up to P100 is legal tender
6. To secure the payment of an earlier loan of P20,000 as well as subsequent loans which her friend Noreen,
would extend to her, Karen executed in favor of Noreen a chattel mortgage over her (Karen) car. Is the
mortgage valid?
a. No, a chattel mortgage cannot effectively secure after-incurred obligations
b. Yes, a chattel mortgage can effectively secure after-incurred obligations
c. No, third persons cannot be mortgagors
d. Yes, based on the mutuality and autonomy of contract
e. No, the contract is unenforceable since it was not in writing
7. Because of failure of Janette and Jeanne to pay their loan to X Bank, the latter foreclosed on the mortgage
constituted on their property which was put up by them as security for the payment of the loan. The price
paid for the property at the foreclosure sale was not enough to liquidate the obligation. The bank sued for
deficiency. In their answer, Janette and Jeanne did not deny the existence of the loan nor the fact of their
default. They, however, interposed the defenses that the price at the auction was extremely low and that
their loan, despite the loan documents, was a long-term loan which had not yet matured.
a. X bank is correct. The inadequacy of the price of the sold properties is not a barrier for the debtor to
redeem such property.
b. X bank is not correct sufficient consideration must be provided in the auction sale.
c. X bank is not correct since the price paid is shocking to the conscience of man
d. X bank is correct. There is lesion in this case and contract can rescinded
8. Solid Investment House commissioned Mon Blanco and his son Steve, both noted artists to paint a mural
for the Main Lobby of Solid for a contract price of P2M. Who owns the mural?
a. Solid owns the mural. Solid was the one who commissioned the artists to do the work and paid for
the work in the sum of P2M
b. Mon Blanco and his son owns the mural being the artists of the mural and the ones who exerted the
efforts.
c. Both Solid and Mon Blanco own the mural jointly since their agreement is silent.
d. Both Solid and Mon Blanco are co-owners of the mural considering that there is a contract to it.
9. Solid Investment House commissioned Mon Blanco and his son Steve, both noted artists to paint a mural
for the Main Lobby of Solid for a contract price of P2M. Who owns the copyright of the mural?
a. Solid owns the copyright. Solid was the one who commissioned the artists to do the work and paid
for the work in the sum of P2M
b. Mon Blanco and his son owns the copyright being the artists of the mural and the ones who exerted
the efforts.
c. Both Solid and Mon Blanco own the copyright jointly since their agreement is silent.
d. Both solid and Mon Blanco are co-owners of the copyright considering that there is a contract to it.
10. X issued a check in favor of his creditor, Y. It reads: " Pay to Y the amount of Seven Thousand Hundred
Pesos (Php700,000.00). Signed, X". What amount should be construed as true in such a case?
a. Php700,000.00.
b. Php700.00.
c. Php7,000.00.
d. Php700,100.00.
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11. In return for the 20 years of faithful service of X as a house helper to Y, the latter promised to pay
Php100,000.00 to X’s heirs if he (X) dies in an accident by fire. X agreed. Is this an insurance contract?
a. Yes, since all the elements of an insurance contract are present.
b. Yes, since X’ services may be regarded as the consideration.
c. No, since Y actually made a conditional donation in X’s favor.
d. No, since it is in fact an innominate contract between X and Y.
12. In a signature by procuration, the principal is bound only in case the agent acted within the actual limits of
his authority. The signature of the agent in such a case operates as notice that he has
a. a qualified authority to sign.
b. a limited authority to sign.
c. a special authority to sign.
d. full authority to sign
13. G, a grocery goods supplier, sold 100 sacks of rice to H who promised to pay once he has sold all the rice.
H meantime delivered the goods to W, a warehouseman, who issued a warehouse receipt. Without the
knowledge of G and W, H negotiated the receipt to P who acquired it in good faith and for value. P then
claimed the goods from W, who released them. After the rice was loaded on a ship bound for Manila, G
invokes his right to stop the goods in transit due to his unpaid lien. Who has a better right to the rice?
a. P, since he has superior rights as a purchaser for value and in good faith.
b. P, regardless of whether or not he is a purchaser for value and in good faith.
c. G, since as an unpaid seller, he has the right of stoppage in transitu.
d. W, since it appears that the warehouse charges have not been paid.
14. Z wrote out an instrument that states: "Pay to X the amount of Php1 Million for collection only. Signed, Z." X
indorsed it to his creditor, Y, to whom he owed Php1 million. Y now wants to collect and satisfy X's debt
through the Php1 million on the check. May he validly do so?
a. Yes, since the indorsement to Y is for Php1 Million.
b. No, since Z is not a party to the loan between X and Y.
c. No, since X is merely an agent of Z, his only right being to collect.
d. Yes, since X owed Y Php1 Million.
15. A promissory note states, on its face: "I, X, promise to pay Y the amount of Php 5,000.00 five days after
completion of the on-going construction of my house. Signed, X." Is the note negotiable?
a. Yes, since it is payable at a fixed period after the occurrence of a specified event.
b. No, since it is payable at a fixed period after the occurrence of an event which may not happen.
c. Yes, since it is payable at a fixed period or determinable future time.
d. No, since it should be payable at a fixed period before the occurrence of a specified event.
16. X executed a promissory note in favor of Y by way of accommodation. It says: "Pay to Y or order the
amount of Php50,000.00. Signed, X." Y then indorsed the note to Z, and Z to T. When T sought collection
from Y, the latter countered as indorser that there should have been a presentment first to the maker who
dishonors it. Is Y correct?
a. No, since Y is the real debtor and thus, there is no need for presentment for payment and dishonor
by the maker.
b. Yes, since as an indorser who is secondarily liable, there must first be presentment for payment and
dishonor by the maker.
c. No, since the absolute rule is that there is no need for presentment for payment and dishonor to hold
an indorser liable.
d. Yes, since the secondary liability of Y and Z would only arise after presentment for payment and
dishonor by the maker.
17. Can a drawee who accepts a materially altered check recover from the holder and the drawer?
a. No, he cannot recover from either of them.
b. Yes from both of them.
c. Yes but only from the drawer.
d. Yes but only from the holder
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18. X, at Y’s request, executed a Real Estate Mortgage (REM) on his (X’s) land to secure Y's loan from Z. Z
successfully foreclosed the REM when Y defaulted on the loan but half of Y's obligation remained unpaid.
May Z sue X to enforce his right to the deficiency?
a. Yes, but solidarily with Y.
b. Yes, since X’s is deemed to warrant that his land would cover the whole obligation.
c. No, since it is the buyer at the auction sale who should answer for the deficiency.
d. No, because X is not Z’s debtor.
19. X found a check on the street, drawn by Y against ABC Bank, with Z as payee. X forged Z's signature as an
indorser, then indorsed it personally and delivered it to DEF Bank. The latter, in turn, indorsed it to ABC Bank
which charged it to the Y’s account. Y later sued ABC Bank but it set up the forgery as its defense. Will it
prosper?
a. No, since the payee's signature has been forged.
b. No, since Y’s remedy is to run after the forger, X.
c. Yes, since forgery is only a personal defense.
d. Yes, since ABC Bank is bound to know the signature of Y, its client.
20. P, a salesgirl in a flower shop at the Ayala Station of the Metro Rail Transit (MRT) bought two tokens or
tickets, one for her ride to work and another for her ride home. She got to her flower shop where she
usually worked from 8 a.m. to 5 p.m. At about 3 p.m., while P was attending to her duties at the flower
shop, two crews of the MRT got into a fight near the flower shop, causing injuries to P in the process. Can P
sue the MRT for contractual breach as she was within the MRT premises where she would shortly take her
ride home?
a. No, since the incident took place, not in an MRT train coach, but at the MRT station.
b. No, since P had no intention to board an MRT train coach when the incident occurred.
c. Yes, since she already had a ticket for her ride home and was in the MRTs premises at the time of
the incident.
d. Yes, since she bought a round trip ticket and MRT had a duty while she was at its station to keep her
safe for her return trip.
21. The following contracts, except one, are void ab initio. Which is the exception?
a. That whose objects is outside the commerce of men
b. That whose object did not exist at the time of the transaction
c. That which contemplates an impossible service
d. That which is undertaken in fraud of creditors
22. Reformation is not the property remedy if
a. The mutual mistake of the parties causes failure of the instrument to disclose their real agreement
b. One party was mistaken and the other acted fraudulently or inequitably in such a way that the
instrument does not show their true intention.
c. There was mistake, fraud, inequitable conduct or accident which prevented the meeting of the
minds of the contracting parties
d. The true intention of the contracting parties is not expressed in the instrument purporting to
embody the agreement by reason off mistake, fraud, inequitable conduct or accident.
23. If an instrument conforms to the following: (1) It must be in writing and signed by the maker or drawer. (2)
It must contain an unconditional promise or order to pay a sum certain in money. (3) It must be payable on
demand or at a fixed or determinable future time, and (4) It must be payable to order to order or to bearer,
the instrument is a
a. Check
b. Promissory Note
c. Bill of Exchange
d. Draft
e. Trade bill
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24. A, B, C and D are joint creditors of E and F, solidary debtors in the amount P40, 000. How much can A, B
and C collect from E?
a. A, B, C and D could collect P20, 000 from E
b. A, B and C could collect P30, 000 from E
c. A, B, C and D could collect all the P40, 000 from E
d. A, B, C, and D could collect P20, 000 from E and P10, 000 from F
e. A, B, and C cannot collect anything
25. Which of the following is not correct?
a. A partnership begins from the moment of the execution of the contract, unless it is the otherwise
stipulated
b. Persons who are prohibited from giving each other any donation or advantage cannot enter into
universal partnership
c. A particular partnership has for its object determinate things, their use of fruits, or a specific
undertaking or the exercise of a profession or vocation
d. Articles of universal partnership entered into without specifications of its nature, only constitutes a
universal partnership of all present property
26. 1st statement – The acceptor of a bill may refuse to pay the holder on the ground that the signature of the
drawer is forged. 2nd statement – An instrument is not negotiable if it is payable to the order of a fictitious
person.
a. 1st statement is wrong, 2nd statement is correct
b. 1st statement is correct, 2nd statement is wrong
c. Both statements are correct
d. Both statements are wrong
27. Annaliza uses a savings account with a BPI bank. The contract between Annaliza and the bank is one of:
a. Agency
b. Deposit
c. Commodatum
d. Simple loan
e. Guaranty
28. As a general rule, in assignment of credit, the assignor in good faith: A. Warrants the existence of the credit
at the time of assignment; B. Warrants the legality of the credit at the time of assignment; C. Warrants the
solvency of the debtor at the time of assignment
a. A and C
b. A and B
c. B and
d. A, B and C
29. Dona pledged her LG washing machine to Belle for P25,000.00. Dona was unable to pay the obligation 60
days after due date. Belle sold the machine at public auction for P15,000.00. Which of the following is
correct?
a. Belle cannot recover the deficiency of P10,000.00
b. Belle can recover the deficiency of P10,000.00
c. Belle can recover the deficiency of P10,000.00 if stipulated
d. Belle can recover the deficiency of P10,500.00 even if there is stipulation that she can
30. Gabriel sold to Andre a car for a price of P750,000.00. The contract provides that Andre will pay cash of
P200,000.00 and for the balance, Andre will give a land worth P550,000.00. What is the nature of the
contract?
a. Sale
b. Barter
c. Partly sale and partly barter
d. Commodatum
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31. 1st statement – The instrument is discharged upon payment by an endorser of a promissory note at or after
maturity date; 2nd statement – The promissory note is discharged upon payment by the accommodation
party at or maturity date
a. 1st statement is wrong, 2nd statement is correct
b. Both statements are correct
c. 1st statement is correct, 2nd statement is wrong
d. Both statements are wrong
32. A sale with the right to repurchase anytime from the date of sale was executed. In this case:
a. The stipulation is valid
b. The buyer has 4 years within which to repurchase the property sold.
c. The buyer has 12 years within which to repurchase the property sold.
d. The buyer has 10 years within which to repurchase the property sold.
33. Atoy sold to Bitoy a residential lot said to be containing an area of 1,000 square meters at P1,000 per
square meter. In this connection, which of the following statements is correct?
a. If the lot should contain 950 sq. meters only, B can ask for proportionate reduction of the prize and
rescission.
b. If the lot should contain 1,200 sq. meters, B cannot reject the excess and must pay additional price
at P1,000 per sq. meter.
c. If the lot should contain 900 sq. meters, B can choose between proportionate reduction of the price
or rescission of the sale.
d. If the lot should contain 900 sq. meters, B can choose between proportionate reduction of the price
but not rescission of the contract.
34. Ownership is retained despite delivery, except
a. Commodatum
b. Universal partnership of profits
c. Mutuum
d. Sale on trial or satisfaction
35. All of the following are obligations of the debtor if the object is a determinate thing, except:
a. To deliver the specific thing promised.
b. To deliver all the accessions or its accessories
c. To deliver the fruits from the perfection of contract.
d. To take care of the thing promised with the diligence of a good father of a family
36. Pedro obliged himself to deliver to Juan an iPhone cellphone. This type of obligation is an example of?
a. Alternative obligation
b. Compound obligation
c. Facultative obligation
d. Simple obligation
e. Bilateral obligation
37. Maria agreed to deliver an IPhone Slim Edge, or Samsung Galaxy S6, or LG Beat Cellphone to Petra. In the
given example of an alternative obligation, which of the following effects of loss of objects of obligation
does not conform to the provisions of the law?
a. If all the items are lost through Maria’s fault, liability will attach
b. If all the items are lost through fortuitous event, Maria will lose the right of choice
c. If the iphone is lost through the fault of Maria, she can still select the Samsung or the LG
d. The loss of the iPhone and Samsung with or without the fault of Maria will reduce the obligation to
a simple one
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38. Which is true in the effects of the payment of the penalty?
a. The debtor can pay the penalty and not perform the obligation
b. The debtor can perform the obligation and not pay the penalty
c. The debtor cannot exempt himself from the non-fulfilment of the obligation even when the right has
been expressly reserved for him
d. The purpose of the penalty is to increase the liability of the debtor
39. Juan and Miguel are solidary debtors of Pedro in the amount of Php 100,000.00. This type of solidarity is
an example of?
a. Active solidarity
b. Conventional solidarity
c. Mixed solidarity
d. Passive solidarity
40. Identify which of the following statement is FALSE?
a. AA and BB are jointly liable to deliver to CC a red Ferrari F-1 type car. This is an example of joint
indivisible obligation
b. AA and BB promised in solidum to pay CC Php 1,000,000.00. This is an example of solidary divisible
obligation
c. If AA and BB are jointly liable to pay CC Php 1,000,000.00. This is an example of joint indivisible
obligation
d. If AA and BB obliged themselves solidarily to give CC a red Ferrari F-1-type car, the obligation is
solidary indivisible obligation
41. AA and BB executed jointly and severally a promissory note for Php 2,000,000.00 in favor of CC. CC
remitted the whole obligation because of his love for AA. Under the foregoing, which is true in remission?
a. AA is entitled to reimbursement from BB
b. If only Php 1,300,000.00 is remitted, BB is still liable to CC for Php 700,000.00
c. If only Php 1,300,000.00 is remitted, BB is liable to reimburse AA for the amount of Php 300,000.00
d. Even though AA did not pay anything, AA is entitled to reimbursement in cases of remission
42. The person who pays for the debtor is put into shoes of the creditor, so to speak.
a. Confusion
b. Consolidation
c. Merger
d. Subrogation
e. Compensation
43. Conventional subrogation of a third person requires the consent of:
a. The original parties only
b. The third person only
c. The original parties and of the third person
d. The courts and the parties
44. It is the statutory amounts allowed to a party to an action for his expenses incurred in the action.
a. Attorney’s fees
b. Extra-judicial expenses
c. Legal fees
d. Judicial costs
45. The following are the remedies available to the creditor in order to protect his rights against the debtor,
except:
a. To be subrogated to all of the rights and actions of the debtor save those which are inherent in his
person
b. To exhaust the property in possession of the debtor
c. To have the debtor prosecuted, punished and imprisoned for violations of the Revise Penal Code of
the Philippines
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d. To impugn all of the acts which the debtor may have done to defraud him
46. AA obliged himself to deliver to BB a specific light weight tire for his race car on December 25, 2022. If AA
does not deliver the light weight tire for the race cf BB, which of the following is not true under the
circumstances:
a. AA is only in ordinary delay in the absence of any demand from BB
b. AA is in default and therefore is liable for damages
c. The law presumes that BB gave AA an extension of the time within which to deliver the tire
d. There is no breach of the obligation and AA is not liable for damages
47. In order that fraud may make a contract voidable:
a. It may be incidental but both parties should not be in pari delicto
b. It may be incidental but should have been employed by both parties
c. It may be serious and the parties must be in pari delicio
d. It should be serious and should have not have been employed by both contracting parties
48. 1st Statement - Payment must be made to the creditor, who is the creditor all the time of the constitution of
the obligation; 2nd Statement – If a person is subrogated to the right of the creditor, payment can still made
to the original creditor.
a. Only the first statement is true
b. Only the second statement is true
c. The statements are both false
d. The statements are both true
49. AA owes fifteen (15) persons substantial amounts of money. His financial situation indicates that his
liabilities far exceed his assets. If AA cedes or assigns his properties to his creditors,
a. The creditors acquire ownership of the properties assigned or ceded
b. The creditors shall sell the properties assigned and when sold, the debt of AA is deemed paid
regardless of whether or not the net proceeds are equal to or less than the amount of the
indebtedness
c. The creditors shall sell the properties assigned and when sold, the debt of AA shall only be released
to the extent of the net proceeds of the sale
d. The cession or assignment shall extinguish the obligation whether or not the creditors sell the
properties assigned
50. In the following instances, tender of payment is not required, except:
a. When the creditor is absent, or unknown, or does not appear at the place of payment
b. When the creditor is incapacitated at the time of the constitution of the obligation
c. When the title of the obligation has been lost
d. When, without just cause, the creditor refuses to give a receipt
51. AA owes BB Php 100,000.00. On the due date, AA delivers a cashier’s check for the full amount. BB refuses
to accept the check.
a. AA has no legal basis for making a consignation
b. Debtor may make a consignation by depositing the amount due with any bank and in the name of
BB
c. AA may make a consignation by depositing the amount due at the disposal of judicial authorities
before whom the tender of payment shall be proved in a proper case
d. The creditor may be considered in mora accipiendi
52. Which is not an element of Novation?
a. Previous valid obligation
b. If they are compatible, the new obligation novates the first
c. The new and the old obligations must be incompatible with the other
d. The new obligation is created
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53. Upon the proposal of a third person, a new debtor substituted the original debtor without the latter’s
consent. The creditor accepted the substitution. Later, however, the new debtor became insolvent and
defaulted in his obligation. What is the effect of the new debtor’s default upon the original debtor?
a. The original debtor is freed of liability since novation took place and this relieved him of his
obligation
b. The original debtor remains liable since he gave no consent to the substitution
c. The original debtor shall pay or perform 50% of the obligation to avoid unjust enrichment on his part
d. The original debtor shall pay or perform the obligation with recourse to the new debtor
54. AA offered to sell his land to BB for Php 300,000.00. BB accepted the offer and paid AA the purchase price.
AA delivered the owner’s duplicate of the Transfer Certificate of title of the land. BB wants to register the
land in his name but the Register of Deeds asks BB for the Deed of Sale. What can BB do?
a. He may occupy and use the land as a buyer in good faith
b. He cannot compel Mr. AA to return the payment because the contract is unenforceable
c. He may sue Mr. AA to return the purchase price under the legal principle that no one may enrich
himself at the expense of another
d. He may compel Mr. AA to execute the Deed of Sale because the contract is valid
55. AA and BB orally agreed on the following: (i) the land to be sold has an area of 10,000 sq. meters; (ii) price
is P5Million; and (iii) AA shall prepare the deed of sale. With fraudulent intent, AA knowing the
inadequacies of BB with respect to numbers wrote 1,000 sq. meters instead of 10,000 sq. meters. The sale
is
a. Valid but the contract may be reformed
b. Valid but the instrument may be reformed
c. Void
d. Voidable but the contract may be reformed
56. Identify which of the following contract is Rescissible:
a. Payments made in state of solvency
b. Contract violating the Statute of Frauds
c. Contract where both parties are of unsound mind
d. A contract where the solvent debtor sells his property to defraud the creditor where the buyer is in
good faith
57. The following are true about Rescission in a Rescissible contract, except:
a. Rescission cannot take place if the damage is repaired
b. Rescission is a principal remedy
c. Rescission is subsidiary
d. Rescission shall be only to the extent necessary to cover the damages
58. Which statement is FALSE?
a. Ratification cleanses the contract from all its defects from the moment it was constituted
b. Ratification does not require the conformity of the contracting party who has no right to bring the
action for annulment
c. Ratification may be effected by the guardian of the incapacitated person
d. The action for annulment of contracts shall be extinguished when the thing which is the object
thereof is lost through fraud or mistake of the person who has a right to institute the proceedings
59. Which is false about the binding effects of voidable contacts?
a. Ratification extinguishes the action to annul a voidable contract
b. Ratification of voidable contracts become absolutely valid and can no longer be annulled
c. The existence of economic damage is essential for the annulment of voidable contracts
d. Voidable contracts are valid and binding between the parties unless annulled by the courts
60. The reckoning of the prescriptive period to file action for annulment is four (4) years depending on the
cause of action. Identify which does not conform with the rule:
a. In case of fraud, from the time of the defect of the consent ceases
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b. In case of intimidation, the time shall be from the time the defect of the consent ceases
c. In case of undue influence, from the time the defect of the consent ceases
d. In case of violence, from the time of the defect of the consent ceases
61. Which of the following is FALSE?
a. The Statute of Frauds is not applicable in actions which are neither for damages nor for the specific
performance thereof
b. The defense of Statute of Frauds is personal to the parties and cannot be interposed by strangers
to the contract
c. The Statute of Frauds cannot be waived
d. The Statute of Frauds does not declare that contracts infringing it are void but merely
unenforceable
62. AA entered into a contract to sell with BB, undertaking to convey to the latter one of the five lots he owns,
without specifying which lot it was, for the price of P1 Million. Later, the parties could not agree which of
five lots he owned AA undertook to sell to BB. What is the standing of the contract?
a. Rescissible
b. Unenforceable
c. Voidable
d. Void
63. AA, who was in the United States of America, phoned his brother, BB, authorizing him to sell AA’s parcel of
land in Pasay. AA sent the title to BB by courier service. Acting for his brother, BB executed a notarized
deed of absolute sale of the land to Z after receiving payment. What is the status of the sale?
a. Valid, since a notarized deed of absolute sale covered the transaction an full payment was made
b. Valid, since the buyer could file an action to compel AA to execute a deed of sale
c. Valid, since BB was truly his brother AA’s agent and entrusted with the title needed to effect the sale
d. Void, since AA should have authorized agent BB in writing to sell the land
64. Which of the following is correct?
a. The disposition by the debtor of his assets to the prejudice of the creditor is void
b. A relatively simulated contract is void
c. An unenforceable contract is void
d. A voidable contract produces legal effects
65. 1st Statement- Fraud is always a ground for annulment of a contract; 2nd Statement – A simulated contract
is voidable
a. Only the first statement is true
b. Only the second statement is true
c. The statements are both false
d. The statements are both true
66. A natural obligation under the New Civil Code of the Philippines is one which
a. Cannot be judicially enforced but authorizes the obligee to retain the obligor’s payment or
performance
b. Refers to an obligation in writing to do or not to do
c. The obligee may enforce through the court if violated by the obligor
d. The obligor has a moral obligation to do, otherwise entitling the oblige to damages
67. Three (3) OF THE Following contracts are void. Which is not?
a. Oral interest agreed upon by the parties
b. Oral authority given to an agent in a sale of land
c. Oral partnership agreement where immovable property is contributed
d. Oral partnership agreement when capital is more than P3,000
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68. X alleged that Y promised to give X one hectare of land. This is in consideration of X’s meritorious service
to Y. Y pleads in defense that since the promise was not in writing, it is unenforceable under the Statute of
Frauds. Decide.
a. The promise is unenforceable because it is not in writing.
b. The Statute of Frauds is applied because A has rendered services already.
c. The Statute of Frauds is inapplicable here because the promise to give the land is not a sale of real
property.
d. The Statute of Frauds can apply to partially executed contracts.
69. Today A and B entered into a contract. Three years later, A discovered that B used fraud in the performance
of their contract.
a. A can no longer ask for annulment because his right has already prescribed.
b. A can ask for annulment within 4 years from the perfection of the contract.
c. A can still ask for annulment within 4 years after the discovery of the fraud.
d. A should have annulled the contract immediately upon its execution.
70. If mistake, fraud inequitable conduct or accident has prevented a meeting of the minds of the parties to a
contract, the proper remedy is –
a. Sue for specific performance of the contract
b. Ratify the contract
c. Annulment of the contract
d. Reformation of the contract
71. S sold to B a parcel of land for P1 million. B paid S P1 million in fake bills. The sale is:
a. Void because there was no valid cause or consideration the bills being fake
b. Voidable only since there was consideration but due to fraud B delivered fake peso bills
c. Valid sale because of valid of P1 million price
d. Void because of false cause which is the counterfeit currency
72. Which of the following statements is not correct?
a. The validity or compliance of a contract cannot be left to the will of the parties
b. In case of foreclosure and the price of the sale is less than the amount due, the pledgee cannot
recover any deficiency
c. Persons who are prohibited by law to enter into contract of donation cannot form universal
partnership
d. Actions for future fraud can be waived
73. The process of intentionally deceiving others by producing the appearance of a contract which is different
from the true agreement is:
a. Relative simulation of a contract
b. Absolute simulation of a contract
c. Annulment of a contract
d. Misrepresentation
74. The crime of estafa by issuing a check has the following elements. Which among the following is not
included:
a. Existence of a contract between the parties
b. Postdating or issuance of a check in payment of an obligation contracted at the time the check was
issued
c. Insufficiency of funds to cover the check
d. fraud or deceit in the issuance of a check
75. Statement No. 1: The offense under B.P. 22 is a continuing offense and may therefore be prosecuted within
the territory where any of the elements have been committed.; Statement No. 2: Each act of drawing and
issuing of a bounced check constitutes a violation of B.P. 22
a. Both are true
b. Both are false
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c. First is true, second is false
d. Second is true, first is false
76. This is constructed to mean an arrangement or understanding with the bank for the payment of such
check.
a. Funds
b. Liability
c. Deposit
d. Credit
77. If a partner is induced by fraud or misrepresentation to become a partner, the remedy is
a. Action to declare the partnership void
b. Specific Performance
c. Unenforceable in courts
d. None of the choices
78. The remedy of the separate judgment creditor of a partner to attach, levy or charge the partner’s interest in
the partnership.
a. specific performance
b. charging order
c. collection of a sum of money
d. appointment of a receiver
e. foreclosure
79. The common property of a universal partnership shall be:
a. All the properties which shall belong to each of the partners after the constitution of the partnership
b. All the properties which belong to each of the partners at the time of the constitution of the
partnership
c. All the properties which belong to each of the partners at time of the constitution of the partnership
as well as the profits which they may acquire therewith
d. All the properties which belong to each of the partners at the time of the constitution of the
partnership as well as the properties which each may acquire thereafter.
80. Which of the following statements is not correct?
a. A limited partner in a partnership manages the business of the partnership but cannot perform acts
of ownership without the consent of all the limited partners.
b. Valid contribution of a limited partner are money and property but not services
c. Additional limited partners may be admitted into the limited partnership with the consent of all
partners
d. A person may be both a general partner and a limited partner
81. Which of the following statements is correct?
a. A partnership contract is not covered by Statute of Fraud
b. A limited partnership is one having at least one general partner or one limited partner and the limited
partner shall not be liable for the obligations of the partnership
c. A limited partner who takes active part in the management of the firm becomes liable as a general
partner
d. The contract of partnership is void if it contains a stipulation which excludes a partner from sharing
in the profits of the firm
82. NO. 1: A substituted limited partner has the right to inquire any information or account of the partnership
transactions and to inspect partnership books. NO. 2: A substituted limited partner shall be subject to all
restriction and liabilities of the assigning limited partner.
a. True, False
b. False, True
c. True, True
d. False, False
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83. If a partner is insolvent, the first in the order of preference in the distribution of his assets is:
a. Partner contribution to the partnership
b. Partnership creditor
c. Separate creditor of the partner
d. Pro-rata between the separate creditors and the partnership creditors.
84. Which of the following is not included in the winding-up of partnership?
a. Consolidation of the partnership assets and receivables
b. Payments of all partnership liabilities
c. Return of partner’s respective contributions
d. Distribution of profits
85. Statement 1: Act of administration: A managing partner can perform even without the knowledge and
consent of the other partners.; Statement 2: Act of dominion or ownership: All partners, including managing
partner, must give their consent.
a. Only the 1st statement is true
b. Only the 1st statement is false
c. Both statements are true
d. Both statements are false
86. Property rights of a partner, except
a. To use specific partnership properly for partnership purpose
b. To share in the profits
c. To participate in the management
d. To exercise appraisal right
87. On November 1, 2020, A orally appointed B as his agent to sell a parcel of land. On November 30, 2020, B
sold the land to C who took possession thereof. However, on November 25, 2020, A without informing B,
had already sold the land to D who up to now has not yet taken possession thereof. Neither C nor D has
registered their respective purchase. Whose contract should prevail?
a. contract of A with B
b. contract of B with C
c. contract of A with D
d. None of the above
88. A sold his land to B who began to possess it. Later C, a stranger, sold the same land to D who in good faith
registered the sale. Who should be considered as the owner?
a. D
b. C
c. B
d. A
89. Statement No. I - Actual knowledge is equivalent to registration of the sale in real property.; Statement No.
II - In case of personal property, the buyer who first registers it is the owner of the thing.; Statement No. III The vendee must appeal the decision in order that the vendor may become liable for eviction.
a. All are true
b. Only 1 statement is false
c. Two statements are false
d. All are false
90. Right of vendee where immovable sold encumbered with non-apparent burden, EXCEPT:
a. Within one year to be computed from the execution of the deed, rescission
b. Within one year to be computed from the execution of the deed, sue for damages
c. One year having elapsed, action for damages counted from discovery of the burden
d. One year having elapsed, rescission counted from discovery of the burden
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91. The following are instances where Unpaid Seller can exercise right of resale, except:
a. default in the payment of the price
b. perishable
c. express reservation
d. buyer becomes insolvent
92. In the Redemption of Rural land, what is the rule?
a. Owner of smaller area
b. One who first requested
c. intended use of the land is best justified
d. in proportion to their respective shares
93. Which of the following is not an obligation of the pledgor?
a. To participate in the public auction of the thing pledged.
b. To inform the pledgee of the flaws, of the thing if known to him.
c. To pay the principal obligation including the interest, and expenses in a proper case.
d. To reimburse the pledgee for the expenses incurred for the preservation of the thing pledged.
94. De Leon owns Candido P10,000. As security, De Leon pledged his horse to Candido. While in the
possession of the latter, the horse gave birth to a pony. Who is entitled to the pony?
a. De Leon being the owner of the horse.
b. Candido because the horse delivered a pony while in his possession.
c. Candido and shall compensate the price of the pony with the expenses for the care of the horse; the
excess, if any, shall be applied to the principal.
d. De Leon shall be entitled to the pony but it shall be included as pledge in the absence of a
stipulation.
95. Dunggon borrowed P50,000 from Carlo. As security for the payment of the debt, Dunggon pledged a rolex
watch valued at P75,000. It was expressly stipulated in the contract that if Dunggon cannot pay his debt
when it matures, the debtor shall “execute a deed of absolute sale of the ring in favor of the creditor.”
Dunggon failed to pay the debt when it matured.
a. Carlo can now appropriate the watch because of the agreement stated in the contract.
b. Carlo cannot appropriate the watch because it is pactum commissorium which is expressly
prohibited by law.
c. The agreement is valid because it does not constitute pactum commissorium.
d. Carlo cannot appropriate because it is obviously unfair on Dunggon whose value of the wristwatch
is over and above the amount of the debt.
96. The Warranties of assignor of credit, except
a. Solvency of the debtor
b. Legality of the credit
c. Person of the debtor
d. Existence of the credit
97. A mortgaged his car to B for P200,000. A failed to pay his obligation. B sold it at public auction for
P180,000. Can B recover the deficiency?
a. Yes, even without stipulation
b. Yes, only if there is stipulation
c. No, even if there is stipulation
d. No, unless there is stipulation
98. May a leasehold improvement constructed on a rented land be the subject of a chattel mortgage?
a. No, if the mortgagor is the lessee.
b. Yes, if the mortgagor is the lessor.
c. No, because a leasehold improvement is a real property.
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d. Yes, if the mortgagor and the mortgagee agree and no third persons are prejudiced.
99. The remedy to recover the ownership of the real property
a. Accion Redhibitoria
b. Accion Publiciana
c. Accion Pauliana
d. Accion Reivindicatoria
e. Accion Subrogatoria
100.
A feature or characteristic of a bill of exchange not found in a promissory note.
a. promise to pay
b. order to pay
c. promise in writing to pay
d. unconditional promise in writing to pay
End of Examination
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Team PRTC Nationwide Online Open First Pre-Board Examination for May 2022 LECPA!
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