BALIUAG UNIVERSITY 

–  JPIA
 JPIA
IN PARTNERSHIP WITH P&A GRANT THORNTON
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
1. During class hours, while the teacher was chatting with her co teacher in the school
corridor, a 7 year old pupil stabbed the eye of another classmate with a ballpen during a
fight causing injury to the latter. The teacher is:
a. Not liable for damages because it was beyond her control to prevent the fight.
b. Liable for damages because of culpa contractual.
c. Liable because of culpa aquiliana.
d. Not liable because she was not the one who inflicted the injury.

2.  The debtor promises to pay as soon as he has the means to do so.

 The debtor promises to pay if his son does not die of cancer i n one year.
a. First obligation is with a condition, while the second is with a period.
b. First is with a period, the second is positive condition.
c. First is with suspensive period, second is with resolutory condition.
d. First is with indefinite period, second with suspensive condition.

3.  The seller warrants that he is the owner at the time of the sale.
 The seller is liable for breach of warranties only i f was in bad faith.
a. Both statements are true
b. Both are false
c. First is true, the second is false.
d. First is false, the second is true.

4.  To affect or be binding on third persons, a mortgage contract:

a.  Written and duly notarized to be in public instrument.
b. Need not be written since it is already binding on the parties.
c. Must be in public instrument and registered.
d. May be in private instrument but must be registered.

5.  Which is statement is correct?

a. Sale of real property or interest therein must be in writing to be valid.
b. In sale of movables, if the price is P400.00 an oral sale is enforceable.
c. Sale of land even if oral is enforceable. because it is not void .
d. Sale of land by an agent must be in writing otherwise it is not void.
6. P telephoned his sister to sell his parcel of land. Per instruction, the latter sold the said
land to B but did not remit the payment to his brother, who now wants to recover the
land. Decide:
a. P can recover the land by annulling the sale.
b.  The sale is void.
c.  The sale is unenforceable, because payment was not received by the principa l.
d. P cannot anymore recover the land since the buyer was not fault.

7. On due date, D, finding himself to pay C , his P1M obligation proposed in a letter that
he would deed over to C his BMW car “to be applied to the amount which 1 owe you”.
 The following day , D sent the car to C with the proper deed of conveyance. It was
accepted. The obligation of D was extinguished by:
a.  Application of payment
b. Dacion en pago
c. Payment by cession
d. Compensation

8. For value received, A promised to deliver to B on or before August 15 2015 his only
BMW car as well as a 2015 model Sony TV set, 21”. Unfortunately, before the scheduled
delivery date, both the car and the TV set which A intended to deliver were lost in
accidental fire. Has the obligation of A been extinguish?
a.  The obligation to deliver both objects was extinguished because they were lost
due to a fortuitous event.
b.  The obligation to deliver both was not extinguished because it was not agreed
upon by the parties that fortuitous event shall absolve the debtor from the
responsibility for the loss.
c.  The obligation to the deliver the TV set is extinguished but not the obligation to
deliver the BMW car.
d.  The obligation to the deliver the car is extinguished but not the obligation to the
deliver to the TV set.

9.  A bound himself to deliver a TV set, Sony, with serial no. wert 35 to B which the latter
found in the former’s store and to repair the piano of B. A did none of these things. May
 A be compelled to perform these obligation of his?
a.  As regard the piano he can be, but with respect to the TV set he cannot be
compelled.
b. In both instances he cannot be compelled.
c. In both instances he can be.
d.  As regards the TV set he can be, with regard the repair of the piano he cannot
be compelled.
10. A. An implied contract requires consent of the parties. A quasi-contract is not predicated
on consent, being unilateral act.
B. the basis of an implied contract is will of the parties. The basis of a quasi-contract is
law, to the end there be no unjust enrichment.
a. Both are false statements.
b. Second is false, first is true.
c. Both are true
d. Second is true, first is false.

11. A sells his Toyota Celica to B, a compadre and leaves it to B to determine the price. If B
refuses to fix the price and simply takes the car, is he still obliged to pay?
a.  Yes because the fixing of the price can be left to the discretion of one of the
contracting parties.
b.  Yes, and he must pay a reasonable price due to his appropriation.
c.  Yes, and A now has the right to fix the price without need of B’s consent.
d. No, because there is no sale for lack of price fixed by the parties.

12. A leased his house to B with the agreement that telephone bills shall be shoulder ed by B.
Six months later, B left the premises leaving behind unpaid telephone bills. A refuses to
pay the unpaid bills on the ground that B had already substituted him as customer of the
telephone company. Decide:
a.  A is correct to assert no liability to the telephone company due to novation of
the contract by way of substitution of debtor.
b.  A is not liable because the telephone company failed to exercise due diligence in
collecting from B his unpaid bills.
c.  A is liable to the telephone company subsidiarily, only after it fails to collect from
B.
d.  A is liable for the unpaid bills of B because the contract was between A and the
telephone company and A cannot be substituted by B without the consent of the
company.

13. These are four special forms of payment. Strictly speaking, one of the following is not a
special form of payment:
a. Dation in payment.
b.  Application of payment.
c. Payment by cession.
d.  Tender of payment and consignation.

14. Which of the following is not correct?

a.  A check must be presented for payment within a reasonable time after its issue
or the drawer will be discharged from liability thereon.
b.  Where a check is certified by the bank on which it is drawn, the certification is
equivalent to acceptance.
 c.  Where the holder of a check procures it to be certified or accepted, the drawer
and all indorsers are discharged from liability thereon.
d.  A check of itself does not operate as an assignment of any part of the funds to
the credit of the drawer with the bank, and the bank is not liable to the holder
unless it accepts or certifies the check.

15. Essential elements of pledge, except:

a. Pledger is the absolute owner of the thing pledged.
b.  The person constituting the pledge has the free disposal of his property or if h e
is an agent or representative, that he is legally authorized.
c.  The thing pledged must be placed in the possession of the creditor or of a 3 rd
person by common agreement.
d.  To bind third persons there must be an affidavit of good faith.

16. The following are ways of enforcing payment of unpaid subscription. Which is the
exception?
a. Sale at public auction of delinquent stock
b. Denying delinquent stock cash dividend
c. Filing a court action to recover unpaid subscription
d. Denying delinquent stock the right to vote and be voted upon

17. Below are two promissory notes prepared by A:

a. “I promise to pay B or order P100,000 if he will pass the CPA Board Examinations.
Sgd. A”
b. “I promise to pay C or order P100,000 if he kills Z. Sgd. A”
 Which of the following statements is correct?
a. Both promissory notes are negotiable
b. Both promissory notes are non-negotiable
c. Only the first promissory note is negotiable
d. Only the second promissory note is negotiable

18. Using the above facts, and both conditions are satisfied, which of the following
statements is correct?
a. Both B and C can collect from A.
b. Neither B nor C can collect from A.
c. Only B can collect from A.
d. Only C can collect from A.

19. The vendor-de-retro shall be entitled to redeem the object of sale within

a. Four years if no period is agreed upon.
b.  Thirty days from notice of intention to repurchase.
c.  Ten years if there is a period stipulated.
d.  The period agreed upon.
20.  A promised to deliver to B 100 sacks of palay from the former’s 2015 summer harvest. A
failed to deliver what was promised due to floods which destroyed the crops before
harvest season. Is the obligation extinguished?
a. No, generic thing does not perish.
b. No, A can still raise the same from future crops.
c.  Yes, the generic thing is limited to the 2015 harvest.
d.  Yes, the contract is void due to non-existing object at the time of perfection of
contract.

21. The following are the characteristics of a contract of sale, except:

a. Principal, which means that a contract of sale can exist by itself.
b. Real, which requires the delivery of the object of the contract of sale for its
perfection.
c. Onerous, where rights are acquired in exchange of a valuable consideration.
d. Bilateral, which means that both parties are bound reciprocally to each other.

22. One of the following characteristics of dacion en pago is a characteristic of a contract of

sale. Which is it?
a.  There is pre-existing credit.
b. Obligations are extinguished.
c.  There is less freedom in fixing the price.
d. Ownership of the object is transferred to the other party.

23. The following items pertain to either a contract of sale or a contract to sell.

I. Ownership of the thing sold is transferred upon delivery.
II. Ownership of the thing is transferred to the buyer at some future time.
III.  The risk of loss is on the buyer.
IV.  The risk of loss is on the seller.
Based on the above data, which of the following is correct?
a. Items I and III pertain to a contract to sell
b. Items I and IV pertain to a contract to sell
c. Items II and IV pertain to a contract of sale
d. Items I and III pertain to a contract of sale
24. The following items pertain to either emptio rei sperati or emptio spei.
I.  The sale of a future thing.
II.  The sale of hope or expectancy.
III.  The sale of present thing.
IV.  The thing sold must come into existence.
Based on the above information, which of the following is correct?
a. Items I and II pertain to emptio rei sperati
b. Items II and III pertain to emptio spei.
c. Items II and III pertain to emptio rei sperati.
d. Items II and IV pertain to emptio spei.

25. This refers to the warranty of the seller that he has the right to sell the thing at the time
 when ownership is to pass, and which can be enforced if the buyer is d eprived of the
property sold by a final judgment in court.
a.  Warranty against hidden defects.
b.  Warranty of merchantable quality.
c.  Warranty against eviction.
d.  Warranty of possession.

26. The following are qualifications of corporate directors, except  – 

a. Must own at least one share of stock
b. Must not be convicted by a final judgment with imprisonment exceeding 6 yrs.
Or violation of the code committed within 5 yrs. prior to election.
c. Majority are citizens of the Philippines.
d. Ownership of shares must be recorded in the books of the corporation.

27. The following cannot be incorporator of a corporation  – 

a.  A corporation organized under Philippine laws;
b.  A resident alien.
c.  A married woman without the consent of her husband even if the payment of
shares is paraphernal property.
d. Subscriber who pays less than 25% of his subscription.

28. An individual or a domestic corporation designated in a written power of attorney, by a

foreign corporation authorized to transact business in the Philippines, on whom any
summons and other legal processes may be served in all actions or other legal proceeding
against such corporation is called – 
a. Resident director
b. Resident agent
c. Receiver
d.  Trustee
29. Which of the following statement is correct?
a. Eleemosynary corporation is one established for business or profit.
b. Corporation aggregate is one established for religious purposes;
c. Civil corporation is one established under the laws of the Philippines;
d. Lay corporation is one established for purposes other than religious.

30. B Company bought out a competitor, C Corporation, with a stipulation that C

Corporation should not thereafter engage in any business in the Philippines unless
consented to and approved by B 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 was done
in writing.
d.  The stipulation is void because it is contrary to public policy.

31.  The common property of a universal partnership shall b e – 

a.  All the properties shall belong to each of the partners after the constitution of
the partnership.
b.  All the properties which belongs to each of the partners at the time of the
constitution of the partnership as well as the profits which they may acquire
therewith.
c.  All the properties which belong to each of the partners at the time of the
constitution of the partnership;
d.  All the properties which belong to each of the partners at the time of the
constitution of the partnership as well as properties which may acquire therewith.

32. Which of the following is incorrect:

a.  A capitalist partner may engage in the same line of business as that of the
partnership.
b.  An offending capitalist partnership may not be excluded from the firm.
c.  An industrial partner may not engage in business for himself unless there i s
contrary stipulation;
d.  An industrial partner who engages in business for him self may be excluded from
the firm.

33. A borrowed P 200,000 from solidary creditors B and C. On due date, B sent a letter to A
demanding payment of the loan directly to him, but before A could comply, C went to A
to collect and so A paid C. Did A make a valid payment?
 A.  Yes, because the debtor may pay any of the solidary creditors
B. No, because payment should be made to B
C.  Yes, because any of the solidary creditors may demand payment of the whole
obligation
 D. No, because A should have split the payment because both creditors demanded
payment

34. To be valid and enforceable, the following contracts should be in writing, except:
 A. Contract to pay interest on loan
B. Contract of donation of real property
C. Contract giving authority to an agent to sell a piece of land
D. Contract made in consideration of marriage

35. A is obliged to give B his specific car on December 31, 2010. There was no delivery and
on January 4, 2011 the garage of the car collapsed due to heavy rains and strong winds of
 Typhoon Pining, and the car was totally destroyed. Is A still l iable?

 A. No, even if A was in default, he could plead impossibility of performance

B.  Yes, because the contract is perfected
C. No, because there was no demand by B to deliver the car
D.  Yes, the obligation to deliver the car is changed to pay the equivalent value
because B is in legal delay

36. A owes B P 10,000. Later A paid B P7,000 leaving a balance of P 3,000. C, a suitor of A
and intending to surprise A paid B the sum of P 10,000 thinking that A still owed B that
amount, C did this without the knowledge of A. Which is correct?

 A. C can recover P10,000 from A

B. C cannot recover anything from A
C. C can recover P10,000 from B
D. C can recover P3,000 from A

37. A owes B P10,000. With the consent of A and B, C pays B P 5,000. Now B and C are
the creditors of A to the amount of P 5,000 each. Suppose, A has only P 5,000. Which is
correct?

 A. B should be preferred

B. C should be preferred
C. B and C should be paid pro rata
D.  A may choose whom to pay

38. A is the guardian of B, a minor, B sold his land in writing to C valued at P 1M for P .7M.
 The sale is
 A. Rescissible
B.  Voidable
C. Unenforceable
D.  Void
39. G was appointed as guardian of M, the latter being 17 years old. Later, without authority
from G, M sold G’s watch in writing to B valued at P100,000 for P70,000. Suffering
lesion by more than ¼ value, the contract is
 A. Rescissible
B.  Voidable
C. Unenforceable
D.  Void

40. A obtained an interest free loan of P50,000 from B evidenced by a promissory note
payable six months after date. At maturity A called B by phone to ask for an extension of
one month and offer to pay 20% interest on the loan. Enticed by the 20% interest, B
agreed to the extension of maturity. Which is correct?
 A.  The interest is a demandable interest by virtue of an agreement
B.  The interest is unenforceable
C.  The loan is valid but the interest is void
D.  The loan and interest are both demandable

41. A is the listed owner of P10,000 shares with par value of P100/share in ABC
Corporation. ABC sued A for the payment of A’s indebtedness of P1M. A contends
that such debt must be compensated by his shares of stocks with the plaintiff
corporation. The contention of A is
 A.  Valid due to legal compensation
B.  Valid by virtue of judicial compensation
C. Untenable since he is not a creditor of the corporation
D.  Automatically extinguished if the fair market value of the shares is P1M

42. S sold his car to B on installment and a chattel mortgage was constituted on the car. B
defaulted in two installment payments. S foreclosed the chattel mortgage and sold the car
at a public auction. If there is deficiency, can S recover the deficiency?
 A.  Yes, even without stipulation
B.  Yes, if there is stipulation
C. No, even if there is stipulation
D. No, unless there is stipulation

43. X borrowed money from Y. X constituted a real estate mortgage over his house to
secure the loan. It was stipulated that in case X could not pay the loan on time, the
house would belong to Y. Which is correct?
 A.  Y shall become the owner of the house upon default by X by virtue of their
 written agreement
B.  Y shall become the owner of the house by virtue of the default of X
C.  Y shall only enjoy the right of alienation over the land
D.  Y shall be entitled to the right of appropriation of the land
44. The following are obligation of the agent, except
 A. In the execution of the agency, the agent shall act in accordance with the
instructions of the principals
B. Shall be bound to advance the necessary funds except when the principal is
insolvent
C. Shall finish the business already begun on the death of the principal, should delay
entail any danger’
D. In case a person declines an agency, he is bound to observe the diligence of a
good father of a family in the custody and preservation of the goods forwarded
to him by the owner until the latter should appoint an agent

45. May not require stockholders approval

 A. Declaration of cash dividend
B. Management contract
C. Increase of bonded indebtedness
D. Removal of a director

46. One of the following is a ground for the suspension or revocation of the certificate of
incorporation by the SEC
 A. If the corporation has commenced its business transactions and afterwards
ceased operations continuously for a period of at least 5 years
B. If the corporation fails to commence and start to operate and the failure to
operate is due to causes beyond its control
C. If the corporation does not formally commence its business operation or
transactions within two years from date of issuance of certificate of
incorporation
D. If the corporation has commenced its operations and subsequently become
continuously inoperative for two years
47. After ten years, five out of the nine incorporators who organized the corporation and
signed the articles of incorporation died. The corporation is
 A. Dissolved as there will only be four left which is below the minimum of five
incorporators required by law
B. Dissolved as the Corporation Code requires that the incorporators be alive
during the operation of the business
C. Not dissolved as it still has forty years left in its term
D. Not dissolved as it enjoys the right of succession

48.  A person cannot be admitted into the partnership without the consent of
 A.  All the partners
B. Majority of the partners
C. 2/3 of the partners
D. Partners representing the controlling interest
49. On April 1, 2014, A and B entered into a contract of partnership for the purpose of
buying a nd selling textbooks, with the former as capitalist partner and the latter as
industrial partner. It was agreed that A shall contribute P100,000 to the common fund
on May 2, 2014. Upon the arrival of the designated date, A failed to deliver the
contribution he promised. As a result
 A. B should make a demand upon A for the delivery of his contribution to render A
in default
B.  The contract of partnership becomes void because A failed to give his
contribution with interest and damages without the common fund
C. B can compel A to deliver his contribution with interest and damages without
the necessity of demand
D.  The contract of partnership was never perfected because there was no delivery of
contributions by the partner

50.  A promissory note reads, “I promise to pay B or order P100,000. Sgd. A. B negotiated
the note to C, then C to D, D to E, E to F, F to G, G to H, then H to E all by special
indorsements. Which of the following is correct? If A dishonors the instrument
 A. E should notify B,C,D,F,G and H to make them liable to him
B. If E notifies G and G notifies D, both D and G are liable to E
C. F, G and H are discharged because they are intervening parties
D. If E notifies C and C notifies B and D, the notice given by C inures to the
benefit of E making B and D liable to E

END