SMARTS

OBLIGATONS

1. A source of obligation where negligence resulted to crime:a) Culpa contractualb) Quasi-contractc) Culpa delictuald) Culpa aquiliana

ANS: C

2. Which is not a source of obligation?a) Lawb) Culpa aquilianac) Culpa contractuald) Quasi-contract

ANS:C

3. Statement No. 1 : D oblige himself to give C a specific car tomorrow. If D failed to deliver tomorrow after demand is made C may compel D to do his obligation and may ask for damages.

Statement No. 2: D oblige himself to deliver a car to C tomorrow. If D failed to deliver tomorrow after demand is made C’s right is to ask a third person to deliver a car to him at the expense of D plus damage.

a) Both are trueb) Both are falsec) No. 1 is true; No. 2 is falsed) No. 1 is false; No. 2 is true

ANS:A

4. Which of the following is considered as quasi-contract?a) Solutio indebitib) When the third person, without the knowledge of

the debtor, pays the debtc) Reimbursement due the person who saved property

during fire or storm without the knowledge of the owner.

d) All of the above

ANS:D

5. A judicial relation known as Negotiorum Gestio takes place.a) When a person voluntarily takes charge of

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.

ANS:A

6. The wrongful act or tort which causes loss or harm to another is called:

a) Damagesb) Damagec) Injury

d) Liability

ANS:C

7. Which of the following is not a generic obligation?a) Obligation to pay ₱5,000

b) Obligation to deliver Toyota INNOVA 2005c) Obligation to deliver 50 cavans of riced) Obligation to give a delimited generic object

ANS:D

8. Statement No. 1 : An obligation which has for its object the delivery of a “delimited generic” object may be lost by reason of fortuitous event.

Statement No. 2: There can be no delay in an obligation not to do.

a) Both statement are trueb) Both statements are falsec) Statement No. 1 is true while statement No. 2 is falsed) Statement No. 1 is false while statement No. 2 is true

ANS:A

9. If the obligation is payable in foreign currencya) The obligation is voidb) The obligation is valid, but the stipulation is voidc) The creditor can compel the debtor to pay in

foreign currency as per agreementd) The stipulation and the obligation are void.

ANS:C

10. “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.

ANS:D

11. Statement No. 1 : The concurrence of more than one creditor or more than one debtor in one and the same obligation implies solidarity.

Statement No. 2: In alternative obligations where the right of choice is exercised by the creditor; consent of the debtor as to the creditor’s choice of which prestation to perform is necessary.

a) Both statements are trueb) Both statements are falsec) Statement No. 1 is true while statement No. 2 is falsed) Statement No. 1 is false while statement No. 2 is true

ANS:B

12. Statement No. 1 : “I will give you a NOKIA 6610 Phone if you will not marry X this year(2012). If by the end of 2012, both parties are alive and no marriage has taken place, my obligation is extinguished.

Statement No. 2: “I will give you ₱10,000 if I decide to go to Cebu Ciy tomorrow. This obligation is valid.

a) Both are trueb) Both are falsec) No. 1 is true; No. 2 is falsed) No. 1 is false; No. 2 is true

ANS:B

13. Statement No. 1 : If the obligation does not fix a period, but from it’s nature and the circumstances, it can be inferred that a period was intended, the court may fix the duration therof. Once it is fixed by the court the parties cannot change the fixed date for performance.

Statement No. 2: “I will give you ₱10,000 if X dies next

year.” This is an obligation with a period.

a) Both are true.b) Both are false.c) No. 1 is true; No. 2 is falsed) No. 1 is false; No. 2 is true

ANS:B

14. Which obligation is not valid?a) “I promise to give you ₱100,000 on December 25,

2012”b) “I promise to give you ₱100,000 if my mood

dictates”.c) “I promise to give you ₱100,000 if your patient

dies”.d) “I promise to give you ₱100,000 if you pass the May

2013 CPA Board Examination

ANS:B

15. Which of the following is an obligation with a period for the benefit of both the debtor and the creditor?

a) Payable if i likeb) Payable when you likec) Payable on or before December 25, 2012d) Payable on December 24, 2012

ANS:D

16. Which of the following obligations is not subject to a period?

a) Payable soonestb) Payable “little by little”c) Payable whenever “I like it”d) Payable “when my means permit me to”

ANS:C

17. A and B signed a promisory note o borrow ₱6,000 from X, Y, and Z, payable in 6 months time. B gave in pledge a ₱10,000 diamond ring as security for the amount borrowed. How much can Y collect from B?

a) ₱1,000b) ₱6,000c) ₱2,000d) ₱3,000

ANS:A

18. If in the situation given above, the diamond ring is returned by agreement to B, which of the following statement is correct?

a) Principal obligation is extinguishedb) Only ₱2,000 of the obligation is extinguishedc) Only ₱3,000 of the obligation is extinguishedd) Accessory obligation is extinguished.

ANS:D

19. A, Band C executed a promisory note worded as follows:We promise to pay X, Y and Z the sum of ₱90,000

(Sgd,) A, B and C

a) A is obliged to pay to X, Y and Z ₱90,000b) A is obliged to pay X ₱30,000c) A is obliged to pay X ₱60,000d) A is obliged to pay X ₱10,000

ANS:D

20. Statement No. 1 : When the fulfillmentof the suspensive or resolutory condition depends upon the sole will of the debtor, the conditional obligation shall be void.

Statement No. 2: If the original obligation is subject to a suspensive or resolutory condition and the contract is novated the new obligation shall be under the same conditions unless otherwise stipulated.

a) Both are trueb) Both are falsec) No. 1 is true; No. 2 is falsed) No. 1 is false; No. 2 is true

ANS:D

21. In contracts and quasi-contracts, the liability of the debtor who acted in good faith:

a) Extends to all natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligaiton was constituted.

b) Extends only to results intended but excluding exemplary damages

c) Extends to all damages which may be reasonably attributable to the nonperformance of the obligation

d) Extends to all damages which may be renounced in advanced

ANS:A

22. Statement No. 1 : In solution indebiti, damages in case of non-compliance is the basis of liability.

Statement No. 2: Negligence, as a ground for damages, refers to the nonperformance of an obligation with respect to time.

a) Both statements are trueb) Both statements are falsec) Statement No. 1 is false while statement No. 2 is trued) Statement No. 1 is true while statement No. 2 is false

ANS:B

23. Debtor obliged himself to deliver to creditor 100 cavans of rice on June 1, 2012. On said date, D failed to make delivery despite repeated demands by C. In this case:

a) C has no remedy under the lawb) C can compel D to deliver 100 cavans of rice plus

damagesc) C may ask a third person to deliver 100 cavans of

rice to him, the value recoverable from D plus dameges

d) Convert obligation to cash.

ANS:C

24. D obliged himself to paint the house of C or to paint the picture of C in his house (SALA) in an standing position, using 10 by 10 canvass. Later, because of financial reverses, C sold his house to X. Which of the following statements is correct.

a) The obligation of D is extinguished because he cannot make a choice

b) D may just paint the picture of Cc) D may cancel the contract and ask for damagesd) Contract is voidable

ANS:C

25. The officious manager or gestor is liable for any fortuitous event in all of the following, EXCEPT:

a) If he has undertaken risky operations which the

owner was accustomed to embark upon.b) If he has preferred his own interest to that of the

owner.c) If he fails to return the property or business after

demand by the owner.d) If he assumed the management in bad faith.

ANS:A

26. Statement No.1 : D obliges himself to give C a specific ring, upon failure, to give C ₱5,000. This is a case of facultative obligation.

Staement No.2: d obliges himself to give C a specific ring. However, if he so desires, D may instead give C ₱5,000. This is an example of an obligation with a penal clause. Given these examples, which statement is correct?

a) Both obligations are valid but both are mislabeled as to their classification as obligations

b) Both obligations are not validc) Both obligations are valid and are properly labeled as

to their classification as obligationsd) Both statements are invalid and improperly labeled as

to their classification as obligations

ANS:A

27. A is obliged to give B his only car on September 2012. On the said date, A did not deliver. On September 2, 2012, an earthquake completely destroyed the car. Is A still liable?

a) No. Considering that no demand to deliver was made by B and the specific thing was lost, due to fortuitous event, the obligation is extinguished.

b) No. The obligation is extinguished, even if the debtor is already in default because the debtor can plead impossibility of performance.

c) Yes. A is already in legal delay, thus the obligation to deliver the lost specific thing is converted into monetary claim for damages.

d) Yes. The creditor can instead demand for a substitute of equivalent value from the debtor.

ANS:A

28. The distinction between period and condition isa) Period may or may not happenb) Condition will always happenc) Period may refer to a past event unknown to the

partiesd) Period is certain to happen unlike condition

ANS:D

29. The debtor shall lose every right to make use of the period except:

a) When he does not furnish a guaranty or security of the creditor

b) When after the obligation has been constituted he becomes insolvent, unless he gives a guaranty or security for the debts

c) When the debtor attempts to abscondd) When the debtor violates any undertaking in

considerations of which the creditor agreed to the period.

ANS:A

30. A owes B ₱100,000 due on December 12, 2012. A mortgaged his house to B as guaranty for the debt. Shortly, however, the mortgaged house was completely destroyed by typhoon “Nitang”. Therafter, B demanded payment from A on

October 28, 2012. Is 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.

ANS:C

31. The creditor is entitled to recover damges and interest in addition to the penalty stipulated:

a) When the parties so agreedb) When the debtor refuses to pay the penaltyc) When the debtor is guilty of fraud in the fulfillment

of the obligationd) All of the above

ANS:B

32. “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 periodb) A suspensive conditionc) A resolutory conditiond) A suspensive period

ANS:C

33. D obliged to give C, either object No. 1 valued ₱15,000; or object No. 2 valued ₱10,000; or object No. 3 valued ₱5,000. All the objects were lost due to D’s fault in the following order stated.

a) D’s obligation is extinguishedb) D’s obligation is to pay the value of object No. 1

plus damagesc) C’s right is to demand the value of any of the object

plus damagesd) Pay ₱5,000 plus damages

ANS:D

34. In question No. 30 if object No. 1 is lost due to fortuitous event; No. 2 is lost due to debtor’s fault; No. 3 is subsisting;

a) The right of C is to demand the value of object No. 2 plus damages

b) C has no right because he did not communicate what object the debtor will deliver

c) The obligation of D is to deliver object No. 3d) D’s obligation is totally extinguished

ANS:C

35. A1, A2, and A3 oblige themselves solidarily to give C a specific car valued ₱12,000. On the due date, C demanded delivery but the debtors failed to deliver. The next day, while A1 is still in possession of the car, it got lost due to fortuitous event. The right of C is

a) None, obligation is totally extinguishedb) Proceed against any of the debtors for the value

and damagesc) Proceed against A1 only, because he is the one is

possession at the time it was lostd) Proceed against A2 or A3 but only ₱4,000 each

ANS:B

36. I will give you a specific car if you will not marry X this year, C.Y. Which of the following statements is incorrect?

a) If on December 25, X died and no marriage took place, my obligation becomes effective (not extinguished) because the expected event cannot occur anymore

b) If on December 25 you marry X, my obligation is extinguished because you violated the condition

c) If the year has ended, and no marriage took place, both parties are still alive, my obligation becomes effective (not extinguished) because the time indicated has already elapsed

d) If on December 25, X entered the convent, the obligation can be demanded immediately because it is clear that the marriage will not take place anymore.

ANS:D

37. D obliged himself to give C a specific car if the latter cannot make a circle that is at the same time a square.

a) The obligation is impossible, therefore void.b) The obligation is void because the condition is

outside the commerce of man.c) D cannot be obliged to deliver at alld) Valid and enforceable

ANS:D

38. Statement No. 1 : In alternative obligations, all the objects promise by the debtor to the creditor are all due.

Statement No. 2: In facultative obligations, there are two objects due but the obligor can deliver one thing due and the obligation is extinguished.

a) No. 1 is true; No. 2 is falseb) No. 1 is false; No. 2 is truec) Both are trued) Both are false

ANS:A

39. A-1 and A-2 are solidary debtors of B-1, B-2 and B-3, joint creditors in the amount of ₱90,000. How much can B-3 collect from A-2?

a) B-3 could collect ₱30,000 from A-2b) B-3 could collect ₱90,000 from A-2 and give

₱30,000, each to B-1 and B-2c) B-3 could collect ₱45,000 from A-2 and give

₱13,000, each to B-1 and B-2d) B-3 could collect ₱15,000 from A-2 and ₱13,000

from A-1

ANS:A

40. Statement No. 1 : A solidary creditor can assign his rights even without the consent of the other creditors.

Statement No. 2: In an obligation that is impossible of division, the debt can be enforced only by proceeding against all the debtors. If one of the debtors should be insolvent, the other shall not liable for his share.

a) Both are trueb) Both are falsec) No. 1 is true; No. 2 is falsed) No. 1 is false; No. 2 is true

ANS:D

41. Statement No.1 : Legal, compensation takes place by operation of law even if the parties may be aware of it.

Statement No.2: The indivisibility of an obligation necessarily implies solidarity.

a) Both statements are trueb) Both statement are falsec) Statement No.1 is true while statement No. 2 is falsed) Statement No. 1 is false while statement No. 2 is true

ANS:C

42. Example No. 1 : D owes C ₱10,000 due on December 25. C owes D ₱6,000 due on December 25. D’s obligation is guaranteed by G. On the due date D is insolvent. G is liable to C for ₱10,000, he(G) cannot set up compensation because he is not a principle debtor.

Example No. 2: D owes C ₱10,000 payable on December 25. Later d through intimidation, was able to make C sign a promissory note stating that C is indebted to D for the same amount. In here, D cannot be required to pay C ₱10,000 because he (D) can set up compensation against C.

a) Both examples are trueb) Both are falsec) Only No. 1 is true; No.2 is falsed) Only No.1 is false; No.2 is true

ANS:D

43. Obligaiton may be modified by:a) Changing their object or principal conditionsb) Substituting the person of the debtor.c) Subrogating a third person in the rights of the

creditord) All of the above

ANS:D

44. Which of the following is not a special mode of payment?a) Dacion en pagob) Payment by cessionc) Tender of paymentd) Consignation alone without the need of tender

payment in cases provided for by the law

ANS:C

45. A and B are solidary debtors of X and Y, solidary creditors to the amount of ₱4,000. On the due date with the consent of Y, X renounced in favor of A the entire obligation. Which of the following is correct?

a) B shall give A ₱2,000b) Y can still collect from A or B ₱2,000c) Y can collect from X ₱2,000d) X has no obligation to reimburse Y any amount

ANS:D

46. The act of abandoning all his properties in favor of his creditors so that the latter may cause their sale and apply the proceeds thereof to their claims proportionally is called:

a) Dacion en pagob) Set offc) Payment by cessiond) Tender of payment with consignation

ANS:C

47. A and B are the debtors and X and Y are the creditors in a solidary obligation to the tune of ₱80,000. On due date, X renounced in favor of A the entire obligation which was validly accepted by A. Which of the following is true?

a) B shall give ₱40,000 to Ab) Y can collect from X ₱40,000c) Y can still collect from A or B the d) A can collect ₱40,000 from B

ANS:B

48. The following except one, are requisites of payment as a mode of extinguishng an ordinary obligation. Which is the exception?

a) Complete or full paymentb) Payment in due course when the obligation is due

and demandablec) Payment using negotiable instrumentd) Payment using legal tender, except if payable in

foreign currency

ANS:C

49. Proof of pecuniary loss is necessary for the award of:a) Liquidated damagesb) Exemplary damagesc) Actual damagesd) Temperate damages

ANS:C

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

a) Compromiseb) Illegalityc) Impossibilityd) Performance

ANS:D

CONTRACTS

1. 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 contractb. Obligatoriness of contractc. Mutuality of contractd. Freedom of contract

ANS:C

2. This principle means that contracts take effect only upon the contracting parties, their assigns or succesors-in-interesta. Relativity of contractb. Obligatoriness of contract c. Mutuality of contractd. Freedom of contract

ANS:A

3. B forced S to sell him (B) a masterpiece painting for 1M. Subseuently, B sold it to X for 2M, a good faith purchaser. S is entitled toa. Rescind the contract with B plus damagesb. Recover the painting from X but no damagesc. Recover damages from Bd. Annul the contract plus damages

ANS:C

4. The following contracts should obseve the Statute of Frauds, except:a. Guarantyb. Lease of personal property longer than one yearc. Representation as to the credit of a third persond. Lease of real property longer than one year

ANS:B

5. On July 15, 2014, X entered into a contract with Y. On February 10, 2015, X discovered that fraud was committed at the time he entered. Remedy of X is to annul when?a. Within three years from the time of the fraudb. Within four years from February 10, 2015c. Within four years from the time A entered into

the contractd. On February 10, 2015

ANS:B

6. Consent is manifestated by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Which of the following constitutes a definite order?a. An offer made through and agentb. Business advertisement of things for salec. Advertisement for biddersd. All of the above

ANS:A

7. An agreement in restraint of tradea. Perfectly validb. Voidablec. Unenforceabled. Void

ANS:D

8. Rescission of contract can take place in this case:a. When the things, which are the object of the

contract, are legally in the possession of third persons who acted in good faith

b. When he demands rescission can return whatever he may be obliged to restore

c. When the party seeking resolution can perform only as to part and rescind as to remainder

d. When the seller cannot return the installment paid to him bu the buyer

ANS:B

9. Which of the following contracts is required to be in writing to be enforceable?a. An agreement that by its terms is not to be

performed within a year from the making thereof.

b. A special promise to answer for debt, default or miscarriage of another.

c. An agreement made in consideration of marriage, other than a mutual promise to marry.

d. All of the above.

ANS:D

10. S makes an offer to B on January 1, 2014. B makes known his acceptance in a letter sent on January 2,

and received by S on January 10. Meantime, on January 5, S becomes insane.a. The contract is voidable because one party is

insaneb. There is already a meeting of minds, the

contract is perfectedc. The contract is not binding because there is no

meeting of mindsd. Contract is unenforceable

ANS:C

11. In a contract, as written, D promises to pay C P10,000 on September 15, 2014. The consideration received by D is not stated in the contract. Decide.a. The contract is valid because the cause is always

presumed to existb. The contract is valid so long as it in writingc. The contract is valid because cause is not

essential to a contractd. The contract is void because the cause is not

stated

ANS:A

12. The storage of “conception” of a contract is:a. When the contract is fully executedb. When the parties come to an agreementc. When negotiations are in progressd. When there is a meeting of the parties’ minds

ANS:C

13. Which of the following contracts is rescissible?a. Those where one of the parties is incapable of

giving consent to a contractb. Those where both parties are incapable of giving

consent to a contractc. 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 of fictitious

ANS:C

14. Contracts that cannot be sued upon unless ratified:a. Voidableb. Unenforceablec. Rescissibled. Void

ANS:B

15. Contract that is made for a valuable consideration is:a. Onerousb. Gratuitousc. Onerous and gratuitousd. Aleatory

ANS:A

16. Who is liable for the loss of subject matter by fortuitous event?a. Creditorb. Debtorc. Both creditor and debtord. None of them

ANS:D

17. These persons are bound by contracts:a. Contracting partiesb. Assigns or assignc. Heirsd. All of them

ANS:D

18. L entered into a contract of lease with X. T, the clerk of L, typed the document. Due to T’s negligence, the document made was that of sale instead of lease.a. The remedy is annulmentb. Parties may go to court for interpretationc. Parties may enforce their right because it is

enforceabled. Remedy is reformation

ANS:D

19. Which of the following can be considered as feature of the void contract?a. Subject to ratificationb. They existc. Action or defense for nullity is subject to

prescriptiond. It is imprescriptible as a defense

ANS:D

20. S entered into a contract with B by threatening B that if B does not agree to make the contract, S would publish defamatory matter concerning 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.

ANS:B

21. S1: If the cause is not stated in the contract it is presumed that it is unlawful.S2: The action for rescission is subsidiary; it cannot be instituted except when there is no other legal means to obtain reparation for damages suffered.a. Both are trueb. Both are falsec. 1 is true; 2 is falsed. 1 is false; 2 is true

ANS:D

22. Because of the intimidation employed by X, a third person, S sold his car to B. This contract is:a. Voidb. Voidablec. Unenforceabled. Rescissible

ANS:B

23. B called C by the telephone to guaranty the debt of D to C. The contract between B and C is:a. Unenforceable

b. Voidablec. Rescissibled. Annullable

ANS:A

24. An obligation which cannot be enforced by court action, but which is binding on the party who makes it in conscience and according to natural justice is calleda. Civil obligationb. Natural obligationc. Pure obligationd. Simple obligation

ANS:B

25. Contract which has no effect at all and cannot be ratified is a/ana. Unenforceableb. Void contractc. Voidabled. All of them

ANS:A

26. Statute of fraud is applicable toa. Partially executedb. Oral contract of loan when the amount involved

is less than P500c. Contract not to be performed within a year from

the making thereofd. All of the above

ANS:C

27. An incidental element of a contracta. Implied warrantyb. Payment of interest in a loanc. Delivery of the object in contract of pledged. All of the above

ANS:B

28. In three of the following defective contracts, ratification cleanses the defects. Which is the exception?a. Both parties are incapable of giving consentb. Sale of immovable property or interest orally

entered intoc. Sale of piece of land thru an agent the authority

is orald. Contracts entered into by a person who has

been given no authority

ANS:C

29. Valid until annulled unless there has been ratifieda. Rescissible contractb. Inexistence contractc. Voidable contractd. None of the above

ANS:C

30. S was forced by X to sign a contract with B for the sale of specific property for 10,000. C a creditor of X is prejudiced by the contract. What can s do?a. S may ask for annulment of the contractb. S may ask for rescission of the contract

c. S may ask C to declare the contract avoidedd. C may ask for the annulment of the contract

ANS:A

31. In the preceding number, what can C do?a. C may ask for rescission of the contractb. C may ask for the reformationc. C may ask S to declare the contract voidedd. C may ask for the annulment of the contract

ANS:A

32. Which of the following contract is voidablea. Those where both parties are incapable of giving

consent to a contractb. Those undertaken in fraud of creditors when the

latter cannot in any other manner collect the claims due to them

c. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud

d. Those whose object is outside the commerce of men

ANS:C

33. S and B agrree that S would sell and B would buy S’s radio for P400, to years from the date of the agreement. At the end of the two-year period, S refused to deliver the radio although B was willing to pay.a. B can compel to deliver because B is willing to

pay the priceb. The contract falls under the statute of frauds,

therefore unenforceablec. No statute of frauds because the price is less

than P500d. No obkect is movable, oral contract is

enforceable

ANS:B

34. This kind of defective contract refers to that contract which is validly agreed upon because all the essential elements exists, but courts nullify it when there is damage or prejudice to one of the parties or to a third person. Its enforcement would cause injustice by reason of some external facts.a. Voidable contractb. Void or inexistence contractc. Rescissible contractd. Unenforceable contract

ANS:C

35. Must be in writing to be enforceablea. Lease of land for 12 monthsb. Lease of car for 18 monthsc. Both a and bd. None of a and b

ANS:D

36. A contract entered into in violation of right of first refusal is:a. Rescissibleb. Voidablec. Unenforceabled. Void

ANS:A

37. Type of defective contract that creates no rights and impose no obligation, but are susceptible of ratification.a. Voidable contractsb. Unenforceable contractsc. Rescissible contractsd. Void contracts

ANS:B

38. D forced C to lend him P10,000. The promissory note is in writing.a. The contract is rescissible because the contract

is fraudulentb. The contract is voidc. C cannot demand payment from D because the

contract is unenforceabled. Contract remains to be valid

ANS:D

39. Which of the following contract is not valid?a. Mutual promise to marry entered into orallyb. Sale of immovable property orally entered intoc. One of the parties in a contract is incapable of

giving consentd. Sale of immovable property thru an agent

ANS:D

40. Three of the following are void contracts. Which is the exception?a. Contracts where the cause is immoralb. Contracts to prevent a known supporter of a

political rival from voting for his candidate for a valuable consideration

c. Contracts with a valid consideration but with unlawful motives

d. Absolutely silmulated contracts

ANS:C

41. Contract with a false cause isa. Voidableb. Voidc. Unenforceabled. All of the above

ANS:B

42. A conferment of a direct benefit in a contract between two persons in a favor of a third person who must accept such benefit before the same is withdrawn is known as:a. Politicitacionb. Stipulation por autruic. Donation propter nuptiasd. Counter-offer

ANS:B

43. The guardian of an insane person sells a house and a lot belonging to the latter valued at P100,000 to B, buyer for P74,000 with the approval of the court. The contract is:a. Validb. Rescissiblec. Voidable

d. Unenforceable

ANS:A

44. Which of the following contract is enforceable even if not reduced in writinga. Lease of car for 2 yearsb. Representation as to the credit of a third personc. Lease of immovable for a period longer than one

yeard. Agreement for the sale of immovable property

ANS:A

45. Simulation of contract – absolute or relative. Relative when:a. Parties not bound at allb. The contract is voidc. The parties conceal their true agreementd. None of the above

ANS:C

46. Essential requisites of a contract:a. Consentb. Causec. Subjectd. All of them

ANS:D

47. The offeror need not know the acceptance by the offeree is the theory of:a. Cognitionb. Manifestationc. Expiditiond. B or C

ANS:D

48. Which of the following instruments is not subject to reformation?a. Simple donations inter vivos wherein no

condition imposedb. Willsc. When the real agreement is voidd. All of the above

ANS:D

49. S1. Place and modes of payment are example of natural elementsS2. Agency, partnership and sale are example of preparatory and consensual contractsa. Both are trueb. Both are falsec. 1 is true; 2 is falsed. 1 is false; 2 is true

ANS:B

50. All are void contracts except:a. Those whose object is outside the commerce of

menb. Those which are relatively simulated of fictitiousc. Those with unlawful considerationd. Those which contemplate an impossible service

ANS:B

PARTNERSHIP1. 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 1807d. Whenever other circumstances render it just and

reasonablee. All of the above

ANS:E

2. Sometimes termed dormant partnera. Limited partner

c. Secret partnerb. Capitalist partner

d. Both silent & secret

ANS:D

3. Every contract of partnership having a capital P3,000 or more in money or property shall appear in a public instrument which must be recorded in the Securities and Exchange Commission. Failure to comply with said requirements.

a. Will not affect the liability of a partnership and the members thereof to third persons.

b. Will render the partnership voidc. Will not give the partnership a legal personalityd. Will give the parnership a de facto existence

ANS:A

4. A, B and C capitalist partners, contributed P10,000 each and D, the industrial partner contributed his services. Suppose X, is the creditor of the firm to the amount of P90,000, after getting the P30,000 assets of the partnership

a. X can recover P20,000 each from A,B and C onlyb. X can recover P60,000 from either A,B or Cc. X can recover P15,000 each from A,B,C and Dd. X can recover P15,000 each from A,B and C but D is

exempt because he is an industrial

ANS:C

5. A, B and C formed a general partnership A and B as general partners contributing P60,000 and P40,000 respectively while C is an industrial partner. The partners agreed that C, the industrial partner is exempted from liability to third person.Upon dissolution the partnership suffered a loss consisting of a liability to X in the amount of P30,000. As stated, which of the following statement is true

a. C is not liable because it was agreed that the industrial partner is exempted from liability to third person

b. The 30,000 is considered a loss of the partnership and C as an industrial partner is exempted up to P10,000 only

c. Each partner is liable P10,000 onlyd. A and B are liable for P15,000 each

ANS:C

6. A, B and C are partners. Their contribution are as follows: A P60,000, B P40,000, and C services. The partners agreed to divide the profits and losses in the following proportions: A 35%, B 25%, and C 40%. If there is a profit of P10,000 how should the said profit of P10,000 be distributed among the partners?

a. A P6,000, B P4,000, C nothingb. A P3,000, B P2,000, C P5,000

c. A P3,500, B P2,500, C P4,000d. A P3,500, B P3,500, C P3,000

ANS:C

7. A, B and C formed a general partnership, each to contribute P100,000. The partnership began its operation but 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 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 P50,000d. Each partner share in the balance

ANS:C

8. In the preceding question, if C is a limited partner and there is no stipulation that C exempted from losses, which of the following statement is correct?

a. 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 P30,000d. Each partner share in the balance of P90,000 is only

P30,000

ANS:C

9. A partner who is liable for the payment of partnership debts to the extent of his separate property after the partnership assets are exhausted is called

a. Managing partnerc. General partner

b. Limited partnerd. Silent partner

ANS:C

10. B-1, B-2 and B-3 are equal partners in 3-Brothers Partnership. The partnership is indebted to PC for P150,000. Partner B-1 is indebted to SC for P20,000. PC attached and took all the assets of the partnership amounting to P90,000. B-2 and B-3 are solvent while B-1 is insolvent and all what he owns is a land valued at P15,000.

a. SC has priority to the land of B-1 as a separate creditor

b. PC has priority to the land of B-1 to cover B-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

ANS:A

11. A partnership is dissolved on the death of a a. General partner

d. Limited partnerb. Industrial partner

e. a,b or cc. General-Limited partner

ANS:E

12. In case of an imminent loss of the business of the

partnership, the following partners are required to give additional contribution except

a. Capitalist partnerd. Industrial partner

b. General partnere. None of the above

c. Capitalist-industrial partner

ANS:D

13. Coverage of Statute of Frauds in partnership contact, which is the exception?

a. Promise to answer for the debt, default of miscarriage of another by a partnership must be in writing

b. If the agreement to form a partnership shall be performed within a year the same must be in writing

c. Contracts for the sale of real property or any interest therein or leasing of partnership immovable property for more than one year must be in writing

d. Sale of partnership personal property at a price not less than P500 must be in writing, unless there is a delivery or payment

ANS:B

14. A, B and C, capitalists partners each contributed P30,000, P20,000 and P10,000 respectively: and D the industrial partner contributed his services. Suppose X a customer is the creditor of the firm to the amount of P180,000. How can X recover the P180,000?

a. X must sue the firm and get P60,000 from the partners including D, the industrial partner. X can still recover the balance of P120,000 from the four partners jointly

b. X can recover from the firm P60,000. X can still recover the balance of P120,000 from the capitalist partners only

c. X can recover from the firm P60,000. X can still recover the balance of P120,000 to any of the partners solidary

d. X can recover from the firm P60,000 and consider the balance of P120,000 as a loss

ANS:A

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

a. All the present property of each partner contributedb. All the profits that may be derived from such

propertiesc. If stipulated, the properties acquired by a partner by

inheritance, legacy or donationd. None of the above

ANS:C

16. The following are causes of dissolution of a limited partnership EXCEPT

a. Death of general partnerb. Retirement of general partnerc. Insanity of a limited partnerd. None of the above

ANS:C

17. A partnership is automatically dissolved, excepta. By the death of any partnerb. By the insolvency of any partner or of the partnershipc. By the civil interdiction of any partnerd. By the insanity of any partnere. All of the above

ANS:D

18. An industrial partner who engages in a separate business without the consent of the other partners

a. May be expelled from the Partnership plus damagesb. May be liable as a debtorc. May be required to gave to Partnership whatever

profits or benefits he may have derived from his separate business

d. May be liable as a trusteee. Both A & C

ANS:A

19. A person who, although not actually a partner, is made liable for the debts of the partnership to third person by reason of his acts or omissions is called:

a. Ostensible partnerb. Nominal partnerc. Silent partnerd. Dormant partnere. None of the above

ANS:B

20. Except when authorized by the other partners, one or more but less than all the partners have no authority to:

a. Assign the partnership property in trust for creditorsb. Dispose of the goodwill of the businessc. Confess a judgementd. Compromise a partnership claim or liabilitye. All of the above

ANS:E

21. Which of the following is not a property right of a partner?a. His rights in specific partnerships propertyb. His interest in the partnershipc. His right to participate in the managementd. To demand true and full information of all things

affecting the partnership

ANS:D

22. Which of the following is considered prima facie evidence of the existence of a partnership?

a. Where payment of interest on a loan varies with the profits of the business

b. The receipts by a person of a share of the profitsc. The sharing of gross returns of a businessd. Where the parties are established as co-owners of a

property

ANS:B

23. X, Y and Z are equal partners XYZ Partnership. A owes the XYZ Partnership for P9,000. Z a partner collected from A P3,000 as his share of what A owes. When X and Y collected from A, A was insolvent

a. Partner Z shall share partners X and Y with the P3,000b. Z cannot be required to share X and Y with the P3,000c. X and Y should first exhaust all remedies to collect from Ad. X and Y can automatically deduct from the capital contribution of Z in the partnership their respective shares in the P3,000

ANS:A

24. A person who takes place of a limited partner who has died is called

a. Heirb. Successor in interestc. Assignor

d. Substituted limited partner

ANS:D

25. If a partner is insolvent, the first order of preference in the distribution of his assets is

a. Partner’s contribution to the partnershipb. Partnership creditorc. Separate creditor of the partnerd. Pro-rata between the separate creditors and partnership creditors

ANS:C

26. When the manner of management has not been agreed upon, who shall manage the affairs of the partnership?

a. Capitalist partnersb. Industrial partnersc. Capitalist-industrial partnersd. All of the partnerse. None of the above

ANS:D

27. X, Y and Z are partnership business X contributed P10,000, Y contributes P5,000 and Z his services only. After payment of partnership debts, what remains of the partnership assets is only P6,000. In the absence of terms to the contrary, the share of Z will be equal to

a. That of Yc. That of X

b. P2,000d. Nothing

ANS:D

28. A, B and C are partners. Their contributions are as follows: A P60,000, B P40,000, C services. The partners did not agree on how to divide profits and losses. If there is a loss of P10,000, how should the said loss of P10,000 be shared by the partners?

a. A P6,000, B P4,000 ,C 0b. A P3,000, B P2,000, C 3,500c. A P3,500, B P3,500, C P3,500d. A P3,500, B P2,500, C P4,000

ANS:A

29. A, B, C and D are partners. Their contributions are as follows: A P50,000, B P30,000, C P20,000, D services. The partnership incurred obligations to third persons which the firm was inable to pay. After exhausting the assets of the partnership, there is still unpaid balance of P10,000. Who are liable for the payment of the unpaid balance of P10,000? How much cash?

a. A P5,000, B P3,000, C P2,000, D nothingb. A P2,500, B P2,500, C P2,500, D P2,500c. A P4,000, B P3,000, C P2,000, D P1,000d. A P4,000, B P4,000, C P2,000, D nothing

ANS:B

30. A partner whose liability for the partnership debts is limited to his capital contribution is called:

a. General partnerd. Secret partner

b. Limited partnere. None of the above

c. General-limited partner

ANS:B

31. A partnership without definite period of existence and which can be dissolved at any time by any of the partners is called

a. Universal partnership of all present propertyb. Universal partnership of profitsc. Particular partnershipd. Partnership at wille. None of the above

ANS:D

32. Which of the following provision in Partnership Law is/are considered directory and not mandatory

a. If the capital is P3,000 or more it must appear in a public instrumentb. The partnership contact must be recorded with the SEC if limited partnershipc. If immovable properties is contributed it must appear in a public instrumentd. B and Ce. A and B

ANS:A

33. A partnership is dissolved:a. In contravention of the partnership agreement by the express will of any partner at any timeb. 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 partnershipc. When a specific thing which a partner had promised to contribute to the partnership perishes before its delivery to the partnershipd. By the loss of the thing, whether before of after its delivery to the partnership when the partner who contributed it having reserve the ownership thereof, has

only transferred the use or enjoyment of the samee. All of the above

ANS:E

34. Coverage of Statute of Frauds in partnership contract, which is the exemption?

a. Promise to answer for the debt, default of miscarriage of another by a partnership must be in writing

b. If the agreement to form a partnership shall be performed within a year the same must be in writing

c. Contracts for the sale of real property or any interest therein or leasing of

partnership immovable property for more than one year must be in writing

d. Sale of partnership personal property at a price not less than P500 must be in writing, unless there is a delivery or payment

ANS:B

35. X and Y established a partnership by contributing P100,000 each. Z a third party allowed his name to be indicated in the firm name of the partnership. The partnership was insolvent and after exhausting all the remaining assets, there was left a liability to third persons the amount of P30,000. The creditors can compel

a. Z to pay the P30,000 remaining liabilityb. X, Y and Z to pay P10,000 eachc. X or Y to pay P30,000 remaining liabilityd. X and Y to pay P15,000 each

ANS:B

36. A partner who has all the rights, power and subject to all restrictions of the general partner but whose liability is, among themselves limited to his capital contribution is called

a. General partnerd. Dormant partner

b. Limited partnere. None of the above

c. General Limited partner

ANS:B

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

a. Express will of any partnerb. Insolvency of any partnerc. Termination of the term d. Expulsion of any partner

ANS:B

38. A partner who does not participate in the management of the affairs of the partnership and whose connection with it is not made known to the public is called

a. Ostensible partnerd. Dormant partner

b. Secret partnere. None of the above

c. Silent partner

ANS:D

39. A capitalist partner engaged for his own account in an operation which is of the kind of business in which the partnership is engaged. Said partner can be

a. Compelled to sell his interest in the partnership to the other capitalist partnersb. Compelled to dissolve or discontinue the operation of his businessc. Compelled to bring to the common funds of the partnership any profits accruing to him from his transactionsd. Denied his share in the profits of the partnership

ANS:C

40. Refers to a partnership whereby the persons who represents themselves, or consent to another or others to represent them to anyone that they are partners

a. General partnershipc. Partnership by estoppel

b. Limited partnershipd. None of the above

ANS:C

41. Bears the risk of things contributed to the partneshipa. Contributing partnerb. Limited partnerc. Partner contributing usufructuary rightsd. All of the above

ANS:C

42. Three of the following are the effects if immovable property is contributed in a partnership but the contract did not appear in a public instrument. Which is the exception?

a. A partnership has no judicial personalityb. The parties may compel each other to observe the

required formc. The parties may request the return of their capital contributiond. The contract of partnership is void

ANS:B

43. Three of the following do not prove the existence of a valid partnership. Which is the exception?

a. The sharing of gross receiptsb. There is an intention of dividing the profits among themselvesc. Receipts by a person of the share of the profits for payment of a partnership debt by installmentsd. When two or more persons are co-owners and they share correspondingly in the profits made from the sale or use of their property

ANS:B

44. Which of the following is valid?a. Oral contract of partnership where a partner contributes real property with a value less than P3,000b. Oral contact of partnership where the capital is P3,000 or morec. Written contact of universal partnership of present properties between husband and wifed. None of them

ANS:A

45. A partnershipa. Is created by agreements of the partnersb. Has a juridical personality separate and distinct from that of each of the partnersc. May be constituted in any form, except where immovable property or real rights are contributed thereto in which case a public instrument is necessaryd. All of the above

ANS:D

46. A partnership which comprises all the profits that the partners may acquire by their work or industry during the existence of the partnership is called

a. Universal partnership of all present propertyb. Universal partnership of profitsc. Particular partnershipd. Partnership at wille. None of the above

ANS:B

47. A partner whose connection is concealed and has no voice nor say in the management of the affair of the partnership is

a. Nominal partnerd. Dormant partner

b. Secret partnere. None of the above

c. Silent partner

ANS:D

48. A limited partner shall not liable as a general partner unless

a. He takes part in the control of the businessb. He contributes his services to the capital of the firmc. His surname appears in the partnership named. The word “limited” is not added to the name of the partnershipe. All of the above

ANS:E

49. Which of the following statements is correct concerning liability when a partner in a general partnership commits a tort while engaged in partnership business?

a. The partner committing the tort is the only party liableb. The partnership is the only party liablec. The partners are jointly and severally liabled. The partnership and the partners are liable

ANS:D

50. A partner whose connection with the partnership is open and public such as by including his name in the firm name of the partnership is called

a. Nominal partnerd. Dormant partner

b. Ostensible partner e. None of the abovec. Secret partner

ANS:B

CORPORATION

1. The by-laws of a corporation may create an executive committee, composed of not less than 3 members of the board of directors to be appointed by the board. The executive committee may act, by majority vote of all its members on such specific matters within the competence of the board, as may be delegated to it in the by-laws or on majority vote of the board, except:a. Approval of any action for which shareholders’

approval is also requiredb. Amendments or repeal of by-laws or adoption of

new by-lawsc. Filing of vacancies in the Boardd. Distribution of cash dividendse. All of the above

ANS:E

2. A corporationa. May not enter into a contracts of guaranty or

suretyship not in furtherance of its business.b. Has no implied power to become a partner with

an individual or another corporationc. May enter into joint venture with individuals

where the nature of the business is within the scope of its legitimate power

d. May issue or sell stocks to subscribere. All of the above

ANS:E

3. One who has agreed to take stock from the corporation on the original issue of such stock is calleda. Incorporatorsb. Membersc. Promotersd. Subscriberse. None of the above

ANS:D

4. The business of this corporation can be managed by the stockholdersa. Closeb. Open

c. Eleemosynaryd. None of the abovee. All of the above

ANS:A

5. Two or more kinds of dividends paid by the corporation is calleda. Cash stockb. Compositec. Property cashd. Scrip

ANS:B

6. The following are some of the requisites of a de facto corporation. Choose the exception.a. Valid law under which it is incorporatedb. Attempt to incorporatec. Assumption of corporate powerd. None of the above

ANS:D

7. Which of the following is not required to be included in the Articles of Incorporation?a. Duties of the presidentb. Name of the corporationc. Period of existenced. Location of the principal office

ANS:A

8. A written promise to pay the money loaned to the corporation but ordinarily it has no specific fund or property as security for the payment is calleda. Mortgage bondb. Collateral trust bondc. Equipment bondd. Debenture bonde. None of the above

ANS:D

9. A form of combination where all the constituent corporations are dissolved and out of them a new one is formed.a. Consolidationb. Mergerc. Joint ventured. All of them

ANS:A

10. Which of the following is not an express power of the corporation?a. To adopt by-laws and amend or repeal the sameb. To enter into merger and consolidation with

other corporationc. To make reasonable donations including those

for the public welfare or for hospital, charitable, cultural. Scientific, civic and similar purposes

d. To established pension retirement and other plans for the benefit of its directors, trustees, officers, and employees.

e. None of the above

ANS:E

11. Statement 1: The Articles of Incorporation or the by-laws may limit or even completely deny the right to vote of any class member in a corporation.

Statement 2: Subscribers for stock shall be liable to the corporation for the interest from the date of subscription, but only if so required in the by-laws.a. Both are trueb. Both are falsec. No. 1 is true; N0. 2 is falsed. No. 1 is false; No. 2 is true

ANS:A

12. The interest or rights of the owner in the management of the corporation in the surplus profits and on dissolution in the balance of its assets after the payment of the debt isa. Certificate of stockb. Share of stockc. Dividendd. Legal capitale. None of the above

ANS:B

13. A written instrument signed by the proper officers of the corporation, stating or acknowledging that the person named therein is the holder of a designated number of shares of its stocka. Certificate of stockb. Share of stockc. Certificate of incorporationd. Dividende. None of the above

ANS:A

14. The owners of shares in stock corporation are calleda. Incorporatorsb. Promotersc. Membersd. Stockholderse. None of the above

ANS:D

15. Shares of stock may be issued fora. Actual cashb. Tangible or intangible propertiesc. Labor performed for or services actually

rendered to the corporationd. Previously incurred indebtedness by the

corporatione. All of the above

ANS:E

16. A non-stock corporationa. May not engage in businessb. One where the capital stock are divided into

sharesc. No part of the income must be distributed as

dividendsd. May have 15 board of trustees whose shall have

a term of office of 3 yearse. All of the above

ANS:E

17. The holders of non-voting shares shall be entitled to vote on the following matters, except;a. Amendments of the Articles of Incorporationb. Sales, lease mortgage, or other disposition of all

or substantially all of the corporate propertiesc. Incurring, creating, or increasing bonded

indebtednessd. Increase or decrease of capital stock

e. None of the above

ANS:E

18. The quorum required by law to elect directors: presence of owners ofa. Majority of the outstanding capital-votingb. Majority of the outstanding capital-voting and

non-votingc. 2/3 of the outstanding capital votingd. 2/3 of the outstanding capital-voting and non-

voting

ANS:A

19. Dividends shall be declared and paid out ofa. Capital stockb. Paid in capitalc. Profits earned in selling no par value sharesd. Unrestricted retained earningse. None of the above

ANS:D

20. Private corporation which have accepted from the state grant of a franchise or contract involving the performance of public duties are calleda. Quasi-public corporationb. Quasi corporationc. Eleemosynary corporationd. Ecclesiastical corporatione. None of the above

ANS:A

21. If the principal office of CPAR corporation is located in Manila, stockholders’ meeting can be held in a. Isabel Buildingb. Las Pinasc. Muntinlupad. All of the above

ANS:D

22. All of the close corporation’s issued shares shall be held of record by not more thana. 10 personsb. 15 personsc. 20 personsd. None of the above

ANS:C

23. A bond which is payable to a particular individual whose name is entered on the books of the corporation as registered owner is calleda. Registered bondb. Coupon bondc. Convertible bondd. Guaranteed bonde. None of the above

ANS:A

24. A corporation, the sole purpose of which is to invest its capital in a specific property and afterwards consume that property or extract its value at a profit is calleda. Quasi corporationb. Wasting assets corporationc. Open corporationd. Eleemosynary corporatione. None of the above

ANS:B

25. Persons who compose the corporation whether as stockholders or members are calleda. Incorporatorsb. Promotersc. Corporatorsd. Subscriberse. None of the above

ANS:C

26. The theory of a corporation fiction may be disregarded under the doctrine of piercing the veil of corporate entity, when the concept of the legal entity being useda. The defeat of public convenienceb. To protect fraudc. To defend crimed. To evade or violate a contract or lawe. All of the above

ANS:E

27. Three of the following are similarities between a partnership and corporation. Which is not?a. The individuals composing both have little voice

in the conduct of the businessb. Both have juridical personality separate and

distinct from that the individuals composing them

c. Like partnership, a corporation can act only through agents

d. Both are organizations composed of an aggregate of individuals

ANS:A

28. The right given to the stockholders to dissent and demand payment of the fair value of their shares is calleda. Right of proxyb. Appraisal rightc. Pre-emptive rightd. Stock righte. None of the above

ANS:B

29. The following are the attributes of a corporation, except:a. It is an artificial beingb. It is created by operation of lawc. It has rights of successiond. It has the power, attributes and properties

expressly authorized by law or incident to its existence

e. None of the above

ANS:E

30. Founder’s sharea. Are given to the organizers or founders of the

corporationb. Maybe given special rights and privileges by the

owners of other sharesc. Maybe given the exclusive right to vote and to

be voted for in the election of the directors for the period not exceeding 5 years

d. All of the abovee. None of the above

ANS:D

31. Which of the following qualifications is necessary in order that one may be elected treasurer of the corporation?a. He must be a citizen and a resident of the

Philippinesb. He must be a director of the corporationc. He must be a stockholder of the corporationd. He must be a treasurer of any other corporatione. None of the above

ANS:E

32. The following are expressed powers of a corporation, except;a. To sue and be suedb. The power of successionc. To adopt and use a corporate seald. To amend its Article of Incorporatione. None of the above

ANS:E

33. Which of the following statements is false?a. The secretary must be a citizen and resident of

the Philippinesb. Delinquent stock are necessarily unpaidc. Treasury stocks are by their very nature

delinquent at the time they are acquired by the corporation

d. In consolidation, the constituent corporation is dissolved and out of them a new one is formed

ANS:D

34. Stockholders of the close corporationa. Given right of pre-emption in the issuance of all

kinds of shares including treasury sharesb. May enter into a written agreement making

them partners among themselvesc. May, for any reason, withdraw from the

corporation and compel it to purchase their share at their fair value, which shall not be less than their or issued value, provided the corporation has sufficient assets to cover its debts and liabilities exclusive of capital stock.

d. Any of them may, by written petition to the SEC. compel the dissolution of the corporation whenever any act of the directors or officers of this corporation is illegal or fraudulent or dishonesty or oppressive or whenever corporate assets are being misapplied.

e. All of the above

ANS:E

35. Statement 1: Stock issued by a corporation in excess of the amount prescribed or limited by its Article of Incorporation are void except in the hands of a bonafide purchaser for valueStatement 2: Treasury shares are part of the outstanding capital stock of a corporationa. True; Trueb. False; Falsec. True; Falsed. False; True

ANS:B

36. Incorporators of a corporationa. Not less the 5 but not more than 15b. Majority are required to be resident of the

Philippines

c. Must own or must subscribe to at least 1 share of the capital stock of the corporation

d. All of the above

ANS:D

37. The power to examine the affairs of a corporation in order to supervise, direct, and control its management is calleda. Visitorial power of the stateb. Visitorial power of the stockholdersc. Visitorial power of the directorsd. Visitorial power of employeese. None of the above

ANS:A

38. Which of the following cannot be lawfully exercised by a non-stock corporation?a. Pay dividendb. Elect trusteesc. Amend the Articles of Incorporationd. Adopt by-laws

ANS:A

39. A bond secured by stocks or other bonds or both which are owned by the debtor, the securities being deposited with a trustee for the bondholder is calleda. Mortgage bondb. Collateral trust bondc. Debenture bondd. Equipment bonde. None of the above

ANS:B

40. Voluntary dissolution of a corporation is caused bya. Voluntary dissolution where no creditors are

affectedb. Voluntary dissolution where creditors are

affectedc. Amendments of the articles of incorporation

resulting in the shortening of corporate termd. In case of a corporation sole be submitting to the

SEC a verified declaration of dissolutione. All of the above

ANS:E

41. Shares of stocks entitling to owner to receive dividends ahead of the owner of common shares not only for the year the dividend is declared but also for prior years where no dividends are declareda. Participating preferred stockb. Cumulative preferred stockc. Founder’s stockd. Watered stock

ANS:B

42. Stocks lawfully issued by the corporation for money, property, or services and subsequently properly reacquired by it area. Watered stocksb. Over issued stockc. Bonus stockd. None of the above

ANS:C

43. Treasury sharea. Shall have no voting right as long as they remain

I the treasury

b. Are not entitled to participate in the distribution of dividends

c. Are not part of the outstanding capital stockd. May again be disposed of for a reasonable price,

even at less than par, by the Board of Directorse. All of the above

ANS:E

44. To revoke the power granted to the board to make by-laws,a. Majority of the board and of the outstanding

capital stock of the membersb. 2/3 of the outstanding capital stock or of the

membersc. Majority of the quorum of the board and 2/3 of

the outstanding capital stock or of the membersd. Majority of the outstanding capital stock or of

the members

ANS:D

45. Which of the following is not correct?a. In the delinquency sale at public auction the

highest bidder is one who offers to pay the full amount of the balance of the subscription plus interest and expenses of the sale for the highest number of shares

b. The sale of delinquent stock in public auction can be stopped if the board of directors stops the sale for valid reasons

c. Payment of unpaid subscription may not be enforced by applying cash dividends to delinquent stockholders

d. The board of directors shall order, by resolution, the sale of delinquent stock specifying the amount due plus accrued interest, the place, time and date of the sale.

ANS:A

46. One of the following does not require stockholders’ approvala. Merger or consolidationb. Change of corporate namec. Investment of corporate funds for a purpose

outside of the main purpose of the corporationd. Declaration of cash dividend

ANS:D

47. Shares deposited by the seller or his agent with a bank or third party to be delivered to the buyer or subscriber only upon the fulfilment of the stipulated suspensive conditiona. Promotion sharesb. Founders’ sharec. Redeemable sharesd. Escrow shares

ANS:D

48. Every decision of the directors or trustee shall be valid as a corporate act at which there is a quorum bya. Majority of the members of the boardb. Majority of the directors or trustees presentc. 2/3 vote of the members of the boardd. 2/3 vote of the directors or trustees present

ANS:B

49. Which of the following qualifications is necessary in order that one may be elected president of a corporationa. He must be a citizen and a resident of the

Philippinesb. He must not be a stockholders or director of a

competitor corporationc. He must not be a president of any other

corporationd. He must be a director of the corporation

ANS:D

50. This share can be acquired by the corporationa. Founder’s shareb. Redeemable sharesc. Par value sharesd. No-par value sharese. None of the above

ANS:B

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