PALAWAN STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY

BSA Fourth Year Block No. 1
Final Examinations - October 19, 2015
SALES, AGENCY & OTHER COMMERCIAL LAW
Prof.: Atty. Emilia Concepcion D. Severino
INSTRUCTIONS:

I.
1.

2.

3.

4.

5.

6.

7.

Write your answers on a separate sheet of paper.

Do not write at the back of the answer sheet.
Write your answer briefly and concisely.
Submit the answer sheet together with this test questionnaire.

MULTIPLE CHOICE: Choose the best answer

It arises in those cases where the principal by his culpable negligence permits his
agent to exercise power not granted to him, even though the principal may have
no notice or knowledge of the conduct of the agent.
a.
Implied agency
c.
Agency by estoppel
b.
Apparent authority
d.
Authority by estoppel
Michael Fermin, without the authority of Pascual Lacas, owner of a car, sold the
same car in the name of Mr. Lacas to Atty. Buko. The contract between Atty. Buko
and Mr. Lacas is --a.
void because of the absence of consent from the owner, Mr. Lacas.
b.
valid because all of the essential requisites of a contract are present.
c.
unenforceable because Michael Fermin had no authority but he sold the car
in the name of Mr. Lacas, the owner.
d.
rescissible because the contract caused lesion to Atty. Buko.
If redemption is made, which of the following will not be paid by the seller to the
buyer?
a.
price paid by the buyer
b.
expenses in the execution of the sales contract paid by the buyer
c.
all necessary expenses on the thing sold and to be redeemed
d.
interest of the price paid by the buyer
A, B, C and O are co-owners of a parcel of land pro-indiviso. A sold his 1/4 share in
the land to B in an absolute deed of sale. Which is correct?
a.
the deed of sale between A and B is void because it was not made in favour
of a third party.
b.
C may exercise his right of redemption on the interest sold by A to B.
c.
C may redeem on 1/4 of the interest sold by A to B.
d.
C cannot exercise the right of redemption because the sale was made in
favour of a co-owner.
In cases where a special power of attorney is necessary, lack thereof would render
the contract entered into by the agent
a.
voidable
c.
void
b.
unenforceable
d.
rescissible
Which of the following acts may be done by an agent?
a.
Making a will
b.
Buying a commercial lot from an alien
c.
Vote during the national election
d.
Commit the crime of theft in accordance with the instructions of the
principal
An agent authorized by a special power of attorney to sell a land belonging to the
principal succeeded in selling the same to the buyer according to the instructions
given the agent. The agent executed the deed of absolute sale on behalf of the
principal two days after the principal died, an event that neither the agent nor the
buyer knew at the time of the sale. What is the standing of the sale?
a.
Voidable
c.
Void
b.
Valid
d.
Unenforceable
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8.

9.

10.

11.

12.

13.

14.

X, who was abroad, phoned his brother, Y, authorizing him to sell Xs parcel of land
in Pasay. X sent the title to Y by courier service. Acting for his brother, Y 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 and
full payment was made.
b.
Void, since X should have authorized agent Y in writing to sell the land.
c.
Valid, since Y was truly his brother Xs agent and entrusted with the title
needed to effect the sale.
d.
Valid, since the buyer could file an action to compel X to execute a deed of
sale.
Darla is agent of Kris, authorized to manage the latters business while she was
abroad. Darla won a trip to Macau so she (Darla) asked Kim to manage the
business during her trip. What would be the effect of Darlas act?
a.
all acts of Kim are void
b.
Darla cannot validly appoint Kim to be a sub-agent
c.
Darla may ask Kim to a be substitute agent
d.
Darla is liable for damages
In which of the following instances will the agent not incur personal liability?
a.
When the agent purports to act for an incapacitated principal and the third
party was aware of the incapacity at the time of the making of the contract
b.
When the agent binds himself
c.
When the agent prevents performance on the part of the principal
d.
when the agent commits illegal acts
Jake is a commission agent authorized to sell on credit the goods of Jasper.
Thereafter, Jake was able to sell the goods but only on credit. Jake informed Jasper
of the transaction. Is the sale on credit valid?
a.
Yes, as long as the principal is informed.
b.
Yes, Jake has the authority to do so.
c.
No, because there was no statement of the names of the buyers.
d.
No, because Jasper was merely informed but he did not expressly consented
thereto.
Jelly and Jay entered into a contract of agency where Jay is granted the authority
to sell the car of Jelly and that the commission of the sale shall be used to pay
Jays tuition fee. However, before the car is sold, Jelly died. Is the agency
extinguished?
a.
Yes, death of the principal extinguishes the agency
b.
No, the agency is not extinguished but the car cannot be sold
c.
No, because the agency is one coupled with interest
d.
No, the death of the agent but not of the principal extinguishes the agency
Which of the following does not reflect a correct legal principle?
a.
A, B and C are co-owners of a three hectare orchard. If A decides to sell his
share to B, C has a right of redemption.
b.
A and B are adjoining owners of rural land. Each land has an area of half
hectare. If B sells his land to D who does not own any rural land, C has a
right of redemption.
c.
If the right to repurchase is not exercised within the period agreed upon, a
judicial order is necessary to consolidate ownership.
d.
A contract of sale is not a mode of acquiring ownership.
When the agent is possessed of a Special Power of Attorney authorizing him to
mortgage the properties of the principal, and he obtains a personal loan from the
bank and executes the Real Estate Mortgage over the properties of his principal
but with himself (the agent) as the mortgagor, then
a.
the real estate mortgage is void.
b.
the real estate mortgage is unenforceable
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c.
d.

15.

16.

17.

18.

19.

20.

21.

the real estate mortgage is valid

the real estate mortgage is voidable

Since an agent assumes no personal liability on the contract he enters into in the
name of the principal, if the agent indeed is a minor, then the agency entered into
is
a.
valid and cannot be annulled
b.
valid until annulled
c.
void
d.
unenforceable, unless ratified
The societys imperative need to constitute the institution of agency is based on
the principle that
a.
No one finds himself bound in a contractual relationship to which he never
consented.
b.
No one may contract in the name of another without being authorized by
the latter or unless he has by law a right to represent him.
c.
A person can only validly sell or dispose of that which he owns.
d.
Qui facit per alim facit per se. He who acts through another acts himself.
In an agency relationship relating to the principals business, the power of the
agent to novate obligations pertaining to the business of the principal
a.
is always an act of strict dominion
b.
is always an act of administration
c.
is an act of strict dominion when it pertains to obligations incurred prior to
the constitution of the agency.
d.
is an act of administration when it pertains to obligations incurred prior to
the constitution of the agency.
The termination of the agency through revocation by the principal
a.
is dependent upon the terms of revocation provided under the contractual
arrangement
b.
is equivalent to rescission in the Law on Contracts, and requires as its basis
the existence of substantial breach
c.
must be made in exactly the same manner by which it was first constituted
d.
is at the will of the principal made known to the agent, even if such act of
revocation is contrary to the terms of the agency instrument.
Which of the following is not a form of an equitable mortgage?
a.
the consideration has been proven to be unusually inadequate
b.
the supposed vendor has remained in the possession of the property even
after the execution of the instrument
c.
the alleged seller has continued to pay the estate taxes on the property
d.
the alleged seller has planted crops and other agricultural products on the
property under an agricultural leasing contract between them
Mr. S sold a banana plantation to Mr. B for P3M although its market value is P20M.
It was agreed that Mr. S shall remain in possession as lessee of the land and shall
be responsible for the real estate taxes.
a.
the contract gives rise to an action for rescission
b.
the contract gives rise to an action for annulment.
c.
the contract is a sale
d.
the contract is presumed to be an equitable mortgage
The following are the causes for the extinguishment of a contract of agency.
Which one is not?
a.
by the dissolution of the firm or corporation which entrusted or accepted the
agency
b.
by the death, civil interdiction, insanity or insolvency of the principal only
c.
by the withdrawal of the agent
d.
by the accomplishment of the object or purpose of the agency
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22.

23.

24.

25.

26.

27.

28.

29.

30.

When an agent has been appointed under a Power of Attorney to administer a

designated business as its General Manager, then the agent has power
a.
to make all payments relating to the business
b.
to make payments on the long term loan taken out for the business many
years ago by the principal
c.
only to enter into contracts and transactions that go into the day to day
affairs of the business enterprise
d.
covering both acts of administration and acts of ownership as long as they
are related to or necessary to run the business
If the agent had general powers the revocation of the agency by the principal
would bind third parties dealing with the agent when
a.
there has been specific notice thereof to the third party being dealt with by
the agent
b.
there has been notice thereof in the newspaper of general circulation
c.
there has been formal notice thereof given to the agent
d.
there has been a surrender of the written instrument covering the agency
Mr. S sold his land to Mr. B with a right to repurchase within ten years from the
date of sale. Despite the lapse of the period of redemption, no such redemption
was made.
a.
Ownership of the land was consolidated on Mr. B by virtue of the failure to
redeem by Mr. S.
b.
Ownership of the land will be consolidated only upon registration of the sale
with the registry of deeds.
c.
Ownership of the land will be consolidated only upon judicial order
d.
Ownership will be consolidated only with the consent of Mr. S.
In a contract of agency, a Special Power to Sell excludes the power to:
a.
Lease
b.
Mortgage
c.
Donate
d.
Novate
A contract of sale with a right to repurchase is deemed an equitable mortgage in
any of the following situations, except:
a.
When the price is unusually inadequate
b.
When the buyer retains for himself part of the purchase price
c.
When the vendor binds himself to pay the taxes on the thing sold
d.
When the buyer is in possession as lessee
In case of doubt, contract purporting to be a sale with right to repurchase shall be
construed as:
a.
Donation
b.
Barter
c.
Equitable Mortgage
d.
Compensation
Between persons who are absent, the acceptance of agency can be implied from
the silence of the agent, provided:
a.
the principal transmits his power of attorney to the agent with objections
b.
the agent was informed through letters or telegram and he did not reply
c.
the agent was allowed to question the power of attorney
d.
the agent was given the right to object
When an agent acts within the scope of his authority but enters into the contract
in his own name
a.
the agent has violated his duty of loyalty
b.
the agent has violated the duty of obedience
c.
the agent has violated his duty of diligence
d.
the agent has violated his duty to account
When an agent acts in the name of the principal without or in excess of authority,
then:
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31.

32.

33.

34.

35.

36.

37.

38.

a.
the contract is void as to the principal and the third party dealt with by the
agent
b.
the contract is void as to the principal
c.
the contract is unenforceable as to the principal
d.
the contract is valid, until annulled
What is the effect of a commission agent selling on credit without the consent of
the principal?
a.
the power to sell includes the power to sell on credit and hence there is no
effect
b.
the principal may demand from the agent the payment in cash
c.
the agent must render an accounting to the principal of the interest charged
on the sale on credit
d.
the sale is void ab initio

The principal is not liable for the expenses incurred by the agent in the any of the
following cases, except:
a.
if the agent acted in contravention of the principals instructions
b.
when the expenses are due to the fault of the principal
c.
when the agent incurred them with knowledge that an unfavourable result
would ensue, if the principal is not aware thereof
d.
when it was stipulated that the expenses would be borne by the agent
If two or more persons have appointed an agent for a common transaction or
undertaking, their liability to the agent shall be:
a.
Solidary
b.
Joint
c.
Separate
d.
No Liabillity
A sale of a piece of land through an agent and the authority of the latter was made
orally, the sale is:
a.
Valid
b.
Voidable
c.
Valid until annulled
d.
Answer not given
Special power of attorney is necessary in the following cases:
a.
acts of strict dominion or ownership
b.
gratuitous contract
c.
contracts where personal trust or confidence is of the essence of the
agreement
d.
all of the above
A contract of voluntary deposit may be entered into:
a.
Orally or in writing
b.
In writing only
c.
In writing and by delivery
d.
In writing or by delivery
In commodatum, in case of fortuitous event, the bailee is still liable for the loss of
the thing if:
a.
he lends the thing loaned to a non-household member
b.
stipulated
c.
the thing loaned has been previously appraised
d.
if he used the thing and caused deterioration
An Undertaking for the use of Safety Deposit Box which holds free and blameless
a hotel for loss of its content is:
a.
valid if posted in the hotel room
b.
valid if signed by the hotel guest
c.
null and void if not posted and/or signed
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39.

40.

41.

42.

43.

44.

45.

46.

d.
null and void at all time
Fred delivered to Dennis a laptop computer and told him that he could use it. Fred
and Dennis entered into a contract of:
a.
mutuum
b.
deposit
c.
precarium
d.
commodatum
The bailee has the right to be reimbursed in full for advances he made for
extraordinary expenses of preservation of the subject matter in commodatum:
a.
he gave notice to the bailor before he incurred the expenses
b.
if the extraordinary expense arose out of the actual use of the thing
c.
if the bailee was negligent in the use of the thing borrowed
d.
even if the cause of the expense was fault of a third person

The borrower in a contract of loan or mutuum must pay interest to the lender
a.
if there is an agreement in writing to that effect
b.
as a matter of course
c.
if the amount borrowed is very large
d.
if the lender so demands at the maturity date
Fixed, savings and current deposits of money in banks and similar instruments
shall be governed by the provisions concerning:
a.
simple loan
b.
necessary deposit
c.
ordinary deposit
d.
irregular deposit
Frodo purchased from Harry a ring worth P120,000 payable in 12 equal monthly
instalments. After the first instalment, Frodo defaulted in the payment of the
balance. Harry sued Frodo to collect the loan. The court awarded Harry P110,000
plus P6,600 as damages. Frodo did not immediately pay the award after the
judgment became final and executory. Is Frodo liable to pay interest on the entire
award?
a.
No, because there was no written agreement on the payment of interest
b.
No, because the judgment did not order compounding of interest
c.
Yes, at the legal rate of six percent
d.
Yes, at the legal rate of twelve percent
Friend borrowed from Owner a car. Friend told Owner that he would just go to
Greenbelt to attend a dinner meeting. While Friend was driving along Makati
Avenue, a palm tree fell and severely damaged the car. Friend skipped the
meeting and returned the car to Owner. Owner brought the car to a shop which
estimated the repair cost at P20,000. Owner asked Friend to equally share the
cost of the repair. Friend refused to pay. Can Friend refuse to pay?
a.
No, because the repair is an ordinary expense
b.
No, because Friend was using the car when it was damaged
c.
Yes, because it was a fortuitous event
d.
Yes, because the use of the car is gratuitous
An accepted promise to deliver something by way of commodatum or mutuum is
what kind of contract?
a.
consensual contract
b.
nominate contract
c.
real contract
d.
perfected contract of commodatum
A contract of mutuum has the following characteristics:
a.
it is unilateral, principal, consensual and nominate
b.
it is bilateral, principal, consensual and nominate
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47.

48.

49.

c.
it is unilateral, principal, real and nominate
d.
it is bilateral, principal, real and nominate
When can the bailee retain the thing loaned in commodatum?
a.
when the bailor owes the bailee money
b.
when the bailor has in his possession things belonging to the bailee
c.
when the bailee has suffered damages arising from hidden defects of the
object
d.
when the bailee has paid extraordinary expenses for use and preservation of
the thing
When may consumable goods be the subject of commodatum?
a.
if the purpose of the contract is the consumption of the object
b.
when the ownership of the goods will transferred as well
c.
when the goods are merely for exhibition
d.
when the fruits of such goods are included in the contract
In a commodatum, when there are two or more bailees to whom a thing is loaned
in the same contract they are liable:
a.
jointly
c.
proportionately
b.
jointly and severally
d.
individually

50.

In commodatum, a bailee can use the fruits of the thing:

a.
only if stipulated
b.
if the nature of the thing allows the use of its fruits as well
c.
if the bailor was silent on this matter when delivery of the thing was made
d.
as long as the bailee does not let the members of his household use it

II.

DEFINE OR GIVE THE MEANING THE FOLLOWING: (2 POINTS EACH)

1.
Subagent
2.
Equitable mortgage
3.
Agency coupled with interest
4.
Precarium
5.
Pre-emption

III.

ESSAY
1.
Give at least five (5) instances of legal redemption. (5)
2.
A is an agent of P authorized to manage Ps house while the latter is away
for his two-month vacation. During this time, a fire broke out in Ps house.
Among the properties damaged by fire, A found out that one of the
properties damaged by the fire need to be sold immediately, otherwise it
will lose its total value. A tried to contact P but he failed. In view of saving
at least an amount than losing the whole value of the property which is of
no use anymore, A decided to sell the damaged property. Is the sale valid
despite the fact that A is not authorized to sell but only to manage a
property? (5)
3.
X owns a parcel of land in the central business district of Makati, which he
plans to develop into a school. The adjacent lot which is merely 40 square
meter is originally owned by Y. However, Y decided to sell it to Z. X having
knowledge of the proposed sale by Y communicated his desire to exercise
his right of pre-emption asserting that the 40 square meter lot will be much
needed for the school he is about to construct. Can X exercise his right of
legal pre-emption over the subject land? (5)
4.
May an agent appoint a substitute? If so, in what cases is the agent liable
for the acts of the substitute? (5)
5.
Arnold sold a large parcel of land in Cebu to Mel for P100M payable in
annual installments over a period of 10 years, but title will remain with
Arnold until the purchase price is fully paid. To enable Mel to pay the price,
Arnold gave him a power of attorney authorizing him to subdivided the land,
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6.

7.

sell the individual lots, and deliver the proceeds to Arnold, to be applied to
the purchase price. Five years later, Arnold revoked the power of attorney
and took over the sale of the subdivision lots himself. Is the revocation valid
or not? Why? (5)
Mr. A was a guest in Mr. Bs hotel. Mr. C, a drunkard, entered the hotel and
destroyed Mr. As personal belongings despite the fact that Mr. A had given
proper notice and had followed all precautions. Will Mr. B be liable? (5)
The bell boy of a hotel, at the point of a gun, asked the watchman of a
hotels safe to open it for him. The bell boy then run away taking with him
some pieces of jewelry deposited in said safe by the guests. Will the hotelkeeper be liable? (5)

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