SMARTS

OBLIGATONS

1. A source of obligation where negligence resulted to crime:

a) Culpa contractual
b) Quasi-contract
c) Culpa delictual
d) Culpa aquiliana

2. Which is not a source of obligation?

a) Law
b) Culpa aquiliana
c) Culpa contractual
d) Quasi-contract

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 true

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

4. Which of the following is considered as quasi-contract?

a) Solutio indebiti
b) When the third person, without the knowledge of the debtor, pays the debt
c) Reimbursement due the person who saved property during fire or storm without the
knowledge of the owner.
d) All of the above

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.

6. The wrongful act or tort which causes loss or harm to another is called:
a) Damages
 b) Damage
c) Injury

d) Liability

7. Which of the following is not a generic obligation?

a) Obligation to pay ₱5,000
b) Obligation to deliver Toyota INNOVA 2005
c) Obligation to deliver 50 cavans of rice
d) Obligation to give a delimited generic object

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 true

b) Both statements are false
c) Statement No. 1 is true while statement No. 2 is false
d) Statement No. 1 is false while statement No. 2 is true

9. If the obligation is payable in foreign currency

a) The obligation is void
b) The obligation is valid, but the stipulation is void
c) The creditor can compel the debtor to pay in foreign currency as per agreement
d) The stipulation and the obligation are void.

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.

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 true

b) Both statements are false
c) Statement No. 1 is true while statement No. 2 is false
d) Statement No. 1 is false while statement No. 2 is true

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 true

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

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 false
d) No. 1 is false; No. 2 is true

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

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 like
b) Payable when you like
c) Payable on or before December 25, 2012
d) Payable on December 24, 2012

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

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

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) ₱1,000
b) ₱6,000
c) ₱2,000
d) ₱3,000
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 extinguished
b) Only ₱2,000 of the obligation is extinguished
c) Only ₱3,000 of the obligation is extinguished
d) Accessory obligation is extinguished.

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 ₱90,000

b) A is obliged to pay X ₱30,000
c) A is obliged to pay X ₱60,000
d) A is obliged to pay X ₱10,000

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 true

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

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

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 true

b) Both statements are false
c) Statement No. 1 is false while statement No. 2 is true
d) Statement No. 1 is true while statement No. 2 is false

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 law
b) C can compel D to deliver 100 cavans of rice plus damages
c) 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.

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 C
c) D may cancel the contract and ask for damages
d) Contract is voidable

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.

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 valid
c) Both obligations are valid and are properly labeled as to their classification as obligations
d) Both statements are invalid and improperly labeled as to their classification as obligations

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.

28. The distinction between period and condition is

a) Period may or may not happen
b) Condition will always happen
 c) Period may refer to a past event unknown to the parties
d) Period is certain to happen unlike condition

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 abscond
d) When the debtor violates any undertaking in considerations of which the creditor agreed to
the period.

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.

31. The creditor is entitled to recover damges and interest in addition to the penalty stipulated:
a) When the parties so agreed
b) When the debtor refuses to pay the penalty
c) When the debtor is guilty of fraud in the fulfillment of the obligation
d) All of the above

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 period
b) A suspensive condition
c) A resolutory condition
d) A suspensive period

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 extinguished
b) D’s obligation is to pay the value of object No. 1 plus damages
c) C’s right is to demand the value of any of the object plus damages
d) Pay ₱5,000 plus damages
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. 3
d) D’s obligation is totally extinguished

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 extinguished
b) Proceed against any of the debtors for the value and damages
c) Proceed against A1 only, because he is the one is possession at the time it was lost
d) Proceed against A2 or A3 but only ₱4,000 each

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.

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 all
d) Valid and enforceable

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 false

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

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-2
b) B-3 could collect ₱90,000 from A-2 and give ₱30,000, each to B-1 and B-2
c) B-3 could collect ₱45,000 from A-2 and give ₱13,000, each to B-1 and B-2
d) B-3 could collect ₱15,000 from A-2 and ₱13,000 from A-1

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 true

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

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 true

b) Both statement are false
c) Statement No.1 is true while statement No. 2 is false
d) Statement No. 1 is false while statement No. 2 is true

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 true

b) Both are false
c) Only No. 1 is true; No.2 is false
d) Only No.1 is false; No.2 is true

43. Obligaiton may be modified by:

a) Changing their object or principal conditions
b) Substituting the person of the debtor.
c) Subrogating a third person in the rights of the creditor
d) All of the above

44. Which of the following is not a special mode of payment?

a) Dacion en pago
 b) Payment by cession
c) Tender of payment
d) Consignation alone without the need of tender payment in cases provided for by the law

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

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 pago
b) Set off
c) Payment by cession
d) Tender of payment with consignation

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 A
b) Y can collect from X ₱40,000
c) Y can still collect from A or B the
d) A can collect ₱40,000 from 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 payment
b) Payment in due course when the obligation is due and demandable
c) Payment using negotiable instrument
d) Payment using legal tender, except if payable in foreign currency

49. Proof of pecuniary loss is necessary for the award of:

a) Liquidated damages
b) Exemplary damages
c) Actual damages
d) Temperate damages

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

a) Compromise
b) Illegality
c) Impossibility
d) Performance
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 contract
b. Obligatoriness of contract
c. Mutuality of contract
d. Freedom of contract
2. This principle means that contracts take effect only upon the contracting parties, their assigns or
succesors-in-interest
a. Relativity of contract
b. Obligatoriness of contract
c. Mutuality of contract
d. Freedom of contract
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 to
a. Rescind the contract with B plus damages
b. Recover the painting from X but no damages
c. Recover damages from B
d. Annul the contract plus damages
4. The following contracts should obseve the Statute of Frauds, except:
a. Guaranty
b. Lease of personal property longer than one year
c. Representation as to the credit of a third person
d. Lease of real property longer than one year
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 fraud
b. Within four years from February 10, 2015
c. Within four years from the time A entered into the contract
d. On February 10, 2015
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 agent
b. Business advertisement of things for sale
c. Advertisement for bidders
d. All of the above
7. An agreement in restraint of trade
a. Perfectly valid
b. Voidable
c. Unenforceable
d. Void
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
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.
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 insane
b. There is already a meeting of minds, the contract is perfected
c. The contract is not binding because there is no meeting of minds
d. Contract is unenforeable
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 exist
b. The contract is valid so long as it in writing
c. The contract is valid because cause is not essential to a contract
d. The contract is void because the cause is not stated
12. The storage of “conception” of a contract is:
a. When the contract is fully executed
b. When the parties come to an agreement
c. When negotiations are in progress
d. When there is a meeting of the parties’ minds
13. Which of the following contracts is rescissible?
a. Those where one of the parties is incapable of giving consent to a contract
b. Those where both parties are incapable of giving consent to a contract
c. 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
14. Contracts that cannot be sued upon unless ratified:
a. Voidable
b. Unenforceable
c. Rescissible
d. Void
15. Contract that is made for a valuable consideration is:
a. Onerous
b. Gratuitous
 c. Onerous and gratuitous
d. Aleatory
16. Who is liable for the loss of subject matter by fortuitous event?
a. Creditor
b. Debtor
c. Both creditor and debtor
d. None of them
17. These persons are bound by contracts:
a. Contracting parties
b. Assigns or assign
c. Heirs
d. All of them
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 annulment
b. Parties may go to court for interpretation
c. Parties may enforce their right because it is enforceable
d. Remedy is reformation
19. Which of the following can be considered as feature of the void contract?
a. Subject to ratification
b. They exist
c. Action or defense for nullity is subject to prescription
d. It is imprescriptible as a defense
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.
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 true
b. Both are false
c. 1 is true; 2 is false
d. 1 is false; 2 is true
22. Because of the intimidation employed by X, a third person, S sold his car to B. This contract is:
a. Void
b. Voidable
 c. Unenforceable
d. Rescissible
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. Voidable
c. Rescissible
d. Annullable
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 called
a. Civil obligation
b. Natural obligation
c. Pure obligation
d. Simple obligation
25. Contract which has no effect at all and cannot be ratified is a/an
a. Unenforceable
b. Void contract
c. Voidable
d. All of them
26. Statute of fraud is applicable to
a. Partially executed
b. Oral contract of loan when the amount involved is less than P500
c. Contract not to be performed within a year from the making thereof
d. All of the above
27. An incidental element of a contract
a. Implied warranty
b. Payment of interest in a loan
c. Delivery of the object in contract of pledge
d. All of the above
28. In three of the following defective contracts, ratification cleanses the defects. Which is the
exception?
a. Both parties are incapable of giving consent
b. Sale of immovable property or interest orally entered into
c. Sale of piece of land thru an agent the authority is oral
d. Contracts entered into by a person who has been given no authority
29. Valid until annulled unless there has been ratified
a. Rescissible contract
b. Inexistence contract
c. Voidable contract
d. None of the above
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 contract
 b. S may ask for rescission of the contract
c. S may ask C to declare the contract avoided
d. C may ask for the annulment of the contract
31. In the preceding number, what can C do?
a. C may ask for rescission of the contract
b. C may ask for the reformation
c. C may ask S to declare the contract voided
d. C may ask for the annulment of the contract
32. Which of the following contract is voidable
a. Those where both parties are incapable of giving consent to a contract
b. 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
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 price
b. The contract falls under the statute of frauds, therefore unenforceable
c. No statute of frauds because the price is less than P500
d. No obkect is movable, oral contract is enforceable
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 contract
b. Void or inexistence contract
c. Rescissible contract
d. Unenforceable contract
35. Must be in writing to be enforceable
a. Lease of land for 12 months
b. Lease of car for 18 months
c. Both a and b
d. None of a and b
36. A contract entered into in violation of right of first refusal is:
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
37. Type of defective contract that creates no rights and impose no obligation, but are susceptible of
ratification.
 a. Voidable contracts
b. Unenforceable contracts
c. Rescissible contracts
d. Void contracts
38. D forced C to lend him P10,000. The promissory note is in writing.
a. The contract is rescissible because the contract is fraudulent
b. The contract is void
c. C cannot demand payment from D because the contract is unenforceable
d. Contract remains to be valid
39. Which of the following contract is not valid?
a. Mutual promise to marry entered into orally
b. Sale of immovable property orally entered into
c. One of the parties in a contract is incapable of giving consent
d. Sale of immovable property thru an agent
40. Three of the following are void contracts. Which is the exception?
a. Contracts where the cause is immoral
b. 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
41. Contract with a false cause is
a. Voidable
b. Void
c. Unenforceable
d. All of the above
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. Politicitacion
b. Stipulation porautrui
c. Donation propter nuptias
d. Counter-offer
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. Valid
b. Rescissible
c. Voidable
d. Unenforceable
44. Which of the following contract is enforceable even if not reduced in writing
a. Lease of car for 2 years
b. Representation as to the credit of a third person
c. Lease of immovable for a period longer than one year
d. Agreement for the sale of immovable property
 45. Simulation of contract – absolute or relative. Relative when:
a. Parties not bound at all
b. The contract is void
c. The parties conceal their true agreement
d. None of the above
46. Essential requisites of a contract:
a. Consent
b. Cause
c. Subject
d. All of them
47. The offeror need not know the acceptance by the offeree is the theory of:
a. Cognition
b. Manifestation
c. Expidition
d. B or C
48. Which of the following instruments is not subject to reformation?
a. Simple donations inter vivos wherein no condition imposed
b. Wills
c. When the real agreement is void
d. All of the above
49. S1. Place and modes of payment are example of natural elements
S2. Agency, partnership and sale are example of preparatory and consensual contracts
a. Both are true
b. Both are false
c. 1 is true; 2 is false
d. 1 is false; 2 is true
50. All are void contracts except:
a. Those whose object is outside the commerce of men
b. Those which are relatively simulated of fictitious
c. Those with unlawful consideration
d. Those which contemplate an impossible service

PARTNERSHIP
1. 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 1807
d. Whenever other circumstances render it just and reasonable
e. All of the above
2. Sometimes termed dormant partner
a. Limited partner c. Secret partner
b. Capitalist partner d. Both silent & secret

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 void
c. Will not give the partnership a legal personality
d. Will give the parnership a de facto existence

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 only
b. X can recover P60,000 from either A,B or C
c. X can recover P15,000 each from A,B,C and D
d. X can recover P15,000 each from A,B and C but D is exempt because he is an industrial

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 only
d. A and B are liable for P15,000 each

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 nothing
b. A P3,000, B P2,000, C P5,000
c. A P3,500, B P2,500, C P4,000
d. A P3,500, B P3,500, C P3,000

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 P50,000
d. Each partner share in the balance

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

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 partner c. General partner
b. Limited partner d. Silent partner

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

11. A partnership is dissolved on the death of a

a. General partner d. Limited partner
b. Industrial partner e. a,b or c
c. General-Limited partner

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 partner d. Industrial partner
b. General partner e. None of the above
c. Capitalist-industrial partner

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

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

15. Which of the following is not a common fund of a Universal Partnership Property?
a. All the present property of each partner contributed
b. All the profits that may be derived from such properties
c. If stipulated, the properties acquired by a partner by inheritance, legacy or donation
d. None of the above

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

a. Death of general partner
b. Retirement of general partner
c. Insanity of a limited partner
d. None of the above

17. A partnership is automatically dissolved, except

a. By the death of any partner
b. By the insolvency of any partner or of the partnership
c. By the civil interdiction of any partner
d. By the insanity of any partner
e. All of the above

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 damages
b. May be liable as a debtor
c. 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 trustee
 e. Both A & C

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 partner
b. Nominal partner
c. Silent partner
d. Dormant partner
e. None of the above

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 creditors
b. Dispose of the goodwill of the business
c. Confess a judgement
d. Compromise a partnership claim or liability
e. All of the above

21. Which of the following is not a property right of a partner?

a. His rights in specific partnerships property
b. His interest in the partnership
c. His right to participate in the management
d. To demand true and full information of all things affecting the partnership

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 profits
c. The sharing of gross returns of a business
d. Where the parties are established as co-owners of a property

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

24. A person who takes place of a limited partner who has died is called
a. Heir
b. Successor in interest
c. Assignor
d. Substituted limited partner
25. If a partner is insolvent, the first order of preference in the distribution of his assets is
a. Partner’s contribution to the partnership
b. Partnership creditor
c. Separate creditor of the partner
d. Pro-rata between the separate creditors and partnership creditors

26. When the manner of management has not been agreed upon, who shall manage the affairs of the
partnership?
a. Capitalist partners
b. Industrial partners
c. Capitalist-industrial partners
d. All of the partners
e. None of the above

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 Y c. That of X
b. P2,000 d. Nothing

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

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 nothing
b. A P2,500, B P2,500, C P2,500, D P2,500
c. A P4,000, B P3,000, C P2,000, D P1,000
d. A P4,000, B P4,000, C P2,000, D nothing

30. A partner whose liability for the partnership debts is limited to his capital contribution is called:
a. General partner d. Secret partner
b. Limited partner e. None of the above
c. General-limited partner

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 property
b. Universal partnership of profits
c. Particular partnership
d. Partnership at will
e. None of the above

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 instrument
b. The partnership contact must be recorded with the SEC if limited partnership
c. If immovable properties is contributed it must appear in a public instrument
d. B and C
e. A and B

33. A partnership is dissolved:

a. In contravention of the partnership agreement by the express will of any partner at any
time
b. 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 partnership
c. When a specific thing which a partner had promised to contribute to the partnership perishes
before its delivery to the partnership
d. 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 same
e. All of the above

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

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 liability
b. X, Y and Z to pay P10,000 each
c. X or Y to pay P30,000 remaining liability
 d. X and Y to pay P15,000 each

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 partner d. Dormant partner
b. Limited partner e. None of the above
c. General Limited partner

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

a. Express will of any partner
b. Insolvency of any partner
c. Termination of the term
d. Expulsion of any partner

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 partner d. Dormant partner
b. Secret partner e. None of the above
c. Silent partner

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 partners
b. Compelled to dissolve or discontinue the operation of his business
c. Compelled to bring to the common funds of the partnership any profits accruing to him
from his transactions
d. Denied his share in the profits of the partnership

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 partnership c. Partnership by estoppel
b. Limited partnership d. None of the above

41. Bears the risk of things contributed to the partneship

a. Contributing partner
b. Limited partner
c. Partner contributing usufructuary rights
d. All of the above

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 personality
b. The parties may compel each other to observe the required form
 c. The parties may request the return of their capital contribution
d. The contract of partnership is void

43. Three of the following do not prove the existence of a valid partnership. Which is the exception?
a. The sharing of gross receipts
b. There is an intention of dividing the profits among themselves
c. Receipts by a person of the share of the profits for payment of a partnership debt by installments
d. When two or more persons are co-owners and they share correspondingly in the profits made
from the sale or use of their property

44. Which of the following is valid?

a. Oral contract of partnership where a partner contributes real property with a value less
than P3,000
b. Oral contact of partnership where the capital is P3,000 or more
c. Written contact of universal partnership of present properties between husband and
wife
d. None of them

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

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 property
b. Universal partnership of profits
c. Particular partnership
d. Partnership at will
e. None of the above

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 partner d. Dormant partner
b. Secret partner e. None of the above
c. Silent partner

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

a. He takes part in the control of the business
b. He contributes his services to the capital of the firm
c. His surname appears in the partnership name
d. The word “limited” is not added to the name of the partnership
 e. All of the above

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 liable
b. The partnership is the only party liable
c. The partners are jointly and severally liable
d. The partnership and the partners are liable

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 partner d. Dormant partner
b. Ostensible partner e. None of the above
c. Secret partner

CORPORATION

CORPORATIONS

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 required
b. Amendments or repeal of by-laws or adoption of new by-laws
c. Filing of vacancies in the Board
d. Distribution of cash dividends
e. All of the above
2. A corporation
a. 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 corporation
c. 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 subscriber
e. All of the above
3. One who has agreed to take stock from the corporation on the original issue of such stock is
called
a. Incorporators
b. Members
c. Promoters
d. Subscribers
e. None of the above
4. The business of this corporation can be managed by the stockholders
a. Close
 b. Open
c. Eleemosynary
d. None of the above
e. All of the above
5. Two or more kinds of dividends paid by the corporation is called
a. Cash stock
b. Composite
c. Property cash
d. Scrip
6. The following are some of the requisites of a de facto corporation. Choose the exception.
a. Valid law under which it is incorporated
b. Attempt to incorporate
c. Assumption of corporate power
d. None of the above
7. Which of the following is not required to be included in the Articles of Incorporation?
a. Duties of the president
b. Name of the corporation
c. Period of existence
d. Location of the principal office
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 called
a. Mortgage bond
b. Collateral trust bond
c. Equipment bond
d. Debenture bond
e. None of the above
9. A form of combination where all the constituent corporations are dissolved and out of them a
new one is formed.
a. Consolidation
b. Merger
c. Joint venture
d. All of them
10. Which of the following is not an express power of the corporation?
a. To adopt by-laws and amend or repeal the same
b. To enter into merger and consolidation with other corporation
c. 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
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 true
b. Both are false
c. No. 1 is true; N0. 2 is false
d. No. 1 is false; No. 2 is true
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 is
a. Certificate of stock
b. Share of stock
c. Dividend
d. Legal capital
e. None of the above
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 stock
a. Certificate of stock
b. Share of stock
c. Certificate of incorporation
d. Dividend
e. None of the above
14. The owners of shares in stock corporation are called
a. Incorporators
b. Promoters
c. Members
d. Stockholders
e. None of the above
15. Shares of stock may be issued for
a. Actual cash
b. Tangible or intangible properties
c. Labor performed for or services actually rendered to the corporation
d. Previously incurred indebtedness by the corporation
e. All of the above
16. A non-stock corporation
a. May not engage in business
b. One where the capital stock are divided into shares
c. No part of the income must be distributed as dividends
d. May have 15 board of trustees whose shall have a term of office of 3 years
e. All of the above
17. The holders of non-voting shares shall be entitled to vote on the following matters, except;
a. Amendments of the Articles of Incorporation
b. Sales, lease mortgage, or other disposition of all or substantially all of the corporate
properties
c. Incurring, creating, or increasing bonded indebtedness
d. Increase or decrease of capital stock
e. None of the above
18. The quorum required by law to elect directors: presence of owners of
 a. Majority of the outstanding capital-voting
b. Majority of the outstanding capital-voting and non-voting
c. 2/3 of the outstanding capital voting
d. 2/3 of the outstanding capital-voting and non-voting
19. Dividends shall be declared and paid out of
a. Capital stock
b. Paid in capital
c. Profits earned in selling no par value shares
d. Unrestricted retained earnings
e. None of the above
20. Private corporation which have accepted from the state grant of a franchise or contract
involving the performance of public duties are called
a. Quasi-public corporation
b. Quasi corporation
c. Eleemosynary corporation
d. Ecclesiastical corporation
e. None of the above
21. If the principal office of CPAR corporation is located in Manila, stockholders’ meeting can be
held in
a. Isabel Building
b. Las Pinas
c. Muntinlupa
d. All of the above
22. All of the close corporation’s issued shares shall be held of record by not more than
a. 10 persons
b. 15 persons
c. 20 persons
d. None of the above
23. A bond which is payable to a particular individual whose name is entered on the books of the
corporation as registered owner is called
a. Registered bond
b. Coupon bond
c. Convertible bond
d. Guaranteed bond
e. None of the above
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 called
a. Quasi corporation
b. Wasting assets corporation
c. Open corporation
d. Eleemosynary corporation
e. None of the above
25. Persons who compose the corporation whether as stockholders or members are called
a. Incorporators
 b. Promoters
c. Corporators
d. Subscribers
e. None of the above
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 used
a. The defeat of public convenience
b. To protect fraud
c. To defend crime
d. To evade or violate a contract or law
e. All of the above
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 business
b. 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
28. The right given to the stockholders to dissent and demand payment of the fair value of their
shares is called
a. Right of proxy
b. Appraisal right
c. Pre-emptive right
d. Stock right
e. None of the above
29. The following are the attributes of a corporation, except:
a. It is an artificial being
b. It is created by operation of law
c. It has rights of succession
d. It has the power, attributes and properties expressly authorized by law or incident to its
existence
e. None of the above
30. Founder’s share
a. Are given to the organizers or founders of the corporation
b. Maybe given special rights and privileges by the owners of other shares
c. 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 above
e. None of the above
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 Philippines
b. He must be a director of the corporation
c. He must be a stockholder of the corporation
d. He must be a treasurer of any other corporation
 e. None of the above
32. The following are expressed powers of a corporation, except;
a. To sue and be sued
b. The power of succession
c. To adopt and use a corporate seal
d. To amend its Article of Incorporation
e. None of the above
33. Which of the following statements is false?
a. The secretary must be a citizen and resident of the Philippines
b. Delinquent stock are necessarily unpaid
c. 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
34. Stockholders of the close corporation
a. Given right of pre-emption in the issuance of all kinds of shares including treasury shares
b. May enter into a written agreement making them partners among themselves
c. 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
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 value
Statement 2: Treasury shares are part of the outstanding capital stock of a corporation
a. True; True
b. False; False
c. True; False
d. False; True
36. Incorporators of a corporation
a. Not less the 5 but not more than 15
b. 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
37. The power to examine the affairs of a corporation in order to supervise, direct, and control its
management is called
a. Visitorial power of the state
b. Visitorial power of the stockholders
c. Visitorial power of the directors
d. Visitorial power of employees
e. None of the above
38. Which of the following cannot be lawfully exercised by a non-stock corporation?
 a. Pay dividend
b. Elect trustees
c. Amend the Articles of Incorporation
d. Adopt by-laws
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 called
a. Mortgage bond
b. Collateral trust bond
c. Debenture bond
d. Equipment bond
e. None of the above
40. Voluntary dissolution of a corporation is caused by
a. Voluntary dissolution where no creditors are affected
b. Voluntary dissolution where creditors are affected
c. Amendments of the articles of incorporation resulting in the shortening of corporate term
d. In case of a corporation sole be submitting to the SEC a verified declaration of dissolution
e. All of the above
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
declared
a. Participating preferred stock
b. Cumulative preferred stock
c. Founder’s stock
d. Watered stock
42. Stocks lawfully issued by the corporation for money, property, or services and subsequently
properly reacquired by it are
a. Watered stocks
b. Over issued stock
c. Bonus stock
d. None of the above
43. Treasury share
a. 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 stock
d. May again be disposed of for a reasonable price, even at less than par, by the Board of
Directors
e. All of the above
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 members
b. 2/3 of the outstanding capital stock or of the members
c. Majority of the quorum of the board and 2/3 of the outstanding capital stock or of the
members
d. Majority of the outstanding capital stock or of the members
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.
46. One of the following does not require stockholders’ approval
a. Merger or consolidation
b. Change of corporate name
c. Investment of corporate funds for a purpose outside of the main purpose of the corporation
d. Declaration of cash dividend
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 condition
a. Promotion shares
b. Founders’ share
c. Redeemable shares
d. Escrow shares
48. Every decision of the directors or trustee shall be valid as a corporate act at which there is a
quorum by
a. Majority of the members of the board
b. Majority of the directors or trustees present
c. 2/3 vote of the members of the board
d. 2/3 vote of the directors or trustees present
49. Which of the following qualifications is necessary in order that one may be elected president of
a corporation
a. He must be a citizen and a resident of the Philippines
b. He must not be a stockholders or director of a competitor corporation
c. He must not be a president of any other corporation
d. He must be a director of the corporation
50. This share can be acquired by the corporation
a. Founder’s share
b. Redeemable shares
c. Par value shares
d. No-par value shares
e. None of the above