Questionnaire I.

MULTIPLE CHOICE QUESTIONS

1. The creditor has the right to the fruits of the thing from the time:

A) the thing is delivered.

B) the obligation to deliver the things arises.
C) the contract is perfected.
D) the fruits are delivered.

2. A debtor is liable for damages in case of delay if he is guilty of any of the following, except:

A) default (mora)
B) mistake
C) negligence (culpa)
D) breach through contravention of the tenor thereof

3. This term refers to a delay on the part of both the debtor and creditor in reciprocal obligations.

A) Mora accipiendi
B) Mora solvendi
C) Compensation morae
D) Solution indibiti

4. The following are the requisites of mora solvendi, except:

A) Obligation pertains to the debtor and is determinate, due, demandable, and liquidated.
B) Obligation was performed on its maturity date.
C) There is judicial or extrajudicial demand by the creditor.
D) Failure of the debtor to comply with such demand.

5. It is an intentional evasion of the faithful performance of the obligation.

A) Negligence
B) Fraud
C) Delay
D) Mistake

6. The following are the requisites of fortuitous event, except:

A) Cause is independent of the will of the debtor.

B) The event is unforeseeable/unavoidable.
C) Occurrence renders it absolutely impossible for the debtor to fulfill his obligation in a normal
manner; impossibility must be absolute not partial, otherwise not force majeure.
D) Debtor contributed to the aggravation of the injury to the creditor.

7. A debtor may still be held liable for loss or damages even if it was caused by a fortuitous event in any
of the following instances, except:

A) The debtor is guilty of dolo, malice or bad faith, has promised the same thing to two or more
persons who do not have the same interest.
B) The debtor contributed to the loss.
C) The thing to be delivered is generic.
D) The debtor is guilty of fraud, negligence or delay or if he contravened the tenor of the
obligation.

8. It is a juridical relation arising from lawful, voluntary and unilateral acts based on the principle that no
one should unjustly enrich himself at the expense of another.

A) Quasi-contract
B) Quasi-delict
C) Cotract
 D) Delict

9. The following are the elements of quasi-delict, except:

A) Act or omission
B) Fault/negligence
C) Damage/injury
D) Pre-existing contract

10. The following are the elements of an obligation, except:

A) Juridical/Legal Tie
B) Active subject
C) Passive subject
D) Consideration

11. It is a conduct that may consist of giving, doing, or not doing something.

A) Obligation
B) Juridical necessity
C) Prestation
D) Contract

12. Rudolf borrowed P1 million from Rodrigo and Fernando who acted as solidary creditors. When the
loan matured, Rodrigo wrote a letter to Rudolf, demanding payment of the loan directly to him. Before
Rudolf could comply, Fernando went to see him personally to collect and he paid him. Did Rudolf make a
valid payment?

A) No, since Rudolf should have split the payment between Rodrigo and Fernando.
B) No, since Rodrigo, the other solidary creditor, already made a prior demand for payment
from Rudolf.
C) Yes, since the payment covers the whole obligation.
D) Yes, since Fernando was a solidary creditor, payment to him extinguished the obligation.

13. Roy and Carlos both undertook a contract to deliver to Sam in Manila a boat docked in Subic. Before
they could deliver it, however, the boat sank in a storm. The contract provides that fortuitous event shall
not exempt Roy and Carlos from their obligation. Owing to the loss of the motor boat, such obligation is
deemed converted into one of indemnity for damages. Is the liability of Roy and Carlos joint or solidary?

A) Neither solidary nor joint since they cannot waive the defense of fortuitous event to which
they are entitled.
B) Solidary or joint upon the discretion of Sam.
C) Solidary since Roy and Carlos failed to perform their obligation to deliver the motor boat.
D) Joint since the conversion of their liability to one of indemnity for damages made it joint.

14. Dina bought a car from Jai and delivered a check in payment of the same. Has Dina paid the
obligation? Why?

A) No, not yet. The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been cashed,
or when through the fault of the creditor they have been impaired.
B) Yes, because a check is a valid legal tender of payment.
C) It depends. If the check is a manager’s check or cashier’s check it will produce the effect of
payment. If it’s an ordinary check, no payment.
D) Yes, because a check is as good as cash.

15. The following are the requisites of legal compensation, except:

A) That each of the obligors is bound principally and that he be the same time a principal
creditor of the other.
 B) That both debts consist in a sum of money, or if the things due are consumable, they be the
same kind, and also of the same quality if the latter has been stated.
C) That the two (2) debts are not yet due.
D) That they be liquidated and demandable.

16. Upon the proposal of a third person, a new debtor substituted the original debtor without the
latter’s consent. The creditor accepted the substitution. Later, however, the new debtor became
insolvent and defaulted in his obligation. What is the effect of the new debtor’s default upon the original
debtor?

A) The original debtor is freed of liability since novation took place and this relieved him of his
obligation.
B) The original debtor shall pay or perform the obligation with recourse to the new debtor.
C) The original debtor remains liable since he gave no consent to the substitution.
D) The original debtor shall pay or perform 50% of the obligation to avoid unjust enrichment on
his part.

17. X borrowed money from a bank, secured by a mortgage on the land of Y, his close friend. When the
loan matured, Y offered to pay the bank but it refused since Y was not the borrower. Is the bank’s action
correct?

A) Yes, since X, the true borrower, did not give his consent to Y’s offer to pay.
B) No, since anybody can discharge X’s obligation to his benefit.
C) No, since Y, the owner of the collateral, has an interest in the payment of the obligation.
D) Yes, since it was X who has an obligation to the bank.

18. It is a principle which holds that contracts must be binding to both parties and its validity and
effectivity can never be left to the will of one of the parties.

A) Obligatory force of contracts

B) Mutuality of contracts
C) Autonomy of contracts
D) Relativity of contracts

19. It refers to the rule that a contract is binding not only between parties but extends to the heirs,
successors in interest, and assignees of the parties, provided that the contract involved transmissible
rights by their nature, or by stipulation or by law.

A) Obligatory force of contracts

B) Mutuality of contracts
C) Autonomy of contracts
D) Relativity of contracts

20. It is rule which holds that the freedom of the parties to contract includes the freedom to stipulate,
provided the stipulations are not contrary to law, morals, good customs, public order or public policy.

A) Obligatory force of contracts

B) Mutuality of contracts
C) Autonomy of contracts
D) Relativity of contracts

21. Contracts take effect only between the parties or their assigns and heirs, except where the rights
and obligations arising from the contract are not transmissible by their nature, by stipulation, or by
provision of law. In the latter case, the assigns or the heirs are not bound by the contracts. This is known
as the principle of:

A) Relativity of contracts.
B) Freedom to stipulate.
C) Mutuality of contracts.
D) Obligatory force of contracts.
22. An offer becomes ineffective on any of the following grounds, except:

A) Death, civil interdiction, insanity/insolvency of either party before acceptance is conveyed.

B) Acceptance of the offer by the offeree.
C) Qualified/conditional acceptance of the offer, which becomes counteroffer.
D) Subject matter becomes illegal/impossible before acceptance is communicated.

23. Which of the following statements is correct?

A) Offers in interrelated contracts are perfected upon consent.

B) Offers in interrelated contracts require a single acceptance.
C) Business advertisements are definite offers that require specific acceptance.
D) Advertisements for Bidders are only invitations to make proposals and the advertiser is not
bound to accept, unless it appears otherwise.

24. If one of the parties to the contract is without juridical capacity, the contract is:

A) voidable
B) rescissible
C) void
D) unenforceable

25. When both parties to the contract are minors, the contract is:

A) voidable
B) rescissible
C) void
D) unenforceable

26. When the consent of one of the parties was vitiated, the contract is:

A) voidable
B) rescissible
C) void
D) unenforceable

27. Consent was given by one in representation of another but without authority. The contract is:

A) voidable
B) rescissible
C) void
D) unenforceable

28. The following are rescissible contracts, except:

A) Entered into by guardian whenever ward suffers damage more than ¼ of value of property.
B) Agreed upon in representation of absentees, if absentee suffers lesion by more than ¼ of
value of property.
C) Contracts where fraud is committed on creditor (accion pauliana).
D) Contracts entered into by minors.

29. The following are the requisites before a contract entered into in fraud of creditors may be
rescinded, except:

A) There must be credited existing prior to the celebration of the contract.

B) There must be fraud, or at least, the intent to commit fraud to the prejudice of the creditor
seeking rescission.
C) The creditor cannot in any legal manner collect his credit (subsidiary character of rescission)
D) The object of the contract must be legally in the possession of a 3rd person in good faith.

30. The following are the characteristics of a voidable contract, except:

 A) Effective until set aside.
B) May be assailed/attacked only in an action for that purpose.
C) Can be confirmed or ratified.
D) Can be assailed only by either party.

31. The following are void contracts, except:

A) Pactum commissorium
B) Pactum de non alienando
C) Pactum leonina
D) Pacto de retro

32. When bilateral contracts are vitiated with vices of consent, they are rendered

A) rescissible.
B) void.
C) unenforceable.
D) voidable.

33. The presence of a vice of consent vitiates the consent of a party in a contract and this renders the
contract

A) Rescissible.
B) Unenforceable.
C) Voidable.
D) Void.

34. Which of the following expresses a correct principle of law? Choose the best answer.

A) Failure to disclose facts when there is a duty to reveal them, does not constitute fraud.
B) Violence or intimidation does not render a contract annullable if employed not by a
contracting party but by a third person.
C) A threat to enforce one’s claim through competent authority, if the claim is legal or just, does
not vitiate consent.
D) Absolute simulation of a contract always results in a void contract.

35. Which of the following statements is wrong?

A) Creditors are protected in cases of contracts intended to defraud them.

B) Contracts take effect only between the parties, their assign and heirs, except in case where
the rights and obligations arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law.
C) If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation.
D) In contracts creating real rights, third persons who come into possession of the object of
the contract are not bound thereby.

36. Which phrase most accurately completes the statement – Any third person who induces another to
violate his contract:

A) shall be liable for damages only if he is a party to the same contract.

B) shall be liable for damages to the other contracting party.
C) shall not be liable for damages to the other contracting party.
D) shall not be liable for damages if the parties are in pari delicto.

37. Which phrase most accurately completes the statement – If at the time the contract of sale is
perfected, the thing which is the object of the contract has been entirely lost:

A) the buyer bears the risk of loss.

B) the contract shall be without any effect.
 C) the seller bears the risk of loss.
D) the buyer may withdraw from the contract.

38. Can future inheritance be the subject of a contract of sale?

A) No, since it will put the predecessor at the risk of harm from a tempted buyer, contrary to
public policy.
B) Yes, since the death of the decedent is certain to occur.
C) No, since the seller owns no inheritance while his predecessor lives.
D) Yes, but on the condition that the amount of the inheritance can only be ascertained after
the obligations of the estate have been paid

39. A warranty inherent in a contract of sale, whether or not mentioned in it, is known as the

A) warranty on quality.
B) warranty against hidden defects.
C) warranty against eviction.
D) warranty in merchantability.

40. A contract granting a privilege to a person, for which he has paid a consideration, which gives him the
right to buy certain merchandise or specified property, from another person, at anytime within the
agreed period, at a fixed price. What contract is being referred to?

A) Option Contract
B) Contract to Sell
C) Contract of Sale
D) Lease

Questionnaire II. MULTIPLE CHOICE QUESTIONS

1) A, B and C are solidary debtors of X in the amount of P9,000. Subsequently, X renounced the share of
‘A’. ‘A’ accepted the renunciation of his share. On due date, B paid X P6,000. B demanded reimbursement
from C but C is insolvent. In this case:

A) B may demand the payment of 3,000 from A.

B) B may not demand any payment from A because the share of A had already been renounced
or condoned.
C) B may demand P1,500 from A representing A’s share in C’s insolvency.
D) B may demand from A P4,500 so that their sharing in the total debt is equal.

2) Which obligation is not valid?

A) I promise to give you P100,000 on December 31, 2012.

B) I promise to give you P100,000 if I go to Quezon City this weekend.
C) I promise to give you P100,000 if your patient dies.
D) I promise to give you P100,000 if you pass the May 2013 CPA Board Examination

3) Which of the following is an example of “emptio spei” ?

A) Sale of puppies of a specific dog expected to give birth on June 2011

B) Sale of mango fruits which will be harvested from a particular grove
C) Sale of a lottery ticket
D) Sale of sugar which will be produced from a particular field

4) A remedy in equity by means of which a written instrument is made so as to express or conform to the
real intention of the parties when some error or mistake has been committed.

A) Restructuring
B) Reconstruction
C) Reformation
 D) None of the above

5) _________________ is a sale of securities where substantially identical securities are acquired or

purchased within a 61-day period beginning 30 days before the sale and ending 30 days after the sale.

A) Treasury Sale
B) Wash Sale
C) Insider Sale
D) None of the above

6) Unless the by-laws provide otherwise, written notice of regular meetings shall be sent to all stock
holders of record:

A) at least one day prior to the meeting

B) at least two days prior to the meeting
C) at least one week prior to the meeting
D) at least two weeks prior to the meeting

7) The following instances are considered as “indicators” that a foreign corporation is “transacting
business” in the Philippines, even without securing a license, except

A) Soliciting orders, purchases and service contracts

B) Subscribing shares of stock from a domestic corporation
C) Engaging into continuous business acts or transactions
D) Participating in the management, supervision or control of any domestic business firm, entity
or corporation in the Philippines

8) FYI Corporation has increased its capital stock and new shares of stock are issued. The stockholders of
FYI Corp wish to exercise their pre-emptive right regarding the shares to be issued. Which of the
following shares does a pre-emptive right of stockholders extends?

A) to shares to be issued in compliance with laws requiring stock offerings or minimum stock
ownership by the public
B) to shares to be issued in good faith with the approval of stockholders representing 2/3 of the
outstanding capital stock in exchange for property needed for corporate purposes
C) to shares to be issued in good faith with the approval of the stockholders representing 2/3 of
the outstanding capital stock in payment of previously contracted debt
D) treasury shares reacquired using the funds from the surplus profits of the corporation which
could have been declared as dividends

9) SUJU Corporation, through its Board of Directors and with the unanimous approval of the
stockholders declared to grant stock dividends to its stockholders for the year 2008 amounting to 79
Billion Pesos. After examining the books and other records of the corporation, Sungmin Lee, Vice
President for Finance, discovered that the authorized capital stock of the Corporation is almost depleted,
that is – almost all were already issued and the remaining cannot accommodate the needed stocks for
stock dividend distribution. The Corporation though was liquid in cash and has retained earnings
amounting to 365 Billion Pesos. How should the Board of Directors of SUJU Corporation best act on it?

A) Issue a Board Resolution deferring the distribution of dividends for the said year.
B) Increase the authorized capital stock and amend the Articles of Incorporation of SUJU
Corporation to cater to the needed stocks for stock dividend distribution.
C) Divide the remaining unissued stocks pro rata to the stockholders as stock dividends.
D) Recall its previous Resolution declaring stock dividends and in its stead, issue another
Resolution declaring cash dividends for year 2008.

10) Which of the following will cause the automatic dissolution of a corporation?

A) Commission by the corporation of an ultra vires act

B) Continuous non-operation for a period of at least 5 years
 C) Refusal to comply with or defiance of any lawful order of the SEC restraining commission of
acts which would amount to grave violation of its franchise
D) None of the above

11) The SEC, after notice and hearing, may dissolve a corporation upon filing of a verified petition for the
dissolution, on grounds provided by law. Which of the following statement is not correct?

A) In case of deadlock in the management of the affairs and business of a close corporation, the
SEC, upon written petition by any stockholder, shall have the power to make such order as it
deems appropriate, including an order dissolving the corporation.
B) Any stockholder of a corporation may, by written petition to the SEC, compel the dissolution
of the corporation whenever any acts of its directors, officers or those in control of the
corporation is illegal, fraudulent or dishonest.
C) The SEC can automatically issue a certificate of dissolution in case a corporation filed for its
dissolution and there are creditors affected provided that majority of the board of directors or
trustee consented to such action.
D) The SEC, after notice and hearing, may dissolve a corporation in case there are violations of
the provisions of the Corporation Code not specially penalized therein.

12) To be enforceable, when must a contract comply with the Statute of Frauds? When by its terms it is
to be performed beyond

A) a year from its making.

B) 5 years from its making.
C) a year from its ratification.
D. 5 years from its ratification

13) Which of the following statements is not correct?

A) A partnership contract is not covered by the Statute of Frauds

B) A limited partner shall not be bound by the obligations of the partnership.
C) A limited partner who takes part in the control of the business shall be liable as a general
partner.
D) A stipulation which excludes a partner from sharing in the profits or loss is void.

14) Which of the following contracts 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) None of the above

15) Choose the situation which illustrates best the minimum requirement of the law to corporate
formation:

Authorized Capital Subscribed Capital Paid-in Capital

A) P150,000 P 35,000 P15,000
B) P600,000 P150,000 P37,500

C) P50,000 P 12,500 P 3,125

D) P60,000 P 30,000 P 5,000

16) In a contract of sale executed by S and b, it appears S sold his motor vehicle to B and B bought it for
P10,000. It turned out however, S has three motor vehicles. Gallant valued P80,000; Hi-Ace van valued
P70,000; and a Jeep valued P60,000. Which of the following is correct?

A) The parties can ask for annulment of contract

B) There is no contract
C) The parties can ask for interpretation because the word Motor vehicle is ambiguous
D) The contract shall be reformed because there was a mistake
17) In order that a stipulation in favor to third person in a contract would be valid and binding upon the
parties thereto, three of the requisites are mentioned in the following enumeration. Which of them is
not a requisite?

A) There must be an existing agency between either of the contracting parties and the third
person
B) The third person communicated his acceptance to the obligor before its revocation
C) The contracting parties must have clearly and deliberately conferred a favor upon that third
person
D) There must be stipulation in favor of a third person

18) G was appointed guardian of S, the latter being 16 years old. S sold his parcel of land in writing to B
valued at P100,000 for P75,000, suffering lesion by 1/4 of the value. What is the status of the contract?

A) Voidable
B) Enforceable
C) Unenforceable
D) Rescissible

19) To call a meeting for the purpose of removing a director of a corporation the required votes of the
stockholders is:

A) majority of the stockholders present

B) ¾ of the outstanding capital stock
C) 2/3 of the outstanding capital stock
D) majority of the outstanding capital stock

20) All except one are instances when the right to vote by proxy is explicitly provided for:

A) election of the board of directors or trustees

B) voting in case of joint ownership of stock
C) pledged or mortgaged share
D) voting in a board meeting

21) The power to sue and be sued as a corporate power is more specifically classified as:

A) Incidental power
B) Express power
C) Implied power
D) Discretionary power

22) A,B,C,D,E, and F, Filipino citizens, X,Y,Z, American citizens, and R and S Japanese citizens agreed to
form a domestic corporation with an authorized capital stock of P1,000,000.00 divided into one hundred
thousand (100,000) shares with a par value of P10.00 per share. B subscribed for 2,000 shares and he
paid P12,000.00. X subscribed for 5,000 shares and he issued a promissory note in the amount of
P30,000.00.00 F joined the group but he did not subscribed for any number of shares. Can the
aforementioned persons validly form a domestic corporation-

A) Yes, provided majority of them are resident of the Philippines.

B) Yes, because majority of them are Filipino citizens.
C) Yes, provided they will subscribed for at least 25% of the authorized capital stock.
D) No, because foreigners cannot be incorporators of a domestic corporation.

23) A with violence in her eyes intimidated her husband B to sell his exclusive property to her. The
contract of sale is

A) Rescissible
B) Voidable
C) Unenforceable
D) Void
24) A delinquent stockholder is not entitled to the following rights, except the right:

A) To be voted
B) To vote or be represented in the meetings of stockholders
C) To dividends
D) He is not entitled to all the rights of a stockholder

25) Three of the following partnership contracts are void. Which one is not?

A) A universal partnership of present property between husband and wife

B) A universal partnership of profits between a man and a woman living together as husband
and wife without the benefit of marriage
C) A particular partnership between husband and wife
D) A universal partnership between a private individual and a public officer

Numbers 26 to 31 are based on the following information:

The articles of incorporation of Nova Corporation provide, among others matters, for an authorized
capital stock of P1,000,000.00, divided into 10,000 shares at par value of P100.00 per share and seven
(7) directors.

26) The minimum subscription and paid-in capital requirements of Nova Corporation at the time of
incorporation is:

A) P1,000,000.00 and P250,000.00, respectively.

B) P250,000.00 and P62,500.00, respectively.
C) P250,000.00 and P250,000.00, respectively.
D) P750,000.00 and P187,500.00, respectively.

27) Assuming that at the time of incorporation, 5,000 shares were subscribed at par value of which 4,000
shares had been paid in full, and 1,000 shares had been paid at 60% of the subscription price, the
number of issued shares of the corporation is:

A) 5,000 shares.
B) 4,000 shares.
C) 10,000 shares.
D) 4,600 shares.

28) The total number of shares subscribed is:

A) 5,000 shares.
B) 4,000 shares.
C) 10,000 shares.
D) 4,600 shares.

29) Assume that Nova Corporation reacquired 100 shares of the 4,000 shares paid in full. How many
shares are outstanding?

A) 3,900 shares.
B) 4,900 shares.
C) 9,900 shares.
D) 900 shares.

30) If you were a stockholder owning 200 shares and 8 stockholders ran for the position of director
during the annual election, you will be entitled to cast a maximum of:

A) 1,600 votes.
B) 1,400 votes.
C) 200 votes.
D) 8 votes.
31) Assuming that you were the subscriber of the 1,000 shares for which you paid 60% of the
subscription price or a total payment of P60,000.00, you shall be entitled at the time of your subscription
to the following rights of a stockholder, except the right to:

A) dividends
B) vote in the election of directors.
C) attend stockholders’ meetings.
D) a stock certificate covering 600 shares.

For Items 32 to 50, state the status of the contract from among the following choices:

A. Valid and enforceable

B. Rescissible

C. Voidable

D. Unenforceable

E. Void

32) A oral contract of lease of a lot by R (lessor) and E (lessee) for a period of 2 years at a monthly rental
of P20,000.00 with E being required to pay a one-month deposit of P20,000.00. E has not given the one-
month deposit, but has started occupying the lot. A

33) A written contract of sale of a computer worth P20,000.00 between S (seller), a minor and B (buyer),
an insane person. The computer has not been delivered and the price has not been paid. D

34) An oral sale of a lot worth P50,000.00 between S (seller) and B (buyer). S has not delivered the lot
but B has given a down payment of P5,000.00. A

35) A deed of sale of a lot worth P100,000.00 between S (seller) and B (buyer). S has not delivered the
lot, and B has not given any payment. The sale is in writing but has not yet been acknowledged by the
parties before a notary public. A

36) A written contract of sale of a specific car between S and B. The car actually belonged to O and was
sold by S in the name of O without the latter’s authority. The car is still in the possession of O although B
has remitted the price of P60,000.00 to S. D

37) A written contract of lease of a lot by R (lessor) and E (lessee) for a period of 2 years at a monthly
rental of P20,000.00 with E being required to pay a one-month deposit of P20,000.00. R has not
delivered the lot. Neither has E given the one-month deposit. The contract has not been acknowledged
by the parties before a notary public. A

38) A written contract of sale entered into by G, guardian, in behalf of his ward M, a minor, and B, 25
years old. The sale had for its object a specific ring with value of P40,000.00. B has paid the price in full
and obtained possession of the ring. B

39) A written contract of sale entered into by G, guardian, in behalf of his ward M, a minor, and B, 25
years old. The sale had for its object a specific ring with value of P40,000.00 belonging to M but was sold
by G for only P30,000.00. B has paid the price in full and obtained possession of the ring. A

40) An oral contract of lease of a room between R (lessor), who is 40 years old, and S (lessee), a 17-year
old student for a period of one-year while S is studying at ABC School. The monthly rental is P5,000.00. S
has paid the first month rental in advance. A

41) A written contract of sale entered into between S (seller) and B (buyer). The object of the sale is the
right lung of S. B has paid the price amounting to P20,000.00. E

42) A written contract of sale of lot between S, seller, and B, buyer, for P50,000.00. The lot is the only
property of S who sold it to defraud C, his creditor. B was not aware of the fraudulent intent of S in
selling the lot to him. B
43) A donation of a gold ring worth P4,000.00 made by D to C. The donation of the gold ring by D and its
acceptance by C were made orally with D simultaneously delivering the ring to C. A

44) An oral contract of commodatum whereby M, 17 year old, lent his cell phone to B, 25 year old, for a
week. C

45) A oral contract of lease of lot by R (lessor) and E (lessee) for a period of 2 years at a monthly rental of
P20,000.00 with E being required to pay a one-month deposit of P20,000.00. R has not delivered the lot.
Neither has E given the one-month deposit. A

46) A oral contract of lease of delivery truck by R (lessor) and E (lessse) for a period of 2 years at a
monthly rental of P20,000.00 with E being required to pay two-month deposit of P40,000.00. R has not
delivered the truck. Neither has E given the two month deposit. A

47) A certificate of bank deposit entered into between D, depositor, and B, bank. D has really no deposit
in the bank but the bank made it appear that D had a deposit so that D could use the certificate of bank
deposit to apply for a visa at a foreign embassy. E

48) A written contract of sale of a lot between S, seller and B, buyer, for P50,000.00. The lot is the only
property of S who sold it to defraud C, his creditor. B was aware of the fraudulent intent of S in selling
the lot to him. B

49) A oral contract of lease of a lot by R (lessor) and E (lessee) for a period of 2 years at a monthly rental
of P20,000.00 with E being required to pay a one-month deposit of P20,000.00. R has not delivered the
lot, but E has given the one-month deposit. A

50) An oral contract of sale of a computer worth P20,000.00 between S (seller), a minor and B (buyer),
an insane person. The computer has been delivered and the price has been paid. D

Questionnaire III. MULTIPLE CHOICE QUESTIONS

1. An instrument which is not dated will be considered dated as at the time of:

A. acceptance.
B. first indorsement.
C. last indorsement.
D. issuance.

2. “I promise to pay P or his order the sum of P10,000.00 30 days after the death of X”. This is an
instrument payable:

A. at a determinable future time.

B. on demand.
C. upon the fulfillment of a condition.
D. at an indefinite time hence, non-negotiable.

3. Who among the following is the holder of a negotiable instrument originally payable to order?

A. The original payee who has negotiated the instrument.

B. The indorsee who is in possession of the instrument.
C. The possessor of the instrument to whom the instrument was delivered without any
indorsement
D. The lndorsee who has negotiated the instrument.

4. An instrument payable to bearer may be negotiated through' any of the following means, except
by:

A. special indorsement plus delivery.

B. mere delivery.
C. blank indorsement plus delivery.
 D. No delivery is required as long as there is an indorsement, whether blank or special.

5. The following instruments are presented to you for evaluation:

I. “Pay to the order of Pablo Patricio P20,000.00”

II. "Pay to the order of Pablo Patricio P20,000.00 or deliver to him a computer of the same
value at his option.”
III. “Pay to the order of Pablo Patricio P20.000.00 or deliver to him a computer of the same value.”
IV. "Pay to the order of Pablo Patricio a computer worth P20,000.00.”

Assuming all the other requisites of negotiability are present, which of the foregoing instruments are
negotiable?

A. Instruments I and II.

B. Instruments I and III.
C. Instruments II and III.
D. Instruments III and IV

6. The separate paper attached to an instrument on which an indorsement or acceptance of the

instrument is written is called:

A. allonge.
B. memorandum.
C. enclosure.
D. attachment.

7. Assuming all the other requisites of negotiability are present, which of the following instruments
is not payable to bearer?

A. “Pay to the order of Cash.”

B. "Pay to the order of Jose Rizal, national hero.”
C. “Pay to Pedro Padernal, bearer.”
D. “Pay to Pedro Padernal or bearer.”

8. Consider these two statements:

I. An instrument originally payable to order may be converted into a bearer instrument.

II. An instrument originally payable to bearer may be converted into an order instrument.

In your evaluation of the foregoing statements:

A. Both statements are true.

B. Both statements are false.
C. Statement I is true; Statement II is false.
D. Statement I is false; Statement II is true.

9. Which of the following is a valid address to a drawee so as to make the instrument negotiable?

A. “To Walter Wenceslao or Wilfredo Wycoco.”

B. "To Walter Wenceslao, or in his absence, Wilfredo Wycoco”
C. “To Walter Wenceslao and Wilfredo Wycoco”
D. “To Walter enceslao and another drawee named Wilfredo."

10. M signs a promissory note payable to the order of P which is blank as to amount. M delivers the
note to P with the instruction to type the amount of P20,000.00 on the blank. P, however, types the
amount of P50TQ00.00, and negotiates the same to A, A to B, B to C, and C to H, a holder in due course.
A, B, C and also H had no knowledge of the wrongful completion of the blank.

A. H may collect from M nothing because P violated M’s instructions.

B. H may collect from M P20,000.00 the amount M instructed P to place on the space for
the amount.
 C. H may collect from M P50,000.00, the amount actually placed by P.
D. H may collect from A, B or C P20,000.00 since they had no knowledge of the wrongful
completion.

11. R signs a check amounting to P50,000.00 but which is blank as to the name of payee. He keeps
the check in his drawer but S, his secretary, steals it, places her name as payee on the blank, and
negotiates it to A, A to B, B to C, and C to H, holder. A, B, and C have no knowledge of the theft of the
check and its unauthorized completion by S. Based on the foregoing, which of the following statements
is incorrect?

A. H may enforce payment of the check against R if H is a holder in due course.

B. H may enforce payment of the check against S, whether H is a holder in due course or
not.
C. H may enforce payment of the check against A, B and C, whether H is a holder in due
course or not.
D. H may not enforce payment of the check against R, whether H is a holder in due course
or not.

12. M makes a note payable to the order of P. He delivers the note to P with the instruction that P
should keep the same until M has obtained the proceeds of his loan from the bank. P, however,
disregarded the instruction of M and indorsed the note to A, A to B, B to C, and C to H, holder. A, B and C
have no knowledge of P’s defective title. Based on the foregoing, which of the following statements is
incorrect?

A. H may enforce payment against M if H is a holder in due course.

B. H may not enforce payment against M if H is not a holder in due course.
C. H may not enforce payment against A, B and C, whether H is a holder in due course or
not.
D. H may enforce payment against P, whether H is a holder in due course or not.

13. One of the following can set up the defense of forgery in an instrument payable to order. Who is
it?

A. An indorser, if the maker’s signature is forged.

B. The acceptor, if the drawer’s signature is forged.
C. A person negotiating by mere delivery if a prior party’s signature is forged.
D. The maker, if an indorser’s signature is forged.

14. M makes a note payable to P or bearer and delivers the note to P. P indorses the note to A. A
keeps the note in his drawer but it is stolen by F who negotiates the same to B by forging A’s signature, B
indorses the note to C, C indorses the note to H, a holder in due course. Who among the following can
set up the defense of forgery?

A. M, maker.
B. P, payee.
C. A, indorser.
D. Forgery is not available as defense to any party to the instrument.

15. One of the following is not a restrictive indorsement. Which is it?

A. An indorsement that prohibits the further negotiation of the instrument.

B. An indorsement that constitutes the indorser a mere assignor of the title to the
instrument.
C. An indorsement that constitutes the indorsee an agent of the indorser.
D. An indorsement that vests title in the indorsee in trust for some other person.

Questionnaire IV. MULTIPLE CHOICE QUESTIONS

1. The maker, by making the instrument, has the following liabilities, except:

A. the engagement to pay the instrument according to its tenor.

B. the admission of the existence of the payee.
C. the admission of the capacity of the payee to indorse the instrument.
D. the admission of the right of the holder to enforce payment of the instrument.

2. M makes a promissory note payable to the order of P. P indorses the note specially to A, A indorses
the note in blank and delivers the same to B. B specially indorses the note to C, C specially indorses the
note to D, D indorses the note in blank and delivers it to E, E specially indorses the note to H, holder.
Whose indorsement may H strike out?

A. The special indorsement of P to A.

B. The special indorsement of E to H.
C. The blank indorsement made by A.
D. The blank indorsement made by D.

3. M makes a promissory note payable to the order of P and delivers the same to P. P indorses the
note to A who keeps it in his drawer. F steals the note and negotiates the same to B by forging A’s
signature. Thereafter, B negotiates the note to C, C to D, and D to H, a holder in due course. Based on the
foregoing information, which of the following statements is true?

A. H can hold M and P liable because they became bound under the instrument before the
forgery.
B. H cannot hold B, C and D liable because they have no participation whatsoever in the
commission of the forgery.
C. H can enforce the instrument only against F, the forger, since he is the perpetrator of the
forgery.
D. H can enforce instrument against F, B, C and D, but not
against M, P and A.
4. A check must be in writing and signed by the drawer for it to be negotiable.' In addition, a check
must have the following requisite, except:

A. It must contain 'an unconditional order to pay a sum certain in money.

B. It must be payable at a fixed or determinable future time.
C. It must be payable to order or to bearer.
D. The bank drawee must be named with reasonable certainty.

5. Which of the following instruments is not payable to order?

A. ‘‘I promise to pay P or his agent P10,000.00”

B. “I promise to pay P or his assigns P10,000.00”
C. “I promise to pay to the order of myself P10,000.00”
D. “Pay to the order of yourself P10,000.00”

6. P executes a promissory note for P20,000.00 indicating therein that the maker is M and that it is
payable to the order of P. Thereafter, he forges the signature of M and indorses the note to A, A to B, B to
C, and C to H, holder. Based on the foregoing data, which of the following statement is incorrect?

A. H can collect from M if H is a holder in due course.

B. H cannot collect from M whether H is a holder in due course or not.
C. H can collect from A, B or C whether H is a holder in due course or not.
D. H can collect from P whether H is a holder in due course or not

7. Which of the following defenses may a party to an instrument avail himself of against any holder?

A. Want of delivery of incomplete instrument.

 B. Want of authority to complete an instrument that was delivered.
C. Want of delivery of complete instrument.
D. Want or absence of consideration.

8. M makes a promissory note payable to the order of P for PHP5.000.00. After delivery to P, P
changed the amount to US$5,000.00. Thereafter, P indorsed the note to A, A to B, B to C, C to D, and D to
H. The parties subsequent to P were not aware of the alteration made by P. Based on the foregoing facts,
which of the following statements is incorrect?

A. H can hold M liable for US$5,000.00 if H is a holder in due course.

B. H can hold M liable for PHP5,000.00 if H is a holder in due course.
C. H cannot hold M liable for any amount if H is not a holder in due course
D. H can hold A, B, C and D liable for US$5,000.00 even if H is not a holder in due course.

9. A holder is a holder in due course if he has taken the instrument complete and regular on its face
and three of the following conditions, except:

A. That he became the holder of the instrument before it was overdue and without notice that
it had been previously dishonored if such was the fact.
B. That he took it in good faith and for value.
C. That there is no fraud or illegality affecting the instrument.
D. That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person

10. M made a promissory note payable to P or bearer. After its delivery to him, P indorsed the note to
A. While the note was in the possession of A, F stole the note and negotiated it to B by forging A’s
signature. Thereafter, B indorsed the note to C, C to D, and D to H, a holder in due course. Which of the
following defenses' are available to M, P and A against H?

I. Forgery of A’s signature.

II. Want of delivery of the note by A since the note was stolen from him.
A. Both defenses are available to M, P and A.
B. Both defenses are not available to M, P and A.
C. Only I is available.
D. Only II is available.

11. M makes a promissory note for P10,000.00 payable to the order of P. After the issuance to him of
the note, P altered the amount to US$10,000.00. P then indorsed the note to A, A to B, and B to H. Only
P knew of the alteration.

The parties and their possible liabilities are:

I. M, P10,000.00.
II. M, US$10,000.00.
III. M, nothing.
IV. A and B, P10,000.00.
V. A and B, US$10,000.00.
VI. A and B, nothing.

If H is a holder in due course, the parties from whom he may collect and the amount of the said
parties’ liability are:

A. I and IV.
B. II and V.
 C. I and V.
D. Ill and VI.

12. A check differs from a bill of exchange because a check;

A. does not require the drawer to have funds with the drawee.
B. may be drawn against a person other than a bank.
C. is always payable on demand.
D. is required to be presented for acceptance in certain cases.

13. The placing of a date in an instrument is necessary in the following cases, except:

A. to fix the maturity of the instrument.

B. to determine when interest is to run.
C. to fix the prescriptive period.
D. to make the instrument negotiable.

14. The following are some causes of discharge of a prior party to an instrument.

I. Discharge of a prior party because the holder failed" to give him a notice of dishonor.
II. Discharged of a prior party, because he was adjudged a bankrupt.
III. Discharge of a prior party because he was released for value by the holder.
Which of the foregoing will discharge subsequent indorsers?

A. I and II.
B. II and III.
C. I and III.
D. I, II and III.

15. M is the maker of a promissory payable to the order of P which is payable 30 days after date. The
note dated August 1, 2010 was issued on the same day by M to P. P indorsed the note to A, A to B, and B
to H. On September 1, 2010, H renounced unconditionally his claim on the note against M who accepted
the renunciation. % Nonetheless, H still negotiated the note on the same day to X who had no
knowledge of the renunciation. May X still collect on the note from M and parties subsequent to M?

A. Yes, against M. No, against parties subsequent to M.

B. No, against M. Yes, against parties subsequent to M.
C. Yes, against M and parties subsequent to M.
D. No, against M and parties subsequent to M.

16. P, by means of fraud, induced M to issue a promissory note payable to the order of P for
P21,000.00. The note was indorsed by P to A, and A to H. A and H had agreed to a consideration of
P20,000.00 (or a discount of P1.000.00). Initially, H gave A the amount of P18.000.00. Before he could
give the balance of P2.000.00 to A, H learned that P’s title was defective. Is H a holder in due course?

A. Yes,for P21,000.00.
B. Yes,for P18,900.00.
C. Yes,for P18,000.00
D. No, he is not a holder in due course because he obtained knowledge of a defect in the title
of a prior party before he could pay in full to A the agreed consideration of P20,000.00

17. Refer to the preceding number. Can H still collect on the note from M?

A. Yes, for P? 1,000.00..

B. Yes, for P18,900.00. 
C. Yes, for P18,000.00.
 D. No, he cannot collect at all because he is not a holder in due course.

18. Which of the following is a common liability of the drawer, maker

and acceptor?

A. The admission of the genuineness of the signature of any indorser.

B. The admission of the existence of the payee and his capacity of the payee to indorse.
C. The admission that the instrument is covered with sufficient funds.
D. The engagement on the payment of the instrument according to its tenor.

19. The acceptance that takes place when a drawee to whom a bill is delivered for acceptance
destroys the bill the bill, or refuses within 24 hours after such delivery, or within such other period as the
holder may allow, to return the bill accepted or non-accepted, to the holder.

A. Implied acceptance
B. Qualified acceptance
C. Constructive acceptance
D. Oral acceptance

20. The following are the requisites of actual acceptance of a bill of exchange, except

A. It must be in writing.
B. It must be signed by the drawee.
C. There must be delivery or notification thereof.
D. It must express that the drawee will perform his promise by the payment of money, the
delivery of a thing or the rendering of some service.

21. These statements are presented to you:

I. The holder of a bill may require that the acceptance be written on the face of the bill,
and if such request is refused, he may treat the bill as dishonored.

II. Acceptance of a bill may be made even before it is drawn.

A. Both statements are true.

B. Both statements are false.
C. Only Statement I is true.
D. Only Statement II is true.

22. These statements are presented to you:

I. A general acceptance assents without qualification to the order of the drawer.

II. An acceptance to pay at a particular place is a qualified acceptance.
A. Both statements are true.
B. Both statements are false.
C. Only Statement I is true.
D. Only Statement II is true.

23. Which of the following indorsements is a valid negotiation of the

instrument?

A. “Pay to Arnulfo Alvez, P20,000.00" The instrument shows an amount of P30,000.00.

 B. "Pay to Arnulfo Alvez and Benito Baldoz.”
C. “Pay to Arnulfo Alvez, P20.000.00, and Benito Baldoz, P10,0000.00.”
D. “Pay to Arnulfo Alvez, P20.000.00 from the amount of P30,000.00 on this note.”

24. M delivers a promissory note payable to the order of P for P10,000.00. P alters the amount to
P40.000.00 and thereafter indorses the note to A who had no knowledge of the alteration; then A to H,
holder in due course. Which of the following is incorrect?

A. H can recover P10,000.00 from M.

B. H can recover P40.000.00 from P.
C. H can recover P40,000.00 from A.
D. H cannot recover any amount from M because M is a party before the alteration. H cannot
also recover from A because A was not aware of the alteration.

25. The signification by the drawee of his assent to the order of the drawer.

A. Acceptance
B. Approval
C. Recommendation
D. Indorsement

26. Which of the following is not a right of a holder in due course?

A. To hold the instrument free from defect of title of prior parties.

B. To hold the instrument free from personal defenses available to prior parties among
themselves.
C. To enforce payment of the instrument for the full amount thereof against all parties liable
thereon.
D. To hold the instrument free from real defenses available to the prior parties among
themselves.

27. Which of the following statements pertaining to indorsements is incorrect?

A. The indorsement must be of the whole instrument.

B. The signature of the indorser without additional words is sufficient.
C. Indorsers are liable in the order in which they indorse.
D. If an instrument is delivered without indorsement, negotiation takes effect at the time of
delivery even if the instrument is subsequently indorsed.

28. M executed a note payable to the order of P. P indorsed the note to A, A to B (by qualified
indorsement), B to C (by general indorsement), and C (by general indorsement) to H, a holder in due
course. Later, it was discovered that P was a minor. None, except P, knew that he was a minor. Who,
aside from P, may avail himself of the minority of P as a defense?

A. M, maker.
B. A, qualified indorser.
C. B, general indorser.
D. None, only P may avail himself of his minority as a defense.

29. Which of the following does not discharge the instrument?

A. Payment in due course by the accommodated party.

B. Intentional cancellation of the instrument by the holder.
C. When the principal debtor becomes the holder in his own
right before maturity.
 D. Payment in due course by or on behalf of the principal debtor.
 

30. A party secondarily liable is discharged through any of the following means, except by the:

A. intentional cancellation of his signature by the holder.

B. discharge of a prior party.
C. release of the principal debtor.
D. extension of the lime of payment which is assented to by such party secondarily liable.

31. Which of the following instruments is negotiable?

A. Treasury warrant.
B. Postal money order.
C. Letter of credit.
D. Trade acceptance.

32. "PAY TO MARIA IN TRUST FOR JESUS" (Sgd.) Jose, is an example of:

A. Conditional endorsement

B. Qualified endorsement

C. Facultative endorsement

D. Restricted endorsement

33. The following, except one, are the requisites for honor on a bill:

A. The bill must be previously protested for dishonor by non-acceptance or protested for better
security.

B. The bill is overdue.

C. The holder must give his consent.

D. The acceptor for honor must be a stranger to the bill.

34. Which of the following is not a secondary party?

A. Acceptance for honor

B. Drawer

C. Payor for honor

D. Endorser

35. When an endorser waives presentment and notice of dishonor, he increases his liability. His
endorsement is:
 A. Alternative endorsement

B. Qualified endorsement

C. Facultative endorsement

D. Restrictive endorsement

36. A holder not in due course has the following rights, except:

A. He may receive payment and if the payment is in due course, the instrument is discharged.

B. He may sue on the instrument in his own name.

C. He cannot recover on the instrument.

D. He is entitled to the instrument but holds it subject to the same defense as if it were non-
negotiable.

37. Which of the following is a negotiable bill of exchange?

A. Pay to the order of Y the sum of P30,000. (Sgd. X) To A or in his absence, to B.

B. Pay to the order of X the sum of P20,000. (Sgd. X) To A or B.

C. Pay to the order of X or Y the sum of P40,000. (Sgd. C) To A or B.

D. Pay to the order of Y the sum of P50,000. (Sgd. X) To A and B.

38. A feature or characteristic of a bill of exchange not found in a promissory note:

A. Promise to pay

B. Order to pay

C. Promise in writing to pay

D. Unconditional promise in writing

39. A bill of exchange to which no document is attached when presentment for payment or
acceptance is made:

A. Trade acceptance

B. Bank acceptance

C. Clean bill of exchange

D. Documentary bill of exchange

40. A check drawn by the bank upon itself and payable to third person:

A. Certified check

B. Manager's check

C. Traveler's check

D. Crossed check
41. Which of the following is not a personal defense?

A. Absence of consideration

B. Forgery of a signature

C. Non-delivery of a complete instrument

D. Failure of consideration

42. An instrument which is not dated will be considered dated as at the time of:
A. acceptance.
B. first indorsement.
C. last indorsement.
D. issuance.

43. “I promise to pay P or his order the sum of P10,000.00 30 days

after the death of X”. This is an instrument payable:

A. at a determinable future time.

B. on demand.
C. upon the fulfillment of a condition.
D. at an indefinite time hence, non-negotiable.

44. Who among the following is the holder of a negotiable instrument originally payable to order?
A. The original payee who has negotiated the instrument.
B. The indorsee who is in possession of the instrument.
C. The possessor of the instrument to whom the instrument was delivered without any
indorsement
D. The lndorsee who has negotiated the instrument.

45. An instrument payable to bearer may be negotiated through' any of the following means, except
by:
A. special indorsement plus delivery.
B. mere delivery.
C. blank indorsement plus delivery.
D. No delivery is required as long as there is an indorsement, whether blank or special.

46. The separate paper attached to an instrument on which an indorsement or acceptance of the
instrument is written is called:
A. allonge.
B. memorandum.
C. enclosure.
D. attachment.

47. Assuming all the other requisites of negotiability are present, which of the following instruments is
not payable to bearer?
A. “Pay to the order of Cash.”
B. "Pay to the order of Jose Rizal, national hero.”
C. “Pay to Pedro Padernal, bearer.”
D. “Pay to Pedro Padernal or bearer.”

48. Consider these two statements:

I. An instrument originally payable to order may be converted into a bearer instrument.
II. An instrument originally payable to bearer may be converted into an order instrument.
 In your evaluation of the foregoing statements:

A. Both statements are true.

B. Both statements are false.
C. Statement I is true; Statement II is false.
D. Statement I is false; Statement II is true.

49. The following instruments are presented to you for evaluation:

I. “Pay to the order of Pablo Patricio P20,000.00”
II. "Pay to the order of Pablo Patricio P20,000.00 or deliver to him a computer of the
same value at his option.”
III. “Pay to the order of Pablo Patricio P20.000.00 or deliver to him a computer of the same
value.”
IV. "Pay to the order of Pablo Patricio a computer worth P20,000.00.”

50. Which of the following is a valid address to a drawee so as to make the instrument negotiable?
A. “To Walter Wenceslao or Wilfredo Wycoco.”

B. "To Walter Wenceslao, or in his absence, Wilfredo Wycoco”

C. “To Walter Wenceslao and Wilfredo Wycoco”

D. “To Walter enceslao and another drawee named Wilfredo."