REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

1. A, B and C are capitalist partners, each contributed P10,000. After exhausting the assets of the
firm, the firm’s indebtedness amounts to P90,000. It was stipulated that A would be exempted
from liability. Which is correct?
a. A may recover his original capital of P10,000
b. A can recover P20,000 each from B and C should he be required to pay the creditors
c. The creditors may collect P30,000 each from A, B and C
d. The creditors can recover P45,000 each from B and C

Answer: C

2. A partnership begins from the moment of

a. Distribution of profits
b. Issuance of certificate by the SEC
c. Consent
d. Delivery of contributions

Answer: C

3. Mr. Sandy is a partner who was able to bring in enormous profits to the partnership. With the
consent of the other partners, he used the partnership car in meeting his clients. Because of
intoxication, he figured in a collision resulting in damage to Mr. Jolly. As a consequence, the firm
was sued and ordered by the court to pay damages. Which of the following statements is not
correct?
a. He can ask that whatever damages he is responsible for shall be deducted from the profits
and benefits which he may have earned for the partnership.
b. He is obliged to compensate the partnership for the damages it was ordered to pay.
c. The partnership and all the partners are solidarily liable.
d. Mr. Sandy is personally responsible to the partnership for the damages suffered by it through
his fault.

Answer: A

4. X, Y and Z are partners in XYZ & Co. to which W is indebted in the amount of P600,000. X, Y and Z
agreed that they will just divide equally the partnership credit if P600,000. X and Y were able to
collect P200,000 each from W, but when Z was collecting, W had already become insolvent
a. X and Y will share with Z the P400,000 already collected
b. To equalize the situation Z will be allowed to withdraw P100,000 from the partnership funds
c. X and Y will return to the partnership capital the P400,000
d. X and Y will just be allowed to retain what they had collected

Answer: C

5. A universal partnership is void except:

a. When there is no agreement as to profits and losses
b. When made by persons who are prohibited in giving each other donation
c. An inventory is not made when an immovable property is contributed
 d. If the purpose or object is against the law, morals, public order, public policy and custom

Answer: A

6. These partners shall be liable pro rata with all their property and after all the partnership assets
have been exhausted
a. Only capitalist partners
b. All partners, including industrial ones
c. Only limited partner
d. Only general partners

Answer: B

7. A partner is personally indebted to his creditor. If such creditor obtains a judgment award against
the partner, can the creditor enforce judgment against a specific partnership property?
a. Yes, being a partner he has an interest over the property of the partnership which can be
attached
b. Yes, in order not to defeat the court judgment award
c. No, the partner’s right over the specific property is free from execution and attachment if it
is not a claim against the partnership
d. No, because the partnership was not sued therein

Answer: C

8. A partnership without a definite period and which can be dissolved at any time by any of the
partners is called:
a. Particular partnership
b. Universal partnership of all present property
c. Universal partnership of profits
d. Partnership at will

Answer: D

9. A and B put up a partnership to engage in distribution of books and school supplies. A contributed
P1M while B his services. A wants to put up a restaurant on the opposite side of the street. On
the other hand, B wants to have a bakery beside A’s restaurant. Which of the following is correct?
a. B may put up his bakery without need of securing A’s consent
b. Both A and B can put up their restaurant and bakery businesses without the need of securing
each other’s consent
c. Neither A nor B can put up another business
d. A may put up his restaurant without need of securing B’s consent

Answer: D

10. A and B are partners in a real estate business. A and B were approached by X who offered to buy
a parcel of land owned by the partnership. Thereafter B sold to A, B’s share in the partnership.
Then A sold the land to X at a big profit. Which is correct?
a. A is liable to B for B’s share in profits
 b. A is not liable to B for any share in the profits
c. The sale of land to X is void
d. B may rescind the contract between A and X

Answer: B

11. A doctrine in corporation wherein the corporation will be estopped from denying the agent’s
authority if it knowingly permits one of its officers or any other agent to act within the scope of
an apparently authority and it holds him out to the public as possessing the power to do those
acts.
a. Doctrine of apparent authority
b. Trust fund doctrine
c. Doctrine of equity
d. Doctrine of estoppel

Answer: A

12. The members of the Board of Directors may be given compensation by any of the following acts,
except
a. If approved by the Board of Directors if the salary given is not more than 10% of the net
income before income tax during the preceding year
b. If approved by the vote of the stockholders representing majority of the outstanding capital
stock
c. If provided in the by-laws
d. If approved by the Board of Directors giving them a reasonable per diem

Answer: A

13. If ABC Corporation will increase its authorized capital stock, the Corporation Code requires
a. The approval of the majority of the Board of Directors only
b. The approval of 2/3 of the shareholders of the outstanding capital stock as well as the
approval of the SEC
c. The approval of the majority of the stockholders and the Board of Directors
d. The approval of the majority of the Board of Directors and approval of the shareholders
holding 2/3 share of the outstanding capital stock

Answer: D

14. The ratification of director’s or trustee’s contract with the corporation requires the vote of
a. 2/3 of outstanding capital stock of voting and non-voting shares or 2/3 of all the members
b. 2/3 of outstanding capital stock of voting shares or 2/3 of the members entitled to vote
c. Majority of outstanding capital stock of voting shares or majority of the members entitled to
vote
d. Majority of outstanding capital stock of voting and non-voting shares or majority of all the
members

Answer: B
 15. Which of the following is not correct about director?
a. A person is disqualified to become a director if he is convicted by final judgement of an offense
punishable by imprisonment for a period exceeding 6 years
b. The number of directors of stock corporation is not less than five but not more than fifteen
c. A juridical person like partnership is allowed to be a director
d. A director must be an owner of at least one share of stock

Answer: C

16. May not require stockholders’ approval

a. Declaration of cash dividend
b. Removal of director
c. Increase of bonded indebtedness
d. Management contract

Answer: A

17. Refers to an equitable right of stockholders to subscribe to newly issued shares of the corporation
in proportion to their shares in order to maintain their surplus as well as proportionate standing
in the corporation
a. Appraisal right
b. Concept of corporate entity
c. Right to be sued
d. Pre-emptive right

Answer: D

18. The authorized capital stock of a proposed corporation if P1,000,000 divided into 10,000 shares
with par value of P100 each. The minimum amount of subscription that must be paid up is
a. P62,500 or 625 shares
b. P87,500 or 875 shares
c. P50,000 or 500 shares
d. P75,000 or 750 shares

Answer: A

19. Majority of the following must be residents of the Philippines, except

a. Officers
b. Incorporators
c. Members of the board of directors
d. Members of the board of trustees

Answer: A

20. This vacancy in the board of directors may be filled by the board of directors if the remaining
directors still constitute a quorum
a. Increase in the number of directors
b. Removal of a director
 c. Expiration of the term of a director
d. Death of a director

Answer: D

21. Stipulation in the bill of lading which provides that “No matter how negligent the carrier will be,
it will not be responsible for the damages cause”. The stipulation is:
a. Perfectly valid
b. Void being contrary to moral
c. Void being contrary to public policy
d. The stipulation can be ratified by the party injured

Answer: C

22. For value received, A promised to deliver to B on or before August 15 his only BMW car, as well a
2000 model Sony TV set. Unfortunately, before the schedule delivery date, both the car and the
TV set which A intended to deliver were lost in an accidental fire. Has the obligation of A been
extinguished?
a. The obligation to deliver the both was not extinguished because it was not agreed upon by
the parties that fortuitous event shall absolve the debtor from responsibility for the loss
b. The obligation to deliver the TV set is extinguished but not the obligation to deliver the BMW
car
c. The obligation to deliver the car is extinguished but not the obligation to deliver the TV set
d. The obligation to deliver both objects was extinguished because they were lost due to a
fortuitous event

Answer: C

23. Pactum commisorium and upset price are both

a. Unenforceable
b. Void
c. Voidable
d. Rescissible

Answer: B

24. Jane asked Joshua if the latter can grant him a loan of P50,000 payable in one year plus 12%
interest and Joshua nodded his head. The contract of loans is in the stage of
a. Preparation
b. Consummation
c. Perfection
d. None of the answers are correct

Answer: A

25. A sold to B a fake Rolex watch on January 3, 2015. On January 13, 2015, B discovered that the
watch he bought from A was an imitation. The law provides that he can annul the sale as voidable
contract within four years. Prescription starts from:
 a. The time of delivery of the watch to B
b. January 3, 2015 when the sale was perfected
c. The time they first talked about the sale of the watch
d. January 13, 2015 when the fraud was discovered by B

Answer: D

26. A sold to B a particular pencil for P450. The sale is oral. It was agreed that the payment and
delivery are to be made after two years from the sale. At the stipulated period, A refused to deliver
alleging he has not obligation to do so. Is A correct?
a. No, because the contract is enforceable since the price is less than P500
b. Yes, because the sale is voidable and cannot be enforced
c. Yes, because the contract is unenforceable it being an oral contract
d. No, the contract is valid, binding and therefore must be given effect

Answer: C

27. X, a customer, drinks a bottle of soft drinks in a restaurant and is hospitalized due to harmful
substance in the beverage. Is the manufacturer liable for damages in the absence of contractual
relation between them?
a. Yes, because of quasi delict
b. Yes, because its liability arises out of quasi-contract
c. No, there being no contract from which liability may arise
d. Yes, because there is actually a contract between them, the restaurant being the agent of the
manufacturer

Answer: A

28. A and B entered into a contract of mortgage. However, as written the document states it is a
contract of sale with right to repurchase, the error due to the fault of the clerk/typist. Hence:
a. Because of the negligence of the parties in signing without first reading the instrument, they
are bound by the contents of the same
b. The instrument may be reformed because it does not express the true agreement of the
parties
c. The contract of sale must be annulled since it is voidable
d. The instrument has to be enforced as is for it is the proof of the agreement between the
parties

Answer: B

29. A borrowed P10,000 from B. On due date, A was not able to pay but she promised to give B a
specific ring, a specific bracelet, or a specific necklace, in payment of the debt. B accepted the
offer of A. What kind of obligation is the new obligation of A?
a. Simple obligation
b. Alternative obligation
c. Facultative obligation
d. Compound obligation
Answer: B

30. Before acceptance is conveyed, an offer becomes ineffective upon death, insanity, insolvency or
civil interdiction
a. Of both the offeror and offeree
b. Of either party
c. Of the offeree
d. Of the offeror

Answer: A

31. If a debtor gives a property to his creditor who accepts it in payment of an obligation in money,
this will be governed by
a. Sales
b. Exchange
c. Barter
d. Cession

Answer: A

32. A penalty cannot be enforced under the following except:

a. When the non-performance of the debtor is due to a fortuitous event
b. When the agreed penalty is contrary to moral
c. When there is a breach of obligation
d. When the principal obligation is void

Answer: C

33. D owes C P1,000,000 C tells D that he is willing to forego collection if the latter will just give him
tape recorded. D consent and gives C the tape recorded. D’s obligation is extinguished by
a. Payment
b. Condonation
c. Confusion
d. Compensation

Answer: A

34. S orally sold to B a specific parcel of land for P1,000,000 where the latter made a down payment
of P500,000 to the former. Can B compel S to execute a deed of sale in a public instrument?
a. Yes, because the sale is valid although rescissible
b. No, because oral sale of land is unenforceable if the sale is not in writing
c. Yes, because the sale is valid and enforceable
d. No, because the sale is void

Answer: C

35. Paul entered into a written agreement to sell a parcel of land to Steve. At the time the agreement
was executed, Paul had consumed alcoholic beverages. Paul’s ability to understand the nature
 and terms of the contract was not impaired. Steve did not believe that Paul was intoxicated. The
consent is:
a. Voidable at Paul’s option
b. Voidable at Steve’s option
c. Void as a matter of law
d. Legally binding on both parties

Answer: D

36. A mortgaged his residential land to B as a guarantee for the payment of P400,000 obligations
to B. They agreed that A should not sell the land while the obligation exists. Before the maturity
of the mortgage, C offered to buy the land from A, which is correct?
a. A cannot sell the land to C because of the agreement not to sell
b. A can sell the land to C only if B consents in writing
c. A can sell the land to C despite the agreement not to sell
d. A cannot sell the land to C unless A pays the obligation

Answer: C

37. S sold to B a specific car for P200,000 payable in four equal installments. S delivered the car to
B but required B to mortgage it back to S to answer for the unpaid installments. B paid the 1st
and 2nd installments but he failed to pay the balance. S foreclosed the mortgaged property and
sold it at public auction for P80,000. As a result,
a. S can recover from B the balance of P20,000
b. S can recover from B the balance of P20,000 if there is stipulation to that effect
c. S cannot recover the deficiency any more even if there is stipulation to that effect
d. S cannot recover the deficiency except if there is stipulation

Answer: C

38. In which of the following acts may a person not appoint an agent?
a. To represent a principal in a wedding ceremony where the principal is a principal sponsor
b. To vote for the principal during the meetings of stockholders where the principal is a
stockholder
c. To represent the principal in a baptismal ceremony where the principal is the father of the
child to be baptized
d. To attend a meeting of the board of directors of a corporation where the principal is a
director

Answer: D

39. Not a fundamental obligation of the agent

a. Sacrifice his interest and give it to the principal if there is a conflict
b. To render an accounting of the transaction
c. Should not carry out the agency even if that is the instruction, if he knew it would result in
a loss or damage to the principal
d. Can be the borrower if he is authorized to lend
Answer: D

40. S, a minor, sold her bracelet to B for P8,000. Later, B needing money to pay her daughter’s
tuition fee, borrowed P15,000 from C and as a security, pledged the bracelet to the latter. B
failed to pay C resulting into the auction sale of the bracelet in favor of D for P10,000 only.
Which of the following statements is correct?
a. The title of B over the bracelet is not valid, hence the pledge, as well as the sale of said
bracelet is likewise defective. The pledgor must be the owner of the thing pledged.
b. The deficiency of P5,000 may still be recovered by C from Bi if there is a stipulation to this
effect.
c. C can no longer recover the deficiency of P5,000 from B. The pledge, together with the sale
is valid. The voidable title of B is valid because it is not yet annulled.
d. If D was a purchaser in bad faith as he knew of the defective title of B over the bracelet from
S, ownership will not pass to him (D).

Answer: C