Law

Multiple Choice
Identify the choice that best completes the statement or answers the question.

____ 1. This is not negotiation of a negotiable instrument

a. Assignment
b. Indorsement completed by delivery of an instrument payable to order
c. Delivery of a bearer instrument
d. Delivery of an instrument to the payee
____ 2.
I Liability from damages arising from fraud is demandable and there can be a waiver
of an action for past fraud.
II There can be a waiver of an action for future negligence but not fraud.

a. True; True
b. False; False
c. False; True
d. True; False
____ 3. Your clients want to organize a corporation with the following capital structure. Authorized Capital Stock - P
10 million, divided into 5,000,000 no par value shares of preferred stock to be offered at an issue value of
P1.00 per share, and 5,000,000 shares of common stock with a par value of P 1.00 per share. What features,
if any is not allowed by law?
a. The P 1.00 par value of common shares
b. 5,000,000 no par value preferred shares
c. The issued value of P1.00 per share for preferred shares
d. Mingling in the capital structure of the same corporation common par value and preferred
no-par value shares
____ 4.
The seller must be the owner of the property he sells but his ownership need not exist on
perfection but upon delivery of the thing.
A contract of sale may be absolute, conditional, either suspensive or resolutory; or subject to a
contingency; or undivided interest in property, either present or future except future
inheritance.

a. First is true, second is false

b. First is false, second is true
c. Both are false
d. Both are true
____ 5. When any ostensible corporation is sued on any transaction entered by it as a corporation or in any tort
committed by it as such, it shall not be allowed to use as a defense its lack of corporate personality since it is
considered a
a. corporation sole
b. eleemosynary corporation
c. de factor corporation
d. corporation by estoppel doctrine
____ 6. One is not a requisite needed in order that obligation shall be extinguished by loss or destruction of the thing
due
a. When the thing lost is generic
b. When the thing is lost without the fault of the debtor
c. When the thing is lost before the debtor has incurred in delay
d. When the thing lost is specific
____ 7. A, issued a promissory note payable to B or order for P10,000 for 10 bottles of whisky sold by B to A. Later
B negotiated the note to C. Subsequently, A discovered that the only 5 bottles of whisky are genuine. As a
result
a. C can enforce the note against A only for P5,000 regardless of whether he is a holder in
due course or not.
b. C cannot enforce the note against A for P10,000 even if he is a holder in due course.
c. C can enforce the note against A for P10,000 regardless of whether C is holder in due
course or not.
d. C can enforce the note against A only for P5,000 if he is not a holder in due course.
____ 8. Under a trust receipt arrangement, who among the parties shall bear the risk of loss of goods covered by trust
receipt?
a. Both the entrustor and the entrustee jointly
b. The entrustee who holds the goods in trust for the entrustor
c. The entrustor and the entrustee are solidarily liable
d. The entrustor who is the owner of the goods
____ 9. Alpha is maker of a promissory note for P100,000 payable to the order of Bravo who negotiates the same in
favor of Charlie. Charlie loses the note and is found by Xray who forges the signature of Charlie and
pretending to be Charlie negotiates the note to Delta, Delta to Echo, Echo to Fanta and Fanta to Gamma who
is a holder in due course. Under the circumstances, which of these is not an incorrect statement?
a. Echo is not liable to Fanta precisely because he was not the one who forged the signature
of Charlie.
b. The signature of Charlie being forged, it becomes inoperative and payment cannot be
enforced as against him.
c. Being a holder in due course, Gamma can recover from maker Alpha.
d. Xray is not liable to any party to the instrument since his name does not appear thereon.
____ 10. There is compensation
a. A owes B P10,000 payable May 31, 2010. B owes A P10,000 payable on June 30, 2010. If
today is May 31, 2010
b. A, debtor of two partners is a creditor of the partnership
c. A owes B a fountain pen and B owes A also a fountain pen. Both debts are due
d. A in his capacity as guardian of B is a creditor of C. c in turn is a creditor of A who owes
him a personal debt
____ 11.
All the partners shall be considered agents and whatever any one of them may do alone
shall bind the partnership.
Every partner may, without the consent of the other partners, associate another person in his
share.

a. First statement is false; second statement is true

b. First statement is true; second statement is false
c. Both statements are true
 d. Both are false
____ 12. The following are remedies available to a corporation to enforce payment of stock except
a. extra-judicial sale
b. mandamus
c. deduction from cash dividends
d. withholding of stock dividends
____ 13. The unpaid seller is not entitled to retain possession of the goods where
a. The possession of the seller on the goods is only as agent or bailee for the buyer.
b. The buyer is insolvent
c. The goods have been sold without any stipulation as to credit.
d. The goods have been sold on credit, but the term of credit has expired.
e. None of the above.
____ 14. Any director of a corporation may be removed from office by vote of
a. Majority of the stockholders present
b. Majority of the members of the board
c. 2/3 of the outstanding capital stock
d. 2/3 of the stockholders present
____ 15. Quasi-tradition is equivalent to
a. Symbolical delivery
b. Execution of a public instrument
c. Brevi-manu
d. Longa manu
e. All of the above.
____ 16. An insurer is never liable for loss due to
a. perils of the ship in marine insurance
b. death not due to accidental causes in life insurance
c. suicide by the insured who is not insane in life insurance
d. friendly fire in fire insurance
____ 17. A subscribed to 100 shares of X Corporation, paying 25% thereof. Despite the demand by A for the issuance
of stock certificate, the corporation refuses to issue one corresponding to the 25% paid. Meanwhile, the
corporation has become insolvent and A now refuses to pay his unpaid balance on his subscription. Can A
validly refuse to pay the unpaid balance on his unpaid subscription now that the corporation has become
insolvent?
a. No, under the doctrine of piercing the veil of corporate fiction.
b. No, under the trust fund doctrine for the protection of creditors.
c. Yes, because of the insolvency of the corporation which also extinguished his obligation
to pay the balance.
d. Yes, because of the denial of his right to stock certificate.
____ 18. Which among the following contracts is void?
a. A contract of sale where B, the buyer, twisted the arm of S, the seller, so that S would sign
the deed of sale
b. A contract of sale where B, the buyer, aimed a gun at the wife of S, so that S would sign
the deed of sale
c. A contract for the sale of a cow which is suffering from a contagious disease
d. A contract of barter between S, insane, and B, 17 years old
 Dr. A. B., a second year resident of X Hospital, and Atty. C.D., a friend of Dr. A.B.’s elder sister (the Late
Isabel), were having a drink one lazy, languorous Friday evening. Like her eldest sister, Dr. A.B was
somewhat fascinated by the legal profession and consulted Atty. C.D. on the following matters

i. X Hospital is owned and operated by X Corporation

ii. As such, X Corporation utilizes doctors, surgeons and medical practitioners (including
resident doctors), and pays them a fixed monthly fee
iii. Dr. A.B. and four of her fellow doctors (E,F,G and H) dream of putting up their own
clinic after the third year of their residency, so they agreed to incorporate Z
Corporation for the purpose
iv. For the purpose, they entered into pre-incorporation subscription agreements
v. Thereafter, they filed the application for incorporation, together with the Articles of
Incorporation and By-laws of Z Corporation with the Securities and Exchange
vi Prior to the issuance of the certificate of incorporation, E, without the knowledge of the
others, enters into a Contract of Lease with R Realty Corporation for the lease of
property for the intended clinic

____ 19. If Z Corporation’s application for incorporation is denied, who will be liable under the lease contract with R
Realty Corporation?
a. Dr. A.B., E, F, G and H as general partners under the corporation by estoppel doctrine
b. Dr. A.B., E, F, G and H but only to the extent of their respective subscriptions
c. No one since the lease is void, Z Corporation being the non-existent
d. E as promoter under the theory on promoter’s contracts
____ 20.
The ownership in the thing shall not pass to the purchaser until he has fully paid the price.
The vendor is responsible to the vendee for any hidden faults or defects in the thing sold only if he
was aware thereof.

a. Both are true

b. Both are false
c. False, true
d. True, false
____ 21. It is basic in Corporation Law that a corporation must have an articles of Incorporation, which may be
amended by the corporation through
a. a 2/3 vote of its directors/ trustees and written assent of stockholders representing a
majority of the outstanding capital stock or majority of members in non-stock corporations
b. a majority vote of its directors or trustees
c. a majority vote of its directors or trustees and written assent of stockholders representing
2/3 of outstanding capital or 2/3 of members of non-stock corporations
d. a majority vote of its directors or trustees and written assent of stockholder representing a
majority of the outstanding capital stock or majority of members of non-stock corporations
____ 22. Which of the following is a Security under the SRC?
a. U.S. Treasury bills
b. assignment of playing rights in Manila Golf Club
c. syndicated loan agreement between one borrower and several lenders
d. time deposits certificate issued by a bank
____ 23. B forged A’s signature as drawer of a check drawn on Citibank. The check was purportedly payable to the
order of B. B then indorsed the check to C, a holder in due course, who deposited the same to his account
with BPI. The check passed through the normal course of clearing and accordingly the drawee Citibank
credited the collecting bank BPI with the amount of the check which Citibank in turn debited from A’s
deposit. Upon receiving his monthly statement from Citibank, together with the canceled checks debited
from his deposit account, discovered the forgery.

Can A compel Citibank to re-credit to his account the amount of the forged check?
a. Yes, because of forgery
b. No, because it is the responsibility of the bank to examine the check
c. No, because C is a holder in due course
d. Yes, because the check was actually cleared
____ 24. Works are protected by the sole fact of their creation
a. irrespective of their mode or form of expression, but not as to their content quality and
purpose
b. irrespective of their mode or form of expression
c. irrespective of their mode or form of expression, as well as to their content quality and
purpose
d. irrespective of their content quality and purpose
____ 25. Pedro was a passenger of a Honda CRV which collided with a BMW. Both motor vehicles have a P50,000
Compulsory Motor Vehicle Liability insurance coverage. Who insurance company is liable if Pedro wants
immediate payment of his P5,000 injuries without waiting for the determination of liability for the accident
a. Pedro must file his claim against the CRV’s insurer because he was a passenger of the
CRV
b. Pedro can choose to file his claim against the CRV’s insurer or the BMW’s insurer
because his P5,000 injuries are within the limits of both insurers
c. Pedro must file his claim against the BMW’s insurer because he was not a passenger of
the BMW
____ 26. S sold to B a specific car for P100,000 payable in four (4) equal installments. B mortgaged the car to C to
answer the unpaid installments. First and second installments B failed to pay. The right of S is:
a. Demand payment from B
b. Exact fulfillment of the obligation
c. Cancel the sale
d. All of the above
____ 27.
Payment by cession does not totally extinguish the whole obligation
In obligation with penal clauses, it is necessary for the creditor to show proof of actual damages
suffered by him on account of the non-performance of the obligation by the debtor.

a. True, true
b. False, false
c. False, True
d. True, false
____ 28.
A The partnership is bound to make good the loss where one partner acting within an apparent
authority receives money or property of a third person and misapplies it.
 B A person accepted as a partner into an existing partnership is liable for all obligations of the
partnership even those arising before his entry to the partnership.
C The creditors of the partnership shall be preferred to those of each partner as regards the
partnership property.

a. Only B is wrong
b. B and C are correct
c. All statements are correct
d. Only C is true
____ 29. A, B, C are co-owners of a parcel of land. A sold his share to B. Can C redeem the said share from B?
a. No, legal redemption applies only if the interest was alienated by onerous title to a third
person.
b. No, unless he was notified of the sale prior to its perfection.
c. Yes, provided he pays B the price, expenses of the sale and necessary and useful expenses
on the thing sold.
d. Yes, because the law frowns upon co-ownership.
____ 30. B went to a store and offered to buy a certain watch for P1,000. S said that he is willing to give it for P1,200.
B turned to go away because he did not want to pay the price. S called him (B) and said he was willing to sell
the watch for P1,000. Is the contact perfected?
a. No, S made another offer not accepted by B.
b. Yes, because B’s acceptance is not qualified.
c. Yes, because the consent was already manifested at the time of the offer.
d. Yes, because there was a meeting of minds between S and B.
____ 31. Alden appoints Maine as agent to sell his land. Which of the following is valid?
a. The authority of Maine is in writing but Maine mortgages it also in writing.
b. The authority of Maine is oral and Maine sells the land to Nidora for P50,000 in written
contract of sale.
c. The authority of Maine is in writing but the sale of land in writing was made beyond the
period expressly set forth by Ado.
d. The authority of Maine from Alden is by way of letter and Main sells the land to Nidora in
writing.
____ 32. A, B and C executed a promissory note worded as follows: “We promise to pay X, Y and Z the sum of
P90,000. Sgd. A, B and C. which is correct?
a. A is obliged to pay to Y P30,000
b. A is obliged to pay to Z P10,000
c. A is obliged to pay to X P60,000
d. A is obliged to pay X, Y and Z P90,000
____ 33. The common law “Duty of Obedience” of directors, trustees and officers comes from the principle in
a. Agency Law principle that every agent is bound to render an account of his transaction
and delivery to the principal whatever he may have receive by virtue of the agency, even
though it may not be owing to the principal
b. in Corporation Law that being a fiduciary of the corporation, he must account to the
corporation all profits and income arising from the property or business managed for the
corporation
c. Agency Law principle that the agent shall be liable for damages if, there being a conflict
between his interest and those of the principal, he should prefer his own
d. Agency Law that every agency must act within the scope of his authority and in
 accordance with the instructions of the principal
____ 34. The doctrine of “Limited Liability” flows from
a. the corporate set-up that directors and corporate officers are agents of the corporation, and
thereby do not become personally liable for corporate debts and obligations
b. the corporate set-up that stockholders join the corporate setting merely as investors to
freely-transferable shares of stock
c. the corporate set-up whereby all corporate powers are vested by law in the Board of
Directors
d. the legal theory that a corporation entity is separate and distinct form ifs stockholders
____ 35. Under the Code of Commerce, contracts negotiated through correspondences shall be deemed perfected upon
which of the following event?
a. From the moment the acceptance through letter is made
b. From the time the offer is made by the offeror
c. From the moment the offeror learned of the acceptance of the offeree
d. From the moment the acceptance made by a letter is received by the offeror
____ 36. Pedro, as President of ACD Corporation, was allowed the use of a Ford Expedition registered in the name of
the corporation. Upon his retirement, he continued to use the Ford Expedition and refused to return it. Which
one of the following would be a correct reason for not returning the vehicle?
a. He owns all of the outstanding shares of the corporation
b. He bought the vehicle from the corporation
c. The corporation owes him some money
d. The vehicle was acquired to the corporation
____ 37. Shares of stock that have been issued by the corporation for consideration less than their par value would
strictly and technically be called
a. “Watered stocks”
b. “Discounted stock”
c. “Premium stocks”
d. “Void stocks”
____ 38. 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 between a private individual and a public officer
c. A universal partnership of profits between a man and a woman living together as husband
and wife without the benefit of marriage
d. A particular partnership between husband and wife
____ 39. In a contract of sale executed by S and B, it appears S sold his motor vehicle to B and B bought it for
P50,000. It turned however, S has three motor vehicles: Galant valued P80,000; Hi-Ace van valued at
P70,000; and a Jeep valued P60,000. Which of the following is correct?
a. The parties can ask for annulment of the contract.
b. There is no contract, because the object is not certain.
c. The contract shall be reformed because there was mistake.
d. The parties can ask for interpretation because the word motor vehicle is ambiguous.
____ 40. The change in the relation of the partners caused by a partner ceasing to be associated in the carrying on of
business.
a. Termination of partnership
b. Winding-up
c. Dissolution
 d. Withdrawal
____ 41. 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. Particular partnership
b. Partnership at will
c. Universal partnership of all present property
d. Universal partnership of profits
____ 42. Sale is distinguished from dation in payment in that in sale.
a. There is a pre-existing obligation or credit.
b. The cause is the price.
c. It is a mode of extinguishing an obligation in the form of payment
d. None of the above.
____ 43. A leased a property to B. part of the premises was subleased by B to C. B violated the conditions of the lease,
so A wanted to rescind the lease contract. Which is correct?
a. A can rescind the lease contract provided he respects the sublease
b. B may object to the cancellation of the contract because he is not a party to the violation
c. A cannot rescind the lease contract as the sublease would naturally be affected
d. A may rescind the lease contract and is not bound to respect the sublease
____ 44. D forced C to sign a promissory note where C promises to pay D P100,000. The correct amount should be
P60,000. Which is correct?
a. The contract is unenforceable
b. D cannot demand payment from C because the contract is voidable
c. The contract is valid
d. The contract is rescissible because there is lesion
____ 45. Legal compensation shall exist in the following cases, except:
a. That both debts be due.
b. That they may be unliquidated and demandable.
c. That they both consist in a sum of money or if consumable also of the same kind and
quality as that stated.
d. That each of the obliges be the principal creditor of the other and he be at the same
principal debtor of the debtor.
____ 46. An attachment to an insurance policy which modifies the conditions of the policy by expanding or restricting
its benefits or excluding certain conditions from its coverage is known as
a. endorsements
b. clauses
c. warranties
d. riders
____ 47. A and B agreed on a certain contract, but A fraudulently made a document reciting another kind of contract.
Later both A and B died. Which is correct?
a. Only the son of A may bring an action to reform the instrument
b. Only the son of B may bring an action to reform the instrument
c. Either the son of A or the son of B may bring an action to reform the instrument
d. Neither the son of A nor the son of B may bring an action to reform the instrument
____ 48.
A It is indispensable for quasi-delict to exist that there is no pre-existing contractual relation
 between the parties.
B The unpaid seller cannot recover the thing sold from an innocent purchaser for value.

a. True, false
b. False, false
c. False, true
d. True, true
____ 49. Which of the following is not negotiable?
a. Documentary Bill of Exchange
b. Certificate of deposit
c. Postal money order
d. Clean bill of exchange
____ 50. G is an accountant and H is a lawyer. Can they form a particular partnership for an accounting practice?
a. No, because they have different fields of interest.
b. No, because in the practice of profession, all partners must belong to the same profession
and the partnership should be for the exercise of common profession.
c. Yes, partnership may pertain to the particular of profession.
d. Yes, they are both professionals.
Law
Answer Section

MULTIPLE CHOICE

1. ANS: A OBJ: Negotiable instruments

2. ANS: A OBJ: Contracts
3. ANS: B OBJ: Corporation Law
4. ANS: D OBJ: Contract of Sales
5. ANS: D OBJ: Corporation Law
6. ANS: A OBJ: Obligations
7. ANS: D OBJ: Negotiable instruments
8. ANS: D OBJ: Marine Law
9. ANS: B
10. ANS: C OBJ: Negotiable instruments
11. ANS: C OBJ: Partnership Law
12. ANS: B OBJ: Corporation Law
13. ANS: E OBJ: Contract of Sales
14. ANS: C OBJ: Corporation Law
15. ANS: B OBJ: Contract of Sales
16. ANS: D OBJ: Insurance Law
17. ANS: B OBJ: Corporation Law
18. ANS: C OBJ: Contracts
19. ANS: D OBJ: Corporation Law
20. ANS: B OBJ: Contract of Sales
21. ANS: C OBJ: Corporation Law
22. ANS: A OBJ: Negotiable instruments
23. ANS: A OBJ: Negotiable instruments
24. ANS: C OBJ: Insurance Law
25. ANS: A OBJ: Marine Law
26. ANS: D OBJ: Contract of Sales
27. ANS: D OBJ: Obligations
28. ANS: C OBJ: Partnership Law
29. ANS: A OBJ: Contract of Sales
30. ANS: A OBJ: Contract of Sales
31. ANS: D
32. ANS: B OBJ: Negotiable instruments
33. ANS: D OBJ: Corporation Law
34. ANS: D OBJ: Corporation Law
35. ANS: C OBJ: Contracts
36. ANS: B OBJ: Corporation Law
37. ANS: B OBJ: Corporation Law
38. ANS: D OBJ: Partnership Law
39. ANS: B OBJ: Contract of Sales
40. ANS: C OBJ: Partnership Law
41. ANS: D OBJ: Partnership Law
42. ANS: B OBJ: Contract of Sales
43. ANS: D OBJ: Contracts
44. ANS: C OBJ: Contracts
45. ANS: B OBJ: Obligations
46. ANS: D OBJ: Insurance Law
47. ANS: B OBJ: Contracts
48. ANS: D OBJ: Obligations
49. ANS: C OBJ: Negotiable instruments
50. ANS: B OBJ: Partnership Law