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UNIVERSITY OF SOUTHERN PHILIPPINES FOUNDATION

COLLEGE OF ACCOUNTANCY
BUSINESS LAW AND TAXATION REVIEW
SATURDAYS, 4:00PM – 7:00PM

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS


Quiz No. 2

Name: ________________ Date: _________


Score:_________

Instruction: Write the letter of your choice before the number.

1. G was appointed guardian of S, the latter being 16 years old. S

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sold his parcel of land in writing to B valued at P100,000 for

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P75,000, suffering lesion by 1/4 of the value. What is the status of

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the contract?

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a. Voidable
b. Enforceable

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c. Unenforceable
d. Rescissible
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2. “A”, bachelor lawyer, raped W twice. Upon learning this, “F” the
father of W, was able to force A to marry W under pain of being sued
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in court and dibarred from the practice of his law profession. Which
statement is correct?
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a. The defective marriage may, however, be ratified


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b. There was no defect, the marriage was perfectly valid


c. The marriage may be annulled on the ground of threat of
intimidation
d. The marriage may be annulled on the ground of force or
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violence
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3. In the preceding question, which of the following is correct?


a. If there is no more offer made, the contract is perfected on
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the offer of B because he will be considered as the highest


bidder.
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b. However, if another bidder, X, bidder P15,000, he will be


considered as the highest bidder and the contract is
perfected
c. In letter (b), if X increase his bid for P20,000, and no
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more bid equals his bid, the contract is perfected for


P20,000.
d. Answer not given

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4. This kind of defective contract refers to that contract which is
validly agreed upon because all the essential elements exists, but
Courts can nullify it when there is damage or prejudice to one of the
parties to a third person. Its enforcement would cause injustice by
reason of some external facts.
A. Voidable Contract C. Rescissible Contract
B. Void or inexistent Contract D. Unenforceable Contract

5. These persons are bound by contracts:


A. Contracting parties C. Assigns
B. Heirs D. All of the them

6. Essential requisites of a contract:


A. Consent C. Subject
B. Cause D. All of these.

7. When the object of the contract is outside the commerce of man, the

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contract is:

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A. Remissible C. Unenforceable
B. Voidable D. Void

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8. It is a contract wherein a person binds himself to a creditor to

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fulfill the obligation of the principal debtor in case the latter
should fail to do so:
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A. Guaranty C. Pacto Comisorio
B. Suretyship D. None of the three

9. Contracts are effective and binding only between the parties, their
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assigns and their heirs. Three of the following enumeration are


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exceptions as provided by law which does not belong to the exception?


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A. Where there is stipulation in favor of a third party.


B. Where one of the parties to the contract dies and thereafter a
suit is filed on the basis of the contact.
C. Where the obligations arising from contract are not transmissible
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by their nature.
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D. Where the obligations arising from the contract are not


transmissible by stipulation or by provision of law.

10. It is a contract wherein a person binds himself to render some


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service or to do something in representation or on behalf of another,


with the consent or authority of the latter.
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A. Agency C. Contract of piece of work


B. Contract of service D. None of the three

11. A and B who are both unemancipated minors entered into a contract.
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The contract entered into by and between them is:


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

12. Which of the following contracts cannot be ratified?


A. Those whose cause or object did not exist at the time of the
transaction

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B. Unauthorized contracts
C. Those where both parties are incapable of giving consent.
D. Those that fail to comply with Statute of Frauds

13. Mr. Santos sold his car to Mr. Garcia for P150,000.00. No date is
fixed by the parties for the performance of their respective
obligations. The obligation of Mr. Santos is:
A. To deliver the car immediately as there is a perfected contract
B. To deliver the car upon the payment by Mr. Garcia of P50,000.00
C. To rescind the contract since there is no time fixed for the
delivery and payment of the car.
D. To deliver the car within a reasonable time after the demand of
Mr. Garcia to deliver.

14. When the subject matter of a contract is lost through fortuitous


event, who is liable?
A. The debtors C. The creditors
B. None of them D. Both creditor and debtor

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15. The buyer of a thing has the right to the fruits of the thing:

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A. From the time the thing bought is delivered
B. From the time the sale is perfected

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C. From the time the obligation to deliver the thing bought arises.
D.
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From the time the fruits are delivered.
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16. Three (3) of the following may be valid objects of a contract,
except:
A. All that are within the commerce of man.
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B. All services which are not contrary to law.


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C. Impossible things or services.


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D. All rights that are transmissible.

17. A contract executed by two (2) parties and one (1) of the parties
in not capable of giving consent is:
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A. Voidable C. Void
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B. Rescissible D. Unenforceable

18. Three (3) of the following contracts are void. Which one is valid?
A. Oral contract of partnership of three (3) partners and capital
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contribution is more than P3,000.4400 in cash.


B. Written contract contemplating impossible services.
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C. Oral contract of partnership where real estate is contributed as


capital.
D. Agent’s authority to sell property given orally.
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19. These are the basic principles or characteristics of a contract.


Which is exception?
A. Freedom or liberty to stipulate
B. Obligatory force and compliance in good faith
C. Binding on third parties
D. Perfected by mere consent

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20. Simulation of a contract may e absolute or relative. It is
relative when:
A. The parties do not intend to be bound at all
B. The contract is void
C. The parties conceal their true agreement
D. Answer not given

21. The proper remedy is annulment of contract and not reformation


when:
A. Mistake, fraud, inequitable conduct, or accident has prevented a
meeting of minds of the parties.
B. A mutual mistake of the parties causes the failure of the
instrument to disclose their real agreement.
C. One party was mistaken and the other knew or believed that the
instrument did not state their real agreement, but concealed the fact
from former.
D. Answer not given.

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22. The action to annul a voidable contract, such as a contract where
one of the parties is incapable of giving consent to the contract, is

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extinguished by:
A. Novation C. Ratification

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B. Rescission D. Answer not given
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23. A contract or receipt for the transport of goods and their
delivery to the person named therein to order or bearer is a:
A. Warehouse receipts C. Bill of lading
B. Dock warrant D. Answer not given
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24. Cecilio kidnapped and tortured Eduardo for refusing to sell his
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(Eduardo’s) land to Cecilio. Eduardo who could no longer bear the


physical pains inflicted upon him signed a document of sale in favor
of Cecilio. This sale is
A. Void C. Valid
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B. Voidable D. Answer not given


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25. Choose the contracts which are voidable.


A. Those undertaken in fraud of creditors when the latter cannot in
any manner collect the claims due them.
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B. Those where the consent is vitiated by mistake, violence,


intimidation, undue influence of fraud.
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C. Those whose subject is outside the commerce of man.


D. Those where both parties are incapable of giving consent to a
contract.
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26. A contract is in the stage of conception when:


A. There is meeting of the minds
B. Negotiations is in progress.
C. The parties come to the agreement
D. The contract is perfected.

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27. Mr. Gamboa owes Mr. Evangelista P100,000. Gamboa knows that on
maturity date, he will not be able to pay Evangelista, and in order to
prevent attachment of his property by Evangelista, Gamboa, before
maturity of his debt, executes a contract pretending to sell to Mr.
Santiago his property. Which of the following statements is correct/
A. The contract is not valid for lack of consideration
B. The contract is binding between Gamboa and Santiago
C. The contract being simulated and executed to defraud Evangelista
is void.
D. Mr. Evangelista can seek rescission of the fictitious contract.

28. Which statements is correct?


A. Condonation is generally gratuitous.
B. Condonation is gratiuitous.
C. Condonation is onerous.
D. Condonation is essentially gratuitous.

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29. Rescission of contracts can take place in this case:

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A. When the things which are the object of the contract are legally
in the possession of third persons who acted in bad faith;

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B. When he who demands rescission can return whatever he may be
obliged to restore;

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C. When the party seeking rescission can perform only as to part
and rescind to remainder;
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D. When the seller cannot return the installment paid to him by
buyer.

30. A stipulation in favor of a third person conferring a clear and


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deliberate favor upon him and which stipulation is merely a part of a


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contract entered into by the parties, neither of whom acted as an


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agent of a third person, and which favor can be demanded by third


person if duly accepted by him before it could be revoked.
A. Stipulation pour autrui C. Caveat emptor
B. In pari delicto D. Pactum commissorium
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31. Juan sold his parcel of land to Maria for only P1M although its
value is P3M. He therefore suffered lesion due to the inadequacy of
the price. The contract is
A. Voidable B. Unenforceable C. Rescissible D. Valid
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32. It is an act or means by virtue of which efficacy is given to a


contract which suffers from vice of curable nullity.
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A. rescission B. ratification. C. prescription D. annulment

33. Caloy offered to sell his house and lot for P2M to Buboy. Buboy
could not make up his mind so he asked that he be given 30 days to
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decide. Caloy agreed. After 15 days, Caloy raised the price to


P2.5M. Assume that Buboy decided to buy the house and lot the
following day, can he compel Caloy to accept the P2M price and
deliver the house and lot?
A. No, there was no acceptance of the original offer.
B. Yes, Caloy cannot change his offer without the consent of Buboy.
C. Yes, there was already a perfected contract of sale.

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D. No, because Buboy agreed that Caloy may change his mind later on
34. An example of an aleatory contract is
A. Sale B. Pledge C. Insurance D. Partnership
35. Vilma, guardian of Nora sold Nora’s house and lot worth P2M for
P1M. As a result:
A. The contract can be rescinded because of inadequacy of price.
B. The contract cannot be rescinded because there is no fraud,
mistake or undue influence.
C. The contract cannot be rescinded because all the elements of a
contract are present.
D. The contract cannot be rescinded because it is expressly provided
by law as one of the contracts that cannot be rescinded

36. Which of the following would be an example of an executory


contract?
A. A customer places an order for merchandise to be picked up and
paid for in one week.

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B. A company sold a one-year subscriptions to its publication and

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received the subscription price in cash.
C. A company sold an appliance and gave a warranty to replace

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defective parts within one year after sale.
D. A company borrowed money from a bank to purchase a delivery

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truck.
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37. S offers to sell his house to B for P100,000. B asks him if he
would accept P80,000. Which of the following is correct?
a. B’s response is more of inquiry, the P100,000 offer of S is
still in force
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b. B’s response is a rejection of the P100,000 offer, and there


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is no offer for P80,000 because it is too indefinite to be


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an offer
c. B’s response is a counter offer effectively terminating the
P100,000 offer and instigating an offer for P80,000
d. Because of ambiguity, both offers are terminated by
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operation of law
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38. Which of the following contracts is not valid?


a. Mutual promise to marry entered into orally
b. Sale of immovable property orally entered into
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c. One of the parties in a contract is incapable of giving


consent
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d. None of the above

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 P10,000. It turned out however,
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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

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40. Three of the following are rescissible, which is not?
a. Sale of property under litigation made by the defendant
without the knowledge of plaintiff and authority of the
court
b. Those made to defraud creditors when the creditors has no
other means to recover his claim
c. Those agreed upon in presentation of absentees, if the
absentee suffers lesion by more than 1/4 of the value of the
property subject of the contract
d. None of the above

41. 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

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contracting parties and the third person

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b. The third person communicated his acceptance to the obligor
before it’s revocation

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c. The contracting parties must have clearly and deliberately
conferred a favor upon that third person

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d. There must be stipulation in favor of a third person
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42. The following are real contracts. Which is not?
A. Contract of donation C. Contract of guaranty
B. Contract of deposit D. Contract of loan
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43. The following cannot give consent to a contract. Which is the


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exception?
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A. Un-emancipated minors
B Deaf-mute who does not know how to write.
C. Insane person during his lucid interval.
D. Person under civil interdiction.
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44. Choose the contract which is voidable:


A. Those undertaken in fraud of creditors where the latter cannot in
any manner collect his credit.
B. Those where consent of one contracting party was vitiated by
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violence or mistake.
C. Those whose object is outside the commerce of man.
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D. Those where both contracting parties cannot give consent.

45. An absolutely simulated contract is :


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

46. An insane entered into contract with a minor.


A. The contract is unenforceable.
B. The contract is voidable
C. The contract is rescissible
D. The contract is void.

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47. Thru some mistake on the part of a bank personnel, A was given One
Million Pesos instead of One Thousand Pesos. This situation will be
governed by the provisions on
A. Contracts C. Quasi-delicts
B. Quasi-contracts D. Law

48. I. As a general rule, in an obligation with a penal clause, the


penalty takes the place of the indemnity for damages and the payment
of interests in case of non-compliance.
II. Proof of actual damages suffered by the creditor is necessary
in order that the penalty may be enforced.
A. True; True C. True; False
B. False; True D. False; False

49. I. The nullity of the penal clause does not carry with it that
of the principal obligation.

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II. The nullity of the principal obligation carries with it that

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of the penal clause.
A. True; True C. True; False

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B. False; True D. False; False

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50. I. No one may contract in the name of another without being
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authorized by the latter, or unless he has by law a right to represent
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him.
II. A contract entered into in the name of another by one who has
no authority or legal representation, or who has acted beyond his
powers, shall be enforceable, unless it is ratified, expressly or
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impliedly, by the person on whose behalf it has been executed, before


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it is revoked by the other contracting party.


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A. True; True C. True; False


B. False; True D. False; False
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-end of quiz-
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Almari Vincent P. Lariza, CPA


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“Thou shalt cultivate the special gifts which God has granted thee, working and
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studying according to thy ability, never leaving the path of righteousness and justice,
in order to attain thy own perfection, by means whereof thou shalt contribute to the
progress of humanity; thus; thou shalt fulfill the mission to which God has appointed
thee in this life and by so doing, thou shalt be honored, and being honored, thou shalt
glorify thy God.” - Apolinario Mabini

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