Part 1: Obligations (VSA-IRS)

1. Unless the law or the stipulations of the parties require another standard of care, every person obliged to give something is also obliged to take care of it with: a. Extra-ordinary diligence b. Diligence of a father of a good family c. Diligence of a good father of a family d. Good diligence of a father of a family 2. This refers to delay on the part of the creditor. a. Mora solvendi ex re b. Compensatio morae c. Mora solvendi ex personae d. Mora accipiendi 3. One of the following obligations is not immediately demandable. a. Pure obligation b. Obligation with a resolutory condition c. Obligation with an in diem period d. Obligation with an ex die period 4. The debtor shall lose the right to make use of the period in the following cases, except when he: a. Becomes insolvent b. Violates any undertaking in consideration of which the creditor agreed to the period c. Attempts to abscond d. Does not furnish any guaranty or security to the creditor 5. A, B, C, and D, joint debtors, are obliged to give V, W, X, Y, and Z, solidary creditors, P20,000.00. a. V may collect from B P20,000.00 b. V may collect from B P4,000.00 c. V may collect from B P5,000.00 d. V may collect from B P1,000.00 6. In obligations with a penal clause, the creditor as a rule may recover from the debtor in case of breach the following: a. The penalty as agreed upon, plus damages and interest b. The penalty and damages c. The penalty and interest d. Only the penalty 7. B borrowed from XYZ bank P2,000,000.00 payable at the end of 5 years. Before maturity, an extraordinary deflation supervened causing the value of the debt to rise to P5,000,000.00 on the date of maturity. On due date, B must pay XYZ bank: a. P2,000,000.00 b. P5,000,000.00 c. P800,000.00 d. P20,000,000.00 8. Consignation alone without any tender of payment is sufficient in the following cases, except: a. When the creditor is absent or unknown or does not appear at the place of payment b. When the creditor represents the title to the obligation for collection c. When without just cause, the creditor refuses to give a receipt d. When two or more persons claim the same right to collect

9. D owes C P10,000.00 with G as guarantor. C, on the other hand, owes D, P8,000.00. Both debts are already due but D is insolvent. In this case: a. C may collect from G P10,000.00 b. C may collect from G P2,000.00 because a guarantor can set up compensation as regards what the creditor owes the principal debtor. c. C may collect nothing form G because D is insolvent d. C may collect P8,000.00 form G 10. On July 1, 2015, D obliged himself to give C P50,000.00 if C will marry X on or before December 31, 2015. The condition of the obligation is a: a. Positive condition b. Negative condition c. Joint condition d. Impossible condition 11. D owes C P6,000.00. No date for payment was stipulated by the parties. a. C cannot require D to pay because there is no date for payment b. C can require D to pay at anytime c. D is not liable to C because the obligation is void there being no date of payment d. D is not required to pay unless C goes to court and asks the court to fix a period for the payment 12. Legal compensation shall not be proper in three of the following cases. Which is the exception? a. Commodatum b. Civil liability arising from a criminal offense c. Gratuitous support d. Bank deposit 13. A, B, and C are solidarily liable to X for P30,000.00. A pays X the whole amount due. C, however, is insolvent. a. A alone will bear the share of C who is insolvent since he (A) made the payment b. A can collect from B P10,000.00 c. A can collect from B P15,000.00 d. A can demand a refund of P10,000.00 from X pertaining to C’s share since C is insolvent 14. D is indebted to C for P20,000.00 which is due on June 10. C owes D P15,000.00 which is due on June 5. On June 8, C assigned his credit rights to T. D gave his consent to the assignment but did not reserve his right to the compensation. On June 10, how much may T collect from D? a. P20,000.00 b. P15,000.00 c. P5,000.00 d. Nothing 15. The return of what has been paid by mistake is known as: a. Solutio indebiti b. Negotiorum gestio c. Quasi-delict d. Natural obligation 16. One of the following obligations is not demandable at once. Which is it? a. D to give his car to C. No date was fixed by the parties for the date of delivery b. D to give his car to C until C completes his course in BS Accountancy c. D to give his car to C until X dies d. D to give C his car should C enroll in BS Accountancy

17. D promised to give C 10 sacks of rice when X, C’s father, dies. The obligation of D to C is: a. An obligation with a suspensive condition b. An obligation with a resolutory condition c. An obligation with a period d. A pure obligation 18. The right of C before the delivery, on one hand, and his right after the delivery, on the other hand, of the agricultural land and its fruits, to him are referred to as: a. Personal right and real right, respectively b. Real right and personal right, respectively c. Both are considered a personal right d. Both are considered a real right 19. When the debtor and the creditor agree to a dacion en pago (transfer of ownership of property to the creditor to settle a monetary obligation), before such transfer of ownership, there is actually a: a. Compensation b. Confusion c. Condonation d. Novation 20. Alternative obligation and facultative obligation are similar in which of the following respects? a. The right of choice may be given either to the debtor or creditor b. Several prestations are due c. Only one prestation is due but the debtor may render another in substitution d. The obligation becomes a simple obligation once the choice of the prestation is made and communicated 21. D owes C the following debts: P3,000.00 due on August 10; P3,000.00 due on August 15; P3,000.00 due on August 20; and P3,000.00 due on August 25 which is secured by pledge of D’s ring. If today is August 22, and D pays C P3,000.00 with neither D nor C designating the debt to which the payment shall apply, the payment shall be applied: a. To the debt due on August 10, following the first-due, first-pay basis b. To the debts due on August 10, August 15, and August 20, proportionately at P1,000.00 each c. To the debt due on August 25, since it is the most onerous to D d. To all the debts proportionately at P750.00 each 22. Which of the following obligations is a pure obligation and is demandable at once? a. D to allow C to use D’s car until December 31, 2015 b. D to allow C to use D’s car until C finishes his course in accounting c. D to give C his car. No mention is made when D shall give the car d. D to give C a car if C finishes his course in accounting 23. D borrowed P100,000.00 from C. the parties agreed at the time the obligation was constituted that should D so desire, he may give his agricultural land to C by way of dacion en pago to pay his loan obligation on due date. The obligation of D to C is: a. A conjunctive obligation b. A simple obligation c. An alternative obligation d. A facultative obligation

24. D obtained a loan from C in the amount of P50,000.00. Unable to give cash on due date in payment of his loan obligation, D proposed to C that he would be giving instead his diamond ring to settle his debt. C agreed and accepted the ring from D. the new agreement between D and C involved both: a. Novation and application of payment b. Novation and dacion en pago c. Compensation and payment by cession d. Confusion and tender of payment 25. A, B, and C are liable in solidum to X for P12,000.00 X renounced the share of A who accepted it. Later, B becomes insolvent. a. X can collect from C P8,000.00 b. X can collect from C P4,000.00 c. X can collect from C P12,000.00 d. X can collect nothing from C 26. D owes C P20,000.00 due on March 15. C, on the other hand, owes D the following debts: P8,000.00 due on March 1, P3,000.00 due on March 8, P5,000.00 due on March 14. On March 12, C assigned his right to T with notice to D but with D not giving his consent to the assignment. On March 15, T can collect from D: a. P20,000.00 b. P9,000.00 c. P4,000.00 d. None, because the assignment made by C was without the consent of D 27. A, B, and C are solidary debtors of X, Y, and Z. solidary creditors, in the amount of P2,700.00. X renounces the whole obligation without the consent of Y and Z. The debtors accepted he renunciation. a. The whole obligation is extinguished b. Only P900.00 is extinguished c. No part of the obligation is extinguished because not all the creditors consented to the renunciation d. Only P300.00 is extinguished 28. A, B, and C are obliged to deliver a specific horse to X, Y, and Z. a. A demand made by X against A, B, and C is a valid demand against all the debtors b. A demand made by X, Y, and Z against A is a valid demand against all the debtors c. If a valid demand is made against all the debtors but debtor C cannot comply with his part of the obligation, the obligation is converted into a monetary obligation to pay the value of the horse plus damages d. If the debtors default in their obligation because C is insolvent, A and B will be liable for C’s share of the obligation 29. The following are characteristics of a facultative obligation, except: a. Only one thing is principally due b. The right of choice cannot be given to the creditor c. The debtor must give the substitute in case the principal thing is lost due to the debtor’s fault before substitution d. If the principal is void, the debtor is not obliged to give the substitute

30. Dacion en pago and payment by cession are special forms of payment. They are similar in which of the following respects? a. On the number of creditors involved b. On the extent of the properties involved in the payment c. On the purpose of the payment d. On whether the debtor is released completely from his obligation/s 31. When two persons are claiming the same right to collect from you and you are in doubt as to whom you will give your payment, your remedy so that you will not pay to the wrong person is: a. Tender of payment b. Application of payment c. Dacion en pago d. Consignation 32. D borrowed P50,000.00 from C. On due date, D did not have any money to pay the debt so he proposed to C that the latter accept a ring to settle the debt. C accepted the proposal and received the ring. Immediately after receiving the ring, C sold it to B. D’s obligation to give P50,000.00 to C is extinguished by: a. Dacion en pago b. Payment by cession c. Sale d. Application of payment 33. D, professional singer, agreed to sing for a fee of P20,000.00 at the birthday party of C who was a fan of D. due to numerous commitments, D could not go to the party of C. He sent X, another professional singer who was known to sing better than D, to sing at C’s party, and informed C that the latter needed to pay only P10,000.00 a. D may validly assign his obligation to sing because the reduced fee was advantageous to C b. D may validly assign his obligation to sing because X could perform the obligation better than him c. D may not validly assign his obligation to sing because it is personal in nature d. C cannot refuse the performance of the obligation by X because the obligation to sing is transmissible since it would not require much effort on the part of either D or X who both are professional singers 34. One peso, P5.00, and P10.00 coins are legal tender up to: a. P100.00 b. P500.00 c. P1,000.00 d. Any amount 35. D obtained a loan of 5,000.00 from C. On due date, D tendered payment amounting to P5,000.00 consisting of P5,000 pieces of P1.00 coin a. The payment offered by D is legal tender b. C may not refuse to accept the payment c. Should C refuse to accept the payment, D may resort to consignation (deposit of the payment in court) d. C may demand that he be paid in bills

36. A, an agent of P, owes B P20,000.00. B, on the other hand, owes P, P20,000.00. both debts are due. a. P may claim legal compensation b. A may claim legal compensation c. B may claim legal compensation d. Neither P, A nor B may claim legal compensation 37. The kind of fraud which renders a contract voidable is: a. Causal fraud b. Incidental fraud c. Fraud in performance d. Future fraud 38. D promised to give P20,000.00 to C provided C does not sign a contract with X on or before December 31, 2014. The condition of the obligation is: a. Negative b. Positive c. Impossible d. No condition exists 39. The delivery of promissory notes payable to order or other bills of exchange or other mercantile documents shall produce the effect of payment when they are: a. Delivered b. Cashed c. Have been impaired through the fault of the debtor d. Deposited in bank 40. The following statements concerning payment by cession are true, except: a. The creditors become the owners of the properties of the debtor that were ceded to them b. Payment by cession extinguishes the obligations only to the extent covered by the proceeds of the proceeds of the sale of the debtor’s properties c. The debtor must be insolvent d. It affects all the properties of the debtor except those exempt from execution 41. In order that condonation may extinguish an obligation involving a movable property whose value exceeds P5,000.00 a. It is sufficient that the condonation and acceptance are in writing, even a private one b. It is required that the condonation and acceptance must be in public instrument c. The delivery of the document evidencing the debt is sufficient since the property is movable d. The condonation and acceptance may be made orally 42. D owes C P50,000.00. Subsequently, D proposed to C that T will assume his (D’s) debt. C accepted the proposal of D. this type of novation which involves the substitution of the debtor is known as: a. Delegacion b. Expromision c. Objective novation d. Subrogation

43. A, 17 years old, B, 25, and C, 30, jointly borrowed P6,000.00 from X. How much may X collect from B? a. P6,000.00 b. P4,000.00 c. P2,000.00 d. Nothing, because A was a minor at the time the obligation was constituted 44. A, B, and C are jointly liable to X in the amount of P12,000.00. On due date, X demanded payment from A but A refused to pay. How much may X collect from B? a. P12,000.00 plus damages for delay b. P8,000.00 plus damages for delay c. P4,000.00 plus damages for delay d. P4,000.00 without any damages 45. The following obligations are demandable at once, except: a. An obligation with a condition antecedent b. An obligation without any term or condition c. An obligation with an in diem period d. An obligation with a condition not to do an impossible thing 46. D is obliged to give object 1, object 2, or object 3 to C. The right of choice as to which object will be delivered to C belongs to: a. Both the parties b. D only c. C only d. Neither of the parties 47. If there is a concurrence of two or more creditors and/or two or more debtors in one and the same obligation, the obligation is presumed to be: a. Individual and collective b. Solidary c. Joint and several d. Joint 48. D borrowed P50,000.00 from C. Not having sufficient cash to pay the debt, D proposed to pay the debt by giving his diamond ring. C accepted the proposal and received the ring. a. D’s obligation is extinguished by payment by cession b. D’s obligation is extinguished by consignation c. D’s obligation is extinguished by dacion en pago d. D’s obligation is not extinguished at all because the payment should have been in cash 49. M obtained a loan of P50,000.00 from P. The loan is evidenced by promissory note executed by M with G signing as a guarantor of the debt. P assigns the note to A, A to B, B to C, and C to G. The assignment of the note to G extinguished a. Both the loan and the guaranty b. Only the loan c. Only the guaranty d. Neither the loan nor the guaranty with G now as the new creditor 50. The principle of negotiorum gestio does not apply: a. When the property or business is not neglected or abandoned b. When the officious manager has been tacitly authorized by the owner c. In both (a) and (b) d. In neither (a) nor (b)

Part 2: Contracts (VSA-IRS)

1. The elements of a contract without which a contract would not exist are known as: a. Accidental elements b. Natural elements c. Special elements d. Essential elements 2. The warranty against hidden defects in a contract of sale is an example of: a. Natural element b. Accidental element c. Original element d. Stipulated element 3. A contract that does not have any special name under the law is known as: a. Nominate contract b. Innominate contract c. Special contract d. Nominal contract 4. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. This is known as the principle of: a. Mutuality of contract b. Relativity of contract c. Consensuality of contract d. Freedom of contract 5. The principle that contracts are perfected by mere consent is known as: a. Consistency of contract b. Consensuality of contract c. Consummation of contract d. Mutuality of contract 6. It is the manifestation of the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. a. Consideration b. Contract c. Consent d. Cause 7. Three of the following instances will render an offer ineffective before acceptance is conveyed. Which one is not? a. Civil interdiction of either party b. Insolvency of either party c. Insanity of either party d. Intoxication of either party 8. One of the following is not incapable of giving his consent. a. Insane persons b. Deaf-mutes who do not know how to write c. Deaf-mutes who do not know how to read d. Unemancipated minors

9. Aside from fraud and undue influence, the following are the vices of consent, except: a. Violence b. Intimidation c. Mistake d. Dealer’s talk 10. It exists when a person takes improper advantage of his power over the will of another depriving the latter of a reasonable freedom of choice. a. Intimidation b. Duress c. Threat d. Undue influence 11. An absolutely simulated contract is: a. Void b. Voidable c. Valid d. Unenforceable 12. S and B orally entered into a contract whereby S sold his one year production of eggs in his poultry farm to B for P50,000.00 which amount B immediately gave in cash to S. the contract between S and B is: a. Void because the object was not existing at the time of execution of the contract b. Valid because future things may be the object of contracts c. Rescissible because B will likely suffer damage if the eggs do not come into existence d. Unenforceable because the contract was not in writing 13. A contract whose cause is the liberality of the benefactor is: a. A gratuitous contract or contract of pure beneficence b. A remuneratory contract c. An aleatory contract d. An onerous contract 14. The following are characteristics of rescissible contracts, except: a. They may be set aside for equitable reasons b. They are valid until rescinded c. The action to rescind them prescribes d. The action to rescind them are not available to third persons even if their interests are directly affected 15. The following are the requisites of a rescissible payment, except: a. The debt is already due b. The debtor is insolvent c. The debtor pays the debt d. The payment is not yet due 16. The following contracts are voidable, except: a. Contracts entered into during a state of drunkenness or hypnotic spell b. Contracts entered into during a lucid interval c. Contracts where one of the parties is incapable of giving consent d. Contracts where the consent of one party is vitiated by violence, intimidation, mistake, fraud or undue influence

17. The following contracts are unenforceable, except: a. Those entered into by one who has no authority or legal representation b. Those that do not comply with the statute of frauds c. Those where both parties are incapable of giving consent to a contract d. Those where the consent of a party is vitiated by violence, intimidation, fraud or undue influence 18. The statute of frauds applies only to: a. Wholly executed contracts b. Contracts wholly or partially executed on the part of the debtor c. Contracts wholly or partially executed on the part of the creditor d. Wholly executory contracts 19. The following contracts are void or inexistent, except: a. Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy b. Those which are absolutely simulated or fictitious c. Those whose cause or object did not exist at the time of transaction d. Those where one of the parties employed fraud to obtain the consent of the other 20. If the illegal contract between the parties is a criminal offense but only one party is guilty, such illegal contract shall produce the following effects, except: a. The guilty party will be criminally prosecuted b. Neither party may compel the other to comply with his undertaking c. The instruments shall be confiscated in favour of the government d. The innocent party cannot recover what he has given 21. Reformation of an instrument is available in the following cases, except: a. When a mutual mistake of the parties causes the failure of the instrument to disclose their agreement b. When one party was mistaken and the other party acted fraudulently or inequitably in such a way that the instrument does not show the true intention c. When a party was mistaken and the other knew or believed that the instrument did not state their real agreement d. When one of the parties has brought an action to enforce the contract 22. A contract of sale is not a: a. Principal contract b. Nominate contract c. Consensual contract d. Real contract 23. D insured his house against fire with C insurance company. The insurance policy which was prepared and printed by C insurance company was signed by D after reading its terms. You are to determine which of the following characterize the contract between D and C insurance company. I. Auto-contract II. Contract of adhesion III. Aleatory contract IV. Nominate contract

The contract between D and C insurance company is:

a. I, II and III b. II, III and IV c. I, II and IV d. I, III and IV 24. Which of the following contracts is rescissible? a. Contracts entered into during a hypnotic spell b. Contracts entered into in a state of drunkenness c. Contracts entered into to defraud creditors when the latter cannot collect the claims due them d. Contracts where both parties are incapable of giving consent 25. P is a minister of a certain church whose members include X. X regularly confides in P because of his many personal problems. P is interested in buying the lot of X and uses his position as elder of the church and confidant of X to convince X to sell to him the lot. Should X sell the lot to P by reason of P taking advantage of his confidential relationship with X, the contract between them would likely be voidable because of: a. Intimidation b. Undue influence c. Fraud d. Mistake 26. B bought a baby boy from S. B knew that the baby boy was his illegitimate son by a woman named W and which W sold to S. the contract between B and S is: a. Valid b. Void c. Unenforceable d. Voidable 27. D, out of love and affection for C, donated a parcel of land to the latter who accepted it. The formalities required by law were complied with. The contract between D and C is: a. An onerous contract b. A gratuitous contract c. A remuneratory contract d. An accessory contract 28. Which of the following contracts is valid and unenforceable? a. An oral promise to answer for the default of another b. A donation and its acceptance in a private instrument of a parcel of land c. An oral lease of a mining equipment for more than two years d. An oral contract of sale of a ring worth P450.00 between an insane and a minor

29. Which of the following contracts is valid and enforceable? a. A contract where a party gave his consent in a moment of drunkenness b. A contract where a party gave his consent because the other party threatened to sue him for an unpaid debt c. A contract where a party gave his consent because the other party threatened to kill the first party’s spouse d. A contract where there was inadequate cause attended by mistake 30. Which of the following contracts is valid and enforceable? a. A written contract for the purchase of a new-born baby who is the illegitimate child of the buyer b. A written contract of employment where the employee agreed voluntarily not to demand overtime payment for work rendered in excess of the regular hours of work per day c. An oral contract for the sale of a piece of land for P50,000.00 with the buyer giving a down payment of P20,000.00 d. An oral contract where the fruits of an immovable belonging to the debtor are to be applied to the interest and principal of his obligation 31. Which of the following contracts involving real property is valid and enforceable although not in writing? a. Sale of piece of land for P50,000.00 b. Lease of an agricultural lot for a period of 2 years at a monthly rental of P3,000.00 c. Mortgage of a commercial lot to secure a loan of P50,000.00 d. Donation and acceptance of a residential lot 32. An insurance policy which, in practice, is prepared by an insurance company and all the insured has to do is to sign thereon if he agrees with its terms, is an example of: a. An auto-contract b. A contract of adhesion c. A commutative contract d. A gratuitous contract 33. Which of the following statements is true as regards a void contract? a. A void contract is ratified by the acceptance by a party to the contract of a benefit under its terms b. The right to set up the defense of illegality of a void contract may be waived if the illegality is not raised within a reasonable time c. If there is a novation of a void contract, such novation is valid provided the new contract is valid d. The right to set up the defense of illegality of a void contract does not prescribe 34. It is a contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter into another contract at a future time, upon the happening of certain events, or the fulfilment of certain conditions. a. Contract of adhesion b. Contract of option c. Contract of sale d. Auto-contract

35. D obtained a loan from C amounting to P200,000.00. To secure the loan, D mortgaged his lot. C registered with the Register of Deeds. Later, D sold the lot to X who was not aware that the lot was mortgaged. On the due date of the loan, C demanded payment but D could not pay. Accordingly, C decided to foreclose the mortgage on the lot. X, however, opposed the foreclosure claiming that he was not bound by the mortgage since he was not a party thereto. a. X was bound by the mortgage although he was not aware of it because the same is registered b. X was not bound by the mortgage because he was not a party thereto c. Only D and C were bound by the mortgage contract because they were the only parties thereto d. X was not bound by the mortgage because he was not aware of it 36. The following are the essential elements of a consensual contract, except: a. Consent of the contracting parties b. Object certain which is the subject matter of the contract c. Delivery of the object of the contract d. Cause of the contract which must be established 37. An insurance contract is: a. An aleatory contract b. A contract of adhesion c. Both (a) and (b) d. Neither (a) nor (b) 38. P, the owner of a business, appointed A as his agent to manage it. P authorized A to borrow money for the business. A himself is the one who lends the money at the current rate of interest. Thus, in the said contract of loan, A enters into the contract in his own behalf as lender and represents P as borrower. The contract of loan in such a case is considered as: a. An auto-contract b. An aleatory contract c. A remuneratory contract d. A gratuitous contract 39. Sermonia agri-products, a supplier of ZZ fertilizer, offered in writing to sell to Barbados farms, 50 bags of fertilizer at the price of P100.00 per bag. The offer stated that the price would be good for one week during which Barbados farms may decide to accept the offer. Three days later and before Barbados could make any acceptance, the general market price went up. Sermonia attempted to revoke the offer by informing Barbados, but Barbados claimed sermonia could not do so. a. Sermonia may withdraw the offer just informing Barbados since there has not yet been any acceptance thereof b. Sermonia may not withdraw the offer since the one-week period within which Barbados may decide had not yet lapsed c. Sermonia may withdraw the offer only after the expiration of the one-week period, unless Barbados in the meantime has accepted the offer d. Sermonia may withdraw the offer because it would suffer a loss if the sale was allowed to push through

40. P, the owner of a certain business, instructed A, his agent and manager of the business to buy goods on credit from S. s issued a sales invoice where A acknowledged the receipt of the goods by signing thereon. P called S by phone and promised to S that he (P) would pay for the goods on due date. S was not paid on due date. Accordingly, he sued P for the price of the goods. P raised the defense of unenforceability under the Statute of Frauds claiming that a representation as to credit must be in writing. a. The promise is enforceable against P although it was not in writing b. The promise is unenforceable against P because it was not in writing c. The promise is enforceable against A because it was he who signed the invoice d. The promise may be enforced both against P and A since they are the debtors in the transaction 41. Which of the following does not apply to a relatively simulated contract? a. The parties are bound by their real agreement b. The parties are not bound at all c. The parties are bound by their ostensible agreement if the real agreement prejudices third persons d. The parties are bound by their ostensible agreement if the real agreement is contrary to law, morals, good customs, public order, and public policy 42. When a physician who takes improper advantage of his power over the will of his patient in order to get the latter’s consent to a contract between the two of them, the contract will: a. Likely be voidable because of intimidation b. Still be valid because the patient is merely returning the favour to his physician who takes care of his health c. Likely be voidable because of undue influence d. Be void because of unlawful service 43. Which of the following contracts is not a void contract? a. A contract of sale of an animal suffering from a contagious disease b. A purchase of an illegitimate child by one who is the father of the child c. A contract of insurance whereby the insured asked another to take his place during the medical examination d. A contract between F, a Filipino and A, an alien, for the purchase of the right kidney of F for P200,000.00 44. An aleatory contract is one: a. The fulfilment of which depends upon chance b. The parties of which are obliged to perform reciprocal prestations c. Where only one party actually and physically enters into the contract d. Where delivery of the object is required to be made for his perfection 45. Zenith Cars Corporation (Zenith) engaged the services of Stronghold Construction Corporation (Stronghold) for the construction of its showroom. For this purpose, Stronghold bought construction materials on a 60-day credit from Durable Materials Corporation (Durable). On due date, Durable demanded payment from Stronghold but the latter contended that it could not make any payment because it has not yet collected from Zenith. In this case: a. Durable can hold liable Stronghold only b. Durable can hold liable Zenith only c. Durable can hold liable both Stronghold and Zenith d. Durable cannot hold liable neither Stronghold nor Zenith

46. Erwin applied for insurance with ABC Insurance Company. The application required Erwin to undertake a physical examination. However, since Erwin was suffering from asthma, he requested Edwin, his identical twin brother who was very healthy, to go through the physical examination and pretend that he was Edwin. ABC Insurance Company thus approved the insurance policy believing that Erwin had a clean bill of health. a. The fraud employed was dolo casuante b. The fraud employed was dolo incidente c. The fraud committed is fraud in performance d. There was no fraud or misinterpretation at all because Edwin is considered as an agent of Erwin 47. The insurance policy (contract) in no. 46 is: a. Valid b. Voidable c. Rescissible d. Void 48. A contract of pledge is perfected upon the: a. Meeting of minds of the parties b. Delivery of the object of the contract c. Execution of the written agreement by the parties d. Acknowledgement by the parties of the instrument evidencing the contract before a notary public 49. It refers to a contract wherein one party imposes a ready-made form of contract, which the other may accept or reject, but which the latter cannot modify. a. Aleatory contract b. Contract of adhesion c. Auto-contract d. Innominate contract 50. Rescission is different from annulment in that rescission: a. Is a principal action b. May be availed of only by the parties whether bound principally or subsidiarily c. Is brought to declare the inefficacy inherent in the contract d. Is based on lesion or damage

Part 3: Partnership (VSA-IRS)

1. A limited partner is prohibited on account of his claim against the partnership from performing the following acts, except: a. To receive or hold as collateral security any partnership property b. To receive from a general partner or the partnership any payment, conveyance or release from liability, if partnership assets are not sufficient to discharge partnership liabilities to outside creditors c. Transact business with the partnership d. None of the foregoing 2. A partner is a co-owner with his partners of specific partnership property. Such co-partnership: a. Allows a partner to assign his right in such property b. Allows partners to use such property of partnership purposes c. Entitles the spouse, children and other relatives of the partner to claim support from such property d. Gives the private creditors of a partner to attach his right in such property 3. Braganza, Ortiz, and Nevado want to form a partnership with Braganza contributing P500,000.00; Ortiz, office equipment; and Nevado, his services. If the three were to form a limited partnership, who among them will be the limited partner/s? a. Either Braganza or Ortiz or both of them b. Either Ortiz or Nevado or both of them c. Either Braganza or Nevado or both of them d. All the three must be limited partners 4. Refer to the preceding number. Assume that the three decide to form a general partnership. As a result, which of the following is incorrect? a. Any of the three may be appointed as manager b. All of them may be appointed as managers c. Only Nevado may be appointed as manager because he only contributes his services d. Any two of them may be Appointed as managers 5. Querubin, Roces, and Solis are partners in a law firm. Querubin was appointed as jjudge of the Regional Trial Court. Such appointment: a. Suspends the participation of Querubin in the management of the firm without causing the dissolution of the partnership b. Prohibits the inclusion of the name of Querubin in the firm name without dissolving the partnership c. Results in the dissolution of the partnership d. Merely requires the disclosure of Querubin’s appointment to the court without dissolving the partnership 6. A person admitted as a partner into an existing partnership shall be liable up to the extent of his separate assets for what obligations? a. Obligations of the partnership existing at the time of his admission only if there was a stipulation b. Obligations of the partnership incurred after his admission only if there was a stipulation c. Obligations of the partnership incurred before and after his admission even if there was no stipulation d. Obligations of the partnership incurred before his admission if there was a stipulation, and those incurred after his admission even if there was no stipulation 7. LIFE Company, a partnership engaged in the water distribution business, is composed of partners Larredo, Ingles, Filler and Escanto. One day, Larredo was driving the firm’s delivery truck beyond the speed limit in order to serve its customers, when he rammed into and caused extensive damage on the parked car of Tertullo. a. Only Larredo can be held liable for damages by Tertulllo b. LIFE company and Larredo are solidarily liable for damages to Tertullo c. LIFE company and the four partners are solidarily liable for damages to Tertullo d. LIFE company and the four partners are jointly liable for damages to Tertullo 8. Which of the following statements concerning the name of a partnership is false? a. The partnership name may include the name of only one of the partners b. The partnership name may include the names of two or more, but not all of the partners c. The partnership name may include the names of all the partners d. The partnership cannot adopt a name which does not include the name of at least one of the partners 9. PATOK enterprises, a partnership engaged in the business of renting out video films is owned by Patricia, Alice, Tina, Olga, and Kaye, with Kaye as the manager. Diana owes PATOK enterprises P6,000.00 and Olga P4,000.00. Both debts are unsecured and are already due. Diana pays Olga P4,000.00 for which Olga issues her own receipt. a. The payment should be applied to Olga’s credit only b. The payment should be applied to PATOK’s credit only c. The payment should be divided proportionately between PATOK and Olga, at P2,400.00 and P1,600.00, respectively d. The payment should be divided equally between PATOK and Olga at P2,000.00 each 10. Which of the following will not cause the automatic dissolution of general partnership? a. Death of a capitalist partner b. Insolvency of a capitalist partner c. Insanity of an industrial partner d. Civil interdiction of an industrial partner 11. Which of the following will not cause the automatic dissolution of a general partnership? a. Death of a partner b. Insolvency of a partner c. When the partnership business becomes unlawful d. Insanity of a partner 12. Belinda, Ara, Rica, and Klaudia are partners in BARK enterprises, a pet shop, with Belinda contributing P50,000.00; Ara, P20,000.00; Rica, P30,000.00. Klaudia is an industrial partner and manages the partnership. Based on the foregoing information, which of the following statements is false? a. Belinda may engage in the buying and selling of rice without the consent of the other partners b. Klaudia may engage in the buying and selling of rice without the consent of the other partners c. Klaudia is not liable for the losses of the partnership d. Klaudia may be held liable by third persons for partnership debts with her separate property 13. One of the distinctions between a partnership and a corporation is that a partnership: a. May be formed by one person b. Is created by operation of law c. Acts through a board of directors d. May exist for an indefinite period 14. Which of the following will not cause the automatic dissolution of a limited partnership? a. Death of a general partner b. Death of a limited partner c. Insolvency of a general partner d. Insanity of a general partner 15. If the assignee does not become the partner referred to in the preceding number, his rights do not include: a. The receipt of the assignor’s share of the profits b. The receipt of the assignor’s other compensation by way of income c. The return of the assignor’s contribution d. The inspection of partnership books or account of partnership transactions 16. A person admitted to all the rights of a limited partner who has died or has assigned his interest in the partnership is known as: a. An ostensible partner b. A liquidating partner c. A substituted limited partner d. A general-limited partner 17. A limited partner shall be liable as general partner in three of the following cases. Which one is the exception? a. When he is a general-limited partner as stated in the certificate b. When he takes part in the control of the business c. When he participates in the management of the business d. When his surname which appears in the partnership name is also the surname of a general partner 18. A limited partner may contribute: a. Money and/or property b. Money and/or services c. Property and/or services d. Services only 19. In a limited partnership where there are 4 partners: a. All the partners must be limited partners b. The number of limited partners must be equal to the number of general partner, that is, 2:2 c. The number of limited partners must be greater than the number of general partners, that is, 3:1 d. It is enough that there is one limited partner; the rest may all be general partners 20. The partnership is not bound in three of the following acts of a partner after dissolution. However, it is bound in one. Which is it? a. Where the partner acting is insolvent b. When it is unlawful to carry on the business c. When the partner has no authority to wind up partnership affairs and the third person is a previous creditor who had no knowledge of the partner’s lack of authority d. When a partner has no authority to wind up partnership affairs and the third person is a new creditor who has not read he publication of the lack of authority of the partner in a newspaper of general circulation in the place or places where the partnership business is carried on

21. When is the partnership not bound by the act/s of a partner after dissolution in the following cases? a. Acts necessary to wind up partnership affairs b. Acts to complete transactions begun before dissolution c. New transactions where the third person is a previous creditor and there was a publication of the dissolution in a newspaper of general circulation in the place or places where the business had been carried on but such third person has not read it d. New transactions where the third person is a new creditor and there was a publication of the dissolution in a newspaper of general circulation in the place or places where the business had been carried on but such creditor has not read it 22. A decree by the court is necessary to dissolve a general partnership based on three of the following grounds. Which one will not require such decree but will cause the automatic dissolution of the partnership? a. The business of the partnership can only be carried on at a loss b. A partner is shown to be of unsound mind c. A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business d. A partner is civilly interdicted 23. The change in the relation of the partners caused by any ceasing to be associated in the carrying on the business is known as: a. Termination of the partnership b. Winding up of partnership affairs c. Liquidation of the partnership business d. Dissolution of the partnership 24. Which of the following statements is incorrect? a. Partnership creditors are preferred as to partnership assets b. Partnership creditors are preferred as to each partner’s separate assets c. A partner’s separate creditors are preferred as to the partner’s separate assets d. A partner’s separate creditors may attach a partner’s share in the partnership assets 25. A partner’s interest in the partnership is his share of the profits and surplus which he may assign to a third person. Which of the following statements concerning such right is correct? a. The conveyance of a partner’s interest will cause the dissolution of the partnership b. The assignee becomes a partner c. The assignee has a right to interfere in the management of the partnership business d. The assignee has the right to receive the profits which the assigning partner would otherwise be entitled to 26. Alexis and Bote entered into a universal partnership of all present property. No stipulation was made regarding other properties. Subsequently, Alexis received a parcel of land by inheritance from his father; and another parcel of land from “The Best Ito University” as remuneration for Alexis work as professor therein. a. The two parcel of land and their fruits are to be enjoyed by the partnership because the contract entered is a universal partnership of all present property b. The two parcel of land and their fruits will not be enjoyed by the partnership because there is no stipulation regarding future properties or their fruits c. The partnership is entitled only to the fruits but not to the two parcel of land d. The partnership is entitled to use the two parcel of land as usufructuary and also entitled to the fruits produced by the property 27. A and B are partners in buying and selling automobiles. A, by the partner’s agreement, was authorized to buy automobiles on a cash basis, never on the installment plan. One day A bought on credit or on installment plan a car from X, a client. X did not know of A’s lack of authority. A’s purchase was made on behalf and in the name of the partnership. Is the partnership bound? a. No because A was not really authorized to bought on installment plan b. No because acquisition of automobiles requires the consent of all partners c. Yes because although A was not really authorized, still for “apparently carrying on in the usual way the business of the partnership” A is implicitly authorized and X did not know of A’s lack of authority d. Yes because all transaction made by any partners with third person is valid provided the latter acted in good faith 28. Paolo contributed P50,000; Ronald contributed P75,000; and Paul contributed P25,000. Jay is the industrial partner. There is no stipulation regarding profits and losses. The partnership suffered a P300,000 loss. The loss shall be shared by the partners as follows: a. P100,000; P100,000; P100,000; and P0 b. P75,000; P75,000; P75,000; and P75,000 c. P100,000; P150,000; P50,000; and P0 d. P100,000; P100,000; P100,000; and P100,000 29. Lets and Gets are partners. On March 1, 2010 when the total obligation of the partnership was P450,000, Go was admitted as a new partner. At the time of Go’s admission, the partnership was indebted to A for P50,000 and B for P400,000. After March 1, 2010, the partnership borrowed from X P200,000 and P40,000 from Y. On December 1, 2010, the partnership became insolvent leaving an obligation totalling P690,000 and partnership assets amounting in P300,000. The creditors are going after the separate properties of the partners to satisfy their remaining claims. How are the creditors' claims satisfied?

ANSWER 1: A and B can go after the separate properties of Lets, Gets and Go. ANSWER 2: X and Y can go after the separate properties of Lets and Gets.

Which of the following is correct? a. Both answers are wrong. b. Both answers are correct. c. Answer #1 is wrong, but answer #2 is correct. d. Answer #1 is correct, but answer #2 is wrong. 30. W, X, and Y are partners. X conveyed his share to Z. Thereafter, the partnership incurred liabilities for the contract entered into between the partnership and M prior to the sale of X’s share to Z. Which of the following statements is correct? a. Z cannot be held liable to M because a partner admitted into a partnership shall become liable for an obligation only from the time he took part in the control of the business. b. Z cannot be held liable to M because as a partner, Z shall be subject to all the restrictions and liabilities of a partnership. c. Z can be held liable pro-rata with the other partners regardless of the time the liability was incurred. d. Z can be held liable to M, but his liability shall be satisfied only out of partnership property, unless there is a stipulation to the contrary.

31. A, B, C, D, and E entered into a contract of partnership to organize events such as weddings and birthday celebrations. A and B are the only limited partners. During one of the parties that the partnership organized, D totally forgot her task to turn on the lights during the entrance of the debutant. As a result, the debutant slipped off injuring her ankle. The victim sues the partnership for damages. Choose the best answer. a. A and B are not liable because they are limited partners. b. The partnership is liable for damages to the same extent as D. c. Only the general partners are liable in equal proportion. d. Only D is liable. 32. In a partnership, the partners share in the profits a. Equally b. According to contribution c. According to the contract d. Justly and equitably 33. A and B entered into a universal partnership of all present property. The common property of the partnership shall be a. All the properties which belonged to each of the partners at the time of the constitution of the partnership b. All the properties which shall belong to each of the partners after the constitution of the partnership c. All the properties which belonged to each of the partners at the time of the constitution of the partnership as well as the profits which they may acquire therewith d. All the properties which belonged to each of the partners at the time of the constitution of the partnership as well as the properties which each may acquire thereafter 34. Statement 1. Where the business of the partnership is in imminent danger of being lost, an industrial partner who refuses to give an additional contribution agreed upon can be compelled to sell his interests to the others. Statement 2. A partner appointed as manager in the Articles of Partnership can be removed with or without cause.

a. Both statements are true b. Both statements are false c. Statement 1 is true, but Statement 2 is false d. Statement 1 is false, but Statement 2 is true 35. A, B and C are partners. A contributed his services only, B P20,000 and C P10,000. The partnership was liquidated. After payment of the partnership obligation, only P9,000 worth of assets remained. The share of A will be – a. P3,000.00 b. Equal to the share of B c. Equal to the share of C d. Nothing 36. A partnership is a(n): I. accounting entity. II. taxable entity. a. I only b. II only c. Neither I nor II d. Both I and II

37. A partner's tax basis in a partnership is comprised of which of the following items? I. The partner's tax basis of assets contributed to the partnership. II. The amount of the partner's liabilities assumed by the other partners. III. The partner's share of other partners' liabilities assumed by the partnership. a. I plus II minus III b. I plus II plus III c. I minus II plus III d. I minus II minus III 38. Which of the following accounts could be found in the PQ partnership's general ledger? I. Due from P II. P, Drawing III. Loan Payable to Q a. I, II b. I, III c. II, III d. I, II, and III 39. A joint venture may be organized as a: I. Partnership. II. Corporation. III. Undivided interest. a. I only b. II only c. I or III only d. I, II, or III 40. When a partnership is formed, noncash assets contributed by partners should be recorded: I. at their respective book values for income tax purposes. II. at their respective fair values for financial accounting purposes. a. I only b. II only c. Both I and II d. Neither I nor II 41. When a new partner is admitted into a partnership and the new partner receives a capital credit less than the tangible assets contributed, which of the following explains the difference? I. The new partner's goodwill has been recognized. II. The old partners received a bonus from the new partner. a. I only b. II only c. Either I or II d. Neither I nor II 42. Paolo contributed P50,000; Ronald contributed P75,000; and Paul contributed P25,000. Jay is the industrial partner. There is no stipulation regarding profits and losses. The partnership suffered a P300,000 loss. The loss shall be shared by the partners as follows: a. P100,000; P100,000; P100,000; and P0 b. P75,000; P75,000; P75,000; and P75,000 c. P100,000; P150,000; P50,000; and P0 d. P100,000; P100,000; P100,000; and P100,000 43. X-cited Limited partnership has X, as general partner, Y, as limited partner, and Z, as industrial partner contributing P150,000; P500,000; and services respectively. The partnership failed and after disposing all its assets to pay partnership debts there still remains an outstanding obligation in the sum of P120,000. The liability of the partners to the creditor will be as follows: a. X = P120,000 b. X and Z = solidarily liable for P120,000 c. X = P40,00 Y= P40,000 Z= P40,000 d. X = P60,00 Y= P0 Z= P60,000 44. A contract where two or more persons bind themselves to contribute money, property or industry to a common fund with the intention of dividing the profits among themselves. a. Voluntary association b. Corporation c. Partnership d. Sole proprietorship 45. One of the following is not a characteristic of contract of partnership. a. Real, in that the partners must deliver their contributions in order for the partnership contract to be perfected b. Principal, because it can stand by itself c. Preparatory, because it is a means by which other contracts will be entered into d. Onerous, because the parties contribute money, property or industry to the common fund 46. One of the following is not a requisite of a contract of partnership. Which is it? a. There must be a valid contract b. There must be a mutual contribution of money, property, or industry to a common fund c. It is established for the common benefit of the partners which is to obtain profits and divide the same among themselves d. The articles are kept secret among the members 47. A partnership formed for the exercise of a profession which is duly registered is an example of: a. Universal partnership of profits b. Universal partnership of all present property c. Particular partnership d. Partnership by estoppel 48. Which of the following stipulations is valid? a. A stipulation excluding a capitalist partner from profits b. A stipulation exempting a capitalist partner rom losses c. A stipulation exempting an industrial partner form losses d. A stipulation excluding an industrial partner from profits 49. By the contract of partnership, two or more persons bind themselves together to contribute the following, except: a. Money b. Property c. Entrepreneurship d. Loyalty, Trust, Honesty, and Love 50. The partnership will bear the risk of the loss of three of the following things. Which is the exception? a. Things contributed to be sold b. Fungible things or those that cannot be kept without deteriorating c. Things contributed so that only their use and fruits will be for the common benefit d. Things brought and appraised in the inventory

Part 4: Corporations (VSA-IRS)

1. ABC owns 15% of the subscribed capital stock of XYZ corporation which owns an office building. ABC owns a security and janitorial agency. ABC, a director of XYZ Corporation, engaged the services of his own company to perform services to the office building. Which of the following conditions is NOT required in order for the service contract between ABC and XYZ to be valid? a. The service contract must be approved by the board of directors of XYZ corporation; b. ABC’s vote was not necessary to constitute a quorum at the meeting of the board of directors; c. ABC’s vote was not necessary for the approval of the service contracts. d. The service contract must be ratified by all the stockholders of the corporation. 2. In line with the Trust Fund Doctrine that generally renders it unlawful for the corporation to return assets to the stockholders representing capital, under what conditions may a stock corporation acquire its own shares: a. There exists in the corporate books unrestricted retained earnings to cover the repurchase of shares; b. The repurchase of shares must be for a legitimate business purpose; c. Both A and B. d. Neither A nor B. 3. In a stockholders’ meeting, Mr. Bean dissented from the corporate act converting preferred voting shares to non-voting shares. Mr. Bean submitted his certificates of stock for notation that his shares are dissenting. The next day, Mr. Bean transferred his shares to Ms. Dora to whom new certificates were issued. Which of these statements is correct? a. Mr. Bean can exercise the right of appraisal because he dissented from the corporate act. b. Mr. Bean can no longer exercise the right of appraisal because he already transferred his shares to Ms. Dora. c. Ms. Dora should exercise the right of appraisal on behalf of Mr. Bean. d. None of the statements is correct. 4. ABC Corporation has 10 members in the Board of Directors. During the election of officers, one of its members got sick, while the other two went abroad, thus, the three of them failed to attend the meeting and cast their vote. Nonetheless, A acquired four votes for the position of Secretary. Is a validly elected as an officer? a. No. The Code requires the vote of majority of all the members of the Board of Directors. b. Yes. The Code requires only the decision of at least a majority of directors present at the election. c. Yes. The articles of incorporation or by-laws may provide for lesser majority in case of election of officers. d. No. The articles of incorporation require the quorum. 5. ABC Corporation is a stock corporation whose principal place of business is in Quezon City. If a regular meeting of its stockholders shall be held, one of the requirements is: a. Notice of meetings must be published in a newspaper of general circulation two weeks before the scheduled meeting. b. Quorum must consist of all the stockholders. c. Written notice of meetings shall be sent at least two weeks prior to the meeting, unless a different period is required by the by-laws. d. All of the above.

6. XYZ Corporation’s by-laws provide that A, one of its directors, shall receive 10% of the net income before tax of the corporation as his yearly compensation. However, B, the Corporation’s president, contends that such provision directly violates the Code prohibiting the compensation of directors. Are directors absolutely not entitled to compensation? a. Yes. The Code expressly provides that directors shall not receive any compensation, except for reasonable per diems. b. No. Directors are entitled to compensation when authorized by the by-laws or by vote of stockholder representing at least majority of the outstanding capital stock, subject to limitations that the total yearly compensation must exceed 10% of the net income before income tax of the compensation during the preceding year. c. No. Directors are entitled when authorized by the by-laws or by vote of stockholders representing at least majority of the outstanding capital stock, subject to limitations that the total yearly compensation shall not exceed 10% of the net income before tax of the corporation during the preceding year. d. Yes. Directors are not entitled to compensation. 7. In order to amend the corporate by-laws, what vote is required to happen for the amendment/s to be valid? a. 2/3 votes of the Board of Directors and 2/3 votes of the outstanding capital stock and capital stock b. Majority votes of the Board of Directors and majority votes of the outstanding capital stock c. 2/3 votes of the Board of Directors and majority votes of the outstanding capital stock d. Majority votes of the Board of Directors and 2/3 votes of the outstanding capital stock 8. A corporation may acquire its own shares for a legitimate purpose provided it has unrestricted retained earnings. In which of the following acquisitions is the requirement of unrestricted retained earnings not imposed? a. When the acquisition is made to eliminate fractional shares b. When delinquent shares are acquired in a delinquency sale c. When redeemable shares are repurchased in accordance with the terms provided in the articles of incorporation d. When shares are acquired from stockholders who exercise their appraisal right 9. Which of the following issuance of stocks is not allowed under the Corporation Code of the Philippines? a. MCE Leisure Corporation issued preferred stock for P 1 par value. b. Toshiba Philippines, Inc. issued a no par value common shares for P 5 per share. c. Metrobank Corporation issued a no par value common shares for P 5 per share. d. Malayan Insurance Corporation issued preferred stock for P 1 par value. 10. Which of the following acts could be ratified by a vote representing at least 2/3 of the outstanding capital stock? a. Acts of directors or trustees who are guilty of gross negligence or bad faith in directing the affairs of the corporation b. An attempt by a director to acquire or actual acquisition of any interest adverse to that of the corporation in respect of any matter reposed upon him in confidence c. Acts of directors constituting an approval of patently unlawful acts d. Acquisition of a business opportunity which should belong to the corporation, thereby acquiring profits which should belong to the corporation 11. Shares of stock shall may be issued in exchange of the following consideration, except: a. Outstanding shares exchanged for stocks in the event of reclassification or conversion b. Amounts transferred from unrestricted retained earnings to stated capital c. Promissory notes d. Patents of copyrights 12. Statement No. 1 - Stockholdings exceeding twenty-five (25%) percent of the outstanding capital stock shall be considered substantial for purposes of interlocking directors. Statement No. 2 – For regular meetings of stockholders, there should be at least two (2) weeks written notice shall be sent to all stockholders or members Statement No. 3 - Notice of meetings of stockholders shall be in writing, and the time and place thereof stated therein. a. Statements No. 1 and 2 are correct b. Statements No. 2 and 3 are correct c. Statements No. 1 and 3 are correct d. All statements are correct 13. Statement No. 1 - A foreign corporation may sue in this jurisdiction for infringement of trademark and unfair competition although it is not doing business in the Philippines because the Philippines were a party to the Convention of the Union of Paris for the Protection of Industrial Property. Statement No. 2 - A foreign corporation not licensed to do business in the Philippines is absolutely incapacitated from filing a suit in local courts. a. Only Statement No. 1 is correct b. Only Statement No. 2 is correct c. Both statements are false d. Both statements are correct 14. Statement No. 1 - Non-filing of by-laws will automatically dissolve the corporation. Statement No. 2 - Failure to file by-laws within the required period is a ground for suspension or revocation of the certificate of registration of corporations. a. Only Statement No. 1 is correct b. Only Statement No. 2 is correct c. Both statements are false d. Both statements are correct 15. Statement No. 1 - Founders' shares classified as such in the articles of incorporation may be given certain rights and privileges not enjoyed by the owners of other stocks, provided that where the exclusive right to vote and be voted for in the election of directors is granted, it must be at least five (5) years from the date of the approval by the Securities and Exchange Commission. Statement No. 2 - Cash dividends due on delinquent stock shall first be applied to the unpaid balance on the subscription plus costs and expenses. Statement No. 3 - Stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully paid. a. Statements No. 1 and 2 are correct b. Statements No. 2 and 3 are correct c. Statements No. 1 and 3 are correct d. All statements are correct 16. The following are advantages of no-par value share of stock. Which is the exception? a. No-par value shares allow flexibility in price. b. The stockholders of no-par value shares are relieved of personal liability for unpaid stock subscription c. It allows the issue of stocks in exchange of property. d. No-par value shares afford a possible remedy of relief from the evil of over-capitalization and stock watering. 17. The distinction between a proxy and a voting trust is that in a voting trust: a. The trustee had no legal title to the shares of the transferring stockholder. b. Unless coupled with interest, is revocable at any time. c. Is not limited to any particular meeting. d. Stock certificate is not cancelled. 18. Stock corporations are prohibited from retaining surplus profits in excess of one hundred percent of their paid-in capital stock in this case: a. When justified, by definite corporate expansion projects or programs approved by the board directors b. When there is pension plan as agreed in the Collective Bargaining Agreement c. When the corporations is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its consent d. When it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as providing preserves for probable contingencies 19. The voting requirement needed in declaring cash or property dividend – a. Majority vote of the Board of Directors b. Majority vote of the Board of Directors plus the vote of a majority of the outstanding shares c. Majority vote of the Board of Directors plus the vote of 2/3 of the outstanding shares d. 2/3 votes of the directors plus a majority of the outstanding shares 20. The by-laws may provide that the holders of a majority of the outstanding capital stock may elect all members of the board of directors. That it may also provide that no officer of the corporation shall be required to be a stockholder.

a. Both statements are true b. Both are false c. First is false, second is true d. First is true, second is false 21. A subscribed to 1,000 shares of stock to X Corporation. She paid 25% of the said subscription. During the stockholder meeting, can A vote all her subscribed shares? a. No, because the subscription has not yet been fully paid b. No, because A’s shares has become delinquent which cannot be voted. c. Yes, as to the paid percentage of subscription d. Yes, because unpaid shares can be voted 22. X is a director in T Corp. who was elected to a 1-year term on Feb. 1, 2010. On April 11, 2010, X resigned and was replaced by R, who assumed as director on May 17, 2010. On Nov. 21, 2010, R died. S was then elected in his place. Until which time should S serve as director? a. April 11, 2011 b. Feb. 1, 2011 c. May 17, 2011 d. Nov. 21, 2011 23. The Articles of Incorporation must be accompanied by a Treasurer's Affidavit certifying under oath, among others, that the total subscription paid is: a. Not less than P25,000.00. b. Not more than P5,000.00. c. Not less than P5,000.00. d. Not more than P25,000.00. 24. The rule is that no stock dividend shall be issued without the approval of stockholders representing at least 2/3 of the outstanding capital stock at a regular or special meeting called for the purpose. As to other forms of dividends: a. A mere majority of the entire Board of Directors applies. b. A mere majority of the quorum of the Board of Directors applies. c. A mere majority of the votes of stockholders representing the outstanding capital stock applies. d. The same rule of 2/3 votes applies. a. b. c. 25. Under this doctrine, the separate personality of a corporation may be disregarded if it is used for fraudulent or illegal purpose or to escape the faithful compliance of an obligation: a. Trust fund doctrine b. Doctrine of piercing the veil of corporate entity c. Doctrine of corporate opportunity d. Doctrine of limited capacity 26. In 2006, Corporation "A" passed a board resolution removing "X" from his position as manager of said corporation. The by-laws of "A" corporation provide that the officers are the president, general-manager, treasurer and secretary. Upon complaint filed with the SEC, it held that the general manager could be removed by mere resolution of the board of director. On motion for reconsideration, "X" alleged that he could only be removed by the affirmative vote of the stockholders representing 2/3 of the outstanding capital stock. Is "X's" contention legally tenable. a. No, the vote required is majority of the board and 2/3 OCS consenting b. Yes, the voting requirement is only 2/3 of the outstanding capital stock. c. No, the required vote is MBD consented by MOCS. d. No, the voting requirement is only majority of the Board of Directors. 27. The Corporation Code sanctions a contract between two or more corporations which have interlocking directors, provided there is no fraud that attends it and it is fair and reasonable under the circumstances. The interest of an interlocking director in one corporation may be either substantial or nominal. It is nominal if his interest: a. Does not exceed 25% of the outstanding capital stock. b. Exceeds 25% of the outstanding capital stock. c. Exceeds 20% of the outstanding capital stock. d. Does not exceed 20% of the outstanding capital stock. 28. ABC Corp. increased its capital stocks from Php10 Million to Php15 Million and, in the process, issued 1,000 new shares divided into Common Shares “B” and Common Shares “C.” T, a stockholder owning 500 shares, insists on buying the newly issued shares through a right of pre -emption. The company claims, however, that its By-laws deny T any right of pre-emption. Is the corporation correct? a. No, since the By-Laws cannot deny a shareholder his right of pre-emption. b. Yes, but the denial of his pre-emptive right extends only to 500 shares. c. Yes, since the denial of the right under the By-laws is binding on T. d. No, since pre-emptive rights are governed by the articles of incorporation. 29. In case of disagreement between the corporation and a withdrawing stockholder who exercises his appraisal right regarding the fair value of his shares, a three-member group shall by majority vote resolve the issue with finality. May the wife of the withdrawing stockholder be named to the three member group? a. No, the wife of the withdrawing shareholder is not a disinterested person. b. Yes, since she could best protect her husband's shareholdings. c. Yes, since the rules do not discriminate against wives. d. No, since the stockholder himself should sit in the three-member group. 30. In elections for the Board of Trustees of non-stock corporations, members may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate. This is true – a. Unless set aside by the members in plenary session. b. In every case even if the Board of Trustees resolves otherwise. c. Unless otherwise provided in the Articles of Incorporation or in the By-laws. d. In every case even if the majority of the members decide otherwise during the 31. 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 voting and non-voting b. ¾ of the outstanding capital stock-voting c. 2/3 of the outstanding capital stock-voting d. majority of the outstanding capital stock-voting a. 32. For the purpose of interlocking directorate, an interlocking director’s interest in a corporation is considered substantial if it is: a. At least 20% b. More than 20% c. At least 25% d. More than 25% 33. The following vote on a per head basis, except: a. Directors of a stock corporation b. Stockholders c. Trustees of non-stock corporation d. Members (of a non-stock corporation) 34. Which of the following is an incorrect composition of the capital stock of a corporation? a. Both par value and no-par value shares b. Both preferred and common shares c. Either par value or no-par value shares d. Either common or preferred shares 35. Other than from retained earnings, dividends may be declared out of: a. Paid-in capital in excess of par value b. Paid-in capital in excess of issued price c. Both (a) and (b) d. Neither (a) nor (b) 36. Shares that may be issued at a price lower than P5.00 per share are: a. Par value shares b. No-par value shares c. Both (a) and (b) d. Neither (a) nor (b) 37. Shares that may be issued at a price higher than P5.00 per share are: a. Par value shares b. No-par value shares c. Both (a) and (b) d. Neither (a) nor (b) 38. No-par shares may not be issued for a price lower than: a. Stock exchange quotation price b. Issued price c. Market price d. Fair market value 39. Which of the following provisions in the articles of incorporation cannot be amended? a. Name of corporation b. Number and name of incorporators c. Term of existence d. Primary purpose 40. Which of the following is not a characteristic of a corporation? a. Perpetual life b. Transferability of ownership interests c. Unlimited liability on the part of the stockholders d. Ability to attract large amount of capital 41. A stock corporation, in general, is taxed in the same manner as a: a. General professional partnership b. Non-general professional partnership c. Sole proprietorship d. Cooperative a. b. c. d. 42. The subscriber of unpaid shares which are not delinquent shall be entitled to the following rights, except the right to: a. Vote b. Inspect corporate books c. Dividends d. A stock certificate 43. Statement 1: amendment of the articles of incorporation requires majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least 2/3 of the outstanding capital stock or at least 2/3 of the members entitled to vote. a. Statement 2: any director or trustee of a corporation may be removed from office by a vote of the stockholders holding or representing at least 2/3 of the outstanding capital stock or at least 2/3 of the members entitled to vote. a. True, true b. True, false c. False, true d. False, false 44. Three of the following are required for the existence of de facto corporation, except a. Incorporated under a valid law b. Attempt in good faith to organize c. Actual use of corporate powers d. Existing in law and in fact 45. A suit brought by a stockholder in the name and in behalf of the corporation to protect corporate rights or redress wrongs committed against the corporation, whenever corporate officers refuse to bring such actions or such officers are the ones to be sued or held liable. a. Individual suit b. Class suit c. Representative suit d. Derivative suit 46. The rule that protects directors who act with due care and in good faith, as long as their decisions are lawful and in the best interests of the corporation. a. Fairness rule b. Business judgment rule c. Golden rule d. Anti-trust rule 47. Which shares may be issued with or without par value? a. Common shares b. Preferred shares c. Both common and preferred shares d. Neither common nor preferred shares 48. Which of the following causes of vacancy in the board of directors may be filled by the remaning directors if they 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. Disqualification of a director 49. The executive committee must have at least: a. Three members who must act with an unanimous vote of all its members b. Three members who must at by a majority vote of all the members c. Five members who must act with an unanimous vote of all its members d. Five members who must act by a majority vote of all its members 50. What may be the composition of the executive committee of a corporation? a. Directors b. Stockholders who are neither officers nor directors c. Officers who are neither stockholders nor directors d. A combination of (a), (b), and (c) a. b. Group 1 (VSA-IRS)

c. Aala, Jessie

d. Abdulhamid, Hamida

e. Anasco, Kim Zaira

f. Alila, Maja Tifanny

g. Aguihap, Jeffrey

h. i. j. k. l. m. n. a. b. c. d.