NAME: ______________________________________________ SCORE: _________________ RATING: ____________

YEAR/COURSE: ___________________________________

GENERAL RULES:
 Use BLACK or BLUE pen. Using a pencil for writing final answers is not allowed.
 Strictly, NO ERASURES.
 “NO ADMISSION SLIP, NO EXAMINATION” is strictly followed.
 You have exactly one and a half (1 ½) hours to finish the examination. GOOD LUCK & GOD BLESS FUTURE CPAs!
________________________________________________________________________________________________________________

MULTIPLE CHOICE
Direction: Read and analyze the following statements. Write the letter of the correct answer on the space provided before the number.

1. Which of the following is not a characteristic of sale?

A. Bilateral
B. Gratuitous
C. Consensual
D. Nominate

2. A characteristic of a contract of sale which involves an exchange of value:

A. Commutative
B. Nominate
C. Bilateral
D. Consensual

3. Dacion en pago as distinguished from sale:

A. The object is always existing and specific.
B. There is greater freedom in fixing the price.
C. There is no pre-existing obligation.
D. The cause is the price.

4. Which is an exception? A sale is a contract where one of the contracting parties, called the seller (or vendor) obligates himself:
A. To transfer ownership of the object.
B. To deliver a determinate thing.
C. To warrant against eviction and hidden defects.
D. To pay therefore a price certain in money or its equivalent.

5. This is not be a valid object of sale:

A. future wool that shall grow upon a sheep
B. sale of human flesh for human pleasure
C. the entire rental next month in a 4-door apartment
D. sale of a lotto ticket that will be drawn next week

6. A case where a contract of sale must not necessarily in writing:

A. Sale of 100 piculs of sugar at P400 per picul when there is partial delivery
B. Sale where by its term cannot be performed within one year from the making thereof
C. Sale of land
D. Sale at public auction

7. Which is not correct? In a sale by auction,

A. The auctioneer may withdraw the goods before the hammer falls whether or not the auction has been announced to be without
recourse.
B. The sale is perfected when the auctioneer announces its perfection by the fall of the hammer.
C. The seller may bid provided such right was reserved and notice was given to the other bidders.
D. Every bidding is merely an offer, and therefore before it is accepted, it may be withdrawn.

8. Statement 1: In sale or return, ownership passes to the vendee upon the delivery of the goods; in sale or trial, ownership does not pass
to the buyer until he accepts the goods.
Statement 2: In sale or return, the risk of loss is on the vendor; in sale or trial, the risk of loss is on the vendee.

A. Both statements are true.

B. Statement 1 is true; Statement 2 is false.
C. Both statements are false.
D. Statement 1 is false; Statement 2 is true.

9. Statement 1: In a sale of personal property in installment, the seller is obliged to exercise the remedy of foreclosure of chattel mortgage,
if there be one, in the event that the buyer fails to pay two or more installments.
 Statement 2: In a sale of personal property in installment, if the seller decided to foreclose but did not actually sell the property, he may
still ask for a specific performance and demand for the remaining deficiency in the price.

A. True, False
B. True, True
C. False, True
D. False, False

10. One of the following is not an alternative remedy available to a seller of personal property on installment if the buyer defaults:
A. To go to the court and ask the court to order delivery of the property
B. To foreclose the chattel mortgage
C. To sue for specific performance
D. To take possession of the property and forfeit the amount paid by the buyer

11. Which of the following statements is false?

A. In contract to sell, ownership is not transferred to the buyer even if there is delivery.
B. Stoppage in transitu can be exercised by unpaid seller if the buyer is insolvent and vendor has not yet parted with the thing sold.
C. The price is considered certain if it is in reference to another thing certain.
D. In a right of resell, it is not necessary that the original buyer is insolvent.

12. Warranty against hidden defect is:

A. an essential element
B. an accidental element
C. a natural element
D. an extraordinary element

13. The buyer has a right to the fruits of the thing from the time:
A. thing is delivered
B. contract is perfected
C. obligation to deliver the thing arises
D. fruits are delivered

14. Effected when the object of sale is already in the possession of the vendee at the time of sale so that delivery need no longer be made:
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Traditio symbolica

15. When the owner of the thing sells it to vendee, but continued to have possession or occupation of the thing not as owner but as tenant:
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Traditio symbolica

16. Goods are deemed in transit:

A. When the buyer accepts delivery of the goods upon arrival at destination
B. When the buyer intercepts and lawfully takes possession of the goods at any point before destination
C. From the time they are delivered by the seller to a common carrier or other bailee for transmission to the buyer, up to the time
that the buyer or his agent takes delivery of the goods from the carrier or bailee.
D. When the carrier or bailee, upon arrival of the goods at destination acknowledges to the buyer or his agent that he is holding the
goods as bailee for the latter.

17. If immovable property should have been sold to different vendees, the ownership shall be transferred to the person:
A. Who have first taken possession in good faith
B. Who presents the oldest title in good faith
C. Who in good faith first recorded it in the Registry of Property
D. Who have paid in good faith the purchase price in full

18. Statement 1: Earnest money and option money both apply to perfected sale.
Statement 2: In a contract of sale of personal property, the price of which is payable in installment, the vendor may cancel the sale should
the vendee fail to pay.

A. First statement is true, second statement is false.

B. First statement is false, second statement is true.
C. Both statements are true.
D. Both statements are false.

19. Statement 1: The husband and wife cannot sell property to each other, as a rule.
Statement 2: The sale of a piece of land or interest therein when made through an agent is void unless the agent’s authority is in writing

SUBJECT: Regulatory Framework and Legal Issues in Business Page 2

 even if the sale itself is in a public instrument and has been registered.

A. First statement is true, second statement is false.

B. First statement is false, second statement is true.
C. Both statements are true.
D. Both statements are false.

20. Statement 1: If the price is grossly inadequate, the sale is void.

Statement 2: Whenever option money is given in a contract of sale, it shall be considered as part of the price and a proof of perfection of
the contract.

A. First statement is true, second statement is false.

B. First statement is false, second statement is true.
C. Both statements are true.
D. Both statements are false.

21. Statement 1: The ownership in the thing shall not pass to the purchaser until he has fully paid the price.
Statement 2: If at the time the contract of sale is perfected, the thing which is the object of the contract has been partially lost, the contract
shall be without effect.

A. First statement is true, second statement is false.

B. First statement is false, second statement is true.
C. Both statements are true.
D. Both statements are false.

22. Delivery of incorporeal property may be through any of the following means, except:
A. execution of a public document
B. placing titles of ownership in the possession of the vendee
C. use by the vendee of his rights, with the debtor’s consent
D. execution of private instrument

23. The full payment of the price is a positive suspensive condition in:
A. Contract to sell
B. Contract of sale
C. Sale or return
D. Sale or trial

24. The non-payment of the price is a negative resolutory condition in:

A. Contract to sell
B. Contract of sale
C. Contract of agency to sell
D. Sale on approval

25. A contract for a piece of work is different from a contract of sale that in a contract for a piece of work:
A. The Statute of Frauds does not apply.
B. The article object of the contract is manufactured or procured in the ordinary course of business.
C. There is usually a stock which is kept on hand and made available to anyone.
D. If the article is not available, there is no change or modification of it when it is ordered by the customer.

CASE ANALYSIS
Direction: Read and analyze the following cases. Answer briefly and concisely. Write your answer at the back page of the test paper.

CASE 1
Puregoods Corporation, which maintains a professional basketball team, entered into a contract with Avenidas Footwear Company for the
latter to provide a pair of rubber shoes to the former’s two imported basketball players, Justine Gregorio and Michael Gabayno. Avenidas
Footwear was instructed to make a pair of any or both of the players in case the company did not manufacture shoes of their size. No pair
was, however, immediately available to both the players. Justine Gregorio, who is 6’3” tall and wears size 12 rubber shoes, was given a pair
the following day from the 200 pairs that Avenidas Footwear was in the process of manufacturing for its customers at the time the orders were
received. Michael Gabayno, who stands at 7 feet and wears size 18 shoes, was provided three days later, with a pair that was specially made
for him since Avenidas Footwear does not make shoes of his size.

What kinds of contracts were entered into for the shoes provided to the two basketball players, Justine and Michael? (2 points)

CASE 2
Iya sold a second hand photocopying machine to Maja. It was agreed that Maja would fix the price five days later.

Is the contract of sale perfected? Explain. (2 points)

CASE 3

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Nene sold her motorcycle to Mimi for P40,000. It was stipulated that the motorcycle will be delivered to Mimi on June 30 of the current year.
Before the end of June, it was completely destroyed without the fault of Nene.

Can Mimi now recover the P40,000 which she paid to Nene? Explain. (2 points)

CASE 4
Donna sold to Regine a piece of jewelry at a price of P20,000. The contract provides that Regine will give Donna cash of P5,000 and a
refrigerator worth P15,000.

What is the nature of the contract? (2 points)

CASE 5
Buboy is interested in buying the car of Starla for P100,000 payable within 30 days from the date of sale. To show that he is really in earnest,
Buboy gives Starla P1,000 upon the execution of their agreement, which amount Starla accepts.

Is there a contract of sale?

On the due date for payment of the price, how much Buboy will pay to Starla?

CASE 6
Sunset sold his only car to Sunshine for P100,000 payable in 10 equal monthly installments of P10,000 each. As security, Sunshine executed
a chattel mortgage on the car and another chattel mortgage on her piano. After paying the first two installments, Sunshine defaulted in the
payment of the third, fourth and fifth installments. As a consequence, Sunset foreclosed the chattel mortgage on the piano which was sold for
P75,000.

May Sunset recover the deficiency of P5,000? (2 points)

May Sunset foreclose the chattel mortgage on the car in order to recover the deficiency? (2 points)

CASE 7
On May 2, Myla delivered an electronic calculator to Milo under a ‘sale or return’ agreement. Myla gave Milo up to May 7 to return the
electronic calculator. Before Milo could return the calculator, the same is destroyed in a fire.

Must Milo still pay the purchase price of the electronic calculator? (2 points)

CASE 8
Hannah bought from Janielle a lot for a lump sum of P1,500,000. Aside from mentioning the boundaries of the lot, the deed of sale also states
the area at 1,500 square meters.

Suppose the area contained within the boundaries is actually 1,400 square meters, what would be the remedy of Janielle? (2 points)
Suppose the area contained within the boundaries is actually 1,600 square meters, what would be Janielle’s remedy? (2 points)

CASE 9
On July 1, D deposited his goods with W, warehouseman, who issued to D, a warehouse receipt which states that the goods are to be
delivered to the order of D. Thereafter, D indorsed the warehouse receipt to A.

Assume that on July 5, A delivered the warehouse receipt without any indorsement to H, a purchaser for value. On July 7, A notified W that
he had sold the goods to X. At the time of such notification, W had not yet learned of the transfer of the document made by A to H.

Who has a better right to the goods? H or X? (3 points)

CASE 10
B ordered 500 cans of sardines from S at P8.00 per can. On the due date, S could deliver only 450 cans.

What are the rights of B? (2 points)

ENUMERATION
51-56. Persons prohibited from acquiring by purchase
57-60. Rights of unpaid seller

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