Midterm Examination in RFBT

1. How may a corporation be created under Philippine setting?

A. In case of private corporation, by operation of general corporation law particularly the Corporation
Code of the Philippines (BP 68).
B. In case of public corporation, by law or enactment of special law.
C. Either A or B.
D. By mere consent of the contracting parties

2. As an artificial being, which of the following constitutional rights is not available to a corporation?
A. Right to due process of law
B. Right to equal protection of the law
C. Right against unreasonable searches and seizures
D. Right against self-incrimination

3. Which of the following statements concerning the implications of being an artificial being of a
corporation is correct?
A. As a general rule, a corporation is not entitled to moral damages because, not being a natural
person, because it cannot experience physical suffering or sentiments like wounded feelings,
serious anxiety, mental anguish and moral shock except when a corporation has a reputation that is
debased, resulting in its humiliation in the business realm particularly in the case of libel or
defamation.
B. As a general rule, a corporation cannot be held liable for a crime because of impossibility of
imposing the penal sanction of imprisonment and because a crime committed in the name of
corporation is actually committed by the individuals who act for and in behalf of such corporation.
However, it may become liable for fines to be imposed in the criminal action.
C. Both A and B.
D. Neither A nor B.

4. The following are the disadvantages of forming a corporation, except

A. There is high cost of formation and operations.
B. It is subject to higher taxes or sometimes indirect double taxation.
C. Stockholders have little voice in the conduct of the business.
D. It makes feasible gigantic financial undertakings due to numerous investors.

5. Which of the following legal principles best describes the strong juridical personality of a corporation?
A. Limited liability rule
B. Business judgment rule
C. Separate entity theory
D. Right of succession or continuity of existence

6. Are the stockholders, directors or officers personally liable for the liabilities of the corporation after the
assets of the corporation are exhausted?
A. Yes because they are considered to be general partners.
B. No under all instances.
C. Yes under all instances.
D. No as a general rule unless exceptional cases warrant the piercing of the veil of corporate fiction.
7. Which of the following instances on itself alone may justify the court in piercing the veil of corporate
fiction?
A. The mere fact that one or more corporations are owned and controlled by a single stockholder
B. The mere fact that two corporations may be sister companies and that they may be sharing
personnel and resources
C. The existence of interlocking directors, corporate officers and shareholders between the two
corporations
D. The control of the corporation is used by the director to commit fraud or to defeat public
convenience.

8. Which of the following statements concerning the prayer for piercing the veil of corporation fiction is
incorrect?
A. Piercing application is essentially a judicial prerogative.
B. Piercing must be shown to be necessary and with factual basis
C. Piercing is an equitable remedy and may be awarded only in cases filed by a person with victim
standing
D. Piercing is a substantive right provided by BP 68 available as a matter of right.

9. Which of the following statements best describes a municipal corporation?

A. It is created by special law for the governance of a particular territory or local government unit.
B. It is created by special law for public purpose or general welfare but performs some commercial
functions or a corporation organized as a stock or nonstock corporation vested with functions
relating to public needs, whether governmental or proprietary in nature and owned by the
Government directly or through instrumentalities wither wholly or where applicable as in the case of
stock corporations to the extent of at least 51% of its capital stock
C. It is created by operation of BP 68 but performs essential government functions because such
function is being privatized by government. They are engaged in private business affected with
public interest
D. It is created by operation of BP 68 and essentially performs commercial functions or for private
interest.

10. Which of the following statements refers to a lay corporation?

A. It is one organized for religious purposes
B. It is one established for charitable purposes.
C. It is one organized for a purpose other than a religion.
D. It is a corporation created by mere lapse of time. It is a corporation with acknowledged personality
inasmuch as it is an institution which antedated by almost a thousand years any other personality in
Europe, and which existad when Grecian eloquence still flourished in Antioch and when idols were
still worshipped in the temple of Mecce. It obtains juridical personality despite the absence of grant
from state

11. Which of the following statements refers to a domestic corporation?

A. It is one incorporated under the Philippine laws.
B. It is one formed, organized or existing under any laws other than those of the Philippines and
whose laws allow Filipino citizens and Filipino corporations to do business in its own country.
C. It is one existing both in fact and law. It is a corporation organized in accordance with the
requirements of law. Its juridical personality is not subject to the attack by the stat
 D. It is one existing in fact but not in law. It is a corporation that is formed where there exists a flaw in
its incorporation but there is a colorable compliance with the requirements of law. Its juridical
personality is subject to direct attack only by the state

12. HONDA Philippines is fully owned by Japanese nationals. Its main office is located at Tokyo, Japan but
it was incorporated under the provisions of the Corporation Code of the Philippines. It engages its
business in the Philippines. What is the classification of the corporation under the Corporation Code?
A. Resident corporation
B. Non-resident corporation
C. Foreign corporation
D. Domestic corporation

13. Which of the following types of corporations is not required to file articles of incorporation to obtain
juridical personality as a private corporation?
A. Corporation by prescription
B. De facto corporation
C. Ostensible corporation
D. De jure corporation

14. Which of the following statements refers to a holding company or parent corporation?
A. It is a corporation which controls another as a subsidiary by the power to elect management. It is
the one that holds stocks in other companies for purposes of control rather than for mere
investment.
B. It is a company which is subject to a common control of a mother or holding company and operated
as party of a system or a corporation that is directly or indirectly, through one or more
intermediaries, is controlled or is under the common control of another corporation.
C. It is a corporation which is being controlled by the parent corporation.
D. It is a corporation which is being influenced by the investor.

15. Which of the following statements refers to promoters?

A. They are the persons who acting alone or with another take initiative in founding and organizing the
business or enterprise of the issuer and receive consideration therefor.
B. They are the persons who agreed to take and pay for original and unissued shares of a corporation
formed or to be formed
C. They are persons who guaranteed on a firm commitment and/or declared best effort basis the
distribution and sale of securities of any kind by another company.
D. They are those stockholders or members mentioned in the articles of incorporation as originally
forming and composing the corporation and who are signatories thereof.

16. The following are the fundamental corporate acts when stocks classified as without voting or non-voting
stocks or stocks with limited voting rights are still allowed to vote or participate, except
A. Approval of Management Contract and/or Issuance of Stock Dividends
B. Investments of corporate funds in another corporation or another business purpose other than in
the Articles of Incorporation as primary and secondary purpose
C. Increase or decrease of capital stock
D. Dissolution of the corporation, liquidation of the corporation or rehabilitation of the corporation

17. They refer to the persons mentioned in the Articles of Incorporation as originally forming and
composing the corporation, having signed the Articles and acknowledged the same before notary public
 A. Incorporators
B. Stockholders
C. Corporators
D. Directors

18. Which is correct as regards to legal capital of par-value shares of stocks and no-par value shares of
stocks?
A. In case of par-value shares of stocks, the legal capital is the total par value of shares issued and
subscribed.
B. In case of no par-value shares of stocks, the legal capital is the entire consideration received.
C. Both A and B
D. Neither A nor B

19. These corporations are not allowed to issue no-par value common shares, except
A. Public utilities
B. Real estate companies
C. Preneed company
D. Buildings and Loans association

20. The following are the corporate acts when stocks classified as without voting or non-voting stocks or
stocks with limited voting rights are not allowed to participate, except
A. Granting compensation to directors
B. Merger and Consolidation of Corporations
C. Ratification of disloyalty of a director or contract with self-dealing director or contract between
corporations with interlocking director
D. Election of Board of Directors

21. If the partnership agreement does not specify how profit is to be allocated, profits or losses should be
allocated
A. Equally
B. In accordance with their capital contribution.
C. In proportion to the average of capital invested during the period
D. Equitably so that partners are well compensated for their time and effort

22. Which of the following will not result in dissolution of a partnership?

A. Incapacity of a partner.
B. Negative capital balance of a partner.
C. Bankruptcy of a partner.
D. Admission of a new partner

23. Which of the following results in the dissolution of a-partnership?

A. The winding up of the partnership and the distribution of remaining assets to the partners.
B. The contribution of additional assets to the partnership by an existing partner
C. The receipt of share by an existing partner.
D. The withdrawal of a partner from a partnership.

24. A limited partnership has A, as general partner, B as limited partner and C as industrial partner
contributing P100,000, P50,000 and services respectively. The partnership failed and after disposing all
 its assets to pay partnership debts, there still remains a note payable in the sum of P30,000. Against
whom can the creditor demand payment?
A B C
A. P30,000 P0 P0
B. P15,000 P0 P15,000
C. P15,000D P 7,500 P 7,500
D. D. P10,000 P10,000 P10,000

25. If a partner is insolvent, his personal properties shall first be distributed

A. To the partnership creditors.
B. To the partners by way of additional contribution when the assets of the partnership were
insufficient to settle all obligations.
C. To partnership and separate creditors in the ratio of their loan exposures
D. To separate creditors

26. In a liquidation, the liabilities of the partnership should be paid

A. Before any sale of assets.
B. Before the distribution of cash to partners
C. Before the distribution of gains and losses on the disposal of assets
D. After a revaluation of assets

27. Claims against partners' personal assets by creditors if the partnership can't pay its debt refers to
A. Unlimited liability
B. Dissolution
C. Mutual agency
D. Liquidation

28. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership
A. Partnership liabilities, partnership loans and partnership capital balances.
B. Partnership drawings, partnership liabilities, partnership loans and partnership capital balances.
C. Partnership liabilities, partnership loans, partnership drawings and partnership balances
D. Partnership liabilities, partnership capital balances and partnership loans.

29. A liquidation differs from a dissolution in that liquidation

A. There may be an adjustment of partners capital accounts.
B. Assets maybe revalued
C. The business will not continue.
D. Gains and losses are distributed according to the partnership agreement.

30. X, Y and Z form Y Partnership to engage in import-export business. The partners agrees that the profit
will be divided on the following ratio: X - 20%, Y-30%, Z 50%, but no agreement as to losses. After one
year of operation, there was a loss of P 10,000. How will you apportion this losses if the capital
contributions are as follows: X - P20,000; Y- P 15,000; Z - P – 5,000
A. According to their capital contribution: X-P5,000; Y-P3,750, Z- P1,250.
B. Equally among X, Y and Z
C. X – P2,000; Y - P3,000, Z - P 5,000
D. A third party may be called to make the distribution.
31. R, S and T decided to form a universal partnership of all present property. The contract of partnership
was executed on October 10, 2009 but they commenced business on October 18, 2010. One of the
following is not correct?
A. If the partnership is for 15 years, but one of the partners withdraws from the partnership on the 12th
year, the firm is dissolved
B. The partnership began its existence on October 10, 2009.
C. If after the expiration of the its term, the partners continue to transact business, the partnership is
converted to a partnership at will
D. In the absence of any partnership agreement specifically covering the division of losses among the
partners, they will be deemed to share the losses in accordance with their capital contributions

32. Partners A, B and C met a tragic accident. A and B instantly died on the spot, while C was brought to
the hospital but died a few hours later. Who may wind up partnership affairs?
A. Legal representative of A
B. Legal representative of B.
C. Legal representative of C
D. The court should appoint a representative who will wind up the affairs.

33. This feature distinguishes a partnership from co-ownership.

A. The purpose is to make profits.
B. It has no juridical personality
C. The profits are divided in proportion to one's interest.
D. Created not only by agreement of the parties but also by law.

34. A B and C formed a Universal Partnership of Profits. The partners contributed the following: A-20
sewing machines: B-14 Furniture and Fixtures; C-4 storey building. The parties agreed that only the
use of the fruits of the objects contributed shall pertain to the partnership. Which of the following
statements is true?
A. The partnership upon delivery shall be the owner of the objects contributed
B. Upon dissolution, the objects shall be converted into cash and the proceeds shall be divided equally
among the partners including the fruits.
C. During the term of the partnership, the contributing partner remains to be the naked owner of the
object contributed but upon dissolution all objects are to be converted into cash and proceeds shall
be divided equally among the three partners.
D. During the term of the partnership, the loss of the objects contributed shall be borne by the partners
concerned

35. April, May and Jun formed a general partnership with a capital of P100,000 and the partners
contributing 50%, 30% and 20%, respectively. Mars has acclaim of P160,000 against the partnership. If
Mars files a suit to collect her claim, which of the following is not correct?
A. All the partners are liable to the extent of their separate property.
B. All the partners shall be liable pro-rata with all their property only after the partnership assets have
been exhausted
C. The personal liability of the partners is merely joint and not solidary
D. After exhaustion of the partnership assets, April, May and Jun shall be liable 50%, 30% and 20%
respectively to Mars for unpaid claim

36. May, Jun and Jules are partners in an import and export business. Customers desiring to place an
order for imported articles are always required to make a deposit of 25% of the total cost of the order.
 Augie, a regular customer deposited P2,000 to May for his order. May instead of turning over the said
amount of the partnership, misappropriated it. As a result, one is not correct?
A. Augie may institute a claim against the partnership and all the partners
B. The personal liability of the partners is merely joint and not solidary
C. The partnership is bound to make good the loss where one partner acting within the scope of his
apparent authority received money or property of a third person and misapplies it
D. All the partners are liable solidarity with the partnership for everything chargeable to the
partnership.

37. A and B are partners. On January 2, 2010, C was admitted as a new partner. At the time of C's
admission, the partnership creditors were M for P50,000 and N for P30,000. After January 2, 2010, the
partnership borrowed from O-P20,000 and P40,000 from P. On May 15, 2010, the partnership became
insolvent leaving an obligation amounting to P140,000 and partnership assets amounting to P30,000.
The creditors are going after the separate properties of the partners to satisfy their remaining claims,
How are the creditors' claims satisfied?
Statement 1-M and N can go after the separate properties of A and B but C's separate properties are
not answerable to their claims
Statement 2-0 and P can go after the separate properties of A, B and C.
A. True: True
B. False, True
C. True, False
D. False, False

38. On April 1, 2010, A and B entered into a contract of partnership for the purpose of buying and selling
textbooks, with the former as capitalist partner and the latter as industrial partner. It was agreed that A
shall contribute P100,000 to the common fund on May 2, 2010. Upon the arrival of the designated date,
A failed to deliver the contribution he promised. As a result
A. B should make a demand upon A for the delivery of his contribution to render A in default.
B. The contract of partnership becomes void because A failed to give his contribution to the common
fund.
C. B can compel A to deliver his contribution with interest and damages without the necessity of
demand
D. The contract of partnership was never perfected because there was no delivery of contributions by
the partners

39. Three of the following are rights of a partner, which one is not? Right to
A. Admit another partner.
B. Inspect and copy partnership books.
C. Associate another person to his share.
D. Ask dissolution of the firm at the proper time.

40. As regards a limited partner, which of the following is correct?

A. He is automatically an agent for the partnership with apparent authority to bind the limited
partnership in a contract
B. He can not own limited partnership interest in other competing limited partnership.
C. He has no liability to creditors even the taken part in the control of the business as long as he is
held out as being a limited partner.
D. He can contribute money and/or property but not services
41. X sold his motor vehicle to V who bought it for P200,000. It turned out however, that X has 2 motor
vehicles: Toyota valued at P230,000 and Lancer valued at P220,000. Which is correct?
A. There is no contract of sale between X and V
B. The parties may ask for interpretation or reformation
C. The parties can ask for annulment of the contract
D. V may choose between the Toyota or Lancer

42. X, the guardian of V, sold V's house and lot worth P480,0000 for P430,000.
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 can be rescinded by X.

43. X, 17 years old, sold to Z of legal age, her necklace worth P20,000 for P15,000, Later, Z sold the
necklace to Y for P20,000. Which of the following statements is correct?
A. X has got a voidable title because at the time of sale, she is a minor
B. X can ask for rescission of the sale to Y because she suffered a lesion of more than ¼ of the value
of the property
C. If Y is in bad faith, Y becomes the owner of the necklace upon delivery to him but his title is
voidable
D. X can ask for the annulment of the sale to Y because at the time of sale she is a minor.

44. Which of the following contracts is not void ab initio?

A. The contract where the object is beyond the commerce of man
B. The contract whose cause, object or consideration is against the law, morals, good customs or
public order.
C. The contract which is relatively simulated or fictitious.
D. The contract where the intention of the relative to the object thereof cannot be ascertained

45. On July 15, 2016, X entered into a contract with Y. On February 10, 2017, X discovered that fraud was
committed at the time he entered into the contract, a fraud that vitiated his consent. The action for
annulment shall be brought
A. Within three years from the time of the fraud.
B. Within four years from February 10, 2017
C. Within four years from the time A entered into the contract
D. On February 10, 2017

46. A delivered his van to B for the latter's use for one week without any compensation. The cause of the
contract is
A. The van of A
B. The generosity of A
C. The period of one week
D. The delivery of the van

47. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. Which of the following constitute an offer?
A. An offer made to an agent
B. Business advertisement of things for sale.
C. Advertisement for bidders.
 D. Answer not given.

48. Contracts entered into during lucid-interval

A. Voidable
B. Void
C. Unenforceable
D. None of the above.

49. Classifications of contracts according to form are

I. Informal or common contract or that which may be entered into in whatever form provided all the
essential requisites for their validity are present
II. Formal or solemn contract or that which is required by law for its efficacy to be in a certain specified
form.
A. True, True
B. True, False
C. False True
D. False, False

50. S1: If the contract is not in the form provided by law for its validity, the contract is void
S2: If the contract is not in the form provided by law for its enforceability, the contract, though it has all
the essential requisites for validity, cannot be enforced against the party sought to be charged.
A. True, True
B. True, False
C. False, False
D. False, True

51. The transfer to a third person of all the rights appertaining to the creditor.
A. Delegacion
B. Expromission
C. Subrogation
D. Novation

52. Andy makes a check payable to bearer, and hands the check to Ben, who hands it to Cyn who finally
hands it to Andy. This is an example of -
A. Condonation or remission of debt
B. Compensation
C. Confusion or merger of rights
D. Prescription

53. A obliged himself to give B a car if 8 places among the top ten in the CPA Board Exam. Subsequently,
they agreed that A would give B the car if B merely passes the CPA Board. This is an example of
A. Mixed novation
B. Real novation
C. Implied novation
D. Personal novation

54. If a third person pays without the debtor's knowledge or against his will, the payor is entitled to
Reimbursement of what he has paid.
 Subrogation to the rights of the creditor.
A. False, True
B. True, False
C. False, False
D. True, True

55. Jo owes John the following debts

Debt 1-P10,000 payable January 1, 2011
Debt 2-P10,000 payable February 1, 2011
Debt 3-P10,000 payable March 1, 2011
Debt 4-P10,000 payable April 1, 2011
Suppose Jo pays John P10,000 on February 1, 2011 without stipulating to which debt his payment shall
be applied. To which of the following debt can he have his payment applied?
A. A Debt 1
B. Debt 2
C. Debt 3
D. Debt 4

56. A owes B P1,000. A, knowing that the debt has prescribed, nevertheless, still pays B. Can A recover
what he voluntarily paid?
First answer: Yes, because B has no right to demand the payment effected by A.
Second Answer: No, the payment extinguished the natural obligation.
A. Both answers are correct
B. Only the first is correct
C. Both answers are wrong.
D. Only the second is correct

57. In case both parties have committed a breach of the obligation:

A. The second infractor may choose between rescission or fulfillment.
B. The first infractor is more is more liable than the second.
C. Each party must bear his own damage.
D. The liability of the first infractor shall be equitably tempered by the courts.

58. Which of the following is not a generic obligation?

A. Obligation to pay P1,000,000
B. Obligation to deliver 1999 Nissan Sentra Series III
C. Obligation to deliver 50 cavans of rice
D. Obligation to give a delimited generic object

59. Elmo is obliged to give Bert, either a ring worth P5,000 or bracelet worth P4,500; or a watch worth
P4,000. All the objects were lost due to Elmo's fault in the order stated.
A. Elmo's obligation is extinguished.
B. Elmo's obligation is to pay the value of the ring plus damages
C. Bert's right is to demand the value of any of the objects plus damages.
D. Elmo's obligation is to pay the value of the watch plus damages

60. "I will give you my car provided that if I like to have it back, you will return the same to me."
A. The obligation is void, because the fulfillment depends upon the will of the debtor.
B. The obligation is vold, because the fulfillment depends upon the will of the creditor.
 C. The obligation is valid because the condition merely causes the loss of rights already acquired
D. Both A and B

Final Examination
1. Rayermoon, after a day of rest and after her plane landed in the Philippine jurisdiction following a
surgery she underwent in Thailand and just after ruling of the court rendering an order/judgement that
he is a she, subscribe to 10,000 shares of stock of NORTHERN Corporation located at the heart of
Baguio along the foot of Bession road and head of Burnham Park. She paid 25% of the said
subscription. During the stockholders meeting, can Rayemoon vote all her subscribed shares?

a. No, because the subscription has not yet been fully paid
b. No, because A's shares have became delinquent which cannot be voted.
c. No as to the unpaid percentage of subscription
d. Yes, because the unpaid shares not delinquent can be voted.

2. Rod Bake Corporation posted a P1M profit in its reality business and its real estate has appreciated in
value in the amount of P4M despite the El Nino phenomenon that struck the northern and southern
Philippines. The board then declared dividends to its stockholders computed on the basis of PSM
representing profits and appreciation in the value of its real estate. Is the dividend declaration valid?
a. Not valid because there was no approval of 2/3 of the outstanding capital stock
b. Valid because it was based on profit and increment in the value of corporate asset
c. Not valid because dividends must only come from the unrestricted retained earnings.
d. Valid if no creditors shall be prejudiced and approved by the required votes of the directors and
stockholders.

3. Mr. Zeu Rex, named after his beautiful mother and handsome father, subscribed to 100 shares of
Sharryl Aduncion Corporation, paying 25% of the amount thereof. The corporation refuses to issue to
the former a stock certificate for his subscription despite the demand of Zeu Rex for a stock certificate
corresponding to 25 shares which he claims have been paid. Meanwhile, the corporation has become
insolvent and Zeu Rex now refuses to pay for his unpaid balance on his subscription is the refusal of
the corporation to issue the certificate valid?
a. Not valid because there can be issued stock certificate for the number of shares already paid
b. Valid because the stock certificate can only be issued after the full payment of the subscription
c. Valid with respect to the unpaid portion of the subscription.
d. Not valid because only delinquent share may be denied stock certificate.

4. Statement 1: After dissolution but after three-year period for liquidation a corporation's term may still be
extended by amendment of its articles of incorporation
Statement 2: The dissolution of corporation shall take place because it has been in continuous non-
operation for five years
a. Both statements are false.
b. First is false, second is true.
c. Both are true.
d. First is true, second is false

5. Statement 1: The by-laws may provide that the holders of a majority of the outstanding capital stock
may elect all the member of the board of directors
Statement 2: That it may also provide that no officer of the corporation shall be required to be a
stockholder.
 a. Both statements are true.
b. First is true, second is false.
c. Both statements are false
d. First is false, second is true.

6. Statement 1: The declaration of dividends out of the capital and not surplus profit is a violation of the
doctrine of piercing the veil of corporate fiction.
Statement 2: When the used as an alter ego or conduct to avoid the performance of an obligation is
violation of the trust fund doctrine
a. Both statements are false.
b. First is false second is true
c. Both statements are true.
d. First is true second is false

7. Statement 1: Stockholders meeting must be in the city or municipality where the principal office is
located while members meeting of a non-stock corporation may be outside thereof
Statement 2: The secretary of the corporation must generally be a citizen and a resident of the
Philippines.
a. Both are true.
b. Both are false.
c. First is true, second is false.
d. First is false, second is true.

8. Statement 1: The doctrine of corporate opportunity rests on the unfairness of an officer or director of a
corporation taking advantage of an opportunity for his own personal benefit adverse to the corporation.
the corporation to acquire juridical personality.
Statement 2: The by-laws must be filed with the SEC for
a. Both are true .
b. Both are false.
c. First is true, second is false
d. First is false, second is true.

9. In three of the following instance, shares with or without voting rights can be voted, except
a. Increase or decrease of capital stock
b. Election of directors or trustees.
c. Dissolution of the corporation.
d. Merger or consolidation with other corporation.

10. The executive committee cannot act on this matter except

a. Filling of vacancy in the board of directors
b. Stock dividend declaration.
c. Cash dividend declaration
d. Board resolution on depository bank of the corporation

11. The following may be consideration of the shares of stock of a corporation, except:
a. Actual cash paid to corporation.
b. Previously incurred indebtedness of the corporation.
c. Amounts transferred from unrestricted retained earnings.
d. Services to be performed by a lawyer on the proposed increased in capital stock of the corporation
12. A, B, C, D, E, F and G are the duly elected directors for 2012 of FIDELITY Corporation whose articles
of incorporation provide for 7 directors. On August 1, 2012, Directors A, B, C, D, and E met to fill the
two vacancies in the board brought about by the valid removal of F for disloyalty to the corporation and
the death of G. In the said meeting, the remaining directors voted for X to replace F, and Y a son of G,
to replace his father. Both X and Y are owners of at least one share of stock of the corporation. The
election of X and Y by the remaining directors:
a. Valid for both X and Y.
b. Not valid for both X and Y.
c. Valid with respect to X, not valid with respect to Y
d. Valid with respect to Y, not valid with respect to X

13. Corporations are distinguished from partnerships

a. The liability extends up to private properties
b. Created by agreement
c. Interest or ownership is transferable only if the owners consent
d. No dissolution in case of death, withdrawal or resignation of the owner.

14. If the remaining directors constitute a quorum, they can fill up the vacancy
a. In case of removal of a director
b. In case of expiration of term of a director
c. If there is an increase in the number of directors
d. In case of abandonment of a director

15. The board of directors of a corporation consists on nine (9) members, where two (2) have died during
their term of office and one (1) is abroad, the quorum would be
a. Five (5) members
b. Six (6) members
c. Four (4) members
d. Seven (7) members

16. Under the 1987 Constitution, which of the following industry or business or activity of national interest is
exclusively reserved for Filipinos or Corporation required to be 100% owned by Filipinos?
a. Ownership and management of mass media
b. Advertising industry
c. Operation of public utility
d. Co-production, joint venture or production sharing agreements with Filipinos involving exploration
and development of natural resources

17. Subscribers of stocks, which are not declared delinquent, are entitled to all rights of shareholders.
Which of the following is the right not available to unpaid subscribed shares not yet declared
delinquent?
a. Right to vote at stockholders' meeting
b. Right to issuance of stock certificate
c. Right to receive dividends
d. Right to protect his interest in appropriate action

18. Which of the following is/are the requisites of a non-stock corporation?

a. It does not have capital stock divided into shares.
 b. No part of whose income is, during its existence, distributable as dividends to its members,
trustees, or officers
c. Both A and B
d. Neither A nor B

19. It refers to a business combination whereby two or more existing corporations form a new corporation
different from the combining corporation.
a. Merger
b. Consolidation
c. Joint arrangement
d. Joint venture

20. When may the SEC compel either the close corporation or stockholders of close corporation to buy
back the shares of unrestricted retained earnings and irrespective of a dissenting stockholder?
a. When there is deadlock in a close corporation regardless of existence the solvency of the close
corporation.
b. When there is deadlock in a close corporation but there must be unrestricted retained earnings.
c. When there is deadlock in a close corporation regardless of existence of unrestricted retained
earnings provided that the corporation's total assets exceed total liabilities
d. When there is deadlock in a close corporation but there must be profit during the year.

21. The following persons are disqualified to form a universal partnership. Who are the exception?
a. Brother and sister
b. Husband and wife
c. Those guilty of adultery and concubinage
d. Those guilty of the same criminal offense, if the partnership is entered into a consideration of the
same

22. A is the capitalist partner and B the industrial partner. A is engaged personally in the same kind of
business the partnership is engaged in
a. If there are losses, the partnership will bear the losses
b. If there are profits, the profits will be shares by A and the partnership
c. If there are profits. A will give the profits to the partnership
d. A will be excluded from the partnership and pay damages.

23. Three (3) of the following are rights of a general partner and also of a limited partner in a limited
partnership. Which is not?
a. To inspect and copy at reasonable hours the books of the partnership and have them kept at the
principal place of business
b. To demand true and full information of all matters affecting the partnership and a formal account of
partnership affairs
c. To have dissolution and winding up by decree of court
d. None of the above

24. The partnership is insolvent. These are preferred as regards to the partnership property.
a. Partnership creditors
b. Partners separate creditors
c. Partners with respect to their capital
d. Partners with respect to their profits
25. When cash or property worth P3,000 or more is contributed as capital. The Articles of Co- Partnership
shall be in a public instrument and be registered with the Securities and Exchange commission. If the
said requirements are not complied with:
a. it will render the partnership void
b. It will not affect the liability of the partnership and the partners to third parties
c. It will not give a legal personality to the partnership.
d. It will give the partnership a de-facto existence.

26. A, B and C are equal partners in Santos Brothers Partnership. The partnership is indebted to PC for
P150,000. Partner A is indebted to SC for P20,000 PC attached and took all the assets of the
partnership amounting to P90,000. B and C are solvent while A is insolvent and all what he owns is a
land valued at P15,000.
a. SC has the priority to the land of A as a separate creditor.
b. PC has priority to the land of A to cover A's share of the P60,000 remaining liability of the
partnership
c. B and C have priority to the land of A if they paid PC the 60,000 remaining liability of the partnership
d. PC and AC shall have priority to the land of A in proportion to their claim of P60,000 and P20,000
respectively

27. When the capital (of a partnership) is P3,000 or more, it must be in a public instrument and must be
recorded with the Securities and Exchange Commission (Article 1772). A, B and C agreed to form a
partnership and each contributed P10,000 as capital of the partnership. There was no compliance in
the provisions of Article 1772
a. The partnership was not established
b. The partnership did not have juridical personality
c. The partnership was established and any partner may compel the execution of a public instrument
d. The partnership is void

28. A, as a partner contributed P30,000; B as partner, P15,000; and C as industrial partner, his services in
the partnership. After payment of all liabilities and expenses, only P18,000 remain as partnership
assets.
a. A, P12,000, B, P6,000, C, None
b. A, P6,000, B, P6,000, C, P6,000
c. A, P9,000; B, P9,000, C, None
d. A, P8,000, B, P4,000, C, P6,000

29. This is the order of preference in the liquidation of a partnership:

a. 1. Outside creditors. 2. Partners with respect to their capital 3. Partners with respect to their profit 4.
Partners aside from capital
b. 1. Partners with respect to their capital 2. Partners with respect to their profit 3. Partners aside from
capital and profit 4. Outside creditors
c. 1. Outside creditors 2. Partners aside from capital and profit 3. Partners with respect to their capital
4. Partners with respect to their profit
d. 1. Partners aside from capital and profit 2. Outside creditors 3. Partners with respect to their capital
4. Partners with respect to their profit

30. W, X, Y and Z formed a partnership. W, X and Y are general partners and contributed P50,000 each
while Z, an industrial partner contributed his services only. All the partners signed an agreement
 stipulating that the liability of W is limited to its contribution. After all the assets of the partnership were
exhausted there remains an unpaid liability of P40,000. The creditors of the partnership can compel:
a. X and Y to pay the P40,000
b. X, Y and Z to pay the P40,000
c. W, X, Y and Z to pay P10,000 each and W and Z can demand reimbursement from X and Y.
d. X and Y to pay P40,000

31. A, B and C are partners engaged in a retail business. Their contribution is P20,000 each. D is admitted
as a new partner with a contribution of P8,000. At the time of his admission, the partnership has an
outstanding obligation to E in the amount of P80,000 In this case
a. D is not liable to E for this obligation
b. D is liable to E for this obligation so that amounting to P68,000 will be exhausted leaving a balance
of P12,000. Only A, B and C shall be liable jointly or pro-rata, out of their separate property.
c. D is liable to E for this obligation so that after the assets of the partnership will be exhausted,
leaving a balance of P12,000, all the partners shall be liable jointly or pro-rata, out of their separate
property
d. Answer not given.

32. A. B and C are partners in D-3 Partnership. On April 29,2010, partner C died. Not knowing that C died,
on May 1, 2010, A contracted a liability to D who also do not know the death of C. The partnership debt
is in the amount of P30,000, he can collect
a. P30,000 from A
b. P15,000 from A and P15,000 from B
c. P10,000 from estate of C, P10,000 from A: P10,000 from B
d. P20,000 from A and P10,000 from B

33. This the order of preference in the liquidation of a general partnership:

a. Outside creditors; Partner as creditors; Partners capital, Partners profit
b. Partner as creditors: Outside creditors; Partners capital, Partners profit
c. Partners capital, Outside creditors, Partneras creditors Partners profit
d. Outside creditors, Partner capital: Partners profit, Partners as creditors

34. W, X, Y and Z are partners. They contributed capital as follows: W, P50,000; X, P30,000, Y, P20,000
and 2, is an industrial partner, his services. The partnership's obligation to outsiders exceed the total
net assets by P18,000. Who and by how much will the partners be liable for the payment of the
P18,000?
W X Y Z
a. P9,000 P5,400 P3,600 P0
b. bP4,500 P4,500 P4,500 P4,500
c. P6,000 P6,000 P6,000 P6,000
d. P4 500 P2,700 P1,800 P9,000

35. Which of the following is a characteristic of partnership as a contract?

a. Formal
b. Gratuitous
c. Innominate
d. Preparatory
36. I. The arrival of the term of a partnership with a fixed term or period shall not dissolve the partnership if
the partners continue with the business of the partnership but such partnership may be terminated
anytime dependent on the will of the continuing partners
II. The general rule is that the loss of the specific thing contributed to the partnership when only the use
of the thing is contributed by the partner and such thing after its transfer to the partnership which used
the same or sometime was subsequently lost, the partnership is not dissolved.
a. True; True
b. True; False
c. False; True
d. False; False

37. A limited partner who takes active part in the management of the firm becomes
a. A managing partner
b. Liable as a general partner
c. A general partner
d. A general partner and a limited partner at the same time

38. Which of the following losses will not cause the dissolution of a partnership?
a. Loss before delivery of a specific thing which a partner had promised to contribute to the
partnership.
b. Loss of a specific thing after its delivery to and acquisition of its ownership by the partnership from
the partner who contributed the same.
c. Loss after delivery of a specific thing where the partner contributed only its use and enjoyment
where such partner reserved the ownership thereof.
d. Loss before delivery of a specific thing where the partner promised to contribute only its use and
enjoyment, reserving the ownership thereof.

39. A and B orally agreed to form a partnership two years from today, each one to contribute P1,000. If at
the arrival of the period, one refuses to go ahead with the agreement, can the other enforce the
agreement?
a. Yes, because the partnership contract is not governed by the Statute of Frauds
b. Yes, because the prior agreement was voluntarily made.
c. No, because the agreement was merely oral and executory
d. No, since the agreement is to be enforced after one year from the making thereof, the same should
be in a public instrument to be enforceable.

40. in case both parties have committed a breach of the obligation:

a. The second infractor may choose between rescission or fulfillment
b. The first infractor is more is more liable than the second.
c. Each party must bear his own damage.
d. The liability of the first infractor shall be equitably tempered by the courts

41. A and B are equal partners in AB Partnership by contributing P50,000 each on June 1, 2010. On July 1,
2010, the partnership contracted an obligation to pay Z the amount of P180,000 on August 31, 2010.
On August 10, 2010, C was admitted as a new partner. C contributed P50,000. How will the obligation
be paid?
a. A P60,000, В Р60,000, С P60,000
b. A P90,000; B P90,000; C. None
c. A P180,000 or B P180,000 and C P50,000
 d. A P65,000, В Р65,000; С P50,000

42. A owes B P1,000, A, knowing that the debt has prescribed, nevertheless, still pays B. Can A recover
what he voluntarily paid?
First answer: Yes, because B has no right to demand the payment effected by A.
Second Answer: No, the payment extinguished the natural obligation.
a. Both answers are correct
b. Only the first is correct
c. Both answers are wrong.
d. Only the second is correct.

43. Which of the following is not a generic obligation?

a. Obligation to pay P1,000,000
b. Obligation to deliver 1999 Nissan Sentra Series III
c. Obligation to deliver 50 cavans of rice
d. Obligation to give a delimited generic object

44. S1: Ibarra obliged himself to give Maria Clara a specific car tomorrow. If Ibarra failed to deliver
tomorrow after demand is made, Maria Clara may compel Ibarra to do his obligation and may ask for
damages.
S2: Darna obliged to deliver a car to Captain Barbel tomorrow. If Darna failed to deliver tomorrow after
demand is made, Captain Barbel's right is to ask a third person to deliver a car to him at the expense of
Dama plus damages.
a. Both statements are true.
b. Statement 1 is true while statement 2 is false.
c. Both statements are false.
d. Statement 1 is false while statement 1 is true.

45. S1: The debtor shall lose the right to make use of the period when he does not fumish any guaranty or
security to the creditor. $2. In an obligation subject to a suspensive period, what is suspended is birth of
the obligation
a. True; true
b. true; false
c. false; false
d. false; true

46. "I will give you my car provided that if I like to have it back, you will return the same to me."
a. The obligation is void, because the fulfilment depends upon the will of the debtor.
b. The obligation is void, because the fulfilment depends upon the will of the creditor,
c. The obligation is valid because the condition merely causes the loss of rights already acquired.
d. Both A and B

47. Elmo is obliged to give Bert, either a ring worth P5,000, or bracelet worth P4,500, or a watch worth
P4,000. All the objects were lost due to Elmo's fault in the order stated
a. Elmo's obligation is extinguished.
b. Elmo's obligation is to pay the value of the ring plus damages.
c. Bert's right is to demand the value of any of the objects plus damages.
d. Elmo's obligation is to pay the value of the watch plus damages.
48. Dennis owes Cart P1M, Xanabelle, without the knowledge or against the will of Dennis paid Cart P2M.
Can Xanabelle get reimbursement from Dennis?
a. P2M by way of reimbursement from Dennis by reason of solutio indebiti
b. P1M only for that is the extent of benefit of Dennis,
c. No reimbursement because the payment was not proper being without the knowledge or against
the will of Dennis
d. P1M plus interest from the time of payment until reimbursement

49. A owes B P11,000 due on July 2, 2010. B owes A P6,000 due on July 3, 2010 and P4,000 due on July
10, 2010. B owes C P11,000 due on July 2, 2010. On July 2, 2010, B cannot pay C so B assigns to C
her credit of P11,000 against A, without the knowledge of A. On July 10, 2010 C tries to collect from A
the P11,000. How much can C compel A to pay?
a. P11,000
b. P9,000
c. P5,000
d. P1,000

50. Article 1251 gives the rules regarding the place for the payment of an obligation without prejudice to
venue under the Rules of Court
I. If there is a stipulation, the payment shall be made in the place designated
II. If there is a stipulation and the thing to be delivered is specific, the payment shall be made at the
place where the thing was, at the perfection of the contract.
III. If there is no stipulation and the thing to be delivered is generic, the place of payment shall be the
domicile of the debtor
a. I, II and III
b. I and II only
c. II and III only
d. I and III only

51. An instrument authenticated by a notary public or competent public official with the formalities required
by law.
a. Private document
b. Public document
c. Memorandum of understanding
d. Written of agreement

52. One of the following contracts is not vitiated by intimidation or violence, and hence valid
a. A contract of sale which was signed by a party because his arm was being twisted by a third person
b. A contract of sale which was entered into because the other party was pointing a gun at his wife
c. A contract where a party was compelled to assign his property to the other to pay a just debt
because the latter threatened to sue him in court if he does not pay his debt
d. A contract of donation of a parcel of land which a party signed because the other party threatened
to burn his house.

53. I-When the from required is for its validity, its non-observance renders the contract voidable.
II-When the required from if for its enforceability, non-compliance therewith will not permit, upon the
objection of a party, the contract, although otherwise valid, to be proved or enforced by action.
a. Only I is true
 b. Only Il is true
c. Both are true
d. Both are false

54. There is no reformation in the following cases, except:

a. Memorandum of agreement
b. Wills
c. Simple donations inter vivos
d. When the real agreement is void

55. I- In order to judge the intention of the constructing parties, only their preceding shall be principally
considered.
II-However, general the terms of the contract maybe, they shall not be understood to comprehend
things that are distinct and a cases that are different from those upon which parties intended to agree.
a. Only I is true
b. Only 11 is true
c. Both are true
d. Both are false

56. On January 1, 2015, V, Inc, and X Corp. entered into a Consultancy Agreement by virtue of which the
former obligated itself to render medical services to employees of X Corp. The said service contract
stipulated among other: “The this AGREEMENT takes effect on January 1, 2015 to December 31,
2015, provided however, that either party who desires to terminate the contract may serve the other
party a written notice at least 30 days in advance." On December 1, 2015, V, Inc. wrote X Corp. to
inform that V, Inc. was assuming from their silence that subject Agreement was renewed from January
1, 2016 to December 31, 2016. In X Corp.'s reply dated December 23, 2015, X Corp notified V Inc. of
the termination of the contract in question upon its expiration on December 31, 2015. But such reply
was formally received by V Inc. only on January 9, 2016. Is the 2015 consutancy agreement deemed
renewed for another term?
a. No, because there is no implied renewal of a consultancy agreement
b. Yes, because the second clause of the contractual provision in dispute is to effect the written notice
of termination should be served at least 30 days in advance.
c. No, because there was a reply dated December 23, 2015 which is within the year 2015
d. Yes, because the reply was received only on January 9, 2016.

57. An accessory contract must be read in its entirety and together with the principal agreement.
a. No-segregation principle
b. No-ambiguity principle
c. Not clear principle
d. No-interpretation principle

58. It is act of making intelligible what was before not understood, or on obvious, by which the meaning of
the contract is ascertained.
a. Annulment
b. Ratification
c. Reformation
d. Interpretation
59. Ann offered to sell her cellular phone for P10,000 to her friend, Beth. Beth accepted the offer but is
willing to pay only P8,000. Is there a perfected contract?
a. a . Yes, for a price of P10,000,
b. b . Yes, for a price of P8,000.
c. c . No, because the acceptance was qualified and it constituted a counter-offer.
d. No, because the offer was rejected.

60. An offer made through an agent is accepted from the time acceptance is communicated to the
a. Agent
b. Principal
c. Agent and the principal
d. Agent and/ or the principal