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Test I- Multiple Choice

1. The defendant in a suit for quasi contract 6. S offers to sell B 20 cartoons of mangoes at P50 per kilo. Before B can accept
a. is accused of negligence the offer, S dies.
b. hes accepted the offer of his action a. B may accept the offer.
c. has been enriched unjustly b. The offer terminated when S died.
d. has expressly agreed to the terms of the contract c. B may accept the offer because the contract between B and S is an
option contract.
2. In order to recover in a suit for a breach of contract, which of the following d. Th offer is effective until B learns of S death.
need not be shown? 7. Barney telephones Fred and tells him that he is offering to n sell his pet dog
a. Formation of a valid contract. for P4,000.
b. The defendant failed to perform. He tells fred that the offer is good for one week.
c. The plaintiff suffered physical injury. a. Barney can revoke the offer at any before Fred accepts.
d. The plaintiff suffered economic injury. b. Barney cannot accept the offer for one week.
c. If Barney were a pet dog merchant, he would be bound.
3. Which of the following is required for the formation of the contract? d. Barneys was only an invitation to offer.
a. consideration c. a writing
b. promise by both parties d. lack of fraud 8. Luis offers the paint to Rogers house for P25,000. Roger tell him, I cant
afford that price.
4. An owner of a large home with one hectare law went on vacation. A retired Will you do it for P11,000?
neighbor noticed that the grass was getting very high. He took his electric grass a. Luiss was terminated by Rogers counteroffer.
cutter and spent the day cutting the grass. When the owner returned he was b. Luiss offer was terminated by operation of law.
very happy with the performance and expressed his gratitude. The neighbor c. Luiss offer has not terminated. Roger can still accept his offer.
a. can recover the reasonable value of the services rendered based on d. Luiss offer has not been rejected by Roger?
quasi contract.
b. can recover the usual charge that he charges based upon the contract 9. A letter of acceptance, in answer to an offer made by letter, is effective when
implied in-fact. a. deposited in the mail c. signed by the offeree
c. can recover at least the value of the value of the gasoline, depreciation, b. received by the offeror d. written
and oil used in the work
d. can recover nothing, since there is no legal duty to pay under the facts 10. Furniture Warehouse is quitting business. The manager writes to the Law firm
given. of the Crook and Law and offers to sell the firm a conference table for P10,000.
The letter also states, Because this is a one time offer, you must respond in
5. Saint Paul School of Business and Law is soliciting bids for a new computer. person. This offer cannot be modified for any reason.
ABC Corp. submits a bid of P2,000,000. The contract is given to XYZ Corp. which a. Crook and Law may accept the offer by letter because the mail is
submitted a bid of P2, 500,000. always a reasonable
a. Saint Paul is obligated to give the contract to ABC Corp. because it manner of acceptance.
accepted b. Crook and Law may accept the offer by phone because the time for
with the lowest bid. acceptance is limited.
b. Saint Paul made an offer which was accepted by XYZ Corp. c. Crook and Law may accept it in any reasonable manner.
c. ABC and XYZ made offers. d. Crook and Low must accept in person because the offer requires it to do
d. Saint Paul made an offer, but ABC had no right to accept. so.

11. Maryowns an attractive diamond that she originally purchased for P25,000.
Unfortunately, Mary was required to raise cash on short notice and, therefore, b. a delegation d. always permissible
sold her ring to Anna for P5,000.
a. This is not binding contract because Anna received a benefit. 17. A paryt is excused from the performance when his performance become
b. This is a binding contract because Marys detriment was excessive. impossible.
c. this is a binding contract supported by legally sufficient consideration. Which of the following is not an example of impossibility of performance?
d. We cannot determine if a binding contract existed because a court must a. The president of the offerror-companies dies.
assess Marys b. The subject matter of the contract is destroyed.
wisdom, considering all relative factors, in determining if the price c. One of the parties to the personal service contracts dies.
constituted valid d. A change in law makes the performance illegal.
consideration.
12. Which of the following is true regarding Statue of Frauds? 18. When a breach of contract is material, the nonbreaching party
a. The writing required is a specific form. a. May repudiate the contract only
b. Both parties to the contract must sign in in order to satisfy the writing b. has no recourse if there has been partial performance by either party
requirement. c. may sue only for anticipatory breach
c. Either party to a contract must sign in order to satisfy the writing d. is excused from the performance of contractual duties and has cause of
requirement. the action to
d. Only the party to be charged need in signs a contract. sue for damages cause by the breach.
13. One of exceptions to the statute of frauds, occurs at times,when
a. there is oral evidence of fraud 19. Floral Inc. agreed to sell plates 1,000 red roses at P6.00 each, and plates
b. there is written evidence of fraud agrees. A hail storm
c. the contract is partially performed Ruined Florals own field which usually, but not always, was Florals supply,
d. the contract involves the sale of goods worth of P500 or more. but the neighbors were
all untouched.
14. Marylou agrees to sell her couch to Stan. Stan finds the couch that he likes a. Floral Inc. is excused from performance because of impossibility.
better and ask Marylou to cancel the contract. Marylou, who had been having b. Floral Inc. must provide red roses.
second thoughts anyway, readily agrees. The second agreement agreement c. Floral is excused by commercial impracticality.
between Marylou and Stan is example of d. Floral Inc. is axcused by the doctrine Act of God.
a. accord and satisfaction c. novation
b. rescission d. delegation 20. Irma purchase a toaster from AAA appliance. The toaster does not work
properly and
15. Ramon wants to move out of his apartment but he has six months left to run Demands the return of her money. Irma is seeking
on his lease. Fred would like to move in Ramos apartment. Ramons landlord a. Reformation c. specific performance
agreed to the substitution and Fred execute a new lease. The parties have b. Rescission d. compensatory damages
agreed to a
a. novation but the landlord can sue Ramon if Fred doesnt pay the rent. 21. Carla and Dot entered into written agreement uder the terms of which
b. novation and Fred only is responsible for the rent Dot to deliver 13 tones grapes to Carla with in 3 days. The parties made a
c. rescission but the landlord can sue Ramon if Fred doesnt pay the rent. mistake because they have
d. rescission and the landlord cannot sue Ramon if Fred doesnt pay the Meant to state delivery would be within 3 days, Dot would seek
rent a. Specific performance c. reformation
b. Rescission d. an action for damages
16. The transfer of rights created by contract to the third party is
a. an assignment c. never permissible
a. Are general partners in the opration of the gas station.
22. A contract that has been completed to the extent of 98% is, generally b. Have formed a limited partnership, because Bert receives money only
speaking, if a profit is made.
An example of c. Are tenants in partnership of the corner lot.
a. Anticipatory breach c. satisfactory performance d. Have a landlord-tenant relationship and nothing more.
b. Material breach d. substantial performance
29. Which of the following is not ground for dissolution of a partnership by
23. Which of the following is a duty owed by the principal to the agent? judicial decree?
a. indemnification c. notice a. death of a partner
b. loyalty d. accounting b. dissensions between the partners
c. mental in capacity of a partner
24. which of the following is an irrevocable agency? d. wrongful act of a partner which destroy the partnership business.
a. agency for a term of 5 years.
b. Agency coupled with an interest 30. Linda hire Cecil to manageher gift shop. Cecils salary is base on a
c. Gratuitous Agency percentage of sales
d. There is no such thing as an irrevocable agency. Made by the shop. Linda and Cecil must agree on all major management
decisions.
25. Mr. X was appointed general agent of ABC Drugstore. It become necessary to Cecil is otherwise in charge. The relationship between Linda and Cecil is
purchase a. A partnership because Cecil receives a share of the profits
An airconditioning unit to keep the drugstore well ventilated in order to b. A partnership because Cecil has equal rights of management.
protect the medicines. c. Not a partnership because Cecil has no ownership interest in the
The matter had never been discussed with the principal. business
a. Mr. X has authority by estoppel to purchase the aircon unit. d. Not a partnership because Cecil and Linda did not sign a written
b. Mr. X has implied authority to purchase the aircon unit. agreement.
c. Mr. X has no authority to purchase the aircon unit.
d. Mr. X has no authority to purchase the aircon as there is no emergency. 31. Ralf and Edna agree to operate a partnership for a period of 3 years. After 2
years,
26. Which of the following is not implied definition of the partnership? Edna decided to quit. She inform Ralph and all their customers. Ralph
a. Voluntary agreement c. sharing of profits and losses a. Can sue Edna for a specific performance
b. two or more persons d. limited liability of one or more b. Cannot sue Edna for specific performance but may sue her for breach
partners of contract
c. Cannot sue Edna because the partnersip is voluntary.
27. Which of the following is true regard to general partnership only? d. Cannot sue Edna but may continue to operate the partnership.
a. Bankruptcy/ insolvency of any partner will cause dissolution of the
partnership. 32. when a limited partnership is formed, a(n)________________ must be filled with
b. General partners have equal management rights. the Securities and
c. illegality of partnership purpose will cause dissolution. Exchange Commission.
d. The partnership can be dissolve by judicial decree. a. Articles of partnership
b. Certificate of limited partnership
28. Sam leases a corner lot where he plans to operate a gas station. Sams c. Affidavit of a limited partner that he will not participate in the
landlord,Bert, receives 5% of Management of the partnership.
Sams monthly gross receipts. Sam and Bert d. Affidavit stating the amount contributed by each limited partner.
33. A certificate of limited partnership may provide that which of the following 38. When two or more persons represent themselves as partners in dealing with
Will not dissolve the business? a third person,
a. Bankruptcy of a general partner When in fact they are not partners at all, the law recognizes
b. Death of a general partner a. A corporation c. a partnership by estoppel
c. Illegality of the partnership business b. A proprietorship d. no partnership at all
d. Judicial decree
39. A formal accounting of partnership affairs is proper
34. An assignment of interest of a limited partner a. only when the partnership is dissolved.
a. automatically dissolve the partnership b. only at the end of a taxable year.
b. makes the assingnee a limited partner with full right. c. any time it is requested by a partner.
c. gives the assignee a voice in the management d. any time it is considered just and reasonable
d. does not dissolve the limited partnership
40. In the absence of partnership agreement
35. Ann, Bart, and Carla were parners in a profitable restaurant business. a. a partnership is managed by the senior partner.
Ann died living her husband, Don, her share in the business. b. a partners voice in the management is determine by the amount of
a. Don is now partner with Bart and Carla capital contribution
b. Dons will received Anns share of the profits so long as Bart and Carla c. all general partners have an equal right in managing the business
Operate the restaurant. d. a court order must determine management authority
c. Don is entitled to the value of Anns share of the business.
d. Don is a limited partner. 41. when a new partner is admitted to an existing partnership
a. any capital contribution made by the new partner could be use to
36. Jones and Smith have formed a partnership. Jones contributed P75,000 and satisfy
Smith P25,000. existing partnership debts.
Jones and Smith capital balances at the end of the year showed the same b.any capital contribution made by the enw partner could be use to
balances. satisfy future partnership debts.
A P10,000 profit was realized after the first year of operation. No agreement c. The new partner is personally liable for existing debts.
as to profit distribution d. The new partner must inform the partnerships creditors of his
Exist. Both wish a distribution of profits. participation
a. Each is entitled to P5,000. In the partnership.
b. Jones is entitled to P7,500 and Smith to P2,500.
c. Neither is entitled to anything 42. Ted, Fred and Jed enter a partnership. Ted undertakes independent consulting
d. Jones has total say as to profit distribution because he has controlling for an outside firm
interest Without the consent of Fred or Jed. Teds compensation from the outside firm
In the business is considered
a. His own personal income c. partnership income
37. The key element of determining if a partnership exist is b. Real property d. illegal income
a. The intent to associate c. a length of the partnership
agreement 43. A partners interest in the partnership consist of
b. a written agreement d. the lack of knowledge a. a proportionate share of the profits earned and surplus
among the partners b. specific real property of the firm
c. specific personal property of the firm
d. a proportionate share of all the chattels of the firm c. The operation of the business may continue indefinitely
d. The business is free from government regulation
44. In court action for quasi-delict against a partnership, partners have If the stockholder
a. no liability c. solidary liability a. Wants to use corporate shareholder records for personal business
b. individual liability d. joint liability b. Employs an agent to inspect the books and records
c. Intends to commence a shareholders derivative suit
45. Partners have what liability arising from contracts entered into by the d. Is investing management misconduct.
partnership? 51. A corporate shareholder is entitled to which of the following rights?
a. joint c. no liability unless a. elect officers c. approve dissolution
they ratify b. receive annual dividends d. prevent corporate borrowing
b. solidary d. proportionate
52. For what purpose the corporation will the shareholder of the corporation be
46. X breaches a fiduciary duty to the XYZ partnership. His breach results in a permitted
loss To file shareholders derivative suit in the name of the corporation?
To the partnership of P10,000 and a profit to him of P20,000. He must pay to a. To compel payment of a properly declaired dividend.
the partnership b. To enforce a right to inspect corporate records
a. P10,000 representing the loss c. To compel dissolution of the corporation
b. P30,000 d. To recover damages from corporate management
c. Zero, because the loss is compensated against profits which was For an ultra vires management act.
earned by the
Partnership through his extraordinary efforts. 53. Absent of a specific provision in its articles of incorporation, a corporations
d. P20,000 board of directors
Has the power to do all of the following,except:
47. Which of the following is not a power of the shareholders/stockholders? a. Repeal the bylaws c. fix compensation of
a. elect board of directors directors
b. elect president of the corporation b. Declare dividends d. amend the articles of
c. vote on changes in the by laws incorporation
d. bring a derivative suit on behalf of the corporation
54. In general, which of the following statements concerning treasury share is
48. For which of the following acts is a director most likely to be found personally correct?
liable? a. A corporation may not reaquire its own stock unless specifically
a. investment of corporate funds in a venture that losses money. authorized
b. failure to supervise president actions. by its articles of incorporation.
c. creation of new product line which is unsuccessful b.On issuance of new stock, a corporation has preemptive rights with
d. breach of warranty based on the faulty product manufactured by the regard
corporation to its treasury stock.
c. Treasury stock may be distributed as a stock dividend
49. Which of the following statements best describe s an advantage of the d. A corporation is entitled to received cash dividend on its treasury
corporate stock.
Form of doing business? 55. whch of the following statement is a general requirement for th merger of
a. Day-to-day management is strictly the responsibility of the directors. two corporation?
b. Ownership is contractually restricted and is not transferable.
a. the merger plan must be approved unanimously by the shareholders of 63. for which of the following negotiable instrument is bank not an acceptor?
the corporation. a. a bill of lading c. certificate of deposit
b. the merger plan must be approved unanimously by the boards of both b. certified check d. bank acceptance
corp. 64. A trade acceptance usually
c.The absorbed corporation must be amend its articles of incorporation. a. is an order to deliver goods to a named person
d. the shareholders of both corporations must be given due notice of a b. provides that the drawer is also the payee
special meeting, c. is not regarded as as a negotiable intstrument under the NIL
including a copy or summry of a merger pla. d. must be made payable to the order of a named person.
56. Which of the following actions maybe taken by a corporation by a 65. There are several legelly significant differences between a negotiable
corporations intstrument
Board of Directors witout shareholders approval? And a contract right, and the transfer of each. Which of the following
a. Purchasing substantially all of the assets of another corporation statements is correct?
b. Selling substantially all of the corporations assets. a. A negotiable instrument is deemed prima facie to have been issued for
c. Dissolving the corporation. consideration , where a contract is not.
d. Amending the articles of incorporation. b. The transferee of the negotiable instrument and te assignee of the
57. Which of the following is not a duty of a director? contract right take free of the most defences.
a. declare dividends c. issue stock c. Neither can be transferred without a signed writing or by a transfer of
b. appoint officers d. sign contracts in behalf possession.
of the corporation d. The statute of frauds apply to both.
58.A director may be removed by the stockholders for cause 66. Shark holds the following instrument:
a. at any time May 19, 2002
b. only at annual meeting I promise to pay to the order of A.B. Shark P1,000
c. by cumulative voting only (one thousand and one hundred pesos) with interest
d. only if the by laws permit the stockholders to do so. Thereon at the rate of 12% pr annum.
59. ultra Vires acts means (Sgd) T.T. Tile
a. by a majority c. a quorum is present Guaranty
b. lawful purpose d. beyond the powers I personally guaranty payment by T.T. Tile.
60. Which of the following would be considered as an ultra vires act of (Sgd) Abner Jones
manufacturing corporation? The above instrument is
a. purchase of raw materials a. Nonnegotiable even though even though it is payable on demand.
b. making a political contribution in the coming election b. Nonnegotiable because th numeric amount differs from the written
c. purchase of land for a plant site amount.
d. making the loan to pay for the land for a plant site c. Negotiable even though a payment date is not specified.
61. Cummulative is device used d. Negotiable because of Abners guaranty.
a. to change corporate by laws 67. The following is in the possession of the Bill North:
b. to elect corporate directors On May 30, 2003, I promise to pay Bill North,
c. by corporate officers to alter corporate policy The bearer of this document, P3,800.
d. by corporate boards appoint corporate officers (Sgd) Joseph Peppers
62. Which of the following is subject to the provisions of the Negotiable Re: Auto Purchase Contract.
Instruments Law? This instrument is
a. a bill of lading c. a certificate of deposit a. Nonnegotiable because undated.
b. a wrehuose receipt d. an investment security b. Nonnegotiable because it is not payable to order or bearer.
c. Negotiable even tough it rfers to the contract out of which it arose. 74. the value requirement in determining whether a parson is a holder in due
d. Negotiable because it is payable at a definite time. course with respect
68. Under the NIL, an indorsement of an instrument for deposit only is an To the check will not be satisfied by the taking of th check
example of a. As a security for an obligation to the extent of th obligation
What type of indorsement? b. As apayment for an antecedent debt.
a. Blank b. qualified c. restrictive d. special c. In exchange for another negotiable instrument.
69.Under the NIL, which of the following statements best describes the effect of d. In exchange for a promise to perform services in the future
indorsing a 75. Silver Corp. sold 20 tons of stel to River Corp. with payment to be by Rivers
Check without recourse? check.
a. The person has no liability to the prior indorsers. The price of the steel is fluctuating daily. Silver requested that the amount
b. The person maks no promise or guarantee of payment on dishonor. of Rivers Check
c. The person gives no warranty protection to later transferees. Be left blank so that Silver could fill in the current market price. River
d. The person converts the check into order paper. compied with Silvers request.
70. Under the NIL, when an instrument is indorsed Pay to Dee Doe and signed Within two days, Silvr received Rivers check. Although the market price of
Faye Maye 20 tons of steel
Which of the following statements, if any, is(are) true? At the time silvers received check was P80,000, Silver filled in the check
Payment of the instrument The instrument Can for P100,000
Is Guaranteed Furhter Negotiated And negotiated it to Hatch Corp. Hatch took the check in good faith,
a. Yes Yes without notice of
b. Yes No Silvers act o any other defense, and in payment of antecedent debt. River
c. No Yes will
d. No No a. Not be liable to Hatch, because the check was materially altered by
71. one of the requirements to qualify as a holder of a negotiable bearer check silver.
is the transferee must b. Not be liable to Hatch, because Hatch failed to give value wen it
a. receive check that is originally mad payable to bearer. acquired the check from Silver
b. take the check in goodfaith c. Be liable to Hatch for P100,000.
c. give value for the check d. Be liable to Hatch but only for P80,000.
d. have possession of the check. 76. A P5,000 promissory note payable to the order of Neptune is discounted to
72. Undr the NIL , which of the following requirements must be meet for a person Bane by
To be a holder in due course Blank indorsement for P4,000. King Steals the note from Bane and sells it to
a. The note must be payable to bearer. Ott,
b. The note must be negotuiable. Who promise to pay King P4,500. After paying King P3,000, Ott learns that
c. All prior holders must have been holders in due course king stole the note.
d. The holder must be the payee of the note. Ott makes no further payment to King. Ott is
73. Under the NIL, which of the following circumstances would prevent the a. A holder in due course to the extent of P5,000.
person from b. An ordinary holder to the extent of P4,500.
Becoming a holder in due course of an instrument? c. A holder in due course to the extent of P3,333.
a. The person was notified that payment was refused. d. An ordinqary holder to the extent of P-0-.
b. The person was notified that one of the prior indorsers was discharge. 77. Under the NIL, which of the following parties will a holder but not be entitled
c. The note was collateral for a loan. to the rights
d. The note was purchased at a discount. Of a holder in du course?
a. A party who, knowing of a real defense to payment, received an a. Discharge in bankruptcy c. fraud in execution
instrument from a holder in due course. b. Forgery d. lack of
b. A party who found an instrument payable to bearer. consideration
c. A party who received, as a gift , an instrument from a holder in due 82. To the extent that a holder of negotiable promissory notes is a holder in due
course. course,
d. A party who, in good faith and without notice of any defect, gave value The holder takes the note free of which of the following defenses?
for a negotiable instrument. a. Minority of the maker if it is a defense to enforcement of a simple
78. Vince Price has in his possession an otherwise negotiable instrument that contract.
reads: b. Forgery of the makers signature
I, Waldo hereby promise to pay to order of Mark the c. Discharge of the maker in bankruptcy.
bearer d. Nonperformance of a condition precedent.
Which of the following is true with respect to the above instrument? 83. Cobb gave Garson a signed check wit the amount payable left blank.
a. Marks signature is required to negotiate the instrument. Garson was to fill in, as the amount, the price of fuel oil Garson was to
b. The instrument is nonnegotiable. deliver to Cobb at
c. If mark indorses the instrument, he assumes potentially greater A later date. Garson estimated amount at P700 but told Cogg it would be no
liability to the subsequent transferees than if he transfers it by mere more than P900.
transfer of possession. Garson did not deliver the fuel oil but filled in the amount of P1,000 on the
d. Because the instrument is payable to Marks order, it is a bill of check. Garson then
exchange. Negotiated the check to Joseph in satisfaction of a P500 debt with the P500
79. Blare bought a house and provided the required funds in the form of a balance paid to
certified check from a bank. Garson in cash. Cobb stop payment, and Josephs is seeking to collect
Which of th following statements correctly describes th legal liability of P1,000 from Cobb.
Blare and the bank? Cobbs maximum liability to Joseph will be
a. The bank has accepted; therefore, Blare is discharge. a. P-0- b. P500 c. P900 d.
b. The bank has not accepted; therefore, Blare has the primary liability. P1,000
c. Te bank has accepted; therefore, blare has secondary liability. 84. If goods have been delivered to a buyer pursuant to asale or return contract,
d. The bank has not accepted; therefore, Blare is without liability. the
80. Under the NIL, which of the following are real defenses against a holder in a. buyer may use the goods but not resell them.
due course? b. seller is liable for the expenses incurred by the buyer in returning the
Alteration Breach of Contract goods to the seller
a. No yes c. title to the goods remains to the seller
b. Yes no d. risks of loss to the goods passed to the buyer
c. Yes Yes 85. Under the law on sales, unless the contract provides otherwise, before title
d. No no to the goods can pass
81. A makr of a note will have a real defense against the holder in due as a result From the seller to a buyer, the goods must be
of any of a. Tendered to the buyer c. accepted by the buyer
The following conditions, except: b. Identified to the contract d. paid for

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