CPAR

CPA Review School of the Philippines

FIRST PRE-BOARD EXAMINATION
Regulatory Framework for Business Transactions

Instructions: Choose the BEST answer for each of the following items. Mark only one answer for each item on
the Special Answer Sheet provided. Strictly no erasure allowed.

1. A contract is presumed to have been entered into

a. In the place where the offer was made
b. In the place where the acceptance was made
c. In the place where the performance was made
d. In the place where the payment was made

2. Before acceptance is conveyed, an offer becomes ineffective upon the death, civil interdiction, insanity or
insolvency
a. Of the offeror
b. Of the offeree
c. Of either party
d. Of both the offeror and offeree

3. Which of the following is not correct?

a. The obligation to give includes that of delivering all its accessions and accessories even though they
may not have been mentioned
b. If a person obliged to do something fails to do it, the same shall be executed at his cost
c. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall
be undone at his expense
d. In reciprocal obligations, from the moment one of the parties fulfills his obligation, delay by the other
begins

4. A pointed a gun and threatened to kill B if B will not sign a promissory note which reads “I promise to pay
A, P100,000”. Out of fear, B signed the note. It turned out that two days earlier, A’s obligation to B
amounting to P100,000 became due and B demanded payment. Now, A alleges compensation. Is A correct?
a. Yes, because the promissory note is valid
b. No, because the promissory note was signed only because there was intimidation
c. Yes, provided B will agree
d. No, because A’s obligation does not exist

5. A, B and C solidarily owe W and Y, solidary creditors Php 24,000, where the share of the debtors is 2:3:5
while the creditors is 1:2. The terms of the contract provide:
1. A will pay if Y will pass the October 2019 CPA Board Exams
2. B will pay on February 14, 2020
3. C will pay on September 10, 2019
On September 10, 2019, W can collect from
a. A = Php 24,000 b. B = Php 12,000 c. C = Php 24,000 d. C = Php 8,000

6. Using the above data, the debtor who effected payment is entitled to get reimbursement from
a. B = Php 12,000 b. A = Php 12,000 c. C = Php 12,000 d. A or B = Php 12,000

7. Assuming Y passed the October 2019 CPA Board Exams, Y can collect from
a. A or C = Php 16,800 b. B = Php 4,800 c. A = Php 12,000 d. A or B or C = Php 12,000

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8. On January 15, 2019, A obliged himself to give to B his only cow or his only dog or his only cat on
December 25, 2019. On July 4, 2019, the cow died after giving birth to a young cow. Two months later,
the cat died due to the fault of A. And on November 1, 2019, the dog died due to a fortuitous event. Which
of the following is true?
a. The obligation of A is extinguished
b. B is entitled to the young cow having been born after the perfection of the contract
c. A is liable for the value of the cat plus damages
d. B can require A to replace the cat by another cat which is equally satisfactory

9. Using the above data, but the right of choice belongs to B, which of the following is correct?
a. The obligation of A is extinguished
b. B is entitled to the young cow having been born after the perfection of the contract
c. A is liable for the value of the cat plus damages
d. B can require A to replace the cat by another cat which is equally satisfactory

10. Using the preceding number, except that the dog is still alive, which of the following is not correct?
a. The obligation of A is converted to a simple obligation
b. B can require A to deliver the dog but without damages
c. A is not liable for the death of the cow
d. B can require A to pay the value of the cat plus damages

11. When the condition has been imposed with the intention of suspending the efficacy of an obligation to
give, the following rules shall be observed, except
a. If the thing is lost, the obligation shall be extinguished
b. If the thing is improved by nature, the improvement shall inure to the benefit of the creditor
c. If the thing is improved at the expense of the debtor, he shall have no other right than that granted to
the usufructuary
d. If the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor

12. It is understood to be that which must necessarily come although it may not be known when
a. Passing the CPA Board Exam c. A priest becoming a saint
b. The birth of a child d. A day certain

13. The expenses of consignation, when properly made shall be charged against
a. The debtor c. Both the debtor and creditor
b. The creditor d. Neither the debtor nor creditor

14. Statement 1 – In expromission, the new debtor’s insolvency or non-fulfillment of the obligation shall not
give rise to any liability on the part of the original debtor
Statement 2 - In delegacion, the insolvency of the new debtor, shall not revive the action of the creditor
against the original debtor
a. True, true b. True, false c. False, true d. False, false

15. In payment of 10 grams of shabu, A made a promissory note which reads “I promise to pay B P10,000.
Sgd. A”. B transferred the note to C, who acted in good faith. Which is correct?
a. C can collect from A c. C can collect from either A or B
b. B can collect from A d. C can collect from B

16. A, B, C and D are joint debtors of V, W, X, Y and Z, solidary creditors the sum of P20,000. Which is
correct?
a. V may collect from B, P20,000 c. V may collect from B P5,000
b. V may collect from B P4,000 d. V may collect from B P1,000

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17. D owes C P6,000. No date for payment was stipulated by the parties. Which is correct?
a. C can require D to pay when the period arrives
b. C can require D to pay at anytime
c. D is not liable to C because the obligation is void there being no date of payment
d. D is not required to pay unless C goes to court and asks the court to require D to pay

18. In January 2012, S, 17 years old, sold his only car to B, 21 years old. The sale was without the knowledge
of G, the guardian of S. Assuming that an annulment case is filed today, which is correct?
a. S may bring the action for annulment c. B may bring the action for annulment
b. G may bring the action for annulment d. Annulment will not prosper whoever will file it

19. The following items, pertain to a contract of sale, which pertains to contract to sell?
a. Ownership of the thing sold is transferred upon delivery
b. Ownership of the thing is transferred to the buyer at some future time
c. The risk of loss is on the buyer upon delivery
d. The risk of loss is on the buyer if the price is not yet fully paid

20. On August 1, 2019, A agreed to sell his only cow to B and B agreed to pay the price of P20,000, if B will
pass the October 2019 CPA Examination. The list of successful examinees was released on October 19,
2019 and B is one of those who passed the examination. As a result,
a. A is entitled to the P20,000 price plus interest beginning August 1, 2019
b. B is entitled to the cow and its fruits beginning October 19, 2019
c. B is entitled to the cow beginning August 1, 2019 and to its fruits beginning October 19, 2019
d. A shall deliver the fruits of the cow and B shall pay the interest on the price beginning August 1, 2019

21. A and B are solidary debtors of C for P100,000 which is due on August 1, 2020. Thinking that the obligation
is already due, A paid C P100,000 on August 1, 2019. What rights will A have on February 1, 2020?
a. A can recover P50,000 reimbursement from B without interest
b. A can recover P100,000 from C plus interest from August 1 2019 to February 1, 2020
c. A can recover P50,000 reimbursement from B with interest from August 1, 2019 to February 1, 2020
d. A cannot recover yet from either B because the obligation is not yet due or C because the payment was
voluntary

22. Using the preceding number, but it is already September 1, 2020, which of the following is correct? A can
recover
a. A can recover from C only the interest from August 1, 2019 to July 31, 2020.
b. A can recover P50,000 from B plus interest from August 1, 2019 to August 1, 2020.
c. A can recover P50,000 from B plus interest from August 1, 2019 to September 1, 2020
d. A can recover from C only the interest from August 1, 2019 to September 1, 2020

23. A, B and C are obliged to deliver a specific cow to W and Y on August 1, 2020. If today is August 1, 2020,
which of the following is true?
a. A demand made by W against A, B and C constitutes a valid demand against all debtors
b. A demand made by W and Y against A will make the debtors in delay
c. If debtor A cannot fulfill his share in the obligation, the obligation of B and C is converted into a
monetary obligation to pay the corresponding portion of the value of the cow without damages
d. If debtor A is insolvent, the obligation of A, B and C is converted into a monetary obligation to pay the
value of the cow plus damages

24. A is indebted to solidary creditors W, Y and Z for P90,000 due on August 1, 2020, while W owes A
P90,000 also due on August 1, 2020. On August 1, 2020,
a. Both obligations are extinguished by compensation c. Either Y or Z can demand P60,000 from A
b. A’s obligation is extinguished up to P30,000 d. Either Y or Z can demand P90,000 from W

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25. Which of the following contracts of sale is void?
a. Where the buyer and seller are both insane
b. Where the husband aimed his gun to his wife so that his wife will sell her land to him
c. Where the buyer twisted the arm of the seller so that the seller will sign the deed of sale
d. Where the object of the contract has a redhibitory defect

26. A obtained a P100,000 loan from B and secured by a mortgage on A’s land. Later, B assigned his credit
right to C and a notice was given to A. Which of the following is not correct?
a. If A did not give his consent to the assignment, C cannot collect from A
b. C can collect from A even if A did not give his consent to the assignment
c. If A cannot pay, C can foreclose the mortgage on the land
d. A should make his payment to C because the notice of the assignment is sufficient

27. A sold his necklace to B in a public instrument and later orally sold his watch to C. Both items will be
delivered 7 days later. On the 5th day, A again sold the same necklace to D and the same watch to E. Both
D and E immediately took physical possession of the necklace and watch, respectively and both are not
aware of the previous sale to B and C. Who will have a better right to the necklace and watch?
a. B and C b. D and E c. B and E d. C and D

28. Which of the following statements is not correct?

a. If A gives his ring to B but it is not clear whether A donated it or merely lent it, the contract should be
interpreted as commodatum rather than donation
b. If A sells his car to B but A has 4 cars and it cannot be determined which car was sold, the contract of
sale is void
c. A borrowed P100,000 from B which bears interest at 12% per year but there is doubt whether it is
payable in 2 or 3 years, the period of payment shall be interpreted at 2 years
d. A engaged the services of B but the contract did not indicate the amount of compensation to be paid,
the amount thereof shall be the rate that is customarily paid in the place where the services were
rendered

29. A owes B P100,000. A also owes C P100,000. A failed to pay both obligations. B filed a complaint in court
and a writ of attachment was issued against A’s land situated in Manila. Later, A sells his land in Makati
to D. Which of the following is not correct?
a. The sale of the land in Makati is presumed fraudulent because a writ of attachment has been issued
b. C may go to court for the rescission of the sale to D
c. B may go to court for the rescission of the sale to D
d. Neither B nor C can go to court for the rescission of the sale to D because the land in Makati was not
the object of the writ of attachment.

30. A has two creditors, B and C. the obligation to B is P10,000 and to C is P12,000. Later, with the consent
of A and B, W pays B P10,000. Now W and C are the creditors of A. Suppose A has only P12,000, which
is correct?
a. C should be preferred c. C and W should be paid proportionately
b. W should be preferred d. A may choose whom to pay

31. X borrowed money from Y. X constituted a real estate mortgage over his house to secure the loan. It was
stipulated that in case X could not pay the loan on time, the house would belong to Y. Which is correct?
a. Y shall become owner of the house upon default by X by virtue of their written agreement
b. Y shall become the owner of the house by virtue of the default of X
c. Y shall only enjoy the right of alienation over the land
d. Y shall be entitled to the right of appropriation of the land

32. A, minor, sold the ring of his brother without authority. The ring has a fair market value of P1M and selling
price was P600,000. The contract is
a. Rescissible b. Voidable c. Unenforceable d. Void

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33. A obtained an interest free loan of P50,000 from B evidenced by a promissory note payable six months
after date. At maturity A called B by phone to ask for an extension of one month and offer to pay 20%
interest on the loan. Enticed by the 20% interest, B agreed to the extension of maturity. Which is correct?
a. The interest is a demandable interest by virtue of an agreement
b. The interest is unenforceable
c. The loan is valid but the interest is void
d. The loan and interest are both demandable

34. In 2018, A promised to give to B his land if B passes the CPA Board Examination in 2019. If the condition
is fulfilled, does A also give the fruits for the period of one year?
a. Yes, in obligation to give, once the condition is fulfilled the obligation shall retroact to the day of the
constitution of the obligation
b. Yes, the creditor shall appropriate the fruits and interest, unless there is contrary intent
c. No, if the obligation is unilateral, the debtor shall appropriate the fruits and interest unless there is
contrary intent
d. A and B will divide the fruits equally

35. Which of the following is a valid stipulation?

a. A promises to give B P10,000, and if A fails, A will allow B to have sexual intercourse with her for
one week
b. A will give B P10,000, if C will go to planet Saturn within the year
c. A agreed to give B a house and lot if B will kill A’s wife
d. A agreed to put poison on the food of B’s wife and if A fails, to pay B P10,000 for damages

36. A and B mutually promised orally to marry each other while they were in Mang Telmo’s place. The
agreement between A and B is
a. Unenforceable, because the agreement was not made in writing
b. Unenforceable, because Mang Telmo’s place is not the proper place to make a promise
c. Enforceable, because this is not covered by the Statute of Frauds
d. Enforceable, and therefore A may compel B to marry her

37. A is indebted to B in the amount of P50,000, with C as guarantor. On due date, A tendered payment to B
but B refused. Because of B’s refusal A deposited the amount in court. After the approval of the
consignation, A withdraws the money with the consent of B and C. Which is correct?
a. B lost the right to collect as A’s obligation is extinguished
b. B lost all the preference she might have over the amount deposited but C is still liable as guarantor
c. B lost the right to collect from A and consequently lost also her right to collect from C
d. B lost all the preference she might have over the amount deposited and C as guarantor was likewise
released from liability.

38. In distinguishing earnest money from option money. Option money is

a. Given when there is no contract of sale
b. Given only when there is a perfected contract of sale
c. Given to bind the offeror in a unilateral promise to sell or buy
d. Given as a separate consideration from the purchase price

39. One of the following does not result into vitiated consent when employed by one against the other in a
contract. This is
a. A person emphasizing the fact that he is the one who raised and educated his niece, who is now a
prospective contracting party
b. Threat of serious bodily injury to a person should he refuse to sign the contract as told
c. Fraud in the fulfillment or performance of the obligation
d. Exchange of vows or marrying the twin brother of your boyfriend

40. Rescission as distinguished from annulment

a. The defect is intrinsic c. This is a sanction
b. The basis is lesion d. Damage to the plaintiff is immaterial
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41. A, in his will, gave some property to B, provided that C would die within 5 years. This is a (an)
a. Pure obligation c. Obligation with a suspensive condition
b. Obligation with a resolutory condition d. Obligation with a period

42. A was having his house repaired by B, who needed construction materials, so A orally told the seller C,
“Give B the materials, I shall be responsible. I shall pay in 30 days. C delivered the materials. As a result,
a. The contract is unenforceable because A made an oral agreement to answer for the debt of B
b. The contract is enforceable because A did not make a special promise to answer for the default of
another person
c. The contract shall be enforceable if there is ratification by A
d. The contract shall be unenforceable if the value is at least P500.00

43. Which of the following statements is true as regards a void contract?

a. A void contract maybe ratified by the acceptance by a party to the contract of a benefit under its terms
b. The right to set up the defense of illegality of a void contract maybe waived if the illegality is not raised
within a reasonable time
c. If a void contract is novated by a valid one, such novation is valid
d. The right to set up the defense of illegality of a void contract is imprescriptible

44. The pre-nuptial agreement of H and W, husband and wife, provides for complete separation of property.
Later, H, with violence and intimidation forced W to sell to him (H), W’s pieces of jewelry. The sale is
a. Rescissible, if W suffered a lesion of more than ¼ of the value of the property
b. Voidable, because the consent of W is vitiated
c. Unenforceable, if the value is at least P500
d. Void, because husband and wife are not allowed to sell property to each other

45. A contract of sale is

a. Consensual, hence delivery is not necessary to transfer ownership
b. Accessory, because it cannot stand alone as two persons are needed as the parties to the contract
c. Real, because delivery is necessary to transfer ownership
d. Commutative because there is an exchange of values

46. Which of the following statements is true?

a. If goods are sold on “sale or return”, the risk of loss of the thing sold remains with the seller after its
delivery to the buyer
b. In sale on “trial or satisfaction”, the buyer becomes the owner of the thing upon delivery but the
ownership is reverted to the seller if the buyer returns it
c. When a thing is purchased from a merchants’ store, the buyer acquires the title to the thing although
the seller may have stolen it or acquired it from a thief
d. A negotiable document of title becomes non-negotiable if it is stamped with the mark “non-negotiable.

47. A sold his land to B with a right to repurchase the said land within 8 years. Then, 4 years later, B sold the
land to C. Can A still exercise the right to repurchase the land from C?
a. No, if C was not aware that there was a right to repurchase
b. Yes, because the title of C was derived only from the title of B
c. No, because contracts shall bind only the contracting parties
d. Yes, if the right has been recorded in the Register of Deeds even if C has no knowledge of the existence
of the right

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48. D was driving on his way to Manila from the province when he suffered a busted tire. Not having any spare
tire, he went to a nearby car spare parts store to buy a new tire. However, he did not have sufficient money
with him so he phoned G, his friend, who happened to know S, the store owner. G then instructed D to give
to S the telephone through which G told S “Don’t worry, if D cannot pay, just charge me”. D was thus able
to buy a new tire for P6,000 for which S issued D a sales invoice. Which is correct?
a. If D cannot pay, S can proceed against G to make good his promise to pay D’s debt
b. G’s promised cannot be enforced against him because he did not execute any writing for the guaranty
he made
c. S can enforce G’s promise to answer for D’s debt since the guaranty was witnessed by D
d. S can enforce G’s promise because there was a writing of some kind, the invoice for the sale of the tire.

49. A delivered to B the following instrument:

In payment of a gambling debt, A made a promissory note which reads: “I promise to pay to B P10,000
Sgd. A.” B indorsed the note in blank before maturity and delivered it to C for value. When due, A refused
to pay and C sued B. Could C recover from B?
a. No, C could not sue B because B did not write the name of C as indorsee
b. No, the instrument is not negotiable and B is a mere assignor of credit
c. Yes, provided C gives notice of dishonor to B otherwise B is discharged from liability
d. Yes, the endorsement will be considered as an assignment, hence B will be liable as an assignor of the
instrument

50. Using the preceding number, but the note is in payment of merchandise purchased by A from B and A
failed to pay due to insolvency. Could C collect from B?
a. No, C could not sue B because B did not write the name of C as indorsee
b. No, the instrument is not negotiable and B is a mere assignor of credit
c. Yes, provided C gives notice of dishonor to B otherwise B is discharged from liability
d. Yes, the endorsement will be considered as an assignment, hence B will be liable as an assignor of credit

51. Reformation of the instrument is the proper remedy where

a. There is no meeting of minds of the parties to the contract
b. The true intention of the parties cannot be ascertained
c. The failure of the instrument to express the true intention of the parties is due to mistake, fraud,
inequitable conduct or accident
d. Consent of the parties was secured because of mistake, fraud, accident or inequitable conduct

52. This executory contract is enforceable even if not in writing

a. Leasing of personal property for 2 years c. Sale of goods or chattels for P500,000
b. A representation as to the credit of a 3rd person d. Sale of immovable property

53 Pedro, a passenger in a bus operated by ABC Trans Co. suffered serious injuries as a result of an accident.
An information was filed against Juan, the driver of the bus, for serious physical injuries through reckless
imprudence. Juan was, however acquitted because according to the judgment of acquittal, Juan was not
negligent. Later, Pedro instituted an action against ABC to recover damages. Will the action prosper?
Answer I – Yes, because the action to recover damages is based on culpa contractual and not on the act or
omission complained of as felony.
Answer II – No, the acquittal of the driver will result to the exoneration of the operator from civil liability.
a. True, true b. True, false c. False, true d. False, false

54. Paul borrowed P2,000 from Juan on January 23, 2019. He executed a promissory note promising to pay
the indebtedness on January 23, 2020. Upon arrival of the designated date for payment, is demand
necessary in order that Paul shall incur in delay?
Answer I – Yes, because the law or obligation should expressly add that the obligor shall incur in delay
if he fails to fulfill the obligation upon the arrival of the designated date.
Answer II – No, there was a stipulation that the indebtedness shall be paid on a designated date and
therefore upon the arrival of such date, demand shall not be necessary.
a. True, true b. True, false c. False, true d. False, false
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55. Which of the following is not correct, with regard to the effect of remission of a solidary obligation effected
by the solidary creditor upon the obligation itself?
a. If the remission covers the entire obligation, the obligation is totally extinguished and the entire juridical
relation among the debtors is terminated altogether
b. If the remission is for the benefit of one of the debtors and it covers his entire share in the obligation,
he is completely released from the creditors, but he is still bound to his co-debtors
c. The solidary creditor responsible for the remission shall be liable to the other solidary creditors for the
share in the obligation corresponding to them
d. If the whole obligation is condoned through the efforts of a solidary debtor or for his benefit, he is
entitled to reimbursement from his co-debtors

56. On January 23, 2017, A borrowed P10,000 from B. The debt is evidenced by a promissory note signed by
A, as principal debtor, and by C as guarantor, by virtue of which it was promised that the entire debt shall
be paid on January 23, 2018. When the note matured, X, a third person paid the entire debt of P10,000 to
B. The payment was made with the consent of A. What are the rights of X as a result of the payment?
Answer I – X should demand reimbursement from C of the entire amount which he has paid to B, because
there is legal subrogation
Answer II – X is now subrogated to all the rights of B, not only against the debtor but even against third
person, such as those arising from a guaranty, mortgage or penalty.
a. True, true b. True, false c. False, true d. False, false

57. Using the above data, suppose on July 23, 2017, the creditor B had condoned ½ of the debt and
subsequently on January 23, 2018, X, a third person paid the entire amount of P10,000 to B, who accepted
it. The payment was made without the knowledge and consent of A, which of the following is not correct?
a. X can demand reimbursement of P5,000 from A
b. X can recover P5,000 from B
c. If X proceeds against A for reimbursement and A cannot pay by reason of insolvency, X can proceed
against the guarantor, C, for reimbursement
d. If payment of an obligation is made by a third person without the knowledge or against the will of the
debtor, the third person who paid can demand reimbursement from the debtor only to the extent that
the latter had been benefited by the payment

58. A owes B P20,000 which became due and payable last July 15, 2017. On that date, A offered B P10,000,
the only money he then had, but B refused to accept the payment. A, thereafter met C. B’s 22 year old son,
to whom he gave the P10,000 with the request that he turn the money to B. The money was stolen while in
C’s possession
I. Was B justified in refusing to accept the payment of A?
II. May B still recover the full amount of A’s debt of P20,000?
Answer I – Yes, unless there is stipulation to the contrary, the creditor cannot be compelled to accept
partial payments, neither may the debtor be compelled to make partial payments
Answer II – No, only the remaining P10,000 may be collected because the loss was through a fortuitous
event.
a. True, true b. True, false c. False, true d. False, false

59. Statement I – If the period for payment of an obligation is shortened, from 4 years to 2 years, is there a
novation of the obligation?
Statement II – Suppose that, instead, there is an extension of two years for payment is there a novation of
the obligation?
Answer I – Yes, because there is a clear case of incompatibility between the two obligations and also
because there is an essential change or alteration of the principal condition of the old obligation.
Answer II – No. there is no incompatibility between the two obligations. They can stand together, neither
is there an essential change in the principal condition.
a. True, true b. True, false c. False, true d. False, false

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60. Which of the following is not included in the attributes of juridical capacity?
a. Juridical capacity is inherent in every natural person and therefore it is not acquired
b. Juridical personality is lost only through death
c. Juridical capacity is the fitness to be the subject of legal relations
d. Juridical capacity cannot exist without capacity to act

61. Which phase most accurately completes the statement – If at the time the contract of sale is perfected, the
thing which is the object of the contract has been entirely lost
a. The buyer bears the risk of loss c. The seller bears the risk of loss
b. The contract shall be without any effect d. The buyer may withdraw from the contract

62. A was the registered owner of a passenger jeepney which was involved in a collision accident with a
delivery truck, resulting in the death of three passengers and injuries to four. At the time of the accident, A
was legally married to B but was cohabiting with C in a relationship akin to that of husband and wife. The
heirs of the dead passengers and the injured persons sought to recover damages. Which of the following is
correct?
a. The liability of A for damages will be on the basis of culpa contractual
b. The liability of A for damages will be on the basis of quasi-delict
c. B is liable to the same extent as A because she is also the owner of the passenger jeepney
d. C is not liable, as the paramour of A, C is not a co-owner.

63. A sold to B a house and lot for Php 5M payable 30 days after the execution of the deed of sale. It was
expressly agreed in the deed that the sale would ipso facto be of no effect upon B’s failure to pay as agreed.
B failed to pay on maturity, and A sued to declare the contract of no force and effect. If B tendered payment
before the action was filed, but subsequent to the stipulated date of payment, would the action prosper?
a. Yes, contracts shall have the force of law between the contracting parties.
b. No, the stipulation is void for being contrary to law
c. No, at the time B tendered payment of the purchase price, there was still no demand made upon him by
A for the payment of said purchase price either judicially or by notarial act
d. Yes, the stipulation that upon failure to pay the price agreed upon the recission of the contract shall of
right take place, shall bind both the contracting parties

64. The liability of judgment debtor A under an obligation imposed by a final judgment is to pay Php 10,000
but A and the judgment creditor B, subsequently entered into a contract reducing the liability of A to only
Php 8,000. Which of the following is correct?
a. There is an implied novation because the existing obligation is extinguished
b. Novation results in the extinguishment of an existing obligation and a new one is substituted in its
place.
c. The payment by C of the reduced amount was the result of the new obligation
d. The agreement to reduce the judgment debt to Php 8,000 completely extinguished the judgment debt
and released A from his pecuniary liability.

65. A offered to sell her car to B for Php 200,000. After inspection of the car, B offered to buy it for Php
180,000 which was accepted by A. The next day, A offered to deliver the car but B being short of funds,
secured postponement of the delivery, promising to pay the price “upon arrival of the vessel, C”. The vessel
however never arrived because it was destroyed by a typhoon and sank somewhere off the coast of Leyte.
Which of the following is correct?
a. The promise to pay is with regard to the date of arrival and not with regard to the fact of arrival.
b. A can compel B to pay the purchase price because there is already a perfected contract
c. The promise to pay is conditional, that is upon the arrival of vessel, C
d. The condition is deemed fulfilled because the failure of the vessel to arrive is due to a fortuitous event

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66. In order that consignation shall produce the effect of payment it is not only essential that it must conform
with all the requisites of payment, but it is also essential that certain special requirements prescribed by
law must be complied with. Which of the following is not correct?
a. There must be a previous tender of payment
b. There is a debt due
c. The thing or amount due had been placed at the disposal of judicial authority
d. The notice previous to and after the consignation had been given to the persons interested in the
fulfillment of the obligation.

67. A and B entered into a contract in Canada, whereby it was agreed that A would build a commercial building
for B in the Philippines, and in payment for the construction, B will transfer and convey his cattle ranch
located in Australia in favor of A. What law would govern the validity, consideration and performance of
the contract?
a. Philippines, Australia and Canada c. Australia, Canada and Philippines
b. Canada, Philippines and Australia d. Canada, Australia and Philippines

68. In culpa aquiliana, the liability of a person who is held liable for the fault or negligence of another person
who is under his care or responsibility shall cease if
a. He observed ordinary diligence to prevent the injury
b. He was not present at the time of the act
c. There was contributory negligence on the part of the injured person
d. The person who caused the injury is a minor

69. The debtor shall not lose the right to make use of the period in one of the following cases
a. When he becomes insolvent
b. When he violates any undertaking in consideration of which the creditor agreed to the period
c. When the debtor attempts to abscond
d. When he does not give any guaranty or security to the creditor

70. D is obliged to give C a specific ring. The parties agreed that D may give a specific necklace as substitute.
Which of the following statements is true?
a. If the ring is lost through a fortuitous event before substitution, the obligation is extinguished
b. If the necklace is lost through a fortuitous event before the substitution, the obligation is extinguished
c. If the necklace is lost through debtor’s fault before substitution, the debtor shall pay damages
d. If the ring is lost through the debtor’s fault after substitution, the debtor shall pay damages

71. One of the following is a natural element in a contract of sale

a. Terms of payment b. Rate of interest c. Place of delivery d. Warranty against eviction

72. The Statute of Frauds applies only to contracts

a. Wholly executed by both parties c. Partially executed on the part of one of the parties
b. Wholly executed on the part of one of the parties d. Wholly executory to both parties

73. D borrowed P100,000 from C. The obligation is secured by a mortgage on D’s land and building. C
registered the mortgage with the Register of Deeds. Thereafter, D sold the land and building to B who was
not aware of the existence of the mortgage at the time of sale since only the photocopy of the transfer
certificate of title which did not yet contain the annotation of the mortgage was shown to him. It was only
when he went to the Register of Deeds to register the sale of the land and building to him that he learned
of the mortgage. Which is correct?
a. C can collect from D and if D cannot pay, C can foreclose the mortgage
b. C can collect from D, but f D cannot pay, C cannot foreclose the mortgage
c. C cannot collect from D. He can only go after the mortgage which was given as security
d. C cannot foreclose the mortgage because B is a buyer in good faith

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74. F made a telephone call to his son S, for S to sell F’s land. In the deed of absolute sale which was
acknowledged before a notary public, S signed as agent of F. Later, in the presence of two witnesses, F
ratified the sale executed by S. Which is correct?
a. The sale was void at the start but was validated upon the ratification by F
b. The sale remained void despite the ratification by F
c. The sale was valid from the start since it was made in a public instrument and F, the owner ratified the
sale
d. The sale was merely unenforceable at the start but the ratification validated the contract

75. A bought a residential house and lot from B Realty for P2M giving a down payment of P200,000 and
promising to pay the balance of P1.8M in 15 years in monthly installments of P10,000. After paying 72
installments A defaulted in the payment of subsequent installments. Despite the grace period given, he was
not able to make any further payments. Accordingly, B Realty cancelled the sale. How much cash surrender
value is A entitled to receive?
a. P552,000 b. P396,000 c. P462,000 d. P506,000

76. A sum of money paid, or a thing delivered upon the making of a contract for the sale of goods to bind the
offer, the delivery and acceptance of which makes the final assent of both parties to the contract
a. Option money b. Arras c. Loan d. Deposit

77. A promised to give B P1,000 if B will hear mass for ten consecutive Sundays. This is a
a. Civil obligation c. Moral obligation
b. Natural obligation d. Religious obligation

78. A sells to B a Sony colored TV for P12,000 payable in twelve equal monthly installments beginning May
5, 2012 and every 5th day of each month thereafter. The contract provides that upon failure to pay any
installment due, the whole balance becomes due and demandable. To secure the obligation, a chattel
mortgage over the TV set was executed. When B defaulted on the seventh and eighth installments, A sued
B for the payment of the whole balance of P6,000. The TV set was levied and subsequently sold at a public
sale for P5,000. Can A still recover the deficiency of P1,000 from B?
a. Yes, if there was stipulation to that effect c. No, any stipulation allowing recovery is void
b. Yes, even though there was no stipulation d. No, if there was no stipulation to that effect

79. C mortgaged his car to B for P200,000. C failed to pay his obligation. B sold it at a public auction for
P180,000. Can B recover the deficiency?
a. Yes, even without stipulation c. No, even if there is stipulation
b. Yes, only if there is stipulation d. No, unless there is stipulation

80. Using the above data, if the sale is for P220,000, can C recover the excess?
a. Yes, even without stipulation c. No, even if there is stipulation
b. Yes, only if there is stipulation d. No, unless there is stipulation

The End!

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