CUP 6

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

Easy Round 1 point each Theory – 10 seconds

Problem – 15 seconds

1. Obligations may rise from any of the following, except:

a. contracts
b. quasi-contracts
c. law
d. prestation

ANSWER: d

2. When the object of the contract is outside the commerce of man, the contract is
a. rescissible
b. voidable
c. unenforceable
d. void

ANSWER: d

3. A contract whereby one of the contracting parties obligates himself to transfer the ownership of
and to deliver a determinate thing and the other to pay therefor a price certain in money or its
equivalent is a contract of
a. barter
b. sale
c. dacion en pago
d. mortgage

ANSWER: b

4. A and B who are both unemancipated minors entered into a contract. The contract entered into by
and between them is
a. rescissible
b. voidable
c. unenforceable
d. void

ANSWER: c

5. Which of the following stipulations is valid?

a. A stipulation excluding a capitalist partner from profits.
b. A stipulation exempting a capitalist partner from losses.
c. A stipulation exempting an industrial partner from losses.
d. A stipulation excluding an industrial partner from profits.

ANSWER: c

6. The articles of incorporation of Balsa Corporation provide for the issuance of 100,000 shares
without par value and an issued price per share of P10. Under Republic Act 11232, also known as
the “Revised Corporation Code of the Philippines”, at the time of incorporation, the minimum value
of subscription and paid-up capital should be
 a. P250,000 and P62,500, respectively.
b. P1,000,000 and P250,000, respectively.
c. P250,000 and P250,000, respectively.
d. P0 and P0, respectively.

ANSWER: d

7. Meeting in one person of the characteristics of both the debtor and creditor in one and the same
obligation extinguishers the obligation by way of:
a. Novation
b. Compensation or set-off
c. Condonation or remission
d. Merger or confusion

ANSWER: d

8. One of the distinctions between a partnership and a corporation is that a partnership

a. Is managed by a board of directors.
b. Is characterized by the principle of delectus personae.
c. Has the right of succession.
d. May be dissolved only with the consent of the State.

ANSWER: b

9. One of the following does not require stockholder’s approval.

a. Merger or consolidation
b. Change of corporate name
c. Investment of corporate funds for a purpose outside of the main purpose of the corporation
d. Declaration of cash dividend

ANSWER: d

10. Which of the following statements is correct?

a. All contracts are perfected by mere consent.
b. All contracts are perfected by delivery of the object.
c. All contracts are required to be in writing.
d. All contracts are required to have a valid consideration.

ANSWER: d

EXTRA QUESTIONS:

11. Unless the law or the stipulations of the parties require another standard of care, every person
obliged to give something is also obliged to take care of it with
a. Extra-ordinary diligence
b. Diligence of a father of a good family
c. Diligence of a good father of a family
d. Good diligence of a father of a family

ANSWER: c
 12. What do you call a principle which states that contracts are perfected by mere consent?
a. Consistency of contract
b. Consensuality of contract
c. Consummation of contract
d. Mutuality of contract

ANSWER: b

Average Round 3 points each Theory – 15 seconds

Problem – 30 seconds

1. X works as a research computer engineer with the Institute of Computer Technology, a government
agency. When not busy with his work, but during office hours, he developed a software program for
law firms that will allow efficient monitoring of the cases, which software program is not at all
related to his work. Assuming the program is patentable, who has the right over the patent?
a. X only
b. The Institute of Computer Technology only
c. Neither X nor the Institute of Compute Technology
d. Jointly by both X and the Institute of Computer Technology

ANSWER: a

2. Linda and Vicky were general partners in a kitchen equipment business. On behalf of the
partnership, Linda contracted to purchase 10 stoves from Gregorio. Unknown to Gregorio, Linda
was not authorized by the partnership agreement to make such contracts. Vicky refused to allow
the partnership to accept delivery of the stoves and Gregorio sought to enforce the contract. In this
case, Gregorio will
a. Lose, because Linda’s action was not authorized by the partnership agreement.
b. Lose, because Linda was not an agent of the partnership.
c. Win, because Linda had express authority to bind the partnership
d. Win, because Linda had apparent authority to bind the partnership.

ANSWER: d

3. F disappeared without his whereabouts having been known sometime in 2003. Whereupon in
2005, W, his wife, sold his house and lot worth P10,000,000 for only P7,000,000 in favor of T in
order to support the family. In 2007, F resurfaced and began staying with his family. In 2012, F
decided to file an action to rescind the contract with T. In this case:
a. The contract of W with T is valid and, therefore, rescission will not be available as a remedy.
b. If F can return the P7,000,000 to T and the house and lot has not been sold to a buyer in
good faith, he can validly ask for rescission.
c. Even if F can return the P7,000,000 and the house and lot has not been sold to a buyer in
good faith, rescission will not lie because more than 4 years had elapsed from the
reappearance and, therefore, his right to rescind has already prescribed.
d. Correct remedy not indicated.

ANSWER: c

4. The following are the requisites before a contract entered into in fraud of creditors may be
rescinded, except:
a. There must be credited existing prior to the celebration of the contract
 b. There must be fraud, or at least, the intent to commit fraud to the prejudice of the creditor
seeking rescission.
c. The creditor cannot in any legal manner collect his credit (subsidiary character of
rescission)
d. The object of the contract must be legally in the possession of a 3rd person in good faith.

ANSWER: d

5. S sold his Toyota car with Plate No. ABC 321 to B for P300,000.00. When the car was delivered to B,
he found out that the stereo and air-conditioning unit of the car were no longer there. Does S have
the right to remove the car’s stereo and air-conditioning unit?
a. Yes, because those things are not included in the sale.
b. No, because when the thing to be delivered is a generic thing, accessions and accessories are
included even though not mentioned.
c. Yes, because S is the seller.
d. No, because when what is to be delivered is a specific thing, accessions and accessories are
deemed included even though not mentioned.

ANSWER: d

6. Under this doctrine, the capital stock and assets of the corporation are held in trust for creditors.
Accordingly, there shall be no distribution of assets to shareholders until the claims of creditors
have been paid or an appropriation of such assets has been made for the payment of such claims.

ANSWER: Trust Fund Doctrine

7. If the thing sold had any hidden fault or defect at the time of the sale and should thereafter be lost
by a fortuitous event but the seller is not aware of the defect, how much can the vendee recover
from the vendor, if the selling price on date of sale is P100,000 and the value on date of loss is
P60,000.

ANSWER: P40,000

8. Acme Cannery produced sardines in cans known as "Sards". Mylene bought a can of Sards from a
store, ate it and suffered from poisoning caused by a noxious substance found in the sardines.
Mylene filed a case for damages against Acme. Which of the following defense will hold?
a. Mylene must have detected the noxious substance in the sardines by smell, yet she still ate it
b. The expiry date of the Sards was clearly printed on its can, still the store sold and Mylene
bought it
c. Acme had no transaction with Mylene; she bought the Sards from a store, not directly from
Acme
d. Acme enjoys the presumption of safeness of its canning procedure and Mylene has not
overcome such presumption

ANSWER: b

9. A bought a parcel of land from B on installment. When the first installment fell due, A did not pay.
His defense was that he did not have available money, and he therefore pleaded impossibility of
performance.
a. A obligation is extinguished because A has no available money.
b. A obligation is extinguished because of impossibility of performance.
c. A is liable. A mere pecuniary inability to fulfill an engagement does not discharge the
obligation of the contract.
 d. A is liable because the obligation is to pay specific money.

ANSWER: c

10. A director of a corporation may be removed from the office by a vote of the stockholders holding
representing:
a. Majority of the outstanding capital stock
b. 2/3 of the stockholders
c. 2/3 of the outstanding capital stock
d. Majority of the stockholders.

ANSWER: c

EXTRA QUESTIONS:

11. Which of the following must be in writing to be enforceable as required by the Statute of Frauds?
a. A subscription for 100 shares of stock of a corporation at P100.00 per share.
b. A contract for the construction of a building scheduled to begin 3 months after the
execution of the contract.
c. A contract for the lease of an agricultural lot for a period of 8 months.
d. A contract whereby one agrees to pay another’s debt if the latter defaults in his payment.

ANSWER: d

12. Cecilio had Eduardo kidnapped and tortured for refusing to sell his (Eduardo’s) land to Cecilio.
Eduardo who could no longer bear the physical pains inflicted upon him signed a document of sale
in favour of Cecilio. The sale is
a. Void
b. Valid
c. Rescissible
d. Voidable

ANSWER: d

Difficult Round 5 points each Theory – 20 seconds

Problem – 60 seconds

1. Y, a fourteen-year old high school student sold his gold necklace to his teacher for P10,000.00 and
he spent P7,400.00 for buying a new jacket, denim pants and long-sleeved polo shirt. He also spent
P800.00 for food and school materials and he deposited P1,000.00 in his bank account. He lost the
remaining amount of P800.00 in gambling. The father of Y filed an action for the annulment of the
contract of sale, which was granted by the court and Y’s gold necklace was returned to him. How
much should Y and his father return to the instructor?

ANSWER: P9,200

2. Which of the following statements is false?

a. P orally appoints A as his agent to sell his land for P40,000. A soid it to X in writing. The sale
by A to X is not valid.
b. P in writing appoints A as his agent to sell his specific parcel of land for P40,000. A sold it
orally to X The contract of A and X is valid
 c. P orally appointed A to sell a house on a parcel of land belonging to X. A sold it to B orally.
The contracts by P and A, and A and B are valid
d. B wrote A, his sister, to sell his parcel of land. The land was purchased by X, but A did not
forward the money to B. B now wants to recover the parcel of land. B can recover because
the authority of S is not in special power of attorney

ANSWER: d

3. Aligada orally offered to sell his two-hectare rice land to Balane for P 10Million. The offer was orally
accepted. By agreement, the land was to be delivered (through execution of a notarized Deed of
Sale) and the price was to be paid exactly one-month from their oral agreement. Which statement is
most accurate?
a. If Aligada refuses to deliver the land on the agreed date despite payment by Balane, the
latter may not successfully sue Aligada because the contract is oral.
b. If Aligada refused to deliver the land, Balane may successfully sue for fulfillment of the
obligation even if he has not tendered payment of the purchase price.
c. The contract between the parties is rescissible.
d. The contract between the parties is subject to ratification by the parties.

ANSWER: d

4. MAGIC Company is a partnership composed of Martha, Agnes, Glenda, Irene and Candice, with
Martha as manager who is authorized to collect the credits of the partnership. Theresa owes Martha
P4,000 which is due on December 10. She also owes MAGIC Company P6,000 which is due on
December 20. On December 15, Theresa tendered payment in the amount of P4,000 to Martha in
payment of her debt to the latter. Martha issued her own receipt acknowledging the payment.
a. The payment will be applied proportionately to the credits of MAGIC and Martha in the
amount of P1,600 and P2,400, respectively.
b. The payment will be applied in its entirety to Martha’s credit.
c. The payment will be applied in its entirety to MAGIC’s credit.
d. The payment will be applied equally to the two debts of Theresa.

ANSWER: d

5. Except for one, every corporation whose character expires by its own limitation, or annulled by
forfeiture or otherwise, or whose corporate existence for other purpose is terminated in any other
manner shall nevertheless be continued as a body corporate for three years after the time when it
would have been dissolved for the purpose of the following. The exception is
a. Prosecuting and defending suits by or against it and enabling it to settle and close its affairs.
b. To dispose and convey its property
c. To distribute its assets
d. Continuing the business for which it was established

ANSWER: d

EXTRA QUESTIONS:

6. Crisostomo donated a parcel of land to Anthony worth P500,000 in a public instrument on January
21, 2014. Anthony accepted the same on the same day in a separate private instrument. When
Anthony now seeks to registered the land in the Registry of Property, the latter refused the
registration because the acceptance of the donated property was not in a public instrument. In this
case:
 a. Anthony can compel the Registry of Property to register the land under his name because
the donation is valid.
b. Anthony cannot compel the Registry of Property to register the land under his name
because the donation is void.
c. The donation is valid but the registration may be refused on the ground that the acceptance
was not in a public instrument.
d. The Registry of property committed a grave abuse of discretion in refusing the registration
of the donated property in question.

ANSWER: b

7. Knowing that the car had a hidden crack in the engine, X sold it to Y without informing the latter
about it. In any event, the deed of sale expressly stipulated that X was not liable for hidden defects.
Does Y have the right to demand from X a reimbursement of what he spent to repair the engine plus
damages
a. No, because Y waived the warranty against hidden defects
b. Yes, X is liable whether or not he was aware of the hidden defects
c. No, because Y is in estoppel, having changed engine without prior demand
d. Yes, since the defect was not hidden; X knew of it but he acted in bad faith in not disclosing
the fact to Y

ANSWER: d

8. A who has a current account in a local bank employs B as a bookkeeper. While in his employ B
forges A's signature to a check which finally finds its way to the bank; the bank pays the check and
debits A's account with the amount appearing on the check. A objects to the action of the bank and
files a suit against the bank for the recovery of the amount of the check debited to his account The
bank sets up a defense that A has been negligent in having permitted B to have access to his papers.
In whose favor should the judgment be rendered?

ANSWER: In favor of A

9. On January 15, 2014, A obliged himself to give to B his only cow or his only dog or his only cat on
December 20, 2014. On July 4, 2014, 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, 2014, the dog died due to a fortuitous
event. Which of the following is true?
a. The obligation of A is extinguished.
b. A is liable for the value of the cat plus damages.
c. B can require A to replace the cat by another cat which is equally satisfactory.
d. B is entitled to the young cow having been born after the perfection of the contract.

ANSWER: a

10. On July 30, 1995, Arrieta wrote Bascon a letter offering a contract of sale. On August 26, Bascon
wrote a letter of complete acceptance of the contract which was received by Arrieta on August 31,
1995. But on August 30, 1995, Arrieta had already written Bascon a letter withdrawing the offer
which was received by Bascon on September 1, 1995. Is there a perfected contract between Arrieta
and Bascon?

Statement 1: There is a perfected contract between Arrieta and Bascon because acceptance was
made before withdrawal.
 Statement 2: There is a perfected contract because Arrieta came to know of the acceptance before
Bascon came to know of the withdrawal.

Which statement(s) is/are correct?

ANSWER: None of the statements

11. In 2007, at age 16, A sold his land to B, of legal age for P4M payable at P1M in 2007, P1M in 2008,
P1M in 2009 and P1M in 2010. In 2012, A wants to annul the contract on the ground of minority.
Will his action prosper?
a. Yes, provided A was then acting in good faith when he sold the property
b. No, the acceptance of the installment payments amounted to ratification of the sale.
c. No, A is allowed to ask for annulment of the contract only within 4 years from the perfection
of the contract
d. Yes, A has 4 years counted from the time he becomes of legal age to ask for annulment of the
contract

ANSWER: b

Clincher Round Theory – 10 seconds

Problem – 30 seconds

1. Can future inheritance be the subject of contract of sale?

a. Yes, since the death of the decedent is certain to occur
b. No, since the seller owns no inheritance while his predecessor lives
c. No, since it will put the predecessor at the risk of harm from a tempted buyer, contrary to
public policy
d. Yes, but on the condition that the amount of inheritance can only be ascertained after the
obligations of the estate have been paid

ANSWER: d

2. Can a drawee who accepts a materially altered check recovered from the holder and the drawer?
a. Yes from both of them
b. Yes, but only from the holder
c. Yes, but only from the drawer
d. No, he cannot recover from either of them

ANSWER: d

3. A is obliged to give B his specific car on December 31, 2010. There was no delivery and on January
4,2011 the garage of the car collapsed due to heavy rains and strong winds of Typhoon Pining, and
the car was totally destroyed. Is A still liable?
a. No, even if A was in default, he could plead impossibility of performance
b. Yes, because the contract is perfected
c. No, because there was no demand by B to deliver the car
d. Yes, the obligation to deliver the car is changed to pay the equivalent value because B is in
legal delay.

ANSWER: c