REGULATORY FRAMEWORK FOR

BUSINESS TRANSACTIONS CPA REVIEW

Believe on what you can do, always bear on your mind that you can answer everything to the best that
you can. Always observe HONESTY. GODBLESS!

1. D owes C P200,000 but the debt had already prescribed. If D, knowing that it has prescribed,
nevertheless paid B he cannot later on get back what he voluntarily paid to C. This is what kind of
obligation?
A. Natural obligation
B. Civil obligation
C. Moral obligation
D. Personal obligation

2. A civil liability which involves the return of the object of the crime whenever possible, plus allowances
for any deterioration or diminution of value as may be determined by the court to the rightful owner.
A. Reparation
B. Indemnification
C. Restitution
D. Imprisonment

3. D is the driver of a passenger bus which is owned and operated by O. While D is driving said bus, it
met an accident through his negligence where P, a passenger, was injured. D is liable to P for damages
which arise from?
A. Law
B. Crime
C. Quasi-contracts
D. Quasi-delict
E. Contract

4. The creditor has a right to the fruits of the thing from?

A. The time the thing is delivered
B. The time the obligation to deliver the thing arises
C. The time the sale is perfected
D. The time the fruits are delivered

5. The obligor is not liable for a fortuitous event when there is?
A. There is default or more on his part
B. He promised to deliver the same thing to two or more persons who do not have the same interest
C. The object is generic
D. The object is determinate

6. Which of the following statements is false?

A. Avendaño is obliged to deliver a particular car to Buenasida. He must also deliver the jack and
other tools
B. Dacones is obliged to deliver a specific parcel of land to Castañeda. He must also deliver the trees
planted thereon
C. Dumalasa is obliged to deliver a restaurant to Cresencio. They agreed that the dishes should not be
anymore included in the delivery. Dumalasa should still deliver the dishes to Cresencio
D. Damiana is obliged to deliver a sari-sari store to Casador. No mention was made in the contract
about the goods thereon. Demiana should still include the goods in the delivery

7. Delay in the giving or delivering a thing.

A. Mora solvendi ex re
B. Mora solvendi ex persona

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 C. Mora accipiende ex re
D. Mora accipiende ex re persona

8. “Dayanan blinds himself to sell to Gagatlun his car for P250,000.” Which of the following statements is
false?
A. If no period has been agreed upon, the performance of the respective obligation is deemed to be
simultaneous
B. If Dayanan delivers the car, Gagatlun will only be in delay from the time demand has been made
by Dayanan
C. Dayanan cannot demand payment if he does not deliver the car
D. Gagatlun cannot demand deliver if he does not pay the price

9. Santana sold his ring to Bengala for P5,000. There was no agreement regarding the delivery date and
the time for payment. Later Santana effected delivery but Bengala failed to pay the price. Is Bengala in
delay in paying the purchase price?
A. No, unless there is a stipulation that demand is not necessary
B. Yes, if demand would be useless
C. Yes, this involves reciprocal obligation
D. No, the general rule provides - No demand, No delay

10. Statement 1: The receipt of the principal obligation without reservation as to the payment of interest
shall give rise to the presumption that the interest has been paid. Statement 2: The receipt of the
latter installment of a debt without reservation as to prior installment, shall not raise a conclusive
presumption that the prior installment is also paid.
A. Both are true
B. No. 1 is true: No. 2 is false
C. Both are false
D. No. 2 is true: No. 1 is false

11. Which of the following is not an exception to the rule that - all rights acquired in virtue of an obligation
are transmissible?
A. When the parties agreed against its transmission
B. When the law prohibits the transmission of rights
C. When the nature of the obligation is purely personal
D. When the obligation is real

12. One of the following is not pure obligation, which one is it?
A. I promise to pay you P500,000
B. I will give you P50,000 if you will pass the CPA Board Examinations this year
C. I will pay you P100,000 on demand
D. I obliged to give you a specific car

13. Period is distinguished from a condition, except this one?

A. Event which must happen sooner or later, at a date known beforehand, or a time which cannot be
determined
B. Always refer to a future.
C. Merely fixes the time for the efficaciousness of the obligation.
D. May refer to a past event unknown to the parties.

14. If the obligation of the debtor is “I will pay you my debt after I have arrived from abroad”, this is what
kind of obligation?
A. Unenforceable
B. Void
C. With a period
D. Conditional
15. A promissory note signed by Martiniano and dated March 15, 2020 is worded as follows: “I promise to
pay Juanita the sum of Fifty Thousand Pesos (P50,000), provided that if she should fail in the October
2020 CPA Examination, she shall return to me said amount.”
A. Suspensive condition
B. Resolutory condition
C. Casual condition

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 D. answer not given

16. Which obligation is not valid?

A. I promise to give you P50,000 on December 31, 2020
B. I promise to give you P75,000 if I decide to go abroad this month
C. I promise to give you P60,000 if your neighbor dies
D. I promise to give you P150,000 if you rank 1 in the May 2021 CPA Board Examination

17. A condition which, if imposed on an obligation will be disregarded and will therefore make the
obligation immediately demandable at once in an obligation.
A. If Juan commits suicide.
B. If Juan passes the CPA board examination.
C. If Juan kills Pedro.
D. If Juan will not rise from the dead.

18. On December 5, 2019, Dymosky obliged himself to give Chateau a car if Chateau passes the CPA
examinations. On May 18, 2020 the giving of the examination was finished. The result was released on
May 19, 2020. Chateau passed the said examinations. He took his oath at the PICC on June 2, 2020.
The obligation of Dymosky to deliver the car became effective on what date?
A. May 18, 2020
B. December 5, 2019
C. May 19, 2020
D. June 2, 2020

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

20. When the thing deteriorates pending the fulfillment of the suspensive condition without the fault of the
debtor, the impairment is borne by whom?
A. To borne by the party who cause the deterioration
B. To be borne partly by the debtor and partly by the creditor
C. To be borne by the debtor
D. To be borne by the creditor

21. A sold to B the former’s horse for P5,000. No date is fixed by the parties for the performance of their
respective obligations. The obligation of A is what?
A. To deliver the horse immediately as there is a perfected contract
B. To deliver the horse upon the payment of B of P5,000
C. To deliver the horse within a reasonable time of two months from the contract date
D. To rescind the contract as there is no time fixed for the delivery and payment

22. I will give you my car one month after your death. The obligation is?
A. Valid, because the event is sure to come
B. Valid, the obligation is conditional
C. Valid, but disregard the condition
D. Void, not legally possible

23. Whenever in an obligation a period is designated, it is presumed to have been established for the
benefit of:
A. Both the creditor and debtor
B. The third party
C. The debtor
D. The creditor

24. On December 20, 2018, Primo signs a promissory note and binds himself to pay Dasma P50,000 plus
12% interest per annum on December 20, 2020.
A. Before December 20, 2020, Dasma can demand payment

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 B. If on December 20, 2019 Primo is paying Dasma, Dasma cannot refuse the payment
C. Because the period is for the benefit of the debtor and creditor, Dasma can refuse any tendered
payment before December 20, 2020
D. Because the period is for the benefit of the debtor, Primo can compel Dasma to accept payment
any date before December 20, 2020

25. The debtor loses the benefit of the period, and his obligation becomes demandable when the
obligation is?
A. Demand by the creditor would be useless
B. The guarantees as promised and delivered by the debtor are not acceptable to the creditor
C. After contracting the obligation, the creditor suspects that the debtor is becoming insolvent
D. The debtor attempts to abscond

26. Statement 1 – Chattel mortgage is a consensual contract and the creditor gets possession of the
thing mortgaged
Statement 2– Pledge is a consensual contract and gives a personal right
Statement 3 – Real estate mortgage is a real contract and creates a real right if registered with the
Registry of Property
Statement 4 – Antichresis is an accessory and gives a real right
A. Only one statement is true C. Three statements are true
B. Two statements are true D. All statements are false

27. One is incorrect about elements of contracts:

A. Absence of an essential element voids the contracts.
B. Absence of natural or accidental elements may result to rescission and damages.
C. In policitation, there is meeting of meetings but contract is incomplete hence needs reformation.
D. In stipulation pour autrui consent or acceptance of the third person involved is mandatory.

28. All are essential characteristics of contracts except:

A. Relativity of contract
B. Obligatoriness of contract
C. Autonomy of contract
D. Uniformity of contract or essential equality of contracting parties

29. Statement No. 1: The death, civil, interdiction, insanity or insolvency of either offeror or offeree before
acceptance in conveyed makes the offer ineffective.
Statement No. 2: The cause of a contract is the psychological or personal reason whereas motive is the
objective or juridical.
A. True, true
B. False, false
C. True, false
D. False, true

30. The following contracts must appear in a public instrument, except:

A. Donation of immovable property
B. Agency to sell land
C. Partnership where immovable property or real rights are contributed
D. When limited partnership is formed
31. In a void contract neither party may seek to enforce it neither can they seek the aid of law. But
recovery can be made by the other party, except:
A. The innocent party
B. The debtor who pays usurious interest
C. The party rejecting the void contract before illegal purpose is accomplished
D. The incapacitated party even if he did not object to the wrongdoing

32. Which is most defective?

A. Both parties are incapacitated
B. One of the parties is a minor suffering lesion by more than ½ of the value of his property
C. Contract entered by a debtor to defraud his creditor
D. Contracts involving very difficult service

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33. Which of the following contracts is enforceable even if not reduced in writing?
A. Representation as to the credit of a third person
B. Agreement for the sale of immovable property
C. Contract executed by one of the parties in a contract
D. Lease of immovable for a period longer than one year

34. X bought a land from Y, paying him cash. Since they were friends, they did not execute any document
of sale. After 7 years, the heirs of X asked Y to execute a deed of absolute sale to formalize the verbal
sale to their father. Unwilling to do so, X’s heirs filed an action for specific performance against Y. Will
their action prosper?
A. No, after more than 6 years, the action to enforce the verbal agreement has already elapsed.
B. No, since the sale cannot under the Statute of Frauds be enforced.
C. Yes, since X bought the land and paid Y for it.
D. Yes, after full payment, the action became imprescriptible.

35. X borrowed money from a bank, secured by a mortgage on the land of Y, his close friend. When the
loan matured, Y offered to pay the bank but it refused since Y was not the borrower. Is the bank’s
action correct?
A. Yes, since X, the true borrower, did not give his consent to Y’s offer to pay.
B. No, since anybody can discharge X’s obligation to his benefit.
C. No, since Y, the owner of the collateral, has an interest in the payment of the obligation.
D. Yes, since it was X who has an obligation to the bank.

36. X and Y were to marry in 3 months. Meantime, to express his affection, X donated a house and lot to Y,
which donation X wrote in a letter to Y. Y wrote back, accepting the donation and took possession of
the property. Before the wedding, however, Y suddenly died of heart attack. Can Y’s heirs get the
property?
A. No, since the marriage did not take place.
B. Yes, since all the requisites of a donation of an immovable are present.
C. No, since the donation and its acceptance are not in a public instrument.
D. Yes, since X freely donated the property to Y who became its owner.

37. Contracts take effect only between the parties or their assigns and heirs, except where the rights and
obligations arising from the contract are not transmissible by their nature, by stipulation, or by
provision of law. In the latter case, the assigns or the heirs are not bound by the contracts. This is
known as the principle of
A. Relativity of contracts
B. Mutuality of contracts
C. Freedom to stipulate
D. Obligatory force of contracts

38. As security for a loan, Sonia mortgaged his house and lot to Belinda. Both parties intended to enter a
mortgage contract but the instrument as written states that the house and lot is sold by Sonia to
Belinda with right of repurchase. In this case, the proper remedy is:
A. Annulment C. Reformation
B. Rescission D. Reconstitution
39. A contract is presumed to have been entered into in the place where the
A. Offer was made
B. Acceptance was made
C. Performance was made
D. Payment was made

40. In a void contract neither party may seek to enforce it neither can they seek the aid of law. But
recovery can be made by the other party, except:
A. The innocent party
B. The debtor who pays usurious interest
C. The party rejecting the void contract before illegal purpose is accomplished
D. The incapacitated party even if he did not object to the wrongdoing
E. Answer not given

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41. The following must appear in writing to be enforceable, except:
A. Promise of the guarantor to pay
B. Lease of more than 1 year
C. Sale of land
D. Interest in a loan

42. Which of the following contracts is enforceable even if not reduced in writing?
A. Representation as to the credit of a third person
B. Agreement for the sale of immovable property
C. Contract executed by one of the parties in a contract
D. Lease of immovable for a period longer than one year

43.Which of the following is not void ab initio?

A. That whose object is outside the commerce of men
B. That whose object did not exist at the time of the transaction
C. That which contemplates an impossible service
D. That which is undertaken in fraud of creditors

44. A orally offered to sell his rice land to B for Php8M. B orally accepted the offer. The land is to be
delivered through the execution of a notarized Deed of Sale and the price is to be paid directly two
weeks from their oral agreement. Which of the following is most accurate?
A. If A refuses to deliver the land on the agreed date despite payment made by B, the latter may not
successfully sue A because the contract is unenforceable
B. If A refused to deliver the land, B may successfully sue A for the fulfillment of the obligation before
the payment of the purchase price
C. The contract between A and B is rescissible
D. The contract between A and B is subject to ratification by the parties.

45. If at the time the contract of sale is perfected, the thing which is the object of the contract has been
entirely lost, which of the following most accurately completes the statement?
A. The buyer bears the risk of loss
B. The seller bears the risk of loss
C. The contract shall be without any effect
D. The buyer may withdraw from the contract.

46. There shall be no reformation in the following except

A. Donation inter-vivos where a simple condition is imposed
B. Holographic wills
C. Notarial wills
D. When the real agreement is void

47. To be valid and enforceable, the following contracts should be in writing, except:
A. Contract to pay interest on loan
B. Contract of donation of real property
C. Contract giving authority to an agent to sell a piece of land
D. Contract made in consideration of marriage

48. 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

49. Which of the following is not correct?

A. Ratification extinguishes the action to annul a voidable contract
B. Ratification maybe effected by the guardian of the incapacitated person

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 C. Ratification cleanses the contract from all its defect from the moment it was constituted
D. Ratification requires the conformity of the contracting party who has no right to bring the action to
annulment

50. A contract of loan is

A. A consensual contract
B. A real contract
C. A formal contract
D. A solemn contract

51. A ordered a ten-year old boy to climb a slippery tree, and promised to share with him part of the fruits.
The boy fell and was killed. A is liable for damages because of his fault or negligence, which is
referred to as a
a. Contract
b. Delict
c. Quasi-delict
d. Quasi-contract
e. Solution indebiti

52. A promissory note signed by Martiniano and dated March 15, 2021 is worded as follows: “I promise to
pay Juanita the sum of Fifty Thousand Pesos (P50,000) provided that if she should fail in the October,
2021 CPA Examination, she shall return to me said amount.” The above note gives rise to an
obligation with -
a. Suspensive condition c. Resolutory condition
b. Casual condition d. Mixed condition

53. When the thing deteriorates pending the fulfillment of the suspensive condition without the fault of the
debtor, the impairment is to be borne by whom?
a. By the party who caused the deterioration.
b. Party by the debtor and partly by the creditor.
c. By the debtor.
d. By the creditor
e. Neither party

54. In this case, advance payment by the debtor is recoverable

a. If the advance payment is only of interest due
b. If the creditor demanded for the advance payment and the debtor knew it was not yet due
c. If the advance payment is in reciprocity to the advance payment of the other party
d. If the debtor was unaware of the period
e. If the both parties were aware of the period

55. On July 1, 2020, A signs a promissory note and binds himself to pay X P100,000.00 plus 15% per
annum interest on June 30, 2021.
a. Before June 30, 2021 X can demand payment
b. If on June 30, 2021 A is paying X. X cannot refuse the payment
c. Because the period is for the benefit of the debtor, A can compel creditor X to accept payment any
date before June 30, 2021
d. Because the period is for the benefit of the debtor and creditor, X can refuse any tendered
payment before June 30, 2021

56. A, B, C and D are joint creditors of E and F, solidary debtors in the amount P40,000.00. How much can
A, B, C and D collect from E?
a. A, B, C and D could collect all the P40,000.00 from E
b. A, B, C and D could collect P20,000.00 from E
c. A, B, C and D could collect P30,000.00 from E
d. A, B, C and D could collect P20,000 from E and P10,000 from F

57. A solidary obligation is one in which each of the debtors is liable for the entire obligation or debt, and
each of the creditors is entitled to the entire credit. Obligations shall also be considered solidary under
the three following exceptions. Which does not belong to the exception?
a. When solidarity is expressly stipulated in the obligation.

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 b. When the prestation is indivisible and there are two or more debtors and creditors.
c. When the law expressly provides solidarity.
d. When solidarity is required from the nature of the obligation.

58. Payment of the obligation by a solidary debtor shall not entitle him to reimbursement from his co-
debtors.
a. If such payment was made before the obligation is due.
b. If such payment was made after the obligation has prescribed or become illegal.
c. If such payment was made in compliance with the demand made to him by all the creditors.
d. If such payment was made after the obligation has become due and demandable and notice of
payment was made only to him.

59. In the absence of an agreement to the contrary, what shall be the basis of payment of an obligation in
case there should supervene an extraordinary inflation or deflation of the currency stipulated?
a. The value of the currency at the time of the establishment of the obligation.
b. The value of the currency at the due date of the obligation.
c. The value of the currency shall be fixed by courts.
d. The value of the currency shall be determined by an expert from the Central Bank.

60. OE is obliged to give OR his 1982 Mitsubishi, 4-door sedan Lancer car with plate number NBA 123 on
September 30, 2020. On October 10, 2020, OE did not yet deliver the car which was totally destroyed
by an earthquake on such date. Is OE still liable?
a. No, the obligation is extinguished. The specific thing was lost due to fortuitous event and no
demand to deliver was made by OR.
b. Yes, OE is in legal delay. OR can claim damages.
c. No, Even OE is already in default and can plead impossibility of performance.
d. Yes, OR can instead demand for another car of equivalent value from OE.

61. These are the basic principles or characteristics of a contract. Which is the exception?
a. Binding on third parties
b. Freedom or liberty to stipulate
c. Obligatory force and compliance in good faith
d. Perfection by mere consent
e. Mutuality

62. In order that a stipulation in favor of a third person in a contract would be valid and binding upon the
parties thereto, three of the requisites are mentioned in the following enumeration. Which among
them is not a requisite:
a. There must be a stipulation in favor of a third person.
b. The contracting parties must have clearly and deliberately conferred a favor upon that third
person.
c. The third person communicated his acceptance to the obligor before its revocation.
d. That there must be an existing agency between either of the contracting parties and the third
person.

63. Mr. Esguerra, a former government employee, suffered from severe paranoia and was confined in the
mental hospital in 1981. After his release he was placed under the guardianship of his wife to enable
him to get his retirement pay. In 1984, he became a mining prospector and sold some mining claims.
In 1987, he sued to annul the sale claiming that he was not mentally capacitated at the time of sale.
The sale in question was
a. Illegal
b. Void
c. Voidable
d. Valid
e. Rescissible

64. There shall be no reformation of contract in the following cases, except:

a. In testamentary wills.
b. Simple donation intervivos with no condition being imposed.
c. Contract of mortgage executed as a contract of sale.
d. A contract of sale fraudulently made as a contract of lease.

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65. Which of the following is not a rule in the interpretation of contracts.
a. If some stipulation of any contract should admit of several meanings, it shall be understood as
bearing that import which is most adequate to render the contract effectual.
b. Words which may have different significations shall be understood in that which is most in
keeping with the nature and object of the contract.
c. In order to judge the intention of the contracting parties, their contemporaneous and subsequent
acts shall be principally considered.
d. Although the cause is not stated in the contract, it is presumed that is exists and is lawful, unless
the debtor proves the contract

66. Rescission of contract can take place in this case:

a. When the things which are the object of the contract are legally in the possession of third persons
who acted in bad faith.
b. When he who demands rescission cannot return whatever he may be obliged to restore.
c. When the party seeking rescission can perform only as to part and rescind as to remainder.
d. When the seller cannot return the installments paid to him by the buyer.

67. The proper remedy is annulment of contract and not reformation when
a. Mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the
parties.
b. A mutual mistake of the parties causes the failure of the instrument to disclose their real
agreement.
c. One party was mistaken and the other knew or believed that the instrument did not state their real
agreement, but concealed the fact from the former.
d. Where both parties were mistaken

68. Which of the following is not unenforceable?

a. That where both parties are incapable of giving consent.
b. That where one party is incapable of giving consent.
c. That which is entered into the name of another person by one who has been given no authority or
legal representation.
d. That which does not comply with the Statute of Frauds.

69. X alleged that Y promised to give X one hectare of land. This is in consideration of X’s meritorious
service to Y. Y pleaded in defense that since the promise was not in writing, it is unenforceable under
the Statue of Frauds. Decide.
a. The promise is unenforceable because it is not in writing.
b. the Statute of Frauds is applied because A has rendered services already.
c. The Statute of Frauds is inapplicable here, because the promise to give the land is not a sale of real
property.
d. The Statute of Frauds can apply to partially executed contract.

70. The following contracts are void an initio except -

A. Those whose object is outside the commerce of man.
B. Those whose object did not exist at the time of the transaction.
C. That which contemplates an impossible service.
D. That which is undertaken in fraud of creditors.

 End 

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