San Juan Campus, San Jose, San Juan, Southern Leyte

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Midterm Examination
in
AE 102 – Obligations and Contracts

I. MULTIPLE CHOICE

Direction: Write the corresponding letter of the correct answer.

1. A borrowed P1M from B and C who acted as solidary creditors. When the loan, matured, B wrote a letter to A
demanding payment of the loan directly to him. Before A could comply, C went to see him personally to collect and
he paid him. Did A make a valid payment?
a. No, since A should have split the payment between B and C
b. No, since B, the other solidary creditor, already made a prior demand for payment from A
c. Yes, since the payment covers the whole obligation
d. Yes, since C was a solidary creditor, payment to him extinguished the obligation
2. A and B both undertook a contract to deliver to C in Manila a boat docked in Subic. Before they could deliver it,
however, the boat sank in a storm. The contract provides that fortuitous event shall not exempt A and B from their
obligation. Owing to the loss of the motor boat, such obligation is deemed converted into one of indemnity for
damages. Is the liability of A and B joint or solidary?
a. Neither solidary nor joint since they cannot waive the defense of fortuitous event to which they are
entitled
b. Solidary or joint upon the discretion of C
c. Solidary since A and B failed to perform their obligation to deliver the motor boat
d. Joint since the conversion of their liability to one of indemnity for damages made it joint
3. Facultative as distinguished from alternative obligation
a. The right of choice is given only to the debtor
b. Various things are due, but the giving of one is sufficient
c. If one of the prestations is illegal, the others may be valid and the obligation remains
d. If it is impossible to give all except one, that last one must still be given
4. Which of the following is wrong in alternative obligations?
a. The obligor shall completely perform one of them
b. The obligee cannot be compelled to receive part of one and part of the other undertaking
c. The right of choice belongs to the creditor, unless it has been expressly granted to the debtor
d. The debtor shall have no right to choose those prestations which are impossible
5. Payment by cession as distinguished from dation in payment
a. The debtor is not necessarily in a state of financial difficulty
b. The effect is to release the debtor for the net proceeds of the things ceded or assigned.
c. The property is alienated by the debtor to the creditor in satisfaction of a debt in money.
d. What is delivered by the debtor is merely a thing to be considered as the equivalent of the performance
of the obligation
6. It is the place of a person’s habitual residence.
a. Domicile c. Permanent address
b. Residence d. Home
7. Indivisibility as distinguished from solidarity.
a. Plurality of subject is indivisible.
b. When the obligation is converted into one of indemnity for damages because of breach, the character of
the obligation remains
c. Refers to the legal tie or vinculum
d. Refers to the prestation which constitutes the object of the obligation
8. A owes B P11, 000 due on July 2, 2022. B owes A P6,000 due in July 3, 2022 and P4,000 due on July 10, 2022. B
owes C P11,000 due on July 3, 2022. On July 3, 2022 B cannot pay C so B assigns to C her credit of P11,000 against
A, without the knowledge of A. On July 10, 2022, C tries to collect from A the P11,000. How much can C compel A to
pay?
a. P11,000 b. P9,000 c. P5,000 d. P1,000
Questions 9-11: A, B, C and D owe W, Y and Z P9,000. On maturity, how much can W collect from A?
9. If debtors are joint and creditors are joint
a. P2,250 b. P3,000 c. P9,000 d. P750
10. If debtors are joint and creditors are solidary
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a. P9,000 b. P750 c. P3,000 d. P2,250
11. If the debtors are solidary and creditors are joint
a. P750 b. P2,250 c. P9,000 d. P3,000
12. Using the same data in No. 9, but the share of debtors A, B, C and D in the indebtedness is 1:2:3:4 and creditors
W, Y and Z is 2:3:5. How much can Y collect from B if debtors are joint and creditors are joint?
a. P1,800 b. P2,700 c. P675 d. P540
13. How much can Z collect from D, if debtors are solidary and creditors are joint?
a. P1,800 b. P1,125 c. P3,600 d. P4,500
14. 113. How much should A pay W, if debtor are joint and creditors are solidary?
a. P180 b. P9,000 c. P2,250 d. P900
15. N, R and J solidarily bound themselves to deliver to S a Honda motorcycle valued at P60,000. The obligation
was not fulfilled through the fault of J. Thereupon, S filed an action in court against N and the court awarded
P72,000 to S representing the value of the motorycle plus damages. Which of the following situations is valid?
a. If N pays S the P72,000, N can collect from R and J P24,000 each
b. S has to collect P24,000 each from N, R and J to satisfy the court's award of P72,000
c. N can refuse to pay the penalty because it should be charged against J, the guilty party.
d. If S succeeds in collecting the P72,000 from N. N in turn can collect from R P20,000 and from J P32,000.
16. A and B are solidarily obliged to give a brand-new Corolla Altis valued at Php 1M to C. C demands delivery from
A and B but they failed to deliver the car because their money is not enough as A only had Php 50,000 while B only
had Php 500,000. As a result, C can
Statement 1 – Ask from either A or B the delivery of the car plus damages
Statement 2- Ask from A the delivery of the car plus damages
Statement 3- Ask from B the delivery of the car without damages
a. All statements are correct c. Only two statements are correct
b. All statements are wrong d. Only one statement is correct
17. 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
18. 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
19. Assuming Y passed the October 2019 CPA Board Exams, Y can collect from
a. A or C = Php 16,800 c. A = Php 12,000
b. B = Php 4,800 d. A or B or C = Php 12,000
20. 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
21. 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
22. Buko, Fermin and Toti are solidary debtors under a loan obligation of Php 300,000 which has fallen due. The
creditor has, however, condoned Fermin's entire share in the debt. Since Toti has become insolvent, the creditor
makes a demand on Buko to pay the debt. How much, if any, may Buko be compelled to pay?
a. Php 200,000 b. Php 300,000 c. Php 100,000 d. Php 150,000
23. Requisites of application of payments except
a. There must be one debtor and one creditor
b. There must be two or more debts
c. The debts must be of different kinds
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d. The payment made must not be suffi cient to cover all the debts.

24. Application of payment to more onerous debts that is true

a. An non-interest-bearing debt is more onerous than a interest bearing debt even if the latter is an older
one.
b. A debt as a solidary debtor is more onerous than as a sole debtor.
c. All things being equal, older debts are more onerous.
d. Of two interest-bearing debts, the one with a lower rate is more onerous.
25. It is one the object of which, in its delivery or performance, is capable of partial fulfillment.
a. divisible obligation c. indivisible obligation
b. alternative obligation d. facultative obligation

III. ILLUSTRATIVE CASE:

Direction: Write your answer in paragraph form.

1. S promised to deliver a specifi c car to B. The contract carried a penal clause that in case of non-compliance,
S would have to pay a penalty of P20,000.00. S did not deliver the car and, as a consequence, B suffered
damage in the amount of P15,000.00. If it is compensatory, how much penalty S should be liable? If
punitive?

2. Bobby obliged himself to give to Ronnie his car on Dec 30, 2022. There was no delivery until Jan 10, 2023
when the garage of Bobby’s house collapsed due to a strong typhoon and the car was totally destroyed. Is
Bobby still liable? Is there a delay?

3. Bob promised to give his Nissan X-trail car if Baby will pass the CPA board exams on October 2022. Before
the results of the exams, the car was destroyed by typhoon “Dagit”. Baby passed the October 2022 CPA
board exams. Is Bob’s obligation extinguished? What kind of obligation is this? What will happen if baby
passed the CPA Board Exam and the car was not destroyed during the typhoon.?

Prepared by:

CHRISTIAN JAMES C. LOPINA, CPA

Instructor I, Accountancy Department