EASY

1. The liability of all the partners, including industrial partners for contracts entered into
in the companys name and for its account, when all partnership assets have been
exhausted is
a. Joint
b. Pro-rata
c. Solidary
d. Voluntary
ANSWER: B. Pro-rata
Legal Basis: According to Article 1816 of the Civil Code of the Philippines, All
partners, including industrial ones, shall be liable pro rata with all their property
and after all the partnership assets have been exhausted, for the contracts which
may be entered into in the name and for the account of the partnership, under its
signature and by a person authorized to act for the partnership. However, any
partner may enter into a separate obligation to perform a partnership contract.
(n)
2. An agency cannot be ___________ if a bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already contracted, or if partner is appointed
manager of a partnership in the contract of the partnership and his removal from the
management is unjustifiable.
ANSWER: Revoked
3. True or False:
The primary purpose of a partnership that is formed for the practice of a profession is
to obtain profits.
ANSWER: False. The primary purpose of a partnership that is formed for the
practice of a profession is no to obtain profits but to render service to the public.
Legal Basis: Paragraph 2 of Article 1767 relates to a general professional
partnership or a partnership for the exercise of a profession. Strictly speaking, the
practice of a profession is not a business or an enterprise for profit.
4. Which of the following rights is the subscriber of shares not fully paid who is not
delinquent not entitled to?
a. Right to dividends
b. Right to vote in stockholders meetings
c. Right to a stock certificate
d. Right to inspection of corporate books and records
ANSWER: C. Right to a stock certificate
Legal Basis: Section 64 of the Laws on Private Corporations states that no
certificate of stock shall be issued to subscriber until the full amount of his
subscription has been paid.

5. Which
a.
b.
c.
d.

of
D
D
D
D

the following is not considered a conditional obligation?

to pay C P5,000.00 as soon as D has the means.
to pay C P5,000.00 if C marries Y.
to pay C P5,000.00 if C tops the CPA Examination.
to pay C P5,000.00 if X dies of Malaria.

ANSWER: A. D to pay C P5,000.00 as soon as D has the means.

Legal Basis: According to Article 1179 (The Law on Obligations and Contracts,
Hector S. De Leon), a Conditional Obligation is one whose consequences are subject
in one way or another to the fulfillment of a condition. Also, as defined in the article,
Condition is a future and uncertain event, upon the happening of which, the
effectivity or extinguishment of an obligation (or right) subject to it depends.

6. One of the following obligations is not immediately demandable.

a. Pure obligation
b. Obligation with resolutory condition
c. Obligation with an ex die period
d. Obligation with an in diem period
ANSWER: C. Obligation with an ex die period
Legal Basis: According to Article 1179, (The Law on Obligations and Contracts,
Hector S. De Leon), an obligation is demandable at once when it is pure (par. 1),
when it is subject to a resolutory condition, and when it is subject to a resolutory
(in diem) period (Art. 1193, par.2.)

7. The delivery and transmission of ownership of a thing by the debtor to the creditor as
an accepted equivalent of performance is known as:
a. Payment by cession
b. Dation in payment
c. Application of payment
d. Consignation
ANSWER: B. Dation in payment
Legal Basis: According to Article 1245, (Notes in Business Law, Fidelito Soriano),
Dation in payment (dacion en pago, adjudicacion en pago or datio in solutum), is
a special form of payment where the ownership of property is transferred to his
creditor to pay a debt in money.

8. The crossing of a check where the words written between the two parallel lines are
and Co. or for payees account only is
a. General
b. Special

c. Qualified
d. Restrictive
ANSWER: A. General

9. Any agreement binding upon the holder to extend the time of payment or to
postpone the holders right to enforce the instrument results in the discharge of the
party secondarily liable unless made with the latters consent. This agreement refers
to one which the holder made with the
a. Principal debtor
b. Principal creditor
c. Secondary creditor
d. Secondary debtor
ANSWER: A. Principal debtor

10. M delivers a negotiable promissory note payable to P or order. Later, P makes a

special endorsement to A and A delivers the note to B. Who is the holder?
a. B, because he is in possession of the note
b. A, because he is the indorsee
c. P, because he is the payee
d. No one can be considered as holder
ANSWER: D. No one can be considered as holder

MODERATE
1. Preceding the incorporation stage, by-laws are adopted and:
a. Approved and signed by all the incorporators
b. Approved and signed by at least 2/3 of the incorporators
c. Approved by the stockholders representing at least 2/3 of the outstanding

capital stock
d. Approved by the stockholders representing at least a majority of the
outstanding capital stock
ANSWER: A. Approved and signed by all the incorporators
Legal Basis: According to Section 46 of the Corporation Code of the Philippines,
Notwithstanding the provisions of the preceding paragraph, by-laws may be
adopted and filed prior to incorporation; in such case, such by-laws shall be
approved and signed by all the incorporators and submitted to the Securities and
Exchange Commission, together with the articles of incorporation. .
2. These statements are presented to you:
I.
Several prestations are due but all must be performed to extinguish the
obligation.
II.
If there are void prestations, the other prestations may still be valid; hence,
the obligation remains.
In your evaluation of the foregoing statements:
a.
b.
c.
d.

Both statements refer to an alternative obligation

Neither statement refers to an alternative obligation
Only Statement I refers to an alternative obligation
Only Statement II refers to an alternative obligation

ANSWER: D. Only Statement II refers to an alternative obligation

Legal Basis: According to Article 1199 of the Civil Code of the Philippines, an
alternative obligation is one where several prestations are due but complete
performance of one of them is sufficient to extinguish the obligation.
Also, as alternative obligation is distinguished from facultative obligation,
alternative obligation are:
a. Several prestations are due, but the performance of one is sufficient to
extinguish the debt.
b. If there are void prestations, the others may still be valid, hence, the
obligation remains.
c. The right of choice is with the debtor, unless expressly given to the creditor.

3. D is obliged to deliver either a specific bracelet, a specific necklace, or a specific ring

to C. No mention was made in the agreement if the partied as to who has the right of
choice. Before due date, C wrote D informing the latter that he (C) preferred that the
ring be delivered to him. D receives the letter but did not give any response to C.
Subsequently, the ring was lost through a fortuitous event.
a. Ds obligation to C is extinguished by fortuitous event
b. D is obliged to pay damages to C because he was in default when he did
not respond to the letter

c. Ds obligation is not extinguished as he may deliver either the bracelet or

the necklace
d. Ds obligation became a simple obligation when C informed D of his (Cs)
preference on the object to be given to him
ANSWER: C. Ds obligation is not extinguished as he may deliver either the
bracelet or the necklace
Legal Basis: Under the Article 1204, (Notes in Business Law, Fidelito Soriano),
when the right of choice is with the debtor:
a. If only on or some are lost through a fortuitous event or through the
debtors fault, the debtor may deliver any of the remainder, or that
which remains if only one subsists.
b. If all are lost through a fortuitous event, the obligation is
extinguished (based on the rule that no person shall be responsible
for fortuitous event.)
c. If all are lost through the debtors fault, the debtor shall pay the
value of the last thing that was lost plus damages.

8. The minimum capital in money or property except when immovable property or real
rights thereto are contributed, that will require the contract of partnership to be in a
public instrument and be registered with the Securities and Exchange Commission
(SEC)
a. P
5,000.00
b. P 10,000.00
c. P
3,000.00
d. P 30,000.00
ANSWER: C
Legal Basis: Article 1772 of the Laws on Private Corporations states that every
contract of partnership having a capital of Three thousand pesos or more, in
money or property, shall appear in a public instrument, which must be recorded in
the office of the Securities and Exchange Commission.

9. Which of the following will not cause the automatic dissolution of a general
partnership?
a. Death of a partner
b. Insolvency of a partner
c. When the partnership business becomes unlawful
d. Insanity of a partner
ANSWER: D. Insanity of a partner
Legal Basis: Articles 1830 and 1831 provide for the statutory causes of
dissolution. Article 1830 enumerates the causes of dissolutions and includes
death of a partner, insolvency of a partner, and when partnership business

becomes unlawful. Article 1831 states that the court shall decree a dissolution
whenever a partner has been declared insane in any judicial proceeding or is
shown to be of unsound mind.

10. D obtained a loan from C in the amount of P50,000.00. Unable to give cash on due
date in payment of his loan obligation, D proposed to C that he would be giving
instead his diamond ring to settle his debt. C agreed and accepted the ring from D.
The new agreement between D and C involved both:
a. Novation and application of payment
b. Novation and dacion en pago
c. Compensation and payment of cession
d. Confusion and tender of payment
ANSWER: B. Novation and dacion en pago
Legal Basis: According to Article 1245, (Notes in Business Law, Fidelito Soriano),
Dation in payment (dacion en pago, adjudicacion en pago or datio in solutum), is
a special form of payment where the ownership of property is transferred to his
creditor to pay a debt in money.
Also, according to Article 1291, (The Law on Obligations and Contracts, Hector S.
De Leon), Novation is the total or partial extinction of an obligation through the
creation of a new one which substitutes it.

HARD
1. Lulu sold his banana plantation to ABC Inc. for Php 100M, payable in installments of
Php 10M per month with 8% interest per annum. Lulu married Luke after 9 months
and they chose conjugal partnership of gains to govern their property relations. When
they married, Luke had an unpaid balance of Php 15M plus interest in Lulus favor. To
whom will ABCs monthly payments go after marriage?
a. Both the interest and principal shall go to Lulu since they are her exclusive

property
b. Both principal and interest shall go to the conjugal partnership since these
become due after the marriage
c. The principal shall go to the conjugal partnership but interest to Lulu
d. The principal shall go to Lulu but the interest to the conjugal property
ANSWER: D. The principal shall go to Lulu but the interest to the conjugal property
Legal Basis: Civil Code of the Philippines
Art. 142. By means of the conjugal partnership of gains the husband and
wife place in a common fund the fruits of their separate property and the
income from their work or industry, and divide equally, upon the dissolution
of the marriage or of the partnership, the net gains or benefits obtained
indiscriminately by either spouse during the marriage. (1392a)
Art. 148. The following shall be the exclusive property of each spouse:
(1) That which is brought to the marriage as his or her own;
(2) That which each acquires, during the marriage, by lucrative title;
(3) That which is acquired by right of redemption or by exchange with other property
belonging to only one of the spouses;
(4) That which is purchased with exclusive money of the wife or of the husband. (1396)

2. Which of the following is not correct?

a. If a person obliged to do something fails to do it, the same shall be executed at his
cost/burden
b. When the obligation consists in not doing, and the obligor does what has been
forbidden him, it shall be undone at his expense
c. The obligation to give includes that of delivering all its accessions and accessories
even though they may not have been mentioned.
d. In reciprocal obligations, from the moment one of the parties fulfills his obligation,
delay by the other begins
ANSWER: C. The obligation to give includes that of delivering all its accessions and
accessories even though they may not have been mentioned.
Legal Basis: Article 1166. The obligation to give a determinate thing includes that
of delivering all its accessions and accessories, even though they may not have
been mentioned. (1097a)

3. Anna was obliged to pay Mike Php 800,000 on December 31, 2015. She paid Mike on
December 31, 2014 believing that the obligation was already due and demandable. How
much may Anna recover from Mike on March 31, 2016?

a.
b.
c.
d.

Nothing because the obligation is already extinguished

Legal interest for one year and three months
Legal interest for one year
P1M plus legal interest for one year
ANSWER: C. Legal interest for one year
Legal Basis: Article 2159. Whoever in bad faith accepts an undue payment, shall
pay legal interest if a sum of money is involved, or shall be liable for fruits received
or which should have been received if the thing produces fruits.
He shall furthermore be answerable for any loss or impairment of the thing from any
cause, and for damages to the person who delivered the thing, until it is recovered.
(1896a)

4. On February 14, 2015, Mark orally sold for Php 10M his house and lot to Bob. It was
agreed that delivery of the house and lot and the payment thereof would be made on
April 10, 2015. Unfortunately, Lucas, a stranger negligently set the house on fire on
March 17, 2015 and the house was completely destroyed. As a result
a. Mark need not deliver the lot and Bob need not pay the Php 10M
b. Bob is required to pay the Php 10M minus the equivalent fair market value of the
house
c. Mark must still deliver the lot and the salvage value of the house while B must still
pay the Php10M
d. Mark must still deliver the lot but is already excused from the delivery of the house
while Bob must still pay the full amount
ANSWER: A. Mark need not deliver the lot and Bob need not pay the Php 10M
Legal Basis: Article 1403. The following contracts are unenforceable, unless they are
ratified:
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In
the following cases an agreement hereafter made shall be unenforceable by action,
unless the same, or some note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a secondary evidence of its
contents:

(e) An agreement for the leasing for a longer period than one year, or for the
sale of

real property or of an interest therein;

5. Which of the following is an indivisible obligation?

a. To pay a loan obligation of P100,000.00 in 10 equal monthly installments
b. To give a rendition tonight of Handels Messiah in a concert at the Folk
Arts Theater
c. To lecture for 5 Saturdays in a tax seminar
d. To construct a pavement measuring 2 meters wide and 10 meters long

ANSWER: B. To give a rendition tonight of Handels Messiah in a concert at the

Folk Arts Theater
Legal Basis: According to Article 1223, an indivisible obligation is one of the object
which, in its delivery or performance, is not capable of partial fulfillment.

6. A, B and C are jointly liable to X in the amount of P12,000.00. On due date, X demanded
payment from A but A refused to pay. How much may X collect from B?
a. P4,000.00 without any damages
b. P8,000.00 plus damages for delay
c. P12,000.00 plus damages for delay
d. P8,000 without any damages
ANSWER: A. P4,000.00 without any damages
Legal Basis: According to Article 1207-1208, Joint obligation or one where the whole
obligation is to be faid or fulfilled proportionately by the different debtors and/or is to
be demanded proportionately by the different creditors.
Meanwhile, Solidary obligation or one where each one of the debtors is bound to
render, and/or each one of the creditors has a right to demand from any of the
debtors, entire compliance with the prestation.
7. What is the rate of documentary tax that must be paid in case of deeds of sale and
conveyance of real properties?
a. PhP 10.00,when the consideration, or the value received or contracted to
be paid for such realty, after making proper allowance of any
encumbrance, does not exceed PhP1,000 and an additional PhP 10.00 for
each additional PhP 1,500, or fractional part thereof in excess of PhP 1,500
of such consideration or value.
b. PhP 10.00,when the consideration, or the value received or contracted to
be paid for such realty, after making proper allowance of any
encumbrance, does not exceed PhP1,000 and an additional PhP 10.00 for
each additional PhP 1,000, or fractional part thereof in excess of PhP 1,000
of such consideration or value.
c. PhP 15.00,when the consideration, or the value received or contracted to
be paid for such realty, after making proper allowance of any
encumbrance, does not exceed PhP1,000 and an additional PhP 15.00 for
each additional PhP 1,500, or fractional part thereof in excess of PhP1,500
of such consideration or value.
d. PhP 15.00,when the consideration, or the value received or contracted to
be paid for such realty, after making proper allowance of any
encumbrance, does not exceed PhP1,000 and an additional PhP 15.00 for
each additional PhP 1,000, or fractional part thereof in excess of PhP 1,000
of such consideration or value.
ANSWER: D. PhP 15.00,when the consideration, or the value received or contracted
to be paid for such realty, after making proper allowance of any encumbrance, does

not exceed PhP1,000 and an additional PhP 15.00 for each additional PhP 1,000, or
fractional part thereof in excess of PhP 1,000 of such consideration or value.
Legal Basis: SECTION 196. Stamp Tax on Deeds of Sale and Conveyances of Real
Property. - On all conveyances, deeds, instruments, or writings, other than grants,
patents or original certificates of adjudication issued by the Government, whereby
any land, tenement or other realty sold shall be granted, assigned, transferred or
otherwise conveyed to the purchaser, or purchasers, or to any other person or
persons designated by such purchaser or purchasers, there shall be collected a
documentary stamp tax, at the rates herein below prescribed, based on the
consideration contracted to be paid for such realty or on its fair market value
determined in accordance with Section 6(E) of this Code, whichever is higher:
Provided, That when one of the contracting parties is the Government, the tax herein
imposed shall be based on the actual consideration:
"(a)
When the consideration, or value received or contracted to be paid for such
realty, after making proper allowance of any encumbrance, does not exceed One
thousand pesos (P1,000), Fifteen pesos (P15.00).

"(b)
For each additional One thousand pesos (P1,000), or fractional part thereof in
excess of One thousand pesos (P1,000) of such consideration or value, Fifteen pesos
(P15.00).
"When it appears that the amount of the documentary stamp tax payable hereunder
has been reduced by an incorrect statement of the consideration in any conveyance,
deed, instrument or writing subject to such tax the Commissioner, provincial or city
Treasurer, or other revenue officer shall, from the assessment rolls or other reliable
source of information, assess the property of its true market value and collect the
proper tax thereon.

8. I. Failure to have the statement of assets of the decedent and the deductions from gross
estate certified by an independent CPA duly accredited by the BIR shall have a fine of not
more than PhP1,000 or imprisonment of not more than 6 months, or both.
II. Failure to keep/preserve records required by law or regulations shall have a fine of not
more than PhP1,000 or imprisonment for not more than 6 months, or both.
III. Failure to pay annual registration fee by a person engaged in the business of distilling,
rectifying, repacking, compounding or manufacturing article subject to excise tax shall
have a fine of not less than PhP30,000 but not more than PhP50,000 and suffer
imprisonment of not less than 2 years but not more than 4 years.
IV. Willful attempt to evade or defeat any tax imposed by the National Internal Revenue
Code or the payment thereof shall have a fine of not less than PhP30,000 but not more
than P100,000 and imprisonment of not less than two years but not more than four
years.
a. Only I and II are true
b. Only II, and III are true
c. Only III and IV are true

d. Only I and IV are true

e. All are true
ANSWER: E. All are true
Both statements I and II are based on the Sec. 275 of NIRC, Statement III is based on
the Sec 258 of the NIRC and Statement IV is based on the Sec 254 of the NIRC.
Legal Basis: SECTION 254. Attempt to Evade or Defeat Tax. Any person who
willfully attempts in any manner to evade or defeat any tax imposed under this Code
or the payment thereof shall, in addition to other penalties provided by law, upon
conviction thereof, be punished by a fine of not less than Thirty thousand pesos
(P30,000) but not more than One hundred thousand pesos (P100,000) and suffer
imprisonment of not less than two (2) years but not more than four (4) years:
Provided, That the conviction or acquittal obtained under this Section shall not be a
bar to the filing of a civil suit for the collection of taxes.
SECTION 258. Unlawful Pursuit of Business. Any person who carries on any
business for which an annual registration fee is imposed without paying the tax as
required by law shall, upon conviction for each act or omission, be punished by a fine
of not less than Five thousand pesos (P5,000) but not more than Twenty thousand
pesos (P20,000) and suffer imprisonment of not less than six (6) months but not
more than two (2) years: Provided, That in the case of a person engaged in the
business of distilling, rectifying, repacking, compounding or manufacturing any article
subject to excise tax, he shall, upon conviction for each act or omission, be punished
by a fine of not less than Thirty thousand pesos (P30,000) but not more than Fifty
thousand pesos (P50,000) and suffer imprisonment of not less than two (2) years but
not more than four (4) years.
SECTION 275. Violation of Other Provisions of this Code or Rules and Regulations in
General. Any person who violates any provision of this Code or any rule or
regulation promulgated by the Department of Finance, for which no specific penalty is
provided by law, shall, upon conviction for each act or omission, be punished by a
fine of not more than One thousand pesos (P1,000) or suffer imprisonment of not
more than six (6) months, or both. (In case of doubt, the citation can be
specifically cited on the Annex A of the Revenue Memorandum Order No.
007-15).
9. I. All application for Authority to Release Imported Goods (ATRIGs) for excisable
products shall be processed and issued at their respective BIR Regional Offices,
specifically by their Excise LT Regulatory Division (ELTRD).
II. ATRIGS issued by the Excise Tax Areas (EXTAs) upon the effectivity of Revenue
Memorandum Order No. 3-2016 shall be considered null and void.
III. All ATRIGs manually processed and issued by the Regional Offices for VAT exempt
transactions shall be stamped with the phrase, NOT VALID FOR ALL EXCISABLE
PRODUCTS".
a.
b.
c.
d.

Only
Only
Only
Only

I is correct
II is incorrect
III is incorrect
I and II are incorrect

e. Only II and III are correct

ANSWER: D. Only II and III are correct
Legal Basis: Under Section II of RMO No. 1-2016, the following would make the
statements correct:
I. All application for Authority to Release Imported Goods (ATRIGs) for excisable
products shall be processed and issued centrally at the BIR National Office more
particularly by the Excise LT Regulatory Division (ELTRD).
II. ATRIGS issued by the Regional Offices and Excise Tax Areas (EXTAs) upon the
effectivity of Revenue Memorandum Order No. 1-2016 (Centralized Processing of
Authority to Release Imported Goods (ATRIGS) for Excisable Products) shall
be considered null and void.
10. Zone-registered enterprises doing business within the Zone shall, in lieu of local and
national taxes, be liable to the pay 5% of gross income earned, broken down into
segments. Which of the following breakdowns is/are correct?
I.
For Subic-Ecozone, 3% comes to the National Government; and 2% to the special
development fund to be utilize for the development of municipalities outside the
City of Olongapo and the Municipality of Subic and other municipalities
contiguous to the base area.
II.
For Zambo-Ecozone, 2% to the National Government; 1% to the City of
Zamboanga, and 1% to the Barangay Special development fund, which is
hereby created, for the development and improvement of the barangays within
the city of Zamboanga.
III.
For Cagayan-Ecozone, 2% to the National Government; 1% to the Province of
Cagayan, 1% to be shared by municipalities affected by the declaration of the
Zone in proportion to their income from business activities within the Zone; and
1% to the CEZA.
a.
b.
c.
d.
e.

All are incorrect

I only
I and II only
II, and III only
All are Correct

ANSWER: A. All are incorrect

Legal Basis: According to Section 3 of RR No. 02-05, these would make the following
statements correct:
I.

II.

For Subic-Ecozone, 3% comes to the National Government; 1% to the Local

Government units affected by the declaration of the Zone; and 1% to the
special development fund to be utilize for the development of municipalities
outside the City of Olongapo and the Municipality of Subic and other
municipalities contiguous to the base area.
For Zambo-Ecozone, 2% to the National Government; 2% to the City of
Zamboanga, and 1% to the Barangay Special development fund, which is
hereby created, for the development and improvement of the barangays within
the city of Zamboanga.

III.

For Cagayan-Ecozone, 2% to the National Government; 1% to the Province of

Cagayan, 1% to be shared by municipalities affected by the declaration of the
Zone in proportion to their income from business activities within the Zone; and
1% to the CEZA.

The other ecozone are the RA 7916 Ecozones; and the 5% GIT:
IV.

3% of which goes to the National Government; and 2% of which shall be directly

remitted by the business establishments to the treasurers office of the
municipality or city where the enterprise is located.

CLINCHER
1. If the article already exists and subsequently acquired by another, it is a contract of
sale, and if the article is still to be manufactured at the instance of another, it is a
contract for a piece of work. This is
a. English rule
b. Massachusetts rule
c. New York rule
d. Chicago rule
ANSWER: C. New York rule

Legal Basis: According to Article 1467, A contract for a piece of work is where in
goods are to be manufactured specially for a customer and upon special order and
not for the general market. While a contract for delivery of an article which the
vendor in the ordinary course of business manufactures or procures for general
market is contract for sale. This is referred to as Massachusetts Rule, which is
observed in the Philippines.
a. Nature of the object test: enunciated in EEI v CIR; each products nature of
execution differs from the others; products are not ordinary products of manufacturer
and still to be manufactured at the instance of another. This is referred to as New
York Rule.

b. Habituality test: enunciated in Celestino v CIR; contract of sale if manufacturer

engages in activity without need to employ extraordinary skills and equipment;
contract for piece of work is sale of service; contract of sale is sale of things. This is
referred to as English Rule.

2. Which of the following subscriptions does not comply with the subscription and paidup capital requirements at the time of incorporation?
Authorized
a.
b.
c.
d.

P1,000,000.00
P 300,000.00
P 100,000.00
P
50,000.00

Subscribed
P250,000.00
P 75,000.00
P100,000.00
P 12,500.00

Paid-up
P 62,500.00
P 50,000.00
P100,000.00
P 3,125.00

ANSWER: D
Legal Basis: According to Section 13 of the Laws on Private Corporation, in no case
shall the paid-up capital be less than Five thousand pesos (P5,000.00).

3. One of the following is not a requisite of legal compensation. Which is it?

a. That each one of the obligors be bound principally, and that he be at
the same time a principal creditor of the other.
b. That the two debts be due.
c. That both debts be liquidated and demandable.
d. That the debts are payable at the same place.
ANSWER: D. That the debts are payable at the same place.
Legal Basis: According to Article 1279, in order that compensation may be proper, it
is necessary:
1. That each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;

2. That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
3. That the two debts be due;
4. That they be liquidated and demandable; and
5. That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor.

a.
b.
c.
d.

4. A holder in due course holds the instrument free from any defect of title of prior
parties and free from defenses available to prior parties among themselves. An
example of such defense is
Fraud in inducement
Duress amounting to forgery
Fraud in esse contractus
Alteration
ANSWER: A. Fraud in inducement

5. 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
ANSWER: A. In the place where the offer was made