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College of Business, Economics, Accountancy and Management


Accountancy Department
Accounting Review

COVERAGE: Contracts
a. Concept and classifications
b. Elements and stages
c. Freedom to contract and limitations
d. Persons bound by contracts
e. Consent-capacitated persons, requisites
f. Objects of contracts
g. Cause or consideration of contracts
h. Formalities, interpretation and reformation of contracts
i. Defective contracts; rescissible, voidable, unenforceable and void
Direction: Read and select the best answer for the following questions.

1. It is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some
service.
a. Obligation
b. Contract
c. Right
d. Civil action
2. The following are the characteristics of contracts, except
a. Obligatory force which constitutes the law as between the parties.
b. Mutuality which means that the validity and performance cannot be left to the will of only one of the parties.
c. Relativity which means it is binding only upon the parties and their successors.
d. Liberty which means that the parties may establish such stipulations, clauses, terms, and conditions as they may deem
convenient provided they not contrary to law, morals, good customs, public order or public policy.
e. Consensuality which means that contracts are perfected by mere consent except in real contracts and formal or solemn
contracts which require additional requirements.
f. Illegality which means that contracts should be contrary to law.
3. The following are the types of elements of a contract, except
a. Essential elements which refer to those which are required in order for a contract to exist such as consent of the contracting
parties, object certain which is the subject matter of the contract and cause of the obligation which must be established.
b. Natural elements which already exist in certain contract unless set aside or suppressed by the parties such as warranty against
eviction and warranty against hidden defects in a contract of sale.
c. Accidental elements which do not normally exist in a contract unless stipulated by the parties such as terms of payment, interest
rate or place of payment.
d. Alien elements which refer to those items which do not exist in earth.
4. Which of the following statements pertain to a real contract?
a. It is a contract perfected by mere consent such as contract of lease and contract of lease.
b. It is a contract perfected by the delivery of the object of the contract such as contracts of deposit, pledge and commodatum.
c. It is a contract which must be in the form provided by law for their perfection such as contract of donation involving immovable
property, together with the acceptance by the donee, must be in a public instrument to be valid.
d. It is a contract involving delivery of real property.
5. Which of the following statements pertain to an onerous contract?
a. It is a contract whereby there is an exchange of valuable consideration such as contracts of sale and barter. For each contracting
party, the cause is the prestation or the promise of a thing or service by the other.
b. It is a contract whereby one party receives no equivalent consideration such as contracts of donation and commodatum. These
contracts are referred to as contracts of pure beneficence, the cause of which is the liberality of the benefactor.
c. It is a contract whereby the cause here is the service or benefit remunerated.
d. It is a contract wherein there is no cause or consideration.
6. Which of the following statements pertain to principal contract?
a. It is a contract whose existence depends upon another contract such as pledge or mortgage which is dependent upon a principal
contract such as loan.
b. It is a contract which serves as a means by which other contracts may be entered into such as agency and partnership.
c. It is a contract that can stand by itself such as contracts of sale and loan.
d. It is a contract which has a name under the Civil Code or special law such as contracts of sale, loan and barter.
e. It is a contract without any name under the Civil Code or special law.

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7. The following are the innominate contracts, except
a. Do ut des (I give that you may give.)
b. Do ut facias (I give that you may do.)
c. Facio ut des (I do that you may give.)
d. Facio ut facias (I do that you may do.)
e. Facias ut des (I do not do that you may not do.)
8. The following are the rules that shall govern innominate contracts, except
a. The stipulation of the parties
b. The provisions of Obligations and Contracts
c. The rules governing the most analogous contracts
d. The customs of the place
e. The provisions of Corporation Code
9. Which of the following statements pertain to aleatory contract?
a. It is a contract whereby the parties give equivalent values such as sale and barter hence, there is real fulfillment.
b. It is a contract whose fulfillment depends upon chance such as insurance contract.
c. It is a contract where only one of the parties is obligated to give or to do something such as commodatum and gratuitous deposit.
d. It is a contract were both parties are required to give or to do something such as sale and barter and it may be reciprocal or non-
reciprocal.
10. Which of the following contracts pertain to auto-contract?
a. It is a contract which has been performed.
b. It is a contract wherein one person contracts with himself.
c. It is a contract wherein one party has already a prepared form of a contract, containing the stipulations he desires, and he simply
asks the other party to agree to them if he wants to enter into the contract.
d. It is a contract that has not yet been performed.
11. Which of the following statements pertaining to the stages of a contract refer to preparation or conception stage?
a. It involves a preliminary negotiations and bargaining, discussion of terms and conditions, with no arrival yet of a definite
agreement.
b. It is the point when there is meeting of minds between the parties on a definite subject matter and valid cause.
c. It is the point when the contract have been fulfilled resulting in its accomplishment.
12. Freedom to contract is one of the liberties of the people of the state. This means that the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to the following, except
a. Law
b. Religion
c. Morals
d. Good customs
e. Public order
f. Public policy
13. In an action for ejectment, the lessee interposed the defense that the contract of lease authorized them to continue occupying the premises
so long as they paid their rents. Is the defense of the lessee tenable?
a. No because it violates mutuality of contract which provides that the contract must bind both contracting parties and its validity or
compliance cannot be left to the will of one of them.
b. Yes because it is stipulated in the contract.
c. No because it is contrary to morals and good customs.
d. Yes because it does not violate public order and public policy.
14. A stipulation provides that the student’s scholarship is good only if he continues in the same school, and that he waives his right to transfer
to another school without refunding the equivalent of his scholarship in cash is null and void because it is contrary to
a. Law
b. Morals
c. Good customs
d. Public policy
15. A stipulation which provides that in the event of nonpayment of the debt at maturity that the creditor may appropriate for himself the thing
given as security is null and void because it is contrary to
a. Morals
b. Good customs
c. Law
d. Public order
16. A stipulation which provides that a person shall marry a person in consideration of money is null and void because it is contrary to
a. Law
b. Morals and good customs
c. Public order

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d. Public policy
17. Two persons agreed in a contract which provides for the concealment of a public offense or the suppression of evidence or the stifling of a
criminal prosecution for a certain consideration. Is the stipulation valid?
a. Yes because mutuality of contract provides that its validity or compliance cannot be left to the will of one of them.
b. Yes because the obligatory force of a contract bind both contracting parties.
c. No because the stipulation is contrary to law and public policy.
d. No because the stipulation is contrary to mutuality of contract.
18. An agreement was entered into by the parties which provides that either one of them may terminate the contract for the violation of any of
its terms and conditions. Is this stipulation valid?
a. No because it violates mutuality of contract which provides that its validity or compliance cannot be left to the will of one of them.
b. Yes because the validity or compliance is not entirely left to the will of one of the contracting parties, but it merely gives the
vendor the right to declare such contract cancelled and of no effect.
c. No because it violates the freedom to enter into contract.
d. Yes because the right to rescind a contract cannot be waived.
19. The contract provides that the determination of the performance is left to of a third person. Is the stipulation valid?
a. No because it is contrary to law, morals, good customs, public order or public policy.
b. No because it violates mutuality of contract.
c. Yes because the determination of the performance of contract may be left to a third person, whose decision shall not be binding
until it has been made known to both contracting parties.
d. Yes because the determination of the third person is obligatory whether or not it is evidently inequitable.
20. What is the remedy of the parties in case the determination of the performance of contract of a third person is evidently inequitable?
a. The contract should be declared null and void.
b. The contract should be rescinded.
c. The court shall decide what is equitable under the circumstances.
d. The court shall leave the status of the contract.
21. Relativity of contract provides that it takes effect only between the following, except
a. Contracting parties
b. Assigns of contracting parties
c. Heirs of contracting parties
d. Third persons
22. Obligations and rights arising from contracts are generally transmissible to the parties’ heirs and assigns. The following are considered
intransmissible, except
a. Those which are purely personal.
b. Those which are provided by law.
c. Those which are stipulated by the party.
d. Those which are based on commercial transactions.
23. A person died leaving liabilities. Are the heirs liable for the obligations of the decedent?
a. No because there is no privity between them and the decedent.
b. No because the heirs are not the contracting parties.
c. Yes even beyond the property they received because contracts take effect between the parties, their assigns and heirs.
d. Yes but not beyond the property they received because there is privity between them and their predecessor.
24. A stipulation which is considered an exception to the relativity of contract is called
a. Stipulation pour autrui
b. Stipulation in favor of the heirs
c. Stipulation in favor of assigns
d. Stipulation in favor of contracting parties
25. The following are the requisites of stipulation pour autrui or stipulation in favor of third person, except
a. There must be stipulation in favor of a third person.
b. The stipulation should be a part, not the whole, of the contract.
c. The contracting parties must have clearly and deliberately conferred a favor upon a third person and not a mere incidental
benefit or interest.
d. The favorable stipulation should not be conditioned or compensated by any kind of obligation whatever.
e. The third person must have communicated his acceptance to the obligor before its revocation.
f. One of the contracting parties bears the legal representation or authorization of the third party.
26. The following statements concerning stipulation pour autrui are correct, except
a. A stipulation in favor of third person has no binding effect in itself before its acceptance by the party favored.
b. Before acceptance by the third person, the contracting parties; by mutual agreement, may modify the contract or revoke it.
c. A mere incidental interest or benefit is not within the doctrine of stipulation pour autrui.
d. The stipulation pour autrui still exists even if the contract is considered null and void.

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27. A mortgages his land to B and the mortgage is registered. Afterwards, A sells the land to C. Is the mortgage contract binding upon C?
a. No because C is not a party to the contract.
b. No because there is no privity between B and C.
c. Yes even if the mortgage contract is not registered.
d. Yes because in contracts creating real rights, third persons who come into possession of the object of the contract are bound
thereby, subject to the provisions of the Mortgage Law and Land Registration Laws.
28. A is a creditor of B. In order to escape the liability to A, B sells all his property to C. May A ask for rescission of the contract of sale
between B and C?
a. No because A is not a party to the contract.
b. No because A has no right of rescission.
c. Yes because creditors are protected in cases of contracts intended to defraud them.
d. Yes even if the right of levy and execution and accion subrogatoria are still available.
29. A contract was entered into between Y and Z. X induces Y to violate the contract. Can Z file an action for damages against X?
a. No because A is not a party to the contract.
b. No because it will be violative of relativity of contract.
c. Yes even if X has no knowledge of the contract between Y and Z.
d. Yes because any third person who induces another to violate his contract shall be liable for damages to the other contracting
party.
30. As a general rule, contracts are perfected by
a. Delivery of the object of a contract.
b. Execution of formalities required by law.
c. Mere consent by contracting parties.
d. Provisions of the law.
31. From the moment of perfection of a contract, what is the extent of its binding effect?
a. The parties are bound only to the fulfillment of what has been expressly stipulated in the contract.
b. The parties are bound only to the natural consequences of the contract.
c. The parties are bound not only to the fulfillment of what has been expressly stipulated in the contract but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and law.
d. The parties are not bound by what is not stipulated in the contract.
32. How is the nature of the contract determined?
a. Contract is what the parties choose to call them.
b. Contract is determined by the stipulations of the parties.
c. Contract is determined by the principles of law.
d. Contract is determined by the surrounding circumstances.
33. Real contracts, such as deposit, pledge and commodatum are perfected by
a. Delivery of the object of a contract.
b. Execution of formalities required by law.
c. Mere consent by contracting parties.
d. Provisions of the law.
34. As a general rule, no one may contract in the name of another without being authorized by the latter or unless he has by law a right to
represent him. What is the status of a contract entered into in the name of another by one who has no authority or legal representation, or
who has acted beyond his powers?
a. Rescissible
b. Unenforceable
c. Voidable
d. Null and void
35. An owner of an hacienda did not authorize his wife and children to sell the said hacienda but upon being informed that they had done so,
instead of demanding the annulment of the sale, he proceeded to collect in installments the amount of promissory note given to the
purchase. Can the buyer of the hacienda enforce the contract of sale of land?
a. No because the contract is unenforceable considering the wife and children has no authority to sell the land.
b. No because the contract is rescissible considering that it is entered into to defraud the creditors.
c. Yes because the contract is only voidable and therefore enforceable.
d. Yes because the contract becomes enforceable upon the collection of the purchase price which is considered an implied
ratification.
36. The following are the essential requisites of contracts, except
a. Formalities of the contracts
b. Consent of the contracting parties
c. Object certain which is the subject matter of the contract
d. Cause of the obligation which is established

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37. Which of the following statements concerning the concept of consent is incorrect?
a. Consent is manifested by the meeting of the officer and the acceptance upon the thing and the cause which are to constitute the
contract.
b. The offer must be certain and the acceptance absolute.
c. A qualified acceptance constitutes a counter-offer.
d. A consent must be expressed but not implied.
38. When does the acceptance made by letter or telegram bind the offerer?
a. From the time he sent his offer.
b. From the time the acceptance was sent by the other party.
c. From the time the acceptance came to the knowledge of the offerer.
d. From the time the parties signed the written contract.
39. A contract entered into through letter, telegram or telephone is presumed to have been entered in what place?
a. In the place where the offer was made.
b. In the place where the acceptance was made.
c. In the place where the written contract was signed.
d. In the place where the object of the contract can be found.
40. The following are the requisites of an offer, except
a. It must be definite.
b. It must be uncertain.
c. It must be complete.
d. It must be intentional.
41. A offers his watch to B for P500. B said that he will buy it for P450. Is the contract perfected?
a. Yes because the consent is manifested.
b. Yes provided B will pay P450.
c. No because there is no delivery of the watch.
d. No because a qualified acceptance constitutes a counter-offer.
42. On January 1,2011 A wrote a letter to B offering him to lease a building. On January 2,2011, B sent a letter to A advising him that his offer
was accepted. This letter was received by A at 2:55pm that day. On the same day, in the morning, at 11:25, A had already written a letter
to B, withdrawing the offer to lease the building. The letter revoking the offer was received by B at 3:55pm. Is the contract perfected?
a. Yes because the offer was accepted by B before the revocation was received by him
b. Yes because the contract is perfected from the moment B send the letter of acceptance.
c. No because before the acceptance is known, the offer can be revoked, it not being necessary, in order for the revocation to have
the effect of impeding the perfection of the contract, that it be known to the offeree.
d. No because the contract is perfected only by the execution of written contract.
43. The following statements concerning concent are correct, except
a. An acceptance may be expressed or implied.
b. The person making the offer may fix the time, place and manner of acceptance, all of which must be complied with.
c. An offer made through an agent is accepted from the time acceptance is communicated to his principal.
d. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance
by communicating such withdrawal, except when the option is founded upon a consideration, something paid or promised.
44. Before the acceptance is conveyed, an offer become ineffective upon the happening of the following to either party, except
a. Civil interdiction
b. Insanity
c. Death
d. Insolvency
e. Sickness
45. A offers B to purchase his car. A allows B two weeks to accept the offer. A and B also enters into a contract of option for the two weeks
allowance and B paid P200 for the option. Can A withdraw the offer before acceptance by B?
a. Yes because an offer may be withdrawn by offerer before the acceptance is communicated.
b. No because the option contract is supported by a consideration.
c. No because the offer cannot be withdrawn once given.
d. Yes because the contract is not yet perfected.
46. A department store advertises a Christmas sale of men’s and women’s shoes, those of men at a price of P20 and above, and those of
women’s at P10 and above. Can anyone of the public make an acceptance of the offer?
a. Yes because business advertisements of things for sale are definite offers.
b. No because business advertisements are mere invitations to make an offer.
c. Yes because those who advertises are estopped.
d. No because an offer cannot be made through an advertisement.

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47. ABC Inc. makes an advertisements for bidders of its land. J-Z is the highest bidder. Is ABC bound to accept the offer of the highest bidder?
a. Yes because advertisements for bidders are definite offers.
b. No because advertisements for bidders are simply invitation to make proposals.
c. Yes because in auction sale the highest bidder is always the winner.
d. No because the lowest bidder should be the winner.
48. The following cannot give consent to a contract, except
a. Unemancipated minors
b. Insane or demented persons
c. Deaf-mutes who do not know how to write
d. Blind persons who cannot speak
49. What is the status of a contract entered into between a person who can give a consent and an unemanciated minor, insane or demented
persons or deaf-mutes who do not know how to write?
a. Voidable on the part of the incapacitated person
b. Voidable on the part of the capacitated person
c. Uenforceable
d. Null and void
50. What is the status of a contract entered into between an unemancipated minor and an insane or demented person?
a. Voidable
b. Rescissible
c. Uenforceable
d. Null and void
51. A contract is entered into between A, a minor and B, an insane person. C, the father of A ratified the contract. What is the status of the
contract after ratification?
a. Voidable
b. Rescissible
c. Uenforceable
d. Null and void
52. What is the status of a contract entered into during a lucid interval?
a. Valid and without any defect
b. Voidable
c. Rescissible
d. Unenforceable
53. What is the status of a contract agreed to in a state of drunkenness or during a hypnotic spell?
a. Voidable
b. Rescissible
c. Unenforceable
d. Null and void
54. What is the status of a contract wherein a contract is wanting and wherein a contract is vitiated, respectively?
a. Valid and Voidable
b. Voidable and void
c. Void and voidable
d. Void and unenforceable
55. The following are the requisites of consent, except
a. It should be intelligent.
b. It should be free.
c. It should be spontaneous.
d. It should be vitiated.
56. What is the status of a contract entered into wherein a consent is given through fraud, undue influence, mistake, intimidation or violence
(F-U-M-I-V)?
a. Voidable
b. Rescissible
c. Uenforceable
d. Null and void
57. The following types of mistakes may result to invalidity or voidability of a contract, except
a. Mistake which should refer to the substance of the thing which is the object of the contract.
b. Mistake which should refer to those conditions which have principally moved one or both parties to enter into the contract.

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c. Mistake as to identity or qualifications of one of the parties wherein such identity or qualifications have been the principal cause
of the contract.
d. Simple mistake of account.

58. The following errors does not vitiate consent, except


a. Error as to the solvency of the other party.
b. Error as to the motive of the party.
c. Error as to estimates.
d. Error as to basis of contract.
59. A and B entered into a contract of sale of a piece of land, not knowing that the said property has already been the object of another sale
under different terms and conditions, by their duly representatives. What is the status of the second contract?
a. Rescissible
b. Voidable
c. Unenforceable
d. Null and void
60. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, who
shall shoulder the burden of proof?
a. The person alleging mistake or fraud.
b. The person enforcing the contract.
c. Third person interested in the contract.
d. Any person.
61. One of the parties agrees to an upset price with full knowledge of the favorable or unfavorable possibilities with respect to the essential
circumstances of the contract. What is the status of the contract?
a. Voidable because there is mistake in the upset price.
b. Null and void because upset price is prohibited by law.
c. Valid and without defect because there is no mistake if the party alleging it knew the doubt, contingency or risk affecting the
object of the contract.
d. Unenforceable because it violates statute of frauds.
62. If one of the parties believed that he received a certain amount as a loan, which the other delivered as a real deposit, what is the status of
the contract?
a. Voidable contract of loan on the part of the first party.
b. Voidable contract of real deposit on the part of the second party.
c. Valid contracts of loan and deposit on both party.
d. Null and void because of want of consent.
63. Which of the following statements is incorrect?
I. There is intimidate when in order to wrest consent, serious or irresistible force is employed.
II. There is violence when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave
evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent.
a. Both I and II
b. Neither I nor II
c. I only
d. II only
64. A borrowed money from B. Upon failure of A to pay the loan, B threatened A to file a collection suit against A if the latter will not execute
the contract of mortgage. As a resulf of the threat, A entered into the contract of mortgage. What is the status of the contract of mortgage?
a. Void because threat is illegal.
b. Voidable because the consent of A is vitiated.
c. Valid and binding because the claim of B is just and legal.
d. Unenforceable because there is violation of statute of fraud.
65. The following are the requisites of violence to vitiate a consent, except
a. There must be physical force.
b. The physical force must be irresistible.
c. It refers to moral force or compulsion.
d. The force must be the determining cause in giving the consent to the contract.
66. The following are the requisites of intimidation to vitiate a consent, except
a. The intimidation must be the determining cause of the consent.
b. The threatened act must be just or lawful.
c. The threat must be real and serious.
d. It must produce a reasonable and well-grounded fear.

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67. Which of the following statements is incorrect?
I. There is fraud when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable
freedom of choice.
II. There is undue influence when, through insidious words or machinations of one of the contracting parties, the other is induced to
enter into a contract which, without them, he would not have agreed to.
a. Both I and II
b. Neither I nor II
c. I only
d. II only
68. Which of the following statements is incorrect?
a. Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in
the contract.
b. Failure to disclose facts, when there is duty to reveal them, as when the parties are bound by confidential relations, constitutes
fraud.
c. The usual exaggeration in trade, when the other party had an opportunity to know the facts, are in themselves fraudulent.
d. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former’s
special knowledge.
69. The following are the requisites of fraud, except
a. It must have been employed by one of the contracting parties.
b. It must have induced the other party to enter into the contract.
c. It must have been serious.
d. It must not result to any damage or injury to the party seeking annulment.
70. A and B entered into a contract of sale. In the performance of the contract, A committed fraud. What is the remedy of B?
a. To ask for annulment of contract because there is dolo incidente.
b. To ask for damages because there is dolo causante.
c. To ask for damages because there is dolo incidente.
d. To ask for annulment of contract because there is dolo causante.
71. Through insidious words and fraudulent machinations by B, A entered into a contract with B. What is the remedy of A?
a. To ask for annulment of contract because there is dolo incidente.
b. To ask for damages because there is dolo causante.
c. To ask for damages because there is dolo incidente.
d. To ask for annulment of contract because there is dolo causante.
72. The following statements are correct, except
a. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and
the same is mutual.
b. Misrepresentation made in good faith is not fraudulent but may constitute error.
c. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting
parties.
d. Incidental fraud may entitle the injured party for annulment of contract.
73. What is the effect when both parties use fraud reciprocally?
a. Any of the parties may ask for annulment of contract.
b. The contract is voidable for both parties.
c. The fraud of one compensates that of the other, and neither party can ask for annulment of the contract because they are in pari
delicto.
d. Any of the parties may ask for damages.
74. What is the status of absolutely simulated or fictitious contract?
a. Voidable
b. Null and void
c. Unenforceable
d. Rescissible
75. Which of the following statements is incorrect?
I. In absolute simulation, there is color of a contract, without any substance thereof, the parties not having any intention to be bound.
II. In relative simulation, the parties have an agreement which they conceal under the guise of another contract.
a. Both I and II

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b. Neither I nor II
c. I only
d. II only
76. What is the remedy of the parties in case of relatively simulated contract?
a. Ask for annulment of contract.
b. Ask for declaration of nullity of contract.
c. Ask for reformation of contract.
d. Ask for rescission of contract.
77. The object of a contract is its subject matter or it is the thing, right or service which is the subject matter of the obligation, arising from the
contract. The following are the requisites of an object of a contract, except
a. The object must be within the commerce of man.
b. It must be licit, or not contrary to law, morals, good customs, public order or public policy.
c. It must be impossible.
d. It must be determinate as to its kind.
78. The following objects may be considered an object of a contract, except
a. Future things
b. All rights which are not intransmissible
c. Future inheritance
d. All services not contrart to law, morals, good customs, public order or public policy
79. Before Don Lasal dies, his heirs enter into an agreement for the partition of the estate of their father. What is the status of the contract?
a. Voidable
b. Null and void
c. Unenforceable
d. Rescissible
80. After Don Miguel died, one of the heirs entered into a contract renouncing his right to inherit. What is the status of the contract?
a. Valid and binding
b. Null and void
c. Unenforceable
d. Rescissible
81. It refers to the immediate and proximate purpose of the contract or the essential reason which impels the contracting parties to enter into it
and which explains and justifies the creation of the obligation through such contract.
a. Object of contract
b. Cause of contract
c. Consent of contract
d. Form of contract
82. Which of the following statements concerning the cause of the contract is incorrect?
a. In onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by
the other.
b. In remuneratory contracts, the cause is the service or benefit which is remunerated.
c. In contracts of pure beneficience, the cause is the mere liberality of the benefactor.
d. The cause of accessory contract should be different from the very cause or consideration of the principal contract.
83. Which of the following statements is incorrect?
I. Contracts without cause or with unlawful cause produce no effect whatever and are considered null and void.
II. Contracts without motive or with unlawful motive produce no effect whatever and are considered null and void.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
84. Which of the following statements is incorrect?
a. The statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon
another cause which is true and lawful.
b. Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary.
c. As a general rule, lesion or inadequacy of cause shall invalidate a contract.
d. The particular motives of the parties in entering into a contract are different from the cause thereof.
85. As a general rule, contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for
their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or
that a contract be proved in a certain way, the requirement is absolute and indispensable. The following contracts are required to be in
certain form to be valid, except
a. Negotiable instruments must be made strictly in the form provided by the Negotiable Instruments Law to be valid.
b. Donations of personal property in excess of P5,000 must be made and accepted in writing to be valid.
c. Donations of real property must be made in public instruments to be valid.

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d. The principal and interest in antichresis must be specified in writing to be valid.
e. The lease of personal property for a period longer than one year should be in writing to be valid.
f. Registration of chattel mortgage is necessary for its validity.
g. A contract of partnership to which real property or real rights are contributed must be in a public instrument, with an inventory
attached, to be valid.

86. If the law requires a document or other special form, what is the right of the contracting parties once the contract is perfected?
a. The contracting parties may annul the contract.
b. The contracting parties may rescind the contract.
c. The contracting parties may compel each other to observe the form or document required by law.
d. The contracting parties need not execute the required form.
87. The following must appear in a public document in order to insure its efficacy but not to for its validity, except
a. Acts or contracts which have for their object the creation, transmission, modification or extinguishment or real rights over
immovable property.
b. The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains.
c. The power to administer property, or any other power which has for its object an act appearing or which should appear in a
public document, or should prejudice a third person
d. The cession of actions or rights proceeding from an act appearing in a public document
e. Contracts where the amount involved exceeds five hundred pesos.
88. When, there having been a meeting of minds of the parties to the contract, their true intention is not expressed in the instrument purporting
to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, what is the remedy of one of the parties?
a. Ask for annulment of the contract because the consent is vitiated.
b. Ash for reformation of the instrument to the end that such true intention may be expressed.
c. Ask for rescission of the contract.
d. Ask for indemnification for damages.
89. If mistake, fraud, inequitable conduct or accident has prevented a meeting of the minds of the parties, what is the proper remedy?
a. Ask for reformation of the instrument.
b. Ask for annulment of the contract.
c. Ask for rescission of the contract.
d. Ask for indemnification for damages.
90. The following are the instances wherein reformation of the instrument is the proper remedy, except
a. When a mutual mistake of the parties the failure of the instrument to disclose their real agreement.
b. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their
true intention.
c. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but
concealed that fact from the former.
d. When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk
or typist, the instrument does express the true intention of the parties.
e. When one of the parties was induced to enter into a contract through fraud, undue influence, mistake, intimidation or violence.
f. If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold
absolutely or with a right of repurchase.
91. There shall be no reformation in the following cases, except
a. Simple donation inter vivos wherein no condition is imposed
b. Wills
c. When the real agreement is void
d. Contract of sales
92. The following may ask for the reformation of an instrument, except
a. Either party if the mistake is mutual.
b. Injured party
c. Successors in interest, heirs and assigns of injured party
d. Party guilty
93. One of the parties has brought an action to enforce the instrument, can he subsequently ask for its reformation?
a. Yes because the remedies are available as successive rights.
b. No because there has been an election as between inconsistent remedies.
c. Yes because the injured party can never be estopped.
d. No if there is stipulation to that effect.
94. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, what shall be the interpretation of
contracts?

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a. The intent of the contracting parties shall still be construed.
b. The literal meaning of its stipulation shall control.
c. The hidden meaning should be determined.
d. The contract shall be enforced even if contrary to law.
95. In case of conflict between the evident intention of the parties and the words of contract, which shall prevail?
a. The words or letter of the contract shall prevail over the intention of the parties.
b. The intention of the parties shall prevail over the words of the contract.
c. The contract shall be annulled because of ambiguity.
d. The contract shall be declared null and void.

96. The following are the rules for interpreting or construing a contract, except
a. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally
considered.
b. However general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases
that are different from those upon which the parties intended to agree.
c. If some stipulation of any contract should admit several meanings, it shall be understood as bearing that import which is most
adequate to render in effectual.
d. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result
from all of them taken jointly.
e. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of
the contract.
f. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract, and shall fill the
omissions of stipulations which are ordinarily established.
g. The interpretation of obscure words or stipulations in a contract shall favor the party who caused the obscurity.
97. When it is impossible to settle doubts by the rules established in number 96, and the doubts refer to incidental circumstances of a
gratuitous contract, what shall be the interpretation of the contract?
a. The greatest transmission of rights and interest shall prevail.
b. The equal transmission of rights and interest shall prevail.
c. The least transmission of rights and interest shall prevail.
d. The contract is null and void.
98. When it is impossible to settle doubts by the rules established in number 96, and the doubts refer to incidental circumstances of an
onerous, what shall be the interpretation of the contract?
a. The doubt shall not be settled.
b. The doubt shall be settled in favor of the greatest reciprocity of interest.
c. The doubt shall be resolved in favor of the creditor.
d. The doubt shall be resolved in favor of the debtor.
99. Where a contract is susceptible of being interpreted as a sale with a right of repurchase and as a loan with a mortgage, what shall be the
interpretation of the contract?
a. The contract is a sale with a right of repurchase.
b. The contract is an absolute sale.
c. The contract is an ordinary loan.
d. The contract is a loan with a mortgage.
100. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or
will of the parties, what shall be the status of the contract?
a. Valid and binding
b. Voidable
c. Null and void
d. Unenforceable
101. Indicate the proper order from lease defective to most defective contract.
I. Rescissible contract which is a contract that has caused a particular damage to one of the parties or to a third person, and which for
equitable reasons may be set aside even if it is valid.
II. Voidable or annullable contract, which is contract in which the consent of one party is defective, either because of want of capacity or
because it is vitiated, but which contract is valid until set aside by a competent court.
III. Unenforceable contract which is a contract that for some reason cannot be enforced, unless it is ratified in the manner provided by
law.
IV. Void or inexistent contract which is an absolute nullity and produces no effect, as if had never been executed or entered into and
cannot be ratified.
a. IV – III – II – I
b. I – II – III – IV
c. II – I – IV – III
d. I – III – II – IV

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102. It is a remedy granted by law to the contracting parties and even to third persons, to secure the reparation of damages caused to them by
a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said
contract.
a. Annulment of contract
b. Rescission of contract
c. Declaration of nullity of contract
d. Ratification of contract

103. The following are the requisites in order that an action for rescission of a contract or accion pauliana may prosper, except
a. The contract must be rescissible.
b. The party asking for rescission must have other legal means to obtain reparation for damages suffered by him.
c. The person demanding rescission must be able to return whatever he may be obliged to restore if rescission is granted.
d. The things which are the object of the contract must not have passed legally to the possession of a third person acting in good
faith.
e. The action for rescission must be brought within the prescriptive period of four years.
104. The following contracts are considered rescissible, except
a. Those which are entered into by guardians whenever the wards they represent suffer lesion by more than ¼ the value of the
things which are the object thereof;
b. Those agreed upon in representation of absentees, if the latter suffer more than ¼ the value of the things which are the object
thereof;
c. Those entered into between two incapacitated persons;
d. Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;
e. Those which refer to thins under litigation if they have been entered into by the defendant without the knowledge and approval of
the litigants or of competent judicial authority;
f. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they
were effected.
105. A, a minor, sold his ballpen to B, a capacitated person for P1,000. The value of the ballpen is P2,000 so A suffered a lesion by more than
¼ the value of the things which are the object thereof. What is the status of the contract of sale?
a. Null and void
b. Rescissible
c. Unenforceable
d. Voidable
106. A, the debtor and B, the creditor entered into a contract of loan secured by personal properties of A. To defraud B, A sold all his properties
to C. Afterwards, C sold to the properties to D, a purchaser in good faith. Which of the following statements is correct?
a. The contract of loan is valid and binding and not rescissible.
b. The contract of sale between A and C can still be rescinded.
c. All contracts are rescissible.
d. All contracts are voidable.
107. The following statements concerning rescission of contracts are correct, except
a. The action for rescission is preferred action, it can be instituted even when the party suffering damage has other legal means to
obtain reparation for the same.
b. Rescission shall be only to the extent necessary to cover the damages caused.
c. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price
with its interest; consequently, it can be carried out only when he who demands rescission can return whatever may be obliged
to restore.
d. Rescission will not prosper when the things which are the object of the contract are legally in the possession of third persons who
did not act in bad faith.
e. In case rescission is not possible, the indemnity for damages may be demanded from the person causing the loss.
108. The following contracts are presumed in fraud of creditors and considered rescissible, except
a. All contracts by virtue of which the debtor alienates property by gratuitous title when the donor did not reserve sufficient property
to pay all debts contracted before the donation.
b. Alienations by onerous title when made by persons against whom some judgment has been rendered in any instance or some
writ of attachment has been issued.
c. Any contracts entered into by a solvent person.
109. What is the liability of a third person who acquires in bad faith the things alienated in fraud of creditors?
a. He shall indemnify the creditor for damages suffered by them on account of alienation whenever it should be impossible for him
to return them.
b. He shall not be liable for damages.

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c. He shall be liable for damages even if he can return the things alienated.
110. What is the prescription of an action for rescission?
a. 4 years
b. 10 years
c. 6 years
d. 5 years
111. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties, except
a. Those where one of the parties is incapable of giving consent to a contract;
b. Those where the contracts do not comply with statute of fraud;
c. Those where the consent is vitiated by fraud, undue influence, mistake, intimidation or violence.

112. The following statements concerning voidable contracts are true, except
a. They are valid and binding until annulled.
b. They are susceptible of ratification.
c. After the annulment, they are effective and obligatory between the parties.
113. What is the prescription of an action for annulment?
a. 4 years
b. 10 years
c. 6 years
d. 5 years
114. Which of the following extinguishes the action to annul a voidable contract?
a. Ceasing of the intimidation, violence or undue influence
b. Discovery of the mistake or fraud
c. Ceasing of the guardianship
d. Ratification
115. The following statements concerning ratification are correct, except
a. Ratification may be effected expressly or tacitly.
b. Ratification may be effected by the guardian of the incapacitated person.
c. Ratification requires conformity of the contracting party who has no right to bring the action for annulment.
d. Ratification cleanses the contract from all its defects from the moment it was constituted.
116. The following may ask for annulment of voidable contracts, except
a. Guardian of a minor
b. Guardian of an insane or demented person
c. Party whose consent is vitiated
d. Party who is capable
117. The following statements pertaining to the effects of annulment are correct, except
a. The contracting parties shall restore to each other the things which have been the subject matter of the contract with their fruits
and the price with interests.
b. In obligations to render service, the value thereof shall be the basis for damages.
c. When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make
any restitution except insofar as he has been benefited by the thing or price received by him.
d. Whenever the person obliged by the degree of annulment to return the thing cannot do so because it has been lost through his
fault, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date.
e. One of the contracting parties may be compelled to restore what in virtue of the decree of annulment he is bound to return even if
the other does not restore what is incumbent upon him.
f. The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost thorough the fraud
or fault of the person who has a right to institute the proceedings.
g. If the loss of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an
obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff.
118. The following contracts are unenforceable unless they are ratified, except
a. Those entered into in the name of another person by one who has been given no authority or legal representative or who has
acted beyond his powers;
b. Those that do not comply with the statute of frauds.
c. Those where both parties are incapable of giving consent to a contract.
d. Those which are absolutely simulated or fictitious.
119. It refers to a term which is a descriptive of statutes which require certain classes of contracts to be in writing and regulates the formalities
of contract necessary to render it enforceable and to prevent fraud or perjury.
a. Statutory construction
b. Statute of fraud
c. Statute of liberty

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d. Statute of freedom
120. The following executory contracts shall be in writing to be enforceable, except
a. An agreement that by its terms is to be performed within a year from the making thereof;
b. A special promise to answer for the debt, default or miscarriage of another;
c. An agreement made in consideration of marriage, other than a mutual promise to marry;
d. An agreement for the sale of goods, chattels or things in action at a price not less than P500 pesos.
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;
f. A representative to the credit of a third person.

121. A sold a land to B orally in the amount of P200,000 payable in four installments. B already paid P50,000 representing the first installment.
What is the status of the contract?
a. Voidable because not in writing
b. Unenforceable because not in writing
c. Valid and binding because already executed
d. Null and void
122. A, agent of P, sold the land of P to B orally. The authority of A is not in writing and B has already paid the whole purchase price to A. What
is the status of the contract?
a. Voidable on the part of P
b. Unenforceable because not in writing
c. Valid and binding because already executed
d. Null and void because the authority is not in writing
123. A and B entered into a partnership to be formed two years from today orally. They contributed P5,000 cash. What is the status of contract
of partnership?
a. Null and void
b. Unenforceable
c. Voidable
d. Valid and binding
124. A and B entered into a partnership to be formed 3 years from today orally. The contributed a piece of land, a building and P2,000. What is
the status of contract of partnership?
a. Null and void
b. Unenforceable
c. Voidable
d. Valid and binding
125. The following statements concerning ratification of unenforceable contracts are true, except
a. The sale of property made by a person without authority of the owner is null and void in the beginning but afterwards it becomes
perfectly valid by the ratification of the owner.
b. Contracts infringing Statute of Frauds are ratified by the failure to object to the presentation of oral evidence to prove the same or
by the acceptance of benefits under them.
c. When a contract is enforceable under the Statute of Frauds, and a public document is necessary for the registration in the
Registry of Deeds, the parties may compel each other to execute the required form.
d. In a contract where both parties are incapable of giving consent, express or implied ratification by the parent, or guardian, as the
case maybe, of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated.
e. In a contract where both parties are incapable of giving consent and if ratification is made by the parents or guardians, as the
case may be, of both contracting parties, the contract shall be validated from the inception.
f. Unenforceable contracts can be assailed by third persons
126. The following contracts are inexistent and void from the beginning, except
a. Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
b. Those which are relatively simulated;
c. Those whose cause or object did not exist at the time of the transaction;
d. Those whose object is outside the commerce of men;
e. Those which contemplate an impossible services;
f. Those where the intention of the parties relative to the principal object cannot be ascertained;
g. Those expressly prohibited or declared void by law.
127. What is the prescription for the action or defense for the declaration of the inexistence of a contract?
a. 10 years
b. 4 years
c. 6 years
d. No prescription

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128. The following are the characteristics of void contracts, except
a. The contract produces no effect whatsoever either against in or in favor of anyone.
b. No action for annulment is necessary but only declaration of nullity.
c. It can be confirmed or ratified.
d. If it has been performed, the restoration of what has been given is in order.

129. The following statements concerning void contracts are correct, except
a. The defense of illegality of contracts is available to third persons whose interests are not directly affected.
b. A contract which is the direct result of a previous illegal contract, is also void and inexistent.
c. In case of a divisible contract, if the illgel terms can be separated from the legal ones, the latter may be enforced.
d. When the law sets or authorizes the setting of a minimum wage for laborers, and a contract is agreed upon by which a laborer
accepts a lower wage, he shall be entitled to recover the deficiency.
e. When the law fixes, or authorizes the fixing of the maximum number of hours of labor, and a contract is entered into whereby a
laborer undertakes to work longer than the maximum thus fixed, he may demand additional compensation for services rendered
beyond the time limit.
f. When the price of any article or commodity is determined by statute or by authority of law, any person paying any amount in
excess of the maximum price allowed may recover such excess.
g. When the agreement is not illegal per se but is merely prohibited, and the prohibition by law is designed for the protection of the
plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.
h. Where one the parties to an illegal contract is incapable of giving consent, the courts may, if the interest of justice so demands,
allow recovery of money or property delivered by the incapacitated person.
i. When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one the parties before the
purpose has been accomplished or before any damage has been caused to third person. In such a case, the courts may if the
public interest will thus be subserved, allow the party repudiating the contract to recover the money or property.
j. Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor, with interest thereon from the
date of payment.
130. When the nullity of the contract proceeds from the illegality of the cause or object of the contract and the act constitutes a criminal offense,
which of the following is incorrect?
a. When both parties are in pari delicto, they shall have no action against each other.
b. Both criminals shall be prosecuted.
c. They can recover the proceeds of the crime.
d. The instruments of the crime shall be forfeited in favor of the government.
e. If only one of the parties is guilty, the innocent one may claim what he has given and shall not be bound to comply with his
promise.
131. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, which of the following rules are
incorrect?
I. When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract or demand
the performance of the other’s undertaking.
II. When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract or ask for the
annulment of what has been promised to him. The other, who is not at fault, may demand the return of what he has given without any
obligation to comply with his promise.
a. Neither I nor II
b. Both I and II
c. I only
d. II only

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