THE

CPA
BOARD EXAMS
OUTLINES
by John Mahatma G. Agripa, CPA

REGULATORY FRAMEWORK FOR

BUSINESS TRANSACTIONS

RANDOM
RFBT

Q&A #2

Select discussions based on lectures

by Atty. Dante de la Cruz, CPA
(CPAR)

LAW OF PARTNERSHIP
IS A GENERAL-LIMITED PARTNER PERSONALLY RESPONSIBLE FOR
PARTNERSHIP DEBTS? LIKEWISE, SHALL A CAPITALIST-INDUSTRIAL
PARTNER SHARE IN THE PARTNERSHIP LOSSES?

General partners are responsible pro rata (equally, personally) for all
partnership debts, while limited partners shall only pay up to the
extent of their contribution. A partner can be both as long as it is
declared in the articles of partnership. If so, such a partner has all the
rights of a general partner, and as to third parties, he is liable pro rata
for partnership debts. But he can demand reimbursement from other
general partners for payments he made beyond his contribution
On the other hand, capitalist-industrial partners are considered two
separate partners, who shall receive profits/losses as a capitalist
and an industrial partner. The manner of paying the partner is a
matter of agreement between the partners

CORPORATION LAW
IF A SHAREHOLDER DIES, WHO GETS TO VOTE DURING ELECTIONS?

During the pendency of estate proceedings, the

executor/administrator acquires legal title and rights of the
deceased shareholders of the shares, which means he is entitled to
vote for corporate elections

LAW ON AGENCY
IF THE PROCEEDS OF SALE EXCEEDS THE PRICE AS STIPULATED BY THE
PRINCIPAL, BUT THE SALE IS NOT IN THE MANNER STIPULATED BY THE
PRINCIPAL, WHO GETS THE EXCESS?

For example, a principal instructs his agent to sell a thing by cash.

However, the agent manages to contract a credit sale at a price
higher than the one set by the principal. Credit sales are
disadvantageous due to risks of collection. In this case, the principal
can immediately demand the stipulated price from his agent in cash.

The excess goes to the agent. If the principal ratifies the sale, the
entire proceeds then goes to him and the agent will not liable for
anything. Of course, if the sale turned out to be a loss, the agent is
liable for the deficiency
As a general rule, acts beyond the authority of agents are not binding
to the principal. However, if such acts are beneficial to the principal,
they are binding to him, and the agent is not liable

LAW ON SALES
WHEN SHOULD THE SELLER DELIVER THE GOODS TO THE BUYER?

A seller is not obligated to deliver the goods to his buyer until the
latter has paid for the thing. This does not work the other way. Buyers
are obligated to pay even if the seller has not yet delivered

LAW ON OBLIGATIONS AND CONTRACTS

IF A PERSON DIES LEAVING OUTSTANDING DEBTS, WILL HIS HEIRS BE
RESPONSIBLE FOR THEM?

Due to relativity of contracts, effects of outstanding contracts live on

despite a persons death, particularly to his heirs and assigns. A
decedents heirs shall assume their liability only up to the extent of
the value of the inheritance they got from him. If the heirs pay the
entire obligation (where the obligation exceeds total inheritance),
they cannot recover the excess of the obligation to the inheritance

LAW ON CREDIT TRANSACTIONS

WHO SHALL SHOULDER EXPENSES IN A CONTRACT OF
COMMODATUM?

Commodatum is an essentially gratuitous loan of the use of nonfungible (non-consumable) goods. To distinguish, food and money
are fungible goods. The obligation by the debtor/bailee in this

contract is to bring back to the creditor/bailor the thing at the quality

when it was lent after the term of the contract (may also be at will). All
ordinary and necessary expenses for the preservation of the thing
shall be borne by the bailee. He shall also be responsible for
loss/deterioration due to his fault only
If for instance, the thing was involved in an accident while in use of
the bailee, the expenses shall be divided between the bailee and
bailor. If not in actual use of the bailee during the accident (such as
when the thing was run over by a truck when it is parked inside the
bailees house), the expenses shall be borne by the bailor alone

LAW OF CORPORATIONS
IF A DIRECTOR REPLACED A DIRECTOR WHO RECENTLY DIED, DOES HE
SERVE A FULL TERM?

In general, members of the board of directors hold their office for a

year and until their successors are elected (the holdover principle). If
a board member dies anytime between his term (and for other
reasons except for term expiration), the replacement shall serve only
for the remainder of his predecessors term. If a directors term
expires, the replacement shall enjoy a full term

LAW ON SALES/AGENCY
IS AN ORAL SALE OF LAND VALID?

An oral sale of land is valid, however unenforceable due to the lack of

documents. The remedy for unenforceable contracts is ratification,
which in this case can be made through either payment or putting
into deed the sale. If the buyer pays the seller despite the oral sale, it
is deemed ratified and thus the contract is cleansed of all its defects
However, if the sale of land was made through an agent, it shall
always be void if the authority of the agent was not in writing, despite
any payments made. Authority of agents are manifested in

documents called power of attorney. The sale of land must be backed

by a special power of attorney, not just a general power of attorney,
for it to be valid and binding to the principal

LAW OF NEGOTIABLE INSTRUMENTS

TO WHOM SHALL CHOICE IN NEGOTIABLE INSTRUMENTS BE GRANTED?

If the promissory note contains a provision that payment can be

made either with cash or in-kind, the instrument can only be
negotiable if the choice was to the creditor. However, if silent, choice
in negotiable instruments belongs to the debtor, making them nonnegotiable