Commercial Law MCQs_Set1 1 UP PORTIA SORORITY 1.

Under the Corporation Code, the power of self-amendment given to a corporation is subject to the following limitations, except one: A. The extension of the corporations term cannot exceed twenty-five (25) years in any one instance. B. It must be with the vote or written assent of two-thirds (2/3) of the members in non-stock corporations, or two-thirds (2/3) of the outstanding capital stock, in stock corporations. C. The appraisal right must be recognized in case the amendment has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class or extending or shortening the term of corporate existence. D. An amendment to increase or decrease capital stock requires a meeting. 2. The following corporate acts require the ratification of two-thirds of the outstanding capital stock or by two-thirds of the members in case of non-stock corporations, except: A. Power to increase or decrease capital stock B. Power to extend or shorten corporate term C. Power to enter into management contract, where a stockholder/s representing the same interest of both the managing and the managed corporations own or control less than one third (1/3) of the total outstanding capital stock entitled to vote of the managing corporation D. Power to invest corporate funds in another corporation or business or for any other purpose 3. Where the articles of incorporation provide for non-voting shares, the holders of such shares shall nevertheless be entitled to vote on all the matters below except A. Dissolution of the corporation B. Adoption or amendment of by-laws C. Entering into a management contract D. Increase or decrease of capital stock 4. Stock corporations are prohibited from retaining surplus profits in excess of 100% of their paid in capital. The following are exceptions to this rule, except: A. When the corporation is prohibited under any loan agreement with any financial institution or creditor from declaring dividends without its/his consent, and such consent has not yet been secured. B. When it can be clearly shown that such retention is necessary under special circumstances C. When justified by definite corporate expansion projects or programs D. When the by-laws of the corporation allows it to retain surplus profits in excess of 100% of their paid in capital. 5. Each of the following instances requires that a stock corporation has sufficient unrestricted retained earnings in its books before it can purchase or acquire its own shares, except: A. During delinquency sale B. To eliminate fractional shares arising out of stock dividends

Commercial Law MCQs_Set1 2 UP PORTIA SORORITY C. Exercise of appraisal rights of dissenting or withdrawing stockholders D. Purchase of redeemable shares upon the expiration of its fixed period. 6. X has a business arrangement with Y. Y would lend money to Z, through X whose name would appear in the promissory note as the lender. X would immediately indorse the note to Y. Is X an accommodation party? A. Yes, because X has no actual participation in the transaction covered by the negotiable instrument but his name appears thereon. B. Yes, because X will indorse the instrument to Y without valuable consideration. C. No, because X will not sign the negotiable instrument as the maker or indorser but as the lender. D. No, because X accommodates Y by lending his name to the latter. 7. X owed P100,000 to Y. When Y demanded payment, they both went to Z, Xs employer for 20 years, who agreed to sign as a maker of a promissory note for half the amount. After signing, Z allowed X to fill out all the other details required in the promissory note. Instead of writing 50,000, X indicated 100,000. Subsequently, X indorsed the promissory note to Y. Y demanded the payment of 100,000 from Z. Does Z have any defense against the demand made by Y? A. Yes, because Y knows that Z authorized X to fill the note only for P50,000, Y cannot claim the full amount of his credit against X. B. Yes, because Z authorized X to fill the note only for P50,000 C. No, because Y is a holder in due course. In his hands, there is a presumption that the note was filled up according to the authority of Z. D. No, because signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount 8. Rescission of an insurance contract always leads to refund of premiums to the insured. A. True, since the insured can no longer expect to receive the proceeds in case of loss. B. False, if the rescission was due to the insureds breach, he cannot recover. C. True, since rescission cannot be done unless a party returning to the other what he has received by virtue of the contract. D. False, since rescission always leads to non-refund of premiums to the insured. 9. X obtained a life insurance policy for 1 Million designating Y, a friend, as irrevocable beneficiary. However, X changed his mind and wanted Z to be included as another beneficiary considering that the proceeds of the policy are sufficient for Y and Z. Can X still add Z as his beneficiary? A. Yes, because the designation was irrevocable only to the extent that Y cannot be removed as a beneficiary. Adding Z does not revoke Ys irrevocable designation B. Yes, but only if Y consents to Zs inclusion as beneficiary.

Commercial Law MCQs_Set1 3 UP PORTIA SORORITY C. No, because the designation was irrevocable and hence, cannot be changed, not even with the consent of the one irrevocably designated as beneficiary. D. No, because the inclusion requires the consent of Y and the insurance company. 10. The Board of Directors of ABC, Inc., a domestic corporation, passed a resolution authorizing the issuance of the unissued shares of stocks comprising the corporations authorized capital stock. The resolution was passed without notice nor approval by the stockholders. X, a stockholder, objected to the issuance contending that it violated his preemptive right. Is X correct? A. Yes, because as a stockholder, X has the right to be given the opportunity to purchase the unissued shares. B. Yes, because X has the right over the unissued shares C. No, because a stockholders preemptive right covers only shares issued due to an increase in the corporations authorized capital stock. D. No, because it was not shown that the issuance was made to dilute the stockholders proportionate shares. 11. When can a corporation be awarded moral damages? A. In cases of defamation directed against the board of directors or officers of the corporation when the subject of the defamation relates to their duties as such. B. In cases of defamation directed against the corporation itself. C. In cases where the board of directors or officers are the offenders D. Never, because unlike a natural person, a corporation cannot feel anguish, sleepless nights etc. which are the bases for the award of moral damages. 12. The Law on Secrecy of Bank deposits provides that all deposits of whatever nature with banks or banking institutions are absolutely confidential in nature and may not be examined, inquired or looked into by any person, government official, bureau or office. The following are exceptions to this EXCEPT: A. in cases of impeachment B. in cases involving bribery C. in cases where the money involved is the subject of litigation D. in cases of anti-graft and corrupt practices act 13. X, a businessman, was preparing for a business trip abroad. As he usually did in the past, he signed several checks in blank and entrusted them to his secretary with instruction to safeguard them and fill them out only when required to pay accounts during his absence. Y, his secretary, filled out one of the checks by placing her name as the payee. She filled out the amount, endorsed and delivered the check to Z who accepted it in good faith for payment of Ys debt to him. X directed his bank to dishonor the check. Can X be held liable to Z?

Commercial Law MCQs_Set1 4 UP PORTIA SORORITY A. Yes, because the check may be enforced by Z, a holder in due course, as if it was filled out strictly according to Xs instruction. B. Yes, because the check may be enforced by any holder as if it was filled out strictly according to Xs instruction. C. No, because there was no valid delivery of the check since the purpose for which the check was delivered is not the purpose intended by the maker D. No, because the check was an incomplete undelivered check. This is a real defense that may be raised by X against any holder since it was completed and delivered without his authority. 14. A, one of XYZ Corporations minority stockholders, filed a suit against B, C, D, and E, the majority stockholders of the corporation for misappropriation of corporate funds. The complaint alleged, among others, that XYZ Corporation is the corporation in whose behalf and for whose benefit the suit is brought. The Board of Directors adopted a resolution authorizing XYZ Corporation to withdraw the suit. Thus, the corporate counsel filed a Motion to Dismiss in the name of XYZ Corporation. Should the Motion to Dismiss be granted? A. Yes, because the real plaintiff in a derivative suit is the corporation. A plaintiff is granted the right to withdraw the complaint provided no counterclaim has been priorly served upon it. B. Yes, because A cannot institute a derivative suit without getting the support of the remaining minority stockholders. C. No, because a derivative suit is the protection granted by law to any minority stockholder against the abuses of the majority. This protection cannot be thwarted by the action of the majority stockholders guised as a corporate act. D. No, A is the real plaintiff. As the minority stockholder, A will be ultimately benefited once the misappropriation suit prospers. 15. X and Y are noted artists whose paintings are highly prized by collectors. Dr. Z commissioned them to paint a mural at the main lobby of his new hospital. Dr. Z will provide all materials and will pay for all the wages of the laborers. X and Y agreed to paint the mural for 10 Million. Dr. Z found the mural very moving. Thus, in the opening of the hospital, Dr. Z distributed shirts and other souvenirs with the mural imprinted on them. Does Dr. Z have the right to reproduce the mural? A. Yes, because Dr. Z owns the mural. As the owner, he has the right to the use of the mural. B. Yes, because given the amount of the consideration, it can be implied that X and Y agreed that Dr. Z can do anything over the mural. C. No, because while Dr. Z owns the mural, X and Y own the copyright over it. D. No, because Dr. Z, X and Y are co-owners of the copyright over the mural. 16. For the past three years of its operation, Corporation X has been earning tremendously in excess of 100% of the corporations paid-in capital, which is

Commercial Law MCQs_Set1 5 UP PORTIA SORORITY equivalent to 75% of its outstanding capital. All of the stockholders have been claiming that they share in the profits of the corporation by way of dividends. However, the Board of Directors refused to declare dividends. Is there any violation of the Corporation Code? A. Yes, because a corporation cannot retain surplus profits in excess of 100% of its paid-in capital B. No, because a corporation is prohibited only from retaining surplus profits in excess of 100% of its outstanding capital C. Yes, because a corporation cannot retain surplus profits in excess of 100% of its paid-in capital for more than one year D. There are not enough facts from which to conclude 17. What law/practice governs Letters of Credit? A. B. C. D. Code of Commerce Civil Code General Banking Law Uniform Customs and Practice for Documentary Credit

18. An irrevocable letter of credit cannot be revoked by the issuing bank ___: A. B. C. D. under any circumstances without the consent of the buyer without the consent of the seller without the consent of the buyer and the seller

19. The principle of independence ___: A. assures the seller or the beneficiary of prompt payment independent of any breach of the main contract B. assures the seller or the beneficiary of prompt payment independent of any non-compliance with the terms of the letter of credit C. assures the seller or the beneficiary of lack of fraud in the main contract D. assures the seller of the beneficiary that payment of the amount is independent of what may be recovered when there is breach of the main contract 20. X, Y, and Z signed a promissory note in favor of A stating, We promise to pay A on December 31, 2001 the sum of P5,000. When the note fell due, A sued X and Y who put up the defense that A should have impleaded Z. Is this defense valid? A. Yes, because the liability of X, Y and Z is joint. Thus, an action should be brought against all of them. B. Yes, because the liability of X, Y and Z is solidary. Thus, an action should be brought against all of them. C. No, because the liability X, Y and Z is joint. Thus, Z is not an indispensable party. Failure of A to implead Z will not prevent A from collecting Xs and Ys proportionate share in the liability.

Commercial Law MCQs_Set1 6 UP PORTIA SORORITY D. No, because the liability of X, Y and Z is solidary. Thus, Z is not an indispensable party. Failure of A to implead Z will not prevent A from collecting the total liability. 21. X, Y, and Z signed a promissory note in favor of A stating, I promise to pay A on December 31, 2001 the sum of P5,000. When the note fell due, A sued X and Y who put up the defense that A should have impleaded Z. Is this defense valid? A. Yes, because the liability of X, Y and Z is joint. Thus, an action should be brought against all of them. B. Yes, because the liability of X, Y and Z is solidary. Thus, an action should be brought against all of them. C. No, because the liability X, Y and Z is joint. Thus, Z is not an indispensable party. Failure of A to implead Z will not prevent A from collecting Xs and Ys proportionate share in the liability. D. No, because the liability of X, Y and Z is solidary. Thus, Z is not an indispensable party. Failure of A to implead Z will not prevent A from collecting the total liability. 22. A applied for a non-medical life insurance. A did not inform his insurer that a few days prior to his application for insurance, he was confined in Makati Medical Center after having been diagnosed with lung cancer. The insured thereafter died in a car accident. Is the insurer liable? A. Yes, because As confinement is not a material fact for he died not of lung cancer, but from a car accident. B. Yes, because As confinement is not a material fact in a non-medical life insurance. C. No, because As confinement is material to the approval of the insurance policy. His non-disclosure constitutes concealment which may be raised as a defense against the insurers liability. D. No, because As concealment of a material fact is not made in good faith. 23. Which of the following statements, in relation to alterations entitling the insurer to rescind a fire insurance contract, is TRUE? A. If the policy does not contain any prohibition limiting the use or condition of the thing insured, an alteration in said use or condition does not constitute a violation of the policy. The contract is not affected by such alteration even though it increases the risk and is the cause of the loss. B. An alteration in the use or condition of the thing, which increases the risk, constitutes a violation of the policy even if the policy does not contain any prohibition limiting such use or condition. C. An alteration in the use or condition of the thing, which increases the risk and is the cause of the loss, constitutes a violation of the policy even if the policy does not contain any prohibition limiting such use or condition. D. If the policy does not contain any prohibition limiting the use or condition of the thing insured, an alteration in said use or condition does not

Commercial Law MCQs_Set1 7 UP PORTIA SORORITY constitute a violation of the policy. The contract is not affected by such alteration even though it increases the risk, except if it is the cause of the loss. 24. A and B had been married since 1990. A took out a life insurance for each of them in 1991. In, 2000, the marriage between A and B had been declared void ab initio. When B died of an accident in 2001, A claimed for the proceeds of the life insurance he took out on B. The insurer denied the claim on the ground that A had no insurable interest in the life of B since at the time of Bs death, they were not spouses anymore. A argued that he had an insurable interest in Bs life at the time of the inception of the contract anyway. Who is correct? A. The Insurer. The insurable interest must exist at the time of the inception of the contract and at the time of the loss, which in this case, is Bs death. B. A. In life insurance, the insurable interest need only exist at the time of the inception of the contract. C. Neither. A never had an insurable interest in the life of B since there had been no marriage at all. D. Neither. A can only have an insurable interest in the life of B if it is shown that A is expected to derive a benefit from Bs continued existence. In this case, the only fact alleged was that B was As spouse. 25. Usni Insurance Corp., issued a third fire insurance policy in favor of X despite Xs failure to pay the initial premium therefor. This had been the practice by Usni in all the contracts of insurance it entered with X. Only three weeks after the issuance of the policy, Xs hardware was razed by fire. X claimed from Usni. Usni denied payment of the claim on the ground that there no insurance contract was perfected between X and Usni due to Xs failure to pay the initial premium payment. Is Usni correct? A. Yes, the insurance policy may never be issued when the initial premium is not paid. In case one is issued, the said policy is void. B. Yes, as a general rule the insurance policy cannot be issued when the initial premium is not paid. While Usni issued the policy notwithstanding nonpayment, it never issued an acknowledgment of receipt of payment. Thus, there was no contract that existed. C. No, Usni is estopped from raising the defense of non-payment since it had been the practice of Usni to issue policies notwithstanding non-payment. D. No, Usni is still liable under the insurance contract since it did not disclose to X that the payment of the initial premium payment is required before an insurance policy may validly issue. 26. Is the extraordinary diligence of a carrier terminated after delivery of the goods to customs authorities? A. Yes, because customs authorities are mandated under the law to receive the goods. B. Yes, because the consignee will receive it afterwards.

Commercial Law MCQs_Set1 8 UP PORTIA SORORITY C. No, because the consignee cannot exercise dominion over the goods yet. D. No, because customs authorities will impose fees on the goods. 27. Which of the following obligations CANNOT be covered by a chattel mortgage constituted on April 15, 2011: A. a debt contracted by the mortgagor on April 1, 2011 the proceeds of which were received on April 16, 2011 B. a debt contracted by the mortgagor on April 1, 2011 subject to the condition that the mortgagors debt from another creditor shall be condoned C. a debt contracted by the mortgagor on April 1, 2011 to be paid by him thirty days therefrom D. a debt contracted by the mortgagor on April 1, 2011 subject to the condition that the mortgagor shall send to the mortgagee the account details of the mortgagors debtors which details must be officially sourced from the bank/s concerned.
28. A executed a chattel mortgage in favor of B, the mortgagee. In order not to

default on his obligation to B, A obtained a loan from C and executed a chattel mortgage upon the same property. Upon As default, B foreclosed the mortgage. C participated in the foreclosure sale but lost to another bidder who paid an amount more than the loan due B. Thereafter, C demanded a share in the proceeds of the said foreclosure sale. B refused. Who is correct?
A. C. C has the right to a proportionate share in the proceeds of the sale

since he, like B, is a creditor-mortgagee and therefore is in pari passu with B. B. B. C has no right to a proportionate share in the proceeds of the foreclosure sale. C is entitled only to recover the excess of the proceeds over the amount of the loan due B. C. B. C has no right to a proportionate share in the proceeds of the foreclosure sale since he is estopped by his act of participating as a bidder in the said sale. D. B. C has no right to a proportionate share in the proceeds of the foreclosure sale since as a junior mortgagee does not have such a right. 29. Juridical persons whose real properties are sold in an extrajudicial foreclosure sale may redeem the same: A. within one (1) year from the registration of the certificate of sale with the Register of Deeds B. within one (1) year from the issuance of the certificate of sale C. anytime between foreclosure and registration D. anytime before registration but in no case, within three (3) months from the foreclosure

Commercial Law MCQs_Set1 9 UP PORTIA SORORITY 30. On January 5, 2000, A sold a centralized airconditioning unit to Dr. B. This was immediately installed in Dr. Bs in his clinic. It was agreed that the price shall be paid in twelve (12) equal monthly instalments. To secure payment, Dr. B was to constitute a chattel mortgage over the airconditioning unit. On the seventh (7th) month, Dr. B was only able to pay the first four (4) instalments. Thus, A foreclosed the mortgage. However, after the sale held on Sept. 16, 2000, only 80% of the price was recovered by A. A only instituted an action to recover the deficiency on Feb. 15, 2003. Will As action prosper? A. No, because in sales on an instalment basis secured by chattel mortgage, the seller cannot recover the deficiency from the purchaser, in case a foreclosure sale is allowed and is availed of by the seller. B. No, because in sales on an instalment basis secured by chattel mortgage, the seller cannot recover the deficiency from the purchaser, in case a foreclosure sale is allowed and is availed of by the seller, unless there is a stipulation to the contrary C. No, because A is estopped from claiming deficiency from Dr. B. D. Yes, because recovery of deficiency is always allowed provided the action therefor is filed within ten (10) years from the date of the sale. 31. Under the Real Estate Mortgage Law, an extrajudicial sale of a land located in Pili, Laguna shall be held: A. only within Pili B. only within Laguna C. In any place stipulated by the parties D. only in the municipal hall in Pili 32. A, the mortgagee, sought to foreclose a piece of land in Malolos, Bulacan worth P1,000,000 subject of a real estate mortgage under the Real Estate Mortgage Law. A also caused the publication of the notice of sale once a week for three consecutive weeks in the Philippine Daily Inquirer. There was no actual posting of the notice in three (3) places in Malolos. Neither was there personal notice served upon the mortgagors. After the sale, the mortgagors questioned the validity of the sale on the ground that there was no compliance with the posting and notice requirement. Is this contention valid? A. Yes, because posting is required in all instances of extrajudicial foreclosure sale under the Real Estate Mortgage Law, regardless of the value of the land. B. Yes, because both posting and personal notice upon the mortgagor/s are required in all instances of extrajudicial foreclosure sale under the Real Estate Mortgage Law, regardless of the value of the land. Failure to comply with these requirements violate due process. C. No, because personal notice is not required unless a stipulation to the contrary is made. Moreover, publication in a newspaper of general circulation already suffices to serve the purpose of the actual posting. D. No, because personal notice and posting are not required when there is newspaper publication, even if there be a stipulation to the contrary, since the publication operates as constructive notice.

Commercial Law MCQs_Set1 10 UP PORTIA SORORITY 33. The foreclosure sale of a lot was held on April 1, 2000. Possession over the property was given to the purchaser on April 8, 2000 by virtue of a writ of possession. On May 9, 2000, the mortgagor filed a petition to set aside the sale on ground of lack of personal notice of the sale. Will the petition prosper? A. Yes, but only if the mortgagor shows that there is an agreement between him and the mortgagee that personal notice of the sale must be given. B. No, since the petition was filed beyond the thirty (30) day period from the date the possession was given to the purchaser. C. No, since the petition was filed beyond the thirty (30) day period from the date of the foreclosure sale. D. Yes, because lack of personal notice of the sale violates due process. 34. Chattel Mortgage Law: After the foreclosure sale :: Real Estate Mortgage Law: ________ A. After one (1) year from the registration of the sale B. After one (1) year from the foreclosure sale C. After the registration of the sale D. After the foreclosure sale 35. A foreclosure sale of As lot was held on May 13, 2000. The sale was registered on May 20, 2000. A petition for annulment of sale was filed on May 30, 2000 and was denied only on July 30, 2000. Until when can A redeem his property? A. May 13, 2001. Since the pendency of the petition for annulment of sale does not suspend the running of the redemption period. B. May 20, 2001. Since the pendency of the petition for annulment of sale does not suspend the running of the redemption period. C. July 13, 2001. Since the pendency of the petition for annulment of sale suspended the running of the redemption period. D. July 20, 2001. Since the pendency of the petition for annulment of sale suspended the running of the redemption period. 36. In 35, should the purchaser file a petition for the issuance of writ of possession on July 15, 2001, must he file a bond? A. Yes, because a bond is required when a petition for issuance of writ of possession is filed before the lapse of the redemption period. Due to the suspension of the running of the period of redemption, the last day of redemption is on July 20. Thus, a bond is required for a petition filed on July 15. B. Yes, because a bond is required whenever a petition for issuance of writ of possession is filed, regardless of when it is filed. C. No, because a bond is required only when a petition for issuance of writ of possession is filed before the lapse of the redemption period. Since there was no suspension of the running of the period of redemption, the last day of redemption is on May 20. Thus, a bond is not required for a petition filed on July 15. D. No, because a bond is not required for a petition for issuance of writ of possession since the writ shall issue as a matter of right.

Commercial Law MCQs_Set1 11 UP PORTIA SORORITY 37. A writ of possession was issued in favor of A, purchaser in an extrajudicial foreclosure sale of real property. The sheriff, about to enforce the writ, found that the apartment subject thereof was being leased to college students. The lease was not registered but this fact was known to the mortgagee. Can the writ be enforced against the college students? A. Yes, because they are not claiming any right adverse to the mortgagor. B. No, because the enforcement of the writ will result rather than prevent an injustice to the college students who are not privy to the mortgage contract. C. Yes, because as lessees, the only way by which the writ cannot be enforced against them is the registration of the lease. The knowledge by the mortgagee is irrelevant since the purchaser is the one seeking to enforce the same. D. No, because while the lease is not registered the knowledge by the mortgagee of the fact of the lease has been held to be sufficient in precluding the enforcement of the writ against the college students. 38. ABC was not able to register its trademark. It brought separate complaints for unfair competition and trademark infringement against ABCD. In its answer ABCD alleged that ABC has no cause of action for both complaints because it did not register its trademark. Is ABCD correct? A. No, because ownership over a trademark is not required for the plaintiff to have a cause of action for unfair competition and infringement. B. No, because while registration is required for a case for infringement, it is not required for a complaint for unfair competition. C. Yes, because ownership over a trademark is an indispensable element of the plaintiffs cause of action. Without registration, the plaintiff has no right that can be violated by the respondent. D. Yes, because registration is a condition precedent that must be satisfied for a complaint for infringement or unfair competition to prosper. 39. EKIS Inc., a corporation engaged in the production and sale of school supplies since 2001 filed its application for registration of its lightbulb trademark in June 2005. CHEK Inc., a corporation who has been engaged in the distribution of lighting materials since 2000, filed its application for registration of the same lightbulb trademark in December 2005. Having learned of this, EKIS Inc. opposed the application of CHEK Inc. Can EKIS Inc. oppose the registration? A. No, because EKIS had no prior use of the trademark. B. No, because EKIS application for registration had not been approved yet. Thus, it had no ownership over the trademark that will entitle it to oppose the registration. C. Yes, because EKIS was first to file its application for registration. Thus, it entitles EKIS to prevent subsequently filed applications. D. Yes, because EKIS has been using the trademark since 2001, prior to CHEKs filing of its application.

Commercial Law MCQs_Set1 12 UP PORTIA SORORITY 40. Unfair competition is broader and more inclusive than that of trademark infringement. A. Yes, because actual intent to defraud is not necessary in an action for unfair competition B. Yes, because any unauthorized use of the mark constitutes unfair competition C. Yes, because any use of the mark, either authorized or unauthorized, constitutes unfair competition when such use has the effect of passing the goods or services to which such mark is used as anothers goods D. Yes, because a person who has not registered his trademark may still bring an action for unfair competition 41. Ana issued a promissory note for P1000 payable to Boy or his order. Boy indorsed the note in blank and delivered it to Carl, who rendered services for Boy. Don stole the note from Carl and presented it to Ana for payment. When asked by Ana, Don said that Boy gave him the note as payment for his services. Ana paid Don the P1000. The next day, having discovered that he does not have the Anas note in his possession, Carl went to Ana for payment. Can Carl claim payment from Ana? A. Yes, because Carl immediately went to Ana for the payment of the amount of the note. B. Yes, because Carl is a holder in due course. C. No, because Carl is not a holder of the note, he not being in possession thereof. To make presentment for payment, it is necessary to exhibit the instrument. D. No, because Carls recourse shall now be against Boy who indorsed the instrument to him 42. A issued a promissory note payable to bearer and delivered the same to B. B, however, indorsed the note to C, naming C as the payee. Subsequently, C indorsed the note to D, without naming D as the payee. Thereafter, D delivered the note to E. Can A be held liable to E? A. Yes, because the note is a bearer instrument. Neither the special indorsement by B nor the blank indorsement by C converted it to an order instrument. Thus, D can negotiate it to E by delivery B. No, because the note was converted into an order instrument upon Bs special indorsement thereof to C. Thus, the note can only be negotiated by indorsement. D did not indorse the same to E. C. Yes, because the note is converted back to a bearer instrument. While it became an order instrument by reason of Bs special indorsement, its subsequent blank indorsement by C to D, caused it to revert to being a bearer instrument. Thus, D can negotiate it to E by delivery. D. No, because the note was converted into an order instrument upon Cs blank indorsement thereof to D. Thus, the note can only be negotiated by indorsement. D did not indorse the same to E. 43. A issued a promissory note payable to B or order and validly indorsed the same to B. B, however, indorsed the note to C, without naming C as the payee. Subsequently, C delivered the note to D. Can A be liable to D?

Commercial Law MCQs_Set1 13 UP PORTIA SORORITY A. No, because the note is an order instrument. The blank indorsement by B did not convert it to a bearer instrument. Thus, C should have indorsed the note to D and not merely deliver it. B. Yes, because the note was converted to a bearer instrument. The blank indorsement by B converted it to a bearer instrument. Thus, C can negotiate it by delivery. C. No, because the note is an order instrument. The blank indorsement by B did not convert it to a bearer instrument. Only a special indorsement can convert an order instrument to a bearer instrument. Thus, C should have indorsed the note to D and not merely deliver it. D. Yes, because the note was converted to a bearer instrument. B made a special indorsement. This special indorsement converted the order instrument to a bearer instrument. Thus, C can negotiate it by delivery. 44. A issued a promissory note payable to B or order and validly indorsed the same to B. B, however, indorsed the note to C, without naming C as the payee. Subsequently, C indorsed the note to D, naming D as payee. Thereafter, D delivered the note to E, without indorsing the same. Can E claim payment from A? A. Yes, because the note is converted to a bearer instrument. The blank indorsement by B converted it to a bearer instrument. Thus, D can negotiate it by delivery. B. Yes, because the note is converted to a bearer instrument. The special indorsement by C converted it to a bearer instrument. Thus, D can negotiate it by delivery. C. No, because the note is reconverted to an order instrument. While the blank indorsement by B converted it to a bearer instrument, it was reconverted to an order instrument by the special indorsement by C to D. Thus, D should have indorsed the note to E and not merely deliver it. D. No, because the note is an order instrument. Neither the blank indorsment by B nor the special indorsment by C converted it to a bearer instrument. Thus, D should have indorsed the note to E and not merely deliver it. 45. X took out a fire insurance policy over his house. X made the loss payable to Y, his son. Should the house be razed by fire, can Y claim the proceeds of the insurance? A. Yes, because Y is the beneficiary designated by the owner of the property. B. No, because Y does not have an insurable interest in the property. C. Yes, because as the son of the owner, Y has an insurable interest in the property. D. Yes, because Y is the beneficiary. The beneficiary need not have an insurable interest in the property insured. 46. A purchased a gold rolex watch from B, to pay for which he gave a promissory note (PN) signed by X. The PN was payable to the order of B. B, for value, indorsed the same to C who in turn indorsed it in blank to D as a gift. D lost the note. E by chance found the same. Who is liable to pay the note to E?

Commercial Law MCQs_Set1 14 UP PORTIA SORORITY A. B B. A C. X D. None of the above 47. In 47, to whom is X not liable to pay? A. D. B. B. C. C. D. None of the above 48. A owes B P500,000.00 to pay for which he issued a crossed check with X as the drawee bank. However, As assistant mistaken C as B so the check was delivered to C. C forged the signature of B and delivered the same to D for value who then deposited it to Bank Y. Upon indorsement of Bank Y, Bank X debited the account of A and credited the same to Bank Y who in turn credited it to Ds account. As recourse is against? A. Bank Y B. D C. Bank X D. None of the above 49. In 48, Ds recourse is against? A. B B. A. C. Bank Y D. None of the Above 50. In 48, Cs recourse is against? A. B. C. D. A Bank X D None of the above