CPA Review School of the Philippines

Manila
FIRST PRE-BOARD EXAMINATION July 30, 2022
Regulatory Framework for Business Transactions
Instructions: Choose the BEST answer for each of the following items. Mark only one answer for
each item on the Special Answer Sheet provided. Strictly no erasure allowed.
For items 1-2.
A, B, C, and D solidarily owe W, Y, and Z, solidary creditors PHP 24,000, where the share of
the debtors is [Link] while the creditors is [Link]. The terms of the contract provide:
I. A will pay if W will pass the October 2022 CPA Board Exams
II. B will pay on December 25, 2022
III. C will pay on Aug 25, 2022
IV. D will pay on July 25, 2022

1. If today is August 25, 2022 and the share of D in the obligation remains unpaid, W can collect
from
a) A = PHP 16,800 plus interest
b) B = PHP 16,800 plus interest on D’s share
c) C = PHP 7,200 without interest
d) D = PHP 16,800 without interest
2. Using the above data, the debtor who effected payment in no. 1 is entitled to get reimbursement
from
a) C - PHP 7,200 without interest D PHP 9,600 plus interest
b) C – PHP 7,200 plus interest and D PHP 9,600 plus interest
c) C – PHP 7,200 without interest
d) D – PHP 9,600 with interest
3. Which of the following statements is correct?
a) If two or more solidary debtors offer to pay, the creditor should accept the payment of the
debtor with greater share in the obligation
b) The debtor may pay any of the solidary creditors even if a demand has been made by one
of them
c) Remission of the entire debt by any of the solidary creditors shall extinguish the obligation
d) A solidary creditor can assign his right whether with or without the consent of the other
creditors
4. A borrowed PHP 200,000 from solidary creditors B and C. On due date, B sent a letter to A
demanding payment of the loan directly to him, but before A could comply, C went to A
to collect and so A paid C. Did A make a valid payment?
a) Yes, because the debtor may pay any of the solidary creditors
b) No, because payment should be made to B
c) Yes, because any of the solidary creditors may demand payment of the whole obligation
d) No, because A should have split the payment because both creditors demanded payment

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5. Which of the following is correct?
a) The effect of a conditional obligation to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation
b) If the obligation is unilateral, the fruits and interest during the pendency of the condition
shall be deemed to have been mutually compensated
c) If the obligation imposes reciprocal prestations upon the parties, the debtor shall
appropriate the fruits and interest received, unless from the nature and circumstances of the
obligation it should be inferred that the intention was different
d) In an obligation to do and not to do, the parties shall determine, in each case the retroactive
effect of the condition that has been complied with
6. A Japanese national and a Filipino national entered into a contract for services in Thailand. The
services will be rendered in Singapore. In case of breach, what law will govern?
a) Thailand Law
b) Philippine Law
c) Singapore Law
d) Japanese Law
7. A orally offered to sell his rice land to B for PHP 8,000,000. B orally accepted the offer. The
land is to be delivered through the execution of a notarized Deed of Sale and the price is
to be paid directly two weeks from their oral agreement. Which of the following is most
accurate?
a) If A refuses to deliver the land on the agreed date despite payment made by B, the latter
may not successfully sue A because the contract is unenforceable
b) If A refused to deliver the land, B may successfully sue A for the fulfillment of the
obligation before the payment of the purchase price
c) The contract between A and B is rescissible
d) The contract between A and B is subject to ratification by the parties
8. If at the time the contract of sale is perfected, the thing which is the object of the contract has
been entirely lost, which of the following most accurately completes the statement?
a) The buyer bears the risk of loss
b) The seller bears the risk of loss
c) The contract shall be without any effect
d) The buyer may withdraw from the contract
9. A, B, C, and D are the solidary debtors of Y for PHP 80,000. Later, Y released D from the
payment of his share of PHP 20,000. When the obligation became due and demandable,
C, turned out to be insolvent. Should the share of C be divided between A and B?
a) Yes, the remission of D’s shares carries with it the total extinguishment of his obligation
b) Yes, the civil code recognizes remission as a mode of extinguishing an obligation
c) No, the rule is that the gratuitous acts should be restrictively construed, allowing only the
least transmission of rights
d) No, as the release of the share of one debtor would then increase the burden of the other
debtors without their consent

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Questions No. 10-14
10. A owes B PHP 100,000 which is already due and demandable. Later, through violence and
intimidation, A forced B to sign a promissory note which reads “I promise to pay A PHP
150,000 on August 10, 2022. Sgd. B” On August 10, 2022, how much can A collect from B?
a) PHP 50,000
b) PHP 100,000
c) PHP 150,000
d) PHP 0
11. Using the above facts, on August 10, 2022, how much can B collect from A?
a) PHP 50,000
b) PHP 100,000
c) PHP 150,000
d) PHP 0
12. Using the facts in No. 10, if A assigns the promissory note to C without the knowledge of B,
how much can C collect from B?
a) PHP 50,000
b) PHP 100,000
c) PHP 150,000
d) PHP 0
13. If B assigns his credit to D without the knowledge of A, how much can D collect from A?
a) PHP 50,000
b) PHP 100,000
c) PHP 150,000
d) PHP 0
14. Assume that the obligation of A to B is not yet due, and A assigns the promissory note to C
on August 10, 2022, without the knowledge of B, how much can C collect from B?
a) PHP 50,000
b) PHP 100,000
c) PHP 150,000
d) PHP 0
15. A, B, and C are solidary debtors sharing at [Link] of solidary creditors W and Y sharing at
1:2. The obligation is PHP 12,000. If B is a minor and A is insolvent and W condones the
obligation of C without the consent of Y, how much can W collect from C?
a) PHP 8,000
b) PHP 6,000
c) PHP 2,000
d) PHP 0
16. How much can Y collect from W by way of reimbursement?
a) PHP 4,000
b) PHP 6,000
c) PHP 13,333
d) PHP 5,333

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17. A owes B PHP 100,000 secured by a mortgage. C, girlfriend of A, and with no interest at all
in the obligation, paid B the 100,000 without the knowledge of A. Which of the following
course of action is allowed?
a) C can recover PHP 100,000 from A
b) C can foreclose the mortgage
c) C is subrogated to the rights of B
d) C is a person who is interested in the fulfillment of the obligation
18. To be valid and enforceable, the following contracts should be in writing, except:
a) Contract to pay interest on loan
b) Contract of donation of real property
c) Contract giving authority to an agent to sell a piece of land
d) Contract made in consideration of marriage
19. X borrowed money from Y. X constituted a real estate mortgage over his house to secure the
loan. It was stipulated that in case X could not pay the loan on time, the house would
belong to Y. Which is correct?
a) Y shall become the owner of the house upon default by X by virtue of their written
agreement
b) Y shall become the owner of the house by virtue of the default of X
c) Y shall only enjoy the right of alienation over the land
d) Y shall be entitled to the right of appropriation of the land
20. A, minor, sold the ring of his brother without authority. The ring has a fair market value of
PHP 1,000,000 and selling price was PHP 600,000. The contract is
a) Rescissible
b) Voidable
c) Unenforceable
d) Void
21. Using the preceding number, the remedy is
a) A can ask for annulment
b) The brother can ask for annulment
c) The buyer can ask for annulment
d) The brother can just ignore the contract
22. A obtained an interest free loan of PHP 50,000 from B evidenced by a promissory note
payable six months after date. At maturity, A called B by phone to ask for an extension of
one month and offer to pay 20% interest on the loan. Enticed by the 20% interest, B
agreed to the extension of maturity. Which is correct?
a) The interest is a demandable interest by virtue of an agreement
b) The interest is unenforceable
c) The loan is valid but the interest is void
d) The loan and interest are both demandable

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23. A delivered to B the following instrument:
In payment of a gambling debt, A made a promissory note which reads: “I promise to pay to
B PHP 10,000. Sgd. A.” B indorsed the note in blank before maturity and delivered it to C for
value. When due, A refused to pay and C sued B. Could C recover from B?
a) No, C could not sue B because B did not write the name of C as indorsee
b) No, the instrument is not negotiable and B is a mere assignor of credit
c) Yes, provided C gives notice of dishonor to B otherwise B is discharged from liability
d) Yes, the endorsement will be considered as an assignment, hence B will be liable as an
assignor of the instrument
24. Using the preceding number, but the note is in payment of merchandise purchased by A from
B and A failed to pay due to insolvency. Could C collect from B?
a) No, C could not sue B because B did not write the name of C as indorsee
b) No, the instrument is not negotiable and B is a mere assignor of credit
c) Yes, provided C gives notice of dishonor to B otherwise B is discharged from liability
d) Yes, the endorsement will be considered as an assignment, hence B will be liable as an
assignor of the instrument
25. A contract of loan is
a) A consensual contract
b) A real contract
c) A formal contract
d) A solemn contract
26. An agreement where the pledgor or mortgagor will execute a contract transferring ownership
of the property pledged or mortgaged to the pledgee or mortgagee in case of default, such
execution of the contract will result to
a) Pactum commissorium
b) Payment by cession
c) Dacion en pago
d) Tender of payment
27. In which of the following obligations is specific performance not available?
a) Obligation to repair the roof of the house of a client
b) Obligation to give support
c) Obligation to give a specific thing
d) Obligation to give a generic thing
28. A is indebted to B in the amount of PHP 50,000, with C as guarantor. On due date, A
tendered payment to B but B refused. Because of B’s refusal A deposited the amount in
court. After the approval of the consignation, A withdraws the money. Which is correct?
The obligation of
a) A to B is revived if B consents to the withdrawal of the money
b) C to B is revived if B consents to the withdrawal of the money
c) A to B is extinguished if the refusal of B to accept the tender of payment is unjustifiable
d) A to B remains and C is not released as guarantor

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29. A Is obliged to give his only horse or his only cow to B, at B"s option on July 30, 2022. On
July 27, 2022, the horse died due to fault of A. Which of the following is correct?
a) The obligation remains to be alternative
b) A is liable for damages for the death of the horse
c) A is not liable for damages because the cow is still alive
d) A is liable for the value of the horse plus damages
30. A, desiring to buy a certain property, hired an expert to ascertain its true value. But the
expert’s opinion turned out to be wrong and A, the buyer, was therefore mislead. May A
ask for the annulment of the contract?
a) Yes, because the opinion was made by an expert
b) No, a mere expression of an opinion does not signify fraud
c) No, because A's own expert committed the error
d) Yes, A has relied on the expert’s special knowledge
31. Which of the following contract is rescissible?
a) Those which were entered into by guardians whenever the wards they represent suffer
lesion of 1/4 off the value of the object of the contract
b) Those executed in representation of a principal, if the latter suffers lesion of more than
1/4 of the value of the object of the contract
c) Those where one of the parties is incapable of giving consent to a contract
d) Those undertaken in fraud of creditors when the latter cannot in any other manner collect
the claims due them
32. D forced C to sign a promissory note where C promised to pay D PHP 100,000 where the
lawful amount is PHP 60,000. Which is correct?
a) The contract is rescissible because there is lesion
b) The contract is unenforceable
c) D cannot demand payment from C because the contract is voidable
d) D can collect PHP 100,000 from C because the contract is valid
33. A obliged himself to give his only cow to B. No date was stipulated for the delivery of the
cow. While still in possession of A, the cow gave birth to a calf. Who is entitled to the
calf?
a) A, because it was born before his obligation to deliver the cow arises
b) A, because B has not yet paid the price
c) B, because the calf was born after the perfection of the contract
d) B, if he will pay additional cost for the calf to be agreed upon by the parties
34. The debtor shall not lose the right to make use of the period in one of the following cases
a) When he becomes insolvent
b) When he violates any undertaking in consideration of which the creditor agreed to the
period
c) When the debtor attempts to abscond
d) When he does not give any guarantee or security to the creditor
35. A contract of sale possesses three of the following characteristics. Which is the exception?
a) Reciprocal, since the parties are bound by their respective obligations
b) Onerous, because the parties give almost equivalent consideration
c) Commutative, since there is an exchange of valuable consideration
d) Real, because the object of sale must be delivered for the perfection of the contract

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36. On January 15, 2022, A obliged himself to give to B his only cow or his only dog or his only
cat on December 25, 2022. On July 4, 2022, the cow died after giving birth to a young
cow. Two months later, the cat died due to the fault of A. And on November 1, 2022, the
dog died due to a fortuitous event. Which of the following is true?
a) The obligation of A is extinguished
b) B is entitled to the young cow having been born after the perfection of the contract
c) A is liable for the value of the cat plus damages
d) B can require A to replace the cat by another cat which is equally satisfactory
37. Using the above data, but the right of choice belongs to B, which of the following is correct?
a) The obligation of A is extinguished
b) B is entitled to the young cow having been born after the perfection of the contract
c) A is liable for the value of the cat plus damages
d) B can require A to replace the cat by another cat which is equally satisfactory
38. Using the preceding number, except that the dog is still alive, which of the following is not
correct?
a) The obligation of A is converted to a simple obligation
b) B can require A to deliver the dog but without damages
c) A is not liable for the death of the cow
d) B can require A to pau the value of the cat plus damages
39. When the condition has been imposed with the intention of suspending the efficacy of an
obligation to give, the following rules shall be observed, except if the thing
a) Is lost, the obligation shall be extinguished
b) Is improved by nature, the improvement shall inure to the benefit of the creditor
c) Is improved at the expense of the debtor, he shall have no other right than that granted to
the usufructuary
d) Deteriorates without the fault of the debtor, the impairment is to be borne by the creditor
40. On August 1, 2022, A agreed to sell his only cow to B and B agreed to pay the price of PHP
20,000, if B will pass the October 2022 CPA Examination. The list of successful
examinees was released on October 19, 2022 and B is one of those who passed the
examination. As a result,
a) A is entitled to the PHP 20,000 price plus interest beginning August 1, 2022
b) B is entitled to the cow and its fruits beginning October 19, 2022
c) B is entitled to the cow beginning August 1, 2022 and to its fruits beginning October 19,
2022
d) A shall deliver the fruits of the cow and B shall pay the interest on the price beginning
August 1, 2022
41. A and B are solidary debtors of C for PHP 100,000 which is due on August 1, 2023.
Thinking that the obligation is already due, A paid C PHP 100,000 on August 1, 2022.
What rights will A have on February 1, 2023?
a) A can recover PHP 50,000 reimbursement from B without interest
b) A can recover PHP 100,000 from C plus interest from August 1, 2022 to February 1,
2023
c) A can recover PHP 50,000 reimbursement from B with interest from August 1, 2022 to
February 1, 2023
d) A cannot recover yet from either B because the obligation is not yet due or C because the
payment was voluntary

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42. Using the preceding number, but it is already September 1, 2023, which of the following is
correct?
a) A can recover from C only the interest from August 1, 2022, to July 31, 2023
b) A can recover PHP 50,000 from B plus interest from August 1, 2022 to August 1, 2023
c) A can recover PHP 50,000 from B plus interest from August 1, 2022 to September 1,
2023
d) A can recover from C only the interest from August 1, 2022, to September 1, 2023
43. A, B, and C are obliged to deliver a specific cow to W and Y on August 1, 2022. If today is
August 1, 2022, which of the following is true?
a) A demand made by W against A, B and C constitutes a valid demand against all debtors
b) A demand made by W and Y against A will make the debtors in delay
c) If debtor A cannot fulfill his share in the obligation, the obligation of B and C is
converted into a monetary obligation to pay the corresponding portion of the value of the
cow without damages
d) If debtor A is insolvent, the obligation of A, B and C is converted into a monetary
obligation to pay the value of the cow plus damages
44. A is indebted to solidary creditors W, Y, and Z for PHP 90,000 due on August 1, 2022, while
W owes A PHP 90,000 also due on August 1, 2022. On August 1, 2022
a) Both obligations are extinguished by compensation
b) A’s obligation is extinguished up to PHP 30,000
c) Either Y or Z can demand PHP 60,000 from A
d) Either Y or Z can demand PHP 90,000 from W
45. Which of the following contracts of sale is void?
a) Where the buyer and seller are both insane
b) Where the husband aimed his gun to his wife so that his wife will sell her land to him
c) Where the buyer twisted the arm of the seller so that the seller will sign the deed of sale
d) Where the object of the contract has a redhibitory defect
46. Which of the following contracts is void?
a) A minor selling the ring of her mother without authority from her mother
b) A widow selling the land of her father with an oral authority from her father
c) A guardian selling for PHP 70,000 the necklace of her ward where the fair market value
of the necklace is PHP 100,000
d) A contract of sale between two deaf-mutes who both don't know how to write
47. A contract of sale between husband and wife is
a) Void, if there is separation of property in the marriage settlement
b) Valid, when there is judicial separation of property
c) Voidable, if they are under the absolute community of property
d) Rescissible, if they are under the conjugal partnership of gains

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48. A sold his necklace to B in a public instrument and later orally sold his watch to C. Both
items will be delivered seven days later. On the fifth day, A again sold the same necklace
to D and the same watch to E. Both D and E immediately took physical possession of the
necklace and watch, respectively and both are not aware of the previous sale to B and C.
Who will have a better right to the necklace and watch?
a) B and C
b) D and E
c) B and E
d) C and D
49. A owes B PHP 100,000. A also owes C PHP 100,000. A failed to pay both obligations. B
filed a complaint in court and a writ of attachment was issued against A's land situated in
Manila. Later, A sells his land in Makati to D. Which of the following is not correct?
a) The sale of the land in Makati is presumed fraudulent because a writ of attachment has
been issued
b) C may go to court for the rescission of the sale to D
c) B may go to court for the rescission of the sale to D
d) Neither B nor C can go to court for the rescission of the sale to D because the land in
Makati was not the object of the writ of attachment
50. A has two creditors, B and C, the obligation to B is PHP 10,000 and to C is PHP 12,000.
Later, with the consent of A and B, W pays B PHP 10,000. Now W and C are the
creditors of A. Suppose A has only PHP 12,000, which is correct?
a) C should be preferred
b) W should be preferred
c) C and W should be paid proportionately
d) A may choose whom to pay
51. Which of the following is a valid stipulation?
a) A promises to give B PHP 10,000, and if A fails, A will allow B to have sexual
intercourse with her for one week
b) A will give B PHP 10,000, if C will go to planet Saturn within the year
c) A agreed to give B a house and lot if B will kill A's wife
d) A agreed to put poison on the food of B's wife and if A fails, to pay B PHP 10,000 for
damages
52. A was having his house repaired by B, who needed construction materials, so A orally told
the seller C, "Give B the materials, I shall be responsible. I shall pay in 30 days." C
delivered the materials. As a result, the contract
a) Is unenforceable because A made an oral agreement to answer for the debt of B
b) Is enforceable because A did not make a special promise to answer for the default of
another person
c) Shall be enforceable if there is ratification by A
d) The contract shall be unenforceable if the value is at least PHP 500

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53. A was the registered owner of a passenger jeepney which was involved in a collision
accident with a delivery truck, resulting in the death of 3 passengers and injuries to four.
At the time of the accident, A was legally married to B but was cohabiting with C in a
relationship akin to that of a husband and wife. The heirs of the dead passengers and the
injured persons sought to recover damages. Which of the following is correct?
a) The liability of A for damages will be on the basis of culpa contractual
b) The liability of A for damages will be on the basis of quasi-delict
c) B is liable to the same extent as A because she is also the owner of the passenger jeepney
d) C is not liable, as the paramour of A, C is not a co-owner
54. The liability of judgment debtor A under an obligation imposed by a final judgment is to pay
PHP 10,000 but A and the judgment creditor B subsequently entered into a contract
reducing the liability of A to only PHP 8,000. Which of the following is correct?
a) There is an implied novation because the existing obligation is extinguished
b) Novation result in the extinguishment of an existing obligation and new one is substituted
in its place
c) The payment by C of the reduced amount was the result of the new obligation
d) The agreement to reduce the judgment debt to PHP 8,000 completely extinguished the
judgment debt and released A from his pecuniary liability
55. In order that consignation shall produce the effect of payment it is not only essential that it
must conform with all the requisites of payment, but it is also essential that certain special
requirements prescribed by law must be complied with. Which of the following is not
correct?
a) There must be a previous tender of payment
b) There is a debt due
c) The thing or amount due had been placed at the disposal of judicial authority
d) The notice previous to and after the consignation has been given to the persons interested
in the fulfillment of the obligation
56. When there is concurrence of two or more creditors or of two or more debtors in one and the
same obligation, the obligation of the debtors and creditors is
a) Both joint and solidary
b) Either joint or solidary
c) Both are joint
d) Both are solidary
57. To constitute a caso fortuito that would exempt a person from responsibility, which of the
following is not necessary?
a) It must be either unenforceable or unavoidable
b) The occurrence must render it impossible for the debtor to fulfil the obligation in a
normal manner
c) The event must be independent of the will of a person
d) The debtor must be free of participation in, or aggravation of, the injury to the creditor
58. When one by his act, representation, oral admission, or by his silence induces another to
believe certain facts to exist and act on such belief, there is estoppel
a) In pais
b) By deed
c) By laches
d) By trust

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59. If a debtor gives a property to his creditor who accepts it in payment of an obligation in
money, this will be governed by
a) Cession
b) Barter
c) Exchange
d) Sales
60. D owes C PHP 6,000. No date for payment was stipulated by the parties. Which is correct?
a) C can require D to pay when the period arrives
b) C can require D to pay at anytime
c) D is not liable to C because the obligation is void there being no date of payment
d) D is not required to pay unless C goes to court and asks the court to require D to pay
61. Which of the following statements is true as regards a void contract?
a) A void contract may be ratified by the acceptance by a party to the contract of a benefit
under its terms
b) The right to set up the defense of illegality of a void contract may be waived if the
illegality is not raised within a reasonable time
c) If a void contract is novated by a valid one, such novation is valid
d) The right to set up the defense of illegality of a void contract is imprescriptible
62. It is a contract by virtue of the terms of which the parties thereto promise and obligate
themselves to enter into another contract at a future time, upon happening of certain
events, or the fulfillment of certain conditions
a) Resolutory contract
b) Option contract
c) Suspensive contract
d) Auto contract
63. A sum of money paid, or a thing delivered upon the making of a contract for the sale of
goods to bind the offer, the delivery and acceptance of which makes the final assent of
both parties to the contract
a) Option money
b) Arras
c) Loan
d) Deposit
64. A promised to give B PHP 1,000 if B will hear mass for 10 consecutive Sundays. This is a
a) Civil obligation
b) Natural obligation
c) Moral obligation
d) Religious obligation
65. A promissory note reads "I promise to pay B PHP 100,000 on October 30 2022. Sgd. A." B
transferred the note to C. Later, X stole the promissory note and transferred the note to Y
who received the note in good faith. On maturity date, Y presented the note to A and
demanded payment. A paid the note in good faith. In this case
a) C can recover from A
b) C can recover from B
c) A's obligation is extinguished
d) C can recover only from either X or Y

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66. Which of the following contracts is not void ab initio?
a) That whose object is outside the commerce of men
b) That who's object did not exist at the time of transaction
c) That which contemplates an impossible service
d) That which is undertaken in fraud of creditors
67. As a rule, when a creditor assigns his credit in good faith
A) He warrants the existence of the credit at the time of assignment
B) He warrants the legality of the credit at the time of assignment
C) He warrants the solvency of the debtor at the time of assignment
a) Only A and C
b) Only A and B
c) Only B and C
d) A, B, and C
68. A granted a loan to B amounting to PHP 660,000 with 6% interest per annum. Such
agreement was not reduced in writing but B paid the obligation and interest in cash and
checks when A demanded payment. Which the following is correct?
a) The payment of loan and interest is valid
b) The payment of loan and interest is void
c) B can demand the return of the amount representing the interest paid
d) The principle of solution indebiti is applicable, hence B can recover the amount paid to A
69. It is a principle which holds that contracts must be binding to both parties and its validity and
effectivity cannot be left to the will of one of the contracting parties
a) Obligatory force of contracts
b) Mutuality of contracts
c) Autonomy of contracts
d) Relativity of contracts
70. Which of the following statements is not correct?
a) If A gives his ring to B but it is not clear whether A donated it or merely lent it, the
contract should be interpreted as commodatum rather than a donation
b) If A sells his car to B but A has four cars and it cannot be determined which car was sold,
the contract of sale is void
c) A borrowed PHP 100,000 from B which bears interest at 12% per year but there is doubt
whether it is payable in two or three years, the period of payment shall be interpreted at 2
years
d) A engaged the services of B but the contract did not indicate the amount of compensation
to be paid, the amount thereof shall be the rate that is customarily paid in the place where
the services were rendered

The End!

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