MCQ: Law on Guaranty May 3, 2015 No comments Facebook Twitter Pinterest LinkedIn Email ADVERTISEMENTS Hello! Thank you for taking this test. This is a quiz on the Law on Guaranty (Articles 2047 to 2081 of the Civil Code of the Philippines). There are 24 questions in all. Don't forget to provide your name on the field below (to be recognized in case you make it to the top 5!).You can share your quiz results on FB and Twitter after you finished the quiz. Good luck! NameA, B, C and D are co-guarantors of P1,000.00. A is released by the creditor without the consent of the other co-guarantors. Which of the following statements holds true? The other guarantors will pay only their original share of the obligation, which is P250.00 The amount guaranteed by the released debtor shall be extinguished The amount guaranteed by the released guarantor shall be divided among the others The P1,000.00 debt will be divided among B, C, and DWhich of the following statements does not describe the differences of guaranty and suretyship: The guarantor can avail of the benefits of excussion and division while the surety cannot avail of such benefits The guarantor is the insurer of the solvency of the debtor while the surety is the insurer of the debt The guarantor is primarily liable while the surety is secondarily liable The guarantor binds himself to pay if the principal debtor cannot pay while the surety undertakes to pay if the principal debtor does not payCBank and D executed an overdraft agreement and pledge wherein CBank granted D an overdraft from time to time on his current account with CBank not to exceed P200,000.00. G executed an absolute guaranty in consideration of the overdraft agreement, pledged and bound himself jointly and severally liable to the bank. Later, D requested for extension from the bank, who in turn granted with the condition that the interest will increase and the amount of the overdraft will be reduced but the former failed to pay their indebtedness on the date due. What is the extent of the liability of G considering the renewal of the overdraft without his knowledge? The contract of absolute guaranty expressly authorized CBank to extend the time of payment and to release or surrender any security or part thereof held by it without notice to or consent of guarantor, and, as such, his liability remains unaltered The contract of absolute guaranty expressly authorized CBank to extend the time of payment and to decrease the guarantor’s obligation if renewal was made without notice to or consent of the guarantor The contract of absolute guaranty expressly authorized the release of the guarantor upon extension of time for payment without notice to or his consent of the guarantor He is released from his obligation because the plaintiff had extended the time of payment without his consentThe following are duties of the creditor if he wants to hold the guarantor liable, except: Notify the guarantors of the debtor’s inability to pay Exhaust the properties of the debtor Resort to possible remedies excluding a suit Prove that the debtor is still unable to payThe guarantor is to obtain release from the guaranty, or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor when: After the lapse of ten years, when the principal obligation has a fixed period for its maturity, unless it is of such nature that it cannot be extinguished except within a period longer than ten years The debt has become demandable by reason of default on the part of the principal debtor The debtor has bound himself to relieve him from the guaranty within a specified period, and this period has not yet expired There are reasonable grounds to fear that the principal debtor intends to abscondThe following statements are exceptions to the right to indemnity of the guarantor, except: The legal interest thereon from the time the payment was made known to the creditor, even though it did not earn interest for the creditor Payment by a third person who does not intend to be reimbursed by the debtor is deemed a donation, which requires the debtor’s consent. But the payment is valid with respect to the creditor Where the guaranty is constituted without the knowledge or against the will of the debtor, the guarantor can only recover insofar as the payment had been beneficial to the debtor Waiver on the part of the guarantorThe following statements are exceptions to the general rule that the guarantor has the right to the benefit of excussion or exhaustion of the debtor’s property except: Where a pledge or mortgage has been given by the guarantor as a special security If the guarantor does not set up the benefit of excussion and fails to point out to the creditor available property of the debtor within the Philippines If it may be presumed that an execution on the debtor’s property will not satisfy the obligation If the guarantor has interposed it as a defense before judgment is rendered against himMaterial alteration in the contract of guaranty is present in the following cases except: The creditor increased the loan from P40,200.00 to P56,800 without the knowledge and consent of the surety The guarantor executed an absolute guaranty in consideration of the overdraft agreement and pledge and bound himself jointly and severally liable to the bank but the creditor and debtor had extended the time of payment without his consent The surety executed an indemnity agreement whereby he bound himself jointly and severally with the debtor for payment of loan in favor of the creditor. Debtor obtained another loan and requested creditor bank a complete restructure of its indebtedness that was approved without notice to or prior consent of surety. In the original contract, A will guarantee B’s indebtedness as selling agent in Baguio but the document was altered. The document shows that places Guagua, Angeles, San Simon, Capas, Magalang, and Mabalacat are includedWhen is the guarantor not entitled to the benefit of excussion? When the pledge or mortgage has been given by him as special security In case of insolvency of the creditor If it may be presumed that an execution on the property of the principal debtor would result in the satisfaction of the obligation When he interposes it as a defense before judgment it rendered against himThe benefit of excussion shall not take place when? The debtor waives the exhaustion of his property The guarantor binds himself solidarily with the debtor The debtor prohibits the exhaustion of his property The guarantor does not bind himself solidarilyBF and BB are friends. Unknown to BF, a contract of guaranty was entered into by BB in an obligation to CC where BF is the principal debtor. Which of the following statement is not correct? None of the options provided (no correct answer provided) The creditor is bound to accept payment of performance by a third person who has no interest in the fulfillment of the obligation unless there is a stipulation to the contrary He can compel the creditor to subrogate him in his rights, such as those arising from mortgage, guaranty, or penalty If he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtorRG is a guarantor of the P50,000.00 indebtedness of PG to ZX, which should be paid before August 16, 2010. RG made the payment without notifying PG. Thereafter, PG without knowing that the obligation was already fulfilled repeated the payment. What is the remedy of RG to recover the amount paid? RG may go after ZX or PG for reimbursement RG may demand reimbursement from PG if a fortuitous event had prevented him from notifying PG of the payment, even if ZX is solvent RG has remedy against PG only RG may demand reimbursement from PG if ZX is insolvent and if fortuitous event had prevented him from notifying PG of the paymentD obtained from C a 2013-2014 sugar crop loan in the amount of P40,200.00 secured by a chattel mortgage. As additional security, S issued a surety bond in favor of C. Three months later, C increased the loan from P40,200.00 to P56,800.00 without the knowledge and consent of S. D failed to liquidate the loan. What is the implication? S’s liability is that of a solidary co-maker so the knowledge and consent of the surety is not necessary for an increase in the amount of the principal obligation. The increase in the indebtedness from P40,200.00 to P56,800.00 is material and prejudicial to S. S waived his right to be notified by virtue of the stipulation in the indemnity agreement. The contract in question is a continuing chattel mortgage so the knowledge and consent of the surety is not necessary for an increase in the amount of the principal obligation.Which of the following statements is not an instance when the guarantor may proceed against the principal debtor even before his payment of the principal obligation? If there are reasonable grounds to fear that the principal debtor intends to abscond After the lapse of ten years, when the principal obligation has a fixed period for its maturity, unless it is of such nature that it cannot be extinguished except within a period longer than ten years When the debtor has bound himself to relieve him from guaranty within a specified period, and this period has expired When the debt has become demandable, by reason of the expiration of the period for paymentC Bank delivered an amount of a credit line to D guaranteed by G to purchase asphalt, which was subsequently delivered to the DPWH. D assigned C Bank to collect the value of the asphalt from DPWH and in return, apply the said value to D’s credit line as payment. The amount was regularly collected by C Bank, until for unknown reasons, the bank ceased to collect, until after 4 years, investigators found that more money was payable to D from DPWH, because the latter had allowed another creditor to collect funds for D. What is the implication when C Bank ceased to collect the money from DPWH? It is the guarantor’s duty to collect the proceeds and to apply in D’s credit line The power of attorney authorizing D to collect the amount is a mere security for the credit line C Bank may go against H in case D is incapable to pay the credit line G is no longer liable by allowing the assigned funds to be exhausted without being notified, the bank deprived the former of any possibility of recoursing against the securityZ furnished a bond in favor of X Company. X was then allowed to withdraw the cosigned goods to PNB. Thereafter, PNB obligated Z to pay the debt of X Company. Before paying the said amount, Z obtained a solidary note from X Company. XX, as president of X Company, signed a document wherein they bound themselves solidarily to pay, reimburse, and refund to Z all such sums or amounts of money as it, or its representative, may pay or become bound to pay, upon its obligation with Z. X Company was declared insolvent. Which of the following statements is correct? XX, as the defendant, shall not pay the plaintiff Z the expenses incurred by X Company in the litigation between X Company and Z XX, as the defendant, shall not pay the plaintiff the expenses incurred in the litigation brought against him XX, as the defendant, shall pay the plaintiff the expenses incurred by X Company in the litigation between X Company and Z XX, as the defendant, shall pay the expenses incurred in the action brought against himThis provides for the enforcement of the rights of the guarantor against the debtor after he (guarantor) has paid his (debtor’s) debt: Right of the guarantor to proceed against the debtor even before payment Right of the surety to proceed against debtor before payment Right of the guarantor to reimbursement after payment Right of the surety to reimbursement after paymentMr. X entered into a contract with Mr. Y for the importation of cotton textile. To secure payment, Mr. X obtained a letter of credit from ABC Bank in Mr. Y’s favor. A trust receipt was issued and signed by Mr. Z where there was a solidary guaranty clause in said receipt. When the balance of Mr. X remained unpaid, Mr. Y went after Mr. Z, who in turn refused to pay stating that he is not a guarantor. Is Mr. Z correct? No. the solidary guaranty clause was binding with respect to Mr. X, Mr. Y, and Mr. Z, although it would not have the same effect as against third parties Yes Mr. Z’s liabilities as guarantor never arose for the trust receipt never bound Mr. Z due to its insufficiency and that even if Mr. Z is a guarantor, he is still entitled to the benefit of excussion No. what is merely needed is that the contract of guaranty is in writing to be effective between the parties Yes. In order that Mr. Z be liable as guarantor, the trust receipt should have been notarized by a notary publicThe benefit of division among several guarantors under Article 2065 can be availed of if there are: Two or more debtors of one debt, even if they be bound solidarily, each with different guarantors If there are several guarantors of only one debtor, for the same debt Two or more guarantors of the same debtor but not only for the same debt If any of the circumstances enumerated in Article 2059 should take place, as would the benefit of exhaustion of the debtor’s propertyWhat happens if A, B, C, and D are co-guarantors of P1,000.00 and A is released by the creditor with the consent of the other co-guarantors? The P1,000.00 debt will be divided among B, C, and D The amount guaranteed by the released debtor shall be extinguished The P1,000.00 debt will be divided among B, C, and D with right for reimbursement from A The other guarantors will pay only their original share of the obligation, which is P250.00What is the obligation of a surety upon posting a bond for the accused? Pay the debt of the accused Only to provide bail bond for the accused He is the jailer of the accused and responsible for the latter’s custody Provide counsel for the accusedWhat is the effect of dacion en pago in a contract of guaranty/suretyship? The neglect of the creditor to sue discharges the guarantors from their liability The guaranty ends if a contract is novated without the guarantors consent The release made by the creditor in favor of one of the guarantors benefits all other guarantors Eviction revives the principal obligation but not the guarantyThe following defenses are available to the guarantor, except: Defenses which are purely personal to the debtor Defenses of the guarantor himself like vitiated consent on his part Defenses inherent to the principal obligation Defenses ordinarily personal to the principal debtor but which are inherent to the debtThe obligation of the guarantor is extinguished in the following except: When the principal obligation is extinguished An essential alteration in the terms of the loan agreement without the consent of the surety If a contract is novated with the guarantor’s consent The creditor voluntarily accepts immovable or other property in payment of the debt In the case of the release of the guarantor by the creditorBe sure to click Submit Quiz to see your results! 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