LAW NEG O PDF

Preview

Summary

BUSINESS LAWQUIZ –Negotiable Instruments Law Part I The drawee is not primarily liable a. Cashier’s check c. Certified check b. Manager’s check d. Traveler’s check If the instrument is payable to the order of a third person a. He is liable to all parties subsequent to the payee b. He is not liable t...

Description

BUSINESS LAW QUIZ –Negotiable Instruments Law Part I 1. The drawee is not primarily liable a. Cashier’s check b. Manager’s check

c. Certified check d. Traveler’s check

2. If the instrument is payable to the order of a third person a. He is liable to all parties subsequent to the payee b. He is not liable to the party c. He is liable to the payee and to all subsequent parties d. He is liable to all parties subsequent to the marker or drawer. 3. Which of the following is not negotiable? a. Pay to D or order P10, 000 on or before Dec.31, 1997 (Sadie) b. Pay to A or order P10, 000 Notice of Dishonor waived (Sgd. B) c. Pay to B or order P5, 000 or deliver two horses at the option of the holder (Sgd.D) d. Pay to C or order P10, 000 and to deliver 10 sacks of rice (Sgd. D) 4. A bill of exchange drawn on a bank and payable on demand is a. Check c. Domestic bill b. Treasury d. Bill of lading 5. Which is not correct? The acceptor by accepting the instrument a. Admits the existence of the payee and his capacity to indorse b. Admits the existence of the drawee, the genuiness of his signature and his capacity and authority to draw the instrument c. Engages that he will pay is according to the tenor of his acceptance d. Admits the existence of the endorser, the genuiness of his signature and his capacity and and authority to indorse instruments. 6. Case 1: Angel buys a diamond ring for P50, 000 for which he issued a check. Later Angel found out the diamond to be an ordinary glass. Case 2: Ben obtains the signature of Cris for autograph purposes. Ben writes a promissory note above Cris’s signature and indorses the note to Dan, a holder in due course. a. Real defense in Case 1, personal defense in Case 2; b. Personal defense in Case 1, real defense in Case 2; c. Real defense in both cases; d. Personal defenses in both cases. 7. Maturity of undated negotiable instrument issued payable 30 days after sight is computed from a. Date of first indorsement; b. Date of last indorsement; c. Date for first presentation for acceptance d. Date of issue 8. When a negotiable instrument payable to order? a. When payable to the order of a specified person or to him or his order b. When payable to the order of a fictitious person or non-existing person and such a fact was known to the person making it so payable; c. When the name of the payee does not purport to be the name of a person. d. When only or last indorsement is in blank. 9. Which of the following is not a characteristic of a bill of exchange? a. Original parties are the drawer, drawee and payee; b. Acceptance is generally required; c. Drawer is primarily liable; d. Contains an unconditional order to pay. 10. A holder in due course has the following rights, except: a. He may receive payment and if in due course, the instrument is discharged; b. He may sue on the instrument in his own name; c. He can recover on the instrument d. He holds the instrument as if it were non-negotiable

11. Which is not correct? The acceptor by accepting a negotiable instrument a. Admits the existence of the payee and his capacity to endorse.

b. Admits the existence of the drawer, the genuiness of his signature and his authority to draw the instrument. c. Admits the existence of the endorser, the genuiness of his signature and his authority to draw the instrument. d. Admits that he will pat it according to the tenor of his acceptance. 12. 1st statement: A check must be presented for payment within a reasonable time after it issue or the drawer will be discharged from a liability thereof. 2nd statement: Where the holder of a check procures it to be accepted or certified, the drawer and all endorsers are discharged from liability thereof. a. only the 1st statement is true c. both statements are not true b. only the 2nd statement is true d. both statements are true 13. A makes a note payable to B or order. The following are the indorsers of the note in the order of their endorsement: B, C, D, E, F (holder) and G (subsequent holder).The note is dishonored in the a Hand of F, who notifies B, C, D and E.Which, is not correct? a. The notice given by F to B operates to the benefit of C, D, E and G b. The notice to C insures to the benefits of D, E and G c. The notice insures to the benefits of B d. The notice to D insures to the benefits of E and G 14. Which of the following instruments is negotiable? a. Pay to bearer C P 10,000. Reimburse yourself out of the rental of my house in Manila. To B (Sgd) A b. Pay to C P 10,000 or his order out of the rental of my house in Manila. To B (Sgd) A c. Pay to C P 10,000 and reimburse yourself out of the rental of my house in Manila. To B (Sgd) A d. Pay to the order of C P10, 000.Reimburse yourself out of the rental of my house in Manila. To (Sgd) A 15. Which of the following is a negotiable Bill of Exchange? a. Pay to order of X the sum of P 20,000(Sgd.) Y To: A and B b. Pay to the order of Y the sum of P 30,000 (Sgd) X To: A or his absence to B c. Pay to the order of X or Y the sum of P 40,000 (Sgd) C To: A or B d. Pay to the order of Y the sum of P50, 000 (Sgd) X To: A and B 16. A check for Fifty Thousand Pesos (P 50,000) was drawn against drawee bank and made payable to XYZ or order. The check was deposited with payee’s account at ABC Bank which then sent the for clearing to the drawee bank. The drawee bank refused to honor the check on the back ground that the serial number thereof had been altered. Is the refusal of the bank justified? a. Yes, it is material alteration which affects the negotiability of the instrument. d.No, it is not a material alteration and the negotiability of the instrument is not affected. c. Yes, because of forgery of the check. d. No, because there is in fact no alteration of the check 17. Where the negotiable instrument is so ambiguous that there is doubt whether a bill or note, the holder may treat it as either at his choice. Lack of consideration is a personal defense which is only available between immediate parties or against parties who are not holders in due course. a. Both statements are false. b. First is true, second is false. c. Both are true. d. First is true, second is true. 18. X draws a check against his current account with ABC bank in favor of B. Although X does not have sufficient funds; the bank honors the check when presented for payment. Apparently, and X has conspired with the bank’s bookkeeper so that his ledger card would show that he has sufficient funds. a. Yes, because X has no sufficient funds with the bank. d.No, because the bank as acceptor became primarily liable to B. c. No, because B was not in good faith as payee. d. Yes, because of solution debit.

19. For the purpose of lending his name without receiving value therefore, A makes a note for P1M payable to the order of B who in turn negotiates it to C, the latter knowing that A is not a party for value. May C recover from A if the latter alleges absence of consideration? a. Yes, because an accommodation party is liable to a holder for value. b. Yes, because an accommodated party is liable to a holder for value. c. No, because the holder is not a holder in due course due to his knowledge of the absence of consideration. d. No, because absence of consideration is a personal defense. 20. Supposing under the same facts, A pays C, can he recover from B? a. No, because as maker he is the principal debtor. b. No, because as accommodation maker he is deemed the donor of B. c. Yes, because as accommodated party is the one ultimately liable. d. Yes, because payment by the accommodation party discharges the instruments. 21. M makes a promissory note payable to bearer and delivers the same to P who endorses it to X in this manner: “Payable to X. Signed: P “ Later X, without indorsing the note delivers the same to B.The note subsequently dishonored by M. May Y proceed against M for the note? a. No, because the special indorsement of P made the bearer note payable to order. b. Yes, because a bearer instrument remains as such despite a special indorsement. c. Yes, because although there was no recognition due to lack of indorsement, Y remains the assignee of the note. d. No, because Y is not considered holder for lack of proper endorsement. 22. An instrument is not negotiable if the day and the month, but not the year of its maturity is given. Where the drawees are in the alternative or in succession, the instrument is not negotiable. a. Both statements are true. b. Both are false. c. First is true, second is false. d. First is true, second is true. 23. A delivers a bearer check to B. B then specially indorses it to C and C later indorses it in blank to D. E steals the check from D and forging the signature of D, succeeds in “negotiating” it to F, who acquires the same in good faith and for value. If, for any reason, the drawee bank refuses to honor the check, can F enforce the check against A? a. No, because of the forgery in the indorsement of D, F did not acquire title over the check. b. Yes, because despite the forgery in the indorsement of D, F acquired title to the instrument. c. Yes, because a holder in due course can always enforce the instrument against all parties liable thereon. d. No, because forgery is a real defense which can be put up even against a holder in due course such as F. 24. Which of the following is not an effect of a crossed check? a. The check may not be encashed but only deposited in a bank. b. The check may be negotiated only once to one who has bank account. c. The act of crossing a check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he received the check pursuant to that purpose otherwise; he is not a holder in due course. d. The indorse remains a holder in due course even if he does not inquire into right of the indorser to the check. 25. A issued an order promissory note to B who indorses it to C.D stole the note from C and forging the instrument of C, “negotiates “it to E who also indorses it to F, the holder in due course. Can F enforces the note against A, B, C? a. Yes, because he is a holder in due course who holds the instrument free from defenses available to prior parties among themselves. b. No, because he did not obtain title to the note because of the forgery in the indorsement of C to D c. No, because all prior parties are not liable to F because of the forgery. d. Yes, because he is a holder in due course who holds the note free from defects of the title of prior parties. 26. Based on the same facts as aforementioned, can F enforce the note against E? a. Yes, because E is party subsequent to C whose endorsement was forged and as indorser. b.Yes, because he is at fault for taking the note from the forger D. c. No, because all parties prior to him are not liable because of forgery. d. No, because E was also a victim who obtained the note from the forger and who himself cannot proceed against A, B and C.

27. A issued to B a check for P 50,000 as payment for the car. Without the knowledge of A, B altered the amount to 150,000 and deposited the said check with X bank which forwarded the same to Y bank for payment bank without noticing the alteration, paid the check, debiting the amount from account of A. Which of the two banks shall suffer the loss? a. X bank, as indorser to Y bank, warrants the correctness of the amount. b. Y bank, as acceptor bank shall be liable for the loss. c. Both banks are jointly liable to A. d X bank initially but with right of reimbursement from Y bank. 28. Supposing in the above example, there was no alteration except for the forgery of A’ signature by B, who shall suffer the loss? a. X bank, as indorser to Y bank, warrants the correctness of the amount. b. Y bank, as acceptor bank shall be liable for the loss. c. Both banks are jointly liable to A. d .X bank initially but with right of reimbursement from Y bank.

29. Supposing further, that there was a forgery only in the indorsement to B as payee, that was made by another person, Z who deposited the check with his bank (X), who shall suffer the loss? a. X bank, as indorser to Y bank, warrants the correctness of the amount. b. Y bank, as acceptor bank shall be liable for the loss. c. Both banks are jointly liable to A. d. X bank initially but with right of reimbursement from Y bank. 30. A issued negotiable promissory note to B with the authority to fill up for P1, 000 only B in violation of his contract with A wrote P 5,000 .B negotiated the note to C who had knowledge of the infirmity turn in indorsed it to D who had no knowledge of the said affirmity.Can D enforce the note against A and for how much? a. D cannot make A liable because of the fraud committed by B and therefore A has a defense. b. D can make A liable but only for P1, 000 c. D can make A liable for the whole amount of P5, 000. d. D cannot make A liable but only B and C. 31. Supposing D indorses the note to E for value but who has knowledge of the infirmity, can the latter enforce the note against A? a. No, because E is a holder not in due course. b. Yes, because he is a holder in due course. c. No, because A has a personal defense against him. d.Yes, because although he is not a holder in due course because of his knowledge of the infirmity in the instrument, he acquires all the rights of a holder in due course for having taken the note from D, a holder in due course. 32. The holder is required to give notice of dishonor to the drawer to make him liable on the instrument in one of the following cases: a. Where the drawer is the person to whom the instrument is presented for payment; b. Where the drawer and the drawee are the same persons; c. Where the drawer has countermanded payment. d. Where the instrument was accepted for his accommodation. 33. The negotiable instrument is not discharged a. When the principal debtor becomes the holder thereof before, at or after maturity in his own right. b. By the intentional cancellation thereof by the holder; c. When it is paid in due course by the principal debtor; d. When it is in due course paid by the party accommodated where the instrument was made or accepted for his accommodation. 34. Where an endorser waives the benefit of any law intended for his advantage such as notice of dishonor, his indorsement is a. Conditional c. Restrictive b. Qualified d.Facultive 35. Which of the following is not negotiable? a .I promise to pay A or order P20, 000(Sgd.D) b. I promise to pay to the order of A P20, 000(Sgd.D) c. I promise to pay bearer P10, 000 on June 28(Sgd.D) d. I promise to pay to the order of the bearer P1, 000 (Sgd.D)

36. A makes a promissory note to B as follows: I promise to pay B or bearer P1, 000 on demand” (Sgd.A) After the issue to B, B negotiates it to C by mere delivery C to D by mere delivery, and D to E by special indorsement and E to F also by special indorsement and F negotiates it to G by blank indorsement, as holder strikes out the special indorsement of D to E and E to F.What are the effects of striking out the said indorsement? Effect 1: D and E are discharged from liability because it was their indorsements which were stricken put by G as not necessary to his title. Effect 2: Subsequent indorser F is also discharged from liability because his right of recourse has been cut off by the discharge of D and E. a. Both effects are true c.First is false, second is true b.Both is false d. First is true, second is false 37. A issued a note to be who did not deliver his promised consideration to A. B indorsed it to C, who is a holder in due course’s indorsed it to D who knew of the failure of consideration. Can D collect from A? a. No, because D is not a holder in due course. b. No, although D is acquired the rights of C, a holder in due course. c. No, because he knew of the failure of consideration. d .Yes, because he acquired the note for a consideration. 38. M makes a note for P10,000 payable to the order of C who indorses it to A. F obtains possession of the note fraudulently, forges the indorsement of A, alters amount to P70, 000 and endorses it to B who in turn endorses it to C .In this case: a. C can enforce the note against A. b. C cannot enforce the note against any party to the note. c. C can enforce the note against M and O. d. C can enforce the note against B. 39. Which of the following is not secondarily liable? a. Drawer c .Payor for honor b.Indorser d. Accept for honor 40. A promissory note for P2M is indorsed as follows: Which of them is not proper indorsement? a. Pay to A P1M and B P1M.Sgd. P b. Pay to A and B P2M.Sgd.P c. Pay to A or B P2M.Sgd.P d. Pay to A P1M Sgd. P. The P1M for the residue of the note already paid. 41. Which of the following is a real defense? a .Fraud in inducement b.Fraud in factum c. Acquisition of the instrument by force d. Acquisition of the instrument for illegal consideration. 42. Which of the following is not negotiable for the reason it is not payable at determinable future time? a. One week after X passes the CPA BE, I promise to pay to the order of Y P10.000.Sgd.Z. b. Thirty days after demand, drawer Z directs Drawee X to pay Y or order P10, 000. c. Ten days after the death of X, I promise to pay to the order of Y P10, 000.Sgd.Z. d. On or before Oct.31, 1998, I promise to pay to the order of Y P10, 000.Sgd.Z. 43. The following instances when a bank may refuse to honor a check drawn against it, except one: a. Drawer has countermanded payment b. Drawer’s insufficient funds. c. Drawer has become insolvent d. Bank obtains knowledge of drawer’s death. 44. A issues a bill to the order of B. Later B, without indorsing the bill, transfers for consideration said bill to C. The following except one are the valid effects of the transfer: a C acquires the right to have indorsement of B. b. The bill is merely assigned not negotiated. c. C has become a holder for value.

45. An instrument is indorsed as follows: Pay to A, for B (Sgd) C.Then A indorsed the instrument to D in payment of his personal loan obtained from the latter. Was D in good faith as holder thereof? a. Yes, because he is a holder in due course. b. Yes, because the instrument was negotiable when indorsed to him. c. No, because of the absence of B’s consent to the negotiation to D. d.No, because of the knowledge of D that A was only a trustee in favor of B without right to negotiate the instrument for his personal benefit. 46. Which of the following is not negotiable instrument? a. I find myself to pay B or bearer P1M. (Sgd)M. c .I obliges to pay or order P1M. (Sgd)M. b. I acknowledged being indebted to P for P1M. d. I agree to pay P or bearer P1M on (Sgd)M. demand. (Sgd)M. 47. Which of the following is not a personal defense? a. Absence of consideration c. Non-delivery of a complete instrument b. Forgery signature d. Delivery of an incomplete instrument 48. If the drawee destroys the bill upon presentment for acceptance in payment of his personal loan obtained from the latter. Was D in good faith as holder thereof? a. He is deemed to have dishonored the bill. b. The holder may treat the instrument as a promissory note. c. The holder may not go after the secondarily liable parties. d. The drawee has impliedly accepted the bill. 49. One of the requisites for a holder in due course that is he became the holder of the instrument before it was overdue. The payee of the note issued by a maker is therefore a holder not in due course if it was issued when already overdue. In acceptance for honor, the acceptor for honor must not be a party to the instrument unlike a payor for honor who may be a party therein. a. Both statement are false c.First is false, second is true b.Both is true d. First is true, second is false 50. It is at the option of the holder if he will resort to the referee in case for need for payment of the instrument in the same way that the holder has the option to have the acceptance of the acceptor for honor. The drawer may insert “without recourse” on the face of the instrument to negative or limit liability just like a qualified indorser may also state in his indorsement “without recourse”. a. Both statement are false c.First is false, second is true b.Both is true d. First is true, second is false 51. In all case of restrictive indorsement, the instruments become non-negotiable. Conditional indorsement does not give the...