Test Bank - LAW 3 Abano - N/A PDF

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Summary

Negoiable instruments1 indorser of an order instrument warrants thatA. The instrument is genuine and in all respect what it purports to be B. He has a good title to it. C. All prior parties had capacity to contract D. The instrument is at the time of his indorsement valid and subsisting. E. All of t...

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Negotiable instruments

1.An indorser of an order instrument warrants that A. B. C. D. E.

The instrument is genuine and in all respect what it purports to be He has a good title to it. All prior parties had capacity to contract The instrument is at the time of his indorsement valid and subsisting. All of the above

2. Warrantors of the genuineness of the signatures on the instrument are A. Indorsers C. Persons negotiating by delivery B. Acceptors D. All of the above. 3. I. No person is liable on the instrument whose signature does not appear thereon. II. If one who signs in a trade or assumed name will be liable to the extent as if he had signed in his own name. A. True; True B. False; False

C. True; False D. False; True

4. I. If the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denoted by the figures (words) is the sum payable. II. If the words are ambiguous or uncertain, reference maybe had to the figures to fix the amount. A. True; True B. False; False

C. True; False D. False; True

5. I. Where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presume. II. Where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved. A. True; True B. False; False 6. I.

C. True; False D. False; True

Where an incomplete instrument has not been delivered, it will (not), if completed and negotiated without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery.

II. Every contract on a negotiable instrument is incomplete and revocable until delivery of

the instrument for the purpose of giving effect thereto. A. True; True B. False; False 7.

C. True; False D. False; True

I. Where an instrument expressed to be payable at a fixed period after date is issued undated, or where the acceptance of an instrument payable at a fixed period after sight is undated, any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly. II. The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is to be regarded as the true date. A. True; True B. False; False

8.

C. True; False D. False; True

I. Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be true date of the making, drawing, acceptance, or indorsement, as the case may be. II. The instrument is (not) invalid for the reason only that it is ante-dated or post-dated, provided this is not done for an illegal or fraudulent purpose. A. True; True B. False; False

9.

C. True; False D. False; True

I. In a joint obligation, each of the debtors is liable only for the proportionate part of the debt and the creditor is entitled only to a proportionate part of the credit. II. In a solidary obligation, the creditor may enforce the obligation against one of the debtors. A. True; True B. False; False

C. True; False D. False; True

10. An instrument is payable on demand I.

When so it is expressed to be payable on demand, or at sight, or on presentation.

II.

In which no time for payment is expressed.

III.

When it is issued, accepted, or indorsed when overdue.

A. True; True; True B. False; False; True

C. True; False; True D. True; True; False

11. I. Negotiable instrument may be issued in blank or simply by a mere signature of a maker or drawer, who intends its issuance a such thereby, omissions of: date; value given or value has been given; the place where it is drawn or payable does (not) affect the instruments. II. The existence of a seal of an instrument or designation of a particular kind of current money in which payment is to be made does (not) affect the negotiable character of an instrument. A. True; True B. False; False

C. True; False D. False; True

12. I. An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. II. The negotiable character of an instrument otherwise negotiable is (not) affected by a provision which authorizes the sale of collateral securities if the instrument be not paid at maturity. A. True; True B. False; False

C. True; False D. False; True

13. An instrument is payable at a determinable future time, which is expressed to be payable I. II. III.

At a fixed period after date or sight. On or before a fixed or determinable future time specified therein. On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening be uncertain.

A. True; True; True B. False; False; True

C. True; False; True D. True; True; False

14. I. An unqualified order or promise to pay is unconditional coupled with – an indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount; or a statement of the transaction which gives rise to the instrument. II. An order or promise to pay out of a particular fund is not unconditional. A. True; True B. False; False By Albano

C. True; False D. False; True

1.The following are functions of a negotiable instrument. Choose the exception: A. It increases purchasing power in circulation. B. C. As legal tender. D. As substitute for money. E. It increases credit circulation. 2. A check upon which the holder’s signature must appear twice, one to be affixed by him at the time it is issued and the second or countersignature, to be affixed by him before it is paid, otherwise it is incomplete is called A. Certified check B. Stale check

C. Travelers’ check D. answer not given.

3. A check drawn by the bank upon itself and payable to a third person. A. Certified check B. Manager’s check

C. Traveler’s check D. Crossed check

4. A bill of exchange to which no document is attached when presentment for payment or acceptance is made: A. Trade acceptance. B. Bank acceptance.

C. Clean bill of exchange. D. Documentary bill of exchange.

5 A bill of exchange to which no document is attached when presentment for payment or acceptance is made: A. Trade acceptance. B. Bank acceptance 7

C. Clean bill of exchange D. Documentary bill of exchange

Which of the following is non-negotiable? A. B. C. D.

I bind myself to pay B or bearer P10,000. (Sgd) A. I acknowledge being indebted to B in the amount of P10,000. (Sgd) A. I promise to pay to the order of B P10,000. (Sgd) A. I agree to pay B or order P10,000 on demand. (Sgd) A.

8 An instrument is rendered non-negotiable if A. B. C. D.

There is an indication of a particular fund out of which reimbursement is to be made. There is an indication of a particular account to be debited with the amount. The instrument is payable out of a particular fund. Answer not given.

16 Can a bill of exchange qualify as a negotiable instrument if – I. II. III. IV.

A. B. C. D.

It is not dated. The day and the month but not the year of its maturity is given. It is payable to cash. It names two alternative drawees. I Yes Yes No No

II Yes No No Yes

III Yes Yes Yes No

IV No No Yes No

17 “I promise to pay to the order of X P10,000 30 days after date”. (Sgd) Y, dated blank. 1st rule: The maturity date of the above promissory note will be counted 30 days from the date of issue of the instrument. “Pay to the order of X P10,000, 30 days after sight.” To Y (Sgd) Z, dated 10/15/2010. 2nd rule: The maturity of the above promissory note will be counted 30 days from the date of the instrument. A. B. C. D.

Both rules are wrong. Both rules are correct. 1st rule correct; 2nd rule wrong. 1st rule wrong; 2nd rule correct.

18. A check for P100,000 was drawn against drawee bank and made payable to XYZ Marketing or order. The check was deposited with payee’s account at RST Bank which then sent the check for clearing to drawee bank. May the drawee bank refuse to honor the check on ground that the serial number thereof had been altered? A. Yes, since the serial number is an item which is an essential requisite for negotiability. B. Yes, because the alteration of the serial number is a material alteration. C. No, since the serial number is not an essential requisite for negotiability and its alteration is not a material alteration. D. No, since the serial number is not an essential requisite for negotiability even if its alteration is a material alteration. 19. I.

If a promissory note is incomplete and undelivered by the maker, a holder in due course can still recover from the maker.

II. A holder in due course does not have the right to recover from the maker if the maker did not deliver the complete promissory note to the payee. A. True; True B. True; False

C. False; False D. False; True

20 Ed issued a negotiable promissory note and authorized Maan to fill up the amount in blank up to P50,000 only. However, Maan filled it up to P75,000 and negotiated the note to Wally, a holder in due course. Which of the following is false? A. B. C. D.

Ed is liable only to Wally up to P50,000. If Ed dishonors the note, Maan is liable to Wally for the full amount of the note. If the note is presented to Ed, she is liable to Wally for P75,000. Both Ed and Maan can beheld liable for the full amount of the note.

20. Nika issued a negotiable promissory note and authorized Tiny to fill up the amount in blank up to P50,000 only. However, Tiny filled it up to P75,000 and negotiated the note to Pia, a holder in due course. A. B. C. D.

Nika is liable only to Pia up to P50,000. If Nika dishonors the note, Tiny is liable to Pia for the full amount of the note. If the note is presented to Nika, she is liable to Pia for P75,000. Both Nika and Pia can be held liable for the full amount of the note.

22 Henry succeeded in making Kate affix her signature on a check without Kate’s knowing that it was a check. At the time of signing, the check was complete in all respects. Henry intended to cash the check the following morning, but that night, it was stolen by Vic who succeeded in negotiating the same to Al who cashed the check the following morning. Can Kate validly refuse to have the amount of the check deducted from her bank deposit if Al is – 1. A holder in due course? 2. Not a holder in due course? Q1 A. Yes B. Yes

Q2 Yes No

C. D.

Q1 No No

Q2 No Yes

26 A promissory note is signed in behalf of the principal by an agent as follows: Juan dela Cruz Per procuration: Manny C. Co This operates as notice that the agent has:

A. Unlimited authority for and in behalf of the principal. B. A limited authority to sign, and the principal is bound only in case the agent in so signing acted within the limits of his authority. C. A limited authority to sign, and the principal is bound only in case the agent in so signing acted outside the actual limits of his authority. D. Answer not given. 27 John makes a negotiable promissory note payable to his order, signing Pedro’s name thereon as maker without Pedro’s knowledge and consent. John then indorses the note to Jose, who in turn, indorses it to Carlos under circumstances which make Carlos a holder in due course. Q1: May Carlos enforce the note against Pedro? Q2: If Pedro dishonor’s the note, may Carlos hold John and Jose liable on their respective indorsements? Q1 A. Yes B. Yes

Q2 Yes No

C. D.

Q1 No No

Q2 No Yes

28 Mimi makes a note payable to the order of Pete who indorses it to Ali. Fheb obtains possession of the note fraudulently, forges Ali’s signature and indorses it to Ben who in turn indorses it to Cane. In this case, Cane can – A. B. C. D.

Enforce the instrument against Mimi and Pete. Enforce the instrument against Ali. Enforce the instrument against Ben. Answer not given.

29 Joan makes a note payable to the order of Ped, who indorses it to Juana. Somehow, Ron obtains possession of the note and forging the signature of Juana, indorses it to Amy. Amy then indorses the note to Neil, the holder. Which of the following is false? A. B. C. D.

Juana has a right to demand payment from Joan. If Joan dishonors by non-payment, Juana has no right of recourse against Ped. Neil has no right of recourse against Joan, Ped or Juana. Neil can proceed against Ron and Amy.

30 A issued a negotiable promissory note to the order of B for P10,000 payable 30 days after date. Later B indorsed it to C. then X stole the note from C, forged the signature of C and negotiated it to D, and D to E, E to F, the holder. On maturity of the note, which of the following statements is not correct and invalid?

A. F can collect from either D or E, because their signatures are genuine and the note is operative against it. B. F can collect from A because A cannot put up forgery as his defense. C. F can not collect from C because it was C’s signature which was forged. D. F can not collect from B because B is a party prior to the forgery. 31 M makes a P10,000 note payable to the order of O who indorses it to A. F obtains possession of the note fraudulently, forges A’s signature, alters the amount to P70,000 and endorses it to B who in turn endorses to C. in this case: A. B. C. D. 32 I -

C can enforce the note against A C can enforce the note against any person. C can enforce the note against M and O. C can enforce the note against B. A holder for value is an endorsee who has both the legal title and the beneficial interest to the instrument and is subject to both real and personal defenses available against him.

II – Every person whose signature appears in the negotiable instrument is presumed to have become a party thereto for value. A. True; True B. True; False

C. False; False D. False; True

34. A issued a promissory note to the order of B for P10,000 payable on September 20, 2011 in payment of a TV set sold by B to him. B failed to deliver the TV set to A and instead transferred the note to C for value but without indorsement. Which of the effects of the transactions listed below is valid? A. B. C. D.

C is deemed a holder in due course when B transferred the note to him. C becomes a holder in due course when B indorsed the note to C on October 4, 2011. C has no right to compel B to make the proper indorsement to him. C cannot collect from A because A’s defense of lack of consideration.

35 P appointed A as his agent to buy sugar. Thereafter, A drew a bill of exchange for the price of the sugar in favor of S, the seller. P accepted the bill. After the acceptance of P, A negotiated the bill to H, a holder in due course. When the sugar was delivered, P refused to pay the bill on the ground that the sugar was deteriorated. Is P liable? A. B. C. D.

No, the sugar is defective. No, there is absence of consideration. No, because there is a failure of consideration. Yes, even if the consideration failed because H is a holder in due course.

36 An accommodation party is not: A. B. C. D.

A surety of the accommodated party. A real party but merely lends his name. Liable to a holder in due course. A signatory to the instrument as maker, drawer, acceptor or indorser.

38 This is not a negotiation of a negotiable instrument: A. B. C. D.

Assignment. Delivery of a bearer instrument. Indorsement completed by delivery of an instrument payable to order. Delivery of an instrument to the payee.

39 A issues a bill payable to the order of B. Later B without endorsing the bill transfers for a consideration said bill to C. the following except one, are the valid effects of the transfer. A. B. C. D.

C acquires the right to have the endorsement of B. The bill is merely assigned and not negotiated. C becomes a holder. The transfer vests in C such title as B had thereon.

40 “I promise to pay to the order of B P10,000 30days after sale”. (Sgd) A. which of the following indorsements of the above promissory note is not valid? A. B. C. D.

“Pay to C and D” (Sgd) B. “Pay to C P5,000, balance of this note” (Sgd) B if P5,000 has been paid by A.” “Pay to C P5,000 to D P5,000. (Sgd) B. “Pay to C and D, partners” (Sgd) B.

41. “Pay to Mar Perez, notice of dishonor waived” is an example of: A. B. C. D.

Special indorsement Facultative indorsement Qualified indorsement Restrictive indorsement

42. “Pay to Mon in trust for Jess” (Sgd) Jun, is the example of A. B. C. D.

Conditional endorsement Qualified endorsement Facultative endorsement Restrictive endorsement

43. When an indorser waives presentment and notice of dishonor, he increases his liability. His indorsement is: A. B. C. D.

Alternative endorsement Qualified endorsement Facultative endorsement Restrictive endorsement

44. I - If the instrument is payable to order, it is negotiated by indorsement plus delivery. II- If the instrument is payable to bearer, it is negotiated only by delivery. A. True; True B. True; False

C. False; False D. False; True

50. I - Every holder is deemed prima facie to be a holder in due course. II- A holder in due course is one who possesses both the legal and beneficial interest to the instrument but is free from real defenses only. A. True; True B. True; False

C. False; False D. False; True

53. This defense is attached to the instrument itself and can e set up against the whole world, including the holder in due course. A. Real defense B. Personal defense

C. Equitable defense D. Self- defense

54. Which of the following is an example of Real Defense? A. B. C. D.

Acquisition of the instrument by force. Acquisition of the instrument for illegal consideration. Fraud in the indorsement. Fraud in factum.

55. Which of the following is not a real defense? A. B. C. D.

Fraud in factum. Incomplete and undelivered instrument Insertion of a wrong date. Forgery of a signature

58. Which of the following is not a personal defense? A. B. C. D.

Absence of consideration. Forgery of a signature Non-delivery of a complete instrument. Failure of consideration.

60. Secondarily liable A. B. C. D.

Maker of a promissory note Acceptor of a bill of exchange Drawee Drawer of a bill

61. Which of the following is not a secondary party? A. B. C. D.

Acceptor for honor Drawer Payor Endorser

65. 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 genuineness of his signature and his capacity to draw the instrument. C. Admits the existence of the endorser, the genuineness of his signature and his authority to draw the instrument. D. Admits that he will pay it according to the tenor of his acceptance. 67. A general indorser is distinguished from the irregular indorser in that a general indorser A. Makes either a blank or special indorsement. B. Indorses after its delivery to the payee. C. Is liable to the payee and subsequent parties unless he signs for the accommodations of the payee, in which case he is li...