NEGOTIABLE INSTRUMENTS LAW

FINAL EXAMINATION
MAY 29, 2015
I. Define the following. (5 points each)
1. Negotiable Instrument
2. Check
3. Forgery
4. Notice of Dishonor
5. Discharge
II. Answer the following questions. (5 points each)
1. Distinguish promissory note from a bill of exchange.
2. Lorenzo signed several blank checks instructing Nicky, his secretary, to fill them as payment
for his obligations. Nicky filled one check with her name as payee, placed P30,000.00 thereon,
endorsed and delivered it to Evelyn as payment for goods the latter delivered to the former.
When Lorenzo found out about the transaction, he directed the drawee bank to dishonor the
check. When Evelyn encashed the check, it was dishonored. Is Lorenzo liable to Evelyn?
3. Who is a holder in due course?
4. Can a drawerdepositor who entrusted his check books, credit cards, passbooks, bank
statements and cancelled checks to his secretary and who had introduced the secretary to the
bank for purposes of reconciliation of his accounts hold the drawee bank liable for the amounts
withdrawn by the secretary by forging his signature on the checks?
5. Can a party who signed on the note as an accommodation party raise the defense of absence
or want of consideration?
6. Is the bank liable to the payee for depositing and encashing the crossed checks to an
unauthorized person?
7. X issued to Y 2 postdated checks as security for pieces of jewelry to be sold. Y negotiated the
check to S. When X failed to sell the jewelry he withdrew all his funds from the drawee bank.
After dishonor, X contends that the holder failed to give her a notice of dishonor. Is notice of
dishonor necessary?
8. What is the effect of failure to make presentment?
9. What is a crossed check? What are the effects of crossing a check? Explain.
10. What constitutes a material alteration?
11. Is a person signing in trade name liable?
12. What is the effect when presentment is not made?
III. Enumeration. (5 points each)
1. What are the different kinds of Indorsement? Explain each.
2. What are the defenses against the Holder? Explain each.

3. What are the different kinds of checks? Explain each.