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Restricted endorsement ANSWER: D 2. The following, except one, are the requisites for honor on a bill: a. The bill must be previously protested for dishonor by non-acceptance or protested for better security. b. The bill is overdue. c. The holder must give his consent. d. The acceptor for honor must be a stranger to the bill. ANSWER: B 3. Which of the following is not a secondary party? a. Acceptance for honor b. Drawer c. Payor for honor d. Endorser ANSWER: C
he increases his liability.000. the instrument is discharged. Which of the following is a negotiable bill of exchange? a. (Sgd.4. b. Alternative endorsement b. Qualified endorsement c. Pay to the order of X the sum of P20. except: a. Restrictive endorsement ANSWER: C 5. When an endorser waives presentment and notice of dishonor. d. He may receive payment and if the payment is in due course. b. His endorsement is: a. Pay to the order of Y the sum of P30. c. Facultative endorsement d. X) To A or B. He cannot recover on the instrument. He is entitled to the instrument but holds it subject to the same defense as if it were non-negotiable. (Sgd. A holder not in due course has the following rights. He may sue on the instrument in his own name. X) To A or in his absence. to B. ANSWER: C 6.000. .
Order to pay c.c.000. Pay to the order of Y the sum of P50. Promise to pay b. A check drawn by the bank upon itself and payable to third person: .000. Bank acceptance c. X) To A and B. A bill of exchange to which no document is attached when presentment for payment or acceptance is made: a. Pay to the order of X or Y the sum of P40. (Sgd. Trade acceptance b. A feature or characteristic of a bill of exchange not found in a promissory note: a. Documentary bill of exchange ANSWER: C 9. Clean bill of exchange d. C) To A or B. Unconditional promise in writing ANSWER: B 8. ANSWER: D 7. d. Promise in writing to pay d. (Sgd.
a. Which of the following is not a personal defense? a. Traveler's check d. Want of delivery of complete instrument c. Forgery of a signature c. Postal money order c. Which of the following may be raised as defense against any holder? a. Non-delivery of a complete instrument d. Treasury warrant b. Crossed check ANSWER: B 10. Failure of consideration ANSWER: B 11. Want of consideration b. Insertion of wrong date . Absence of consideration b. Certified check b. Which of the following instruments is negotiable? a. Trade acceptance ANSWER: D 12. Manager's check c. Letter of credit d.
"I acknowledge my debt to P" d. Does not require the drawer to have funds with the drawee b. Want of delivery of an incomplete instrument ANSWER: D 13. Which of the following is not a promise to pay. a. "I agree to pay P" b. "I oblige myself to pay P" ANSWER: C 14. "I bind myself to pay P" c. May be drawn against a person other than a bank c. Is required to presented for acceptance in certain cases ANSWER: C 15. The signification by the drawee of his assent to the order of the drawer. A check differs from a bill of exchange because a check: a. Recommendation . Approval c. and thus will make an instrument non-negotiable? a. Is always payable on demand d. Acceptance b.d.
d. 48 hours d. except by: . 24 hours c. given by the drawee or acceptor for the dishonor. An instrument payable to bearer may be negotiated through any of the following means. Protest d. if any. Certification b. Affidavit ANSWER: C 18. Indorsement ANSWER: A 16. 72 hours ANSWER: B 17. The time within which the drawee is allowed to give his acceptance is a. A formal written statement made by a notary public at the request of a holder of a bill of exchange stating that he has demanded acceptance or payment of the bill. 12 hours b. Demand Letter c. and that it has been refused. with the reasons. a.
Mere delivery c. Payment in due course by the accommodated party. Which is it? is not a restrictive a. b. Special indorsement plus delivery b. An indorsement that prohibits the further negotiation of the instrument.a. An indorsement that constitutes the indorsee an agent of the indorser. c. When the principal debtor becomes the holder in his own right before maturity. . An indorsement that vests title in the indorsee in trust for some other person. c. An indorsement that constitutes the indorser a mere assignor of the title to the instrument. ANSWER: B 20. Blank indorsement plus delivery d. Intentional cancellation of the instrument by the holder. whether blank or special ANSWER: D 19. b. d. Which of the following does not discharge the instrument? a. One of the following indorsement. No delivery is required as long as there is an indorsement.
Restrictive endorsement Answer: A A facultative endorsement is one where the indorser enlarges his liability by waiving the usual deman and notice of dishonor. holder. No. No. he increases his liability. Y pays for the honor of C. X does not pay and F has duly protested non-payment. Q#3: Ariel issued a note to Brando. Y can ask reimbursement from A. as the drawee. The bill was successively endorsed to C. Which of the following statement is wrong? a. the negotiable instrument is subject to any defenses as if it were non-negotiable. But a holder who derives through a holder in due course and who is not a party to any fraud or illegality affecting the instrument. and succeeds to both the rights and duties of the holder as regards for the party whose honor he pays and all the parties liable to the latter. b. Brando issued the note for consideration to Cecil who is a holder in due course. Qualified endorsement c. ANSWER: C Q#1: A draws a bill payable to B or order with X. Alternative endorsement d. c. No. has all the rights of such former holder in respect of all parties prior to the latter. E is discharged. Q#2: When an endorser waives presentment and notice of dishonor. Facultative endorsement b. His endorsement is: a. although David acquired the rights of Cecil. C is discharged. Yes. b. There was a total failure of consideration. Answer: C Sec. 58 of Negotiable Instrument Law provides that in the hands of any holder other than the holder in due course. Answer: C All parties subsequent to the party whose honor it is paid are discharged but the payor for honor is subrogated for. D is discharged. because David acquired the note for consideration. . c.d. D. Payment in due course by or on behalf of the principal debtor. because David knew the failure of consideration. E and F. Cecil indorsed the note to David who knew of the failure of consideration. Can David successfully collect from Ariel? a. d. becuase David is not a holder in due course. d. a holder in due course and he was not a party to any illegality.
The holder in due course doctrine will strip away a defense of duress unless. §§ 3-305(a)(1)(ii) & cmt. 3-305(b). A defense that the making of a note was induced by this particular kind of fraud -. 58. the defense makes an obligation entirely null and void. 1. Answer (A) is incorrect. 1. may go against Ariel beacuse of Sec. under applicable law. 1. Answer (C) is incorrect. 3-305(b). otherwise.often called real fraud or fraud in the factum -. a holder in due course. (D) A defense that the note is voidable at the option of the maker because its making was induced by duress. §§ 3-305(a)(1)(ii) & cmt. he would be disqualified. The holder in due course doctrine does not strip away a defense that the making of a note was an ultra vires act of a corporation if the defense renders the obligation completely null. (B) A defense that the maker was tricked into signing the note in the belief that the note was merely a receipt and not a promissory obligation. David acquired all the rights of Cecil. The defense described in Answer (D) makes the obligation merely voidable. Payment Systems Topics: Negotiable Instruments (Definitions. Negotiable Instruments: Definitions. and not void. It is worth noting the David acquired the rights of Cecil because he was not a party to fraud. a holder in due course. (C) A defense that the obligation of the note was discharged by a bankruptcy court. 3-305(b). Holder in Due Course Doctrine) Negotiable Instruments: Holder in Due Course Doctrine Question: A holder in due course takes an instrument free of which of the following defenses? (A) A defense that making the note was an ultra vires act nullifying the obligation of its corporate maker. 3-305(b). §§ 3-305(a)(1)(iv).is not stripped away by the holder in due course doctrine. A defense based on discharge in bankruptcy is not stripped away. Basic Principles Question: . Answer (B) is incorrect.David. Answer: Answer (D) is the correct answer. §§ 3-305(a)(1)(iii) & cmt. The defense therefore is stripped away.
a check). D) 2 INCORRECT The laws of negotiable instruments are governed by the UCC. Lucy is not an "accommodation party" under section 3-419(a) because she is the direct beneficiary of the value given for the note . Lucy signs a negotiable promissory note in which she promises to make monthly payments to Dealer. but that term is not defined by UCC Article 3 Your Results: The correct answer for each question is indicated by a . Answer: Answer (B) is the correct answer. B) . As Lucy is executing a note in which she is promising to make payments.Lucy buys a new car from Dealer on credit. Lucy may be a "borrower" under the common understanding and use of that term. An "accommodation party" cannot be the direct beneficiary of the value given for the note.g. (C) accommodation party.. 1 CORRECT To be negotiable. Lucy is not a "drawer" under section 3-103(a)(5) because she executed a note. rather than a draft (e." Answer (A) is incorrect. she fits the definition of "maker" at section 3-103(a)(7): "a person who signs or is identified in a note as a person undertaking to pay. (B) maker. Answer (C) is incorrect. C) must be payable on demand or at a definite time.the new car. A) FTC. Under UCC Article 3. Answer (D) is incorrect. A) must bear the signature of the drawee or acceptor. B) can be oral or written. (D) borrower. Lucy's signature on the note makes her a(n) (A) drawer. an instrument can be for a fixed or flexible amount of money. At Dealer's request.
D) 7 INCORRECT An assignment is . A) holder. C) requires the words "pay to the order of" on the back of a check. you are called the maker. C) the instrument is not negotiable. A) requires the words "with recourse" on the back of the check. D) 3 INCORRECT When you receive a check made out to you in your name. B) consists of the signature alone on the instrument. D) 6 CORRECT A blank indorsement requires the words "without recourse" on the back of the check. C) drawer. C) notes and drafts. D) 4 INCORRECT When the date is omitted the date when the instrument is negotiated is considered the date of issue. C) CDD.FDIC. A) drafts and checks. D) 5 INCORRECT There are two basic kinds of negotiable instruments: drafts and bonds. B) assignee. A) the instrument must be returned and the date inserted. B) the date when the instrument is received is considered to be the date of issue. B) notes and CDs.
A) is found with a fraud in the inducement. A) the bank is liable for any loss that you might suffer. D) 9 CORRECT A bad check is one that the bank deems to old to honor. C) the transfer of your rights under a contract to someone else.a restrictive indorsement that allows for the transfer of an instrument from one party to A) another. C) is signed by someone other than the drawer. a negotiable instrument payable to the order of the person holding it. B) the transfer of an agreement in such a way that the transferee becomes a holder. and without notice. D) 8 CORRECT A holder in due course is a holder who accepts all liability for the paying of the instrument. is the note still . Hypo: if I give a promissory note to my friend Jack in return for $50 and say that it will be payable subject to his sister going on a date with me. B) provides for oral stop-payment orders that are binding. in good faith. D) NEGOTIABLE INSTRUMENTS & BANKING Q1. A) allows electronic processing to clear checks quickly and safely. D) 10 CORRECT The Check 21 Act requires you reconcile your bank account within 21 days of receiving your statement. B) takes an instrument for value. C) authorizes the use of restricted debit cards by minors. B) is drawn on an account in which there is insufficient funds. C) accepts a properly negotiated instrument.
But here I said to Jack that I would pay him only if his sister went out with me. however.negotiable? A1. assuming that they did not also sign the instrument “without recourse. Indorsers 4 and 5 would have to seek payment from indorsers 1 and 2. this makes it non-negotiable. there is no written evidence that my obligation to pay the note is conditional. The effect of writing “without recourse” is that the indorser will not be liable to any future transferee should payment be refused on the negotiable instrument. This is a verbal statement! Thus. Q2. my oral statement to Jack did not make the note non-negotiable. if the maker or drawee refuses to pay. If payment of a note is conditioned on the happening of a certain event. and the third indorser signs “without recourse” she will not be liable to indorsers 4 and 5 if the note is later dishonored i.” . What is the legal effect of such an indorsement on the liability of the indorser? A2. Articulate what is meant by a qualified indorsement.e. A transferor of a negotiable instrument gives a “qualified indorsement” when she signs her name and then writes “without recourse” below her signature. the note is negotiable. Trick question! Yes. Example: if a note is signed by five indorsers. Thus.
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