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ANSWERS in Negotiable Instruments Final Exam:

1. No. If a bank refuses to pay a check (notwithstanding the sufficiency of funds), the payee-holder
cannot, in view of Sections 185 and 189, sue the bank. The payee should instead sue the drawer who
might in turn sue the bank. Section 189 is sound law based on logic and established legal principles: no
privity of contract exists between the drawee-bank and the payee.

2. A. Crossed check is a check with two parallel lines, written diagonally on the upper left corner thereof.
It has the following characteristics:

a.) For deposit only and cannot be encashed.

b.) It can be endorsed but only once, to one who has an account with the bank.

c.) It is a warning that the check is issued for a particular purpose only, and it is incumbent upon
the holder to ascertain whether the purpose had been achieved; otherwise, he is not considered as a
holder in due course.

B. Cancelled check – one marked or stamped “paid” and/or “cancelled” by or on behalf of a drawee
bank to indicate payment thereof.

C. Manager’s check – a manager’s check is one drawn by the bank’s manager upon the bank itself. It is
similar to a cashier’s check both as to effect and use.

D. Certified check –a check of a drawer with the word “certified” stamped on it. The purpose of
procuring a check to be certified is to impart strength and credit to the paper by obtaining an
acknowledgement from the certifying bank that the drawer has funds therein sufficient to cover the
check, and securing the engagement of the bank that the check will be paid upon presentation.

3. No. As a result of the certification, the indorsers as well as the payee are discharged from liability.

4. No, since it is payable at a fixed period after the occurrence of an event which may not happen.

5. No, a bill may not be addressed to two or more drawees in the alternative or in succession. To do
makes the order conditional.

6. Not negotiable. The instalments are not stated; hence the amount for each instalment is uncertain.

7. Negotiability is not affected, as the date is not one of the requirements for negotiability. Omission of
date is not fatal.

Also, the holder may insert therein the true date of issue or acceptance. 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.
8. Yes, it is payable to bearer as the name of the payee does not purport to be the name of any person.

9. Negotiable. An acknowledgment may become a promise by the addition of words by which a promise
of payment is naturally implied, such as, “payable,” “payable on a given day,” “payable on demand,”
“paid…when called for.”

10. Not negotiable. It is a mere acknowledgment of the existence of a debt.

11. P50K, but with the obligation to hold P20K for Y’s benefit.

12. Yes, as long as the indorser received value for the restrictive indorsement.

13. Yes, the PN is negotiable even though the amount is stated in foreign currency.

14. No. The fraud committed by Alpha is a personal defense not available against a holder in due course.

15. N, being O’s immediate negotiator of bearer note.

16. Reasonable time is meant not more than 6 months from the date of issue. Beyond said period, it is
unreasonable time and the check becomes stale.

17. No, since F can treat U as maker due to the minority of T, the drawee.

18. Yes, because the acceptance is in reality a clear assent to the order of the drawer to pay.

19. Where the instrument is paid by a party secondarily liable thereon, it is not discharged; but the party
so paying it is remitted to his former rights as regard all prior parties, and he may strike out his own and
all subsequent indorsements, and again negotiate the instrument, except:

a.) Where it is payable to the order of a third person, and has been paid by the drawer; and

b.) Where it was made or accepted for accommodation, and has been paid by the party
accommodated.

20. Renunciation means the act of surrendering a right or claim without recompense, e.g., when you
execute a quitclaim in favour of any party.

21. A.) Negotiability is affected as the maker is given the option, making the note conditional.

B.) Negotiability is not affected as the option is given to the holder.