Professional Documents
Culture Documents
1. The following are the conditions to constitute a holder in due course, C) To constitute a notice of defect, holder must have actual knowledge.
except:
a. Only A and B are incorrect.
a. He took the instrument in good faith and for value. b. Only A and C are correct.
b. He has knowledge of infirmity in the instrument. c. All are correct.
c. He took the instrument complete and regular in its face. d. All are incorrect.
d. He became the holder of the instrument before it was overdue.
Answer: b. He has knowledge of infirmity in the instrument. The NIL in Sec. 52 5. Jeff issues a promissory note payable to the order of Ancheta. Ancheta
par. 5 provides that at the time of negotiation, the holder in due course must not indorses in blank to Ryan. Paul stole the promissory note from Ryan and
have notice of infirmity or defect in the title of the person negotiating it. delivered the note to Mansano, a holder in due course. Mansano
delivered to Joseph, who was informed by Ryan that said note was stolen.
2. A obtained the note of M through simple fraud and negotiates it to Z, Z a. Joseph can collect from Jeff.
to Y, Y to X, and X to E, the present holder. Which is correct? b. Joseph cannot collect from Jeff.
c. Joseph should ran after Paul for payment.
a. E is presumed a holder in due course. d. Both B and C can collect.
b. E is a mere holder for value only.
c. E must prove that he is actually a holder in due course. Answer: a. Joseph can collect from Jeff. Joseph delivered his title through a
d. All are correct. holder in due course and was not a part a party to any fraud or illegality
affecting the instrument. Hence, Joseph is subrogated to the rights of a
Answer: a. E is presumed a holder in due course. Every holder is prima facie holder in due course. Jeff cannot raise the personal defense of complete and
presumed a holder in due course (sec. 59, NIL) undelivered.
3. The following are the rights of an ordinary holder, except: 6. Dan, a holder in due course, came to Nick, the maker, for collection of
payment. In order for Nick to escape liability, which defense can he
a. He may sue on the instrument on his own name. interpose against Dan.
b. He may receive payment in due course in effect discharges the
instrument. a. Failure of consideration
c. He may enforce payment for the full amount thereof against all parties b. Want of delivery but complete instrument
liable thereon. c. Fraud in essecontractus
d. He holds the instrument subject to the same defenses as if it were non- d. Spoliation
negotiable.
Answer: C. Fraud in essecontractus. This is a real defense which can stand
Answer: c. He may enforce payment for the full amount thereof against all against a holder in due course.
parties liable thereon. An ordinary holder cannot enforce payment against a
party who has a defense.
7. Joey upon hearing that his best friend is in need of money issued a check
payable to his best friend Romel. Romel, for consideration, indorsed it to
4. A) Notice of defect or infirmity to an agent is deemed a notice to the Dondy, an ordinary holder. The following are all correct, except:
principal.
B) Notice to a partner is a notice to the partnership. a. Joey cannot be liable to Dondy.
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b. Romel was a holder for value. Answer: d. Incomplete and undelivered instrument. It is a real defense
c. Romel should be liable to Dondy. available against any holder, whether holder in due course.
d. If Dondy is a holder in due course, Joey can be held liable to Dondy.
Answer: b. Romel was a holder for value. Love and affection does not 11. These stamen are presented to you:
constitute value.
A) Minority is a real defense available against a holder in due course.
B) Prior parties of a minor indorser can set-up minority as a defense
8. Which of the following is not a right of a holder in due course? against a holder in due course.
a. He can hold the instrument free from defect of title of prior parties. a. Both statements are true.
b. He can hold the instrument free from personal defenses. b. Both statements are false.
c. He can hold the instrument free from real defenses. c. Only statement A is true.
d. He can enforce payment of the instrument for the full amount thereof d. Only statement B is false.
against all parties liable thereon.
Answer: a. Both statements are true. Minority as a defense passes to the
Answer: c. He can hold the instrument free from real defenses. A Real minor. On the minor can avail of said defense.
defense is available even against a holder in due course.
12. Gloria makes a promissory note for Three Million to the order of Benigno.
9. Amer made a promissory note indicating that Nassief is the maker and is To secure benigno’s debt to Mar of Two million, he pledges the nore to
payable to order of Amer. Amer forges Nassief’s signature. Amer indorses Mar as a security.
the note to Norsad and Norsad to Ahmed, the present holder.
A) Mar may recover Three Million, holding the surplus One million for
a. Whether Ahmed is a holder in due course or not, he cannot collect to Benigno, if the note matured.
Nassief. B) If Gloria has defense of failure of consideration against Benigno,
b. Whether Ahmed is a holder in due course or not, he can collect to Mar can collect Two Million if he is a holder in due course.
Nassief.
c. Whether Ahmed is a holder in due course or not, he can collect to Amer. a. Both statements are true.
d. Ahmed can collect to Nassief, provided he is a holder in due course. b. Both statements are false.
c. Only statement A is true.
Answer: d. Ahmed can collect to Nassief, provided he is a holder in due d. Only statement B is false.
course. Forgery is a real defense which is available even against a holder in due
course. Answer: a. Both statements are true. Mar is deemed a holder for value to the
extent of his lien.
14. The following are precluded from raising the defense of forgery except: a. drawer is guilty of negligence
a. The forger as he cannot raise his own malfeasance as a defense b. drawer whose signature was forged
b. The indorsees and persons negotiating the instrument by delivery c. drawee’s negligence
as they do not warranted that the instrument is genuine and in all d. a&b
respects what it purports to be. e. b&c
c. Those who are barred by estoppels or by their own negligence from
raising the defense of forgery. 3. If a bank pays a forged check
d. The acceptor with respect to the signature of the drawer as he admits
the existence of the drawer, the genuineness of his signature, and his a. bank is liable
capacity and authority to draw the instrument. b. drawee bank bears the loss
c. drawee bank considered as paying out of its funds
15. The rules on liabilities of parties on a forged documents in a promissory d. b&c
note are: e. all of the above
Statement A: A party whose indorsement is forged on a note payable
to order and all parties prior to him including the maker 4. In the case of PNB vs. CA, for bearer instrument the signature of payee or
can be held liable by any holder. holder is
Statement B : A party whose indorsement is forged on a noted
originally payable to bearer and all other parties prior to a. unnecessary to pass title to the instrument
him including the maker may be held liable by the holder b. essential to transfer title to the instrument
in due course provided that it was mechanically c. necessary to indorse the instrument
complete before the forgery. d. unnecessary to indorse the instrument
Statement C : A maker whose signature was forged cannot be held e. none of the above
liable by any holder.
5. Indorser of order instrument warrants that
f. All statements are true.
g. Both statements A and B are true. a. instrument is genuine and in all respect what it purports to be
h. Both statements A and C are true. b. has a good title to it
i. Both statements B and C are true. c. all prior parties had capacity to contract
j. All statements are false. d. instrument is valid and subsisting
e. all of the above
NEGOTIABLE INSTRUMENTS LAW
6. In the case of PNB vs. CA, for order instruments the signature of its rightful
FORGERY order is
1. Forged signature makes the instrument a. unnecessary to pass the title to the instrument
b. essential to transfer title to the instrument
a. wholly inoperative c. necessary to indorse the instrument
b. unenforceable d. unnecessary to indorse the instrument
c. invalid e. none of the above
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d. none of the above
7. Payment under a forged instrument is
13. Irrespective of good faith in paying a forged check
a. violation of a bank’s duty
b. not the drawer’s order a. bank is not liable
c. drawee’s bank right to reimbursement b. bank is liable
d. none of the above c. bank and drawer are liable
d. b&c
8. In the case of Samsung vs. FEBTC, drawee who has paid upon the forged e. none of the above
signature bears the loss except when
14. Forgery is committed through
a. drawee’s negligence
b. negligence can be traced on the part of the drawer a. dishonor of checks
c. a&b b. counterfeit and alteration
d. none of the above c. counterfeit-making or fraudulent alteration of writing and may consist
in the signing of another’s name or the alteration of an instrument in
9. Fiduciary relationship exists between a bank and depositor where the name, amount, description of the person and the like, with intent
thereby to defraud
a. simple care and diligence is required d. none of the above
b. extraordinary care and diligence is required
c. highest degree of care and diligence is required 15. In the case of Samsung vs. FEBTC, condition which bars a party from
d. b&c setting up the defense of forgery
14. The phrase "to any subsequent indorser" refers to: Assuming all the other requisites of negotiability are present, which
a. indorsers in good faith of the foregoing instruments are not negotiable?
b. indorsers without any knowledge of any fact which would a. Instruments I and II b. Instruments I and
impair the validity of the instrument or render it useless. III
c. indorsers who is obliged to pay. b. Instruments II and III d. Instruments III and IV
d. indorsers between the drawer and the holder.
Answer: D; Sec. 5
The phrase "to any subsequent indorser" refers to any indorsers between
the drawer and the holder. They may also be called as intervening c. The following are functions of a negotiable instrument. Choose the
indorsers. exception:
a. It is a substitute for money.
15. A qualified indorser is liable to the following except: b. It increases credit circulation.
a. Lack of good title to the instrument indorsed c. It increases purchasing power in circulation.
b. lack of capacity to contract on the part of prior parties d. It extinguishes obligation if its delivery is accepted by the creditor.
c. insolvency of the person primary liable Answer: D
d. forgery e. Which of the following instruments is not negotiable for the reason that
the instrument is not payable at a determinable future time?
The effect of qualified indorsement is merely to limit his liability. He is secondarily a. 30 days after demand, drawer A directs B to pay C or order P10,000.
liable for breach of his warranties as an indorser under Section 65. Warranty b. 20 days after the death of Z, I promise to pay to the order of B,
liability is still present even if indorsement is qualified unless such indorsement P10,000. Sgd. Q
specifically excludes warranties. But the qualified indorser is not liable to the 10 days after A passes the Bar exams, I promise to pay to the order of B P10,000.
indorsee if the instrument is dishonored for some other reason like the Sgd. CSgd. B
insolvency of the person primarily liable
Answer: C
Multiple Choice Questions in Negotiable Instruments (Section 1-9) c. Which of the following is negotiable?
1. Which of the following renders the instrument non-negotiable? a. “I promise to pay B or order P20,000 if he will pass the Bar exams
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on 2013.” (Sgd.) A e. An instrument is considered payable on demand:
b. “I promise to pay B or order P20,000 in four instalments.” (Sgd. A) a. When no time of payment is required
c. “I promise to pay B or order P20,000, 30 days after the death of his b. When payable to order
father.” (Sgd.) A c. When the last indorsement is in blank
d. “I promise to pay B, P20,000.” (Sgd.) A d. When the last indorsement is restricted
Answer: C Answer: A
e. Which of the following instruments is not negotiable for the reason that e. Which of the following is not negotiable?
the instrument is not payable at a determinable future time? a. “Pay to C or order, P20,000 with interest at 2.5%.” To XY, signed: CB
a. “On the death of X. I promise to pay to the order of B P1,000.” (Sgd) b. “Pay to the order of C within six months from date the sum of
A P20,000 with interest at 12% per annum.” To TP, signed: XY.
b. “On or before October 30, 2015, I will promise to pay B or his order c. “Pay to C or bearer P20,000 six months after date. If not paid on
P10,000.” (Sgd A) due date, I agree to pay collection and attorney’s fees.” To MN,
c. Sixty days after sight, I promise to pay to the order of B P5.000.” signed: DG.
(Sgd.) A d. “Pay to C or order P20,000 on instalment.” To OP, signed: AB.
d. “Ten days before the death of X, I promise to pay B or his order
P10,000.” (Sgd. ) A Answer: D
5. The acceptor warrants the following EXCEPT 8. What is liability of Romeo to Shylock?
A. Existence of the drawer A. Primary
B. Genuineness of the indorser’s signature B. Secondary
C. Existence of the payee C. Not liable at all
D. Authority and capacity to draw the bill D. Discharged from payment thereof
Answer B.
Reason: The acceptor does not admit the genuineness of the indorser’s Answer C.
signature because it is only the signature of the drawer that he warrants Reason: Romeo is not liable to Shylock because his signature was forged.
although the purported indorsement was on the bill at the time it was He can raise the defense of forgery.
accepted. (First nat. bank v. Northwestern Nat. Bank).
Portia issued a PN payable to Juliet or bearer. Juliet indorsed the note to Romeo. 9. An indorser is liable to the following EXCEPT:
Romeo placed the note in his drawer, which was stolen by the janitor William. A. All indorsers subsequent to him
William indorsed the note to Antonio who in turn delivered It to Shylock, a holder in B. All indorsers prior to him
due course, without indorsement. C. Any holder in any order
D. None of the above.
6. What is the liability of Portia to Shylock? Answer: A
A. Primary Reason: Every indorser is liable to all indorsers subsequent to him , but
B. Secondary not those indorsers prior to him.
C. Not liable at all
D. Discharged from payment thereof 10. As a general rule, an agent or broker who negotiates an instrument without
indorsement is liable as:
Answer A. A. Maker or drawer
Reason: Portia is the maker of PN, thus she is primarily liable to Shylock, a B. Accommodation party
holder in due course. The presence of special indorsements on the PN does C. General indorser
D. Qualified indorser
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the collecting bank can debit the account of the depositor for his breach of
Answer C warranty. (Jai-alai Corp. of the Phil V. BPI, G.R. No. L-39432, August 6, 1975)
Reason Sec. 69 NIL. The agent or broker who negotiates an instrument
without indorsement incurs all liabilities prescribed to a general indorser 13. Brad indorsed a check to Angelina. Julie stole the check from Angelina, forged
unless he discloses the name of his principal and the fact that he is only the latter’s signature and indorsed it to Pitt. Holly Bank encashed the check
acting as an agent. upon presentment thereof by Pitt. Is the bank liable?
A. YES, it is the primary duty of the bank to know that the check was duly
11. The following are warranties provided by the person negotiating an endorsed by the original payee.
instrument EXCEPT: B. YES, the bank who encashed a stolen check always bears the loss.
A. That the instrument is genuine and in all respects what it purports to be C. NO, the bank is only bound to know the signature of the drawee, not of
B. That he has a good title to it the payee
C. That all prior parties had capacity to contract D. NO, the bank can raise the defense of forgery since the payee’s signature
D. That he has knowledge of any fact which would impair the validity of the was forged.
instrument or render it useless. Answer: A.
Reason: The bank has the primary duty to know that check was duly indorsed
Answer: D by the original payee and, where it pays the amount of the checks to a third
Reason: A person negotiating an instrument warrants that he has NO person who has forged the signature of the payee, the loss falls on the bank
knowledge of any fact which would impair the validity of the instrument who encashed the checks. A bank engaged in business is invested with public
or render it useless. interest and its duty to protect its clients and all persons who transacts with
it. (Traders Royal bank v. RPN, G.R. No. 138510, Oct. 10, 2002)
12. Can a collecting bank debit the account of the depositor when the check 14. The following are the liabilities of an acceptor EXCEPT:
indorsed to it were forged? A. Engages to pay according to the original tenor of the bill
B. Admits the existence of the drawer, the genuineness of his signature,
A. YES, because the depositor of a check as indorser warrants that it is genuine and his capacity and authority to draw the instrument
and in all respect what it purports to be. C. Admits the existence of the payee
B. YES, because the depositor of a check as holder warrants that the check is D. Admits the capacity of the payee to indorse.
free from any defect that impair the validity of the instrument or render it Answer A
useless Reason: The acceptor engages to pay according to the TENOR OF HIS
C. NO, the collecting bank was negligent, thus it cannot recover. ACCEPTANCE.
D. NO, the collecting bank has no authority to debit until notice of dishonor has
been given.
Answer: B
Reason: When checks deposited had forged indorsements and the collecting 15. Mariah issued a check to Carrie. Carrie subsequently indorsed it to Celine.
bank as a consequence of such forgery, was made to pay the drawee bank, When Celine is about to encash the check, the drawee, Superbank refused to
encash it due to insufficiency of funds. Celine sued Carrie for payment of
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money. Carrie moved for dismissal of the case on the contention that Mariah c) Both a and b
is an indispensable party. Does the argument hold water? d) None of the above
A. YES, there is privity between the drawer and the holder
Answer: C
B. YES, the drawer is liable together with the indorser.
C. NO, there is no privity between the drawer and the holder. 4. When the maturity of payment falls on a Sunday, when shall be the
D. NO, indorsers are always secondarily liable. presentment for payment?
a) The next succeeding business day.
Answer: C b) The last working day prior to that Sunday.
Reason: The drawer is merely secondarily liable. The indorser (Carrie in the c) The Friday before the Sunday.
d) The Saturday before the Sunday.
above case) warranted that upon due presentment, the checks were to be
accepted or paid, or both, according to their tenor, and in case they were Answer: A
dishonored, she would pay the corresponding amount. After instrument is
dishonored by non-payment, indorsers cease to be secondarily liable. They 5. The instrument without grace falls due on April 30, 2006 which is a
become principal debtors whose liability becomes identical to that of the Sunday, when shall be the presentment for payment?
original obligor. (Tuason v. Heirs of Bartolome ramos, G.R. No. 156262, July a) Any time before the maturity date.
b) April 30, 2006 for it is the maturity date.
14, 2005)
c) May 1, 2006 for it is the next day after April 30, 2006 which falls on a
Sunday.
d) May 2, 2006.
Patrick Famillaran
1. The following are instances when a negotiable instrument is considered Answer: D
to be dishonored except.
a) If it is not accepted when presented for acceptance. 6. Is the Notice of Dishonor needs to be signed?
b) If it is not paid when presented for payment at maturity. a) Yes, for a signature signifies acceptance.
c) If presentment is excused or waived and the instrument is past due b) No, a written notice that is not signed would not invalidate it.
and unpaid. c) Yes, to be sure that there is consent from the person who issued it.
d) All of the above. d) No, as long as it is in possession of a holder in due course.
Answer: D Answer: B
12. The following are cases where notice of dishonor is not required to be given 1. The following are material alterations except:
to an indorser, except a. Substituting the words “or bearer” for “Order”
a) Where the indorser is the person to whom the instrument is b. Writing “protest waived” above a blank indorsement
presented for payment. c. Changing the date from which interest is to run
b) When the drawee is a fictitious person and the indorser was aware of d. Changing “I promise to pay” to “we promise to pay
that fact at the time he indorsed the instrument. 2. Any change in the instrument which affects or changes the the liability
c) When the holder is a holder in due course. of the parties in any way.
d) Where the instrument was made for his accommodation. a. Material alteration
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b. Immaterial alteration c. Blank paper
c. Spoliation d. Delivery
d. Material particular 10. Alteration by a stranger is called
3. Changes in the following constitutes material alteration except a. Spoliation
a. Date b. Forgery
b. Sum payable c. Mechanical act
c. Interest d. Ultra vires act
d. Serial number 11. This means the transfer of the possession of the instrument by the
4. When the date of the instrument is in blank. The ______ may fill the maker or drawer with the intent to transfer title to the payee
blank by writing the date intended. a. Delivery
a. Payee b. Issue
b. Drawee c. Assign
c. Holder d. Transfer
d. Maker 12. ABC signs a piece of paper and delivers it to XYZ with the intention of
5. What acts are necessary to complete an instrument? making the instrument negotiable
a. Mechanical act of writing, and delivery a. XYZ can fill it up for any amount
b. Mechanical act of writing, or delivery b. XYZ has implied authority to complete it
c. Mechanical act of writing, and issuing c. A and B
d. Mechanical act of writing, or issuing d. None of the above
6. In order that a person may have a prima facie authority to convert a 13. It is the first delivery of the instrument complete in form to a person
signature on a blank paper into a negotiable instrument and fill it up for who takes it as a holder
any amount, the following must be present. Except. a. Assignment
a. The blank paper bears the name of the payee b. Negotiation
b. The blank paper bears the signature of the maker or drawer c. Issuance
c. It was delivered by the person making the signature d. Indorsement
d. It was delivered in order that the paper may be converted into a 14. A signature on a blank paper delivered by the person making the
negotiable instrument signature in order that the paper may be converted into a negotiable
7. When may blanks in the document be filled? instrument operates as a __________ authority to fill it up as such for
a. When an instrument is wanting in any material particulars any amount
b. When an instrument is not delivered a. Absolute
c. When an instrument is negotiated b. General
d. When an instrument is assigned c. Special
8. When an instrument is a mechanically incomplete but delivered d. Prima facie
instrument, any person who becomes a party thereto after its 15. The writing of the signature on a paper attached to the negotiable
completion shall be liable to: instrument
a. A holder in due course a. Allonge
b. Any holder b. Procuration
c. Maker c. Forgery
d. Indorser d. alteration
9. It operate as a prima facie authority to fill up an instrument as such for Reiner O. Querubin
any amount
a. Indorsement Negotiable Instruments Law
b. Signature Atty. Ma. Ella Cecilia Escalante Dumlao
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1st Semester 2012-2013 d. Does not avoid the instrument in the hands of any holder
1. An instrument “Payable to Angel Locsin or order the sum of P1, 000. Signed X” 7. Which of the following do not destroy the negotiability of an instrument?
is: a. Alternative Drawees
a. Non-negotiable b. Joint Drawees
b. A bearer instrument since it is an instrument payable to the c. Drawees in succession
order of a fictitious person. d. None of the above
c. Negotiable because it complies with the requisites of
negotiability. 8. When no time for payment is expressed, it is :
d. A bearer instrument since the name of the payee does not a. Payable on demand
purport to be the name of any person. b. Payable on a period fixed by the court
c. Payable on the date subsequently agreed upon
2. The negotiable character of an instrument otherwise negotiable is not affected d. Payable based on the circumstances of each instrument
when it gives the _______ an election to require something to be done in lieu of
payment in money. 9. Which of the following is not one of the requisites in order that an agent who
a. Holder signs a negotiable instrument escapes personal liability?
b. Drawer a. Duly authorized
c. Drawee b. Such authorization must be in writing
d. Maker c. Adding words to his signature indicating that he signs as an
agent
3. Which of the following is a negotiable instrument? d. Disclosed his principal
a. Bonds
b. Postal Money Order 10.
c. Trust Receipt I promise to pay X or order P 1,000.
d. Treasury Warrant
(Signed) Y
4. The liability of the drawee is: To : Z
a. Zero liability
b. Primary
c. Secondary before acceptance The instrument is:
d. Secondary after acceptance a. A promissory note since it contains the word “promise”
b. A bill of exchange because it is addressed to a drawee
5. Which of the following is not a bearer instrument? c. Non-negotiable because it is ambiguous and therefore does
a. Pay to cash not conform to the requisites of negotiability
b. Pay to the order of the king of Atlantis d. Either a promissory note or a bill of exchange
c. Pay to john doe or order
d. Pay to the bearer, X 11. An instrument with the words “I promise to pay” signed by two or more
persons give rise to:
6. Insertion of a wrong date: a. No Liability
a. Avoids the instrument in the hands of a holder in due course b. Joint Liability
b. Avoids the instrument in the hands of any holder c. Solidary Liability
c. Does not avoid the instrument in the hands of a holder in due d. Either Joint or Solidary Liability depending on the holder
course
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12. An instrument payable on February 29, 2015 is payable on: to Lando?
a. Either on February 28, 2015 or on March 1, 2015
b. Demand since the date February 29, 2015 does not exist a. Yes, because Bobby took the instrument from Danilo, a
c. Date fixed by court holder in due course.
d. February 29, 2016, the nearest year in which the month of b. Yes, because Bobby did not participate in the breach of trust
February has 29 days committed by Eva against Lando.
c. No, because Bobby had knowledge of the breach of trust
13. An instrument payable to ______ (blank) or order is: committed by Eva against Lando.
a. Negotiable since the holder may insert the name of the payee d. No, because Lando is not a holder in due course.
b. A bearer instrument because the name of the payee does not
purport to be the name of any person (Source: Notes and Cases on Banking and Negotiable Instruments Law
c. Negotiable since it can be proven by extrinsic evidence who the Volume I, 2009 Edition, page 140-141 by Timoteo B. Aquino)
intended payee is
d. Non-negotiable
2. Aldo purchase an overdue negotiable promissory note signed by Bobby.
14. If the signature is so placed upon the instrument that it is not clear in what Therefore, Aldo is not a holder in due course. Can Aldo still enforce the
capacity the person intended to sign, he is deemed : instrument to Booby and held the latter still liable for the amount stipulated in
a. Not a party to the instrument the instrument?
b. A maker or a drawer
c. Indorser a. No, because the promissory note is already overdue.
d. Holder in due course b. No, because Aldo is not a holder in due course.
c. Yes, because the Negotiable Instrument Law does not provide
15. Acceleration clause dependent on the ________ makes the instrument non- that a holder who is not a holder in due course may not
negotiable. recover on the instrument in any case.
a. Holder d. Yes, because Booby cannot raise the defense that the
b. Maker or drawer promissory note is overdue.
c. Drawee
d. All of the above since the time of payment is not on demand, or (Source: Chan Wan vs. Tan Kim, G.R. No. L-15380, September 30,
at fixed, or determinable future time 1960, 109 Phil. 706)
3. Azalea has with her a postdated check in the amount of P10,000.00. Azalea
needs money so she asks Betty to discount her check. In return for Azalea’s
Choose the best answer. check, Betty issued a check in favor of Azalea less the agreed interest. Which of
the following statement is not correct?
1. Lando issued a promissory note in favor of Eva and authorized the a. Betty is a holder for value if Azalea already encashed the
latter to fill up the amount in blank with his loan account in the check.
amount of P10,000.00. However, Eva inserted P100,000.00 in violation b. Betty is a holder for value when the check she issued
of the instruction given to her by Lando. Eva negotiated the note to was impaired without her fault.
Juan who had knowledge of the infirmity. Juan, in turn, negotiated the c. Betty is a holder for value if Azalea negotiated the check
note to Danilo for value and who had no knowledge of the infirmity of to a third person who is a holder in due course.
the instrument. Supposed Danilo negotiated the note to Bobby for d. Betty can never be a holder for value.
value but with knowledge of the infirmity, can Bobby enforce the note
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(Source: Notes and Cases on Banking and Negotiable Instruments Law b. acquisition of instrument for an illegal consideration
Volume I, 2009 Edition, page 132 by Timoteo B. Aquino) c. want of delivery of incomplete instrument
d. forgery
4. Who is a “holder” contemplated in the Negotiable Instruments Law? (Source: The Philippine Negotiable Instruments Law, 2004 Edition,
page 206 by Hector S. De Leon and Hector M. De Leon, Jr.)
a. the payee in a bearer instrument
b. the payee or the indorsee of a bill or note who is in
possession of the instrument, or the bearer thereof 7. Angelo draws a bill for P10,000.00 with Budoy as payee and Xavier
c. the bearer of an order instrument as drawee. Budoy indorses the bill to Cathy, who fails to give a value
d. the holder of a bearer instrument thereon. Cathy indorses the bill to Daniella who, on maturity date pay
the amount of P6,000.00 only. Five (5) days after such payment,
(Source: Notes and Cases on Banking and Negotiable Instruments Law Daniella learns that Cathy did not give value for the instrument. Can
Volume I, 2009 Edition, page 121 by Timoteo B. Aquino) Daniella be considered a holder in due course?
6. Which of the following is not a real defense and, therefore, may not (Source: Chamberlain vs. Geer, 237 Pac. 719)
be set up against a holder in due course?
a. incapacity as far as incapacitated person is concern 9. Which of the following statement is correct?
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value, indorses the note to Baby. Which of the following
a. A claim of a holder in due course can still be defeated by the statement is incorrect?
person primarily and secondarily liable if the latter has in its
favor personal and real defenses. a. Baby is deemed a holder for value not only as regard Annie
b. A claim of a holder in due course cannot be defeated by a real but also as regards Mary and Pedro.
defense of forgery. b. Baby is deemed a holder for value only as regard Annie but
c. Forgery cannot be raised against a holder in due course. not as regards Mary and Pedro.
d. A holder in due course is free from real defenses. c. If Baby is a holder in due course, he may enforce payment
for the full amount of the note against Mary, Pedro and Annie.
(Source: Notes and Cases on Banking and Negotiable Instruments Law d. If Baby is not a holder in due course, Mary can set up the
Volume I, 2009 Edition, page 138 by Timoteo B. Aquino) defense of want of consideration.
a. No, because Ben refused to say how and why the check was
passed to him by Amy.
b. No, because from the moment the check was stolen, no one
outside of Reema can be termed a holder in due course as the
latter had not indorsed it in due course.
c. Yes, because Ben acquired the check in good faith and for
value.
d. Yes, because Ben had no knowledge that the check was stolen
by Amy.