Professional Documents
Culture Documents
Nego Nego Nego
Nego Nego Nego
)
Jose, is an example of:
a. Conditional endorsement
b. Qualified endorsement
c. Facultative endorsement
d. Restricted endorsement
ANSWER: D
ANSWER: B
ANSWER: C
4. When an endorser waives presentment and notice
of dishonor, he increases his liability. His
endorsement is:
a. Alternative endorsement
b. Qualified endorsement
c. Facultative endorsement
d. Restrictive endorsement
ANSWER: C
ANSWER: C
ANSWER: D
a. Promise to pay
b. Order to pay
c. Promise in writing to pay
d. Unconditional promise in writing
ANSWER: B
a. Trade acceptance
b. Bank acceptance
c. Clean bill of exchange
d. Documentary bill of exchange
ANSWER: C
ANSWER: B
a. Absence of consideration
b. Forgery of a signature
c. Non-delivery of a complete instrument
d. Failure of consideration
ANSWER: B
a. Treasury warrant
b. Postal money order
c. Letter of credit
d. Trade acceptance
ANSWER: D
a. Want of consideration
b. Want of delivery of complete instrument
c. Insertion of wrong date
d. Want of delivery of an incomplete instrument
ANSWER: D
ANSWER: C
ANSWER: C
a. Acceptance
b. Approval
c. Recommendation
d. Indorsement
ANSWER: A
a. 12 hours
b. 24 hours
c. 48 hours
d. 72 hours
ANSWER: B
a. Certification
b. Demand Letter
c. Protest
d. Affidavit
ANSWER: C
ANSWER: D
ANSWER: B
ANSWER: C
Q#1:
A draws a bill payable to B or order with X, as the drawee. The bill was successively endorsed to C, D,
E and F, holder. X does not pay and F has duly protested non-payment. Y pays for the honor of C.
a. D is discharged.
b. E is discharged.
c. C is discharged.
d. Y can ask reimbursement from A.
Answer: C
All parties subsequent to the party whose honor it is paid are discharged but the payor for honor is
subrogated for, 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.
Q#2:
When an endorser waives presentment and notice of dishonor, he increases his liability. His
endorsement is:
a. Facultative endorsement
b. Qualified endorsement
c. Alternative endorsement
d. Restrictive endorsement
Answer: A
A facultative endorsement is one where the indorser enlarges his liability by waiving the usual deman
and notice of dishonor.
Q#3:
Ariel issued a note to Brando. There was a total failure of consideration. Brando issued the note for
consideration to Cecil who is a holder in due course. Cecil indorsed the note to David who knew of the
failure of consideration. Can David successfully collect from Ariel?
Answer: C
Sec. 58 of Negotiable Instrument Law provides that in the hands of any holder other than the holder
in due course, 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, has all the rights of such former holder in respect of all parties prior to the
latter.
David, a holder in due course, may go against Ariel beacuse of Sec. 58. David acquired all the rights of
Cecil, a holder in due course. It is worth noting the David acquired the rights of Cecil because he was
not a party to fraud; otherwise, he would be disqualified.
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.
(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.
(C) A defense that the obligation of the note was discharged by a bankruptcy court.
(D) A defense that the note is voidable at the option of the maker because its making was
induced by duress.
Answer:
Answer (D) is the correct answer. The holder in due course doctrine will strip away a
defense of duress unless, under applicable law, the defense makes an obligation entirely
null and void. §§ 3-305(a)(1)(ii) & cmt. 1; 3-305(b). The defense described in Answer (D)
makes the obligation merely voidable, and not void. The defense therefore is stripped away.
Answer (A) is incorrect. 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. §§ 3-305(a)(1)(ii) & cmt. 1; 3-305(b).
Answer (B) is incorrect. A defense that the making of a note was induced by this
particular kind of fraud -- often called real fraud or fraud in the factum -- is not stripped
away by the holder in due course doctrine. §§ 3-305(a)(1)(iii) & cmt. 1; 3-305(b).
Question:
Lucy buys a new car from Dealer on credit. At Dealer's request, Lucy signs a negotiable
promissory note in which she promises to make monthly payments to Dealer.
Under UCC Article 3, Lucy's signature on the note makes her a(n)
(A) drawer.
(B) maker.
(D) borrower.
Answer:
Answer (B) is the correct answer. As Lucy is executing a note in which she is promising
to make payments, 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."
Answer (A) is incorrect. Lucy is not a "drawer" under section 3-103(a)(5) because she
executed a note, rather than a draft (e.g., a check).
Answer (C) is incorrect. Lucy is not an "accommodation party" under section 3-419(a)
because she is the direct beneficiary of the value given for the note - the new car. An
"accommodation party" cannot be the direct beneficiary of the value given for the note.
Answer (D) is incorrect. Lucy may be a "borrower" under the common understanding and
use of that term, but that term is not defined by UCC Article 3
Your Results:
The correct answer for each question is indicated by a .
1 CORRECT
To be negotiable, an instrument
UCC.
A)
FTC.
B)
FDIC.
C)
CDD.
D)
3
INCORRECT When you receive a check made out to you in your name, you are called the
maker.
A)
holder.
B)
assignee.
C)
drawer.
D)
4
INCORRECT When the date is omitted
the date when the instrument is negotiated is considered the date of issue.
A)
the date when the instrument is received is considered to be the date of issue.
C)
requires the words "pay to the order of" on the back of a check.
D)
7
INCORRECT An assignment is
a restrictive indorsement that allows for the transfer of an instrument from one party to
A) another.
the transfer of an agreement in such a way that the transferee becomes a holder.
C)
the bank is liable for any loss that you might suffer.
B)
requires you reconcile your bank account within 21 days of receiving your statement.
A)
Q1. 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, is the note still
negotiable?
A1. Trick question! Yes, the note is negotiable. If payment of a note is conditioned on
the happening of a certain event, however, this makes it non-negotiable. But
here I said to Jack that I would pay him only if his sister went out with me. This is
a verbal statement! Thus, there is no written evidence that my obligation to pay
the note is conditional. Thus, my oral statement to Jack did not make the note
non-negotiable.
Q2. Articulate what is meant by a qualified indorsement. What is the legal effect of
such an indorsement on the liability of the indorser?
A2. A transferor of a negotiable instrument gives a “qualified indorsement” when she
signs her name and then writes “without recourse” below her signature. 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.
Example: if a note is signed by five indorsers, and the third indorser signs
“without recourse” she will not be liable to indorsers 4 and 5 if the note is later
dishonored i.e. if the maker or drawee refuses to pay. Indorsers 4 and 5 would
have to seek payment from indorsers 1 and 2, assuming that they did not also
sign the instrument “without recourse.”