NEGOTIABLE INSTRUMENT LAW MIDTERM

ATTY. RAY ANTHONY FAJARITO P.S.B.A-QC

TEST I. TRUE OR FALSE

1. A payor for honor must not be a party to the instrument.

2. A promise to pay 5 days after the death of a person is payable
at a determinable future time.
3. An instrument payable to order becomes a bearer instrument if
the last endorsement is an endorsement in blank.
4. A bearer instrument becomes an order instrument if the
instrument is endorsed through a special endorsement.
5. A promissory note payable to the order of a fictitious person is a
bearer instrument.
6. The Negotiable Instrument Law requires that the payee must be
named or otherwise indicated therein with reasonable certainty.
7. If the negotiable instrument is endorsed by conditional
endorsement, the instrument becomes non-negotiable because it already
contains a condition.
8. The negotiability of the instrument is ended when it is
restrictively endorsed.
9. The maker can refuse to pay the holder who is a holder in due
course if an incomplete but delivered instrument is completed beyond the
authority given.
10. A promissory note which promises to pay the amount on a
stated installment still contains a promise to pay a sum certain in money.

TEST II. MULTIPLE CHOICE

1. First Statement. As a general rule, the person secondarily

liable on the instrument is released from liability if there is delay in the
presentation of payment of the instrument. Second statement. The
defense for complete but undelivered instrument is merely a personal
defense if the same is negotiated without authority.

a. Both statements are true.

b. The first statement is true while the second statement is
false.
c. The first statement is false while the second statement is
true.
d. Both statements are false.

2. First Statement. Every holder is presumed to be a holder in due

course. Second statement. Presentment for payment is not necessary
to charge the person primarily liable.

a. Both statements are true.

 b. The first statement is true while the second statement is
false.
c. The first statement is false while the second statement is
true.
d. Both statements are false.
3. First Statement. The person primarily liable is required to pay
according to the original tenor of a materially altered instrument if the same
is in the hands of a holder in due course. Second statement. Drawer is
a party to a bill of exchange.
.
a. Both statements are true.
b. The first statement is true while the second statement is
false.
c. The first statement is false while the second statement is
true.
d. Both statements are false.

4. First statement. If an instrument is issued when overdue the

holder cannot be a holder in due course. Second statement. The maker is a
party to a bill of exchange.

a. Both statements are true.

b. The first statement is true while the second statement is
false.
c. The first statement is false while the second statement is
true.
d. Both statements are false.

5. First Statement. The sum is still certain even if it contains an

additional provision which undertakes to pay attorney’s fees and cost of
collection in case of default. Second statement. A negotiable
promissory note becomes non-negotiable if it contains a seal.

a. Both statements are true.

b. The first statement is true while the second statement is
false.
c. The first statement is false while the second statement is
true.
d. Both statements are false.

6. First Statement. If an incomplete and undelivered promissory

note is completed and negotiated without authority, the maker can refuse to
pay even if the holder is a holder in due course. Second statement. An
accommodated party can still be held liable on the instrument even if no
notice of dishonor is given to him.

a. Both statements are true.

b. The first statement is true while the second statement is
false.
 c. The first statement is false while the second statement is
true.
d. Both statements are false.

7. First Statement. The drawer’s liability on the instrument is

primary. Second statement. The acceptor admits the existence of
the drawer, the genuineness of his signature and his capacity and authority
to draw the instrument.

a. Both statements are true.

b. The first statement is true while the second statement is
false.
c. The first statement is false while the second statement is
true.
d. Both statements are false.

8. First Statement. The drawee has no liability on the instrument

unless and until he accepts the same. Second statement. A person
who negotiates the instrument by delivery warrant to the transferee and to
subsequent parties that the instrument is valid and subsisting.

a. Both statements are true.

b. The first statement is true while the second statement is
false.
c. The first statement is false while the second statement is
true.
d. Both statements are false.

9. First Statement. Protest is required in foreign bill of exchange.

Second statement. The order to pay to two or more drawee can be in the
alternative.

a. Both statements are true.

b. The first statement is true but the second statement is false.
c. The first statement is false but the second statement is true.
d. Both statements are false.

10. First Statement. An intentional cancellation of the instrument

discharges the instrument. Second statement. An order to pay out of a
particular fund is conditional order to pay.

a. Both statements are true.

b. The first statement is true while the second statement is
false.
 c. The first statement is false while the second statement is
true.
d. Both statements are false.

III. DECIDE WITH REASON

1. The bill of exchange ostensibly issued by Aldwin in the amount

of Php 500,000.00 was presented to Miko for acceptance by Rico. Miko
accepted the instrument for Php 400,000.00. After the instrument was
accepted by Miko, Rico negotiated it to Ramon. On the due date, Ramon
presented it for payment to Rico but the latter found out that the signature
of Aldwin is a forgery and so he refused to pay Ramon despite that the
latter is a holder in due course. Is the refusal of Rico justified? Why.

XXXXX GOODLUCK XXXXX