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Since 1977

RFBT.3205 VILLEGAS/AGUILAR
Negotiable Instrument and Bouncing Checks Law MAY 2022

QUESTIONS
1. It is a defense which attaches to the instrument a. Yes. There being absence of consideration on the
irrespective of the parties and is predicated on the part of B.
principle that the right sought to be enforced has never b. Yes. Since B is a minor and minority is a personal
existed or has ceased to exist. defense.
a. real defense c. Yes. Since B is a minor and minority is a real
b. personal defense defense.
c. equitable defense d. Both b and c
d. absolute defense e. Correct answer not given
e. Correct answer not given
7. When a signature is placed upon a negotiable
2. “Pay to Y or order P10,000.00 or deliver to him 100 instrument that it is not clear in what capacity the
cavans of first class rice.” person making the same intended to sign, what is his
(Sgd) X liability?
To: Z a. drawer
a. Is the above instrument negotiable? b. maker
b. Yes, it contains all the requisites in order for the c. payee
instrument to be negotiable. d. indorser
c. Yes, it is payable to order and all the necessary e. forger
parties are present.
d. No, the order is conditional inasmuch as the choice 8. An indorsement made on a slip of paper physically
as to what is to be paid or what is to be delivered is attached to the instrument so as to become part of it.
given to the drawee. a. letter of credit
e. No, the word “order or bearer” is not found in the b. allonge
instrument. c. sight draft
f. None of the above d. demand draft
e. protest
3. In case the instrument is so ambiguous that there is a
doubt whether it is bill or a note, the instrument shall 9. “Pay to A in trust for B”, the indorsement is –
be treated as – a. qualified
a. promissory note b. special
b. bill of exchange c. allonge
c. non-negotiable d. restrictive
d. the holder may treat it as either at his election e. correct answer not given
e. none of the above
10. A person who, not otherwise a party to an instrument,
4. Statement No. 1: A negotiable instrument can be places thereon his signature in blank before delivery.
transferred by negotiation. a. qualified indorser
Statement No. 2: A non-negotiable instrument can be b. general indorser
transferred only by assignment. c. regular indorser
a. Statement 1 is correct; Statement 2 is incorrect d. irregular indorser
b. Statement 1 is incorrect; Statement 2 is correct e. acceptor for honor
c. Both are correct
d. Both are incorrect 11. A feature or characteristic of a bill of exchange not found
e. Correct answer not given in a promissory note.
a. promise to pay
5. Statement No.1: If the instrument is payable to bearer, b. order to pay
it is negotiated by delivery. c. promise in writing to pay
Statement No. 2: If the instrument is payable on d. unconditional promise in writing to pay
demand, it is negotiated by the indorsement of the
holder completed by delivery. 12. Absence or failure of consideration is a matter of
a. Statement 1 is correct; Statement 2 is incorrect defense against a person who is –
b. Statement 1 is incorrect; Statement 2 is correct a. holder in due course
c. Both are correct b. not a holder in due course
d. Both are incorrect c. holder of the instrument
e. Correct answer not given d. none of the above

6. A issued a check payable to the order of B, a minor, in 13. An instrument which is originally negotiable ceases to
the amount of P10,000.00. B indorsed and delivered the be negotiable when
instrument to C who paid value therefore in good faith. a. restrictively indorsed
When C presented the instrument for payment to the b. qualified indorsement
drawee bank X, the latter refused to pay the instrument. c. the last and only indorsement is in blank
C gave notice of dishonor to A and B. Can C collect from d. none of the above
B?

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14. An instrument is rendered non-negotiable if –

a. There is an indication of a particular fund out of 22. Which of the following documents is negotiable?
which reimbursement is to be made a. pawn ticket
b. There is an indication of a particular account to be b. certificate of stock
debited with the amount. c. letter of credit
c. The instrument is payable out of a particular d. dock warrant
account e. bills in set
d. none of the above
23. It means the payee or indorsee of a bill or note, who is
15. Which of the following terms mean that the instrument in possession of it or the bearer thereof.
is payable on demand? a. holder
a. Pay to X or order P10,000.00 at sight b. maker
b. Pay to Y order P10,000.00 c. drawee
c. Pay to Z or order P10,000.00 on demand d. drawer
d. All of the above e. acceptor
e. None of the above
24. Who among the parties are not primarily liable?
16. “I promise to pay Jose Cruz or order P1,000.00, if he is a. acceptor
going to pass the departmental exam in Law 3”. b. maker
(Sgd. Pedro Santos) c. acceptor supra protest
This promissory note is not negotiable because: d. certifier of a check
a. It is not payable at a fixed determinable future time. e. correct answer not given
b. It is payable upon the happening of a specified
event which is not certain to happen. 25. Which of the following instruments is a type of
c. It is not payable a fixed period after sight. promissory note?
d. None of the above a. bills in set
b. check
17. Which of the following is not a real defense? c. foreign bill of exchange
a. The maker is of minor age d. due bill
b. An incomplete and undelivered instrument e. bank draft
c. The date of the note was erroneously filled up
d. None of the above 26. He is the person named by the drawer or indorser as
the one to whom the holder may resort in case of need,
18. An instrument is payable at a determinable future time that is, in case the bill is dishonored by anon-acceptance
when expressed to be so payable: or non-payment.
a. At a fixed period after date or sight a. acceptor for honor
b. On or before a fixed or determinable future time b. payor for honor
specified c. certifier of a bill
c. Payable upon a contingency and the contingency d. referee in case of need
happens e. allonge
d. At a fixed period after the occurrence of a specified
event which is certain to happen 27. Statement 1 – A notarial act of dishonor is required in
e. None of the above. acceptance supra protest.
19. Although a negotiable instrument does not constitute Statement 2 – Consent of the holder is required
legal tender, it serves as: acceptance for honor.
a. medium of exchange for most commercial a. Statement 1 is true, Statement No. 2 is false;
transaction b. Statement 1 is false, Statement No. 2 is true;
b. medium of credit transaction c. Both are true
c. substitute for money d. Both are false
d. all of the above
28. Statement 1 – The acceptor for honor is primarily liable
20. The relationship between the accommodation party and Statement 2 – The payor for honor is secondarily liable.
the accommodated party is one of: a. Statement 1 is true, Statement No. 2 is false;
a. principal debtor and surety b. Statement 1 is false, Statement No. 2 is true;
b. principal debtor and guarantor c. Both are true
c. principal debtor and agent d. Both are false
d. none of the above
29. Two of the following can make a protest, who is not
21. Statement No. 1 – Notice of dishonor is a mandatory allowed?
requirement for a foreign bill of exchange. a. holder
Statement No. 2 – A promissory note is an unconditional b. b.notary public
order in writing addressed by one person to another c. any respectable resident in the presence of two
signed by the maker, engaging to pay on demand or at witnesses
a fixed or determinable future time a sum certain in d. Answer not given
money to order or to bearer.
a. Statement No. 1 is correct, Statement No. 2 is 30. All of the following instances require presentment for
incorrect acceptance, which is the exception?
b. Statement No. 1 is incorrect, Statement No. 2 is a. demand instrument
correct b. bill payable after sight
c. Both are correct c. stipulation of the parties
d. Both are incorrect d. bill payable elsewhere than the residence of the
e. Correct Answer not given drawee

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31. The following instances allow qualified acceptance,
which is the exception?
a. partial
b. qualified as to time
c. local
d. acceptance of the bill before it is drawn
32. I. The primary functions of commercial paper are to
serve as a substitute for money and as a credit device.
II. To be negotiable, the terms of a promise or order
must be included on the face of the instrument.
III. For purposes of negotiability, a promise to pay in
goods is treated as equivalent to a promise to pay a fix
amount of money if the value of the goods can be easily
calculated at the time payment is due.
a. All statement are true.
b. All statements are false.
c. I and II are true; III is false.
d. Answer not given
33. I. All negotiable instruments can be transferred by
negotiation only.
II. The law on contracts does not govern the assignment
of negotiable instruments.
III. A financial instrument will be negotiable only if it
has the word “negotiable” printed on it.
a. All statements are true.
b. All statements are false.
c. I and II are false; II is true;
d. None of the above.
34. As part of a loan to pay improvements to her restaurant,
Paz executes a negotiable instrument in favor of Ofelia.
They are the only parties to the instrument. A
negotiable instrument that has only two parties is a –
a. bank draft
b. check
c. promissory note
d. indorsement
35. Ferdinand owes P10,000 in unpaid taxes. Using a white
handkerchief, he executes an instrument for that
amount that otherwise meets the requirements of
negotiability. This instrument is likely –
a. negotiable
b. non-negotiable, because a handkerchief is not
sufficiently permanent;
c. non-negotiable, because the government does not
appreciate such gesture.
d. Non-negotiable, because an instrument must be on
paper so that it may be processed efficiently in the
banking system.
36. Diner’s Restaurant issues an instrument in favor of
General Supplies, Inc. For the instrument to be a. a.
negotiable, it need not –
a. be an unconditional promise or order to pay.
b. be payable on demand or at a specific time.
c. be signed by Diner’s Restaurant.
d. recite the consideration given in exchange for a
promise to pay.
37. To borrow money to finance the start-up of her
consulting business, Belle executes an instrument in
favor of Foremost National Bank. For the instrument to
be negotiable, Belle’s signature –
a. must be placed in the lower right-hand corner of the
instrument.
b. may be placed anywhere on the instrument
c. must be placed at the bottom of the instrument.
d. None on the above.
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38. Miguel, the chief financial officer of Great Computers
Co., signs an instrument that includes the phrase “ this
debt arises from the sale of 100 hard drives.” This
instrument is –
a. negotiable
b. non-negotiable, because it states an express
condition.
c. non-negotiable, because obligations with respect to
the note are stated in another writing.
d. None of the above.
39. Julia executes a promissory note in favor of General
Credit Corp. that allows the holder to demand payment
of the entire amount due, with interest, if Julia fails to
make a payment. This is –
a. a penal clause
b. an acceleration clause
c. an extension clause
d. a surety clause
40. Arturo transfers an instrument to Alberto by assigning
his rights in the instrument to Alberto. This transfer is
governed by –
a. Administrative law
b. Civil law
c. Criminal law
d. Constitutional law
41. Maria signs a check payable to Jose and gives it to Jose.
Jose indorses the check to Pedro to satisfy a prior debt.
Pedro indorses the check to Sebastian as a birthday
present. Sebastian indorses the check to Juan. The
instrument was issued when –
a. Sebastian indorsed the check to Juan.
b. Pedro indorsed the check to Sebastian.
c. Jose indorsed the check to Pedro.
d. Maria gave the check to Jose.
42. I. An accommodation maker is primarily liable on an
instrument
II. An accommodation party that pays an instrument
has a right of recourse against the party accommodated
III. An accommodated party can compel an
accommodation party to pay an instrument.
a. All statements are true.
b. All statements are false.
c. I and II are false; III is true.
d. I and II are true; III is false.
43. I. When an instrument is taken in payment of, or as a
security for, an antecedent, or prior debt, the value
requirement for holders in due course status is met.
II. A promise to give value in the future is normally
sufficient to confer the rights of a holder in due course
on one in possession of a negotiable instrument
III. A holder takes an instrument for value if he gives a
check as payment for it.
a. All statements are true.
b. All statements are false.
c. I and II are false; III is true.
d. II is false; I and III are true.
44. Nicanor, an accountant, gives Lerma, a niece, a check
for P2,000 as a graduation present. The check was
given to Nicanor as payment for work to be done for a
client. Nicanor, who indorses the check “without
recourse,” knows that the work has not yet been done,
but Lerma does not. Who is a holder in due course of
the check?
a. Nicanor only
b. Lerma only
RFBT.3205
EXCEL PROFESSIONAL SERVICES, INC.

c. Nicanor and Lerma c. The cashier, but not her bank.

d. None of the above d. No one

45. Frodo inherits a promissory note previously held by his 52. In a blank indorsement, the indorser renders himself
deceased grandmother. Frodo has no notice that the a. Primarily liable c. Solidarily liable
note has been dishonored or is overdue. Frodo has the b. Secondarily liable d. subsidiarily liable
rights of -
a. a holder only 53. Real and personal defenses may be raised between
b. a holder in due course a. Immediate parties c. intervening
c. both a holder and a holder in due course parties
d. none b. Remote parties d. subsequent
parties
46. Angelo, in good faith and for value, gets from Gerardo
a negotiable bearer instrument. Angelo does not know 54. This is a real defense
that Gerardo stole the instrument. Angelo is – a. Fraud in inducement
a. not a holder in due course, because the instrument b. Want of consideration
is a bearer instrument. c. Want of delivery of an incomplete instrument
b. not a holder in due course, because Angelo did not d. Duress in the absence of physical pressure
acquire the instrument in good faith because it was
stolen or it proceeds from a crime. BOUNCING CHECKS LAW (BP 22)
c. a holder in due course, because the good faith
requirement applies only to the holder, not the 55. S1 – “Drawn Against Insufficient Funds” is included in
transferor. the words ‘CLOSED ACCOUNT.”
d. None of the above S2 – The gravamen of the offense under BP 22 is the
act of making and issuing a bouncing check.
47. Aida writes a check to Marlyn that is drawn on her a. All statements are correct
account at Primary National Bank. Marlyn presents the b. All statements are incorrect
check to the bank for payment, and the bank accepts c. Only S1 is correct
the check. The bank is – d. Only S2 is correct
a. primarily liable
b. secondarily liable 56. S1 – Notice of dishonor under BP 22 may be oral or in
c. not liable for payment writing.
d. none of the above S2 – Violation of BP 22 is categorized as a transitory or
continuing crime.
48. Josefina is the maker of a P1,000 promissory note in a. All statements are correct
favor of Beth. Beth indorses the note to Dawn who, in b. All statements are incorrect
turn, indorses it to Mona, who then indorses it to Pia, c. Only S1 is correct
the present holder. If the note is dishonored by Josefina d. Only S2 is correct
after it is properly presented to her for payment by Pia,
then Pia, after giving timely notice to Beth and Mona, 57. S1 – Violation of BP 22 can be filed at the places of
may collect payment from – issue, delivery and dishonor of the check.
a. Beth only S2 – Check Kiting is a specie of fraud or fraudulent
b. Mona only practice of exchange of checks of approximately the
c. either Beth or Mona same dates and amounts.
d. neither Beth or Mona a. All statements are correct
b. All statements are incorrect
49. If Pia collects from Mona after having given notice of c. Only S1 is correct
Josefina’s dishonoring of the promissory note to both d. Only S2 is correct
Beth and Mona, then Mona –
a. must give notice to Beth before she can present the 58. S1 - BP 22 covers crossed check.
instrument to her. S2 – The word “credit” as used under BP 22 shall be
b. must give notice to Dawn before she can present construed to mean an arrangement or understanding
the instrument to her. with the bank for the payment of such check.
c. is not required to give notice to Dawn prior to her a. All statements are correct
presentation of the instrument for payment. b. All statements are incorrect
d. None of the above. c. Only S1 is correct
d. Only S2 is correct
50. Juan who does not understand English, is asked by Sam
to sign a piece of paper that Sam says is an application 59. Which of the following circumstances of dishonor of a
to open a bank account. In fact, the document was a check can be a basis for the prosecution under the
note. If later sued by a holder, Juan’s best defense bouncing check law?
would be – a. The check was returned unpaid with stamped “stop
a. duress payment,” although the drawer’s deposit was
b. mistake sufficient.
c. fraud in the inducement b. The check, drawn and issued in the Philippines, was
d. fraud in the execution dishonored by the drawee bank in a foreign country.
c. The check was presented to the bank for payment
51. Lora is a shop owner. If the cashier steals one of Lora’s 6 months after the date of issue.
checks and forges Lora’s signature, Lora can recover d. The drawer of the check paid its value within 5 days
from – from notice of dishonor.
a. her bank which can recover from the cashier.
b. her bank which cannot recover from the cashier.

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60. The accused was convicted under BP 22 for having
several checks which were dishonored by the drawee
bank on their due date because the accused closed her
account after the issuance of the checks. On appeal, she
argued that she could not be convicted under BP 22 by
reason of the closing of her account because said law
applies solely to checks dishonored by reason of
insufficiency of funds and that at the time she issued
the checks concerned, she had adequate funds in the
bank. Is her contention correct?
a. Yes, the application thereof would be tantamount to
an ex post facto law
b. Yes, the application thereof would be a violation of
the right against double jeopardy.
c. No, the law punishes two acts and the act in case at
bar falls under the second way of violating it
d. No, the proof beyond reasonable doubt was not
established
61. The period of prescription under BP 22 is 4 years
counted from –
a. Knowledge of Insufficiency of funds
b. Presentment of the check for payment from the
drawee bank
c. Dishonor of the check by the drawee bank
d. Date of the giving of the notice of dishonor to the
drawer
e. Lapse of the 5 banking days from the notice of
dishonor within which to make good the check
64. In order to give rise to the prima facie presumption of
knowledge of insufficiency of funds or credit, the
prosecution must show the following, except:
a. The first and third elements of the offense are
present
b. The check was presented within ninety days from
the date of the maturity of the check
c. Offender received an oral notice of dishonor
d. Despite the lapse of five banking days after
receiving notice, the check has not been paid by the
drawee
Nobody can go back and start a new beginning,
but anyone can start today and make a new ending.”
― Maria Robinson
“The STRUGGLE that you are in TODAY is developing the
STRENGTH you need for TOMORROW”
“The more you sweat in peace, the less you bleed in war”
End of RFBT.3205

62. A, a businessman, borrowed P500,000 from B, a friend

. To pay the loan, A issued a postdated check to be
presented for payment 30 days after the transaction.
Two days before the maturity of the check, A called up
B and told him no to deposit the check on the date
stated on the face thereof, as A had not deposited in the
drawee bank the amount needed to cover the check.
Nevertheless, B deposited the check in question and the
same was dishonored for insufficiency of funds. A failed
to settle the amount with B in spite of the latter’s written
demand received personally by. Is A guilty of violating
the Bouncing Checks Law?
a. No. A is not liable because of the timely order of
stop payment.
b. Yes. A is liable because the check was dishonored.
c. No. A is not liable because there was no intent to
defraud
d. It depends. If damage suffered by B is proven, then
he is liable; otherwise, he is not.

63. Jane is a money lender. Edmund is a businessman who

has been borrowing money from Jane by rediscounting
his personal checks to pay his loans. In March 2015, he
borrowed P100,000 from Jane and issued to her a check
for the same amount. The check was dishonored by the
drawee bank for having been drawn against a closed
account. When Edmund was notified of the dishonor of
the check, he promised to raise the amount within five
(5) days. He failed. Consequently, Jane sued Edmund
for violation of the Bouncing Checks Law. The defense
of Edmund was that he gave the check to serve as a
memorandum of his indebtedness to her and not
supposed to be enchased. Is the defense of Edmund
valid?
a. Yes, what the law punishes is the mere issuance of
a bouncing check
b. Yes, since the instrument is negotiable
c. No, since Memorandum checks are not covered by
BP 22
d. No, since Jane violated the terms of their contract

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