Question 1

Explain the purposes of endorsement.

Accepted Answer

An endorsement is a means to carrying out the following purposes: transferring title to an instrument that is payable to order;giving increased security to the payee or subsequent holder;identifying the party who is entitled to payment;and acknowledging partial payment.

Question 2

The difference between a cheque and draft is that

Accepted Answer

A) the drawee on a cheque is a bank or financial institution,whereas the drawee of a draft may be a financial institution or bank. 
B) a cheque is a bill of exchange drawn against a bank that is payable on demand,whereas a draft is not payable on demand. 
C) a cheque is a bill of exchange drawn against a person that is payable on demand,whereas a draft is drawn against a financial institution. 
D) a cheque is not a negotiable instrument,whereas a draft is a negotiable instrument. 
E) a cheque is a bill of exchange,whereas a draft is not a bill of exchange. 
A) the drawee on a cheque is a bank or financial institution,whereas the drawee of a draft may be a financial institution or bank. 
B) a cheque is a bill of exchange drawn against a bank that is payable on demand,whereas a draft is not payable on demand. 
C) a cheque is a bill of exchange drawn against a person that is payable on demand,whereas a draft is drawn against a financial institution. 
D) a cheque is not a negotiable instrument,whereas a draft is a negotiable instrument. 
E) a cheque is a bill of exchange,whereas a draft is not a bill of exchange. A

Question 3

Tina gave Zach a cheque for $1000 to pay for a TV.Zach took the cheque to Cash Mart,he endorsed it,and Cash Mart paid him $950.Cash Mart is a holder in due course of a negotiable instrument.

Accepted Answer

A) True 
 B)False  True

Question 4

Liability of the drawer,acceptor,or maker on a bill of exchange is dependent on

Accepted Answer

A) the delivery of the bill. 
B) the negotiation of the bill. 
C) the presentment of the bill. 
D) the signing of the bill. 
E) the signing and delivery of the bill. 
A) the delivery of the bill. 
B) the negotiation of the bill. 
C) the presentment of the bill. 
D) the signing of the bill. 
E) the signing and delivery of the bill.

Question 5

On the death of a maker or acceptor of a bill of exchange,her or his liability passes to her or his personal representatives.

Accepted Answer

A) True 
 B)False

Question 6

Certification is an undertaking by the bank to pay the amount of the cheque to the drawer when it is presented for payment.

Accepted Answer

A) True 
 B)False

Question 7

Explain the effect of certification of a cheque.

Accepted Answer

Certification is an undertakin

Question 8

Which of the following defences is available to the drawer of a cheque who is being sued by a holder in due course of a negotiable instrument?

Accepted Answer

A) The cheque was obtained through breach of contract. 
B) The payee was negligent. 
C) The drawer's signature was a forgery. 
D) The cheque was obtained through misrepresentation. 
E) A and B 
A) The cheque was obtained through breach of contract. 
B) The payee was negligent. 
C) The drawer's signature was a forgery. 
D) The cheque was obtained through misrepresentation. 
E) A and B

Question 9

Sight drafts can be used as collection devices.

Accepted Answer

A) True 
 B)False

Question 10

The two classes of negotiable instruments are

Accepted Answer

A) promissory notes and drafts. 
B) promissory notes and cheques. 
C) those governed by the Bills of Exchange Act and those governed by other statutes and other laws. 
D) sight drafts and time drafts. 
E) those governed by the Bills of Exchange Act and share certificates. 
A) promissory notes and drafts. 
B) promissory notes and cheques. 
C) those governed by the Bills of Exchange Act and those governed by other statutes and other laws. 
D) sight drafts and time drafts. 
E) those governed by the Bills of Exchange Act and share certificates.

Question 11

Presentment of a bill is necessary where the bill of exchange is payable at sight,or after sight,because there is the need to determine the time at which payment is due.

Accepted Answer

A) True 
 B)False

Question 12

What is a time draft?

Accepted Answer

A time draft is a bill of exch

Question 13

A minor who makes a cheque payable to a holder is always liable to the holder.

Accepted Answer

A) True 
 B)False

Question 14

Delivery of a bill may be actual or constructive.

Accepted Answer

A) True 
 B)False

Question 15

Where a bill of exchange is payable at sight,or after sight,presentment is necessary.

Accepted Answer

A) True 
 B)False

Question 16

Negotiable instruments began as a form of bill of exchange.

Accepted Answer

A) True 
 B)False

Question 17

Explain why putting a stop payment on a cheque may not be binding on a bank.

Accepted Answer

This is because the relationship between

Question 18

Negotiable instruments are different from other contracts.Explain this difference.

Accepted Answer

The transfer of negotiable instruments i

Question 19

Explain the difference between a bearer instrument and an order instrument.

Accepted Answer

A bearer instrument is one that is payab

Question 20

Jack provides James with a cheque in payment for the delivery of goods.Later,when Jack checks the goods,he realizes that James has delivered the wrong goods.Jack wishes to cancel the cheque.Jack may go to the bank and request a

Accepted Answer

A) cancel document. 
B) negotiable instrument. 
C) de-certification order 
D) stop payment order. 
E) stop payee document. 
A) cancel document. 
B) negotiable instrument. 
C) de-certification order 
D) stop payment order. 
E) stop payee document.

Exam 19: Negotiable Instruments

Explain the purposes of endorsement.

The difference between a cheque and draft is that

Tina gave Zach a cheque for $1000 to pay for a TV.Zach took the cheque to Cash Mart,he endorsed it,and Cash Mart paid him $950.Cash Mart is a holder in due course of a negotiable instrument.

Liability of the drawer,acceptor,or maker on a bill of exchange is dependent on

On the death of a maker or acceptor of a bill of exchange,her or his liability passes to her or his personal representatives.

Certification is an undertaking by the bank to pay the amount of the cheque to the drawer when it is presented for payment.

Explain the effect of certification of a cheque.

Which of the following defences is available to the drawer of a cheque who is being sued by a holder in due course of a negotiable instrument?

Sight drafts can be used as collection devices.

The two classes of negotiable instruments are

Presentment of a bill is necessary where the bill of exchange is payable at sight,or after sight,because there is the need to determine the time at which payment is due.

What is a time draft?

A minor who makes a cheque payable to a holder is always liable to the holder.

Delivery of a bill may be actual or constructive.

Where a bill of exchange is payable at sight,or after sight,presentment is necessary.

Negotiable instruments began as a form of bill of exchange.

Explain why putting a stop payment on a cheque may not be binding on a bank.

Negotiable instruments are different from other contracts.Explain this difference.

Explain the difference between a bearer instrument and an order instrument.

Jack provides James with a cheque in payment for the delivery of goods.Later,when Jack checks the goods,he realizes that James has delivered the wrong goods.Jack wishes to cancel the cheque.Jack may go to the bank and request a

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