Exam 22: Creation of Negotiable Instruments

Which of the following must a promissory note contain to make it negotiable?

The primary benefit of a negotiable instrument is that it can be used as a substitute for money.

Article 3 of the UCC governs the use of negotiable instruments.

Rubber-stamps are not recognized as signing instruments under the UCC.

A check is a type of promissory note.

List out the functions of a negotiable instrument.

The issuance of a negotiable instrument is known as negotiation.

To be negotiable, a draft or check must contain the drawer's unconditional order to pay a payee.

A(n)________ is type of instrument that is payable to anyone in physical possession of the instrument and presents it for payment when it is due.

Mike deposited $100, 000 in a bank and procured a certificate of deposit on it, payable to himself, and for repayment in 5 years with a 5 percent interest rate.A year after that, Mike borrows $25, 000 from Jill, and gives her a promissory note to repay it in one year.As collateral, Mike gave Jill the certificate of deposit and asked to put in a prepayment clause to which Jill agreed.They mutually agreed that Mike could repay in monthly payments, as mentioned it in the note. -In which of the following ways will the prepayment clause help Jill?

The financial institution upon which the check is written is the payee of a check.

Notes cannot be named after the security that underlies the note.

Mike deposited $100, 000 in a bank and procured a certificate of deposit on it, payable to himself, and for repayment in 5 years with a 5 percent interest rate.A year after that, Mike borrows $25, 000 from Jill, and gives her a promissory note to repay it in one year.As collateral, Mike gave Jill the certificate of deposit and asked to put in a prepayment clause to which Jill agreed.They mutually agreed that Mike could repay in monthly payments, as mentioned it in the note. -Mike deposited $100, 000 in a bank and procured a certificate of deposit on it, payable to himself, and for repayment in 5 years with a 5 percent interest rate.A year after that, Mike borrows $25, 000 from Jill, and gives her a promissory note to repay it in one year.As collateral, Mike gave Jill the certificate of deposit and asked to put in a prepayment clause to which Jill agreed.They mutually agreed that Mike could repay in monthly payments, as mentioned it in the note. If Mike defaults on the payment even after one year, which of the following is true of the foreclosure options Jill has with the certificate of deposit Mike gave her?

Instruments that are payable upon an uncertain act or event are not negotiable.

A maker or drawer can appoint an agent to sign a negotiable instrument on his or her behalf.

Which of the following is true about a certificate of deposit?

________ of the UCC is a model code that establishes rules for the creation of, transfer of, enforcement of, and liability on negotiable instruments.

If the payee of the instrument is not mentioned on the face of the instrument, it is considered nonnegotiable.

Who is the acceptor of a draft in a draft transaction?

Acceptances for drafts can be done orally.