Question 1

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

Accepted Answer

A) True 
 B)False  False

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

Briefly identify two modern alternatives that are reducing the reliance on paper negotiable instruments and cash.

Accepted Answer

Early in the new millennium direct debit cards displaced credit cards in an increasing proportion of transactions.The trend currently is toward virtual wallets and digital currency.These are the important developing alternatives to paper negotiable instruments and cash.

Question 4

The bank on which a cheque is drawn is called

Accepted Answer

A) the accepting bank. 
B) the certifying bank. 
C) the promissory note bank. 
D) the drawee bank. 
E) the drawer bank. 
A) the accepting bank. 
B) the certifying bank. 
C) the promissory note bank. 
D) the drawee bank. 
E) the drawer bank.

Question 5

Use the fact situation above to answer the question. When Albert advised the bank that the cheque was lost and put the stop payment on it,he then asked the bank to replace it with another certified cheque.The bank responded by telling Albert that it would only replace the cheque if Albert entered into an indemnity agreement with the bank indemnifying the bank in the event the cheque was found and presented for payment.In this case

Accepted Answer

A) the bank can refuse to replace the lost certified cheque because it always has the right to refuse to honour any negotiable instrument. 
B) the bank can refuse to replace the lost certified cheque unless Albert agrees to give it the indemnity agreement. 
C) the bank cannot refuse to replace the lost certified cheque with another one because Albert is the original drawer. 
D) the bank cannot refuse to replace the lost certified cheque because the stop payment is effective to protect the bank if the original certified cheque is presented for payment. 
E) none of the above 
A) the bank can refuse to replace the lost certified cheque because it always has the right to refuse to honour any negotiable instrument. 
B) the bank can refuse to replace the lost certified cheque unless Albert agrees to give it the indemnity agreement. 
C) the bank cannot refuse to replace the lost certified cheque with another one because Albert is the original drawer. 
D) the bank cannot refuse to replace the lost certified cheque because the stop payment is effective to protect the bank if the original certified cheque is presented for payment. 
E) none of the above

Question 6

Explain the nature of the liability of a drawer on a draft and cheque.

Accepted Answer

The drawer of a draft undertakes that wh

Question 7

If a holder takes an instrument knowing it is defective,he is still a "protected" holder in due course if he acts promptly in correcting the defect.

Accepted Answer

A) True 
 B)False

Question 8

Given that the majority of negotiable instruments are now being replaced by electronic transactions and,further,that there is a movement toward digital currency and transactions,will the old method of doing business using bills of exchange and negotiable instruments one day find itself outdated and will such legislation become obsolete?

Accepted Answer

The development of bills of exchange and

Question 9

Albert,a supplier of goods,owes George $2000.00.Albert gives George a note for $2000.00 payable in 60 days.A couple of weeks later,George buys $800.00 worth of goods from Albert.If George has not paid Albert the $800.00 by the time the 60 days has expired and Albert claims payment of the $2000.00 note

Accepted Answer

A) Albert need not honour the note until George has paid him the $800.00. 
B) Albert must honour the note and pay the $2000.00. 
C) Albert can deduct,or set-off,the $800.00 owed by George against the $2000.00 that he owes and pay George $1200.00. 
D) Albert need not honour the $2000.00 note until a reasonable time after the 60 days expires. 
E) none of the above 
A) Albert need not honour the note until George has paid him the $800.00. 
B) Albert must honour the note and pay the $2000.00. 
C) Albert can deduct,or set-off,the $800.00 owed by George against the $2000.00 that he owes and pay George $1200.00. 
D) Albert need not honour the $2000.00 note until a reasonable time after the 60 days expires. 
E) none of the above

Question 10

Delivery of a negotiable instrument in payment

Accepted Answer

A) is only a conditional discharge. 
B) is an acceptance. 
C) is a guarantee of payment. 
D) completely discharges the debt. 
E) indemnifies the payor. 
A) is only a conditional discharge. 
B) is an acceptance. 
C) is a guarantee of payment. 
D) completely discharges the debt. 
E) indemnifies the payor.

Question 11

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

Accepted Answer

The transfer of negotiable instruments i

Question 12

Only real defences can be used to block the claim of a holder in due course.

Accepted Answer

A) True 
 B)False

Question 13

Delivery of a bill may be actual or

Accepted Answer

A) incomplete. 
B) ineffective. 
C) constructive. 
D) by notification. 
E) pretend. 
A) incomplete. 
B) ineffective. 
C) constructive. 
D) by notification. 
E) pretend.

Question 14

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 15

Who is a holder in due course,and what are the requirements that must be met for a holder to be a holder in due course?

Accepted Answer

Holder in due course is the expression t

Question 16

A person who negotiates an instrument in bearer form is known as

Accepted Answer

A) transferor. 
B) transferee. 
C) a transferor by delivery. 
D) a transferee by delivery. 
E) delivering party. 
A) transferor. 
B) transferee. 
C) a transferor by delivery. 
D) a transferee by delivery. 
E) delivering party.

Question 17

Use the fact situation above to answer the question. When Edward delivers the cheque to Albert,the cheque becomes

Accepted Answer

A) a bearer cheque. 
B) an assignment cheque. 
C) a promissory note. 
D) an endorsement cheque. 
E) all of the above 
A) a bearer cheque. 
B) an assignment cheque. 
C) a promissory note. 
D) an endorsement cheque. 
E) all of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A bearer instrument is one that is payab

Question 20

Albert owes George a sum of money and gives George a cheque made out to George for the amount he owes.In this case,George is

Accepted Answer

A) the payor of the cheque. 
B) the assignor of the cheque. 
C) the payee of the cheque. 
D) the holder of the cheque. 
E) the endorser of the cheque. 
A) the payor of the cheque. 
B) the assignor of the cheque. 
C) the payee of the cheque. 
D) the holder of the cheque. 
E) the endorser of the cheque.

Exam 19: Negotiable Instruments

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

The difference between a cheque and draft is that

Briefly identify two modern alternatives that are reducing the reliance on paper negotiable instruments and cash.

The bank on which a cheque is drawn is called

Explain the nature of the liability of a drawer on a draft and cheque.

If a holder takes an instrument knowing it is defective,he is still a "protected" holder in due course if he acts promptly in correcting the defect.

Delivery of a negotiable instrument in payment

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

Only real defences can be used to block the claim of a holder in due course.

Delivery of a bill may be actual or

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

Who is a holder in due course,and what are the requirements that must be met for a holder to be a holder in due course?

A person who negotiates an instrument in bearer form is known as

Use the fact situation above to answer the question. When Edward delivers the cheque to Albert,the cheque becomes

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

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

Albert owes George a sum of money and gives George a cheque made out to George for the amount he owes.In this case,George is

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