Question 1

What is a time draft?

Accepted Answer

A time draft is a bill of exch

Question 2

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

Question 3

Explain the effect of certification of a cheque.

Accepted Answer

Certification is an undertakin

Question 4

A court will impose liability for payment if all of the following are true EXCEPT

Accepted Answer

A) the instrument was presented for payment. 
B) it was dishonoured. 
C) prompt notice of the dishonour was given to the defendant. 
D) a lawsuit was commenced within the limitation period. 
E) a notice of arbitration was served on the endorser. 
A) the instrument was presented for payment. 
B) it was dishonoured. 
C) prompt notice of the dishonour was given to the defendant. 
D) a lawsuit was commenced within the limitation period. 
E) a notice of arbitration was served on the endorser.

Question 5

A promissory note is not a bill of exchange.

Accepted Answer

A) True 
 B)False

Question 6

Use the fact situation above to answer the question. In this case,if the certified cheque is negotiated

Accepted Answer

A) Albert's advice to the bank of the loss of the cheque discharges the bank from having to honour it. 
B) being certified,no stop payment can be put on the cheque and the bank must honour it. 
C) Albert can put a stop payment on the cheque and the bank will not have to honour it. 
D) the bank can put a stop payment on the cheque and the bank will not have to honour it. 
E) none of the above 
A) Albert's advice to the bank of the loss of the cheque discharges the bank from having to honour it. 
B) being certified,no stop payment can be put on the cheque and the bank must honour it. 
C) Albert can put a stop payment on the cheque and the bank will not have to honour it. 
D) the bank can put a stop payment on the cheque and the bank will not have to honour it. 
E) none of the above

Question 7

Liability of the drawee on a bill of exchange is dependent on

Accepted Answer

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

Question 8

On April 5,Tim gave Winnie a cheque for $3000 drawn on his bank account to pay for a horse.The cheque was postdated to April 15.On April 7,the horse died,and Tim stopped payment on the cheque.On April 12,Winnie took Tim's cheque to Big Bank and endorsed it.Big Bank gave her cash in the face amount of the cheque.When Big Bank sent the cheque for clearing,Tim's bank refused to honour the cheque because of the stop payment Tim had placed on it and returned the cheque to Big Bank.Which of the following statements is TRUE?

Accepted Answer

A) A postdated cheque is not a negotiable instrument. 
B) One cannot stop payment on a cheque. 
C) Tim is not liable to Big Bank because he put a stop payment on the cheque before Winnie endorsed it over to Big Bank. 
D) Only Winnie is liable to Big Bank. 
E) Tim is liable to Big Bank because Big Bank is a holder in due course of a negotiable instrument. 
A) A postdated cheque is not a negotiable instrument. 
B) One cannot stop payment on a cheque. 
C) Tim is not liable to Big Bank because he put a stop payment on the cheque before Winnie endorsed it over to Big Bank. 
D) Only Winnie is liable to Big Bank. 
E) Tim is liable to Big Bank because Big Bank is a holder in due course of a negotiable instrument.

Question 9

A prepares and signs a promissory note,but leaves the amount blank.The note is subsequently stolen by B,who fills in the amount and negotiates it to C.C now looks for payment from A,who refuses.If C sues A

Accepted Answer

A) A will successfully defend the lawsuit on the basis of lack of delivery of an incomplete instrument. 
B) A will be liable to C because C is now the payee of the note. 
C) A will successfully defend the lawsuit on the basis of lack of capacity. 
D) A will successfully defend C's lawsuit on the basis that B committed a fraud. 
E) A will be liable to C because C is a holder in due course. 
A) A will successfully defend the lawsuit on the basis of lack of delivery of an incomplete instrument. 
B) A will be liable to C because C is now the payee of the note. 
C) A will successfully defend the lawsuit on the basis of lack of capacity. 
D) A will successfully defend C's lawsuit on the basis that B committed a fraud. 
E) A will be liable to C because C is a holder in due course.

Question 10

A remote party who fails to meet the standards of a holder in due course is subject to real defences only.

Accepted Answer

A) True 
 B)False

Question 11

Briefly identify the loophole closed by the Bills of Exchange Act to address the unfairness related to the general rules of negotiable instruments to consumers.

Accepted Answer

Consumers historically were faced with f

Question 12

Jack writes a note for Mary.The note states,"I,Jack,promise to pay you,Mary,$500.00 on January 4,2003,or anytime after that date when a demand is made." Jack has given Mary a

Accepted Answer

A) maker note. 
B) promissory note. 
C) certificate note. 
D) certification. 
E) promise in a note. 
A) maker note. 
B) promissory note. 
C) certificate note. 
D) certification. 
E) promise in a note.

Question 13

On a piece of paper,A writes a memo that sets out the name of his bank,his bank account number,and a statement indicating that the bank is required to pay to B whatever amount B desires.A then puts his signature at the bottom and gives the memo to B.In this case,the memo is

Accepted Answer

A) a cheque. 
B) a negotiable instrument. 
C) a promissory note. 
D) a bill of exchange. 
E) none of the above 
A) a cheque. 
B) a negotiable instrument. 
C) a promissory note. 
D) a bill of exchange. 
E) none of the above

Question 14

Explain how time drafts can be used as a means of finance for a business drawing them.

Accepted Answer

By discounting the time drafts

Question 15

The Bills of Exchange Act governs which of the following kinds of instruments?

Accepted Answer

A) bills of exchange only 
B) bills of exchange and negotiable instruments 
C) drafts only 
D) bills of exchange,promissory notes,and cheques 
E) bills of exchange,negotiable instruments,and cheques 
A) bills of exchange only 
B) bills of exchange and negotiable instruments 
C) drafts only 
D) bills of exchange,promissory notes,and cheques 
E) bills of exchange,negotiable instruments,and cheques

Question 16

Many retail businesses have taken steps to minimize the risks associated with negotiable instruments.These steps include

Accepted Answer

A) not presenting any instrument for payment. 
B) not accepting accommodation bills. 
C) acting as a factor. 
D) not accepting cheques or bills of exchange as payment for goods. 
E) signing all drafts without recourse. 
A) not presenting any instrument for payment. 
B) not accepting accommodation bills. 
C) acting as a factor. 
D) not accepting cheques or bills of exchange as payment for goods. 
E) signing all drafts without recourse.

Question 17

The formal requirements of negotiable instruments include each of the following EXCEPT

Accepted Answer

A) they must be in writing and signed by the creator or drawer. 
B) there must be an unconditional obligation to pay a fixed amount of money. 
C) they must indicate a specific time when payment is due. 
D) they must indicate whether the payment is for money or assets. 
E) they must be a transfer of the whole obligation. 
A) they must be in writing and signed by the creator or drawer. 
B) there must be an unconditional obligation to pay a fixed amount of money. 
C) they must indicate a specific time when payment is due. 
D) they must indicate whether the payment is for money or assets. 
E) they must be a transfer of the whole obligation.

Question 18

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 19

A demand draft is

Accepted Answer

A) a bill of exchange that is payable within a stipulated period,after presentation. 
B) a bill of exchange on which the expression demand draft is written. 
C) a bill of exchange that is payable within a stipulated period,after the date stated on the instrument. 
D) a bill of exchange that is payable immediately upon presentation without any days of grace. 
E) a bill of exchange that is payable at sight. 
A) a bill of exchange that is payable within a stipulated period,after presentation. 
B) a bill of exchange on which the expression demand draft is written. 
C) a bill of exchange that is payable within a stipulated period,after the date stated on the instrument. 
D) a bill of exchange that is payable immediately upon presentation without any days of grace. 
E) a bill of exchange that is payable at sight.

Question 20

Use the fact situation above to answer the question. If instead of Edward signing the back of the cheque in his name,before Edward gives the cheque to Albert,Edward signs the cheque over to Albert and then gives it to him,then Albert becomes

Accepted Answer

A) the endorsee and holder of the cheque. 
B) the assignor and endorsee of the cheque. 
C) the promissor and holder of the cheque. 
D) the payor and bearer of the cheque. 
E) all of the above 
A) the endorsee and holder of the cheque. 
B) the assignor and endorsee of the cheque. 
C) the promissor and holder of the cheque. 
D) the payor and bearer of the cheque. 
E) all of the above

Exam 19: Negotiable Instruments

What is a time draft?

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.

Explain the effect of certification of a cheque.

A court will impose liability for payment if all of the following are true EXCEPT

A promissory note is not a bill of exchange.

Use the fact situation above to answer the question. In this case,if the certified cheque is negotiated

Liability of the drawee on a bill of exchange is dependent on

A prepares and signs a promissory note,but leaves the amount blank.The note is subsequently stolen by B,who fills in the amount and negotiates it to C.C now looks for payment from A,who refuses.If C sues A

A remote party who fails to meet the standards of a holder in due course is subject to real defences only.

Briefly identify the loophole closed by the Bills of Exchange Act to address the unfairness related to the general rules of negotiable instruments to consumers.

Jack writes a note for Mary.The note states,"I,Jack,promise to pay you,Mary,$500.00 on January 4,2003,or anytime after that date when a demand is made." Jack has given Mary a

On a piece of paper,A writes a memo that sets out the name of his bank,his bank account number,and a statement indicating that the bank is required to pay to B whatever amount B desires.A then puts his signature at the bottom and gives the memo to B.In this case,the memo is

Explain how time drafts can be used as a means of finance for a business drawing them.

The Bills of Exchange Act governs which of the following kinds of instruments?

Many retail businesses have taken steps to minimize the risks associated with negotiable instruments.These steps include

The formal requirements of negotiable instruments include each of the following EXCEPT

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?

A demand draft is

Use the fact situation above to answer the question. If instead of Edward signing the back of the cheque in his name,before Edward gives the cheque to Albert,Edward signs the cheque over to Albert and then gives it to him,then Albert becomes

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