Question 1

A bearer is a person to whom an instrument is made payable.

Accepted Answer

A) True 
 B)False

Question 2

For a note or a certificate of deposit to be negotiable, it must be signed by the drawer .

Accepted Answer

A) True 
 B)False

Question 3

With respect to negotiability, it is necessary to know when the maker, drawee, or acceptor is required to pay.

Accepted Answer

A) True 
 B)False

Question 4

Because a check specifies no time for payment, a check is a time instrument.

Accepted Answer

A) True 
 B)False

Question 5

When an instrument is payable on or before a stated date, the instrument is clearly nonnegotiable.

Accepted Answer

A) True 
 B)False

Question 6

Brie signs an instrument in which she promises to pay Carmen a certain price for her Dodge Dart. The instrument will be negotiable if it meets all of the requirements for negotiability, including that it is payable in

Accepted Answer

A)  goods equal in value to the market price of the car. 
B)  money. 
C)  all of these. 
D)  services equal in value to the market price of the car. 
A)  goods equal in value to the market price of the car. 
B)  money. 
C)  all of these. 
D)  services equal in value to the market price of the car.

Question 7

The Uniform Commercial Code applies to transactions involving negotiable instruments, except for bank deposits and collections.

Accepted Answer

A) True 
 B)False

Question 8

On the back of an envelope, Phoebe writes, "I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe." What type of instrument is this? Is it negotiable? If not, why not?

Accepted Answer

This instrument is a promissory note and

Question 9

Ollie negotiates an order instrument to Phil by

Accepted Answer

A)  assignment of its rights under a contract. 
B)  delivery with any necessary indorsement. 
C)  making an unconditional promise to pay. 
D)  presenting it in response to a demand by B. 
A)  assignment of its rights under a contract. 
B)  delivery with any necessary indorsement. 
C)  making an unconditional promise to pay. 
D)  presenting it in response to a demand by B.

Question 10

Fact Pattern 22-3 To borrow the funds to pay tuition at State College, Tia signs an instrument unconditionally promising to pay to "United Credit Company" $17,500 with interest in installments with the final payment due June 30, 2028.
Refer to Fact Pattern 22-3. With respect to this instrument, Tia is

Accepted Answer

A)  the drawee. 
B)  the indorser. 
C)  the maker. 
D)  the payee. 
A)  the drawee. 
B)  the indorser. 
C)  the maker. 
D)  the payee.

Question 11

To borrow funds to finance his business, Rollo executes an instrument in favor of Security Bank. For the instrument to be negotiable, the signature must be

Accepted Answer

A)  anywhere on the instrument. 
B)  anywhere on the lower half of the instrument only. 
C)  in the lower left -hand corner of the instrument only. 
D)  in the lower right -hand corner of the instrument only. 
A)  anywhere on the instrument. 
B)  anywhere on the lower half of the instrument only. 
C)  in the lower left -hand corner of the instrument only. 
D)  in the lower right -hand corner of the instrument only.

Question 12

An indorsement is most often written on the back of an instrument itself.

Accepted Answer

A) True 
 B)False

Question 13

Fact Pattern 22-1 Erin draws a check payable to "Foodland" to buy groceries.
Refer to Fact Pattern 22-1. Erin's check is most likely

Accepted Answer

A)  a certificate of deposit. 
B)  an order to pay. 
C)  a promise to pay. 
D)  a cashier's check 
A)  a certificate of deposit. 
B)  an order to pay. 
C)  a promise to pay. 
D)  a cashier's check

Question 14

Mort negotiates an instrument to Nell. This is the transfer of an instrument

Accepted Answer

A)  for valuable consideration under a contract. 
B)  in such form that the transferee becomes a holder. 
C)  pursuant to preliminary contract discussions. 
D)  without the payment of a recognized medium of exchange. 
A)  for valuable consideration under a contract. 
B)  in such form that the transferee becomes a holder. 
C)  pursuant to preliminary contract discussions. 
D)  without the payment of a recognized medium of exchange.

Question 15

Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because it does not include an express promise to pay. 
C)  nonnegotiable, because it does not recite any consideration. 
D)  nonnegotiable, because it does not state any conditions to payment. 
A)  negotiable. 
B)  nonnegotiable, because it does not include an express promise to pay. 
C)  nonnegotiable, because it does not recite any consideration. 
D)  nonnegotiable, because it does not state any conditions to payment.

Question 16

Brad, the owner of Clear Cut Corporation, signs an instrument that includes the phrase "payment for this note will be made from the proceeds of next year's timber sale." This instrument is

Accepted Answer

A)  not necessarily nonnegotiable . 
B)  nonnegotiable, because payment can be made only out of a particular source. 
C)  nonnegotiable, because it states an express condition to payment. 
D)  nonnegotiable, because the reasons for the note are not clear on its face. 
A)  not necessarily nonnegotiable . 
B)  nonnegotiable, because payment can be made only out of a particular source. 
C)  nonnegotiable, because it states an express condition to payment. 
D)  nonnegotiable, because the reasons for the note are not clear on its face.

Question 17

A conditional promise or order can be negotiable if the terms are included in writing in an instrument.

Accepted Answer

A) True 
 B)False

Question 18

An instrument recorded on an impermanent surface can still qualify as a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 19

To finance the purchase of a house from Sander, Tobias signs an instrument promising to pay to "Uno Mortgage Company" $200,000 with interest in installments with the final payment due July 10, 2047. To be negotiable, this instrument must include the signature of

Accepted Answer

A)  a non-party witness. 
B)  Sander or Sander's realtor. 
C)  Tobias. 
D)  all of these. 
A)  a non-party witness. 
B)  Sander or Sander's realtor. 
C)  Tobias. 
D)  all of these.

Question 20

To obtain office supplies for Doctors Medical Clinic, Emma executes a draft in favor of Floyd. A draft is

Accepted Answer

A)  a conditional promise to pay money. 
B)  an unconditional written order to pay money. 
C)  a qualified promise to set aside a sum of money. 
D)  a restricted promise to deliver goods at a future date. 
A)  a conditional promise to pay money. 
B)  an unconditional written order to pay money. 
C)  a qualified promise to set aside a sum of money. 
D)  a restricted promise to deliver goods at a future date.

Exam 22: The Essentials of Negotiability

A bearer is a person to whom an instrument is made payable.

For a note or a certificate of deposit to be negotiable, it must be signed by the drawer .

With respect to negotiability, it is necessary to know when the maker, drawee, or acceptor is required to pay.

Because a check specifies no time for payment, a check is a time instrument.

When an instrument is payable on or before a stated date, the instrument is clearly nonnegotiable.

Brie signs an instrument in which she promises to pay Carmen a certain price for her Dodge Dart. The instrument will be negotiable if it meets all of the requirements for negotiability, including that it is payable in

The Uniform Commercial Code applies to transactions involving negotiable instruments, except for bank deposits and collections.

On the back of an envelope, Phoebe writes, "I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe." What type of instrument is this? Is it negotiable? If not, why not?

Ollie negotiates an order instrument to Phil by

To borrow funds to finance his business, Rollo executes an instrument in favor of Security Bank. For the instrument to be negotiable, the signature must be

An indorsement is most often written on the back of an instrument itself.

Fact Pattern 22-1 Erin draws a check payable to "Foodland" to buy groceries. Refer to Fact Pattern 22-1. Erin's check is most likely

Mort negotiates an instrument to Nell. This is the transfer of an instrument

Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is

Brad, the owner of Clear Cut Corporation, signs an instrument that includes the phrase "payment for this note will be made from the proceeds of next year's timber sale." This instrument is

A conditional promise or order can be negotiable if the terms are included in writing in an instrument.

An instrument recorded on an impermanent surface can still qualify as a negotiable instrument.

To finance the purchase of a house from Sander, Tobias signs an instrument promising to pay to "Uno Mortgage Company" $200,000 with interest in installments with the final payment due July 10, 2047. To be negotiable, this instrument must include the signature of

To obtain office supplies for Doctors Medical Clinic, Emma executes a draft in favor of Floyd. A draft is

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