Question 1

For an instrument to be negotiable, it must be in writing.

Accepted Answer

A) True 
 B)False

Question 2

Fact Pattern 19-3
​Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1, 2017.
-Refer to Fact Pattern 19-3. With respect to this instrument, Union Bank is​

Accepted Answer

A)  ​the drawee. 
B)  ​theindorser. 
C)  ​themaker. 
D)  ​the payee. 
A)  ​the drawee. 
B)  ​theindorser. 
C)  ​themaker. 
D)  ​the payee.

Question 3

An unauthorized signature binds the person whose name is signed.

Accepted Answer

A) True 
 B)False

Question 4

A maker is secondarily liable on an instrument.

Accepted Answer

A) True 
 B)False

Question 5

A negotiable instrument can only be transferred by negotiation.

Accepted Answer

A) True 
 B)False

Question 6

Failure to present an instrument on time is not improper presentment.

Accepted Answer

A) True 
 B)False

Question 7

Lenora signs a note "payable to the order of Medical Account Collection Agency." Unless Lenora has a valid defense against payment, Lenora's liability on this note is​

Accepted Answer

A)  ​immediate. 
B)  ​imposed only after payment is demanded. 
C)  ​postponed until the note is dishonored by the payee. 
D)  ​suspended until payment is due. 
A)  ​immediate. 
B)  ​imposed only after payment is demanded. 
C)  ​postponed until the note is dishonored by the payee. 
D)  ​suspended until payment is due.

Question 8

A holder takes an instrument for value by promising to perform in the future.

Accepted Answer

A) True 
 B)False

Question 9

Vicenzo, in good faith and for value, gets from Wren a check "payable to the order of bearer." Vicenzo does not know that Wren stole the check. Vicenzo is​

Accepted Answer

A)  ​an HDC. 
B)  ​not an HDC, because Wren did not acquire the check for value. 
C)  ​not an HDC, because Wren did not acquire the check in good faith. 
D)  ​not an HDC, because the check is a bearer instrument. 
A)  ​an HDC. 
B)  ​not an HDC, because Wren did not acquire the check for value. 
C)  ​not an HDC, because Wren did not acquire the check in good faith. 
D)  ​not an HDC, because the check is a bearer instrument.

Question 10

Fact Pattern 19-1
​Erin draws a check payable to "Foodland" to buy groceries.
-Refer to Fact Pattern 19-1. 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 promissory note. 
A) a certificate of deposit. 
B) an order to pay. 
C) a promise to pay. 
D) a promissory note.

Question 11

Bernice signs a promissory note for $1,500 in favor of Community College. The note is undated but specifies that it is "payable one month after date." This note is​

Accepted Answer

A)  ​negotiable. 
B)  ​not negotiable, because one month is not a reasonable time. 
C)  ​not negotiable, because there is no option to pay early. 
D)  ​not negotiable, because the maturity date cannot be determined from the face of the instrument. 
A)  ​negotiable. 
B)  ​not negotiable, because one month is not a reasonable time. 
C)  ​not negotiable, because there is no option to pay early. 
D)  ​not negotiable, because the maturity date cannot be determined from the face of the instrument.

Question 12

Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is​

Accepted Answer

A)  ​a blank indorsement. 
B)  ​a qualified indorsement. 
C)  ​a restrictive indorsement. 
D)  ​a special indorsement. 
A)  ​a blank indorsement. 
B)  ​a qualified indorsement. 
C)  ​a restrictive indorsement. 
D)  ​a special indorsement.

Question 13

All parties to a negotiable instrument will be discharged when the party primarily liable on it pays to a holder the full amount due.

Accepted Answer

A) True 
 B)False

Question 14

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Accepted Answer

A) True 
 B)False

Question 15

A check is a time instrument because it is payable in due time.

Accepted Answer

A) True 
 B)False

Question 16

A time draft is payable at a definite future time.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Barry draws a check payable to "Cash" and presents it to Dollars & Sense store for payment. This instrument is​

Accepted Answer

A)  ​a bearer instrument. 
B)  ​an order instrument. 
C)  ​valid but nonnegotiable. 
D)  ​void. 
A)  ​a bearer instrument. 
B)  ​an order instrument. 
C)  ​valid but nonnegotiable. 
D)  ​void.

Question 19

Gwen deposits $5,000 with Home State Bank on July 1, 2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1, 2021. Home State Bank issued to Gwen​

Accepted Answer

A)  ​a certificate of deposit. 
B)  ​a check. 
C)  ​a nonnegotiable instrument. 
D)  ​a trade acceptance. 
A)  ​a certificate of deposit. 
B)  ​a check. 
C)  ​a nonnegotiable instrument. 
D)  ​a trade acceptance.

Question 20

With respect to negotiability, a mere reference to another writing or record makes a promise conditional.

Accepted Answer

A) True 
 B)False

Exam 19: Negotiable Instruments

For an instrument to be negotiable, it must be in writing.

Fact Pattern 19-3 ​Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1, 2017. -Refer to Fact Pattern 19-3. With respect to this instrument, Union Bank is​

An unauthorized signature binds the person whose name is signed.

A maker is secondarily liable on an instrument.

A negotiable instrument can only be transferred by negotiation.

Failure to present an instrument on time is not improper presentment.

Lenora signs a note "payable to the order of Medical Account Collection Agency." Unless Lenora has a valid defense against payment, Lenora's liability on this note is​

A holder takes an instrument for value by promising to perform in the future.

Vicenzo, in good faith and for value, gets from Wren a check "payable to the order of bearer." Vicenzo does not know that Wren stole the check. Vicenzo is​

Fact Pattern 19-1 ​Erin draws a check payable to "Foodland" to buy groceries. -Refer to Fact Pattern 19-1. Erin’s check is most likely

Bernice signs a promissory note for $1,500 in favor of Community College. The note is undated but specifies that it is "payable one month after date." This note is​

Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is​

All parties to a negotiable instrument will be discharged when the party primarily liable on it pays to a holder the full amount due.

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

A check is a time instrument because it is payable in due time.

A time draft is payable at a definite future time.

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?​

Barry draws a check payable to "Cash" and presents it to Dollars & Sense store for payment. This instrument is​

Gwen deposits $5,000 with Home State Bank on July 1, 2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1, 2021. Home State Bank issued to Gwen​

With respect to negotiability, a mere reference to another writing or record makes a promise conditional.

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Fact Pattern 19-3 Thalia signs an instrument unconditionally promising to pay to "Union Bank" $7500 with interest in installments with the final payment due June 1, 2017. -Refer to Fact Pattern 19-3. With respect to this instrument, Union Bank is

Lenora signs a note "payable to the order of Medical Account Collection Agency." Unless Lenora has a valid defense against payment, Lenora's liability on this note is

Vicenzo, in good faith and for value, gets from Wren a check "payable to the order of bearer." Vicenzo does not know that Wren stole the check. Vicenzo is

Fact Pattern 19-1 Erin draws a check payable to "Foodland" to buy groceries. -Refer to Fact Pattern 19-1. Erin’s check is most likely

Bernice signs a promissory note for $1,500 in favor of Community College. The note is undated but specifies that it is "payable one month after date." This note is

Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is

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?

Barry draws a check payable to "Cash" and presents it to Dollars & Sense store for payment. This instrument is

Gwen deposits $5,000 with Home State Bank on July 1, 2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1, 2021. Home State Bank issued to Gwen