Question 1

An instrument has been signed if the maker or drawer has put a name or other symbol on it with the intention of validating it.

Accepted Answer

A) True 
 B)False

Question 2

A note which contains the statement, "I owe you $500":

Accepted Answer

A)  constitutes an order to pay. 
B)  constitutes a promise to pay. 
C)  is not a negotiable instrument. 
D)  does not acknowledge a debt. 
A)  constitutes an order to pay. 
B)  constitutes a promise to pay. 
C)  is not a negotiable instrument. 
D)  does not acknowledge a debt.

Question 3

A draft is a _____ instrument.

Accepted Answer

A)  two-party 
B)  three-party 
C)  single-party 
D)  non-negotiable 
A)  two-party 
B)  three-party 
C)  single-party 
D)  non-negotiable

Question 4

Nigel, a resident of North Carolina, sent Claude, a resident of Lyon, France, a note that read, "Ninety days after date, I promise to pay to the order of Claude €5,000 (signed) Nigel." The note is:

Accepted Answer

A)  payable in an equivalent dollar amount. 
B)  not payable in the foreign money specified. 
C)  payable on demand in the foreign money specified. 
D)  payable at sight in an equivalent dollar amount. 
A)  payable in an equivalent dollar amount. 
B)  not payable in the foreign money specified. 
C)  payable on demand in the foreign money specified. 
D)  payable at sight in an equivalent dollar amount.

Question 5

A teller's check is a:

Accepted Answer

A)  draft drawn by a bank on any other financial institutions other than a bank. 
B)  check drawn by a bank on an individual's funds. 
C)  draft on which the drawer or drawee are the same bank. 
D)  draft drawn by a bank on another bank or payable at or through a bank. 
A)  draft drawn by a bank on any other financial institutions other than a bank. 
B)  check drawn by a bank on an individual's funds. 
C)  draft on which the drawer or drawee are the same bank. 
D)  draft drawn by a bank on another bank or payable at or through a bank.

Question 6

Which of the following will destroy the negotiability of an instrument?

Accepted Answer

A)  Postdating the negotiability of an instrument 
B)  Conditioning payment on the payee's performance 
C)  Using phrases such as "please pay" or "pay to the order of" 
D)  Antedating the negotiability of an instrument 
A)  Postdating the negotiability of an instrument 
B)  Conditioning payment on the payee's performance 
C)  Using phrases such as "please pay" or "pay to the order of" 
D)  Antedating the negotiability of an instrument

Question 7

A certificate of deposit is an instrument containing an acknowledgement by a bank that it has received a deposit of money and a promise by the bank to repay the sum of money.

Accepted Answer

A) True 
 B)False

Question 8

For an instrument to be negotiable, it need not be in writing.

Accepted Answer

A) True 
 B)False

Question 9

A note in which the maker states, "I promise to pay to the order of Oliver $600 or a six-string guitar" is:

Accepted Answer

A)  not negotiable because it contains a conditional promise. 
B)  negotiable for payment of the guitar only. 
C)  negotiable for payment only if Oliver is the holder of the instrument. 
D)  not negotiable because it is not payable for money alone. 
A)  not negotiable because it contains a conditional promise. 
B)  negotiable for payment of the guitar only. 
C)  negotiable for payment only if Oliver is the holder of the instrument. 
D)  not negotiable because it is not payable for money alone.

Question 10

An instrument states, "Subject to Approval of Title, Pay to the Order of Yvette, $3,000." Is the instrument negotiable?

Accepted Answer

No, this instrument is not negotiable. A

Question 11

The Federal Trade Commission (FTC) has adopted a regulation that:

Accepted Answer

A)  follows the traditional rights of a holder in due course in consumer purchase transactions. 
B)  alters the rights of a holder in due course in consumer purchase transactions. 
C)  prevents a consumer who gives a negotiable instrument to use the defense of fraudulent inducement. 
D)  denies all rights of a holder in due course in consumer purchase transactions. 
A)  follows the traditional rights of a holder in due course in consumer purchase transactions. 
B)  alters the rights of a holder in due course in consumer purchase transactions. 
C)  prevents a consumer who gives a negotiable instrument to use the defense of fraudulent inducement. 
D)  denies all rights of a holder in due course in consumer purchase transactions.

Question 12

A two-party instrument in which one person makes an unconditional promise in writing to pay another person, with or without interest, either on demand or at a specified, future time is a _____.

Accepted Answer

A)  promissory note 
B)  certificate of deposit 
C)  draft 
D)  check 
A)  promissory note 
B)  certificate of deposit 
C)  draft 
D)  check

Question 13

Ricardo borrowed $5,000 from his friend, Lorenzo. Ricardo signed a handwritten note stating, "I promise to pay $5,000 to Lorenzo on or before August 1, 2001, in return for the same amount borrowed from him on May 1, 2001." Under these circumstances, the note is _____.

Accepted Answer

A)  negotiable because it was handwritten 
B)  not negotiable because the note states the reason for the debt 
C)  not negotiable because the note is not payable to bearer or to order 
D)  negotiable because it is a simple contract 
A)  negotiable because it was handwritten 
B)  not negotiable because the note states the reason for the debt 
C)  not negotiable because the note is not payable to bearer or to order 
D)  negotiable because it is a simple contract

Question 14

Carlos borrowed $100 from his friend, Juanita. Carlos signed a handwritten note stating, "I promise to pay $100 to the order of Juanita." Under these circumstances, the note is _____.

Accepted Answer

A)  negotiable because it is a simple contract 
B)  not negotiable because it does not acknowledge the reason for the debt 
C)  not negotiable because it does not state the time payment is due 
D)  negotiable because it meets all the requirements for negotiability 
A)  negotiable because it is a simple contract 
B)  not negotiable because it does not acknowledge the reason for the debt 
C)  not negotiable because it does not state the time payment is due 
D)  negotiable because it meets all the requirements for negotiability

Question 15

Commercial paper is basically a contract for the payment of money.

Accepted Answer

A) True 
 B)False

Question 16

For an instrument to be negotiable, it must be signed by the issuer.

Accepted Answer

A) True 
 B)False

Question 17

Identify the statement that holds true of revised Article 3 of the Uniform Commercial Code regarding checks.

Accepted Answer

A)  Under revised Article 3, an instrument does not qualify as a check if it contains the engraving "money order" on its face. 
B)  Revised Article 3 prevents an instrument from meeting the "unconditional promise" if it requires a countersignature of a person whose specimen signature appears on the draft. 
C)  Under revised Article 3, a payor bank may pay a postdated check before the stated date unless the drawer has notified the bank of postdating pursuant to a procedure set out in the Code. 
D)  Revised Article 3 states that an instrument which names a fixed time for payment should not contain a clause permitting the time for payment to be accelerated at the option of the maker. 
A)  Under revised Article 3, an instrument does not qualify as a check if it contains the engraving "money order" on its face. 
B)  Revised Article 3 prevents an instrument from meeting the "unconditional promise" if it requires a countersignature of a person whose specimen signature appears on the draft. 
C)  Under revised Article 3, a payor bank may pay a postdated check before the stated date unless the drawer has notified the bank of postdating pursuant to a procedure set out in the Code. 
D)  Revised Article 3 states that an instrument which names a fixed time for payment should not contain a clause permitting the time for payment to be accelerated at the option of the maker.

Question 18

Which of the following statements is true of signing a negotiable instrument?

Accepted Answer

A)  An instrument in the form of a note must be signed by the payee who accepts the promise of the issuer. 
B)  An instrument in the form of a draft must be signed by the person giving the instruction to pay. 
C)  An instrument is not considered to be negotiable when the maker signs by writing his name on it. 
D)  A person or company cannot authorize an agent to sign instruments for it. 
A)  An instrument in the form of a note must be signed by the payee who accepts the promise of the issuer. 
B)  An instrument in the form of a draft must be signed by the person giving the instruction to pay. 
C)  An instrument is not considered to be negotiable when the maker signs by writing his name on it. 
D)  A person or company cannot authorize an agent to sign instruments for it.

Question 19

If words and numbers on commercial paper are conflicting, the numbers control the words.

Accepted Answer

A) True 
 B)False

Question 20

A _____ is a draft on which the drawer or drawee are the same bank (or branches of the same bank).

Accepted Answer

A)  cashier's check 
B)  teller's check 
C)  promissory note 
D)  certificate of deposit 
A)  cashier's check 
B)  teller's check 
C)  promissory note 
D)  certificate of deposit

Exam 38: Negotiable Instruments

An instrument has been signed if the maker or drawer has put a name or other symbol on it with the intention of validating it.

A note which contains the statement, "I owe you $500":

A draft is a _____ instrument.

Nigel, a resident of North Carolina, sent Claude, a resident of Lyon, France, a note that read, "Ninety days after date, I promise to pay to the order of Claude €5,000 (signed) Nigel." The note is:

A teller's check is a:

Which of the following will destroy the negotiability of an instrument?

A certificate of deposit is an instrument containing an acknowledgement by a bank that it has received a deposit of money and a promise by the bank to repay the sum of money.

For an instrument to be negotiable, it need not be in writing.

A note in which the maker states, "I promise to pay to the order of Oliver $600 or a six-string guitar" is:

An instrument states, "Subject to Approval of Title, Pay to the Order of Yvette, $3,000." Is the instrument negotiable?

The Federal Trade Commission (FTC) has adopted a regulation that:

A two-party instrument in which one person makes an unconditional promise in writing to pay another person, with or without interest, either on demand or at a specified, future time is a _____.

Ricardo borrowed $5,000 from his friend, Lorenzo. Ricardo signed a handwritten note stating, "I promise to pay $5,000 to Lorenzo on or before August 1, 2001, in return for the same amount borrowed from him on May 1, 2001." Under these circumstances, the note is _____.

Carlos borrowed $100 from his friend, Juanita. Carlos signed a handwritten note stating, "I promise to pay $100 to the order of Juanita." Under these circumstances, the note is _____.

Commercial paper is basically a contract for the payment of money.

For an instrument to be negotiable, it must be signed by the issuer.

Identify the statement that holds true of revised Article 3 of the Uniform Commercial Code regarding checks.

Which of the following statements is true of signing a negotiable instrument?

If words and numbers on commercial paper are conflicting, the numbers control the words.

A _____ is a draft on which the drawer or drawee are the same bank (or branches of the same bank).

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Property

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers

Introduction to Security

Security Interests in Personal Property

Bankruptcy

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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