Question 1

What is a time draft?

Accepted Answer

The answer of What is a time draft?...

Question 2

There are three types of bills of exchange, these are

Accepted Answer

A)  sight certificates, demand notes and certificates of deposit. 
B)  demand drafts, sight drafts and time drafts. 
C)  certificates, demand drafts, and sight certificates. 
D)  time notes, certificates of deposit, and certificates. 
E)  shares, demand notes and time payments.

Question 3

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

Accepted Answer

The answer of Who is a holder in due course,...

Question 4

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

Accepted Answer

The answer of Describe the difference between a bearer instrument...

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

Liability of the drawer, acceptor, or maker on a bill of exchange is dependent on the signing and delivery of the bill.

Accepted Answer

A) True 
 B)False

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 placed on it, and returned the cheque to Big Bank. Which of the following statements is true?

Accepted Answer

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

Question 9

If a consumer bill or note is marked "consumer purchase" as required by the Bills of Exchange Act, the maker may raise a defence against a finance company that takes the bill or note for value and through endorsement based on breach of contract by the payee.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a characteristic of a bill of exchange?

Accepted Answer

A)  The written order instructs to pay another party. 
B)  It is a written order by one party. 
C)  The payment order may require payment to be made to order or to the bearer of the document. 
D)  The order to pay concerns a specified sum of money. 
E)  The order to pay specifies that there must be money available before payment.

Question 11

Explain the difference between negotiable instruments and other contracts.

Accepted Answer

The answer of Explain the difference between negotiable instruments and...

Question 12

Sight drafts can be used as collection devices.

Accepted Answer

A) True 
 B)False

Question 13

Joseph obtains a draft that states as follows: "pay to the order of Joseph Daniels the sum of $1000." Joseph wants to negotiate this instrument to Jack Spratt to pay a debt owing to Jack. To negotiate this instrument Joseph must

Accepted Answer

A)  hand over the draft to Jack and get a receipt. 
B)  endorse and present the instrument to Jack's bank. 
C)  present the instrument to Jack's bank and have it accepted and then transfer it to Jack. 
D)  indicate accepted on the draft and then deliver it to Jack. 
E)  endorse and deliver the instrument to Jack.

Question 14

A time draft is

Accepted Answer

A)  a bill of exchange that is payable within a stipulated period after the date stated on the instrument or after presentation. 
B)  a bill of exchange that is payable by 10:00am on the stipulated date. 
C)  a bill of exchange that is payable immediately it is presented. 
D)  a bill of exchange that is payable by midnight on the stipulated date. 
E)  a bill of exchange that is payable "at sight" that is at a particular time.

Question 15

A bill of exchange began as a document made by a merchant or banker instructing a government officials or lawyers in another city to make payment to a certain person or the bearer of the document.

Accepted Answer

A) True 
 B)False

Question 16

A promissory note is presented for acceptance.

Accepted Answer

A) True 
 B)False

Question 17

A court in British Columbia decided that a promissory note payable at a variable interest rate ( e.g. prime + 1% per annum) was not a negotiable instrument. Why might the court make this decision? How might the decision affect the rights of a third party obtaining the promissory note through endorsement?

Accepted Answer

The answer of A court in British Columbia decided that...

Question 18

Delivery of a negotiable instrument in payment

Accepted Answer

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

Question 19

Certification is an undertaking by the bank to pay the amount of the cheque to the drawer when it is presented for payment.

Accepted Answer

A) True 
 B)False

Question 20

A promissory note is not a bill of exchange.

Accepted Answer

A) True 
 B)False

Exam 21: Negotiable Instruments

What is a time draft?

There are three types of bills of exchange, these are

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

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

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

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

Liability of the drawer, acceptor, or maker on a bill of exchange is dependent on the signing and delivery of the bill.

If a consumer bill or note is marked "consumer purchase" as required by the Bills of Exchange Act, the maker may raise a defence against a finance company that takes the bill or note for value and through endorsement based on breach of contract by the payee.

Which of the following is not a characteristic of a bill of exchange?

Explain the difference between negotiable instruments and other contracts.

Sight drafts can be used as collection devices.

Joseph obtains a draft that states as follows: "pay to the order of Joseph Daniels the sum of $1000." Joseph wants to negotiate this instrument to Jack Spratt to pay a debt owing to Jack. To negotiate this instrument Joseph must

A time draft is

A bill of exchange began as a document made by a merchant or banker instructing a government officials or lawyers in another city to make payment to a certain person or the bearer of the document.

A promissory note is presented for acceptance.

Delivery of a negotiable instrument in payment

Certification is an undertaking by the bank to pay the amount of the cheque to the drawer when it is presented for payment.

A promissory note is not a bill of exchange.