GUIDE TO BUSINESS LAW Multiple choice questions Chapter 30: Negotiable instruments and other forms of payment

Name: Student number: Date:

Instructions to all candidates:

A correct answer will score +5 points, and an incorrect answer will score 2 points. Leaving the answer blank will score zero.

Questions: The two main characteristics of a negotiable instrument are: Ease of transfer and simplicity of delivery. Simplicity of transfer and safety of transfer. Simplicity of transfer and transfer free from equities. Safety of transfer and indisputable title after transfer. Which of the following is false? All of the following are governed by the Bills of Exchange Act 34 of 1964: Bill of exchange, cheque. Cheque, promissory note. Share warrant, business trust. Promissory note, share warrant.

Which of the following is true? The bearer of an order instrument is the payee. The endorser is the person who takes possession of a cheque with the intention of depositing it. The drawee bank is the bank of the drawer on which the cheque is drawn. Endorsement is a process of negotiation by which an endorser transfers a right to an endorsee in such a way that the endorsee becomes a holder in due course. Which of the following is false? An order cheque drawn in favour of Person A or person B is valid. Writing on a cheque Pay XYZ on or before a specific date makes the order conditional, and therefore the cheque is no longer a negotiable instrument. A cheque does not have to be signed by the drawer; it will still be valid if it is stamped with the drawers signature. An order cheque drawn in favour of Cash is not valid. Which of the following is false? The holder in due course is entitled to greater rights than those given to a cessionary in terms of the law of contract. Negotiation of a cheque automatically transfers ownership. A defence on the underlying contract can also be used to defend a claim on the cheque. A cheque may be validly negotiated to different people any number of times. Which of the following is false? The purpose of crossing a cheque is to make it more difficult for an unauthorised person to receive payment. A generally crossed cheque may bear across its face two transverse parallel lines. A generally crossed cheque may bear across its face two parallel transverse lines with the words and company between them. A generally crossed cheque must be paid over the counter and not into a bank account. Which of the following is false? A cheque may be specially crossed by adding to the face of it:

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The name of a specific bank. The name of a specific bank with the words not negotiable. The name of a specific bank with two transverse parallel lines and the words not negotiable. The name of a specific bank with two transverse parallel lines. Which of the following is false? A cheque may be restrictively endorsed by adding words that limit or exclude the ability of a holder to negotiate it. This can be achieved by adding the words: Not transferable to the face of the cheque. Only to the name of the payee. Not negotiable to an uncrossed cheque. Account payee only to the face of the cheque. Which of the following is not an absolute defence to a claim on a cheque? Person was tricked into signing the cheque and did not believe he or she was binding himself or herself. Cheque was signed but the name of the payee was left out. Person signed as a surety. Cheque was not signed at all. Which of the following is false? To become a holder in due course, a holder: Must fill in and complete any details on the cheque that have been omitted. Must take the cheque for value. Must have had the cheque negotiated to him or her. Must take the cheque without any notice of previous dishonour.

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