Law on Negotiable Instruments

Long Quiz

I. Multiple Choice Question: Choose the best answer

1. Creditors are bound to accept checks in payment of debtor’s obligation.
An order or promise to pay out of a particular fund is not negotiable.
a. Both are true c. Only first statement is true
b. Both are false d. Only second statement is true

2. An instrument where no time for payment is expressed is payable on demand.

An instrument which contains an order or promise to do any act in addition to the payment of money
will not render the instrument non-negotiable.
a. Both are true c. Only first statement is true
b. Both are false d. Only second statement is true

3. Absence or failure of consideration is a matter of defense as against any person not a holder in due
course.
An accommodation party is liable on the instrument to a holder for value notwithstanding such
holder at the time of taking the instrument knew him to be only an accommodation party.
a. Both are true c. Only first statement is true
b. Both are false d. Only second statement is true

4. What are the functions of negotiable instrument?

a. Used as substitute for money
b. Media of exchange for most commercial transactions
c. Served as a medium of credit transactions
d. All of the above

5. What law governs the negotiable instrument in the Philippines?

a. B. P. 22 c. Act No. 2031
b. Uniform negotiable instruments law d. R. A. 8022

II. Case Analysis

1. Alakdan issued a negotiable PN (promissory note) payable to Buwitre or order in payment of certain goods.
Buwitre indorsed the PN to Cardo in payment of an existing obligation. Later Alakdan found the goods to
be defective. While in Cardo‘s possession the PN was stolen by Dennis who forged Cardo‘s signature and
discounted it with Edgar, a money lender who did not make inquiries about the PN. Edgar indorsed the PN
to Felix, a holder in due course. When Felix demanded payment of the PN from Alakdan the latter refused
to pay. Dennis could no longer be located.

A. What are the rights of Felix, if any, against Alakdan, Buwitre, Cardo and Edgar? Explain 3 pts.
B. Does Cardo have any right against Alakdan, Buwitre and Felix? Explain. 3pts.

2. CX maintained a checking account with UBANK, Makati Branch. One of his checks in a stub of fifty was
missing. Later, he discovered that Ms. DY forged his signature and succeeded to encash P15,000 from
another branch of the bank. DY was able to encash the check when ET, a friend, guaranteed due execution,
saying that she was a holder in due course. Can CX recover the money from the bank? Reason briefly. (4
pts.)

III. Give 10 Examples of an Negotiable Instrument ( Promissory Note, Check, Bill of Exchange)
IV. Give Examples of an Negotiable Instrument and its Amibuity.