Negotiable Instruments Law Questionnaire

GROUP 1

1. If the instrument is payable to the order of a third person

a. He is liable to all parties subsequent to the payee
b. He is not liable to the party
c. He is liable to the payee and to all subsequent parties
d. He is liable to all parties subsequent to the marker or drawer.

2. Which of the following is not negotiable?

a. Pay to D or order P10, 000 on or before Dec.31, 1997 (Sadie)
b. Pay to A or order P10, 000 Notice of Dishonor waived (Sgd. B)
c. Pay to B or order P5, 000 or deliver two horses at the option of the holder (Sgd.D)
d. Pay to C or order P10, 000 and to deliver 10 sacks of rice (Sgd. D)

3. 1st statement: A check must be presented for payment within a reasonable time after it
issue or the drawer will be discharged from a liability thereof.
2nd statement: Where the holder of a check procures it to be accepted or certified, the
drawer and all endorsers are discharged from liability thereof.
a. only the 1st statement is true c. both statements are not true
nd
b. only the 2 statement is true d. both statements are true

4. A makes a note payable to B or order. The following are the indorsers of the note in the order
of their endorsement: B, C, D, E, F (holder) and G (subsequent holder).The note is dishonored in
the
a Hand of F, who notifies B, C, D and E.Which, is not correct?
a. The notice given by F to B operates to the benefit of C, D, E and G
b. The notice to C insures to the benefits of D, E and G
c. The notice insures to the benefits of B
d. The notice to D insures to the benefits of E and G

5. For the purpose of lending his name without receiving value therefore, A makes a note for
P1M payable to the order of B who in turn negotiates it to C, the latter knowing that A is not a
party for value. May C recover from A if the latter alleges absence of consideration?

a. Yes, because an accommodation party is liable to a holder for value.

b. Yes, because an accommodated party is liable to a holder for value.
c. No, because the holder is not a holder in due course due to his knowledge of the absence
of consideration.
d. No, because absence of consideration is a personal defense.
6. A delivers a bearer check to B. B then specially indorses it to C and C later indorses it in blank
to D. E steals the check from D and forging the signature of D, succeeds in “negotiating” it
to F, who acquires the same in good faith and for value. If, for any reason, the drawee bank
refuses to honor the check, can F enforce the check against A?

a. No, because of the forgery in the indorsement of D, F did not acquire title over the check.
b. Yes, because despite the forgery in the indorsement of D, F acquired title to the
instrument.
c. Yes, because a holder in due course can always enforce the instrument against all parties
liable thereon.
d. No, because forgery is a real defense which can be put up even against a holder in due
course such as F.

7. Supposing D indorses the note to E for value but who has knowledge of the infirmity, can the
latter enforce the note against A?
a. No, because E is a holder not in due course.
b. Yes, because he is a holder in due course.
c. No, because A has a personal defense against him.
d.Yes, because although he is not a holder in due course because of his knowledge of
the infirmity in the instrument, he acquires all the rights of a holder in due course
for having taken the note from D, a holder in due course.

8. Where an endorser waives the benefit of any law intended for his advantage such as notice of
dishonor, his indorsement is
a. Conditional c. Restrictive
b. Qualified d.Facultive

9. A makes a promissory note to B as follows: I promise to pay B or bearer P1, 000 on demand”
(Sgd.A) After the issue to B, B negotiates it to C by mere delivery C to D by mere delivery, and
D to E by special indorsement and E to F also by special indorsement and F negotiates it to G by
blank indorsement, as holder strikes out the special indorsement of D to E and E to F.What are
the effects of striking out the said indorsement?

Effect 1: D and E are discharged from liability because it was their indorsements which were
stricken put by G as not necessary to his title.

Effect 2: Subsequent indorser F is also discharged from liability because his right of recourse
has been cut off by the discharge of D and E.

a. Both effects are true c.First is false, second is true

b.Both is false d. First is true, second is false
10. A issues a bill to the order of B. Later B, without indorsing the bill, transfers for
consideration
said bill to C. The following except one are the valid effects of the transfer:
a C acquires the right to have indorsement of B.
b. The bill is merely assigned not negotiated.
c. C has become a holder for value.

11. Which of the following is not a personal defense?

a. Absence of consideration c. Non-delivery of a complete instrument
b. Forgery signature d. Delivery of an incomplete instrument

12. Which of the following is a real defense?

a .Fraud in inducement
b.Fraud in factum
c. Acquisition of the instrument by force
d. Acquisition of the instrument for illegal consideration.

13. This is not negotiation of negotiable instrument

a. Assignment
b Delivery of bearer instrument
c. Indorsement completed by delivery of an instrument
d. Delivery of an instrument to the payee

14. A holder of negotiable instrument may to sue thereon in his own name and payment to him in
due course
discharges it.
a) Holder in due course c) Holder for value
b) Holder NOT in due course d) All of them

15. A: There is a valid payment when negotiable instrument is delivered and accepted by the
creditor.
B: Creditors are bound to accept checks in payment of obligation.
a.)Both statements are true
b.)First statement is false; second statement is true
c.) Both statements are false
d.) First statement is true; second statement is false

16. A: An order or promise to pay out a particular fund is negotiable.

B: An instrument which is payable to bearer is negotiated by indorsement plus the delivery of
the instrument.
a.)Both statements are true
b.)First statement is false; second statement is true
c.) Both statements are false
d.) First statement is true; second statement is false
17. A: A holder in due course is one who possesses both legal and beneficial interest to the
instrument and is subject to personal defenses only.
B: A holder for value is an endorsee who has both the legal title and the beneficial interest
to the instrument and is subject to both real and personal defenses against him.
a.)Both statements are true
b.)First statement is false; second statement is true
c.) Both statements are false
d.) First statement is true; second statement is false

18. A: The indorsement of the instrument by a minor passes the title there to notwithstanding that
a from want to capacity, the minor may incur no liability.
B: A person whose signature does not appear on the instrument may be held liable thereon.

a.)Both statements are true

b.)First statement is false; second statement is true
c.) Both statements are false
d.) First statement is true; second statement is false

19. A: A note promising to pay B or order Php.10, 000, 30 days after Ms. W passes the CPA
exams is negotiable.
B: The indorsement need not to be written on the negotiable instrument itself.
a.)Both statements are true
b.)First statement is false; second statement is true
c.) Both statements are false
d.) First statement is true; second statement is false

20. An instrument is payable on demand when:

a.) Expressed to be payable on determinable future time
b.) After sight or presentation
c.) Time for payment is expressed
d.) Issued overdue