ARAULLO UNIVERSITY-PEN COLLEGE OF MANAGEMENT ANG ACCOUNTANCY NEGOTIABLE INSTRUMENTS LAW FINAL Exam MULTIPLE CHOICE. SHADE THE LETTER OF YOUR CHOICE ON THE ANSWER SHEET. 1. Negotiable instruments are considered substitute for money, hence considered as legal tender. A legal tender is a medium of exchange which the law compels the creditor to accept in payment for obligations. a. Both are true c. Only first statement is true b. Both are false d. Only second statement is true 2. The original parties in a bill of exchange are the drawer, acceptor and payee. The original parties in a promissory note are the maker and payee. a. Both are true c. Only first statement is true b. Both are false d. Only second statement is true 3. A signature by procuration operates as notice that the agent has but a limited authority to sign, and the principal is bound only is case the agent is so doing acted within the actual limits of his authority. A conditional indorsement renders the instrument nonnegotiable. a. Both are true c. Only first statement is true b. Both are false d. Only second statement is true 4. The drawer’s liability is secondary. The drawee’s liability primary. a. Both are true c. Only first statement is true b. Both are false d. Only second statement is true 5. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon have to become a party thereto for value. The bank is not liable to the holder, unless and until it accepts. a. Both are true c. Only first statement is true b. Both are false d. Only second statement is true 6. 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 7. 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 b. Both are false
c. Only first statement is true d. Only second statement is true
8. 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 9. 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 10. What law governs the negotiable instrument in the Philippines? a. B. P. 22 c. Act No. 2031 b. Uniform negotiable instruments lawd. R. A. 8022 11. Which of the following is not negotiation of a negotiable instrument? a. Delivery to the payee b. Delivery of a bearer instrument c. Indorsement completed by delivery d. Assignment 12. a. b. c.
An indorsement is restrictive when It prohibits the further negotiability of an instrument It constitutes the indorsee the agent of the indorser It vests the title in the indorsee in trust for or to the use of some other person d. All of the above
13. Which of the following instruments is negotiable? a. “I promise to pay P or order P100 in two installments” Sgd. M b. “I promise to pay P or order P100,000 when he reach the age of majority” Sgd. A c. “I promise to pay P, P10,000 on December 10, 2011” Sgd. B d. “I promise to pay P or order P 1000 10 days after his father’s death” Sgd. C 14. An instrument which is originally negotiable ceases to be negotiable when a. Restrictively indorse b. Qualifiedly indorse c. The last and only indorsement is in blank d. All of the above 15. Absence or failure of consideration is a matter of defense against any person a. Holder in due course b. Not a holder in due course c. Holder of an instrument d. Holder for value
16. a. b. c. d.
All are warranties of a qualified indorser, except Capacity of prior parties Instrument is valid and subsisting He has good title to it Instrument is genuine and in all respect that it purports to be
17. M signed a blank check which he inadvertently left in his desk at his office. P later stole the same, who filled in the amount of P 20,000.00 and a fictitious name as payee. P then indorsed the check in the payee’s name and indorsed the check to A; thereafter, A indorsed to B; then B to C, and C to D. a. D cannot enforce the instrument against M only if D is holder in due course b. D can enforce the instrument against M even if D is not a holder in due course because the signature of D is genuine c. D cannot enforce the instrument against any one of the prior parties because the instrument is not a valid instrument and therefore, not negotiable d. D can enforce the instrument against any one of the prior parties except M 18. Which feature of a bill of exchange in not found on a promissory note? a. Promise to pay b. Order to pay c. Written instrument d. Promise to pay sum certain in money 19. a. b. c. d.
Which instrument is payable to bearer Pay to bearer B, P1000 Pay to B, bearer, P1000 Pay to bearer, P1000 All of the above
20. A promissory note payable on demand must be presented for payment a. Within a reasonable time after its issuance b. Within a reasonable time after its last negotiation c. Within a reasonable time after its last indorsement d. None of the above 21. The validity and negotiability of an instrument are not affected by the following omissions, except a. It is not dated b. Does not specify where it is drawn or the place where it is payable c. Designates a particular fund from which payment is to be made d. None of the above 22. An indorsement where the indorser adds the phrase “ without recourse” is called a. Blank indorsement b. Restrictive indorsement c. Qualified indorsement
d. Conditional indorsement 23. Which of the following is not necessary in order to make an instrument negotiable? a. It must be in writing and signed by the maker or drawer b. It must contain an unconditional promise or order to pay a certain in money c. It must be payable only to a specified person d. It must be payable on demand or at fixed or determinable future time 24. a. b. c. d.
A bill of exchange may be treated as a promissory note When the drawee and the payee are the same person When the drawer and the payee are the same person When the drawer and the drawee are the same person All of the above
25. The following are the warranties of a qualified indorser, except a. That the instrument is genuine and in all respect what it purports to be b. That he had good title to it c. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless d. None of the above 26. a. b. c. d.
Not a method of transferring commercial paper Assignment Negotiation Indorsement and delivery None of the above
27. a. b. c. d.
Which is not a negotiable instrument? Promissory note Bill of exchange Checks Certificate of stock
28. a. b. c. d.
Which of the following is an example of real defense? Acquisition of the instrument by force Acquisition of the instrument for illegal consideration Fraud in the indorsement Fraud in factum
29. a. b. c. d.
Which of the following is not a personal defense? Absence of consideration Forgery of a signature Nondelivery of a complete instrument Failure of consideration
30. X obtains the signature of Y for autograph purpose. X writes a negotiable promissory note above Y’s signature. The note was validly negotiated to A who is a holder in due course. What kind of defense can Y avail against A? a. Personal defense b. Real defense c. Qualified defense
d. Equitable defense 31. A issued a bearer instrument to B. the note is negotiated by B to C, by C to D, by D to E. who can E hold liable for the instrument? a. A b. B c. C d. D 32. a. b. c. d.
Which of the following is not a real defense? Fraud in factum Forgery of a signature Incomplete and undelivered instrument Insertion of a wrong date
33. Instances when presentment for payment is excused a. Where after the exercise of reasonable diligence presentment as required by this Act cannot be made b. Where the drawee is a fictitious person c. By waiver of presentment, express or implied d. Where there are excusable circumstances which are unavoidable and not attributable to the fault of the holder 34. a. b. c. d.
An accommodation party He must be a party to the instrument He must receive value therefor He must sign for lending his name or credit All of the above
35. a. b. c. d.
All must be complied for an agent to escape liability, except Agent is duly authorized He indicates that he signs as an agent He declares his principal None of the above.
36. The following are the rights of indorsee in a restrictive indorsement, except a. To receive payment on the instrument b. To bring any action thereon that the indorser could bring c. To negotiate the instrument d. None of the above 37. “I promise to pay P10,000.00” (Sgd) M a. Negotiable b. Non-negotiable 38.
“I authorize you to pay P or order P10,000.00” (Sgd) M
a. Negotiable
b. Non-negotiable
39. “I agree to pay to the order of P, P10,000.00” (Sgd) M a. Negotiable b. Non-negotiable 40. “I promise to pay P or order P10,000.00, 30 days after the death of his partner” (Sgd) M a. Negotiable b. Non-negotiable 41. M signed a blank check which he inadvertently left in his desk at his office. P later stole the same, who filled in the amount of P 20,000.00 and a fictitious name as payee. P then indorsed the
check in the payee’s name and indorsed the check to A; thereafter, A indorsed to B; then B to C, and C to D. e. D cannot enforce the instrument against M only if D is holder in due course f. D can enforce the instrument against M even if D is not a holder in due course because the signature of D is genuine g. D cannot enforce the instrument against any one of the prior parties because the instrument is not a valid instrument and therefore, not negotiable h. D can enforce the instrument against any one of the prior parties except M 42. Which feature of a bill of exchange in not found on a promissory note? e. Promise to pay f. Order to pay g. Written instrument h. Promise to pay sum certain in money 43. Which instrument is payable to bearer e. Pay to bearer B, P1000 f. Pay to B, bearer, P1000 g. Pay to bearer, P1000 h. All of the above 44. A promissory note payable on demand must be presented for payment e. Within a reasonable time after its issuance f. Within a reasonable time after its last negotiation g. Within a reasonable time after its last indorsement h. None of the above 45. The validity and negotiability of an instrument are not affected by the following omissions, except e. It is not dated f. Does not specify where it is drawn or the place where it is payable g. Designates a particular fund from which payment is to be made h. None of the above 46. Which of the following is not necessary in order to make an instrument negotiable? e. It must be in writing and signed by the maker or drawer f. It must contain an unconditional promise or order to pay a certain in money g. It must be payable only to a specified person h. It must be payable on demand or at fixed or determinable future time 47. A bill of exchange may be treated as a promissory note e. When the drawee and the payee are the same person f. When the drawer and the payee are the same person g. When the drawer and the drawee are the same person h. All of the above 48. Not a method of transferring commercial paper
e. Assignment c. Negotiation f. Indorsement and delivery d. None of the above 49. Which is not a negotiable instrument? e. Promissory note c. Bill of exchange f. Checks d. Certificate of stock 50. Which of the following is an example of real defense? e. Acquisition of the instrument by force f. Acquisition of the instrument for illegal consideration g. Fraud in the indorsement h. Fraud in factum 51. X obtains the signature of Y for autograph purpose. X writes a negotiable promissory note above Y’s signature. The note was validly negotiated to A who is a holder in due course. What kind of defense can Y avail against A? e. Personal defense c. Real defense f. Qualified defense d. Equitable defense 52. Which of the following is not a real defense? e. Fraud in factum f. Forgery of a signature g. Incomplete and undelivered instrument h. Insertion of a wrong date 53. Instances when presentment for payment is excused e. Where after the exercise of reasonable diligence presentment as required by this Act cannot be made f. Where the drawee is a fictitious person g. By waiver of presentment, express or implied h. Where there are excusable circumstances which are unavoidable and not attributable to the fault of the holder 54. An accommodation party e. He must be a party to the instrument f. He must receive value therefore g. He must sign for lending his name or credit h. All of the above 55. All must be complied for an agent to escape liability, except e. Agent is duly authorized c. He indicates that he signs as an agent f. He declares his principal d. None of the above. 56. A check which has not been presented for payment within a reasonable time after its issuance is a a. Certifies check c. Stale check b. Cashier’s check d. None of the above 57. If the drawee destroys the bill a. The bill is considered accepted c. The bill is considered dishonored b. The bill is discharged d. The bill is cancelled
58. A demand promissory note must be presented for payment a. Within a reasonable time after issuance b. Within reasonable time after its last negotiation c. Within a reasonable time after the last indorsement d. All of the above 59. Any alteration which changes the following shall be deemed to be material, except a. The date b. The sum payable, either principal or interest c. The time or place of payment d. None of the above 60. A person secondarily liable on the instrument is discharged, except a. By any act which discharged the instrument b. By the intentional cancellation of his signature by the holder c. By the discharged of a prior party d. None of the above 61. In the renunciation of the holder of his rights against any party to the instrument, which of the following statement is false? a. If the instrument, is delivered to the person primarily liable without collecting, it constitutes renunciation b. If renunciation is made in favor of any party secondarily liable, all parties subsequent to him are discharged from liability c. Renunciation will not affect the rights of a holder in due course d. If the renunciation is made in favor of the party primarily liable it must be made before or on maturity 62. Where in a bill the drawer and the drawee are the same person or where the drawee is a fictitious person, or a person not having the capacity to contract, the holder, at his option, may treat the instrument as a. Dishonored c. Bill of exchange b. Promissory note d. Either a bill of exchange or a promissory note 63. Which of the following will not discharge a negotiable instrument? a. Payment in due course by the accommodated party which the instrument is made or accepted for his accommodation b. Payment in due course by the principal debtor c. Intentional cancellation of the instrument by the maker d. Payment in due course by the accommodation maker 64. Presentment for payment is required in the following, except a. When presentment is necessary to fix the maturity of the instrument b. When the bill expressly stipulates that it shall be presented for acceptance c. Where a bill is drawn payable elsewhere than at the residence or place of business of the drawee d. None of the above 65. When acceptance may be made a. Before the bill has been signed by the drawer
b. Before it is complete c. When it is overdue d. All of the above 66. All are requisites of actual acceptance, except a. It must be in writing and signed by the drawer b. It must not express that the drawee will perform his promise by any other means than the payment of money c. There must be delivery or notification of the acceptance d. None of the above 67. A bill of exchange is treated as a promissory note in the following, except a. When the drawer and drawee are the same person b. When the drawee is a fictitious person c. When the drawee is an incapacitated person d. When the drawee and the payee are the same person 68. When notice of dishonor need not be given to the indorser a. When the drawer is a fictitious person or a person not having capacity to contract, and the indorser was aware of the that fact at the time he indorsed the instrument b. Where the indorser is the person to whon the instrument is presented for payment c. Where the instrument was made or accepted for his accommodation d. None of the above 69. When presentment for payment is excused a. Impossibility of presentment b. The drawer is a fictitious person c. By waiver of presentment, express or implied d. All of the above 70. A formal declaration of a fact of non-acceptance or non-payment usually executed by a notary, and in popular sense all the steps accompanying the dishonor of a bill or note necessary to charge the drawer or an indorser. a. Notice c. Cancellation b. Protest d. Renunciation 71. The following are the requisites for acceptance for honor, except a. The bill must have been protested for non-acceptance or nonpayment b. The bill is not overdue at the time of the acceptance for honor c. The acceptance may be made by any person d. The holder must give his consent 72. Which is not a bill of exchange? a. Memorandum check b. Due bill
c. Cashier’s check d. None of the above
73. A promissory note a. Must be in writing and signed by the maker or drawer b. Must be payable to order or bearer c. Must be payable in sum certain in money
d. All of the above 74. When a negotiable instrument has been dishonored by nonacceptance or non-payment, notice of dishonor must be given to the following, otherwise they are discharged a. Maker c. Drawee b. Drawer d. Acceptor 75. An instrument is rendered non-negotiable if a. there is an indication of a particular fund out of which reimbursement is to be made b. there is an indication of a particular account to be debited with the amount c. the instrument is payable out of a particular fund d. none of the above 76. A promissory note for 100,000.00 payable to A or order. A signs his name at the back and delivers the note to B. B negotiated the note to C by mere delivery. a. title is not transferred to C because B did not endorse b. C is a mere agent of B c. C becomes a holder by mere delivery d. C cannot negotiate be mere delivery to D 77. All are non-negotiable instruments except a. Treasury warrant c. Shares of stock b. Bill of Lading d. memorandum check 78. Absence or failure of consideration is a matter of defense against any person a. holder in due course c. holder for value b. not a holder in due course d. holder of instrument 79. a. b. c.
When is an instrument payable to bearer? when the only or last indorsement is an indorsement in blank when it is expressed to be so payable When the name of the payee does not purport to be the name of any person d. All of the above
80. The following are warranties of a qualified indorser except a. capacity of prior parties b. instrument is valid and subsisting c. good title d. instrument is genuine in all respect it purport to be 81. When presentment for acceptance of a bill is not necessary? a. when the bill is payable after sight b. when the bill is drawn payable elsewhere than at the residence or place of business of the drawee c. when it is payable at a certain number of days after date d. when the note is restrictively indorse 82. A check which has not been presented for payment within a reasonable time after its issuance is a
a. certified check manager’s check
b. stale check c. cashier’s check
83. If the drawee destroys the bill a. the bill is considered accepted dishonored b. the bill is discharged
d.
c. the bill is considered d. the bill is cancelled
84. A feature or characteristic of a bill of exchange not found in a promissory note is a. promise to pay c. order to pay b. promise in writing to pay d. unconditional promise in writing 85. Which is an instrument payable to bearer? a. pay to bearer B, 10,000.00 c. pay to B, the bearer, 10,000.00 b. Pay to possessor, 10,000.00 d. all of the above 86. An indorsement where the indorser adds the phrase “without recourse” is a a. blank indorsement c. restrictive indorsement b. qualified indorsement d. conditional indorsement 87. Which is an instrument payable to the order of the drawee? a. pay to yourself or order, 100.00 c. pay to the order of ourselves, 100.00 b. I promise to pay myself or order, 100.00 d. all of the above 88. Which of the following is not necessary in order to make an instrument negotiable? a. it must be in writing and signed by the maker or drawer b. it must contain an unconditional promise or order to pay a sum certain in money c. it must be payable on demand or at a fixed determinable future time it must be pay 89. Which of the following issued and signed by Kimpoy is negotiable? a. I promise to pay A or order P 100.00 if he will pass the Bar exams this year. b. I promise to pay A or order P 100.00 10 days after the death of his dog Kinky. c. I promise to pay A or order P 100.00 in two installments. d. I promise to pay A P 100.00. 90. A promissory note is different from Bill of Exchange because – b. c. d.
a. It contains an unconditional order; The maker is primarily liable; There are three parties in a promissory note; The maker is the principal debtor. 91. An instrument which is originally negotiable ceases to be negotiable when –
a.
Qualifiedly indorsed b. c. Indorsed in blank
Restrictively indorsed d.
Indorsed especially
92. Which of the following is not a right of a holder in due course? a. To enforce payment of the instrument for the full amount thereof against all parties liable thereon;
b. To receive payment and if payment is in due course the instrument is discharged; c. He holds the instrument subject to the same defenses as if it were non-negotiable; He may sue on the instrument in his own name. 93. Payable to the order of the drawee –
d. a. b. c. d.
Pay to the order of ourselves P 1,000.00 Pay to yourself or order P 1,000.00 I promise to pay myself or order P 1,000.00 All of the above 94. Demand promissory note must be presented for payment -
a. b. c. d.
Within a reasonable time after its issuance Within a reasonable time after the last negotiation Within a reasonable time after the last endorsement All of the above 95. A certificate of stock is not negotiable because it lacks the requirement of -
a. b. c. d.
The instrument must be in writing and signed by the maker or drawer It must contain an unconditional promise or order to pay a sum certain in money It must be payable on demand, or at a fixed or determinable future time It must be payable to order or to bearer 96. Which of the following is not warranted by a person negotiating an instrument by delivery?
b.
a. That at the time of his endorsement the instrument is valid and subsisting That the instrument is genuine and in all respect what it purports to be c. That he has good title to it and that all prior parties have capacity to contract d. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless 97. Alteration which changes the following shall be deemed to be material, except a. Date a. Time or place of payment
d.
b. Sum payable, either principal or interest The check number
98. Which of the following is not a right of a holder in due course? a. He may enforce payment of the instrument for the full amount thereof against all parties liable thereon b. He may receive payment and if payment is in due course, the instrument is discharged c. He holds the instrument subject to the defenses as if it were non-negotiable d. He may sue on the instrument in his own name 99. Which of the following is not negotiable? a. b. c. d. 100. a. b. c. d.
I agree to pay to the order of X P1,000.00 ( sgd ) Y Good to X or order P1,000.00 ( sgd ) Y I promise to pay X or order P1,000.00 on January 25. ( sgd ) Y I promise to pay X or order P1,000.00. ( sgd ) Y Which of the following alterations is not material? An alteration which changes the currency in which payment is to be made. Alteration which adds a place of payment where no place of payment is specified. An alteration which substitutes the word “bearer” for the word “order” An alteration of the check number issued by the PNB San Jose City, N.E.
