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ASIA PACIFIC COLLEGE OF ADVANCED STUDIES

PRELIMINARY EXAMINATION
LAW 3
LAW ON NEGOTIABLE INSTRUMENTS
MULTIPLE CHOICE:
1. The following are essential requisites of a negotiable promissory note except
a. must be written and signed by the drawer
b. must contain an unconditional promise to pay a sum certain in money
c. must be payable upon fixed determinable future time.
d. must be payable to order or bearer
2. Which of the following is not an essential element of a bill of exchange?
a. must be written and signed by the drawee
b. must contain an unconditional promise to pay a sum certain in money
c. must be payable to order or bearer
d. drawee must be named therein
3. The following are negotiable except
a. Pay to bearer Jose Cruz P 10,000 upon demand, signed by A and addressed to B
b. Pay to Jose Cruz or bearer P 10,000 upon demand, signed by A and addressed to B
c. I oblige myself to pay Pedro Reyes or order P 3,000 ten days after day signed by M as
maker.
d. Good to L or order P 5,000 July 1, 2009 signed by M as maker
4. Which of the following is negotiable?
a. I promise to pay Jose Cruz or order P 10,000 or deliver 1 cow 20 days after date at
the option of the holder signed by M as maker
b. Pay to Pedro Reyes or bearer P 10,000 or deliver 1 cow on 4-4-10 at the option of the
drawee, signed by A and addressed to B
c. Pay to Pedro C. Cruz or order P 5,000 out of fund I deposited with you signed by A
and addressed to B
d. I promise to pay K. KHO or order P 10,000 in 5 installments, first installment August
1, 2009 and every month thereafter, signed by M as maker
5. The following are functions of negotiable instrument; except:
a. used as substitute for money
b. medium of credit transactions
c. medium of exchange for commercial transactions
d. none of them.
6. Which of the following is no an incident in the life of negotiable instrument?
a, Issue
c. Preparation
b. notice of dishonor
d. Negotiation
7. Which of the following is negotiable?
a. Postal Money order
b. Certificate of stock
c. Treasury warranty
d. None of them

8. A promissory note is payable to bearer when:


a. It is payable to a person named therein or bearer
b. the only indorsement is blank
c. the name of payee does not support to be the name of a person
d. all of the above
9. Who of the following is party with primary liability?
a. Maker
c. drawer
b. Indorser
d. person negotiating by mere delivery
10. A check is not presented for payment within a reasonable length of time after issue is
called
a. certified
c. memorandum
b. Stale
d. crossed
11. The following are promissory notes except:
a. due bill
c. certificate of deposit
b. bond
d. none of them
12. Which of the following is false?
a. the acceptor is primarily liable
b. the drawer is secondarily liable
c. the issue is not negotiation
d. when the drawer and drawee are the same person the holder consider the bill was a
note
13. I promise to pay Jose Reyes or order P 10,000 ten days after the date signed by M as
maker. The note is undated. Which of the following is correct?
a. the note is non negotiable
b. the payee can require payment 10 days after issue
c. the payee can require payment at any time
d. the payee cannot negotiate the note
14. The negotiable promissory note signed by M as maker for P 10,000 is payable to Jose
Cruz or bearer on May 10, 2009. M however issued the note to the payee May 15, 2009.
In this case:
a. The instrument is considered non-negotiable because the date of issue is later than the
date of payment.
b. Cruz can ask for payment at anytime
c. Cruz can require payments only on May 15, 2009
d. Cruz cannot negotiate the note
15. Ferdinand owes 8,000 in unpaid taxes. Using the back of an old shirt, he executes an
instrument for 8,000 that otherwise meets the requirements for negotiability. This
instrument is likely
a. negotiable.
b. nonnegotiable, because a shirt is not sufficiently permanent.
c. nonnegotiable, because the government does not appreciate such gestures.
d. nonnegotiable, because an instrument must be on paper so that it may be processed
efficiently in the banking system.
16. Which of the following writings are negotiable instruments?
a. a conditional promise to pay 25
b. an unconditional promise to pay a reasonable sum

c. an unconditional promise to pay 25 sometime next month


d. none of the above
17. Which of the following statements will make a promise to pay a conditional one?
a. "payment as per our contract"
b. "payment upon delivery of goods as stated in contract"
c. both A and B
d. none of the above
18. Which of the following terms satisfy the requirement that negotiable instruments be for a
fixed amount?
a. "pay 1,000"
b. "pay 1,000 + 10% interest"
c. "pay 1,000 + legal rate of interest"
d. all of the above
19. Which of the following orders are payable in money?
a. "Pay on demand $1,000 in gold."
b. "Pay on demand 1,000 doughnuts."
c. both A and B
d. none of the above
20. Are instruments with acceleration clauses negotiable?
a. no, because the value is not for a fixed amount
b. no, because the time of payment is uncertain
c. both A and B
d. yes
21. To borrow money to finance the start-up of her consulting business, Barb executes an
instrument in favor of First National Bank. For the instrument to be negotiable, Barbs
signature
a. must be placed in the lower right-hand corner of the instrument.
b. may be placed anywhere on the instrument.
c. must be placed at the bottom of the instrument.
d. none of the above
22. Kent writes on a piece of paper, I owe you 500, signs it, and gives it to Lane. This
instrument is
a. Negotiable
b. nonnegotiable, because it does not include an express promise to pay.
c. nonnegotiable, because it does not state any conditions to payment.
d. none of the above.
23. Which of the following phrases makes an order instrument negotiable?
a. "Pay to the order of Phil Palmer"
b. "Pay to the order of my brother"
c. both A and B
d. none of the above
24. Carol signs a check that is payable to the order of All-Mart Discount Stores, Inc., but that
does not include a date. This check is
a. negotiable.
b. nonnegotiable, because it does not include a date.

c. nonnegotiable, because it is payable to All-Mart Discount Stores.


d. nonnegotiable, because it is signed by Carol.
25. On May 1, Doug signs a check that is payable to the order of Excel Credit Card
Corporation and that is dated July 1. This check is
a. negotiable.
b. nonnegotiable, because it is payable to Excel Credit Card Corporation.
c. nonnegotiable, because it is postdated.
d. nonnegotiable, because it is signed by Doug
26. With a cashier's check, a bank acts as a
a. drawee.
c. payee.
b. drawer.
d. both A and B
27. Which of the following language on an order will create a negotiable instrument?
a. "Pay X"
c. "I wish you would pay X"
b. "Please pay X"
d. both A and B
28. Which of the following phrases indicates a bearer instrument?
a. "payable to bearer"
c. "pay to the order of cash"
b. "pay to cash"
d. all of the above
29. Dick signs a check payable to the order of Jane, writes this is nonnegotiable in the
lower left corner, and gives it to her. This check is
a. negotiable.
b. nonnegotiable, because it includes the notation this is nonnegotiable.
c. nonnegotiable, because it is not governed by Article 3.
d. nonnegotiable, because it was given to Jane
30. Cindy signs a check payable to the order of my blue-eyed friend and gives it to Dan,
who does not have blue eyes. This check is
a. Negotiable
b. nonnegotiable, because Dan does not have blue eyes.
c. nonnegotiable, because it does not indicate a specific payee
d. nonnegotiable, because it was executed as a joke.
31. Pam signs an instrument payable to the order of Quick Credit, Inc., that allows a holder to
demand payment of the entire amount due, with interest, if Pam fails to make a payment.
This instrument is
a. negotiable.
b. nonnegotiable, because a holder can move up the payment date.
c. nonnegotiable, because moving up the payment date is conditional.

d. nonnegotiable, because the exact payment date cannot be determined from the face of
the instrument.
32. Sam signs an instrument in which he promises to pay one thousand feet of digital cable to
Jill on May 1. This instrument is
a. negotiable.
b. nonnegotiable, because digital cable is not a medium of exchange authorized or
adopted by a domestic or foreign government as part of its currency.
c. nonnegotiable, because it does not indicate a specific brand of digital cable.
d. nonnegotiable, because it states a specific date on which it is payable.
33. Al has a negotiable instrument that does not indicate when it is to be paid. When is it
payable to Al?
a. Immediately
b. in 30 days
c. in a reasonable time
d. Never--the instrument is void if it does not have a payment date.
34. Al loans Peg 1,000, and Peg agrees to repay him 200 per month for six months. The
agreement contains an acceleration clause that may be invoked if any payment is missed.
Peg makes one payment, and then defaults. What amount is due to Al immediately?
a. 0
b. 200, for the missed payment
c. 800, the remaining balance of the loan
d. 1,000, the remaining balance of the loan, plus interest
35. Alan writes a check. In the box on the check, he writes "40.00." In the blank on the
check, he writes, "Thirty pesos and 0/100." For how much may the holder cash the
check?
a. 30
c. 35
b. 40
d. 0
36. Josephine owes 7,000 in unpaid taxes. Using the flank of her prized sow, she executes an
instrument for 7,000 that otherwise meets the requirements for negotiability. This
instrument is likely...
Which of the following is true?
a. Negotiable
b. Nonnegotiable, because a pig is not monetary.
c. Nonnegotiable, because the government does not appreciate such a gesture.
d. Nonnegotiable because an instrument must be on paper so that it may be processed
efficiently in the banking system.
37. Rita signs a promissory note for 10,000 in favor of Phil. University. The note does not
specify the date of its payment. Rita defaults. In PUs suit to collect on the note, the court
will most likely rule in favor of
a. Rita, because PU assumed the risk that the note would not be paid.
b. Rita, because the note is not payable at a definite time or on demand.
c. PU, because the note is an unconditional promise to pay the holder.
d. PU, because there is a uniform default time for repayment when a date is not
specified.
38. When two people sign a note, they are known as co-payees
a. True
b. False
c. Maybe
d. Sometimes

39. To be negotiable, an instrument:


a. Can be for a fixed or flexible amount of money
b. Must bear the signature of the drawee or acceptor
c. Must be payable on demand or at a fixed time
d. Can be oral or written
40. Checks involve three parties:
a. The drawer, the drawee, and the acceptor
b. The drawer, the drawee, and the maker
c. The drawer, the maker, and the payee
d. The drawer, the maker, and the acceptor
41. Negotiable instruments must be payable on demand or at a definite time.
a. True
b. False
c. Maybe
d. Sometimes
42. In order for an instrument to be negotiable, it must be either typed or handwritten in pen.
a. True
b. False
c. Maybe
d. Sometimes
43. There are two basic kinds of negotiable instruments:
a. Drafts and bonds
b. Notes and Bills
c. Drafts and checks
d. Notes and drafts
44. A certificate of deposit is a note provided by a bank.
a. True
b. False
c. Maybe
d. Sometime
The following choices are for items No. 45-76:
a. Negotiable
c.

Partly Negotiable

b. Non-Negotiable
d. None of the above

45. I promise to pay X or order the sum of 200 on Oct 1, 2014. Sgd. M
46. I agree to pay X or order the sum of 200 on Oct 1, 2014. Sgd M
47. I oblige myself to pay X or order the sum of 200 on Oct 1, 2014. Sgd M
48. I commit to pay X or order the sum of 200 on Oct 1, 2014. Sgd M
49. I shall pay X or order the sum of 200 on Oct 1, 2014. Sgd M
50. I will pay X or order the sum of 200 on Oct 1, 2014. Sgd M
51. I acknowledge that I owe X or order the sum of 200 on Oct 1, 2014. Sgd M
52. Pay to X or order the sum of 100 and reimburse yourself from my salary. Sgd M To: Y
53. Pay to X or order the sum of 100 and debit the amount from my bonus. Sgd M To: Y
54. Pay to X or order the sum of 100 which is payment for the shoes I purchased. Sgd. M
55. Pay to X or order the sum of 100 from my allowance. Sgd M To: Y
56. I promise to pay S or order the sum of 100 on demand. Sgd. M
57. I promise to pay S or order the sum of 100 at sight. Sgd. M
58. I promise to pay S or order the sum of 100 upon presentation. Sgd. M
59. I promise to pay S or order the sum of 100. Sgd. M
60. I promise to pay S or order the sum of 100 on December 18, 2014. Sgd. M
61. Pay to S or order the sum of 100 30 days after date. Sgd. M

62. Pay to S or order the sum of 100 30 days after sight. Sgd. M
63. Pay to S or order the sum of 100 on or before Oct. 1, 2012. Sgd. M
64. Pay to S or order the sum of 100 30 days after the death of A. Sgd. M
65. Pay to S or order the sum of 100 30 days before the death of A. Sgd. M
66. Pay to S or order the sum of 100 30 days after he graduates. Sgd. M
67. I promise to pay S or order the sum of 100. Sgd. M
68. Pay to the order of myself the sum of 500. Sgd. M
69. Pay to the order of yourself the sum of 500. Sgd. M
70. Pay to the order of A, B. and C the sum of 500. Sgd. M
71. Pay to the order of A, B, or C the sum of 500. Sgd. M
72. Pay to the order of the President of X Corp the sum of 1,000 on August 1, 2015. Sgd. M
73. Pay to bearer the sum of 5,000 on demand. Sgd. M
74. I promise to pay P or bearer the sum of 5,000. Sgd. M
75. Pay to the order of CASH 10,000. Sgd. M
76. I promise to pay to the order of Pablo Patricio the sum of 10,000. Sgd.M
At the back of instrument, Pablo Patricio merely signed as follows. Sgd. Pablo Patricio
77. A bill of exchange to which no document is attached when presentment for payment or
acceptance is made.
a. Trade acceptance
c. Clean Bill of Exchange
b. Bank Acceptance
d. Documentary Bill of Exchange
78. Payable to specified person.
a. Pay to B or his agent 1,000
b. Pay to B or his assigns 1,000
c. Pay to B or his indorsees 1,000
d. None of the above
79. A note as distinguished from a bill of exchange
a. It contains an unconditional order
b. The one who issues it is primarily liable
c. The one who issues it secondarily liable
d. There are 3 parties
80. Managers check may be treated and considered a promissory note because
a. The drawer and drawee are the same persons
b. The drawee is fictitious
c. The instrument is ambiguous
d. Answer not given
81. Not unconditional order to pay
a. To pay out of a particular fund
b. To pay and charge against a particular fund
c. Both a and b
d. None of the above
82. A feature or characteristics of a bill of exchange not found in a promissory note
a. Promise to pay
b. Order to pay
c. Promise in writing to pay
d. Unconditional promise in writing

83. The sum payable is a sum certain although it is to be paid


a. With interest
b. By stated installments
c. With exchange
d. All of the above
84. A non-negotiable instruments
a. Treasury warrant
c. Bill of Lading
b. Money Order
d. All of the above
85. All of the following are negotiable except:
a. Certificate of Deposit
c. Post Office Money Order
b. Due bill
d. Trade Acceptance
86. An instrument is payable at a fixed or determinable future time when it is expressed to be
payable:
a. At a fixed period after date or sight
b. On or before a fixed or determinable future time
c. On or at a fixed period after the occurrence of a specified event which is not certain
to happen
d. Both a & b
87. It is a check which bears a two parallel lines across its face indicating that the check is for
deposit
a. Memorandum check
c. Crossed Check
b. Cashiers Check
d. Stale Check
88. It is a form of expression sufficient which can be deducted as a direct promise to pay a
sum certain in money
a. Unconditional Promise
c. Conditional Promise
b. Unconditional Order
d. Conditional Order
ESSAY (12 POINTS)
89.90. Differentiate condition from a period.
91-100. When is an instruments negotiable?