BUSINESS LAW

QUIZ –Negotiable Instruments Law Part I 8. When a negotiable instrument payable to order?
a. When payable to the order of a specified person or to him or his order
1. The drawee is not primarily liable b. When payable to the order of a fictitious person or non-existing person and such a fact
a. Cashier’s check c. Certified check was
b. Manager’s check d. Traveler’s check known to the person making it so payable;
c. When the name of the payee does not purport to be the name of a person.
2. If the instrument is payable to the order of a third person d. When only or last indorsement is in blank.
a. He is liable to all parties subsequent to the payee
b. He is not liable to the party 9. Which of the following is not a characteristic of a bill of exchange?
c. He is liable to the payee and to all subsequent parties a. Original parties are the drawer, drawee and payee;
d. He is liable to all parties subsequent to the marker or drawer. b. Acceptance is generally required;
c. Drawer is primarily liable;
3. Which of the following is not negotiable? d. Contains an unconditional order to pay.
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) 10. A holder in due course has the following rights, except:
c. Pay to B or order P5, 000 or deliver two horses at the option of the holder (Sgd.D) a. He may receive payment and if in due course, the instrument is discharged;
d. Pay to C or order P10, 000 and to deliver 10 sacks of rice (Sgd. D) b. He may sue on the instrument in his own name;
c. He can recover on the instrument
4. A bill of exchange drawn on a bank and payable on demand is d. He holds the instrument as if it were non-negotiable
a. Check c. Domestic bill
b. Treasury d. Bill of lading 11. Which is not correct? The acceptor by accepting a negotiable instrument
a. Admits the existence of the payee and his capacity to endorse.
5. Which is not correct? The acceptor by accepting the instrument b. Admits the existence of the drawer, the genuiness of his signature and his authority
a. Admits the existence of the payee and his capacity to indorse to
b. Admits the existence of the drawee, the genuiness of his signature and his capacity draw the instrument.
and c. Admits the existence of the endorser, the genuiness of his signature and his
authority to draw the instrument authority to
c. Engages that he will pay is according to the tenor of his acceptance draw the instrument.
d. Admits the existence of the endorser, the genuiness of his signature and his capacity d. Admits that he will pat it according to the tenor of his acceptance.
and
and authority to indorse instruments. 12. 1st statement: A check must be presented for payment within a reasonable time after
it
6. Case 1: Angel buys a diamond ring for P50, 000 for which he issued a check. Later Angel issue or the drawer will be discharged from a liability thereof.
found 2nd statement: Where the holder of a check procures it to be accepted or certified,
out the diamond to be an ordinary glass. the
Case 2: Ben obtains the signature of Cris for autograph purposes. Ben writes a drawer and all endorsers are discharged from liability thereof.
promissory a. only the 1st statement is true c. both statements are not true
note above Cris’s signature and indorses the note to Dan, a holder in due b. only the 2nd statement is true d. both statements are true
course.
a. Real defense in Case 1, personal defense in Case 2; 13. A makes a note payable to B or order. The following are the indorsers of the note in the
b. Personal defense in Case 1, real defense in Case 2; order of
c. Real defense in both cases; their endorsement: B, C, D, E, F (holder) and G (subsequent holder).The note is
d. Personal defenses in both cases. dishonored in the
a Hand of F, who notifies B, C, D and E.Which, is not correct?
7. Maturity of undated negotiable instrument issued payable 30 days after sight is a. The notice given by F to B operates to the benefit of C, D, E and G
computed from b. The notice to C insures to the benefits of D, E and G
a. Date of first indorsement; c. The notice insures to the benefits of B
b. Date of last indorsement; d. The notice to D insures to the benefits of E and G
c. Date for first presentation for acceptance
d. Date of issue 14. Which of the following instruments is negotiable?
 a. Pay to bearer C P 10,000. Reimburse yourself out of the rental of my house in
Manila. To B 19. For the purpose of lending his name without receiving value therefore, A makes a note
(Sgd) A for P1M
b. Pay to C P 10,000 or his order out of the rental of my house in Manila. To B (Sgd) A payable to the order of B who in turn negotiates it to C, the latter knowing that A is
c. Pay to C P 10,000 and reimburse yourself out of the rental of my house in Manila. not a party
To B (Sgd) A for value. May C recover from A if the latter alleges absence of consideration?
d. Pay to the order of C P10, 000.Reimburse yourself out of the rental of my house in a. Yes, because an accommodation party is liable to a holder for value.
Manila. b. Yes, because an accommodated party is liable to a holder for value.
To (Sgd) A c. No, because the holder is not a holder in due course due to his knowledge of the
absence of
15. Which of the following is a negotiable Bill of Exchange? consideration.
a. Pay to order of X the sum of P 20,000(Sgd.) Y To: A and B d. No, because absence of consideration is a personal defense.
b. Pay to the order of Y the sum of P 30,000 (Sgd) X To: A or his absence to B
c. Pay to the order of X or Y the sum of P 40,000 (Sgd) C To: A or B 20. Supposing under the same facts, A pays C, can he recover from B?
d. Pay to the order of Y the sum of P50, 000 (Sgd) X To: A and B a. No, because as maker he is the principal debtor.
b. No, because as accommodation maker he is deemed the donor of B.
16. A check for Fifty Thousand Pesos (P 50,000) was drawn against drawee bank and made c. Yes, because as accommodated party is the one ultimately liable.
payable d. Yes, because payment by the accommodation party discharges the instruments.
to XYZ or order. The check was deposited with payee’s account at ABC Bank which
then sent the 21. M makes a promissory note payable to bearer and delivers the same to P who endorses
for clearing to the drawee bank. The drawee bank refused to honor the check on the it to X in
back ground this manner:
that the serial number thereof had been altered. Is the refusal of the bank justified? “Payable to X. Signed: P “
a. Yes, it is material alteration which affects the negotiability of the instrument. Later X, without indorsing the note delivers the same to B.The note subsequently
d.No, it is not a material alteration and the negotiability of the instrument is not dishonored by
affected. M. May Y proceed against M for the note?
c. Yes, because of forgery of the check. a. No, because the special indorsement of P made the bearer note payable to order.
d. No, because there is in fact no alteration of the check b. Yes, because a bearer instrument remains as such despite a special indorsement.
c. Yes, because although there was no recognition due to lack of indorsement, Y
17. Where the negotiable instrument is so ambiguous that there is doubt whether a bill or remains the
note, the assignee of the note.
holder may treat it as either at his choice. d. No, because Y is not considered holder for lack of proper endorsement.
Lack of consideration is a personal defense which is only available between
immediate parties or 22. An instrument is not negotiable if the day and the month, but not the year of its
against parties who are not holders in due course. maturity
a. Both statements are false. is given.
b. First is true, second is false. Where the drawees are in the alternative or in succession, the instrument is not
c. Both are true. negotiable.
d. First is true, second is true. a. Both statements are true.
b. Both are false.
18. X draws a check against his current account with ABC bank in favor of B. Although X c. First is true, second is false.
does not d. First is true, second is true.
have sufficient funds; the bank honors the check when presented for payment.
Apparently, and X 23. A delivers a bearer check to B. B then specially indorses it to C and C later indorses it
has conspired with the bank’s bookkeeper so that his ledger card would show that he in blank
has sufficient to D. E steals the check from D and forging the signature of D, succeeds in
funds. “negotiating” it to
a. Yes, because X has no sufficient funds with the bank. F, who acquires the same in good faith and for value. If, for any reason, the drawee
d.No, because the bank as acceptor became primarily liable to B. bank refuses
c. No, because B was not in good faith as payee. to honor the check, can F enforce the check against A?
d. Yes, because of solution debit.
 a. No, because of the forgery in the indorsement of D, F did not acquire title over the same to Y
check. bank for payment bank without noticing the alteration, paid the check, debiting the
b. Yes, because despite the forgery in the indorsement of D, F acquired title to the amount
instrument. from account of A. Which of the two banks shall suffer the loss?
c. Yes, because a holder in due course can always enforce the instrument against all a. X bank, as indorser to Y bank, warrants the correctness of the amount.
parties b. Y bank, as acceptor bank shall be liable for the loss.
liable thereon. c. Both banks are jointly liable to A.
d. No, because forgery is a real defense which can be put up even against a holder in d X bank initially but with right of reimbursement from Y bank.
due course
such as F. 28. Supposing in the above example, there was no alteration except for the forgery of A’
signature by
24. Which of the following is not an effect of a crossed check? B, who shall suffer the loss?
a. The check may not be encashed but only deposited in a bank. a. X bank, as indorser to Y bank, warrants the correctness of the amount.
b. The check may be negotiated only once to one who has bank account. b. Y bank, as acceptor bank shall be liable for the loss.
c. The act of crossing a check serves as a warning to the holder that the check has c. Both banks are jointly liable to A.
been issued d .X bank initially but with right of reimbursement from Y bank.
for a definite purpose so that he must inquire if he received the check pursuant to
that
purpose otherwise; he is not a holder in due course. 29. Supposing further, that there was a forgery only in the indorsement to B as payee, that
d. The indorse remains a holder in due course even if he does not inquire into right of was made
the by another person, Z who deposited the check with his bank (X), who shall suffer the
indorser to the check. loss?
a. X bank, as indorser to Y bank, warrants the correctness of the amount.
25. A issued an order promissory note to B who indorses it to C.D stole the note from C b. Y bank, as acceptor bank shall be liable for the loss.
and forging c. Both banks are jointly liable to A.
the instrument of C, “negotiates “it to E who also indorses it to F, the holder in due d. X bank initially but with right of reimbursement from Y bank.
course. Can
F enforces the note against A, B, C? 30. A issued negotiable promissory note to B with the authority to fill up for P1, 000 only B
a. Yes, because he is a holder in due course who holds the instrument free from in
defenses violation of his contract with A wrote P 5,000 .B negotiated the note to C who had
available to prior parties among themselves. knowledge of
b. No, because he did not obtain title to the note because of the forgery in the the infirmity turn in indorsed it to D who had no knowledge of the said affirmity.Can D
indorsement of C to D enforce
c. No, because all prior parties are not liable to F because of the forgery. the note against A and for how much?
d. Yes, because he is a holder in due course who holds the note free from defects of a. D cannot make A liable because of the fraud committed by B and therefore A has a
the title of prior defense.
parties. b. D can make A liable but only for P1, 000
c. D can make A liable for the whole amount of P5, 000.
26. Based on the same facts as aforementioned, can F enforce the note against E? d. D cannot make A liable but only B and C.
a. Yes, because E is party subsequent to C whose endorsement was forged and as
indorser. 31. Supposing D indorses the note to E for value but who has knowledge of the infirmity,
b.Yes, because he is at fault for taking the note from the forger D. can the
c. No, because all parties prior to him are not liable because of forgery. latter enforce the note against A?
d. No, because E was also a victim who obtained the note from the forger and who a. No, because E is a holder not in due course.
himself cannot b. Yes, because he is a holder in due course.
proceed against A, B and C. 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
27. A issued to B a check for P 50,000 as payment for the car. Without the knowledge of A, in the instrument, he acquires all the rights of a holder in due course for having
B altered taken the note
the amount to 150,000 and deposited the said check with X bank which forwarded the from D, a holder in due course.
 a. No, because D is not a holder in due course.
32. The holder is required to give notice of dishonor to the drawer to make him liable on b. No, although D is acquired the rights of C, a holder in due course.
the c. No, because he knew of the failure of consideration.
instrument in one of the following cases: d .Yes, because he acquired the note for a consideration.
a. Where the drawer is the person to whom the instrument is presented for payment;
b. Where the drawer and the drawee are the same persons; 38. M makes a note for P10,000 payable to the order of C who indorses it to A. F obtains
c. Where the drawer has countermanded payment. possession of the
d. Where the instrument was accepted for his accommodation. note fraudulently, forges the indorsement of A, alters amount to P70, 000 and
endorses it to B who in
33. The negotiable instrument is not discharged turn endorses it to C .In this case:
a. When the principal debtor becomes the holder thereof before, at or after maturity in a. C can enforce the note against A.
his own right. b. C cannot enforce the note against any party to the note.
b. By the intentional cancellation thereof by the holder; c. C can enforce the note against M and O.
c. When it is paid in due course by the principal debtor; d. C can enforce the note against B.
d. When it is in due course paid by the party accommodated where the instrument
was made or 39. Which of the following is not secondarily liable?
accepted for his accommodation. a. Drawer c .Payor for honor
b.Indorser d. Accept for honor
34. Where an endorser waives the benefit of any law intended for his advantage such as
notice of 40. A promissory note for P2M is indorsed as follows: Which of them is not proper
dishonor, his indorsement is indorsement?
a. Conditional c. Restrictive a. Pay to A P1M and B P1M.Sgd. P
b. Qualified d.Facultive b. Pay to A and B P2M.Sgd.P
c. Pay to A or B P2M.Sgd.P
35. Which of the following is not negotiable? d. Pay to A P1M Sgd. P. The P1M for the residue of the note already paid.
a .I promise to pay A or order P20, 000(Sgd.D)
b. I promise to pay to the order of A P20, 000(Sgd.D) 41. Which of the following is a real defense?
c. I promise to pay bearer P10, 000 on June 28(Sgd.D) a .Fraud in inducement
d. I promise to pay to the order of the bearer P1, 000 (Sgd.D) b.Fraud in factum
c. Acquisition of the instrument by force
d. Acquisition of the instrument for illegal consideration.
36. 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 42. Which of the following is not negotiable for the reason it is not payable at determinable
by mere delivery, and D to E by special indorsement and E to F also by special future time?
indorsement and F negotiates it to G by blank indorsement, as holder strikes out the a. One week after X passes the CPA BE, I promise to pay to the order of Y
special indorsement of D to E and E to F.What are the P10.000.Sgd.Z.
effects of striking out the said indorsement? b. Thirty days after demand, drawer Z directs Drawee X to pay Y or order P10, 000.
Effect 1: D and E are discharged from liability because it was their indorsements which c. Ten days after the death of X, I promise to pay to the order of Y P10, 000.Sgd.Z.
were d. On or before Oct.31, 1998, I promise to pay to the order of Y P10, 000.Sgd.Z.
stricken put by G as not necessary to his title.
43. The following instances when a bank may refuse to honor a check drawn against it,
Effect 2: Subsequent indorser F is also discharged from liability because his right of except one:
recourse has a. Drawer has countermanded payment
been cut off by the discharge of D and E. b. Drawer’s insufficient funds.
a. Both effects are true c.First is false, second is true c. Drawer has become insolvent
b.Both is false d. First is true, second is false d. Bank obtains knowledge of drawer’s death.

37. A issued a note to be who did not deliver his promised consideration to A. B indorsed it 44. A issues a bill to the order of B. Later B, without indorsing the bill, transfers for
to C, who is a holder consideration
in due course’s indorsed it to D who knew of the failure of consideration. Can D collect said bill to C. The following except one are the valid effects of the transfer:
from A? a C acquires the right to have indorsement of B.
 b. The bill is merely assigned not negotiated. acceptor for honor.
c. C has become a holder for value.
The drawer may insert “without recourse” on the face of the instrument to negative or
45. An instrument is indorsed as follows: Pay to A, for B (Sgd) C.Then A indorsed the limit
instrument to liability just like a qualified indorser may also state in his indorsement “without
D in payment of his personal loan obtained from the latter. Was D in good faith as recourse”.
holder thereof? a. Both statement are false c.First is false, second is true
a. Yes, because he is a holder in due course. b.Both is true d. First is true, second is false
b. Yes, because the instrument was negotiable when indorsed to him.
c. No, because of the absence of B’s consent to the negotiation to D. 51. In all case of restrictive indorsement, the instruments become non-negotiable.
d.No, because of the knowledge of D that A was only a trustee in favor of B without right Conditional indorsement does not give the maker or the drawee the option to disregard
to the
negotiate the instrument for his personal benefit. conditional and make payment to the holder.
a. Both are false statements. c.First is false, second it true
46. Which of the following is not negotiable instrument? b. Both are true
a. I find myself to pay B or bearer P1M. (Sgd)M. c .I obliges to pay or order P1M. c. First is true, second is false
(Sgd)M.
b. I acknowledged being indebted to P for P1M. d. I agree to pay P or bearer P1M 52. Which of the following instances does not discharge an instrument?
on a. Payment by the maker of promissory before the maturity date.
(Sgd)M. demand. (Sgd)M. b .Intentional cancellation of the instrument by the holder thereof
c. Payment by the primarily liable to the holder of his agent.
47. Which of the following is not a personal defense? d. Voluntary surrender of the instrument to the party primarily liable.
a. Absence of consideration c. Non-delivery of a complete
instrument 53. Which of the following is not negotiable?
b. Forgery signature d. Delivery of an incomplete a. X promises to pay to the order of P in dollars at the rate of exchange prevailing on
instrument October 30,
2000 the amount of P1M.
48. If the drawee destroys the bill upon presentment for acceptance b. X promises to pay to the order of P P1M with 12% interest
in payment of his personal loan obtained from the latter. Was D in good faith as holder c. X promises to pay to the order of P P1M in installments
thereof? d. X promises to pay to the order of P P1M in equal installments the first installment
a. He is deemed to have dishonored the bill. due on Jan.
b. The holder may treat the instrument as a promissory note. 20, 2000 and the second due on Jan.28, 2001.
c. The holder may not go after the secondarily liable parties.
d. The drawee has impliedly accepted the bill. 54. A issues a bill to the order of J.J indorses it to P and P indorses it to M, M to R and R to
S,
49. One of the requisites for a holder in due course that is he became the holder of the the holder now of the bill. Which of the following is not true, if S decides to strike out
instrument any
before it was overdue. The payee of the note issued by a maker is therefore a holder indorsement?
not in due a. If S cancels the indorsement of P; P is relieved from liability
course if it was issued when already overdue. b If S cancels the indorsement of J; J, P, M and R are relieved from liability
In acceptance for honor, the acceptor for honor must not be a party to the instrument c. If S cancels the indorsement of P; P, M and R are relieved from liability
unlike a d. If S cancels the indorsement of M; M and R are relieved from liability
payor for honor who may be a party therein.
a. Both statement are false c.First is false, second is true 55. “Pay to A, Notice of dishonor waived. (Sgd) P”. is an example of
b.Both is true d. First is true, second is a. Qualified indorsement c. Restrictive indorsement
false b. Special indorsement d. Facultative indorsement

50. It is at the option of the holder if he will resort to the referee in case for need for 56. The following are some of the functions of negotiable instruments. Which is not
payment of included?
the instrument in the same way that the holder has the option to have the acceptance a. It increases the purchasing power in c. It is a substitute for money
of the circulation
 b. It increases credit circulation d. It is legal tender 64.Due to the threat of C to his life if he does not pay his debt ,both D and C went to E
from whom
57. This instrument is negotiable: D requested a promissory note in the amount of P10,000.00.Fearing that C would kill
a. “I promise to pay P10, 000(Sgd) M” D,E
b “Pay to P order P10, 000 if he marries X. (Sgd) M.” acceded to the request. She affixed her signature on a piece of paper with the
c. “Good to P or bearer P1M. (Sgd) M”. assurance of D
d. “I promise to pay P order P1M or deliver to him one BMW. (Sgd)M. that he will just fill it up later. D then filled up the blank paper, making a promissory
note
58. This is not negotiation of negotiable instrument in the amount of P100, 000.00 and indorsed the same to C who accepted it as payment
a. Assignment of D’s
b Delivery of bearer instrument debt. Which of the following is correct?
c. Indorsement completed by delivery of an instrument a. E is liable for the whole amount of the note since she voluntarily issued the same.
d. Delivery of an instrument to the payee b. C is a holder in due course because D voluntarily indorsed a complete note to him.
c. E is liable to C in the amount of P100, 000.00 as an accommodation party
59.”I promise to pay to bearer, Juan dela Cruz, the sum of P1M.Sgd.M”.The promissory d. C is not a holder in due course.
note is
a. Negotiable instrument payable on demand 65. A holder in due course is one who becomes the holder of a complete instrument.
b Negotiable promissory note payable to bearer Therefore, if the
c. Negotiable instrument payable to order maker issues an incomplete instrument to the payee, the latter is holder not in due
d. Non-negotiable promissory note course.
60. M makes a promissory note payable to the order of P in the amount of P30,000.P In the hands of a holder not in due course the instrument is as if not negotiable and he
negotiates the holds
note to A, who with the consent of P raises the amount to P30, 000 and thereafter the instrument subject to all defenses.
endorses it to a. Both statements are incorrect
B, B to C and C to D, a holder in due course. In this case: b. Both are correct
a. D can recover P3, 000 from M; c. Only in the first is incorrect
b D can recover P30, 000 from M; d. Only the second is correct
c. P and A are liable to D P3, 000
d. B and C are not liable to D. 66. A holder in due course is one who becomes the holder of an instrument not overdue. If
the
61. Which of the following is negotiable instrument? payee is issued an overdue instrument by the maker thereof, he is a holder not in due
a. Letter of credit c. Certificate of time deposit course.
b. Treasury warrant d. Postal money order The negotiable character of an instrument is generally not affected by the
indorsements thereof.
62. A and B have business arrangements wherein the latter would lend money to another a. Both are false statements d. Second is true
through A b. Both are true
who would appear in the promissory note as the lender. A would indorse the note to c. First is true
B.Is there
an accommodation party in the transaction between A and B? 67. Negotiable instrument as distinguished from negotiable document of title:
a. A is the accommodation party for signing in behalf of B a. There is no accumulation of secondary contacts
b D can recover P30, 000 from M; b. It refers to the delivery of goods.
c. P and A are liable to D P3, 000 c. There is a liability on the part of the indorser in case of non-delivery of the object of
d. B and C are not liable to D. the contact
d. It is governed by the civil code.
63. An irregular indorser as distinguished from a general indorser:
a. He becomes the guarantor of the primarily liable party 68. Where the holder of a check procures it to be certified, the following is discharged:
b He is not a party to the instrument but signs to add credit to the instrument. a. Drawer c. Drawer and indorser
c. He is a regular party to the instrument and signs upon delivery of the instrument. b. Indorse d. None of the above
d. He signs the instrument for valuable consideration.
69. A check must be presented for payment within a reasonable time for the last
negotiation thereof.
 Where check is certified by the bank on which it is drawn, the certification is equivalent d.) First statement is true; second statement is false
to an
acceptance. 6.Where an incomplete instrument has not been delivered ,it will not ,if completed and
a. Both are incorrect c. First is incorrect negotiated
b. First is incorrect d. Both are correct without authority , be a valid contract as against any person whose signature was
placed thereon
70. A person is secondarily liable on the instrument is the one who is absolutely required to before delivery in the hands of a
pay the a.)Holder in due course b.)Holder not in due course c.)Holder for value d.) Any
instrument. holder
A check as a bill of exchange is not an assignment of funds with the bank to the credit
of the drawer 7. Where this instrument is in the hands of a holder in due course, a valid delivery thereof
a. Both are false c. Second is true by all
b. Both are true d. First is true a party prior to him so as to make them liable is conclusively presumed. This refers to
a) An incomplete and delivered instrument c) A complete and delivered
instrument
BUSINESS LAW b) An incomplete and undelivered instrument d) None of the above
QUIZ – NEGOTIABLE INSTRUMENTS LAW (PART II)
8. Distinction/s of a promissory note with a bill of exchange.
MULTIPLE CHOICE a) Contains an unconditional order to pay c) The issuer is primary liable
1. A negotiable instrument must contain a promise or order to pay a sum certain in money, b) Involves three (3) parties d) Maybe payable to bearer
except
a.) Which must be payable to order or bearer c.) Which he must be unconditional 9. This kind of signature operates as notice that the agent has but a limited authority to
promise or order sign.
b) That must be in writing d.) The payee must be identified. a) Blank signature c) Special indorsement
b) Signature of procuration d) Forged signature
2. The following are the functions of a negotiable instrument, EXCEPT:
a.) It operates as a substitute for money 10. When a signature is forged or made without the authority of the person whose
b.)It is a means of creating and transferring credits signature it
c.)It facilities the sale of goods and increases the purchasing medium in circulation. purports to be, it is totally
d.)It is legal tender. a) Blank signature c) Special indorsement
b) Signature of procuration d) Forged signature
3. An instrument is payable to bearer except:
a.) The only or last indorsement is in blank c.) It is payable to a specified persons or 11. Every negotiable instrument is deemed prima facie to have been issued valuable-
bearer a) Reason c) Contract
b) Payable to “CASH” d.) The payable to the order of the bearer. b.) Consideration d) Money or property

4. An instrument is payable to specified person or entity is. 12. Where cause or consideration has at any time been given for the instrument, the
a.) Negotiable because it complies with Section 1 of the law holder is deemed a holder
b.) Not negotiable because it must be payable to order or bearer a) In due course c) Not in due course but for
c.) Negotiable because specified person is a payee or bearer. value
d.) Not negotiable because the payee is named. b.) For value d) In due course and for value

5. A. An incomplete and already delivered instrument, if completed, and is negotiated to a 13. Absence or failure of consideration is a matter of defense as against any person who is
holder a a) Holder in due course c) Holder for value
on due course, is valid and effectual for all purposes in his hands. b.) Not a holder in due course d) Not holder for value
B. Such holder may enforce it as if it had been filled up strictly in accordance with the
authority 14. A party who has signed the instrument as a maker, drawer, acceptor, or indorser,
given and within a reasonable time. without
a.)Both statements are true value therefore, and for the purpose of lending his name to some other person.
b.)First statement is false; second statement is true a.) Accommodated party b.)Accommodation party c.)Drawee
c.) Both statements are false d.)Endorser
 23. Feature/s of a bill of exchange not found in a promissory note:
15. When an instrument is transferred from one person to another in such manner as to a) Unconditional order to pay c) Addressed to a drawee
contribute b) Written promise to pay d) Both (a) and (c)
the transferee the holder thereof:
a.) Assignment b.)Negotiation c.)Endorsement d.)All of 24. A issued a promissory note to the order of B for P10,000.00 payable 30 days after
the above date.Later,B
indorsed it to C. Then, X stole the note from C and forged the signature of C (as
16. A paper attached to a negotiable instrument where endorsements may be made endorser), then
a.)Allonge negotiated it to D and D to E, E to F, the holder. On maturity of the note, which of the
b.)Dorsal of back portion of the instrument following
c.) Face of the instrument statement is not correct.
d.) All of the above a.)F can collect from either D or E because their signatures are genuine and the note is
operative
17. An indorsement specifies no indorsee, and an instrument so indorsed is payable to against them.
bearer, and may be b.)F can collect from A because she cannot put up forgery as her defense
a.)Special b.)Blank c.) Restrictive d.) Conditional c.)F can collect from C because it was the latter’s signature which has forged
d.)F cannot collect from B because he is a party prior to the forgery.
18.”For a value received, I/We jointly and severally promised to pay A the sum of P1M,
Philippine 25. A holder of negotiable instrument may to sue thereon in his own name and payment to
Currency, the said principal sum to be payable in 24 monthly installments starting on him in due course
January discharges it.
15, 2005 and every 15th of the month thereafter until fully paid.Sgd.J a) Holder in due course c) Holder for value
a.)This is negotiable because it is payable by stated installments b) Holder NOT in due course d) All of them
b.)Not negotiable because it is not payable to order or bearer.
c.) Not negotiable because it is payable to specified person. 26. Person not a party to a negotiable instrument.
d.) Both B and C. a.)Acceptor b.) Drawer c.) Assignor d.)
Endorser
19. A bill of exchange is rendered non-negotiable if:
a.)It is payable out of a particular fund. 27. “I promise to pay to the order of C Php 10,000.00, 30 days after slight. (Sgd) S”. The
b.)There is an indication of a particular fund out which reimbursement is to be made promissory note is
c.) There is an indication of a particular account to be debited with the amount paid negotiable because it is-
d.) Answer are not given a) Payable to the order of order of specific person c) Payable to bearer
b) Payable at a fixed or determinable future time d) Letters (a) and (b) are
20. This does not constitute negotiation of an instrument: correct
a.)Delivery of a bearer instrument 28. Which of the following is non-negotiable?
b.)Indorsement completed by delivery of a bill payable to order a.)” I bind myself to pay B or bearer P10, 000.00(Sgd) C.”
c.) Assignment b.)Negotiable note payable to order
d.) Delivery of an instrument to the payee c.)Negotiable bill payable to bearer
d.)Non-negotiable because it is payable to a specified person.
21. A written instrument is not negotiable because it lacks an unconditional promise or
order to pay 29. A fan (E) obtains the signature of a starlet (G) by way of autograph. He prepared a
a sum certain money. negotiable |
a.)Bill of Exchange b.)Bill of Lading c.) Manager’s Check d.) Promissory promissory note above the starlet’s signature. The note was validly negotiated to E
Note who is a holder in due
course. What defense can G avail against E?
22.”I promise to pay bearer or H the sum of P20, 000.00. (Sgd) C”. The promissory note is: a.) Personal defense b.) Equitable defense c.)Real defense (forgery)
a.)Negotiable note payable on demand d.)Qualified defense
b.)Negotiable note payable to order
c.)Negotiable bill payable to bearer 30.”PAY TO W or her order US $10,000 only plus 2% interest (Sgd. J) - TO: X, Cashier.”
d.)Non-negotiable because it is payable to a specified person. a.)Not negotiable because the drawee is not named or indicated with reasonable
certainty.
 b.)Negotiable because it complies with Section 1 39. A: A check is a bill of exchange drawn on a bank payable on demand or at a fixed
c.)Not negotiable because the sum payable is not certain determinable future time.
d.)Not negotiable because it is payable in foreign currency B: A check must be presented for payment within six (6) months after its issue
otherwise it becomes stale
31. Which of the following is not a personal defense? and the drawer will be discharged from liability.
a) Absence of consideration c) Forgery of a a.)Both statements are true
signature b.)First statement is false; second statement is true
b) Non-delivery of a complete instrument d) Failure of c.) Both statements are false
consideration d.) First statement is true; second statement is false

32. An instrument is payable at determinable future time except: 40. A: A person whose signature does not appear on the instrument may be liable
a.)Undated therefore.
b.)Payable at a day certain after presentment B: When the instrument is not dated, it will be considered to be dated as of the time it
c.)On or before certain definite given date was drawn, made
d.) Before or after a specified and certain event or endorsed.
e.) Letters (a) and (d) are not correct a.)Both statements are true
b.)First statement is false; second statement is true
33. “I PROMISE TO PAY PHP 5,000 OR DELIVER TWO (2) SACKS OF RICE, IF HE WANTS. c.) Both statements are false
(SGD.DONG) d.) First statement is true; second statement is false
a.)Not negotiable because it requires an act in addition to the payment of money
b.)Negotiable because it gives the holder an election to require something to be done
in lieu of payment of 41. A: There is a valid payment when negotiable instrument is delivered and accepted by
money. the creditor.
c.)Not negotiable because the payee is not named. B: Creditors are bound to accept checks in payment of obligation.
a.)Both statements are true
34. Where an instrument is issued, accepted, or indorsed when overdue, it is, as regards b.)First statement is false; second statement is true
the person is issuing, c.) Both statements are false
accepting, or indorsing it, payable d.) First statement is true; second statement is false
a) At sight c) On demand
b) At presentment d) All of the above 42. A: Liability of the endorser is primary.
B: An instrument becomes an overdue after its date of maturity.
35. An instrument is payable to bearer except: a.)Both statements are true
a) P or poor bearer c.)To the order of b.)First statement is false; second statement is true
Spiderman c.) Both statements are false
b) At presentment d) All of the above d.) First statement is true; second statement is false

36. M signed a promissory note in favor of R promising to pay Php.10, 000.00 on Christmas 43. A: An instrument payable upon contingency is negotiable and the happening of the
Day of 2008.Who event cure the defect
can sue on this note and enforce the obligation? of the condition.
a) Both of them c.) M only B: An instrument where no time for is expressed is payable on demand.
b) Forgery d) Neither M or R a.)Both statements are true
b.)First statement is false; second statement is true
37. “Pay to P only” is only an example of: c.) Both statements are false
a) Special indorsement c.) Restrictive d.) First statement is true; second statement is false
indorsement
b) Facultative indorsement d.) Fraud in inducement 44. 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
38. Which of the following is NOT a real defense? delivery of the
a) Incomplete or undelivered instrument c.) Material alteration instrument.
b) Facultative indorsement d.) Fraud in inducement 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

45. A: When a signature is placed upon the instrument that it is not clear in what capacity
the person making
the same intended to sign , he is deemed to be an indorsee.
B: Where the instrument is payable to bearer, the payee may not be named or
otherwise not indicated with
reasonable certainty.
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

46. 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

47. 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

48. 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

49. An instrument is payable on demand when:

50. Which of the following is for deposit only?