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Northeastern College
College of Accountancy & Business Administration
Negotiable Instruments Law (Law 3) 2:3pm MWF
PRELIM EXAMS (July 22, 2016)

GENERAL INSTRUCTION: Before taking this exam, make sure that all your things must be
placed infront (near the blackboard). Only your permit, pen, questionnaires fee and the
questionnaire/answer sheets must be found on your writing desk. (Failure to follow the same is
likewise equivalent to automatic failure from this exam). NO CHEATING!!!
I. MULTIPLE CHOICE. Encircle the correct letter of your choice. 2.5% each.

1. Presentment for payment may be waived expressly or impliedly; and in such a case, if
there is no presentment
(a) Parties secondarily liable will be discharged.
(b) Parties primarily liable will not be discharged.
(c) Parties primarily liable will be discharged.
(d) Parties secondarily liable will not be discharged.

2. The following is NOT a requisite of a negotiable instrument:

(a) must be payable on demand or at a fixed future time
(b) it must be in writing signed by the maker or drawer
(c) must contain an unconditional promise or order to pay a sum certain money
(d) must be payable to order or bearer

3. Comment on the obligation of the following instrument as issued assuming that the other
requisites for negotiability are present.
Pay to Y order Php. 10,000.00 to be debited against Payable. Sgd. X.
(a) It is negotiable because the order is unconditional though indicated a particular
account to be debited with the amount.
(b) It is not negotiable because it is chargeable against Accounts Payable
(c) It is negotiable with an indication of a particular fund out of which reimbursement is to
be made.
(d) It is not negotiable because there is an implied condition.

4. A draws a bill payable to B or order with X, as the drawee. The bill was successively
endorsed to C, D, E and F, holder. X does not pay and F has duly protested non-payment. Y
pays for the honor of C.
Which of the following statement is wrong?
(a) D is discharged.
(b) E is discharged.
(c) C is discharged.
(d) Y can ask reimbursement from A.

5. X executed a promissory note in favor of Y containing the words: I, X, promise to deliver

to Y the sum of P500 or a pair of dogs, at Xs option. The note is:
(a) negotiable because it contains a promise to deliver a sum of money.
(b) negotiable because the delivery of a sum of money or a pair of dogs is at the option of
the obligor, X.
(c) non-negotiable because the maker is given the option to deliver something in lieu of
money.
(d) Non-negotiable because the obligee is not given the option to choose which should be
delivered to him.

6. M makes promissory note for Php 3,000 payable to P or order. P negotiates the note to A,
who, with the consent of P raises the amount to Php 8,000.00 and thereafter indorses it to
B, B to C, and C to D under circumstances which make D not a holder in due course.
(a) the note is discharged as against M.
(b) D cannot enforce the note against M even for the original tenor.
(c) A would be liable to D for the sum of Php 8,000.00
(d) P would not be liable to D for Php 8,000.00
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7. A makes a promissory note payable to bearer and delivers it to B. in turn B negotiates it by

mere delivery to C; who indorses it specially to D. D negotiates it by special endorsement
to E, who negotiates it to F by mere delivery. A did not pay.
(a) D is only liable to E (c) D and E are not liable to F
(b) B and C are not liable to F (d) A is not liable to F

8. B forged As signature as drawer of check drawn on Citibank. The check purportedly

payable to the order of B. B then indorsed the check to C, a holder in due course, who
deposited the same to his account with BPI. The check passed through the normal course
of clearing and accordingly the drawee Citibank credited the collecting bank BPI with the
amount of the check which Citibank, together with the cancelled checks debited from his
deposit account, discovered the forgery.
Can A compel Citibank to re-credit to his account the amount of the forged check?
(a) Yes, because of forgery
(b) No ,because C is a holder in due course
(c) Yes, because the check was actually cleared
(d) No, because it is the responsibility of the bank to examine the check.

9. In the preceding problem, may the Citibank or BPI proceed against C?

(a) Yes, Citibank has a right of recourse against bank BPI, because of its warranty as endorser.
(b) No, having gone thru normal course of clearing, can assume that the check was properly
drawn.
(c) Yes, because a bank can assume responsibility of the drawing of the check.

10. In the preceding problem, may the Citibank or BPI proceed against C?
(a) Yes, because C as endorser assumes the warranty as endorser.
(b) No, because C is not a privy to the contract.
(c) Yes, because he is liable as a prior party.
(d) No, because he is special endorser.

11. Arman drew a bill of exchange, stating I promise to pay to the order of Bob and
Cathy (Sgd.) Arman. Bob and Cathy are not partners. Who should indorse the instrument?
(a) Bob, provided he was authorized by Cathy.
(b) Either Bob or Cathy, whoever is solvent.
(c) Both Bob and Cathy, because they are joint payees.
(d) Both Bob and Cathy, because they are solidary payees.

12. Which one is a negotiable instrument?

(a) Letter of credit (c) Postal money order
(b) Warehouse receipt (d) Certificate of time deposit

13. A drawee who has not accepted a bill of exchange is not a party to the instrument
and cannot be held liable, whether primarily or secondarily, except that
(a) He may be held liable by the drawer by reason of the instrument
(b) He may be held liable by the holder by reason of an independent agreement or
arrangement between them
(c) He may be held liable by the holder by reason of the instrument
(d) He may be held liable by the drawer by reason of an independent agreement or
arrangement between them

14. The indorsement pay to Ultimate Bank for collection and deposit only, without
recourse to me is
(a) Blank-qualified-restrictive (c) special-qualified-non-restrictive
(b) Special-qualified-restrictive (d) special-unqualified-non-restrictive

15. Can a bill of exchange qualify as a negotiable instrument if the day and the month
but not the year of its maturity is given?
(a) No, if the holder inserts the incorrect date
(b) Yes, the date of issuance is not a requisite prescribed by Section 1
(c) Yes, the negotiability of an instrument is not affected if it is not dated
(d) No, the intent is to make the instrument payable on a fixed date but the year was omitted.
Hence, the time for payment is not determinable in this case
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16. I promise to pay to the order of bearer P1,000.00. (Sgd) Digong. Is this a
negotiable instrument?
(a) No, because it is not payable to order or bearer
(b) Yes, because it is considered a bearer instrument
(c) Yes, because it is considered an order instrument
(d) No, because it is not payable to the order of a specified person or bearer

17. September 13, 2016, I promise to pay X or order the sum of P10,000.00, with
interest at 20% per annum. (Sgd) Leni. When is the accrual date of the interest?
(a) September 13, 2016 (c) On any date that the holder
demands interest
(b) On the date of issuance (d) It would depend on the agreement of
parties

18. Assuming all the other requisites of negotiability are present, which of the following
instruments is not payable to bearer?
(a) Pay to the order of Cash (c) Pay to Bato, bearer.
(b) Pay to the order of Jose Rizal, national hero. (d)Pay to Bato or bearer.

19. This is not a negotiation of a negotiable instrument

(a) Assignment
(b) Delivery of a bearer instrument
(c) Indorsement completed by delivery of an instrument payable to order
(d) Delivery of an instrument to the payee

20. The rule is that a bill of exchange can be treated as a promissory note. One such
instance is when
(a) The drawer and the drawee are not the same person
(b) The drawer and the drawee are the same person
(c) The drawee has no legal capacity to contract
(d) The drawee is a real person

21. One of the following is not entitled to a notice of dishonor

(a) Maker (c) Indorser
(b) Drawer (d) Irregular indorser

22. When is an instrument payable to bearer?

(a) When it is payable to the order of the bearer
(b) When it is payable to the holder of an office
(c) When it is payable to the order of a specified person
(d) When the name of the payee does not purport to be the name of any person

23. Pay to the order of X P11,000.00. (Sgd) Z.

To: The Dean of the College of Law of NC Santiago city or the Dean of the College of
Accountancy.
Is this a negotiable instrument?
(a) Yes, even if it is undated
(b) No, because the drawees are named in the alternative
(c) No, because the drawees are not named with reasonable certainty
(d) Yes, because it substantially complies with all the requisites under Section 1 of NIL

24. The Philippine Negotiable Instruments Law is patterned with very slight
modifications after the
(a) Uniform Negotiable Instruments Act of the United States of 1896
(b) English Bill of Exchange Act of 1882
(c) US Uniform Commercial Code (d) None of the above

25. NIL was enacted as Act No. 2031 on

(a) June 2, 1911 (c) June 12, 1911
(b) February 3, 1911 (d) February 13, 1911

26. A man does not always have property, or valuable property rights which he can turn
into cash at any moment. This pertains to Negotiable Instruments as
(a) A substitute for money
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(b) A medium of exchange for most commercial transactions

(c) A medium of credit transactions
(d) A combination of all of the above

II. ESSAY. Give what is being asked. Support your answers with legal basis. Write your
answers on the spaces provided. You may use the back portions of these
questionnaires.
1. Who are the three kinds of holders and define each (6%)

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2. Enumerate the nine incidents in the life of a negotiable instrument and explain each?
(15%)

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3. Define the following. You may write your answers at the back if the spaces below are not
enough.
a. Accumulation of secondary contracts (3%)
b. Indorsement (1.5%)
c. Good faith (1.5%)
d. Delivery (1.5%)
e. Allonge (1%)
f. Value (1.5%)
g. Payable on demand (2%)
h. Unconditional promise (2%)

-NOTHING FOLLOWS-

God bless and study harder!!!

ATTY. RAIDAH MOLATO MANGANTULAO

Instructor