BUSINESS LAW
QUIZ –Negotiable Instruments Law Part I
1. The drawee is not primarily liable
a. Cashier’s check c. Certified check
b. Manager’s check d. Traveler’s check
2. 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.
3. 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)
4. A bill of exchange drawn on a bank and payable on demand is
a. Check c. Domestic bill
b. Treasury d. Bill of lading
5. Which is not correct? The acceptor by accepting the instrument
a. Admits the existence of the payee and his capacity to indorse
b. Admits the existence of the drawee, the genuiness of his signature and his capacity and
authority to draw the instrument
c. Engages that he will pay is according to the tenor of his acceptance
d. Admits the existence of the endorser, the genuiness of his signature and his capacity and
and authority to indorse instruments.
6. Case 1: Angel buys a diamond ring for P50, 000 for which he issued a check. Later Angel found
out the diamond to be an ordinary glass.
Case 2: Ben obtains the signature of Cris for autograph purposes. Ben writes a promissory
note above Cris’s signature and indorses the note to Dan, a holder in due course.
a. Real defense in Case 1, personal defense in Case 2;
b. Personal defense in Case 1, real defense in Case 2;
c. Real defense in both cases;
d. Personal defenses in both cases.
7. Maturity of undated negotiable instrument issued payable 30 days after sight is computed from
a. Date of first indorsement;
b. Date of last indorsement;
c. Date for first presentation for acceptance
d. Date of issue
8. When a negotiable instrument payable to order?
a. When payable to the order of a specified person or to him or his order
b. When payable to the order of a fictitious person or non-existing person and such a fact was
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.
d. When only or last indorsement is in blank.
9. Which of the following is not a characteristic of a bill of exchange?
a. Original parties are the drawer, drawee and payee;
b. Acceptance is generally required;
c. Drawer is primarily liable;
d. Contains an unconditional order to pay.
10. A holder in due course has the following rights, except:
a. He may receive payment and if in due course, the instrument is discharged;
b. He may sue on the instrument in his own name;
c. He can recover on the instrument
d. He holds the instrument as if it were non-negotiable
11. Which is not correct? The acceptor by accepting a negotiable instrument
a. Admits the existence of the payee and his capacity to endorse.
b. Admits the existence of the drawer, the genuiness of his signature and his authority to
draw the instrument.
c. Admits the existence of the endorser, the genuiness of his signature and his authority to
draw the instrument.
d. Admits that he will pat it according to the tenor of his acceptance.
12. 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
b. only the 2nd statement is true d. both statements are true
13. 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 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
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
(Sgd) A
b. Pay to C P 10,000 or his order out of the rental of my house in Manila. To B (Sgd) A
c. Pay to C P 10,000 and reimburse yourself out of the rental of my house in Manila.
To B (Sgd) A
d. Pay to the order of C P10, 000.Reimburse yourself out of the rental of my house in Manila.
To (Sgd) A
15. Which of the following is a negotiable Bill of Exchange?
 a. Pay to order of X the sum of P 20,000(Sgd.) Y To: A and B
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
d. Pay to the order of Y the sum of P50, 000 (Sgd) X To: A and B
16. A check for Fifty Thousand Pesos (P 50,000) was drawn against drawee bank and made payable
to XYZ or order. The check was deposited with payee’s account at ABC Bank which then sent
the for clearing to the drawee bank. The drawee bank refused to honor the check on the back
ground that the serial number thereof had been altered. Is the refusal of the bank justified?
a. Yes, it is material alteration which affects the negotiability of the instrument.
d.No, it is not a material alteration and the negotiability of the instrument is not affected.
c. Yes, because of forgery of the check.
d. No, because there is in fact no alteration of the check
17. Where the negotiable instrument is so ambiguous that there is doubt whether a bill or note, the
holder may treat it as either at his choice.
Lack of consideration is a personal defense which is only available between immediate parties
or against parties who are not holders in due course.
a. Both statements are false.
b. First is true, second is false.
c. Both are true.
d. First is true, second is true.
18. X draws a check against his current account with ABC bank in favor of B. Although X does not
have sufficient funds; the bank honors the check when presented for payment. Apparently,
and X has conspired with the bank’s bookkeeper so that his ledger card would show that he has
sufficient funds.
a. Yes, because X has no sufficient funds with the bank.
d.No, because the bank as acceptor became primarily liable to B.
c. No, because B was not in good faith as payee.
d. Yes, because of solution debit.
19. 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.
20. Supposing under the same facts, A pays C, can he recover from B?
a. No, because as maker he is the principal debtor.
b. No, because as accommodation maker he is deemed the donor of B.
c. Yes, because as accommodated party is the one ultimately liable.
d. Yes, because payment by the accommodation party discharges the instruments.
21. M makes a promissory note payable to bearer and delivers the same to P who endorses it to X
in this manner:“Payable to X. Signed: P “ Later X, without indorsing the note delivers the same to
B.Thenote subsequently dishonored byM. May Y proceed against M for the note?
a. No, because the special indorsement of P made the bearer note payable to order.
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 remains the
assignee of the note.
d. No, because Y is not considered holder for lack of proper endorsement.
22. An instrument is not negotiable if the day and the month, but not the year of its maturity
is given.
Where the drawees are in the alternative or in succession, the instrument is not negotiable.
a. Both statements are true.
b. Both are false.
c. First is true, second is false.
d. First is true, second is true.
23. 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
coursesuch as F.
24. Which of the following is not an effect of a crossed check?
a. The check may not be encashed but only deposited in a bank.
b. The check may be negotiated only once to one who has bank account.
c. The act of crossing a check serves as a warning to the holder that the check has been issued
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.
d. The indorse remains a holder in due course even if he does not inquire into right of the
indorser to the check.
25. A issued an order promissory note to B who indorses it to C.D stole the note from C and forging
the instrument of C, “negotiates “it to E who also indorses it to F, the holder in due course.
Can F enforces the note against A, B, C?
a. Yes, because he is a holder in due course who holds the instrument free from defenses
available to prior parties among themselves.
b. No, because he did not obtain title to the note because of the forgery in the indorsement of C
to D
c. No, because all prior parties are not liable to F because of the forgery.
d. Yes, because he is a holder in due course who holds the note free from defects of the title of
prior
parties.
26. Based on the same facts as aforementioned, can F enforce the note against E?
a. Yes, because E is party subsequent to C whose endorsement was forged and as indorser.
b.Yes, because he is at fault for taking the note from the forger D.
c. No, because all parties prior to him are not liable because of forgery.
d. No, because E was also a victim who obtained the note from the forger and who himself
cannot
proceed against A, B and C.
27. A issued to B a check for P 50,000 as payment for the car. Without the knowledge of A, B
altered the amount to 150,000 and deposited the said check with X bank which forwarded the same
to Y bank for payment bank without noticing the alteration, paid the check, debiting the amount
from account of A. Which of the two banks shall suffer the loss?
a. X bank, as indorser to Y bank, warrants the correctness of the amount.
b. Y bank, as acceptor bank shall be liable for the loss.
c. Both banks are jointly liable to A.
d X bank initially but with right of reimbursement from Y bank.
28. Supposing in the above example, there was no alteration except for the forgery of A’ signature
by
B, who shall suffer the loss?
a. X bank, as indorser to Y bank, warrants the correctness of the amount.
b. Y bank, as acceptor bank shall be liable for the loss.
c. Both banks are jointly liable to A.
d .X bank initially but with right of reimbursement from Y bank.
29. Supposing further, that there was a forgery only in the indorsement to B as payee, that was
made by another person, Z who deposited the check with his bank (X), who shall suffer the loss?
a. X bank, as indorser to Y bank, warrants the correctness of the amount.
b. Y bank, as acceptor bank shall be liable for the loss.
c. Both banks are jointly liable to A.
d. X bank initially but with right of reimbursement from Y bank.
30. A issued negotiable promissory note to B with the authority to fill up for P1, 000 only B in
violation of his contract with A wrote P 5,000 .B negotiated the note to C who had knowledge of
the infirmity turn in indorsed it to D who had no knowledge of the said affirmity.Can D enforce
the note against A and for how much?
a. D cannot make A liable because of the fraud committed by B and therefore A has a defense.
b. D can make A liable but only for P1, 000
c. D can make A liable for the whole amount of P5, 000.
d. D cannot make A liable but only B and C.
31. 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.
32. The holder is required to give notice of dishonor to the drawer to make him liable on the
instrument in one of the following cases:
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;
c. Where the drawer has countermanded payment.
d. Where the instrument was accepted for his accommodation.
33. The negotiable instrument is not discharged
a. When the principal debtor becomes the holder thereof before, at or after maturity in his own
right.
b. By the intentional cancellation thereof by the holder;
c. When it is paid in due course by the principal debtor;
d. When it is in due course paid by the party accommodated where the instrument was made
or accepted for his accommodation.
34. 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
35. Which of the following is not negotiable?
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)
c. I promise to pay bearer P10, 000 on June 28(Sgd.D)
d. I promise to pay to the order of the bearer P1, 000 (Sgd.D)
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 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
37. A issued a note to be who did not deliver his promised consideration to A. B indorsed it to C,
who is a holderin due course’s indorsed it to D who knew of the failure of consideration. Can D
collect from A?
a. No, because D is not a holder in due course.
b. No, although D is acquired the rights of C, a holder in due course.
 c. No, because he knew of the failure of consideration. a. Yes, because he is a holder in due course.
d .Yes, because he acquired the note for a consideration. 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.
38. M makes a note for P10,000 payable to the order of C who indorses it to A. F obtains possession d.No, because of the knowledge of D that A was only a trustee in favor of B without right to
of the note fraudulently, forges the indorsement of A, alters amount to P70, 000 and endorses it to negotiate the instrument for his personal benefit.
B who in turn endorses it to C .In this case:
a. C can enforce the note against A. 46. Which of the following is not negotiable instrument?
b. C cannot enforce the note against any party to the note. a. I find myself to pay B or bearer P1M. (Sgd)M. c .I obliges to pay or order P1M. (Sgd)M.
c. C can enforce the note against M and O. b. I acknowledged being indebted to P for P1M. d. I agree to pay P or bearer P1M on
d. C can enforce the note against B. (Sgd)M. demand. (Sgd)M.

39. Which of the following is not secondarily liable? 47. Which of the following is not a personal defense?
a. Drawer c .Payor for honor a. Absence of consideration c. Non-delivery of a complete instrument
b.Indorser d. Accept for honor b. Forgery signature d. Delivery of an incomplete instrument

40. A promissory note for P2M is indorsed as follows: Which of them is not proper indorsement?
a. Pay to A P1M and B P1M.Sgd. P
b. Pay to A and B P2M.Sgd.P
c. Pay to A or B P2M.Sgd.P
d. Pay to A P1M Sgd. P. The P1M for the residue of the note already paid.
41. 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.
42. Which of the following is not negotiable for the reason it is not payable at determinable future
time?
a. One week after X passes the CPA BE, I promise to pay to the order of Y P10.000.Sgd.Z.
b. Thirty days after demand, drawer Z directs Drawee X to pay Y or order P10, 000.
c. Ten days after the death of X, I promise to pay to the order of Y P10, 000.Sgd.Z.
d. On or before Oct.31, 1998, I promise to pay to the order of Y P10, 000.Sgd.Z.
48. If the drawee destroys the bill upon presentment for acceptance
in payment of his personal loan obtained from the latter. Was D in good faith as holder thereof?
a. He is deemed to have dishonored the bill.
b. The holder may treat the instrument as a promissory note.
c. The holder may not go after the secondarily liable parties.
d. The drawee has impliedly accepted the bill.
49. One of the requisites for a holder in due course that is he became the holder of the instrument
before it was overdue. The payee of the note issued by a maker is therefore a holder not in due
course if it was issued when already overdue.
In acceptance for honor, the acceptor for honor must not be a party to the instrument unlike a
payor for honor who may be a party therein.
a. Both statement are false c.First is false, second is true
b.Both is true d. First is true, second is false
50. It is at the option of the holder if he will resort to the referee in case for need for payment of
the instrument in the same way that the holder has the option to have the acceptance of the
acceptor for honor.

43. The following instances when a bank may refuse to honor a check drawn against it, except one: The drawer may insert “without recourse” on the face of the instrument to negative or limit
a. Drawer has countermanded payment liability just like a qualified indorser may also state in his indorsement “without recourse”.
b. Drawer’s insufficient funds. a. Both statement are false c.First is false, second is true
c. Drawer has become insolvent b.Both is true d. First is true, second is false
d. Bank obtains knowledge of drawer’s death.
51. In all case of restrictive indorsement, the instruments become non-negotiable.
44. A issues a bill to the order of B. Later B, without indorsing the bill, transfers for consideration Conditional indorsement does not give the maker or the drawee the option to disregard the
said bill to C. The following except one are the valid effects of the transfer: conditional and make payment to the holder.
a C acquires the right to have indorsement of B. a. Both are false statements. c.First is false, second it true
b. The bill is merely assigned not negotiated. b. Both are true
c. C has become a holder for value. c. First is true, second is false

45. An instrument is indorsed as follows: Pay to A, for B (Sgd) C.Then A indorsed the instrument to 52. Which of the following instances does not discharge an instrument?
D in payment of his personal loan obtained from the latter. Was D in good faith as holder a. Payment by the maker of promissory before the maturity date.
thereof? b .Intentional cancellation of the instrument by the holder thereof
 c. Payment by the primarily liable to the holder of his agent. b D can recover P30, 000 from M;
d. Voluntary surrender of the instrument to the party primarily liable. c. P and A are liable to D P3, 000
d. B and C are not liable to D.
53. Which of the following is not negotiable?
a. X promises to pay to the order of P in dollars at the rate of exchange prevailing on October 61. Which of the following is negotiable instrument?
30, 2000 the amount of P1M. a. Letter of credit c. Certificate of time deposit
b. X promises to pay to the order of P P1M with 12% interest b. Treasury warrant d. Postal money order
c. X promises to pay to the order of P P1M in installments
d. X promises to pay to the order of P P1M in equal installments the first installment due on 62. A and B have business arrangements wherein the latter would lend money to another through
Jan.20, 2000 and the second due on Jan.28, 2001. A who would appear in the promissory note as the lender. A would indorse the note to B.Is there
an accommodation party in the transaction between A and B?
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, a. A is the accommodation party for signing in behalf of B
the holder now of the bill. Which of the following is not true, if S decides to strike out any b D can recover P30, 000 from M;
indorsement? c. P and A are liable to D P3, 000
a. If S cancels the indorsement of P; P is relieved from liability d. B and C are not liable to D.
b If S cancels the indorsement of J; J, P, M and R are relieved from liability
c. If S cancels the indorsement of P; P, M and R are relieved from liability 63. An irregular indorser as distinguished from a general indorser:
d. If S cancels the indorsement of M; M and R are relieved from liability a. He becomes the guarantor of the primarily liable party
b He is not a party to the instrument but signs to add credit to the instrument.
55. “Pay to A, Notice of dishonor waived. (Sgd) P”. is an example of c. He is a regular party to the instrument and signs upon delivery of the instrument.
a. Qualified indorsement c. Restrictive indorsement d. He signs the instrument for valuable consideration.
b. Special indorsement d. Facultative indorsement

56. The following are some of the functions of negotiable instruments. Which is not included?
a. It increases the purchasing power in c. It is a substitute for money
circulation
b. It increases credit circulation d. It is legal tender

57. This instrument is negotiable:

a. “I promise to pay P10, 000(Sgd) M”
b “Pay to P order P10, 000 if he marries X. (Sgd) M.”
c. “Good to P or bearer P1M. (Sgd) M”.
d. “I promise to pay P order P1M or deliver to him one BMW. (Sgd)M.

58. 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

59.”I promise to pay to bearer, Juan dela Cruz, the sum of P1M.Sgd.M”.The promissory note is
a. Negotiable instrument payable on demand
b Negotiable promissory note payable to bearer
c. Negotiable instrument payable to order
d. Non-negotiable promissory note
60. M makes a promissory note payable to the order of P in the amount of P3,000.P negotiates the
note to A, who with the consent of P raises the amount to P30, 000 and thereafter endorses it to
B, B to C and C to D, a holder in due course. In this case:
a. D can recover P3, 000 from M;
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 A check as a bill of exchange is not an assignment of funds with the bank to the credit of the
D requested a promissory note in the amount of P10,000.00.Fearing that C would kill D,E drawer
acceded to the request. She affixed her signature on a piece of paper with the assurance of D a. Both are false c. Second is true
that he will just fill it up later. D then filled up the blank paper, making a promissory note b. Both are true d. First is true
in the amount of P100, 000.00 and indorsed the same to C who accepted it as payment of D’s
debt. Which of the following is correct?
a. E is liable for the whole amount of the note since she voluntarily issued the same. BUSINESS LAW
b. C is a holder in due course because D voluntarily indorsed a complete note to him. QUIZ – NEGOTIABLE INSTRUMENTS LAW (PART II)
c. E is liable to C in the amount of P100, 000.00 as an accommodation party
d. C is not a holder in due course. MULTIPLE CHOICE
1. A negotiable instrument must contain a promise or order to pay a sum certain in money, except
65. A holder in due course is one who becomes the holder of a complete instrument. Therefore, if a.) Which must be payable to order or bearer c.) Which he must be unconditional promise or
the maker issues an incomplete instrument to the payee, the latter is holder not in due course. order
In the hands of a holder not in due course the instrument is as if not negotiable and he holds b) That must be in writing d.) The payee must be identified.
the instrument subject to all defenses.
a. Both statements are incorrect 2. The following are the functions of a negotiable instrument, EXCEPT:
b. Both are correct a.) It operates as a substitute for money
c. Only in the first is incorrect b.)It is a means of creating and transferring credits
d. Only the second is correct c.)It facilities the sale of goods and increases the purchasing medium in circulation.
d.)It is legal tender.
66. A holder in due course is one who becomes the holder of an instrument not overdue. If the
payee is issued an overdue instrument by the maker thereof, he is a holder not in due course. 3. An instrument is payable to bearer except:
The negotiable character of an instrument is generally not affected by the indorsements a.) The only or last indorsement is in blank c.) It is payable to a specified persons or bearer
thereof. b) Payable to “CASH” d.) The payable to the order of the bearer.
a. Both are false statements d. Second is true
b. Both are true 4. An instrument is payable to specified person or entity is.
c. First is true a.) Negotiable because it complies with Section 1 of the law
b.) Not negotiable because it must be payable to order or bearer
67. Negotiable instrument as distinguished from negotiable document of title: c.) Negotiable because specified person is a payee or bearer.
a. There is no accumulation of secondary contacts d.) Not negotiable because the payee is named.
b. It refers to the delivery of goods.
c. There is a liability on the part of the indorser in case of non-delivery of the object of the 5. A. An incomplete and already delivered instrument, if completed, and is negotiated to a holder a
contact on due course, is valid and effectual for all purposes in his hands.
d. It is governed by the civil code. B. Such holder may enforce it as if it had been filled up strictly in accordance with the authority
given and within a reasonable time.
68. Where the holder of a check procures it to be certified, the following is discharged: a.)Both statements are true
a. Drawer c. Drawer and indorser b.)First statement is false; second statement is true
b. Indorse d. None of the above c.) Both statements are false
d.) First statement is true; second statement is false
69. A check must be presented for payment within a reasonable time for the last negotiation
thereof. 6.Where an incomplete instrument has not been delivered ,it will not ,if completed and negotiated
Where check is certified by the bank on which it is drawn, the certification is equivalent to an without authority , be a valid contract as against any person whose signature was placed
acceptance. thereon before delivery in the hands of a
a. Both are incorrect c. First is incorrect a.)Holder in due course b.)Holder not in due course c.)Holder for value d.) Any holder
b. First is incorrect d. Both are correct
7. Where this instrument is in the hands of a holder in due course, a valid delivery thereof by all
70. A person is secondarily liable on the instrument is the one who is absolutely required to pay the a party prior to him so as to make them liable is conclusively presumed. This refers to
instrument. a) An incomplete and delivered instrument c) A complete and delivered instrument
b) An incomplete and undelivered instrument d) None of the above
 b.)Not negotiable because it is not payable to order or bearer.
8. Distinction/s of a promissory note with a bill of exchange. c.) Not negotiable because it is payable to specified person.
a) Contains an unconditional order to pay c) The issuer is primary liable d.) Both B and C.
b) Involves three (3) parties d) Maybe payable to bearer
19. A bill of exchange is rendered non-negotiable if:
9. This kind of signature operates as notice that the agent has but a limited authority to sign. a.)It is payable out of a particular fund.
a) Blank signature c) Special indorsement b.)There is an indication of a particular fund out which reimbursement is to be made
b) Signature of procuration d) Forged signature c.) There is an indication of a particular account to be debited with the amount paid
d.) Answer are not given
10. When a signature is forged or made without the authority of the person whose signature it
purports to be, it is totally 20. This does not constitute negotiation of an instrument:
a) Blank signature c) Special indorsement a.)Delivery of a bearer instrument
b) Signature of procuration d) Forged signature b.)Indorsement completed by delivery of a bill payable to order
c.) Assignment
11. Every negotiable instrument is deemed prima facie to have been issued valuable- d.) Delivery of an instrument to the payee
a) Reason c) Contract
b.) Consideration d) Money or property 21. A written instrument is not negotiable because it lacks an unconditional promise or order to
pay a sum certain money.
12. Where cause or consideration has at any time been given for the instrument, the holder is a.)Bill of Exchange b.)Bill of Lading c.) Manager’s Check d.) Promissory Note
deemed a holder
a) In due course c) Not in due course but for value 22.”I promise to pay bearer or H the sum of P20, 000.00. (Sgd) C”. The promissory note is:
b.) For value d) In due course and for value a.)Negotiable note payable on demand
b.)Negotiable note payable to order
13. Absence or failure of consideration is a matter of defense as against any person who is c.)Negotiable bill payable to bearer
a) Holder in due course c) Holder for value d.)Non-negotiable because it is payable to a specified person.
b.) Not a holder in due course d) Not holder for value
23. Feature/s of a bill of exchange not found in a promissory note:
14. A party who has signed the instrument as a maker, drawer, acceptor, or indorser, without a) Unconditional order to pay c) Addressed to a drawee
value therefore, and for the purpose of lending his name to some other person. b) Written promise to pay d) Both (a) and (c)
a.) Accommodated party b.)Accommodation party c.)Drawee d.)Endorser
24. A issued a promissory note to the order of B for P10,000.00 payable 30 days after date.Later,B
15. When an instrument is transferred from one person to another in such manner as to contribute indorsed it to C. Then, X stole the note from C and forged the signature of C (as endorser), then
the transferee the holder thereof: negotiated it to D and D to E, E to F, the holder. On maturity of the note, which of the following
a.) Assignment b.)Negotiation c.)Endorsement d.)All of the above statement is not correct.
a.)F can collect from either D or E because their signatures are genuine and the note is
16. A paper attached to a negotiable instrument where endorsements may be made operative
a.)Allonge against them.
b.)Dorsal of back portion of the instrument b.)F can collect from A because she cannot put up forgery as her defense
c.) Face of the instrument c.)F can collect from C because it was the latter’s signature which has forged
d.) All of the above d.)F cannot collect from B because he is a party prior to the forgery.

17. An indorsement specifies no indorsee, and an instrument so indorsed is payable to bearer, and 25. A holder of negotiable instrument may to sue thereon in his own name and payment to him in
may be due course discharges it.
a.)Special b.)Blank c.) Restrictive d.) Conditional a) Holder in due course c) Holder for value
b) Holder NOT in due course d) All of them
18.”For a value received, I/We jointly and severally promised to pay A the sum of P1M, Philippine
Currency, the said principal sum to be payable in 24 monthly installments starting on January 26. Person not a party to a negotiable instrument.
15, 2005 and every 15th of the month thereafter until fully paid.Sgd.J a.)Acceptor b.) Drawer c.) Assignor d.) Endorser
a.)This is negotiable because it is payable by stated installments
27. “I promise to pay to the order of C Php 10,000.00, 30 days after sight. (Sgd) S”. The promissory b) At presentment d) All of the above
note is negotiable because it is-
a) Payable to the order of order of specific person c) Payable to bearer 36. M signed a promissory note in favor of R promising to pay Php.10, 000.00 on Christmas Day of
b) Payable at a fixed or determinable future time d) Letters (a) and (b) are correct 2008.Who can sue on this note and enforce the obligation?
28. Which of the following is non-negotiable? a) Both of them c.) M only
a.)” I bind myself to pay B or bearer P10, 000.00(Sgd) C.” b) Forgery d) Neither M or R
b.)Negotiable note payable to order
c.)Negotiable bill payable to bearer 37. “Pay to P only” is only an example of:
d.)Non-negotiable because it is payable to a specified person. a) Special indorsement c.) Restrictive indorsement
b) Facultative indorsement d.) Fraud in inducement
29. A fan (E) obtains the signature of a starlet (G) by way of autograph. He prepared a negotiable |
promissory note above the starlet’s signature. The note was validly negotiated to E who is a 38. Which of the following is NOT a real defense?
holder in due a) Incomplete or undelivered instrument c.) Material alteration
course. What defense can G avail against E? b) Facultative indorsement d.) Fraud in inducement
a.) Personal defense b.) Equitable defense c.)Real defense (forgery)
d.)Qualified defense 39. A: A check is a bill of exchange drawn on a bank payable on demand or at a fixed determinable
future time.
30.”PAY TO W or her order US $10,000 only plus 2% interest (Sgd. J) - TO: X, Cashier.” B: A check must be presented for payment within six (6) months after its issue otherwise it
a.)Not negotiable because the drawee is not named or indicated with reasonable certainty. becomes stale and the drawer will be discharged from liability.
b.)Negotiable because it complies with Section 1 a.)Both statements are true
c.)Not negotiable because the sum payable is not certain b.)First statement is false; second statement is true
d.)Not negotiable because it is payable in foreign currency c.) Both statements are false
d.) First statement is true; second statement is false
31. Which of the following is not a personal defense?
a) Absence of consideration c) Forgery of a signature 40. A: A person whose signature does not appear on the instrument may be liable therefore.
b) Non-delivery of a complete instrument d) Failure of consideration B: When the instrument is not dated, it will be considered to be dated as of the time it was
drawn, made or endorsed.
32. An instrument is payable at determinable future time except: a.)Both statements are true
a.)Undated b.)First statement is false; second statement is true
b.)Payable at a day certain after presentment c.) Both statements are false
c.)On or before certain definite given date d.) First statement is true; second statement is false
d.) Before or after a specified and certain event
e.) Letters (a) and (d) are not correct
41. A: There is a valid payment when negotiable instrument is delivered and accepted by the
33. “I PROMISE TO PAY PHP 5,000 OR DELIVER TWO (2) SACKS OF RICE, IF HE WANTS. creditor.
(SGD.DONG) B: Creditors are bound to accept checks in payment of obligation.
a.)Not negotiable because it requires an act in addition to the payment of money a.)Both statements are true
b.)Negotiable because it gives the holder an election to require something to be done in lieu of b.)First statement is false; second statement is true
payment of c.) Both statements are false
money. d.) First statement is true; second statement is false
c.)Not negotiable because the payee is not named.
42. A: Liability of the endorser is primary.
34. Where an instrument is issued, accepted, or indorsed when overdue, it is, as regards the person B: An instrument becomes an overdue after its date of maturity.
is issuing,accepting, or indorsing it, payable a.)Both statements are true
a) At sight c) On demand b.)First statement is false; second statement is true
b) At presentment d) All of the above c.) Both statements are false
d.) First statement is true; second statement is false
35. An instrument is payable to bearer except:
a) P or poor bearer c.)To the order of Spiderman
43. A: An instrument payable upon contingency is negotiable and the happening of the event cure d.) First statement is true; second statement is false
the defect of the condition.
B: An instrument where no time for is expressed is payable on demand. 49. An instrument is payable on demand when:
a.)Both statements are true a.) Expressed to be payable on determinable future time
b.)First statement is false; second statement is true b.) After sight or presentation
c.) Both statements are false c.) Time for payment is expressed
d.) First statement is true; second statement is false d.) Issued overdue

44. A: An order or promise to pay out a particular fund is negotiable. 50. Which of the following is for deposit only?
B: An instrument which is payable to bearer is negotiated by indorsement plus the delivery of a.) Crossed check c.) Forged check
the b.) Stale check d. Manager’s check
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

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 withreasonable 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