NEGOTIABLE INSTRUMENTS REVIEWER FOR BSA 4-3D PART 2 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 b. notice of dishonor c. Preparation 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. The following are considered negotiation except a. issue b. indorsement plus delivery c. delivery d. none of them 10. This indorsement constitutes the indorser as a mere assignor of the title of the instrument:

a. Special b. Blank

c. qualified d. restrictive

11. The following are requisites in order that a person can be considered a holder in due course; except a. that the instrument is complete and regular upon its face. b. the instrument is not yet overdue or no notice of dishonor c. holder for value and in good faith d. none of them. 12. Which of the following is not false? a. a holder for value is not necessarily a holder in due course b. only person whose signature appear in the instrument can be held liable therein c. forgery is both real and personal defense d. an accommodation party is liable only to a holder in due course 13. Real defenses are those that attached to the instrument itself and can be set up even against holder in due course. Which of the following is not considered real defense? a. fraud in factum b. forgery c. absence or failure of consideration d. minority

14. The existence of the payee and his then capacity to indorse is a warranty of: a. the maker b. acceptor c. drawer d. all of them

15. Which of the following is not a warranty of a qualified indorser? a. the instrument is genuine b. he has a good title c. prior parties have capacity to contact d. instrument is valid and subsisting 16. Notice of dishonor is not required to be given by a drawer when: a. The drawer and the drawee are the same person b. the drawee has countermanded payment c. the drawee is fictitious d. all of the above 17. Which of the following is not considered material alternation a. changing the date b. changing the amount c. changing the relation of the parties d. none of them 18. A negotiable instrument is discharged by: a. payment in due course by or on behalf of the party primarily liable b. payment in due course by the party accommodated c. intentional cancellation thereof by the holder d. none of them 19. Who of the following is party with primary liability? a. Maker b. Indorser c. drawer d. person negotiating by mere delivery

20. A check is not presented for payment within a reasonable length of time after issue is called a. certified b. Stale c. memorandum d. crossed

21. Signification by the drawee of his assent to comply with the order of the drawer is: a. Indorsement b. delivery 22. Presentment for acceptance is required when a. the bill is payable after sight b. the bill requires it c. the bill is drawn payable elsewhere than the residence of the drawee d. all of them 23. Protest is required when this bill is dishonored: a. domestic/local b. foreign 24. The following are promissory notes except: a. due bill b. bond 25.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 26. 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 27. 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 28. Pay to Maria or order P 20,000 upon demand , signed by A as drawer and addressed to B. Maria negotiated the bill to C, C to D, E stole the bill from D and indorsed it to F by forging the signature of D. F in turn indorsed the bill to G & G to H. Which of the following is false? a. all indorsers prior to the forgery are discharged b. the drawer is liable to H c. F is liable to H d. Forgery is real defense 29. M is the maker of a note payable to J. Cruz or order for P 5,000 due July 30, 2009. Cruz borrowed P 2,000 from C payable July 31, 2009 and pledged the note by indorsing it to C. Which of the following is correct? a. a promissory note cannot be pledged without the consent of the maker b. On July 30, 2009 C can collect from M only P 2,000 c. on July 30, 2009 C can collect from M P 5,000 d. partial indorsement is allowed 30. A is the drawer of a bill addressed to B, payable to C or order 10 days after acceptance for P 8,000. C negotiated the bill to D, to E and E to F. The bill was accepted by B when presented by F. If the signature of A is forge, which of the following is false? a. B is required to pay F even if the signature of A is a forgery b. B is not required to pay F since he has the defense of forgery c. Forgery is considered a real defense d. If B dishonors the bill by non-payment F may give to any indorse c. certificate of deposit d. none of them c. trade acceptance d. all of the above c acceptance d. presentment for acceptance

31. M is the maker of a note, payable to C or order for P 10,000. C negotiated the note to D, D to E, E to F, F to G and G to H. M dishonored the note when presented by H for payment. H gave notice of dishonor to F. Which of the following is true. a. all indorsers prior to F are discharged b. only G is discharged c. H is required to notify M d. F in turn can give notice to G 32. Pay to Pedro Reyes or order P 20,000 ten days after sight SIGNED By A drawer as agent of B To: B Pedro Reyes negotiated the bill to C, C to D and D to E. B dishonored the bill by non payment. E gave notice of dishonor to all prior parties except B. Which of the following is not correct? a. The drawer is not liable to E b. The drawer is liable to E since he was duly notified of the dishonor c. if D paid E , C becomes liable to D d. this bill maybe considered as a note 33. M signed a promissory note payable to C or order for P 5,000 ten days after date. C indorsed the note to D, D to E and E to F. F, without authority from the prior parties, altered the amount to P 15,000 then indorsed the note to G. a. the unauthorized alteration renders the note void b. G cannot require M to pay anything c. G can require M to pay only P 5,000 if G is a holder in due course d. G can require M to pay P 25,000 if G is a holder in due course 34. Drawer A addressed a bill to B for P 20,000 payable to C or order 20 days after acceptance. B made a conditional acceptance in this case: a. the bill becomes non-negotiable b. it is still negotiable notwithstanding the conditional acceptance c. the holder cannot refuse to take a conditional acceptance d. B is considered a constructive acceptor 35.M is the maker of a note for P 30,000 payable to C or bearer. C negotiated the note to D, D to E, E to F and F to M. Which is correct? a. the note is discharged b. the noted is not discharged since there is no payment c. M cannot re-issued the note d. The indorsers are not dischaged 36. Drawer A addressed a bill to B payable to C or bearer for P 60,000 upon demand. C negotiated the note to D, D to E, E to F and F to G. Upon proper presentment, B paid the bill. Which of the following is true? a. the bill is discharged b. persons secondarily liable are likewise discharged c.the bill is not required to be presented for acceptance d. all of the above

Suggested Answers 1. a 2. a 3. a 4. a 5.d

6.d 7. d 8. d 9d 10. c 11. d 12. a 13. c 14. d 15. d 16. d 17. d 18. d 19. a 20. b 21. c 22. d 23. b 24. d 25. c 26. b 27. b 28. b 29. c 30. b 31. c 32. b 33. c 34. b 35. a NEGOTIABLE INSTRUMENTS REVIEWER FOR BSA 4-3D PART 1 TRUE OR FALSE

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Indorsers are liable prima facie in the order in which they indorse. Joint payees or joint indorsees are deemed to indorse jointly and severally. Payment in good faith before maturity which is made by the principal debtor to the holder and without notice that his title is defective discharges the instrument. The cancellation of a negotiable instrument which is made by the holder is presumed to have been made intentionally. When the principal debtor becomes the holder in his own right before maturity, the instrument is discharged by confusion or merger. An absolute and unconditional renunciation made by the holder before, at or after maturity in favor of the principal debtor discharges the instrument. A bill of exchange does not operate as an assignment of funds in the hands of the drawee and the drawee is not liable until the same accepts. The certification of a check by a bank is equivalent to acceptance, and when procured by the holder, the drawer and indorsers are discharged. A check is always payable on demand. The drawer of a bill of exchange need not have funds with the drawee except in the case of a check.

MULTIPLE CHOICE

1. An instrument which is not dated will be considered dated as at the time of: a. acceptance b. first indorsement c. last indorsement d. issuance 2. I promise to pay P or his order the sum of P10,000.00 30 days after the death of X . This is an instrument payable: a. at a determinable future time b. on demand c. upon the fulfillment of a condition d. at an indefinite time, hence, non-negotiable

3. Who among the following is the holder of a negotiable instrument originally payable to order? a. The original payee who has negotiable instrument b. The indorsee who is in possession of the instrument c. The possessor of the instrument to whom the instrument was delivered without any indorsement d. The ondoresee who has negotiable the instrument 4. An instrument payable to bearer mat be negotiated through any of the following means, except: a. special indorsement plus delivery b. mere delivery c. blank indorsement plus delivery d. No delivery is required as long as there is an indorsement, wheather blank or special. 5. The following instrument were presented to you for evaluation: I. Payable to the order of Pablo Patricio P20,000.00 II. Pay to the order of Pablo Patricio P20,000.00 or deliver to him a computer of the same value at this option. III. Pay to the order of Pablo Patricio P20,000.00 or deliver to him a computer of the same value. IV. Pay to the order of Pablo Patricio a Computer worth P20,000.00

Assuming all the other requisites of negotiability are present, which of the foregoing instrument are negotiable? a. Instrument I and II b. Instrument I and III c. Instrument II and III d. Instrument III and IV 6. The separate paper attached to an instrument on which an indorsement or acceptance of the instrument is written is called: a. allonge b. memorandum c. enclosure d. attachment 7. Assuming all the other requisites of negotiability are present, which of the following instrument is not payable to bearer? a. Pay to the order of cash b. Pay to the order of Jose Rizal, national hero. c. Pay to Pedro Padernal, bearer d. Pay to Pedro Padernal or bearer 8. Consider these two statements: I. An instrument originally payable to order may be converted into a bearer instrument. II. An instrument originally payable to bearer may be converted into an order instrument. a. Both statements are true. b. Both statements are false. c. Statement I is true; Statement II is false. d. Statement I is false; Statement II is true. 9. Which of the following is a valid address to a drawee so as to make the instrument negotiable? a. To Walter Wenceslao or Wilfredo Wycoco. b. To Walter Wenceslao, or in his absence, Wilfredo Wycoco. c. To Walter Wenceslao and Wilfredo Wycoco. d. To Walter Wenceslao and another drawee named Wilfredo. 10. M signs a promissory note payable to the order of P which is blank as to amount. M delivers the note to P with instruction to type the amount of P20,000 on the blank. P, however, types the amount of P50,000 and negotiates the same to A, A to B, B to C, and C to H, a holder in due course. A, B, C and also H had no knowledge of the wrongful completion of the blank. a. H may collect from M nothing because P violated M s instructions. b. H may collect from M P20,000 the amount M instructed P to place on the space for the amount. c. H may collect from M P50,000 the amount actually placed by P. d. H may collect from A, B or C P20,000 since they had no knowledge of the

wrongful completion. 11. R signs a check amounting to P50,000 but which is blank as to the name of the payee. He keeps the check in his drawer but S, his secretary, steals it, places her name as payee on the blank, and negotiates it to A, A to B, B to C, and C to H, holder. A, B, and C have no knowledge of the theft of the check and its unauthorized completion by S. Based on the foregoing, which of the following statements is incorrect? a. H may enforce payment of the check against R if H is a holder in due course. b. H may enforce payment of the check against S, whether H is a holder in due course or not. c. H may enforce payment of the check against A, B, or C, whether H is a holder in due course or not. d. H may not enforce payment of the check against R, whether H is a holder in due course or not. 12. M makes a note payable to the order of P. He delivers the note to P with the instruction that P should keep the same until M has obtained the proceeds of his loan from the bank. P, however, disregarded the instruction of M and indorsed the note to A, A to B, B to C, and C to H, holder. A, B, and C have no knowledge of P s defective title. Based on the foregoing, which of the following statements is incorrect? a. H may enforce payment against M if H is a holder in due course. b. H may not enforce payment against M if H is not a holder in due course. c. H may not enforce payment against A, B, and C, whether H is a holder in due course or not. d. H may enforce payment against P, whether H is a holder in due course or not. 13. One of the following can set up the defense of forgery in an instrument payable to order. Who is it? a. An indorser if the maker s signature is forged. b. The acceptor, if the drawer s signature is forged. c. A person negotiating by mere delivery if a prior party s signature is forged. d. The, maker if an indorser s signature is forged. 14. M makes a note payable to P or bearer and delivers the note to P. P indorses the note to A. A keeps the note in his drawer but it is stolen by F who negotiates the same to B by forging A s signature, B indorses the note to C, C indorses the note to H, a holder in due course. Who among the following can set up the defense of forgery? a. M, maker. b. P, payee. c. A, indorser. d. Forgery is not available as defense to any party to the instrument. 15. One of the following is not a restrictive indorsement. Which is it? a. An indorsement that prohibits the further negotiation of the instrument. b. An indorsement that constitutes the indorser a mere assignor of the title to the instrument. c. An indorsement that constitutes the indorsee an agent of the indorser. d. An indorsement that vests title in the indorsee in trust for some other person. 16. M makes a note payable to the order of P in the amount of P10,000. P indorses the note to A as follows Pay to A if he passes the 2004 Bar Examination. a. M must wait for the condition to be fulfilled before he can pay A. b. M may pay A even if the condition has not been fulfilled but A has to hold the proceeds subject to the rights of P. c. M cannot be compelled to pay even if the condition is fulfilled because the conditional indorsement renders the instrument non-negotiable. d. M may pay A even if the condition has not been fulfilled. The fulfillment of the condition becomes immaterial and A becomes the absolute owner of the proceeds of the note. 17. In order that a person may be held liable as an accommodation party, the following requisites must concur, except: a. He has signed the instrument as maker, drawer, acceptor or indorser. b. He has not received any value for such making, drawing, accepting or indorsing the instrument. c. His purpose of signing the instrument is to lend his name or credit to some other person. d. The holder must have no knowledge that such person signed the instrument as an accommodation party. 18. An indorsement where the indorser signs only his name at the back of the instrument is a: a. special indorsement. b. blank indorsement. c. qualified indorsement.

d. restrictive indorsement. 19. An indorsement where the indorser waives the benefits of any law intended for his protection is known as: a. an absolute indorsement. b. a facultative indorsement. c. a conditional indorsement. d. a successive indorsement. 20. M makes a note payable to the order of P. P specially indorses the note to A, A specially indorses the note to B, B indorses the note in blank and delivers it to C, C specially indorses the note to D, D specially indorses the note to H, holder. Which of the following indorsements may H strike out? a. The special indorsement of P to A. b. The blank indorsement of B to C. c. The special indorsement of C to D. d. The special indorsement of D to H. 21. Which of the following is not right of a holder in due course? a. To hold the instrument free from defect of title of prior parties. b. To hold the instrument free from personal defenses available to prior parties among themselves. c. To enforce payment of the instrument for the full amount thereof against all parties liable thereon. d. To hold the instrument free from real defenses available to the prior parties among themselves. 22. Which of the following statements pertaining to indorsements is incorrect? a. The indorsement must be of the whole instrument. b. The signature of the indorser without additional words is sufficient. c. Indorsers are liable in the order in which they indorse. d. If an instrument is delivered without indorsement, negotiation takes effect at the time of delivery even if the instrument is subsequently indorsed. 23. M executed a note payable to the order of P. P indorsed the note to A, A to B (by qualified indorsement), B to C (by general indorsement), and C (by general indorsement) to H, a holder in due course. Later, it was discovered that P was a minor. None, except P, knew that he was a minor. Who, aside from P, may avail himself of the minority of P as a defense? a. M, maker. b. A, qualified indorser. c. B, general indorser. d. None, only P may avail himself of his minority as a defense. 24. Which of the following does not discharge the instrument? a. Payment in due course by the accommodated party. b. Intentional cancellation of the instrument by the holder. c. When the principal debtor becomes the holder in his own right before maturity. d. Payment in due course by or on behalf of the principal debtor. 25. A party secondarily liable is discharged though any of the following means, except by the: a. intentional cancellation of his signature by the holder. b. discharge of a prior party. c. release of the principal debtor. d. extension of the time of payment which is assented to by such party secondarily liable. 26. Which of the following instrument is negotiable? a. Treasury warrant. b. Postal money order. c. Letter of credit. d. Trade acceptance. 27. An instrument reads as follows: November 30, 2003 I promise to pay to the order of Paolo Pimentel the sum of P50,000 if he places first in the May 2004 CPA Examination. (Sgd.) Mariano Miranda

a. The instrument is valid and negotiable. b. The instrument is valid but not negotiable. c. The instrument is invalid but negotiable. d. The instrument is invalid and not negotiable. 28. An instrument reads as follows: I promise to pay to the order of Patrick Pelaez the sum of P50,000 sixty (60) days after date. (Sgd.) Minerva Maceda The instrument was delivered by Minerva Maceda on December 1, 2003 to Patrick Pelaez who indorsed and delivered the note on the same day to Alberto Antonio. Immediately upon receipt, Alberto Antonio wrote November 1, 2003 as its date of issue. The following day, Alberto Antonio indorsed and delivered the note to Herman Hernandez who knew nothing with respect to the insertion of a different date of issue. a. Herman Hernandez can collect the amount of the note from Minerva Maceda on December 31,2003. b. Herman Hernandez can collect the amount of the note from Minerva Maceda on January 30, 2004. c. Herman Hernandez can collect nothing from Minerva Maceda because of the insertion of a wrong date. d. Herman Hernandez can collect the amount of the note on December 2, 2003 when it was negotiated to him. 29. An instrument reads as follows: January 1, 2004 I promise to pay to the order of Perla Persida the sum of P30,000 on January 31, 2004. (Sgd.) Melba Montinola (Sgd.) Milnore Manuel (Sgd.) Maila Medina On January 31, 2004, Perla Persida may collect from Melba Montinola: a. P30,000 b. P20,000 c. P10,000 d. Nothing, because the note is void since it reads I promise to pay but it was signed by three makers. 30. Which of the following may be raised as defense against any holder? a. Want of consideration. b. Want of delivery of complete instrument. c. Insertion of a wrong date. d. Want of delivery of an incomplete instrument. 31. Pay to Alberto Alvarez for collection only. (Sgd.) Pontiano Parcero This is an example of: a. The agency type of restrictive indorsement. b. The trust type of restrictive indorsement. c. A qualified indorsement. d. A conditional indorsement. 32. Which of the following defenses may a party to an instrument avail himself of against any holder of a negotiable instrument? a. Want of delivery of incomplete instrument. b. Want of authority to complete an instrument that was delivered. c. Want of delivery of complete instrument. d. Want or absence of consideration. 33. Which of the following is not a promise to pay, and thus will make as instrument non-negotiable? a. I agree to pay b. I bind myself to pay c. I acknowledge my debt to P d. I oblige myself to pay P

34. The acceptor by accepting the instrument, admits the following, except: a. The existence of the payee. b. The capacity of the payee to indorse. c. The genuineness of the drawer s signature. d. The right of the holder to enforce payment of the instrument. 35. On August 1, 2003, M executed a promissory note for P50,000 payable to the order of P which is payable 30 days after date. Thereafter, P indorsed the note to A, A to B, B to C, C to D, and D to M. The indorsement by D to M was made on August 29, 2003. a. The obligation on the note was extinguished by merger or confusion on August 29,2003. b. M may reissue/renegotiate the promissory note after it was indorsed to him. c. M can go after P, A, B, C and D to collect. d. M may strike out the indorsement to him by D.

IDENTIFICATION 1. An alteration made by a stranger to the instrument. 2. It exists in those cases in which a person, without negligence, has signed as instrument which was, in fact, a negotiable instrument, but was deceived as to the character of the instrument and without knowledge of it. 3. Includes not only a promise to pay on the part of the maker but also grants permission to the payee to take judgment against the maker without trial if the maker fails to pay on maturity. 4. Literally, his pleading being abandoned ; it refers to a confession of judgement accompanied by withdrawal of defense. 5. Literally he has confessed action ; it refers to a written confession of defendant acknowledging indebtedness to plaintiff after action has been filed.

6. The formal declaration drawn up and signed by a notary that he presented a bill of exchange for acceptance or for payment and that it was refused or cannot be obtained. 7. A bill composed of various parts, each part being numbered, and containing a reference to the other parts, all of which parts constitute but one bill. 8. The person who signifies his acceptance to the order of the drawer. 9. The authority for confession of judgment before the action is begun. 10. A person who, not otherwise a party to the instrument, places thereon his signature in blank before delivery.

ANSWERS: TRUE OR FALSE

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

True True False True False False True True True True

MULTIPLE CHOICE

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35.

D A B D A A C C C C A C D D B B D B B C D D D C D D B A A D A A C D B

IDENTIFICATION

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Spoilation Fraud in factum or in esse contractus Cognovit note Relicta verificatione Cognovit actionem Protest Bill in set Acceptor Warrant of attorney Irregular or anomalous indorser