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FINAL EXAMINATION
LAW 3
LAW ON NEGOTIABLE INSTRUMENTS
a. Special
b. Conditional
c. Restrictive
d. Facultative
e. Blank
f. Qualified
____30. An antedated or postdated instrument is valid, and it does not lose its negotiable
character just because it is antedated or postdated, provided this is not done for an illegal
or fraudulent purpose.
____31. An instrument where no time of payment is expressed is payable on demand.
____32. Where the instrument is not dated, it will be considered to be dated as of the time it
was issued.
____33. An instrument which contains an order or promise to do any act in addition to the
payment of money is not negotiable.
____34. An instrument payable upon contingency is not negotiable and the happening of the
event does not cure the defect.
____35. Where a signature is so placed upon the instrument, that it is not clear in what capacity
the person making the same intended to sign, he is deemed an indorser.
MULTIPLE CHOICE
36. A executed a bill of exchange in favor of B for P10,000. B altered the amount to
P100,000 and presented the bill to C, the drawee who accepted the bill. Thereafter, the
bill was negotiated by C to D. Which is correct?
a. The drawee is liable up to P10,000 only
b. The drawee is not liable because of the alteration
c. The drawee is liable only up to P10,000 except if D is a holder in due course in which
A is liable up to P100,000
d. The drawee by accepting the bill is liable according to the tenor of his acceptance,
that is P100,000.
37. Not a method of transferring commercial papers.
a. Assignment
c. Indorsement and delivery
b. Negotiation
d. None of the above
38. One of the following indorsements is a valid negotiation
a. Pay to A P6,000 (amount of the instrument is P10,000)
b. Pay to A 7,000 and B, the balance (amount of the instrument is P10,000)
c. Pay to A P8,000 out of the instrument of P10,000 of this note
d. Pay to A and B P10,000
39. A bill of exchange to which no document is attached when presentment for payment or
acceptance is made
a. Trade acceptance
c. Clean Bill of exchange
b. Bank acceptance
d. Documentary bill of exchange
40. Which of the following statements best describes the effect of a person endorsing a check
without recourse?
a. The person has no liability to prior endorsers
b. The person makes no promise or guarantee of payment on dishonor
c. The person gives no warranty protection to later transferees
d. The person converts the check into order paper
41. A issued a negotiable PN to the order of B for P10,000 payable after 30 days after date.
Later B indorsed it to C. Then X stole the note from C, forged the signature of C and
negotiated it to D, and D to E, E to F, the holder. On maturity of the note, which of the
following is not correct and invalid?
a. F cannot collect from C because it was Cs signature which was forged.
b. F can collect from A because A cannot put up forgery as his defense
c. F can collect from either D or E, because their signature are genuine and the note is
operative against them
d. F cannot collect from B because he is a party prior to the forgery
42. Which of the following is not negotiable for the reason that it is not payable at a
determinable future time?
a. On the death of X, I promise to pay to the order of P P10,000. (Sgd) M
b. On or before October 30, 2015, I promise to pay P or order P10,000.(Sgd) M.
c. Sixty days after sight, I promise to pay to the order of P P10,000. (Sgd) M
d. Ten days before the death of X, I promise to pay P or his order P10,000 (Sgd) M
43. Payable to specified person
a. negotiable.
b. nonnegotiable, because it does not include a date.
c. nonnegotiable, because it is payable to All-Mart Discount Stores.
d. nonnegotiable, because it is signed by Carol.
65. On May 1, Doug signs a check that is payable to the order of Excel Credit Card
Corporation and that is dated July 1. This check is
a. negotiable.
b. nonnegotiable, because it is payable to Excel Credit Card Corporation.
c. payee
b. drawer.
d. Both A and B
67. Which of the following language on an order will create a negotiable instrument?
a. "Pay X"
b. "Please pay X"
c. "I wish you would pay X"
d. both A and B
68. Which of the following phrases indicates a bearer instrument?
a. "payable to bearer"
b. "pay to cash"
c. "pay to the order of cash"
d. all of the above
69. Dick signs a check payable to the order of Jane, writes this is nonnegotiable in the
lower left corner, and gives it to her. This check is
a. negotiable.
b. nonnegotiable, because it includes the notation this is nonnegotiable.
c. nonnegotiable, because it is not governed by Article 3.
d. nonnegotiable, because it was given to Jane
70. Cindy signs a check payable to the order of my blue-eyed friend and gives it to Dan,
who does not have blue eyes. This check is
a. Negotiable
b. nonnegotiable, because Dan does not have blue eyes.
c. nonnegotiable, because it does not indicate a specific payee
d. nonnegotiable, because it was executed as a joke.
ESSAY 10 Points
71-75 What are the rights of the holder in forgery of indorsement if the note is payable to bearer?
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76. 80 What are the rights of the holder in forgery of indorsement if the note is payable to order?
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