MC Questions 1

1. The Negotiable Instruments Law of the Philippines took effect on

A. June 2, 1911
B. July 2, 1911
C. June 1, 1911
D. July 1, 1911

2. Negotiable instruments allow a person to avail of his existing credit.

A. Substitute for money
B. Medium of exchange
C. Medium of credit transactions
D. All of the above

3. It is a form of deferred payment

A. Credit
B. Money
C. Debt
D. Currency

4. Which law applies primarily to crossed checks?

A. Negotiable Instruments Law
B. New Civil Code
C. U.S. Uniform Commercial Code
D. Code of Commerce

5. Which law applies primarily to promissory notes?

A. Negotiable Instruments Law
B. New Civil Code
C. U.S. Uniform Commercial Code
D. Code of Commerce

6. It is a special type of bill of exchange

A. Promissory Note
B. Check
C. Money
D. Special Bill

7. A quality of a bill or a note whereby it may pass from hand to hand

similar to money.
A. Transferability
B. Assignability
C. Negotiability
D. Capability

8. An instrument is non-negotiable under the Negotiable Instruments Law

(NIL) if it states:
A. The amount is payable out of a particular fund.
B. There is a stipulation that interest shall be paid.
C. Designates the account out of which reimbursement is to be made.
D. Designates the account where the amount payable shall be debited.
9. The following are persons involved in a bill of exchange, except:
A. Drawer
B. Maker
C. Drawee
D. Payee

10. Which of the following bills of exchange may be treated as a

promissory note by the holder?
A. To C. Pay P100.00 to the order of P. Signed A.
B. To X. Pay P1,000.00 to P or bearer. Signed X.
C. To Drawee. Pay P10,000 to P or order. Signed Drawer.
D. To Metrobank. Pay P100,000 to bearer. Signed Mr. Luhit.

11. Statement I: Payment by check extinguishes an obligation.

Statement II: A check is always drawn on a bank.
A. Only Statement I is true
B. Statements I and II are true
C. Only Statement II is true
D. Statements I and II are false

12. Statement I: An instrument which contains an order or promise to

do any act in addition to the payment of money is not negotiable.
Statement II: An instrument that gives the holder an election to
require something to be done in lieu of payment of money is negotiable.
A. Only Statement I is true
B. Statements I and II are true
C. Only Statement II is true
D. Statements I and II are false

13. The following are bearer instruments, except:

A. I promise to pay bearer P1,000
B. I promise to pay P or bearer P1,000
C. I promise to pay to the order of Harry Potter P1,000
D. I promise to pay Ms. Eyas or order P1,000

14. Statement I: Once a bearer instrument, always a bearer

instrument.
Statement II: A bearer instrument becomes an order instrument if it has
been specially indorsed.
A. Only Statement I is true
B. Statements I and II are true
C. Only Statement II is true
D. Statements I and II are false

15. The following are parties to a bill of exchange, except:

A. Drawer
B. Drawee
C. Acceptor
D. Payee

16. He makes the promise and signs the instrument.

A. Maker
B. Drawer
 C. Payee
D. Drawee

17. He is ordered to pay under the instrument.

A. Maker
B. Drawer
C. Payee
D. Drawee

18. He is the person to whom the promise is made or the instrument is

made payable.
A. Holder
B. Referee
C. Payee
D. Acceptor

19. The following are exceptions to the general rule that only
persons who sign the negotiable instrument are liable thereon, except:
A. Agent who fails to disclose his principal
B. Written promise to accept a bill before it is drawn
C. Acceptance of a bill on a separate paper
D. Persons signing under a trade name

20. Order by one person to another to pay money to a third person.

A. Payable to order
B. Good order
C. Mail order
D. Bill of exchange

21. Statement I: In case of conflict between words and figures, the

words control.
Statement II: The written words prevail over the printed words.
A. Only Statement I is true
B. Statements I and II are true
C. Only Statement II is true
D. Statements I and II are false

22. If this is the last indorsement, the instrument may be negotiated

by delivery.
A. Special
B. Restrictive
C. Blank
D. Qualified

23. The counterfeit-making or fraudulent alteration of a writing.

A. Allonge
B. Forgery
C. Procuration
D. Issuance

24. Ante-dating or post-dating a negotiable instrument

A. is not invalid
B. is valid if done for an illegal purpose
 C. is valid if done for a fraudulent purpose
D. is invalid

25. M wrote a complete promissory note payable to bearer. The note

was stolen and his signature forged. It ends up in the hands of a
holder in due course. Which of the following is true?
A. M can set up the defense of want of delivery of a complete
instrument.
B. M is liable because he is an endorser.
C. M is not liable because the forged signature is inoperative.
D. M is liable to a holder in due course.

26. Which of the following are requirements for acceptance of a bill

on a separate piece of paper?
A. acceptance must be shown to the person to whom the instrument is
negotiated
B. such person must take the bill for value on the faith of such
acceptance
C. A and B
D. None of the above

27. The transfer of possession, actual or constructive, from one

person to another with intent to transfer title thereto
A. Delivery
B. Negotiation
C. Assignment
D. Indorsement

28. X forged the signature of an endorser on a bill of exchange

payable to order. Which of the following is true?
A. Only X is liable as forger
B. All endorsers prior to the forgery are liable
C. All endorsers after the forgery are liable
D. Blank endorsers are not liable

29. M signs a blank piece of paper and delivers it to P with the

intention of making the instrument negotiable.
A. P can fill it up for any amount
B. P has implied authority to complete it
C. A and B
D. None of the above

30. It is the first delivery of the instrument complete in form to a

person who takes it as a holder
A. Assignment
B. Negotiation
C. Issuance
D. Indorsement

31. They are parties who are not in direct contractual relation to
each other.
A. remote parties
B. immediate parties
 C. Drawers
D. Holders

32. An indorsement is made by:

A. Writing the signature on the instrument
B. Allonge
C. A and B
D. None of the above

33. There can be no partial indorsement of a negotiable instrument,

except:
A. If the parties agree to a partial indorsement
B. If part of the amount has already been paid
C. If the instrument is indorsed jointly
D. If the instrument is indorsed severally

34. It is the final act essential to the consummation of an

obligation under a negotiable instrument.
A. Delivery
B. Indorsement
C. Transfer
D. Signature

35. A signature on a blank paper delivered by the person making the

signature in order that the paper may be converted into a negotiable
instrument operates as a _______ authority to fill it up as such for
any amount.
A. Absolute
B. General
C. Special
D. Prima facie

36. The writing of the signature on a paper attached to the

negotiable instrument.
A. Allonge
B. Procuration
C. Forgery
D. Issuance

37. The following omissions do not affect negotiability, except:

A. Date
B. Value
C. Seal
D. Order

38. The act by which a principal gives power to another to act in his
place as he could himself.
A. Allonge
B. Forgery
C. Procuration
D. Issuance
39. Statement I: A due bill is a special type of bill of exchange.
Statement II: Acceptor is a drawer who accepts a bill of exchange.
A. Only Statement I is true
B. Statements I and II are true
C. Only Statement II is true
D. Statements I and II are false

40. Statement I: A person who places his signature on an instrument

where it is not clear in what capacity he is signing is deemed a
holder.
Statement II: An instrument that states: "Pay to bearer Jill P1,000.00"
is not negotiable.
A. Only Statement I is true
B. Statements I and II are true
C. Only Statement II is true
D. Statements I and II are false