NEGOTIABLE INSTRUMENTS

D 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.

A 2. “ I promise to pay P on 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.

B 3. Who among the following is the holder of a negotiable instrument originally payable to order?
a. The original payee who has negotiated the 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 indorsee who has negotiated the instrument.

D 4. An instrument payable to bearer may be negotiated through any of the following means, except by:
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, whether blank or special.

A 5. The following instruments are presented to you for evaluation:

I. “Pay to the order of Pablo Patricio P20,000.00”.
II. “Pay to the order of Pablo Patriocio P20,000.00 or deliver to him a computer of the same value at his
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 instruments are
negotiable?
a. Instruments I and II.
b. Instruments I and III.
c. Instruments II and III.
d. Instruments III and IV.

A 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.

C 7. 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.”
b. “Pay to the order of Jose Rizal, national hero.”
c. “Pay to Pedro Padernal, bearer.”
d. “Pay to Pedro Padernal or bearer.”

C 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.

In your evaluation of the foregoing statements:

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.

C 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.”

C 10. M signs a promissory note payable to the order of P which is blank as to amount. M delivers the note of P with
the instruction to type the amount of P20,000.00 on the blank. P, however, types the amountof P50,000.00, and
negotiates the same A, A to B, B to C, and C to H, a holderin 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 P20,000.00 the amount M instructed P to place on the space for the amount.
c. H may collect from M P50,000.00, the amount actually placed by P.
d. H may collect from A, B or C P20,000.00 since they had no knowledge of the wrongful completion.

A 11. R signs a check amounting to P50,000.00 but which is blank as to the name of 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 mat 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 and 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.

C 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.

D 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.

D 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 tolen by F who negotiates the same to B by froging 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 instrument.

B 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.

B 16. M makes a note payable to the order of P in the amount of P10,000.0. P indorsers the note to A as follows “Pay
to A if he passes the 2015 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 to be fulfilled before he can pay A.
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 the
absolute owner of the proceeds of the note.

D 17. In order that a person may be held liable as an accommodation party, the following requisites must concur,
except:
a. He has ssigned 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.

B 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.

B 19. An indorsement where the indorser waives the benefit of any law intended for his protection is known as:
a. An absolute indorsement.
b. A faculatative indorsement.
c. A conditional indorsement.
d. A successive infdorsement .

C 20. M makes a note payable to the order of P. P specially indorses the note to A, A specially indorse 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 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.

D 21. Which of the following is not a 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.

D 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.

D 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 on 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 on his minority as a defense.

C 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.

D 25. A party secondarily liable is discharged through 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.

D 26. Which of the following instruments is negotiable?

a. Treasury warrant.
b. Postal money order.
c. Letter of credit.
d. Trade acceptance

B 27. An instrument reads as follows:

November 30, 2015

I promise to pay to the order of Paolo Pimentel the sum of P50,000.00 if he

places first in the May 2016 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.

A 28. An instrument reads as follows:

November 30, 2015

I promise to pay to the order of Patrick Pelaez the sum of P50,000.00 sixty
(60) days after date.

(Sgd.) Minerva Maceda

The instrument was delivered by Minerva Maceda on December 1, 2014 to Patrick Pelaez who indorsed and
delivered the note on the same day to Alberto Antonio wrote on the note “November 1, 2014” 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, 2014.
b. Herman Hernandez can collect the amount of the note from Minerva Maceda on January 30, 2015.
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 December 2, 2014 when it was negotiated to him.
e. Herman Hernandez can collect the amount of the note on December 2, 2014 when it was negotiated to him.

A 29. An instrument reads as follows:

November 1, 2015

I promise to pay to the order of Patrick Pelaez the sum of P30,000.00 on

November 30,2015.

(Sgd.) Minerva Maceda (Sgd.) Milnore Manuel

(Sgd.) Maila Medina

 On November 30, 2015, Perla Persida may collect from Melba Montinola:
a. P30,000.00.
b. P20,000.00.
c. P10,000.00.
d. Nothing, Because the note is void since it reads “I promise to pay” but it was signed by three makers.

B 30. At a movie premier, Perfecto Palmares approached Sharon Morales, the star of the movie, and requested an
autograph from her. Sharon Morales willingly obliged and signed her name at the bottom right portion of a
white “8 X 11” stationery which Perfcto Palmares presents to her. Shortly after reaching home, Perfecto
Palmares printed above the signature of Sharon Morales through his computer the following: “I promise to pay
Perfecto Palamares or his order P50,000.00.” Thereafter, Perfecto Palmares negotiatied the paper to Arturo
Alvarez, Arturo Alvarez to Bernardo Benitez, and Bernardo Benitez to Henry Hilado, holder. Alvarez, Benitez,
and HIlado knew nothing about how the apparent note came into being.
a. If he is a holder in due course. Henry Hilado can collect from Sharon Morales.
b. Whether he is a holder in due course or not, Henry Hilado cannot collect from Sharon Morales.
c. Whether he is a holder in due course or not, Henry Hilado cannot collect from Arturo Alvarez.
d. Whether he is a holder in due course or not. Henry Hilado cannot collect from Bernardo Benitez.

D 31. M makes a promissory note payable to the order of P for P10,000.00. P indorses the note to A, and A to B.
Thereafter, B indorsed tha amount of the note in full to H to secure his (B’s) debt of P8,000.00 to H. Based on
the foregoing, which of the following statements is incorrect?
a. If M has no defenses against H, H may collect P10,000.00 from M.
b. If M has personal defenses against H, H may collect P8,000.00 from M.
c. If M has real defenses against H, H may collect nothing from M.
d. H cannot collect anything from M whether M has real or personal defenses.

A 32. Which of the following renders an instrument non-negotiable?

a. The promise or order is to pay the amount of the instrument out of a particular fund.
b. The promise or order to pay is coupled with a statement of the transaction that gave rise to the transaction.
c. The sum payable is to paid with costs of collection or an attorney’s fee in case payment is not made at
maturity.
d. The instrument contains a provision authorizing the sale of collateral securities in case the instrument is not
paid at maturity.

D 33. Which of the following ommissions on the face of an instrument will render it non-negotiable?
a. The omission of the date issue.
b. The omission of any statement that value has been given.
c. The omission of the place where the instrument was drawn.
d. The omission of the signature of the maker above his typewritten name.

B 34. Medardo Medrano makes a note payable to the order of Pidencio Palomar and Prudencio Perez for P20,000.00.
The payees are not partners and neither one authorized the other to act in his behalf. Based on the foregoing,
which of the following is a valid indorsement?
a. “Pay to Antonio Arevalo, P12,000.00, and to Alberto Alvarez, P8,000.00.

(Sgd.) Pidencio Palomar (Sgd.)Prudencio Perez.”

 b. “Pay to Antonio Arevalo, P14,000.00.

(Sgd.) Pidencio Palomar (Sgd.)Prudencio Perez.”

Note: Medardo Medrano has paid a total of P6,000.00 to both payees before the latter made their
indorsement.

c. “Pay to Antonio Arevalo, P14,000.00.

(Sgd.) Pidencio Palomar (Sgd.)Prudencio Perez.”

Note: Medardo Medrano has not paid any amount to the payees.

d. “Pay to Antonio Arevalo P20,000.00.

(Sgd.) Pidencio Palomar”

D 35. Which of the following may be raised as defence agaist 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.

A 36. “Pay to Alberto Alvarez for collection only.

(Sgd.) Pomciano 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.

A 37. M makes a promissory note for P10,000.00 payable to the order of P for merchandise to be delivered by P to
him. P, however, was able to deliver to M merchandise worth P8,000.00 only. P indorsed the note to A, and A to
H.
I. If H is a holdr in due course, he can collect P10,000.00 from M.
II. If H is not a holder in due course, he can collect P8,000.00 from M.

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.

D 38. M makes a note payable to the order of P. P indorses the note to A, A to B, B to C, C to D, D to E, and E back to A.
Based on the foregoing, which of the following statements is incorrect?
a. A may renegotiate the promissory note.
b. A cannot go after B,C,D and E.
c. B, C, D and E enjoy temporary defense is A is the holder.
d. If the instrument is renegotiated by A to F, the latter cannot go after B, C, D and E.
C 39. Mary Montes and Melany Manalo obtained a loan of P100,000.00 from Patricia Palma. The debtors executed a
promissory note which reads as follows:

We promise to pay Patricia Palma or order P100,00.00 on November

30,2015.

(Sgd.) Mary Montes (Sgd.) Melany Manalo

To secure the loan, Mary Montes pledged her diamond ring, while Melany Manalo executed a mortgage on her
lot.

a. Mary Montes may demand the return of her diamond ring if she pays her share of the debt, while Melany
Manalo’s share remains outstanding.
b. Melany Manalo may demand the cancellation of the mortgage on her lot if she pays her share of the debt,
while Mary Montes’s share remains outstanding.
c. Both Mary Montes and Melany Manalo must pay the total amount of the debt before Mary Montes could
demand the return of the diamond ring, and Melany Manalo the cancellation of the mortgage on her lot.
d. Patricia Palma may demand payment of the amount of P100,000.00 from either Mary Montes or Melany
Manalo.

D 40. M executed a promissory note in the amount of P20,000.00 payable to the order of P. M made the promissory
note for goods purchased by M from P shortly after M obtained the consent of P whether the latter would
accept the promissory note in the meantime. When P visited M’s office to collect the note, M was not around,
but P found on, M’s table the completed note that M made for him. Without waiting for M, P took the note.
Based on the foregoing, which of the following statements is incorrect?

a. P cannot enforce payment of the note if M refuses to pay it.

b. If P indorses the note to H who knows nothing on how P obtained the note, H can collect on the note from
M.
c. If P indorses the note to H who knows how P obtained the note from M, H cannot collect from M.
d. If P indorses the note to H, H can collect from M whether H was aware or not on how the note was obtained
by P since he (H) was not a party to the wrongdoing commited by P.

D 41. The following instruments are presented to you for evaluation:

I. “Pay to the order of Pablo Patricio P20,000.00 in goods which are displayed at your store.”
II. “Pay to the order of Pablo Patricio P20,000.00 or deliver to him a computer of the same value at his
option.’
 Assuming all the other requisites of negotiability are present:
a. Both instruments are negotiable.
b. Both instruments are not negotiable.
c. Instrument I is negotiable; Instrument II is not negotiable.
d. Instrument II not negotiable; Instrument I is negotiable.

C 42. The following are two of several requisites of an instruments:

I. The instrument must be payable on demand or at a fixed or determinable future time.
II. The instrument must be payable to order or to bearer.

a. Both requisites apply to promissory notes only.

b. Both requisites apply to bills of exchange only.
c. Both requisites apply to borth promissory notes and bills of exchange.
d. Requisite I applies to promissory notes; Requisite II applies to bills of exchange.

B 43. The attribute of a negotiable instrument which allows it to be passed from one another similar to money, so as
to give a holder in due course the right to hold the instrument free from defect of title of prior parties, and free
from defenses available to prior parties among themselves, and to enforce payment of the instrument for the
full amount thereof against all parties liable thereon is known as:
a. Assignability.
b. Negotiability.
c. Transferability.
d. Acceptability.

D 44. An instrument is not payable on demand in one of the following cases. Which case is it?
a. When the instrument is expressed to be payable at sight.
b. When the instrument is expressed to be payable upon presentation.
c. When no time for payment is expressed.
d. When the instrument is expressed to be payable after the occurrence of a specified event which is certain to
happen.

C 45. Consider the following statements on the interpretation of instruments;

I. Where the sum payable is expressed in words and also in figures and there is a discrepancy between the
two, the sum denoted by the words is the sum payable.
II. Where there is a conflict between the written and printed provisions of the instrument, the printed
provisions prevail.

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 I is true.

C 46. A bill of exchange reads as follows:

January 1,2015

Pay to the order of Pamela Pineda the sum of P50,000.00 thirty (30) days after sight.

(Sgd.) Rosita Rodriguez

To: Wilma Warner

 The above bill was issued by Rosita Rodriguez to Pamela Pineda on December 28,2014 and was presented for
acceptance by Pamela Pineda to Wilma Warner on January 10, 2015.

Based on the foregoing facts, the maturity date of the bill is:
a. January 27,2015.
b. January 31,2015.
c. February 9, 2015.
d. January 10,2015.

D 47. Ramos draws a bill of exchange payable to the order of Palma. Palma presents the bill to Wagan, drawee, for
acceptance, and the latter accepts it. Thereafter, Palma indorses the note to Alunan, Alunan to bernarte,
Bernarte to Hornedo, holder. On due date, Hornedo presents the bill to Wagan for payment but Wagan
dishonors it claiming that Palma is a minor. Wagan, Ramos, Alunan and Bernarte claim that they did know that
Palma was a minor at the time that they transacted on the instrument. Aside from Palma, who may claim the
defense of minority?
a. Ramos.
b. Wagan.
c. Alunan and Bernarte.
d. None of the four.

D 48. A promissory note reads as follows:

November 1,2015

I promise to pay Paloma Perez or order the sum of P20,000.00.

(Sgd.) Maria Montaño

The above promissory note was delivered by Maria Montaño to Paloma Perez who made the following
indorsement at the back of the promissory note:

Pay to Alona Almonte if she finishes her course in Business Administration.

(Sgd.) Paloma Perez

I. The condition of the indorsement is suspensive.

II. The condition placed on the indorsement renders the instrument non-negotiable.
III. Maria Montaño may waive the fulfillment of the condition and pay Alona Almonte.

a. All statements are true.

b. I and II are true.
c. II and III are true.
d. I and III are true.

D 49. The acceptor, by accepting the instrument, admits the following, except the:
a. Existence of the payee.
b. Capacity of the payee to indorse.
c. Genuineness of the drawer’s signature.
 d. Right of the holder to enforce payment of the instrument.

D 50. The maker, by making the instrument, has the following liabilities, except:
a. The engagement to pay the instrument according to its tenor.
b. The admission of the existence of the payee.
c. The admission of the capacity of the payee to indorse the instrument.
d. The admission of the right of the holder to enforce payment of the instrument.

B 51. M makes a promissory note payable to the order of P. P indorses the note specially to A, A indorses the note in
blank and delivers the same to B. B specially indorses the note to C, C specially indorses the not to D, D indorses
the note in blank and delivers it to E, E specially indorses the note to H, holder. Whose indorsement may H strike
out?
a. The special indorsement of P to A.
b. The special indorsement of E to H.
c. The blank indorsement made by A.
d. The blank indorsement made by D.

D 52. M makes a promissory note payable to the order of P and delivers the same to P. P indorses the note to A who
keeps it in his drawer. F steals the note and negotiates the same to B by forging A’s signature. Thereafter, B
negotiates the note to C, C to D, and D to H, a holder in due course. Based on the foregoing information, which
of the following statements is true?
a. H can hold M and P liable because they became bound under the instrument before the forgery.
b. H cannot hold B, C and D liable because they have no participation whatsoever in the commission of the
forgery.
c. H can enforce the instrument only against F, the forger, since he is the perpetrator of the forgery.
d. H can enforce instrument against F, B, C and D but not against M, P and A.

B 53. A check must be in wrinting and signed by the drawer for it to be negotiable. IN addition, a check must have the
following requisite, except:
a. It must contain an unconditional order to pay a sum certain in money.
b. It must be payable at a fixed or determinable future time.
c. It must be payable to order or to bearer.
d. The bank drawee must be named with reasonable certainty.

D 54. These two instrument are presented to you for evaluation:

Instrument I
Manila, Philippines
October 21, 2015

Pay to the order of Pedro Panelo the sum of P20,000.00 or deliver to him a brand
new Acer computer of the same value.

(Sgd.)Roberto Ramirez

To: Walter Wenceslao

 Instrument II

Manila, Philippines
October 21, 2015

Pay to the order of Pedro Panelo the sum of P20,000.00 and reimburse yourself out
of the proceeds of my loan from PNB which are in your possession.

(Sgd.)Roberto Ramirez

To: Walter Wenceslao

a. Both instruments are negotiable.

b. Both instruments are non-negotiable.
c. Instrument I is negotiable; Instrument II is non-negotiable.
d. Instrument I is non-negotiable; Instrument II is negotiable.

C 55. Which of the following is not a promise to pay, and thus will make an instrument non-negotiable?
a. “I agree to pay P”
b. “I bind myself to pay P”
c. “I acknowledge my debt to P”
d. “I oblige myself to pay P”

C 56. An instrument to be negotiable must be payable at a fixed or determinable must be payable at a fixed or
determinable future time. Which of the following does not comply with said requisite?
a. “I promise to pay P or order on Christmas day 2 years from now”
b. “I promise to pay P or order on the death of X”
c. “I promise to pay P or order 10 days before the death of X”
d. “I promise to pay P or order before Valentine’s Day next year”

A 57. Which of the following instruments is not payable to order?

a. “I promise to pay P or his agent P10,000.00”
b. “I promise to pay P or his assigns P10,000.00”
c. “I promise to pay to the order of myself P10,000.00”
d. “Pay to the order of yourself P10,000.00”

A 58. P executes a promissory note for P20,000.00 indicating therein that the maker is M and that it is payable to the
order of P. Thereafter, he forges the signature of M and indorses the note to A, A to B, B to C, and C to H, holder.
Based on the foregoing data, which of the following statements is incorrect?
a. H can collect from M if H is a holder in due course.
b. H cannot collect from M whether H is a holder in due course or not.
c. H can collect from A, B or C whether H is a holder in due course or not.
d. H can collect from P whether H is a holder in due course or not.

B 59. An instrument reads as follows:

I promise to pay to the order of P the sum of P50,000.00 sisxty (60) days after date.

(Sgd.) M
 On September 1,2015, M issued the promissory note to P, P indorsed the note to A, A to B, and B to C. C
indorsed the note to H on September 20,2015, but before delivering it to H, C inserted August 1,2015 as the
date of issue. H is a holder in due course. The due date of the promissory note insofar as H is concerned is:
a. October 31,2015.
b. September 30, 2015.
c. The promissory note becomes demandable at once.
d. The promissory note is avoided because of the insertion of a wrong date; hence, it is of no use to determine
the date of maturity.

A 60. Which of the following defenses may a party to an instrument avail himself of against any holder?
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.

A 61. M makes a promissory note payable to the order of P for PHP5,000.00. Thereafter, P indorsed the note to A, A to
B, B to C, C to D, and D to H. The parties subsequent to P were not aware of the alteration made by P. Based on
the foregoing facts, which of the following statements is incorrect?
a. H can hold M liable for US$5,000.00 if H is a holder in due course.
b. H can hold M liable for PHP5,000.00 if H is a holder in due course.
c. H cannot hold M liable for any amount if H is not a holder in due course.
d. H can hold A, B, C and D liable for US$5,000.00 even if H is not a holder in due course.

C 62. A holder is a holder in due course if he has taken the instrument complete and regular on its face and three of
the following conditions, except:
a. That he became the holder of the instrument before it was overdue and without notice that it had been
previously dishonored if such was the fact.
b. That he took in good faith and for value.
c. That there is no fraud or illegality affecting the instrument.
d. That at the time it was negotiated to him, he had no notice of any infirmity in the instrument of defect in the
title of the person negotiating the same.

B 63. Marilou Macto execute4d a promissory note in favor of Patria Plata as follows:

“I promise to pay Patria Plata or order P50,000.00 or to deliver to herba brand new laptop computer.”

(Sgd.) Marilou Mateo

Based on the foregoing instrument, which of the following statements is true?

a. The instrument is negotiable.
b. The obligation is an alternative obligation.
c. The choice as to which prestation will be performed belong to Patria Plata.
d. The obligation is payable at a determinable future time.

C 64. M executes a promissory note for P10,000.00 payable to the order of P, a minor. M and P had a private
understanding that M is liable only for the discounted amount of P9,500.00. P indorsed the note to A, A to B, B
to C, C to D, and D to H, holder.
 a. M may dishonors the note, A may refuse to pay H on the same ground that P is a minor.
b. If M dishonors the note, A may refuse to pay H on the same ground that P is a minor.
c. The indorsement made by P passed title to the instrument in favor of A.
d. Assuming that P was already of the age of majority at the time of the execution of the note, M is liable to H
for P9,500.00 since that was the amount that he agreed with P that he should pay.

B 65. On August 1, 2015, M executed a promissory note for P50,000.00 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 29,2015.
a. The obligation on the note was extinguished by merger or confusion on August 29,2015.
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.

B 66. M, maker, P, payee, of ta note payable to the order of P. The back of the note contains the indorsement of P to
A, A to B, B to C, C to D, and D to H, a holder in due course.
Assume the following independent facts:
I. M is insolvent.
II. P is a minor.
III. A’s signature was forged.

If C were a qualified indorser, which of the foregoing indendent facts will not affect his liability (i.e., he will still
be liable) although he was not aware of any of them?
a. I and II.
b. II and III.
c. I and III.
d. I, II and III.

B 68. One of the distinctions between negotiation and assignment of a negotiable instrument is that in assignment
the:
a. Transferor of the instrument warrants the solvency of prior parties.
b. Transferee of the instrument is subject to both personal and real defenses.
c. Transferee of the instrument holds that instrument free from defect of title of prior parties.
d. Transferor is not liable in case no presentment for payment is made to the party primarily liable and notice
of dishonor is not given to such transferor.

B 69. M made a promissory note in favor of P or order. The note, which was payable after 60 days from date of issue,
Amounts to P100,000.00 and bears interest at 10% per annum. After the delivery of the note to him, P altered
the interest rate to 18% per annum without the knowledge of M and indorsed it to A who knew nothing of the
alteration. Thereafter, A indorsed the note to H, a holder in due course.
a. H may not collect any amount, whether of the principal or of the interest, from M.
b. H may collect P100,000.00 and interest at 10% per annum from M.
c. H may collect P100,000.00 and interest at 18% per annum from M.
d. H may not collect any amount, whether of the principal or of the interest, from A, since A was not aware of
the alteration.
C 70. Which of the following indorsements is a qualified indorsement?
a. “ Pay Angelo Amores for collection.”
b. “ Pay Angelo Amores intrust for Teofilo Tangco.”
c. “ Pay Angelo Amores. Indorser not holden.”
d. “ Pay Angelo Amores. Notice of dishonor waived.”

B 71. Manuel Miranda wrote a letter to his goddaughter which reads as follows:

To Pilar Perez:

Dear Pilar:
I am greatly pleased that you have enrolled in accounting in response to my
continual urging.

I am formally making the promise I have made earlier to you to pay you or
your order P500,000.00 or a brand-new Toyota Corolla Altis, at your option, as soon
as you graduate.

Your Godfather,
(Sgd,) Manuel Miranda

a. The instrument is valid and negotiable.

b. The instrument is valid but not negotiable.
c. The instrument is not valid but negotiable.
d. The instrument is not valid and not negotiable.

B 72. M made a promissory note payable to P or bearer. After its delivery to him, P indorsed the note to A. While the
note was in the possession of A, F stole the note and negotiated it to B by forging A’s signature. Thereafter, B
indorsed the note to C, C to D, and D to H, a holder in due course. Which of the following defenses are available
to M, P and A against H?
I. Forgery of A’s signature.
II. Want of delivery of the note by A since the note was stolen from him.

a. Both defenses are available to M, P and A.

b. Both defenses are not available to M, P and A.
c. Only I is available.
d. Only I is available.

D 73. The following promissory notes are presented to you:

I. I promise to pay to the order of Pancho Pineda the sum of P20,000.00 if

he passes the CPA Board Examination.

(Sgd.) Mario Marquez

At the back of the promissory note, the following appears:

Pay to the order of Antonio Abad.

(Sgd.) Pancho Pineda

 II. I promise to pay to the order of Pancho Pineda the sum of
P20,000.00.

(Sgd.) Mario Marquez

At the back of the promisorry note, the following appears:

Pay to Antonio Abad only and no other.

(Sgd.) Pancho Pineda

In your evaluation of the foregoing instruments:

a. Both instruments are negotiable in origin but ceased to be negotiable at the time of indorsement.
b. Both instruments are non-negotiable in origin.
c. Only Instrument I is negotiable in origin but ceased to be negotiable at the time of indorsement.
d. Only Instrument II is negotiable in origin but ceased to be negotiable at the time of indorsement.

C 74. M issued a promissory note payable to the order of P for P50,000.00. Thereafter, P indorsed the note to A. While
the note was in the possession of A, F stole it and negotiated it to B by forging the signature of A. B was not
aware of the forgery of A’s signature. B then indorsed the note to H, a holder in due course. The parties who
may raise forgery as a defense are:
a. A and B.
b. M and P.
c. M, P and A.
d. None of the parties may raise forgery as a defense because H is a holder in due course.

D 75. Refer to the preceding number. Assume the same facts except that the note is payable to bearer. In such a case,
the parties who may raise forgery as a defense are:
a. A and B.
b. M and P.
c. M, P and A.
d. None of the parties may raise the defense of forgery.

C 76. M makes a promissory note for P10,000.00 payable to the order of P. After the issuance to him of the note, P
altered the amount to US$10,000.00. P then indorsed the note to A, A to B, and B to H. Only P knew of the
alteration.

The parties and their possible liabilities are:

I. M, P10,000.00.
II. M, US$10,000.00.
III. M, nothing.
IV. A and B, P10,000.00.
V. A and B, US$10,000.00.
VI. A and B, nothing.

If H is a holder in due course, the parties from whom he may collect and the amount of the said parties’ liability
are:
 a. I and IV.
b. II and V.
c. I and V.
d. III and VI.

C 77. A check differs from a bill of exchange because a check;

a. Does not require the drawer to have funds with the drawee.
b. May be drawn against a person other than a bank.
c. Is always payable on demand.
d. Is required to be presented for acceptance in certain cases.

D 78. The placing of a date in an instrument is necessary in the following cases, except:
a. To fix the maturity of the instrument.
b. To determine when interest is to run.
c. To fix the prescriptive period.
d. To make the instrument negotiable.

B 79. A holder is still a holder a holder in due course although:

a. He received the instrument after it has become overdue but he has no knowledge of it.
b. He received the instrument after it was dishonored and he has no notice of such dishonor.
c. He did not give any value for it.
d. The instrument was not complete and regular on its face.

D 80. On May 1,2015, Manolo Montes executed the following promissory note for goods he purchased from Peter
Perez:

(No Date)

I promise to pay Peter Perez or order the sum of P20,000.00 with interest, thirty days after date, in
payment of the goods I purchased from him today. To secure the amount of this note, I herby
pledge my ring which I authorize Peter Perez to sell in case of my default on due date.

(Sgd.) Manolo Montes

The part of the above instrument that renders it non-negotiable is the phrase or statement:
a. “In payment of the goods that I purchased from him today.”
b. “With interest, thirty days after date.”
c. “To secure the amount of this note, I hereby pledge my ring which I authorize Peter Perez to sell in case of
my default on due date.”
d. The instrument is negotiable notwithstanding the presence of such phrases or statements in the body
thereof.

C 81. Medardo Medrano has an obligation to give 10 sacks of rice worth P10,000.00 to Pancho Panza, the same being
due on September 5, 2015. Medardo Medrano failed to deliver 10 sacks of rice to Pancho Panza on due date
despite the latter’s demand. Medardo Medrano requested Pancho Panza to give him a period of 30 days to give
 the amount of P10,000.00 or to deliver 10 sacks of rice, assuring Pacho Panza of the payment by issuing the
promissory note shown below. Pancho Panze agreed to Medardo Medrano’s proposal.

September 6,2015

I promise to pay Pancho Panza or order the sum of P10,000.00 or to deliver him 10
sacks of rice.

(Sgd.) Medardo Medrano

a. The new obligation is a facultative obligation.

b. The promissory note is negotiable.
c. Medardo Medrano has the choice whether to give P10,000.00 or deliver 10 sacks of rice.
d. The instrument ispayable at a determinable future time.

B 82. The following are certain conditions in an instrument or the transfer thereof:
I. A condition placed on the face of the instrument that the maker will pay it to the payee upon the fulfillment
of the condition.
II. A condition placed on an indorsement that the instrument will be paid upon the fulfillment of the condition.
III. A condition placed upon the delivery of the note to the payee and instructs him not to negotiate the
instrument until the maker obtains the proceeds of his loan.

In your evaluation of the above statements, the instruments that are negotiable or remain negotiable despite
the presence of the condition mentioned are:
a. I and II.
b. II and III.
c. I and III.
d. I, II and III.

B 83. This promissory note was issued by Maila Moreno to Patricia Pineda on August 1, 2015:

August 1, 2015

I promise to pay Patricia Pineda or order the sum of P20,000.00 thirty (30) days after
date.

(Sgd.) Maila Morena

The note was thereafter indorsed by Patricia Pineda to Alma Alajar, Alma Alajar to Brenda Bermejo, and Brenda
Bermejo to Carmela Castro. On August 30,2015, Carmelo Castro indorsed the note as follows:

Pay to Maila Morena.

(Sgd.) Carmela Castro.

a. The promissory note was extinguished when Maila Morena became the holder.
b. The promissory note was not extinguished when Maila Morena became the holder.
c. Maila Morena may not renegotiate the instrument after it was indorsed to her.
d. Maila Morena may go aftter Patricia Pineda, Alma Alajar, Brenda Bermejo and Carmela Castro.
A 84. Refer to the preceding number. Assuming that the note was extinguished when it was indorsed by Carmela
Castro to Maila Morena, the cause of the extuinguishment is:
a. Confusion.
b. Condonation.
c. Compensation.
d. Novation.

D 85. The following are defenses in a negotiable instrument:

I. Want of delivery of incomplete instrument.
II. Want of authority to complete instrument.
III. Want of consideration.

Which of the above defenses may be raised against a holder not in due course?
a. I and II only.
b. II and III only.
c. I and III only.
d. I, II and III.

B 86. Which of the following indorsement is a valid negotiation of the instrument?

a. “Pay to Arnulfo Alvez, P20,000.00” The instrument shows an amount of P30,000.00.
b. “Pay to Arnulfo Alvez and Benito Baldoz.”
c. “Pay to Arnulfo Alvez, P20,000.00, and Benito Baldoz, P10,000.00.”
d. “Pay to Arnulfo Alvez, P20,000.00 from the amount of P30,000.00 on this note.”

D 87. M delivers a promissory note payable to the order of P for P10,000.00. P alters the amount to P40,000.00 and
thereafter indorses the note to A who had no knowledge of the alteration; then A to H, holder in due course.
Which of the following is incorrect?
a. H can recover P10,000.00 from M.
b. H can recover P40,000.00 from P.
c. H can recover P40,000.00 from A.
d. H cannot recover any amount from M because M is a party before the alteration. H cannot also recover from
A because A was not aware of the alteration.

A 88. The signification by the drawee of his assent to the order of the drawer.
a. Acceptance
b. Approval
c. Recommendation
d. Indorsement

C 89. The acceptance that takes place hen a drawee to whom a bill is delivered for acceptance destroys the bill the
bill, or refuses within 24 hours after such delivery, or within such other period as the holder may allow, to return
the bill accepted or non-accepted, to the holder.
a. Implied acceptance.
b. Qualified acceptance.
c. Constructive acceptance
d. Oral acceptance

D 90. The following are the requisites of actual acceptance of a bill of exchange, except.
 a. It must be in writing.
b. It must be signed by the drawee.
c. There must be delivery or notification thereof.
d. It must express that the drawee will perform his promise by the payment of money, the delivery of a thing
or the rendering of some service.

A 91. There statements are presented to you:

I. The holder of a bill may require that the acceptance be written on the face of the bill, and if such request is
refused, he may treat the bill as dishonored.
II. Acceptance of a bill may be made even before it is drawn.

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

C 92. These statements are presented to you:

I. A general acceptance assents without qualification to the order of the drawer.
II. An acceptance to pay a particular place is a qualified acceptance.

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

A 93. These statements are presented to you:

I. The holder may refuse to take a qualified acceptance, and if he does not obtain an unqualified acceptance,
he may treat the bill as dishonored by non- acceptance.
II. As a rule, a qualified acceptance taken by the holder will discharge the drawe and indorsers.

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

B 94. The time within which the drawee is allowed to give his acceptance is:
a. 12 hours.
b. 24 hours.
c. 48 hours.
d. 72 hours.

C 95. These statements are presented to you:

I. A bill may be accepted before it has been signed by the drawer.
II. A bill cannot be accepted while it is still incomplete.

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
 d. Only Statement II is true.

C 96. These statements are presented to you:

I. A bill may accepted although it is already overdue.
II. A bill cannot be accepted after it has been previously dishonored by a refusal to accept, or by non-payment.

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

D 97. In which of the following cases is presentment for acceptance of a bill optional?
a. Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary to
fix the maturity of the instrument.
b. Where the bill expressly stipulates or provides that it shall be presented for acceptance.
c. Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee.
d. Where the bill is drawn payable elsewhere than at the residence or place of business of the drawer.

B 98. These statements are presented to you:

I. The payee of a bill which is required to be presented for acceptance must present it for acceptance within a
reasonable time before he can negotiate it.
II. A holder of a bill which is required to be presented for acceptance cannot receive the bill unless it was first
presented for acceptance by the payee.

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

A 99. These statements are presented to you:

I. Presentment for acceptance can be made on a Saturday whether the instrument is payable on demand or
not.
II. Presentment for payment can be made on a Saturday only for instrument payable on demand.

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

C 100. A formal written statement made by a notary public at the request of a holder of bill of exchange stating that he
has demanded acceptance or payment of the bill, and that it has been refused, with the reasons, if any, given by
the drawee or acceptor for the dishonor.
a. Certification.
b. Demand letter.
c. Protest.
d. Affidavit.
A 101. Protest is required in the case of a:
a. Foreign bill of exchange.
b. Inland bill of exchange.
c. Foreign promissory note.
d. Inland promissory note.

B 102. Who is qualified to be an acceptor for honor?

a. A person already a party to the bill.
b. A stranger to the bill.
c. Either (a) or (b).
d. Both (a) and (b).

C 103. Who is qualified to be a payer for honor?

a. A person already a party to the bill.
b. A stranger to the bill.
c. Either (a) or (b).
d. Both (a) and (b).

B 104. An acceptance for honor which does not expressly state for whose honor it is made is deemed to be for the
honor of the:
a. Drawee.
b. Drawer.
c. Acceptor.
d. Payee.

C 105. These statements are presented to you:

I. A bill in set is one composed of several parts, each set being numbered and containing a reference to the
other parts.
II. In a bill in set, the number of bills depend upon the number of parts; hence, if there are four
parts, there will be four separate bills.

a. Both statements are true.

b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

A 106. R, drawer; W, drawee. The bill is payable to the order of P for P10,000.00. Assume the following independent
acceptances by W.
I. “Accepted. Payable for P10,000.00. (Sgd.) W”
II. “Accepted. Payable in gold worth P10,000.00. (Sgd.) W”

Which of the foregoing is a valid acceptance?

a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
B 107. P is the payee of a check on which two diagonal parallel lines appear on the upper left portion of the check. R is
the drawer; W Bank is the drawee bank. P has a savings account in C bank where he regularly deposits checks
and cash given to him as payment. What may P do with the check so that he can receive payment thereon?
a. Cash the check with W bank only.
b. Deposit the check in his savings account with C Bank only.
c. Demand payment of the check against R, the drawee, only.
d. None of the foregoing.

C 108. R draws a check for P100,00.00 payable to the order of P and against his deposit of P2,000,000.00 at W Bank.
The check is indorsed by P to H, holder. H delays the presentment of the check to W Bank. By the time he
presents it for payment, W Bank is already insolvent. R is abl to recover P500,000.00 from the Philippine Deposit
Insurance Corporation on his deposit. Will R still be liable to H?
a. Yes, for P100,000.00.
b. Yes, for P75,000.00.
c. Yes, for P25,000.00.
d. No, R will no longer be liable because H’s delay in presenting the check for payment totally discharged him
from liability on the check.

D 109. Refer to the preceeding number. May H go after P, the party who indorsed the check to him?
a. Yes, for P100,000. in view of his warranty as an indorser.
b. Yes, for only P75,000.00.
c. Yes, for only P25,000.00.
d. No, P was discharged by reason of the lack of due presentment of the check.

C 110. These statements are presented to you:

I. A check is payable on demand although such fact is not stated on its face.
II. A check that is post-dated can be deposited even before the date indicated thereon since a check is always
payable on demand.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

B 111. Which of the following statements on post-dated check is correct?

a. A post-dated check is payable on demand starting from the date of issue.
b. The post-dating of a check converts it into time instrument.
c. The dishonored of a post-dated check when it is presented before the date appearing thereon makes the
drawer criminally liable.
d. A post-dated check may be cashed with the bank against which it is drawn before the date indicated
thereon.

D 112. R drew a check against his account with W Bank payable to the order of P for P20,000.00. F stole the check,
forged P’s signature, and deposited the check in his account with C Bank. After clearing, F withdrew the amount
of the check and fled. Who among the following will shoulder the loss?
a. R.
 b. P.
c. W Bank
d. C Bank

C 113. On October 1,2015, R bought goods from the store of P amounting to P10,000.00, issuing a check for P20,000.00
against his account with W Bank. R knew that his fund with W Bank was insufficient to cover the check.
Consequently, the check was dishonored by W Bank when P presented it for encashment. What offense may be
charged against R?
a. Violation of Batas Pambansa Blg. 22 (Bouncing Checks law.)
b. Estafa under Revised Penal Code.
c. Both (a) and (b).
d. Neither (a) nor (b).

A 114. The following are some causes of discharged of a prior party to an instrument.
I. Discharge of a prior party because the holder failed to give him a notice of dishonor.
II. Dicharge of a prior party because he was adjudged a bankrupt.
III. Discharge of a prior party because he was released for value by the holder.

Which of the foregoing will not discharge subsequent indorsers?

a. I and II.
b. II and III.
c. I and III.
d. I, II and III.

C 115. M is the maker of a promissory payable to the order of P which is payable 30 days after date. The note dated
August 1,2015 was issued on the same day by M to P. P indorsed the note to A, A to B, and B to H. On August
31,2015, H renounced unconditionally his claim on the note against M who accepted the renunciation.
Nonetheless, H still negotiated the note on the same day to X who had no knowledge of the renunciation. May X
still collect on the note from M and parties subsequent to M?
a. Yes, against M. No, against parties subsequest to M.
b. No, against M. Yes, against parties subsequent to M.
c. Yes, against M and parties subsequent to M.
d. NO, against M and parties subsequent to M.

B 116. P, by means of fraud, induced M to issue a promissory note payable to the order of P for P21,000.00. The note
was indorsed by P to A, and A to H. A and H had agreed to a consideration of P20,000.00 (or a discount of
P1,000.00). Initially, H gave A the amount of P18,000.00. Before he could give the balance of P2,000.00 to A, H
learned that P’s title was defective. Is H a holder in due course?
a. Yes, for P21,000.00.
b. Yes, for P18,900.00.
c. Yes, for P18,000.00.
d. No, he is not a holder in due course because he obtained knowledge of a defect in the title of a prior party
before he could pay in full to A the agreed consideration.

B 117. Refer to the preceding number. Can H still collect on the note from M?
a. Yes, for P21,000.00.
b. Yes, for P18,900.00.
c. Yes, for P18,000.00.
 d. No, he cannot collect at all because he is not a holder in due course.

A 118. Which of the following is a real defense?

a. Illegality of contract expressly so declared in a statute.
b. Illegality of the contract because it was issued for unlawful consideration.
c. Renunciation before maturity.
d. Fraud in inducement.

B 119. These statements are presented to you:

I. An instrument payable on demand has no date of maturity.
II. When a transfer of an instrument is effected on the date of maturity, the holder is considered to have
taken the instrument when it is already overdue; hence, he is no longer a holder in due course.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

B 120. Which of the following is a common liability of the drawer, maker and acceptor?
a. The admission of the genuineness of the signature of any indorser.
b. The admission that the instrument is covered with sufficient funds.
c. The admission that the instrument is covered with sufficient funds.
d. The engagement on the payment of the instrument according to its tenor.