MCQs on NEGOTIABLE INSTRUMENTS LAW and

BANKING LAWS
AY 2017-2018 SECOND SEMESTER

1. A negotiable instrument is defined as:

a. a medium of exchange intended as a substitute for money;
b. a legal tender that produces the effect of payment;
c. a written contract that unconditionally promises or orders the payment of
a fixed amount of money;
d. a credit instrument which increases credit circulation.
2. Who are primarily protected by the Negotiable Instrument Law?
a. payees;
b. holders in due course;
c. public;
d. merchants.
3. Which of the following is not a common formal requirement of a promissory note and
a bill of exchange?
a. it must be in writing and signed by the one who issued the same;
b. it must contain an unconditional promise or order to pay a sum certain in
money;
c. where the instrument is addressed to another person being ordered to pay,
he must be named or otherwise indicated therein with reasonable
certainty;
d. it must be payable on demand, or at a fixed or determinable future time;
e. it must contain the language of negotiability.
4. The characteristic of negotiability means:
a. the creditor may not refuse to accept negotiable instrument in payment of
obligations;
b. obligations are deemed paid only when the instrument is delivered to a
holder;
c. negotiable instruments are transferred from one person to another similar to
money, so as to constitute the transferee to be a holder who may acquire a
better title from the transferor;
d. it allows accumulation of secondary contracts.
5. Which of the following is not payable in money?
a. payable in currency;
b. payable in BSP notes of one hundred-peso bills;
c. payable in current funds;
d. none of the above.
6. An incident in the life of a negotiable instrument wherein it is first delivered complete
in form, to a person who takes it as a holder:
a. preparation;
b. issuance;
c. negotiation;
d. presentment;
e. dishonor.
7. It means the transfer of possession, actual or constructive, from one person to another:
a. acceptance;
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b. delivery;
c. indorsement;
d. presentment.
8. It is the production of the bill of exchange to the person required to pay for him to
signify his assent to the order of drawer:
a. presentment for acceptance;
b. presentment for payment;
c. notice of dishonor;
d. protest.
9. Statement A: Negotiability of an instrument is determined from the writing, that is, the
whole of the instrument shall be considered.
Statement B: Acceptance of a bill of exchange is not important in the determination of its
negotiability.
a. only A is true;
b. only B is true;
c. both are true;
d. both are false.
10. A consequence of the doctrine that a negotiable instrument is not legal tender:
a. delivery of a negotiable instrument produces the effect of payment;
b. a creditor may not accept negotiable instrument as payment of obligation;
c. obligations are deemed paid upon receipt of the negotiable instruments;
d. a negotiable instrument is a proof of transaction.
11. A distinctive feature of negotiable instruments:
a. freedom of negotiability;
b. limited negotiability;
c. represent title to goods;
d. accumulation of various contracts.
12. Effect of accumulation of secondary contracts:
a. limits liability of a party;
b. increases probability of default;
c. greater probability of payment;
d. complicates negotiation.
13. One of the following statements is not a factor in the determination of negotiability of
instruments?
a. the entire instrument shall be considered;
b. only what appears on the face of instrument shall be considered;
c. in case of ambiguity, the holder may resort to other documents;
d. the law on negotiable instruments shall be applied.
14. A person who by the terms of the instrument is absolutely required to pay the same:
a. a person secondarily liable;
b. a person subsidiarily liable;
c. a person principally liable;
d. a person who accommodated a party to the instrument.
15. A party either in a promissory note or a bill of exchange:
a. maker;
b. drawer;
c. acceptor;
d. indorser.
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16. It is a promissory note payable to bearer on demand and intended to circulate as

money:
a. certificate of deposit;
b. bond;
c. due bill;
d. bank note.
17. It is a form of promissory note issued by a bank acknowledging the receipt of money
on deposit which the bank promises to repay the depositor, or to him or his order at a later
date or on demand:
a. certificate of deposit;
b. bond;
c. mortgage note;
d. bank note.
18. A check, as distinguished from a bill of exchange:
a. anyone may be a drawee;
b. it is always payable on demand and need not be presented for acceptance;
c. it is not necessarily drawn on a deposit account;
d. death of a drawer with knowledge of the drawee does not revoke the latter’s
authority to pay.
19. This type of check is not subject to countermand by the payee after indorsement and
has the same legal effect as a certificate of deposit or a certified check and may be treated
as a promissory note by the bank:
a. memorandum check;
b. cashier’s check;
c. traveler’s check;
d. stale check.
20. In which of the following documents the transferee can be a holder in due course?
a. duly signed and filled up withdrawal slip;
b. crossed check;
c. treasury warrant;
d. postal money order.
21. A bill of exchange wherein the seller as drawer orders the buyer as drawee to pay a
sum certain to the same seller as payee:
a. trade acceptance;
b. sight or demand draft;
c. clean bill of exchange;
d. documentary bill of exchange;
e. banker’s acceptance.
22. Which of the following principles is not applicable to a crossed check?
a. it may be en-cashed;
b. it must be deposited in the bank;
c. it may be negotiated only once;
d. warns the holder that it has been issued for a definite purpose so that the holder
thereof must inquire if he has received the check pursuant to that purpose.
23. It is intended for immediate use thus, it must be presented for payment within a
reasonable time after it is issued:
a. check;
b. bill of exchange;
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c. promissory note;
d. bank note.
24. Certification of a check is equivalent to an acceptance by the bank, what is the effect
of such certification?
a. it discharges persons secondarily liable if procured by the holder;
b. it operates as an assignment of funds of the drawer in the hands of the drawee;
c. the holder becomes the depositor of the drawee-bank;
d. all of the above;
e. none of the above.
25. The sum certain requirement is met if the holder can calculate or compute from the
instrument itself the amount he is entitled to receive at maturity. Which clause or
stipulation renders uncertain the sum to be paid?
a. with interest or by stated installments;
b. with acceleration clause;
c. with extension clause;
d. all of the above;
e. none of the above.

26. It affects the negotiability of the instrument:

a. acceleration clause dependent on the maker, acceptor or debtor;
b. acceleration clause at the option of the payee or holder;
c. extension clause at the option of the payee or holder;
d. extension clause at the option of the maker or acceptor upon a specified event.
27. A non-negotiable instrument not payable at a determinable future time:
a. “Two days after Ana is granted a US visa, I promise to pay to the order of
Paz, P1,000.00. (Sgd) Mat;”
b. “Three days after demand, pay to the order of Paz P1,000.00. To Darwee.
(Sgd.) Doreen;”
c. “Four days after a major earthquake hits Metro-Manila, I promise to pay to
the order of Pedro P1,000.00. (Sgd.) Noy;”
d. “I promise to pay Peter or his order P1,000.00. (Sgd.) Quiel.”
28. Which of the following is not negotiable?
a. “I bind myself to pay Pido or bearer P10,000.00 (Sgd.) Neng;”
b. “I acknowledge being indebted to Percy in the amount of P10,000.00
(Sgd.) Gil;”
c. “I promise to pay to the order of bearer Boogie P10,000.00 (Sgd.) Flor;”
d. “I agree to pay bearer or order P10,000.00 on demand (Sgd.) Mary.”
29. A promissory note states: “I, Lupeng K. Hinirang, promise to pay Pantong M.
Kabayan or bearer P10,000.00.” The note was typewritten except for the name of the
maker in italics, which was in her handwriting. There was no signature appearing on any
other part of the note. Is the promissory note negotiable?
a. No, it does not contain an unconditional promise or order to pay a sum certain
money;
b. No, the note was not signed by the maker;
c. Yes, because it payable to order or bearer;
d. Yes, it complies with the formal requirements of a promissory note.
30. Choose a non-negotiable instrument among the following:
a. “I promise to pay Karen or order P5,000.00 with interest of ____. Sgd.
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Mckee.”;
b. “Mrs. Ferrer will oblige Mr. Rowee by paying Ms. Pattie or bearer P1,000.00
on his account. Sgd. Mr. Rowee.”;
c. “I promise to pay on demand P10,000.00 to Parson or order subject to the
terms and conditions of the contract to sell. Sgd. Marco.”;
d. “Pay to Paulo or order P2,000.00 and reimburse yourself from the proceeds of
the sale of my laptop with you. Sgd. Dina”
31. One of the following instances prevents an instrument from being negotiable:
a. The dorsal portion of the instrument contains an indorsement to a specified
person;
b. The instrument is payable to a specified person only;
c. The person to whose order the instrument is payable is non-existent;
d. The instrument is payable to order of a minor.
32. A statement that does not indicate a promise to pay:
a. “Due Mr. Lima P50,000.00;”
b. “I.O.U. P40,000.00 to be paid on May 12, 2013;”
c. “I acknowledge myself to be indebted to Ms. Sembrano in P30,000.00 payable
when called for;”
d. “I recognize my obligation of P20,000.00 to Mr. Taberna due on demand.”
33. Mr. Monroe issued in favor of Ms. Panda a promissory note stating: “I promise to
pay Ms. Panda or order P2,000.00 on or before December 25, 2015 with legal interest. In
case of my failure to pay the principal amount, I agree to pay the collection expenses and
attorney’s fees.” Is the note negotiable?
a. No, the sum payable after maturity is uncertain;
b. Yes, it is payable in a sum certain in money at maturity;
c. No, at maturity, the sum is not certain as the holder has to compute the total
amount due;
d. No, the interest rate and the amounts of collection expenses and attorney’s fees
are not indicated.
34. What phrase does not express a sum certain?
a. “to pay P500.00 or what may be due on my deposit book;”
b. “to pay P500.00 with interest of 2% a month”;
c. “to pay P500.00 in two monthly equal installments beginning January 12,
2013;”
d. “to pay P500.00 on or before January 30, 2013 but may extended for one
month by the maker.”
35. Which of the following instruments is not negotiable?
a. “I promise to pay Superman or bearer P5,000.00. Sgd. Mr. Cruz;”
b. “I assent to pay Mr. Reyes or order P1,000.00. Sgd. Mr. Cruz;”
c. “Good for P3,000.00 to Mr. Lao or order. Sgd. Mr. Cruz;”
d. “I promise to pay Mr. Lee or order the sum of P4,000.00 on May 2.
Sgd. Mr. Cruz;”
36. An instance where promise or order is not unconditional:
a. to pay out of a particular fund;
b. a statement of the transaction which gives rise to the instrument;
c. an indication of a particular fund out of which reimbursement is to be made;
d. a direction to debit a particular account.
37. Equivalent to promise to pay:
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a. due on demand;
b. I guaranty to pay;
c. I agree to pay;
d. all of the above.
38. Which of the following is negotiable?
a. “Pay to the order of Penny P2,000.00 to be taken from my commission. Sgd.
Dr. Weewee. To Dr. Where;”
b. “Pay to Pamela or order P1,000.00 and charge to my account with you. Sgd.
Dr. Weewee. To Dr. Where;”
c. “I promise to pay Peter or order P2,000.00 from the proceeds of the sale of my
house. Sgd. Mr. Ker;”
d. “I promise to pay Paul or bearer P1,000.00 out of my salary. Sgd. Mr. Ker.”
39. In a bill of exchange, there must be an unconditional order to pay by one party to
another. An order is a command or imperative direction. Which of the following is not an
order to pay?
a. “please credit Mr. Payee or order;”
b. “the drawee will much oblige the drawer by paying Mr. Payee;”
c. “let the bearer have;”
d. “I authorize you to pay.”
40. “Bearer” means the person in possession of a bill or a note which is payable to bearer.
Which word is not equivalent to “bearer”?
a. “assignee;”
b. “possessor;”
c. “holder or order;”
d. “to bearer Mr. Payee.”
41. An instrument not payable to bearer:
a. if it is payable to the order of a fictitious person;
b. “pay to payroll;”
c. last indorsement in blank;
d. none of the above.
42. An instrument must be payable at a definite time or at all events, choose the phrase
that is payable at a definite time?
a. “at the earliest possible time after date.”
b. “payable 10 days before Good Friday of 2016;”
c. “payable upon reaching the age of majority;”
d. all of the above.
43. Statement A: As a general rule, an instrument which contains an order or promise to
do any act in addition to the payment of money is not negotiable.
Statement B: A statement in the instrument that “the maker will deliver additional
security to the satisfaction of the holder” impairs negotiability.
Statement C: Giving the holder an election to require something to be done in lieu of
payment of money makes the instrument non-negotiable.

a. only A is true;
b. only B is true;
c. only C is true;
d. all are true;
e. all are false.
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44. An omission which renders the instrument non-negotiable:

a. no date;
b. no seal;
c. no place of payment;
d. no statement of value;
e. none of the above.
45. A legal consequence of ante-dating or post-dating:
a. renders the instrument non-negotiable;
b. makes the instrument invalid;
c. as a general rule, it does not affect the negotiability of an instrument;
d. renders the instrument voidable.
46. Sandra obtained the autograph of Echo Rosales. However, Sandra wrote a negotiable
promissory note above Echo’s signature. The note was validly negotiated to Albert who is
a holder in due course. What kind of defense can Echo avail of against Albert?
a. personal defense;
b. absolute defense;
c. equitable defense;
d. none of the above.
47. Statement A: When a mechanically complete but undelivered instrument is in the
hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to
make them liable to him is conclusively presumed.
Statement B: When an incomplete instrument has not been delivered, it will not, if
completed and negotiated, without authority, be a valid contract in the hands of any
holder, as against any person whose signature was placed thereon before delivery.
a. only A is true;
b. only B is true;
c. both are true;
d. both are false.
48. What is the right of the holder when the instrument is so ambiguous that there is
doubt whether it is a bill or a note?
a. the holder may demand payment at any time;
b. he may treat it as either bill or note at his election;
c. he may treat it as payable to bearer;
d. the may dispense with the presentment.
49. When is a promissory note similar to a bill of exchange?
a. when a note is payable to the maker;
b. when a note is indorsed by the payee;
c. when a note is payable at the bank;
d. when a note is for the accommodation of the maker.
50. When does a bill of exchange become a promissory note?
a. when the drawee is a bank;
b. when the bill is accepted by the drawee;
c. when drawer and payee are the same person;
d. when the drawer waives the notice of dishonor.
51. A bill of exchange may treated as a promissory note when:
a. the drawer and the payee are the same person;
b. the drawee is unknown;
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c. the drawee is insolvent;

d. the instrument is ambiguous;
e. none of the above.
52. As a general rule, no person is liable on the instrument whose signature does not
appear thereon, except:
a. a person signs in a trade name;
b. an authorized agent signs in behalf of the principal;
c. where the acceptor makes his acceptance of a bill on a separate paper;
d. all of the above.
53. A person who is not liable on the negotiable instrument:
a. a conditional promise in advance to accept a future bill of exchange;
b. one who signs using an assumed name;
c. a person whose signature is forged;
d. persons who negotiate by mere delivery.
54. The following are legal effects when a signature is forged or made without authority
of the person whose signature it purports to be, except:
a. there is no right to retain the instrument;
b. the instrument is wholly inoperative;
c. there is no right to discharge the instrument;
d. there is no right to enforce payment;
e. all of the above.
55. It may not prejudice the party from invoking forgery as a defense:
a. silence;
b. warranty;
c. negligence;
d. dishonor.
56. Statement A: Every negotiable instrument is deemed prima facie to have been issued
for a valuable consideration.
Statement B: An accommodation party is not liable to a holder in due course who, at
the time of taking the instrument, knew him to be only an accommodation party.
a. only A is true;
b. only B is true;
c. both are true;
d. both are false.
57. Statement A: Only negotiable instruments may be negotiated either by endorsement
thereof coupled by delivery, or by delivery alone.
Statement B: A negotiable instrument may be assigned or transferred only.
a. only A is true;
b. only B is true;
c. both are true;
d. both are false.
58. An indorsement must be written on the instrument itself or upon a paper attached
thereto with the intent to transfer title, which of the following is not correct?
a. the signature of the indorser is a sufficient indorsement;
b. indorsement must be of the entire instrument;
c. it is essential to the negotiation of an order instrument;
d. it is necessary in an assignment of negotiable or non-negotiable instrument.
59. Which of the following is not applicable to a negotiation by delivery?
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a. indorsement is not necessary because the instrument is payable to bearer;

b. refers to a holder who negotiates the instrument in the same condition in
which he received it;
c. includes the blank indorser;
d. the liability of a person negotiating by delivery is the same as the person who
negotiates by qualified indorsement.
60. A characteristic of an irregular indorser:
a. he is not subject to defenses;
b. indorses the instrument after its delivery to the payee;
c. he is liable only to parties subsequent to him;
d. always makes a blank indorsement.
61. A special and restrictive indorsement:
a. “Pay to Cathy only. (Sgd.) Peter;”
b. “Pay to Amy without recourse. (Sgd.) Paul;”
c. “Pay to Andy is she marries before her 30th birthday. (Sgd.) Pepot;”
d. “For collection only. (Sgd.) Ben.”
62. A general indorser, as distinguished from an irregular indorser:
a. makes either a blank or special indorsement;
b. indorses before delivery of the instrument to the payee;
c. always makes a blank indorsement;
d. is liable to the payee and subsequent parties.
63. Effect of a restrictive indorsement:
a. it confers upon the indorsee the right to sue;
b. the holder may transfer his right;
c. the holder may receive payment of the instrument;
d. it is prohibitive;
e. all of the above;
64. The following conditions must concur in order to qualify a person a holder in due
course, except:
a. the instrument is complete and regular upon its face;
b. the holder takes the instrument before it was overdue, and without notice
that it has been previously dishonored, if such was in fact;
c. the instrument was negotiated to the holder within a reasonable length of
time;
d. the holder took the instrument in good faith and for value;
e. at the time the instrument was negotiated to the holder, he had no notice of
any infirmity in the instrument or defect in the title of the person
negotiating it.
65. A holder in due course has the following rights, except:
a. he may sue on the instrument in his own name;
b. he may receive payment and if the payment is in due course, the instrument is
discharge;
c. he holds the instrument free from personal and real defenses available to prior
parties among themselves;
d. He holds the instrument free from any defect of title of prior parties.
66. Statement 1: The payee may be a holder in due course.
Statement 2: The drawee, by paying the bill of exchange, may become a holder in due
course.
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a. both statements are correct;

b. both statements are incorrect;
c. only first statement is correct;
d. only second statement is correct.
67. Annie issued a draft payable to the order of Raizza who, in turn, transferred the draft
to Donna for a consideration without indorsing it. The following, except one, are the valid
effects of the transfer:
a. Donna acquired the right to have the endorsement of Raizza;
b. Donna is merely an assignee;
c. Donna becomes a holder;
d. The transfer vests in Donna such title as Raizza had thereon.

68. An example of personal defense:

a. spoliation;
b. prescription;
c. illegality of contract when declared by law;
d. incapacity.
69. Which of the following is true with respect to an anomalous indorser?
a. he is an accommodation indorser;
b. he is a party to the instrument;
c. he is liable to all parties to the instrument;
d. he signs his name after the issuance of the instrument.

70. Azcona issued a note to Basco. There was a total failure of consideration. Basco
indorsed the note for a consideration to Cruz who is a holder in due course. Cruz
indorsed the note to Diaz who knew of the failure of consideration. Can Diaz successfully
collect from Azcona?
a. No, because Diaz is not a holder in due course;
b. Yes, Diaz acquired the rights of Cruz, a holder in due course and he was not a
party to any illegality;
c. No, because Azcona’s defense is a real defense;
d. Yes, because Diaz acquired the note for a consideration.

71. In which of the following cases is presentment for payment necessary in order to
charge persons secondarily liable?
a. when the drawee is a fictitious person;
b. when there is waiver of presentment for payment;
c. when there is delay caused by circumstances beyond the control of the holder
and not imputable to his default, misconduct or negligence;
d. when the bill of exchange has been dishonored by non-acceptance.
72. The purpose of giving notice of dishonor:
a. to inform the parties secondarily liable that the maker or acceptor has failed to
meet his engagement;
b. to advise parties secondarily liable that they will be required to make
payment;
c. to conform to the rules of international law;
d. a and b only.
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73. Ms. Darra issued in favor of Mr. Peek a check for deposit for a piece of jewelry that
she was supposed to sell. Ms. Darra failed to sell the piece of jewelry so she returned it to
Mr. Peek, the payee, before maturity of the check. The check, however, could no longer
be retrieved as it was already negotiated by Mr. Peek to Mr. Insee. Ms. Darra then
withdrew her funds from the drawee bank. When Mr. Insee presented the check for
encashment, it was dishonored for insufficiency of funds. Is Ms. Darra liable to Mr. Insee
despite the lack of notice of dishonor?
a. no, there was no consideration as the piece of jewelry was returned to Mr. Peek;
b. no, notice of dishonor was required because Ms. Darra was only secondarily
liable;
c. yes, because Ms. Darra could not have expected her check to be honored;
d. yes, Ms. Darra was primarily liable.
74. The following acts discharge the negotiable instrument, except:
a. payment by accommodated party;
b. intentional cancellation of instrument by holder;
c. merger of the rights of creditor and debtor;
d. reacquisition by principal debtor of the instrument as an agent.
75. A makes a note payable to B or order. The following are the indorsers of the note in
the order of their indorsement: B, C, D, E, F (holder), and G (subsequent holder). The
note is dishonored in the hands of F, who notifies B, C, D, and E. Which is not correct?
a. the notice given by F to B operates to the benefit of C D E and G;
b. the notice to C inures to the benefit of D E and G;
c. the notice to C inures to the benefit of B;
d. the notice to D inures to the benefit of E and G;
76. A bill may be addressed to more than one drawee, which of the following is allowed?
a. “to X and Y”;
b. “to A, B, C and D”;
c. “to A or B”;
d. “to X, in his absence, to Y”;
e. a and b only;
f. c and d only.

77. What is the reason why a bill of exchange may not be addressed to two or more
drawees in the alternative or in succession?
a. it is difficult to determine the exact date of the dishonor;
b. the drawees are not partners;
c. the obligation of the drawees once they accept is not absolute;
d. the acceptance of the drawees is subject to condition.

78. Which of the following does not discharge a negotiable instrument?

a. payment in due course by the accommodated party when the instrument was
made or accepted for his accommodation;
b. payment in due course by the principal debtor;
c. intentional cancellation of the instrument by the holder;
d. payment in due course by the accommodation indorser.
79. Which of the following is an inland bill?
a. a bill drawn outside but payable in the Philippines;
b. a bill drawn in the Philippines and payable in the Philippines;
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c. a bill drawn within but payable outside the Philippines;

d. all of the above.
80. Which of the following is not a requisite for acceptance:
a. it must be in writing;
b. it must be signed by the drawee;
c. it must not expressed that the drawee will perform his promise by any other
means than the payment of money;
d. it must be notarized.
81. An example of a general acceptance:
a. “accepted, payable at BDO PSE branch;”
b. “accepted, payable only at my residence;”
c. “accepted 30 days from date” when the bill is 50 days from date;
d. “accepted, 50% of the value only.”
82. On May 2, 2012, Mr. Pierre, as payee, obtained a promissory note for P6,000.00 from
Mr. Moore by means of fraud. On May 5, 2012, Mr. Pierre negotiated the note to Mr.
Inigo at a discounted amount of P5,000.00, the term of which is P3,000.00 cash and
P2,000.00 payable within 15 days from May 5. On May 10, 2012, Mr. Moore informed
Mr. Inigo of the fraud committed by Mr. Pierre who induced the former to execute the
note. What is the legal effect of the transactions?
a. Mr. Inigo is a holder in due course;
b. Mr. Inigo is not a holder in due course;
c. Mr. Inigo is a holder in due course up to P3,000.00 only;
d. Mr. Inigo is a holder in due course up to P5,000.00 only.
83. In the preceding question, what defense is available to Mr. Moore?
a. personal for the whole amount;
b. real for the whole amount;
c. personal, P3,000.00, real, P3,000.00;
d. personal, P3,000.00, real, P2,000.00.
84. “Defects of title” of the holder covers:
a. all those situations which are known as personal defenses;
b. those equities of ownership where there is breach of faith in negotiation;
c. things that are wrong with the instrument itself;
d. a and b only;
e. b and c only;
85. An example of a real defense:
a. absence or failure of consideration;
b. fraudulent alteration by holder;
c. fraud in inducement;
d. discharge by payment or renunciation before maturity.
86. A type of personal defense:
a. fraud in esse contractus;
b. acquisition of instrument by unlawful means, or for an illegal consideration;
c. duress amounting to forgery;
d. want of authority, apparent or real.
87. Fraud in factum (in the execution), as distinguished from simple fraud (in
inducement):
a. is a personal defense;
b. relates to the quality, quantity, value or character of the consideration of the
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instrument;
c. exists where a person signed an instrument but deceived as to its character
and without knowledge of it;
d. is present in an existing contract as the signer knew what he was signing.
88. Who among the following persons is not primarily liable?
a. maker of a promissory note;
b. drawee of a bill of exchange;
c. acceptor of a bill of exchange;
d. the certifier of a check.
89. By signing the instrument, the drawer, with respect to a bill of exchange, and the
maker, as to a promissory note:
a. unconditionally bind themselves to pay the instrument according to its
tenor;
b. admit the existence of the payee and his then capacity to indorse the
instrument at the time it was executed;
c. engage that on due presentment, the instrument will be accepted or paid, or
both, according to its tenor;
d. engage to pay after certain conditions are complied with.
90. Statement A: The acceptor has the same liability as the maker of the promissory note
and the drawer of the bill with regard to the existence of the payee and the latter’s
capacity to indorse.
Statement B: The drawer can negative, or limit his liability, while the maker may not do
so.
a. only A is correct;
b. only B is correct;
c. both statements are correct;
d. both statements are not correct.

91. The drawee, by accepting the bill, is precluded from asserting a defense that:
a. the drawer is fictitious or non-existent;
b. the drawer’s signature is a forgery;
c. there is want or failure of consideration between the drawer and drawee;
d. the drawer has overdrawn his account;
e. all of the above;
92. Which of the following is not a common warranty for a person negotiating an
instrument by delivery, qualified indorser, irregular indorser, and general indorser?
a. he has no knowledge of any fact which would impair the validity of the
instrument or render it valueless;
b. the instrument is genuine and in all respects what is purports to be;
c. he has good title to it;
d. all prior parties had capacity to contract.
93. What is the effect of want of demand for payment on the principal debtor?
a. the principal debtor in not in default;
b. the person primarily is absolutely liable, thus he may be sued by the holder;
c. waiver of the holder to effect payment;
d. persons secondarily liable are discharged.
94. Presentment means:
a. the production of a bill of exchange to the drawee for his acceptance;
 14

b. the production of a bill of exchange to the acceptor for payment;

c. the production of a promissory note to the party liable for its payment;
d. all of the above;
e. none of the above.
95. The purpose of this undertaking by a stranger to a bill (who becomes secondarily
liable) is to preserve the credit of the parties to the instrument:
a. payment for honor;
b. acceptance for honor;
c. bills in set;
d. referee in case of need.
96. Statement A: Where notice is given by or on behalf of the holder, it inures to the
benefit of all subsequent holders and all prior parties who have a right of recourse against
the party to whom it is given.
Statement B: Where notice is given by or on behalf of a party entitled to give notice, it
inures to the benefit of the holder and all parties subsequent to the party whom notice is
given.
a. only A is correct;
b. only B is correct;
c. both statements are correct;
d. both statements are not correct.
97. What is the effect of waiver of protest?
a. deemed a waiver of notice of protest;
b. deemed a waiver of protest for foreign bill;
c. deemed waiver of protest for foreign bill or other negotiable instrument;
d. deemed waiver not only of a formal protest, but also of presentment and
notice of dishonor.
98. A negotiable instrument is discharged:
a. by payment in due course by or on behalf of the debtor;
b. by payment in due course by the party accommodated, where the instrument
is made or accepted for accommodation;
c. by cancellation of the instrument by the holder;
d. when the principal debtor becomes the holder of the instrument in his own
right.
99. What is the effect of material alteration?
a. the instrument is avoided;
b. the instrument and all prior parties to material alteration are discharged;
c. it does not discharge the party who has himself made, authorized or
assented to the alteration and subsequent indorsers;
d. all of the above;

100. Where a negotiable instrument is materially altered, it is avoided except as to:

a. indorsers subsequent to alteration;
b. parties prior to the alteration;
c. holder in due course;
d. all of the above;
e. a and c only.
101. A characteristic of a material alteration:
a. it refers to physical alterations;
 15

b. the alteration must be favorable to the person making it;

c. it excludes innocent changes;
d. all of the above.
102. Mr. Brower prepared a bill of exchange and inserted in the said instrument the
provision “no recourse against the drawer”. What is the legal effect of the inserted
provision?
a. it is not valid as the drawer cannot limit his liability to the holder;
b. it is valid because the drawer may escape secondary liability;
c. it is void because it prevents negotiation of the instrument;
d. it is legal because the bill can still be assigned.

103. A constructive acceptance:

a. the drawee promised to accept a future bill of exchange;
b. the drawee returned the bill unaccepted after 24 hours from presentment;
c. the drawee destroyed the bill of exchange;
d. the drawee failed to notify the drawer that the bill was not accepted;
e. all of the above;
104. Effect of transfer without endorsement of an order instrument:
a. the transfer does not vest title in favor of the transferee;
b. the bearer acquires title from the transferor;
c. there is a complete negotiation;
d. the transferor assigns his right to the transferee;
e. all of the above;
105. A requisite of a payment in due course:
a. made in behalf of the accommodated party where the instrument is made
for his accommodation;
b. payment made to the indorser;
c. payment before maturity;
d. the holder must be in good faith and without notice that his title is
defective;
106. Which of the following negotiable instruments is incomplete?
a. “Pay to Ann or order P500.00.” (SGD) Bert.
b. “Pay to the order of Ann P500.00.” (SGD) Bert.
c. “I promise to pay to Bert or order P500.00.” (SGD) Bert.
d. “I promise to pay bearer the sum of P500.00.” (SGD) Bert.

107. It renders the instrument non-negotiable:

a. by agreement binding upon the holder to extend time of payment;
b. discharge;
c. valid tender of payment made by a prior party;
d. intentional cancellation of his signature by the holder;

108. Protest, as distinguished from notice of dishonor:

a. applies only to inland bills;
b. it may be verbal or written;
c. its noting made by the notary public or a respectable resident should be made
on the day and in place of dishonor;
d. it is made or given in the residence of the parties or in other places provided by
 16

law.
109. Acceptance for honor, as differentiated from ordinary acceptance:
a. protest is not necessary;
b. the acceptor is a stranger who is secondarily liable;
c. any word indicating acceptance is enough and the consent of the holder
is not necessary;
d. payment in due course by the acceptor discharges the bill as it involves the
entire instrument.
110. Payment by a person primarily liable, as distinguished from payment by honor:
a. there must be protest for non-payment by notarial act;
b. the person who will pay may be any person (a party or a stranger) and payment
discharges only the parties after the party in whose favor payment is made;
c. payment is in favor of a specified person and the law requires that there is a
statement for whose payment is made;
d. the person who will pay is a party and payment in due course discharges the
instrument.
111. What is the effect if an acceptor accepts two or more parts of the bills in set in the
hands of different persons?
a. the acceptor is only liable for one part as bills in set constitute one bill;
b. the acceptor is liable to separate holders in due course;
c. the acceptor is liable to the first holder who will first make the presentment for
payment;
d. the acceptor is not liable because the acceptance is void.

BANKING LAWS:

1. The gravamen of the offense - violation of the Bouncing Check Law (BP 22):
a. fraudulent making and issuance of an unfunded check;
b. the act of making and issuing a worthless check;
c. the issuance of check from a personal account that has no sufficient funds;
d. the making and issuance of a bum check intended for payment.
2. Transactions covered by BP 22:
a. issued as evidence of indebtedness;
b. guarantee;
c. payment of existing obligation;
d. all of the above;
e. a and c only.
3. An element of crime of BP 22:
a. the issuance of a corporate check;
b. knowledge of the maker, drawer, or issuer that at the time of issue, he or she
does not have sufficient funds in or credit with the drawee bank;
c. subsequent dishonor of the check for insufficiency of funds or credit or
dishonor for the same reason had not drawer, without any valid cause,
ordered the bank to stop payment;
d. all are elements of the crime;
e. b and c only.
4. Prima facie knowledge on the part of the maker, drawer or issuer of insufficiency of
funds in or credit with the drawee bank:
 17

a. when the dishonored check is presented within 90 days from date of check and
the bank has informed the payee of the dishonor;
b. if the bounced check is presented within 90 days from date of check and the
maker or drawer fails to pay in full thereon or to make arrangement with
the drawee bank for that purpose within 5 banking days from notice of
dishonor;
c. if the dishonored check is presented within 30 days from date of issuance and
the maker or drawer failed to pay within 5 banking days from notice;
d. if the dishonored check is presented within 60 days from date of check and the
maker or drawer fails to pay the holder or to make arrangement with the
drawee bank for that purpose within 5 banking days from notice of
dishonor.
5. Function of the Philippine Deposit Insurance Corporation (PDIC):
a. insurer;
b. regulator of banks;
c. receiver and liquidator of closed banks;
d. all answers are functions of PDIC;
e. a and c only.
6. Mr. Bernal has 3 bank accounts: a) in his name alone worth P700,000.00; b) jointly
with Ms. Cabral, P800,000.00; and c) jointly with Ms. Divina, P900,000.00. How much
is the insured deposit of Mr. Bernal?
a. P500,000.00;
b. P750,000.00;
c. P1M;
d. answer not given.
7. One of the following accounts is not allowed to be insured with PDIC:
a. foreign currency deposits of domestic banks;
b. deposits of insured domestic bank at its branch outside the Philippines;
c. bonds and other securities issued by the banks;
d. all are not allowed to be insured.
8. Aside from deposits in banking institutions, this may not be examined, inquired or
looked into by any person unless authorized by law:
a. investments in bonds issued by the government;
b. foreign investment in banks;
c. all securities deposited with the bank;
d. all are covered by the Law on Secrecy of Bank Deposits;
e. only deposits in banks are covered by the law.
9. Which of the following government entities is not allowed to look into bank accounts?
a. Commission on Audit;
b. PDIC;
c. Court of Appeals;
d. Securities and Exchange Commission.
10. Foreign currency deposits with Philippine banks designated by the BSP are
considered:
a. liabilities of the Philippine government;
b. part of the international reserve;
c. obligations of the banks to foreign countries;
d. all answers are correct.
 18

11. One of the benefits of the foreign currency deposit:

a. it is tax exempt;
b. generally, it can be withdrawn or transferred without any restriction;
c. it is exempt from attachment, garnishment, or any other order or process;
d. all answers are correct.
12. The Unclaimed Balances Law not only applies to deposits of money but also to:
a. credits;
b. bullion;
c. security;
d. all of the above.
13. It is a judicial process in which the state, by virtue of its sovereignty, steps in and
claims abandoned, left vacant, or unclaimed property, without there being an interested
person having a legal claim thereto:
a. expropriation;
b. escheat;
c. writ of execution;
d. writ of attachment.
14. Any act or attempted act to conceal or disguise the identity of illegally obtained
proceeds so that they appear to have originated from legitimate source:
a. money laundering;
b. embezzlement;
c. misappropriation;
d. masking process.
15. Under AMLA, it is a transaction in cash or other equivalent monetary instrument
involving a total amount in excess of five hundred thousand pesos (P500,000.00) within
one (1) banking day:
a. suspicious transaction;
b. unknown transaction;
c. covered transaction;
d. planned transaction.
16. It is an extraordinary and interim relief issued by the Court of Appeals to prevent the
dissipation, removal, or disposal of properties that are suspected to be proceeds of, or
related to, unlawful activities as defined by AMLA:
a. interlocutory order;
b. freeze order;
c. protective order;
d. restraining order.
17. Which of the following statements is false?
a. banking business is impressed with public interest;
b. a bank’s liability as an obligor is not merely vicarious but primary;
c. the diligence required of banks is that of Roman pater familias;
d. the law imposes on banks fiduciary duty.
18. It is a form of intervention by the BSP to avert potential financial system instability or
economic disruption wherein BSP can enforce it as soon as a bank’s condition indicates
higher-than normal risk of failure:
a. prompt corrective action;
b. receivership;
c. liquidation;
 19

d. rehabilitation order.
19. A bank that has the authority to exercise, in addition to the powers authorized for a
commercial bank, the powers of an investment house and the power to invest in non-
allied enterprises:
a. commercial bank;
b. thrift bank;
c. universal bank;
d. development bank.
20. These are interest-bearing deposit accounts that combine the payable on demand
feature of checks and investment feature of savings accounts:
a. anonymous or numbered accounts;
b. negotiable order of withdrawal (NOW) accounts;
c. deposit substitutes;
d. time deposits.
21. It means all those liabilities of the BSP and of other banks which are denominated in
Philippine currency and are subject to payment in legal tender upon the presentation of
checks:
a. demand deposits;
b. treasury bills;
c. deposit substitutes;
d. numbered accounts.
22. The total amount of loans, credit accommodations and guarantees that may be
extended by a bank to any person, partnership, association, corporation or other entity
shall at no time exceed:
a. 25% of the net worth of such bank;
b. 10% of the total assets of the bank;
c. 25% of the capital of such bank;
d. 10% of the total liquid assets of the bank.
23. An exception to restriction on bank exposure to directors, officers, stockholders, and
their related interests (DOSRI):
a. if the transaction is with written approval of the majority of all the directors,
excluding the director concerned;
b. transaction under a fringe benefit plan approved by the BSP;
c. transaction approved by at least 2/3 votes of the shareholders;
d. a and c only;
e. a and b only.
24. The BSP may issue an order requiring the financial institution to cease and desist
from conducting business in an unsafe and unsound manner and may further order that
immediate action be taken to correct the conditions resulting from such unsafe or
unsound practice. The following circumstances may be deemed as conducting business in
an unsafe or unsound manner, except:
a. the act or omission has resulted or may result in material loss or damage, or
abnormal risk or danger to the safety, stability, liquidity or solvency of the
institution;
b. the act or omission has resulted or may result in material loss or damage or
abnormal risk to the institution's depositors, creditors, investors,
stockholders or to the BSP or to the public in general;
c. the act or omission has caused any undue injury, or has given any unwarranted
 20

benefits, advantage or preference to the bank or any party in the discharge

by the director or officer of his duties and responsibilities through
manifest partiality, evident bad faith or gross inexcusable negligence;
d. the act or omission involves entering into any contract or transaction
disadvantageous to the bank, quasi-bank or trust entity, whether or not the
director or officer profited or will profit thereby.
25. When a bank or a quasi-bank is in a state of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to protect the interests of depositors
and creditors, the Monetary Board may appoint this person to take charge of the assets,
liabilities, and the management of the bank:
a. liquidator;
b. receiver;
c. conservator;
d. members of the management committee.