BUSINESS LAW QUIZ –Negotiable Instruments Law Part I

8. When a negotiable instrument payable to order?

1. The drawee is not primarily liable a. When payable to the order of a speciied person or to him or his order
a. Cashier’s check c. Certiied check b. When payable to the order of a ictitious person or non-existing person and such a factwas
b. Manager’s check d. Traveler’s check known to the person making it so payable;
c. When the name of the payee does not purport to be the name of a person.
2. If the instrument is payable to the order of a third person
d. When only or last indorsement is in blank.
a. He is liable to all parties subsequent to the payee
b. He is not liable to the party 9. Which of the following is not a characteristic of a bill of exchange?
c. He is liable to the payee and to all subsequent parties a. Original parties are the drawer, drawee and payee;
d. He is liable to all parties subsequent to the marker or drawer. b. Acceptance is generally required;
c. Drawer is primarily liable;
3. Which of the following is not negotiable? d. Contains an unconditional order to pay.
a. Pay to D or order P10, 000 on or before Dec.31, 1997 (Sadie)
b. Pay to A or order P10, 000 Notice of Dishonor waived (Sgd. B) 10. A holder in due course has the following rights, except:
c. Pay to B or order P5, 000 or deliver two horses at the option of the holder (Sgd.D) a. He may receive payment and if in due course, the instrument is discharged;
d. Pay to C or order P10, 000 and to deliver 10 sacks of rice (Sgd. D) b. He may sue on the instrument in his own name;
c. He can recover on the instrument
4. A bill of exchange drawn on a bank and payable on demand is d. He holds the instrument as if it were non-negotiable
a. Check c. Domestic bill
b. Treasury d. Bill of lading 11. Which is not correct? The acceptor by accepting a negotiable instrument
a. Admits the existence of the payee and his capacity to endorse.
5. Which is not correct? The acceptor by accepting the instrument b. Admits the existence of the drawer, the genuiness of his signature and his authority
a. Admits the existence of the payee and his capacity to indorse to draw the instrument.
b. Admits the existence of the drawee, the genuiness of his signature and his capacityand c. Admits the existence of the endorser, the genuiness of his signature and his authority to draw
authority to draw the instrument the instrument.
c. Engages that he will pay is according to the tenor of his acceptance d. Admits that he will pat it according to the tenor of his acceptance.
d. Admits the existence of the endorser, the genuiness of his signature and his capacityand and
authority to indorse instruments. 12. 1st statement: A check must be presented for payment within a reasonable time afterit issue or the
drawer will be discharged from a liability thereof.
6. Case 1: Angel buys a diamond ring for P50, 000 for which he issued a check. Later Angelfound 2nd statement: Where the holder of a check procures it to be accepted or certiied, the drawer and all
out the diamond to be an ordinary glass. endorsers are discharged from liability thereof.
Case 2: Ben obtains the signature of Cris for autograph purposes. Ben writes a promissory a. only the 1st statement is true c. both statements are not true
note above Cris’s signature and indorses the note to Dan, a holder in due course. b. only the 2nd statement is true d. both statements are true
a. Real defense in Case 1, personal defense in Case 2;
b. Personal defense in Case 1, real defense in Case 2; 13. A makes a note payable to B or order. The following are the indorsers of the note in theorder
c. Real defense in both cases; of
d. Personal defenses in both cases. their endorsement: B, C, D, E, F (holder) and G (subsequent holder).The note is dishonored in the a
Hand of F, who notiies B, C, D and E.Which, is not correct?
7. Maturity of undated negotiable instrument issued payable 30 days after sight iscomputed from a. The notice given by F to B operates to the beneit of C, D, E and G
a. Date of irst indorsement; b. The notice to C insures to the beneits of D, E and G
b. Date of last indorsement; c. The notice insures to the beneits of B
c. Date for irst presentation for acceptance d. The notice to D insures to the beneits of E and G
d. Date of issue
14. Which of the following instruments is negotiable?
a. Pay to bearer C P 10,000. Reimburse yourself out of the rental of my house in
Manila. To
(Sgd) A
b. Pay to C P 10,000 or his order out of the rental of my house in Manila. To B (Sgd) A
c. Pay to C P 10,000 and reimburse yourself out of the rental of my house in Manila.
To B (Sgd) A
d. Pay to the order of C P10, 000.Reimburse yourself out of the rental of my house inManila.
To (Sgd) A
15. Which of the following is a negotiable Bill of Exchange?
a. Pay to order of X the sum of P 20,000(Sgd.) Y To: A and B
b. Pay to the order of Y the sum of P 30,000 (Sgd) X To: A or his absence to B
c. Pay to the order of X or Y the sum of P 40,000 (Sgd) C To: A or B
d. Pay to the order of Y the sum of P50, 000 (Sgd) X To: A and B
16. A check for Fifty Thousand Pesos (P 50,000) was drawn against drawee bank and madepayable
to XYZ or order. The check was deposited with payee’s account at ABC Bank which then sent the
for clearing to the drawee bank. The drawee bank refused to honor the check on the back ground
the serial number thereof had been altered. Is the refusal of the bank justiied? a. Yes, it is material alteration
which afects the negotiability of the instrument.
d.No, it is not a material alteration and the negotiability of the instrument is not afected.
c. Yes, because of forgery of the check.
d. No, because there is in fact no alteration of the check
17. Where the negotiable instrument is so ambiguous that there is doubt whether a bill ornote, the
may treat it as either at his choice.
Lack of consideration is a personal defense which is only available between immediate parties or
parties who are not holders in due course. a. Both statements are false.
b. First is true, second is false.
c. Both are true.
d. First is true, second is true.
18. X draws a check against his current account with ABC bank in favor of B. Although Xdoes not have
suicient funds; the bank honors the check when presented for payment. Apparently, and X
has conspired with the bank’s bookkeeper so that his ledger card would show that he has suicient
funds.
a. Yes, because X has no suicient funds with the bank.
d.No, because the bank as acceptor became primarily liable to B.
c. No, because B was not in good faith as payee.
d. Yes, because of solution debit.
19. For the purpose of lending his name without receiving value therefore, A makes a notefor P1M
payable to the order of B who in turn negotiates it to C, the latter knowing that A is not a party for
value. May C recover from A if the latter alleges absence of consideration? a. Yes, because an
B accommodation party is liable to a holder for value.
b. Yes, because an accommodated party is liable to a holder for value.
c. No, because the holder is not a holder in due course due to his knowledge of theabsence
of consideration.
d. No, because absence of consideration is a personal defense.
20. Supposing under the same facts, A pays C, can he recover from B?
a. No, because as maker he is the principal debtor.
b. No, because as accommodation maker he is deemed the donor of B.
c. Yes, because as accommodated party is the one ultimately liable.
d. Yes, because payment by the accommodation party discharges the instruments.
21. M makes a promissory note payable to bearer and delivers the same to P who endorsesit to X in this
manner:
“Payable to X. Signed: P “
Later X, without indorsing the note delivers the same to B.The note subsequently dishonored by
that M. May Y proceed against M for the note?
a. No, because the special indorsement of P made the bearer note payable to order.
b. Yes, because a bearer instrument remains as such despite a special indorsement.
c. Yes, because although there was no recognition due to lack of indorsement, Yremains the
assignee of the note.
d. No, because Y is not considered holder for lack of proper endorsement.
holder 22. An instrument is not negotiable if the day and the month, but not the year of itsmaturity is given.
Where the drawees are in the alternative or in succession, the instrument is not negotiable.
against a. Both statements are true.
b. Both are false.
c. First is true, second is false.
d. First is true, second is true.
23. A delivers a bearer check to B. B then specially indorses it to C and C later indorses itin
blank
to D. E steals the check from D and forging the signature of D, succeeds in
“negotiating” it to F, who acquires the same in good faith and for value. If, for any reason, the drawee bank
refuses to honor the check, can F enforce the check against A?
a. No, because of the forgery in the indorsement of D, F did not acquire title over thecheck.
b. Yes, because despite the forgery in the indorsement of D, F acquired title to the instrument.
c. Yes, because a holder in due course can always enforce the instrument against allparties
liable thereon.
d. No, because forgery is a real defense which can be put up even against a holder indue course
such as F.
24. Which of the following is not an efect of a crossed check? 29. Supposing further, that there was a forgery only in the indorsement to B as payee, thatwas made
a. The check may not be encashed but only deposited in a bank. by another person, Z who deposited the check with his bank (X), who shall sufer the loss?
b. The check may be negotiated only once to one who has bank account. a. X bank, as indorser to Y bank, warrants the correctness of the amount.
c. The act of crossing a check serves as a warning to the holder that the check hasbeen issued b. Y bank, as acceptor bank shall be liable for the loss.
for a deinite purpose so that he must inquire if he received the check pursuant to that purpose c. Both banks are jointly liable to A.
otherwise; he is not a holder in due course. d. X bank initially but with right of reimbursement from Y bank.
d. The indorse remains a holder in due course even if he does not inquire into right of
the 30. A issued negotiable promissory note to B with the authority to ill up for P1, 000 only Bin
violation of his contract with A wrote P 5,000 .B negotiated the note to C who had knowledge of
indorser to the check. the inirmity turn in indorsed it to D who had no knowledge of the said airmity.Can D
25. A issued an order promissory note to B who indorses it to C.D stole the note from Cand enforce the note against A and for how much?
forging a. D cannot make A liable because of the fraud committed by B and therefore A has adefense.
the instrument of C, “negotiates “it to E who also indorses it to F, the holder in due course. Can b. D can make A liable but only for P1, 000
F enforces the note against A, B, C? c. D can make A liable for the whole amount of P5, 000.
a. Yes, because he is a holder in due course who holds the instrument free fromdefenses d. D cannot make A liable but only B and C.
available to prior parties among themselves.
b. No, because he did not obtain title to the note because of the forgery in the indorsement of C to D 31. Supposing D indorses the note to E for value but who has knowledge of the inirmity,can the latter
c. No, because all prior parties are not liable to F because of the forgery. enforce the note against A?
d. Yes, because he is a holder in due course who holds the note free from defects of thetitle of prior a. No, because E is a holder not in due course.
parties. b. Yes, because he is a holder in due course.
c. No, because A has a personal defense against him.
26. Based on the same facts as aforementioned, can F enforce the note against E? d.Yes, because although he is not a holder in due course because of his knowledge of the inirmity
a. Yes, because E is party subsequent to C whose endorsement was forged and as indorser. in the instrument, he acquires all the rights of a holder in due course for having taken the note from
b.Yes, because he is at fault for taking the note from the forger D. D, a holder in due course.
c. No, because all parties prior to him are not liable because of forgery. 32. The holder is required to give notice of dishonor to the drawer to make him liable onthe instrument in
d. No, because E was also a victim who obtained the note from the forger and whohimself cannot one of the following cases:
proceed against A, B and C. a. Where the drawer is the person to whom the instrument is presented for payment;
b. Where the drawer and the drawee are the same persons;
27. A issued to B a check for P 50,000 as payment for the car. Without the knowledge of A, c. Where the drawer has countermanded payment.
B altered d. Where the instrument was accepted for his accommodation.
the amount to 150,000 and deposited the said check with X bank which forwarded the same to 33. The negotiable instrument is not discharged
Y
a. When the principal debtor becomes the holder thereof before, at or after maturity in his own
bank for payment bank without noticing the alteration, paid the check, debiting the amount from right.
account of A. Which of the two banks shall sufer the loss?
b. By the intentional cancellation thereof by the holder;
a. X bank, as indorser to Y bank, warrants the correctness of the amount.
c. When it is paid in due course by the principal debtor;
b. Y bank, as acceptor bank shall be liable for the loss.
d. When it is in due course paid by the party accommodated where the instrumentwas made or
c. Both banks are jointly liable to A. d X bank initially but with right of reimbursement from Y bank.
accepted for his accommodation.
28. Supposing in the above example, there was no alteration except for the forgery of A’signature by
34. Where an endorser waives the beneit of any law intended for his advantage such asnotice of dishonor,
B, who shall sufer the loss? his indorsement is
a. X bank, as indorser to Y bank, warrants the correctness of the amount.
a. Conditional c. Restrictive
b. Y bank, as acceptor bank shall be liable for the loss. b. Qualiied d.Facultive
c. Both banks are jointly liable to A. d .X bank initially but with right of reimbursement from Y bank.
35. Which of the following is not negotiable? 41. Which of the following is a real defense?
a .I promise to pay A or order P20, 000(Sgd.D) a. .Fraud in inducement b.Fraud in factum
b. I promise to pay to the order of A P20, 000(Sgd.D) c. Acquisition of the instrument by force
c. I promise to pay bearer P10, 000 on June 28(Sgd.D) d. Acquisition of the instrument for illegal consideration.
d. I promise to pay to the order of the bearer P1, 000 (Sgd.D)
42. Which of the following is not negotiable for the reason it is not payable at determinablefuture time?
a. One week after X passes the CPA BE, I promise to pay to the order of Y P10.000.Sgd.Z.
36. A makes a promissory note to B as follows: I promise to pay B or bearer P1, 000 ondemand” (Sgd.A) After b. Thirty days after demand, drawer Z directs Drawee X to pay Y or order P10, 000.
the issue to B, B negotiates it to C by mere delivery C to D by mere delivery, and D to E by special c. Ten days after the death of X, I promise to pay to the order of Y P10, 000.Sgd.Z.
indorsement and E to F also by special indorsement and F negotiates it to G by blank indorsement, as holder d. On or before Oct.31, 1998, I promise to pay to the order of Y P10, 000.Sgd.Z.
strikes out the special indorsement of D to E and E to F.What are the efects of striking out the said
indorsement? 43. The following instances when a bank may refuse to honor a check drawn against it,except one:
Efect 1: D and E are discharged from liability because it was their indorsements which were stricken a. Drawer has countermanded payment
put by G as not necessary to his title. b. Drawer’s insuicient funds.
c. Drawer has become insolvent
Efect 2: Subsequent indorser F is also discharged from liability because his right of recourse has been
d. Bank obtains knowledge of drawer’s death.
cut of by the discharge of D and E.
a. Both efects are true c.First is false, second is true 44. A issues a bill to the order of B. Later B, without indorsing the bill, transfers forconsideration said bill to
b.Both is false d. First is true, second is false C. The following except one are the valid efects of the transfer: a C acquires the right to have
indorsement of B.
37. A issued a note to be who did not deliver his promised consideration to A. B indorsed itto C, who is a holder
b. The bill is merely assigned not negotiated.
in due course’s indorsed it to D who knew of the failure of consideration. Can D collect from A?
c. C has become a holder for value.
a. No, because D is not a holder in due course.
b. No, although D is acquired the rights of C, a holder in due course. 45. An instrument is indorsed as follows: Pay to A, for B (Sgd) C.Then A indorsed theinstrument to
c. No, because he knew of the failure of consideration. d .Yes, because he acquired the note for a
D in payment of his personal loan obtained from the latter. Was D in good faith as holder thereof?
consideration.
a. Yes, because he is a holder in due course.
38. M makes a note for P10,000 payable to the order of C who indorses it to A. F obtainspossession of the b. Yes, because the instrument was negotiable when indorsed to him.
note fraudulently, forges the indorsement of A, alters amount to P70, 000 and endorses it to B who in c. No, because of the absence of B’s consent to the negotiation to D.
turn endorses it to C .In this case: d.No, because of the knowledge of D that A was only a trustee in favor of B without right
a. C can enforce the note against A. to
b. C cannot enforce the note against any party to the note. negotiate the instrument for his personal beneit.
c. C can enforce the note against M and O.
d. C can enforce the note against B. 46. Which of the following is not negotiable instrument?
a. I ind myself to pay B or bearer P1M. (Sgd)M. c .I obliges to pay or order P1M.(Sgd)M.
39. Which of the following is not secondarily liable? b. I acknowledged being indebted to P for P1M. d. I agree to pay P or bearer P1Mon
a. Drawer c .Payor for honor (Sgd)M. demand. (Sgd)M.
b.Indorser d. Accept for honor
47. Which of the following is not a personal defense?
40. A promissory note for P2M is indorsed as follows: Which of them is not properindorsement? a. Absence of consideration c. Non-delivery of a completeinstrument
a. Pay to A P1M and B P1M.Sgd. P b. Forgery signature d. Delivery of an incomplete instrument
b. Pay to A and B P2M.Sgd.P
c. Pay to A or B P2M.Sgd.P 48. If the drawee destroys the bill upon presentment for acceptance in payment of his personal loan
d. Pay to A P1M Sgd. P. The P1M for the residue of the note already paid. obtained from the latter. Was D in good faith as holder thereof?
 a. He is deemed to have dishonored the bill. the holder now of the bill. Which of the following is not true, if S decides to strike out any indorsement?
b. The holder may treat the instrument as a promissory note. a. If S cancels the indorsement of P; P is relieved from liability b If S cancels the indorsement of J; J,
c. The holder may not go after the secondarily liable parties. P, M and R are relieved from liability
d. The drawee has impliedly accepted the bill. c. If S cancels the indorsement of P; P, M and R are relieved from liability
d. If S cancels the indorsement of M; M and R are relieved from liability
49. One of the requisites for a holder in due course that is he became the holder of theinstrument
before it was overdue. The payee of the note issued by a maker is therefore a holder not in due course if 55. “Pay to A, Notice of dishonor waived. (Sgd) P”. is an example of
it was issued when already overdue. a. Qualiied indorsement c. Restrictive indorsement
In acceptance for honor, the acceptor for honor must not be a party to the instrument unlike a payor for b. Special indorsement d. Facultative indorsement
honor who may be a party therein.
a. Both statement are false c.First is false, second is true 56. The following are some of the functions of negotiable instruments. Which is notincluded?
b.Both is true d. First is true, second is false a. It increases the purchasing power in c. It is a substitute for money circulation
b. It increases credit circulation d. It is legal tender
50. It is at the option of the holder if he will resort to the referee in case for need forpayment of 57. This instrument is negotiable:
the instrument in the same way that the holder has the option to have the acceptance of the acceptor for a. “I promise to pay P10, 000(Sgd) M” b “Pay to P order P10, 000 if he marries X. (Sgd) M.” c.
honor. “Good to P or bearer P1M. (Sgd) M”.
d. “I promise to pay P order P1M or deliver to him one BMW. (Sgd)M.
The drawer may insert “without recourse” on the face of the instrument to negative or limit
58. This is not negotiation of negotiable instrument
liability just like a qualiied indorser may also state in his indorsement “without recourse”.
a. Assignment b Delivery of bearer instrument
a. Both statement are false c.First is false, second is true
c. Indorsement completed by delivery of an instrument
b.Both is true d. First is true, second is false
d. Delivery of an instrument to the payee
51. In all case of restrictive indorsement, the instruments become non-negotiable. Conditional indorsement
59.”I promise to pay to bearer, Juan dela Cruz, the sum of P1M.Sgd.M”.The promissory note is
does not give the maker or the drawee the option to disregard the conditional and make payment to the
a. Negotiable instrument payable on demand b
holder. Negotiable promissory note payable to bearer c. Negotiable
a. Both are false statements. c.First is false, second it true instrument payable to order
b. Both are true d. Non-negotiable promissory note
c. First is true, second is false 60. M makes a promissory note payable to the order of P in the amount of P30,000.Pnegotiates the
note to A, who with the consent of P raises the amount to P30, 000 and thereafter endorses it to
52. Which of the following instances does not discharge an instrument? B, B to C and C to D, a holder in due course. In this case: a. D can
a. Payment by the maker of promissory before the maturity date. b .Intentional recover P3, 000 from M; b D can recover P30, 000 from M;
cancellation of the instrument by the holder thereof c. Payment by the primarily c. P and A are liable to D P3, 000
liable to the holder of his agent. d. B and C are not liable to D.
d. Voluntary surrender of the instrument to the party primarily liable.
61. Which of the following is negotiable instrument?
53. Which of the following is not negotiable?
a. Letter of credit c. Certiicate of time deposit
a. X promises to pay to the order of P in dollars at the rate of exchange prevailing on
b. Treasury warrant d. Postal money order
October 30,
2000 the amount of P1M. 62. A and B have business arrangements wherein the latter would lend money to anotherthrough A
b. X promises to pay to the order of P P1M with 12% interest who would appear in the promissory note as the lender. A would indorse the note to B.Is there an
c. X promises to pay to the order of P P1M in installments accommodation party in the transaction between A and B? a. A is the accommodation party for signing in
d. X promises to pay to the order of P P1M in equal installments the irst installmentdue on Jan. behalf of B b D can recover P30, 000 from M;
20, 2000 and the second due on Jan.28, 2001. c. P and A are liable to D P3, 000
d. B and C are not liable to D.
54. A issues a bill to the order of J.J indorses it to P and P indorses it to M, M to R and R toS,
63. An irregular indorser as distinguished from a general indorser: a. Both are incorrect c. First is incorrect
a. He becomes the guarantor of the primarily liable party b He is not a party to the instrument b. First is incorrect d. Both are correct
but signs to add credit to the instrument.
c. He is a regular party to the instrument and signs upon delivery of the instrument. 70. A person is secondarily liable on the instrument is the one who is absolutely required topay the
d. He signs the instrument for valuable consideration. instrument.
64.Due to the threat of C to his life if he does not pay his debt ,both D and C went to E A check as a bill of exchange is not an assignment of funds with the bank to the credit of the drawer
from whom D requested a promissory note in the amount of P10,000.00.Fearing that C would kill a. Both are false c. Second is true
D,E b. Both are true d. First is true
acceded to the request. She aixed her signature on a piece of paper with the assurance of D
that he will just ill it up later. D then illed up the blank paper, making a promissory note BUSINESS LAW QUIZ – NEGOTIABLE INSTRUMENTS LAW (PART II)
in the amount of P100, 000.00 and indorsed the same to C who accepted it as payment of D’s
debt. Which of the following is correct?
MULTIPLE CHOICE
a. E is liable for the whole amount of the note since she voluntarily issued the same.
1. A negotiable instrument must contain a promise or order to pay a sum certain in money,except
b. C is a holder in due course because D voluntarily indorsed a complete note to him.
a.) Which must be payable to order or bearer c.) Which he must be unconditionalpromise or order
c. E is liable to C in the amount of P100, 000.00 as an accommodation party
b.) That must be in writing d.) The payee must be identiied.
d. C is not a holder in due course.

65. A holder in due course is one who becomes the holder of a complete instrument. 2. The following are the functions of a negotiable instrument, EXCEPT:
Therefore, if the maker issues an incomplete instrument to the payee, the latter is holder not in due course. a.) It operates as a substitute for money
In the hands of a holder not in due course the instrument is as if not negotiable and he holds the b.)It is a means of creating and transferring credits
instrument subject to all defenses. a. Both statements are incorrect c.)It facilities the sale of goods and increases the purchasing medium in circulation.
b. Both are correct d.)It is legal tender.
c. Only in the irst is incorrect
3. An instrument is payable to bearer except:
d. Only the second is correct
a.) The only or last indorsement is in blank c.) It is payable to a speciied persons orbearer
66. A holder in due course is one who becomes the holder of an instrument not overdue. Ifthe b.) Payable to “CASH” d.) The payable to the order of the bearer.
payee is issued an overdue instrument by the maker thereof, he is a holder not in due course.
4. An instrument is payable to speciied person or entity is.
The negotiable character of an instrument is generally not afected by the indorsements thereof.
a.) Negotiable because it complies with Section 1 of the law
a. Both are false statements d. Second is true
b.) Not negotiable because it must be payable to order or bearer
b. Both are true
c.) Negotiable because speciied person is a payee or bearer.
c. First is true
d.) Not negotiable because the payee is named.
67. Negotiable instrument as distinguished from negotiable document of title:
5. A. An incomplete and already delivered instrument, if completed, and is negotiated to aholder a on due
a. There is no accumulation of secondary contacts
course, is valid and efectual for all purposes in his hands.
b. It refers to the delivery of goods.
B. Such holder may enforce it as if it had been illed up strictly in accordance with the authority given and
c. There is a liability on the part of the indorser in case of non-delivery of the object of the contact
within a reasonable time. a.)Both statements are true
d. It is governed by the civil code.
b.)First statement is false; second statement is true
68. Where the holder of a check procures it to be certiied, the following is discharged: c.) Both statements are false
a. Drawer c. Drawer and indorser d.) First statement is true; second statement is false
b. Indorse d. None of the above
6.Where an incomplete instrument has not been delivered ,it will not ,if completed and negotiated
without authority , be a valid contract as against any person whose signature was placed
69. A check must be presented for payment within a reasonable time for the lastnegotiation thereof.
thereon before delivery in the hands of a
Where check is certiied by the bank on which it is drawn, the certiication is equivalent to an acceptance. a.)Holder in due course b.)Holder not in due course c.)Holder for value d.) Any holder
 17. An indorsement speciies no indorsee, and an instrument so indorsed is payable tobearer, and may be
7. Where this instrument is in the hands of a holder in due course, a valid delivery thereof by all a.)Special b.)Blank c.) Restrictive d.) Conditional
a party prior to him so as to make them liable is conclusively presumed. This refers to 18.”For a value received, I/We jointly and severally promised to pay A the sum of P1M, Philippine
a) An incomplete and delivered instrument c) A complete and delivered instrument Currency, the said principal sum to be payable in 24 monthly installments starting on
b) An incomplete and undelivered instrument d) None of the above January
15, 2005 and every 15th of the month thereafter until fully paid.Sgd.J a.)This is negotiable
8. Distinction/s of a promissory note with a bill of exchange. because it is payable by stated installments
a) Contains an unconditional order to pay c) The issuer is primary liable b.)Not negotiable because it is not payable to order or bearer.
b) Involves three (3) parties d) Maybe payable to bearer c.) Not negotiable because it is payable to speciied person.
d.) Both B and C.
9. This kind of signature operates as notice that the agent has but a limited authority tosign.
a) Blank signature c) Special indorsement 19. A bill of exchange is rendered non-negotiable if:
b) Signature of procuration d) Forged signature a.)It is payable out of a particular fund.
b.)There is an indication of a particular fund out which reimbursement is to be made
10. When a signature is forged or made without the authority of the person whosesignature it
purports to be, it is totally c.) There is an indication of a particular account to be debited with the amount paid
a) Blank signature c) Special indorsement d.) Answer are not given
b) Signature of procuration d) Forged signature
20. This does not constitute negotiation of an instrument:
11. Every negotiable instrument is deemed prima facie to have been issued valuable- a.)Delivery of a bearer instrument
a) Reason c) Contract b.)Indorsement completed by delivery of a bill payable to order
b) Consideration d) Money or property c.) Assignment
d.) Delivery of an instrument to the payee
12. Where cause or consideration has at any time been given for the instrument, theholder is deemed a holder
a) In due course c) Not in due course but for value 21. A written instrument is not negotiable because it lacks an unconditional promise ororder to pay a sum
b.) For value d) In due course and for value certain money.
a.)Bill of Exchange b.)Bill of Lading c.) Manager’s Check d.) Promissory
13. Absence or failure of consideration is a matter of defense as against any person who is Note
a) Holder in due course c) Holder for value
b.) Not a holder in due course d) Not holder for value 22.”I promise to pay bearer or H the sum of P20, 000.00. (Sgd) C”. The promissory note is:
a.)Negotiable note payable on demand
14. A party who has signed the instrument as a maker, drawer, acceptor, or indorser,without value b.)Negotiable note payable to order
therefore, and for the purpose of lending his name to some other person. c.)Negotiable bill payable to bearer
a.) Accommodated party b.)Accommodation party c.)Drawee d.)Non-negotiable because it is payable to a speciied person.
d.)Endorser 23. Feature/s of a bill of exchange not found in a promissory note:
15. When an instrument is transferred from one person to another in such manner as tocontribute the a) Unconditional order to pay c) Addressed to a drawee
transferee the holder thereof: b) Written promise to pay d) Both (a) and (c)
a) Assignment b.)Negotiation c.)Endorsement d.)All of the above
24. A issued a promissory note to the order of B for P10,000.00 payable 30 days afterdate.Later,B
16. A paper attached to a negotiable instrument where endorsements may be made indorsed it to C. Then, X stole the note from C and forged the signature of C (as endorser), then
a.)Allonge negotiated it to D and D to E, E to F, the holder. On maturity of the note, which of the following statement
b.)Dorsal of back portion of the instrument is not correct.
c.) Face of the instrument a) F can collect from either D or E because their signatures are genuine and the note isoperative
d.) All of the above against them.
b) F can collect from A because she cannot put up forgery as her defense
 c) F can collect from C because it was the latter’s signature which has forged 33. “I PROMISE TO PAY PHP 5,000 OR DELIVER TWO (2) SACKS OF RICE, IF HE WANTS.
d) F cannot collect from B because he is a party prior to the forgery. (SGD.DONG)
a.)Not negotiable because it requires an act in addition to the payment of money
25. A holder of negotiable instrument may to sue thereon in his own name and payment tohim in due course b.)Negotiable because it gives the holder an election to require something to be done in lieu of payment of
discharges it.
money.
a) Holder in due course c) Holder for value
c.)Not negotiable because the payee is not named.
b) Holder NOT in due course d) All of them
34. Where an instrument is issued, accepted, or indorsed when overdue, it is, as regardsthe person is issuing,
26. Person not a party to a negotiable instrument.
accepting, or indorsing it, payable
a.)Acceptor b.) Drawer c.) Assignor d.)
a) At sight c) On demand
Endorser
b) At presentment d) All of the above
27. “I promise to pay to the order of C Php 10,000.00, 30 days after slight. (Sgd) S”. Thepromissory note is
35. An instrument is payable to bearer except:
negotiable because it is-
a) P or poor bearer c.)To the order of
a) Payable to the order of order of speciic person c) Payable to bearer
Spiderman
b) Payable at a ixed or determinable future time d) Letters (a) and (b) are correct
b) At presentment d) All of the above
28. Which of the following is non-negotiable?
a.)” I bind myself to pay B or bearer P10, 000.00(Sgd) C.” 36. M signed a promissory note in favor of R promising to pay Php.10, 000.00 on ChristmasDay of 2008.Who
b.)Negotiable note payable to order can sue on this note and enforce the obligation?
c.)Negotiable bill payable to bearer a) Both of them c.) M only
d.)Non-negotiable because it is payable to a speciied person. b) Forgery d) Neither M or R
29. A fan (E) obtains the signature of a starlet (G) by way of autograph. He prepared anegotiable | 37. “Pay to P only” is only an example of:
promissory note above the starlet’s signature. The note was validly negotiated to E who is a holder in due a) Special indorsement c.) Restrictive indorsement
course. What defense can G avail against E? b) Facultative indorsement d.) Fraud in inducement
a) Personal defense b.) Equitable defense c.)Real defense (forgery)
d.)Qualiied defense 38. Which of the following is NOT a real defense?
a) Incomplete or undelivered instrument c.) Material alteration
30.”PAY TO W or her order US $10,000 only plus 2% interest (Sgd. J) - TO: X, Cashier.” b) Facultative indorsement d.) Fraud in inducement
a.)Not negotiable because the drawee is not named or indicated with reasonable certainty. 39. A: A check is a bill of exchange drawn on a bank payable on demand or at a ixeddeterminable future time.
b.)Negotiable because it complies with Section 1 B: A check must be presented for payment within six (6) months after its issue otherwise it becomes stale
c.)Not negotiable because the sum payable is not certain and the drawer will be discharged from liability. a.)Both statements are true
d.)Not negotiable because it is payable in foreign currency b.)First statement is false; second statement is true
c.) Both statements are false
31. Which of the following is not a personal defense? d.) First statement is true; second statement is false
a) Absence of consideration c) Forgery of a signature
b) Non-delivery of a complete instrument d) Failure ofconsideration 40. A: A person whose signature does not appear on the instrument may be liabletherefore.
B: When the instrument is not dated, it will be considered to be dated as of the time it was drawn, made
32. An instrument is payable at determinable future time except: or endorsed.
a.)Undated a.)Both statements are true
b.)Payable at a day certain after presentment b.)First statement is false; second statement is true
c.)On or before certain deinite given date c.) Both statements are false
d.) Before or after a speciied and certain event d.) First statement is true; second statement is false
e.) Letters (a) and (d) are not correct
41. A: There is a valid payment when negotiable instrument is delivered and accepted bythe creditor. d.) First statement is true; second statement is false
B: Creditors are bound to accept checks in payment of obligation. a.)Both statements
are true 47. A: The indorsement of the instrument by a minor passes the title there to notwithstanding that a from
b.)First statement is false; second statement is true want to capacity, the minor may incur no liability.
c.) Both statements are false B: A person whose signature does not appear on the instrument may be held liable thereon.
d.) First statement is true; second statement is false a.)Both statements are true
b.)First statement is false; second statement is true
42. A: Liability of the endorser is primary. c.) Both statements are false
B: An instrument becomes an overdue after its date of maturity. a.)Both statements d.) First statement is true; second statement is false
are true
b.)First statement is false; second statement is true 48. A: A note promising to pay B or order Php.10, 000, 30 days after Ms. W passes the CPAexams is negotiable.
c.) Both statements are false B: The indorsement need not to be written on the negotiable instrument itself. a.)Both statements are
d.) First statement is true; second statement is false true
b.)First statement is false; second statement is true
43. A: An instrument payable upon contingency is negotiable and the happening of theevent cure c.) Both statements are false
the defect of the condition. d.) First statement is true; second statement is false
B: An instrument where no time for is expressed is payable on demand. a.)Both statements are
true 49. An instrument is payable on demand when:
b.)First statement is false; second statement is true a.) Expressed to be payable on determinable future time
c.) Both statements are false b.) After sight or presentation
d.) First statement is true; second statement is false c.) Time for payment is expressed
d.) Issued overdue
44. A: An order or promise to pay out a particular fund is negotiable.
B: An instrument which is payable to bearer is negotiated by indorsement plus the delivery of the 50. Which of the following is for deposit only?
instrument. a.) Crossed check c.) Forged check
a.)Both statements are true b.) Stale check d. Manager’s check
b.)First statement is false; second statement is true
c.) Both statements are false
d.) First statement is true; second statement is false

45. A: When a signature is placed upon the instrument that it is not clear in what capacitythe person making
the same intended to sign , he is deemed to be an indorsee.
B: Where the instrument is payable to bearer, the payee may not be named or otherwise not
indicated with reasonable certainty.
a.)Both statements are true
b.)First statement is false; second statement is true
c.) Both statements are false
d.) First statement is true; second statement is false

46. A: A holder in due course is one who possesses both legal and beneicial interest tothe
instrument and is subject to personal defenses only.
B: A holder for value is an endorsee who has both the legal title and the beneicial interest to the
instrument and is subject to both real and personal defenses against him. a.)Both statements are true
b.)First statement is false; second statement is true
c.) Both statements are false