MCQ Nego 3 Quiz

1. An instrument to be negotiable must conform to the following requirements, except: a. It must be in writing singed by the maker or drawer. b. Must contain a conditional promise or order to pay a sum certain. c. Must be payable on demand, or at a fixed or determinable future time. d. Must be payable to order or to bearer. 2. What is the commercial function of negotiable paper? a. To supplement the currency of the government b. To substitute for money c. To increase the purchasing medium d. All of the above 3. When does the Negotiable Instruments Law take effect? a. June 2, 1911 b. June 2, 1912 c. June 2, 1913 d. June 2, 1914 4. It is an unconditional promise in writing by one person to another signed by the maker engaging to pay on demand or at a fixed or determinable future time, a sum certain in money, to order or to bearer. a. Negotiable promissory note b. Check c. Bill of exchange d. None of the Above 5. It is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. a. Check b. Bill of Exchange c. Negotiable promissory note d. None of the above 6. It is a bill of exchange drawn on a bank payable on demand. a. Negotiable Promissory note b. Check c. Letter of Credit d. Negotiable document 7. Which of the following is a holder in due course? a. One who has taken the instrument incomplete and irregular upon its face. b. One who took it for value and in good faith. c. One who has became the holder of an instrument while it was overdue. d. One who had notice of the infirmity or defect in the instrument. 8. Which of the following is negotiable under the Negotiable Instruments Law? a. Money Order b. Warehouse Receipts c. Trade Acceptance d. Pawn ticket 9. A bearer instrument is always a a. Bearer instrument 1

b. Order instrument c. Check d. Promissory note 10. When is an instrument payable on demand? a. When it is payable at a fixed period after date or sight. b. When payable on or before a fixed or determinable future time specified therein. c. When payable on or at a fixed period after the When no time for payment is expressed. d. Occurrence of a specified event which is certain to happen. 11. a. b. c. d.

What is the effect of a forged signature in negotiable instruments? Holder has the right to retain the instrument The instrument is wholly inoperative Holder has the right to give a discharge therefore Holder has the right to enforce payment thereof against any party thereto

12. It is the one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefore, and for the purpose of lending his name to some other person. a. Holder in due course b. Accommodation Party c. Blank Indorsement d. Qualified Indorsement 13. An order instrument becomes a bearer instrument when a. The only or last indorsement is in blank b. The instrument is forged. c. The instrument is delivered to a holder in due course. d. The instrument is delivered to a holder for value. 14. When an endorser waives presentment and notice of dishonor, he increases his liability. His endorsement is: a. Facultative endorsement b. Qualified endorsement c. Alternative endorsement d. Restrictive endorsement 15. Ariel issued a note to Brando. There was a total failure of consideration. Brando issued the note for consideration to Cecil who is a holder in due course. Cecil indorsed the note to David who knew of the failure of consideration. Can David successfully collect from Ariel? a. No, because David knew the failure of consideration. b. No, although David acquired the rights of Cecil, a holder in due course and he was not a party to any illegality c. Yes, because David acquired the note for consideration. d. No, because David is not a holder in due course.

16.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."

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17. Under the Negotiable Instruments Law, a signature by procuration operates as a notice that the agent has but a limited authority to sign. Thus, a person who takes a bill that is drawn, accepted, or indorsed by procuration is duty-bound to inquire into the extent of the agent's authority by: a. Examining the agent’s special power of attorney b. Examining the bill to determine the extent of such authority. c. Asking the agent about the extent of such authority. d. Asking the principal about the extent of such authority. 18. A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves. An example of such a defense is a. Faud in inducement. b. Duress amounting to forgery. c. Fraud in esse contractus. d. Alteration. 19.When is a person not deemed to be a holder in due course? a. When he has taken the instrument complete and regular upon its face, b. When he took it in good faith and for value. c. When he negotiated the instrument payable on demand for an unreasonable length of time after its issue. d. When he became the holder of it before it was overdue. 20. The following are negotiable instruments except: a. Trade acceptance b. Bonds c. Debenture d. Treasury Warrant 21. A drawer in a bill of exchange is a party who a. Executes the written order to pay. b. Is commanded or ordered to pay a sum certain in money c. One whose favor the bill is drawn or is payable. d. None of the above 22. An Acceptor in negotiable instruments is a. A person who may be designated in the instrument as the person who may be resorted to by the parties in case of dispute. b. A drawee who accepts the order to pay made by the drawer. c. One who has signed the instrument as maker, drawer, acceptor or indorser without receiving vale therefore and for the purpose of lending his name to some other person. d. A party in whose favor the bill is drawn or is payable. 23. Which of the following is not an example of a Real Defenses? a. Prescription b. Duress amounting to Forgery c. Mistake d. Marriage in the case of a wife

24. In the acquisition of an instrument, the title of a person becomes defective when he obtains the instrument or any signature thereto by a. Fraud, force duress or fear b. For an illegal consideration c. None of the above d. All of the above

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25. Which of the following party is primarily liable under the Instrument? a. Drawer b. Indorser c. Maker d. Accommodation Party 26.Forgery is committed through a. Dishonor of checks b. Counterfeit and alteration c. Counterfeit-making or fraudulent alteration of writing and may consist in the signing of another’s name or the alteration of an instrument in the name, amount, description of the person and the like, with intent thereby to defraud d. None of the above 27.

The following are the conditions to constitute a holder in due course, except: a. He took the instrument in good faith and for value. b. He has knowledge of infirmity in the instrument. c. He took the instrument complete and regular in its face. d. He became the holder of the instrument before it was overdue.

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A obtained the note of M through simple fraud and negotiates it to Z, Z to Y, Y to X, and X to E, the present holder. Which is correct? a. E is presumed a holder in due course. b. E is a mere holder for value only. c. E must prove that he is actually a holder in due course. d. All are correct.

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The following are the rights of an ordinary holder, except: a. He may sue on the instrument on his own name. b. He may receive payment in due course in effect discharges the instrument. c. He may enforce payment for the full amount thereof against all parties liable thereon. d. He holds the instrument subject to the same defenses as if it were non-negotiable.

30. Analyze the following statements and determine which of the choices below best describes the statements: A) Notice of defect or infirmity to an agent is deemed a notice to the principal. B) Notice to a partner is a notice to the partnership. C) To constitute a notice of defect, holder must have actual knowledge. a. Only A and B are incorrect. b. Only A and C are correct. c. All are correct. d. All are incorrect.

31. Jeff issues a promissory note payable to the order of Ancheta. Ancheta indorses in blank to Ryan. Paul stole the promissory note from Ryan and delivered the note to Mansano, a holder in due course. Mansano delivered to Joseph, who was informed by Ryan that said note was stolen. a. Joseph can collect from Jeff. b. Joseph cannot collect from Jeff. c. Joseph should ran after Paul for payment. 4

d. Both B and C are collect. 32. Dan, a holder in due course, came to Nick, the maker, for collection of payment. In order for Nick to escape liability, which defense can he interposed against Dan. a. Failure of consideration b. Want of delivery but complete instrument c. Fraud in essecontractus d. Spoliation 33. Joey upon hearing that his best friend is in need of money issued a check payable to his best friend Romel. Romel, for consideration, indorsed it to Dondy, an ordinary holder. The following are all correct, except: a. Joey cannot be liable to Dondy. b. Romel was a holder for value. c. Romel should be liable to Dondy. d. If Dondy is a holder in due course, Joey can be held liable to Dondy. 34. Which of the following is not a right of a holder in due course? a. He can hold the instrument free from defect of title of prior parties. b. He can hold the instrument free from personal defenses. c. He can hold the instrument free from real defenses. d. He can enforce payment of the instrument for the full amount thereof against all parties liable thereon. 35. Amer made a promissory note indicating that Nassief is the maker and is payable to order of Amer. Amer forges Nassief’s signature. Amer indorses the note to Norsad and Norsad to Ahmed, the present holder. a. Whether Ahmed is a holder in due course or not, he cannot collect to Nassief. b. Whether Ahmed is a holder in due course or not, he can collect to Nassief. c. Whether Ahmed is a holder in due course or not, he can collect to Amer. d. Ahmed can collect to Nassief, provided he is a holder in due course. 36. Which defense is available against any holder? a. Failure or absence of consideration. b. Complete but undelivered instrument. c. Incomplete but delivered instrument. d. Incomplete and undelivered instrument. 37.Analyze the following statements and determine which of the choices below best describes the statements: A) Minority is a real defense available against a holder in due course. B) Prior parties of a minor indorser can set-up minority as a defense against a holder in due course. a. b. c. d.

Both statements are true. Both statements are false. Only statement A is true. Only statement B is false.

38.Gloria makes a promissory note for Three Million to the order of Benigno. To secure benigno’s debt to Mar of Two million, he pledges the note to Mar as a security. Analyze the following statements and determine which of the choices below best describes the statements:

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A) Mar may recover Three Million, holding the surplus One million for Benigno, if the note matured. B) If Gloria has defense of failure of consideration against Benigno, Mar can collect Two Million if he is a holder in due course. a. b. c. d.

Both statements are true. Both statements are false. Only statement A is true. Only statement B is false.

39. Analyze the following statements and determine which of the choices below best describes the statements: A) A payee may be a holder in due course. B) A drawee may be a holder in due course. a. b. c. d.

Both statements are true. Both statements are false. Only statement A is true. Only statement B is false.

40.Mahal signed a promissory note for P500, 000 as maker, and payable to bearer, delivered to Belo in payment for Mahal’s scheduled medical operation that will make her tall. Later, Mahal was informed that it is impossible to make her tall. However, Belo has already delivered the note to Haden upon the terms of payment of P 300, 000 and the balance in a month. Haden received notice of the defect. Which is true? a. Haden can collect P 500, 000 because he is a holder in due course entitle to the full amount of the instrument. b. Haden must pay the balance before he can collect for the full amount. c. Haden is a holder in due course to the extent of P300, 000, the amount paid by him. d. Haden cannot collect because of the failure or absence of consideration. 41.Who is a holder in due course in the following situations? a. When instrument is payable on demand is negotiated payable on demand is negotiated in an unreasonable length of time after its issue. b. Where instrument taken by a holder, who has not yet paid anything, and he receives notice of infirmity in the instrument. c. Where a holder took instrument for value and in good faith. d. Where a postal money order is delivered to Ryan, the holder. 42. Forged signature makes the instrument a. wholly inoperative b. unenforceable c. invalid d. none of the above

43. Forgery is a real or absolute defense when a. The drawer is guilty of negligence b. The drawer whose signature was forged c. The drawee was negligent d. A and B e. B and C

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44.If a. b. c. d. e.

a bank pays a forged check The drawee bank is liable The drawee bank bears the loss The drawee bank is considered to have paid out of its funds B and C All of the above

45. In the case of PNB vs. CA, for bearer instrument the signature of payee or holder is a. Unnecessary to pass title to the instrument b. Essential to transfer title to the instrument c. Necessary to indorse the instrument d. Unnecessary to indorse the instrument e. None of the above 46. An indorser of order instrument warrants that a. Instrument is genuine and in all respect what it purports to be b. He has as a good title to it c. All prior parties had capacity to contract d. The instrument is valid and subsisting e. All of the above 47. In the case of PNB vs. CA, for order instruments the signature of its rightful owner is a. Unnecessary to pass the title to the instrument b. Essential to transfer title to the instrument c. Necessary to indorse the instrument d. Unnecessary to indorse the instrument e. None of the above 47. A a. b. c. d.

fiduciary relationship exists between a bank and depositor where Simple care and diligence is required Extraordinary care and diligence is required Highest degree of care and diligence is required B and C

48. A general indorser guarantees a. All prior indorsements b. Only present indorsements c. All prior indorsements including forged indorsement. d. None of the above 49. a. b. c. d.

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Which is not a function of a negotiable instrument? is a substitute for money. increases credit circulation. increases purchasing power in circulation. extinguishes obligation if its delivery is accepted by the creditor.

50. Which of the following instruments is not negotiable for the reason that the instrument is not payable at a determinable future time? a. 30 days after demand, drawer A directs B to pay C or order P10,000. b. 20 days after the death of Z, I promise to pay to the order of B, P10,000. Sgd. Q c. 10 days after A passes the Bar exams, I promise to pay to the order of B P10,000. Sgd. C 7

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