Question 1

An extension clause allows the date of maturity of an instrument to be extended to sometime in the future.

Accepted Answer

A) True 
 B)False

Question 2

A(n)________ is a clause in an instrument that allows the payee or holder to quicken payment of the principal amount of the instrument, plus accrued interest, upon the occurrence of an event.

Accepted Answer

A) acceleration clause 
B) prepayment clause 
C) extension clause 
D) forestallment clause 
A) acceleration clause 
B) prepayment clause 
C) extension clause 
D) forestallment clause

Question 3

A ________ is a type of draft that is always paid at a future date.

Accepted Answer

A) sight draft 
B) bill of exchange 
C) time draft 
D) demand draft 
A) sight draft 
B) bill of exchange 
C) time draft 
D) demand draft

Question 4

In order to be considered valid, a negotiable instrument need not state a fixed amount of money.

Accepted Answer

A) True 
 B)False

Question 5

The UCC signature requirement indicates that a negotiable instrument must be signed by ________.

Accepted Answer

A) a witness 
B) the maker or drawer 
C) the drawee 
D) the financee 
A) a witness 
B) the maker or drawer 
C) the drawee 
D) the financee

Question 6

In a draft transaction, the payee is called the acceptor of the draft.

Accepted Answer

A) True 
 B)False

Question 7

Which one of the following would be a three-party transaction?

Accepted Answer

A) a promissory note 
B) a certificate of deposit 
C) an ordinary lease 
D) a draft 
A) a promissory note 
B) a certificate of deposit 
C) an ordinary lease 
D) a draft

Question 8

Who is the drawee in a draft transaction?

Accepted Answer

A) The party that demands the draft. 
B) The party who pays the money stated in a draft. 
C) The party who writes an order for a draft. 
D) The party who receives the money from a draft. 
A) The party that demands the draft. 
B) The party who pays the money stated in a draft. 
C) The party who writes an order for a draft. 
D) The party who receives the money from a draft.

Question 9

What is the similarity between a demand draft and a trade acceptance?

Accepted Answer

A) both are examples of sight drafts 
B) both require credit to be extended to the buyer 
C) both have the drawer to be the payee as well 
D) both are considered two-party transactions 
A) both are examples of sight drafts 
B) both require credit to be extended to the buyer 
C) both have the drawer to be the payee as well 
D) both are considered two-party transactions

Question 10

A negotiable instrument can be honored with payment of non-monetary items.

Accepted Answer

A) True 
 B)False

Question 11

A promise or order is only considered negotiable if ________.

Accepted Answer

A) the promise or order to pay is unconditional 
B) it states that the promise or order is subject to or governed by another writing 
C) the rights to the promise or order are stated in another writing 
D) an express condition to payment is mentioned 
A) the promise or order to pay is unconditional 
B) it states that the promise or order is subject to or governed by another writing 
C) the rights to the promise or order are stated in another writing 
D) an express condition to payment is mentioned

Question 12

A bill of exchange is a type of sight draft.

Accepted Answer

A) True 
 B)False

Question 13

Roger, a certified lawyer, borrowed money from Jax to start a business.He gave a promissory note to Jax promising to pay the money back anytime within the next five years.But in order to accept the note Jax demanded a security deposit.Roger gave the gold that he owned as security.Roger in turn demanded that a specific clause be added to the promissory note to allow faster repayment of the lawn in case he inherited money within the next five years.But even after five years, Roger was unable to complete payment.He made a new promissory note promising to finish payment within the next year, and promised to provide free legal service to Jax for the next two years.
-What kind of promissory note did Jax secure from Roger for the original amount?

Accepted Answer

A) a collateral note 
B) a mortgage note 
C) an installment note 
D) a time note 
A) a collateral note 
B) a mortgage note 
C) an installment note 
D) a time note

Question 14

Which of the following is true about a promissory note?

Accepted Answer

A) It is a three-party transaction. 
B) It is not an order to pay. 
C) The party who makes the promise is the lender. 
D) The payee cannot transfer a note to a third party. 
A) It is a three-party transaction. 
B) It is not an order to pay. 
C) The party who makes the promise is the lender. 
D) The payee cannot transfer a note to a third party.

Question 15

Which of the following statements is true for a negotiable instrument?

Accepted Answer

A) It should be signed by the payee. 
B) It need not state a fixed amount of money. 
C) It should not require any undertaking other than the payment of money. 
D) It can be either written or oral. 
A) It should be signed by the payee. 
B) It need not state a fixed amount of money. 
C) It should not require any undertaking other than the payment of money. 
D) It can be either written or oral.

Question 16

Roger, a certified lawyer, borrowed money from Jax to start a business.He gave a promissory note to Jax promising to pay the money back anytime within the next five years.But in order to accept the note Jax demanded a security deposit.Roger gave the gold that he owned as security.Roger in turn demanded that a specific clause be added to the promissory note to allow faster repayment of the lawn in case he inherited money within the next five years.But even after five years, Roger was unable to complete payment.He made a new promissory note promising to finish payment within the next year, and promised to provide free legal service to Jax for the next two years.
-Which of the following clause did Roger ask to add in the first promissory note?

Accepted Answer

A) prepayment clause 
B) acceleration clause 
C) extension clause 
D) forestallment clause 
A) prepayment clause 
B) acceleration clause 
C) extension clause 
D) forestallment clause

Question 17

Which of the following is true of a bearer paper?

Accepted Answer

A) It will mention a specific person as payee. 
B) It will not specify a payee. 
C) It will contain the term "payable to the order of." 
D) It will contain an additional undertaking besides the payment of money. 
A) It will mention a specific person as payee. 
B) It will not specify a payee. 
C) It will contain the term "payable to the order of." 
D) It will contain an additional undertaking besides the payment of money.

Question 18

An order instrument is payable to anyone in physical possession of the instrument and presents it for payment when it is due.

Accepted Answer

A) True 
 B)False

Question 19

A conditional promise is not a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 20

Promissory notes are not paid on demand.

Accepted Answer

A) True 
 B)False

Exam 22: Creation of Negotiable Instruments

An extension clause allows the date of maturity of an instrument to be extended to sometime in the future.

A(n)________ is a clause in an instrument that allows the payee or holder to quicken payment of the principal amount of the instrument, plus accrued interest, upon the occurrence of an event.

A ________ is a type of draft that is always paid at a future date.

In order to be considered valid, a negotiable instrument need not state a fixed amount of money.

The UCC signature requirement indicates that a negotiable instrument must be signed by ________.

In a draft transaction, the payee is called the acceptor of the draft.

Which one of the following would be a three-party transaction?

Who is the drawee in a draft transaction?

What is the similarity between a demand draft and a trade acceptance?

A negotiable instrument can be honored with payment of non-monetary items.

A promise or order is only considered negotiable if ________.

A bill of exchange is a type of sight draft.

Which of the following is true about a promissory note?

Which of the following statements is true for a negotiable instrument?

Which of the following is true of a bearer paper?

An order instrument is payable to anyone in physical possession of the instrument and presents it for payment when it is due.

A conditional promise is not a negotiable instrument.

Promissory notes are not paid on demand.

Legal Heritage and the Digital Age

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Third-Party Rights and Discharge

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E-Commerce and Digital Law

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Title to Goods and Risk of Loss

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