Exam 22: Creation of Negotiable Instruments

When does the drawee become liable for payment of a draft?

Both checks and notes have makers.

Determine whether the following instrument is a negotiable instrument,addressing all the requirements of negotiability in your response. "I,Orville Wright,promise to pay $5,000 to Billy's Bicycle Parts in four equal installments of principal,beginning on January 1,2004,and on the same day in each of the next 3 years.Each payment will consist of $1,250 in principal,plus interest accrued since the date of this note,in the case of the first payment,or since the prior payment in the case of all other payments.Interest shall accrue at the rate of 8% per annum,or in the event of default,at the maximum rate allowed by law until the default is cured.This note is secured by collateral consisting of various experimental flying machines.This note may be paid in whole or in part prior to the due dates,and the interest accrued will be reduced accordingly.The due date for any payment under this note may be extended by mutual agreement of the parties up to 6 months from the due date as stated herein.The proceeds of this note will be used by Orville Wright to further his aviation experiments,and in the event those experiments are unsuccessful,the payment obligation is canceled. Signed,Orville Wright 1/1/03

Madolyn's father executes a promissory note stating,"I promise to pay to the order of my daughter,Madolyn,$50,000,on the date that she marries Robbie Roberts." Is the note negotiable?

Negotiable instruments enable the credit economy of the United States.

A promise to pay engraved in a mile-long steel pipe would qualify as a negotiable instrument as the promise would meet the permanency requirement.

A certificate of deposit is a form of note in which the bank is the maker.

A sight draft that arises when credit is extended with the sale of the goods is known as:

A promissory note for the purchase of an automobile qualifies as a negotiable instrument.

Which of the following is true about drafts?

Karen has a checking account at First Bank.Karen writes a check to Bonanza Apartments for her rent.In this situation:

Both a sight draft and a time draft are payable on demand.

What is the effect of a promissory note containing a conditional promise?

Which of the following correctly describes a certificate of deposit?

Which of the following statements,if it appeared on a negotiable instrument,would destroy the negotiability of that instrument?

What problems hinder any efforts to establish uniform international rules for negotiable instruments? What additional variables are there in trying to establish a uniform international set of rules for negotiable instruments compared to doing so solely within the United States?

Which of the following best describes a negotiable promissory note?

If one instrument stated,"Pay to the Order of IBM," and the other stated,"Pay to IBM," which instrument would be negotiable?

A variable interest rate note is considered a negotiable instrument under the Revised Article 3 of the UCC.

Alice Johnson issued a note payable over 24 equal monthly installments.The note contained a provision making the entire balance due immediately if Alice defaulted on two consecutive installments.The note contained: