Question 1

Under Revised Article 3, a promise to pay only out of a particular fund will destroy the negotiability of an instrument.

Accepted Answer

A) True 
 B)False

Question 2

The Check Clearing for the 21st Century Act:

Accepted Answer

A)  creates a new negotiable instrument. 
B)  requires banks to accept checks in electronic form. 
C)  requires banks to create image replacement documents for any checks received. 
D)  All of these. 
A)  creates a new negotiable instrument. 
B)  requires banks to accept checks in electronic form. 
C)  requires banks to create image replacement documents for any checks received. 
D)  All of these.

Question 3

The Code provides that which of the following provisions may be included in an instrument without adversely affecting negotiability?

Accepted Answer

A)  A power to give collateral to secure payment 
B)  Authorization to confess judgment on the instrument 
C)  Waiver of the benefit of any law intended for the protection of the obligor 
D)  All of these 
A)  A power to give collateral to secure payment 
B)  Authorization to confess judgment on the instrument 
C)  Waiver of the benefit of any law intended for the protection of the obligor 
D)  All of these

Question 4

The person who signs a note and promises to pay it is the maker.

Accepted Answer

A) True 
 B)False

Question 5

Akeya sells and delivers goods to Wayne for $10,000. Wayne executes and delivers a negotiable note to Akeya for $10,000 payable to Akeya's order in sixty days. A week later, Akeya duly negotiates the note to Maria. Which of
The following is correct?

Accepted Answer

A)  Maria is required to notify Wayne that she has acquired the note from Akeya. 
B)  If the goods are defective, Wayne's defense against Akeya is not available against Maria if Maria acquired the note in good faith and for value and had no knowledge of Wayne's defense against Akeya and took the note without reason to question its authenticity. 
C)  Maria is not entitled to hold Wayne for the full face amount of the note at maturity if Wayne has a valid defense against Akeya for defective goods regardless of the circumstances surrounding the negotiation of the note to Maria. 
D)  If there is a valid defense against Akeya, Maria cannot become a holder in due course when the note is transferred to her. 
A)  Maria is required to notify Wayne that she has acquired the note from Akeya. 
B)  If the goods are defective, Wayne's defense against Akeya is not available against Maria if Maria acquired the note in good faith and for value and had no knowledge of Wayne's defense against Akeya and took the note without reason to question its authenticity. 
C)  Maria is not entitled to hold Wayne for the full face amount of the note at maturity if Wayne has a valid defense against Akeya for defective goods regardless of the circumstances surrounding the negotiation of the note to Maria. 
D)  If there is a valid defense against Akeya, Maria cannot become a holder in due course when the note is transferred to her.

Question 6

June purchases $8,000 of goods from Will on thirty days' credit, and Will assigns the account to Mark. If June finds the goods defective and only worth $6,000:

Accepted Answer

A)  she has no defense against full payment since the account was assigned. 
B)  she only needs to pay Mark $6,000 if Mark had notified her of the assignment. 
C)  Mark is entitled to the full $8,000 since he acquires rights greater than those of Will, who assigned the contractual rights to payment. 
D)  she must pay $6,000 directly to Will regardless of whether Mark notified her of the assignment. 
A)  she has no defense against full payment since the account was assigned. 
B)  she only needs to pay Mark $6,000 if Mark had notified her of the assignment. 
C)  Mark is entitled to the full $8,000 since he acquires rights greater than those of Will, who assigned the contractual rights to payment. 
D)  she must pay $6,000 directly to Will regardless of whether Mark notified her of the assignment.

Question 7

Jones signed a 90-day note promising to pay $1,000 plus interest. The note states interest is to be based on a variable published rate external to the note. The sum the borrower must repay is uncertain; therefore, under Revised Article
3, the note is not negotiable.

Accepted Answer

A) True 
 B)False

Question 8

A reference to another writing makes a promise or order conditional.

Accepted Answer

A) True 
 B)False

Question 9

A promissory note is an instrument that involves three parties in three capacities.

Accepted Answer

A) True 
 B)False

Question 10

An "X" or a thumbprint could constitute a signature under the Code.

Accepted Answer

A) True 
 B)False

Question 11

An instrument contains the following language: "Harold T. Stone as President hereby promises to pay $12,348 to the order of Joe Jones Furniture for office equipment for Redkenn Corporation, payable from its corporate assets. (Signed) Harold T. Stone as President, Redkenn Corporation." Would the instrument be negotiable?

Accepted Answer

A)  No, because the promise refers to another contract 
B)  No, because its payment is limited to a particular fund 
C)  Yes, because it meets all the requirements of a negotiable instrument 
D)  Yes, because it is unequivocal 
A)  No, because the promise refers to another contract 
B)  No, because its payment is limited to a particular fund 
C)  Yes, because it meets all the requirements of a negotiable instrument 
D)  Yes, because it is unequivocal

Question 12

Distinguish between a note and a certificate of deposit. How are they alike? How are they different? Explain your answer.

Accepted Answer

Promissory notes and CD's are alike in t

Question 13

Negotiability is wholly a matter of form.

Accepted Answer

A) True 
 B)False

Question 14

Notes and certificates of deposit are orders to pay money to a third person.

Accepted Answer

A) True 
 B)False

Question 15

Paper payable "on demand" fails the test of negotiability in that it does not contain a specific time.

Accepted Answer

A) True 
 B)False

Question 16

Payment to a named payee by a bank with a check drawn on itself is a:

Accepted Answer

A)  cashier's check. 
B)  trade acceptance. 
C)  sight draft. 
D)  time draft. 
A)  cashier's check. 
B)  trade acceptance. 
C)  sight draft. 
D)  time draft.

Question 17

Which of the following is true of the "order to pay" requirement of a negotiable instrument?

Accepted Answer

A)  It is an instruction to pay and must be more than an authorization or request. 
B)  It must identify with reasonable certainty the person to be paid. 
C)  The addition of words of courtesy, such as "please pay," will not destroy the negotiability. 
D)  All of these. 
A)  It is an instruction to pay and must be more than an authorization or request. 
B)  It must identify with reasonable certainty the person to be paid. 
C)  The addition of words of courtesy, such as "please pay," will not destroy the negotiability. 
D)  All of these.

Question 18

Only a bank may serve as the maker of a certificate of a deposit.

Accepted Answer

A) True 
 B)False

Question 19

A time draft is one payable upon demand (at the time it is presented to the drawee).

Accepted Answer

A) True 
 B)False

Question 20

An instrument which is ambiguous as to whether it is a draft or note, such as, "To A: On demand I promise to pay
$200 to the order of B. Signed, C" must be treated as a note and be presented to C for payment.

Accepted Answer

A) True 
 B)False

Exam 26: Form and Content

Under Revised Article 3, a promise to pay only out of a particular fund will destroy the negotiability of an instrument.

The Check Clearing for the 21st Century Act:

The Code provides that which of the following provisions may be included in an instrument without adversely affecting negotiability?

The person who signs a note and promises to pay it is the maker.

Akeya sells and delivers goods to Wayne for $10,000. Wayne executes and delivers a negotiable note to Akeya for $10,000 payable to Akeya's order in sixty days. A week later, Akeya duly negotiates the note to Maria. Which of The following is correct?

June purchases $8,000 of goods from Will on thirty days' credit, and Will assigns the account to Mark. If June finds the goods defective and only worth $6,000:

Jones signed a 90-day note promising to pay $1,000 plus interest. The note states interest is to be based on a variable published rate external to the note. The sum the borrower must repay is uncertain; therefore, under Revised Article 3, the note is not negotiable.

A reference to another writing makes a promise or order conditional.

A promissory note is an instrument that involves three parties in three capacities.

An "X" or a thumbprint could constitute a signature under the Code.

Distinguish between a note and a certificate of deposit. How are they alike? How are they different? Explain your answer.

Negotiability is wholly a matter of form.

Notes and certificates of deposit are orders to pay money to a third person.

Paper payable "on demand" fails the test of negotiability in that it does not contain a specific time.

Payment to a named payee by a bank with a check drawn on itself is a:

Which of the following is true of the "order to pay" requirement of a negotiable instrument?

Only a bank may serve as the maker of a certificate of a deposit.

A time draft is one payable upon demand (at the time it is presented to the drawee).

An instrument which is ambiguous as to whether it is a draft or note, such as, "To A: On demand I promise to pay $200 to the order of B. Signed, C" must be treated as a note and be presented to C for payment.

Introduction to Law

Business Ethics and the Social Responsibility of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Relationship of Principal and Agent

Relationship With Third Parties

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Products Liability: Warranties and Strict Liability in Tort

Sales Remedies

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature, Formation, and Powers

Financial Structure

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Fundamental Changes

Secured Transactions and Suretyship

Bankruptcy

Protection of Intellectual Property

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Employment Law

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Accountants Legal Liability

Environmental Law

International Business Law

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

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the Legal Environment of Business

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Negotiable Instruments

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