Question 1

The parties to a negotiable promissory note are the:

Accepted Answer

A) maker and the drawee. 
B) drawee and the drawer. 
C) drawer and the payee. 
D) maker and the payee. 
A) maker and the drawee. 
B) drawee and the drawer. 
C) drawer and the payee. 
D) maker and the payee.

Question 2

Conville signed a note as an officer of the Hughesville Manufacturing Corporation, but she did not name the corporation in the note or indicate that she was acting as an officer for it. Later, she was sued by the Grange National Bank, the holder of the note. She raised the defense that the corporation was liable on the note. Who was liable?

Accepted Answer

Conville was personally liable

Question 3

Article 3 of the UCC establishes a __________-year statute of limitations for most actions involving negotiable instruments.

Accepted Answer

A) one 
B) two 
C) three 
D) four 
A) one 
B) two 
C) three 
D) four

Question 4

Instruments are negotiable when they contain the terms required by contract law.

Accepted Answer

A) True 
 B)False

Question 5

When the drawee of a draft has indicated by writing or record a willingness to pay the amount specified in the draft, the drawee has accepted liability and is called the acceptor.

Accepted Answer

A) True 
 B)False

Question 6

A payee has no rights in an instrument until:

Accepted Answer

A) the drawer or the maker has delivered the instrument to the payee. 
B) an acceptor has been established. 
C) an accommodation party has signed the instrument. 
D) a guarantor has signed the instrument. 
A) the drawer or the maker has delivered the instrument to the payee. 
B) an acceptor has been established. 
C) an accommodation party has signed the instrument. 
D) a guarantor has signed the instrument.

Question 7

A person who becomes a party to an instrument to add strength to the instrument for the benefit of another party to the instrument is called a:

Accepted Answer

A) benefactor. 
B) secondary obligor. 
C) collateral obligor. 
D) contingent beneficiary. 
A) benefactor. 
B) secondary obligor. 
C) collateral obligor. 
D) contingent beneficiary.

Question 8

Both drafts and promissory notes may have the quality of negotiability.

Accepted Answer

A) True 
 B)False

Question 9

A drawee on a draft has no responsibility under the draft until it has accepted that instrument.

Accepted Answer

A) True 
 B)False

Question 10

The person on whom the order to pay a draft is made is called a drawer.

Accepted Answer

A) True 
 B)False

Question 11

An instrument is payable at a definite time if it is payable:

Accepted Answer

A) on or before a stated date. 
B) at a fixed period after a stated date. 
C) at a fixed period after sight. 
D) all of the above. 
A) on or before a stated date. 
B) at a fixed period after a stated date. 
C) at a fixed period after sight. 
D) all of the above.

Question 12

An unconditional written promise made by one person to another, signed by the maker, that promises to pay on demand a specific sum of money to the bearer is a:

Accepted Answer

A) negotiable draft. 
B) bill of exchange. 
C) promissory note. 
D) certificate of deposit. 
A) negotiable draft. 
B) bill of exchange. 
C) promissory note. 
D) certificate of deposit.

Question 13

The signature requirement, as an element of negotiability, can be met by:

Accepted Answer

A) the use of initials. 
B) a mark. 
C) a trade name. 
D) all of the above. 
A) the use of initials. 
B) a mark. 
C) a trade name. 
D) all of the above.

Question 14

An authorized agent signing an instrument will not be liable on the instrument if the agent discloses on the paper either the identity of the principal or the fact that the agent has signed in a representative capacity.

Accepted Answer

A) True 
 B)False

Question 15

If an instrument is nonnegotiable, the rights of the parties are governed by the general principles of contract law.

Accepted Answer

A) True 
 B)False

Question 16

An instrument will be considered payable to order if:

Accepted Answer

A) it is payable to bearer or the order of bearer. 
B) it is payable to cash. 
C) the last or only indorsement is a blank indorsement. 
D) none of the above 
A) it is payable to bearer or the order of bearer. 
B) it is payable to cash. 
C) the last or only indorsement is a blank indorsement. 
D) none of the above

Question 17

The maker is the person who writes out and creates a promissory note.

Accepted Answer

A) True 
 B)False

Question 18

Antedating an instrument affects an instrument's negotiability.

Accepted Answer

A) True 
 B)False

Question 19

Revised UCC Article 3 refers to which of the following parties as secondary obligors?

Accepted Answer

A) drawers 
B) indorsers 
C) accommodation parties 
D) all of the above 
A) drawers 
B) indorsers 
C) accommodation parties 
D) all of the above

Question 20

Which of the following terms would make an instrument nonnegotiable?

Accepted Answer

A) It specifies collateral as security for a debt. 
B) It is undated. 
C) It is payable in foreign money. 
D) It gives the holder the right to receive goods or money. 
A) It specifies collateral as security for a debt. 
B) It is undated. 
C) It is payable in foreign money. 
D) It gives the holder the right to receive goods or money.

Exam 28: Kinds of Instruments, Parties, and Negotiability

The parties to a negotiable promissory note are the:

Article 3 of the UCC establishes a __________-year statute of limitations for most actions involving negotiable instruments.

Instruments are negotiable when they contain the terms required by contract law.

When the drawee of a draft has indicated by writing or record a willingness to pay the amount specified in the draft, the drawee has accepted liability and is called the acceptor.

A payee has no rights in an instrument until:

A person who becomes a party to an instrument to add strength to the instrument for the benefit of another party to the instrument is called a:

Both drafts and promissory notes may have the quality of negotiability.

A drawee on a draft has no responsibility under the draft until it has accepted that instrument.

The person on whom the order to pay a draft is made is called a drawer.

An instrument is payable at a definite time if it is payable:

An unconditional written promise made by one person to another, signed by the maker, that promises to pay on demand a specific sum of money to the bearer is a:

The signature requirement, as an element of negotiability, can be met by:

An authorized agent signing an instrument will not be liable on the instrument if the agent discloses on the paper either the identity of the principal or the fact that the agent has signed in a representative capacity.

If an instrument is nonnegotiable, the rights of the parties are governed by the general principles of contract law.

An instrument will be considered payable to order if:

The maker is the person who writes out and creates a promissory note.

Antedating an instrument affects an instrument's negotiability.

Revised UCC Article 3 refers to which of the following parties as secondary obligors?

Which of the following terms would make an instrument nonnegotiable?

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