Question 1

For an instrument to be negotiable, the instrument must indicate it was created with the purpose of being transferred.

Accepted Answer

A) True 
 B)False  True

Question 2

[Auto Repair] Sam writes a check from his checking account with Banking International to pay Auto Repair for service work it performed on his vehicle.
-Under the UCC, what role does Auto Repair hold?

Accepted Answer

A)  Drawee 
B)  Drawer 
C)  Owner 
D)  Payee 
E)  Payor 
A)  Drawee 
B)  Drawer 
C)  Owner 
D)  Payee 
E)  Payor D

Question 3

If a third party never becomes involved in the transaction, it does not matter whether an instrument may be considered negotiable.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is true regarding an IOU instrument containing the language "payable on demand"?

Accepted Answer

A)  The instrument is not negotiable because it does not contain an unconditional promise or order to pay, but it may be an enforceable contract. 
B)  The instrument contains an unconditional promise to pay; and, therefore, the fact that it is an IOU instrument does not affect negotiability. 
C)  The instrument contains an unconditional promise to pay but nevertheless is not negotiable because it is an IOU instrument. 
D)  The instrument is not negotiable because the words "payable on demand" are included; otherwise, the IOU instrument would contain an unconditional promise to pay. 
E)  The instrument is not negotiable, nor could it be an enforceable contract, because it does not contain an unconditional promise to pay. 
A)  The instrument is not negotiable because it does not contain an unconditional promise or order to pay, but it may be an enforceable contract. 
B)  The instrument contains an unconditional promise to pay; and, therefore, the fact that it is an IOU instrument does not affect negotiability. 
C)  The instrument contains an unconditional promise to pay but nevertheless is not negotiable because it is an IOU instrument. 
D)  The instrument is not negotiable because the words "payable on demand" are included; otherwise, the IOU instrument would contain an unconditional promise to pay. 
E)  The instrument is not negotiable, nor could it be an enforceable contract, because it does not contain an unconditional promise to pay.

Question 5

If an instrument fails to qualify as a negotiable instrument, it means that it could still be an enforceable contract, but the special rules regarding negotiable instruments do not apply.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following does not satisfy the requirement that to be negotiable an instrument must be payable at a time certain or on demand?

Accepted Answer

A)  The instrument states a specific date for payment. 
B)  The instrument is dated and then states that "payment will be made 5 days after the above date." 
C)  An instrument that states that payment is due at a fixed time but may be extended at the election of the holder. 
D)  An instrument that states that "payment will be made 10 days after delivery of the goods." 
E)  An instrument that permits acceleration of payment and has a fixed date of payment if the acceleration clause is not affected. 
A)  The instrument states a specific date for payment. 
B)  The instrument is dated and then states that "payment will be made 5 days after the above date." 
C)  An instrument that states that payment is due at a fixed time but may be extended at the election of the holder. 
D)  An instrument that states that "payment will be made 10 days after delivery of the goods." 
E)  An instrument that permits acceleration of payment and has a fixed date of payment if the acceleration clause is not affected.

Question 7

The ancient Lex mercatoria, or law of merchants, of England recognized that agreements could be paid for with documents that promised payment and that these documents themselves could then be circulated ________.

Accepted Answer

A)  as a King's document 
B)  as a bank draft 
C)  as a substitute for money 
D)  as a substitute for payment 
E)  as a court order 
A)  as a King's document 
B)  as a bank draft 
C)  as a substitute for money 
D)  as a substitute for payment 
E)  as a court order

Question 8

________ refers to the quality of a negotiable instrument that ensures it is mobile or available in a commercially reasonable and expected manner.

Accepted Answer

A)  Momentum 
B)  Movability 
C)  Performance ability 
D)  Adaptability 
E)  Versatility 
A)  Momentum 
B)  Movability 
C)  Performance ability 
D)  Adaptability 
E)  Versatility

Question 9

Vivian purchases a certificate of deposit for $10,000 at Right Now Bank. What does the certificate of deposit give Vivian?

Accepted Answer

A)  A note of the bank that gives the right to collect the principal plus interest at a future date. 
B)  An instrument that states that it is payable 30 days after presentment. 
C)  A time instrument that is payable within 10 days after presentment. 
D)  An instrument that states that it is payable on demand or at sight or otherwise indicates that it is payable at the will of the holder, or does not state any time of payment. 
E)  An instrument that states that it is payable on demand or at sight or otherwise indicates that it is payable at the will of the holder; does not state any time of payment; or is payable within ten days after presentment. 
A)  A note of the bank that gives the right to collect the principal plus interest at a future date. 
B)  An instrument that states that it is payable 30 days after presentment. 
C)  A time instrument that is payable within 10 days after presentment. 
D)  An instrument that states that it is payable on demand or at sight or otherwise indicates that it is payable at the will of the holder, or does not state any time of payment. 
E)  An instrument that states that it is payable on demand or at sight or otherwise indicates that it is payable at the will of the holder; does not state any time of payment; or is payable within ten days after presentment.

Question 10

[Defaulted Loan] Bruce wanted to open his own restaurant, The Burger Bar, and called his friend Janet for a loan. Janet orally agreed to loan Bruce $200,000. The agreement was not put into writing. Two years later, the loan was never repaid and is in default. The Burger Bar is bankrupt and Janet decides to sue Bruce in his individual capacity.
-If the reasoning of the case in the text, Athanasios Valsamis v. Néstor González-Romero is followed, what would Janet have to prove in court?

Accepted Answer

A)  Janet does not have to prove anything, as the burden would shift to Bruce to prove an agreement did not exist. 
B)  Janet must prove money is due and Bruce is the responsible party. 
C)  Janet must prove money is due. 
D)  Janet must prove The Burger Bar is the responsible party. 
E)  Janet must prove money is due and The Burger Bar is the responsible party. 
A)  Janet does not have to prove anything, as the burden would shift to Bruce to prove an agreement did not exist. 
B)  Janet must prove money is due and Bruce is the responsible party. 
C)  Janet must prove money is due. 
D)  Janet must prove The Burger Bar is the responsible party. 
E)  Janet must prove money is due and The Burger Bar is the responsible party.

Question 11

An oral negotiable instrument is permitted under the UCC with special conditions.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following instruments would classify as a negotiable instrument?

Accepted Answer

A)  A check that states, "Pay to the order of John Green." 
B)  A check payable to "X." 
C)  A check payable to "cash." 
D)  A blank check. 
E)  A $100 bill. 
A)  A check that states, "Pay to the order of John Green." 
B)  A check payable to "X." 
C)  A check payable to "cash." 
D)  A blank check. 
E)  A $100 bill.

Question 13

Fallon is discussing with Lynne the purposes of negotiable instruments for an upcoming test. Fallon indicates that for an instrument to be negotiable, the instrument must indicate that it was created for the purpose of being transferred, is he correct?

Accepted Answer

A)  Yes. 
B)  No, it must have the words "pay to" on the document. 
C)  No, the instrument must indicate which bank is to accept the instrument. 
D)  No, the instrument must indicate the insurer's name on the instrument. 
E)  No, there is nothing specific that must be on the instrument. 
A)  Yes. 
B)  No, it must have the words "pay to" on the document. 
C)  No, the instrument must indicate which bank is to accept the instrument. 
D)  No, the instrument must indicate the insurer's name on the instrument. 
E)  No, there is nothing specific that must be on the instrument.

Question 14

[Book Payment] Hye and Pat signed a contract providing that "Pat will furnish the correct used business law book for use in Hye's business law class; and on August 15, 2016, Hye promises to pay Pat $50 for the book." Hye took the book and planned to pay Pat. Meanwhile, Pat properly assigned the contract Hye had signed to Jack. When Hye went to class, however, she discovered that the book was the incorrect book. When Jack asked Hye for payment, Hye refused. Hye told Jack that the book was useless to her and that she was not paying either him or Pat anything for it. Jack told Hye that he had an enforceable assignment in the form of a negotiable instrument and that he could collect regardless of whether the book was useless. Hye did not believe him. Since she was trying to save money on books, she also agreed to buy Dante's U.S. history book for $40. She had an oral agreement with Dante that he would give her the book and that she would pay him in three days. This time Hye got the right book. Dante, in writing, properly assigned the right to the $40 payment to Aris. Aris asked Hye for the money. Hye admitted her agreement with Dante but told Aris that she was not going to pay him because he did not have a negotiable instrument. Hye also purchased a communications book from Sam promising in writing to give him, to his order, a DVD she had in return the next day.
-Which of the following is true regarding Jack's claim that he had a negotiable instrument and could collect from Hye?

Accepted Answer

A)  Jack is correct. 
B)  The agreement is not negotiable because it does not contain words of negotiability. 
C)  The agreement is not negotiable because the book was the wrong book. 
D)  The agreement is not negotiable because Jack was not a party to the original contract. 
E)  The agreement is not negotiable because the amount at issue is insufficient to create a negotiable instrument. 
A)  Jack is correct. 
B)  The agreement is not negotiable because it does not contain words of negotiability. 
C)  The agreement is not negotiable because the book was the wrong book. 
D)  The agreement is not negotiable because Jack was not a party to the original contract. 
E)  The agreement is not negotiable because the amount at issue is insufficient to create a negotiable instrument.

Question 15

When an instrument fails to meet the technical requirements necessary to qualify as a negotiable instrument, which of the following statements is true?

Accepted Answer

A)  The instrument is still enforced as a negotiable instrument if it has been transferred to a holder in due course. 
B)  The instrument is still enforced as a negotiable instrument if it has been accepted by a bank. 
C)  The instrument is still enforced as a negotiable instrument if the holder can establish detrimental reliance based on a reasonable belief that the instrument qualified as a negotiable instrument. 
D)  The instrument may qualify as an enforceable contract. 
E)  The instrument is null and void and of no use to the holder. 
A)  The instrument is still enforced as a negotiable instrument if it has been transferred to a holder in due course. 
B)  The instrument is still enforced as a negotiable instrument if it has been accepted by a bank. 
C)  The instrument is still enforced as a negotiable instrument if the holder can establish detrimental reliance based on a reasonable belief that the instrument qualified as a negotiable instrument. 
D)  The instrument may qualify as an enforceable contract. 
E)  The instrument is null and void and of no use to the holder.

Question 16

A certificate of deposit is a note of ________.

Accepted Answer

A)  the federal government 
B)  a state government 
C)  a bank 
D)  a third party promisee 
E)  a private third party 
A)  the federal government 
B)  a state government 
C)  a bank 
D)  a third party promisee 
E)  a private third party

Question 17

Analynd issues a note to Baliee indicating a specified date of payment in which to pay the note. This is an example of a(n) ________ instrument.

Accepted Answer

A)  time 
B)  demand 
C)  recourse 
D)  draft 
E)  intermediary 
A)  time 
B)  demand 
C)  recourse 
D)  draft 
E)  intermediary

Question 18

Which of the following is true regarding the relationship between negotiability and an unconditional promise or order to pay?

Accepted Answer

A)  There is no such requirement in order to find negotiability. 
B)  A promise or order to pay must be specific and not be implied in order for negotiability to be found. 
C)  Simply acknowledging a debt satisfies the negotiability requirement of an unconditional promise to pay. 
D)  A common IOU is sufficient to satisfy the negotiability requirement of an unconditional promise to pay. 
E)  An offer of unconditional partial payment satisfies requirements of negotiability. 
A)  There is no such requirement in order to find negotiability. 
B)  A promise or order to pay must be specific and not be implied in order for negotiability to be found. 
C)  Simply acknowledging a debt satisfies the negotiability requirement of an unconditional promise to pay. 
D)  A common IOU is sufficient to satisfy the negotiability requirement of an unconditional promise to pay. 
E)  An offer of unconditional partial payment satisfies requirements of negotiability.

Question 19

A note is an order by a drawer to a drawee to pay a payee.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is a draft with respect to which the drawer and drawee are the same bank or branches of the same bank?

Accepted Answer

A)  Cashier's check 
B)  Traveler's check 
C)  Certified check 
D)  Check certificate 
E)  Approved draft 
A)  Cashier's check 
B)  Traveler's check 
C)  Certified check 
D)  Check certificate 
E)  Approved draft

Exam 26: Negotiable Instruments: Negotiability and Transferability

For an instrument to be negotiable, the instrument must indicate it was created with the purpose of being transferred.

[Auto Repair] Sam writes a check from his checking account with Banking International to pay Auto Repair for service work it performed on his vehicle. -Under the UCC, what role does Auto Repair hold?

If a third party never becomes involved in the transaction, it does not matter whether an instrument may be considered negotiable.

Which of the following is true regarding an IOU instrument containing the language "payable on demand"?

If an instrument fails to qualify as a negotiable instrument, it means that it could still be an enforceable contract, but the special rules regarding negotiable instruments do not apply.

Which of the following does not satisfy the requirement that to be negotiable an instrument must be payable at a time certain or on demand?

The ancient Lex mercatoria, or law of merchants, of England recognized that agreements could be paid for with documents that promised payment and that these documents themselves could then be circulated ________.

________ refers to the quality of a negotiable instrument that ensures it is mobile or available in a commercially reasonable and expected manner.

Vivian purchases a certificate of deposit for $10,000 at Right Now Bank. What does the certificate of deposit give Vivian?

An oral negotiable instrument is permitted under the UCC with special conditions.

Which of the following instruments would classify as a negotiable instrument?

Fallon is discussing with Lynne the purposes of negotiable instruments for an upcoming test. Fallon indicates that for an instrument to be negotiable, the instrument must indicate that it was created for the purpose of being transferred, is he correct?

When an instrument fails to meet the technical requirements necessary to qualify as a negotiable instrument, which of the following statements is true?

A certificate of deposit is a note of ________.

Analynd issues a note to Baliee indicating a specified date of payment in which to pay the note. This is an example of a(n) ________ instrument.

Which of the following is true regarding the relationship between negotiability and an unconditional promise or order to pay?

A note is an order by a drawer to a drawee to pay a payee.

Which of the following is a draft with respect to which the drawer and drawee are the same bank or branches of the same bank?

An Introduction to Dynamic Business Law

Business Ethics

The Us Legal System

Alternative Dispute Resolution

Constitutional Principles

International and Comparative Law

Crime and the Business Community

Tort Law

Negligence and Strict Liability

Product Liability

Liability of Accountants and Other Professionals

Intellectual Property

Introduction to Contracts

Agreement

Consideration

Capacity and Legality

Legal Assent

Contracts in Writing

Third-Party Rights to Contracts

Discharge and Remedies

Introduction to Sales and Lease Contracts

Title, Risk of Loss, and Insurable Interest

Performance and Obligations Under Sales and Leases

Remedies for Breach of Sales and Lease Contracts

Warranties

Negotiation, Holder in Due Course, and Defenses

Liability, Defenses, and Discharge

Checks and Electronic Fund Transfers

Secured Transactions

Other Creditors Remedies and Suretyship

Bankruptcy and Reorganization

Agency Formation and Duties

Liability to Third Parties and Termination

Forms of Business Organization

Partnerships: Nature, Formation, and Operation

Partnerships: Termination and Limited Partnerships

Corporations: Formation and Financing

Corporations: Directors, Officers, and Shareholders

Corporations: Mergers, Consolidations, Terminations

Corporations: Securities and Investor Protection

Employment and Labor Law

Employment Discrimination

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

The Nature of Property, Personal Property, and Bailments

Real Property

Landlord-Tenant Law

Insurance Law

Wills and Trusts

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